Magnit · RUS:MGNT
Magnit — Investor Presentation (2007)
32 slides from Magnit's investor presentation, 2007
Slide 1: Company mission statement
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 2: 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 3: Company & Strategy
Company & Strategy
Slide 4: Our history
Our history 1994 1998 End of 1999 2006 2001-2005 Foundation of Decision to Stores Leading food retailer in Rapid regional wholesale expand into merged into Russia by number of roll-out: 1 500 distribution grocery retail Magnit stores and customers stores by the business by market discounter IPO end
Slide 5: To 2006 Magnit is:
To 2006 Magnit* is: Net sales, 2006, USD bn Number of stores*, 2006 X5 3,55 Magnit 1 893 Magnit 2,51 X5 619 7th Continent 0,96 7th Continent 123 0,0 1,0 2,0 3,0 4,0 0 500 1 000 1 500 2 000 Source: Companies; * Excluding franchised stores Source: Companies 2003** 2004 2005 2006 CAGR Net sales, millio
Slide 6: Opportunities
Opportunities Current format and Our considerable experience in food retail, economies of scale, highly sophisticated in- house logistics system and other competitive advantages will help us to succeed in hypermarket sector other food retail segments Further expansion Strengthen our position in the
Slide 7: Strategy
Strategy Organic growth in existing Increase market penetration in existing markets markets and selective Focus on expansion into cities in selected new regions with population of less than geographic expansion 500 000 and a favorable competitive situation Value-for-money product mix Focus on brand
Slide 8: Business Overview
Business Overview
Slide 9: Main Format features
Main Format features Key features Typical Magnit stores Best prices for 200 indicative SKUs in the Outstanding local market value-for-money Active price communication by priority shelving of special offers Convenient location close to customers’ homes Convenient Freestanding or on the ground floor o
Slide 10: Hypermarket Model features
Hypermarket Model features Model Highlights Projected Magnit Hypermarkets 14 Hypermarkets are already under construction Short-term expansion plans We aim to open our hypermarkets in regional cities of European part of Russia with population of 80 000--500 000 people All the Hypermarkets will be bui
Slide 11: Corporate and organizational structure
Corporate and organizational structure Group’s corporate structure Group’s operating structure (December, 2006) Southern 100% regional division CJSC Tander Food retail and wholesale Holding company for Magnit Group Central 100% regional division LLC Selta Transportation services for the Group 100% V
Slide 12: Strong regional coverage FY2006
Strong regional coverage FY2006 Demographical breakdown of store locations Store portfolio by Federal district 1 million + residents; 8.6% V olga; 28.4% 500-1000 Southern ; 41.3% up to 100 thousand thousand residents; North-Western; residents; 21.1% 43.1% 4.4% 100-500 Urals; 1.5% thousand Central; 2
Slide 13: Addressing the needs of our target customers
Addressing the needs of our target customers 30% 20% Pensioners (60+ years old) Youth (up to 30 years old) Priorities: Priorities: 1. Price 1. Assortment 2. Location 50% 2. Location 3. Assortment Families (30-60 years old) 3. Comfort 4. Comfort 4. Price Priorities: Key features: 1. Location Key feat
Slide 14: Assortment selection
Assortment selection Share of stores offering fresh and Assortment structure, FY2006 value-added products, FY2006 Alcohol, soft-drinks and beverages 24,9% Fresh categories 96,9% Meat and meat products 15,6% Salads 73,2% Dairy products 15,0% Confectionary 9,9% Chilled chicken 96,8% Cosmetics 6,7% Fis
Slide 15: Highly flexible and differentiated pricing model
Highly flexible and differentiated pricing model Mark-up criteria Mark-up adjustments Target weighted average mark- Overall necessity of a product up for the Group Competition in the area of 500 m Target audience for a product from the store Mark-up for a given product Geographical location Purchasi
Slide 16: Suppliers, purchasing and Private Label products
