Mitchells & Butlers plc · LSE:MAB
Mitchells & Butlers — Debt Investor Presentation (November 2007)
48 slides from Mitchells & Butlers's debt investor presentation, Nov 30, 2007
Slide 1: Andrew Vaughan, Group Treasurer
Andrew Vaughan Group Treasurer 30 November 2007
Slide 2: Highlights
Highlights z Gross debt outstanding at year end £2,416m z EBITDA (reported) £420m z Free cashflow £307m z Debt / EBITDA 5.75x z EBITDA DSCR 2.4x z FCF DSCR 1.7x Underlying EBITDA £25m higher than at time of Securitisation tap in September 2006 2
Slide 3: Free Cash Flow
Free Cash Flow £m EBITDA 420 Tax (51) Required maintenance capital (62) Free cashflow 307 Interest (137) 1.7x Principal repayment (39) Debt Service (176) 3
Slide 4: Securitisation Covenants
Securitisation Covenants FY 07 H1 H2 Year Free Cashflow : Debt Service 1.7x 1.8x 1.7x EBITDA : Debt Service 2.3x 2.5x 2.4x Net Worth £2.3bn Well within required covenants Note: Default Covenants. FCF/Debt Service 1.1x, Net Worth of £0.5bn Restricted Payment Test. FCF/Debt Service 1.3x, EBITDA/Debt S
Slide 5: Maintenance & Capital Enhancement
Maintenance & Capital Enhancement Securitisation Estate £m Repairs* 30 138 (vs. required amount of £91m) Maintenance 108 Enhancement 36 174 Substantial investment to maintain and enhance estate quality *Charged through Profit & Loss account 5
Slide 6: Cashflow - uses
Cashflow - uses £m FCF 307 Debt Service (176) Maintenance Capital (over required amount) (47) Net Capital Enhancement Expenditure* (10) Excess Cash 74 Restricted Payments made (66) Restricted Payment Maximum increase 8 Restricted Payment Maximum at start of year 31 Restricted Payment Maximum at end
Slide 7: MAB PLC vs. MAB Retail Limited
MAB PLC vs. MAB Retail Limited PLC Securitisation Estate z Number of pubs* 2,003 1,713 z Turnover £1,894m £1,628m z EBITDA** £472m £420m z EBIT** £343m £311m Difference driven by 290 pubs and head office infrastructure *As at 29 September 2007 ** Before exceptional items 7
Slide 8: Karim Naffah, Finance Director
Karim Naffah Finance Director 30 November 2007
Slide 9: Financial Highlights
Financial Highlights 52 weeks ended 29 September 2007 % Growth Revenue £1,894m 10.1 % EBITDA* £472m 9.8 % Operating profit* £343m 11.0 % Profit before tax* £207m (0.5) % EPS* 35.5p 21.2 % Total dividend 14.25p 16.3 % *Before exceptional items 9
Slide 10: Presentational Points to Note – FY 2007
Presentational Points to Note – FY 2007 z FY 2007 events Special Dividend of £486m and share consolidation in Oct 2006 Disposal of 102 pubs to Trust Inns for £101m in Oct 2006 z Results include a full year of the Acquired Sites Revenue £176m; operating profit* £33m Pre-opening and closure co
Slide 11: FY 2007 Results – Exceptional Items
FY 2007 Results – Exceptional Items £m Gross Net Operating Profit - Financial Hedges (221) (155) - Property disposals 22 15 - Movement from revaluation (45) (32) - Integration of Acquired Sites (4) (3) - Property JV transaction (7) (7) - Tax adjustments 27 Total Exceptional Items (255) (155) 11
Slide 12: Underlying Profit Growth
Underlying Profit Growth FY 2007 Division Acquired Core Core Adjusted Total Sites Estate Growth Growth vs LY vs LY* £m £m £m % % Pubs & Bars Revenue 968 16 952 - 0.6% + 3.5% Operating Profit 191 3 188 + 5.0% + 11.9% Restaurants Revenue 908 160 748 + 2.7% Operating Profit 145 16 129 + 4.0% Strong und
Slide 13: Like-for-Like Sales: Divisional
Like-for-Like Sales: Divisional* FY 07 H1 07** Same Outlet (Invested and uninvested pubs) Pubs & Bars 4.7% 5.1% Restaurants 1.0% 1.6% Total*** 3.0% 3.6% Uninvested Pubs & Bars 3.0% 3.4% Restaurants 0.1% 0.4% Total*** 1.7% 2.1% • Excludes Acquired Sites ** 32 weeks to include the entire Easter Period
