Slide 1: Preliminary Results 2017
Preliminary Results 2017 Ralph Findlay, Chief Executive Officer Andrew Andrea, Chief Financial and Corporate Development Officer
Slide 2: Ralph Findlay, Chief Executive Officer
2 Ralph Findlay Chief Executive Officer
Slide 3: Highlights
3 HIGHLIGHTS 1. Continued progress in 2017 • Turnover up 10% to c.£1bn • PBT growth of 3%, EPS up 2% • Dividend up 3% to 7.5p per share • Proforma leverage down and fixed charge cover maintained 2. Transformed estate in growth • Like-for-like sales growth in all businesses • Profit per pub +2% • 19
Slide 4: Transformed Business, Clear Growth Plans
4 TRANSFORMED BUSINESS, CLEAR GROWTH PLANS Track record of Strong asset Clear consistent base and finance Clear growth growth and strategy plans returns structure 2018 4 year LFL > market 94% freehold Proforma CWBB Transformed estate Margin discipline 56% LTV 2017 pub acquisitions Profit per pub +c.
Slide 5: Market Dynamics
5 MARKET DYNAMICS Consumer outlook Sector supply Economic, Political • Leisure spend anticipated to grow • Slowdown in rates of opening • Tax-related cost increases likely • Inflationary pressures starting to • Freehold opportunities outside - employment/energy > inflation squeeze “big ticket” items
Slide 6: Transformed Pub Estate Over Last Decade
6 TRANSFORMED PUB ESTATE OVER LAST DECADE OUT WITH THE OLD IN WITH THE NEW Spiral Weave, Kirkcaldy Profit per pub up c.70% over the estate High quality pub estate; 60% of Destination estate < 10 years old
Slide 7: Pub Estate Operating Across All Markets
7 PUB ESTATE OPERATING ACROSS ALL MARKETS Operating profit No. of Average no. Average profit per 2017 £m pubs of pubs pub vs LY% Destination and premium 88.9 397 381 +1 Taverns 57.0 806 816 +2 Leased 27.1 365 365 +2 Total 173.0 1,568 1,562 +2 +2.5% LFL performance vs market* (%pts) +1.6% +0.9% +0.8%
Slide 8: Evolving the Offer: Key Themes
8 EVOLVING THE OFFER: KEY THEMES 1. ‘Raising the bar’ on service • ‘Firebrand’ to reignite value formats (241) 2. Staying contemporary • Format development – Pizza Kitchen, Rotisserie, Smokehouse • Refresh the traditional – Carvery • Exciting drinks range – ‘Craft’, ‘World beers’, non-alcoholic 3. I
Slide 9: Evolving the Destination Offer
9 EVOLVING THE DESTINATION OFFER Green Dragon, Hull Blue Bell, Malvern Continuous development to maintain market advantage
Slide 10: Accommodation
10 ACCOMMODATION 2017: New lodges Future: strong performance enhance metrics 5-10 lodges p.a. • c.1,250 rooms • 8 lodges opened in 2017 • New-build sites • LFL sales up 4.5% • RevPAR up 10% to £47 • Existing pub opportunities • RevPAR up 4.4% to £38 • Occupancy up 4% to 83% • Jan 2018: Ebbsfleet - 1
Slide 11: Premium Expansion
11 PREMIUM EXPANSION Continued growth of premium estate, 3 new sites planned for 2018
Slide 12: 2018 Plans – Continued Growth, Good Pipeline
12 2018 PLANS – CONTINUED GROWTH, GOOD PIPELINE 1. Appropriate investment plans for market conditions • New openings remain key driver of earnings growth 2. Current 2018 plan: • 15 pub-restaurants and bars • 6 lodges 3. Strong pipeline for future growth • Pub-restaurants, lodges, premium • Opportuni
Slide 13: Streamlined Operational Structure
13 STREAMLINED OPERATIONAL STRUCTURE Structure focused on consumer occasion with cross-segmental learning
Slide 14: Marston's Beer Co - UK No. 1 Premium Ale Brewer
14 MARSTON’S BEER CO - UK NO. 1 PREMIUM ALE BREWER Pre CWBB CWBB Today 40 brands delivered 17 brands delivered 57 brands delivered to 9,000 pubs to 1,500 pubs to 10,500 pubs 11% of ale market London, SE England, 15% of ale market Scotland 17% of premium 21% of premium packaged ale market packaged al
