17th Apr 2008 07:03
X5 Retail Group N.V.17 April 2008 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN X5 RETAIL GrouP N.V. REPORTS USD 427 million in OPERATING CASH FLOW FOR 2007 ON THE BACK OF STRONG OPERATIONAL RESULTS AND WORKING CAPITAL IMPROVEMENT Amsterdam, 17 April 2008 - X5 Retail Group N.V. ("X5" or the "Company"),Russia's largest food retailer in terms of sales (LSE ticker: "FIVE"), publishedtoday its audited IFRS results for the full year ended 31 December 2007. FY 2007 Highlights In accordance with its audited full year 2007 results X5 confirms: • Net sales of USD 5,320 mln, an increase of 53%1 year-on-year; • Gross profit of USD 1,404 mln, an increase of 51% year-on-year; and • EBITDA of USD 479 mln, an increase of 62% year-on-year. X5's audited net profit for 2007 totaled USD 144 mln, an increase of 41% year-on-year. X5's audited operating cash flow totaled USD 427 mln, an increase of 35% year-on-year. Evgeny Kornilov, X5 Retail Group CFO, commented: "Our strong operational performance in 2007, supported by rigorous workingcapital management, resulted in healthy cash flow generation, enabling theCompany to finance almost half of its capital expenditure program from its ownresources. These results also provide a solid foundation for the implementationof our ambitious expansion program throughout 2008 and beyond". P&L Highlights USD mln FY 2007 FY 20061 % change y-o-yNet Sales, incl. 5,320.4 3,485.4 53%Retail 5,284.3 3,460.4 53%Gross Profit 1,403.9 928.9 51%Gross Margin, % 26.4% 26.7%EBITDA 479.3 296.7 62%EBITDA Margin, % 9.0% 8.5%EBIT 336.9 210.3 60%EBIT Margin, % 6.3% 6.0%Net Profit 143.7 102.2 41%Net Margin, % 2.7% 2.9% For detailed discussion on X5 P&L trends please see our press release dated 28February 2008. Selected Balance Sheet Data (please see Appendix I for detailed BS information) USD mln 31 December 2007 31 December 2006 % change, y-o-yASSETSNon-Current Assets, incl. 5,660.9 4,460.5 27%Property, plant and equipment & investment property 2,117.4 1,305.8 62%Goodwill 2,934.2 2,629.0 12%Intangible assets 523.5 492.3 6%Current Assets, incl. 861.5 632.0 36%Inventories of goods for resale 325.0 208.6 56%Cash 179.5 168.0 7%Total Assets 6,522.4 5,092.5 28% EQUITY AND LIABILITIESTotal Equity 3,243.7 2,890.1 12% Non-Current Liabilities, incl. 1,726.4 1,133.9 52%Long-term borrowings 1,464.7 949.1 54%Current Liabilities 1,552.3 1,068.5 45%Short-term borrowings 253.7 218.0 16%Total Liabilities 3,278.7 2,202.4 49% Total Equity and Liabilities 6,522.4 5,092.5 28% Net Debt 1,538.9 999.1 54%Net Debt/EBITDA 3.2x 3.4xNet Working Capital (Net of Short Term Debt) (437.1) (218.5) 100% Balance Sheet - Key Trends and Developments Non-Current Assets At the end of 2007 PP&E and investment property amounted to USD 2,117 mln, anincrease of 62% year-on-year. This increase is attributable to organicexpansion and tactical M&A transactions closed during 2007. At the end of 2007 goodwill totaled USD 2,934 mln versus USD 2,629 mln at theend of 2006. The majority of the amount reported at 31 December 2006 wasassociated with the reverse acquisition of Pyaterochka, while USD 305 mlnincrease in 2007 was generated from tactical acquisitions in the amount of USD116 mln and FX revaluation adjustment in the amount of USD 189 mln. Current Assets Current assets increased by 36% to USD 862 mln. The increase was lower thanrevenue growth and was attributable to higher VAT and other taxes recoverable aswell as an increase in inventories in line with sales growth. Non-Current Liabilities Non-current liabilities totaled USD 1,726 mln, an increase of 52% year-on-year,mainly due to higher amount of long-term outstanding debt (USD 1,465 mln as of31 December 2007). During 2007 X5 focused on optimization of its debt portfolio for the purpose ofimproving the Company's financing terms and debt structure. As a result, at theend of 2007 over 85% of X5's outstanding debt was long-term, while the effectiveinterest rate was 7.1%. Current Liabilities Current liabilities grew 45% year-on-year to USD 1,552 mln. This increase isprimarily explained by growth in trade and other accounts payable as X5 managedto improve its payment terms with suppliers and other counterparties in 2007. Cash Flow - Key Trends and Developments USD mln 31 December 2007 31 December 20062 Net Cash from Operating Activities 427.5 316.9Net Cash Used in Investing Activities (898.8) (40.9)Net Cash from / (Used in) Financing Activities 470.0 (138.1) Effect of Exchange Rate Changes on Cash 12.8 0.2 Net Increase in Cash 11.5 138.1 Cash Flow from Operating Activities Net cash from operating activities totaled USD 427 mln on the back of strongoperating performance as well as working capital improvement. USD mln 31 December 2007 31 December 20062 Increase in trade and other accounts receivable (65.1) (61.9)Increase in inventories (77.0) (76.8)Increase in trade payable 330.1 235.6(Decrease) / Increase in other accounts payable (48.2) 52.7Changes in Working Capital 139.8 149.6 The increase in trade and other accounts receivable is explained by growth inX5's scale of business and, as a result, higher supplier bonuses and allowances. The increase in inventories is explained by the same factor, however, goingforward, as X5 continues to develop its logistics infrastructure and increaseits levels of supply centralization, these initiatives should have positiveimpact on inventories turnover and, hence, the Company's working capital. The increase in trade accounts payable is a result of two key factors: highervolume of purchases from suppliers and better supplier terms reflecting animprovement of X5's purchasing power. The decrease in other accounts payable is mainly attributable to cancellationfees in respect of Pyaterochka's Employee Stock Option Program (ESOP) in theamount of approximately USD 65 mln that were reported in the 2006 P&L but paidin 2007. Cash Flow from Investing Activities Net cash used in investing activities totaled USD 899 mln, as the Companycontinued to add selling space and invested in its distribution infrastructuredevelopment. USD mln 31 December 2007 31 December 20063Cash Flows from Investing Activities, incl.Purchase of property, plant and equipment & investment property (629.4) (256.6)Acquisition of subsidiaries, including loans issued, net of cash (231.6) 227.9acquiredNet Cash Used in Investing Activities (898.8) (40.9) In total, X5 added 31% in net selling space during 2007. The total net sellingarea increased by 143.1 thousand sq.m. This takes into account 3.6 thousandsq.m. that were closed during the year (8 soft discounters and 2 supermarkets)and includes stores acquired through tactical M&A transactions. Net addition ofstores totalled 249, of which 223 were in soft discount format, 23 weresupermarkets and 3 were hypermarkets. As a result, at 31 December 2007, X5 operated 868 company-managed stores(consisting of 674 soft discounters, 179 supermarkets, 14 compact hypermarketsand one full-size hypermarket store), with the total net selling space of 609.2thousand sq. m. During 2007 X5 also added net five distribution centers (DCs) (one DC in Moscowwas closed), increasing its storage capacity by 78.1 thousand sq.m. As aresult, at the end of 2007 the Group had 10 DCs with the total storage area of143.7 thousand sq.m., including four DCs in Moscow (total storage space of 88.0thousand sq.m.), three DCs in St. Petersburg (total storage space of 37.2thousand sq.m.), one DC in Nizhniy Novgorod (storage space of 13.5 thousandsq.m.), one DC in Chelyabinsk (2.5 thousand sq.m.) and one DC in Yekaterinburg(2.5 thousand sq.m.). A step-up in 2007 CapEx is explained by USD devaluation against RUR (9%),inflation in real estate and construction prices as well as the fact that abigger than planned amount (about 20% of full year CapEx) was spent on stores tobe opened in 2008 and further, including purchasing of landplots for futurehypermarket construction. Cash Flow from Financing Activities Net cash from financing activities amounted to USD 470 mln as the Company raisedfunds to finance its capital expenditure program. USD mln 31 December 2007 31 December 20064 Cash Flows from Financing Activities, incl.Proceeds from loans 2,042.2 674.3Repayment of loans (1,563.3) (432.4)Distribution to shareholders - (300.0)Net Cash from / (used in) Financing Activities 470.0 (138.1) During 2007 X5 optimized its debt portfolio and as a result decreased its costof funding and improved its debt structure. The steps undertaken by the Company in 2007 to optimize its debt portfolioincluded ruble debt restructuring whereby X5 replaced three outstanding bondspreviously issued by Pyaterochka and Perekrestok in the total amount of RUR 6bln with one 7-year bond (puttable in 3 years) with an interest of 7.6% and anotional amount of RUR 9 bln (USD 352 mln). Additionally, X5 has replaced itsprevious syndicated loan with a USD 1.1 bln facility bearing interest of LIBOR +225 basis points p.a. during the first year. Starting from the second year,spread over LIBOR on this facility will decrease to 200 bps or lower dependingon the company's Net Debt/EBITDA ratio. As a result of these measures, at the end of 2007 over 85% of X5's outstandingdebt was long-term, while the effective interest rate was 7.1%. 