Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2008)
59 slides from Mitchells & Butlers's debt investor presentation, Nov 27, 2008
Slide 1: Bond Investor Update – 27 November 2008
Andrew Vaughan Group Treasurer Bond Investor Update – 27 November 2008
Slide 2: Highlights
Highlights z Gross debt outstanding at year end £2,374m z EBITDA (reported) £398m z Free cashflow £341m z Debt / EBITDA 6.0x z EBITDA DSCR* 2.3x z FCF DSCR* 2.0x EBITDA above level at time of Securitisation tap in September 2006 * Relevant Year 2
Slide 3: Free Cash Flow
Free Cash Flow £m £m EBITDA 398 Tax 6 Required maintenance capital (63) Free cashflow 341 Interest (133) 2.0x Principal repayment (41) Debt Service (174) 3
Slide 4: Securitisation Covenants
Securitisation Covenants FY 08 H1 H2 Year Free Cashflow:Debt Service 2.0x 1.9x 2.0x EBITDA:Debt Service 2.2x 2.4x 2.3x Net Worth £1.61bn Well within required covenants Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Restricted Payment Test. FCF/Debt Service 1.3x, EBITDA/Debt Serv
Slide 5: Maintenance & Capital Enhancement
Maintenance & Capital Enhancement Securitisation Estate £m Repairs* 29 114 (vs. required amount of £93m) Maintenance 85 Enhancement 42 156 Substantial investment to maintain and enhance estate quality *Charged through Profit & Loss account 5
Slide 6: Cashflow - uses
Cashflow - uses £m FCF 341 Debt Service (174) Maintenance Capital (over required amount) (21) Net Capital Enhancement Expenditure* 22 Excess Cash 168 Restricted Payments made (147) Restricted Payment Maximum increase 21 Restricted Payment Maximum at start of year 39 Restricted Payment Maximum at end
Slide 7: MAB PLC vs. MAB Retail Limited
MAB PLC vs. MAB Retail Limited Securitisation PLC Estate £m £m Number of pubs* 1,993 1,704 Turnover 1,908 1,607 EBITDA 477 398 EBIT 343 287 Difference driven by 289 pubs and head office infrastructure outside the Securitisation *As at 27 September 2008 7
Slide 8: Jeremy Townsend, Finance Director
Jeremy Townsend Finance Director Bond Investor Update – 27 November 2008
Slide 9: Key Messages
Key Messages z Resilient sales growth z Robust operating profit performance in a challenging environment z Capital investment has continued to earn good returns z Strong cashflows from operations z Significant debt reduction z Non-core asset disposal program impacted by credit conditions z To accele
Slide 10: Financial Highlights
Financial Highlights 52 weeks ended 27 September 2008 Growth z Revenue £1,908m 0.7% z EBITDA* £477m 1.1% z Operating profit* £343m - z Net Interest* £164m (20.6)% z Profit before tax* £179m (13.5)% z EPS* 31.5p (11.3)% Resilient sales growth and robust operating performance 10 * Before exceptional i
Slide 11: Exceptional Items and IAS 39 Movements
Exceptional Items and IAS 39 Movements £m Gross Net Operating Profit Loss on swap closure (182) (129) Strategic review (12) (9) Impairment revaluation (160) (136) (206) Fair value adjustments (46) (42) Property disposals 6 4 Tax credit 26 Total Exceptional Items (394) (286) IAS 39 movements (23) (17
Slide 12: Like-for-Like Sales Growth
Like-for-Like Sales Growth 1.4% 1.0% 0.8% H1 07/08 H2 07/08 1st 8 weeks 08/09 Consistent like-for-like sales trend 12
Slide 13: Divisional Operating Performance
Divisional Operating Performance FY 08 FY 07 £m £m Revenue Pubs & Bars 954 968 (1.4)% Retail Restaurants 939 908 3.4% 0.9% SCPD 15 18 1,908 1,894 0.7% Operating Profit* Pubs & Bars 176 191 (7.9)% Retail Restaurants 156 145 7.6% (1.2)% SCPD 11 7 343 343 - Strong growth in Restaurants; Pubs & Bars imp
Slide 14: Underlying Profit Growth
Underlying Profit Growth FY 08 Division Acquired Core Underlying Total Sites Estate Growth* £m £m £m % Pubs & Bars Revenue 954 23 931 flat Operating Profit 176 4 172 (7.0)% Restaurants Revenue 939 178 761 1.7% Operating Profit 156 30 126 (2.3)% Smoking ban and cost pressures reduce net margins 14 *
