LNTA.L Regulatory News (LNTA)

LENTA SALES AND OPERATING HIGHLIGHTS FOR THE FIRST QUARTER

ENDED 31 MARCH 2015

St-Petersburg, Russia; 23 April, 2015- Lenta Ltd, (LSE, MOEX: LNTA / "Lenta" or the "Company") one of the largest retail chains in Russia, is pleased to announce the Company's consolidated sales and operating results for the first quarter ended 31 March 2015. 

1Q 2015 Operating Highlights:

· Total sales grew 37.7% in 1Q 2015 to Rub 54.5bn (1Q 2014: Rub 39.6bn);

· Like-for-like ("LFL")[1] sales growth of 15.0% vs. 1Q 2014;

· LFL traffic growth of 7.8% combined with a 6.7% increase in LFL ticket;

· Four hypermarkets opened during the first quarter of 2015;

· Total of 136 stores at 31 March 2015, comprising 112 hypermarkets and 24 supermarkets;

· Total selling space increased to 727,610 sq.m. as at 31 March 2015 (+40.0% vs. 31 March 2014); and

· Number of active loyalty cardholders[2] increased to 7.1m (+34% y-o-y) with approximately 90% of transactions in the first quarter made using the loyalty card.

Material events in 1Q 2015 and after the reported period:

· In March Lenta completed a primary capital increase of 35.2 million new GDRs via an accelerated bookbuilding, raising gross proceeds of US$225.3 million;

· Lenta has signed Rub 15bn three-year revolving loan facility with VTB Bank;

· Lenta has agreed revised leverage requirements which provide increased covenant headroom under its facility agreements with VTB Capital, EBRD and Raiffeisenbank.

Lenta's Chief Executive Officer, Jan Dunning commented:

"In the first quarter of 2015, Lenta delivered industry leading sales growth of 38%. Consumer income remains under pressure and Lenta's low price-low cost business model positions us well to minimise the impact of inflation and help our customers manage their budgets. Continuous improvements to our offer resulted in exceptional growth of 8% in like-for-like customer visits, the highest in over three years. This enabled total like-for-like sales growth of 15%, with food sales up even more at 17.5%.

We successfully completed a primary capital increase in March with gross proceeds of US$225m which strengthened our balance sheet and provides additional financial flexibility to accelerate our store opening programme in 2015 and beyond. We are well-positioned to capitalise on the growth opportunities in Russian food retail and expect to comfortably exceed our target of doubling net selling space over the three years to December 2016."

For further information, please visit www.lentainvestor.com, or contact:

Lenta Store Developments

In the first quarter of 2015, Lenta opened four hypermarkets (three owned standard stores in Velikiy Novgorod, Chelyabinsk and Orel and one leased compact store in Engels), taking the total number of hypermarkets to 112. The Company entered three new cities in the first quarter of 2015 and is now present in 63 cities. Lenta added 26,459 sq.m. of new selling space, which is 89.0% more than the Company added in the first quarter of 2014. Total selling space as at 31 March 2015 increased to 727,610 sq.m., up 40.0% year-on-year.

Lenta's Operating Performance

Continuing selling space additions and robust sales in LFL stores resulted in an overall sales growth of 37.7% for the first quarter of 2015. Total sales amounted to Rub 54.5bn in the first quarter, compared to Rub 39.6bn for the same period last year. 

In the first quarter of the year Lenta continued to implement digital marketing activities to reach customers with special offers tailored on an individual basis to enhance traffic. The number of active loyalty cardholders increased to 7.1 million as at 31 March, 2015 (+34% y-o-y).

LFL sales growth of 15.0% in the first quarter was supported by LFL traffic growth of 7.8% and average LFL ticket increase of 6.7% to Rub 1,135 due to inflationary effects partly offset by a reduction in the number of items per basket and negative product mix. LFL food sales increased by 17.5%, while non-food declined slightly, reflecting the current pressures on household budgets.

