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H1 an Q2 2021 Operating and Financial Results

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Fix Price Group Ltd. (FIXP)
12-Aug-2021 / 09:01 MSK
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.

Fix Price announces key operating and financial results for H1 and Q2 2021

 

Resilient and flexible business model delivers robust EBITDA growth of 24.1%

 

12 August 2021, Moscow - Fix Price (LSE and MOEX: FIXP, the "Company" or the "Group"), one of the leading variety value retailers globally and the largest in Russia, today announces its operating and auditor-reviewed IFRS financial results for the six months ended 30 June 2021 (H1 2021).

 

The Company also announces an interim dividend for H1 2021 of RUB 11.5 per GDR/share and upgrades its forecast for net store openings for the full year to 730.

 

Operating and financial summary for H1 2021

 

Fix Price CEO Dmitry Kirsanov said:       

"I am proud of Fix Price's debut IFRS financial results as a publicly traded company. Our business model has continued to demonstrate its resilience and flexibility as macroeconomic headwinds have contributed to a complex trading environment. Thanks to our ability to consistently offer the best value for money as accelerating inflation puts pressure on real disposable incomes, Fix Price remains the value retailer of choice for customers across its markets of presence.

"Half-year revenue surpassed RUB 100 billion, increasing by 28.1% to RUB 106.1 billion, driven by double-digit LFL sales and the continued expansion of our store network. EBITDA of RUB 19.8 billion was up by 24.1% year-on-year, with a robust EBITDA margin of 18.7% - only slightly below the abnormally high level of last year and significantly ahead of the same period pre-COVID in 2019 - as management maintained strict control of costs and maximised operational leverage. SG&A costs continue to decrease as a share of revenue as we continue to improve lease terms and due to other operational efficiencies.

"During the first half of the year management focused on maintaining operational flexibility and gradually adjusting to the new environment as the post-COVID recovery continues, with the introduction of new price points and fast assortment rotation. We also focused on growing traffic to position Fix Price to benefit from an expected increase in impulse shopping and discretionary spending in the second half of the year. In addition, we accelerated our store opening programme as we sought to lock in lower capex costs and offset an anticipated rise in raw materials costs through the rest of the year, completing 60% of the plan for FY 2021 in the first half of the year and entering 65 new localities.

"Since the end of the reporting period management has introduced a number of measures to support LFL sales growth going forward in response to additional pressures from external factors in the macroeconomic environment. Notwithstanding current headwinds, management remains committed to achieving the guidance that we announced during our IPO. Our belief in the strength of the business is reflected in the decision to pay a dividend equal to 100% of IFRS net profit for H1 2021 - well above the minimum level set out in the Company's Dividend Policy."

LFL dynamics, %

 

 

      H1 2021

H1 2020

H1 2019

LFL sales growth

 

11.9%

13.3%

18.6%

LFL traffic growth

 

9.0%

(4.5%)

10.3%

LFL average ticket growth

 

2.6%

18.7%

7.5%

 

 

 

 

      Q2 2021

Q2 2020

Q2 2019

LFL sales growth

 

11.8%

10.8%

18.3%

LFL traffic growth

 

21.8%

(15.3%)

9.9%

LFL average ticket growth

 

(8.2%)

30.8%

7.7%

 

Store base, geographical coverage and selling space

 

30.06.2021

31.12.2020

30.06.2020

Number of stores

4,585

4,167

3,773

Russia

4,204

3,891

3,589

Belarus

180

152

116

Kazakhstan

138

89

52

Uzbekistan

38

15

0

Latvia

19

14

10

Georgia

4

4

4

Kyrgyzstan

2

2

2

Number of company-operated stores

4,099

3,742

3,363

Russia

3,775

3,507

3,251

Belarus

171

143

67

Kazakhstan

115

77

45

Uzbekistan

38

15

0

Number of franchised stores

486

425

410

Russia

429

384

338

Belarus

9

9

49

Kazakhstan

23

12

7

Latvia

19

14

10

Georgia

4

4

4

Kyrgyzstan

2

2

2

Selling space (sqm)

