REG-O'KEY Group S.A. O'KEY GROUP ANNOUNCES AUDITED FINANCIAL RESULTS FOR 2019
06/04/2020 08:05
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O'KEY Group S.A. (OKEY)
O'KEY GROUP ANNOUNCES AUDITED FINANCIAL RESULTS FOR 2019
06-Apr-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.
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Press Release
6 April 2020
O'KEY GROUP ANNOUNCES AUDITED FINANCIAL RESULTS FOR 2019
O'KEY Group S.A. (LSE: OKEY, the 'Group'), one of the leading Russian food
retailers, announces its financial results for the FY2019 based on audited
consolidated financial statements.
All materials published by the Group are available on its website,
1 okeygroup.lu.
All results are presented under IFRS 16 standard unless stated otherwise.
2019 financial highlights
• Organic Group total revenue, excluding the effect of the supermarket
business sale, increased by 3.0% YoY. Total Group revenue increased by
2.3% YoY, from RUB 161,303 mln to RUB 165,086 mln.
• Organic revenue generated by O'KEY, excluding the effect of the
supermarket business sale, increased by 0.3% YoY. Total revenue
generated by O'KEY decreased by 0.3% YoY to RUB 147,175 mln, while net
retail revenue decreased by 0.4%
• Total revenue generated by DA! grew by 31.5% YoY to RUB 17,911 mln,
strongly driven by LFL revenue increase of 14.9%.
• Group gross margin increased by 19 bps to 23.7% versus 12M 2018, while
gross profit increased by 3.2% YoY to RUB 39,100 mln.
• Group EBITDA decreased by 0.5% YoY to RUB 14,061 mln compared with
RUB 14,133 mln in 2018, while the EBITDA margin decreased by
24 bps YoY to 8.5%.
• O'KEY's EBITDA decreased by 4.4% YoY to RUB 14,277 mln, while O'KEY's
EBITDA margin decreased by 41 bps to 9.7%.
• EBITDA generated by DA! improved from negative RUB 793 mln (-5.8% of
sales) in 12M 2018 to negative RUB 215 mln (-1.2% of sales) in 12M
2019, driven by new store openings, higher revenue and increased
efficiency.
• Net profit for the Group amounted to RUB 747.0 mln in 12M 2019
compared to net loss of RUB 1047 mln in 12M 2018.
• Net debt position increased to RUB 26.2 bln at the end of 12M 2019
from RUB 25.7 bln at the end of 12M 2018.
Key events in 12M 2019:
• 19 new discounters were opened.
• O'KEY successfully issued 3-year bonds in the amount of RUB 5,000 mln
at 9.35% per annum in April and 5-year bonds in the amount of
RUB 5,000 mln at 7.85% per annum in December 2019.
• In a continuing effort to optimize the Group's property portfolio, the
Group sold subsidiaries holding rights for lease of 2 land plots to a
third party in June.
Group operating results
12M 2019 12M 2018
Segment Net retail Traffic Average Net retail Traffic Average
revenue ticket revenue ticket
Group 2.4% 2.1% 0.3% -8.6% -12.9% 5.0%
LFL Group 0.9% 0.0% 0.9% -3.3% -2.6% -0.6%
O'KEY -0.4% -2.5% 2.1% -11.1% -18.2% 8.6%
LFL O'KEY -0.4% -1.8% 1.4% -4.3% -4.8% 0.4%
Discounters 31.7% 24.5% 5.8% 31.9% 27.8% 3.3%
LFL Discounters 14.9% 8.6% 5.8% 12.7% 9.5% 1.2%
For more details, please refer to O'KEY's 2 Q4 2019 Operating Results
Update.
Revenue
In 2019, total Group revenue increased by 2.3% YoY to RUB 165,086 mln. The
revenue increase was primarily triggered by the continuing the continuing
expansion of DA! and higher shelf inflation. At the same time, organic
Group total revenue, excluding the effect of the supermarket business
sale, increased by 3.0% YoY, on the back of continuing double-digit growth
of the discounter business. The value-for-money concept continued to show
its efficiency: LFL revenue of DA! grew by 14.9% YoY, supported by a
steady increase in LFL traffic and average ticket (up 8.6% YoY and 5.8%
YoY respectively).
