X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q1 2018 Earnings Presentation

38 slides from X5 Corporate Center's earnings presentation, Apr 26, 2018

  1. Slide 1: Climb Higher! Q1 2018 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q1 2018 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 26 APRIL 2018

  2. Slide 2: Disclaimer

    02 DISCLAIMER T his presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or This presentation includes statements that are, or may be deemed to be, “forward- looking statements”, with respect to the financial The information and opi

  3. Slide 3: I. Highlights

    I. HIGHLIGHTS

  4. Slide 4: Strategic Highlights

    04 STRATEGIC HIGHLIGHTS  X5 is a true multi-format retailer with business model, which enables to capture growth in the three largest segments of Russia’s food retail business  X5 reinforced its market leadership in Russian food retail, with market share increasing to 9.5% in 2017, up from 8.0% in

  5. Slide 5: Key Achievements in Q1 2018

    05 KEY ACHIEVEMENTS IN Q1 2018  The Company added 580 new  Revenue growth remained stores in Q1 2018 adding net strong at 19.9% 253 th. sq. m. of selling space, 80%[1] of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at ~76% of Perekrestok stores 6.3% operating

  6. Slide 6: Operational Highlights

    06 OPERATIONAL HIGHLIGHTS Net retail sales dynamics, RUB bn Customer visits, mln 25.3% 25.5% CAGR 2013-2017: 24.7% CAGR 2013-2017: 19.0% 3,849 CAGR 2015-2017: 26.5% 1,287 CAGR 2015-2017: 24.9% 1,026 3,072 804 2,468 2,114 632 1,918 533 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Selling space,

  7. Slide 7: Financial Highlights

    07 FINANCIAL HIGHLIGHTS Revenue dynamics, RUB bn Gross profit & gross margin CAGR 2013-2017: 24.8% CAGR 2013-2017: 24.1% CAGR 2015-2017: 26.5% 25.3% CAGR 2015-2017: 24.8% 24.4% 24.5% 24.5% 24.2% 23.9% 1,295 1,034 23.6% 809 309 634 250 535 198 130 155 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

  8. Slide 8: II. Market Overview

    II. MARKET OVERVIEW

  9. Slide 9: Macro Environment (1/2)

    09 MACRO ENVIRONMENT (1/2) Real food retail trade remained weak on the back Real disposable income switched to growth in Q1 of cautious consumer behavior after long-term 2018 (0.9% y-o-y) along with record real wage real disposable income decline growth (9.5%) because of significant pre- election pa

  10. Slide 10: Macro Environment (2/2)

    10 MACRO ENVIRONMENT (2/2) Consumer confidence improved but still remained Industrial production recovery is still weak and negative. Trading down is still high in absolute unsustainable, but Russian manufacturing PMI terms index shows moderately positive outlook of firms for further production perf

  11. Slide 11: Recent Market Trends…

    11 RECENT MARKET TRENDS… KEY TRENDS DESCRIPTION CONCLUSIONS  Growth of over working age  Growth of price-sensitive Changing population by 2% p.a. vs. consumer segment demographics reduction of working age group  Growth of proximity format by 1% p.a. popularity  Growth in attractiveness  Increas

  12. Slide 12: …and X5's Response

    12 …AND X5’S RESPONSE KEY TRENDS X5 RESPONSE  Continued expansion of proximity segment (>75% of X5 revenues) Changing  5-10% discounts for pensioners from 9:00 until 13:00 demographics  Focus on mothers with children  Constant adaptation of value proposition to customers’ needs Declining  Negot

  13. Slide 13: X5 vs. Russian Food Retail in Top-Line Growth

    13 X5 VS. RUSSIAN FOOD RETAIL IN TOP-LINE GROWTH 35% 33% 30% 28% 30% 25% 25% 28% 20% 20% 23% 21% 21% 20% 14% 19% 15% 18% 12% 11% 9% 9% [1] 10% 8% 8% 8% 9% 4% 5% 3% 4% 0% 2011 2012 2013 2014 2015 2016 2017 Q1 2018 X5 Revenue growth y-o-y Top-10 Market Source: Infoline, X5 analysis [1] – X5’s estimate

  14. Slide 14: Retail Market Snapshot

    14 RETAIL MARKET SNAPSHOT Top 10 Russian food retailers % market share % market share # Company name 2016 2017 1 Х5 8.0% 9.5% 2 Magnit 7.4% 7.5% 3 Lenta 2.1% 2.5% 4 Auchan 2.9% 2.2% 5 Dixy 2.4% 2.1% 6 SPS Holding 1.2% 1.8% 7 Metro 1.6% 1.4% 8 O‘Key 1.2% 1.2% 9 Monetka 0.6% 0.6% 10 Globus 0.6% 0.6% T

