REG - X5 Retail Group N.V - X5 REPORTS 15.3% REVENUE GROWTH IN Q3 2020
X5 REPORTS 15.3% REVENUE GROWTH IN Q3 2020
8.0% EBITDA MARGIN UNder IAS 17
ü X5 delivered revenue growth of 15.3% year-on-year (y-o-y) on the back of solid like-for-like (LFL)(1) sales, selling space expansion and ongoing store refurbishments.
ü EBITDA under IAS 17 increased by 35.1% y-o-y in Q3 2020, reflecting gross margin expansion and positive operating leverage effect. EBITDA margin reached 8.0% (13.0% under IFRS 16), up 116 b.p. y-o-y.
ü Gross margin(2) under IAS 17 improved by 59 b.p. y-o-y to 25.1% (25.5% under IFRS 16) in Q3 2020, mainly driven by decreased shrinkage and lower price investments.
ü SG&A expenses under IAS 17 (excl. D&A&I, LTI, share-based payments and impact from Karusel transformation) before reclassification(2) decreased by 41 b.p. y-o-y to 17.8% (13.2% under IFRS 16) of revenue mainly due to lower staff and lease expenses.
ü Net profit under IAS 17 increased by 434% y-o-y in Q3 2020. Net profit margin under IAS 17 increased by 193 b.p. to 2.5% (1.6% under IFRS 16).
ü The net debt/EBITDA ratio under IAS 17 was 1.53x (3.16x under IFRS 16) as of 30 September 2020.
Amsterdam, 26 October 2020 - X5 Retail Group N.V. ("X5" or the "Company"), a leading Russian food retailer (LSE and MOEX ticker: FIVE) that operates the Pyaterochka, Perekrestok, and Karusel retail chains, today released the Company's unaudited condensed consolidated interim financial information for the three months (Q3) and nine months (9M) ended 30 September 2020, in accordance with International Financial Reporting Standards as adopted by the European Union.
Profit and loss statement highlights(3)
Russian Rouble (RUB), million (mn)
IFRS 16
IAS 17
Q3 2020
Q3 2019
change,
Impact on Q3 2020*
Q3 2020
Q3 2019
change,
y-o-y, %
y-o-y, %
Revenue
486,641
421,955
15.3
-
486,641
421,955
15.3
incl. net retail sales(4)
485,551
420,712
15.4
-
485,551
420,712
15.4
Pyaterochka
399,776
337,778
18.4
-
399,776
337,778
18.4
Perekrestok (incl. online)
74,568
62,818
18.7
-
74,568
62,818
18.7
Karusel
11,207
20,116
(44.3)
-
11,207
20,116
(44.3)
Gross profit
124,011
105,148
17.9
1,785
122,226
103,493
18.1
Gross profit margin, %
25.5
24.9
56 b.p.
37 b.p.
25.1
24.5
59 b.p.
Adj. EBITDA(5)
63,637
52,267
21.8
24,427
39,210
29,903
31.1
Adj. EBITDA margin, %
13.1
12.4
69 b.p.
502 b.p.
8.1
7.1
97 b.p.
EBITDA
63,129
51,878
21.7
24,427
38,702
28,645
35.1
EBITDA margin, %
13.0
12.3
68 b.p.
502 b.p.
8.0
6.8
116 b.p.
Operating profit
27,958
18,099
54.5
6,634
21,324
10,803
97.4
Operating profit margin, %
5.7
4.3
146 b.p.
136 b.p.
4.4
2.6
182 b.p.
Net profit
7,841
102
7,587.3
(4,108)
11,949
2,238
433.9
Net profit margin, %
1.6
0.0
159 b.p.
(84) b.p.
2.5
0.5
193 b.p.
Note: Financial measures under IAS 17 are used in this press release, as following adoption of IFRS 16 management continued to apply IAS 17 to leases for performance assessment purposes; this is mainly due to the fact that the investment community continues to focus on IAS 17 and management decision making processes, as well as the fact that internal reporting is also based on IAS 17. A reconciliation of IAS 17 and IFRS 16 figures is presented below in the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
Russian Rouble (RUB), million (mn)
IFRS 16
IAS 17
9M 2020
9M 2019
change,
Impact on 9M 2020*
9M 2020
9M 2019
change,
y-o-y, %
y-o-y, %
Revenue
1,449,266
1,265,130
14.6
-
1,449,266
1,265,130
14.6
incl. net retail sales
1,446,988
1,260,415
14.8
-
1,446,988
1,260,415
14.8
Pyaterochka
1,175,615
1,002,447
17.3
-
1,175,615
1,002,447
17.3
Perekrestok (incl. online)
228,529
194,388
17.6
-
228,529
194,388
17.6
Karusel
42,844
63,101
(32.1)
-
42,844
63,101
(32.1)
Gross profit
366,526
318,494
15.1
5,373
361,153
313,557
15.2
Gross profit margin, %
25.3
25.2
12 b.p.
