FY 2017 IFRS Financial Results Investor presentation. 12 March, 2018

Transcription

1 FY 017 IFRS Financial Results Investor presentation 1 March, 018

2 Forward looking statements This presentation includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, expected, plan, goal, believe, or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Lenta's control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. Any forward-looking statements made by or on behalf of Lenta speak only as at the date of this presentation. Save as required by any applicable laws or regulations, Lenta undertakes no obligation publicly to release the results of any revisions to any forwardlooking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

3 017 Highlights Total sales growth in 017 of 19.%, reaching Rub 365.bn LFL sales growth in 017 of 0.9% (incl. (1.4%) LFL traffic and.3% LFL average ticket growth) 40 new hypermarkets and 49 new supermarkets opened in 017 meeting the guidance Total selling space of 1,38,111 sqm as of 31 December 017 (0.6% y-o-y growth) Adjusted EBITDA of RUB 35.5bn, up 11.8% with a margin of 9.7% Net Profit of RUB 13.3bn, up 18.4% with a margin of 3.6% 3

4 Margins and costs Gross margin (0.7 p.p).1% 1.4% 016 Change 017 Gross margin reduced 70bps reflecting: Improved supplier terms offset by price investments linked to higher promo share and significant negative one-off accounting effect on margins as a result of new Trade Law Reduced supply chain cost by 0bps to 1.0% of sales due to further improvement of average distance, higher centralization ratio and increased share of own fleet plus minor positive one-off accounting effect on costs as a result of the new Trade Law Higher efficiency of in-store production, resulting in 19bps of own production result improvement Adjusted 1 SG&A as % of sales Adjusted EBITDA margin 10.4% 0.1 p.p 11.4% 11.4% 11.5% 016 Change 017 (0.65 p.p) 9.7% 9.7% 016 Change 017 (0.0 p.p) Net margin 3.7% 3.6% 3.6% 016 Change 017 Adjusted SG&A as % of sales remained almost flat: Labor costs improved 1bps due mainly to higher productivity in the LFL hypermarkets combined with increase in ratio of store staff to management positions which more than offset indexation of salaries in 4Q 017 Increase in utility costs (+4bps) and other costs (+14bps) related to high number of young stores with relatively lower sales densities and tariff increases Lower professional fees due to less consulting and other expenses. Marketing costs almost flat. Adjusted EBITDA grew 11.8% y-o-y: Adjusted EBITDA margin decreased 65bps to 9.7% primarily driven by lower gross margin Rent expenses up 3bps: record high share of new rented space (54%) and higher proportion of supermarkets Net profit increased 18.4% while net income margin decreased slightly to 3.6%: D&A of.7% as % of sales up 14bps due to 0.6% selling space growth and own fleet extension Effective tax rate of 1.6% driven by a positive one-off effect - mainly attributable to recognition of tax loss carry forward of the Kesko entities acquired in 016 (~Rub 1.bn) Net interest expenses up 13.7% as lower cost of debt (16bps reduction y- o-y) was offset by higher average borrowings (1) Adjusted SG&A is SG&A before rent paid on land, equipment and premises leases, depreciation and one-off non-operating costs () Adjusted EBITDA is reported EBITDA adjusted for non-recurring one-off items such as changes in accounting estimates and one-off non-operating costs and income 4

5 SG&A dynamics SG&A bridge % of total sales 15.16% (1bps) (9bps) 016 Personnel Professional fees 1bps 4bps 14.94% 14.95% 14.96% 14bps 15.00% 3bps 15.14% 14bps 15.18% 15.3% 1 Marketing Utilities Other Rent D&A 017 SG&A costs as % of sales increased by 15bps driven by: Labor costs down 1bps y-o-y: higher efficiency in LFL stores offsetting salary increases in Q4 017 Lower professional fees (-9bps) Marketing cost almost flat (+1bps) Higher utility costs (+4bps) and other costs (+14bps) related to high number of young stores with low sales densities and tariff increases Rent expenses up (+3bps) to 1.%: record high share of rented new selling space in 017 (54%) Higher D&A (+14bps) due to 0.6% selling space growth and own fleet extension Cost per FTE and Sales per FTE development Share of rented space and selling space growth % % Cost per FTE, RUB k Sales per FTE, RUB m (1) Other includes cleaning, repairs and maintenance, taxes other than income tax, security services, pre-opening costs, etc. () FTE full time equivalent XX XX +0.7% Number of FTE per hypermarket Cost per FTE growth, % 37.3% 38.7% 38.6% 5.8%.8% 9.9% 7.1% 0.6% 4% 18% 19% 0% 19% 15% 17% 11% 76% 8% 81% 81% 80% 89% 85% 83% 1H'014 H'014 1H'015 H'015 1H'016 H'016 1H'017 H'017 Rented Owned Rented Owned X.X% Selling space growth 5

