North West Company Inc. · TSX:NWC
North West — Shareholder Meeting (2018)
45 slides from North West's shareholder meeting presentation, 2018
Slide 1: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders
Slide 2: Executive Vice-President & Chief Financial Officer Remarks
Executive Vice-President & Chief Financial Officer Remarks
Slide 3: 2017 Financial Highlights
2017 Financial Highlights Key Performance Factors ü Record capital investment of $173 million ü Acquisitions: • Roadtown Wholesale Trading Ltd. (RTW) • North Star Air Ltd. (NSA)
Slide 4: 2017 Financial Highlights Continued
2017 Financial Highlights Key Performance Factors Continued x Caribbean hurricane-related store closures: • 2 Cost-U-Less stores & 3 RTW stores • Annualized impact: • U.S. $92 million in sales • U.S. $6.6 million EBITDA ü / x U.S. tax reform
Slide 5: Top Line Growth Continues
Top Line Growth Continues • 2017 Financial Highlights Sales ($ in millions) Canada $1,844 $1,954 International $1,796 $782 $706 $719 ü Top line sales +5.9% driven by: ü RTW & NSA acquisitions ü New Giant Tiger stores $1,090 $1,125 $1,172 ü Same store sales +1.2% x Hurricane-related store closures –
Slide 6: EBITDA Performance
EBITDA Performance • 2017 Financial Highlights EBITDA ($ in millions) $166.5 $169.6 Canada $151.3 International $56.8 $57.2 $53.1 ü RTW & NSA contribution ü Northern Canada store results $109.7 $112.4 x Acquisition costs $98.2 x Hurricane-related store closures = EBITDA +$3.1 million, +1.9% 2015 201
Slide 7: Acquisitions Drive Adjusted EBITDA Improvement
Acquisitions Drive Adjusted EBITDA Improvement • 2017 Financial Highlights Adjusted EBITDA ($ in millions) Hurricane-related Store Closures $181.2 Acquisition Costs $5.3 Reported EBITDA $6.3 x Stamp duty paid to BVI government $166.5 $169.6 x Negative hurricane impact $151.3 1.5 = Adjusted EBITDA +$
Slide 8: Net Earnings Performance
Net Earnings Performance • 2017 Financial Highlights Net Earnings ($ in millions) $69.8 $77.1 $69.7 x Non-comparable costs x Higher amortization & interest expense x U.S. tax reform transition tax – $5.8 million = Net earnings – $7.4 million, – 9.6% 2015 2016 2017
Slide 9: Net Earnings Performance
Net Earnings Performance • 2017 Financial Highlights Adjusted Net Earnings ($ in millions) U.S. Tax Reform $86.0 Hurricane-related Store Closures $5.8 Acquisition Costs Reported Net Earnings $4.3 $77.1 $6.2 $69.8 $69.7 = Adjusted net earnings +$8.9 million, +11.5% ü Contribution from RTW & NSA ü Sol
Slide 10: 2017 Other Financial Highlights
2017 Other Financial Highlights
Slide 11: Investing to Sustain and Grow
Investing to Sustain and Grow • 2017 Financial Highlights 2017 Capital Expenditures ($ in millions) CAPEX $173 ü Invest in new markets & strengthen RTW & NSA our supply chain +$109 million $109 ü Continue to sustain & grow existing business: • Top Markets $76 $78 • Top Categories $64 • Project Enter
Slide 12: Financial Capacity
Financial Capacity • 2017 Financial Highlights Debt, Leverage & Borrowing Capacity ($ in millions) Debt Available Capacity Debt-to-EBITDA ü Available borrowing capacity $266 $266 million $265 $189 ü Extended debt maturities 1.8 1.5 1.4 ü Increased fixed interest rate debt $314 $225 $229 ü Financial
Slide 13: Shareholder Returns
Shareholder Returns • 2017 Financial Highlights Total Return Performance (% at January 31) NWC TSX Composite 190 ü Share price growth +26% 165 ü Dividend reinvestment 140 1.5 = 9.5% total returns 5-year CAGR 1.4 1.4 115 90 2013 2014 2015 2016 2017 2018
Slide 14: Increasing Dividends
Increasing Dividends • 2017 Financial Highlights Dividends Per Share & Yield Dividends Per Share Dividends Yield % (1) $1.24 $1.28 $1.16 $1.20 $1.04 $1.12 ü 4.9% dividend 6-year $0.96 CAGR ü 4.6% average yield 1.5 1.4 1.4 = Approximately 50% of total 4.8% 4.7% 4.6% 4.8% 4.5% 4.4% 4.1% returns to sha
Slide 15: 2018 First Quarter Financial Performance
2018 First Quarter Financial Performance
Slide 16: Sales Performance
Sales Performance • 2018 First Quarter Performance Sales ($ in millions) Canada $486 (1) $466(1) International $439 $173 $205 $172 ü NSA sales growth ü New Giant Tiger stores x Hurricane-related store closures $266 $281 $294 – $24 million x Foreign exchange impact – $8 million Q1 2016 Q1 2017 Q1 201
Slide 17: Non-comparable Expenses Impact EBITDA
Non-comparable Expenses Impact EBITDA • 2018 First Quarter Performance EBITDA ($ in millions) Canada $39.5 International $37.6 ü Non-comparable expenses: $12.5 $12.8 $30.1 • Lower share-option expense $10.2 • RTW acquisition costs x Hurricane-related store closures $24.8 $19.9 $27.0 = EBITDA +$9.4 m
Slide 18: EBITDA Performance
