X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — VTB Capital's Sixth Annual Investment Forum 2014

39 slides from X5 Corporate Center's conference presentation, Oct 1, 2014

  1. Slide 1: X5 Retail Group

    X5 Retail Group Gregory Madick, X5 IR Director VTB Capital’s Sixth Annual Investment Forum RUSSIA CALLING! Moscow, Russia 1 October, 2014 X5 RETAIL GROUP

  2. Slide 2: Russian Market Opportunity

    Russian Market Opportunity 2

  3. Slide 3: 2013 Industry Turnover in Russia

    2013 INDUSTRY TURNOVER IN RUSSIA Retail is one of the largest industries in Russia (~13x > telecom or ~6x > agriculture) RUB Grocery (food) retail is 50% of total retail Industry Top 18 Industry Top 15 Industry Top 10 Top 12 Industry overall companies* overall companies* overall companies* companies

  4. Slide 4: Grocery Retail Market Size by Country in 2013

    GROCERY RETAIL MARKET SIZE BY COUNTRY IN 2013 Russia is the 5th largest grocery market globally and fastest growing USD Note: In retail prices including VAT, Grocery market growth (CAGR) is calculated in constant 2013 prices, fixed 2013 exchange rates Source: Euromonitor, Planet Retail, IGD, Company

  5. Slide 5: Grocery Retail Market Development in Russia

    GROCERY RETAIL MARKET DEVELOPMENT IN RUSSIA Grocery retail is expected to grow 7-8% p.a. midterm; adding ~1T RUB incremental every year CAGR CAGR (05-13) (13-20f) RUB •Positive socio-economics since 2005 (GDP and PDI +15% p.a. nominal) •Fast development of modern retail (universe from 13K stores in

  6. Slide 6: Russian Grocery Retail Market Dynamics

    RUSSIAN GROCERY RETAIL MARKET DYNAMICS There is a power shift from Traditional Trade to Modern Trade with Federal Chains being the main driver RUB Federal Chains will grow by +5T RUB incremental from 2013 to 2020 Note: Federal players are Magnit, X5, Auchan, METRO, Lenta, O’Key, Dixy, 7 Continent; A

  7. Slide 7: Share of Modern Trade by Country, 2013

    SHARE OF MODERN TRADE BY COUNTRY, 2013 Low penetration of Modern Trade, market size & fragmentation create opportunities 88% 85% 83% 81% 79% 72% 64% 63% 51% 32% 2% Germany USA UK France Japan Poland China Russia Brazil Turkey India Sources: Planet Retail, Euromonitor and X5 estimates 7

  8. Slide 8: Top-5 Share of Grocery Retail Globally in 2013

    TOP-5 SHARE OF GROCERY RETAIL GLOBALLY IN 2013 The top 5 grocery retailers in Russia are 21% of the market (vs. 60-70% in established markets) Typically #1 player on the market is ~1.5x the size of #2 player Market leader sales Second player sales 1.4 1.9 1.6 1.1 1.7 3.3 1.1 1.8 Source: Company Repo

  9. Slide 9: Share of Top-2 Grocers by Country 2013

    SHARE OF TOP-2 GROCERS BY COUNTRY 2013 Leaders typically command an ~20% market share 40% 38% 35% Sainsbury Schwarz 31% 14% Group Kroger 16% 15% 7% Tesco Walmart 26% Edeka 22% 24% 20% UK Germany USA Russia 9

  10. Slide 10: X5 Today

    X5 Today 10 )XS5RETAILGROUP © Tamiépouxa feMep=npecron Bx kapyee

  11. Slide 11: Aspirations

    ASPIRATIONS Leverage our scale and multi-format value proposition to capture greater wallet share by providing the best customer experience in the dynamic Russian food retail market Develop the best multi-format model to ensure market coverage and satisfy the demands of the Russian Creating consume

  12. Slide 12: Focus Since 2012

    FOCUS SINCE 2012  Developing the right management team  Creating effective multi-format business model  Defining appropriate format value propositions  Focusing on operational execution, “Back to Basics” retail  Continuing to take advantage of market opportunities for “intelligent” growth 12

  13. Slide 13: Execution of Turnaround Agenda

    EXECUTION OF TURNAROUND AGENDA Different formats are in different stages of the turnaround process  “New Pyaterochka” rebranding launched in October 2013 – rejuvenation of “Pyaterochka” team spirit underway  Cluster based operating model up and running – control, transparency & accountability to m

  14. Slide 14: Execution of Turnaround Agenda: Logistics

    EXECUTION OF TURNAROUND AGENDA Logistics  Logistics separation along format lines is on schedule – to be completed before the 2015 high-season  By the beginning of the 2014 high-season we will have 8 Pyaterochka mono-format DCs, 7 Perekrestok/Karusel mono-format DCs and 14 multi-format DCs (plus 2

