X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q4 2018 Earnings Presentation

38 slides from X5 Corporate Center's earnings presentation, Mar 20, 2019

  1. Slide 1: Q4 2018 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q4 2018 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 20 MARCH 2019

  2. Slide 2: Disclaimer

    02 DISCLAIMER T his presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or This presentation includes statements that are, or may be deemed to be, “forward- looking statements”, with respect to the financial The information and opi

  3. Slide 3: I. Highlights

    I. HIGHLIGHTS

  4. Slide 4: Strategic Highlights

    04 STRATEGIC HIGHLIGHTS  X5 is a true multi-format retailer with focus on the three largest segments of Russian food retail market and primarily on proximity stores and supermarkets  According to the new strategy X5 uses smart and balanced approach to expansion  X5 reinforced its market leadershi

  5. Slide 5: Key Achievements in Q4 and FY 2018

    05 KEY ACHIEVEMENTS IN Q4 AND FY 2018  The Company added 746 net  Revenue growth remained new stores in Q4 2018 adding strong at 16.9% in Q4 2018 net 309 th. sq. m of selling and 18.3% in FY 2018 space, 89% of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at 86%

  6. Slide 6: Operational Highlights

    06 OPERATIONAL HIGHLIGHTS Net retail sales dynamics, RUB bn LFL sales, % y-o-y growth CAGR 2014-2018: 24.6% CAGR 2016-2018: 21.9% 18.5% 13.7% 1,525 1,287 9.8% 1,026 7.7% 804 5.4% 632 1.5% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Selling space, th. sq. m Number of stores, end of period CAGR

  7. Slide 7: Financial Highlights

    07 FINANCIAL HIGHLIGHTS Revenue dynamics, RUB bn Gross profit & gross margin CAGR 2014-2018: 24.7% CAGR 2014-2018: 24.3% CAGR 2016-2018: 21.8% CAGR 2016-2018: 21.6% 18.3% 24.5% 24.5% 24.2% 23.9% 24.1% 1,533 19.7% 1,295 1,034 370 809 309 634 250 155 198 2014 2015 2016 2017 2018 2014 2015 2016 2017 20

  8. Slide 8: II. Market Overview

    II. MARKET OVERVIEW

  9. Slide 9: Macro Environment (1/2)

    09 MACRO ENVIRONMENT (1/2) Real food retail trade resumed its Real income remained weak in Q4 2018 moderate recovery in Q4 2018 despite despite persisting growth in real wage and CPI food acceleration low unemployment rate 12 Y-o-y growth rates, % 11 Y-o-y growth rates, % 0.6 9 10 7 0.4 8 5 0.2 6 3

  10. Slide 10: Macro Environment (2/2)

    10 MACRO ENVIRONMENT (1/2) Consumer confidence halted its recovery Positive growth in industrial production is in H2 2018. Trading down continued largely based on mining sector acceleration declining but remained high – without significant improvement in the manufacturing sector 0 70 56 68 6 (5) 54

  11. Slide 11: Recent Food Retail Market Trends…

    11 RECENT FOOD RETAIL MARKET TRENDS… KEY TRENDS DESCRIPTION CONCLUSIONS  Consumers are raising the bar on  Opportunity to improve Changing consumer product quality and costumer competitiveness through service behavior experience and personalisation  Consumer preferences shift towards Increasing p

  12. Slide 12: …and X5's Response

    12 …AND X5’S RESPONSE KEY TRENDS X5 RESPONSE  Constant adaptation of CVPs to customers’ needs leveraging extensive Changing consumer knowledge from our loyalty programs across all formats behavior  Personalised offers based on the loyalty programmes Increasing popularity of  Improving the quality

  13. Slide 13: X5 vs. Russian Food Retail in Top-Line Growth

    13 X5 VS. RUSSIAN FOOD RETAIL IN TOP-LINE GROWTH 33% 28% 28% 30% 25% 23% 21% 21% 20% 19% 18% 18% 14% 12% 11% 9% 10% 9% 8% 9% 5% 8% 4% 2% 2011 2012 2013 2014 2015 2016 2017 2018 X5 y-o-y revenue growth Top-10 Market Source: Infoline, X5 analysis Starting from 2015, X5 has constantly outperformed the

  14. Slide 14: Russian Retail Market Snapshot

    14 RUSSIAN RETAIL MARKET SNAPSHOT Top 10 Russian food retailers % market share % market share # Company name 2017 2018 1 Х5 9.5% 10.7% 2 Magnit 7.5% 7.7% 3 Lenta 2.5% 2.8% 4 SPS Holding (Red and White) 1.8% 2.4% 5 Dixy 2.1% 2.1% 6 Auchan 2.2% 1.9% 7 Metro 1.4% 1.3% 8 O‘Key 1.2% 1.1% 9 Monetka 0.6% 0

