Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — H1 2017 Earnings Presentation
31 slides from Mitchells & Butlers's earnings presentation, May 2017
Slide 1: Half Year Results 2017
re Mitchells ~~ & Butlers Half Year Results 2017
Slide 2: Financial Review H1 2017
Financial Review H1 2017 Tim Jones Finance Director –2–
Slide 3: Income Statement
Income Statement H1 2017 H1 2016 £m £m Revenue 1,123 1,096 2.5% Operating costs (974) (940) Operating profit 149 156 (4.5)% Interest (66) (68) Pensions finance charge (4) (6) Profit before tax 79 82 (3.7)% Operating margin 13.3% 14.2% (0.9) ppts Earnings per share 15.2p 15.7p (3.2)% –3–
Slide 4: Like-for-like sales
Like-for-like sales Week Week Week Week 1 – 15 16 – 28 1 – 28 1 – 33 Food 1.6% (0.1)% 0.8% 1.4% Drink 1.7% 3.2% 2.3% 2.4% Total 1.7% 1.4% 1.6% 1.9% • Strong recovery in LFL sales across the estate from prior year • Half year results are impacted by Easter moving to second half • Sales growth driven
Slide 5: Building sales momentum
Building sales momentum Total like-for-like sales Uninvested like-for-like sales Weeks 1 – 33 (0.5)% Weeks 1 – 33 +1.9% Oct 2015 May 2017 Oct 2015 May 2017 Rolling 12-week average ● Improvement in sales trend including uninvested estate ● Continuation of market outperformance –5–
Slide 6: EBIT movement
EBIT movement +£13m £(10)m £(4)m £(6)m FY 2016 FY 2017 Like-for-like H1 2016 Easter H1 2017 openings and openings and trading; £156m movement £149m remodels remodels mainly inflationary costs –6–
Slide 7: Inflationary cost headwinds unchanged
Inflationary cost headwinds unchanged • Inflationary cost headwinds remain in line with previous guidance: £m FY17 Food/ drink (including Labour Property Energy Other currency impact) • FY18 outlook for similar overall rate of cost inflation (notably wages, business rates, auto-enrolment, sugar tax,
Slide 8: Group Cash Flow
Group Cash Flow H1 2017 H1 2016 FY 2016 £m £m £m EBITDA before adjusted items 210 217 431 Working capital / non cash items - - (7) Pension deficit contributions (23) (26) (49) Cash flow from operations 187 191 375 Capital expenditure (93) (88) (167) Net interest paid (60) (62) (125) Tax (11) (8) (28
Slide 9: Capital expenditure and returns
Capital expenditure and returns • Increase in return generating capex investment reflecting revised estate plan and reduced remodel lifecycle • Partly funded by a reduction in maintenance and infrastructure investment • Annual EBITDA return for conversion and acquisition projects of 18%, with recent
Slide 10: Summary
Summary • Strong improvement in sales across the estate • Movement of Easter will now help the second half • Inflationary cost headwinds remain strong putting margins under pressure • Unchanged interim dividend at 2.5p per share • Pension negotiations ongoing, will update once concluded – 10 –
Slide 11: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 11 –
Slide 12: The Macro Environment – The Consumer
The Macro Environment – The Consumer ● Positive performance against uncertain economic backdrop Consumer confidence Disposable income growth Brexit Source: GFK Source: Asda Income Tracker ● Consumer confidence remains low ● Consumer spending has remained in driven by macro economic concerns growth h
Slide 13: The Macro Environment - Inflation
The Macro Environment - Inflation Inflation ● Inflationary cost environment unchanged: - Cost headwinds remain and are in line with previous guidance - Food inflation accelerated by supply issues and foreign exchange - Pricing: market has begun to respond to increasing costs Source: CPI ONS, FPI Pre
Slide 14: The Market Context
The Market Context Supply Discounting Restaurant Supply Growth Competitor ad. 2011 2012 2013 2014 2015 2016 Source: CGA Peach ● Slow down in restaurant openings ● Widespread discounting during quieter ● Instances of new brands closing sites or periods disguises some of the pricing slowing growth imp
Slide 15: First half sales
First half sales ● Continued positive sales momentum: - Sales improved in uninvested estate - Strong performance over key dates - Operating margin down 0.9ppts - YTD total sales up 2.6% - YTD like-for-like sales up 1.9% ● Easter movement distorts financial performance of H1 – 15 –
Slide 16: Like-for-like sales versus market
Like-for-like sales versus market 7% 6% 5% 4% 3% 2% 1% 0% (1%) (2%) (3%) (4%) (5%) Oct Apr Oct Apr 2015 2016 2016 2017 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 16 –
