Transcript
2
DisclaimerDisclaimer
The materials contained in this presentation (“Presentation”) have been prepared solely for the use in this Presentation and have not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of OJSC “Magnit” (“the Company”), nor any shareholder of the Company, nor any of its or their affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection with the Presentation.
No part of this Presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.
This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.
Matters discussed in this Presentation may constitute forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe,”“expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “may,” “should” and similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures; growth in demand for products; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of competitors.
The forward-looking statements in this Presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements include the achievement of the anticipated levels of profitability, growth, cost and its recent acquisitions, the timely development of new projects, the impact of competitive pricing, the ability to obtain necessary regulatory approvals, and the impact of general business and global economic conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance.
Neither the Company, nor any of its agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this Presentation or to update or to keep current any other information contained in this Presentation. The information and opinions contained in this document are provided as at the date of this Presentation and are subject to change without notice.
By reviewing this Presentation and/or accepting a copy of this document, you acknowledge and agree to be bound by the foregoing.
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Table of ContentsTable of Contents
1.1. IntroductionIntroduction
2.2. Business OverviewBusiness Overview
-- Convenience FormatConvenience Format
-- Hypermarket FormatHypermarket Format-- General OverviewGeneral Overview
3.3. Financial OverviewFinancial Overview
4.4. Summary ConclusionsSummary Conclusions
4
Our HistoryOur History
� Foundation of wholesale business by Mr. Galitskiy
� Tander becomesone of the major distributors of household products and cosmetics in Russia
� Decision to expand into food retail market
1994 1994 –– 19981998
Early years:wholesale distribution
� Firstconvenience store opened in Krasnodar
� Experiments with format
� Stores merged into Magnit discounter retail chain
1998 1998 –– 19991999
Entrance into
food retail
� Rapid regionalroll-out: 1,500 stores by the end of 2005
� Adoption of IFRS
� Strict financial control
� Performance-linked compensation
2001 2001 –– 20052005
Extensive roll-out
to capturemarket share
� Leading food retailer inRussia by number ofstores
� IPO in 2006
� Independent director elected to the Board
� Audit Committee established
� Corporate governance rules established to comply with best practice
� SPO – 2008, 2009
� 24 hypermarkets openedin 2007-2009
� 636 convenience stores opened in 2009 (the total store base is 3,228 as of December 31, 2009)
2006 2006 –– 2009 crisis2009 crisis
Continued growth with focus on
margin expansion and multi-format
� Acceleration of growth –800 convenience stores and 27 hypermarkets added in 2010
� Large investment programme for 2011: plan to make Capital expenditures of about $1.5 bn
� Plan to open up to 800 convenience stores and up to 55 hypermarkets during 2011
� Ongoing efficiency improvement
20102010--20112011
Strong performer
compared to peers
5
Magnit TodayMagnit Today
4,14% 2,81% 4,93% 6,78%9,19%
20,15%13,91%
18,84%
-10%-5%0%5%
10%15%20%25%
FY2007-FY2006
FY2008-FY2007
FY2009-FY2008
1Q2010-1Q2009
1H2010-1H2009
9M2010-9M2009
FY2010-FY2009
1Q2011-1Q2010
� Leading market position with broad geographic coverage
� Focus on cities and towns with population under 500,000 people
� Strong platform for rapid hypermarket operations expansion
� Efficient logistics system
� Sophisticated IT systems
� Experienced management team
� Strong financial performance
Number of Stores, eop
Financial Performance
7 7775 3545 348
22,4%
21,7%23,5%
7,5%8,1%
9,5%4,3%3,5% 5,1%
1 000
3 000
5 000
7 000
2008 2009 2010
0%
5%
10%
15%
20%
25%
Sales Gross Margin EBITDA Margin NI Margin
($MM) (%)
Source: CompanySource: Company, IFRS accounts
Source: Company
’02-’10 CAGR: 35%
Sales, Lfl Growth, Rub terms
3 204
4 004 4 132
2 197
3 228
4 189
2 5682 194
4 055
2 582
