O'KEY Group S.A. (OKEY)
O'KEY GROUP ANNOUNCES UNAUDITED FINANCIAL RESULTS FOR 1H 2019
27-Aug-2019 / 11:51 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.
Press Release
27 August 2019
O'KEY GROUP ANNOUNCES UNAUDITED FINANCIAL RESULTS FOR 1H 2019
O'KEY Group S.A. (LSE: OKEY, the 'Group'), one of the leading Russian food
retailers, announces its financial results for 1H 2019 based on the
condensed consolidated interim financial statements reviewed by their
auditors.
All materials published by the Group are available on its website,
okeygroup.lu. [1]
All results are presented under IFRS 16 standard unless stated otherwise.
1H 2019 financial highlights
- Organic Group total revenue, excluding the effect of the supermarket
business sale, increased by 3.4% YoY. Total Group revenue increased by
2.2% YoY, from RUB 78,179 mln to RUB 79,883 mln.
- Organic revenue generated by O'KEY, excluding the effect of the
supermarket business sale, increased by 0.4% YoY. Revenue generated by
O'KEY decreased by 0.9% YoY to RUB 71,272 mln. The decrease was primarily
caused by the supermarket business sale (December 2017 - April 2018).
- Revenue generated by DA! grew by 36.8% YoY to RUB 8,611 mln, supported
by steady growth in traffic and the average ticket.
- The Group gross margin decreased by 6 bps to 23.6% versus 1H 2018, while
gross profit increased by 1.9% YoY to RUB 18,836 mln.
- The Group EBITDA grew by 3.9% YoY to RUB 6,341 mln compared with RUB
6,105 mln in 1H 2018, while the EBITDA margin increased by 13 bps YoY to
7.9%.
- O'KEY's EBITDA decreased by 0.4% YoY to RUB 6,509 mln, while O'KEY's
EBITDA margin increased slightly to 9.1% due to a slight decrease in
operating expenses as a percentage of revenue.
- EBITDA generated by DA! improved from negative RUB 432 mln (-6.9% of
sales) in 1H 2018 to negative RUB 169 mln (-2.0% of sales) in 1H 2019,
driven by new store openings and higher LFL sales.
- Net profit for the Group amounted to RUB 632 mln in 1H 2019 compared to
negative RUB 897 mln in 1H 2018.
- Net debt position improved to RUB 29.7 bln at the end of 1H 2019 from
RUB 32.0 bln at the end of 1H 2018.
Key events in 1H 2019:
- 4 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 a continuing effort to optimize the Group's property portfolio, the
Group sold 2 land plots to a third party in June.
Guidance 2019
- We are revising our organic hypermarkets' top line growth guidance
slightly upward and now expect it to grow to a low single digit for the
whole year
- We expect double-digit LFL growth for DA! and plan to open 20
discounters in 2019.
Group operating results
Segment 1H 2019 1H 2018
Net Traffic Average Net Traffic Average
retail ticket retail ticket
revenue revenue
Group 2.2% 0.8% 1.4% (8.7%) (12.4%) 4.2%
LFL Group 0.6% (0.8%) 1.4% (2.3%) (1.5%) (0.8%)
O'KEY (0.9%) (4.4%) 3.7% (11.3%) (17.6%) 7.6%
LFL O'KEY (1.0%) (3.2%) 2.3% (3.4%) (3.6%) 0.2%
Discounters 37.0% 28.6% 6.5% 35.4% 32.7% 2.2%
LFL 18.7% 11.8% 6.2% 15.8% 14.3% 1.3%
Discounters
For more details, please refer to O'KEY's Q2 2019 Operating Results Update.
[2]
Revenue
In 1H 2019, total Group revenue increased by 2.2% YoY to RUB 79,883 mln. The
revenue increase was primarily triggered by the continuing DA! expansion and
higher shelf inflation. At the same time, organic Group total revenue,
excluding the effect of the supermarket business sale, increased by 3.4%
YoY, on the back of continuing double-digit growth of discounters.
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 at a
discount, 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 1H 2019 1H 2018 - YoY 2019 1H 2018 - YoY 2019
/ 18 (IAS 17) / 18
Total Group 79,883 78,179 2.2% 78,179 2.2%
revenue
O'KEY 71,272 71,884 -0.9% 71,884 -0.9%
DA! 8,611 6,296 36.8% 6,296 36.8%
Organic 79,883 77,278 3.4% 77,278 3.4%
Group
revenue
O'KEY 71,272 70,982 0.4% 70,982 0.4%
DA! 8,611 6,296 36.8% 6,296 36.8%
Gross profit 18,836 18,480 1.9% 18,227 3.3%
Gross profit 23.6% 23.6% -6 bps 23.3% 27 bps
margin
Group EBITDA 6,341 6,105 3.9% 3,470 82.7%
Group EBITDA 7.9% 7.8% 13 bps 4.4% 350 bps
margin
EBITDA O'KEY 6,509 6,537 -0.4% 4,370 48.9%
EBITDA 9.1% 9.1% 4 bps 6.1% 305 bps
margin O'KEY
EBITDA DA! (169) (432) -61.0% (900) -81.2%
EBITDA -2.0% -6.9% 490 bps -14.3% 1,233 bps
margin DA!
