Marston's Plc · LSE:MARS
Marston's — FY2019 Earnings Presentation
44 slides from Marston's's earnings presentation, 2019
Slide 1: Preliminary Results 2019
Preliminary Results 2019
Slide 2: Introduction
Marston’s PLC Preliminary results 2019 2 INTRODUCTION 1. 2019 performance • Revenue growth in all trading segments • 6th consecutive year of LFL sales growth in pubs • Earnings growth in drinks-led businesses offset by weaker food sales • Brewing continued to build on record 2018 • Cash flow improve
Slide 3: Focused Strategy, Clear Targets
Marston’s PLC Preliminary results 2019 3 FOCUSED STRATEGY, CLEAR TARGETS PUBS BREWING Balanced pub Quality Leading Leading portfolio estate brands service Food-led Focused investment Premium ale Well invested, Wet-led Format development Regional beers skilled supply Premium Disposals Craft beers cha
Slide 4: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer
Slide 5: Financial Summary
Marston’s PLC Preliminary results 2019 5 FINANCIAL SUMMARY 2019 YOY Revenue* £1,174m +3% Growth in all trading divisions EBITDA* £222m - Growth in Taverns and Beer Company Operating profit* £179m (2)% Growth in Taverns and Beer Company PBT* £101m (3)% EPS* 13.5 pence (3)% Final dividend 4.8 pence -
Slide 6: Managed and Franchised Like-for-Like Performance
Marston’s PLC Preliminary results 2019 6 MANAGED AND FRANCHISED LIKE-FOR-LIKE PERFORMANCE +4 3.8% 2.4% LFL 1.9% sales % 1.1% 0.8% 0.6% 2015 2016 2017 2018 2019 (1) Destination and Premium Managed and Franchised Taverns Total Solid start to 2019/20 – LFL sales in growth and Christmas bookings up Bala
Slide 7: Pub Segmentation
Marston’s PLC Preliminary results 2019 7 PUB SEGMENTATION Operating profit No. of Average no. Average profit per 2019 £m pubs of pubs pub vs LY%* Destination and Premium 87.1 412 409 (4) Taverns 86.3 1,125 1,132 +2 Total 173.4 1,537 1,541 - Pub EBITDAR £m +11% 218 220 213 208 200 198 150 +18% 100 20
Slide 8: Beer Company
Marston’s PLC Preliminary results 2019 8 BEER COMPANY Turnover: £389m 3% Operating profit: £33m 2% • Profit growth despite tough PY comparative • Strong performances in independent free trade, off trade ale and contract distribution (new 2019 contracts) • Weaker off-trade lager sales vs Summer 2018
Slide 9: Cost Guidance
Marston’s PLC Preliminary results 2019 9 COST GUIDANCE 2020 Drink c.2% • c.90% contracted for 2020 Food c.2% • c.90% contracted for 2020 Brewing raw materials c.2% Energy inflation c.3% • c.95% commodity contracted to Spring 2021 Labour cost inflation - National Minimum Wage 3-4% - National Living W
Slide 10: Cash Flow Summary
Marston’s PLC Preliminary results 2019 10 CASH FLOW SUMMARY 2019 2018 £m £m Operating cash flow 196 183 Net interest (75) (80) Pre-investment FCF 121 103 Organic capex (85) (100) Disposals 50 47 Dividend (48) (48) FCF pre new-build and acquisitions 38 2 New-build and acquisitions (49) (63) Net under
Slide 11: Evolution of Debt Structure
Marston’s PLC Preliminary results 2019 11 EVOLUTION OF DEBT STRUCTURE 2019 Target £m £m Securitised (amortisation profile to 2035) 745 c.600 Medium Term Facility (£400m facilities to 2023/4) 296 c.240 Property leasing (35-40 year financing) 358 c.360 Net Debt (pre IFRS16)* 1,399 c.1,200 Leverage 6.3
Slide 12: Capex
Marston’s PLC Preliminary results 2019 12 CAPEX £m 2019 2020 YOY 2021 (forecast) change (forecast) Maintenance capex 50 50 - 40-45 Growth capex: Target 20% ROI 35 35 - 35 Organic Capex 85 85 - 75-80 New-site 49 10 (39) - Total Capex 134 95 (39) 75-80 Disposals (50) (70) (20) (40) Net Capex 84 25 (59
Slide 13: Property and Disposals