37 b.p.
24.9
24.8
14 b.p.
Adj. EBITDA(5)
186,498
161,098
15.8
72,454
114,044
95,975
18.8
Adj. EBITDA margin, %
12.9
12.7
13 b.p.
500 b.p.
7.9
7.6
28 b.p.
EBITDA
184,968
159,788
15.8
72,454
112,514
93,796
20.0
EBITDA margin, %
12.8
12.6
13 b.p.
500 b.p.
7.8
7.4
35 b.p.
Operating profit
84,899
70,811
19.9
21,118
63,781
49,642
28.5
Operating profit margin, %
5.9
5.6
26 b.p.
146 b.p.
4.4
3.9
48 b.p.
Net profit
26,614
20,414
30.4
(9,785)
36,399
25,043
45.3
Net profit margin, %
1.8
1.6
22 b.p.
(68) b.p.
2.5
2.0
53 b.p.
* For more details on the impact of IFRS 16 please refer to the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
Net retail sales
Total net retail sales growth reached 15.4% y-o-y in Q3 2020, driven by:
§ 6.9% increase in LFL sales; and
§ 8.5% y-o-y increase in net retail sales from net new space, resulting from a 9.6% y-o-y rise in selling space.
Selling space by format, square meters (sq. m)
As at
30-Sep-20
As at
31-Dec-19
change vs
31-Dec-19, %
As at
30-Sep-19
change vs
30-Sep-19, %
Pyaterochka
6,414,939
5,975,147
7.4
5,788,675
10.8
Perekrestok
1,039,482
899,893
15.5
853,514
21.8
Karusel
225,334
364,077
(38.1)
366,369
(38.5)
X5 Retail Group
7,679,755
7,239,117
6.1
7,008,558
9.6
Q3 & 9M 2020 LFL store performance by format, % change y-o-y(6)
In Q3 & 9M 2020, LFL sales performance remained strong at 6.9% and 5.6% y-o-y, respectively.
LFL basket remained the main driver of LFL sales growth, with less frequent customer visits to stores and larger purchases per visit mostly due to customers' safety considerations, more clients working from home and the slow recovery of the HoReCa segment.
Q3 2020
9M 2020
Sales
Traffic
Basket
Sales
Traffic
Basket
Pyaterochka
8.5
(0.4)
8.9
6.9
(4.2)
11.5
Perekrestok(6)
1.4
(10.8)
13.6
1.7
(14.3)
18.7
Karusel
(10.1)
(17.5)
9.0
(6.9)
(18.5)
14.2
X5 Retail Group
6.9
(1.8)
8.8
5.6
(5.5)
11.8
For more details on net retail sales growth please refer to X5's Q3 2020 Trading Update.
Gross profit margin
The gross profit margin under IAS 17 increased by 59 b.p. y-o-y to 25.1% (by 56 b.p. to 25.5% under IFRS 16) in Q3 2020. This growth was mainly due to a decrease in shrinkage vs Q3 2019, and lower price investments. Shrinkage contributed to 39% of the gross margin improvements, logistics 15% and commercial margin 46%, supported by lower price investments. Gross margin performance of the core formats (Pyaterochka and Perekrestok) was higher compared to the X5 average, mainly due to the ongoing Karusel transformation.
Selling, general and administrative (SG&A) expenses (excl. D&A&I and impact from Karusel transformation)
RUB mn
IFRS 16
IAS 17
Q3 2020
Q3 2019
change,
Impact on Q3 2020*
Q3 2020
Q3 2019
change,
y-o-y, %
y-o-y, %
Staff costs
(39,372)
(34,610)
13.8
-
(39,372)
(34,610)
13.8
% of Revenue
8.1
8.2
(11) b.p.
-
8.1
8.2
(11) b.p.
incl. LTI and share-based payments
(508)
(270)
88.1
-
(508)
(270)
88.1
staff costs excl. LTI % of Revenue
8.0
8.1
(15) b.p.
