Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2009)
41 slides from Mitchells & Butlers's debt investor presentation, Nov 27, 2009
Slide 1: Bond Investor Update – 27 November 2009
Andrew Vaughan Group Treasurer Bond Investor Update – 27 November 2009
Slide 2: Highlights
Highlights Gross debt outstanding at year end £2,330m EBITDA £358m Free cashflow £309m EBITDA DSCR 2.0x FCF DSCR 1.8x Resilient performance in tough market conditions 2
Slide 3: Free Cash Flow
Free Cash Flow £m EBITDA 358 Tax 9 Required maintenance capital (58) Free cashflow 309 Interest (132) 1.8x Principal repayment (44) Debt Service (176) 3
Slide 4: Securitisation Covenants
Securitisation Covenants FY 09 H1 H2 Year Free Cashflow: Debt Service 1.6x 2.0x 1.8x EBITDA: Debt Service 1.9x 2.2x 2.0x Net Worth £1. 59bn Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Well within required covenants Restricted Payment Test. FCF/Debt Service 1.3x, EBITDA/Debt S
Slide 5: Maintenance & Capital Enhancement
Maintenance & Capital Enhancement Securitisation Estate £m Repairs* 34 108 (vs. required amount of £92m) Maintenance 74 Enhancement 31 139 Substantial investment to maintain *Charged through Profit & Loss account and enhance estate quality 5
Slide 6: Cashflow - Uses
Cashflow - Uses £m FCF 309 Debt Service (176) Maintenance Capital (over required amount) (16) Net Capital Enhancement Expenditure* 0 Excess Cash 117 Restricted Payments made (120) Restricted Payment Maximum decrease (3) Restricted Payment Maximum at start of year 60 Restricted Payment Maximum at end
Slide 7: MAB PLC vs MAB Retail Limited
MAB PLC vs MAB Retail Limited PLC Securitisation £m Estate £m Number of pubs* 1,970 1,675 Turnover 1,958 1,632 EBITDA 428 358 EBIT 300 254 Difference driven by 295 pubs and head office *As at 26 September 2009 infrastructure outside the Securitisation 7
Slide 8: Jeremy Townsend, Finance Director
Jeremy Townsend Finance Director Bond Investor Update – 27 November 2009
Slide 9: Key Messages
Key Messages Good like-for-like sales growth Abnormal levels of cost inflation Strong focus on cost management Continued debt reduction Challenging economic environment Robust performance. Positioned well. 9
Slide 10: Financial Highlights
Financial Highlights 52 weeks ended 26 September 2009 Growth Revenue £1,958m 2.6% EBITDA* £428m (10.3)% Operating profit* £300m (12.5)% Net Interest* £166m 0.6% Profit before tax* £134m (23.9)% EPS* 23.6p (23.9)% Strong sales growth impacted by cost pressures * Before exceptional items and other adj
Slide 11: Exceptional Items & Other Adjustments
Exceptional Items & Other Adjustments £m Operating Profit Loss on swap closure (95) Less amounts charged to prior periods 40 (55) Property valuation adjustments (123) Loss on property disposals (8) Exceptional pension credit 44 Finance charge from pensions (6) Interest on tax credits 4 Exceptional i
Slide 12: Like-for-Like Sales Growth
Like-for-Like Sales Growth 3.2% 1.6% 1.0% FY 08 FY 09 1st 8 weeks FY 10 Increasing like-for-like sales growth 12
Slide 13: Like-for-Like Sales Growth
Like-for-Like Sales Growth % FY09 FY09 FY09 FY10 H1* H2** Total 8 weeks Food 2.5% 4.1% 3.1% 5.9% Drinks 1.7% 2.0% 1.8% 2.0% Other (8.8%) (8.4%) (8.7%) (2.7%) Total 1.2% 2.1% 1.6% 3.2% Good growth in food and drink • 33 weeks to include the entire Easter period ** Week 34-52 13
Slide 14: Operating Performance
Operating Performance FY09 FY08 £m £m Revenue Pubs & Bars 958 954 0.4% Restaurants 999 939 6.4% Retail 1957 1893 3.4% SCPD 1 15 1,958 1,908 2.6% Operating Profit* Pubs & Bars 159 176 (9.7)% Restaurants 141 156 (9.6%) Retail 300 332 (9.6%) SCPD - 11 300 343 (12.5)% * Before exceptional items and othe
Slide 15: Key Operating Statistics
