Home | Business News | Browse by Publication | F | Fair Disclosure Wire

Marston's plc Acquisition of Nouveaustar Limited (Eldridge Pope) - Conference Call - Final.

Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Thanks for standing by and welcome to the Marston's conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (OPERATOR INSTRUCTIONS). I must advise you that this conference is being recorded today, Thursday, January 25, 2007.

I would now like to hand the conference over to your speaker today, Mr. Ralph Findlay. Please go ahead, sir.

RALPH FINDLAY, CEO, MARSTON'S PLC: Thank you and good morning, ladies and gentlemen. From Marston's you have got me, Ralph Findlay, the Chief Executive. Good morning.

PAUL INGLETT, CFO, MARSTON'S PLC: It is also Paul Inglett here, the Finance Director.

RALPH FINDLAY: We are going to use as the basis of the discussion this morning the presentation called Marston's PLC acquisition of Nouveaustar Eldridge Pope. With that we're one page two of that presentation. We are delighted to announce the acquisition of Eldridge Pope from Michael Cannon for GBP 155.1 million. The estate is a very good quality estate concentrated in southern England. The majority of the pubs are in Hampshire, Dorset, Berkshire, and Gloucestershire.

The Eldridge Pope business is a business we have looked at for some time. We have seen what Michael Cannon and team have done with the business in recent years to improve it. We made our interests first known to Michael Cannon and his management team in November last year and the business was not auctioned. The discussion was between us and the management team and (inaudible).

Michael Cannon took the Eldridge Pope business private in 2004. The core of the estate has always been very good, but Eldridge Pope had embarked on what at the time was a poorly thought out High Street expansion plan and it is by rationalizing and investing in the estate since acquisition that Michael Cannon's team has significantly improved the business and in particular by introducing the Que Pasa branded concept into the estate, thereby significantly transforming the High Street offer within the business.

The key to the business being acquired is a continuing estate of 135 managed and tenanted pubs made up of 95 managed pubs and 40 tenanted pubs. By number, the estate is just over 70% freehold and by EBITDA it is about 80% of the EBITDA coming from freehold pubs.

In addition, there are 18 sites to be sold which we will come back to later on in the presentation. Fundamentally what we have acquired is an estate which is performing strongly and which is well positioned.

PAUL INGLETT: If you turn to page three, you can see here the distribution of the acquired Eldridge Pope estate. I think what this acquisition does it further enhances our presence in southern England with 58% of the acquired pubs in the Southwest and 36% of the pubs in the Southeast. Overall, a very good geographic fit.

RALPH FINDLAY: Turning to page four for and the reasons for the acquisition, first of all Eldridge Pope is, as Paul described, an excellent geographical fit. It is also a great operational fit for us. The estate is mainly traditional community pub estates. As I said, it is substantially freehold or long leasehold. There is a combination of managed and tenanted pubs. It will provide good quality distribution for Marston's beers.

It is a good mix of business for us. The combination of managed and tenanted pubs and the mainly community mix is good but also with some High Street and the business also comes with an in-house distribution operation. To many potential buyers, these are complexities, but given our business model they provide us with opportunity that is not available to everybody.

We believe that the business is well-positioned for further development. It has got strong emphasis on food and accommodation within the managed estate. We think there is further to go in that area. There is scope for further investment particularly in the tenanted estates and the acquisition provides us with a platform for the continued development of our new build managed pubs program and the acquisition of single site tenanted pubs in the south of England.

We see the integration process as a straightforward one. Eldridge Pope is well-run. There is clearly scope for improved buying terms and reduced overhead costs, which we will come back to. The acquisition is absolutely consistent with our stated strategy to continue to develop a national high-quality pub estate and it will be earnings enhancing in the first full financial year following acquisition. So in summary, we see benefits to each of our trading divisions.

Turning to page five and the managed estate first of 95 pubs, within the managed estate there is a strong emphasis on food. This business has seen significant growth in food and indeed sales since acquisition by Michael Cannon in 2004. That growth in food has come principally through investment and focus. Food sales are about 30% of average turnover per week of GBP 13,000 per managed pub. That focus was recognized in Eldridge Pope winning the Company of the Year Award for public and food awards in 2006.

As I said before, we do see other opportunities to continue to develop the food business including through the introduction of Marston's Tavern Table, [Carbury] and two-for-one formats into what are some very well-positioned sites.

Secondly, the estate is well prepared for the smoking ban. 90% of the pubs in the estate have got good outside trading areas. They have already invested in those outside trading areas ahead of the ban and the business does comprise a good quality estate with a strong emphasis on food. So we think it is well positioned.

Accommodation is a meaningful and well-managed part of the business through a part of the managed estate called Nostalgic Inns which is 26 excellent pubs with rooms. Within the existing Marston's estate, we have 34 very good quality pubs with rooms and we...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!