1 2006 P&L numbers represent final pro-forma results for 2006 as if themerger between Perekrestok and Pyaterochka took place on January 1, 2006 andtake into account only two months (November and December) of Mercado operations.These numbers also include reclassification of product handling and deliveryexpenses from SG&A to Cost of Sales. For your convenience, Appendix IV to thispress release contains detailed information on final pro-forma P&L for 2006. 2007 P&L numbers include one month (December) of Korzinka operations. For your convenience, Appendix V to this press release contains full yearrevenue numbers for Merkado (2006), Korzinka (2007) and Strana Gerkulesia(2007). 2 2006 cash flow numbers take into account Pyaterochka's cash flow onlysince the date of the merger - 18 May 2006. 3 2006 cash flow numbers take into account Pyaterochka's cash flow onlysince the date of the merger - 18 May 2006. USD 227.9 million positive impact on the investing cash flow in 2006 was aone-off item attributable to the reverse acquisition of Pyaterochka andassociated with the accounting treatment of the transaction. 4 2006 cash flow numbers take into account Pyaterochka's cash flow onlysince the date of the merger - 18 May 2006. USD 300 million negative impact on the financing cash flow in 2006 was a one-offitem attributable to the reverse acquisition of Pyaterochka and associated withthe accounting treatment of the transaction. Appendices I. Consolidated Balance Sheet at 31 December 2007 II. Consolidated Income Statement for the Year Ended 31 December 2007 III. Consolidated Statement of Cash Flows for the Year Ended 31 December 2007 IV. Final Pro-Forma P&L for 2006 V. Full Year Merkado (2006), Korzinka (2007) and Strana Gerkulesia (2007) Net Sales with Quarterly Breakdown VI. Financial Calendar for 2008 The full version of X5's audited financial statements for 2007 is available onthe Company's web site at www.x5.ru. Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. TheCompany was created as a result of a merger between Pyaterochka (soft discounterchain) and Perekrestok (supermarket chain) on 18 May 2006. As of 31 March 2008, X5 had 731 Company managed soft discount stores located inMoscow (321), St. Petersburg (249) and other Russian areas (161), 183 Companymanaged supermarkets across Central Russia and Ukraine, including 108 stores inMoscow (Moscow region and Yaroslavl region), and 16 Company managedhypermarkets. As of 31 March 2008, X5's franchisees operated 711 stores across Russia andKazakhstan. X5's net sales for the full year 2007 reached USD 5,320 mln, an increase of 53%year-on-year. Gross profit for the period totaled USD 1,404 mln, EBITDAamounted to USD 479 mln. Full year 2007 net income reached USD 144 mln. X5 Retail Group N.V.'s net retail sales for the first quarter 2008 surged 61% inUSD terms and reached USD 1,775 mln. For further details please contact Anna Kareva Elena Cherkalova IR Director PR Manager Tel.: +7 (495) 980-2729, ext. 22 162 Tel.: +7 (495) 950-5577 e-mail: [email protected] e-mail: [email protected] Forward looking statements: This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can beidentified by the fact that they do not only relate to historical or currentevents. 