X5 Retail Group N.V. Reports USD 427 Million in Operating Cash Flow For 2007
17 Apr 2008
Amsterdam, 17 April 2008 - X5 Retail Group N.V. (“X5” or the “Company”), Russia's largest
food retailer in terms of sales (LSE ticker: “FIVE”), published today its audited IFRS results for
the full year ended 31 December 2007.
FY 2007 Highlights
In accordance with its audited full year 2007 results X5 confirms:
• Net sales of USD 5,320 mln, an increase of 53%* year-on-year;
• Gross profit of USD 1,404 mln, an increase of 51% year-on-year; and
• EBITDA of USD 479 mln, an increase of 62% year-on-year.
X5’s audited net profit for 2007 totaled USD 144 mln, an increase of 41% year-on-year.
X5’s audited operating cash flow totaled USD 427 mln, an increase of 35% year-on-year.
Evgeny Kornilov, X5 Retail Group CFO, commented:
“Our strong operational performance in 2007, supported by rigorous working capital
management, resulted in healthy cash flow generation, enabling the Company to finance almost
half of its capital expenditure program from its own resources. These results also provide a solid
foundation for the implementation of our ambitious expansion program throughout 2008 and
beyond".
* 2006 P&L numbers represent final pro-forma results for 2006 as if the merger between Perekrestok and Pyaterochka took place on January 1, 2006 and take into account only two months (November and December) of Mercado operations. These numbers also include reclassification of product handling and delivery expenses from SG&A to Cost of Sales. For your convenience,2007 P&L numbers include one month (December) of Korzinka operations.
For your convenience, Appendix V to this press release contains full year revenue numbers for Mercado (2006), Korzinka (2007) and Strana Gerkulesia (2007).
P&L Highlights
|
USD mln |
FY 2007 |
FY 2006* |
% change y-o-y |
|
Net Sales, incl. |
5,320.4 |
3,485.4 |
53% |
|
Retail |
5,284.3 |
3,460.4 |
53% |
|
Gross Profit |
1,403.9 |
928.9 |
51% |
|
Gross Margin, % |
26.4% |
26.7% |
|
|
EBITDA |
479.3 |
296.7 |
62% |
|
EBITDA Margin, % |
9.0% |
8.5% |
|
|
EBIT |
336.9 |
210.3 |
60% |
|
EBIT Margin, % |
6.3% |
6.0% |
|
|
Net Profit |
143.7 |
102.2 |
41% |
|
Net Margin, % |
2.7% |
2.9% |
|
For detailed discussion on X5 P&L trends please see our press release dated 28 February 2008.
Selected Balance Sheet Data (please see Appendix I for detailed BS information)
|
USD mln |
31 December 2007 |
31 December 2006 |
% change, y-o-y |
|
ASSETS |
|
|
|
|
Non-Current Assets, incl. |
5,660.9 |
4,460.5 |
27% |
|
Property, plant and equipment & investment property |
2,117.4 |
1,305.8 |
62% |
|
Goodwill |
2,934.2 |
2,629.0 |
12% |
|
Intangible assets |
523.5 |
492.3 |
6% |
|
Current Assets, incl. |
861.5 |
632.0 |
36% |
|
Inventories of goods for resale |
325.0 |
208.6 |
56% |
|
Cash |
179.5 |
168.0 |
7% |
|
Total Assets |
6,522.4 |
5,092.5 |
28% |
|
EQUITY AND LIABILITIES |
|
|
|
|
Total Equity |
3,243.7 |
2,890.1 |
12% |
|
|
|
|
|
|
Non-Current Liabilities, incl. |
1,726.4 |
1,133.9 |
52% |
|
Long-term borrowings |
1,464.7 |
949.1 |
54% |
|
Current Liabilities |
1,552.3 |
1,068.5 |
45% |
|
Short-term borrowings |
253.7 |
218.0 |
16% |
|
Total Liabilities |
3,278.7 |
2,202.4 |
49% |
|
|
|
|
|
|
Total Equity and Liabilities |
6,522.4 |
5,092.5 |
28% |
|
|
|
|
|
|
Net Debt |
1,538.9 |
999.1 |
54% |
|
Net Debt/EBITDA |
3.2x |
3.4x |
|
|
Net Working Capital (Net of Short Term Debt) |
(437.1) |
(218.5) |
100% |
* 2006 P&L numbers represent final pro-forma results for 2006 as if the merger between Perekrestok and Pyaterochka took place on January 1, 2006 and take into account only two months (November and December) of Mercado operations. These numbers also include reclassification of product handling and delivery expenses from SG&A to Cost of Sales. For your convenience, Appendix IV to this press release contains detailed information on final pro-forma P&L for 2006. 2007 P&L numbers include one month (December) of Korzinka operations.
For your convenience, Appendix V to this press release contains full year revenue numbers for Mercado (2006), Korzinka (2007) and Strana Gerkulesia (2007).
Balance Sheet – Key Trends and Developments
Non-Current Assets
At the end of 2007 PP&E and investment property amounted to USD 2,117 mln, an increase of
62% year-on-year. This increase is attributable to organic expansion and tactical M&A
transactions closed during 2007.
At the end of 2007 goodwill totaled USD 2,934 mln versus USD 2,629 mln at the end of 2006.
