Slide 1: Preliminary Results 2014
2014 Preliminary Results John Hutson – CEO Kirk Davis – FD The Port Jackson, Bishop’s Stortford
Slide 2: Kirk Davis FD
Kirk Davis FD 12 September 2014 The Admiral Collingwood, Ilfracombe
Slide 3: Financial Summary
Financial Summary 52 weeks to 27/07 2014 2013 Revenue £1,409.3m £1,280.9m +10.0% Like-for-like sales +5.5% +5.8% Operating profit £115.6m £111.3m +3.8% Profit before tax £79.4m £76.9m +3.1% Earnings per share (including shares held in trust) 47.0p 44.8p +4.9% Free cash flow £92.9m £65.3m +42.1% Free
Slide 4: Average Sales Per Pub Week (including VAT)
Average Sales Per Pub Week (including VAT) £000 36.0 36 34.0 34 32.3 31.1 32 30.3 30.1 30.1 29.9 30 29.0 28.2 28 26 24 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record Average Sales Per Pub Week 4
Slide 5: Profit before Tax & Exceptional Items
Profit before Tax & Exceptional Items £m 79.4 80.0 76.9 72.4 75.0 71.0 70.0 66.2 66.8 65.0 62.0 58.4 58.2 60.0 55.0 50.0 47.2 45.0 40.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record PBT (pre-exceptional) performance 5
Slide 6: Earnings Per Share before exceptional items (pence)
Earnings Per Share before exceptional items (pence)* pence 50.0 47.0 44.8 45.0 39.8 40.0 36.0 34.1 32.6 35.0 28.1 27.6 30.0 24.1 25.0 20.0 16.9 15.0 10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Record EPS (pre-exceptional) performance *Including shares held in trust 6
Slide 7: Like-for-like Performance
Like-for-like Performance % 2014 2013 2012 2011 2010 2009 2008 2007 Bar +2.7 +3.8 +2.8 +1.7 -0.8 +2.5 -4.3 +3.3 Food +12.0 +10.9 +4.8 +4.2 +0.1 -0.4 +7.9 +12.6 Machines -3.1 +0.4 -2.8 -3.9 +12.1 -7.5 -5.8 +2.7 LFL sales +5.5 +5.8 +3.2 +2.1 +0.1 +1.2 -1.1 +5.6 LFL Pub Profit* +2.0 +4.4 -2.2 -1.2 -2.0
Slide 8: Operating Margin - Summary
Operating Margin - Summary 2014 2014 2013 2013 £m % of £m % of Sales Sales Turnover 1,409.3 - 1,280.9 - Pub profit (pre repairs) 283.4 20.1 260.2 20.3 Repairs (56.6) (4.0) (48.0) (3.7) Head office costs (45.0) (3.2) (41.7) (3.3) Share Incentive Plan (7.1) (0.5) (6.1) (0.5) Depreciation & impairment
Slide 9: Cost Increases
Cost Increases • Tax increases: machine duty and carbon tax • Bar and food supplies around 3% • Utility costs: +5% (price up 3% and consumption up 2% including new pubs) • We have also increased our investment in staff costs and repairs expenditure 9
Slide 10: Exceptional Items - Summary
Exceptional Items - Summary 2014 2013 Operating exceptional items £000 £000 Property impairment - 15,551 Onerous lease provision - 3,278 Loss on disposal of P, P&E - 971 Total operating exceptional items - 19,800 Other exceptional items Interest on HMRC repayment 997 - Current income tax (4,375) (77
Slide 11: Allocation of Resources
Allocation of Resources £90m £123m £161m £90m £59m £108m £164m £159m £117m £218m £15m £24m Dividend £5m £25m £10m £5m £15m FH reversions & £33m £8m investment £7m £23m properties £76m £15m Buybacks £26m £8m £8m £17m £78m £154m £12m £43m £10m £121m Capex £113m £82m £94m £75m £61m £39m £49m £38m 2005
Slide 12: Capital Expenditure
Capital Expenditure 2014 2013 £m £m New Openings: Acquisition and development costs Current year 64.5 48.1 Future year 33.2 5.1 Property investment 23.6 7.7 121.3 60.9 Reinvestment in existing pubs: Kitchen and bar equipment / furniture etc. 22.6 16.7 Refurbishments 22.0 12.8 Business and IT project