  15. Slide 15: III. Operational Results Q1 2018

    III. OPERATIONAL RESULTS Q1 2018

  16. Slide 16: Q1 2018 Results: Operational Highlights

    16 Q1 2018 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop), th. sq. m 27.7% 24.9% 29.5% 28.7% 27.8% 27.4% 26.4% 23.4% 1,041 26.0% 20.2% 999 1,011 961 848 5,480 5,733 359 350 5,145 319 317 4,550 4,821 291 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q1 2017

  17. Slide 17: Q1 2018 Results: Net Retail Sales Summary

    17 Q1 2018 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln 271,048 350,346 291,484 55,250 22,218 Q1 2017 Q1 2018 KEY DRIVERS  Pyaterochka, which continues to meet customers’ needs in a challenging macro environment, was the key driver for X5’s growth thanks to

  18. Slide 18: Q1 2018 Results: Expansion Summary

    18 Q1 2018 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m. Net selling space added in Q1 2018, th. sq. m.  Total store base increased to 12,701 stores as of 5,733 31 March 2018 31 March 2018  Pyaterochka was the main driver (3) for the store base increase with a 48 216 th. sq. m. selling

  19. Slide 19: IV. Financial Results Q1 2018

    IV. FINANCIAL RESULTS Q1 2018

  20. Slide 20: Q1 2018 Results: Financial Highlights

    20 Q1 2018 RESULTS: FINANCIAL HIGHLIGHTS [1] Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI), RUB bn 27.5% 24.1% 23.9% 23.7% 23.8% 23.8% 26.5% 18.2% 24.7% 17.0% 17.1% 17.7% 23.0% 15.4% 19.9% 85.9 64.0 63.9 361.7 76.6 75.8 83.7 54.6 320.8 319.4 351.5 70.6 49.8 49.6 293.1 Q1 2017 Q2 2017 Q3

  21. Slide 21: Q1 2018 Results: Capital Expenditure Overview

    21 Q1 2018 RESULTS: CAPITAL EXPENDITURE OVERVIEW Capex breakdown for Q1 2018 Capex breakdown by quarter, RUB mln Total Capex in Q1 2018: RUB 16,564 mln 11% 38,131 6% New store openings 7% 26,222 Refurbishments 19,885 Logistics 16,564 14,403 IT, Maintenance and 76% other 722 stores opened (gross) Q1

  22. Slide 22: Q1 2018 Results: Debt Structure

    22 Q1 2018 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 22% RUB mln 31 Mar 2018 31 Mar 2017 Total Debt 191,642 162,155 33% Short-Term Debt 57,427 49,280 34% % of total debt 30.0% 30.4% Long-Term Debt 134,215 112,875 % of total debt 70.0% 69.6% 11% Net Debt 178,707 155,923 31 Mar

  23. Slide 23: Q1 2018 Results: Adjusted SG&A Expenses Analysis

    23 Q1 2018 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q1 2018 analysis 12M 2017 analysis as percent of revenue as percent of revenue 18.2% 119 b.p. 17.0% 16.8% (33) b.p. 17.2% 0.7% 3 b.p. 1.0% 5 b.p. 0.8 4 b.p. 0.7% 0.8 (16) b.p. 1.1 1.2% 3 b.p. 1.0% 0.9 1.1% 1.2 (17) b.p. 1.4 2.3% 22 b.p. Third p

  24. Slide 24: Financial Statements (1/3): Profit and Loss Statement

    FINANCIAL STATEMENTS (1/3) 24 PROFIT AND LOSS STATEMENT RUB mln Q1 2018 Q1 2017 +/( - ) +/ ( - ), % Revenue 351,518 293,078 58,440 19.9 % Net retail sales 350,346 291,484 58,862 20.2 % COGS (267,848) (222,466) (45,382) 20.4 % Gross profit 83,670 70,612 13,058 18.5 % Gross profit margin 23.8 % 24.1 %

  25. Slide 25: Financial Statements (2/3): Balance Sheet

    FINANCIAL STATEMENTS (2/3) 25 BALANCE SHEET RUB mln 31 Mar 2018 31 Mar 2017 +/( - ) +/( - )% Total current assets 140,030 110,322 29,708 26.9% Cash & cash equivalents 12,935 6,232 6,703 107.6% Inventories 99,174 81,879 17,295 21.1% Total non-current assets 412,441 350,143 62,298 17.8% Net PP&E 284,3

  26. Slide 26: Financial Statements (3/3): Cash Flow

    FINANCIAL STATEMENTS (3/3) 26 CASH FLOW RUB mln Q1 2018 Q1 2017 +/( - ) +/( - )% Net cash generated from operating 13,704 (418) 14,122 (3,378.5)% activities Net cash from operating activities before 21,318 22,287 (969) (4.3)% changes in working capital Change in Working Capital, incl.: (1,888) (13,9

