Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — FY2018 Earnings Presentation
34 slides from Mitchells & Butlers's earnings presentation, 2018
Slide 1: Full Year Results 2018
Full Year Results 2018 –1–
Slide 2: Financial Review FY 2018 – Tim Jones, CFO
Financial Review FY 2018 Tim Jones Chief Financial Officer –2–
Slide 3: Key messages
Key messages • Sustained like-for-like sales growth ahead of the market • Profit growth in the second half • Trading strong for first 7 weeks of FY 2019, with sales up 2.2% • Cost headwinds and economic uncertainty remain • Momentum building from second wave of initiatives • Prioritising estate inve
Slide 4: Income Statement (before adjusted items)
Income Statement (before adjusted items) FY 2018 FY 2017 52 week 53 week £m £m Revenue 2,152 2,180 Operating costs (1,849) (1,866) Operating profit 303 314 Interest (118) (124) Pensions finance charge (7) (7) Profit before tax 178 183 Operating margin 14.1% 14.4% Earnings per share 34.1p 34.9p –4–
Slide 5: Income Statement (before adjusted items)
Income Statement (before adjusted items) FY 2018 FY 2017 Movement 52 week 52 week 52 week £m £m % Revenue 2,152 2,141 0.5% Operating costs (1,849) (1,833) Operating profit 303 308 (1.6%) Interest (118) (121) Pensions finance charge (7) (7) Profit before tax 178 180 (1.1%) Operating margin 14.1% 14.4
Slide 6: Like-for-like sales
Like-for-like sales Week Week Week Week 1-7 1 – 32* 33– 52 1 – 52 FY 2019 Food 1.0% (0.6%) 0.3% 1.8% Drink 1.9% 3.5% 2.6% 2.7% Total 1.4% 1.2% 1.3% 2.2% • Sales growth driven by increase in spend per item in part reflecting premiumisation of the estate • H2 food and drink performance impacted by wea
Slide 7: Inflationary cost headwinds
Inflationary cost headwinds FY 2019 £m Food/ drink Labour Property Energy Other • Mitigation of £28m in FY 2018 through procurement, labour, capital plan efficiency and other site level initiatives • FY 2019 cost headwinds anticipated to be marginally stronger impacted by energy, wages and food infl
Slide 8: Adjusted EBIT movement
Adjusted EBIT movement +£21m +£15m £(7)m £(2)m +£28m £(60)m FY 2017 Inflationary Cost savings Like-for-like FY 2017 FY 2018 FY 2017 FY 2018 £308m cost and trading* openings openings Disposals £303m headwinds efficiencies and and remodels remodels * Includes impact of snow –8–
Slide 9: Property estate valuation
Property estate valuation • Estate > 80% freehold and long-leasehold sites • 20% of sites inspected per annum • Short leaseholds assessed for impairment • Total value of £4.4bn (FY 2017 £4.4bn) FY 2018 FY 2017 £m £m Revaluation (28) (51) Income Statement Other Impairment (15) (17) Impairment of asse
Slide 10: Capital expenditure and returns
Capital expenditure and returns FY 2018 FY 2017 # # £m £m sites sites Remodels - refurb 63 188 42 143 Remodels - expansionary 7 13 14 31 Conversions 21 31 39 78 Acquisitions – freehold 7 2 3 1 Acquisitions – leasehold 3 5 18 12 Total return generating capital 101 239 116 265 Maintenance and infrastr
Slide 11: Capital expenditure and returns
Capital expenditure and returns Remodel profile of estate • Now on a 6-7 year investment cycle • Reducing the average time since remodel across the estate • Still a tail of (largely wet-led) sites over 10 years since last investment Site profile of last investment • After 2020 reach steady state – 1
Slide 12: Cash flow
Cash flow FY 2018 FY 2017 £m £m EBITDA before adjusted items 422 429 Working capital / non cash items 7 (10) Pension deficit contributions (48) (46) Cash flow from operations 381 373 Cash flow from adjusted items (2) - Capital expenditure (171) (169) Net interest paid (119) (121) Tax (20) (26) Dispo
Slide 13: Capital allocation and cash flow policy
Capital allocation and cash flow policy • Mandatory fixed charges on cash generation include debt service (c.£200m pa) and pension contributions (c.£48m pa) • Remaining cash allocation priorities: - Investment in the estate to remain competitive; and - Maintaining a strong balance sheet • Dividends
Slide 14: Deleveraging capital structure
Deleveraging capital structure £m Current enterprise value 0 • Illustrative example over 10 years • Based on 2016 pensions triennial agreement and mandated bond amortisation – 14 –
Slide 15: Summary
Summary • Sustained like-for-like sales growth ahead of the market • Profit growth in the second half • Trading strong for first 7 weeks of FY 2019, with sales up 2.2% • Cost headwinds and economic uncertainty remain • Momentum building from second wave of initiatives • Prioritising estate investmen
Slide 16: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 16 –
Slide 17: Market environment
