Tesco Plc · LSE:TSCO
Tesco — FY2006/07 Earnings Presentation
32 slides from Tesco's earnings presentation, Apr 17, 2007
Slide 1: Preliminary Results 17 April 2007
Preliminary Results 17 April 2007 David Reid Chairman 1
Slide 2: Results highlights
Results highlights • Sales have increased by 10.9% • Profit before tax up by 20.3% • Underlying profit before tax up 13.2% • Underlying diluted earnings per share up 11.6% • Full year dividend up 11.7% Four part strategy • Core UK • International • Non-food • Retailing services 2
Slide 3: Our people
Our people 3
Slide 4: Community Plan
Community Plan • New Initiatives - Milk pricing - Carbon labelling - Regeneration - Packaging Andrew Higginson Finance and Strategy Director 4
Slide 5: Results headlines
Results headlines • Strong growth in sales, profits and earnings • Property funding programme increased • More share buy-backs, reduced dilution, strong dividend growth • Cash flows strong, returns rising • Investing in future growth Group performance • Sales up 10.9% to £46.6bn • Trading profit up
Slide 6: Property and group performance
Property • Group property profits up 81% to net £139m • Including JV contribution of £47m • Proceeds of over £1bn from just over 5% of UK space • 65% premium to book value • Increased scale of programme Group performance • Underlying profit up 13.2% to £2,545m • Group operating profit* up 17.7% to £
Slide 7: UK sales growth
UK sales growth* Sales up 9.0% 3.4% 0.6% 5.6% 5.0% Volume Inflation Like-for-like New stores Total sales *sales including petrol UK sales growth* Quarter 4 Final 7 wks % % Like for like 5.8 5.8 Net new stores 3.6 4.0 Total 9.4 9.8 *sales excluding petrol 7
Slide 8: UK trading profit
UK trading profit • Trading profit up 9.2% to £1,914m • Trading margin up slightly at 5.9% • After £42 million start-up costs on U.S. and Tesco Direct 8
Slide 9: International and Asia
International • Sales £11.0bn, up 17.9% at actual rates • Trading profits £564m, up 18.0% at actual rates • Trading margin stable (up slightly pre- integration costs) Asia • Sales £4.7bn, up 16.8% at actual rates • Trading profit £246m, up 18.8% at actual rates • Margins increased • Malaysia moved i
Slide 10: Europe and Tesco.com
Europe • Sales £6.3bn, up 18.7% at actual rates • Trading profit £318m, up 17.3% at actual rates (up 22.5% pre-integration costs) • Margins up 30 basis points pre-integration costs Tesco.com • £1.2bn sales, up 29.2% • Profit up 48.5% to £83m* • Over 250,000 weekly grocery orders • Tesco Direct launc
Slide 11: Telecoms and Tesco Personal Finance
Telecoms • Moved into profit • Voted number one for customer service • Average revenue per user up by 6% Tesco Personal Finance • £65m share of profit • Increased provision for bad debts • Actual bad debt experience better than industry average 11
Slide 12: Credit card arrears trends and JVs and Associates
Credit card arrears trends 3 month arrears as a % of active balances 1.2% 1.0% 0.8% 0.6% 0.4% Total market TPF 0.2% 0.0% 2004 2005 2006 2007 Source: APACS JV’s and Associates • £106m share of profit • Includes share of profit of £47m from asset sales 12
Slide 13: Finance costs and taxation, Net debt
Finance costs and taxation • Finance costs £126m (£127m last year) • Interest cover strengthened to 21 times • Effective tax rate 29.1% (last year 29.0%) Net debt • Net debt increased to £5.0bn • Gearing stable at 48% • 118 million shares bought back, an investment of almost £470m 13
Slide 14: Pensions and Capital expenditure
Pensions • Scheme now fully funded on actuarial valuation • Finance Act revision – A-Day • Fall in IFRS deficit to just under £670m post-tax Capital expenditure £bn 3.0 3.0 2.8 Europe 2.5 2.4 2.3 2.1 Asia 2.0 Group 1.5 UK 1.0 0.5 02/03 03/04 04/05 05/06 06/07 14
Slide 15: Cash flow and returns
Cash flow and returns • Operating cash flow up to £3.5bn - IFRS pensions charge - Change to international year-end • Good progress on returns 15
Slide 16: Terry Leahy, Chief Executive
Terry Leahy Chief Executive 16
Slide 17: Why I am a Tesco shareholder
Why I am a Tesco shareholder • Strong, sustainable growth • Disciplined investment • Good returns for shareholders Returns • ROCE and return of capital • 200 basis point ROCE target • ROCE increased in 2006/7 • Up 50 basis points before effect of acquisitions and start-up costs • On track to hit tar
Slide 18: Property
Property • Big element of embedded value • Successful joint ventures • Integral part of a retail business • Retain at least 70% freehold • Buy-back increased to at least £3.0bn 18
Slide 19: Communities and environment
Communities and environment • Being good neighbours • Behaving responsibly • Seizing new challenges 19
Slide 20: International
International • Flexible • Local • Focus • Multi-format • Capability • Brand Focus • Organic growth, in-market acquisitions • 8.2m square feet – 4 times new UK space • 50% more than last year • Over 7.5m new square feet this year (excluding U.S.) 20
Slide 21: Focus - Europe, Focus - Asia
Focus - Europe Czech Republic Poland Focus - Asia Malaysia China 21
Slide 22: Multi-format
Multi-format Express tence Kipa: 3% Lotus ug TESCO
Slide 23: United States and International returns progress
United States International returns progress Cash return on investment including % over 70% 12.0 capital less than 5 yrs old 11.5 11.4 11.0 11.0 10.7 10.2 10.0 02/03 03/04 04/05 05/06 06/07 23
Slide 24: International returns 2005/6 and 2006/7
International returns - 2005/6 £m capital invested 2,000 Korea 1,500 ROI Poland 1,000 Thailand Czech Republic Hungary 500 Slovakia Turkey Japan Malaysia 0 c.7-10% c.10% c.15% LFL CROI International returns - 2006/7 £m capital invested 2,000 Korea 1,500 ROI Poland 1,000 Czech Republic Thailand Hungar
Slide 25: International returns 2006/7
International returns - 2006/7 £m capital invested 2,000 Korea 1,500 ROI Poland 1,000 Czech Republic Thailand Hungary 500 Slovakia Japan Turkey Malaysia 0 c.7-10% c.10% c.15% LFL CROI International returns - 2006/7 £m capital invested 2,000 Korea 1,500 ROI Poland 1,000 Czech Republic Thailand Hungar
Slide 26: Price
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Slide 27: Service, Range
Service Range 27
Slide 28: Availability, Consumer priorities
Availability Consumer priorities 28
Slide 29: Organics, Non-food
Organics Non-food 29
Slide 30: Tesco Direct, Retailing services
Tesco Direct Retailing services • Tesco.com • Tesco Personal Finance • Telecoms *pre start-up costs 30
Slide 31: Tesco Q&A
Tesco • Sustaining strong growth • Following the customer • Improving returns • Tangible benefits for shareholders • Tackling social and environmental challenges • Investing for the future and delivering today Q&A 31
Slide 32: Preliminary Results April 2007
Preliminary Results 17 April 2007 32