O'Key H1 IFRS net profits rise 10%
MOSCOW. Aug 30 (Interfax) - The Russian retailer O'Key made 1.614 billion rubles in net profits to International Financial Reporting Standards (IFRS) in the first half of 2013, a 9.8% year-on-year increase, the company reported.
An Interfax consensus forecast had predicted 1.636 billion rubles.
O'Key's earnings before interest, taxes, depreciation, and amortization (EBITDA) were up 14.4% at 4.239 billion rubles and the margin was 6.6% versus 6.8% in H1 last year.
The retailer's earnings before interest, taxes, depreciation, and amortization (EBITDA) were a little lower than the 4.344 billion rubles the analysts predicted, and the margin was also lower than forecast (6.8%).
Company sales revenues for the half were up 19.6% at 64.714 billion rubles, gross profits 22.1% at 14.862 billion rubles, and the gross margin was 23% versus 22.5% in H1 2012.
"We have demonstrated solid operational performance in the first half of 2013 with market leading LFL revenue and traffic growth," CEO Patrick Longuet is quoted in the statement as saying. "The growing scale of our operations has enabled us to improve purchasing conditions with suppliers, which has had a positive impact on our gross margin, and helped to mitigate growing SG&A expenses as we expanded our presence and strengthened our promotional and advertising activities," he said.
SG&A expenses were up 24.6% at 11.855 billion rubles, mainly on account of rising personnel costs. These expenses represented 18.3% of revenues in H1 (17.6% in H1 last year).
Personnel expenditures rose 25.9% to 6.083 billion rubles due to workforce expansion of 17% with the opening of new stores and a 7% wage hike in July of 2012. In Q4 last year, an incentive program for management was revised and the size of the variable part of remuneration increased. Starting this year, spending associated with outsourcing, business trips, training and selecting staff have been moved into the personnel spending column, prompting it to rise an additional 3%.
"Operating leases increased by 27.5% to 1.39 million rubles in the reporting period, fuelled by the 24% expansion of our leased space compared to H1 2012. Since June 30, 2012, the proportion of our leased space expanded with the opening of 6 rented hypermarkets and one supermarket," the company said. "The cost of communication and utilities increased by 29.9% year-on-year to 1.129 million rubles, following the 18.8% expansion in space, and tariff increases as of July 2012," it said.
"Net cash from operating activities resulted in an inflow of 443.6 million rubles in H1 2013 compared to 71.2 million rubles in 2012. Cash from operating activities before changes in working capital increased by 298.0 million rubles to 2.417 million rubles. Changes in working capital resulted in 1.974 million rubles outflows, which reflect an improvement of 74.4 million rubles compared to 2012. Improvement in working capital was driven by the 26% increase in trade and other payables year-on-year," O'Key reported.
The company's net debt stood at 13.455 billion rubles at end-June versus 12.458 billion rubles a year earlier. Its net debt to EBITDA ratio was 1.4 versus 1.5 at end-2012.
O'Key operates a chain of eponymous hypermarkets and O'Key Express supermarkets. It had 54 of the former and 31 of the latter at end-June.
Longuet has said that the company plans to open 10 new hypermarkets in 2013. It opened two of them in H1 and plans to open another two this quarter. He predicted that sales revenues could rise 21%-25% this year.
O'Key inked agreements concerning the opening of seven new outlets during the first half of this year. They include five hypermarkets. It is now working on projects for 28 hypermarkets and 22 supermarkets, of which nine of the former and one of the latter are in the construction stage.
