Company Presentation 3Q 2018 P0 Agenda Migros in a snapshot 2 1 - - PowerPoint PPT Presentation

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Company Presentation

3Q 2018

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1 2

Agenda

Migros in a snapshot Operating environment 2 7 Review of historical financial performance & projections 26

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Geographical Footprint

 Operating in 3 countries

— Turkey (81 cities out of 81) — Macedonia and Kazakhstan

2,090 Stores1

 1,980 (supermarkets)  50 (upscale supermarkets)  18 (wholesale and foodservice stores)  42 (international stores)  Migros Online

— 1.7m members and 60% mobile orders — Acquisition and re-launch of Tazedirekt

Innovation, Loyalty & Customer Service

 5.8m active households Money Club Card  Introduced more than 100 innovations for the retail market

Sustainability and Corporate Governance

 Only retail company in the “BIST Sustainability Index”  Included Corporate Governance Index since 2015  27,596 employees of which 40% are women  Best retailer of the country 14 years in a row2

Migros at a Glance

80%

• f HH

+100

38%

• f HH

A- 2017 CDP Grade: 64th Year!

1 as of September 30, 2018 2 Capital Business magazine.

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2018 At a Glance

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Expansion

 Merger of Kipa under of Migros Ticaret A.Ş.  Acquisition of Uyum/Makromarket stores (54 stores)

Operations

 Good progress on space optimization of Kipa-legacy hypermarkets  Physical store expansion continued as planned

Financing

 Debut of TL bond issuance  Reduction of Euro debt exposure from € 672m to € 610m in 9M 2018

Strategy

 Migros’ long-term strategic growth plans are unscathed even after the external macro

shocks

Istanbul Municipality/ State Institutions (49%) & Private Sector (Koç Holding 51%) Private Sector (Koç Holding 51%) & Public 49% Anadolu Group 50.0% & BC Partners 23.2% Joint Venture Free Float 26.8% Foreign investment (Swiss Migros 50%) & Istanbul Municipality/State Institutions (50%) Joint Venture BC Partners 80.51% & Public 19.49% 1st era (1954–1974) 2nd era (1975–1990) 3rd era (1991–2008) 4th era (2008–2015) 5th era (2015–…)

Migros has been a leading supermarket operator since its foundation 64 years ago

 Migros was established in 1954 (as a joint venture between Swiss Migros & Istanbul Municipality/State Institutions).  Throughout its history, the company had 5 different ownership structures.  Ownership changes did not interfere with the long established Company operating principles and management. P4

Note: Shareholder structure as of September 30, 2018

Ownership Structure

Direct Shareholding Structure

JV Structure between BC Partners & Anadolu Group

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AG Anadolu Grubu Holding A.Ş. 50.00% Free Float 26.81% Migros Ticaret A.Ş. BC Partners & related funds 23.19%

Indirect Shareholding Structure

Kenan Investments S.A. 14.88% MH Perakendecilik ve Ticaret A.Ş. 49.18% Free Float 26.37% Moonlight Capital S.A. 7.94% Migros Ticaret A.Ş. AG Anadolu Grubu Holding A.Ş. 100.00% Migros Ticaret A.Ş.* 1.64% BC Partners & related funds (*): Migros purchased its own shares due to the Migros-Kipa merger Note: Anadolu Group maintains its 50% stake in Migros

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1 2

Agenda

Migros in a snapshot Operating environment 2 7 Review of historical financial performance & projections 26

3

Operating Environment

Experienced management Multi-channel synergistic

• ffering with a footprint in 81

Turkish cities and abroad #1 supermarket operator with an outstanding reputation Flexible and efficient business model combined with state of art facilities Attractive market with significant upside potential to support future growth

A C F B E

Retail technology and innovation leadership

D

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Population (m) Total Grocery Spend per Capita ($)

Attractive market with significant upside potential to support future growth

Source: Planet Retail

83 81 66 65 61 46 38

Total Grocery Spend in 2017 [~ TL 377bn]

Turkish Food Retail Market MGD Grocery Market Share (%)

