Magnit · RUS:MGNT
Magnit — Investor Presentation (2006)
37 slides from Magnit's investor presentation, 2006
Slide 1: Company overview and 1Q2006 management accounts
Company overview and 1Q2006 management accounts
Slide 2: Important information
Important information This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does
Slide 3: Company & Strategy
Company & Strategy Section 1
Slide 4: Our history
Our history 1998 2001-2005 End of 2005 1994 End of 1999 Decision to Rapid regional Leading food retailer in Foundation of Stores merged expand into roll-out: 1,500 Russia by number of wholesale into Magnit grocery retail stores by the stores and sales distribution discounter retail market end of 200
Slide 5: Favourable environment for roll out of discounters
Favourable environment for roll out of discounters Growing economy and income… …boost retail spend per capita… 20% 2000 1,701 15% CAGR 2000-05 24% 1,491 15% 1500 11% 10% 9% 9% 1,021 10% 7% 7% 1000 730 833 5% 5% 6% 580 5% 500 0% 0 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 Real GDP growth
Slide 6: To 2006 Magnit is:
To 2006 Magnit is: Net sales, 2005E, $ bn Magnit 1,6 Pyaterochka 1,4 Perekryostok 1,0 Auchan 1,0 Dixi 0,9 Seventh Continent 0,7 Lenta 0,6 2003* 2004 2005 CAGR Kopeyka 0,6 Ramstore 0,6 Net sales, US$ m 440 849 1,578 85% 0,0 0,5 1,0 1,5 2,0 Number of stores, eop 610 1,014 1,500 57% Source: Companies S
Slide 7: Today Magnit is:
Today Magnit is: The leading Russian food retailer by sales and number of stores 1,574 stores in discounter format as of March 31, 2006 More than 492 cities and towns in European Russia as of March 31, 2006 Over 411 thousand sq. m of selling space as of March 31, 2006 Significant share in discounter
Slide 8: Our strengths
Our strengths Unique purchasing power: – Platinum client for many multinational and Russian FMCG producers Leading food retailer in Russia – Direct purchasing contracts and centralised delivery help to negotiate favorable terms and offer competitive prices to customers Presence in 5 out of 7 federal
Slide 9: Strategy
Strategy Organic growth in existing Increase market penetration in existing markets markets and selective Expansion into cities in selected new regions with less than 500,000 population and a geographic expansion favorable competitive situation Focus on branding and Value-for-money product mix devel
Slide 10: Vision and Mission
Vision and Mission Where do we want to be in 5 years from now? The largest food retail chain in Russia The leading logistics platform in Russia Sustain our efficient growth with a track record of profitability Our Mission We work hard to increase the prosperity of our customers by minimising their e
Slide 11: Business Overview
Business Overview Section 2
Slide 12: Format features
Format features Key features Typical Magnit stores Best prices for 200 indicative SKUs in the Outstanding local market value-for-money Active price communication by priority shelving of special offers Convenient location close to customers’ homes Convenient Freestanding or on the ground floor of loc
Slide 13: Corporate and organizational structure
Corporate and organizational structure Group’s corporate structure Group’s operating structure (as at March 31, 2006) Southern regional division CJSC Tander 100% Food retail and wholesale Central regional division 99%* LLC Selta Alcohol licence holder for Stavropol region Volzhsky regional 1% 99% LL
Slide 14: Top management
Top management Sergey Galitskiy, Chief Executive Officer Alexander Prisyazhnyuk Vladimir Gordeychuk Chief Financial Officer Chief Operating Officer Photo to Founder of the Group come Age – 38 Photo Since 1997 Education: Kuban Photo Since 1996 to come Age – 33 State University, to come Age – 44 Educa
Slide 15: Strong regional coverage 1Q2006
