Slide 1: Tesco Preliminary Results 2023/24
Tesco Preliminary Results 2023/24. Ken Murphy, Chief Executive Officer Imran Nawaz, Chief Financial Officer 10 April 2024
Slide 2: Agenda
Agenda. 01. Introduction 02. Full year results 03. Strategic priorities 04. Q&A
Slide 3: Introduction
Introduction Ken Murphy amma
Slide 4: Passion for people and product
Passion for people and product. Winning with customers – value for money driving satisfaction and growth Sales growth and continued cost savings delivering strong financial performance Significant progress across all our strategic priorities Track record gives us confidence in continuing to deliver
Slide 5: Long-term strategic partnership with Barclays
Long-term strategic partnership with Barclays. Combines Tesco’s reach and customer focus with Barclays’ financial service expertise Offering customers Tesco branded banking services powered by Clubcard De-risks balance sheet; other Tesco banking activities retained Enables additional returns to shar
Slide 6: Investment in value, quality and service drives strong financial performance
Investment in value, quality and service drives strong financial performance. Sales 1 £61.5bn +7.4% YoY Profit 2 £2.8bn +12.8% YoY Cash flow 3 £2.1bn (3.3)% YoY 1. Group sales exclude VAT and fuel. Change shown at actual rates. 6 2. Group adjusted operating profit, comprises Retail adjusted profit (
Slide 7: Brand perception growing on all measures
Brand perception growing on all measures. Brand Perception +216bps +170bps +129bps +96bps +101bps +88bps +6bps (2)bps (26)bps (41)bps (121)bps (125)bps Impression Quality Value Reputation Satisfaction Recommend Tesco Competitors Chart shows YoY changes in YouGov BrandIndex scores for the 12 weeks en
Slide 8: Share growth supported by switching gains
Share growth supported by switching gains. UK market share1 Switching gains £80m £70m Tesco +41bps £60m £50m £40m £30m Limited-range discounters2 +11bps £20m £10m £m (8)bps Other full-line grocers3 Apr-23 Mar-24 1. Tesco share of Total Grocers Till Roll sales on a 12-week rolling basis to 17 March 2
Slide 9: Unique value offer supporting customers
Unique value offer supporting customers.
Slide 10: Outstanding quality, innovative products
Outstanding quality, innovative products.
Slide 11: Investing in high returning and future growth opportunities
Investing in high returning and future growth opportunities. Stores Products Supply Chain • Ongoing store expansion and • AI-based solutions drive • Enhanced transport scheduling improvement programme productivity & customer value and more automated distribution
Slide 12: Investing in our colleagues
Investing in our colleagues. Significant increase in colleague pay with c.£800m invested over past 2 years1 Increased focus on health and wellbeing including unlimited access to a virtual GP Extended support for colleagues - Enhanced family leave incl. improved maternity, paternity, adoption & kinsh
Slide 13: Supporting our communities when and where it matters most
Supporting our communities when and where it matters most. • Almost £30 million donated to date for our • >200 million meals donated in the UK to date • Stronger Starts supporting over 4,000 projects health charity partnership • 10th year of surplus redistribution in ROI • Over 450,000 free meals fo
Slide 14: Trusted partnerships with suppliers
Trusted partnerships with suppliers. >£75m Additional support for key agricultural suppliers 27 Start-up suppliers enrolled in innovation-led Accelerator Programme 1st Position in Advantage supplier survey for 8th year in a row 87.2% Supplier satisfaction +60bps 14
Slide 15: Leading position in health and sustainability
Leading position in health and sustainability. 61% Reduction in Scope 1 and 2 emissions against baseline, exceeding 2025 target of 60% On track for net zero by 2050, SBTi1 validated climate targets Healthy products now 63% of sales volume in UK and ROI, on track for 65% by 2025 target2 15 1. Net zer
Slide 16: Full year results
