Company Presentation 9M 2020 Results and Performance

Company Presentation

9M 2020 Results and Performance October 2020

2

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Head Office Address

2nd floor, Tabacalera Building, 900 Romualdez Street, Paco, Manila, 1007 Philippines

Disclaimer

3

First store

Opened in

Mandaluyong

City, Metro

Manila

Expansion

Launched loyalty

program in 2001;

renamed as

Tindahan ni Aling

Puring in 2004

Between 2002 and

2006, launched an

average of 3 new

stores every year

and expanded

operations in North

and South Luzon

Brand recognition

Reader’s Digest

Asia’s “Most

Trusted Brands”

Market leadership

The 2nd largest

hypermarket and

supermarket

retailer in the

Philippines in terms

of net sales

Rapid expansion via organic

new Puregold stores roll-out

and acquisitions

2011 - Opened 38 new

Puregold stores

2012 – Opened 31 new

Puregold stores; Acquired

Parco supermarkets with 19

stores and S&R warehouse

membership shopping club

with 6 stores

Rapid store expansion from 1 to 436 stores in 21 years

Continuing new stores roll-

out via organic geographic

expansion and acquisitions

Acquired Company E with

15 stores in 2013

NE Bodega 9 stores and

Budgetlane 8 stores

acquisitions in 2015

B&W Supermarket

acquisition in 2017First format

introduction

New format

introduction

- 2008

New format

introduction - 2010

Store roll-out through FY 2019

1 3 16 3064

102

215

298

360408

436

1998 2001 2006 2008 2010 2011 2013 2015 2017 2018 2019

4

Macroeconomic Updates

• PH GDP Growth Rates

6.4 7.2 7.56.6 6.5 6.4 6.1 6.4 5.7 5.4

6.3 6.7

-0.7

-16.5

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

source: PSA, NEDA, HSBC

• Q3 2020 GDP forecast to decline by 11.1% (HSBC)

5

Shopper Trends

• Decline in Frequency of store visits

– Local government restrictions/quarantine

• Increase in spending per trip is not enough to offset big

frequency drop

• Shorter browsing time per store visit

• Re-prioritization of spending

– Focusing on essential needs

– Health (vitamins)

– Home-cooking

– Sanitation

• Online Shopping and Digital Payments

6

Update on Sari-sari stores customers

Sari-sari stores challenged to stay afloat:

• Less capital due to lower sales– Needs to prioritize assortment

• Lower sales due to less foot traffic in general– No Work / No School

– Limited Income of shoppers during ECQ

– Limited operating hours

• Sourcing Issues– Out of stock products and no delivery/delayed delivery

– Long lines in Supermarket

– Imposed buying limits (anti-hoarding) by government

– Seniors not given quarantine pass (LGU level)

• Lack of income drive more customers asking for “credit”

7

Puregold Enterprise

S&R

• Membership shopping model

• Catering to the upper income customers

• Class A & B and upper C segment

• Imported and large size SKUs

Puregold

• Caters to the low income and low-middle income customers

• Lower C, D and E market

• Sari sari store customers/resellers

• Popular local and small sized SKUs

8

4 Pillars of Growth

1. Protect our Supply Chain

- Revised inventory targets for emerging categories, food

preparation and health/sanitation

- Increased inventory levels since most companies had supply

chain disruptions during lockdown and raw

materials/packaging material sourcing

- Develop local suppliers to improve supply in provincial areas

2. Improve Logistics end-to-end

- Strengthen and open additional cross-dock facilities for Puregold

- Build new and bigger distribution center for S&R

- Build additional capacity for store to shopper delivery

9

4 Pillars of Growth

3. New Channel Development & Digital Marketing Activities

‒ Reactivate coverage of sari-sari stores

‒ Opening up of new accounts

‒ E-commerce investments

4. Margin Improvement

- House Brands

- Streamlining of current operations thru Digitization

- Front margin pricing strategy

- Marketing activation = more supplier support

10

Update on Puregold – 9M 2020

11

• Consolidated net sales were better than expected; grew by 10.1%

in 9M 2020;

• Gross profit grew by 7.9% in 9M 2020; with gross profit margin

posted 16.4%

• Operating income increased by 11.8% in 9M 2020; with operating

margin at 7%

• Consolidated Net income increased by 10.9% in 9M 2020;

consolidated net profit margin at 4.2% (PGOLD net margin is at

2.6% while S&R net margin is 8.8%.)