Marston’s PLC Preliminary results 2019 13 PROPERTY AND DISPOSALS 2020 DISPOSALS • 137 non-core leased, tenanted and franchise pubs Project Harvest £45m • Profit per pub and ROC accretive • Strong visibility Target disposals £25m • Expected to achieve book value £70m • Impairment of lowest performing
Slide 14: Net Asset Value
Marston’s PLC Preliminary results 2019 14 NET ASSET VALUE 160 +6p (11)p Gilt Yield Driven 151p (9)p (9)p 128p 100 2018 Underlying Asset Pension Swap MTM 2019 earnings impairment Gilt yields impacting reported NAV
Slide 15: IFRS 16 – Lease Accounting
Marston’s PLC Preliminary results 2019 15 IFRS 16 – LEASE ACCOUNTING 1. Accounting change • No impact on cash flows or business decision making • H1 2020 will be the first reporting period to be reported under IFRS 16 • Modified approach adopted 2. Financial Impact • Income Statement - C.8% reductio
Slide 16: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer
Slide 17: Market Dynamics
Marston’s PLC Preliminary results 2019 17 MARKET DYNAMICS Consumer Sector Economic, Political • Spend is up • M&A – pubs and brewing • High employment, wage - drinks-led vs food-led • Structural change growth • Experience - Supply reducing • Low gilt yields • Health awareness • Cost pressures • Livi
Slide 18: Pubs – A Balanced High Quality Portfolio
Marston’s PLC Preliminary results 2019 18 PUBS – A BALANCED HIGH QUALITY PORTFOLIO Community 1,209 pubs Family/food 284 pubs Premium 44 pubs and bars The Royal Oak, Wolverhampton Lost & Found, Leeds The Oddfellows, Wolverhampton • Reduced market supply • Competitive market • High Street and Country
Slide 19: 'Raising the Bar' in Commercial Excellence
Marston’s PLC Preliminary results 2019 19 ‘RAISING THE BAR’ IN COMMERCIAL EXCELLENCE 1. Reduced complexity • Creation of Marston’s Pubs & Bars • Clear customer segmentation - community, family, signature, premium • Format and menu rationalisation – underway • Single commercial team – in place - Ways
Slide 20: Focused Investment in Experience and Premiumisation
Marston’s PLC Preliminary results 2019 20 FOCUSED INVESTMENT IN EXPERIENCE AND PREMIUMISATION Family pubs Premium Premium Signature Revere Country Bars The Folly, Bristol Huntsman, Brockenhurst Lost & Found, Sheffield • £0.2m spend in Dec 2018 • £0.8m spend in 2016 • £0.3m conversion in Jan 2018 • S
Slide 21: Lost & Found, Sheffield Lazy Pig in the Pantry, Chesham Pitcher & Piano, Cornhill
Lost & Found, Sheffield Pitcher & Piano, Cornhill Lazy Pig in the Pantry, Chesham White Hart, Godstone
Slide 22: Focused Investment in Pub Standards
Marston’s PLC Preliminary results 2019 22 FOCUSED INVESTMENT IN PUB STANDARDS 1. Project Showman – 43 pubs, £2.1m : pub standards, inside and out • Dog & Duck, Shardlow Spend: £46k MAT sales: +18% Return: 139% ROC 2. Project Hatton – 25 pubs, £1m : gardens • Red Hawk, Brough Spend: £40k per pub MAT
Slide 23: Focused Investment – Community Pub Acquisition
Marston’s PLC Preliminary results 2019 23 FOCUSED INVESTMENT – COMMUNITY PUB ACQUISITION • 15 pubs acquired from Aprirose in October 2018 • £4m investment in repositioning • Average turnover £13k per week vs. £7k at acquisition • Trading ahead of 25% ROC target at time of acquisition Hesketh Arms, P
Slide 24: Guest Focus - Digital Technology Innovation
Marston’s PLC Preliminary results 2019 24 GUEST FOCUS - DIGITAL TECHNOLOGY INNOVATION • Local pub information and 1000’s of pieces of localised New and existing customers receive more offer data held centrally for communications created using relevant communications directly from their templated des
Slide 25: Guest Focus – Guest Insight
