Tesco Plc · LSE:TSCO
Tesco — H1 2008/09 Earnings Presentation
67 slides from Tesco's earnings presentation, Sep 30, 2008
Slide 1: Interim Results 30 September 2008
Interim Results 30 September 2008
Slide 2: David Reid, Chairman
A a aw a” av David Reid Chairman
Slide 3: Slide 3
Slide 4: Korea
Korea
Slide 5: India
India
Slide 6: China
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Slide 7: United States
United States & easy Neighborhood Market
Slide 8: Retailing Services
Retailing Services TESCO | vey vite holps
Slide 9: Slide 9
Slide 10: Our people
Our people
Slide 11: Andrew Higginson, Finance and Strategy Director
Andrew Higginson Finance and Strategy Director
Slide 12: Headlines
Headlines • Good growth in sales, profit, earnings and dividend • Acquisition of high quality assets • Disciplined cash and capital management • Plan to deliver solid net debt number by year-end • Underlying business will be cash positive in second half
Slide 13: Group performance
Group performance • Sales £28.1bn, up 14.1% • Trading profit rose 9.4% to £1,367m • Start-up losses relating to U.S. totalled £60m • Excluding the U.S., trading profit rose 12.7% to £1,427m • Trading margin stable at 5.6% (pre-U.S.) • Group underlying profit £1,453m, up 10.3%
Slide 14: Property
Property • UK property profits £164m • Four deals completed in the first half • Average yield 5.0% • Appetite for Tesco property and covenant has remained strong • Value realised from property programme totals £2bn to date
Slide 15: Group performance
Group performance • Group operating profit up 13.1% • Group pre-tax profit up 11.3% • Underlying diluted earnings per share up 11.6% to 13.28p • Proposed interim dividend is 3.57p, up 11.6%
Slide 16: UK sales growth
UK sales growth • Sales up 9.7% • Excluding petrol, sales up 6.9% • Like-for-like sales up 3.7%, excluding petrol – Quarter 1 like-for-like sales up 3.5% – Quarter 2 like-for-like sales up 4.0% • Net new stores sales up 3.2% • Inflation slightly higher in Quarter 2
Slide 17: UK trading profit
UK trading profit • UK trading profit £1,081m, up 8.6% • UK trading margin stable at 5.9%
Slide 18: International
International • Sales £8.0bn, up 26.8%* at actual exchange rates • Trading profits £286m • Trading profit up 27.7% at actual exchange rates before U.S. start-up losses • Trading margins rose by 10 basis points to 4.9% before including the U.S. * Sales growth reported on a consistent basis (six month
Slide 19: Asia
Asia • Sales £3.2bn, up 16.0% at actual rates • Trading profit £145m, up 16.9% at actual rates • Margins stable at 4.9% after significant investment in China • Malaysia moved into strong profitability • Integration costs on Homever c.£16m in 2008/9 • Acquired stores expected to be profitable in the
Slide 20: Europe
Europe • Sales £4.7bn, up 33.0% at actual rates • Contribution from new space expected to pick-up in the second half • Trading profit £201m, up 36.7% at actual rates • Trading margins rose to 4.9%
Slide 21: United States
United States
Slide 22: Retailing Services
Retailing Services • Profit target of £1bn • Sales £1.7bn, up 16.4% • Profits £200m, up 26.5%
Slide 23: Tesco Personal Finance
Tesco Personal Finance • Expect to complete the acquisition shortly • Our share of profits £35.5m, up 34% • Solid and stable business mix • More products launched • No increase in bad debt
Slide 24: Credit card arrears
Credit card arrears index 120 100 80 60 40 20 0 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Note: index of balances three payments in arrears as a percentage of total balances
Slide 25: Tesco.com
Tesco.com • Sales £902m, up over 20% • Profits £48.4m, up 21% • Grocery availability and customer satisfaction at highest ever levels • New customer numbers up 11% (exc. Direct)
Slide 26: Direct
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Slide 27: Telecoms
