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Magnit 9 m_2016
Magnit presented operational and financial results for 9M 2016. Key highlights include: - Revenue grew 14.7% to RUB 521.5 billion in 1H 2016 compared to 1H 2015. - EBITDA margin was 9.89% in 1H 2016 versus 10.69% in 1H 2015. - The company operates 13,364 stores across 2,436 cities and towns in Russia as of September 30, 2016. - Store formats include convenience stores, hypermarkets, Magnit family stores, and drogerie stores.
Magnit 9 m_2016
- 1. INVESTOR PRESENTATION 9M 2016OPERATIONAL RESULTS published on October 21, 2016
- 2. Magnit at aGlance Magnit at a Glance Source: Company, Thomson Reuters, Company’s calculations based on IFRS accounts for 1H2016 2 2 436Cities & Towns 13 364Total Number of Stores 4 825thous.sq.m. Selling Space 33DCs 5 779Trucks №1 Retailer in Europe in Market Capitalization $20bnMarket Capitalization >7%Share in Russian Grocery Sector (As of FY 2015) Shareholder Structure as of 1H 2016 61,4% Free-float 35,1% Sergey Galitskiy, CEO 0,8% Lavreno Ltd. (Cyprus) 0,1% As of September 30, 2016 As of September 30, 2016 2,7% Other
- 3. Magnit at aGlance Key Metrics 3 Source: Company’s estimates and calculations *as of June 30, 2016 790bn 14,4 % 5,18% Net Margin 10,16% EBITDA Margin 1,1* Net debt/ LTM EBITDA 1000-1100 80 1200 P= Revenue growth Y-o-Y Guidance for FY2016 Figures for 9M 2016 14-16% Sales Growth Rub 10-10,5% EBITDA Margin 67bn Capex Rub New Convenience Stores New Hypermarkets New Drogerie Stores Revenue growth 9M 2016
- 4. Magnit at aGlance Strategy 4 Growth Value Efficiency Multi-format Organic Store Growth Geographic Scope Density of Store Coverage Low Prices High Quality Assortment Cost Management Vertical Integration Centralization
- 5. 65 Magnit at aGlance Russian Food Retail Market 5 Market Composition by Format RUB 13 410bn Market Size FY 2015 % Modern Retail Penetration Non-Modern Modern Source: INFOLine, as of December 31, 2015 65%35% Top-7 Retail Chains 22,5% Modern Non-Chain Stores 16,5% Other chains 26% Traditional Trade 28% Open Markets 7%
- 6. Magnit at aGlance Magnit vs Peers 6Source: Companies, INFOLine, Thomson Reuters, Magnit’s Estimates Number of Stores, eop 2015 Selling Space thous. sq.m., eop 2015 Revenue RUB bn, eop 2015 Market Cap US$ bn, eop 2015 Market Share %, eop 2015 7 6 2 2 1 3 2 Not public Not public 950.6 808.8 272.3 252,8 162.5 415,6 225,0 12 089 7,020 2,708 172 146 96 87 Magnit X5 Dixy Lenta Okey Auchan Metro 4,414 3,333 908 882 593 836 661 19.0 5.1 0.5 3.3 0,5
- 7. 2 819Drogerie Stores99 543 726 802 262 268 119 10 138Convenience Stores 228Hypermarkets 179Magnit Family 33Distribution Centers 6 44 34 53 15 15 12 8 64 38 66 14 30 8 362 1 698 2 754 3 016 1 009 919 380 Operational Overview Geographical Coverage 7 Source: Company, as of September 30, 2016 2 436 Cities & Towns 7 Federal Regions North Caucasus Southern Volga North West Urals SiberiaCentral 1 8 9 8 2 3 2
- 8. Operational Overview Logistics System 8 Source:Company, as of September 30, 2016 13 364Total Number of Stores 1 335thous.sq.m. Warehousing Space 33DCs 5 779Trucks 9 8 8 3 1 2 2 Central Volga Southern Urals North Caucasus North West Siberia 3 856 4 082 2 340 1 237 473 865 511 448.415 283,871 310,387 142,533 40.799 73.601 35.438 Centralization Ratio % 90 10 92 8 Convenience Stores 9M2016 Future Targets 72 28 80 20 Hypermarkets Delivered from DC Delivered from supplier Delivered from DC Delivered from supplier
- 9. Operational Overview Suppliers 9 Source: Company, asof December 31, 2015 5 800 Domestic Suppliers 4 600Local Suppliers 1 200Federal Suppliers Assortment 55% 45%
