beluga group earnings presentati… · group magnit lenta gross margin, 2019 +25% lfl revenue...
TRANSCRIPT
BELUGA GROUP 1H2020 EARNINGS PRESENTATION
August 2020
Disclaimer
2
This presentation has been prepared by Beluga Group, Co. (the “Company“, or “Beluga Group”) and together with its subsidiaries. By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following limitations and notifications. This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form, in whole or in part. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire shares of the Company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.
This presentation may contain statements that are, or may be deemed to be, forward-
looking statements within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby. Examples of such forward-looking statements include, but are not limited to statements of the Company’s predictions, forecasts, projections, strategies, plans, targets, objectives, expectations, estimates, intentions, beliefs or goals, including those related to acquisitions, sales, products or services, results of operations, financial condition, liquidity, prospects or dividend policy; statements concerning future business or industry performance; other statements that do not relate strictly to historical or current facts; and assumptions underlying such statements.
By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that the forward-looking statements will not be achieved. Among other things, forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future.
Readers should be aware that several important factors could cause the Company’s
assumptions to be incorrect, and could cause actual results to differ materially from the predictions, forecasts, projections, strategies, plans, targets, objectives, expectations, estimates, intentions, beliefs or goals expressed in such forward-looking statements.
These factors include:
• changes in political, social, legal or economic conditions in Russia generally, or in the regions of Russia in which the Company operates, including changes in levels of consumer spending and demand for some or all of its products;
• changes in consumer preferences and tastes, demographic trends or perceptions about health related issues;
• increased competitive product and pricing pressures and unanticipated actions by competitors that could impact the Company’s market share, increase expenses and hinder growth potential;
• the ability to complete business combinations, partnerships, acquisitions or disposals, existing or future, and to achieve integration, expected synergies and/or costs savings;
• levels of marketing, promotional and innovation expenditure by the Company and its competitors;
• the Company’s ability to protect its intellectual property rights; • increasing recognition in Russia of product liability and personal injury torts; • legal and regulatory developments and changes in the policies of the government of the
Russian Federation, including regional authorities, including regulatory developments or policy changes regarding consumption of or advertising for spirits, or taxation;
• changes in the cost of raw materials and labor costs; • renewal of distribution rights and contracts on favorable terms when they expire; • technological developments that may affect the distribution of products; • changes in financial and equity markets, including significant interest rate and foreign
currency exchange rate fluctuations, which may affect the Company’s access to or increase the cost of financing or which may affect the Company’s financial results;
• changes in accounting standards, policies or practices; • availability of qualified personnel, including accounting personnel; and • ability to identify other risks relating to the Company’s business and manage the risks
associated with the aforementioned factors. This list of important factors is not exhaustive. Readers should carefully consider such
factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Company operates. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update or revise any of them. Readers should not place undue reliance on forward-looking statements. The Company does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.
BELUGA GROUP 1H2020 financial highlights
3
+15% total volume +12% volume of in-house +42% volume of import
Financial and Operational highlights
Net Revenue increased
by 23% to 26,3 bln.
Rubles
Sales grew 20% and reached 38 bln. Rubles*
Operating profit increased by 25% to
2,2 bln. Rubles
EBITDA grew 23% and reached
3,3 bln. Rubles
EPS increased by 22% and achieved
36 Rubles
Ultimate leadership in major
spirits categories:
vodka, brandy, liquors, whiskey**
* - incl. excise taxes, net of VAT ** Russian Federation, production (according to Fedstat)
4
Operating performance
6 250
7 173
1H2019 1H2020
5
Beluga Group performance during COVID-19
Sources: Company data,
Volume growth in 1H 2020
Total shipment 000, 9L cases
+15%
5 620
6 283
1H2019 1H2020
In-house brands shipment 000, 9L cases
+12%
630
890
1H2019 1H2020
Import shipment 000, 9L cases
+42%
Social responsibility The Group implemented additional preventive measures at all its facilities of, including production facilities and retail stores. The Company continues to provide targeted support to the regions of its presence — in particular, in Primorsky Krai, Moscow and Arkhangelsk Regions.
Double digit volume growth is reflected in even higher growth of Group’s financials in 1H2020.
