Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — FY2010 Earnings Presentation
40 slides from Mitchells & Butlers's earnings presentation, Nov 23, 2010
Slide 1: Mitchells & Butlers Plc Final Results
Mitchells & Butlers Plc Final Results 23 November 2010
Slide 2: Highlights
Highlights Excellent strategic progress in reshaping the group Strong operating profit performance through sales and margin increases Good cash generation reducing net debt Well positioned to deliver growth 2
Slide 3: Tim Jones, Finance Director
Tim Jones Finance Director Final Results – 23 November 2010
Slide 4: Income statement
Income statement 52 weeks ended 25 September 2010 FY09 FY10 £m £m Revenue 1,958 1,980 +1.1% Operating costs (1,530) (1,531) EBITDA 428 449 +4.9% Dep’n & amort. (128) (127) Operating profit 300 322 +7.3% Interest (166) (153) PBT pre exceptionals 134 169 +26.1% Exceptional Items (144) (302) EPS (pre e
Slide 5: Operating profit movement
Operating profit movement +34 £322m* FY10 £300m* (16) FY09 +13 (5) (4) Regulatory Disposals, pre- Inflationary Energy Costs Trading Costs opening costs Costs and other Good trading offsets VAT & regulatory cost increases * Excluding exceptional items and other adjustments 5
Slide 6: Major transactions
Major transactions # of sites Date £m Completed FY10 Lodge sale 52 lodges & 8 pubs Aug +91 Hollywood Bowl sale 24 bowls Aug +39 Completed FY11 Bar Ha Ha purchase 22 pubs Oct (20) Stonegate sale 333 pubs Nov +363 Significant estate repositioning 6
Slide 7: Proforma Retained Estate
Proforma Retained Estate Year ended 25 September 2010 Reported Growth Retained* Growth Revenue £1,980m 1.1% £1,680m 1.8% EBITDA £449m 4.9% £391m 9.8% EBIT £322m 7.3% £285m 14.5% EBIT margin 16.3% 1.0 ppts 17.0% 1.9 ppts 14% growth in Retained Estate operating profits * MAB excluding SCPD, major disp
Slide 8: Like-for-like sales growth
Like-for-like sales growth 2.8% 2.6% 2.0% 1.8% 1.6% 1.0% FY 08 FY 09 FY 10 Mitchells & Butlers Retained Estate Increasing sales growth 8
Slide 9: Retained Estate like-for-like sales
Retained Estate like-for-like sales FY10 FY10 FY10 FY11 H1* H2** Total 8 weeks Food 4.5% 5.0% 4.7% 6.9% Drinks 1.4% 1.5% 1.4% 1.4% Total 2.7% 3.0% 2.8% 3.7% Growth focused on the informal eating-out market • 33 weeks to include the entire Easter period ** Week 34-52 9
Slide 10: Key operating statistics
Key operating statistics Year ended 25 September 2010 Reported Growth Retained Growth Gross margin 1.0 ppts 1.2 ppts Food cash gross margin 8.9% 9.1% Total cash gross margin 2.4% 3.8% Outlet staff costs 24.5% 0.2 ppts 24.7% 0.1 ppts EBIT margin 16.3% 1.0 ppts 17.0% 1.9 ppts Improving gross and net m
Slide 11: Capital expenditure
Capital expenditure EBITDA return > 30% on last 2 years’ investments Total capex in FY10 of £138m - £28m of expansionary capex - £102m spent on maintenance capex - £8m of IT systems and energy efficiency projects Total capex in FY11 estimated at £185m - £90m expansionary capex - £80m maintenance cap
Slide 12: Cash flow
Cash flow FY09 FY10 £m £m EBITDA 428 449 Working capital / non cash items 22 40 Maintenance capex (86) (110) Net interest paid (160) (147) Tax 21 (8) Additional pension contributions (24) (32) Operating Cash Flow * 201 192 Expansionary capex (43) (28) Disposals 72 130 Share capital 4 (3) Net Cash Fl
Slide 13: Group net debt
Group net debt Sept 09 Sept 10 £m £m Securitisation debt (2,319) (2,274) Cash / other 92 215 Securitised net debt (2,227) (2,059) Unsecured net debt (373) (243) Group net debt (2,600) (2,302) Net Debt : EBITDA 6.1x 5.1x Current Group net debt (1,960) 13
