2015 Interim Results John Hutson – CEO Ben Whitley – Interim FD The Forty Foot, Dún Laoghaire, Republic of Ireland
The Old Unicorn, Bramley Ben Whitley Interim FD 13 March 2015
Financial Summary 26 weeks to 25/01/2015 H1 2015 H1 2014 Δ % Revenue £744.4m £683.2m +9.0% Like-for-like sales +4.5% +5.2% Operating profit £55.1m £55.7m -1.1% Profit before tax and exceptional items £37.5m £37.8m -0.9% Earnings per share 22.6p 22.1p +2.3% Earnings per share (excluding shares held in trust) 23.5p 22.9p +2.6% Free cash flow £44.9m £42.6m +5.4% Free cash flow per share 36.5p 33.8p +8.0% Dividend 4.0p 4.0p - After Exceptional Items: Profit before tax £37.5m £36.0m +4.1% Earnings per share 22.6p 20.7p +9.2% Earnings per share (excluding shares held in trust) 23.5p 21.4p +9.8% 3
Average Weekly Sales Per Pub (including VAT) £000 36.9 38 36.0 35.3 36 34.0 34 32.3 31.1 32 30.3 30.1 30.1 29.9 29.0 30 28.2 28 26 24 22 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 H1 2014 2015 Record average weekly sales per pub 4
Like-for-like Performance % H1 H1 H2 2015 2014 2014 2012 2011 2010 2014 2013 +1.5 +3.4 +1.9 +2.7 +3.8 Bar +2.8 +1.7 -0.8 Food +10.1 +10.5 +13.5 +12.0 +10.9 +4.8 +4.2 +0.1 Machines +1.1 -9.5 +3.8 -3.1 +0.4 -2.8 -3.9 +12.1 Total LFL sales +4.5 +5.2 +5.8 +5.5 +5.8 +3.2 +2.1 +0.1 +0.9 +4.3 +1.7 +2.6 +4.4 LFL Pub Profit* -2.2 -1.2 -2.0 Reasonable LFL sales and profit growth 5 * Excludes head office, depreciation, share incentive plan and interest costs
Operating Margin - Summary H1 2015 H1 2015 H1 2014 H1 2014 £000 % of Sales £000 % of Sales Turnover 744,367 683,229 19.9 21.2 Pub profit (pre repairs) 148,292 145,122 Repairs (26,509) (3.6) (26,900) (3.9) Head office costs (30,736) (4.1) (30,307) (4.4) Share incentive plan (3,724) (0.5) (3,800) (0.5) Depreciation (32,234) (4.3) (28,399) (4.2) Operating profit 55,089 7.4 55,716 8.2 Note: There was a change in the internal cost allocation. The comparatives has been amended accordingly. 6
Cost Increases • Tax increases – business rates and carbon tax (36% from April) • Bar and food supplies increased in the region of 2 % • Utility costs increased by 11% (price up 5% and consumption up 6% including new pubs) • Pub based salary increases averaged 5% in October • Continued investment in repairs and central overheads 7
Allocation of Resources £90m £123m £161m £90m £59m £108m £164m £159m £117m £217m £96m £106m £15m Dividend £24m FH reversions & investment £5m £25m properties £15m £5m £10m Buybacks £8m £33m £23m £7m Capex £76m £15m £10m £8m £10m £26m £13m £8m £7m £17m £2m £3m £78m £153m £12m £121m £43m £10m £113m £94m £82m £81m £76m £75m £61m £49m £39m £38m 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 H1 2014 2015 Increase in capital expenditure due to new openings, reinvestment and freehold reversions 8
Capital Expenditure H1 2015 H1 2014 £m £m Freehold reversions 12.8 7.1 Acquisition and development costs Current year 46.1 34.5 Future year 13.5 16.4 New openings and freehold reversions 72.4 58.0 Fixtures, fittings & equipment 8.0 11.1 Refurbishments 10.5 10.4 Investment in IT 2.9 3.2 Reinvestment 21.4 24.7 Total 93.8 82.7 9
Movement in Net Debt inc. Finance leases Free cash flow increased to £44.9m (2014: £42.6m). £m Total net bank borrowing (including finance leases) of £597.2m, an increase of £40.6m in FY 2014 Net debt 556.6 the last 6 months (July 2014: £556.6m) Free cash flow (44.9) Unutilised bank facilities and cash balances New pub capex 72.4 of £146.2m as at 25 January 2015 (July 2014: £138.1m) * Dividends 9.8 Share buy backs 2.4 Following the period end, the Company concluded an amendment and extension of Other 0.9 its existing banking facility to £820m, H1 2015 Net debt 597.2 expiring in February 2020. Net debt for the year expected to increase by between £50 - £70m due to increased investment in new properties and a greater proportion of Freeholds. 10 * The amended facility, referred to in the Chairman’s Statement, provides an additional £100m of funds
Debt Position H1 H1 FY 2015 2014 2014 Net debt/EBITDA 3.38 2.93 3.21 Interest cover (times) 3.13 3.01 3.11 Interest cover pre exceptional (times) 3.13 3.11 3.19 Fixed charge cover (times) statutory 1.72 1.70 1.75 excluding depreciation 2.33 2.25 2.31 excluding depreciation and exceptionals 2.33 2.28 2.33 Average interest rate 5.65% 6.87% 6.63% 11
