Lenta Ltd. (LNTA;LNTR)
Lenta PLC.: FY 2019 IFRS financial results

25-Feb-2020 / 07:59 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


LENTA PUBLISHES AUDITED IFRS FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

 

St. Petersburg, Russia; 25 February 2020 - Lenta PLC ("Lenta" or the "Company"), one of the largest retail chains in Russia, today announces its audited consolidated IFRS results for the year ending 31 December 2019.

2019 Financial Highlights:

  • Total sales grew 1.0% to Rub 417.5bn (2018: Rub 413.6bn), including retail sales growth of 4.0% to Rub 408.0bn (2018: Rub 392.2bn) and wholesales decline of 55.5%;
  • The gross margin of 22.0% (+0.5 p.p. vs. 2018) increased on the back of a slightly higher retail margin and a positive impact from a declining share of low-margin wholesale business in total sales;
  • SG&A increased to 18.3% of sales (1.6 p.p. higher vs. 2018) mostly due to higher personnel expenses, higher depreciation linked to a reassessment of the economic useful life of land improvements and an increase in rental costs linked to the indexation of rental fees;
  • EBITDA of Rub 34.0bn, down 6.2% (2018: Rub 36.2bn) with a margin of 8.1% (2018: 8.8%).
  • Non-cash expenses of approx. Rub 14.1bn, including impairment of assets of approx. Rub 11.8bn and depreciation from a change in useful life of land improvements of approx. Rub 2.3bn;
  • Net interest expenses of Rub 9.3bn, an increase of 1.9% compared to 2018 (Rub 9.1bn) as an increase in gross debt offset a decline in the average cost of debt;
  • Net Loss[1] of Rub 2.1bn due to non-cash expenses, with a negative Net Profit margin of 0.5% compared to Net Profit of Rub 11.7bn in 2018 with Net Profit margin of 2.9%;
  • Net cash generated from operating activities, before net interest and income taxes paid, of Rub 42.8bn compared to Rub 32.4bn in 2018 with an increase of 32.1% due to movements in working capital;
  • Capital expenditures of Rub 14.1bn, a decrease of 36.1% compared to 2018 (Rub 22.1bn) mainly due to the slower rate of expansion compared to the prior year, tight control over expenses and changes in the phasing of payments for some planned non-expansion projects;
  • The Company generated a positive free cash flow of Rub 17.0bn in 2019;
  • Net Debt of Rub 77.1bn as of 31 December 2019 vs. Rub 93.3bn as at the end of 2018 and Rub 99.3 as at 30 June 2019;
  • Net Debt/EBITDA of 2.3x compared to 2.6x as at 31 December 2018 and 2.7x as at 30 June 2019.

 

2019 Operational Highlights:

  • Eight new hypermarkets and three supermarkets were opened in 12M 2019, while three hypermarkets and seven supermarkets were closed during the same period;
  • Total number of stores was 380 as at 31 December 2019, comprising 249 hypermarkets and 131 supermarkets with a selling space of 1,489,497 sq.m (+1.5% vs. 31 December 2018);
  • Lenta has changed its approach to recognizing wholesale and retail sales and revised sales figures from these two channels for 4Q/FY 2018 and 4Q/FY 2019. The revision did not affect total sales growth of the Company.
  • Like-for-like ("LFL")[2] retail sales growth of 0.1% excluding VAT. This is the equivalent of LFL retail sales growth of 0.9% including VAT, due to the increase in VAT from 1 January 2019;
  • LFL average ticket growth of 0.1% and flat LFL retail traffic in 2019;
  • The number of active loyalty cardholders[3] increased by 10.1% y-o-y to a total of 15.8m as of 31 December 2019;
  • Lenta opened a new distribution center in Moscow with total space of 70,990 sq.m and extended its warehouse in Novosibirsk, bringing its total space to 71,837 sq.m. Both facilities contain new features, which will optimize the Company's procurement and logistics in addition to support centralization and further development of Lenta's "hero categories".

