Tesco Plc · LSE:TSCO
Tesco — H1 2024/25 Earnings Presentation
41 slides from Tesco's earnings presentation, Oct 3, 2024
Slide 1: Tesco Interim Results 2024/25
Tesco Interim Results 2024/25. Ken Murphy, Group Chief Executive Imran Nawaz, Group Chief Financial Officer 3 October 2024
Slide 2: Agenda
Agenda. 01. Introduction 02. Interim results 03. Strategic progress 04. Q&A 2
Slide 3: Introduction
Introduction. Ken Murphy 3
Slide 4: Customer offer drives volume growth and share gains
Customer offer drives volume growth and share gains. Strong customer perception improvement Volume growth in all territories Market-leading share gains in the UK & ROI YouGov UK BrandIndex Score YoY1 UK Market Share YoY2 ROI Market Share YoY3 +88bps 12 w/e 26 Aug 23 12 w/e 25 Aug 24 +416bps +62bps +
Slide 5: Improving customer satisfaction
Improving customer satisfaction. Perception improves ahead of market across all measures1. Tesco Competitor Average +1,058bps +650bps +604bps +416bps +402bps +446bps Impression Quality Value Reputation Satsifaction Recommend Improving NPS trajectory over the last two years2. 25 20 15 10 H1 2022 H1 2
Slide 6: Winning share across the market
Winning share Net UK switching gains for 19 consecutive periods1 across the market. £150m £100m £50m £0m £(50)m H1 2023 H1 2024 Other full-line grocers Limited range discounters Rest of market Total switching 6 1. UK Kantar net switching gains 12-week rolling basis to 1 September 2024. Limited range
Slide 7: Strong financial performance
Strong financial performance. Group Sales1 £31,463m +4.0% Retail Operating Profit2 £1,555m +10.0% Retail Free Cash Flow3 £1,261m (7.8)% Earnings Per Share4 14.45p +23.7% 1. Group sales exclude VAT and fuel on a continuing operations basis. Sales change shown at constant rates. 2. Adjusted operating
Slide 8: Interim results
Interim results. Imran Nawaz 8
Slide 9: Performance headlines
Performance headlines. On a continuing operations basis1 Retail profit 3 Retail sales 2 Volume-led sales growth +3.5% £1,555m Volume performance and Save to Invest delivery drives Like-for-like +2.9% +10.0% vs. last year strong profit growth Retail free cash Net debt Retail free cash flow ahead of e
Slide 10: Segmental performance
Segmental performance. On a continuing operations basis1 Change at Adjusted Change at Sales 2 constant LFL operating constant Margin4 rates profit3 rates UK & ROI £28,917m 3.7% 3.1% £1,506m 10.0% 4.7% Central Europe £2,027m 0.9% 0.6% £49m 8.7% 2.3% Retail £30,944m 3.5% 2.9% £1,555m 10.0% 4.5% 1 Bank
Slide 11: UK
UK. LFL – Food/Non-Food View LFL - Channel View LFL sales +4.0%; strong volume growth with inflation returning to normalised levels +9.3% +4.9% Food +4.9%; continued investment in value and quality; upweighted activity during key events +4.2% Home & Clothing +0.3%, reflects transition to a +1.6% exc
Slide 12: UK - Online
UK - Online. Sales growth1 +9.3%; order growth from targeted capacity increases and strong customer satisfaction Total Online1 24/25 YoY change Sales inc. VAT £3.3bn 9.3% Tesco Whoosh now in 1,460 stores, with orders per store up c.40% since H2 last year Orders per week 1.3m 9.3% Introduced Tesco Ma
Slide 13: ROI
ROI. LFL – Food/Non-Food View LFL sales +4.7%, primarily from stronger +0.9% +5.6% volumes; market share gains +88bps2 +5.4% +4.7% Food sales +5.4%, supported by ongoing investment in our fresh proposition Home & Clothing (0.8)%, reflects transition +0.6% excluding toys +0.6% to a commission model w
Slide 14: Booker
Booker. Core Retail +0.6%; symbol brands2 performing well, Sales LFL some weakness in independent convenience sector Core Retail £1,657m 0.6% Core Catering +1.7%; supported by high customer satisfaction and further availability improvements Core Catering1 £1,350m 1.7% Ongoing weakness in parts of fa
