DJ Magnit Reports Audited FY 2020 Results
MAGNIT PJSC (MGNT)
Magnit Reports Audited FY 2020 Results
15-March-2021 / 09:59 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.
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Magnit Reports Audited FY 2020 Results
Krasnodar, Russia (15 March, 2021): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers,
announces its audited consolidated IFRS results for the year ending 31 December 2020[1].
FY 2020 key financial highlights:
- Total revenue increased by 13.5% y-o-y to RUB 1,553.8 billion;
- Net retail sales reached RUB 1,510.1 billion representing 13.3% y-o-y growth;
- Gross profit margin stood at 23.5% - an increase of 74 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;
- Cash SG&A expenses[2] as percentage of sales improved by 36 bps to 17.5% primarily as a result of lower rent as
well as positive operating leverage effect partially offset by higher packaging and raw materials costs.
- EBITDA was RUB 109.4 billion with a 7.0% margin - an increase of 97 bps y-o-y driven by strong gross margin
dynamics and lower SG&A expenses;
- Net income increased by 120.8% y-o-y and stood at RUB 37.8 billion. Net income margin increased from 1.2% in 2019
to 2.4% in 2020.
- As of December 31, 2020 Net debt was RUB 121.4 billion. The Net Debt to EBITDA ratio was 1.1x vs 2.1x as at 31
December 2019.
Key events after the reported period:
- Magnit presented its Corporate Strategy 2021-2025;
- Magnit redeemed its RUB 10 billion exchanged-traded bonds of BO-003P-02 series;
- Magnit opened another seven discounters bringing the total number of stores to 23;
- Magnit opened new distribution centre in Surgut;
FY 2020 Key Financial Results
IAS 17 IFRS 16
million RUB FY 2020 FY 2019 Change FY 2020 FY 2019 Change
Total revenue 1,553,777 1,368,705 13.5% 1,553,777 1,368,705 13.5%
Retail 1,510,071 1,332,929 13.3% 1,510,071 1,332,929 13.3%
Wholesale 43,707 35,777 22.2% 43,707 35,777 22.2%
Gross Profit 365,729 311,999 17.2% 365,756 311,999 17.2%
Gross Margin, % 23.5% 22.8% 74 bps 23.5% 22.8% 74 bps
SG&A, % of sales -20.5% -21.3% 82 bps -19.1% -19.8% 70 bps
EBITDA pre LTI[3] 110,264 85,111 29.6% 179,043 149,309 19.9%
EBITDA Margin pre LTI, % 7.1% 6.2% 88 bps 11.5% 10.9% 61 bps
EBITDA 109,410 83,112 31.6% 178,189 147,310 21.0%
EBITDA Margin, % 7.0% 6.1% 97 bps 11.5% 10.8% 71 bps
EBIT 63,493 36,324 74.8% 88,424 59,216 49.3%
EBIT Margin, % 4.1% 2.7% 143 bps 5.7% 4.3% 136 bps
Net finance costs -13,497 -15,095 -10.6% -44,268 -47,509 -6.8%
FX gain / (loss) -1,310 781 -267.8% -1,453 873 -266.5%
Profit before tax 48,686 22,010 121.2% 42,703 12,579 239.5%
Taxes -10,905 -4,901 122.5% -9,709 -3,015 222.0%
Net Income 37,781 17,108 120.8% 32,993 9,564 245.0%
Net Income Margin, % 2.4% 1.2% 118 bps 2.1% 0.7% 142 bps
Total revenue in 2020 increased by 13.5% to RUB 1,553.8 billion.
Net retail sales in 2020 grew by 13.3% y-o-y to RUB 1,510.1 billion driven by a combination of 3.6% selling space growth and 7.4% LFL sales growth. Every quarter of the reported year net retail sales growth outpaced selling space growth as strong LFL results have led to a continuous improvement of sales densities across all formats since January 2020.
Wholesale revenue in 2020 increased by 22.2% y-o-y to RUB 43.7 billion primarily driven by improvements of wholesale operations. Share of wholesale segment increased from 2.6% in 2019 to 2.8% in 2020.
