Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (April 2021)
28 slides from Tesco's debt investor presentation, Apr 14, 2021
Slide 1: Debt Investor Call
Debt Investor Call. 14 April 2021 Alan Stewart, CFO Lynda Heywood, Group Treasurer
Slide 2: Introduction
Introduction. Truly exceptional year – significant impact from COVID-19 Demonstrated the strength and agility of our business Incredible team effort to serve customers in challenging conditions Our focus on customers is building a stronger business for all stakeholders 2
Slide 3: Group performance
Group performance. Retail Full-year Sales1 Profit2 free cash flow3 Dividend +7.1% Retail Bank (29.8)% Level (14.7)% n/m 9.15p 9.15p £53.4bn £1,690m £193m £2,332m £1,187m £49.9bn £1,990m £(175)m 19/20 20/21 19/20 20/21 19/20 20/21 19/20 20/21 19/20 20/21 1. Sales exclude VAT and fuel. Sales change sh
Slide 4: UK & ROI
UK & ROI. UK Food sales growth1 Lockdown Lockdown Lockdown 1 2 3 Strong top-line growth 15% − LFL: +6.8% (H1 +7.2%, H2 +6.5%) Ongoing, sustained benefit of shift from 10% Eat Out to ‘out-of-home’ consumption in food Help Out 5% Major shifts in buying patterns, including strong online growth 0% F M A
Slide 5: Online growth
Online growth. Sales up 77% Significant increase Largest quantum 6.3 in scale growth2 % share of market 3.3 3.4 3.6 £6.3bn growth 3.2 Total online sales1 +£2.8bn Online sales YoY 16/17 17/18 18/19 19/20 20/21 Tesco JS Asda Morrisons Waitrose Ocado 1. Online sales shown inc. VAT. 2. Source: Kantar -
Slide 6: Market outperformance
Market outperformance. Gaining from Switching £m all key gains1 competitors1 Aldi Asda Lidl Mar 2020 Morrisons Feb 2021 Sainsbury's 1. Source: Kantar. Net switching gains from competitors refers to 12 w/e data to 21 February 2021.
Slide 7: Booker
Booker. Strong retail sales Catering performance Additional sales growth correlated to COVID- contribution from Retail 19 restrictions Best Food Logistics sales Catering +18.5% sales £0.7bn (40.8)% M A M J J A S O N D J F Sales M A M J J A S O N D J F
Slide 8: UK & ROI
UK & ROI. Repayment of £(535)m business rates FY 20/21 relief included in operating profit before Operating profit1 £1,866m exceptional items change at actual rates % (13.5)% Operating profit growth significantly impacted by the COVID-19 pandemic: change at constant rates % (13.7)% − £(892)m direct
Slide 9: Central Europe
Central Europe. Year-on-year sales performance1 89% LFL (0.4)%; Food LFL +0.3% 4% Changes to customer shopping behaviour different to UK & ROI: (3)% Hypermarkets Supermarkets Online − Hypermarkets and non-food trading restrictions − Smaller ‘out of home’ market FY 20/21 Trading regulations continue
Slide 10: Asia
Asia. £8.2bn sale completed in December 2020 £5.0bn returned to shareholders in February £2.5bn payment to pension scheme, freeing up c.£260m future annual cashflows Value created through efforts of 50,000 colleagues over two decades
Slide 11: The Tesco Group
The Tesco Group. UK ROI Central Europe Tesco Bank
Slide 12: Sources and uses of cash
Sources and uses of cash. Retail cash Working Retail cash Exceptional Retail Cash Capex Net Interest1 Tax Net Property Net Market Repayments Retail free generated from Capital generated from cash items operating (ex Buybacks) acquisitions, purchases of of cash flow operations inflow operations cash
Slide 13: Retail free cash flow year-on-year
Retail free cash flow year-on-year. FY20 retail Proceeds from Rebased Profit decline More store Higher working Lower cash Other FY21 retail free cash Gain Land FY20 retail buybacks capital inflow exceptionals free cash flow disposal last free cash flow year flow
Slide 14: Total indebtedness