- 10. Operational Overview Direct Import 10 Source:Company, Direct Import – as of December 31, 2015; Private Label – as of September 30, 2016 10%Share of Revenue 621 PL SKUs M 82%Food Items Private Label 9% International Direct Import 757 Open Contracts
- 11. Operational Overview Employees 11 Source: Company, asof September 30, 2016 *as of June 30, 2016 261 148 Employees 31 650 Average Monthly Salary* 11% Wage Rate Increase* P= 191 550In-store Personnel 35 539 People Engaged in Distribution 21 021People in Regional Branches 10 598People Employed by Head Office 1000 employees 2 440Other
- 12. Operational Overview Competitive Attributes 12 43-45%of Family Budget Spent on Food Location Quality (of Products) Assortment Reliability AtmospherePrices 5 000 People — Minimum Population (1 500–1 600 Families) 4 000-9 500 Monthly Family Food Budget P= Overlap “Good” Cannibalization Magnit #1 Magnit #2 500m Competitor #1 Competitor #2 Competitor #3 500m Sales Catchment Area Source: Company’s Estimates
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- 14. Operational Overview Convenience Store 14 Source:Company, as of September 30, 2016 464 sq.m. Total 327 sq.m. Selling Space 89% Food 11% Non-food 24% Owned 76% Leased Format Description Key Operational Statistics Opening Size of the Store Average Ticket Payback Store Ownership Structure Sales Mix Traffic tickets/sq.m./day Sales Density sales/sq.m./year LFL 9M2016 –9M2015,% 241,7P= $3,5 245 306P= $4 024 -0,29 Average Ticket, RUB 2,88 Traffic 2,59 Sales 2,7 3 years If Leased If Owned Cost of New Store per sq.m. of Total Space, thousand RUB Time to Maturity 6 months 4-6 years Owned 35-105 Leased 10-19
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- 16. Operational Overview Hypermarket 16 Source: Company, asof September 30, 2016 80% Food 20% Non-food 73% Owned 27% Leased Format Description Key Operational Statistics Size of the Store Average Ticket Store Ownership Structure Sales Mix Traffic tickets/sq.m./day Sales Density sales/sq.m./year LFL 9M2016 – 9M2015,% 592,2P= $8,7 272 278P= $4 467 1,1 6 491 sq.m. Total 2 892 sq.m. Selling Space -1,44 Average Ticket, RUB -8,28 Traffic -9,60 Sales Opening Payback 6-9 years Cost of New Store per sq.m. of Total Space, thousand RUB Owned 56-98 Leased 31-41 8-15 months Time to Maturity S: up to 3 000 M: 3 000-6 000 L: over 6 000
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- 18. Operational Overview Magnit Family 18 Source:Company, as of September 30, 2016 2 135 sq.m. Total 1 097 sq.m. Selling Space 84% Food 16% Non-food 37% Owned 63% Leased Format Description Key Operational Statistics Opening Size of the Store Average Ticket Payback Store Ownership Structure Sales Mix Traffic tickets/sq.m./day Sales Density sales/sq.m./year LFL 9M2016 – 9M2015,% 442,3P= $6,5 349 703P= $5 737 1,9 6-9 years Cost of New Store per sq.m. of Total Space, thousand RUB Owned 71-112 Leased 31-54 8-15 months -1,48 Average Ticket, RUB -4,70 Traffic -6,12 Sales Time to Maturity
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- 20. Operational Overview Drogerie Store 20 Source: Company,as of September 30, 2016 291 sq.m. Total 231 sq.m. Selling Space 100% Non-food 13% Owned 87% Leased Format Description Key Operational Statistics Opening Size of the Store Average Ticket Payback Store Ownership Structure Sales Mix Traffic tickets/sq.m./day Sales Density sales/sq.m./year LFL 9M2016 – 9M2015,% 305,6P= $4,5 114 924P= $1 885 9,34 Average Ticket, RUB -3,91 Traffic 5,07 Sales 0,9 3 years If Leased If Owned Cost of New Store per sq.m. of Total Space, thousand RUB Time to Maturity 6 months Owned 20-70 Leased 9-16 4-6 years
