X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Goldman Sachs Russian Retail Fieldtrip, Moscow, July 2008
26 slides from X5 Corporate Center's conference presentation, July 2008
Slide 1: Leadership In Russian Food Retail
Leadership In Russian Food Retail July 2008 p. 1
Slide 2: Russian Food Retail Market
Russian Food Retail Market Total Food Retail Market Size in 2007, USD million $262bn $221bn $212bn $190bn Amongst the Largest Food $116bn $93bn Retail Market in Europe... UK France Germany Italy Spain Russia'07 Modern Format as % of Total Food Retail Market 85,0% 82,0% 80,0% 60,0% 57,0% ...But Still
Slide 3: Russian Food Retail Market
Russian Food Retail Market • Russian consumer spending growing strongly Consumer Spending – 2003-06 CAGR of 29.5% and growing to 32.3% in -07 2006 f c.32% 2007 th o Grow • The total Russian food retail market grew at 28.1% USD 578 bln -06 CAGR between 2003 and 2006 (in value terms) 2003 f c.30% Ro U
Slide 4: X5 Retail Group… a Clear Leader in the Russian Food Retail Market
X5 Retail Group… …a Clear Leader in the Russian Food Retail Market X5 today.. # Company FY 2007 Sales % in % in Total • 2007 net retail sales excluding Karusel – (USD mln) Top 10 Market USD 5,284 million, USD 3,744 million in H1 2008 • 2007 net retail sales including Karusel (1) - USD 6,115 million,
Slide 5: Company Strategy
Company Strategy Multi-Format Exposure to enable the Company to benefit in full from market growth by capturing every potential target audience Continue development of soft discount and supermarket formats Maintain Progress on Multi- Format Development Increase exposure in hypermarkets to achi
Slide 6: Strategy Diversified Across Formats
Strategy Diversified Across Formats Soft Discount 2007 LFL(2) Performance by Format Stores Based on RUR-denominated Data as at 30 June 2008 gross sales Basket Traffic 22% • 762 stores 19% 20% • Total net selling space – 17% 389,321sq. m. 6% 14% 9% • Average assortment – • Sales per sq. m. – USD 11,3
Slide 7: Strategy Diversified Across Geography
Strategy Diversified Across Geography… ...National Presence With Leading Position in Moscow and St. Petersburg 2007 Net Retail Sales by Region (1) 2007 Sales, EOP Store Locations and Selling Space (1) FY07 Net Retail Sales of USD 5,284 million Region FY07 Net Selling Net Retail No of Space 0,6% Sale
Slide 8: New Store Openings
New Store Openings … ... Through Expansion Into The European Part Of Russia & Urals Key priority area for expansion St. Petersburg Pskov Veliky Novgorod Total Area(1) Total Population(1) Regions Tver’ Cherepovez (million km2, %) (million, %) Vologda Smolensk Yaroslavl MOSCOW Kostroma European Part B
Slide 9: Selective Acquisitions
Selective Acquisitions… …Of Small Chains and Successful Franchises in Attractive Regions of European Russia and Urals # of Selling Real Estate EV Date Company Region EV/Sales Stores Space in Owner- (USD mln) (sq. m.) ship (sq.m.) June-08 Franchisee Urals 11 (24%) 0.4x 83 31,100 14,700 Rationale: get
Slide 10: Ensuring Best-In-Class Execution
Ensuring Best-In-Class Execution… … to Drive LFL Sales and Continuously Improve Sales Densities Pricing Initiatives Group 2007 and H1-08 LFL(1) Performance Based on RUR-denominated • Price offers for a group of SKUs during a gross sales certain period 25% 27% • In/out actions 20% 18% • Packaged offe
Slide 11: Enhancing Operational Efficiency
Enhancing Operational Efficiency • Growing scale means more favourable purchasing terms Supplier compared to competitors • Bonuses received from suppliers effectively reduce the Relationship cost of good purchased and support gross margin Enhancement • Centralized purchasing is in place to optimize
Slide 12: Enhancing Operational Efficiency
Enhancing Operational Efficiency Supplier Relationship Enhancement & Logistics Infrastructure Development Supplier Relationship Enhancement Logistics Infrastructure Development • Relationship with suppliers – one of our key • Total DCs area operated by X5 at 30 June competitive strengths 2008 was ap
Slide 13: Upgrading IT Systems
Upgrading IT Systems • X5 has chosen SAP for Retail as its enterprise resource planning system to provide strong platform for future growth • To facilitate control over processes ranging from strategic planning to store level operations • Introduction of system to be conducted in stages – First stag
