Alimentation Couche-tard Inc. · TSX:ATD
Alimentation Couche-tard — Investor Presentation (November 2017)
69 slides from Alimentation Couche-tard's investor presentation, November 2017
Slide 1: Investors Presentation
ALIMENTATION COUCHE-TARD INC. INVESTORS PRESENTATION November 2017
Slide 2: Forward-Looking Information and Cautionary Language
FORWARD-LOOKING INFORMATION AND CAUTIONARY LANGUAGE This presentation and the accompanying oral presentation contain forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “projected”, “estimate”, “may”
Slide 3: Agenda
AGENDA 1. Company Highlights 2. Ambitions & Strategy 3. Value Creation & Financial Review 4. Recent acquisitions summary 3
Slide 4: Key Data
KEY DATA • Listed on the Toronto Stock Exchange ATD.B • Market Cap1 Approx. CA$36B • Revenue US$37.9B Fiscal Year 20172 US$22.0B Q2 2018 YTD2 (+30,4%) • Gross Profit US$6.5B Fiscal Year 20172 US$3.8B Q2 2018 YTD2 (+23.3%) • EBITDA US$2.4B Fiscal Year 20172 US$1.5B Q2 2018 YTD2 (+24.8%) • Number of s
Slide 5: Company Highlights
ALIMENTATION COUCHE-TARD INC. COMPANY HIGHLIGHTS
Slide 6: Who We Are
WHO WE ARE Couche-Tard is a Canada based group and a world leader in the convenience store and road transportation fuel retail sector • In North America, Couche-Tard is the largest independent convenience store operator in terms of number of company-operated stores. • In Europe, Couche-Tard is a lea
Slide 7: A Disciplined Convenience Store Operator and Integrator
A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR • World class retailer and leading C-store operator with geographically diverse footprint Broad Geographic Footprint with • Strong banners, with our new global convenience brand “Circle KTM” and our fuel banner Leading Market Positions “Ingo” a
Slide 8: North American Network
Largest independent convenience store operator in the US in terms of number of NORTH AMERICAN NETWORK company operated stores • In the US, the convenience sector is fragmented and in a consolidation phase • Couche-Tard acquired The Pantry in March 2015, one of the largest independently operated conv
Slide 9: European Network
EUROPEAN NETWORK Leader in convenience store and road transportation fuel retail in the Scandinavian and Baltic countries and Ireland • The European convenience store sector is often dominated by a few major players, including integrated oil companies. Some of these are in the process of selling, or
Slide 10: International Presence
INTERNATIONAL PRESENCE Central / South Asia America China United Arab 80 Emirates Saudi 32 Arabia 2 • Convenience stores operated by independent Mexico Hong Kong operators under the 558 332 Circle K brand Egypt Philippines • License agreement to 8 22 use the brand name Macau Circle K Honduras 31 Gua
Slide 11: Consolidated Network Recap
CONSOLIDATED NETWORK RECAP Canada U.S. Europe Total COCO(1) 1,598 5,754 1,975 9,327 CODO(2) 251 131 355 737 DODO(3) - 625 420 1,045 Franchise/Affiliated(4) 377 729 - 1,106 Number of sites, end of period 2,226 7,239 2,750 12,215 CAPL network - - - 1,206 Circle K branded sites under licensing agreemen
Slide 12: Couche-Tard Is a World Leader
COUCHE-TARD IS A WORLD LEADER Couche-Tard is a leading global convenience store operator with EBITDA of $2.7 billion • Well diversified across geographies • Focus on growing high margin categories REVENUES Merchandises and services Motor Fuel Other Total $11,531M $29,830M $1,154M $42,514M Europe US
Slide 13: A History of Strong Financial Performance
A HISTORY OF STRONG FINANCIAL PERFORMANCE Gross Profit Same Store Sales Growth 2012 2013 2014 2015 2016 2017 (in millions of US Dollars) Merchandise sales +17% CAG US 2.7% 1.0% 3.8% 3.9% 4.6% 2.0% 6,082 6,482 Europe 1.6% 2.0% 2.8% 3.5% 4,988 5,268 Canada 2.8% 2.0% 1.9% 3.4% 2.9% 0.1% 4,610 Motor Fue
