investor presentation - follow on offering - september 2012
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Investor presentation - Follow on offering - september 2012TRANSCRIPT
Book Runner
Follow-on Offering
Investor Presentation September 2012
Characteristics of the
Offering
3
Current number of shares outstanding 248,617,522
Number of shares being offered 750,000,000
Number of shares after the transaction Up to 998,617,522
Number of share subscription rights per share ~ 3.01668
Condition of success Capital Increase will be declared successful after raising the amount
required
Amount required by the judicial settlement CLP 120,000,000,000
Amount required by the EGM CLP 90,000,000,000 (Prior to approval with lenders)
Subscription
Through any Chilean stockbroker, but the funds will be retained
temporarily in an escrow account at Banco Santander Chile until the
publication of the result of the capital increase:
• Condition of success met: funds will be transferred to La Polar
• Condition of success not met: funds will be returned to those who
subscribed shares
Additional Information More information about the company is available in a data room after
signing a confidentiality agreement
Financial Advisor and Book Runner
Follow-on Offering
Characteristics of the Offering
4
Subscription Price Use of Proceeds
CLP 50 billion
CHILE
Remodeling of Stores
Financing of customer loans
CLP 50 billion
COLOMBIA
New stores
Financing of customer loans
CLP 20 billion SERNAC1 and others
Follow-on Offering
Characteristics of the Offering
Weighted average of transactions in the Santiago Stock Exchange (“SSE”) during the 3 trading days prior to the subscription less a discount of 5%
Minimum of CLP 160 per share
(1): Chile’s National Consumer Service
5
Key Transaction Dates
Follow-on Offering
Characteristics of the Offering
AUGUST
27
SEPTEMBER
3
OCTOBER
2
AUGUST - SEPTEMBER
27 - 28
Opening of Data Room
PRP 1 ends(*)
PRP 1 begins
Road Show (*) Once the Preemptive Rights Period 1 ("PRP 1") of 30 days ends, the BOD shall have the power to offer any remaining unsubscribed shares in a second offering period of 7 calendar days to shareholders who subscribed shares and third parties who acquired share subscription rights and subscribed shares.
If there are still unsubscribed shares remaining after this second period, the BOD shall have the power to offer them in a third offering period of 2 calendar days to shareholders who subscribed shares in the first and second offerings and third parties who acquired share subscription rights during the first period and subscribed shares in both the first and second period. Share subscription rights can only be traded through the SSE during the first period.
The BOD also has the power to hold an auction of remaining unsubscribed shares or a “Subasta de un Libro de Órdenes” instead of holding a third offering period.
AUGUST SEPTEMBER
M T W T F S S M T W T F S S
1 2 3 4 5 1 2
6 7 8 9 10 11 12 3 4 5 6 7 8 9
13 14 15 16 17 18 19 10 11 12 13 14 15 16
20 21 22 23 24 25 26 17 18 19 20 21 22 23
27 28 29 30 31 24 25 26 27 28 29 30
OCTOBER
M T W T F S S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
July 2011
7
What we found…
La Polar in July 2011
No Executives / Unmotivated
Staff
High Administration
Expenses
Distrustful Suppliers
Affected Customers
Restricted Financial Business
No Focus on Retail
Colombia
No Corporate Governance
1
2
3
4
5
6
7
8
8
Engaged Board of Directors Corporate Governance
1
(1) Committee from Jul/11 to May/12, (2) Committee since May/12
Gino Manríquez
Controller
Controller
Control and Transparency
Reports directly to the Board
Internal Audit
Committee Directors (1) Directors (2) Risk Credit Card
César Barros M.
Georges de Bourguinon A.
Alberto Marraccini V.
Jorge Id S.
Juan Pablo Vega W.
Fernando Tisné M.
Aldo Motta C.
Georges de Bourguignon A.
Vice-chairman
Juan Pablo Vega W. Director
Aldo Motta C. Director
Jorge Id S. Director
César Barros M. Chairman
Fernando Tisné M. Director
Alberto Marraccini V. Director
9
First-class team with strong experience in the industry
Talented Organization | New Executive Staff
Strategic Support
Francisco Martínez
CEO Colombia
Andrés Molina
Soft Lines Mngr.
