Transcript Slide 1

Interim
Results 2006
Preliminary results 2005
David Thompson
Chairman
2
Interim results 2006
1.
Strong first half results
• turnover and profit growth in each of our trading divisions
2.
Increased operating margin
• despite significant cost pressures
3.
Earnings per share* up 10.0%
• strong growth in profit before tax
4.
Dividend +10.0% to 14.52 pence per share
• consistent with earnings growth, strong underlying cashflow
We remain confident in achieving a satisfactory
out-turn for the year
3
* before exceptional items and adjusted for the impact of IFRS
Preliminary results 2005
Paul Inglett
Finance Director
4
Profit and loss account*
5
2006
2005
% change
•
Turnover
£m
281.4
257.6
+ 9.2
•
Operating profit
£m
66.4
58.3
+13.9
•
Operating margin
%
23.6
22.6
+ 1.0
•
Profit before tax
£m
40.2
35.6
+12.9
•
Earnings per share
p
36.2
32.9
+10.0
•
Dividend per share
p
14.52
13.20
+10.0
* before exceptional items and adjusted for the impact of IFRS
Increased operating margin*
2006
vs 2005
Key drivers
%
%
Pathfinder Pubs
16.9
(0.6)
+ve flat buying in prices – food and drink
- ve utilities
+£2.5m
- ve NMW
+£1.0m
- ve Sky
+£0.4m
Union Pub Company
43.9
+1.6
+ve higher proportion longer leases
+ve synergies from acquisitions
WDB Brands
19.3
(0.8)
- ve utilities
+£0.5m
- ve pricing pressure from further
consolidation
Central Costs
(2.0)
+0.1
Group
23.6
+1.0
6
* before exceptional items and adjusted for the impact of IFRS
+ve benefits from acquisitions
+ve higher proportion of tenanted profits
Strong cashflow
7
2006
£m
2005
£m
% change
Cashflow from operating activities
99.2
57.6
+ 72.2
Interest
(21.0)
(22.5)
Maintenance capex
(14.0)
(12.0)
Free cashflow
64.2
23.1
Investment capex
(36.8)
(42.7)
Disposals/FT loans/other
14.1
11.1
Acquisitions
(45.3)
(129.1)
Dividends, shares bought/issued
(22.3)
(16.7)
Net increase in debt
(26.1)
(154.3)
+177.9
Efficient financing structure
1. Net debt
£m
Bank facility
153
• headroom of £112m
Securitisation
788
• c70% of estate securitised
Loan notes
10
Cash in bank/securitisation
(53)
898
2. Key financing ratios
Average interest rate
% at fixed rate
88%
Interest cover*
3.0x
Net debt: EBITDA*
4.7x
Average debt maturity
8
<6.0%
* Proforma 12 months to March ‘06
15 yrs
Financing capacity
1.
Interest
•
2.
Impact on financing capacity
•
3.
aim to maintain interest cover in range of 2.5x – 3.0x
ability to finance pub acquisitions of up to £500m without
recourse to equity
Acquisition criteria
•
return above WACC
•
earnings enhancement
•
strategic fit
Flexibility to make acquisitions or further capital returns
9
Preliminary results 2005
Ralph Findlay
Chief Executive
10
W&DB today
1. Pub operator – 2,358 pubs
•
Pathfinder Pubs – 543* managed pubs
•
The Union Pub Company – 1,815* tenanted/leased pubs
•
situated across England and Wales
•
95% community/neighbourhood estate, 95% freehold
2. Brewer
•
leading ale brands
•
largest brewer of cask ale in the UK
3. Vertically integrated business
11
•
clearly differentiated market position
•
consistent record of strong financial performance
* 93 pubs transferring to UPC in H2
W&DB strategy
1.
2.
Development of national, high quality pub estate
•
new build pubs/acquisition of existing pubs
•
pub refurbishment
•
predominantly community pubs
•
continued investment in people and skills
Increase market share of WDB Brands’ beers
•
3.
12
exploit benefits of integrated model
Maintain a strong, efficient balance sheet
•
predominantly freehold ownership
•
long-term, low cost debt financing
•
gearing to reflect stable income, risks
UPC in strong growth
1. Growth through acquisition
•
•
•
2005 - Burtonwood: 420 pubs
2005 - Jennings:
2006 - Celtic Inns:
