Roger Carr Roger Carr Chairman Preliminary Results 2005 – 30 November
Karim Naffah Karim Naffah Finance Director Preliminary Results – 30 November 2005
Financial Highlights Financial Highlights 53 Weeks ending 1 October 2005 Growth (52 Weeks)** � Turnover - £1662m (£1631m) +4.6% � EBITDA* - £413m (£405m) +6.3% � Operating profit* - £297m (£291m) +6.6% � Profit before tax* - £195m (£191m) +10.4% � EPS* - 26.0p (25.4p) +21.5% � Final dividend - 7.55p +13.5% Note: Figures in brackets are for 52 weeks * Before exceptional items ** 2004 comparatives restated for FRS17 3
Presentational Points to Note Presentational Points to Note � 53 week year � Focus on 52 weeks for comparison with FY04 � FRS 17 adopted for pensions accounting � FY04 comparatives restated � Reporting to Debt Investors � Covers the securitised estate 4
FY 2005 Results - - Summary Summary FY 2005 Results FY 05 FY 05 FY 04** 53 wks 52 wks 52 wks £m £m £m Operating Profit* 297 291 273 +6.6% Interest (102) (100) (100) PBT* 195 191 173 +10.4% Tax (62) (61) (56) Earnings* 133 130 117 +11.1% EPS* 26.0p 25.4p 20.9p +21.5% Average no. of shares 511m 511m 559m (8.6) * Before exceptional items **2004 comparatives restated for FRS17 5
Operating Performance Operating Performance FY 05 FY 05 FY 04 53 wks 52 wks 52 wks £m £m £m Turnover Pubs & Bars 957 939 913 +2.8% Retail +4.4% Restaurants 697 684 641 +6.7% SCPD 8 8 6 1662 1631 1560 +4.6% Operating Profit* Pubs & Bars 180 176 173 +1.7% Retail Restaurants 116 114 99 +15.2% +6.6% SCPD 1 1 1 297 291 273 +6.6% * Before exceptional items 6
Like- -for for- -Like Sales: Divisional Like Sales: Divisional Like FY 05* H1 05** Same Outlet (Invested + Uninvested) Pubs & Bars +3.4% +3.1% Restaurants +6.9% +7.4% Total +4.8% +4.8% Uninvested Pubs & Bars +2.1% +1.9% Restaurants +4.4% +5.3% Total +3.0% +3.2% * 52 weeks ** 32 weeks 7
Like- -for for- -Like Sales: Segment Like Sales: Segment Like FY 05* H1 05** Same Outlet (Invested + Uninvested) Residential + 5.7% +5.7% High Street + 3.3% +3.5% Total + 4.8% +4.8% Uninvested Residential + 3.6% +3.8% High Street + 2.3% +2.5% Total + 3.0% +3.2% * 52 weeks ** 32 weeks 8
Balancing Sales Growth & Margin Balancing Sales Growth & Margin FY 05* H1 05** Uninvested LFL Sales + 3.0% + 3.2% Average Selling Price*** flat flat Movement in Gross Margin (%) flat flat Movement in LFL Gross Profit (£) + ve + ve Focus on growing like-for-like gross profit * 52 weeks ** 32 weeks *** Drink & Food 9
Key Operating Statistics* Key Operating Statistics* � Drink sales : up 2% � Food sales : up 8% � Food mix 31% of sales � Outlet staff costs : 24% of sales � Support cost savings : £2m Net operating margin up 0.4% points *All figures relate to Retail 10
Operating Profit Movement Operating Profit Movement £297m* +6 +35 53 rd week +£24m 2005 (17) £273m* 2005 2004 Regulatory Trading & Energy costs * Before exceptional items 11
FY 2005 Expansionary Capital FY 2005 Expansionary Capital Residential Locals Pub Restaurants £10m £44m Drinks Food led led £3m £1m High Street Restaurants City Centre Note: Excludes Hollywood Bowl / Other: £3m 12
Returns by Segment Returns by Segment Residential Locals Pub Restaurants Inc. ROI 16% Inc. ROI 18% Drinks Food led led Inc. ROI 15% Inc. ROI 8% High Street Restaurants City Centre 16% overall incremental ROI – up 1% on last year Notes: Incremental ROI is an EBIT return Cumulative £1bn expansionary investment over the last 15 years (UK only – excl. Hollywood Bowl) 13
Strong Cash Returns Strong Cash Returns 52 weeks £m CROCCE £m NOPAT 291 EBIT 291 Depreciation/Amortisation 114 EBITDA 405 Cash Tax (at 25% of EBIT)* (73) (73) Cash Return 332 218 Average Net Operating Assets 3,434 3,434 Accumulated Depreciation 358 10.6% 7.9% 10.6% 7.9% (721) Revaluations (721) 50 Goodwill written off 50 Cash Capital Employed 3,121 2,763 *Unleveraged tax rate 14
Cash Flow (a) Cash Flow (a) FY 05 53 weeks £m EBIT 297 Depreciation & amortisation 116 EBITDA 413 Working capital / non cash items 21 Maintenance capex (106) Expansionary capex (61) Disposals 57 Additional pension contributions (30) Operating Cash Flow after Net Capex 294 15
