X5 Retail Regulatory News (FIVE)

24 Sep 2007 11:34

X5 Retail Group N.V.24 September 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN X5 Retail GROUP N.V. RELEASES AUDITED H1 2007 RESULTS Amsterdam, 24 September 2007 - Further to the preliminary results announcementon 17 September, X5 Retail Group N.V. (the "Group"), Russia's largest foodretailer in terms of sales, today publishes its audited financial results forthe first half of 2007. • Net sales increased by 49% to US$ 2,348 million, which represents an acceleration of growth in comparison to 43% in H1 2006 (pro forma, not including Merkado store operations). • Gross profit increased to US$ 617 million, up 53% vs. H1 2006. • Gross profit margin increased from 25.6% to 26.3%. • EBITDA, including new ESOP launch costs of US$ 22 million, increased to US$ 212 million, or 74% increase vs. H1 2006 (EBITDA before new ESOP launch costs increased to US$ 234 million). • Profit before tax grew to US$ 93 million to 3.9% of Net sales vs. US$ 33 million or 3.7% in the same period in 2006. • Net income, including new ESOP costs, more than doubled to US$ 41 million, up from US$ 19 million in H1 2006. Commenting on today's announcement, Vitaliy Podolskiy, Group CFO stated: "Our audited results confirm the strong performance of the Group in the FirstHalf, with revenue and Gross profit growth maintaining high levels and positiveprofitability trends. Strong results were also recorded in Gross Profit andEBITDA, despite the effect of number of one-off factors, related torestructuring of borrowings, ESOP launch, tax structure and depreciation costs. However, underlying business performance for the Second Half remains verystrong and we look forward to reporting our Full Year results in due course."A conference call to discuss the H1 2007 audited financial will be hosted by Vitaliy Podolskiy today at 17.00 Moscow time / 14.00 UK time / 09.00 East Coasttime. To join the call please see the dial-in details below. Dial-in Number: UK Free Call* Dial In: 0808 238 0678 International Dial In: + 44 1452 587 436 Russia Toll Free: 810 800 2440 1012 USA Toll Free: 1866 854 5856 ID Code: 18158220 - Ends - Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of30 June 2007, the Group had 539 company-managed "Pyaterochka" soft discountstores located in the Moscow (241), St. Petersburg (223) and other Russian areas(75), and 170 company managed "Perekrestok" supermarkets across Central Russiaand Ukraine, including 98 stores in Moscow. As of 30 June 2007, franchisees operated 591 Pyaterochka branded stores acrossRussia and Kazakhstan. Perekrestok had 10 stores operated by franchisees in theMoscow area. Pyaterochka and Perekrestok have merged their operations as of 18 May 2006 tocreate the leading company in the Russian food retail market by sales. The Group's Net sales for the 1H 2007 were US$ 2,348 million, up +49% vs. 1H2006. Pyaterochka chain provided US$ 1,306 million of net sales; the Perekrestokchain contributed US$ 1,042 million of net sales. Forward looking statements: This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identifiedby 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 otherwords of similar meaning. By their nature, forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances, a number of which are beyond X5Retail Group N.V.'s control. As a result, actual future results may differmaterially from the plans, goals and expectations set out in theseforward-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 anyapplicable laws or regulations, X5 Retail Group N.V. undertakes no obligationpublicly to release the results of any revisions to any forward-lookingstatements in this document that may occur due to any change in its expectationsor to reflect events or circumstances after the date of this document. Enquiries to: X5 Retail Group N.V. Gennady Frolov Head of Corporate Communications Office +7 495 950 5577 ext. 10130 Mobile +7 495 998 3335 Email gennady.frolov@x5.ru X5 Retail Group N.V. International Financial Reporting StandardsConsolidated Interim Financial Statements andIndependent Auditor's Report 30 June 2007 Contents DIRECTORS' RESPONSIBILITY STATEMENT INDEPENDENT AUDITOR'S REPORT.................................................................................1 FINANCIAL STATEMENTS Consolidated Interim Balance Sheet...........................................................................2 Consolidated Interim Income Statement........................................................................3 Consolidated Interim Statement of Cash Flows.................................................................4 Consolidated Interim Statement of Changes in Equity..........................................................5 NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1 PRINCIPLE ACTIVITIES AND THE GROUP