Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — FY2004 Earnings Presentation
46 slides from Mitchells & Butlers's earnings presentation, Dec 1, 2004
Slide 1: Roger Carr, Chairman
Roger Carr Chairman 1 December 2004
Slide 2: Karim Naffah, Finance Director - Preliminary Results
Karim Naffah Finance Director Preliminary Results 1 December 2004
Slide 3: Financial Highlights
Financial Highlights z Turnover £1,560m up 3.7% z Operating profit* £285m up 3.6% z Profit before tax* £184m down 7.5% z EPS* 22.2p up 21% z Final dividend per share 6.65p up 18% * Adjusted to exclude exceptional items. 2003 comparative, proforma figures 3
Slide 4: FY 2004 Results - Summary
FY 2004 Results - Summary FY 04 FY 03* £m £m EBITDA 393 374 + 5.1% Operating Profit 285 275 + 3.6% Interest (101) (76) PBT 184 199 (7.5)% Tax (60) (64) Earnings 124 135 (8.1)% EPS 22.2p 18.4p + 20.7% Average no. of shares 559m 735m (24)% Note: All numbers are stated pre-exceptional items * Proforma
Slide 5: Presentational Points to Note
Presentational Points to Note z First full financial year as independent PLC Proforma comparative for 2003 z FRS 5 Turnover recorded net of coupons and staff discounts Sales comparative reduced by £9m – no profit impact z Reporting to Debt Investors Covers securitised estate from 13 November
Slide 6: Operating Performance
Operating Performance FY 04 FY 03 £m £m Turnover Pubs & Bars 913 873 + 4.6% Retail Restaurants 641 614 + 4.4% +4.5% SCPD 6 17 1,560 1,504 + 3.7% Operating Profit* Pubs & Bars 180 177 + 1.7% Retail +4.0% Restaurants 104 96 + 8.3% SCPD 1 2 285 275 + 3.6% Note: 2003 turnover restated on the adoption of
Slide 7: Retail Sales Growth
Retail Sales Growth FY 04 Total Sales Same Outlet* Pubs and Bars + 4.6% + 4.6% Restaurants + 4.4% + 7.0% Total Retail + 4.5% + 5.6% z Differences in growth rates due to: Pub disposals and transfers to franchise New sites acquired Transfers from Restaurants to Pubs & Bars *Same outlet like for
Slide 8: Like-for-Like Sales
Like-for-Like Sales FY 04 Same Outlet (Invested + Uninvested) Residential + 6.6% High Street + 3.4% Total + 5.6% Uninvested Residential + 4.8% High Street + 1.5% Total + 3.8% H2 like for likes reflect wks 33-52 to exclude Easter from both periods. All figures restated for the amendment to FRS 5 8
Slide 9: Balancing Sales Growth & Margin
Balancing Sales Growth & Margin FY 04 H2 04 Uninvested LFL Sales + 3.8% + 4.3% Average Selling Price* < - 2% < - 1% Movement in Gross Margin (%) flat +ve Movement in LFL Gross Profit (£) + ve + ve Balance of price, margin and volume to maximise profit *Food & Drink 9
Slide 10: Key Operating Statistics
Key Operating Statistics* z Drink sales : up 3% z Food sales : up 7% Food mix 29.8% sales : up 0.6% points z Outlet staff costs : constant at 23.8% of sales z Overhead savings of £5m Net operating margin: 18.3% *All figures MAB Retail; 2003 restated for FRS5 10
Slide 11: Operating Profit Movement
Operating Profit Movement +21 £285m* SCPD -1 +£10m £275m* 2003 2004 +5 Trading External Overhead Costs Savings -15 11
Slide 12: FY 2004 Expansionary Capital
FY 2004 Expansionary Capital Residential Locals Pub Restaurants £15m £30m Drinks Food led led £5m - High Street Restaurants City Centre Note: Excludes Hollywood Bowl / Other: £7m 12
Slide 13: Returns by Segment
Returns by Segment Residential Locals Pub Restaurants Inc. ROI 17% Inc. ROI 16% Drinks Food led led Inc. ROI 14% Inc. ROI 10% High Street Restaurants City Centre Incremental ROI - 15% overall, up 1% on last year Note: UK only – excludes Hollywood Bowl Cumulative £1bn expansionary investment over the
Slide 14: Strong Cash Returns
Strong Cash Returns 12 months to 25 September 2004 £m CROCCE £m NOPAT EBIT 285 285 Depreciation/Amortisation 108 EBITDA 393 Cash Tax (at 26% of EBIT)* (75) (75) Cash Return 318 210 Average Net Operating Assets 3,463 3,463 Accumulated Depreciation 285 10% 7.5% Revaluations (731) (731) Goodwill writte
Slide 15: Cashflow (a)
