Transcript Interim report - presentation 20/05/2005 5MB

Interim Results
May 2005
www.wdb.co.uk
www.pathfinderpubs.co.uk
www.tupc.co.uk
Interim results 2005
1.
2.
Strong first half results
- turnover and profit growth in each of our trading divisions
Successful integration of recent acquisitions
- Wizard, Burtonwood integrated ahead of schedule
- expected synergies from both acquisitions exceeded
3.
Earnings per share* up 10.2%
- strong growth in profit before tax
4.
Dividend +10.0% to 13.2 pence per share
- average increase over 30 years of over 10%
We are confident that our performance and out-turn for the year will be satisfactory
*Before goodwill and exceptional items
2
Interim results 2005 : profit and loss account
2004
% change
Turnover
£m
277.6
233.9
+18.7
Operating profit*
£m
57.4
48.5
+18.4
Operating margin*
%
20.7
20.7
-
Profit before tax*
£m
36.0
31.7
+13.6
Earnings per share*
p
33.6
30.5
+10.2
Dividend per share
p
13.2
12.0
+10.0
* Before goodwill and exceptional items
3
2005
Interim results 2005: like-for-like sales growth*
+3.5%
+3.0%
+3.2%
• c.600 21 year leases agreed
(2.7)%
Beer sales Machines
Rent
Total
+4.8%
+3.1%
+2.8%
• community +3.7% (85% of estate)
• town centre +0.8% (15% of estate)
(1.1)%
• includes Wizard
*24 weeks to 19 March 2005,
excludes Burtonwood
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Wet
Food
Machines
Total
Interim results 2005: integration of Wizard, Burtonwood
White Lion, Thornbury, Bristol
Hoghton Arms, Newton Le Willows
Crown, Heathfield, East Sussex
Childwell Abbey Hotel, Liverpool
5
Dwyeyfylchi Hotel, Penmaenmawr
Interim results 2005 : successful acquisitions
1.
Higher pub profits (before admin savings)
- Wizard like-for-like profit +4.3%
2.
Greater cost savings
- Burtonwood*¹ : at least £3.5m pa vs estimate £3.0m pa
- Wizard*²
: at least £2.8m pa vs estimate £2.5m pa
3.
Fast and efficient integration
- Burtonwood, Wizard both integrated ahead of schedule
- aided by use of consistent, experienced integration teams
- SAP platform across the Group provides robust systems framework
Trading from acquisitions has been strong and cost savings delivered.
*¹ 460 pubs acquired January 2005 for consideration of £167.6m
*² 63 pubs acquired June 2004 for consideration of £91.3m
6
Interim results 2005 : successful acquisitions
4.
Disposals at above book value
- three Wizard sites sold for £4.7m, book profit £1.8m
- several potential AUV disposals within the Burtonwood estate
5. Potential for increased value from acquired freeholds
- Red Lion, Wendover and Café Mango, Sutton: £3.1m
6.
Further development potential to exploit
- Wizard: 6 major and 6 minor refurbishments planned in H2
- Burtonwood:
• 9 transfers to tenancy in H2
• considerable scope for profitable investment in remainder of estate
• up to 50% of estate suitable for long lease
Our acquisitions offer considerable potential for value enhancement
7
Interim results 2005 : integration of Wizard, Burtonwood
1.
Acquisitions principally debt funded
£m
Wizard (100% cash)
91
Burtonwood (c.75% cash) 168
259
debt
equity
consideration
£m
216
43
259
83%
17%
100%
2.
Acquisitions achieved at attractive multiples
- Wizard
: 7.8x EBITDA (historic post overhead, post synergies)
- Burtonwood
: 8.4x EBITDA (historic post overhead, post synergies)
3.
Total acquisition goodwill estimated at £3m
- Burtonwood element is provisional
Acquisitions have been earnings enhancing, with returns > WACC
8
Interim results 2005 : financing
1. Financing remains conservative, with strong asset backing
- debt : EBITDA
4.1x
- interest cover
3.2x
- freehold/long leaseholds
97% (by value)
2. Estate revaluation demonstrates further increase in value
- 2004: 75% of estate revalued, £170m valuation uplift
- 25% of estate currently being revalued in accordance with policy
- expected net uplift c£50m
- will be accounted for in full year results
Despite impact of acquisitions, gearing has reduced vs 2004
9
Interim results 2005 : objectives of refinancing
1. Increasing maturity profile of debt
2. Increasing flexibility and acquisition ‘headroom’
3. Reduced borrowing costs
4. Maintaining operational flexibility
5. Continued flexibility over capex and dividends
Debt re-financing offers scope for greater flexibility and lower costs
whilst reducing risk
10
Interim results 2005 : background to results
1. Investment is generating good returns
- pub refurbishment and site development, Pathfinder Pubs
- pub acquisitions, The Union Pub Company
2. Margins and costs have been well managed
- operating margin of 20.7% unchanged
3.
