Investor Presentation - March 2009 - Canadian Tire Corporation

corp.canadiantire.ca

Investor Presentation - March 2009 - Canadian Tire Corporation

Canadian Tire Corporation, Limited

March 2009


Forward-looking Information

This disclosure contains statements that are forward-looking. These forward-looking statements

relate to, among other things, our objectives, goals, strategies, intentions, plans, beliefs,

expectations and estimates, and can generally be identified by the use of words such as “may”,

“will”, “could”, “should”, “would”, “suspect”, “outlook”, “expect”, “intend”, “estimate”, “anticipate”,

“believe”, “plan”, “forecast”, “objective” and “continue” (or the negative thereof) and words and

expressions of similar import, and include statements concerning possible or assumed future

results. Certain material factors or assumptions are applied in making forward-looking

statements, and actual results may differ materially from those expressed or implied in such

statements. Information about material factors that could cause actual results to differ materially

from expectations and about material factors or assumptions applied in making forward-looking

statements may be found in the body of this document, as well as in the 2007 Management’s

Discussion and Analysis (“MD&A”).

The forward-looking information contained in this document is presented for the purpose of

assisting the Company's security holders and financial analysts in understanding its financial

position and results of operations as at and for the periods ended on the dates presented and

the Company’s strategic priorities and objectives, and may not be appropriate for other

purposes. When relying on the forward-looking statements to make decisions with respect to

the Company, investors and others should carefully consider the foregoing factors and other

uncertainties and potential events. Although the Company believes that the expectations

reflected in such forward-looking statements are reasonable, such statements involve risks and

uncertainties, and undue reliance should not be placed on such statements. The Company

does not undertake to update any forward-looking statements, including those statements that

are incorporated by reference herein, whether written or oral, that may be made from time to

time by or on its behalf, except in accordance with applicable securities laws.

2


Core Assets


Store Networks

Canadian Tire Retail: approximately 400 new or rebuilt stores since 1994

– Mark’s: approximately 280 stores built, upgraded or acquired since 2002

– Petroleum: 2/3 of sites now upgraded or rebranded

– PartSource: now has close to 100 sites, including 8 Hub stores


Supply Chain

– New Canadian Tire Retail DC in Eastern Quebec

All Financial Services credit cards relaunched with PayPass technology in 2008

3


Strategic and Operational Strengths






One of Canada’s most trusted brands

Loyal customer base across all of our businesses

Products and service offering targeted at the needs (not just wants) of everyday

Canadian families at competitive prices

Financial Services one of the best run credit card businesses in the country – very

capable risk management team

Financially strong company, fully funded and able to adapt and respond to the

changing Canadian economy

We are well-positioned

for days like today and tomorrow

4


Q4 and Year-End Consolidated Highlights

($ in millions except per share amounts)

Q4 2008

Q4 2007 1

Change FY 2008 FY 2007 1 Change

Retail sales 2 3,219.6 3,015.0 6.8% 10,614.4 10,084.5 5.3%

Adjusted earnings per share 4 1.59 1.64 (3.0)% 4.85 4.96 (2.2)%

Gross operating revenue

EBITDA 3

Adjusted earnings before income

taxes (excludes non-operating gains and losses) 4

Net earnings

Adjusted net earnings (excludes nonoperating

gains and losses) 4 2,587.8

277.3

192.0

101.2

129.9

2,505.1

266.3

188.3

131.3

133.8

3.3%

4.1%

2.0%

(22.9)%

(3.0)%

9,121.3

892.7

572.5

374.2

395.3

8,606.1

881.2

599.9

411.7

404.2

6.0%

1.3%

(4.5)%

(9.1)%

(2.2)%

Basic earnings per share

1.24 1.61 (22.9)% 4.59 5.05 (9.1)%

Q4 results demonstrate the strength of our retail offering and

our ability to deliver results in a tough economy

(1) 2007 figures have been restated for the implementation, on a retrospective basis, of the CICA HB 3031 – Inventories.

(2) Represents retail sales at CTR (which includes PartSource), Mark’s corporate and franchise stores and Petroleum’s sites.

(3) EBITDA does not have a standardized meaning under Canadian GAAP. We consider EBITDA to be an effective measure of the contribution of our businesses to our profitability on an operational

basis before allocating the cost of interest, income taxes, depreciation and amortization.

(4) Non-GAAP measure.

5


2009 Strategic Priorities


Three fundamental priorities as we continue to grow and

benefit from our strong brand:

– Driving productivity and efficiency

– Investments in growth

– Enhancing financial flexibility

2009 focus will be based on a balanced approach to

maximize earnings potential

6


Focused on Productivity and Efficiency

Initiative

Future Impact / Rationale

Automotive Infrastructure

Strengthened technology platform, significantly enhanced supply chain, and

improved customer service; capture long-term top line and bottom line benefits

Canadian Tire Retail Change

Program

More efficient promotional planning, pricing management, and vendor relationship

management

Technology Renewal

Financial Services

Upgrade of the technology infrastructure that supports Canadian Tire Retail,

Petroleum and PartSource; will provide increased functionality, reduced risk, lower

operating costs and a simplified architecture

Technology investments and process improvements continue to drive down

operating costs as a percentage of receivables

7


Growth Initiatives

Initiative

Future Impact / Rationale

Real estate projects

Focused growth and upgrade of network to strengthen brand and generate returns,

including CTR capital-light formats with 10% IRR

•40 Canadian Tire Retail stores (Smart and Small Market stores)

