Company Presentation
1H 2018
P0 Agenda
1 Migros in a snapshot 2
2 Operating environment 6
3 Review of historical financial performance & projections 27
P1
Migros at a Glance 64th Year!
Operating in 3 countries Geographical Footprint — Turkey (81 cities out of 81) — Macedonia and Kazakhstan
1,742 (supermarkets)
50 (upscale supermarkets)
161 (Supermarkets and Hypermarkets)
17 (wholesale and foodservice stores) 2,011 Stores1 41 (international stores)
Migros Online — 1.7m members and 56% mobile orders — Acquisition and re-launch of Tazedirekt
7.7m active households Money Club Card Innovation, Loyalty & 80% 38% +100 Customer Service Introduced more than 100 innovations for the retail market of HH of HH
Only retail company in the “BIST Sustainability Index”
Included Corporate Governance Index since 2015
Sustainability and 27,596 employees of which 40% are women A- Corporate Governance Best retailer of the country 14 years in a row2 2017 CDP Grade:
1 as of June 30, 2018 2 Capital Business magazine. P2
Ownership Structure
JV Structure between BC Partners & Anadolu Group
Shareholding Structure as of June 2018
AG Anadolu BC Partners Grubu Holding A.Ş. & related funds
MH Kenan Moonlight Free Float Perakendecilik Investments Capital S.A. ve Ticaret A.Ş. S.A. 26.8% 8.07% 50.00% 15.13%
Migros Ticaret A.Ş.
P3
Migros has been a leading supermarket operator since its foundation 64 years ago
Migros was established in 1954 (as a joint venture between Swiss Migros & Istanbul Municipality/State Institutions). Throughout its history, the company had 5 different ownership structures. Ownership changes did not interfere with the long established Company operating principles and management.
Istanbul Municipality/ State BC Partners 80.51% Institutions (49%) & Private & Public 19.49% Sector (Koç Holding 51%)
1st era 2nd era 3rd era 4th era 5th era (1954–1974) (1975–1990) (1991–2008) (2008–2015) (2015–…)
Foreign investment Private Sector BC Partners 23.2% & (Swiss Migros 50%) & (Koç Holding 51%) Anadolu Group 50.0% Istanbul Municipality/State & Public 49% Joint Venture Institutions (50%) Joint Free Float 26.8% Venture
Note: Shareholder structure as of June 30, 2018
P4 Agenda
1 Migros in a snapshot 2
2 Operating environment 6
3 Review of historical financial performance & projections 27
P5
Operating Environment
A Attractive market with significant upside potential to support future growth F B #1 supermarket operator with Experienced management an outstanding reputation
E C Flexible and efficient business Multi-channel synergistic model combined with state of offering with a footprint in 81 art facilities Turkish cities and abroad
D
Retail technology and innovation leadership
P6
A Attractive domestic market
Attractive market with significant upside potential to
support future growth
Population (m) Total Grocery Spend per Capita ($)
3,670 81 83 3,516 3,200 3,008 65 66 61
46 2,031 1,781 38 1,282
Turkish Food Retail Market MGD Grocery Market Share (%)
85%
82%
81% Unorganized Organized 66% 34% 80%
54%
43% Total Grocery Spend in 2017 [~ TL 380bn] 34%
Source: Planet Retail P7
B #1 supermarket operator with an outstanding reputation
Market Share Evolution
Market Share Gain Migros FMCG Market Share Evolution (%)
Migros on a consolidated basis 16.1 16.0 maintained its market shares in FMCG markets. However, Migros brand continued its market share gains. 6.8 6.8
1H17 1H18 1H17 1H18 Total FMCG Market Share Modern FMCG Market Share
