preliminary results december 2004 december 2004 the wolverhampton & dudley breweries, plc 1

Preliminary ResultsPreliminary Results

December 2004December 2004

The Wolverhampton & Dudley Breweries, PLCThe Wolverhampton & Dudley Breweries, PLC

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www.wdb.co.ukwww.pathfinderpubs.co.ukwww.tupc.co.uk

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

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Preliminary results 2004Preliminary results 2004

Financial PerformanceFinancial Performance

Paul Inglett Paul Inglett

Finance DirectorFinance Director

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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

Preliminary results 2004 : profit and loss account

* Before goodwill and exceptional items

2004 % change

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Union Pub Company : like-for-like sales growth

• includes all pubs except acquisitions and M to T transfers during the last 2 years

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H1 H2 FY Beer Machine Rent Total sales income

+5.2%

+3.5%

+4.3%

+3.0%

-2.2%

+4.3%

%growth

+9.9%

Pathfinder Pubs : like-for-like sales growth

• 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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Community Food Town Total led centre 63% 22% 15% 100%

+4.1%+3.4%

+0.2%

+3.2%

+1.8%

+7.8%

-4.3%

+3.2%

Wet Food Machines Total

• H1 +2.8%• H2 +3.6%

Our business model reduces and spreads risk

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20.321.6 22.1 22.0

%

2000 2001 2002 2003 2004

Group operating margin 2000 - 2004

Preliminary results 2004: consistent margin performance

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2004 vs 2000

• NMW +£16m• Insurance + £1m• Pensions + £3m• Sky TV costs + £1m• Leasehold rents + £2m• Total + £ 23m

= 4.5% of margin

Costs

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 estate8

2004£m

2003£m

%change

Cashflow from operating activities 148.4 130.9 +13.4

Interest and tax (57.4) (54.0)

Maintenance capex (22.9) (21.9)

Free cashflow 68.1 55.0 +23.8

Investment capex (59.0) (26.0)Disposals/FT loan inflow/other 18.5 23.9

Acquisition of Wizard Inns (91.3) -

Dividends, share buy-back/issue (28.0) (24.7)

Net (increase)/decrease in debt (91.7) 28.2

Preliminary results 2004 : free cashflow

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Preliminary results 2004 : financing

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1. Prudent financing ratios relative to the sector Actual Bank

2004 covenants - debt: EBITDA 3.7x <4.25x

- interest cover 3.3x >2.50x- % fixed debt 93%- gearing 86%

2. Asset quality

- 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 Revaluation gain Nos. £m % change

363 Pathfinder Pubs 76.8 +22 863 Union Pub Company 78.0 +27 - WDB Brands 7.0 +29 - Unlicensed properties 7.7 +73 1,226 169.5 +25

2. Remaining 25% of pubs to be re-valued in 2005

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Preliminary results 2004Preliminary results 2004

Business DevelopmentBusiness Development

Ralph Findlay Ralph Findlay

Chief ExecutiveChief Executive

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Preliminary results 2004 : business development

1. More resource devoted to new pub site acquisition

2. Targeted investment - 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

3. Focus on beer supply opportunities - Pubco market - off trade

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Organic development plans announced 2003...

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- 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

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UPC development (2) : capital investment

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2004 Capital Investment £27.6m

20 pubs bought £9.3m Invested in estate £18.3m

average investment/pub = £465k average barrels/pub = 300 average ROC = 13%

70 refurbishments 130 ‘Fastrack’ capex investments investment in lease preparation

2005F : 30 pubs £14m 2005F : £10m

2005 Capital Investment £24m

UPC development (3) : Pubs acquired in 2004

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The Lime Kiln, Port y Waen

New Inn, Ross on Wye

New EllistonCoalville

Rose & Crown, Severn Stoke

Moon Inn, Stoney Middleton

Pathfinder development (1) : operating formats

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1. Bostin’ Local development Now 2006- contemporary pub design- mid-market, value for money position- 30% food 100 120

2. Service That Suits- flexible, developed service style- higher price platform- 60% food 30 40

3. New build programme- exploits house building demand- ‘monopoly’ value of new sites 5 50

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 3 340 58

Pathfinder development (2) : capital investment

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• More emphasis on new-build activity : 30 sites under negotiation

Pathfinder development (3) : investment returns

Organic development creates internal goodwill19

11,300

16,00018,000

Pathfinder Majorrefurbishments

New builds/acquisitions

£

1. Average sales per week

2. Return on capital- incremental cash return on refurbishments consistently >20%- refurbishment cost falling (£0.3m per pub)

Cost£m

Sales/wk£k

EBITDA£k

EBIT£k

1. Example new-build Bostin’Local

1.3 15 250 200

Return on capital - - 19% 15%

2. Site development vs acquisition EBITDA multiple Price/pub

New-build Bostin’ Local 5.2x

Recent acquisition multiples (historic, post overhead)

InnSpired (Punch) 9.5x Laurel (GK, post synergies) 9.2x Wizard (W&DB, post synergies) 7.8x

£1.3m

£0.3m£1.5m£1.4m

Pathfinder development (4) : value creation

Organic development creates internal goodwill20

Pathfinder development (5) : refurbishments, new pubs

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Cobblers Hall, Newton Aycliffe

Hilly House, Dudley

VoyagerGuisborough

Hilton Brook, Derby

Ye Olde White Hart, Kinver

Prime locations, high quality amenities, outside trading areas

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

1. Average turnover

- per pub per annum £103.6k +8.8 £587.6k +11.9

2. Average EBITDA

- per pub per annum £57.6k +7.7 £177.2k +12.0

3. Operating margin 43.1% +0.8 21.5% +0.5

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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%

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* excluding revaluation

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 200427

Preliminary ResultsPreliminary Results

December 2004December 2004

The Wolverhampton & Dudley Breweries, PLCThe Wolverhampton & Dudley Breweries, PLC

www.wdb.co.ukwww.pathfinderpubs.co.ukwww.tupc.co.uk

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