Investor presentation2Q & 1H 2012 Investor Presentation Disclaimer
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1 Content
Introduction 3
Strategy & Outlook 8
2Q & 1H 2012 Operational and Financial Review 14
Appendix 24
2 DIXY Group at Glance Sales Breakdown by Region
Over 20 years presence in the market, since 1992 DIXY Group is the 3rd largest national food retailer with revenue USD 4.1 bln in FY2011, selling space 446 ths. sq.m. and 1,284 stores (as of July 31, 2012) • Acquisition of Victoria Group in June 2011 contributed over 50% of revenue and selling space, and over 250 stores DIXY Group historically focuses on the neighborhood stores format • Fast and convenient neighboring store experience with Sales Breakdown by Format strong track record of organic growth • Neighborhood stores accounts for nearly 80% of the selling space and revenue DIXY Group sells food and non-food products to over 500 million customers in almost 400 places across Russia IPO at Russian Stock Exchange in 2007, raised US$360 mln Market capitalization as of September 01, 2012 is US$1.4 bln
3 Source: Company data 1H 2012 Our Formats: Key Facts and Numbers Focus on Neighborhood Format Complemented by Strong Supermarket Brands
Neighborhood Supermarket Compact Hypermarket
Number of stores 1,045 183 11 26 18 1
Average store selling space (sqm) 274 358 718 1,705 2,111 3,051
Product range (SKUs) 2,000-3,500 2,500-6,000 7,500 20,000 20,500 19,000
Food/Non-food 90%/10% 92%/8% 88%/12% 87%/13% 79%/21% 83%/17%
Average ticket (RUB) 249 239 426 495 573 2,210
•Near public transportation hubs in • People living in close walking •People living within 5 min by car/15 areas with low or limited competition Target audience proximity of 5–10 min min walking distance •People living in 10 min by car / 30 •In populated residential districts •In populated residential districts min by public transport
4 Source: Company data for July 2012 Our Geographical Footprint Russia's Per Capita Income by Region
1–20 stores Murmansk South 16,3 Over 20 stores Vologda Karelia DIXY Group DC Siberia 16,4 Kostroma Victoria Group DC Ivanovo Saint Petersburg and Volga 17,1 Leningrad region Novgorod Russia 20,7 Kaliningrad NW 21,3 Pskov Urals 22,9 Yaroslavl’ Far East 23,1 Smolensk Vladimir Moscow and Central 26,7 Moscow region Source: RosStat, 2011 Kaluga Tula Serpukhov Russia's Retail Revenue Our geography evolution Ryazan’ Yekaterinburg Tyumen’ by Region (# of Stores) Chelyabinsk 1,276 93 353 Central 35% 646 Others 77 47% 181 Presence in almost 400 places across Russia 830 388 North- Penetration in the most prospective regions West 2010 1H 2012 representing more than 50% of Russian retail Urals 9% market, and with the highest per capita income 9% Central NW Urals
Source: RosStat, 2011 Source: Company data 1H 2012 5 Source: Company Data 1H 2012 Strong Track Record of Growth
Beginning. Going Public Building Platform Intensive & Extensive Growth 1992 – 2008 2008 – 2010 2011 – current
1992 – founded as a wholesale 2008 – Mercury Group becomes major 2011 – Marketing turn-around of DIXY distributor shareholder chain: new market positioning, rebranding 1995 – First Megamart store opened Supply chain restructuring. New IT system and differentiation strategy implantation starts 1999 – First DIXY retail store opened Aldata GOLD (used by Tesco, Ahold, Carrefour and Casino) introduced 2011- DIXY Group acquires Victoria Group 2004 – Private equity funds acquire rd Company centralization accomplished and becomes the 3 largest national food stakes in DIXY Group retailer by revenue, selling space and 2007 - IPO at RTS (raised $360mln) 2010 - New marketing team develops DIXY number of stores chain re-positioning strategy 2011 – Record # of 255 stores opened
