Slide 1: Preliminary Results 2011
P li i Preliminary Results R lt 2011
Slide 2: Highlights
Highlights 1. Encouraging performance against challenging consumer backdrop • Revenue and profit growth growth, strong margin performance • Double digit EPS growth 2. Focused and consistent growth plans • New-builds performing ahead of target • Continued roll out of Retail Agreement, performing in l
Slide 3: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer
Slide 4: Financial summary
Financial summary 52 weeks 2011 2010 % change Revenue £682.2m £650.7m +4.8% Operating Margin 22.6% 22.9% (0.3)% EBITDA £195.8m £188.6m +3.8% Operating Profit £154.3m £148.7m +3.8% Profit before tax* £80.4m £73.5m +9.4% Adjusted EPS* 11.2p 10.0p +12.0% CROCCE 9.8% 9.6% +0.2% Full Year Dividend 5.8p 5
Slide 5: Like-for-like performance
Like-for-like performance 2011 performance Current trading Like-for-like sales* % change Like-for-like sales* % change for 8 weeks to 26 November Di k Drink +1.8% 1 8% Di k Drink +3.0% 3 0% Food +5.0% Food +3.0% Total +2.9% Total +3.0% 6 5 YTD 4 (%) Period 3 2 1 3.0% 1.4% 3.0% 5.0% 2.0% 2.9% 0 8 wks
Slide 6: Retail margin performance
Retail margin performance ( ) (%) 18.5 0.2% 18.1% 0.2% 0.1% Margin 0.2% 17.5 17.4% 16.5 2010 Drinks Food Labour Other 2011 6 Continuing the improved margin performance
Slide 7: 2012 cost outlook
2012 cost outlook £m £1.0m £2.0m 8 £1.5m 1% 7 RSP £3.0m 6 £2.0m 5 2% RSP 4 £1.5m £1.5m 3 £2.0m 2 £1.5m 1 0 Drink Food Labour Utilities Carbon levy Wet price Food price Menu Cost management management 7 2012 cost pressures will be mitigated
Slide 8: Long-term leases and Retail Agreement performance
Heading (Arial Black MPC 22pt)segmented: Heading (Arial Black 22pt) 2011 performance Long-term g Retail Agreement g Total leases estate No. of pubs c1,000 c600 c1,600 Turnover +0.7% +22% +7.7% Rent +1.6% n/a - YOY EBIT % +0.8% -% +0.6% STABILITY OPPORTUNITY First 8 weeks: EBIT growth of 2.0% 8 Long-
Slide 9: Continued market outperformance
Continued market outperformance 1. Revenue growth • Revenue up 0.4% • Group ale volume up 2% • Strong ale performance in all channels 2. Robust financial performance p • Operating profit up 0.6%, margins maintained • Strong cash generation 3. 2012 cost outlook • Circa £1.0m of cost inflation – prima
Slide 10: Cashflow summary
Cashflow summary £ £m 2011 2010 2009 C Comments t Operating cashflow 182.4 189.3 147.3 £13m higher tax Net interest (69.9) (72.6) (77.3) Pre-investment FCF 112.5 116.7 70.0 New-builds and Net capex* (94.2) (63.3) (32.6) Retail Agreements Pre-dividend FCF 18.3 53.4 37.4 Dividend (33.0) (33.0) (35.9)
Slide 11: Financing structure
Financing structure £m Securitisation S ii i 1,040 1 040 • FCF cover: 1.5x 1 vs covenant >1.1x 11 • EBITDA cover: 1.7x vs covenant >1.5x Bank facility 126 • Interest cover: 4.3x vs covenant >3.0x • Debt to EBITDA: 1.9x vs covenant <4.5x • New £257.5m facility to May 2016 with £42.5m accordion 1,166
Slide 12: Core Strategic Objectives
Core Strategic Objectives 1. Sustainable Growth Turnover £m 2010 651 +5% 2011 682 2010 189 EBITDA £m 2011 196 +4% EPS 2010 10.0p +12% 2011 11 2p 11.2p (pence per share) 2. Reduce Leverag ge 2010 5.7x 0.1x Debt: EBITDA 2011 5.6x lower 3. Improve ROC 2010 9.6% CROCCE % +0.2% 2011 9.8% 12 Progress on a
Slide 13: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer
Slide 14: Dealing with the downturn
Dealing with the downturn Macro/environment Discretionary spend under pressure Inflation above pay settlements Prolonged economic uncertainty Consumers Strategy Value Relevant Service Licensees Focused and clear Quality Consistent Consistency C i t Business building Financial assistance Access to bu
Slide 15: Trends in consumer expenditure
