Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — H1 2004 Earnings Presentation
47 slides from Mitchells & Butlers's earnings presentation, May 19, 2004
Slide 1: Roger Carr, Chairman
Roger Carr Chairman 19 May 2004
Slide 2: Karim Naffah, Finance Director
Karim Naffah Finance Director 19 May 2004
Slide 3: Financial Highlights
Financial Highlights z Turnover £823m up 4% z EBITDA £197m up 3% z Operating profit £140m up 2% z Profit before tax £88m down 5% z Adjusted EPS* 10.0p up 16% z Interim dividend per share 2.85p * Adjusted to exclude exceptional items. 2003 comparative, proforma figures 3
Slide 4: Interim Results - Summary
Interim Results - Summary HY 04 HY 03* £m £m EBITDA 197 191 + 3.1% Operating Profit 140 137 + 2.2% Interest (52) (44) PBT 88 93 - 5.4% Tax (29) (30) Earnings 59 63 - 6.3% EPS 10.0p 8.6p + 16.3% Average no. of shares 591m 734m Note: All numbers are stated pre-exceptional items * Proforma 4
Slide 5: Presentational Points to Note
Presentational Points to Note z FRS 5 Turnover recorded net of coupons and staff discounts Sales comparative reduced by £4m – no profit impact z Treatment of Easter Straddles period end vs. entirely in H2 last year Like for likes quoted for 32 weeks z Reporting to Debt Investors First publ
Slide 6: Operating Performance
Operating Performance HY 04 HY 03 £m £m Turnover Pubs & Bars 485 464 + 4.5 % Restaurants 333 321 + 3.7 % SCPD 5 4 + 25 % 823 789 + 4.3 % Operating Profit* Pubs & Bars 92 91 + 1.1 % Restaurants 47 45 + 4.4 % SCPD 1 1 - 140 137 + 2.2 % Note: 2003 turnover restated on the adoption of the Amendment to F
Slide 7: Key Operating Statistics
Key Operating Statistics* z Food sales : up 6% z Food mix 29.5% sales : up 0.4% points z Outlet staff costs : constant at 24% of sales z Retail staff productivity Contribution per staff hour – held constant z Support cost savings of £5m Net retail operating margin 17% *All figures MAB Retail; 2003
Slide 8: Operating Profit Movement
Operating Profit Movement +5 +5 -8 +1 £140m* £137m* H1 H1 2004 2003 Support Trading Easter Costs External Costs *Includes £1m EBIT from SCPD in both years 8
Slide 9: Retail Sales Growth
Retail Sales Growth 6% + 5.3%* 5% + 4.4% + 3.4%* 4% 3% 2% 1% 0% H1 2004 H1 2004 H1 2004 UNINVESTED SAME OUTLET TOTAL SALES 84% of pubs +10% = 94% of pubs +6% = 100% of pubs Same outlet = uninvested + invested All comparatives restated for the amendment to FRS 5 * 32 weeks 9
Slide 10: Like-for-Like Sales
Like-for-Like Sales H1 04 H2 03 Same Outlet (i.e. Invested + Uninvested) Residential + 6.4% + 3.3% High Street + 3.1% - 0.6% Total + 5.3% + 1.8% Uninvested Residential + 4.4% + 0.8% High Street + 1.3% - 3.0% Total + 3.4% - 0.1% H1 like for likes reflect wks 1-32 to include Easter in both periods. H2
Slide 11: Balancing Sales Growth & Margin
Balancing Sales Growth & Margin H1 2004 Uninvested LFL Sales + 3.4% Average Selling Price* c.- 3% Movement in Gross Margin (%) -ve Movement in LFL Gross Profit (£) +ve *Food & Drink 11
Slide 12: H1 2004 Expansionary Capital
H1 2004 Expansionary Capital Residential Locals Pub Restaurants £8m £16m Drinks Food led led £3m £0m High Street Restaurants City Centre Note: UK only and excludes Hollywood Bowl at £2m 12
Slide 13: Performance by Segment
Performance by Segment Residential Locals Pub Restaurants Inc. ROI 16% Inc. ROI 14% Drinks Food led led Inc. ROI 14% Inc. ROI 9% High Street Restaurants City Centre Note: UK only – excludes Hollywood Bowl Cumulative £1bn expansionary investment over the last 10 years 13
Slide 14: Net Cashflow (a)
Net Cashflow (a) HY 04 £m EBITDA 197 Working capital movement 44 Maintenance Capital Expenditure (48) Expansionary Capital Expenditure (29) Disposals 29 Additional pension contributions (40) Other items 2 Net Operating Cashflow 155 14
Slide 15: Net Cashflow (b)
Net Cashflow (b) HY 04 £m Net Operating Cashflow 155 Net interest paid (45) Tax paid (9) Normal Dividends Paid (29) Special Dividend (501) Securitisation Costs* (26) Other Items 1 Net cash flow ** (454) * Includes £4m operating exceptionals ** Before £11m of bond repayments 15