Full year results. Imran Nawaz
Slide 17: Performance headlines
Performance headlines. On a continuing operations basis1 Retail sales Retail profit 2 3 Sales growing across all segments +7.0% £2,760m Strong profit growth, with accelerated cost savings Like-for-like +6.8% +10.9% vs. last year offsetting significant cost headwinds & investments Retail free cash Ne
Slide 18: Segmental performance
Segmental performance. On a continuing operations basis1 Change at Adjusted Change at Sales 2 constant LFL operating constant Margin5 rates3 profit4 rates3 UK & ROI £56,344m 7.6% 7.3% £2,670m 15.7% 4.2% Central Europe £4,322m 0.6% 0.2% £90m (50.0)% 2.0% Retail £60,666m 7.0% 6.8% £2,760m 10.9% 4.1% 1
Slide 19: UK
UK. 9.3% LFL +7.7% LFL sales +7.7%; inflation easing across the year, with volume growth across second half Food +9.3%; strong seasonal performance, (3.4)% 10.4% supported by ongoing investments in value Food Home 8.2% & Clothing Home & Clothing performance reflects decision to exit low-margin categ
Slide 20: UK - Online
UK - Online. Online LFL +10.4% Growth of +10.4%; growth in active customers Total Online* 23/24 YoY change and availability improving to 98.1% Sales inc. VAT £6.2bn 10.4% Orders per week 1.2m 5.3% Whoosh contributing c.2% to growth; rolled out to a further 424 stores; weekly orders now at 142k Baske
Slide 21: ROI
ROI. 9.1% LFL +6.8% LFL sales +6.8%, with three consecutive quarters of volume growth; market share gains +73bps2 Fresh food sales +10.6%, driven by ‘fresh first’ (3.9)% refresh and investment in market-leading deals Food Home & Clothing Home & Clothing performance reflects impact of rebalancing spa
Slide 22: Booker
Booker. Sales LFL Strong performance across both retail Retail excl. Tobacco £3,205m 11.0% and catering, including volume growth Catering1 £2,501m 10.2% Growth excluding tobacco of +8.2% Best Food Logistics £1,518m (0.1)% Retail growth +11.0%; supported by 354 net new retail partners2 and growth of
Slide 23: Central Europe
Central Europe. LFL +0.2% 1.1% LFL sales +0.2%; trading environment remains challenging due to sustained market inflation Food sales up +1.1%; volume trajectory improving as customers responding positively (4.8)% 4.5% to our investment in value Food Non-Food Non-food performance impacted by reductio
Slide 24: Retail operating profit
Retail operating profit. +10.9%2 UK & ROI CE Retail Operating profit1 £2,670m £90m £2,760m Margin3 4.2% 2.0% 4.1% +£273m year-on-year Margin YoY3 42bps (208)bps 25bps 1 1 1. Retail adjusted operating profit before adjusting items at actual rates. 24 2. Profit change shown at constant rates. 3. Margi
Slide 25: Retail operating profit – UK & ROI
Retail operating profit – UK & ROI. Strong profit growth2 of +15.7% reflective of: • Outperformed volumes expectations, reflecting ongoing customer investments • Input and operating cost pressures well-managed • Continued strong Save to Invest delivery • Includes particularly strong Booker • Margin3
Slide 26: Retail operating profit – Central Europe
Retail operating profit – Central Europe. Profit step back2 of (50.0)% reflective of: • Challenging external market conditions persisting • Volumes impacted by sustained, high market inflation • Regulatory actions in Hungary: retail taxes, price caps and mandatory promotions • Significant inflationa
Slide 27: Statutory profit after tax
Statutory profit after tax. On a continuing operations basis FY 23/24 FY 22/231 YoY £m £m £m • Statutory profit up £1.1bn, driven by a £(982)m non-cash net Adjusted operating profit 2,829 2,509 320 impairment charge on non-current assets in the prior year: Adjusting items2: (8) (1,099) 1,091 • £1,01
Slide 28: Retail free cash flow
Retail free cash flow. On a continuing operations basis FY 23/24 FY 22/23 £m £m Retail cash generated pre-working capital 4,415 4,095 • Strong cash performance, exceeding expectations Decrease in working capital 418 468 • Working capital inflow of £418m, driven by higher Retail operating cash flow 4
Slide 29: Planned sale of banking operations
