Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — FY2017 Earnings Presentation
36 slides from Mitchells & Butlers's earnings presentation, 2017
Slide 1: Full Year Results 2017
Full ear Results.2017 m:. Soeuelers « , £ Serving With pil i
Slide 2: Financial Review FY 2017
Financial Review FY 2017 Tim Jones Finance Director –2–
Slide 3: Income Statement
Income Statement FY 2017 FY 2016 53 week 52 week £m £m Revenue 2,180 2,086 Operating costs (1,866) (1,768) Operating profit 314 318 Interest (124) (125) Pensions finance charge (7) (12) Profit before tax 183 181 Operating margin 14.4% 15.2% Earnings per share 34.9p 34.9p –3–
Slide 4: Income Statement – 52 week
Income Statement – 52 week FY 2017 FY 2016 Movement 52 week 52 week 52 week £m £m % Revenue 2,141 2,086 2.6% Operating costs (1,833) (1,768) Operating profit 308 318 (3.1%) Interest (121) (125) Pensions finance charge (7) (12) Profit before tax 180 181 (0.6%) Operating margin 14.4% 15.2% (0.8 ppts)
Slide 5: Like-for-like sales
Like-for-like sales Week Week Week Week 1-7 1 – 33 34– 53 1 – 53 FY 2018 Food 1.4% 1.3% 1.4% 2.0% Drink 2.4% 1.7% 2.1% 2.7% Total 1.9% 1.6% 1.8% 2.3% • Sales growth driven by increase in spend per item in part reflecting premiumisation of the estate • Sales momentum continued into early FY18; strong
Slide 6: Inflationary cost headwinds unchanged
Inflationary cost headwinds unchanged £m FY18 Food/ drink Labour Property Energy Other • Mitigation of £26m in FY17 through labour, procurement, repairs and other site level efficiencies • Initiatives in place to target similar level of mitigation in FY18 –6–
Slide 7: Adjusted EBIT movement
Adjusted EBIT movement +£20m +£16m £(10)m £(2)m +£26m £(60)m FY 2016 FY 2016 FY 2017 Disposals Inflationary Cost savings Like-for-like FY 2017 £318m openings and openings and cost and trading £308m remodels remodels headwinds efficiencies –7–
Slide 8: Property estate valuation
Property estate valuation • Estate comprised of more than 80% freehold and long-leasehold sites • Freehold and long-leasehold properties valued annually • 20% of sites inspected per annum • Short leaseholds assessed for impairment • Total value of £4.4bn (FY 2016 £4.4bn) FY 2017 FY 2016 £m £m Revalu
Slide 9: Capital expenditure and returns
Capital expenditure and returns FY 2017 FY 2016 # # £m £m sites sites Remodels - refurb 42 143 34 137 Remodels - expansionary 14 31 13 38 Conversions 39 78 31 77 Acquisitions – freehold 3 1 1 2 Acquisitions – leasehold 18 12 7 6 Total return generating capital 116 265 86 260 Maintenance and infrastr
Slide 10: Capital Structure – summary balance sheet
Capital Structure – summary balance sheet FY 2017 FY 2016 £m £m Property, plant and equipment 4,429 4,423 Other non-current assets 121 154 Current assets (excluding cash) 78 57 Current liabilities (300) (305) Net borrowings (1,795) (1,895) Derivatives (249) (351) Pension (292) (337) Provisions (366)
Slide 11: Group Structure: overview
Group Structure: overview M&B plc Unsecured estate • New site investment 408 sites • Short term facilities (£150m) EBITDA £69m • Mandated debt service profile Secured estate 1,346 sites • Fixed criteria for cash distributions EBITDA £352m – 11 –
Slide 12: Capital Structure – analysis of net borrowing
Capital Structure – analysis of net borrowing FY 2017 FY 2016 Unsecured £m £m Cash 20 25 Short term borrowings (6) (31) 14 (6) Secured Cash 100 106 Subject to restrictions Liquidity cash on deposit 147 147 Liquidity drawn facility (147) (147) Securitised debt (1,909) (1,995) Mandated repayment profi
Slide 13: Group Structure: movement of cash
Group Structure: movement of cash SHAREHOLDERS M&B plc • Cash/debt volatility from c.£47m Unsecured estate capital allocation decisions PENSION FUND 408 sites EBITDA £69m INTRAGROUP DIVIDEND c.£200m Secured estate • Cross charged for goods and BONDHOLDERS services 1,346 sites • Internal dividend max
Slide 14: Dividend Policy
Dividend Policy Dividend determined after considering several factors: . • Cash flow more of a constraining factor than earnings • Leverage: secured and unsecured estates • Future investment requirements • Outlook and prospects FY17: Final dividend of 5p (full year 7.5p) FY18: No interim dividend. A
Slide 15: Deleveraging capital structure
Deleveraging capital structure £m Current enterprise value 0 • Illustrative example over 10 years • Based on 2016 pensions triennial agreement and mandated bond amortisation – 15 –
Slide 16: Summary
Summary • Strong improvement in sales across the estate • First 7 weeks of FY 2018 sales growth of 2.3% • Inflationary cost headwinds remain strong putting margins under pressure • Work continues to drive sales and mitigate cost pressures • Pension negotiations concluded providing clarity on contrib
Slide 17: Phil Urban, Chief Executive Officer
Phil Urban Chief Executive Officer – 17 –
Slide 18: The context two years ago
