REG - X5 Retail Group N.V - X5 reports 15.2% revenue growth in Q1 2023

X5 Retail NVAnnouncement

27/04/2023 08:00

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RNS Number : 5916X  X5 Retail Group N.V.  27 April 2023

X5 reports 15.2% revenue growth in Q1 2023, 5.8% adj. EBITDA margin pre-IFRS 16

+15.2 % y-o-y
Revenue growth in Q1 2023

driven by solid like-for-like (LFL) (1) sales and selling space expansion

+35.9 % y-o-y
Digital business (express delivery, Vprok.ru, 5Post and Mnogo Lososya) net
sales growth in Q1 2023

Digital business net sales amounted to RUB 25.6 billion, which comprised 3.7%
of consolidated Q1 2023 revenue.

24.0 %           -88 b.p.
Gross margin under IFRS 16 in Q1 2023

(-88 b.p. to 23.7% pre-IFRS 16(2))

driven by the aggressive expansion of the Chizhik hard discounter format into
the regions, the consolidation of Krasny Yar and Slata, as well as the
transformation of Pyaterochka's CVP

10.2 %               -143 b.p.
Adjusted EBITDA(3) margin under IFRS 16 in Q1 2023

(-126 b.p. to 5.8% pre-IFRS 16)

1.4%                            +98 b.p.
Net profit margin under IFRS 16 in Q1 2023

(+92 b.p. to 1.7% pre-IFRS 16)

2.65x
Net debt/EBITDA ratio under IFRS 16 as of 31 March 2023

(1.13x pre-IFRS 16)

Amsterdam, 27 April 2023 - X5 Retail Group N.V. ("X5" or the "Company", LSE
and MOEX ticker: FIVE), a leading Russian food retailer that operates the
Pyaterochka, Perekrestok and Chizhik retail chains, today released its
unaudited condensed consolidated interim financial information for the three
months ended 31 March 2023, in accordance with International Financial
Reporting Standards, as adopted in the European Union.

Profit and loss statement highlights(4)

 RUB mln                               IFRS 16                                  Pre-IFRS 16
                                       Q1 2023  Q1 2022  change,                Q1 2023  Q1 2022  change,

y-o-y, % or multiple
y-o-y, % or multiple
 Revenue                               696,364  604,230  15.2                   696,364  604,230  15.2
 incl. net retail sales(5)             693,481  601,776  15.2                   693,481  601,776  15.2
 Pyaterochka (incl. express delivery)  548,912  489,193  12.2                   548,912  489,193  12.2
 Perekrestok (incl. express delivery)  101,442  96,565   5.1                    101,442  96,565   5.1
 Chizhik                               18,744   4,099    5x                     18,744   4,099    5x
 Karusel                               631      5,430    (88.4)                 631      5,430    (88.4)
 Gross profit                          167,231  150,430  11.2                   164,949  148,472  11.1
 Gross profit margin, %                24.0     24.9     (88) b.p.              23.7     24.6     (88) b.p.
 Adj. EBITDA                           70,923   70,179   1.1                    40,236   42,532   (5.4)
 Adj. EBITDA margin, %                 10.2     11.6     (143) b.p.             5.8      7.0      (126) b.p.
 EBITDA                                70,191   69,556   0.9                    39,504   41,909   (5.7)
 EBITDA margin, %                      10.1     11.5     (143) b.p.             5.7      6.9      (126) b.p.
 Operating profit                      30,516   26,190   16.5                   19,332   17,106   13.0
 Operating profit margin, %            4.4      4.3      5 b.p.                 2.8      2.8      (5) b.p.
 Net profit                            9,696    2,499    288.0                  12,172   5,022    142.4
 Net profit margin, %                  1.4      0.4      98 b.p.                1.7      0.8      92 b.p.

 

Revenue

Revenue growth reached 15.2% year-on-year in Q1 2023. Net retail sales
increased by 15.2%, driven by a combination of 7.9% selling space growth and
6.5% LFL sales growth, while X5's digital business sales grew by 35.9% y-o-y.