Cashflow (a) FY 04 £m EBITDA 393 Working capital / non cash items 30 Maintenance capex (93) Expansionary capex (57) Disposals 51 Additional pension contributions (40) Operating Cashflow after Net Capex 284 15
Slide 16: Cashflow (b)
Cashflow (b) FY 04 £m Operating Cashflow after Net Capex 284 Net Interest paid (98) Tax paid (34) Normal dividends paid (44) Special dividend (501) Securitisation/separation costs* (27) Other items (3) Net Cashflow** (423) Closing Net Debt £1.63bn*** * Includes £4m exceptional operating expenditure
Slide 17: Financing
Financing z Net Debt : EBITDA 4.2x z Book Gearing* 50% z Interest Cover 2.8x Well within all securitisation covenants * Net Debt / (Net Assets + Net Debt) 17
Slide 18: Dividends and Share Repurchase
Dividends and Share Repurchase z Progressive dividend policy Final dividend of 6.65p 2004 total regular dividend 9.5p z Share buy-back programme Plan to spend £100m in FY05 Maintain efficient balance sheet Cash returns to shareholders 18
Slide 19: Pensions
Pensions z Actuarial Valuation at 31/3/04: deficit of £167m** Regular service contributions – up £3m p.a. Tri-ennial review cycle going forward z Additional cash contributions: £40m over 3 years In addition to £20m pledged at securitisation Cash payments* - 2005: £30m; 2006: £20m; 2007: £10m
Slide 20: 2005: Pensions Accounting, IFRS update, 53rd Week
2005 z Pensions Accounting Move from SSAP 24 to FRS 17 for FY05 Impact on FY04 comparative: SSAP 24 FRS 17 £m £m Operating Profit Charge (2) (14) Interest Income - 1 PBT (2) (13) Net Assets 105 (114) z IFRS update post Interims z 53rd Week Adds c.£6m of operating profit, c.£4m PBT 20
Slide 21: Summary
Summary z Sales-led strategy is working z Generating strong cashflow z High returns on investment z Efficient balance sheet z Redeploying cash resources z Preserving appropriate flexibility More value for shareholders 21
Slide 22: Tim Clarke, Chief Executive
Tim Clarke Chief Executive Preliminary Results 1 December 2004
Slide 23: Introduction
Introduction z Strong trading results z Successful execution of strategy z Benefiting from repositioned estate z Momentum continuing into 2005 z High returns and increasing cash flow Clear strategy for delivering value to shareholders 23
Slide 24: Operational Levers
Operational Levers z Delivering superior amenity, range, service and value z Growing food sales and capturing drinks share z Optimal balance of price, volume and mix z Pub and corporate level scale benefits of increasing volumes z High returns on brand and format investment Focus on profitable sales
Slide 25: Strong Like for Like Sales Growth
Strong Like for Like Sales Growth 7.0% 6.0% 5.8% 6.0% 5.3% 5.0% 4.3% 4.4% 4.0% 3.4% 3.0% 2.0% 1.0% 0.0% H1* 04 H2 04 8 w ks 05 H1* 04 H2 04 8 w ks 05 Uninvested Same Outlet * weeks 1 – 32 to include Easter in both years 25
Slide 26: Profitable Market Share Gains
Profitable Market Share Gains Product Category Same Outlet On-Trade* MAB Market vs LY vs LY Volume Volume Beer + 4% - 2% Wines, Spirits, Soft Drinks + 10% + 3% Food + 8% + 3% Sustainable sales growth from wider customer base & greater frequency *Source : ONS/BBPA/Neilsen MAB data: FY 04 Beer / soft
Slide 27: The Role of Price
The Role of Price z Most powerful when used with other activity z Significant evidence of rising price elasticities z Rigorous control trials to maximise gross profits z Extent of activity driven by elasticity evidence Varies across brand segments, product categories, time slots and geographies z
Slide 28: Benefits of Estate Repositioning
Benefits of Estate Repositioning Toby Carvery, Nottingham The Flask, Highgate z High takes – AWT’s up 8% to £15.2k z Asset scale in high volume locations z Brands and formats targeting growth segments 28
Slide 29: Estimated Industry Supply & Demand
Estimated Industry Supply & Demand Segment % of MAB % Growth/Decline Key Factors and UK Pub in MAB Positioning Sales Supply Demand Residential Pub Restaurants 37% 2% 5% Eating-out growth. Well targeted brands Locals Pubs 33% -1% 2% Drinks share gains and food growth High St Circuit Venues 11% 0% -3%