• Opened 16 new PGOLD stores; 2 S&R Warehouse and 4 S&R

QSR in 9M 2020; closed 3 PGOLD store

• Operating 455 stores in 9M 2020; with consolidated NSA of

around 583,000 sqm

9M 2020 Results and Performance

12

Operating Performance – 9M 2020

*Same Stores Growth for 2020 are based on stores opened as of end December 2018.

Format Hypermarket, supermarket, extra Membership shopping

Revenue contribution

Gross profit (PHP million) & Margin (%) 12,694 (14%) 7,150 (23.7%)

Total traffic (million) 99 7.2

Average net ticket (PHP) 919 4,465

Net sales growth (%) 4.5% 24.5%

Traffic growth (%) -25.7% 13.4%

Average net ticket growth (%) 44.3% 9.8%

Same Store net sales growth (%)* 4.5% 6.4%

Same Store traffic growth (%)* -28.4% -2.5%

Same Store average net ticket growth (%)* 46.1% 9.2%

Puregold75%

S&R25%

13

Breakdown of Stores (per format) Net Selling Area of Stores (in sqm)

Traffic and Ave Ticket Size

Operating Performance – 9M 2020

*NE Bodega and Budgetlane Stores are converted to Puregold Stores in 2018

518,862 537,965 565,995 582,889

Traffic (in M) PGOLD S&R2018 178 8.2

2019 180 8.9 9M 20 99 7.2

Ave Ticket (in Php) PGOLD S&R2018 612 3,959

2019 656 4,212 9M 20 919 4,465

Group 2018 2019 9M 20Hypermarket 208 230 234

Supermarket 104 103 102Extra 42 47 57S&R 16 18 20S&R QSR 39 38 42

NE & Budgetlane 0 0 0TOTAL 409 436 455

Puregold Only 2018 2019 9M 20

Metro Manila 125 130 136North Luzon 93 100 104

South Luzon 101 106 110Visayas 25 33 32Mindanao 10 11 11

TOTAL 354 380 393

442,449 450,791 468,994 474,963

72,904 83,048 92,883 103,529 3,509 4,126 4,078 4,397

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2017 2018 2019 9M 20Puregold S&R only S&R QSR

14

North Luzon

(112 stores)

Visayas

(40 stores)

South Luzon

(120 stores)

Metro Manila

(170 stores)

BULACAN

RIZAL

LAGUNA

CAVITE

Manila Bay

Laguna de Bay

Caloocan

Pasig

Marikina

Valenzuela

Caloocan

Malabon

Quezon City

ManilaSan Juan

Mandaluyong

Navotas

Makati

Parañaque

Pasay Taguig

Pateros

Las Piñas

Muntinlupa

Key statistics 9M 2020 Geographic coverage

Area with Puregold store coverage

Mindanao

(13 stores)

Store Portfolio – 9M 2020

Total no. of

stores 455

No. of stores

per format

234 hypermarkets;

102 supermarkets;

57 extras

20 S&Rs

42 S&R QSR

Consolidated

net selling

area

about 583,000

square meters

*NE Bodega and Budgetlane Stores are converted to Puregold Stores in 2018

Metro Manila 136 10 24

North Luzon 104 3 5

South Luzon 110 3 7

Visayas 32 2 6

Mindanao 11 2 0

393 20 42

15

Net sales (in Php billions) Gross profit & Margin (in PHP billions)

• Continuing strong revenue growth driven by the 380 Puregold stores and the 20 S&R stores in 2019

• Increasing costs of suppliers resulted to reduced marketing and promo support

• Positive effect of Tax Reform law to Filipino consumers supported continuing growth in revenues

Financial Performance – 9M 2020

124.7141.14

154.49

109.98121.14

2017 2018 2019 9M 19 9M 20

21.69 23.93 25.95

18.3919.84

17.4% 17.0% 16.8% 16.7% 16.4%

12.0%

17.0%

22.0%

27.0%

0

5

10

15

20

25

30

35

2017 2018 2019 9M 19 9M 20

Gross Profit GP Margin

16


Other Operating Income (in PHP millions) Operating Expenses (in PHP millions)

EBITDA & Margin (in Php millions)

2,692 2,941 3,263 2,307 2,298

2.2% 2.1% 2.1% 2.1% 1.9%

0.0%

5.0%

10.0%

15.0%

-

1,000

2,000

3,000

4,000

2017 2018 2019 9M 19 9M 20

Other Income % of Sales

14,611 16,639 17,830

13,097 13,645

11.7% 11.8% 11.5% 11.9% 11.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

-

5,000

10,000

15,000

20,000

25,000

2017 2018 2019 9M 19 9M 20OPEX % of Sales

12,730 13,719 15,204

10,412 11,594

10.2% 9.7% 9.8% 9.5% 9.6%

0.0%

10.0%

20.0%

30.0%

40.0%

(1,000)

