X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q3 2017 Earnings Presentation

37 slides from X5 Corporate Center's earnings presentation, Oct 19, 2017

  1. Slide 1: Q3 and 9M 2017 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q3 AND 9M 2017 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 19 OCTOBER 2017

  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 Securities on the t

  3. Slide 3: I. Highlights

    I. HIGHLIGHTS

  4. Slide 4: Strategic Highlights

    04 STRATEGIC HIGHLIGHTS  X5 is a true multi-format retailer with unique decentralised model that allows development autonomy for three banners, with support of Corporate Centre enhancing efficiency and sharing best-practices  X5 achieved its strategic milestone of market leadership in Russian food

  5. Slide 5: Key Achievements in 9M 2017

    05 KEY ACHIEVEMENTS IN 9M 2017  The Company added a record  Revenue growth remained 2,139 new stores in 9M 2017, strong at 26.2% vs. 1,554 stores in 9M 2016.  301 stores refurbished  >97% of Pyaterochka stores and  EBITDA margin up by ~70% of Perekrestok stores 13 b.p. y-o-y to 7.8% operating u

  6. Slide 6: Operational Highlights

    06 OPERATIONAL HIGHLIGHTS Net retail sales dynamics, Rub bn Customer visits, mln 27.5% 24.5% CAGR 2012-2016: 20.3% CAGR 2012-2016: 14.4% CAGR 2014-2016: 27.4% 1,025.6 CAGR 2014-2016: 20.5% 3,072 804.1 2,468 2,114 631.9 1,793 1,918 532.7 490.1 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Selling

  7. Slide 7: Financial Highlights

    07 FINANCIAL HIGHLIGHTS Revenue dynamics, Rub bn Gross profit & gross margin CAGR 2012-2016: 20.4% 27.8% CAGR 2012-2016: 21.2% CAGR 2014-2016: 27.7% CAGR 2014-2016: 27.0% 1,033.7 ,400.0 23.6% 24.4% 24.5% 24.5% 24.2% 25.0% 808.8 26.0% ,300.0 633.9 250.0 20.0% 491.1 534.6 198.4 ,200.0 155.0 115.8 130.

  8. Slide 8: II. Market Overview

    II. MARKET OVERVIEW

  9. Slide 9: Macro Environment

    09 MACRO ENVIRONMENT Real wage growth remains high, real disposable Real food retail market recovers, inflation income continues to decline, consumer confidence resumed its decline triggered by seasonal factors grows but is still negative 12 15 Y-o-y growth rates, % Y-o-y growth rates, % 10 10 8 5 6

  10. Slide 10: Recent Market Trends…

    10 RECENT MARKET TRENDS… KEY TRENDS DESCRIPTION CONCLUSIONS  Growth of price-sensitive  Growth of 60+ age population consumer segment Changing by 2-3% p.a. vs. reduction of demographics  Growth of proximity format 20-29 year group by 6% p.a. popularity  Growth in attractiveness  Increased price

  11. Slide 11: …and X5's Response

    11 …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 Declining  Constant adaptation of value proposition to customers’ needs populat

  12. Slide 12: X5 vs. Russian Food Retail in Top-Line Growth

    12 X5 VS. RUSSIAN FOOD RETAIL IN TOP-LINE GROWTH  Strategic transformation of X5 35% 33%  X5 is delivering on growth strategy while others are slowing down 30% 27.6% 27.8% 27.0% 30% 24% 25% 23% 21% 20% 21% 18% 17%* 20% 14% 19% 15% 12% 11% 9% 9% 9% 8% 10% 8% 5% 5% 3% 0% 2010 2011 2012 2013 2014 201

  13. Slide 13: Retail Market Snapshot

    13 RETAIL MARKET SNAPSHOT Top 10 Russian Food retailers % in total market % in total market # Company name 2015 2016 1 Х5 6.3% 8.0% 2 Magnit 6.8% 7.4% 3 Auchan 2.8% 2.9% 4 Dixy 2.2% 2.4% 5 Lenta 1.8% 2.1% 6 Metro 1.6% 1.6% 7 SPS Holding 0.7% 1.2% 8 O‘Key 1.2% 1.2% 9 Monetka 0.6% 0.6% 10 Globus 0.5%

