DJ MAGNIT PJSC: Magnit Reports 11.4% Sales Growth in 2Q 2019
MAGNIT PJSC (MGNT)
MAGNIT PJSC: Magnit Reports 11.4% Sales Growth in 2Q 2019
25-Jul-2019 / 10:00 MSK
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.
Magnit Reports 11.4% Sales Growth in 2Q 2019
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Krasnodar, Russia (25 July, 2019): Magnit PJSC (MOEX and LSE: MGNT), one of
Russia's leading retailers, announces sales growth of 11.4% in 2Q 2019.
2Q 2019 key operating and financial highlights:
- Total revenue[1] increased by 11.4% from RUB 307.8 billion in 2Q 2018 to
RUB 342.9 billion in 2Q 2019.
- Net retail sales reached RUB 333.3 billion representing 10.8% growth
YoY.
- Wholesale revenue increased by 26.7% up to RUB 7.4 billion primarily
driven by contribution from SIA Group.
- LFL[2] sales growth improved to 1.7% on 4.1% average ticket growth and
2.3% traffic decline, compared to 0.6% LFL sales growth in 1Q 2019.
- The Company opened 661 stores[3] on net basis (322 convenience stores
and 340 drogerie stores as well as 1 supermarket closure) compared to 335
stores (220 convenience stores, 5 supermarkets and 110 drogerie stores)
opened in 2Q 2018. Total store base reached 19,884 stores as of June 30,
2019.
- Addition of selling space in 2Q 2019 amounted to 218 thousand sq. m. (or
16.7% growth YoY) compared to 115 thousand sq. m. in 2Q 2018.
- During the reported quarter the Company redesigned 509 convenience
stores and 256 drogerie stores (compared to 264 convenience stores and 30
drogerie stores in 2Q 2018). As of June 30, 2019 the share of stores
operating under the new concept reached 63% and 40% respectively.
- Gross Profit[4] in 2Q 2019 stood at RUB 82.2 billion with margin of
24.0%. The impact of the fire at the Voronezh DC on gross margin was 29
bps. Adjusted for this one-off factor, gross margin in 2Q 2019 was flat
YoY due to better commercial terms despite higher shrinkage and logistics
costs.
- EBITDA in 2Q 2019 was RUB 24.2 billion with 7.1% margin. The decline of
87 bps YoY was caused by gross margin dynamics, LTI provisions and
increased operating expense.
- Net income in 2Q 2019 decreased by 39.5% YoY and stood at RUB 6.3
billion. Net income margin decreased by 154 bps YoY to 1.8%.
Key events in 2Q and after the reported period:
- The AGM elected a new Board of Directors consisting of 9 members
including 5 independent non-executive directors. Charles Ryan was elected
a Chairman of the Board of Directors.
- Magnit paid dividends for FY 2018 in the total amount of c. RUB 17
billion.
- Jan Dunning, the President of Magnit, assumed the role of the Chief
Executive Officer.
- Ruslan Ismailov was appointed Director of Retail Chain Management and
Anton Zavalkovsky - Director for Real Estate Management and Non-Commercial
Purchasing.
- Part of the distribution center in Voronezh was damaged by the fire
accident for the total amount of RUB 1.2 billion.
- 10,000,000 exchange-traded bonds with an interest rate of 7.85% per
annum were placed on MoEx for the total amount of Rub 10 billion. RAEX
Rating Agency (Expert RA) assigned credit rating of ruAA- to this bond
issue.
- Magnit made LTI payments to the management for FY2018 for the total
amount of 105,258 shares representing c. 0.1% of share capital.
- Over 1.4 million cards have been issued in regions of Yaroslavl and
Chelyabinsk covered by the pilot cross-format loyalty program. Penetration
in sales reached 59% during first two months.
- Two Magnit City pilot stores in the ultra-small format have been opened
in Moscow and Krasnodar.
Jan Dunning, President and CEO of Magnit, commented:
"We are continuing our transformation journey. Despite the challenging macro
environment, we are showing some good dynamics in sales growth,
like-for-like sales and EBITDA margin as the transformation has gained
traction. There are still many challenges facing us this year but I am
confident that with our renewed focus on the key issues and emphasis on
working as one team, we will successfully continue the promising trends in
our operational results."