18931500
1014610368
0600
1 2001 8002 4003 0003 6004 2004 800
2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q2011
Convenience Stores Hypermarkets
6
Further expansionof convenience
store operations
StrategyStrategy
Hypermarketroll-out
Efficiency and profitability
improvements
7
Medium term plans� High level growth of convenience store operations� Plan to add up to 800 convenience stores in 2011� Acquisition of land plots and premises to secure pipeline for future stores
Store opening decision factors
� Proximity to existing distribution centres� Ability to find suitable retail space� Level of modern format penetration and consumer disposable income
Further Expansion of Convenience Store OperationsFurther Expansion of Convenience Store Operations
Further penetration in existing regions
� Areas with low modern format penetration� Expansion into towns with population as low as 5,000 people� Expansion into new locations within regions where Magnit is already present
Further expansion of convenience
store operations
Hypermarketroll-out
Efficiency improvement
Adjusting format to customers’ needs
� Flexible SKU matrix adjustable to consumer disposable income � Gradual shift to larger convenience store size to improve store attractiveness� Promotion of one-stop shopping concept for everyday needs
8
Strong operational platform
� Strong brand name recognition and customer awareness generated by a large regional network of convenience stores
� Economies of scale in purchasing and efficient logistics system capable of supporting both formats in existing and new locations
� Existing retail expertise strengthened by a team of hypermarket specialists brought in to manage execution risks
� Increase of the number of owned stores
Target locations
� Low or limited competition from other hypermarkets or modern retail formats� Relatively low prices of land plots for hypermarket construction in towns with population of
50,000 and more� Benefiting from strong growth of disposable income and consumer spendings in the Russian
regions
Hypermarkets Roll-OutHypermarkets Roll-Out
Roll-out plan
� Locations are chosen on the basis of competition from other hypermarkets in the area, the strongest growth of disposable income of the population and minimum negative impact on existing convenience stores
� In small towns hypermarkets will be located in central locations which will give advantage of targeting consumers who do not own cars
� Hypermarkets total selling space (1) will vary from 2,000 to 12,500 sq. m. depending on availability of land plots
Further expansion of convenience
store operations
Hypermarketroll-out
Efficiency improvement
Note (1) Including selling space designated for leases to third parties
9
� Further growth of the share of high margin products, including fresh food products, ready-made meals and private label
� Fresh food products and ready-made meals are expected to motivate customers to shop at our stores more frequently
Efficiency and Profitability ImprovementEfficiency and Profitability Improvement
Achievesynergies
� Synergies arising from operation of neighbouring hypermarkets and convenience stores, allowing to increase the effect of economies of scale
Further expansion of convenience
store operations
Hypermarketroll-out
Efficiency improvement
Increase the share of products
distributed through own logistics
system
� Efficient utilisation of in-house logistics system– Increase in the share of goods distributed through the company’s distribution centres from
approximately 81% of cost of goods sold in 1Q 2011 up to 90-92%* in the long term– Reduction of third party logistics costs
Improve the product mix
Increasepurchasing power
� Increasing the penetration of convenience store operations in areas of presence with relatively low market share, which is expected to result in greater purchasing or negotiating power vis-à-vis local suppliers and landlords
Optimiselabor productivity
� Investing in various technologies that have significant potential for productivity increases� Measures to improve retention rates for employees and management, that will reduce costs
associated with losing experienced employees and recruiting and training new ones* for convenience stores
11
A Shift to Multi FormatA Shift to Multi Format
HypermarketConvenience Store
Number of stores 4,132 (1) as of 31 March 2011 57 as of 31 March 2011
Average store size� Total space – 467 sq. m.� Selling space – 316 sq. m.
� Total space: 7,386 sq. m.� Magnit selling space (2): 3,175 sq. m.