6 Capex Capex in 017 significantly lower than in 016 (-49.7%): Slower organic expansion combined with relatively low cost acquisitions Significantly higher share of new rented space (54% in 017 vs. 15% in 016) and proportion of new supermarket space (17% in 017 vs. 5% in 016) in total added space Lower pre-investments in land and store construction for future pipeline during 017 than in previous years More efficient construction cycle allowed shifting some investments into new stores from H017 into 1H018 Total investments in land acquisition and construction of hypermarkets and supermarkets of 80% of total capex Capex funded primarily by operating cash flow and to a lesser extent by debt CAPEX breakdown 017 vs. 016 RUB bn Land Hypermarkets opened in the previous year Hypermarkets opened in the current year Hypermarkets to be opened in next years CAPEX dynamics RUB bn Supermarkets Supply Chain IT and Other

7 Efficient supply chain development Evolution of total DC space, k sqm Current capacity for 50+ hypermarkets and 50+ supermarkets St. Petersburg Moscow Togliatti Ekaterinburg Rostov-on-Don DCs opened before 015 DC opened in 015 DC 1 opened in 016 Novosibirsk % y-o-y reduction in average distance, km/pallet Stable centralization ratio 1.6% 1.61% 1.4% 1.7% 1.1% 1.6% 0.91% 1.14% % 40.9% 4.9% 48.6% 48.7% 5.4% 53.6% 53.7% 1H'014 H'014 1H'015 H'015 1H'016 H'016 1H'017 H'017 1H'014 H'014 1H'015 H'015 1H'016 H'016 1H'017 H'017 XX% Supply chain costs as % of sales (1) Owned dedicated supermarket DC () Percentage of goods destined for stores (measured by the inbound value of goods received by the store) that are shipped via Lenta s DCs 7

8 Debt portfolio as of 31 st of December 017 Debt mix 1.8% 10.3% 1.6% 17.9% 13.5% Net Debt and dynamics leverage Net debt, Rub bn 0.7% 36.7% Bonds Net debt/adjusted EBITDA Lease adjusted Net debt/adjusted EBITDAR LT Long-term debt at fixed at rate fixed rate Long-term at floating floating rates ratesswapped into into fixed fixed rates rates dsaf Long-term at floating floating rates rateshedged hedged LT Long-term debt at floating floating rate unhedged ratesunhedged Short-term debt Cash Cash and and cash cash equivalents equivalents Adjusted EBITDA/Net interest Fixed charge cover 9.8 Comments Net debt of Rub 9.8bn (total debt of Rub 107.1bn with Rub 14.3bn cash) 8.% of debt is long-term 80.3% of debt is at fixed rate or hedged with only 19.7% of debt exposed to interest rate increase (but as a result of hedging structure, 9.9% of debt would benefit from any reduction in interest rates) New long-term loan agreements signed with Sberbank (Rub 10.0bn) and VTB (Rub 5.0bn) New revolving credit line signed with MKB (Rub 5.0bn) New bond issue BO-001P-01 (Rub 5.0bn) was placed Total undrawn amount of loans of Rub 61.6bn, of which Rub 11.5bn longterm Rub 47.0bn of approved credit limits not yet transferred into loan agreements Average debt maturity of.8 months Average effective cost of debt in 4Q017 of 9.7% p.a. Average effective cost of debt in 017 of 10.3% (16 bps down y-o-y) Average effective cost of debt in 1Q018 is projected at 9.1% Maturity profile Rub bn 43.5 Bonds Short-term loans Long-term loans.4x 1.9x 3.0x.6x 3.3x 3.4x 3.x 3.4x.8x.8x.6x.7x December December December (1) Lease adjusted net debt calculated as net debt plus operating leases multiplied by capitalization rate of 8.0x in accordance with credit rating agencies approach () Fixed charge cover defined as EBITDAR divided by (net interest + rent payments) (3) Bond issues of Rub 10bn (10 year maturity with.5 year and 3.0 year put option) and of Rub 7bn (7 year maturity with.5 year put option) shown with maturity on date of put option 8

9 Guidance for 018 Plan to open about 0 new hypermarkets and about 50 new supermarkets Full year capital expenditures of ~RUB 30-35bn Organic growth remains the core of Lenta s expansion strategy, but plan provides flexibility to pursue value accretive acquisition opportunities if these appear on the market 9