  15. Slide 15: III. Operational Results Q4 2018

    III. OPERATIONAL RESULTS Q4 2018

  16. Slide 16: Q4 2018 Results: Operational Highlights

    16 Q4 2018 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,184 1,212 27.4% 26.0% 23.3% 23.4% 20.2% 1,168 19.6% 18.0% 19.4% 17.6% 17.1% 1,041 1,011 6,464 5,946 6,155 421 5,480 5,733 359 381 373 350 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q4 2017 Q1 20

  17. Slide 17: Q4 2018 Results: Net Retail Sales Summary

    17 Q4 2018 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln Hypermarkets Hypermarkets 25,967 26,095 Supermarkets 54,624 67,215 Supermarkets +17.1% 359,467 420,883 276,443 Proximity stores 326,513 Proximity stores Q4 2017 Q4 2018 KEY DRIVERS  Pyaterochka, which

  18. Slide 18: Q4 2018 Results: Expansion Summary

    18 Q4 2018 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m Net selling space added in 18.0% Q4 2018, th. sq. m  Total store base increased to 14,431 stores as of 6,464 (0) 31 December 2018 5,480 Supermarkets  Pyaterochka was the main driver 53 for the store base increase with a 256 th. sq.

  19. Slide 19: X5 Regional Presence

    19 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 14,431, including: ― 13,522 Pyaterochka stores ― 760 Perekrestok supermarkets ― 94 Karusel hypermarkets North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 242 1,174 5

  20. Slide 20: X5 Distribution Capabilities

    20 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 31 December 2018 Space, Federal district # of DCs th. sq. m Central 600 17 5 North-Western 131 5 Volga 195 9 17 Ural 139 6 9 6 Southern 96 4 4 Siberian 18 1 1 Total 1,179 42 Centralisation levels Highlights for Q4 2018  X5 continued the implemen

  21. Slide 21: IV. Financial Results Q4 2018

    IV. FINANCIAL RESULTS Q4 2018

  22. Slide 22: Q4 2018 Results: Financial Highlights

    22 Q4 2018 RESULTS: FINANCIAL HIGHLIGHTS Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI) 24.6% 23.0% 17.7% 18.2% 16.9% 17.9% 18.0% 19.9% 19.3% 17.6% 24.1% 16.9% 23.8% 23.8% 24.0% 101.8 76.0 91.8 92.5 64.8 67.0 423.0 85.9 83.7 64.0 63.9 361.7 382.6 375.5 351.5 Q4 2017 Q1 2018 Q2 2018 Q3 20

  23. Slide 23: Q4 and FY 2018 Results: Capital Expenditure

    23 Q4 AND FY 2018 RESULTS: CAPITAL EXPENDITURE Capex breakdown, % Capex dynamics by quarter, RUB mln 18% 38,131 11% Q4 2018 55% 11% 28,037 New store openings 5% Refurbishments 20,440 Logistics 18,757 16,433 13% Maintenance 10% IT and other FY 2018 9% 61% 8% Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 So

  24. Slide 24: Q4 2018 Results: Debt Structure

    24 Q4 2018 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 29% RUB mln 31 Dec 2018 31 Dec 2017 Total Debt 207,764 194,296 32% Short-Term Debt 60,435 58,674 % of total debt 29.1% 30.2% 39% Long-Term Debt 147,329 135,622 % of total debt 70.9% 69.8% Net Debt 183,396 166,691 31 Dec 201

  25. Slide 25: Q4 2018 Results: Adjusted SG&A Expenses Analysis

    25 Q4 2018 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q4 2018 analysis 12M 2018 analysis as percentage of revenue as percentage of revenue 18.0% 29 b.p. 17.7% 17.7% 91 b.p. 0.9% (10) b.p. 1.0% 0.8% (2) b.p. 16.8% 1.6% 47 b.p. 1.1% 1.1% 21 b.p. 0.8% (15) b.p. 1.2% 1.1% (7) b.p. 0.9% 1.1% 1.2% 2.1%

  26. Slide 26: Financial Statements (1/3): Profit and Loss Statement

    FINANCIAL STATEMENTS (1/3) 26 PROFIT AND LOSS STATEMENT +/ ( - ), +/ ( - ), RUB mln Q4 2018 Q4 2017 +/( - ) 12M 2018 12M 2017 +/( - ) % % Revenue 422,955 361,705 61,250 16.9% 1,532,537 1,295,008 237,529 18.3% Net retail sales 420,883 359,467 61,416 17.1% 1,525,015 1,286,949 238,066 18.5% COGS (321,1