Slide 14: Stellar Stock Performance
STELLAR STOCK PERFORMANCE 800% 800% 700% 700% 600% 600% 500% 500% 400% 400% 300% 300% 200% 200% 100% 100% 0% 0% 4/26/2011 4/26/2012 4/26/2013 4/26/2014 4/26/2015 4/26/2016 4/26/2017 4/26/2011 4/26/2012 4/26/2013 4/26/2014 4/26/2015 4/26/2016 4/26/2017 Couche-Tard C-Stores Couche-Tard Casey's Grocery
Slide 15: Ambitions & Strategy
ALIMENTATION COUCHE-TARD INC. AMBITIONS & STRATEGY
Slide 16: Our Vision
OUR VISION TO BECOME THE WORLD’S PREFERRED DESTINATION FOR CONVENIENCE AND FUEL 16
Slide 17: Our Global Brand
OUR GLOBAL BRAND 17
Slide 18: Rebranding Status
REBRANDING STATUS Project well under way: Close to 2,000 stores(1) in North America and close to 1,400 stores(1) in Europe are now proudly displaying our new global convenience brand Circle K • Scandinavia and Baltics markets already completed – Outstanding success • Poland and Canada are now underw
Slide 19: The Promise Behind the Brand
THE PROMISE BEHIND THE BRAND 19
Slide 20: Super Global Super Local
NEW GLOBAL BRAND – SAME APPROACH TO SERVING OUR CUSTOMERS SUPER GLOBAL SUPER LOCAL 20
Slide 21: Working on Two Clock Speed
WORKING ON TWO CLOCK SPEED KEY FOCUS AREAS STRATEGIC INITIATIVES Famous For Categories Digital Private Label Products M&A Roadmap People Lean and Efficient Convenience Offer of the Operations Future 21
Slide 22: Adding Expertise, Talent and Leadership to Accelerate Our Strategy
ADDING EXPERTISE, TALENT AND LEADERSHIP TO ACCELERATE OUR STRATEGY New Chief New Chief New Chief Information Human Marketing Officer Officer Resource Officer Position Position Position Creation of a Creation of a Global Global Fuel Categories Group Group 22
Slide 23: Time & Convenience
OUR TWO STRONGEST PRODUCT CATEGORIES TIME & CONVENIENCE 23
Slide 24: Time & Convenience
TIME & CONVENIENCE Shoppers recognize the c-store channel of trade for its convenient locations, extended hours of operations, one-stop shopping, grab- and-go foodservice, variety of merchandise and fast transactions Industry offers speed of service to time-starved consumers who want to get in and o
Slide 25: US C-Store Industry Facts
US C-STORE INDUSTRY FACTS Convenience stores have an unmatched speed of transaction: The average time it takes a customer to walk in, purchase an item and depart is between 3 to 4 minutes Convenience stores are everywhere. There are 155 thousand convenience stores in the United States—or one store f
Slide 26: Making It Easy: Brand Pillars Supporting Our Promise
MAKING IT EASY BRAND PILLARS SUPPORTING OUR PROMISE 26
Slide 27: Brand Pillars – Products for People on the Go
BRAND PILLARS – PRODUCTS FOR PEOPLE ON THE GO Hot Cold Private Food Dispensed Dispensed Car Wash Fuel Label Beverages Beverages 27
Slide 28: Brand Pillars – Easy Visits
BRAND PILLARS – EASY VISTS Predictable in-store and forecourt experience Clean In-stock Fast transaction #2 reason impacting Out-of-stock is #1 reason 88% of US adults want shoppers’ decision of for missed sale in their store checkout which c-store to visit (after c-stores experience to be faster lo
Slide 29: Brand Pillars – Fast & Friendly Service
BRAND PILLARS – FAST & FRIENDLY SERVICE Recruitment Employee Employee Service Physical & Hiring Training engagement turnover standards appearance 29
Slide 30: Location: Store Construction and Relocation
We completed the LOCATION construction, relocation or reconstruction of 91 stores during fiscal 2017 and 44 since the beginning of fiscal 2018. 30
Slide 31: Strategic Initiatives - Preparing for the Road Ahead
STRATEGIC INIATIVES - PREPARING FOR THE ROAD AHEAD 31
Slide 32: Digital Transformation
DIGITAL TRANSFORMATION 32
Slide 33: Digital – Control Our Destiny and Create Our Future
