3rd Nov 2006 07:51
X5 Retail Group N.V.03 November 2006 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN 3 November 2006 X5 RETAIL GROUP N.V. ANNOUNCES AUDITED 1H 2006 RESULTS AND ESOP RESTRUCTURING PLAN GROUP PRO FORMA SALES OF US $1,581 MILLION, UP +43% VS. 1H 2005 GROUP PRO FORMA GROSS MARGIN OF 26.7% VS. 24.5% 1H 2005 GROUP PRO FORMA EBITDA OF US $122 MILLION, UP +24% (1)VS. 1H 2005 Amsterdam, 3 November 2006 - Following its post-merger decision to switch tosemi-annual audit frequency, X5 Retail Group N.V., Russia's leading groceryretailer, released today its first post-merger audited consolidated accountsfor 1H 2006 signed by PricewaterhouseCoopers, the company's new auditor. Theaudited pro-forma results before the costs of employee stock option programmeare generally in line with the management accounts: • Pro-forma Net Sales of US $1,581 million; up 43.4% vs. 1H 2005 (unchanged from the management accounts) • Pro-forma Gross profit of US $422 million (vs. US $420 million under the management accounts); • Pro-forma Gross margin of 26.7% (vs. 26,6%) • Pro-forma EBITDA of US $162 million (vs. US $161 million); EBITDA margin of 10.3% (vs. 10.2%) • Net profit of US $80 million (vs. US $74 million); Net margin of 5.0% (vs. 4.7%) At the same time, the Company increased its 6 months reserves for theliabilities under the Pyaterochka employee stock option programme (ESOP) in 1H2006 from US $11.750 million to US $40.711 million, applying earlier costsrecognition approach. Therefore, EBITDA on a pro-forma basis changed to US$122 million (vs. US $149 million under the management accounts); EBITDA marginchanged to 7.7% (vs. 9.4%). Net profit on a pro-forma basis changed to US $39million (vs. US $62 million); Net margin changed to 2.5% (vs. 3.9%). In 2005, Pyaterochka Holding N.V. approved an option plan for its certain keyemployees for a total of 6,129,088 options which were granted on August 16, 2005and December 2, 2005. On November 2, 2006 the Supervisory Board approved the ESOP restructuring planaccepted by the stock options holders under which the existing stock optionswill be terminated this year and the beneficiaries will receive a one-off cashand GDR compensation. As a result, ESOP restructuring will cost to the Companyestimated US $ 65,5 million, which implies around USD 11,0 per GDR. The ESOPcosts in amount of US $ 60,0 million will be fully recognised in 9 monthsfinancial results, and the Company has no further liabilities under the existingstock option programme going forward. Group CFO Vitaly Podolsky commented "First of all, we are pleased to announce a strong set of audited operationalfinancial results for 6 months of 2006 which confirm the prudence of ourmanagement reporting released in early September. The Board's yesterday decisionto restructure the ESOP will certainly affect our performance this year, howeverit translates into dozens of millions of savings for the Company going forward,reduces uncertainty of our potential liabilities and strongly enhance our futureprofitability." Group CEO Lev Khasis commented "The existing ESOP was designed before the merger and its original structuredoes not well align with objectives of the Company, its shareholders noreffectively motivates the participants. The decision to restructure the ESOPprogram was not easy, as our key concern was to ensure that we maintain a highlevel of commitment of the Pyaterochka's managers in this important period ofour history. Therefore, I was very pleased that the restructuring plan wasfully supported by both the Board members and employees". Analyst and Investors Conference Call There will be a conference call today for analysts and investors at 15:00 Moscowtime (07:00 EST/12:00 UK time) hosted by Vitaliy Podolskiy, Group CFO, todiscuss the audited 1H 2006 results. Friday, 3 November 2006 07:00 EST/12:00 UK time /15:00 Moscow time Participant access number(s): UK Toll: +44 (0)20 7138 0808 Russia Toll: +7 495 545 0588 USA Toll: +1 718 354 1158 Replay service available until midnight (UK time) on 7th November: UK Toll : +44(0)20 7806 1970 USA Toll : +1 718 354 1112 Russia Toll Free: 810 800 2501 1012 Replay passcode: 4683350# 1H 2006 