EUROCASH The broadest food distribution and retail platform in - - PowerPoint PPT Presentation
EUROCASH The broadest food distribution and retail platform in Poland Eurocash Group executive summary Innovative approach to understanding consumer needs RAPIDLY GROWING E-COMMERCE B2B2C PLATFORM supported by scale as No. 1 wholesale
Innovative approach to understanding consumer needs
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Quality and efficiency
Fresh Products
Personalization + advanced market data
Eurocash.pl
Premiumization + Individualized approach
Eurocash.pl Market
Personalization
POS + CRM
New Technologies
Omnichannel Education 2.0 + Social Engagement of Entrepreneurs
10k wholesale clients
PLN 3.5 bn sales 3
Today Future objective
Enable access by all 80k wholesale clients 1.5k retail stores
40% of turnover, 2.5x LFL
Launched
in September 2019
1.5k retail stores
Quality, everyday delivery
Consumer online access to full marketplace assortment Profitable home delivery of Stock-up mission in main cities Warsaw 42% market share
Automated warehouse
Access to consumers all over the country brings tremendous advantage to understand needs through big data
Platform extension on “white label” basis to Wholesale’s franchise chain clients Fresh offered next to main franchised supermarket chains
1 2 2 3 4 5 6 7 9 15 15 15 18 16 17 18 1 1 1 1 1 2 2 2 3 4 5
1 2 2 3 5 6 7 8 10 17 17 17 20 19 21 23
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Wholesale Retail
❑ Competitiveness of Traditional trade derive from our scale, rolling-up category leaders, capturing synergies around a common back-office ❑ Modern Trade’s focus on large formats failed: Hypermarkets have shown little growth for last 10 years
3 9 3 6 9 5 10 5 7 17 3 2 7 4 5 9 10 8 11 11 17 32
3 6 7 7 7 8 10 10 11 18 23 51
Selgros Dino Metro (Makro C&C) Żabka Intermarche Carrefour Tesco Kaufland Auchan Lidl Eurocash Biedronka
2018 2013 2009 Eurocash Group sales evolution (PLN bn) Ranking of FMCG distributors & retailers (sales, PLN bn)
Source: RZ500
*IFRS 15 accounting change (appx. 2.4bn PLN)
MBO IPO Delikatesy Centrum KDWT PayUp McLane Batna Premium Distributors Tradis Group Inmedio Kolporter FMCG Frisco.pl Rogala FHC-2 PDA EKO Mila M&A history: MHC PayUp Disposal
*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.
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Top players in Poland are not names one would expect to outrank famous international retail chains
Several times larger than next players, strongest in the categories sold mostly by small stores Wholesale market share
Eurocash Group 28%
Makro - FMCG (C&C) 5% Selgros (C&C) 4% PT Dystrybucja (T) 3% Distribev (A) 3% PHUP Gniezno (T) 2% Alti (A) 1%
Others 54%
covered by Eurocash
Dedicated distribution platforms covering different store profiles
4,5 4,6 2,2 5,9 0,5
Sales (PLN bn)
Cash&Carry Eurocash Distribution Alcohol Distribution Tobacco & Impulse Distribution HoReCa
Delivery Generalists Specialized
T - Tobacco; A - Alcohol,
2018:
Now merging:
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Enormous purchasing power and efficient logistics now serving to transition into Retail growth
Delikatesy Centrum Cash&Carry Tobacco Specialized Distribution Alcohol Specialized Distribution Food Service (HoReCa)
Over 80k clients. 13.8k retail stores organized within soft franchise chains: abc, Lewiatan, Groszek, Eurosklep, Gama
Eurocash Distribution
Delikatesy Centrum: 1.56k stores - 564 own & 996 hard franchise Inmedio: 449 newsagents
Sales’18: EBITDA’18: PLN 17.7 bn (+6%) PLN 410 m (+18%) PLN 4.9 bn* (+26%) PLN 112 m (-13%) PLN 74 m PLN -45 m N/A PLN -102 m
Inmedio Duży Ben Kontigo Others Faktoria Win (W) PayUp (W)
Already moved to Wholesale or Retail (W or R) having broken even:
Fresh Project (R)
Sales’18: PLN 22.7 bn (+10% YoY) EBITDA’18: PLN 374 m (+4% YoY)
sold in 2018 for 14x EBITDA
* Consolidated sales. Total annualized sales including franchise retail sales amounted to 7.4 bn. Retail already includes Fresh Project.