Suppliers, purchasing and Private Label products 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: Weekly Assortment Committee approves the 551 Own Label
Slide 17: 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 invent
Slide 18: Logistics system
Logistics system As of 12M2006 up to 68% of cost of goods sold is The company’s breakdown of shares in processed through our in-house logistics systems turnover FY2006 and the long-term target for 2010 is to increase this share to 85% FY2006 Direct delivery Automated stock replenishment system f rom
Slide 19: Well trained dedicated personnel
Well trained dedicated personnel The total number of employees in the Group exceeded 45 400 as of 31 March 2007: Average number of employees vs. average – 34 414 in-store personnel, salary, 2005-2006 – 6 673 people engaged in distribution, – 3 360 people in regional branches and 40 000 9 249 12 000
Slide 20: Store opening process varies from 1 to 3 months
Store opening process varies from 1 to 3 months Month 1 Month 2 Month 3 Considerable experience of store W W W W W W W W W W W W 1 2 3 4 1 2 3 4 1 2 3 4 openings Identification of a Preference given to leased store due to property or a land plot quick roll out in new markets Feasibility report and o
Slide 21: Summary Magnit store statistics
Summary Magnit store statistics Store portfolio, 31 December 2006 Owned and leased stores Number of stores and breakdown, FY2006 Selling space, sq. m ow ned ow ned 11.6% 24.1% 2 000 522 916 525 000 500 000 1 600 1 893 475 000 1 200 1 501 450 000 leased 425 000 800 75.9% 382 609 400 000 400 leased 37
Slide 22: Operating and financial results
Operating and financial results
Slide 23: Magnit today
Magnit today*: The leading Russian food retailer by number of stores and customers – 1 893 stores in discounter format as of FY 2006 – 640.1 million customers in 2006 – The only retail chain with presence in 608 cities and towns in European Russia as of FY 2006 Net Sales in 2006 amounted to USD 2 50
Slide 24: Regional store performance
Regional store performance Sales per store*, 2004-2006 Sales per sq. m*, 2004-2006 2282 Moscow 2 195 7 787 1 781 Moscow 7 705 6 097 1829 St. Petersburg 1 621 5 691 1 358 St. Petersburg 5 415 4 527 1568 Southern 1 270 5 868 1 053 Southern 4 938 4 089 1339 4 949 Volga 1 031 Volga 4 326 773 3 310 1218
Slide 25: LFL sales analysis
LFL sales analysis LFL 2006 to 2005*, RUR Tickets per store, LFL growth 2.80% LFL revenue growth Average ticket, LFL growth 13.19% LFL growth 3M 2007 to 3M 2006** 10.11% Average ticket, RUR 12.76% Average ticket, USD 20.71% Number of tickets 2.52% * For stores opened by July 2003 and not closed down
Slide 26: Improved operating efficiency and capital structure
Improved operating efficiency and capital structure In US$m FY* 2005 FY* 2006 YoY, % 2005 2006 net sales 1 577,7 2 505,0 58,8% cost of goods sold (1 312,9) (2 046,2) 55,9% gross profit 264,8 458,9 73,3% gross margin, % 16,8% 18,3% Current SG&A (185,9) (336,3) 80,9% Current assets; assets; 52,30% EBI
Slide 27: Profitability analysis
Profitability analysis GM dynamics, 12M2005-12M2006 SG&A expense dynamics, 12M2005-12M2006 Gross margin, 18,3% Gross Profit, million USD 16,8% million USD expense, % expense, 14,59 of sales 12,74 SG&A SG&A 365 % 459 265 201 2005 2006 2005 2006 EBITDA dynamics, 12M2005-12M2006 Changes in SG&A expense
Slide 28: Working capital and capital expenditure
Working capital and capital expenditure Inventory days, 2005-2006 Capital expenditure structure, 2006 50 Machinery and equipm ent; 20,8% 40 35 35 33 32 Other as s ets ; 30 Land and 8,6% buildings ; 20 32,8% 10 0 Cons truction 2005 2006 Other in progres s ; payables inventory inves tm ents ; 37,8% 0,
Slide 29: Consolidated balance sheet, FY2006
Consolidated balance sheet, FY2006 Source: reviewed IFRS Financial Statements 28
Slide 30: Consolidated balance sheet, FY2006
Consolidated balance sheet, FY2006 Source: reviewed IFRS Financial Statements 29
Slide 31: Consolidated cash flow statement, FY2006
Consolidated cash flow statement, FY2006 Source: reviewed IFRS Financial Statements 30
Slide 32: Consolidated cash flow statement, FY2006
Consolidated cash flow statement, FY2006 Source: reviewed IFRS Financial Statements 31