Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — H1 2019 Earnings Presentation
32 slides from Mitchells & Butlers's earnings presentation, 2019
Slide 1: Half Year Results 2019
Half Year Results 2019 –1–
Slide 2: Financial Review H1 2019
Financial Review H1 2019 Tim Jones Chief Financial Officer –2–
Slide 3: Key messages
Key messages • Strong like-for-like sales growth ahead of the market • Second wave of initiatives delivering sales growth and cost savings • Organic profit growth at increased margin • Cost headwinds and economic uncertainty remain • Priority remains de-leverage obligations and estate investment –3–
Slide 4: Income Statement (before adjusted items)
Income Statement (before adjusted items) H1 2019* H1 2018* £m £m Revenue 1,186 1,130 5.0% Operating costs (1,035) (989) Operating profit 151 141 7.1% Interest (61) (64) Pensions finance charge (4) (4) Profit before tax 86 73 17.8% Operating margin 12.7% 12.5% 0.2 ppts Earnings per share 16.1p 13.9p
Slide 5: Like-for-like sales
Like-for-like sales Week Week Week Week 1 – 14 15 – 28 1 – 28 1 – 33 Food 4.6% 2.4% 3.5% 3.6% Drink 4.8% 4.3% 4.5% 3.9% Total 4.7% 3.4% 4.1% 3.8% • Sales growth driven by increase in spend per item in part reflecting premiumisation of the estate • Improvement in volumes trajectory of both food and d
Slide 6: Like-for-like sales
Like-for-like sales Like-for-like sales growth Uninvested like-for-like sales growth FY18 FY19 FY18 FY19 • Trajectory has consistently improved in both the invested and uninvested estates • Illustrates capital and other initiatives working together to drive improved performance • Uninvested like-for
Slide 7: Like-for-like sales
Like-for-like sales Year to date like-for-like sales vs. the market 7.4% 3.0% 2.4% 1.8% 1.2% 0.0% • Outperformance of the market in each segment as identified by Coffer Peach tracker • Broad based outperformance in sales across the brand portfolio • Particularly strong growth in Restaurants segment,
Slide 8: Inflationary cost headwinds
Inflationary cost headwinds £m FY19 Food/ drink Labour Property Energy Other • FY19 cost headwinds of c.£65m in line with expectations • Low forward visibility due to macroeconomic and political uncertainty but FY20 currently expected to be in region of £60m-£65m –8–
Slide 9: Adjusted EBIT movement
Adjusted EBIT movement +£15m +£8m +£19m £(5)m £(3)m +£13m £(37)m H1 2018 Snow Easter FY 2018 FY 2019 Inflationary Cost savings Like-for-like H1 2019 £141m FY18 openings openings cost and trading £151m and and headwinds efficiencies remodels remodels –9–
Slide 10: Capital expenditure and returns
Capital expenditure and returns H1 2019 H1 2018 # # £m £m sites sites Maintenance and infrastructure (excl remodels) 30 29 Remodels - refurb 43 182 51 181 Remodels - expansionary 4 11 5 13 Conversions 8 13 16 26 Acquisitions – leasehold 5 2 3 4 Total return generating capital 60 208 75 224 Total cap
Slide 11: Cash flow
Cash flow H1 2019 H1 2018 £m £m EBITDA before adjusted items 217 206 Share-based payments 2 1 Administrative pension costs 1 1 Working capital / non cash items 33 32 Pension deficit contributions (24) (23) Cash flow from operations 229 217 Cash flow from adjusted items (1) - Capital expenditure (90)
Slide 12: Deleveraging capital structure
Deleveraging capital structure £m Current enterprise value 0 • Illustrative example over 10 years • Based on 2016 pensions triennial agreement and mandated bond amortisation – 12 –
Slide 13: Summary
Summary • Strong like-for-like sales growth ahead of the market • Second wave of initiatives delivering sales growth and cost savings • Organic profit growth at increased margin • Cost headwinds and economic uncertainty remain • Priority remains de-leverage obligations and estate investment – 13 –
Slide 14: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 14 –
Slide 15: Like-for-like sales versus market
Like-for-like sales versus market 12% Festive 11% 10% Snow 9% 8% 7% 6% World Cup 5% 4% 3% 2% 1% (0%) (1%) (2%) (3%) (4%) (5%) (6%) (7%) FY16 FY17 FY18 FY19 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 15 –
Slide 16: Market environment
Market environment • Ongoing Brexit impact uncertainty • Sector impacted by continued inflationary cost headwinds including living wage, business rates, statutory energy costs • Restaurant supply growth starting to abate • Pressures are resulting in a number of CVAs and closures • Total restaurant n
