Magnit · RUS:MGNT
Magnit — H1 2007 Earnings Presentation
33 slides from Magnit's earnings presentation, 2007
Slide 1: 1H 2007 Results
1H 2007 Results
Slide 2: Our mission: increasing customer prosperity
We work hard to increase the prosperity of our customers by minimizing their expenditure on quality consumer goods, through: •Efficient use of the Company’s resources •On-going improvements in technology •Adequate compensation for our employees
Slide 3: Important information
Important information This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does
Slide 4: Company & Strategy
Company & Strategy
Slide 5: Our history
Our history 1994 1998 End of 1999 2001-2005 2006 Foundation of Decision to Stores Rapid regional Leading food retailer in wholesale expand into merged into roll-out: 1 500 Russia by number of distribution grocery retail Magnit stores by the stores and customers business by market discounter end of 2
Slide 6: To 1H2007 Magnit is:
To 1H2007 Magnit* is: Net sales, 1H2007, USD bn Number of stores*, 1H2007 X5 2,35 Magnit 2 009 Magnit 1,64 X5 709 7th Continent 0,59 7th Continent 125 0,0 1,0 2,0 3,0 0 500 1 000 1 500 2 000 Source: Companies; * Excluding franchised stores Source: Companies 2004 2005 2006** 1H 2007* CAGR 2004-2006 N
Slide 7: Strong regional coverage 1H2007
Strong regional coverage 1H2007 Demographical breakdown of store locations North-Western FD: Central FD: 492 stores 80 stores Number of residents 1H2007 3 Distribution centers Up to 100 thousand 44,2% 100-500 thousand 27,1% 500-1000 thousand 20,2% Over 1 million 8,5% Source: Company data Store portf
Slide 8: Opportunities
Opportunities Our considerable experience in food retail, economies of Current format and scale, highly sophisticated in-house logistics system and hypermarket sector other competitive advantages will help us to succeed in other food retail segments Strengthen our position in the regional markets (m
Slide 9: Strategy
Strategy Organic growth in Increase market penetration in existing markets existing markets and Focus on expansion into cities in selected new regions with selective geographic population of less than 500 000 and a favorable expansion competitive situation Focus on brand Value-for-money product mix
Slide 10: Business Overview
Business Overview
Slide 11: Corporate & organizational structure
Corporate & organizational structure Group’s corporate structure Group’s operating structure (1H2007) Southern 100% regional division CJSC Tander Food retail and wholesale Holding company for Central 100% Magnit Group LLC Selta regional division Transportation services for the Group 100% Volzhsky LL
Slide 12: Main Format features
Main Format features Key features Typical Magnit stores Outstanding Best prices for 200 indicative SKUs in the local market value-for- Active price communication by priority shelving of money special offers Convenient location close to customers’ homes Freestanding or on the ground floor of apartmen
Slide 13: Hypermarket Model features
Hypermarket Model features Model Highlights Projected Magnit Hypermarkets 17 Hypermarkets are already under Short-term construction expansion We aim to open our hypermarkets in plans regional cities of European part of Russia with population of 80 000-500 000 people All the Hypermarkets will be buil
Slide 14: Addressing the needs of our target customers
Addressing the needs of our target customers Families (30-60 years old) 30% Youth (up to 30 years old) 20% Priorities: Priorities: 1. Location 1. Assortment 2. Assortment 2. Location 3. Price 3. Comfort 4. Comfort 4. Price Key features: Key features: Time is of greater value than for other 50% More
Slide 15: Assortment selection
Assortment selection Share of stores offering fresh and value- Assortment structure, 1H2007 added products, 1H2007 Fresh categories 96,5% Alcohol, soft-drinks and beverages 25,03% Meat and m eat products 14,93% Salads 66,4% Dairy products 15,11% Confectionary 10,07% Chilled chicken 96,6% Cosm etics
Slide 16: Highly flexible and differentiated pricing model
Highly flexible and differentiated pricing model Mark-up criteria Mark-up adjustments Target weighted average mark-up Overall necessity of a product for the Group Competition in the area of 500 m Target audience for a product Mark-up for a from the store given product Geographical location Purchasin
Slide 17: Suppliers, purchasing & Private Label