6
Unmatched leadership in home country and further advance worldwide
The leading spirits company in Russia
Sources: Rosstat 1H2020; AC Nielsen (2018); ISWR (2019) Notes: 1) Including bitters, herbal liquors, flavored liquors 2) brands over 1 mln cases a year, Millionaires Club
Strong brand positions in Russia
Russia Distilled spirits producer
#1
Russia Flavored spirits producer1
#1
Beluga In super-premium segment
#2
Russia Brandy producer
#1
Russia Independent importer
#1
Arkhangelskaya In low-premium segment
#1
Zolotoy Reserv Brandy in the country
#3
Globally Vodka producer
#4 Globally Spirits companies
#9
Belenkaya Vodka in the country
#2
Dr. August In flavored liquors
#1
Russia Whiskey producer
#1
#3 Globally Brands among bestselling Vodka brands2
7
Unmatched leadership in Russia in major spirits categories
Sources: Rosstat 1H2020
Market share in 1H2020 by volume
Top-5 vodka producers Top-5 flavored liquors producers
Top-5 brandy producers
6,4%
8,7%
9,8%
12,0%
12,6%
Global Spirits
ASG
Tatspirtprom
Roust
Beluga Group
5,6%
6,8%
7,5%
11,2%
16,7%
Tatspirtprom
Global Spirits
Sordis
OPVZ
Beluga Group
8,0%
11,8%
12,0%
12,6%
16,5%
KIN
Stellar
Allians
Alvisa
Beluga Group
Top-5 whiskey producers
5,8%
7,2%
14,1%
23,6%
36,2%
Ariant
Alvisa
Allians
Kristall-Lefortovo
Beluga Group
Nielsen Top Growing Brands, 1H 2020
8
136 147 165 205
252 294
348
407
468 518
545 570
604 612 622
0
100
200
300
400
500
600
700
9
Winelab key facts
Development of own specialized retail chain to further increase level of controlled sales
Sources: Company data, Bloomberg Notes: 1) Without beer 2) without export
Stores rollout dynamics
High profitability
Winelab accounted for 9,5% of BELUGA GROUP's in-house brands2 sold in 2019 (vs. 8% in 2018)…
…and for 38% of partners’ brands in 2019 (vs. 30% in 2018)
Focus on 3 major regions: Moscow, St. Petersburg and East Federal districts
Unique assortment with wide range of wines and own products
Lucrative locations in trading areas of stores with high traffic
Proven track record of stores rollout
# of stores (end of period)
31,1% 24,6%
22,8% 22,0%
Beluga(retail only)
X5 RetailGroup
Magnit Lenta
Gross margin, 2019
+25%
LFL revenue growth 1H2019/1H2020
+13%
# of tickets LFL growth 1H2019/1H2020
RUB 440
Average ticket
1,000 92 sqm
# of SKUs1 Average selling space
10
Fast growth of Winelab’s e-commerce. Omnichannel model.
Sources: Company data
Launched in Aug’18, Omnichannel platform now:
Winelab.ru web site with more than 340k visitors and 16k orders (monthly)
Mobile App with more than 100k uploads and 200k estimate uploads at the end of the year
> 600 off-line stores which support e-commerce and operate on the “click-and-collect” basis
Share of e-commerce in total sales and in Moscow&SPB regions
Presence in Social Media and on Yandex.Market
1,6%
0,4%
5%
1%
1H2020 1H2019 1H2020Moscow&SPB
1H2019Moscow&SPB
1 896
839
1H'2020 1H'2019
Website and App traffic, ths. visitors
RUB 3000
Average ticket in 2Q2020, 5 times higher than in store
40% Clients on Winelab.ru are completely new clients
11
New product development: own brands, launch in 2020
New vodkas in premium and low-premium price segments
Traditional Siberian Vodka. Made from highest quality spirits and purest natural water on Mariinskiy production facility (where Beluga vodka is produced). Premium price segment.
Launch: June 2020.
Vodka from the North. Made from Lux spirits. Deep freezing purification. Low premium price segment.
Launch: June 2020.
