Marston's Plc · LSE:MARS
Marston's — H1 2010 Earnings Presentation
40 slides from Marston's's earnings presentation, May 2010
Slide 1: Interim Results 2010
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Slide 2: David Thompson, Chairman
David Thompson Chairman
Slide 3: Highlights
Highlights 1. H1 performance in line with targets • Revenue growth, margins broadly level 2. Good progress in strategy development • New-build programme on track and performing ahead of target • Extensive roll out of innovative Retail Agreement 3. Interim dividend of 2.1p per share 4. Clearly define
Slide 4: Andrew Andrea, Finance Director
Andrew Andrea Finance Director
Slide 5: Financial Summary
Financial Summary Profit and loss account 26 weeks 2010 2009 % change Revenue £309.2m £307.5m +0.6% Operating Margin 21.2% 21.3% (0.1)% Operating Profit £65.5m £65.4m +0.2% Profit before tax1 £27.8m £27.7m +0.4% Adjusted EPS1 2 3.8p 5.8p (34.5)% Dividend2 2.1p 3.4p (38.2)% 1 before exceptional items
Slide 6: Like-for-like performance
Like-for-like performance H1 performance +2% 5% (2)% Like-for-like sales* % change 39% Drink 56% Drink +0.5% Food Food +2.5% Other Accommodation +1.1% Current trading Machines +1.9% Like-for-like sales % change Total +1.4% for 6 weeks to 15 May Drink +0.8% Food +2.0% Total +1.2% * Excludes any pubs
Slide 7: Retail margin performance
Retail margin performance 0.3% 14.5% 0.5% 14.0% 0.1% 0.7% (0.2)% (0.9)% Presentation name > date 7 Continuing the improved margin performance
Slide 8: 2011 Cost outlook
2011 Cost outlook 1.Labour • Minimum wage impact £1.5m 2. Food • Currently no inflationary headwinds 3. Lager • New contracts commencing October 2010, no material cost impact anticipated 4. Utilities • Electricity – in contract – flat costs • Gas – in negotiation – anticipate flat Presentation name
Slide 9: Pub Company KPI analysis
Heading (Arial Black 22pt) Heading (Arial KPI analysis Black 22pt) H1 2010 H1 2009 Total Pub Company YOY revenue (4.8)% (6.9)% YOY EBIT (4.5)% (6.9)% YOY profit per pub (1.7)% (6.9)% Substantive estate % of estate 83% 80% Rent per pub +2% +2% Profit vs LY +0.5% Flat Substantive: 85% of estate as at
Slide 10: Tenant health check issues
Heading (Arial Black 22pt) Tenant health Heading (Arialcheck Blackissues 22pt) 1. Rental management • Concessions easing • 2% increase in average rent per pub to £25.8k* • Historical ‘fair rent’ approach remains appropriate • Introduction of innovative, flexible agreements to drive growth 2. Pub clo
Slide 11: Strong performance maintained
Strong performance maintained 1. Strong top-line growth • Revenue up 8.6% Improved premium ale volume - up 4% Stronger Take Home volume - up 8% 2. Solid margin performance • Decline of 0.9% driven by off-trade mix • 2011 cost outlook neutral 3. Strong cash return on net assets • EBITDA return on ass
Slide 12: Cashflow summary
Cashflow summary £m H1 2010 H1 2009 YOY Comments Operating cashflow 81.3 53.5 +£27.8m Working capital and tax Net interest (36.9) (40.4) +£3.5m Pre-investment FCF 44.4 13.1 +£31.3m Net capex* (31.4) (22.2) £(9.2)m New-build/less disposals Pre-dividend FCF 13.0 (9.1) +£22.1m Final dividend (21.0) (22
Slide 13: Securitisation highlights: year to 3 April 2010
Securitisation highlights: year to 3 April 2010 Securitisation results Actual • Gross debt(1) outstanding as at 3 April 2010 £1,070.1m • EBITDA £126.8m • Free cashflow (FCF) £115.7m • Debt service (DSCR)` £77.6m Financial covenants Actual Covenant • FCF : DSCR 1.5x >1.1x(2) • EBITDA : DSCR 1.6x >1.5
Slide 14: Financing structure