Slide 15: Key Operating Statistics
Key Operating Statistics z Same outlet food sales: up 4.9% z Same outlet drink sales: down 0.8% z Gross margin down 1.4% points z Outlet staff costs: 24.2% of sales z Tight cost control z Increased inflationary cost pressures Overall net operating margin 17.5% Note: all figures relate to Retail 15
Slide 16: Operating Profit Movement
Operating Profit Movement Original Acquired Sites +15 SCPD £343m* Trading £343m* +4 FY07 +13 FY08 (2) Disposals (30) External Costs Strong trading performance offset by external costs * Before exceptional items and IAS 39 movements 16
Slide 17: Outlook for FY09 Costs
Outlook for FY09 Costs z Volatile energy and food costs z Estimated £30m of inflationary cost pressure in food and energy z Forward markets indicating sharp declines in second half food and energy costs z £20m of additional regulatory cost increases z Productivity, food margin management and other c
Slide 18: FY08 Expansionary Capital
FY08 Expansionary Capital Residential Locals Pub Restaurants Core £23m Core £21m Original Acquired Sites Original Acquired Sites £1m £30m Drinks Food led led Core £7m High Street Restaurants City Centre 16% investment return on expansionary capex 18
Slide 19: Capex Investments
Capex Investments FY08 Returns CROCCE return 10.6% NOPAT return 8.0% FY09 projected capex Reduction in organic expansionary capex while debt reduction prioritised £18m allocated to 44 new site conversions Bulk of capex focused on maintenance of amenity Total capex for year projected at £
Slide 20: Group Debt and Outstanding Facilities
Group Debt and Outstanding Facilities Sept 08 Feb 08 £m £m Securitisation gross debt (2,361) (2,391) Cash / other 140 76 Unsecured facility (514) (595) Net debt (2,735) (2,910) Unsecured facility 600m 700m Headroom +86m +105m Net debt reduction of £175m in 8 months 20
Slide 21: Cash Flow (1)
Cash Flow (1) FY 08 FY 07 £m £m EBIT 343 343 Depreciation & amortisation 134 129 EBITDA 477 472 Working capital / non cash items 33 19 Maintenance capex (111) (122) Expansionary capex (82) (139) Total capex (193) (261) Disposals 82 162 Net capital expenditure (111) (99) Additional pension contributi
Slide 22: Cash Flow (2)
Cash Flow (2) FY 08 FY 07 £m £m Operating Cash Flow after Net Capex 375 352 Net Interest paid (164) (145) Tax paid (4) (33) Normal dividends paid (58) (52) Special dividend paid - (486) Issue of share capital 3 11 Shares repurchased (5) (46) Net Cash Flow 147 (399) Exceptional Cash Flow Items £(412)
Slide 23: Focus on Reducing Debt
Focus on Reducing Debt Amortisation Facility Unsecured Secured Total FY08 Current £600m FY09 December 2008 £550m 50 43 93 FY10 December 2009 £400m 150 FY10 June 2010 £350m 50 46 246 FY11 December 2010 £300m 50 49 99 £339m of scheduled amortisation over next 2 years 23
Slide 24: Balance Sheet
Balance Sheet z Net Debt : EBITDA 5.7x z Book Gearing* 69% z IAS 19 Pension deficit £23m z Property Value** £4.7bn Strong balance sheet and strengthening financial platform 24 * Net Debt / (Net Assets + Net Debt) ** Incorporates fixed assets and assets held for resale
Slide 25: Summary
Summary z Well positioned to further accelerate market share gains z Opportunity for leverage from Original Acquired Sites z Strong operational performance driving productivity gains z Easing pressure from inflation z Cash conservation is key priority z Capital investment programme focussed on maint
Slide 26: Andrew Vaughan, Group Treasurer
Andrew Vaughan Group Treasurer Bond Investor Update – 27 November 2008
Slide 27: Strategy for a Recession
