X5 Corporate Center · RUS:X5

X5 Corporate Center — X5 Retail Group — Q3 2018 Earnings Presentation

38 slides from X5 Corporate Center's earnings presentation, Oct 24, 2018

  1. Slide 1: Q3 2018 Financial Results

    CLIMB HIGHER! X5 Capital Markets Day 2016 Moscow, 27 October 2016 Q3 2018 FINANCIAL RESULTS MOSCOW, RUSSIAN FEDERATION 24 OCTOBER 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 Q3 2018

    05 KEY ACHIEVEMENTS IN Q3 2018  The Company added 507 net  Revenue growth remained new stores in Q3 2018 adding strong at 17.6% net 209 th. sq. m of selling space, 83% of which was organic growth  All of Pyaterochka stores and  Adjusted EBITDA margin at over 83% of Perekrestok stores solid 7.4%

  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 1,918 2,114 632 533 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 growth stopped by Real income resumed decline in Q3 2018 the end of Q3 2018 on the back of CPI despite persisting growth in real wage and food acceleration and consumer record lows of unemployment sentiment deterioration 12 Y-o-y growth rates, % 11 Y

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

    10 MACRO ENVIRONMENT (1/2) Consumer confidence halted its recovery Positive growth in industrial production is in Q3 2018. Trading down continued not supported by the outlook for future declining but remained high production indicated by the Russian manufacturing PMI index 0 70 56 68 6 (5) 54 66 (10

  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% 19% 19% 18% 14% 12% 11% [1] 9% 9% 9% 8% 9% 4% 4% 8% 3% 2011 2012 2013 2014 2015 2016 2017 9M 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 Q3 2018

    III. OPERATIONAL RESULTS Q3 2018

  16. Slide 16: Q3 2018 Results: Operational Highlights

    16 Q3 2018 RESULTS: OPERATIONAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,168 1,184 27.8% 27.4% 26.0% 23.3% 24.9% 23.4% 19.6% 20.2% 19.4% 1,041 17.6% 999 1,011 6,155 5,733 5,946 5,145 5,480 359 381 373 350 317 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017

  17. Slide 17: Q3 2018 Results: Net Retail Sales Summary

    17 Q3 2018 RESULTS: NET RETAIL SALES SUMMARY Net retail sales breakdown by retail format, RUB mln 297,946 372,934 317,131 53,225 20,647 Q3 2017 Q3 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: Q3 2018 Results: Expansion Summary

    18 Q3 2018 RESULTS: EXPANSION SUMMARY Net selling space, th. sq. m Net selling space added in Q3 2018, th. sq. m  Total store base increased to 13,685 stores as of 6,155 (4) 30 September 2018 30 September 2018  Pyaterochka was the main driver 23 for the store base increase with a 194 th. sq. m sel

  19. Slide 19: X5 Regional Presence

    19 X5 REGIONAL PRESENSE X5 today  Multi-format presence in seven Federal Districts  Total stores – 13,685, including: ― 12,822 Pyaterochka ― 712 Perekrestok ― 92 Karusel North North Format Unit Southern Central Volga Ural Siberian Total Caucasus Western 208 1,047 5,085 3,506 1,477 1,075 424 12,822

  20. Slide 20: X5 Distribution Capabilities

    20 X5 DISTRIBUTION CAPABILITIES Warehouse space as of 30 September 2018 Space, Federal district # of DCs th. sq. m Central 578 16 5 North-Western 131 5 Volga 195 9 16 Ural 145 6 9 6 Southern 78 3 3 Siberian 18 1 1 Total 1,145 40 Centralisation levels Highlights for Q3 2018 93% 94%  X5 started the i

  21. Slide 21: IV. Financial Results Q3 2018

    IV. FINANCIAL RESULTS Q3 2018

  22. Slide 22: Q3 2018 Results: Financial Highlights

    22 Q3 2018 RESULTS: FINANCIAL HIGHLIGHTS Net retail sales Traffic, mln customers Net selling space (eop) 1,168 1,184 27.8% 27.4% 26.0% 23.3% 24.9% 23.4% 19.6% 20.2% 19.4% 1,041 17.6% 999 1,011 6,155 5,733 5,946 5,145 5,480 359 381 373 350 317 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q

  23. Slide 23: Q3 2018 Results: Capital Expenditure Overview

    23 Q3 2018 RESULTS: CAPITAL EXPENDITURE OVERVIEW Capex breakdown for Q3 2018 Capex breakdown by quarter, RUB mln Total Capex in Q3 2018: RUB 18,757 mln 38,131 20% New store openings 26,222 Refurbishments 20,440 12% Logistics 18,757 57% 16,433 IT, Maintenance and other 12% 594 stores opened Q3 2017 Q