Unorganized 66% Organized 34%

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A

Attractive domestic market

3,670 3,516 3,200 3,008 2,031 1,781 1,282 84% 81% 79% 79% 54% 43% 34%

Market Share Evolution

B

#1 supermarket operator with an outstanding reputation

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Source: Nielsen Note: FMCG stands for Fast Moving Consumer Goods; Modern FMCG market and total FMCG market include all food-retail formats

Migros FMCG Market Share Evolution (%)

7.0 16.7

7.1 16.9

Total FMCG Market Share Modern FMCG Market Share 9M17 9M18 9M18 9M17

Market Share Gain

16.9%

Migros’ market share in modern FMCG market in Turkey

7.1%

Migros’ market share in total FMCG market in Turkey…

20 bps & 10 bps

improvement respectively

Macro Fundamentals Product Innovation Format Evolution Inorganic / Acquisitions International Proven ability to launch new, successful formats and products, achieve business transformations

2008 2014 1997 1997 2010 2011

1 The format started operating in 2010 on a trial basis and was fully launched in 2011

2012 2017-2018 2016 2013 2005 Launch of new concept Launch of 1 Space optimization of Hypermarkets Launch of Migros jet in petrol stations Introduction of self check-out Launch of online Club Card launch Acquisition & Merger of Acquisition of Conversion of Tansas stores into Migros format Private label relaunch Acquisition of

Growth Levers

2009

C

With a clear strategy to organically and inorganically drive growth in the decades ahead

Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

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 Number of stores: 1,980 including 1,153 Supermarkets. 58 Hypermarkets,

and 769 Migros Jet stores,

 Penetration: 81 cities

─ (40*-4,500) sqm / (1,800* – 18,000) SKUs ─ Differentiated offering and service on fresh product categories ─ Wide branded assortment of FMCG products ─ Consistent Every Day Low Pricing on commodity Private Label products ─ Fashionable, complementary and seasonal non-food selection

Migros

Migros, Largest National Supermarket Chain Focus on proximity supermarkets

 Migros Jet and M Migros  Proximity Stores, (40*-300) sqm,  1,800* – 3,000 SKUs  CRM applications for different customer segments

─ Customized & Differentiated Offering for Money Club Card holders ─ Club Card Loyalty Program for 17 years

Loyalty Program

(*): including Migros Jet stores and Migros Jet 7/24 forecourt stores as of September 30, 2018

C

Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

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Macrocenter

Exclusive shopping

Penetration: 6 cities

 Number of stores: 50  400 - 2,500 sqm / 10,000 SKUs

─ Upscale gourmet store serving with strong brand

loyalty

─ Wide product range in delicatessen, appetizers and

• spirits. Premium quality in fresh products

─ Complementary and premium non-food

 Customized service such as banquet ready meal delivery

C

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Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

 Currently operating in 7 regions through dedicated sales

team.

 Dedicated warehouses and customer delivery  18 Wholesale stores

Penetration: 13 cities

Wholesale & Food Service

Focus on Horeca Penetration

C

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Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

 Turkey’s first and leading e-commerce web site in food retail  Data oriented, personalized customer experience & digital journey  Top-line growth is significantly higher than the Company average  Improved operational efficiency through picking automation  Direct delivery from stores (124 stores in 28 cities across Turkey)

Natural Fresh Organic Healthy

C

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Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

Online Business

Kazakhstan Macedonia

1 Shopping Mall 26 Supermarkets

International Operations

C

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Multi-channel synergistic offering with a footprint in all 81 Turkish cities and abroad

 1.3% of consolidated sales from Kazakh operations

 Number of stores: 16, including 2 hypermarkets, 13

supermarkets and 1 Macrocenter.

