Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2011)
40 slides from Mitchells & Butlers's debt investor presentation, Nov 23, 2011
Slide 1: Bond Investor Update – Tim Jones, Finance Director
Tim Jones Finance Director Bond Investor Update – 23 November 2011
Slide 2: Income statement
Income statement FY 11 FY 10 £m £m Retained Estate: Revenue 1,762 1,680 4.9% Operating profit 288 285 1.1% Other operations 6 37 Total operating profit 294 322 (8.7%) Interest (138) (153) PBT (pre exceptionals) 156 169 (7.7%) EPS (pre exceptionals) 28.0p 29.7p (5.7%) Continued progress in Retained E
Slide 3: Drivers of LFL food and drink sales
Drivers of LFL food and drink sales Food Drink 7.0% 3.9% (1.2%) 6.0% 1.5% (4.5%) Volume 5.0% Mix & Mix & 4.0% Range 4.0% Range 3.0% +4.8% Volume 2.1% LFL 2.0% Price LFL 1.0% Price +1.0% 0.0% Total LFL sales growth of 2.6% Mix & range improvements driving food sales 3
Slide 4: Retained Estate: EBITDA movement
Retained Estate: EBITDA movement +£5m (£8m) +£7m +£33m £398m (£17m) FY 11 £391m FY 10 (£13m) FY10 capex Returns Opening NMW, duty, Food, energy Trading costs CRC, rates inflation FY11 capex Trading & capex returns offset inflationary costs 4
Slide 5: Retained Estate: net operating margin
Retained Estate: net operating margin (0.3%) 17.0% (1.0%) FY 10 1.4% 16.3% FY 11 (0.8%) Site opening NMW, duty, Food, energy Trading costs CRC, rates inflation Cost headwinds impact on margin 5
Slide 6: Brand roll-out
Brand roll-out 70 Number of sites 60 50 40 30 20 10 0 H1 H2 H1 H2 H1 H2 FY 09 FY 10 FY 11 Conversions New sites Expansion increasingly focused on new sites Note: Includes all acquisitions from FY09 onwards 6
Slide 7: Brand roll-out returns
Brand roll-out returns Overall EBITDA return of 21% on FY10 & FY11 investments Return by segment: - Freehold acquisitions 17% - Package lease acquisitions 15% - Single site lease acquisitions >30% - Conversions 22% Principal new site expansions: - Harvester, All Bar One, Browns, Toby Carvery Strong
Slide 8: Property valuation
Property valuation Freehold and long leasehold sites valued annually Short leases assessed for impairment Increase of £71m, represents c. 2% of the £3.3bn estate value £m (pre tax) FY 11 FY 10 Income Statement: Revaluations 8 (256) Impairment (10) (48) Balance Sheet: Revaluation reserve 73 69 71 (23
Slide 9: Group cash flow
Group cash flow FY 11 FY 10 £m £m EBITDA 404 449 Working capital / non cash items (26) 49 Maintenance capex (90) (110) Operating Cash Flow 288 388 Net interest paid (134) (147) Tax (20) (8) Deficit pension contributions (40) (32) Free Cash Flow 94 201 Expansionary capex (82) (28) Disposals 424 130 N
Slide 10: Group net debt
Group net debt Sep 11 Sep 10 £m £m Securitisation debt (2,226) (2,274) Cash & other 137 215 Securitised net debt (2,089) (2,059) Cash / (unsecured net debt) 219 (243) Group net debt (1,870) (2,302) Net Debt : EBITDA* 4.7x 5.1x Continuing reduction in net debt * Sep 11 ratio calculated using EBITDA f
Slide 11: Outlook
Outlook 2.0% in first 8 weeks although 1% underlying run rate Margin pressures anticipated to remain: - Food and energy inflation - National Minimum Wage and duty increases Initiatives identified and being executed 53 week accounting year (to 29 September 2012) Exceptional items for reorganisation a
Slide 12: Key messages
Key messages Continued progress in challenging climate Net debt reduced to 4.7 times EBITDA after completion of disposals Strong pipeline of brand roll-out investment opportunities offering high returns Resumption of dividend remains under review pending sustainable cover by profits and cash Well po
Slide 13: Andrew Vaughan, Group Treasurer
Andrew Vaughan Group Treasurer Bond Investor Update – 23 November 2011 13
Slide 14: Highlights
Highlights Gross debt outstanding at year end £2,235m EBITDA £355m Free Cashflow £275m EBITDA DSCR 2.0x FCF DSCR 1.5x 14
Slide 15: Free cash flow
Free cash flow £m EBITDA 355 Tax (20) Required maintenance capital (60) Free Cashflow 275 Interest (130) 1.5x Principal repayment (49) Debt Service (179) 15
Slide 16: Securitisation covenants
Securitisation covenants FY 11 H1 H2 Year Free Cashflow: Debt Service 1.5x 1.6x 1.5x EBITDA: Debt Service 1.8x 2.2x 2.0x Net Worth £1. 51bn Well within required covenants Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Restricted Payment Test. FCF/Debt Service 1.3x, EBITDA/Debt S
Slide 17: Maintenance & capital enhancement
Maintenance & capital enhancement Securitisation Estate £m Repairs* 34 113 (vs. required amount of £93m) Maintenance 79 Enhancement 20 (ex Permitted Acquisition for £462m) 133 Substantial investment to maintain and enhance estate quality *Charged through Profit & Loss account 17
Slide 18: Cashflow - uses
