Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1 .

28
Preliminary Results Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC The Wolverhampton & Dudley Breweries, PLC 1 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk

Transcript of Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1 .

Page 1: 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

1

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

Page 2: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

2

Page 3: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Preliminary results 2004Preliminary results 2004

Financial PerformanceFinancial Performance

Paul Inglett Paul Inglett

Finance DirectorFinance Director

3

Page 4: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

4

Page 5: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Union Pub Company : like-for-like sales growth

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

5

H1 H2 FY Beer Machine Rent Total sales income

+5.2%

+3.5%

+4.3%

+3.0%

-2.2%

+4.3%

%growth

+9.9%

Page 6: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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%

6

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%

Page 7: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

7

2004 vs 2000

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

= 4.5% of margin

Costs

Page 8: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

Page 9: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

9

Page 10: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Preliminary results 2004 : financing

10

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

Page 11: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

11

Page 12: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Preliminary results 2004Preliminary results 2004

Business DevelopmentBusiness Development

Ralph Findlay Ralph Findlay

Chief ExecutiveChief Executive

12

Page 13: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

13

Organic development plans announced 2003...

Page 14: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

14

Page 15: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

UPC development (2) : capital investment

15

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

Page 16: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

UPC development (3) : Pubs acquired in 2004

16

The Lime Kiln, Port y Waen

New Inn, Ross on Wye

New EllistonCoalville

Rose & Crown, Severn Stoke

Moon Inn, Stoney Middleton

Page 17: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Pathfinder development (1) : operating formats

17

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

Page 18: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

18

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

Page 19: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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)

Page 20: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

Page 21: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

Pathfinder development (5) : refurbishments, new pubs

21

Cobblers Hall, Newton Aycliffe

Hilly House, Dudley

VoyagerGuisborough

Hilton Brook, Derby

Ye Olde White Hart, Kinver

Prime locations, high quality amenities, outside trading areas

Page 22: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

22

Page 23: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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’

23

Page 24: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

24

Page 25: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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%

25

* excluding revaluation

Page 26: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

26

Page 27: Preliminary Results December 2004 December 2004 The Wolverhampton & Dudley Breweries, PLC 1   .

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

Page 28: 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

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

28