Lenta's expansion resulted in an increase in the number of new maturing stores included in the LFL store base for comparison. During the first quarter of 2015, nine hypermarkets and four supermarkets entered the LFL panel.

The average hypermarket ticket in the first quarter increased to Rub 1,132 (+4.0% compared to the first quarter of 2014), lower than the 6.7% increase in the LFL average hypermarket ticket due to the increase in the proportion of young stores. As of 31 March 2015 the share of selling space younger than three years increased to 61% compared to 49% as the end of 1Q 2014 and the share of stores operating less than one year increased to 30% compared to 27% a year ago. The same trend was visible in the supermarket format, where the average ticket in the first quarter increased by 8.1% to Rub 592 compared to 12.2% increase in the LFL average ticket.

Total customer traffic increased by 34.3% in the first quarter of 2015 compared with the same period of the previous year, comprising 30.0% growth in hypermarket traffic and a 124.2% increase in traffic at Lenta's supermarket format.

The supermarket format demonstrated LFL sales growth of 28.0% for the first quarter of 2015. The supermarket format's share of Lenta's total sales increased to 4.1% in the quarter, up from 2.3% in the first quarter of 2014. Lenta's supermarkets in combination with five hypermarkets operating in Moscow and the Moscow region showed impressive sales ramp-up pace - the share of this region in total sales has increased from zero to 7.4% over the last two years.

Debt update

The proceeds from Lenta's capital increase enabled the Company to reduce total debt and leverage. The combination of this reduction in debt, the optimisation of the Company's loan portfolio and the recent falls in Mosprime rates will lead to a significant reduction in interest costs. The average effective interest rate on Lenta's drawn debt in 1Q 2015 was 16.6%. At current MosPrime rates the average effective interest rate in 2Q 2015 would be 13.5%.

Guidance

Lenta has revised its 2015 outlook following successful completion of the capital increase in March 2015, which provided additional financial flexibility to revise upwards certain of its previously announced growth targets. Lenta plans to open at least 25 new hypermarkets in 2015, while the supermarket openings target of 10-15 new stores in 2015 remains unchanged. Total sales growth guidance remains 34-38%, as the incremental hypermarket openings will, as usual, occur towards the end of the year, thereby benefitting sales growth primarily in 2016.

Planned capital expenditure will increase by RUB 5bn to around RUB 30bn for 2015, with the majority of the incremental capex deployed in 2H 2015. Capital expenditure might be further increased in the course of the year subject to market conditions and the availability of suitable opportunities.

Looking ahead, Lenta expects to further increase hypermarket openings in 2016 to be broadly in line with the number of openings in 2014 and to maintain a similar or higher pace of expansion thereafter. The number of supermarket openings is also expected to increase in 2016.

The acceleration in our rate of expansion enabled by the capital increase will mean that we can comfortably exceed our goal of doubling selling space over the three years to December 2016.

About Lenta

Lenta is one of the largest retail chains in Russia and the country's second largest hypermarket chain (in terms of 2014 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 112 hypermarkets in 63 cities across Russia and 24 supermarkets in Moscow and the Moscow region, with a total of approximately 727,610 sq.m. of selling space. The average Lenta hypermarket store has selling space of approximately 6,300 sq.m. The Company operates five owned hypermarket distribution centres.

The Company's price-led hypermarket formats are differentiated in terms of their promotion and pricing strategies as well as their local product assortment. The Company employed approximately 35,100 people as of 31 December 2014[4].

The Company's management team combines a mix of local knowledge and international expertise coupled with extensive operational experience in Russia. Lenta's largest shareholders include TPG Capital, the European Bank for Reconstruction and Development and VTB Capital Private Equity, all of whom are committed to maintaining high standards of corporate governance. Lenta is listed on the London Stock Exchange and on the Moscow Exchange and trades under the ticker: 'LNTA'.

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 Lenta'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 Lenta speak only as at the date of this announcement. Save as required by any applicable laws or regulations, Lenta 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.