Planned sale of banking operations. Barclays to acquire existing banking operations Balance sheet of disposal group FY 23/24 (credit cards, loans and savings) Assets (classified as held for sale) £7.7bn Continuing to offer Tesco-branded banking products and services, including Clubcard benefits Liab
Slide 30: Tesco Bank
Tesco Bank. FY 23/24 FY 22/231 We retain insurance, ATM, travel money and gift cards which are presented as continuing ops Revenue £1,521m £1,234m Continuing operations delivering strong growth Continuing ops £811m £666m across insurance with high renewals & new business Discontinued ops £710m £568m
Slide 31: Balance sheet metrics
Balance sheet metrics. 1 2 Net debt Fixed charge cover Balance sheet further strengthened 2.6x 2.2x 3.5x 3.7x £10.5bn Net debt reduced £0.7bn, driven by strong retail £9.8bn £1,156m £1,182m free cash flow and receipt of a £250m special £192m £185m dividend from Tesco Bank £7.7bn £7.6bn Net debt rati
Slide 32: Investing in high-returning growth & capability
Investing in high-returning growth & capability. 1 Retail ROCE 13.4% 12.1% Continued investment in our estate; 113 new stores 11.8% & 389 stores refreshed; stepped up investment to 9.7% support Booker growth, inc. new 120k sq.ft retail hub 8.7% FY23/24 WACC Investing in automation; started construct
Slide 33: FY 24/25 outlook
FY 24/25 outlook. Expect to deliver retail adjusted operating profit of at least £2.8bn In addition, expect Bank adjusted operating profit of c.£80m, based on completion of sale in second half of this calendar year Retail free cash flow within our guidance range of £1.4bn to £1.8bn Commitment to buy
Slide 34: Summary
Summary. Building a consistent track record of delivery Strong sales and profit performance Over £2bn retail free cash, ahead of medium-term range Progressive dividend; up 11% to 12.10p £1.8bn of shares purchased to date1; commitment to buy back a further £1bn by April 2025 34 1. Since launching on-
Slide 35: Strategic progress
Strategic progress. Ken Murphy
Slide 36: Our strategic priorities
Our strategic priorities. Magnetic I love my Easily the Save to value for Tesco most Invest customers Clubcard convenient Re-defining value to become Creating a competitive Serving customers wherever, Simplify, become more the customer’s favourite advantage through powerful whenever and however they
Slide 37: An unrivalled value combination
An unrivalled value combination. >600 Aldi Price Match lines >1,000 Low Everyday Prices locked >8,000 Products on Clubcard Prices each week 37
Slide 38: Cheapest full-line grocer
Cheapest full-line grocer. Price, indexed to Tesco at 100 Tesco Asda Sainsbury's Morrisons Average prices from 29 January 2024 to 25 February 2024. UK price index is an internal measure calculated using the retail selling price of each item on a per unit or unit of measure basis. Competitor retail s
Slide 39: Recognised for high-quality innovation
Recognised for high-quality innovation. >3,700 New or improved product lines 216 awards won Own Brand 45 awards Taste of Ireland +96bps Increase in quality perception1 Consecutive periods of 19 switching gains from premium retailers2 39 1. YoY change in YouGov BrandIndex score for ‘Quality’ for the
Slide 40: Tesco Finest outperforming expectations
Tesco Finest outperforming expectations. >£2bn Finest sales; +£500m growth over last 3 years >23m Customers buying Tesco Finest this year 1 in 4 Christmas baskets included a Finest product 420 New products launched this year
Slide 41: Record digital engagement
Record digital engagement. 16.3m App users across the Group +13% £25 Clubcard sales 82% penetration in UK and growth in all markets 53% Digital Clubcard scans recorded in UK 41
Slide 42: Personalisation accelerated
Personalisation accelerated. 289m Personalised coupons issued to 7.6m customers >10x Sales to cost ratio from personalised coupons 17m Customers receiving ‘Clubcard Unpacked’, up from 9m last year 42
Slide 43: Scale provides significant opportunity to monetise media interactions