Product range� 3,134 SKUs on average� Private label – 14.00% of retail sales
� 13,019 SKUs depending on format� Private label – 7.90% of retail sales
Positioning (format)� Walking distance from home� Ground floor stores or freestanding� Open 12 hrs/7 days
� All hypermarkets are built in convenient locations� All easily accessed by public transport
Target group � People living within 500 metres from the store� People living within 15 minutes by car / 30 minutes
by public transport from the store. Effective radius –7 km
Ownership � 34.7% owned / 65.3% leased as of 31 March 2011 � 89.5% owned / 10.5% leased
Note: (1) Including 4 drogerie stores (2) Excludes selling space designated for leases
13
Format DescriptionFormat Description
145
207
160
696
185
837
184
012
1967
85
53416283
74775801 6 480
0
2000
4000
6000
8000
0
50 000
100 000
150 000
200 000
2006 2007 2008 2009 2010Rub USD
Format Highlights
� Low prices
� Convenient locations
� Carefully selected product mix
� Standardised exterior and car parking
� Functional interior design
� Attention to customers
� Increasing customer convenience
� Main target group: all consumers living within 500 m radius
Geographical Breakdown (% of total stores)
Number of Convenience stores (1)
6101 014
1 5001 893
2 1942 568
3 204
4 004 4 132
3680
1 000
2 000
3 000
4 000
2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q2011
Operating Statistics
sales / sq. m. / year
Source: Company
Source: Company (1) Number for 2010 includes 4 drogerie stores
Source: Company
Southern26%
Volga31%
Central24%
North-Caucasian
6%
North-West6%
Urals6%
Siberian1%
14
Typical Store Opening ProcessTypical Store Opening Process
� Considerable experience of store openings
� Acquisitions and construction are preferred in existing markets with already high penetration
� Key store opening criterion is payback period of not more than 3 years if leased; 4 – 6 years if owned
� Average total cost of a new convenience store is US$800 – 2,500 per sq. m. (excl. VAT)
� New stores reach their average traffic and sales target within 6 months from opening
� Rationalisation of store portfolio
Identification of a property or a land plot
Feasibility report and opening budget prepared
Approval by the regional director and branch director
MOU signed with landlord
Legal due diligence
Technical due diligence
Approval by Committee on Store Openings
Lease agreement or SPA signed
Repair and maintenance
Purchasing and installation of equipment
Personnel hiring and training
Sublet agreements signed
Store opened
W
1
W
2
W
3
W
4
W
1
W
2
W
3
W
4
W
1
W
2
W
3
W
4
Month 1 Month 2 Month 3
15
Store Opening DynamicsStore Opening Dynamics
2003 2004 2005 2006 2007 2008 2009 2010 1Q 2011
Southern 387 550 684 783 888 1,005 1,153 1,076 1,092
North-Caucasian 260 264
Central 100 224 379 461 545 638 802 952 981
Volga 114 214 368 536 628 743 950 1,235 1,276
North-West 9 26 61 84 88 115 160 215 229
Urals 8 29 45 67 139 245 262
Siberian 21 28
Total 610 1,014 1,500 1,893 2,194 2,568 3,204 4,004 4,132
New openings 259 438 550 513 409 452 702 865 146
Closings 17 34 64 120 108 78 66 65 18
Net openings 242 404 486 393 301 374 636 800 128
� 18 convenience stores were closed as of March 31, 2011– 8 due to poor performance– 7 were relocated to better locations– 3 were shut due to disagreements with landlords
16
Store Ownership StructureStore Ownership Structure
34,7%
65,3%
Owned Leased
Store Ownership Structure
Source: Company as of 31 March 2011
� As of 31 March 2011 the company owned 1,432 convenience stores and leased 2,700
� Store ownership is gained on the basis of the following documents:
– Sale-purchase agreements
– Lease agreements with redemption rights
– Construction share holding agreements
– Investment contracts
89,5%10,5%
Owned Leased
Convenience stores Hypermarkets
17
88,3% 87,7% 87,2% 89,0%
11,7% 12,3% 12,8% 11,0%
0%
20%
40%
60%
80%
100%
2008 2009 2010 1Q2011
Food Non Food
Key Operating StatisticsKey Operating Statistics
Sales Mix
Traffic
3,3 3,1 3,1 3,1
0,0
2,0
4,0
6,0
2008 2009 2010 1Q2011
Average Floor Size
299 306 314 316
458 470 469 467
0
200
400
600
2008 2009 2010 1Q2011Selling Space Total Space
Source: Company
Source: Company
Source: Company
Source: Company
(tickets / sq. m. / day)
(sq. m.)