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 becausethey relate to future events and circumstances, a number of which are beyond X5Retail Group N.V.'s control. As a result, actual future results may differmaterially from the plans, goals and expectations set out in theseforward-looking statements. Any forward-looking statements made by or on behalf of X5 Retail Group N.V.speak only as at the date of this announcement. Save as required by anyapplicable laws or regulations, X5 Retail Group N.V. undertakes no obligationpublicly to release the results of any revisions to any forward-lookingstatements in this document that may occur due to any change in its expectationsor to reflect events or circumstances after the date of this document. Appendix I: CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 (expressed in thousands of US Dollars, unless otherwise stated) 31 December 2007 31 December 2006 ASSETSNon-current assetsProperty, plant and equipment 1,988,391 1,265,833Investment property 129,006 40,020Goodwill 2,934,216 2,629,046Intangible assets 523,533 492,259Prepaid leases 54,846 9,440Loan originated to related parties - 5,250Other non-current assets 2,534 -Deferred tax assets 28,357 18,626 5,660,883 4,460,474Current assetsInventories of goods for resale 325,036 208,576Available for sale financial assets - 623Derivative financial assets 1,500 -Loans originated 248 10,985Current portion of non-current prepaid lease 5,766 -Trade and other accounts receivable 149,137 148,225Current income tax receivable 4,622 6,161VAT and other taxes recoverable 195,752 89,434Cash 179,496 167,988 861,557 631,992 Total assets 6,522,440 5,092,466 EQUITY AND LIABILITIESEquity attributable to equity holders of the parentShare capital 70,883 70,936Share premium 2,896,355 2,901,350Cumulative translation reserve 294,169 79,459Accumulated deficit (17,960) (161,708)Minority interests 220 -Total equity 3,243,667 2,890,037 Non-current liabilitiesLong-term borrowings 1,464,684 949,123Long-term finance lease payable 1,181 2,913Deferred tax liabilities 214,101 177,604Long-term deferred revenue 3,221 4,117Share-based payments liability 43,208 -Other non-current liabilities - 159 1,726,395 1,133,916Current liabilitiesTrade accounts payable 968,505 552,060Short-term borrowings 253,733 218,013Share-based payments liability 2,389 69,990Short-term finance lease payables 2,145 2,271Interest accrued 2,763 13,544Short-term deferred revenue 4,943 414Current income tax payable 33,303 11,511Provisions and other liabilities 284,597 200,710 1,552,378 1,068,513 Total liabilities 3,278,773 2,202,429 Total equity and liabilities 6,522,440 5,092,466 Appendix II CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007(expressed in thousands of US Dollars, unless otherwise stated) 31 December 2007 31 December 2006 Pro-forma* Revenue 5,320,424 3,485,412Cost of sales (3,916,493) (2,556,504)Gross profit 1,403,931 928,908 Selling, general and administrative expenses (1,135,046) (759,401)Lease/sublease and other income 68,032 40,834Operating profit 336,917 210,341 Finance costs (net) (125,789) (71,762)Net foreign exchange gain 31,545 14,762Profit before tax 242,673 153,305 Income tax expense (98,925) (51,066)Profit for the year 143,748 102,239 * 2006 P&L numbers represent final pro-forma results for 2006 as if the mergerbetween Perekrestok and Pyaterochka took place on January 1, 2006 and take intoaccount only two months (November and December) of Mercado operations. Thesenumbers also include reclassification of product handling and delivery expensesfrom SG&A to Cost of Sales. For your convenience, Appendix IV to this pressrelease contains detailed information on final pro-forma P&L for 2006. 2007 P&L numbers include one month (December) of Korzinka operations. For your convenience, Appendix V to this press release contains full yearrevenue numbers for Merkado (2006), Korzinka (2007) and Strana Gerkulesia (2007) Appendix III: CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31DECEMBER 2007* (expressed in thousands of US Dollars, unless otherwise stated) 31 December 2007 31 December 2006 Profit before tax 242,673 120,274Adjustments for:Depreciation and amortisation 142,376 79,097Loss / (gain) on disposal of property, plant and equipment 137 (4,241)Loss on disposal of intangible assets 35 38Finance costs, net 125,789 61,520Impairment of trade and other accounts receivable 1,369 4,073Loss on disposal of subsidiaries - 110Share-based payments expense 43,208 27,702Amortisation of deferred expenses 2,929 1,535Loss on write-off of other long-term investments - 400Net foreign exchange gain (67,195) (14,083)Net cash from operating activities before changes in working 491,321 276,425capital Increase in trade and other accounts receivable (65,107) (61,855)Increase in inventories (77,041) (76,773)Increase in trade payable 330,154 235,617(Decrease) / Increase in other accounts payable (48,234) 52,694Net cash generated from operations 631,093 426,108 Interest paid (109,177) (63,843)Interest