Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Bass — FY2000 Earnings Presentation
35 slides from Mitchells & Butlers's earnings presentation, November 2000
Slide 1: Tim Clarke, C.E.O.
TIM CLARKE C.E.O.
Slide 2: Bass PLC
31 BASS PLC • Powerful brands • Market leading positions • Strong growth prospects
Slide 3: Creating Shareholder Value
32 BASS PLC Creating Shareholder Value • Concentrating on:- - high growth hotels - high return branded retail • Build brand scale in global hotels • Drive growth opportunity from retail conversion pipeline • Improving balance sheet efficiency
Slide 4: Bass Hotels & Resorts: Platform for Growth
33 BASS HOTELS & RESORTS Platform for Growth Central Central Reservations Reservations 32m 32m calls calls p.a. p.a. $1.4bn $1.4bn revenues revenues p.a. p.a. 491,064 rooms Priority Priority Club Club 3,063 hotels 92 countries 10m 10m members members 21m 21m room room nights nights p.a. p.a. E-Comme
Slide 5: Profit Mix
34 BASS HOTELS & RESORTS Profit Mix % of Profits 1999/2000 - Total = $567m* Owned and Leased Managed & Franchised Americas -16% Americas - 42% EMEA - 34% EMEA - 4% Asia-Pacific - 1% Asia-Pacific - 3% ** excludes excludes FelCor FelCor,, others others and and goodwill goodwill amortisation amortisati
Slide 6: Brand Power Virtuous Circle
35 BASS HOTELS & RESORTS Brand Power Virtuous Circle Brand Value Marketing Brand Awareness Scale Guest Preference Distribution Room Night Scale Delivery Returns to RevPAR Property Owner Premiums
Slide 7: Hotel Industry Growth Potential
36 BASS HOTELS & RESORTS Hotel Industry Growth Potential • Superior growth potential of global brands - Faster growth of international travel • Scope for branded conversions, by region* - Over 75% of rooms in EMEA/Asia Pacific unbranded • Consolidation opportunities ** Source Source Arthur Arthur An
Slide 8: Key Levers for Growth
37 BASS HOTELS & RESORTS Key Levers for Growth • Organic growth from RevPAR outperformance - Reservations systems, loyalty programmes • Management contracts/Franchises • Utilisation of capital - Asset acquisitions - Sliver equity/joint ventures - Modernisation of existing owned hotels
Slide 9: Brand Outperformance
38 BASS HOTELS & RESORTS Brand Outperformance US RevPAR and RevPAR Growth - Oct 99 to Sep 00 +8.8% +8.8% 80 80 80 80 80 80 70 70 70 +3.4% +3.4% 70 70 70 US$ in US$ 60 60 60 60 60 60 +5.0% +5.0% RevPAR in 50 50 50 50 +6.4% +6.4% +3.3% +3.3% 50 50 +4.0% +4.0% RevPAR 40 40 40 40 40 40 30 30 30 30 30 30
Slide 10: Distribution Growth
39 BASS HOTELS & RESORTS Distribution Growth Net Increase in Hotels System Size Inter-Continental +11 Crowne Plaza +3 Holiday Inn +20 264 Hotels Express +131 34,000 Rooms (net) Staybridge +18 SPHC +57 Bristol +28 Forum -4
Slide 11: Current Pipeline
40 BASS HOTELS & RESORTS Current Pipeline Signed Deals Deals Inter-Continental 24 Crowne Plaza 45 596 Deals 75,314 Rooms Holiday Inn 131 Express 343 Staybridge 53
Slide 12: Key Strategic Distribution Priorities
41 BASS HOTELS & RESORTS Key Strategic Distribution Priorities • Extend global representation of Inter-Continental and Crowne Plaza across key cities and resorts • Build domestic positions for Holiday Inn and Express in Western Europe • Leverage US midscale franchise infrastructure Primary focus to
Slide 13: Investment Criteria