  15. Slide 15: Pyaterochka

    PYATEROCHKA Selling Space (sq. m.) 1,414,102 Surprising customers everyday! 1,191,353 996,054 We want to move closer to customers, and surprise with cleanliness, freshness and new assortment. 586,311  Location – neighborhood food store, convenient locations 493,016  Price/promo – interesting promo

  16. Slide 16: Perekrestok

    PEREKRESTOK Selling Space (sq. m.) 383,459 397,750 #1 Supermarket for fresh! 347,266 313,024 Providing a dependable and wide range of fresh products for 284,359 daily shopping and special occasions with exceptional service and quality.  “Good-better-best” assortment with strong private label and ex

  17. Slide 17: Karusel

    KARUSEL Selling Space (sq. m.) 371,293 368,249 375,808 Convenient shopping, fair prices! 351,753  Everything I need for my weekly shopping and more 285,581  Competitive pricing supported by targeted communication to cultivate value for money perception and aggressive promo to reinforce price image

  18. Slide 18: Pyaterochka – Before & After

    PYATEROCHKA – BEFORE & AFTER 18

  19. Slide 19: Perekrestok – Before & After

    PEREKRESTOK – BEFORE & AFTER 19

  20. Slide 20: Current Financial Highlights

    CURRENT FINANCIAL HIGHLIGHTS RUB million Q-o-Q Y-o-Y Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 (where applicable) +/( - )% +/( - )% Revenue 133,449 124,246 150,341 144,167 155,579 7.9 % 16.6 % Net retail sales 133,076 123,534 149,786 143,898 155,109 7.8 % 16.6 % COGS (101,876) (93,155) (113,559) (109,

  21. Slide 21: Net Retail Sales and Selling Space Growth

    NET RETAIL SALES AND SELLING SPACE GROWTH X5 Retail Group Pyaterochka 16.6% 13.9% 22.6% 12.9% 12.3% 12.1% 19.5% 19.9% 11.5% 11.9% 18.7% 16.9% 17.7% 14.1% 6.6% 7.2% Q3'13 Q4'13 Q1 '14 Q2'14 Q3'13 Q4'13 Q1 '14 Q2'14 Perekrestok Karusel 5.9% 5.5% 8.7% 4.4% 7.1% 7.4% 3.7% 5.6% 2.0% 1.6% 1.6% 1.1% 2.1% (

  22. Slide 22: Like for Like Results

    LIKE FOR LIKE RESULTS X5 Retail Group Pyaterochka 11.1% 8.1% 8.2% 6.3% 5.2% 3.9% 11.8% 9.5% 8.1% 4.9% 3.1% 6.1% 4.7% 4.5% 0.7% 0.1% 0.6% 0.2% (-.6%) (-1.2%) (-6.2%) (-7.%) (1.7%) (2.6%) Q3'13 Q4'13 Q1'14 Q2'14 Q3'13 Q4'13 Q1'14 Q2'14 Perekrestok Karusel 6.3% 0.6% 5.0% 0.4% 0.0% 4.1% 5.2% 3.4% 3.4% 1

  23. Slide 23: July 2014 Trading Results

    JULY 2014 TRADING RESULTS (1) Sales results Format Net retail sales growth, RUR, y-o-y LFL sales results, y-o-y (2) Customer Average ticket Net retail sales (2) Total LFL Traffic Basket visits Pyaterochka 30.9% 17.6% 11.5% 18.2% 5.4% 12.1% Perekrestok 9.6% (4.8%) 14.4% 6.1% 2.0% 4.1% Karusel 6.5% 0.

  24. Slide 24: Appendix I – X5 Additional Information

    Appendix I – X5 Additional Information 24

  25. Slide 25: X5 since 2005

    CREATING A MULTI-FORMAT RETAILER X5 since 2005 Capturing a greater share of the customer’s wallet The right strategy, the right market, the right time 25

  26. Slide 26: Timeline of Key Events

    TIMELINE OF KEY EVENTS  Transformation to multi-format structure  Merger of Pyaterochka & Perekrestok  X5 opens 3,000th store  Renamed X5 Retail Group N.V.  Over 1.6 bln customer visits  More than 600 stores under management  577 stores added organically  Presence in 21 regions  Successful

  27. Slide 27: Regional Presence

    REGIONAL PRESENCE Number of stores by region as of June 30 2014 (1) Overview • Multi-format presence in 62 cities of European Russia, the Urals and Western North region Siberia with population > 200,000 (2) Pyaterochka: 69 • Total stores – 4,779, including: North-West region Petrozavodsk ― 4,128 Pya

