DJ Magnit Reports 6.9% LFL Sales Growth and 7.2% EBITDA margin
MAGNIT PJSC (MGNT)
Magnit Reports 6.9% LFL Sales Growth and 7.2% EBITDA margin
29-Oct-2020 / 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 6.9% LFL Sales Growth and 7.2% EBITDA margin
Krasnodar, Russia (29 October, 2020): Magnit PJSC (MOEX and LSE: MGNT; the
Company), one of Russia's leading retailers, announces its 3Q and 9M 2020
operating and unaudited financial results.
3Q 2020 key operating and financial highlights:
- Total revenue increased by 11.9% y-o-y to RUB 383.2 billion;
- Net retail sales reached RUB 371.0 billion representing 11.4% y-o-y
growth;
- LFL[1] sales growth stood at 6.9% driven by 12.4% average ticket growth
and 4.9% traffic decline;
- The Company opened 349 stores on gross basis (187 convenience stores,
one supermarket and 161 drogeries). As part of the Company's ongoing
efficiency improvement campaign, 89 stores were closed resulting in a net
store addition of 260 and the total store base as of September 30, 2020 of
21,154;
- Addition of selling space amounted to 80 thousand sq. m. bringing total
selling space to 7,371 thousand sq. m. (representing 3.2% y-o-y growth);
- The Company redesigned three convenience stores and three supermarkets.
As at September 30, 2020, 71% of convenience stores, 25% of supermarkets
and 55% of drogeries are either new or refurbished;
- Gross profit margin stood at 23.8% - an increase of 134 bps y-o-y on
improved commercial terms, lower promo activity in a combination with
better promo coverage and higher promo margin, lower shrinkage and supply
chain costs partially offset by ongoing cost of the loyalty program;
- EBITDA was RUB 27.6 billion with 7.2% margin demonstrating the largest
y-o-y improvement among three quarters of this year by 133 bps driven by
strong gross margin dynamics and lower SG&A expenses;
- Net income increased by 174.1% y-o-y and stood at RUB 9.6 billion. Net
income margin increased from 1.0% in 3Q 2019 to 2.5% in 3Q 2020.
Jan Dunning, President and CEO of Magnit, commented:
"In the environment of unprecedented challenges, we continued being
absolutely committed to key business priorities, while making customers'
safety and satisfaction a centric one.
We are pleased with the third quarter results that came above our
expectations despite macro headwinds. We see gradual normalization of
consumer shopping behaviour with traffic recovery and stabilization of the
basket growth. We have again delivered strong LFL sales growth thanks to
consistent qualitative improvements in the stores. Strong momentum continues
in October with some acceleration of LFL sales growth boding well for the
fourth quarter.
We observe further progress in efficiency improvement of our stores - strong
returns across all out formats and regions. We are gradually resuming our
expansion and redesign programs and expect further acceleration in the next
periods with continued focus on returns.
Even though direct positive impact of pandemic on top-line is diminishing,
but we still bear COVID-related expenses, our sales remains solid and
profitability continues gaining traction with the largest y-o-y expansion
among three quarters of this year. Strong sales and EBITDA coupled with the
first working capital improvements bodes well for higher cash flow
generation and further deleveraging. With that we will jump into the next
year with completely different financial position and ambitions".
Key events in 3Q 2020 and after the reported period:
- The Company's commercial function was restructured, including the launch
of a dedicated commercial procurement unit. Jan Dunning, Magnit CEO has
assumed the additional role of acting Commercial Director and is leading
the critical initiatives in the Company's reorganization process;
- Magnit's Board of Directors approved the Program and the Prospectus of
RUB bonds for a total amount of up to RUB 100 billion, enabling future
bond issuance under a simplified procedure;
- Magnit expanded its discounter format pilot and opened a further two new
stores under the My Price banner. The pilot now includes five discounters.
