Corporate Presentation August 2015 Disclaimer
This document contains forward-looking information concerning Grupo Gigante, S.A.B. de C.V., and its subsidiaries, based on assumptions made by its management. This information as well as the statements regarding future events and expectations are subject to risks and uncertainties, as well as to factors that could cause that the actual results, performance or achievements of Grupo Gigante, differ at any time. Such factors includes changes in the economic, political, governmental and/or business conditions, at a national and/or international level, as well as changes in the interest rates, inflation rates, exchange rate volatility, commodity prices and energy situation among several others. Because of these risks and factors, the actual results of Grupo Gigante, could present material variations from the estimates described in this document. Grupo Gigante does not accept any responsibility for any variations in estimates contained in this document or for information provided by any source other than Grupo Gigante, including official sources.
2 Grupo Gigante At First Glance
Company Overview Grupo Gigant’s Presence
• Grupo Gigante, S.A.B. de CV, is a holding company incorporated in Presence in 32 states of Mexico and in 8 countries in Central America, Mexico since 1962 the Caribbean and South America – Our shares trade on the Mexican Stock Exchange since 1991 Stores by Region 2014 (1) – Losada Group is the controlling shareholder with a 68% equity South West Central and 4% South participation South East 9% America 9% North East • In 2014 we had 485 units in operation, equivalent to 395,000 m2 of 12% sales floor and 29,158 seats North 4% Metropolitan • In addition to our business, we have a strong focus on social Central Area Area 42% 20% responsibility through the Gigante Foundation and the programs of each company
• We control companies involved in the following segments:
Segment Operating Units
Specialized Retail
Restaurants
Real Estate
(1) Mexico is divided between Metropolitan Area, Central Area, North, North East, South East and South West. 3 Grupo Gigante – Corporate Structure
Losada Group Revenue Breakdown 2014 68% 32% / 2% 1% ’15E EBITDA: Ps.3,106 mm 7% (consolidated) (3) 14% ’15E EBITDA: Ps.3,319 mm (consolidated proforma)(3)(6)
76% 2Q15 Net Debt: Ps. 8,984 mm (1)
100% 100% 100%
Specialized Retail Restaurants (4) Real Estate
(2)
Total Revenue ’15E Ps.20,987mm Ps.4,092 mm Ps. 1,586 mm
EBITDA ’15E Ps.1,902mm Ps.563 mm Ps. 1,000 mm (5)
Total Revenue ’15E Ps.23,594mm Ps.4,302 mm -- Proforma (6)
EBITDA ’15E Proforma (6) Ps.2,101mm Ps.577mm --
Note: Results are distributed individually and have no adjustments for intercompany sales. The estimated numbers include acquisitions from the date of purchase. (1) Total consolidated debt of Grupo Gigante Ps.13,680 mm - cash and short-term investments of Ps.4,696 (2Q15). (2) Petco is a Joint Venture of 50% and its contribution to Grupo Gigante is reflected in the financial statements in joint ventures. (3) Sum of subsidiaries’ EBITDAs is not exactly equal to Grupo Gigante’s consolidated EBITDA due to additional corporate expenses at holding level and other income. 4 (4) Includes SET (“Servicio de Estacionamientos Toks”). (5) Net Operating Income(NOI). (6) The pro forma figures include 12 months of the acquired units. California purchase was completed in March 12, 2015, Prisa on April 29, 2015 and RadioShack Mexico on June 18, 2015. Grupo Gigante – Our Success Story
2011 / 2012 • The first Panda Express is inaugurated in Mexico 1971 2013 • Cup Stop starts Toks opens its • Partnership is operations first restaurant made with Petco • Acquisition of the other 50% of Office Depot 1991 Mexico Gigante enters the Mexican Stock Exchange 2007 becoming a public Divestment is company approved in the supermarket business, 205 2015 stores become part • Acquisition of 51% of of Soriana Stores Grupo Prisa’s shares in Chile • Acquisition of 1962 Restaurantes The first chain California store opens in • Acquisition of the100% Mexico City of RadioShack México
2009 The Home Store starts operations 2008 1994 Gigante Grupo Partnership Inmobiliario is made with starts Office Depot operations Inc.