Slide 16: Financing
Financing z Closing Net Debt £1.7bn z Net Debt : EBITDA* 4.5x z Book Gearing** 51% z Interest Cover 2.7x z Securitisation FCF/Debt Service 2.0x * Based on EBITDA for FY 2003 **Net Debt / (Net Assets + Net Debt) 16
Slide 17: Strong Cash Returns
Strong Cash Returns 12 months to 10 April 2004 £m CROCCE £m NOPAT EBIT 278 278 Depreciation/Amortisation 102 EBITDA 380 Cash Tax (at 22% of EBIT)* (61) (61) Cash Return 319 217 Average Net Operating Assets 3,450 3,450 Accumulated Depreciation 273 10% 8% Revaluations (735) (735) Goodwill written off
Slide 18: Dividends
Dividends Interim 2.85p Final 6.65p Total 9.5p Progressive policy to deliver real dividend growth 18
Slide 19: Summary
Summary z Good performance in first half z Refinancing successfully completed z Emphasis on organic growth is bearing fruit z Tougher sales comparatives in second half z Focus on cash and high investment returns z Progressive dividend policy Commitment to most value creative use of cash 19
Slide 20: Tim Clarke, Chief Executive
Tim Clarke Chief Executive 19 May 2004
Slide 21: Operational Delivery of Strategy
Operational Delivery of Strategy z Profitable Sales Growth z Focus on best value experience z Growing food sales and capturing drinks market share z Efficiency gains from growing volumes Strategy on course and building momentum 21
Slide 22: Five Key Levers
Five Key Levers z Consumer value proposition z Optimal combination of price, volume and mix z Cost efficiencies from unit and corporate scale z Evolving consumer appeal of brands and formats z Proactive estate development Drive earnings growth, cash returns and property appreciation 22
Slide 23: Estate Repositioning to Growth Segments
Estate Repositioning to Growth Segments Sales = £0.9bn* Sales = £1.5bn Food Machines 11% 7% Food Accommodation 29% & Other 2% Beer Beer 69% 35% H1’04 1994 MAT Soft Drinks and Wines & Spirits 11% Machines 5% Soft Drinks and Accommodation & Wines & Spirits Other 6% 25% Integrated, informal food and dr
Slide 24: Strong Sales Performance
Strong Sales Performance 6% 5.8% 5% 4.8% 4.8% 4% 4.0% 3.9% 3% 2.8% 2% 1% 0% First 16 weeks wks 17-32 First 16 weeks wks 17-32 First 16 weeks wks 17-32 Uninvested LFL Same Outlet LFL Total Sales Adjusted for FRS 5 24
Slide 25: Gaining Share Among Managed Pubs
Gaining Share Among Managed Pubs MAB % Drink Share of Managed Market* 0.8 0.7 0.6 0.5 % po ints 0.4 0.3 0.2 0.1 0.0 W eeks 10 - 31** Weeks 25 - 31** Movement in Volume % Share Movement in Value % Share *Beer, cid er, s oft d rinks, FABs and sp irits ** Perio d to 1 May 200 4 Source: AC Neilsen Pubtr
Slide 26: Focus on Profitable Sales Growth
Focus on Profitable Sales Growth Volume Growth key to driving higher asset productivity Unit scale economies of high take managed houses Average Weekly Takes + 7% to £14.7k per week Regulatory cost inflation exceeding consumer price inflation Volume growth from recruiting customers and incre
Slide 27: Draught Beer
Draught Beer £1.75 £1.95 £2.20 £2.50 Premiumisation Consumers trading up to Stella ( 0 to 100k barrels p.a.) Driving value on standard products 14% price reduction, 32% volume increase in Carlsberg Widening Range Introduction of Scot Co beers Good, better, best pricing architecture 27
Slide 28: Wines
Wines z Proprietary brands in each main grape variety z “Own label” sourced direct from the growers z Silverland (own label) from 0% to 10% of wine volume Improving Consumer Choice 28
Slide 29: Soft Drinks
Soft Drinks Range extensions to meet changing customer tastes z Fresh fruit juices available alongside packaged products z Offer better value for money z Harvester fresh juice servings doubled Product innovation to capture new market trends 29
Slide 30: Revenue and Product Yield Management
Revenue and Product Yield Management Targeting market growth segments for volume gains z Food volumes up 9% z Soft drinks volumes up 10% z Wines & spirits volumes up 13% Managing product range and pricing for mix margin benefits z Beer volumes up 5%, Draught lager volumes up 10% z PPL’s : volume fla
