Slide 1: Interim Results 2012
Interim Results 2012 =a “Citas! = at Be} s en AW NY
Slide 2: Highlights
Highlights Focused and consistent strategy yielding growth • New-builds and Franchise Agreements continue to perform well Continued strong operational performance • Revenue and profit growth in all three trading segments EPS growth of 14.6% 14 6% drives return to dividend growth • Interim dividend u
Slide 3: Andrew Andrea, CFO
Andrew Andrea CFO
Slide 4: Financial summary
Financial summary 26 weeks 2012 2011 vs. LY Revenue £342.1m £317.9m +7.6% EBITDA £88.6m £86.8m +2.1% Operating Profit £67.6m £66.4m +1.8% Profit before tax* £33.5m £29.2m +14.7% Adjusted EPS* 4.7p 4.1p +14.6% Interim Dividend 2.2p 2.1p +4.8% Dividend Cover 2.1x 1.9x +0.2x * before exceptional items
Slide 5: Segmental operating profit
Segmental operating profit +4.8% +3% 3% £69.6m (£2.0)m +3% 3% +7% +1 8% +1.8% £67.6m One-off One off costs £66.4m Insurance £1.0m Advisory £0.5m 2011 H1 Managed Tenanted and Brewing Pre-central Central Reported Franchised Page 5 Growth in all trading segments
Slide 6: Retained estate performance
Retained estate performance Retained Disposals Reported Retained Disposals Reported 12 10 +10% £0.7m £4.5m 8 % +8% £4.5m 6 +5% +7% 4 +5% 2 0 Revenue Operating profit Page 6 Strong underlying growth
Slide 7: Sales performance
Sales performance Like-for-like sales* 26 weeks to 32 weeks to % change 31 March 12 May Drink +3.6% +2.3% Food +3.9% +2.7% Total +3.6% +2.4% * Excludes any pubs acquired in last two years 14-28 April (11)% vs Royal Opportunities: Diamond Jubilee Soft December comps Wedding Euro 2012 +5.0% +3.5% +3.2
Slide 8: Margin performance
Margin performance 14.0% 14.5% 14.6% 14.9% 3.6% 2.4% 1 4% 1.4% (1.8)% 2009 H1 2010 H1 2011 H1 2012 H1 Margin % LFL Page 8 Growth achieved with strong margin progression
Slide 9: 2013 cost outlook
2013 cost outlook Drink Food Labour Utilities Carbon Levy Drink price Food price Menu Reduced management energy 3% Increase £1.0m £2.0m £1.0m 3% Increase 1.5% 1 5% £1.5m Increase £1.5m £3.0m 1% Increase £1 5m £1.5m £0.5m £2.0m Page 9 Reduced inflationary pressure, mitigation plans identified
Slide 10: Performance
Performance Tenancies and Franchise Total Leases Agreement estate No. of pubs c.1,000 c.600 c.1,600 Revenue +2.3% +33.2% +14.2% Rent +3.4% n/a - YOY EBIT +0.6% +13.5% +3.1% SUSTAINABLE OPPORTUNITY GROWTH Page 10 Stable core estate, franchise driving growth
Slide 11: Continued market outperformance
Continued market outperformance Revenue growth • Revenue up 6.6% R 6 6% • Group ale volume up 2% • Ale growth across all channels Robust financial performance • Operating profit up 2.7% • Strong cash generation 2013 cost outlook • c.£1m of cost inflation – energy • Mitigated through price and effici
Slide 12: Cashflow summary
Cashflow summary £m H1 2012 H1 2011 Comments EBITDA 88 6 88.6 86 8 86.8 Working capital/pension/tax (13.8) (7.8) Working capital timing Operating cashflow 74.8 79.0 et interest Net te est ( 0 5) (40.5) (36.6) (36 6) One-off arrangement g fees Pre-investment FCF 34.3 42.4 Higher new new-build build o
Slide 13: Financing structure
Financing structure £m Securitisation 1 029 1,029 • FCF cover: 1.5x 1 5x vs covenant >1 >1.1x 1x • EBITDA cover: 1.7x vs covenant >1.5x Bank facility 161 • Interest cover: 5.1x vs covenant >3.0x • Debt to EBITDA: 2 2.4x 4x vs covenant <4 <4.0x 0x • £257.5m facility to May 2016 with £42.5m accordion
Slide 14: Interest costs
Interest costs New £120m swap arrangement to 2020 “Replaces” more expensive £140m swaps to 2014 R d Reduces interest ch harges by c.£2 £2-3 3m pa • Mitigates 2013/14 step up in securitised interest Securitised interest £m 61 61 2012 - 2016 58 58 57 2012 2013 2014 2015 2016 Page 14 New swaps reduce u
