Carrefour Sa · EURONEXT:CA
Carrefour Sa — H1 2008 Earnings Presentation
64 slides from Carrefour Sa's earnings presentation, Aug 29, 2008
Slide 1: Half year 2008 results
Half year 2008 results Friday, 29 August 2008 www.groupecarrefour.com
Slide 2: Agenda
Agenda I- H1 2008 highlights II- Financial performance III- 2008 objectives & action plan IV- Convictions and conclusion 2
Slide 3: Agenda
Agenda I- H1 2008 highlights II- Financial performance III- 2008 objectives & action plan IV- Convictions and conclusion 3
Slide 4: H1 2008 key indicators
H1 2008 key indicators Sales excl. VAT +8.5% (at constant exchange rates) Sales excl. VAT +8% (at current exchange rates) ACDA* +6.9% Activity Contribution +5.5% 16.7% Cash flow / Net debt (vs. 16% in H1 07) *ACDA: Activity Contribution before Depreciation & Amortization 4
Slide 5: Good sales growth momentum in the First Half
Good sales growth momentum in the First Half +25.5% Sales excl. VAT Sales excl. VAT (€m) by geographic region Group +8.0% at current +8.0% exchange rates 41,948 41,948 +4.3% 38,845 +3.1% +2.5% +2.9% -0.5% +1.2% Like-for- Expansion Acquisitions Change H1 08 H1 07 France Western Growth like Europe mar
Slide 6: Sustained growth in Activity Contribution
Sustained growth in Activity Contribution AC regional breakdown (€m) Group France* Western Growth +5.5% Europe markets -0.8% +0.7% +30.0% 1,404 379 330 1,331 701 695 376 1 404 254 H1 07 H1 08 H1 07 H1 08 H1 07 H1 08 H1 07* H1 08 *H1 07 restated in accordance with IFRS 2 6
Slide 7: Fastest growth in H1 Activity Contribution since 2005
Fastest growth in H1 Activity Contribution since 2005 Sales excl. VAT Activity Contribution (€m, at current exchange rates) (€m) +8.0% +5.5% 41,948 1,404 +5.5% +3.2% -0.2% +8.9% 38,845 -2.8% 1,334 +2.7% 1,331 150 36,822 150 33,804 1,293 H1 05 H1 06 H1 07 H1 08 H1 05 H1 06 H1 07 H1 08 Robust performa
Slide 8: Key highlights of H1 2008
Key highlights of H1 2008 Multi-format strategy enhanced Single-banner, single-brand strategy effectively leveraged Constant and significant progress in growth markets Increasing professionalism in the Group’s second métier: better leveraging real estate 8
Slide 9: Multi-format strategy enhanced
Multi-format strategy enhanced New stores with formats more tailored New hypermarkets with more to customer expectations appropriate size Breakdown by format (in sq.m.) Average size of hypermarkets opened Sales area under banners (in thousands of sq.m.) Store network, Stores opened end-2006 Jan. 07–
Slide 10: Single-banner, single-brand strategy effectively leveraged
Single-banner, single-brand strategy effectively leveraged Increasing contribution from own brand products in France (+150bp) and Spain (+250bp) in dry grocery. Strong performance by stores that switched over to the Carrefour Express banner in Spain, Argentina and Brazil (+11%, +38% and +7% in H1 on
Slide 11: Constant and significant progress in growth markets
Constant and significant progress in growth markets Sales excl. VAT Activity Contribution (€m, at current exchange rates) (€m) +30.0% +25.5% 330 11,783 +46.1% +17.7% +25.1% +7.1% 254 9,391 +31.4% +15.7% 7,979 174 6,379 162 H1 05 H1 06 H1 07 H1 08 H1 05 H1 06 H1 07 H1 08 Growth markets currently acco
Slide 12: Increasing professionalism in second métier: real estate
Increasing professionalismin the Group’s second métier: better leveraging real estate EUROPE’S NO. 1 PROPERTY COMPANY by number of sites and sq.m. held ASSETS 292 hypermarkets 595 supermarkets FRANCE No. of assets: 733 Total GLA**: 2.7m sq.m. SALES AREA 4,1 million sq.m ITALY No. of assets: 37 GAV*
Slide 13: Increasing professionalism in second métier: real estate
Increasing professionalism in the Group’s second métier: better leveraging real estate A FUNCTIONING ORGANISATION • Own legal structure established STRUCTURE 1. • 1 lease per location • Strategic Committee FUNCTIONING 2. • Investment Committee • Management Committee • Management team in place MANAGE
Slide 14: In conclusion
In conclusion Steady growth in sales (+8.5% at constant exchange rates) and Activity Contribution (+5.5%) Our international multi-format, single-brand strategy enhanced Increasing professionalism in real estate 14