Cash Flow (b) Cash Flow (b) FY 05 53 weeks £m Operating Cash Flow after Net Capex 294 Net Interest paid (102) Tax paid (43) Normal dividends paid (50) Licensing costs (4) Exercise of share options 16 Shares repurchased (101) Net Cash Flow* 10 Closing Net Debt £1.625bn * Before £35m bond repayments 16
Financing Financing � Net Debt : EBITDA* 4.0x � Book Gearing** 53% � Interest Cover*** 2.8x Well within all securitisation covenants * 52 weeks ** Net Debt / (Net Assets + Net Debt) *** Excluding net finance income from pensions 17
Financing Strategy Financing Strategy Last 2 years st 2 years � £1.9Bn securitisation in November 2003 - Returned £0.5Bn to shareholders � Organic growth strategy delivering strong cash-flows - £40m increase in annual EBITDA* � Deploying cash resources to maximise value - Invested £118m expansionary capital for high returns - Repaid £63m of securitised debt - Funded £70m of additional pensions contributions - Paid £94m of ordinary dividends - Completed £100m share buy-back Committed to maintaining an efficient balance sheet * 2003 restated for FRS17 18
Share Repurchase and Dividends Share Repurchase and Dividends � Share buy-back programme � £100m in FY06 � Dividend � Final dividend 7.55p, up 13.5% � Annual dividend 10.75p, up 13.2% � Progressive policy Cash returns to shareholders 19
IFRS Update IFRS Update � Will report H1 06 under IFRS � Impact on FY05 results* � Earnings broadly unchanged � Net Assets reduced by up to £250m � No impact on cash flows or debt covenants � More volatility in reported figures Full IFRS disclosure to be made in December * Subject to audit 20
Summary Summary � Business strategy has delivered - good sales growth - higher net margins and returns � Strong cash-flow put to good use - capital investment earning high returns - cash back to shareholders � Maintain efficient balance sheet - preserving appropriate flexibility Delivering value to shareholders 21
Tim Clarke Tim Clarke Chief Executive Preliminary Results 2005 – 30 November
Strategy is Delivering Strategy is Delivering � Profitable sales growth � Leading the informal, value, eating out market � Strong drinks volume growth � Estate development: AWTs +8% to £16.4k � High takes and corporate scale defending margins � Increasing returns and strong cash flow Profitably gaining market share 23
Customer Driven Strategy Customer Driven Strategy � Widening the inclusive appeal of the pub � Estate repositioning to growth markets � Format innovation and evolution � High quality amenity � Product marketing: range, quality and value � Capacity management of high volume, service delivery � Productivity and purchasing gains � High investment returns Focus on operational performance 24
Strong Like- -for for- -Like Sales Growth Like Sales Growth Strong Like 6% 4.8% 4.7% 5% 4% 3.2% 2.7% 3% 2% 1% 0% H1* 05 H2 05 H1* 05 H2 05 Uninvested Same Outlet Uninvested Same Outlet * Includes Easter in both years 25
Profitable Market Share Gains Profitable Market Share Gains MAB Estimated Volume Growth (1) Market Growth (2) Food + 9% + 4% Wines & Soft Drinks + 8% + 2% Spirits + 4% -1% Beer & Cider +2% - 3% (1) FY 05 same outlet volume growth (2) MAB estimates based on BBPA/ AC Neilsen/ ONS for Pub Market 26
Demand Trends – – Overall Market Overall Market Demand Trends CAGR (Actual) Consumer Expenditure £m 1982 to 2004 Total Total 70000 (Nominal) (Real) 7.2% 1.8% 60000 50000 9.1% 3.6% 40000 Eating Out (1) 30000 Wine & Cider 20000 Spirits 5.6% 0.4% Drinking 10000 Out Beer 0 Source:Office for National Statistics (1) Eating out market includes soft drink 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Eating out shows 4% growth driven by fundamental life style changes, while drinking out is stable in real terms 27
Increasing New Users to the Pub Increasing New Users to the Pub % of Adults visiting the Pub 80 at least monthly 70 60 50 at least weekly 40 30 20 3+ week 10 0 1980 1985 1990 1995 2000 2005 Source: TNS Alcovision 28
Growth of Pubs’ Share Growth of Pubs’ Share of Eating Out of Eating Out Eating Out Market Eating Out Eating Out £27.6bn* Market Growth Market Growth +25% +25% Eating Out Market £22.0bn* Pub Food Growth * Pub Food £6.4bn * £4.9bn +31% Market 2000 2005 Source: Mintel (excluding institutional catering and other expenditures on food outside the home) * Includes VAT 29
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