Strong regional coverage 1Q2006 Demographical breakdown of store locations 1 million + residents; 9% up to 100 thousand 500 - 1000 residents; thousand 41% residents; 24% North-Western Federal district: 100-500 Central Federal district: 67 stores thousand 396 stores residents; 2 Distribution centres
Slide 16: Addressing the needs of our target customers
Addressing the needs of our target customers 30% 20% Pensioners (60+ years old) Youth (up to 30 years old) Priorities: Priorities: 1. Price 1. Assortment 2. Location 2. Location 3. Assortment 50% 3. Comfort 4. Comfort 4. Price Key features: Key features: Shopping habits formed in Soviet time Familie
Slide 17: Assortment selection
Assortment selection Share of stores offering fresh and Assortment structure, 1Q2006 value-added products Fresh categories 98,5% Alcohol, soft-drinks 23,29% Salads 64,3% and beverages Chilled chicken 42,8% Meat and meat 15,00% products Fish 28,8% Grilled chicken and meat 14,3% Dairy products 15,47%
Slide 18: Highly flexible and differentiated pricing model
Highly flexible and differentiated pricing model Mark-up criteria Mark-up adjustments Target weighted average mark-up for Overall necessity of a product the Group Competition in the area of 500 m from Target audience for a product the store Mark-up for a given product Geographical location Purchasin
Slide 19: Suppliers, purchasing and Private Label products
Suppliers, purchasing and Private Label products Magnit is the largest customer for many domestic and Private Label products are designed to substitute the international FMCG producers. cheapest SKUs to maximise returns on each metre of shelving space: Over 2,000 suppliers with the 20 largest accoun
Slide 20: Management Information System and automated stock replenishment
Management Information System (MIS) and automated stock replenishment system High degree of visibility of remote markets and store performance: Monthly consolidated P&L reports Daily detailed management reports on KPIs Real time access to information on inventory Automated inventory management syste
Slide 21: Logistics system
Logistics system Up to 60% of cost of goods sold is processed through The company’s breakdown of shares in our in-house logistics systems and the long-term target is to increase this share to 85% turnover Automated stock replenishment system 5 distribution centres with approximately 62 thousand sq.
Slide 22: Well trained dedicated personnel
Well trained dedicated personnel As of March 31, 2005, the Group employed approximately 34,186 staff, including: – 26,541 in-store personnel, – 4, 524 people engaged in distribution, Average personnel headcount vs average – 2,589 people in regional branches and salary, 2004-2005 – 532 people employe
Slide 23: Store opening process varies from 1 to 3 months
Store opening process varies from 1 to 3 months Month 1 Month 2 Month 3 W W W W W W W W W W W W Significant experience of store openings 1 2 3 4 1 2 3 4 1 2 3 4 Leased stores are preferred for quick roll out in Identification of a property new markets or a land plot Feasibility report and In existin
Slide 24: Summary Magnit store statistics
Summary Magnit store statistics Store portfolio as at 31 March 2006 Owned and leased stores Number of stores and breakdown Selling space, sq. m Owned; 1580 415000 11,4% 410000 Owned; 12% 1560 405000 400000 1540 395000 1520 390000 385000 1500 380000 375000 1480 Leased, Leased, 370000 88,6% 88% 1460 3
Slide 25: Operating and financial results
Operating and financial results Section 3
Slide 26: Store information
Store information Total number of stores, 2001-1Q2006 Average total space per store, 2001-1Q2006 2000 450 387 387 1574 374 368 365 376 1500 400 1500 350 1014 300 250 sq m 1000 610 200 368 150 500 100 153 50 0 0 2001 2002 2003 2004 2005 1q2006 2001 2002 2003 2004 2005 1q2006 Source: Company data Sour
