Slide 1: Interim Results 2007
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Slide 2: David Thompson, Chairman
David Thompson Chairman 2
Slide 3: Highlights
Highlights 1. Strong interim results • good organic growth • effective integration of acquisitions 2. Continued increase in quality of estate • acquisitions – Sovereign Inns, Eldridge Pope • organic investment • disposals – 279 tenanted pubs sold 10 May 2007 3. Increased cash return to shareholders
Slide 4: Paul Inglett, Finance Director
Paul Inglett Finance Director 4
Slide 5: Financial highlights
Financial highlights +20.1% +10.6% +8.5% +6.1% +1.5% Revenue Operating* Profit before* EPS* Dividend profit tax £305.3m £71.3m £41.6m 10.01p 4.36p *before exceptional items continued double digit growth in EPS and dividends 5
Slide 6: Like-for-like sales
Like-for-like sales* +14.0% +7.0% % change +3.7% +0.4% Drink Food Machines Total • community +7.5% • town centre +5.9% • Eldridge Pope estate LFL growth similar to core estate post acquisition • strong trading continued into 2nd half: +6.6% in 33 weeks to 19 May 2007 *94% of estate, excluding Eldrid
Slide 7: Margins
Margins vs H1 2006 • LFL sales growth +7% • Average selling prices1 flat • Gross margin % flat - drink 73%; food 67% • Volume growth +7% Turnover H1 2007 Drinks sales2 Food Stout Wines Spirits/RTD’s Ale 33% 4% 12% 15% 12% Minerals 14% Machines Cider Drink 3% 5% 62% Accommodation Lager 2% 38% 1 drink
Slide 8: Balance sheet
Balance sheet March 2007 March 2006 £m Fixed assets* 1,796 1,597 • impact of acquisitions Goodwill & investments 244 177 Net debt (1,146) (898) • impact of acquisitions and share buy-backs Deferred tax (121) (118) Net other liabilities (144) (116) Net assets 629 642 • share buy-backs of £55m in last
Slide 9: Asset revaluations
Asset revaluations Latest pub valuation dates* Not revalued: 15% 2007: 7% 2% 2004: 14% 2006: 3% 2005: 74% • c.90% of valuations carried out by Christie + Co. • accounts valuations exclude any lotting premium * 2,535 pubs as at 31 March 2007 policy to review on a 5 year rolling cycle 9
Slide 10: Split of net debt
Split of net debt Group net debt: £1,146m Securitisation Bank debt Cash/other £m Available £m Original amount 805 £m facility Drawn Headroom Cash balances (37) Repayments (16) Other 14 Corporate 400 340 60 Currently outstanding 789 Share buy-backs 100 40 60 (23) 500 380 120 Group Interest rate: c.5.
Slide 11: Split of assets
Split of assets* 2,256 pubs + Securitisation Bank facilities Marston’s Pubs Limited Other Group companies 287 Managed pubs 281 Managed pubs 1,116 Tenanted pubs 572 Tenanted pubs 1,403 853 + * as at 31 March 2007, adjusted for sale of 279 pubs on 10 May 2007 38% of pubs not securitised 11
Slide 12: Split of EBITDA
Split of EBITDA1 Group EBITDA: £207m Securitisation Bank facilities £m £m 53 25 64 Non-securitised pubs2 65 Securitisation EBITDA2 117 EBITDA 90 Debt: EBITDA 6.7x Debt: EBITDA 4.2x 1 pro-forma 12 months to March 2007, adjusted for full year impact of Eldridge Pope and Sovereign Inns 2 net of allocat
Slide 13: Financing ratios
Financing ratios 12 months to March 2007 Target Interest cover 2.9x 2.25x – 2.75x Net debt: EBITDA* 5.5x 5.25x – 6.0x Balance sheet efficiency • committed to £150m of share buy-backs this year • increased interim dividend by 20% • opportunity to securitise up to 38% of pub estate • retain some flexi
Slide 14: REITs: financial cost/benefit analysis
REITs: financial cost/benefit analysis Benefits Costs 1. 2% entry charge 1. Tax savings 2. Stamp duty land tax 3. Securitisation break costs 2. No CGT on disposal 4. Transaction costs 5. Costs of running 2 PLCs 6. Funding of pension deficit estimated to be broadly neutral 14
Slide 15: REITs considerations
REITs considerations 1. Clear benefit of freehold ownership • operational flexibility • benefit of long-term capital appreciation 2. Cost/benefit analysis is broadly neutral • REITs not currently compelling 3. Other alternative structures still emerging • monitor market developments • continue to di