  28. Slide 28: Corporate Governance

    CORPORATE GOVERNANCE Corporate Governance Bodies Supervisory Board Composition Audit Committee Independent General Meeting of (3 members) Name Position Directors(1) Shareholders Nomination and Mr. Dmitry Dorofeev Chairman Remuneration Committee (4 members) Supervisory Board Mr. Mikhail Fridman Membe

  29. Slide 29: Appendix II – Russian Macro Environment

    Appendix II – Russian Macro Environment 29

  30. Slide 30: Russian Macro Indicators

    RUSSIAN MACRO INDICATORS Industrial Production Real Retail Food Sales Growth Food CPI 1.8% 1.9% 3.4% 9.4% 1.7% 8.7% 2.5% 6.5% 7.2% 7.3% 1.0% 1.1% 2.4% 1.1% (0.1%) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Real Wage Growth Unemployment Rate Consumer Con

  31. Slide 31: Appendix III – Q2 2014 Financial Results

    Appendix III – Q2 2014 Financial Results 31

  32. Slide 32: Revenue & EBITDA Dynamics

    REVENUE & EBITDA DYNAMICS 447 1,176 627 40 97 155,579 19,743 133,449 Revenue Dynamics, Total: + 22.6% Total: + 1.6% Total: + 7.4% Total: + 31.7% RUB million Central: + 25.4% Central: + 3.4% Central: + 22.9% Central: + 31.7% NW: + 7.0% NW: + 8.5% NW: - 0.4% NW: - Other: + 28.3% Other: - 7.8% Other: -

  33. Slide 33: SG&A Breakdown

    SG&A BREAKDOWN Q2 % of Q2 % of Q1 % of Q2 % of RUB mln 2013 Revenue 2014 Revenue 2014 Revenue 2014 Revenue 10,754 8.1% 12,001 7.7% Staff costs 12,104 8.4% 12,001 7.7% 5,555 4.2% 6,719 4.3% Lease expenses 6,598 4.6% 6,719 4.3% 3,412 2.6% 4,108 2.6% D&A 3,889 2.7% 4,108 2.6% 2,654 2.0% 3,069 2.0% Util

  34. Slide 34: Cash Flow Highlights

    CASH FLOW HIGHLIGHTS RUB mln Q2 2013 Q2 2014 +/( - ) +/ ( - ), % Net cash generated from/ (used in) operating activities 1,548 12,776 11,228 725.4 % Net cash from operating activities before changes in working capital 9,383 12,201 2,818 30.0 % Change in Working Capital (4,114) 3,056 7,170 n/a (Incre

  35. Slide 35: Capital Expenditures Overview

    CAPITAL EXPENDITURES OVERVIEW Q2 2014 Capital Expenditures(1) Net Investment Cash Flows, RUB mln Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Reconstruction & Maintenance 38% New Store Openings 58% (4,289) (4,787) (4,911) (5,183) Logistics, IT & Other 4% (7,885) In Q2 2014, capex focused on organic expan

  36. Slide 36: Condensed Balance Sheet

    CONDENSED BALANCE SHEET RUB mln 31 December 2013 30 June 2014 +/( - ) +/( - )% Total current assets 76,488 75,741 (747.0) (1.0) % Cash & cash equivalents 7,611 6,121 (1,490.0) (19.6) % Inventories 37,465 37,009 (456.0) (1.2) % Total non-current assets 225,415 225,792 377.0 0.2 % Net PP&E 134,998 136

  37. Slide 37: Debt Structure

    DEBT STRUCTURE Debt Profile Debt Portfolio Maturity 45.8% RUB mln 30 Jun 2013 31 Dec 2013 30 Jun 2014 Total Debt 122,886 110,523 110,361 Short-Term Debt 54,987 30,680 20,729 23.7% % of total debt 44.7% 27.8% 18.8% 13.6% 18.5% Long-Term Debt 67,899 79,843 89,632 16.9% % of total debt 55.3% 72.2% 81.2

  38. Slide 38: Disclaimer

    DISCLAIMER This presentation does not constitute or form part of and should not be construed as an advertisement of securities, an offer or invitation to sell or issue or the solicitation of an offer to buy or acquire or subscribe for securities of X5 Retail Group N.V. or any of its subsidiaries or

  39. Slide 39: IR Department Contacts

    IR DEPARTMENT CONTACTS Gregory Madick Andrey Napolnov, CFA Executive IR Director Senior IR manager Tel.: +7 (495) 502 97 83 Tel.: +7 (495) 662 8888 ext. 22-455 Mob.: +7 (910) 459 73 56 Mob.: +7 (926) 654 6262 E-mail: Gregory.Madick@X5.ru E-mail: Andrey.Napolnov@X5.ru Address: 4/28, Sr. Kalitnikovska

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