DIXY Group Revenue and Number of Stores 1 200 1,119 1 000 122 800 646 537 600 493 388 65 400 48 54 200 37 0 2007 2008 2009 2010 2011 Revenue, bln RUR # of Stores
6 Source: Company data Content
Introduction 3
Strategy & Outlook 8
2Q & 1H 2012 Operational and Financial Review 14
Appendix 24
7 Russian Retail Market
One of the largest food retail Undersupply of Top-5 food retail chains’ market markets in Europe… neighborhood stores… share by country ($bn) 322 84% 83% 286 76% 257 237 235 66% 64% 62% 54% Russia avg. 19 48% 128 41% 89 26% 53 44 44 17%
Europe avg. 111
-
UK
Italy
Italy
Spain
USA
land
Russia
France Poland
Spain
Greece
Ukraine
Switzer
Russia
France
Czech Czech
United United
Germany
Sweden
Portugal
Hungary
Republic Kingdom Source: Planet Retail for 2011 for forecourt and Germany Source: Planet Retail, 2011 Source: Planet Retail, 2011 convenience stores …with one of the lowest rates of …underpinning significant Russia’s Top food retail chains modern retail penetration growth potential market share
Russia 0,1% 88% 86% 86% 6,2% Belgium 2,6% 4,6% 72% 70% 3,0% Denmark 2,6% X5 53% 47% 1,4% 42% 42% Norway 3,7% 34% 1,3% Magnit Switzerland 4,2% Auchan Luxem- … 4,6%
DIXY
- UK 10,0%
UK O'Key
Italy Ireland 11,5%
Spain
land
Russia
France
Poland Greece
Ukraine Other
Switzer Germany Source: Planet Retail for 2011 for forecourt and 83,5% Source: Planet Retail, 2011 convenience stores Source: Planet Retail, 2011
8
8 Our Growth Strategy
DIXY Mission: Always concerned about the wellbeing of our customers, we guarantee a pleasant everyday shopping experience by offering high-quality goods at a good price, providing fast, considerate service, and planning convenient store locations and operating hours.
Organic growth through stores roll-out in the regions of presence in 2012-2013 Continued Focus Accelerated store openings in high growth regions (primarily Central, Northwest on Growth and Urals Federal Districts) Leverage on Victoria acquisition to capitalize on larger scale and efficiency improvement
Neighborhood store concept unification via rebranding Continued development of three successful store formats: neighborhood store, Evolving Marketing supermarket, and compact hypermarket Improvement of customer service and product offering with focus on bestsellers, Strategy complemented by private labels proposition Price differentiation and flexible pricing based on regular price monitoring in the neighborhood Development of customer loyalty programs for neighborhood stores
Supply chain centralization across Victoria Group neighborhood stores by the end of 2012 Supply Chain Launch new distribution centers to support continuing store roll-out program in the regions of presence Implement innovative IT-solutions to further enhance logistics and distribution efficiency
9 Source: Company data 1H 2012 Strong Expertise in Neighborhood Format Striving for best in-store execution “for the majority”
