X5 Corporate Center · RUS:X5
X5 Corporate Center — X5 Retail Group — Investor Presentation (January 2010)
42 slides from X5 Corporate Center's investor presentation, January 2010
Slide 1: Profitable Growth & Long-Term Leadership
Profitable Growth & Long-Term Leadership Investor Presentation January 2010 p. 1
Slide 2: 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
Slide 3: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership • X5’s Strategic Priorities • 2009 Performance • 2010 Growth Outlook II. Q3 & 9M 2009 Financial Highlights Appendices p. 3
Slide 4: X5 - #1 Russia's Retailer
X5 - #1 Russia’s Retailer X5 Retail Group today • 2009 net retail sales - USD 8,675 mln; growth on 2008 of Russia’s leading food retailers 25% on pro-forma basis (1) in RUR terms, # Company FY 2008 % in % in Total 33% on consolidation basis (2) in RUR terms Net Retail Top-10 Market (4) (4) • Market
Slide 5: X5's Strategic Priorities
X5’s Strategic Priorities • Build multi-format success • Strengthen value propositions • Drive LFL and top line growth Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 5
Slide 6: X5 Multi-Format Approach
X5 Multi-Format Approach X5 Operates Stores for Every Lifestyle and Family Budget Soft Discounters Net selling space: from 300 to 800 sq.m. Average assortment: 3,000 SKUs Pricing policy: Lowest price in the market on 100% of assortment res , 0 39 s to e s Format strengths: Price and convenience 1 l
Slide 7: Consumer Confidence
Consumer Confidence…. …was Substantially Affected by the Economic Crisis at the Beginning of 2009… 5% • Russian consumer confidence index (CCI) -5% dropped to -35% in Q1 2009… -15% Q4’09 • i.e. its the lowest level since Q4 1999 -25% Q3’09 -35% Q2’09 -45% Q1'03 Q1'04 Q1'05 Q1'06 Q1'07 Q1'08 Q1'09 …H
Slide 8: Throughout 2009 X5 Delivered…
Throughout 2009 X5 Delivered… … Stable LFL Performance Despite Persistent Trading Down Trends X5’s 2009 LFL Performance by Region Supermarkets’ 2009 LFL Performance Based on RUR- Traffic Basket Based on RUR- Traffic Basket denominated gross sales denominated gross sales + 13% 6% + 10% + 3% + 5% + 8%
Slide 9: X5's Competitive Position
X5’s Competitive Position… …Further Strengthened Since the Beginning of the Crisis X5 LFL Performance vs Competition(1) LFL Sales Growth 22% Magnit 22% (2) 20% Seventh Continent 19% Dixy 17% X5 14% 12% 11% 12% 13% 10% 12% 10% 7% 7% 5% 4% 5% 3% 2% 2% 1% 4% -1% -2% -3% FY 2008 Q1 2009 H1 2009 9M 2009
Slide 10: Value Propositions
Executing for Long-Term Multi-Format Success Fine-Tuning of Formats’ Value Proposition to Match Long-Term Leadership Goal Soft • Best price in the market on 100% of assortment Lower-income & Discounters • Assortment optimization towards lower price points price-focused customers • Private label deve
Slide 11: Evolving X5's Private Label Concept
Evolving X5’s Private Label Concept Aligning Private Label Strategy to Enhance Multi-Format Leverage and Margins Low Price Segment Medium Price Segment Premium Segment Price Leaders Margin Builders Margin Builders “Red Price” Multiple Single Brand Single Brand Brands NT PME Single Brand LO T VE EN L
Slide 12: X5's Strategic Priorities
X5’s Strategic Priorities • Build supply chain advantages • Drive efficiency and margins • Ensure support for long-term growth Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 12
Slide 13: X5's Strategic Efficiency Program
X5’s Strategic Efficiency Program Supply Chain Management Efficiency Asset IT Systems Efficiency Integration Operational Excellence In-Store Business Labour Processes Productivity Improvement p. 13
Slide 14: Logistics Development
Logistics Development… … Has Been the Company’s Focus since 2007… Fruit & DC locations as at Region # of DCs 000 sq. m. Dry Veg Fresh Frozen Non-Food 31 December 2009 Central 8 153.9 v v v v v North-West 5 65.1 v v v v Volgo-Vyatsky 1 17.5 v v v Urals 4 21.8 v v v v Centralno-Chernozemny 2 11.8 v v
Slide 15: Supply Chain Efficiency
Supply Chain Efficiency … Now We are Bringing It to a New Level… … to Create a Fully Integrated & Efficient Supply Chain Purchasing/ Optimal Warehouse Efficient Efficient Sourcing DC Network Productivity Transportation In-Store Structure Logistics Areas of Focus • Assortment • Optimization of DC • W
Slide 16: Transformation of X5's IT Systems
