Marston's Plc · LSE:MARS
Marston's — The Wolverhampton & Dudley Breweries — FY2004 Earnings Presentation
28 slides from Marston's's earnings presentation, December 2004
Slide 1: Preliminary Results December 2004
The Wolverhampton & Dudley Breweries, PLC Preliminary Results December 2004 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk 1
Slide 2: Strong results, developing momentum
Preliminary results 2004 1. Strong results, developing momentum - good like-for-like sales in Pathfinder Pubs and UPC - margins and profit ahead in all three divisions - operating margin maintained despite rising costs 2. Earnings per share* +10.0% to 75.8 pence per share - profit before tax up 6.3%
Slide 3: Financial Performance
Preliminary results 2004 Financial Performance Paul Inglett Finance Director 3
Slide 4: Profit and loss account
Preliminary results 2004 : profit and loss account 2004 % change Turnover £m 513.7 +4.7 Operating profit* £m 112.9 +4.3 Operating margin* % 22.0 (0.1) Profit before tax* £m 77.7 +6.3 Earnings per share* p 75.8 +10.0 Dividend per share p 35.3 +10.0 * Before goodwill and exceptional items 4
Slide 5: Union Pub Company: like-for-like sales growth
Union Pub Company : like-for-like sales growth +9.9% +5.2% +4.3% +4.3% % +3.5% +3.0% growth -2.2% H1 H2 FY Beer Machine Rent Total sales income • includes all pubs except acquisitions and M to T transfers during the last 2 years 5
Slide 6: Pathfinder Pubs: like-for-like sales growth
Pathfinder Pubs : like-for-like sales growth +7.8% +4.1% +3.4% +3.2% +3.2% +1.8% • H1 +2.8% • H2 +3.6% +0.2% -4.3% Wet Food Machines Total Community Food Town Total led centre 63% 22% 15% 100% • includes all pubs except acquisitions during the last two years • uninvested like-for-like sales +0.1% •
Slide 7: Consistent margin performance
Preliminary results 2004: consistent margin performance Group operating margin 2000 - 2004 21.6 22.1 22.0 20.3 2004 vs 2000 Costs 17.6 • NMW +£16m • Insurance + £1m • Pensions + £3m • Sky TV costs + £1m • Leasehold rents + £2m • Total + £ 23m % = 4.5% of margin 2000 2001 2002 2003 2004 Our business
Slide 8: Effective acquisition integration
Preliminary results 2004 : effective acquisition integration Integration of Wizard Inns 1. Integration completed August 2004 - synergies of £2.5m+ being realised - all systems transferred - office closed 2. Conversion opportunities - 9 pubs due to be refurbished during 2005 3. Independently valued a
Slide 9: Free cashflow
Preliminary results 2004 : free cashflow 2004 2003 % £m £m change Cashflow from operating activities 148.4 130.9 +13.4 Interest and tax (57.4) (54.0) Maintenance capex (22.9) (21.9) Free cashflow 68.1 55.0 +23.8 Investment capex (59.0) (26.0) Disposals/FT loan inflow/other 18.5 23.9 Acquisition of W
Slide 10: Financing
Preliminary results 2004 : financing 1. Prudent financing ratios relative to the sector Actual Bank 2004 covenants - debt: EBITDA 3.7x <4.25x - interest cover 3.3x >2.50x - % fixed debt 93% - gearing 86% 2. Asset quality - Freeholds/long leaseholds 96% by value - Community >90% of estate - Tangible
Slide 11: Estate revaluation
Preliminary results 2004 : estate revaluation 1. 75% of estate re-valued September 2004 Pub Revaluation gain Nos. £m % change 363 Pathfinder Pubs 76.8 +22 863 Union Pub Company 78.0 +27 - WDB Brands 7.0 +29 - Unlicensed properties 7.7 +73 1,226 169.5 +25 2. Remaining 25% of pubs to be re-valued in 2
Slide 12: Business Development
Preliminary results 2004 Business Development Ralph Findlay Chief Executive 12
Slide 13: Business development
Preliminary results 2004 : business development Organic development plans announced 2003... 1. More resource devoted to new pub site acquisition 2. Targeted investment - value for money community locals (‘Bostin’ Local’) - growth in informal eating out market (‘Service That Suits’) - increasing pres
Slide 14: UPC development (1): organic
UPC development (1) : organic 1. Volumes supplied to tenants/lessees +1% like-for-like - sustainable business, average barrels per pub >280 per year - wine, cider, minerals showing strong growth 2. Average rent per pub £24.2k +9.9% - over 500 Open House Leases agreed - food sales driving business fo
Slide 15: UPC development (2): capital investment
