16 February 2017

Lenta publishes audited IFRS financial results for the year ended 31 December 2016

St. Petersburg, Russia; 16 February 2017 – Lenta Ltd (“Lenta” or the “Company”), one of the largest retail chains in Russia, today announces its audited consolidated IFRS results for the year ending 31 December 2016.

To view the full press release, please click here

2016 Financial Highlights:

• Total sales grew 21.2% to Rub 306.4bn (2015: Rub 252.8bn);
• Adjusted EBITDA1 of Rub 31.8bn, up 13.1% (2015: Rub 28.1bn) with a margin of 10.4% (2015: 11.1%);
• Gross margin of 22.1% (-0.2 p.p. vs. 2015) slightly decreased due to additional price investments which were not quite fully compensated by better supplier conditions, supply-chain efficiency and improved in-store production results;
• SG&A increased to 15.2% of sales (0.9 p.p. higher vs. 2015) due to increases in marketing and other costs to support rapid expansion, and increased depreciation expenses which more than offset continuous operational improvements and increased productivity;
• Capital expenditures of Rub 54.3bn, an increase of 73.0% compared to 2015 (Rub 31.4bn) linked to rapid organic expansion and the acquisition of Kesko’s food retail business in Russia;
• Net cash generated from operating activities, before net interest and income taxes paid, of Rub 27.9bn compared to Rub 25.9bn in 2015 (an increase of 7.7%) primarily driven by EBITDA growth;
• Net interest expenses of Rub 9.2bn, a decrease of 0.5% compared to 2015 (Rub 9.3bn) thanks to lower interest rates offsetting a substantial increase in total borrowings;
• Net Profit2 of Rub 11.2bn, up 8.9% (2015: Rub 10.3bn) with a margin of 3.7%; and
• Net Debt of Rub 89.2bn as of 31 December 2016 (Net debt/Adjusted EBITDA of 2.8x).

2016 Operational Highlights:

• 51 hypermarkets and 17 supermarkets net openings during 2016, meeting the Company’s guidance;
• Total number of hypermarkets at 31 December 2016 was 191, with 49 supermarkets in operation, selling space was c. 1,146,148 sq.m (+29.9% vs. 31 December 2015);
• Lenta opened its seventh own distribution centre (“DC”) in Moscow, dedicated to its supermarket format;
• Like-for-like (“LFL”)3 sales growth was 3.9% for 2016;
• LFL average ticket increased by 4.0% in 2016;
• LFL traffic declined by 0.1% in 2016; and
• The number of active loyalty cardholders4 increased by 25% y-o-y to a total of 10.5m as of 31 December 2016.

Material events after the reported period:

• The Company signed lease contracts with the ADG Group real estate development company to open 36 supermarkets (approx. 47,000 sq.m of total space and 30,300 sq.m of selling space) in Moscow shopping and entertainment centers in 2018-2019; and
• Lenta signed an agreement to acquire eight properties in Novosibirsk which are planned for use as Lenta supermarkets.

Lenta’s Chief Executive Officer, Jan Dunning said:

“Lenta delivered strong growth and profitability in 2016, with sales up 21% and EBITDA margin of 10.4% - against the back-drop of a challenging consumer and macro environment.

We continued to make progress with improving supplier conditions, augmented by increasing supply chain and in-store production efficiency, while also investing in prices to help customers in this tough environment. We managed to further increase productivity in Like-for-Like stores by optimising processes and leveraging synergies from the increasing scale of the business. However, these initiatives were offset by cost investments to support our rapid expansion and additional marketing expenses reflecting the increased promo sensitivity of Russian consumers.

Our outlook for the short-to-medium term remains quite cautious. Pressure on disposable household income has impacted food retail sales growth in the country, which declined in both real and nominal terms in the recent past. Continued deterioration in consumers’ purchasing power combined with increasing price sensitivity and promo orientation is putting additional pressure on retailers and we don’t see signs of improvement in consumer budgets in the short-term”.

About Lenta

Lenta is the largest hypermarket chain in Russia (in terms of selling space) and the country’s fifth largest retail chain (in terms of 2015 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 192 hypermarkets in 77 cities across Russia and 49 supermarkets in Moscow, St. Petersburg and the Central region with a total of approximately 1,151,668 sq.m of selling space. The average Lenta hypermarket store has selling space of approximately 5,800 sq.m. The average Lenta supermarket store has selling space of approximately 900 sq.m. The Company operates seven owned distribution centres.

The Company’s price-led hypermarket formats are differentiated in terms of their promotion and pricing strategies as well as their local product assortment. The Company employed approximately 45,689 people as of 31 December 201610.

The Company’s management team combines a mix of local knowledge and international expertise coupled with extensive operational experience in Russia. Lenta’s largest shareholders include TPG Capital and the European Bank for Reconstruction and Development, both of which are committed to maintaining high standards of corporate governance. Lenta is listed on the London Stock Exchange and on the Moscow Exchange and trades under the ticker: ‘LNTA’.

A brief video summary on Lenta’s business and its Big Data initiative can be seen here.

To view the full press release, please click here

For further information please visit http://www.lentainvestor.com/en/or 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

FTI Consulting
Leonid Fink
Tel: +44 7497 783 705
E-mail: Leonid.Fink@fticonsulting.com

Jenny Payne
Tel: +44 20 3727 1000
E-mail: Jenny.Payne@fticonsulting.com

1Adjusted 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
2Net Profit equates to “Profit for the year” in the attached IFRS Financial Statements
3Lenta’s stores are included in the LFL store base starting 12 months after the end of the month they are opened
4Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December, 2016 are considered active
10FTE (full-time equivalent). Average FTE for 2016 was 35,677 employees