 

Events after the reported period:

  • On the 21st of February Lenta received a certificate of temporary registration in Cyprus following its application to the Department of Registrar of Companies and Official Receiver. As a result of the Redomiciliation becoming effective, the Company is now named Lenta PLC, has adopted a new memorandum and articles of association, and entered into a new deposit agreement with Deutsche Bank Trust Company Americas. All the relevant announcements can be viewed on the Company's website at www.lentainvestor.com

Lenta's Chief Executive Officer, Herman Tinga said:

"2019 presented a challenging economic and operating environment, but we took measures to increase our resilience to adapt to changing market conditions. The year was also a turning point for us at Lenta, both in terms of changes in our shareholder structure and an evolution of our strategy. We continued to slow our previously rapid expansion with a clear focus on store performance and returns. As a result, our overall selling space grew by just 1.5%, and we also closed a few unprofitable hypermarkets. This, along with the subdued macroeconomic environment, aggressive competition, higher promo-activity, and some misses in our non-food performance hit our EBITDA margin in 2019, which declined to 8.1% from 8.8% in the previous year.

In the current environment, our hypermarkets faced the greatest challenges. This was especially visible in the third and the fourth quarter with declining LFL sales - a result of fewer visits by consumers along with a lower number of items purchased per basket. Nonetheless, we retained our strong position in the market and as evidence we see a further inflow of new customers who chose Lenta for grocery shopping. Our priority for this year is to offer customers a better shopping experience, improved assortment and enhanced customer communication to achieve positive trends in the performance of our core business.

Finally, I am satisfied with the work of our supermarkets over the past year. This format had been a significant challenge for us in 2018. However, we appointed a dedicated team and implemented a number of initiatives to better our customer value proposition. As a result we saw material improvements in EBITDA which remained positive throughout 2019. I am confident in the prospects of this format, although it still represents a relatively small part of our business."

Lenta's Chief Financial Officer, Rud Pedersen commented:

"In 2019 we worked on initiatives to achieve operational efficiency and improve our cash flow. Our efforts started to pay off as we saw some improvements in the dynamics of our SG&A in the second half of the year due to optimizing the headcount, our marketing costs and other operating expenses. Our team also achieved good results in managing working capital, which, along with tight control over capital expenditures, resulted in a strong free cash flow of around Rub 17bn. Considering the new stage of the Company's development and our own efforts, we maintain our target to remain free-cash-flow positive and deliver value to our shareholders. 

Improving our cash flow and performance across all formats remains our key priority for the current year, albeit we do not exclude potential opportunities to further strengthen our position in the market. This can include expansion in existing and new formats and further exploration of the online market."

 

 

Operating performance

 

 

Quarterly

Year to Date

 

As at 31 December

4Q 2019

As at 31 December

4Q 2018

Net change

Change (%)

As at 31 December

FY 2019

As at 31 December

FY 2018

Net change

Change (%)

Total sales (Rub, million)

117,893

119,586

(1 693)

(1.4%)

 417,500

  413,562

      3,938

1.0%

Retail sales   (Rub, million)

 115,285

   115,449

(164)

(0.1%)

  407,986

  392,199

     15,787

4.0%

 Hypermarkets

105,524

106,390

(866)

(0.8%)

  373,012

  364,758

      8,253

2.3%

     Supermarkets

9,761

 9,059

702

7.7%

    34,974

    27,441

      7,534

27.5%

Wholesales (Rub, million)

   2,608

    4,136

(1,528)

(37.0%)

    9,514

     21,363

 (11,850)

(55.5%)

 

Lenta updated operational figures provided in January for FY 2018 and FY 2019 with the effect on the previous quarterly results. These changes reflect the elimination of differences between operating and financial accounting.

YoY growth

1H 2019

2H 2019

2019

Total sales

3.1%

-0.9%

1.0%

    Retail sales

7.2%

1.2%

4.0%

LFL retail sales

2.9%

-2.2%

0.1%

     LFL retail traffic

2.2%

-1.9%

0.0%

     LFL retail ticket

0.7%

-0.3%

0.1%

 

Lenta's total sales in 2019 increased 1.0% compared to 2018 on the back of an increase in retail sales by 4.0% and a decline in wholesales by 55.5%. This included retail sales growth from new stores that opened in 2019, new stores that opened in 2018 that are not yet part of the LFL panel and a like-for-like retail sales increase of 0.1%. Lenta recorded a 1.5% increase in net selling space as of 31 December 2019 compared to 31 December 2018.

After the robust performance in the first half, sales came under pressure in the second half of the year due to declining inflation, higher promotional activity and a decline in LFL sales, which was especially pronounced in the fourth quarter. Total LFL retail sales increased 0.1% during the reported year driven by an increase in LFL ticket by 0.1%, while LFL traffic was flat versus 2018.

