Slide 1: Preliminary Results 2008
Preliminary Results 2008
Slide 2: David Thompson, Chairman
David Thompson Chairman
Slide 3: Progress, robust performance, dividend maintained, clear focus
1. Progress in each trading division • investment in pub standards and brand marketing 2. Robust underlying performance • value for money appeal • sustainable and fair basis of dealing with tenants and lessees • strong underlying cash flow 3. Final dividend maintained at 8.47 pence per share • total
Slide 4: Paul Inglett, Finance Director
Paul Inglett Finance Director
Slide 5: Financial highlights
Financial highlights Financial year 2008 % change Revenue £666.1m +2.0 % EBITDA* £204.6m (0.6)% Operating profit* £161.6m (1.0)% Operating margin* 24.3% (0.7)% Profit before tax* £85.1m (13.2)% EPS* 25.6p (2.3)% Dividend 13.27p +3.4 % *before exceptional items resilient performance in challenging tr
Slide 6: Exceptional items
Exceptional items Gross Net £m £m Interest rate swaps mark to market* 4.2 3.0 Reorganisation costs 3.9 2.7 Phasing out of industrial buildings allowance* - 1.4 REITs project costs 0.8 0.6 Total exceptional items 8.9 7.7 • REITs now considered extremely unlikely in the foreseeable future * non-cash i
Slide 7: Like-for-like sales and turnover analysis
Like-for-like sales* Total By category Turnover analysis +4.7% % change vs. 2007 machines 3% accommodation 2% +3.0% +0.3% (1.5)% (0.6)% (2.6)% (8.2)% drink 59% H1 H2 FY drink food machines rooms *excludes any pubs acquired in last 2 years food continues to be key driver of growth 7
Slide 8: Cost outlook
Cost outlook 1. £12m of additional costs in 2009 • employment, food, energy, brewing raw materials 2. 17% increase in alcohol duty since Mar 2008 • duty escalator remains in place for 2009 3. Fixed contracts • electricity: pubs and breweries fixed to Sept 2011 • gas: breweries fixed to Sept 2009, pu
Slide 9: Actions to reduce costs
Actions to reduce costs Expected cost increases in 2009 Managed Pubs Other Total £m Utilities Employment Food Overheads Original view 4 3 3 2 12 Mitigating actions (2) (1) (2) (5) (10) Current view 2 2 1 (3) 2 focused on tight cost management in 2009 9
Slide 10: Balance sheet
Balance sheet 2008 2007 £m £m Fixed assets* 1,992 1,942 • 98% of value freehold or long leasehold Intangibles & investments 272 252 Net debt (1,268) (1,189) Deferred tax (142) (155) Net other liabilities (147) (101) • pension scheme deficit unchanged Net assets 707 749 • share buy-backs of £29m in 2
Slide 11: Asset valuations
Asset valuations 1. Year end property valuation of c.£2.0bn • impairment charge of £4.9m • reflects permanent impairments on closed pubs and potential disposals 2. Support for property values • valuations reflect cash generated by individual pubs - like-for-like tenanted profits down 1.7% in 2008 •
Slide 12: Cash flow
Cash flow 2008 2007 £m £m Cash inflow from operating activities 172.4 156.0 Net interest/debt issues costs/other (79.0) (58.8) Free cash flow pre investment 93.4 97.2 Capital expenditure (117.2) (146.3) Disposals 21.5 102.0 Net capital expenditure (95.7) (44.3) Acquisitions (12.1) (193.9) (14.4) (14
Slide 13: Split of assets
Split of assets* 2,249 pubs + Securitisation Bank facilities Marston’s Pubs Limited Other Group companies 247 Managed pubs 259 Managed pubs 1,636 Tenanted pubs 107 Tenanted pubs 1,883 366 + * as at 4 October 2008 84% of pubs are securitised 13
Slide 14: Performance of Marston's securitised estate
Performance of Marston’s securitised estate £140m £134.5m £128.4m £126.9m MAT EBITDA £m £122.0m £119.8m £118.6m £116.7m £117.1m £100m Year to: Dec 06 Mar 07 June 07 Sept 07 Dec 07 Mar 08 June 08 Sept 08 consistent performance 14
Slide 15: Securitisation highlights
Securitisation highlights 1. Securitisation results FY2008 Actual • gross debt(1) outstanding as at 4 October 08 £1,097.5m • EBITDA £134.5m • free cash flow (FCF) £112.7m • debt service (DSCR) £72.7m 2. Financial covenants Covenant (i) FCF: DSCR 1.6x >1.1x (ii) EBITDA: DSCR 1.9x >1.5x(2) (iii) net w
Slide 16: Financing structure
Financing structure £m Securitised debt 1,098 • amortises to 2035 • capital repayments: 2009 £18m; 2010 £19m; 2011 £20m Bank facility* 242 • £400m available facility • expires August 2010 • supported by c.£480m of pub assets + c.£140m brewing net assets Bank overdraft 6 Gross debt 1,346 • 92% at fix
Slide 17: Key financing ratios