983,919

889,526

801,710

Company-operated stores

877,518

797,352

712,317

Franchised stores

106,401

92,174

89,393

 

 

Operating results

Store network expansion

 

LFL sales growth

 

Assortment and category mix

 

Loyalty programme development

 

Financial results for H1 2021    

Statement of comprehensive income highlights   

 RUB mln

H1 2021

H1 2020

H1 2019

Change H1'21 vs H1'20, %

CAGR H1'19-H1'21

Revenue

106,116

82,869

64,088

28.1%

28.7%

Retail revenue

93,026

71,506

55,482

30.1%

29.5%

Wholesale revenue

13,090

11,363

8,606

15.2%

23.3%

Cost of sales

(72,968)

(55,771)

(44,200)

30.8%

28.5%

Gross profit

33,148

27,098

19,888

22.3%

29.1%

Gross margin, %

31.2%

32.7%

31.0%

 

 

SG&A (excl. D&A)

(13,741)

(11,238)

(8,968)

22.3%

23.8%

Other op. income and share of profit of associates

421

121

168

247.9%

58.3%

EBITDA

19,828

15,981

11,091

24.1%

33.7%

EBITDA margin, %

18.7%

19.3%

17.3%

 

 

D&A

(5,676)

(4,782)

(4,008)

18.7%

19.0%

Operating profit

14,152

11,199

7,080

26.4%

41.4%

Operating profit margin, %

13.3%

13.5%

11.0%

 

 

Net finance costs

(647)

(317)

(469)

104.1%

17.5%

FX gain / (loss), net

96

1,100

(351)

(91.3%)

n/a

Profit before tax

13,601

11,982

6,260

13.5%

47.4%

Income tax

(3,813)

(2,968)

(2,151)

28.5%

33.1%

Profit for the period

9,788

9,014

4,109

8.6%

54.3%

Net profit margin, %

9.2%

10.9%

6.4%

 

 

 

 

Selling, general and administrative expenses

 

 RUB mln

H1 2021

H1 2020

H1 2019

Change H1'21 vs H1'20, %

CAGR H1'19-H1'21. %

Staff costs

(9,561)

(7,860)

(6,237)

21.6%

23.8%

% of revenue

(9.0%)

(9.5%)

(9.7%)

 

 

Depreciation of right-of-use assets

(4,425)

(3,717)

(3,158)

19.0%

18.4%

% of revenue

(4.2%)

(4.5%)

(4.9%)

 

 

Other depreciation and amortisation

(1,251)

(1,065)

(850)

17.5%

21.3%

% of revenue

(1.2%)

(1.3%)

(1.3%)

 

 

Bank charges

(1,151)

(863)

(544)

33.4%

45.5%

% of revenue

(1.1%)

(1.0%)

(0.8%)

 

 

Rental expenses

(708)

(733)

(660)

(3.4%)

3.6%

% of revenue

(0.7%)

(0.9%)

(1.0%)

 

 

Security services

(744)

(648)

(526)

14.8%

18.9%

% of revenue

(0.7%)

(0.8%)

(0.8%)

 

 

Advertising costs

(356)

(274)

(306)

29.9%

7.9%

% of revenue

(0.3%)

(0.3%)

(0.5%)

 

 

Repair and maintenance costs

(402)

(348)

(357)

15.5%

6.1%

% of revenue

(0.4%)

(0.4%)

(0.6%)

 

 

Utilities

(340)

(236)

(142)

44.1%

54.7%

% of revenue

(0.3%)

(0.3%)

(0.2%)

 

 

Other expenses

(479)

(276)

(196)

73.6%

56.3%

% of revenue

(0.5%)

(0.3%)

(0.3%)

 

 

SG&A (excl. D&A)

(13,741)

(11,238)

(8,968)

22.3%

23.8%

% of revenue

(12.9%)

(13.6%)

(14.0%)

 

 

Total SG&A

(19,417)

(16,020)

(12,976)

21.2%

22.3%

% of revenue

(18.3%)

(19.3%)

(20.2%)

 

 

 

The Group recorded strong revenue growth of 28.1% to RUB 106.1 billion for H1 2021, with a 30.1% increase in retail revenue and 15.2% growth in wholesale revenue.

