Alimentation Couche-tard Inc. · TSX:ATD
Alimentation Couche-tard — Investor Presentation (October 2016)
75 slides from Alimentation Couche-tard's investor presentation, October 2016
Slide 1: Investors Presentation
ALIMENTATION COUCHE-TARD INC. INVESTORS PRESENTATION October 2016
Slide 2: Forward-Looking Information and Cautionary Language
FORWARD-LOOKING INFORMATION AND CAUTIONARY LANGUAGE This presentation and the accompanying oral presentation contain forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “projected”, “estimate”, “may”
Slide 3: Company Representatives
COMPANY REPRESENTATIVES Brian Hannasch President and Chief Executive Officer Claude Tessier Chief Financial Officer Mathieu Descheneaux Vice President Finance 3
Slide 4: Agenda
AGENDA 1. Company Highlights 2. Ambitions & Strategy 3. Network Development 4. Value Creation & Financial Review 5. CST Case Study 4
Slide 5: Key Data
KEY DATA • Listed on the Toronto Stock Exchange ATD.B • Market Cap1 Approx. CA$36B • Revenue US$34.1B Fiscal Year 20162 US$8.4B Q1 2017 YTD2 • Gross Profit US$6.0B Fiscal Year 20162 US$1.5B Q1 2017 YTD2 (+7.1%) • EBITDA US$2.3B Fiscal Year 20162 US$0.6B Q1 2017 YTD2 (+12.2%) • Number of stores3 12,0
Slide 6: Company Highlights
ALIMENTATION COUCHE-TARD INC. COMPANY HIGHLIGHTS
Slide 7: Who We Are
WHO WE ARE Couche-Tard is a Canadian based group and a world leader in the convenience store and road transportation fuel retail sector • In North America, Couche-Tard is the largest independent convenience store operator in terms of number of company-operated stores. • In Europe, Couche-Tard is a l
Slide 8: Company History
COMPANY HISTORY • 1980 Start of operations with the opening of a first convenience store located in Laval, Québec. • 80’s-90’s Consolidation of the Canadian market. • 2001 First breakthrough of Couche-Tard in the United States : acquisition of the assets of Johnson Oil Company, Inc., owner of 225 Bi
Slide 9: A Disciplined Convenience Store Operator and Integrator
A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR • Leading C-store operator in North America, Scandinavia, Ireland and Baltics Broad Geographic Footprint with • Strong banners Leading Market Positions • World class retailer with geographically diversified footprint • Increasing focus on priva
Slide 10: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM Alain Bouchard Brian P. Hannasch Claude Tessier Founder and Executive President and Chief Chief Financial Officer Chairman of the Board Executive Officer On September 24, 2014, President and Chief Claude Tessier, CPA, CA, is Mr. Bouchard stepped down Executive Officer sin
Slide 11: North American Network
Leader in the Canadian convenience store industry NORTH AMERICAN NETWORK • In Canada, the convenience store sector is dominated by a few major players including Couche-Tard and integrated oil companies. Some of the later are selling, or expected to sell their retail assets. • In 2016, Couche-Tard si
Slide 12: European Network
EUROPEAN NETWORK Leader in convenience store and road transportation fuel retail in the Scandinavian and Baltic countries and Ireland (which was acquired on February 1st, 2016) • The European convenience store sector is often dominated by a few major players, including integrated oil companies. Some
Slide 13: International Presence
INTERNATIONAL PRESENCE Central / South Asia America • Convenience stores China United Arab operated by independent Mexico 94 Emirates operators under the 297 Circle K brand 30 • License agreement to Guam use the brandname Honduras 13 Circle K 18 • Agreement to convert Hong Kong over 700 « Extra » Eg
Slide 14: Consolidated Network Recap
CONSOLIDATED NETWORK RECAP Canada U.S. Europe International Total presence COCO(1) 1,440 4,661 1,864 - 7,965 CODO(2) - 145 375 - 520 DODO(3) - 551 469 - 1,020 Franchise/Affiliated(4) 390 676 - - 1,066 Licensed(5) - - - 1,510 1,510 Total 1,830 6,033 2,708 1,510 12,081 Of which: Automats - - 969 - 969
Slide 15: Couche-Tard – World Leader
COUCHE-TARD – WORLD LEADER Couche-Tard is a leading global convenience store operator with EBITDA of $2.4 billion(1) • Well diversified • Merchandise and services represent 56% of gross profits • Focus on growing high margin categories (1) 2017 Q1 LTM, Pro forma Topaz 15