Strategy for a Recession z Generating resilient like-for-like sales performance z Profitable optimisation of volume, price and mix z Productivity and purchasing efficiency gains z Delivering strong uplifts on Original Acquired Sites z Prioritising debt reduction z Reduced capex focus on maintaining
Slide 28: Key Trading Priorities
Key Trading Priorities z Caution on FY09 market prospects z Top line sales focus crucial to operationally geared model z Protecting amenity, quality, price, service z Value and volume strategy responsive to consumer trends z Deploy purchasing scale to deliver customer needs z Drive marketing scale e
Slide 29: Like-for-Like Sales (%)
Like-for-Like Sales (%) FY 09 FY 08 FY 08 8wks H2 H1* Divisional Pubs & Bars (0.2) (0.3) (0.5) Restaurants 2.3 3.3 2.2 Segmental Residential 1.9 2.4 0.8 High Street (0.7) Flat 0.3 Total** 1.0 1.4 0.8 FY08 like-for-like sales growth of 1.0% 29 * 32 weeks to include the entire Easter period ** Include
Slide 30: Profitable Market Share Gains
Profitable Market Share Gains MAB Estimated Volume Growth (1) Market Volume Growth (2) Food 8% 2% Wine & Soft Drinks 2% -6% Spirits -6% -7% Beer & Cider -2% -8% Acceleration in market share gains 30 (1) Same outlet like-for-like growth (2) MAB estimates based on BBPA/AC Neilsen / ONS
Slide 31: UK Food Growth – FY08
UK Food Growth – FY08 z Food sales mix 39% z Like-for-like food sales up 4.9% z Total food sales up 7.7% z Average weekly food sales per pub up 7.2% to £7,800 z Average number of meals per pub per week up 10.2% to 1,220 z Serving over 110 million meals per annum z Enhanced purchasing scale Food volu
Slide 32: Volume out-performance (% points)
Beer Market Volume Out-performance* 6% Volume out-performance (% points) 5% 4% 3% 2% Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- 06 06 06 06 07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08 08 Strateg
Slide 33: Average Retail Price (%)
Retail Price 4 Drinks Food +0.3% Average Retail Price (%) 3 +2.5% Mix/Range 2 +2.8% LFL Price +0.9% 1 LFL Price LFL Price 1 Mix/Range -2.8% 2 3 -3.7% Value positioning to drive market share gains 33
Slide 34: Margin Management
Margin Management z Maximising cash contribution at net operating margin level z Challenges of input cost inflation and shift to lower margin food z Maximise volume, purchasing and productivity gains z Sales growth, offsetting gross margin reinvestment from value strategy z Accelerating market share
Slide 35: Eating Out Market Average Spend & Volume
Eating Out Market Average Spend & Volume Spend per Meal Full Service Restaurants £10 £9.45 £8 £7.92 MAB £6.05 £6.07 £6 £4 Pubs £3.22 Transport & Leisure £2 Quick Service Restaurants £0 10 20 30 40 50 60 70 80 90 100 Volume Share (%) MAB out-performing eating out market by 6% 35 Source: NPD Crest Sep
Slide 36: Value for Money in All Market Segments
£0.00 £2.00 £4.00 £6.00 £8.00 £10.00 £12.00 £14.00 Rose and Crown (Warwick) Eagle Farringdon Source: Menurama PCDG PREMIUM Chef & Brewer Frankie & Benny's Beefeater The Market – Orchid Carvery Pizza Express Taybarns Vintage Inns Wagamama Harvester Gourmet Burger Kitchen MID MARKET Brewers Fayre Harv
Slide 37: Key Menu Priorities
Key Menu Priorities z Menus tailored to different timeslot needs z Different dynamics of value, mid-market and premium segments z Widen range of choice and price points on menus z Menu management to mitigate margin impact of products with highest cost inflation z Emphasis on fish and chicken versus
Slide 38: Menu Development
Menu Development z Day time value sessions Protect KVI* entry point dishes to attract customers trading down Introduction of complementary value packages alongside main menus in mid-market and premium offers z Evening and weekend premium sessions Enhance quality of dishes to respond to demand
Slide 39: Sizzling Pub Co.