5 Grupo Gigante – Strategy Summary
Core Strategies
• Organic and non-organic growth, focusing on cash generation and profitability
• Boost synergies and strengthen technology • Leadership consolidation in market capabilities, logistics and distribution among all participation segments segments and subsidiaries • Identification and development of new • “E-commerce” strategy at Group level, specialized retail formats using the infrastructure and synergies between subsidiaries Grupo Gigante Specialized • Identifying and developing new Joint Ventures • Continue with our clear dividend Consolidated Retail Segment policy • Expansion and consolidation inside and outside of Mexico • Provide share liquidity
Restaurants Real Estate • Growth and cash flow generation via • Segment Segment Execution of the remodeling and new real estate projects reconversion programs • Focus and commitment to efficiency and • Identifyin strategic opportunities for the profitability through sales and income of our development of new formats developments • Internal and external renovation, offering • Real estate development, efficient and cost-effective atmosphere with cutting-edge architectural designs, management, reshaping and rethinking our assets new dishes and constant service improvements and potential in this field
6 Grupo Gigante – Evolution Since 2007 In 2007, the Board of Directors approved the divestment of the supermarkets business, 205 stores became part of Soriana stores. Since then, Grupo Gigante has had an excellent performance.
Total Revenues Accounting Standard (1) (Ps. in mm) Change to IFRS
CAGR ’07 – ’14: 18.4% $ 22,732 $20,814 $21,504 $18,861 $19,166
$13,575
$8,882 $7,631 $8,091 $6,381
2007 2008 2009 2010 2011 2012 2013 2014LTM UDM (2)
Number of Stores (Units) 798 CAGR ’07 – ’14: 11.0% 536 485 428 389 351 323 274 285 234
2007 2008 2009 2010 2011 2012 2013 2014 1T152Q15 (3)
Note: Total Revenues and Number of Stores do not include subsidiaries that have been sold since 2007 (Radioshack and Super Precio). (1) Change in policy mainly due to the accounting effect of the consolidation of Office Depot. 7 (2) LTM as of 2Q!5. (3) Number of stores include units acquired of Restaurantes California, Prisa and Radio Shack. Grupo Gigante – 2Q15 Summary
2Q15 Summary 2Q15 vs. 2Q14 (Ps. in mm) • 19.9% increase in total revenues vs. 2Q14 and same- store sales increased 5.5%, reflecting the improvement Metric 2Q15 2Q14 ∆ (%) generated in the global market environment Number of 798 (1) 456 (1) 75.0% Units • 18.1% EBITDA increase vs. the generated in 2Q14 Number of 120 120 -- • Addition of 267 units between openings and Properties (2) acquisitions, reaching 798 units in operation at the end Number of of 2Q15 40,848 26,850 52.1% Seats • 484,677 m2 of sales floor and 40,848 seats Total $11,534 $9,616 19.9% Revenues • 120 properties in operation, with more than 1,500 rental units Gross Profit $4,465 $3,860 15.7% • Over 25,000 employees in all business units Gross 38.7% 40.1% (1.4 pp.) • 2Q15 leverage ratio consolidating all units of the group Margin is equal to 4.5x EBITDA EBITDA $1,399 $1,184 18.1% • RadioShack México and Prisa in Chile (51%) EBITDA acquisition 12.1% 12.3% (.2 pp.) Margin • Conclution of the acquisition of Restaurantes California Net Income $436 $628 (30.6%) (3)
(1) At 2Q15 includes 583 Specialized Retail units and 215 Restaurants; At 2Q14 includes 306 Specialized Retail units and 150 Restaurants. 8 (2) Does not include properties on development (land, construction projects, etc.). (3) Negative effect mainly from the effect of exchange rate and financial costs. Grupo Gigante – Prospects and Major Plans Grupo Gigante has identified a growth plan for the coming years. Below is a summary of the prospects and major plans for 2015 and 2016.
