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Annual General Meeting 28 January 2011 Marston’s today Marston’s today 1. National pub operator • Marston’s Inns and Taverns – 485 managed pubs • Marston’s Pub Company – 1,663 tenanted/leased pubs • Situated across England and Wales • 98% freehold estate (by value)* 2. National Brewer – Marston’s Beer Company • Ale brewer; market leading position in premium ales 3. Vertically integrated business • Cost efficient • More opportunities • Reduced risk *includes long leaseholds A leading pub operator and brewer with a flexible business model Presentation name > date 2 Financial snapshot 2010 2009 % Change £650.7m £645.1m +0.9% 22.9% 22.8% +0.1% Operating Profit £148.7m £147.4m +0.9% Profit before tax1 £73.5m £70.3m +4.6% 3.7p 3.7p - Revenue Operating Margin Final Dividend 2010 2009 Operating cashflow £189.3m £147.3m Pre-investment FCF £116.7m £70.0m Net capex* (£63.3m) (£32.6m) Pre-dividend FCF £53.4m £37.4 1 Before exceptional items * Includes disposal proceeds FCF = Free cashflow Return to turnover and profit growth, strong cash generation Presentation name > date 3 Clear divisional strategies STRATEGY KEY COMPONENTS OBJECTIVES • ‘F-Plan’ • New-build investment Exploit and develop competitive advantage in pubs and brewing sectors • Innovative agreements • Greater control of retail offer • • • Sustainable growth Lower gearing ratios Increased ROC • ‘Localness’ • Premium ales > date 4 A clear strategy focused on growth and return ‘F-Plan’ drives transformation ‘F-Plan’: Food, Families, Females, Forty/Fifty somethings 2005 28% Food sales mix: trends, strategy, development 40% 14m Meals served: 70% of visits are food-led 24m £11k AWT per pub: investment, churn £15k £5.70 Spend per head on food: value increased £6.06 62% Food margins: ‘Every Day Value’ 66% A higher quality business adapting to today’s consumer Presentation name > date 5 2010 Managed - new build investment Illustrative pro-forma Actual 2010 New-builds 2011-2015 ‘Pro-forma’ 490 120 610 15 25 17 40% 60% 45% 85 40 125 c.9% c.15% c.11% Number of pubs AWT (£k per week) Food sales mix EBITDA (£m) ROC 1. Visibility and control of plans • • • 2011: 20 sites under contract, 2 open and 8 on site 2012: 25 sites identified 2013 – 2015: c.100 sites under constant review 2. ROC anticipates pressure on returns • 15% target below current run-rate – returning competition, build costs Presentation name > date 6 Importance of food retailing skills continues to increase Tenanted - innovative agreements Heading (Arial Black 22pt) Heading (Arial Black 22pt) Long-term leases Retail Agreement Estate Disposals Total No. of pubs 1,000 600 64 1,664 % of estate 60 36 4 100 Divisional profit £71m £8m - £79m % of profit 90 10 - 100 YOY EBIT % +1 -24 STABILITY OPPORTUNITY Presentation name > date 7 -4 -4 REVIEW Majority of profit stable, significant Retail Agreement opportunity Retail Agreement: target – 60022pt) pubs Heading (Arial Black 22pt) Heading (Arial Black 1. Target EBITDA uplift - £10k per pub (20% EBITDA ROC) p.a. 2010 2011 2012 2013 2014 Retail Agreements* 100 300 500 600 600 Target profit uplift £m* 1.0 1.5 3.5 5.3 6.0 Cumulative 2. Key objectives • • • • • Increased consumer appeal Increased market share Response to market trends – ‘F-Plan’ Reduced overheads Reduction in % of income derived from traditional leased model Presentation name > date 8 Clear growth plan focused on delivery of high ROC Brewing - ‘Localness’ adds value 1. ‘Localness’ • Provenance, tradition, heritage, authenticity 2. Signals of ‘Localness’ • Brewing, distribution, marketing 3. Competition • Regional brewers, micro brewers 4. Marston’s competitive advantage • • • Genuinely local National distribution, cost-efficient Industry-leading guest ale programme 5. Measuring success – Free Trade outperformance • • Volume +10%, premium cask ale +18%, sales +13%, profit +10% Account base +11% Presentation name > date 9 Unique: a local brewer with national distribution and high service level Market leader in premium cask, bottled ale Premium Cask Ale 2005-2010 Marston’s market share % Premium cask ale vs. total ale market Bottled Ale 2005-2010 Marston’s market share % Total bottled ale market *source: BBPA market tracker Presentation name > date 10 Growth prospects, attractive consumer profile and margins Summary 1. Clear strategy to exploit and develop competitive advantage • • • ‘F-Plan’, new-build investment Innovative agreements, greater control of retail offer ‘Localness’, Premium Ale 2. Clear financial objectives • 2010 results demonstrate strategy is being well-executed 3. Current trading • • • Encouraging and robust performance despite weather Profitability in line with our expectations Good progress in each of our trading divisions Presentation name > date 11 Improving trends, clear agenda for growth www.marstons.co.uk