CORPORATE PRESENTATION 2018
InRetail Overview Peruvian multi-format retailer, also present in Ecuador, Colombia and Bolivia through the pharma business Leading positions in Peru in its 3 segments #1 supermarket chain #1 pharmacy chain and distributor in Peru, with strong presence in the Andean region #1 shopping center operator Controlled by Intercorp Peru, one of Peru s largest business groups 2
InRetail is part of one of Peru s leading business groups 100.0% 77.6% Education Float 1/ 28.8% 2/ BVL: INRETC1 1/ Includes 6.3% of Nexus 2/ On January 26, 2018, InRetail announced the acquisition of Quicorp for an equity value of US$583 million. Nexus holds a ~13% participation in InRetail Pharma. 3
Q1 18 Financial and Operational Snapshot Million Soles (S/ mm) Food Retail Pharma 1/ Shopping Malls Q1 18 figures (S/ mm; %) + + = Revenues % Revenues Contribution 1,234 45% 1,379 50% 121 4% 2,711 Adj. EBITDA 2/ % EBITDA Contribution 76 33% 78 34% 76 33% 226 Adj. EBITDA Margin 6.2% 5.7% 81.4% 8.3% Market Position 1 st 1 st 1 st 1 st # of Stores 286 2,186 21 - Total Sales Area / GLA (sqm) 329 K - 671 K - # of Employees 14,070 23,535 451 38,056 Countries 1/ Includes two months of Quicorp s operation and one-time expenses related to the acquisition. 2/ Shopping Malls EBITDA was adjusted for mark to market gains from valuation of investment properties. 4
KEY INVESTMENT HIGHLIGHTS 1 2 3 4 SIGNIFICANT UPSIDE POTENTIAL MARKET LEADERSHIP WITH CLEAR STRATEGY STRONG FINANCIAL RESULTS CAPEX 2018-2020 10
1 SIGNIFICANT UPSIDE POTENTIAL
Fastest growing economy boosts emerging middle class Real GDP Growth Population by Socio-Economic Category (2012-2017 CAGR) 3.6% ~1.9x 1.7% SEC Annual Income 2007 2017 % of total population Perú Latin America 1/ A $ 49,614 1/ Average Real GDP growth of Colombia, Brazil, Chile, Mexico Source: IMF World Economic Outlook GDP per capita B $ 25,433 8% 15% +14% (2017, US$ 000) C $ 14,987 18% 26% 15.1 14.5 Average: US$10.3 D $ 7,578 29% 24% 9.9 9.3 6.8 6.3 E $ 4,951 45% 36% -14% Source: APOYO Consultoría 2017 Chile Argentina Brazil Mexico Peru Colombia Source: IMF World Economic Outlook Estimates 7
Significant upside potential for modern retail Supermarkets Pharmacies Shopping Malls Penetration as a % of Total Sales - 2016 Sales of Retail Pharma per capita US$ - 2015 Malls per million people - 2015 Mean ex-peru: 58.8% ~2.4x Sales area per capita: Peru 0.23 sqm vs Mexico 0.40 sqm 52% 56% 59% 68% Mean ex-peru: 115.4 ~2.6x 208 Mean ex-peru: 3.9 ~1.7x 3.7 4.3 5.0 24% 69 88 97 2.3 2.6 50 Peru Brazil Ecuador Chile Mexico Peru Colombia Mexico Brazil Chile Peru Brazil Colombia Ecuador Chile Source: Euromonitor, 2016 Source: Business Monitor, 2015 Source: Accep 2016 8
Peru: Rising Retailing Market in Peaking Stage Global Retail Development Index Opportunities Opening Peaking Maturing Closing Peru top-ranked LatAm country in the GRDI 2017 Ranking Peru (2015) Brazil (2013) Mexico (2009) 1. India 6. Indonesia 9. Peru 10. Colombia 19. Paraguay 29. Brazil Brazil (2005) Chile (1998) Mexico (2003) Peru (2002) Growing middle class Consumers willing to explore organized formats Consumers seek organized formats and global brands Real estate affordable and available Consumer spending has expanded Sophisticated local competition Real estate difficult to secure Chile (2016) Mexico (2016) Consumers used to modern retail Higher discretionary spending High competition Real Estate expensive and not readily available Peru: Increase consumer spending, growing middle class and strong consumer confidence Free-trade agreements with strategic markets will keep investment and trade flows strong Hot spot for international retailers to invest in the apparel and specialty sector The market is showing signs of consolidation Source: ATKearney The 2017 Global Retail Development Index TM 9