In 2019 the Company recorded a significant decline in LFL non-food sales by 7.4% (excl. VAT). The results were weak amid a high base of 2018, where LFL non-food sales were positive throughout the year due to revised assortment and successful promo-campaigns. The demand for the similar assortment fell significantly last year mainly due to a deteriorated macroeconomic environment. The company will keep working on its offering in this category to meet consumer demand and deliver positive trends in non-food sales performance.

At the same time, our LFL food sales grew 1.2% (excl. VAT) as a result of positive changes in the assortment, procurement and marketing communication during the year. In 2019 the Company launched new initiatives and focused on the development of "hero categories" - the part of food products that is intended to attract customers to the stores. As a result of the efforts, "hero categories" delivered LFL sales growth of 3.5% (excl. VAT).

The Company maintained a focus on digital marketing activities as a mean to reach customers. Lenta's mobile App has been installed by 4.8 million customers since its launch in the fourth quarter of 2018. Direct communication with consumers via the app with personalized offers delivered promising uplifts in sales. The Company will continue improving its App with a series of upgrades steadily increasing functionality. Lenta's goal is to switch to low-cost digital customer communication leveraging insights from individual customer loyalty-card data to deliver a better customer experience leading to increased loyalty, higher sales and lower costs.

Store Network Development, Supply Chain and Performance Review

Lenta opened eight hypermarkets and three supermarkets during 2019, while three hypermarkets and seven supermarkets were closed, taking the total number of hypermarkets to 249 and supermarkets to 131. The Company did not enter any new cities during the period and remained present in 88 cities[4] across the country. Total selling space as at 31 December 2019 increased to 1,489,497 sq.m., up 1.5% year-on-year.

In 2019 the Company made a decision to run a bottom-up store performance review to identify stores which have low potential to reach expected returns. As a result of this review the Company closed seven supermarkets and three hypermarkets during the year. An additional three hypermarkets may be closed, subject to rent negotiations. The Company will continue operating these stores if there is a positive outcome of lease negotiations.

In the second half of the year the Company added 21 stores to the performance-review base, which resulted in additional impairment charges of around Rub 2.8bn. Lenta is not considering closing any of these stores. 

The Company continued investing in the optimization of its logistics. In 2019, Lenta opened a new distribution center in Moscow with a total space of around 70,990 sq.m. and extended the total space of its existing warehouse in Novosibirsk from 39,137to 71,837 sq.m. The larger space of the distribution center mainly reflects the Company's decision to upgrade its supply-chain standards by adding different temperature zones for fresh and frozen food categories, as well as separate units for hero categories to support their centralization and further development.

 

FY2019 Financial Performance

 

 

IAS 17

 RUB (millions)

1H 2018

1H 2019

2H 2018

2H 2019

2018

2019

% Change 2019 - 2018

Total sales

193,220

199,211

220,342

218,289

413,562

417,500

1.0%

Gross profit

42,319

44,855

46,475

46,803

88,794

91,659

3.2%

Gross margin

21.9%

22.5%

21.1%

21.4%

21.5%

22.0%

0.5p.p

SG&A, % of sales

17.1%

19.1%

16.4%

17.6%

16.7%

18.3%

1.6p.p

Adjusted SG&A[5], % of sales

12.5%

13.9%

12.2%

12.8%

12.3%

13.3%

1.0p.p

EBITDAR[6]

20,030

19,235

22,228

21,067

42,258

40,302

(4.6%)

EBITDAR margin

10.4%

9.7%

10.1%

9.7%

10.2%

9.7%

(0.5p.p)

Rental expenses, % of sales

1.5%

1.6%

1.4%

1.5%

1.5%

1.5%

-

EBITDA

17,112

16,144

19,082

17,816

36,194

33,959

(6.2%)

EBITDA margin

8.9%

8.1%

8.7%

8.2%

8.8%

8.1%

(0.7p.p)

Operating profit before impairment

11,226

8,756

12,990

10,495

24,217

19,251

(20.5%)

Impairment

(200)

(9,005)

68

(2,845)

(132)

(11,850)

89.7x

Operating profit/(loss)

11,027

(250)

13,058

7,651

24,084

7,401

(69.3%)

Profit before income tax

6,354

(4,829)

8,464

3,089

14,817

(1,740)

(111.7%)

Net Profit

5,161

(4,453)

6,634

2,349

11,794

(2,104)

(117.8%)

Net profit margin

2.7%

(2.2%)

3.0%

1.1%

2.9%

(0.5%)

(3.4p.p)

 

Gross profit margin improved to 22.0% from 21.5% in 2018. The Company mainly benefited from a significant decline in a share of a low-margin wholesales business in the total sales throughout the year.An additional positive effect came from a higher retail margin as an increase in promo share as % of sales by 4.p.p. y-o-y was fully compensated by a combined effect of higher promo margin and better coverage of promo activities by suppliers.