Slide 15: Pension triennial valuation
Pension triennial valuation Reduction in deficit since 2008 • £30m improvement in cash deficit to £75m • Reflects consistency of funding over time No changes to current funding profile • c £11m per annum increasing by 5 c.£11m 5.75% 75% per annum Deficit targeted to be cleared by 2017 • De-risking D
Slide 16: Ralph Findlay, CEO
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Slide 17: Market backdrop
Market backdrop Opportunities • Eating-out market resilient • Inflation easing • Unemployment p y threat easing g • Technology • Minimum pricing? Challenges • Taxation – duty, VAT • Regulation • Changing consumer behaviour • Economy Page 17 Opportunities outweigh challenges
Slide 18: Drivers of organic growth
Drivers of organic growth Improved consumer insight Offer • Trends into attractions • Format range • Flexible approach Investment Service • Design innovation • Customer services • Estate refurbishment • Standards • Maintenance • Investment in people • Disciplined allocation • Stable team Improving r
Slide 19: Disciplined capex
Disciplined capex Target 2012 capex programme Return External • New-builds £50m 16.5% t • Investment capital £10m 20% nal Intern • Maintenance capital £10m £70m Page 19 70% of capex growing estate; LFL growth with moderate capex
Slide 20: Flexible pub offers: Taverns
Flexible pub offers Taverns Homestead Pubs: 213 Village LFL: +1.9% • ‘In the houses’ • Rural village g location Food mix: 26% • Clearly defined target market • Wider target market • Everyday favourites – Pedigree, Pedigree Banks’s, Banks’s scampi • More M adventurous d t menu, drinks d i k ranges •
Slide 21: Flexible pub offers: Destination
Flexible pub offers Destination Two for One Pubs: 260 Milestone LFL: +3.8% • Landmark sites • Ultimate food deal! Food mix: 54% - Every Day Low Prices • Pub classics with a twist • Value-driven g growth • More flexible pricing • Intimate “pubby” feel • Intimate “pubby” feel Reasons to visit - conven
Slide 22: Pitcher & Piano
Pitcher & Piano High-quality g q y estate in strong gggrowth • 21 pubs, c.50% freehold • LFL up 9%, wet up 7%, food up 16% • Food mix up 2% to 22% • Margins up 1% Continuous development • Theatre approach to food and drink • 95% “Fresh Food” • Modest investment, maximum impact Strong and stable team
Slide 23: Customer focused business
Customer focused business Customer service – balanced scorecard SMILE culture • Making customers feel welcome High5 • Maximising sales from customer visit Customer experience monitoring Page 23 Customer service at the heart of everything we do
Slide 24: Make your name at Marston's
“Make your name at Marston’s” Attracting new talent • “Make it” - our pub employer brand • New N recruitment it t website/app b it / • Social media - Twitter Clear career progression Cl i in i a growing business • Pub career path • Modern Apprenticeships and Diplomas • Opportunities for the ambitiou
Slide 25: New-build performance
New-build performance 2009 Pre 2010 Post 2010/11 target sites sites Revenue p per week £20k £21k £27k EBITDA conversion 30% 32% 32% Food mix 55% 57% 62% Food spend per head c.£6.00 c.£6.00 c.£6.50 EBITDA ROI* 15% 17.3% 18.5% *annualised pro‐forma Page 25 Strong performance continues; investment at 5
Slide 26: New-build growth
New-build growth Clear visibility over pipeline • Sites identified for next three years • Retail parks and beyond - premium community food - smaller footp print sites • National coverage • Focus on quality not quantity Planning • Increased build cost c.£0.2m per site • “Delay” rather than “prevent”
