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Pharmacy Chain 36.6Company Presentation
July 2009
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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.
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Table of Contents
I. Overview
II. Retail unit
III. Veropharm
IV. Early Learning Center (ELC)
V. Summary
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I. Overview
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Pharmacy chain 36.6 is the leading Pharmacy chain 36.6 is the leading pharmaceutical retailer in Russiapharmaceutical retailer in Russia
First open formatted store
Over 1 000 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
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Group consolidated revenue
Brand awareness in comparison with industry
peers*
*Source: A/R/M/I -Marketing, 2008 г. (% of respondents) ** unaudited management accounts Source: 2004-2008 audited IFRS accounts,
mln USD
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Structure of Pharmacy Chain 36.6Structure of Pharmacy Chain 36.6
ELC (Children’s goods)
50%50%
36,6
Pharmacy Chain 36.6 (Retail)
«Veropharm» (Pharmaceutical’s
production)
43.7% 56,3%
Free float
52%48%
36,6 Investors
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Free float
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First 36,6storeopened
2003 IPO 36,6
2006 IPO Veropharm
History of Pharmacy Chain 36.6
1998
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46 acquisitions in 2005-2007
SPO 36,6
1 000th store opening
ERP systemintroduction
Glazar joint venture creation
Consolidated 2007 NetLoss - USD 121,3 mln.
New CEO hired
EMC sold
In Q3 2008 Retail unit delivered breakthrough EBITDA
Consolidated Net Loss decreased by 53,5%
2003-2006
2005-2007
2008
Foundation
Going public
Rapid expansion
Transition and Refocus
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Board of Directors
Sergey KrivosheevChairman of the Board of Directors, Co-founder
Artem BektemirovGeneral Director, Co-founder
Vladimir StolinChairman of the Board
of Directors of the consulting company
ZAO “Ecopsi Consulting”
Vasily Rudomino Partner and co-
founder of the law firm “ALRUD”
Lev GlikChairman of the Board
of Directors of OJSC “Revyakinskiy
metalloprokatniy zavod8
Arkadi GibovPartner and co-founder
of «GEP»
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Management team
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Financial highlights (Consolidated)
mln, USDmln, USD
Source: 2004-2008 audited IFRS accounts
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Financial Highlights as of 31.03.2009(Consolidated)
Source: unaudited Q1 2009 IFRS accounts
In rubles In US dollarsRUR, mln $ mln
Growth: +1,1%
Net Loss Growth: +10,2%
Decline: -37,8%
Decline: -27,7%
Growth: + 875,0%
Net Loss Decline: -21,1%
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Credit profile
Debt structure (breakdown by currency,
as of 31.03.2009)
Debt structure(breakdown by
maturity, as of 31.03.2009)
Group consolidated financial debt stood at USD
142.2 mln as of 31.03. 2009 (excludes amounts
or expenses associated with Glazar Joint
Venture)
Group consolidated financial debt
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253,1
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Key priorities for 2009
Complete turn-around in the Retail Unit
Grow Veropharm
Leverage trend towards import substitution
Resolve funding needs
Be socially responsible
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II. Retail unit
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Russian retail market turnoverGrowth of annual disposable income and real GDP
Source: The Ministry for Economic Development, www.economy.gov.ru
Source: The Central Bank of Russia, www.cbr.ru
Macroeconomics
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RUR bln. RUR bln.
GDP growthReal disposable income
Exchange rate dynamics (USD/RUR)
Source: The Ministry for Economic Development, www.economy.gov.ru
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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 2008. Segments: commercial, Hospital, FRP)Source: CMR “Pharmexpert”
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Key operating highlights
National market share – 4.97 %*
1084 stores in 29 regions in Russia
Over 9 000 employees
As of April 1st, 2009**: Revenue – USD 141.2 mln
38.6% decrease vs .Q1 2008 in USD terms 14.2% decrease vs.Q1 2008 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 67 000 sq. meters
9.7% decrease vs. Q1 2008
Source: unaudited management accounts
Number of stores (end of period)
Source: Data 2008, Pharmexpert** unaudited Q1 2009 IFRS accounts
L-F-L sales, mln RUR
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Key operating highlights (cont’d)
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Financial Highlights (Retail unit)
19Source: 2004-2008 audited IFRS accounts
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Financial Highlights as of 31.03.2009(Retail unit)
Source: unaudited Q1 2009 IFRS accounts
In rubles In US dollarsRUR, mln $ mln
Revenue Gross Profit
EBITDA
Net Profit
Net Profit
EBITDA
Gross Profit
Revenue
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%
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21(*) Company’s calculations Source: Company’s data
Pharmacy Chain 36.6 operates in 29 regions of Russia (6 Federal regions)
Source «Farmvestnik» № 39 dated 04.12.07
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Pharmacy Chain 36.6 – Russia’s largest pharmaceutical retailer with a strong regional presence
Number of stores (Q1 2009):
Moscow - Central 364 including Northwest 25South Urals 248South 189Volga 127North Urals 94Western Siberia 62
Total: 1084
Sales breakdown by regions*
2005
2005
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Product differentiation
36.6 has launched new projects aimed to differentiate its product mix and obtain higher margins
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Sales breakdown in Q1 2009
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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. 23
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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
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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.
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Strategy for 2009
Profitable growth!
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III. Veropharm
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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 2 000 employees
Key Financials
Source: 2004-2008 audited IFRS accounts
Source: Company
Sales breakdown, Q1 2009
(1) Source: CMR “Pharmexpert”(2) Source: IMS
$ m
ln.
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Financial Highlights as of 31.03.2009(Veropharm)
Source: unaudited Q1 2009 IFRS accounts
In rubles In US dollarsRUR mln $ mln
Growth: + 8,4%
Decline: -39,7%
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IV. Early Learning Center (ELC)“Network of developmental toys for children ages 0-8”
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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 6 500 participants
Alive internet presence of 1000 visitors per day.
30* 36.6 share in Total sales of the Company
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V. Summary
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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
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Address: 119530, Moscow, Ochakovskoe shosse, bld. 10-2-1
Tel.: +7 (495) 792-5207Fax: +7 (495) 792-5206
E-mail: [email protected]
www.pharmacychain366.ru
Contact information
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