REG-O'KEY Group S.A. O'KEY GROUP ANNOUNCES 3.6% REVENUE GROWTH IN Q3 AND 5.8% IN 9M 2020

O'Key SAAnnouncement

30/10/2020 08:00

============

   O'KEY Group S.A. (OKEY)
   O'KEY GROUP ANNOUNCES 3.6% REVENUE GROWTH IN Q3 AND 5.8% IN 9M 2020

   30-Oct-2020 / 09:00 CET/CEST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

   ══════════════════════════════════════════════════════════════════════════

   Press release
   30 October 2020
    

      O'KEY GROUP ANNOUNCES 3.6% REVENUE GROWTH IN Q3 AND 5.8% IN 9M 2020

    

   O'KEY Group S.A. (LSE:  OKEY, the "Group"), one  of Russia's leading  food
   retailers, today announces its unaudited  operating results for the  third
   quarter (Q3) and first nine months (9M) of 2020.

   All materials published by the Group are available at  1 www.okeygroup.lu.

    

   Q3 2020 operating highlights

     • Group net retail revenue 2  1  grew by  3.6% YoY to RUB 39,463 mln  in
       Q3 2020.
     • Group like-for-like (LFL) net retail revenue increased by 2.8% YoY  in
       Q3 2020, driven by growth at the DA! discounter brand.
     • DA! discounters delivered a 45.7%  YoY increase in net retail  revenue
       to RUB 6,202 mln in  Q3 2020, on the back  of 26.8% growth of LFL  net
       retail revenue  and supported  by  a 19.4%  YoY expansion  of  selling
       space.
     • DA! LFL net retail revenue growth was  a result of a 5.6% increase  in
       traffic and a 20.1% rise in the average ticket in Q3 2020.
     • The Group plans to increase the number of DA! stores by 18% YoY in  FY
       2020. The Group sees the discounters  as a major growth driver of  the
       Group's top-  and bottom-line  performance over  the medium  and  long
       term.
     • Net retail revenue  at O'KEY  hypermarkets decreased by  1.6% YoY  due
       mainly to a 1.8% YoY reduction in selling space.
     • O'KEY hypermarkets LFL net  retail revenue was almost  flat YoY in  Q3
       2020, as 16.1% growth of the LFL average ticket growth was offset by a
       14.1% decrease in LFL traffic.

   9M 2020 operating highlights

     • Group net retail revenue  rose by 5.8%  YoY to RUB  123,793 mln in  9M
       2020, driven mainly by LFL revenue growth.
     • LFL net  retail  revenue  increased  by 5.8%  YoY  in  9M  2020,  with
       contributions from both the O'KEY and DA! brands.
     • DA! discounters net retail revenue grew by 46.6% YoY to RUB 18,821 mln
       in 9M 2020, on the back of 29.8% growth of LFL net retail revenue  and
       selling space expansion.
     • O'KEY hypermarkets LFL net retail revenue  improved by 2.8% YoY in  9M
       2020, resulting in a  net retail revenue increase  of 0.8% YoY to  RUB
       104,973 mln.

   Key events in Q3 2020 and after the reporting date

     • In September, the Group  launched a new O'KEY  brand store concept  at
       one of its hypermarkets in Moscow. The concept aims to further enhance
       the competitiveness of O'KEY stores against long-term consumer trends,
       and leverages  the Group's  own innovative  solutions and  the  latest
       global expertise. The  new concept will  further improve the  shopping
       experience and customer service, and  also make more efficient use  of
       selling space. The  Group plans to  continue the roll-out  of the  new
       concept to other O'KEY stores.
     • In October, the  Group entered  into an agreement  with Sbermarket,  a
       nationwide food  and essentials  delivery service,  to deliver  online
       orders from  O'KEY  hypermarkets in  four  cities across  Russia.  The
       coverage area is planned  to expand going  forward. Previously, in  Q2
       2020, O'KEY started  cooperation with the  iGooods service, which  now
       delivers hypermarket items to customers in five cities where O'KEY has
       a presence.

