Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — FY2016 Earnings Presentation
33 slides from Mitchells & Butlers's earnings presentation, November 2016
Slide 1: Full Year Results 2016
‘Mitchells ~ Nee oe & Butlers —— _ Full Year Results 2016 je,
Slide 2: Financial Review 2016
Financial Review 2016 Tim Jones Finance Director –2–
Slide 3: Income statement
Income statement (Pre adjusted items) FY 2016 FY 2015 £m £m Revenue 2,086 2,101 (0.7%) Operating costs (1,768) (1,773) Operating profit 318 328 (3.0%) Interest (125) (129) Pensions finance charge (12) (15) Profit before tax 181 184 (1.6%) Operating margin 15.2% 15.6% (0.4 ppts) Earnings per share 34
Slide 4: Like-for-like sales
Like-for-like sales Week 1 – 8 Week 1 – 28 Week 29 – 52 Week 1 – 52 FY 2017 Food (2.0%) (0.8%) (1.4%) 0.2% Drink (1.5%) 1.3% (0.1%) 0.6% Total (1.6%) 0.2% (0.8%) 0.5% –4–
Slide 5: Like-for-like sales progress
Like-for-like sales progress Like-for-like sales ● Building sales momentum ● Impact of events - Euro 2016 - Weather in September - Rugby World Cup ● Growth driven by mix, spend per head and price Oct 2015 Nov 2016 Rolling 12-week average –5–
Slide 6: EBIT movement
EBIT movement +£11m (£15m) +£3m (£9m) FY 2015 FY 2016 FY 2015 Orchid Like-for-like FY 2016 openings and openings and £328m synergies trading and £318m remodels remodels costs –6–
Slide 7: Inflationary cost headwinds - summary
Inflationary cost headwinds - summary ● Labour: - NLW increase (Apr 2017) MAB cash cost base (£1.6bn) - Potentially two NMW increases (Oct 2016 + Apr 2017) Other - Apprentice levy (Apr 2017) Food Utilities ● Business rates increased 20% from April 2017 with Drink transitional relief to 2022 c£200m P
Slide 8: Inflationary cost headwinds – FY16 and FY17
Inflationary cost headwinds – FY16 and FY17 £m FY16 FY17 Food/ drink Food/ drink (including Labour Property Energy Other (including Labour Property Energy Other currency impact) currency impact) ● Overall inflationary headwind of c3.5% on cost base of £1.6bn –8–
Slide 9: Mitigation of inflationary headwinds
Mitigation of inflationary headwinds ●Cost management: - Continue to leverage purchasing scale - Substitution of inputs (particularly to reduce foreign currency exposure) - Savings initiatives at both site and overhead level ●Sales growth: - Price increases anticipated - Increased spend per head and
Slide 10: Group cash flow
Group cash flow FY 2016 £m FY 2015 £m EBITDA 431 439 Working capital / non cash items (7) 48 Pension deficit contributions (49) (86) Cash flow from operations 375 401 Maintenance & infrastructure capex (115) (116) Expansionary capex (52) (46) Net interest paid (125) (127) Tax (28) (25) Other 5 8 Fre
Slide 11: Property estate
Property estate ● Estate comprised of more than 80% freehold and long-leasehold sites ● Freehold and long leasehold properties valued annually ● 20% of sites inspected per annum ● Short leaseholds assessed for impairment ● Total value of £4.4bn (FY 2015 £4.2bn) FY 2016 FY 2015 £m £m Revaluation (80)
Slide 12: Capital expenditure and returns
Capital expenditure and returns FY 2016 FY 2015 ● Acceleration in remodel / £m # £m # sites conversion investment through sites FY16 and FY17 Maintenance and 81 82 infrastructure ● Expansionary returns increased Remodels – maintenance to 20% (FY 2015: 18%) 34 137 34 116 Remodels – expansionary 13 38
Slide 13: Summary
Summary ● Improved sales performance in the second half ● Margins will continue to be impacted by cost headwinds ● Final dividend of 5.0p approved (full year 7.5p) ● Negotiations with Trustees of pension schemes ongoing – 13 –
Slide 14: Business Review 2016
Business Review 2016 Phil Urban Chief Executive – 14 –
Slide 15: Recap
Recap Restaurants Supply Growth % - to Sep 2015 10.0% 8.0% 6.0% 4.0% 2.0% Net 1,700 new openings 0.0% (2.0%) (4.0%) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2012 2013 2013 2015 Source: CGA Outlet Index ● Challenges to address ● Three priorities identified ‒ High levels of new suppl
Slide 16: Reminder: H1 - Like-for-like sales
Reminder: H1 - Like-for-like sales Week Week Week Week 1 – 17 18 – 28 1 – 28 29 – 33 Food (1.5%) (2.6%) (2.0%) (1.1%) Drink (0.6%) (2.8%) (1.5%) 0.4% Total (1.0%) (2.6%) (1.6%) (0.4%) – 16 –
