Roger Carr. Chairman. 4 th December 2003

Transcription

1 Roger Carr Chairman 4 th December 2003

2 Responsibility statement The directors of Mitchells & Butlers plc accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Mitchells & Butlers plc (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information. Cautionary note regarding forward-looking statements This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934). These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "target", "expect", "intend", "believe" or other words of similar meaning. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Factors that could affect the business and the financial results are described in Item 3 Key Information - Risk Factors in the Mitchells & Butlers plc Form 20-F filed with the United States Securities and Exchange Commission on 28 March

3 Agenda Introduction Roger Carr (Chairman) Financial Results Karim Naffah (Finance Director) Actions and Priorities Tim Clarke (Chief Executive) Questions & Answers 3

4 Highlights Unlocking Value Demerger and benefit of focus Efficient balance sheet restructuring Prudent use of capital Ongoing Priorities Stimulation of organic growth Strengthening of profitability Maximise cash generation and return on capital Reward shareholders 4

5 Karim Naffah Finance Director 4 th December 2003

6 Financial Highlights Turnover 1,513m up 2% EBITDA 374m flat Operating profit 275m down 5% Profit before tax 199m* down 1% Net Operating Cashflow 241m** up 106m EPS 18.4p* down 0.1p Final dividend per share 5.65p *On a proforma basis ** Before interest, tax and dividends 6

7 Pro forma - Key Assumptions A Reminder As if separation had occurred on 1 st October 2001 No adjustments to operating profit Debt position worked backwards to reflect cashflow Interest based on separation bank facilities Taxation reflects increased interest charge All one-off items relating to separation excluded Weighted average number of shares 735m (2002: 734m) 7

8 Pro forma Results FY 03 FY 02 m m EBITDA % Operating Profit % Interest (76) (86) PBT % Tax (64) (65) Earnings % EPS 18.4p 18.5p 8

9 Operating Performance FY 03 FY 02 m m Turnover Pubs & Bars % Restaurants % Other % Operating Profit Pubs & Bars % Restaurants % Other % 9

10 Key Operating Statistics Food sales : up 3% Food mix 29.5% sales : up 0.5% points Outlet staff costs : 24% of sales Retail staff productivity : up +4.5% Support cost savings of 5m in second half Net retail operating margin 18.2% 10

11 Margin Movements A year of two halves H1 H2 FY Sales Growth + 0.4% + 2.6% + 1.4% Ave. Selling Price* c.+ 2% c.- 2% Flat Movement in % Gross Margins + ve - ve Flat Movement in Net Margins - 1.3% pts -1.1% pts -1.2% pts Adjusted for Easter - 0.8% pts -1.6% pts -1.2% pts Additional regulatory costs equivalent to 1.2% pts of margin Promotional sales activity skewed towards second half *Food & Drink 11

12 Retail Sales Growth 3% FY - 2.4% FY - 0.4% FY + 1.4% 2% 1% 0% H2 H2 H1 H2-1% H1 Total -2% -3% H1 Same Outlet* -4% Uninvested* -5% 76% of pubs +18% = 94% of pubs +6% = 100% of pubs NB. Same outlet = uninvested + invested *Adjusted to include Easter in H1 12

13 Like-for-Like Sales FY 03 H2 03* Same Outlet (i.e. Invested + Uninvested) Residential +0.9% +3.3% High Street - 3.2% - 0.6% Total - 0.4% + 1.8% Uninvested Residential - 1.5% + 0.8% High Street - 5.2% - 3.0% Total - 2.4% - 0.1% * Adjusted to exclude Easter 13

14 2003 Expansionary Capital Locals Residential Pub Restaurants 22m 32m Drinks led Food led 13m 2m High Street City Centre Restaurants Note: UK only - excludes Hollywood Bowl 14

15 Performance by Segment Locals Residential Pub Restaurants Inc. ROI 15% Inc. ROI 14% Drinks led Food led Inc. ROI 13% Inc. ROI 11% High Street City Centre Restaurants Note: UK only - Excludes Hollywood Bowl *Cumulative 1bn expansionary investment over the last 10 years 15

