Slide 1: Preliminary Results 2013
Preliminary Results 2013 1
Slide 2: Highlights
Highlights 1. Growth in 2013 with H2 profit up 13% • Destination and Premium – 24% profit growth, 22 new-builds completed • Taverns – expansion of franchise replacing challenged tenanted model • Leased – stability achieved in smaller estate • Brewing – market share gains and continued growth 2. Acce
Slide 3: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer 3
Slide 4: Financial Summary
Financial Summary +9% +7% +5% +1% +0.5% £783m £168m £88m 6.4p 10.8% Revenue Operating PBT Dividend CROCCE* Profit *Calculations included in appendices 4 Revenue and profit growth with strong H2 performance
Slide 5: Strong underlying performance
Strong underlying performance £0.5m £(0.5)m £(3.1)m 102 £13.5m £101.3m £(9.8)m 97 £m 92 £87.8m £88.4m 87 82 2012 PBT Destination Brewing Core EBIT pre Disposals Interest 2013 PBT and Taverns and disposals Premium Group and interest increase 5 Growth in Destination and Premium, offset by finance cost
Slide 6: Interest charges
Interest charges 85 £3m £80m 80 £5m 75 £2m £m £70m 70 65 2012 2012 swap Securitised step-up Lease financing 2013 Securitised Interest £m 63 AB1 note interest 61 £6.7m per annum 59 58 57 56 2012 2013 2014 2015 2016 2017 6 Securitised interest costs now falling
Slide 7: Pub segmentation
Pub segmentation FY 2013 Operating No. of Average Operating Growth profit £m pubs no. of pubs profit per capital pub £k allocation Destination & Premium 70.3 349 339 207 90% Taverns 69.5 1,316 1,379 50 7% Leased 26.0 385 390 67 3% Total 165.8 2,050 2,108 79 100% 17% 16% 36% 42% 47% 42% 2012 Profit m
Slide 8: Destination and Premium LFL sales
Destination and Premium LFL sales 5% 5% 5 Food Drink Total 4% 4% 4 3% 3 2% 2% 2% 2 1% 1 0% 0% % 0 H1 2013 H2 2013 FY 2013 7 weeks to 23 November -1 -2 (2)% Food mix 2013 2012 YOY% Destination 56% 54% +2% Premium 25% 24% +1% Destination and Premium 52% 49% +3% 8 H2 performance driven by strong food s
Slide 9: Taverns profit
Taverns profit Managed and Franchised LFL H1 2013 (2)% 74 H2 2013 2% FY 2013 - £73.2m (6)% 7 weeks to 23 Nov 2% 73 3% £72.6m £(1.8)m 72 £1.2m £(3.1)m £m 71 70 £69.5m Franchised +£0.5m Franchised +£1.0m Managed £(1.0)m Managed +£1.0 m 69 Tenanted £(1.3)m Tenanted £(0.8)m 68 67 FY 2012 H1 Core H2 Core
Slide 10: 2014 cost outlook
2014 cost outlook Drink Food Labour Utilities Drink Food Cost Menu Energy cost cost & Carbon Levy prices prices savings management usage +3% £1.0m £2.0m £1.0m +2-3% £1.0m £1.5m <1% £1.5m £1.5m +1% £1.5m £2.0m 10 Proven plans to offset inflation
Slide 11: Continued market outperformance
Continued market outperformance 1. Revenue and volume growth • Revenue up 12% • Ale volume up 6% • Strong growth in off-trade • Market share growth in bottled and cask ale 2. Robust financial performance • Operating profit up 3% • Margins lower due to higher off-trade mix • Strong cash generation 3.
