EUROCASH Empowering modern retail entrepreneurs Eurocash Group - PowerPoint PPT Presentation

EUROCASH Empowering modern retail entrepreneurs

Eurocash Group – executive summary Poland’s sizeable market has unique traits that favor neighborhood stores  GDP is of EUR 475 bn and population is of 38.4 m (EUR 26k per Capita PPP) but population density in large cities is quite low  Typically small living quarters lead to daily shopping nearby and has severely limited the success of “big box” retail forma ts Through M&A and organic growth, Eurocash has built the broadest distribution and retail platform  With Sales of EUR 5.5 bn, and EBITDA of EUR 85 m, cash flow generation is of approximately 133% of EBITDA  While many retailers failed in Poland , Eurocash built scale through M&A and its purchasing power has kept small format stores competitive  Today, Eurocash is the 2 nd largest player, No.1 in branded FMCG sales, the dominant small store operator, and leads in several product categories As wholesale distribution leader, Eurocash invests to improve small store competitiveness and growth  With 27% market share serving most small stores including 13.5k soft franchisees, sales are of EUR 4.2 bn and EBITDA of EUR 95 m  Eurocash.pl is a fast growing e-commerce platform with sales of EUR 800 m, giving small store owners solutions comparable to modern trade As the 7 th largest retailer, the roll-up growth strategy for its supermarket chain brings synergy and upside  With sales of Eur 1.7Bn from 1500 hard franchise and own stores, the objective is to add 900 stores in 5 years to become the 3 rd largest retailer  The retail strategy builds on already-strong product categories of wholesale while helping Eurocash grow into new, under-represented ones  Eurocash’s experience with post-acquisition integration of distressed assets offers the prospect of strong upside from profit recovery Cash generation funds continued investment to innovate in support of small stores in a changing industry  Addressing the needs for automation, digitalization, and individualized customer offerings brings further competitiveness to small store formats  Following on investments of EUR 800 m over the last 10 years, today’s projects are at tipping point to show long -term benefits in growth and profitability 2

Poland is a unique market Demographics: small towns, small living quarters, that necessitate daily shopping close to home Percentage of population living in cities/rural area Share of distribution channels in FMCG sales in Poland Others Eurocash Eurocash 22,5% 26,2% market market 50.2% 50.2% Minimarkets 18,9% 28% Rura ral 17,0% Proximity Supermarkets Cities 0-2 Ci -20K 40% 8,8% 7,0% 4,1% 4,9% Ci Cities 20-5 -50K Large Supermarkets 19.4% 16.6% 12,5% 14,5% Ci Cities 50-1 -100K 8% Hypermarkets Ci Cities 100K+ 33,2% 30,4% 11% Discounters 13% 2018 2023E Source: www.retailytics.com  Total population of 38.4 M  60% of Poles live in villages & small towns  GDP per Capita PPP of EUR 26.1k  Small living quarters have limited space to store food  GDP increase by 5.1% in 2018  As a result, most Poles shop almost every day Source: GUS, Eurostat 3

Food market growth Small format stores accelerating their growth Food market growth by channel Food market growth in small format channels (FY 2018, YoY) (FY 2018, YoY) 13,5% 9,3% FY 2017 FY 2018 12,2% 8,5% 10,1% 6,5% 4,5% 5,0% 2,0% 2,3% 0,9% 0,8% 0,0% -0,6% -0,8% Discounters Hypermarkets Supermarkets Small Format -4,8% 2500+ 300-2500 FY 2017 FY 2018 Small Supermarkets Convenience 40-100 Small Grocers -40 Specialized & Others 100-300  Total Poland Food sales increased by 5.4%, while in Small Format stores increase was of 6.5% 4 Source: Nielsen, Total Poland, All Food

Food market dynamics Sales per one small format store is increasing the fastest despite declining number of all outlets Change of sales per one store 16,6% 13,2% 10,1% 5,9% 4,2% 2,6% 0,7% -3,5% Discounters Hypermarkets Supermarkets 300- Small Format Small Convenience 40- Small Grocers -40 Specialized & 2500+ 2500 Supermarkets 100- 100 Others 300 2015 2016 2017 2018 Change of number of stores No. of 8.9 27.0 33.2 22.3 3.3 4.0 91.5 0.3 stores (k) 158 114 -5 -31 -244 -615 -2 197 -3 087 Discounters Hypermarkets 2500+ Supermarkets 300- Small Format Small Supermarkets Convenience 40-100 Small Grocers -40 Specialized & Others 2500 100-300 5 Source: Nielsen, Total Poland, All Food