UPC development (2) : capital investment 2004 Capital Investment £27.6m 20 pubs bought £9.3m Invested in estate £18.3m average investment/pub = £465k 70 refurbishments average barrels/pub = 300 130 ‘Fastrack’ capex investments average ROC = 13% investment in lease preparation 2005F : 30
Slide 16: UPC development (3): Pubs acquired in 2004
UPC development (3) : Pubs acquired in 2004 The Lime Kiln, Port y Waen Rose & Crown, Severn Stoke New Elliston Coalville New Inn, Ross on Wye Moon Inn, Stoney Middleton 16
Slide 17: Pathfinder development (1): operating formats
Pathfinder development (1) : operating formats 1. Bostin’ Local development Now 2006 - contemporary pub design - mid-market, value for money position - 30% food 100 120 2. Service That Suits - flexible, developed service style - higher price platform - 60% food 30 40 3. New build programme - exploit
Slide 18: Pathfinder development (2): capital investment
Pathfinder development (2) : capital investment Number £m 2004 2005(F) 2004 2005(F) Pubs bought/built 5 20 8 28 Sites bought not developed 8 10 4 5 Major refurbishments 47 54 15 15 Minor refurbishments - - 10 7 Freeholds re-purchased 2 3 3 3 40 58 • More emphasis on new-build activity : 30 sites und
Slide 19: Pathfinder development (3): investment returns
Pathfinder development (3) : investment returns 18,000 1. Average sales per week 16,000 11,300 £ Pathfinder Major New builds/ refurbishments acquisitions 2. Return on capital - incremental cash return on refurbishments consistently >20% - refurbishment cost falling (£0.3m per pub) Organic developmen
Slide 20: Pathfinder development (4): value creation
Pathfinder development (4) : value creation Cost Sales/wk EBITDA EBIT £m £k £k £k 1. Example new-build Bostin’ 1.3 15 250 200 Local Return on capital - - 19% 15% 2. Site development vs acquisition EBITDA multiple Price/pub New-build Bostin’ Local 5.2x £1.3m Recent acquisition multiples (historic, po
Slide 21: Pathfinder development (5): refurbishments, new pubs
Pathfinder development (5) : refurbishments, new pubs Cobblers Hall, Newton Aycliffe Hilton Brook, Derby Voyager Guisborough Hilly House, Dudley Ye Olde White Hart, Kinver Prime locations, high quality amenities, outside trading areas 21
Slide 22: WDB Brands development (1)
WDB Brands development (1) 1. New distribution agreements - J D Wetherspoon - Mitchells & Butlers - significant market opportunity for the Marston’s brands 2. Bass contract - UK supply of Draught Bass - will also brew packaged Bass for UK market 3. Capacity utilisation - Burton: brewing 90%, bottlin
Slide 23: WDB Brands development (2)
WDB Brands development (2) Fresh ideas generate interest in a stale category…. 1. Marston’s Old Empire - authentic IPA 2. Marston’s FC - smooth beer with genuine taste 3. Red Brick Brewery beer - short shelf life ‘fresh’ beer - ‘fresh is best’ 4. Resolution - lowest carbohydrate beer on the market -
Slide 24: Pub performance
Pub performance UPC % change Pathfinder % change 1. Averageturnover - per pub per annum £103.6k +8.8 £587.6k +11.9 2. AverageEBITDA - per pub per annum £57.6k +7.7 £177.2k +12.0 3. Operating margin 43.1% +0.8 21.5% +0.5 24
Slide 25: WDB Brands: brand performance
WDB Brands : brand performance 1. Turnover £120.3m vs £122.3m last year - H2 growth +1.9% 2. Operating margin +0.4% to 17.8% 3. Operating profit +0.5% to £21.4m 4. Return on capital* +2.0% to 27.5% 5. Brand performance - premium ale UK market share +0.6% to 10.2% - standard ale UK market share remai
Slide 26: Regulations: key issues
Regulations : key issues 1. White paper (smoking ‘ban’ timetable: end 2008) - ‘eating out’ remains a driver of growth - exclusion of wet-led pubs is positive - W&DB is well positioned to weather the changes 2. TISC (report expected December 2004) - UPC is at the forefront of best practice 3. Respons
Slide 27: Summary
Preliminary results 2004 : summary 1. Strong results reflecting high quality pub estate - organic performance consistently amongst the best in sector 2. Business development has momentum - pub and site acquisition - beer brand distribution 3. Conservatively financed - reduces financing risk in uncer
Slide 28: Preliminary Results December 2004
The Wolverhampton & Dudley Breweries, PLC Preliminary Results December 2004 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk 28
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