DIXY Group Investor Presentation
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THESE MATERIALS DO NOT CONSTITUTE A PROSPECTUS OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, OR ANY OFFER TO UNDERWRITE OR OTHERWISE ACQUIRE ANY EQUITY OR OTHER SECURITIES OF THE COMPANY, NOR SHALL THEY OR ANY PART OF THEM NOR THE FACT OF THEIR DISTRIBUTION OR COMMUNICATION FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT, COMMITMENT OR INVESTMENT DECISION IN RELATION THERETO, NOR DOES IT CONSTITUTE A RECOMMENDATION REGARDING ANY SECURITIES OF THE COMPANY. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS GIVEN AS TO THE ACCURACY OF THE INFORMATION OR OPINIONS CONTAINED IN THESEMATERIALS AND NO LIABILITY IS ACCEPTED FOR ANY SUCH INFORMATION OR OPINIONS BY THE COMPANY OR ANY OF ITS AFFILIATES, DIRECTORS, MEMBERS, OFFICERS, EMPLOYEES, AGENTS OR ADVISERS.
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THESE MATERIALS INCLUDE FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY'S INTENTIONS, BELIEFS OR CURRENT EXPECTATIONS. FORWARD-LOOKING STATEMENTS INVOLVE ALL MATTERS THAT ARE NOT HISTORICAL FACT. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF WORDS INCLUDING “MAY”, “WILL”, “WOULD”,“SHOULD”, “EXPECT”, “INTEND”, “ESTIMATE”, “ANTICIPATE”, “PROJECT”, “BELIEVE”, “SEEK”, “PLAN”, “PREDICT”, “CONTINUE” AND SIMILAR EXPRESSIONS OR THEIR NEGATIVES. SUCH STATEMENTS ARE MADE ON THE BASIS OF ASSUMPTIONS AND EXPECTATIONS WHICH, ALTHOUGH THE COMPANY BELIEVES THEM TO BE REASONABLE AT THIS TIME, MAY PROVE TO BE ERRONEOUS.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND ASSUMPTIONS AND OTHER FACTORS THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS OF OPERATIONS, FINANCIAL CONDITION, LIQUIDITY, PERFORMANCE, PROSPECTS OR OPPORTUNITIES, AS WELL AS THOSE OF THE MARKETS IT SERVES OR INTENDS TO SERVE, TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR SUGGESTED BY, THESE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE THOSE DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO: CHANGING BUSINESS OR OTHER MARKET CONDITIONS, GENERAL ECONOMIC CONDITIONS IN RUSSIA, THE EUROPEAN UNION, THE UNITED STATES AND ELSEWHERE, AND THE COMPANY'S ABILITY TO RESPOND TO TRENDS IN ITS INDUSTRY. ADDITIONAL FACTORS COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY. THE COMPANY AND EACH OF ITS DIRECTORS, OFFICERS, EMPLOYEES AND ADVISORS EXPRESSLY DISCLAIM ANY OBLIGATION OR UNDERTAKING TO RELEASE ANY UPDATE OF OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION AND ANY CHANGE IN THE COMPANY’S EXPECTATIONS OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH THESE FORWARD LOOKING STATEMENTS ARE BASED EXCEPT AS REQUIRED BY APPLICABLE LAW OR REGULATION BY ATTENDING THIS FORWARD-BASED, REGULATION. PRESENTATION YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS.