Growth in the Group's retail revenue to RUB 93.0 billion was driven by a 11.9% increase in like-for-like sales and a 21.8% year-on-year increase in the average number of stores operated by the Group. Growth in the Group's wholesale revenue to RUB 13.1 billion was due to the expansion of its franchised stores footprint. The share of wholesale revenue in the Company's total revenue decreased by 138 bps to 12.3%, driven primarily by the buyout of 58 franchised stores in international geographies in the first half of 2020.

Gross profit increased by 22.3% y-o-y to RUB 33.1 billion for H1 2021. The gross margin normalised by 146 bps for the same period to 31.2%, reflecting a change in the product mix towards food items compared to the abnormally high share of non-food in H1 2020, as well as pressure on cost of goods sold due to continued dislocations in the international freight market, commodities price inflation and FX volatility, and growth of transportation costs and shrinkage.

In comparison to the pre-pandemic environment of H1 2019, the gross margin for H1 2021 improved by 21 bps despite significant macroeconomic headwinds due to freight, commodities and FX pressures. The flexibility of the Fix Price business model successfully mitigates those headwinds through the introduction of new assortment at higher price points, product reengineering and fast assortment rotation. The Group maintains a substantial price advantage over other retailers and preserves customer trust, even as consumers generally remain cautious amid the "new normal" and are taking time to revert to pre-pandemic shopping patterns.

As prices edge up across the board, real disposable income remains under pressure. As per recent market research[3], consumers are tending to reduce spending, postponing impulse buying and shopping predominantly for essential items like groceries and cleaning products. In the current environment, Fix Price has shifted its focus to supporting recovering traffic dynamics by boosting sales of food and personal care and household products, which generate somewhat lower margins compared to discretionary non-food items.

In H1 2020 the gross margin was further supported by higher share of non-food items in sales mix amid the onset of the pandemic. Fix Price stores remained open and enjoyed additional demand for higher-margin nonfood items, driven by strong home consumption trends as entertainment venues and specialty retailers were closed.

Transportation costs as a share of revenue increased by 16 bps year-on-year and reached 1.8% in H1 2021 due to a lower base in H1 2020 (seasonal load restrictions for trucks were suspended in H1 2020 due to COVID), an increase in the number of longer trips to international geographies on the back of network expansion, as well as higher share of retail revenue in the overall revenue mix. In comparison with H1 2019, transportation costs as percentage of revenue increased at a slower pace, by just 9 bps.

Inventory write-down due to shrinkage and write-offs to net realisable value in H1 2021 increased by 16 bps year-on-year to 0.9% as a share of revenue, due to application of higher accruals compared to the year-ago period based on the results of the Q4 2020 inventory count, as well as a higher share of retail revenue in the overall revenue mix. Shrinkage and write-downs as a percentage of revenue improved by 2 bps compared to H1 2019.

The Group's selling, general and administrative expenses decreased as percentage of revenue by 103 bps to 18.3% due to increased operating efficiency (SG&A excluding D&A decreased as percentage of revenue by 61 bps to 12.9%). This was driven mainly by decreases in the share of revenue from rental expenses, staff costs and D&A.

The key driver in reducing SG&A expenses as a share of revenue was staff costs, which decreased by 47 bps to 9.0% of revenue on the back of an increase in efficiency of in-store personnel and HQ personnel amid network expansion.

Rental expenses (in accordance with IAS 17) decreased by 13 bps to 5.2% of revenue, reflecting a continued strong negotiating position with landlords, as lease terms remained favourable for tenants in the post-COVID environment.

Rental expenses (under IFRS 16) decreased by 22 bps to 0.7% of revenue. In absolute terms rental expenses decreased by 3.4% to RUB 708 million due to a reduction in the average lease rate on variable leases, as well as overall reduction of the variable component in operating leases.