Slide 15: Agenda
Agenda I- H1 2008 highlights II- Financial performance III- 2008 objectives & action plan IV- Convictions and conclusion 15
Slide 16: Solid performance
Solid performance €m H1 2008 H1 2007** Change Sales excl. VAT 41,948 38,845 +8.0% ACDA* 2,303 2,154 +6.9% Activity Contribution after IFRS 2 adjustment** 1,404 1,331 +5.5% Non-recurring income (expenses) 85 56 EBIT (Activity Contribution after non-recurring items) 1,489 1,387 +7.4% Net result from r
Slide 17: Sales up in all geographic regions
Sales up in all geographic regions Sales ex VAT per region Change at constant €m H1 2008 H1 2007 Change exch. rates France 18,351 18,126 +1.2% +1.2% Europe 15,677 14,478 +8.3% +8.1% Latin America 4,936 3,480 +41.8% +42.2% Asia 2,985 2,760 +8.1% +16.3% Total 41,948 38,845 +8.0% +8.5% 17
Slide 18: ACDA continues to show good growth
ACDA continues to show good growth €m H1 2008 H1 2007 Change Sales excl. VAT 41,948 38,845 +8.0% Commercial income 9,380 8,750 +7.2% SG&A* (7,077) (6,596) +7.3% ACDA 2,303 2,154 +6.9% Depreciation (899) (823) +9.2% Activity Contribution 1,404 1,331 +5.5% after IFRS 2 adjustment *SG&A: labour costs +
Slide 19: Commercial margin broadly stable
Commercial margin broadly stable €m H1 2008 H1 2007 Change Commercial income 9,380 8,750 +7.2% Commercial margin % 22.4% 22.5% Up slightly in France Broadly stable in Europe Down slightly in growth markets, due to Atacadao integration 19
Slide 20: Tight control over SG&A is paying off
Tight control over SG&A is paying off €m H1 2008 H1 2007 Change SG&A (excl. rents) (6,557) (6,124) +7.1% SG&A excl. rents as a % of sales 15.6% 15.8% Asset costs (rents & depreciation) (1,419) (1,295) +9.6% Asset costs (rents & depreciation) as a % of sales 3.4% 3.3% SG&A excl. rents have decreased
Slide 21: Activity Contribution up 5.5%
Activity Contribution up 5.5% €m H1 2008 H1 2007 Change Activity Contribution before IFRS 2 adjustment 1,442 1,364 +5.7% Activity Contribution after IFRS 2 adjustment 1,404 1,331 +5.5% Activity Contribution as a % of sales 3.3% 3.4% --- Activity Contribution was up 5.5%, a solid performance driven b
Slide 22: FRANCE: stable results
FRANCE: stable results (44% of consolidated sales) Sales excl. VAT Activity Contribution at current exch. rates (€m) (€m) +1.2% -0.8% 18,351 701 695 18,126 H1 07 H1 08 H1 07 H1 08 Commercial margin up 2% in value. SG&A and depreciation under control, rising only 2.6% despite a €41m charge related to
Slide 23: EUROPE: good performance
EUROPE: good performance (37% of consolidated sales) Sales excl. VAT Activity Contribution at current exch. rates (€m) (€m) +8.3% +1.5% 15,677 443 436 14,478 H1 07 H1 08 H1 07 H1 08 Sales in Europe grew faster than in H1 2007, thanks to the good growth recorded in Spain, a stabilised performance in
Slide 24: LATIN AMERICA: excellent performance
LATIN AMERICA: excellent performance (12% of consolidated sales) Sales excl. VAT Activity Contribution at current exch. rates (€m) (€m) +41.8% +75.3% 4,936 147 3,480 84 H1 07 H1 08 H1 07 H1 08 A continued sales increase in Latin America (+41.8%): excluding Atacadao, sales rose 21%. Activity Contribu
Slide 25: ASIA: sustained performance
ASIA: sustained performance (7% of consolidated sales) Sales excl. VAT Activity Contribution at current exch. rates (€m) (€m) +8.1% +8.0% 2,985 119 2,760 110 H1 07 H1 08 H1 07 H1 08 Sales were up 8.1% at current exchange rates. At constant exchange rates, sales showed the same vigorous growth as in
Slide 26: Higher financial expenses, lower tax rate
Higher financial expenses, lower tax rate €m H1 2008 H1 2007 Change Financial costs (279) (248) +12.7% Income tax (319) (329) Tax rate 26.4% 28.9% Associates 16 2 Minorities (157) (71) +121.9% Net result from recurring operations – Group 750 741 +1.2% share The increase in financial expenses (€31m)
Slide 27: Significant improvement in cash flow
Significant improvement in cash flow €m H1 2008 H1 2007 + 12% Cash flow 1,838 1,637 Capex (1,189) (1,144) Change in working capital and other* (2,805) (2,276) Free cash flow (2,156) (1,783) Acquisitions (207) (1,021) Disposals 604 232 Other 19 (35) Cash flow after investments and disposals (1,740) (
