Interim Results - Ei Group plc · 2019. 8. 26. · Interim Results 2008 Financial highlights 6...
Transcript of Interim Results - Ei Group plc · 2019. 8. 26. · Interim Results 2008 Financial highlights 6...
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Interim Results 2008
Interim Results
31 March 2008
VISIT OUR WEBSITE www.enterpriseinns.com
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Interim Results 2008
Financial highlights 6 months to 31 March 2008
EBITDA unchanged at £256m
Profit before tax and exceptional items reduced by 11% to £132m
Weighted average number of shares reduced by 13%
Adjusted earnings per share up 5% to 19.3 pence
Interim dividend up 12% to 5.8 pence
Robust financing structure in place
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Interim Results 2008
EBITDA EBITDA unchanged at £256m
6 Months to 31 March
Year to 30 Sept
Pro forma Pro forma
£m 2008 2007 2007
Revenue 438 450 918
Cost of sales (166) (176) (358)
Gross profit 272 274 560
Administrative expenses
(16) (18) (34)
EBITDA 256 256 526
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Interim Results 2008
Profit & loss account Adjusted EPS up 5% 6 Months to
31 March
£m 2008 2007
Revenue 438 453
EBITDA 256 258
Depreciation (4) (4)
Interest (120) (105)
PBT (pre exceptional items) 132 149
Taxation (36) (44)
Profit after tax (pre exceptional items) 96 105
Adjusted EPS (p) 19.3 18.4
Weighted average no. of shares (m) 497.8 571.1
Dividend per share (p) 5.8 5.2
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Interim Results 2008
Gross margin analysis Increased margin on beer sales
£m Beer, cider & fabs
Licensee discounts
Wines, spirits & minerals
Rent Machines & other Total
2007/08 - Group
Turnover 304 (25) 16 131 12 438
Cost of sales (151) - (12) (3) - (166)
Gross profit 153 (25) 4 128 12 272
Gross margin % 50.3% 62.1%
2006/07 – Proforma
Turnover 317 (25) 17 128 13 450
Cost of sales (160) - (13) (3) - (176)
Gross profit 157 (25) 4 125 13 274
Gross margin % 49.5% 60.9%
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Interim Results 2008
Cash flow statement Free cash inflow of £35m
6 Months to
31 March
Year to 30 Sept
£m 2008 2007 2007
Operating profit 252 254 521
Operating cash inflow 270 252 523
Interest (102) (98) (220)
Tax (43) (35) (71)
125 119 232
Dividends (52) (52) (79)
Pub capital expenditure (37) (35) (75)
Other capital expenditure (1) (2) (3)
Free cash inflow 35 30 75
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Interim Results 2008
Balance sheet Loan to Value at 66%
31 March 30 Sept
£m 2008 2007 2007
Goodwill & investments 417 419 417
Pubs 5,789 5,332 5,740
Net debt (3,809) (3,621) (3,798)
Net other liabilities (179) (152) (165)
Deferred tax (690) (691) (711)
Net worth 1,528 1,287 1,483
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Interim Results 2008
Debt structure Underlying net debt unchanged
As at 31 March As at 30
Sept
£m 2008 2007 2007
Bank debt (1,054) (818) (1,035)
Corporate bonds (1,185) (1,185) (1,185)
Securitised bonds (1,586) (1,586) (1,586)
Gross debt (3,825) (3,589) (3,806)
Cash 91 85 90
Underlying net debt (3,734) (3,504) (3,716)
Other (including mark to market of swaps) (75) (117) (82)
Net debt (3,809) (3,621) (3,798)
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Interim Results 2008
Group leverage ratios Efficient capital structure
2008 MAT 2007 FY
Net debt : EBITDA 7.1x 7.0x
Interest cover 2.2x 2.4x
Fixed charge cover 2.2x 2.4x
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Interim Results 2008
Weighted average life & cost of debt 89% fixed at 6.5% for an average of 11 years
As at 31 March 2008
Facility Weighted average life
Weighted average cost
Bank debt 3 yrs 6.5%
Corporate bonds 14 yrs 6.5%
Securitised bonds 12 yrs 6.4%
Total 11 yrs 6.5%
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Interim Results 2008
Three pronged financing Flexible debt structure
Bank debt Corporate bonds Securitised bonds
£m
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Interim Results 2008
Three pronged financing Loan to Value at 66%
£m
Corporate bonds
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Interim Results 2008
Three pronged financing Significant pub value headroom
Headroom
£m
Bank debt
Pub value
secured
against debt
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Interim Results 2008
Bank debt Cash headroom of £168m
£m As at 31 March 2008
Facility Drawn Headroom
Club facility 1,000 1,000 -
Committed facility 100 50 50
Uncommitted facility 100 4 96
Total 1,200 1,054 146
Overdraft 25 3 22
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Interim Results 2008
Bank debt Comfortable covenant headroom
March 2008 Covenant
Net debt : EBITDA* 5.71x 6.5x
Interest cover* 2.75x 2.0x
First charge assets ratio 1.43x 1.0x
Total property assets ratio 1.92x 1.5x
* Excludes inter-company debt of £50m and inter-company interest of £2m
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Interim Results 2008
Corporate bonds Structure enables constant leverage
At 30 September 2007 Asset cover Income cover
Bond Covenant Actual Covenant Actual
1. £60m due 2014 1.50x 1.57x 1.50x 2.60x
2. £600m due 2018 1.67x 1.69x 2.00x 2.00x