Financial Highlights Pro Forma X5 Retail Group N.V. (Pyaterochka Holding N.V.) Calculated on the basis of the results of both the Pyaterochka and Perekrestokchains from 1 January - 30 June 2006 • Net Sales of US $1,581 million; up 43.4% vs. 1H 2005 • Gross profit of US $422 million; Gross margin of 26.7% • EBITDA of US $122 million; EBITDA margin of 7.7% • Net profit of US $39 million; Net margin of 2.5% Pyaterochka chain stand-alone Calculated on the basis of the results of the Pyaterochka chain from 1 January -30 June 2006 • Net Sales of US $906 million; up 41.9% vs. 1H 2005 • Gross profit of US $235 million; Gross margin of 25.9% • EBITDA of US $74 million; EBITDA margin of 8.1% • Net profit of US $20 million; Net margin of 2.2% Perekrestok chain stand-alone Calculated on the basis of the results of the Perekrestok chain from 1 January -30 June 2006 • Net Sales of US$675 million; up 45.5% vs. 1H 2005 • Gross profit of US $187 million; Gross margin of 27.7% • EBITDA of US $48 million; EBITDA margin of 7.1% • Net profit of US $19 million; Net margin of 2.8% IFRS Consolidated X5 Retail Group N.V. (Pyaterochka Holding N.V.) Calculated on the basis of results of the Perekrestok chain from 1 January - 30June 2006 and the results of Pyaterochka chain from 19 May - 30 June 2006 • Net Sales of US $899 million • Gross profit of US $247 million; Gross margin of 27.5% • EBITDA of US $72 million; EBITDA margin of 8.0% • Net profit of US $22 million; Net margin of 2.4% PRO FORMA GROUP (PYATEROCHKA chain + PEREKRESTOK chain) INCOME STATEMENT HIGHLIGHTS For the six month periods ending 30 June 2006 and 30 June 2005 30 June 2006 30 June 2005 USD '000 USD '000 Sales 1,580,846 1,102,199Cost of goods sold (1,158,684) (832,072)Gross profit 422,162 270,127 Operating expenses (354,457) (202,101)including:Staff costs (182,504) (93,547)Operating lease expenses (55,047) (34,175)Depreciation of property, plant and equipment (29,687) (20,579)Utilities (15,143) (8,223)Supplies and materials (8,557) (5,865)Advertising (15,965) (6,242)Consulting and information services (5,040) (6,685)Security costs (6,638) (6,113)Repair and maintenance costs (8,181) (5,167)Taxes other than income tax (6,320) (2,635)Bank charges (3,412) (2,101)Impairment of trade and other accounts receivable (3,542) (2,205)Transportation costs (5,024) (2,861)Amortisation of intangible assets (422) (472)Other operating expenses (8,975) (5,231) Gain / (loss) from disposal of PP&E 3,850 15,898Lease / sublease and other income 20,075 11,734Operating profit 91,630 95,658 Finance costs, net (26,990) (8,325)Net foreign exchange gain 3,172 (4,069)Profit before tax 67,812 83,264 Income tax expense (28,932) (17,109) Profit for the period 38,880 66,155 Attributable to:Equity holders of the parent 38,880 66,095Minority interest 60Profit for the period 38,880 66,155 PYATEROCHKA chain stand-alone INCOME STATEMENT HIGHLIGHTS For the six month periods ending 30 June 2006 and 30 June 2005 30 June 2006 30 June 2005 USD '000 USD '000 Sales 905,869 638,178Cost of goods sold (670,961) (485,277)Gross profit 234,908 152,901 Operating expenses (184,992) (90,832)including:Staff costs (109,874) (42,896)Operating lease expenses (27,251) (15,571)Depreciation of property, plant and equipment (14,720) (9,622)Utilities (4,481) (2,466)Supplies and materials (2,799) (2,067)Advertising (2,789) (1,804)Consulting and information services (1,554) (3,359)Security costs (3,074) (3,626)Repair and maintenance costs (5,128) (3,176)Taxes other than income tax (2,854) (682)Bank charges (1,626) (972)Impairment of trade and other accounts receivable (1,523) (1,169)Transportation costs (3,347) (1,706)Amortisation of intangible assets (26) (101)Other operating expenses (3,946) (1,615) Gain / (loss) from disposal of PP&E 1,748 (2,658)Lease / sublease and other income 7,205 3,360Operating profit 58,869 62,771 Finance costs, (18,559) (3,084)netNet foreign exchange gain 858 (1,019)Profit before tax 41,168 58,668 Income tax expense (21,232) (11,336) Profit for the period 19,936 47,332 Attributable to:Equity holders of the parent 19,936 47,332Minority interestProfit for the period 19,936 47,332 PEREKRESTOK chain stand-alone INCOME