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1 Pharmacy Chain 36.6 Company Presentation July 2009.

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Presentation on theme: "1 Pharmacy Chain 36.6 Company Presentation July 2009."— Presentation transcript:

1 1 Pharmacy Chain 36.6 Company Presentation July 2009

2 2 DISCLAIMER THIS DOCUMENT IS NOT AN ADVERTISEMENT OF SECURITIES IN THE RUSSIAN FEDERATION, AND IS NOT AN OFFER TO SELL, OR AN INVITATION TO MAKE OFFERS TO PURCHASE, ANY SECURITIES IN THE RUSSIAN FEDERATION. NOT FOR RELEASE, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN. This document includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, expected, plan, goal believe, or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Companys control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. Any forward-looking statements made by or on behalf of the Company speak only as at the date of this announcement. Save as required by any applicable laws or regulations, the Company undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to US persons unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. No public offering of the securities will be made in the United States. This communication is being distributed only to and is directed only at (a) persons outside the United Kingdom, (b) persons who have professional experience in matters relating to investments, i.e., investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), and (c) high net worth companies, unincorporated associations and other bodies to whom it may otherwise lawfully be communicated in accordance with Article 49 of the Order (all such persons together being referred to as "relevant persons"). The securities are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be available only to or will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

3 3 Table of Contents I.Overview II.Retail unit III. Veropharm IV.Early Learning Center (ELC) V.Summary 3

4 4 I. Overview 4

5 5 Pharmacy chain 36.6 is the leading pharmaceutical retailer in Russia First open formatted store Over stores currently in operation First Russian pharmaceutical company to go public 36.6 – number one brand recognition nationwide First Russian company to become member of the US National Retail Federation Over USD 1 bln. of Group consolidated revenue by the end of 2008 Portfolio of attractive assets: OJSC Veropharm LLC «Kub-Market» (Early Learning Center) Closed-end property mutual fund 5 Group consolidated revenue Brand awareness in comparison with industry peers* *Source: A/R/M/I -Marketing, 2008 г. (% of respondents) ** unaudited management accounts Source: audited IFRS accounts, mln USD

6 6 Structure of Pharmacy Chain 36.6 ELC (Childrens goods) 50%50% 50% 36,6 Pharmacy Chain 36.6 (Retail) «Veropharm» (Pharmaceuticals production) 43.7% 56,3 % Free float 52% 48% 36,6 Investors 6 Free float

7 7 First 36,6 store opened 2003 IPO 36, IPO Veropharm History of Pharmacy Chain acquisitions in SPO 36, th store opening ERP system introduction Glazar joint venture creation Consolidated 2007 Net Loss - USD 121,3 mln. New CEO hired EMC sold In Q Retail unit delivered breakthrough EBITDA Consolidated Net Loss decreased by 53,5% Foundation Going public Rapid expansion Transition and Refocus

8 8 Board of Directors Sergey Krivosheev Chairman of the Board of Directors, Co-founder Artem Bektemirov General Director, Co-founder Vladimir Stolin Chairman of the Board of Directors of the consulting company ZAO Ecopsi Consulting Vasily Rudomino Partner and co-founder of the law firm ALRUD Lev Glik Chairman of the Board of Directors of OJSC Revyakinskiy metalloprokatniy zavod 8 Arkadi Gibov Partner and co-founder of «GEP»

9 9 Management team

10 10 Financial highlights (Consolidated) mln, USD Source: audited IFRS accounts

11 11 Financial Highlights as of (Consolidated) Source: unaudited Q IFRS accounts In rublesIn US dollars RUR, mln$ mln Growth: +1,1% Net Loss Growth: +10,2% Decline: -37,8% Decline: -27,7% Growth: + 875,0% Net Loss Decline: -21,1%

12 12 Credit profile Debt structure (breakdown by currency, as of ) Debt structure (breakdown by maturity, as of ) Group consolidated financial debt stood at USD mln as of (excludes amounts or expenses associated with Glazar Joint Venture) Group consolidated financial debt 12 $ mln 253,1

13 13 Key priorities for 2009 Complete turn-around in the Retail Unit Grow Veropharm Leverage trend towards import substitution Resolve funding needs Be socially responsible 13

14 14 II. Retail unit 14

15 15 Russian retail market turnover Growth of annual disposable income and real GDP Source: The Ministry for Economic Development, Source: The Central Bank of Russia, Macroeconomics 15 RUR bln. GDP growth Real disposable income Exchange rate dynamics (USD/RUR) Source: The Ministry for Economic Development,

16 16 Leading Russian drugstore chains by turnover (mln.USD) Russian pharmaceutical retail market Source: CMR Pharmexpert 16 Russian pharmaceutical retail market in consumer prices* *ex.rate= average USD/RUR rate for Segments: commercial, Hospital, FRP) Source: CMR Pharmexpert

17 17 Key operating highlights National market share – 4.97 %* 1084 stores in 29 regions in Russia Over employees As of April 1 st, 2009**: Revenue – USD mln 38.6% decrease vs.Q in USD terms 14.2% decrease vs.Q in RUR terms Purchases – 21 mln. 23.5% decrease vs. Q Average check across the network – RUR % growth vs. Q Total trade area – over sq. meters 9.7% decrease vs. Q Source: unaudited management accounts Number of stores (end of period) Source : Data 2008, Pharmexpert ** unaudited Q IFRS accounts L-F-L sales, mln RUR 17