Like for Like vs. inflation Small Format stores sales growth accelerated despite lower inflation than other segments Like for Like sales dynamics by chain Food inflation by product category (YoY, 2018) 2018 4Q 2018 Large format categories Small format categories 6,8% 6,4% 5,9% 12% 10% 4,5% 4,3% 8% 6,8% 3,2% 2,8% 5,4% 2,1% 6% 4,7% 2,0% 2,0% Food 1,6% 3,9% 1,2% 4% 0,9% 2,7% average 2,0% 1,8% 1,7% 1,4% 1,3% 1,3% 2% 0% -0,1% Small Stores Large Stores -2% average +3.4% average +0.5% -2,3% -2,4% -4% -2,8% Fats Dairy Vegetables Bread and Food Meat Coffee & Tobacco Fish Beverages Alcohol Fruits Sugar, Cereals Tea incl. Spirits, sweets, abc Gama Lewiatan EKO Delikatesy Bierdronka Carrefour Tesco CEE Biedronka Wine Beer jams (DC) Centrum Source: Eurocash Group, Companies reports, Source: GUS wiadomościhandlowe.pl, abc – data for appx. 300 stores 2018 (I-IX) 2018 (I-XII) Delikatesy Centrum inflation: wholesale prices -1.2%, retail prices +0.4% in 2018 YoY 6

Eurocash Group overview Enormous purchasing power and efficient logistics to serve small and neighborhood stores across Poland Sales*: PLN 22.7bn (+10% YoY) Eurocash EBITDA*: PLN 374m (+4% YoY) Group Wholesale Projects Others (HQ) Retail Sales* PLN 4.9 bn** (+26%) PLN 74 m N/A PLN 17.7 bn (+6%) PLN 410 m (+18%) PLN 112 m (-13%) PLN -102 m EBITDA* PLN -45 m Duży Ben Cash&Carry Delikatesy Centrum Tobacco Specialized Kontigo Inmedio Distribution Alcohol Specialized Others Distribution Already moved to Wholesale or Retail Food Service (HoReCa) (W or R) due to reach of break even point: Faktoria Win (W) Eurocash Distribution recently sold for PayUp (W) Delikatesy Centrum: 1.5k stores - Over 80k clients. 13.5k retail stores organized 14x EBITDA 500 own & 1000 hard franchise within soft franchise chains: abc, Lewiatan, Inmedio: 500 newsagents Fresh Project (R) Groszek, Eurosklep, Gama * Results for 2018 7 ** Consolidated sales. Total annualized sales including franchise retail sales amounted to 7.4bn. Retail already includes Fresh Project

Eurocash - 2nd largest overall player in an unique market Top players are not names one would expect to outrank famous international retail chains *IFRS 15 Eurocash Group sales evolution (PLN bn) Ranking of FMCG distributors & retailers (sales, PLN bn) accounting change (appx. 2.4bn PLN) 48 Biedronka 23 32 Wholesale Retail 17 21 23 Eurocash 20 19 (Pro-Forma) 7 19 5 16 17 17 17 2 Lidl 11 4 5 3 11 2 Tesco 10 1 2 9 10 Kaufland 8 5 10 10 Auchan 8 11 10 1 18 7 18 10 17 6 16 15 15 15 1 Carrefour 5 9 6 1 1 3 7 0 9 Intermarche 5 2 2 1 7 3 2017 0 6 5 7 4 3 Żabka 4 2 2 1 7 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016 2017 2018 Metro (Makro C&C) 7 9 5 Dino 1,7 2009 3 Selgros 3 Delikatesy Tradis MHC Inmedio Rogala 3 Premium PayUp MBO IPO McLane Batna EKO Mila Centrum Group Kolporter FMCG FHC-2 Distributors KDWT Source: RZ500 PayUp Frisco.pl PDA M&A history: Disposal  16 acquisitions aimed at rolling up strong category leaders , capturing synergies around a common back-office  Hypermarkets have shown little growth for last 10 years *IFRS 15 – change of accounting rules, impacting sales revenues and costs of goods sold by EUR 2.4 bn due to reclassification part of sales into lower purchase conditions. No impact on EBITDA. 8

Wholesale: No. 1 distributor in Poland Building scale and purchasing power to bring competitiveness to small stores Wholesale market share Dedicated distribution platforms covering different store profiles • Local sub-wholesalers Eurocash • Producers own distribution • Specialized & categories not Generalists Group 25% covered by Eurocash Cash&Carry 4,5 27% Sales (PLN bn) Others 51% 26% Eurocash Distribution 4,6 13% Alcohol Delivery Makro - FMCG Distribution 2,2 (C&C) 6% Specialized Selgros (C&C) Tobacco & Impulse 33% Distribution 4% 5,9 PT Dystrybucja (T) 4% 3% Distribev (A) 3% HoReCa PHUP Gniezno Bać -Pol 2% 0,5 (T) 1% Alti (A) 1% T- Tobacco; A-Alcohol, 9

Eurocash.pl - successfully developed in 2018 Tremendous change in everyday life of store owner Digital approach to increase store owners competitiveness  To customize offer to local consumers  To flexibly compete with centrally managed retail chains  To reduce store costs, making work much easier and more automated  To fully integrate supply chain from Eurocash to Consumer # of Eurocash.pl users (thsd.) 2018 avg. order by type (pln) 2018 # of ordered SKU 33 1 173 8,7 80 934 8,0 +141% +108% +26% +88% 623 16 14 2017 2018 LT Others Sales Rep. www Others Sales Rep. www Objective 10