Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — H1 2005 Earnings Presentation
50 slides from Mitchells & Butlers's earnings presentation, May 19, 2005
Slide 1: Interim Results Presentation
Interim Results Presentation 19 May 2005
Slide 2: Roger Carr, Chairman
Roger Carr Chairman Interim Results - 19 May 2005
Slide 3: Karim Naffah, Finance Director
Karim Naffah Finance Director Interim Results - 19 May 2005
Slide 4: Financial Highlights
Financial Highlights z Turnover £864m up 5.0% z EBITDA* £202m up 5.8% z Operating profit* £140m up 4.5% z Profit before tax* £86m up 4.9% z EPS* 11.2p up 20.4% z Interim dividend per share 3.20p up 12.3% * Adjusted to exclude exceptional items. 2004 comparatives restated for FRS17 4
Slide 5: HY 2005 Results - Summary
HY 2005 Results - Summary HY 05 HY 04 £m £m Operating Profit* 140 134 +4.5% Interest (54) (52) PBT* 86 82 +4.9% Tax (28) (27) Earnings* 58 55 +5.5% EPS* 11.2p 9.3p +20.4% Average no. of shares 517m 591m (12.5)% * Adjusted to exclude exceptional items 2004 comparatives restated for FRS17 5
Slide 6: Presentational Points to Note
Presentational Points to Note z FRS 17 pensions accounting adopted Restatement of prior year HY04* Previously HY04* £m Reported Adjustment Re-stated Operating profit 140 (6) 134 PBT 88 (6) 82 EPS (pence) 10.0p (0.7p) 9.3p Net Assets 1,609 (237) 1,372 z Treatment of Easter All in first half this
Slide 7: Operating Performance
Operating Performance HY 05 HY 04 £m £m Turnover Pubs & Bars 500 485 +3.1% Retail Restaurants 356 333 +6.9% +4.6% SCPD 8 5 864 823 5.0% Operating Profit* Pubs & Bars 86 88 (2.3)% Retail Restaurants 53 45 17.8% +4.5% SCPD 1 1 140 134 4.5% * Before exceptional items 7
Slide 8: Like-for-Like Sales: Divisional
Like-for-Like Sales: Divisional HY 05* Same Outlet (Invested + Uninvested) Pubs & Bars + 3.1% Restaurants + 7.4% Total + 4.8% Uninvested Pubs & Bars + 1.9% Restaurants + 5.3% Total + 3.2% * 32 weeks. Includes Easter in both periods 8
Slide 9: Like-for-Like Sales: Segment
Like-for-Like Sales: Segment HY 05* Q1 05** Same Outlet (Invested + Uninvested) Residential + 5.7% + 6.6% High Street + 3.5% + 2.9% Total + 4.8% + 5.2% Uninvested Residential + 3.8% + 4.8% High Street + 2.5% + 2.1% Total + 3.2% + 3.8% * 32 weeks. Includes Easter in both periods ** 16 weeks 9
Slide 10: Balancing Sales Growth & Margin
Balancing Sales Growth & Margin HY 05 FY 04 Uninvested LFL Sales + 3.2% + 3.8% Average Selling Price* flat <(2)% Movement in Gross Margin (%) flat flat Movement in LFL Gross Profit (£) + ve + ve *Food & Drink Focus on growing like-for-like gross profit 10
Slide 11: Key Operating Statistics
Key Operating Statistics* z Drink sales : up 2% z Food sales : up 9% Food mix 31% of sales z Outlet staff costs : 24% of sales Net operating margin in line with last year *All figures MAB Retail 11
Slide 12: Operating Profit Movement
Operating Profit Movement +15 +1 £140m (10) +£6m £134m* 2004 2005 Regulatory/ Trading Easter Energy costs * Before operating exceptional items 12
Slide 13: HY 2005 Expansionary Capital
HY 2005 Expansionary Capital Residential Locals Pub Restaurants £6m £20m Drinks Food led led £2m - High Street Restaurants City Centre Note: Excludes Hollywood Bowl / Other: £3m 13
Slide 14: Returns by Segment
Returns by Segment Residential Locals Pub Restaurants Inc. ROI 16% Inc. ROI 18% Drinks Food led led Inc. ROI 14% Inc. ROI 10% High Street Restaurants City Centre 16% overall incremental ROI – up 1% on last year Note: UK only – excludes Hollywood Bowl Cumulative £1bn expansionary investment over the
Slide 15: Strong Cash Returns
Strong Cash Returns 12 months to 9 April 2005 £m CROCCE £m NOPAT EBIT 279 279 Depreciation/Amortisation 113 EBITDA 392 Cash Tax (at 26.5% of EBIT)* (74) (74) Cash Return 318 205 Average Net Operating Assets 3,414 3,414 Accumulated Depreciation 324 10.4% 7.5% Revaluations (726) (726) Goodwill written
Slide 16: Cashflow (a)
Cashflow (a) HY 05 £m EBIT 140 Depreciation & amortisation 62 EBITDA 202 Working capital / non cash items 32 Maintenance capex (57) Expansionary capex (31) Disposals 42 Additional pension contributions (30) Operating Cashflow after Net Capex 158 16
Slide 17: Cashflow (b)