Operating results for 2Q 2019
2Q 2018 2Q 2019 Change Change, %
Total net retail sales, million 300,862 333,279 32,417 10.8%
RUB
Convenience stores 228,348 258,302 29,955 13.1%
Supermarkets 50,515 49,247 -1,268 -2.5%
Drogerie Stores 20,829 25,029 4,199 20.2%
Other formats 1,170 701 -469 -40.1%
Number of Stores (EOP) 16,910 19,884 2,974 17.6%
Convenience stores 12,503 14,231 1,728 13.8%
Supermarkets 457 466 9 2.0%
Drogerie Stores 3,950 5,187 1,237 31.3%
New Store Openings (NET) 335 661 326 97.3%
Convenience stores 220 322 102 46.4%
Supermarkets 5 -1 -6 -120.0%
Drogerie Stores 110 340 230 209.1%
Total Selling Space (EOP), th. 5,945 6,936 991 16.7%
sq. m.
Convenience stores 4,092 4,777 685 16.7%
Supermarkets 933 939 6 0.7%
Drogerie Stores 917 1,208 291 31.7%
New Selling Space, th. sq. m. 115 218 103 89.6%
Convenience stores 81 134 53 65.6%
Supermarkets 9 -1 -10 -113.3%
Drogerie Stores 25 78 53 214.6%
Number of tickets, million 1,116 1,199 83 7.4%
Convenience stores 947 1,021 74 7.8%
Supermarkets 100 97 -3 -2.9%
Drogerie Stores 68 79 11 16.3%
Average ticket[5], RUB 270 278 8 3.1%
Convenience stores 241 253 12 4.9%
Supermarkets 505 507 2 0.4%
Drogerie Stores 306 317 10 3.3%
Operating results for 1H 2019
1H 2018 1H 2019 Change Change, %
Total net retail sales, million 586,195 643,877 57,682 9.8%
RUB
Convenience stores 443,648 495,777 52,129 11.8%
Supermarkets 99,066 96,999 -2,068 -2.1%
Drogerie Stores 41,773 49,759 7,986 19.1%
Other formats 1,708 1,342 -365 -21.4%
Number of Stores (EOP) 16,910 19,884 2,974 17.6%
Convenience stores 12,503 14,231 1,728 13.8%
Supermarkets 457 466 9 2.0%
Drogerie Stores 3,950 5,187 1,237 31.3%
New Store Openings (NET) 612 1,536 924 151.0%
Convenience stores 378 804 426 112.7%
Supermarkets 6 -1 -7 -116.7%
Drogerie Stores 228 733 505 221.5%
Total Selling Space (EOP), th. 5,945 6,936 991 16.7%
sq. m.
Convenience stores 4,092 4,777 685 16.7%
Supermarkets 933 939 6 0.7%
Drogerie Stores 917 1,208 291 31.7%
New Selling Space, th. sq. m. 190 511 322 169.6%
Convenience stores 134 333 199 148.2%
Supermarkets 3 -3 -5 -208.2%
Drogerie Stores 53 172 119 225.6%
Number of tickets, million 2,121 2,255 135 6.4%
Convenience stores 1,795 1,912 118 6.6%
Supermarkets 192 188 -5 -2.4%
Drogerie Stores 133 154 21 15.6%
Average ticket[6], RUB 276 286 9 3.3%
Convenience stores 247 259 12 4.9%
Supermarkets 515 517 1 0.3%
Drogerie Stores 314 324 10 3.0%
LFL results
2Q 2019
LFL composition, % Average Ticket Traffic Sales
Total 4.1% -2.3% 1.7%
Convenience stores 4.9% -2.1% 2.7%
Supermarkets 1.9% -5.3% -3.5%
Drogerie Stores 4.5% -0.7% 3.8%
1H 2019
LFL composition, % Average Ticket Traffic Sales
Total 4.1% -2.9% 1.1%
Convenience stores 4.9% -2.8% 1.9%
Supermarkets 1.6% -4.9% -3.4%
Drogerie Stores 3.9% -0.3% 3.6%
Total net retail sales for the 2Q 2019 was RUB 333.3 billion or 10.8% growth
YoY (which is 12.0% growth YoY including VAT) driven by a combination of
selling space growth of 16.7% and LFL sales growth of 1.7%.