Slide 12: Cashflow summary
Cashflow summary £m 2012 2013 Comments Operating cashflow 168 169 Net interest (76) (83) Securitised step-up Pre-investment FCF 92 86 £7m bottling line in Beer Company, Net capex pre new-build* (19) (33) D&P investment including Revere Dividend (34) (35) FCF pre new-build 39 18 Increased WIP due to
Slide 13: Capex guidance
Capex guidance £m 2014 2015 Comments New-build 80 90 27 sites 2014, 30 sites 2015 Pub growth 25 25 Pub maintenance 20 20 2015 – new EPOS system Brewing and Group 15 15 Total c.£140m c.£150m Disposals c.£150-160m c.£60-70m Net capex £(20)-(10)m £80-90m 13 Acceleration of new-build programme
Slide 14: Financing structure
Financing structure Total Future As at 5 October 2013 £m funding Visible, consistent debt service Securitisation 911 profile £257.5m facility extended to Bank 171 November 2018 Net debt excluding lease 1,082 finance 35-40 year financing, opportunity Lease financing 109 to utilise further Net debt 1,
Slide 15: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer 15
Slide 16: Market dynamics
Market dynamics 1. Consumer backdrop presents opportunity • Real incomes remain under pressure • Leisure occasions still in high demand 2. ‘Flight to value’ remains key consumer trend • Trend across the consumer spectrum • Consumer increasingly demanding – mediocrity not acceptable • Pubs continue t
Slide 17: Strategy
Sustainable growth; increase ROC; reduce leverage Pubs Brewing “National distribution, local “The best place around here” appeal” Strategy Operating Estate Consumer Localness Premium Flexibility Development Focus Action Category Format range New-builds ‘F-Plan’ Free Trade champions of Agreements Pub
Slide 18: Return on capital
Return on capital CROCCE* 11 10.8% 10.8 10.6 10.4 10.3% 10.2 10 9.9% 9.8 9.6% 9.6 9.4 9.2 9 2010 2011 2012 2013 *calculations in appendix 18 Strategy continues to improve returns
Slide 19: Estate development: Creating value through new-builds
Estate development: Creating value through new-builds £110m of value creation or c20p per share £m 300 £280m 250 Target c.60 freehold pubs 200 £170m 150 Target ROI – 16.5% 100 implies c.6x ‘acquisition’ multiple 50 £28m 0 2014+15 investment 2014/15 new-build EBITDA Value at 10xEBITDA* * Marston’s cu
Slide 20: Estate development: Disposal of non-core pubs
Estate development: Disposal of non-core pubs 1. Portfolio disposal No of pubs MAT EBITDA Taverns 158 £9.2m Leased 44 £3.0m Total 202 £12.2m 2. Proceeds of £90m • Management fee of £0.4m per annum, 4 year income guarantee for retained pubs 3. Represents 7.6x multiple net of management fee 4. Utilisa
Slide 21: Estate development: Vision
Estate development: Vision Operating 2013 2016 model Destination and Premium Managed 349 c.430 25-30 new-builds p.a. Franchised, Franchise conversion Taverns 1,316 c.800 Disposals Managed Leased Leased 385 c.320 Franchise or Revere 2,050 c.1,550 Key principles: • New pub-restaurants provide growth a
Slide 22: New-builds: The story so far
New-builds: The story so far Expertise • Stable team • Strong reputation in market Delivery • Over 80 sites in the last four years, including 22 in 2013 • National programme including first Scottish sites Consistency • Tight ROC performance across new-build sites • Rigorous selection process means n
Slide 23: New-builds: Looking forward
New-builds: Looking forward Accelerate growth • Strong pipeline of sites with visibility to 2017 • Increasing rate of growth to 25-30 per annum National programme • 30% southern sites • 25 Scottish sites in next five years Clear brand focus • Milestone and “Two for One” drive brands • Continued evol
Slide 24: Destination
Destination High quality pub environment Great value food Premium drinks Service standards 30 million meals p.a. Premium beers +10-12% Upselling opportunity 56% of sales Wine +15% Double digit growth in Wine 27% of drink sales starters, desserts, coffee Main meal £4.50 - £10 Soft drinks +8% Technolo
Slide 25: Growing the drive brands: 5 year plan