Transformation of X5’s IT Systems… … Supporting Company-Wide Efficiency and Scalable Growth with Integrated ERP Platform Current Status 2012 IT Infrastructure In-Store: • Unified IT platform at supermarkets and hypermarkets, different platform at discounters Stores Logistics: • Several warehouse man
Slide 17: Transformation of X5's IT Systems Roadmap
Transformation of X5’s IT Systems Roadmap 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 SAP Blueprint, Launch in a development & Roll-out For Retail testing pilot region SAP Blueprint, development Launch in a Roll-out For HR & testing pilot region SAP Blueprint, development Pilot launch Ro
Slide 18: Business Processes Improvement
Business Processes Improvement Legal Structure Regional Branches’ Optimization Processes Standardization Areas of Focus Transformation into aligned, efficient Standardization and simplification of and agile organization: business processes across formats: • In-store operations • Single operating com
Slide 19: In-Store Labour Productivity
In-Store Labour Productivity… … Can be Substantially Enhanced through Improving Efficiency of… In-Store and Working Workplace Store Personnel Personnel Core Processes Hours Management Education Management Areas of Focus • Merchandising • Efficient planning of • Optimization of • Performance • Educat
Slide 20: Focus on Efficient Asset Employment
Focus on Efficient Asset Employment Energy Efficiency Improved Leasing Terms Areas of Focus Stage I: Diagnosis & “Quick Wins” (2009) New Lease Contracts • Audit & optimization: • Capitalizing on current macro environment to –energy consumption meters obtain better rental terms and lock in landlords
Slide 21: Strategic Efficiency Program
Strategic Efficiency Program… …will Impact Every Area of X5’s Business Support of Working Long-Term Sales Cost Capital Scalable Growth Savings Project Improvement Expansion Efficient Supply Chain Management IT Systems Integration Business Processes Improvement Labour Productivity Improvement Efficie
Slide 22: Strategic Efficiency Program Roadmap
Strategic Efficiency Program Roadmap 2008 2009 2010 2011 Project Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Supply Chain Analysis and Management strategy “Quick Wins” Roll-out adjustment IT Systems Integration Please see page 16 for detailed roadmap Business Support Functions Processes Roll-out Core Proces
Slide 23: X5's Strategic Efficiency Program Delivering Results
X5’s Strategic Efficiency Program…. …is Multi-Year but We Are Already Delivering Results SG&A(1) as % of Sales 19,1% 19,2% 18,3% 18,1% 18,0% 18,0% 17,2% 17,2% 17,0% 17,0% Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 (1) Excluding Depreciation and Amortization p. 23
Slide 24: X5's Strategic Priorities
X5’s Strategic Priorities • Cash generation • Disciplined growth • Liquidity management Customer Operational Financial Focus Excellence Discipline Profitable Growth & Long-Term Leadership p. 24
Slide 25: Financial Discipline
Financial Discipline Cash Generation Disciplined Liquidity From Operations Growth Management Areas of Focus • Ensure sustainable • Focus on discounters, • Optimize debt structure operational primarily rented with focus on maturity performance profile improvement • Capitalize on lower • Capture cost
Slide 26: Selling Space Expansion in 2009
Selling Space Expansion in 2009… … was Focused and Selective • 271 stores or 189 th. sq.m. of selling space added in Number Of Stores 2009 on net basis: – Organically X5 added 126 th.sq. m. or 189 stores, substantially exceeding its initial expansion plan while staying well within its FY CapEx limit
Slide 27: Acquisition of Paterson Supermarket Chain
Acquisition of Paterson Supermarket Chain... … Provides X5 with Strong Value Enhancement Opportunities Business Rationale Potential Impact ~20% increase in Moscow & the region Reinforces X5 positions in supermarkets… supermarket count Strategic ~40% increase in St. Petersburg … by securing h
Slide 28: Performance Improvement Roadmap
Performance Improvement Roadmap 12 Months to Sep-09(1) 2010 2011 ▲Early benefits of re-branding ▲Sales per sq.m. normalizing at ▲Competitive pricing to drive sales Perekrestok and Pyaterochka Net Sales density levels 10,968 (RUR mln) ▼Short-term closing of stores for re- branding, integration and IT
Slide 29: Transaction Overview