Cashflow (b) HY 05 £m Operating Cashflow after Net Capex 158 Net Interest paid (51) Tax paid (22) Normal dividends paid (34) Exercise of share options 13 Shares repurchased (52) Net Cashflow* 12 Closing Net Debt £1.625bn * Before £17m bond repayments 17
Slide 18: Financing
Financing z Net Debt : EBITDA* 4.1x z Book Gearing** 53% z Interest Cover 2.6x Well within all securitisation covenants * MAT ** Net Debt / (Net Assets + Net Debt) 18
Slide 19: Dividends and Share Repurchase
Dividends and Share Repurchase z Dividend Interim dividend of 3.2p, up 12.3% Progressive policy z Share buy-back programme £52m spent to date On track for £100m in FY05 Maintain efficient balance sheet Cash returns to shareholders 19
Slide 20: IFRS Update
IFRS Update Unaudited and based on work to date z Impact on reported earnings expected to be broadly neutral z Net Assets expected to reduce by up to £250m z No impact on cashflows z Work on-going - further adjustments may arise Implementation project is on track 20
Slide 21: Summary
Summary z Business strategy continues to deliver - Profitable sales growth - Net margins held z High returns on investment z Generating strong cashflow z Redeploying cash resources z Efficient balance sheet Delivering value to shareholders 21
Slide 22: Tim Clarke, Chief Executive
Tim Clarke Chief Executive Interim Results - 19 May 2005
Slide 23: Executing the Strategy
Executing the Strategy z Profitable sales growth z Focus on higher growth segments z Extracting benefits of high take pubs and corporate scale z Accelerating market share gains z Overcoming the cost pressures z Raising returns and increasing cash flow Outperforming amidst the consumer slow-down 23
Slide 24: Key Operating Levers
Key Operating Levers z Consumer appeal of brands and formats z Product marketing: Range, quality and value z Estate repositioning to growth markets z High quality amenity z Customer service delivery z Productivity and purchasing gains z High investment returns z Proactive asset management Focus on o
Slide 25: Strong Like for Like Sales Growth
Strong Like for Like Sales Growth 6% 5.2% 5.1% 5% 4.5% 4% 3.8% 3.2% 3% 2.7% 2% 1% 0% wks 1-16 wks 17-32* wks 1-16 wks 17-32* wks 25-32* wks 25-32* Uninvested Same Outlet Last 8 wks *To include Easter in both years 25
Slide 26: Profitable Market Share Gains
Profitable Market Share Gains MAB Estimated Volume Growth (1) Market Growth (2) Food + 9% + 3% Wines & Soft Drinks + 8% + 3% Spirits + 4% + 0% Beer + 2% - 3% (1) H1 same outlet volume growth (2) MAB estimates based on BBPA/ AC Neilsen/ ONS 26
Slide 27: Market Dynamics
Market Dynamics Demographics Offers Assets/Locations Demand Growth / Limited Supply Dual working couples Commuter belts Families Outer suburbs Casual integrated Females food and drink pubs Urban housing estates Greys City centre living Single households Declining Demand / Excess Supply Blue collar m
Slide 28: Repositioning to Growth Markets
Repositioning to Growth Markets Locals Pub Restaurants Food, Wines, Soft Drinks, Accommodation & Other City Centre High St. Pubs Beer, Spirits and Machines Brasseries NB. Pie charts proportional to perc entage of MAB Sales 28
Slide 29: Real price declines in food
Real price declines in food 7 year 1998 2005 Change Average Earnings Index* 100 135 + 35% Main Course Price** Harvester (Spit Roast Chicken) £8.40 £7.95 - 5% Harvester EarlyBird £5.60 £5.30 - 5% Toby (Carvery Meal) £6.45 £6.65 + 3% Vintage (8oz Rump Steak) £6.95 £7.50 + 8% * Source ONS: compares Feb
Slide 30: Beer Market Trends - Volume
Beer Market Trends - Volume On and Off Trade Beer Volume 27% 38% Barrels 73% 62% Off-Trade Off-Trade On-Trade Time Source: ONS, BBPA 30
Slide 31: Beer Market Trends - Price
Beer Market Trends - Price On and Off Trade Beer Price 130 125 On-Trade 120 Price (re-based to 100) 115 110 105 Off-Trade 100 95 90 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Source: ONS, BBPA 31
Slide 32: Out-performing the Beer Market
Out-performing the Beer Market Declines Nicholsons All Bar One Toby O’Neills Nicholsons Range extensions and value key to volume growth 32
Slide 33: Wine/Soft Drinks/Spirits Range Extension
Wine/Soft Drinks/Spirits Range Extension Fresh Soft Drinks Own Label Wine Ty Nant Mineral Water Range Premium Spirits 33