Slide 15: Marston's Beer Co - Developing Licensed Brands
15 MARSTON’S BEER CO - DEVELOPING LICENSED BRANDS Pre CWBB CWBB Today Experienced team Developed US craft portfolio Best selling UK keg craft No.1 PBA NPD since Estrella Damm launch in 2015 World lager portfolio Founders MAT +10% volume growth Enhanced skills/knowledge Kirin Erdinger Future opportun
Slide 16: Marston's Beer Co – Best in Class Industry Service
16 MARSTON’S BEER CO – BEST IN CLASS INDUSTRY SERVICE Pre CWBB CWBB Today Packaging 38% of UK PBA Canning line capacity 42% of UK PBA Distribution On-trade, off-trade South East and London Further opportunity building on Major contract wins in 2017 geographies 2017 success Brewing Efficient low cost
Slide 17: Proven Acquisition Capability
17 PROVEN ACQUISITION CAPABILITY Proven acquisition capability CWBB £55m initial consideration Ringwood – 2007, £20m • Well invested freehold site: bv £20m • Fortyniner, Boondoggle • Bombardier, Courage, Directors, McEwan’s Old Thumper, Razorback • Licensed brands • Shipyard • Export capability • Co
Slide 18: Andrew Andrea
18 Andrew Andrea Chief Financial and Corporate Development Officer
Slide 19: Financial Summary
19 FINANCIAL SUMMARY +10% 1.9x Growth in Tax rate cover all trading benefit +3% +3% segments +2% +1% £992m £175m £100m 14.2p 7.5p Revenue Operating profit PBT EPS Dividend Underlying numbers, statutory numbers in appendices Continued progress in revenue and earnings supports dividend growth
Slide 20: Managed and Franchise Like-for-Like Performance
20 MANAGED AND FRANCHISE LIKE-FOR-LIKE PERFORMANCE Margin +0.1% +0.1% +0.1% +0.2% - +0.6% (0.4)% +0.2% 3.1% 2.7% 2.3% 2.1% 2.0% 1.8% 1.6% 0.9% 2014 2015 2016 2017 Destination and Premium Managed and Franchised Taverns 2018: Encouraging start with LFL sales growth in both businesses Long-term LFL sal
Slide 21: Leased
21 LEASED Quality • Profit per pub growth +2% estate • 2% rental growth delivering • Higher margin from higher rental mix growth • Licensee stability >90% Income • Bad debt <0.1% of turnover stability • Moderate capital investment • Agreement flexibility The Tavern, Denstone Sustainable income throu
Slide 22: FY 2018 Cost Guidance
22 FY 2018 COST GUIDANCE • c.85% fixed for 2018 Drink c.2% • c.80% contracted to 2020 • c.70% fixed for 2018 Food c.2% • c.50% contracted to 2020 • Fixed for 2018 Brewing raw materials c.2% • c.85% commodity contracted to 2019/20 Energy inflation c.3% • Granted water licence Labour cost inflation -
Slide 23: Cash Flow Summary
23 CASH FLOW SUMMARY 2017 2016 £m £m Operating cash flow 214 183 • Creditors: CWBB Net interest (78) (72) • £3m facility arrangement fees Pre-investment FCF 136 111 Organic capex (85) (79) Disposals 62 48 Dividend (44) (41) FCF pre new-build and acquisitions 69 39 • Includes Whitbread and Pointing N
Slide 24: Capex Guidance
24 CAPEX GUIDANCE 2018 2017 £m £m Organic capex Includes CWBB and c.80 85 investment for new distribution contracts New sites c.70-75 111 Disposals (c.45-50) (62) Net capex 100-110 134 £25-35m reduction in 2018 capex spend
Slide 25: Financing Structure
25 FINANCING STRUCTURE Fixed Bank and Total (excl. Property charge Securitised cash property) leasing Total cover** Visible, smooth Property £320m bank amortising debt leases 35-40 facility to 2022 to 2035* year term Net Debt (£m) 2017 806 222 1,028 301 1,329 Net Debt: EBITDA 2017 6.9x 2.3x 4.8x 6.2
Slide 26: Evolution of Finance Structure
