17th Sep 2007 07:04
X5 Retail Group N.V.17 September 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN X5 RETAIL GROUP N.V. ANNOUNCES 1H 2007 RESULTS NET SALES OF US$2,348 MILLION, UP +49% GROSS PROFIT OF US$ 617 MILLION, UP +53% EBITDA OF US$ 212 MILLION, UP +74% Amsterdam, 17 September 2007 - X5 Retail Group N.V. (the "Group"), Russia'slargest food retailer in terms of sales, is pleased to present today financialresults for the first half of 2007. In 2007, the Group adopted reclassificationof costs related to distribution and transportation of goods from OPEX to theCost of Sales. For convenience of comparison, the financial results in 2006have been also reclassified when applicable. • Net sales increased by 49% to US$ 2,348 million, which represents anacceleration of growth in comparison to 43% in 1H 2006 (pro forma, not includingMerkado store operations). • Gross profit increased to US$ 617 million, up 53% vs. 1H 2006. • Gross profit margin increased from 25.6% to 26.3%. • EBITDA, including new ESOP launch costs of US$ 22 million, increased toUS$ 212 million, or 74% increase vs. 1H 2006 (EBITDA before new ESOP launchcosts increased to US$ 234 million). The Group will publish its 1H 2007 IFRS audited accounts on 24th of September,2007 which will be available on the Group's website - www.x5.ru. Reclassification of handling and delivery costs To align its reporting practices with the international retail sector, startingfrom January 2007 the Group adopted a change in the classification of expensesrelated to goods' distribution and transportation. These costs have beenreclassified from Selling, General and Administrative expenses to Cost of Sales,and comparatives for 2006 have been adjusted accordingly. This new reportinglowered the Group's reported gross margin by 1.1% to 25.6% in 1H 2006, and by1.3% to 26.3 % in 1H 2007. This new IFRS reporting format has no P&L impact atEBITDA level or below. New employee stock option program Under the new Employee Stock Option Program (ESOP) as approved by AGM in June2007, the total number of share options has been capped at 10,824,008 GDRs. Theprogram will run through to 18 May 2010 and options to employees have beengranted in four annual tranches starting from June 2007. The exercise price of1st tranche in amount of the 1,395,000 options was set at US$18 per GDR (GDRprice at the date of the merger of Pyaterochka and Perekrestok on 18 May 2006),and the exercise price of the remaining unvested three tranches will be equal tothe average market value of the Group's GDRs during the 30 days prior to thevesting date of each of these options. The total number of participants is notlimited and will vary during the program's lifetime, but it is expected to coverinitially over 150 key employees and managers of the Group in 2007. Although the first tranche and a part of the second tranche are covered by theGroup's treasury stock of approximately 3.6 million GDRs purchased in 2006 (themarket value of treasury shares as of 30 of June 2007 was US$ 106, million vs.the acquisition costs of US$ 77 million, the relevant full ESOP costs have beenreflected in the Group's results in accordance with IFRS. Therefore in the 1H2007 accounts, US$ 22 million has been included in Selling, General andAdministrative expenses, related to the ESOP costs. Operational highlights - During 1H 2007, the Group continued to strengthen its positivelike-for-like sales trends to reach +23% in US Dollar terms (composed of traffic+10% and basket +13%) or +16% in Rouble terms (composed of traffic increase of+10% and basket growth of +6%), with the first positive traffic indicator inrecent years for Pyaterochka stores in St. Petersburg region, Russia's mostcompetitive market. - In total during 1H 2007, the Group gained additional net selling space ofapproximately 50,000 sq. meters. - In March 2007, the Supervisory Board approved the Group's 5-year strategyand objectives with clear identification of key formats, target market share andfinancial objectives, geographic expansion and SCM performance targets. - The Group has successfully completed integration of the ex-Merkado storesacquired in November 2006. As of today 10 of the stores are operating under thePerekrestok brand and 7 stores under the Pyaterochka brand. - The Group continued its regional expansion by gaining control over 40Pyaterochka ex-franchised stores with a total net selling space of approximately14,000 sq. meters in Chelyabinsk region and integrating them into Pyaterochkafilial in Yekaterinburg which demonstrated exceptional 38 % LfL sales growth in1H 2007, benefiting from operational and commercial know-how of the Group. - A new distributional center "Sholokhovo" was opened in the Moscow regionwith an additional capacity of approx. 