Market environment • Ongoing Brexit impact uncertainty • Sector impacted by living wage, business rates, cost of goods, statutory energy costs, apprenticeship levy, sugar tax etc. • Restaurant supply growth starting to abate • Pressures are resulting in a number of CVAs and closures – 17 – Source: C
Slide 18: Market size and share
Market size and share Number of people eating out Average frequency Average spend per visit M&B accounts for <4% of market turnover Source: Eating Out In the UK Report 2018: MCA – 18 –
Slide 19: Like-for-like sales versus market
Like-for-like sales versus market 7% Snow 6% 5% World Cup 4% 3% 2% 1% 0% (1%) (2%) (3%) (4%) (5%) (6%) (7%) FY16 FY17 FY18 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 19 –
Slide 20: Ignite
Ignite 2 • Renewed programme of work with multiple workstreams • Project office and governance routine now in place focusing on maximising and safeguarding value created from each workstream • A number of initiatives already implemented and others are longer term – 20 –
Slide 21: Strategic priorities
Strategic priorities Build a more Instil a more Drive 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 - New
Slide 22: Cashless sundries and IntelliQ
Cashless sundries and IntelliQ • Removal of cash expenditure for sundry expenses within businesses: - Heightened visibility of spend - Enable opportunity to use scale to reduce costs - Trial complete, roll out in FY 2019 • Introduction of interrogative software: - Analyses all transactions identifyi
Slide 23: Menus
Menus • Rationalisation of products, removing ingredients not widely used on the menu and creating waste • Review of menu psychology • Use of consumer insight to ensure menu appeal – 23 –
Slide 24: Stock
Stock • Updated stock system will enable: - Remote stock counting: use of bar scanning which automatically syncs with the live stock system to enable more flexible and faster counting - Auto-ordering: system generated suggested orders based on individual site trading history - Prep & par systems: gu
Slide 25: Digital
Digital • Technology is evolving consumer behaviour • Workstream to enable more agile adoption of new technologies • New CRM system in place • Recommendations of alternative M&B venues when fully booked • Payment from mobile device enabled across all brands • Order at table from mobile device triall
Slide 26: People
People • Engagement scores are up across all cohorts • Turnover at manager level has reduced by 2.6ppts • Kitchen manager turnover has reduced most significantly • 1,800 apprentices in the business across retail and corporate schemes – 26 –
Slide 27: A lot of ground covered
A lot of ground covered • Miller & Carter to >100 sites • Responding to 93% of online reviews through reputation.com • 131 sites offering delivery through Just Eat and Deliveroo • Table and kitchen management systems integrated into business • 130k online bookings a week • Award winning digital lear
Slide 28: Further innovation
Further innovation • Exploring joint venture opportunities with agreement in place with Ego Restaurants • First Miller & Carter site in Germany to open 2019 • New innovation being continuously explored and trialled and fed into main business where appropriate – 28 –
Slide 29: Summary
Summary • Sustained like-for-like sales growth ahead of the market • Profit growth in the second half • Trading strong for first 7 weeks of FY 2019, with sales up 2.2% • Cost headwinds and economic uncertainty remain • Momentum building from second wave of initiatives • Prioritising estate investmen
Slide 30: Questions
Questions
Slide 31: Full Year Results 2018 Supplementary Slides
Full Year Results 2018 Supplementary Slides – 31 –
Slide 32: FY 2018 – Outlet reconciliation
FY 2018 – Outlet reconciliation Total Managed1 Franchised Total MAB Opening outlets (start FY 2018) 1,695 59 1,754 Transfers (2) 2 - Disposals (10) (1) (11) Acquisitions 7 - 7 Closing outlets (end FY 2018) 1,690 60 1,750 Notes: 1. FY 2018 closing managed total includes 3 non-trading sites. 2. Lodges
Slide 33: FY 2018 – Financial covenants summary
FY 2018 – Financial covenants summary Securitisation Restricted Payments Tests Test Actual (Relevant Year) Headroom Free cash flow to debt service 1.3x 1.4x £20m EBITDA to debt service 1.7x 1.8x £17m Securitisation Covenants Covenant Actual (Relevant Year) Headroom Free cash flow to debt service 1.1
Slide 34: FY 2018 – Securitisation profile
– 34 – Sep-36 Sep-35 Sep-34 Sep-33 Sep-32 Sep-31 Sep-30 Sep-29 Sep-28 Debt Service Sep-27 FY 2018– Securitisation profile Sep-26 Sep-25 Sep-24 Sep-23 Sep-22 Sep-21 Sep-20 Sep-19 Sep-18 £ms (250.00) (200.00) (150.00) (100.00) (50.00) 0.00