Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — H1 2016 Earnings Presentation
29 slides from Mitchells & Butlers's earnings presentation, May 19, 2016
Slide 1: Half Year Results 2016
Half Year Results 2016 19 May 2016 –1–
Slide 2: Financial Review H1 2016
Financial Review H1 2016 Tim Jones Finance Director
Slide 3: Income statement
Income statement (Pre exceptional items) H1 2016 H1 2015 £m £m Revenue 1,096 1,113 (1.5%) Operating costs (940) (960) Operating profit 156 153 +2.0% Interest (68) (70) Pensions finance charge (6) (8) Profit before tax 82 75 +9.3% Operating margin 14.2% 13.7% +0.5 ppts Earnings per share 15.7p 14.4p
Slide 4: Like-for-like sales
Like-for-like sales Week Week Week Week Week 1 – 17 18 – 28 1 – 28 29 – 33 1 – 33 Food (1.5%) (2.6%) (2.0%) (1.1%) (1.8%) Drink (0.6%) (2.8%) (1.5%) 0.4% (1.1%) Total (1.0%) (2.6%) (1.6%) (0.4%) (1.4%) ● Overall market challenging ● Strong sales performance in invested sites offset by declines in un
Slide 5: Price / spend and volume - LFL
Price / spend and volume - LFL Food Drink (1.5%) (2.0%) (5.1%) (4.8%) + +3.6% +3.3% Volume Price / spend / mix ● Volume declines primarily in uninvested mid market brands ● Spend per head increase driven by mix and focus on profitable sales –5–
Slide 6: EBIT movement
EBIT movement 160 +£4m (£4m) 158 +£3m (£1m) +£6m 156 (£5m) 154 152 150 148 H1 2015 Orchid Direct cost FY 2015 H1 2016 Like-for-like Cost H1 2016 £153m synergies inflation openings openings and trading management / £156m remodels non-recurring costs ● Margin movement: - Improved by 0.5ppts to 14.2% -
Slide 7: Group cash flow
Group cash flow H1 2016 H1 2015 FY 2015 £m £m £m EBITDA 217 213 439 Working capital / non cash items - 26 48 Pension deficit contributions (26) (23) (86) Cash flow from operations 191 216 401 Maintenance & infrastructure capex (72) (70) (116) Expansionary capex (16) (24) (46) Net interest paid (62)
Slide 8: Capital expenditure and returns
Capital expenditure and returns ● Acceleration of remodel / front of house spend H1 2016 H1 2015 £m # sites £m # sites ● Remodel returns c25% Maintenance and 34 42 infrastructure (excl remodels) ● Overall acquisition and Remodels 38 142 28 97 conversion returns stable at 18% Conversions 12 22 10 23
Slide 9: Wage inflation
Wage inflation ● NMW - Currently £6.70 - Increase to £6.95 from October 2016 ● NLW - Introduced at £7.20 from April 2016 - Expected to escalate at 6% per annum to 2020 ● NLW: £7m incremental impact in H2 FY16 ● Mitigating activities ongoing as part of business improvement ● Risk around timing of fut
Slide 10: Summary
Summary ● Challenging sales environment emphasising the importance of relevance, execution and amenity ● Margins ahead in the first half, although H2 will be impacted by NLW ● EPS up 9.0% to 15.7p ● Interim dividend of 2.5p approved ● Pensions triennial as at March 2016, negotiations underway – 10 –
Slide 11: Business Review H1 2016
Business Review H1 2016 Phil Urban Chief Executive
Slide 12: Agenda
Agenda ● Overview ● Six months on ● Review of strategic options ● What are we working on? ● Vision and outlook – 12 –
Slide 13: Six months on
Six months on The market Consumers National living wage - New supply - Technology-focused - New cost headwind - More choice – 13 –
Slide 14: Strategic options considered
Strategic options considered ● Maintain the status quo ● ‘Run for cash’ ● Significant fast-casual acquisition ● Major disposal ● OpCo / PropCo ● Best option: Accelerated organic growth Aim: To deliver long-term sustainable shareholder value – 14 –
Slide 15: Accelerated organic growth
Accelerated organic growth - Increase investment cycle ● Maximise return from existing assets ● Protect value in freehold estate - Conversion of sites to premium growth concepts ● Improved amenity: - Response to competitive threat - Innovation: brands, products, concepts - Leverage brand scale ● Rep
Slide 16: My priorities