Trends in consumer expenditure 12% Eating Out Food 10% Non-Food 8% ** 6% 4% * 2% 0% * (2)% (4)% (6)% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2010 2011 Source: *BRC Tracker ** Coffer Peach Tracker 15 Eating out > food > non-food
Slide 16: Clear divisional strategies
Clear divisional strategies STRATEGY KEY COMPONENTS OBJECTIVES • ‘F-Plan’ • New-build investment • Innovative agreements Exploit and develop • Greater control of retail offer 1. Sustainable growth competitive advantage 2. Lower gearing ratios in pubs and brewing 3 IIncreased 3. d ROC sectors • Local
Slide 17: 'F-Plan': differentiation in food retailing
‘F-Plan’: differentiation in food retailing • Award A ard winning menus inning men s • “II love my food food” Our award winning menu • Food stories - the narrative behind the plate • Contented child = happy parent • Comfort food or stretch your taste buds! • Everybody's welcome; family inclusive pla
Slide 18: Pub formats
Pub formats Growth Category g y Formats Investment Destination Two T o for for One One New-build Ne b ild 253 Milestone Impact gardens Taverns Community EIP 213 pubs Impact Gardens Branded B d d Hi High h Pitcher & Piano Street Regular refresh Bluu 26 18 Broad pub formats for all consumers
Slide 19: Two for One
Two for One Food Families Females 40/50’s and beyond Excellent customer satisfaction scores consistently higher than industry average 19
Slide 20: Two for One
Two for One • Strong lfl sales • Wet +6% • Food +8% • High food mix 61% • Kids meals +25% • 11 million meals per annum • Quality offer encourages trading up • Starters +20% • Desserts +26% • Coffee +20% 20 Consistent, value for money format driving growth
Slide 21: Impact gardens investment
Impact gardens investment • Modest investment • 9 investments of c.£50k each • High impact investment • Recreating “the cult of the home” • Enhanced performance • Turnover up £4.5k per week • EBITDA uplift of £87k per annum • Strong returns • ROIC c.165% • Payback in seven months Wheatsheaf, Baslow
Slide 22: New-build performance
New-build performance 2009 Pre 2010 Post 2010/11 target sites sites Turnover 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% 18.6% *annualised pro-forma 22 Strong performance continues; investment at 5.4x EB
Slide 23: New-builds: regional performance
New-builds: regional performance MAT Performance on new-build sites: 55 sites 2005-2011* North West 14 pubs North East AWT: £25k 10 pubs EBITDA ROI: 18% AWT: £23k EBITDA ROI: 18% Wales 6 pubs AWT: £23k EBITDA ROI: 18% South East 18 pubs South West AWT: £22k EBITDA ROI: 17% 7 pubs AWT: £23k EBITDA RO
Slide 24: New-build performance
New-build performance Cobblestones March Cobblestones, Blue Jay Jay, Derby 20 Running Horse, Fakenham The Orchard at Amesbury
Slide 25: Flexible Operating Models
Heading (Arial Black 22pt) Heading (Arial Flexible BlackModels Operating 22pt) O Operating ti M Model d l Tenanted e a ted Franchise a c se Bespoke offer Standardised consumer proposition Higher food mix Every day value Entrepreneur taking risk Lower risk for licensee More skilled operator driving s
Slide 26: Three year profit performance
Heading (Arial Black 22pt)Three Heading (Arialperformance year profit Black 22pt) +2.0 2.0 2 +1.0 1 T (%) +0.3 0 orted EBIT 2009 2010 2011 H1 2011 H2 8 wks to 26 (1) Nov (2) YOY Repo (3) (4) (3 7) (3.7) Y (5) ((6)) (7) (7.0) Return to absolute EBIT growth, trends improving 26
Slide 27: Retail Agreement performance
Heading (Arial Black 22pt) Retail Heading (Arial Black Agreement 22pt) performance 1. Post-conversion performance 2. 2010 sites improving: Turnover p.w. pw 4000 • Turnover per week: £3,700 => continuing to improve £ per pub 3500 • EBITDA: => achieving EBITDA target £45kpa 3000 • ROIC: 45% => approx.