Slide 13: Movement in Net Debt inc. Finance leases
Movement in Net Debt inc. Finance leases £m FY13 Net debt 474.2 • Free cash flow increased to £92.9m (2013: £65.3m) due to a working Free cash flow (92.9) capital inflow of £29.9 m in the year Disposal of fixed assets (0.5) compared to an outflow of £6.0m in the previous year New pubs 97.7 Freehold
Slide 14: Debt Position
Debt Position 2014 2013 Net debt/EBITDA 3.21 2.88 Interest cover (times) 3.11 2.66 Interest cover pre exceptional (times) 3.19 3.24 Fixed charge cover (times) statutory 1.75 1.56 excluding depreciation 2.31 2.08 excluding depreciation and exceptionals 2.33 2.27 Average interest rate 6.63% 6.83% 14
Slide 15: Dividends
Dividends • 12p total dividend (2013: 12p) – 8p full year proposed – 4p interim dividend paid – Dividend cover is 2.8 times (2013: 3.2 times) • Dividend maintained The Black Boy, Newtown, Wales 15
Slide 16: Financial Summary
Financial Summary • Strong sales and robust financial performance • Slight operating margin decline: increased LFL pub profits • Continued strong cash generation • Opportunities to continue investment in core estate and new openings The Bath Arms, Warminster 16
Slide 17: John Hutson CEO
John Hutson CEO Peri-peri roast chicken Philly cheese steak sandwich
Slide 18: Business Update
Business Update The Man in the Moon, Newport, IOW • Property • People • Changing Sales Mix • Peach Brandtrack • Continued improvement • Cost outlook • Taxation • Current trading and outlook 18
Slide 19: Property Update
Property Update • Average cost of development £1.64m, compared to £1.55m last year due to 2014 2013 increased investment in beer gardens, hotel rooms and kitchen equipment Trading pubs at start of FY 886 860 • In the current financial year, as at 12 Freehold pubs opened 31 14 September 2014 we have
Slide 20: “It’s a People Thing”
“It’s a People Thing” • 145 employees have graduated from the catering academy this year, with over 800 employees currently going through the programme • Staff retention at its highest ever level. Average length of service of pub managers now 10 years and 1 month and 6 years and 6 months for kitchen
Slide 21: 10 Year Sales Performance
10 Year Sales Performance £ millions 1500 1409 1400 1281 1300 1197 1200 1072 1100 996 955 1000 908 889 848 900 810 800 700 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Continued strong sales growth 21
Slide 22: Changing Sales Mix Over Last 10 Years
Changing Sales Mix Over Last 10 Years 100.0% 0.4% 0.5% 0.7% 4.8% 4.5% 3.2% Other 90.0% 23.2% Machines 80.0% 29.4% 35.3% 70.0% Food 60.0% 50.0% Bar 40.0% 71.6% 30.0% 65.6% 60.8% 20.0% 10.0% 0.0% FY 2003 FY 2008 FY 2014 Long-term growth in food mix 22
Slide 23: Britain’s favourite big brand
Britain’s favourite big brand If the following brands were available in the same location, which would be your first choice to eat at? (ranked by % of adults choosing each brand) (out of a list of 16 – the top 6 ) The Nightjar, Ferndown May Oct April Oct April 2012 2012 2013 2013 2014 Wetherspoon 11
Slide 24: Market Update
