2015 Interim Results John Hutson CEO Ben Whitley Interim FD The - - PowerPoint PPT Presentation

2015 Interim Results

John Hutson – CEO Ben Whitley – Interim FD

The Forty Foot, Dún Laoghaire, Republic of Ireland

Ben Whitley Interim FD

13 March 2015

The Old Unicorn, Bramley

Financial Summary

3

26 weeks to 25/01/2015 H1 2015 H1 2014 Δ% Revenue £744.4m £683.2m +9.0% Like-for-like sales +4.5% +5.2% Operating profit £55.1m £55.7m

• 1.1%

Profit before tax and exceptional items £37.5m £37.8m

• 0.9%

Earnings per share 22.6p 22.1p +2.3% Earnings per share (excluding shares held in trust) 23.5p 22.9p +2.6% Free cash flow £44.9m £42.6m +5.4% Free cash flow per share 36.5p 33.8p +8.0% Dividend 4.0p 4.0p

• After Exceptional Items:

Profit before tax £37.5m £36.0m +4.1% Earnings per share 22.6p 20.7p +9.2% Earnings per share (excluding shares held in trust) 23.5p 21.4p +9.8%

Average Weekly Sales Per Pub (including VAT)

22 24 26 28 30 32 34 36 38 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 28.2 29.0 30.3 30.1 29.9 30.1 31.1 32.3 34.0 36.0 35.3 36.9

£000

4

Record average weekly sales per pub

Like-for-like Performance

% H1 2015 H1 2014 H2 2014

2014 2013

2012 2011 2010 Bar

+1.5 +3.4 +1.9 +2.7 +3.8

+2.8 +1.7

• 0.8

Food

+10.1 +10.5 +13.5 +12.0 +10.9

+4.8 +4.2 +0.1 Machines

+1.1

• 9.5

+3.8

• 3.1

+0.4

• 2.8
• 3.9 +12.1

Total LFL sales

+4.5 +5.2 +5.8 +5.5 +5.8

+3.2 +2.1 +0.1 LFL Pub Profit*

+0.9 +4.3 +1.7 +2.6 +4.4

• 2.2
• 1.2
• 2.0

5

Reasonable LFL sales and profit growth

* Excludes head office, depreciation, share incentive plan and interest costs

Operating Margin - Summary

H1 2015 £000 H1 2015 % of Sales H1 2014 £000 H1 2014 % of Sales Turnover 744,367 683,229 Pub profit (pre repairs) 148,292

19.9

145,122

21.2

Repairs (26,509)

(3.6)

(26,900)

(3.9)

Head office costs (30,736)

(4.1)

(30,307)

(4.4)

Share incentive plan (3,724)

(0.5)

(3,800)

(0.5)

Depreciation (32,234)

(4.3)

(28,399)

(4.2)

Operating profit 55,089

7.4

55,716

8.2

6

Note: There was a change in the internal cost allocation. The comparatives has been amended accordingly.

Cost Increases

• Tax increases – business rates and

carbon tax (36% from April)

• Bar and food supplies increased in

the region of 2%

• Utility costs increased by 11% (price

up 5% and consumption up 6% including new pubs)

• Pub based salary increases averaged

5% in October

• Continued investment in repairs and

central overheads

7

Allocation of Resources

8

Increase in capital expenditure due to new openings, reinvestment and freehold reversions

£90m £123m £161m £90m £59m £108m £164m £159m £117m £217m £96m £106m

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015

£39m £38m £75m £61m £49m £82m £121m £113m £94m £153m £76m £81m £43m £78m £76m £12m £33m £23m £25m £3m £2m £5m £8m £8m £24m £7m £13m £8m £7m £10m £17m £10m £26m £5m £15m £15m £15m £10m £10m

Dividend FH reversions & investment properties Buybacks Capex

Capital Expenditure

H1 2015 £m H1 2014 £m Freehold reversions 12.8 7.1 Acquisition and development costs Current year 46.1 34.5 Future year 13.5 16.4 New openings and freehold reversions 72.4 58.0 Fixtures, fittings & equipment 8.0 11.1 Refurbishments 10.5 10.4 Investment in IT 2.9 3.2 Reinvestment 21.4 24.7 Total 93.8 82.7