In merging process since 2019
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4,3 3,1
996
Number
Retail Sales (PLN bn, 2018)
Own Franchise
564
51 18 11 10 10 8 7 7 7 6 3 3 3 2 2 Biedronka Lidl Auchan Kaufland Tesco Carrefour Delikatesy Centrum Intermarche Żabka Dino Netto*
Stokrotka Polomarket* Piotr i Paweł*
Entering retail through market consolidation, followed by operational integration, with LT objective to become no. 3 retailer
Ranking of retailers (2018 sales, PLN bn)
> Retail Sales
> By 2023 Acquisitions Green Field Franchise Chain 2-3Y integration to ensure standardized business with unified processes
LT
EV/Sales 50% (JMT) 37% (TSCO) 22% (CA) ? 62% (PE**) 114% (DIN, IPO) 49% (PE**) 57%
Profi (Romania)
68% (PE**) Average
consolidated 5.1 Source: RZ500 *no data for 2018, data used for 2017 **PE – Private Equity deal
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❑ Warsaw market leader, home delivery with 42% market share ❑ E-supermarket B2C ❑ Automated warehouse launched in May 2019
❑ Specialized liquor store ❑ Supported by Eurocash scale ❑ Deconsolidated market 50 stores at the end of 1H 2019 with store level avg. break-even in 6 months. LFL in first half of year +21%.
❑ Following Faktoria Win, PayUp & Fresh Projects success, new and promising ones are in expansion phase ❑ Frisco.pl – a laboratory for innovations, Duży Ben as the next most promising Project operating in non-organized market
Sweet&Alcohol store independence (2018) Sweet&Alcohol store sales dynamics (YoY 2018) 57,0% 43,0%
Non-Organized Chain
7,6% 5,4%
Sweet & Alcohol Total Market
20% 28% 36% 42%
2015 2016 2017 2018
Value Market Share (Warsaw)
Doubled market share in last 3 years
Source: Nielsen Retail Trade Panel, Value sales, period: January 2017 – December 2018, Food categories; Nielsen 2018 In-store audit
Chain/organized store Independent store Total Poland
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In a changing industry Eurocash is able to keep investing, in good times and bad, to innovate & support small stores
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0,2 0,4 0,7 0,9 1,6 2,1 2,4 3,4 3,7 4,2 4,7
0,2 0,3 0,7 1,8 1,9 2,0 2,3 2,4 2,7 3,0 3,4
158% 101% 93% 100% 137% 135% 60% 206% 74% 137% 133%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
OCF/EBITDA
Cumulative Operational Cash Flow (OCF) and Investment Cash Flow (ICF) PLN bn Cash Conversion (in days)
❑ Cash conversion one of best in the market and also if compared with international peers ❑ Cash generative business model funds M&A and innovation for long-term ❑ We kept investing even in tough macro environment: total investment in last 10 years of EUR 800 m
IFRS 15 accounting change (-2 days)*
*IFRS 15 impact on working capital rotation due to 2.4 bn PLN sales reclassification
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Now, as before, a capex-light business model and working capital discipline underpin M&A and investments
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Innovative approach to understanding consumers need
with almost half of the market and 6% sales dynamics
EBITDA INCREASE BY PLN 22 M YOY (+14%)