07-10 $ CAGR: 11,5%
149 158 169 188
6,05,0 5,6
6,4
0
50
100
150
200
2008 2009 2010 1Q20110,0
2,0
4,0
6,0
8,0
RUB US $
Average Ticket
18
Lfl Sales AnalysisLfl Sales Analysis
Source: Company
Average Ticket, Lfl
21,7%
5,8% 5,8%
13,9%
0%
10%
20%
30%
2008 2009 2010 1Q2011
RUB terms
Traffic, Lfl
-2,32% -1,52%
2,95%
5,95%
-3,0%
-1,0%
1,0%
3,0%
5,0%
7,0%
2008 2009 2010 1Q2011Sales, Lfl
18,8%
4,1%
8,9%
20,7%
0%
5%
10%
15%
20%
25%
30%
2008 2009 2010 1Q2011
RUB terms
Source: Company
Note: LFL analysis is based on the result of convenience stores that had been operating for not less than six months and have achieved a mature level of sales
Lfl Sales AnalysisLfl Sales Analysis
19
Note: LFL analysis is based on the result of convenience stores that had been operating for not less than six months and have achieved a mature level of sales
21
Format DescriptionFormat Description
Source: Company
44%
26%
12%
18%
50 - 100 100 - 250 250 - 500 >500
Format Highlights
� 3 principal hypermarket sub-formats
– Small: selling space (1) of up to 3,000 sq. m.
– Medium: selling space (1) of3,000 – 5,000 sq. m.
– Large: selling space (1) of over 5,000 sq. m.
� The decision with regards to hypermarket format principally depends on the following factors:
– Consumer disposable budget of the region
– 5-7 year budget forecast
– Percentage of the budget, attributable to hypermarket
– Population of the region
– Competition
Number of hypermarkets and selling space
Breakdown by sub-format (2) Breakdown by population, ths
(2) Based on selling space
58%35%
7%
small medium large
(1) Excluding rental space
22
Key Operating StatisticsKey Operating Statistics
5,26%
8,50%9,76%
4,59%
15,53%13,48%
0%
3%
6%
9%
12%
15%
18%
FY10-FY09* 1Q11-1Q10*
Average ticket, RUR Traffic Sales, RUR
77% 78% 76% 77%
23% 22% 24% 23%
0%
20%
40%
60%
80%
100%
2008 2009 2010 1Q2011
Food Non-food
tickets/sq. m./day
0,81 1,11
0
0,5
1
1,5
2008 2009 2010 1Q2011
LFL Analysis Sales Mix
Traffic Average Ticket
* Based on 14 hypermarkets opened by May 1, 2009
528
521527
519
21
1617 18
510
520
530
2008 2009 2010 1Q2011
RUR USD
23
Geographical CoverageGeographical Coverage
North-Western
2 hypermarket
229 convenience stores
1 distribution center
Central
10 hypermarkets
981 convenience stores
4 distribution centers
Volga
12 hypermarkets
1,276 convenience stores
2 distribution centers
Southern
28 hypermarkets
1,092 convenience stores
3 distribution centers
North-Caucasian
4 hypermarkets
264 convenience stores
Urals
1 hypermarket
262 convenience stores
1 distribution centerSiberian
28 convenience stores
1,239 locations in 1,239 locations in 7 federal districts7 federal districts
24
Typical Store Opening ProcessTypical Store Opening Process
M
1
M
2
M
3
M
4
M
5
M
6
M
7
M
8
M
9
M
10
M
11
M
12
M
13
M
14
M
15
M
16
M
17
M
18
Identification
Land plot audit
Land plot approval
SPA signed
Ownership right received
Construction permit
Building design
Construction
Financing
Interior design / equipment
Licences approval
Hypermarket launch
Ownership rights received
� Key store opening criterion is payback period from 5 to 8 years
� Average total cost of a new hypermarket varies between US$1,500 – 3,500 per sq. m. depending on format (excl. VAT)
� Expected store maturity pattern: 8 - 15 months from opening
26
Priorities
� Price
� Location
� Assortment
� Comfort
Key Features
� Shopping habits formed in Soviet time
� Conservative shoppers
� Most are low income
Key Focus Areas
� Increased offering of Private Label products to reduce prices foressential goods
Pensioners (60+ Years Old)
Priorities
� Assortment
� Location
� Comfort
� Price
Key Features
� More open to western lifestyles and oriented towards modern retail formats
Key Focus Areas
� Offering product categories appealing to young audience
Youth (Up to 30 Years Old)
Target AudienceTarget Audience
Priorities
� Location
� Assortment
� Price
� Comfort
Key Features
� Time is of greater value than forother groups
