North West Company Inc. · TSX:NWC
North West — Shareholder Meeting (2018)
71 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: Caution Concerning Forward Looking Statements and Non-GAAP Financial Measures
Caution Concerning Forward Looking Statements and Non-GAAP Financial Measures Certain information presented today may constitute forward-looking statements. Such statements reflect North West’s current expectations, estimates, projections and assumptions. These forward-looking statements are not gua
Slide 3: Chairman Remarks
Chairman Remarks A WE ARE NortuH WEST
Slide 4: Royal Gala Apples
Royal Gala Apples 3 Ib bag, 258730 No purchase required. Coupon redeemable at Winnipeg Giant Tiger locations only. One coupon per person Facsimile coupons will not be accepted. Expires June 30, 2018 EE Ki 1.07 PURE RETAIL = wears NORTH WEsT
Slide 5: Chairman Remarks
Chairman Remarks A WE ARE NortuH WEST
Slide 6: Derek Riley
Derek Riley July 1, 1922–May 6, 2018 North West Founding Chairman 1987–1994
Slide 7: Chairman Remarks
Chairman Remarks A WE ARE NortuH WEST
Slide 8: Brock Bulbuck
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Slide 9: Deepak Chopra
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Slide 10: Frank J. Coleman
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Slide 11: Wendy F. Evans
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Slide 12: Stewart Glendinning
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Slide 13: Robert J. Kennedy
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Slide 14: Annalisa King
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Slide 15: Vi Konkle
LY PURE RETAIL Vi Konkle —_— wear NORTH WEST
Slide 16: Eric L. Stefanson
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Slide 17: Victor Tootoo
1.0 PURE RETAIL Victor Tootoo Y —— + EYE —_ weare NORTH WEST
Slide 18: Edward Kennedy
LY PURE RETAIL Edward Kennedy i EE » ——s 4 oe > weare NORTH WEST
Slide 19: H. Sanford Riley
1.0 PURE RETAIL H. Sanford Riley Y — = LEE ——_ od =. . we are NORTH WEST
Slide 20: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders
Slide 21: 1. Receive Audited Financial Statements
1. Receive Audited Financial Statements
Slide 22: 2. Special Resolution to amend articles to increase number of Directors
2. Special Resolution to amend North West’s articles to increase the number of Directors from 12 to 13
Slide 23: 3. Election of Directors
LY PURE RETAIL 3. Election of Directors = weare NORTH WEST
Slide 24: 4. Appointment of Auditors
LY PURE RETAIL 4. Appointment of Auditors = weare NORTH WEST
Slide 25: 5. Advisory Resolution on Executive Compensation
5. Advisory Resolution on Executive Compensation
Slide 26: 6. First Amended and Restated Performance Share Unit Plan
6. First Amended and Restated Performance Share Unit Plan
Slide 27: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders
Slide 28: Executive Vice-President & Chief Financial Officer Remarks
Executive Vice-President & Chief Financial Officer Remarks
Slide 29: 2017 Financial Highlights: Key Performance Factors
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 30: Key Performance Factors 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. $6.6 million EBITDA ü / x U.S. tax reform
Slide 31: Top Line Growth Continues
Top Line Growth Continues • 2017 Financial Highlights Sales ($ 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 $1,172 ü Same store sales +1.2% x Hurricane-related store closures –
Slide 32: EBITDA Performance
EBITDA Performance • 2017 Financial Highlights EBITDA ($ 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 +$3.1 million, +1.9% 2015 201
Slide 33: Acquisitions Drive Adjusted EBITDA Improvement
Acquisitions Drive Adjusted EBITDA Improvement • 2017 Financial Highlights Adjusted EBITDA ($ 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 34: 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 – $7.4 million, – 9.6% 2015 2016 2017
Slide 35: Net Earnings Performance: Adjusted Net Earnings
Net Earnings Performance • 2017 Financial Highlights Adjusted Net Earnings ($ 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 +$8.9 million, +11.5% ü Contribution from RTW & NSA ü Sol
Slide 36: 2017 Other Financial Highlights
2017 Other Financial Highlights
Slide 37: Investing to Sustain and Grow
Investing to Sustain and Grow • 2017 Financial Highlights 2017 Capital Expenditures ($ 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 $64 • Project Enter