supported by 5.1% organic sales increase
STRONG DELIKATESY CENTRUM RETAIL LFL AT +3.4% IN 1H 2019 and 8.0% in 2Q 2019
IFRS16 IMPACT ON P&L AND BS:
EBITDA PLN +178 m, EBIT +19 m, Net Profit -9 m and Net Debt +1.8 bn
LTM OPERATING CASH FLOW AT THE LEVEL OF 0.7X EBITDA
with ND/EBITDA at level 1.5x driven by dividend and M&A 11
10% 30% 18% 28% 21% 7% 47% 26% 9% 64% 17% 11% 4% 26% 44% 40% 61% 55% 62% 82% 43% 65% 83% 30% 78% 84% 94% 73% 46% 31% 21% 17% 17% 12% 10% 9% 8% 6% 5% 5% 2% 1% HM (+2500m²) SM (400-2500m²) SMALL FORMAT (under 400m²)
Demographics: small towns, small living quarters that necessitate daily shopping close to home
40% 13% 11% 8% 28%
Rural Cities 0-20K Cities 20-50K Cities 50-100K Cities 100K+
❑ 60% of Poles live in villages & small towns
Percentage of population living in cities/rural area
❑ Small living quarters have limited space to store food ❑ As a result, most Poles shop almost every day ❑ Total population of 38.4 M ❑ GDP per Capita PPP of EUR 26.1k
Share of distribution channels in European countries
❑ GDP increase by 5.1% in 2018
Source: GUS, Eurostat, Nielsen RMS 2017
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9,5%
6,0%
Discounters Hypermarkets 2500+ Supermarkets 300-2500 Small Format
2,8% 11,4%
10,3%
Small Supermarkets 100-300 Convenience 40-100 Small Grocers - 40 Specialized & Others
Small supermarkets and discounters accelerating, grocery stores still strong while big boxes are struggling
Source: Nielsen Retail Trade Panel, Value sales, period: January 2017 – July 2019, Food categories
Food market growth by channel
(FY 2018 & LTM JUL 2019 YoY)
Food market growth in small format channels
(FY 2018 & LTM JUL 2019 YoY)
❑ In the PLN 280 bn FMCG market, Small format stores have 46% and have grown 3% p.a. last 3 years ❑ LTM July Food sales increased by 5.6%, while in Small format stores increased 6.0%
123 117 128 107 128 152 230 245 279
2012 2015 2018 Small Format Large Format
Total FMCG Market Evolution
(PMR, incl. VAT)
Source: PMR CAGR
CAGR 3,0% CAGR 6,1% CAGR 5,9%
CAGR 2,0% CAGR 4,5%
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6,8% 5,4% 4,7% 3,9% 2,7% 2,0% 1,8% 1,7% 1,4% 1,3% 1,3%
19,6% 6,1% 4,0% 0,0% 0,7% 3,4% 3,3% 1,5% 1,9%
4,3%
Fats Dairy Vegetables Bread and Cereals Food Tobacco Coffee & Tea Meat Fish Beverages Alcohol incl. Spirits, Wine Beer Fruits Sugar, sweets, jams
2018 (I-XII) 2019 (I-VII) 2,0% 1,8% 1,9% 2,2% 1,5% 1,7% 2,0% 1,4% 1,2% 2,4% 2,9% 2,8% 3,4% 3,4% 4,6% 5,6% 3,9% 3,2% 2,2% 1,1% 1,8% 4,7% 6,8% 7,2% 1,1% 0,8% 1,0% 0,9% 1,1% 1,7% 1,8% 1,6% 1,4%1,3% 1,2%
1Q'17 2Q 3Q 4Q 1Q'18 2Q 3Q 4Q 1Q'19 2Q Jul (flash) Aug (flash)
CPI CPI - food & non-alcoholic beverages CPI - alcoholic beverages & tobacco Large format categories Small format categories
Food inflation is accelerating to record levels with CPI at heights not seen since 2012.
Food average
Inflation
(YoY)
Food inflation by product category
Source: GUS, data for entrepreneurs with more than 9 employees
❑ Trend in food inflation changed and accelerated to 4.7% in 2Q 2019 and 7.2% in August 2019 ❑ Vegetables, bakery, meat and dry food are driving food inflation. Beverages are stable below 2%.