Rodrigo Karmy
Hard Lines Mngr.
Eduardo Lobos
Planning Mngr.
Marcelo Acosta
Sales and Distrib. Mngr.
Carlos Arredondo
Logistics Mngr.
Sergio López
Risk Mngr.
Claudio Sierpe
Customers and Payments Mngr.
Fernado Silva
Insurance Brokerage Mngr.
Enrique Vitar
Collection Mngr.
Álvaro Araya
CFO
Ricardo Rubio
IT Mngr.
Olivia Brito
H.R. Mngr.
Rodrigo Nazer
Marketing Mngr.
Andrés Escabini
Legal Mngr.
Business Areas
Colombia CEO Financial Team Sales, Planning and Logistics
Patricio Lecaros
CEO
CEO
+ 23 years of exp. Ripley, C&I,
Quintec
+ 11 years of exp. SQM
+ 17 years of exp. Ripley, Hites
+ 16 years of exp. Epson Chile
+ 18 years of exp. Falabella
+ 22 years of exp. La Polar, BCI + 21 years of exp.
Ripley, Johnson
+ 20 years of exp. Ripley
+ 30 years of exp. Hites,
Scotiabank
+ 27 years of exp. Din, Conosur,
Ripley
+ 34 years of exp. Banco Estado, otros
+ 28 years of exp. Banefe,
B. Falab., Johnson
+ 27 years of exp. Salcobrand
+ 21 years of exp. Servipag y Corpgroup
+ 9 years of exp. La Polar
+ 11 years of exp. Viña Undurraga
Motivated Staff
2
Building the new
People
Product
Culture
11
Talented Organization Strong
Reduction in Expenses
8.070
6.719
DIC 2010 DIC 2011
20% 2010 2011 Variation
Managers 51 23 -55%
Professionals, Administrators, etc. 1,795 1,297 -28%
Sellers, Assistants, etc. 6,497 5,399 -17%
Staffing
3
38% of employees are new talents
DEC 2010 DEC 2011
12
Selling, General and Administrative Expenses
73.528
61.991
74.450
49.722
ENE-JUL (7M) AGO-DIC (5M)
PPTO 2011 REAL
Strong Reduction in
Expenses
3
SG&A expenses below 30% of Retail Revenue
SG&A expenses over 40% of Retail Revenue
- 20%
Aconcagua Plan
20% expenses reduction
Review and tender of existing contracts
CLP 5 billion decrease in salaries
CLP 5 billion decrease in advertising
CLP 2.2 billion decrease in general expenses
JAN – JUL (7M) AUG – DEC (5M)
13
Suppliers Improved Supplier Relations
4
Trust recovered
Obligations fulfilled
New payment system for foreign suppliers
14
La Polar, a strong Brand
5,5 5,5 5,2
5,5 5,5
4,7
5,7 5,9
6,3 6,5
6,7
¿Would you buy in La Polar again?
Revenues Evolution
Source: Guiñez Consultores Market Study | Sample: Population who buy regularly or occasionally in La Polar
49%
19%
32%
58% 27%
15%
Date: jan-12 Date: jul-11
UF/M2
Founded in 1920, the brand has
been PRESENT in the market for
nearly a century
Despite what happened in
2011, sales are showing a significant recovery reaffirming BRAND VALUE
Brand PERCEPTION has
dramatically improved compared to July 2011
Dec/23/11 was the best-selling day in LA POLAR HISTORY
13.2
Customers: Base of the
Business
5
Yes No
Maybe
Yes
No
Maybe
68% 85%
Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)
15
Customers … … one of the most valuable assets of the company
456,861 customers with an ACTIVE LA POLAR
CREDIT CARD (TLP) AND A POSITIVE BALANCE
75%
10%
15%
79%
15%
6%
¿Would you buy again with your TLP?
