REG-O'KEY Group S.A. O'KEY GROUP DELIVERS 7.9% EBITDA MARGIN IN H1 2020
27/08/2020 09:00
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O'KEY Group S.A. (OKEY)
O'KEY GROUP DELIVERS 7.9% EBITDA MARGIN IN H1 2020
27-Aug-2020 / 10:00 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
27 August 2020
O'KEY GROUP DELIVERS 7.9% EBITDA MARGIN IN H1 2020
O'KEY Group S.A. (LSE: OKEY, the 'Group'), one of Russia's leading food
retailers, has announced its financial results for the first six months of
2020 based on condensed consolidated interim financial statements reviewed
by auditors.
All materials published by the Group are available on its website,
1 okeygroup.lu.
All results are presented under IFRS 16 unless stated otherwise.
H1 2020 financial highlights
• Total Group revenue increased by 6.5% YoY to RUB 85,059 mln
• O'KEY revenue rose by 1.6% YoY to RUB 72,417 mln, driven by 4.3% LFL
revenue growth
• DA! revenue jumped by 46.8% YoY to RUB 12,642 mln, led by 31.3% LFL
revenue growth and supported by selling space expansion
• Group gross profit increased by 4.3% to RUB 19,654 mln
• Group EBITDA grew by 5.6% YoY to RUB 6,698 mln, and EBITDA margin
stood at 7.9%
• DA! discounters EBITDA improved from negative RUB 169 mln in H1 2019
to positive RUB 459 mln in H1 2020, on the back of strong revenue
performance and efficiency growth
• Net debt position remained flat YoY at a 3.9x total interest bearing
liabilities to EBITDA ratio, as of June 30, 2020
Group operating results in H1 2020
LFL Net Retail Q2 2020 vs. Q2 2019 H1 2020 vs. H1 2019
Revenue, % Net retail Traffic Average Net retail Traffic Average
revenue ticket revenue ticket
O'KEY Group 7.4% (23.5%) 40.4% 7.3% (10.2%) 19.4%
O'KEY 3.7% (27.6%) 43.3% 4.3% (13.4%) 20.5%
DA! 34.7% (8.5%) 47.2% 31.3% 2.6% 28.0%
For more details, please refer to the Group's 2 Q2 2020 Trading Update.
Group profit and losses highlights in H1 2020
RUB mln H1 2020 H1 2019 ∆ YoY, %
Total Group revenue 85,059 79,883 6.5%
O'KEY 72,417 71,272 1.6%
DA! 12,642 8,611 46.8%
Gross profit 19,654 18,836 4.3%
Gross profit margin, % 23.1% 23.6% (0.5pp)
Selling, general and administrative expenses (16,978) (16,532) 2.7%
SG&A,as % of revenue 20.0% 20.7% (0.7pp)
Other operating (expenses)/income, net (413) 139 n/a
Operating profit 2,262 2,443 (7.4%)
Finance costs, net (2,406) (2,567) (6.3%)
Foreign exchange (loss)/gain (1,082) 692 n/a
Net profit (loss) (900) 632 n/a
Group EBITDA 6,698 6,341 5.6%
Group EBITDA margin, % 7.9% 7.9% -
O'KEY EBITDA 6,239 6,509 (4.2%)
O'KEY EBITDA margin, % 8.6% 9.1% (0.5pp)
DA! EBITDA 459 (169) n/a
DA! EBITDA margin, % 3.6% (2.0%) +5.6pp
Group revenue
RUB mln H1 2020 H1 2019 ∆ YoY, %
Total Group revenue 85,059 79,883 6.5%
Retail revenue 84,336 78,925 6.9%
Rental income 723 958 (24.5%)
Group retail revenue rose by 6.9% YoY to RUB 84,336 mln in H1 2020. This
growth was driven by strong LFL performances from both O'KEY and DA!, and
supported by DA! selling space expansion.
Rental income decreased from RUB 958 mln in H1 2019 to RUB 723 mln in H1
2020, due to leaseholders' businesses shutting down during the pandemic.
In H1 2020, total Group revenue increased by 6.5% YoY to RUB 85,059 mln.
Group gross profit
The Group's gross profit increased by 4.3% YoY to RUB 19,654 mln, driven
by retail revenue growth and sales mix improvement in H1 2020.
The Group's gross margin decreased by 0.5 pps YoY to 23.1%, on the back of
higher shrinkage costs and a decline in rental income. However, this was
partially offset by lower logistics costs.