Slide 16: Financial summary
Financial summary 1. Good progress in key financial measures • continued double digit earnings growth • 20% increase in interim dividend 2. Improved balance sheet efficiency • £40m share buy-backs, further £110m to follow • opportunity to gear up business further 3. REITs • tax benefits not compelli
Slide 17: Ralph Findlay, Chief Executive
Ralph Findlay Chief Executive 17
Slide 18: Marston's strategy
Marston’s strategy 1. Growth through development of national, high quality pub estate • corporate acquisitions • new build pubs/acquisitions of existing pubs • predominantly community pubs 2. Exploit benefits of integrated model • operational flexibility • adding value to acquisitions 3. Maintain a
Slide 19: Consistent growth in turnover per pub
Consistent growth in turnover per pub Average turnover per week per pub £’000 13.7 13.2 12.0 11.3 10.1 £’000 9.7 8.8 7.9 7.3 5.8 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(I) • active estate management – >600 pubs transferred to tenancy since 1999 • major acquisitions – Wizard Inns (2004); El
Slide 20: Increasing contribution from new-build pubs
Increasing contribution from new-build pubs Pub openings 20 12 8 2005 2006 2007(F) The Maple Tree, Doncaster • H1 2007 openings (7): Brighton, Bristol, Cheshire, Exeter, Hertfordshire, London, Nuneaton • average investment c£2m: EBITDA returns 15%+ • investment focus: food, families, females, non-di
Slide 21: Branded high street development adds value
Branded high street development adds value target: high quality offer, not price led 21
Slide 22: Food offer becoming more important
Food offer becoming more important Food mix % 33% 30% 31% 29% 27% 2003 2004 2005 2006 2007 • centralised menu development/food procurement across all pubs • specified suppliers/ingredients used by national distributor • greater emphasis on family, value, health and ‘provenance’ • H1 LFL sales growth
Slide 23: Segmentation clearer, more consistent
Segmentation clearer, more consistent Branded food Great food Locals no. of pubs1 94 95 216 average £12k £16k £13k sales/week profit2 conversion 28% 27% 30% food sales mix 59% 42% 24% 1 excluding pubs identified for disposal 2 EBITDAR food sales are significant across all segments 23
Slide 24: High Street portfolio performing strongly
High Street portfolio performing strongly Branded Unbranded high street high street no. of pubs1 46 95 average £20k £13k sales/week profit2 34% 28% conversion food sales mix 18% 13% 1 excluding pubs identified for disposal 2 EBITDAR further potential to increase food sales in high street segments 24
Slide 25: Consistent like-for-like sales growth
Consistent like-for-like sales growth % change year on year +7.0 +3.6 +3.2 +2.8 +2.4 2003 2004 2005 2006 H1 2007 Catherine Wheel, Bibury, Nr. Cirencester • H1 2007 - good weather, estate segmentation, menu development - increased customer spend, not price • 2006 - World Cup, hot summer • 2004 - Euro
Slide 26: Eldridge Pope: 95 managed pubs
Eldridge Pope: 95* managed pubs 1. Strong emphasis on food • food sales c.30% of retail turnover • ‘Company of the Year’ award at The Publican Food Awards 2006 • further menu development opportunities - review of HJ Wellfed, Tavern Table and ‘Menu V’ 2. Accommodation is 5% of EP managed turnover • ‘
Slide 27: Eldridge Pope: attractive pub estate
Eldridge Pope: attractive pub estate Eliot Arms, Cirencester, Gloucester Half Moon Inn, Sherborne, Dorset Swan, Thatcham, Berkshire White Hart, Chippenham, Wiltshire Que Pasa, Banbury, Oxfordshire Angel Inn, Lymington, Hampshire well positioned to exploit positive market trends 27
Slide 28: Eldridge Pope: integration benefits
Eldridge Pope: integration benefits 1. Synergy capture on-track • expected cost savings of £4.6m in year 1 • further purchasing benefits of £1m targeted in year 2 2. Extension of brands/trading formats • conversions: c.6 Que Pasa bars to Pitcher & Piano, c.15 unbranded Marston’s bars to Que Pasa 3.
