X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q3 2019 Earnings Presentation

37 slides from X5 Corporate Center's earnings presentation, Oct 22, 2019

  1. Slide 1: Q3 2019 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q3 2019 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 22 October 2019

  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 focus on the three largest segments of Russian food retail market and primarily on proximity stores and supermarkets  According to the new strategy X5 uses smart and balanced approach to expansion  X5 reinforced its market leadershi

  5. Slide 5: Key Achievements in Q3 2019

    05 KEY ACHIEVEMENTS IN Q3 2019  The Company added 492 net  Revenue growth remained new stores in Q3 2019 adding strong at 12.4% in Q3 2019 net 222 th. sq. m of selling space, 78% of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at 91% of Perekrestok stores solid

  6. Slide 6: Operational Highlights

    06 OPERATIONAL HIGHLIGHTS Net retail sales dynamics, RUB bn LFL sales, % y-o-y growth CAGR 2014-2018: 24.6% CAGR 2016-2018: 21.9% 18.5% 13.7% 1,525 1,287 9.8% 1,026 7.7% 804 5.4% 632 1.5% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Selling space, th. sq. m Number of stores, end of period CAGR

  7. Slide 7: Financial Highlights

    07 FINANCIAL HIGHLIGHTS Revenue dynamics, RUB bn Gross profit & gross margin CAGR 2014-2018: 24.7% CAGR 2014-2018: 24.3% CAGR 2016-2018: 21.8% CAGR 2016-2018: 21.6% 18.3% 24.5% 24.5% 24.2% 23.9% 24.1% 1,533 19.7% 1,295 1,034 370 809 309 634 250 155 198 2014 2015 2016 2017 2018 2014 2015 2016 2017 20

  8. Slide 8: Quality of New Openings

    08 QUALITY OF NEW OPENINGS Cash return on new store opened >30% +5 p.p. y-o-y Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Note: Opened 12-36 months ago Pyaterochka and Perekrestok - Organic 15,752 6.6% 15,260 14,779 14,431 6.0% 13,685 5.8% 6.1% 5.3% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Number of stor

  9. Slide 9: Sales Density Stabilisation Pressure from Regional Mix

    SALES DENSITY STABILISATION 09 PRESSURE FROM REGIONAL MIX Overall 257 256 256 256 255 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Moscow & St Petersburg Rest of Russia Moscow region & Leningrad region 372 330 203 203 372 371 327 202 371 202 322 319 202 370 317 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q

  10. Slide 10: II. Market Overview

    II. MARKET OVERVIEW

  11. Slide 11: Macro Environment (1/2)

    11 MACRO ENVIRONMENT (1/2) Real food retail trade continued its Real wages showed a marked acceleration moderate recovery in H1 2019 despite CPI in H1 2019 with the new record lows of the food acceleration unemployment rate. However, real disposable income continued to fall 7 Y-o-y growth rates, % Y

  12. Slide 12: Macro Environment (2/2)

    12 MACRO ENVIRONMENT (2/2) Consumer confidence slightly improved Positive growth in industrial production is in H1 2019 relative to the end of 2018. still largely based on mining sector Trading down continued declining acceleration – without significant improvement in the manufacturing sector 0 59.0

  13. Slide 13: Recent Food Retail Market Trends

    13 RECENT FOOD RETAIL MARKET TRENDS… KEY TRENDS DESCRIPTION CONCLUSIONS  Consumers are raising the bar on  Opportunity to improve Changing consumer product quality and costumer competitiveness through service behavior experience and personalisation  Consumer preferences shift towards Increasing p

  14. Slide 14: …and X5's Response

    14 …AND X5’S RESPONSE KEY TRENDS X5 RESPONSE  Constant adaptation of CVPs to customers’ needs leveraging extensive Changing consumer knowledge from our loyalty programs across all formats behavior  Personalised offers based on the loyalty programmes Increasing popularity of  Improving the quality

  15. Slide 15: X5 vs. Russian Food Retail in Top-Line Growth

    15 X5 VS. RUSSIAN FOOD RETAIL IN TOP-LINE GROWTH 33% 28% 28% 30% 25% 23% 21% 21% 20% 19% 18% 18% 15% 14% 12% 11% 9% 10% 10%* 9% 8% 8% 9% 5% 8% 4% 2% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 X5 y-o-y revenue growth Top-10 Market Source: Infoline, X5 analysis * X5 estimates Starting from 2015,