STRUCTURE............................................................6 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES..............................................................6 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES...........................16 4 ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS..............................................17 5 NEW ACCOUNTING PRONOUNCEMENTS..........................................................................18 6 SEGMENT REPORTING.....................................................................................19 7 SUBSIDIARIES...........................................................................................21 8 ACQUISITION OF SUBSIDIARIES............................................................................21 9 RELATED PARTY TRANSACTIONS.............................................................................25 10 CASH...................................................................................................27 11 PROPERTY, PLANT AND EQUIPMENT.........................................................................28 12 INVESTMENT PROPERTY....................................................................................29 13 GOODWILL...............................................................................................30 14 INTANGIBLE ASSETS.....................................................................................31 15 INVESTMENT IN ASSOCIATE................................................................................32 16 INVENTORIES OF GOODS FOR RESALE........................................................................32 17 TRADE AND OTHER ACCOUNTS RECEIVABLE....................................................................33 18 VAT AND OTHER TAXES RECOVERABLE........................................................................34 19 FINANCIAL ASSETS AND LIABILITIES.......................................................................34 20 OTHER LIABILITIES......................................................................................35 21 BORROWINGS.............................................................................................36 22 OBLIGATIONS UNDER FINANCE LEASES.......................................................................37 23 SHARE CAPITAL..........................................................................................38 24 EARNINGS PER SHARE.....................................................................................38 25 REVENUE................................................................................................38 26 EXPENSES BY NATURE....................................................................................38 27 OPERATING LEASE INCOME.................................................................................39 28 FINANCE INCOME AND COSTS...............................................................................39 29 STAFF COSTS............................................................................................39 30 SHARE-BASED PAYMENTS...................................................................................39 31 INCOME TAX.............................................................................................40 32 SEASONALITY............................................................................................42 33 FINANCIAL RISKS MANAGEMENT.............................................................................43 34 CAPITAL RISK MANAGEMENT................................................................................44 35 COMMITMENTS AND CONTINGENCIES..........................................................................45 36 SUBSEQUENT EVENTS......................................................................................46 DIRECTORS' RESPONSIBILTY STATEMENT The following statement, which should be read in conjunction with theindependent auditors' responsibilities stated in the independent auditors'report, is made with a view to distinguishing the respective responsibilities ofmanagement and those of the independent auditors in relation to the consolidatedinterim financial statements of X5 Retail Group N.V. and its subsidiaries (the "Group"). Management is responsible for the preparation of the consolidated interimfinancial statements that present fairly the financial position of the Group at30 June 2007, and the results of its operations, cash flows and changes inshareholders' equity for the twelve month period then ended, in compliance withInternational Financial Reporting Standards as adopted by the European Union. In preparing the consolidated interim financial statements, management isresponsible for: • Selecting suitable accounting principles and applying them consistently; • Making judgments and estimates that