1,228 neighborhood stores representing 80% of selling space and generating 80% of retail revenue with 35% growth rate New marketing strategy and repositioning since 2011: • Rebranding all DIXY stores in the next 3 years (layout, logo, etc.) • Reshuffling assortment, changing procurement strategy, and pricing attitude to increase average ticket and margins • Products for daily consumption (dairy, bakery, fruits & vegetables) generate 40% of the format’s revenue • Private labels to guarantee the best-priced product basket and best value-for-money proposition • Loyalty programs and promos to increase traffic • Advertising campaign to invest in brand recognition and equity Over 230 Victoria neighborhood stores acquired in 2011 are being integrated and rebranded into DIXY neighborhood network
10 Source: Company Data July 2012 Victoria Supermarkets Advantages Strong brand and expertise to complement the business model
Acquired in 2011, Victoria Supermarkets is now the second largest business after neighborhood stores, located mainly in Moscow and Kaliningrad and generating 11% of retail revenue with 22% growth Range of up to 25,000 SKUs successfully complemented by in-house production of up to 600 SKUs daily (meat and fish gastronomy, bakery, salads) Excellent in-store execution: special focus on layout and floor space ergonomics to increase average ticket High service level: “shop-in-shop” concept, parking, complementing services (laundries, pharmacies, etc.) Customer Loyalty program Successful locations: proximity to cinemas, cafes, and other places of interest to increase traffic Procurement and delivery have been centralized with DIXY to leverage on economies of scale
11 Source: Company data 1H 2012 Efficient and Centralized Supply Chain
Stores
Warehouse Own – 84% 3rd party – 16%
Suppliers Delivery to stores Fleet of 643 trucks
Operating 7 distribution centers in the regions of presence and the fleet of 643 trucks Diversified Supply Base Top 10 A new built-to-suit DC (c.47,000 sqm, supply for 450-500 stores) in Moscow suppliers region to be launched in November 2012 20% Centralized procurement and delivery across all store formats One of the industry highest centralization rate of 84%, and logistic service level of 92% Diversified base of 1,300 federal, regional and international suppliers Others GOLD ERP system designed by ALDATA to manage the entire logistic flow and 80% supply chain system
12 Source: Company data, 1H 2012 Content
Introduction 3
Strategy & Outlook 8
2Q & 1H 2012 Operational and Financial Review 14
Appendix 24
13 1H 2012 Achievements
184 organic openings gross in 1H 2012, almost doubled versus a year ago numbers Pro-forma1 selling space increased 22% in 1H 2012 DIXY Group Consolidated Revenues increased 81% in 1H 2012 DIXY Group Revenues increased pro-forma 21%, and LFL Sales grew 4.5% in 1H 2012 Products under DIXY Private Label single brand launched in Sept 2012 Gross Margin improved by 200 bp y-on-y to 28.5% in 2Q, and by 270 bp to 28.1% in1H
14 Source: Company data 1H 2012 1 Pro-forma statements include Victoria Group results from the beginning of FY 2011. Victoria Integration Status: Progress and Results
