O'key Regs Regulatory News (OKEY)

O`KEY GROUP REPORTS NET PROFIT FOR H1 2022

DA! DISCOUNTERS EBITDA MORE THAN DOUBLED 

Press Release

15 September 2022

O`KEY Group S.A. (LSE, MOEX: OKEY, the “Group”), one of Russia’s leading food retailers, has announced its financial results for the first six months of 2022 based on condensed consolidated interim financial statements.

All materials published by the Group are available on its website, okeygroup.lu.

All results are according to IFRS 16, unless stated otherwise.

H1 2022 Financial Highlights

Key events after the reporting period

The full announcement is available at https://okeygroup.lu/press-center/press-releases/2022/1810/.

Armin Burger, O`KEY Group CEO, commented:

“In the first half of 2022, the Group delivered strong operational and financial results, despite the unprecedented geopolitical and macroeconomic turmoil that the global economy faced. The Group demonstrated a year-on-year improvement in both gross and EBITDA margins in H1 2022.

Since March 2022, we have successfully revised our supplier portfolio and adjusted the supply chain and logistics to ensure full-shelf product availability. Our focus remains on domestic supply, with around 80% of the assortment sourced locally.

We continued to develop the three pillars of O'KEY Group's business model: modern O'KEY hypermarkets, fast-growing DA! discounters, and the e-grocery business. The Group acquired and relaunched under a new concept 4 O'KEY hypermarkets in the Moscow region, opened 12 DA! discounters in Central Russia and added 6 pick-up points for online orders at O'KEY hypermarkets in Moscow and St. Petersburg.

For O'KEY hypermarkets, we went on optimising the store portfolio and streamlining the cost base. In Q2 2022, we temporarily limited promotional activity at hypermarkets in order to ensure sufficient stock levels and full on-shelf availability, as well as protect our margins in a highly inflationary environment. In H1 2022, the hypermarkets demonstrated a strong EBITDA margin of 8%.

DA! discounters showed a 63% YoY revenue growth with a record-high like-for-like increase of 35% in H1 2022. In Q2 2022, the discounter business reached 28.5% of the Group's net retail revenue. As the chain continued to ramp up in H1 2022, its EBITDA grew more than twofold, and the EBITDA margin improved substantially to 6.8%.

We expect the discounters to remain a key driver of the Company's continued top-and bottom-line growth and, in several years, to constitute half of the Group's business. In 2022, we plan to open up to 45 new DA! discounters and undergo a concept update in up to 8 O'KEY hypermarkets.”

Group Profit and Losses Highlights in H1 2022

Group Revenue

In H1 2022, Group retail revenue rose by 10.4% YoY to RUB 96,814 mln on DA! discounters’ record-high LFL performance, supported by store expansion of both O`KEY and DA! chains. Rental income increased by 2.6% YoY and amounted to RUB 989 mln in H1 2022. Total Group revenue climbed 10.3% YoY to RUB 97,803 mln in H1 2022.

Group net retail revenue and LFL revenue in H1 2022

For more details, please refer to the Group’s Q2 2022 Trading Update.

Group Gross Profit

In H1 2022, Group gross profit went up by 14.5% YoY to RUB 22,302 mln, and gross margin rose by 0.8 pps YoY to 22.8%. The improvement was mainly thanks to the Group’s effective procurement and logistics management, timely efforts in reshaping its product supply, as well as operational synergy between the formats.

Group Selling, General and Administrative Expenses

The Group’s total SG&A expenses increased by 14.6% YoY to RUB 19,794 mln in H1 2022. SG&A expenses as a percentage of revenue rose by 0.75 pps YoY to 20.2% in H1 2022, mainly due to the growth of personnel costs and depreciation and amortisation (D&A) expenses.

In H1 2022, personnel costs increased by 14.3% YoY to RUB 8,494 mln and, as a percentage of revenue, by 0.3 pps YoY to 8.7%. The growth came mainly on the back of new store openings across both hypermarket and discounter chains, as well as wages indexation in hypermarkets.

Advertising and marketing expenses increased by 14.4% YoY to RUB 1,029 mln, and by 0.05 pps YoY to 1.1% as a percentage of revenue, mainly due to the planned replacement of advertising equipment in hypermarkets.

Repairs and maintenance expenses went up by 18.1% YoY to RUB 766 mln, and, as a percentage of revenue, by 0.05 pps YoY to 0.8%, largely due to new hypermarket and discounter openings.