12
New product development: own brands, launch in 2020
Premium Russian sparkling wine TÊTE DE CHEVAL
Tête de Cheval – premium Russian sparkling wine produced according to traditional method of bottle champagnization. Made on own Golubitskoye estate vineyard. No less than 12 months aging in the bottle. Tête de Cheval family: Brut, Rose Brut, Semi-Dry, Sweet, Rose Sweet, Blanc de Blancs Reserve, Zero Dosage Reserve, Reserve Brut 2017. Launch: May 2020
13
New product development: own brands, launch in 2020
Caribbean rum Devil’s Island
Spirits from Caribbean Islands. Aging in oak barrels. Bottling on Georgievskiy production facility. Mainstream price segment. Launch: June 2020.
14
New import contracts, 2020
Noy Armenian brandy - best selling imported brandy in Russia*
#1 imported brandy in Russia. #1 Armenian brandy in Russia. Aging in oak barrels. From Middle to Premium price segment. Launch: March 2020.
* Nielsen, 1Q2020
15
New import contracts, 2020
Mateus - best selling Portuguese wine in Russia*. Part of Portuguese producer Sogrape portfolio
#1 Portugal wine in Russia. #1 Rose wine in the World. Launch: May 2020.
* Russian Custom 2019
16
Financial overview
59% 29%
12%
17
Consolidated Revenue and Gross Profit
Sources: Company data * - including intersegment
Total Net Revenue RUB bn
21,5 26,3
1H2019 1H2020
15,4 16,9
1H2019 1H2020
+10%
+23%
Revenue breakdown by main segments RUB bn*
Alc
oh
ol
54% 36%
9%
Food Alcohol
Retail
Consolidated Revenue split*
1H2019
1H2020
Revenue growth by 23% in 1H2020 mainly due to 15% growth of Company’s shipments
8,4 9,2
1H2019 1H2020
+9%
Total Gross Profit RUB bn
Gross Profit grew 9% mainly due to changes in gross profit composition: share of import and Winelab’s operations in the total revenue/gross profit is growing
7,4
11,4
1H2019 1H2020
+53%
Ret
ail
Food Alcohol
Retail
0,45 0,46
0,38
1H2019 1H2020
18
Consolidated EBITDA and Net Profit
Sources: Company data
Consolidated EBITDA RUB bn
2,2 2,7
0,5
0,7
1H2019 1H2020
1,61 1,55
4,85 5,24
1H2019 1H2020
G&A distribution
-3%
+23%
G&A and distribution expenses RUB bn
Operating Profit and Net Income RUB bn
+8%
1,7
2,2
1H2019 1H2020
+2%
Operating Profit Net Income
+25%
Distribution expenses grew only 8% on the back of 23% net revenue growth due to the optimization of trade-marketing policy.
G&A expenses decreased by 3% mostly due to improvements in operating efficiency.
EBITDA grew 23% due to: double-digit growth of total sales; Winelab’s profitability improvement since major part of the stores matured
IFRS 16 effect
IFRS 16 effect
One-off effects
+81%
Net profit increased by 2%. However, without one-off currency exchange losses and additional charity due to COVID-19 Net profit grew 81%.
2,7
3,4
19
Segment EBITDA*
Sources: Company data * - including intersegment
EBITDA breakdown by main segments RUB bn
2,32 2,34
1H2019 1H2020
+1%
Alcohol
65,9%
33,9%
0,2%
Food Alcohol
Retail
EBITDA split
1H2020 EBITDA in Retail segment significantly grew since major part of the stores matured
0,48
1,20
1H2019 1H2020
Retail
EBITDA margin by main segments %
13,8%
10,5%
Alcohol Retail
Since 2018 the Company has reported 3 segments: Alcohol, Retail, Food.