My priorities Build a more Instil a more Increase the pace of balanced business commercial culture execution and innovation - Brand propositions - Profitable sales - Build on technology investment - Conversion to successful formats - Core operational drivers - Digital marketing - Upgraded amenity in
Slide 17: Estate plan
Estate plan ● Outstanding estate: focus on maximising value H1 15 # sites H2 15 # sites H1 16 # sites ● Full site review completed REMODELS 97 19 142 ● Rebalance estate: ACQUISITIONS 9 5 4 - Increase exposure to premium segments CONVERSIONS 23 28 22 - Accelerate pace of remodel investment - Limited
Slide 18: Estate plan: Harvester and Orchid conversions
Estate plan # sites ● High-performing brand with rollout potential: End FY15 36 Harvester conversions +3 - Consistently strong LFL sales and volumes Orchid conversions +3 - Clear brand proposition Acquisition +1 End H1 16 43 - Premium offering Orchid conversions +2 - Scope for national presence Othe
Slide 19: Estate plan: Pizza and Carvery format
Estate plan # sites ● Rollout of Pizza and Carvery format 14 x Pizza End H1 2016 & Carvery ● Premiumisation of the value estate Crown Carveries & c20 ● Strong ROIs seen in initial conversions Orchid conversions Planned end FY16 c35 ● Pipeline of future conversions from existing estate, principally C
Slide 20: Estate plan: Miller & Carter
Estate plan ● Strong brand, in a highly competitive segment End H1 2016: 233 SITES ● 233 sites, with varying levels of amenity Miller & Other brand Selective Carter ● Intention to reduce estate to core conversions conversions disposals ● Core brand to be invested in next 18 months: - Achieve consist
Slide 21: Estate plan: capex
Estate plan: capex c£200m c£200m ● Accelerated capex under way 200 c£180m £162m £162m - Increased remodel and conversion capex 150 - Reduction in back-of-house capex 100 ● In-year profit impact from closure and pre-opening costs 50 - FY 2016 -£2m 0 FY14 FY15 FY16 FY17 FY18 - FY 2017 -£2m MAINTENANCE
Slide 22: Estate plan: enhanced amenity
Estate plan: enhanced amenity Proportion of estate by most recent investment ● 300 – 350 remodels per annum ● Increased investment cycle - Currently more than 10 years - Move towards 5 – 6 years – 22 –
Slide 23: Organisational restructure
Organisational restructure ● Four operating divisions RESTAURANTS - Similar brands aligned - Faster decision-making PREMIUM ● Executive team strengthened CITY - Greater operational presence - Commercial Director appointed PUBS – 23 –
Slide 24: Sales culture
Sales culture 15,750 hrs Planned sales training investment FY16 H2 New sales training London sales team live. New weekly sales incentive Released restaurant for all operational Future expansion to scheme introduced for inventory to online management other cities second half teams booking Building a
Slide 25: Guest care, pricing and procurement
Guest care, pricing and procurement All complaints to be resolved All sites managing Co-ordinated pricing trials Using technology to drive efficiency within 24 hours TripAdvisor feedback Simplify price bands Optimise delivery frequency Improved price laddering Leverage scale – 25 –
Slide 26: Technology support
Digital and technology Guest care Guest acquisition Web & Apps Guest experience Technology support Marketing communications (SMS, Email, Push) CRM Next Loyalty generation mobile Guest Social media In outlet tech & EPOS – 26 –
Slide 27: Brand and Product Development
Brand and Product Development Ongoing brand innovation New concept innovation Recognising the need for innovation – 27 –
Slide 28: Summary
Summary Build a more Instil a Increase the pace of balanced business commercial culture execution and innovation Maximise returns from Leverage technology Profitable sales growth the best estate and digital Long-term sustainable shareholder value – 28 –
Slide 29: Questions
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