Tesco Plc · LSE:TSCO
Tesco — FY2007/08 Earnings Presentation
76 slides from Tesco's earnings presentation, Apr 15, 2008
Slide 1: Preliminary Results 15 April 2008
Preliminary Results 15 April 2008
Slide 2: David Reid, Chairman
David Reid Chairman
Slide 3: Highlights
Highlights • Sales increased by 11.1% to £51.8bn • Group profit before tax up 15.3%* • Underlying profit up 11.8% to £2,846m • Underlying diluted earnings per share up 13.1% (normal tax rate) • Full year dividend up 13.1% * excluding last year’s exceptionals; mainly Pensions A-Day credit
Slide 4: International
International U.S. China
Slide 5: UK
UK
Slide 6: Non-food
r Point ae s
Slide 7: Retailing services
Retailing services • Tesco Personal Finance • Telecoms • Dot com
Slide 8: Strategy
Strategy • Core UK • International • Non-food • Retailing services • Community
Slide 9: Community
Community Labelling roll-out £4.4 million raised
Slide 10: Property
Property
Slide 11: Our people
Our people
Slide 12: Andrew Higginson, Finance and Strategy Director
Andrew Higginson Finance and Strategy Director
Slide 13: Results headlines
Results headlines • Strong growth in sales, profits and earnings • Returns are rising • Increasing investment in new growth • Programme to release value from property progressing well • Shareholders continue to benefit
Slide 14: Group performance
Group performance • Sales £51.8bn, up 11.1% • Trading profit rose 11.0% to £2,751m • Start-up costs relating to U.S. and Direct totalled £87m • Group underlying profit £2,846m, up 11.8%
Slide 15: Property profits
Property profits £m 07/08 06/07 UK 186 98 International 2 (6) 188 92 J.V.’s 0 47 188 139
Slide 16: Property
Property
Slide 17: Group performance
Group performance • Group operating profit up 5.4% and Group pre- tax profit up 5.7% • Last year credit from Pensions A-day
Slide 18: Returns to shareholders
Returns to shareholders • Underlying diluted earnings per share up 20.8% to 27.02p • Using a normalised tax rate, underlying diluted earnings per share up 13.1% • Bought and cancelled 150 million shares • Proposed final dividend is 7.70p, up 12.7% • Full year dividend of 10.90p, up 13.1%
Slide 19: UK sales growth
UK sales growth including petrol Sales up 6.7% 2.8% 1.9% 3.9% 2.0% Volume Inflation Like-for-like New stores Total sales
Slide 20: UK trading profit
UK trading profit • UK trading profit £2,050m, up 7.1%, after start-up costs on U.S. and Direct • UK trading margin was 6.1%*, up on last year * Excluding start-up costs on U.S. and Direct
Slide 21: US reporting
US reporting • Sales and start-up losses reported in UK segment • US segmental reporting in current year – beginning with Interim Results • Expect trading losses to rise this year to around £100m
Slide 22: International
International • Sales £13.8bn, up 25.3% at actual rates • Trading profits £701m, up 24.3% at actual rates • Trading margins rose by 15 basis points before including China • A quarter of Group sales and profit - delivered more than half of Group growth
Slide 23: Asia
Asia • Sales £6.0bn, up 27.2% at actual rates • Excluding China, sales up 12.3% at actual rates • Trading profit £304m, up 23.6% at actual rates • Margins strong, driven by performances in Korea, Thailand and Malaysia
Slide 24: Europe
Europe • Sales £7.8bn, up 23.9% at actual rates • Strong sales growth of 22.5% in fourth quarter • Trading profit £397m, up 24.8% at actual rates
Slide 25: tesco.com
tesco.com • Sales £1.6bn, up 31% • Profits up 49%* to £124m (includes international dot com operations) • UK - over one million regular customers • 20% growth in new customers * Before initial operating losses on Direct
Slide 26: Tesco Direct
Tesco Direct
Slide 27: Telecoms
Telecoms Telecoms Centre Home Phones Home Phones Pay As You Go Le aaa
Slide 28: Tesco Personal Finance
Tesco Personal Finance • Delivering excellent returns to the group • Profits broadly flat on last year, after the £31m cost of household insurance claims • Our share of the cost of flood liabilities £11m • Reduced exposure on defaulting accounts • Underlying bad debts down 15% on last year • Credit
Slide 29: J.V.'s and Associates
J.V.’s and Associates • Profits were £75m • One-off profits on asset sales were £47m last year • Excluding these, profit up £16m
Slide 30: Finance costs
Finance costs • Net finance costs down, at £63m • Reduction reflects favourable movements in the IFRS non-cash elements of finance costs
Slide 31: Tax
Tax • Tax charged at an effective rate of 24.0% • One-off benefit to deferred tax due to corporation tax change • Settlement of prior year tax • Tax rate for the current year to be around 27.5%
Slide 32: Net debt
Net debt • Increased to £6.2bn from £4.9bn at the last year-end • Due to three factors – increase in capex – currency movements – Dobbies acquisition • Debt maturity – 70% fixed
Slide 33: Pensions
Pensions • Award-winning defined-benefit pension scheme • Started triennial valuation • IFRS deficit decreased by £112m pre-tax • Post-tax, IFRS pensions deficit now around £600m
Slide 34: Capital expenditure
Capital expenditure £bn 4.0 3.9 US and China 3.5 Europe 3.0 3.0 2.8 Asia 2.5 2.4 2.3 Group 2.0 1.5 UK 1.0 0.5 03/04 04/05 05/06 06/07 07/08
Slide 35: Capital outlay
Capital outlay £bn 5.0 4.2 4.2 4.0 3.8 3.0 2.0 1.0 0.0 06/07 07/08 08/09 Capex Via acquisitions
Slide 36: Operating cash flow
Operating cash flow • Operating cash flow was £4.1bn • Up from £3.5bn last year and £0.2bn higher than capex
Slide 37: TESCO | Evy uate holps
TESCO | Evy uate holps
Slide 38: Terry Leahy, Chief Executive
Terry Leahy Chief Executive
Slide 39: TESCO | Evy uate holps
TESCO | Evy uate holps
Slide 40: International
International Operating/trading profit £m 800 701 600 400 200 0 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08
Slide 41: International
International • Sales up by more than 25% • First time contribution from China • Positive like-for-like growth 2% • Profits advanced well, up 24% • Good margin growth • Returns on track
Slide 42: Central Europe
Central Europe Poland Czech Republic
Slide 43: Europe
Europe Hungary Turkey Ireland
Slide 44: Asia
Asia Malaysia Japan
Slide 45: China
TESCO | Eve uit holps
Slide 46: International
International • Flexible • Local • Focus • Multi-format • Capability • Brand
Slide 47: Focus
Focus TESCO | Eve uit holps
Slide 48: Brand
Brand Poland Malaysia
Slide 49: Multi-format
Multi-format i as } womoo!
