Roger Carr. Chairman. March

Transcription

1 Roger Carr Chairman March

2 Agenda Introduction Roger Carr (Chairman) Financial Results Karim Naffah (FD) Actions and Priorities Tim Clarke (CEO) Q&A 2

3 Business Highlights Independent future with twin goals Improved capital efficiency Accelerated profitable growth Rebalance business culture From margin emphasis to driving growth 3

4 Karim Naffah Finance Director 4

5 Financial Highlights Turnover 793m - up 1% EBITDA 191m - flat Operating Profit 137m - down 6% EPS 8.6p - down 0.7p* Net Operating Cashflow 152m** - up 80m *On a proforma basis **Before interest, tax and dividends 5

6 Operating Performance H1 03 H1 02 m m Turnover Pubs & Bars % Restaurants % Other % Operating Profit Pubs & Bars % Restaurants Other % 6

7 Proforma Key Assumptions As if separation had occurred on 1 st October 2001 No adjustments to operating profit Debt position worked backwards from cashflow Interest based on terms of current facilities Taxation reflects increased interest charge All one-off items relating to separation excluded Number of shares constant at 734 million 7

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9 Proforma P&L H1 03 H1 02 FY 02 m m m Operating Profit * Interest (44) (46) (86) PBT Tax (30) (32) (65) EPS 8.6p 9.3p 18.5p * After 2m exceptional costs on disposal of fixed assets 9

10 Key Operating Statistics Food sales up 2.7% Food mix 29.4% - up 0.6% points Outlet staff costs % of sales Year to date employee productivity up 5% Food and drink prices up 2% in first half expected to be flat for the year as a whole Cost savings of 5m in second half 10

11 Managed Estate Segmentation Local Pubs Drinks led Scream 91 Arena 59 Ember Inns 146 Other Locals Metropolitan Professionals Sizzling 114 Residential Other Pub Restaurants Vintage Inns Toby Innkeepers Fayre 24 Express by Holiday Inn Harvester 148 Pub Restaurants Food led O Neill s Goose 51 All Bar One Flares Other High St Browns High St Pubs & Bars Edwards Classics Nicholsons Restaurants City Centre Note: Excludes Hollywood Bowl and Alex Excludes Innkeepers Lodges associated with other outlets 11

12 Uninvested Like-for-Like Sales 32 weeks to 10 May Total company - 3.7% Pubs & Bars - 4.3% Restaurants - 2.8% 12

13 Performance by Segment Locals Residential Pub Restaurants Inc. ROI* - 15% Total sales + 0.7% AWT 10.6k Inc. ROI* - 13% Total sales + 1.7% AWT 17.8k Drinks led Food led Inc. ROI* - 13% Total sales - 0.6% AWT 12.8k Inc. ROI* - 10% Total sales - 2.8% AWT 22.9k High Street City Centre Restaurants Note: Excludes Hollywood Bowl and Alex * MAT to H1 FY2003 on cumulative 0.9bn expansionary investment. 13

14 Expansionary Capital - First Half Locals Residential Pub Restaurants 13m 16m Drinks led Food led 6m 0m High Street City Centre Restaurants Note: Excludes Hollywood Bowl and Alex 14

15 Strong Cash Returns 12 months to 12 April 2003 m EBIT 280 Depreciation/Amortisation 95 EBITDA 375 Cash Tax (at 23% of EBIT)* (65) Cash Return 310 CROCCE m 280 (65) 215 NOPAT Average Net Operating Assets Accumulated Depreciation 250 Revaluations (746) 10% (746) 8% Goodwill written off Cash Capital Employed * Unleveraged tax rate (including capital allowances) 15

16 Net Cashflow H1 03 H1 02 m m EBITDA Working capital movement 22 5 Capital Expenditure (80) (146) Disposal proceeds Net Operating Cashflow

17 Proforma Balance Sheet* At H1 03 m Net Operating Assets Net Debt* 3.5bn 1.3bn Market Cap Gearing** 82% Debt / EBITDA*** 3.5x * Post de-merger and 0.7bn return of capital ** Share price pence as of close 21 May 2003 *** Last 12 months 17

18 Re-Financing Update Securitisation of UK pubs and restaurants Further enhance efficiency of balance sheet Release surplus funds for shareholders Reduce weighted average cost of capital 18

19 Securitisation Plan Major transaction in its own right Significant work now underway Final due diligence Documentation Legal structuring Expect to execute during the Autumn Raise sufficient proceeds to refinance existing debt and return at least 400m to shareholders Subject to capital market conditions 19

20 Criteria on Terms Equity-based Strategy EPS EPS growth Further value creation Asset appreciation Dividend Policy pence per per share in in 2004 Progressive thereafter Sufficient capex Flexibility to to churn Ability to to release capital Cashflow test test Reconcile higher gearing with sufficient corporate flexibility 20

21 Summary Solid performance Defending high returns Driving strong cash generation Refinancing plan in place to release surplus funds for shareholders 21

22 Tim Clarke Chief Executive 22

23 Value Creating Operating Actions Driving profitable sales growth Developing and evolving the brands and formats Disciplined capital allocation programme Raising productivity and reducing costs Driving strong cash returns, earnings growth and freehold property appreciation 23