Slide 16: Revenue & Gross Profit
REVENUE & GROSS PROFIT Gross Profit is the more accurate reflection of our business operations • Revenue includes road transportation fuel revenues which is the dollar amount of sales • Revenue can therefore change with movements in the average selling price of road transportation fuel • In fiscal 2
Slide 17: History of Strong Financial Performance
ACT - HISTORY OF STRONG FINANCIAL PERFORMANCE Gross Profit Same Store Sales 2010 2011 2012 2013 2014 2015 2016 Merchandise Sales (in millions of US Dollars) 16% CAGR US 2.9% 4.2% 2.7% 1.0% 3.8% 3.9% 4.6% 6 082 Europe - - - - 1.6% 2.0% 2.8% 4 988 5 268 4 610 Canada 4.8% 1.8% 2.8% 2.0% 1.9% 3.4% 2.9%
Slide 18: Stock Performance Compared to Public Competitors and Retail Industry
STOCK PERFORMANCE – COMPARED TO PUBLIC COMPETITORS AND RETAIL INDUSTRY Source: Reuters. As of August 26, 2016. 18
Slide 19: Ambitions & Strategy
ALIMENTATION COUCHE-TARD INC. AMBITIONS & STRATEGY
Slide 20: Our Vision
OUR VISION TO BECOME THE WORLD’S PREFERED DESTINATION FOR CONVENIENCE AND FUEL 20
Slide 21: Our Global Brand
OUR GLOBAL BRAND GET HIGH DEF 21
Slide 22: Global Circle K Brand
GLOBAL CIRCLE K BRAND • On September 22, 2015, Couche-Tard announced the creation of a new, global convenience brand, “Circle KTM” • The existing Circle K is already Couche-Tard’s largest and most international brand. It can be seen today serving the needs of customers in 16 countries around the wor
Slide 23: Rebranding Status
REBRANDING STATUS As of Q1 2016, 477 stores in North America and 247 stores in Europe had been rebranded with our new global convenience brand Circle K. 23
Slide 24: Super Global Super Local
NEW GLOBAL BRAND – SAME APPROACH TO SERVING OUR CUSTOMERS SUPER GLOBAL SUPER LOCAL 24
Slide 25: The Promise Behind the Brand
THE PROMISE BEHIND THE BRAND 25
Slide 26: Making It Easy: Brand Pillars Supporting Our Promise
MAKING IT EASY BRAND PILLARS SUPPORTING OUR PROMISE 26
Slide 27: Brand Pillars – Fast & Friendly Service
BRAND PILLARS – FAST & FRIENDLY SERVICE Recruitment Employee Employee Service Physical & Hiring Training engagement turnover standards appearance 27
Slide 28: Brand Pillars – Easy Visits
BRAND PILLARS – EASY VISTS Predictable in-store and forecourt experience Clean In-stock Fast transaction #2 reason impacting Out-of-stock is #1 reason 88% of US adults want shoppers’ decision of for missed sale in c- their store checkout which c-store to visit stores experience to be faster (after l
Slide 29: Brand Pillars – Products for People on the Go
BRAND PILLARS – PRODUCTS FOR PEOPLE ON THE GO Hot Cold Private Food Dispensed Dispensed Car Wash Fuel Label Beverages Beverages 29
Slide 30: Convenience Key Categories
CONVENIENCE KEY CATEGORIES 30
Slide 31: Private Label
PRIVATE LABEL Better value proposition to customers Increased Circle K brand awarness Higher penny profit 31
Slide 32: Fuel
FUEL Consumer Payment & experience Loyalty Pillars Product Pricing Differentiation 32
Slide 33: Network Development
ALIMENTATION COUCHE-TARD INC. NETWORK DEVELOPMENT
Slide 34: New Format Development
NEW FORMAT DEVELOPMENT Larger fuel offering Food service expansion High traffic locations Focus on site layouts & critical dimensions Circle K Branded store & customized fuel branding Standardization of building, interior layout & image 34
Slide 35: New Sites
NEW SITES We completed the construction, relocation or reconstruction of 93 stores during fiscal 2016 35
Slide 36: Value Creation and Financial Review
ALIMENTATION COUCHE-TARD INC. VALUE CREATION AND FINANCIAL REVIEW
Slide 37: Our Four Pillars of Value Creation
OUR FOUR PILLARS OF VALUE CREATION – THE EQUATION Protect Value & Enable Value Drivers Growth Capital Organic Cost Structure & Value Acquisitions Growth Discipline Financial Creation Discipline 37
Slide 38: Organic Growth
Focus on ORGANIC GROWTH customers’ needs and respond to market trends Emphasize on Construction, key categories relocation or – Food, coffee, reconstruction cold of stores beverages, fuel and car wash Branding Organic Innovation and Growth technology Private label Execution Continuous improvement 38
Slide 39: Organic – Fiscal 2016 Top-Line Growth