DIGITAL – CONTROL OUR DESTINY AND CREATE OUR FUTURE Employee Experience Customer Experience & & Value Proposition Brand Promise Fuel Construction Operations Network, Procurement Warehousing Logistics & & Format & Sales & maintenance HSE Concept Service Convenience Backbone Stem Front-end Make it eas
Slide 34: Our Views on Digital
OUR VIEWS ON DIGITAL It is not a temporary thing … it is part of every aspect of how we do business It is not a one-time program … it is a shift of mindset and way of working It is not just IT or Marketing … it is orchestration across the entire arrow 34
Slide 35: Broad Portfolio of Digitalization Opportunities
BROAD PORTFOLIO OF DIGITALIZATION OPPORTUNITIES Mobile Car Loyalty Social Medias Site Presence Payments Connectivity Insights and Employees Personalized Data Analytics Merchandizing Communication Supply Chain Promotions Strategy Tools POS Artificial Robotics Reporting Transformation Intelligence Our
Slide 36: Mobility Is Changing – Bringing Significant Opportunities
MOBILITY IS CHANGING – BRINGING SIGNIFICANT OPPORTUNITIES 36
Slide 37: Transportation Vehicles - Useful Facts
TRANSPORTATION VEHICLES - USEFUL FACTS Global vehicle fleet is Worldwide electric vehicle 2016 Worldwide electric Average lifecycle of more than 1.2 billion fleet is approximately 2 vehicle sales % total: vehicles is 16-19 years vehicles and is expected million vehicles or 0.2% of 1.10% to reach 2 b
Slide 38: Couche-Tard's View
COUCHE-TARD’S VIEW Gradual and manageable change process Continuous Industry’s monitoring reaction Opportunity Continued ACT’s focus on competitive business advantages 38
Slide 39: A Gradual and Manageable Change Process
A GRADUAL AND MANAGEABLE CHANGE PROCESS Global mobility trends will change how we think about cars and demand for fuel is going to decline but Couche-Tard believes that this change is going to happen gradually because In order for substantial electric vehicle penetration: •Cost of electric vehicles
Slide 40: Possible Offsets to Declining Fuel Demand
POSSIBLE OFFSETS TO DECLINING FUEL DEMAND Possible decline in number of stations and fuel volume consolidation. Out of 155k convenience stores in the US, 60% are operated by single store operators Increased fuel margins Higher share of premium fuels (higher margins) Expansion of current convenience
Slide 41: ACT's Competitive Advantages
ACT’S COMPETITIVE ADVANTAGES Experience in Scale & Buying Decentralized transforming and Power model adapting Proven capacity Strong balance Norway to transform and sheet and Laboratory Innovate capacity to invest 41
Slide 42: Couche-Tard's Continued Focus on Optimizing Business
COUCHE-TARD’S CONTINUED FOCUS ON OPTIMIZING BUSINESS Continued commitment towards growing and improving our current fuel business • Continued improvement of offer and adaptation to changing customers needs • Excellence in execution and capacity to innovate • Continued adaptation of our fuel branding
Slide 43: Continuous Monitoring
CONTINOUS MONITORING Although we believe that changing global mobility trends are going to happen gradually and that US fuel demand is going to continue to increase or be stable for another 5-10 years, we are committed to proactively monitor the change in trends and to work towards adapting our busi
Slide 44: Value Creation and Financial Review
ALIMENTATION COUCHE-TARD INC. VALUE CREATION AND FINANCIAL REVIEW
Slide 45: Our Four Pillars of Value Creation – The Equation
OUR FOUR PILLARS OF VALUE CREATION – THE EQUATION Protect Value & Enable Value Drivers Growth Capital Organic Cost Structure & Value Acquisitions Growth Discipline Financial Creation Discipline 45
Slide 46: Organic Growth
ORGANIC GROWTH Customer Focus Key Digital Categories Network Innovation Development Organic Growth Branding Execution Continuous Private Label Improvement 46