The expansion of the Company's own production and increased volumes led to a rise in related costs by 43 bps. The share of shrinkage increased by 13 bps as a result of ongoing changes in procurement, including increased direct import and direct contracts with suppliers. At the same time, Lenta recorded a declining shrinkage in its fresh-food category as a result of the Company's focused efforts.

Supply-chain cost as % of sales rose by 17 bps to 1.3% in 2019 vs 1.2% in 2018. The increase was mainly driven by higher fuel prices and higher personnel expenses following an expansion of own truck fleet and the launch of new distribution centers. Nonetheless, higher transport costs were largely offset by an increase in the share of deliveries by own truck fleet, the increase in supply-chain income versus the previous year and ongoing improvements in transportation efficiency. The Company's average centralization ratio increased to 60.5% from 56.9% in 2018.

Personnel costs as % of sales grew by 56 bps y-o-y due to one-off expenses related to management compensation, including an amount of Rub 116.5m related to a change the shareholder structure, and further stores expansion. Professional fees were higher as % of sales by 12 bps mainly due to rapid growth of the share of customer payments by debit and credit cards, in addition to one-off expense of around Rub 332m related to MTO[7] and the re-domiciliation process. A country-wide increase in tariffs resulted in higher utilities, and cleaning and communal costs which increased by 27bps.

As a result, adjusted SG&A as % of sales increased by 1.0 p.p to 13.3% in 2019 compared to 2018. Rental expenses increased marginally by 5 bps to 1.5% of sales as a result of the indexation of rental fees in 2019 linked to the CPI.

Following the factors mentioned above, EBITDA in 2019 reached Rub 34.0bn and the EBITDA margin stood at 8.1%.

Depreciation as % of sales increased by 63 bps y-o-y, which was mainly due to the Company reviewing the economic useful life of land improvements from 30 years to 7 years (as practice has proven that the factual useful life of land improvements does not exceed 7 years). Consequently, the Company recognized an additional non-cash expense of around Rub 2.3bn in 2019.

Total SG&A as % of sales increased to 18.3% in the reported period, up from 16.7% in 2018.

In the first half of the year, the Company's management decided to reassess its impairment of assets. Lenta performed an impairment test of assets at the lowest level of aggregation of assets that is able to generate independent cash Inflows, which is generally at the individual store level. In 2019 an impairment charge was made on 100 objects (55 hypermarkets and 40 supermarkets), including closed stores, stores that may be closed, and several projects in progress; and also cover land, land improvements, buildings and equipment. The Company recognised one-off non-cash impairment loss of approximately Rub 11.8bn for 2019.

Net interest expenses increased 1.9% to Rub 9.3bn as the increase in gross debt outpaced the reduction of the cost of debt. Overall, the weighted-average effective interest cost decreased 40 bps from 8.6% for 2018 to 8.2% for 2019, declining to 7.8% in the fourth quarter of the year. The Company achieved it through the combined effects of improvements in the terms and conditions of major long-term loan facilities, debt repayments and refinancing.

In 2019 Lenta recorded a tax benefit as a result of losses before tax, which was offset by additional one-off income tax expenses. As a result the Company recognized a tax expense in the amount of Rub 363m.  

In the reported period the Company recognized a Net Loss of Rub 2.1bn compared to a Net Profit of Rub 11.8bn in 2018. This was mainly due to the negative impact from the above mentioned non-cash items in the total amount of Rub 14.1bn.

 

 

IFRS 16

 RUB (millions)

IFRS 16 impact

1H 2019

IFRS 16 impact

2H 2019

IFRS 16 impact

2019

Total sales

-

199,211

-

218,289

-

417,500

Gross profit

187

45,043

171

46,975

358

92,017

Gross margin

0.1p.p

22.6%

0.1p.p

21.5%

-

22.0%

SG&A, % of sales

(0.3p.p)

18.8%

(0.4p.p)

17.2%

(0.3p.p)

18.0%

Adjusted SG&A[8], % of sales

-

13.9%

-

12.8%

-

13.3%

EBITDAR[9]