Average ticket dynamics remained strong in the 2Q 2019 (4.1% LFL growth)
driven by on-going assortment improvement and promo enhancement. Net of VAT,
average ticket continued to grow across all formats, including 4.9% in
convenience stores, 0.4% in supermarkets and 3.3% in drogeries. LFL traffic
dynamics improved from -3.5% in 1Q 2019 to -2.3% in 2Q 2019 on the back of
continued store refurbishment program and the new CVP rollout. Overall LFL
sales stood at 1.7% compared to 0.6% in 1Q 2019.
77.5% of total net retail sales was generated by convenience segment. In 2Q
2019 Magnit opened 322 convenience stores (net) adding 134 thousand sq. m.
Sales in the convenience format grew by 13.1% driven by selling space growth
of 16.7% and LFL sales growth acceleration from 1.1% in 1Q 2019 to 2.7% in
2Q 2019. LFL traffic stood at -2.1% demonstrating less negative dynamics vs
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DJ MAGNIT PJSC: Magnit Reports 11.4% Sales Growth in -2-
1Q 2019 of -3.6%. LFL average ticket growth continued to be strong and stood
at 4.9% in 2Q 2019.
Supermarkets account for 14.8% of the Group's net retail sales. During the
2Q 2019 - the pilot stage of the new CVP - one store was closed and no new
stores added. Upon the completion of the CVP pilot and its final approval by
the Board, Magnit will resume openings of supermarkets. Sales growth in this
segment was -2.5% on the back of selling space growth of 0.7% YoY and
negative LFL sales of 3.5%.
Sales growth in the drogerie format (representing 7.5% of the total net
retail sales) was 20.2% driven by a combination of selling space growth of
31.7% and LFL sales growth of 3.8%. During 2Q 2019 Magnit opened 340
cosmetics stores and added 78 thousand sq. m. of selling space. LFL traffic
was negative and stood at -0.7% offset by accelerated LFL average ticket
growth to 4.5% on the back of changes in the promo mechanics.
Magnit continued its renovation program with 509 convenience stores and 256
drogerie stores being redesigned during the second quarter. As a result, the
share of stores operating under the new concept reached 63% for convenience
and 40% for drogerie format.
Monthly operating results for 2Q 2019
April YoY, % May YoY, % June YoY, %
Total net retail 108,812 12.9% 112,855 11.4% 111,612 8.2%
sales, million RUB
Convenience stores 84,532 15.6% 87,788 13.7% 85,983 10.2%
Supermarkets 16,235 -1.3% 16,451 -1.1% 16,561 -5.0%
Drogerie Stores 7,758 19.4% 8,446 20.1% 8,825 20.9%
Other formats 287 -6.4% 170 -62.3% 244 -40.9%
Number of Stores 19,426 n/a 19,602 n/a 19,884 n/a
(EOP)
Convenience stores 14,007 n/a 14,075 n/a 14,231 n/a
Supermarkets 467 n/a 467 n/a 466 n/a
Drogerie Stores 4,952 n/a 5,060 n/a 5,187 n/a
New Store Openings 203 n/a 176 n/a 282 n/a
(NET)
Convenience stores 98 n/a 68 n/a 156 n/a
Supermarkets 0 n/a 0 n/a -1 n/a
Drogerie Stores 105 n/a 108 n/a 127 n/a
Total Selling Space 6,786 15.7% 6,842 16.1% 6,936 16.7%
(EOP), th. sq. m.
Convenience stores 4,686 16.1% 4,716 16.3% 4,777 16.7%
Supermarkets 941 1.4% 941 1.1% 939 0.7%
Drogerie Stores 1,154 28.0% 1,179 30.2% 1,208 31.7%
New Selling Space, 68 n/a 56 n/a 94 n/a
th. sq. m.