16 Strong Cash Returns 12 months to 30 September 2003 m EBIT 275 Depreciation/Amortisation 99 EBITDA 374 Cash Tax (at 21% of EBIT)* (58) Cash Return 316 CROCCE m 275 (58) 217 NOPAT Average Net Operating Assets Accumulated Depreciation 225 Revaluations (741) 10% (741) 8% Goodwill written off Cash Capital Employed *Unleveraged tax rate (including and benefit of pensions, exceptional costs and demerger related items, estimated rate for 2004 c.26%) 16

17 Net Cashflow FY 03 FY 02 m m EBITDA Working capital movement (3) (4) Capital Expenditure (151) (256) Disposal proceeds Net Operating Cashflow Additional Pension Contributions (27) (10) Net Operating Cashflow inc. pensions Year end net debt was 1,228m 17

18 Exceptional items - P & L De-merger costs 32 Bid defence costs 10 Memo FY 03 FY 04 m m Syndicated loan to support demerger 8 2 Refinancing fees 4 1 SNR abortive fees 1 Tax credit* (31) Earnings Impact * Including benefit of group relief from SXC of 75m 18

19 Securitisation - Headlines Largest corporate securitisation to date 1.9bn raised Cost effective long term fixed rate finance Cash Interest cost : 6% 24m costs amortised Enables 500m return to shareholders 12 for 17 share consolidation 520m issued shares post consolidation Funds returned on 8 December Appropriate business flexibility 19

20 Securitisation - Key Terms Flexibility to: Maintain progressive dividend policy Free cashflow to debt service covenant 1.3x s Continue to churn the estate Disposals 25% EBITDA + ability to re-set unlimited with repayment of allocated debt Maintain asset quality Minimum maintenance expenditure 6.4% Turnover (capital + revenue) Compatible with strategy for long term organic growth 20

21 Categories of Expenditure Revenue Repairs Annual day-to-day repairs Expansionary Capital Development project Changes consumer offer Increases trading area Acquisition Capital Expensed through Profit & Loss Maintenance Capital Minor maintenance spend Repairs / maintenance work Refresh spend Updates existing offer in line with refresh cycle New site FY 03 35m 78m 73m P & L Capital * Maintenance Covenant = Revenue Repairs + Maintenance Capital 21

22 Appropriate financial structure Net debt (post return of funds) c. 1.8bn Market cap gearing 150%* Net debt : EBITDA Interest cover Dividend cover < 5x s >2x s >2x s** NB. All ratios based on Mitchells & Butlers plc results for y/e 2003 and net debt of 1.8bn * Based on share price on 4 December 2003 ** Dividend cover based on 9.5 pence per share in 2004 and earnings for y/e

23 Dividend Policy Important Part of Shareholder Returns 2003 Final: 5.65p 2004 Interim p 9.5p Final p Underpinned by strong cash flow Positive top line growth Real growth in underlying earnings Confidence in medium term prospects Progressive policy to deliver real dividend growth 23

24 Summary Solid set of results in an eventful year Optimal financing structure now in place 500m returned to shareholders Continued focus on cash control and returns Emphasis on driving profitable sales growth Commitment to growth in dividends 24

25 Tim Clarke Chief Executive 4 th December 2003

26 Value Creating Operating Actions Driving profitable sales growth Raising productivity and reducing costs Raising asset productivity through brand and format evolution Proactive asset management Driving strong cash returns, earnings growth and freehold property appreciation 26

27 Delivering Customer Value to Enhance Asset Productivity and Returns Sales Generating Actions Growing Sales Volumes Driving Returns Range Price Promotions Service Amenity Control trials Growing cash gross profits Mix enhancement Productivity improvements Purchasing gains Enhancing asset productivity Mitigating external costs Defending operating margins Building volume to extract profit opportunities from outlet and corporate scale 27

28 Raising Productivity and Reducing Costs Action Offsetting external costs: 17m in 03/04 Staff cost flexibility: scheduling and training Negotiate lower purchasing costs Rationalise central processes Enhance IT systems 2003 Progress Staff productivity + 4.5% Pub staff costs maintained at 24% sales 4% reduction on 40% of COGS renegotiated 10m annualised support cost saving Growing volume provides opportunity for continued efficiencies 28

29 Driving Sales Growth Focus on improving consumer choice: Progressive extension of drinks range Enhancing food menus Competitive pricing Targeted marketing and promotions In a high quality environment: Increased staff service, sales training and incentives High amenity levels to compete with at-home alternatives 29