Selling space by format, square metres (sqm)

              AS AT 31-MAR-23  AS AT 31-DEC-22  CHANGE                        AS AT 31-MAR-22  CHANGE Y-O-Y, % OR MULTIPLE

VS 31-DEC-22, % OR MULTIPLE
 Pyaterochka  7,634,733        7,497,056        1.8                           7,183,452        6.3
 Perekrestok  1,068,031        1,085,496        (1.6)                         1,094,674        (2.4)
 Karusel      -                49,225           n/a                           108,982          n/a
 Chizhik      174,368          152,370          14.4                          25,361           7x
 X5 Group(6)  9,203,045        9,107,479        1.0                           8,528,416        7.9

 

Q1 2023 LFL store performance by format, % change y-o-y

In Q1 2023, LFL sales increased by 6.5% year-on-year, supported by solid LFL
results of Pyaterochka and Perekrestok at 7.0% and 4.1%, respectively.

LFL traffic was the main driver of LFL sales in Q1 2023, with the LFL basket
in positive territory at 2.8% year-on-year.

              SALES  TRAFFIC  BASKET
 Pyaterochka  7.0    3.9      3.0
 Perekrestok  4.1    1.3      2.7
 X5 Group(7)  6.5    3.6      2.8

 

For more details on net retail sales performance, please refer to X5's Q1 2023
Trading Update
(https://www.x5.ru/wp-content/uploads/2023/04/q1_2023_trading_update_eng.pdf)
.

Gross profit margin

Gross profit margin under IFRS 16 decreased by 88 b.p. year-on-year to 24.0%
(decreased by 88 b.p. year-on-year to 23.7% pre-IFRS 16) in Q1 2023, mainly
due to the aggressive expansion of the Chizhik hard discounter format into the
regions, the consolidation of Krasny Yar and Slata, as well as the
transformation of Pyaterochka's CVP.

Selling, general and administrative (SG&A) expenses (excl. D&A&I
and the impact of the Karusel transformation)

                                                                                 IFRS 16                         Pre-IFRS 16
 RUB mln                                                                         Q1 2023    Q1 2022   change,    Q1 2023    Q1 2022    change,

y-o-y, %
y-o-y, %
 Staff costs                                                                     (61,198)   (50,078)  22.2       (61,198)   (50,078)   22.2
 % of revenue                                                                    8.8        8.3       50 b.p.    8.8        8.3        50 b.p.
 incl. LTI and share-based payments                                              (732)      (376)     94.7       (732)      (376)      94.7
 staff costs excl. LTI and share-                                                8.7        8.2       46 b.p.    8.7        8.2        46 b.p.

based payments as % of revenue
 Lease expenses                                                                  (5,271)    (4,169)   26.4       (31,357)   (28,168)   11.3
 % of revenue                                                                    0.8        0.7       7 b.p.     4.5        4.7        (16) b.p.
 Utilities                                                                       (16,868)   (13,867)  21.6       (16,868)   (13,867)   21.6
 % of revenue                                                                    2.4        2.3       13 b.p.    2.4        2.3        13 b.p.
 Other store costs                                                               (6,153)    (5,620)   9.5        (6,366)    (5,839)    9.0
 % of revenue                                                                    0.9        0.9       (5) b.p.   0.9        1.0        (5) b.p.
 Third-party services                                                            (4,144)    (4,514)   (8.2)      (4,086)    (4,419)    (7.5)
 % of revenue                                                                    0.6        0.7       (15) b.p.  0.6        0.7        (14) b.p.
 Other expenses                                                                  (8,390)    (8,187)   2.5        (10,270)   (9,564)    7.4
 % of revenue                                                                    1.2        1.4       (15) b.p.  1.5        1.6        (11) b.p.
 SG&A (excl. D&A&I and the impact of the Karusel transformation)                 (102,024)  (86,435)  18.0       (130,145)  (111,935)  16.3
 % of revenue                                                                    14.7       14.3      35 b.p.    18.7       18.5       16 b.p.
 SG&A (excl. D&A&I, LTI, share-based payments and the impact of the              (101,292)  (86,059)  17.7       (129,413)  (111,559)  16.0
 Karusel transformation)
 % of revenue                                                                    14.5       14.2      30 b.p.    18.6       18.5       12 b.p.