24 Driving Profitable Sales Growth Trading conditions changed in the second half of calendar year 2002: Shift in business priorities and culture Combining brand and asset development with organic sales growth From margin defence to sales generation Optimal balance of volumes, mix and margins Emphasis on cash gross profit vs % gross margin Productivity and cost gains to offset fixed cost pressures 24

25 Competitive Pricing Dynamics High Street overcapacity/central London weak demand Defending profit through tactical activity Recent price stabilisation Overall industry real price increases vs. off-trade On-trade beer + 3% p.a. Off-trade beer - 2% p.a. Restaurants + 4% p.a. Food (shops & catering) unchanged Residential share gain strategy sources ONS [and Nielsen] 25

26 Driving Sales Growth 1 st half: controlled promotional trials and evaluation Initially in c.100 outlets Increased consumer price sensitivity to brand premium pricing Indiscriminate discounting unviable Variations across product categories and time slots Extended activity now in implementation: c.1,000 outlets Extended product ranges Price reductions Promotional marketing 26

27 Driving Sales Growth Key Areas of Promotional Activity Brands and channels selected by competitive dynamics Central London High Street Community drinks Family dining 27

28 Pricing, Volume and Margins Average retail price change of combined food and drink basket: Oct 02 vs Oct % April 03 vs April % Est. Sept 03 vs Sept 02-1% to - 2% Positive impact on cash gross profit trend Gross margin impact mitigated by: Shift to higher margin lagers & soft drinks Purchasing cost gains 28

29 Improving Like-for-Like Sales Trends Uninvested Like for Likes 8 weeks to 23 Nov - 4.5% 8 weeks to 18 Jan - 3.3% 8 weeks to 15 March - 3.9% 8 Weeks to 10 May - 3.1% 29

30 6 of the Best (London) Successful promotion in Town Bars adapted for London Carling / Carlsberg, Smirnoff Double and Mixer, Stella, Reef, Becks, Wine All at 1.99 Trial results Volume up Positive gross profits 30

31 Harvester Early Bird Re-launched in February From opening time to 6.30pm, Monday to Friday, 5.00pm Saturday 1/3 off almost the entire menu Accompanied by radio advertising Results to-date encouraging Food volume up by 9.5% Drink volume up by 9.2% 31

32 Service, Sales Training and Incentives Service Quality is programme Selling Product knowledge Serve standards Partnership with key suppliers Bar floor service Table service up-selling and techniques to add extra sales (e.g. Coffees, puddings) Motivation and Incentives Mystery Customer scores Incentives linked to sales Cultural change from order takers to sales people 32

33 Evolution & Development City Centre & London Strategy of Differentiation or Value z Specialist Continental lagers & ales z Enhanced wine offer z Fast Lunch menu z Evolution of light bites offer z Music & lighting zoning z Young professionals in affluent suburbs of larger cities z Individual, re-branding a good local pub z Interesting range on menu z Low capital cost 33

34 Evolution and Development Residential Strategy to to Grow Sales & Distribution Now 146 outlets Average sales uplifts of 61% Growing appeal to sociable regulars Cask ales & premium lagers Widening appeal to females Design and menu enhancement 34

35 Evolution and Development Residential Strategy to to Grow Sales & Distribution REDUCING CAPITAL INTENSITY Ember & Toby Evolution of template: 40%+ reductions in capital costs Identify customer key points of value Maximise ratio of trading to back of house space Minimisation of structural work Rationalisation of kitchen specs Allows fit to a wider variety of sites 35

36 Evolution and Development Residential Strategy to to Grow Sales & Distribution Development and roll-out of a scale community pub food brand Introduction of three plate sizes & healthier menu options 114 sites open: potential for over

37 Disciplined Capital Allocation H1 Development Conversions Acquisitions Number of projects opened 70 8 Average investment 234k 2.0m Incremental ROI 16% 11% 37

38 Disciplined Capital Allocation Future Development FY 2003 Pipeline of 500 conversions at start of year 135 conversions 14 acquisitions 19m disposal proceeds in H1, similar level in H2 FY 2004 FY 2006 Balance of pipeline developed Average conversion capex 250k acquisitions p.a. >80% residential On-going programme of opportunistic site disposals 38

39 Aggressive Management of Cost Base Continued improvement in staff productivity: + 6% in Q2 Ongoing renegotiation of non-tied supply contracts 6% reduction achieved on 24% of COGS renegotiated in H1 Support cost rationalisation Delivered 10m annualised savings, 5m this year 39

40 Near Term Outlook Improvement in trading seen in Q2 continued into May Residential segments with food most resilient High Street over-capacity Uncertainty as to prospects for London recovery Regulatory cost pressures Impact of marketing, range, pricing, promotional actions Cautious on UK consumer spending but confident of resilience of M and B model 40

41 Medium Term Outlook Integrated economics of food and drink Take share in eating out/drinking out market versus Low amenity, small, beer dependent pubs Restaurants lacking drinks profitability Licensing Reform positives Proven systems, purchasing and overhead scale Well placed to add value through consolidation 41

42 Summary Key strategic priorities Driving sales growth Efficiency on capital and costs Implementing optimal financial structure 42

43 Q & A 43