Slide 1: Preliminary Results 2006
Preliminary Results 2006 Preliminary Results 2006 1
Slide 2: Preliminary results 2006 - highlights
Preliminary results 2006 - highlights 1. Record results • turnover and profit growth in each of our trading divisions 2. Earnings per share* up 14.0% • profit before tax* up 13.2% 3. Dividend +10.0% to 42.75 pence per share • consistent double digit growth over 30 years 4. £100m buy back planned thi
Slide 3: Financial Review
Financial Review Paul Inglett Finance Director Preliminary Results 2006 3
Slide 4: Financial Highlights
Financial Highlights Margin +0.9% to 25.6% +14.0% +13.2% +10.7% +10.0% +7.1% Revenue Operating Profit before EPS* Dividend profit * tax* £595.5m £152.3m £101.5m 95.1p 42.75p good progress in all key measures Preliminary Results 2006 * before exceptional items 4
Slide 5: Earnings and dividend growth
Earnings and dividend growth Adjusted earnings* per share (p) 5 yr compound annual growth +10.9% +14.0% vs 2005 100 95.1p 83.4p EPS 75.8p 75 68.9p 62.6p 56.7p 50 2001 2002 2003 2004 2005 2006 +10.0% vs 2005 50 42.75p 30 yr compound annual growth +12.4% Dividend per share (p) 45 40 35 30 Dividend 25
Slide 6: Operating performance
Operating performance 2006 2005 Revenue £m £m % change Pathfinder Pubs 330.7 317.4 + 4.2 UPC 178.8 153.3 +16.6 WDB Brands 86.0 85.4 + 0.7 Group 595.5 556.1 + 7.1 Operating profit* Pathfinder Pubs 63.5 63.3 + 0.3 UPC 80.3 65.1 +23.3 WDB Brands 18.0 17.8 + 1.1 Central (9.5) (8.6) Group 152.3 137.6 +10
Slide 7: Pathfinder like-for-like sales
Pathfinder like-for-like sales Wet +1.8% Food +5.0% H2 performance Machines (6.8)% +3.7% • better weather, World Cup; +6.7% in June, July. Community +2.8% % change +2.4% • volume not price driven. High Street +1.0% • focused promotional activity. +1.0% • successful major refurbishment programme. • m
Slide 8: Improved operating margin
Improved operating margin Gross margins: long leases now 47% of estate +2.4% mix improvements unchanged % margin vs 2005 +0.9% Pathfinder +0.1% UPC WDB Brands Group (0.7)% +ve: exit low margin wholesalers - ve: market consolidation Net margins impacted by: - ve: energy costs Energy +£5.0m NMW +£2.0m
Slide 9: Capital investment
Capital investment Total spend: £98.9m (2005: £95.8m) By division By nature of spend Pa thfinde r £60.6m Ne w builds/site s £18.3m UPC £27.2m Single site a cquisitions £10.0m W DB Bra nds £8.5m Inve stme nt ca pe x £40.6m Ce ntra l £2.6m Ma intena nce ca pe x £30.0m total forecast spend 2007: £120m
Slide 10: Key metrics of pub estate
Key metrics of pub estate 2006 % increase Average turnover/pub/wk £13.2k +10.0% Drink: 64% Food mix Machines: 4% 31% +1.2% Other: 1% Average EBITDA p.a. per pub £202.3k +6.4% Longer leases 892 +24.4% Average EBITDA p.a. per pub £57.4k +5.0% improving quality of estate Preliminary Results 2006 10
Slide 11: Cashflow
Cashflow £m 2006 2005 % change Cashflow from operating activities 190.0 99.2* +91.5 Interest (45.9) (49.7) Maintenance capex (30.0) (25.0) Free cashflow 114.1 24.5 +365.7 Investment capex (69.1) (73.1) Disposals/other 32.3 (31.8) Cash generated pre-acquisitions and returns to shareholders 77.3 (80.4
Slide 12: Flexible debt structure
Flexible debt structure £m Net debt Bank facility 155 • existing facility £275m Loan notes 9 Cash (53) Securitisation 783 • 67% of estate securitised 894 • average debt maturity 14 yrs Key financing ratios Average rate <6.0% % fixed rate 88% EBIT interest cover 3.0x EBITDA interest cover 3.8x Net de
Slide 13: Balance sheet efficiency
Balance sheet efficiency 1. Target financing ratios • interest cover: target lower end of range of 2.5x – 3.0x • net debt/EBITDA: target 5.0x - 5.75x 2. Dividends/share buybacks • £33m dividends: +12.4% 30 year CAGR • bought back 1.1m shares at total cost of £14.8m in FY06 • announced plans to retur
Slide 14: Real estate investment trusts
Real estate investment trusts 1. Potential opportunity • tax savings • enhance shareholder value 2. Considerations • legislation only just emerging • detail complex • operational constraints • reduced financial flexibility • significant conversion and re-financing break costs • short term benefits v
Slide 15: Accounting issues
Accounting issues 1. Reported on IFRS basis • minimal impact on P&L • < £1m reduction in profit; reduced tax charge 2. Pensions • triennial valuation • more conservative assumptions used offsetting +ve investment returns • deficit before tax increased from £45.6m to £53.1m • £7.2m additional annual
Slide 16: Financial summary
Financial summary 1. Good progress in all key financial measures • continued double digit earnings and dividend growth 2. Turnover and profit growth in each division • improved margins 3. Improving quality of pub estate • average profit per pub; Pathfinder +6.4%, UPC +5.0% 4. Flexible debt structure