Highlights
V Strengthen leadership and market share in participation segments
V Organic and non-organic growth, focusing on cash generation and profitability
V Identifying and exploiting strategic opportunities to develop new formats and business
V “E-commerce” strategy at Group level, using the infrastructure and synergies between subsidiaries and segments
V Focus and commitment to efficiency and profitability, through improved margins, cost reduction, optimization of technology and strengthening of the organization
V Boost synergies and strengthen technology capabilities, logistics and distribution across all segments and subsidiaries
V Continue with our clear dividend policy
V Complete and consolidate corporate restructuring, grouping businesses by specialty
V Focus and commitment to employees, suppliers and customers
V Target leverage of 2.5x – 3.0x at Group level
V Strategy development and execution of our share liquidity
V Maintain our transparent, robust and institutional corporate governance
V Implementation of policies and actions of social responsibility at Group level and subsidiaries
9 Grupo Gigante – 2015 Results Guide
Total Revenues (Ps. in mm)
CAGR ’12 – ’14: 5.1% $29,444 $26,627
$20,814 $18,861 $19,166
2012 2013 2014 2015E 2015E PF (1)
EBITDA (Ps. in mm) CAGR ’12 – ’14: 6.7% $3,319 $3,106
$2,843 $2,733 $2,500
2012 2013 2014 2015E 2015E PF (1)
Note: The estimated numbers include acquisitions from the date of purchase. (1) The pro forma figures include 12 months of the acquired units. California purchase was completed in March 12, 2015, Prisa on April 29, 2015 and RadioShack Mexico on June 18, 2015. 10 1. Specialized Retail Segment Specialized Retail Segment
Office Depot de México The Home Store PetCo Share of sales: 97% Share of sales: 3%
• The market leader in office supplies, • It began operations in 2009, currently it • Grupo Gigante under the Joint Venture stationery, furniture and electronic operates stores in several shopping scheme with PetCo Animal Supplies products for office centers, each with approximately 1,400 Stores Inc. brought in 2013, an innovative m2 concept of pet stores, pet food and • Operates stores in 9 countries (Mexico, accessories Colombia, Guatemala, Costa Rica, • More than 8,000 products, including Panama, El Salvador, Honduras and the decorative items, accessories, gifts, • Petco, began operations in Mexico with Dominican Republic and Chile recently) furniture and appliances, all to provide a the opening of its first store in Zapopan in better home environment the month of October of 2013, offering • Has ~12 thousand employees more than 7,000 items in addition to • Has ~451 employees specialized services such as grooming • At the close of 2Q15 it had 565 units salon, training and a veterinary hospital • At the close of 2Q15 it had 18 units (1) • 565 At the close of 2Q15, PetCo had 12 units spread in Nuevo Leon, Jalisco, Queretaro Units Units 18 302 302 17 and Mexico City 16 16
257 263 13 241 11 225 7
2010 2011 2012 2013 20142Q15 1T15 2010 2011 2012 2013 2014 1T152Q15
Note: Petco is a Joint Venture of 50% and its contribution to Grupo Gigante is reflected in the financial statements in joint ventures. 12 (1) One of which is currently being renovated because of an accident. Specialized Retail Segment – Strategy Summary
1 Organic and non-organic, profitable, organized, focused and selective growth
Strategy development and implementation of "e-commerce", leveraging resources, synergies and 2 potentials of all formats and business segments
3 Consolidation of leadership in segments and market participation
4 Identification and development of new specialized retail formats
Identification and development of new Joint - Ventures, according to requirements and demands 5 of the Mexican and Latin American consumer
6 Boost synergies and strengthen capabilities in technology, logistics and distribution
7 Expansion and consolidation inside and outside Mexico
Focus and commitment to efficiency and profitability, through improved margins, cost reduction, 8 optimization of technology and strengthening of the organization
13 Specialized Retail Segment – 2Q15 Summary and Perspectives
2Q15 Summary 2015-2016 Perspectives
• Grupo Gigante, throuh its subsidiary Office Depot, announced the • Control will be taken and will start integration of acquired purchase of 51% of Grupo Prisa in Chile companies (RadioShack Mexico and Prisa) – With this ODM will begin operations in the country • 27 store openings to perform from July 2015 to December 2016 • In March 2015, Grupo Gigante entered into a purchase agreement and 21 more considered joint venture (Petco) for the same to acquire 100% of the shares of RadioShack de Mexico, SA de period C.V., Retail Answers, S.A. de C.V., and Logistic Answers, S.A. de • Consolidation of sales through e-commerce C.V. The acquisition was completed on June 18, 2015. • Continue with the saturation of markets with different formats of • Announcement of the purchase of RadioShack Mexico, 247 stores the group will adhere to Office Depot de Mexico, which in 2014 generated sales of ~1,747 million pesos • Expansion in Mexico and other Latin American countries
• Complete coverage of the population pyramid in Mexico 2Q15 vs. 2Q14 • Commitment to service and quality, seeking mexican and latin (Ps. in mm) american customer satisfaction • Identification and use of best practices Metrics 2Q15 2Q14 ∆ (%) • Implementation of policies and action of social responsibility actions, including "Green Projects" and environmental protection Number of Stores 581 (1) 306 89.9%
Total Revenues 8,933 7,512 18.9%
EBITDA 785 630 24.6%
EBITDA Margin 8.8% 8.4% 0.4 pp.
