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Interim Results May 2005

Interim Results May 2005. www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk. Interim results 2005. 1. Strong first half results - turnover and profit growth in each of our trading divisions. 2. Successful integration of recent acquisitions

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Interim Results May 2005

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  1. Interim Results May 2005 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk

  2. Interim results 2005 1.Strong first half results- turnover and profit growth in each of our trading divisions 2. Successful integration of recent acquisitions - Wizard, Burtonwood integrated ahead of schedule - expected synergies from both acquisitions exceeded 3. Earnings per share* up 10.2% - strong growth in profit before tax 4. Dividend +10.0% to 13.2 pence per share - average increase over 30 years of over 10% We are confident that our performance and out-turn for the year will be satisfactory *Before goodwill and exceptional items 2

  3. Interim results 2005 : profit and loss account 20052004% change Turnover £m 277.6 233.9 +18.7 Operating profit* £m 57.4 48.5 +18.4 Operating margin* % 20.7 20.7 - Profit before tax* £m 36.0 31.7 +13.6 Earnings per share* p 33.6 30.5 +10.2 Dividend per share p 13.2 12.0 +10.0 * Before goodwill and exceptional items 3

  4. Interim results 2005: like-for-like sales growth* • c.600 21 year leases agreed • community +3.7% (85% of estate) • town centre +0.8% (15% of estate) • includes Wizard *24 weeks to 19 March 2005, excludes Burtonwood 4

  5. Interim results 2005: integration of Wizard, Burtonwood White Lion, Thornbury, Bristol Hoghton Arms, Newton Le Willows Crown, Heathfield, East Sussex Dwyeyfylchi Hotel, Penmaenmawr Childwell Abbey Hotel, Liverpool 5

  6. Interim results 2005 : successful acquisitions 1.Higher pub profits (before admin savings)- Wizard like-for-like profit +4.3% 2. Greater cost savings - Burtonwood*¹ : at least £3.5m pa vs estimate £3.0m pa - Wizard*² : at least £2.8m pa vs estimate £2.5m pa 3. Fast and efficient integration- Burtonwood, Wizard both integrated ahead of schedule - aided by use of consistent, experienced integration teams - SAP platform across the Group provides robust systems framework Trading from acquisitions has been strong and cost savings delivered. *¹ 460 pubs acquired January 2005 for consideration of £167.6m*² 63 pubs acquired June 2004 for consideration of £91.3m 6

  7. Interim results 2005 : successful acquisitions 4.Disposals at above book value - three Wizard sites sold for £4.7m, book profit £1.8m - several potential AUV disposals within the Burtonwood estate 5. Potential for increased value from acquired freeholds - Red Lion, Wendover and Café Mango, Sutton: £3.1m • Further development potential to exploit - Wizard: 6 major and 6 minor refurbishments planned in H2 - Burtonwood: • 9 transfers to tenancy in H2 • considerable scope for profitable investment in remainder of estate • up to 50% of estate suitable for long lease Our acquisitions offer considerable potential for value enhancement 7

  8. Interim results 2005 : integration of Wizard, Burtonwood • Acquisitions principally debt funded £m £mWizard (100% cash) 91 • Burtonwood (c.75% cash)168259 debt 216 83% equity 43 17%consideration 259 100% 2. Acquisitions achieved at attractive multiples - Wizard : 7.8x EBITDA (historic post overhead, post synergies) - Burtonwood : 8.4x EBITDA (historic post overhead, post synergies) 3. Total acquisition goodwill estimated at £3m - Burtonwood element is provisional Acquisitions have been earnings enhancing, with returns > WACC 8

  9. Interim results 2005 : financing 1. Financing remains conservative, with strong asset backing- debt : EBITDA 4.1x - interest cover 3.2x - freehold/long leaseholds 97% (by value) 2. Estate revaluation demonstrates further increase in value- 2004: 75% of estate revalued, £170m valuation uplift - 25% of estate currently being revalued in accordance with policy - expected net uplift c£50m - will be accounted for in full year results Despite impact of acquisitions, gearing has reduced vs 2004 9

