Fuller, Smith & Turner P.l.c. Class A · LSE:FSTA
Fuller, Smith & Turner P.l.c. Class A — H1 2013 Earnings Presentation
50 slides from Fuller, Smith & Turner P.l.c. Class A's earnings presentation, November 2013
Slide 1: Fuller, Smith and Turner PLC Half Year Results
Fuller, Smith and Turner PLC Half Year Results for the 26 weeks ended 28 September 2013
Slide 2: Michael Turner, Chairman
ye ) Michael Turner Chairman
Slide 3: Agenda
Agenda • Overview • Financial Results • Operations • Prospects
Slide 4: Highlights
Highlights • Strong first half for the Group • Managed Pubs and Hotels LFL sales up 7.9% • Good progress on strategic initiatives • Adjusted EPS up 9% to 24.79p • Adjusted PBT up 8% to £18.1m • Revenue up 6% to £146.3m • Interim dividend up 8% to 5.80p • Net debt / EBITDA at 2.5x on a pro forma basi
Slide 5: James Douglas, Finance Director
James Douglas Finance Director
Slide 6: Group Performance
Group Performance H1 2013 H1 2012 £m £m Revenue 146.3 137.9 +6% Operating costs* (125.3) (118.1) +6% Operating profit* 21.0 19.8 +6% Net finance costs*# (2.9) (3.0) -3% Adjusted profit*# 18.1 16.8 +8% Depreciation & amortisation 7.1 7.1 level EBITDA* 28.1 26.9 +4% * Excluding exceptional items # 201
Slide 7: Exceptional Items
Exceptional Items H1 2013 H1 2012 £m £m Profit on sale of properties 0.5 0.6 Asset impairments & reversals (0.5) 0.5 Acquisition costs (0.3) (0.2) Onerous lease provision release 0.6 - Reorganisation costs (1.3) - Mark to market of financial instruments - 0.1 Pension scheme finance costs# (0.3) (0.5
Slide 8: Managed Pubs and Hotels
Managed Pubs and Hotels H1 2013 H1 2012 LFL sales +7.9% +1.6% Revenue £94.4m £86.1m +10% Operating costs* £81.8m £75.2m +9% Operating profit* £12.6m £10.9m +16% Operating margin 13.3% 12.7% Depreciation & amortisation £4.8m £4.8m level EBITDA* £17.4m £15.7m +11% * Excluding exceptional items
Slide 9: Margin Evolution
Margin Evolution Managed Pubs and Hotels margin up 69 bp on last half year Managed Pubs and Hotels operating margin H1 2012/13 H1 2013/14 H2 2013/14 Food margin improvements Gross profit % continue and impact of Further progress expected premium strategy on wet mix Further progress expected Payroll
Slide 10: Tenanted Inns
Tenanted Inns H1 2013 H1 2012 LFL profits +1% +1% Average EBITDA per pub level +8% Revenue £16.0m £15.7m +2% Operating costs* £9.8m £9.5m +3% Operating profit* £6.2m £6.2m level Operating margin 38.8% 39.5% Depreciation £0.8m £0.8m level EBITDA* £7.0m £7.0m level * Excluding exceptional items
Slide 11: The Fuller's Beer Company
The Fuller’s Beer Company H1 2013 H1 2012 Total Beer & Cider volumes -1% +1% Revenue £58.3m £57.7m +1% Operating costs* £54.3m £53.4m +2% Operating profit* £4.0m £4.3m -7% Operating margin 6.9% 7.5% Depreciation* £1.5m £1.5m level EBITDA £5.5m £5.8m -5% * Excluding exceptional items
Slide 12: Borrowing Capacity
Borrowing Capacity Mar 13 Sep 12 Sep 13 £m £m £m • £150m committed across five banks following 160 Co-operative Bank novation 37.0 37.0 38.0 to RBS and Lloyds Available • Freedom to add further committed 120 facilities funding for acquisitions Bank debt • 81% of period end gross 80 112.5 112.3 111.8
Slide 13: Generation and Use of Cash
Generation and Use of Cash H1 2013 H1 2012 £m £m EBITDA 28.1 26.9 Working capital / other adjustments 2.7 (1.7) Interest and refinancing costs (2.7) (2.7) Tax (4.0) (3.8) Cash available for discretionary spend 24.1 18.7 Capex on existing estate and brewery (6.6) (6.7) Corporate acquisitions (2.1) -
Slide 14: Annual Capital Expenditure
