DETSKY MIR GROUP NET PROFIT INCREASES BY 36.3% TO RUB 6.6BN IN 2018
Moscow, Russia, 1 March 2019 – Detsky Mir Group (“Detsky Mir”, “the Group” or “the Company”, MOEX: DSKY), Russia’s largest specialized children’s goods retailer and a Sistema Group company (LSE: SSA, MOEX: AFKS) announces its audited financial results in accordance with International Financial Reporting Standards (IFRS) for the fourth quarter and twelve months ended 31 December 2018.
Q4 2018 FINANCIAL HIGHLIGHTS[1]
- Group audited revenue increased by 13.0% year-on-year to RUB 34.3 bn
- Online revenue[2] improved by 82% year-on-year to RUB 3.6 bn.
- Revenue in Kazakhstan rose by 68% year-on-year to RUB 823m.
- Like-for-like sales[3] at Detsky Mir stores in Russia grew by 3.0%. The number of tickets grew by 5.4% while the average ticket price decreased by 2.3%.
- Like-for-like sales[4] at Detsky Mir stores in Kazakhstan increased by 31%.
- Detsky Mir opened 63 new branded stores in Q4 2018. The Group had 743 stores as of 31 December 2018.[5]
- Total selling space increased by 11.6% year-on-year to c. 768,000 sq. m.
- Gross profit increased by 9.8% year-on-year to RUB 11.8 bn, with a gross margin of 34.4%.
- SG&A as a percentage of revenue[6] decreased by 60 bps year-on-year, driven by increased operational efficiency.
- Adjusted EBITDA[7] increased by 8.0% year-on-year to RUB 4.6 bn; the adjusted EBITDA margin was 13.5%. EBITDA[8] totaled RUB 4.3 bn (+2.4% year-on-year).
- Adjusted net profit[9] increased by 8.8% year-on-year to RUB 2.9 bn. Net profit totaled RUB 2.6 bn (+1.4% year-on-year).
- The net debt /adjusted EBITDA ratio stood at 1.4x as of 31 December 2018.
FY 2018 FINANCIAL HIGHLIGHTS[1]
- Group audited revenue increased by 14.3% year-on-year to RUB 110.9 bn
- Online revenue almost doubled year-on-year to RUB 8.8 bn.
- Revenue in Kazakhstan almost doubled year-on-year to RUB 2.5 bn.
- Like-for-like sales at Detsky Mir stores in Russia grew by 4.3%. The number of tickets grew by 6.9% while the average ticket price decreased by 2.4%.
- Like-for-like sales at Detsky Mir stores in Kazakhstan increased by 30%.
- Detsky Mir opened 100 new branded stores[10] in 2018.
- Gross profit increased by 12.3% year-on-year to RUB 36.8 bn, with a gross margin of 33.2%.
- SG&A as a percentage of revenue decreased by 100 bps year-on-year, driven by increased operational efficiency.
- Adjusted EBITDA increased by 18.8% year-on-year to RUB 12.7; the adjusted EBITDA margin grew by 40 bps year-on-year to 11.4%. EBITDA totaled RUB 11.9 bn (+20.7% year-on-year);
- Adjusted net profit rose by 31.4% year-on-year to RUB 7.2 bn. Net profit totaled RUB 6.6 bn (+36.3% year-on-year).
EVENTS AFTER THE REPORTING PERIOD
- In February 2019, Detsky Mir Group opened its first store in the Belarusian capital Minsk, with total selling space of 1,690 sq m. Detsky Mir Group entered the Belarusian market under the Detmir brand, in line with its website’s domain name (detmir.ru in Russia and detmir.by in Belarus).
Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:
“In 2018, Detsky Mir Group further strengthened its leading position in the children’s goods market and improved its operational efficiency. Despite the stagnation of the children’s goods market in Russia, our Company grew at a fast pace and increased revenues 14.3% to RUB 110.9bn. The key achievements of last year include the opening of 100 new stores, the doubling of online sales and a 36.3% increase in net profit.
“The key strategic goal of Detsky Mir is consolidation of the children’s goods market in Russia, Kazakhstan and Belarus. We aim to achieve this by expanding the chain, developing omni-channel sales and offering affordable and diverse products, including store brands. Detsky Mir retail chain has considerable growth potential, which is why we plan to open at least 300 more stores in the medium term.