  10. Interim results 2005 : objectives of refinancing • Increasing maturity profile of debt • Increasing flexibility and acquisition ‘headroom’ • Reduced borrowing costs • Maintaining operational flexibility • Continued flexibility over capex and dividends Debt re-financing offers scope for greater flexibility and lower costs whilst reducing risk 10

  11. Interim results 2005 : background to results 1. Investment is generating good returns- pub refurbishment and site development, Pathfinder Pubs - pub acquisitions, The Union Pub Company 2. Margins and costs have been well managed- operating margin of 20.7% unchanged • Acquisitions have been effectively and quickly integrated - focussed, experienced integration teams- robust systems platform capable of expansion 4. Significant future opportunity clearly identified- from the core Pathfinder Pubs, UPC estates - from the further development of the Wizard, Burtonwood estates - through refinancing 11

  12. Interim results 2005: Pathfinder Pubs investment, margins 0.7 (1.0) • £2.5m of cost increases > inflation = 1.9% of operating margin. • Investment, management of margins and cost have more than offset impact of cost increases. • higher margins through - pricing - purchasing terms - estate repositioning • wet, food margin % ahead of last year. • labour costs as percentage of sales unchanged. 30 5.5 (1.1) 29 (0.4) 28 27.2 27 26 25 EBIT £m 24 23.5 23 22 21 20 2004 Sales Gross NMW Utilities Sky 2005 growth margin A good combination of sales growth and strong margins 12

  13. The Old College, Barry, S Glamorgan College Farm, Swindon Pitcher & Piano, Nottingham Plas Coch, Wrexham Cronkinsons Farm, Nantwich Interim results 2005: investment in Pathfinder Pubs 13

  14. Interim results 2005 : Pathfinder Pubs* 1. Average per pub - turnover per pub (mat) £608k +11.4% - EBITDA per pub (mat) £184k + 9.5% 2. Operating margin 19.0% (0.5)% 3. Total Pathfinder Pubs- turnover £143.5m +19.2% - operating profit £ 27.2m +15.7% Pathfinder Pubs has developed strong momentum * Excluding 40 acquired Burtonwood managed pubs 14

  15. Interim results 2005 : The Union Pub Company 1. Reduced costs from pubs transferred from Pathfinder Pubs- 41 transferred in 2004, 20 planned in H2 2. Continued strong sales performance by lessees- like-for-like sales +3.2%, ahead of the market - 600 21-year leases now agreed - Over 200 suitable pubs for conversion to lease within the Burtonwood estate • Growth being achieved through single site acquisition, refurbishment - 11 pubs acquired in H1- £7.8m invested in pub refurbishment - returns achieved on acquisitions and refurbishments are on target UPC continues to offer significant further development potential 15

  16. Interim results 2005 : The Union Pub Company* Change 1. Average per pub - profit per pub (mat EBITDA) £59.2k +5.0% - average rent roll per pub £24.5k +4.3% 2. Operating margin 43.1% + 0.2% 3. Total UPC - turnover £62.4m +10.1% - operating profit £26.9m +10.7% UPC has achieved growth in sales, margin and profits * Excluding 420 acquired Burtonwood tenanted pubs 16

  17. Interim results 2005 : WDB Brands – brand performance* WDB Brandsvs Market (%) WDB Brands Ale Market % Change% Change Premium ale +13.9 (3.4) +17.3 Standard ale +0.2 (6.0) + 6.2 Total ale +4.3 (5.5) + 9.8 • On-trade vs market = +11.0%; off-trade vs market = +5.2% • Marston’s Pedigree market share increased +1.9% to 11.0% (on-trade) • WDB Brands share of premium cask ale market now 14% Our brands have significantly outperformed the market 17 * sources: BBPA statistics, own data. Owned brands only. UK market shares, 6 months to March 2005