Slide 38: Financial Capacity
Financial Capacity • 2017 Financial Highlights Debt, Leverage & Borrowing Capacity ($ 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 39: 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 40: 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 $0.96 CAGR ü 4.6% average yield 1.5 1.4 1.4 = Approximately 50% of total 4.8% 4.7% 4.6% 4.8% 4.5% 4.4% 4.1% returns to sha
Slide 41: 2018 First Quarter Financial Performance
2018 First Quarter Financial Performance
Slide 42: Sales Performance
Sales Performance • 2018 First Quarter Performance Sales ($ 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 – $8 million Q1 2016 Q1 2017 Q1 201
Slide 43: Non-comparable Expenses Impact EBITDA
Non-comparable Expenses Impact EBITDA • 2018 First Quarter Performance EBITDA ($ 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 +$9.4 m
Slide 44: EBITDA Performance
EBITDA Performance • 2018 First Quarter Performance Adjusted EBITDA ($ 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 – $0.4 million, – 0.8% 1.5 1.4 1.4 Q1 201
Slide 45: Non-comparable Expenses Impact Earnings
Non-comparable Expenses Impact Earnings • 2018 First Quarter Performance Net Earnings ($ 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 +$9.5 million Q1 2016 Q1 2017 Q1 2018
Slide 46: Net Earnings Performance
Net Earnings Performance • 2018 First Quarter Performance Adjusted Net Earnings ($ 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 $18.6 x Gian
Slide 47: Consistent Dividend Yield
Consistent Dividend Yield • 2018 First Quarter Performance Quarterly Dividends ($ 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 48: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders
Slide 49: President & CEO Remarks
President & CEO Remarks EA WE ARE NortuH WEST
Slide 50: 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 51: 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 52: 2017: Opportunistic & Strategy Aligned
2017: Opportunistic & Strategy Aligned Roadtown Wholesale Trading Ltd. North Star Air Ltd.
Slide 53: 2017: Unexpected & Managed
2017: Unexpected & Managed Caribbean Hurricanes Northern Manitoba Wildfires
Slide 54: Priority Areas Review
Priority Areas Review 1. Pure Retail 2. Top Markets & Categories 3. North Star Air 4. Giant Tiger
Slide 55: Pure Retail
V.0S PURE KEIAIL
Slide 56: Pure Retail Approach
Pure Retail Approach • Tackle low-value activity • Liberate store hours • Reinvest to get sales
Slide 57: Pure Retail Scope
Pure Retail Scope • 150 opportunities • 53 projects • 90-120 days to complete
Slide 58: 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 59: 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 60: 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 61: Pure Retail People Stream
Pure Retail People Stream • More satisfying store roles • Better physical environment • Higher attraction and retention
Slide 62: Community Associate Training
Community Associate Training • 26% of management from communities • Structure unfairly discriminates • A new approach delivers many benefits
Slide 63: Top Categories & Markets
Top Categories & Markets • Prioritize high potential markets & products • “Learn, fix and double down”
Slide 64: Top Categories
Top Categories • Convenience is leading Top Category • Equals 28% of sales • 5-6% growth rate • Very profitable, more growth ahead
Slide 65: Top Categories
Top Categories • 8 c-stores planned • Modular units for far North • 41 stand alone by year-end
Slide 66: Tomorrow Stores
“Tomorrow Stores” • Drive new category growth: 1) Reposition small road stores 2) Build out direct-to-customer • Leverage < NWC advantages
Slide 67: Top Markets
Top Markets • Slower pace, higher execution • Change or eliminate low performing programs • A compelling investment priority
Slide 68: North Star Air
North Star Air • Tremendous work effort • New cost reduction, revenue opportunities ahead • Phase 2 complete by month-end
Slide 69: Giant Tiger
Giant Tiger • Priority for improvement • Cost reductions • In-store merchandising focus • Treat it like a core business
Slide 70: Community Relations
Community Relations • Uniquely important to our success • A “community lens” approach • Trusted partner outcome
Slide 71: 2018 Annual General & Special Meeting of Shareholders
2018 Annual General & Special Meeting of Shareholders