Roger Carr Roger Carr Chairman Preliminary Results 2005 30 - - PowerPoint PPT Presentation

Roger Carr Roger Carr

Chairman

Preliminary Results 2005 – 30 November

Karim Naffah Karim Naffah

Finance Director

Preliminary Results – 30 November 2005

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Financial Highlights Financial Highlights

53 Weeks ending 1 October 2005

Growth (52 Weeks)**

Turnover - £1662m (£1631m) +4.6% EBITDA* - £413m (£405m) +6.3% Operating profit* - £297m (£291m) +6.6% Profit before tax* - £195m (£191m) +10.4% EPS* - 26.0p (25.4p) +21.5% Final dividend - 7.55p +13.5%

Note: Figures in brackets are for 52 weeks * Before exceptional items ** 2004 comparatives restated for FRS17

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Presentational Points to Note Presentational Points to Note 53 week year

Focus on 52 weeks for comparison with FY04

FRS 17 adopted for pensions accounting

FY04 comparatives restated

Reporting to Debt Investors

Covers the securitised estate

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FY 2005 Results FY 2005 Results -

• Summary

Summary

* Before exceptional items **2004 comparatives restated for FRS17

FY 05 FY 05 FY 04** 53 wks 52 wks 52 wks £m £m £m

Operating Profit* 297 291 273 +6.6% Interest (102) (100) (100) PBT* 195 191 173 +10.4% Tax (62) (61) (56) Earnings* 133 130 117 +11.1% EPS* 26.0p 25.4p 20.9p +21.5% Average no. of shares 511m 511m 559m (8.6)

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Operating Performance Operating Performance

FY 05 FY 05 FY 04 53 wks 52 wks 52 wks £m £m £m

Turnover Pubs & Bars 957 939 913 +2.8% Restaurants 697 684 641 +6.7% SCPD 8 8 6 1662 1631 1560 +4.6% Operating Profit* Pubs & Bars 180 176 173 +1.7% Restaurants 116 114 99 +15.2% SCPD 1 1 1 297 291 273 +6.6%

Retail +4.4% Retail +6.6%

* Before exceptional items

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Like Like-

• for

for-

• Like Sales: Divisional

Like Sales: Divisional

FY 05* H1 05** Same Outlet (Invested + Uninvested)

Pubs & Bars +3.4% +3.1% Restaurants +6.9% +7.4% Total +4.8% +4.8%

Uninvested

Pubs & Bars +2.1% +1.9% Restaurants +4.4% +5.3% Total +3.0% +3.2%

* 52 weeks ** 32 weeks

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Like Like-

• for

for-

• Like Sales: Segment

Like Sales: Segment

FY 05* H1 05** Same Outlet (Invested + Uninvested)

Residential + 5.7% +5.7% High Street + 3.3% +3.5% Total + 4.8% +4.8%

Uninvested

Residential + 3.6% +3.8% High Street + 2.3% +2.5% Total + 3.0% +3.2%

* 52 weeks ** 32 weeks

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Balancing Sales Growth & Margin Balancing Sales Growth & Margin

FY 05* H1 05**

Uninvested LFL Sales + 3.0% + 3.2% Average Selling Price*** flat flat Movement in Gross Margin (%) flat flat Movement in LFL Gross Profit (£) + ve + ve

Focus on growing like-for-like gross profit

* 52 weeks ** 32 weeks *** Drink & Food

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Key Operating Statistics* Key Operating Statistics* Net operating margin up 0.4% points Drink sales : up 2% Food sales : up 8%

Food mix 31% of sales

Outlet staff costs : 24% of sales Support cost savings : £2m

*All figures relate to Retail

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Operating Profit Movement Operating Profit Movement

2005

+35 (17)

Regulatory & Energy costs

2004

+£24m +6

53rd week Trading

2005

£273m* £297m*

* Before exceptional items

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FY 2005 Expansionary Capital FY 2005 Expansionary Capital

Note: Excludes Hollywood Bowl / Other: £3m

High Street Pub Restaurants Restaurants Locals

City Centre Food led Drinks led Residential

£10m £44m £3m £1m

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High Street Pub Restaurants Restaurants Locals