30 Improving Like for Like Trend Same outlet (i.e. invested & uninvested) 2 1 % 0 Q1 '03 Q2 '03 Q3 '03 Q4 '03 WKS 1-8 ' Un-invested Adjusted for the movement in Easter 30

31 Like for Like Sales First 8 Weeks of 03/04 Same outlet (i.e. invested + uninvested) Residential + 5.7% High St + 2.3% TOTAL + 4.5% Uninvested Residential + 3.8% High St + 0.6% TOTAL + 2.6% 31

32 Driving Sales Drinks and Food Range Increasing freedom from tied supply contracts 40% of beer now free of tie 45% of soft drinks now free of tie Customers value range and choice on bar Now stocking three leading beer brands in each major draught category Wider spread of price points Attracting new customers through value perceptions Trading up to premium products 32

33 Driving Sales Growth Drinks and Food Range Draught Beer Range extended in around 1400 outlets Dual stocking of Coors and Carlsberg-Tetley products Stella now in c.1200 outlets, 5% of drinks sales Trial of Scottish Courage products Extensive range of regional cask ales Wine Over 10% of drinks sales by value Own label New World brands Fresh Juices Sales of almost 1 million litres Growth in excess of 10% Food 250 new dishes introduced Over 200 dishes improved Price points widened 33

34 Enhancing the GP Mix Through Category Growth Mix Other Packaged Beer Packaged Spirits Growth + 2% -2% -6% Volume 1st 8 weeks compared to last year Wine Ale/Stout Soft Drinks Spirits + 10% -6% + 10% + 25% Total drinks sales up 3.5% Average price down 3.7% Total Volume up 7.5% Positive growth in cash gross profits Volume gains in relatively higher % margin products Premium Lager + 21% + 11% Standard Lager + 7% 34

35 Driving Sales Growth Combined food and drink promotions 35

36 Driving Differentiation Through Advertising 36

37 Driving Sales Growth Sales training and incentives 37

38 Gaining Share Among Managed Pubs MAB % SHARE OF MANAGED PUB MARKET * MAB VALUE share rolling 4 weeks % 19 MAB VOLUME share rolling 4 weeks January 03 November 03 *Beer/ Cider/ FABs/ Soft Drinks (Draught & Packaged) Source: AC Neilsen, Pub Track 38

39 Brand and Format Evolution to Raise Asset Productivity Profitable evolution to meet changing customer demand Strong pay-backs: value engineering template costs Spectrum of hard brands, operating formats, individual classics Segmentation and differentiation to add value to licensed sites Over 350 conversion pipeline sites 39

40 Developing and evolving the brands and formats Differentiation All Bar One Flares/Reflex Nicholson s/classics O Neill s City Centre/High Street Strategy of differentiation or value Value Goose Town Bars Coal Hole, Nicholson s, WC2 All Bar One, Canary Wharf Goose, Doncaster 40

41 Developing and evolving the brands and formats Residential Strategy Consumer demand for informal, integrated food and drinks offer Driving food, wine and soft drinks in local pubs Ember; Metro Professionals; Scream; Sizzling Pub Co. Increasing drinks sales in pub restaurants: Harvester, Toby, Vintage Combining high volume food sales with integrated bar areas Toby Carvery, Eastbourne Three Stags, Ember Inn, Bebbington 41

42 Pro-active Asset Management Plans for 2004 Good sales uplifts and high incremental ROIs 140 conversions and 15 new site acquisitions Maintaining site quality and customer offers Gross capital expenditure of 160m Encouraging results from Business Franchise / SAT 18 in operation Disposal of selective individual sites for value 30-40m proceeds anticipated Driving sales uplifts and incremental returns through development 42

43 Market Conditions Supply High Street - growth of new capacity significantly slowed Residential areas low net new investment Licensing reform Demand Cautious as to impact of rising interest rates Positive demographic and social trends Growing and 45+ age groups Growth continues to be driven by value for money Favourable medium term trends, short term cost pressures 43

44 Outlook Focused pub business, appropriately financed Quality estate, proven formats, scale efficiencies Growing sales momentum through customer value Reinvesting margin to drive cash profits Uplifts from estate development Volume, mix, productivity and purchasing gains To overcome regulatory costs Building competitive advantage, gaining share, driving returns 44

45 Q & A 4 th December 2003