Slide 17: Business Development
Business Development Ralph Findlay Chief Executive Preliminary Results 2006 17
Slide 18: W&DB today
W&DB today 1. Pub operator – 2,352 pubs • Pathfinder Pubs – 459 managed pubs • The Union Pub Co. – 1,893 tenanted/leased pubs • Situated across England and Wales • 95% community/neighbourhood estate, 96% freehold 2. Brewer • leading ale brands • largest brewer of cask ale in the UK 3. Vertically int
Slide 19: Pub estate geography
Pub estate geography* North Ea st Yorkshire Ea st Anglia North W e st South Ea st London South W e st W a le s Ea st Midla nds W e st Midla nds national pub estate throughout England and Wales Preliminary Results 2006 * 2,352 pubs as at September 2006 19
Slide 20: W&DB strategy
W&DB strategy 1. Growth through development of national, high quality pub estate • corporate acquisitions • new build pubs/acquisition of existing pubs • pub refurbishment • predominantly community pubs • continued investment in people and skills 2. Increase market share of WDB Brands’ beers • explo
Slide 21: Organic development: new build pubs (1)
Organic development: new build pubs(1) 1. Significant developer of new-build pubs • relies on detailed knowledge, specialist capabilities • time consuming activity, difficult to replicate • typically 2 year time-span from site identification to opening • 12 new builds in 2006, 20 planned in 2007 2.
Slide 22: Organic development: new build pubs (2)
Organic development: new build pubs(2) 3. Value creation from new-build pubs Illustrative 5 year programme 20 pubs p.a. @ £2m per pub investment multiple 6.0x EBITDA exit multiple 9.0x EBITDA after 5 years value creation c£75m - discount factor 10% n new builds open n 2007 sites n trading pubs acqui
Slide 23: Organic development: managed community pubs
Organic development: managed community pubs 1. New consumer segments • Taverners’ Carvery (12 pubs) - great value carvery offer - traditional pub ambience - food 55% of sales - average sales per week c £18k • 2 for 1 (54 pubs) - every day fixed offer - high retail standards, high service level - foo
Slide 24: Organic development: high street (1)
Organic development: high street(1) 1. Pitcher & Piano (25 units) • sold – Leeds and Norwich • recent openings – Taunton, Brighton • development sites – Poole, Derby • average sales per week £23k 2. Bluu • 4 sites acquired in July 2006 - Nottingham, London, Manchester, Glasgow - also acquired Fat Ca
Slide 25: Organic development: high street (2)
Organic development: high street (2) 3. Unbranded high street (total 50 bars) Rack & Tenter, Moorgate, London • £250k refurbishment • sales uplift +55% to £28k per week • estimated EBIT return 80% Pavilion End, Watling Street, London • £280k refurbishment • sales uplift +65% to £20k per week • estim
Slide 26: Licensing impact
Licensing impact Split of like for like sales growth in Pathfinder Pubs 1. By day 2. By hour Friday Sat/Sun Late Lunch Early 31% 15% 24% 8% 31% 45% 46% Midweek Early evening licensing reform has had a limited impact on trade Preliminary Results 2006 26
Slide 27: Organic development: tenanted and leased pubs (1)
Organic development: tenanted and leased pubs(1) 1. Strong support • first operator to commit funds and guidance during licensing reform process - total cost c£3m • £10m investment ahead of smoking ban • launch of uniON - intranet service for licensees • training days - 1,500 attendees on ‘Skills Po
Slide 28: Organic development: tenanted and leased pubs (2)
Organic development: tenanted and leased pubs(2) 2. Growth in leased estate • 47% of estate leased (2005: 41%) • average rent per leased pub: +36% vs average • attractions - ability to generate significant capital - assignability and security attractive to lessees - full repairing leases - range of
Slide 29: Organic development: tenanted and leased pubs (3)
Organic development: tenanted and leased pubs(3) 3. Capital investment potential • £27.2m investment in 2005/6 - £40m+ is planned in 2006/7 - smoking ban ‘defence’ - further development of Celtic Inns, Jennings and Burtonwood estates • individual pub acquisitions - more pubs coming to market pre smo
Slide 30: Operational issues: tenanted and leased pubs
Operational issues: tenanted and leased pubs 1. Tenant cost and legislative pressures • energy • Sky TV • NMW • licensing reform 2. Impact on tenants • rent concessions <0.6% rent roll • no rent reviews taken to arbitration • bad debts unchanged at 0.3% of turnover • over 400 fully funded approved a
Slide 31: Preparation for the smoking ban (1)
