Detskiy Mir PAO — Detsky Mir — Investor Presentation (September 2018)
34 slides from Detskiy Mir PAO's investor presentation, September 2018
Slide 1: Investor Presentation
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Slide 2: Disclaimer
Oede8@ Disclaimer Detsxy MirR THIS DOCUMENT IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES Certain information in this document is forward-looking, and reflect Detsky Mir’s current expectations and projections about future events, which reflect vari
Slide 3: Our Investment Story; Recent Financial Performance
Our Investment Story Recent Financial Performance 6 68 Detsxy MirR
Slide 4: Overview and Key Updates
6 ef Detsky Mir o Overview and Key Updates
Slide 5: Russia's Children Goods Retail Market Leader
Russia’s Children Goods Retail Market Leader With Strong Growth and Shareholder Returns Key Facts 6 68 Detsxy MirR Strong Operating and Financial Results? Detsky Mir is the undisputed #1 player in the specialized children’s goods market in Russia “Detsky Mir” is an iconic brand with 99% prompted awa
Slide 6: Private Labels and Key 2018 Business Initiatives
6 ef Detsky Mir = Growing private labels + direct imports share across our four main Share of Private Labels & Direct Imports in Sales by Category categories 1H17 1W18 ™ Share in total revenue increased from 31.7% to 34.1% in 1H'17 /1H'18 TESTI = Main focus on toys as our key margin- and traffic-dri
Slide 7: Our Investment Story
6 ef Detsky Mir & Our Investment Story
Slide 8: Detsky Mir - Leading the Solid Russian Children's Goods Retailing Sector
4 Detsky Mir - Leading the Solid Russian Children's ®8O®@ . Goods Retailing Sector Detsky Mir Experienced management team with well- #1 player ina large, Fragmented market Iconic category- defining brand with attractive multi- category customer proposition Sustainable asset- light business model est
Slide 9: Solid Fundamentals
Solid Fundamentals Sizeable Children’s Population in Russia #1 Player in a Large, Fragmented Market with 6 68 Detsky Mir Russian Children’s Goods Market Continues Its Steady Growth Number of Children Under 12 in Russia (m) 1: 2.8% CAGR 2013 - 2017: 2.8 202 208 217 222 226 22.8 230 23.2 231 CAGR 2017
Slide 10: Iconic Category-Defining Brand with Attractive Multi-Category Customer Proposition
-Iconic Category-Defining Brand with Attractive eese Multi-Category Customer Proposition Detsky Mir Leading Customer Proposition Bigger, Better and More Recognizable Than the Competition Stores in Total Number of Stores NapeEaIO Moscow and Senet QS Poll: Unaided Brand Awareness (H1 2018) eee (H12018
Slide 11: Four-Pillar Growth Strategy: Taking over Whitespace
Well-Defined Four-Pillar Growth Strategy Detsky Mir @ Taking over Whitespace in Large and Small Cities, as Well as International Markets Number of Stores (incl. ELC) Visible Expansion Pipeline GB OM stores 120) Cities with no DM Presence (50k -100k inhabitants) G@) Malls identified as priority locat
Slide 12: Four-Pillar Growth Strategy: e-Commerce Platform
Well-Defined Four-Pillar Growth Strategy Detsky Mir ® Continuous Development of Our e-Commerce Platform... Key Achievements in 2017 7 624% 1118 vs 17, ® New Composite Customer Service Level KPI introduced for 85% Free t each delivery channel and call center ® Increased focus on UI/UX - full redesign
Slide 13: B
B 180 10 9 160 8 140 7 120 6 100 5 80 4 60 3 40 2 20 1 0 0
Slide 14: Four-Pillar Growth Strategy: Pricing and Merchandising
Well-Defined Four-Pillar Growth Strategy 6 ef Detsxy MirR Competitive Pricing and Effective Merchandising with Focus on Traffic Generating Categories Drive Strong LFL Sales Growth and Growing Gross Profit per sqm Competitive Pricing Effective Marketing and Merchandising ¥ Medium to medium-low prices
Slide 15: Four-Pillar Growth Strategy: Execution Excellence
Well-Defined Four-Pillar Growth Strategy Detsky Mir ®> Focus on Execution Excellence to Achieve Superior Operating Margins H 1 Improvement of 330bps in adj. EBITDA’ margin since 2013 driven by: Adjusted EBITDA! (RUBm) ¥ Store operation improvements v — Optimization of IT platforms and personnel vy —
Slide 16: Expansion Platform Geared Up to Future Growth
Expansion Platform Geared Up to Future Growth eese Detsky Mir Strong Infrastructure Backbone Store Management and Rollout Distribution & Logistics IT Infrastructure = Strict investment hurdles For store openings: = Well-established import trade competencies and in- = Set-up SAP system manages on-sto
Slide 17: A C B
A C ̶ B D Detsky Mir Clicks Poya Lojas Renner LPP CCC Raia Drogasil B&M Liverpool XXL X5 Magnit Lenta Five Below Children's Carters Jumbo Baby Bunting Mothercare place High Performance Specialty Retailers Russian Food Retailers Children’s Goods Retailers
