Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (October 2018)
23 slides from Tesco's debt investor presentation, Oct 3, 2018
Slide 1: Debt Investor Call
Debt Investor Call. 3 October 2018 Alan Stewart – CFO Lynda Heywood – Group Treasurer
Slide 2: 1H results
1H results.
Slide 3: Group performance
Group performance +12.8% +24.4% (1.4)% £933m £1,139m £1,123m £28.3bn £750m £25.2bn 1H 17/18 1H 18/19 1H 17/18 1H 18/19 1H 17/18 1H 18/19 Positive sales growth1 Strong profit growth2 Strong retail cash generation3 1. Group sales growth at actual rates on a comparable days and a continuing operations
Slide 4: UK & ROI performance
UK & ROI performance +47.6% +2.6% (4.8)% £685m Food LFL GM LFL +189,500 £464m 1H 17/18 1H 18/19 Tesco Booker Continued focus on food More customers shopping with us1 Improved profitability 1. KantarWorldpanel UK data for the 52 weeks ending 9 September 2018. 4
Slide 5: UK & ROI
UK & ROI Operating profit and margin1 • Booker consolidated from 5 March 2018 • Continued strong LFL sales performance; 2.10% 2.66% 1H +3.8%, 2Q +4.2% • Improved profitability: £685m – 1H margin +56bps YoY £464m – £171m saved through cost savings plan • Closed Tesco Direct in July – 1H 18/19 sales:
Slide 6: UK & ROI - Booker
UK & ROI - Booker LFL 14.3% 15.1% £97m £16m 9.9% 4.2% 3.8% 1.3% 1Q 2Q 3Q 4Q 1Q 2Q 17/18 17/18 17/18 17/18 18/19 18/19 Strong sales Profit contribution Synergies on track (pre-synergies) 6
Slide 7: Central Europe
Central Europe Operating profit and margin1 • Sales impacted by trading laws in Poland 1.90% 1.89% – 13 fewer days impacting CE LFL by (1.2)% – 18 store closures and a further 13 announced £61m £59m • Operating profit £59m – Year-on-year decline reflects £9m property profits last year – £34m saved t
Slide 8: Asia
Asia Operating profit and margin1 • 1Q LFL : (9.0)% 2Q LFL: (4.8)% following annualisation of bulk-selling 5.60% 4.23% • LFL sales in Thailand impacted by: £141m – Significant changes to sales mix and promotional strategy £100m – Government welfare cards c.(2)% LFL – Deflationary effect from price i
Slide 9: Sources and uses of cash
Sources and uses of cash Working capital £110m £1,299m £1,270m £(139)m £1,123m £(29)m £(147)m £(459)m £54m £99m £404m £(274)m £(139)m Retail cash Underlying Timing Retail cash Exceptional Retail Cash capex Net interest Net property Net Market Retail free generated working impact generated from cash
Slide 10: Capital expenditure
Capital expenditure £13m £86m £109m £0.4bn £0.4bn by region by type £233m £251m £89m £35m UK & ROI Central Europe Asia Bank Maintenance/refresh IT/productivity New space/business FY 18/19 capex guidance: no more than £1.2bn FY 19/20 onwards capex guidance: between £1.1bn and £1.4bn 10
Slide 11: Balance sheet progress
Balance sheet progress Net debt Lease commitments Pension deficit £7.3bn £7.2bn £6.9bn £3.3bn £3.1bn £2.6bn £2.7bn £2.4bn £2.1bn 1H 17/18 FY 17/18 1H 18/19 1H 17/18 FY 17/18 1H 18/19 1H 17/18 FY 17/18 1H 18/19 1 2 Booker combination impact Booker combination impact 1. Cash outflow of £0.7bn relating
Slide 12: Improving debt metrics
Improving debt metrics Total indebtedness ratio1 Fixed charge cover2 7.0x 4.0x 6.5x 6.0x 6.0x THRESHOLD > 3.0x 3.0x 2.7x 2.9x 5.5x 5.1x 5.0x 5.0x 2.2x 1.9x 1.9x 4.5x 2.0x 4.0x 3.5x 3.3x 3.2x 1.0x 3.0x THRESHOLD < 3.0x 2.5x 2.0x 0.0x FY 14/15 FY 15/16 FY 16/17 FY 17/18 1H 18/19 FY 14/15 FY 15/16 FY 1
Slide 13: Liability Management
Liability Management • £3.3bn repaid since FY 16/17, £1.4bn at maturity and £1.9bn tendered • Tenders aimed at accelerating gross debt reduction and interest savings • 35% reduction in Finance Costs* since FY 16/17 £m Finance Costs* Interest Total Savings (£m) Size Savings (p.a.) to Maturity** 500 4
Slide 14: Liquidity Position
Liquidity Position • £2.2bn cash and short term investments* • £3bn undrawn committed facilities maturing in 2021 • Well balanced debt maturity profile: WAM 8 years 2.0 Remaining Debt Maturities Early Repayments 1.5 1.0 0.5 0.0 *Cash & cash equivalents less reported overdraft (figure exclude Tesco B
Slide 15: Gross debt position and outstanding bonds by currency
Gross debt position and outstanding bonds by currency £1.3bn GBP MTN £0.4bn 10% £0.6bn 32% USD 144A £8.0bn EUR MTN £6.2bn £5.4bn 48% 10% GBP Secured HY 17/18 FY 17/18 HY 18/19 Gross Debt ex. O/D Overdraft 72% of outstanding debt is hedged back to GBP (remainder is in EUR) Gross Debt = Net Debt + Cas
Slide 16: Credit ratings
Credit ratings Agency Long Term Rating Short Term Rating Outlook S&P BB+ B Stable Fitch BB+ B Stable Moody's Ba1 NP Positive Positive outlook from Moody’s (June 2018) “Positive outlook reflects the improvements in operational performance and credit metrics achieved over recent times and our belief t
Slide 17: Six strategic drivers
Six strategic drivers. 17
Slide 18: Our six strategic drivers – a progress update
Our six strategic drivers – a progress update 1. A differentiated brand • Quality perception up +3.6, stable value perception 2. Reduce operating costs by £1.5bn • Further cost savings of £241m achieved in 1H • Cumulative cost savings of £1.1bn 3. Generate £9bn cash from operations • £7.2bn cumulati
Slide 19: Summary
Summary. • Good start to the year – growth in sales, increased profitability and strong cash flow • Strong financial performance in UK & ROI • Specific challenges in Poland and Thailand • Booker ‘Joining Forces’ synergies on track with £16m in 1H • On track to achieve 2019/20 £1.5bn cost savings tar
Slide 20: Q&A
Q&A. 2 0
Slide 21: Appendix
Appendix A Ae
Slide 22: Guidance
Guidance Operating margin 3.5% to 4.0% Group operating margin by 19/20 Operating costs Reduce operating costs by a further £1.5bn by 19/20 Retail cash generation Generate £9bn of cash from operations by 18/19 Working capital Underlying decrease of around £0.2bn per annum Pension deficit contribution
Slide 23: Disclaimer
Disclaimer. This document may contain forward-looking statements that may or may not prove accurate. Forward-looking statements are statements that are not historical facts; they include statements about Tesco’s beliefs and expectations and the assumptions underlying them. For example, statements re