Interim%20Results%202006

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Interim Results 2006
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Preliminary results 2005
David Thompson Chairman
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Interim results 2006

• Strong first half results
• turnover and profit growth in each of our trading
  divisions
• 2. Increased operating margin
• despite significant cost pressures
• Earnings per share up 10.0
• strong growth in profit before tax
• Dividend 10.0 to 14.52 pence per share
• consistent with earnings growth, strong
  underlying cashflow

We remain confident in achieving a satisfactory
out-turn for the year
before exceptional items and adjusted for the
impact of IFRS
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Preliminary results 2005
Paul Inglett Finance Director
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Profit and loss account

• 2006 2005 change
• Turnover m 281.4 257.6
  9.2
• Operating profit m 66.4 58.3
  13.9
• Operating margin 23.6
  22.6 1.0
• Profit before tax m 40.2 35.6
  12.9
• Earnings per share p 36.2
  32.9 10.0
• Dividend per share p 14.52 13.20
  10.0

before exceptional items and adjusted for the
impact of IFRS
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Increased operating margin
2006 vs 2005 Key drivers
Pathfinder Pubs 16.9
(0.6) Union Pub Company 43.9 1.6 WDB
Brands 19.3 (0.8) Central Costs
(2.0) 0.1Group 23.6 1.0
ve flat buying in prices food and drink - ve
utilities 2.5m - ve NMW 1.0m - ve
Sky 0.4m ve higher proportion longer
leases ve synergies from acquisitions - ve
utilities 0.5m - ve pricing pressure from
further consolidation ve benefits
from acquisitionsve higher proportion of
tenanted profits
before exceptional items and adjusted for the
impact of IFRS
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Strong cashflow
2006 2005 m m
change Cashflow from operating activities 99.2
57.6 72.2 Interest (21.0)
(22.5) Maintenance capex (14.0)
(12.0) Investment capex (36.8)
(42.7) Disposals/FT loans/other 14.1
11.1 Acquisitions (45.3) (129.1) Dividends,
shares bought/issued (22.3) (16.7)Net
increase in debt (26.1) (154.3)
Free cashflow 64.2 23.1 177.9
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Efficient financing structure
1. Net debt m Bank facility
153 headroom of 112m
Securitisation 788 c70 of estate
securitised Loan notes 10
Cash in bank/securitisation (53)
898 2. Key financing ratios Average
interest rate lt6.0 at fixed rate
88 Interest cover 3.0x Net
debt EBITDA 4.7x Average debt
maturity 15 yrs
Proforma 12 months to March 06
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Financing capacity

• 1. Interest
• aim to maintain interest cover in range of 2.5x
  3.0x
• 2. Impact on financing capacity
• ability to finance pub acquisitions of up to
  500m without recourse to equity
• 3. Acquisition criteria
• return above WACC
• earnings enhancement
• strategic fit

Flexibility to make acquisitions or further
capital returns
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Preliminary results 2005
Ralph Findlay Chief Executive
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WDB today

• 1. Pub operator 2,358 pubs
• Pathfinder Pubs 543 managed pubs
• The Union Pub Company 1,815 tenanted/leased
  pubs
• situated across England and Wales
• 95 community/neighbourhood estate, 95
  freehold
• 2. Brewer
• leading ale brands
• largest brewer of cask ale in the UK
• 3. Vertically integrated business
• clearly differentiated market position
• consistent record of strong financial
  performance

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93 pubs transferring to UPC in H2
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WDB strategy

• 1. Development of national, high quality pub
  estate
• new build pubs/acquisition of existing pubs
• pub refurbishment
• predominantly community pubs
• continued investment in people and skills
• 2. Increase market share of WDB Brands beers
• exploit benefits of integrated model
• 3. Maintain a strong, efficient balance sheet
• predominantly freehold ownership
• long-term, low cost debt financing
• gearing to reflect stable income, risks

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UPC in strong growth
86.4

• 1. Growth through acquisition
• 2005 - Burtonwood 420 pubs
• 2005 - Jennings 128 pubs
• 2006 - Celtic Inns 63 pubs
• 2. Organic growth
• average profit per pub 4.4
• operating margin 1.6
• 3. Transfers from Pathfinder Pubs
• 93 pubs transferring in H2

70.4
37.9
m
29.8
Stable business, predictable cashflow
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Acquisition of Celtic Inns