Slide 28: Our key financial ratios are sound
Our key financial ratios are sound H1 2008 H1 2007 Net debt at year-end (€m) 11,008 10,212 ACDA / Financial costs 8.2x 8.7x Gearing 96.9% 96.5% Cash flow / Net debt 16.7% 16.0% 28
Slide 29: In conclusion
In conclusion A set of results characterised by: 8% sales growth at current exchange rates Stable commercial margin, good control over SG&A A solid 5.5% growth in Activity Contribution A healthy balance sheet to support further growth 29
Slide 30: Agenda
Agenda I- H1 2008 highlights II- Financial performance III- 2008 objectives & action plan IV- Convictions and conclusion 30
Slide 31: Our objectives for 2008
Our objectives for 2008 We confirm our 2008 objectives: Sales growth at constant exchange rates of 7% (vs 7% in 2007) Growth in Activity Contribution broadly in line with sales (vs 3.4% in 2007) Operating free cash flow of €1.5bn (vs 691m€ in 2007) 31
Slide 32: A challenging economic environment
A challenging economic environment Higher raw material costs Persistent inflation No indication of improved consumer demand in Western Europe Consumer demand still buoyant in emerging markets Volatility in oil prices Uncertainties around other indicators, e.g. employment statistics, real estate Agai
Slide 33: A reinforced action plan for H2 08
A reinforced action plan for H2 08 Stepped-up commercial activity at French hypermarkets Accelerated roll-out of Carrefour Market Cost reduction plan and tighter screening of capital allocation Accelerated store openings in our growth markets Use of Carrefour Property as an operational lever 33
Slide 34: Stepped-up commercial activity at French hypermarkets
Stepped-up commercial activity at French hypermarkets Promotional campaigns: Nation-wide campaign on “Prix baissés, bloqués”, up to 20% discount on 300 products, mainly national brands Initiatives in fresh produce: launch of a weekly catalogue on fruit & veg and butchery Strengthening of our loyalty
Slide 35: Stepped-up commercial activity: nation-wide campaign
Stepped-up commercial activity at French hypermarkets Nation-wide campaign 35
Slide 36: Gaining traction in food
Stepped-up commercial activity at French hypermarkets Gaining traction in food 36
Slide 37: Gaining traction in non-food
Stepped-up commercial activity at French hypermarkets Gaining traction in non-food 37
Slide 38: Accelerated roll-out of Carrefour Market
Accelerated roll-out of Carrefour Market Carrefour Market: generating value First and foremost, commercially-driven Gain market share Grow sales by Develop and pool own brand resources between 5% and Become the No. 1 franchise network in France 7% Excellent return on capital At least €200m in Activi
Slide 39: Accelerated roll-out of Carrefour Market
Accelerated roll-out of Carrefour Market Conversion programme (number of stores) 1,050 A dedicated team of 200 people 900 10 stores converted a week 750 Carrefour loyalty programme introduced at converted stores 150 End-2008 End-2009 Mid-2010 39
Slide 40: Share of Carrefour own-brand products
Accelerated roll-out of Carrefour Market Share of Carrefour own-brand products June 2008 December 2008 Start of Carrefour 80% Carrefour brand brand roll-out 40
Slide 41: Franchise response and pooling of support functions
Accelerated roll-out of Carrefour Market Strong positive response from franchise network Pooling of support functions among formats Marketing department Food and non-food sales department Streamlining IT systems 300 applications out of a total of 500 eliminated by end-2009 Analyzing the supply chain
Slide 42: Cost reduction plan and tighter screening of capital allocation
Cost reduction plan and tighter screening of capital allocation Cost reduction at the heart of our business model For memory: Planned improvement in operating cost ratio 2008 objective of at least 0.1% of sales €100m of cost savings to deliver our target despite unanticipated expenses: TACA* and Act
Slide 43: Capital expenditure focus on growth markets