City Centre Food led Drinks led Residential

• Inc. ROI 16%
• Inc. ROI 18%
• Inc. ROI 8%
• Inc. ROI 15%

Returns by Segment Returns by Segment

Notes: Incremental ROI is an EBIT return Cumulative £1bn expansionary investment over the last 15 years (UK only – excl. Hollywood Bowl)

16% overall incremental ROI – up 1% on last year

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*Unleveraged tax rate

Strong Cash Returns Strong Cash Returns

£m

291 (73) 218 3,434 (721) 50 2,763 10.6% 10.6%

52 weeks £m

EBIT 291 Depreciation/Amortisation 114 EBITDA 405 Cash Tax (at 25% of EBIT)* (73) Cash Return 332 Average Net Operating Assets 3,434 Accumulated Depreciation 358 Revaluations (721) Goodwill written off 50 Cash Capital Employed 3,121

CROCCE

7.9% 7.9%

NOPAT

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Cash Flow (a) Cash Flow (a)

FY 05 53 weeks £m

EBIT 297 Depreciation & amortisation 116 EBITDA 413 Working capital / non cash items 21 Maintenance capex (106) Expansionary capex (61) Disposals 57 Additional pension contributions (30) Operating Cash Flow after Net Capex 294

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Cash Flow (b) Cash Flow (b)

FY 05 53 weeks £m

Operating Cash Flow after Net Capex 294 Net Interest paid (102) Tax paid (43) Normal dividends paid (50) Licensing costs (4) Exercise of share options 16 Shares repurchased (101) Net Cash Flow* 10

* Before £35m bond repayments

Closing Net Debt £1.625bn

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Financing Financing

* 52 weeks ** Net Debt / (Net Assets + Net Debt) *** Excluding net finance income from pensions

Net Debt : EBITDA* 4.0x Book Gearing** 53% Interest Cover*** 2.8x Well within all securitisation covenants

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Financing Strategy Financing Strategy

£1.9Bn securitisation in November 2003

• Returned £0.5Bn to shareholders

Organic growth strategy delivering strong cash-flows

• £40m increase in annual EBITDA*

Deploying cash resources to maximise value

• Invested £118m expansionary capital for high returns
• Repaid £63m of securitised debt
• Funded £70m of additional pensions contributions
• Paid £94m of ordinary dividends
• Completed £100m share buy-back

Committed to maintaining an efficient balance sheet

Last 2 years st 2 years

* 2003 restated for FRS17

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Share Repurchase and Dividends Share Repurchase and Dividends Share buy-back programme £100m in FY06 Dividend Final dividend 7.55p, up 13.5% Annual dividend 10.75p, up 13.2% Progressive policy Cash returns to shareholders

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IFRS Update IFRS Update

Will report H1 06 under IFRS Impact on FY05 results*

Earnings broadly unchanged Net Assets reduced by up to £250m

No impact on cash flows or debt covenants More volatility in reported figures

Full IFRS disclosure to be made in December

* Subject to audit

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Summary Summary Business strategy has delivered

• good sales growth
• higher net margins and returns

Strong cash-flow put to good use

• capital investment earning high returns
• cash back to shareholders

Maintain efficient balance sheet

• preserving appropriate flexibility

Delivering value to shareholders

Tim Clarke Tim Clarke

Chief Executive

Preliminary Results 2005 – 30 November

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Strategy is Delivering Strategy is Delivering

Profitable sales growth Leading the informal, value, eating out market Strong drinks volume growth Estate development: AWTs +8% to £16.4k High takes and corporate scale defending margins Increasing returns and strong cash flow

Profitably gaining market share

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Customer Driven Strategy Customer Driven Strategy

Widening the inclusive appeal of the pub Estate repositioning to growth markets Format innovation and evolution High quality amenity Product marketing: range, quality and value Capacity management of high volume, service delivery Productivity and purchasing gains High investment returns

