Tesco Plc · LSE:TSCO
Tesco — Debt Investor Presentation (April 2017)
29 slides from Tesco's debt investor presentation, Apr 12, 2017
Slide 1: Debt Investor Update – 16/17 Results
Debt Investor Update – 16/17 Results 12 April 2017 Alan Stewart – CFO Lynda Heywood – Group Treasurer
Slide 2: A year of strong performance
A year of strong performance +4.3% +30% +9.1% £49.9bn £47.9bn £2.3bn £1,280m £2.1bn £985m FY 15/16 FY 16/17 FY 15/16 FY 16/17 FY 15/16 FY 16/17 Positive sales growth1 Strong profit growth2 Strong cash generation3 1. Group sales growth at actual rates on a comparable days and a continuing operations
Slide 3: A year of strong performance
A year of strong performance NPS +6 83% 25 FY 16/17 81% 77% 20 70% 70% 15 60% 10 5 0 1 FY 14/15 FY 15/16 FY 16/17 FY 14/15 FY 15/16 FY 16/17 FY 14/15 FY 15/16 FY 16/17 Customers recommend1 Colleague engagement2 Supplier viewpoint3 1. Reflects % of Fans minus % of Critics answering the question “Base
Slide 4: A year of strong performance - UK
A year of strong performance - UK +1.6% +1.7% +140,000 Volume-based recovery Transaction growth Increasing footfall1 1. Data from Kantar Worldpanel – change in customer numbers from Feb 16 to Feb 17. 4
Slide 5: A year of strong performance - UK Market Outperformance
A year of strong performance - UK Market Outperformance2 FY 16/17 Total Store UK like-for-like volume Total Food 4.0% Fresh Packaged General Merchandise 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Market Outperformance2 4Q 16/17 Total Store Total Food Fresh (7.0)% 2011/12 1Q 2Q 3Q 4Q 1Q 2Q 2Q 3Q 4Q 1Q 2014/15 3Q
Slide 6: A year of consolidation – International
A year of consolidation – International Asia +4.0% +0.5% Europe +0.5% Volume growth Sales growth1 Portfolio simplification 1. Sales growth ay constant exchange rates on a comparable days basis. 6
Slide 7: Our six strategic drivers – a progress update
Our six strategic drivers – a progress update 1. A differentiated brand • YouGov most improved brand 2. Reduce operating costs • £226m of cost savings 3. Generate £9bn cash • £2.3bn retail cash generation 4. Max the mix • Group operating margin of 2.3% 5. Maximise value from property • Released £0.5
Slide 8: Group performance
Group performance Change Change Continuing operations FY 16/17 constant actual rates rates Group sales (exc. VAT, exc. Fuel)1 £49.9bn 1.1% 4.3% Group operating profit before exceptional items £1,280m 24.9% 29.9% Exceptional items £(263)m n/m n/m Group statutory operating profit £1,017m (11.8)% (5.1)
Slide 9: Segmental performance
Segmental performance Sales Operating profit before exceptional items Change Change Change Change FY 16/17 FY 15/16 constant actual FY 16/17 FY 15/16 constant actual rates 1 rates1 rates rates UK & ROI £37.7bn £37.2bn 0.6% 1.4% £803m £503m 57.7% 59.6% International £11.2bn £9.7bn 2.1% 15.2% £320m £3
Slide 10: Exceptional items
Exceptional items FY 16/17 FY 15/16 Net impairment1 £(6)m £(423)m Restructuring and redundancy £(199)m £(126)m Tesco Bank customer redress £(45)m - Interchange settlement £57m - Property transactions £165m £156m Provision for SFO and FCA obligations £(235)m - Past service credit and associated costs
Slide 11: Finance income and costs
Finance income and costs FY 16/17 FY 15/16 Interest received £48m £29m IAS 32 and 39 ‘Financial instruments’ £61m £(19)m - fair value measurements Interest payable £(523)m £(490)m Capitalised interest £6m £6m IAS 19 net pension finance costs £(113)m £(155)m Net finance costs1 £(521)m £(629)m 1. Stat
Slide 12: Movement in net debt
Movement in net debt £m 387 2,278 201 1,690 (582) 219 1,381 133 286 744 (952) 1 Cash flow from Impact from Underlying working Retail cash Interest and Tax Capex Free cash flow Net impact of Net impact of Other Reduction in net retail operations exceptionals and capital generated from disposals prope
Slide 13: Capital expenditure
Capital expenditure UK & ROI Europe Asia £731m £141m £262m Capex on new space / new businesses Capex on existing space / existing businesses Excludes capex on Tesco Bank and dunnhumby 13
Slide 14: Total indebtedness