Slide 29: Strategy for continued organic growth
Strategy for continued organic growth 1. Continued focus on ‘F Plan’ to exploit market trends • clear food emphasis, more focus on income from rooms • alignment of offer towards families, female customers • reduction in wet-led promotion, more ‘Every Day Fair Prices’ 2. Leading new-build site develo
Slide 30: Increasing quality: 'raising the bar'
Increasing quality: ‘raising the bar’ 1. All BDM’s trained on the BII ‘Profitable Business Portfolio’ • professional development programme - running a successful pub 2. Greater transparency for tenants and lessees • BII accreditation for providing more information to tenants • unique in continuing t
Slide 31: Strategy for continued growth
Strategy for continued growth 1. Continual improvement in the quality of the estate • 279 pubs sold on 10 May 2007 for £82.5m • acquisition of 20-30 pubs p.a. and managed pub transfers • ongoing disposals estimated at 20-30 p.a. • significant capital investment programme 2. ‘Sustainable growth, unco
Slide 32: Growing market share in a competitive market
Growing market share in a competitive market 1. Volume +1.0% for key brands • Marston’s Pedigree, Jennings Cumberland Ale, Marston’s Smooth, Banks’s Original • Marston’s share of total ale market 7.5% 2. Volume +4.8% in premium ale • share of cask premium ale 17.7% 3. Operating margin down 0.7% vs 2
Slide 33: Increased marketing investment
Increased marketing investment continued investment vital to increasing market share 33
Slide 34: Smoking ban
Smoking ban 1. Preparations well advanced • 90% of pubs have outside trading areas • investment substantially complete - £20m+ to date 2. Disposal of 279 pubs on 10 May 2007 reduces risk 3. Pubs with food are less exposed and have more opportunity • c.90% of tenanted/leased pubs offer food • 33% of
Slide 35: Summary (1)
Summary (1) 1. Strong first-half results • EPS +10.6% • like-for-like food sales in managed pubs +14.0% • underlying operating margin ahead of last year 2. Plans to increase cash returns to shareholders • interim dividend +20% vs 2006 • share buy-back increased from £100m to £150m 3. Integration of
Slide 36: Summary (2)
Summary (2) 4. Financing structure • freehold ownership confers clear benefits • continue to monitor market developments 5. Smoking ban • preparations well advanced • disposal of 279 pubs on 10 May 2007 reduces risk • experience in Wales encouraging 6. Organic development • new-build pub development
Slide 37: Interim Results 2007
www.marstons.co.uk Interim Results 2007 37
Slide 38: Interim Results Appendices
Interim Results 2007 Appendices 38
Slide 39: Financial highlights
Financial highlights1 2007 2 2006 % change Revenue £m 154.6 153.1 + 1.0% EBITDA £m 36.4 36.3 + 0.3% Operating profit £m 26.1 25.9 + 0.8% Operating margin % 16.9 16.9 - Average no. of pubs 458 535 1before exceptional items 2 excludes pubs acquired as part of the acquisition of Eldridge Pope 39
Slide 40: Financial highlights
Financial highlights1 20072 2006 % change Revenue £m 97.1 86.4 +12.4% EBITDA £m 48.2 42.9 +12.4% Operating profit £m 43.3 38.0 +13.9% Operating margin % 44.6 44.0 + 0.6% Average no. of pubs 1,890 1,756 1before exceptional items 2 excludes pubs acquired as part of the acquisition of Eldridge Pope and
Slide 41: Financial highlights
Financial highlights* 2007 2006 % change Revenue £m 40.2 41.9 (4.1)% EBITDA £m 11.2 11.5 (2.6)% Operating profit £m 7.4 8.0 (7.5)% Operating margin % 18.4 19.1 (0.7)% * before exceptional items 41
Slide 42: Estate movement
Estate movement Pub numbers Managed Tenanted Group September 2006 459 1,893 2,352 Acquisitions/new builds 120 83 203 Disposals (11) (9) (20) March 2007* 568 1,967 2,535 * includes 279 tenanted pubs sold on 10 May 2007 42
Slide 43: Capital investment
Capital investment Total spend: £69.0m (2006: £50.8m) By division By nature of spend Inns a nd Ta ve rns £31.8m Ne w builds/site s £16.0m Pub Com pa ny £29.0m Single site a cquisitions £4.9m Be e r Com pa ny £6.8m Inve stme nt ca pe x £32.6m Ce ntra l £1.4m Ma inte na nce ca pe x £15.5m full year fo
Slide 44: Additional information and guidance
Additional information and guidance • Average number of shares in H1 2007 302.7m • Number of shares in issue as at 25 May 2007 296.1m • Additional dilutive number of shares 3.8m Forecast Forecast 2007 2008 • Forecast tax rate c.27% 26.5%-27.5% • Capex forecast: Existing business £75m £55m : New buil
Slide 45: Interim Results 2007
www.marstons.co.uk Interim Results 2007