  14. Slide 14: III. Operational Results Q3 2017

    III. OPERATIONAL RESULTS Q3 2017

  15. Slide 15: Q3 2017 Results: Operational Highlights

    15 Q3 2017 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop), th. sq. m 961 999 30.7% 27.8% 30.2% 29.1% 29.5% 28.7% 27.5% 26.4% 27.7% 24.9% 831 848 799 4,550 4,821 5,145 319 317 4,302 291 291 4,025 254 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q3 2016 Q4 2

  16. Slide 16: Q3 2017 Results: Net Retail Sales Summary

    16 Q3 2017 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln 251,653 42,417 317,131 20,705 2,356 253,978 Q3 2016 Q3 2017 Source: X5 data KEY DRIVERS  Pyaterochka, which continues to meet customers’ needs in a challenging macro environment, was the key driver for

  17. Slide 17: Q3 2017 Results: Expansion Summary

    17 Q3 2017 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m. Net selling space added in Q3 2017, th. sq. m.  Total store base increased to 11,326 stores as of 5,145 30 September 2017 30 September 2017  Continued investments into 21 1 existing stores, with 100 refurbishments in Q3 2017 4,025

  18. Slide 18: IV. Financial Results Q3 2017

    IV. FINANCIAL RESULTS Q3 2017

  19. Slide 19: Q3 2017 Results: Financial Highlights

    19 Q3 2017 RESULTS: FINANCIAL HIGHLIGHTS [1] Revenue Gross profit & gross margin SG&A (excl. D&A&I&LTI), Rub bn 30.7% 500.0 27.8% 26.5% 27.5% 24.7% 30.0% 17.4% 17.1% 17.0% 17.1% 450.0 24.4% 24.3% 24.1% 23.9% 23.7% 15.4% 400.0 25.0% 350.0 319.4 50.3 54.6 294.2 293.1 320.8 76.6 49.8 49.6 300.0 256.2 2

  20. Slide 20: Q3 2017 Results: Capital Expenditure Overview

    20 Q3 2017 RESULTS: CAPITAL EXPENDITURE OVERVIEW Capex breakdown for Q3 2017 Capex breakdown by quarter, RUB mln 856 stores opened Total Capex in Q3 2017: 26,222 RUB mln (gross) 27,147 26,222 17% New store openings 20,614 19,885 5% Refurbishments 14,403 Logistics 11% 100 stores IT, Maintenance and 6

  21. Slide 21: Q3 2017 Results: Debt Structure

    21 Q3 2017 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 17% 22% Rub mln 30 Sep 2017 30 Sep 2016 Total Debt 172,064 156,435 34% Short-Term Debt 46,496 43,281 % of total debt 27.0% 27.7% 27% Long-Term Debt 125,568 113,154 % of total debt 73.0% 72.3% Net Debt 160,350 150,417 30-Sep

  22. Slide 22: Q3 2017 Results: Adjusted SG&A Expenses Analysis

    22 Q3 2017 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q3 2017 analysis 9M 2017 analysis as percent of revenue as percent of revenue 17.1% (22) b.p. 17.3% 16.5% (70) b.p. 17.2% 0.9 14 b.p. 0.7 1 b.p. 0.7 Third party services 0.9 (26) b.p. 1.2 0.8 1.0 Other expenses 0.8 (22) b.p. 1.2 (10) b.p. 1.3 (

  23. Slide 23: Financial Statements (1/3) Profit and Loss Statement

    FINANCIAL STATEMENTS (1/3) 23 PROFIT AND LOSS STATEMENT +/ ( - ), +/ ( - ), RUB mln Q3 2017 Q3 2016 +/( - ) 9M 2017 9M 2016 +/( - ) % % Revenue 319,424 256,247 63,177 24.7 933,303 739,491 193,812 26.2 Net retail sales 317,131 253,978 63,153 24.9 927,482 734,300 193,182 26.3 COGS (243,659) (193,693)

  24. Slide 24: Financial Statements (2/3) Balance Sheet

    FINANCIAL STATEMENTS (2/3) 24 BALANCE SHEET RUB mln 30 Sep 2017 30 Sep 2016 +/( - ) +/( - )% Total current assets 121,979 104,187 17,792 17.1 Cash & cash equivalents 11,714 6,018 5,696 94.6 Inventories 84,953 64,809 20,144 31.1 Total non-current assets 378,598 329,580 49,018 14.9 Net PP&E 259,814 21