Market Update Where we sit down and eat - BRITAIN’S MOST VISITED PUB & CASUAL DINING BRANDS Claimed usage in last 6 May 12 Oct 12 Apr 13 Oct 13 Apr 14 months Wetherspoon 44% 40% 43% 43% 42% Harvester 29% 28% 28% 29% 24% Pizza Hut 41% 30% 32% 31% 23% Pizza Express 26% 22% 21% 22% 23% Nando’s 26% 20%
Slide 25: Continued Improvement
Continued Improvement • 317 pubs in 2015 CAMRA Good Beer Guide. 34% of the estate compared with 20% of estate in 2007 • Raised £1.65m in the year and over £9.29m during our 12 year partnership with CLIC Sargent (for children with cancer) The Bridge House, Belfast • Loo Awards – UK Winner (Individual
Slide 26: Cost Outlook
Cost Outlook Eggs Royale • Tax increases: business rates, machine gaming duty and carbon tax Salted caramel cheesecake • Input cost inflation expected to be around 2-3% • Continued investment in staffing • Continue to focus on maintaining a well-invested estate for the long-term benefit of the compa
Slide 27: Taxation
Taxation 2014 £m 2013 £m VAT 275.1 253.0 Alcohol duty 157.0 144.4 PAYE and NIC 78.4 70.2 Business rates 44.9 46.4 Corporation tax 18.1 18.4 Machine duty 11.3 7.2 Climate change levies 6.3 4.3 Carbon tax 2.7 2.6 Fuel duty 2.1 2.0 Stamp duty 2.1 1.0 Landfill tax 1.5 1.3 Premise licence and TV licences
Slide 28: Tax Equality Day – 24th September 2014
Tax Equality Day – 24th September 2014 • Over 10,000 pubs have closed in the last 10 years. 50% of beer sales have been lost to supermarkets in the last 30 years or so. • 7.5% reduction in JDW prices to customers for one day with additional one day offers • 10,000-15,000 pubs and restaurants partici
Slide 29: Current Trading and Outlook
Current Trading and Outlook • LFL sales for the 6 weeks to 7th September increased by 6.3% with total sales increasing by 11.4%. • Increases expected in bar and food supplies, labour and utilities • Opportunities to expand the estate profitably The Crown Inn, Knaresborough Aiming for a reasonable ou
Slide 30: Questions
Questions Parson’s Barn, Shoeburyness
Slide 31: Appendix
wether *. — spoon Appendix
Slide 32: Appendices
Appendices Pork, leek & chive A 10 year overview sausages B 10 year financial trends C 10 year capital trends D1 ROC/CROCCE/ROE calculations D2 ROC/CROCCE/ROE calculations D3 ROC/CROCCE/ROE calculations E Cash flow F Summary financial performance G SWAP maturity profile H 10 year operating profit Ic
Slide 33: 10 Year Overview
Appendix A 10 Year Overview £000 Average Gross Sales Per Pub Week 36.0 Number of Pubs 950 34.0 900 32.0 850 36.0 800 30.0 927 34.0 750 886 32.3 860 28.0 823 31.1 700 30.3 30.1 29.9 30.1 775 731 28.2 29.0 650 694 26.0 655 657 671 600 24.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 20
Slide 34: 10 Year Financial Trends
Appendix B 10 Year Financial Trends 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sales per pub (£000) 1,246 1,283 1,354 1,333 1,344 1,335 1,360 1,401 1,476 1,566 EBITDA per pub (£000) (1) 195.7 205.6 219.0 211.6 212.9 205.8 198.7 194.9 200.9 205.0 Number of pubs 655 657 671 694 731 775 823 860
Slide 35: 10 Year Capital Trends
Appendix C 10 Year Capital Trends 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Size (sq.ft.) – Openings 4,176 3,928 3,855 3,618 3,359 3,781 3,572 3,325 3,643 3,585 Number of openings 13 9 18 23 39 47 50 40 29 46 % which are freehold 54 22 61 57 33 32 68 45 48 67 Freehold average cost 873 625 75