9

Movement in Net Debt inc. Finance leases

£m FY 2014 Net debt 556.6 Free cash flow (44.9) New pub capex 72.4 Dividends 9.8 Share buy backs 2.4 Other 0.9 H1 2015 Net debt 597.2

 Free cash flow increased to £44.9m (2014: £42.6m).  Total net bank borrowing (including finance leases) of £597.2m, an increase of £40.6m in the last 6 months (July 2014: £556.6m)  Unutilised bank facilities and cash balances

• f £146.2m as at 25 January 2015 (July

2014: £138.1m) *  Following the period end, the Company concluded an amendment and extension of its existing banking facility to £820m, expiring in February 2020.  Net debt for the year expected to increase by between £50 - £70m due to increased investment in new properties and a greater proportion of Freeholds.

10

* The amended facility, referred to in the Chairman’s Statement, provides an additional £100m of funds

Debt Position

H1 2015 H1 2014 FY 2014 Net debt/EBITDA 3.38 2.93 3.21 Interest cover (times) 3.13 3.01 3.11 Interest cover pre exceptional (times) 3.13 3.11 3.19 Fixed charge cover (times) statutory 1.72 1.70 1.75 excluding depreciation 2.33 2.25 2.31 excluding depreciation and exceptionals 2.33 2.28 2.33 Average interest rate 5.65% 6.87% 6.63%

11

Financial Summary

• Reasonable sales performance
• Continue to generate strong cash flows
• Significant investment in core estate and

new openings

12

The Picture House, Morley

John Hutson CEO

The Saxon Crown, Corby

Business Update

• Property
• People
• Changing sales mix
• Peach Brandtrack
• Continued improvement
• Cost outlook
• Taxation
• Current trading and outlook

14

Property Update

H1 2015 FY 2014 Trading pubs at start of FY 927 886 Freehold pubs opened 11 31 Leasehold pubs opened 1 15 Closures

• 3
• 5

Total trading pubs 936 927

Leasehold, (52%) Freehold, (48%)

 Average cost of development of £1.9m, £0.3m higher than in 2014  Higher proportion of freehold pubs  18 pubs opened as of 13 March 2015  9 pubs on site as of 13 March 2015  We anticipate opening approximately 30 pubs this financial year

15

New Mexican Monday range

“It’s a people thing”

16

• Circa 34,000 employees (2007: 20,588)
• Created over 13,500 jobs since the start of the credit crunch

and over 800 jobs in the last six months

• Dedicated employee website & e-learning suite
• Catering Academy – 212 employees have graduated with 665

employees currently going through the programme.

• Staff retention at its highest ever level. Average length of service for:
• pub managers now over 10 years and 5 month,
• kitchen managers 6 years and 8 months.
• We have been recognised as one of ‘Britain’s Top Employers’ in a

Guardian publication for 12 consecutive years.

• We have signed up to the Government ‘Think, Act, Report’ campaign

aiming to improve gender equality in the workplace.

• Around 10,000 employees are shareholders in the Company.

Graduates Our team at the Crown Rivers, Heathrow T5

Changing Sales Mix

71.6% 65.6% 59.5% 23.2% 29.4% 36.6% 4.8% 4.5% 3.1% 0.4% 0.5% 0.8%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% FY 2003 FY 2008 H1 2015

Other Machines Food Bar

17

Long-term growth in food sales mix

(out of a list of 16 – the top 6 ) May 2012 October 2012 April 2013 Oct 2013 April 2014 Oct 2014 Wetherspoon 10% 11% 11% 12% 13% 13% Nandos 11% 9% 9% 8% 8% 7% Toby Carvery 5% 5% 5% 5% 7% 6% Pizza Express 7% 7% 7% 7% 7% 6% Wagamama

• 6%

5% 7% 6% Harvester 8% 8% 8% 8% 6% 6%

Source: Peach BrandTrack, May 2012, Oct 2012, April 2013, Oct 2013, April 2014, Oct 2014

Peach BrandTrack: 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)

18

Respondents first choice of brand from following list: Beefeater, Bella Italia, Brewer’s Fayre, Café Rouge, Fayre & Square, Frankie & Benny’s, Harvester, Hungry Horse, Nando’s, Pizza Express, Pizza Hut, Sizzling Pubs, Slug & Lettuce, T.G.I Friday’s, Toby Carvery, Wagamama, JD Wetherspoon

Continued Improvement

• 317 pubs are in the 2015 CAMRA Good Beer

Guide

• Raised over £867k in the last 6 months and over

£10.2m during the 12 year partnership with CLIC Sargent (Charity caring for children with cancer providing support for families at home and in hospital from the day of diagnosis.)