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PLN m
1H 2018 1H 2019 before IFRS16 Y/Y Change % of Sales 1H 2018 % of Sales 1H 2019 before IFRS16 1H 2019 % of Sales 1H 2019 Net sales 10 747 11 921 10.9% 11 921 Gross profit 1 288 1 550 20.4% 12.0% 13.0% 1 550 13.0% EBITDA 156.6 159.9 2.1% 1.5% 1.3% 337.5 2.8% EBIT 60.5 53.2
0.6% 0.4% 71.7 0.6% Net profit 17.5 15.8
0.2% 0.1% 6.7 0.1%
11% sales growth with reported EBITDA margin at 2.8% driven by IFRS16
❑ Gross Margin driven mainly by consolidation of retail companies. Wholesale margin slightly improved. ❑ EBITDA increase by PLN 3.3 m, while EBITDA margin deteriorate due to change of sales mix. ❑ IFRS16 drives EBITDA by PLN +178 m, EBIT by PLN +18.6 m and impacts net profit by PLN -9.1 m
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1,72% 1,84% 2,00%
1H 2017 1H 2018 1H 2019 EBITDA EBITDA/Sales
1H 2017 1H 2018 1H 2019 Sales
Supported by 5.1% organic sales increase
+17.4 m +12.5% ❑ Sales increase by PLN 433 m, EBITDA by PLN 22.4 m and EBITDA margin by 0.16 p.p. in 1H 2019 ❑ EBITDA driven by Tobacco, Cash&Carry, ECD and partially off-set by Alcohol Distribution
1H Sales of goods evolution
(PLN m)
1H EBITDA evolution
(PLN m)
+22.4 m +14.2% +442 m +5.4% +433 m +5.1%
278
(IFRS16)
before IFRS16
16
8 561 8 995 4 291 77 20
Sales 1H 2018 Cash&Carry Tobacco Distribution Food Service & Other Sales 1H 2019
Strong 5% sales increase despite further reductions of sub wholesalers and deals in Alcohol Distribution +433 m +5.1%
Wholesale sales evolution by format
(1H 2019 YoY)
❑ Strong Tobacco sales increase by 10%, followed by ECD, C&C and Food Service healthy dynamics ❑ Eurocash Distribution ex. Alcohol growth by 9.2% driven by sales to franchisees (+11.4% in 1H and +15.0% in 2Q 2019 YoY), Alcohol currently off-setting the growth due to merger process (Logistics and HO cost reduction, digital sales introduction, change of sales strategy)
+2.1% +8.8% +2.4% +10.0%
+9.2% ex. Alcohol dist. +11.4% Franchisees
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3,45% 2,40% 1,86%
1H 2017 1H 2018 1H 2019 EBITDA EBITDA/Sales
1H 2017 1H 2018 1H 2019 Sales
Accelerating Delikatesy Centrum LFLs, EBITDA growth partially off-set by consolidation of Mila
❑ Sales increase driven by M&A (Mila PLN +560 m, Partner PLN +61 m). ❑ Ongoing integration on schedule: strategy revision, concept of operational model ready, new design of organizational structure with full team in place. Phase of common IT solution roll out currently being developed. 1H Sales of goods evolution
(PLN m)
1H EBITDA evolution
(PLN m)
+2.5 m +5.0% +205 m +10.9% +741 m +35.5%
129
(IFRS16)
before IFRS16
18
Sales increase in all formats despite low basket inflation +138 +3.5%
Retail sales evolution by format
(1H 2019 YoY)
❑ Own supermarkets increasing sales by PLN 673 m ❑ Franchise stores with sales increase by 4.9% in 1H 2019
+741 m +35.5%
997 Franchise 877
Own Supermarkets
211 Inmedio 1 046 Franchise 1 550
Own Supermarkets
230 Inmedio
10.1% 42.1% 47.8% 8.1% 54.8% 37.0%
❑ Delikatesy Centrum LFL at level of +3.35% in 1H 2019 and average retail basket inflation at +0.72% ❑ Inmedio newsagents LFL +5.22% in 1H 2019
6,7%
3,4%
0,9% 8,5%
8,0%
2,1%
6,3%
2Q 1Q 4Q'18 3Q 2Q 1Q
Delikatesy Centrum Wholesale Delikatesy Centrum Retail
Delikatesy Centrum like for like 1Q’18 1Q’19 4Q
2 085 2 826
673 49 19
Sales 1H 2018 Supermarkets Own Delikatesy Centrum Franchise Inmedio Sales 1H 2019 +76.7% +4.9% +9.2% 19
1H 2017 1H 2018 1H 2019 EBITDA
1H 2017 1H 2018 1H 2019 Sales
+10 m from Duży Ben
Projects excluding Fresh Project
1H 2019 Sales of goods evolution
(PLN m)
1H 2019 EBITDA evolution
(PLN m)
+8.3 m +53.7% +15.1 m +63.3% ❑ Duży Ben driving sales with 50 stores at the end of 2Q 2019 ❑ EBITDA impacted by costs of expansion and investments into brand awareness
(20)
(IFRS16)
before IFRS16
❑ LFL in Duży Ben in 1H 2019 amounted to +20.8% ❑ Further expansion needed to reach break even point
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31 31 28 30 30 27 24 21 23 22 25 23 21 24 24 24 20 20 25 20 ( 21) ( 21) ( 22) ( 27) ( 23) ( 25) ( 24) ( 28) ( 25) ( 25) ( 76) ( 75) ( 71) ( 81) ( 77) ( 76) ( 68) ( 70) ( 72) ( 68)
20 40
Q1 2017 Q2 Q3 Q4 Q1 2018 Q2 Q3 Q4 Q1 2019 Q2 Receivables Stock Cash conversion Liabilities
PLN m
1H 2019 1H 2019
before IFRS16
1H 2018 Net operating cash flow 265
83
186 Net profit (loss) before tax 19
30
42 Depreciation 266
107
96 Change in working capital 1
1
63 Other (21)
(55)
(15) Net investment cash flow (180)
(180)
(378) Net financial cash flow (84)
98
138 Total cash flow 1
1
(54)
Operating CF driven by depreciation from IFRS16. LTM OCF before IFRS16 at 0.71x EBITDA.