are reasonable and prudent; • Stating whether IFRS as adopted by the European Union and IFRS as issued by the International Accounting Standards Board have been followed, subject to any material departures disclosed and explained in the consolidated interim financial statements; and • Preparing the consolidated interim financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business for the foreseeable future. Management is also responsible for: • Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Group; • Maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Group, and which enable them to ensure that the consolidated interim financial statements of the Group comply with IFRS as adopted by the European Union and IFRS as issued by the International Accounting Standards Board; • Maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions in which the Group operates; • Taking such steps as are reasonably available to them to safeguard the assets of the Group; and • Preventing and detecting fraud and other irregularities. The consolidated interim financial statements for the six month period ended 30June 2007 were approved on21 September 2007 by: Lev Khasis, Chief Executive Officer and Vitaliy Podolskiy,Chief Financial Officer. INDEPENDENT AUDITOR'S REPORT To the Management Board of X5 Retail Group N.V.: We have audited the accompanying consolidated interim financial statements of X5Retail Group N.V. and its subsidiaries (the "Group") which comprise theconsolidated interim balance sheet as at 30 June 2007 and the consolidatedinterim income statement, consolidated interim statement of changes in equityand consolidated interim statement of cashflows for the six months then ended,and a summary of significant accounting policies and other explanatory Notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of theseconsolidated interim financial statements in accordance with InternationalFinancial Reporting Standards as adopted by the European Union. Thisresponsibility includes: designing, implementing and maintaining internalcontrol relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated interimfinancial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those Standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonableassurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated interim financial statementspresent fairly, in all material respects, the financial position of the Group asof 30 June 2007, and its financial performance and its cash flows for the sixmonths then ended in accordance with International Financial Reporting Standardsas adopted by the European Union applicable to interim financial reporting(IAS34). Moscow, Russian Federation21 September 2007 X5 Retail Group N.V.Consolidated Interim Balance Sheet at 30 June 2007(expressed in thousands of US Dollars, unless otherwise stated) Note 30 June 2007 31 December 2006ASSETSNon-current assetsProperty, plant and equipment 11 1,415,462 1,271,930Investment property 12 48,232 40,020Goodwill 13 2,681,484 2,622,949Intangible assets 14 481,926 492,259Prepaid leases 15,762 9,440Investment in associate 15 5,250 -Loan originated to related parties 9 154 5,250Other non-current assets 2,050 -Deferred tax assets 31 16,184 18,626 4,666,504 4,460,474Current assetsInventories of goods for resale 16 210,508 208,576Available for sale financial assets 19 5,939 623Derivative financial assets 19 4,194 -Loans originated 19 20,000 10,985Trade and other accounts receivable 17 131,452 148,225Current income tax receivable 2,232 6,161VAT and other taxes recoverable 18 119,982 89,434Cash 10 334,668 167,988 828,975 631,992 Total assets 5,495,479 5,092,466 EQUITY AND LIABILITIESof the parentShare capital 23 70,936 70,936Share premium 2,901,350 2,901,350Cumulative translation reserve 133,956 79,459Accumulated deficit (120,658) (161,708)Minority interests 220 -Total equity 2,985,804 2,890,037Non-current liabilitiesLong-term borrowings 21 1,859 949,123Long-term finance lease payable 22 2,024 2,913Deferred tax liabilities 31 184,206 177,604Long-term deferred revenue 1,513 4,117Share-based payments liability 30 21,700 -Other non-current liabilities - 159 211,302 1,133,916Current liabilitiesTrade accounts payable 546,525 552,060Short-term borrowings 21 1,468,385 218,013Share-based payments liability 30 6,163 69,990Derivative financial liabilities 19 77,362 -Short-term finance lease payables 22 2,373 2,271Interest accrued 5,456 13,544Short-term deferred revenue 2,900 414Current income tax payable 16,787 11,511Other liabilities 20 172,422 200,710 2,298,373 1,068,513Total liabilities 2,509,675 2,202,429Total equity and liabilities 5,495,479 5,092,466 X5 Retail Group N.V.Consolidated Interim Income Statementfor the six months ended 30 June 2007(expressed in thousands of US Dollars, unless otherwise stated) Note 30 June 2007 30 June 2006 