12 March 2018
Lenta publishes audited IFRS financial results for the year ended 31 December 2017
St. Petersburg, Russia; 12 March 2018 – 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 2017.
2017 Financial Highlights:
- Total sales grew 19.2% to Rub 365.2bn (2016: Rub 306.4bn);
- Adjusted EBITDA1 of Rub 35.5bn, up 11.8% (2016: Rub 31.8bn) with a margin of 9.7% (2016: 10.4%);
- Gross margin of 21.4% (-0.7 p.p. vs. 2016) decreased due to additional price investments and one-off accounting effects of the new Trade Law which were not quite fully compensated by improved supplier conditions, increased supply-chain efficiency and in-store production productivity improvements;
- SG&A slightly increased to 15.3% of sales (0.15 p.p. higher vs. 2016) due to higher depreciation expenses linked to expansion which more thaan offset continuous operational improvements and increased productivity;
- Capital expenditures of Rub 27.3bn, a decrease of 49.7% compared to 2016 (Rub 54.3bn) due mainly to the slower rate of expansion compared to the prior year and lower pre-investments in land and stores to be opened in future years;
- Net cash generated from operating activities, before net interest and income taxes paid, of Rub 34.8bn compared to Rub 27.9bn in 2016 (an increase of 24.8%) primarily driven by working capital movements and higher EBITDA;
- Net interest expenses of Rub 10.5bn, an increase of 13.7% compared to 2016 (Rub 9.2bn) due to an increase in average borrowings which was partly offset by much lower interest rates;
- Net Profit2 of Rub 13.3bn, up 18.4% (2016: Rub 11.2bn) with a margin of 3.6%; and
- Net Debt of Rub 92.8bn as of 31 December 2017 (Net debt/Adjusted EBITDA of 2.6x).
2017 Operational Highlights:
- 40 new hypermarkets and 49 new supermarkets were opened during 2017 with 236.0 th. sq.m of net selling space addition – in line with the Company’s FY 2017 store opening guidance
- Total number of stores was 328 as at 31 December 2017, comprising 231 hypermarkets and 97 supermarkets with selling space of 1,382,111 sq.m (+20.6% vs. 31 December 2016);
- Like-for-like (“LFL”)3 sales growth of 0.9% for 2017;
- LFL average ticket increased by 2.3% in 2017;
- LFL traffic declined by 1.4% in 2017; and
- The number of active loyalty cardholders4 increased by 17% y-o-y to a total of 12.3m as of 31 December 2017.
Events after the reported period:
- Lenta launched a co-branded loyalty programme with Raiffeisenbank which combines the existing Lenta loyalty programme benefits with the bank’s bonus point cashbacks; and
- The Company launched a new private label range (“Bonvida”) for professional customers.
Lenta’s Chief Executive Officer, Jan Dunning said:
“Once again, Lenta delivered strong growth and profitability in 2017, with sales up 19% and an EBITDA margin of 9.7% - against the back-drop of a challenging market environment.
We continued to make progress with improving supplier conditions and supply-chain efficiency combined with strict cost control, although this came in combination with growing promotion share and a deflationary environment. During 2017, Lenta’s management team launched a series of initiatives including improvements in assortment, marketing and communication to support sales and these have started to pay off, delivering an uplift in sales growth and positive operating leverage. We will continue and build on these initiatives as well as driving efficiency still further, improving our competitiveness and the returns on new stores. All this, combined with stabilization of the economy makes us confident that Lenta will be able to sustain strong growth and market-leading profitability in 2018.
1 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
2 Net Profit equates to “Profit for the year” in the attached IFRS Financial Statements
3 Lenta’s stores are included in the LFL store base starting 12 months after the end of the month they are opened
4 Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December, 2017 are considered active