Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (April 2016)
25 slides from Tesco's debt investor presentation, Apr 14, 2016
Slide 1: Preliminary Results – Fixed Income Investor Call
14 April 2016 Preliminary Results – Fixed Income Investor Call Alan Stewart – CFO, Shubhi Rao – Group Treasurer
Slide 2: Group performance
Group performance Change Change Continuing operations FY 15/16 constant actual rates rates Group sales (exc. VAT, exc. Fuel) £48.4bn 0.1% (1.6)% Group operating profit before exceptional items £944m 1.1% 0.0% Exceptional items £102m n/m n/m Group statutory operating profit £1,046m n/m n/m Group PBT
Slide 3: Segmental performance
Segmental performance Sales Operating profit before exceptional items Change Change Change Change FY 15/16 FY 14/15 constant actual FY 15/16 FY 14/15 constant actual rates rates rates rates UK & ROI £37.2bn £38.2bn (0.5)% (0.9)% £505m £498m 1.4% 0.6% International £10.2bn £10.7bn 1.8% (4.3)% £277m £
Slide 4: UK and ROI like-for-like sales performance
UK and ROI like-for-like sales performance1 UK ROI 0.9% 1.0% 0.0% 0.0% (1.0)% (1.2)% (2.0)% (1.3)% (1.5)% (2.0)% (1.7)% (2.9)% (4.0)% (4.0)% (4.4)% (5.1)% (6.0)% (6.0)% (6.9)% (6.7)% (8.0)% (8.0)% 14/15 14/15 15/16 15/16 15/16 15/16 14/15 14/15 15/16 15/16 15/16 15/16 3Q 4Q 1Q 2Q 3Q 4Q 3Q 4Q 1Q 2Q 3
Slide 5: UK like-for-like sales performance
UK like-for-like sales performance Extra Superstore (0.3)% (0.7)% (1.1)% (2.2)% (2.4)% (2.5)% (2.3)% (3.2)% (3.4)% (3.2)% (6.1)% (6.3)% 14/15 14/15 15/16 15/16 15/16 15/16 14/15 14/15 15/16 15/16 15/16 15/16 3Q 4Q 1Q 2Q 3Q 4Q 3Q 4Q 1Q 2Q 3Q 4Q Metro Express 4.5% 4.4% 4.1% (0.2)% (0.2)% 3.3% 3.0% (1.
Slide 6: Rebuilding operating profit
Rebuilding operating profit £m 613 498 505 (78) 226 (409) (345) UKUK&&ROI UK & ROI ROI Lower Volume and Investment in Net cost Other UK & ROI FYFY14/15 14/15 prices mix benefit customer offer savings FY FY 15/16 15/16
Slide 7: Rebuilding operating profit - 2H
Rebuilding operating profit - 2H £m 35 339 307 268 (45) (226) UK & ROI UK & ROI UK & ROI Lower Volume and Net cost Other UK & ROI 2H H214/15 14/15 prices mix benefit savings 2H H215/16 15/16
Slide 8: International performance
International performance • Market share gains in 5 of 7 markets • Strong volume growth • Strong cash generation – Operating cash up 87% – Stock days reduced by 6 days
Slide 9: International like-for-like sales performance
International like-for-like sales performance1 Europe Asia 4.1% 3.5% 4.0% 2.4% 3.3% 3.1% 0.1% 2.2% (3.4)% (5.0)% 0.3% (6.2)% 14/15 14/15 15/16 15/16 15/16 15/16 14/15 14/15 15/16 15/16 15/16 15/16 3Q 4Q 1Q 2Q 3Q 4Q 3Q 4Q 1Q 2Q 3Q 4Q 1. Exc. VAT, exc. Fuel.
