Migros T icaret A.Ş. 9M 2019 Financial Results Migros Sustainability Report 2018
CONTENTS Market Share Sales Evolution Capital Expansion Expenditures Ataşehir Migros Management Financial Overview Overview Financial Format Results Summary 1
Sales in 9M 2019 ▪ Migros recorded 24.7% sales growth in 9M 2019 ▪ Strong customer traffic at existing Migros stores 21.3% Sales in 3Q (TL million) Sales in 9M (TL million) top-line growth in 3Q19 despite 6,464 17,195 relatively low space growth of 1.6% y-o-y 5,331 13,794 3Q 2018 3Q 2019 9M 2018 9M 2019 21.3% Sales Growth in 9M19 24.7% Sales Growth in 3Q19 2
Market Share Evolution Market Share Gain Migros FMCG Market Share Evolution (%) 17.7 ◼ 80 bps market share gain in 16.9 modern FMCG market. ◼ 80 bps market share gain in total FMCG market. 7.9 7.1 Source: Nielsen Note: FMCG stands for Fast Moving Consumer Goods; 9M 2019 9M 2018 9M 2019 9M 2018 Modern FMCG market and total FMCG market include all food-retail formats Total FMCG Market Share Modern FMCG Market Share 3
Expansion Number of Stores - Total Net Sales Area Split By Banner - 9M 2019 96 +75 new store openings in 9M 2019 2,165 2,090 9 new store openings in October 2019 9M 2018 9M 2019 81 cities operating in every Space growth (m 2 ) 1.6% * city in the Country Net Sales Area (3Q19) 1,517 K sqm 2,165 number of stores as of 3Q19 * Hypermarket space optimization (m 2 ) impact: 100 bps * High base of 9M18 due to acquisition of Uyum&Makro stores 4
Capital Expenditures Capex (TL million) % of Sales 2.6% 2.6% 2.7% 1.2% 2.7% 488 Cautious stand in 399 370 capex plans 297 continues 208 Space optimization in large stores 2016 2017 2018 9M 2018 9M 2019 continues 21 completed since Kipa acquisition (including 7 in the current year) 5
Consolidated Gross Profit in 9M 2019 Gross Profit in 9M (TL million) Gross Profit 3Q (TL million) 1,772 4,690 1,749 4,628 More value to the customers through 1,387 3,553 reduced prices in fruits & vegetables and fresh meat 3Q 2018 9M 2018 3Q 2019 3Q 2019 9M 2019 9M 2019 [IFRS 16] [IFRS 16] Margin Margin 26.0% 27.1% 27.4% 25.8% 26.9% 27.3% 6
Consolidated EBITDA(R) in 9M 2019 EBITDA in 3Q (TL million) EBITDA9M (TL million) 1,774 698 7.8% 503 1,214 383 EBITDA margin in 859 3Q19, w/o IFRS 16 impact 3Q 2019 9M 2019 3Q 2018 9M 2018 3Q 2019 9M 2019 [IFRS 16] [IFRS 16] Margin 7.2% Margin 6.2% 7.8% 10.8% 7.1% 10.3% EBITDAR 3Q (TL million) EBITDAR 9M (TL million) 794 2,013 12.3% 625 1,512 EBITDAR margin in 3Q19 9M 2018 9M 2019 3Q 2018 3Q 2019 Margin 11.7% 12.3% Margin 11.0% 11.7% *EBITDA(R)= Operating Profit+Amortization+EmployeeTermination Benefits +Unused Vacation Provision-Other Income+Other Expenses+(Rent Expenses) 7
Enhancing online penetration 2019 Initiatives 1 Six online channels ▪ Delivery within 30 minutes ▪ Same day delivery, ▪ Over 28,000 SKUs, only ▪ Service available in 48 cities, ▪ Same prices with Migros ▪ Night delivery between 22:00- stores 24:00 in selected regions ▪ Over 1,800 SKUs 2 ▪ Delivery within 3 days ▪ Products available for courier shipping Darkstore 3 ▪ Increased service quality ▪ Improved order fulfillment ratio ▪ Labor efficiency and last mile optimization 8
