Alimentation Couche-tard Inc. · TSX:ATD
Alimentation Couche-tard — Investor Presentation (July 2018)
67 slides from Alimentation Couche-tard's investor presentation, July 2018
Slide 1: Investor Presentation
ALIMENTATION COUCHE-TARD INC. INVESTOR PRESENTATION July 2018
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 (1) 2. Ambitions & Strategy 3. Value Creation & Financial Review (1) 4. Recent acquisitions summary (1) All data presented is excluding CAPL unless specifically mentioned. 3
Slide 4: Key Data
KEY DATA • Listed on the Toronto Stock Exchange ATD.B • Market Cap1 Approx. CA$33B • Revenue US$50.0B Fiscal Year 2018 • Gross Profit US$8.0B Fiscal Year 2018 • EBITDA US$2.9B Fiscal Year 2018 • Number of stores2 16,108 North America 10,015 Europe 2,725 CAPL network 1,346 Circle K branded si
Slide 5: Company Highlights
ALIMENTATION COUCHE-TARD INC. COMPANY HIGHLIGHTS
Slide 6: Our Company Timeline
OUR COMPANY TIMELINE Acquisition of the assets Acquisition of The Pantry Inc., a of Johnson Oil Company, leading convenience store operator Inc., owner of 225 Bigfoot in the southeastern United States. stores, all located in the Global Circle K brand is launched U.S. Midwest Acquisition of 278 Esso-
Slide 7: Who We Are
WHO WE ARE Couche-Tard is a canadian 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 l
Slide 8: 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 Leading Market • Strong banners, with our new global convenience brand “Circle KTM” and our fuel banner “Ingo” at unmanned
Slide 9: North American Network
NORTH AMERICAN NETWORK Largest independent convenience store operator in the US in terms of number of company operated stores • In the US, the convenience sector is fragmented and in a consolidation phase • On June 28, 2017, Couche-Tard acquired 100% of the outstanding shares of CST Brands, the 4th
Slide 10: 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 11: International Presence
INTERNATIONAL PRESENCE Central / South Asia America China United Arab 80 Emirates Saudi 33 Arabia 4 • Convenience stores operated by independent Mexico Hong Kong operators under the 715 333 Circle K brand Egypt Philippines • License agreement to 12 25 use the brand name Macau Circle K Honduras 29 Gu
Slide 12: Consolidated Network Recap
CONSOLIDATED NETWORK RECAP Canada U.S. Europe Total COCO(1) 1,587 6,133 1,998 9,718 CODO(2) 250 138 334 722 DODO(3) - 659 392 1,051 Franchise/Affiliated(4) 370 878 1 1,249 Number of sites, end of period 2,207 7,808 2,725 12,740 CAPL network - - - 1,346 Circle K branded sites under licensing agreemen
Slide 13: Couche-Tard Is a World Leader
COUCHE-TARD IS A WORLD LEADER Couche-Tard is a leading global convenience store operator with EBITDA of $3.0 billion • Well diversified across geographies • Focus on growing high margin categories REVENUES Merchandises and services Motor Fuel Other Total $12,899M $35,831M $1,270M $50,001M Europe US
Slide 14: A History of Strong Financial Performance
A HISTORY OF STRONG FINANCIAL PERFORMANCE Gross Profit Same Store Sales Growth 2013 2014 2015 2016 2017 2018 (in millions of US Dollars) Merchandise sales +11% CAG 7,992 US 1.0% 3.8% 3.9% 4.6% 1.6% 0.8% Europe 1.6% 2.0% 2.8% 2.7% 2.7% 6,482 6,082 5,268 Canada 2.0% 1.9% 3.4% 2.9% -0.9% 0.4% 4,988 4,6
Slide 15: Stellar Stock Performance
STELLAR STOCK PERFORMANCE 800% 800% 700% 700% 600% 600% 500% 500% 400% 400% 300% 300% 200% 200% 100% 100% 0% 0% 2013-06-12 2014-06-12 2015-06-12 2016-06-12 2017-06-12 2018-06-12 2013-06-12 2014-06-12 2015-06-12 2016-06-12 2017-06-12 2018-06-12 Couche-Tard C-Stores Grocery Couche-Tard Casey's Delek H
Slide 16: Ambitions & Strategy
ALIMENTATION COUCHE-TARD INC. AMBITIONS & STRATEGY
Slide 17: Our Vision
OUR VISION TO BECOME THE WORLD’S PREFERRED DESTINATION FOR CONVENIENCE AND FUEL 17
Slide 18: Our Global Brand: Circle K
OUR GLOBAL BRAND: CIRCLE K
Slide 19: Rebranding Status
REBRANDING STATUS Project well under way: More than 3,350 stores(1) in North America and more than 1,650 stores(1) in Europe are now proudly displaying our new global convenience brand Circle K • Statoil sites completed • Scandinavia and Baltics markets already completed – Outstanding success • Cana
