2. Magnit at a Glance
Magnit at a Glance
№1Russian Food Retail
Chain by Revenue
and Number of Stores
1 959
Cities & Towns
8 618
Total Number
of Stores
3 189
thous.sq.m.
Selling Space
24
DCs
5 697
Trucks
Multi-format Business Model
Comprising Convenience, Hypermarkets,
“Magnit Family” Stores & Drogeries
Retailer in Europe
Market
№2 in Market
Capitalization $28bn >6%
Capitalization Share in Russian
Grocery Sector
Shareholder Structureas of 1H2014
Free-float
54,6%
Sergey Galitskiy, CEO
38,7%
Other
3,3%
0,1% Lavreno Ltd. (Cyprus)
3,4%
As of 30.06.2014
Source: Company, Bloomberg, IFRS accounts for 1H2014 2
3. Magnit at a Glance
Key Metrics
Revenue
349,0bn ($10,0bn)1H2014
Net
Margin
5,61%
EBITDA
Margin
10,47%
Net debt/
LTM EBITDA
0,9
Dividend
Yield*
1,31%
Payout
Ratio*
36%
P=
Guidance for 2014
New Stores
1 100Convenience
Stores 80Hyper-markets
300-350Drogeries
RUR Sales
Growth
26-29%
EBITDA
Margin
10,6-10,9%
Capex
$1,7-1,8bn
3 *As of FY2013
Source: IFRS accounts for 1H2014, Company’s Estimates
4. Magnit at a Glance
Strategy
Growth
Multi-format Organic
Store Growth
Geographic
Scope
Density of Store
Coverage
4
Value Efficiency
Low
Prices
High
Quality
Assortment Cost
Management
Vertical
Integration
Centralization
5. 47
Magnit at a Glance
Russian Food Retail Market
Market Composition by Format
53% 47%
7,3%Food
Inflation $311bnMarket
Size
FY 2013
%Modern
Retail
Penetration
Non-Modern Modern
Discounters
22%
Supermarkets
14%
Hypermarkets
11%
Open Markets
10%
Kiosks, Pavilions
8%
Traditional Stores
34%
5
Source: Sberbank CIB Estimates for FY2013
6. Magnit at a Glance
Magnit vs Peers
Number
of Stores
Selling Space
thous. sq.m.
Revenue
RUR bn
Market Cap
US$ bn
Market Share
%
8 093
4 544
1 799
Magnit
XS
Dixy
3 011
2 223
617
579,7
532,7
180,5
26,5
4,6
1,6
6
5
2
94
87
79
72
Okey
Lenta
Auchan
Metro
489
508
740
564
139,5
144,3
300,0
183,2
3,2
n/a
n/a
n/a
1
1
2
2
Source: As of 2013; Companies, Infoline, Bloomberg, Magnit’s Estimates; 6
7. Operational Overview
Geographical Coverage
1 959 Cities
& Towns
7 Federal
Districts
North
Caucasus
Southern Volga North
Central Urals Siberia
West
322
147
Convenience Stores 7 614
2
1 452 1 931 2 446 658 658
Hypermarkets 6 51 27 54 10 19
169
Magnit Family 2 15 12 19 2 5 2
57
12
Drogeries 51 211 170 221 68 45
778
Distribution Centers 1 5 7 6 1 2 2 24
Source: Company, as of June 30, 2014 7
8. Operational Overview
Logistics System
8 618
Total Number
of Stores
707
thous.sq.m.