(1) Not considering two The Home Store store and 6 PetCo stores. 14 Specialized Retail Segment – 2015 Results Guide
Total Revenues (Ps. in mm)
$23,594 CAGR ’12 – ’14: 3.0%
$20,987
$16,351 $15,414 $15,182
2012 2013 2014 2015E 2015E PF (1)
EBITDA (Ps. in mm)
CAGR ’12 – ’14: 3.3%
$2,101
$1,902
$1,618 $1,665 $1,562
2012 2013 2014 2015E 2015E PF (1)
Note: The estimated numbers include acquisitions from the date of purchase. (1) The pro forma figures include 12 months of the acquired units. Prisa purchase was completed on April 29, 2015 and RadioShack Mexico on June 18, 2015. 15 Prisa and RadioShack México Acquisition Summary
• On February 19, 2015, ODM announced the acquisition of 51% • On March 27, 2015, ODM announced the acquisition of 100% of of Grupo Prisa RadioShack México – The transaction officially closed on April 29, 2015 – The transaction officially closed on June 18, 2015
• Leader in the distribution and marketing of office supplies and • Average store size: ~92 m 2 cleaning equipment in Chile • Purchasing power (~ 68% of RadioShack Mexico suppliers are • In addition Prisa offers logistics and storage for office and shared with ODM) cleaning equipment to a select number of institutional clients • Significant synergies by consolidating distribution centers and • Major clients include Nestle, Walmart Chile, Bechtel, CODELCO, other cost synergies Claro, Pisa, among others • Great potential of cross-selling products of ODM
• Incorporation to the ODM store portfolio as “convenience” stores Key Events RadioShack RadioShack Corp Mexico reaches files for Chapter 11 in 200 stores the United States
1992 2008 2015
Begins operations RadioShack Corp becomes ODM finalizes in Mexico through 100% owner of RadioShack purchase of a partnership with Mexico after acquiring the RadioShack Mexico Grupo Gigante participation of Grupo for US$31.5 mm Gigante for US$43 mm
16 2. Restaurant Segment Restaurant Segment
Restaurantes Toks Panda Express Cup Stop Share of sales: 94% Share of sales: 5% Share of sales: 1%
• Restaurantes Toks owns a chain of • Panda Express, asian fast food • Cup Stop, offers specialty coffee and family restaurants that stand out for their restaurant gourmet foods, began operations in innovation in dishes, excellent service December 2012 • and casual atmosphere At 2Q15 had 22 units • At the close of 2Q15 it had 8 units • At 2Q15 had 132 Restaurantes Toks, 46 Restaurantes California and 7 Beer Factory units Units Units
Units 24 185 2223 10 20 10 8 8
133 121 109 91 97 7 3
2
2010 2011 2012 2013 2014 1Q152Q15 2011 2012 2013 2014 1Q152Q15 2012 2013 20142Q15 1T15
18 Restaurant Segment – Strategy Summary
1 Organic and non-organic growth above the industry average
2 Renovations and conversions program execution
Internal and external renovation, offering atmosphere with cutting-edge architectural designs, 3 new dishes and constant service improvements
4 Identification of strategic opportunities for the development of new formats
5 Focus on quality and service, warm and efficient
Customer satisfaction, innovating and developing new concepts and always offering fresh food 6 and quality
Focus and commitment to efficiency and profitability, through improved margins and sales cost 7 reduction, optimization of technology and strengthening of the organization
Consolidation and development of "Toks Institute" to strengthen training and career plans at all 8 levels of the organization