• 4.93 average food hygiene ratings out of a

maximum of 5. A total of 93.6% of pubs achieving the maximum score of 5.

• Won The Loo of the Year Awards in six categories

19 The Star, Hoddesdon

Cost Outlook

• Tax increases: business rates and carbon tax (36%

higher since April)

• Input cost inflation expected to be around 1-2%

(excluding duty)

• Utility rates expected to be flat from October 2015
• Continued investment in staffing
• Continued focus on maintaining a well-invested estate

for the long-term benefit of the Company

20 The Chief Justice of the Common Pleas, Keswick

2015 H1 £m (estimate)* 2014 H1 £m (rebased)*

VAT 144.8 133.6 Alcohol duty 75.2 74.7 PAYE and NIC 40.7 38.0 Business rates 24.0 22.5 Corporation tax 7.8 8.8 Corporation tax credit (historic capital allowances) (2.0) – Machine duty 5.7 5.5 Climate change levy 3.0 3.0 Fuel duty 1.9 1.1 Carbon tax 1.8 1.3 Stamp duty 1.2 1.2 Landfill tax 0.8 0.7 Premise licence and TV licences 0.4 0.3 TOTAL TAX £305.3m £290.7m PROFIT AFTER TAX (excluding exceptionals) £27.8m £27.9m

Taxation

Taxes increased by £14.6m compared to £0.1m decrease in profit after tax (before exceptional items)

21 * UK taxes only

Current Trading and Outlook

• 50m Lavazza coffees and teas sold per annum
• 24m breakfasts sold per annum
• Aim to triple coffee and breakfast sales over the

next 18 months

• From 18 March, in approximately 880 pubs:

– 99p (or under) for a Lavazza filter coffee with free refills between 8am and 2pm every day – More competitive breakfast pricing – Magners Cider (568ml) and Punk IPA (330ml) priced at £1.99 each

22

Current Trading and Outlook

• LFL sales for the six weeks to 8 March 2015 increased by 1.6% with total sales

growth of 5.6%

• The largest ever ale festival starting today running through to 29 March
• Continuing pressure from increased taxation and inflation
• Strong H2 profit performance last financial year
• Marketing and labour costs may be higher in the second half
• Continue to expect a reasonable outcome for the year

23 The Dairyman, Brentwood

Questions

24 The Sawyer’s Arms, Maesteg

Appendix

Gin Palace

Appendices

• A

10 year overview

• B

10 year financial trends

• C

10 year capital trends

• D1

ROC/CROCCE/ROE calculations

• D2

ROC/CROCCE/ROE calculations

• E

Cash flow

• F

SWAP maturity profile

26

10 Year Overview

600 650 700 750 800 850 900 950 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2015 655 657 671 694 731 775 823 860 886 927 936

Number of pubs

400 600 800 1,000 1,200 1,400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 810 848 889 908 955 996 1,072 1,197 1,281 1,409 683 774

Turnover

£ millions 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 80.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 47.2 58.4 62.0 58.2 66.2 71.0 66.8 72.4 76.9 79.4 37.8 37.5

Profit before tax (before exceptional items)

£ millions

Appendix A

24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 28.2 29.0 30.3 30.1 29.9 30.1 31.1 32.3 34.0 36.0 35.3 36.9

