Mitchells & Butlers Plc · LSE:MAB
Mitchells & Butlers — H1 2014 Earnings Presentation
31 slides from Mitchells & Butlers's earnings presentation, May 22, 2014
Slide 1: Mitchells & Butlers Half Year Results 2014
Mitchells & Butlers Half Year Results 2014 22 May 2014 1
Slide 2: Highlights
Highlights Turnaround in volumes Satisfactory conclusion to pension negotiations People initiatives gaining momentum NPS growing across the business Remodel programme accelerating successfully Pub systems upgrade on track Successful execution of established plans 2
Slide 3: Financial Review
Financial Review Tim Jones – Finance Director Half Year Results 2014 22 May 2014 3
Slide 4: Income statement
Income statement (pre exceptional items and other adjustments) 28 weeks to 12 April 2014 H1 2014 H1 2013 £m £m Revenue 1,016 991 + 2.5% Operating costs (869) (847) Operating profit 147 144 + 2.1% Interest (70) (70) Profit before tax 77 74 + 4.1% Earnings per share 14.6p 14.4p + 1.4% Operating margin
Slide 5: Like-for-like sales growth
Like-for-like sales growth Week 1-17 Week 18-28 Week 1 – 28 Week 1 – 33 Food 2.5% (1.5%) 0.9% 1.1% Drink 1.3% 1.2% 1.3% 1.3% Total 2.0% (0.3%) 1.1% 1.2% • Volatility driven primarily by weather and special events • Still large regional variations although recovery expected to be broad based 5
Slide 6: Drivers of LFL food and drink sales
Drivers of LFL food and drink sales Total +1.1% Food +0.9% Drink +1.3% 1.8% +0.7% +0.2% 1.6% (0.3%) 1.6% 1.4% Volume 1.2% 1.0% Price / 0.8% Volume 0.6% Spend 0.4% Price / 0.2% Spend 0.0% 6
Slide 7: Like-for-like volume and price trends
Like-for-like volume and price trends 8.0% Food 8.0% Drink 6.0% 6.0% Volume 4.0% Volume 4.0% Price / 2.0% Price / 2.0% Spend 0.0% Spend 0.0% FY10 FY11 FY12 FY13 H1 FY14 FY10 FY11 FY12 FY13 H1 FY14 (2.0%) (2.0%) (4.0%) (4.0%) (6.0%) (6.0%) Volume Price / spend 7
Slide 8: EBIT movement
EBIT movement +£3m (£4m) (£1m) +£3m +£2m £144m FY13 new FY14 new Investment in £147m LFL Trading Depreciation H1 2013 openings openings IT H1 2014 infrastructure 8
Slide 9: Group cash flow
Group cash flow H1 2014 H1 2013 FY 2013 £m £m £m EBITDA 204 204 420 Working capital / non cash items 25 22 (9) Pension deficit contributions (20) (20) (40) Cash flow from operations 209 206 371 Maintenance & infrastructure capex (58) (48) (100) Net interest paid (65) (63) (126) Tax (16) (13) (31) Fr
Slide 10: Group net debt
Group net debt Apr 14 Sep 13 Apr 13 £m £m £m Securitisation debt1 (2,101) (2,124) (2,156) Liquidity facility (148) - - Cash & other 247 101 132 Securitised net debt (2,002) (2,023) (2,024) Cash and cash equivalents 281 264 247 Group net debt (1,721) (1,759) (1,777) Net Debt : EBITDA2 4.1x 4.2x 4.3x
Slide 11: Capital expenditure
Capital expenditure H1 2014 H1 2013 £m £m Maintenance and infrastructure 58 48 Expansionary 28 11 Cash flow from operations 86 59 Increased capital spend from low level last year Rollout of key infrastructure projects Ongoing investment in successful remodel programme Expansion of 15 new / converted
Slide 12: Expansionary capex returns
Expansionary capex returns 45 40 35 New sites 30 Number 25 Conversions of sites 20 15 10 5 0 H1 H2 H1 H2 H1 FY 12 FY 13 FY 14 H1 2014 Capex a H1 2014 No of sites FY 2011-14 EBITDA ROI Freehold Acquisitions £23m 6 14% Leasehold Acquisitions £5m 5 18% Conversions £1m 4 17% Total £29m 15 16% a: Relates
Slide 13: Pensions
Pensions Funding: Agreement now reached with Trustees on 2013 triennial valuation Deficit £572m (2010 valuation: £400m) Recovery plan extended by three years to 2023 Annual contributions starting at £45m (previously £40m per annum) Further contribution of £40m by September 2015 Accounting: Adoption
Slide 14: Key messages
Key messages Return to food volume growth and turnaround in drink volumes Sales growth at stable operating margin Adjusted earnings per share growth of 1.4% Continued investment in business transformation programme, both through capital and expensed Agreement reached on 2013 pensions triennial valua
Slide 15: Business Review
Business Review Alistair Darby – Chief Executive Half Year Results 2014 22 May 2014 15
Slide 16: Building long term success at M&B