Marston’s PLC Preliminary results 2019 25 GUEST FOCUS – GUEST INSIGHT 1. Marston’s Pubs & Bars – new experience management provider • SMG • Real time guest feedback through dashboard and mobile app 2. Premium Pubs & Bars • Feed it Back - Mobile and kitchen connectivity in real time - New standard in
Slide 26: Team Focus – Motivated Teams
Marston’s PLC Preliminary results 2019 26 TEAM FOCUS – MOTIVATED TEAMS 1. Recruitment • Launch of new recruitment and partner websites • Caterer.com Hospitality Apprenticeship Employer of the Year 2. Retention • KPI targets – reduced turnover in key roles • Redesigned on-boarding platform for new jo
Slide 27: Beer Company – In Growth, Industry Leading
Marston’s PLC Preliminary results 2019 27 BEER COMPANY – IN GROWTH, INDUSTRY LEADING 1. Strong brands in growth segments of the market • 14% of UK ale market, 25% of premium ale market • 81% of portfolio rated as ‘premium’ • 7% of UK ‘World Beer’ market: World Lager, US Craft 2. Wide distribution ac
Slide 28: Beer Company – Premium Ale
Marston’s PLC Preliminary results 2019 28 BEER COMPANY – Premium Ale Why premium? – premiumisation trend, margin, quality
Slide 29: Beer Company – World Beers - Our Licensed Brands Portfolio
Marston’s PLC Preliminary results 2019 29 BEER COMPANY – World Beers - our licensed brands portfolio World beer increased volume by 6% in 2019
Slide 30: Licensed Brand Development - Shipyard
Marston’s PLC Preliminary results 2019 30 LICENSED BRAND DEVELOPMENT - SHIPYARD Shipyard Volume (HL) 100k 0 2012 2013 2014 2015 2016 2017 2018 2019 • Currently #4 Craft beer brand - aspiration to be #1 in the UK • Launch of the premium low alcohol Shipyard Low Tide in 2019 • Pipeline of new product
Slide 31: Brand and Distribution Partnership - Young's
Marston’s PLC Preliminary results 2019 31 BRAND AND DISTRIBUTION PARTNERSHIP - YOUNG’S • A portfolio fit for purpose – satisfying the traditional Young’s drinker whilst creating appeal for the younger consumer • The “Take London Head On” ATL campaign celebrates Young’s London roots. Double-digit gro
Slide 32: Environmental Strategy
Marston’s PLC Preliminary results 2019 32 ENVIRONMENTAL STRATEGY Externally recognised environmental programme • Improved ESG score • EMA – Energy Management Team of the Year • National recycling awards – Partnership Excellence • Footprint Drinks Sustainability Awards • Sustainable Use of Water • Wa
Slide 33: Summary
Marston’s PLC Preliminary results 2019 33 SUMMARY 1. 2019 • Strong performance from wet-led pubs and brewing • Cash flow improvement • Maintained sustainable dividend 2. Focused strategy • Clear target on debt reduction – good progress • Pubs: “Raising the Bar” through organic self-help and focused
Slide 34: Appendices
Appendices
Slide 35: IFRS16
Marston’s PLC Preliminary results 2019 35 IFRS16 • Also impacts other leased assets eg. company cars, coffee machines • Average unexpired lease term c.25 years reflecting long-dated nature of leases. • Estimated impact of 2020 results £ Income statement • Lease related payments (16-17)m • Depreciati
Slide 36: Financial Summary – Statutory Basis
Marston’s PLC Preliminary results 2019 36 FINANCIAL SUMMARY – STATUTORY BASIS 2019 2018 Revenue £1,174m £1,141m Operating profit £106.5m £133.4m PBT £(20.0)m £54.3m EPS (2.8) pence 7.1 pence
Slide 37: Segmental Profit
Marston’s PLC Preliminary results 2019 37 SEGMENTAL PROFIT 2019 £m 2018 £m YOY % Turnover Destination & Premium 460.1 450.7 2.1% Taverns 324.1 312.0 3.9% Beer Division 389.3 377.7 3.1% Total 1,173.5 1,140.4 2.9% EBITDA Destination & Premium 104.4 105.8 (1.3)% Taverns 96.3 95.3 1.0% Beer Division 44.
