Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2006)
42 slides from Mitchells & Butlers's debt investor presentation, Nov 30, 2006
Slide 1: Bond Investor Briefing – Finance Director
Karim Naffah Finance Director Bond Investor Briefing – 30 November 2006
Slide 2: Highlights – 52 weeks to 30 Sept 2006
Highlights – 52 weeks to 30 Sept 2006 z Gross debt outstanding at last year end £1,837m z Gross debt outstanding at this year end £2,455m z EBITDA (reported) £396m z EBITDA (pro-forma*) £394m z Free cashflow £285m z EBITDA DSCR 2.8x z FCF DSCR 2.0x Tap issue in Q4: £655m additional debt £450m FRNs r
Slide 3: Pro-forma EBITDA adjusting for acquisitions/disposals
Pro-forma EBITDA adjusting for acquisitions/disposals Reported EBITDA £396m Full year from 16 acquired pub restaurants £8m Disposals of 100 pubs to Trust Inns (£9m) Other disposals / consented disposals (£4m) Associated reduction in management charge £3m Pro-forma EBITDA (ongoing estate)* £394m 239
Slide 4: Valuation
Valuation Average Value Per Pub £2.8m £2.0m 2003 2006 Estate Valuation £3.85bn £4.83bn LTV 49% 51% 4
Slide 5: Maintenance & Capital Enhancement
Maintenance & Capital Enhancement Securitisation Estate £m Repairs* 32 136 ** Maintenance 104 Enhancement 52 188 Substantial investment to improve estate quality *Charged through Profit & Loss account ** Versus required amount of £101m 5
Slide 6: Free Cash Flow
Free Cash Flow £m EBITDA 396 Tax (43) Required maintenance capital (68) Free cashflow 285 Interest (107) 2.0x Principal repayment (37) Debt Service (144) Maintenance capital (over required) (35) Enhancement capital (net of disposals) (28) Excess cash 78 The restricted payment maximum is now £31m 6
Slide 7: Securitisation Covenants
Securitisation Covenants FY 05 FY 06 Year H1 H2 Year FCF: Debt Service 1.9x 1.9x 2.2x 2.0x EBITDA: Debt Service 2.7x 2.7x 3.0x 2.8x Net Worth £1.28bn £2.21bn Well within required covenants Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Restricted Payment Test. FCF/Debt Service 1
Slide 8: MAB Retail vs MAB plc
MAB Retail vs MAB plc FY06 No. of pubs EBITDA (Year end) MAB plc £430m 2152 MAB Retail (Securitisation) £396m 1847 MAB Retail as % of total 92% 86% Securitisation estate continues to represent over 85% of MAB 8
Slide 9: Financial Highlights
Financial Highlights 52 weeks ended 30 September 2006 % Growth Revenue £1720m 5.5% EBITDA* £430m 6.7% Operating profit* £309m 6.9% Profit before tax* £208m 10.1% EPS (before exceptional items) 29.3p 15.4% EPS (including exceptional items) 39.7p 59.4% Total dividend 12.25p 14.0% Net Operating Margin
Slide 10: Operating Profit Movement
Operating Profit Movement +39 £309m** +£20m £289m* (24) +6 (1) 2005 Trading Regulatory & Acquired SCPD 2006 Energy costs Sites * For 52 weeks before exceptional items and restated for IFRS ** Before exceptional items 10
Slide 11: FY 2006 Expansionary Capital
FY 2006 Expansionary Capital Residential Locals Pub Restaurants £17m £47m Drinks Food led led £8m £0m High Street Restaurants City Centre Incremental ROI on last 2 years investment > 20% Note: Excludes non trading property: £1m 11
Slide 12: Group Points to Note
Group Points to Note z Net debt now: c. £2.5bn Interest cover* c.2.3x Net debt/EBITDA c.5.8x z Dividend Total dividend 12.25p, up 14% Special dividend of £1 per share post year end Progressive policy z Pensions £60m commitment £40m paid in October 12
Slide 13: REIT's
REIT’s z Tax efficient structure for property assets Available from 1 January 2007 z Would require split into two independent companies REIT and OpCo z Cost / benefit equation Tax advantages; conversion charge; other transition costs Stability of new legislation; market ratings of separate e
Slide 14: Summary
Summary z Strong operating performance Growing sales; improving margin Generating high returns on investment z Property appreciation benefits Value-creative disposals Refinancing on attractive terms z Using cash resources profitably Acquired Sites provide additional platform for growth S
Slide 15: John Butterfield, Strategy Director
John Butterfield Strategy Director Bond Investor Briefing – 30 November 2006