-
8.0
8.1
(15) b.p.
Lease expenses
(2,847)
(1,980)
43.8
21,374
(24,221)
(21,709)
11.6
% of Revenue
0.6
0.5
12 b.p.
(439) b.p.
5.0
5.1
(17) b.p.
Utilities
(9,531)
(8,398)
13.5
-
(9,531)
(8,398)
13.5
% of Revenue
2.0
2.0
(3) b.p.
-
2.0
2.0
(3) b.p.
Other store costs
(5,224)
(4,443)
17.6
243
(5,467)
(4,677)
16.9
% of Revenue
1.1
1.1
2 b.p.
(5) b.p.
1.1
1.1
2 b.p.
Third party services
(3,764)
(2,971)
26.7
(88)
(3,676)
(2,861)
28.5
% of Revenue
0.8
0.7
7 b.p.
2 b.p.
0.8
0.7
8 b.p.
Other expenses
(4,532)
(4,327)
4.7
970
(5,502)
(4,853)
13.4
% of Revenue
0.9
1.0
(9) b.p.
(20) b.p.
1.1
1.2
(2) b.p.
SG&A (excl. D&A&I and impact from Karusel transformation)
(65,270)
(56,729)
15.1
22,499
(87,769)
(77,108)
13.8
% of Revenue
13.4
13.4
(3) b.p.
(462) b.p.
18.0
18.3
(24) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and impact from Karusel transformation)
(64,762)
(56,459)
14.7
22,499
(87,261)
(76,838)
13.6
% of Revenue
13.3
13.4
(7) b.p.
(462) b.p.
17.9
18.2
(28) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and impact from Karusel transformation) before reclassification(2)
(64,196)
(56,459)
13.7
22,431
(86,627)
(76,838)
12.7
% of Revenue
13.2
13.4
(19) b.p.
(461) b.p.
17.8
18.2
(41) b.p.
RUB mn
IFRS 16
IAS 17
9M 2020
9M 2019
change,
Impact on 9M 2020*
9M 2020
9M 2019
change,
y-o-y, %
y-o-y, %
Staff costs
(116,903)
(102,221)
14.4
-
(116,903)
(102,221)
14.4
% of Revenue
8.1
8.1
(1) b.p.
-
8.1
8.1
(1) b.p.
incl. LTI and share-based payments
(1,530)
(1,191)
28.5
-
(1,530)
(1,191)
28.5
staff costs excl. LTI % of Revenue
8.0
8.0
(2) b.p.
-
8.0
8.0
(2) b.p.
Lease expenses
(8,350)
(5,929)
40.8
63,214
(71,564)
(63,656)
12.4
% of Revenue
0.6
0.5
11 b.p.
(436) b.p.
4.9
5.0
(9) b.p.
Utilities
(28,800)
(26,517)
8.6
-
(28,800)
(26,517)
8.6
% of Revenue
2.0
2.1
(11) b.p.
-
2.0
2.1
(11) b.p.
Other store costs
(15,637)
(13,136)
19.0
738
(16,375)
(13,832)
18.4
% of Revenue
1.1
1.0
4 b.p.
(5) b.p.
1.1
1.1
4 b.p.
Third party services
(10,095)
(8,920)
13.2
(264)
(9,831)
(8,639)
13.8
% of Revenue
0.7
0.7
(1) b.p.
2 b.p.
0.7
0.7
(0) b.p.
Other expenses
(13,913)
(11,614)
19.8
2,468
(16,381)
(13,158)
24.5
% of Revenue
1.0
0.9
4 b.p.
(17) b.p.
1.1
1.0
9 b.p.
SG&A (excl. D&A&I and impact from Karusel transformation)
(193,698)
(168,337)
15.1
66,156
(259,854)
(228,023)
14.0
% of Revenue
13.4
13.3
6 b.p.
(456) b.p.
17.9
18.0
(9) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and impact from Karusel transformation)
(192,168)
(167,146)
15.0
66,156
(258,324)
(226,832)
13.9
% of Revenue
13.3
13.2
5 b.p.
(456) b.p.
17.8
17.9
(11) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and impact from Karusel transformation) before reclassification(2)
(189,843)
(167,146)
13.6
65,990
(255,833)
(226,832)
12.8
% of Revenue
13.1
13.2
(11) b.p.
(455) b.p.
17.7
17.9
(28) b.p.