2 DIXY Group Today 3 DIXY Group at Glance
Working since 1992
# 3 national food retailer
2,761 stores in 774 locations
> 60,000 employees
Revenue in 2015 – RUR 272 bln
Market capitalization – RUR 43 bln
4 Source: Company data, July 2016, Bloomberg for market capitalization data as of August 23, 2016 DIXY Group: Track Record of Growth
# of stores
646 1,119 1,499 1,799 2,195 2,708
+ 2,062 stores 272 x4.3 times 229 Revenue, RUB bln 181 147 102 64
2010 2011 2012 2013 2014 2015 5 Source: Company data, 2015 DIXY Group Regional Snapshot Sales Breakdown by Region 1,888 DIXY stores Moscow 50 Victoria stores 579 DIXY stores Urals Region 4 DCs 64 Victoria stores 3 DCs North - 9% 29% West St. Petersburg 22% Central
Northwestern federal district 69% Moscow 15%Other Moscow Central federal Nizhny Novgorod 26% district Central Sales Breakdown by Banner Volga federal district Yekaterinburg Megamart 6% Urals federal district Victoria 11% DIXY
83% 121 DIXY stores 21 DIXY stores 38 Megamart stores 1 DC
6 Source: Company data, Number of stores as of July 31, 2016, Sales breakdown as of 2Q 2016 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 2011 – Marketing turn-around of DIXY distributor major shareholder chain: new market positioning, 1996 – First MegaMart store Supply chain restructuring. New rebranding and differentiation strategy opened IT system Aldata GOLD (used by implantation starts 1999 – First DIXY retail store Tesco, Ahold, Carrefour and 2011 – DIXY Group acquires Victoria opened Casino) introduced Group and becomes the 3rd largest national food retailer by revenue, selling 2004 – Private equity funds Company centralization space and number of stores acquire stakes in DIXY Group accomplished 2012 – Victoria integration finalized, 2007 – IPO at RTS (raised 2010 – New marketing team DIXY chain re-branded $360 mln) develops DIXY chain re- positioning strategy 2014 – 2,000th store opened 2015 – record number of store openings 7 Source: Company data DIXY Neighborhood Division
83% of Group’s retail revenue
RUB 339 average ticket
2,700-4,800 SKUs
2,609 stores
292 m2 average selling space
8 Source: Company data, 2Q 2016; Number of stores as of July 31, 2016 Victoria Division
11% of Group’s retail revenue
RUB 304-525 average ticket
2,400-22,300 SKUs
114 stores
308 – 1,250 m2 average selling space
9 Source: Company data, 2Q 2016; Number of stores as of July 31, 2016 Megamart Division
6% of Group’s retail revenue
RUB 488-666 average ticket
6,200-21,000 SKUs
38 stores
800 – 2,575 m2 average selling space
Source: Company data, 2Q 2016; Number of stores as of July 31, 2016 Our Efficient and Centralized Supply Chain
Diversified base of federal, regional Operating 8 DCs in the regions and international suppliers of presence and own fleet of >1,000 trucks
GOLD ERP system designed by ALDATA to manage the entire logistic flow and supply chain system One of the industry highest Centralized procurement and delivery centralization rate of 91% in 2Q 2016 across all store formats 11 Source: Company data, 2Q 2016 July 2016 DIXY Group Organic Growth # Stores Selling Space ths. sq. m 2 708 2 761 +53 +11% 937 840
as of December 31, as of July 31, 2016 as of July 31, 2015 as of July 31, 2016 2015 12 Source: Company data, July 2016 DIXY Group Monthly Retail Revenue Growth in 7M 2016
o For the first 7M 2016 DIXY Group retail revenue growth was +20.3% o For 2Q 2016 retail revenue growth was +23.7%
24,6% 23,0% 23,5% 20,2%
16,2% 15,2% 14,7%
January February March 2016 April 2016 May 2016 June 2016 July 2016 2016 2016*
Source: Company data, July 2016 13 * Please note that there were 28 days in February 2015, compared to 29 days in February 2016. Not adjusted for the leap year effect retail revenue growth would be 18.5% Russian Food Retail Market 14 Russian Food Retail Market in Global Context o Russian is #4 and #9 largest food retail market in Europe and worldwide respectively
Russian Food Retail Market, $203 bln UK, $283 bln
Italy, $181 bln France, $262 bln