187

19,422

176

21,243

363

40,665

EBITDAR margin

-

9.7%

-

9.7%

-

9.7%

Rental expenses, % of sales

(1.3p.p)

0.3%

(1.2p.p)

0.3%

(1.2p.p)

0.3%

EBITDA

2,680

18,824

2,866

20,682

5,547

39,506

EBITDA margin

1.3p.p

9.4%

1.3p.p

9.5%

1.4p.p

9.5%

Operating profit before impairment

833

9,589

982

11,477

1,815

21,066

Impairment

-

(9,005)

-

(2,845)

-

(11,850)

Operating profit/(loss)

833

583

982

8,633

1,815

9,216

Profit before income tax

(470)

(5,299)

(393)

2,696

(863)

(2,603)

Net Profit

(376)

(4,829)

(314)

2,035

(690)

(2,794)

Net profit margin

(0.2p.p)

(2.4%)

(0.2p.p)

0.9%

(0.2p.p)

(0.7%)

 

 

 

Cash Flow and Balance Sheet

RUB (millions)

IAS 17

IFRS 16

FY 2018

FY 2019

Change, % 2019 -2018

IFRS 16 impact

FY 2019

Cash flow from operating activities

32,416

42,835

32.1%

5,599

48,434

Movements  in working capital

(4,400)

7,422

2.7x

57

7,479

Net interest and income taxes paid

(10,789)

(11,767)

9.1%

(2,795)

(14,562)

Net cash flow from  operating activities

21,627

31,068

43.7%

2,804

33,872

Net cash flow from  investing activities

(22,144)

(14,008)

(36.7%)

44

(13,964)

Net cash flow from  financing activities

20,020

22,540

12.6%

(2,848)

19,692

Net increase/(decrease) in cash and cash equivalents

19,503

39,600

2.0x

-

39,600

 

Net cash generated from operating activities before net interest and income taxes paid increased by 32.1% and reached Rub 42.8bn as opposed to Rub 32.4bn in 2018. The Company improved its inventory levels, which resulted in better working capital in the reported year. Another positive impact came from higher trade payables compared to 2018 due to better supplier conditions.

Capital expenditures in 2019 were 36.1% lower than in 2018 and amounted to Rub 14.1bn. The reduction mainly reflected the effect of slower organic expansion, tight control over expenses and changes in phasing of payments for some planned non-expansion projects. At 31 December 2019, the Group had contractual capital expenditure commitments in respect to property, plant and equipment, and intangible assets totalling Rub 6.2bn net of VAT (30 December 2018: Rub 11.5bn net of VAT).

As a result, the Company generated Rub 17.0bn of free cash flow during the reported period.

 

RUB (millions)

31 December 2019

30 June 2019

31 December 2018

Gross debt

150,541

170,260

127,080

Long-term debt

82,110

87,064

106,341

Short-term debt

68,431

83,197

20,739

Cash and cash equivalents

73,405

70,969

33,805

Net Debt

77,136

99,291

93,275

Net Debt/EBITDA

2.3x

2.7x

2.6x

 

As of 31 December 2019, the Company had a gross debt of Rub 150.5bn and a cash balance of Rub 73.4bn, giving Net Debt of Rub 77.1bn. In addition, Lenta had Rub 89.1bn of undrawn short- and long-term facilities.

New long-term loan facilities with lower fixed rates were placed early in the first quarter of 2019 and shortly after the closure of the second quarter. These facilities enabled the Company to secure a lower cost of debt with sufficient cash on hand to cover all of Lenta's refinancing needs in 2019 and part of 2020. All of Lenta's debt is denominated in Russian rubles and unsecured. A total of 69.6% of debt is long-term, of which 21.2% is due within one year.

As of 31 December 2019, Net Debt to EBITDA stood at 2.3x, Lease Adjusted Net Debt to EBITDAR[10] at 3.2x and EBITDA to Net Interest at 3.7x. As of 31 December 2018, Net Debt to EBITDA stood at 2.6x, Lease Adjusted Net Debt to EBITDAR at 3.4x and EBITDA to Net Interest was at 3.9x.

Impact of IFRS 16

In 2019 Lenta applied IFRS 16, which changes the accounting principles for operating leases, using the modified retrospective approach under which the prior year figures in the financial statement were not restated. 

Under IFRS 16, Lenta's gross profit increased by Rub 359m due to a reduced supply-chain cost by an amount related to an operating lease of distribution centers. Gross profit margin stood flat at 22.0% vs. compared to figure under IAS 17.

