Slide 1: Preliminary Results 2012
Preliminary Results 2012
Slide 2: Highlights
Highlights Resilient performance with growth in all segments • Strategy appropriate for continuing economic uncertainty High quality pubs underlined by estate valuation • New-build pubs increased by over 50% versus build cost Strategy remains on track • New-builds • Franchise Agreements • Disposal p
Slide 3: Andrew Andrea, CFO
Andrew Andrea CFO AA ad Mon.- Sat. £59 12-230 05 5-9 Sunday ¢725
Slide 4: Financial summary
Financial summary 52 weeks 2012 2011 vs. LY Revenue £719.7m £682.2m +5.5% EBITDA* £198.6m £195.8m +1.4% Operating Profit* £157.9m £154.3m +2.3% Profit before tax* £87.8m £80.4m +9.2% Adjusted EPS* 12.3p 11.2p +9.8% Full Year Dividend 6.1p 5.8p +5.2% Dividend Cover 2.0x 1.9x +0.1x * before exceptiona
Slide 5: Resilient trading performance
Resilient trading performance 10% +9% +7% +5% +4% +3% +1% 0% Turnover Operating Profit Managed Tenanted and Franchised Brewing Page 5 Turnover and profit growth in all trading segments
Slide 6: Retained estate performance
Retained estate performance Retained Disposals Reported Retained Disposals Reported 8 7 6 +7% +3% +7% +2% 5 % 4 +5% 3 2 +4% 1 0 Revenue Operating profit Page 6 Strong underlying growth
Slide 7: Sales performance
Sales performance Like-for-like sales* 52 weeks to 8 weeks to % change 29 September 24 November Drink +2.2% +0.9% Food +2.4% +3.4% Total +2.2% +2.0% * Excludes any pubs acquired in last two years +7.0% Tough Q1 comps, Q2-Q4 less challenging 2013 +3.0% +3.0% +3.4% 2012 +2.9% +2.0% 2011 +1.4% +1.2% +0
Slide 8: Margin performance
Margin performance 16.4% 17.4% 18.1% 18.3% 3% 2% 2% (1)% 2009 2010 2011 2012 Margin % LFL Page 8 Growth achieved with strong margin progression
Slide 9: 2013 cost outlook
2013 cost outlook Drink Food Labour Utilities Carbon Levy Drink price Food price Menu Reduced management energy 3% Increase £1.0m £2.0m £1.0m 3% Increase 1.5% £1.5m Increase £1.5m £3.0m 1% Increase £1.5m £0.5m £2.0m 2012 inflation: £8 million 2013 inflation: £7 million Page 9 Reduced inflationary pr
Slide 10: Tenanted & Franchise performance
Performance Tenanted & Franchise Total Leased Agreement No. of pubs c.1,000 c.600 c.1,600 Revenue Level +26% +9% Rent +2% n/a - YOY EBIT Level +23% +3% STABILITY OPPORTUNITY Page 10 Stable core estate, franchise driving growth
Slide 11: Continued market outperformance
Continued market outperformance Revenue growth • Revenue up 7% • Group ale volume up 2% • Strong growth in off-trade • Market share growth Robust financial performance • Operating profit up 0.6% • Strong cash generation 2013 cost outlook • c.£1m of cost inflation – energy • Mitigation through price
Slide 12: Cashflow summary
Cashflow summary £m 2012 2011 Comments £12.9m working capital Operating cashflow 168.4 182.4 upside in 2011 £3.5m one-off Net interest (76.0) (69.8) arrangement fee Pre-investment FCF 92.4 112.6 Higher new-build spend, offset Net capex* (78.7) (94.2) by sale and leaseback Final dividend (33.5) (33.0
Slide 13: Financing structure
Financing structure Secured Unsecured Total Net debt (£m) 959 162 1,121 EBITDA (£m) 128 71 199 Net debt: EBITDA 7.5x 2.3x 5.6x Proforma for 2012 7.5x 2.1x 5.4x new-builds rollover % of pub profit 69% 31% (100% freehold) (85% freehold) Leverage strategy Smooth debt Funding Further service growth redu
Slide 14: Estate revaluation
Estate revaluation No of Old New % Sites NBV NBV Change £m £m Managed New-build (2007-12) 65 144 225 56% Other Managed 419 710 794 12% Total Managed 484 854 1,019 19% Tenanted and Franchised Retained 1,219 803 732 (9)% Disposals 436 229 115 (50)% Total Tenanted and Franchised 1,655 1,032 847 (18)% O
Slide 15: Ralph Findlay, CEO
Ralph Findlay CEO
Slide 16: Strategy
Sustainable growth; increase ROC; reduce leverage Pubs Brewing “The best pub around here” “National distribution, local appeal” Strategy Operating Estate Consumer Localness Premium Flexibility Development Focus Category Action Format range New-build ‘F-Plan’ Free Trade champions of Agreements Pub st
Slide 17: Operating flexibility and expertise
