Leadership in Russian Food Retail: July 2008
Leadership in Russian Food Retail: July 2008
July 2008
p. 1
Russian Food Retail Market
Total Food Retail Market Size in 2007, USD million
$262bn
$221bn $212bn
$190bn
Amongst the Largest Food $116bn $93bn
Maintain Progress on Multi- Continue development of soft discount and supermarket formats
Format Development Increase exposure in hypermarkets to achieve scale and market
leadership in this fast growing market segment
Karusel acquisition
p. 5
Strategy Diversified Across Formats
7%
6%
13%
Hypermarkets
Data as at 30 June 2008
31%
• 39 stores, including 23 Karusel • Average assortment – 36%
hypermarkets Compact: 30,000 SKUs
• Average net selling space – Full-size: 40,000-60,000 SKUs 57%
Compact: 4,000 sq. m. • Sales per sq. m. – USD 8,909(1)
Full-size: 5,000-10,000 sq. m. • 50%
Fresh & perishable products – 40%
Hypermarkets Supermarkets
Soft Discounters Karusel hypermarkets
2007 Net Retail Sales by Region (1) 2007 Sales, EOP Store Locations and Selling Space (1)
FY07 Net Retail Sales of USD 5,284 million Region FY07 Net Selling
Net Retail No of Space
0,6%
Sales (USD Stores (‘000 sq. m.)
15,3%
mln)
Key priority
area for
expansion
St. Petersburg
Pskov
Veliky Novgorod
Total Area(1) Total Population(1)
Regions
Tver’
Cherepovez (million km2, %) (million, %)
Vologda
Smolensk Yaroslavl
…Of Small Chains and Successful Franchises in Attractive Regions of European Russia
and Urals
# of Selling Real Estate
EV
Date Company Region EV/Sales Stores Space in Owner-
(USD mln)
(sq. m.) ship (sq.m.)
(1) 26 stores were operational in 2007, three additional stores are scheduled for opening in 2008 (29 stores’ total selling space of 12,900 sq. m.)
p. 9
Ensuring Best-In-Class Execution…
(1) LFL retail sales are calculated on a pro-forma basis, i.e. by including acquired Pyaterochka stores for the full year in each of 2006 and 2007, excluding Karusel
p. 10
Enhancing Operational Efficiency
p. 11
Enhancing Operational Efficiency
p. 12
Upgrading IT Systems
• X5 has chosen SAP for Retail as its enterprise resource planning system to provide strong
platform for future growth
• To facilitate control over processes ranging from strategic planning to store level operations
p. 13
X5 Track Record of Operating Performance
(1) LFL retail sales are calculated on a pro-forma basis, i.e. by including acquired Pyaterochka stores for the full year in each of 2006 and 2007
p. 14
X5 Track Record of Financial Performance
(1) EBITDA calculated by adding depreciation and amortisation of USD 141.7m in 2007 and USD 86.4m in 2006
p. 15
X5 Track Record of Financial Performance
p. 16
H1 Operating and Financial Results
…Continuing Strong Performance
Growth (H1-2008) H1 2008 LFL Breakdown per Format
•61% increase in net retail sales excluding Karusel year-on-year in Based on RUR-
US dollar terms to USD 3,744 mln denominated gross sales Basket Traffic
35%
•Karusel’s net retail sales grew 63% year-on-year to USD 559 mln 30%
•X5’s LFL sales excluding Karusel grew 27% (in Rouble terms) 28%
25% 23%
•Karusel’s LFL growth totaled 35% 21%
19%
•In H1-08 X5 added 100 new stores (50,631sq. m. of net selling 15% 21%
space) organically and further 23 stores (132,014 sq.m. of net 20%
selling space) through the acquisition of Karusel 11% 14%
5% 8%
Profitability (Q1-2008), excluding Karusel 7%
Gross margin of 25.7% Soft Discount Supermarkets Hypermarkets Karusel Total*
EBITDA margin of 9.0% Stores Hypermarkets
Net margin of 4.8% * Including Karusel
