Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (April 2020)
25 slides from Tesco's debt investor presentation, Apr 8, 2020
Slide 1: Debt Investor Call
Debt Investor Call. 8 April 2020 Alan Stewart – CFO Lynda Heywood – Group Treasurer
Slide 2: Group performance
Group performance Sales1 Profit2 Retail free cash flow3 Dividend Note: For UK & ROI our reported statutory performance is for the 53 weeks ended 29 February 2020. For all other operations, these results are for the calendar year ended 29 February 2020. To aid comparability, headline results are show
Slide 3: Segmental performance
Segmental performance UK & ROI Central Europe Asia Total Retail Tesco Bank Sales1 £44,909m £5,332m £5,218m £55,459m £1,068m change at constant exchange rates % 0.2% (10.1)% 0.1% (0.9)% (2.6)% Operating profit2 £2,184m £156m £426m £2,766m £193m change at constant exchange rates % 16.9% (27.6)% 24.8%
Slide 4: Retail performance
Retail performance Sales: Sales: Sales: +0.2% (10.1)% +0.1% Operating profit: Operating profit: Operating profit: +16.9% (27.6)% +24.8% UK & ROI Central Europe Asia Sales exclude VAT and fuel; change shown at constant rates on a comparable days basis for Central Europe and Asia. Operating profit bef
Slide 5: Booker
Booker EPS Buying Optimise Synergies accretive Better supply £207m in second year +£1.1bn Completed Together chain Sales 7 March ROIC Portfolio in excess of cost of capital in Year 2 of brands Merger benefits delivered Best Food Logistics acquisition Further opportunities completed
Slide 6: Sources and uses of cash
Sources and uses of cash 1. Exceptional cash items comprise £(197)m of restructuring activity (of which £(133)m relate to prior year activity), £(23)m integration costs and £(10)m corporate costs.
Slide 7: Liquidity and debt profile
Liquidity and debt profile • Significant cash liquidity available • £3.0bn of committed facilities undrawn • Investment grade credit ratings with all three agencies • Re-paid £1.3bn of outstanding debt during FY19/20, including £0.5bn bonds repaid early • Issued 6 year GBP £0.4bn (2.5%) and 6.5 year
Slide 8: Total indebtedness
Total indebtedness Total indebtedness1 Total indebtedness ratio2 TARGET TARGET 3.0x to 2.5x c.2.5x 1. Total indebtedness post-IFRS 16 comprises Net debt (inc. lease liabilities) plus the IAS 19 deficit in the pension schemes (net of tax). 2. Total indebtedness ratio pre-IFRS 16: Net Debt + defined p
Slide 9: Debt Mix & Fixed Charge Cover
Debt Mix & Fixed Charge Cover Debt Mix Fixed Charge Cover1 4.0x GBP MTN 3.5x 19% 30% THRESHOLD > 3.0x EUR MTN 3.0x 9% 2.5x USD 144A 2.0x GBP Secured 1.5x 42% 1.0x FY FY FY FY FY FY 14/15 15/16 16/17 17/18 18/19 19/20 1. Fixed charge cover pre-IFRS 16: EBITDAR / (Net finance costs (before exceptional
Slide 10: Credit ratings
Credit ratings Agency Long Term Rating Short Term Rating Outlook Fitch BBB- F3 Stable Moody's Baa3 NR Stable S&P BBB- A-3 Stable Investment grade rating from S&P (November 2019) “Tesco’s operating results have improved consistently in recent quarters, while credit metrics also benefitted from a redu
Slide 11: Proposed sale of businesses in Thailand & Malaysia
Proposed sale of businesses in Thailand & Malaysia • Proposed sale to CP Group: • $10.6bn enterprise value, hedged on announcement • Implies 12.5x EV/EBITDA multiple • Effective use of proceeds: • £2.5bn to eliminate pension funding deficit • c.£5bn special dividend • c.£0.5bn for general corporate
Slide 12: A simpler, stronger business
A simpler, stronger business Central Europe: £167m £277m 58% 60% proceeds of £258m proceeds China JV disposal Realising value from property Increased freehold proportion1 1. Represents Group freehold ownership by value for FY18/19 and FY19/20.
Slide 13: Summary
Summary • Strong financial performance in FY 19/20 • Robust liquidity and funding position • Continuing to operate within capital allocation framework • Proposed sale of businesses in Thailand and Malaysia1 • Well-placed in the short-term to support colleagues and customers, and in the long-term, to
Slide 14: COVID-19
COVID-19.
Slide 15: Initial impact – sales shape
Initial impact – sales shape Food sales growth First known Government UK domestic issues ‘stay at transmission home’ guidance
Slide 16: Scenarios – sales drivers
Scenarios – sales drivers Further Longer-term Base case restrictions restrictions Stockpiling + Shift from eating out of home + + + Holiday cancellations + + + GM/Clothing - - - Fuel - - -
Slide 17: Together, we can do this
Together, we can do this 1 Food for all 2 Safety for everyone 3 Supporting our colleagues 4 Supporting our communities
Slide 18: Q&A
Q&A.
Slide 19: Appendix
Appendix.
Slide 20: Guidance
Guidance Capex £0.9bn-£1.2bn per annum Net finance costs1 Less than 4% of long-term debt per annum Tax Effective tax rate c.24% for 2020/21; c.21% over medium term Not taken option to defer VAT payments Dividend Full year dividend pay-out ratio of 50% Interim dividend 35% of prior year full year div
Slide 21: Proposed sale of businesses in Thailand & Malaysia
Proposed sale of businesses in Thailand & Malaysia 9 March 2020 Sale agreed As soon as practicable Circular and notice convening first general meeting First general meeting Competition approval 2H 2020 Sale completion Notice convening second general meeting Second general meeting Share consolidation
Slide 22: Capital expenditure
Capital expenditure £1.1bn £1.1bn by region by type
Slide 23: Exceptional items
Exceptional items Net restructuring & redundancy costs £(107)m Net property disposals£193m £44m Booker integration £102m costs £120m £(23)m Acquisition of property joint venture £(136)m Net impairment loss of non-current assets Business- 2°C TBC £(15)m Impairment of investment in India joint venture
Slide 24: Impact of week 53
Impact of week 53 YoY 53 week change YoY 52 week change 2019/20 Exclude: 2019/20 (actual exchange (actual exchange 53 week basis week 53 52 week basis rates) rates) Group sales (exc. VAT, exc. fuel) £57,370m £(843)m £56,527m 1.1% (0.7)% Group operating profit before exceptional items £3,005m £(46)m
Slide 25: Scenarios – UK costs
Scenarios – UK costs Further Longer-term Base case restrictions restrictions Payroll £(280)m £(335)m £(405)m Distribution £(135)m £(155)m £(175)m Store expenses £(105)m £(110)m £(200)m Property £(65)m £(75)m £(80)m Other (technology, communication) £(65)m £(65)m £(65)m Total incremental costs £(650)