Deleveraging Migros 9M 2019 Cash and Leverage Position Gross Euro Debt (in million) Total TL m Cash & Debt Items Total TL m [w/ IFRS 16] Cash & Cash equivalents 2,282 2,282 692 TL m 1,598 1,598 672 EUR m 111 111 7,522 1 4,344 Financial Debt 611 TL m 1,484 4,662 462 432 EUR m 462 462 2,062 5,240 Net Debt 2,319 2 1,572 EBITDA LTM 1.3x 2.3x Net Debt / EBITDA LTM 2016 2017 2018 9M19 2019E 1 Includes capitalized costs of lease contracts over their maturity Gross Euro debt is expected to be decreased by €30 m n with an early 2 IFRS 16 was implemented since 01.01.2019. Includes the IFRS 16 LTM rent cost impact down payment in 4Q19 which was extrapolated based on 9M19 rent cost. (TL 560.3 / 3 x 4 = TL 747.1 mn) Deleveraging Profile - Net Debt / EBITDA LTM 3.2x 3.0x 2.9x 2.7x 2.6x 2.3x 1.3x 2014 2015 2016 2017 2018 9M 2018 9M 2019 3.7099 Euro/TL Rate 2.8207 3.1776 4.5155 6.0280 6.9505 6.1836 Change: - 11% Note: Net debt / EBITDA ratios without IFRS 16 9
Expectations and Guidance 2019 Guidance [Consolidated] 2019E Guidance 23-25% Sales Growth EBITDA Margin 6-6.5%* 125+ Expansion Target new stores CAPEX ~TL 320 mn * excluding IFRS 16 impact Management Agenda in 2019 Growth & Operational Profitability Online Business Deleveraging Operational performance is on track Recalibrating our online channel; • ~30% y-o-y decrease in Gross Euro • and the management maintains debt is expected in 2019 Geographical coverage of Migros • 2019 FY top-line growth & Hemen, concept aiming a “delivery • Asset divestitures reached TL 616 mn operational profitability guidance time of 30 minutes” , is expanding in total (TL 406 mn in 2019) • Normalization in EBITDA margin is in three big cities expected in 4Q19 • Collaboration with Trendyol (a subsidiary of Alibaba Group) facilitated and increased online business penetration momentum 10
Financials & Format Summary - Financials - Operations
Summary of Income Statement – 9M 2019 IFRS Consolidated Income Statement Summary 9M 2019 9M 2018 (TL Million) 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 0 0 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 12
Summary of Balance Sheet – 9M 2019 IFRS Consolidated Balance Sheet Summary 9M 2019 2018 (TL Million) 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 13
Migros at a Glance 65 th Year! ◼ Operating in 3 countries — Turkey (81 cities out of 81) Geographical Footprint — North Macedonia and Kazakhstan (44 stores) ◼ 2,044 (supermarkets) ◼ 56 (upscale supermarkets) ◼ 21 (wholesale and foodservice stores) ◼ 44 (international stores) 2,165 Stores 1 ◼ Migros Online — 3.5m members and 70% mobile orders — Tazedirekt ◼ 7m loyal households Money Club Card Innovation, Loyalty & 38% 80% +100 of HH Customer Service of HH ◼ Introduced more than 100 innovations for the retail market ◼ Member of “BIST Sustainability Index” ◼ Included Corporate Governance Index since 2015 Sustainability and ◼ 32,114 employees of which 40% are women Corporate Governance ◼ Best retailer of the country 15 years in a row 2 1 as of September 30, 2019 2 Capital Business magazine. 14
Three-year Summary Consolidated Sales (TL million) 18,717 15,344 11,059 9,390 Consolidated sales & EBITDA 2015 2016 2017 2018 doubled in 3 years Consolidated EBITDA (TL million) 1,217 872 677 602 2015 2016 2017 2018 15
Migros Migros, Largest National Supermarket Chain ◼ 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 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 18 years (*): including Migros Jet stores and Migros Jet 7/24 forecourt stores as of September 30, 2019 16
Macrocenter Exclusive shopping ◼ 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 Penetration: 6 cities 17
Wholesale & Food Service Focus on Horeca Penetration ◼ Currently operating in 7 regions through dedicated sales team. ◼ Dedicated warehouses and customer delivery ◼ 21 Wholesale stores Penetration: 16 cities 18
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