Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Bass — FY1999 Earnings Presentation
52 slides from Mitchells & Butlers's earnings presentation, November 1999
Slide 1: Preliminary Results for the year ended 30 September 1999
Preliminary Results for the year ended 30 September 1999
Slide 2: Sir Ian Prosser, Chairman
SIR IAN PROSSER CHAIRMAN
Slide 3: Highlights
BASS PLC Highlights • Turnover * +10.8% • Operating profit * +14.1% • Earnings per share +8.5% • Dividend per share +7.7% * Continuing operations
Slide 4: Divisional Results 98/99
BASS PLC Divisional Results 98/99 Operating Profit (£m) Bass Hotels & Resorts 321 Up 23.5% Bass Leisure Retail 298 Up 10.8% Bass Brewers 160 Up 6.7% Britvic Soft Drinks 44 Up 15.8%
Slide 5: Growing Shareholder Value
BASS PLC Growing Shareholder Value Financial FinancialResults Results Delivers DeliversValue Value Markets Markets Outperformance Outperformance Strategy Strategy Consistent Consistent&&Successful Successful
Slide 6: Richard North, Finance Director
RICHARD NORTH FINANCE DIRECTOR
Slide 7: Bass Hotels & Resorts Operating Profit
BASS HOTELS & RESORTS Operating Profit US $m 98/99 97/98 Growth Americas 202 195 3.6% EMEA 71 65 9.2% Asia Pacific 7 1 - Sub Total 280 261 7.3% Inter-Continental 214 *116 84.5% FelCor/Bristol 21 42 - Other Income 6 10 - Operating Profit 521 429 21.4% Average Exchange Rates $:£ 1.63 1.65 *27 weeks ea
Slide 8: Bass Hotels & Resorts Underlying Profits
BASS HOTELS & RESORTS Underlying Profits US $m 98/99 97/98 Growth Holiday Inn, H I Express 280 261 7.3% & Crowne Plaza Inter-Continental 214 *174 23.0% Other Income 6 10 - Underlying Business 500 445 12.4% * 25 weeks to 25.3.98 under previous ownership; 27 weeks to 30.9.98 under Bass ownership.
Slide 9: Americas (excl. Inter-Continental)
BASS HOTELS & RESORTS Americas (excl. Inter-Continental) Profits - Up 3.6% Crowne Plaza RevPAR* - Up 5.1% Holiday Inn RevPAR* - Up 5.3% Holiday Inn Express RevPAR* - Up 6.9% * US only
Slide 10: EMEA (excl. Inter-Continental)
BASS HOTELS & RESORTS EMEA (excl. Inter-Continental) Profits - Up 9.2 % Crowne Plaza RevPAR * - Up 3.8 % Holiday Inn RevPar * - Up 2.5 % Holiday Inn Express RevPAR - Up 16.8 % * Owned and leased hotels
Slide 11: Asia Pacific (excl. Inter-Continental)
BASS HOTELS & RESORTS Asia Pacific (excl. Inter-Continental) • Operating profit $7m • Australian owned hotels performing well • RevPAR down 7.3%
Slide 12: Inter-Continental - Results
BASS HOTELS & RESORTS Inter-Continental - Results US $m 98/99 97/98 Growth Operating profit Full Year 214 116 84.5% Proforma 214 174* 23.0% RevPAR ($) 88.44 84.18 5.1% * 25 weeks to 25.3.98 under previous ownership; 27 weeks to 30.9.98 under Bass ownership.