 

In Q1 2023, SG&A expenses excluding D&A&I, LTI, share-based
payments and the impact of the Karusel transformation under IFRS 16 as a
percentage of revenue increased by 30 b.p. to 14.5% (increased by 12 b.p. to
18.6% pre-IFRS 16), mainly driven by increased staff costs, lease expenses and
utilities as a percentage of revenue.

Staff costs (excluding LTI and share-based payments) as a percentage of
revenue increased by 46 b.p. year-on-year in Q1 2023 to 8.7%, mainly due to a
negative operating leverage effect.

LTI and share-based payment expenses amounted to RUB 732 million in Q1 2023,
up by 94.7% from RUB 376 million in Q1 2022, driven by the introduction of the
LTI programme for new businesses and an increase in accruals for the 2021-2023
LTI programme on the back of updated KPIs and a reassessment of the
probabilities of the KPIs' achievement.

Lease expenses under IFRS 16 as a percentage of revenue in Q1 2023 increased
by 7 b.p. year-on-year to 0.8%, mainly due to an increase in the number of
reverse franchising stores. The decrease in pre-IFRS 16 lease expenses by 16
b.p. to 4.5% was caused by a positive operating leverage effect for fixed
lease rates.

Utilities costs as a percentage of revenue in Q1 2023 increased by 13 b.p.
year-on-year to 2.4%, mainly due to a negative operating leverage effect.

Other store costs under IFRS 16 as a percentage of revenue in Q1 2023
decreased by 5 b.p. year-on-year (falling by 5 b.p.

pre-IFRS 16), mainly due to the increased cost efficiency of security and
cleaning services.

Third-party service expenses under IFRS 16 as a percentage of revenue in Q1
2023 decreased by 15 b.p. year-on-year to 0.6% (down 14 b.p. to 0.6% pre-IFRS
16), mainly due to a shift in the timing of marketing initiatives.

Other expenses under IFRS 16 as a percentage of revenue in Q1 2023 decreased
by 15 b.p. year-on-year to 1.2% (down 11 b.p. to 1.5% pre-IFRS 16), due to the
high base effect in Q1 2022 driven by one-off expenses.

Lease/sublease and other income (8)

As a percentage of revenue, the Company's income from leases, subleases and
other operations under IFRS 16 totalled 0.7%, representing a decrease of 31
b.p. year-on-year in Q1 2023 (a decrease of 32 b.p. to 0.7% pre-IFRS 16),
driven by lower income from sales of recyclables.

EBITDA and EBITDA margin

                                                                                 IFRS 16                          Pre-IFRS 16
 RUB mln                                                                         Q1 2023    Q1 2022   change,     Q1 2023    Q1 2022    change,

