OREANDA-NEWS. September, 9 2009. Dixy Group – one of the leading Russian food retailers - announced consolidated unaudited IFRS results for the first six months of 2009.

Key P&L figures for first 6 months of 2009 in comparison to the first 6 months of 2008 results

In RUR:

• Total Revenues increased 15.9% to RUR 26,754 mln.

• Gross Profit increased 28.8% to RUR 7,254 mln.

• Gross Profit Margin increased from 24,4% for the first 6 months of 2008 to 27,1%.

• EBITDA increased 14.3% to RUR 1 464 mln.

• Net Loss totaled RUR 99 mln.

• Net operating cash flow declined by 8.8% to RUR 429 mln.

In USD:

• Total Revenues decreased 16.1% to USD 809.1 mln.

• Gross Profit decreased 6.7% to USD 219.4 mln.

• EBITDA decreased 17.3% to USD 44.3 mln.

• Net Loss totaled USD 3.0 mln.

• Net operating cash flow declined by 33.9% to USD 13 mln.

Commenting on Group performance during the first 6 months of 2009, the President of the Company Ilya Yakubson said: “During the first half of 2009 the Company's management has been focused on improving the efficiency of goods flow, especially in the Central Federal region, which accounts for over 50% of Company’s sales. In the second quarter of this year, we were able to fundamentally improve the level of logistic service and more than double the volume of goods handled through our central distribution center in Serpukhov, Moscow region. Simultaneously, we were successful in transferring to the new IT platform G.O.L.D operating companies in Moscow, Kaluga and Ryazan and already started to transfer the
operating companies located in the Moscow region. All in all, from the logistic support point of view, at the start of the third quarter the Company was ready to begin marketing actions and promotional campaigns stimulating sales”.

Key unaudited financial indicators

 

 

 

In thousands of RUR

 

 

 

 

H1 2009

H1 2008

Growth (%)

Net Sales

26 753 709

23 091 297

15,9%

Gross Profit

7 254 206

5 632 395

28,8%

EBITDAR

2 592 151

2 127 747

21,8%

EBITDA

1 464 104

1 281 377

14,3%

Net Profit

-99 146

294 910

NA

Net Operating cash flow

428 680

469 801

-8.8%

In thousands of USD

 

 

 

 

H1 2009

H1 2008

Growth (%)

Net Sales

809 054

964 388

-16,1%

Gross Profit

219 373

235 232

-6,7%

EBITDAR

78 389

88 863

-11,8%

EBITDA

44 276

53 516

-17,3%

Net Profit

-2 998

12 317

NA

Net Operating cash flow

13,0

19,6

-33,9%

 

H1 2009

H1 2008

 

Gross Profit

27,1%

24,4%

 

EBITDAR

9,7%

9,2%

 

EBITDA

5,5%

5,5%

 

Net Profit

-0,4%

1,3%

 

Net Sales as of the first 6 months of 2009 amounted to RUR 26 754 mln., representing a 15,9% increase over the first 6 months of 2008. Falling short of our retail sales targets, is due to natural propensity of lower retail spending due to adverse economic environment, while also due to low efficiency in the execution at the level of our logistics function. Sales in USD amounted to USD 809 054 mln., representing a decrease of 16,1% from the same period last year. The decrease in USD revenue is due to USD appreciation against the RUR, exceeding the RUB sales growth during the period.

Gross profit for the first six months of 2009 amounted to RUR 7 254 mln. (USD 219 mln.), demonstrating growth of 28.8% in RUR (-6.7% in USD) from the first 6 months of 2008 result. Gross margin increased from 24,4% in the first half of 2008 to 27,1% over the same period in 2009, reaching 28.6% in the second quarter.

Commenting on Group’s Gross Margin performance during the 6 months of 2009, the President of the Company Ilya Yakubson said:

“Reaching in the second quarter of 2009, one of the highest gross margins in our sector is a non-
recurrent event and is related to three factors. First, due to a significant increase in the volume of goods processed through our central DC in Serpukhov, Moscow region and improvements in supply conditions.

Second, due to a more effective processing of marketing bonuses from the suppliers. Third, due to the fact all marketing initiatives, including pricing policy changes and promotional campaigns took place only starting from the third quarter of 2009. Beginning from July of this year, we switched from a customary approach of lowering prices on a selected group of products by 5-15%, to a more tailor made marketing campaigns involving the reduction of prices by 40-50% while taking into the account the seasonality, regional demand characteristics and the competitive environment. We widened three times the number product lines sold at lowest prices, simultaneously optimizing the product offering by increasing the number of SKUs from lower price categories. We therefore, expect to see a considerable improvement at the level of retail sales growth in the second half of 2009, while recording a decrease at the level Gross Profit margin for the period. For 2009, we expect the Gross Profit margin to remain within the range of 25-26%.”

EBITDAR amounted to RUR 2 595 mln. (USD 78,4 mln.), which represents a 21.8% growth in RUR (11.8% decline in USD). EBITDAR margin increased from 9,2% in the first half of 2008 to 9,7% over the same period in 2009. EBITDAR growth is primarily due to the increase in Gross Profit for the Company during the period.

Thous. RUR

 

 

 

 

H1 2009

H1 2008

Growth (%)

Salaries

2 746 231

2 313 366

18,7%

Lease Expense

1 128 047

789 560

42,9%

D&A

779 122

538 861

44,6%

Utilities

305 437

195 534

56,2%

Other   Expenses   (shrinkage,   transport,

bank charges, advertising costs etc.)