Slide 20: The Promise Behind the Brand
THE PROMISE BEHIND THE BRAND 20
Slide 21: Super Global, Super Local
NEW GLOBAL BRAND – SAME APPROACH TO SERVING OUR CUSTOMERS SUPER GLOBAL SUPER LOCAL 21
Slide 22: Strategic Vision & Priorities: Working at Two-Clock Speed
STRATEGIC VISION & PRIORITIES: WORKING AT TWO-CLOCK SPEED FOCUSING ON TO LOOKING THE THE CORE FUTURE BUSINESS To enhance company value, we are focusing on: • Key Categories of FoodToandremain Fuel a growth company for • Growing Customer basethe shareholders we must find the recipe for the future • L
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 Cold Hot Dispensed Food Dispensed Car Wash Private Label Fuel Beverages Beverages 27
Slide 28: Brand Pillars – Easy Visits
BRAND PILLARS – EASY VISITS Predictable in-store and forecourt experience Clean In-stock Fast transaction #2 reason impacting shoppers’ Out-of-stock is #1 reason for 88% of US adults want their store decision of which c-store to visit missed sale in checkout experience to be faster (after location)
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 88 stores during fiscal 2018. 30
Slide 31: Strategic Initiatives - Preparing for the Road Ahead
STRATEGIC INIATIVES - PREPARING FOR THE ROAD AHEAD 31
Slide 32: An Open Door on New Technologies
AN OPEN DOOR ON NEW TECHNOLOGIES
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: Our Next Gen Retail Tech Is All About Making It Easy
OUR NEXT GEN RETAIL TECH IS ALL ABOUT MAKING IT EASY Easy access to Easy visits Easy tools customer insight Cloud enabled Mobile Hardware independent Internet of forecourt payments software Things App payment at In-store app Centralized Location based forecourt payment management marketing
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 more Worldwide electric vehicle 2016 Worldwide electric Average lifecycle of than 1.2 billion vehicles and fleet is approximately vehicle sales % total: vehicles is 16-19 years is expected to reach 2 million vehicles or 0.2% 1.10% 2 bill
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 Power model and adapting Strong balance Proven capacity Norway sheet and to transform and Laboratory capacity to Innovate 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 Value Drivers Protect Value & Enable Growth Capital Organic Cost Structure & Value Acquisitions Growth Discipline Financial Creation Discipline 45
Slide 46: Organic Growth
ORGANIC GROWTH Customer Focus Digital Key Categories Network Innovation Development Organic Growth Branding Execution Continuous Private Label Improvement 46
Slide 47: Organic – Fiscal 2018 Top-Line Growth
ORGANIC – FISCAL 2018 TOP-LINE GROWTH Europe SSS +2,7% Canada SSV Europe SSV (-1.4)% 0.0% Organic Growth Canada SSS US SSS +0.4% +0.8% US SSV (-0.4)% SSS: Same-store merchandise sales 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) 12,899 14,525 +11% CAG +15% CAG 10,724 10,072 11,793 8,276 10,502 7,596 7,953 7,626 8,135 6945 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Slide 49: Organic Growth – Leading to Strong Margins in All Geographies
ORGANIC GROWTH – LEADING TO STRONG MARGINS IN ALL GEOGRAPHIES Europe 44.0% Organic Growth United Canada States 34.4% 33.6% FISCAL 2018 MERCHANDISE & SERVICE MARGIN 49
Slide 50: No Clear Correlation Between Fuel Prices & Margins
NO CLEAR CORRELATION BETWEEN FUEL PRICES & MARGINS U.S Market 16.99 18.77 18.11 21.74 • No clear correlation between fuel selling 20.15 18.56 19.39 price and margins • Our margins are not directly impacted by lower fuel selling prices 3.54 3.51 3.41 2.89 2.20 2.18 2.37 • Lower fuel prices leave cust
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 24.00 22.00 22.00 +1.9 CAG 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 Roadmap
ACQUISITIONS ROADMAP Strike the Identify the Secure Swift and Realization of Reverse right deal at right acquired efficient available synergies and Deleverage the right opportunities talent integration synergies learnings price
Slide 53: Proven Track Record of Successful Acquisitions
PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS Acquisitions Garvin oil Compac Revenue ($) Food Stores Winners Sterling Stores Pump N Shop 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Leverage ratio(1) 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 Topaz, IOL, CST, Cracker Barrel, Circle K Acquisition No Transformational Acquisition SFR and The Pantry Acquisition Holiday and Jep Pep stores
Slide 55: Delivering on Synergies Through Our Acquisitions
DELIVERING ON SYNERGIES THROUGH OUR ACQUISITIONS Acquisitions Synergies Statoil Fuel and Retail Synergies The Pantry • Target: $150M - $200M • Target for the first 24 months: $125M • Realized: >$200M • Realized: >$125M Synergies CST Brands, Inc Synergies Holiday Stationstores • Target for the first
Slide 56: Cost Control – Part of Our DNA
COST CONTROL – PART OF OUR DNA Disciplined Culture Year over year expense growth Optimization of Continuous Shared Services Benchmarking Strategy 2.1% 2.0% 1.5% 0.8% Sharing of Best 0.2% AI, Robotics Cost Control Practices 2014 2015 2016 2017 (1) 2018 Scalable Organization, Cost Efficient Systems &
Slide 57: Capital Structure & Financial Discipline
CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Competitive cost of debt Rapid delevera-ging Well spread 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 (in million dollars US) Adjusted Leverage Ratio 3.13:1 1,226 +14 % CAG Average Cost of Investment Grade 1,065 Debt 3.0 % Credit Profile 979 865 890 614 Capital Structure & Financial Discipline $7.7 Billion Free Cash Flow of senior unsecu
Slide 59: Strong and Scalable Free Cash Flow Conversion
Capital Structure &Capital STRONG AND SCALABLE FREE CASH FLOW CONVERSION Financial Structure & Discipline Financial Discipline 81 1,226 95 890 1,065 215 979 102 2,919 276 85 865 2,396 360 2,331 162 614 351 63 145 1,876 104 1,640 279 77 79 1,376 172 172 87 65 1,056 56 899 807 81 899 807 563 457 459 9
Slide 60: Disciplined Capital Allocation
Capital Structure & Financial DISCIPLINED CAPITAL ALLOCATION Discipline CAPITAL EXPENDITURES ALLOCATION 23% 27% Income 40% 32% Income producing producing 73% 41% 73% 38% 2017 2018 (1) Development Commercial Programs Maintenance Continuous improvement in capital allocation efficiency (1) Excluding on
Slide 61: Adjusted Diluted EPS and Return on Equity Growth
RESULT OF THE VALUE CREATION EQUATION : ADJUSTED DILUTED NET EARNINGS PER SHARE AND RETURN ON EQUITY GROWTH Adjusted Diluted Net Earnings Return on Equity per Share (USD) Value Creation +19% CAG 2.60 27.0% 2.21 24.9% 24.80% 2.08 22.6% 22.5% 21.5% 1.79 1.35 1.11 2013 2014 2015 2016 2017 2018 2013 201
Slide 62: Result of the Value Creation Equation: Dividend Growth
RESULT OF THE VALUE CREATION EQUATION : DIVIDEND GROWTH Dividends Paid – US Millions 162 Value 145 +24 % CAG Creation 104 87 65 56 Dividend vs Free cash flow 1,226 FCF +14 % CAG 1,065 2013 2014 2015 2016 2017 2018 979 865 890 Quarterly dividend increased twice during fiscal 2017, from CA 7.75¢ per s
Slide 63: Result of the Value Creation Equation: Stock Value Growth
RESULT OF THE VALUE CREATION EQUATION : STOCK VALUE GROWTH 5-Year Stock Performance Value 450.0% Creation 350.0% 250.0% 150.0% 50.0% -50.0% Variance ACT stock price (%) Variance TSX index (%) Source: Bloomberg. As of June 4th, 2018. 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: Holiday Stationstores Acquisition
• On December 22, 2017, Alimentation Couche-Tard Inc. acquired all the membership interest of Holiday Stationstores, LLC and certain affiliated companies (“Holiday”). Holiday is an important convenience store player in the Upper Midwest United-States, with 516 sites, 2 food commissaries and a fuel t
Slide 67: A Disciplined Convenience Store Operator and Integrator
A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR Broad Geographic Track Record of Highly Superior Product Footprint with Leading Disciplined Growth and Offerings Market Positions Debt Reduction Attractive Sector Powerful Financial Attractive Synergy Dynamics Results Potential Disciplined Mana
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