Sizzling Pub Co. www.sizzlingpubs.co.uk 39
Slide 40: Crown Carveries
Crown Carveries www.crowncarveries.co.uk 40
Slide 41: Town Pubs
Town Pubs Mitchells “) & Butlers = a nn Great choice at More to share, a great price less to pay All day every day Sandwich & drink 5 10 SHARING DISHES Great choice at a great price ™ Now serving food till 1opm 41
Slide 42: Vintage Inns
Vintage Inns www.vintageinn.co.uk 42
Slide 43: Ember Inns
Ember Inns www.emberinns.co.uk 43
Slide 44: Toby Carvery
Toby www.toby-carvery.co.uk 44
Slide 45: Premium Country Dining
Premium Country Dining The Seahorse Thursday 20th November Chris Goodchild our Head Chef is Proud To Recommend: Soup: Roast Tomato + Bombay Sapphire Gin 4.45 Scallops: Seared Scallops + Black Pudding + Pea & Mint Puree + Rocket 7.95 Risotto: Smoked Haddock + Mixed Peppers + Spring Onion 10.95 Fish:
Slide 46: Key Drinks Priorities
Key Drinks Priorities z Beer & Cider Extending range of premium imported lagers: volumes up 33% Wider distribution of cask ales: volumes up 9% Growth of cider from new product lines: volumes up 12% Cellar training: 700 cask marque accreditations Taking share in declining UK-brewed lager se
Slide 47: World Beers, Cask Ale & Cider
World Beers, Cask Ale & Cider 47
Slide 48: Wine, Soft and Hot Drinks
SOFT DRINKS All our refreshing juices are just €1.25 for a regular glass! Choose from: Fresh Orange, Cranberry, Crushed Apple, Apple & Mango, Red Pomegranate and Summer Breeze (Orange & Cranberry) Smoothies £1.55 Ice chilled for total refreshment Berry Apple, banana, strawberry, raspberry and blackb
Slide 49: Drinks Price Gap
Drinks Price Gap Average Price per Pint of Standard Lager – Sept 08 vs Sept 07 £3.00 +14p +10p +6p £2.50 £2.00 £1.50 £1.00 +4p £0.50 £0.00 MAB Managed Pubs Total Tenancy / Total Grocery Leased Multiples FY07 FY08 MAB over 40p less per pint than leased Source: AC Nielsen 49
Slide 50: Efficiency Gains
Efficiency Gains z Productivity Rapid growth in staff contribution per hour +5.4% Training, deployment, scheduling systems z Purchasing Food inflation held to 3% Volume growth mitigating commodity pricing pressures z Infrastructure efficiencies Rationalisation implemented z Overall fixed a
Slide 51: Residential Pub Restaurants
Residential Pub Restaurants z Returns from margin reinvestment Menu quality Value Service training z Successful turnaround of Vintage The Swan, Vintage Inn, Horning Inns z Harvester Enhancing evening menus Evolving day time offer z Strong performance in Crown Carveries and Toby Toby Carver
Slide 52: Residential Pubs – Original Acquired Sites
Residential Pubs – Original Acquired Sites z Fourth quarter EBITDA run rate uplift of over 50% z Sales uplifts of 20% z Average food volumes up 32% Riverside Inn, Harvester, Bournemouth z Productivity gains Employment ratio fallen from 32% to 27% z Purchasing gains of £8m Scotsbridge Mill, Premium
Slide 53: Residential Pubs
Residential Pubs z Repositioning to food: 24% sales mix z Food sales up 12% Man On The Moon, Cornerstone, Kings Norton z Sharp acceleration in drinks market share gains z Expansion of Sizzling Pub Co., Cornerstone and Metro Professionals Fighting Cocks, Metro Professionals, Moseley Same outlet like-
Slide 54: High Street and City Centre Markets
High Street and City Centre Markets z 24% of sales z Central London growth All Bar One, Browns, Nicholson’s z Repositioning of O’Neill’s, Scream, Town Pubs z Pressure on Late Evening Venues z Food growth +11% z Rapid growth in breakfast +30% and coffee +10% Argyll Arms, Nicholson’s, Oxford Circus
Slide 55: Repositioned Estate
Repositioned Estate Residential Residential Pubs Pub Restaurants 30% of sales 46% of sales Food: Food: 24% of mix 61% of mix +12% growth +4% growth Drinks led Food led High Street City Centre 20% of sales 4% of sales Food: Food: 13% of mix 43% of mix +17% growth +4% growth City Centre Note: 1. Pie c
Slide 56: Current Trading
Current Trading z Strong food growth: like-for-likes +3.5% z Drinks like-for-likes now positive +0.5% z Pub Restaurants Resilient performance Actions to improve Harvester z Residential Pubs Rapid food growth Further drinks share gains z High Street Impacted by absence of Rugby World Cup
Slide 57: Outlook
Outlook z Weakening consumer spending in 2009 z Value and volume strategy to ensure defensive position in recession z Intense supermarket drinks competition z Widening value gap with rest of on-trade z Rising consumer price elasticities z Customer focus on value in slowing eating out market z First
Slide 58: Summary
Summary z Radical action to defend business from recessionary pressures z Priorities of debt reduction and operational out-performance z Dividend temporarily suspended to pre-empt facility step downs z Uncertainty over value realisation from disposals z Issue of cash flow, not fundamental long term
Slide 59: Questions & Answers
Questions & Answers Bond Investor Update – 27 November 2008
Mitchells & Butlers — Debt Investor Presentation (November 2008) on 6ix