  24. Slide 24: Q3 2018 Results: Debt Structure

    24 Q3 2018 RESULTS: DEBT STRUCTURE Debt profile Debt portfolio maturity 100% 12% RUB mln 30 Sep 2018 30 Sep 2017 20% Total Debt 217,184 172,064 30% Short-Term Debt 55,987 46,496 % of total debt 25.8 27.0 38% Long-Term Debt 161,197 125,568 % of total debt 74.2 73.0 Net Debt 201,846 160,350 30 Sep 201

  25. Slide 25: Q3 2018 Results: Adjusted SG&A Expenses Analysis

    25 Q3 2018 RESULTS: ADJUSTED SG&A [1] EXPENSES ANALYSIS Q3 2018 analysis 9M 2018 analysis as percentage of revenue as percentage of revenue 17.9% 75 b.p. 17.6% 115 b.p. 17.1% 0.9% 3 b.p. 0.8% 1 b.p. 16.5% 0.9% 0.9% 0 b.p. 0.9% 14 b.p. 0.8% 1.1% 0.9% (11) b.p. 1.2% 1.1% (4) b.p. 0.8% 2.0% 1.2% 31 b.p

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

    FINANCIAL STATEMENTS (1/3) 26 PROFIT AND LOSS STATEMENT +/ ( - ), +/ ( - ), RUB mln Q3 2018 Q3 2017 +/( - ) 9M 2018 9M 2017 +/( - ) % % Revenue 375,505 319,424 56,081 17.6% 1,109,582 933,303 176,279 18.9% Net retail sales 372,934 317,131 55,802 17.6% 1,104,132 927,482 176,650 19.0% COGS (283,023) (2

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

    FINANCIAL STATEMENTS (2/3) 27 BALANCE SHEET RUB mln 30 Sep 2018 30 Sep 2017 +/( - ) +/( - )% Total current assets 142,432 121,979 20,453 16.8% Cash & cash equivalents 15,338 11,714 3,624 30.9% Inventories 99,755 84,953 14,802 17.4% Total non-current assets 426,644 378,598 48,046 12.7% Net PP&E 295,5

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

    FINANCIAL STATEMENTS (3/3) 28 CASH FLOW STATEMENT RUB mln Q3 2018 Q3 2017 +/( - ) +/( - )% 9M 2018 9M 2017 +/( - ) +/( - )% Net cash generated from operating 28,147 26,693 1,454 5.4% 55,779 37,598 18,181 48.4% activities Net cash from operating activities before changes 27,666 22,281 5,385 24.2% 77,

  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 12,822 stores as of 5,035 th. sq. m of selling space 30 September 2018, as of 30 September 2018, 22.3% increase y-o-y 21.5% increase y-o-y Q3 2018 net retail sales – 1,021 mln of customers in RUB 297.9 bn, Q3 2018, 19.2% increase y-o-y 18.4% increase y-o-y Q3

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

    31 PYATEROCHKA SUMMARY (2/3) Q3 2018 net retail sales: Q3 2018 selling space: 18.4% increase y-o-y 21.5% 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]) 36.1% 278 41.1% 275 272 268 266 262 259 30.6% 39.2% 254 251 249 31.2% 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 712 stores as of 728 th. sq. m. of selling space 30 September 2018, as of 30 September 2018, 21.9% increase y-o-y 24.4% increase y-o-y Q3 2018 net retail sales of 126 mln customers in Q3 2018, RUB 53.2 bn, 27.2% increase y-o-y 25.5% increase y-o-y

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

    34 PEREKRESTOK SUMMARY (2/3) Q3 2018 net retail sales: Q3 2018 selling space: Q3 2018 sales densities: 25.5% increase y-o-y 24.4% increase y-o-y 2.0% 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]) 324 326 326 327 25.5% 24.4% 318 32

  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 30 September 2018: as of 30 September 2018, 1.1% increase y-o-y 0.4% increase y-o-y Q3 2018 net retail sales: 32 mln customers in Q3 2018, RUB 20.6 bn, 3.1% decrease y-o-y 0.3% decrease y-o-y Q3 2018 LFL Results Shar

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

    37 KARUSEL SUMMARY (2/3) Q3 2018 net retail sales: Q3 2018 selling space: Q3 2018 sales densities: 0.3% decline y-o-y 0.4% increase y-o-y 3.2% 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% 233 237 237 237 227 229 10.7% 6.4%

  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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