Building long term success at M&B Balanced transformation Simplification drives scale benefits Foundations of success Exceptional people Compelling brands and formats Quality like-for-like sales profit growth Continued execution of established strategy 16
Slide 17: Key elements of strategy
Key elements of strategy Build team stability Attract, develop, retain Lead in safety and efficiency Scores on the doors, systems infrastructure Be guests’ first choice Trust and loyalty builders, insight, remodels Expand the business Drive organic growth through four target brands: All Bar One, Har
Slide 18: Geographical economic environment
Geographical economic environment Average Annual Real spending London & SE Other UK growth (%) c.40% revenue c.60% revenue Anticipated recovery in real spending 2.5% growth across all regions 2.0% 1.5% 2014 - Fastest growth continuing to come 2017 2014 - from London / South East 1.0% 2017 2008 - 0.5
Slide 19: UK market environment
UK market environment Consumer expenditure growth (%) Market growth to track overall 8.0% growth in consumer expenditure 6.0% Expenditure on eating and drinking out stable 4.0% Continued switch from drinking 2.0% out to eating out 0.0% M&B 3% of market: substantial (2.0%) opportunity to grow through
Slide 20: Execution centred on priorities
Execution centred on 4 priorities Exceptional people... Outstanding operators of scale brands and formats... Which guests love... Leading to market leadership and profit growth Profit through people, guests and operational practices 20
Slide 21: Our people
Our people Key performance indicator: FY11 FY12 FY13 H1 14 MAT Staff Turnover 85% 82% 78% 78% Jobs market: Unemployment falling across UK Skills shortage, especially food People strategy critical to long term success 21
Slide 22: Our people: key activity
Our people: key activity Central recruitment Success in London being rolled out to regions Engagement increasing, e.g. 127% increase in responses to most recent attitudes survey 1,000 new apprentices in the next two years £2m investment in induction training Membership of ‘Pick a Perk’ up 6k in firs
Slide 23: Our practices
Our practices Food safety scores: Year on year improvement in key guest metric off already high base Targeting all businesses to be 4 or 5 New pub systems rolled out to >750 pubs Handhelds, KMS, tills speed up guest service: increases NPS Modernised infrastructure frees up GM, RBM time for business
Slide 24: Our guests
Our guests Key performance indicator: FY11 FY12 FY13 H1 14 Net promoter score 47% 55% 59% 63% 700,000 responses received annually Net promoter score growth across the business Trust and loyalty builders well-established FY11 FY12 FY13 H1 14 Guest satisfaction key focus of Good to Great Guest-facing
Slide 25: Our guests: food innovation
Our guests: food innovation Increased relevance Provenance: National Park lamb Sharers: All Bar One, Castle Better value Generosity: Sizzling ultimate plates All-inclusive: Harvester bundle deal Enhancing the way we delight our guests with food 25
Slide 26: Our guests: drinks innovation
Our guests: drinks innovation Volume-driving initiatives: Cocktail Masterclass, Cask Ale Club Evolving drinks range: Craft beer range, ‘home-made drinks’ Sports loyalty card promotions, World Cup activity Wide range of drinks initiatives to drive volumes 26
Slide 27: Our profits: expansion
Our profits: expansion Expansion based on four key brands Opportunities to expand through freeholds and leaseholds Multiple routes to successful expansion 27
Slide 28: Our profits: expansion
Our profits: expansion Tighter focus builds openings expertise Portfolio enables opportunistic acquisition, e.g. Convivial Increased expansionary capital programme 28
Slide 29: Our profits: improving existing estate
Our profits: improving existing estate 97 remodels carried out in H1 2014 (H1 2013: 83) More than 600 remodels planned from FY14 to FY16 Targeted investment based on guest insight Accelerating remodel programme 29
Slide 30: Conclusion
Conclusion Transforming the business for long term success Clear strategy in place Strategy underpinned by well-defined operational priorities Economy improving across all regions Well positioned for future growth 30
Slide 31: Q&As
Q&As Half Year Results 2014 22 May 2014 31