X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Investor Presentation (September 2009)
40 slides from X5 Corporate Center's investor presentation, September 2009
Slide 1: Profitable Growth & Long-Term Leadership
Profitable Growth & Long-Term Leadership Investor Presentation September 2009 p. 1
Slide 2: 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
Slide 3: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership II. Q2 & H1 Financial Review Appendices p. 3
Slide 4: X5 - #1 Russia's Retailer
X5 - #1 Russia’s Retailer X5 Retail Group today Russia’s leading food retailers • 2008 pro-forma(1) net sales - USD 8,892 mln; growth on 2007 of 45% on pro-forma, 57% - on consolidation basis # Company FY 2008 % in % in Total Net Retail Top-10 Market (4) • Market position: # 1 Sales (USD mln) • #1 p
Slide 5: X5's Strategic Priorities
X5’s Strategic Priorities • Build multi-format success • Strengthen value propositions • Drive LFL and top line growth Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 5
Slide 6: X5 Multi-Format Approach
X5 Multi-Format Approach X5 Operates Stores for Every Lifestyle and Family Budget Soft Discounters Net selling space: from 300 to 800 sq.m. Average assortment: 3,000 SKUs Pricing policy: Lowest price in the market on 100% of assortment s store Format strengths: Price and convenience 900 f sales o 53
Slide 7: Consumer Confidence
Consumer Confidence…. …Was Substantially Affected by the Economic Crisis Consumer Confidence at Lowest Level Since ‘99 Rosstat’s Consumer Confidence Index(1) • Russian consumer confidence index (CCI) 5% dropped to -35% in Q1 2009 -5% • It is the lowest level of CCI since Q4 1999 -15% -25% • In Q2 09
Slide 8: New Trading Environment
New Trading Environment… … was Reflected in X5’s H 1 2009 Operating Results X5’s H1 ’09 LFL Performance by Region Supermarkets’ H1 ‘09 LFL Performance Based on RUR- Based on RUR- Traffic Basket Traffic Basket denominated gross sales denominated gross sales + 10% + 16% + 9% + 6% + 12% 9% 11% 7% 8% +
Slide 9: X5's Competitive Position
X5’s Competitive Position X5’s LFL Performance is Stable vs Competition Thanks to Multi-Format Approach X5 LFL Performance vs Competition LFL Sales Growth Magnit(1) 25% Seventh Continent (1) (1) 19% Dixy 20% X5 15% 14% 15% 15% 11% 13% 10% 8% 9% 5% 7% 5% 2% 0% Q4 2008 Q1 2009 Q2 2009 -5% -4% (1) Base
Slide 10: Value Propositions
Executing for Long-Term Multi-Format Success Fine-Tuning of Formats’ Value Proposition to Match Long-Term Leadership Goal Soft • Best price in the market on 100% of assortment Lower-income & Discounters • Assortment optimization towards lower price points price-focused customers • Private label deve
Slide 11: Evolving X5's Private Label Concept
Evolving X5’s Private Label Concept Aligning Private Label Strategy to Enhance Multi-Format Leverage and Margins Low Price Segment Medium Price Segment Premium Segment Price Leaders Margin Builders Margin Builders “Red Price” Multiple Single Brand Single Brand Brands NT PME Single Brand LO T VE EN L
Slide 12: X5's Strategic Priorities
X5’s Strategic Priorities • Build supply chain advantages • Drive efficiency and margins • Ensure support for long-term growth Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 12
Slide 13: X5's Strategic Efficiency Program
X5’s Strategic Efficiency Program Supply Chain Management Efficiency Asset IT Systems Efficiency Integration Operational Excellence In-Store Business Labour Processes Productivity Improvement p. 13
Slide 14: Logistics Development
Logistics Development… … Has Been the Company’s Focus since 2007… DC locations as at Fruit & Region # of DCs 000 sq. m. Dry Veg Fresh Frozen 30 June 2009 Central 7 112.1 v v v v North-West 4 44.5 v v v v Volgo-Vyatsky 1 17.5 v v v Urals 5 18.2 v v v Centralno-Chernozemny 2 10.7 v v v Sredne-Volzhsky
Slide 15: Supply Chain Efficiency