• 70 pubs
• 43.1m acquisition cost
• acquired 17 March 2006

Rose Crown, Nether Stowey, Somerset
White Lion, Tenterden, Kent

• EBITDA 4.5m
• effective multiple 9.6x

• predominantly freehold, community estate
• situated South Wales and Southern England

The Cayo Arms Hotel, Cardiff
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Response to rising costs, competition

• Rising costs impact c5k per pub p.a.
• energy
• labour
• Sky TV
• 2. Competitive pricing environment
• value for money offers more prevalent in the
  on-trade
• continued challenge from cut-price deals in
  supermarkets
• Response of good tenants/lessees
• manage price, mix and margin
• actively manage other costs
• develop the pub offer

Estate quality and tenant/operator relationships
matter
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More business support (1)

• 1. More tenants/lessees attending The Skills
  Pool
• RAPPID (5 days)
• NCPLH (1 day)
• Drinks, Drunks, Rocks and Your Role
• 2. Launch of UniOn - intranet
• online ordering
• marketing and promotional tools
• training courses
• supplier offers
• 3. Preparation for the smoking ban
• significant investment planned 2006/07

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More business support (2)
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Estate composition year-end 2006
No. of pubs

• 1. Community locals 226
• Bostin Locals
• Taverners Carveries
• Traditional Locals
• 2. Great food pubs 140
• Service That Suits
• Two for One
• Quality Food Pubs
• Pitcher Piano 27
• Town Centre Traders 50
• Acquisitions/new builds 20
• 463

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High quality segmented pub estate (1)
Taverners
Carvery ? A pub, not a restaurant ? Fresh
food? A real deal ? Mums
cooking on demand

• Bostin Locals
• ? Something for everyone ? They know me, I
  know them
• ? Easier than eating at home ? A great place to
  watch sport

Llangewydd Arms, Bridgend
Loom Shuttle, Kidderminster

• Two For One
• ? A budget deal ? No compromises,
  irresistible prices
• ? Well appointed pubs ? Great food, huge choice

Service That Suits ?
Restaurant meal at pub prices ? Everyday special
treat ? Menu choice and quality
? Personal service
College Farm, Watchfield
Ye Olde Saracens Head, Balsall Common
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High quality segmented pub estate (2)
Town Centre ? The gathering
place ? A clean safe venue
? Great food service

• Pitcher Piano
• ? Cool, contemporary, city party ?
  To be conspicuous
• ? Premium food, drink
  service ? True retail brand

Bell at Mill Hill
Richmond
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20 new openings in 2006/07
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Acquisitions delivering in 2006/07
No. of sites
Planning granted - 7 Planning submitted -
10 Allowance for refusals - (3) Deals in
legals - 3 Trading pubs - 3 Expected
openings - 20
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Trading pub acquisitions

• Bure Farm, Bicester
• 1.8m investment
• 21k AWT
• 18 ROC
• Boundary, South Normanton
• 1.9m investment
• 20k AWT
• 15 ROC

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Increasing market share

• 1. All trade channels
• WDB Brands has 7.6of the UK ale market and
  growing
• The UK beer market declined by c2 (last 12
  months)
• 2. Premium and standard ale
• Premium ale performing strongerthan standard
  ale
• Premium ale stronger in off-tradethan standard
  ale

15.5
12.6
11.1
6.5

5.8
5.6
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Source industry estimates 12 months MAT data to
March 06
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Significant brand support
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Smoking ban industry impact

• Timing of ban - England June 07, Wales Dec
  06?
• 2. Winners and losers
• - winners well invested, well located pubs
• - losers pubs with little amenity, limited
  capacity for investment
• 3. Positive action will mitigate impact -
  positive retailing vs defensive approach
• - adapt to changing consumer profile

Avoid complacency act early
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WDB action

• Ahead of the game
• - c900 pubs sold over 5 years
• - significant investment already completed
• - all plans will be completed by June 2007
• Positive retailing
• - outdoor investment gardens, patios, decor
• - continued development of food offers, both
  managed and tenanted pubs
• Co-ordinated activity
• - cross-divisional smoking group
• - deriving value from integrated model

Working fast, working smart, working together
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Defensive spend

• Defensive spend is better than
  doing nothing

• .. but new customers will not be
  attracted

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Inside Out patios and gardens
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Inside Out patios and gardens
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Smoking ban key points