Slide 14: Like-for-Like Sales: Segment
Like-for-Like Sales: Segment* FY 07 H1 07** Same Outlet (Invested and uninvested pubs) Residential 3.1% 4.1% High Street 3.0% 2.9% Total 3.0% 3.6% Uninvested Residential 1.5% 2.3% High Street 2.3% 2.2% Total 1.7% 2.1% * Excludes Acquired Sites ** 32 weeks to include the entire Easter period 14
Slide 15: Balancing Sales Growth & Margin
Balancing Sales Growth & Margin FY 07 H1 07 Uninvested LFL Sales* +1.7% +2.1% Average Selling Price** up < 2% up 2% Movement in Gross Margin (%) Slightly down flat Movement in LFL Gross Profit (£) +ve +ve Sustaining LFL cash contribution from sales * like-for-like sales to 32 weeks to include the en
Slide 16: Retail Operating Statistics
Retail Operating Statistics* z Same outlet drink sales : up 2.2% z Same outlet food sales : up 5.1% z Outlet staff costs : 23.6% of sales z Tight cost controls Strong margin performance * Excludes Acquired Sites 16
Slide 17: Operating Profit Movement
Operating Profit Movement +27 +7 £343m* (14) +33 (8) 2005 + £34m £309m* 2006 2007 (11) Closure and Disposals Trading Acquired Pre-opening Regulatory SCPD Sites Costs Costs * Before exceptional items 17
Slide 18: FY 2007 Expansionary Capital
FY 2007 Expansionary Capital Residential Locals Pub Restaurants Core £25m Core £20m Acquired Sites £12m Acquired Sites £68m Drinks Food led led Core £5m Core £0m High Street Restaurants City Centre Note: Excludes non trading property (£1m) 18
Slide 19: Returns by Segment
Returns by Segment Residential Locals Pub Restaurants Inc. ROI 22% Inc. ROI 18% Drinks Food led led Inc. ROI 18% Inc. ROI 11% High Street Restaurants City Centre 18% overall incremental ROI Notes: Incremental ROI is calculated before tax and after depreciation Cumulative £1.1bn UK expansionary inves
Slide 20: Pensions
Pensions z IAS 19 deficit of £18m, as at 29 September 2007 Updated mortality assumptions z Full Actuarial Valuation as at 31 March 2007 Gilts-based deficit of c.£250m Recovery Plan to close past service deficit z Schedule of future contributions being finalised Special contribution of £4m in
Slide 21: Property Update
Property Update z Rigorous review of different ways to release additional value from property z Preferred option was JV transaction and R20 was most competitive bidder z Debt market crisis in July prevented implementation z Valuation gap still exists z Actively looking at options to realise objectiv
Slide 22: Property Valuation
Property Valuation z Property value of £5bn in year-end accounts Revaluation of freehold / long leasehold properties up £1.1bn Aggregate value of individual pubs – not portfolio Plan to revalue each year on a rolling basis z Alternative valuation based on PropCo structure Freehold / long lea
Slide 23: Summary
Summary z Good sales growth and operating margin result z On track for full uplifts from Acquired Sites in 2008/9 z Achieving high returns on investment z Strong cash flows from trading and from disposals z Aim to release additional value from property z Dividend increase of 16.3% Generating further
Slide 24: John Butterfield, Strategy Director
John Butterfield Strategy Director Bond Investor Update 3030November 2007 November 2007
Slide 25: Year of Strong Growth
Year of Strong Growth z Fourth year of strong growth: EPS 2003-07 up 105% z Value and volume strategy driving market share gains z Format innovation delivering high returns z Productivity, purchasing and efficiency gains z Rapid conversion of Acquired Sites Strengthened competitive position 25
Slide 26: Operational Strategy
