beluga group earnings presentati… · beluga group 2019 financial highlights 3 +9,3% total volume...

BELUGA GROUP 2019 EARNINGS PRESENTATION

April 2020

Disclaimer

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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 2019 financial highlights

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+9,3% total volume +7,6% in-house volume +26,2% volume of import +22% volume of vodka Beluga

Financial and Operational highlights

Net Revenue increased

by 22% to 53,1 bln. Rubles

Sales grew 18% and reached 78 bln. Rubles*

Operating profit increased by 34% to

4,4 bln. Rubles

EBITDA grew 53% and reached

6,5 bln. Rubles

EPS increased by 52% and achieved

104 Rubles

53% growth of Net Income to

1,4 bln. Rubles

* - incl. excise taxes, net of VAT

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Consolidated Revenue and Gross Profit

Sources: Company data * - including intersegment

Total Net Revenue RUB bn

43,4 53,1

2018 2019

31,3

38,9

2018 2019

+24% +22%

Revenue breakdown by segments RUB bn*

Alc

oh

ol

6,5 6,3

2018 2019

-3%

Foo

d

64%

25%

11%

Food Alcohol

Retail

Consolidated Revenue split *

2018 2019

Revenue growth by 22% in 2019 mainly due to 9,3% volume increase as well as growth of Winelab retail chain

16,9 19,5

2018 2019

+16%

Total Gross Profit RUB bn

Gross Profit grew 16% mainly due to changes in revenue/gross profit composition: share of Winelab’s operations in the total revenue/gross profit is growing

9,3

15,2

2018 2019

+64%

Ret

ail

67%

20%

13%

Food Alcohol

Retail

0,94

1,43

2018 2019

5

Consolidated EBITDA and Net Profit

Sources: Company data

Consolidated EBITDA RUB bn

4,3

5,3

1,2

2018 2019

3,1 3,0

10,3 11,9

2018 2019

G&A distribution

+16%

+53%

G&A and distribution expenses RUB bn

Operating Profit and Net Income RUB bn

-2%

3,3

4,4

2018 2019

+53%

Operating Profit Net Income

+34%

16% year-on year increase in distribution expenses due to significant volume growth as well as growth of Winelab retail chain.

G&A expenses decreased by 2% - mostly due to improvements in operating efficiency.

EBITDA grew by 53% due to: overall volume growth; improvements in operating efficiency as a result of ongoing positive effect from the efficiency improvement; IFRS 16 implementation effect: if apply comparable with previous period IAS 17, EBITDA growth was 25%

IFRS 16 effect

6,5

6

Segment EBITDA*

Sources: Company data * - including intersegment

EBITDA breakdown by segments RUB bn

Since 2018 the Company has reported 3 segments: Alcohol, Retail, Food.

3,5

4,9

2018 2019

+43%

Alcohol

0,3

0,2

2018 2019

-33%

Food

74%

23%

3%

Food Alcohol

Retail

EBITDA split

2019

Alcohol segment EBITDA grew due to improvements in operating efficiency, sales mix premiumization and effect from IFRS 16 implementation.

EBITDA margin in Retail segment is higher than the average in the retail sector in Russia

0,8

1,5

2018 2019

Retail

EBITDA margin by segments %

13%

10%

3%

Alcohol Retail Food

+102%

91%

9%

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Debt Profile overview

0,9 0,5 2,4

10,1 12,4

12,6

31 Dec'17 31 Dec'18 31 Dec'19

Short-term debt Long-term debt

79%

19%

19%

1-2 years

2-5 years

Debt statistics summary

RUB mln 31 Dec’18 31 Dec’19

Debt 12,886 15,016

Cash and cash equivalents 1,083 1,085

Net Debt 11,803 13,931

EBITDA (LTM) 4,251 5,299

Net Debt / EBITDA* 2.8x 2.6x

Interest coverage** 2.1x 2.5x

11,0

15,0

12,9

Debt evolution RUB bn

Debt breakdown by maturity and type As of 31 Dec, 2019

Less than 1 year

Unsecured debt

Secured debt

RUB 15.0 bn

RUB 15.0 bn

Sources: Company data Notes: * without effect from IFRS 16 ** EBITDA over net finance cost