Growing the drive brands: 5 year plan • 138 pubs • £250k EBITDA per pub • c 200 pubs • 82 pubs • £290k EBITDA per pub • c 200 pubs • 220 pubs • c 400 pubs Drive Brands • £265k EBITDA per pub 25 Two drive brands underpin new-build investment
Slide 26: Premium – 35 pubs and bars
Premium – 35 pubs and bars • Well recognised premium brand • 8 sites converted (6 in 2013) • 20 bars • Initial signs encouraging Now • Average turnover of £26k p.w. • Continuous learning • 1st new site for several years-Hitchin • Leverage into mainstream estate • Continuous organic investment • 6 si
Slide 27: Taverns: Great community pubs
Taverns: Great community pubs • Everyday value food and drink Outstanding • Entertainment – TV sports, games offers • ‘Community locals’ Motivated • Well trained, sales focused licensees licensees • Franchise model increasingly appropriate • Range of agreements under franchise model • Attractive pub
Slide 28: Taverns: Why franchise works
Taverns: Why franchise works Buying power Systems Resources Local knowledge Flexibility Motivation Insight Franchisee Brand Consumer engagement Investment Development Rent N/A Beer prices N/A Simplicity Affordability Flexibility 28 A model that combines the best of managed and tenanted
Slide 29: Leased: Evolution of relationship
Leased: Evolution of relationship • £80k EBITDA, 50% rental income mix Higher quality • Team dedicated to leased entrepreneurs smaller estate • Better engagement and understanding • Partnership approach Higher quality • Premiumising our service support • Products to technology supply • Capital inves
Slide 30: Brewing: key drivers of growth
Brewing: key drivers of growth Market leading Innovation Development OPENING NEW MARKETS NO. 1 IN MARKET EXPORT fastcaskTM Premium cask and bottled ale +14% growth in 2013 HORECA market BEST PREMIUM ALE EXTEND RANGE NEW MARKETS RANGE Craft Beer, Single Hop Russia, Europe, Asia +12% in 2013; +25% in
Slide 31: Summary
Summary 1. Strong profit growth in H2 2. Strategic plans well advanced • Acceleration of well proven new-build programme • Increased disposal of smaller wet-led pubs • Franchise development • Premium beers and export 3. Dividend increase reflects confidence 31 Consistent focused strategy to deliver
Slide 32: Appendices
Appendices
Slide 33: Pub numbers
Pub numbers Destination and Taverns Leased Total Premium 2012 Opening 303 1,452 393 2,148 New-build additions 25 25 Disposals (23) (23) 2013 Opening 328 1,429 393 2,150 New-build additions 22 22 Disposals (1) (113) (8) (122) 2013 Closing 349 1,316 385 2,050 2013 average numbers 339 1,379 390 2,108 3
Slide 34: Pub segmentation
Pub segmentation Destination & Premium Taverns Leased Food sales mix 52% Food sales mix 25% Destination – 2 value brands Community pubs Independent, individual • Milestone, Two for One • Franchise strategy • Distinctive pubs Premium • Flexible formats • Strong locations • Pitcher & Piano, Revere • L
Slide 35: Securitisation as at October 2013
Securitisation as at 5 October 2013 Securitisation results £m Actual Gross debt outstanding as at 5 October 2013 995.6 EBITDA 131.6 Free cashflow (FCF) 123.6 Debt service (DSCR) 84.6 Financial covenants Actual Covenant FCF: DSCR 1.5x >1.1x EBITDA:DSCR 1.6x >1.5x Net worth £598m £90m 35
Slide 36: Securitised debt profile
Securitised debt profile Principal Final maturity Tranche Type outstanding at 3 Step-up date date October 2013 A1 Floating £131.6m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £215.0m October 2012 2031 AB1 Floating £80.0m October 2012
Slide 37: Securitisation profile
Securitisation profile Securitised Debt Service 100 Max £86.8m Debt Service 90 80 Max £86.8m 70 A2, B step-up A3 step-up 60 Interest A2, B step-up Principal A3 step-up £m 50 40 30 20 10 0 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year 37
Slide 38: Cash return on cash capital employed
Cash return on cash capital employed FY2013 FY2012 FY2011 FY2010 FIXED ASSETS: Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Goodwill 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 Other intangible assets 24.1 6.1 30.2 23.5 5.2 28.7 24.6 3.5 28.1 24.6 2.9 27.5
Slide 39: Notes
Notes 39
Slide 40: www.marstons.co.uk
www.marstons.co.uk 40 Pitcher & Piano, Hitchin