Convenience stores 43 n/a 30 n/a 61 n/a
Supermarkets 0 n/a 0 n/a -1 n/a
Drogerie Stores 24 n/a 25 n/a 29 n/a
Number of tickets, 388 9.1% 406 6.1% 405 7.2%
million
Convenience stores 330 9.7% 347 6.3% 344 7.5%
Supermarkets 32 -2.2% 33 -3.1% 33 -3.4%
Drogerie Stores 25 16.4% 27 15.4% 27 17.0%
Average ticket, RUB 281 3.5% 278 5.0% 276 0.9%
Convenience stores 256 5.3% 253 7.0% 250 2.5%
Supermarkets 513 1.0% 506 2.0% 502 -1.6%
Drogerie Stores 307 2.5% 319 4.1% 324 3.3%
Financial results for 2Q 2019
IAS 17 IFRS 16
million 2Q 2Q Change 2Q 2019 2Q 2018 Change
RUB 2019 2018[7]
Total 342,87 307,822 11.4% 342,879 307,822 11.4%
revenue 9
Retail 333,27 300,862 10.8% 333,279 300,862 10.8%
9
Wholesale 7,396 5,839 26.7% 7,396 5,839 26.7%
Other 2,204 1,121 96.5% 2,204 1,121 96.5%
Gross 82,216 74,645 10.1% 82,216 74,645 10.1%
Profit
Gross 24.0% 24.2% -27 bps 24.0% 24.2% -27 bps
Margin, %
EBITDA 25,735 24,386 5.5% 41,937 38,696 8.4%
adjusted[
8]
EBITDA 7,5% 7.9% -42 bps 12.2% 12.6% -34 bps
Margin
adjusted
EBITDA 24,733 24,386 1.4% 40,936 38,696 5.8%
pre
LTI[9]
EBITDA 7.2% 7.9% -71 bps 11.9% 12.6% -63 bps
Margin
pre LTI,
%
EBITDA 24,176 24,386 -0.9% 40,379 38,696 4.3%
EBITDA 7.1% 7.9% -87 bps 11.8% 12.6% -79 bps
Margin, %
EBIT 12,434 15,706 -20.8% 15,679 21,673 -27.7%
EBIT 3.6% 5.1% -148 4.6% 7.0% -247
Margin, % bps bps
Profit 8,685 13,068 -33.5% 3,962 11,703 -66.1%
before
tax
Taxes -2,416 -2,712 -10.9% -1,421 -2,439 -41.7%
Net 6,269 10,356 -39.5% 2,541 9,263 -72.6%
Income
Net 1.8% 3.4% -154 0.7% 3.0% -227
Income bps bps
Margin, %
Total revenue in 2Q 2019 increased by 11.4% and stood at RUB 342.9 billion
driven by 16.7% selling space growth (661 store additions) and 1.7% LFL
sales growth.
Gross Profit in 2Q 2019 stood at RUB 82.2 billion with margin of 24.0%. The
impact of the fire at the Voronezh DC on gross margin was 29 bps. Adjusted
for this one-off factor, gross margin in 2Q 2019 was flat YoY due to better
commercial terms despite higher shrinkage and logistics costs.
EBITDA in 2Q 2019 was RUB 24.2 billion with 7.1% margin. The decline of 87
bps YoY was caused by gross margin dynamics, LTI provisions and increased
operating expense. The growth of operating expense of 44 bps YoY was driven
by higher payroll, rental, marketing and other costs.
However, the operating expense in 2Q 2019 includes two one-off type payments
totalling 44 bps, the higher of which was RUB 899 million relating to long
term consultancy contracts that were expensed in Q2 as the projects were
finished.
Depreciation of assets in the 2Q 2019 was RUB 11.7 billion, 35.3% higher
than in the 2Q 2018. Under the new IFRS 16 methodology, the Company has
adjusted useful life of assets in line with the period of corresponding
lease agreements. As a result, useful life of reconstructions has been
decreased from 30 years to 10 years and depreciation has been recalculated
accordingly.
Net finance costs increased by 102.4% to RUB 3.9 billion compared to 2Q 2018
(RUB 1.9 billion) due to a combination of higher interest rates and higher
average amount of borrowings compared to the previous year. The weighted
average effective interest rate for 2Q 2019 was 8.0% (including the effect
of subsidized debt).
Income tax for 2Q 2019 was RUB 2.4 billion. Effective tax rate increased to
27.8% compared to 20.8% in 2Q 2018 due to higher share of non-deductible
expenses.
As a result, net income in 2Q 2019 decreased by 39.5% YoY and stood at RUB
6.3 billion. Net income margin decreased by 154 bps YoY to 1.8%.
As of 30 June 2019 Net Debt was RUB 181.4 billion compared to RUB 137.8
billion at the end of 2018. The net debt increase was due to payments of
dividends for the full year 2018 and acceleration of redesign program and
store openings. Company's debt is fully RUB denominated matching revenue
structure. As of end of 2Q 2019 it was 62% long-term debt. Net/Debt to
EBITDA ratio was 2.1x.
