Lenta Ltd announces its reviewed consolidated IFRS results for the half year ending 30 June 2016

St. Petersburg, Russia, 2016-Aug-26 — /EPR Retail News/ — Lenta Ltd (“Lenta” or the “Company”), one of the largest retail chains in Russia, today (24 August 2016) announces its reviewed consolidated IFRS results for the half year ending 30 June 2016 [1].

1H 2016 Financial Highlights:
•Total sales grew 21.9% to Rub 140.1bn (1H 2015: Rub 114.9bn);
•Adjusted EBITDA [2] of RUB 13.7bn, up 16.4% (1H 2015: RUB 11.7bn) with a margin of 9.8% (1H 2015: 10.2%);
•Gross margin of 21.9% (+0.2 p.p vs. 1H 2015) rose due to better supplier terms, supply chain improvements and more efficient in-store production which more than offset investments in prices;
•SG&A increased to 15.5% of sales (+0.9 p.p vs. 1H 2015) despite continuing successful productivity measures in the like-for-like stores, due to combined effects of the high number of new stores in the ramp-up phase, additional investments in marketing and increases in utility costs;
•Capital expenditures of RUB 16.1bn, an increase of 37.0% compared to 1H 2015 (RUB 11.8bn) linked to higher investments in land acquisition and hypermarket construction;
•Net cash generated from operating activities, before net interest and income taxes paid, of RUB 7.2bn compared to RUB 5.1bn in 1H 2015 (an increase of 39.3%) primarily driven by EBITDA growth;
•Net interest expenses of RUB 4.5bn, a decrease of 12.7% compared to 1H 2015 (RUB 5.1bn) primarily due to lower interest rates;
•Net Profit [3] of RUB 4.3bn, up 45.9% (1H 2015: RUB 3.0bn) with a margin of 3.1%; and
•Net Debt of RUB 67.1bn as of 30 June 2016 (Net debt/Adjusted EBITDA of 2.2x).

1H 2016 Operational Highlights:
•Eight hypermarkets and 10 supermarkets opened during the first half of 2016;
•Total store count reached 189 stores as at 30 June 2016, comprising 147 hypermarkets and 42 supermarkets;
•Total selling space increased to 922,865 sq.m. as at 30 June 2016 (+22.8% vs. 30 June 2015);
•Like-for-like (“LFL”) [4] sales growth of 5.2% vs 1H 2015;
•LFL average ticket increased by 3.0%;
•LFL traffic growth of 2.1%;
•Number of active loyalty cardholders [5] increased to 9.3m (+23% y-o-y) with approximately 93% of transactions in the second quarter made using the loyalty card.

Material events after the reported period:
•Lenta agreed a Rub 53bn credit limit with Sberbank, providing access to new long-term loans of up to RUB 25bn for a period of up to 5 years;
•Lenta registered an Exchange Bond programme for up to a total maximum principal amount of RUB 100bn;
•Fitch Ratings has upgraded Lenta’s Long-term foreign and local currency Issuer Default Ratings (IDRs) from ‘BB-’ to ‘BB’ and National Long-term rating from ‘A+(rus)’ to ‘AA-(rus)’. The outlook on the ratings is stable;
•Started operations in a new dedicated supermarket distribution centre in Moscow during August.

Lenta’s Chief Executive Officer, Jan Dunning said:
“We continue to deliver strong results against the back-drop of a challenging consumer and macro environment.

Lenta’s results demonstrate continuing efficiency improvements in all areas of our business. Further development of logistics led to additional benefits in supply chain cost which in combination with better supplier conditions and improved productivity in our own production allowed us to deliver an increase in gross profit margin increase despite additional price investments made to support customers. We proved that the operational improvements made last year were sustainable and in the first half of this year continued optimizing processes, especially in the like-for-like stores, to drive productivity. However, the productivity improvements in the like-for-like stores were not enough to offset the impact of enhanced investments in marketing activities to support traffic and the increase in housing costs, mainly driven by the large number of new stores we opened. As a result, Lenta reports a slight reduction in EBITDA margin.

We continue to strengthen our financial position and improve our debt profile. Falling market interest rates and optimization of our major long-term loan facilities translated into a significant reduction in interest expenses which supported 46% growth in net income.

We are well on track to meet our target of at least 40 new hypermarket openings this year, while in our supermarket format we plan to further accelerate of expansion. We have almost finalized the pipeline of hypermarket openings for the next year and continue our very selective approach focused on opportunities with attractive returns”.
[1] Certain amounts do not correspond to the IFRS financial statements for the half year ended 30 June 2015 and reflect adjustments made as detailed in Note 2 of the IFRS financial statements
[2] Adjusted EBITDA is reported EBITDA as set out in Note 6 of the IFRS financial statements adjusted for non-recurring one-off items such as changes in accounting estimates and one-off non-operating costs and income
[3] Net Profit equates to “Profit for the year” in the attached IFRS Financial Statements
[4] Lenta’s stores are included in the LFL store base starting 12 months after the end of the month they are opened
[5] Cardholders who made at least 2 purchases at Lenta during the 12 months to 30 June 2016 are considered active

Forward looking statements:
This announcement includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal”, “believe”, or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Lenta’s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

Any forward-looking statements made by or on behalf of Lenta speak only as at the date of this announcement. Save as required by any applicable laws or regulations, Lenta undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

For further information please visit www.lentainvestor.com

Contact:
Lenta
Anna Meleshina,
Public Relations & Government Affairs Director
Tel: +7 812 363 28 53
E-mail: anna.meleshina@lenta.com

Anastasia Kuznetsova,
Corporate Communications Manager
Тel:+7 (812) 336 39 97
E-mail: a.kuznetsova@lenta.com

David Westover
Senior Director
+44 207 282 2886 desk
+44 7768 897722 mobile
David.westover@citigatedr.co.uk

Marina Zakharova
Director
+44 207 282 1079 desk
+44 7774 256545
Marina.zakharova@citigatedr.co.uk

Source: Lenta