 Owns 1 shopping mall in Almaty  Total sales area of 23,789 sqm

─

Serving in the cities of Almaty and Astana in a large country

 Operates in multi-format since 1999

 1.5% of consolidated sales from Macedonian operations

 Number of supermarkets: 26  Owns 1 shopping mall in Skopje  Total sales area of 21,919 sqm  Operations started in 2005

1 Shopping Mall 2 Hypermarkets 13 Supermarkets 1 Macrocenter

Migros Intelligent Office Mkolay Scan&Go Migros Mobile App & Personalized Campaign Engine Self-Service Checkout+ BKM E-Wallet & Self-Service Checkout Integration Electronic Smart Tag Mi-Fi Me-Mobil Supplier Information Center

Migros R&D Center

Innovations

Sales Over ‘pin-on-receipt’ Technologies

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D

Retail technology and innovation leadership

D

Money Club & CRM

Retail technology and innovation leadership

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Advanced Segmentation Turkey’s largest loyalty programme

Effective Communication Network

11.5 Million

Active Cards

73%

• f Loyalty Card

Sales 538 k Followers 4.4 Million

Mobile Phones

1.7 Million

E-Mails

25

Communication & CampaignChannels

6

Life Style Segments

5.8 Million

Active Households

Partnerships With Strong Brands

285 k 1 Money = 20 Miles

62.3 Million

Money Points

923k customer benefited

"Just For You" campaigns

Programme With Highest Customer Interaction

2.1 Million

Money Winning Customer

Store Segmentation Customer Value Model

Self-service technologies

Self-service revolution in retail

2009: 1 pilot store (4 SSCO) 2014: 189 stores (603 SSCO)

3.7 30% 55%

Million transactions per month % average transaction ratio2 Generation cash register Top 10 stores’ average transaction ratio1 % 2018: 250 stores (860 SSCO1)

D

 Turkey’s First In-store self scanning experience  Statistical fraud and security algorithm  Hassle free direct bagging and payment  System will be available over 20 stores by the

end of the year

Mkolay – Scan&Go

1 SSCO stands for Self Service Check Out 2 Share of transactions made via self-service checkouts in equipped stores

3.

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Retail technology and innovation leadership

Migros mobile apps and Mi-Fi

 Personalized – Customer Communication Channel  At the right place– At the right time  New I-beacon technology

Highlights of Mi-Beacon, Migros mobile apps

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 Free wireless internet access during shopping – a

first in Turkey

 Available for 200 5M and MMM stores in large

cities, stores where pedestrian traffic and tourist potential are high

Highlights of Mi-Beacon, Migros mobile apps

 Turkey’s First Mobile wallet integration on a

physical store payment

 Currently available on 860 self service checkout

and over 6400+ regular checkouts

BKM E-Wallet & Self-Service Checkout Integration

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Retail technology and innovation leadership

 IOS & Android platform  5 M downloads  Core functionalities

‒ Mkolay –self scan shopping experience ‒ ‘Just For You’ campaign offers ‒ Accessibility of ‘Migroskop’ ‒ Closest store finder ‒ Migros Wi-Fi access ‒ Easy access to Migros TV ‒ Migros ‘İyi Gelecek Elçileri’ platform ‒ Call center

Capex as a percentage of sales 2017 (%)¹

 Largely rented business model  Flexible lease terms

‒ Leases can be exited on average with a 1-3 month notice ‒ Termination rights of landlords more limited (selected leases locally registered with the Land Registry)

 Well-invested facilities and low capex requirements

‒ One of the lowest capex as a percentage of sales amongst peers ‒ The meat plant, the distribution center sorter system and a centralized control systems on energy savings are examples of major one off investments realized over the last years

 Leveraging “must have” anchor tenant position in malls and

in the high street ‒ Preferred relationship status ‒ Power to (re-)negotiate size of the store

Flexible / capital light model with preferred tenant status

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2,5% 2,6% 2,6% 2,7% 2,8% 2,9% 2,9% 2,9% 3,7% 4,0% 4,6% 6,9% Tesco Morrison Migros Ahold Delhaize Sainsbury Dixy Carrefour Casino Shoprite Colruyt Magnit X5