ORGANIC – FISCAL 2016 TOP-LINE GROWTH THROUGHOUT Europe SSS +2.8% Canada Europe SSV SSV +2.6% +0.9% Organic Growth Canada US SSS SSS +2.9% +4.6% US SSV: Same-store volume SSV SSS: Same-store merchandise sales +6.6% 39
Slide 40: Organic – Sustainable Top-Line Growth
ORGANIC – SUSTAINABLE TOP-LINE GROWTH Merchandise & Service Sales Road Transportation Fuel Volume (millions of US dollars) (millions of gallons) 10% CAG 20% CAG 10,072 10,502 7,953 8,276 7,626 8,135 7,596 6,945 6,222 6,599 4,613 4,195 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Same-
Slide 41: Fiscal 2016 Merchandise & Service Margin Improvements
ORGANIC GROWTH – FISCAL 2016 MERCHANDISE & SERVICE MARGIN IMPROVEMENTS Europe 42.5% +1.3% Organic Growth United Canada States 32.8% 33.3% -0.1% +0.4% 41
Slide 42: No Clear Correlation Between Fuel Prices & Margins
NO CLEAR CORRELATION BETWEEN FUEL PRICES & MARGINS U.S. Market (1) • No clear correlation between fuel selling price and margins • Our margins are not directly impacted by lower fuel selling prices • Lower fuel prices leave customers more money in their pockets for their in-store shopping U.S. Fuel
Slide 43: US Fuel Margins Trends
US FUEL MARGINS TRENDS Year-over-year volatility – Long term trend is up ACT Historical US Fuel Margins (CPG) US Industry Historical Fuel Margins (CPG) 24,00 22,00 +2.9 CAG 24,00 22,00 20,00 20,00 18,00 18,00 16,00 16,00 14,00 14,00 12,00 12,00 10,00 10,00 2006 2007 2008 2009 2010 2011 2012 2013 201
Slide 44: Acquisitions
Smart, ACQUISITIONS disciplined acquisition strategy – Spotting the right opportunities and striking the right deals at the right price Spot the right Deleveraging opportunities Acquisitions Realization of Strike the right available deal at the right synergies price Swift and efficient integration 4
Slide 45: Proven Track Record of Successful Acquisitions
PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS Garvin oil Compac Revenue ($) Food Stores Winners Sterling Stores Pump N Shop 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 YTD Debt/ Adjusted 3.1 1.5 1.2 1.8 1.7 1.3 1.1 0.7 0.8 2.4 (2) (3) 1.6 (3) 1.5 (3) (4) 1.2 (3) (4) 1.2
Slide 46: Exceptional Deleveraging Track Record
EXCEPTIONAL DELEVERAGING TRACK RECORD • ACT committed to maintaining a strong balance sheet and sustaining its investment grade credit rating • Track record of rapid deleveraging after landmark acquisitions The Pantry Circle K Acquisition No Transformational Acquisition SFR Acquisition Acquisition 2
Slide 47: Acquisitions at Full Speed
ACQUISITIONS AT FULL SPEED Topaz 444 sites Small Shell Acquisitions Danemark 295 sites 127 sites Synergies Statoil Fuel and Retail •Target: $150M - $200M Acquisitions •Realized: >$200M CST Brands The Pantry Synergies The Pantry 1,296 sites 1,559 sites •Target for the first 24 months: $125M Imperial
Slide 48: Cost Control – Part of Our DNA
COST CONTROL – PART OF OUR DNA Disciplined Year-over-year expense Culture growth Scalable Organization, Continuous 1,9% Systems & Benchmarking 1,7% Processes 1,5% 0,8% Cost Control 0,2% Economies of Sharing of Scale Best Practices 2011 2012 2013 2014 2015 2016 -0,9% Cost Efficient Systems 5-year Ave
Slide 49: Capital Structure & Financial Discipline
CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Competitive cost of debt Rapid deleveraging Well spread after maturities acquisitions Cost Discipline Access to Disposal of liquidities – non-core Cash and assets credit facilities Careful Dividend Allocation of growth Capital 49
Slide 50: Strong EBITDA to FCF Conversion
STRONG EBITDA TO FCF CONVERSION Capital Investment primarily consists of the investment in property and equipment net of disposals and the ongoing improvement of our network: 23% CAG • Construction of new stores • Relocation and construction of existing stores • Replacement of equipment • Informatio
Slide 51: Strong Capital Structure & Financial Discipline
STRONG CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Adjusted Free Cash Flow Leverage (in million dollars US) Ratio 1.90:1 5-year Average Cost Investment of Debt Grade Credit compounded 2.4 % Profile annual growth 1 089 1 067 +23 % 979 865 Capital Structure & Financial €750M of 614 Free Cash Discipline F
Slide 52: Adjusted Diluted EPS and Return on Equity Growth