2 MARKET LEADERSHIP WITH CLEAR STRATEGY
Largest nationwide footprint of premier retail locations Food Retail Pharmacies Shopping Malls 106 Spmkts 180 Mass 2,186 Stores 21 Malls (7) (1) (5) (2) (3) (1) (1) (15) (100) (11) (96) (73) (42) (137) (61) Piura (2) Chiclayo Trujillo Chimbote Cajamarca Huánuco Ucayali (73) (180) (3) (2) (2) (2) (1) (2) (1) (68) (36) (29) (13) (979) (4) (94) (82) (24) (65) (11) (136) (14) (8) (33) Lima (9) Huancayo Cusco Juliaca Arequipa Only modern shopping mall (32) First mover in 17 out of the 23 cities outside of Lima Total sales area (sqm): 329,169 62% of stores are owned 1/ Present in all of Peru s 24 departments 100% of stores are rented 45% in Lima / 55% in Provinces First mover in 6 out of the 12 cities Total GLA (sqm): 671,160 1/ Owned by Supermercados Peruanos or through a related party 11
Openings and SSS by Segment Openings Same Store Sales (SSS) Food Retail Sales Area ( 000 sqm) Food Retail 2017: 5.9% Mass Spmkts 306 316 319 327 329 295 299 298 299 297 7.9% 5.7% 3.9% 6.0% 4.7% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 N o Spmkts 106 N o Mass 70 107 101 106 125 107 161 106 180 Pharmacies N o Stores Pharmacies 2017: -3.6% 2,186 4.5% Mifarma Inkafarma 1,125 1,149 1,155 1,153 Q1 17 Q2 17 Q3 17 Q4 17 1,051 1,135 Q1 18-3.3% Q1 17-5.6% Q2 17-4.5% Q3 17-1.2% Q4 17 Q1 18 Shopping Malls GLA ( 000 sqm) Shopping Malls 2017: 2.6% 626 626 627 633 671 6.9% 3.1% 4.6% 1.3% 1.8% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 N o malls 19 19 19 19 21 Note/ Shopping Malls SSS includes anchor stores 12
Food Retail Segment Formats Differentiated price positioning through Every Day Low Price strategy Brand Sales area range (sqm) # of Stores Total / Provinces Revenues LTM Q1 18 S/4,735 MM Fastest growing chain with largest presence across Peru Secured access to landbank and Real Estate team to sustain growth 2,000 5,000 69 / 28 Compact Hypermarkets 78% Launched e-commerce platforms for Plaza Vea and Vivanda brands Ranked 1 st in Great Place to Work and 12 th among the most valuable brands in Peru (Brandz) 500 2,000 29 / 6 Supermarkets 12% 900 1,200 8 / 0 High-end 6% 150-200 180 / 0 Hard Discount 4% 13
Discount Model Low CAPEX, low cost, every day low price format to capture untapped demand and penetrate traditional trade 180 stores between 100 and 300 sqm in Lima Testing value proposition (assortment, price, store size, etc.) Ensuring cost structure through store productivity and efficient supply chain 14
Pharma Segment: Retail Every-Day-Low-Price strategy Every-day-low-price strategy focused on offering the best value proposition and being the #1 top of mind pharmacy chain in Peru Strategy targets a wider audience Discounts and promotions Targeted discounts to loyal customers. For example, 10% discounts on Mondays and 10% discount for people aged 50+ Supported by the successful Monedero del Ahorro loyalty program with over 7 million subscribers Focused on assisted sales Mixed formats: Assisted sales and drugstores Drugstore 21% Counter (1) 79% 1/ Assisted sales model 15