Source: Company estimates, Reuters ¹ Latest reported fiscal year

Flexible / capital light model

E

Flexible and efficient business model

Unparalleled capabilities in fresh categories

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E

Highlights

 Focusing on fresh products (vegetables, fruit, fresh meat, etc.)  Renewed meat production facility  Exclusive licensing from Ministry of Agriculture: “Good Agricultural Practice”,

covering now poultry & red meat

 Broader range of bakery products and self service bakery model.  Fresh and ready to cook fish range in MAP packaging (modified atmosphere

packaging),

Flexible and efficient business model

Meat processing/production plants – Miget and Gebze

Location Closed Area # of Employees Miget Meat Production Plant Izmir Torbali 11,356 m2 249 Gebze Meat Production Plant Kocaeli GOSB 3,632 m2 43 Service Products Special Products Packed Veal and Lamb Products Special Gourme Products Lamb Parts Packed Meatballs Vacuum Packed Meatball Patty Offal Packed Minced Meat Vacuum Packed Minced Meat Dough 2 meat production plants, for meat processing 18,455 ton production capacity per year per shift, in product groups

E

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Flexible and efficient business model

Distribution centers and logistics - overview

E

 25 Distribution Centers (including 7 Fruit and Vegetable DCs)  19,000 active SKUs  % of sales delivered centrally to the stores has reached 83%  Continuing to improve round trip store distances  Sorting and picking automation continues

Bayrampasa Gebze Gebze (Meat) Bursa (F&V) Izmir (F&V) Kemalpasa Pinarbasi Miget (Meat) Mugla Kumluca (F&V) Antalya (F&V) Antalya Mersin (F&V) Adana (Meat) Gölbaşı Samsun (F&V) Erzurum Antalya (Meat) Adana Gölbaşı (Meat) Esenyurt Torbalı Tarsus (F&V)

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Flexible and efficient business model

Çorlu Bursa

Best-in-class quality management and recognized excellence

E

CDP Turkey “Climate Leadership Award” Capital “Most Admired Retailer” Grand Stevie “Stevie Awards for Great Employers” Mobile Marketing Association “The Smarties Awards” Association for Talent Development “Excellence in Practice Awards”

Annual records Selected awards ISO Certificates Laboratories and Audits

1,000+ supplier audits 30,000 product analysis 7,000 approvals of new products for sales 3,200 store audits ISO 9001 Quality M.S. ISO 22000 Food Safety M.S. OHSAS 18001 Occupational Health & Safety M.S. TS EN ISO 14001:2004 Environmental M.S. ISO 10002 Customer Satisfaction M.S 13 owned laboratories 10 outsourced laboratories and audit firms

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Flexible and efficient business model

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1 2

Agenda

Migros in a snapshot Operating environment 2 7 Review of historical financial performance & projections 26

3

The strong growth momentum continued in 3Q 2018… … despite high- base of last year

• Consolidated sales growth of 24.4% in 3Q 2018
• A very good summer seasonal performance,
• Foreign subsidiaries performance exceeding expectations in 3Q 2018

Sales Growth in 3Q18 24.4% Sales Growth in 9M18 21.8%

Sales in 9M 2018

Sales in 3Q 2018 (TL million) 5,331 4,285

3Q 2017 3Q 2018

Sales in 9M 2018 (TL million) 13,794 11,322

9M 2017 9M 2018

*Kipa’s financial results were started to be consolidated since 01 March 2017.

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Capital Expenditures

Capex (TL million)

We have over- achieved our expansion target Space optimization in large stores has been continuing as projected

Capex as a Percentage

• f Sales

297 399

2016 2017

253 370

9M 2017 9M 2018

2.2% 2.7% 2.7% 2.6%

 54 Uyum and Makro stores were converted into Migros banners  Capex for 2018 is expected to be around TL 440 million

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Consolidated Gross Profit in 9M 2018

The more efficient supply chain, the more value for customers

• Increase in consolidated gross profit was slightly higher than top-line growth in 3Q 2018
• Merger synergies and new store acquisitions facilitated the strong gross profitability

