Slide 1: Interim Results 2014
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Slide 2: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer
Slide 3: Highlights
Highlights 1. Good trading performance, in line with our expectations • Growth in core profits in each trading segment • Earnings per share up 10.8% 2. Strategic initiatives contributing to performance in H1 • 11 new pub-restaurants performing well; at least 27 forecast this year • Franchise-style a
Slide 4: Market dynamics
Market dynamics 1. Economic recovery benefiting regions • Wage growth of 1.7%, above inflation of 1.6% in March • Discretionary spend supported by declining rate of inflation • Unemployment rate lower than in 2013 2. Positives for Marston’s • Pubs increasing share of growing eating-out market (sourc
Slide 5: Increasing ROC: 9.6% in 2010, 10.8% in 2013
Increasing ROC: 9.6% in 2010, 10.8% in 2013 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 Transf
Slide 6: Estate development: Vision
Estate development: Vision Operating 2013 2014 2016 2014 profit model H1 per pub Destination and Managed 349 356 c.430 £270k Premium Franchised, Taverns 1,316 1,078 c.800 £55k Managed Leased Leased 385 341 c.320 £80k 2,050 1,775 c.1,550 6 Creating a higher quality estate
Slide 7: 100 new-builds: 2009-2014
100 new-builds: 2009-2014 2014 openings North North 3 11% Midlands 18% Midlands 5 Scotland South East 14% 36% South West South West 21% 5 7 National pub openings programme delivering consistent returns
Slide 8: New-builds: Looking forward
New-builds: Looking forward National programme • 30% southern sites • 25 Scottish pubs in next 5 years Accelerated growth • Increased rate of growth to 25-30 per annum • Strong pipeline of sites with visibility to 2017 Incremental opportunity • Lodges – 4 currently operated, 15 pubs with lodge capab
Slide 9: Destination: Customer satisfaction growing ahead of market
Destination: Customer satisfaction growing ahead of market Index Marston's July to Sept Oct to Dec Jan to Mar Apr to Jun July to Sept Oct to Dec 12 12 13 13 13 13 Source: Empathica. Data from 1 July 2012 to 12 January 2014 Satisfaction improvement since w/c 1 July 2012 Spend per head Starters and Ho
Slide 10: Like-for-like (LFL) sales growing ahead of market
Like-for-like (LFL) sales growing ahead of market Marston’s vs. Peach Tracker – LFL sales 0% Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Peach outside M25 Destination and Premium Taverns - Managed and Franchised 10 Regional trends improving, Marston’s outperforming the regions
Slide 11: Revere – premium, independent
Revere – premium, independent Sales +86% Meals served +7% Food spend per head +76% Drinks served +30% Price per drink +49% Florentine, Sheffield REVPAR +32% (converted Nov 2013) Return on investment 30% 11 Improving the strength of our premium offer
Slide 12: 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 13: The evolution of franchise
The evolution of franchise 2009 2011 2013 2014 First Retail 340 pubs Franchise 550 pubs Agreement Pub Franchise Development First multi-site developed developed Manager operators appointed BFA accreditation 13 Retail Agreements, The Pub Franchise – models for the future
Slide 14: Two models for community pubs
Two models for community pubs Retail Agreement Pub Franchise Lowest risk Greatest opportunity Network performance Weekly turnover range £5-10k £10-20k Operating margin 20% 20% Food sales mix 10-30% 30-50% Franchisee Sales 20% 20% Profit - 20% Franchise fee - 1.5% marketing levy Capital requirement £
Slide 15: Genuine engagement with franchisees