Slide 30: Industry Expansionary Capex
Industry Expansionary Capex £m SOURCE: MAB Estimates 30
Slide 31: Residential Segments
Residential Segments The Pine Marten, Harrogate Vintage Inns Crown Inn, Sutton Coldfield - Ember Drinks price -1% Uninvested Like for Like 4.8% Food price +1% Drink volume +6% Same outlet Like for Like 6.6% Food volume +9% *FY2004 31
Slide 32: Generating Profitable Volumes
Generating Profitable Volumes Toby Carvery, Snaresbrook Toby promotion in Saga magazine Toby Carvery, Eastbourne Targeted marketing and capacity management 32
Slide 33: Focus on Range Extension
Focus on Range Extension New Harvester menu Increased and improved cask ale range Range of fresh fruit juices Wider customer choice drives volumes and opportunities for yield management 33
Slide 34: Maintaining Amenity and Offer Evolution
Maintaining Amenity and Offer Evolution Dexter Hotel, Leeds - Ember Harvester, Eastbourne 34
Slide 35: Food Capabilities in Local Pubs
Food Capabilities in Local Pubs Vesper Gate, Leeds – Sizzling Pub Co Sizzling Pub Co Menu 35
Slide 36: High Street/City Centre Market
High Street/City Centre Market Flares, Warrington Old Wellington, Manchester The Clachan, London W1- Nicholsons Town Pubs for office Circuit Venues workers, shoppers, Central London tourists. Late Evening Day time/early evening Drink price - 4% Uninvested like for like sales +1.5% Drink volume + 8%
Slide 37: Range Extension
Range Extension Yield management opportunities from premiumisation and value offers 37
Slide 38: Capturing Scale Benefits - Purchasing
Capturing Scale Benefits - Purchasing z Volume related improvements in purchasing Over 2% net reduction in unit cost of goods z Planning for greater drinks supply freedom Beer supply Distribution arrangements Focus on optimal combination of volume, mix and cost 38
Slide 39: Capturing Scale Benefits – Productivity and Overheads
Capturing Scale Benefits – Productivity and Overheads z Volume related improvements in productivity Employment costs ratio held at 24% of sales Offsetting 7% increase in national minimum wage 3% increase in volumes served per hour worked z Overhead efficiencies through process improvements £
Slide 40: High Returns from Expansionary Investments
High Returns from Expansionary Investments Conversions Acquisitions Rising Sun Whetstone – Sizzling Pub co Jack Rabbit, Vintage Inn & Innkeepers Lodge Plymouth z 95 completed z 10 completed z Biased towards residential z 4 with lodges local pubs z Average weekly takes > z High Sales uplifts £30k Inc
Slide 41: Improving Asset Productivity
Improving Asset Productivity z Lodges on existing sites z Non-trading property z Business Franchise z Proactive disposal 41
Slide 42: Regulatory Issues - Alcohol
Regulatory Issues - Alcohol z Updated Alcohol Social Responsibility policy Control of promotions Operating rules z “Responsible Drinks Retailer” award Case for pub as best environment for controlled retailing of alcohol 42
Slide 43: Regulatory Issues - Smoking
Regulatory Issues - Smoking z White Paper on Public Health 4 years to prepare for smoking legislation Wide consultation process Potential for adverse, unintended consequences Avoid incentivising pubs to retain smoking z MAB Approach In great majority of estate continue to drive strong food
Slide 44: Levers of Future Earnings Growth
Levers of Future Earnings Growth z Focus on profitable like for like sales growth Widening competitive gap on customer value Defensible premium to supermarkets Scale advantage in value for money eating out Drinks range extensions Competitive share gains on standard products z Virtuous circ
Slide 45: Differentiated Strategy for Growth
Differentiated Strategy for Growth z Profitable sales growth and continued momentum z Outlook for consumer demand uncertain z Well positioned to continue to take market share z Cash generation z Asset appreciation z Proactive use of cash resources to generate value 45
Slide 46: Preliminary Results December 2004
Preliminary Results 1 December 2004