  16. Slide 16: Russian Retail Market Snapshot

    16 RUSSIAN RETAIL MARKET SNAPSHOT Top 10 Russian food retailers % market share % market share # Company name 2017 2018 1 Х5 9.5% 10.7% 2 Magnit 7.5% 7.7% 3 Lenta 2.5% 2.8% 4 SPS Holding (Red and White) 1.8% 2.4% 5 Dixy 2.1% 2.1% 6 Auchan 2.2% 1.9% 7 Metro 1.4% 1.3% 8 O‘Key 1.2% 1.1% 9 Monetka 0.6% 0

  17. Slide 17: III. Operational Results Q3 2019

    III. OPERATIONAL RESULTS Q3 2019

  18. Slide 18: Q3 2019 Results: Operational Highlights

    18 Q3 2019 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,336 1,315 19.6% 18.0% 1,184 1,212 15.1% 14.1% 13.9% 17.6% 17.1% 1,162 15.3% 14.4% 12.8 7,009 6,464 6,599 6,786 421 436 421 6,155 404 373 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 201

  19. Slide 19: Q3 2019 Results: X5 Net Retail Sales Summary

    19 Q3 2019 RESULTS: X5 NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln Hypermarkets Hypermarkets 20,647 20,116 53,225 62,818 Supermarkets Supermarkets +12.8% 372,934 420,712 337,778 297,946 Proximity stores Q3 2018 Q3 2019 KEY DRIVERS  Pyaterochka, which continues to m

  20. Slide 20: Q3 2019 Results: Expansion Summary

    20 Q3 2019 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m Net selling space added in 13.9% Q3 2019, th. sq. m  Total store base increased to 7,009 15,752 stores as of 6,155 Hypermarkets 30 September 2019  Pyaterochka was the main driver Supermarkets 2 39 for the store base increase with a

  21. Slide 21: X5 Regional Presence

    21 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 15,752, including: ― 14,850 Pyaterochka stores ― 811 Perekrestok supermarkets ― 91 Karusel hypermarkets North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 267 1,345 5

  22. Slide 22: X5 Distribution Capabilities

    22 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 30 September 2019 Space, Federal district # of DCs th. sq. m Central 587 16 6 North-Western 151 6 Volga 195 9 16 Ural 139 6 9 6 Southern 96 4 4 Siberian 49 2 2 Total 1,216 43 Centralisation levels Highlights for Q3 2019  X5 continued the impleme

  23. Slide 23: IV. Financial Results Q3 2019

    IV. FINANCIAL RESULTS Q3 2019

  24. Slide 24: Q3 2019 Results: X5 Financial Highlights

    24 Q3 2019 RESULTS: X5 FINANCIAL HIGHLIGHTS Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI)2 24.8% 25.0% 24.9% 17.9% 18.0% 18.3% 18.4% 24.6% 24.5% 17.3% 17.6% 16.9% 15.5% 14.3% 24.1% 76.0 75.6 77.8 13.5% 12.4% 74.4 109.5 103.5 105.1 67.0 101.8 100.6 92.5 57.4 423.0 405.9 437.3 422.0 375.5

  25. Slide 25: Q3 2019 Results: X5 Capital Expenditure Overview

    Q3 2019 RESULTS: X5 CAPITAL EXPENDITURE OVERVIEW 25 OVERVIEW Capex breakdown, 9M 2019 Capex dynamics by quarter, RUB mln 28,037 21,818 21,006 18,757 12,414 11% 9% New store openings Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Refurbishments 6% RUB Logistics Expected change in Capex structure 55 bn 57% I

  26. Slide 26: Q3 2019 Results: Debt Structure

    26 Q3 2019 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 19% RUB mln 30 Sep 2019 30 Sep 2018 22% Total Debt 226,586 217,184 Short-Term Debt 72,868 55,987 38% % of total debt 32.2% 25.8% Long-Term Debt 153,718 161,197 21% % of total debt 67.8% 74.2% Net Debt 215,719 201,846 30 Sep

  27. Slide 27: Q3 2019 Results: Adjusted SG&A Expenses Analysis

    27 Q3 2019 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q3 2019 analysis as percentage of revenue 35 b.p. 18.2% 17.9% (22) b.p. 0.7% 0.9% 1.2% 0.9% 24 b.p. 1.1% 1.1% (2) b.p. 2.0% 2.0% 13.4% Third party services (2) b.p. 0.7% 1.0% Other expenses 1.1% 5.1% 6 b.p. 5.1% Other store costs 2.0% 0.5% Util