3. £125m due 2021 1.50x 1.72x 1.50x 2.00x
4. £125m due 2025 1.50x 1.70x 1.50x 2.00x
5. £275m due 2031 1.67x 1.67x 1.50x 2.13x
• Covenants tested annually on a MAT basis
• Bonds 2 to 5 : annual withdrawal of pubs to either income cover of 2x or asset cover covenant
• Substitution of pubs as and when required
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Interim Results 2008
Securitised bonds Debt repayment profile until 2018
£140m of debt prepaid
Next scheduled repayment June 2010
£m
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Interim Results 2008
Securitised bonds Significant liquidity and headroom on covenants
March 2008 Covenant
Debt Service Cover Ratio (DSCR) 2.15x 1.10x
Net worth £m 1,401 150
Covenants
Liquidity
Liquidity facility - £190m
Retained cash within structure – circa £100m
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Interim Results 2008
Group financing Structure summary
3 prongs provide flexibility
89% of debt is fixed at 6.5% for an average of 11 years
Net debt at 66% of freehold estate value
Leverage is appropriate for current market conditions
Fixed charge cover at 2.2 times is comfortable
Undrawn facilities provide sufficient liquidity
Significant headroom to financial covenants
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Interim Results 2008
Operating highlights 6 months to 31 March 2008
Group EBITDA unchanged at £256m
Solid performance in a tough market
Increased support for pub retailers through discounts and concessions
Average EBITDA per pub down 0.9% at £33,000
£37m capital expenditure invested into the estate
40 high quality acquisitions for £32m
Surplus land, underperforming & HAUV pubs sold for £12m (£1m profit)
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Interim Results 2008
EBITDA (£m) 257 528 268 547 258 528 256
Ave pub no. 8,687 8,651 8,594 8,522 7,747 7,741 7,756
EBITDA per pub (£k) 29.6 61.0 31.2 64.2 33.3 68.2 33.0
Y-o-Y % increase 9.0% 8.3% 5.4% 5.2% 6.7% 6.2% (0.9)%
EBITDA per pub Resilient performance in a tough market
Half year
Full year
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Interim Results 2008
Top quality pub estate Enterprise secured the best available pub assets
Original pubs
acquired
Pubs at P06 FY08
% retained
Historic* cost (£m)
Current value (£m)
Income % of
historic cost
Income % of
current value
Pre float 490 177 36% 34 97 29% 10%
Other 2,267 1,161 51% 465 784 17% 10%
2001 Managed pubs (Whitbread and S&N) 840 690 82% 458 620 14% 10%
2002 Laurel (Whitbread leases) 1,860 1,641 88% 881 1,224 13% 10%
2004 Unique (Grand Met and M&B) 3,955 3,509 89% 2,162 2,626 13% 10%
Individual acquisitions 708 607 86% 338 438 11% 9%
Scotland 141 - 0%
TOTAL 10,261 7,785 76% 4,337 5,789 13% 10%
• Historic cost includes post acquisition capital expenditure
• ETI estate 61% southern based
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Interim Results 2008
Property revaluation Freehold pub estate conservatively valued
Christies House Price Index 100.0 114.9 118.7 130.1 139.1
Enterprise Inns 100.0 103.7 109.4 116.5 123.5
ETI Pub value uplift (%) 3.7 5.5 6.5 5.9
ETI EBITDA/pub uplift (%) 8.0 8.3 5.2 6.2
Enterprise Inns pubs are valued on an individual basis excluding lotting premium in financial accounts
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Interim Results 2008
Capital investment Consistent investment targeting 12% return
6 months to 31 March 2008
Investment
spend
Total
investment
(£m)
No of
projects
£200k + 14 44
£100-£200k 8 51
£50-£100k 6 88
£10-£50k 7 318
£5-£10k 2 248
Total 37 749
Projects
£m No.
Sept 05 49 1,093
Sept 06 54 1,390
Sept 07 75 1,594
Mar 08 37 749
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Interim Results 2008
Capital investment
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Interim Results 2008
Acquisitions & disposals 40 individual acquisitions completed, consistently targeting 10% return
£m
40 acquisitions (32)
Disposals (inc land) 12
Net cash outflow (20)
Acquisitions Disposals
No. £m No. £m
FY05 21 14 158 47
FY06 95 80 876* 366
FY07 108 91 154** 128
* 12th September 06 sale of 769 pubs to Admiral Taverns for £318m
** 4th December 06 sale of 137 pubs to Retail & Licensed Properties Ltd for £115m
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Interim Results 2008
Acquisitions Golden Boar, Freckenham, Suffolk
Trowel & Hammer,
Nr Stowmarket, Suffolk
Old Oak, Holmer Green, Nr High Wycombe Ye Olde Mustard Pot, Nr Stocksbridge , Sheffield
Green Man, Sturminster Newton, Dorset
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Interim Results 2008
Disposals Estate value underpinned by alternative use
Essex Arms, Walthamstow sold on 25th
April 08 for £1.9m
Royal Oak, Kinson sold on 3rd Jan 08 for £1.3m
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Interim Results 2008
Ave licensee profit £9k £26k £37k £52k £66k £94k
Licensee profitability Profile of estate provides security and opportunity
Source: Estates Review – September 2007 (updated for H1 churn)
Post rent licensee profit
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Interim Results 2008
Licensee profitability Why the tied model really works?