Operating flexibility and expertise Taverns Destination Premium Food Pubs Buying power Flexible formats Increased control Shared insights Managed Leased Franchised Page 17 Customers see pubs not business models
Slide 18: Operating flexibility: controlling the retail offer
Operating flexibility: controlling the retail offer Direct control 42% 56% 70% 8% 20% 42% 50% 58% 48% 44% 30% 2007 2012 Target Profit mix Profit mix Profit mix Tenanted and leased Managed Franchised Page 18 The highest quality leased pubs remain ‘independent’
Slide 19: Operating flexibility: Franchise Agreement evolution
Operating flexibility: Franchise Agreement evolution Low barriers to Simple model Efficient entry operation ACTION ACTION ACTION 20% of turnover retained by Licensee All bills paid by Marston’s £5k deposit except labour Comprehensive training No rent Marston’s fully stock the programme All stakehold
Slide 20: Operating flexibility: stable traditional estate
Operating flexibility: stable traditional estate Agreement Sales and flexibility business support Flexible Promotional support Attractive to entrepreneurs Group buying power Pub standards Licensee quality Consistent Rigorous maintenance Long-term recruitment partnership Over 90% retention Page 20 Po
Slide 21: Estate development: disciplined capex
Estate development: disciplined capex Target Capex programme 2012 2013 return External New-builds £60m £65m 16.5% Investment capital £10m £15m 20% Internal Maintenance capital £10m £10m - 3rd Party lodges (offset by disposals) £5m - 25% Total £85m £90m Page 21 Majority of capex growing estate; LFL g
Slide 22: Estate development: new-build
Estate development: new-build New-build strategy key driver of growth • Consistent with growth of eating-out market • Returns strong vs marginal cost of debt at c7% • Low risk – very high success rate • Value accretive deployment of capital vs small acquisitions Completed 25 sites in 2012 • ‘Back-en
Slide 23: Estate development: site selection criteria
SITE Estate development: site selection criteria SELECTION CRITERIA Visibility • Main arterial routes High traffic flow • Office, business • Leisure REDROW RESIDENTIAL DEVELOPMENT • Retail park, supermarkets MONEYSUPERMARKET HQ • Competitors UNILEVER REDROW WELSH WATER HSBC DE VERE Population densit
Slide 24: Estate development: new-build targets
Estate development: new-build targets 2009 Current target target Build cost £2.3m £2.5m Revenue per week £20k £26k EBITDA conversion 30% 30% Food mix 55% 60% Food spend per head c.£6.00 c.£6.50 EBITDA ROI 15% 16.5% Page 24 Current performance > target; investment at <6x EBITDA
Slide 25: Estate development: Marston's Inns
Estate development: Marston’s Inns c.50 pubs with 656 rooms • Lfl sales +4% • Occupancy +7% • REVPAR +4% The Two Rivers, Chepstow Trial of “small lodge” model in 2 sites • Chepstow and Aberystwyth Lodge investment funded through sale and leaseback • Pub-restaurant remains freehold Target ROI of 25%
Slide 26: Estate development: accelerated disposals
Estate development: accelerated disposals Disposal pipeline of over 400 pubs identified • Pubs that do not have a sustainable future • Mainly sold for alternative use • Carrying value c.£260k per pub Target to generate £30-40m p.a. over next 3 to 4 years • Absolute profit growth remains a priority •
Slide 27: Consumer focus: the UK eating out market
Consumer focus: the UK eating out market £50bn spent on eating out in 2012 • Projected to continue growing 80 • Pub restaurant share still small • Pub restaurants outperforming market 60 £85bn spent on eating-in • Cost of eating-out vs eating-in narrowing £bn Eating-out Opportunity to gain share fro
Slide 28: Consumer focus: sources of insight
Consumer focus: sources of insight Our licensees Our and Our market consumers customers ‘SMILE’ Brand tracking Benchmarking Focus groups Surveys Surveys Surveys Insight Page 28 Objective: the customer comes first
Slide 29: Customer focus: a transformed business
Customer focus: a transformed business ‘F-Plan’: Food, Families, Females, Forty/Fifty somethings 2005 2012 28% Food sales mix: trends, strategy, development 44% 14m Meals served: 70% of visits are food-led 28m £11k AWT per pub: investment, churn £17k £5.70 Spend per head on food: value increased £6.
