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

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Company Presentation

1Q 2018

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1 2

Agenda

Migros in a snapshot Operating environment 2 6 Review of historical financial performance & projections 27

3

Geographical Footprint

 Operating in 3 countries

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

1,933 Stores1

 1,668 (supermarkets)  46 (upscale supermarkets)  162 (Supermarkets and Hypermarkets)  17 (wholesale and foodservice stores)  40 (international stores)  Migros Online

— 1.7m members and 56% mobile orders — Acquisition and re-launch of Tazedirekt

Innovation, Loyalty & Customer Service

 7.7m 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  26,992 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 March 31, 2018 2 Capital Business magazine.

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Ownership Structure

Current Shareholding Structure

JV Structure between BC Partners & Anadolu Group

Kenan Investments S.A. 15.13% MH Perakendecilik ve Ticaret A.Ş. 50.00% AG Anadolu Grubu Holding A.Ş. Free Float 26.8% Migros Ticaret A.Ş. Moonlight Capital S.A. 8.07% BC Partners & related funds

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Istanbul Municipality/ State Institutions (49%) & Private Sector (Koç Holding 51%) Private Sector (Koç Holding 51%) & Public 49% BC Partners 23.2% & Anadolu Group 50.00% 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

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1 2

Agenda

Migros in a snapshot Operating environment 2 6 Review of historical financial performance & projections 27

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 3,520 3,164 3,156 2,954 1,922 1,753 1,290

Total Grocery Spend in 2017 [~ TL 380bn]

Turkish Food Retail Market MGD Grocery Market Share (%) 83% 81% 81% 78% 54% 45% 34%

Unorganized 66% Organized 34%

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A

Attractive domestic market

Market Share Evolution

 Migros improved its market share

by 210 bps in modern FMCG market and 80 bps in total FMCG market y-o-y.

 Migros accounts for 16.1% of

FMCG sales in modern FMCG market and 6.6% market share in total FMCG in Turkey.

Market Share Gain

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

FMCG Market Share Evolution (%)

5.8 14.0

6.6 16.1

Total FMCG Market Share Modern FMCG Market Share 1Q17 1Q18* 1Q18* 1Q17

* including Kipa

B

#1 supermarket operator with an outstanding reputation

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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 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 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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Multi-channel expertise anchored around large, full-service supermarkets

C

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

Banner Key concept Sales area split Supermarkets Large SPMs & HPMs Total # of stores (Target size) 40-800 sqm 800-7,000 sqm

Core supermarkets expertise anchored around large supermarkets 66% (Migros) 7% (5M) [645] [576] [314] [21] [112] [1,668] Focused on the Western regions of Turkey 21% [70] [45] [47] [162] Well positioned in upper income segment 2% [46] [46] International operations 3% [19] [21] [40] First and leading e- commerce food retail website Wholesale & Food Service 1% [17] [17]

Total # of stores [1,372] [561] [1,933]

(#): Number of stores as of March 31, 2018

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 Number of stores: 1,668 including 447 5M, MMM & MM stores and 1,221

Migros Jet & M 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  645 Migros Jet and 576 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 March 31, 2018

C

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

Kipa

31.03.2018

Focused on the Western regions of Turkey

 Number of stores: 162  Space optimization in 4 Kipa stores completed in 2017  Space optimization in 8 more stores completed so far in

2018, 6 more in 2018 pipeline

 Product portfolio optimization is in progress

Penetration: 20 cities

C

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

Macrocenter

Exclusive shopping

Penetration: 6 cities

 Number of stores: 46  400 - 2,500 sqm / 10,000 SKUs

─ Upscale gourmet store ─ 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

31.03.2018

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  17 Wholesale stores

Penetration: 12 cities

Wholesale & Food Service

Focus on Horeca Penetration

31.03.2018

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  Top-line growth is significantly higher than the Company average  Improved operational efficiency through picking automation  Direct delivery from stores (111 stores in 28 cities across Turkey)

Online Business

Natural Fresh Organic Healthy

C

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

Kazakhstan Macedonia  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: 24  Owns 1 shopping mall in Skopje  Total sales area of 21,039 sqm  Operations started in 2005

International Operations

1 Shopping Mall 2 Hypermarkets 13 Supermarkets 1 Macrocenter 1 Shopping Mall 24 Supermarkets

C

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

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

10.3 Million

Active Cards

75%

• f Loyalty Card

Sales 887 k Followers 6.1 Million

Mobile Phones

1.1 Million

E-Mails

25

Communication & CampaignChannels

6

Life Style Segments

7.7 Million

Active Households

Partnerships With Strong Brands

305 k 1 Money = 20 Miles

48.0 Million

Money Points

900k customer benefited

"Just For You" campaigns

Programme With Highest Customer Interaction

1.7 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)

3.5 30% 61%

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

Mi-Beacon, 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

D

 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 will be available over 6000+ regular checkouts Q1 2018

BKM E-Wallet & Self-Service Checkout Integration

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Retail technology and innovation leadership

 IOS & Android platform  4,5 M downloads  Core functionalities

‒ Mkolay –self scan shopping experience ‒ ‘Just For You’ campaign offers ‒ 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

 24 Distribution Centers (including 1 Kipa DC and 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 started

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) Saray Gölbaşı Samsun (F&V) Erzurum Antalya (Meat) Adana Saray (Meat) Esenyurt Torbalı Tarsus (F&V)

P24

Flexible and efficient business model

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 6 Review of historical financial performance & projections 27

3

17.9%

Domestic sales growth w/o Kipa

• perations

Strong growth momentum despite high base

• f last year
• Consolidated sales turnover increased by 26.5% and reached TL 3,940 million in 1Q2018
• Strong sales performance of Migros stores continued

Sales Growth in 1Q18 26.5% Sales Growth in 2017 38.7%

Sales in 1Q 2018

*Kipa’s financial results have been consolidated since 01 March 2017.