IFRS 16 implementation
The Group has applied IFRS 16 since 1 January 2019. Upon adopting IFRS 16,
the Group recognised its lease liabilities in relation to leases which had
previously been classified as 'operating leases' under IAS 17. The
associated right-of-use assets for leases were measured at their carrying
amounts as if the standard had been applied since the commencement date,
but discounted using the Group's incremental borrowing rate at the date of
initial application.
Upon implementing the standard, the Group's management began to assess
Company performance based on the figures presented in accordance with
IFRS 16.
Group profit and losses
RUB mln 12M 2019 12M 2018 (IFRS 16) ∆ YoY 2019 12M 2018 ∆ YoY 2019
- unaudited / 18 (IAS 17) / 18
Total Group 165,086 161,303 2.3% 161,303 2.3%
revenue
O'KEY 147,175 147,688 -0.3% 147,688 -0.3%
DA! 17,911 13,616 31.5% 13,616 31.5%
Organic Group 165,086 160,322 3.0% 160,322 3.0%
revenue
O'KEY 147,175 146,706 0.3% 146,706 0.3%
DA! 17,911 13,616 31.5% 13,616 31.5%
Gross profit 39,100 37,904 3.2% 37,382 4.6%
Gross profit 23.7% 23.5% 19 23.2% 51
margin
Group EBITDA 14,061 14,133 -0.5% 8,644 62.7%
Group EBITDA 8.5% 8.8% (24) 5.4% 316
margin
EBITDA O'KEY 14,277 14,926 -4.4% 10,416 37.1%
EBITDA margin 9.7% 10.1% (41) 7.1% 265
O'KEY
EBITDA DA! (215) (793) -72.8% (1,772) -87.8%
EBITDA margin -1.2% -5.8% 462 -13% 1 181
DA!
Net profit 747 (1,047) n/a (599) n/a
(loss)
Net profit 0.5% -0.6% 110 -0.4% 82
(loss) margin
Cost of goods sold and gross profit
The table below provides a breakdown of the cost of goods sold in 2019 and
2018:
12M 2018 ∆ ∆
RUB mln 12M 2019 % of (IFRS 16) % of YoY, 12M 2018 % of YoY,
revenue - revenue bps (IAS 17) revenue bps
unaudited
Total 165,086 100% 161,303 100.0% - 161,303 100.0% -
revenue
Cost of (125,987) 76.3% (123,400) 76.5% (19) (123,922) 76.8% (51)
goods sold
Cost of
trading
stock (118,330) 71.7% (115,981) 71.9% (22) (115,981) 71.9% (22)
(less
supplier
bonuses)
Inventory (3,127) 1.9% (2,875) 1.8% 11 (2,875) 1.8% 11
shrinkage
Logistics (3,896) 2.4% (3,902) 2.4% (6) (4,424) 2.7% (38)
costs
Labelling
and (633) 0.4% (642) 0.4% (1) (642) 0.4% (1)
packaging
costs
Gross 39,100 23.7% 37,904 23.5% 19 37,382 23.2% 51
profit
The Group's gross profit margin increased by 19 bps YoY on a comparable
basis while increasing in absolute terms by RUB 1,196 mln, driven by
better sales, the optimisation of the assortment matrix and the continuing
improvement of purchasing conditions. Increased imports of own brand
assortment in different categories also positively affected gross margin.
Shrinkage costs increased by 8.8% YoY, mainly due to cancelling supplier
returns of products with a shelf-life of less than 30 days.
Logistics costs remained flat at 2.4% of revenue in 2019, as two opposing
factors offset one another: as quality standards were increased,
processing costs also grew, however that was compensated for by a decrease
in delivery tariffs.