RESULT OF THE VALUE CREATION EQUATION : ADJUSTED DILUTED EARNINGS PER SHARE AND RETURN ON EQUITY GROWTH Adjusted Diluted Return on Equity Earnings per Share - Value Diluted (USD) Creation 5-year compounded annual growth 2.09 27.0% +26 % 24.9% 1.79 22.0% 21.5% 22.6% 20.3% 1.35 1.11 0.81 0.67 2011 201
Slide 53: Result of the Value Creation Equation: Dividend Growth
RESULT OF THE VALUE CREATION EQUATION : DIVIDEND GROWTH Dividends Paid – US Millions 5-year compounded annual growth 104 +26% 87 Value Creation 65 50 56 33 2011 2012 2013 2014 2015 2016 Quarterly dividend increased twice during fiscal 2016, from CA5.50¢ per share to CA7.75¢ per share, an increase of
Slide 54: Result of the Value Creation Equation: Stock Value Growth
RESULT OF THE VALUE CREATION EQUATION : STOCK VALUE GROWTH Value Creation Value Creation 54
Slide 55: Q1 Snapshot – Continued Growth
Q1 SNAPSHOT – CONTINUED GROWTH Q1-2016 Merchandise same-store revenues United States +2.4 % Europe +4.9 % Canada +0.9 % Road transportation fuel same-store volume United States +2.5 % Europe +0.9 % Canada +0.6 % Adjusted EBITDA $616M / +12 % Adjusted Diluted Earnings per Share $0.58 / +14 % Declared
Slide 56: Acquisitions
ALIMENTATION COUCHE-TARD INC. ACQUISITIONS Value Creation
Slide 57: Shell Denmark Snapshot
SHELL DENMARK SNAPSHOT • In March 2015, Couche-Tard announced an agreement to acquire 315 service stations in Denmark • The agreement also included Shell’s commercial fuel business and Shell’s aviation fuel business in Denmark • Great strategic fit for Couche-Tard’s business in Denmark • On May 1, 2
Slide 58: Topaz Snapshot
TOPAZ SNAPSHOT • Acquisition closed February 1, 2016 • Topaz is the leading convenience and fuel retailer in Ireland, made up of 444 stations including its recently acquired Esso station network • 158 sites are operated by Topaz and 286 by dealers. Topaz owns underlying real estate for about 100 sit
Slide 59: Esso Canada Snapshot
ESSO CANADA SNAPSHOT • On March 8, 2016, Couche-Tard announced an agreement to acquire 279 Esso-branded fuel and convenience sites in Canada • 229 sites are located in the province of Ontario, the majority of which in the Greater Toronto Area • 50 sites are located in the province of Québec, in the
Slide 60: CST Case Study
ALIMENTATION COUCHE-TARD INC. CST CASE STUDY
Slide 61: Transaction Summary
TRANSACTION SUMMARY • Alimentation Couche-Tard Inc. (“ACT”) has entered into a merger agreement to acquire 100% of the outstanding shares of CST Brands Inc. (“CST”) by merger, representing a total enterprise value of US$4.43 billion or approximately US$4.28 billion excluding the value of CST’s equit
Slide 62: CST Overview
CST OVERVIEW • CST operates as an independent retailer of motor fuel and convenience in the United States and Eastern Canada • US public company (NYSE ticker: CST) with a market capitalization of ~ $3.4B • Fuel offer mainly branded Valero in the US and Ultramar in Canada • Convenience offer mainly b
Slide 63: Highlights of the Transaction
HIGHLIGHTS OF THE TRANSACTION Strategic Significant Acquisition Synergies Importance Rationale Potential • Unique opportunity to acquire • Operating model alignment • Top-line upside one of few remaining potential North American public targets • Strong geographic • Sharing of business awareness exce
Slide 64: CST Retail Network
CST RETAIL NETWORK 1,146 company US Network operated sites -305 company operated sites -72 cardlock Canadian sites Network -496 commission agents sites As of June 30, 2016. US Network pro forma sale of 79 sites in California and Wyoming. 64
Slide 65: Pro Forma North America Footprint
PRO FORMA NORTH AMERICA FOOTPRINT 53 • COUCHE-TARD 6 US: 6,052 15 4 Canada: 1,836 • CST (1) US: 1,140 Canada: 873 (2) • Esso Canada Ontario: 229 Quebec: 50 • Total US: 7,192 13 Canada: 2,988 7 North America: 10,180 17 9 CST acquisition will allow ACT to 32 further diversify its ope
Slide 66: Pro Forma Profile - Financial
PRO FORMA PROFILE - FINANCIAL Couche-Tard to strengthen its leadership position as a global convenience store operator with pro forma EBITDA of $2.9B (2) At Closing Pre-synergies EBITDA Contribution (billions of US Dollars) (1) Pro Forma Revenues 38.4 9.3 47.7 5% % of total 81% 19% 100% 3% 14% GP 6.