Source: Guiñez Consultores Market Study | Sample: Persons with a TLP
Customers: Base of the
Business
5
Date: jan-12 Date: jul-11
Yes
No
Maybe Yes
No
Maybe
85% 94%
16
Reducing the financial risk
Decrease in the Risk Rate
Decrease in Portfolio Delinquencies
Source: La Polar
Source: La Polar
69% 84%
14% 8% 16% 9%
Not delinquent (0 -30 days) Delinquency (31-90 days) Delinquency (>91 days)
Attracting new customers
New card
New credit policy
New collection policy
Renewed Financial Business
6
34%
26%
33% 34% 35%
22% 20% 19% 18% 18% 17% 17% 12%
Aconcagua Plan
17
New benefits program
New product development
New financial regulation in Chile
Renewed Financial Business
6
Financial Revenues
Financial Revenues over Retail Sales (%)
Aconcagua Plan
35% 44%
58%
75%
101%
88%
58%
26% 22% 30%
2005 2006 2007 2008 2009 2010 2011 2011 (L5M)
1S12 … 2014
Source: La Polar
18
New Business Model…
… Focus on Retail
Focus on Retail
7
Aconcagua Plan
11,2
9,9
8,7
7,0 6,1
7,4 6,8
6,4
10,0
2005 2006 2007 2008 2009 2010 2011 Jun-12 (LTM)
… 2014
Monthly Retail Revenues in Chile (UF/m2)
Aconcagua Plan – 10 UF/m2
Product and brand new proposal
New store concept
Attracting new customers
Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)
19
New Business Model…
… Focus on Retail
Focus on Retail
7
Retail Direct Margin in Chile
Aconcagua Plan – 30%
Development of private labels
Improvement in logistics
Strategic alliances with suppliers
Aconcagua Plan
26% 26% 24% 24% 26% 25%
23% 22%
30%
2005 2006 2007 2008 2009 2010 2011 Jun-12 (LTM)
… 2014
Source: La Polar
20
Products
Full renovation in clothing department
New mix of our own brands
Improvement of the purchasing process
Creation of a new department dedicated to design
New mix of National/Imported products
Focus on Retail
7
21
New Store Proposal
Change of image / layout
Remodeling of 100,000 m2
Focus on Retail
7
22
Where we are Expansion Plan
La Polar Colombia…
…growth opportunity
Barranquilla
Cartagena de Indias
Medellín
Pereira
Cali Villavicencio
Bogotá
Bucaramanga
18 CONCRETE PROJECTS in
development stages and study
Future INVESTMENT of
USD 100 million
Floresta Opening: November 2011
Los Molinos Opening: October 2011
Centro Mayor Opening: October 2010
Carabobo Opening: August 2011
Bucaramanga Store Cacique Mall
Opening: November 30,
2012 Area of 6.103 m2
Colombia
8
CHALLENGES
24
Aconcagua Plan
RETAIL REVENUES 10 UF/M2
RETAIL MARGIN 30%
SG&A EXPENSES / RETAIL
REVENUES < 30%
FINANCIAL REVENUES / RETAIL
REVENUES 30%
PROVISIONS 12%
RETAIL EBITDA MARGIN > 10%
La Polar has set specific goals for the short and medium term to be
achieved by 2014
Source: La Polar | UF: Unidades de Fomento (currency indexed to Chilean CPI)
Background
26
36 35 38
14
42
Falabella Cencosud Ripley Hites La Polar
37%
25%
22%
10% 5%
16,3
11,1 9,9
7,1 6,8
Falabella Cencosud Ripley Hites La Polar
4th Player in Department Stores… … with 10% Market Share in Sales
Market Share by Revenues (2011)
Monthly Revenues by Surface (2011) Number of Department Stores
Relevant Market Share at NATIONAL LEVEL
LA POLAR has the largest number of stores
La Polar is POSITIONED in a segment that presents
significant barriers to entry
Source: Company Reports
N° UF/m2
Source: Company Reports | Note: The selling area of Paris at the end of 2011 was updated from 272,388 m2 to 239,531 m2. This correction was provided by the administration of Paris
27
Unique Portfolio of Strategic Locations throughout Chile
Chile
42 STORES
Iquique
Antofagasta
Punta Arenas
Copiapó
Osorno Puerto Montt
Valdivia
Coquimbo La Serena Ovalle
Valparaíso Viña del Mar
El Belloto San Antonio
Rancagua
Los Andes
Santiago
Los Ángeles Concepción
Bío Bío Chillán
Curicó Talca
Linares
Colina
Plaza Norte
Estación Central
Puente
Ahumada
Las Rejas
Maipú
Panamericana
La Reina
La Florida
Gran Avenida
Puente Alto
Mall Plaza Sur
San Bernardo
El Bosque
+ 160.000 m2 of SELLING SPACE
LOCATIONS are a
significant barrier to entry
Santiago
Present in 20 of the 24 largest cities in the country, covering over 10 MILLION PEOPLE all over Chile
28
635
135 99
119
572
29
754 707
129
1 2 3
Cartera Neta Provisiones
Loan Portfolio Evolution Agreement with Chile’s National Consumer Service
CLP Million Amount Cash
effect Accounting
effect
Interest Rate Reduction + Elimination of fees and interest
293,000 0 0
Return to Net Creditors1 17,500 13,800 13,800
Provision in RU2 Portfolio 5,200 0 5,200
Universal Repair Bonus 15,020 2,220 2,220
Tax Benefit Penalty2 25 25 25
Total 330,745 16,045 21,245
What changed since July 2011?