Supply Chain Efficiency … Now We are Bringing It to a New Level… … to Create a Fully Integrated & Efficient Supply Chain Purchasing/ Optimal Warehouse Efficient Efficient Sourcing DC Network Productivity Transportation In-Store Structure Logistics Areas of Focus • Assortment • Optimization of DC • W
Slide 16: Transformation of X5's IT Systems
Transformation of X5’s IT Systems… … Supporting Company-Wide Efficiency and Scalable Growth with Integrated ERP Platform Current Status 2012 IT Infrastructure In-Store: • Unified IT platform at supermarkets and hypermarkets, different platform at discounters Stores Logistics: • Several warehouse man
Slide 17: Transformation of X5's IT Systems Roadmap
Transformation of X5’s IT Systems Roadmap 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 SAP Blueprint, Launch in a development & Roll-out For Retail testing pilot region SAP Blueprint, development Launch in a Roll-out For HR & testing pilot region SAP Blueprint, development Pilot launch Ro
Slide 18: Business Processes Improvement
Business Processes Improvement Legal Structure Regional Branches’ Optimization Processes Standardization Areas of Focus Transformation into aligned, efficient Standardization and simplification of and agile organization: business processes across formats: • In-store operations • Single operating com
Slide 19: In-Store Labour Productivity
In-Store Labour Productivity… … Can be Substantially Enhanced through Improving Efficiency of… In-Store and Working Workplace Store Personnel Personnel Core Processes Hours Management Education Management Areas of Focus • Merchandising • Efficient planning of • Optimization of • Performance • Educat
Slide 20: Focus on Efficient Asset Employment
Focus on Efficient Asset Employment Energy Efficiency Improved Leasing Terms Areas of Focus Stage I: Diagnosis & “Quick Wins” (2009) New Lease Contracts • Audit & optimization: • Capitalizing on current macro environment to –energy consumption meters obtain better rental terms and lock in landlords
Slide 21: Strategic Efficiency Program
Strategic Efficiency Program… …will Impact Every Area of X5’s Business Support of Working Long-Term Sales Cost Capital Scalable Growth Savings Project Improvement Expansion Efficient Supply Chain Management IT Systems Integration Business Processes Improvement Labour Productivity Improvement Efficie
Slide 22: Strategic Efficiency Program Roadmap
Strategic Efficiency Program Roadmap 2008 2009 2010 2011 Project Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Supply Chain Analysis and Management strategy “Quick Wins” Roll-out adjustment IT Systems Integration Please see page 16 for detailed roadmap Business Support Functions Processes Roll-out Core Proces
Slide 23: X5's Strategic Efficiency Program Delivering Results
X5’s Strategic Efficiency Program…. …is Multi-Year but We Are Already Delivering Results SG&A(1) as % of Sales 19.1% 19.2% 18.3% 18.1% 18.0% 18.0% 17.0% 17.2% 17.0% Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 (1) Excluding Depreciation and Amortization p. 23
Slide 24: X5's Strategic Priorities
X5’s Strategic Priorities • Cash generation • Disciplined growth • Liquidity management Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 24
Slide 25: Financial Discipline
Financial Discipline Cash Generation Disciplined Liquidity From Operations Growth Management Areas of Focus • Ensure sustainable • Focus on discounters, • Optimize debt structure operational primarily rented with focus on maturity performance profile improvement • Capitalize on lower • Capture cost
Slide 26: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership II. Q2 & H1 Financial Review Appendices p. 26
Slide 27: Q2&H1 2009 Top Line Growth
Q2&H1 2009 Top Line Growth… … Was Solid Despite Tougher Macro-Economic Environment Net Sales, consolidation (1) Net Sales, consolidation (1) RUR mln USD mln + 6% + 46% 131,548 + 46% + 7% 3,766 3,978 90,177 68,202 1,980 2,111 46,854 Q2 2008 Q2 2009 H1 2008 H1 2009 Q2 2008 Q2 2009 H1 2008 H1 2009 Net
Slide 28: Q2&H1 2009 Financial Performance