Scale provides significant opportunity to monetise media interactions. 17,000 campaigns 550 supplier partners 400 colleagues in new dedicated retail media team “The team’s expertise helped us deliver exceptional results with over 50,000 new customers shopping the category Sponsored at Tesco for the
Slide 44: Continued strength in online, with growth in rapid delivery
Continued strength in online, with growth in rapid delivery. 98.1% Availability across online +20ppts Increase in perfect orders 708k Record number of active Delivery Saver subscribers 1,424 stores, reaching two- thirds of the UK population 74% of deliveries within 30 minutes, larger baskets availab
Slide 45: Refresh and partnerships strengthen offer in large stores
Refresh and partnerships strengthen offer in large stores. 389 Stores refreshed, and 113 stores opened across the group Stores launching The c.750 Entertainer by Christmas 2024 Stores with Paperchase range 120 >50 Retail partners in store 45
Slide 46: Improving our convenience network
Improving our convenience network. 60 New Tesco Express store openings in the UK, and 27 new One Stop stores >40% Customer cost saving by replacing products with own- brand in Express 790 One Stop stores and franchises offer online orders £68m Investment in new stores and store upgrades in ROI 46
Slide 47: Booker outperformance and expansion
Booker outperformance and expansion. 81.7% Retail satisfaction +6.0ppts 87.1% Catering satisfaction +2.1ppts 354 Net new Booker retail partners supporting growth 97.1% Availability across retail and catering +2.3ppts Significant growth in own label ‘Chef’s Essential’ & ‘Chef’s Larder’ catering range
Slide 48: Investing to enhance our catering offer
Investing to enhance our catering offer. Strong foundations Redesigning our network Enabling future growth • c.400k catering customers nationwide • Fareham DC centralises retail fulfilment and • Improving warehouse and distribution systems increases branch capacity for catering customers and process
Slide 49: Save to Invest offsetting inflation & driving productivity
Save to Invest offsetting inflation & driving productivity. Exceeded original target with savings of £640m in 23/24; £1.2bn since Feb-22 Plan to deliver £500m during 24/25 Technology investment in stores driving productivity and reduced shrinkage New transport scheduling and improved stock processes
Slide 50: Strong momentum; confident in delivery
Strong momentum; confident in delivery. Progress against strategic priorities supporting strong performance Positive volumes, growing share and further efficiencies support growth Continuing to drive value for money and enhanced quality for customers Delivering for all stakeholders 50
Slide 51: Q&A
Q&A.
Slide 52: Appendix
Appendix.
Slide 53: Guidance
Guidance. Retail profit Expect to deliver at least £2.8bn for FY 24/25 Bank profit Around £80m, including part-year effect of partnership income in second half of year Retail free cash £1.4bn to £1.8bn in FY 24/25, despite normalisation of working capital inflow flow Capex Expect FY 24/25 capital ex
Slide 54: Debt and liquidity
Debt and liquidity. Debt maturity profile Smooth debt maturity profile – Less than £1bn maturing in any year – Weighted average maturity of c.7 years Weighted average interest cost of 5% Strong liquidity position – £3.2bn cash1 – £2.5bn of undrawn committed facilities 54 1. Cash and cash equivalents
Slide 55: Adjusting items – FY 23/24
Adjusting items – FY 23/24. FY 23/24 FY 22/23 £m £m Net impairment release / (charge) on non-current assets 28 (982) Save to Invest restructuring provisions (50) (132) Property transactions 75 91 Amortisation of acquired intangible assets (74) (76) Other1 13 - Total adjusting items in statutory oper
Slide 56: Disclaimer
Disclaimer. Certain statements made in this document are forward-looking statements. For example, statements regarding future financial performance, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", “should”, "anticipate", "well-placed",