Detskiy Mir PAO — Detsky Mir — Investor Presentation (November 2018)
34 slides from Detskiy Mir PAO's investor presentation, November 2018
Slide 1: Detsky Mir Investor Presentation
(O) a © on \ So eee ae q | C ) ) ~ Detsky Mir DS Investor Presentation ©) } sy #1 Russian specialized children’s goods retailer aed i = - : wy Ne (G) cc Ol? CS ry VY - aS, (a alan CY NS, CO)
Slide 2: Disclaimer
Oede8@ Disclaimer Detsxy MirR THIS DOCUMENT IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES Certain information in this document is forward-looking, and reflect Detsky Mir’s current expectations and projections about future events, which reflect vari
Slide 3: Our Investment Story; Recent Financial Performance
Our Investment Story Recent Financial Performance 6 68 Detsxy MirR
Slide 4: Overview and Key Updates
6 ef Detsky Mir o Overview and Key Updates
Slide 5: Russia's Children Goods Retail Market Leader
Russia’s Children Goods Retail Market Leader With Strong Growth and Shareholder Returns Key Facts 6 68 Detsxy MirR Strong Operating and Financial Results? Detsky Mir is the undisputed #1 player in the specialized children’s goods market in Russia “Detsky Mir” is an iconic brand with 99% prompted awa
Slide 6: Private Labels, Direct Imports and Belarus Plans
6 ef Detsky Mir ™ Growing the share of private labels and direct imports across our four Share of Private Labels & Direct Imports in Sales by Category main product categories 9M'17 9M18 ™ Share in total revenue increased from 33.7% to 36.2% in 9M'17 /9M18 TECH = Main focus on toys as our key margin-
Slide 7: Our Investment Story
6 ef Detsky Mir & Our Investment Story
Slide 8: Leading the Solid Russian Children's Goods Retailing Sector
4 Detsky Mir - Leading the Solid Russian Children's ®8O®@ . Goods Retailing Sector Detsky Mir Experienced management team with well- #1 player ina large, Fragmented market Iconic category- defining brand with attractive multi- category customer proposition Sustainable asset- light business model est
Slide 9: Solid Fundamentals
Solid Fundamentals Sizeable Children’s Population in Russia #1 Player in a Large, Fragmented Market with 6 68 Detsky Mir Russian Children’s Goods Market Continues Its Steady Growth Number of Children Under 12 in Russia (m) 1: 2.8% CAGR 2013 - 2017: 2.8 20,2 20,8 21,7 222 226 CAGR 2017- 2021: 0.5% 22
Slide 10: Iconic Category-Defining Brand with Attractive Multi-Category Proposition
-Iconic Category-Defining Brand with Attractive eese Multi-Category Customer Proposition Detsky Mir Leading Customer Proposition Bigger, Better and More Recognizable Than the Competition Stores in , ; Total Number of Stores NapeEaIO Moscow and Seed QS Poll: Unaided Brand Awareness (9M 2018) arene (9
Slide 11: Four-Pillar Growth Strategy: Taking Over Whitespace
Well-Defined Four-Pillar Growth Strategy Detsky Mir @ Taking over Whitespace in Large and Small Cities, as Well as International Markets Number of Stores (incl. ELC) Visible Expansion Pipeline GB OM stores 120) Cities with no DM Presence (50k -100k inhabitants) G@) Malls identified as priority locat
Slide 12: Four-Pillar Growth Strategy: e-Commerce Platform
Well-Defined Four-Pillar Growth Strategy Detsky Mir ® Continuous Development of Our e-Commerce Platform... Key Achievements in 2017 ee ona vcom ste 1920170032. pies M17) ® New Composite Customer Service Level KPI introduced for 78% free traffic (9M 2018) each delivery channel and call center ® Incre
Slide 13: B
B 180 10 9 160 8 140 7 120 6 100 5 80 4 60 3 40 2 20 1 0 0
Slide 14: Four-Pillar Growth Strategy: Traffic Generation
Well-Defined Four-Pillar Growth Strategy 6 ef Detsxy MirR Competitive Pricing and Effective Merchandising with Focus on Traffic Generating Categories Drive Strong LFL Sales Growth and Growing Gross Profit per sqm Effective Marketing and Merchandising Y Innovative store concepts based on highly inter
Slide 15: Four-Pillar Growth Strategy: Execution Excellence
Well-Defined Four-Pillar Growth Strategy Detsky Mir ®> Focus on Execution Excellence to Achieve Superior Operating Margins H 1 Improvement of 330bps in adj. EBITDA’ margin since 2013 driven by: Adjusted EBITDA! (RUBm) ¥ Store operation improvements v — Optimization of IT platforms and personnel vy —
Slide 16: Expansion Platform Geared Up to Future Growth
Expansion Platform Geared Up to Future Growth eese Detsky Mir Strong Infrastructure Backbone Store Management and Rollout Distribution & Logistics IT Infrastructure = Strict investment hurdles For store openings: = Well-established import trade competencies and in- = Set-up SAP system manages on-sto
Slide 17: Peer Comparison of Retailers
A C ̶ B D Detsky Mir Clicks Poya Lojas Renner LPP CCC Raia Drogasil B&M Liverpool XXL X5 Magnit Lenta Five Below Children's Carters Jumbo Baby Bunting Mothercare place High Performance Specialty Retailers Russian Food Retailers Children’s Goods Retailers