• Our pubs are well positioned
• - gt85 have gardens/outside trading areas -
  food is 30 of retail turnover and growing - we
  have already disposed of the vulnerable pubs
• 2. We started investment plans early
• - 5m invested in 250 Pathfinder schemes
  2003-2005
• - 20 smoke-free sites trading positively -
  3m invested in 400 UPC schemes by September 2006
• 3. We have clear investment plans in place for
  2006/07
• - 5m on 300 Pathfinder Pubs outlets
• - 7m on 1,050 Union Pub Company outlets
• 4. Group benefits from our business model

Our aim neutralise the risks, maximise the
opportunities
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Summary of interim results

• 1. Strong interim results
• effective implementation of organic development
  strategies
• successful integration of acquisitions
• 2. Strong balance sheet
• prudently financed, with debt capacity
• more flexible financing post securitisation
• 3. Current trading
• in line with expectations, recent LFL sales
  2.5 in Pathfinder
• pressure on discretionary spend, set to
  continue
• we remain confident in achieving a satisfactory
  out-turn for the year

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Appendices
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Appendix
1Key financials
2006 2005
change
Turnover m 153.1 147.3
3.9 EBITDA m
36.3 35.3
2.8 Operating profit m 25.9
25.8 0.4 Operating
margin 16.9 17.5
(0.6)
restated for reallocation of central
overheads, changes to transfer pricing and impact
of IFRS
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Appendix
2 Key financials
2006 2005
change Turnover m 86.4
70.4 22.7EBITDA m 42.8
34.2 25.1 Operating profit m
37.9 29.8 27.2 Operating
margin 43.9 42.3 1.6
restated for reallocation of central
overheads, changes to transfer pricing and impact
of IFRS
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Appendix 3
Key financials
2006 2005 change
Turnover m 41.9
39.9 5.0 EBITDA m
11.6 11.1 4.5 Operating
profit m 8.1 8.0 1.3
Operating margin 19.3 20.1
(0.8)
restated for reallocation of central
overheads, changes to transfer pricing and impact
of IFRS
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Appendix 4
Impact of IFRS restatement (1)
Profit and loss account
Interim Mar 05
Year to Sept 05 Profit
Profit PBT Tax after tax PBT
Tax after tax m m m
m m m UK GAAP
36.0 (11.1) 24.9 90.1 (26.5)
63.6 Pensions (0.5) 0.2 (0.3)
(0.6) 0.2 (0.4) Share based payments
0.1 (0.3) (0.2) 0.2 (1.8)
(1.6)Pre-exceptional IFRS profit 35.6 (11.2)
24.4 89.7 (28.1) 61.6 Exceptionals
under UK GAAP (3.4) 1.0 (2.4) (42.2)
12.0 (30.2) Revaluation/other (1.7)
- (1.7) (0.4) -
(0.4) Goodwill 3.6 - 3.6
7.1 - 7.1 Deferred tax -
0.4 0.4 - 1.0
1.0Exceptionals under IFRS (1.5) 1.4
(0.1) (35.5) 13.0 (22.5) Post exceptional
IFRS profit 34.1 (9.8) 24.3 54.2
(15.1) 39.1
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Appendix 5
Impact of IFRS restatement (2)
Balance sheet net assets
As at Mar 05 As at Sept
05 m m m m UK
GAAP 704.3 758.5 Deferred
tax (90.7) (89.9) Pensions (45.8) (45.9) D
ividends 10.1 19.8 Revaluation 52.0
- Goodwill 3.6 7.1 Share based
payments 3.2 2.5 (67.6)
(106.4) IFRS 636.7 652.1
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Appendix
6 Additional information and guidance

• Average number of shares in H1 2006 77.3m
• Number of shares in issue as at 26 May
  2006 77.2m
• Additional dilutive number of shares 0.6m
• Full year 2006
• Forecast tax rate 30.0 - 30.5
• Capex forecast Existing business 60m
• New builds/sites 25m
• Pub acquisitions 10m
• 95m
• Forecast disposal proceeds 20m

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Appendix
7 Website addresses
Website addresseswww.pathfinderpubs.co.uk www.w
dbbrands.co.uk www.theunionpubcompany.co.uk For
a pdf version of this presentation please visit
our Group website on www.wdb.co.uk
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Interim Results 2006