BELUGA GROUP Aug August 2019 1H2019 EARNINGS PRESENTATION - - PowerPoint PPT Presentation

BELUGA GROUP

1H2019 EARNINGS PRESENTATION

Aug August 2019

Disclaimer

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This presentation has been prepared by Beluga Group, Co. (the “Company“, or “Beluga Group”) and together with its subsidiaries. By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following limitations and

• notifications. This presentation is strictly confidential to the recipient, may not be distributed to

the press or any other person, and may not be reproduced in any form, in whole or in part. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire shares of the Company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any

• jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall

form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation may contain statements that are, or may be deemed to be, forward- looking statements within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby. Examples of such forward-looking statements include, but are not limited to statements of the Company’s predictions, forecasts, projections, strategies, plans, targets, objectives, expectations, estimates, intentions, beliefs or goals, including those related to acquisitions, sales, products or services, results of operations, financial condition, liquidity, prospects or dividend policy; statements concerning future business or industry performance; other statements that do not relate strictly to historical or current facts; and assumptions underlying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the forward-looking statements will not be achieved. Among other things, forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. Readers should be aware that several important factors could cause the Company’s assumptions to be incorrect, and could cause actual results to differ materially from the predictions, forecasts, projections, strategies, plans, targets, objectives, expectations, estimates, intentions, beliefs or goals expressed in such forward-looking statements. These factors include:

• changes in political, social, legal or economic conditions in Russia generally, or in the

regions of Russia in which the Company operates, including changes in levels of consumer spending and demand for some or all of its products;

• changes in consumer preferences and tastes, demographic trends or perceptions about

health related issues;

• increased competitive product and pricing pressures and unanticipated actions by

competitors that could impact the Company’s market share, increase expenses and hinder growth potential;

• the ability to complete business combinations, partnerships, acquisitions or disposals,

existing or future, and to achieve integration, expected synergies and/or costs savings;

• levels of marketing, promotional and innovation expenditure by the Company and its

competitors;

• the Company’s ability to protect its intellectual property rights;
• increasing recognition in Russia of product liability and personal injury torts;
• legal and regulatory developments and changes in the policies of the government of the

Russian Federation, including regional authorities, including regulatory developments or policy changes regarding consumption of or advertising for spirits, or taxation;

• changes in the cost of raw materials and labor costs;
• renewal of distribution rights and contracts on favorable terms when they expire;
• technological developments that may affect the distribution of products;
• changes in financial and equity markets, including significant interest rate and foreign

currency exchange rate fluctuations, which may affect the Company’s access to or increase the cost of financing or which may affect the Company’s financial results;

• changes in accounting standards, policies or practices;
• availability of qualified personnel, including accounting personnel; and
• ability to identify other risks relating to the Company’s business and manage the risks

associated with the aforementioned factors. This list of important factors is not exhaustive. Readers should carefully consider such factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Company operates. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update or revise any of them. Readers should not place undue reliance on forward-looking statements. The Company does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

BELUGA GROUP 1H2019 financial highlights

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total volume is stable + 19,4% volume of import + 22,6% export volume of vodka Beluga

Financial and Operational highlights

Net Revenue increased by 14% to

21,5 bln. Rubles

Sales grew 8% and reached

31 bln. Rubles*

Operating profit increased by 23% to

1,7 bln. Rubles

EBITDA grew 41% and reached

2,7 bln. Rubles

EPS increased by 22% and achieved

29 Rubles

10% growth of Net Income to

452 mln. Rubles

* - incl. excise taxes, net of VAT

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Consolidated Revenue and Gross Profit

Sources: Company data * - including intersegment

Total Net Revenue RUB bn

18,8 21,5

1H2018 1H2019

13,9 15,4

1H2018 1H2019

+11% +14%

Revenue breakdown by segments RUB bn*

Alcohol 3,2 3,1

1H2018 1H2019

• 5%

Food

62% 26% 12% Food Alcohol Retail

Consolidated Revenue split * 1H2018 1H2019

Revenue growth by 14% in 1H2019 mainly due to growth

• f Winelab retail

chain and import

• perations

8 8,4

1H2018 1H2019

+5%

Total Gross Profit RUB bn

Gross Profit grew 5% mainly due to changes in revenue/gross profit composition: share

• f Winelab’s
• perations in the

total revenue/gross profit is growing 4,3 6,5

1H2018 1H2019

+51% Retail

65% 20% 15% Food Alcohol Retail

0,41 0,45

1H2018 1H2019

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Consolidated EBITDA and Net Profit

Sources: Company data

Consolidated EBITDA RUB bn

1,9 2,7

1H2018 1H2019

1,56 1,61 4,97 4,85

1H2018 1H2019 G&A distribution

• 2%

+41%

G&A and distribution expenses RUB bn Operating Profit and Net Income RUB bn

+3% 1,4 1,7

1H2018 1H2019

+10% Operating Profit Net Income +23% 2% year-on year decrease in distribution expenses due to the optimization

• f trade-marketing policy.