Acquisitions have been effectively and quickly integrated
- focussed, experienced integration teams
- robust systems platform capable of expansion
4. Significant future opportunity clearly identified
- from the core Pathfinder Pubs, UPC estates
- from the further development of the Wizard, Burtonwood estates
- through refinancing
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Interim results 2005: Pathfinder Pubs investment, margins
0.7
30
(1.0)
5.5
29
£2.5m of cost increases > inflation
= 1.9% of operating margin.
(1.1)
(0.4)
28
27.2
27
EBIT £m
26
25
24
Investment, management of
margins and cost have more
than offset impact of cost
increases.
 higher margins through
- pricing
- purchasing terms
- estate repositioning
23.5
23
22
 wet, food margin % ahead
of last year.
21
20
2004
Sales
growth
Gross
margin
NMW
Utilities
Sky
2005
 labour costs as percentage
of sales unchanged.
A good combination of sales growth and strong margins
12
Interim results 2005: investment in Pathfinder Pubs
The Old College, Barry, S Glamorgan
College Farm, Swindon
Pitcher & Piano, Nottingham
Plas Coch, Wrexham
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Cronkinsons Farm, Nantwich
Interim results 2005 : Pathfinder Pubs*
1. Average per pub
- turnover per pub (mat)
- EBITDA per pub (mat)
2. Operating margin
£608k
£184k
+11.4%
+ 9.5%
19.0%
(0.5)%
£143.5m
£ 27.2m
+19.2%
+15.7%
3. Total Pathfinder Pubs
- turnover
- operating profit
Pathfinder Pubs has developed strong momentum
* Excluding 40 acquired Burtonwood managed pubs
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Interim results 2005 : The Union Pub Company
1. Reduced costs from pubs transferred from Pathfinder Pubs
- 41 transferred in 2004, 20 planned in H2
2. Continued strong sales performance by lessees
- like-for-like sales +3.2%, ahead of the market
- 600 21-year leases now agreed
- Over 200 suitable pubs for conversion to lease within the Burtonwood estate
3.
Growth being achieved through single site acquisition, refurbishment
- 11 pubs acquired in H1
- £7.8m invested in pub refurbishment
- returns achieved on acquisitions and refurbishments are on target
UPC continues to offer significant further development potential
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Interim results 2005 : The Union Pub Company*
Change
1.
Average per pub
- profit per pub (mat EBITDA)
- average rent roll per pub
£59.2k
£24.5k
+5.0%
+4.3%
2.
Operating margin
43.1%
+ 0.2%
3.
Total UPC
£62.4m
£26.9m
+10.1%
+10.7%
- turnover
- operating profit
UPC has achieved growth in sales, margin and profits
* Excluding 420 acquired Burtonwood tenanted pubs
16
Interim results 2005 : WDB Brands – brand performance*
WDB Brands
% Change
Ale Market
% Change
WDB Brands
vs Market (%)
Premium ale
+13.9
(3.4)
+17.3
Standard ale
+0.2
(6.0)
+ 6.2
Total ale
+4.3
(5.5)
+ 9.8
• On-trade vs market = +11.0%; off-trade vs market = +5.2%
• Marston’s Pedigree market share increased +1.9% to 11.0% (on-trade)
• WDB Brands share of premium cask ale market now 14%
Our brands have significantly outperformed the market
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* sources: BBPA statistics, own data. Owned brands only. UK market shares, 6 months to March 2005
Interim results 2005 : WDB Brands performance
1. Turnover growth is being achieved across the division
- independent free trade + 6.9%
- pub companies
+ 9.3%
- off trade
+ 0.1%
- total WDB Brands
• increased distribution
• new account gains
• growth in core brands
+ 5.5%
2. Operating margin of 15.4% (2004: 16.0%)
- growth in distribution to pub companies at lower margin
- continuing pricing pressure in the off-trade
- some cost increases eg. utilities
3. Operating profit +1.1% to £9.2 million
New business won has offset rising costs.