Slide 31: Cost Efficiencies: Staff Productivity
Cost Efficiencies: Staff Productivity z Improvements in scheduling and base rosters Minimising hours required to service incremental volumes Kitchen work methods Sales training and product knowledge z Trialling incentives link to sales performance 31
Slide 32: Residential Areas: 70% of Estate
Residential Areas: 70% of Estate Integrated Food and Drink Offers Same outlet like for likes + 6.4%* Un-invested like for likes + 4.4%* Drinks Volume + 7.0% Drinks Price - 2.0% Food Volume + 9.0% Food Price Flat Growth driven by 5 key brands * 32 weeks 32
Slide 33: Residential Areas: Customer Demand Factors
Residential Areas: Customer Demand Factors z Real growth in eating out market z Fast growing ancillary sales Wine Soft drinks Coffee z Widening competitive gap driving beer market share Estate and brand strategy focused on opportunity 33
Slide 34: Pub Restaurants
Pub Restaurants Toby Carvery, Washington Vintage Inns, Cunning Man, Reading Harvester, Barnet 34
Slide 35: Pub Restaurants: Evolving the Offers
Pub Restaurants: Evolving the Offers 35
Slide 36: Residential Pubs: Conversion
Residential Pubs: Conversion Urban Residential Areas White Hart, Nottingham Sizzling Pub Co Mid-Market Suburbs Affluent London Villages Royal Oak, Halesowen Ember Inns Prince of Wales, Notting Hill Metropolitan Professionals 36
Slide 37: Residential Pubs: Sales Development
Residential Pubs: Sales Development 37
Slide 38: High Street/City Centre Market: 30% of Estate
High Street/City Centre Market: 30% of Estate Circuit Venues Pubs for office staff, Central London Late evening shoppers, tourists. Day time / early evening z Same outlet like for likes + 3.1% * z Univested like for likes + 1.3% * z Drinks volumes +10.0% z Drinks prices -6.0% Rebasing price to gener
Slide 39: High Street/City Centre Markets
High Street/City Centre Markets Draught Beer Range in London estate Goose pubs 39
Slide 40: Estate Development: Site by Site Approach
Estate Development: Site by Site Approach z Development of pipeline z Tactical use of maintenance capex to evolve/refurb z New build site acquisitions z Expansion of Business Franchise model z Extract value from non trading property z Disposal 40
Slide 41: Acquisitions and Conversions
Acquisitions and Conversions Garden Gate, Hampstead Metropolitan Professionals Golden Retriever, Bracknell Vintage Inn 41
Slide 42: Evolution through Maintenance Capex
Evolution through Maintenance Capex Royal Oak, Halesowen Routine annual spend Ember Regular, small investment to maintain fabric of building and offer Brand / format refresh To keep offer current & ensure pub trades to full potential Every 4 – 7 years, in line with maintenance cycle All within
Slide 43: Business Franchises
Business Franchises A partnership to maximise the trading potential of mid-sized pubs z 52 properties at end of H1 z Franchisee benefit: Accesses managed systems & infrastructure Favourable supply terms z MAB benefit: share in trading upside through turnover fee Retain property appreciation
Slide 44: Social and Regulatory Issues
Social and Regulatory Issues z Licensing Act and the Guidelines z Alcohol Harm Reduction Strategy z Smoking in Public Places z Gaming Regulation z Select Committee Inquiry Well positioned to meet the changes 44
Slide 45: Market Growth Trends
Market Growth Trends Consumer expenditure £m CAGR (Actual) 1982 to 2003 70000 Total Total (Nominal) (Real) 60000 7.4%* 1.8% 50000 9.4% 3.8% 40000 30000 Eating Out* Wine & Cider 20000 5.8% 0.2% Spirits Drinking 10000 Out Beer 0 1982 1985 1988 1991 1994 1997 2000 2003 *including soft drinks Source: Of
Slide 46: Differentiated Strategy for Growth
Differentiated Strategy for Growth z Quality estate targeting growth segments z Integrated food and drink formats z Scale advantages enable customer value proposition z Power of retail marketing z Focus on sustainable sales growth z Driving earnings, cash returns and freehold appreciation Operating
Slide 47: Questions & Answers
Questions & Answers 19 May 2004