Warehousing Space
24
DCs
5 697
Trucks
7
6
Central
Volga
2589
2548
273,346
147,883
Centralization Ratio
%
1H2014 Future Targets
Convenience Stores
5
2
1
1
2
Southern
Urals
North Caucasus
North West
Siberia
1779
759
329
450
164
111,832
92,782
34,503
21,060
26,064
Magnit
Outsourced
89
11
92
8
Hypermarkets
Magnit
Outsourced
71
29
80
20
Source: Company, as of June 30, 2014 8
9. Operational Overview
Suppliers
5000Domestic
Suppliers
4000
Local Suppliers
1000
Federal Suppliers
55-60% 40-45%
Assortment
Big International
200 Corporations
Source: Company, as of December 31, 2013 9
10. Operational Overview
Direct Import
10%International
Direct Import 800Open
Contracts
12%Share
M SKUs 86%Food
627 of Revenue PL
10 Source: Company,
Direct Import – as of FY2013; Private Label - as of June 30, 2014
Items
Private Label
11. Operational Overview
Employees
229 272Employees 0Foreign
Workers
Average Weighted Number of Employees – 197 251
161 438
42 144
17 034
8 656
People Engaged
in Distribution
People in Regional
Branches
People Employed
by Head Office
Monthly
Salary 10%Wage Rate
In-store
Personnel
1000 employees
Average
Increase P=
27 376Source: Company, as of June 30, 2014 11
12. Operational Overview
Competitive Attributes
Location Quality
Assortment Reliability Prices Atmosphere
(of Products)
5 000 People —
Minimum
Population
Sales Catchment Area
Monthly
Family Food
Budget P=
12
(1 500–1 600 Families)
4 000-9 500
35%of Family
Budget
Spent on Food
Competitor #1 Competitor #2
Overlap “Good”
Cannibalization
Magnit #1
Magnit #2
500m
Competitor #3
500m
Source: Company’s Estimates
14. Operational Overview
Convenience Store
Format Description Key Operational Statistics Opening
Size of the Store Average Ticket Payback
sq.m.
458 Total
320 sq.m.
Selling Space
89% Food
Sales Mix
=P217,1
$6,2
Traffic
tickets/sq.m./day
2,9
If Leased
3 years
If Owned
4-6 years
11% Non-food
Store Ownership Structure
29% Owned
71% Leased
Sales Density
sales/sq.m./year
=P214 746
$6 743
LFL 1H2014-1H2013,%
7,23Average
Ticket, RUR
1,90Traffic
9,26Sales
Cost of New Store
per sq.m. of Total Space
Owned $1 100-2 800
Leased $250-500
Time to Maturity
6 months
Source: Company, as of June 30, 2014 14
16. Operational Overview
Hypermarket
Format Description Key Operational Statistics
Size of the Store Average Ticket
=P566,7
$16,2
Traffic
tickets/sq.m./day
1,3
sq.m.
7 058 Total
2 985 sq.m.
Selling Space
Opening
Payback
6-9 years
Cost of New Store
per sq.m. of Total Space
Owned $1 700-2900
Leased $700-900
S: up to 3 000
M: 3 000-6 000
L: over 6 000
81% Food
19% Non-food
Sales Mix
Store Ownership Structure
85% Owned
15% Leased
Sales Density
sales/sq.m./year
=P248 649
$7 807
LFL 1H2014-1H2013,%
6,37 Average
Ticket, RUR
5,55 Traffic
12,28 Sales
Time to Maturity
8-15 months
Source: Company, as of June 30, 2014 16
18. Operational Overview
Magnit Family
Format Description Key Operational Statistics Opening
Size of the Store Average Ticket Payback
sq.m.
2 297 Total
1 176 sq.m.
Selling Space
85% Food
Sales Mix
=P396,8
$11,3
Traffic
tickets/sq.m./day
2,3
6-9 years
Cost of New Store
per sq.m. of Total Space
Owned $2 000-2 600
Leased $800-1 400
15% Non-food
Store Ownership Structure
40% Owned
60% Leased
Sales Density
sales/sq.m./year
=P330 110
$10 365
LFL 1H2014 -1H2013,%
Time to Maturity
8-15 months
7,51 Average
Ticket, RUR
9,96 Traffic
18,22 Sales
Source: Company, as of June 30, 2014 18
20. Operational Overview
Drogerie
Format Description Key Operational Statistics Opening
Size of the Store Average Ticket Payback
sq.m.
314 Total
236 sq.m.
Selling Space
100% Non-food
Sales Mix
=P243,3
$7,0
Traffic
tickets/sq.m./day
1,0
If Leased
3 years
If Owned
4-6 years
Store Ownership Structure
28% Owned
72% Leased
Sales Density
sales/sq.m./year
=P74 532
$2 340
LFL 1H2014 – 1H2013,%
3,05 Average
Ticket, RUR
45,11 Traffic
49,54 Sales
Cost of New Store
per sq.m. of Total Space
Owned $800-2 500
Leased $200-450
Time to Maturity
6 months
Source: Company, as of June 30, 2014 20
21. Size
of the Store
sq.m.
