Page 101 - RusRPTSept20

gross margin increased 4.3p.p to 26.7% on margins expansion of PIK revenues (+130bps,30%), better margins of Morton’s projects ( 17% vs 8.3% in 1H2019), lower share of revenues from Morton in total development top line (25% in 1h20 vs 31% in 1H19). Yet we expected Morton’s share to be lower at 20% . As a result, reported gross profit was marginally (6%) below BCSe. Gross margin of non development business improved by 200 bps to 19.9% .
o Finance income was at RUB5.3bn ie 2x higher than we expected on one off gain from early repayment of liabilities for the land. Finance costs recorded in PNL were twice below our estimates as half of it was reflected in CF statement , in inventories change. As a result, PIK net income was 15.5% above BCSe, but if adjusted looked inline.
o Operating cash flows were at -RUB23bn - as expected, remained under pressure on transition onto escrow (sales on escrow in 1H20 amounted RUB20Bn) and growth of inventories . OCF before WC changes was materially higher at RUB16.9bn vs 2.9bnRUBfor 1H19 o Gross debt amounted added 36bn RB to RUB175.8bn, on growth of project finance debt, while corporate debt declined 7% . ND/EBITDA stood at 1.3x ie close to BCSe expected 1.25x “Results are solid and broadly in line with BCSe. Strong revenues and margins growth as result fee development expansion, higher prices. Improvement of gross margins across all segments by 130+ bps. OCF before WC change shows visible Y/Y improvement, yet WC build is at RUB40bn on escrow transition, inventories growth,” BCS Global Markets said in a note.
9.2.5 Retail corporate news
X5 Retail Group reports strong 2Q20 IFRS results. According to management, since the start of 3Q20, revenues are up 16.1% y/y, with 7.6% y/y LFL growth. The core Pyaterochka format saw its top line increase 19.3% y/y, while LFL sales added 9.3% y/y. EBITDA guided to be stronger in 2H20, which we view as a key reason for the revision in the stock price yesterday. Store openings are to be reduced 15-20%. Our View: X5 Retail Group has released strong 2Q20 IFRS results, with an EBITDA margin of 8.4% and a net margin of 3.3% (IAS 17), while EBITDA and net income were up 14% y/y and 20% y/y, respectively. The results came fully in line with our expectations, as management had already shared its outlook on the second quarter trends in July. The most important comment was that the company thinks “the results will have a lasting effect in the quarters ahead.”
Russia's largest traditional retailer X5 Retail Group maintained the leadership in the e-grocery segment in 1H20, according to the updated data by the Infoline agency cited by VTB Capital on August 18. X5 boosted its e- grocery turnover 4-fold year on year to RUB8.2bn ($112mn). As reported by bne IntelliNews, X5 had a strong headstart on digital innovation in Russian retail segment and used the advantage to emerge as largest e-grocer amid coronavirus lockdown. E-grocery is currently the fastest growing segment of Russian e-commerce and foodtech segments. In 1H20 X5 was followed by established market player Utkonos (sales up by 66% y/y to RUB8bn) and Sbermarket e-grocery service of Russia's largest bank Sberbank, that had sales soar 10-fold y/y to RUB6.7bn. "The online food retail market was previously a narrow niche, with really only one player (Utkonos, from 2002),"
101 RUSSIA Country Report September 2020 www.intellinews.com