Source: Nielsen Note: FMCG stands for Fast Moving Consumer Goods; Modern FMCG market and total FMCG market include all food-retail formats
* including Kipa
P8
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
With a clear strategy to organically and inorganically drive growth
in the decades ahead
Proven ability to launch new, successful formats and products, achieve business transformations
Conversion of Tansas
Launch of online Launch of new concept stores into Migros Private label relaunch Launch of Migros jet in Acquisition of format petrol stations
1997 2008 2010 2012 2014 2017
2013 1997 2005 2009 2011 2016
Club Card launch Acquisition of Introduction of self Launch of 1 Space optimization of Acquisition of check-out Hypermarkets
Growth Levers
Macro Product Inorganic / Format Evolution International Fundamentals Innovation Acquisitions
1 The format started operating in 2010 on a trial basis and was fully launched in 2011
P9
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Multi-channel expertise anchored around large, full-service supermarkets
Sales Banner Key concept Supermarkets Large SPMs & HPMs Total # of stores area split (Target size) 40-800 sqm 800-7,000 sqm
Core supermarkets [333] [680] expertise anchored 67% (Migros) [23] [1,742] around large 7% (5M) [593] supermarkets [113]
Focused on the Western [69] 2 19% [47] [161] regions of Turkey [45]
Well positioned in upper 3% [50] [50] income segment
International operations 3% [21] [20] [41]
First and leading e- commerce food retail website
Wholesale & Food Service 1% [17] [17]
Total # of [1,425] [586] [2,011] stores
(#): Number of stores as of June 30, 2018
P10
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Migros
Migros, Largest National Supermarket Chain Number of stores: 1,742 including 469 5M, MMM & MM stores and 1,273 Migros Jet & M stores, Penetration: 81 cities ─ (40*-4,500) sqm / (1,800* – 18,000) SKUs ─ Differentiated offering and service on fresh product categories ─ Wide branded assortment of FMCG products ─ Consistent Every Day Low Pricing on commodity Private Label products ─ Fashionable, complementary and seasonal non-food selection
Focus on proximity supermarkets
680 Migros Jet and 593 M Migros Proximity Stores, (40*-300) sqm, 1,800* – 3,000 SKUs
Loyalty Program
CRM applications for different customer segments ─ Customized & Differentiated Offering for Money Club Card holders ─ Club Card Loyalty Program for 17 years
(*): including Migros Jet stores and Migros Jet 7/24 forecourt stores as of June 30, 2018 P11
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Macrocenter
Exclusive shopping
Number of stores: 50 400 - 2,500 sqm / 10,000 SKUs ─ Upscale gourmet store serving with strong brand loyalty ─ Wide product range in delicatessen, appetizers and spirits. Premium quality in fresh products ─ Complementary and premium non-food
Customized service such as banquet ready meal delivery
Penetration: 6 cities
P12
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Kipa as of June 2018
Focused on the Western regions of Turkey
Number of stores: 161 Space optimization in 4 Kipa stores completed in 2017 Space optimization in 8 more stores completed so far in 2018, 6 more in 2018 pipeline Product portfolio optimization is in progress
Penetration: 20 cities
(#): Number of stores as of June 30, 2018 P13
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Wholesale & Food Service
Focus on Horeca Penetration
Currently operating in 7 regions through dedicated sales team.