Over 230 Victoria neighbourhood stores under three different brands and over 20 supermarkets in Russia’s Central region and North-West regions acquired in 2011 Successful complementation of DIXY formats by strong supermarket brand Victoria • Victoria SM will operate under their brand , managing their assortment, pricing, and marketing Benefiting from locations synergy – expanding geographical presence without cannibalization Leverage on single purchasing strategy (Gross Margin improved by 270 bp in 1H 2012). Unification of assortment, pricing, promotions, store design and layout for neighbourhood stores: • In 2011, integrated 37 Victoria’s neighb’d stores into DIXY in St-Petersburg • Integrated 30 stores in Central region by September2012 • Being integrated 114 stores more, to be completed by November 2012 Centralization of operational structure for Victoria and DIXY Group in progress
Geographical Synergy Formats Synergy (# of Stores) (Revenue )
1,276 DIXY + DIXY + Victoria Victoria 93 9% +81% 13% +78% 353 715 DIXY DIXY 76 11% 197 3% 830 79%
442 86%
1H 11 1H 12 1H 11 1H 12
Central NW Urals Neigh. SM HM 15 Source: Company data 15 1H 2012: DIXY Stores Rebranding and Repositioning
Re-opened after refurbishment with new design 37 DIXY stores and 26 more are being refurbished by Sept 2012
Taking pictures welcomed Credit cards accepted 16 Source: Company data 1H 2012 16 1H 2012: Investment in DIXY Brand Equity
TV commercials to support “1000th store” opening DIXY brand advertising on bill-boards and public transport Sustainable promo campaigns to boost traffic and loyalty
DIXY LFL Sales growth 4.5% in Central region in 1H 2012 DIXY market share grew + 110 bp in food categories DIXY market share increased +180 bp in non-food Collecting “stamps” promo
DIXY ad on public transport TV campaign “Opening of 1000th Store” 17 Market share source: Nielsen, value, food Russian market, FM 2012 Nielsen value, non-food Russian market, AM 2012 17 Marketing Strategy: Private Labels New Design
DIXY private labels program includes over 300 SKUs under 40 brands across food and non- food product categories Contributes 10% to Company total retail revenue Offerings in organic food, the lowest price, and well-known brands quality “Efficiency Leader” annual award in Private Label Management in 2011 DIXY private label launched in Sept 2012, to unify high margin and high quality bestsellers under DIXY single brand
Food products launched Non-food products launched 18 Source: Company data 1H 2012 18 Operational and Financial Highlights: Q2 2012
Selling space and # of stores LFL Q2 2012 Revenue
(‘000 sqm, eop) 5,5% (RUBmm) 5,0% 5,2% 36 130 443 364 Traffic 21 189
Check (1,5)% (2,1)% (1,7)%
Q2 2011 Q2 2012 DIXY Victoria Total Q2 2011 Q2 2012
# of stores 971 1,276 Total 3.4% 3.3% 3.4%
Gross Profit EBITDA (RUBmm) (RUBmm) 10 291 2 080 1 510 5 623
Q2 2011 Q2 2012 Q2 2011 Q2 2012
% margin 26.5% 28.5% % margin 7.1% 5.8%
19 Source: Company data 1H 2012 Operational and Financial Highlights: 1H 2012
Selling space / LFL 1H2012 Revenue Number of stores (‘000 sqm, eop) LFL Traffic LFL Check (RUBmm) 5,1% 4,8% 5,0% 70 835 443 364 39 165
(0,6)% (0,2)% (0,5)%
DIXY Victoria Total 1H 2011 1H 2012 1H 2011 1H 2012 Total 4.4% 4.6% 4.5% # of stores 971 1,276
Gross Profit EBITDA (RUBmm) (RUBmm) 19 887 4 211
2 515 9 945
1H 2011 1H 2012 1H 2011 1H 2012
% margin 25.4% 28.1% % margin 6.4% 5.9%
20 Source: Company data 1H 2012 2012 Objectives
Expand the store network in the regions of presence 320 store openings net Integration and through roll-out of neighborhood stores Up to 150 integrated Victoria store rollout Continue integration/rebranding of acquired Victoria stores stores Refurbishment of existing DIXY neighborhood stores 100 refurbished DIXY stores
