Lenta may consider possibility of paying dividends beginning in 2020
MOSCOW. Feb 22 (Interfax) - Retailer Lenta may consider the possibility of dividend payments beginning in 2020, the retailer said in a statement.
"Lenta will continue the buyback program, but is considering other means of distributing profit among shareholders, including an open tender or dividends. Lenta expects that possible changes in the corporate structure will be implemented in 2019, which will make it is possible to consider dividend payments beginning in 2020," the statement said.
Lenta announced a buyback at the end of October 2018, on the day that operating results for Q3 were announced. It said that growth in revenue had slowed to 12.5% from 16.6% in Q2 and that in would open significantly fewer stores in 2019 than in 2018.
The buyback program began October 29, 2018 and will last until October 29, 2019. Its limit is 11.6 billion rubles, the equivalent of 10% of GDRs according to their market value as of the close of trading on October 26.
Since then, Lenta has spent 291 million rubles buying back about 1.2 million GDRs, constituting around 0.24% of charter capital, the company said.
Lenta is a major hypermarket operator and the third-biggest retailer in Russia. It runs 244 hypermarkets in 88 cities and 135 supermarkets in Moscow, St. Petersburg, Siberia, and the Ural and Central Federal Districts.
In 2019, it plans to open only eight new hypermarkets, four of which were supposed to open in 2018 but were delayed "due to bureaucratic hold-ups"; and only eight supermarkets. Last year, 13 hypermarkets and 38 supermarkets were opened, fewer than the company's forecast (about 18 and 40, respectively).
Former CEO Jan Dunning, who left the company in December, said that given market conditions and share prices, Lenta considered it more important to invest funds in purchasing its own shares than in building "boxes."
Lenta has never yet paid dividends, though its management has repeatedly referred to them as one way to distribute capital among shareholders. In January, the company said that payment of dividends was not likely.
"We'll continue the buyback in 2019, but, of course, the board of directors might consider other ways to distribute funds among shareholders in the future. There are two ways to return funds to shareholders: dividends and buying back shares. We're not opposed to dividends, but in light of Lenta's corporate structure - I have in mind its registration in the British Virgin Islands - and of the issuer, which is Lenta Ltd., the board of directors isn't discussing dividends, due to tax considerations," IR Director Albert Avetikov said during a conference call in January.
"Dividends are the least likely scenario due to their ineffectiveness from the point of view of taxes," Lenta CFO Jago Lemmens said.
Lenta's main shareholder is TPG Group, which holds a 34.1% stake. The European Bank of Reconstruction and Development holds 7.4% of shares, and company directors and management own 0.6%. The company itself holds 0.5%, while 57.5% of shares are in free float.