- 21. 80% 20% Size of the Store sq.m. Average Ticket Traffic Tickets/ sq.m./day Density Sales/ sq.m./year Sales Mix LFL9M2016- 9M2015 % 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 13% 87% 37% 63% 73% 27% 24% 76% Operational Overview Format Summary 21Source: Company, as of September 30, 2016; * Excludes selling space designated for leases Hypermarket Drogerie Store Magnit Family 464 6 491 291 2,135 327 2 892* 231 1,097 Owned RUB 35-105k Leased RUB 10-19k 2,7 1.1 0,9 1,9 P.241,7 $3,5 P.592,2 $8,7 P.305,6 $4,5 P.442,3 $6,5 P.245 306 $4 024 P.272 278 $4 467 P. 114 924 $1 885 P.349 703 $5 737 89% 11% Convenience store 6 8-15 6 8-15 3 (if leased) 6-9 3 (if leased) 6-9 4-6 (if owned) 4-6 (if owned) Owned RUB 56-98k Leased RUB 31-41k Owned RUB 20-70k Leased RUB 9-16k Owned RUB 71-112k Leased RUB 31-54k 84% 16% 100% -0.29 -1.44 9.34 -1.48 2.88 -8.28 -3.91 -4.70 2.59 -9.60 5.07 -6.12
- 22. Financial Overview Summary P&L SG&Ais presented net of Depreciation & Amortization (except for Depreciation of production fixed assets which was included in the Cost of sales) Source: Company’s calculations based on IFRS accounts for 1H2015 – 1H2016 Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22 RUB MN 1H2015 1H2016 1H2015 / 1H2016 Y-o-Y Growth Net sales 454,808.63 521,527.57 14.7% Cost of sales (327,748.22) (379,464.58) 15.8% Gross profit 127,060.41 142,062.99 11.8% Gross margin, % 27.94% 27.24% SG&A (79,406.25) (92,661.97) 16.7% Other income, net 937.45 2,138.69 128.1% EBITDA 48,627.66 51,599.85 6.1% EBITDA margin,% 10.69% 9.89% Depreciation & Amortization (10,033.63) (12,101.38) 20.6% EBIT 38,594.03 39,498.47 2.3% Net finance costs (5,865.82) (6,853.38) 16.8% Profit before tax 32,728.21 32,645.09 -0.3% Taxes (7,462.55) (6,537.85) -12.4% Effective tax rate 22.80% 20.03% Net income 25,265.66 26,107.24 3.3% Net margin, % 5.56% 5.01%
- 23. 20 25 26 1H2014 1H20151H2016 349 455 522 1H2014 1H2015 1H2016 Financial Overview Revenue & Costs 23Source: Company’s calculations based on IFRS accounts for 1H2014-1H2016 27.8 27.9 27.2 10.5 10.7 9.9 5.6 5.6 5.0 0 5 10 15 20 25 30 1H2014 1H2015 1H2016 Revenue Dynamics RUB bn Net Income Dynamics RUB bn Margin DynamicsSG&A Expense Structure Revenue — 522 RUB bn Gross Margin EBITDA Margin Net Margin % +30,3% 11,5% -0,5% +14,7% +29,0% +3,3% LFLLFL Sales Growth, RUB Sales Growth, RUB 2,07 (0,42) ― Packaging & Raw Materials 1,84 (0,37) ― Repair & Maintenance 50,08 (10,05) ― Payroll & Related Taxes 1,56 (0,31) ― Taxes, Other than Income Tax 11,50 (2,31) ― Deprecation & Amortization 25,81 (5,18) ― Rent & Utilities 3,00 (0,60) ― Other in SG&A,% in Revenue, % 2,51 (0,50) ― Advertising 1,63 (0,33) ― Bank Services 20% 104 703 RUB mn
- 24. 27.83 27.94 27.24-0.42-0.11 -0.60 -0.160.64 0.06 15 17 19 21 23 25 27 29 31 33 GM 1H2014 Trading Margin Transport Losses GM 1H2015 Trading Margin Transport Losses GM 1H2016 Financial Overview Gross Margin Bridge 24Source: Company’s calculations EBITDA Margin Bridge % of Sales % of Sales +11 b.p. -70 b.p. +22 b.p. -80 b.p. 10.47 10.69 9.89 -0.29 -0.22 -0.06 -0.70 -0.75 -0.04 -0.04 0.11 0.59 0.09 0.43 0.09 0.21 0 2 4 6 8 10 12 EBITDA 1H2014 Gross Margin Payroll & Taxes Rent & Utilites Advertising Taxes other than income tax Other EBITDA 1H2015 Gross Margin Payroll & Taxes Rent & Utilites Advertising Repair & Maintenance Packaging & Raw Materials Other EBITDA 1H2016