Boost top-line through store rollout program Top-line growth: 20% – 25% Focus on maintaining positive traffic trend Top-line growth and Maintaining ticket growth at levels close to inflation Profitability COGS improvement due to enhanced purchasing power and stronger product mix
Invest in new store openings, logistics, IT and maintenance of RUR 9.5 – 10 bln CAPEX program existing network
21 Source: Company data 1H 2012 Our Main Advantages
Leader in Historical focus on neighborhood stores, one of the most attractive segments of the Russian food retail market Neighborhood Store Acquisition of Victoria Group significantly contributed to DIXY Group’s successful neighborhood Concept format in key geographical markets
Combination of convenience and attractive value proposition of “local” store Excellent In-Store The assortment is optimised to customer’s preferences, flexible system of discounts on best-selling Experience products as a traffic driver
Selling space CAGR of c.28% vs. c.27% for peers over 2008-2011 Track Record of Strong Revenue CAGR of c.28% vs. c.24% for peers over 2008-2011 Growth EBITDA CAGR of c.32% vs. c.21% for peers over 2008-2011 50% expansion in selling area through acquisition of Victoria Group in June 2011
7 distribution centers with over 117 th. sqm of total space Own large fleet of 643 trucks under operations Efficient Supply Chain High level of supply centralization: 84% in 1H 2012 Increasing level of logistical service: 92% in June 2012
Experienced Experienced team of professionals with a strong track-record in the food retail industry Disciplined approach to acquisitions and demonstrated execution track record Management Team
22 Source: Company data 1H 2012 Content
Introduction 3
Strategy & Outlook 8
2Q & 1H 2012 Operational and Financial Review 14
Appendix 24
23 2Q 2012 Summary Consolidated P&L
in RUR million Consolidated Pro-forma 2Q 2012 2Q 2011 ∆ 2Q 2011 ∆ Total Revenue 36,130 21,189 70.5% 30,099 20.0% Retail Revenue 35,796 21,035 70.2% 29,803 20.1% Gross Profit 10,291 5,623 83.0% 8,638 19.1% Gross Margin, % 28.5% 26.5% 200 bp 28.7% (20 bp) SGNA 9,275 4,757 95.0% 7,424 24.9% SGNA, % of Sales 25.7% 22.4% 330 bp 24.7% 100 bp Operating Profit 1,016 866 17.3% 1,213 (16.2%) Operating Margin, % 2.8% 4.1% (130 bp) 4.0% (120 bp) Net Profit 145 386 (62.3%) 526 (72.3%) Net Profit Margin, % 0.4% 1.8% (140 bp) 1.7% (130 bp) EBITDA 2,080 1,510 37.8% 2,147 (3.1%) EBITDA Margin, % 5.8% 7.1% (130 bp) 7.1% (130 bp)
24 Source: Company data, 1H 2012 1H 2012 Summary Consolidated P&L
in RUR million Consolidated Pro-forma 1H 2012 1H 2011 ∆ 1H 2011 ∆ Total Revenue 70,835 39,165 80.9% 58,648 20.8% Retail Revenue 70,159 38,902 80.3% 58,073 20.8% Gross Profit 19,887 9,945 100.0% 15,961 24.6% Gross Margin, % 28.1% 25.4% 270 bp 27.2% 90 bp SGNA 17,645 8,534 106.8% 13,816 27.7% SGNA, % of Sales 24.9% 21.8% 310 bp 23.6% 130 bp Operating Profit 2,242 1,411 58.9% 2,145 4.5% Operating Margin, % 3.2% 3.6% (40 bp) 3.7% (50 bp) Net Profit 501 550 (8.9%) 851 (41.1%) Net Profit Margin, % 0.7% 1.4% (70 bp) 1.5% (80 bp) EBITDA 4,211 2,515 67.4% 3,857 9.2% EBITDA Margin, % 5.9% 6.4% (50 bp) 6.6% (70 bp) 25 Source: Company data, 1H 2012 DIXY Group Performance: Revenue by Banner
DIXY Group Victoria Group Total Revenue (RUR mln) (RUR mln) (RUR mln) 70 835
43 306 11 989 49 804 32 172 7 910 37 154 39 165 20 355 3 813 5 168 1 169 1 330 456 1 747 264 676
