J Sainsbury Plc · LSE:SBRY
J Sainsbury — Debt Investor Presentation (June 2020)
28 slides from J Sainsbury's debt investor presentation, June 2020
Slide 1: Debt Investor Update
J Sainsbury plc al act Sainsbury's Bank L Debt Investor Update y A
Slide 2: Head of Investor Relations
Head of Investor Relations
Slide 3: Group performance overview
Group performance overview £m 2019/20 2018/19 Change Underlying results* Group sales (inc VAT) 32,394 32,412 O 0% Retail operating profit 938 981 O 4% Financial Services operating profit 48 31 © 55% Underlying profit before tax 586 601 OQ 2% Underlying basic EPS 19.8p 20.7p QO 4% Retail free cash fl
Slide 4: Sales Momentum
Sales Momentum Grocery; Total sales growth General Merchandise: Total sales growth Qi Q2 Q3 0% Argos 5% Total GM (inc. Habitat) JS GM -10% Clothing: Total sales growth 4.4% 3.3% a eo Q2 3 Q4 4 Debt Investor Results Call 2019/20 - June 2020 J Sainsbury plc
Slide 5: Sales performance versus market
Sales performance versus market Grocery: Volume growth’ Argos: Value growth v BRC” 4% Q4 19/20 Argos YoY Q2 0% “e BRC YoY 0% Total Q3 (excluding Argos) grocers 19/20 FY 2019/20 a Tesco Clothing: Value Growth (%YOY)’ 19720 Asda Sainsbury’s Sainsbury’s Morrisons 5% 0% Total market 1 Kantar unit growth
Slide 6: Underlying profit before tax
Underlying profit before tax UPBT Waterfall (£m) H1/ H2 UPBT 601 " (43) IVs Interest = (ho Retail Financial Services 238 18/19 19/20 18/19 UBPT 19/20 UBPT H1 6 Debt Investor Results Call2019/20 - June 2020 J Sainsbury plc
Slide 7: Balance sheet targets
Balance sheet targets * Non-lease net debt reduction Net debt exc. Lease liabilities' (¢m FY FY of at least £750m over the et dent ex labitities’ (em) =m 2019/20 2018/19 three years from 18/19 to 21/22 Net debt (6,947) (7,346) . . 2,125 , : * Medium leverage reduction Of which lease liabilities (5,7
Slide 8: Nectar
Nectar Digital Nectar Coalition strengthened Nectar 360 4.5m+ digital -——————> Ss collectors sky store Argos ee ee | ——~ Oct Nov Dec Jan Feb Mar 2019 2020 8 Debt Investor Results Call2019/20 - June 2020 J Sainsbury plc
Slide 9: Digital
Digital £6.3bn * Rolled out to all supermarkets * Sales participation in handset stores: 18% £1.1bn r " L [et | 14/15 19/20 Seamless Universal financial discovery services Single basket 9 Debt Investor Results Call 2019/20 - June 2020 J Sainsbury plc
Slide 10: Profit Outlook
Profit Outlook Base case * Materially higher operating * General Merchandise * Travel Money expenses * Clothing * ATMs * Stock clearance — clothing * Fuel * Reduced consumer spend and seasonal * Impairments * Reduced tenant and * Colleaque absence concession income g * Costs £500m+ profit impact 10
Slide 11: Profit Outlook
Profit Outlook Base case Year on Year Profit Impact £500m+ £500m+ * Material COVID-19 related costs * GM, clothing and fuel sales * Stock write-downs * Financial services * Grocery sales * £450m business rates relief = Net impact unchanged 11 Debt Investor Results Call2019/20 - June 2020 J Sainsbury
Slide 12: Summary
Summary * Good momentum in our Grocery business * Great response across the business to COVID-19; supporting . . customers, colleagues, communities and suppliers * Coming together as one multi brand, multi channel business * Strength and flexibility of the multi brand multi channel platform * Strong
Slide 13: Mike Larkin
Mike Larkin Chief Financial Officer
Slide 14: Reminder of our priorities
Reminder of our priorities Vision Objective Priorities To be the provider of Financial Services for loyal Sainsbury’s Group Customers An agile, capital and cost efficient provider of simple, mobile-led financial services Reshape the Balance Sheet Stop mortgage origination Improve margins - Deposits
Slide 15: The commitments we made at Capital Markets Day
The commitments we made at Capital Markets Day sl) Stop putting cash in to Financial Services No capital input from the Group from now* 2 Double UPBT; double digit ROCE within 5 years 4 Cost to Income c.50%** within 5 years 5 Stop Mortgage acquisition; review back book options 6 Increase connectivit