Total indebtedness. 3.1x 3.6x3.6x Total indebtedness £13.0bn, down £1.9bn £14.9bn − Driven by £2.5bn one-off pension £2.6bn £13.0bn £1.0bn contribution Total indebtedness ratio 3.6x from 3.1x last year due to: £9.5bn £8.5bn − COVID-19 impact on retail EBITDA − Increase in underlying IAS19 pension de
Slide 15: Fixed Charge Cover & Debt Mix
Fixed Charge Cover & Debt Mix. 3.1x 2.9x £1,261m £1,239m £213m £234m £1,048m £1,005m FY 19/20 FY 20/21 Lease liability payments Net finance cost 1. Fixed Charge comprises net finance cost excluding net pension finance cost, exceptional items, capitalised interest, fair value remeasurements of financ
Slide 16: Liquidity and debt profile
Liquidity and debt profile. Actions taken in the year: − New issuance of GBP 450m 10-year Bond (2.750%) & EUR 750m 8.5 year Sustainability Linked Bond (0.375%) − Early repayment of £0.5bn of outstanding debt through tender offers − Committed facilities refinanced at £2.5bn for three years including
Slide 17: Integrating sustainability
Integrating sustainability. Sustainability-linked Sustainability-linked Enhanced TCFD committed facility bond Interest linked to: First for a retailer Embedded in strategic business 1 Carbon emissions decision making €750m Coupon of 0.375% New quantitative assessment 2 Renewable energy 8.5 year matu
Slide 18: Sustainability – integral to commercial strategy
Sustainability – integral to commercial strategy. Healthier foods 50bn calories removed since 2018 New commitment to increase sales of healthy1 products to 65% by 2025 Plant-based ranges WWF Now over 350 plant-based meat Long term goal of halving alternatives environmental impact of average shopping
Slide 19: Sustainability - Net zero
Sustainability - Net zero. Leading Packaging: Home delivery Energy efficiency reduction of 4 R’s strategy fleet fully - continuous food waste electric by 2028 improvement
Slide 20: Summary
Summary. Well positioned to build on momentum Expect strong recovery in profit and free cash flow in 2021/22 Significant economic and consumer uncertainties remain We are a highly cash generative business Remain committed to a strong balance sheet Integrated approach to sustainability Imran Nawaz to
Slide 21: Q&A
Q&A.
Slide 22: Appendix
Appendix. 22
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 Moody’s (March 2021) “Tesco’s Baa3 rating reflects the company scale, in particular as the market leader in the UK, with the number one position in the online grocery an
Slide 24: UK COVID-19 costs
UK COVID-19 costs. 1H 2H Full Year 12 weeks pay for vulnerable colleagues incl. £(60)m £(19)m £(79)m pregnancy Colleague absence / backfill / additional colleagues £(153)m £(137)m £(290)m Front line colleague bonuses £(78)m £(95)m £(173)m Safety consumables1 £(35)m £(23)m £(58)m Additional distribut
Slide 25: Segmental performance
Segmental performance. UK & ROI Central Europe Total Retail Tesco Bank Group Sales1 £48,848m £3,862m £52,710m £735m £53,445m change at constant exchange rates % 8.6% (0.6)% 7.9% (31.2)% 7.0% Operating profit2 £1,866m £124m £1,990m £(175)m £1,815m change at constant exchange rates % (13.7)% (29.0)% (
Slide 26: Capital expenditure – FY21
Capital expenditure – FY21. £23m £55m £85m £215m £1.0bn £1.0bn by region by type £777m £875m UK & ROI CE Bank Maintenance/ refresh IT/ productivity New space/ business
Slide 27: Exceptional items – FY21
Exceptional items – FY21. On a continuing operations basis FY 20/21 FY 19/201 Impairment charge on Tesco Bank goodwill £(295)m - Net impairment reversal of non-current assets £156m £64m Acquisition of property joint venture £134m £(136)m UK - ATM business rates £105m - Litigation costs £(93)m - Prop
Slide 28: Disclaimer
Disclaimer. Certain statements made in this document are forward-looking statements. 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", “should”, "anticipate"