Slide 18: Experienced Management Team With Well-Established Governance
Experienced Management Team With Well- eo ef ; Established Governance Detsky Mir Highly Experienced Management... ...With a Strong Track Record... aa & 9 y Management 2 nw i] b ul ar Team Vladimir Anna Farid Pavel Se 103 100 = 104 Chirakhov Garmanova Kamalov Pischikov at ! 56 Chief Executive Chief F
Slide 19: Recent Financial Performance
oS Recent Financial Performance 6 ef Detsky Mir
Slide 20: Continued Solid Top-Line Growth
Continued Solid Top-Line Growth 6 68 Detsxy MirR Total Revenue (RUBm) Like For Like Growth! 44% __ tt 61% | pa 5.6% . 1 + 15% ' 42,096 48,116 i ! 7 1 , 9 __— 10.726] 2.9% [Bers 8.9% 24,096 | i 21,035 ’ 2.6% 1 m 3.09, 5.4% 2.6% 1 -3.7%| 3.0% ! 1 1 Q2'17 Q2 18 ' H1'17 H1'18 Q2'17 Q218 H117 H1'18 m™ Nu
Slide 21: Growing Profitability
6008 Growing Profitability Detsxy MirR Growing Gross Profit Personnel per Store and Rent Costs Reductions 15% 7 7 10.9 1 1 15,536 im 9.9 | 13,771 34.7% 35.0% : 19 —a 1 8,430 ' 7,308 ' 18 | L 1 1 1 Q2'17 Q2'18 j H1'17 H118 H1'17 H118 lm Gross Profit (RUB mn) == Gross Profit Margin (%) mmm Personnel p
Slide 22: Strong Cash Flow Conversion
Strong Cash Flow Conversion Comments 6 ef Detsxy MirR ™ Cash conversion (EBITDA-capex/EBITDA) remains stable at very high levels with improvement in ROIC LTM m Increase in NWC significantly affected the decline in the Operating Cash Flow due to the seasonality of the business ™ Q4 is the highest sal
Slide 23: Conservative Financial Policy and Stable Leverage
6008 Conservative Financial Policy Detsxy MirR and Stable Leverage Comments Leverage’? dynamics = Commitment to a conservative financial policy = Total debt - RUB 19.7bn - Fully RUB denominated debt to match RUB revenue — Relationships with multiple Russian and international banks = Leverage’? as of
Slide 24: Sustainably High Returns to Shareholders
Sustainably High Returns to Shareholders Comments 6 ef Detsxy MirR Adjusted Net Income (RUBm)! = Asset-light cash generative model underpinning significant dividend paying capacity - Dividends as major differentiator from the majority of Russian high- growth food retailers - Ability to consistently
Slide 25: 7.2% LFL growth, outperforming the market
7.2% LFL growth, Single-digit growth, outperforming the outperforming the market market
Slide 26: Appendix
(> 6 69 Detsxy Mir Appendix # | / — 7 / ? 7 fig Ye
Slide 27: Top Management Compensation Structure
Top Management Compensation Structure Detsky Mir Overview Annual Compensation Structure Feo _— ee Fixed 50% 50% - 80% 70% - 85% Total 50% 20% - 50% 15% - 30% Variable incl. Financial’ 25% 6% -17% 3% -9% Incl. Functional’? 25% 14% -33% 10.5% - 21% Last LTI Programme i New Equity-Based Compensation Pr
Slide 28: H1 2018 Key Highlights
yt . Store openings 251 new Detsky branded stores opened ’ in H1 2018 (+16%YoY of selling space) Most of new stores will be opened in H2 Like-for-like? growth = 14.3% total revenue growth in H1 2018 5.6% LFL? sales growth in H1 2018 with 8.9% LFL? traffic growth Profitabil Adj. EBITDA‘ growth of 32,
Slide 29: LFL Traffic Growth, LFL Ticket Growth
1 LFL Traffic Growth LFL Ticket Growth 2
Slide 30: Why Detsky Mir Is Very Different from the Food Retail
Why Detsky Mir Is Very Different from eese the Food Retail? Detsky Mir 828@ 20 ne ssn Leading Russian food retailers Competition for Low High new locations 9 5 E 3S Gap #1 to #2 rf (Revenue 2017) 4.6x 1.3x | = 86%! 17-21%? Average dividend yield 6.8%3 0-3.0%4 2017 (cash Flow basis) Source: Company d
Slide 31: LFL Growth vs Peers by Quarter
1Q'15/ 1Q'14 2Q'15/ 2Q'14 3Q'15/ 3Q'14 4Q'15/ 4Q'14 1Q'16/ 1Q'15 2Q'16/ 2Q'15 3Q'16/ 3Q'15 4Q'16/ 4Q'15 1Q'17/ 1Q'16 2Q'17/ 2Q'16 3Q'17/ 3Q'16 4Q'17/ 4Q'16 1Q'18/ 1Q'17 2Q'18/ 2Q'17 Detsky Mir X5 Magnit Okey M.Video
Slide 32: Net Trade Working Capital Overview
6008 Net Trade Working Capital Overview Detsxy MirR Focus on Constant Improvement & Optimization of NWC12 (RUB m) 24,796 26,440 17,346 (16,718) (25,215) (24,387) 2015 2016 2017 H1‘17 H1'18 lll Inventories Ml Trade Receivables Mill Payables -===NWCas % of Revenue . . . . i i i . i i ital i " = Improv
Slide 33: Financial Performance Summary
Financial Performance Summary Detsxy MirR (RUBm, unless specified otherwise)! Comments 2015 6 2017 H1“ Number of stores 428 S25 622 S29 = Strong support from both network expansion and LFL Detsky Mir stores 381 480 578 489 . ELC stores 46 45 46 40 ™ Solid LFL Sales growth rates Selling space (k sqm)
Slide 34: Contact Information
CYT Y | Contact Information Detsxy MirR eaee8 Sergey Levitskiy Head of Investor Relations [email protected] +7 903 971-43-65 Detsky mir +7 495 781-08-08, ext, 2315 detmirru