Germany, $212 bln Japan, $374 bln USA, $1,148 bln China, $2,077 bln India, $651 bln
Brazil, $230 bln
15 Source: Planet Retail Data, 2015 Russian Regional Market Snapshot
9% of population 27% of population 9% of foods retail market 35% of foods retail market
St. Petersburg o DIXY Group operates Northwestern federal district in 4 federal districts which account for Moscow 64% of population Central federal Nizhny Novgorod and 71% of the district Russian food retail market Volga federal district Yekaterinburg
Urals federal district
20% of population 8% of population 18% of foods retail market 9% of foods retail market
16 Source: Rosstat, 2015 Russian Food Retail Market o Russian food retail market is still fragmented o Top-10 players account < 25% of the market o Large opportunities for further consolidation
0,5% 0,5% 1% 0,5% 2% 7%
2% Other, ≈76% 2%
3% 6%
17 Source: Companies data, INFOline, 2015E Leaders of the Russian Food Retail Industry DIXY Group is #3 largest Russian food retail company in 2015
Number of stores Selling space Revenue stores 000 sq m RUB bln Magnit 9 968 Magnit 3 929 Magnit 910
Х5 7 020 Х5 3 333 Х5 809
DIXY Group 2 708 Auchan 1 020 Auchan 416
Maria-Ra 790 DIXY Group 908 DIXY Group 272
Monetka 768 Lenta 882 METRO 225
Intertorg 453 METRO 660 Lenta 253
Auchan 267 O'Key 593 O'Key 163
Lenta 172 Monetka 317 Monetka 70
O'Key 146 Maria-Ra 290 Maria-Ra 66
METRO 87 Intertorg 216 Intertorg 65 18 Note: Revenue ex. VAT, also revenue of Magnit stores excludes revenue of Magnit Cosmetic stores Source: Companies data, INFOLine, 2015 Leading Players Outperform the Market Growth o Russian food retail turnover grew 2.7 times in 8 years since 2007 o Leading players outperformed the market growth by 2-2.5 times, taking share from non-organized trade, traditional stores and smaller chains
Russian food retail turnover and revenue of leading food retailers in Russia in RUB bln
13,400
CAGR +13% +33% +25% +28% 2007-2015: 948 804 4,900 272 136 94 37
2007 2015 Magnit X5 DIXY Group Russian food retail turnover 19 Source: Companies data, Rosstat, 2015 Penetration of Modern Retail Format in Russia
o Growth of modern retail trade is the driver of the market growth
Dynamics of share of modern and non-modern retail trade, %
60% 59% 58% 57% 56% 54% 53% 52%
39% 41% 42% 43% 45% 46% 47% 48%
2008 2009 2010 2011 2012 2013 2014 2015
Modern trade formats Non-modern trade formats 20 Source: Planet Retail, 2015 Latest Macro Trends in Russia 21 Macro Factors Influenced Retail
o In 2015, food retail turnover index came negative for the fist time since 2009 o While the decline was even more significant than in 2009
13,7% 11,7%
6,5% 7,1% 6,3% 5,1% 3,6% 3,9% 3,4% 2,6% 2,7% 0,0%
-1,9% -5,1%
-9,0% -10,0%
2008 2009 2010 2011 2012 2013 2014 2015
Food retail turnover Retail turnover (total)
22 Source: Rosstat, 2015 Quarterly Russian Retail Turnover
o Russian retail continued it negative dynamics with -5.6% in 2Q16 o Food retail turnover went down by -5.4% in 2Q16
-4,7% -5,8% -5,4%- 5,6% -6,9%- 7,0%
-9,1% -9,5% -9,6% -9,9% -10,1%
-12,7% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Food retail turnover Retail turnover (total)
23 Source: Rosstat, 2015 – 2Q 2016 Consumer Environment in Russia
o In 2Q 2016, real salaries turned to positive territory o Food inflation in 2Q 2016 continued to slow down
7,7% 7,9% 25,0% 22,4% 5,7% 5,9% 4,7% 20,3% 3,3% 20,0% 18,0% 0,5% 15,8% 15,0% 16,2%15,8% 15,7% -0,6% 14,5% 10,0% 8,4% 7,4% 6,9% -8,5% 5,0% -9,0% -9,5% -9,8% 5,7% 1Q15 2Q15 3Q14 4Q15 1Q16 2Q16 0,0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Average monthly nominal salary CPI Food infation Average monthly real salary 24 Source: Rosstat, 2015 – 2Q 2016 2Q 2016 Operational Review 25 DIXY Group: 2Q 2016 Operational Highlights
14 stores opened net in 2Q 2016 and 50 stores opened net for 6M 2016;
Selling space grew by 13% YoY to 935,696 sq. m. as of June 30, 2016;
LFL sales grew by 9.8% for the Group and by 12.3% for DIXY division in 2Q 2016.
