X5 Retail Group N.V. announces preliminary Q4 and FY 2006 results
01 Mar 2007
Amsterdam, 1 March 2007 – X5 Retail Group N.V., Russia's largest food retailer in terms of sales, is pleased today to present a strong set of preliminary financial results for the full year of 2006. The figures provided are management accounts on pro-forma basis.
The year of 2006 has been an eventful period for the Group. The merger between Pyaterochka and Perekrestok was closed on 18 May 2006 and was immediately followed by intense internal work ensuring that the merger benefits are realised according to plan. In 2006, the Group faced two major challenges – successful integration of the two bigger national chains designed to extract practical synergies of the merger, and at least maintenance of the growth rates of the company. The preliminary results of FY 2006 clearly show that both objectives are being met successfully.
Growth
On a pro forma basis, sales increased by 47% to US$3,485 million, which represents a significant acceleration of growth in comparison to 34% in FY 2005. Through a successful effort by our purchasing team, due to gradual introduction of private labels and upgrade of our logistics capacity, X5 managed to raise gross margin from 25.4% to 27.9%, thereby generating gross profit growth of an impressive 60.9%.
The Group has made significant investments in the business in terms of store openings and an increased marketing budget. Nevertheless, the operating cost base remained tight and pro forma EBITDA has increased 31% to US$ 295 million, which translates in 56% increase in case the effect of the Tushino Plaza capital gain in 2005 and ESOP restructuring costs in 2006 are excluded.
In 2006, the Group successfully completed its store opening program gaining additional net selling space of approximately 126,000 square metres, thus outstripping its FY 2006 store opening target to add approximately 120,000 square metres. Also, the Group experienced strong Like-for-Like sales trends across both chains (+11%), demonstrating the strongest performance in Q4 2006 (+13%). Over the year, the Group showed continued improvement of Pyaterochka Like-for-Like sales performance in St. Petersburg, with the traffic of 0% in Q4 2006 vs. Q4 2005. In January 2007, LfL sales performance of Pyaterochka in St. Petersburg continued to improve demonstrating positive traffic (+2.5%) for the first time over the last several years.
Integration
The merger between Pyaterochka and Perekrestok was closed on 18 May 2006 and was immediately followed by intense internal work ensuring that the merger benefits are realised according to plan. The first seven months of this work has confirmed the logic of the combination. While results responsibilities remained with the two operating divisions, back office centralisation was an immediate priority. In 2006, the Group centralised key functions in its corporate centre to focus on extracting practical synergies in purchasing, advertising, M&A, cost of financing, and prepared for next steps of integration in the areas of HR, logistics and IT. A new international management team composed of professionals with extensive and successful experience in major Russian companies and leading international retail chains was built up at corporate HQ to lead the integration process and further progress of the Group.
There have been already achieved first practical results. During 2H 2006 the Group’s integrated purchasing team re-concluded contracts with all suppliers on behalf of the enlarged company, with initial net savings of at least US$ 20 million in 2006. These savings were partially re-invested into price.
In 2006, new modern logistics centres have been opened in Moscow and St. Petersburg which will support the Group’s growth and provide further efficiency gains. In November, the Group’s single M&A team successfully closed the second largest on Russia’s food retail market deal to acquire a Moscow based supermarket chain “Merkado” of 16 stores which were quickly integrated into the existing formats of Pyaterochka and Perekrestok.
Quotes
Lev Khasis, Group CEO:
”The strong financial performance of X5 Retail Group in 2006 and the specific progress in integration of Pyaterochka and Perekrestok clearly demonstrate that we are passing smoothly through the integration process, stepping now into the period of capitalisation on practical synergies of the merger. We are in process of building a solid multi-format foundation to continue our further expansion in the role of the main consolidator of the Russian food retail market. I am excited and confident about our future.”
Vitaliy Podolskiy, Group CFO:
“Strong financial results of the Group in 2006 maintain our confidence in successful realization of our further investment plans and in our ability to attract necessary capital for the execution of these plans.”
12M2006 Financial Highlights
Pro Forma X5 Retail Group N.V.
Calculated on the basis of the results of both the Pyaterochka and Perekrestok chains from
1 January – 31 December 2006
• Net Sales of US $3,485 million; up 46.8% vs. 12M 2005
• Gross profit of US $972 million, up 60.9% vs. 12M 2005; Gross margin of 27.9% vs. 25.4% 12M 2005
• EBITDA of US $295 million, up 31.0% vs. 12M 2005; EBITDA margin of 8.5% vs. 9.5% 12M 2005
Pyaterochka chain stand-alone
Calculated on the basis of the results of the Pyaterochka chain from
1 January – 31 December 2006
• Net Sales of US $1,973 million; up 45.2% vs. 12M 2005
• Gross profit of US $530 million, up 56.5% vs. 12M 2005; Gross margin of 26.9% vs. 24.9% 12M 2005
• EBITDA of US $179 million, up 10.0% vs. 12M 2005; EBITDA margin of 9.1% vs. 12.0% 12M 2005
Perekrestok chain stand-alone
Calculated on the basis of the results of the Perekrestok chain from
1 January – 31 December 2006
• Net Sales of US$1,512 million; up 49% vs. 12M 2005
• Gross profit of US $442 million, up 66.6% vs. 12M 2005; Gross margin of 29.3% vs. 26.2% 12M 2005
• EBITDA of US $116 million, up 85.9% vs. 12M 2005; EBITDA margin of 7.7% vs. 6.1% 12M 2005
Q4 2006 Financial Highlights
Pro Forma X5 Retail Group N.V.
Calculated on the basis of the results of both the Pyaterochka and Perekrestok chains from
1 October – 31 December 2006
• Net Sales of US $ 1,074 million; up 51.1% vs. Q4 2005
• Gross profit of US $ 325 million, up 72.3% vs. Q4 2005; Gross margin of 30.3% vs. 26.6% Q4 2005
• EBITDA of US $ 120 million, up 54.2% vs. Q4 2005; EBITDA margin of 11.2% vs. 11.0% Q4 2005
Pyaterochka chain stand-alone
Calculated on the basis of the results of the Pyaterochka chain from
1 October – 31 December 2006
• Net Sales of US $ 599 million; up 49.6% vs. Q4 2005
• Gross profit of US $ 172 million, up 65.2% vs. Q4 2005; Gross margin of 28.8% vs. 26.1% Q4 2005
• EBITDA of US $ 79 million, up 50.2% vs. Q4 2005; EBITDA margin of 13.2% vs. 13.1% Q4 2005
Perekrestok chain stand-alone
Calculated on the basis of the results of the Perekrestok chain from
1 October – 31 December 2006
• Net Sales of US $ 475 million; up 53.0% vs. Q4 2005
• Gross profit of US $ 153 million, up 81.0% vs. Q4 2005; Gross margin of 32.3% vs. 27.3% Q4 2005
• EBITDA of US $ 41 million, up 62.6%% vs. Q4 2005; EBITDA margin of 8.7% vs. 8.2% Q4 2005
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 X5 Retail Group N.V.'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 X5 Retail Group N.V. speak only as at the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail Group N.V. 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.
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