By the end of 2020, Magnit plans to open another five stores under the new
concept;
- The Company has updated the Magnit City store concept, and as part of
the pilot, plans to open a further 30 Magnit City stores by the end of
2020;
- Magnit launched express delivery service for customers in a partnership
with Delivery Club and Yandex.Eda;
- Magnit launched an online pharmacy pilot scheme that enables customers
to order products from over 100 pharmacies throughout Moscow and the
Moscow region;
- Magnit opened a new distribution center in Novosibirsk;
- Magnit joined the UN Global Compact strengthening the Company's Retail
with Purpose strategy for long-term sustainable transformation.
3Q and 9M 2020 Operating Results
3Q 3Q Change Change, 9M 9M Change Change,
2020 201 % 202 2019 %
9 0
Total Net 370, 332 37,987 11.4% 1,1 975, 138,93 14.2%
Retail Sales, 952 ,96 14, 976 4
million RUB 5 910
Convenience 284, 254 30,313 11.9% 860 750, 110,12 14.7%
Stores[2] 552 ,23 ,14 016 6
9 2
Supermarkets[3] 48,6 49, -600 -1.2% 149 146, 3,356 2.3%
63 263 ,61 262
8
Drogerie Stores 34,9 28, 6,274 21.8% 97, 78,4 18,798 24.0%
93 719 275 77
Other 2,74 745 2,000 268.5% 7,8 1,22 6,654 544.7%
Formats[4] 4 76 2
Number of 1,20 1,2 -17 -1.4% 3,4 3,47 14 0.4%
Tickets, mln 0 17 86 2
Convenience 1,00 1,0 -22 -2.1% 2,9 2,94 -13 -0.4%
stores 6 28 28 0
Supermarkets 86 96 -10 -10.7% 254 284 -30 -10.6%
Drogerie Stores 99 90 10 10.8% 281 243 37 15.4%
Other Formats 8 3 6 205.7% 24 4 20 450.2%
Average 309 274 36 13.0% 320 281 39 13.8%
Ticket[5], RUB
Convenience 283 247 36 14.4% 294 255 39 15.2%
stores
Supermarkets 566 512 55 10.7% 590 515 75 14.5%
Drogerie Stores 353 321 32 10.0% 347 323 24 7.4%
Other Formats 325 259 65 25.1% 318 266 52 19.6%
Number of 21,1 20, 657 3.2% 21, 20,4 657 3.2%
Stores (EOP) 54 497 154 97
Convenience 14,6 14, 192 1.3% 14, 14,5 192 1.3%
Stores 99 507 699 07
Supermarkets 469 467 2 0.4% 469 467 2 0.4%
Drogerie Stores 5,98 5,5 463 8.4% 5,9 5,52 463 8.4%
6 23 86 3
Store Openings 349 742 -393 -53.0% 847 2,52 -1,673 -66.4%
(Gross) 0
Convenience 187 396 -209 -52.8% 426 1,42 -1,000 -70.1%
Stores 6
Supermarkets 1 3 -2 -66.7% 2 3 -1 -33.3%
Drogerie Stores 161 343 -182 -53.1% 419 1,09 -672 -61.6%
1
Store Closures 89 129 -40 -31.0% 418 371 47 12.7%
Convenience 69 120 -51 -42.5% 349 346 3 0.9%
Stores
Supermarkets 4 2 2 100.0% 6 3 3 100.0%
Drogerie Stores 16 7 9 128.6% 63 22 41 186.4%
Store Openings 260 613 -353 -57.6% 429 2,14 -1,720 -80.0%
(Net) 9
Convenience 118 276 -158 -57.2% 77 1,08 -1,003 -92.9%
Stores 0
Supermarkets -3 1 -4 -400.0% -4 0 -4 n/a
Drogerie Stores 145 336 -191 -56.8% 356 1,06 -713 -66.7%
9
Total Selling 7,37 7,1 228 3.2% 7,3 7,14 228 3.2%
Space (EOP), 1 43 71 3
th. sq.m
Convenience 5,00 4,9 105 2.1% 5,0 4,90 105 2.1%
Stores 5 00 05 0
Supermarkets 940 941 0 0.0% 940 941 0 0.0%
Drogerie Stores 1,38 1,2 104 8.1% 1,3 1,28 104 8.1%
4 80 84 0
Other Formats 42 22 19 85.7% 42 22 19 85.7%
Selling Space 80 207 -127 n/a 132 718 -586 n/a
Addition (Net),
th. sq.m
Convenience 49 123 -74 n/a 53 456 -403 n/a
Stores
Supermarkets -3 2 -5 n/a -8 -1 -7 n/a
Drogerie Stores 34 72 -38 n/a 81 244 -163 n/a
Other Formats 1 11 -10 n/a 6 19 -14 n/a
3Q and 9? 2020 LFL results
3Q 2020
LFL composition, % Average Ticket Traffic Sales
Total 12.4% -4.9% 6.9%
Convenience stores 13.6% -5.0% 7.8%
Supermarkets 10.6% -11.3% -1.9%
Drogerie Stores 9.8% 2.5% 12.6%
9? 2020[6]
LFL composition, % Average Ticket Traffic Sales
Total 13.4% -5.3% 7.3%
Convenience stores 14.4% -5.5% 8.2%
Supermarkets 14.1% -11.5% 1.0%
Drogerie Stores 7.3% 2.8% 10.3%
Trading performance
Total sales in 3Q 2020 grew by 11.9% y-o-y to RUB 383.2 billion.