Cost reduction plan and tighter screening of capital allocation As part of our plan of action, we are reinforcing our focus on growth markets in 2008 Capital Expenditure breakdown Mature markets Growth markets Achieved in 2006 Initial budget for 2008 Estimate for 2008 53% 62% 38% 53% 47% 50% 50% Mai
Slide 44: Accelerated store openings in our growth markets
Accelerated store openings in our growth markets The centre of gravity is shifting increasingly towards growth markets 2006 Estimate for 2008 Breakdown of new m² 29% 51% 49% 71% Mature markets Growth markets* 17% 27% Activity Contribution 83% 73% 73% *Growth markets: markets other than France, Spain
Slide 45: Use of Carrefour Property as an operational lever
Use of Carrefour Property as an operational lever Manage and optimise the Group’s property assets Growth Support and boost the Group’s growth strategy Shopping mall management Enhance customer flow Optimisation of existing sales areas Work out trade-offs between existing sales areas Partial monetisa
Slide 46: Use of Carrefour Property as an operational lever
Use of Carrefour Property as an operational lever Step up prospecting for opportunities to open stores with less than 1,000 sq.m. in France Return to shopping mall management business Examples of Pau Lescar in France, Kolobrezg (Poland) Thorough analysis of opportunities to re-allocate portions of o
Slide 47: In conclusion: a reinforced action plan
In conclusion A reinforced action plan: to achieve our 2008 objectives to provide momentum for 2009 47
Slide 48: Agenda
Agenda I- H1 2008 highlights II- Financial performance III- 2008 objectives & action plan IV- IV- Convictions Convictionsand andconclusion conclusion 48
Slide 49: A resilient Group profile
A resilient Group profile FOOD MULTI-FORMAT INTERNATIONAL Sales by activity Sales by format Sales by region (end-2007) (end-2007) (end-2007) 8% 17,4% 25% 20% 72% 58,4% 15% 46% 9,2% 29% Food Hypermarkets France Non-food Supermarkets Spain, Italy, Belgium Petrol Hard-discount Growth markets Convenienc
Slide 50: Consolidating our fundamentals
Consolidating our fundamentals By further leveraging our brand: All supermarkets under the Carrefour banner by 2010 No taboos about other formats Reinforcement of assortments in Carrefour own branded goods By expanding our international footprint: Stepped up organic-growth store openings, and multi-
Slide 51: We have the means to fund our growth ambitions
We have the means to fund our growth ambitions A/A1 rating for the Group Capacity to dedicate cash flow to growth Free cash flow target of €1.5bn for 2008 Net debt target at 2008 year-end of €7bn vs. €7.4bn in 2007 51
Slide 52: Non-negotiable convictions whatever the environment
Non-negotiable convictions whatever the environment Low prices are a must, and so are significant cost reductions Brand unification – pooling resources, simplifying our business Investment in profitable sales growth 52
Slide 53: A new organisation structure to further the strategy
A new organisation structure to further the strategy Successfully complete brand convergence FRANCE Boost hypermarket sales Simplify structures and back-office operations EUROPE & Leverage opportunities for consolidation HARD DISCOUNT Guarantee cash flow GROWTH AREAS & HARD Leverage all growth oppor
Slide 54: A solid Group, on the move
A solid Group, on the move Sound fundamentals A business model focused mainly on food A balanced portfolio of countries and formats Leading positions wherever we operate A healthy balance sheet and healthy cash flow Distinguishing features that generate value A powerful brand A single-banner strateg
Slide 55: Half year 2008 results
Half year 2008 results Friday, 29 August 2008 www.groupecarrefour.com
Slide 56: Exhibits
» EXHIBITS <6 groupecarrefour 56
Slide 57: Summary income statement
Summary income statement €m H1 2008 H1 2007 Change Sales excl. VAT 41,947.8 38,844.8 8.0% Other income 578.7 489.2 18.3% Cost of goods sold (33,146.6) (30,584.3) 8.4% Gross margin from current operations 9,379.9 8,749.7 7.2% SG&A (7,077.0) (6,596.0) 7.3% Activity Contribution before D&A and provis.