Genuine engagement with franchisees • Ideas Franchise • Research Development Group Consider • Discussion • Assessment Franchise • Feedback Advisory Consult • Recommendations Council • Development Support • Testing Teams • Delivery Create 15 Marston’s and franchisees have the same objective - growth
Slide 16: Franchise in action
Franchise in action Revenue +27% Meals served +25% Drinks served +26% Operating profit +50% Margin +3% ROI The Fairway in Sheffield 40% Converted to franchise in 2013 with c£100k investment 16 Franchise: an effective solution for underperforming pubs – making pubs great
Slide 17: Estate development: Disposal of non-core pubs
Estate development: Disposal of non-core pubs FY 2014 and FY 2015 target £210-230m proceeds at c.11-12x multiple Portfolio disposal Around 400 single sites 202 pubs £60m-70m per annum £90m at 7.6x multiple Double-digit multiple Exceeds cash value of pubs 17 Improving returns and estate quality throu
Slide 18: Premiumisation driving beer market – and Marston's
Premiumisation driving beer market – and Marston’s 75 +71% Premium ale 2014 vs 2010 +61% +54% 50 +44% 25 +20% +8% +1.1% 5.9% 2010 2014 0 Share of beer market *PCA vs Beer on-trade **PBA vs off-trade Marston's premium ale mix of total beer Market Marston's *PCA – Premium Cask Ale **PBA – Premium Bott
Slide 19: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer
Slide 20: Financial summary
Financial summary +10.8% +9.4% +4.5% +4.3% Reflects disposals £374m £29m 4.1p 2.4p £66m (1.4)% Revenue Operating PBT EPS Dividend Profit 20 Revenue and profit growth despite disposals
Slide 21: Core estate pub performance
Core estate pub performance £m +10% +2 73 (4) +4 EBIT (3) 67 66 2013 H1 Destination Taverns and Core estate Portfolio Single site 2014 H1 and Premium Leased profit disposal disposals 21 Strong underlying performance
Slide 22: Pub segmentation
Pub segmentation FY 2014 Operating No. of Average profit £m pubs no. of pubs Destination and Premium 28.6 356 351 Taverns 25.1 1,078 1,171 Leased 12.5 341 361 Total 66.2 1,775 1,883 19% 20% 36% 43% 44% 38% H1 2013 profit mix H1 2014 profit mix Destination and Premium Taverns Leased Destination and P
Slide 23: LFL sales
LFL sales 6% 6% 6 Destination and 5% 5% 5 Premium 4% 4% 4% 4% 4 3 2% 2% 2 1 0 0% -1 -2 (2)% % H1 2013 H2 2013 H1 2014 5 weeks to 10 May 6 5 Taverns: Managed and 4% 4% 4% 4 Franchised 3% 3% 3% 3% 3 2% 2 1% 1% 1 0 -1 -2 -3 (2)% (3)% Food Drink Total 23 Strong H1 across all pub segments, positive H2 mo
Slide 24: Leased
Leased Quality estate • H1 LFL profit growth +3.0% delivering • £80k average EBITDA growth • 50% wet/rental mix • Licensee stability > 90% Income stability • Bad debt < 0.1% of turnover • Moderate capital investment reintroduced Current trading: profit estimated to be up 5% in 5 weeks to 10 May 24 S
Slide 25: Brewing
Brewing +4.0% +3.5% +2.0% +0.1% Revenue Margin Profit Premium volume Current trading: Group ale volumes up 6% in 5 weeks to 10 May 25 Revenue, margin and profit growth demonstrate quality of earnings
Slide 26: Cashflow summary
Cashflow summary £m H1 2014 H1 2013 Comments EBITDA 84 86 Reflects disposals Working capital timing (movement in Operating cashflow 46 69 half year). Expect full-year reversal. Net interest (44) (44) Pre-investment FCF 2 25 Organic capex (32) (39) Disposals 116 18 Includes £90m portfolio disposal Di
Slide 27: Financing structure
Financing structure Securitised Non-securitised 2014 2013 £257.5m bank facility to Visible, smooth November 2018 amortising debt £155m property leases to 2035* 35-40 year term Debt £m 904 286 1,190 1,194 Debt:EBITDA 7.0x 3.9x 5.9x 6.1x Target 6.0x 3.5x 5.0x Debt:EBITDA (exc property 5.1x 5.6x leases