(MORE TO FOLLOW) Dow Jones Newswires
October 29, 2020 03:00 ET (07:00 GMT)
DJ Magnit Reports 6.9% LFL Sales Growth and 7.2% -2-
Net retail sales in 3Q 2020 grew by 11.4% y-o-y driven by a combination of
3.2% selling space growth and 6.9% LFL sales growth. For a third consecutive
quarter, net retail sales growth outpaced selling space growth as strong LFL
results have led to a continuous improvement of sales densities since
January 2020. Overall sales densities in 3Q 2020 improved by 1.4% q-o-q and
3.6% y-o-y while in the Company's main convenience store format they
improved by 5.4% y-o-y.
All operating regions showed solid positive LFL sales growth with the
North-West, Siberia and Moscow outpacing the rest.
LFL sales growth in 3Q 2020 remained almost in line with the Company's 2Q
2020 result and well above CPI. Mature stores continue to be the main driver
of the Company's strong LFL performance with only 607 stores (incl. 299
convenience and 308 drogeries) entering LFL panel in 3Q. Only 5% of Magnit's
selling space is currently in the ramp-up phase with 95% already matured.
As in the previous quarter, average ticket was the main driver of LFL sales
growth. This reflects continued trend of lower frequency of visits
overcompensated by strong basket growth driven by increased spending per
visit.
LFL average ticket growth in 3Q 2020 was 12.4% predominantly due to
customers 'trading up' purchases and higher on-shelf inflation. The number
of articles per basket, which was the main driver in the previous quarter,
started easing from July.
This was combined with gradual recovery in customer traffic from -14.0% in
2Q 2020 to -4.9% in the reported quarter reflecting continued normalization
of shopping behaviour.
Promo intensity was still lower y-o-y mainly on the back of more normal
shopping patterns and different marketing tactics leading to a shift from
"bulk" to personalized actions. The level of promo was moderately higher
q-o-q due to seasonal factors.
In the second half of September the sales of dry and non-food categories
started to pick up, however sales were a tenth of the levels seen in March.
The impact of the pandemic on the consumer behaviour is now insignificant as
customers are taking a more rational approach to forward buying of
non-perishable goods.
Magnit's cross-format loyalty program continued to gain popularity among
customers during the period. Over 75 million cards have been issued since
the start of the pilot in March 2019 with the number of active users
approaching 39 million. Company-wide, the share of tickets using the loyalty
card was 50% with penetration in sales reaching 67%. The loyalty program is
delivering positive cross-format gains with sustainable growth of customers
visiting 2+ store formats (over 40% of Magnit customer base at the end of
3Q).