Focus on operational performance

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Strong Like Strong Like-

• for

for-

• Like Sales Growth

Like Sales Growth

* Includes Easter in both years

Uninvested Uninvested Same Outlet Same Outlet

H1* 05 H2 05 H1* 05 H2 05

4.7% 4.8% 2.7% 3.2%

0% 1% 2% 3% 4% 5% 6%

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Profitable Market Share Gains Profitable Market Share Gains

(1) FY 05 same outlet volume growth (2) MAB estimates based on BBPA/ AC Neilsen/ ONS for Pub Market

MAB Estimated Volume Growth (1) Market Growth (2) Food + 9% + 4% Wines & Soft Drinks + 8% + 2% Spirits + 4%

• 1%

Beer & Cider +2%

• 3%

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10000 20000 30000 40000 50000 60000 70000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Eating Out (1) Wine & Cider Spirits Beer

Demand Trends Demand Trends – – Overall Market Overall Market

Consumer Expenditure £m

Total (Nominal) 7.2% CAGR (Actual) 1982 to 2004 9.1% 5.6% Drinking Out Total (Real) 1.8% 3.6% 0.4%

Eating out shows 4% growth driven by fundamental life style changes, while drinking out is stable in real terms

Source:Office for National Statistics

(1) Eating out market includes soft drink

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Increasing New Users to the Pub Increasing New Users to the Pub

% of Adults visiting the Pub

Source: TNS Alcovision

10 20 30 40 50 60 70 80

1980 1985 1990 1995 2000 2005 at least monthly at least weekly 3+ week

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Growth of Pubs’ Share Growth of Pubs’ Share

• f Eating Out
• f Eating Out

Eating Out Market

£27.6bn*

Eating Out Market

£22.0bn*

Source: Mintel (excluding institutional catering and other expenditures on food outside the home) * Includes VAT

Eating Out Eating Out Market Growth Market Growth +25% +25% Pub Food Growth +31% Pub Food Market

* *

£4.9bn £6.4bn

2000 2005

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MAB Growing Share MAB Growing Share

• f Managed Pub Food
• f Managed Pub Food

Source: A.C. Neilsen’s Pub Track Survey – Number of main meals served (1) : Rolling MAT basis

MAB Growth Managed Managed Pubs Pubs Growth Growth

Growth In Number Of Main Meals Sold (1)

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05

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Growth of Food Spend on Eating Out Growth of Food Spend on Eating Out

Source: ONS (Family spending survey) / US Food & Drug Administration

% Of Total Food Spend Out Of Home

1989 2004 Current

c.50%

US UK

33% 21%

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1989 2004 3rd Income Decile

(Just above min wage)

6th Income Decile

(Average – C1)

9th Income Decile

(Affluent – B)

Source: ONS (Family Spending Survey)

Growth of Eating Out Demand by Growth of Eating Out Demand by Income Level Income Level

% Of Total Food Spend Out Of Home

2.3x 1.6x 1.3x

Increase

10% 23% 20% 32% 27% 35%

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Increase Increase VALUE VALUE Reduce Reduce COSTS COSTS Increase Increase VOLUME VOLUME Increase Increase BUYING POWER BUYING POWER

Staff training, scheduling, incentives Reinvest margin in quality/value Capacity management of productivity Supply chain efficiency

Volume and Value Virtuous Circle

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Growth in Average Weekly Takes Growth in Average Weekly Takes

Other includes AWP, accommodation, door and bowling

Profitability from growing food & drink

£14.1k £15.2k £16.4k

Sales Mix 2003-2005

Growth + 16%

Beer & Cider Beer & Cider Beer & Cider Food Food Food

Wine & Soft Drinks Wine & Soft Drinks Wine & Soft Drinks

Spirits Spirits Spirits Other Other Other 2 4 6 8 10 12 14 16 2003 2004 2005 Average Weekly Take

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Average Weekly Meals Growth Average Weekly Meals Growth

Total Company - over 75 million main meals served FY05

Growth +23%

Average Weekly Number of Main Meals per Outlet - Pub Restaurants

500 1000 1500 2000 2003 2004 2005

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Capacity Utilisation Capacity Utilisation – – Pub Restaurants Pub Restaurants