Slide 16: Strategy is Delivering
Strategy is Delivering z Customer focused, value and volume strategy z Sustained like for like sales growth z Market share gains z Productivity and purchasing gains z Acquisition gives eating out market leadership z High returns from conversions z Further repositioning of core estate to food Powerfu
Slide 17: Key Levers of Profits Growth
Key Levers of Profits Growth z Leading the growth of eating out Large pubs, uniquely positioned to capture neighbourhood dining growth High volume, capacity management skills Menu development z Accelerating drinks market share gains Extended range, own label, glycol cooling Widening the co
Slide 18: Strong Like-for-Like Sales Growth
Strong Like-for-Like Sales Growth 6% 5% 4.5% 4.2% 4% 4.0% 2.9% 3% 2.6% 2.6% 2% 1% 0% H1* 06 H2 06 Wks 1-7 H1* 06 H2 06 Wks 1-7 Uninvested Same Outlet * 32 weeks to include Easter in both years 18
Slide 19: Profitable Market Share Gains
Profitable Market Share Gains MAB Estimated Volume Growth (1) Market Vol Growth (2) Food + 6% + 4% Wines & Soft Drinks + 6% + 1% Spirits - 4% - 5% Beer & Cider + 1% - 3% (1) Same outlet like for like for 52 weeks vs. equivalent 52 calendar weeks of FY2005 (incl. pubs disposed to Trust Inns in Oct 20
Slide 20: Repositioned to Growth - Product Mix
Repositioned to Growth - Product Mix* Machines 4% Accommodation & Other 6% Spirits 11% Food 35% Wine & Soft Drinks 13% Beer & Cider 31% *Pro-forma including the Acquired Sites and excluding sites disposed in FY06 and to Trust Inns Ltd in Oct 06 20
Slide 21: Rising pub usage by less frequent customers
Rising pub usage by less frequent customers 80 % Of Adults Visiting 70 Monthly 60 50 Weekly 40 30 20 > 3x per week 10 0 1980 1990 2000 2006 44% visit a pub to eat at least once a month Source: TNS Drinks Market Survey & Alcovision 2006 21
Slide 22: Capturing a disproportionate share of the growth in eating out
Capturing a disproportionate share of the growth in eating out Compound Annual Growth 8.0% In Value 2000-2006 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Eating Out Market* Pub Food Market* MAB** * Mintel Pub Catering August 2006 ** excludes the Acquired Sites 22
Slide 23: High food volumes at pub and company level
High food volumes at pub and company level Average food sales per week Average meals per week £14,700 1950 £6,100 930 Pub Restaurants Total Company Pub Restaurants Total Company 96 million meals per annum* * including the Acquired Sites 23
Slide 24: Food Priorities
Food Priorities z Quality on the plate z Value for money z Freshly cooked & healthy z Responding to changing tastes z Catering for all occasions z Build kitchen capability z Prompt and attentive service Create offers that are hard to replicate at home 24
Slide 25: Value for money in all market segments
Value for money in all market segments Average Price of a Main Meal (£s) PREMIUM MID-MARKET MASS MARKET £14 Eagle Rose & Crown Farringdon (Warwick) £12 Beefeater £10 Two Chef & For Brewer One Brewers £8 Fayre Hungry Pizza Horse Express £6 JDW £4 McDonalds £2 £0 Freemasons Saxon Mill Harvester Vintag
Slide 26: Integrated Food and Drinks Economics
Integrated Food and Drinks Economics z Informality and accessibility key to wide social appeal z Strong bar trade is central to profitability z Maximising ancillary drinks sales at the table z Drinks’ higher gross margins and lower employment costs underpin food value proposition Combining higher ma
Slide 27: Drinks Priorities
Drinks Priorities z Widening range Introduce new and innovative speciality beers Wine, soft drinks and cider z Focus on presentation Glassware and serve style z Improve serve quality Glycol cooling systems now in 700 pubs z Develop non-beer drinks Wine, soft drinks Focus on points of differenti
Slide 28: Widening the drinks range
Widening the drinks range Number of Products 2001 2006 +/- Standard Lager 3 7 Premium Lager 4 18 Speciality beer 0 18 Cider 10 18 Total Beer 17 61 +44 Own Label 0 13 Red 32 64 White 66 111 Rose 4 22 Sparkling 12 22 Total Wine 114 232 +118 28
Slide 29: Product Innovation – Draught Wine