Slide 10: International like-for-like sales performance
International like-for-like sales performance Hypermarket Superstore 2.9% 1.7% 2.0% 2.0% 1.0% (1.1)% (1.9)% (1.9)% 15/16 15/16 15/16 15/16 15/16 15/16 15/16 15/16 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Convenience 6.3% 5.1% 4.3% 2.2% 15/16 15/16 15/16 15/16 1Q 2Q 3Q 4Q Online FY 15/16: 23.7%
Slide 11: International profit performance
International profit performance £m 76 126 277 254 (47) (37) (95) International 14/15 FY Lower Volume Other customer Net cost Other International 15/16 FY Operating FY 14/15 Profit prices and mix investment savings Operating FY 15/16 Profit
Slide 12: Tesco Bank
Tesco Bank • More value delivered to Tesco customers • Outstanding customer service recognised • Strong growth in customer metrics • Capital and liquidity position remains strong Customer Lending/Deposits Core Tier 1 ratio 8.5 16.6% £bn 7.7 15.2% 7.4 14.0% 6.9 6.9 6.1 13/14 14/15 15/16 13/14 14/15 1
Slide 13: Tesco Mobile
Tesco Mobile • Valuable asset Customer Numbers • JV with O2 4.4m 4.6m 4.0m • UK’s largest MVNO and 5th largest 3.5m mobile operator 2.9m • National footprint in 400+ stores • Attractive sector fundamentals • Industry change creates options 11/12 12/13 13/14 14/15 15/16
Slide 14: Finance income and costs
Finance income and costs FY 15/16 FY 14/15 Interest payable £(504)m £(535)m Capitalised interest £6m £44m IAS 32 and 39 ‘Financial instruments’ £(19)m £(26)m – fair value measurements IAS 19 net pension finance costs £(155)m £(134)m Finance income £29m £80m Net finance costs1 £(643)m £(571)m 1. Stat
Slide 15: Tax
Tax Before Statutory exceptional items Profit before tax £280m £162m Tax (charge) / credit £(8)m £54m Effective tax rate 2.7% (33.2)% • Effective tax rate affected by: – Lower book value than tax value of properties disposed of in year – Change in tax rate on deferred tax balances – Unrecognised tax
Slide 16: Exceptional items
Exceptional items FY 15/16 FY 14/15 Net impairment1 £(408)m £(5,389)m Net restructuring and redundancy £(126)m £(406)m Property transactions £156m - Past service credit and associated costs arising £480m - on UK defined benefit pension scheme Stock-related - £(500)m Reversal of commercial income - £
Slide 17: Total indebtedness
Total indebtedness £m 21,719 18,532 (1,721) (232) (1,234) 1,121 15,536 (4,117) Opening total Change in Change in Change in Total Korea Property Closing total indebtedness net debt discounted pension deficit indebtedness Transactions indebtedness FY 14/15 operating before FY 15/16 leases Korea and pr
Slide 18: Total indebtedness
Total indebtedness £m 21,719 15,536 Pension deficit £2,612m Discounted operating leases £7,814m Net debt £5,110m Opening total Change in Change in Change in Total Korea Property Closing total indebtedness net debt discounted pension deficit indebtedness Transactions indebtedness FY 14/15 operating b
Slide 19: Movement in net debt
Movement in net debt1 3,334 £m 441 3,371 £350m IMPROVEMENT IN WORKING CAPITAL 392 2,581 2,231 (1,684) 280 (297) (91) (231) 1,280 (1,004) Cash flow from Impact from New approach Korea working Underlying Retail cash Interest and Cash capex Free cash flow Net impact of Net impact of Other Reduction in
Slide 20: Property
Property1 FY 15/16 FY 14/15 % selling space owned UK & ROI 52% 43% International 71% 70% Group 61% 58% % total property owned - by value2 UK & ROI 47% 41% International 75% 73% Group 54% 49% 1. Based on continuing operations. 2. Excluding fixtures and fittings.
Slide 21: Pensions
Pensions • Significant progress made with pension scheme de-risking – Defined benefit scheme replaced with defined contribution scheme • £1.3bn reduction in deficit – £480m exceptional actuarial credit resulting from RPI to CPI index change – Part-year payment under £270m per annum funding plan • Gr
Slide 22: Strong liquidity
Strong liquidity • £4.4bn available cash • £5.0bn committed facilities in place – £2.6bn RCF – £2.4bn bilaterals • Strong funding and liquidity profile £bn 2.0 Debt Maturity Profile 1.0 0.0
Slide 23: Improving debt metrics
Improving debt metrics FY 15/16 FY 14/15 Total indebtedness ratio1 5.1x 6.0x Fixed Charge Cover2 1.9x 1.9x 1. Net Debt + pension deficit + NPV of lease obligations)/ EBITDAR. 2. EBITDAR/(Interest + Rent).
Slide 24: Financial summary
Financial summary • Positive sales momentum across the Group • Rebuilding profitability • Improved cash generation • Significant reduction in total indebtedness • Strong liquidity • Strengthening balance sheet
Slide 25: Disclaimer
Disclaimer This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "antici