Slide 1: Preliminary Results 2009
Preliminary Results 2009
Slide 2: David Thompson, Chairman
David Thompson Chairman
Slide 3: Highlights
Highlights 1. Rights issue raised net proceeds of £165.6m • strengthened balance sheet, improved leverage ratios 2. Clear plans and timescales to invest rights issue proceeds • 60 large new-build food-led managed pubs over 3 years • on track to open 15 in 2010 3. Improving trends: H2 revenue broadly
Slide 4: Andrew Andrea, Finance Director
Andrew Andrea Finance Director
Slide 5: Financial summary – profit and loss account
Financial summary – profit and loss account 52 weeks 2009 2008 % change Revenue* £645.1m £654.4m (1.4)% EBITDA*1 £191.8m £199.3m (3.8)% Operating margin*1 22.8% 23.9% (1.1)% Operating profit*1 £147.4m £156.3m (5.7)% Profit before tax*1 £70.3m £81.3m (13.5)% Adjusted EPS1 13.4p 18.3p (26.8)% Dividend
Slide 6: Financial summary – improving trends
Financial summary – improving trends e enu (2.8)% v Re (0.1)% ofi t g pr n (9.9)% rati O pe (2.0)% (1.6)% rgin Ma (0.5)% % vs. last year stronger second half performance on all 3 metrics 6
Slide 7: Like-for-like sales
Like-for-like sales Like-for-like sales* % change 5.3% for the year ended 3 Oct 4.4% drink (2.4)% 1.3% food +2.8 % accommodation +1.3 % machines (7.3)% Like-for-like sales % change for 8 weeks to 28 Nov TOTAL (0.6)% drink +1.6% food +5.3% TOTAL +3.1% *excludes any pubs acquired in last 2 years susta
Slide 8: Retail margin performance
Retail margin performance 16.9% 0.7% 16.4% (0.5)% (0.4)% 0.3% (0.1)% % 0.3% (0.8)% H2 margins 0.3% to 18.6% improving margin performance, stronger in H2 8
Slide 9: Cost pressures easing
Cost pressures easing +£0.5m +£0.5m change vs. prior year £(1.4)m £(1.6)m £(3.0)m £(3.0)m utilities food labour favourable second half cost trends to extend into 2010 9
Slide 10: Margin drivers: performance stabilised
Margin drivers: performance stabilised Volume • slight improvement in H2 • annualised £2m additional discounts Wet margin • reduction in wine, spirit and mineral prices • delayed supplier price increases • annualised rent concessions of £1m Rent • substantive agreements rent in growth Debt • bad deb
Slide 11: Tenants health check
Tenants health check issues 1. Rental management • concessions have increased to £3m but have now stabilised - £1m rent; £2m additional discount • average rent per pub £25.5k - 95 rent reviews completed, none went to arbitration - substantive agreements rent +2% 2. Pub closures • 14 closed pubs - 11
Slide 12: Polarised performance
Polarised performance Substantive Other Total % of estate 80 20 100 % of profit 90 10 100 rent vs LY% +2 (31) (4) EBIT vs LY% - (36) (7) Two key challenges: • maintain and develop our core estate • exploit opportunities in the remainder current trading improving from (7)% to (5)%* *like-for-like pro
Slide 13: Organic growth in second half
Organic growth in second half % vs. prior year 8.4% 6.0% 1.4% (2.6)% (0.4)% revenue operating margin profit revenue and profit growth in H2 13
Slide 14: Property exceptional items
Property exceptional items Value £m High street leaseholds (19.8) Freehold impairments (4.3) Onerous lease provision (12.9) (37.0) • 78 site valuations adjusted, on top of 288 pubs impaired at half year • total impairment in year of £68m, 3.4% of estate value, £43.9m through revaluation reserve appr
Slide 15: Pension update
Pension update 1. IAS19 deficit broadly stable at £35.3m • £10m top-up contribution minimises deficit exposure • equity performance offsetting bond yield downside (63% equities mix) 2. Tri-ennial valuation agreed • funding deficit of £106.8m • top-up payments consistent with previous years - £10m in
Slide 16: Securitisation highlights: year to 3 October 2009
Securitisation highlights: year to 3 October 2009 Securitisation results Actual • gross debt(1) outstanding as at 3 October 2009 £1,079.4m • EBITDA £126.9m • free cash flow (FCF) £110.0m • debt service (DSCR)` £77.4m Financial covenants Actual Covenant • FCF : DSCR 1.42x >1.1x(2) • EBITDA : DSCR 1.6
Slide 17: Financing structure
Financing structure £m securitisation 1,079 • amortises to 2035 bank facility* 131 • interest cover: 5.2x vs covenant >2.75x • debt to EBITDA: 1.4x vs covenant <4.75x 1,210 net cash (91) debt issue costs (20) net debt 1,099 •underlying net debt reduction of £15m •average cost of net debt c.6.7% net
