Fix Price announces key financial results for Q4 and FY 2021

28 February 2022 - Fix Price (LSE and MOEX: FIXP, the "Company" or the "Group"), one of the leading variety value retailers globally and the largest in Russia, today announces its audited IFRS financial results for the twelve months ended 31 December 2021 (FY 2021).

In view of the current elevated levels of uncertainty and market volatility, the conference call scheduled for today with management to discuss the results will not take place. Investors, analysts and media can send questions to Fix Price using the contact details at the end of this press release.

Key highlights

• FY 2021 revenue up 21.3% y-o-y to RUB 230.5 billion, driven by store network expansion and LFL sales growth
• FY 2021 LFL sales[1] for Russian stores unaffected by COVID restrictions rose by 9.0%. FY 2021 LFL sales for the Group were up 7.2% y-o-y, reflecting the impact of new COVID restrictions as well as headwinds in Fix Price's international geographies (Belarus and Kazakhstan)
• FY 2021 gross margin of 31.8% vs 32.4% in 2020; Q4 2021 gross margin up 80 bps y-o-y to 32.9% due to successful absorption of cost of sales growth
• FY 2021 EBITDA margin of 19.2%, unchanged from the average for FY 2019-2020, despite significant macroeconomic and COVID-related headwinds
• FY 2021 net profit up 21.7% y-o-y to RUB 21.4 billion, with net profit margin of 9.3%, unchanged from FY 2019-2020 levels
• IAS 17-based adjusted net debt to EBITDA ratio remained at a conservative 0.4x, well below the threshold of 1.0x set out in the Group's guidance
• Final dividend of RUB 5.8 billion, or RUB 6.8 per share/GDR was announced. FY 2021 dividend will reach RUB 15.6 billion or RUB 18.3 per share/GDR, equivalent to 73% of FY 2021 net profit

Dmitry Kirsanov, CEO of Fix Price, said:       

Financial summary for Q4 2021[2]

• Revenue increased by 14.5% y-o-y to RUB 66.5 billion driven by new store openings and LFL sales growth:
  • Retail revenue was up by 15.1% y-o-y to RUB 59.1 billion
  • Wholesale revenue increased by 9.6% y-o-y to RUB 7.4 billion
• Gross profit increased by 17.3% y-o-y to RUB 21.9 billion. The gross margin of 32.9% exceeded the level of Q4 2020 by 80 bps driven by diligent and proactive work with the assortment to adjust to higher cost of sales amid continued pressure from raw materials inflation and dislocations in the global shipping market. Gross margin was down 109 bps from the level of Q4 2019 amid a higher share of food and inflationary impact on production costs
• SG&A costs (excl. D&A) as a percentage of revenue increased by 54 bps to 13.2% reflecting increased staff costs amid tighter competition on the Russian labour market
• EBITDA[3] increased by 16.8% to RUB 13.4 billion, with the EBITDA margin up by 40 bps y-o-y to 20.1% thanks to the expansion of the gross margin. EBITDA margin in pre‑COVID Q4 2019 stood at 21.5%
• Operating profit rose by 16.6% to RUB 10.3 billion. The operating margin was 15.5% versus 15.2% for Q4 2020 and 15.9% for Q4 2019
• Profit for the period increased by 12.1% to RUB 6.5 billion. The net profit margin was 9.7%, compared to 10.0% and 12.6% for the same periods of 2020 and 2019, respectively

Financial results for Q4 and FY 2021    

Statement of comprehensive income highlights 

LFL dynamics, %

Store selling space

Selling, general and administrative expenses

The Group's revenue increased by 14.5% to RUB 66.5 billion for Q4 2021, driven by 15.1% growth in retail revenue and a 9.6% increase in wholesale revenue.

Retail revenue grew to RUB 59.1 billion on the back of expansion of the network of company-operated stores and a 3.2% increase in like-for-like sales, partially offset by a decrease in sales densities in Belarus and Kazakhstan amid pressure on real disposable income and government restrictions.

LFL sales increased by 3.2% in Q4 2021 driven by 6.9% LFL average ticket growth, which offset a LFL traffic contraction of 3.5% due to new COVID-related restrictions. Excluding the impact of international geographies, LFL sales at company-operated stores in Russia grew by 5.3% in Q4 2021. For stores unaffected by restrictions in November-December and adjusting for the leap-year effect, LFL sales were up by 6.5% in Q4 2021 and 9.0% for FY2021 despite abnormal market turbulence.