Store network development and performance by format
The convenience segment generated 76.7% of total net retail sales in the
reported quarter. In 3Q 2020 Magnit resumed its expansion program and opened
(gross) 187 convenience stores compared to 94 in 2Q 2020. The Company
continued its efficiency campaign and closed 69 convenience stores - less
than in 2Q (107) and less than originally planned as some stores
demonstrated significant operational improvements and were excluded from the
closure pipeline. As a result, Magnit added 118 stores (net) during 3Q 2020,
bringing the total number of convenience stores to 14,699. The selling space
of convenience stores increased by 2.1% y-o-y to 5,005 thousand sq. m. as of
September 30, 2020. Sales in the convenience format grew by 11.9% driven by
LFL sales growth of 7.8% in 3Q 2020. Traffic across this segment
demonstrated gradual recovery from -14.3% in the previous quarter to -5.0%
in 3Q 2020 as restrictions had been lifted and customers started to resume
their normal shopping patterns. LFL average ticket growth remained strong
having normalized from 26.3% in 2Q 2020 to 13.6% in 3Q 2020 and
overcompensating negative LFL traffic growth.
Supermarkets accounted for 13.1% of the Group's net retail sales. During the
reported quarter the total number of supermarkets decreased by three stores
to 469 following one store opening and four closures. Selling space across
this format remained almost flat y-o-y and stood at 940 thousand sq. m. The
supermarket segment is the most affected segment in the pandemic environment
as customers continue to prefer convenience stores to larger formats,
especially those located in the shopping malls. Magnit's standalone
supermarkets demonstrate better recovery trends compared to the Company's
168 stores that are in shopping centers. LFL traffic remained negative but
recovered from -20.2% in the previous quarter to -11.3% in 3Q 2020
translating into a stabilization of LFL average ticket growth to 10.6%. As a
result, supermarkets demonstrated negative LFL sales growth of 1.9%. Given
almost flat selling space growth this resulted in negative sales growth of
1.2%. This year Magnit did not repeat the coupon campaign launched in 3Q
2019 in the large formats as despite generating additional traffic and
ticket expansion, this campaign had a negative impact on profitability last
year. Nowadays Magnit is exploring alternative promo formats aimed at higher
promo efficiency, including additional bonuses for every RUB 1,000 spent in
supermarkets, progressive bonus system, and canvassing of convenience store
customers.
The share of drogerie format as a proportion of the total net retail sales
continued to expand and reached 9.4% in the reported quarter. During 3Q 2020
Magnit opened (net) 145 cosmetics stores (compared to 336 in 3Q 2019) and
added 34 thousand sq. m. of selling space delivering an 8.1% increase in
selling space, the highest increase across all formats. Driven by this
increase in selling space and LFL sales growth of 12.6%, sales grew 21.8%
representing the strongest performance among all Magnit's store formats and
an acceleration from the 2Q 2020 level of 9.3%. LFL traffic growth improved
significantly from -2.5% to a positive territory at 2.5%. Traffic recovery
did not lead to softer LFL average ticket growth - it remained strong at
9.8% growth.
During 3Q 2020 three convenience stores and three supermarkets were
redesigned resulting in the combined share of refurbished and new stores at:
71% for convenience stores, 25% for supermarkets and 55% for the drogerie
format. For more information on FY 2020 forecast - see guidance section.