General, selling, and administrative costs
The table below provides the general, selling, and administrative expenses
breakdown for 12M 2019 and 12M 2018:
12M 2018 ∆ 12M ∆
RUB mln 12M % of (IFRS 16) % of YoY, 2018 % of YoY,
2019 revenue unaudited revenue bps (IAS revenue bps
17)
Personnel costs 14,672 8.9% 14,068 8.7% 17 14,068 8.7% 17
Depreciation
and 8,100 4.9% 7,782 4.8% 8 4,367 2.7% 220
amortisation
Communication 3,656 2.2% 3,503 2.2% 4 3,503 2.2% 4
and utilities
Advertising and 2,268 1.4% 2,012 1.2% 13 2,012 1.2% 13
marketing
Repairs and 1,317 0.8% 1,228 0.8% 4 1,230 0.8% 4
maintenance
Insurance and
bank 918 0.6% 817 0.5% 5 817 0.5% 5
commissions
Security 713 0.4% 736 0.5% (2) 736 0.5% (2)
expenses
Legal and
professional 656 0.4% 630 0.4% 1 630 0.4% 1
expenses
Operating taxes 638 0.4% 803 0.5% (11) 803 0.5% (11)
Expense
relating to
variable lease 347 0.2% 461 0.3% (8) 5,426 3.4% (315)
payments /
Operating lease
expense
Materials and 321 0.2% 294 0.2% 1 294 0.2% 1
supplies
Other costs 24 0.0% 29 0.0% (0) 29 0.0% (0)
Total 33,630 20.4% 32,362 20.1% 31 33,915 21.0% (65)
In 2019, personnel costs as a percentage of revenue increased by 17 bps to
8.9% or by RUB 604 mln YoY. This increase was largely attributable to
necessary wage increases at the hypermarkets business in the second half
of 2018 and to new discounter openings, partly offset by the sale of the
supermarket business.
Communications, utilities, repairs, and maintenance expenses increased as
a percentage of revenue by 8 bps YoY or by 5.1% in absolute terms. The
increase was primarily caused by indexing utility tariffs in the second
half of 2019, rising tariffs for cleaning services and planned equipment
repairs in 2019. The Group continues to work towards optimising related
costs and efficiency improvements.
Advertising and marketing expenses as a percentage of revenue increased by
13 bps primarily driven by higher expenses related to promo actions and
recently introduced regular leaflets for Fresh categories.
Insurance and banking expenses as a percentage of revenue increased by 5
bps due to the growing usage of cards for payment by our clients.
Depreciation and amortisation increased by 85.5% YoY in comparison with
2018 figure under IFRS 17 due to the implementation of new IFRS 16
standard.
Other operating income and expenses
In June 2019, the Group signed an agreement with a third party for the
sale of subsidiaries holding rights for lease of land plots in Moscow.
According to the agreement, the total proceeds are RUB 1,553 mln.
Additionally, the Group recognised an impairment loss in the amount of RUB
821 mln in 2019 versus RUB 369 mln in 2018, primarily in respect of mature
low-performing stores and other related non-current assets, including one
O'KEY store and one DA! store.
Foreign exchange gain / (loss)
The foreign exchange gain was due to a substantial difference in exchange
rates at both the end and the beginning of the reporting period, arising
primarily from intragroup USD-denominated loans.
Net finance costs
Finance costs on loans and borrowings decreased as a percentage of revenue
by 0.3% YoY, driven by a decline in the weighted average interest rate
from 8.8% in 12M 2018 to 8.5% in 12M 2019. At the same time, total finance
costs increased by 58.3% YoY as a result of additional interest costs on
lease liabilities in the amount of RUB 2,223 mln under the new IFRS 16
standard.
Cash flow and working capital
RUB mln 12M 2019 (IFRS 16) 12M 2018 (IAS 17)
Net cash from operating activities 11,078 4,762
Net cash (used in) / from investing (1,352) 3,479
activities
Net cash used in financing activities (12,922) (7,248)
Net (decrease) / increase in cash and (3,196) 993
cash equivalents
Effect of exchange rate on cash and (9) (31)
cash equivalents
Net cash used in operating activities during the reporting period improved
from RUB 4,762 mln in 12M 2018 to RUB 11,078 mln in 12M 2019, due amongst
other factors, to the implementation of IFRS 16. Repayment of principal
amount of lease liabilities and interest paid on them in the amount of
RUB 6,370 mln were presented in cash flows from financing activities,
while in 2018 under IAS 17 all lease payments were presented in cash flows
from operating activities.
