the north west company edward kennedy, president & ceo
TRANSCRIPT
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Presentation by
Edward Kennedy, President & CEO
The North West Company
Manitoba Investment Forum; November 10, 1999
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“WHY INVEST IN NORTH WEST?”
1. Who We Are
2. Our Investor Values
4. Yield
3. Growth
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“Our vision is to be the mostsuccessful small market
retailer in North America.”
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Stores - Canada (142) $470 million
Stores - Alaska (26) $150 million
Catalogue - Canada $ 25 million
E-Commerce -----
REVENUE BY CHANNEL
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“WHY INVEST IN NORTH WEST?”
1. Who We Are
2. Our Investor Values
4. Yield
3. Growth
!
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VALUES we strive to be known for...
customer
community
employee
INVESTOR
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“To our investors, we want tobe known for delivering total
returns that achieve topquartile performance
measured against otherpublicly-traded companies in
North America.”
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“WHY INVEST IN NORTH WEST?”
1. Who We Are
2. Our Investor Values
4. Yield
3. Growth
!
!
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GROWTH
" Grow with the North
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Source: Statistics Canada Census 1996
49%34%
Population Under 25Years of Age
NWC Markets
CanadianAverage
Northern CanadaGrowth Rate
CanadianGrowth Rate
2.3%1.1%
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ECONOMIC DRIVERSECONOMIC DRIVERS
Populationgrowth,Political action,Land claims
Increased spending onhousing &infrastructure
Increased employment, spending in all non-food categories
NATURAL RESOURCES MARKET
New capacity Jobs, overtime,increasedemployment andspendingin all non-foodcategoriesABORIGINAL MARKET
Resource pricecycle
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GROWTH
" Grow with the North
# Increase market share
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MARKET SHARE BY CUSTOMER TYPE
“Convenience, creditand impulse-driven atlow price points”
% ofTotalMarket
NWC50%
Outshopping50%
LocalCompetition
30%
Outshopping40%
LocalCompetition
25%
LocalCompetition
20%
NWC30%
60% 25% 15%
“Quality andselection-drivenat medium pricepoints”
“Trend-drivenyouth customers”
Outshopping25%
NWC30%
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MARKET SHARE GROWTH STRATEGIES
$ More store space for food and convenience-driven needs
$ More catalogue space for selection-drivenneeds
$ Lower price points$ Better execution in foods$ Invest in complementary services
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GROWTH
" Grow with the North
# Increase market share
% Achieve potential in Alaska
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& Streamline support costs
ALASKA STRATEGIES
& Focus on food and everyday needs
& Invest in high potential locations
& Build expertise and “brand”
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ACHIEVE POTENTIAL IN ALASKA
$0.6
$3.6
$6.3
$2.2
$3.3
$2.2
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
1995 1996 1997 1998 19986Mos.
19996Mos.
EBITDA $
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ACHIEVE POTENTIAL IN ALASKA
0.5
4.73.01.9
11.310.712.1
10.1
02468101214
1995 1996 1997 1998
Alaska Canada
EBITDA %%
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GROWTH PERFORMANCE 1995 - 1999*
$0.68
$1.18$1.40
$1.82
$0.70$0.92
$0.00
$0.50
$1.00
$1.50
$2.00
1995 1996 1997 1998 19986Mos.
19996Mos.
Earnings Per Unit BeforeUnusual Items
* Earnings per share for 1995 - 1997
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“WHY INVEST IN NORTH WEST?”
1. Who We Are
2. Our Investor Value
4. Yield
3. Growth
!
!
!
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100% - 15 M units100% - 15 M units
NWF STRUCTURENWF STRUCTURE
UNITHOLDERS
100% - sub debt $175 M100% common 15 M shares
NWF
NWC
$11.67 sub debt @ 12.5%1 common share
EACH UNIT
NWF
NWC
Income distributable per unit:1999 - 1.44
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$37.9$33.3
$44.1 $42.2$45.1
$22.0
0.00
10.00
20.00
30.00
40.00
50.00
PRE-TAX CASH FLOW
1994 1995 19961997
1998
$ in millions
1999
6 Mos.
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DEBT : EQUITY
177 175 172 172
178
$ Millions
169160 147 160
164
140
1.3
1.1
1.3
1.1
1.2
1.1
0
50
100
150
200
250
1994 1995 1996 1997 1998 SA 99
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
Debt Equity debt : equity
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“WHY INVEST IN NORTH WEST?”
1. Strong, focussed retailer withdeliverable plans
2. Earnings growth potential of10% +
3. Yield potential of 10% +
+
+
= Total returns of 20% +
!
!
!
!
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QUESTIONS?
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For additional information on the Fund orthe Company, please call 204-934-1501 ortoll-free 1-800-563-0002; fax 204-934-1317;e-mail [email protected]….or visit ourweb site www.northwest.ca.
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MERCHANDISING INDICES:MERCHANDISING INDICES:
FOOD STORES 57.8%
NWF.UN 18.5%
SPECIALITY STORES 14.0%
TSE 2.1%
MERCHANDISING 0.3%
DEPARTMENT STORES -21.1%
WHOLESALE DIST. -31.1%
HOSPITALITY -54.7%
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OTHER COMPARABLES:
Canadian Tire 41.10 1.0 19.2Sears Canada 26.00 0.9 18.3Wal-Mart 95.38 0.4 49.7
Empire 25.30 1.1 5.5Loblaws 40.50 0.5 38.2Safeway 51.50 -- 32.9
NWF.UN 14.35 8.3 7.9*
* Does not include a $0.74 charge related to Canadian re-structuring
ClosedApr.5 /99 Yield % P/E
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& Leverage local market knowledge curve
% Accelerate Alaska Performance Trend
& Increase “mid-sized” new store growth rate
& Move on opportunities created by localmarket consolidations
& Exit “can’t be fixed” locations
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& Expand in-store offer for food, everyday needsand financial services
# Increase Canadian Market Share
& Expand catalogue offer for apparel, AF&E
& Shift to more “extreme value” price points
& Build people capability in foods
& Achieve 5% comp. sales growth by 2000
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" Achieve Canadian productivitygains
“V2K+” GROWTH STRATEGIES
# Increase Canadian market share
% Accelerate Alaska performancetrend
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