* For more details on the impact of IFRS 16 please refer to the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
In Q3 2020, SG&A expenses excluding D&A&I, LTI, share-based payments and impact from Karusel transformation under IAS 17 as a percentage of revenue decreased by 28 b.p. to 17.9% (decreased by 7 b.p. to 13.3% under IFRS 16) mainly due to lower staff costs and lease expenses. Excluding reclassification(2), SG&A expenses decreased by 41 b.p. under IAS 17.
Staff costs (excluding LTI and share-based payments) as a percent of revenue decreased by 15 b.p. y-o-y in Q3 2020 to 8.0%, due to positive operating leverage effect, lower personnel turnover and increased labour productivity, which was partially offset by reclassification(2).
LTI and share-based payments expenses amounted to RUB 508 mn in Q3 2020, based on achievement of both targets during the period: maintaining leadership by revenue and achieving leadership in terms of enterprise value multiple relative to peers.
Lease expenses under IAS 17 as a percentage of revenue in Q3 2020 decreased by 17 b.p. y-o-y due to the positive operating leverage effect despite the growing share of leased space in X5's total real estate portfolio, which accounted for 80% as of 30 September 2020, compared to 79% as of 30 September 2019.
Utilities costs as a percentage of revenue in Q3 2020 remained flat at 2.0%.
Other store costs under IAS 17 as a percentage of revenue remained flat at 1.1% (1.1% under IFRS 16).
Third party services under IAS 17 as a percentage of revenue increased by 8 b.p. to 0.8% (increased by 7 b.p. to 0.8% under IFRS 16), mainly due to marketing costs of Perekrestok and online businesses.
Other expenses under IAS 17 as a percentage of revenue changed immaterially compared to Q3 2019, totaling 1.1%.
Lease/sublease and other income
As a percentage of revenue, the Company's income from lease, sublease and other operations under IAS 17 totalled 0.9% (0.9% under IFRS 16) increasing by 11 b.p. y-o-y (and decreasing by 14 b.p. y-o-y under IFRS 16) in Q3 2020, including proceeds from the sale of a shopping mall in Moscow.
EBITDA and EBITDA margin
RUB mn
IFRS 16
IAS 17
Q3 2020
Q3 2019
change,
Impact on Q3 2020*
Q3 2020
Q3 2019
change,
y-o-y, %
y-o-y, %
Gross profit
124,011
105,148
17.9
1,785
122,226
103,493
18.1
Gross profit margin, %
25.5
24.9
56 b.p.
37 b.p.
25.1
24.5
59 b.p.
SG&A (excl. D&A&I, LTI, share-based payments and effect of Karusel transformation)
(64,762)
(56,459)
14.7
22,499
(87,261)
(76,838)
13.6
% of Revenue
13.3
13.4
(7) b.p.
(462) b.p.
17.9
18.2
(28) b.p.
Net impairment losses on financial assets
(91)
(39)
133.3
-
(91)
(39)
133.3
% of Revenue
0.019
0.009
1 b.p.
-
0.019
0.009
1 b.p.
Lease/sublease and other income
4,479
3,617
23.8
143
4,336
3,287
31.9
% of Revenue
0.9
0.9
6 b.p.
3 b.p.
0.9
0.8
11 b.p.
Adj. EBITDA
63,637
52,267
21.8
24,427
39,210
29,903
31.1
Adj. EBITDA margin, %
13.1
12.4
69 b.p.
502 b.p.
8.1
7.1
97 b.p.
LTI, share-based payments and other one-off remuneration payments expense and SSC
(508)
(270)
88.1
-
(508)
(270)
88.1
% of Revenue
(0.1)
(0.1)
(4) b.p.
-
(0.1)
(0.1)
(4) b.p.
Effect of Karusel transformation
-
(119)
(100.0)
-
-
(988)
(100.0)
% of Revenue
-
(0.0)
3 b.p.
-
-
(0.2)
23 b.p.
EBITDA
63,129
51,878
21.7
24,427
38,702
28,645
35.1
EBITDA margin, %
13.0
12.3
68 b.p.
502 b.p.
8.0
6.8
116 b.p.
RUB mn
IFRS 16
IAS 17
9M 2020
9M 2019
change,
Impact on 9M 2020*
9M 2020
9M 2019
change,
y-o-y, %
y-o-y, %
Gross profit
366,526
318,494
15.1
5,373
361,153
313,557
15.2
Gross profit margin, %
25.3
25.2
12 b.p.
37 b.p.