Preparation for the smoking ban(1) 1. Investment • £20m planned to be invested by April 2007 • significant progress already made - over 1,500 tenants/lessees already ‘signed up’ - plans substantially complete in Pathfinder Pubs 2. Disposal of ‘the tail’ • >900 pubs sold in last 5 years - estate well
Slide 32: Preparation for the smoking ban (2)
Preparation for the smoking ban(2) investment designed to provide attractive outside trading areas Preliminary Results 2006 32
Slide 33: Organic development: WDB Brands (1)
Organic development: WDB Brands (1) 1. The UK beer market* remained weak in 2005/6 - WDB Brands increased share of the ale market UK beer market : 12 months to September 2006 % change (2.0)% (7.5)% (8.8)% (2.7)% Beer Ale On-trade Off-trade ale ale WDB Brands has a 16% share of UK draught premium ale
Slide 34: Organic development: WDB Brands (2)
Organic development: WDB Brands (2) 2. WDB Brands increased volume and market share in premium ale • premium ale volume +3% - market share gain +0.8% • draught premium ale volume +4% - market share gain +1.4% • off trade premium ale +3% - bottled premium ale +17% 3. WDB Brands increased market share
Slide 35: Organic development: WDB Brands (3)
Organic development: WDB Brands (3) 4. Strong performance from Jennings • Jennings premium cask ale +29% 5. Key new product development • Old Empire +9.5% volume increase - Old Empire launched in a can • Marston’s Smooth +104% volume increase - Marston’s Smooth launched in a can 6. Increased marketi
Slide 36: Organic development: WDB Brands (4)
Organic development: WDB Brands (4) Preliminary Results 2006 36
Slide 37: Marketing campaigns: WDB Brands
Marketing campaigns: WDB Brands Preliminary Results 2006 37
Slide 38: Change of name (1)
Change of name(1) 1. Development of company • national trading area (England and Wales) - recruitment - site acquisition • national marketing campaigns eg. ECB sponsorship 2. Promotion of company values • tradition, heritage of the business and employees • badge of quality for all products – pubs an
Slide 39: Change of name (2)
Change of name(2) Preliminary Results 2006 39
Slide 40: Change of name (3)
Change of name(3) badge of quality on pubs Preliminary Results 2006 40
Slide 41: Change of name (4)
Change of name(4) clear visibility of Marston’s name on pub signage Preliminary Results 2006 41
Slide 42: Summary
Summary 1. Strong performance in 2005/6 2. Flexible financing structure - around £100m to be returned to shareholders, subject to preserving flexibility - active in evaluating acquisition opportunities 3. Name change to Marston’s PLC 4. Clear, value enhancing organic growth strategy - well prepared
Slide 43: Preliminary Results 2006
Preliminary Results 2006 Preliminary Results 2006 43
Slide 44: Appendices
Preliminary Results 2006 Appendices Preliminary Results 2006 44
Slide 45: Key financials (1)
Key financials(1) 2006 1 2005 2 % change Revenue £m 330.7 317.4 + 4.2% EBITDA £m 83.4 82.9 + 0.6% Operating profit £m 63.5 63.3 + 0.3% Operating margin % 19.2 19.9 (0.7)% 1 includes the results of 93 pubs transferred to UPC during H2 Preliminary Results 2006 2 before exceptional items and restated f
Slide 46: Key financials (2)
Key financials(2) 2006 2005* % change Revenue £m 178.8 153.3 +16.6% EBITDA £m 89.8 74.4 +20.7% Operating profit £m 80.3 65.1 +23.3% Operating margin % 44.9 42.5 +2.4% Preliminary Results 2006 * before exceptional items and restated for IFRS 46
Slide 47: Key financials (3)
Key financials(3) 2006 2005* % change Revenue £m 86.0 85.4 +0.7% EBITDA £m 25.0 24.3 +2.9% Operating profit £m 18.0 17.8 +1.1% Operating margin % 20.9 20.8 +0.1% Preliminary Results 2006 * before exceptional items and restated for IFRS 47
Slide 48: Taxation
Taxation 2006 2005 Total Pre-excep. Total PBT £m 101.5 89.7 54.2 Tax £m (28.2) (26.8) (15.1) Tax rate % 27.8% 29.9% 27.9% Cash outflow £m (4.0)* (19.9) Cash tax rate % 3.9% 22.2% 2007 forecast tax rate 28% - 29% Preliminary Results 2006 * includes £14m of tax relief relating to refinancing in 2005 4
Slide 49: Estate movement
Estate movement Pub Numbers Managed Tenanted Group September 2005 542 1,748 2,290 Acquisitions/new builds 26 69 95 Disposals (7) (26) (33) Transfers (102) 102 - September 2006 459 1,893 2,352 Preliminary Results 2006 49
Slide 50: Additional information and guidance
Additional information and guidance • Average number of shares in 2006 77.1m • Number of shares in issue as at 1 Dec 2006 76.2m • Additional dilutive number of shares 0.8m Forecast 2007 • Forecast tax rate 28% - 29% • Capex forecast: Existing business £70m : New builds/sites £40m : Pub acquisitions
Slide 51: Preliminary Results 2006
Preliminary Results 2006 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk www.wdbbrands.co.uk Preliminary Results 2006 51