26 EVOLUTION OF FINANCE STRUCTURE Illustrative 2017 2012 2017 (all new-build leasehold) £m £m £m Securitised 959 806 806 Bank 162 222 222 Debt excluding property leasing 1,121 1,028 1,028 Property leasing - 301 - Total Debt 1,121 1,329 1,028 Leverage excluding property leasing 5.6x 4.7x 4.7x Leverag
Slide 27: Return on Capital
27 RETURN ON CAPITAL 10.9% 10.8% 10.7% 10.6% 10.5% 10.5% 9.8% 9.6% 2010 2011 2012 2013 2014 2015 2016 2017 CROCCE calculations included in Appendices Continue to deliver strong returns, 2017 impacted by timing of capex
Slide 28: Summary
28 SUMMARY 1. Solid 2017 performance • Revenue earnings and dividend growth • Expansion through acquisition and new pub development 2. Clear plans for 2018 • Encouraging start to year following challenging summer • Annualised benefit of acquisitions • 15 new pubs and bars, six lodges 3. Long-term sh
Slide 29: Appendices
, ee ‘ ¥ “= f = = — . — PP J Prue \ ; Ne, _4 e ndices
Slide 30: Financial Summary – Statutory Basis
30 FINANCIAL SUMMARY – STATUTORY BASIS +24% +12% +8% +4% £1,011m £170m £100m 14.2p Revenue Operating profit PBT EPS Revenue and profit growth despite disposals
Slide 31: Segmental Profit
31 SEGMENTAL PROFIT 2017 £m 2016 £m YOY % Turnover Destination & Premium 438.0 419.0 4.5% Taverns 246.7 238.5 3.4% Leased 54.6 55.0 (0.7)% Beer Division 252.9 193.3 30.8% Total 992.2 905.8 9.5% EBITDA Destination & Premium 104.5 102.0 2.5% Taverns 65.1 65.0 0.2% Leased 28.6 28.6 - Beer Division 36.0
Slide 32: Pub Segment Changes
32 PUB SEGMENT CHANGES H1 2016 FY 2016 FY 2016 H1 2016 FY 2016 H1 2016 Pub movements Original Original Revised Change Change Revised £m £m £m Turnover Destination & Premium (39) 204.8 440.8 (10.9) (21.8) 193.9 419.0 Taverns 4 107.1 221.0 8.8 17.5 115.9 238.5 Leased 35 24.2 50.7 2.1 4.3 26.3 55.0 Bee
Slide 33: Pub Numbers
33 PUB NUMBERS Destination and Taverns Leased Total Premium 2016 Closing 416 812 331 1,559 New-build additions/Acquisitions 4 22 - 26 Transfers (39) 4 35 - Disposals (4) (15) (1) (20) H1 2017 Closing 377 823 365 1,565 New-build additions/Acquisitions 24 - - 24 Transfers (2) 2 - - Disposals (2) (19)
Slide 34: Historical LFL
34 HISTORICAL LFL Destination and Premium Taverns Total Total 52 wks to 04/10/14 3.1% 2.1% 16 wks to 24/01/15 2.0% 2.0% 10 wks to 04/04/15 0.6% 0.5% 26 wks to 04/04/15 1.5% 1.4% 15 wks to 18/07/15 2.0% 2.3% 41 wks to 18/07/15 1.7% 1.7% 11 wks to 03/10/15 2.2% 3.1% 52 wks to 03/10/15 1.8% 2.0% 16 wks
Slide 35: Capex, Tax and Share Capital
35 CAPEX, TAX AND SHARE CAPITAL Forecast Actual 2017 2018 New-build capex c.£70-75m Organic capex c.£80m Total c.£150-155m Disposals £45-50m Net capex £100-110m Tax rate 15.6% 17-18% Average number of shares in 2017 596.9m Shares in issue at 30 September 2017 633.7m Additional dilutive number of sha
Slide 36: Securitised Debt Profile
36 SECURITISED DEBT PROFILE Principal Final maturity Tranche Type outstanding at Step-up date date 30 September 2017 A1 Floating £60.3m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £181.8m October 2012 2031 B Fixed/Floating £155.0m Jul
Slide 37: Securitisation Profile
37 SECURITISATION PROFILE 90.0 Max Debt Service 80.0 70.0 A3 step-up A2, B step- 60.0 Principal 50.0 Interest £m 40.0 30.0 20.0 10.0 - '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY20
Slide 38: CROCCE
38 CROCCE CROCCE FY2017** FY2016 FY2015 FY2014 FY2013* FY2012 NON-CURRENT ASSETS: Bal Depn Reval Adj Bal Depn Reval Adj Bal Depn Reval Adj Adj Adj Adj Goodwill 230.3 230.3 227.5 227.5 227.5 227.5 224.2 224.2 224.2 Other intangible assets 67.6 6.8 74.4 37.3 7.5 44.8 37.6 6.6 44.2 30.4 30.2 28.7 Prope
Slide 39: Notes
maa Marston’s PLC Preliminary results 2017, 39
Slide 40: www.marstons.co.uk
www.marstons.co.uk