X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q2 2018 Earnings Presentation

38 slides from X5 Corporate Center's earnings presentation, Aug 14, 2018

  1. Slide 1: Climb Higher! Q2 2018 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q2 2018 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 14 AUGUST 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 Q2 2018

    05 KEY ACHIEVEMENTS IN Q2 2018  The Company added 477 net  Revenue growth remained new stores in Q2 2018 adding strong at 19.3% net 213 th. sq. m of selling space, 88% of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at over 77% of Perekrestok stores solid 7.7%

  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 Trend towards a recovery in real income was back of cautious consumer behavior, CPI food interrupted in Q2 2018 despite persisting continued to decelerate growth in real wage and record lows of unemployment 12 Y-o-y growth rates,

  10. Slide 10: Macro Environment (1/2)

    10 MACRO ENVIRONMENT (1/2) Consumer confidence improved but still Positive growth in industrial production is not remained negative. Trading down is still high supported by the outlook for future production in absolute terms indicated by the Russian manufacturing PMI index 0 70.0 6 56.0 (5) 60.0 54.

  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 33% 28% 28% 30% 25% 23% 21% 21% 20% 20% 19% 18% 14% 12% 11% 9% 9% 8% [1] 8% 9% 4% 8% 4% 3% 2011 2012 2013 2014 2015 2016 2017 H1 2018 X5 y-o-y revenue growth Top-10 Market Source: Infoline, X5 analysis [1] – X5’s estimate Starting from 2015, X5 has co

  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 Q2 2018

    III. OPERATIONAL RESULTS Q2 2018

  16. Slide 16: Q2 2018 Results: Operational Highlights

    16 Q2 2018 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,168 28.7% 27.8% 27.4% 26.0% 27.7% 24.9% 23.4% 23.3% 20.2% 19.4% 1,041 1,011 999 961 5,733 5,946 5,145 5,480 359 381 4,821 350 319 317 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q2 2017 Q3 2017 Q

  17. Slide 17: Q2 2018 Results: Net Retail Sales Summary

    17 Q2 2018 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln 302,265 380,852 318,867 55,158 21,858 Q2 2017 Q2 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: Q2 2018 Results: Expansion Summary

    18 Q2 2018 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m Net selling space added in Q2 2018, th. sq. m  Total store base increased to 13,178 stores as of 5,946 30 June 2018 30 June 2018  Pyaterochka was the main driver 4 20 for the store base increase with a 198 th. sq. m selling space 4

  19. Slide 19: X5 Regional Presence

    19 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 13,178, including: ― 12,314 Pyaterochka ― 691 Perekrestok ― 93 Karusel North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 191 980 4,949 3,356 1,428 1,031 379 12,314 N

  20. Slide 20: X5 Distribution Capabilities

    20 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 30 June 2018 Space, Federal district # of DCs th. sq. m Central 543 16 5 North-Western 132 5 16 Volga 194 9 Ural 145 6 9 6 Southern 78 3 3 Siberian 18 1 1 Total 1,110 40 Centralisation levels Highlights for Q2 2018 93% 94%  X5 started the implem

  21. Slide 21: IV. Financial Results Q2 2018

    IV. FINANCIAL RESULTS Q2 2018

  22. Slide 22: Q2 2018 Results: Financial Highlights

    22 Q2 2018 RESULTS: FINANCIAL HIGHLIGHTS Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI) 27.5% 24.7% 23.0% 18.9% 19.6% 19.8% 23.9% 23.7% 23.8% 23.8% 24.0% 17.4% 16.9% 19.9% 19.3% 70.9 69.8 91.8 64.8 382.6 85.9 83.7 60.3 361.7 351.5 55.7 76.6 75.8 320.8 319.4 Q2 2017 Q3 2017 Q4 2017 Q1 201

  23. Slide 23: Q2 2018 Results: Capital Expenditure Overview

    23 Q2 2018 RESULTS: CAPITAL EXPENDITURE OVERVIEW Capex breakdown for Q2 2018 Capex breakdown by quarter, RUB mln Total Capex in Q2 2018: RUB 20,440 mln 38,131 New store openings 28% 26,222 Refurbishments 19,885 20,440 Logistics 16,433 3% 60% IT, Maintenance and 9% other 628 stores opened Q2 2017 Q3

