Migros T icaret A.. 9M 2019 Financial Results Migros Sustainability - - PowerPoint PPT Presentation

Migros Ticaret A.Ş.

9M 2019 Financial Results

Migros Sustainability Report 2018

Sales

CONTENTS

Management Overview

1

Expansion Format Summary Financial Overview Financial Results

Ataşehir Migros

Market Share Evolution Capital Expenditures

21.3%

top-line growth in 3Q19 despite relatively low space growth of 1.6% y-o-y ▪ Migros recorded 24.7% sales growth in 9M 2019 ▪ Strong customer traffic at existing Migros stores

Sales in 3Q (TL million)

2

Sales in 9M 2019

6,464 5,331

3Q 2018 3Q 2019

Sales in 9M (TL million) 17,195 13,794

9M 2018 9M 2019

Sales Growth in 3Q19

21.3%

Sales Growth in 9M19 24.7%

Market Share Evolution

3

Market Share Gain Migros FMCG Market Share Evolution (%)

7.1 16.9

7.9 17.7

Total FMCG Market Share Modern FMCG Market Share 9M 2018

◼ 80 bps market share gain in

modern FMCG market.

◼ 80 bps market share gain in total

FMCG market.

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

9M 2019 9M 2018 9M 2019

4

Expansion

Net Sales Area Split By Banner - 9M 2019

Space growth (m2)

1.6%*

Net Sales Area (3Q19)

1,517 K sqm

9M 2018 9M 2019

Number of Stores - Total 2,090 2,165 +75

96

new store

• penings in

9M 2019

9

new store

• penings in

October 2019

81 cities

• perating in every

city in the Country

2,165

number of stores as of 3Q19

* Hypermarket space optimization (m2) impact: 100 bps * High base of 9M18 due to acquisition of Uyum&Makro stores

Capital Expenditures

5

Capex (TL million)

% of Sales

Cautious stand in capex plans continues Space optimization in large stores continues

21 completed since

Kipa acquisition (including 7 in the current year)

297 399 488

2016 2017 2018

2.7% 2.6% 2.6% 370 208

9M 2018 9M 2019

2.7% 1.2%

More value to the customers through reduced prices in fruits & vegetables and fresh meat

1,772 1,749 1,387

3Q 2018 3Q 2019 3Q 2019

[IFRS 16]

Gross Profit 3Q (TL million)

6

Gross Profit in 9M (TL million) 4,690

Margin 27.3% 25.8% 26.9%

4,628 3,553

9M 2018 9M 2019 9M 2019

[IFRS 16]

Margin 27.4% 26.0% 27.1%

Consolidated Gross Profit in 9M 2019

7.8%

EBITDA margin in 3Q19, w/o IFRS 16 impact

12.3%

EBITDAR margin in 3Q19

7

Consolidated EBITDA(R) in 9M 2019

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

EBITDA9M (TL million) EBITDA in 3Q (TL million) EBITDAR 9M (TL million)

Margin 11.7% 11.0%

2,013 1,512 EBITDAR 3Q (TL million)

Margin 12.3% 11.7%

794 625

3Q 2018 3Q 2019 9M 2018 9M 2019

Margin 10.3% 6.2% 7.1%

1,774 859 1,214

9M 2019

[IFRS 16]

9M 2019 9M 2018

Margin 10.8% 7.2% 7.8%

698 383 503

3Q 2019

[IFRS 16]

3Q 2019 3Q 2018

▪ Delivery within 30 minutes

• nly

▪ Same prices with Migros stores ▪ Over 1,800 SKUs ▪ Same day delivery, ▪ Over 28,000 SKUs, ▪ Service available in 48 cities, ▪ Night delivery between 22:00- 24:00 in selected regions

Six online channels

8

▪ Delivery within 3 days ▪ Products available for courier shipping ▪ Increased service quality ▪ Improved order fulfillment ratio ▪ Labor efficiency and last mile

• ptimization

Darkstore 1

2019 Initiatives

Enhancing online penetration

2 3

Migros 9M 2019 Cash and Leverage Position

1 Includes capitalized costs of lease contracts over their maturity 2 IFRS 16 was implemented since 01.01.2019. Includes the IFRS 16 LTM rent cost impact

which was extrapolated based on 9M19 rent cost. (TL 560.3 / 3 x 4 = TL 747.1 mn)