Total indebtedness Lease commitments Pension deficit Net debt £9.4bn £8.5bn £7.8bn £7.4bn £5.5bn £5.1bn £3.9bn £3.7bn £2.6bn FY 14/15 FY 15/16 FY 16/17 FY 14/15 FY 15/16 FY 16/17 FY 14/15 FY 15/16 FY 16/17 14
Slide 15: Property
Property1 FY 16/17 FY 15/16 % selling space owned UK & ROI 52% 52% International 74% 71% Group 63% 61% % total property owned - by value2 UK & ROI 50% 47% International 78% 75% Group 57% 54% 1. Based on continuing operations and does not include impact of April 17 British Land transaction. 2. Exclud
Slide 16: Pension scheme
Pension scheme • IAS 19 deficit calculation impacted by drop in corporate yields – no change in underlying cash commitments to pension members • Asset de-risking strategy completed • Continued strong performance of scheme assets • Long-term deficit funding plan of £270m per annum cash contribution •
Slide 17: Improving debt metrics
Improving debt metrics FY 16/17 1H 16/17 FY 15/16 Net Debt/ EBITDA1 1.6x 2.1x 2.7x Fixed Charge Cover2 2.2x 2.0x 1.9x Total indebtedness ratio3 5.0x 5.6x 5.1x 1. EBITDA is based on continuing operations (excluding Turkey) 2. EBITDAR/(Interest + Rent) 3. Net Debt + pension deficit + NPV of lease obli
Slide 18: Credit ratings
Credit ratings Agency Long Term Rating Short Term Rating Outlook S&P BB+ B Stable Fitch BB+ B Stable Moody's Ba1 NP Stable Stable outlook from all three credit rating agencies 18
Slide 19: Credit spread performance
Credit spread performance 500 Tesco 5 year CDS Itraxx Crossover 450 Itraxx Europe (IG) 400 350 300 250 200 150 100 50 Jun-2014 Oct-2014 Feb-2015 Jun-2015 Oct-2015 Feb-2016 Jun-2016 Oct-2016 Feb-2017 Source: Bloomberg. 19
Slide 20: Strong liquidity position vs upcoming maturities
Strong liquidity position vs upcoming maturities YE 1617 Available Cash Weighted average maturity: 9.5 years 3 Interest Bearing Debt Weighted average rate at year end: 4.08% Undrawn Committed Facilities 2 1 0 20
Slide 21: Liquidity Sources
Liquidity Sources Total Liquidity £3.0bn available cash (Retail ex Bank) £10.2bn £9.4bn • excludes £0.8bn set aside for Booker £7.4bn • net of overdrafts and cash in transit £4.4bn of undrawn committed facilities • £2.0bn maturing 2019 • £2.4bn maturing 2021 FY 15/16 HY 16/17 FY 16/17 Undrawn Commit
Slide 22: Outstanding Debt & Funding Programmes
Outstanding Debt & Funding Programmes £11bn £11bn £9bn 12% GBP - MTN £3.0bn 34% 14% EUR - MTN £3.5bn USD - 144A £1.2m GBP - Secured Debt £1.1bn 40% FY 15/16 HY 16/17 FY 16/17 Principal outstanding is shown after the impact of hedging 80% of outstanding debt is hedged back to GBP (remainder is in EUR
Slide 23: Unlocking new growth
Unlocking new growth TESCO & BOOKER Creating the UK’s leading food business 23 TESCO
Slide 24: The UK’s leading food business
The UK’s leading food business PRODUCT CHANNELS CUSTOMER Fresh Packaged GM Clothing Professional In home Improved choice / range Large stores Enhanced volume for efficiency Small stores EXISTING e.g. full crop utilisation Online Wholesale NEW Out of home Incremental to standalone 3.5% - 4% margin am
Slide 25: The UK’s leading food business
The UK’s leading food business At least At least 9x EV/EBIT £25m £175m inc. synergies Growth Synergies Multiple 25
Slide 26: Core Geography, Core Product, New Channel
& Core Core New Geography Product Channel £85bn Industry > WACC market leading 2 years growing at 3.8% Expertise Returns Growth1 1. Out of home market forecast for ‘15-’18. 26
Slide 27: Summary
Summary. • Continuing to deliver on our six strategic drivers • Results ahead of our expectations - 30% increase in Group operating profit before exceptional items - 60% increase in UK & ROI operating profit before exceptional items - Improved cash generation including a £387m underlying working cap
Slide 28: Appendix – Debt Metric Calculations
Appendix – Debt Metric Calculations (£m) FY1617 H1 1617 (LTM) FY1516 Net Debt 3.7 4.3 5.1 Pension Deficit 5.5 5.9 2.6 NPV of operating leases 7.4 7.8 7.8 Total Indebtedness 16.7 18.0 15.5 EBITDAR 3.3 3.2 3.1 Total indebtedness ratio 5.0x 5.6x 5.1x EBITDA 2.3 2.1 1.9 Net Debt/EBITDA 1.6x 2.1x 2.7x Op
Slide 29: 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", "antic