Dedicated warehouses and customer delivery
17 Wholesale stores
Penetration: 12 cities
P14
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
Online Business
Turkey’s first and leading e-commerce web site in food retail
Top-line growth is significantly higher than the Company average Improved operational efficiency through picking automation Direct delivery from stores (111 stores in 28 cities across Turkey)
Healthy
Organic Natural
Fresh
P15
C Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad
International Operations
Kazakhstan Macedonia
1.3% of consolidated sales from Kazakh operations 1.4% of consolidated sales from Macedonian operations
Number of stores: 16, including 2 hypermarkets, 13 supermarkets and 1 Macrocenter. Number of supermarkets: 25
Owns 1 shopping mall in Almaty Owns 1 shopping mall in Skopje Total sales area of 23,789 sqm Total sales area of 21,485 sqm ─ Serving in the cities of Almaty and Astana in a large
country Operations started in 2005 Operates in multi-format since 1999
1 Shopping Mall 2 Hypermarkets 13 Supermarkets 1 Macrocenter
1 Shopping Mall 25 Supermarkets
P16
D Retail technology and innovation leadership
Innovations
Migros Mobile App & Personalized Self-Service Checkout+ Campaign Engine
BKM E-Wallet & Self-Service Sales Over Checkout ‘pin-on-receipt’ Integration Technologies
Mkolay Scan&Go
Migros Intelligent Office
Mi-Fi Me-Mobil Supplier Information Center Electronic Smart Tag
Migros R&D Center
P17
D Retail technology and innovation leadership
Money Club & CRM
6 Life Style 75% Segments 10.3 Million of Loyalty Card Active Cards Sales Advanced Turkey’s 48.0 Million Programme With Segmentation largest loyalty Money Points Highest Customer Customer Value programme Interaction Model 1.7 Million 7.7 Million Money Winning Customer
Active Households Store 900k customer benefited "Just For You" campaigns Segmentation
Partnerships Effective Communication With Strong Network 6.1 Million 305 k Brands 25 Mobile Phones Communication & CampaignChannels 887 k 1.1 Million Followers 1 Money = 20 Miles E-Mails P18
D Retail technology and innovation leadership
Self-service technologies
Self-service revolution in retail Mkolay – Scan&Go
2018: Turkey’s First In-store self scanning experience Million 250 stores Statistical fraud and security algorithm (860 SSCO1) transactions Hassle free direct bagging and payment 3.5 per month System will be available over 20 stores by the end of the year
% average transaction 30% ratio2
Top 10 stores’ average 2014: 61% transaction 1 189 stores ratio % (603 SSCO)
Generation cash 3. register
2009: 1 pilot store (4 SSCO)
1 SSCO stands for Self Service Check Out 2 Share of transactions made via self-service checkouts in equipped stores P19
D Retail technology and innovation leadership
Mi-Beacon, Migros mobile apps and Mi-Fi
Highlights of Mi-Beacon, Migros mobile apps Highlights of Mi-Beacon, Migros mobile apps
Personalized – Customer Communication Channel Free wireless internet access during shopping – a At the right place– At the right time first in Turkey New I-beacon technology Available for 200 5M and MMM stores in large cities, stores where pedestrian traffic and tourist potential are high
IOS & Android platform 4,5 M downloads Core functionalities ‒ Mkolay –self scan shopping BKM E-Wallet & Self-Service Checkout Integration experience ‒ ‘Just For You’ campaign offers Turkey’s First Mobile wallet integration on a physical store payment ‒ Closest store finder Currently available on 860 self service checkout ‒ Migros Wi-Fi access and will be available over 6400+ regular checkouts ‒ Easy access to Migros TV Q2 2018 ‒ Migros ‘İyi Gelecek Elçileri’ platform ‒ Call center
P20
E Flexible and efficient business model
Flexible / capital light model with preferred tenant status
Flexible / capital light model Capex as a percentage of sales 2017 (%)¹