   The  full   text  of   the  Sbermarket   announcement  is   available   at
    3 https://okeygroup.lu/press-center/press-releases/2020/1722/

     • In October, the Group closed an  order book on RUB 5 billion  ten-year
       bonds with a three-year  put option to  refinance a publically  traded
       bond issue due in April 2021. The annual coupon was set at 7.5%, below
       the pre-marketed range. The new bonds are planned to start trading  on
       Moscow Exchange in early November 2020.

   The full text of the announcement is available at
    4 https://okeygroup.lu/press-center/press-releases/2020/1725/

    

   Commenting on the results, Armin Burger, Chief Executive Officer of  O'KEY
   Group, said:

   "Thanks to the resilience and flexibility of our business model, the Group
   has reported  solid growth  amid a  challenging economic  environment  and
   frequent changes in customer behaviour brought  on by the pandemic. In  9M
   2020, the Group's  net retail revenue  and LFL revenue  both grew by  5.8%
   YoY."

   "As we have noted previously, DA! discounters are becoming a major  growth
   driver for  the Group,  with an  almost  47% YoY  increase in  net  retail
   revenue for the first nine months of 2020. In the third quarter, DA!  grew
   retail revenue by an impressive 46% YoY and LFL revenue by 27% on the back
   of both  positive traffic  and basket  dynamics. Today,  DA! is  the  only
   successful implementation of the European discounter model in the  Russian
   market,  due   in  particular   to  its   exceptionally  competitive   and
   well-balanced assortment of around 2,800 SKUs based on unrivalled  private
   label expertise."

   "O'KEY hypermarkets  remain  in demand  among  consumers thanks  to  their
   well-chosen and wide  product range, which  is designed to  meet the  main
   customer needs, as well as competitive prices and a high level of service.
   In order to further increase the competitiveness of O'KEY stores, we  have
   launched a transformation  programme for our  hypermarkets in response  to
   global consumer trends. The programme is based on a new store concept that
   is designed to  significantly raise O'KEY's  attractiveness by  leveraging
   the company's expertise and the latest solutions in modern food retail. We
   plan to present  the new  store concept in  more detail  in November  this
   year."

    

   Operating review

   Group Net Retail Revenue in Q3 and 9M 2020

   Net Retail Revenue, RUB mln Q3 2020 Q3 2019 YoY, %  9M 2020 9M 2019 YoY, %
   (excl. VAT)
   O'KEY Group                  39,463  38,076    3.6% 123,793 117,000   5.8%
   O'KEY hypermarkets           33,260  33,818  (1.6%) 104,973 104,161   0.8%
   DA! discounters               6,202   4,257   45.7%  18,821  12,840  46.6%

    

   Group Like-for-Like Net Retail Revenue Dynamics in Q3 and 9M 2020

                              Q3 2020 vs. Q3 2019      9M 2020 vs. 9M 2019
   LFL Net Retail Revenue,    Net            Average   Net            Average
   %                        retail  Traffic  ticket  retail  Traffic  ticket
                            revenue                  revenue
   O'KEY Group                 2.8%  (10.0%)   14.2%    5.8%  (10.1%)   17.7%
   O'KEY hypermarkets        (0.3%)  (14.1%)   16.1%    2.8%  (13.7%)   19.1%
   DA! discounters            26.8%     5.6%   20.1%   29.6%     3.4%   25.4%

   Note: Q3 2020 LFL metrics calculated based on 74 O'KEY and 84 DA! stores.