Financial Background
Mar-11 Jul-11 Jun-12
CLP Billion
N° of cards with balance
1,206,410 630,980 468,684
(1) Cash effect already considered a payment of $3,700 in previous plans (2) UTM 600 fine subject to ratification of the judge. UTM stands for Unidad Tributaria
Mensual and is a currency linked to Chilean CPI used for tax purposes. 1 UTM = CLP 39,570 as of August 2012
CLP 500 million of the provisioned portfolio is recovered monthly
Net Portfolio Provisions
29
-13%
-3%
15%
-14%
-5% -3%
1T'12 2T'12 2012 … 2014
Real Plan
59 71 55 68
284
1T'12 2T'12 2012 … 2014
Real Plan
Aconcagua Plan
Financial Background
Income Statement (CLP billion) 1Q ’12 2Q ’12
Revenues 81.1 91.6
Retail 64.8 76.4
Financial 16.3 15.2
Gross profit -7.2 20.4
EBITDA -32.4 -5.5
Chile -29.8 -2.3
Colombia -2.7 -3.3
Adjusted EBITDA(1) -10.6 -5.7
Chile -7.8 -2.4
Colombia -2.7 -3.3
Net Earnings -34.9 -10.2
Indicators show recovery in sales
Income Statement Evolution of Retail Sales in Chile
Nonrecurring Expenses Adjusted(1) EBITDA Mg. over Retail Sales in Chile
(1) EBITDA adjusted for nonrecurring expenses | (2) Business Plan 2012 publicly published on Oct/27/11
CLP billion Aconcagua Plan
(2)
(2) Nonrecurring (CLP billion) 1Q ’12 2Q ’12
SERNAC provision -21.2 -
Compensation -0.8 -1.5
Extraordinary fees -1.4 0.3
Penalty recovery 1.5 1.3
Total -21.9 0.1
462
+7% +4%
30
0
20
40
60
80
100
120
140
160
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 … 2032
Senior Amortization Junior Amortization (e) Senior Interests Senior Bond (CLP)
Amount $185,013 million(1)
Amortization Semiannual starting in 2015
Interests From 2013 to 2022 with a rate between 4% and 10%
Junior Bond (UF)
Amount CLP 235,472 million(1)
Amortization One coupon in 2032
Interests No interest payments
Tranche C
Amount CLP 23,820 million(1)
Amortization Semiannual starting in July 2018 until July 2024
Interests BCP 10 Rate + 1% starting July 31, 2013
Settlement Description (Nov/2011) Bond Amortization Profile
Debt Restructuring
Financial Background
442(2)
CLP billion
(2): Junior Amortization estimated with an annual inflation of 3% (1): Plus interest accrued between Jul-2011 and the date of fulfillment of the Condition of Success
31
Balance Sheet as of June 2012 Top Impacts Post Capital Increase
Pro-forma Balance Sheet of La Polar post-Capital increase
Balance Sheet
Balance Sheet (CLP billion) Dec ‘11 Jun ’12 Jun ’12 Pro-forma*
Cash and Equivalents 35 16 136
Accounts Receivables 132 99 99
Inventories 44 52 52
Fixed Assets 69 68 68
Other Assets 55 68 68
Total Assets 335 304 424
Financial Debt 476 484 228
Current 470 479 14
Non-current 6 5 214
Accounts Payables 68 56 56
Other Liabilities 20 36 36
Equity -228 -272 104
Total Liabilities and Equity 335 304 424
(*) Estimation of the effect post-capital increase
Effect on equity:
+ CLP 120 billion due to Capital Increase
+ CLP 256 billion due to validity of Judicial Settlement
Effect on Short-Term Debt: The validity of the Judicial Settlement enables La Polar to lower its debt obligations in the short term
Financial Debt Effect:
- CLP 256 billion due to validity of Judicial Settlement
Cash Effect:
+ CLP 120 billion due to Capital Increase
32
1. Brand Value 2. Corporate Governance 3. First-class Team
4. Market Position 5. Customers 6. Colombia
7. Aconcagua Plan
Investment Thesis
“The crisis is the greatest blessing that can happen to people and countries, because the crisis brings progress.
