Migros T icaret A.Ş. 9M 2018 Financial Results
CONTENTS Market Share Sales Evolution Capital Expansion Expenditures Ataşehir Migros Financial Guidance Overview Financial Format Results Summary 1
Sales in 9M 2018 Consolidated sales growth of 24.4% in 3Q 2018 A very good summer seasonal performance, Foreign subsidiaries performance exceeding expectations in 3Q 2018 The strong growth momentum Sales in 3Q 2018 (TL million) Sales in 9M 2018 (TL million) continued 5,331 13,794 in 3Q 2018… 4,285 11,322 … despite high- base of last year 3Q 2017 3Q 2018 9M 2017 9M 2018 Sales Growth in 3Q18 24.4% Sales Growth in 9M18 21.8% * Kipa’s financial results were started to be consolidated since 01 March 2017. 2
Market Share Evolution Market Share Gain Migros FMCG Market Share Evolution (%) Migros accounts for 16.9% of 16.9 16.7 FMCG sales in modern FMCG market and 7.1% market share in total FMCG in Turkey; an improvement of 20 bps and 10 7.1 7.0 bps respectively. 9M17 9M18 9M17 9M18 Total FMCG Market Share Modern FMCG Market Share Source: Nielsen Note: FMCG stands for Fast Moving Consumer Goods; Modern FMCG market and total FMCG market include all food-retail formats 3
Expansion Net Sales Area Split By Banner - 9M 2018 85 Number of Stores - Total new store openings in 3Q18 219 new store +228 openings in 9M18 2,090 1,862 81 cities operating in every city in the Country 9M 2017 9M 2018 2,090 stores as of 3Q18 Space growth (m 2 ) 5.0% 1,494K sqm 9M 2018 Sales area 4
Capital Expenditures Capex (TL million) Capex as a 2.6% 2.2% 2.7% 2.7% Percentage of Sales 399 370 We have over- achieved our 297 expansion target.. 253 Space optimization in large stores has been continuing as 9M 2017 9M 2018 2016 2017 projected. 54 Uyum and Makro stores were converted into Migros banners Capex for 2018 is expected to be around TL 440 million 5
Consolidated Gross Profit in 9M 2018 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) Gross Profit in 9M (TL million) The more efficient supply chain, the 1,489 3,827 more value for customers 1,170 3,002 3Q 2017 3Q 2018 9M 2017 9M 2018 Margin 27.3% 27.9% Margin 26.5% 27.7% 6
Consolidated EBITDA(R) in 9M 2018 EBITDA 3Q (TL million) EBITDA 9M (TL million) More than 388 874 297 646 7% EBITDA margin in 3Q18 driven by better sales performance 3Q 2017 3Q 2018 9M 2017 9M 2018 and strong gross Margin 6.9% 7.3% Margin 5.7% 6.3% profitability EBITDAR 3Q (TL million) EBITDAR 9M (TL million) More than 651 1,587 12% EBITDAR 498 1,202 margin in 3Q18 3Q 2017 3Q 2018 9M 2017 9M 2018 Margin 11.6% 12.2% Margin 10.6% 11.5% *EBITDA(R)= Operating Profit+Amortization+Employee Termination Benefits +Unused Vacation Provision-Other Income+Other Expenses+(Rent Expenses) 7
Track Record of Deleveraging Migros 9M 2018 Cash and Leverage Position Total TL m TL m EUR m Cash & Debt Items 1,858 1,579 40 Cash & Cash equivalents 5,192 916 615 Financial Debt* Net Debt 3,334 3.0x Net Debt / EBITDA LTM * Based on amortised costing as indicated in financial statements Deleveraging Profile - Net Debt / EBITDA LTM 4.0x 3.2x 3.0x 2.9x 2.8x 2.7x 2.6x 9M 2017 9M 2018 2013 2014 2015 2016 2017 4.1924 6.9505 2.9365 2.8207 3.1776 3.7099 4.5155 Euro/TL Currency : Change: + 66% 8
Expectations and Guidance 2018 Guidance [Consolidated] 2018E Previous Guidance New Guidance Sales Growth ~22% ~20% 6.0% + EBITDA Margin 5.5-6.0% 230+ 200+ Expansion Target new stores new stores ~ TL 440 mn CAPEX TL 440 mn Management Agenda in 2018 Vigilant cost management Continued emphasis on property Migros TL bond issuance of divestitures TL 196 million Efforts to increase performance Sale of three Migros owned Focus on digitalization of of large stores with space stores amounting to TL 56 physical stores and online optimization million in 4Q 2018 business growth 9
Financials & Format Summary - Financials - Operations
SUMMARY OF INCOME STATEMENT – 9M 2018 IFRS Consolidated Income Statement Summary 9M 2018 9M 2017 (TL Million) 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 11
SUMMARY OF BALANCE SHEET – 9M 2018 IFRS Consolidated Balance Sheet Summary 9M 2018 2017 (TL Million) 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 12
Migros Migros, Largest National Supermarket Chain 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 Focus on proximity supermarkets Migros Jet and M Migros Proximity Stores, (40*-300) sqm, 1,800* – 3,000 SKUs Loyalty Program CRM applications for different customer segments ─ Customized & Differentiated Offering for Money Club Card holders ─ Club Card Loyalty Program for 17 years (*): including Migros Jet stores and Migros Jet 7/24 forecourt stores as of September 30, 2018 13
Macrocenter Exclusive shopping 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 Penetration: 6 cities 14
Wholesale & Food Service Focus on Horeca Penetration Currently operating in 7 regions through dedicated sales team. Dedicated warehouses and customer delivery 18 Wholesale stores Penetration: 13 cities 15
Online Business 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) Healthy Organic Natural Fresh 16
International Operations Kazakhstan Macedonia 1.3% of consolidated sales from Kazakh operations 1.5% of consolidated sales from Macedonian operations Number of stores: 16 , including 2 hypermarkets, 13 Number of supermarkets: 26 supermarkets and 1 Macrocenter. Owns 1 shopping mall in Almaty Owns 1 shopping mall in Skopje Total sales area of 23,789 sqm Total sales area of 21,919 sqm Serving in the cities of Almaty and Astana in a large ─ country Operations started in 2005 Operates in multi-format since 1999 1 Shopping Mall 2 Hypermarkets 13 Supermarkets 1 Macrocenter 1 Shopping Mall 26 Supermarkets 17
Store Portfolio 9M 2017 9M 2018 1,922 # of stores # of stores Supermarkets (incl. 769 Migros Jet stores) Supermarkets 1,694 1,922 Hypermarkets 71 58 58 Hypermarkets Wholesale 16 18 Macrocenter 43 50 50 Macrocenter stores Domestic Total 1,824 2,048 Upscale format Ramstores 38 42 42 Grand Total 1,862 2,090 Ramstores Macedonia & Kazakhstan Sales area (th sqm) 1,422 1,494 18
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