Slide 1: Preliminary Results 2014
Preliminary Results 2014 Ralph Findlay Chief Executive Officer Andrew Andrea Chief Financial Officer 1
Slide 2: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer
Slide 3: Highlights
Highlights 1. Solid Trading Performance • Core PBT growth of 12% • Returns remain strong at 10.5% • Positive momentum into current financial year 2. Two year transformation of pub estate on track • 27 new pub-restaurants opened • Continued conversion of pubs from tenanted to franchised models • 388
Slide 4: Market dynamics
Market dynamics 1. Macroeconomic outlook looking positive • Employment rate increasing • Lower inflationary pressure leading to real wage growth • Corporate and Government investment growing 2. Consumer becoming increasingly demanding • Innovation and differentiation key to organic growth • Loyalty
Slide 5: Improving long-term returns
Improving long-term returns New-builds Broad appeal Take control Disposals Destination P&P, Revere Target 85% Funds for Better quality franchised + new-build of earnings Community managed investment Leased Maximise Improve Increase Increase profit per ROC opportunity ROC pub 5 10.5% CROCCE in 2014 d
Slide 6: Estate development: Vision and progress to date
Estate development: Vision and progress to date 2013 2014 2016 Operating model Destination and Premium 349 372 c420 Managed Franchised, Taverns 1,316 974 c800 Managed Leased 385 343 c320 Leased 2,050 1,689 c1,540 6 Creating a higher quality estate
Slide 7: Pub segmentation
Pub segmentation FY 2014 Operating No. of Average Average profit per pub profit £m pubs no. of pubs vs LY £k % Destination and Premium 76.0 372 357 213 +3 Taverns 55.7 974 1,082 52 +4 Leased 23.5 343 348 68 +2 Total 155.2 1,689 1,787 87 +10 2012 profit mix Destination and Premium 2013 profit mix 201
Slide 8: 100 new-builds: 2010-2014
100 new-builds: 2010-2014 2014 openings North North 3 11% Midlands 18% Midlands 5 Scotland South East 14% 36% South West South West 21% 5 8 National pub openings programme delivering consistent returns
Slide 9: New-builds: Looking forward
New-builds: Looking forward 2010 – 2014 2015 2016 • 100 pubs opened • At least 25 openings • c25 per annum • National coverage • 3 lodges • Strong pipeline to 2017 • 25 in South • 8 in South • c5 per annum in Scotland • 7 in Scotland • 4 in Scotland • Maintain southern mix • 5,000 jobs created • 1,2
Slide 10: Destination and Premium accommodation
Destination and Premium accommodation Current Future • 700 rooms in 42 pubs - 2.5% of sales • 15 existing sites with lodge opportunity - 18% LFL sales growth in 2014 - c450-500 rooms • occupancy up 5% • revpar up 13% • 22 lodges adjacent to pubs • 3-5 additional opportunities per annum - 5 Marston’s
Slide 11: Destination: Customer satisfaction growing ahead of market
Destination: Customer satisfaction growing ahead of market July to Dec Jan to Jun Jul to Dec Jan to Jun July to Oct 12 13 13 14 14 Source: InMoment. Data from 1 July 2012 to 30 October 2014 Hospitality Marston's Satisfaction improvement since w/c 1 July 2012 Spend per head Starters and Hot drinks de
Slide 12: Like-for-like sales growing ahead of market
Like-for-like (LFL) sales growing ahead of market MIT vs Peach Pubs (outside M25) - 2 Year Trend 3% 2% 1% 0% Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 -1% Dest & Prem vs Peach Food led Taverns vs Peach Wet led -2% 12 Marston’s outperforming the market
Slide 13: Differentiation through innovation
Differentiation through innovation Add Garden 13 Inside and outside
Slide 14: Differentiation through premium
Differentiation through premium 14 3 conversions to Revere in 2015, new sites for 2016
Slide 15: Small Business, Enterprise and Employment Bill