Annual Capital Expenditure 80 76 Cornish Orchards 70 Development costs for 60 new pubs 50 New committed pubs 44 39 £m 40 31 Fuller's Inns 30 24 20 Fuller's Beer Company 12 10 0 2009 2010 2011 2012 2013 2014E Capital expenditure for all years includes pub acquisition costs paid in the period, which f
Slide 15: Simon Emeny, Chief Executive
Need food shot here Simon Emeny Chief Executive
Slide 16: Adjusted Half Year Profits
Adjusted Half Year Profits Five year growth of 48% 20 18.1 18 16.4 16.8 15.8 16 14.6 14 12 £m 10 8 6 4 2 -1% +20%* +17% +8%* +10% +4%* +3% +2%* +8% 0 2009* 2010* 2011* 2012* 2013 Adjusted profits are profits before tax excluding exceptional items *2012 and years before have been restated to exclude
Slide 17: Adjusted Half Year EPS
Adjusted Half Year EPS Five year growth of 60% 24.8 25 22.8 21.3 20.1 Pence per 40p share 20 18.7 15 10 5 level +21%* +17% +8%* +9% +6%* +7% +7%* +9% 0 2009* 2010* 2011* 2012* 2013 Excluding exceptional items *2012 and years before have been restated to exclude pension finance costs/income from adju
Slide 18: Interim Dividend
Interim Dividend Five year growth of 104% 6 5.80 5.35 5.05 5 4.75 4.50 Pence per 40p share 4 3 2 1 +5%# +6% +6% +6% +8% 0 2009 2010 2011 2012 2013 # 2009 % increase ignores the 1.50p rebasing of the interim dividend
Slide 19: The Fuller's Vision
The Fuller’s Vision “We will create and operate the most stylish pubs and hotels whilst brewing Britain’s most coveted premium brands for discerning customers both at home and abroad.”
Slide 20: Drivers for Growth
Drivers for Growth Distinctive Pub & Targeted Premium Brand Hotel Experience Acquisitions & Portfolio Developments
Slide 21: Investing throughout the cycle
Targeted Distinctive Pub & Premium Brand Hotel Experience Acquisition & Portfolio Development Our people Customer feedback Investing Retail offer throughout the cycle Customer Behind scenes experience investment
Slide 22: Distinctive Pub & Hotel Experience: Our People
Distinctive Pub & Hotel Experience Our people Staff Engagement Service coaches – training and Customer promotion of engaging service feedback values Retail offer Engaging Service Passport – ownership of customer experience Recruitment Portal New recruitment portal planned for H2 Customer Behind scen
Slide 23: Distinctive Pub & Hotel Experience: Menu and Drinks
Distinctive Pub & Hotel Experience Our people Menu Creation Executive chef team Freshly prepared on site by Customer trained chefs feedback Retail offer Bespoke menus with “Only at Fuller’s” dishes - eg Golden Pride sourdough Drinks Portfolio Premium range of craft ales and ciders, interesting lager
Slide 24: Distinctive Pub & Hotel Experience: Behind the Scenes
Distinctive Pub & Hotel Experience Our people Kitchens Investment in design and layout Customer State of the art equipment feedback Cellars Retail offer Master Cellarman programme Regular quality control visits Systems Star Chef recipe management Labour scheduling Contactless payment technology Cust
Slide 25: Distinctive Pub & Hotel Experience: Fabric of our Pubs
Distinctive Pub & Hotel Experience Our people Customer The Fabric of our Pubs feedback Continual investment in Retail offer refurbishing our pubs to a high standard Emphasis on stylish but enduring design Enhancement of outdoor areas Customer Behind scenes experience investment
Slide 26: Distinctive Pub & Hotel Experience: Customer Feedback