Slide 67: Pro Forma Profile – Gross Profits Breakdown
PRO FORMA PROFILE – GROSS PROFITS BREAKDOWN (1) (2) Pro Forma Europe Canada Europe Canada 12% Canada 17% 25% Canada 20% 27% 100% By United United Geography States States 63% 73% United States 63% Others Others Merch. & Others 3% Others Services 4% 4% 31% 1% Fuel By 42% Merch. & Fuel Merch. & Merch.
Slide 68: Exceptional Synergies Potential
EXCEPTIONAL SYNERGIES POTENTIAL TOP-LINE SYNERGIES COST SYNERGIES Merchandise Supply Costs Increased brand Leveraging key penetration and awareness consumer $150M- $200M in pre-tax cost synergies Leveraging Value drivers, best practices and Operating Fuel e.g. loyalty, cross- Expenses Sourcing & dig
Slide 69: Integration Strategy
INTEGRATION STRATEGY Transfer Integrate Re- Roll-out key CST to support negotiate Evaluate Integrate programs– Rebrand to existing functions, ACT talent pool Sale of CST operations & Polar Pop, ACT non- Review technology Circle K/ existing and secure Canadian eliminate Simply fuel distribution and s
Slide 70: Forecasts
FORECASTS Adj. Free cash flow Leverage (2)(3) (1)(3) 9% CAGR 3,5 3,1 1 489 1 544 2,6 2,2 1 437 2,0 1,8 1 208 986 1,4 798 FY16 Y1 Y2 Y3 Y4 Y5 FY16 PF Y1 Y2 Y3 Y4 Y5 Strong cash flow coupled with disciplined capital allocation and debt repayment to provide financial flexibility and ample room for cont
Slide 71: Proven Record of Disciplined Debt Paydown
PROVEN RECORD OF DISCIPLINED DEBT PAYDOWN • At close, pro forma leverage expected to stand at 3.5x(3) (Adjusted Net Debt / Adjusted EBITDAR) • Combined company expected to benefit from strong free cash flow generation & robust EBITDA growth • Scalable capital expenditure allows flexibility to achiev
Slide 72: Strong Financing Plan
STRONG FINANCING PLAN Transaction financing needs of ~$4.8 billion (including acquisition costs), funded through Capacity under ACT’s existing credit facilities New acquisition financing consisting of term loans – three tranches with 1, 2 and 3 years terms ACT expects to repay for the term loa
Slide 73: CrossAmerica
CROSS AMERICA Creates Leading Wholesale Distributorship in US West Coast Region CODO DODO cODO DODO Couche-Tard 99 223 HeartlandRegion Midwest Region | circus | 152 544 CrossAmerica oO oO cODO DODO coDO DODO - Couche-Tard 27 38 CROSSAMERICA CoucheTard 5 60 684 385 CrossAmerica 85 132 PARTNERS LP Qe
Slide 74: CrossAmerica
CROSS AMERICA • ACT brings CrossAmerica: • Continuity with a sponsor whose management culture is aligned with CrossAmerica – Disciplined operator with best practices in acquisitions and integration – Strong and consistent financial performance throughout all economic cycles – Heightened focus on gro
Slide 75: Conclusion
CONCLUSION Broad Geographic Footprint with Leading Market Positions Superior Product Offerings Track Record of Highly Disciplined Growth and Debt Reduction Attractive Sector Dynamics Powerful Financial Results Attractive Synergy Potential Disciplined Management Culture Poised for growth: Store netwo
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