Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — H1 2018 Earnings Presentation
33 slides from Mitchells & Butlers's earnings presentation, 2018
Slide 1: Half Year Results 2018
Half Year Results 2018 –1–
Slide 2: Financial Review H1 2018
Financial Review H1 2018 Tim Jones Finance Director –2–
Slide 3: Key messages
Key messages • Continued improvement and outperformance on sales • Cost headwinds unchanged, with progress on mitigation • Stabilisation of underlying profit performance • Further wave of strategic initiatives identified and starting to be executed –3–
Slide 4: Income Statement
Income Statement H1 2018* H1 2017* £m £m Revenue 1,130 1,123 0.6% Operating costs (989) (974) Operating profit 141 149 (5.4%) Interest (64) (66) Pensions finance charge (4) (4) Profit before tax 73 79 (7.6%) Operating margin 12.5% 13.3% (0.8 ppts) Earnings per share 13.9p 15.2p (8.6%) * before seper
Slide 5: Weekly sales
Snow impact on sales £m Weekly sales • The snow resulted in lost sales of c.£12m • Impact exacerbated by heavy snow on Sundays • Profit impact c.£8m, including increased food wastage and repairs • Excluding the impact of snow year to date like-for-likes would be 2.5% –5–
Slide 6: Like-for-like sales
Like-for-like sales Week Week Week Week 1 – 14 15 – 28 1 – 28 1 – 32 Food 1.4% 2.1% 1.8% 1.0% Drink 1.0% 1.8% 1.4% 1.9% Total 1.1% 2.0% 1.6% 1.4% • Weeks 1-28 sales impacted by snow and movement of Easter into first half • Strong trading over Easter weekend which moves into the first half; like-for-
Slide 7: Inflationary cost headwinds unchanged
Inflationary cost headwinds unchanged £m FY18 Food/ drink Labour Property Energy Other • Full year cost inflation guidance remains unchanged • Anticipate similar levels to continue into the next financial year • Progress made on mitigation through strategic objectives –7–
Slide 8: Adjusted EBIT movement
Adjusted EBIT movement +£16m +£4m +£17m £(10)m £(2)m £(8)m +£7m £(2)m £(30)m H1 2017 Inflationary Cost savings Like-for-like FY 2017 FY 2018 £149m Easter FY17 Snow Accelerated H1 2018 £149m cost and trading openings openings movement Disposals investment £141m headwinds efficiencies and and plan rem
Slide 9: Cash flow
Cash flow H1 2018 H1 2017 FY 2017 £m £m £m EBITDA before adjusted items 208 212 429 Working capital / non cash items 32 (2) (10) Pension deficit contributions (23) (23) (46) Cash flow from operations 217 187 373 Capital expenditure (104) (93) (169) Disposals 4 1 46 Net interest, tax and other (73) (
Slide 10: Capital expenditure and returns
Capital expenditure and returns H1 2018 H1 2017 # # £m £m sites sites Maintenance and infrastructure (excl remodels) 29 24 Remodels - refurb 51 181 24 101 Remodels - expansionary 5 13 9 22 Conversions 16 26 24 49 Acquisitions – freehold - - - - Acquisitions – leasehold 3 4 12 6 Total return generati
Slide 11: Capital allocation and dividend
Capital allocation and dividend • As advised, no dividend declared at Interim stage • Assessment to be made at the Full Year • Priority to maintain the condition and competitiveness of the estate and protect the balance sheet • Continued deleverage through bond amortisation and pensions payments – 1
Slide 12: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 12 –
Slide 13: Snow!