Pharma Segment: MDM Best-in-class distribution network Vertical integration with Pharmacy chains (% of sales) Leading pharmaceutical distributor in Peru with presence in other LatAm countries Vital link between manufacturers and healthcare providers Pharmacy chains 28% Other channels 72% of MDM sales are to alternative sales channels (1) Robust network density reaching +26k POS through all channels Partner of choice for leading pharma companies Brand Development CIPA 1 Access to market intelligence 2 Manufacturing capabilities 3 Instant access to own +2,200 pharmacies 4 Best-in-class distribution to other channels 1/ Includes government, independent pharmacies, private hospitals, wholesalers and others. 16
Shopping Malls Segment Shopping Malls Sales Sales (S/ millions) 2016 7,206 Nationwide premium portfolio of 21 locations, with 671k sqm of GLA 5,458 4,135 Preferred partner for local and international tenants: High tenant renewal rates and low concentration of renewal per year High occupancy levels despite recent important additions in GLA Secured access to landbank to sustain growth 2,580 2,173 2,167 Source: ACCEP 2017 Falabella includes Open Plaza and 60% of Mall Aventura Plaza Parque Arauco includes its malls and 50% of Mega Plaza 1/ 6 additional malls, 40% of Aventura Mall and 50% of Mega Plaza Occupancy Rates Otros 1/ Ranked 4 th in Great Place to Work for companies from 251 to 1,000 employees and 4 th among most valuable brands in Peru (Brandz) 92% 93% 94% 97% 97% 97% 95% 2012 2013 2014 2015 2016 2017 Q1 18 17
3 STRONG FINANCIAL RESULTS
Q1 18 CONSOLIDATED FINANCIAL RESULTS Million Soles (S/ mm) Highlights Revenues Double-digit growth in Revenues and Adjusted EBITDA mainly due to the acquisition of Quicorp at the end of January 7,273 +7.4% 7,810 8,607 Gross and EBITDA margins mainly impacted by the acquisition of Quicorp due to the incorporation of the MDM unit, that operates with lower margins 1,913 +41.7% 2,711 Net Income decreased, mainly due to one-time expenses related to the acquisition and to the prepayment of the InRetail Consumer bonds issued in 2014 Gross Margin Q1 17 Q1 18 2016 2017 LTM Q1 18 29.7% 28.8% 31.0% 30.7% 30.3% Adj. EBITDA Net Income 793 +4.0% 825 862 268 +6.7% 286 192 +19.8% 188 226 73 Q1 17 Q1 18 2016 2017 LTM Q1 18-21 Q1 17 Q1 18 2016 2017 LTM Q1 18 Margin 9.8% 8.3% 10.9% 10.6% 10.0% Margin 3.8% -0.8% 3.7% 3.7% 2.2% Note: Q1 18 consolidated figures include two months of Quicorp s operation and one-time expenses related to the acquisition. 19
Revenues FINANCIAL RESULTS BY FORMAT Million Soles (S/ mm) +9.7% +3.9% 4,241 4,652 4,735 108.3% +4.2% 2,624 2,734 3,451 458 476 486 7.2% 1,379 8.8% 1,151 1,234 662 112 121 Adj. EBITDA 1/ Gross Margin: Q1 17 Q1 18 2016 2017 LTM Q1 18 Q1 17 Q1 18 2016 2017 LTM Q1 18 Q1 17 Q1 18 2016 2017 LTM Q1 18 25.6% 25.3% 26.7% 26.4% 26.3% 32.1% 29.3% 32.7% 33.0% 31.7% 65.5% 67.6% 68.8% 67.0% 67.5% +11.8% +3.8% -4.5% 310 315 257 241 277 231 286 297 306 7.5% 71 76 52 50.8% 78 13.0% 67 76 Q1 17 Q1 18 2016 2017 LTM Q1 18 Q1 17 Q1 18 2016 2017 LTM Q1 18 Q1 17 Q1 18 2016 2017 LTM Q1 18 Margin: 6.1% 6.2% 6.5% 6.7% 6.7% 7.8% 5.7% 9.2% 8.4% 7.4% 79.3% 81.4% 82.1% 81.7% 85.6% 1/ InRetail Shopping Malls calculated as Net Rental Margin 20
CONSOLIDATED NET INCOME Million Soles (S/ mm) Net Income Net Income Breakdown +6.7% 268 286 73 37 192-102 73-21 Q1 17 Q1 18 2016 2017 LTM Q1 18 Net Margin 3.8% -0.8% 3.7% 3.7% 2.2% Net Income Q1 17 EBITDA Growth Higher Net Financial Expenses 0 Flat Mark to Market -18 Lower FX Gain -10 Higher D&A Flat Tax -21 Net Income Q1 18 Net Income excluding FX and mark-to-market +3.0% 252 260 178 59-23 Q1 17 Q1 18 2016 2017 LTM Q1 18 S/ 102 mm in higher financial expenses, explained by: S/ 52 mm in premiums related to the repurchase of the 2014 InRetail Consumer Bonds S/ 18 mm in interest expense from the bridge loan for the Quicorp acquisition S/ 12 mm in write-off of structuring costs related to 2014 InRetail Consumer Bonds S/ 20 mm in unwinding of 2015 Call Spreads and other financial expenses Net Margin 3.1% -0.9% 3.5% 3.3% 2.1% 21