Depreciation and amortisation (D&A) expenses increased by 18.7%, driven by a 19.0% increase in depreciation of right-of-use assets and a 17.5% increase in other D&A.

Bank charges increased by 4 bps to 1.1% of revenue, driven by a continued increase in the share of non-cash payments with higher commissions on bank card transactions compared to cash transactions.

Utilities as a share of revenue remained stable y-o-y at 0.3%. The increase in absolute terms of 44.1% to RUB 340 million was attributable to store network expansion and the abnormally cold winter of 20202021.

Costs for security services were down by 8 bps to 0.7% of revenue, while advertising costs as percentage of revenue remained stable at 0.3%.

Other expenses increased by 12 bps to 0.5% of revenue due to expansion of the business, as well as the one-off impact of IPO-related expenses, which were partially offset by income received from a depositary bank in connection with the IPO.

EBITDA IAS 17 and IFRS 16 reconciliation

  RUB mln

H1 2021

H1 2020

H1 2019

EBITDA IFRS 16

      19,828  

      15,981  

      11,091  

Rental expense

(4,764)

(3,650)

(3,373)

Utilities

(76)

(80)

(74)

EBITDA IAS 17

      14,988  

      12,251  

        7,644  

EBITDA under IFRS 16 was up by 24.1% to RUB 19.8 billion for H1 2021. The EBITDA margin normalised by 60 bps to 18.7% due to the high base effect of H1 2020 amid an elevated share of non-food items in sales, while gross margin pressure was to a large extent offset by improvements on the SG&A side. The significant 138 bps increase in the EBITDA margin compared to pre-COVID H1 2019 reflects structural improvements to operational efficiency.

EBITDA under IAS 17 was up by 22.3% to RUB 15.0 billion for H1 2021, with the IAS 17-based EBITDA margin standing at strong 14.1%.

Net finance costs in H1 2021 increased by 104.1% to RUB 647 million, driven by an increase in loans and borrowings year-on-year.

In H1 2021 the Group recorded an FX gain of RUB 96 million, compared to RUB 1.1 billion in H1 2020, due to a significantly lower gain on revaluation of the Company's FX-denominated cash balances.

The Group's total income tax expense increased by 28.5% to RUB 3.8 billion in H1 2021. The effective tax rate was up from 24.8% in H1 2020 to 28.0% in the reporting period due to a deferred tax expense in relation to future dividend distributions.

Profit for the period increased by 8.6% y-o-y to RUB 9.8 billion. The net profit margin was 9.2% versus 10.9% for H1 2020 and 6.4% for H1 2019.

 

 

Statement of financial position highlights

 

 RUB mln

30.06.2021

31.12.2020

30.06.2020

Current loans and borrowings

15,613

15,680

5,797

Current lease liabilities

6,707

6,339

5,436

Non-current lease liabilities

4,103

3,713

2,740

Cash and cash equivalents

(4,959)

(26,375)

(7,789)

Net Debt/(Cash)

21,464

(643)

6,184

Dividends payable

-

23,658

662

Adjusted Net Debt

21,464

23,015

6,846

Adjusted Net Debt/ EBITDA (IFRS 16)

0.5x

0.6x

0.2x

Current lease liabilities

(6,707)

(6,339)

(5,436)

Non-current lease liabilities

(4,103)

(3,713)

(2,740)

IAS 17-Based Adjusted Net Debt/(Cash)

10,654

12,963

(1,330)

IAS 17-based Adjusted Net Debt/ EBITDA (IAS 17)

0.4x

0.5x

(0.1)x

 

As of 30 June 2021, the Group's total loans, borrowings and lease liabilities amounted to RUB 26.4 billion. Financial debt remained largely unchanged compared with 31 December 2020.

As of 30 June 2021, adjusted net debt stood at RUB 21.5 billion, while IAS 17-based adjusted net debt totaled RUB 10.7 billion. The Group's IAS 17-based adjusted net debt to EBITDA ratio remained at a conservative 0.4x, well below the threshold of 1.0x set out in the Group's guidance.

