Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (April 2022)
26 slides from Tesco's debt investor presentation, Apr 13, 2022
Slide 1: Debt Investor Update 2021/22
Debt Investor Update 2021/22. Imran Nawaz, Chief Financial Officer Lynda Heywood, Group Treasurer 13 April 2022 0
Slide 2: Ukraine - Supporting those affected by the crisis
Ukraine - Supporting those affected by the crisis. 1
Slide 3: An extraordinary year
An extraordinary year. Supporting customers & Navigating significant industry Improved competitive position colleagues through the pandemic disruption despite inflationary pressures Leveraged supplier partnerships & supply Consistent, compelling value proposition; Prioritised safety and well-being t
Slide 4: Group performance
Group performance. Sales1 Group profit2 Retail free cash flow3 +3.0% £2,825m £2,277m +10.2% vs. 19/20 +58.9% vs. last year +£0.9bn vs. last year Net debt EPS4 Dividend down £1.4bn 21.86p 10.90p +88.8% vs. last year +19.1% vs. last year 1. Sales exclude VAT and fuel. Sales change shown at constant ra
Slide 5: Segmental performance
Segmental performance. Adjusted Change at 1-year 2-year Change at Sales operating Margin constant rates LFL LFL1 constant rates profit2 UK & ROI £49,984m 2.6% 2.2% 8.8% £2,481m 35.4% 4.4% Central Europe £3,862m 3.7% 2.9% 2.5% £168m 41.1% 4.2% Total Retail £53,846m 2.7% 2.3% 8.3% £2,649m 35.8% 4.4% B
Slide 6: UK & ROI sales
UK & ROI sales. UK1 FY LFL: ROI FY LFL: Booker FY LFL: 1-yr 0.4.% 1-yr (2.9)% 1-yr 15.3% 2-yr 8.2% 2-yr 10.6% 2-yr 11.9% £bn £bn £bn £bn £bn £bn 2.7 7.8 39.4 39.7 36.5 2.5 6.7 2.3 6.1 19/20 20/21 21/22 19/20 20/21 21/22 19/20 20/21 21/22 1. UK includes Tesco UK retail business, One Stop and dunnhumb
Slide 7: Central Europe
Central Europe. 1-year 2-year LFL LFL Growth in all channels and categories Total 2.9% 2.5% on a one-year and two-year basis Stores 2.9% 1.1% Channel Online 5.4% 100.2% Non-food trading restrictions and reduced store opening hours last year Food 1.0% 1.4% Strong contribution from non-food as Categor
Slide 8: Retail operating profit
Retail operating profit. UK & ROI CE Retail Adjusted £2,481m £168m £2,649m operating profit1 Year-on-year £642m £44m £686m Change %2 35.4% 41.1% 35.8% +£686m increase year-on-year Margin (%) 4.4% 4.2% 4.4% 1 1 1. Operating profit before adjusting items. 2. Percentage change shown at constant rates.
