Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2012)
36 slides from Mitchells & Butlers's debt investor presentation, Nov 28, 2012
Slide 1: Bond Investor Update
Bond Investor Update 28 November 2012
Slide 2: Tim Jones, Finance Director
PEOPLE LWVE TOEAT AND ORINK WITH us Tim Jones Finance Director
Slide 3: Income statement (53 weeks)
Income statement (53 weeks) FY 2012 FY 2011 53 wks £m 52 wks £m Retained Estate: Revenue 1,889 1,762 Operating profit* 304 288 Disposed operations - 6 Total operating profit* 304 294 Interest* (138) (138) Profit before tax* 166 156 Earnings per share* 30.5p 28.0p * Stated before exceptional items an
Slide 4: Income statement (52 weeks)
Income statement (52 weeks) FY 2012 FY 2011 52 wks £m 52 wks £m Retained Estate: Revenue 1,855 1,762 5.3% Operating profit* 297 288 3.1% Disposed operations - 6 Total operating profit* 297 294 1.0% Interest* (135) (138) Profit before tax* 162 156 3.8% Earnings per share* 29.8p 28.0p 6.4% * Stated be
Slide 5: Like-for-like sales growth
Like-for-like sales growth Week 1-33 Week 34-52 Week 1-52 Week 1-8 FY 2012 FY 2012 FY 2012 FY 2013 Food 3.2% 2.5% 2.9% 1.5% Drink 0.8% 2.4% 1.4% (1.9)% Machines/Other 0.1% 2.2% 0.8% 3.1% Total 2.0% 2.4% 2.1% (0.1)% • Food sales continue to drive LFL growth • Early 2013 trading (weeks 1-8) comprise o
Slide 6: Drivers of LFL food and drink sales
Drivers of LFL food and drink sales Food Drink 1.2% (4.0%) Mix & 2.2% (1.4%) 4.4% Range Mix & Volume Volume Range LFL 2.2% Price LFL + 2.9% Price + 1.4% Total LFL sales growth of 2.1% Note: 52 week basis 6
Slide 7: 52 week EBIT movement
52 week EBIT movement +£2m -£4m +£15m -£17m +£41m £297m FY 12 £288m FY 11 -£16m -£18m +£6m FY 11 Returns Opening NMW, duty, Food, energy, Service & Restruc- Other trading capex costs CRC, rates rent amenity turing investment savings FY 12 capex Note: Retained Estate 7
Slide 8: 52 week net operating margin
52 week net operating margin 16.3% +0.1% -0.9% FY 11 +2.0% 16.0% -0.9% FY 12 -1.0% +0.4% FY11&12 NMW, duty, Food, energy, Service & Restruc- Other trading capex CRC, rates rent amenity turing investment savings • H1 impacted by greater inflationary pressures • Recovery in H2 margins Note: Retained E
Slide 9: Exceptional items
Exceptional items FY 2012 FY 2011 £m £m Profit / loss on asset disposals - (4) Pensions curtailment charge - (13) Bid defence (6) - Restructuring and reorganisation IT infrastructure (7) - Support operations (7) - Operating exceptionals (20) (17) Property valuation & impairment (35) 8 Other property
Slide 10: Group cash flow
Group cash flow FY 2012 FY 2011 £m £m EBITDA 415 404 Working capital / non cash items (28) (28) Deficit pension contributions (40) (40) Cash flow from operations 347 336 Maintenance & infrastructure capex (92) (90) Net interest paid (129) (134) Tax (25) (20) Share capital 0 2 Free Cash Flow 101 94 E
Slide 11: Group net debt
Group net debt Sep 12 Sep 11 £m £m Securitisation debt (2,177) (2,226) Cash & other 135 137 Securitised net debt (2,042) (2,089) Cash 201 219 Group net debt (1,841) (1,870) Net Debt : EBITDA* 4.5x 4.7x Note: Retained Estate, 52 weeks basis 11
Slide 12: Brand roll-out
Brand roll-out 70 Number of sites 60 50 40 30 20 10 0 H1 H2 H1 H2 H1 H2 H1 H2 FY 09 FY 10 FY 11 FY 12 Conversions New sites • Leisure and Retail Park sites opened in FY12: 32 (FY11: 23; FY10: nil) 12
Slide 13: Brand roll-out returns
Brand roll-out returns Overall EBITDA return of 17% on FY11 & FY12 investments Number opened Achieved in FY 12 EBITDA ROI%* Freehold acquisitions 9 13% Package lease acquisitions 9 14% Single site lease acquisitions 29 25% Conversions 10 16% • Forward focus on single site leases (particularly Leisur
Slide 14: Property
Property • Freehold and long leasehold properties valued annually • Short leaseholds assessed for impairment • No material movement in overall multiples (7.8 times EBITDA) • Moderator for high value pubs retained (value > £3.5m) • 20% of sites inspected p.a. £m (pre tax) FY 12 FY 11 Income statement
Slide 15: Closing thoughts
Closing thoughts • Resilient financial performance • LFL sales +2.1% • EPS pre-exceptionals +6.4% • EBIT margin recovery in H2 after investment in service and amenity • Brand roll-out focused on returns • Pension triennial review March 2013 • Dividends remain under review 15
Slide 16: Andrew Vaughan, Group Treasurer
Andrew Vaughan Group Treasurer 16
Slide 17: Highlights
Highlights • Gross debt outstanding at year end £2,184m • EBITDA £367m • Free cashflow £297m • EBITDA DSCR 2.0x • FCF DSCR 1.6x Note: FY2012 is a 53 week year 17
Slide 18: Free Cash Flow
Free Cash Flow £m EBITDA 367 Tax (28) Required maintenance capital (42) Free cashflow 297 Interest (133) 1.6x Principal repayment (52) Debt Service (185) 18
Slide 19: Securitisation Covenants
Securitisation Covenants FY 12 H1 H2 Year Free Cashflow: Debt Service 1.6x 1.7x 1.6x EBITDA: Debt Service 2.0x 2.1x 2.0x Net Worth £1. 51bn Well within required covenants Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Restricted Payment Test. FCF/Debt Service 1.3x, EBITDA/Debt S