G&A expenses increased

• nly by 3% - less than

revenue growth mostly due to improvements in

• perating efficiency.

EBITDA grew by 41% due to: double-digit growth of import operations; improvements in

• perating efficiency as a

result of ongoing positive effect from the efficiency improvement; IFRS 16 implementation effect: if apply comparable with previous period IAS 17, EBITDA growth was 15%

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Segment EBITDA*

Sources: Company data * - including intersegment

EBITDA breakdown by segments RUB bn

Since 1H2018 the Company has reported 3 segments: Alcohol, Retail, Food. 1,88 2,32

1H2018 1H2019

+23% Alcohol 0,20 0,11

1H2018 1H2019

• 42%

Food

77% 17% 6% Food Alcohol Retail

EBITDA split 1H2019

Alcohol segment EBITDA grew due to improvements in

• perating efficiency

and effect from IFRS 16 implementation. EBITDA margin in Retail segment is higher than the average in the retail sector in Russia

• 0,09

0,48

1H2018 1H2019

Retail

EBITDA margin by segments %

15% 7% 4%

Alcohol Retail Food

56% 37% 7%

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Debt Profile overview

0,7 0,5 4,6 13,4 12,4 11,5

30 Jun'18 31 Dec'18 30 Jun'19 Short-term debt Long-term debt

24% 47% 29% 1-2 years 2-5 years

Debt statistics summary

RUB mln 31 Dec’18 30 Jun’19 Debt 12,886 16,084 Cash and cash equivalents 1,083 812 Net Debt 11,803 15,272 EBITDA (LTM) 4,251 5,033 Net Debt / EBITDA 2.8x 3.0x Interest coverage1 2.1x 2.3x 14,1 16,1 12,9

Debt evolution RUB bn Debt breakdown by maturity and type As of 30 Jun, 2019

Less than 1 year Bonds Unsecured debt Secured debt

RUB 16.1 bn RUB 16.1 bn

Sources: Company data Notes: 1) EBITDA over net finance cost

Decrease in cost of borrowing from 9.0% p.a. in 2018 to 8.96% p.a. in 1H2019 All short-term debt was refinanced in July 2019 through issuance of 5 bln., 5 years bond Share of unsecured loans is stable (93%)

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Income statement

Sources: Company data

Rub ub mln ln 2017 2017 2018 2018 1H 1H20 2018 1H 1H20 2019 YoY

• Y,

, % Ne Net revenue 37 37,30 303 43 43,41 411 18 18,78 782 21 21,45 450 14% 14% Cost of sales (23,628) (26,521) (10,766) (13,055) 21% Gr Gross ss pr prof

• fit

13 13,67 675 16 16,89 890 8, 8,01 016 8, 8,39 394 5% 5% margin 36.7% 38.9% 42.7% 39,1%

• 3.6 pp

G&A expenses (2,951) (3,102) (1,562) (1,605) 3% Distribution expenses (7,719) (10,269) (4,967) (4,851)

• 2%

Other income / (expenses) (157) (246) (75) (204) Operating profit 2,848 3,273 1,412 1,734 23% margin 7.6% 7.5% 7.5% 8.1% +0.6 pp EB EBITDA 3, 3,62 625 4, 4,25 251 1, 1,91 919 2, 2,70 703 41% 41% margin 9.7% 9.8% 10.2% 12,6% +2.4 pp Net finance costs (1,931) (2,059) (952) (1,128) 18% Income tax (271) (276) (50) (154) 206% Ne Net inc incom

• me

655 655 938 938 410 410 452 452 10% 10% margin 1.8% 2.2% 2.2% 2.1%

• 0.1 pp

Ba Basi sic c earn arning ings pe per shar share (Rub) ub) 34 34.60 60 68 68.34 34 24 24.06 06 29 29.41 41 22% 22%

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Balance sheet

Sources: Company data

Rub mln 31 Dec’18 30 Jun’19 ASSETS Non Non-curr rrent as asse sets Property, plant and equipment 10,593 14,202 Goodwill 3,095 3,095 Intangible assets 10,097 10,048 Other long-term assets 530 465 Deferred tax assets 1,399 1,647 Tot

• tal

al no non-curr rrent as asse sets 25 25,71 714 29 29,45 457 Cur Current asse assets Inventories 12,721 14,594 Biological assets 165 171 Trade and other receivables 8,059 7,296 Prepayments 595 952 Income tax prepayment 133 105 Assets held for sale