Distinctive Pub & Hotel Experience Our people Customer Net Promoter Scores Implemented during H1 - valuable feedback Retail offer feedback on customer advocacy Online Reputation Quicker and easier to follow up reviews and monitor scores across web and social media Customer Behind scenes experience i
Slide 27: Managed Pubs and Hotels Trading
Managed Pubs and Hotels Trading • Sector leading LFL sales, well LFL Growth Rates ahead of Peach Tracker 11.8% 12% • Drinks sales boosted by good weather and premium portfolio 10% 7.8% 7.9% • Food continues to grow strongly 8% 6.9% ‒ Average food spend per 6% cover up 5% to £10.84 4% ‒ Covers up 7%
Slide 28: Ale & Pie
Ale & Pie The evolution of a timeless pub • Created 20 years ago – 13 stylish, iconic pubs in city centre locations • Enduring and original concept which has been our most consistently well performing area • Much imitated over the years, now being updated to keep one step ahead ‒ Delicious freshly h
Slide 29: Connecting with Customers
Connecting with Customers The new website has increased web presence and multiplied links with social media. Our focus is now: Feedback & social media • Roll out of new tool to assist managers with management of feedback and ratings • Also links to pub twitter and facebook accounts • Provides sentim
Slide 30: Targeted Acquisitions & Developments
Distinctive Pub & Targeted Premium Brand Hotel Experience Acquisitions & Portfolio Developments Acquisitions Developments Heart of the Market Refurbishment & Transport Hubs Iconic London Pubs Town Repositioning
Slide 31: Acquisitions – Iconic London Pubs
Acquisitions – Iconic London Pubs The White Hart, Southwark • Purchased in July for £2.6m • Well known classic pub in a developing area • Excellent strategic fit, close to attractions like the Tate Modern and the Globe theatre The White Hart, Southwark The Distillers, Hammersmith • Completed acquisi
Slide 32: Development Sites
Development Sites Cams Mill, Fareham • Exciting freehold new build • Oak framed barn overlooking the estuary – recreating the original tidal mill that stood on the site 100 years ago • Opened on 18 November Pipeline of developments • Heathrow, Terminal 2 – £1.7m investment now complete, will open Ju
Slide 33: Refurbishment & Repositioning
Refurbishment & Repositioning The White Horse, Richmond The Chineham Arms, Hampshire The Tap on the Line, Kew The Hereford Arms, Gloucester Road The Vintry, EC4
Slide 34: Refurbishment & Repositioning
Refurbishment & Repositioning • 12 pubs refurbished (2012: 12) plus 2 large developments (2012: 3), total capital spend of £5.1m (2012: £5.3m) • 29 weeks of closures in the first half (2012: 53 weeks) ‒ 5 weeks relating to development projects (2012: 15 weeks) • Key elements of our refurbishments: ‒
Slide 35: Tenanted Inns
Tenanted Inns • LFL profits up 1% on prior period following increased investment • 211 Tenanted pubs at 28 September 2013 • During the period four Managed pubs have been transferred to Tenanted • Purchase of The White Hart, Southwark • Plan to dispose of 10 pubs which no longer fit our model, two ex
Slide 36: Working with our Tenants
Working with our Tenants • 70% of Tenants are currently signed up to our Service Agreement, with great feedback • Awarded the Good Pub Guide’s Brewery of the Year 2014, on the strength of our Tenanted pubs • Average length of tenure over six years Andrew and Nicola Ralley, The Farmer’s Boy, Dunstabl
Slide 37: Premium Brand Portfolio
Targeted Distinctive Pub & Premium Brand Acquisition & Hotel Experience Portfolio Development Leverage Expertise Well Invested Brands Broaden Portfolio Internationally
Slide 38: The Fuller's Beer Company