Slide 47: Organic – Fiscal 2017 Top-Line Growth
ORGANIC – FISCAL 2017 TOP-LINE GROWTH Europe SSS +3.5% Canada Europe SSV SSV +1.0% (-0.3)% Organic Growth Canada US SSS SSS +0.1% +2.0% US SSS: Same-store merchandise sales SSV +2.6% SSV: Same-store volume 47
Slide 48: Organic – Sustainable Top-Line Growth
ORGANIC – SUSTAINABLE TOP-LINE GROWTH Merchandise & Service Sales Road Transportation Fuel Volume (millions of US dollars) (millions of gallons) +10% CAG +21% CAG 11,793 10,072 10,724 10,502 7,953 8,276 7,626 8,135 7,596 6,945 6,599 4,613 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 S
Slide 49: Organic Growth – Leading to Strong Margins in All Geographies
ORGANIC GROWTH – LEADING TO STRONG MARGINS IN ALL GEOGRAPHIES Europe 42.4% Organic Growth United Canada States 33.8% 33.2% FISCAL 2017 MERCHANDISE & SERVICE MARGIN 49
Slide 50: No Clear Correlation Between Fuel Prices & Margins
NO CLEAR CORRELATION BETWEEN FUEL PRICES & MARGINS U.S Market(1) 3.54 3.51 3.41 • No clear correlation between fuel selling 2.89 2.20 price and margins 2.18 2.28 18.77 21.74 • Our margins are not directly impacted by 16.99 18.11 20.06 20.15 18.56 lower fuel selling prices • Lower fuel prices leave c
Slide 51: US Fuel Margins Trends
US FUEL MARGINS TRENDS Year-over-year volatility – Long term trend is up ACT Historical US Fuel Margins (CPG) US Industry Historical Fuel Margins (CPG) 24.00 22.00 +1.9 CAG 24.00 22.00 20.00 20.00 18.00 18.00 16.00 16.00 14.00 14.00 12.00 12.00 10.00 10.00 2006 2007 2008 2009 2010 2011 2012 2013 201
Slide 52: Acquisitions
ACQUISITIONS Identify the right opportunities Strike the right Deleveraging deal at the right price Acquisitions Realization of Swift and available efficient synergies integration 52
Slide 53: Proven Track Record of Successful Acquisitions
PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS Acquisitions Garvin oil Revenue ($) Compac Food Stores Winners Sterling Stores Pump N Shop 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Debt/ Adjusted 2.2 0.8 0.4 1.5 1.3 1.0 0.8 0.3 0.4 2.0 (2) 1.3 1.2 (3) 1.0 (3) 1.1
Slide 54: Exceptional Deleveraging Track Record
EXCEPTIONAL DELEVERAGING TRACK RECORD Acquisitions ACT is committed to maintaining a strong balance sheet and sustaining its investment grade credit rating The Pantry, Topaz and IOL stores Circle K Acquisition No Transformational Acquisition SFR Acquisition Acquisitions 2,453 Stores Acquired 1,017 S
Slide 55: Delivering on Synergies Through Our Acquisitions
DELIVERING ON SYNERGIES THROUGH OUR ACQUISITIONS Acquisitions Synergies Statoil Fuel and Retail • Target: $150M - $200M • Realized: >$200M Synergies CST Brands, Inc • Initial target for the first 36 months: $150M –$200M Synergies The Pantry • Target for the first 24 months: $125M • Realized: >$125M
Slide 56: Cost Control – Part of Our DNA
COST CONTROL – PART OF OUR DNA Disciplined Culture Year-over-year expense Optimization growth of Shared Services Continuous Benchmarking Strategy 1.9% 1.5% 0.8% Cost Sharing of AI, Robotics Best Practices Control 0.2% 0.2% 2012 2013 2014 2015 2016 2017 (1) Scalable Organization, Cost Efficient Syste
Slide 57: Capital Structure & Financial Discipline
CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Competitive cost of debt Rapid delevera- Well spread ging after maturities acquisitions Capital Structure & Financial Access to Disposal of Discipline liquidities – non-core Cash and assets credit facilities Careful Dividend allocation of growth capital 57
Slide 58: Strong Capital Structure & Financial Discipline
STRONG CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Free Cash Flow Adjusted (in million dollars US) Leverage Ratio 2.88:1 Average Cost Investment +17 % CAG of Debt Grade Credit 1,145 3.2 % Profile 979 1,065 865 890 614 Capital Structure & $2.5 Billion 404 Financial and Free Cash Discipline Flow CA $700M