19 Restaurant Segment – 2Q15 Summary and Perspectives
2Q15 Summary 2015-2016 Perspectives
• In March 2015, Restaurantes Toks acquired all of the shares of • It plans to open 50 units between July 2015 to Restaurantes California and Beer Factory December 2016
• 46 Restaurantes California and 7 Beer Factory units were • It will continue with the renovation both internally and external incorporated in March. of the units, offering new dishes and constant improvement in service • Growth of 25.5% and 6% in Total Revenue and Ebitda, respectively. • Will start the construction of its new distribution center
• The incomes of Restaurantes California is integrated in the • Cup Stop will be customized to offer variety of options consolidated income of Restaurantes Toks as of April 2015. • Accelerate the conversion plan of the Restaurantes California’s units
• Implementation of policies and actions of social responsibility, with emphasis on "productive projects" to support the 2Q15 vs. 2Q14 community and those in need (Ps. in mm)
Metrics 2Q15 2Q14 ∆ (%)
Number of Stores 215 (1) 150 43.3%
Total Revenue 2) 1,883 1,500 25.5%
EBITDA (2) 246 232 6.0%
EBITDA Margin (2) 13.1% 15.5% (2.4 pp.)
Note: Includes SET (Servicio de Estacionamientos Toks) contribution. (1) Includes 46 Restaurantes California and 7 Beer Factory units. 20 (2) Does not include financial information from California and Beer Factory. Does not consider royalty payments and corporate expenses to Gigante Grupo. Restaurant Segment – 2015 Results Guide
Total Revenue (1) (Ps. in mm)
CAGR ’12 – ’14: 11.9% $4,302 $4,092
$3,142 $2,850 $2,510
2012 2013 2014 2015E 2015E PF (2)
EBITDA (1) (Ps. in mm)
CAGR ’12 – ’14: 6.8% $577 $563
$500 $487
$427
2012 2013 2014 2015E 2015E PF (2)
Note: EBITDA does not consider payment of royalties or Grupo Gigante’s corporate expenses. The estimated numbers include acquisitions from the date of purchase. (1) Includes SET (Servicio de Estacionamientos Toks) contribution. 21 (2) The pro forma figures include 12 months of the acquired units. The purchase of California was completed in March 12, 2015. 3. Real Estate Segment Real Estate Segment
Overview Principales Desarrollos • Grupo Gigante capitalizes on the accumulated experience and in Start of Land Construction Development Format Location 2008 formalized the birth of Gigante Grupo Inmobiliario Operation (m 2) (m 2) • Main business focus is the development and management of real state properties Offices 2012 7,277 67,817 D.F. • Estado de Currently the geography of the locations allow it to have presence Commercial 2010 27,657 103,889 in more than 25 entities México Estado de – Our real estate properties have a total of more than 1,500 Commercial 2010 28,762 59,203 commercial premises México – We have a land reserve of 280,000 m2 Commercial 2010 16,450 10,362 Acapulco – We also have more than 3 million m2 of construction and land Commercial 2011 13,685 37,244 Cancún • We also participate in the sale of residential units aimed at the medium / high sector Commercial 2012 47,662 143,068 Guadalajara
Commercial 2012 31,902 45,866 Zapopan Distribution (1) Leaseable Area By Sector Properties By Region Mixt 2015 90,811 211,685 Veracruz Offices South 3% East 3% (1) West Mixt 2016 43,954 535,495 D.F. 18% Residential 2015 11,466 75,540 D.F.