Net profit 632 (897)<-100% (541)<-100%
(loss)
Net profit 0.8% (1.1%) 194 bps (0.7%) 148 bps
(loss)
margin
Cost of goods sold and gross profit
The table below provides a breakdown of the cost of goods sold in 1H 2019
and 1H 2018:
RUB mln 1H 2019 % of 1H 2018 % of - 1H % of -
revenue revenu YoY, 2018 revenu YoY,
e bps (IAS e bps
17)
Total 79,883 100.0% 78,179 100.0% 78,17 100.0%
revenue 9
Cost of (61,047 76.4% (59,699 76.4% 6 (59,9 76.7% (27)
goods ) ) 52)
sold
Cost of (57,228 71.6% (56,020 71.7% (2) (56,0 71.7% (2)
trading ) ) 20)
stock
(less
supplier
bonuses)
Inventory (1,477) 1.8% (1,377) 1.8% 9 (1,37 1.8% 9
shrinkage 7)
Logistics (2,032) 2.5% (1,991) 2.5% (0) (2,24 2.9% (33)
costs 4)
Labelling (310) 0.4% (311) 0.4% (1) (311) 0.4% (1)
and
packaging
costs
Gross 18,836 23.6% 18,480 23.6% (6) 18,22 23.3% 27
profit 7
The Group's gross profit margin remained almost flat YoY on a comparable
basis while increasing in absolute terms by RUB 356 mln, driven by better
sales.
Shrinkage costs increased by 7.2% YoY, mainly due to cancelling supplier
returns of products with a shelf-life of less than 30 days.
General, selling, and administrative costs
The table below provides the general, selling, and administrative expenses
breakdown for 1H 2019 and 1H 2018:
RUB mln 1H 2019 % of 1H % of - 1H % of -
reven 2018 reven YoY, 2018 reven YoY,
ue ue bps (IAS ue bps
17)
Personnel (7,377) 9.2% (7,19 9.2% 3 (7,19 9.2% 3
costs 8) 8)
Depreciation (3,721) 4.7% (3,74 4.8% (13) (2,13 2.7% 193
and 4) 3)
amortisation
Communications (1,873) 2.3% (1,77 2.3% 8 (1,77 2.3% 8
and utilities 1) 1)
Advertising (1,069) 1.3% (1,08 1.4% (4) (1,08 1.4% (4)
and marketing 1) 1)
services
Repairs and (668) 0.8% (583) 0.7% 9 (583) 0.7% 9
maintenance
costs
Insurance and (450) 0.6% (410) 0.5% 4 (410) 0.5% 4
bank
commissions
Taxes other (381) 0.5% (401) 0.5% (4) (401) 0.5% (4)
than on income
Security (355) 0.4% (375) 0.5% (4) (375) 0.5% (4)
expenses
Legal and (293) 0.4% (279) 0.4% 1 (279) 0.4% 1
professional
expenses
Expenses (185) 0.2% (288) 0.4% (14) (2,66 3.4% (318)
relating to 8)
variable lease
payments and
operating
lease expenses
Materials and (149) 0.2% (132) 0.2% 2 (132) 0.2% 2
supplies
Other costs (11) 0.0% (16) 0.0% (1) (16) 0.0% (1)
Total (16,532) 20.7% (16,2 20.8% (13) (17,0 21.8% (111)
77) 48)
In 1H 2019, personnel costs as a percentage of revenue increased by 3 bps to
9.2% or by RUB 179 mln YoY. This increase was largely attributable to
necessary wage increases at hypermarkets business in the second half of 2018
and to lesser extent to new openings of discounters, partly offset by the
sale of the supermarket business.
Communications, utilities, repairs, and maintenance expenses increased as a
percentage of revenue by 17 bps YoY to 3.2%. The increase was primarily
caused by indexing utility tariffs in the second half of 2018 and planned
equipment repairs in 1H 2019. The Group continues to work towards optimising
related costs and efficiency improvements.
Advertising and marketing expenses as a percentage of revenue almost stayed
flat YoY, at 1.3%.
Other operating income and expenses
In June 2019, the Group signed an agreement with a third party for the sale
of two land plots in Moscow. According to the agreement, the total proceeds
are RUB 1,553 mln.