24.9
24.8
14 b.p.
SG&A (excl. D&A&I, LTI, share-based payments)
(192,168)
(167,146)
15.0
66,156
(258,324)
(226,832)
13.9
% of Revenue
13.3
13.2
5 b.p.
(456) b.p.
17.8
17.9
(11) b.p.
Net impairment losses on financial assets
(290)
(141)
105.7
-
(290)
(141)
105.7
% of Revenue
0.020
0.011
1 b.p.
-
0.020
0.011
1 b.p.
Lease/sublease and other income
12,430
9,891
25.7
925
11,505
9,391
22.5
% of Revenue
0.9
0.8
8 b.p.
6 b.p.
0.8
0.7
5 b.p.
Adj. EBITDA
186,498
161,098
15.8
72,454
114,044
95,975
18.8
Adj. EBITDA margin, %
12.9
12.7
13 b.p.
500 b.p.
7.9
7.6
28 b.p.
LTI, share-based payments and other one-off remuneration payments expense and SSC
(1,530)
(1,191)
28.5
-
(1,530)
(1,191)
28.5
% of Revenue
(0.1)
(0.1)
(1) b.p.
-
(0.1)
(0.1)
(1) b.p.
Effect of Karusel transformation
-
(119)
(100.0)
-
-
(988)
(100.0)
% of Revenue
-
(0.0)
1 b.p.
-
-
(0.1)
8 b.p.
EBITDA
184,968
159,788
15.8
72,454
112,514
93,796
20.0
EBITDA margin, %
12.8
12.6
13 b.p.
500 b.p.
7.8
7.4
35 b.p.
* For more details on the impact of IFRS 16 please refer to the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
D&A&I
Depreciation, amortisation and impairment costs under IAS 17 totalled RUB 17,378 mn in Q3 2020 and RUB 48,733 mn in 9M 2020 (RUB 35,171 mn in Q3 2020 and RUB 100,069 mn in 9M 2020 under IFRS 16), decreasing as a percentage of revenue by 66 b.p. y-o-y to 3.6% (decreasing by 78 b.p. y-o-y to 7.2% under IFRS 16), (for 9M 2020: down by 13 b.p. to 3.4% under IAS 17 and down by 13 b.p. to 6.9% under IFRS 16). This was due to impairment of non-current assets related to the Karusel transformation in 2019.
Non-operating gains and losses
RUB mn
IFRS 16
IAS 17
Q3 2020
Q3 2019
change,
Impact on Q3 2020*
Q3 2020
Q3 2019
change,
y-o-y, %
y-o-y, %
Operating profit
27,958
18,099
54.5
6,634
21,324
10,803
97.4
Net finance costs
(13,886)
(14,197)
(2.2)
(9,951)
(3,935)
(4,394)
(10.4)
Share of profit/(loss) of associates
(15)
-
-
-
(15)
-
-
Net FX result
(2,568)
(144)
1,683.3
(1,817)
(751)
19
-
Profit before tax
11,489
3,758
205.7
(5,134)
16,623
6,428
158.6
Income tax expense
(3,648)
(3,656)
(0.2)
1,026
(4,674)
(4,190)
11.6
Net profit/(loss)
7,841
102
7,587.3
(4,108)
11,949
2,238
433.9
Net profit margin, %
1.6
0.0
159 b.p.
(84) b.p.
2.5
0.5
193 b.p.
Effect of Karusel transformation
209
4,736
-
-
209
5,335
-
% of Revenue
0.0
1.1
(108) b.p.
-
0.0
1.3
(122) b.p.
Adj. net profit
8,050
4,838
70.9
(4,108)
12,158
7,572
60.5
Adj. net profit margin, %
1.7
1.1
51 b.p.
(84) b.p.
2.5
1.8
70 b.p.
RUB mn
IFRS 16
IAS 17
9M 2020
9M 2019
change,
Impact on 9M 2020*
9M 2020
9M 2019
change,
y-o-y, %
y-o-y, %
Operating profit
84,899
70,811
19.9
21,118
63,781
49,642
28.5
Net finance costs
(42,489)
(41,199)
3.1
(30,049)
(12,440)
(12,842)
(3.1)
Share of profit/(loss) of associates
(15)
-
-
-
(15)
-
-
Net FX result
(4,503)
1,810
-
(3,299)
(1,204)
410
-
Profit before tax
37,892
31,422
20.6
(12,230)
50,122
37,210
34.7
Income tax expense
(11,278)
(11,008)
2.5
2,445
(13,723)
(12,167)
12.8
Net profit/(loss)
26,614
20,414
30.4
(9,785)
36,399
25,043
45.3
Net profit margin, %
1.8
1.6
22 b.p.