Harvester - Number of Meals Sold (NOMS)

1000 2000 3000 4000 5000 6000 7000

Average NOMS per week

Average of all record NOMS per week within brand Highest individual NOMS per week Record best week

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Capacity Utilisation Capacity Utilisation – – Pub Restaurants Pub Restaurants

Number of Meals Sold (NOMS)

1000 2000 3000 4000 5000 6000 7000

Vintage Inns Toby Pub Carvery Harvester

Average NOMS per week

Average of all record NOMS per week within brand Highest individual NOMS per week Record best week

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Comparison of Off Comparison of Off-

• Trade Price of Food to

Trade Price of Food to On On-

• Trade Meal

Trade Meal

*30mins of time at minimum wage of £5.05

Compelling value proposition versus eating at home Compelling value proposition versus eating at home

£2.13 £2.52* £4.65 £3.99 Rump Steak, Chips, Toms Labour cost ‘Real Value’ Price SPCo Price £0.00 £1.00 £2.00 £3.00 £4.00 £5.00

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Wine/Soft Drinks/Spirits Wine/Soft Drinks/Spirits Range Extension Range Extension

Soft Drinks Premium Spirits Wines

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Beer Volumes : On Beer Volumes : On-

• Trade Market

Trade Market

MAB continues to significantly outperform the on-trade market

Source: BBPA and MAB

Year on Year Rolling Bi-monthly Beer Volume Change

MAB Growth Market Market Decline Decline

• 6.0%
• 5.0%
• 4.0%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

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Range, Dispense Quality and Supply Range, Dispense Quality and Supply Freedom Freedom

All Bar One Nicholsons O’Neill’s Toby

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Off Off-

• Trade Price Competition

Trade Price Competition

64.5p

Source : Major supermarket internet price on largest pack size sold in November

20.5p 27.2p

Price per pint 16.7 16.7 17.4 17.4 38.2 9.6 3.1

10 20 30 40 50 60 70 80

Stella Milk Evian

VAT Duty Retailer's Income

27.2 27.2

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MAB Beer Prices MAB Beer Prices vs vs On On-

• Trade Prices

Trade Prices

Source: AC Neilsen and Company Information

Average Price of Pint of Beer

£2.00 £2.05 £2.10 £2.15 £2.20 £2.25 £2.30 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05

MAB MAB On On-

• trade

trade

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Purchasing and Productivity Gains Purchasing and Productivity Gains

Purchasing: COGS held flat on like-for-like products Productivity: staff contribution per hour up 3% Overheads: further reduction of £2m Unit and corporate scale drives cost efficiency

Impact of volume increases

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Capacity Management, Service and Capacity Management, Service and Productivity Productivity

Car park capacity Staff availability at peak times Guests seated promptly Table configuration Wait staff section size Menu development Kitchen capacity Prep and cooking processes Ticket management Order wait times Bar layout and dispense speed Drinks floor service Bill payment times Incentives and tips

The science of high volume management The science of high volume management Combining high cover turn and customer satisfaction

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Pub Restaurants Pub Restaurants

Bells of Ouzeley, Old Windsor (Harvester – 128 pubs) Toby Carvery, Harlow (Toby – 95 pubs) The Golden Retriever, Bracknell (Vintage Inns – 198 pubs)

Same outlet like-for-likes up 7.5%

Toby Carvery, Carlisle

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Pub Restaurants Innovation Pub Restaurants Innovation

Saxon Mill, Warwick Barnt Green Inn, Nr Bromsgrove Pretty Pigs, Tamworth Salt Dean Tavern, Brighton

Premium Country Dining – 17 pubs Pub Carvery – 39 pubs

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Residential Pubs Residential Pubs

The Court Oak, Harborne Ember & Taverns – 228 pubs Crown & Sceptre, London Metro-Professionals – 71 pubs The Vesper Gate, Leeds Sizzling Pub Company/unbranded food locals – 211 pubs The Man on the Moon, Kings Norton Arena/ unbranded Locals – 144 pubs

