Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (October 2015)
28 slides from Tesco's debt investor presentation, Oct 8, 2015
Slide 1: Interim Results – Fixed Income Investor Call
8 October 2015 INTERIM RESULTS – Fixed Income Investor Call Alan Stewart – CFO, Shubhi Rao – Group Treasurer
Slide 2: Agenda
Agenda • One year on • Detailed results • Three key priorities
Slide 3: Sales improving
Sales improving LFL LFL LFL 14/15 14/15 14/15 15/16 15/16 14/15 14/15 14/15 15/16 15/16 14/15 14/15 14/15 15/16 15/16 1H 3Q 4Q 1Q 2Q 1H 3Q 4Q 1Q 2Q 1H 3Q 4Q 1Q 2Q 4.0% 0.1% 3.1% (1.0)% (1.3)% (1.7)% 2.2% 0.3% (3.4)% (4.3)% (4.8)% (5.0)% (5.1)% (0.3)% (6.2)% UK Europe Asia
Slide 4: UK volume-based recovery
UK volume-based recovery UK LFL Volume 2.0% (7.0)% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Slide 5: UK transaction growth
UK transaction growth Year-on-year change in UK transactions by quarter % 2.0% (4.0)% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2013/14 2014/15 2015/16
Slide 6: UK formats like-for-like sales performance
UK formats like-for-like sales performance* Extra Superstore 2014/15 2014/15 2015/16 2015/16 2014/15 2014/15 2015/16 2015/16 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q (1.1)% (2.2)% (2.4)% (2.5)% (2.3)% (3.4)% (6.3)% (6.1)% Metro Express 4.5% 4.4% 4.1% 2014/15 2014/15 2015/16 2015/16 3Q 4Q 1Q 2Q 2.1% (0.2)% (0.2)% (1.
Slide 7: UK online sales
UK online sales +14.5% +2.7% +14.0% Grocery General Clothing Merchandise
Slide 8: Costs reduced £400m
Costs reduced UK: 53 £400m Asia: 8 Europe: 16 Restructuring Store closures Decisive action benefits
Slide 9: Rebuilding profit
Rebuilding profit Customer satisfaction £354m Operating leverage Group operating Creating a virtuous Reinvesting for profit circle customers
Slide 10: Capital discipline
Capital discipline £bn 3.8 3.0 3.0 2.0 <1.0 11/12 12/13 13/14 14/15 15/16 49 sites exited Full ownership of Significant 21 superstores reduction in capex regained
Slide 11: Portfolio reviewed
Portfolio reviewed Significant Process concluded Increasing level of proceeds cash generation
Slide 12: Financial summary
Financial summary Continuing operations 1H 15/16 1H 14/15 Change % Group sales (exc. VAT, exc. Fuel) £23.9bn £24.3bn (1.9)%* Group operating profit before exceptional items £354m £779m (54.6)% Exceptional items - £(563)m n/a Group statutory operating profit £354m £216m 63.9% Group PBT before excepti
Slide 13: Transparent profit measure
Transparent profit measure 1H 14/15 FY 14/15 Trading profit £937m £1,390m Revised phasing of commercial income adjustment £42m - Adjustments: IAS /IFRS Adjustments £(70)m £(100)m Other (losses)/ profits arising on property-related items £7m £(60)m Operating profit before exceptional items £916m £1,2
Slide 14: Segmental performance
Segmental performance Sales Operating profit before exceptional items Change Change Change Change 1H 15/16 1H 14/15 actual constant 1H 15/16 1H 14/15 actual constant rates rates rates rates UK & ROI £18.4bn £18.6bn (1.2)% (0.6)% £166m £543m (69.4)% (70.0)% International £5.1bn £5.2bn (4.6)% 0.8% £10
Slide 15: UK and ROI like-for-like sales performance
UK and ROI like-for-like sales performance* UK ROI 2014/15 2014/15 2015/16 2015/16 2014/15 2014/15 2015/16 2015/16 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q (1.0)% (1.3)% (1.7)% (2.9)% (4.4)% (5.1)% (6.9)% (6.7)% * Exc. VAT, Exc. Fuel.
Slide 16: UK sales breakdown
UK sales breakdown 2014/15 2014/15 2014/15 2014/15 2015/16 2015/16 1Q 2Q 3Q 4Q 1Q 2Q 0.0% (1.0)% (2.0)% (3.0)% (4.0)% Contribution of net new stores (5.0)% (6.0)% Like For Like Like-for-like Total sales Salesgrowth Growth
Slide 17: UK and ROI operating profit
UK and ROI operating profit £m 600 543 400 200 166 0 UK and ROI 1H 14/15 Lower quantum sales Lower prices Investment in service Net cost savings Other UK and ROI 1H 15/16
Slide 18: International sales performance
International sales performance* 98% International Asia Europe £5.1bn £2.2bn 96% £2.8bn 96% 21% of Group Thailand & Central Europe & total Malaysia Turkey * Exc. VAT, Exc. Fuel, at actual exchange rates.
Slide 19: Tesco Bank
Tesco Bank • Bank revenue down (0.8)% to £478m – Credit card interchange income – Customer accounts +6.2% – Customer lending +10.2% • Operating profit before exceptional items down (13.1)% – Impact of interchange • Capital and liquidity position remains strong – Risk asset ratio improved 200bps to 1
Slide 20: Capex
Capex Property Capability & £364m <£1bn infrastructure Maintenance & Refresh 1H capex On track Allocation in line
Slide 21: Movement in net debt
Movement in net debt* £m 1,500 £194m INCREASE IN WORKING CAPITAL 1,300 1199 1,100 438 1,005 900 700 (401) (226) 500 (231) 281 300 (498) 100 73 (100) (107) (300) (461) Cash flow Cash impact New Underlying Retail cash Interest Cash capex Free cash British Land Other Movement in from retail from prior
Slide 22: Pensions
Pensions • Current UK scheme to be replaced with defined contribution scheme from November 2015 – Greater certainty on future cash requirements – Sustainable benefits for colleagues • IAS 19 deficit increased from £3.9bn to £4.2bn – Asset returns impacted by volatile equity markets • Deficit funding
Slide 23: Sale of Homeplus
Sale of Homeplus • Pro-forma expected decrease in Group indebtedness: £4,225m – Cash consideration: £4,004m – Taxes and transaction costs: £(653)m – Capitalised lease and other commitments: £874m • Shareholder and regulatory approval received • Expected completion within approximately one month
Slide 24: Total indebtedness
Total indebtedness PRO FORMA IMPACT OF HOMEPLUS DISPOSAL* £m £21.7bn 107 316 £21.9bn (262) (3,351) £17.7bn (874) 16,000 Opening total Change in net Change in Change in Total Cash proceeds Operating lease Total indebtedess indebtedness debt operating leases pension deficit indebtedness and other afte
Slide 25: Financial summary
Financial summary • Maintained momentum in UK sales performance • Improving like-for-like trends across International • Rebuilding profitability from 2H 14/15 • Significant progress on balance sheet
Slide 26: Priorities
Priorities 1 Regaining competitiveness in our UK business 2 Protecting and strengthening the balance sheet 3 Rebuilding trust and transparency
Slide 27: Q&A
Q&A
Slide 28: Disclaimer
Disclaimer This document may contain forward-looking statements that may or may not prove accurate. 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", "antici