Slide 27: Operating KPIs
Operating KPIs Number of tickets, 2003-1Q2006 Average ticket, 2003-1Q2006 500,0 469,3 400,0 4,0 3,58 3,3 273,2 3,5 3,0 in millions 300,0 3,0 2,5 2,5 200,0 158,8 US$ 137,90 2,0 1,5 100,0 1,0 0,5 0,0 0,0 2003 2004 2005 1q2006 2003 2004 2005 1q2006 Source: Company data Source: Company data 26
Slide 28: Regional store performance
Regional store performance Sales per store*, 2003-2005 Sales per sq. m*, 2003-2005 2,195 7,705 Moscow 1,781 Moscow 6,097 1,159 4,046 1,621 5,415 St. Petersburg 1,358 St. Petersburg 4,527 757 2,901 1,270 4,938 Southern 1,053 Southern 4,089 871 3,305 1,031 4,326 Volga 773 Volga 3,310 628 2,605 970 3,8
Slide 29: Improved operating efficiency
Improved operating efficiency 1. Increase in number of stores In US$m FY 2004 FY 2005 YoY, % 2. Sales per square metre growth thanks to: Net sales 848.5 1,577.7 86% Traffic growth: Cost of goods sold (739.8) (1,312.9) 77% – Macroeconomic factors – Increased market share due to outflow of customers f
Slide 30: LFL sales analysis
LFL sales analysis LFL 2004 to 2005 Sales dynamics, 2004-2005 1 800 1 500 1600 Tickets per 1 600 1400 Number of stores, eop store, LFL 1 400 1 014 1200 growth 1 200 1000 US$m 1 000 LFL revenue 800 800 1 552,6 +13.9% growth 600 600 400 813,5 400 200 200 Average 0 0 ticket, LFL 2004 2005 growth +26% R
Slide 31: LFL sales analysis
LFL sales analysis LFL 1Q2006 to 1Q2005 Tickets per store, LFL growth LFL revenue growth +3.91% Average ticket, LFL growth +15.45% +11.11% Note: for stores opened before July 2003 and not closed down permanently, expanded or downsized by the end of 2005, i.e. 399 stores Source: Companies’ data 30
Slide 32: Gross margin improvement factors
Gross margin improvement factors 18% + 0.4% + 0.4% -0.1% 16.8% + 3.3% 16% 14% 12.8% 12% as % of sales 10% 8% 6% 4% 2% 0% GM 2004 Trading Transportation Inventory Rebates GM 2005 margin costs shortages Source: audited IFRS Financial Statements 31
Slide 33: Profitability analysis
Profitability analysis SG&A expense dynamics, 2004-2005 EBITDA dynamics, 2004-2005 200 11.8% 15% 90 6% SG&A expenses, US$ m 80 4.9% 10.9% 12% 5% EBITDA margin, % 70 EBITDA, US$ m 150 as % of Sales 60 4% 9% 50 100 185.5 3% 40 78.0 6% 30 1.5% 2% 50 92.9 20 3% 1% 10 12.7 0 0% 0 0% 2004 2005 2004 2005 S
Slide 34: Summary consolidated balance sheet, 2004-2005
Summary consolidated balance sheet, 2004-2005 In US$m 31-Dec-04 31-Dec-05 P,P&E 93.9 160.1 Intangible assets 0.2 0.4 Other non-current assets 0.0 - Total non-current assets 94.1 160.5 Merchandise 77.9 151.3 Trade accounts receivable 4.5 1.0 Taxes receivable 14.5 19.2 Advances paid 6.1 23.6 Other rec
Slide 35: Summary consolidated cash flow statement, 2004-2005
Summary consolidated cash flow statement, 2004-2005 in US$m 2004 2005 OPERATING ACTIVITIES: Profit before income tax 1.3 50.0 Adjustments for: Depreciation 6.1 15.1 (Loss)/gain on disposal of property, plant and equipment (0.0) 0.1 Change in provisions for doubtful receivables 0.5 0.5 Other adjustme
Slide 36: Working capital and capital expenditure
Working capital and capital expenditure Inventory days, 2003-2005 Capital expenditure structure, 2005 80 74 Store equipment, 70 47.9% 60 50 41 40 40 34 32 Store 28.8 Warehouse 30 equipment, premises, 20 28.7% 1.8% 10 0 Other, 2.9% Warehouse Fit-out costs, 2004 2005 premises, 14.0% 4.6% Receivables P
Slide 37: Capital structure
Capital structure Magnit significantly improved its financial standing in 2005: Capital structure, 2004-2005 – The net debt/EBITDA ratio decreased from 4.6x in 2004 to 1.5x 31 Dec 2004 31 Dec 2005 in 2005 100.00% – EBITDA/Net Interest increased from 2.4x in 2004 to 6.1x in 80.00% Current Current 200