� Growing car ownership
� High level of responsibility for quality of purchased food and family budget
Key Focus Areas
� Increased share of fresh dairy,semi-prepared products andready meals
� Ensure quick shopping, avoid bottlenecks in rush hour
� One stop shopping: ATMs, pharmacies, payment of mobile phone bills, etc
� Building more parking spaces at the stores
Families (30 – 60 Years Old)64% 12%
24%
Shopping Motivation
Convenience Stores
� Daily fresh shopping
� First need products
Hypermarkets
� Weekly shopping
27
Mark-up for a given product
Overall necessity of a product
Target audience for a product
Purchasing frequency of a product
Share in consumer basket
Target weighted average mark-up for the Group
Competition in the area
Geographical location(urban / rural matrix)
Mark-Up Criteria
� Price assessment for convenience stores is based on an every day product basket (bread, milk, etc…)
� Hypermarket pricing model focuses on SKUs needed on a weekly basis
� Each product category is assigneda certain mark-up
� Revised every 4 months
� Weighted average mark-up is established at the Group levelbased on the monitoring of competitors’prices for 200 key SKUs
� Mark-up monitored on a daily basis using the powerful MIS
� Revised on a bi-weekly basis
� Can be changed within several hours
Mark-Up Adjustments
Seasonality
Centralised matrix-basedpricing system
Pricing ModelPricing Model
28
Suppliers, Purchasing and Private LabelSuppliers, Purchasing and Private Label
Share of Private Label Products in Revenue(%)
551700 700
530 614 621508
8,2%
10,9%12,1% 12,1% 12,3% 12,7% 13,3%
0
200
400
600
800
2005 2006 2007 2008 2009 2010 1Q20110%
3%
6%
9%
12%
15%
Number of Items Share in Retail Sales
Magnit is the largest buyer for many domestic and international FMCG producers� Weekly Assortment Committee approves the assortment
and suppliers� Direct purchasing and delivery contracts� Economies of scale and wide geographical presence
enable low prices and favorable contract terms– Volume discounts– Compensation of external and internal logistics costs– Average credit term in 2010 was 40 days – Contract term is typically 1-year– Often can be unilaterally terminated by Magnit with
no penalties� Supplier bonuses criteria is based on
– Meeting sales targets– Store promotions– Loyalty
Private label products are designed to replace the cheapest SKUs to maximise returns on each metre of shelving space
� 621 private label SKUs
� Private label products accounted for 14.00% (convenience format)/7.90%(hypermarket) share of retail revenue in 1Q 2011
� Approximately 90% of private label products are food
� Share of non-food products in private label is expected to increase
Source: Company
29
2006-2010 IT Systems Update2006-2010 IT Systems Update
� Transport management system
– Optimal route planning
– All cars are equipped with GPS locating systems
� Warehouse management systems
– Introduction of WiFi operated data collection terminals
– Warehouses are customised to work with hypermarket product traffic
� Oracle IT platform introduced to convenience store format
� New price management system introduced to both formats
� Electronic document traffic system with suppliers
� Introduction of Corporate Information System based on 1C platform
Cas
hier
s
Internet
Database Server
Store Director
Mail Server
ADSL / GPRS
Database Server (cluster)
Distribution CentresTasks Processor (robot)
Main OfficeStores
30
Logistics SystemLogistics System
As of March 31, 2011 approximately 81% of COGS vs. 57% in 2005 were distributed through the company’s distribution centers and the long-term target is to increase this share up to 90-92% for convenience stores and up to 80% for hypermarkets.
At the moment Company’s logistics system includes:� Automated stock replenishment system� 11 distribution centers with approximately
240 942 sq. m. capacity � Fleet of 2,997 vehicles
CityFederalDistrict Effective Space sq. m.