Slide 20: Maintenance & Capital enhancement
Maintenance & Capital enhancement Securitisation Estate £m Repairs* 45 129 (vs. required amount of £87m) Maintenance 84 Enhancement 5 134 Substantial investment to maintain and enhance estate quality *Charged through Profit & Loss account 20
Slide 21: Cashflow - uses
Cashflow - uses £m FCF 297 Debt Service (185) Maintenance Capital (over required amount) (42) Net Capital Enhancement Expenditure* (3) Excess Cash 67 Restricted Payments made (84) Restricted Payment Maximum decrease (17) Restricted Payment Maximum at start of year 41 Restricted Payment Maximum at en
Slide 22: Other Issues
Other Issues • Standard & Poors Ratings A Notes downgraded to A+ from AA- Driven by downgrades of counterparty banks • Margin Step-Up Next relevant step-up date is September 2013 in respect of A4, AB, C2 and D1 Notes 22
Slide 23: MAB PLC vs. MAB Retail Limited
MAB PLC vs. MAB Retail Limited PLC Securitisation £m Estate £m Number of pubs* 1,638 1,441 Turnover 1,889 1,631 EBITDA 415 367 EBIT 304 273 Difference driven by 197 pubs and head office infrastructure outside the Securitisation *As at 29 September 2012 23
Slide 24: Market
Market • Eating out market still growing: • Guest still eating out but reduced frequency • Special occasion focus • Competition from supermarkets • Continued pressure on disposable incomes: • Particularly lower income deciles • Faultless execution a given: • Brands with right blend of amenity, servi
Slide 25: Results – key messages
Results – key messages • Resilient sales performance driven by: • Total 8.5% food sales growth • Brands in the middle to upper end of spend per head spectrum • Robust operating performance in a challenging environment: • Continued inflationary and regulatory pressures • Essential investment in servi
Slide 26: Investment in service and amenity
Investment in service and amenity £m Lead indicator Employment (5) • Guest satisfaction + 5ppts • Team engagement + 5ppts Repairs (9) • Improved Food Hygiene Rating scores (80% ranked 4+) Pub supplies (4) • Food quality scores + 5ppts • Drink quality scores + 4ppts Reorganisation and IT 6 • £10m ann
Slide 27: 12 months ago
12 months ago • No CEO • No independent non-executives • Small Board team • Business in a holding pattern • Structural, operational and cultural issues 27
Slide 28: A good business, not a great business
A good business, not a great business • Great brands, assets and people, but: • Guest was not the main focus • ‘Command and control’ culture • Lacking clear accountability and responsibility • Bureaucratic, managers drowning in administration • Acquisition programme focused on site numbers not quali
Slide 29: Progress report
Progress report • Culture change underway • Clear responsibility and accountability • Flattened the organisation - £6m saved in FY 2012, £10m annualised • ‘Head Office’ now ‘Retail Support Centre’ and new training academy opened • Investment in service and amenity • Managers empowered and engaged •
Slide 30: Impact on: our people
Impact on: our people Overall engagement 2011 2012 General managers 76.4% 82.2% Retail teams 74.4% 79.5% • Improved engagement in retail teams and managers • Reduced staff turnover • Improved staff stability • Ways of working empowers managers and teams 30
Slide 31: Impact on: our guests
Impact on: our guests 65% • Increased front line 60% labour and training • Investment in amenity 55% • Improved: 50% • Guest satisfaction • Guest recommendation 45% FY 2011 FY 2012 40% Guest satisfaction Net promoter score Note: guest satisfaction is % of guests that “strongly agree” that they were
Slide 32: Impact on: our platform for growth
Impact on: our platform for growth • Launched cloud-based data centre and improved networking • Free wi-fi across the UK business • Improved menu implementation speed • 33m website visitors (up 33%) • Email sign-up increased 38%, mobile and Facebook up 50% • Achieved target of 1.5m online bookings t
Slide 33: Positioning the business for long term growth
Positioning the business for long term growth • Resilient operating performance • Encouraging progress across the lead indicators • Ways of working trials now in c 300 businesses • Award-winning brand development • Innovation in digital marketing and IT • Appointment of independent Non-Executive Dir
Slide 34: Outlook for 2013
Outlook for 2013 • Economic environment expected to remain challenging • Like-for-like sales broadly flat in first 8 weeks • Further inflationary & regulatory costs • No special events in 2013 • A better summer?! 34
Slide 35: Priorities for the year ahead
Priorities for the year ahead • Expand ways of working trials • Brand development • Operational excellence: safe, efficient • Proactive response to cost inflation (especially food) • Maintain focus on returns on expansionary capex • Successful execution of established strategy 35
Slide 36: Q&A
Q&A Bond Investor Update – 28 November 2012 36
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