In H1 2022, D&A expenses rose by 17.7% YoY to RUB 5,115 mln, and by 0.3 pps YoY to 5.2% of revenue, driven primarily by the discounter chain growth.

Group EBITDA and EBITDA Margin

The Group’s EBITDA grew by 14.2% YoY to RUB 7,511 mln, while EBITDA margin improved by 0.3 pps YoY to 7.7% in H1 2022.

O`KEY hypermarkets EBITDA declined by 2.3% YoY, from RUB 5,904 mln in H1 2021 to RUB 5,765 mln in H1 2022, due to the above-mentioned SG&A expenses growth, partially offset by an increase in gross profit. O`KEY hypermarkets EBITDA margin fell slightly by 0.1 pps, from 8.1% in H1 2021 to 8.0% in H1 2022.

DA! discounters EBITDA more than doubled year-on-year to RUB 1,745 mln in H1 2022, compared with RUB 671 mln in H1 2021. As the business continued to ramp up, DA! EBITDA margin improved by 2.5 pps YoY and reached 6.8% in H1 2022.

Group Net Profit

In H1 2022, the Group posted RUB 576 mln in net profit, compared to the profit of RUB 152 mln in H1 2021.

Group Cash Flow

Net cash from operating activities amounted to RUB 948 mln and was driven mainly by the discounter business growth, partially offset by an increase in working capital in H1 2022.

Net cash used in investing activities amounted to RUB 3,482 mln in H1 2022, almost a twofold increase in comparison with the RUB 1,786 mln of cash used in H1 2021. In H1 2022, the Group invested approximately RUB 1.6 bn (excluding VAT) in the development of the hypermarket business, and over RUB 1.9 bn (excluding VAT) in the development of the discounter business.

Net cash from financing activities amounted to RUB 1,405 mln in H1 2022, compared with the RUB 4,344 mln of net cash used in financing activities in H1 2021. The dynamics resulted from the Group's regular credit portfolio refinancing in H1 2022.

As of 30 June 2022, the Group had RUB 13,150 mln of available credit lines in Russian roubles with fixed and floating interest rates, in respect of which all conditions have been met. If necessary, proceeds from these facilities may be used to finance operating and investing activities.

Group Net Debt Position

[1] Short-term debt does not include interest accrued on loans and borrowings.

The Group’s financial position remained stable during the reporting period.

As of 30 June 2022, the total interest-bearing liabilities (net of cash) to LTM EBITDA ratio decreased to 3.68x from 3.97x as of 30 June 2021. As of 30 June 2022 and during the twelve-month period then ended, the Group complied with all of its loan covenants.

Group interim IFRS report

The Group’s interim report, including the full set of interim IFRS financial statements, can be found at https://okeygroup.lu/investors/result-center/ifrs-statements/.

For more information, please contact:

ABOUT O`KEY GROUP

O`KEY Group S.A. (LSE, MOEX: OKEY) is one of the leading grocery retailers in Russia, operating hypermarkets under the O`KEY brand and discounters under the DA! brand.

As of 30 June 2022, the Group operated 243 stores across Russia (79 hypermarkets and 164 discounters) with a total selling space of 638,638 square meters. The Company opened its first hypermarket in St. Petersburg in 2002 and has since demonstrated continuous growth. O`KEY was the first Russian food retailer to launch e-commerce operations in St. Petersburg and Moscow, offering a full range of hypermarket products for home delivery. The Group has nine e-commerce pick-up points in Moscow and ten e-commerce pick-up points in St. Petersburg. In 2015, the Group launched the first discount chain in Russia under the DA! brand. The Group operates five distribution centres in Russia – three in Moscow and two in St. Petersburg. The Group employs more than 22,000 people.

In 2021, the Group’s revenue amounted to RUB 187.1 bn, while EBITDA reached RUB 15.5 bn.

The O`KEY Group shareholder structure is as follows: NISEMAX Co Ltd – 49.11%, GSU Ltd – 34.14%, free-float and other holders – 16.75%.

DISCLAIMER

These materials contain statements about future events and expectations that are forward-looking statements. These statements typically include words such as ‘expects’ and ‘anticipates’ and words of similar import. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

None of the future projections, expectations, estimates or prospects in this announcement should be taken as forecasts or promises, nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in this announcement. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.