Insider: director stake-building at Marston's and Vodafone

Share buying at the pubs chain coincides with boozers reopening after lockdown. Is their timing right?

The chairman of Marston's (LSE:MARS) has dipped into his pocket in a toast to the return of drinkers at the company's pubs after an absence of three months.

Alas for pub-goers, the £54,000 set aside by William Rucker hasn't gone behind the bar. The money was instead used for buying 100,000 Marston's shares ahead of the industry's “Super Saturday”, when about 85% of the group's estate in England was due to re-open.

Rucker, who is chief executive of asset manager Lazard in the UK, will be hoping that the return to trading will sustain the recent improvement for Marston's shares since a surprise deal to put its brewing operations into a joint venture with Carlsberg UK.

He wasn't alone in buying shares last week, with non-executive directors Bridget Lea and Octavia Morley also picking up £15,000 worth of shares at prices of between 58p and 62p.

Their purchases follow a rollercoaster period in which Marston's shares fell from more than 100p in February to just 22p a month later, before recovering back to 71p in early June.

That spike reflected the impact of the Carlsberg deal, which will bolster the Marston's balance sheet with an immediate £239 million cash injection and provide a clearer focus on growth in the pub estate, which is made up of 1,400 managed, franchised and tenanted outlets.

The deal - due to complete in the autumn - will leave Marston's with a 40% stake in a larger and more attractive brewing business. Its major beer brands include Marston’s Pedigree, Hobgoblin, Wainwright, Young’s, Courage, Banks’s and McEwan’s.

The collaboration with Northampton-based Carlsberg UK brings in brands including Carlsberg Export, Poretti and Tetley’s, as well as the UK brand licence for San Miguel.

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How Marston's plans to maximise value from the pubs estate will be disclosed at a capital markets day in the autumn, when the outlook for the industry should also be a lot of clearer.

Its predominately freehold estate has been an advantage during the lockdown, while it is much less exposed than its peers to city centres, where the long-term impact of Covid-19 may be more pronounced. About 90% of its sites also benefit from having outside space.

Much now depends on whether customers accept a new social environment where distancing and enhanced hygiene measures are the new norm and pubs have to operate at 60% of capacity. As the industry navigates its way out of the lockdown, CEO Ralph Findlay has called for the Government to provide continued support through business rates relief and cuts to VAT.

Looking further ahead, he believes the focused pubs business is now much better placed financially to rebuild trading momentum and seize on opportunities as they arise.

Numis Securities has a target price of 103p, with the broker noting undemanding valuations across the pub sector with Marston's trading on a price/earnings (PE) multiple of 4.8x.

They said in the wake of June's interim results:

“The joint venture with Carlsberg is a sensible route to address the balance sheet, with synergy upside from the combination worth £25 million or 15p share not reflected in the price.”

Rucker will be hoping his investment performs better than the last time he bought Marston's shares. That £100,000 purchase made shortly before becoming chairman in October 2018 has fallen £44,000 in value.

Vodafone boss buys big 

In that same month, Nick Read took over from Vittorio Colao as Vodafone (LSE:VOD) CEO. His new contract at the time specified that the former chief financial officer should aim for a Vodafone shareholding worth 500% of his £1.05 million salary.

This stood at 495% at the end of 2019/20 financial year in March, with Read required to achieve the threshold by July 2023. He took the opportunity to meet this target when he topped up his £5.2 million of Vodafone shares on June 26, buying £573,630 of stock at a price of 128p.

Read's move comes after a recovery for Vodafone shares from 98p in mid-March, although the purchase was below the 141p in early June and the 155p prior to the Covid-19 market sell-off.

Jefferies recently upgraded its price target to 159p, with the City firm anticipating a recovery in European service revenues from the third quarter onwards. First-quarter results are due on July 24, when Jefferies thinks that sharp falls in Span and Italy will leave revenues 3.6% lower.

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The Covid-19 lockdowns led to an inevitable spike in the use of data traffic, but this has been offset by the impact of lower international travel on roaming revenues.

Jefferies is also looking ahead to November's half-year results, when Vodafone is expected to provide additional financial disclosure on its European tower assets. Their long-awaited sale through an IPO in early 2021 should make some inroads into a bloated net debt balance.

Recent annual results point to an improving overall picture, however. The company returned to pre-tax profit with a surplus of €795 million (£716 million), while the maintenance of the final dividend was made possible by prodigious cash generation. The company also remains in the vanguard of the 5G roll-out, with a presence in 97 cities across eight European markets.