Slide 1: Interim Results 2013
: fie MARSTON’S fi’ ‘ x . th \ — rons H ‘\ : i dl ‘y .\ ey Interim Pik 2 \ *
Slide 2: Highlights
Highlights Confident in meeting full year expectations • Embedded management actions • Good start to H2 Underlying performance remains strong • New-builds driving Destination and Premium growth • Revenue growth in Brewing • Q2 snow has impacted trading Interim dividend up 4.5% Board and senior manag
Slide 3: Andrew Andrea, CFO
Andrew Andrea CFO
Slide 4: Financial summary
Financial summary 26 weeks 2013 2012 vs. LY Revenue £358.1m £342.1m +5 % Operating Profit* £66.6m £67.6m (1)% Interest* £(39.0)m £(34.1)m (14)% Profit before tax* £27.6m £33.5m (18)% Adjusted EPS* 3.8p 4.7p (19)% Interim Dividend 2.3p 2.2p +5 % * before exceptional items Page 4 Dividend growth refle
Slide 5: Embedded growth for H2
Embedded growth for H2 13 £3m £12m 12 11 10 £2m 9 8 Operating £3m profit 7 £m 6 Operating profit 5 £4.5m less £4m interest 4 £(1.5)m 3 2 1 0 2012 New-builds 2013 New-builds Cost savings Week 53 Total Page 5 Clear management actions to grow in second half
Slide 6: Pub segmentation
Pub segmentation H1 2013 Operating No. of Average % of % of profit £m pubs no. pubs profit pubs Destination & Premium 24.2 339 334 36% 16% Taverns 29.8 1,398 1,414 44% 66% Leased 13.1 391 392 20% 18% Total 67.1 2,128 2,140 100% 100% Page 6 Increasing proportion of direct control
Slide 7: Destination and Premium – sales performance
Destination and Premium – sales performance LFL % Reported H1 excl. Weeks Weeks snow 27-32 1-32 Food 2 4 9 4 +7% Drink (2) 2 3 (1) Total - 3 6 1 2013 2012 YOY Food mix 52% 50% +2% Page 7 Solid underlying performance
Slide 8: Destination and Premium profit
Destination and Premium profit 26 £0.5m (£0.2m) 25 (£0.2m) £24.2m £2.0m 24 Operating profit £m 23 £22.1m 22 21 20 H1 2012 2012 New- 2013 New- Premium LFL Refurbishment H1 2013 builds builds Profit Closure Page 8 New-build performance strong, mitigates snow
Slide 9: Taverns profit
Taverns profit 33 £0.5m (£2.3m) £32.1m 32 31 Operating profit (£0.5m) £m 30 £29.8m 29 28 H1 2012 Franchise Managed and Disposals H1 2013 Tenanted LFL Page 9 Lower managed and tenanted LFL partly offset by franchise growth
Slide 10: 2014 cost outlook
2014 cost outlook Drink Food Labour Utilities Drink Food Cost Menu Energy cost cost & Carbon Levy prices prices savings management usage +3% £1.0m £2.0m £1.0m +2-3% £1.0m £1.5m <1% £1.5m £1.5m +1% £1.5m £2.0m Page 10 Inflationary changes stable, less pressure to increase food prices
Slide 11: Continued market outperformance
Continued market outperformance Revenue and volume growth • Revenue up 12% • Ale volume up 8% • Strong growth in off-trade • Market share growth Robust financial performance • Margins lower due to higher off-trade mix • Operating profit flat • Strong cash generation 2014 cost outlook • c.£1m of cost
Slide 12: H1 interest charges
H1 interest charges 40 £1m £39m £2m 38 £2m 36 £m £34m 34 32 30 H1 2012 2012 swap Securitised step-up Other H1 2013 62 62 Securitised Interest £m 59 58 57 56 2012 2013 2014 2015 2016 2017 Page 12 Short term increase in interest costs
Slide 13: Cashflow summary
Cashflow summary £m H1 2013 H1 2012 Comments Operating cashflow 69 75 Net interest (44) (41) Pre-investment FCF 25 34 Organic capex (39) (33) Front-ended capex programme Disposals 18 23 £40-50m full year guidance Final dividend (22) (21) FCF pre new-build (18) 2 New-build (40) (26) Evenly phased ope
Slide 14: £108m long-term lease financing
£108m long-term lease financing Extend debt maturity 35-40 year term Low cost of Initial cash cost 5.10 - 5.65% debt P&L cost of debt c.6.8% Freehold Freehold reverts at end of term preference Flexible, No covenant reporting, asset substitution efficient 6x EBITDA, less geared than traditional s&l K
Slide 15: Finance structure
Finance structure As at 30 March 2013 Total £m Securitisation 954 Visible, consistent debt service profile Bank 139 £257.5m facility to May 2016 Net debt excluding lease finance 1,093 Lease finance 101 35-40 year financing Net debt 1,194 Page 15 Flexible finance structure, 90% long dated maturity
Slide 16: Ralph Findlay, CEO
Ralph Findlay CEO v7
Slide 17: Market dynamics
Market dynamics Consumer backdrop • Confidence remains weak, pay subdued • Positive – increased tax-free allowance ‘Flight to value’ offers opportunity for Marston’s • Established trend • Pubs well placed • Better quality + good service + price = consumers win Government – mixed messages • HM Treasu
Slide 18: Strategy
Sustainable growth; increase ROC; reduce leverage Pubs Brewing “National distribution, local “The best pub around here” appeal” Strategy Operating Estate Consumer Localness Premium Flexibility Development Focus Action Category Format range New-build ‘F-Plan’ Free Trade champions of Agreements Pub st
Slide 19: Pub segmentation
Pub segmentation Destination & Premium Taverns Leased Food sales mix 52% Food sales mix 25% Destination – 2 value formats Community pubs Independent, individual • Milestone, Two for One • Franchise strategy • Distinctive pubs Premium • Flexible formats • Strong locations • Pitcher & Piano , Revere •
Slide 20: Destination – four ingredients
