Slide 1: Interim Results 2015
Interim Results 2015 Ralph Findlay Chief Executive Officer Andrew Andrea 1 Chief Financial Officer
Slide 2: Ralph Findlay, Chief Executive Officer
Ralph Findlay Chief Executive Officer 2
Slide 3: Highlights
Highlights 1. Solid trading performance • Revenue and profit growth despite disposals and higher pension costs • Core PBT growth of 15% • Growth in all business segments 2. Two year transformation of pub estate progressing well • On track to open 25 new-builds this year • Continued conversion of pub
Slide 4: Market dynamics
Market dynamics 1. Macroeconomic environment remains favourable • Employment rate increasing • Lower inflationary pressure leading to real wage growth • Consumer confidence is stronger • Sector supply increasing 2. Consumers are driving the agenda • Seeking new and innovative experiences • Customers
Slide 5: Improving long-term returns
Improving long-term returns New-builds Broad appeal Take control Disposals Destination P&P, Revere Target 85% Funds for Better quality franchised + new-build of earnings Community managed investment Leased Maximise Improve Increase Increase profit per ROC opportunity ROC pub 5 Transformation of pub
Slide 6: Estate development: Vision and progress to date
Estate development: Vision and progress to date 2013 2014 2015 2016 Operating H1 model Destination and 349 372 380 c.420 Managed Premium Franchised, Taverns 1,316 974 909 c.800 Managed Leased 385 343 343 c.320 Leased 2,050 1,689 1,632 c.1,540 6 Consistent progress on clearly stated strategy
Slide 7: Pub segmentation
Pub segmentation H1 2015 Operating No. of Average Average profit profit £m pubs no. of pubs per pub vs LY % Destination and Premium 31.6 380 376 +3 Taverns 24.1 909 942 +19 Leased 12.4 343 343 +4 Total 68.1 1,632 1,661 +17 2012 profit mix 2015 profit mix 17% 15% 36% 42% 50% Destination 35% 47% Taver
Slide 8: Destination expansion
Destination expansion Site • 25 new-build sites to be completed this year • Good visibility on future site pipeline pipeline Build • Modest pressure on site costs reflects competition • Higher standards of environmental compliance costs - Build cost +£100-200k per site vs. 5 years ago • Investment m
Slide 9: Accommodation
Accommodation Destination – 34 pubs Revere – 10 pubs c.600 rooms c.130 rooms Occupancy 65% RevPAR £35 RevPAR £27 Current 3 new lodges 2 conversions Dunbar Elephant at the Balloch Market, Newbury Whitby Farmhouse, Derby c. 5 lodges per annum 1-2 conversions per Future up to 40 rooms annum Selective c
Slide 10: Premium
Premium Pitcher & Piano Revere Town Revere Country • Branded • Independent feel • Independent feel • Premium bars in a • Great food – distinctive • Great food – distinctive mainstream market menus menus • High tempo, high energy • Relaxed, informal ambience • Premium drinks • Great food but not food
Slide 11: Slide 11
Slide 12: Taverns
Taverns Current Future Franchise Franchise rollout evolution • target completion • managed Taverns 2016 and Destination Dispose of smaller pubs Potential new- • 150 disposals build outstanding 12 Creating a high quality community pubs business
Slide 13: Leased
Leased Quality core estate delivering growth • Profit per pub +4% • 50% wet/rental mix Stable income stream • Licensee stability >90% • Bad debt <0.1% of turnover • Moderate capital investment 13 Stable and sustainable income from quality estate
Slide 14: Summary: Evolution of strategy
Summary: Evolution of strategy Current Future £70-80m per year £60-70m per year Freehold returns target 13-15%* Freehold returns target 13-15%* Leasehold returns 30% Leasehold returns 30% Destination Destination 25-30 new-builds 20-25 new-builds – mainly freehold 2-3 lodges c.5 lodges - leasehold Pr
Slide 15: Brewing – Focus on premium and bottled
Brewing – Focus on premium and bottled Off trade • £0.5bn value - £1bn by 2020 at current growth market in • Off trade >50% of beer market growth • c.40% of PBA drinkers <44 Marston’s leads PCA, • 23% share of PBA market* PBA • 20% share of PCA market* markets • NPD key to success – >20 launched per
Slide 16: Thwaites' acquisition
Thwaites’ acquisition Strong existing business • Consistent with existing strategy • Two great premium brands – Wainwright and Lancaster Bomber • Around 1.5% share of premium cask and premium bottled market • Geographical infill, increasing strength in Manchester • Quality sales and marketing busine
Slide 17: Andrew Andrea, Chief Financial Officer
Andrew Andrea Chief Financial Officer 17
Slide 18: Financial highlights
Financial highlights +4% +3% +2% +2% +1% £384.5m £66.5m £29.6m 4.2p 2.5p Revenue EBIT PBT EPS Dividend 18 Revenue and profit growth despite disposals and pension costs
Slide 19: Core profit bridge
Core profit bridge £1m £2m £2m £30m £29m £3m £3m £26m +15% 2014 H1 Disposals 2014 H1 core D&P Taverns & Brewing Pension cost 2015 H1 profit leased increase 19 Strong momentum from core business