Creativity is born of anxiety as the day is born of the night. The Crisis is in the birthplace of invention, discovery,
and the great tragedies. Whoever overcomes crisis outdoes himself without being “overcome”. ”
33
Book Runner
Follow-on Offering
Investor Presentation September 2012
Appendix I
Retail Industry in Chile
35
128
140
149
145
160
100
110
120
130
140
150
160
170
2005 2006 2007 2008 2009 2010 2011 2012e 2013e
Total GDP Commerce GDP Private Consumption
Commerce GDP and Private Consumption
Retail Sales Index (IVCM)
Consumer Trends in Chile: Sustainable Growth of Commerce GDP and Retail Sales Solid macro scenario and domestic demand
Total GDP CAGR of 4.2% from 2005-2011
Private Consumption CAGR of 6.4% from 2005-2011
Commerce GDP CAGR of 6.9% from 2005-2011
Structural economic changes support greater private consumption
57% vs. 65% in Private Consumption/GDP in 2005 and 2011 respectively
In the LTM, the two lines of products with the highest growth rates in retail sales are present in the business of La Polar
21% real growth in devices, articles and equipment for domestic use
18% real growth in textiles, clothing, footwear and leather goods
Retail Industry in Chile
0%
5%
10%
15%
20%
Growth in Retail Sales (MoM) Average
Average Growth 10.2%
Commerce GDP has had a major boost in the past two years
Source: Central Bank of Chile (www.bcentral.cl) and Latin Concensus Forecasts as of Jul-12
Source: INE (www.ine.cl) | IVCM: Índice de Ventas de Comercio al por Menor (Retail Sales Index)
36
Retail Industry in Chile
Chile ranks 2nd in the GRDI (Global Retail Development IndexTM), index that shows the most attractive developing countries for retail investment
Sophisticated and complete market consolidated in five major operators, both specialized and multi-format
They all have financial services and have expanded to other countries, with the exception of Hites
Industry with high barriers to entry
Highest market penetration in LATAM
Store locations
Brand loyalty
Department Stores
Supermarkets
Home Improvement
Shopping Centers
Financial Services
International Presence
Retail Industry in Chile Highly Consolidated
Top 10 GRDI (Global Retail Development IndexTM)
Major retail stores format in Chile
57,4
58,5
58,9
60,6
60,6
60,8
63,1
63,8
65,3
73,8
0 20 40 60 80
Peru
Mongolia
Oman
Georgia
Saudi Arabia
India
Uruguay
China
Chile
Brazil
Source: A.T. Kearney (www.atkearney.com)
Appendix II
Retail Industry in Colombia
38
Consumer Trends in Colombia: Products present in the Department Store format have had a strong boost in sales
Contribution to total Δ in
sales
Present in La Polar stores
Growth in sales (LTM)
Appliances and home furnishings 2.4% 13.6%
Textiles and clothing 2.1% 13.3%
Personal care products, cosmetics and perfumery
0.9% 11.0%
Footwear and leather goods 0.8% 28.5%
Home computer equipment 0.5% 9.9%
Articles and household utensils 0.5% 12.0%
Pharmaceuticals 0.2% 5.4%
Products for household cleaning 0.2% 7.9%
Parts and accessories for vehicles 0.2% 10.1%
Liquors and Cigars 0.2% 9.9%
Hardware 0.1% 7.1%
Other goods 0.6% 10.2%
Total Sales 8.8% 7.2%
Retail Industry in Colombia
Solid macro scenario and domestic demand
Total GDP CAGR of 4.8% from 2005-2011
Private Consumption CAGR of 4.8% from 2005-2011
Commerce GDP CAGR of 5.1% from 2005-2011 and
7.0% YoY in 2011
In the LTM as of 1Q12, retail sales grew by 8.8% in real terms