Financial Summary • Reasonable sales performance • Continue to generate strong cash flows • Significant investment in core estate and new openings The Picture House, Morley 12
John Hutson CEO The Saxon Crown, Corby
Business Update • Property • People • Changing sales mix • Peach Brandtrack • Continued improvement • Cost outlook • Taxation • Current trading and outlook 14
Property Update Average cost of development of £1.9m, £0.3m higher than in 2014 Higher proportion of freehold pubs H1 FY 2015 2014 18 pubs opened as of 13 March 2015 Trading pubs at start of FY 927 886 9 pubs on site as of 13 March 2015 Freehold pubs opened 11 31 Leasehold pubs opened 1 15 We anticipate opening approximately 30 pubs this financial year Closures -3 -5 Total trading pubs 936 927 New Mexican Monday range Freehold, Leasehold, (48%) (52%) 15
“It’s a people thing” Circa 34,000 employees (2007: 20,588) • • Created over 13,500 jobs since the start of the credit crunch and over 800 jobs in the last six months • Dedicated employee website & e-learning suite • Catering Academy – 212 employees have graduated with 665 employees currently going through the programme. Graduates • Staff retention at its highest ever level. Average length of service for: • pub managers now over 10 years and 5 month, • kitchen managers 6 years and 8 months. • We have been recognised as one of ‘Britain’s Top Employers’ in a Guardian publication for 12 consecutive years. We have signed up to the Government ‘Think, Act, Report’ campaign • Our team at the Crown Rivers, Heathrow T5 aiming to improve gender equality in the workplace. • Around 10,000 employees are shareholders in the Company. 16
Changing Sales Mix 0.4% 0.5% 0.8% 100.0% 3.1% 4.8% 4.5% Other 90.0% 23.2% Machines 29.4% 80.0% 36.6% 70.0% Food 60.0% Bar 50.0% 40.0% 71.6% 65.6% 30.0% 59.5% 20.0% 10.0% 0.0% FY 2003 FY 2008 H1 2015 Long-term growth in food sales mix 17
Peach BrandTrack: Britain’s favourite big brand If the following brands were available in the same location, which would be your first choice to eat at? (ranked by % of adults choosing each brand) ( out of a list of 16 – the May October April Oct April Oct top 6 ) 2012 2012 2013 2013 2014 2014 Wetherspoon 10% 11% 11% 12% 13% 13% Nandos 11% 9% 9% 8% 8% 7% Toby Carvery 5% 5% 5% 5% 7% 6% Pizza Express 7% 7% 7% 7% 7% 6% Wagamama - - 6% 5% 7% 6% Harvester 8% 8% 8% 8% 6% 6% Respondents first choice of brand from following list: Beefeater, Bella Italia, Brewer’s Fayre, Café Rouge, Fayre & Square, Frankie & Benny’s, Harvester, Hungry Horse, Nando’s, Pizza Express, Pizza Hut, Sizzling Pubs, Slug & Lettuce, T.G.I Friday’s, Toby Carvery, Wagamama, JD Wetherspoon 18 Source: Peach BrandTrack, May 2012, Oct 2012, April 2013, Oct 2013, April 2014, Oct 2014
Continued Improvement • 317 pubs are in the 2015 CAMRA Good Beer Guide Raised over £867k in the last 6 months and over • £10.2m during the 12 year partnership with CLIC Sargent (Charity caring for children with cancer providing support for families at home and in hospital from the day of diagnosis.) • 4.93 average food hygiene ratings out of a maximum of 5. A total of 93.6% of pubs achieving the maximum score of 5. • Won The Loo of the Year Awards in six categories The Star, Hoddesdon 19
Cost Outlook • Tax increases: business rates and carbon tax (36% higher since April) • Input cost inflation expected to be around 1-2% (excluding duty) • Utility rates expected to be flat from October 2015 Continued investment in staffing • • Continued focus on maintaining a well-invested estate for the long-term benefit of the Company The Chief Justice of the Common Pleas, Keswick 20
Taxation 2015 2014 H1 H1 £m (estimate)* £m (rebased)* VAT 144.8 133.6 Alcohol duty 75.2 74.7 PAYE and NIC 40.7 38.0 Business rates 24.0 22.5 Corporation tax 7.8 8.8 Corporation tax credit (historic capital allowances) (2.0) – Machine duty 5.7 5.5 Climate change levy 3.0 3.0 Fuel duty 1.9 1.1 Carbon tax 1.8 1.3 Stamp duty 1.2 1.2 Landfill tax 0.8 0.7 Premise licence and TV licences 0.4 0.3 TOTAL TAX £305.3m £290.7m PROFIT AFTER TAX (excluding exceptionals) £27.8m £27.9m * UK taxes only Taxes increased by £14.6m compared to £0.1m decrease in profit after tax (before exceptional items) 21
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