X5 Retail Regulatory News (FIVE)

22 Dec 2008 07:00



X5 RETAIL GROUP ESTABLISHES PARTNERSHIP

WITH A5 PHARMACY CHAIN 

Amsterdam, 22 December 2008 - X5 Retail Group N.V., Russia's largest retailer in terms of sales (LSE ticker: "FIVE"), and A5 Pharmacy Chain, one of Russia's leading pharmacy retailers, today announced they have entered into a partnership agreement.

In accordance with the agreement, X5 Retail Group will grant A5 preemptive rights to rent space adjacent to X5's food retail stores at commercial market rates, at properties owned or leased by the Company. The agreement grants X5 a call option to acquire the entire A5's business in two years with a discount that will depend on performance of A5's pharmacies located on X5's premises.

Lev Khasis, X5 Retail Group CEO, commented:

"This partnership is an opportunity to enhance our customer appeal and convenience by locating pharmacies adjacent to X5 food retail stores.  We have always seen the potential for synergies between pharmacy and food retail, and are excited about pursuing these opportunities together with A5. The agreement does not call for any cash settlement, which is important in the current market environment. At the same time we will have the option to purchase the business in two years if it meets our criteria for performance, market fundamentals and prospects." 

Roman Buzdalin, the Chairman of the Board of A5 Pharmacy Chain, added:

"Partnership with the unrivalled leader in Russian retail gives us a unique opportunity to strengthen A5's competitive positions and ensure strong organic growth in current economic conditions. X5's strength and leadership makes it our partner of choice, and we see this agreement as a major step forward in our strategy to build A5's leadership in the Russian pharmacy market." 

  Note to Editors:

X5 Retail Group

X5 Retail Group N.V. is Russia's largest retailer in terms of sales. The Company was created as a result of a merger between Pyaterochka (soft discounter chain) and Perekrestok (supermarket chain) on 18 May 2006.

As at 30 September 2008, X5 had 1,027 Company-managed stores located in Moscow, St. Petersburg and other regions of European Russia, Urals and Ukraine, including 794 soft discount stores, 191 supermarkets and 42 hypermarkets.

As of 30 September 2008, X5's franchisees operated 684 stores across Russia. 

X5's net sales for the full year 2007 reached USD 5,320 mln, an increase of 53% year-on-year. Gross profit for the period totaled USD 1,404 mln, EBITDA amounted to USD 479 mln. Full year 2007 net income reached USD 144 mln.

Including Karusel on pro-forma basis the Company's net sales for the first nine months of 2008 totaled USD 6,516 mln, gross profit amounted to USD 1,674 mln, EBITDA - to USD 578 mln and net income - to USD 138 mln.

A5 Pharmacy Chain

Founded in 2006, A5 Pharmacy Chain has established itself as a leading brand in the Russian pharmacy sector with a strong track record of organic growth. Today A5 has 180 pharmacies and is one of the top-5 pharmacy chains in Moscow. A5 is also present in 6 other regions of the European part of Russia.

The chain comprises different formats of pharmacies, from pharmacy kiosks to premium stores in the center of Moscow. A5's well-thought out strategy and strong execution of its customer value proposition have established the chain's leadership and won awards and recognition in independent industry rankings.

A5's net sales for the full year 2007 totaled USD 27.8 mln. The company expects full year 2008 net sales to reach USD 100 mln. The company is owned by members of the A5 management team. 

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.