X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Deutsche Bank GEM Conference 2012
50 slides from X5 Corporate Center's conference presentation, Sep 5, 2012
Slide 1: Investor Presentation
1 Investor Presentation Gregory Madick, Executive IR Director Deutsche Bank GEM Conference New York, NY 5-7 September 2012
Slide 2: Disclaimer
Disclaimer 2 This presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or invitation to sell or issue or the solicitation of an offer to buy or acquire or subscribe for securities of X5 Retail Group N.V. or any of its subsidiaries o
Slide 3: Agenda
Agenda 3 Topic Pg I Key Corporate Milestones 4 II Recent Developments 5 III Company Overview 12 IV Strategy, Guidance & Targets 19 V Russian Retail Market & Macroeconomic Review 24 VI Summary 28 Appendix 1: Management Biographies 30 Appendix 2: Q2 Financial Results 34
Slide 4: Timeline of Key Events
Timeline of Key Events 4 Merger of Pyaterochka & Perekrestok X5 opens 3,000th store Renamed X5 Retail Group N.V. Over 1.6 bln customer visits More than 600 stores under management 577 stores added organically Presence in 21 regions Successful roll out of SAP IT platform Perekrestok
Slide 5: II Recent Developments
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Slide 6: Multi-Format Organization
Multi-Format Organization 6 2012 & beyond: Customer-Centric 2007 – 2011: Functional Organizational Structure Multi-Format Organizational Structure X5 Central Office Customer • Purchasing dept. • Marketing / Pricing Soft Discounter Hypermarket Supermarket • Logistics • IT Format Format Format • Human
Slide 7: Multi-format - Capturing Wallet Share
Multi-format - Capturing Wallet Share 7 X5 Value Proposition – A Store for Every Lifestyle, Budget & Occasion is Nearby Soft Discounters Net selling space: ~ 350 sq. m. on average Assortment: ~ 3,500 SKUs Value proposition: Convenient and efficient shopping, every day low prices, unique private labe
Slide 8: Management Team
Management Team(1) 8 X5 Senior Management Team Since Jun. 2012 – Certain CEO functions were temporarily (Acting) CEO delegated to Mr. DuCharme by Supervisory Board until the S. DuCharme appointment of a new CEO Since Jan. 2011 – Approx. 20 yrs finance CFO HR Since May 2011 – Approx. 20 yrs experienc
Slide 9: Step-Up in Managed Store Base
Step-Up in Managed Store Base 9 H1 Regional Breakdown 2008 2009 2010 2011 2012 Moscow & Central 492 598 798 1,438 1,573 St. Petersburg & North-West 311 356 408 489 515 Central and North-West regions 803 954 1,206 1,927 2,088 Centralno-Chernozemny 35 37 57 167 179 Volgo-Vyatsky 54 64 92 215 232 Privo
Slide 10: Regional Presence
Regional Presence(1) 10 Moscow & Central region Discounters: 1,263 Stores St. Petersburg & Supermarkets: 196 Hypermarkets: 17 North-West region Convenience stores: 97 • More than 607 locations Discounters: 464 Supermarkets: 34 Multi-format presence in 59 cities(2) of European Russia, Hypermarkets:
Slide 11: Internet Retail Channel - E5.ru
Internet Retail Channel - E5.ru 11 E5 Business Model E5 at a Glance • Simple navigation Russian E-commerce Market Highlights • Easy order – minimal clicks • Largest internet audience in Europe (monthly audience 50 mln) • Minimal personal information • Market size in 2011 – USD 9.0 bln, an increase o
Slide 12: III Company Overview
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Slide 13: X5 - Russia's #1 Retailer
X5 - Russia’s #1 Retailer(1) 13 Russia’s Leading Food Retailers Evolution of X5 Market Share RUR 9.1 trl Sales 2011, % in % in total # Company name USD mln(2) Top-10 market(3) RUR 7.1 trl 1 X5 15,397 29.0% 5.7% 2 Magnit 11,420 21.5% 4.2% RUR 4.9 trl 5.7% 3 Auchan 6,965 13.1% 2.6% 4.4% 4 Metro 5,405
Slide 14: Employees – Our Most Valuable Asset
Employees – Our Most Valuable Asset 14 Personnel Overview X5 Headcount and Average Salary Headcount 100 • Year-end 2011, number of X5 employees was approximately 100,000, including 79,000 in-store employees 76 68 Compensation package and benefits 21.9 • Gross average monthly salary of retail employe