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Interim results 2005 : acquisition of Jennings
1. Pub estate of 128 high quality pubs
- freehold tenanted estate
- average EBITDA per pub £54k
- situated in North of England, mainly Cumbria and the North West
2. Small profitable brewing operation
- annual turnover £6.0m, profit c£1m
- main brand Cumberland Ale – strong local franchise
- opportunities for wider distribution within W&DB pub estates
3. Combined W&DB estate of 2,275 pubs
- 1,738 tenanted, 537 managed
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Interim results 2005 : acquisition of Jennings
1. The offer has been declared wholly unconditional
- acceptances received and shares held in respect of 82.5% of shares
2. Benefits of the acquisition
- synergies of at least £2m per annum
- development opportunities
• pub estate
• beer brands
- excellent geographical fit
- earnings enhancing in first full financial year of ownership
- expected to generate return in excess of WACC in first full financial year
3. Total acquisition cost of £67m financed from debt
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Jennings: acquisition multiples (historic)
February
2005
Implied
multiple
£18.2m
3.7x
EBITDA (pre- overhead, pre-synergies)
£7.8m
8.6x
EBITDA (post overhead, post-synergies)
£7.2m
9.3x
Turnover
* Assumed enterprise value of £67 million
21
*
Jennings: an estate of high quality
The Sun Inn, Ullswater
The Bush, Whitehaven
The Oddfellows Arms, Wigton
The Hermitage Inn, Warkworth
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The Bank Tavern, Keswick
Interim results 2005 : summary
1. Strong, record results reflecting
- high quality pub estate, strong beer brand performance
- organic development, including investment
- effective integration of acquisitions
2. Significant development potential
- Wizard
- Burtonwood
- Jennings
- refinancing
3. Strong current trading*
- Pathfinder Pubs like-for-like sales +3.2%
- The Union Pub Company like-for-like sales +3.0%
- Own brewed beer brands +4.3%
* 32 weeks to 14 May 2005.
23
Interim results 2005
Appendices
24
Appendix 1
Interim results 2005 : free cashflow
Cashflow from operating activities
Interest and tax
Maintenance capex
Free cashflow
Investment capex
Disposals/FT loan inflow/other
Acquisition of Burtonwood
Dividends, share buy-back/issue
Net (increase)/decrease in debt
25
2005
£m
2004
£m
%
change
68.3
(33.2)
(12.0)
57.2
(31.6)
(11.0)
+19.4
23.1
14.6
+58.2
(42.7)
(20.6)
11.1
8.0
(129.1)
-
(16.7)
(16.6)
(154.3)
(14.6)
Appendix 2
Pathfinder Pubs : key financials
2005*
2004
% change
Turnover
£m
143.5
120.4
+19.2
EBITDA
£m
36.1
31.0
+16.5
Operating profit
£m
27.2
23.5
+15.7
Operating margin
%
19.0
19.5
(0.5)
* excluding the acquisition of Burtonwood
26
Appendix 3
Union Pub Company : key financials
2004
% change
Turnover
£m
62.4
56.7
+10.1
EBITDA
£m
30.9
28.1
+10.0
Operating profit
£m
26.9
24.3
+10.7
Operating margin
%
43.1
42.9
+0.2
* excluding the acquisition of Burtonwood
27
2005*
Appendix 4
WDB Brands : key financials
28
2005
2004
% change
Turnover
£m
59.9
56.8
+5.5
EBITDA
£m
12.3
12.4
(0.8)
Operating profit
£m
9.2
9.1
+1.1
Operating margin
%
15.4
16.0
(0.6)
Appendix 5
Interim results 2005 : additional information and guidance
-
Average number of shares in H1 2005
74.1m
-
Number of shares in issue as at 20 May 2005
76.6m
-
Additional dilutive number of shares
-
Forecast tax rates
-
Capex forecast : Existing business £50m
: New builds/sites £34m
: Pub acquisitions £11m
£95m
£45m
£35m
£15m
£95m
-
Forecast disposal proceeds
£15m+
29
2005
30.0% – 30.8%
£15m+
0.9m
2006
30.0% - 31.0%
Interim Results
20 May 2005
www.wdb.co.uk
www.pathfinderpubs.co.uk
www.tupc.co.uk