Largely rented business model Flexible lease terms 6.9% ‒ Leases can be exited on average with a 1-3 month notice ‒ Termination rights of landlords more limited (selected leases locally registered with the Land Registry) 4.6% Well-invested facilities and low capex requirements 4.0% ‒ One of the lowest capex as a percentage of sales amongst 3.7% peers 2.9% 2.9% 2.9% 2.7% 2.8% ‒ The meat plant, the distribution center sorter system and 2.5% 2.6% 2.6% a centralized control systems on energy savings are examples of major one off investments realized over the last years Leveraging “must have” anchor tenant position in malls and in the high street
‒ Preferred relationship status X5
Dixy
Tesco
Casino
Migros
Magnit Ahold
‒ Power to (re-)negotiate size of the store Colruyt
Shoprite
Delhaize
Morrison
Carrefour Sainsbury
Source: Company estimates, Reuters ¹ Latest reported fiscal year
P21
E Flexible and efficient business model
Unparalleled capabilities in fresh categories
Highlights
Focusing on fresh products (vegetables, fruit, fresh meat, etc.) Renewed meat production facility Exclusive licensing from Ministry of Agriculture: “Good Agricultural Practice”, covering now poultry & red meat Broader range of bakery products and self service bakery model. Fresh and ready to cook fish range in MAP packaging (modified atmosphere packaging),
P22
E Flexible and efficient business model
Meat processing/production plants – Miget and Gebze
2 meat production plants, for meat processing
Location Closed Area # of Employees
Miget Meat Production Plant Izmir Torbali 11,356 m2 249
Gebze Meat Production Plant Kocaeli GOSB 3,632 m2 43
18,455 ton production capacity per year per shift, in product groups
Service Products Special Products Packed Veal and Lamb Products Special Gourme Products Lamb Parts Packed Meatballs Vacuum Packed Meatball Patty Offal Packed Minced Meat Vacuum Packed Minced Meat Dough
P23
E Flexible and efficient business model
Distribution centers and logistics - overview
24 Distribution Centers (including 1 Kipa DC and 7 Fruit and Vegetable DCs) 19,000 active SKUs % of sales delivered centrally to the stores has reached 83% Continuing to improve round trip store distances Sorting and picking automation started
Esenyurt Samsun (F&V) Bayrampasa Gebze Gebze (Meat)
Bursa (F&V) Saray Erzurum Saray (Meat) Gölbaşı
Miget (Meat) Izmir (F&V) Pinarbasi Kemalpasa Torbalı
Mugla Antalya Tarsus (F&V) Adana Antalya (Meat) Adana (Meat) Antalya (F&V) Mersin (F&V) Kumluca (F&V)
P24
E Flexible and efficient business model
Best-in-class quality management and recognized excellence
Annual records Selected awards
1,000+ supplier audits 30,000 product analysis 7,000 approvals of new products for sales
3,200 store audits CDP Turkey Capital “Climate Leadership Award” “Most Admired Retailer” ISO Certificates
ISO 9001 Quality M.S. ISO 22000 Food Safety M.S. OHSAS 18001 Occupational Health & Safety M.S. Grand Stevie TS EN ISO 14001:2004 Environmental M.S. “Stevie Awards for Great Mobile Marketing Association Employers” “The Smarties Awards” ISO 10002 Customer Satisfaction M.S
Laboratories and Audits
13 owned laboratories 10 outsourced laboratories and audit firms Association for Talent Development “Excellence in Practice Awards” P25 Agenda
1 Migros in a snapshot 2
2 Operating environment 6
3 Review of historical financial performance & projections 27
P26
Sales in 1H 2018
. Consolidated sales turnover increased by 20.3% and reached TL 8,463 million in 1H2018
. Domestic sales growth excluding Kipa was stronger in 2Q 2018 with 19.3% vs 17.9% in 1Q 2018 19.3% Domestic sales growth w/o Kipa operations in 2Q Sales in 2Q 2018 (TL million) Sales in 1H 2018 (TL million) 2018
4,523 8,463
3,923 7,037
Strong growth
momentum despite high base
of last year
2Q 2017 2Q 2018 1H 2017 1H 2018
Sales Growth in 2Q18 15.3% Sales Growth in 1H18 20.3%
*Kipa’s financial results have been consolidated since 01 March 2017.