SG&A expenses decreased by Rub 1.5bn mainly due to the exclusion of lease expenses of Rub 5.2bn under the new standard. At the same time, the Company recognized additional depreciation of around Rub 3.7bn. Operating profit before impairment amounted to Rub 21.1bn under IFRS 16 vs. Rub 19.3bn under IAS 17. Adjusted for impairment, the Company recorded operating profit of Rub 9.2bn under the new standard vs. an operating profit of Rub 7.4bn under IAS 17.

Interest expenses under IFRS 16 increased by Rub 2.8bn, related to interest expenses on lease liabilities, while income-tax expense increased by Rub 173m due to additional depreciation expenses. As a result, Net Loss under the new standard reached Rub 2.8bn vs. Rub 2.1bn under IAS 17.

The net changes in cash position has not changed under IFRS 16 vs. IAS 17, while the relevant reclassifications were made within the cash-flow statement.

Guidance

Lenta expects its selling space to increase by ~3% in 2020. This figure reflects the Company's decision to focus on improvements in store performance and operational efficiency. Nonetheless, Lenta will continue looking for attractive growth opportunities and expansion in existing and new formats, as well as further exploration of on-line market.

In 2020 Lenta will continue working to optimize SG&A expenses. The Company expects that the implementation of priorities set for this year will result in the EBITDA margin in 2020 above that of 2019.

Lenta plans to invest ~4% of its sales in capital expenditures in 2020. The Company will have overall lower investments in organic expansion and supply-chain infrastructure when compared to 2019. Meanwhile Lenta will increase spending on IT, digital marketing and other projects aimed to upgrade and enhance the customer's experience in its stores as well as drive operational efficiency.

The current plans for expansion and capital expenditures, as well as further efforts to optimize operating cash flow, will result in positive free cash-flow generation by the Company in 2020.

The full set of accounts for Lenta PLC. for financial years of 2011-2019 are available at www.lentainvestor.com

 

About Lenta

Lenta is the largest hypermarket chain in Russia and the country's fourth-largest retail chain. The Company was founded in 1993 in St. Petersburg. Lenta operates 249 hypermarkets in 88 cities across Russia and 131 supermarkets in Moscow, St. Petersburg, and the Siberia, Ural and Central regions, with a total of approximately 1,489,497 sq.m. of selling space. The average Lenta hypermarket has selling space of approximately 5,500 sq.m. The average Lenta supermarket has selling space of approximately 840 sq.m. The Company operates 12 distribution centers.

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 48,391 people as of 31 December 2019[11].

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 Severgroup, which is 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'

  • A brief video summary on Lenta's business and its Big Data initiative can be seen here.
  • For further information, please visit www.lentainvestor.com, or contact:  
  •  
  • Lenta
  • Mariya Filippova

PR&GR Director

 

Russian Media:

NW Advisors

Victoria Afonina

Тel:+7 495 795 06 23

E-mail: lenta@nwadvisors.com

 

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", and 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. 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.

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[1] Net Loss equates to "(Loss)/Profit for the period" in the attached IFRS Financial Statements

[2] Lenta's stores are included in the LFL store base starting 12 months after the end of the month they are opened

[3] Cardholders who made at least 2 purchases at Lenta during the 12 months to 31 December 2019 are considered active

[4] According to Lenta's methodology for calculating the number of cities of presence, since 1 May 2015 all cities located in Moscow city limits and the Moscow region are shown as Moscow, and all cities located in the Leningrad region and St. Petersburg are shown as St. Petersburg.

[5] Adjusted SG&A is SG&A before rent paid on land, equipment and premises leases, depreciation

[6] EBITDAR is EBITDA before rent paid on land, equipment and premises leases

[7] In 2019 Severgroup LLC acquired 34.45% and 7.47% of Lenta's issued and outstanding voting shares from TPG and EBRD respectively. As a result, Severgroup launched a cash offer on 30 April 2019 to acquire all of the issued shares and GDR's of Lenta (Mandatory Tender Offer);

 

[8] Adjusted SG&A is SG&A before rent paid on land, equipment and premises leases, and depreciation

[9] EBITDAR is EBITDA before rent paid on land, and equipment and premises leases

[10] Lease adjusted Net Debt calculated as Net Debt plus operating leases multiplied by capitalization rate of 8.0x in accordance with the approach of credit rating agencies.

[11] FTE (full-time equivalent). Average FTE for FY 2019 was 51,908 employees