STATEMENT HIGHLIGHTS For the six month periods ending 30 June 2006 and 30 June 2005 30 June 2006 30 June 2005 USD '000 USD '000 Sales 674,977 464,021Cost of goods sold (487,723) (346,795)Gross profit 187,254 117,226 Operating expenses (169,465) (111,269)including:Staff costs (72,630) (50,651)Operating lease expenses (27,796) (18,604)Depreciation of property, plant and equipment (14,967) (10,957)Utilities (10,662) (5,757)Supplies and materials (5,758) (3,798)Advertising (13,176) (4,438)Consulting and information services (3,486) (3,326)Security costs (3,564) (2,487)Repair and maintenance costs (3,053) (1,991)Taxes other than income tax (3,466) (1,953)Bank charges (1,786) (1,129)Impairment of trade and other accounts receivable (2,019) (1,036)Transportation costs (1,677) (1,155)Amortisation of intangible (396) (371)assetsOther operating expenses (5,029) (3,616) Gain / (loss) from disposal of PP&E 2,102 18,556Lease / sublease and other income 12,870 8,374Operating profit 32,761 32,887 Finance costs, net (8,431) (5,241)Net foreign exchange gain 2,314 (3,050)Profit before tax 26,644 24,596 Income tax expense (7,700) (5,773) Profit for the period 18,944 18,823 Attributable to:Equity holders of the parent 18,944 18,763Minority interest 60Profit for the period 18,944 18,823 PYATEROCHKA HOLDING N.V. IFRS CONSOLIDATED BALANCE SHEET As of 30 June 2006 and 31 December 2005 30 June 2006 31 December 2005 USD '000 USD '000ASSETSNon-current assetsProperty, plant and equipment 918,231 324,598Intangible assets 2,873,459 43,193Prepaid leases 14,259 4,218Loan to related party 5,250 5,250Deferred tax assets 2,537 -Other long-term investment 389 - 3,814,125 377,259Current assetsInventories of goods for resale 118,090 68,576Short-term financial investments 2,946 12Trade and other accounts receivable 76,234 24,528VAT and other taxes recoverable 95,048 59,084Cash 48,658 30,067 340,976 182,267 Total assets 4,155,101 559,526 PYATEROCHKA HOLDING N.V. IFRS CONSOLIDATED BALANCE SHEET (Continued from page 9) As of 30 June 2006 and 31 December 2005 30 June 2006 31 December 2005 USD '000 USD '000EQUITY AND LIABILITIESEquity attributable to equity holders of the parentShare capital 72,139 30Share premium 2,976,681 122,152Cumulative translation reserve 15,621 5,724(Accumulated deficit) / Retained earnings (224,385) 54,080Total equity 2,840,056 181,986 Non-current liabilitiesLong-term borrowings 681,466 144,089Liability for share-based payments 46,141 -Long-term finance lease payable 3,509 -Deferred tax liabilities 24,906 16,674Long-term deferred revenue 3,838 -Other non-current liabilities 155 146 760,015 160,909Current liabilitiesTrade accounts payable 313,535 119,634Short-term borrowings 136,685 52,602Short-term finance lease payables 2,053 -Interest accrued 4,752 702Payable to related parties 502 2,758Current income tax payable 6,620 5,018Other liabilities 90,883 35,917 555,030 216,631 Total liabilities 1,315,045 377,540 Total equity and liabilities 4,155,101 559,526 PYATEROCHKA HOLDING N.V. IFRS CONSOLIDATED INCOME STATEMENT For the six month periods ending 30 June 2006 and 30 June 2005 30 June 2006 30 June 2005 USD '000 USD '000 Sales 898,783 464,021Cost of goods sold (652,026) (346,795)Gross profit 246,757 117,226 Operating expenses (210,633) (111,269)including:Staff costs (93,974) (50,651)Operating lease expenses (34,586) (18,604)Depreciation of property, plant and equipment (18,769) (10,957)Utilities (11,760) (5,757)Supplies and materials (6,529) (3,798)Advertising (13,959) (4,438)Consulting and information services (3,102) (3,326)Security costs (4,381) (2,487)Repair and maintenance costs (4,004) (1,991)Taxes other than income tax (4,571) (1,953)Bank charges (2,139) (1,129)Impairment of trade and other accounts receivable (3,396) (1,036)Transportation costs (2,438) (1,155)Amortisation of intangible (400) (371)assetsOther operating expenses (6,625) (3,616) Gain / (loss) from disposal of PP&E 2,016 18,556Lease / sublease and other income 14,509 8,374Operating profit 52,649 32,887 Finance costs, net (15,833) (5,241)Net foreign exchange gain (452) (3,050)Profit before tax 36,364 24,596 Income tax expense (14,829) (5,773) Profit for the period 21,535 