Gross Euro Debt (in million) 692 672 611 462 432 2016 2017 2018 9M19 2019E Deleveraging Profile - Net Debt / EBITDA LTM

3.2x 2.9x 2.7x 2.6x 2.3x 2014 2015 2016 2017 2018

Euro/TL Rate 2.8207 3.1776 3.7099 4.5155 6.1836 Change:-11% 6.0280 6.9505

Deleveraging

Cash & Debt Items Total TL m Total TL m

[w/ IFRS 16]

Cash & Cash equivalents

2,282 2,282

TL m 1,598 1,598 EUR m 111 111

Financial Debt

4,344 7,5221

TL m 1,484 4,662 EUR m 462 462

Net Debt

2,062 5,240

EBITDA LTM

1,572 2,3192

Net Debt / EBITDA LTM

1.3x 2.3x

9

Gross Euro debt is expected to be decreased by €30 mn with an early down payment in 4Q19

Note: Net debt / EBITDA ratios without IFRS 16

3.0x 1.3x 9M 2018 9M 2019

10

Management Agenda in 2019

Growth & Operational Profitability Online Business

• Operational performance is on track

and the management maintains 2019 FY top-line growth &

• perational profitability guidance
• Normalization in EBITDA margin is

expected in 4Q19

Deleveraging

Recalibrating our online channel;

• Geographical coverage of Migros

Hemen, concept aiming a “delivery time of 30 minutes”, is expanding in three big cities

• Collaboration with Trendyol

(a subsidiary of Alibaba Group) facilitated and increased online business penetration momentum

• ~30% y-o-y decrease in Gross Euro

debt is expected in 2019

• Asset divestitures reached TL 616 mn

in total (TL 406 mn in 2019)

* excluding IFRS 16 impact

Expectations and Guidance

2019 Guidance [Consolidated]

2019E Guidance

Sales Growth

23-25%

EBITDA Margin

6-6.5%*

Expansion Target

125+

new stores CAPEX

~TL 320 mn

• Financials
• Operations

Financials & Format Summary

IFRS Consolidated Income Statement Summary

Summary of Income Statement – 9M 2019

12

Net Sales 17,195 13,794 Cost of sales

• 12,504
• 10,240

Gross Profit 4,690 3,553 Operating Expenses

• 3,635
• 2,985

Other Operating Income / (Expense)

• 358
• 282

Operating Profit 697 286 Income / (Expense) from Investment activities 15

• 15

Operating Income Before Finance Income / (Expense) 711 271 Financial Income / (Expense)

• 883
• 1,685

Income/Loss Before Tax From Continuing Operations

• 171
• 1,414

Tax Income / (Expenses)

• 8
• 31

Deferred Tax Income

• 23

239 Net Profit / Loss

• 202
• 1,207

Net Profit / Loss - Non-controlling interest Net Profit / Loss - Equity holders of parent

• 202
• 1,207

EBITDA 1,214 859 EBITDA (with IFRS 16 impact) 1,774

• EBITDAR

2,013 1,512

(TL Million)

9M 2019 9M 2018

IFRS Consolidated Balance Sheet Summary

Summary of Balance Sheet – 9M 2019

13

Current Assets 5,127 4,474 Non-current Assets 9,289 6,411 Total Assets 14,415 10,885 Current Liabilities 7,448 6,675 Non-current Liabilities 6,512 3,575 Total Liabilities 13,960 10,250 Equity 455 635 Total Liabilities and Equity 14,415 10,885

(TL Million)

9M 2019 2018

Geographical Footprint

◼ Operating in 3 countries

— Turkey (81 cities out of 81) — North Macedonia and Kazakhstan (44 stores)

2,165 Stores1

◼ 2,044

(supermarkets)

◼ 56

(upscale supermarkets)

◼ 21

(wholesale and foodservice stores)

◼ 44

(international stores)

◼ Migros Online

— 3.5m members and 70% mobile orders — Tazedirekt

Innovation, Loyalty & Customer Service

◼ 7m loyal households Money Club Card ◼ Introduced more than 100 innovations for the retail market

Sustainability and Corporate Governance

◼ Member of “BIST Sustainability Index” ◼ Included Corporate Governance Index since 2015 ◼ 32,114 employees of which 40% are women ◼ Best retailer of the country 15 years in a row2

Migros at a Glance

80%

• f HH

+100

38%

• f HH

65th Year!

1 as of September 30, 2019 2 Capital Business magazine.