128 pubs
63 pubs
2. Organic growth
•
average profit per pub +4.4%
•
operating margin +1.6%
90
80
70
60
£m 50
40
30
20
10
0
86.4
70.4
37.9
29.8
operating profit
+27.2%
2005
2006
3. Transfers from Pathfinder Pubs
•
93 pubs transferring in H2
Stable business, predictable cashflow
13
turnover
+22.7%
Acquisition of Celtic Inns
• 70 pubs
• £43.1m acquisition cost
• acquired 17 March 2006
Rose & Crown, Nether Stowey, Somerset
White Lion, Tenterden, Kent
• EBITDA £4.5m
• predominantly freehold,
community estate
• effective multiple 9.6x
• situated South Wales and
Southern England
14
The Cayo Arms Hotel, Cardiff
Response to rising costs,
competition
1. Rising costs – impact c£5k per pub p.a.
•
energy
•
labour
•
Sky TV
2. Competitive pricing environment
•
value for money offers more prevalent in the on-trade
•
continued challenge from cut-price deals in supermarkets
3. Response of good tenants/lessees
•
manage price, mix and margin
•
actively manage other costs
•
develop the pub offer
Estate quality and tenant/operator relationships matter
15
More business support (1)
1. More tenants/lessees attending ‘The Skills Pool’
•
RAPPID (5 days)
•
NCPLH (1 day)
•
Drinks, Drunks, Rocks and Your Role
2. Launch of UniOn - intranet
•
online ordering
•
marketing and promotional tools
•
training courses
•
supplier offers
3. Preparation for the smoking ban
•
16
significant investment planned 2006/07
More business support (2)
Recognition
Social responsibility
Development
17
2
Estate composition: year-end 2006
No. of pubs
1. Community locals
•
Bostin’ Locals
•
Taverner’s Carveries
•
Traditional Locals
2. Great food pubs
•
Service That Suits
•
Two for One
•
Quality Food Pubs
140
3. Pitcher & Piano
27
4. Town Centre Traders
50
5. Acquisitions/new builds
18
226
20
463
High quality segmented pub estate (1)
Bostin’ Locals
● Something for everyone
● They know me, I know them
● Easier than eating at home ● A great place to watch sport
Llangewydd Arms, Bridgend
Two For One
● A budget deal
● No compromises, irresistible prices
● Well appointed pubs ● Great food, huge choice
Ye Olde Saracen’s Head, Balsall Common
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Taverner’s Carvery
● A pub, not a restaurant ● Fresh food
● A real deal
● Mum’s cooking on demand
Loom & Shuttle, Kidderminster
Service That Suits
● Restaurant meal at pub prices ● Everyday special treat
● Menu choice and quality
● Personal service
College Farm, Watchfield
High quality segmented pub estate (2)
Town Centre
● The gathering place
● A clean & safe venue
● Great food & service
Pitcher & Piano
● Cool, contemporary, city & party ● To be conspicuous
● Premium food, drink & service
● True retail brand
Bell at Mill Hill
Richmond
20
20 new openings in 2006/07
Number of Openings
30
25
20
Plan 2007/08
New builds
Trading pubs
15
10
5
0
2004/05
2005/06
2006/07
Year
21
2007/08
Acquisitions: delivering in 2006/07
No. of sites
Planning granted
Planning submitted
Allowance for refusals
Deals in legals
Trading pubs
Expected openings
22
-
7
10
(3)
3
3
20
Trading pub acquisitions
Bure Farm, Bicester
•
£1.8m investment
•
£21k AWT
•
18% ROC
Boundary,
South Normanton
23
•
£1.9m investment
•
£20k AWT
•
15% ROC
Increasing market share*
1. All trade channels
7.9
6.8
•
•
WDB Brands has 7.6%
of the UK ale market
and growing
6.4
%
on-trade
off-trade
The UK beer market
declined by c2%
(last 12 months)
2004
2005
2. Premium and standard ale
•
•
24
6.6
6.2
5.9
Premium ale
performing stronger
than standard ale
Premium ale
stronger in off-trade
than standard ale
*Source: industry estimates 12 months MAT data to March ‘06
2006
15.5
12.6
11.1
%
5.6
2004
5.8
2005
6.5
2006
premium ale
standard ale
Significant brand support
25
Smoking ban: industry impact
1.
Timing of ban
- England June ‘07, Wales Dec ‘06?
2.
Winners and losers
- winners: well invested, well located pubs
- losers: pubs with little amenity, limited capacity for investment
3.
Positive action will mitigate impact
- positive retailing vs defensive approach
- adapt to changing consumer profile
Avoid complacency: act early
26
W&DB action
1.
Ahead of the game
- c900 pubs sold over 5 years
- significant investment already completed
- all plans will be completed by June 2007
2.
Positive retailing
- outdoor investment: gardens, patios, decor
- continued development of food offers, both managed
and tenanted pubs
3.
Co-ordinated activity
- cross-divisional smoking group
- deriving value from integrated model
Working fast, working smart, working together
27
Defensive spend
•
•
28
…….. but new customers will
not be attracted
Defensive spend is better than
doing nothing ………
‘Inside Out’: patios and gardens
29
‘Inside Out’: patios and gardens
30
Smoking ban: key points
1.
