Transcript No Slide Title

The Wolverhampton & Dudley Breweries, PLC
Preliminary Results
December 2004
www.wdb.co.uk
www.pathfinderpubs.co.uk
www.tupc.co.uk
1
Preliminary results 2004
1.
Strong results, developing momentum
- good like-for-like sales in Pathfinder Pubs and UPC
- margins and profit ahead in all three divisions
- operating margin maintained despite rising costs
2.
Earnings per share* +10.0% to 75.8 pence per share
- profit before tax up 6.3%
- share buy-backs £8.0 million
3.
Dividend +10.0% to 35.32 pence per share
- in line with earnings growth
- average annual increase > 10% over 30 years
* Before goodwill and exceptional items
2
Preliminary results 2004
Financial Performance
Paul Inglett
Finance Director
3
Preliminary results 2004 : profit and loss account
% change
Turnover
£m
513.7
+4.7
Operating profit*
£m
112.9
+4.3
Operating margin*
%
22.0
(0.1)
Profit before tax*
£m
77.7
+6.3
Earnings per share*
p
75.8
+10.0
Dividend per share
p
35.3
+10.0
* Before goodwill and exceptional items
4
2004
Union Pub Company : like-for-like sales growth
+9.9%
+5.2%
+4.3%
+4.3%
+3.5%
%
growth
+3.0%
-2.2%
H1
H2
FY
Beer
sales
Machine
income
• includes all pubs except acquisitions and M to T transfers during the last 2 years
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Rent
Total
Pathfinder Pubs : like-for-like sales growth
+7.8%
+4.1%
+3.4%
+3.2%
+3.2%
• H1 +2.8%
• H2 +3.6%
+1.8%
-4.3%
+0.2%
Community
63%
Food
led
22%
Town
centre
15%
Total
100%
• includes all pubs except acquisitions during the last two years
• uninvested like-for-like sales +0.1%
• Wizard like-for-like sales +3.0%
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Wet
Food
Machines
Total
Preliminary results 2004: consistent margin performance
Group operating margin 2000 - 2004
20.3
21.6
22.1
22.0
2004 vs 2000
• NMW
• Insurance
• Pensions
• Sky TV costs
• Leasehold rents
• Total
17.6
%
= 4.5% of margin
2000
2001
2002
2003
Our business model reduces and spreads risk
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2004
Costs
+£16m
+ £1m
+ £3m
+ £1m
+ £2m
+ £ 23m
Preliminary results 2004 : effective acquisition integration
Integration of Wizard Inns
1.
Integration completed August 2004
- synergies of £2.5m+ being realised
- all systems transferred
- office closed
2.
Conversion opportunities
- 9 pubs due to be refurbished during 2005
3.
Independently valued at £85.8m
- acquisition goodwill £9.1m
- three freeholds being bought
- three sites being sold for HAUV - profit £2.0m
We see considerable development potential in the estate
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Preliminary results 2004 : free cashflow
2004
£m
2003
£m
%
change
148.4
(57.4)
(22.9)
130.9
(54.0)
(21.9)
+13.4
68.1
55.0
+23.8
Investment capex
Disposals/FT loan inflow/other
Acquisition of Wizard Inns
Dividends, share buy-back/issue
(59.0)
18.5
(91.3)
(28.0)
(26.0)
23.9
(24.7)
Net (increase)/decrease in debt
(91.7)
28.2
Cashflow from operating activities
Interest and tax
Maintenance capex
Free cashflow
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Preliminary results 2004 : financing
1.
Prudent financing ratios relative to the sector
-
2.
Bank
covenants
3.7x
3.3x
93%
86%
<4.25x
>2.50x
Asset quality
-
10
debt: EBITDA
interest cover
% fixed debt
gearing
Actual
2004
Freeholds/long leaseholds 96% by value
Community >90% of estate
Tangible fixed assets 2.1x net debt
Preliminary results 2004 : estate revaluation
1.
75% of estate re-valued September 2004
Pub
Nos.
363
863
1,226
2.
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Revaluation gain
£m % change
Pathfinder Pubs
Union Pub Company
WDB Brands
Unlicensed properties
76.8
78.0
7.0
7.7
+22
+27
+29
+73
169.5
+25
Remaining 25% of pubs to be re-valued in 2005
Preliminary results 2004
Business Development
Ralph Findlay
Chief Executive
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Preliminary results 2004 : business development
Organic development plans announced 2003...
1.
More resource devoted to new pub site acquisition
2.
Targeted investment
-
3.
value for money community locals (‘Bostin’ Local’)
growth in informal eating out market (‘Service That Suits’)
increasing pressure for new housing new pub building
acquisition of sustainable tenanted/leased pubs
Focus on beer supply opportunities
- Pubco market
- off trade
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UPC development (1) : organic
1.
Volumes supplied to tenants/lessees +1% like-for-like
- sustainable business, average barrels per pub >280 per year
- wine, cider, minerals showing strong growth
2.
Average rent per pub £24.2k +9.9%
- over 500 Open House Leases agreed
- food sales driving business for 55% of licensees
3.
Greater support for tenants
-
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1,215 licensees from 897 pubs attended ‘skills pool’ modules
CD based guide to wines and spirits development launched
‘Active Ingredients’ released : a guide to developing food offer
Group purchasing power made available to tenants
UPC development (2) : capital investment
2004
Capital Investment £27.6m
20 pubs bought
£9.3m
Invested in estate
average investment/pub = £465k
 average barrels/pub = 300
 average ROC = 13%

