Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — FY2019 Earnings Presentation
36 slides from Mitchells & Butlers's earnings presentation, 2019
Slide 1: Full Year Results 2019
Full Year Results 2019 –1–
Slide 2: Financial Review 2019
Financial Review 2019 Tim Jones Chief Financial Officer –2–
Slide 3: Key messages
Key messages • Strong like-for-like sales growth ahead of the market • Organic profit growth at increased margin • Cost headwinds and economic uncertainty expected to remain • Ignite delivering tangible benefits, third wave to launch in FY20 • Prioritising estate investment and value creation throug
Slide 4: Income Statement (before adjusted items)
Income Statement (before adjusted items) FY 2019* FY 2018* Movement £m £m % Revenue 2,237 2,152 +3.9% Operating costs (1,920) (1,849) Operating profit 317 303 +4.6% Interest (113) (118) Pensions finance charge (7) (7) Profit before tax 197 178 +10.7% Operating margin 14.2% 14.1% +0.1 ppts Earnings p
Slide 5: Like-for-like sales
Like-for-like sales Week Week Week Week 1-7 1 – 33 34– 52 1 – 52 FY 2020 Food 3.6% 3.1% 3.4% 1.7% Drink 3.9% 2.1% 3.2% 0.7% Total 3.8% 2.9% 3.5% 1.4% • Sales growth driven by increase in spend per item in part reflecting premiumisation of the estate • Improvement in volumes trajectory of both food a
Slide 6: Inflationary cost headwinds
Inflationary cost headwinds FY20 £m Food/ drink Labour Property Energy Other • FY19 cost headwinds of £64m in line with expectations • Low forward visibility due to macroeconomic and political uncertainty but FY20 currently expected to be in region of £60m –6–
Slide 7: Adjusted EBIT movement
Adjusted EBIT movement +£20m +£1m +£32m +£25m £(64)m FY 2018 FY 2018 FY 2019 Inflationary Cost savings Like-for-like FY 2019 £303m openings openings cost and trading £317m and and headwinds efficiencies remodels remodels –7–
Slide 8: Capital expenditure and returns
Capital expenditure and returns FY 2019 FY 2018 # # £m £m sites sites Remodels - refurb 65 212 63 188 Remodels - expansionary 5 11 7 13 Conversions 11 17 21 31 Acquisitions – freehold 4 5 7 2 Acquisitions – leasehold 7 2 3 5 Total return generating capital 92 247 101 239 Maintenance and infrastructu
Slide 9: Cash flow
Cash flow FY 2019 FY 2018 £m £m EBITDA before adjusted items 436 422 Non cash items 6 5 Operating cash flow before adjusted items, 442 427 working capital and pension contribution Working capital 9 2 Pension deficit contributions (49) (48) Operating cash flow before adjusted items 402 381 Cash flow
Slide 10: Deleveraging capital structure
Deleveraging capital structure £m Current enterprise value 0 • Progressive de-leverage through securitisation amortisation and pension deficit contributions • Over the last three years (since FY16) leverage reduced from 4.3 times to 3.6 times (excluding pension) – 10 –
Slide 11: Number of leases
IFRS16 (Leases) • Adoption from FY19/20 financial year using the modified retrospective (asset equals liability) method with no restatement of comparatives • Leases (with some exceptions) will be recognised on balance sheet through a right of use asset and related lease liability. In the income stat
Slide 12: IFRS 16 Summary impact on transition
IFRS 16 Summary impact on transition £m Impact on £50m (£44m) income statement • EBITDA +£50m (£17m) • EBIT +£6m £11m • PBT (£11m) • EPS (2.1p) Reduction in Increased Increased lease cost depreciation interest • FY20 opening balance sheet values: Right of use asset £500m Lease liability £546m • Incr
Slide 13: Summary
Summary • Strong like-for-like sales growth ahead of the market • Organic profit growth at increased margin • Cost headwinds and economic uncertainty expected to remain • Ignite delivering tangible benefits, third wave to launch in FY20 • Prioritising estate investment and value creation through de-
Slide 14: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 14 –
Slide 15: Profit growth achieved
Profit growth achieved • Three consecutive halves of profit growth • Profitability stabilised and operating margin growth • Momentum continues to gather pace • Every brand in like-for-like sales growth – 15 –
Slide 16: Like-for-like sales versus market
Like-for-like sales versus market 12% Festive 11% 10% 9% Snow 8% 7% World Cup 6% 5% 4% 3% 2% 1% (0%) (1%) (2%) (3%) (4%) (5%) (6%) (7%) FY18 FY19 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 16 –
Slide 17: Macro landscape