Slide 13: Bass Hotels & Resorts Operating Profit
BASS HOTELS & RESORTS Operating Profit US $m 98/99 97/98 Growth Americas 202 195 3.6% EMEA 71 65 9.2% Asia Pacific 7 1 - Sub Total 280 261 7.3% Inter-Continental 214 116 84.5% FelCor/Bristol 21 42 - Other Income 6 10 - Operating Profit 521 429 21.4% Average Exchange Rates $:£ 1.63 1.65
Slide 14: Leisure Retail Summary Results
BASS LEISURE RETAIL Summary Results £m 98/99 97/98 Growth Ongoing pub business 292 256 14.1% Profit from managed 6 13 - pubs sold Total 298 269 10.8%
Slide 15: Leisure Retail Results
BASS LEISURE RETAIL Results Growth on LY Ongoing Outlets (ave.) 3.9% Sales per outlet 3.5% Drinks sales per outlet 1.8% Food sales 13.1% Machine profits after rent 5.3% Like for like sales (uninvested) (2.1)% Operating profit 14.1%
Slide 16: Leisure Retail Key Drivers of Results
BASS LEISURE RETAIL Key Drivers of Results • Profits growth from brands of over 30% - Restaurants AWT £17.6k + 3.5% - Bars & Venues AWT £15.0k + 4.2% • High ROIs on brand roll-outs • Staff take per hour up 7.4% • Reduced overheads improve margins
Slide 17: Bass Brewers Operating Profit
BRANDED DRINKS Bass Brewers Operating Profit £m 98/99 97/98 Growth UK 166 154 7.8% International (6) (4) - Total 160 150 6.7%
Slide 18: Bass Brewers Results
BRANDED DRINKS Bass Brewers Results UK Volume Growth Bass Brewers Market H1 H2 FY FY On-Trade -1.6% -0.5% -1.2% -3.6% Off-Trade -3.8% +13.7% +4.8% +2.3% Total -2.2% +3.0% +0.3% -1.9%
Slide 19: Bass Brewers Results - UK
BRANDED DRINKS Bass Brewers Results - UK • Cost savings - Benefit of £5 million • Further reduction in capital employed - ROCE up from 16.9% to 18.9% • Export business - beer volumes up 6.4%
Slide 20: Britvic Soft Drinks Results
BRANDED DRINKS Britvic Soft Drinks Results • Competitive market • Volumes up 3.8% • Turnover up 3.0% • Productivity improved • Profits up 15.8% to £44 million
Slide 21: Year Ended 30 September 1999
BASS PLC Year Ended 30 September 1999 £m 98/99 97/98 Growth Operating profit 824 758 8.7% Exceptional items * (112) 173 PBIT 712 931 Interest (140) (97) Tax (177) (179) Earnings 387 650 Earnings per share ** 62.3p 57.4p 8.5% Interest cover ** 5.9x 7.7x * Surplus of £682m taken to reserves ** adjuste
Slide 22: Net Cash Flow 98/99
BASS PLC Net Cash Flow 98/99 £m 98/99 97/98 Operating profit 824 758 Depreciation 237 247 Working capital/Other (49) (25) Profit from Associates (16) (39) Trade loans 32 27 Capital expenditure (net) (501) (587) Operating cash flow 527 381 Interest (130) (105) Taxation (174) (152) Dividends (250) (25
Slide 23: 2000 Capex Allocation - £800m
BASS PLC 2000 Capex Allocation - £800m £m 450 400 400 350 300 300 250 200 150 100 100 50 0 BHR BLR Branded Drinks Note: Additional cash consideration for ADR pubs of £179m, 5th October 1999
Slide 24: Re-Valuation
BASS PLC Re-Valuation • Uplift of £682 m - Includes uplift on ICH hotel above valuation at date of acquisition • Lotting premium of £800m not booked • Goodwill on brands not booked
Slide 25: Balance Sheet
BASS PLC Balance Sheet £m Sept 99 Sept 98 Net debt 1,995 1,950 Shareholder equity 3,313 2,577 Market-cap gearing 32% 35% Interest cover (adjusted) 5.9x 7.7x
Slide 26: Sir Ian Prosser, Chairman
SIR IAN PROSSER CHAIRMAN
Slide 27: Strategy & Competitive Advantage
BASS PLC Strategy & Competitive Advantage Brands Brands Scale Scale Portfolio Portfolio Focus Focus Infrastructure Infrastructure Management Management