Gross Profit in 2020 increased by 17.2% to RUB 365.7 billion with a margin increase of 74 bps y-o-y to 23.5%. This came 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 as well as increased share of high-margin drogerie business. This was partially offset by the ongoing investments into Magnit's loyalty program with higher penetration and growing share of low-margin wholesale business.
Alongside with the growing share of fresh products and overall improvement of on-shelf availability shrinkage as a proportion of sales decreased by 56 bps y-o-y driven by ongoing optimization of supply chain processes, renegotiation of quality standards with suppliers and other initiatives.
Despite continuous increase of on-shelf availability and improvement of service level, transportation expenses as a percentage of sales improved by 6 bps y-o-y on route optimisation, higher utilization of trucks and other efficiency gains leading to a reduction of cost per kilometre by 7.9% y-o-y.
Selling, General and Administrative Expenses (SG&A)
IAS 17 IFRS 16 million RUB FY 2020 FY 2019 Change FY 2020 FY 2019 Change Payroll and related taxes 138,640 121,677 13.9% 138,640 121,677 13.9% as a % of Sales 8.9% 8.9% 3 bps 8.9% 8.9% 3 bps Rent 67,011 63,195 6.0% 1,429 982 45.5% as a % of Sales 4.3% 4.6% -30 bps 0.1% 0.1% 2 bps Depreciation & amortization 45,917 46,788 -1.9% 89,765 88,094 1.9% as a % of Sales 3.0% 3.4% -46 bps 5.8% 6.4% -66 bps Utilities 28,287 24,737 14.3% 28,287 24,737 14.3% as a % of Sales 1.8% 1.8% 1 bps 1.8% 1.8% 1 bps Advertising 7,628 7,715 -1.1% 7,628 7,715 -1.1% as a % of Sales 0.5% 0.6% -7 bps 0.5% 0.6% -7 bps Other expenses 9,051 8,723 3.8% 9,051 8,723 3.8% as a % of Sales 0.6% 0.6% -5 bps 0.6% 0.6% -5 bps Bank services 7,108 6,516 9.1% 7,108 6,516 9.1% as a % of Sales 0.5% 0.5% -2 bps 0.5% 0.5% -2 bps Repair and maintenance 6,732 5,748 17.1% 6,732 5,748 17.1% as a % of Sales 0.4% 0.4% 1 bps 0.4% 0.4% 1 bps Taxes, other than income tax 2,925 3,240 -9.7% 2,925 3,240 -9.7% as a % of Sales 0.2% 0.2% -5 bps 0.2% 0.2% -5 bps Packaging and raw materials 4,861 3,215 51.2% 4,861 3,215 51.2% as a % of Sales 0.3% 0.2% 8 bps 0.3% 0.2% 8 bps Total SG&A 318,159 291,555 9.1% 296,425 270,648 9.5% as a % of Sales 20.5% 21.3% -82 bps 19.1% 19.8% -70 bps Cash SG&A (excl D&A) 272,242 244,767 11.2% 206,660 182,554 13.2% as a % of Sales 17.5% 17.9% -36 bps 13.3% 13.3% -4 bps
SG&A costs demonstrated solid improvement of 82 bps to 20.5% as a percent of sales.
Cash SG&A expenses as a percentage of sales improved by 36 bps to 17.5% primarily as a result of lower rent costs as well as positive operating leverage effect partially offset by higher packaging and raw materials costs.
Personnel costs as a percent of sales remained flat at 8.9% - one-off COVID-related expenses incurred in March and April 2020 were offset by efficiency improvements. The Company made increased payments to its frontline personnel related to extra working hours and additional hiring to cover high demand in March partially compensated by increased productivity and lower staff turnover. 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 30 bps y-o-y to 4.3% driven by higher sales density, improved lease terms with landlords and closing of inefficient stores. This was achieved despite the increased share of leased selling space to 78.0% in 2020 vs 77.2% a year ago.
Despite growing costs related to the loyalty program, advertising expenses as a percentage of sales decreased by 7 bps y-o-y to 0.5% thanks to more efficient tactics and tools of promo campaigns.
Packaging and raw materials expenses increased by 8 bps y-o-y to 0.3% reflecting the ongoing provision of means of sanitary protection to customers and employees during the COVID-19 pandemic.
