Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (October 2019)
23 slides from Tesco's debt investor presentation, Oct 2, 2019
Slide 1: Debt Investor Call
Debt Investor Call. 2 Oct 2019 Alan Stewart – CFO Lynda Heywood – Group Treasurer
Slide 2: Operating profit
Operating profit1 £1,085m £63m £171m £87m +28.4% +1.3%2 +54.1% (3.3)% CE £(x)m UK & ROI CE Asia Tesco Bank Group operating profit1 £1,406m, up 25.4% 1. Operating profit before exceptional items and amortisation of acquired intangibles; change shown at actual exchange rates. 2. Growth is shown exclud
Slide 3: Group income statement
Group income statement 1H 19/20 % change1 Group sales £28,296m 0.1% 4.51% Operating profit2 £1,406m 25.4% 3.73% post-IFRS 16, incl. Booker pre-IFRS 16, Margin (%) 4.41% 87bps excl. Booker 4.61% 4.41% JVs and associates2 £10m (44.4)% 3.79% Net finance costs3 £(377)m 13.1% 3.67% Profit before tax3 £1,
Slide 4: Sources and uses of cash
Sources and uses of cash Net working capital inflow £114m £210m £2,237m £2,123m £2,121m £(96)m £(116)m £(389)m £12m £(529)m £(24)m £(52)m £814m £(325)m Retail cash Timing impacts Underlying Retail cash Exceptional Retail Cash capex Net interest & Net property Net Market Repayments Retail free cash g
Slide 5: Year-on-year free cash flow
Year-on-year free cash flow £70m £87m £126m £31m £814m £(38)m £(43)m £(123)m £307m +105% +£417m £397m 1H 18/19 retail Increased profit Working capital Lower capex Lower net Lower interest Lower market Increased Other (inc. 1H 19/20 retail free cash flow inflow property and tax share purchases repaym
Slide 6: Capital expenditure
Capital expenditure £19m £25m £42m £91m £35m £0.4bn £0.4bn by region by type £256m £276m UK & ROI Central Europe Asia Bank Maintenance/refresh IT/productivity New space/business FY 19/20 capex guidance of c.£1.1bn
Slide 7: Property proceeds
Property proceeds 1H: £8m 50 site 1H: £65m disposals of c.£145m agreed1 Realising value Group cash proceeds CE store disposals 1. Aggregate proceeds due to be received in the second half of this financial year and beyond.
Slide 8: Balance sheet progress
Balance sheet progress Total indebtedness1 £15.8bn £15.5bn £14.7bn £2.1bn £2.3bn £2.1bn £10.7bn £0.9bn £10.5bn £10.3bn since year end £3.0bn £2.7bn £2.3bn 1H 18/19 FY 18/19 1H 19/20 Underlying net debt Lease liabilities Pension deficit 1. Total indebtedness post-IFRS 16 comprises Net debt (inc. leas
Slide 9: Debt Capital Markets Activity
Debt Capital Markets Activity • Reduced interest cost • Reduced gross debt via bond tenders and repayments • Re-entered Sterling Bond Market in May-19 with £0.4bn new issue • Well balanced debt maturity profile: WAM 8 years 1.0 0.9 5.000% Remaining Debt Maturities Repayments New Issue 0.8 1.375% 2.5
Slide 10: Improving debt metrics
Improving debt metrics Total indebtedness ratio1 Fixed Charge Cover2 7.0x 3.5x 6.5x THRESHOLD > 3.0x 6.0x 3.0x 5.5x 5.0x 2.5x 4.5x 4.0x 2.0x 3.5x 3.0x 1.5x TARGET RANGE 3.0x to 2.5x 2.5x 2.0x 1.0x FY FY FY FY FY HY FY FY FY FY FY HY 14/15 15/16 16/17 17/18 18/19 19/20 14/15 15/16 16/17 17/18 18/19 1
Slide 11: Liquidity Position and Debt Mix
Liquidity Position and Debt Mix • Strong liquidity GBP MTN - £1.7bn cash and short term investments1 10% - £3.0bn in committed facilities 11% EUR MTN 37% • Proven access to Capital Markets USD 144A - £15bn EMTN programme - €0.75bn Issuance Oct-18 GBP Secured 42% - £0.4bn Issuance May-19 80% of outst
Slide 12: Credit ratings
Credit ratings Agency Long Term Rating Short Term Rating Outlook Fitch BBB- F3 Stable Moody's Baa3 P-3 Stable S&P BB+ B Positive Investment grade rating from Moody’s (June 2019) “Following changes to Management and a renewed strategic focus on competitiveness, Tesco’s operating metrics and profitabi
Slide 13: Financial summary
Financial summary • More profitable sales mix • £290m cost savings in 1H; £1.6bn savings to date • Margin ambition achieved; 12-month margin 3.73% (pre-IFRS 16, excl. Booker) • Operating profit1 +£285m; driven by cost savings and an improved product mix • Free cash flow +£417m; +105% • Return to GBP
Slide 14: Well-positioned for sustainable, profitable growth
Well-positioned for sustainable, profitable growth Group operating profit1 Growth. Enabling Innovation technology 1H 1H 1H 1H 1H 15/16 16/17 17/18 18/19 19/20 June 2019 Strong financial position Opportunities set out Focus on delivery 1. Excludes amortisation of acquired intangibles and excludes exc
Slide 15: Innovation: product
Innovation: product F&F sustainable Whole fabrics crop utilisation Fox & Ivy Go Cook
Slide 16: Enabling technology: cost efficiency
Enabling technology: cost efficiency +6.7% c.£40m +18% Fresh sales forecast accuracy saving transactions New algorithms Stock control Pay+
Slide 17: Sustainable value creation for shareholders
Sustainable value creation for shareholders £2.3bn Cash profitability1 3.5% to 4.0% +8 pts2 Customer £9bn £1.5bn 49.8% satisfaction £814m EPS Free cash growth flow Medium-term ambitions Underlying philosophy 1. Cash profitability refers to 1H 2019/20 EBITDA. 2. UK Multichannel tracker. Based on your
Slide 18: Our priorities for allocating capital
Our priorities for allocating capital 1 Reinvest in business & customer offer 2 Maintain leverage at 3x to 2.5x Total indebtedness/EBITDAR1 3 Grow and then maintain dividend at 50% pay-out ratio1 4 Consideration of inorganic growth opportunities that may arise 5 Return surplus cash to shareholders 1
Slide 19: Summary
Summary • Delivered every element of turnaround plan • Celebrating 100 years of great value with customers • Customer satisfaction improving across all measures and channels • Strong increase in profitability • Significant improvement in cash generation • Positioned well for profitable growth in yea
Slide 20: TESCO
TESCO
Slide 21: Guidance
Guidance Working capital Underlying decrease of around £0.2bn Pension deficit contribution £285m per annum from April 2018 Capex £1.1bn - £1.4bn per annum; current year c.£1.1bn Net finance costs1 Less than 4% of long-term debt per annum Effective tax rate Decreasing to c.20% over medium term; curre
Slide 22: Exceptional items
Exceptional items 1H 19/20 1H 18/19 Net restructuring and redundancy costs £(75)m £(22)m Impairment of assets in Poland £(71)m - Impairment of investment in India joint venture £(47)m - Property transactions £24m £13m Booker integration costs £(6)m - Provision for customer redress £(45)m £(7)m Bank
Slide 23: 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", “should