Slide 38: Pub Numbers
Marston’s PLC Preliminary results 2019 38 PUB NUMBERS Destination and Taverns Total Premium 2018 Closing 406 1,139 1,545 New-build additions/Acquisitions 8 16 24 Transfers - - - Disposals (2) (30) (32) 2019 Closing 412 1,125 1,537 2018 average numbers 402 1,155 1,557 2019 average numbers 409 1,132 1
Slide 39: Historical Total LFL
Marston’s PLC Preliminary results 2019 39 HISTORICAL TOTAL LFL Destination Taverns Total and Premium 52 wks to 04/10/14 3.1% 2.1% 2.8% 52 wks to 03/10/15 1.8% 2.0% 1.9% 52 wks to 01/10/16 2.3% 2.7% 2.4% 26 wks to 01/04/17 1.1% 1.1% 1.1% 52 wks to 30/09/17 0.9% 1.6% 1.1% 16 wks to 20/01/18 (0.9%) 2.6
Slide 40: Capex, Depreciation, Tax and Share Capital
Marston’s PLC Preliminary results 2019 40 CAPEX, DEPRECIATION, TAX AND SHARE CAPITAL Forecast Actual 2019 2020 New-build capex £49m c.£10m Organic capex £85m c.£85m Total £134m c.£95m Disposals £50m c£70m Net capex £84m c£25m Tax rate 15.2% c16% Average number of shares in 2019 632.6m Shares in issu
Slide 41: Securitised Debt Profile
Marston’s PLC Preliminary results 2019 41 SECURITISED DEBT PROFILE Principal Final maturity Tranche Type outstanding at Step-up date date 28 September 2019 A1 Floating £18.8m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £161.6m October
Slide 42: Securitisation Profile
Marston’s PLC Preliminary results 2019 42 SECURITISATION PROFILE Securitised Debt Service 90 Max £81.5m Debt Service 80 70 A3 step up 60 A2, B step up Principal 50 £m 40 Interest 30 20 10 0 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year FY2020 FY2021 FY2022 FY2023
Slide 43: CROCCE
Marston’s PLC Preliminary results 2019 43 CROCCE CROCCE FY2019 FY2018 FY2017** FY2016 FY2015 FY2014 NON-CURRENT ASSETS: Bal Depn Reval Adj Bal Depn Reval Adj Adj Adj Adj Adj Goodwill 230.3 230.3 230.3 230.3 230.3 227.5 227.5 224.2 Other intangible assets 88.5 6.3 94.8 70.0 6.2 76.2 74.4 44.8 44.2 30
Slide 44: New Look, Still Ugly
HOBGOBLIN ; yay, pail S| eo is 4 OBGOBLIN mE 455 RUBY sn x) oe i = —_ ca oS Mm | Hoacosu | HoBG