Suppliers, purchasing & Private Label Magnit is the largest buyer for many Own Label products are designed to substitute the cheapest SKUs to domestic and international FMCG maximise returns on each metre of producers. shelving space: 730 Own Label SKUs (1H2007) Weekly Assortment Committee approves
Slide 18: Management Information System and automated stock replenishment
Management Information System (MIS) and automated stock replenishment system Clear visibility of remote markets and store performance: − Monthly consolidated P&L reports − Daily detailed management reports on Key Performance Indicators (KPIs) − Real time access to information on inventory Automated
Slide 19: Logistics system
Logistics system City Federal Space, Share in Number of Leased/ As of 1H2007 up to 70% of cost of district sq.m. total DC serviced Owned goods sold is processed through our turnover, % stores in-house logistics systems and the Bataysk Southern 16 576 6,2% 216 Owned long-term target is to increase th
Slide 20: Well trained dedicated personnel
Well trained dedicated personnel The total number of employees in the Group exceeded 49 000 as of 30 June 2007: Average number of employees vs. average – 36 656 in-store personnel, salary, 2005-2006 – 7 387 people engaged in distribution, – 3 777 people in regional branches and – 1 252 people employ
Slide 21: Store opening process varies from 1 to 3 months
Store opening process varies from 1 to 3 months Considerable experience of store openings Month 1 Month 2 Month 3 W W W W W W W W W W W W Preference given to leased store due to 1 2 3 4 1 2 3 4 1 2 3 4 quick roll out in new markets Identification of a property or a land plot Acquisitions and constru
Slide 22: Summary Magnit store statistics
Summary Magnit store statistics Store portfolio, 30 June 2007 Owned and leased stores breakdown, FY2006 Number of stores and Selling space, sq. m 2 040 580 000 Owned Owned 570 701 570 000 1 980 560 000 11,6% 24.1 % 2 009 550 000 540 000 1 920 522 916 530 000 520 000 1 860 1 893 510 000 Leased Leased
Slide 23: Operating and financial results
Operating and financial results
Slide 24: Magnit today
Magnit today*: The leading Russian food retailer by number of stores and customers – 2 009 convenience stores as of 1H2007 – 370 million customers in 1H2007 – The only retail chain with presence in 648 cities and towns in European Russia as of 1H2007 Net Sales in 1H2007 amounted to USD 1 638 million
Slide 25: Regional store performance
Regional store performance Sales per store*, 2004-2006 Sales per sq. m*, 2004-2006 2282 7 787 Moscow 2 195 Moscow 7 705 1 781 6 097 1829 5 691 St. Petersburg 1 621 St. Petersburg 5 415 1 358 4 527 1568 5 868 Southern 1 270 Southern 4 938 1 053 4 089 1339 4 949 Volga 1 031 Volga 4 326 773 3 310 1218
Slide 26: LFL sales analysis
LFL sales analysis LFL 1H2007 to 1H2006*, RUR Number of tickets, LFL growth 1.83% LFL revenue growth Average ticket, LFL growth 15.79% 13.70% LFL growth FY2006 to FY2005** Average ticket, RUR 10.11% Average ticket, USD 14.32% * Applicable to 1 072 stores opened by July 2005 Number of tickets 2.80% *
Slide 27: Improved operating efficiency and capital structure
Improved operating efficiency and capital structure In US$ mn FY2005* FY2006* YoY,% 1H2006** 1H2007** YoY,% 1H2006 1H2007 Net sales 1 577.7 2 505.0 58.8% 1 074.0 1 638.2 52.5% Cost of goods sold (1312.9) (2 046.1) 55.9% (884.8) (1 329.8) 50.3% non- current non- Gross profit 264.8 458.9 73.3% 189.2 3
Slide 28: Profitability analysis
Profitability analysis GM dynamics, 1H2006-1H2007 SG&A expense dynamics, 1H2006-1H2007 18,8% 300,0 17,0% 400 19,0% 15,2% 16,0% 300 18,5% 200,0 14,2% 15,0% 200 17,6% 18,0% 249,3 14,0% 308,4 100,0 152,6 100 17,5% 13,0% 189,2 0 17,0% 0,0 12,0% 1H2006 1H2007 1H2006 1H2007 Gross profit, US D m ln Gross m
Slide 29: Working capital and capital expenditure
Working capital and capital expenditure Inventory days, 2005-2006 Capital expenditure structure, 1H2007 50 construction machinery in progress; 40 33 32 35 35 and 37,77% 30 equipment; 20 12,52% 10 other assets; 0 4,23% 2005 2006 payables inventory land and buildings ; other 45,47% investments; Workin
Slide 30: Consolidated balance sheet, 1H2007
Consolidated balance sheet, 1H2007 * Reviewed IFRS Financial Statements ** Audited IFRS Financial Statements 29
Slide 31: Consolidated balance sheet, 1H2007
Consolidated balance sheet, 1H2007 30
Slide 32: Consolidated cashflow statement, 1H2007
Consolidated cashflow statement, 1H2007 * Reviewed IFRS Financial Statements 31
Slide 33: Consolidated cash flow statement, 1H2007
Consolidated cash flow statement, 1H2007 32