Slide 28: Innovative property leases
Innovative property leases Balance at Term Initial P&L 5 April 2014 yield interest 2013 £109m 35-40 yrs 5.3% 6.6% 2014 £46m 40 yrs 4.6% 6.4% Total £155m 5.1% 6.5% • “Sale and leaseback” where freehold reverts at nil cost - Retains freehold tenure • Innovative financing unique to sector to fund build
Slide 29: Pensions and property
Pensions and property 1. Pension • Current accounting deficit £0.2m, cash deficit £27m • Intention to close to future accrual from 30 September 2014 – Currently 291 active members • Next triennial valuation September 2014 2. Property • Increased frequency of valuation - every 3 years – To confirm va
Slide 30: Summary
Summary 1. Strong underlying profit growth 2. Strategic plans well advanced 3. Progressive dividend increase 4. Outlook • Encouraged by early positive trading momentum in second-half • Signs of improving consumer confidence 30 Clear, focused strategy to deliver long-term shareholder value
Slide 31: Appendices
| MA S Appendices
Slide 32: Pub segmentation
Pub segmentation Destination and Taverns Leased Premium Food sales mix 54% Food sales mix 24% Destination – two value brands Community pubs Independent, individual Milestone, Two for One Franchise strategy Distinctive pubs Premium Flexible formats Strong locations Pitcher & Piano, Revere Local engag
Slide 33: Pub numbers
Pub numbers Destination and Taverns Leased Total Premium At 29 September 2012 328 1,429 393 2,150 New-build additions 22 - - 22 Disposals (1) (113) (8) (122) At 5 October 2013 349 1,316 385 2,050 New-build additions 11 - - 11 Disposals (4) (238) (44) (286) At 5 April 2014 356 1,078 341 1,775 2013 av
Slide 34: H1 segmental profit
H1 segmental profit 2014 2013 £m £m % Revenue Destination & Premium 173.9 154.7 12.4% Taverns (inc AHFS) 113.2 117.2 (3.4%) Leased 25.2 26.3 (4.2%) Beer Division 62.0 59.9 3.5% Group Services 0.0 0.0 Total 374.3 358.1 4.5% EBITDA Destination & Premium 36.3 31.6 14.9% Taverns (inc AHFS) 29.5 35.0 (15
Slide 35: 2015 cost outlook
2015 cost outlook Drink Food Labour Utilities Drink Food Cost Menu Energy cost cost & Carbon Levy prices prices savings management usage +3% £1.0m £2.0m £1.0m +2-3% £1.0m £1.5m <1% £2.0m £2.5m +1% £1.5m £2.5m 35 Proven plans to offset inflation
Slide 36: Capex and tax guidance
Capex and tax guidance Forecast 2014 Forecast 2015 Comments New-build capex £80m £90m 27 sites 2014, 30 sites 2015 Pub growth £25m £25m Pub maintenance £20m £20m 2015 – new EPOS system Brewing and Group £15m £15m Total c.£140m c.£150m Disposals c.£150-160m c.£60-70m Net capex £(20)-(10)m £80-90m Tax
Slide 37: 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 38: Securitised debt profile
Securitised debt profile Principal Final maturity Tranche Type outstanding at 5 Step-up date date April 2014 A1 Floating £123.4m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £211.5m October 2012 2031 B Fixed/Floating £155.0m July 2019
Slide 39: Securitisation profile
Securitisation profile Securitisation Debt Service 90 Max £80.6m Debt Service 80 70 A2, B step-up A3 step-up 60 Principal 50 Interest £m 40 30 20 10 0 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY20
Slide 40: Cash return on cash capital employed
Cash return on cash capital employed £m FY2013 FY2012 FY2011 FY2010 FIXED ASSETS: 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 Other intangible assets 24.1 6.1 30.2 23.5 5.2 28.7 24.6 3.5 28.1 24.6 2.9 27
Slide 41: Notes
Notes 41
Slide 42: 42
42
Slide 43: Chalkhill Blue, Andover
ere s Chalkhill Blue, Andover
Slide 44: www.marstons.co.uk
Pitcher & Piano, Nottingham www.marstons.co.uk