Page 107 - RUSRptSept18

9.2.4 Construction & Real estate corporate news
One of Russia's largest real estate developers LSR Group almost doubled its net profit year-on-year to RUB3.8bn ($56mn) in the first half of 2018 , with revenues up by 27% y/y to RUB52bn, and Ebitda margin of 18%. The company also announced a change in CEO, as the key shareholder Andrey Molchanov is to be replaced by Maxim Sokolov and ex-Minister of Transport. Rivalry between major developers such as LSR, PIK, and Etalon will intensify as they are set to benefit from the ongoing regulatory changes in the sector that will limit the pre-sale of housing under share agreements, giving the upper hand to large companies with access to financing sources. Previously LSR’s and its main peers posted robust second-quarter operating results , while the market leader PIK promised to resume dividend payments with a solid payout and Etalon said it will channel shares to top management incentive programme . In the first half of 2018 strong operational numbers turned LSR's net operating cash flow positive to RUB1.2bn versus three consecutive years of negative readings. Net debt declined by RUB2.5bn to RUB40.6bn, with 1.0x net debt/Ebitda leverage.
Russia's largest real estate developer PIK Group reported IFRS results for January-June 2018, which had Ebitda almost quadruple year-on-year to RUB10.5bn and revenues surge 2.4-fold y/y. However, the results of the company were affected by the acquisition of peer Morton and a new accounting method for revenue recognition (IFRS 15). PIK peaked the industry through Morton acquisition, but rivalry with other major players LSR and Etalon will intensify as they are set to benefit from the ongoing regulatory changes in the sector that will limit the pre-sale of housing under share agreements, giving the upper hand to large companies with access to financing sources. Previously PIK and its main peers posted robust second-quarter operating results , while the PIK also promised to resume dividend payments with a solid payout and Etalon said it will channel shares to top management incentive programme . For January-June, however, cash flow generation of PIK "was on the weaker side, as a working capital release did not provide as much of a boost as the one in 1H17," Sberbank CIB commented on August 31. Operating cash flow for 1H18 was about RUB9.5bn, down 53% y/y, while gross debt expanded due to the greater need for cash of the expanded development business (net debt remained flat).
9.2.5 Retail corporate news
Russia’s leading supermarket chain X5 Retail Group is still out in front with a strong set of 2Q18 IFRS results . The company's EBITDA of RUB29bn beat the consensus expectations by 4% and EBITDA margin of 7.5% was up 150bp q/q, primarily due to the seasonally lower share of selling, general and administrative expenses (SG&A) expenses helped by the 20bp q/q gross margin expansion, VTB Capital (VTBC) said in a note on August 15. However, the EBITDA margin was down 120bp on a y/y basis due to the different pace of sales growth -- 27.5% y/y in 2Q17 vs. 19.3% y/y in 2Q18 -- and subsequently higher share of SG&A expenses as a percentage of sales. “The bottom line was weaker than market expectations due to the higher depreciation expense and income tax rate. We think that the latter is less important and that the stock is already more attractive after its 14% drop in the last ten days. The company’s sales growth is in line with our FY18F forecast of around 19% y/y and management’s guidance of a 7+% EBITDA margin,” VTBC said. Sales growth remains very strong and was up 19.3% y/y, broadly coinciding with the previously reported trading update. For 1H18, y/y sales growth stood at 19.6%. The gross margin in 2Q18 did not see much change either y/y or q/q, which means stable levels of promos, format mix and commercial terms. The bugbear was the growth in costs across the board, as the sales growth pattern was at a different level. “On a q/q basis the trend saw
107 RUSSIA Country Report September 2018 www.intellinews.com