Q2&H1 2009 Financial Performance EBITDA Margin Supported by Strong Cost Controls Net Sales EBITDA & EBITDA Margin USD mln EBITDA, USD mln EBITDA Margin, % 9.0% 8.7% - 8% 9.2% 8.7% -10% - 8% 4,326 -13% 3,978 388 347 2,287 211 2,111 184 Q2 2008 Q2 2009 H1 2008 H1 2009 Q2 2008 Q2 2009 H1 2008 H1 2009 G
Slide 29: Q2&H1 2009 P&L Highlights
Q2&H1 2009 P&L Highlights % change % change % change % change USD mln Q2 2009 Q2 2008 H1 2009 H1 2008 USD RUR USD RUR Net Sales 2,111.2 2,287.2 (8%) 26% 3,978.1 4,325.8 (8%) 27% incl. Retail 2,099.6 2,274.2 (8%) 26% 3,959.0 4,301.6 (8%) 27% Gross Profit 520.8 596.0 (13%) 19% 979.0 1,114.9 (12%) 21%
Slide 30: Key Q2&H1 2009 P&L Developments
Key Q2&H1 2009 P&L Developments • Q2 2009 gross margin declined 140 bp year-on-year, resulting in H1 2009 gross margin decline of 120 bp year-on-year to 24.6%. The decline is attributable to continuous investment in prices across formats, including change in Pyaterochka’s pricing policy to offer low
Slide 31: Q2&H1 2009 Cash Flow Highlights
Q2&H1 2009 Cash Flow Highlights Strong Cash Generation from Operations Offset by Working Capital Seasonality % change % change % change % change USD mln Q2 2009 Q2 2008 H1 2009 H1 2008 USD RUR USD RUR Net Cash Flows from Operating Activities 77.9 77.8 0% 41% 39.5 112.1 (65%) (51%) Net Cash from Oper
Slide 32: Liquidity Update
Liquidity Update In H1 X5: Debt Maturity Profile as at 30.06.09 • Completely eliminated its short-term FX exposure by repaying Denominated in RUR Denominated in USD short-term USD-denominated debt USD mln 1,396 • Placed 7-year RUR 8 bln corporate bonds with a put option in 2 years. Proceeds were use
Slide 33: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership II. Q2 & H1 Financial Review Appendices p. 33
Slide 34: X5's Regional Coverage
X5’s Regional Coverage North-West region Moscow & the region Sales breakdown: Sales breakdown: 28% Hypermarkets 10% Hypermarkets 51% Discounters • As at 30 June, X5 was present in 42 cities 64% Discounters 8% Supermarkets 39% Supermarkets of European Russia and the Urals Volgo-Vyatsky region Sales b
Slide 35: 2008 Operational Performance
2008 Operational Performance Soft Discounters Store Count & Sales Supermarkets Store Count & Sales Net Retail Sales, USD mln Net Retail Sales, USD mln # of Stores + 51% 4 464 # of Stores 2 702 + 39% 1 945 2 947 674 848 179 207 FY 2007 FY 2008 FY 2007 FY 2008 Hypermarkets Store Count & Sales 2008 LFL
Slide 36: 2008 P&L Highlights
2008 P&L Highlights % change USD mln (1) FY 2008 FY 2007 y-o-y Net Sales 8,892.4 6,151.5 45% incl. Retail 8,843.8 6,109.6 45% Gross Profit 2,278.5 1,610.7 41% Gross Margin, % 25.6% 26.2% EBITDA 803.2 547.6 47% EBITDA Margin, % 9.0% 8.9% Adjusted Operating Profit (2) 552.5 370.7 49% Adjusted Operatin
Slide 37: 2008 Cash Flow & Debt Position
2008 Cash Flow & Debt Position % change USD mln (1) FY 2008 FY 2007 y-o-y Net Cash from Operating Activities 629.3 427.5 47% Net Cash from Operating Activities before Changes in Working Capital 774.3 491.3 58% Change in Working Capital 243.9 139.8 75% Net Interest and Income Tax Paid (388.9) (203.6)
Slide 38: 2009 Sales Growth & CapEx Outlook
2009 Sales Growth & CapEx Outlook 2008 2009E Sales Growth (in RUR) 41% >25% Capital Expenditures ~USD 1,000 Up to RUR 14 bln mln 2009 Approximate CapEx Breakdown Margins: Focus on Customers and Efficiency 18% • Continued gross margin investment in customer 69% value proposition 13% • Cost control re
Slide 39: X5 Share Capital Structure
X5 Share Capital Structure 0.1% 27.0% 1.9% 47.9% Alfa Group 23.1% Founders of Pyaterochka X5 Management Free Float Total number of shares – 67,893,218 Treasury Shares Equivalent of 271,572,872 GDRs p. 39
Slide 40: Contact information
Contact information IR Department Contact Details Anna Kareva Maria Korotaeva IR Director IR Manager X5 Retail Group N.V. X5 Retail Group N.V. 28 bldg., 4, Sr. Kalitnikovskaya, 28 bldg., 4, Sr. Kalitnikovskaya, Moscow, Russia Moscow, Russia Tel.: +7 (495) 792 3511 Tel.: +7 (495) 980 2729 ext. 22-450
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