Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (October 2022)
27 slides from Tesco's debt investor presentation, Oct 5, 2022
Slide 1: Tesco Interim Results 2022/23 Debt Investor Call
Tesco Interim Results 2022/23. Debt Investor Call. Imran Nawaz, Chief Financial Officer Lynda Heywood, Group Treasurer 5 October 2022 0
Slide 2: Six months of progress
Six months of progress. Supporting customers with a Rewarding loyalty through Creating value for all relentless focus on value Clubcard stakeholders Leading combination of Aldi Price Match, Over 20 million households now actively Announced biggest single year investment Low Everyday Prices & Clubcar
Slide 3: Group performance
Group performance. Sales1 Group profit2 Retail free cash flow +3.5% £1,315m £1,283m Like-for-like +3.2% (9.8)% vs. last year £(0.3)bn vs. last year Net debt EPS Dividend down £0.5bn 10.67p 3.85p (4.9)% vs. last year +20.3% vs. last year 2 1. Sales exclude VAT and fuel. Sales change shown at constant
Slide 4: Segmental performance
Segmental performance. Change at Adjusted Change at Sales1 LFL Margin constant rates operating profit2 constant rates UK & ROI £25,630m 2.6% 2.7% £1,169m (11.5)% 3.9% Central Europe £2,008m 9.5% 10.4% £79m 19.1% 3.7% Total Retail £27,638m 3.1% 3.2% £1,248m (10.0)% 3.9% Bank £540m 24.6% n/a £67m (6.9
Slide 5: UK sales
UK sales. UK LFL Q1 (1.5)% Q2 +2.8% H1 +0.7% Like-for-like by channel Large Online Convenience1 xxx +1.4% (11.3)% +6.5% 3.6% 6.7% 6.2% (7.7)% (0.7)% (14.5)% Q1 Q2 Q1 Q2 Q1 Q2 Q1 reflects annualisation of Seeing some normalisation as Strong footfall recovery in city COVID-19 benefit customers switch
Slide 6: ROI
ROI. LFL Total (0.1)% Large (1.7)% Trading over highest level of COVID-19 Channel restrictions in Q1 last year Convenience 6.4% Online 5.9% Further expansion of Online – now represents 9% of sales Food (0.7)% Completed Joyce’s Supermarkets Category acquisition in June GM (2.8)% Clothing 23.0% 5
Slide 7: Booker
Booker. Retail Sales £1,264m £1,239m £1,168m £1,179m £1,154m £1,091m H1 LFL Sales LFL +2.2% Q1 Q2 Q3 Q4 Q1 Q2 Total £4,399m1 13.9% 21/22 22/23 Retail £2,442m 2.2% Catering Sales £962m £800m £867m £786m £728m Catering £1,830m 35.5% £552m H1 LFL +35.5% Booker Catering £1,090m 36.1% Q1 Q2 Q3 Q4 Q1 Q2 B
Slide 8: Central Europe
Central Europe. LFL Total 10.4% Large 10.6% Significantly inflationary environment due Channel to macroeconomic factors Convenience 12.6% Online (11.0)% Volumes resilient, market share up +16bps1 YoY driven by switching gains Food 12.0% Clubcard Prices and Low Price Guarantee Category rolled-out acr
Slide 9: Retail operating profit
Retail operating profit. UK & ROI CE Retail Adjusted £1,169m £79m £1,248m operating profit1 Year-on-year £(149)m £11m £(138)m Change %2 (11.5)% 19.1% (10.0)% £(138)m decrease year-on-year Margin (%) 3.9% 3.7% 3.9% 1 1 8 1. Operating profit before adjusting items. 2. Percentage change shown at consta
Slide 10: Statutory profit after tax
Statutory profit after tax. H1 22/23 H1 21/22 Change % Adjusted operating profit £1,315m £1,458m (9.8)% Adjusting items £(579)m £(154)m Non-cash impairment charge in current year driven by increase Impairment of non-current assets £(626)m £36m in discount rates Litigation costs £0m £(193)m Prior yea
Slide 11: Retail free cash flow
Retail free cash flow. H1 22/23 H1 21/22 YoY Retail cash generated from operations exc. working capital £2,030m £2,183m £(153)m Lower volumes and opex inflation, partially offset by Save to Invest Decrease in working capital £390m £556m £(166)m Inflow from higher trade balances due to higher food co
Slide 12: Balance sheet metrics
Balance sheet metrics. Total indebtedness1 Net debt2 Fixed charge cover3 3.1x 2.5x 2.5x 3.6x 2.5x 2.5x 3.5x 3.1x 3.1x 3.5x 3.5x 3.4x £10.5bn £10.8bn £10.0bn £10.2bn £1,213m £1,184m £0.2bn £0.2bn £238m £219m £7.9bn £7.9bn £8.0bn £8.0bn £975m £965m £2.6bn £2.1bn £2.6bn £2.1bn FY 21/22 H1 22/23 FY 21/2
Slide 13: Debt and liquidity
Debt and liquidity. Debt maturity profile £bn 1.0 Debt Maturities Sustainability-Linked Bond Smooth debt maturity profile – Less than £1bn maturing in any year 0.8 – Weighted average maturity of c.8 years 0.5 Weighted average interest cost of 3.5% 0.3 0.0 Strong liquidity position – £3.2bn cash1 – £
Slide 14: 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 15: Great prices
Great prices. APM distribution 12 Distribution Points (m) 10 8 6 4 2 0 H1 21/22 H2 21/22 H1 22/23 Aldi Price Match items in Aldi Price Match items in 99% of large baskets1 >80% of top up baskets2 14 1. Percentage of baskets with over 30 items in Large stores that contained at least one Aldi Price Ma
Slide 16: More engaging, relevant & personal
More engaging, relevant & personal. Clubcard penetration1 Clubcard personalisation Clubcard app users UK 70% 75% UK 10m ROI 56% 65% ROI 300k CE 54% 73% 2m CE 1.0m Clubcard holders 15 1. Clubcard sales penetration across all formats in all three markets for August 2022.
Slide 17: Online performance
Online performance. Opened fifth UFC; two Click & Collect now within More than doubled more later this year. a 25min drive of >70% of number of Whoosh Continuing to refine model UK households sites to 442 16
Slide 18: Enhancing our physical network
Enhancing our physical network. New stores: 5 New franchises: 28 New Express stores UK: 17 ROI: 2 Net new CE: 1 openings: 195 17
Slide 19: Save to invest
Save to invest. Ahead of original three year plan On track for c.£500m this year Seeking to deliver c.£1bn by Feb 24 – one year early 18
Slide 20: Summary
Summary. A strong performance in a challenging market Investing for customers and colleagues at a time when they need us most Strategic priorities serving us well Relentless focus on value, competitiveness and operational execution Confident in our ability to generate and return cash 19
Slide 21: Q&A
Q&A. 20
Slide 22: Appendix
Appendix. 21
Slide 23: 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 24: 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 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: Guidance
Guidance. Retail profit FY 22/23 between £2.4bn and £2.5bn Bank profit c.£120m to £160m Retail free cash flow At least £1.8bn Capex At top end of guidance range of £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 debt1/EBITDA Tax2
Slide 27: 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",