Our pubs are well positioned
- >85% have gardens/outside trading areas
- food is 30% of retail turnover and growing
- we have already disposed of the ‘vulnerable’ pubs
2.
We started investment plans early
- £5m invested in 250 Pathfinder schemes 2003-2005
- 20 smoke-free sites trading positively
- £3m invested in 400 UPC schemes by September 2006
3.
We have clear investment plans in place for 2006/07
- £5m on 300 Pathfinder Pubs outlets
- £7m on 1,050 Union Pub Company outlets
4.
Group benefits from our business model
Our aim: neutralise the risks, maximise the opportunities
31
Summary of interim results
1.
Strong interim results
• effective implementation of organic development strategies
• successful integration of acquisitions
2.
Strong balance sheet
• prudently financed, with debt capacity
• more flexible financing post securitisation
3.
Current trading
• in line with expectations, recent LFL sales +2.5% in Pathfinder
• pressure on discretionary spend, set to continue
32
• we remain confident in achieving a satisfactory out-turn
for the year
Appendices
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Appendix 1
Key financials
2006
% change
Turnover
£m
153.1
147.3
+ 3.9
EBITDA
£m
36.3
35.3
+ 2.8
Operating profit
£m
25.9
25.8
+ 0.4
%
16.9
17.5
Operating margin
34
2005*
* restated for reallocation of central overheads, changes to transfer pricing and impact of IFRS
(0.6)
Appendix 2
Key financials
2005*
% change
Turnover
£m
86.4
70.4
+22.7
EBITDA
£m
42.8
34.2
+25.1
Operating profit
£m
37.9
29.8
+27.2
%
43.9
42.3
+1.6
Operating margin
35
2006
* restated for reallocation of central overheads, changes to transfer pricing and impact of IFRS
Appendix 3
Key financials
36
2006
2005*
% change
Turnover
£m
41.9
39.9
+5.0
EBITDA
£m
11.6
11.1
+4.5
Operating profit
£m
8.1
8.0
+1.3
Operating margin
%
19.3
20.1
(0.8)
* restated for reallocation of central overheads, changes to transfer pricing and impact of IFRS
Appendix 4
Impact of IFRS restatement (1)
Profit and loss account
Year to Sept 05
PBT
£m
Tax
£m
Profit
after tax
£m
24.9
90.1
(26.5)
63.6
0.2
(0.3)
(0.6)
0.2
(0.4)
0.1
(0.3)
(0.2)
0.2
(1.8)
(1.6)
Pre-exceptional IFRS profit
35.6
(11.2)
24.4
89.7
(28.1)
61.6
Exceptionals under UK GAAP
(3.4)
1.0
(2.4)
(42.2)
12.0
(30.2)
Revaluation/other
(1.7)
-
(1.7)
(0.4)
-
(0.4)
Goodwill
3.6
-
3.6
7.1
-
7.1
-
0.4
0.4
-
1.0
1.0
(1.5)
1.4
(0.1)
(35.5)
13.0
(22.5)
(9.8)
24.3
54.2
(15.1)
39.1
PBT
£m
Tax
£m
UK GAAP
36.0
(11.1)
Pensions
(0.5)
Share based payments
Deferred tax
Exceptionals under IFRS
Post exceptional IFRS profit 34.1
37
Interim Mar 05
Profit
after tax
£m
Appendix 5
Impact of IFRS restatement (2)
Balance sheet: net assets
As at Mar ’05
£m
UK GAAP
£m
704.3
£m
758.5
Deferred tax
(90.7)
(89.9)
Pensions
(45.8)
(45.9)
Dividends
10.1
19.8
Revaluation
52.0
-
Goodwill
3.6
7.1
Share based payments
3.2
2.5
IFRS
38
£m
As at Sept ’05
(67.6)
(106.4)
636.7
652.1
Appendix 6
Additional information and guidance
•
Average number of shares in H1 2006
77.3m
•
Number of shares in issue as at 26 May 2006
77.2m
•
Additional dilutive number of shares
0.6m
Full year
2006
•
Forecast tax rate
•
Capex forecast
30.0% - 30.5%
: Existing business
£60m
: New builds/sites
£25m
: Pub acquisitions
£10m
£95m
•
39
Forecast disposal proceeds
£20m+
Appendix 7
Website addresses
Website addresses:
www.pathfinderpubs.co.uk
www.wdbbrands.co.uk
www.theunionpubcompany.co.uk
For a pdf version of this presentation please visit
our Group website on:
www.wdb.co.uk
40
Interim
Results 2006