Slide 28: Retail Agreement appeal
Heading (Arial Black 22pt) Heading Retail(Arial Black appeal Agreement 22pt) Retailer • High number of applicants – 3x higher than traditional tenancy • Retention high • High approval rating – 93% recommend Consumer • Leverage managed house insights and disciplines • Refurbished pub: “best place aro
Slide 29: Stability in traditional estate
Heading (Arial Black 22pt) Headingin Stability (Arial Black estate traditional 22pt) 1. Enhanced licensee support • Combined C bi d commercial i ld department t t • Revenue generating support • Access to Group buying power 2. Improved licensee quality • Internal code of conduct introduced - Process
Slide 30: Continued progress in beer
Continued progress in beer 1. Group ale up 2% despite a declining market • Innovation assisting growth, fastcaskTM now 20% of cask ale brewed 2. Localness • Independent Free Trade success continues - 7% increase in customers - Cask ale up 4% • Local marketing gsu pport maintained 3. Premium • Leadin
Slide 31: Summary
Summary 1. Clear, consistent and focused strategy 2. Strategy designed to respond to long-term consumer and customer trends 3. Progress on all three strategic objectives 4. Current trading encouraging Watermead, Northwich 31 Improving trends, clear agenda for growth
Slide 32: Attack: It's all about Pedigree
Attack It’s all about Pedigree N
Slide 33: Appendices
Appendices
Slide 34: 85% of pubs are securitised
2,148 pubs + Marston’s Pubs Limited Other Group companies 276 Managed pubs 218 Managed pubs 1 554 Tenanted pubs 1,554 100 Tenanted pubs 1,830 318 + 334 85% of pubs are securitised
Slide 35: Segmental analysis
Segmental analysis H1 H2 Full Year 2011 2010 2011 2010 2011 2010 £m £m % £m £m % £m £m % Turnover Marston’s Inns and Taverns 181.7 175.4 3.6% 210.1 198.4 5.9% 391.8 373.8 4.8% Marston’s Pub Company 85.9 82.2 4.5% 98.0 88.6 10.6% 183.9 170.8 7.7% Marston’s Beer Company 50.3 51.6 (2.5%) 56.2 54.5 3.1%
Slide 36: Average number of shares in 2011
Average number of shares in 2011 568 9m 568.9m Number of shares in issue as at 1 October 2011 568.9m Additional dilutive number of shares 3.1m Actual Forecast 2011 2012 Tax rate c.21% 22 - 24% Capex £111m £100-110m Disposal proceeds c.£15m c.£30m 36
Slide 37: Securitisation as at 1 October 2011
Securitisation as at 1 October 2011 Securitisation results £m Actual • Gross debt(1) outstanding as at 1 Oct 2011 1,039.7 • EBITDA 131.3 • Free cashflow (FCF) 113.4 • Debt service (DSCR) 77.7 Financial covenants Actual Covenant • FCF : DSCR 1 5x 1.5x 1x(2) >1.1x >1 • EBITDA : DSCR 1.7x >1.5x(3) • Ne
Slide 38: Securitisation debt profile
Securitisation debt profile Tranche Type Principal Step-up Final Maturity outstanding Date Date at 1/10/2011 A1 Floating g £162.1m Julyy 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £228.6m October 2012 2031 AB1 Floating £80.0m October 2012
Slide 39: Securitisation profile
Securitisation profile Securitised Debt Service (DS) 100.0 M £86.3m/£84.2m Max £86 3 /£84 2 A3 Stepup 90.0 A1 Stepup DS pre Interest Income 80.0 Total DS 70.0 70 0 A2 B1 A4 AB1 Stepup Stepup 60.0 Interest Principal £m 50.0 £ 40.0 30.0 20.0 10.0 Deposit interest - '11 '12 '13 '14 '15 '16 '17 '18 '19
Slide 40: www.marstons.co.uk
wWww.marstons.co.uk