3Q 2020 Monthly Operating Results
July Change August Change September Change
Total net retail 131,185 14.3% 124,207 10.7% 115,559 9.0%
sales, RUB
million
Convenience 100,978 14.7% 94,884 11.3% 88,689 9.6%
Stores
Supermarkets 17,356 3.2% 16,510 -2.2% 14,797 -4.9%
Drogerie Stores 11,965 23.5% 11,909 20.9% 11,119 21.1%
Other Formats 886 437.5% 904 269.3% 954 184.8%
Number of 412 0.9% 401 -2.5% 386 -2.6%
tickets, million
Convenience 346 0.2% 336 -3.2% 324 -3.4%
stores
Supermarkets 30 -9.2% 29 -11.5% 27 -11.5%
Drogerie Stores 33 13.0% 34 9.4% 32 10.0%
Other Formats 2.7 324.3% 2.8 212.0% 2.9 138.7%
Average 318 13.4% 309 13.5% 299 12.0%
ticket[7], RUB
Convenience 292 14.5% 282 15.0% 274 13.5%
stores
Supermarkets 583 13.7% 568 10.5% 547 7.5%
Drogerie Stores 358 9.3% 355 10.4% 345 10.1%
Other Formats 327 28.6% 318 24.9% 328 23.6%
Number of Stores 20,900 n/a 20,971 n/a 21,154 n/a
(EOP)
Convenience 14,579 n/a 14,620 n/a 14,699 n/a
stores
Supermarkets 469 n/a 470 n/a 469 n/a
Drogerie Stores 5,852 n/a 5,881 n/a 5,986 n/a
Store Openings 44 n/a 94 n/a 211 n/a
(Gross)
Convenience 25 n/a 58 n/a 104 n/a
stores
Supermarkets 0 n/a 1 n/a 0 n/a
Drogerie Stores 19 n/a 35 n/a 107 n/a
Store Closures 38 n/a 23 n/a 28 n/a
Convenience 27 n/a 17 n/a 25 n/a
stores
Supermarkets 3 n/a 0 n/a 1 n/a
Drogerie Stores 8 n/a 6 n/a 2 n/a
Store Openings 6 n/a 71 n/a 183 n/a
(Net)
Convenience -2 n/a 41 n/a 79 n/a
stores
Supermarkets -3 n/a 1 n/a -1 n/a
Drogerie Stores 11 n/a 29 n/a 105 n/a
Total Selling 7,290 4.0% 7,316 3.4% 7,371 3.2%
Space (EOP), th.
sq. m.
Convenience 4,956 2.8% 4,973 2.4% 5,005 2.1%
stores
Supermarkets 941 0.4% 942 0.0% 940 0.0%
Drogerie Stores 1,352 9.4% 1,359 7.9% 1,384 8.1%
Other Formats 41 203.6% 41 130.6% 42 85.7%
Selling Space -0.4 n/a 26.0 n/a 54.7 n/a
Added (Net), th.
sq. m.
Convenience 0.2 n/a 17.2 n/a 31.4 n/a
stores
Supermarkets -3.0 n/a 1.4 n/a -1.7 n/a
Drogerie Stores 2.3 n/a 7.0 n/a 24.7 n/a
Other Formats 0.2 n/a 0.3 n/a 0.3 n/a
Net retail sales growth in each month of the third quarter demonstrated
gradual deceleration in line with selling space growth dynamics reflecting
Company's decision to slowdown expansion focusing on improvements in the
(MORE TO FOLLOW) Dow Jones Newswires
October 29, 2020 03:00 ET (07:00 GMT)
DJ Magnit Reports 6.9% LFL Sales Growth and 7.2% -3-
mature stores. July was the strongest month of the third quarter with 14.3%
sales growth - almost in line with April and above the 2Q average. Strong
July results were mainly driven by government payments stimulating
consumption as well as later start of the domestic tourist season and
limited foreign travel.
Absolute traffic growth (number of tickets) remained negative but
demonstrated gradual recovery compared to the previous quarter with July
delivering positive traffic growth on the back of normalizing frequency of
visits and continued growth of unique customers gained from other players -
mainly traditional retailers and large formats.
LFL ticket growth has been normalizing throughout the reported quarter but
remained strong. Trading up effect driven by assortment and on-shelf
availability improvements, shelf-price inflation and volume growth remained
the key elements of solid average ticket development.