Slide 16: Focusing on providing financial services for loyal Sainsbury's Group customers
Focusing on providing financial services for loyal Sainsbury’s Group customers Increasing connectivity with the Group Sainsburys Bank Sainsbury's Bank se" 1) Sb 18, Gogo 0000 Retail Spend Credit Cards Volumes (= + (are 18/19 19/20 18/19 19/20 A FINANCIAL SERVICES Credit Penetration Argos Sales | 10%
Slide 17: Through simple, mobile-led solutions
Through simple, mobile-led solutions Further enhancements of digital solutions with more in the pipeline Customer offering so far... HELPFUL ..Current initiatives * My Argos Card app _— * Enhancing functionality for the credit card app - A further 500k customers registered in year - 59% of payment v
Slide 18: Financial headlines
Financial headlines Good growth in profit and connected product lending Financial Services uPBT (£m) Customer Assets (£bn) 75 74 68 70 —Bank — Personal loans — Credit cards —AFS d bi bongs — Mortgages | AFS (recognised by Argos — Store cards 2018/19 2019/20 Feb19 Feb20 Feb 19 Deposits (£bn) Feb 20 1
Slide 19: Cost headlines
Cost headlines Headcount a good leading indicator of progress Costs’ (£m) 300 — Depreciation — Colleague costs — Other expenses 2018/19 2019/20 1 Group contribution basis Headcount Feb 19 Feb 20 No. of registered customers to AFS mobile App (m) Feb 19 Feb 20 19 Debt Investor Results Call 2019/20 - J
Slide 20: Bank key financials
Bank key financials Strong profit growth and capital position FY FY £m 2019/20 2018/19 Change Financial Services operating profit 75 68 © 10% Operating profit recognised by Bank 48 31 © 55% Total income* 444 439 © 1% Customer lending? £74bn £70bn © 6% Customer deposits £6.3bn £6.0bn © 5% Active cust
Slide 21: Sainsbury's Bank COVID Response
Sainsbury’ Bank J Sainsbury plc Free cash withdrawals COVID Response
Slide 22: We have a diversified income base....
We have a diversified income base.... Challenging times for ATM and Travel business lines Argos storecard Mortgages Be or Insurance Savings Credit Cards Travel Money % of 19/20 Financial Services revenue Increasing impact of COVID 19 22 Debt Investor Results Call2019/20 - June 2020 J Sainsbury plc
Slide 23: ....but these headwinds are significant but manageable..
....but these headwinds are significant but manageable.. COVID-19 impact viewed as an earnings shock, not a capital or liquidity event Impacts to date: * Travel Money bureaux and Argos stores closed, staff redeployed * Lower card spend and ATM usage * Higher costs / staffing * Forbearance offer (pay
Slide 24: We benefit from a strong capital position..
We benefit from a strong capital position.. Strong position to weather the storm Capital Available to Use: = Over £300m of loss absorption in order to manage stress { Surplus 2.0% ! CCyB 1.0% = 2.0% surplus held above regulatory requirements = Counter Cyclical buffer (CCyB) requirement reduced to Eq
Slide 25: ..and a strong liquidity position
..and a strong liquidity position Strong position to weather the storm Average Liquidity Coverage Ratio (%) Liquidity Available to Use: = Significant excess liquidity at February 20 = Deposits stable since February = >90% of deposits are covered by Deposit Guarantee scheme = Proven ability to raise
Slide 26: We should benefit from our conservative credit approach
We should benefit from our conservative credit approach Stable underlying credit risk on a high quality portfolio 90 days past due at 18 months (%) Bank Unsecured IFRS 9 12mth PD (%) COVID-19 Impact Nectar Non Nectar Non Nectar Nectar Cards Loans Low quality 1 0 Satisfactory \ quality —_ 11% 3% Cred
Slide 27: Resilient Bank with strong capital and liquidity positions
Resilient Bank with strong capital and liquidity positions COVID-19 impact viewed as an earnings shock, not a capital or liquidity event Impacts to date: * Travel Money bureaux and Argos stores closed, staff redeployed * Lower card spend and ATM usage * Higher costs / staffing * Forbearance offer (p
Slide 28: Q&A