Slide 59: Strong and Scalable Free Cash Flow Conversion
STRONG AND SCALABLE FREE CASH FLOW CONVERSION 81 1,065 890 Capital Structure & Financial 95 Discipline 979 865 102 85 614 2,396 360 2,331 351 1,876 63 145 77 1,640 79 279 104 404 1,376 7 172 172 87 56 65 899 841 50 807 91 457 459 563 289 2012 2013 2014 2015⁽¹⁾ 2016⁽²⁾ 2017 EBITDA Business disposals
Slide 60: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Capital CAPITAL EXPENDITURES ALLOCATION Structure & Financial Discipline 27% 23% Income 39% 40% Income producing producing 73% 78% 34% 38% 2016 2017 Development Commercial Programs Maintenance Continuous improvement in capital allocation efficiency
Slide 61: Result of Value Creation: Adjusted Diluted EPS and ROE Growth
RESULT OF THE VALUE CREATION EQUATION : ADJUSTED DILUTED NET EARNINGS PER SHARE AND RETURN ON EQUITY GROWTH Adjusted Diluted Net Return on Equity Earnings per Share Value (USD) Creation +22% CAG 2.21 2.08 27.0% 1.79 24.9% 22.0% 21.5% 22.6% 22.5% 1.35 1.11 0.81 2012 2013 2014 2015 2016 2017 2012 2013
Slide 62: Result of Value Creation: Dividend Growth
RESULT OF THE VALUE CREATION EQUATION : DIVIDEND GROWTH Dividends Paid – US Millions Value 160 145 Creation +24 % CAG 104 87 65 50 56 Dividend vs Free cash flow 2012 2013 2014 2015 2016 2017 2018 Q2 LTM FCF +17 % CAG1 1,145 1,065 979 865 890 Quarterly dividend increased twice during fiscal 2016, fro
Slide 63: Result of Value Creation: Stock Value Growth
RESULT OF THE VALUE CREATION EQUATION : STOCK VALUE GROWTH 5-Year Stock Performance Value 45.0% Creation 35.0% 25.0% 15.0% 5.0% -5.0% 11/16/2012 11/16/2013 11/16/2014 11/16/2015 11/16/2016 11/16/2017 Variance ACT stock price (%) Variance TSX index (%) Source: Bloomberg. As of November 16, 2017. 63
Slide 64: Acquisitions Completed During FY18
ALIMENTATION COUCHE-TARD INC. ACQUISITIONS COMPLETED DURING FY18 Value Creation
Slide 65: CST Transaction Summary & Overview
CST TRANSACTION SUMMARY & OVERVIEW Transaction Summary • Acquired 100% of the outstanding shares of CST Brands Inc. (“CST”), representing a total enterprise value of US $4.4 billion or approximately US, $4.2 billion excluding the value of CST’s equity participation in CrossAmerica Partners LP (“CAPL
Slide 66: Highlights of the Transaction
HIGHLIGHTS OF THE TRANSACTION Strategic Significant Acquisition Synergies Importance Rationale Potential • Unique opportunity to acquire • Operating model alignment • Top-line upside one of few remaining potential North American public targets • Strong geographic • Sharing of business awareness exce
Slide 67: Pro Forma Profile for CST - Financial
PRO FORMA PROFILE FOR CST - FINANCIAL (1) (2) At Closing Pre-synergies EBITDA Contribution (billions of US Dollars) Pro Forma Revenues 37.9 8.2 46.1 % of total 82% 18% 100% GP 6.5 1.2 7.6 22% % of total 85% 15% 100% 78% EBITDA(3) 2.4 0.7 3.1 Store network 12,664 1,263 13,927 Debt 7.6 DEBT/EBITDA 2.4
Slide 68: Holiday Stationstores Acquisition
• On July 10, 2017, Alimentation Couche-Tard Inc. announced that it had signed an agreement with Holiday Companies to acquire all of the issued and outstanding shares of Holiday Stationstores, Inc. and certain affiliated companies (“Holiday”), an important convenience store player in the Upper Midwe
Slide 69: Optimistically Transforming Our Future
A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR Broad Geographic Track Record of Footprint with Superior Product Highly Disciplined Leading Market Offerings Growth and Debt Positions Reduction Attractive Sector Powerful Financial Attractive Synergy Dynamics Results Potential Disciplined Prov
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