Slide 20: Destination and Premium, Taverns LFL performance
LFL performance 5.7% and Premium Destination 4.1% 2.0% 1.5% 2014 2015 2014 2015 Weeks 32-52 2014: H1 Weeks 27-31 flat LFL comparative 3.8% Taverns 3.0% 2.8% 1.4% 20 Solid H1 performance, comparatives soften in H2
Slide 21: Brewing
Brewing +10% +9% +9% +4% Group Ale Premium Ale Revenue Profit Operating margin up 10bps Future business mix impact from Thwaites’ pub supply contract (150bps) 21 Revenue, profit and margin growth from high quality business
Slide 22: Cost guidance
Cost guidance 1. 2015 – no material changes • Insurance - £0.5m from increased cost of captive 2. 2016 – similar cost profile envisaged • Food and drink inflation: 2–3% - Standard lager contract renewal from October • Labour cost inflation: 2-3% - National minimum wage up 3% to £6.70 • Energy inflat
Slide 23: Cashflow summary
Cashflow summary 2015 2014 Comments £m £m Operating cashflow 58 46 Working capital improvement Net interest (38) (44) Impact of AB1 redemption in 2014 Pre-investment FCF 20 2 Organic capex (34) (32) Disposals (exc New River) 26 26 Dividend (25) (23) FCF pre new-build capex (13) (27) New-build capex
Slide 24: Financing structure
Financing structure Bank and Total Property Total Securitised cash (excl. property) Leasing £202m Visible, smooth £257.5m bank property amortising debt facility to leases 35-40 to 2035 November 2018 year term Debt £m 879 164 1,043 202 1,245 Debt: EBITDA 7.5x 2.2x 5.4x 6.4x Interest risk hedge 100% 5
Slide 25: Estate revaluation
Estate revaluation No of Old New Change Sites NBV NBV (£m) (£m) (£m) Managed New-Build post 2009 103 332 404 72 Other Managed 369 840 879 39 Total Managed 472 1,172 1,283 111 Tenanted, Franchise and Leased 929 653 610 (43) Disposals 234 65 54 (11) Other – Industrial and ULP 190 62 59 (3) Total 1,825
Slide 26: Summary
Summary 1. Good trading momentum 2. Estate transformation plan well advanced • Average profit per pub up 17% • Valuation uplift 3. Evolution of investment strategy 4. Brewing achieving growth in competitive market 5. Dividend up 4.1% to 2.5p per share 26 Returns focused strategy continuing to drive
Slide 27: Appendices
Appendices 27
Slide 28: Segmental profit
Segmental profit H1 2015 £m H1 2014 £m YOY % Turnover Destination & Premium 187.2 173.9 7.6% Taverns (inc AHFS) 104.4 113.2 (7.8)% Leased 25.1 25.2 (0.4)% Beer Division 67.8 62.0 9.4% Total 384.5 374.3 2.7% EBITDA Destination & Premium 39.5 36.3 8.8% Taverns (inc AHFS) 27.7 29.5 (6.1)% Leased 13.3 1
Slide 29: Pub numbers
Pub numbers Destination and Taverns Leased Total Premium 2014 Opening 349 1,316 385 2,050 New-build additions 27 27 Disposals (4) (342) (42) (388) 2014 Closing 372 974 343 1,689 New-build additions 8 8 Disposals (65) (65) H1 2015 Closing 380 909 343 1,632 2013 average numbers 339 1,379 390 2,108 201
Slide 30: Historical LFL
Historical LFL Destination and Premium Taverns Total Food Wet Total 26 wks 30/03/13 0.0% 2.0% (2.0%) 0.0% 32 wks to 11/05/13 1.0% 3.3% (1.5%) 0.0% 42 wks to 20/07/13 2.1% 3.7% 0.5% 0.0% 53 wks 05/10/13 2.2% 3.9% 0.2% 0.0% 7 wks to 23/11/13 3.1% 4.6% 1.0% 2.1% 8 wks to 18/01/14 5.0% 6.4% 3.3% 3.8% 15
Slide 31: 2015 cost outlook
2015 cost outlook Drink Food Labour Utilities Drink Food Menu Cost Energy cost cost & Carbon Levy prices prices management savings usage £1.0m +3% £2.0m £1.0m +2-3% £1.0m £1.5m <1% £2.0m £2.5m +1% £1.5m £2.5m 31 Modest inflation, clear mitigation plans
Slide 32: Capex, tax and share capital
Capex, tax and share capital Forecast Forecast Comments 2015 2016 New-build capex £80m £70m c.25 sites 2015 Pub growth £25m £25m Pub maintenance £25m £25m 2015 – new EPOS system Brewing and Group £15m £15m Total c.£145m c.£135m Disposals c.£60m c.£40m Net capex c.£85m c.£95m Tax rate c.20% c.20-21%
Slide 33: Securitised debt profile
Securitised debt profile Principal Final maturity Tranche Type outstanding at Step-up date date 4 April 2015 A1 Floating £106.5m July 2012 2020 A2 Fixed/Floating £214.0m July 2019 2027 A3 Fixed/Floating £200.0m April 2027 2032 A4 Floating £203.7m October 2012 2031 B Fixed/Floating £155.0m July 2019
Slide 34: Securitisation profile
Securitisation profile Securitisation Debt Service 90.0 Max £80.7m Debt Service 80.0 70.0 A3 step-up A2, B step-up 60.0 Principal 50.0 Interest £m 40.0 30.0 20.0 10.0 0.0 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 Financial year FY2015 FY2016 FY2017 FY2018 FY
Slide 35: CROCCE
CROCCE FY2014 FY2013 FY2012 FY2011 FY2010 FIXED ASSETS: Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Bal Depn Reval Total Goodwill 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 224.2 Other intangible assets 25.1 5.3 30.4 24.1 6.1 30.2 23.5 5.2 28.7 24.6
Slide 36: www.marstons.co.uk
The Union Rooms ¢c1952 = a ; The Union Rooms 2014 el , . ° a ° di e Grow up. Don’t Change. Marston's Pedigree We Pedigre www .livealifeofpedigree.co.uk © @MarstonPedigree