Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (October 2020)
23 slides from Tesco's debt investor presentation, Oct 7, 2020
Slide 1: Debt Investor Call
Debt Investor Call. 7 October 2020 Alan Stewart – CFO Lynda Heywood – Group Treasurer
Slide 2: Highlights of performance
Highlights of performance • Over a million customers more loyal to Tesco • Net switching gains from Aldi for first time in over a decade • Online capacity doubled in five weeks • 12 weeks’ pay for vulnerable colleagues; full pay for all from day one of absence • Recruited 47,000 temporary colleagues
Slide 3: Group performance
Group performance 6.6% Retail Bank (14.1)% 20.8% 4.4% n/m £26.7bn £645m 3.20p £554m £25.0bn £1,142m £1,192m 2.65p £87m £(155)m 1H 1H 19/20 20/21 1H 1H 1H 19/20 1H 20/21 19/20 20/21 1H 19/20 1H 20/21 1H 19/20 1H 20/21 Sales1 Profit2 Retail free cash flow3 Dividend 1. Sales exclude VAT and fuel. Sales
Slide 4: Segmental performance
Segmental performance UK & ROI Central Europe Total Retail Tesco Bank Group Sales1 £24,337m £1,929m £26,266m £386m £26,652m change at constant exchange rates % 8.5% (1.5)% 7.7% (31.4)% 6.8% Operating profit2 £1,133m £59m £1,192m £(155)m £1,037m change at constant exchange rates % 6.2% (23.4)% 4.2% n
Slide 5: UK & ROI
UK & ROI Food sales growth • Strong top-line growth 50% • LFL: 1Q +8.2%, 2Q +6.2% • Significant stock-piling in early weeks Government Pubs and restaurants issues ‘stay at in England able to open • Ongoing benefit of shift from ‘out-of- 30% home’ guidance home’ consumption • Major shifts in buying p
Slide 6: Our response to COVID-19
Our response to COVID-19 1 Food for all 2 Safety for everyone 3 Supporting our colleagues 4 Supporting our communities
Slide 7: Sales mix
Sales mix Channels Products Booker 22.7% 68.7% 9.2% (0.3)% (17.2)% 7.6% (40.6)% (41.2)% 1.4% Large Convenience1 Online Food Clothing GM Fuel Retail Catering Note: Sales change shown on a like-for-like basis 1. Convenience comprises Tesco Express and One Stop stores.
Slide 8: COVID-19 costs
COVID-19 costs FY forecast1 1H (illustrative) 12 weeks pay for vulnerable colleagues incl. pregnancy £(60)m £(70)m Colleague absence / backfill / additional 47,000 colleagues £(153)m £(240)m Safety consumables2 £(35)m £(65)m Additional distribution costs £(23)m £(23)m Property costs £(57)m £(100)m 1
Slide 9: Online
Online Slot capacity 13% 21% Launched West Bromwich in Click & Collect 1.5m August participation +21% A further 2 to open this year Mar Apr May Jun Jul Aug orders per van More than doubled capacity Improved productivity Additional opportunity through UFCs
Slide 10: Booker
Booker #1 Retailer Bulk buys Started in 300 roll-out of Jack’s #1 Delivered Wholesale c.£1bn stores products #1 Caterer additional sales Top-up at #1 Cash & Carry Tesco for caterers Strong market positions Best Food Logistics Joining Forces acquisition completed
Slide 11: Central Europe
Central Europe • Changes to customer shopping behaviour 1H 20/21 similar to UK Sales1 £1,929m • Strong online grocery demand change at actual rates % (4.3)% • Shift in sales to more essential items change at constant rates % (1.5)% • Highly competitive markets with significant competitor price activ
Slide 12: Sources and uses of cash
Sources and uses of cash £263m £1,975m £1,805m £1,848m £(127)m £(93)m Net working capital inflow £(369)m £170m £(319)m £6m £(125)m £(116)m £(79)m £554m £(292)m Retail cash Impact of Non-fuel Retail cash Exceptional Retail Cash capex Net interest 1 Tax Net property Net Market Repayments Retail free g
Slide 13: Liquidity and debt profile
Liquidity and debt profile Debt Mix 18% GBP MTN • Actions taken in 1H: 36% EUR MTN 9% • Early redemption of EUR 20 (£0.2bn) USD 144A • Issued 10 year GBP £0.5bn (2.75%) GBP Secured • Committed facilities refinanced at £2.5bn for three years 37% • Significant cash liquidity of £2.0bn1 £bn Remaining D
Slide 14: Credit Metrics
Credit Metrics Total indebtedness1 Fixed Charge2 £15.9bn £1,261m £1,243m £14.9bn £3.3bn £13.2bn £2.6bn £1.1bn £1,048m £1,034m £9.5bn £9.5bn £8.7bn £2.8bn £3.0bn £3.3bn £213m £209m FY 19/20 1H 20/21 1H 20/21 FY 19/20 (Restated) 1H 20/21 Reported Proforma Pro forma Reported Underlying net debt Lease l
Slide 15: 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 Moody’s (May 2020) “Tesco’s issuer rating reflects the company scale, in particular as the market leader in the UK, and the sustained recovery in its operating metrics an
Slide 16: Sales of Thailand, Malaysia and Poland businesses
Sales of Thailand, Malaysia and Poland businesses Asia disposal £8.0bn of net cash proceeds1 Approved by shareholders in May Regulatory approval and sale completion due by end of calendar year Followed immediately by shareholder meeting to approve return of capital Poland disposal c.£165m of proceed
Slide 17: Summary
Summary • Strong top-line growth • Significant additional COVID-19 costs in Retail business offset by volume and business rates relief • Strong liquidity position • Sales of Thailand, Malaysia and Poland businesses progressing well • Strengthening customer offer; will continue to invest in value pro
Slide 18: Q&A
Q&A.
Slide 19: Appendix
Appendix.
Slide 20: Guidance
Guidance Capex £0.9bn-£1.2bn per annum Net finance costs1 Less than 4% of long-term debt per annum Tax Effective tax rate c.22% for 2020/21; c.21% over medium term No deferral of VAT payments Dividend Full year dividend pay-out ratio of 50% Interim dividend 35% of prior year full year dividend Debt
Slide 21: Sale of businesses in Thailand & Malaysia
Sale of businesses in Thailand & Malaysia 9 March 2020 Sale agreed 22 April 2020 Circular and notice convening first general meeting 14 May 2020 First general meeting 2H 2020 Competition approval Sale completion Notice convening second general meeting Second general meeting Share consolidation and s
Slide 22: Exceptional items
Exceptional items On a continuing operations basis 1H 2020/21 1H 2019/20 Net restructuring and redundancy costs - (39) Impairment of investment in India joint venture - (47) Property transactions (2) 14 Booker integration costs (2) (6) Provision for customer redress - (45) Bank Transformation costs
Slide 23: Disclaimer
Disclaimer Certain statements made in this document are forward-looking statements. For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", “should”, "anticipate",