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Pharmacy Chain 36.6 Company Presentation

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Presentation on theme: "Pharmacy Chain 36.6 Company Presentation"— Presentation transcript:

1 Pharmacy Chain 36.6 Company Presentation
July 2009

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 Company’s 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 Table of Contents Overview Retail unit Veropharm
Early Learning Center (ELC) Summary

4 I. Overview

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 Brand awareness in comparison with industry peers* Group consolidated revenue mln USD *Source: A/R/M/I -Marketing, 2008 г. (% of respondents) ** unaudited management accounts Source: audited IFRS accounts,

6 Structure of Pharmacy Chain 36.6
Free float Pharmacy Chain 36.6 (Retail) «Veropharm» (Pharmaceutical’s production) 43.7% 56,3% Free float 52% 48% 36,6 Investors ELC (Children’s goods) 50% 36,6 ELC, cо штаб квартирой в Великобритании, один из самых крупных ритейлеров детских игрушек в Европе 10 магазинов работают в Москве и Зеленограде; к 2009 году планируется увеличить количество магазинов до 20 Смежный с аптеками сегмент розничного рынка Эксклюзивный ассортимент детских игрушек для аптек Собственная логистика и импорт

7 Transition and Refocus
History of Pharmacy Chain 36.6 Transition and Refocus New CEO hired EMC sold In Q Retail unit delivered breakthrough EBITDA Consolidated Net Loss decreased by 53,5% Rapid expansion 2008 46 acquisitions in 2005- 2007 SPO 36,6 1 000th store opening ERP system introduction Glazar joint venture creation Consolidated 2007 Net Loss - USD 121,3 mln. Going public 2003 IPO 36,6 2006 IPO Veropharm Foundation First 36,6 store opened 1998

8 Board of Directors Sergey Krivosheev Artem Bektemirov
Chairman of the Board of Directors, Co-founder Artem Bektemirov General Director, Co-founder Arkadi Gibov Partner and co-founder of «GEP» 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

9 Management team

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

11 Financial Highlights as of 31.03.2009 (Consolidated)
RUR, mln In rubles $ mln In US dollars Decline: -37,8% Growth: +1,1% Decline: -27,7% Net Loss Decline: -21,1% Growth: + 875,0% Net Loss Growth: +10,2% Source: unaudited Q IFRS accounts

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

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

14 II. Retail unit

15 Russian retail market turnover Growth of annual disposable income
Macroeconomics Russian retail market turnover Growth of annual disposable income and real GDP RUR bln. RUR bln. Source: The Ministry for Economic Development, Exchange rate dynamics (USD/RUR) GDP per capita in 2001 amounted around $2000 GDP growth Real disposable income Source: The Central Bank of Russia, Source: The Ministry for Economic Development,

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

17 Key operating highlights
National market share – 4.97 %* 1084 stores in 29 regions in Russia Over employees As of April 1st, 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. Q1 2008 Average check across the network – RUR 235 18.1% growth vs. Q1 2008 Total trade area – over sq. meters 9.7% decrease vs. Q1 2008 Number of stores (end of period) L-F-L sales, mln RUR Source: Data 2008, Pharmexpert ** unaudited Q IFRS accounts Source: unaudited management accounts

18 Key operating highlights (cont’d)

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

20 Financial Highlights as of 31.03.2009 (Retail unit)
RUR, mln In rubles $ mln In US dollars Decline: -14,2% Decline: -38,6% Growth: +2,9% Decline: -26,5% Net Loss Decline: -0,7% Growth: +114,2% Growth: +109,8% Net Loss Decline: -29,0% Revenue Gross Profit Revenue Gross Profit EBITDA EBITDA Net Profit Net Profit Source: unaudited Q IFRS accounts

21 Sales breakdown by regions*
Pharmacy Chain 36.6 – Russia’s largest pharmaceutical retailer with a strong regional presence Number of stores (Q1 2009): Pharmacy Chain 36.6 operates in 29 regions of Russia (6 Federal regions) Moscow - Central 364 including Northwest 25 South Urals 248 South 189 Volga 127 North Urals 94 Western Siberia 62 Total: 1084 2005 - Sales breakdown by regions* 2005 - (*) Company’s calculations Source: Company’s data Source «Farmvestnik» № 39 dated

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 stores and opticians departments Sales breakdown in Q1 2009

23 Private Label – excellent quality for lower price
Over RUR 279 mln. sales volume in Q1 2009 740 SKUs 54 Russian manufactures in 25 cities of Russia producing Private label Private label share in Q1 2009: 5.8% of Total sales.

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 в каждой аптеке, не смотря на их ограниченное предложение на рынке в кризисных условиях (социальная карта москвича, дисконтные карты и т.п.) 24

25 Profitable growth! Strategy for 2009
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. Profitable growth!

26 III. Veropharm

27 Veropharm – one of the largest Russian producers of pharmaceutical products
Key Financials 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 $ mln. Source: audited IFRS accounts Sales breakdown, Q1 2009 Source: CMR “Pharmexpert” Source: IMS Source: Company

28 Financial Highlights as of 31.03.2009 (Veropharm)
RUR mln In rubles In US dollars $ mln Growth: + 8,4% Decline: -39,7% Source: unaudited Q IFRS accounts

29 IV. Early Learning Center (ELC)
“Network of developmental toys for children ages 0-8”

30 Early Learning Center (ELC)
One of the largest retailers of children’s 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. * share in Total sales of the Company

31 V. Summary

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

33 Ochakovskoe shosse, bld. 10-2-1
Contact information Address: , Moscow, Ochakovskoe shosse, bld Tel.: +7 (495) Fax: +7 (495)

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