1 610 386

995 747

61,7%

6 569 223

 

4 833 068

 

35,9%

 

H1 2009

H1 2008

 

Salaries

Lease Expense

D&A

Utilities

Other   Expenses   (shrinkage,   transport,

bank charges, advertising costs etc.)

10.3%
4.2%
2.9%
1.1%

6.0%

10.0%
3.4%
2.3%
0.8%

4.3%

 

 

24.6%

 

20.9%

 

Salary Expense, in H1 2009 amounted to RUR 2 746 mln. versus RUR 2 313 mln. in H1 2008. Demonstrating an 18.7% year-on-year growth and a 3.6% quarter-on-quarter decline. Reduction in salary expense in Q2 is due to optimization of wages and reduction of total headcount.

Lease Expense for Q2 2009 amounted to RUR 553 mln. a reduction of 3.7% from RUR 575 mln. in Q1 2009. The reduction was achieved by further successful efforts to renegotiate lease agreements and by continuous optimization of the retail assets portfolio. Lease expense as a percentage of revenue increased to 4.2% from 3.4% in H1 2008 due to 22% increase in leased gross selling space, and lower sales growth.

Utilities and maintenance expenses: 56% growth in utilities and maintenance expense in H1 2009 versus H1 2008 is due to a 23.5% growth in gross selling space and an over 50% growth in warehousing areas, following the opening of the 35 thousand sq. m. DC in Serpukhov, Moscow region, in Q4 2008. Buildings’, equipment’s and trucks’ fixed assets, excluding accumulated amortization, grew by over 50% from Q2 2008.

Shrinkage for the first six months of 2009 amounted to RUR 498 mln. In Q2 shrinkage expense decreased 5% to RUR 247 mln. from RUR 255 mln. in Q1 2009. Nevertheless, for H1 2009, Shrinkage Expense remains at 1.9% of Sales, which is one of the highest levels in our peer group. Reduction of shrinkage remains one of the key priorities for the management.

EBITDA increased by 14.3% in RUR terms (a 17% decline in USD), to RUR 1 464 mln. (USD 44.3 mln.). EBITDA margin remained at H1 2008 level of 5.5%. Significant increase in EBITDA in Q2 2009 was primarily driven by the increase in Gross Margin and accentuated by the q-on-q decline in staff costs and lease expense, while slightly toned down by the rising q-on-q utility and maintenance expense.

Net Loss: in H1 2009 the Group recorded a Net Loss of RUR 99 mln. (USD 3 mln.) primarily due to RUR 347 mln. in FX translational losses sustained during the period. The FX gain recorded during Q2 2009, was completely offset by the RUR 840 mln. FX translational loss from Q1 2009. Accumulated FX translational losses amounted to RUR 347 mln., without the effect of these losses Net Income for the six-month period would amount to RUR 248 mln.

Net debt as of June 30, 2009 amounted to RUR 8,274,208 K or USD 264,443 K.

 

H1 2009

H1 2008

Growth (%)

Number of stores

488

403

21.0%

Number of employees

15,500

15,417

0%

Total Space owned, sq.m.

169,199

134,671

25.6%

Total Space, sq.m.

448,098

362,768

23.5%

Selling Space, sq.m. by format:

191,916

157,516

21.8%

DIXY

157,771

131,080

20.3%

V-MART

--

641

--

MEGAMART

28,525

20,865

36.7%

MINIMART

5,620

4,930

14.0%

Commenting on Group’s plans and targets for the second part of 2009, the President of the Company Ilya Yakubson said:

“Our priorities for the second half of 2009 remain as previously: the increase in the pace of sales growth, optimization of logistics operations, completion of the transition to a unified IT platform in logistics and shrinkage reduction. By the end of October, GOLD Information System GOLD will be installed in every operating unit in the Company. During the same period, we plan to increase the centralization of supply through our main distribution center in Serpukhov, Moscow region to up to 70% and expand the range of SKUs delivered through our DC to up to 3100 units. Our five-hundredth store was opened at the end of August. In 2009, we plan to open 65-70 new stores. Total CAPEX for the year is budgeted at RUR 2 bln. and will be financed entirely from our operational cash flow.”

Thous. RUR

H1 2009

H1 2008

Growth (%)

DIXY
V-MART
MEGAMART
MINIMART
OTHER REVENUE

22 355 488

68 034

2 991 727

991 144

347 316

19 741 704

95 490

2 218 774

831 734

203 595

13,2%

-28,8%

34,8%

19,2%

71%

 

26 753 709

23 091 297

15,9%

 

 

Thous. USD

H1 2009

H1 2008

Growth (%)

DIXY
V-MART
MEGAMART
MINIMART
OTHER REVENUE

676 048

2 057

90 472

29 973

10 503

824 495

3 988

92 665

34 737

8 503

-18,0%
-48,4%

-2,4%
-13,7%

23.5%

809 054

964 388

-16.1%

Average ticket by format

 

RUR

H1 2009

H1 2008

Growth (%)

DIXY

MEGAMART

MINIMART

213,54
537,50
373,27

202,64
522.86
367.61

5,38%
2.80%
1.54%

Exchange rates

RUR / USD eop

30 June 2009

31,2904

H1 2009

31 December 2008

29,3804

H1 2008

RUR / USD average

33,0676

 

23,9440