Anchor Commercial Partners
North ► ► ► 22% Soriana Cinemex The Home Central Depot 53% ► Chedraui ► Cinépolis ► Bodega Aurrera Commercial North ► Liverpool ► Coppel 97% East 4%
(1) Joint Venture project. 23 Real Estate Segment – Strategy Summary
1 Growth through new projects in mixed, commercial and office uses
Real estate development and management, efficient and cost-effective, remodeling and 2 rethinking our assets and potential in this field
3 Flow generation via new real estate projects
Focus and commitment to efficiency and profitability through sales and lease of our 4 developments and products, as well as cost reduction, optimization of technology and strengthening of the organization
5 Boost synergies and strengthen capabilities in technology, logistics and distribution
6 Identification and use of external best practices and within the Group
24 Real Estate Segment – 2Q15 Summary and Perspectives
2Q15 Summary 2015-2016 Perspectives
• It operates 120 properties in 25 states of Mexico • We will continue with the successful sale in the various housing developments • It has more than 1,500 rental units • Will seek to grow occupancy rate in malls • The two most important projects that GGI is participating are Miyana and Andamar, in Mexico City and in the state of Veracruz, • Implementation social responsibility policies and actions, with respectively emphasis on sustainability projects and environmental protection • Increase of 6.7% and 7.7% in rental income and net operating income, respectively • Complete the first stage of the Miyana development (the complex includes residential, office and retail) • Occupancy rate of 97.6% • We have identified more than 15 developments with great potential
2Q15 vs. 2Q14 (Ps. in mm)
Metrics 2Q15 2Q14 ∆ (%)
Number of Properties 120 (1) 120 --
Occupancy 97.6% 97.5% 0.1 pp.
Rental Income 663 621 6.7%
Net Operating Income 471 437 7.7%
NOI Margin (2) 71.0% 70.4% 0.6 pp.
(1) Does not include properties on development (land, construction projects, etc.). 25 (2) NOI Margin calculated vs Rental Income. Real Estate Segment – 2015 Results Guide
Total Revenues (Ps. in mm)
CAGR ’12 – ’14: 17.3%
$1,586
$1,386 $1,277
$1,008
2012 2013 2014 2015E
Net Operating Income (Ps. in mm)
CAGR ’12 – ’14: 13.7% $1,000
$886 $832
$685
2012 2013 2014 2015E
26 2015 Estiamtes Summary
Grupo Gigante’s 2015 Estimates
(Ps. in mm)
Total Revenues EBITDA
2014 2015E 2015E PF (1) %(2) 2014 2015E 2015E PF (1) %(2)
Consolidated 20,814 26,627 29,444 27.9% 2,843 3,106 3,319 9.3%
Specialized 16,351 20,987 23,594 28.4% 1,665 1,902 2,101 14.2% Retail
Restaurants 3,142 4,092 4,302 30.2% 487 563 577 15.6%
Real Estate 1,386 1,586 -- 14.4% 886 (3) 1,000 (3) -- 12.9%
Nota: Sum of subsidiaries’ Total Revenues and EBITDAs is not exactly equal to Grupo Gigante’s consolidated due to additional corporate expenses and other income at holding level.. Nota: The estimated numbers include acquisitions from the date of purchase. 27 (1) The pro forma figures include 12 months of the acquired units. California purchase was completed in March 12, 2015, Prisa on April 29, 2015 and RadioShack Mexico on June 18, 2015. (2) % change between 2014 and 2015E. (3) Net Operating Income (NOI). Information to Investors
CORPORATE HEADQUATERS CHIEF CORPORATE OFFICER Grupo Gigante, S.A.B. de C.V. Sergio Montero Querejeta Av. Ejército Nacional No. 350, Tel. (52) 55 5269 - 8121 Col. Chapultepec Morales. [email protected] C.P. 11570, Delegación Miguel Hidalgo, México D.F. CORPORATE FINANCE VP Tel.: (52) 55 5269 8000 Arturo Cabrera Valladares Fax: (52) 55 5269 8169 Tel. (52) 55 5269 - 8082 [email protected]
www.grupogigante.com.mx CEO, FUNDACION GIGANTE Juan Manuel Rosas Pérez DEPOSITARY BANK Tel. (52) 55 5269-8227 Banco de Nueva York [email protected] 620 Avenue of the Americas Nueva York, N.Y. 10011, USA INVESTOR RELATIONS Jorge Hernández Talamantes Tel. (52) 55 5269-8186 [email protected]
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