Average
Ticket
Traffic
Tickets/
sq.m./day
Density
Sales/
sq.m./year
Sales
Mix
LFL 1H2014-
1H2013
%
Store Owner-ship
Structure
Payback
Years
Cost of New
Store
per sq.m.
of Total Space
Time
to Maturity
Months
• Total
• Selling Space
• Food
• Non-food
• Av.ticket
• Traffic/ Sales
• Owned
• Leased
29%
71%
Operational Overview
Format Summary
458
320
Owned
$1 100-2 800
Leased
$ 250-500
P.217,1 2,9
$6,2
P.214 746
$6 743
89%
11%
Convenience
store
3 (if leased) 6
4-6 (if owned)
7,23
1,90
9,26
Owned
85%
15%
28%
72%
40%
60%
Hypermarket
Drogerie
Magnit
Family
7 058
2985*
314
236
2 297
1 176
1,3
1,0
2,3
P.566,7
$16,2
P.243,3
$7,0
P.396,8
$11,3
P.248 649
$7 807
P.74 532
$2 340
P.330 110
$10 365
81%
19%
100%
85%
15%
8-15
6
8-15
6-9
3 (if leased)
4-6 (if owned)
6-9
6,37
5,55
12,28
3,05
7,51
45,11
9,96
49,54
18,22
$1 700-2 900
Leased
$ 700-900
Owned
$800-2 500
Leased
$200-450
Owned
$2 000-2 600
Leased
$800-1 400
Source: Company, as of June 30, 2014; * Excludes selling space designated for leases 21
22. Financial Overview
Summary P&L
UUUUSSSSDDDD MMMMMMMM 1111HHHH2222000011113333 1111HHHH2222000011114444 1111HHHH2222000011113333 //// 1111HHHH2222000011114444
Y-o-YYYY GGGGrrrroooowwwwtttthhhh
NNNNeeeetttt ssssaaaalllleeeessss 8888 777799996666,,,,44443333 9999 999977778888,,,,55559999 13,4%
Cost of sales (6 398,47) (7 201,70) 12,6%
GGGGrrrroooossssssss pppprrrrooooffffiiiitttt 2222 333399997777,,,,99996666 2222 777777776666,,,,88889999 15,8%
Gross margin, % 27,26% 27,83%
SG&A (1 518,88) (1 760,15) 15,9%
Other income/(expense)
10,86 27,32 151,5%
EEEEBBBBIIIITTTTDDDDAAAA 888888889999,,,,99994444 1111 000044444444,,,,88888888 17,4%
EBITDA margin,% 10,12% 10,47%
Depreciation & amortization (217,72) (242,70) 11,5%
EEEEBBBBIIIITTTT 666677772222,,,,22222222 888800002222,,,,11119999 19,3%
Net finance costs (72,15) (80,69) 11,8%
Profit before tax 600,07 721,50 20,2%
Taxes (131,15) (161,52) 23,2%
Effective tax rate 21,86% 22,39%
NNNNeeeetttt iiiinnnnccccoooommmmeeee 444466668888,,,,99991111 555555559999,,,,99999999 19,4%
Net margin, % 5,33% 5,61%
Source: Reviewed IFRS accounts for 1H2013 – 1H2014
Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22
25. Financial Overview
Free Cash Flow
Working Capital Analysis
The Average Days Payable to
Suppliers is 36 Days.