Slide 28: Corporate Transformation
BASS PLC Corporate Transformation Change in Contribution to Group Operating Profit 100 Gaming Leased Pubs • £2.6 billion of 80 Hotels acquisitions* Hotels 60 • £2.0 billion of Managed disposals Managed 40 Pubs Pubs • £1.3 billion of 20 expansionary Branded Branded capex Drinks Drinks 0 1996 1999 £83
Slide 29: Hotel Industry Growth Potential
BASS HOTELS & RESORTS Hotel Industry Growth Potential • Scope for branded conversions, by region* % Unbranded Total Rooms Americas 40 4.9m EMEA 76 6.4m Asia Pacific 85 2.3m • Consolidation: Top 10 companies represent 22% of world room supply • Forecast worldwide tourist arrivals 4.5% pa growth * Sou
Slide 30: Brands
BASS HOTELS & RESORTS Brands Segment Brand ADR North America Upper $174 Upscale Lower $103 Full Service $76 Without Midscale food- $65 beverage Extended $83 stay
Slide 31: International Brand Leadership
BASS HOTELS & RESORTS International Brand Leadership 700,000 Number of Rooms KEY 600,000 Cendant 500,000 Accor Bass Nos. of Upscale 400,000 & Midscale Marriott Hilton/ Best Western Rooms 300,000 Promus Choice Starwood 200,000 Source: Hotels Wyndham Carlson Magazine 100,000 July 1999 Hilton Intl Gran
Slide 32: Balanced Portfolio
BASS HOTELS & RESORTS Balanced Portfolio Operating Profit By Region By Ownership Management/ Europe Americas Franchised Owned Other and Leased Other
Slide 33: Upscale - Distribution
BASS HOTELS & RESORTS Upscale - Distribution Inter-Continental • Acquisitions programme commenced: - ICH Central Park South, New York - ICH Hyde Park Corner, London (50% bought out) • Signed 21 new management contracts since acquisition, 18 in last financial year Crowne Plaza • 10 new hotels in 1998
Slide 34: ICH Modernisation Programme
BASS HOTELS & RESORTS ICH Modernisation Programme • Big ‘10’ Projects • Substantial opportunity to invest on attractive returns - higher rates, additional facilities • Phased programme to minimise earnings impact
Slide 35: Holiday Inn Brand - US
BASS HOTELS & RESORTS Holiday Inn Brand - US Rev PAR 6.9% Growth 5.3% 2.8% 2.6% Midscale Holiday Midscale Holiday with F&B Inn without Inn F&B Express
Slide 36: Other Midscale - Distribution
BASS HOTELS & RESORTS Other Midscale - Distribution • Express - Added 9,536 rooms (132 hotels) in Americas net - Now over 1,000 hotels worldwide • Staybridge - 9 now open with 16 under construction • EMEA deal with Westmont Hospitality - 19 hotels to be rebranded in Italy - Makes Holiday Inn the 2nd
Slide 37: Leisure Retail Demand Trends
BASS LEISURE RETAIL Demand Trends Growth rates in Year to September 1999 GDP 3.4% Consumer Spending 5.4% Eating & Drinking Out 6.9% On-trade wine, spirits 3.5% and soft drinks On-trade beer 1.2% * All figures nominal Source: ONS; Bass estimates
Slide 38: Leisure Retail Industry Structure
BASS LEISURE RETAIL Industry Structure Large, Large,Managed ManagedPubs Pubs DEMAND DEMAND Branded Branded TRENDS TRENDS GROWTH GROWTH Social Social Demographic Demographic Small, Small, Leased Leased Pubs Pubs Unbranded Unbranded LONG LONG TERM TERM DECLINE/ DECLINE/ CASHFLOW CASHFLOW
Slide 39: Examples of Growth Markets
BASS LEISURE RETAIL Examples of Growth Markets Sector Brands Drinks-led: - Premium circuit venue Edward’s O’Neill’s - Students Its A Scream - Late night drinks Bar Coast - Suburban Premium pub Ember Inns - High Street Value Goose Food-led: - Urban Casual Dining Browns - Service Professionals All Bar