Transaction Overview Description Acquisition of 100% ownership of Paterson retail business and property Equity value: USD 189.5 mln Transaction Value Net Debt: no more than RUR 2,467.5 bln (approximately USD 85 mln) Enterprise Value: USD 275 mln 100% cash payment for equity Transaction Str
Slide 30: 2010 – Step Up in New Store Openings
2010 – Step Up in New Store Openings 2010 Outlook • Assuming stabilisation of the macro-economic environment, in 2010 X5 expects to deliver net sales growth comparable to 2009 pro-forma level(1). Actual top line performance will depend on inflationary trends and the timing of a recovery in the consu
Slide 31: Liquidity Management
Liquidity Management Key Highlights Debt Maturity Profile as at 30.09.09 In June ‘09 X5 placed 7-year RUR 8 bln corporate bonds with a put USD mln option in 2 years. Proceeds were used to reduce short-term debt Denominated in RUR Denominated in USD As at 30 Sep ‘09 X5’s short-term debt increased
Slide 32: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership • X5’s Strategic Priorities • 2009 Performance • 2010 Growth Outlook II. Q3 & 9M 2009 Financial Highlights Appendices p. 32
Slide 33: Q3 & 9M 2009 Financial Performance
Q3 & 9M 2009 Financial Performance(1) Net Sales EBITDA & EBITDA Margin USD mln EBITDA, USD mln - 7% EBITDA Margin, % 8.9% 8.4% 8.7% 6,516 6,081 7.7% -12% - 4% 578 509 2,190 -15% 2,103 191 162 Q3 2008 Q3 2009 9M 2008 9M 2009 Q3 2008 Q3 2009 9M 2008 9M 2009 Gross Profit Net Profit Gross Profit, USD ml
Slide 34: Q3 & 9M 2009 P&L Highlights
Q3 & 9M 2009 P&L Highlights(1) % change % change % change % change USD mln Q3 2009 Q3 2008 9M 2009 9M 2008 USD RUR USD RUR Net Sales 2,103.1 2,190.3 (4%) 24% 6,081.2 6,516.1 (7%) 26% incl. Retail 2,094.2 2,177.0 (4%) 24% 6,053.2 6,478.7 (7%) 26% Gross Profit 501.8 558.8 (10%) 16% 1,480.8 1,673.7 (12
Slide 35: Key Q3 & 9M 2009 P&L Developments
Key Q3 & 9M 2009 P&L Developments Q3 2009 gross margin totaled 23.9% - a 160 bp decline year-on-year, resulting in 9M 2009 gross margin decline of 130 bp year-on-year to 24.4%. This decline is in line with the management's expectations and is attributable to our continuous investment in prices acr
Slide 36: Q3 & 9M 2009 Cash Flow Highlights
Q3 & 9M 2009 Cash Flow Highlights(1) Strong Cash Generation from Operations Offset by Working Capital Seasonality % change % change % change % change USD mln Q3 2009 Q3 2008 9M 2009 9M 2008 USD RUR USD RUR Net Cash Flows from Operating Activities 151.0 147.7 2% 37% 190.5 259.8 (27%) (1%) Net Cash fr
Slide 37: Agenda
Agenda I. X5 Retail Group – Profitable Growth and Long-Term Leadership • X5’s Strategic Priorities • 2009 Performance • 2010 Growth Outlook II. Q3 & 9M 2009 Financial Highlights Appendices p. 37
Slide 38: Acquisition of Paterson - Supermarkets
Acquisition of Paterson - … … Strategic Step Up in Supermarkets in Key Geographic Markets(1) + 9 Paterson # of Stores as at 31.12.09 Net Retail Sales (FY 2008) stores (1) (2) St. Petersburg Moscow 275 3,054 USD mln Perekrestok: 20 stores Central Perekrestok: 84 stores 2,702 Perekrestok: 125 stores 2
Slide 39: Acquisition of Paterson - Discounters
Acquisition of Paterson - … … Complementary Addition of Discounters(1) +6 Paterson stores +2 Paterson stores Moscow Pyaterochka: 202 stores St. Petersburg +13 Paterson +3 Paterson Moscow Pyaterochka: 237 stores stores stores Central Pyaterochka: 420 stores North-West Urals Pyaterochka: 304 stores Py
Slide 40: X5's Regional Coverage
X5’s Regional Coverage Moscow & the Region Net Retail Sales 2009: North-West region USD 4,460mln Breakdown: • As at 31 December, X5 was present in 45 Net Retail Sales 2009: USD 2,433mln Hypermarkets cities of European Russia and the Urals, Breakdown: Discounters Hypermarkets Supermarkets Volgo-Vyats
Slide 41: X5 Share Capital Structure
X5 Share Capital Structure 0.1% 27.0% 1.9% 47.9% Alfa Group 23.1% Founders of Pyaterochka X5 Management Free Float Total number of shares – 67,893,218 Treasury Shares Equivalent of 271,572,872 GDRs p. 41
Slide 42: Contact information
Contact information IR Department Contact Details Anna Kareva Maria Korotaeva IR Director IR Manager X5 Retail Group N.V. X5 Retail Group N.V. 28 bldg., 4, Sr. Kalitnikovskaya, 28 bldg., 4, Sr. Kalitnikovskaya, Moscow, Russia Moscow, Russia Tel.: +7 (495) 792 3511 Tel.: +7 (495) 980 2729 ext. 22-450
X5 Retail Group — Investor Presentation (January 2010) on 6ix