Lenta : 1H2017 IFRS Financial Results

St. Petersburg, Russia; 30 August 2017 - Lenta Ltd ('Lenta' or the 'Company'), one of the largest retail chains in Russia, today announces its reviewed consolidated IFRS results for the half year ending 30 June 2017.

To view the full press release, click here.

1H 2017 Financial Highlights:

• Total sales grew 16.7% to RUB 163.5bn (1H 2016: RUB 140.1bn);
• Adjusted EBITDA of RUB 15.6bn, up 14.2% (1H 2016: RUB 13.7bn) with a margin of 9.6% (1H 2016: 9.8%);
• Gross margin of 21.7% (-0.15 p.p vs. 1H 2016) decreased as better supplier terms, supply chain improvements, shrinkage and more efficient in-store production were offset by investments in prices and a one-off effect of around Rub 0.9bn as a result of the new Trade Law;
• SG&A rose to 15.9% of sales (+0.4 p.p vs. 1H 2016) despite continuing successful productivity measures in the like-for-like stores, due to combined effects of the high number of new stores in the ramp-up phase, rise in depreciation and increases in utility and communal costs;
• Capital expenditures of RUB 10.0bn, a decrease of 38.3% compared to 1H 2016 (RUB 16.1bn) linked to lower investments in land acquisition and hypermarket construction;
• Net cash generated from operating activities, before net interest and income taxes paid, of RUB 7.3bn compared to RUB 7.2bn in 1H 2016 (an increase of 1.7%);
• Net interest expenses of RUB 5.4bn, an increase of 21.3% compared to 1H 2016 (RUB 4.5bn) primarily due to higher amount of borrowings not compensated by lower cost of debt;
• Net Profit of RUB 4.5bn, up 3.8% (1H 2016: RUB 4.3bn) with a margin of 2.7%; and
• Net Debt of RUB 98.3bn as of 30 June 2017 (Net debt/Adjusted EBITDA of 2.9x).

1H 2017 Operational Highlights:

• Four hypermarkets and 11 supermarkets opened during the first half of 2017;
• Total store count reached 254 stores as at 30 June 2017, comprising 195 hypermarkets and 59 supermarkets;
• Total selling space increased to 1,173,416 sq.m as at 30 June 2017 (+27.1% vs. 30 June 2016);
• Like-for-like ('LFL') sales growth of (1.8%) vs 1H 2016;
• LFL average ticket increased by 0.6%;
• LFL traffic growth of (2.4%);
• Number of active loyalty cardholders increased to 11.5m (+23% y-o-y) with approximately 94% of transactions in the second quarter made using the loyalty card.

Material events during and after the reported period:

• In May Lenta completed placement of Rub 5.0bn 3-years bonds with semi-annual coupon and an interest rate of 8.7%;
• The Company issued 98,217 new ordinary shares (491,085 GDRs) under Management Incentive Program (MIP) and Long-Term Incentive Program (LTIP). As a result share capital increased to 97,416,963 shares (487,084,815 GDRs);
• Lenta signed an agreement to lease 14 hypermarkets in Moscow and Russian regions currently operated under the NASH brand; and
• Analytical credit rating agency (ACRA) assigned Lenta a rating of A+ (RUB). The outlook on the rating is 'Stable'.

Lenta's Chief Executive Officer, Jan Dunning said:
'Lenta's results demonstrate the Company's ability to combine strong profitability with rapid growth despite the challenging macro and consumer environment. We adapted well to recent regulatory changes and managed to achieve an improvement of underlying profitability and cash generation, excluding the one-off effects of the new Trade Law.

We have made good progress in developing our organic pipeline and also signed an agreement to lease 14 former 'Nash' hypermarkets, including 7 hypermarkets in Moscow. This will significantly strengthen our position in the strategic Moscow market and is complimentary for our expansion in other regions. As a result we have upgraded our store opening guidance to about 40 hypermarkets in 2017 while adjusting our opening schedule which enables the larger number of new hypermarkets without increasing capex guidance for the year'.

To view the full press release, click here.

Adjusted EBITDA is reported EBITDA as set out in Note 3 of the IFRS financial statements adjusted for non-recurring one-off items such as changes in accounting estimates and one-off non-operating costs and income
Net Profit equates to 'Profit for the period' in the attached IFRS Financial Statements
Lenta's stores are included in the LFL store base starting 12 months after the end of the month they are opened
Cardholders who made at least 2 purchases at Lenta during the 12 months to 30 June 2017 are considered active
31,744 shares (158,720 GDRs) under LTIP are held as treasury shares