y-o-y, %
y-o-y, %
 Gross profit                                                                    167,231    150,430   11.2        164,949    148,472    11.1
 Gross profit margin, %                                                          24.0       24.9      (88) b.p.   23.7       24.6       (88) b.p.
 SG&A (excl. D&A&I, LTI, share-based payments and the effect of the              (101,292)  (86,059)  17.7        (129,413)  (111,559)  16.0
 Karusel transformation)
 % of revenue                                                                    14.5       14.2      30 b.p.     18.6       18.5       12 b.p.
 Net impairment losses on financial assets                                       (66)       (435)     (84.8)      (66)       (435)      (84.8)
 % of revenue                                                                    0.01       0.07      (6) b.p.    0.01       0.07       (6) b.p.
 Lease/sublease and other income (excl. the effect of the Karusel                5,050      6,243     (19.1)      4,766      6,054      (21.3)
 transformation)
 % of revenue                                                                    0.7        1.0       (31) b.p.   0.7        1.0        (32) b.p.
 Adj. EBITDA                                                                     70,923     70,179    1.1         40,236     42,532     (5.4)
 Adj. EBITDA margin, %                                                           10.2       11.6      (143) b.p.  5.8        7.0        (126) b.p.
 LTI, share-based payments and other one-off remuneration payment expenses and   (732)      (376)     94.7        (732)      (376)      94.7
 SSC
 % of revenue                                                                    0.1        0.1       4 b.p.      0.1        0.1        4 b.p.
 Effect of the Karusel transformation                                            -          (247)     (100.0)     -          (247)      (100.0)
 % of revenue                                                                    -          0.04      4 b.p.      -          0.04       4 b.p.
 EBITDA                                                                          70,191     69,556    0.9         39,504     41,909     (5.7)
 EBITDA margin, %                                                                10.1       11.5      (143) b.p.  5.7        6.9        (126) b.p.

 

D&A&I

Depreciation, amortisation and impairment costs under IFRS 16 decreased as a
percentage of revenue by 148 b.p. year-on-year to 5.7% (down 121 b.p.
year-on-year to 2.9% pre-IFRS 16) in Q1 2023, totalling RUB 39,675 million
(RUB 20,172 million pre-IFRS 16). This was mainly driven by the high base
effect of Q1 2022 and capex growth at a lower rate compared to revenue.

Non-operating gains and losses

                       IFRS 16                                    Pre-IFRS 16
 RUB mln               Q1 2023   Q1 2022   change,                Q1 2023  Q1 2022  change,

y-o-y, % or multiple
y-o-y, % or multiple
 Operating profit      30,516    26,190    16.5                   19,332   17,106   13.0
 Net finance costs     (16,763)  (17,066)  (1.8)                  (3,160)  (5,810)  (45.6)
 Net FX result         (1,411)   (3,294)   (57.2)                 (736)    (2,307)  (68.1)
 Profit before tax     12,342    5,830     111.7                  15,436   8,989    71.7
 Income tax expense    (2,646)   (3,331)   (20.6)                 (3,264)  (3,967)  (17.7)
 Net profit            9,696     2,499     288.0                  12,172   5,022    142.4
 Net profit margin, %  1.4       0.4       98 b.p.                1.7      0.8      92 b.p.

 

Net finance costs under IFRS 16 in Q1 2023 decreased by 1.8% year-on-year to
RUB 16,763 million (down 45.6% year-on-year to RUB 3,160 million pre-IFRS 16),
driven by lower finance costs on the back of decreased interest rates in
Russian capital markets vs Q1 2022 and lower total debt. Under IFRS 16 this
was offset by increasing interest on lease liabilities.

The negative net FX result totalled RUB 1,411 million (RUB 736 million under
pre-IFRS 16) in Q1 2023, compared with negative RUB 3,294 million (negative
RUB 2,307 million under pre-IFRS 16) in Q1 2022, due to depreciation of the
rouble.

In Q1 2023, income tax expense under IFRS 16 decreased by 20.6% year-on-year
(decreased by 17.7% year-on-year pre-IFRS 16) due to one-off effects.

Consolidated cash flow statement highlights

                                                                       IFRS 16                                    Pre-IFRS 16
 RUB mln                                                               Q1 2023   Q1 2022   change,                Q1 2023   Q1 2022   change,

y-o-y, % or multiple
y-o-y, % or multiple
 Net cash from operating activities before changes in working capital  69,843    70,757    (1.3)                  39,447    43,306    (8.9)
 Change in working capital                                             (30,879)  (24,192)  27.6                   (30,699)  (23,894)  28.5
 Net interest and income tax paid                                      (22,227)  (20,409)  8.9                    (8,651)   (9,178)   (5.7)
 Net cash flows generated from operating activities                    16,737    26,156    (36.0)                 97        10,234    (99.1)
 Net cash used in investing activities                                 (17,076)  (21,967)  (22.3)                 (17,200)  (22,124)  (22.3)
 Net cash (used in)/generated from financing activities                (3,919)   22,966    n/a                    12,845    39,045    (67.1)
 Effect of exchange rate changes on cash & cash equivalents            122       (5)       n/a                    122       (5)       n/a
 Net increase in cash and cash equivalents                             (4,136)   27,150    n/a                    (4,136)   27,150    n/a