Slide 14: Property accounting valuation
Property accounting valuation “Red Book” valuation of freehold and long leasehold properties based on site level EBITDA Short leaseholds held at cost less impairment Total movements across estate: - Exceptional revaluation reductions £304m - Increases to revaluation reserve £69m Excluding Stonegate,
Slide 15: Internal rent structure
Internal rent structure Key components: Total internal rent set at £190m, equivalent to 40% of freehold and long leasehold pub level EBITDA Site level charge reflects historical capital invested Annual escalator: average of RPI and retail rents Incremental rent charged on expansionary capex No inten
Slide 16: Illustrative split: Retained Estate
Illustrative split: Retained Estate FY10 Operations Property Total £m £m £m Revenue 1,680 - 1,680 EBITDAR 425 - 425 External rent (34) - (34) Internal rent (190) 190 - EBITDA 201 190 391 16
Slide 17: Implied enterprise value
Implied enterprise value Enterprise Value Property Yield (£m) 6.0% 6.25% 6.5% 5.5x 4,272 4,146 4,029 Operating 6.0x 4,373 4,246 4,129 EBITDA 6.5x 4,473 4,347 4,230 Multiple 7.0x 4,574 4,447 4,330 7.5x 4,674 4,548 4,431 Significant increase over current valuation 17
Slide 18: Key messages
Key messages Strong operating profit performance Increased gross and net margins Substantially reduced net debt Strong balance sheet Well positioned to deliver growth strategy 18
Slide 19: Adam Fowle, Chief Executive
Adam Fowle Chief Executive Final Results – 23 November 2010
Slide 20: Strategic review progress
Strategic review progress Targeted area On track Reshape to food-led business Price sensitive drinks-led pubs withdrawal Complete Improve operating margins Improve returns on capex Address pension funding & reduce net debt Complete Operations and property disclosure Complete Address incentive
Slide 21: Reshape to food-led business
Reshape to food-led business Drinks-led Food-led All Bar One Premium Higher (36) Browns (14) Higher Country Metro Dining (69) Professionals Miller & (100) Carter (17) Vintage O’Neill’s Nicholson’s Inns (221) (52) Price (76) Toby Price Carvery per (134) per Harvester drink Ember Inns meal (172) (143)
Slide 22: Improving operating margin percentage
Improving operating margin percentage FY09 FY10 Like-for-like sales +2.6% +2.8% Food gross margin % (1.0) ppts +2.6 ppts Labour cost % (0.1) ppts (0.1) ppts Sales and gross margin increases; labour broadly flat Retained Estate 22
Slide 23: Operating margin progression
Operating margin progression FY09 FY10 Total Company 15.3% 16.3% Retained Estate 15.1% 17.0% Margin progression from base in FY09 on track 23
Slide 24: Returns on expansionary capital
Returns on expansionary capital EBITDA returns increasing*: FY08: 18% FY09: 23% FY10: > 30% Drivers have been Lower capital intensity Trading performance Improving returns on expansionary capital * Retained Estate, expansionary investments made over 2 years Expansionary capital excluding Whitbread a
Slide 25: Strategic progress
Strategic progress Pension funding Operations and property disclosure Incentives Culture Two key areas of activity remain: Retained Estate profit progression Pipeline expansion for brand expansion 25
Slide 26: Retained Estate historical performance
Retained Estate historical performance FY07 FY08 FY09 FY10 AWT per managed pub £18.7k £19.7k £20.8k £21.3k Like-for-like growth 3.2% 1.8% 2.6% 2.8% Operating margin 16.8% 16.8% 15.1% 17.0% Operating profit per pub £158k £165k £156k £181k A solid platform for future growth 26