Slide 18: Experienced Management Team With Well-Established Governance
Experienced Management Team With Well- eo ef ; Established Governance Detsky Mir Highly Experienced Management... ...With a Strong Track Record... aa & 9 y Management 2 nw i] b ul ar Team Vladimir Anna Farid Pavel Se 103 100 = 104 Chirakhov Garmanova Kamalov Pischikov at ! 56 Chief Executive Chief F
Slide 19: Recent Financial Performance
oS Recent Financial Performance 6 ef Detsky Mir
Slide 20: Continued Solid Top-Line Growth
Continued Solid Top-Line Growth 6 68 Detsxy MirR Total Revenue (RUBm) Like For Like Growth! 45% 7 6.1% , 72% 5 ! _ 3.7% n 4.9% + 16% \ 76 566 i ss | 66.649 ' i) ' i) ' ly 24554 28449 | * ! | 1 a 6m : 1 Q3'17 Q3 18 ' 9M 17 9M 18 Q3'17 Q3'18 9M "17 9M 18 m Revenue (RUBm) ™ Number of Tickets LFL_ ™ Ave
Slide 21: Growing Profitability
6008 Growing Profitability Detsxy MirR Growing Gross Profit Personnel per Store and Reduction of Rent Costs + 15% _— 7 - 25.024 - 22 048 10,4 33,7% 33,4% 1 _— 9,5 =——8 ' 19 —rz 38277 9488 1 i : 1 | a Q3'17 Q3'18 i 9M "17 9M 18 1 9M "17 9M 18 mmm Gross Profit (RUB mn) B= Gross Profit Margin (%) mmm P
Slide 22: Strong Cash Flow Conversion
Strong Cash Flow Conversion Comments 6 ef Detsxy MirR Cash Flow (RUBm) ™ Cash conversion (EBITDA-capex/EBITDA) remains stable at very high levels with improvement in ROIC LTM m Increase in NWC significantly affected the decline in the Operating Cash Flow (expect normalization in Q4): - Additional go
Slide 23: Conservative Financial Policy and Stable Leverage
6008 Conservative Financial Policy Detsxy MirR and Stable Leverage Comments Leverage’? dynamics = Commitment to a conservative financial policy = Total debt - RUB 17.6bn - Fully RUB-denominated debt to match RUB revenue — Relationships with multiple Russian and international banks = Leverage’? as of
Slide 24: Sustainably High Returns to Shareholders
Sustainably High Returns to Shareholders Comments 6 ef Detsxy MirR Adjusted Net Income (RUBm)! = Asset-light cash generative model underpins significant dividend paying capacity - Dividends as major differentiator from the majority of Russian high- growth food retailers - Ability to consistently mai
Slide 25: 7.2% LFL growth, outperforming the market
7.2% LFL growth, Single-digit growth, outperforming the outperforming the market market
Slide 26: Appendix
(> 6 69 Detsxy Mir Appendix # | / — 7 / ? 7 fig Ye
Slide 27: Top Management Compensation Structure
Top Management Compensation Structure Detsky Mir Overview Annual Compensation Structure Feo _— ee Fixed 50% 50% - 80% 70% - 85% Total 50% 20% - 50% 15% - 30% Variable incl. Financial’ 25% 6% -17% 3% -9% Incl. Functional’? 25% 14% -33% 10.5% - 21% Last LTI Programme i New Equity-Based Compensation Pr
Slide 28: 9M 2018 Highlights
7 . —.. openings Like-for-like? growth Profitabil = generation ' Online 371 new Detsky Mir branded stores opened in 9M 2018 (+13%YoY of selling space) Majority of new stores will be opened in Q4 14.9% total revenue growth in9M 2018 4.9% LFL? sales growth in 9M 2018 with 7.5% LFL? traffic growth Adj.
Slide 29: LFL Traffic Growth, LFL Ticket Growth
1 LFL Traffic Growth LFL Ticket Growth 2
Slide 30: Why Detsky Mir Is Very Different from Food Retail
Why Detsky Mir Is Very Different from eese the Food Retail? Detsky Mir 828@ 20 ne ssn Leading Russian food retailers Competition for Low High new locations 9 5 E 3S Gap #1 to #2 rf (Revenue 2017) 4.6x 1.3x | = 86%! 17-21%? Average dividend yield 6.8%3 0-3.0%4 2017 (cash Flow basis) Source: Company d
Slide 31: Quarterly Growth vs Peers
1Q'15/ 1Q'14 2Q'15/ 2Q'14 3Q'15/ 3Q'14 4Q'15/ 4Q'14 1Q'16/ 1Q'15 2Q'16/ 2Q'15 3Q'16/ 3Q'15 4Q'16/ 4Q'15 1Q'17/ 1Q'16 2Q'17/ 2Q'16 3Q'17/ 3Q'16 4Q'17/ 4Q'16 1Q'18/ 1Q'17 2Q'18/ 2Q'17 3Q'18/ 3Q'17 Detsky Mir Lenta X5 Magnit M.Video
Slide 32: Net Trade Working Capital Overview
6008 Net Trade Working Capital Overview Detsxy MirR Focus on Constant Improvement & Optimization of NWC12 (RUB m) 31196 _ 83% 26 440 24796 24.473 6.1% WF 2 802 11d. US} 5 109 7d. (16 718) (25.215) (24387) 21.662 -24380 2015 2016 2017 9M ‘17 9M 18 MEE Inventories Ml Trade Receivables Ml Payables ====
Slide 33: Financial Performance Summary
Financial Performance Summary Detsxy MirR (RUBm, unless specified otherwise)! Comments 2015 1016 2017 9M ‘18 Number of stores 425 525 622 557 666 = Strong support from both network expansion and LFL Detsky Mir stores 381 480 578 516 610 . ELC stores 46 45 46 “1 56 ™ Solid LFL Sales growth rates Sell
Slide 34: Contact Information
CYT Y | Contact Information Detsxy MirR eaee8 Sergey Levitskiy Head of Investor Relations slevitskiy@detmir.ru +7 903 971-43-65 Detsky mir +7 495 781-08-08, ext, 2315 detmirru