Magnit · RUS:MGNT
Magnit — 9M2007 Earnings Presentation
32 slides from Magnit's earnings presentation, 2007
Slide 1: 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 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
MATHHT Company & Strategy
Slide 4: Our history
Our history 1994 1998 End of 1999 2001-2005 2007 Foundation Decision to Stores merged Rapid regional First hypermarket of wholesale expand into into Magnit roll-out: 1 500 opened in Krasnodar business by grocery retail discounter stores by the 15 hypermarkets under Mr. Galitskiy market retail chain
Slide 5: To 2007 Magnit is:
To 2007 Magnit is: Net sales, 9M2007, USD bn Number of stores*, 9M2007 X5 3,62 Ma gnit 2 069 Magnit 2,57 X5 749 7th Continent 0,89 7th Continent 125 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 2004 2005 2006** 9M 2007* CAGR 2004-2006
Slide 6: Strong regional coverage 9M2007
Strong regional coverage 9M2007 Demographical breakdown of store locations North-Western FD: Central FD: 512 stores 80 stores Number of residents 9M2007 3 Distribution centers Up to 100 thousand 45,1% 100-500 thousand 26,8% 500-1000 thousand 19,8% Over 1 million 8,3% Source: Company data Store portf
Slide 7: 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 8: 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 9: Business Overview
Business Overview
Slide 10: Corporate & organizational structure
Corporate & organizational structure Group’s corporate structure Group’s operating structure (9M2007) Southern 100% regional division CJSC Tander Food retail and wholesale Holding company for 1% Central 99% Magnit Group LLC Alkotrading regional division Alcohol license holder for Stavropol region 99
Slide 11: 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 12: Hypermarket Format features
Hypermarket Format features New Format Highlights Projected Magnit Hypermarkets Short-term 1 operating hypermarket 15 hypermarkets are under construction expansion Target locations are cities with population plans of 80 000-500 000 people All the Hypermarkets are built in convenient locations: mainl
Slide 13: 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 14: Assortment selection
Assortment selection Share of stores offering fresh and value- Assortment structure, 9M2007 added products, 9M2007 Fresh categories 96,7% Alcohol, soft-drinks and beverages 25,07% Salads 64,7% Meat and m eat products 15,49% Dairy products 15,18% Chilled chicken 96,7% Confectionary 10,04% Cosm etics
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 Mark-up for a from the store given product Geographical location Purchasi
Slide 16: 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 shelving space: producers. 736 Own Label SKUs (9M2007) Weekly Assortment Committee approves
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 City Federal Warehousing Share in Number of Leased/ As of 9M2007 up to 70% of cost of district space, total DC serviced Owned sq.m. goods sold is processed through our turnover, % stores in-house logistics systems and the Bataysk Southern 16 576 12,7% 251 Owned long-term target is t
Slide 19: Well trained dedicated personnel
Well trained dedicated personnel The total number of employees in the Group exceeded 53 055 as of 30 September 2007: Average number of employees vs. average – 40 086 in-store personnel, salary, 2005-2006 – 7 626 people engaged in distribution, – 3 867 people in regional branches and – 1 476 people e
Slide 20: 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 21: Summary Magnit store statistics
Summary Magnit store statistics Store portfolio, 30 September 2007 Owned and leased stores breakdown, 9M2007 Number of stores and Selling space, sq. m ow ned; 2 070 593 053 600 000 owned; owned; 11,6% 24,1% 25,7% 2 020 580 000 1 970 560 000 1 920 522 916 2 069 540 000 1 870 520 000 leased; 1 820 1 8
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 – 2 069 convenience stores as of 9M2007 – 567 million customers in 9M2007 – The only retail chain with presence in 667 cities and towns in European Russia as of 9M2007 Net Sales in 9M2007 amounted to USD 2 573 million
Slide 24: 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 25: LFL sales analysis
LFL sales analysis LFL 9M2007 to 9M2006*, RUR Number of tickets, LFL growth 0.35% LFL revenue growth Average ticket, LFL growth 14.39% 13.99% LFL growth FY2006 to FY2005** Average ticket, RUR 10.11% Average ticket, USD 14.32% * Applicable to 1 043 stores opened by July 2005 Number of tickets 2.80% *
Slide 26: 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 27: Profitability analysis
Profitability analysis GM dynamics, 9M2006 - 9M2007* SG&A expense dynamics, 1H2006-1H2007** 19,3% 300,0 17,0% 600 19,5% 15,2% 500 19,0% 16,0% 200,0 400 14,2% 15,0% 17,9% 18,5% 300 249,3 14,0% 495,4 18,0% 100,0 200 152,6 13,0% 100 310,7 17,5% 0,0 12,0% 0 17,0% 1H2006 1H2007 9M2006 9M2007 SG&A e x pe
Slide 28: 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 35 35 32 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 29: Consolidated balance sheet, 1H2007
Consolidated balance sheet, 1H2007 * Reviewed IFRS Financial Statements ** Audited IFRS Financial Statements 28
Slide 30: Consolidated balance sheet, 1H2007
Consolidated balance sheet, 1H2007 29
Slide 31: Consolidated cashflow statement, 1H2007
Consolidated cashflow statement, 1H2007 * Reviewed IFRS Financial Statements 30
Slide 32: Consolidated cash flow statement, 1H2007
Consolidated cash flow statement, 1H2007 31