Gross Profit 3Q (TL million) 1,489 1,170

3Q 2017 3Q 2018 Margin 27.9% 27.3%

Gross Profit in 9M (TL million) 3,827 3,002

9M 2017 9M 2018 Margin 27.7% 26.5% P28

Consolidated EBITDA(R) in 9M 2018

*EBITDA(R)= Operating Profit+Amortization+Employee Termination Benefits +Unused Vacation Provision-Other Income+Other Expenses+(Rent Expenses)

More than

7% EBITDA

margin in 3Q18

driven by better sales performance and strong gross profitability

More than

12% EBITDAR

margin in 3Q18

EBITDA 9M (TL million)

Margin 6.3% 5.7%

874 646

9M 2017 9M 2018

EBITDA 3Q (TL million)

Margin 7.3% 6.9% 3Q 2017 3Q 2018

388 297 EBITDAR 9M (TL million)

Margin 11.5% 10.6%

1,587 1,202

9M 2017 9M 2018

EBITDAR 3Q (TL million)

Margin 12.2% 11.6% 3Q 2017 3Q 2018

651 498

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Track Record of Deleveraging

Migros 9M 2018 Cash and Leverage Position Cash & Debt Items Total TL m TL m EUR m

Cash & Cash equivalents

1,858 1,579 40

Financial Debt*

5,192 916 615

Net Debt

3,334

Net Debt / EBITDA LTM

3.0x

Deleveraging Profile - Net Debt / EBITDA LTM 4.0x 3.2x 2.9x 2.7x 2.6x

2013 2014 2015 2016 2017

* Based on amortised costing as indicated in financial statements Euro/TL Currency :

2.9365 2.8207 3.1776 3.7099 4.5155

2.8x 3.0x

9M 2017 9M 2018 4.1924 6.9505

Change: + 66%

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Expectations and Guidance

2018 Guidance [Consolidated]

2018E Previous Guidance New Guidance

Sales Growth

~20%

~22%

EBITDA Margin

5.5-6.0%

6.0% +

Expansion Target

200+ new stores

230+

new stores CAPEX

TL 440 mn

~ TL 440 mn

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Management Agenda in 2018

• Vigilant cost management
• Efforts to increase performance
• f large stores with space
• ptimization
• Continued emphasis on property

divestitures

• Sale of three Migros owned

stores amounting to TL 56

million in 4Q 2018

• Migros TL bond issuance of

TL 196 million

• Focus on digitalization of

physical stores and online business growth

IFRS Consolidated Income Statement Summary

SUMMARY OF INCOME STATEMENT – 9M 2018

Net Sales 13,793.9 11,321.8 Cost of sales

• 9,967.0
• 8,319.7

Gross Profit 3,826.9 3,002.1 Operating Expenses

• 3,243.6
• 2,616.1

Other Operating Income / (Expense)

• 282.2
• 170.1

Operating Profit 301.1 215.9 Income / (Expense) from Investment activities

• 15.3

1,064.6 Operating Income Before Finance Income / (Expense) 285.8 1,280.5 Financial Income / (Expense)

• 1,684.8
• 513.3

Income/Loss Before Tax From Continuing Operations

• 1,399.0

767.2 Tax Income / (Expenses)

• 31.2
• 47.1

Deferred Tax Income 235.5

• 5.2

Net Profit / Loss

• 1,194.7

715.0 Net Profit / Loss - Non-controlling interest 0.1

• 4.0

Net Profit / Loss - Equity holders of parent

• 1,194.8

719.0 EBITDA 873.8 645.8 EBITDAR 1,587.1 1,201.5

(TL Million)

9M 2018 9M 2017

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IFRS Consolidated Balance Sheet Summary

SUMMARY OF BALANCE SHEET – 9M 2018

Current Assets 4,136.8 3,776.3 Non-current Assets 6,682.4 6,526.4 Total Assets 10,819.2 10,302.7 Current Liabilities 6,180.3 5,516.1 Non-current Liabilities 4,380.8 3,259.4 Total Liabilities 10,561.1 8,775.5 Equity 258.1 1,527.1 Total Liabilities and Equity 10,819.2 10,302.7

(TL Million)

9M 2018 2017

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