This is #7 in our "Twelve Stocks of Christmas 2025" Series. You can review the full set here.
The Pitch
Marston’s (LON:MARS) is now completely focused as a pub operator (1,300 pubs), having sold its brewing operations (Pedigree and Hobgoblin) to Carlsberg in 2024. On first glance, it seems another debt-laden, ex-growth, “cheap for a reason” stock. But a trading statement in October with “free cashflow significantly ahead of plan” has triggered a re-rating. Debt paydown is happenting at pace, store refurbishment returns are impressive, and shareholder returns may soon be on the cards. If so, and at a StockRank of 97, the shares may be significantly underpriced.
The Big Picture
Marston’s over-expanded when debt was cheap. Lenders happily lent because loans were asset backed - across both brewing and pubs. But COVID hit at peak leverage and cashflow disappeared. Since then management have shown operating discipline, selling the capital-heavy brewing business, and focusing on the higher return pub estate. It’s working.
- Debt is shrinking by design - the business has securitised its debt, which is on a payment schedule. This enforces management discipline, as they have to hit repayment targets.
- Cashflow has crossed a line - improving profitability (+71%) and margins (at 23%) have pushed free cashflow to £53m, well ahead of the £44m fixed debt payments.
- Value is shifting from debt to equity - this is key. As debt is paid down, the business should generate more and more free cashflow to equity. Marston’s last paid a dividend in 2019. If dividends are reinstated, as expected within 18 months, expect a new shareholder base to aggressively buy the shares. It seems some already are.
Going Deeper
Marston’s is now a far simpler operation having exited brewing. Revenue growth is not the primary goal, financial resilience is. Nonetheless, the business is showing skill at implementing their strategy and sweating assets.
- Refurbishment is working - management upgraded 31 pubs in the last year across three smart, localised concepts - “Grandstand” focused on big game sports events, “Woodies” which appeal to families, and “Two-Door” which target drinkers and diners. These upgrades drove 23% revenue increases at a 30% ROI at the venues.
- Disciplined rollout - 50+ refurbishments are planned in 2026, with capex at up to 7-8% of revenue. Importantly, this…
