Page 132 - bneIntelliNews monthly country report Russia May 2024

6.3%, and accor. EBITDA amounted to RUB 55bn. We also note a decrease in net financial expenses and depreciation, which led to an increase in net profit by 97% y/y to RUB 24bn. At the same time, X5’s capital expenditures increased significantly, amounting to RUB 36bn. in 1Q24 versus RUB 17.2bn. in 1Q23. Overall, X5's 1Q results look strong, although we expect greater pressure on margins from labor costs in coming quarters and maintain our forecast for margins to decline in 2024.
On Thursday (April 25), X5 reported that the Moscow Regional Arbitration Court granted the Ministry of Industry and Trade's application to suspend the exercise of X5's corporate rights in its Russian subsidiary LLC Corporate Center X5. The court granted the application in full, but has not yet published the full text of its decision. Thus, the company is not aware of the specific content of the court decision and the date of its publication, which serves as the starting point for the procedures provided for by law. However, it is already clear that the court decision suspends X5’s shareholder rights in LLC “Corporate Center ICS 5” and transfers the shares owned by X5 to the subsidiary company itself. The decision also means that non-Russian holders of depositary receipts and beneficiaries of the company (as of the date of issue of the full court decision) will be able to receive shares of the subsidiary in proportion to their participation in X5, while Russian holders and ultimate owners of depositary receipts of the company (as of issuance of a full judgment) will be required to accept such distributed shares. The court's decision does not affect trade operations in Russia.
• • Other
Fix Price released its 1Q24 results. We note the following key points: LfL sales dynamics improved only slightly despite a lower base – growth was 0.4%, and traffic decreased by 3.2% (vs. -0.9% and -4.4% in 4Q23). As a result, revenue increased by 9% to RUB 71.7 billion, being 4% below our forecast and 2% below the consensus.
Gross margin decreased by 64 bps. y/y to 32.7%, slightly below our and consensus expectations.
The company continued to experience significant pressure on profitability from high personnel cost increases. These expenses increased by 31% and by 250 bps. as a percentage of revenue. As a result, adjusted profitability EBITDA and EBITDA (IAS 17) decreased by 3.4 percentage points. and 3.5 p.p. to 13.9% and 8.8% respectively. EBITDA (IAS 17) was 23% below our forecast and 19% below consensus. Fix Price net profit fell by 44% to RUB 3.3 billion. in 1Q24. Free cash flow before lease payments amounted to RUB 2.0 billion. versus RUB 3.1 billion a year earlier. The company ended the quarter with a net cash position of RUB 13.2 billion. (IAS 17).
Overall, the results look weak given the relatively modest pace of revenue growth and the significant decline in margins. We believe that in the absence
132 RUSSIA Country Report May 2024 www.intellinews.com