Other costs including utilities, bank and tax expenses improved on positive operating leverage effect.
Total costs incurred as a result of the Company's response to COVID-19 in 2020 reached RUB 2.8 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 109.4 billion with a 7.0% margin reflecting 97 bps y-o-y expansion due to strong gross margin dynamics and lower SG&A expenses. LTI expenses in the reported period stood at 0.05% of sales - as a result EBITDA margin pre-LTI was 7.1%.
Depreciation as a percent of sales reduced by 46 bps y-o-y to 3.0% driven by operating leverage, slower expansion (839 net openings in 2020 vs 2,377 stores opened last year) and redesign program (385 refurbishments in 2020 vs 2,341 redesigns made last year).
As a result, operating profit in 2020 stood at RUB 63.5 billion or 74.8% higher than a year ago.
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DJ Magnit Reports Audited FY 2020 Results -2-
Net finance costs in 2020 decreased by 10.6% y-o-y (or 23 bps) to RUB 13.5 billion due to the lower cost of debt and total amount of borrowings. As a result of continued focus on financial efficiencies, the cost of debt reduced to 6.1% (102 bps y-o-y).
In 2020 the Company reported FX loss in the amount of RUB 1.3 billion related to direct import operations.
Income tax in 2020 was RUB 10.9 billion with effective tax rate of 22.4%.
As a result, net income in 2020 more than doubled y-o-y and stood at RUB 37.8 billion. Net income margin increased to 2.4%.
Balance Sheet and Cash Flows
Financial Position Highlights as of 31.12.2020 (IFRS 16)
Million RUB 31.12.2020 31.12.2019 Non-current assets 678,461 697,347 Inventories 205,949 218,874 Trade and other receivables 8,564 13,993 Cash and cash equivalents 44,700 8,901 Other current assets 7,718 9,574 Assets 945,392 948,689 Equity 182,889 188,533 Long-term borrowings 147,695 119,632 Other long-term liabilities 330,535 340,125 Trade and other payables 161,072 161,631 Short-term borrowings and short-term portion of long-term borrowings 18,392 64,578 Other short-term liabilities 104,809 74,189 Equity and liabilities 945,392 948,689
Despite ongoing improvement to on-shelf availability, the increased share of drogerie format by 66 bps as a percent of net retail sales, supplier inflation and total sales growth of 13.5%, inventories decreased by RUB 12.9 billion vs December 31, 2019 and stood at RUB 205.9 billion. This was driven by a number of projects launched in 2020 including a reduction of slow-moving items, assortment harmonization and IT solutions aimed at better on-shelf availability and promo forecasting.
Trade and other payables remained flat y-o-y and stood at RUB 161.1 billion. RUB 4.7 billion increase in trade payables driven by improvement of payment days was offset by RUB 5.2 billion decrease of other payables related to high pace of expansion in 2019. Accounts receivables decreased by RUB 5.4 billion or 38.8% to RUB 8.6 billion as a results of ongoing optimisation initiatives including weekly tracking of overdue debts and clearing activities as well as launch of electronic document flow with suppliers.
Debt Composition and Leverage as of 31.12.2020
billion RUB 2020 Share, % 1H 2020 Share, % 2019 Share, % IAS 17 Gross debt 166.1 208.6 184.2 Long term debt 147.7 88.9% 117.4 56.3% 119.6 64.9% Short term debt 18.4 11.1% 91.2 43.7% 64.6 35.1% Net debt 121.4 187.4 175.3 Net debt / EBITDA 1.1x 2.0x 2.1x IFRS 16 Net debt 479.0 538.8 532.5 Net debt / EBITDA 2.7x 3.3x 3.6x
As a results of repayment activities gross Debt decreased by RUB 18.1 billion or 9.8% compared to December 31, 2019 and stood at RUB 166.1 billion as of December 31, 2020 with cash position of RUB 44.7 billion. As a result, Net Debt reduced by RUB 53.9 billion compared to December 31, 2019 and stood at RUB 121.4 billion. The Company's debt is fully RUB denominated matching revenue structure, 99% of debt portfolio was long-term with 22 months maturity. The Net Debt to EBITDA ratio was 1.1x as at 31 December 2020 vs 2.1x as at 31 December 2019.