Financial results for 3Q and 9M 2020 (IAS 17)
million RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
Total 383,189 342,583 11.9% 1,146,550 1,000,499 14.6%
revenue
Retail 370,952 332,965 11.4% 1,114,910 975,976 14.2%
Wholesale 12,237 9,618 27.2% 31,640 24,523 29.0%
Gross Profit 91,180 76,930 18.5% 270,701 232,253 16.6%
Gross 23.8% 22.5% 134 bps 23.6% 23.2% 40 bps
Margin, %
SG&A, % of -20.5% -21.0% 54 bps -20.5% -21.5% 98 bps
sales
EBITDA pre 27,891 20,672 34.9% 81,461 64,690 25.9%
LTI[8]
EBITDA 7.3% 6.0% 124 bps 7.1% 6.5% 64 bps
Margin pre
LTI, %
EBITDA 27,598 20,101 37.3% 80,819 63,144 28.0%
EBITDA 7.2% 5.9% 133 bps 7.0% 6.3% 74 bps
Margin, %
EBIT 16,841 8,945 88.3% 46,978 28,718 63.6%
EBIT Margin, 4.4% 2.6% 178 bps 4.1% 2.9% 123 bps
%
Net finance -3,368 -3,802 -11.4% -10,642 -11,244 -5.4%
costs
FX gain / -905 -55 n/a -1,730 586 -395.3%
(loss)
Profit 12,567 5,088 147.0% 34,606 18,060 91.6%
before tax
Taxes -2,948 -1,578 86.7% -7,942 -4,966 59.9%
Net Income 9,620 3,509 174.1% 26,664 13,093 103.6%
Net Income 2.5% 1.0% 149 bps 2.3% 1.3% 102 bps
Margin, %
Total revenue in 3Q 2020 increased by 11.9% to RUB 383.2 billion. Net retail
sales in 3Q 2020 grew by 11.4% y-o-y to RUB 371.0 billion.
Wholesale revenue in 3Q 2020 increased by 27.2% y-o-y to RUB 12.2 billion.
This accelerated rate of growth from 4.2% in the previous quarter was driven
by a recovery of the HORECA demand after removal of restrictions, start of
the tourist season and improvement in the wholesale pharmaceutical market
after a slowdown in 2Q 2020. Wholesale revenue as a proportion of total
revenue increased from 2.1% in 2Q 2020 to 3.2% in the reported quarter.
Gross Profit in 3Q 2020 increased by 18.5% to RUB 91.2 billion with a margin
increase of 134 bps y-o-y to 23.8% as a result of improved commercial terms,
lower promo activity in combination with better promo coverage and higher
promo margin, lower shrinkage and reduced supply chain costs. This was
partially offset by the ongoing investments into Magnit's loyalty program
with higher penetration not yet compensated by suppliers. Format structure
had a mixed impact on gross margin, with the share of high-margin drogerie
business growing from 8.6% in 3Q 2019 to 9.4% in 3Q 2020 and the share of
lower margin wholesale segment increasing as a % sales.
Despite continuous increase of on-shelf availability supply chain costs
improved substantially y-o-y due to lower transportation costs and higher
utilization.
Alongside with the growing share of fresh products and overall improvement
of on-shelf availability shrinkage as a proportion of sales decreased
further by 69 bps y-o-y driven by ongoing optimization of supply chain
processes, renegotiation of quality standards with suppliers and other
initiatives launched in 2019.
SG&A costs demonstrated solid improvement of 54 bps to 20.5% as a percent of
sales. This was achieved as a result of lower depreciation, rent, marketing
and other expenses as well as positive operating leverage effect.
Personnel costs as a percent of sales increased by 36 bps y-o-y driven by
higher payments to retail personnel due to stronger sales offsetting
productivity increase. Staff turnover continued to improve during the period
driven by on-going automation of business processes and improved working
conditions in the Company's stores including a selective increase in
compensation for frontline employees as well as higher retention rate.
Rental costs as a percent of sales decreased by 40 bps y-o-y driven by
higher sales density, improved lease terms with landlords, lower y-o-y store
openings and closing of inefficient stores. This was achieved despite the
increased share of leased selling space to 77.6% in 3Q 2020 vs 76.8% a year
ago.
Depreciation as a percent of sales reduced by 45 bps y-o-y driven by
operating leverage and slower expansion. During the reported quarter, Magnit
renovated only six stores in total compared to 639 stores over the
corresponding period of last year.
Lower promo intensity and smarter marketing strategies on the back of low
promo sensitivity of customers and softer competition resulted in the
continued reduction of advertising expenses y-o-y.
The 25 bps y-o-y growth in utilities costs was primarily driven by a
country-wide increase in tariffs, including annual indexation of electricity
costs and an increase in cleaning expenses due to higher frequency of
cleaning and sanitary treatment.
Packaging and raw materials expenses increased by 15 bps y-o-y reflecting
the ongoing provision of means of sanitary protection to customers and
employees during the COVID-19 pandemic.