Slide 14: X5 Track Record of Operating Performance
X5 Track Record of Operating Performance LFL(1) Gross Margins Based on RUR-denominated % of net sales gross sales 27% 25,2% 26,7% 26,4% 20% 15% 2006 2007 H1 2008 2005 2006 2007 Number Of Stores Net Selling Space 700 Thousand square meters 1 000 15 60 600 800 179 500 46 12 192 600 400 156 300 163 400
Slide 15: X5 Track Record of Financial Performance
X5 Track Record of Financial Performance ...Strong Growth Combined With Highly Attractive Margins USD mln 2007 2006 % change, y-o-y Net Sales 5,320.4 3,485.4 53% Retail 5,284.3 3,460.4 53% Gross Profit 1,403.9 928.9 51% % Gross Margin 26.4% 26.7% EBITDA 479.3 296.7 62% % EBITDA Margin 9.0% 8.5% Oper
Slide 16: X5 Track Record of Financial Performance
X5 Track Record of Financial Performance ... And Strong Cash Flow Generation USD mln 2007 2006 Net Cash From Operating Activities 427.5 316.9 Net Cash (used in) / from Investing Activities (898.8) (40.9) Net Cash (used in) / from Financing Activities 470.0 (138.1) Effect of Exchange Rate Changes on
Slide 17: H1 Operating and Financial Results
H1 Operating and Financial Results …Continuing Strong Performance Growth (H1-2008) H1 2008 LFL Breakdown per Format •61% increase in net retail sales excluding Karusel year-on-year in Based on RUR- US dollar terms to USD 3,744 mln denominated gross sales Basket Traffic 35% •Karusel’s net retail sale
Slide 18: Karusel Acquisition
Karusel Acquisition… ...Compelling Investment Proposition Significant Step-Up in Scale of #1 Position in Russian Food Retail by Revenues – Increasing Lead over X5’s Business Closest Competitor by over 60%(2) Immediate Position as a Leading Position in the Fastest Growing Food Retail Format in Ru
Slide 19: Transaction Highlights
Transaction Highlights Transaction Acquisition of 100% of shares in Formata Holding BV, owner of the Structure Karusel Hypermarket chain Value determined by formula in the Call Option Agreement Equity value: c.$925 million Transaction Value Additional $15 million paid to acquire certain inte
Slide 20: Karusel Overview
Karusel Overview Business Highlights # 5 Hypermarket Operator in Russia #5 hypermarket operator in Russia both by sales and net Net Sales, USD mln selling space as at 31 December 2007 Net Selling Space, '000 sq. m. 3 500 Strong presence in key markets 3 200 − 23 stores located in St. Petersburg
Slide 21: Significant Step-Up in Scale of Business
Significant Step-Up in Scale of Business 2007 Share in Top-10 Retailers+Karusel (1) 2007 Net Selling Space 25.1% 724 ‘000 sq.m. 21.7% 652 609 15.0% 14.3% 13.0% 351 272 224 6.4% 6.1% 5.8% 177 5.2% 4.7% 151 147 4.5% 3.4% 115 100 96 Metro Kopeyka Magnit 7th Continent Dixy O'Key X5 + Karusel Karusel Dix
Slide 22: Karusel Acquisition
Karusel Acquisition… Evolution of Russian Modern Food Retail(1) Russian Hypermarket Operators Store Count 2003 2010F [2] 16.6% 44.4% 29.4% 39 37 (2) 26 22 (2) 18 15 12 Metro X5 + Lenta Karusel Auchan X5 O'Key Karusel 40.4% Note: Figures as of 31 December 2007 43.0% 26.2% Russian Hypermarket Operator
Slide 23: Excellent Geographic Fit
Excellent Geographic Fit St. Petersburg Moscow region St. Petersburg & North West region – 15 stores in operation – 4 stores Pskov and 1 store under construction Veliky Novgorod Cherepovez Yaroslavl – 1 store opened in a test mode Tver’ Vologda Smolensk Yaroslavl Nizhny Novgorod & Dzerzhinsk – 2 sto
Slide 24: Karusel - Significant Synergy Benefits
Karusel - Significant Synergy Benefits Synergies Sources Improvement in sales per sq. m. of existing Karusel stores through Sales − Rebranding − Improvement in assortment − Layout improvement − More competitive pricing & active promotions Enhancement of X5-Karusel combined purchasing power & bet
Slide 25: USD 1 bln Rights Offering
USD 1 bln Rights Offering… ... Successfully Completed in May to Finance the Acquisition of Karusel USD1,026 mln offering of rights to eligible (1) existing GDR holders to acquire new GDRs (48.1m new GDRs at USD 21.32 per new GDR (ratio of 2:9)) New GDRs which were not subscribed for by the end o
Slide 26: Disclaimer
Disclaimer 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 or
X5 Retail Group — Goldman Sachs Russian Retail Fieldtrip, Moscow, July 2008 on 6ix