  28. Slide 28: Financial Statements (1/3): Profit and Loss Statement

    FINANCIAL STATEMENTS (1/3) 28 PROFIT AND LOSS STATEMENT IAS 17 IFRS 16 RUB mln Q3 2019 Q3 2018 +/( - ) +/ ( - ), % Q3 2019 Revenue 421,955 375,505 46,450 12.4% 421,955 Net retail sales 420,712 372,934 46,450 12.8% 420,712 COGS (318,462) (283,023) 35,439 12.5% (316,807) Gross profit 103,493 92,482 11

  29. Slide 29: Financial Statements (2/3): Balance Sheet (IFRS 16)

    FINANCIAL STATEMENTS (2/3) 29 BALANCE SHEET (IFRS 16) RUB mln 30 Sep 2019 31 Dec 2018* Total current assets 148,592 170,840 Cash & cash equivalents 10,867 24,368 Inventories 107,270 115,990 Total non-current assets 866,857 439,959 Right-of-use assets 410,323 - Net PP&E 309,848 303,802 Goodwill 99,78

  30. Slide 30: Financial Statements (3/3): Cash Flow Statement

    FINANCIAL STATEMENTS (3/3) 30 CASH FLOW STATEMENT (IAS 17 AND IFRS 16) IAS 17 IFRS 16 RUB mln Q3 2019 Q3 2018 +/( - ) +/ ( - ), % Q3 2019 Net cash generated from 2,437 28,147 (25,710) (91.3)% 15,170 operating activities Net cash from operating activities before 29,403 27,666 1,737 6.3% 51,440 change

  31. Slide 31: Appendix: Performance Summary of Key Formats

    APPENDIX PERFORMANCE SUMMARY OF KEY FORMATS

  32. Slide 32: Pyaterochka Summary (1/3): Russia's #1 Proximity Network by Revenue

    PYATEROCHKA SUMMARY (1/3) 32 RUSSIA’S #1 PROXIMITY NETWORK BY REVENUE 14,850 stores as of 5,789 th. sq. m of selling space 30 September 2019, as of 30 September 2019, 15.8% increase y-o-y 15.0% increase y-o-y Q3 2019 net retail sales – 1,142 mln of customer visits in RUB 337.8 bn, Q3 2019, 11.8% inc

  33. Slide 33: Pyaterochka Proximity Stores Summary (2/3)

    33 PYATEROCHKA PROXIMITY STORES SUMMARY (2/3) Q3 2019 net retail sales: Q3 2019 selling space: Q3 2019 sales densities: 13.4% increase y-o-y 15.0% increase y-o-y 1.5% 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]) 31.9% 266 36.1% 26

  34. Slide 34: Pyaterochka Summary (3/3): Strategy Overview

    PYATEROCHKA SUMMARY (3/3) 34 STRATEGY OVERVIEW  Maximise the share of customers, and maximise share of these customers’ wallet: − Further adaptation of CVP and assortment − Leadership in NPS and service level − Decrease personnel turnover; improve loyalty − Improvement in operational efficiency, in

  35. Slide 35: Perekrestok Summary (1/3): Russia's #1 Supermarket

    PEREKRESTOK SUMMARY (1/3) 35 RUSSIA’S #1 SUPERMARKET 811 stores as of 854 th. sq. m. of selling space 30 September 2019, as of 30 September 2019, 13.9% increase y-o-y 17.2% increase y-o-y Q3 2019 net retail sales of 144 mln customers in Q3 2019, RUB 62.8 bn, 14.5% increase y-o-y 18.0% increase y-o-y

  36. Slide 36: Perekrestok Supermarkets Summary (2/3)

    36 PEREKRESTOK SUPERMARKETS SUMMARY (2/3) Q3 2019 net retail sales: Q3 2019 selling space: Q3 2019 sales densities: 18.0% increase y-o-y 17.2% increase y-o-y 0.8% 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]) 326 326 327 326 328 3

  37. Slide 37: Perekrestok Summary (3/3): Strategy Overview

    PEREKRESTOK SUMMARY (3/3) 37 STRATEGY OVERVIEW  Fine-tuning value proposition and adapting to customer needs: − Further adaptation of assortment with focus on fresh, F&V, ready-to-eat − Omni-channel development − Targeted loyalty system and personalised promo − Best-in-class service, further increa

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