10 Appendix

11 Established corporate governance practices Shareholder structure Board of Directors Free Float (1) 57.5% TPG Group 34.0% EBRD 7.4% Directors and Management 1.1% Position Name Cat. Director since Committees Audit Nomination Remuneration Capex Chairman John Oliver TPG 009 Sen. INED Steven Johnson INED 010 C C Director Michael Lynch Bell INED 013 C Director Anton Artemyev INED 013 Director Dmitry Shvets TPG 009 C Director Steven Hellman TPG 017 Director Martin Elling EBRD 011 Director Jan Dunning CEO 013 Director Jago Lemmens CFO 013 Committee member C Chairman of committee (1) Company estimate 11

12 Market inflation and income trends Real GDP dynamics in CPI dynamics in Quarterly growth y-o-y, % 0.3% 0.5% -0.4% -0.5% -0.4% -1.9% -.7% -3.4% -3.%.5% 1.8% 1.% 1 9.8% 9.% Monthly growth y-o-y, % 8.1% 7.3% 7.5% 7.% 7.3% 7.3% 6.4% 5.% 5.3% 5.6% 6.5% 6.5% 6.% 6.9% 6.4% 6.1% 5.8% 5.4% 5.0% 4.8% 4.6% 4.1% 4.3% 4.1% 5.9% 5.7% 5.% 4.6% 4.% 3.7% 3.6% 3.5% 4.4% 3.9% 3.8% 3.9% 3.3% 3.0%.7%.5%.5%.%.6%.0% 1.6% 1.1% 1.1% 0.7% Real CPI CPI food Real disposable income and wage in Nominal and real food retail sales dynamics in % -6.0% Monthly growth y-o-y, % 5.8% 6.% 6.% 1.5%.7% 1.9%.1%.8% 3.1% 3.8% 3.8% 5.4% 3.0% 4.3%.7%.3% 1.0% 1.4% 0.4% 1.0% 0.8% 0.6% 0.6% -1.1% -3.7% -0.5% -.6% -5.0% -4.4% -5.9% -6.5% -6.% -7.3% -8.0% -9.9% 8.8% -3.8% -4.% -7.8% -0.6% -0.1% -3.9% -0.8% -0.7% -0.1% 0.0% -1.6% -1.4% 4.6% 4.6% Monthly growth y-o-y, % 1.7%.0% 1.1%.3% 3.3% 3.3% 3.6%.1%.% 0.0%.5% 1.1% -3.4% -4.0% -3.4% -4.7% -4.7% -4.5% -4.% -5.0% -5.3% -4.8% -5.1% -5.6% -5.9% -6.0% 3.5% 4.3% 4.6% 4.8% 6.7% 5.% 5.6% 5.% 4.8% 4.1% 3.7% 3.7% 3.1% 3.4%.%.% 1.7% -0.1% 0.3% -0.6% -0.4% -1.5% Source: Rosstat (1) - Company s estimation Real wages Real income Nominal Real 1

13 BUSINESS GEOGRAPHY NUMBER OF STORES Murmansk As at One store More than one store Stores opened in 017 New city entered in 017 Cities with supermarkets presence St. Petersburg and region 36 Hyper- markets 6 Petrozavodsk Supermarkets Moscow and region 4 45 Hypermarkets Supermarkets Regions 17 9 Hypermarkets Supermarkets 3 Hypermarkets across 84 cities in Russia 100 Supermarkets in St. Petersburg, Moscow, Novosibirsk, Yekaterinburg and Central region Pskov Cherepovets Syktyvkar Veliky 3 Vologda Novgorod Khanty- Yaroslavl Mansiysk Tver 4 Kostroma Ivanovo 3 Nizhny Smolensk Obninsk Novgorod Yoshkar Perm Vladimir Ola 4 Izhevsk Nizhny Tagil Kaluga Cheboksary Tobolsk Nizhnekamsk Tula 3 Ryazan 4 Kazan Ekaterinburg Bryansk Naberezhnye Chelny 4 5 Tyumen Orel Lipetsk Saransk Ulyanovsk Almetyevsk Kamensk-Uralsky Dimitrovgrad 4 Ufa Penza 6 Chelyabinsk Kursk Togliatti Omsk 3 Samara 6 Belgorod Voronezh 3 Sterlitamak Saratov Balakovo Magnitogorsk Engels Volzhsky Volgograd 5 Novoshakhtinsk 4 Orenburg Orsk Taganrog Shakhty 4 Novocherkassk Rostov-na-Donu Krasnodar 3 Novorossiysk Stavropol Astrakhan Cherkessk Armavir Zheleznovodsk Surgut Novosibirsk 77 Barnaul 3 RUSSIA 3 Tomsk Yurga 5 Krasnoyarsk Achinsk 3 Kemerovo Prokopievsk Bratsk 5 Novokuznetsk Biysk Irkutsk Grozny