Licensee model
£k
Pub value 740.0
Dry rent 32.0
Discounts foregone 18.4
Machine income foregone 3.0
53.4
Domestic accommodation (10.0)
Effective rental cost to licensee 43.4
5.9%
Pubco model
£k
Pub value 740.0
Property yield 53.4
Wholesale profit 19.5
Income 72.9
9.9%
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Interim Results 2008
Licensee profitability What’s it really like out there?
3,200 enquiries converted to 790 formal applications
82% of estate let on long term assignable leases
257 lease assignments, average premium £69k
(£86k including tenants fixtures and fittings)
Rent concessions increased to 1.0% of rent roll
480 rent reviews, 5 settled at arbitration
Rent reviews were completed at an average annual increase of 2.5%
Overdue balances similar level to last year, bad debts remain constant at 0.1% of
turnover
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Interim Results 2008
Licensee profitability What are Enterprise really doing to help?
Consistent application of fair rent policy
Removal of upward only rent reviews in 1996
Assessments based upon competent retailer
Equitable split of profits
Always prepared to go to binding third party
settlement
Code of practice rent review available outside
normal rent review cycle
H1 08 FY 07 FY 06
DoV rent reductions
No 35 63 79
£m 0.4 0.6 0.9
Rent reviews
No 480 1,457 1,317
% pa inc
2.5 2.7 2.6
Rent concessions
No 184 103 53
£m 2.6 1.4 0.9
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Interim Results 2008
Growth in a tenanted estate How the model works in a normal market
Core growth in operating profit (target 3% growth)
Invest and churn
(target 10-15% return)
Evaluate all acquisition opportunities
Manage balance sheet leverage in line with profit growth and estate valuation
Return spare cash to shareholders
Double digit growth in EPS
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Interim Results 2008
Growth in a tenanted estate Delivering EPS growth in a tough market
2008 2007 2006
Half 1 Year Year
Normal EPS growth 1% 11% 12%
(Organic, capex, churn and debt reduction)
Strategic disposals - (2)% -
(769 pubs & 137 Scottish pubs)
Cost savings 2% 3% 2%
(Overheads, interest and tax rate)
Share buybacks 2% 4% 3%
(net of interest)
Adjusted EPS growth 5% 16% 17%
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Interim Results 2008
Growth in a tenanted estate Delivering eps growth in 07/08
Challenges
Consumers are short of money and confidence
Smoking ban has affected traditional bar trade
Input costs and duty increases have put pressure on margins
Supermarkets continue to promote and sell alcohol at irresponsibly low prices
Credit markets are closed
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Interim Results 2008
Growth in a tenanted estate Delivering double digit growth in 07/08
Strengths
Quality of estate is at its best ever, improving and gaining market share
Quality of estate continues to attract great licensees
Food offerings increasing and improving
Long term supply contracts are in place
Pub estate is 98% freehold (99% by value)
Robust financing structure, with significant headroom on all covenants
89% of debt fixed at 6.5% for an average of 11 years
Cash generation continues to be strong
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Interim Results 2008
Real Estate Investment Trust (REIT) Enhancing shareholder value
Strategic imperatives Continued ownership of pub assets
Internal opco/propco structure to optimise refinancing opportunities
No change in relationship with licensees
Retain cash sufficient to grow the business
No material refinancing costs
Obtain approval of rating agencies and consent of trustees
Outcomes on conversion Conversion charge 2% of asset value Group tax charge reduced to 6-7%
Minimum 90% of tax exempt property income paid as dividend
Timetable Autumn 2008
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Interim Results 2008
Summary
5% growth in adjusted earnings per share
Strong cash generation
12% increase in dividend
Best quality pub estate
Clear strategy for growth in shareholder value
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Interim Results 2008
Interim Results
31 March 2008
Appendix
VISIT OUR WEBSITE www.enterpriseinns.com
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Interim Results 2008
Restatement of 2007 EBITDA £2m EBITDA from Admiral disposal & Scottish disposal
2007 Adjustments* Restated 2007
£m H1 H2 Year H1 H2 Year H1 H2 Year
Revenue 453 468 921 (3) - (3) 450 468 918
Cost of sales (177) (182) (359) 1 - 1 (176) (182) (358)
Gross profit 276 286 562 (2) - (2) 274 286 560
Overheads (18) (16) (34) - - - (18) (16) (34)
EBITDA 258 270 528 (2) - (2) 256 270 526
* Scottish estate of 137 pubs sold on 4th December 2006