Slide 15: Central Europe
Central Europe. LFL – Food/Non-Food View LFL - Channel View LFL sales +0.6%, driven by stronger volumes +11.9% +0.9% Food sales up +0.9%; positive response to value investments +4.4% Non-food sales impacted by wetter weather in Q2 Large LFL reflects customer preference for smaller, (1.7)% more frequ
Slide 16: Retail operating profit
Retail operating profit. Operating profit growth2 of +10% reflective of: UK & ROI CE Retail • UK & ROI • Strong volume growth in UK & ROI, partly offset by Operating profit1 £1,506m £49m £1,555m weaker performance in Booker • Ongoing Save to Invest delivery, more than offsetting Operating profit ope
Slide 17: Statutory profit after tax
Statutory profit after tax. On a continuing operations basis1 H1 24/25 H1 23/241 YoY £m £m £m • Statutory profit after tax up +15.2% driven by Adjusted operating profit 1,649 1,426 223 operating profit growth of +15.6% Adjusting items2 (37) - (37) • Adjusting net charge of £(37)m, relating mainly to
Slide 18: Retail free cash flow
Retail free cash flow. On a continuing operations basis1 H1 24/25 H1 23/24 £m £m • Retail free cash flow of £1.26bn Retail cash generated pre-working capital 2,382 2,212 • Working capital inflow of £169m is lower than last Decrease in working capital 169 368 year, reflecting lower levels of cost inf
Slide 19: Tesco Bank
Tesco Bank. Continuing operations profit of £94m: • strong growth in insurance business, due to high level of renewals and new business volumes • £42m of non-recurring benefits relating to new pet insurance contract and net investment income Sale of existing banking operations on track to complete l
Slide 20: Balance sheet metrics
Balance sheet metrics. 1 2 Net debt Fixed charge cover 2.2x 2.1x 3.7x 3.9x £9.8bn £9.7bn £1,182m £1,153m Balance sheet remains strong with net debt ratio lower than year end £185m £164m £7.6bn £7.5bn Fixed charge cover improves to 3.9x reflecting strong EBITDA growth £997m £989m £2.1bn £2.1bn 3 FY 2
Slide 21: FY 24/25 outlook
FY 24/25 outlook. Now expect to deliver retail adjusted operating profit of around £2.9bn In addition, now expect retained Tesco Bank adjusted operating profit of around £120m Retail free cash flow within our medium-term guidance range of £1.4bn to £1.8bn £575m of shares bought in first half; on tra
Slide 22: Strategic progress
Strategic progress. Ken Murphy 22
Slide 23: 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 24: Revisiting the multi-year performance framework
Revisiting the Drive top-line growth, underpinned by: Increasing customer satisfaction relative to the market multi-year Growing or at least maintaining our core UK market share performance framework. Grow absolute profits whilst maintaining sector- leading margins through: Leveraging our asse
Slide 25: Increased customer satisfaction driving market share gains
Increased customer satisfaction driving market share gains. What we said What we have delivered Drive top-line growth, YouGov BrandIndex, Rebased UK Market Share underpinned by: Tesco Market Increasing customer satisfaction 27.8% relative to the market Growing or at least maintaining our core UK
Slide 26: Customer satisfaction at the core of strong financial performance
Customer satisfaction at the core of strong financial performance. What we said What we have delivered Retail Operating Profit1 Retail Media Income YoY Increase Grow absolute profits whilst £3.0bn Around £2.9bn maintaining sector-leading margins through: £1.5bn Leveraging our assets efficiently ac
Slide 27: Leading on value
Leading on value. Helping customers spend less Price Indexed to Tesco (100)1 across the Group: 110 • Cheapest full-line UK grocer since November 2022 • Winner of the 2024 Grocer Gold ‘Grocer 33 Price Award’ • Price cuts on at least 1,500 products in each CE market • Price lock on over 700 Booker cat