42 BASS HOTELS & RESORTS Investment Criteria • NPV positive • Above WACC returns by Year 3 • Earnings enhancing in first full year of ownership • Price takes account of cycle
Slide 14: Modernisation Programme
43 BASS HOTELS & RESORTS Modernisation Programme • San Francisco, Budapest, Vienna almost completed • Miami, Chicago, New York, Madrid under way • New opportunities identified at Paris Le Grand, Cannes, Mayfair • Overall investment now estimated at $450m
Slide 15: Big 10 - Current Plans
44 BASS HOTELS & RESORTS Big 10 - Current Plans DIRECTIONAL Projected Projected Movement Movement FY00 FY00 FY01 FY01 FY02 FY02 FY03 FY03 FY04 FY04 FY05 FY05 in in profit* profit* ($m) ($m) Americas Americas -- -5 -5 +10 +10 +15 +15 +21 +25 EMEA EMEA - +10 -30 -24 +41 +81 Total Total -- +5 +5 -20 -2
Slide 16: Hotels Summary
45 BASS HOTELS & RESORTS Summary • Increase organic pipeline of new hotels • Acquire assets to add value by brand conversion • Complete Big 10 modernisation programme • Sustain brand out-performance through marketing, sales, e-commerce • Maintain focus on product quality/brand innovation/service del
Slide 17: Bass Leisure Retail
46 BASS LEISURE RETAIL • 3,000 outlets - AWT £10.7k, of which: - 800 branded outlets - AWT £16.7k - accounting for over 40% of sales • Strong portfolio of brands adding value to sites • Selected pipeline of sites for conversion • High incremental returns being achieved
Slide 18: Estate Repositioning
47 BASS LEISURE RETAIL Estate Repositioning 80 80 80 80 12 12 10.7 10.7 70 70 65% 65% 70 70 10 10 Sales 60 60 of Sales 60 60 50 50 88 6.8 6.8 50 38% 50 39% 39% 38% AWT AWT 40 40 40 40 66 % of 30 30 30 30 % 18% 18% 44 20 20 20 20 22 10 10 10 10 00 00 00 South East Draught Beer Average Weekly Take KEY
Slide 19: Market Conditions
48 BASS LEISURE RETAIL Market Conditions • Decline in on-trade beer volumes • Exacerbated by new supply outstripping demand • Over-capacity impact on existing asset base • Demand for genuine amenity or value • High returns generated
Slide 20: Market Prospects
49 BASS LEISURE RETAIL Market Prospects • Withdrawal of some major players • Growth in eating and drinking-out market of 4% p.a. • Improving supply and demand balance • Industry continuing to polarise: - proven high take brands with high returns - smaller, assets run for cash
Slide 21: New Organisation Structure
50 BASS LEISURE RETAIL New Organisation Structure BLR 3033 3033 outlets outlets (£10.7k (£10.7k AWT) AWT) BLR Restaurant Restaurant Pubs Pubs & & Bars Bars Inns Inns Group* Group* Group* Group* 507 507 Branded Branded Outlets Outlets 285 285 Branded Branded Outlets Outlets (AWT (AWT £17.4k) £17.4k)
Slide 22: Restaurants Group
51 BASS LEISURE RETAIL Restaurants Group • Suburban pub restaurant market estimated at £2.5bn with demand growing faster than supply • Demonstrable chain and unit economies of scale - brand brand marketing marketing - food food supply supply chain chain - operating operating systems systems • BLR we
Slide 23: Restaurants Group
52 BASS LEISURE RETAIL Restaurants Group • LFL sales growth of suburban brands: 3.4% • New sites AWT £24.5k • Uplift on new upgrades: - Toby Carvery £21k AWT - New Harvester template £24k AWT • Food gross margin up by 1 percentage point • Returns continue to build