P27
Capital Expenditures
Capex (TL million) Kipa stores Capex as a 12 Percentage 2.2% 3.2% 2.7% 2.6% Space optimization of Sales 399 completed 271 297 154 TL 440m Targeted consolidated capex in 2018
Capex as a 1H 2017 1H 2018 2016 2017 percentage of sales is expected to remain at 2017 level at the year end
P28
Consolidated Gross Profit in 1H 2018
. Consolidated Gross profit reached TL 2,338 million with an increase of 27.6% in 1H 2018
. 2018 FY gross profit margin expansion is expected to exceed the Company’s targets for the year
Gross Profit 2Q (TL million) Gross Profit in 1H (TL million) Targets exceed in gross profit 1,261 2,338
1,015 1,832
Further synergies expected following the legal merger with Kipa
2Q 2017 2Q 2018 1H 2017 1H 2018
Margin 25.9% 27.9% Margin 26.0% 27.6%
P29
Consolidated EBITDA(R) in 1H 2018
EBITDA 2Q (TL million) EBITDA 1H (TL million)
275 486 193 348 42.9% EBITDA increase in 2Q18 2Q 2017 2Q 2018 1H 2017 1H 2018 Margin 4.9% 6.1% Margin 5.0% 5.7%
EBITDAR 2Q (TL million) EBITDAR 1H (TL million)
11.3% 512 936 EBITDAR 387 704 margin in 2Q18
2Q 2017 2Q 2018 1H 2017 1H 2018 Margin 9.9% 11.3% Margin 10.0% 11.1%
*EBITDA(R)= Operating Profit+Amortization+Employee Termination Benefits +Unused Vacation Provision-Other Income+Other Expenses+(Rent Expenses)
P30
Track Record of Deleveraging
Migros 1H 2018 Cash and Leverage Position
Cash & Debt Items Total TL m TL m EUR m
Cash & Cash equivalents 1,359 1,238 23
Financial Debt* 4,092 865 608
Net Debt 2,733
Net Debt / EBITDA LTM 2.7x
* Based on amortised costing as indicated in financial statements
Net debt/EBITDA improved in 1H 2018 y-o-y despite hard currency appreciation
Deleveraging Profile - Net Debt / EBITDA LTM
4.0x 3.2x 3.2x 2.9x 2.7x 2.7x 2.6x
1H 2017 1H 2018 2013 2014 2015 2016 2017
Euro/TL Currency : 4.0030 5.3092 2.9365 2.8207 3.1776 3.7099 4.5155
P31
Expectations and Guidance
2018 Guidance [Consolidated]
2018E Previous Guidance New Guidance
Sales Growth 15-18% ~20%
EBITDA Margin 5.5-6.0% 5.5-6.0%
120-150 200+ Expansion Target new stores new stores
CAPEX Target TL 400 mn TL 440 mn
Management Agenda in 2018
Merger of Migros & Kipa by the Total gross Euro debt decreased Focus on digitalization of end of August 2018 by almost 10% in 1H18 versus physical stores and online Space optimisation in large 2017 year-end business growth Kipa stores will continue Migros TL bond debut with Strengthening our pioneer TL 150 million position in Turkish Retail
P32
SUMMARY OF INCOME STATEMENT – 1H 2018
IFRS Consolidated Income Statement Summary
(TL Million) 1H 2018 1H 2017 Net Sales 8,463.4 7,036.9 Cost of sales -6,125.4 -5,205.1 Gross Profit 2,338.0 1,831.9 Operating Expenses -2,054.7 -1,667.1 Other Operating Income / (Expense) -154.3 -111.9 Operating Profit 129.0 52.8 Income / (Expense) from Investment activities 0.2 1,065.2 Operating Income Before Finance Income / (Expense) 129.2 1,118.0 Financial Income / (Expense) -631.6 -320.2 Income/Loss Before Tax From Continuing Operations -502.4 797.8 Tax Income / (Expenses) -37.9 -12.0 Deferred Tax Income 8.8 0.8 Net Profit / Loss -531.5 786.6 Net Profit / Loss - Non-controlling interest -3.3 -2.9 Net Profit / Loss - Equity holders of parent -528.2 789.5
EBITDA 486.3 348.5 EBITDAR 935.8 703.8
P33
SUMMARY OF BALANCE SHEET – 1H 2018
IFRS Consolidated Balance Sheet Summary
(TL Million) 1H 2018 2017
Current Assets 3,623.0 3,776.3 Non-current Assets 6,684.7 6,526.4 Total Assets 10,307.8 10,302.7 Current Liabilities 5,778.3 5,516.1 Non-current Liabilities 3,512.7 3,259.4 Total Liabilities 9,291.0 8,775.5 Equity 1,016.7 1,527.1 Total Liabilities and Equity 10,307.8 10,302.7
P34