Key Operating Statistics Same outlet food sales up 3.1% Same outlet drink sales up 1.8% Gross margin down 1.5% points Cash gross margin up 1.3% Outlet staff costs 24.3% of sales Retail operating margin down 2.2% points Improving trajectory on margins Note: all figures relate to Retail 15
Slide 16: Retail Operating Profit Movement
Retail Operating Profit Movement +15 Total acquired (8) sites (30) Disposals Regulatory Costs +15 Trading £332m* (24) FY08 Food & Energy £300m* FY09 Good trading performance offset by inflationary costs * Before exceptional items and other adjustments 16
Slide 17: Outlook for FY10 Costs
Outlook for FY10 Costs Food and drinks inflation continues Further duty increases expected £20m additional regulatory costs Energy costs decrease by around £10m Target £20m of efficiency gains Inflationary costs lower than previous years 17
Slide 18: FY09 Capital Expenditure
FY09 Capital Expenditure Focus on maintenance £86m spent on maintenance capex £36m of expansionary capex ROI on last two years investments at 13% Total capex in FY10 estimated at £140m Good returns on capex 18
Slide 19: Cash Flow (a)
Cash Flow (a) FY09 £m EBIT 300 Depreciation & amortisation 128 EBITDA 428 Working capital / non cash items 22 Maintenance capex (86) £(129)m Expansionary capex (43) Disposals 72 Additional pension contributions (24) Operating Cash Flow after Net Capex* 369 * Before exceptional items 19
Slide 20: Cash Flow (b)
Cash Flow (b) FY09 £m Operating cash flow after net capex 369 Net interest paid (160) Issue of share capital 4 Net Cash Flow* 213 Exceptional cash flow items (93) Tax credits 21 Continuing strong operating cash flows * Before exceptional items 20
Slide 21: Group Debt and Outstanding Facilities
Group Debt and Outstanding Facilities Sept 09 Sept 08 Feb 08 £m £m £m Securitisation debt (2,319) (2,361) (2,391) Cash / other 102 140 76 Unsecured drawings (383) (514) (595) Net debt (2,600) (2,735) (2,910) Unsecured facility £550m £600m £700m Headroom +£167m +£86m +£105m Net debt £135m lower 21
Slide 22: Balance Sheet
Balance Sheet Net debt : EBITDA 6.1x Book gearing* 72% Interest cover** 1.8x Fixed charge cover*** 2.0x IAS 19 pension deficit £130m Property value £4.5bn Balance sheet underpins operating performance EBITDA is before exceptional items and other adjustments * Net debt / (net assets + net debt) ** Ex
Slide 23: Summary
Summary Challenging economic conditions Increasing MAB like-for-like sales growth Significant cost pressures but decreasing next year Strong cash flows with net debt decreasing Focus on maintaining amenity in whole estate Continuing operational improvements generating competitive advantage Well posi
Slide 24: Andrew Vaughan, Group Treasurer
Andrew Vaughan Group Treasurer Bond Investor Update – 27 November 2009
Slide 25: Mitchells & Butlers Performance
Mitchells & Butlers Performance Trading improved through FY09 Value and volume strategy delivering in recession FY10 started well Mitchells & Butlers in a strong position Performing well in challenging markets 25
Slide 26: Improving H2 Performance
Improving H2 Performance H1 H2 Like-for-like sales 1.2% 2.1% Change in operating margin % (3.2)% pts (1.1)% pts Change in Retail EBIT (16.8)% (2.4)% Performance maintained into FY10 26
Slide 27: Like-for-Like Sales by Segment
Like-for-Like Sales by Segment H1 09* H2 09** FY09 FY10 (8 wks) Residential 2.0% 3.3% 2.5% 4.4% High Street 0.3% (1.0)% (0.2)% Flat Total 1.2% 2.1% 1.6% 3.2% Growing like-for-like trajectory * Wks 1-33 to include the entire Easter period ** Wks 34-52 to exclude the entire Easter period 27
Slide 28: Drivers of Residential Growth
Drivers of Residential Growth Strong performance driven by main brands Proven customer appeal with: - Good quality, value-for-money food - Extensive quality drinks range - Consistent & efficient service - High amenity levels A focus on driving cash gross margin 28