Slide 24: Pubs and Bars - Market
53 BASS LEISURE RETAIL Pubs and Bars - Market • High Street in growth at expense of Locals • New supply on High Street causing pressure on LFL sales • Successful brands earning high returns • Locals: - Traditional Community pubs facing declining demand and cash extraction - Quality suburban offers g
Slide 25: Pubs and Bars - Branded Performance
54 BASS LEISURE RETAIL Pubs and Bars - Branded Performance • New sites: £27.5k AWT • High Street premium brands: high returns - 18% returns on capital invested in last 4 years - 29% returns on new acquisitions in 99/00 • Goose: attractive returns and strong LFLs - 15% returns on new acquisitions in
Slide 26: Development Estate - Plan
55 BASS LEISURE RETAIL Development Estate - Plan • Expect to have 300 open by end Sept 2001 • Closure and pre-opening costs up c. £10m • Overall plan to complete conversions by September 2002
Slide 27: Development Estate
56 BASS LEISURE RETAIL Development Estate AII 78 converted outlets, average 14 14 +47% +47% on on Allied Allied year year to to Aug Aug 99 99 12.5 12.5 12 12 +59% +59% on on pre-conversion pre-conversion Food Food && 10 10 8.5 8.5 7.9 7.9 Drink Drink 88 AWT AWT 66 44 22 00 Allied Allied Final Final
Slide 28: Development Estate - Examples
57 BASS LEISURE RETAIL Development Estate - Examples O’Neills Shepherds Bush 30 30 26.7 26.7 25 25 Food Food && 20 20 Drink Drink AWT 15 AWT 15 12.6 12.6 10.9 10.9 10 10 55 00 Allied Allied Final Final Year Year 98/99 98/99 BLR BLR Pre-conversion Pre-conversion BLR BLR Post-conversion Post-conversio
Slide 29: Development Estate - Examples
58 BASS LEISURE RETAIL Development Estate - Examples Goose, Selly Oak 25 25 23.0 23.0 20 20 Food Food && Drink 15 Drink 15 AWT AWT 10 8.6 8.6 9.0 9.0 10 55 00 Allied Allied Final Final Year Year 98/99 98/99 BLR BLR Pre-conversion Pre-conversion BLR BLR Post-conversion Post-conversion
Slide 30: Development Estate - Examples
59 BASS LEISURE RETAIL Development Estate - Examples Toby Carvery Carvery,, Aldenham 35 35 29.3 29.3 30 30 Food Food && 25 25 Drink Drink 20 20 AWT AWT 15 15 11.5 11.5 8.2 8.2 10 10 55 00 Allied Allied Final Final Year Year 98/99 98/99 BLR BLR Pre-conversion Pre-conversion BLR BLR Post-conversion Po
Slide 31: Development Estate - Examples
60 BASS LEISURE RETAIL Development Estate - Examples Prince of Wales (Ember Inns), Sheffield 18 18 16.9 16.9 16 16 14 14 Food & Food & 12 12 Drink Drink 10 10 AWT AWT 88 5.9 5.9 66 5.1 5.1 44 22 00 Allied Allied Final Final Year Year 98/99 98/99 BLR BLR Pre-conversion Pre-conversion BLR BLR Post-con
Slide 32: Driving Scale Economies
61 BASS LEISURE RETAIL Driving Scale Economies • Further purchasing and supply chain gains anticipated • Further £15m of overhead reduction over next 2 years • Productivity and training: staff take per hour increased 3% in 99/00 • Increasing focus on brand marketing to drive LFL profits - 25% increa
Slide 33: Leisure Retail Summary
62 BASS LEISURE RETAIL Summary • Build on proven brands • Two stage investment strategy - Growth from conversions of Development Estate - Reduced investment focused on restaurants, Goose and Ember • Exploit scale economies to drive LFL profit
Slide 34: Outlook
63 BASS PLC Outlook Strong Brands Growth and Leadership Positions Returns
Slide 35: Slide 35