Cashflow - uses £m FCF 275 Debt Service (179) Maintenance capital (over required amount) (19) Net capital enhancement expenditure* 3 Excess Cash 80 Restricted Payments made (59) Restricted Payment Maximum increase 21 Restricted Payment Maximum at start of year 20 Restricted Payment Maximum at end of
Slide 19: Asset transfer
Asset transfer Non-core asset sales of over £500m (2010) 182 unsecured pubs acquired for £462m (Feb 2011) Initial marginal EBITDA dilution (c4.5% pro-forma) Acquired pubs are large, well invested, food-led outlets with better growth prospects 19
Slide 20: Rating actions
Rating actions Fitch - A Notes and AB Notes downgraded to A+ from AAA and AA respectively - B Notes downgraded to A- from A - Application of revised WBS criteria including industry sector rating caps Standard & Poors - A Notes downgraded to AA- from AA - Application of revised counterparty criteria
Slide 21: Margin step-up
Margin step-up A1N and A3N Notes margin increased from 0.18% to 0.45% (December 2010 NPD) Additional interest cost of c£1m per annum Next relevant step-up date is September 2013 in respect of A4, AB, C2 and D1 Notes 21
Slide 22: MAB PLC vs. MAB Retail Limited
MAB PLC vs. MAB Retail Limited PLC Securitisation £m Estate £m Number of pubs* 1,605 1,442 Turnover 1,796 1,533 EBITDA 404 355 EBIT 294 263 Difference driven by 163 pubs and head office infrastructure outside the Securitisation *As at 24 September 2011 22
Slide 23: Introduction
Introduction Business change agenda Business development Capital led expansion Current trading and outlook Summary M&B is a good business: our vision is to make it a great business 23
Slide 24: Key tasks
Key tasks Board recruitment: - Appoint CEO - Appoint high quality non-execs Drive forward existing strategy Business change agenda - Organisational change - Business development - Capital led expansion Key tasks actively being implemented 24
Slide 25: Strong market position
Strong market position Some of the best sites in the industry - Best pubs from Bass, Allied and Whitbread - c.90% freehold or long leasehold - Southern bias with 44% in London & South East High sales and profitability per site - AWT of £22k v. £18k for key competitors - Profit of £180k v. £120k for
Slide 26: Effectiveness
Driving changes through business Objectives Simplify the organisation Effectiveness Clear responsibilities and accountable Ensuring M&B has a Improve pace of decision making high performance Proactive response to changing environment culture Efficiency Reduce overhead cost 26
Slide 27: Confirmation
Developing a better business Feedback Enquiries Adm sks in Ta Re -ch eck ing rol Cont Re-confirmation New systems New Projects Req ues ts es Confirmation ng Co ha in ntro Tasks Too many C Adm l demands clog the system 27
Slide 28: Action plan
Action plan Appointed Operations Director: Robin Young Business Development Director: Kevin Todd Started New operating structure Consultation period to be initiated Trials for new working practices To be announced Brand Operating Directors appointments Further operational practice improvements Reorg
Slide 29: Business developments
Business developments Technology - IT infrastructure - Till system - Wi-Fi - Food product information database Food development Continuing brand improvements 29
Slide 30: Capital led development
Capital led development “Doing things better for less” - Maintenance - Capital projects Good pipeline in attractive areas More single site freehold acquisitions More high return retail & leisure park sites Building on successful experience 30
Slide 31: Harvester
Harvester Xscape Milton Keynes £30k AWT 31
Slide 32: Harvester
Harvester Merthyr Tydfil: £40k AWT 32
Slide 33: Premium Country Dining
Premium Country Dining The Green House Sutton Coldfield £51k AWT 33
Slide 34: Miller & Carter
Miller & Carter Albert dock: £28k AWT 34
Slide 35: Browns
Browns Bluewater: £46k AWT 35
Slide 36: Vintage Inns
Vintage Inns Trent Lock Nottingham: £23k AWT 36
Slide 37: Toby Carvery
Toby Carvery Toby Carvery Basildon: £39k AWT 37
Slide 38: Current trading and outlook
Current trading and outlook Last 8 weeks trading: like-for-like sales 2.0% - good first week - underlying resilience Challenging consumer environment will continue - Inflationary cost headwinds - Customers being more selective Challenging environment but continuing sales growth 38
Slide 39: Summary
Summary Strong underlying business Strategy continues Organisational change program will drive benefits Initiatives being implemented to generate further growth Confidence in the business potential Strong business; well positioned to grow 39
Slide 40: Questions & Answers
Questions & Answers Bond Investor Update – 23 November 2011
Mitchells & Butlers — Debt Investor Presentation (November 2011) on 6ix