Financing structure £m Securitisation 1,070 • Amortises to 2035 Bank facility* 98 • Interest cover: 4.8x vs covenant >2.7x • Debt to EBITDA: 1.6x vs covenant <4.8x 1,168 • 100% at fixed rates Net cash (42) Debt issue costs (17) Net debt 1,109 • Average cost of net debt c.6.7% Debt:EBITDA 5.8x • No r
Slide 15: Pension update
Pension update 1. Agreed pension scheme changes • Move future accruals to 80ths basis rather than 60ths - Employees can pay additional contributions to achieve 60ths • Move minimum retirement age with no actuarial reduction to 61 from 60 - Long term intention to align to state retirement age • Schem
Slide 16: Summary
Summary 1. Returning to growth • Trends improving in all three divisions • Group operating margins broadly flat, MIT improvement 2. Stronger cashflows • Tight working capital management driving improvement • Pension liability management will mitigate medium term cashflow risks 3. Financing • No refi
Slide 17: Ralph Findlay, Chief Executive
Ralph Findlay Chief Executive
Slide 18: Profitable growth in a challenging environment
Profitable growth in a challenging environment 1. 2010: growth despite challenging environment • Improvement in all trading divisions • Strong growth in free cashflow • Substantial freehold asset base 2. Clear strategy and return criteria • Appropriate for difficult economic and political backdrop •
Slide 19: Clear divisional strategies
Clear divisional strategies Inns and Taverns Pub Company Beer Company Organic growth through ‘F-Plan’ Innovative agreements Localness New-build investment Increased control of retail offer Focus on premium ale Marston’s PLC Sustainable growth Maximise return Increase ROC > date 19 Three divisions, t
Slide 20: 'F-Plan' drives consistent growth
‘F-Plan’ drives consistent growth Food LFL c11m meals served Margins Food mix 39% +2.5% +5.4% +1.0% +2.0% Consistent Sales Food 50% growth £62m spend per growth in since 2001 head six years £6.00 ‘F-Plan’: Food, Families, Females, Forty/Fifty somethings 20 Improving sales, margin and mix in a curren
Slide 21: New-build investment
New-build investment 1. Investment plans to build 60 pubs over next three years • £140m investment • Target returns:15% EBITDA , 13% EBIT • Target £21m EBITDA upside by 2013 2. Build programme on track • 2010 plan to open 15 sites - 8 sites are open, including 1st Magnum - Remainder on site • 45 sit
Slide 22: New-build performance
New-build performance 2010 new- 2010 Pre 2010 builds target sites Number of pubs 6 15 30 Turnover per week £23k £20k £20.5k EBITDA conversion 31% 30% 30% Food mix 61% 55% 57% Food spend per head c.£6.50 c.£6.00 c.£6.00 EBITDA ROC* 16.9% 15.0% 15.7% LFL sales +4.5% *annualised pro-forma Presentation
Slide 23: Development of tenanted and leased pubs
Development Heading (Arial Black of tenanted 22pt) Heading andBlack (Arial leased22pt) pubs 1. MPC performance has benefited from relationships based on: • Openness, transparency • Fair rents, fair share of risks and rewards • Sustainability 2. Licensees have benefited from: • Flexibility on rents,
Slide 24: The Retail Agreement is different
The Heading Heading (Arial Black 22pt) Retail Agreement is different (Arial Black 22pt) 1. Not a traditional tenanted agreement • ‘Franchise-style’ agreement • Retailer earns a percentage of sales revenue • Marston’s responsible for all bills other than staff costs 2. Viable business model for small
Slide 25: Retail Agreement learnings from trials
Retail Heading (Arial Black Agreement 22pt) – learnings Heading from22pt) (Arial Black trials 1. Improved consumer proposition • Pub standards • Consistency • Value for money • Extension of ‘F-Plan’ into tenanted pubs 2. Significant revenue/volume uplift • Consumer driven – takes time 3. Wider pool
Slide 26: Retail Agreement: target 600 pubs
