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Lenta

July 27, 2020

1H 2020 financial & 2Q 2020 sales and operating results

Lenta Reports Q2 Retail LFL Sales Growth of 10.1% and 1H EBITDA Margin of 10.2%

St. Petersburg, Russia (July 27th, 2020): Lenta PLC (MOEX & LSE: LNTA; the “Company”), one of the largest retail chains in Russia, is pleased to publish its 1H 2020 auditor-reviewed consolidated IFRS Financial Results and its Q2 and 1H 2020 Operational Results.

View the full press release here

Financial Highlights during 1H 20201:

·             Retail Sales increased 9.6% YoY to 213.4 billion Rubles in 1H 2020

·             Gross Margin increased to 23.29% in 1H 2020, an improvement of 77 bps YoY

·             SG&A decreased as a percent of sales to 17.59% in 1H 2020, an improvement of 153 bps YoY

·             EBITDA Margin increased to 10.17% in 1H 2020, an improvement of 207 bps or 26% YoY

·             Net Income Margin increased to 4.31% in 1H 2020 vs. -2.24% in 1H 2019

·             Free Cash Flow increased to a positive 1.5 billion Rubles in 1H 2020 vs. -4.7 billion in 1H 2019

·             Net Debt/EBITDA decreased 30% to 1.9x as of 30 Jun 2020 vs. 2.7x as of 30 Jun 2019

·             Net Interest Expense decreased 28% YoY to 3.4 billion Rubles in 1H 2020

Operational Highlights during 1H 2020:

·             LFL Sales grew 10.1% in 2Q 2020 (Average Ticket Size 24.2% - Traffic -11.3%)

·             LFL Sales grew 7.1% in 1H 2020 (Average Ticket Size 12.5% - Traffic -4.8%)

·             Retail Sales increased 9.6% in 1H 2020 (Hypermarkets 9.3% and Supermarkets 12.6%)

·             Average Ticket Size increased 12.6% to 1,102 Rubles in 1H 2020

·             Lenta opened three new supermarkets in St. Petersburg in 1H 2020

·             Employee Turnover fell 9.8% to 29% during 1H 2020, from 39% during 1H 2019

·             Private Label Sales continue to grow and now comprise more than 14% of Total Sales

·             Stock Losses (“Shrinkage”) during 1H 2020 decreased 56 bps YoY

·             Online sales grew to 1.9 billion Rubles in 1H 2020 an increase of 324% YoY

Key Events during 1H 2020 and after the Reporting Period:
Update on Redomiciliation to Russia: On July 22nd, Lenta held an EGM meeting where the following resolutions were passed: (1) to approve the redomiciliation in principle; (2) to change the name of the Company after redomiciliation to Russia from Cyprus; (3) to approve the interim financial statements of the Company for the period ended 31 May 2020; (4) to ratify the appointment of the Cyprus auditors and the preparation of the interim audited accounts; (5) to authorize members of the Board to approve of the share issue prospectus. All other actions and main documents relating to Russian Law requirements will be approved at a separate EGM to be held later in 2020.

COVID-19 Response: Since March, the COVID-19 pandemic has had a significant impact on communities and businesses throughout Russia. Lenta has prioritized the safety and well-being of its customers and employees throughout this challenging period. The Company was quick to establish a business-wide COVID-19 response team whose focus since mid-March has been on coordinating Lenta’s effective response to the pandemic. Lenta has worked closely with its suppliers throughout the crisis to ensure shelves remained sufficiently stocked with both food and non-food items during this period of increased demand. Comprehensive health and safety measures were introduced across Lenta’s business to ensure the ongoing safety of colleagues and customers in its stores. Whilst the COVID-19 pandemic had a temporary impact on store traffic during the lockdown period, Lenta is pleased to report significant increases in average ticket sizes across both hypermarket and supermarket formats.

Herman Tinga (Chief Executive Officer) commented on 1H 2020:
“We are pleased to report an encouraging performance during the first half of the year. Retail Sales growth of 9.6% together with effective cost control and gross margin improvement has resulted in a better than expected EBITDA margin of more than 10%. “The first half of 2020 has been an unprecedented period for communities and businesses across Russia.

The COVID-19 pandemic has demonstrated how critical the food supply chain is and we are very proud of the way in which Lenta responded to the crisis and continued to serve communities across the Russian Federation. Our priorities throughout this period have been on ensuring the safety of our customers and employees and that our stores remained well-stocked for customers. We are pleased to report that during Q2 Lenta achieved Retail LFL growth in excess of 10% which reflects the strength of our customer proposition and the effectiveness of the actions taken by the business to ensure our stores remained accessible and safe for all customers.

“Whilst the longer-term impact of COVID-19 on customer behavior remains unknown, we believe Lenta is very well positioned. Our market-leading hypermarket segment continues to offer consumers an excellent product range and a strong value proposition. We are very pleased with the turnaround of our supermarket format over the recent year. Furthermore, we are optimistic about our fast-growing online business where we can efficiently leverage our existing infrastructure to serve customers with maximum convenience. We intend to provide a fuller strategic update to our stakeholders in the second half of 2020.”

Rud Pedersen (Chief Financial Officer) commented 1H 2020:
“Lenta delivered a strong financial performance in the first half of the year reflecting the Company’s operational excellence, effective response to the COVID-19 pandemic, and the resilience of our business model. The Company’s very strong free cash flow and reduced cost of capital contributed to a significant 30% reduction to Lenta’s Net Debt to EBITDA ratio, which now stands at 1.9x.

“Despite lower footfall, as a result of the COVID-19 pandemic, we achieved more than 7% growth in LFL Sales during the first half. This was driven by a 12.5% increase in Average Ticket Size reflecting Lenta’s best-in-class product range and continued product availability.

This sales growth, alongside our continued focus on increasing efficiencies across the business, supported a 26% improvement to our EBITDA Margin.

Despite ongoing macroeconomic uncertainty we are confident in the relevance of our customer proposition and opportunities for long-term growth.”

View the full press release here

For further information please visit www.lentainvestor.com or contact:
Mariya Filippova
Head of Public Relations & Government Affairs
maria.filippova@lenta.com

Timothy Post
Head of Investor Relations
timothy.post@lenta.com

1 Please note that all Financial Highlights are based upon IAS 17 numbers

 

 

 

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