    

   Group Net Retail Revenue Monthly Metrics for Q3 2020

                        Jul      Aug      Sept   Q3 2020  9M 2020
   Net retail revenue, % YoY
   O'KEY Group            7.4%     1.8%     1.8%     3.6%     5.8%
   O'KEY hypermarkets     1.8%   (3.6%)   (3.1%)   (1.6%)     0.8%
   DA! discounters       50.3%    45.5%    41.1%    45.7%    46.6%
   Customer traffic, % YoY
   O'KEY Group          (7.9%)   (8.7%)   (8.1%)   (8.2%)   (9.0%)
   O'KEY hypermarkets  (15.9%)  (16.1%)  (14.8%)  (15.6%)  (15.5%)
   DA! discounters       22.3%    20.1%    17.2%    19.9%    16.4%
   Average ticket, % YoY
   O'KEY Group           16.7%    11.4%    10.8%    12.9%    16.3%
   O'KEY hypermarkets    21.1%    15.0%    13.8%    16.6%    19.2%
   DA! discounters       22.9%    21.2%    20.4%    21.5%    26.0%

    

   The  Group's  business  model  once   again  proved  its  resilience   and
   flexibility amid a turbulent macro  environment. Group net retail  revenue
   increased by 3.6% YoY to RUB 39,463 mln in Q3 2020, and by 5.8% YoY to RUB
   123,793 mln in 9M  2020, mainly due to  growth of like-for-like (LFL)  net
   retail revenue.

   Group LFL net retail revenue grew by 2.8% YoY in Q3 2020, and by 5.8%  YoY
   in 9M 2020.

   DA! discounters continued to  lead the Group's  performance, with a  45.7%
   YoY increase in net retail revenue in Q3 2020, and a 46.36 YoY rise in  9M
   2020 (compared to average growth of around 30% pre-COVID).

   The DA! discounter business continued to capitalise on long-term  consumer
   trends with its  competitive business model  and private label  expertise.
   Thanks to DA!'s  strong value-for-money  proposition, competitive  prices,
   high-quality  fresh   products   offering  and   extensive   private-label
   portfolio, customers remained loyal  to the brand  after the lockdown  was
   eased.

   DA! discounters grew LFL net  retail revenue by 26.8%  in Q3 2020, and  by
   29.6% in 9M 2020. Both LFL ticket and traffic recorded positive growth  in
   3Q and 9M 2020.

   Five DA! stores  opened in Q3  2020, and plans  to open 18  stores net  of
   closures in FY 2020 (an 18% YoY increase). The Group sees discounters as a
   major growth driver of the Group's top- and bottom-line performance in the
   medium and long term.

   Net retail revenue  at O'KEY  hypermarkets decreased  by 1.6%  YoY to  RUB
   33,260 mln in  Q3 2020,  mainly due  to a  1.8% YoY  reduction of  selling
   space. In 9M 2020, O'KEY stores grew net retail revenue by 0.8% YoY to RUB
   104,973 mln, on the back of a 2.8% increase in LFL net retail revenue.

   In the third quarter, we saw more frequent customer visits compared to the
   lockdown during Q2. However, while  customer traffic in shopping malls  in
   Moscow and St. Petersburg  began to recover, it  remained lower YoY in  Q3
   2020. O'KEY LFL traffic was down by 14.1% YoY in Q3 2020, a recovery  from
   a 27.6% YoY outflow in Q2 2020.  At the same time, the average LFL  ticket
   rose by 16.1% in Q3, compared to 43.3% growth in Q2 2020, due mainly to  a
   decrease in items  per basket  as clients  tended to  stockpile less  than
   during the  lockdown. As  a result,  O'KEY's LFL  net retail  revenue  was
   almost flat in Q3 2020.

   In Q3, O'KEY  continued to  improve the  efficiency of  its logistics  and
   supply chain,  ensuring  on-the-shelf availability  and  a high  level  of
   service, and further improving the  freshness and quality of the  products
   on offer.  Ultra-fresh  and  fresh,  own  production  and  private  labels
   assortment and  display  remained key  priorities.  The share  of  private
   labels increased by 1.1 pp YoY, amounting to 8.1% of O'KEY retail sales in
   Q3 2020.