Retail Agreement: Heading (Arial Black 22pt) target Heading (Arial – 60022pt) Black pubs 1. Target EBITDA uplift - £10k per pub (20% EBITDA ROC) p.a. Cumulative 2010 2011 2012 2013 2014 Retail Agreements* 100 300 500 600 600 Target profit uplift £m* 1.0 1.5 3.5 5.3 6.0 2. Key objectives • Increased
Slide 27: Development of lease agreements
Development Heading (Arial Black 22pt) Headingof leaseBlack (Arial agreements 22pt) 1. C.1,000 pubs will continue to be operated as leases • 5 – 30 years • Assignable 2. Widespread availability of Advance agreement • Free trade pricing model • Direct debit payment, online ordering • Rent adjustment
Slide 28: Localness strategy
Localness strategy Local Beer/Total Beer* 1. Local brand growth still strong • Jennings +9% • Ringwood +15% • Wychwood +9% % change in volume 2. Leverage growth in Free Trade 3. ROC is key performance metric • 16.5% EBITDA return on assets • Tetley brewing contract will increase capacity utilisation
Slide 29: Premium ale focus
Premium ale focus 1. Long term growth in on- and off-trade 2. Volumes up 4% vs LY 3. No. 1 market share • Premium cask ale: 23.1%* • Premium bottled ale: 24.4%* 4. Innovation 115 • FastcaskTM - opportunity to drive further gains in 100 distribution and market share 80 *source: BBPA market trader 29
Slide 30: Summary
Summary 1. Revenue and profit growth • Progress in all three trading divisions • Strong balance sheet • Worst is over, but pace of recovery uncertain 2. Future growth achieved from focussed and clearly stated divisional strategies • MIT – New-builds and organic growth through ‘F-Plan’ • MPC – Retail
Slide 31: Appendices
Appendices
Slide 32: 85% of pubs are securitised
2,167 pubs + Marston’s Pubs Limited Other Group companies 273 Managed pubs 218 Managed pubs 1,574 Tenanted pubs 102 Tenanted pubs 1,847 320 + Presentation name > date 32 85% of pubs are securitised
Slide 33: Inns and Taverns results
2010 2009 % change Revenue £m 175.4 173.7 +1.0% EBITDA £m 35.3 35.9 (1.7)% Operating profit £m 25.5 24.3 +4.9% Operating margin % 14.5 14.0 +0.5% Average no. of pubs 493 504 Presentation name > date 33
Slide 34: Pub Company results
Heading (Arial Black 22pt) Heading (Arial Black 22pt) 2010 2009 % change Revenue £m 82.2 86.3 (4.8)% EBITDA £m 43.3 45.4 (4.6)% Operating profit £m 38.5 40.3 (4.5)% Operating margin % 46.8 46.7 +0.1% Average no. of pubs 1,682 1,729 Presentation name > date 34
Slide 35: Beer Company results
2010 2009 % change Revenue £m 51.6 47.5 +8.6% EBITDA £m 11.5 11.6 (0.9)% Operating profit £m 7.2 7.1 +1.4% Operating margin % 14.0 14.9 (0.9)% Presentation name > date 35
Slide 36: Pub numbers
Pub numbers 3 October 2009 496 1,688 2,184 New-builds/single site 5 - 5 acquisitions Disposals (10) (12) (22) 3 April 2010 491 1,676 2,167 Presentation name > date 36
Slide 37: Share numbers and forecast tax, capex, disposals
• Average number of shares in H1 2010 569.2m • Number of shares in issue as at 19 May 2010 569.2m • Additional dilutive number of shares 1.7m Forecast Forecast 2010 2011 • Forecast tax rate c.22% 23%-25% • Capex forecast:Existing business £35-40m £35-40m Retail Agreements £3m £10m New-builds/sites £
Slide 38: Securitisation debt profile
Securitisation debt profile Tranche Type Principal Step-up Final Maturity outstanding Date Date At 3/04/2010 A1 Floating 183.0 July 2012 2020 A2 Fixed/Floating 214.0 July 2019 2027 A3 Fixed/Floating 200.0 April 2027 2032 A4 Floating 238.1 October 2012 2031 AB1 Floating 80.0 October 2012 2035 B Fixed
Slide 39: Securitisation profile
Securitisation profile RELEVANT YEAR Max £86.3m/£84.2m A3 Stepup A1 Stepup A4 AB1 A2 B Presentation name > date 39
Slide 40: www.marstons.co.uk
www.marstons.co.uk