Key financing ratios(1) Group financing ratios EBITDA interest cover 2.7x EBIT interest cover 2.1x Net debt: EBITDA 6.2x £400m bank facility Actual Covenant Net debt: EBITDA 3.4x <5.5x(2) (1) financial year to 4 October 2008 before exceptional items (2) 5.5x for 2 periods following acquisition of Re
Slide 18: Financial summary
Financial summary 1. Resilient performance in extremely challenging trading conditions • EPS down 2.3% • 3.4% increase in dividend 2. Balance sheet • asset values supported by 98% freehold estate* by value • property value over £700m > net debt • capital investment reduced by c.£60m in 2009 3. Finan
Slide 19: Ralph Findlay, Chief Executive
Ralph Findlay Chief Executive
Slide 20: Operational and financial elements of strategy
Operational and financial elements of strategy 1. Develop a national, high quality pub estate 2. Develop greater food skills, broaden consumer appeal 3. Recruit skilled tenants and lessees 4. Increase distribution of our ale brands 5. Create greater value through vertical integration 6. Match freeho
Slide 21: Acquisitions have extended our trading geography
Acquisitions have extended our trading geography Jennings 2005 128 pubs tenanted and brewing £73m Burtonwood 2005 460 pubs Wychwood Brewery tenanted and managed 2008 £168m Brewing £14m Celtic Inns 2006 63 pubs Wizard Inns 2004 tenanted and managed 63 pubs £43m managed £91m Eldridge Pope 2007 Ringwoo
Slide 22: Market drivers of strategy
Market drivers of strategy Demographics Market trends Competitors • ageing population • choice, vfm, service • the home • rising female employment • eating out • supermarkets • flexible working • provenance, authenticity • other ‘pubcos’ • increasing diversity • on-trade vs. off-trade • restaurants
Slide 23: Influences over pub trading in 2008
Influences over pub trading in 2008 Which factors have affected pub sales over the past year?(1) • food important to 75% of pubs • 47% reported sales up • 22% reported sales decrease • since ‘the ban’ - 45% ‘neutral’ - 17% ‘beneficial’ • on-trade beer volumes down 8-10%(2) (1)source: The Publican Fo
Slide 24: UK pub market and closures
Pub closures are estimated to be 36 per week* food-led managed tenanted/leased town centre free trade community UK pub market South West No. of pubs in UK (000’s) Scotland Midlands Wales North South East free trade tenanted/ managed total *source: CGA 2008 leased smaller wet-led tenancies/free trade
Slide 25: Priorities in 2009
Priorities in 2009 1. Optimising price and promotions 2. Continued focus on innovation, current trends 3. A rigorous approach to pub standards 4. Capitalise on beer brand portfolio 5. Tightly controlled costs, excellent customer service 6. Ensure customer/consumer knowledge is relevant, meaningful 7
Slide 26: Food sales continue to increase
Food sales continue to increase Food as % of retail sales • LFL +3.0% in 2008; +13.3% in 2007 % of total retail sales dining occasion drives 65% of customer visits 26
Slide 27: 22m meals sold per annum – and growing
22m meals sold per annum – and growing 1. Food sales growth is volume led • volume +4.3%, price/range (1.3)% 2. Growth in food covers +4% % change vs. 2007 • main courses are c.80% of total food sales spend per head slightly up on 2007 at c. £6 27
Slide 28: Evidence of weaker consumer confidence
Evidence of weaker consumer confidence 1. Lunchtime sales remain strong (food and drink) • later evening drink sales weaker 2. Average spend per head increased • slightly weaker in H2 • average spend per head on food c.£6 3. Number of covers in 2008 +4% • increase in main courses retailing at below
Slide 29: Value – 90% of managed pubs offer promotions
Value – 90% of managed pubs offer promotions 35% of sales ‘on promotion’ 29
Slide 30: Differentiating a value offer in a competitive market
Differentiating a value offer in a competitive market 1. Pub quality • Marston’s Two-for-One concept in large, high quality pubs 2. Extensive ale offer • not available at home - differentiates pub vs restaurant; - sign of quality 3. Food quality/service • fresh vegetables; more local produce 4. Exte
Slide 31: Identifying growth areas, consumer trends
Identifying growth areas, consumer trends Pub design – contemporary, modern Pitcher & Piano, Chester Stags Leap, Rugeley Bluu, Birmingham improved quality of offer, more diverse revenues 31
Slide 32: Maximising opportunity – Marston's Inns
Maximising opportunity – Marston’s Inns improved quality of offer, more diverse revenues 32
Slide 33: Clear, focused support strategy for retailers