Revenue 25 2,347,601 898,783Cost of sales (1,730,836) (661,423)Gross profit 616,765 237,360 Selling, general and administrative expenses (511,298) (202,197)Lease/sublease and other income 27 31,336 14,509Operating profit 136,803 49,672 Finance costs 28 (63,095) (16,025)Finance income 28 9,074 192Net foreign exchange gain / (loss) 9,947 (452)Profit before tax 92,729 33,387 Income tax expense 31 (51,679) (14,115)Profit for the period 41,050 19,272 Attributable to:Equity holders of the parent 41,050 19,272Minority interest - -Profit for the period 41,050 19,272 Basic earnings per share for profit attributable to the equity holders of the parent (expressed in USD per share) 24 0.77 0.77 Diluted earnings per share for profit attributable to theequity holders of the parent (expressed in USD per share) 24 0.77 0.76 X5 Retail Group N.V.Consolidated Interim Statement of Cash Flowsfor the six months ended 30 June 2007(expressed in thousands of US Dollars, unless otherwise stated) Note 30 June 2007 30 June 2006Profit before tax 92,729 33,387Adjustments for:Depreciation and amortisation 26 75,185 22,146Gain on disposal of property, plant and equipment (2,154) (2,016)Loss on disposal of intangible assets - 38Finance costs, net 28 54,021 15,833Impairment of trade and other accounts receivable 26 70 3,396(Gain)/ loss on disposal of subsidiaries - 110Share-based payments expense 30 21,700 3,853Amortisation of deferred expenses 1,405 565Net foreign exchange (gain) / loss (9,947) 2,772Net cash from operating activities before changes in working capital 233,009 80,084 Decrease / (increase) in trade and other accounts receivable 2,215 (16,133)Increase in inventories 6,509 6,288Decrease in trade accounts payable (21,210) (12,771)(Decrease) / increase in other accounts payable and deferred (108,498) 11,120revenueNet cash generated from operations 112,025 68,588 Interest paid (51,093) (13,891)Interest received 6,350 141Income tax paid (52,945) (15,278)Net cash from operating activities 14,337 39,560 Cash flows from investing activitiesPurchase of property, plant and equipment 11 (201,501) (73,936)Non-current prepaid lease (2,389) (6,338)Acquisition of subsidiaries, net of cash acquired 8 1,688 327,504Acquisition of other long-term investments - (389)Short-term loans issued (19,873) -Proceeds from sale of property, plant and equipment 14,978 2,102Acquisition of investments available for sale (15,111) (2,807)Proceeds from sale of investments available for sale 9,232 16Purchase of intangible assets 16 (735) (53)Net cash (used in) / from investing activities (213,711) 246,099 Cash flows from financing activitiesProceeds from short-term loans 678,543 92,629Repayment of short-term loans (413,311) (48,889)Proceeds from long-term loans 199,869 154,879Repayment of long-term loans (101,949) (165,309)Distribution to shareholders - (300,000)Principal payments on finance lease obligations (2,133) (420)Net cash from / (used in) financing activities 361,019 (267,110)Effect of exchange rate changes on cash 5,035 42 Net increase in cash 166,680 18,591 Movements in cashCash at the beginning of the period 167,988 30,067Net increase in cash 166,680 18,591 Cash at the end of the period 334,668 48,658 X5 Retail Group N.V.Consolidated Interim Statement of Changes in Equityfor the six months ended 30 June 2007(expressed in thousands of US Dollars, unless otherwise stated) Attributable to the shareholders of the Company Retained Cumulative earnings / Total Number of Share Share translation (Accumulated shareholders' Minority Note shares capital premium reserve deficit) equity interest TotalBalance as at 1 January 2006 38,306,785 30 122,152 5,724 54,080 181,986 - 181,986Translation movement - - - 9,897 - 9,897 - 9,897Profit for the period - - - - 19,272 19,272 - 19,272Total recognised income for theperiod - - - 9,897 19,272 29,169 - 29,169Reverse acquisition 15,813,253 72,109 2,854,529 - - 2,926,638 - 2,926,638Distribution to shareholders - - - - (300,000) (300,000) - (300,000)Balance as at 30 June 2006 54,120,038 72,139 2,976,681 15,621 (226,648) 2,837,793 - 2,837,793Translation movement - - - 63,838 - 63,838 - 63,838Profit for the period - - - - 64,940 64,940 - 64,940Total recognised income for theperiod - - - 63,838 64,940 64,940 - 64,940Acquisition of treasury shares (902,278) (1,203) (75,331) - - (76,534) - (76,534)Balance as at 31 December 2006 53,217,760 70,936 2,901,350 79,459 (161,708) 2,890,037 - 2,890,037Translation movement - - - 54,497 - 54,497 - 54,497Profit for the period - - - - 41,050 41,050 - 41,050 Total recognised income for theperiod - - - 54,497 41,050 95,547 - 95,547Acquisition of subsidiaries 8 - - - - - - 220 220Balance as at 30 June 2007 53,217,760 70,936 2,901,350 133,956 (120,658) 2,985,584 220 2,985,804 This information is provided by RNS The company news service from the London Stock Exchange