Slide 9: Statutory profit after tax
Statutory profit after tax. FY 21/22 FY 20/21 Change % Adjusted operating profit £2,825m £1,788m 58.9% This year’s number includes £(193)m of historical Adjusting items £(265)m £(241)m shareholder litigation claims Net finance costs £(542)m £(937)m Net finance costs before FV Lower net pension finan
Slide 10: Retail free cash flow
Retail free cash flow. FY 21/22 FY 20/21 YoY Retail cash generated from operations Increase driven by higher sales, lower COVID-19 costs & benefit £4,268m £3,227m £1,041m from one-off pension contribution in prior year exc. working capital Decrease in working capital £501m £450m £51m Sharp recovery
Slide 11: Other cash items
Other cash items. FY 21/22 FY 20/21 Retail free cash flow (FCF) £2,277m £1,340m Acquisitions & disposals £122m £(2)m Proceeds from sale of Polish business to Salling Group A/S Includes disposal of Fenny Lock distribution centre in UK and Property proceeds & purchases £228m £(110)m retained Poland pr
Slide 12: Balance sheet metrics
Balance sheet metrics. Total indebtedness1 Net debt2 Fixed charge cover3 3.6x 3.1x 3.6x 3.3x 3.1x 3.1x 2.9x 3.5x £13.0bn 2.5x 2.5x £12.0bn £1.0bn £1,239m £10.8bn £1,213m £10.5bn £0.2bn £234m £238m £8.5bn £8.5bn £7.9bn £7.9bn £1,005m £975m £3.4bn £3.4bn £2.6bn £2.6bn FY 20/21 FY 21/22 FY 20/21 FY 21/
Slide 13: Debt and liquidity
Debt and liquidity. Debt maturity profile £bn Smooth debt maturity profile 1.0 Debt Maturities Sustainability-Linked Bond – Less than £1bn maturing in any year – Weighted average maturity of c.7 years 0.8 0.5 Weighted average interest cost of 3.3% 0.3 0.0 Strong liquidity position – £3.0bn cash1 – £
Slide 14: Sustainability Linked Financing
Sustainability Linked Financing. Revolving Sustainability Supply Credit Linked Bonds Chain Facility Finance September 2020 January 2021 & November 2021 April 2021 13
Slide 15: 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 16: Market environment
Market environment. Concerns about inflation1 74% 59% Biggest cost of living increases in 30 years Nov 21 Apr 22 Significant increase in household energy costs IGD Shopper Confidence Index2 5 Post COVID-19 normalisation uncertainty 0 Feb 18 Feb 22 (5) (10) Impact of war in Ukraine adding to sourcing
Slide 17: Championing great value for customers
Championing great value for customers. Continue to ensure price does not 1 become a reason to shop elsewhere A brilliant offer for customers choosing to 2 trade down from Eating out to Eating in 3 Be there for customers as their needs change – e.g. staycations 16
Slide 18: FY 22/23 Outlook
FY 22/23 Outlook. Retail adjusted operating profit: c.£2.4bn to £2.6bn Bank adjusted operating profit of c.£120m to £160m Strong retail free cash performance within our £1.4bn to £1.8bn range Commitment to buy back £750m by no later than April 2023 17
Slide 19: Summary
Summary. Strong performance in an extraordinary year Most competitive positioning for many years Unwavering commitment to value Creating long-term value for all of our stakeholders Firmly committed to returning capital 18
Slide 20: Q&A
Q&A. 19
Slide 21: Appendix
Appendix. 20
Slide 22: Credit Ratings
Credit Ratings. Agency Long Term Rating Short Term Rating Outlook Fitch BBB- F3 Stable Moody's Baa3 P-3 Stable S&P BBB- A-3 Stable Fitch (February 2022) “Tesco’s [rating] of ‘BBB-’ reflects its position as a leading European food retailer, characterised by a strong market position in its core highly
Slide 23: Capital allocation
Capital allocation. Principles Parameters Reinvest in business and customer Capex within range of £0.9bn to 1 offer => £1.2bn per year Maintain a solid investment grade Target/maintain leverage at c.2.8-2.3 2 balance sheet => times Net debt1/EBITDA Target a pay-out ratio of c.50% of 3 Pay a progress
Slide 24: FY 22/23 Guidance
FY 22/23 Guidance. Retail profit1 c.£2.4bn to £2.6bn Bank profit1 c.£120m to £160m Retail free cash flow Within our £1.4bn to £1.8bn range Capex At top end of guidance range of c.£0.9bn-£1.2bn per annum Net finance costs c.3.5% of long-term debt p.a. Leverage ratio Targeting c.2.8 – 2.3 times Net de
Slide 25: Multi-year performance framework
Multi-year performance framework. Drive top-line growth, underpinned by: − Increasing customer satisfaction relative to the market − Growing or at least maintaining our core UK market share Grow absolute profits whilst maintaining sector-leading margins through: − Leveraging our assets efficiently a
Slide 26: 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",