(68) b.p.
2.5
2.0
53 b.p.
Effect of Karusel transformation
1,023
4,736
-
-
1,023
5,334
-
% of Revenue
0.1
0.4
(30) b.p.
-
0.1
0.4
(35) b.p.
Adj. net profit
27,637
25,150
9.9
(9,785)
37,422
30,377
23.2
Adj. net profit margin, %
1.9
2.0
(8) b.p.
(68) b.p.
2.6
2.4
18 b.p.
* For more details on the impact of IFRS 16 please refer to the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
Net finance costs under IAS 17 in Q3 2020 decreased by 10.4% y-o-y to RUB 3,935 mn (and decreased by 2.2% y-o-y to RUB 13,886 mn under IFRS 16), reflecting the lower weighted average effective interest rate on X5's total debt as a result of declining interest rates in Russian capital markets, as well as actions taken by X5 to minimise interest expenses.
The negative net FX result of RUB 751 mn (negative RUB 2,568 mn under IFRS 16) in Q3 2020, compared to positive RUB 19 mn (negative RUB 144 mn under IFRS 16) in Q3 2019, was due to accounts payable nominated in foreign currency related to regular direct import operations. The negative result under IFRS 16 is also due to revaluation of foreign currency liabilities resulting from lease contracts denominated in foreign currencies.
In Q3 2020 income tax expense under IAS 17 increased by 11.6% y-o-y to RUB 4,674 mn (and decreased by 0.2% y-o-y to RUB 3,648 mn under IFRS 16), reflecting business growth in 2020 and the significant impact on income in 2019 from the Karusel transformation. X5's effective tax rate under IAS 17 for the quarter totalled 28.1% (31.8% under IFRS 16), including the accrual of deferred tax on investments associated with potential dividend payments.
Consolidated cash flow statement highlights
RUB mn
IFRS 16
IAS 17
Q3 2020
Q3 2019
change,
Impact on Q3 2020*
Q3 2020
Q3 2019
change,
y-o-y, %
y-o-y, %
Net cash from operating activities before changes in working capital
62,250
51,440
21.0
24,146
38,104
29,403
29.6
Change in working capital
(2,600)
(17,090)
(84.8)
800
(3,400)
(17,564)
(80.6)
Net interest and income tax paid
(20,085)
(19,180)
4.7
(9,928)
(10,157)
(9,402)
8.0
Net cash flows generated from operating activities
39,565
15,170
160.8
15,018
24,547
2,437
907.3
Net cash used in investing activities
(20,659)
(23,003)
(10.2)
-
(20,659)
(23,003)
(10.2)
Net cash (used) /generated in/from financing activities
(18,527)
1,763
-
(15,018)
(3,509)
14,496
-
Effect of exchange rate changes on cash & cash equivalents
(9)
(6)
-
-
(9)
(6)
-
Net increase/(decrease) in cash & cash equivalents
370
(6,076)
-
-
370
(6,076)
-
RUB mn
IFRS 16
IAS 17
9M 2020
9M 2019
change,
Impact on 9M 2020*
9M 2020
9M 2019
change,
y-o-y, %
y-o-y, %
Net cash from operating activities before changes in working capital
182,844
159,109
14.9
71,391
111,453
94,486
18.0
Change in working capital
(2,916)
(18,871)
(84.5)
444
(3,360)
(18,801)
(82.1)
Net interest and income tax paid
(56,425)
(52,510)
7.5
(29,981)
(26,444)
(24,217)
9.2
Net cash flows generated from operating activities
123,503
87,728
40.8
41,854
81,649
51,468
58.6
Net cash used in investing activities
(58,702)
(58,562)
0.2
-
(58,702)
(58,562)
0.2
Net cash used in financing activities
(71,691)
(42,653)
68.1
(41,854)
(29,837)
(6,393)
366.7
Effect of exchange rate changes on cash & cash equivalents
(40)
(14)
-
-
(40)
(14)
-
Net decrease in cash & cash equivalents
(6,930)
(13,501)
(48.7)
-
(6,930)
(13,501)
(48.7)
* For more details on the impact of IFRS 16 please refer to the section "Effect of IFRS 16 on X5 Retail Group's financial statements".