Macro landscape • Political landscape remains uncertain • Inflationary cost headwinds continue to impact the industry • Consumer confidence fragile CGA market growth tracker • Supply has begun to decrease with restaurant outlets down 3.4% • Leasehold businesses continue to face challenges Gfk consum
Slide 18: Ignite
Ignite FEB 2016 – FEB 2018 1 MAR 2018 – CURRENT 2020 ONWARDS IGNITE 1 IGNITE 2 IGNITE 3 – 18 –
Slide 19: Target under performing sites
Target under performing sites • Three workstreams dedicated to improving under-performing assets: - Invested sites missing appraisal - Largest year on year decline - Onerous leases • Dedicated actions plans for identified sites • Structured review and site visit process • Result has been a significa
Slide 20: Menu engineering
Menu engineering • Workstream dedicated to optimising menus • Focus on enhancing menu appeal of each brand • Provide trade up opportunities • Reduce waste by removing orphan products and reviewing supplier pack sizes • Estimated value of workstream is £5m gross profit – 20 –
Slide 21: Digital
Digital • Continued focus on enhancing guests digital experience • Booking platforms significantly improved by reducing steps • Online bookings grew by 25% in the year • Conversion of website visits to bookings increased to 11.4% • Cost of customer acquisition reduced – 21 –
Slide 22: Ignite
Ignite IGNITE PROJECT OFFICE EXTERNAL SPEND DIGITAL MENU & PRICING LABOUR - Removal of cash - Delivery and - Event pricing - New software spend in site takeaway - Offer Employee shift - Central - Bookings premiumisation management app procurement - Personalised - Menu - Enhanced - Energy communicati
Slide 23: Capital programme
Capital programme Sites age of investment • Capital programme one contributor towards improved trading performance • Target 6-7 year investment cycle • Ensure the right amount is spent on each project • Reducing proportion of sites not invested for more than 7 years • Strong returns from investment
Slide 24: Premium Country Pubs – Project Mandarin
Premium Country Pubs – Project Mandarin – 24 –
Slide 25: Vintage Inns - Very Vintage
Vintage Inns - Very Vintage – 25 –
Slide 26: Browns Edinburgh
Browns Edinburgh – 26 –
Slide 27: The George at Harpenden
The George at Harpenden • New all day concept • Fresh food from an open kitchen • Premium environment – 27 –
Slide 28: Strategic priorities
Strategic priorities Build a more Instil a more Drive an balanced business commercial culture innovation agenda - Brand propositions - Profitable sales - Build on technology investment - Conversion to successful formats - Core operational drivers - Digital marketing - Upgraded amenity in core - New
Slide 29: Sustainability
Sustainability • Developed a new sustainability strategy • Aim to increase our positive impact on society and reduce our negative impact on the environment • Ambitious targets set on greenhouse gas emissions, food waste, recycling and use of plastics • Progress will be reported annually – 29 –
Slide 30: People
People • Engagement up across all cohorts • Award winning apprentice scheme continues to grow • Chef academy expanded to 7 locations nationwide • Turnover reduced by 3ppts • Mental health wellbeing training being rolled out – 30 –
Slide 31: Summary
Summary • Strong like-for-like sales growth ahead of the market • Organic profit growth at increased margin • Cost headwinds and economic uncertainty expected to remain • Ignite delivering tangible benefits, third wave to launch in FY20 • Prioritising estate investment and value creation through de-
Slide 32: Questions
Questions
Slide 33: Full Year Results 2019 Supplementary Slides
Full Year Results 2019 Supplementary Slides – 33 –
Slide 34: FY 2019 – Outlet reconciliation
FY 2019 – Outlet reconciliation Total Managed1 Franchised Total MAB Opening outlets (start FY 2019) 1,690 60 1,750 Transfers (10) 10 - Disposals (8) (2) (10) Acquisitions 8 - 8 Closing outlets (end FY 2019) 1,680 68 1,748 Notes: 1. FY2019 closing managed total includes 9 non-trading sites. 2. Lodges
Slide 35: FY 2019 – Financial covenants summary
FY 2019 – Financial covenants summary Securitisation Restricted Payments Tests Test Actual (Relevant Year) Headroom Free cash flow to debt service 1.3x 1.5x £37m EBITDA to debt service 1.7x 1.9x £32m Securitisation Covenants Covenant Actual (Relevant Year) Headroom Free cash flow to debt service 1.1
Slide 36: FY 2019 – Securitisation profile
FY 2019 – Securitisation profile – 36 –