Same outlet like-for-likes up 3.8%

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Residential Pubs Innovation Residential Pubs Innovation

The Ropewalk, Metropolitan Professionals, Nottingham The Merry Hill, Locals Pubs, Wolverhampton Barley Mow, Sizzling PubCo, Banbury

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High Street/City Centre Market High Street/City Centre Market

Same outlet like-for-likes up 3.3%

Old Wellington, Manchester

Town pubs Daytime/early evening

Flares, Warrington

Circuit venues Late evening Central London

All Bar One, Leicester Square

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Maintaining Amenity and Offer Evolution Maintaining Amenity and Offer Evolution

Holyhead, Ember, Coventry The Bowling Green, Ember, Lichfield Toby Carvery, Cardiff

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Proactive Asset Management Proactive Asset Management

High returns from continued estate repositioning

New sites £15m Conversions / growth projects £46m £61m

Continued success of Franchise with 115 pubs Disposals raising £57m Completed 80 conversions and opened 6 new sites

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Regulation: Smoking Regulation: Smoking

Health Bill: uncertainty over Parliamentary amendments Preparing for range of potential ban outcomes Small scale trials to measure impacts Contingency planning for “food based” ban

Unclear as yet what exemptions to be permitted Unclear food definition Moving great majority of estate to food positioning Reviewing minority where food to be removed Major uncertainty over how long it would last

Proactive preparations to mitigate disruption and maximise

• pportunities in food businesses

54

Regulation : Licensing Regulation : Licensing

90% of applications for variation granted Average of just over one hour extra in the evening Operational preparations Earlier day time opening opportunities

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Current Trading Current Trading

First 7 weeks sales trend Same Outlet like for like sales +3.8% Uninvested like for like sales +2.0% General consumer confidence Weak beer market Some reduction in growth rate but robust performance in current market

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Outlook Outlook

Continued weakness in consumer spending Pub market

Attracting new, lighter consumers Food and other drinks more resilient than beer Extended hours and limited new supply

Need to overcome c.£25m of external cost pressures Growth opportunities

Orientated towards growth segments Defensive customer value proposition Capturing advantage from asset and corporate scale High returns on expansionary investment

Continued out-performance in slowing market

Questions & Answers Questions & Answers

Preliminary Results 2005 – 30 November

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This announcement contains certain forward-looking statements as defined under US legislation (section 21E of the Securities Exchange Act of 1934) with respect to the financial condition, results of operations and business

• f Mitchells & Butlers and certain of the plans and objectives of the board of directors with respect thereto.

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 such words as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. The forward-looking statements contained herein are based on assumptions and assessments made by the Mitchells & Butlers’ management in light of their experience and their perception of historical trends, current conditions, expected future developments and

• ther factors they believe to be appropriate. By their nature, forward-looking statements are inherently

predictive, speculative and involve risk and uncertainty, and 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. These factors include, but are not limited to: the future balance between supply and demand for

Mitchells & Butlers’ sites; the effect of economic conditions and unforeseen external events on Mitchells & Butlers’ business; the availability of suitable properties and necessary licenses; consumer and business spending, changes in consumer tastes and preference; levels of marketing and promotional expenditure by Mitchells & Butlers’ and its competitors; changes in the cost and availability of supplies; key personnel and changes in supplier dynamics; significant fluctuations in exchange rates; interest rates and tax rates; the availability and effects of any future business combinations, acquisitions or dispositions; the impact of legal and regulatory actions or developments; the impact of the European Economic and Monetary Union; the ability

• f Mitchells & Butlers to maintain appropriate levels of insurance; the maintenance of Mitchells & Butlers’ IT

structure; competition in markets in which Mitchells & Butlers’ operates; political and economic developments and currency exchange fluctuations; economic recession; management of Mitchells & Butlers’ indebtedness and capital resource requirements; material litigation against Mitchells & Butlers; substantial trading activity in Mitchells & Butlers’ shares; the reputation of Mitchells & Butlers’ brands; the level of costs associated with leased properties; and the weather.