- 25. 49,065 36,336 11,551 -5,777 -2,239 -5,735 -4,755 -24 434 -351 -19299 1 972 Financial Overview Free Cash Flow 25Source: Company’s calculations based on IFRS accounts for 1H2015-1H2016 Working Capital Analysis The Average Days Payable to Suppliers is 38 Days. Inventory Management Days is 57 Days Working Capital: RUB 34 258 mn as of 30.06.2016 RUB mn 1H 2015 1H 2016 Adjusted for loss from disposal of PPE, provision for doubtful receivables, foreign exchange loss, gain on disposal of subsidiary Calculated as additions + transfers of PP&E during the respective period Does not include cash flow from financing activities 51,182 23,519 2,374 -3,505 -16,964 -6,796 -3,903 -21 018 -127 -20 982 15 102 Adjusted EBITDA Change in Working capital Net Interest Expense Taxes Paid OCF Capex Other Cash Flow from Investing Activities FCF Payment of Dividents Other Cash Flow from Financing Activities CF
- 26. Financial Overview Balance Sheet Source:Company’s calculations based on IFRS accounts for FY2014 - 1H2016 Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26 RUB MN 2014 2015 1H2016 ASSETS Property plant and equipment 232,968.80 265,995.94 275,088.83 Other non-current assets 6,043.82 6,380.79 6,102.59 Cash and cash equivalents 17,691.54 8,390.90 4,885.52 Inventories 81,475.66 116,471.59 123,665.09 Trade and other receivables 813.26 993.67 672.00 Advances paid 4,849.30 5,295.73 4 147.20 Taxes receivable 69.38 96.67 376.07 Short-term financial assets 475.18 246.78 268.87 Prepaid expenses 242.53 320.91 350.42 Income tax receivable 131.86 - - TOTAL ASSETS 344,761.33 404,192.98 415,556.59 EQUITY AND LIABILITIES Equity 143,651.62 165,140.60 186,475.82 Long-term debt 44,410.14 59,411.19 34,959.71 Other long-term liabilities 10,617.70 12,998.59 14,024.63 Trade and other payables 66,794.61 88,372.22 73,498.37 Short-term debt 51,256.67 44,817.12 85,207.60 Dividends payable 14,372.03 16,993.86 7.10 Other current liabilities 13,658.56 16,459.40 21,383.36 TOTAL EQUITY AND LIABILITIES 344,761.33 404,192.98 415,556.59
- 27. Financial Overview Capex Analysis 27 1CAPEX for 1H2016 amounts to RUB 21,018 mn 2 Source: Company’s calculations based on IFRS accounts for FY2015, Company’s Estimates for FY2016 Buildings: Complete & under Construction Machinery & Equipment Other Assets Land 36 231 15 750 541 1 753 FY 2015 (Actual) 1 RUB 54 bn FY 2016 (Estimates) 2 RUB 67 bn RUB 500 mn Buildings: Complete & under Construction Machinery & Equipment Other Assets Land 41 000 23 000 1 000 2 000 RUB 500 mn
- 28. 95,667 104,228 120,167 77,975 95,837 115,282 51,257 44,817 85,208 44,410 59,411 34,960 2014 2015 1H2016 NetDebt Short-term Debt Long-term Debt % Financial Overview Debt Burden 28Source: Company’s calculations based on IFRS accounts for FY2014-1H2016 12.9 8.7 7.5 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2014 2015 1H2016 0.9 0.9 1.1 0 0.5 1 1.5 2 2014 2015 1H2016 Debt Level Dynamics RUB mn Credit Metrics Credit Profile EBITDA / Finance Expenses Net Debt / LTM EBITDA The Company Has an Impeccable Credit History Collaboration with the Largest Banks Low Debt Burden: Net Debt / LTM EBITDA Ratio of 1,1 No Currency Risk: 100% of Debt is Rub Denominated Matching Revenue Structure Insignificant Interest Rate Risk: Interest Payments are Made at Fixed Rates Primarily 53,6% 43,0% 70,9% 29% of Debt is Long-term Approximately 59% of LT Debt is Rub Bonds
- 29. Contact Information Contact Information 29 TimothyPost Head of Investor Relations post@ir.magnit.com http://ir.magnit.com 15/2 Solnechnaya Street Krasnodar, 350072 Russian Federation