Slide 18: Financial summary
Financial summary 1. Resilient trading performance • second half performance strong • strong like-for-likes and margins in MIT • improving trends in MPC • MBC – organic growth in second half 2. Balance sheet • asset values predominantly freehold • appropriate impairment of weakest assets 3. Financin
Slide 19: Ralph Findlay, Chief Executive
Ralph Findlay Chief Executive
Slide 20: Marston's today
Marston’s today 1. Pub operator • Marston’s Inns and Taverns – 496 managed pubs • Marston’s Pub Company – 1,688 tenanted/leased pubs • situated across England and Wales • 98% freehold estate (by value)* 2. Brewer – Marston’s Beer Company • ale brewer; market leading position in premium ales 3. Verti
Slide 21: Operational strategy
Operational strategy Red Lion, Madley, Hereford Kingfisher, Saddleworth differentiated strategy leading to resilient performance 21
Slide 22: Estate quality more important than geography
Estate quality more important than geography Lfl sales vs average Substantive lfl turnover vs average further demonstrated by overall performance vs. peers 22
Slide 23: 'F-Plan': food, families, females, '40-50 somethings'
‘F-Plan’: food, families, females, ‘40-50 somethings’ 1. ‘F-Plan’ consistent with well understood long-term structural trends • growth in eating-out market • increased pub usage by families, females • decline of ‘the boozer’ • maturing population 2. ‘F-Plan’ focus is even more appropriate for today’
Slide 24: 65% of our customers visit the pub to dine
65% of our customers visit the pub to dine % of total retail sales like-for-like growth despite recessionary environment 24
Slide 25: Food growth: volume, value, range & quality, service
Food growth: volume, value, range & quality, service 1. 23m meals served last year • like-for-like volume +4.0%, price (1.2)% 2. Value offers performed most strongly • Two for one, carvery, 2 for £10 promotions • food margins maintained through menu engineering, better purchasing terms 3. Range exte
Slide 26: New-build plans 2010 – 2012 progressing well
New-build plans 2010 – 2012 progressing well • areas of high population density • high visibility sites • office, leisure, retail activity • Milestone and Two for One formats • 180-250 covers dependent on location • roll-out timetable 2010 15 sites 2011 20 sites 2012 25 sites Total 60 sites identifi
Slide 27: New openings in strong trading locations
New openings in strong trading locations The Boathouse, Braunston OLDHAM Ladybird, Caterham Ladybird, Caterham The Boathouse, Braunston hand-picked sites, consistent returns 27
Slide 28: Current market conditions have created an opportunity
Current market conditions have created an opportunity 1. Plentiful supply of high quality sites – few competing buyers 2. Lower cost of acquisition • better sites available 3. Co-location with Travelodge – de-risking rooms expansion 4. Reduced construction costs 5. Lower risk than acquisitions • pre
Slide 29: Existing new builds performing well
Existing new builds performing well 52 weeks to 3 October 2009 (30 sites) Average turnover per week £20k EBITDA conversion 30% EBIT conversion 25% Like for like sales % +7% EBITDA ROC % 15% performance in line with rights issue appraisal despite recession 29
Slide 30: Development of the substantive estate
Development of the substantive estate 1. Fair rent-setting process • average rent per pub £25.5k per annum • rental growth achieved, but at lower rate 2. Price flexibility • permanent reductions in wine, spirit and mineral prices (wholesale price benchmark) • Advance agreement trial - free trade ref
Slide 31: Tracker agreement – innovative response
Tracker agreement – innovative response 1. Target operator • good licensee concerned about fixed costs (rent) 2. Business model • target optimal rent £15k per annum • rent charged as a variable surcharge of £75 per barrel on drink volume • rent capped at 200 barrels • 99 pubs at year-end • keeps sma
Slide 32: Retail agreement – innovative response