Slide 28: Improving quality across the range
Improving quality across the range. Improving intrinsic quality across our range: Quality Perception1 • Over 860 new or improved products; new 40 ranges including Root & Soul and Pinch • Enhanced sustainability credentials and improved taste of own brand block chocolate • ROI food sales up +5.4%, wi
Slide 29: Volume growth driving strong performance: Finest products
Tesco Finest Steak Tesco Finest Berries Volume growth driving strong performance: • More than 180 new or improved Finest products • +17.9% Finest Dine In sales volume post-relaunch • Over 20m customers buying a Finest product, +5.4% more year-on-year • Finest switching gains from all competitors1 Fi
Slide 30: Evolving digital capabilities
Evolving digital capabilities. Expanding and evolving our digital Group Clubcard Penetration reach: 100% • Growth in Clubcard penetration across the Group +5.1ppts +1.3ppts • Personalised Clubcard +2.9ppts Challenges for 4.9m customers +4.7ppts • 91 brands participated in our ‘Summer of Sport’ event
Slide 31: Developing our leading digital platform
Developing our leading digital platform. • Over 500 suppliers engaging customers through retail media • More than 7,600 campaigns in the half • Multi-channel execution across store, digital, AV and print • Over 4,000 digital screens “What was a real step-change was across large and convenience the c
Slide 32: Investing in our network
Investing in our network. Expanding and improving our physical estate • 44 new stores across the Group, 182 refreshed • ‘Fresh first’ refresh in ROI driving market outperformance • Aylesford chilled DC opens Summer 2025, leveraging robotic automation • 397 net new Booker retail partners Aylesford DC
Slide 33: Caring for colleagues and communities
Caring for colleagues and communities. Colleagues Communities • c.£800m invested in store colleague pay awards since 2022 • Stronger Starts awarding >£9m to date to >8,000 projects • ‘Employer of the Year (Retailer)’ at Grocer Gold Awards 2024 • 220m meals donated through FareShare partnership to da
Slide 34: Supporting suppliers and the planet
Supporting suppliers and the planet. Suppliers Planet • Ranked 1st in Advantage supplier survey for 9th year running • Signed new renewable energy Power Purchase Agreement • Further 16 brands included in 2024 Accelerator Programme • Trialling methane-reducing feed supplement for dairy cows • Launche
Slide 35: Summary
Summary. Strong customer offer delivers volume growth and market share gains Strong financial performance in the half Continued investment in value, quality and service whilst unlocking longer-term growth opportunities Delivering for all stakeholders 35
Slide 36: Q&A
Q&A. Ken Murphy & Imran Nawaz 36
Slide 37: Appendix
Appendix. 37
Slide 38: Guidance
Guidance. Retail profit Expect to deliver around £2.9bn for FY 24/25 Retained Tesco Around £120m, including part-year effect of partnership income in H2 of year Bank profit Retail free cash £1.4bn to £1.8bn in FY 24/25 flow Capex Expect FY 24/25 capital expenditure of c.£1.4bn Net finance costs1 Bro
Slide 39: 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.6.5 years Weighted average interest cost of 5.1% Strong liquidity position – £3.1bn cash1 – £2.5bn of undrawn committed facilities 39 1. Cash and cash equival
Slide 40: Adjusting items – H1 24/25
Adjusting items – H1 24/25. H1 24/25 H1 23/24 £m £m Property transactions 7 24 Amortisation of acquired intangible assets (38) (37) Other1 (6) 13 Total adjusting items in statutory operating profit (continuing operations) (37) - Net finance costs 51 18 Tax (2) 23 Total adjusting items (continuing op
Slide 41: 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",