Slide 50: Capability
Capability 1 i J
Slide 51: International returns progress
International returns progress LFL cash return on investment (CROI)* % 13.1 13.0 12.7 12.5 12.2 12.0 11.4 11.0 03/04 04/05 05/06 06/07 07/08 * CROI is measured as earnings before interest, tax, depreciation and amortisation, expressed as a percentage of net invested capital.
Slide 52: International returns – 2006/07
International returns – 2006/07 £m capital invested 2,500 2,000 Korea 1,500 ROI Poland 1,000 Thailand Hungary Czech Republic 500 Slovakia Japan Turkey Malaysia 0 c.7-10% c.10% c.15% LFL CROI
Slide 53: International returns – 2007/08
International returns – 2007/08 £m capital invested 2,500 Korea 2,000 Poland 1,500 ROI Thailand 1,000 Czech Republic Hungary 500 Turkey Japan Slovakia Malaysia 0 3.0% 5.0% c.7-10% 7.0% 9.0% c.10% 11.0% 13.0% 15.0% c.15% 17.0% 19.0% 21.0% LFL CROI
Slide 54: International returns – 2007/08
International returns – 2007/08 £m capital invested 2,500 Korea 2,000 Poland 1,500 ROI Thailand 1,000 Czech Republic Hungary 500 Turkey Japan Slovakia Malaysia 0 3.0% 5.0% c.7-10% 7.0% 9.0% c.10% 11.0% 13.0% 15.0% c.15% 17.0% 19.0% 21.0% LFL CROI
Slide 55: International returns – 2007/08
International returns – 2007/08 £m capital invested 2,500 Korea 2,000 Poland 1,500 ROI Thailand 1,000 Czech Republic Hungary 500 Turkey Japan Slovakia Malaysia 0 3.0% 5.0% c.7-10% 7.0% 9.0% c.10% 11.0% 13.0% 15.0% c.15% 17.0% 19.0% 21.0% LFL CROI
Slide 56: United States
United States Se
Slide 57: Fresh & Easy - growing sales
Fresh & Easy - growing sales index 160 150 140 130 120 110 100 90 80 Jan Feb Mar Apr
Slide 58: Customer satisfaction
Customer satisfaction Asked: How satisfied were you with your shopping experience at Fresh & Easy? % 100 75 69 50 30 25 1 0 0 Extremely Very satisfied Somewhat Not satisfied satisfied satisfied Source: AKO Capital/Ipsos
Slide 59: United States
Vi TESCO | Eve uit holps
Slide 60: TESCO | Evy uate holps
TESCO | Evy uate holps
Slide 61: UK
UK
Slide 62: Price
Price
Slide 63: Service
Service “If there’s more than one customer in front of you at the checkout, we'll always aim to open another until all our checkouts are open” |
Slide 64: Range
Range
Slide 65: Availability
Availability : F 3 a $reg. ee a on oa alae i ye Se
Slide 66: Step change
Step change
Slide 67: Non-food
Non-food
Slide 68: Tesco Digital
esco Digital Ble Edt View History Goolmaris Toos Hep 9-08 Li custonieunts [L) htpilmmm.murin. 7ES<2 Digital Musi TW&Film Li stared Decaents Games New Releases Charts Genres Artists A-2 Music Come Away With Me Released 6 April albums, singles and tracks RewSingles |” New Tracks Bruce Soringsteen Dorm
Slide 69: Tesco Direct
Tesco Direct
Slide 70: Retailing services
Retailing services • Dot com • Tesco Personal Finance • Telecoms
Slide 71: TESCO | Evy uate holps
TESCO | Evy uate holps
Slide 72: Community
Community On track to save 2 billion 10 million sold in one year
Slide 73: Community
Community Transport Train by canal Green stores
Slide 74: Summary
Summary • Strong sustainable growth • Growth is broadly-based • Investing to drive long-term growth • Improving returns and benefits for shareholders • Tackling social and environmental challenges • A company for all seasons, well placed to meet the challenges ahead
Slide 75: Q&A
Q&A
Slide 76: Preliminary Results 15 April 2008
Preliminary Results 15 April 2008