Operational Strategy z Tightening consumer environment z Rapid response to changing market conditions Reinforcing value and volume strategy Gearing up roll-out of category killer formats z Pubs & Bars Sustained volume driven growth Rapid food growth and drinks share gains z Restaurants Enh
Slide 27: Profitable Market Share Gains
Profitable Market Share Gains MAB Estimated Volume Growth (1) Market Volume Growth (2) Food 6% 3% Wine & Soft Drinks 1% -2% Spirits -1% -4% Beer & Cider 0% -4% (1) Same outlet like-for-like growth (2) MAB estimates based on BBPA/AC Neilsen/ONS 27
Slide 28: Sales Mix
Sales Mix Machines Accom & Other 5% 3% 11% Spirits 37% Food 13% Wines & Soft Drinks Beer & Cider 31% Increasing exposure to growth categories Note: Managed Sales 28
Slide 29: Divergent Disposable Income Trends
Divergent Disposable Income Trends % of UK 17% 38% 31% 13% Households MAB estate 27% 44% 25% 4% segmentation Socio/ Professionals/ Mainstream Skilled Low paid/ Economic grp managerial suburban blue collar unemployed Economic Strong earnings Interest rates/ Full Tax credits/ position growth stealth t
Slide 30: Profitable Food Sales Growth
Profitable Food Sales Growth z High sales sensitivity to customer value perceptions High price elasticity in mid/lower affluence segments Rising menu quality expectations in higher affluence segments z Customer buying behaviours different by occasion Daytime / early evenings – value and speed
Slide 31: Average Retail Price
Retail Price Drinks Food 4 Average Retail Price (%) +0.8% 3 +2.6% Mix/Range 2 +3.4% +1.6% LFLPrice LFL Price 1 LFL Price Mix/Range -0.8% 1 -2.4% Value positioning to drive market share gains Note: Includes the Acquired sites 31
Slide 32: Value for money in all market segments
0 2 4 6 8 10 12 14 Rose and Crown (Warwick) Eagle Farringdon Source: Menurama Premium Country Dining PREMIUM Harvester Beefeater Chef & Brewer Frankie & Benny's Café uno Slug & lettuce Two for One Vintage Inns All Bar One Brewers Fayre MID-MARKET Metro-Professionals Pizza Express Hungry Horse Toby C
Slide 33: The Value and Volume Model
The Value and Volume Model Pub & Carvery example 2004 2007 Average spend per head £4.71 £4.01 -15% Average meal volumes per pub per week 1,800 2,950 +64% z Price elasticity >4 times z 42% drinks sales mix z Ave profit per pub +29% Very attractive profitable volume growth 33
Slide 34: Gaining share in declining on-trade beer market
Gaining share in declining on-trade beer market MAT Beer Volume Off-trade volume 1.1 1.05 1 MAB volume** 0.95 0.9 On-trade volume* 0.85 0.8 D 4 M 4 D 5 D 3 M 3 M 5 D 6 M 6 D 7 M 7 Se 5 Ju 6 Se 6 Ju 7 Se 7 Ju 3 8 Se 3 Ju 4 Se 4 Ju 5 0 -0 0 -0 0 -0 0 0 -0 -0 -0 0 -0 -0 0 0 -0 0 -0 -0 0 p- p- p- p- p-
Slide 35: Drinks Price Gap
Drinks Price Gap Average Price per Pint of Standard Lager - FY07 £3.00 £2.48 £2.50 £2.12 £2.27 £2.00 £1.50 £1.00 £0.73 £0.50 £0.00 MAB Managed Leased Supermarkets Price change: FY03 to FY07 +8% +8% +14% -1% Balancing short profitability with long term share gains Source: AC Neilsen 35
Slide 36: Wine, Soft Drinks and Coffee
Wine, Soft Drinks and Coffee Wine Sales volumes +3% Draught dispense in 600 pubs Own label Soft Drinks Sales volumes flat Fresh juices +4% Draught carbonates +1% Packaged carbonates & mixers -5% Coffee Sales volumes +23% c.1,200 coffee machines installed 36
Slide 37: Efficiency Gains
Efficiency Gains Productivity Rapid growth in staff contribution per hour: +3.9%* Enhancement of scheduling system Purchasing COGS index increases held to under 1% £7m of purchasing synergies from acquisition Infrastructure efficiencies Current year rationalisation process underway £7m o
Slide 38: Residential Pub Restaurants