1H consolidated1H DIXY Megamart Minimart Kvartal/ Victoria Cash DIXY Victoria Non-retail Total Deshevo/Kopilka
43 306 11 989 70 835
58 648 32 172 7 910 49 804
37 154 forma - 20 355 20 919 3 813 5 168 pro 1 330 456
1 169 575 676
H 1 DIXY Megamart Minimart Kvartal/ Victoria Cash DIXY Victoria Non-retail Total Deshevo/Kopilka
22 351 36 130 5 876 16 689 25 751 3 933 21 189
19 288
10 045 2Q 1 978 2 691 621 709 236 1 747 154 334
DIXY Megamart Minimart Kvartal/ Victoria Cash DIXY Victoria Non-retail Total Deshevo/Kopilka
2011 2012
26 Source: Company data, 1H 2012 DIXY Group Performance: LFL Sales
DIXY Group Victoria Group Total
+11.1 +11.8
+9.5 4,6% +4.4 +4.6 +4.5 +3.3 7,8% +2.2 +1.2 4,96% 6,2% 4,5% 3,7% 3,5% 4,3% -3.6 5,1% 4,8% 5,0%
1H 2012 1H 3,7% (1,4%) (2,3%) (1,9%) (0,7%) (0,2%) (0,5%) (1,1%) -1,8% DIXY Megamart Minimart Kvartal Deshevo Victoria CASH DIXY VICTORIA TOTAL
+10.3 +10.1 +8.6 5,8% +4.2 +3.4 +3.3 +3.4 +2.3 8,7% +0.4 -2.0 5,1% 4,3% 4,3% 4,1% 5,4% 5,0% 5,5% 5,2% 2Q 2012 2Q 2,5% 3,4% (1,1%) (1,5%) (1,7%) 1,4% (3,6%) (4,4%) (2,1%) (1,9%) DIXY Megamart Minimart Kvartal Deshevo Victoria CASH DIXY VICTORIA TOTAL
+11.9 +13.7
+10.5 3,4% 6,8% +6.1 +5.7 +4.4 +4.1 +4.4 4,8% +5.4 -10.8 0,8% 4,2%
4,7% 8,2% 6,4% 3,1% 4,4% 5,4% 5,2% 5,7% 1Q 2012 1Q 1,0% 0,0% 0,7% 1,9% (0,3%) (11,4%) 0,3%
DIXY Megamart Minimart Kvartal Deshevo Victoria CASH DIXY VICTORIA TOTAL
LFL Traffic LFL Check 8.7% 7.4% 8.2%
27 Source: Company Data 1H 2012
(1.2)% (1.7)% (2.7)% Dixy Victoria Total Growing Financial Efficiency
EBITDA Bridge 1H 2011 – 1H 2012 Comments (RUR mln)
EBITDA 1H 2012 4 211 1 Substantial increase in asset value following Victoria acquisition, as well as rapid organic growth directly impacted D&A in 1H 2012
Other 67 2 SG&A growth was driven by personnel and lease expenses growth due to rapid organic growth in 1H 2012, complemented by Victoria
D & A growth 933 Group expenses. 1
3 Increase in cost of sales offset partially by increased purchasing SG & A growth (9,111) power and revenue growth, due to the organic store openings in 2 1H 2012, as well as Victoria stores COGS consolidation
Cost of sales growth (21,729) 3 4 Revenue boosted by 184 newly opened stores in 1H 2012, 255 Victoria stores acquired in mid-2011, and Group’s LFL sales Revenue growth 31 670 4 growth 4.5% in 1H 2012
EBITDA 1H 2011 2 515
28 Source: Company Data 1H 2012 Debt Portfolio
Net debt Net debt/EBITDA (RUBmm)
22 094 2,7x 18 918 2,4x 2,1x
7 782
2010 2011 1H2012 2010 2011 1H2012 pro-forma pro-forma Comments Comments
We increased our leverage across all debt facilities in 1H2012, including Our leverage increased pro-forma in 1H2012 to 2.7x Net Debt/EBITDA revolving credit lines, bridge loans, and bank loans, in order to re-finance (from 2.4x in 2011)
funds raised for the Victoria acquisition Our financial management practices aim to keep the Total Financial
More than 80% of the borrowings are long-term loans Debt/EBITDA ratio at a level lower than 3.5x
29 Source: Company Data 1H 2012 Investor Relations Contacts
Natalya Belyavskaya Head of Investor Relations DIXY Group of Companies Tel.: +7 495 223-3338 Fax: + 7 495 933-0259 E-mail: [email protected]
Ekaterina Kralkovskaya Financial Analyst DIXY Group of Companies Tel.: +7 495 223-3338 Fax: + 7 495 933-0259 E-mail: [email protected]
Investor Web-site: www.dixy.ru/en
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