Cost of borrowing is stable - 9.0% p.a. in 2019

Net Debt/EBITDA* declined from 2.8X in 2018 to 2.6 in 2019

Share of unsecured loans is stable (91%)

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Income statement


Rub mln 2017 2018 2019 YoY, %

Net revenue 37,303 43,411 53,074 22%

Cost of sales (23,628) (26,521) (33,547) 26%

Gross profit 13,675 16,890 19,527 16%

margin 36.7% 38.9% 36,8% -2.1 pp

G&A expenses (2,951) (3,102) (3,042) -2%

Distribution expenses (7,719) (10,269) (11,939) 16%

Other income / (expenses) (157) (246) (154)

Operating profit 2,848 3,273 4,392 34%

margin 7.6% 7.5% 8.3% +0.8 pp

EBITDA 3,625 4,251 6,495 53%

margin 9.7% 9.8% 12,2% +2.4 pp

Net finance costs (1,931) (2,059) (2,429) 18%

Income tax (271) (276) (530) 92%

Net income 655 938 1,433 53%

margin 1.8% 2.2% 2.7% +0.5 pp

Basic earnings per share (Rub) 34.60 68.34 103.71 52%

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Balance sheet


Rub mln 31 Dec’18 31 Dec’19 ASSETS

Non-current assets

Property, plant and equipment 9,898 13,885

Goodwill 3,095 3,511

Intangible assets 10,091 10,017

Other long-term assets 530 260

Deferred tax assets 1,401 1,786

Total non-current assets 25,431 29,459

Current assets

Inventories 12,666 16,181

Biological assets 165 159

Trade and other receivables 8,049 9,813

Prepayments 595 605

Income tax prepayment 133 126

Assets held for sale - -

Cash and cash equivalents 1,083 1,085

Total current assets 22,691 27,969

TOTAL ASSETS

48,122

57,428

Rub mln 31 Dec’18 31 Dec’19

SHAREHOLDERS’ EQUITY AND LIABILITIES

Equity and reserves Share capital 1,940 1,940 Own shares repurchased from shareholders (545) (669) Share premium 3,760 3,339 Retained earnings 13,012 14,222

Total equity 18,167 18,832 Non-controlling interest 1,136 1,201 Total equity and reserves 19,303 20,033 Long-term liabilities Loans and bonds 12,419 12,628 Long-term payables 840 580 Long-term lease liabilities - 2,326 Deferred tax liabilities 820 1,077 Total long-term liabilities 14,079 16,611 Current liabilities Loans and bonds 467 2,388 Lease liabilities - 1,232 Trade and other payables 13,917 16,800 Income tax payable 356 364 Total current liabilities 14,740 20,784

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 48,122 57,428

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Cash Flow


Rub mln 2017 2018 2019

Operating profit 2,848 3,273 4,392

Depreciation and amortization 768 978 2,103

Other non-cash transactions 200 28 229

Changes in working capital (1,860) 466 (2,218)

CF from operating activities 1,956 4,745 4,506

Interest paid (1,849) (1,927) (2,063)

Income tax paid (578) (636) (595)

Net CF from operating activities (471) 2,182 1,848

Acquisition of subsidiaries and associates (380) (463) (551)

Acquisition and disposal of PPE (349) (1,720) (1,643)

Net CF from investing activities (729) (2,183) (2,194)

Issue of share capital -

Repurchase of own shares (913) (1,281) (545)

Loans received 40,885 38,804 54,502

Loans repaid (38,963) (37,258) (52,412)

Net CF from financing activities 1,009 265 348

Net increase/(decrease) in cash (191) 264 2

Cash at the beginning of the year 1,010 819 1,083

Cash at the end of the period 819 1,083 1,085

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Appendix

12

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

13

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

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High level of corporate governance with independent members on the Board of directors


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

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Расположение текста на цветной плашке



Company strategy for further development




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

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