Slide 58: Key operating ratios
Key operating ratios €m H1 2008 H1 2007 Change Sales excl. VAT 41,947.8 38,844.8 +8.0% Other income 578.7 489.2 +18.3% Gross margin from current operations 22.4% 22.5% as a % of sales SG&A as a % of sales (16.9%) (17.0%) ACDA as a % of sales 5.5% 5.5% D&A / provisions as a % of sales (2.1%) (2.1%) A
Slide 59: Summary cash flow statement
Summary cash flow statement €m H1 2008 H1 2007 Net debt, beginning of period (7,357) (6,309) Cash flow from operating activities 1,838 1,637 Change in working capital (2,438) (2,030) Impact of discontinued operations 20 (28) Net cash flow from operating activities (581) (421) Capex (1,189) (1,144) O
Slide 60: Activity Contribution by region
Activity Contribution by region €m H1 2008 H1 2007 Change France 695 701 -0.8% Europe 443 436 +1.5% Latin America 147 84 +75.3% Asia 119 110 +8.0% Total 1,404 1,331 +5.5% 60
Slide 61: Growth in sales, ACDA and Activity Contribution
Growth in sales, ACDA and Activity Contribution Activity % growth – H1 08 vs. H1 07 Sales ACDA Contribution France +1.2% 2.1% -0.8% Europe excl. France +8.3% 3.7% +1.5% Latin America +41.8% 50.7% +75.3% Asia +8.1% 7.0% +8.0% Total 8.0% 6.9% 5.5% 61
Slide 62: Sales excl. VAT by format and by region
Sales excl. VAT by format and by region €m France Europe Americas Asia Total % sales Hypermarkets 9,543 8,330 4,071 2,880 24,824 59.2% Supermarkets 4,227 2,779 377 44 7,427 17.7% Hard discount 1,377 2,338 378 54 4,148 9.9% Other formats 3,204 2,230 110 5 5,549 13.2% Total 18,351 15,677 4,936 2,984 4
Slide 63: Consolidated store network, 30 June 2008
Consolidated store network, 30 June 2008 HYPER SUPER HARD DISCOUNT CONVENIENCE CASH & CARRY TOTAL FRANCE 194 607 834 34 1,669 Spain 156 86 2008 3 2,253 Belgium 56 63 119 Greece 30 204 279 33 546 Italy 65 243 178 17 503 Poland 76 239 315 Portugal 357 357 Turkey 20 108 431 559 Romania 14 21 35 EUROPE
Slide 64: Stores under Group banners, 30 June 2008
Stores under Group banners (incl. franchisees and partners), 30 June 2008 HYPER SUPER HARD DISCOUNT CONVENIENCE CASH & CARRY TOTAL FRANCE 219 1,015 899 3,212 135 5,480 Spain 162 88 2 836 3 3,089 Belgium 56 377 177 610 Greece 30 221 377 242 870 Italy 67 491 1,012 20 1,590 Poland 76 239 15 330 Portuga