14

15 Consolidated Sales (TL million) 9,390 11,059 15,344 18,717 2015 2016 2017 2018

Consolidated sales & EBITDA doubled in 3 years

Consolidated EBITDA (TL million) 602 677 872 1,217 2015 2016 2017 2018

Three-year Summary

◼ Number of stores: 2,044 including 1,170 Supermarkets. 56 Hypermarkets,

and 818 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

16

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 18 years

Loyalty Program

(*): including Migros Jet stores and Migros Jet 7/24 forecourt stores as of September 30, 2019

Macrocenter

Exclusive shopping

Penetration: 6 cities

◼ Number of stores: 56 ◼ 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

17

◼ Currently operating in 7 regions through dedicated sales

team.

◼ Dedicated warehouses and customer delivery ◼ 21 Wholesale stores

Penetration: 16 cities 18

Wholesale & Food Service

Focus on Horeca Penetration

Kazakhstan North Macedonia

19

◼ 1.1% of consolidated sales from Kazakh operations

◼ Number of stores: 17, including 2 hypermarkets and

15 supermarkets.

◼ Owns 1 shopping mall in Almaty ◼ Total sales area of 22,898 sqm ◼ Operates in multi-format since 1999

◼ 1.4% of consolidated sales from Macedonian operations

◼ Number of supermarkets: 27 ◼ Owns 1 shopping mall in Skopje ◼ Total sales area of 22,568 sqm ◼ Operations started in 2005

International Operations

1 Shopping Mall 2 Hypermarkets 15 Supermarkets 1 Shopping Mall 27 Supermarkets

20

Store Portfolio

1,988

Supermarkets

(incl. 818 Migros Jet stores)

56

Hypermarkets

56

Macrocenter stores

Upscale format

44

Ramstores

North Macedonia & Kazakhstan

September 30, 2018 September 30, 2019

# of stores Sales area

(th sqm)

# of stores Sales area

(th sqm)

Migros (M, MM,MMM) 1,153 959.8 1,170 980.4 Migros Jet 769 149.4 818 165.7 5M 58 292.6 56 274.1 Wholesale 18 10.3 21 12.0 Macrocenter 50 35.9 56 39.5

Domestic Total 2,048 1,447.9 2,121 1,471.7

Ramstores 42 45.7 44 45.5

Grand Total 2,090 1,493.6 2,165 1,517.1

Ownership Structure

Direct Shareholding Structure

Migros Ticaret A.S.

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 merger in 2018 in accordance with relevant CMB legislation Note: Anadolu Group maintains its 50% stake in Migros

21

Carbon Footprint Water Management Energy Management

Our Target: Reducing daily carbon emissions per sales area (m2) by 25% in 2023 compared to 2015 Our Target: Reducing daily water consumption per sales area (m2) by 5% in 2023 compared to 2017 Our Target: Reducing daily energy consumption per sales area (m2) by 17% in 2023 compared to 2013

Sustainability

22

We completed 78% of this target by the end of 2018 We reduced our daily water consumption per sales area (m2) by 1.1% compared to 2017 We completed 61% of this target by the end of 2018

Waste Management & Biodiversity Conservation

23

Combating Food Waste Combating Deforestation Good Agricultural Practices Combating Plastic Waste

We supported 1,124,023 meals to be delivered to those in need thanks to Respecting Food Project We saved food amounting to total revenues of 10 Migros Jet stores through discounted sales of fresh food products and ripened vegetables & fruits 5,281 tons of organic was sent to a biogas plant The amount of plastic we use in our 40 different private label products in the detergent and paper category contains 327 tons less plastic We sold 317,518 nonwoven and cloth bags We made life cycle assessment for 50% of our private label product purchases, We delivered 663,565 tons of Good Agricultural Practices (GAP) fruit and vegetables to our customers in 8 years Our whole chicken and turkey products were produced in accordance with GAP procedures and principles including 317 checkpoints We supported planting 543,350 olive trees in 10 years We saved 33,830 trees by printing all campaign and promotional brochures and booklets on recycled paper

Pillars of Migros Sustainability Vision

Migros Better Future Plan

24

Consider compliance with human rights in all

• ur activities, and to respect gender and equal
• pportunities;

Ensure transparent, consistent and rapid flow

• f product content and information;

Implement innovative practices that increase

• ur efficiency, add convenience and speed to

the lives of our stakeholders; Measure and strive to reduce our carbon footprint in order to combat climate change; Conduct environmental impact assessments before establishing our new areas of activity; Develop solutions with our suppliers in order to improve the life cycle of the products we

• ffer to our customers;

Measure, reduce, reuse or recycle waste from

• ur operations;

To combat environmental, water, air, soil, noise and visual pollution and to develop preventive solutions; Develop projects to ensure efficient consumption

• f water and energy;

Support the activities in the field of conservation

• f biodiversity and to eliminate the negative

impacts that may arise from our activities; To raise awareness towards the value adding activities our stakeholders can implement for a more habitable world and future; Create shared value by including our stakeholders in our sustainability development goals towards our generated economic value, jobs and business partnerships.