Slide 17: Strategic priorities
Strategic priorities Build a more Instil a more Drive 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
Slide 18: Ignite
Ignite 2 • Ignite 2 has identified several opportunities across the business to drive sales growth and increase efficiencies • The transformation project continues to build momentum • 43 initiatives underway • Project office is well established • Large number of incremental gains which in aggregate
Slide 19: Capital programme
Capital programme • Capital programme one contributor towards improved trading performance • Target 6-7 year investment cycle • More value to unlock: - 17% not invested in >7years - 148 sites not invested in >10 years • Strong returns from investment projects – 19 –
Slide 20: Sales – intelligent pricing
Sales – intelligent pricing • Developed more sophisticated approach to pricing • Maintaining good value for money by: - Protecting entry points - Product quality which commands higher price point • Drink price positioning reviewed twice a year through individual site surveys • Provide opportunities
Slide 21: Sales - initiatives
Sales - initiatives • Greater local ownership facilitated by: - Sales training workshops - Team of Sales Managers for key sites - “Everybody Sells” incremental sales initiative • Investment in software creating a smoother booking process for customers Bookings per week trebled in 3 years – 21 –
Slide 22: Sales – customer feedback
Sales – customer feedback • Reputation.com – feedback consolidation tool for managers • Facilitates direct manager engagement with customers • More personal response to feedback and local ownership of response • Response times continue to improve • Guest satisfaction scores continue to improve – 22
Slide 23: Costs - labour
Costs - labour • Focus on labour efficiencies which do not adversely impact service • New system has facilitated: - More accurate deployment plans based on individual site forecasts and trading patterns - Enhanced trust in the system resulting in actual schedules being closer to the system suggestio
Slide 24: Costs – cashless sundries
Costs – cashless sundries • Ignite workstream identified opportunity in sundry site purchases • Non-cash solution for day to day purchases in place • Improved visibility of purchases • Ability to leverage buying power – 24 –
Slide 25: Future priorities
Future priorities • Implementation of new stock system • Further digital development: - Order at table - Trial of cash-free business - Opening our platform to allow quick integration with 3rd party software • First M&C Germany to open in June • Investment in all accommodation due to be complete by e
Slide 26: Summary
Summary • Strong like-for-like sales growth ahead of the market • Second wave of initiatives delivering sales growth and cost savings • Organic profit growth at increased margin • Cost headwinds and economic uncertainty remain • Priority remains de-leverage obligations and estate investment – 26 –
Slide 27: Questions
Questions
Slide 28: Half Year Results 2019 Supplementary Slides
Half Year Results 2019 Supplementary Slides – 28 –
Slide 29: IFRS16 (Leases)
IFRS16 (Leases) • Adoption from FY19/20 financial year • Essentially means that all leases (with some exceptions) will be recognised on balance sheet through a right of use asset and related lease liability. In the income statement operating lease costs will be replaced by depreciation of the asset
Slide 30: H1 2019 – Outlet reconciliation
H1 2019 – Outlet reconciliation Total Managed1 Franchised Total MAB2 Opening outlets (start FY 2019) 1,690 60 1,750 Transfers (5) 5 - Disposals (6) (1) (7) Acquisitions 2 - 2 Closing outlets (end H1 2019) 1,681 64 1,745 Notes: 1. H1 2019 closing managed total includes 4 non-trading sites. 2. Lodges
Slide 31: H1 2019 – Financial covenants summary
H1 2019 – Financial covenants summary Securitisation Restricted Payments Tests Test Actual (Relevant Year) Headroom Free cash flow to debt service 1.3x 1.5x £31m EBITDA to debt service 1.7x 1.8x £28m Securitisation Covenants Covenant Actual (Relevant Year) Headroom Free cash flow to debt service 1.1
Slide 32: H1 2019 – Securitisation profile
– 32 – Sep-36 Sep-35 Sep-34 Sep-33 Sep-32 Sep-31 Sep-30 Sep-29 Sep-28 Debt Service Sep-27 H1 2019 – Securitisation profile Sep-26 Sep-25 Sep-24 Sep-23 Sep-22 Sep-21 Sep-20 Sep-19 Sep-18 (50.00) (250.00) (200.00) (150.00) (100.00) £m 0.00