The Fuller’s Beer Company • Well invested equipment and processes drive quality in everything we do • Skilled brewers regularly produce over 20 different beer styles • Putting flavour first by maturing for longer • Constantly innovating to produce new seasonal beers and limited edition brews • Showc
Slide 39: Made of London Campaign - Phase Two
Made of London Campaign - Phase Two
Slide 40: Cornish Orchards Acquisition Update
Cornish Orchards Acquisition Update • Acquired 4 June for £3.8m* • First five months trading is strong, with demand outstripping supply • New tanks in place have increased cider capacity by 60% • Exceptional quality cider made from freshly pressed local apples • Premium soft drinks range will comple
Slide 41: Cornish Orchards
CORNISH ORCHARDS: CORNISH rORCHARDS®
Slide 42: Premium Drinks Portfolio
Premium Drinks Portfolio Westside Drinks • Opens up new markets for the sale of our premium drinks portfolio including Frontier, Chimay, Veltins and Cornish Orchards • Targeting stylish bars, clubs and restaurants wanting exclusive products on their bar • Dedicated sales team • Initial test of Front
Slide 43: Exports
Exports • 1 in 5 barrels exported Destination of Export sales Sweden • Continues to expand with 100% volume growth over last five years USA Canada • Growing interest in imported and Russia craft beers Italy Finland • Focus on profitable growth within Other our existing markets through increasing bot
Slide 44: Summary
Summary • A strong first half for the Group – Adjusted PBT up 8% to £18.1m – Adjusted EPS up 9% to 24.79p • Investments made over recent years are delivering results • Enhancing all elements of the Fuller’s customer experience, both behind the scenes and in the fabric of our pub estate • Successful
Slide 45: Current Trading and Prospects
Current Trading and Prospects • Continuing strong underlying trading, with an excellent development pipeline – Managed LFL sales up 7.8% for 33 weeks – Tenanted LFL profits up 2% for 33 weeks – Total beer & cider volumes up 1% for 33 weeks • Good momentum in our Managed Pubs & Hotels business driven
Slide 46: Slide 46
Slide 47: Appendix – Reconciliation to Statutory Profit
Appendix – Reconciliation to Statutory Profit H1 2013 H1 2012 £m £m Adjusted profit# 18.1 16.8 +8% Exceptional items# (1.3) 0.5 Profit before tax* 16.8 17.3 -3% Tax on adjusted profit (4.2) (4.1) +2% Exceptional tax 3.5 2.1 Profit after tax* 16.1 15.3 +5% Adjusted EPS# 24.79p 22.78p +9% Basic EPS* 2
Slide 48: Appendix – Fuller's Inns Estate
Appendix – Fuller’s Inns Estate Mar Sept Acquired/ Nov 2013 Acquired Disposed Transfers Transfers 2013 developed Disposed 2013 Managed Pubs and Hotels 177 - (1) (4) 2 174 2 - 176 Tenanted Inns 209 1 (1) 4 (2) 211 - (2) 209 Total 386 1 (2) - - 385 2 (2) 385 Managed Pubs and Hotels • 610 bedrooms acro
Slide 49: Griffin's Eye View
GRIFFIN’S EYE VIEW She's on our bottles, our pint glasses and the logo on this poster. Bur she first appeared on our brewery wall in Chiswick over 175 years ago. As unofficial head of security (in mythology the Griffin is a beast that protects treasure) nothing escapes her on that perch high above t
Slide 50: Horses Love It
HORSES LOVE IT Back in the day, London Pride was transported through the city using horse and wagon. The horses would get thirsty and the drivers would give them a bottle or two. Soon the horses developed a fondness for our fine ale, and it got to the point where they refused to drink water. So, in
Fuller, Smith & Turner — H1 2013 Earnings Presentation on 6ix