Small Business, Enterprise and Employment Bill 1. Franchise-style pubs are different • The franchisee chose this type of agreement for good reasons • Franchisee income based on percentage of turnover/pub profit – no rental element to agreement – no beer purchased • No rent reviews and no market rent
Slide 16: Franchise: Enhanced returns from Taverns
Franchise: Enhanced returns from Taverns Marston’s Franchisee Enhanced returns Maximise return Systems Local knowledge Insight Flexibility Increased sales Buying power Motivation and profit Brand development Consumer engagement Minimise risk Focus on sales Affordability Greater control Simplicity En
Slide 17: Estate development: Disposal of non-core pubs
Estate development: Disposal of non-core pubs FY 2014 and FY 2015 target £210–220m proceeds at c11-12x EBITDA multiple 2014 2015 388 pubs disposed Around 200 single sites £144m proceeds Target c£70m proceeds Double-digit multiple Higher multiple 17 Improving returns and estate quality through dispos
Slide 18: Premiumisation driving beer market – and Marston's
Premiumisation driving beer market – and Marston’s +10%pts 10 Premium ale 9 2014 vs 2010 71% +8% 8 7 +6% 6 5 4 3 2 +1%pt 2010 2014 1 7% 0 Premium ale share of total Marston's vs. PCA* Marston's vs. PBA** Marston's premium ale beer market mix of total Marston's ale *PCA – Premium Cask Ale **PBA – Pre
Slide 19: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer
Slide 20: Financial summary (52 week basis)
Financial summary (52 week basis) +5% +2% +2% +1% Reflects disposals (4)% Revenue Operating profit PBT EPS Dividend Underlying profit on a 52 week basis 20 Revenue and profit growth despite disposals
Slide 21: Core business profit performance
Core business profit performance £m 86 (3) +1 (2) +1 (9) +1 83 +8 PBT +12% 74 2013 53rd week Disposals 2013 core D&P Taverns Brewing Interest Group 2014 reported (net of profit and reported interest) Leased 21 Double-digit core business growth
Slide 22: Like for like sales
Like for like sales 6 Destination and Premium 5 4% 4 3% 3% 3 2% 2% 2% 2% 2% 2 1 0% 0 6 2013 2014 7 weeks to 22 November Taverns 5 4 3 2% 2% 2 1 0% 0 -1 Food Drink Total Food mix YOY -2 Destination 57% +1%pt -3 Premium 27% +2%pts Taverns 24% - 22 Consistent annual LFL’s. Food mix continues to improve
Slide 23: 2015 cost outlook
2015 cost outlook Drink Food Labour Utilities Drink Food Menu Cost Energy cost cost & Carbon Levy prices prices management savings usage £1.0m +3% £2.0m £1.0m +2-3% £1.0m £1.5m <1% £2.0m £2.5m +1% £1.5m £2.5m 23 Modest inflation, clear mitigation plans
Slide 24: Leased
Leased Quality estate • LFL profit growth +3% delivering • Rent up 2% growth • c50% wet/rental mix • Licensee stability >90% Income stability • Bad debt <0.1% of turnover • Moderate capital investment reintroduced Current trading: profit up in 7 weeks to 22 November 24 Sustainable income through qua
Slide 25: Brewing
Brewing +5% +4% +3% Premium Revenue Profit volume 25 Revenue and profit growth demonstrates quality of earnings
Slide 26: Cashflow summary
Cashflow summary 2014 Comments £m Disposals impact on EBITDA and £20m Operating cashflow 128 working capital timing one-offs. Net interest (79) Pre-investment FCF 49 Organic capex (64) Disposals 144 Includes £90m portfolio disposal. Dividend (37) FCF pre new-build capex 90 New-build capex (78) 11 pu
Slide 27: Financing structure
Financing structure Bank and Total Property Total Securitised cash (excl. property) Leasing £158m Visible, smooth £257.5m bank property amortising debt facility to leases 35-40 to 2035* November 2018 year term Debt £m 892 148 1,040 158 1,198 Debt: EBITDA 7.4x 2.1x 5.4x 6.2x Interest risk hedge 100%
Slide 28: Pensions and property