 

In Q1 2023, the Company's net cash from operating activities before changes in
working capital under IFRS 16 decreased by RUB 914 million (down RUB 3,859
million under pre-IFRS 16) and totalled RUB 69,843 million (RUB 39,447 million
under pre-IFRS 16). The negative change in working capital under IFRS 16 of
RUB 30,879 million in Q1 2023 was driven by an increase in inventories and
accounts payable on the back of business growth.

Working capital highlights

 RUB mln                                           31-Mar-23  31-Dec-22  31-Mar-22
 Inventories                                       213,201    208,661    169,122
 Trade, other accounts receivable and prepayments  17,831     21,382     16,734
 Trade accounts payable                            206,943    238,641    192,458
 Provisions and other liabilities                  128,160    130,450    95,375
 Short-term contract liabilities                   3,071      3,767      3,981

 

Net interest and income tax paid under IFRS 16 in Q1 2023 increased by 8.9%
year-on-year (down 5.7% year-on-year pre-IFRS 16) and totalled RUB 22,227
million (RUB 8,651 million pre-IFRS 16). This was driven by higher income tax
paid due to a low base effect in Q1 2022 on the back of state support measures
for income tax payment deferral.

As a result, net cash flow generated from operating activities under IFRS 16
totalled RUB 16,737 million in Q1 2023, down from RUB 26,156 million in Q1
2022 (RUB 97 million, down from RUB 10,234 million in Q1 2022 pre-IFRS 16).

In Q1 2023, net cash used in investing activities, which predominantly
consists of payments for property, plant and equipment, decreased to RUB
17,076 million under IFRS 16 (to RUB 17,200 million pre-IFRS 16) due to a
change in the timing of new store openings.

Net cash used in financing activities under IFRS 16 totalled RUB 3,919 million
(net cash generated from financing activities of RUB 12,845 million pre-IFRS
16) in Q1 2023, compared with net cash generated from financing activities of
RUB 22,966 million (RUB 39,045 million pre-IFRS 16) in Q1 2022.

Liquidity update

 RUB mln                        31-Mar-23  % of total                     31-Dec-22  % of total                       31-Mar-22  % of total
 Total debt                     247,390                                   234,532                                     333,408
 Short-term debt                99,989                  40.4              87,146                   37.2               115,489                    34.6
 Long-term debt                 147,401                 59.6              147,386                 62.8                217,919                    65.4
 Net debt (pre-IFRS 16)         208,271                                   191,277                                     280,196
 Net debt/EBITDA (pre-IFRS 16)  1.13x                                     1.02x                                       1.67x
 Lease liabilities (IFRS 16)    597,204                                   591,160                                     570,090
 Net debt/EBITDA (IFRS 16)      2.65x                                     2.58x                                       3.08x

 

The Company's net debt/EBITDA ratio under IFRS 16 was 2.65x (1.13x pre-IFRS
16) as of 31 March 2023.

The Company's debt pre-IFRS 16 is 100% denominated in Russian roubles.

As of 31 March 2023, the Company had access to RUB 421,044 million in
available credit limits with major banks.

Notes:

1.    LFL comparisons of retail sales between two periods are comparisons
of retail sales in local currency (including VAT) generated by the relevant
stores. The stores that are included in LFL comparisons are those that have
operated for at least 12 full months. Their sales are included in LFL
calculations starting from the day of the store's opening. We include all
stores that fit our LFL criteria in each reporting period. Sales of express
delivery service from stores and dark stores that have operated for less than
12 full months are also included in LFL calculations.

