Download - Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1
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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
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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%
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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%
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Our business model reduces and spreads risk
17.6
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
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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
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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
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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...
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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- 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
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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
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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
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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
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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)
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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
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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
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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
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
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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 200427
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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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