Slide 40: Estate Repositioning
BASS LEISURE RETAIL Estate Repositioning 1999 1998 No. of branded outlets 754 655 Percentage of Managed 30% 25% estate branded Food sales as % of total 22.5% 21.5% % sales from SE 33% 30% Average weekly take (AWT) £10.8k £9.9k per outlet No. outlets with AWT over £10k 960 890 over £20k 210 180
Slide 41: Brand Roll-Out
BASS LEISURE RETAIL Brand Roll-Out • 68 new outlets opened with AWT £19.8k • 56 new sites added to pipeline • Branded outlets account for 45% of total sales • Branded outlets, AWT £16.5k
Slide 42: Ember Inns
BASS LEISURE RETAIL Ember Inns • New brand for successful ‘Taverns’ concept • Premium suburban pub segment • 33 now open • AWT £13k, 40% uplift on conversion • Significant potential in BLR and ex-Allied estate
Slide 43: 550 Allied Pubs
BASS LEISURE RETAIL 550 Allied Pubs • Regulatory clearance - BLR prepared to meet undertakings required • Separate management structure • Transfer to brand management once converted • Progress to date - initial appraisals confirmed - first 100 conversions in for planning and licensing
Slide 44: Leisure Retail Sales Profile
BASS LEISURE RETAIL Sales Profile Sales Split by Market Segment Mostly - Ember Inns - Differentiated formats LOCALS HIGH STREET SUBURBAN FOOD Industry Proforma BLR * * Including 550 Allied sites - sales as at post conversion Source: BLR; Industry Analysts
Slide 45: Leisure Retail Returns
BASS LEISURE RETAIL Returns • Aggressive disposal of tail end pubs, for £800 million • Approximately £1bn of organic expansion capex in last 5 years - which represents approximately two thirds of the current capital employed • Overall Bass Leisure Retail ROCE of 17.4%* * calculated on historical cos
Slide 46: Brewers Market - Channel Shift
BASS BREWERS Market - Channel Shift Changes in Consumption by Channel 1994 to 1999 8 6 Volume 4 Change 2 0 (%) -2 National Take Home Free On Tied On -4 Accounts -6 -8 -10 -12 • Volume moving to large accounts with purchasing power, but • Large accounts need leading brands
Slide 47: Core Brands Outperformance
BASS BREWERS Core Brands Outperformance Brand Category Growth Growth Category Carling 9.4% 2.1% Std Lager E&W Tennents (0.5)% (1.0)% Std Lager Scot Grolsch 32.8% 2.7% Premium Lager Worthington 9.5% (6.6)% Std Ale Caffrey’s (14.9)% (20.6)% Premium Ale
Slide 48: Carling - The UK's Most Successful Beer
BASS BREWERS Carling - The UK’s Most Successful Beer • 1999 volume - 3.6 million barrels + 9.4% • First lager to sell 1 billion pints in a 12 month period • Leading sports and music sponsor
Slide 49: Brewers Operating Performance
BASS BREWERS Operating Performance • UK Market share up 0.5 percentage points • Core brands now 74% of own brand sales • Operating Profits up 8% • Overheads per barrel down 5% in real terms • Production barrels per employee up 6%
Slide 50: Brewers UK Returns
BASS BREWERS UK Returns Progress from 1995 to 1999 • £176m capital taken out of the business • Profits up at CAGR of 3.6% • ROCE up from 13.7% to 18.9%
Slide 51: Current Trading
BASS PLC Current Trading • BHR - strong trading • BLR - like for likes improving • Brewers and Britvic - strong volume growth
Slide 52: Strong Brands, Focused Investment, Growing Shareholder Value
Strong Strong Focused Focused Brands Brands + Investment Investment Growing GrowingShareholder ShareholderValue Value