26 Source: Company data, 2Q 2016 2Q 2016 DIXY Group Organic Growth # Stores Selling Space ths. sq. m 2 708 2 758 +50 +13% 936 827
as of December 31, as of June 30, 2016 as of June 30, 2015 as of June 30, 2016 2015 27 Source: Company data, June, 30 2016 2Q and 6M 2016 DIXY Group Total Revenue Revenue 6M 2016 Revenue 2Q 2016
RUB bln RUB bln 84 158 +20% +24% 132 68
6M 2015 6M 2016 2Q 2015 2Q 2016
Source: Company data, 2Q and 1H 2016 28 * Please note that there were 28 days in February 2015, compared to 29 days in February 2016. The one-day difference resulted in +0.6% effect in Company’s retail revenue growth for the first six months of 2016. 2Q and 6M 2016 DIXY Group LFL Sales
2Q 2016 12,3% 7,7% 9,8% 6,6% 4,3% 3,0% 1,1% -0,1% -1,2% -3,0% -1,4% -1,6%
1H 2016
7,6% 3,3% 6,2% 4,1% 2,6% 2,7% 3,4% 1,0% 0,0%
-1,6% -1,0% -1,0%
DIXY Victoria Megamart DIXY Division Division Division Group
LFL sales Number of tickets Average basket 29 Source: Company data, 2Q and 1H 2016 DIXY Private Labels: “D”-Brand
320 SKUs in food and non-food categories
Quality is higher or equal to a leader in the product group
Price is lower vs. leading brands
Active promo and advertising
30 Source: Company data, 2Q 2016 DIXY Private Labels: Pervym Delom
183 SKUs in food and non-food categories
The lowest price on the shelf
Quality up to the standard
Cross-divisional private label
31 Source: Company data, 2Q 2016 DIXY Private Labels: Unique Trade Marks
Exclusive imported brands
Products with the emotional component
32 Source: Company data, 2Q 2016 DIXY Private Labels Program
2Q 2015 2Q 2016 3,2% 2,0% 4,9% 6,0% 7,5% 7,2%
16.3% -1.9% 14.4%
“D”-brand share in DIXY revenue Pervym Delom share in DIXY revenue Other private labels share in DIXY revenue
532 SKUs 584 SKUs
33 Source: Company data, 2Q 2016 2Q 2016 Financial Review 34 DIXY Group: 2Q and 1H 2016 P&L Summary
in RUB million 2Q 2016 2Q 2015 ∆ 1H 2016 1H 2015 ∆
Total Revenue 84,053 67,988 23.6% 158,173 131,619 20.2% Retail Revenue 83,511 67,510 23.7% 157,156 130,653 20.3% Gross Profit 23,424 20,126 16.4% 43,149 38,311 12.6% Gross Margin, % 27.9% 29.6% (170bp) 27.3% 29.1% (180bp) SG&A expenses 20,858 17,990 15.9% 41,163 35,092 17.3% SG&A, % of Sales 24.8% 26.5% (170bp) 26.0% 26.7% (70bp) Net Profit / (Loss) 1,071 947 13.1% (441) 807 na Net Profit Margin, % 1.3% 1.4% (10bp) na 0.6% na EBITDA 4,732 4,001 18.2% 6,254 6,810 (8.2%) EBITDA Margin, % 5.6% 5.9% (30bp) 4.0% 5.2% (120bp)
35 Source: Company data, 2Q and 1H 2016 DIXY Group: 1H 2016 Cash Flow Summary
in RUB million 1H 2016 1H 2015 ∆ Net Cash from/(Used in) Operating Activities 4,209 1,415 3.0x Net Cash from Operating Activities before Changes in WC 6,764 6,988 (3.2%) Changes in WC 116 (2,562) na Net Interest and Income Tax Paid (2,671) (3,011) (11.3%) Net Cash Used in Investing Activities (3,454) (7,218) (52.2%) Net Cash from / (Used in) Financing Activities (861) 4,574 na Net Increase/(Decrease) in Cash & Cash Equivalents (106) (1,230) na Cash and Cash Equivalents, EOP 2,815 1,520 85.2%
36 Source: Company data, 1H 2016 DIXY Group Debt Portfolio
Total Financial Debt
(RUB mln) +25.2% -2.3% 34 813 34 009 As of June 30, 2016, 64% of the 27 803 borrowings were long-term loans As of June 30, 2016, all our borrowings were nominated in Russian Rubles
2014 2015 as of June 30, 2016
Total Debt/EBITDA (times) 2,6x 2,6x As of June 30, 2016, our Total 1,7x Debt/EBITDA was 2.6x As of June 30, 2016, our Net Debt to EBITDA ratio was 2.4x
2014 2015 as of June 30, 2016
37 Source: Company data, 2Q 2016 Note: Total financial debt includes finance lease Investor web-site: www.dixygroup.com
Investor Relations DIXY Group PJSC Tel.: +7 495 223-3338 Fax: + 7 495 933-0259 38 E-mail: [email protected]