Destination – four ingredients Standards Service Value Consumer New-builds ‘Smile’ Food spend c.£6.30 ‘F-Plan’ Refurbishments Technology Service standards Independent research Constant improvement Food quality Competitor analysis Focus groups Page 20 Average sales per week £19k, profit per pub £230k
Slide 21: New-build plans well established
New-build plans well established 2013 programme • Nine sites completed • 1st site in Scotland – Dunbar; Glasgow and Edinburgh Summer 2013 • Two lodges open – Chepstow, Aberystwyth • Turnover and returns strong • At least 20 projected for the full year 2010-2012 sites • Continue to perform well • LFL
Slide 22: New-build 2014 visibility
New-build 2014 visibility Geographical split • South East 6 9% • South West 6 35% • Scotland 4 57% • North 4 • Midlands 3 23 Two for One Milestone Rotisserie Milestone Carvery Page 22 National programme
Slide 23: Premium – 38 pubs
Premium – 38 pubs • 20 bars • Average turnover per week £23k • Expansion potential • Four sites established • Initial signs encouraging • Further six sites identified for 2014 investment Page 23 Improving the strength of our premium offer
Slide 24: Taverns: community pubs – new approach
Taverns: community pubs – new approach Political Consumer Competition Economy Stability Sustainability Profitability Page 24 Adding value = better experience for customers
Slide 25: Franchising - background
Franchising - background £13.4bn industry 91%* providing profitable businesses 90%* have satisfactory relations with their franchisor Franchisees feel they have a competitive advantage* *Source: NatWest BFA Franchise Survey Page 25 Minimal pub competition
Slide 26: Taverns: why franchise works
Taverns: why franchise works Rent N/A Beer prices N/A Buying power Simplicity Affordability Flexibility Insight Systems Local knowledge Motivation Flexibility Franchisee Resources Brand Consumer engagement Investment Development Page 26 A model which combines the best of managed and tenancy
Slide 27: Leased estate
Leased estate 391 Pubs Food orientated Average Rent £40k Average EBITDA c.£80k Page 27 Smaller, high quality estate
Slide 28: Evolution of leased relationship
Evolution of leased relationship Smaller • Industry engagement scores correlated to size of estate focused estate • Team dedicated to leased model only Being a better • Identify investment opportunities • Aligned with lessee requirements retail partner • Develop operational skills • Capital investme
Slide 29: BIS Review
BIS Review Marston’s will have fewer tenancies • Conversion to franchise model Smaller, high quality leased estate • Emphasis on service, support and relationships • Long-term commitment to fair, sustainable rents and transparency • Cellar monitoring: not required in the medium term Adjudicator/stat
Slide 30: Localness
Localness Localness very relevant to consumers* Two out of three beer drinkers want local and regional beers Local 2013 vs 2009 Free beers Trade +25% +10% +43% Accounts Cask ale +17% +14% * Source: RBD Research Page 30 Local strategy achieving growth in a declining market
Slide 31: Premium
Premium External beer sales 2013 vs 2009 2009 90% 83% Other Std Ale 23% 31% 61% Prem Ale 46% % Volume change 2013 19% Other 20% Std Ale 28% 0% Premium Ale Bottled ale Export Prem Ale 52% £7 million bottling line investment H2 2013 Page 31 Repositioned as a higher quality business
Slide 32: Summary
Summary Confidence in full year out-turn • New-build momentum • Cost reduction • Solid start to H2 Strategic plans well advanced • New-builds • Franchise development • Local and premium beers Dividend increase reflects confidence Page 32 The right strategy
Slide 33: Appendices
Appendices
Slide 34: Pub numbers
Pub numbers Destination and Taverns Leased Total Premium 2012 Opening 303 1,452 393 2,148 New-Build Additions 25 25 Disposals (23) (23) 2013 Opening 328 1,429 393 2,150 New-Build Additions 9 9 Transfers 2 (2) 0 Disposals (31) (31) 2013 H1 339 1,398 391 2,128 2013 Average Numbers 334 1,414 392 2,140
Slide 35: Average number of shares in 2013
Average number of shares in 2013 569.2m Number of shares in issue as at 30 March 2013 569.3m Additional dilutive number of shares 6.8m Forecast Forecast 2013 2014 Tax rate 21% 21 - 23% Capex £120 - 130m £120 - 130m Disposal proceeds c.£40 - 50m c.£40 - 50m Page 35
Slide 36: Securitisation as at 30 March 2013
Securitisation as at 30 March 2013 Securitisation results £m Actual Gross debt outstanding as at 30 March 2013 1,007.3 EBITDA 128.6 Free cashflow (FCF) 117.8 Debt service (DSCR) 80.6 Financial covenants Actual Covenant FCF : DSCR 1.5x >1.1x EBITDA : DSCR 1.6x >1.5x Net worth £577m £90m Page 36
Slide 37: Securitised debt profile
Securitised debt profile Tranche Type Principal Step-up Final Maturity outstanding Date Date at 30 March 2013 A1 Floating £139.4m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £218.9m October 2012 2031 AB1 Floating £80.0m October 2012 2
Slide 38: Securitisation profile
Securitisation profile Page 38
Slide 39: www.marstons.co.uk
www.marstons.co.uk | | Posies $ ; ©. » ~ Pr oae >. +) - i= ped vt ene ‘ } : ; “45% $33 a 13244 ; L Se ee, isa: :obaee _ - : ct . ‘ ; : = : se , +58 SiGets Basa Seees ; oS rer TE TESAT ass ; Sheath