Pensions and property 1. Pension • Current accounting surplus of £8m • Closed scheme to future accrual from 30 September 2014 • Next triennial valuation September 2014 – update at 2015 Interims • Pension costs £1m higher in 2015 2. Property • Next external valuation in H1 2015, current valuation £2b
Slide 29: Summary
Summary 1. Strong underlying growth 2. Consistent, focused strategy remains on track • At least 25 new-builds open per annum • Transformed pub estate • Premium beer business 3. 5% growth in dividend • Reflects confidence in strategy 4. Outlook • Encouraging start to year • Innovation and service key
Slide 30: Bellcote
BELLCOTE t« Pub Restaurant ROTISSERIE Families Welcome ¢
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Slide 32: Appendices
re % a 38) | MARSTON’S Appendices
Slide 33: Segmental Profit
Segmental Profit 2014 (52 wks) 2013 (53wks) YOY £m £m % Turnover Destination & Premium 376.9 349.2 7.9% Taverns (inc AHFS) 225.1 250.8 (10.2%) Leased 53.1 55.6 (4.5%) Beer Division 132.5 127.3 4.1% Total 787.6 782.9 0.6% EBITDA Destination & Premium 91.4 84.9 7.7% Taverns (inc AHFS) 63.9 79.0 (19.1%
Slide 34: Pub numbers
Pub numbers Destination and Taverns Leased Total Premium 2013 Opening 328 1,429 393 2,150 New-build additions 22 22 Disposals (1) (113) (8) (122) 2014 Opening 349 1,316 385 2,050 New-build additions 27 27 Disposals (4) (342) (42) (388) 2014 Closing 372 974 343 1,689 2013 average numbers 339 1,379 39
Slide 35: Historical LFL analysis
Historical LFL analysis Destination and Premium Taverns Total Food Wet Total 26 wks 30/03/13 0.0% 2.0% (2.0%) 0.0% 6 wks to 11/05/13 6.0% 9.0% 3.0% 0.0% 32 wks to 11/05/13 1.0% 3.3% (1.5%) 0.0% 10 wks to 20/07/13 5.0% 4.6% 5.9% 0.0% 42 wks to 20/07/13 2.1% 3.7% 0.5% 0.0% 11 wks 05/10/13 2.2% 4.0% (0
Slide 36: Pub segmentation
Pub segmentation Destination & Premium Taverns Leased Food sales mix c55% Food sales mix c25% Destination – 2 value brands Community pubs Independent, individual • Milestone, Two for One • Franchise strategy • Distinctive pubs • Flexible formats • Strong locations Premium • Local engagement • Both f
Slide 37: Capex and tax guidance
Capex and tax guidance Forecast 2015 Comments New-build capex £80m c25 sites 2015 Pub growth £25m Pub maintenance £25m 2015 – new EPOS system Brewing and Group £15m Total c£145m Disposals c£70m Net capex c£75m Tax rate c20-22% Average number of shares in 2014 570.7m Number of shares in issue at 4 Oc
Slide 38: Prior year impact of IAS 19 changes
Prior year impact of IAS 19 changes 30/03/2013 05/10/2013 Impact on the Group income statement £m £m Increase in current service cost in respect of retirement benefits - (0.1) Increase in net finance cost in respect of retirement benefits (1.1) (2.2) Decrease in taxation charge 0.2 0.6 (0.9) (1.7) 3
Slide 39: Securitised debt profile
Securitised debt profile Principal Final maturity Tranche Type outstanding at Step-up date date 4 October 2014 A1 Floating £115.1m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £207.5m October 2012 2031 B Fixed/Floating £155.0m July 201
Slide 40: Securitisation profile
Securitisation profile Securitisation Debt Service 90.0 Max £80.7m Debt Service 80.0 70.0 A3 step-up A2, B step-up 60.0 Principal 50.0 Interest £m 40.0 30.0 20.0 10.0 0.0 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year FY2015 FY2016 FY2017 FY2018 FY
Slide 41: Cash return on cash capital employed
Cash return on cash capital employed FY2014 FY2013 FY2012 FY2011 FY2010 FIXED ASSETS: Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Goodwill 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 Other intangible assets 25.1 5.3 30.4 24
Slide 42: www.marstons.co.uk
42 www.marstons.co.uk