 

 

Statement of cash flows highlights

 

 RUB mln

H1 2021

H1 2020

H1 2019

Profit before tax

13,601

11,982

6,260

Cash from operating activities before changes in working capital

20,759

16,582

11,658

Changes in working capital

(6,437)

(1,088)

(2,514)

Net cash generated from operations

14,322

15,494

9,144

Net interest paid

(741)

(372)

(483)

Income tax paid

(3,115)

(2,299)

(1,198)

Net cash flows from operating activities

10,466

12,823

7,463

Net cash flows used in investing activities

(3,713)

(2,501)

(2,346)

Net cash flows used in financing activities

(28,239)

(15,703)

1,299

Effect of exchange rate fluctuations on cash and equivalents

70

1,289

(459)

Net (decrease) / increase in cash and equivalents

(21,416)

(4,092)

5,957

 

As of 30 June 2021, the Group's net trade working capital[4] was up to RUB 4.4 billion, compared to RUB 1.8 billion as of 30 June 2020, as the Company took pre-emptive measures amid dislocations in the international transportation market and purchased safety stock to lock in purchase prices and ensure shelves remained full.

Capex for the reporting period amounted to RUB 3.8 billion compared with RUB 2.6 billion for the same period of 2020. The year-on-year increase was expected and driven by investments in the distribution centre network, the higher pace of store openings and the restart of the store renovation program.

 

Announcement of interim dividends for 2021

The Board of Directors of Fix Price Group Ltd. is pleased to announce that the Company intends to pay an interim dividend in the amount of RUB 9,788 million or RUB 11.5 per GDR/share (gross amount subject to taxes and fees), amounting to 100% of profit under IFRS for the six months ended 30 June 2021. The interim dividend will be paid on 28 September 2021 to shareholders on the register of members at the close of business on 24 September 2021. The ex-dividend date will be 23 September 2021.

 

About the Company

Fix Price (LSE and MOEX: FIXP), one of the leading variety value retailers globally and the largest in Russia. has helped its customers save money every day since 2007. Fix Price offers its customers a unique and constantly refreshed product assortment of non-food goods, personal care and household products and food items at low fixed price points.

Today there are more than 4,600 Fix Price stores in Russia and neighbouring countries, all of them stocking approximately 1,800 SKUs across around 20 product categories. As well as its own private brands, Fix Price sells products from leading global names and smaller local suppliers.

In 2020, the Company recorded revenue of RUB 190.1 billion, EBITDA of RUB 36.8 billion and net profit of RUB 17.6 billion, in accordance with IFRS.

 

Contacts

Fix Price investor relations   Fix Price media relations

      Ekaterina Lukina

ir@fix-price.com     elukina@fix-price.ru

 

EM

Dmitry Zhadan   Peter Morley   Ekaterina Shatalova

zhadan@em-comms.com morley@em-comms.com shatalova@em-comms.com

+7 916 770 8909  +43 676 684 5252  +7 915 321 8579

[1] Here and hereinafter, like-for-like (LFL) sales, average ticket and number of tickets are calculated based on the results of stores operated by Fix Price and that have been operational for at least the 12 full calendar months preceding the reporting date. LFL sales and average ticket calculated based on retail revenue including VAT. LFL numbers exclude stores that were temporarily closed for seven or more consecutive days during the reporting period and the comparable period

[2] EBITDA calculated as profit for the respective period adjusted for income tax expense, interest expense, interest income, depreciation and amortisation expense, and foreign exchange gain (net)

[3] Research into the target audience of Fix Price stores in cities with population of over one million in the spring 2021, conducted by Vector at the Company's request

[4] Net trade working capital is calculated as Inventories plus Receivables and other financial assets minus Payables and other financial liabilities


Category Code:

IR

TIDM:

FIXP

LEI Code:

549300EXJV1RPGZNH608

Sequence No.:

119777

EQS News ID:

1225942


 

End of Announcement

EQS News Service

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