Retail agreement – innovative response 1. Target operator • good licensee concerned about funding, risk 2. Business model • modest investment (typically £50k per pub) • target £3.5k per week turnover at 25% EBITDA conversion • Marston’s pay all of the bills except staff costs • 24 pubs currently tra
Slide 33: Encouraging performance from new agreements
Encouraging performance from new agreements Retail agreements Tracker agreements YOY* YOY* (11 pubs) (99 pubs) volumes +390 brls volumes +400 brls EBITDA +£80k EBITDA +£100k incremental EBITDA incremental EBITDA +£3,600 +£500 per pub per month per pub per month • 11 open at last year-end • 24 open a
Slide 34: BISC and OFT Inquiries
BISC* and OFT Inquiries 1. The tie offers opportunity • low cost of entry vs. franchise vs. ownership • existence of the tie provides operator incentive to support the business 2. Tenant/operator relationships need to improve • more openness, greater transparency • increased flexibility and recognit
Slide 35: Outperforming the beer market
Outperforming the beer market 1. Customer focused strategy Volume performance • choice, quality, taste • efficient cost management but not production-led (6)% on-trade - additional cost of multi-site operations <£1m pa (2)% - fully justified by local brand performance 1% 2. Key points of difference
Slide 36: Off-trade benefited from the 'Summer of Cricket'
Off-trade benefited from the ‘Summer of Cricket’ Final quarter bottled ale performance* Share (%) Volume change (%) 1. PBA full year volume change* • Hobgoblin +21.9% • Marston’s Pedigree +47.7% • Marston’s Old Empire (5.4)% • Brakspear Oxford Gold +20.9% • Jennings Cumberland Ale +5.4% 2. Total cor
Slide 37: Key priorities in 2009 – continuing into 2010
Key priorities in 2009 – continuing into 2010 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. Reduce debt 7. Maintain high ethi
Slide 38: Current trading – 8 weeks to 28 November 2009
Current trading – 8 weeks to 28 November 2009 1. Encouraging start to the year • MIT like-for-like sales +3.1%, food sales +5.3%, drink sales +1.6% • MPC like-for-like profit (5)% - sector-leading performance • MBC continue to perform in line with expectations 2. Cost outlook more favourable 3. Econ
Slide 39: Summary
Summary 1. Resilient performance in very challenging environment • strong H2 including market-leading margin performance 2. Rights issue • provides opportunities to exploit market conditions and accelerate new-build roll-out • investment plans help to reduce net debt/EBITDA ratio 3. Good progress in
Slide 40: Questions
TmaAncrens] Questions Uae MARSTON’S www.drinkaware.co.uk
Slide 41: Appendices
Appendices
Slide 42: Split of assets
Split of assets* 2,184 pubs + Securitisation Bank facilities Marston’s Pubs Limited Other Group companies 254 Managed pubs 242 Managed pubs 1,584 Tenanted pubs 104 Tenanted pubs 1,838 346 + * as at 3 October 2009 84% of pubs are securitised 42
Slide 43: Financial highlights
Financial highlights* 2009 2008 % change Revenue £m 367.8 381.7 (3.6)% EBITDA £m 83.2 87.9 (5.3)% Operating profit £m 60.3 64.5 (6.5)% Operating margin % 16.4 16.9 (0.3)% Average no. of pubs 502 550 *before exceptional items, 2008 restated to 52 weeks for comparative purposes 43
Slide 44: Financial highlights
Financial highlights* 2009 2008 % change Revenue £m 175.8 183.0 (3.9)% EBITDA £m 92.0 97.5 (5.6)% Operating profit £m 81.8 88.0 (7.0)% Operating margin % 46.5 48.1 (1.6)% Average no. of pubs 1,718 1,713 *before exceptional items, 2008 restated to 52 weeks for comparative purposes 44
Slide 45: Financial highlights
Financial highlights* 2009 2008 % change Revenue £m 101.5 89.7 13.2% EBITDA £m 25.0 23.6 5.9% Operating profit £m 16.0 15.4 3.9% Operating margin % 15.8 17.2 (1.4)% *before exceptional items, 2008 restated to 52 weeks for comparative purposes 45
Slide 46: Estate movement
Estate movement Pub numbers 4 October 2008 506 1,743 2,249 New-builds/single site acquisitions 5 - 5 Disposals (15) (55) (70) 3 Oct 2009 496 1,688 2,184 46
Slide 47: Additional information and guidance
Additional information and guidance • Average number of shares in 2009 415.8m • Number of shares in issue as at 3 December 2009 569.2m • Additional dilutive number of shares 1.9m Forecast 2010 • Forecast tax rate 23%-25% • Capex forecast: existing business £40m-£45m new-builds/sites £45m £85m-£90m •
Slide 48: www.marstons.co.uk
www.marstons.co.uk