Slide 29: High Street Market Conditions
High Street Market Conditions London in growth Late night business trending towards flat Polarisation on the high street - Youth unemployment impact on drinks focussed pubs - Demand for value food continues to grow Exploiting food led growth opportunities 29
Slide 30: Food Value Growth vs Market
Food Value Growth vs Market 10% 8% 6% Food Value Growth (%) MAB like-for-like value 4% 2% 0% -2% Total Market* -4% -6% Pub market* -8% -10% Q3 FY08 Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Outperformance widening in Q4 Source: CREST data, the NPD Group and Company 30
Slide 31: Beer Market Volume Outperformance
Beer Market Volume Outperformance MAT percentage change in volume 2.0% MAT percentage change in volume 0.0% -2.0% MAB* -4.0% -6.0% -8.0% On-Trade -10.0% Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Continuing large market share gains *Same outlet like-for-like Source: BBPA, Company 31
Slide 32: Investment in Amenity
Investment in Amenity Total capital invested of £122m 1,260 projects < £40k completed 575 larger projects > £40k supporting growth Customer preferences help direct investment Effective use of capex driven by customer demands 32
Slide 33: Strategic Priorities
Strategic Priorities Exploiting long term growth of the eating out market Enhancing shareholder value by - growing profits at the unit level - exploiting the growth potential of MAB brands Supporting value creation with operational capability 33
Slide 34: New Channels: Market Position
New Channels: Market Position City and Value Suburban Country Key driver Price Quality of visit Stay at Pub and Alternatives home Restaurant Full table Service Efficiency service Focussing business on customer groups 34
Slide 35: New Channels Metrics
New Channels Metrics City and Value Suburban Country Food spend per £4.76 £7.35 £9.94 head* Food volumes 1,150 2,050 1,050 (meals)** Avg drinks price* £1.82 £1.94 £2.54 Customer price Higher Higher/Lower Lower sensitivity Driving net operating margins * incl VAT ** Per pub per week 35
Slide 36: Underpinning Operating Margins
Underpinning Operating Margins Increasing purchasing scale - 574m drinks - 129m meals A focus on efficient operations - Productivity - Stock & Waste management - Overhead A focus on improving net operating margins 36
Slide 37: Continuous Operational Development
Continuous Operational Development Detailed customer insight: 635,000 feedback forms Kitchen Skills Academy & 2 food development centres Over 1,400 NVQs undertaken in one year Staff cost ratio maintained in last 5 years despite - £50m of employment cost pressures - Food sales mix from 30% to 41% Ope
Slide 38: Current Trading Update
Current Trading Update First 8 weeks: 3.2% growth Residential sales up 4.4% High Street sales flat “Other” sales improving Net margins recovering Improved current trading 38
Slide 39: Likelihood of Eating Out in Next 6 Months
Likelihood of Eating Out in Next 6 Months 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% Feb Mar Apr May Jun Jul Aug Sep Oct More than before Less than before Net Likelihood to Eat Out Improved consumer confidence Source: Company 39
Slide 40: Outlook
Outlook First half - Eating and drinking out under pressure - Cost outlook improved - Consumer confidence has stabilised Second half - Low visibility of post election consumer environment Second half outlook uncertain 40
Slide 41: Conclusion
Conclusion Best brands underpinned by best locations Robust trading with relatively low ticket spend Strong market share gains Operational focus is continuing to deliver sales and improving net margins Mitchells & Butlers well positioned 41
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