Number of Serviced Stores
Bataysk Southern 17,407 412
Kropotkin Southern 30,048 465
Slavyansk-on-Kuban Southern 20,496 299
Engels Volga 19,495 537
Togliatti Volga 18,724 627
Tver Central 13,136 180
Oryol Central 14,326 305
Tambov Central 26,733 336
Ivanovo Central 43,365 443
Veliky Novgorod North-Western 21 060 175
Chelyabinsk Urals 16,152 410
Total 240 942 4 189
DC Processed Goods Source: Company
Target20102010
17%
83%
Outsourced
Owned92%
8%
Outsourced
Owned80%
20%
Outsourced
Owned
35%
65%
Target
Convenience stores Hypermarkets
Owned
Outsourced
Source: Company
31
Well trained dedicated personnelWell trained dedicated personnel
59 13575 745
90 998
16 50313 100 13 714
20 000
40 000
60 000
80 000
100 000
2008 2009 2010
0
5 000
10 000
15 000
20 000
in R
UR
Average headcount Average monthly salary
Average number of employees vs. average salary, 2008-2010
� The average number of employees* in the Group amounted to 117,121 as of March 31, 2011:
• 83,488 in-store personnel,• 23,573 people engaged in distribution,• 6,925 people in regional branches,• 3,135 people employed by head office
� The average age of our employees is approximately 25 years
� The gross average monthly salary in 2010 was RUR 16,503 of which approximately 75% was basic salary
� Special performance-linked bonuses and incentives help to motivate the employees at all levels
� Key members of the Management hold Company’s shares
� Performance monitoring and evaluation on a regular basis
� Career development programs for all levels to ensure
• Lower staff turnover
• Increased motivation
• Higher productivity
� Personnel training
• 174 classrooms for trainings at all levels• Regular meetings and seminars between mid-level managers to
exchange best practices• Coaching for top-management
� Strong corporate culture aimed at development of loyalty of employees
• The Company publishes a corporate newspaper every two months• Team building events to ensure integrity of the team
Source: Audited IFRS Financial Statements
* Total number of employees as of March 31, 2011 is 131,857
33
Summary P&LSummary P&L
In US$ MM 2009 2010 FY10 / FY09Y-o-Y Growth
Net sales 5 354,5 7,777.4 45.25%
Cost of sales (4,097.2) (6,036.9) 47.34%
Gross profit 1257.3 1740.5 38.44%
Gross margin, % 23.48% 22.38%
SG&A (760.3) (1,127.1) 48.25%
Other income/(expense) 12.5 18.2
EBITDA 509.5 631.6 23.96%
EBITDA margin,% 9.52% 8.12%
Depreciation & amortization (103.1) (150.4) 45.86%
EBIT 406.4 481.2 18.40%
Net finance costs (51.7) (32.6)
Profit before tax 354.7 448.6
Taxes (79.5) (114.9)
Effective tax rate 22.43% 25.61%
Net income 275.2 333.7 21.28%
Net margin, % 5.14% 4.29%
Source: IFRS accounts
34
Gross Margin Bridge / SG&A Expense StructureGross Margin Bridge / SG&A Expense Structure
Gross Margin Bridge
* As % of SalesSource: Company, IFRS accounts
SG&A Expense Structure16.43%* 16.12%*
1,7%
11,8% 11,9%
20,4% 20,8%
54,4% 53,9%
1,9%2,2% 1,8%2,6% 2,5%7,0% 7,2%
2010 2009payroll and related taxes
rent and utilities
depreciation&amortization
other expenses
taxes, other than income tax
packaging and raw materials
repair and maintanance
21,68%
1,85%
0,20%
(0,25%)
23,48%
0,42%
(1,25%) (0,27%)
22,38%
10%
12%
14%
16%
18%
20%
22%
24%
GM 2008 TradingMargin %
Transport Losses GM 2009 TradingMargin %
Transport Losses GM 2010
35
EBITDA BridgeEBITDA Bridge
EBITDA Bridge
As % of Sales
Source: Company, IFRS accounts
8,12%
(0,05%)(0,25%)(1,10%)
9,52%
0,13%0,06%0,08%
(0,06%)1,80%
7,51%
2%
4%
6%
8%
10%
12%
EBITDA2008
GM Bankservices
Rent andutilities
Foreignexchanfe
gain