• Cash and cash equivalents

1,083 812 Tot

• tal

al cur current as asse sets 22 22,75 756 23 23,93 930 TOTAL ASS ASSETS 48 48,47 470 53 53,38 387 Rub mln 31 Dec’18 30 Jun’19 SHAREHOLDERS’ EQUITY AND LIABILITIES Equity quity and and reser serves Share capital 1,940 1,940 Own shares repurchased from shareholders (545) (618) Share premium 3,760 3,469 Retained earnings 13,012 13,274 Total equity 18,167 18,065 Non-controlling interest 1,300 1,302 Tot

• tal

al equity quity and and rese serves 19 19,46 467 19 19,36 367 Lo Long ng-term lia liabilit bilitie ies s Loans and bonds 12,419 11,485 Long-term payables 1083 3,239 Deferred tax liabilities 734 916 Total al lon long-term liabilit liabilitie ies 14, 14,23 236 15, 15,64 640 Cur Current lia liabilit bilities ies Loans and bonds 467 4,599 Trade and other payables 13,944 13,581 Income tax payable 356 200 Tot

• tal

al cur current lia liabilit bilities ies 14 14,76 767 18 18,38 380 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 48 48,47 470 53 53,38 387

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Cash Flow

Sources: Company data

Rub mln 2017 2018 1H2018 1H2019 Operating profit 2,848 3,273 1,412 1,734 Depreciation and amortization 768 978 507 969 Other non-cash transactions 200 28 13 32 Changes in working capital (1,860) 466 (2,292) (2,834) CF from operating activities 1,956 4,745 (360) (99) Interest paid (1,849) (1,927) (873) (1060) Income tax paid (578) (636) (449) (305) Net CF from operating activities (471) 2,182 (1,682) (1,464) Acquisition of subsidiaries and associates (380) (463) 289 (275) Acquisition and disposal of PPE (349) (1,720) (957) (870) Net CF from investing activities (729) (2,183) (668) (1,145) Issue of share capital

• Repurchase of own shares

(913) (1,281) (553) (364) Loans received 40,885 38,804 19,191 22,270 Loans repaid (38,963) (37,258) (16,427) (19,568) Net CF from financing activities 1,009 265 2,211 2,338 Net increase/(decrease) in cash (191) 264 (139) (271) Cash at the beginning of the year 1,010 819 819 1,083 Cash at the end of the period 819 1,083 680 812

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Appendix

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Super premium

Diversified product portfolio of own brands

Sub-premium / premium Middle Mainstream Vodka Brandy / Cognac / liquor Wine Other spirits (gin, tequila, rum, etc.)

Sources: Company data Notes: Price range for every segment could differ based on product category

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Super premium

Diversified product portfolio of imported brands

Sub-premium / premium Middle Mainstream Whisky Brandy / Cognac / liquor Wine Other spirits (gin, tequila, rum, etc.)

Sources: Company data Notes: Price range for every segment could differ based on product category. Whiskys Cigars Barrel, Fox&Dogs, Trouble Maker, Eagle’s Rock are bottled on Georgiyevskiy Plant

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High level of corporate governance with independent members on the Board of directors

Sources: Company data

ALEXANDER MECHETIN CEO Founder of Beluga Group NIKOLAY BELOKOPYTOV Chairman of the BoD CFO KONSTANTIN PROKHOROV Head of Retail ROSTISLAV ORDOVSKY- TANAEVSKY BLANCO Independent Non-Executive Director Founder and Chairman of the BoD

• f Rosinter

SERGEY MOLCHANOV Chief Operating Officer MIKHAIL KASHIRIN Head of Business Development ALEXANDER IKONNIKOV Independent Non-Executive Director Acknowledged Russian expert in corporate governance and Board efficiency New members

• n the Board
• f Directors

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In June 2019, BELUGA GROUP reinforced the Board of Directors: Independent non-executive directors

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The Board of Directors has audit committee with the following members: Alexander Ikonnikov (chairman of the committee) Rostislav Ordovsky-Tanaevsky Blanco Nikolay Belokopytov

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Company strategy for further development

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Сноска или примечание

Brand portfolio

 Diversified brand portfolio, coverage of all segments  Focus on premium and profitable products  Increase in price and brand recognition  Strengthening the presence in growing categories

Retail and distribution

 Continued development of the distribution platform with a focus on direct sales  Development of Winelab  Direct contact with end customers through trade marketing and own retail  Best IT platform

Key business

 Production, sale and distribution of its

• wn alcohol products

 Use of modern technologies to enhance the overall operational performance

Export

 Expansion of the general export geography and Beluga brand in particular  Improving the quality of imported

• perations through targeted selection of

partners  Focus on super-premium international vodka markets