In H1 2020, shrinkage costs grew, as a percentage of revenue, by 0.3 pps
YoY, primarily due to the cancellation of returns to suppliers of products
with a shelf-life of less than 30 days. Rental income, as a percentage of
total revenue, declined by 0.3 pps YoY, as explained above. Logistic
costs, as a percentage of revenue, decreased by 0.1 pps YoY, due to
continuous delivery process optimization.
Group selling, general and administrative expenses
RUB mln H1 2020 % of H1 2019 % of ∆ YoY, pps
revenue revenue
Personnel costs (7,702) 9.1% (7,377) 9.2% (0.1pp)
Depreciation and amortisation (4,017) 4.7% (3,721) 4.7% -
Communication and utilities (1,812) 2.1% (1,873) 2.3% (0.2pp)
Advertising and marketing (955) 1.1% (1,069) 1.3% (0.2pp)
Repairs and maintenance costs (614) 0.7% (668) 0.8% (0.1pp)
Operating taxes (431) 0.5% (381) 0.5% -
Insurance and bank (503) 0.6% (450) 0.6% -
commissions
Security expenses (359) 0.4% (355) 0.4% -
Legal and professional (335) 0.4% (293) 0.4% -
expenses
Materials and supplies (212) 0.2% (149) 0.2% -
Other costs (22) 0.0% (11) 0.0% -
Variable operating lease (15) 0.0% (185) 0.2% (0.2pp)
expenses
Total Group SG&A (16,978) 20.0% (16,532) 20.7% (0.7pp)
Group SG&A expenses, as a percentage of revenue, decreased by 0.7 pps YoY
to 20.0% in H1 2020, on the back of enhanced operational efficiency and
disciplined cost management.
Personnel costs, as a percentage of revenue, reduced by 0.1 pps YoY to
9.1% in H1 2020, due mainly to the increased efficiency of store
operations and a ramp-up in the DA! business. This was partially offset by
extra bonuses to store staff during the pandemic.
Communication and utilities expenses declined, as a percentage of revenue,
by 0.2 pps YoY while repairs and maintenance expenses went down by 0.1 pps
YoY in H1 2020. This decrease was mainly attributable to the optimization
of utility costs and the reduction of equipment repair and maintenance
costs.
Advertising and marketing expenses fell, as a percentage of revenue, by
0.2 pps YoY to 1.1%, largely due to a change in advertising mix towards
digital activities in response to the consumer demand for online shopping
during Q2.
The Group brought variable lease expenses, as a percentage of revenue,
down by 0.2 pps YoY in H1 2020, partially due to rental deductions
received during the pandemic.
Group other operating expenses
The Group recognized operating expenses amounting to RUB 413 mln in H1
2020 compared to other operating income of RUB 139 mln in H1 2019. The
difference was mainly attributable to the disposal of non-current assets
related to store closures. This amounted to a net loss of RUB 360 mln in
H1 2020, compared to a RUB 68 mln gain in H1 2019. Additionally, gains
from lease agreement modifications (under IFRS 16) dropped to RUB 56 mln
in H1 2020, down from RUB 315 mln in H1 2019 (when the main effect was
recognized upon IFRS 16 standard implementation). Both items have a
non-cash nature.
Group EBITDA and EBITDA margin
Group EBITDA grew by 5.6% YoY to RUB 6,698 mln in H1 2020, led by revenue
growth, improved operational efficiency, and disciplined cost management.
DA! EBITDA improved to positive RUB 459 mln in H1 2020, compared to
negative RUB 169 mln in H1 2019.
O'KEY EBITDA experienced a slight decline, down from RUB 6,509 mln in H1
2019 to RUB 6,239 mln in H1 2020. This decrease resulted from the drop in
rental income and reduced non-cash gains from asset modification
(according to IFRS 16) in the reporting period.
The Group's EBITDA margin remained flat YoY at 7.9% in H1 2020, driven by
retail revenue growth and cost optimization. This was partially offset by
a year-on-year decrease in rental income and lower non-cash gain from
lease agreement modification, as described above.
Group finance costs, foreign exchange and net profit
Net finance costs decreased by 6.3% YoY to RUB 2,406 mln in H1 2020,
driven by a decline in the weighted average interest rate. A substantial
part of interest costs were attributable to non-current lease liabilities
(accounted under IFRS 16).