  25. Slide 25: Financial Statements (3/3) Cash Flow

    FINANCIAL STATEMENTS (3/3) 25 CASH FLOW RUB mln Q3 2017 Q3 2016 +/( - ) +/( - )% 9M 2017 9M 2016 +/( - ) +/( - )% Net cash generated from operating 26,693 20,135 6,558 32.6 37,598 38,416 (818) (2.1) activities Net cash from operating activities before changes in 22,281 20,050 2,231 11.1 72,562 56,86

  26. Slide 26: X5 Regional Presence

    26 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 11,326, including: ― 10,481 Pyaterochka ― 584 Perekrestok ― 91 Karusel ― 170 Express stores North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 166 765 4,325 2,876 1,2

  27. Slide 27: X5 Distribution Capabilities

    27 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 30 September 2017 Space, Federal district # of DCs th. sq. m. Central 542 16 4 North-Western 114 4 16 Volga 144 7 Ural 121 6 7 6 Southern 77 3 3 Siberian 18 1 1 Total 1,015 37 Centralisation levels 91% 88% 85% Highlights for Q3 2017 78% 78% 76% 7

  28. Slide 28: Appendices I. Performance Summary of Key Formats

    APPENDICIES I. PERFORMANCE SUMMARY OF KEY FORMATS

  29. Slide 29: Pyaterochka Summary (1/3) Highlights

    PYATEROCHKA SUMMARY (1/3) 29 HIGHLIGHTS 10,481 stores as of 4,146 th. sq. m. of selling space 30 September 2017, as of 30 September 2017, 34.6% increase y-o-y 34.1% increase y-o-y Q3 2017 net retail sales – 857 mln of customers for Q3 2017, RUB 251.7 bn, 28.7% increase y-o-y 28.8% increase y-o-y Q3

  30. Slide 30: Pyaterochka Summary (2/3)

    30 PYATEROCHKA SUMMARY (2/3) Q3 2017 net retail sales growth: Q3 2017 selling space growth: Q3 2017 sales densities: 28.8% increase y-o-y 34.1% increase y-o-y 4.7% 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]) 40.6% 41.1% 38.3% 35

  31. Slide 31: Pyaterochka Summary (3/3) Strategy Overview

    PYATEROCHKA SUMMARY (3/3) 31 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

  32. Slide 32: Perekrestok Summary (1/3) Russia's #1 Supermarket

    PEREKRESTOK SUMMARY (1/3) 32 RUSSIA’S #1 SUPERMARKET 584 stores as of 586 th. sq. m. of selling space 30 September 2017, as of 30 September 2017, 16.1% increase y-o-y 14.1% increase y-o-y Q3 2017 net retail sales of 99.0 mln customers for Q3 2017, RUB 42.4 bn, 14.6% increase y-o-y 18.1% increase y-o

  33. Slide 33: Perekrestok Summary (2/3)

    33 PEREKRESTOK SUMMARY (2/3) Q3 2017 net retail sales growth: Q3 2017 selling space growth: Q3 2017 sales densities: 18.1% increase y-o-y 14.1% increase y-o-y 6.0% 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]) 17.7% 320 16.4% 318

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

    PEREKRESTOK SUMMARY (3/3) 34 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

  35. Slide 35: Karusel Summary (1/3) Highlights

    KARUSEL SUMMARY (1/3) 35 HIGHLIGHTS 91 store as of 381 th. sq. m. of selling space 30 September 2017: as of 30 September 2017, 1.1% increase y-o-y down 1.0% y-o-y Q3 2017 net retail sales: 32.6 mln customers in Q3 2017, RUB 20.7 bn, down 0.2% y-o-y 3.8% increase y-o-y Q3 2017 LFL Results Share of X5

  36. Slide 36: Karusel Summary (2/3)

    36 KARUSEL SUMMARY (2/3) Q3 2017 net retail sales Q3 2017 selling space: Q3 2017 sales densities growth: 3.8% increase y-o-y 1.0% decline y-o-y growth: 9.2% 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]) 8.8% 9.1% 15.4% 229 14.2%

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

    KARUSEL SUMMARY (3/3) 37 KARUSEL STRATEGY OVERVIEW Good results at model hypers Development plan  Upgrade operating model for new  Key achievements: hypermarkets with all best practices taken − Positive LFL traffic in model hypers from “Model Hypermarkets” pilots − Increase of average check  Furt

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