Net cash used in investing activities amounted to RUB 1,352 mln in 2019.
This was a result of the Group's 2019 capital expenditures (CAPEX) of
RUB 2,919 mln (excluding VAT), which were partly offset by proceeds
received from the sale of subsidiaries owning lease rights for two land
plots and other non-current assets of the RUB 1,553 mln. During the
reporting period, the Group paid RUB 1,004 mln (excluding VAT) for the
development of its hypermarket business and RUB 1,915 mln (excluding VAT)
for the development of its discounter business.
Net cash used in financing activities in 12M 2019 amounted to
RUB 12,922 mln. Over the reporting period, the Group attracted
RUB 13,253 mln in financing and made repayments of loans and borrowings
totalling RUB 15,844 mln. As at 31 December 2019, the Group had
RUB 15,947 mln of undrawn, committed borrowing facilities available in
Russian roubles on a fixed and floating basis, in respect of which all
conditions have been met. Proceeds from these facilities may be used to
finance operating and investing activities as necessary.
Financial liabilities
By 31 December 2019, net debt had increased by 1.9% YoY to RUB 26,212 mln.
With its major creditors, the Group negotiated a new covenant calculated
as total interest-bearing liabilities (net debt and lease liabilities)
divided by the EBITDA based on IFRS 16. The Group complies well with all
bank covenants as of 31/12/2019.
As of 31 As of 31
RUB mln December 2019 December 2018
(IFRS16) (IAS17)
EBITDA LTM 14,061 8,644
Total debt 31,719 34,426
Short-term debt 1,629 2,461,
Long-term debt 30,090 31,964
Cash & cash equivalents 5,507 8,712
Net Debt 26,212 25,713
Total Lease Liabilities 25,122 -
Short-term lease liabilities 3,950 -
Long-term lease liabilities 21,173 -
Total Interest-Bearing Liabilities (Net of 51,334 25,713
сash & сash equivalents)
Total Interest-Bearing Liabilities (Net of 3.7 2.97
сash & сash equivalents) / EBITDA
Report
The report, including the full set of reviewed IFRS financial statements,
can be found at 3 https://okeygroup.lu/press-center/press-releases.
O'KEY Group S.A. (LSE: OKEY) is pleased to invite the investment community
to join O'KEY conference call on 12M 2019 IFRS financial results. The date
and time of the conference call will be announced later.
All related materials will be published on the "Investor" section of the
Company's website at 4 https://okeygroup.lu/.
OVERVIEW
O'KEY Group S.A. (LSE: OKEY, Fitch - 'B+', RAEX - 'ruA-') is one of the
largest retail chains in Russia. The Group operates under two main
formats: hypermarkets, under the 'O'KEY' brand and discounters, under the
'DA!' brand.
As at April 2, 2020, the Group operates 178 stores across Russia. The
Group opened its first hypermarket in St. Petersburg in 2002 and has since
demonstrated continuous growth. O'KEY is the first among Russian food
retailers to launch and actively develop e-commerce operations in St.
Petersburg and Moscow, offering a full range of hypermarket products for
home delivery. The Group operates four distribution centres across the
Russian Federation.
For the full year 2019, revenue totalled RUB 165,086,202 thousand, EBITDA
reached RUB 14,061,432 thousand, and the net profit for the period
amounted to RUB 746,958 thousand.
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:
5 ir@okmarket.ru
6 okeygroup.lu
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Attachment
Document title: O'KEY Group S.A. Annual Report 2019
Document: 7 https://eqs-cockpit.com/c/fncls.ssp?u=BEKALXJILE
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ISIN: US6708662019
Category Code: ACS
TIDM: OKEY
LEI Code: 213800133YYU23T4L791
Sequence No.: 56689
EQS News ID: 1015865
End of Announcement EQS News Service
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