  27. Slide 27: X5 Regional Presence

    27 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 12,701, including: ― 11,797 Pyaterochka ― 674 Perekrestok ― 92 Karusel ― 138 Express stores North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 182 905 4,790 3,201 1,3

  28. Slide 28: X5 Distribution Capabilities

    28 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 31 March 2018 Space, Federal district # of DCs th. sq. m. Central 542 16 4 North-Western 114 4 16 Volga 194 9 Ural 145 6 9 6 Southern 77 3 3 Siberian 18 1 1 Total 1,089 39 Centralisation levels Highlights for Q1 2018 93% 92%  New Logistics and T

  29. Slide 29: Appendix: Performance Summary of Key Formats

    APPENDIX PERFORMANCE SUMMARY OF KEY FORMATS

  30. Slide 30: Pyaterochka Summary (1/3): Highlights

    PYATEROCHKA SUMMARY (1/3) 30 HIGHLIGHTS 11,797 stores as of 4,643 th. sq. m. of selling space 31 March 2018, as of 31 March 2018, 31.0% increase y-o-y 29.7% increase y-o-y Q1 2018 net retail sales – 858 mln of customers in Q1 2018, RUB 271.0 bn, 20.8% increase y-o-y 21.6% increase y-o-y Q1 2018 LFL

  31. Slide 31: Pyaterochka Summary (2/3)

    31 PYATEROCHKA SUMMARY (2/3) Q1 2018 net retail sales: Q1 2018 selling space: Q1 2018 sales densities: 21.6% increase y-o-y 29.7% increase y-o-y 5.3% decline y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq. m[1]) 36.1% 39.3% 285 32.8%32.3% 31.9% 38

  32. Slide 32: Pyaterochka Summary (3/3): Strategy Overview

    PYATEROCHKA SUMMARY (3/3) 32 STRATEGY OVERVIEW  Maximise the share of customers, and maximise share of these customers’ wallet: − Continue applying the current value proposition, enhancing it through implementation of new initiatives − Support rapid, sustainable growth with development in new regio

  33. Slide 33: Perekrestok Summary (1/3): Russia's #1 Supermarket

    PEREKRESTOK SUMMARY (1/3) 33 RUSSIA’S #1 SUPERMARKET 674 stores as of 686 th. sq. m. of selling space 31 March 2018, as of 31 March 2018, 23.9% increase y-o-y 24.2% increase y-o-y Q1 2018 net retail sales of 113.3 mln customers in Q1 2018, RUB 55.3 bn, 19.6% increase y-o-y 22.9% increase y-o-y Q1 20

  34. Slide 34: Perekrestok Summary (2/3)

    34 PEREKRESTOK SUMMARY (2/3) Q1 2018 net retail sales: Q1 2018 selling space: Q1 2018 sales densities: 22.9% increase y-o-y 24.2% increase y-o-y 4.5% increase y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq. m[1]) 22.9% 326 22.4% 19.8% 20.4% 24.2%

  35. Slide 35: Perekrestok Summary (3/3): Strategy Overview

    PEREKRESTOK SUMMARY (3/3) 35 STRATEGY OVERVIEW  Fine-tuning value proposition and adapting to customer needs: − Maintaining the pace of organic growth and refurbishments − Roll out the regional model to support the future growth − Further adaptation of assortment to meet customer needs − Increase l

  36. Slide 36: Karusel Summary (1/3): Highlights

    KARUSEL SUMMARY (1/3) 36 HIGHLIGHTS 92 stores as of 382 th. sq. m. of selling space 31 March 2018: as of 31 March 2017, 1.1% decrease y-o-y 0.2% decrease y-o-y Q1 2018 net retail sales: 32.4 mln customers in Q1 2018, RUB 22.0 bn, 1.3% decrease y-o-y 5.5% increase y-o-y Q1 2018 LFL Results Share of X

  37. Slide 37: Karusel Summary (2/3)

    37 KARUSEL SUMMARY (2/3) Q1 2018 net retail sales: Q1 2018 selling space: Q1 2018 sales densities: 5.5% increase y-o-y 0.2% decline y-o-y 7.2% increase y-o-y Net Sales Growth (% y-o-y) Net Selling Space Growth (% y-o-y) Sales Densities Net (th. RUB/sq. m[1]) 14.5% 8.8% 9.1% 237 233 6.4% 229 227 10.7

  38. Slide 38: Karusel Summary (3/3): Strategy Overview

    KARUSEL SUMMARY (3/3) 38 STRATEGY OVERVIEW  Implementing new CVP and increasing customer loyalty: − Gradually rebrand the stores using new branding, giving priority to older stores or stores in one particular region − Expand omni-channel offering − Increase loyalty card penetration and implement pe

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