   The  Group  is  transforming  its  hypermarkets  to  further  enhance  the
   competitiveness of O'KEY  stores by delivering  the highest quality,  best
   value proposition and  an outstanding customer  experience. In  September,
   the Group launched a new store concept  for the O'KEY brand at one of  its
   hypermarkets in Moscow. The new concept aims to further improve the  value
   proposition with key focus on assortment and shopping experience, customer
   service, and efficiency of selling  space utilisation. The upgraded  store
   combines advances in modern detail and leverages the Group's expertise and
   global best practice. The new  concept hypermarket combines innovative  IT
   and digital  solutions, operational  efficiencies,  vast choice  of  fresh
   categories,  safety  and  convenience,  an  appealing  design  and  unique
   ambience. The  Group plans  to continue  remodelling and  upgrading  O'KEY
   stores based on the new concept.

   Online sales through O'KEY's  own delivery service rose  be 30% YoY in  9M
   2020, and reached 3.6% of O'KEY net  retail revenue in Moscow and 1.9%  in
   St. Petersburg in Q3 2020.

   To meet  growing  consumer  demand for  omnichannel  shopping,  O'KEY  has
   expanded its online presence across nine cities of Russia, in addition  to
   the Group's own e-commerce platform in Moscow and St. Petersburg.

   In Q2 2020, O'KEY started cooperation with the iGooods service, which  now
   delivers hypermarket items to customers in Yekaterinburg, Tyumen,  Surgut,
   Rostov-on-Don and Krasnodar.

   In October 2020, the  Group entered into an  agreement with Sbermarket,  a
   nationwide food and essentials delivery service, to deliver online  orders
   from O'KEY hypermarkets in Omsk, Ufa, Rostov-on-Don and Nizhny Novgorod.

   The Group plans  to develop  its own delivery  service in  Moscow and  St.
   Petersburg, its core cities of presence, while expanding regional coverage
   via partnerships with leading delivery operators.

    

   Group Stores Expansion

   Stores and Selling Space           Q3 2020 Q3 2019  Net change Change (%)
   Number of stores, EoP                  182      165         17      10.3%
   O'KEY hypermarkets                      77       78        (1)         na
   DA! discounters                        105       87         18      20.7%
   Number of net store openings             5        1          4         4x
   O'KEY hypermarkets                       0        0         na         na
   DA! discounters                          5        1          4         4x
   Total selling space (sq. m.), EoP  591,352  589,362      1,990       0.3%
   O'KEY hypermarkets                 519,369  529,055    (9,686)     (1.8%)
   DA! discounters                     71,983   60,307     11,676      19.4%
   Total selling space added (sq. m.)   1,458      653        805     123.3%
   O'KEY hypermarkets                 (1,212)        0    (1,212)         na
   DA! discounters                      2,670      653      2,017     308.9%

    

   In Q2 2020, the company opened one O'KEY hypermarket in St. Petersburg and
   closed two in  Stavropol and Volgograd.  In addition, one  O'KEY store  in
   Moscow was under reconstruction in Q2  and Q3 2020, halving the  available
   selling space. Thus, the selling space  of the O'KEY chain reduced by  9.7
   thousand sq.m, or by 1.8% YoY, as of September 30, 2020.

   In Q3 2020, the Group opened 5 DA! stores net of closures, increasing  the
   chain by 18 stores YoY and selling space by 19.4% YoY, as of September 30,
   2020.

   As of 30 September 2020,  the Group operated 77  O'KEY stores and 105  DA!
   discounters, with total selling space of 591,352 sq. m.

    

   OVERVIEW

   O'KEY Group S.A. (LSE: OKEY, RAEX - 'ruA-') is one of the leading  grocery
   retailers in  Russia, operating  hypermarkets under  the O'KEY  brand  and
   discounters under the DA! brand.