Slide 27: Like-for-like sales
Like-for-like sales 6% 5% 4% 3% 2% 1% 0% FY06 FY07 FY08 FY09 FY10 Resilient sales performance through economic cycle Notes: Retained Estate Chart reflects like-for-like trend line 27
Slide 28: Food sales - market outperformance
Food sales - market outperformance 8.0% 7.0% 6.0% 5.0% 4.0% 7% outperformance 3.0% 2.0% 1.0% 0.0% Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Food driving continued outperformance 12 month moving average total Retained Estate Source: Crest data, the NPD Group 28
Slide 29: Food spend per head and volume
Food spend per head and volume 8.0% +6.8% +5.7% 6.0% +4.2% 4.0% 2.0% 0.0% Q1 Q2 Q3 Q4 -2.0% (2.4)% -4.0% Ex VAT Inc VAT Volume Increasing food spend per head and Retained Estate Like-for-like pubs only underlying volume growth Q1=weeks 1-16; Q2=weeks 17-28; Q3=weeks 29-40; Q4=weeks 41-52 29
Slide 30: Food cash gross margin
Food cash gross margin +3.8% (0.5)% +1.7% +2.2% +9.1% +2.1% (0.2)% Volumes Same Product Menu Same Product Spend Disposals Price Engineering Cost Deflation increases Movements Significant uplifts in gross margins with flat prices Retained Estate 30
Slide 31: Drink cash gross margin
Drink cash gross margin +1.9% (3.2)% +3.7% (0.9)% (1.3)% +0.2% Same Product Mix Volumes COGS/Duty Disposals Price Movements Price and mix gains offset volume declines Retained Estate 31
Slide 32: Operational delivery
Operational delivery Guest satisfaction +2% pts Food & drink waste reduction of £5m NVQs 3,100 complete or in progress Management turnover reduced by 4% Productivity: contribution per staff hour up 2% Continuing focus on service, productivity & efficiency Retained Estate 32
Slide 33: Building brands – reducing discounting
Building brands – reducing discounting Promotional meals account for 8% of total Cash cost of discounts reduced Media expenditure more than doubled Net promotional and marketing investment flat A balanced approach to brand building and optimising trading opportunities 33
Slide 34: Advertising to grow awareness
Advertising to grow awareness 5 week TV campaign in each brand Significant sales and volume uplifts Average pay-back within 6 weeks Broadcast advertising only viable for strong national brands 34
Slide 35: Digital communication platform
Digital communication platform FY09 FY10 Emails sent 6.2m 16.8m Facebook fans 28k 266k Mobile subscribers 77k 530k Online bookings - 30k Cost effective and immediate sales generation Retained Estate 35
Slide 36: Expansion pipeline
Expansion pipeline 54 conversions, 1 new opening in FY10 70 conversions, 50 new openings in FY11 FY11 openings enabled by site redesign Retail & leisure locations enable faster build of pipeline 36
Slide 37: Recent trading
Recent trading FY10 FY11 Total 8 weeks Food 4.7% 6.9% Drinks 1.4% 1.4% Total 2.8% 3.7% Like-for-like sales over the last 18 weeks of 4.1% Retained Estate 37
Slide 38: Outlook
Outlook VAT increase Jan 2011 Fragile consumer outlook: taxation & unemployment Eating-out market: continued low growth Cost pressures balanced Confident in market share gains 38
Slide 39: Conclusion
Conclusion Excellent progress against strategy New management team established Strong balance sheet: net debt/EBITDA of 5x Business performing well in challenging conditions Strong returns on expansionary capital Well positioned for future growth 39
Slide 40: Questions & Answers
Questions & Answers Final Results – 23 November 2010