EBITDA margin in Retail segment is higher than the average in the retail sector in Russia
+152%
31%
62%
7%
20
Debt Profile overview
4,6 2,4 2,4
11,5 12,6
17,3
30 Jun'19 31 Dec'19 30 Jun'20
Short-term debt Long-term debt
56% 32%
12%
1-2 years
2-5 years
Debt statistics summary
RUB mln 30 Jun’19 30 Jun’20
Financial debt (loans and bonds) 16,084 19,703
Cash and cash equivalents 812 3,017
Net Debt 15,272 16,686
EBITDA1 (LTM) 5,033 5,762
Net Debt / EBITDA 3.0x 2.9x
Interest coverage 2.3x 2.1x
16,1
19,7
15,0
Debt evolution RUB bn
Debt breakdown by maturity and type As of 30 Jun, 2020
Less than 1 year
Bonds
Unsecured debt
Secured debt
RUB 19.7 bn
RUB 19.7 bn
Sources: Company data Notes: 1) Without IFRS16 effect
Decrease in cost of borrowing from 8.9% p.a. in 2019 to 8.5% p.a. in 1H2020
The debt structure was improved through issuance of two 5 bln., 5 years bonds in July and December 2019
Share of unsecured loans is stable (93%)
21
Income statement
Sources: Company data * including 321 mln rubles FX losses
Rub mln 2018 2019 1H2019 1H2020 YoY, %
Net revenue 43,411 53,074 21,450 26,283 23%
Cost of sales (26,521) (33,547) (13,055) (17,097) 31%
Gross profit 16,890 19,527 8,394 9,186 9%
margin 38.9% 36,8% 39,1% 35,0% -4.1 pp
G&A expenses (3,102) (3,042) (1,605) (1,553) -3%
Distribution expenses (10,269) (11,939) (4,851) (5,241) 8%
Other income / (expenses) (246) (154) (204) (225)
Operating profit 3,273 4,392 1,734 2,167 25%
margin 7.5% 8.3% 8.1% 8.2% +0.1 pp
EBITDA 4,251 6,495 2,703 3,325 23%
margin 9.8% 12,2% 12,6% 12,7% +0.1 pp
Net finance costs (2,059) (2,429) (1,128) (1,601)* 42%
Income tax (276) (530) (154) (106) -31%
Net income 938 1,433 452 460 2%
margin 2.2% 2.7% 2.1% 1.8% -0.3 pp
Basic earnings per share (Rub) 68.34 103.71 29.41 35.76 22%
22
Balance sheet
Sources: Company data
Rub mln 31 Dec’19 30 Jun’20 ASSETS
Non-current assets
Property, plant and equipment 13,885 13,382
Goodwill 3,511 3,511
Intangible assets 10,017 10,025
Other long-term assets 260 398
Deferred tax assets 1,786 1,807
Total non-current assets 29,459 29,123
Current assets
Inventories 16,181 18,911
Biological assets 159 158
Trade and other receivables 9,813 6,980
Prepayments 605 1,123
Income tax prepayment 126 255
Cash and cash equivalents 1,085 3,017
Total current assets 27,969 30,444
TOTAL ASSETS
57,428
59,567
Rub mln 31 Dec’19 30 Jun’20
SHAREHOLDERS’ EQUITY AND LIABILITIES
Equity and reserves Share capital 1,940 1,580 Treasury shares (669) (338) Share premium 3,339 3,019 Retained earnings 14,222 14,271
Total equity 18,832 18,532 Non-controlling interest 1,201 966 Total equity and reserves 20,033 19,498 Long-term liabilities Loans and bonds 12,628 16,907 Long-term payables 580 - Long-term lease liabilities 2,326 2,000 Deferred tax liabilities 1,077 1,237 Total long-term liabilities 16,611 20,144 Current liabilities Loans and bonds 2,388 2,796 Lease liabilities 1,232 1,363 Trade and other payables 16,800 15,436 Income tax payable 364 330 Total current liabilities 20,784 19,925
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 57,428 59,567
23
Cash Flow
Sources: Company data
Rub mln 2018 2019 1H2019 1H2020
Operating profit 3,273 4,392 1,734 2,167
Depreciation and amortization 978 2,103 969 1,158
Other non-cash transactions 28 229 32 153
Changes in working capital 466 (2,218) (2,834) (2,999)
CF from operating activities 4,745 4,506 (99) 479
Interest paid (1,927) (2,063) (1,060) (1,124)
Income tax paid (636) (595) (305) (148)
Net CF from operating activities 2,182 1,848 (1,464) (793)
Acquisition of subsidiaries (463) (551) (275) (361)
Acquisition and disposal of PPE (1,720) (1,643) (870) (457)
Net CF from investing activities (2,183) (2,194) (1,145) (818)
Issue of share capital
Repurchase of treasury shares (1,281) (545) (364) (349)
Dividends (81)
Payments of lease liabilities (1,197) (504) (684)
Loans received 38,804 54,502 22,270 22,925
Loans repaid (37,258) (52,412) (19,064) (18,268)
Net CF from financing activities 265 348 2,338 3,543
Net increase/(decrease) in cash 264 2 (271) 1,932
Cash at the beginning of the year 819 1,083 1,083 1,085
Cash at the end of the period 1,083 1,085 812 3,017
24
Appendix
25
Key direction for business diversification
Diversified business with high share of non-vodka products
Categories extension
BELUGA GROUP alcohol revenue evolution
Acquisition of vineyards and winery in Russia, focus on premium Russian wines
Expansion of imported brands portfolio
Brand innovation
Distribution platform focused on direct sales
Growing share of export operations
Product portfolio has been significantly diversified: shares of export & import operations as well as brown spirits and wine categories continue its growth
Vodka (local sales)
Vodka (export)
80% 39%
4% 8%
Brandy, flavored liquors & other
12% 26%
Wine & spirits 4% 27%
In-h
ou
se p
rod
uct
ion
Im
po
rt
2011
Total alcohol sales
Sources: Company data, AC Nielsen Notes: 1) AC Nielsen, 2018 2) Controlled sales include direct sales and sales through dedicated sales force 3) xx% - share of a given category in alcohol segment revenue
2019
Focus on new product development (launches of Green Baboon gin, Vogue sparkling wine, Fox & Dogs whisky, etc.)