Additionally, the Group recognized impairment losses on several stores in
the amount of RUB 237 mln, while in the year prior, no impairment was
charged to P&L in 1H 2018.
Foreign exchange gain / (loss)
Foreign exchange gain was due to a substantial difference in exchange rates
at both the end and the beginning of the reporting period, arising from
intragroup USD-denominated loans.
Net finance costs
Finance costs on loans and borrowings decreased as a percentage of revenue
by 0.2% YoY, driven by a decline in the weighted average interest rate from
9.1% in 1H 2018 to 8.9% in 1H 2019. At the same time, total finance costs
increased by 66% YoY as a result of additional interest costs on lease
liabilities in the amount of RUB 1,189 mln under the new IFRS 16 standard.
Cash flow and working capital
RUB mln 1H 2019 (IFRS 16) 1H 2018 (IAS 17)
Net cash from / (used in) 334 (5,319)
operating activities
Net cash from investing 294 5,375
activities
Net cash used in financing (5,302) (6,437)
activities
Net decrease in cash and cash (4,674) (6,380)
equivalents
Effect of exchange rate on (22) (35)
cash and cash equivalents
Net cash used in operating activities during the reporting period improved
from negative RUB 5,319 mln in 1H 2018 to RUB 334 mln in 1H 2019, amongst
others, due to implementation of IFRS 16. Repayment of principal amount of
lease liabilities and interest paid on them in the amount of RUB 3,191 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 from investing activities amounted to RUB 294 mln in 1H 2019. This
was primarily a result of the RUB 1,553 mln proceeds received from the sale
of two land plots, which largely offset the Group's 1H 2019 capital
expenditures (CAPEX) of RUB 1,259 mln (excluding VAT). During the reporting
period, the Group invested RUB 526 mln (excluding VAT) into the development
of its hypermarket business and RUB 733 mln (excluding VAT) into the
development of its discounter business.
Net cash used in financing activities in 1H 2019 amounted to RUB 5,302 mln.
Over the reporting period, the Group attracted RUB 5,250 mln in financing
and made repayments totalling RUB 5,894 mln. As at 30 June 2019, the Group
had RUB 13,450 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 30 June 2019, net debt had decreased by 7.2% YoY to RUB 29,668 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 30/06/2019.
RUB mln As of 30 As of 30
June 2019 June 2018
(IFRS16) (IAS17)
EBITDA LTM 14,369 9,155
Total debt 33,684 33,303
Short-term debt 1,709 8,097
Long-term debt 31,975 25,206
Cash & cash equivalents 4,016 1,334
Net Debt 29,668 31,969
Total Lease Liabilities 26,662 -
Short-term lease liabilities 3,734 -
Long-term lease liabilities 22,928 -
Total Interest-Bearing Liabilities (Net of 56,330 31,969
?ash & ?ash equivalents)
Total Interest-Bearing Liabilities (Net of 3.9x 3.5x
?ash & ?ash equivalents) / EBITDA
Interim report
The interim report, including the full set of reviewed IFRS interim
financial statements, can be found at
https://okeygroup.lu/press-center/press-releases [3].
O'KEY Group S.A. (LSE: OKEY) is pleased to invite the investment community
to join O'KEY conference call on 1H 2019 IFRS financial results.
Date: Tuesday, August 27th, 2019
Time:
? 5.00 p.m. (Moscow)
? 3.00 p.m. (London)
? 10.00 a.m. (New York)
Participants:
? Armin Burger, CEO
? Konstantin Arabidis, CFO
? Anton Farlenkov, Corporate Development Director
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 lines +7 495 646 9190
Toll free 8 10 8002 8675011
UK: Local lines +44 330 336 9411
Toll free 0800 279 7204
Europe: Local lines +49 69 2222 2018
Toll free 0800 101 1732
USA: Local lines +1 929 477 0448
Toll free 888 254 3590
Confirmation Code: 5150721
Replay of the call will be available at the event's section of the Investor
Calendar at the Group's website:
https://okeygroup.lu/investors/investor-calendar/ [4].
All related materials will be published on the "Investor" section of the
Company's website at https://okeygroup.lu/ [1].
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 August 27, 2019, the Group operates 164 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 2018, revenue totalled RUB 161,303,411 thousand, EBITDA
reached RUB 8,644,008 thousand, and the net loss for the period amounted to
RUB 599,755 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:
Anton Farlenkov
Corporate Development Director
+7 919 777 0220
Anton.farlenkov@okmarket.ru
okeygroup.lu [1]
ISIN: US6708662019
Category Code: QRT
TIDM: OKEY
LEI Code: 213800133YYU23T4L791
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 18091
EQS News ID: 863677
End of Announcement EQS News Service
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(END) Dow Jones Newswires
August 27, 2019 05:51 ET (09:51 GMT)