Clear, focused support strategy for retailers RETAILER SUPPORT flexible cost business volume agreements management building incentives • 48 pubs per BDM across whole estate • comprehensive training support • sustainable rents objective: sustainable business, shared risks and rewards 33
Slide 34: Retailer support – making a real difference
Retailer support – making a real difference 1. Flexible agreements • ‘Tracker’ agreement launched - rent linked to volume, greater tenant flexibility • further options being developed • straightforward discounts, rent concessions: c.£2m pa - where appropriate 2. Cost management • online payroll • le
Slide 35: Retailer support is focused on business building
Retailer support is focused on business building 1. Business building • menu development tool • national catering support • ‘Beds at the Inn’ website • free pub website building • investment in BDM training, stability - ‘Pedigree People Programme’ • ‘Full House’ marketing manual • line cleaning ince
Slide 36: Reduced investment in new-build pubs in 2009
Reduced investment in new-build pubs in 2009 Pub openings Woodman, Rotherham • 2008 openings: London, Birmingham, Ludlow, Ipswich, Norwich, Brynmawr, Mansfield, Chester, Rugeley, Hull, Kidderminster, Manchester, Warwick, Chorley, Blackwood, Rotherham remains important for longer-term development 36
Slide 37: New-build pubs in 2004-2008
New-build pubs in 2004-2008 56 pubs and bars built in the last 5 years 37
Slide 38: New-build pubs deliver good returns
New-build pubs deliver good returns 1. Over 50 pubs developed over last 5 years • high turnover, good returns 2. Site pipeline 2008/9 community Pitcher & Piano • 4 units on site/developed 4 - • 6 sites ‘landbanked’ 6 - • 8 sites to complete 2009 7 1 • 8 sites to complete 2010+ 7 1 freehold pubs, cle
Slide 39: Strong market position in all segments
Strong market position in all segments 1. Share of UK ale market c.9% (1) • volume up by 5% in 2008 (2) 2. Share of on-trade premium cask ale 21.8% (1) • volume up by 17.5% in 2008 (2) 3. Share of premium bottled ale market c. 18% (3) • strong growth in off-trade through Wychwood brands (1) based on
Slide 40: Best range of cask ale brands in the market
Best range of cask ale brands in the market Signature brands Mainstream brands Select brands +4 guest ales per month wide choice for managed pubs and all of our customers 40
Slide 41: Wychwood transformed Marston's off-trade profile
Wychwood transformed Marston’s off-trade profile 1. Clear brand priorities • Marston’s Pedigree, Marston’s Old Empire, Hobgoblin, Jennings Cumberland Ale, Brakspear Oxford Gold, Ringwood Old Thumper 2. Marston’s Pedigree has underperformed in off-trade • review of packaging, support 3. Cricket spons
Slide 42: Summary
Summary 1. 2008 – resilient performance in challenging conditions • robust like-for-like performance in pub estate • operating margin 0.7% lower than in 2007, earnings per share 2.3% lower • strong growth in cashflow from operating activities 2. 2009 – clear priorities • appropriate actions taken to
Slide 43: Questions
www.drinkaware.co.uk
Slide 44: Appendices
Appendices
Slide 45: Financial highlights (1)
Financial highlights (1) 2008 (2) 2007 % change Revenue £m 388.3 367.8 + 5.6% EBITDA £m 90.5 88.8 + 1.9% Operating profit £m 67.2 66.7 + 0.7% Operating margin % 17.3 18.1 (0.8)% Average no. of pubs 550 520 (1) before exceptional items (2) includes the results of 47 pubs transferred to tenancy in H2
Slide 46: Financial highlights (1)
Financial highlights (1) 2008 (2) 2007 % change Revenue £m 186.4 200.9 (7.2)% EBITDA £m 99.5 100.6 (1.1)% Operating profit £m 90.0 90.8 (0.9)% Operating margin % 48.3 45.2 +3.1% Average no. of pubs 1,713 1,810 (1) before exceptional items (2) excludes the results of 47 pubs transferred to tenancy in
Slide 47: Financial highlights
Financial highlights* 2008 2007 % change Revenue £m 91.4 84.1 8.7% EBITDA £m 24.3 25.3 (4.0)% Operating profit £m 16.1 17.4 (7.5)% Operating margin % 17.6 20.7 (3.1)% *before exceptional items 47
Slide 48: Estate movement
Estate movement Pub numbers September 2007 550 1,722 2,272 New builds/single site acquisitions 16 4 20 M to T transfers (47) 47 - Disposals (13) (30) (43) September 2008 506 1,743 2,249 48
Slide 49: Additional information and guidance
Additional information and guidance • Average number of shares in 2008 271.9m • Number of shares in issue as at 4 Oct 2008 270.3m • Additional dilutive number of shares 2.5m Forecast 2009 • Forecast tax rate 24% - 26% • Capex forecast : maintenance capex £30m : investment capex £20m : new builds/sit
Slide 50: www.marstons.co.uk
www.marstons.co.uk