Marston's PLC · LSE:MARS
Marston's — Debt Investor Presentation (May 2007)
44 slides from Marston's's debt investor presentation, May 2007
Slide 1: Annual Bondholder Presentation
Annual Bondholder Presentation
Slide 2: Paul Inglett, Finance Director
Paul Inglett Finance Director 2
Slide 3: Securitisation highlights: 12 months to March 2007
Securitisation highlights: 12 months to March 2007 • Gross Debt Outstanding as at 31 March £789.2m • EBITDA £117.1m • Free cashflow £ 88.4m • Debt service £ 51.2m • EBITDA DSCR 2.3x • FCF DSCR 1.7x 3
Slide 4: Securitisation: Estate movement
Securitisation: Estate movement Number of pubs Tenanted Managed Total At closing 1,238 354 1,592 Net transfers 66 (66) - Disposals (7) (1) (8) As at 31 March 2007 1,297 287 1,584 • subsequent to the half-year end, 181 securitised tenanted pubs were sold on 10 May for £54.8m • EBITDA of 181 pubs was
Slide 5: Highlights – Marston's PLC Group
Highlights – Marston’s PLC Group 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 r
Slide 6: Financial highlights – Marston's PLC Group
Financial highlights – Marston’s PLC Group +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 6
Slide 7: Like-for-like sales
Like-for-like sales* Group +14.0% Securitised Pubs +15.1% +7.0% +6.9% +3.7% +2.9% (0.2)% +0.4% Drink Food Machines Total 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:
Slide 8: 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 9: 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 10: 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 10
Slide 11: 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 12: 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 12
Slide 13: 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 14: 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 15: 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 15
Slide 16: 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 17: 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 18: Ralph Findlay, Chief Executive
Ralph Findlay Chief Executive 18
Slide 19: 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 20: 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 21: 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 22: Branded high street development adds value
Branded high street development adds value target: high quality offer, not price led 22
Slide 23: 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 24: 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 24
Slide 25: 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 25
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: Increased marketing investment
Increased marketing investment continued investment vital to increasing market share 31
Slide 32: 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 33: 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 34: 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 35: www.marstons.co.uk
www.marstons.co.uk Annual Bondholder Presentation 35
Slide 36: Annual Bondholder Presentation 2007 Appendices
Annual Bondholder Presentation 2007 Appendices 36
Slide 37: 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 37
Slide 38: 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 39: 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 39
Slide 40: 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 40
Slide 41: 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 42: Outstanding debt
42 Outstanding debt £m £0m £100m £200m £300m £400m £500m £600m £700m £800m £900m Oct'05 Oct'07 Amortisation profile Oct'09 Oct'11 Oct'13 Oct'15 Oct'17 Oct'19 Oct'21 Oct'23 Oct'25 Oct'27 Oct'29 Oct'31 Oct'33
Slide 43: 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 44: www.marstons.co.uk
www.marstons.co.uk Annual Bondholder Presentation