Other EBITDA 2009 GM Salaries Advertising EBITDA 2010
36
Balance SheetBalance Sheet
In US$ MM 2009 2010
ASSETS
Property plant and equipment 1,638.5 2,651.1
Other non-current assets 28.5 61.0
Cash and cash equivalents 371.0 132.6
Inventories 415.2 659.8
Trade and other receivables 11.4 20.6
Advances paid 48.4 69.2
Taxes receivable 4.4 54.7
Other current assets 11.1 40.0
TOTAL ASSETS 2,528.5 3,689.0
EQUITY AND LIABILITIES
Equity 1,424.8 1,722.7
Long-term debt 152.3 810.3
Other long-term liabilities 27.3 66.4
Trade accounts payable 572.3 770.1
Short-term debt 266.6 196.8
Other current liabilities 85.2 122.7
TOTAL EQUITY AND LIABILITIES 2,528.5 3,689.0
Source: IFRS accounts
37
2010 Capex (1) Analysis2010 Capex (1) Analysis
US’ mn
Notes (1) Capex calculated as additions + transfers of PP&E in each period
Source: IFRS accounts
Total 2010: Total 2010: $$ 11,189.42 ,189.42 mnmn
733 mn 61%
212 mn 18%
43 mn 4% 201 mn
17%Other assets
Construction in progress & Buildings
Machinery and equipment
Land
38
Cash Flow StatementCash Flow Statement
In US$ MM 2009 2010
OPERATING ACTIVITIES:
Operating cash flows before movements in working capital 508.7 634.1
Net cash generated from operating activities 376.2 428.7
INVESTING ACTIVITIES:
Net Cash used in investing activities (448.1) (1,230.0)
FINANCING ACTIVITIES:
Net cash generated from financing activities 339.2 565.2
Effect of foreign exchange rates on cash and cash equivalents (11.3) (2.3)
Net increase/decrease in cash and cash equivalents 256.0 (238.4)
Cash and cash equivalents, end of the year 371.0 132.6
Source: IFRS accounts
39
46,4
40
20
30
40
2009 2010
Working Capital AnalysisWorking Capital Analysis
Inventory Management Days (2)
32,4 32,1
10
14
18
22
26
30
34
2009 2010
Trade Accounts Payable Days (3)
Source: Company
Source: Company, IFRS accounts
Working Capital (1)
(173,7)
(77,5)
(200)
(160)
(120)
(80)
(40)
-
2009 2010
Source: Company
0,09
1,38
0,0
0,5
1,0
1,5
2009 2010
Net Debt (4)/ EBITDA, USD
Notes: (1) Current assets (less C&CE and short-term investments) – current liabilities (less short-term debt)(2) 2009-2010: 360 / (Cost of sales/year average inventory)(3) 2009-2010: 360 / (Cost of sales/year average trade accounts payable)(4) Net debt = long / short-term bonds and borrowings + finance lease liabilities – cash and cash equivalents
41
Summary ConclusionsSummary Conclusions
Leading Russian retailer: broadest geographic coverage with 4,189 stores (as of 31 March 2011) in more than 1,239 cities in seven out of eighth federal districts in Russia
Further organic growth of store operations: continued roll-out of established business model in existing markets and selective expansion into new geographic areas
Expanding hypermarket operations: leveraging strong existing platform (operations, logistics, brand, scale) to develop a leading hypermarket chain in the European part of Russia
Additional measures to improve profitability: enhancing product mix, shifting to direct import contracts, increasing private label and increasing distribution through own logistics system to achieve margin improvements and cost savings
Strong foothold in Russia’s cities and towns with p opulation under 500,000 people: first mover advantage (first retailer in many locations to establish a modern format); low competition from other chains outside of Russia’s large cities
Financing of expansion program: implementation of the Company’s mid-term strategy will be executed through a mix of operating cashflow and debt (bank loans and bonds)
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