In Q3 2020, the Company's net cash from operating activities before changes in working capital under IAS 17 increased by RUB 8,701 mn and totalled RUB 38,104 mn (and increased by RUB 10,810 mn and totalled RUB 62,250 mn under IFRS 16), reflecting business growth and sustainably high profitability. The negative change in working capital under IAS 17 of RUB 3,400 mn over Q3 2020 (RUB 2,600 mn under IFRS 16), compared to negative RUB 17,564 mn in Q3 2019, was mainly due to a lower increase in inventories and a lower decrease in accounts payable y-o-y (calendarisation effect).
Net interest and income tax paid under IAS 17 in Q3 2020 increased by RUB 755 mn, or 8.0% y-o-y, and totalled RUB 10,157 mn (increased by RUB 905 mn, or 4.7% y-o-y, and totalled RUB 20,085 mn under IFRS 16). Income tax paid under IAS 17 increased y-o-y due to higher tax accruals in Q2 2020, following strong operating performance. Interest paid was lower, driven by a decrease in the weighted average effective interest rate on X5's total debt.
As a result, in Q3 2020, net cash flow generated from operating activities under IAS 17 totalled RUB 24,547 mn, up 907.3% from RUB 2,437 mn in Q3 2019 (and totalled RUB 39,565 mn, up 160.8% from RUB 15,170 mn in Q3 2019 under IFRS 16).
In 9M 2020, net cash flows generated from operating activities under IAS 17 totalled RUB 81,649 mn, up 58.6% from RUB 51,468 mn for the same period of 2019 (and totalled RUB 123,503 mn, up 40.8% from RUB 87,728 mn for the same period of 2019 under IFRS 16) reflecting overall business growth and profitability.
Net cash used in investing activities, which generally consists of payments for property, plant and equipment, decreased to RUB 20,659 mn in Q3 2020 from RUB 23,003 mn in Q3 2019. For 9M 2020, net cash used in investing activities remained relatively flat and totalled RUB 58,702 mn.
Free cash flow in 9M 2020 was positive at RUB 22,947 mln, supported by strong operating performance and sustainably high profitability.
Net cash used in financing activities under IAS 17 totalled RUB 3,509 mn (net cash used in financing activities totalled RUB 18,527 mn under IFRS 16) in Q3 2020 compared to net cash generated from financing activities of RUB 14,496 mn (net cash generated from financing activities of RUB 1,763 mn under IFRS 16) in Q3 2019. For 9M 2020, net cash used in financing activities under IAS 17 increased to RUB 29,837 mn from RUB 6,393 mn (and increased to RUB 71,691 mn from RUB 42,653 mn under IFRS 16) in 9M 2019.
Liquidity update
RUB mn
30-Sep-20
% in total
31-Dec-19
% in total
30-Sep-19
% in total
Total debt
228,291
227,933
226,586
Short-term debt
75,520
33.1
74,755
32.8
72,868
32.2
Long-term debt
152,771
66.9
153,178
67.2
153,718
67.8
Net debt (under IAS 17)
216,619
209,331
215,719
Net debt/ EBITDA (under IAS 17)
1.53
1.71
1.75
Lease liabilities
(IFRS 16)
530,256
484,795
463,593
Net debt/ EBITDA (under IFRS 16)
3.16
3.28
-
The Company's net debt/EBITDA ratio under IAS 17 was 1.53x (3.16x under IFRS 16) as of 30 September 2020.
The Company's debt under IAS 17 is 100% denominated in Russian roubles.
As of 30 September 2020, the Company had access to RUB 487,835 mn in available credit limits with major Russian and international banks.
Effect of IFRS 16 on X5 Retail Group's financial statements
Effect on gross profit
Gross profit and gross margin are higher by RUB 1,785 mn and 37 b.p. under IFRS 16 compared to IAS 17 in Q3 2020 (RUB 5,373 mn and 37 b.p. in 9M 2020), respectively, due to the lease for distribution centres, which was previously part of cost of sales, but has been excluded from the gross profit calculation.
Effect on EBITDA, operating profit and finance costs
Lease expenses, other store costs, third party services and other expenses in the total amount of RUB 22,499 mn have been excluded from SG&A expenses in Q3 2020 (RUB 66,156 mn in 9M 2020) under the new standard. Additional depreciation of RUB 17,793 mn related to leased assets has been added under operating costs in Q3 2020 (RUB 51,336 mn in 9M 2020) under IFRS 16.