Product Innovation – Draught Wine 29
Slide 30: Gaining share in the declining on-trade beer market
Gaining share in the declining on-trade beer market Volume index 1.1 Off-trade volume 1.05 MAB volume 1 On-trade volume 0.95 0.9 2003 2004 2005 2006 Sustainable profitability from market share gains Source: BBPA 30
Slide 31: Widening value gap
Widening value gap Average price of a pint of standard lager £3.00 £2.50 £2.00 £1.50 £1.00 £0.50 £0.00 2004 2005 2006 MAB Managed Tenancies Supermarkets MAB now 18p cheaper than managed competition and 35p cheaper than tenancies Source: AC Neilsen 31
Slide 32: Driving productivity through capacity management
Driving productivity through capacity management z Staff contribution per hour: +4%* z Increasing volumes enable More productive deployment of staff More accurate forecasting and scheduling Increased earnings for staff z Higher capacity utilisation z Since FY 2003: Sales volumes up 13%, Staff
Slide 33: Purchasing gains
Purchasing gains z Unit COGS held flat off-setting: • duty • contractual increases • inflation z Gains from first year of freedom from beer tie z Logistics and technical service costs reduced z Upward pressure on commodity food prices contained Improved purchasing terms enabled reinvestment in highe
Slide 34: MAB locations positioned in higher growth markets
MAB locations positioned in higher growth markets Affluent Commuter Belts City Centres/Town Centres and Urban Areas 25% of sales 24% of sales Disadvantaged Inner Cities/Ex Industrial Areas 4% of sales Mass Market Housing Estates and Students Mid-Market Suburbia 14% of sales 33% of sales In 1990, c70
Slide 35: Acquired Sites – Conversion Progress in line with expectations
Acquired Sites – Conversion Progress in line with expectations z Intensive pre-acquisition preparations z Rapid implementation of site appraisals and conversions z 25 sites reopened: 10% of estate z 50 sites to have reopened by Christmas: 21% of estate z c.100 sites to have reopened by Easter: 40% o
Slide 36: Growth in Pub Restaurants
Growth in Pub Restaurants z c.180 sites from Acquired Sites z Neighbourhood, casual dining growth in mid market suburbs Market leading food volumes: Harvester: 2,200 meals / pub / week Toby: 2,500 meals / pub / week Harvester, Windsor Pub Carvery: 2,550 meals / pub / week z Segmenting the co
Slide 37: Residential Pubs
Residential Pubs z Major drinks market share gains z Repositioning to food: 20% sales mix z 2nd half like for like food sales up 13% z 50 conversions to Sizzling Pub Co and Ember in 06/07 The Fieldhouse, Ember - Solihull z Disposed smaller pubs with limited food prospects The Barley Mow, Sizzling Pu
Slide 38: High Street / City Centre Markets
High Street / City Centre Markets z 25% of total sales z Central London: buoyant trading z Town Pubs: strong growth z Circuit venues: competition from later hours in local pubs z Maximise food opportunity Blackfriar, Nicholson’s – Central London Same outlet like for like sales up 2.3% 38
Slide 39: Smoking Ban and Licensing Reform
Smoking Ban and Licensing Reform Smoking z Scottish experience weeks 1-7* Food sales +7% Drinks sales -2% z 80% of the England & Wales estate has external areas z Attracting new food customers to smoke free pubs Licensing z Marginally positive for sales in FY06 z Helping reduction in alcohol related
Slide 40: Outlook
Outlook z Good start to new financial year z Consumer demand above expectations in 2006 z Further polarisation in demand trends Strong food and ancillary drinks growth Beer decline intensifying z Priority of successfully converting acquired sites z Pipeline of c.400 investment opportunities in c
Slide 41: Summary
Summary z Eating out market leadership z Widening drinks market share gains z Scale productivity and purchasing gains z Powerful consumer formats generating high returns z Conversion pipeline z Generating and capturing asset appreciation Focus on long term, sustainable, real growth 41
Slide 42: Questions & Answers
Questions & Answers Bond Investor Briefing – 30 November 2006
Mitchells & Butlers — Debt Investor Presentation (November 2006) on 6ix