The majority of the amount reported at 31 December 2006 was associated with the reverse
acquisition of Pyaterochka, while USD 305 mln increase in 2007 was generated from tactical
acquisitions in the amount of USD 116 mln and FX revaluation adjustment in the amount of USD
189 mln.
Current Assets
Current assets increased by 36% to USD 862 mln. The increase was lower than revenue growth
and was attributable to higher VAT and other taxes recoverable as well as an increase in
inventories in line with sales growth.
Non-Current Liabilities
Non-current liabilities totaled USD 1,726 mln, an increase of 52% year-on-year, mainly due to
higher amount of long-term outstanding debt (USD 1,465 mln as of 31 December 2007).
During 2007 X5 focused on optimization of its debt portfolio for the purpose of improving the
Company’s financing terms and debt structure. As a result, at the end of 2007 over 85% of X5’s
outstanding debt was long-term, while the effective interest rate was 7.1%.
Current Liabilities
Current liabilities grew 45% year-on-year to USD 1,552 mln. This increase is primarily
explained by growth in trade and other accounts payable as X5 managed to improve its payment
terms with suppliers and other counterparties in 2007.
* 2006 cash flow numbers take into account Pyaterochka’s cash flow only since the date of the merger – 18 May 2006.
Cash Flow from Operating Activities
Net cash from operating activities totaled USD 427 mln on the back of strong operating
performance as well as working capital improvement.
The increase in trade and other accounts receivable is explained by growth in X5’s scale of
business and, as a result, higher supplier bonuses and allowances.
The increase in inventories is explained by the same factor, however, going forward, as X5
continues to develop its logistics infrastructure and increase its levels of supply centralization,
these initiatives should have positive impact on inventories turnover and, hence, the Company’s
working capital.
The increase in trade accounts payable is a result of two key factors: higher volume of purchases
from suppliers and better supplier terms reflecting an improvement of X5’s purchasing power.
The decrease in other accounts payable is mainly attributable to cancellation fees in respect of
Pyaterochka’s Employee Stock Option Program (ESOP) in the amount of approximately USD 65
mln that were reported in the 2006 P&L but paid in 2007.
Cash Flow from Investing Activities
Net cash used in investing activities totaled USD 899 mln, as the Company continued to add
selling space and invested in its distribution infrastructure development.
In total, X5 added 31% in net selling space during 2007. The total net selling area increased by
143.1 thousand sq.m. This takes into account 3.6 thousand sq.m. that were closed during the year
(8 soft discounters and 2 supermarkets) and includes stores acquired through tactical M&A
transactions. Net addition of stores totalled 249, of which 223 were in soft discount format, 23
were supermarkets and 3 were hypermarkets.
* 2006 cash flow numbers take into account Pyaterochka’s cash flow only since the date of the merger – 18 May 2006.
USD 227.9 million positive impact on the investing cash flow in 2006 was a one-off item attributable to the
reverse acquisition of Pyaterochka and associated with the accounting treatment of the transaction.
As a result, at 31 December 2007, X5 operated 868 company-managed stores (consisting of 674
soft discounters, 179 supermarkets, 14 compact hypermarkets and one full-size hypermarket
store), with the total net selling space of 609.2 thousand sq. m.
During 2007 X5 also added net five distribution centers (DCs) (one DC in Moscow was closed),
increasing its storage capacity by 78.1 thousand sq.m. As a result, at the end of 2007 the Group
had 10 DCs with the total storage area of 143.7 thousand sq.m., including four DCs in Moscow
(total storage space of 88.0 thousand sq.m.), three DCs in St. Petersburg (total storage space of
37.2 thousand sq.m.), one DC in Nizhniy Novgorod (storage space of 13.5 thousand sq.m.), one
DC in Chelyabinsk (2.5 thousand sq.m.) and one DC in Yekaterinburg (2.5 thousand sq.m.).
A step-up in 2007 CapEx is explained by USD devaluation against RUR (9%), inflation in real
estate and construction prices as well as the fact that a bigger than planned amount (about 20% of
full year CapEx) was spent on stores to be opened in 2008 and further, including purchasing of
landplots for future hypermarket construction.
Cash Flow from Financing Activities
Net cash from financing activities amounted to USD 470 mln as the Company raised funds to
finance its capital expenditure program.
During 2007 X5 optimized its debt portfolio and as a result decreased its cost of funding and
improved its debt structure.
The steps undertaken by the Company in 2007 to optimize its debt portfolio included ruble debt
restructuring whereby X5 replaced three outstanding bonds previously issued by Pyaterochka and
Perekrestok in the total amount of RUR 6 bln with one 7-year bond (puttable in 3 years) with an
interest of 7.6% and a notional amount of RUR 9 bln (USD 352 mln). Additionally, X5 has
replaced its previous syndicated loan with a USD 1.1 bln facility bearing interest of LIBOR + 225
basis points p.a. during the first year. Starting from the second year, spread over LIBOR on this
facility will decrease to 200 bps or lower depending on the company’s Net Debt/EBITDA ratio.
As a result of these measures, at the end of 2007 over 85% of X5’s outstanding debt was longterm,
while the effective interest rate was 7.1%.
* 2006 cash flow numbers take into account Pyaterochka’s cash flow only since the date of the merger – 18 May 2006.
USD 300 million negative impact on the financing cash flow in 2006 was a one-off item attributable to the
reverse acquisition of Pyaterochka and associated with the accounting treatment of the transaction.
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