Successful launch of new vodka brands (e.g. Arhangelskaya and Mednaya Loshadka): Arhangelskaya gained 5% market share in the category on its third year1
High and growing level of the controlled sales2 (85% of total sales in 2019)
Expansion of own specialized retail chain Winelab
Export to more than 95 countries across the world
8% of alcohol revenue in 2019 (vs. 4% in 2011)
Natural FX hedge against exchange rate swings
RUB 38.9 bn RUB 21.2 bn
26
Super premium
Diversified product portfolio: own brands
Sub-premium / premium
Middle
Mainstream
Vodka Brandy / Cognac / liquor Wine Other spirits
(gin, tequila, rum, etc.)
Sources: Company data Notes: Price range for every segment could differ based on product category
27
Super premium
Diversified product portfolio: imported brands
Sub-premium / premium
Middle
Mainstream
Whisky Brandy / Cognac / liquor Wine Other spirits
(gin, tequila, rum, etc.)
Sources: Company data Notes: Price range for every segment could differ based on product category. Whiskys Cigars Barrel, Fox&Dogs, Trouble Maker, Eagle’s Rock are bottled on Georgiyevskiy Plant
28
High level of corporate governance with independent members on the Board of directors
Sources: Company data
ALEXANDER MECHETIN
CEO
Founder of Beluga Group
NIKOLAY BELOKOPYTOV
Chairman of the BoD
CFO
KONSTANTIN PROKHOROV
Head of Retail
ROSTISLAV ORDOVSKY-TANAEVSKY BLANCO
Independent Non-Executive Director
Founder and Chairman of the BoD of Rosinter
SERGEY MOLCHANOV
Chief Operating Officer
MIKHAIL KASHIRIN
Head of Business Development
ALEXANDER IKONNIKOV
Independent Non-Executive Director
Acknowledged Russian expert in corporate governance and Board efficiency
New members on the Board of Directors
4
In June 2019, BELUGA GROUP reinforced the Board of Directors:
Independent non-executive directors
2
The Board of Directors has audit committee with the following members:
Alexander Ikonnikov (chairman of the committee)
Rostislav Ordovsky-Tanaevsky Blanco
Nikolay Belokopytov
29
Расположение текста на цветной плашке
Расположение текста на цветной плашке
Расположение текста на цветной плашке
Company strategy for further development
Расположение текста на цветной плашке
Расположение текста на цветной плашке
Расположение текста на цветной плашке
Сноска или примечание
Brand portfolio Diversified brand portfolio, coverage of
all segments
Focus on premium and profitable
products
Increase in price and brand recognition
Strengthening the presence in growing
categories
Retail and distribution Continued development of the
distribution platform with a focus on
direct sales
Development of Winelab
Direct contact with end customers
through trade marketing and own retail
Best IT platform
Key business Production, sale and distribution of its
own alcohol products
Use of modern technologies to
enhance the overall operational
performance
Export Expansion of the general export
geography and Beluga brand in particular
Improving the quality of imported
operations through targeted selection of
partners
Focus on super-premium international
vodka markets