Inventory Management Days is 44
Days
USD mn
1H2013
1H2014
87
-87
901
755
103
-130
-63 -100
-666
-158
17
14
-75
Working Capital: -120 mn USD as of
30.06.2014
1 056
945
-111
Adjusted
EBIDTA
Change in
Working
capital
Net Interest
Expense
Taxes
Paid
OCF Capex Other Cash
Adjusted for loss from disposal of PPE, provision
for doubtful receivables, foreign exchange gain,
finance costs, gain on disposal of subsidiary and
investment income
364
-581
Flow
from
Investing
Activities
FCF Payment of
Calculated as additions
+ transfers of PP&E
during the respective
period
-64
-245
-183
Dividents
Other Cash
Flow
from
Financing
Activities
CF
Does not include cash flow from
financing activities
Source: IFRS accounts for 1H2013 – 1H2014 25
26. Financial Overview
Balance Sheet
UUUUSSSSDDDD MMMMMMMM 2222000011112222 2222000011113333 1111HHHH2222000011114444
AAAASSSSSSSSEEEETTTTSSSS
Property plant and equipment 5 226,8 5 962,8 6 144,5
Other non-current assets 130,0 176,1 169,5
Cash and cash equivalents 410,0 181,2 110,9
Inventories 1 350,7 1 713,9 1 769,4
Trade and other receivables 19,2 19,3 16,0
Advances paid 88,1 96,9 70,5
Taxes receivable 1,0 0,9 2,5
Short-term financial assets 28,9 35,1 41,9
Prepaid expenses 6,0 7,7 6,5
TTTTOOOOTTTTAAAALLLL AAAASSSSSSSSEEEETTTTSSSS 7777 222266660000,,,,7777 8888 111199993333,,,,9999 8888 333333331111,,,,7777
EEEEQQQQUUUUIIIITTTTYYYY AAAANNNNDDDD LLLLIIIIAAAABBBBIIIILLLLIIIITTTTIIIIEEEESSSS
Equity 3 267,3 3 854,7 4 070,1
Long-term debt 1 259,2 1 144,0 1 618,4
Other long-term liabilities 202,8 258,6 270,5
Trade and other payables 1 413,1 1 471,8 1 489,9
Short-term debt 827,1 1 109,7 394,8
Dividends payable - - -
Other current liabilities 291,2 355,1 488,0
TTTTOOOOTTTTAAAALLLL EEEEQQQQUUUUIIIITTTTYYYY AAAANNNNDDDD LLLLIIIIAAAABBBBIIIILLLLIIIITTTTIIIIEEEESSSS 7777 222266660000,,,,7777 8888 111199993333,,,,9999 8888 333333331111,,,,7777
Source: Audited IFRS accounts for FY2012 – 1H2014
Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26
27. Financial Overview
Capex Analysis
Construction in Progress
& Buildings
Machinery &
Equipment
Other Assets Land Acquisition of
Subsidiaries
906 362 258 68 53
FY2013¹
$1,647 bn
FY2014 (plan)
$1,775 bn
Hyper Markets Trucks Distribution
Centres
Convenience
Stores
Acquisition &
Construction
of Conv.Stores
Buy-out of
Leased
Conv.Stores
Greenhouses Land for
HyperMarkets
Store
Renovation
Maintenance Drogeries
80 400 4 1 100 350
700 85 240 220 140 60 100 50 50 30 100
27 ¹CAPEX for 1H2014 amounts to $581 mn
Source: Company, as of December 31, 2013; Company’s Estimates
28. Financial Overview
Debt Burden
11,7
13,0
12,2
14
12
10
8
6
4
Debt Level Dynamics
USD mn
Credit Metrics Credit Profile
EBIDTA / Finance Expenses The Company Has
an Impeccable Credit History
Collaboration with
the Largest Banks
Low Debt Burden:
Net Debt / EBITDA Ratio of 0,9
2 086
2 254
2 013
1 676
2 073
1 902
1 110
1 259
1 144
1 618
Net Debt
Short-term Debt
Long-term Debt
%
2
0
2012 2013 1H2014
Net Debt / LTM EBITDA
1,1
1
0,9
2
1,5
1
0,5
0
2012 2013 1H2014
NNNNoooo CCCCuuuurrrrrrrreeeennnnccccyyyy RRRRiiiisssskkkk:::: 100%
of Debt is Rub Denominated
Matching Revenue Structure
NNNNoooo IIIInnnntttteeeerrrreeeesssstttt RRRRaaaatttteeee RRRRiiiisssskkkk::::
Interest Payments are Made
at Fixed Rates
827
395
49,2%
19,6%
2012 2013 1H2014
39,6%
88880000%%%% of Debt is Long-term
Approximately 33338888%%%%
of LT Debt is Rub Bonds
Source: IFRS accounts for FY2012 – 1H2014 28