In H1 2020, net foreign exchange loss amounted to RUB 1,082 mln, compared
to a RUB 692 mln gain in H1 2019. The loss was largely attributable to
intragroup US-dollar-denominated loans, as well as lease contracts
denominated in foreign currencies, while losses from import operations had
a relatively small impact on the Group's results.
The Group recorded a net loss of RUB 900 mln in H1 2020, compared to a RUB
632 mln net profit in H1 2019.
The loss is fully explained by the aforementioned foreign currency loss,
as well as non-cash losses from non-current assets disposal in H1 2020.
Group cash flow
RUB mln H1 2020 H1 2019
Net cash from/ (used in) operating activities (468) 334
Net cash used in/ (from) investing activities (1,614) 294
Net cash used in financing activities (1,234) (5,302)
Net decrease in cash and cash equivalents (3,316) (4,674)
Effect of exchange rate on cash and cash equivalents (10) (22)
Net cash used in operating activities amounted to RUB 468 mln in 1H 2020,
compared to a net inflow of RUB 334 mln in 1H 2019. The decrease was a
result of investments in working capital, used to secure goods to ensure
shelf availability and meet customer demand during the months of the
pandemic.
Net cash used in investing activities amounted to RUB 1,614 mln in H1
2020, in comparison with RUB 294 mln in cash receipts from investment
activities in H1 2019. In H1 2020, the Group invested almost RUB 860 mln
(excluding VAT) into the development of its hypermarket business and over
RUB 700 mln (excluding VAT) into the expansion of its discount store
operation. In H1 2019, the Group sold two land plots and received cash
proceeds totalling RUB 1,553 mln outweighing its capital expenditures in
the respective period.
Net cash used in financing activities amounted to RUB 1,234 mln in H1
2020. As of June 30, 2020, the Group has RUB 9,900 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 if necessary.
Group net debt position
RUB mln As of 30 As of 30
June 2020 June 2019
EBITDA LTM 14,419 14,369
Total debt 35,077 33,684
Short-term debt1 7,469 1,709
Long-term debt 27,608 31,975
Cash & cash equivalents 2,181 4,016
Net Debt 32,895 29,668
Total Lease Liabilities 23,640 26,662
Short-term lease liabilities 4,421 3,734
Long-term lease liabilities 19,219 22,928
Total Interest-Bearing Liabilities (Net of сash & сash 56,535 56,330
equivalents)
Total Interest-Bearing Liabilities (Net of сash & сash 3.9x 3.9x
equivalents) / EBITDA LTM
1 Short-term debt does not include interest accrued on loans and
borrowings.
The Group's financial position remained stable during the reporting
period. As of June 30, 2020, net debt to EBITDA ratio stood flat YoY at
3.9x. As of June 30, 2020 and during the six-month period then ended, the
Group complied with all of its loan covenants.
Group interim IFRS report
The Group's interim report, including the full set of reviewed IFRS
interim financial statements, can be found at
3 https://okeygroup.lu/investors/result-center/ifrs-statements/.
O'KEY Group S.A. (LSE: OKEY) is pleased to invite the investment community
to join O'KEY conference call on H1 2020 IFRS financial results.
Date: August 27, 2020
Time:
• 5.00 p.m. (Moscow)
• 3.00 p.m. (London)
• 10.00 a.m. (New York)
Participants:
• Armin Burger, CEO
• Konstantin Arabidis, CFO
• Natalya Belyavskaya, Head of IR
The conference call details are provided below. Please dial in 5-10
minutes prior to the start time using the number / Confirmation Code
below:
Russia: Local access +7 495 646 9190
Toll free 8 10 800 2867 5011
UK: Local access +44 (0) 330 336 9411
Toll free 0 800 279 7204
Europe: Local access +49 (0) 69 2222 2018
USA: Local access +1 929 477 0402
Toll free 888 256 1007
Conference ID: 3275275
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 June 30, 2020, the Group operates 177 stores across Russia (77
hypermarkets and 100 discounters) with a total selling area of 589,894
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 the Russian Federation - two in
Moscow and two in St. Petersburg. The company 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
4 Natalya.Belyavskaya@okmarket.ru
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ISIN: US6708662019
Category Code: MSCH
TIDM: OKEY
LEI Code: 213800133YYU23T4L791
Sequence No.: 83026
EQS News ID: 1124035
End of Announcement EQS News Service
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