Slide 17: My priorities
My priorities Build a more Instil a more Driving 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 conce
Slide 18: Performance versus market
Performance versus market Like-for-like sales: MAB vs market Nov Oct Apr 2016 2015 2016 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 18 –
Slide 19: External environment
External environment Restaurants supply growth % - to Sep 2016 UK Consumer Confidence NLW announced EU referendum 2012 2013 2014 2015 2016 2011 2015 2016 Source: CGA Outlet Index Source: Trading Economics ● Consistent supply growth from 2013 to mid-2015 ● Confidence remains below pre-referendum leve
Slide 20: FY 2017 – Performance in first 8 weeks
FY 2017 – Performance in first 8 weeks Like-for-like sales ● Continued sales momentum - Rugby World Cup in prior year impacted early weeks - Sales growth in recent weeks in line with Q4 ● Significant cost headwinds - Focus on mitigation where possible Sep 2015 Nov 2016 Rolling 12-week average – 20 –
Slide 21: Pricing
Pricing ●Unprecedented level of cost headwinds ●Potential for sector price movement ●Ongoing internal focus – 21 –
Slide 22: Rebalancing our portfolio
Rebalancing our portfolio ● Full estate review: right brand identified for each site ● Insight-driven brand reviews ● Conversion and remodel program to deliver balance ● Ongoing estate review for acquisitions and disposals – 22 –
Slide 23: Brand conversions
Brand conversions Miller & Carter Stonehouse ● Continued growth through acquisition and conversion ● New brand for Pizza / Carvery concept ● 52 sites at year-end ● 36 sites at year-end ● Intention to reach c100 sites by the end of 2017 ● Intention to reach >80 sites in 2017 ● 12 conversions generati
Slide 24: Balancing the estate
Balancing the estate 300 250 200 150 100 Total Remodels and 50 Conversions 0 2013 2014 2015 2016 2017 Harvester Remodels and disposals ● Brand development through ‘Feel Good Dining’ template ● Acceleration of remodel and conversion capex ● 32 remodels completed with strong sales and profit uplifts ●
Slide 25: Sales-focused culture
Sales-focused culture Sales training Sales teams BT Sport ● 11 London sales managers in operation ● Reintroduced to 539 businesses ● Workshop delivered for c600 managers and c110 Area Managers ● Incremental profit in second half ● Expansion to other cities in progress – 25 –
Slide 26: Guest care
Guest care ● Focus on speed of complaint resolution ● Improved from >11 days to c48 hours ● Use guest feedback to minimise complaints – 26 –
Slide 27: Improving technological capability
Improving technological capability Online bookings – average per week OCT 2015 SEP 2016 ● Improvement in online booking channels and immediate availability ● Majority of bookings now through brand websites ● More than half of bookings now online – 27 –
Slide 28: Digital sales drivers
Digital sales drivers +8% average score +47% total reviews 54% reviews responded to ● Management of guest feedback across all ● Initial Deliveroo trial showing strong incremental channels sales ● All Managers live with Trip Advisor accounts ● Delivery opportunity for c25% of the estate ● Early evide
Slide 29: Multiple digital channels
Multiple digital channels ●Five brand apps launched - More than 400,000 downloads - Stronger link to response rates ●Loyalty mechanic to be launched ●Gift card sales up >40% to >£6m – 29 –
Slide 30: New concept development
New concept development ●Fostering an innovative experimental ethos ●Chicken Society - Fast-casual chicken concept aimed at Millennials - First site opening December 2016 - Possible solution for other sites and secondary trading space ●Other new concepts in development – 30 –
Slide 31: Engagement
Engagement ●Improving engagement - Internal surveys showing improving trend - Higher response rates - Scores up across frontline teams and support centre ●Correlation seen between engagement and business metrics – 31 –
Slide 32: Summary and outlook
Summary and outlook ● Continued sales momentum from Q4 into the new financial year ● Outperformance versus subdued market in recent months ● Good progress against business priorities ● Cost headwinds and potential exchange rate impact – 32 –
Slide 33: Questions
Questions – 33 –