IFRS 16 implications
Under the IFRS 16 methodology rent expense went down by RUB 15.6 billion
bringing new EBITDA up to RUB 40.4 billion and EBITDA margin of 11.8%, which
is 473 bps better versus IAS 17 result.
Depreciation increased by RUB 13.0 billion and interest expenses grew by RUB
8.0 billion.
2Q 2019 income tax compared to IAS 17 improved by 41.2% or RUB 1 billion,
while profit before tax decreased by 54.4% or RUB 4.7 billion. New effective
tax rate was 35.9% compared to 27.8% in 2Q 2019 pre-IFRS 16 driven by
increased share of non-deductible expenses.
As a result, IFRS 16 net income stood RUB 2.5 billion or 0.7% margin. It was
RUB 3.7 billion and 109 bps lower compared to previous accounting
methodology.
Note:
1) This announcement contains inside information which is disclosed in
accordance with the Market Abuse Regulation which came into effect on 3
July 2016.
2) Please note that there may be small variations in calculation of
totals, subtotals and/ or percentage change due to rounding of decimals.
For further information, please contact:
Dmitry Kovalenko
Director for Investor Relations
Email: dmitry_kovalenko@magnit.ru
Office: +7 (861) 210-48-80
Dina Chistyak
Director for Investor Relations
Email: dina_chistyak@magnit.ru
Office: +7 (861) 210-9810 x 15101
Media Inquiries
Media Relations Department
Email: press@magnit.ru
Note to editors:
Public Joint Stock Company "Magnit" is one of Russia's leading retailers.
Founded in 1994, the company is headquartered in the southern Russian city
of Krasnodar. As of June 30, 2019, Magnit operated 38 distribution centres
and 19,884 stores (14,231 convenience, 466 supermarkets and 5,187 drogerie
stores) in 3,354 cities and towns throughout 7 federal regions of the
Russian Federation.
In accordance with the unaudited IFRS management accounts for 1H 2019,
Magnit had revenues of RUB 662 billion and an EBITDA of RUB 43 billion.
Magnit's local shares are traded on the Moscow Exchange (MOEX: MGNT) and its
GDRs on the London Stock Exchange (LSE: MGNT) and it has a credit rating
from Standard & Poor's of BB.
Forward-looking statements:
This document contains forward-looking statements that may or may not prove
accurate. For example, statements regarding expected sales growth rate and
store openings are forward-looking statements. Forward-looking statements
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involve known and unknown risks, uncertainties and other important factors
that could cause actual results to differ materially from what is expressed
or implied by the statements. Any forward-looking statement is based on
information available to Magnit as of the date of the statement. All written
or oral forward-looking statements attributable to Magnit are qualified by
this caution. Magnit does not undertake any obligation to update or revise
any forward-looking statement to reflect any change in circumstances.
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[1] Since 2019 the Company reviewed revenue composition and reclassified
income from advertising services and rental income from respective cost
centres into revenue line. Changes were applied retrospectively and had
impact on all ratios calculated as percentage of revenue.
[2] LFL calculation base includes stores, which have been opened for 12
months since its first day of sales. LFL sales growth and average ticket
growth are calculated based on sales turnover including VAT.
[3] The number of stores does not include pharmacies.
[4] Note during 2018 and 1H 2019 the Company extended list of expenses
related to cost of sales, including expenses for the processing of goods at
distribution centres (payroll, utilities, etc.), penalties for goods for
resale, cost of sales for promo campaigns. The Company applied changes
retrospectively and recalculated comparable data for 2018.
[5] Excluding VAT
[6] Excluding VAT
[7] 2Q 2018 numbers have been recalculated to be comparable with the 2Q 2019
approach, including new methodology of gross profit calculation.
[8] Adjusted for the accident on Voronezh DC and LTI expense
[9] Long-Term Incentive Program
ISIN: US55953Q2021
Category Code: MSCU
TIDM: MGNT
LEI Code: 2534009KKPTVL99W2Y12
OAM Categories: 2.2. Inside information
Sequence No.: 14592
EQS News ID: 846643
End of Announcement EQS News Service
(END) Dow Jones Newswires
July 25, 2019 03:00 ET (07:00 GMT)