Residential Pub Restaurants z Suburban Pub Restaurants Good growth in Harvester, Toby, Pub & Carvery z Commuter Belt Pub Restaurants Toby Carvery, Banbury Decline in Vintage Inns New competitive capacity z Mid market slow-down in disposable incomes The Hedgehog, Vintage Inns, Lichfield Same ou
Slide 39: Pub Restaurants Margin Reinvestment
Pub Restaurants Margin Reinvestment z Plan to reinvest c.2% of food margin in quality and value z Concentrated in: Vintage Inns menu quality Harvester and Toby value and quality Pub Carvery value z Introduced at end October: Dark Nights menus z Strong growth upswing in November z In all cases
Slide 40: Pub Restaurants – Acquired Sites
Pub Restaurants – Acquired Sites z Rapid integration process 172 sites converted to date 9 Franchised 15 disposed on premium multiples z Remaining conversions to be completed in first half z Outstanding site quality The Scotsbridge Mill, Premium Country Dining, Rickmansworth Speed of integrati
Slide 41: Residential Pubs
Residential Pubs z Widening drinks market share gains z Repositioning to food: 21% sales mix z Food sales up 16% The Travellers Rest, Sizzling Pub Co, Reading z High returns from c.70 conversions z Rapid expansion in Sizzling Pub Co, Cornerstone and Metro Professional z Exited pubs with limited food
Slide 42: High Street & City Centre Markets
High Street & City Centre Markets z 25% of sales z Strong format portfolio Clachan, Nicholson’s, London z Successful evolution of O’Neill’s, Scream & Town Pubs z Central London buoyant: All Bar One, Nicholson’s z Rapid food growth z Breakfast and coffee opportunity The Queen of Hearts, Scream, Manch
Slide 43: Estate Development
Estate Development z c.100 conversions including remaining Acquired Sites z 6 to 8 new build, high take, super-pubs z Increasing focus on category killer, value formats z Rapid expansion of Sizzling Pub Co, Pub Carvery, Cornerstone Over 50 to be opened this year c.300 pubs, over 15% of the total
Slide 44: Smoking Ban
Smoking Ban Scottish Like for Like Sales since ban 6.7% 7.0% 6.0% English Like for Like Sales since ban 5.0% 4.0% 1.9% 4.0% 3.2% 2.0% 2.2% 1.8% 3.0% 1.6% 1.4% 2.0% 1.2% 0.7% 1.0% 0.8% 1.0% 0.4% 0.6% 0.4% 0.2% 0.0% 0.0% Ban to FY 07 wks FY 07 wks FY 07 wks FY08 1- Ban to end FY07 FY08 1-7 wks end FY0
Slide 45: Current Trading
Current Trading z Same outlet like-for-likes up 1.4% in first seven weeks z Same outlet like-for-likes up 2.4% in November z Positive impact of new menus and pricing actions in Restaurants z Pubs & Bars accelerating drinks share gains & food sales growth z Remaining Acquired Sites to close for conve
Slide 46: Outlook
Outlook z Uncertain consumer outlook z First winter of smoking ban impact z Resilience against on-trade declines z Positive consumer response to Restaurants’ sales actions z Power of MAB format portfolio z Focus on top line growth from managed super-pubs z Intensifying value and volume model z Attra
Slide 47: Property and Strategy
Property and Strategy z Overriding commitment to shareholder value z Unlocking the embedded value of the estate z Higher valuations placed by dedicated property investors z Best sites, formats and operational skills z Key is mutual incentives for property and operations in lease arrangement Equity g
Slide 48: Summary
Summary z Out-performing amidst tougher conditions z Formats positioned to growth segments z Scale advantages in value driven markets z Operational excellence, cost efficiency z Consolidation opportunities z Property: reviewing options for unlocking value Focus on sustainable shareholder value 48
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