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Magnit 1 h2014_reviewed_newx
- 1. 1 Financial Results 1H 2014
- 2. Magnit at aGlance 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, Cosmetics & “Magnit Family” Stores & Hypermarkets 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 aGlance 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* 30% P= Guidance for 2014 New Stores 1 100Convenience Hyper-markets Cosmetics Stores 80300-350Stores 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 aGlance 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 ata Glance Russian Food Retail Market Market Composition by Format 53% 47% 7,3%Food Inflation $311bnMarket Size FY 2013 %Modern Retail Penetration Non-Modern Modern Discounters 22% Supermarkets 14% Hypermarkets 11% Open Markets 10% Kiosks, Pavilions 8% Traditional Stores 34% 5 Source: Sberbank CIB Estimates for FY2013
- 6. Magnit at aGlance Magnit vs Peers Number of Stores Selling Space thous. sq.m. Revenue RUR bn Market Cap US$ 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 GeographicalCoverage 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 Cosmetics Stores 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 LogisticsSystem 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 DirectImport 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 197 251Employees (Average Weighted) 0Foreign Workers Total Number of Employees – 229 272 136 070 41 476 12 104 7 601 People in Regional Branches People Employed by Head Office Monthly Salary 10%Wage Rate In-store Personnel People Engaged in Distribution 1000 employees Average Increase P= 27 376Source: Company, as of June 30, 2014 11
- 12. Operational Overview CompetitiveAttributes 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
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- 14. Operational Overview ConvenienceStore 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
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- 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
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- 18. Operational Overview MagnitFamily 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
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- 20. Operational Overview CosmeticsStore 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 theStore 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 Cosmetics Store 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 SummaryP&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
- 23. Financial Overview Revenue& Costs Revenue Dynamics USD mn Net Income Dynamics USD mn Sales Growth, USD +29,8% Sales Growth, USD +13,4% 8,8% 10,6% +38,0% SG&A Expense Structure Margin Dynamics +19,4% LFL LFL 6 776 8 796 9 979 1H2012 1H2013 1H2014 340 469 560 1H2012 1H2013 1H2014 25,6 27,3 27,8 9,9 10,1 10,5 5,0 5,3 5,6 30 25 20 15 10 5 0 Gross Margin EBIDTA Margin Net Margin 1H2012 1H2013 1H2014 Revenue — 9 979 USD mn % 20% 2 002 USD mn in SG&A,% in Revenue, % 1,88 (0,38) ― Packaging & Raw Materials 1,77 (0,36) ― Repair & Maintenance 55,18 (11,07) ― Payroll & Related Taxes 2,09 (0,42) ― Taxes, Other than Income Tax 12,08 (2,42) ― Deprecation & Amortization 20,67 (4,15) ― Rent & Utilities 6,33 (1,26) ― Other Source: IFRS accounts for 1H2012 – 1H2014 23
- 24. 25,61 1,77 -0,11-0,01 0,26 0,34 -0,03 27,83 27,26 33 31 29 27 25 23 21 19 17 15 GM 1H2012 Trading Margin Transport Losses GM 1H2013 Trading Margin Transport Losses GM 1H2014 Financial Overview Gross Margin Bridge % of Sales +165 b.p. +57 b.p. EBITDA Margin Bridge % of Sales +22 b.p. +35 b.p. 1,65 -1,00 -0,19 9,90 -0,35 -0,05 -0,03 10,12 0,57 -0,24 0,21 10,47 14 12 10 8 6 4 2 0 EBIDTA 1H2012 Gross Margin Salaries Rent & Utilites Repair & Maintenance Other EBIDTA 1H2013 Gross Margin Rent & Utilites Advertising Other EBIDTA 1H2014 Source: IFRS accounts for 1H2012 – 1H2014 24
- 25. Financial Overview FreeCash 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 BalanceSheet 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 CapexAnalysis 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 Cosmetics Stores 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 DebtBurden 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