20,000 sq. meters. - The former Merkado Distribution Centre became the new Group's HQ,consolidating three leased office locations in Moscow and resulting in savingson rental and operational costs as well as facilitating business integrationprocesses. The Group launched a service centre in N. Novgorod, which is plannedto centralise and transfer accounting, payroll and other back-office functionsfrom HQ, regional offices and stores in 2007 - 2008, which is expected tostreamline business processes and deliver tangible savings going forward. - Recognizing X5's strengthened positions in the Russian food retail market,Standard & Poor's Rating Services upgraded its outlook for X5 Retail Group N.V.and its subsidiaries to stable from negative, and Moody's Investors Serviceupgraded the outlook on the B1 corporate family rating to positive from stablein July 2007. - X5 completed restructuring its borrowing portfolio by repurchasing 3issues of Pyaterochka and Perekrestok rouble bonds, and simultaneously, issuingthe first tranche of X5 Finance's 7-year rouble bonds with a total nominal valueof 9 billion roubles. It was the first transaction of this nature in theRussian rouble bond market history and it allowed the Group to improve its debtstructure, decrease its funding costs and provide the Company with additionalresources to fund further expansion. - In June, X5 raised US$ 1.0 billion through a loan facility to refinancethe existing syndicated loan and short-term credit lines on attractive terms tooptimize the Group's capital structure and lower funding costs. Quotes Lev Khasis, Group CEO: "Our financial results figures reinforce our leadership position in the Russianmarket. The Group is showing outstanding progress in all formats and across itsareas of operation, with especially encouraging results in the Russian regions.We are continuing to implement our growth strategy and see major opportunitiesfor the Group in the market in the remaining months of 2007." Vitaliy Podolskiy, Group CFO: "Strong and positive trend in underlying store profitability as well as thechains' integration savings and purchasing scale more than off-set ourintegration costs and strategic investments into the future of the Group.Current performance allows us to improve our outlook on the Group's futurecapital structure and its financial projections, which gives us continuedconfidence in our ability to finance our growth in future." 1H 2007 Financial Highlights X5 Retail Group N.V. • Net Sales of US$ 2,348 million; up 49% vs. 1H 2006; • Gross profit of US$ 617 million, up 53% vs. 1H 2006; • Gross margin of 26.3% vs. 25.6% 1H 2006; • EBITDA including ESOP costs of US $212 million, up 74% vs. 1H 2006; EBITDA margin of 9.0% vs. 7.7% 1H 2006; • EBITDA excluding ESOP costs of US$ 234 million, up 44% vs. 1H 2006, EBITDA margin of 10.0% vs. 10.3% 1H 2006. Pyaterochka chain stand-alone • Net Sales of US$ 1,306 million; up 44% vs. 1H 2006 • Gross profit of US$ 326 million, up 46% vs. 1H 2006; Gross margin of 25.0% vs. 24.7% 1H 2006 Perekrestok chain stand-alone • Net Sales of US$ 1,042 million; up 54% vs. 1H 2006 • Gross profit of US$ 291 million, up 61% vs. 1H 2006; Gross margin of 27.9% vs. 26.7% 1H 2006. Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of30 June 2007, the Group had 539 company-managed "Pyaterochka" soft discountstores located in the Moscow (241), St. Petersburg (223) and other Russian areas(75), and 170 company managed "Perekrestok" supermarkets across Central Russiaand Ukraine, including 98 stores in Moscow. As of 30 June 2007, franchisees operated 591 Pyaterochka branded stores acrossRussia and Kazakhstan. Perekrestok had 10 stores operated by franchisees in theMoscow area. Pyaterochka and Perekrestok have merged their operations as of 18 May 2006 tocreate the the leading company in the Russian food retail market by sales. The Group's Net sales for the 1H 2007 were US$ 2,348 million, up +49% vs. 1H2006. Pyaterochka chain provided US$ 1,306 million of net sales, the Perekrestokchain contributed US$ 1,042 million of net sales. Forward looking statements: This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identifiedby 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 otherwords 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. Enquiries to: X5 Retail Group N.V. Gennady Frolov Head of Corporate Communications Office +7 495 950 5577 ext. 10130 Mobile +7 495 998 3335 Email [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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