Slide 15: Suppliers & Purchasing
Suppliers & Purchasing 15 Overview • Established relations with over ~5,000 leading domestic and international FMCG companies and continue to enhance and develop those relations on the back of the growing business scale • As of 2012, negotiations with suppliers based on customer-driven assortment •
Slide 16: Key Operating Metrics
Key Operating Metrics 16 Traffic, mln Average basket, USD, incl. VAT 1,639 12 11 11 1,218 10 10 995 816 605 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Net Sales and Gross Profit Dynamics Net Cash From Operations, USD mln 10,118 926 8,674 8,914 8,161 734 7,233 629 427 378 2,304 2,607 1,983 2,1
Slide 17: Corporate Governance
Corporate Governance 17 Corporate Governance Supervisory Board Audit Committee Independent Name Position (3 members) Directors(1) General Meeting of Shareholders Nomination and Mr. Hervé Defforey Chairman Remuneration Committee Mr. Mikhail Fridman Member (4 members) Supervisory Board Mr. David Gou
Slide 18: Share Capital
Share Capital(1) 18 Share Capital Shares and Trading Treasury Shares 0.11% • The Company’s shares are listed on the London Stock Exchange in the form of Global Free Float Depositary Receipts (GDRs) 32.04% • Each GDR represents an interest of 0.25 of one Alfa Group 47.86% ordinary share • Since 2008,
Slide 19: IV Strategy, Guidance & Targets
19 IV Strategy, Guidance & Targets
Slide 20: X5 Strategy
X5 Strategy 20 Experienced Management Multi-Format Customer Positioning Focus on Food Trade Area Expansion Engaged & Motivated Personnel Customer Satisfaction Cost & Shrinkage Availability on Shelf Control Powerful, Technological Advantage
Slide 21: Guidance & Targets
Guidance & Targets 21 Objective 2012 Guidance Mid-term Targets(1) Focus on • Net RUR retail sales growth of ~15% • Maintain EBITDA margin above 7% Sales & • Maintain EBITDA margin above 7% • Increase share in Russian retail market to ~7%-8% Margins • Stronger sales results, expected in 2H 2012 • Cap
Slide 22: X5 Distribution Capabilities
X5 Distribution Capabilities 22 Distribution center (DC) locations Warehouse Space(1) Space, # of Stores Region # of DCs th sq. m. Serviced(2) Central 301.6 11 1,572 North-West 80.4 5 515 North-West V. Vyatsky Urals V.-Vyatsky 23.6 2 232 Urals 38.7 4 283 Central Chernozemny 30.7 2 179 Sr.-Volzhsky 2
Slide 23: Store Opening Process
Store Opening Process 23 Soft Discounter Supermarket Hypermarket • Regional Investment Committees have autonomy to open leased Investment Committee • Format Investment Committee • CIC approval is needed stores. Owned real estate requires approval Central Investment Committee (CIC) approval is needed
Slide 24: V Russian Retail Market & Macroeconomic Review
24 V Russian Retail Market & Macroeconomic Review
Slide 25: Russian Retail Market Highlights
Russian Retail Market Highlights 25 Modern retail penetration in developing markets, 2010 Modern retail penetration in developed markets, 2010 80% Russia well below peers Russia well below peers 78% 88% 87% 83% 80% 60% 71% 48% 45% 40% 40% Czech Hungary South Poland Turkey Russia Finland France UK Ge
Slide 26: Russian Retail Market
Russian Retail Market 26 Russian Retail Market, tln RUR Russian Retail Market Structure, 2010 4 year CAGR: 15% 19.1 16.5 13.9 14.6 Modern Retail 10.9 10.0 Other 40% 8.5 48% 7.4 7.5 6.0 7.1 8.0 9.1 4.9 6.5 2007 2008 2009 2010 2011 Open Markets Food retail Non-food retail 12% Sources: X5 estimates, Ro
Slide 27: Russian Trade Market Dynamics
Russian Trade Market Dynamics 27 Contribution of trade to Russian economy Comments 20% 18% 18% • Trade sector represents one of the key contributors 16% to Russian economy: 12% 8% 8% 6% 1990 Trade input to GDP has tripled from 1990 to 3% 2010 2010 4% 2% 0% Contribution to Contribution to Contribut
Slide 28: VI Summary
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Slide 29: X5 Investment Case
29 X5 Investment Case #1 Russian Retailer(1) With Substantial Growth Opportunities • Modern food retail is one of the fastest growing industries in Russia • Solid platform for growth in Russia’s still developing, modern retail Creating market Shareholder • Store base in the high density Central (Mos
Slide 30: Appendix 1: Management Bios
30 Appendix 1: Management Bios
Slide 31: Management Team Biographies
Management Team Biographies 31 Stephan DuCharme, Acting CEO & X5 Retail Group Supervisory Board Member Chief Executive In June 2012, the Supervisory Board delegated Mr. DuCharme special duties to provide more intensive supervision and council to the Officer Company’s executive board in the absence o
Slide 32: Management Team Biographies
32 Management Team Biographies Frank Michael Mros, General Director of Soft Discounter Format Year of birth: 1963 Expertise: Frank will join X5 in June 2012. He has over 18 years of retail industry experience in Europe with the leading German discounter chain Lidl. He began his career at Lidl as a r
Slide 33: Management Team Biographies
Management Team Biographies 33 Anton Mironenkov, Mergers, Acquisitions and Business Development Director Year of birth: 1976 Expertise: Anton joined X5 as Deputy Director in September 2006. From 2005 to 2006 Anton managed various projects in Alfa Group including the merger of Pyaterochka and Perekre
Slide 34: Appendix 2: Financial Results
34 Appendix 2: Financial Results
Slide 35: Summary Highlights – Q2 & H1 2012
Summary Highlights – Q2 & H1 2012 35 Our Business • Russia's largest food retailer in terms of sales – 5.7% of total food retail market(1) • Multi-format brand retail operator: Pyaterochka (Soft Discounter), Perekrestok (Supermarket), Karusel (Hypermarket) plus assorted brand name convenience stores
Slide 36: Key Macroeconomic Indicators
Key Macroeconomic Indicators 36 JAN FEB MAR APR MAY JUN % change, y-o-y 2012 2012 2012 2012 2012 2012 Retail turnover 7.4% 7.9% 7.4% 6.5% 6.8% 6.9% Food retail turnover, incl. drinks and tobacco 5.2% 5.2% 5.3% 4.1% 4.8% 4.0% Inflation (CPI) 4.2% 3.7% 3.7% 3.6% 3.6% 4.3% Inflation (CPI), food product
Slide 37: Financial Overview – Q2 2012 vs. Q2 2011
37 Financial Overview – Q2 2012 vs. Q2 2011
Slide 38: Financial Highlights
Financial Highlights 38 Q-o-Q Y-o-Y USD mln Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 +/( - )% +/( - )% Retail sales 4,006.0 3,610.7 3,954.6 3,862.0 3,981.8 3.1% (0.6)% Total revenues 4,021.4 3,623.0 3,965.3 3,870.7 3,987.9 3.0% (0.8)% COGS 3,075.2 2,784.7 2,984.4 2,923.5 3,077.6 5.3% 0.1% Gross profi
Slide 39: SG&A Breakdown
SG&A Breakdown 39 % of Net % of Net % of Net % of Net Q2 2011 Q2 2012 USD mln Q1 2012 Q2 2012 Sales Sales Sales Sales (320.5) 8.0% (324.5) 8.1% Staff Costs (342.4) 8.8% (324.5) 8.1% (146.8) 3.7% (144.6) 3.6% Lease Expenses (151.3) 3.9% (144.6) 3.6% (56.2) 1.4% (61.9) 1.6% Other Store Costs (61.3) 1.
Slide 40: Cash Flow Highlights
Cash Flow Highlights 40 USD mln Q2 2012 Q2 2011 +/( - ) +/( - )% Net Cash Flows (Used in)/Generated from Operating Activities 68.8 (65.6) 134.4 n/a Net Cash from Operating Activities before Changes in Working Capital 275.0 293.3 (18.3) (6.2) % Change in Working Capital (85.3) (241.7) 156.4 (64.7) %
Slide 41: Capital Expenditures Overview
Capital Expenditures Overview 41 Q2 2012 Capital Expenditures Breakdown Net Cash Flows From Investing Activities, USD mln IT &Other 17% 397.6 Reconstruction & Maintenance 226.6 14% 194.5 171.6 180.4 Logistics 98.2 3% New Store Openings 67% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 In Q2 2012,
Slide 42: Condensed Balance Sheet
Condensed Balance Sheet 42 USD mln 30 June 2012 31 December 2011 +/( - ) +/( - )% Total current assets 1,803.0 2,051.2 (248.2) (12.1) % incl. Cash & cash equivalents 166.0 385.0 (219.0) (56.9) % incl. Inventories 837.9 895.0 (57.1) (6.4) % Total non-current assets 6,753.0 6,759.0 (6.0) (0.1) % incl.
Slide 43: Debt Structure
Debt Structure 43 Debt profile Debt portfolio maturity, USD mln (2) % in % in USD mln 31-Mar-12 30-Jun-12 1,048 1,057 total total 955 Total Debt 3,997.1 3,691.4 280 Short-Term Debt 1,091.9 27.3% 1,170.1 31.7% 647 935 Long-Term Debt 2,905.2 72.7% 2,521.3 68.3% 955 768 Net Debt / (Net Cash) 3,808.3 3,
Slide 44: 2012 YTD Expansion Update
2012 YTD Expansion Update Number of Stores Opened, net Selling Space Added, net sq.m. + 92 stores 334 + 39,185 sq.m. 96,432 242 57,247 7M 2011 7M 2012 7M 2011 7M 2012 Acceleration of expansion y-o-y in 7M 2012: ~40% more stores opened adding ~70% more selling space 44
Slide 45: 2012 YTD Net RUR Retail Sales Dynamics
2012 YTD Net RUR Retail Sales Dynamics Total Net Retail Sales Growth, % y-o-y Soft Discounter Net Retail Sales Growth, % y-o-y (1) + 22 % + 15 % + 18 % + 17 % + 11 % + 10 % + 10 % +5 % Apr-12 May-12 Jun-12 Jul-12 Apr-12 May-12 Jun-12 Jul-12 Supermarkets Net Retail Sales Growth, % y-o-y (1) Hypermark
Slide 46: 2012 YTD RUR LFL Sales Dynamics
2012 YTD RUR LFL Sales Dynamics Total LFL Sales Growth, % Soft Discounters LFL Sales Growth, % +3 % +7 % +3 % +3 % (1 %) (2 %) (5 %) (3 %) Apr-12 May-12 Jun-12 Jul-12 Apr-12 May-12 Jun-12 Jul-12 Supermarkets LFL Sales Growth, % Hypermarkets LFL Sales Growth, % +2 % (2 %) (5 %) (10 %) (6 %) (13 %) Ap
Slide 47: 2012 YTD RUR Sales: Traffic and Basket
2012 YTD RUR Sales: Traffic and Basket Total X5 Sales Growth, % Soft Discounters Sales Growth, % (1) Total basket growth, % Total traffic growth, % Total basket growth, % Total traffic growth, % 20% 11% 14% 16% 17% 14% 10% 9% 3% 6% 0% 0% -4% -1% -5% -3% Apr-12 May-12 Jun-12 Jul-12 Apr-12 May-12 Jun-
Slide 48: 2012 YTD LFL RUR Sales: Traffic & Basket
2012 YTD LFL RUR Sales: Traffic & Basket Total X5 LFL Sales Growth, % Soft Discounters LFL Sales Growth, % LFL basket growth, % LFL traffic growth, % LFL basket growth, % LFL traffic growth, % 0% 1% 3% 1% 5% -1% -1% 1% 0% -3% 3.9% 2% -4% 0% -1% -2% Apr-12 May-12 Jun-12 Jul-12 Apr-12 May-12 Jun-12 Ju
Slide 49: 2012 YTD Convenience Store RUR Results
2012 YTD Convenience Store RUR Results Net Retail Sales Growth, % LFL Sales Growth, % 69 % 61 % +9 % +9 % 57 % +7 % 44 % +4 % Apr-12 May-12 Jun-12 Jul-12 Apr-12 May-12 Jun-12 Jul-12 Net Retail Sales, mln USD Comments • Rapidly developing format operating under Perekrestok 405 Express and Kopeyka bra
Slide 50: Contact Information
Contact Information 50 IR Department Contact Details Gregory Madick Anastasiya Kvon Andrey Napolnov Executive IR Director IR Director Senior IR manager X5 Retail Group N.V. X5 Retail Group N.V. X5 Retail Group N.V. 28 bldg., 4, Sr. Kalitnikovskaya, 28 bldg., 4, Sr. Kalitnikovskaya, 28 bldg., 4, Sr.