Slide 17: Our Performance – Improvement across portfolio
Our Performance – Improvement across portfolio Change in brand like-for-like: H1 2016 vs H1 2017 ● Improvement in brand LFL sales performance across the majority of brands ● Sales growth is not all capital driven – 17 –
Slide 18: Recap on three priorities
Recap on three priorities Build a more Instil a more Driving an balanced business commercial culture innovation agenda - Brand propositions - Profitable sales - Build on technology investment - Conversion to successful formats - Core operational drivers - Digital marketing - Upgraded amenity in core
Slide 19: Build a more balanced business
Build a more balanced business Increase Premium element of business ● Proposition led by insight-driven brand review process ● Estate plan model developed supporting long term strategy ● On track to achieve 6-7 year investment cycle – 19 –
Slide 20: Build a more balanced business
Build a more balanced business ● Focus on premiumisation of estate and upgrade of amenity ● 67 Miller & Carter sites now open (15 opened YTD) ● 72 Stonehouse Pizza & Carvery conversions now open (34 opened YTD) ● Harvester Feel Good Dining concept in 55 sites (23 opened YTD) ● Disposal of 78 sites p
Slide 21: Instil a more commercial culture
Instil a more commercial culture ● New divisional structure embedded ● Improved sales forecasting enabling better 6 0 (0) cost management 0 (0) 0 (0) ● Time and Attendance enabled through 0 (0) system upgrade 2 ● Team flexibility facilitated through technology 01 – 21 –
Slide 22: Instil a more commercial culture – Guest care
Instil a more commercial culture – Guest care ● Online tool which consolidates all digital feedback launched ● Increased engagement from teams and increased positive ratings ● Over 40k feedback and review comments per month ● In March we responded to 82% of comments vs. 40% this time last year – 22
Slide 23: Reputation score
Instil a more commercial culture – Guest care Increase LFL sales Decrease complaints ratio Increase guest satisfaction Reputation score ● Positive link between ratings and other key output metrics – 23 –
Slide 24: Instil a more commercial culture – Profitable sales
Instil a more commercial culture – Profitable sales ● Pricing strategy - Menu development with opportunities to increase spend per head - Utilise data to drive pricing decisions ● Central procurement leverages scale - Product substitution - Joint procurement ● Commercial ethos - Second wireless devi
Slide 25: Driving an innovation agenda – Technology and digital
Driving an innovation agenda – Technology and digital Online bookings – average per week Guest digital experience ● Continued focus on bookings ● Mobile payment through Flypay ● Focus on improving booking journey ● Order at table facility under development through integrated table management and ● U
Slide 26: Driving an innovation agenda – Technology and digital
Driving an innovation agenda – Technology and digital ● 6 brands now have apps live ● 825k downloads ● Browns is the latest app to be launched and includes a loyalty mechanic ● Number of loyalty mechanics being tested – 26 –
Slide 27: Driving an innovation agenda – Delivery
Driving an innovation agenda – Delivery ● 55 sites now live on Deliveroo ● Average sales per week at £300 a site ● 7 of top 10 performing sites outside major cities ● New concepts demand is particularly high ● Trial with new partners to access more of this growing market ● Opportunity in up to 25% o
Slide 28: Driving an innovation agenda – New concepts
Driving an innovation agenda – New concepts ● Two new trial concepts now open, monitoring and refining the offers ● Process of development bringing progressive thinking to existing brands ● Further new concepts currently in development – 28 –
Slide 29: People
People ● Turnover • Total pub staff turnover reduced by 2.6% in H1 ● Engagement • 1,500 more responses than last year • Total engagement up 3% • Improved scores for every cohort ● Focus on recruiting and training apprentices • 2,000 apprentices on our programme • 600 new apprentices recruited in H1
Slide 30: Summary
Summary ● Encouraging like-for-like sales momentum ● Inflationary cost headwinds remain ● Strong progress made and continuing on all three strategic priorities – 30 –
Slide 31: Questions
QUESTIONS.