  24. Slide 24: Q2 2018 Results: Debt Structure

    24 Q2 2018 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 22% RUB mln 30 Jun 2018 30 Jun 2017 19% Total Debt 224,164 170,635 Short-Term Debt 63,392 46,389 29% % of total debt 28.3 27.2 Long-Term Debt 124,246 30% 160,772 % of total debt 71.7 72.8 Net Debt 210,390 163,856 30 Jun 201

  25. Slide 25: Q2 2018 Results: Adjusted SG&A Expenses Analysis

    25 Q2 2018 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q2 2018 analysis H1 2018 analysis as percentage of revenue as percentage of revenue 16.9% 149 b.p. 15.4% 17.5% 136 b.p. 16.2% 0.7% (3) b.p. 0.7% (0) b.p. 0.9% 33 b.p. 0.9% 21 b.p. 0.7% 1.1% (3) b.p. 0.7% 1.1% (0) b.p. 0.7% 0.5% 1.1% Third party

  26. Slide 26: Financial Statements (1/3) Profit and Loss Statement

    FINANCIAL STATEMENTS (1/3) 26 PROFIT AND LOSS STATEMENT +/ ( - ), +/ ( - ), RUB mln Q2 2018 Q2 2017 +/( - ) H1 2018 H1 2017 +/( - ) % % Revenue 382,559 320,801 61,758 19.3% 734,077 613,879 120,198 19.6% Net retail sales 380,852 318,867 61,986 19.4% 731,198 610,351 120,848 19.8% COGS (290,771) (244,1

  27. Slide 27: Financial Statements (2/3) Balance Sheet

    FINANCIAL STATEMENTS (2/3) 27 BALANCE SHEET RUB mln 30 Jun 2018 30 Jun 2017 +/( - ) +/( - )% Total current assets 142,700 114,153 28,547 25.0% Cash & cash equivalents 13,774 6,779 6,995 103.2% Inventories 102,947 82,767 20,180 24.4% Total non-current assets 420,410 360,137 60,273 16.7% Net PP&E 290,

  28. Slide 28: Financial Statements (3/3) Cash Flow Statement

    FINANCIAL STATEMENTS (3/3) 28 CASH FLOW STATEMENT RUB mln Q2 2018 Q2 2017 +/( - ) +/( - )% H1 2018 H1 2017 +/( - ) +/( - )% Net cash generated from operating 13,928 11,323 2,605 23.0% 27,632 10,905 16,727 153.4% activities Net cash from operating activities before changes 28,742 27,994 748 2.7% 50,0

  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 12,314 stores as of 4,841 th. sq. m of selling space 30 June 2018, as of 30 June 2018, 27.1% increase y-o-y 25.9% increase y-o-y Q2 2018 net retail sales – 1,002 mln of customers in RUB 302.3 bn, Q2 2018, 22.6% increase y-o-y 21.0% increase y-o-y Q2 2018 LFL R

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

    31 PYATEROCHKA SUMMARY (2/3) Q2 2018 net retail sales: Q2 2018 selling space: Q2 2018 sales densities: 21.0% increase y-o-y 25.9% increase y-o-y 5.6% decline y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 36.1% 283 41.1% 278 275 272 268 32.

  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 691 stores as of 705 th. sq. m. of selling space 30 June 2018, as of 30 June 2018, 24.1% increase y-o-y 24.9% increase y-o-y Q2 2018 net retail sales of 125.4 mln customers in Q2 2018, RUB 55.2 bn, 25.6% increase y-o-y 22.8% increase y-o-y Q2 2018

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

    34 PEREKRESTOK SUMMARY (2/3) Q2 2018 net retail sales: Q2 2018 selling space: Q2 2018 sales densities: 22.8% increase y-o-y 24.9% increase y-o-y 2.6% increase y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 24.9% 320 324 326 326 312 318 22.9

  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 93 stores as of 386 th. sq. m. of selling space 30 June 2018: as of 30 June 2017, 3.3% increase y-o-y 1.7% increase y-o-y Q2 2018 net retail sales: 33 mln customers in Q2 2018, RUB 21.9 bn, 1.4% decrease y-o-y 1.3% increase y-o-y Q2 2018 LFL Results Share of X5's

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

    37 KARUSEL SUMMARY (2/3) Q2 2018 net retail sales: Q2 2018 selling space: Q2 2018 sales densities: 1.3% increase y-o-y 1.7% increase y-o-y 4.5% increase y-o-y Net sales growth (% y-o-y) Net selling space growth (% y-o-y) Net sales densities (th. RUB/sq. m[1]) 14.5% 9.1% 233 237 237 227 229 6.4% 215

  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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