“Our team will continue to make every effort to increase the Company’s market capitalisation and dividend payments. In Q4 2018, Detsky Mir’s net profit under RAS may amount to RUB 3.3bn, which gives grounds for the Company’s management to recommend distributing all net profit as annual dividends.”
Guidance
The Company’s management team expects to open at least 300 new Detsky Mir stores with IRR of ~40% in the next four years. The Company currently expects that like-for-like sales in Russia may grow faster than the children’s goods market as a whole, and remain at single digits due to an increase in the number of cheques in 2019. Another key strategic goal of the Group is boosting operational efficiency and maintaining the adjusted EBITDA margin at double-digit levels in the medium term.
In accordance with the Russian Accounting Standards (RAS), the Company’s management will recommend distributing all net profit for 2018 as dividends.
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Conference Call Information
Detsky Mir’s management will host a conference call today at 16:00 (Moscow time) / 13:00 (London time) / 8:00 (New York time) to discuss the Company’s FY 2018 Audited IFRS Financial Results.
The dial-in numbers for the conference call are:
Russia
+7495 646 93 15
8 800 500 98 63 (toll-free)
UK
+44 207 194 37 59
0800 376 61 83 (toll-free)
USA
+1 646 722 49 16
8442 860 643 (toll-free)
PIN:
62 435 204#
The conference call title: “Detsky Mir Group – FY 2018 Audited IFRS Financial Results”.
For additional information:
|
Nadezhda Kiseleva Head of Public Relations Office: +7-495-781-08-08, ext. 2041 Cell: +7-985-992-78-57 nkiseleva@detmir.ru |
Sergey Levitskiy Head of Investor Relations Office: +7-495-781-08-08 ext. 2315 slevitskiy@detmir.ru |
Detsky Mir Group (MOEX: DSKY) is a multi-format retailer and Russia’s largest specialized children’s goods retailer. The Group comprises the Detsky Mir retail chain, ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The company operates a network of 673 Detsky Mir stores in Russia and Kazakhstan located in 237 cities in Russia and 15 cities in Kazakhstan, as well as 57 ELC and nine ABC stores as of 31 December 2018. The Zoozavr retail chain comprises four stores. Total selling space was approximately 768,000 square meters.
In accordance with the audited Financial Statements under IFRS, Group revenue amounted to RUB 110.9 bn for FY 2017, adjusted EBITDA totaled RUB 12.7 bn and adjusted profit amounted to RUB 7.2 bn.
Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC Sistema[11] – 52.10%, Russia-China Investment Fund (RCIF) [12] – 14.03%, other shareholders owning less than 5% of the shares – 33.87%.
Lear more at www.detmir.ru, corp.detmir.ru, elc-russia.ru.
Disclaimer
Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Detsky Mir. You can identify forward looking statements by terms such as “expect”, “believe”, “anticipate”, “estimate”, “intend”, “will”, “could,” “may” or “might” the negative of such terms or other similar expressions. Detsky Mir wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Detsky Mir does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Detsky Mir, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries Detsky Mir operates in, as well as many other risks specifically related to Detsky Mir and its operations.
([1]) Excluding the effect of the new IFRS 16 (“Lease”) accounting standards.
([2]) Hereinafter, this channel includes online orders at www.detmir.ru, including in-store pick-up.
([3]) Hereinafter, like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth based on stores in operation for at least 12 full calendar months.
([4]) Hereinafter, like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth based on stores in operation for at least 12 full calendar months.
([5]) Including 66 ELC and ABC stores, as well as four Zoozavr stores.
([6]) Hereinafter, selling, general and administrative expenses exclude D&A expenses and adjusted for share-based compensation and cash bonuses under the LTI program
([7]) Hereinafter, adjusted EBITDA is calculated as profit for the period before income tax, FX loss, net finance expense, D&A; adjusted for share-based compensation and cash bonuses under the LTI program. See Attachment A.
([8]) Hereinafter, see Attachment A for definitions and reconciliation of EBITDA to IFRS financial measures.
([9]) Hereinafter, adjusted for additional bonus accruals under the LTI program (together with related tax effects). See Attachment A.
([10]) In 2018, Detsky Mir closed five stores.
([11]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality.
([12]) RCIF, an equity fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: FLOETTE HOLDINGS LIMITED and EXARZO HOLDINGS LIMITED.