Slide 34: Capturing the Benefits from Growing Volumes
Capturing the Benefits from Growing Volumes 100% Net Profit 80% Property* Fixed 60% Other % of Sales Utilitie s 40% Employment 20% Cost of Goods Variable 0% H1 2005 COGS & employment represent over 50% of sales * Including repairs and depreciation 34
Slide 35: Maximising Profit from Incremental Sales
Maximising Profit from Incremental Sales Toby Carvery, Eastbourne Toby Carvery, Snaresbrook z Increasing covers and improving cover turn z Improving quality and reducing wastage z Raising employee productivity 35
Slide 36: Staff Productivity
Mitchells & Butlers ivity Staff Product 36
Slide 37: Staff Productivity
Staff Productivity Proven track record of maintaining employment cost % of sales 37
Slide 38: Pub Restaurants
Pub Restaurants The George- Ruislip Toby Carvery – Washington The Bears Head – Sandbach Harvester – 130 pubs Toby – 91 pubs Vintage Inns – 198 pubs The Willow Tree – Torquay The Woolpack – Stoke Mandeville IKL and Vintage Inn – Chigwell Pub Carvery – 34 pubs Prem ium Country Dining – 12 pubs Adjoini
Slide 39: Pub Restaurants: Food Innovation
Pub Restaurants: Food Innovation Toby Carvery “Dark Nights” Weekend menu Vintage Inns “Light Nights” menu Harvester Early Bird Menu w ith Pizza Offer 39
Slide 40: Local Pubs
Local Pubs The Three Stags – The Wirral The Flask - Highgate Em ber & Taverns – 225 pubs Metro Professional – 74 pubs The Tyburn House - Birm ingham The Man On The Moon – Kings Norton Sizzling Pub Company/unbranded food locals – 208 pubs Arena/Unbranded Locals – 143 pubs 40
Slide 41: Format Development and Food Growth in Locals
Format Development and Food Growth in Locals Vesper Gate, Leeds Sizzling Pub Company Ember Inns – Sunday Roast Offer Targeting growth in eating out in local pubs 41
Slide 42: High St/City Centre market
High St/City Centre market Flares, Warrington The Philharmonic, Liverpool Golden Lion, Nicholsons, St James Circuit venues Town pubs Central London Late evening Daytime/early evening Central London and town pubs offsetting circuit venues 42
Slide 43: Maintaining Amenity and Offer Evolution
Maintaining Amenity and Offer Evolution Harvester, The Cricketers, Croydon Prince of Wales, Metro Professionals, London 43
Slide 44: Regulatory Update
Regulatory Update Smoking Pressing ahead with increased non-smoking areas Non-smoking trials Await consultation process Licensing Applications progressing Upside available but slow process Responsible Drinking Initial consultation ended 28 February Gambling Bill Neutral for pubs Revi
Slide 45: Investing for High Returns
Investing for High Returns Application of proven brands/formats to existing /new sites z Development opportunities to increase food capability Residential: Sizzling Pub Co, Pub Carveries, Metro Professionals New Pub Restaurants: Toby, Vintage, Harvester z Innkeepers Lodges adjacent to existing s
Slide 46: Format Innovation
Format Innovation z Premium Country Dining z Metro Professionals outside London z New Locals format z Town Pubs z Franchise The Mall, Bristol (Metro Professionals) The Woolpack, Stoke Mandeville (Premium Countr y Dining) 46
Slide 47: Differentiated Strategy for Growth
Differentiated Strategy for Growth z Profitable sales growth z Amenity, service, range and value z Estate quality and corporate scale efficiencies z Skills in capacity management of high volumes z Cost control and cash generation z Consolidation opportunities Proactive use of cash resources to gener
Slide 48: Outlook
Outlook z Outlook for consumer spending deteriorating z Pub Market: Mixed recent trading patterns Food and other drinks more resilient than beer z Further external cost pressure z MAB growth opportunities: Orientated towards growth segments Estate development MAB market share gains 48
Slide 49: Questions & Answers
Questions & Answers Interim Results - 19 May 2005 49
Slide 50: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This announcement contains certain forward-looking statements as defined under US legislation (section 21E of the Securities Exchange Act of 1934) with respect to the financial condition, results of operations and business of Mitchells & Butlers a