The first 6 lines with the largest growth are present in La Polar stores
-5%
0%
5%
10%
15%
20%
25%
Growth in Retail Sales (MoM) Average
Commerce GDP and Private Consumption
Retail Sales Index (MMCM(*))
Average growth 7,1%
135
132 133
(MMCM): Muestra mensual de comercio al por menor (monthly sample of retail sales, excludes gasoline and vehicles) | Source: DANE (www.dane.gov.co)
Source: Colombia’s Central Bank (www.banrep.gov.co) and Latin Consensus Forecasts as of Jul-12
Source: DANE (www.dane.gov.co) – Boletín GAHM as of mar-12
100
110
120
130
140
150
2005 2006 2007 2008 2009 2010 2011
Total GDP Commerce GDP Private Consumption
39
11
4
Falabella La Polar
Retail Industry in Colombia
Significant participation of Chilean companies in the industry such as La Polar, Falabella, Cencosud and soon Ripley
Colombian competitors mainly participate with the supermarket format
Important opportunity given the low market penetration
23% of retail sales are in shopping malls vs. 75% in the
United States
46 million inhabitants vs. 17 million in Chile
12 cities with more than 400,000 inhabitants
Department Stores
Supermarkets
Home Improvement
Shopping Centers
Financial Services
International Presence
Retail Industry in Colombia with Low Penetration
Number of Department Stores and Surface
Format of the major retail stores in Colombia
6.3 UF/m2
5.2 UF/m2
Source: Company Reports
N°
Appendix III
Financial Industry in Chile
41
5,3 4,3 4,3 4,9 5,6
7,4 6,0 5,3 5,3
5,4
12,8
10,4 9,6 10,2
11,1
2007 2008 2009 2010 2011
Bank Credit Cards Non-bank Credit Cards
Financial Industry in Chile
Chile has shown an increase in terms of average consumer loans and balance due from client, reflection of the good macroeconomic performance of the country
Consumer market increasingly more educated and conscious, promoting differentiation in retailer’s products
Retailers have extended their reach and market share of their credit cards through strategic alliances with other retailers that operate in different segments
Recent alliances of retailers with Visa and Mastercard could encourage the use of non-bank cards
Direct advantage of retailers to increase their market share due to the
knowledge of the customers and their consumption habits Evolution of Total Credit Cards with Transactions
Loan Evolution associated with Non-bank Credit Cards Mkt. Share of Non-bank Credit Cards with Transactions (dec-11)
N° MM
Description
(ex. La Polar)
6 million cards
Falabella 34%
Cencosud 23%
Ripley 18%
La Polar 9%
Presto 8%
ABC DIN 5%
Johnson 3%
Consorcio 0%
2.256 2.016 2.130 2.283
406 236 188
179
2.662
2.252 2.318 2.462
2008 2009 2010 2011
Non-delinquent portfolio Delinquent Portfolio
Source: SBIF (www.sbif.cl)
Source: SBIF (www.sbif.cl) y La Polar Source: SBIF (www.sbif.cl) | Note: Real CLP billions as of dec-11
(ex. La Polar) (ex. La Polar)
42
Follow-on Offering
Investor Presentation September 2012
Book Runner
43
Investing in our shares involves risks that are described in detail in the Prospectus approved by the Superintendencia de Valores y Seguros, which is available in www.lapolar.cl and www.celfin.com. In the case share subscription rights are acquired, the corresponding shares are subscribed and the capital increase is declared unsuccessful, you may recover the amount subscribed but not the amount paid for the share subscription rights
Disclaimer