2.    The pre-IFRS 16 financial measures are calculated by adjusting the
applicable IFRS measures to include fixed lease expenses and fixed non-lease
components of lease contracts, and to exclude any gain on derecognition of
right-of-use assets and lease liabilities, depreciation of right-of-use assets
and interest on lease liabilities, and gain/loss from asset sale and leaseback
operations for the proportion of rights retained as recognised under IFRS 16.

3.    Adjusted EBITDA is EBITDA before costs related to the LTI programme,
share-based payments, other one-off remuneration payment expenses and the
impact of the Karusel transformation.

4.    Please note that, in this and other tables and in the text of this
press release, immaterial deviations in the calculation of % changes,
subtotals and totals are due to rounding.

5.    Net retail sales represent revenue from the operations of X5-managed
stores net of VAT. This number differs from revenue, which includes proceeds
from wholesale operations, direct franchisees (royalty payments) and other
revenue. Including Mnogo Lososya, Vprok.ru, Krasny Yar and Slata.

6.    Including Vprok.ru dark stores, Mnogo Lososya dark kitchens, Krasny
Yar and Slata stores and joint dark stores.

7.    Excluding Krasny Yar and Slata, Vprok.ru and Mnogo Lososya; including
Chizhik and Karusel.

8.    Mainly consists of lease/sublease income, income from the sale of
recyclable materials and other one-off gains.

Note to Editors

X5 Retail Group N.V. (LSE and MOEX: FIVE; Expert RA - ruAAA; ACRA - AAA(RU))
is a leading Russian food retailer. The Company operates proximity stores
under the Pyaterochka brand, Perekrestok supermarkets and Chizhik hard
discounters. X5 provides an omnichannel experience to its customers,
integrating retail stores and e-commerce through its businesses Vprok.ru,
5Post and Mnogo Lososya.

As of 31 March 2023, X5 had 21,760 Company-operated stores. It has the leading
market position in both Moscow and St. Petersburg and a significant presence
in the European part of Russia. Its store base includes 19,549 Pyaterochka
proximity stores, 956 Perekrestok supermarkets, 591 Chizhik hard discounters
and 596 Krasny Yar and Slata stores. The Company operates 55 DCs and 4,490
Company-owned trucks across the Russian Federation.

X5 is one of the largest employers in Russia. The Company employs over 345
thousand people.

For the full year 2022, revenue totalled RUB 2,605,232 million (USD 38,005
million*), EBITDA pre-IFRS 16 reached RUB 186,788 million (USD 2,725
million*), and net profit pre-IFRS 16 for the period amounted to RUB 52,248
million (USD 762 million*). In Q1 2023, revenue totalled RUB 696,364 million
(USD 9,569 million**), adjusted EBITDA pre-IFRS 16 reached RUB 40,236 million
(USD 553 million**), and net profit pre-IFRS 16 amounted to RUB 12,172 million
(USD 167 million**).

Forward-looking statements

This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by 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 other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances, a number of which are
beyond X5 Group N.V.'s control. As a result, actual future results may differ
materially from the plans, goals and expectations set out in these
forward-looking statements.

Any forward-looking statements made by or on behalf of X5 Group N.V. speak
only as of the date of this announcement. Save as required by any applicable
laws or regulations, X5 Group N.V. undertakes no obligation publicly to
release the results of any revisions to any forward-looking statements in this
document that may occur due to any change in its expectations or to reflect
events or circumstances after the date of this document.

*             FX rate: 68.5494 USD/RUB

**          FX rate: 72.7738  USD/RUB

For further details, please contact:

Polina Ugryumova

Head of Corporate Finance and IR

Tel.: +7 (495) 662-88-88 ext. 13-312

e-mail: Polina.Ugryumova@x5.ru (mailto:Polina.Ugryumova@x5.ru)

Maria Yazeva

Investor Relations Officer

Tel.: +7 (495) 662-88-88 ext. 13-147

e-mail: Maria.Yazeva@x5.ru (mailto:Maria.Yazeva@x5.ru)

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