Cash Flow Statement for FY 2020
IAS 17 IFRS 16 million RUB 2020 2019 Change 2020 2019 Change Operating cash flows before working capital changes 109,798 86,183 27.4% 175,408 148,492 18.1% Changes in working capital 30,349 -13,385 -326.7% 30,712 -11,501 -367.0% Net Interest and income tax paid -25,738 -16,968 51.7% -56,509 -49,377 14.4% Net cash from operating activities 114,409 55,830 104.9% 149,611 87,614 70.8% Net cash used in investing activities -29,533 -57,167 -48.3% -29,020 -55,709 -47.9% Net cash generated / (used) from/(in) financing activities -49,077 -16,510 197.3% -84,793 -49,752 -70.4% Net cash increase / (decrease) 35,798 -17,846 -300.6% 35,798 -17,846 -300.6%
The Company's cash flows from operating activities before changes in working capital for 2020 equalled to RUB 109.8 billion, which was RUB 23.6 billion or 27.4% higher y-o-y. The change in working capital improved to RUB 30.3 billion from RUB -13.4 billion in 2019 as a result of a decrease in inventory, receivables, higher accrued expenses and taxes payable.
Net interest and income tax paid in 2020 increased by RUB 8.8 billion or 51.7% to RUB 25.7 billion. Net interest expenses decreased by 10.1% y-o-y to RUB 12.6 billion in 2020 due to lower cost of debt and lower amount of borrowings. Income tax paid for 2020 increased to RUB 13.1 billion.
With this net cash flow from operating activities in 2020 increased by 104.9% to RUB 114.4 billion as a result of positive movement of working capital and lower interest paid.
Net cash used in investing activities predominantly composed of capital expenditures decreased by 48.3% to RUB 29.5 billion in 2020. The dynamics was attributable to a slowdown of expansion program (1,292 store openings on gross basis in 2020 vs 2,841 in 2019) and decelerated redesign program (385 stores in 2020 vs 2,341 stores in 2019). Capex in 2020 came below the Company's guidance on lower than expected expansion given pandemic restrictions and management's intention to expand selectively following strict return requirements.
In 2020 net cash used from financing activities was RUB 49.1 billion vs RUB 16.5 billion used in 2019. In 2020 the Company paid dividends in the amount of RUB 29.9 billion[4] The rest was driven by dynamics of proceeds from borrowings and repayment of loans.
As a result of factors mentioned above net cash position in 2020 increased by RUB 35.8 billion to RUB 44.7 billion as of December 31, 2020.
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. 3. Please follow the link to view 2020 financial report - www.magnit.com/en/shareholders-and-investors/
results-and-reports/ or https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
For further information, please contact:
Dmitry Kovalenko Dina Chistyak
Director for Investor Relations Director for Investor Relations
Email: dmitry_kovalenko@magnit.ru Email: dina_chistyak@magnit.ru
Office: +7 (861) 210-48-80 Office: +7 (861) 210-9810 x 15101
Media Inquiries Twitter:
Media Relations Department @MagnitIR
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 December 31, 2020, Magnit operated 38 distribution centres and 21,564 stores (14,911 convenience, 470 supermarkets and 6,183 drogerie stores) in 3,752 cities and towns throughout 7 federal regions of the Russian Federation.
In accordance with the audited IFRS 16 results for FY 2020, Magnit had revenues of RUB 1,553.8 billion and an EBITDA of RUB 178.2 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. -----------------------------------------------------------------------------------------------------------------------
[1] EBITDA and LFL metrics are calculated by the Company and are not audited
[2] Selling, general and administrative expenses excluding depreciation and amortization
[3] Long-Term Incentive Program
[4] Excluding intercompany transactions between PJSC Magnit and JSC Tander -----------------------------------------------------------------------------------------------------------------------
ISIN: US55953Q2021 Category Code: MSCU TIDM: MGNT LEI Code: 2534009KKPTVL99W2Y12 OAM Categories: 2.2. Inside information Sequence No.: 95472 EQS News ID: 1175442 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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