As of 31 Dec As of 30 June Net added in
2007 2008 H1-08 USD mln Q1 2008 * Q1 2007 * % change, y-o-y
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Karusel Acquisition…
...Compelling Investment Proposition
Significant Step-Up in Scale of #1 Position in Russian Food Retail by Revenues – Increasing Lead over
X5’s Business Closest Competitor by over 60%(2)
Immediate Position as a
Leading Position in the Fastest Growing Food Retail Format in Russia
Leading Hypermarket Operator
Financially Compelling
Significant Synergy Benefits
Acquisition
(1) 6,986,020 X5 GDRs paid at a provisional value of USD 33.10 per GDR
p. 19
Karusel Overview
Cumulative Store Opening Schedule Net Sales, Margins & Store Count
22 22 22 23 Net Sales, USD mln # of Stores Gross Margin %
19 19
23.7% 24.9%
21.6%
11
9 22
6 7 19
6
3 361 831
1 1 1
84
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
FY 2005 FY 2006 FY 2007
2004 2005 2006 2007 2008
15.0%
14.3%
13.0%
351
272
224
6.4% 6.1%
5.8% 177
5.2% 4.7% 151 147
4.5% 3.4% 115 100 96
Metro
Kopeyka
Magnit
7th Continent
O'Key
X5 + Karusel
Karusel
Dixy
Dixy
Lenta
X5
Viktoria
Magnit
O'Key
Auchan
Metro
Viktoria
X5
Auchan
Kopeyka
7th Continent
X5 + Karusel
Lenta
Karusel
The combined X5 and Karusel now has a market share of 25.1% in the Top-10 Russian food
retailers including Karusel, which translates into 3.2% market share in the total food retail
market of Russia(2)
Significant lead ahead of its closest competitors – over 60% gap in terms of PF 2007 sales
Evolution of Russian Modern Food Retail(1) Russian Hypermarket Operators Store Count
2003 2010F [2]
16.6%
44.4%
29.4% 39 37 (2)
26 22 (2)
18 15 12
St. Petersburg
Moscow region St. Petersburg & North West region – 15 stores in operation
– 4 stores Pskov and 1 store under construction
Veliky Novgorod
Smolensk Yaroslavl
Nizhny Novgorod & Dzerzhinsk – 2 stores
MOSCOW Kostroma
Kaluga
Bryansk
VladimirIvanovo Izhevsk –
N.Novgorod Kirov
Orel Tula 1 store
Kursk Ryazan
Lipetsk Arzamas Yoshkar-Ola Perm
Cheboksary
Belgorod Saransk Izhevsk
Kazan
Tambov Penza
Voronezh
Ulyanovsk Ekaterinburg
Toglyatty
Saratov Ufa
Samara Chelyabinsk Tyumen
Rostov-na-Donu
Volgograd Yekaterinburg – 1 store
Novorossiysk under construction
Orenburg
Krasnodar
Volgograd – X5 Existing Operations
Sochi
Stavropol Elista 1 store New regions to be entered in 2008
Astrakhan
Karusel Hypermarkets
Synergies Sources
Total integration costs expected to be USD 150 mln in 2008 and 2009
p. 24
USD 1 bln Rights Offering…
... Successfully Completed in May to Finance the Acquisition of Karusel
USD1,026 mln offering of rights to eligible (1) existing GDR holders to acquire new GDRs
(48.1m new GDRs at USD 21.32 per new GDR (ratio of 2:9))
New GDRs which were not subscribed for by the end of the Subscription Period were offered
Offering Structure for sale by the underwriters in the Rump Offering
Rights to acquire GDRs were not be tradable, however there was a “make-whole” provision
resulting from the placement of the Rump to compensate non-participating shareholders
The gross proceeds of the Offering used to fund the cash portion of the purchase price for
Karusel
Use of Proceeds
The remaining amount to be used for rebranding, restyling and integration of Karusel
hypermarkets and for general corporate purposes
(1) Qualified investors within the meaning of relevant implementation of the Prospectus Directive outside of the US (under Reg S) and qualified institutional
buyers in the US (pursuant to Rule 144A)
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