EBITDA Performance • 2018 First Quarter Performance Adjusted EBITDA ($ in millions) Hurricane-related Store Closures $40.2 Acquisition Costs $36.3 $39.8 Share-option Expense $5.8 Reported EBITDA -$1.3 $2.0 $37.6 -$1.7 $4.3 -$1.3 $30.1 $39.5 = Adjusted EBITDA – $0.4 million, – 0.8% 1.5 1.4 1.4 Q1 201
Slide 19: Non-comparable Expenses Impact Earnings
Non-comparable Expenses Impact Earnings • 2018 First Quarter Performance Net Earnings ($ in millions) $17.8 $18.6 ü Lower share-option expense ü Acquisition costs 1.5 x Hurricane-related store closures 1.4 1.4 $9.1 = Net earnings +$9.5 million Q1 2016 Q1 2017 Q1 2018
Slide 20: Net Earnings Performance
Net Earnings Performance • 2018 First Quarter Performance Adjusted Net Earnings ($ in millions) Hurricane-related Store Closures Acquisition Costs $19.2 Share-option Expense $16.5 $18.2 $1.3 Reported Net Earnings -$1.3 $5.8 -$1.7 = Adjusted net earnings – $1.0 million, – 5.2% $17.8 $4.3 $18.6 x Gian
Slide 21: Consistent Dividend Yield
Consistent Dividend Yield • 2018 First Quarter Performance Quarterly Dividends ($ per share) $0.32 $0.32 $0.31 ü 4.6% yield at April 30 ü Future increases based on earnings and cash flow growth 1.5 1.4 1.4 Q1 2016 Q1 2017 Q1 2018
Slide 22: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders
Slide 23: President & CEO Remarks
President & CEO Remarks EA WE ARE NortuH WEST
Slide 24: Helping Our Customers Live Better
“Helping Our Customers Live Better” Deliver Our Vision Customer & Superior Positive Top Stores Community Customer Offer Community Impact Key Work Superior New Markets 2nd Level Top Markets Top Categories Logistics & Businesses 1.5 1.4 1.4 Store & Our Key Work Effective 1st Level Top (Store) Talent C
Slide 25: Helping Our Customers Live Better
“Helping Our Customers Live Better” Deliver Our Vision Customer & Superior Positive Top Stores Community Customer Offer Community Impact Key Work Superior New Markets 2nd Level Top Markets Top Categories Logistics & Businesses 1.5 1.4 1.4 Store & Our Key Work Effective 1st Level Top (Store) Talent C
Slide 26: 2017: Opportunistic & Strategy Aligned
2017: Opportunistic & Strategy Aligned Roadtown Wholesale Trading Ltd. North Star Air Ltd.
Slide 27: 2017: Unexpected & Managed
2017: Unexpected & Managed Caribbean Hurricanes Northern Manitoba Wildfires
Slide 28: Priority Areas Review
Priority Areas Review 1. Pure Retail 2. Top Markets & Categories 3. North Star Air 4. Giant Tiger
Slide 29: Pure Retail
V.0S PURE KEIAIL
Slide 30: Pure Retail Approach
Pure Retail Approach • Tackle low-value activity • Liberate store hours • Reinvest to get sales
Slide 31: Pure Retail Scope
Pure Retail Scope • 150 opportunities • 53 projects • 90-120 days to complete
Slide 32: Pure Retail Example #1
Pure Retail Example #1 PROBLEM • Log-in delays of several minutes SOLUTION • Clean-up connector app files LIBERATED HOURS • 20,000
Slide 33: Pure Retail Example #2
Pure Retail Example #2 PROBLEM • Time to receive individual cartons SOLUTION • Receive by container (with controls) LIBERATED HOURS • 7,800
Slide 34: Pure Retail Roll-up
Pure Retail Roll-up • 250,000 liberated hours • 129 full time positions = $5 million • Sets the stage for more simplicity and sales
Slide 35: Pure Retail People Stream
Pure Retail People Stream • More satisfying store roles • Better physical environment • Higher attraction and retention
Slide 36: Community Associate Training
Community Associate Training • 26% of management from communities • Structure unfairly discriminates • A new approach delivers many benefits
Slide 37: Top Categories & Markets
Top Categories & Markets • Prioritize high potential markets & products • “Learn, fix and double down”
Slide 38: Top Categories
Top Categories • Convenience is leading Top Category • Equals 28% of sales • 5-6% growth rate • Very profitable, more growth ahead
Slide 39: Top Categories
Top Categories • 8 c-stores planned • Modular units for far North • 41 stand alone by year-end
Slide 40: Tomorrow Stores
“Tomorrow Stores” • Drive new category growth: 1) Reposition small road stores 2) Build out direct-to-customer • Leverage < NWC advantages
Slide 41: Top Markets
Top Markets • Slower pace, higher execution • Change or eliminate low performing programs • A compelling investment priority
Slide 42: North Star Air
North Star Air • Tremendous work effort • New cost reduction, revenue opportunities ahead • Phase 2 complete by month-end
Slide 43: Giant Tiger
Giant Tiger • Priority for improvement • Cost reductions • In-store merchandising focus • Treat it like a core business
Slide 44: Community Relations
Community Relations • Uniquely important to our success • A “community lens” approach • Trusted partner outcome
Slide 45: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders