X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q2 2019 Earnings Presentation

38 slides from X5 Corporate Center's earnings presentation, Aug 15, 2019

  1. Slide 1: Q2 2019 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q2 2019 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 15 AUGUST 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 Q2 2019

    05 KEY ACHIEVEMENTS IN Q2 2019  The Company added 481 net  Revenue growth remained new stores in Q2 2019 adding strong at 14.3% in Q2 2019 net 187 th. sq. m of selling space, 85% of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at 89% of Perekrestok stores solid

  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 continued its Real wages showed a marked acceleration moderate recovery in H1 2019 despite CPI in H1 2019 with the new record lows of the food acceleration unemployment rate. However, real disposable income continued to fall 7 Y-o-y growth rates, % 1

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

    10 MACRO ENVIRONMENT (2/2) Consumer confidence slightly improved Positive growth in industrial production is in H1 2019 relative to the end of 2018. still largely based on mining sector Trading down continued declining acceleration – without significant improvement in the manufacturing sector 0 70 5

  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% 15% 14% 12% 11% 9% 10% 10%* 9% 8% 8% 9% 5% 8% 4% 2% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 X5 y-o-y revenue growth Top-10 Market Source: Infoline, X5 analysis * X5 estimates Starting from 2015,

  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 Q2 2019

    III. OPERATIONAL RESULTS Q2 2019

  16. Slide 16: Q2 2019 Results: Operational Highlights

    16 Q2 2019 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,336 23.3% 19.6% 1,212 18.0% 15.1% 19.4% 17.6% 1,168 1,184 1,162 14.1% 17.1% 15.3% 14.4% 6,464 6,599 6,786 436 5,946 6,155 421 404 381 373 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q2 2018 Q3 20

  17. Slide 17: Q2 2019 Results: X5 Net Retail Sales Summary

    17 Q2 2019 RESULTS: X5 NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln Hypermarkets Hypermarkets 21,858 21,068 55,158 65,125 Supermarkets Supermarkets +14.4% 380,852 435,588 349,395 302,265 Proximity stores Proximity stores Q2 2018 Q2 2019 KEY DRIVERS  Pyaterochka, whi

  18. Slide 18: Q2 2019 Results: Expansion Summary

    18 Q2 2019 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m Net selling space added in 14.1% Q2 2019, th. sq. m  Total store base increased to 6,786 15,260 stores as of 5,946 Hypermarkets 30 June 2019  Pyaterochka was the main driver Supermarkets (5) 21 for the store base increase with a 17

  19. Slide 19: X5 Regional Presence

    19 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 15,260, including: ― 14,385 Pyaterochka stores ― 785 Perekrestok supermarkets ― 90 Karusel hypermarkets North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 254 1,292 5

  20. Slide 20: X5 Distribution Capabilities

    20 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 30 June 2019 Space, Federal district # of DCs th. sq. m Central 587 16 6 North-Western 151 6 Volga 195 9 16 Ural 139 6 9 6 Southern 96 4 4 Siberian 18 1 1 Total 1,187 42 Centralisation levels Highlights for Q2 2019  X5 continued the implementati

  21. Slide 21: IV. Financial Results Q2 2019

    IV. FINANCIAL RESULTS Q2 2019

  22. Slide 22: Q2 2019 Results: X5 Financial Highlights

    22 Q2 2019 RESULTS: X5 FINANCIAL HIGHLIGHTS Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI) 25.4% 24.6% 24.8% 25.0% 25.2% 17.9% 18.0% 18.3% 17.3% 16.9% 19.3% 17.6% 16.9% 15.5% 24.0% 24.1% 14.3% 76.0 74.4 75.6 13.5% 109.5 111.2 67.0 12.8% 101.8 100.6 102.2 64.8 423.0 437.3 91.8 92.5 56.0 3

  23. Slide 23: Q2 2019 Results: Capital Expenditure Overview

    23 Q2 2019 RESULTS: X5 CAPITAL EXPENDITURE OVERVIEW Capex breakdown, % Capex dynamics by quarter, RUB mln 28,037 21,818 20,440 18,757 18% New store openings Refurbishments 12,414 8% Logistics Q2 2019 54% IT 14% Other expenses 6% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Source: X5 data (prepared under

  24. Slide 24: Q2 2019 Results: Debt Structure

    24 Q2 2019 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 14% RUB mln 30 Jun 2019 30 Jun 2018 28% Total Debt 212,055 224,164 Short-Term Debt 59,852 63,392 41% % of total debt 28.2% 28.3% Long-Term Debt 152,203 160,772 17% % of total debt 71.8% 71.7% Net Debt 195,112 210,390 30 Jun

  25. Slide 25: Q2 2019 Results: Adjusted SG&A Expenses Analysis

    25 Q2 2019 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q2 2019 analysis as percentage of revenue 36 b.p. 16.9% 17.3% 1 b.p. 0.7% 0.7% 0.9% 15 b.p. 1.0% 1.1% (3) b.p. 1.1% 1.9% 12.8% Third party services 1.9% (4) b.p. 0.7% Other expenses 0.8% 1.0% 4.9% (3) b.p. 4.8% Other store costs 1.9% Utilities

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

    FINANCIAL STATEMENTS (1/3) 26 PROFIT AND LOSS STATEMENT IAS 17 IFRS 16 RUB mln Q2 2019 Q2 2018 +/( - ) +/ ( - ), % Q2 2019 Revenue 437,311 382,559 54,752 14.3% 437,311 Net retail sales 435,588 380,852 54,735 14.4% 435,588 COGS (327,811) (290,771) (37,040) 12.7% (326,130) Gross profit 109,500 91,788

  27. Slide 27: Financial Statements (2/3): Balance Sheet (IFRS 16)

    FINANCIAL STATEMENTS (2/3) 27 BALANCE SHEET (IFRS 16) RUB mln 30 Jun 2019 31 Dec 2018* Total current assets 148,226 170,840 Cash & cash equivalents 16,943 24,368 Inventories 103,686 115,990 Total non-current assets 849,136 439,959 Right-of-use assets 397,369 - Net PP&E 309,555 303,802 Goodwill 98,04

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

    FINANCIAL STATEMENTS (3/3) 28 CASH FLOW STATEMENT (IAS 17 AND IFRS 16) IAS 17 IFRS 16 RUB mln Q2 2019 Q2 2018 +/( - ) +/ ( - ), % Q2 2019 Net cash generated from 31,819 13,928 17,891 128,5% 43,213 operating activities Net cash from operating activities before 36,292 28,742 7,550 26.3% 57,599 changes

  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 14,385 stores as of 5,607 th. sq. m of selling space 30 June 2019, as of 30 June 2019, 16.8% increase y-o-y 15.8% increase y-o-y Q2 2019 net retail sales – 1,158 mln of customer visits in RUB 349.4 bn, Q2 2019, 15.6% increase y-o-

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

    31 PYATEROCHKA PROXIMITY STORES SUMMARY (2/3) Q2 2019 net retail sales: Q2 2019 selling space: Q2 2019 sales densities: 15.6% increase y-o-y 15.8% increase y-o-y 2.2% 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]) 38.3% 268 266 36.1

  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 785 stores as of 815 th. sq. m. of selling space 30 June 2019, as of 30 June 2019, 13.6% increase y-o-y 15.5% increase y-o-y Q2 2019 net retail sales of 147 mln customers in Q2 2019, RUB 65.1 bn, 17.3% increase y-o-y 18.1% increase y-o-y Q2 2019 L

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

    34 PEREKRESTOK SUPERMARKETS SUMMARY (2/3) Q2 2019 net retail sales: Q2 2019 selling space: Q2 2019 sales densities: 18.1% increase y-o-y 15.5% increase y-o-y 1.0% 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

  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 90 stores as of 364 th. sq. m. of selling space 30 June 2019: as of 30 June 2019, 3.2% decrease y-o-y 5.8% decrease y-o-y Q2 2019 net retail sales: 30 mln customer visits in Q2 2019, RUB 21.1 bn 8.0% decrease y-o-y 3.6% decrease y-o-y Q2 2019 LFL Results Share of

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

    37 KARUSEL HYPERMARKETS SUMMARY (2/3) Q2 2019 net retail sales: Q2 2019 selling space: Q2 2019 sales densities: 3.6% decline y-o-y 5.8% decline y-o-y 0.5% 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]) 233 237 237 237 237 238 238 1

  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

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