received 3,380 687Income tax paid (97,824) (46,076)Net cash from operating activities 427,472 316,876 Cash flows from investing activitiesPurchase of property, plant and equipment (620,233) (250,706)Purchase of investment property (9,173) (5,936)Non-current prepaid lease (46,543) (6,836)Acquisition of subsidiaries, net of cash acquired (211,412) 227,932Acquisition of other long-term investments (211) (389)Short-term loans issued in connection with acquisitions (20,157) -Loans originated - (11,608)Proceeds from sale of property, plant and equipment 10,949 13,125Proceeds from sale of investments available for sale - 66Purchase of intangible assets (1,987) (6,594)Net cash used in investing activities (898,767) (40,946) Cash flows from financing activitiesProceeds from short-term loans 583,917 204,060Repayment of short-term loans (396,016) (207,232)Proceeds from long-term loans 1,458,306 470,208Repayment of long-term loans (1,167,265) (225,186)Distribution to shareholders - (300,000)Acquisition of treasury shares (5,048) (76,534)Principal payments on finance lease obligations (3,872) (3,491)Net cash from / (used in) financing activities 470,022 (138,175)Effect of exchange rate changes on cash 12,781 166Net increase in cash 11,508 137,921 Movements in cashCash at the beginning of the year 167,988 30,067Net increase in cash 11,508 137,921Cash at the end of the year 179,496 167,988 * 2006 cash flow numbers take into account Pyaterochka's cash flow only sincethe date of the merger - 18 May 2006. Appendix IV final pro-forma P&L for 2006 P&L FY 2006 Step 1 Step 2 Step 3 FY 2006 Q4 2006 Initial Logistics Merkado Final FinalUSD mln Pro-Forma* Reclass D&A Jan-Oct 06 Pro-Forma Pro-Forma Net Sales, incl. 3,551.5 (66.1) 3,485.4 1,074.0Cost of Sales (2,562.0) -42.3 47.8 (2,556.5) (763.4)Gross Profit 989.5 (18.3) 928.9 310.6Gross Margin, % 27.9% 26.7% 28.9%SG&A (808.8) 42.3 (17.9) 25.0 (759.4) (219.4)Lease/sublease and other income 43.8 (3.0) 40.8 10.1EBITDA before ESOP 360.0 1.3 361.3 124.1EBITDA Margin, % 10.1% n/a 10.4% 11.6%EBITDA 295.4 1.3 296.7 121.5EBITDA Margin, % 8.3% n/a 8.5% 11.3%EBIT 224.5 (17.9) 3.7 210.3 101.3EBIT Margin, % 6.3% n/a 6.0% 9.4%Profit Before Tax 159.5 (17.9) 11.7 153.3 79.4Income Tax Expense (56.7) 4.3 1.3 (51.1) (13.3)Net Profit 102.8 (13.6) 13.0 102.2 66.1Net Margin, % 2.9% , n/a 2.9% 6.2% * as reported in the Company's Annual Report for 2006 Step 1: Product delivery and handling expenses were reclassified from SG&A toCost of Sales. Step 2: In line with IFRS requirements for pro-forma reporting, additionaldepreciation and amortization (D&A) charge was reported as if merger betweenPerekrestok and Pyaterochka took place on January 1, 2006, hence Pyaterochka'sassets were revalued at market price as of January 1, 2006 and not May 18, 2006. Step 3: 10 months of Merkado operations (January through October) wereexcluded from final 2006 pro-forma P&L. The management believes that for thepurposes of financial reporting pro-forma approach should be applied tostrategic large size acquisitions only, while small tactical M&A transactionsare reported on consolidation basis as of the date of the purchase. Appendix V FULL YEAR SALES DATA FOR MERKADO (2006), KORZINKA (2007) AND STRANA GERKULESIA(2007) 2006 Pyaterochka, Perekrestok & Merkado Net Sales USD mln Q1 2006 Q2 2006 Q3 2006 Q4 2006 FY 2006 Perekrestok & Pyaterochka1 762.3 818.5 830.5 1,057.4 3,468.8Merkado 19.8 18.8 19.7 24.4 82.7Total Net Sales 782.1 837.3 850.2 1,081.8 3,551.5 2007 X5 Retail Group, Korzinka & Strana Gerkulesia Net Sales USD mln Q1 2007 Q2 2007 Q3 2007 Q4 2007 FY 2007 X5 Retail Group2 1,106.2 1,241.4 1,270.1 1,682.6 5,300.4Korzinka 29.2 37.3 45.0 52.7 164.1Strana Gerkulesia 19.5 20.4 20.1 21.6 81.6Total Net Sales 1,154.9 1,299.1 1,335.2 1,756.9 5,546.1 1 Excluding two months (November & December) of Merkado operations 2 Excluding one month (December) of Korzinka operations Appendix VI: Financial Calendar for 2008 Date Event April 17, 2008 Audited FY 2007 IFRS Results Release May 29, 2008, TBC Q1 2008 Unaudited Financial Results Release July 10, 2008, TBC Q2 & H1 2008 Trading Update Release September 23, 2008, TBC Q2 & H1 Audited IFRS Results Release October 9, 2008, TBC Q3 2008 Trading Update Release November 25, 2008, TBC Q3 2008 Unaudited Financial Results Release This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
X5 Retail