Snow! © Serving with pride, since 1898 =1935
Slide 14: Strategic priorities
Strategic 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 - Ne
Slide 15: The market context
The market context Net increase in restaurants of c.4,000 ● Consumer discretionary income has been under pressure but our market continues to grow ● Market remains challenging: • Supply has slowed but long term increase in supply has outstripped 2012 2013 2014 2015 2016 2017 demand growth • CVAs and
Slide 16: Like-for-like sales versus market
Like-for-like sales versus market 7% 6% 5% 4% 3% 2% 1% 0% (1%) (2%) (3%) (4%) (5%) (6%) (7%) Ignite 1 began Sept Sept Sept April 2015 2016 2017 2018 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 16 –
Slide 17: Driving an innovation agenda – digital
Driving an innovation agenda – digital ● Net promoter score 61 (H1 17: 56) ● Social media response rate 90% (H1 17: 64%) ● 120k online bookings per week (H1 17: 80k) ● 1.5m visits to our websites each week, up 25% ● Delivery: • Deliveroo in 73 sites • Just Eat in 36 sites ● 2 million guest downloads
Slide 18: Instil a more commercial culture – labour
Instil a more commercial culture – labour ● New labour rostering system fully rolled out helping managers to: • Improve sales forecasting • Enhance deployment; system suggestion tailored to individual businesses • Easily review planned and actual deployment versus system suggestion ● Resulting in: •
Slide 19: Instil a more commercial culture – stock management
Instil a more commercial culture – stock management ● New stock system: • Auto ordering • Improved stock control • Reduction in wastage • Fewer instances of stock outages • More efficient stock take process ● Food prep and par system in trial: • Optimum product prepared • Remote counting and bar cod
Slide 20: Build a more balanced business
Build a more balanced business Proportion of estate by most recent investment ● Accelerated capital programme: • Reduction in spend per project • Reduction in closure time ● 224 projects in first half: • 46 more than H1 2017 ● 6-7 year investment cycle established: • Estate quality greatly improved
Slide 21: New Concept development
New Concept development ●Continue to drive new concept and product development ●Two new concepts getting very positive customer reaction • Chicken Society: food offer for existing businesses • Son of Steak: needs refining but will become a viable offer ●Further ideas in early stages of development –
Slide 22: People
People ● Team engagement: • Improvement across all cohorts ● Apprenticeship programme investment: • Brexit related recruitment challenge • 1,600 total apprentices in learning • Real career path opportunities • Largest chef academy in the UK • Early in Career Programme award ● Received Overall Best P
Slide 23: Second phase of initiatives – Ignite 2
Second phase of initiatives – Ignite 2 ● Phase 1 stabilised underlying profits ● Phase 2 will drive the business forward: • 8 buckets of activity • Each sponsored by an Executive member • Led by Operations Directors • Simultaneous initiatives across business – 23 –
Slide 24: Ignite 2: Sales and service / Labour
Ignite 2: Sales and service / Labour 1. Sales and service: • Unprofitable hours • Selling up • Under-performing assets • Raising site standards 2. Labour: • Improved sales forecasting • Support and training for sites • Not just cutting costs but optimising deployment – 24 –
Slide 25: Ignite 2: Stock / external spend
Ignite 2: Stock / external spend 3. Stock: • Roll-out of auto-ordering • Trial and roll-out of prep & par 4. External spend: • Leveraging scale • Cash spend in the business • Further product rationalisation • Reducing maintenance costs – 25 –
Slide 26: Ignite 2: Menus and pricing / ROI
Ignite 2: Menus and pricing / ROI 5. Menus and pricing: • Menu psychology • Speed to market of menu changes • More radical tailored pricing by site • Lead time on point of sale 6. ROI: • Value engineering • Improved site selection techniques • Focus on poor performing investments – 26 –
Slide 27: Ignite 2: Digital / Stock and cash leakage
Ignite 2: Digital / Stock and cash leakage 7. Digital marketing: • CRM effectiveness improvement • Order at table • Optimising our delivery partnerships 8. Stock and cash leakage: • Trial of new software • Pinpoint weakness in controls • Speedy resolution of issues – 27 –
Slide 28: Summary
Summary • Continued improvement and outperformance on sales • Cost headwinds unchanged, with progress on mitigation • Stabilisation of underlying profit performance • Further wave of strategic initiatives identified and starting to be executed – 28 –
Slide 29: Questions
ESTIONS “Qu ~~
Slide 30: Half Year Results 2018 Supplementary Slides
Half Year Results 2018 Supplementary Slides – 30 –
Slide 31: H1 2018 – Outlet reconciliation
H1 2018 – Outlet reconciliation Total Managed Franchised Total MAB Opening outlets (start FY 2018) 1,695 59 1,754 Transfers (1) 1 Disposals (7) (1) (8) Acquisitions 4 4 Closing outlets (end H1 2018) 1,691 59 1,750 Note: Lodges attached to sites do not appear as a separate outlet. Supplementary Slide
Slide 32: H1 2018 – Financial covenants summary
H1 2018 – Financial covenants summary Securitisation Restricted Payments Tests Test Actual (Relevant Year) Headroom Free cash flow to debt service 1.3x 1.5x £32m EBITDA to debt service 1.7x 1.8x £22m Securitisation Covenants Covenant Actual (Relevant Year) Headroom Free cash flow to debt service 1.1
Slide 33: H1 2018 – Securitisation profile
H1 2018 – Securitisation profile Annual cash interest Annual amortisation – 33 –