Average gross sales per pub week

£000

27

10 Year Financial Trends

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 Sales per pub (£000) 1,246 1,283 1,354 1,333 1,344 1,335 1,360 1,401 1,476 1,566 766 801 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 99.8 99.0 Number of pubs 655 657 671 694 731 775 823 860 886 927 905 936 % freeholds (%) 41 41 42 42 42 41 44 44 44 47 45 48 CROCCE (%) (2) 11.9 12.1 12.3 11.3 11.0 10.8 10.7 10.9 10.6 10.5 10.7 10.2 Cash return on investment (%) (2) 14.4 14.8 15.4 14.0 13.6 12.9 11.8 12.6 12.4 12.3 12.5 12.2 Free cash flow per share (pence) 37.1 42.1 35.6 50.6 71.7 52.9 57.7 70.4 51.8 74.1 33.8 36.5 Diluted earnings per share (pence) (3) 16.9 24.1 28.1 25.7 32.6 36.0 35.3 41.3 46.8 47.0 22.1 22.6

(1) Excluding sale & leaseback (2) See appendix D for calculation (3) Excluding exceptional items

Appendix B

28

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2014 H1 2015 Average Size (sq.ft.) – Openings 4,176 3,928 3,855 3,618 3,359 3,781 3,572 3,325 3,643 3,585 3,538 4,080 Number of openings 13 9 18 23 39 47 50 40 29 46 19 12 % which are freehold 54 22 61 57 33 32 68 45 48 67 74 92 Freehold average cost (£k) 873 625 750 958 765 857 825 639 589 559 401 811 Average development cost (£k, excluding FH) 1,401 1,301 1,520 1,498 851 857 1,207 1,420 1,552 1,643 1,505 1,948 Average development cost per sq.ft. 335 331 394 414 253 226 338 427 426 458 425 478 Population within 2 miles 64,000 59,000 45,000 50,000 38,000 67,000 54,000 39,000 30,000 27,000 28,000 46,000

10 Year Capital Trends

Appendix C

29

12 months to Jan 2015 £000 12 months to Jan 2014 £000 EBITDA (cash return) (a) 176,877 170,773 Depreciation (b) (61,911) (55,823) Operating profit (c) 114,966 114,950 Interest (35,935) (35,061) Profit before tax 79,031 79,889 Current tax (d) (16,440) (18,641) Profit after cash tax (e) 62,591 61,248 Deferred tax (charge)/credit (excluding exceptional items) (3,761) 6,619 Profit after tax 58,830 67,867 Return on capital employed [(c+d)/average h) 10.7% 11.7% Cash return on cash capital employed [(a+d)/average h) 10.2% 10.7% P&L return on shareholders equity [e/average f] 17.0% 18.1% Cash return on investment [(b-e)/average (i-g) 12.2% 12.5%

Appendix D1

ROC/CROCCE/ROE

30 *All returns are calculated after tax.

ROC/CROCCE/ROE

H1 2015 £000 H1 2014 £000 Shareholders equity per accounts 219,622 234,467 Deferred tax balances 73,498 53,177 Interest rate swaps valuations 56,796 33,688 Impairment balances 39,071 42,105 Net book value of revalued assets (7,603) (8,322) Adjusted shareholders equity (f) 381,384 355,115 Debt (g) 597,167 499,586 Capital employed (h) 978,551 854,701 Accumulated depreciation (excluding impairments) 682,872 624,885 Cash capital employed (i) 1,661,423 1,479,586

Appendix D2

31

H1 2015 £000 H1 2014 £000 FY 2014 £000 Free Cash Flow 44,877 42,597 92,850 Proceeds on Disposal 3

• 505

Investment in new pubs (59,656) (50,875) (97,704) Freehold reversions & investment properties (12,763) (7,135) (23,577) HMRC – Rank Claim Repayment

• (16,696)

Dividends (9,761) (9,987) (14,949) Loan issue cost 379 4,080 4,103 Share Buy Backs (2,413) (2,893) (24,550) Other (1,282) (1,160) (2,320) Movement in net debt (40,616) (25,373) (82,338)

Appendix E

Cash Flow

32

Swap Maturity Profile

Swap Value From To Weighted Average %

£400m 12 Nov 2014 31 Jul 2016 3.5% £400m 31 Jul 2016 31 Jul 2018 2.2% £400m 31 July 2018 31 July 2021 3.7% £150m 31 July 2021 31 July 2023 3.8%

Appendix F

33

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 and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to the Company as of the date of this presentation. All written or

• ral forward-looking statements attributable to the Company are qualified by this
• caution. The Company does not undertake any obligation to update or revise any

forward-looking statement to reflect any change in circumstances or in the Company’s expectations.

34