18 18 Key operating highlights (contd) 18

19 19 Financial Highlights (Retail unit) 19 Source: audited IFRS accounts

20 20 Financial Highlights as of (Retail unit) Source: unaudited Q IFRS accounts In rublesIn US dollars RUR, mln$ mln RevenueGross Profit EBITDA Net Profit EBITDA Gross ProfitRevenue Decline: -14,2% Net Loss Decline: -29,0% Growth: +109,8% Decline: -26,5% Decline: -38,6% Net Loss Decline: -0,7% Growth: +114,2% Growth: +2,9%

21 21 (*) Companys calculations Source: Companys data Pharmacy Chain 36.6 operates in 29 regions of Russia (6 Federal regions) Source «Farmvestnik» 39 dated Pharmacy Chain 36.6 – Russias largest pharmaceutical retailer with a strong regional presence Number of stores (Q1 2009): Moscow - Central364 including Northwest25 South Urals248 South189 Volga127 North Urals94 Western Siberia62 Total:1084 Sales breakdown by regions* 2005

22 22 Product differentiation 36.6 has launched new projects aimed to differentiate its product mix and obtain higher margins Beauty Laboratories Natural cosmetics located in over 50 major pharmacies Optics Exclusive offers among Optics Pharmaceutical retailers 14 stores and 21 opticians departments 22 Sales breakdown in Q1 2009

23 23 Private Label – excellent quality for lower price Over RUR 279 mln. sales volume in Q SKUs 54 Russian manufactures in 25 cities of Russia producing Private label Private label share in Q1 2009: 5.8% of Total sales. 23

24 24 Social responsibility of Pharmacy Chain 36.6 Maintenance of vital medicine assortment Prevention of distribution of counterfeit medicines Formation of high business standards in the pharmaceutical sector (transparency and ethics) Expansion of the Private label which offers excellent quality for lower price Granting additional discounts to socially unprotected citizens Partnership with ММА of I.M. Setchenov in training future experts for pharmaceutical sector Designated as one of 295 backbone companies 24

25 25 Enhancement of operational efficiency Expand our unique concept Earn the right to grow Reduce store level expenses Decrease G&A expenses Direct contracts and back-margins improvements Centralize purchasing Optimize operating platform: Introduction of modern IT services Assortment optimization Control over on –shelf availability of goods Effective use of the pricing strategies Completion of shared-services program Close of unprofitable stores Offer the best value for money RX/OTC drugs in the market Unique offer to our clients: Expansion of the Private Label portfolio Release of new exclusive brands and goods Customers loyalty program («Malina») Beauty laboratories Rebrand existing stores Perfection of services and personnel qualifications Strengthen our positions in key markets: Moscow and the Moscow region Yekaterinburg Ufa Rostov Nizhniy Novgorod Novosibirsk Selective financially-driven approach on new stores openings and M&A. 25 Strategy for 2009 Profitable growth!

26 26 III. Veropharm 26

27 27 Veropharm – one of the largest Russian producers of pharmaceutical products Market share in 2008 – 6.1% Company operates 3 production facilities in Russia: Belgorod (GMP line built in December 2001) Voronezh (#1 in Russia and Ukraine in adhesive bandages) (1) Pokrov (#1 in oncology products with 48,3% market share among Russian producers) (2) Product portfolio of over 400 drugs (RX, OTC, traditional, adhesives) Wide portfolio of generic drugs, most of which are positioned in high- growth, high-margin pharmaceutical groups IPO in April 2006, 49% placement of shares on RTS Over employees Key Financials Source: audited IFRS accounts Source: Company Sales breakdown, Q (1)Source: CMR Pharmexpert (2)Source: IMS $ mln. 27

28 28 Financial Highlights as of (Veropharm) Source: unaudited Q IFRS accounts In rublesIn US dollars RUR mln $ mln Growth: + 8,4% Decline: -39,7%

29 29 IV. Early Learning Center (ELC) Network of developmental toys for children ages

30 30 Early Learning Center (ELC) One of the largest retailers of childrens toys in UK working on a franchising base: LLC Kub-Market – franchisee since July 2006, own logistics, import, 94 employees A unique concept of stores for children and mothers: Developmental toys and special play zones for kids In 2008: Business in Russia was rewarded The fastest growing business (75% growth versus 2007) Sales increased to USD 5.7 mln* 11 stores in Moscow ELC zones in 42 Pharmacy Chain 36,6 stores. Loyalty program Happy Birthday Club including participants Alive internet presence of 1000 visitors per day. 30 * 36.6 share in Total sales of the Company

31 31 V. Summary 31

32 32 Pharmacy Chain 36.6: A valuable asset with the leading position in the Russian retail pharmaceutical market Refocused strategy on retail development Significant year-over-year improvements at operational level Experienced management team with proven expertise Leading the industry in social responsibility 32

33 33 Address: , Moscow, Ochakovskoe shosse, bld Tel.: +7 (495) Fax: +7 (495) Contact information 33

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