CONSOLIDATED CAPEX AND FREE CASH FLOW Million Soles (S/ mm) Consolidated Capex Cash-Flow Breakdown 2017: S/ 541 mm 1,128 335 482-142 240 180 1/ 280 125-335 159 119 130 133-1,874 2,352 155 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Starting Cash Balance 2018 Operating Cash Flow CAPEX Quicorp Debt Acquisition Increase Nexus Equity Financial Expenses Other Non- Operating Investing Activities Ending Cash Balance Q1 18 Free Cash Flow LTM Q1 18: - S/ 274 mm 1/ Q1 18 CAPEX includes ~S/180 mm for the acquisition of Real Plaza Pucallpa and Estación Central, disclosed in previous earnings report. 22
CONSOLIDATED FINANCIAL DEBT Million Soles (S/ mm) Proforma Leverage (Net Debt / LTM Mar 18 EBITDA) 1 USD Exposure Net Debt / EBITDA: 4.3x Debt: ~ S/ 5.1 b Cash: ~ S/ 0.5 b Net Debt: ~ S/ 4.6 b 39% 42% 40% 45% Net Debt / EBITDA: 5.4x Net Debt / EBITDA: 0x 23% 23% 22% 6% 51% 38% 35% 38% Net Debt / EBITDA: 2.9x Net Debt / EBITDA: 4.5x Dec-15 Dec-16 Dec-17 Proforma Mar-18 Hedge USD PEN 1/ Proforma leverage calculated considering: (i) Net Debt to reflect the full prepayment of the bridge loan, new bond issuances and call spreads, and (ii) Normalized EBITDA for LTM Mar 18 which includes LTM EBITDA for Quicorp and excludes S/ 18 million of one-time expenses related to the acquisition of Quicorp. 23
4 CAPEX 2018-2020
CAPEX 2018-2020 2018 Key Investments Projected CAPEX of S/2 B for 2018-2020 Opening of +7,600 sqm of sales area Supermarkets Start operations of our new distribution center in 1H18 Finish construction and start operations of our new production facility and fresh food warehouse Continue expanding Mass Pharmacies Closure of 160 stores as part of a store optimization initiative post acquisition of Quicorp By Type of Investment Shopping Malls Start construction of Puruchuco mall (+120k sqm of GLA) ~+8k sqm of GLA from mall expansions Acquisition of Real Plaza Pucallpa and Estación Central (+37,483 sqm of GLA) 26
5 APPENDIX
Composition of Stores by Age Food Retail 9% 12% 6% 5% 10% 9% 11% 14% 8% 9% 6% 4% 10% 10% 10% 10% 9% 12% 14% 8% 9% 7% 4% 6% 5% 14% 11% 10% 7% 4% 6% 5% 5% 5% 3% 2% 4% 4% 2% 2% 5% 5% 7% 6% 4% 8% 10% 9% 10% 73% 72% 72% 70% 72% 72% 72% 75% 78% 77% 78% 83% 84% 85% 88% 90% 91% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Mature 2-3 years 1-2 years 0-1 years Pharmacies 18% 17% 16% 15% 14% 14% 12% 11% 11% 10% 12% 18% 15% 15% 14% 14% 13% 12% 11% 24% 23% 23% 16% 14% 13% 12% 20% 6% 8% 10% 17% 20% 20% 18% 19% 19% 16% 9% 9% 8% 10% 11% 10% 10% 9% 7% 6% 16% 13% 8% 11% 53% 52% 52% 49% 50% 52% 55% 60% 63% 65% 66% 62% 62% 63% 65% 69% 70% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Mature 2-3 years 1-2 years 0-1 years 28
Cash Cycle Food Retail 94 52 99 93 90 93 93 92 93 93 88 90 56 59 52 59 54 59 52 61 57 60 99 86 53 55 91 61 105 99 98 73 59 62 4 4 2 3 2 3 2 3 1 1 1 3 1 1 3 4 4 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18-38 -39-32 -35-31 -36-31 -39-30 -30-29 -43-29 -30-29 -35-31 Days Acc Payables Inventory Turnover Days Acc Receivables Cycle Pharmacies 116 126 107 104 112 112 116 120 112 111 116 125 110 121 105 108 141 103 103 87 82 81 78 83 88 84 83 88 95 84 89 77 72 3 4 4 3 3 3 3 4 3 4 4 4 3 3 3 4 90 35 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18-10 -18-17 -19-27 -32-30 -27-25 -24-24 -26-23 -16-29 -24-32 Days Acc Payables Inventory Turnover Days Acc Receivables Cycle 29
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For more information contact: ir@inretail.pe www.inretail.pe