Cash conversion cycle
❑ Net Working Capital rotation at stable LT optimum level of -25 days ❑ OCF at level of PLN 265 m. Before IFRS16 at 83 m. ❑ Working capital impacted by increased sales and inventory reductions as of end 2018. Rotation of each position impacted by change in mix of sales (increase of share of tobacco and fresh categories in total revenues).
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❑ Q1 2019 Net Debt increase of PLN 347 m
Net Debt increase due to seasonality and M&A. IFRS16 not impacting operations and financial capabilities
Net Debt vs. EBITDA
❑ IFRS16 drives ND to PLN 2.55 bn ❑ IFRS Index below 3.5x IFRS16 EBITDA
(1) IFRS16 EBITDA – estimation for 2019 based on the assumption that the number of contracts will be constant and no change of their conditions is to occur. The estimated IFRS16 EBITDA shall not constitute any definitive forecasts and as
such is not guaranteed by Eurocash to any extent .
(2) NET DEBT - the sum of long and short term loans, borrowings and financial liabilities less cash and cash equivalents (3) IFRS16 INDEX – new measure of indebtedness including operating leasing. The estimation shall not constitute any definitive forecasts and as such is not guaranteed by Eurocash to any extent.
2 416
(incl. IFRS16)2
3.21x
(incl. IFRS16)3
3.44x
(incl. IFRS16)3
2 554
(incl. IFRS16)2
1 825 1 788
3301
742
(incl. IFRS16)1
752
(incl. IFRS16)1
210 m M&A + Dividend
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(1) IFRS16 EBITDA – estimation for 2019 based on the assumption that the number of contracts will be constant and no change of their conditions is to occur. The estimated IFRS16 EBITDA shall not constitute any definitive forecasts and as
such is not guaranteed by Eurocash to any extent .
(2) NET DEBT - the sum of long and short term loans, borrowings and financial liabilities less cash and cash equivalents (3) IFRS16 INDEX – new measure of indebtedness including operating leasing. The estimation shall not constitute any definitive forecasts and as such is not guaranteed by Eurocash to any extent.
❑ CAPEX-light business model will drive IFRS16 Index / EBITDA (1) to 2.9x, EBITDA (1) to PLN 748 m and EBITDA (1) margin to 3.3%
Net Debt vs. EBITDA in 2018 (PLN m)
AFTER IFRS 16 IFRS 16 IMPACT CURRENT
NET DEBT / IFRS16 INDEX
EBITDA
NET DEBT (IFRS16 INDEX) / EBITDA
EBITDA margin
SALES
2Q 2019 vs 2Q 2018 23
This presentation and the associated slides and discussion contain forward-looking statements. These statements are naturally subject to uncertainty and changes in circumstances. Those forward-looking statements may include, but are not limited to, those regarding capital employed, capital expenditure, cash flows, costs, savings, debt, demand, depreciation, disposals, dividends, earnings, efficiency, gearing, growth, improvements, investments, margins, performance, prices, production, productivity, profits, reserves, returns, sales, share buy backs, special and exceptional items, strategy, synergies, tax rates, trends, value, volumes, and the effects of Eurocash S.A. merger and acquisition activities. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to developments in government regulations, foreign exchange rates, oil and gas prices, political stability, economic growth and the completion of ongoing transactions. Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, you are cautioned not to place undue reliance on any of the forward looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which speak only as of the date hereof) to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as maybe required under applicable securities laws. Statements and data contained in this presentation and the associated slides and discussions, which relate to the performance of Eurocash S.A. in this and future years, represent plans, targets or projections.
Cezary Giza
Investor Relations Director cezary.giza@eurocash.pl mobile: +48 693 930 415
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