Financial costs increased by RUB 9,951 mn under the new standard compared to IAS 17 due to the interest expense on lease liabilities in Q3 2020 (RUB 30,049 mn in 9M 2020).
The implementation of IFRS 16 increases the Company's EBITDA significantly, as lease expenditure previously recognised in the income statement is excluded. Adjusted EBITDA margin is 502 b.p. higher under the new standard compared to IAS 17 in Q3 2020 (500 b.p. in 9M 2020). Interest expense on liabilities is recognised in finance costs, below the EBITDA level.
Effect on net profit
The negative net FX result is RUB 1,817 mn higher under IFRS 16 compared to IAS 17 in Q3 2020 (RUB 3,299 mn in 9M 2020) due to the revaluation of foreign currency liabilities resulting from lease contracts denominated in foreign currencies.
IFRS 16 resulted in lower income tax expense due to lower profit before tax. The effective tax rate under the new standard is 31.8% and 29.8% in Q3 2020 and 9M 2020, respectively.
Net profit and net profit margin are impacted by the IFRS 16 standard as a result of additional depreciation and interest, and are lower by RUB 4,108 mn and 84 b.p. under the new standard compared to IAS 17 in Q3 2020 (RUB 9,785 mn and 68 b.p. in 9M 2020).
Effect on cash flow statement
The implementation of the new standard affects cash flow statement presentation but not the net change in cash result, as principal payments on leases will be classified as financing activities, prepayments are classified as investing activities, and interest payments are considered interest paid in operating activities.
(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 the LFL calculation starting from the day of the store's opening. We include all stores that fit our LFL criteria in each reporting period.
(2) Starting from Q2 2020, the Company reclassified income from the sale of recyclable materials at distribution centres as well as costs related to Perekrestok Vprok and express last mile delivery from gross profit. The income from sale of recyclable materials at distribution centres is now reported under lease/sublease and other income. Costs related to Perekrestok.ru and express last mile delivery are now reported under SG&A expenses, mostly in staff costs and other expenses. The net effect on the Q3 gross margin from reclassifications was slightly positive.
(3) 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.
(4) 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.
(5) Adjusted EBITDA is EBITDA before costs related to the LTI programme, share-based payments and other one-off remuneration payments expense and one-off impact from Karusel transformation.
(6) Excluding Perekrestok Vprok
Note to Editors:
X5 Retail Group N.V. (LSE and MOEX: FIVE, Fitch - 'BB+', Moody's - 'Ba1', S&P - 'BB+', RAEX - 'ruAA+') is a leading Russian food retailer. The Company operates several retail formats: the chain of proximity stores under the Pyaterochka brand, the supermarket chain under the Perekrestok brand and the hypermarket chain under the Karusel brand.
As of 30 September 2020, X5 had 17,352 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 16,385 Pyaterochka proximity stores, 910 Perekrestok supermarkets and 57 Karusel hypermarkets. The Company operates 43 DCs and 4,072 Company-owned trucks across the Russian Federation.
For the full year 2019, revenue totalled RUB 1,734,347 mn (USD 26,791 mn), Adjusted EBITDA under IAS 17 reached RUB 127,380 mn (USD 1,968 mn), and net profit under IAS 17 for the period amounted to RUB 25,908 mn (USD 400 mn). In 9M 2020, revenue totalled RUB 1,449,266 mn (USD 20,476 mn), adjusted EBITDA reached RUB 114,044 mn (USD 1,611 mn), and net profit amounted to RUB 36,399 mn (USD 514 mn).
X5's Shareholder structure is as follows: CTF Holdings S.A. - 47.86%, Intertrust Trustees Ltd (Axon Trust) - 11.43%, X5 Directors - 0.09%, treasury shares - 0.01%, Shareholders with less than 3% - 40.61%.
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 Retail 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 Retail Group N.V. speak only as of the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail 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.
Elements of this press release contain or may contain inside information about X5 Retail Group N.V. within the meaning of Article 7(1) of the Market Abuse Regulation (596/2014/EU).
For further details please contact:
Natalia Zagvozdina
Head of Corporate Finance and IR
Tel.:+7 (495) 662-88-88 ext. 27-300
e-mail: Natalia.Zagvozdina@x5.ru
Andrey Vasin
Head of Investor Relations
Tel.:+7 (495) 662-88-88 ext. 13-151
e-mail: Andrey.Vasin@x5.ru
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