The context two years ago ● New supply at a peak ● Like-for-like sales decline ● Performance behind the market ● Unprecedented cost headwinds ahead – 18 –
Slide 19: Strategic priorities
Strategic priorities Build a more Instil a more Driving 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 - Ne
Slide 20: Like-for-like sales versus market
Like-for-like sales versus market 7% 6% 5% 4% 3% 2% 1% 0% (1%) (2%) (3%) (4%) (5%) Sept Sept Sept 2015 2016 2017 MAB underperformance MAB outperformance Rolling four-weekly average vs Peach Tracker – 20 –
Slide 21: Instil a more commercial culture – cost mitigation
Instil a more commercial culture – cost mitigation ● Time and attendance – new software now live across all sites ● Tool facilitates most efficient deployment of labour based on algorithms specific for each site ● Team paid on clocked hours, removing manual task from managers ● Access for management
Slide 22: Instil a more commercial culture – cost mitigation
Instil a more commercial culture – cost mitigation ● Stock control system upgraded ● Materially reduce time taken to complete stocktakes ● In trial with auto order and prep and par systems ● Improves stock control ability ● Reduces waste ● Frees up management time – 22 –
Slide 23: Progress made in last 12 months
Progress made in last 12 months Like-for-like sales +2.6ppts Net promoter score +7.8ppts TripAdvisor response rate +24.0ppts Engagement +2.0ppts Online bookings per week +33k Delivery sales per week +£7k Food safety (double 5) +5.8ppts – 23 –
Slide 24: People
People ● Turnover • Total pub staff turnover reduced by 4ppts • Managers have, on average, been with the company for 8 years ● Engagement • 1,500 more responses than last year • Total engagement up 2% ● Focus on recruiting and training apprentices • Over 1,600 apprentices on our programme • 1,300 ne
Slide 25: Build a more balanced business
Build a more balanced business ● Continued premiumisation of estate through increased investment ● On track to maintain 6-7 year investment cycle ● Growth of Miller & Carter ● Reduction in capex ● Disposed of 79 sites not offering long term growth ● Onerous lease provision increased in the year – 25
Slide 26: Build a more balanced business
Build a more balanced business Opened during Total Open FY17 Miller & Carter 32 84 StoneHouse 46 82 Harvester Feel Good Dining 27 59 ● On track to open 100th Miller & Carter during the beginning of the next calendar year ● StoneHouse has proved a successful premiumisation route for the Crown estate
Slide 27: Build a more balanced business – accommodation
Build a more balanced business – accommodation ● Increased investment in accommodation providing opportunity to extract additional value from the estate ● Currently operate across 52 locations with 900 rooms ● 15 remodels during the financial year ● Like-for-like sales growth of over 20% following i
Slide 28: Making technology work
Making technology work ● Reputation.com embedded with managers responding to 83% of online comments and feedback scores increasing ● New brand apps launched ● Delivery now live with JustEat and Deliveroo ● Click and collect is being trialled with JustEat ● Loyalty mechanic in trial in Browns ● Order
Slide 29: Consumer insight
Consumer insight Consumer insight Environment Experience Amenity Price, quality and service Brand development and evolution – 29 –
Slide 30: Second wave of initiatives
Second wave of initiatives Build a more Instil a more Driving an balanced business commercial culture innovation agenda - Capital investment and - Sales and service - Menu process and pricing estate management - External spend - Digital marketing - Labour deployment - Stock and waste management – 30
Slide 31: Summary
Summary ● Good progress against strategy ● Consistent like-for-like sales growth ahead of the market ● Current trading strong and Christmas bookings ahead of last year – 31 –
Slide 32: Questions
QUESTIONS.
Slide 33: Full Year Results 2017 Supplementary Slides
Full Year Results 2017 Supplementary Slides – 33 –
Slide 34: FY 2017 – Outlet reconciliation
FY 2017 – Outlet reconciliation Total Managed Franchised Total MAB Opening outlets (start FY 2017) 1,768 57 1,825 Transfers (7) 3 (4) Disposals (79) (1) (80) Acquisitions 13 13 Closing outlets (end FY 2017) 1,695 59 1,754 Note: Lodges attached to sites do not appear as a separate outlet. Supplementa
Slide 35: FY 2017 – Financial covenants summary
FY 2017 – Financial covenants summary Securitisation Restricted Payments Tests Test Actual (Relevant Year) Headroom Free cash flow to debt service 1.3x 1.5x £36m EBITDA to debt service 1.7x 1.8x £22m Securitisation Covenants Covenant Actual (Relevant Year) Headroom Free cash flow to debt service 1.1
Slide 36: FY 2017 – Securitisation profile
FY 2017– Securitisation profile Annual cash interest Annual amortisation – 36 –