  27. Slide 27: Financial Statements (2/3): Balance Sheet

    FINANCIAL STATEMENTS (2/3) 27 BALANCE SHEET RUB mln 31 Dec 2018 31 Dec 2017 +/( - ) +/( - )% Total current assets 170,840 159,273 11,567 7.3% Cash & cash equivalents 24,368 27,605 (3,237) (11.7)% Inventories 115,990 99,300 16,690 16.8% Total non-current assets 439,959 405,985 33,974 8.4% Net PP&E 30

  28. Slide 28: Financial Statements (3/3): Cash Flow Statement

    FINANCIAL STATEMENTS (3/3) 28 CASH FLOW STATEMENT 12M 12M RUB mln Q4 2018 Q4 2017 +/( - ) +/( - )% +/( - ) +/( - )% 2018 2017 Net cash generated from operating 42,255 21,060 21,195 100.6% 98,034 58,658 39,376 67.1% activities Net cash from operating activities before changes 30,101 24,268 5,833 24.0

  29. Slide 29: Appendix: Performance Summary of Key Formats

    APPENDIX PERFORMANCE SUMMARY OF KEY FORMATS

  30. Slide 30: Pyaterochka Summary (1/3)

    PYATEROCHKA SUMMARY (1/3) 30 RUSSIA’S #1 PROXIMITY NETWORK BY REVENUE 13,522 stores as of 5,291 th. sq. m of selling space 31 December 2018, as of 31 December 2018, 20.5% increase y-o-y 19.5% increase y-o-y Q4 2018 net retail sales – 1,032 mln of customer visits in RUB 326.5 bn, Q4 2018, 17.0% incre

  31. Slide 31: Pyaterochka Summary (2/3)

    31 PYATEROCHKA SUMMARY (2/3) Q4 2018 net retail sales: Q4 2018 selling space: Q4 2018 sales densities: 18.1% increase y-o-y 19.5% increase y-o-y 4.6% decline y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 36.1% 39.2% 275 37.4%38.3% 272 268

  32. Slide 32: Pyaterochka Summary (3/3): Strategy Overview

    PYATEROCHKA SUMMARY (3/3) 32 STRATEGY OVERVIEW  Maximise the share of customers, and maximise share of these customers’ wallet: − Further adaptation of CVP and assortment − Leadership in NPS and service level − Decrease personnel turnover; improve loyalty − Improvement in operational efficiency, in

  33. Slide 33: Perekrestok Summary (1/3)

    PEREKRESTOK SUMMARY (1/3) 33 RUSSIA’S #1 SUPERMARKET 760 stores as of 782 th. sq. m. of selling space 31 December 2018, as of 31 December 2018, 19.1% increase y-o-y 22.6% increase y-o-y Q4 2018 net retail sales of 141 mln customers in Q4 2018, RUB 67.2 bn, 24.2% increase y-o-y 23.0% increase y-o-y Q

  34. Slide 34: Perekrestok Summary (2/3)

    34 PEREKRESTOK SUMMARY (2/3) Q4 2018 net retail sales: Q4 2018 selling space: Q4 2018 sales densities: 23.0% increase y-o-y 22.6% increase y-o-y 0.8% increase y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 25.5% 324 326 326 327 326 24.9% 31

  35. Slide 35: Perekrestok Summary (3/3): Strategy Overview

    PEREKRESTOK SUMMARY (3/3) 35 STRATEGY OVERVIEW  Fine-tuning value proposition and adapting to customer needs: − Further adaptation of assortment with focus on fresh, F&V, ready-to-eat − Omni-channel development − Targeted loyalty system and personalised promo − Best-in-class service, further increa

  36. Slide 36: Karusel Summary (1/3): Highlights

    KARUSEL SUMMARY (1/3) 36 HIGHLIGHTS 94 stores as of 382 th. sq. m. of selling space 31 December 2018: as of 31 December 2018, 1.1% increase y-o-y 0.8% decrease y-o-y Q4 2018 net retail sales: 35 mln customer visits in Q4 2018, RUB 26.1 bn, 3.3% decrease y-o-y 0.5% increase y-o-y Q4 2018 LFL Results

  37. Slide 37: Karusel Summary (2/3)

    37 KARUSEL SUMMARY (2/3) Q4 2018 net retail sales: Q4 2018 selling space: Q4 2018 sales densities: 0.5% increase y-o-y 0.8% decrease y-o-y 1.6% increase y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 14.5% 233 237 237 237 237 227 229 10.7%

  38. Slide 38: Karusel Summary (3/3): Strategy Overview

    KARUSEL SUMMARY (3/3) 38 STRATEGY OVERVIEW  Increasing sales density and increasing customer loyalty: − Further adapt assortment − Improve price perception − Increase share of private label − Expand omni-channel offering & digital innovations − Improve personnel engagement − Reduce lease costs, shr

X5 Retail Group — Q4 2018 Earnings Presentation on 6ix