Sales 1Q (TL million)

3,940 3,114

1Q 2017 1Q 2018

Sales in 2017 (TL million)

15,344 11,059

2016 2017 P27

Capital Expenditure & Working Capital

TL 400m

Targeted consolidated capex in 2018

Domestic operations Working Capital in days

(37) (36)

2016 2017 P28 Capex (TL million)

Capex as a Percentage

• f Sales

297 399

2016 2017

62 77

1Q 2017 1Q 2018

2.0% 2.0% 2.7% 2.6%

(*) with Kipa

(37) (36)

1Q 2017 1Q 2018*

Consolidated Gross Profit in 1Q 2018

Solid Gross Profit Generation Substantial increase in purchasing volumes

• Consolidated Gross profit reached TL 1,077 million with an increase of 31.8% in 1Q 2018
• 2018 FY gross margin is expected to converge to historical averages

Gross margin in 1Q18 27.3% Gross margin in 2017 26.6%

Gross Profit 1Q (TL million) 1,077 817

1Q 2017 1Q 2018 Margin 27.3% 26.2%

Gross Profit in 2017 (TL million) 4,082 2,953

2016 2017 Margin 26.6% 26.7% P29

Consolidated EBITDA(R) in 1Q 2018

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

35.5%

EBITDA increase in 1Q18

11.5%

EBITDAR margin in 1Q18 w/o Kipa

• perations

EBITDA 2017 (TL million)

Margin 5.7% 6.1%

872 677

2016 2017

EBITDA 1Q (TL million)

Margin 5.4% 5.0% 1Q 2017 1Q 2018

211 156 EBITDAR 2017 (TL million)

Margin 10.7% 11.1%

1,634 1,231

2016 2017

EBITDAR (TL million)

Margin 10.7% 10.2% 1Q 2017 1Q 2018

423 317

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Track Record of Deleveraging

Migros 1Q 2018 Cash and Leverage Position Cash & Debt Items Total TL m TL m EUR m

Cash & Cash equivalents

1,197 1,043 32

Financial Debt*

3,948 872 632

Net Debt

2,751

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

 Net debt/EBITDA improved in 1Q 2018 y-o-y despite hard currency appreciation

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

2.9365 2.8207 3.1776 3.7099 4.5155

3.6x 3.0x

1Q 2017 1Q 2018 3.9083 4.8673

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Performance Indicator 2016 Target 2017 Performance vs Guidance

Expansion Program

(Number of NEW Stores)

232

180+

193



Top-Line Sales Growth

17.8%

~38%

38.7%



EBITDA Margin

6.1%

~5.5%

5.7%



Performance Summary 2017

Performance Summary Management Message for 2017

• Migros’ consolidated sales

more than doubled in 4

years from 7.1 billion in 2013

to 15.3 billion TL in 2017.

• Outstanding year in terms of

sales performance and profitability

• Free cash flow generation is

driving the Net Debt/EBITDA improvement, despite hard currency appreciation and additional acquisition financing.

 Consolidated shareholders’ equity was bolstered by TL 743,7 million as a result of asset revaluation in 2017

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Expectations and Guidance

Management Agenda in 2018

2018 Guidance [consolidated] Sales Growth

15-18%

EBITDA Margin

5.5-6.0%

Expansion Target

120-150 new stores

• Merger of Migros & Kipa
• Space optimisation in large

Kipa stores

• Acquisition and integration of

Uyum stores in Istanbul and Makro Markets in Antalya

• Total gross Euro debt decreased

by almost 6% in 1Q18 versus 2017 year-end

• Hard currency debt is expected

to decrease in the rest of 2018

• Focus on digitalization of

physical stores and online business growth

• Strengthening our pioneer

position in Turkish Retail

P33

IFRS Consolidated Income Statement Summary

SUMMARY OF INCOME STATEMENT – 1Q 2018

Net Sales 3,940.1 3,113.6 Cost of sales

• 2,863.1
• 2,296.3

Gross Profit 1,077.1 817.3 Operating Expenses

• 962.5
• 742.1

Other Operating Income / (Expense)

• 59.7
• 44.1

Operating Profit 54.9 31.2 Income / (Expense) from Investment activities

• 3.3

1,068.0 Operating Income Before Finance Income / (Expense) 51.6 1,099.2 Financial Income / (Expense)

• 283.0
• 185.3

Income/Loss Before Tax From Continuing Operations

• 231.5

913.9 Tax Income / (Expenses)

• 15.3
• 0.8

Deferred Tax Income 6.1

• 7.1

Net Profit / Loss

• 240.6

906.0 Net Profit / Loss - Non-controlling interest

• 2.2
• 1.0

Net Profit / Loss - Equity holders of parent

• 238.4

907.0 EBITDA 211.0 155.8 EBITDAR 423.3 317.3

(TL Million)

1Q 2018 1Q 2017

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IFRS Consolidated Balance Sheet Summary

SUMMARY OF BALANCE SHEET – 1Q 2018

Current Assets 3,251.7 3,776.3 Non-current Assets 6,539.6 6,526.4 Total Assets 9,791.3 10,302.7 Current Liabilities 4,988.6 5,516.1 Non-current Liabilities 3,514.2 3,259.4 Total Liabilities 8,502.8 8,775.5 Equity 1,288.5 1,527.1 Total Liabilities and Equity 9,791.3 10,302.7

(TL Million)

1Q 2018 2017

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