•24 Petroleum sites

•27 Mark’s stores

•22 PartSource stores

Financial Services

Drive managed growth of receivables with benefits of relaunched cards with

PayPass capability, testing of further new credit cards, and select investments in

balance transfer offers

Reduction in gross capital expenses to $380 - $400 million in 2009 ($472 million in 2008)

Focused on managing working capital and investing in initiatives that will

deliver positive cash flow in 2009

8


New Capital-Light Store Formats

Smart Store

Next wave of renewal

Dramatically different inside, store within

store concept; Mark’s within each store

Higher productivity per square foot

Capital-light: $0.6 - $1MM per store

Test expansion into select food products,

including some frozen & refrigerated food

35 in 2009

Small Market Store

100+ underserved markets

$5-9MM revenue

Capital light design – greater use of outdoor

space; intense merchandising; Mark’s within

each store & gas bar

5 in 2009

9


Financial Flexibility

Financing Source

Committed bank lines of credit

Commercial paper program

Amount

Available

$1.22 billion

$800 million

Description

• Provided by 11 domestic and international financial institutions

• Supports the $800 million commercial paper program

• No balance drawn on bank lines as at January 3, 2009

• No commercial paper outstanding as at January 3, 2009

Medium Term Notes (MTN) program

Securitization of receivables

Broker deposits

Sale/leaseback transactions

$750 million

Transaction

specific

Market size

$66 billion

Transaction

specific

• $300 million has been issued to date under the current Base

Shelf Prospectus

• Handled through Glacier Credit Card Trust

• Financial Services has securitized $635 million of credit card

receivables in 2008

• Funds are readily available through broker networks

• Financial Services held $927 million in broker deposits at the

end of 2008

• Strategic transactions involving Company owned properties

• Completed sale and leaseback transactions that raised approx.

$214 million in proceeds in 2008

Securitization an important funding program, in the past and future, but we have alternatives

10


Financial Services - Risk Management Competencies


We have been on a journey over the last three years:

– New technologies

– Conservative credit limits

– Reduced near prime exposure


Action to manage future credit risk exposure:

– Third party review of the entire risk management function

– Reduced credit limits for cardholders

– Enhanced predictive scorecards to identify high risk customer behaviour

– Enhanced collection strategies

– Newly developed bankruptcy model scorecards

Focused on mitigating future credit risk exposure to ensure

we perform as well as we can in an economic downturn

11


Managing Portfolio Profitability

The Financial Services Business Model:

(Approximate Percentages of 2008 Average Receivables)

Gross yield including insurance 25%

Operating expenses 7.0%

Write-offs and bankruptcies 6.0%

Funding cost 5.0%

Loyalty and other 2.0%

= 5.0% ROR

We manage the level of operating expenses to drive a consistent

4.5% to 5% return on receivables

12


Financial Services 10 Year Key Metrics


Operating leverage has driven consistent performance

1998A

1999A

2000A

2001A

2002A

2003A

2004A

2005A

2006A

2007A

2008A

Credit Card (1) 7.44%

Sales ($B)

1.9

2.1

2.6

3.3

4.7

6.0

7.2

8.1

9.1

10.4

11.1

GAAR ($B)

0.9

0.9

1.1

1.2

1.6

2.1

2.5

2.8

3.1

3.5

3.7

Average Balance ($)

556

681

758

729

930

1,164

1,436

1,614

1,736

1,899

2,031

Yield

22.59%

21.94%

20.68%

19.58%

17.28%

17.19%

16.84%

16.47%

16.08%

15.64%

15.74%

Net Write-off Rate

5.95% 5.87% 5.46% 5.43% 5.03% 5.90% 5.86% 6.15% 5.98% 5.67% 6.44%

ROR (2) 5.90% 6.10% 4.42% 5.37% 5.17% 4.81% 4.89% 4.77% 5.25% 5.11% 4.93%

Total Portfolio

OPEX as a % of GAAR (3) 18.55% 18.32% 17.71% 15.15% 11.45% 10.28% 9.29% 8.37% 7.83% 7.89%

(1) Includes Retail Card & CT MasterCards

(2) Excludes Securitization Gain/(Loss), LTIP, Gain on disposal of shares and gain/(loss) on disposal of assets

(3) OPEX excludes LTIP

13


Outlook 2009/2010







Accelerate roll-out of 2 new capital-light CTR store formats

Continued network expansion at Mark’s and PartSource

Reduction in gross capital expenses from approximately $472 million in 2008 to

$380 - $400 million in both 2009 and 2010

Key productivity expenditures substantially complete: CTR change program,

automotive infrastructure, IT renewal etc.

Continued sale/leaseback activities for urban store properties and Montreal DC

Tax rates continue to decline

$150 million Debentures @ 12.1% mature in May 2010

A balanced plan for growth with a focus on

driving efficiency and productivity,

expense management and financial flexibility

14

More magazines by this user
Similar magazines