Slide 36: ROC/CROCCE/ROE
Appendix D1 ROC/CROCCE/ROE 2013 2014 P&L return on capital 11.6% 11.3% CROCCE 10.6% 10.5% P&L return on equity 17.7% 17.6% Detailed calculations in appendix D2 36
Slide 37: ROC/CROCCE/ROE
Appendix D2 ROC/CROCCE/ROE 2013 2014 £000 £000 Shareholders equity per accounts 214,915 227,168 Deferred tax balances 49,600 77,651 Interest rate swap valuations 44,045 30,166 Impairment balances 42,105 39,071 Net book value of revalued assets (9,447) (7,963) Adjusted shareholders equity (a) 342,188
Slide 38: ROC/CROCCE/ROE
Appendix D3 ROC/CROCCE/ROE 2013 2014 £000 £000 EBITDA (cash return) (e) 164,407 173,650 Depreciation (f) (53,097) (58,075) Operating profit (g) 111,310 115,575 Interest (34,367) (36,213) Profit before tax 76,943 79,362 Current tax (h) (19,356) (17,004) Profit after cash tax (i) 57,587 62,358 Deferre
Slide 39: Cash Flow
Appendix E Cash Flow 2013 2014 £000 £000 Free Cash Flow 65,349 92,850 Proceeds on Disposal 645 505 Investment in new pubs (53,228) (97,704) Freehold reversions & investment properties (7,660) (23,577) HMRC - Rank Claim repayment - (16,696) Dividends (15,053) (14,949) Share Buy Backs - (24,550) Other
Slide 40: Summary Financial Performance
Appendix F Summary Financial Performance Profit before tax Earnings per share before Financial and exceptional exceptional items (including Free cash flow year Total sales items shares held in trust) Free cash flow per share £000 £000 pence £000 pence 1984 818 (7) 0.0 1985 1,890 185 0.2 1986 2,197 2
Slide 41: Swap Maturity Profile
Appendix G Swap Maturity Profile Swap Value From To Weighted Average % £400m 29 Jul 2012 19 Sept 2014 5.33% £350m 20 Sept 2014 11 Nov 2014 5.30% £400m 12 Nov 2014 31 Jul 2016 3.53% £400m 31 Jul 2016 31 Jul 2018 2.19% £400m 31 Jul 2018 31 Jul 2021 3.74% £150m 31 Jul 2021 31 Jul 2023 3.82% 41
Slide 42: 10 Year Operating Profit
Appendix H 10 Year Operating Profit 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 £m £m £m £m £m £m £m £m £m £m Turnover 809.9 847.5 888.5 907.5 955.1 996.3 1,072.0 1,197.1 1,280.9 1,409.3 Pub profit (pre repairs) 181.5 197.2 207.3 202.4 207.5 217.5 226.6 245.5 260.2 283.4 Repairs (29.0) (33.6)
Slide 43: 10 Year Debt Overview
Appendix I 10 Year Debt Overview 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net debt/EBITDA 2.81 2.80 3.21 3.24 2.74 2.70 2.98 2.96 2.88 3.21 Interest cover (times) 2.84 3.31 3.13 2.71 2.43 3.08 2.73 2.68 2.66 3.11 Interest cover pre exceptional 2.94 3.31 3.13 2.81 3.14 3.45 2.88 3.07 3.24 3.
Slide 44: Taxation
Appendix J Taxation 2011 2012 2013 2014 £m £m £m £m VAT 204.8 241.2 253.0 275.1 Alcohol duty 120.2 136.8 144.4 157.0 PAYE and NIC 65.2 67.1 70.2 78.4 Business rates 39.8 43.9 46.4 44.9 Corporation tax 21.2 18.2 18.4 18.1 Machine duty 2.9 3.3 7.2 11.3 Climate change levies 1.6 1.9 4.3 6.3 Carbon tax
Slide 45: Forward-looking statements
This document may contain forward-looking statements that may or may not prove accurate. Phrases such as "target", "intend", "anticipate", "believe", "estimate", "expect" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known a