  18. Interim results 2005 : WDB Brands performance 1. Turnover growth is being achieved across the division • increased distribution • new account gains • growth in core brands - independent free trade + 6.9% - pub companies + 9.3% - off trade + 0.1% - total WDB Brands + 5.5% 2. Operating margin of 15.4% (2004: 16.0%)- growth in distribution to pub companies at lower margin - continuing pricing pressure in the off-trade - some cost increases eg. utilities 3. Operating profit +1.1% to £9.2 million New business won has offset rising costs. 18

  19. Interim results 2005 : acquisition of Jennings 1. Pub estate of 128 high quality pubs- freehold tenanted estate - average EBITDA per pub £54k - situated in North of England, mainly Cumbria and the North West 2. Small profitable brewing operation- annual turnover £6.0m, profit c£1m - main brand Cumberland Ale – strong local franchise - opportunities for wider distribution within W&DB pub estates 3. Combined W&DB estate of 2,275 pubs- 1,738 tenanted, 537 managed 19

  20. Interim results 2005 : acquisition of Jennings 1. The offer has been declared wholly unconditional - acceptances received and shares held in respect of 82.5% of shares 2. Benefits of the acquisition- synergies of at least £2m per annum - development opportunities• pub estate • beer brands - excellent geographical fit - earnings enhancing in first full financial year of ownership - expected to generate return in excess of WACC in first full financial year 3. Total acquisition cost of £67m financed from debt 20

  21. Jennings: acquisition multiples (historic) * * Assumed enterprise value of £67 million 21

  22. Jennings: an estate of high quality The Sun Inn, Ullswater The Bush, Whitehaven The Oddfellows Arms, Wigton The Hermitage Inn, Warkworth The Bank Tavern, Keswick 22

  23. Interim results 2005 : summary 1. Strong, record results reflecting - high quality pub estate, strong beer brand performance - organic development, including investment - effective integration of acquisitions 2. Significant development potential- Wizard - Burtonwood- Jennings - refinancing 3. Strong current trading*- Pathfinder Pubs like-for-like sales +3.2% - The Union Pub Company like-for-like sales +3.0% - Own brewed beer brands +4.3% * 32 weeks to 14 May 2005. 23

  24. Interim results 2005 Appendices 24

  25. Appendix 1 Interim results 2005 : free cashflow 25

  26. Pathfinder Pubs : key financials Appendix 2 2005*2004% change Turnover £m 143.5 120.4 +19.2 EBITDA £m 36.1 31.0 +16.5Operating profit £m 27.2 23.5 +15.7 Operating margin % 19.0 19.5 (0.5) * excluding the acquisition of Burtonwood 26

  27. Appendix 3 Union Pub Company : key financials 2005*2004% change Turnover £m 62.4 56.7 +10.1EBITDA £m 30.9 28.1 +10.0 Operating profit £m 26.9 24.3 +10.7 Operating margin % 43.1 42.9 +0.2 * excluding the acquisition of Burtonwood 27

  28. Appendix 4 WDB Brands : key financials 20052004% change Turnover £m 59.9 56.8 +5.5EBITDA £m 12.3 12.4 (0.8)Operating profit £m 9.2 9.1 +1.1 Operating margin % 15.4 16.0 (0.6) 28

  29. Appendix 5 Interim results 2005 : additional information and guidance • -Average number of shares in H1 2005 74.1m- Number of shares in issue as at 20 May 2005 76.6m • - Additional dilutive number of shares 0.9m • - Forecast tax rates 20052006 30.0% – 30.8% 30.0% - 31.0% • Capex forecast :Existing business £50m £45m • : New builds/sites £34m £35m : Pub acquisitions £11m£15m £95m £95m • - Forecast disposal proceeds £15m+ £15m+ 29

  30. Interim Results 20 May 2005 www.wdb.co.uk www.pathfinderpubs.co.uk www.tupc.co.uk

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