18,823 Attributable to:Equity holders of the parent 21,535 18,763Minority interest 60Profit for the period 21,535 18,823 PYATEROCHKA HOLDING N.V. CONSOLIDATED STATEMENT OF CASH FLOWS For the six month periods ending 30 June 2006 and 30 June 2005 6m 2006, 6m 2005, USD '000 USD '000 Profit before tax 36,364 24,596Adjustments for:Depreciation and amortisation 19,169 11,328Gain on disposal of property, plant and equipment (2,016) (18,556)Loss on disposal of intangible assets 38 -Inventory shrinkage 10,715 4,695Finance costs, net 15,833 5,241Impairment of trade and other accounts receivable 3,396 1,036Loss on disposal of subsidiaries 110 -Share-based payments expense 3,853 -Amortisation of deferred expenses 565 -Net unrealised foreign exchange loss 2,772 3,050Net cash from operating activities before changes in working 90,799capital 31,390 Decrease / (increase) in VAT recoverable 6,385 (16,956)Increase in trade and other accounts receivable (30,081) (3,805)Increase in inventories (1,479) (918)Decrease in trade accounts payable (18,758) (11,559)Increase / (decrease) in other accounts payable and deferredrevenue 16,333 (2,967)Translation effect on working capital 5,389 (1,274)Net cash generated from operations 68,588 (6,089) Interest paid (13,891) (3,592)Interest received 141 97Income tax paid (15,278) (1,480)Net cash from operating activities 39,560 (11,064) PYATEROCHKA HOLDING N.V. CONSOLIDATED STATEMENT OF CASH FLOWS (Continued from page 12) For the six month periods ending 30 June 2006 and 30 June 2005 6m 2006, 6m 2005, USD '000 USD '000 Cash flows used in investing activitiesPurchase of property, plant and equipment (73,936) (85,325)Non-current prepaid lease (6,338) (357)Acquisition of subsidiaries 327,504 (8,750)Acquisition of other long-term investments (389) -Proceeds from sale of property, plant and equipment 2,102 2,500Long-term loan to related party originated - (5,250)Acquisition of investments available for sale (2,807) (1,211)Proceeds from sale of investments available for sale 16 1,148Purchase of intangible assets (53) (246)Net cash used in investing activities 246,099 (97,491) Cash flows from financing activitiesProceeds from short-term loans 92,629 224,163Repayment of short-term loans (48,889) (135,690)Proceeds from long-term loans 154,879 -Repayment of long-term loans (165,309) (15,000)Distribution to shareholders (300,000) -Principal payments on finance lease obligations (420) -Net cash from financing activities (267,110) 73,473Effect of exchange rate changes on cash 42 (670)Net increase / (decrease) in cash 18,591 (35,752) Movements in cashCash at the beginning of the year 30,067 52,618Net increase / (decrease) in cash 18,591 (35,752)Cash at the end of the year 48,658 16,866 Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of30 September 2006, the group had 420 company-managed "Pyaterochka" soft discountstores located in the Moscow (199), St. Petersburg (199) and Yekaterinburg (22)areas, and 141 company-managed "Perekrestok" supermarkets across Central Russiaand Ukraine, including 81 stores in Moscow. As of 30 September 2006, franchisees operated 539 Pyaterochka branded storesacross Russia, in Ukraine and Kazakhstan. Perekrestok has 10 convenience storesoperated by franchisees in the Moscow area. Pyaterochka and Perekrestok have merged their operations as of 18 May 2006 tocreate the clear leader in the Russian food retail market. Pyaterochka's 2005 net sales (pre-merger) reached USD 1,359 million, with grossbanner sales in 2005 of over USD 2 billion. Perekrestok net sales reached USD1,015 million in 2005. The Group's pro forma net sales for the first half of 2006 were US $1,581million (audited accounts). During 1H 2006, the Pyaterochka chain provided US$906 million of net sales, while the Perekrestok chain contributed US $675million of net sales. - End - Enquiries to: X5 Retail Group N.V. Gennady Frolov Head of Corporate Communications Office +7 495 984 6956 ext.2093 Mobile +7 495 724 6414 Email [email protected] -------------------------- (1) For comparability excludes the capital gain of USD $19 million on the saleof Tushino Plaza in 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
X5 Retail