2005F : 30 pubs
70 refurbishments
 130 ‘Fastrack’ capex investments
 investment in lease preparation

2005F :
£14m
2005
Capital Investment £24m
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£18.3m
£10m
UPC development (3) : Pubs acquired in 2004
The Lime Kiln, Port y Waen
Rose & Crown, Severn Stoke
New Elliston
Coalville
New Inn, Ross on Wye
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Moon Inn, Stoney Middleton
Pathfinder development (1) : operating formats
1.
2.
Bostin’ Local development
Now
2006
- contemporary pub design
- mid-market, value for money position
- 30% food
100
120
30
40
5
50
Service That Suits
- flexible, developed service style
- higher price platform
- 60% food
3.
New build programme
- exploits house building demand
- ‘monopoly’ value of new sites
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Pathfinder development (2) : capital investment
Number
£m
2004
2005(F)
2004
2005(F)
Pubs bought/built
5
20
8
28
Sites bought not developed
8
10
4
5
Major refurbishments
47
54
15
15
Minor refurbishments
-
-
10
7
Freeholds re-purchased
2
3
3
40
3
58
• More emphasis on new-build activity : 30 sites under negotiation
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Pathfinder development (3) : investment returns
1.
Average sales per week
18,000
16,000
11,300
£
Pathfinder
2.
Major
refurbishments
New builds/
acquisitions
Return on capital
- incremental cash return on refurbishments consistently >20%
- refurbishment cost falling (£0.3m per pub)
Organic development creates internal goodwill
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Pathfinder development (4) : value creation
Cost Sales/wk
£m
£k
1. Example new-build
Bostin’
Local
Return on capital
EBIT
£k
1.3
15
250
200
-
-
19%
15%
EBITDA multiple
Price/pub
2. Site development vs acquisition
New-build Bostin’ Local
5.2x
£1.3m
Recent acquisition multiples (historic, post overhead)
InnSpired (Punch)
Laurel (GK, post synergies)
Wizard (W&DB, post synergies)
9.5x
9.2x
7.8x
£0.3m
£1.5m
£1.4m
Organic development creates internal goodwill
20
EBITDA
£k
Pathfinder development (5) : refurbishments, new pubs
Cobblers Hall, Newton Aycliffe
Hilton Brook, Derby
Voyager
Guisborough
Hilly House, Dudley
Ye Olde White Hart, Kinver
Prime locations, high quality amenities, outside trading areas
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WDB Brands development (1)
1.
New distribution agreements
- J D Wetherspoon
- Mitchells & Butlers
- significant market opportunity for the Marston’s brands
2.
Bass contract
- UK supply of Draught Bass
- will also brew packaged Bass for UK market
3.
Capacity utilisation
- Burton: brewing 90%, bottling 90%
- Wolverhampton: 80%+
- £2.3m brewhouse development complete January 2005
4.
Marston’s Pedigree
- new TV campaign launched October 2004
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WDB Brands development (2)
Fresh ideas generate interest in a stale category….
1.
Marston’s Old Empire
- authentic IPA
2.
Marston’s FC
- smooth beer with genuine taste
3.
Red Brick Brewery beer
- short shelf life ‘fresh’ beer
- ‘fresh is best’
4.
Resolution
- lowest carbohydrate beer on the market
- re-launch of ‘Low C’
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Pub performance
UPC
% change
Pathfinder % change
- per pub per annum £103.6k
+8.8
£587.6k
+11.9
1. Average turnover
2. Average EBITDA
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- per pub per annum
£57.6k
+7.7
£177.2k
+12.0
3. Operating margin
43.1%
+0.8
21.5%
+0.5
WDB Brands : brand performance
1.
Turnover £120.3m vs £122.3m last year
- H2 growth +1.9%
2.
Operating margin +0.4% to 17.8%
3.
Operating profit +0.5% to £21.4m
4.
Return on capital* +2.0% to 27.5%
5.
Brand performance
- premium ale UK market share +0.6% to 10.2%
- standard ale UK market share remains 5.5%
- off trade volume +3.4%, Pedigree +5.6%
* excluding revaluation
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Regulations : key issues
1. White paper (smoking ‘ban’ timetable: end 2008)
- ‘eating out’ remains a driver of growth
- exclusion of wet-led pubs is positive
- W&DB is well positioned to weather the changes
2.
TISC (report expected December 2004)
- UPC is at the forefront of best practice
3.
Responsible retailing
- BBPA initiatives, Crime and Disorder Partnerships, Portman Group
- UPC: ‘Most Responsible Pub Company’
4.
Licensing reform (in place by end 2005)
- First to support tenants, free trade operators
- Opportunity for business development
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Preliminary results 2004 : summary
1.
Strong results reflecting high quality pub estate
- organic performance consistently amongst the best in sector
2.
Business development has momentum
- pub and site acquisition
- beer brand distribution
3.
Conservatively financed
- reduces financing risk in uncertain market
- provides flexibility for acquisitions
4.
Current trading is strong*
- Pathfinder Pubs like-for-like sales +3.2%
- Union Pub Company like-for-like sales +4.2%
- own brewed beer volumes +4.7%
* figures for 8 weeks ended 27 November 2004
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The Wolverhampton & Dudley Breweries, PLC
Preliminary Results
December 2004
www.wdb.co.uk
www.pathfinderpubs.co.uk
www.tupc.co.uk
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