Slide 30: Format evolution – Two for One
Consumer focus: format evolution – Two for One 2013 – c.10 New-builds, 15 refurbishments Focus on food presentation and quality Hand-held tills increase speed of service Staff incentives – margin investment triggers behaviour change Page 30 Premiumising the value offer
Slide 31: Format evolution – Milestone
Consumer focus: format evolution – Milestone 2013 – c.15 New-builds, 8 refurbishments ‘The Loggia’ – inside/outside dining Intimate “pubby” feel – real fires Food theatre – 1 in 3 meals are from the Rotisserie Page 31 Focus on customer experience to raise spend per head
Slide 32: Premium pubs and bars expanding
Consumer focus: Premium pubs and bars expanding Pitcher & Piano continues to grow • LFL sales up 6% Dedicated team, premium offer • ‘Theatre’ approach • Independent feel Revere pubs • Unbranded premium pub – opens in Birmingham • Two suburban sites – Westbourne and Solihull • Modest investment, maxi
Slide 33: Brewing: differentiated strategy
Brewing: differentiated strategy Market leaders in premium cask and bottled ale Market share – premium ale 18%; bottled ale 22% Localness – “local ale Premium – “long-term is the local hero” growth” Aligned to growth of eating-out market Local marketing activity Gaining share in a growing market Con
Slide 34: Summary
Summary Consistent, clear and focused strategy driving growth and value Resilient performance despite economic and weather pressures Quality estate confirmed by estate valuation Progressive dividend Page 34 Driving shareholder value now and in the future
Slide 35: Appendices
Appendices
Slide 36: Segmental analysis
Segmental analysis Full Year 2012 2011 £m £m % Revenue Managed Pubs 405.5 391.8 3.5% Tenanted and Franchised 200.5 183.9 9.0% Brewing 113.7 106.5 6.8% Group Services - - - Total 719.7 682.2 5.5% EBITDA Managed Pubs 93.6 91.2 2.6% Tenanted and Franchised 92.6 89.6 3.3% Brewing 24.5 25.0 (2.0%) Group
Slide 37: Average number of shares in 2012
Average number of shares in 2012 568.9m Number of shares in issue as at 29 September 2012 569.2m Additional dilutive number of shares 4.6m Actual Forecast 2012 2013 Tax rate 20.4% 21 - 23% Capex £130m £115 - 125m Disposal proceeds c.£48m c.£40 - 50m Page 37
Slide 38: Securitisation as at 29 September 2012
Securitisation as at 29 September 2012 Securitisation results £m Actual Gross debt outstanding as at 29 Sept 2012 1,018.3 EBITDA 128.3 Free cashflow (FCF) 116.1 Debt service (DSCR) 77.7 Financial covenants Actual Covenant FCF : DSCR 1.5x >1.1x EBITDA : DSCR 1.7x >1.5x Net worth £567.3m £90m Page 38
Slide 39: Securitised debt profile
Securitised debt profile Tranche Type Principal Step-up Final Maturity outstanding Date Date at 29/9/2012 A1 Floating £147.2m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £222.1m October 2012 2031 AB1 Floating £80.0m October 2012 2035
Slide 40: Securitisation profile
Securitisation profile Page 40
Slide 41: Slide 41
Slide 42: www.marstons.co.uk
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