Total costs incurred as a result of the Company's response to COVID-19 in 3Q
2020 amounted to approximately RUB 0.5 billion. This included additional
payments to frontline personnel (reflected in staff costs), and safety
procedures (reflected in other operating expenses).
As a result, EBITDA was RUB 27.6 billion with 7.2% margin - the largest
y-o-y expansion across three quarters of this year (a 133 bps increase) due
to strong gross margin dynamics and lower SG&A expenses. LTI expenses in the
reported period stood at 0.08% of sales - as a result EBITDA margin pre-LTI
was 7.3%.
EBITDA margin in 3Q 2020 was lower than that for 2Q 2020 predominantly due
to negative q-o-q operational leverage effect (lower absolute sales),
seasonal product mix effect (higher share of low-margin product categories
in average basket) and moderately higher q-o-q promo activity in the market.
Net finance costs in 3Q 2020 decreased by 11.4% y-o-y (or 23 bps as a
percent of sales) to RUB 3.4 billion due to the lower cost of debt. As a
result of continued focus on financial efficiencies, the cost of debt
further reduced to 6.17% (156 bps y-o-y or 13 bps q-o-q). This has also led
to further improvement of the debt profile with increased share of long-term
borrowings to 98% and longer debt maturity from 21 months to 23 months.
In 3Q 2020 the Company reported FX losses in the amount of RUB 0.9 billion
related to direct import operations.
Income tax in 3Q 2020 was RUB 2.9 billion. Effective tax rate has normalized
to 23.5%.
As a result, net income in 3Q 2020 increased by 174.1% y-o-y and stood at
RUB 9.6 billion. Net income margin increased by 149 bps y-o-y to 2.5%.
Financial results for 3Q and 9M 2020 (IFRS 16)
million RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
Total 383,189 342,583 11.9% 1,146,550 1,000,499 14.6%
revenue
Retail 370,952 332,965 11.4% 1,114,910 975,976 14.2%
Wholesale 12,237 9,618 27.2% 31,640 24,523 29.0%
Gross Profit 91,180 76,930 18.5% 270,701 232,253 16.6%
Gross 23.8% 22.5% 134 bps 23.6% 23.2% 40 bps
Margin, %
SG&A, % of -18.9% -19.6% 63 bps -19.0% -20.1% 111 bps
sales
EBITDA pre 44,680 36,743 21.6% 131,921 111,813 18.0%
LTI[9]
EBITDA 11.7% 10.7% 93 bps 11.5% 11.2% 33 bps
Margin pre
LTI, %
EBITDA 44,388 36,172 22.7% 131,278 110,267 19.1%
EBITDA 11.6% 10.6% 103 bps 11.4% 11.0% 43 bps
Margin, %
EBIT 23,080 14,345 60.9% 64,882 42,962 51.0%
EBIT Margin, 6.0% 4.2% 184 bps 5.7% 4.3% 136 bps
%
Net finance -10,765 -11,994 -10.2% -33,700 -35,545 -5.2%
costs
FX gain / -1,018 -41 n/a -1,938 600 -423.1%
(loss)
Profit 11,297 2,310 389.0% 29,244 8,017 264.8%
before tax
Taxes -2,693 -1,023 163.3% -6,870 -2,958 132.3%
Net Income 8,603 1,287 568.4% 22,374 5,059 342.2%
Net Income 2.2% 0.4% 187 bps 2.0% 0.5% 145 bps
Margin, %
Balance Sheet and Cash Flows
Financial Position Highlights as of 30.09.2020 (IAS 17)
Million RUB 30.09.2020 30.06.2020
Inventories 209,526 219,236
Trade and other receivables 13,038 9,949
Cash and cash equivalents 5,551 21,149
Long-term borrowings 150,733 117,389
Trade and other payables 121,280 117,654
Short-term borrowings and short-term 33,092 91,204
portion of long-term borrowings
(MORE TO FOLLOW) Dow Jones Newswires
October 29, 2020 03:00 ET (07:00 GMT)
DJ Magnit Reports 6.9% LFL Sales Growth and 7.2% -4-
Despite ongoing improvement to on-shelf availability, the increased share of
drogerie format to 9.4% of net retail sales and supplier inflation,
inventories decreased by RUB 9.7 billion vs June 30, 2020 and stood at RUB
209.5 billion primarily due to a reduction of slow-moving items.