Disclaimer Statement

25

Migros Ticaret A.Ş. (the “Company”) has prepared this presentation for the sole purpose of providing information about its business, operations and financial results. The informaation in this presentation is subject to updating, revision and amendment. The information in this presentation, which includes certain information drawn from external sources, does not purport to be comprehensive and has not been independently verified. No reliance may be placed for any purpose whatsoever on the information contained in this presentation or any assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, any of its subsidiaries or any of its advisers, officers, employees or agents, as to the accuracy, reliability or completeness of the information or opinions contained in this presentation or in any revision of the presentation or of any other written or oral information made or to be made available to any interested party or its advisers. Save in the case of fraud, no responsibility or liability is accepted (and all such liability is hereby excluded for any such information or opinions). No liability is accepted by any of them for any such information or opinions (which should not be relied upon) and no responsibility is accepted for any errors, misstatements in or omissions from this presentation or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. The information and opinions contained in this document are provided as at the date

• f this presentation and are subject to change without notice.

To the extent available, the industry, market and competitive position data contained in this presentation come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. While the Company believes that each of these publications, studies and surveys has been prepared by a reputable source, the Company has not independently verified the data contained therein. In addition, certain of the industry, market and competitive position data contained in this presentation come from the Company’s own internal research and estimates based on the knowledge and experience of the Company’s management in the markets in which the Company operates. While the Company believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry, market

• r competitive position data contained in this presentation.

This document is not intended for potential investors and does not constitute a financial promotion or other invitation or inducement to engage in investment activity. In particular, this document does not constitute or form part of any offer to sell or issue or invitation to purchase or subscribe for, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. The information, statements and opinions contained in this document do not constitute any advice or recommendation regarding the securities of the Company or other financial instruments. The content of this presentation has not been approved by an authorized person within the meaning of the Financial Services and Markets Act 2000 of the United Kingdom. In the United Kingdom, this presentation is only being distributed to persons who are reasonably believed to be persons who fall within Articles 19 (Investment professionals) or 49 (High net worth companies etc.) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 or to other persons to whom this presentation may

• therwise be lawfully distributed. This presentation is being distributed outside the United Kingdom only to persons to whom this presentation may lawfully be distributed

pursuant to any applicable legal requirements. Persons to whom this presentation may not lawfully be distributed should return this presentation immediately to the Company and in any event, must not act or rely upon the information contained in this presentation. By reading this presentation or attending or listening to any relevant meeting, conference call or podcast organized by the Company, each person is deemed to confirm, warrant and represent that they are persons to whom this presentation may lawfully be distributed. This presentation contains “forward looking statements” which may relate to, without limitation, the Company’s plans, objectives, goals, strategies, future operational performance, and anticipated developments in the Turkish retail market and the Turkish economy. These forward looking statements are characterized by words such as “anticipate”, “estimate”, “believe”, “intend”, “plan”, “predict”, “may”, “will”, “would”, “should”, “continue”, “expect” and similar expressions, but these expressions are not the exclusive means of identifying such statements. Such forward looking statements involve risks, uncertainties and other important factors that could cause circumstances or the Company’s actual results, performance or achievements to be materially different from any future circumstances, results, performance or achievements expressed or implied by such statements. Relevant risks and uncertainties include, among others, economic slowdown, sector consolidation, consumer demand, competitive pricing and activities. There can be no assurance that actual results will not differ materially from expectations, and, therefore, readers are cautioned not to place undue reliance on such statements. Any forward-looking statement in this presentation speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Further details of the principal risks and uncertainties affecting the Company are provided in the Company's filings with the Istanbul Stock Exchange, including the Company's most recent annual report. By reading this presentation or attending or listening to any relevant meeting, conference call or podcast organized by the Company you agree to be bound by the above provisions.