4,000

9,000

14,000

19,000

2017 2018 2019 9M 19 9M 20EBITDA EBITDA Margin

17


Operating Income/EBIT and Margins (in PHP millions) Net Income & Margins (in PHP millions)

9,769 10,231 11,384

7,600 8,497

7.8% 7.2% 7.4%6.9% 7.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

(1,000)

1,000

3,000

5,000

7,000

9,000

11,000

13,000

15,000

2017 2018 2019 9M 19 9M 20

EBIT EBIT Margin

5,494 6,200 6,773

4,553 5,050

4.4% 4.4% 4.4%4.1% 4.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-

2,000

4,000

6,000

8,000

10,000

2017 2018 2019 9M 19 9M 20

Net Income NI Margin

18

Financial Performance – Puregold Only

Revenues (in PHP Billions) Gross Profit & Margins (in PHP millions)

EBITDA and Margin (in PHP millions) Net Profit & Margins (in PHP millions)

98.7 109.53118.24

84.93 90.99

-10

10

30

50

70

90

110

130

150

2017 2018 2019 9M 19 9M 20

15,758 16,997 17,659

12,632 12,694

16.0% 15.5% 14.9% 14.9% 14.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

-

5,000

10,000

15,000

20,000

25,000

2017 2018 2019 9M 19 9M 20GP GP Margin

8,995 8,893 9,281

6,436 6,356 9.1% 8.1% 7.8% 7.6% 7.0%

0.0%

5.0%

10.0%

15.0%

20.0%

-

2,000

4,000

6,000

8,000

10,000

12,000


3,842 4,274 4,330

2,525 2,399

3.9% 3.9% 3.7% 3.0% 2.6%-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2017 2018 2019 9M 19 9M 20NIAT NIAT Margin

19

Financial Performance – S&R Only

Revenues (in PHP Billions) Gross Profit & Margins (in PHP millions)

EBITDA and Margin (in PHP millions) Net Profit & Margins (in PHP millions)

25.8731.61

36.32

2530.1

2017 2018 2019 9M 19 9M 20

5,795 6,932

8,291

5,757 7,150

22.4% 21.9% 22.8% 23.0%23.7%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

-

2,000

4,000

6,000

8,000

10,000

12,000

2017 2018 2019 9M 19 9M 20

GP GP Margin

2,162 2,399 2,917

2,0282,650

8.4%7.6% 8.0% 8.1%

8.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2017 2018 2019 9M 19 9M 20NIAT NIAT Margin

3,712 4,826

5,922

3,976

5,238

14.3% 15.3% 16.3% 15.9% 17.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


20


Notes:

1.Average of inventory at the beginning and end of the period / cost of sales x 363 (for full year))

2.Average of trade receivables at the beginning and end of the period / net sales x 363 (for full year)

3.Average of trade payable at the beginning and end of the period / cost of sales x 363 (for full year)

Working capital days due to S&R importations and

Puregold rapid store expansions and acquisitions

Trade Receivables Days

Inventory Days

Trade Payables Days

New Puregold Store roll out and new S&R Stores to be opened in 2019

Similar payments terms to suppliers to avail of continued discounts

2018 2019 9M 20

7.6 6.6 2.9

58.0 55.4 57.0

23.9 22.9 15.8

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Guidance for 2020

• Consolidated net sales target to grow between 4 to 5% in 2020

– Opening of 25 new Puregold stores

– Opening of 2 S&R Warehouse stores

• Improve PGOLD gross and net profit margins versus 9M 2020

• Sustain S&R gross profit margins versus 9M 2020

• Pursue acquisitions and expand into new geographic locations

22

Use of Proceeds: Php 12 Billion

1. M&A Opportunities Php 5 billion

2. Increase Inventory Supply by 1.5 to 2 weeks Php 4.5 billion

3. Investments in Logistics (DC and Cross Dock) Php 2 billion

4. S&R Solar Projects for 8 warehouse clubs Php 200 million

5. S&R Store Renovations Php 300 million

23

CAPEX Guidance for FY 2020

• CAPEX Budget of Php 3.4 billion in 2020

– Php 1 billion for 25 new Puregold Stores

– Php 1.6 billion for 2 S&R stores

– Php 200 million for 10 S&R QSR

– Php 600 million Maintenance Capex

Q & A

Thank you!

Documents

Company Presentation 9M 2020 Results and Performance