   As of September 30, 2020, the Group operates 182 stores across Russia  (77
   hypermarkets and  105 discounters)  with total  selling space  of  591,352
   square meters. The company opened its first hypermarket in St.  Petersburg
   in 2002 and has since demonstrated  continuous growth. O'KEY is the  first
   Russian food retailer  to launch e-commerce  operations in St.  Petersburg
   and Moscow,  offering  a  full  range of  hypermarket  products  for  home
   delivery. The Group has  six e-commerce pick-up points  in Moscow and  six
   e-commerce pick-up points in St.  Petersburg. In 2015, the Group  launched
   the first discount chain in Russia under the DA! brand. The Group operates
   four distribution centres throughout Russia - two in Moscow and two in St.
   Petersburg. The Group employs 20,000+ people.

   In 2019, Group's revenue totalled RUB 165.1 billion, while EBITDA  reached
   RUB 14.1 billion and net income climbed to RUB 747 million.

   The O'KEY shareholder structure  is as follows: NISEMAX  Co Ltd -  44.79%,
   GSU Ltd - 29.52%, free float - 25.69%.

    

   DISCLAIMER

   These materials contain  statements about future  events and  expectations
   that are forward-looking  statements. These  statements typically  contain
   words such as 'expects' and 'anticipates' and words of similar import. Any
   statement in these materials that is not a statement of historical fact is
   a  forward-looking  statement  that  involves  known  and  unknown  risks,
   uncertainties and  other  factors  which may  cause  our  actual  results,
   performance or achievements  to be  materially different  from any  future
   results,  performance  or  achievements  expressed  or  implied  by   such
   forward-looking statements.

   None of the  future projections, expectations,  estimates or prospects  in
   this announcement should be taken as forecasts or promises nor should they
   be taken  as implying  any  indication, assurance  or guarantee  that  the
   assumptions on which such  future projections, expectations, estimates  or
   prospects have been prepared are correct or exhaustive or, in the case  of
   the  assumptions,  fully  stated  in  this  announcement.  We  assume   no
   obligations to update the  forward-looking statements contained herein  to
   reflect actual  results,  changes in  assumptions  or changes  in  factors
   affecting these statements.

    

   For further information please contact:

    

   Natalya Belyavskaya

   Head of Investor Relations

   +7 495 663 6677 ext. 266

    5 Natalya.Belyavskaya@okmarket.ru

    

   Alla Golovatenko

   Public Relations Manager

   +7 926 169 9117

    6 alla.golovatenko@okmarket.ru

    7 www.okeygroup.lu

    

   ══════════════════════════════════════════════════════════════════════════

    8  1  Hereinafter, net retail revenue, LFL net retail revenue, and the
   average ticket metrics are provided net of VAT.

   ══════════════════════════════════════════════════════════════════════════

   ISIN:          US6708662019
   Category Code: MSCH
   TIDM:          OKEY
   LEI Code:      213800133YYU23T4L791
   Sequence No.:  86871
   EQS News ID:   1144189


    
   End of Announcement EQS News Service

   ══════════════════════════════════════════════════════════════════════════

    9 fncls.ssp?fn=show_t_gif&application_id=1144189&application_name=news&site_id=reuters8

References

   Visible links
   1. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=165d1384cdd074f733b492a43c94ae37&application_id=1144189&site_id=reuters8&application_name=news
   2. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_8PYghopz.html#_ftn1
   3. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=b508b39b650906ed89b724b63717a8c8&application_id=1144189&site_id=reuters8&application_name=news
   4. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=79ccd8730275c8261275b86e6a6fab52&application_id=1144189&site_id=reuters8&application_name=news
   5. mailto:Natalya.Belyavskaya@okmarket.ru
   6. mailto:alla.golovatenko@okmarket.ru
   7. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=165d1384cdd074f733b492a43c94ae37&application_id=1144189&site_id=reuters8&application_name=news
   8. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_8PYghopz.html#_ftnref1


============