14 Appendix Quarterly operational data 1Q'16 Q'16 3Q'16 4Q'16 FY'16 1Q'17 Q'17 3Q'17 4Q'17 FY'17 Sales total, Rub bn Total sales growth.1% 1.8% 0.% 0.9% 1.% 17.% 16.3% 18.7% 3.4% 19.% Hypermarkets Supermarkets Number of stores Hypermarkets Supermarkets Selling space, K sqm ,146 1,146 1,167 1,173 1,03 1,38 1,38 Hypermarkets ,100 1,100 1,119 1,119 1,144 1,98 1,98 Supermarkets LFL Sales growth 5.6% 4.9% 4.3% 1.7% 3.9% -1.7% -.0% 0.7% 5.% 0.9% Hypermarkets 5.5% 4.9% 4.3% 1.6% 3.9% -1.8% -.1% 0.5% 5.4% 0.8% Supermarkets 7.9% 3.5% 4.4% 6.1% 5.5% 0.9% 0.4% 5.0% 1.4% 1.9% LFL Traffic growth 3.0% 1.4% 0.1% -3.9% -0.1% -.0% -.9% -1.5% 0.6% -1.4% Hypermarkets.8% 1.3% 0.0% -4.% -0.% -.% -.8% -1.7% 0.9% -1.4% Supermarkets 5.%.7% 1.0% -0.7% 1.9% 0.% -3.4% 0.6% -1.7% -1.1% LFL Ticket growth.5% 3.4% 4.% 5.9% 4.0% 0.3% 0.9%.% 4.6%.3% Hypermarkets.6% 3.6% 4.% 6.0% 4.1% 0.3% 0.8%.3% 4.5%.% Supermarkets.5% 0.8% 3.4% 6.9% 3.5% 0.7% 4.0% 4.4% 3.% 3.1% 14

15 Profit & loss statement RUB m YoY growth Sales 306,35 365, % Cost of goods sold (38,584) (86,94) 0.3% Gross profit 67,768 78, % Gross margin, %.1% 1.4% (0.7)p.p SG&A (46,443) (55,918) 0.4% Other income / (expense),370 3, % Adj. EBITDA 31,759 35, % Adj. EBITDA margin, % 10.4% 9.7% (0.65)p.p D&A (7,695) (9,691) 6.0% Adj. EBIT 4,065 5,803 7.% Adj. EBIT margin, % 7.9% 7.1% (0.8)p.p Net finance costs (9,33) (10,497) 13.7% Other non-operating income / (expenses) % Profit before tax 14,553 15,17 4.3% PBT margin, % 4.8% 4.% (0.6)p.p Income tax (3,351) (1,908) (43.1%) Effective tax rate, % 3.0% 1.6% (10.4)p.p Net income 11,0 13, % Net margin, % 3.7% 3.6% (0.0)p.p 15

16 Balance sheet RUB m 31 December December 017 Property, plant and equipment 147,81 170,308 Other non-current assets 13,761 7,937 Inventories 7,491 36,933 Trade and other receivables 17,036 10,957 Cash and cash equivalents 13,038 14,30 Advances paid,670,86 Other current assets 4,36 3,430 TOTAL ASSETS 6,170 46,731 Equity 58,369 71,787 Long-term borrowings 66,956 6,194 Other long-term liabilities 7,36 8,387 Trade and other payables 56,17 57,60 Short-term borrowings and short-term portion of longterm borrowings 35,45 44,888 Other short-term liabilities,066,14 TOTAL LIABILITIES and EQUITY 6,170 46,731 Net debt / Adjusted EBITDA.8x.6x 16

17 Cash flow statement RUB m Full year ended 31 December 016 Full year ended 31 December 017 YoY growth Profit before income tax 14,553 15,17 4.3% Cash from operating activities before movements in working capital 3,578 35, % Movements in working capital (4,668) (1,105) (76.3%) Cash from operating activities 7,910 34, % Net interest (7,90) (10,380) 31.4% Income tax (89) (709) 145.1% Net cash generated from operating activities 19,719 3, % Net cash used in investing activities (54,57) (7,75) (49.7%) Net cash generated from financing activities 5,10 4,795 (80.9%) Net increase/(decrease) in cash and cash equivalents (9,418) 1,64 - Cash and cash equivalents at the end of the period 13,038 14,30 9.7% 17

18 Albert Avetikov Director for Investor Relations Dmitry Kovalenko Investor Relations Manager 11 Savushkina str. St. Petersburg, Russia 18