Wholesale revenue increase to RUB 7.4 billion was driven by growth of the franchised network, while the share of wholesale revenue in the Company's total revenue decreased by 49 bps to 11.2% on the back of faster growth of sales densities at company-operated stores.

Please refer to our Q4 2021 operating results press release for more details on revenue drivers.

Gross profit grew by 17.3% y-o-y to RUB 21.9 billion for Q4 2021. The gross margin improved by 80 bps y-o-y to 32.9% as a result of successful adaptation of the assortment strategy to macro headwinds, including steep raw materials price inflation and elevated freight costs. Despite a higher share of food in the sales mix, product rotation and redesign as well as price point architecture reengineering and solid sell-through of the seasonal New Year assortment supported gross margin both year-over-year and quarter-over-quarter, while price levels remained competitive.

In pre-pandemic Q4 2019, gross margin stood at 34.0% amid a lower share of food in sales and more favourable macroeconomic backdrop.

Transportation costs as a percentage of revenue decreased by 12 bps y-o-y to 1.5% despite higher tariffs for truckload services and an increased number of international stores requiring longer trips. In comparison with Q4 2019, transportation costs as a percentage of revenue grew by 18 bps.

Inventory write-down due to shrinkage and write-offs to net realisable value in Q4 2021 slightly improved by 7 bps to 1.0%. Shrinkage and write-downs as a percentage of revenue was up by 49 bps versus Q4 2019.

The Group's selling, general and administrative expenses grew as a percentage of revenue by 65 bps to 17.8% mainly due to an increased share of depreciation of right-of-use assets. SG&A excluding D&A as percentage of revenue was up by 54 bps to 13.2%, driven by growth in the share of staff costs, bank charges, security and maintenance services. These were partially offset by improved efficiency in rental and advertising costs as well as other expenses.

Staff costs as a percentage of revenue increased by 60 bps to 9.0% due to growth of average wages in line with the market on the back of higher inflation, as well as competition for talent with online players because of a shortage of personnel as a result of COVID-related travel restrictions, and an increase in staff numbers amid a slowdown in revenue growth.

Rental expense (in accordance with IAS 17) were slightly down by 6 bps y-o-y to 4.7% of revenue, reflecting strong negotiating power, which helped to improve lease terms in the post-COVID environment despite pressure from external factors on LFL sales growth.

Rental expense (under IFRS 16) improved by 5 bps y-o-y to 0.8% of revenue despite a growing share of variable lease contracts to 57% from 49% as of December 31, 2020.

Depreciation and amortisation (D&A) expenses as a percentage of revenue increased by 11 bps to 4.6% driven by a 10 bps increase in depreciation of right-of-use assets and a 1 bps increase in other D&A.

Bank charges slightly increased by 3 bps to 1.1% as a share of revenue on the back of the continued growth in the share of non-cash payments with higher commissions on bank card transactions compared to cash transactions.

Despite tariff growth mitigated by efficient store management and partial passing of utilities costs to landlords under newly signed contracts, utilities as a share of revenue remained flat y-o-y at 0.3%.

Costs for security services increased by 2 bps to 0.7% of revenue due to the low base of 2020, which was a result of a lack of workforce during the pandemic and travel restrictions, whilst advertising costs as percentage of revenue further decreased by 2 bps to 0.3%.

Other expenses decreased by 12 bps and amounted to 0.4% of revenue.

Other operating income and share of profit of associates substantially increased by 13 bps on the back of higher income from third-party companies advertising via the Company's advertising tools, higher proceeds from the sale of waste such as cardboard and stretch film for the purpose of recycling, as well as income received from a depositary bank in connection with the IPO, with the latter being accrued on a linear basis during the life of the depositary facility and lower costs related to the IPO.

EBITDA IAS 17 and IFRS 16 reconciliation

EBITDA under IFRS 16 increased by 16.8% to RUB 13.4 billion for Q4 2021. The EBITDA margin improved by 40 bps y-o-y and stood at 20.1%, on the back of gross margin improvement which was partially offset by the increase of SG&A costs as a result of higher wages and inflation.

EBITDA under IAS 17 increased by 17.5% to RUB 10.8 billion for Q4 2021, with the IAS 17-based EBITDA margin standing at strong 16.2% versus 15.8% for Q4 2020 and 16.9% for Q4 2019.

Net finance costs in Q4 2021 increased by 388.4% to RUB 630 million, driven by an increase in loans and borrowings year-on-year, higher loan rates and decrease in income on bank deposits and financial instruments.