Trade and other payables increased by 3.1% or RUB 3.6 billion compared to
June 30, 2020 and stood at RUB 121.3 billion as a result of improved
supplier payment terms. This improvement was partially offset by the
increase in accounts receivables by RUB 3.1 billion.
Working capital management remains one of the key priorities of the Company.
A number of ongoing initiatives, including the optimization of receivables,
electronic document flow, cross-functional projects aiming at reducing
inventories, etc. will result in working capital improvements going forward
predominantly through the reduction of inventory turnover in days.
30 September 30 June 2020 31 December 30 September
2020 2019 2019
Gross Debt, 183.8 208.6 184.2 175.3
RUB billion
Net Debt, 178.3 187.4 175.3 168.7
RUB billion
Net 1.8x 2.0x 2.1x 2.0x
Debt/EBITDA
Gross Debt decreased by RUB 24.8 billion or 11.9% compared to June 30, 2020
and stood at RUB 183.8 billion as of September 30, 2020 with cash position
of RUB 5.5 billion. As a result, Net Debt reduced by RUB 9.1 billion
compared to June 30, 2020 and stood at RUB 178.3 billion. The Company's debt
is fully RUB denominated matching revenue structure. The Net Debt to EBITDA
ratio was 1.8x as at 30 September 2020 vs 2.0x as at 30 June 2020.
Capex during 3Q 2020 decreased by 57.9% y-o-y to RUB 7.0 billion following a
slowdown of expansion program (349 store openings on gross basis in 3Q 2020
vs 742 in 3Q 2019) and decelerated redesign program (6 stores in 3Q 2020 vs
639 stores in 3Q 2019). Total capital expenditure for the first nine months
of 2020 stood at RUB 19.3 billion compared to RUB 38.9 billion in 9M 2019
(down by 50.5% y-o-y).
FY 2020 Guidance
Magnit confirms its full year store opening and redesign guidance published
on 30 July 2020 adjusted as a result of the impact of the COVID-19 pandemic
The Company expects an accelerated pace of expansion and renovation over the
next periods.
The Company reduces its 2020 capital expenditures projections from RUB
45-50bn to RUB 35-40 billion to account for lower investments in expansion
and redesign, economy gains from more efficient projects execution and
slippage for 2021.
Note:
1) This announcement contains inside information disclosed in accordance
with the Market Abuse Regulation effective from July 3, 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 September 30, 2020, Magnit operated 38 distribution
centres and 21,154 stores (14,699 convenience, 469 supermarkets and 5,986
drogerie stores) in 3,819 cities and towns throughout 7 federal regions of
the Russian Federation.
In accordance with the unaudited IFRS 16 management accounts results for 1H
2020, Magnit had revenues of RUB 763.4 billion and an EBITDA of RUB 86.9
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
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] LFL calculation base includes stores, which have been operating for 12
months since its first day of sales. LFL sales growth and average ticket
growth are calculated based on sales turnover including VAT
[2] Convenience Stores include convenience stores and small pilots such as
Magnit City and My Price
[3] Supermarkets include Magnit Family supermarkets and superstores
[4] Other Formats include pharmacies and stores located at Russian Post
offices
[5] Excluding VAT
[6] Excluding leap year effect, i.e. based on trading results of February
1-28, 2020
[7] Excluding VAT
[8] Long-Term Incentive Program
[9] Long-Term Incentive Program
ISIN: US55953Q2021
Category Code: MSCU
TIDM: MGNT
LEI Code: 2534009KKPTVL99W2Y12
OAM Categories: 2.2. Inside information
Sequence No.: 86774
EQS News ID: 1143847
End of Announcement EQS News Service
(END) Dow Jones Newswires
October 29, 2020 03:00 ET (07:00 GMT)
© 2020 Dow Jones News