Telecoms • Profit £29m, up 8% • Sales £299m • Tesco mobile remains the number one for customer satisfaction • Tesco mobile the only major pre-pay provider to grow its customer base
Slide 28: Capital expenditure – H1
Capital expenditure – H1 £bn 3.0 2.5 2.0 1.5 Mixed-use Windfall and 1.0 energy UK 0.5 04/05 05/06 06/07 07/08 08/09
Slide 29: Capital expenditure – H1
Capital expenditure – H1 £bn 3.0 2.5 2.5 US, China 2.0 Europe Asia 1.5 Group Mixed-use Windfall and 1.0 energy UK 0.5 04/05 05/06 06/07 07/08 08/09
Slide 30: Operating cash flow
Operating cash flow • Operating cash flow was £2.2bn • Up from £1.9bn last year and £0.3bn lower than capex
Slide 31: J.V.’s and Associates
J.V.’s and Associates • Profits were £43m, up 34% • Driven by strong TPF performance
Slide 32: Tax and finance costs
Tax and finance costs • Tax charged at an effective rate of 27.5% • Last year’s rate lower due to impact of rule changes on deferred tax • Net finance costs up, at £88m • Excluding impact of IFRS non-cash elements, underlying net finance costs up 35%
Slide 33: Net debt
Net debt • Increased to £7.4bn from £6.2bn at the year-end • £0.4bn impact from exchange rates • Target of £8.0bn for this year-end • Expect underlying business to be cash positive in second half – improvement in working capital – disposal of some non-core assets – lower capex – phasing of share buy
Slide 34: Pensions
Pensions • IFRS deficit of £1.1bn, up from £0.6bn at year-end • Current IFRS deficit reduced to £0.7bn • Triennial valuation underway – due to complete in November • Relatively small actuarial deficit
Slide 35: Slide 35
Slide 36: Terry Leahy, Chief Executive
A a aw a” av Terry Leahy Chief Executive
Slide 37: Slide 37
Slide 38: International
International • Sales increased strongly • Positive like-for-like growth • Profits advanced well • International contributed half Group profit growth • Returns on track
Slide 39: Europe
Europe Hungary Poland
Slide 40: Europe
Europe Ireland Turkey
Slide 41: Asia
Asia Thailand Malaysia
Slide 42: Asia
Asia China Japan
Slide 43: Strategy
Strategy • Flexible • Local • Focus • Multi-format • Capability • Brand
Slide 44: Focus
Focus Homeplus Homever
Slide 45: Flexible
Flexible India India
Slide 46: Multi-format
Multi-format Poland Turkey
Slide 47: Capability
Cap VY, ability -_
Slide 48: Fresh & Easy – growing store sales
Fresh & Easy – growing store sales* index 200 180 160 140 120 100 80 60 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 * Index of average sales per store
Slide 49: Fresh & Easy
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Slide 50: UK
UK
Slide 51: Price
Price
Slide 52: Range
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Slide 53: Service
Service 26 million customers 20% of transactions
Slide 54: Availability
Availability
Slide 55: Step-change
Step-change
Slide 56: Non-food
Non-food
Slide 57: Clothing
Clothing
Slide 58: Retailing Services
Retailing Services
Slide 59: Tesco Personal Finance
Tesco Personal Finance TESCO Child Health Plan TESCO » | | TESco Compare SSB || ==25° Travel Money Card \ The smarter, safer way Now \ Ce to take your compare currency abroad gas & electricity tescocompare.com Helping you find the best deal insurance Helping the medicinego py Motorbike 4% OAR insure
Slide 60: Tesco.com
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Slide 61: Telecoms
Telecoms = ae L~ Tr — Telecoms Centre
Slide 62: Community
Community
Slide 63: Community
Community ecelV! e You'll also"
Slide 64: Community
Community Over 40% fewer bags
Slide 65: Summary
Summary • Strong growth from across the Group • Staying close to customers • Keeping costs low to stay competitive • Delivering for all stakeholders • Well-placed to cope with challenges • Investing in our strategy
Slide 66: Q&A
A aw aD aD aD Q&A
Slide 67: Interim Results 30 September 2008
Interim Results 30 September 2008