Slide 27: Profit performance
Profit performance +3.1 3.1 3 eported EBIT (%) +1.0 1 +0 3 +0.3 (1) 2009 2010 2011 H1 2011 H2 2012 H1 YOY Re (3) (3.7) (5) (7) (7.0) Page 27 Continued profit growth, trends improving
Slide 28: Franchise Agreement performance
Franchise Agreement performance 140 135 130 125 Volumes EBITDA Robin Hood, Congleton 120 115 110 105 100 FY FY HY 2010 2011 2012 419 pubs 2010 Benchmark = 100 Page 28 Continued volume and profit growth
Slide 29: Franchise Agreement evolution
Franchise Agreement evolution Conversion from managed to franchised • Minimal cappital investment • Wet-led, lower turnover, community pubs • Nine targeted by year end Case study: Sun, Doncaster December 2011 conversion Capex: £50k MAT EBITDA growth: +40% 40% Revenue growth since conversion: +16% “C
Slide 30: Stability in traditional estate
Stability in traditional estate Focus on top-line support • Di ti l offers Directt promotional ff • Marketing and commercial advice • Moderate capital investment Focus on licensee quality • Central recruitment team for all pubs - higher standards • Stability increased to 92% Agreement flexibility •
Slide 31: Localness and Premium
Localness and Premium Free Trade Growth 18% Accounts Premium Localness demonstrated through cask ale free trade growth 10% 7% Premium – cask and bottle 5% 5% 4% • L di market Leading k t shares h - premium bottled up 9%; premium cask up 2% 2010 2011 2012 H1 Innovation • fastcaskTM now 33% of cask al
Slide 32: Summary
Summary Clear, consistent and focused strategy Value,, service and q quality y across all business segments g Stable and secure finance structure Strategy and effective execution delivering growth R t Return tto progressive i dividend di id d Page 32 Focused strategy driving shareholder returns
Slide 33: Appendices
Appendices
Slide 34: Group strategy
Group strategy STRATEGY KEY COMPONENTS OBJECTIVES • ‘F-Plan ‘F Pl ’ • New-build investment • Innovative agreements • Greater control of retail offer Exploit and develop 1. Sustainable growth competitive advantage in 2. Lower gearing ratios pubs and brewing sectors 3 IIncreased 3. d ROC • Localness •
Slide 35: Segmental analysis
Segmental analysis Interim 2012 2011 £m £m % Revenue Managed Houses 190.4 181.7 4.8% Tenanted and Franchised 98 1 98.1 85 9 85.9 14.2% 14 2% Brewing 53.6 50.3 6.6% Central - - - Total 342.1 317.9 7.6% EBITDA Managed Houses 38.3 36.5 4.9% Tenanted and Franchised 45.6 43.6 4.6% Brewing 11.6 11.6 0.0%
Slide 36: Average number of shares in 2012
Average number of shares in 2012 568 9m 568.9m Number of shares in issue as at 31 March 2012 568.9m Additional dilutive number of shares 4.3m Forecast Forecast 2012 2013 Tax rate c.20% 21 - 23% Capex £110m £110m Disposal proceeds c £30m c.£30m c £30m c.£30m Page 36
Slide 37: Securitisation as at 31 March 2012
Securitisation as at 31 March 2012 Securitisation results £m Actual • Gross debt outstanding as at 31 Mar 2012 £1,029.3m • EBITDA 131.0m • Free cashflow (FCF) 113.6m • Debt service (DSCR) 77.7m Financial covenants Actual Covenant • FCF : DSCR 1 5x 1.5x >1 1x >1.1x • EBITDA : DSCR 1.7x >1.5x • Net wo
Slide 38: Securitised debt profile
Securitised debt profile Tranche Type Principal Step-up Final Maturity outstandingg Date Date at 31/3/2012 A1 Floating £154.8m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200 0m £200.0m April 2027 2032 A4 Floating £225.5m October 2012 2031 AB1 Floating £80.0m October 2
Slide 39: Securitisation profile
Securitisation profile Page 39
Slide 40: www.marstons.co.uk
www.marstons.co.uk