SILVER BULLETS - Espirito Santo Investment Bank incorporating ...

THIRD QUARTER 2010
Mitchells & Butlers
Valuation Metrics Sept 2009 Sept 2010E Sept 2011E Sept 2012E Sept 2013E
Recommendation: BUY Execution P/E 11.6 10.7 9.0 7.9 7.3
Fair Value: 360.0p Reported P/E 279.5 10.7 9.0 7.9 7.3
EV / Sales 1.8 1.8 1.8 1.7 1.7
Share Price: 274p EV / EBITDA 8.3 8.2 7.8 7.5 7.3
Upside / Downside 31.4% EV / EBIT 11.9 11.7 10.9 10.4 10.1
FCF Yield 9.3% 7.6% 6.5% 6.2% 6.3%
Previous Fair Value 300p Dividend yield 0.0% 0.0% 3.6% 4.4% 4.7%
% change to fair value 20.0% REP Ratio 0.99 1.01 1.08 1.11 1.13
NAV 244 274 302 320 339
Bloomberg: BBG Code LFL sales % 2% 1% 3% 3% 2%
T-One: MAB NAV goodwill adjusted 244 274 302 320 339
Model Published On: 01 July 2010 EPRA+ 377 406 433 453 472
Key ratios Sept 2009 Sept 2010E Sept 2011E Sept 2012E Sept 2013E
Shares In Issue (Less Treasury) 408
Market Cap 1,118 EBITDA margin 21.9% 22.0% 22.8% 23.3% 23.4%
Net Debt 2,444 EBIT margin 15.3% 15.4% 16.2% 16.7% 16.8%
Adjustments For Associates & Minorities 0 Capex / Revenue 6.2% 7.1% 8.9% 8.6% 8.5%
Enterprise Value 3,562 Capex / Depreciation 0.95 1.08 1.36 1.31 1.30
Net Pension Deficit -130 Net Debt / EBITDA 6.1 5.6 5.0 4.6 4.3
EBITDA / Net Interest 2.0 2.7 3.0 3.3 3.5
ROE 0.4% 9.4% 10.1% 10.9% 11.0%
Forthcoming Catalysts
Adj ROCE 7.0% 7.6% 8.2% 8.7% 9.0%
Third quarter results 22 July 2010
Fourth quarter results September 2010
Full year results November 2010 P&L Summary Sept 2009 Sept 2010E Sept 2011E Sept 2012E Sept 2013E
First quarter results January 2011
Second quarter results April 2011 Revenue 1,958 1,979 2,013 2,052 2,094
Interims results May 2011 % change 1.1% 1.7% 1.9% 2.0%
EBITDA 428 435 458 478 489
% change 1.5% 5.4% 4.2% 2.5%
Execution Analyst % margin 21.9% 22.0% 22.8% 23.3% 23.4%
Alistair Macdonald Depreciation & Amortisation -128 -129 -132 -134 -137
(44) 20 7456 9126 EBIT 300 305 326 343 352
alistair.macdonald@executionlimited.com % change 1.7% 7.0% 5.2% 2.7%
% margin 15.3% 15.4% 16.2% 16.7% 16.8%
Operating Profit 300 305 326 343 352
Revenue Breakdown Net Financials -217 -158 -152 -144 -138
Pre Tax Profit 83 147 175 200 214
Income Tax Expense 14 -42 -51 -58 -62
Net Income 4 105 124 142 152
Execution Net Income 96 105 124 142 152
Operating Profit Breakdown
Reported EPS 1.0 25.7 30.4 34.8 37.3
Execution EPS 23.5 25.7 30.4 34.8 37.3
DPS (p) 0.0 0.0 10.0 12.0 13.0
Payout Ratio 0.0% 0.0% 32.9% 34.5% 34.8%
Shares In Issue (Less Treasury) 408 408 408 408 408
Cash Flow Summary Sept 2009 Sept 2010E Sept 2011E Sept 2012E Sept 2013E
EBITDA 428 435 458 478 489
Taxes Paid 25 -2 -25 -58 -62
Interest Paid / Received -160 -158 -152 -144 -138
Change in Working Capital 0 -22 -23 -23 -23
Operating cash flow 293 252 258 253 266
Capital Expenditure -122 -140 -180 -176 -178
Free Cash Flow 171 112 78 76 88
Acquisitions & Disposals 65 44 99 53 48
Dividends Paid To Shareholders 0 0 -12 -43 -50
Equity Raised / Bought Back 4 0 0 0 0
Other Financing Cash Flow -97 0 0 0 0
Net Cash Flow 143 156 165 87 86
Margin Trends Balance Sheet Summary Sept 2009 Sept 2010E Sept 2011E Sept 2012E Sept 2013E
Margin
25%
20%
15%
10%
5%
0%
Restaurants
51%
Restaurants
47%
Pubs & Bars
49%
Pubs & Bars
53%
2009 20010E 2011E 2012E 2013E
EBITDA margin EBIT margin
Cash & Equivalents 107 97 97 97 97
Tangible Fixed Assets 4,461 4,428 4,377 4,365 4,359
Goodwill & Intangibles 0 0 0 0 0
Associates & Financial Investments 25 25 25 25 25
Other Assets 176 177 178 179 180
Total Assets 4,769 4,727 4,677 4,667 4,661
Interest Bearing Debt 2,707 2,541 2,376 2,289 2,203
Other Liabilities 1,065 1,068 1,070 1,071 1,073
Total Liabilities 3,772 3,609 3,445 3,360 3,276
Shareholders' Equity 997 1,118 1,232 1,306 1,385
Total Equity 997 1,118 1,232 1,306 1,385
Net Debt 2,600 2,444 2,279 2,192 2,106
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