In Q4 2021 the Group recorded an FX loss of RUB 165 million, compared to a RUB 134 million gain in Q4 2020, as revaluation of trade accounts denominated in foreign currency was partially offset by forward contracts.

The Group's total income tax expense was down by 1.0% to RUB 3.0 billion in Q4 2021. The effective tax rate was 31.8% in the reporting period versus 34.5% in Q4 2020. The abnormally high effective tax rate in Q4 2020 was attributable to withholding tax accrued on intra-group dividends.

Profit for the period increased by 12.1% y-o-y to RUB 6.5 billion. The net profit margin was 9.7% versus 10.0% for Q4 2020.

Statement of financial position highlights

As of 31 December 2021, the Group's total loans, borrowings and lease liabilities amounted to RUB 32.3 billion, up RUB 6.5 billion from the start of the year on the back of raising additional financial debt for dividend financing amid slowdown in cash generation.

As of 31 December 2021, adjusted net debt was RUB 23.5 billion, while IAS 17-based adjusted net debt stood at RUB 12.7 billion. The Group's IAS 17-based adjusted net debt to EBITDA ratio remained low at a conservative 0.4x, well below the threshold of 1.0x set out in the Group's guidance.

Statement of cash flows highlights

As of 31 December 2021, the Group's net trade working capital[4] stood at RUB 7.9 billion, compared to RUB 1.1 billion as of 31 December 2020 due to a build-up of inventories amid purchasing additional safety stock to mitigate supply chain disruptions, higher cost of inventory due to inflation, increase of the active assortment matrix and the shift in the product mix towards seasonal ranges at higher price points heading into peak trading during the New Year season. All these factors coupled with a slowdown in LFL sales growth on the back of COVID-related restrictions led to tying up more working capital compared to the previous year.

CAPEX for the reporting period stood at RUB 1.1 billion compared to RUB 2.6 billion for the same period of 2020. The year-on-year decrease was attributable to lower investments in the distribution centre network in Q4 2021 and a lower number of openings of company-operated stores.

 Announcement of final dividends for 2021

The Board of Directors of Fix Price Group Ltd. today announces that the Company intends to pay a final dividend of RUB 5.8 billion or RUB 6.8 per GDR/share (gross amount subject to taxes and fees).

Together with the interim dividend paid on September 28, 2021, total dividends for the year will amount to RUB 15.6 billion, or RUB 18.3 per share/GDR, or 73% of FY 2021 net profit under IFRS.

The final dividend will be paid on 31 May 2022 to shareholders on the register of members at the close of business on 27 May 2022. The ex-dividend date will be 26 May 2022.

About the Company

Fix Price (LSE and MOEX: FIXP), one of the leading variety value retailers globally and the largest in Russia, has helped its customers save money every day since 2007. Fix Price offers its customers a unique and constantly refreshed product assortment of non-food goods, personal care and household products and food items at low fixed price points.

As of 31 December 2021, Fix Price operates 4,904 Fix Price stores in Russia and neighbouring countries, all of them stocking approximately 2,000 SKUs across around 20 product categories. As well as its own private brands, Fix Price sells products from leading global names and smaller local suppliers. The Company operates 8 DCs covering 79 regions of Russia and 6 countries.

In 2021, the Company recorded revenue of RUB 230.5 billion, EBITDA of RUB 44.2 billion and net profit of RUB 21.4 billion, in accordance with IFRS.

Contacts

Fix Price investor relations   Fix Price media relations

Elena Mironova     Ekaterina Lukina

ir@fix-price.com     elukina@fix-price.ru

EM

Dmitry Zhadan   Peter Morley   Ekaterina Shatalova

zhadan@em-comms.com morley@em-comms.com shatalova@em-comms.com

+7 916 770 8909  +43 676 684 5252  +7 915 321 8579

[1] Here and hereinafter, like-for-like (LFL) sales, average ticket and number of tickets are calculated based on the results of stores operated by Fix Price and that have been operational for at least the 12 full calendar months preceding the reporting date. LFL sales and average ticket calculated based on retail revenue including VAT. LFL numbers exclude stores that were temporarily closed for seven or more consecutive days during the reporting period and the comparable period

[2] Here and hereinafter Q4 results are unaudited and based on management accounts

[3] EBITDA calculated as profit for the respective period adjusted for income tax expense, interest expense, interest income, depreciation and amortisation expense, and foreign exchange gain / (loss), net

[4] Net trade working capital is calculated as Inventories plus Receivables and other current assets minus Payables and other financial liabilities