X5 Retail Regulatory News (FIVE)

29 May 2007 07:03

X5 Retail Group N.V.29 May 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN X5 RETAIL GROUP N.V. ANNOUNCES Q1 2007 RESULTS GROUP NET SALES OF US $ 1,106 MILLION, UP +45.1% VS. Q1 20061 GROUP GROSS MARGIN OF 27.3% VS. 26.3% IN Q1 2006 GROUP EBITDA OF US $ 107 MILLION, UP +53.3% VS. Q1 2006 Amsterdam, 29 May 2007 - X5 Retail Group N.V., Russia's largest food retailer interms of sales (LSE ticker: "FIVE"), announced today its preliminary unauditedfinancial results for the 1st quarter of 2007. - Net sales increased by 45.1% in comparison with Q1 2006 and reached US $1,106 million. - Gross profit increased by 50.2% to US $ 302 million - Gross profit margin increased from 26.3% to 27.3% - EBITDA increased by 53.3% to US$ 107 million - EBITDA margin increased from 9.2% to 9.7%2 1. 2006 results in this release are on a pro-forma basis2. Including ESOP termination costs Operational highlights - A new leased distributional center "Sholokhovo" was opened in the Moscowregion with additional capacity of approx. 20,000 sq. meters. - The Group has successfully completed integration of Merkado storesacquired in November 2006: 10 of the stores are currently operating underPerekrestok brand and 7 stores - under Pyaterochka brand. - The Group continued its regional expansion by gaining control over 40Pyaterochka ex-franchising stores with total net selling space of 13,811 sq.meters in Chelyabinsk region. In total during Q1 2007, the Group gainedadditional net selling space of 32,363 sq. meters. - During Q1 2007, the Group further strengthened positive like-for-likesales trends to reach +21% in US Dollar terms (composed of traffic +8% andbasket +13%) or +13% in Rouble terms (composed of traffic +8% and basket +5%),with first over the last few years positive traffic results for Pyaterochkastores in Russia's most competitive market of St. Petersburg. - In March 2007, the Group announced its new employee stock option program(ESOP) designed to efficiently motivate around 100 key executives and employees.The total number of share options is planned to be capped at 10,824,008 GDRs.The program based on the market value of the shares will run through to 18November 2010 and options will be granted in 4 tranches, subject to AGM approvalon 15th of June 2007. - In March 2007, the Group has finalised its 5-year strategy with clearidentification of key formats, geography and logistics strategic goals. - Former Merkado Distribution Centre is designated to become a new HQ of theCompany and consolidate three leased office locations in Moscow which willresult in savings on rental costs and facilitate better communication andcorporate management. Quotes Lev Khasis, Group CEO: "The financial results for the first three months, supported by importantoperational measures and improvements, are in line with our expectations. Ournet sales increased by 45.1% on the back of the successful store opening resultsof the previous periods and the continuous improvement of LfL sales trends inthe key operating regions across both chains. Also, despite of a big portion ofnew store openings during last few months of 2006, we enjoyed an increase ingross margins across both chains due to continued effort of our purchasing team,upgraded logistics capacity in the core Moscow region and a progress inintroduction of private labels. We especially pleased with ahead-of-schedule and efficient integration of "Merkado" chain which shows that the Company's has a well established mechanismof quickly integrating acquired chains. The opening of a new distribution centreprovides an important support to our store opening program and will allow us tofurther improve our operations. I look with optimism into 1H 2007 and over." Q1 2007 Financial Highlights Starting from Q1 2007, the Group will report financial results for the wholeGroup with only disclosing of Net Sales, Gross Profit and LfL sales for singleformats operations. X5 Retail Group N.V. $ Million Q1 2007 Q1 2006 Change (+/-, %)Net Sales 1,106.2 762.3 45.1%Gross Profit 301.5 200.7 50.2%Gross Margin 27.3% 26.3% OPEX 165.3 107.0 54.4%% of Sales 14.9% 14.0% EBITDAR 136.1 93.6 45.5%EBITDAR Margin 12.3% 12.3% Net Rental Expense 29.1 18.2 60.2%EBITDA before options 107.1 75.4 42.0%EBITDA before options Margin 9.7% 9.9% Options - 5.6 -100.0%% of Sales 0.0% 0.7% EBITDA 107.1 69.8 53.3%EBITDA Margin 9.7% 9.2% Pyaterochka chain stand-alone • Net Sales of US $620 million; up 41.3% vs. Q1 2006 • Gross profit of US $161 million, up 48.3% vs. Q1 2006; Gross margin of 26.0% vs. 24.8% Q1 2006 Perekrestok chain stand-alone • Net Sales of US $486 million; up 50.3% vs. Q1 2006 • Gross profit of US $140 million, up 52.5% vs. Q1 2006; Gross margin of 28.9% vs. 28.4% Q1 2006 Quotes Vitaliy Podolskiy, Group CFO: "In line with our strategy focusing on growth, in Q1 2007 we raised our OPEXfrom 14.0% of net sales in Q1 2006 to 14.9% by increasing payroll costs asnecessary action to improve staff availability and the marketing budget. Thisallowed us to achieve an impressive 45.1% sales growth. Also, the consolidationof our regional chain in Yekaterinburg and Chelyabinsk contributed to anincrease in OPEX. As a result, EBITDA before options grew slower than net saleson a pro-forma basis, in line with management expectations." Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of31 March 2007, the Group had 512 company-managed "Pyaterochka" soft discountstores located in the Moscow (232), St. Petersburg (215) and other Russian areas(65), and 169 company-managed "Perekrestok" supermarkets across Central Russiaand Ukraine, including 99 stores in Moscow. As of 31 March 2007, franchisees operated 533 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 clear leader in the Russian food retail market. The Group's audited pro-forma net sales for the FY 2006 were US $3,551 million,up +50% vs. 2005. Pyaterochka chain provided US $1,973 million of net sales, thePerekrestok chain contributed US $1,496 million of net sales, and Merkado chaincontributed US $ 82 million. 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 Sergey Ustimov Head of IR Office +7 495 950 5577 ext. 30430 Mobile +7 909 969 1683 Email sergey.ustimov@x5.ru This information is provided by RNS The company news service from the London Stock Exchange