P&L Highlights(1)
| USD million |
FY 2010 |
FY 2009 |
% change y-o-y |
| Net Sales |
11,280.5 |
8,717.4 |
29% |
| incl. Retail |
11,248.1 |
8,674.5 |
30% |
| Gross Profit |
2,628.8 |
2,107.9 |
25% |
| Gross Margin, % |
23.3% |
24.2% |
|
| EBITDA |
843.6 |
736.0 |
15% |
| EBITDA Margin, % |
7.5% |
8.4% |
|
| Operating Profit |
545.1 |
467.8 |
17% |
| Operating Margin, % |
4.8% |
5.4% |
|
| Net Profit / (Loss) |
271.2 |
165.4 |
64% |
| Net Margin, % |
2.4% |
1.9% |
|
Net Sales & Gross Margin Performance
| USD million |
FY 2010 |
FY 2009 |
% change y-o-y |
| Net Sales |
11,280.5 |
8,717.4 |
29% |
| incl. Retail |
11,248.1 |
8,674.5 |
30% |
| Hypermarkets |
2,012.7 |
1,687.9 |
19% |
| Supermarkets |
2,737.2 |
2,307.2 |
19% |
| Soft Discounters |
6,199.8 |
4,676.3 |
33% |
| Convenience stores(2) |
61.2 |
- |
n/a |
| Online(3) |
20.3 |
3.1 |
552% |
| Kopeyka(4) |
217.0 |
- |
n/a |
| Gross Profit |
2,628.8 |
2,107.9 |
25% |
| Gross Margin, % |
23.3% |
24.2% |
|
(1)Please note that in this and other tables of this Annual Report immaterial deviations in the calculation of percentage changes, subtotals and totals are explained by rounding. Kopeyka results are consolidated from 1 December 2010. (2)Consolidated from April 2010. (3)Consolidated from October 2009. (4)Consolidated from December 2010.
For 2010 X5 reported net sales of USD 11,280 million – a year-on-year increase of 29% in USD terms. In RUR terms net revenue for the year increased 24%. This comprises 7% growth in like-for-like (LFL)(1) sales with the rest coming from expansion (+15%) as well as the initial contribution from acquired Kopeyka stores (+2%).
2010 LFL sales growth totalled 7%. X5 recorded over 1.2 billion store visits by our customers, thanks to our “Close to the Customer” policy of reinvesting in prices to enhance customer loyalty and drive traffic growth. Throughout 2010 we kept average prices for our products well below the country’s official inflation rate and provided meaningful savings to Russian consumers: prices on X5’s shelves rose on average by 8.7% year-on-year in December 2010 versus December 2009 compared to Russia’s official food inflation rate of 12.9% for December 2010. This approach supported strong LFL growth but put pressure on gross margin and EBITDA.
As a result full year 2010 gross margin totalled 23.3% – a 90 bp decline compared to 2009, which is attributable to continuous investment in prices. In 2010 EBITDA totalled USD 844 million, for an EBITDA margin of 7.5%.
Selling, General and Administrative Expenses (SG&A)
| USD million |
FY 2010 |
FY 2009 |
% change y-o-y |
| Staff Costs, incl. |
(1,002.1) |
(761.2) |
32% |
| % of Net Sales |
8.9% |
8.7% |
|
| ESOP |
(63.2) |
(59.3) |
6% |
| % of Net Sales |
0.6% |
0.7% |
|
| Lease Expenses |
(372.1) |
(264.2) |
41% |
| % of Net Sales |
3.3% |
3.0% |
|
| Other Store Costs |
(151.0) |
(110.8) |
36% |
| % of Net Sales |
1.3% |
1.3% |
|
| D&A |
(298.5) |
(268.2) |
11% |
| % of Net Sales |
2.6% |
3.1% |
|
| CIP & Fixed Assets Impairment |
- |
(48.3) |
n/a |
| % of Net Sales |
- |
0.6% |
|
| Utilities |
(214.3) |
(154.6) |
39% |
| % of Net Sales |
1.9% |
1.8% |
|
| Third Party Services |
(99.7) |
(76.5) |
30% |
| % of Net Sales |
0.9% |
0.9% |
|
| Other Expenses |
(86.6) |
(105.2) |
(18%) |
| % of Net Sales |
0.8% |
1.2% |
|
| Total SG&A |
(2,224.4) |
(1,740.6) |
28% |
| % of Net Sales |
19.7% |
20.0% |
|
(1) Like-for-like (LFL) comparisons of retail sales between two periods are comparisons of retail sales in local currency (including VAT) generated by the relevant stores. The stores that are included in LFL comparisons are those that have operated for at least twelve full months preceding the beginning of the last month of the reporting period. Their sales are included in LFL calculation starting from the first day of the month following the month of the store opening.
2010 SG&A expenses (including D&A) totalled USD 2,224 million or 19.7% of sales – a decrease of 30 bp as a percentage of sales year-on-year. 2010 SG&A expenses were affected by the overall cost base inflation, including wages, leases and utilities. Additional cost pressure came from a significant step-up in store openings in the second half of the year with sales still ramping up.
2010 staff costs increased by 20 bp as a percentage of sales, from 8.7% to 8.9%. Staff costs excluding ESOP increased to 8.3% of sales in 2010 versus 8.0% a year ago. At year-end, X5 employed about 90,000 people (including approximately 13,000 people employed by the acquired Kopeyka chain). Without Kopeyka, which was acquired in December 2010, X5 headcount stood at 75,548 employees compared to 68,457 a year ago, an increase of 10%. This increase is attributable to the expansion of X5’s store base and logistics capacity. It is notable that headcount growth was well below the 19% increase in selling space for the year (excluding Kopeyka), thanks to the initial progress of X5’s in-store labour productivity project. Wages increased by approximately 10% due to salary indexation in line with Russian labour market trends.
Lease expenses as a percentage of revenue rose by 30 bp year-on-year due to higher rents as a consequence of the gradual recovery of the commercial real estate market and also a higher share of leased stores in X5’s portfolio. At the end of 2010, 52% of X5’s total selling space was leased compared to 43% at the end of 2009.
In 2010 electricity and heating rates rose on average by 20%, which resulted in a 10 bp year-on-year increase in utility costs as a percentage of revenue.
Non-Operating Gains and Losses
| USD million |
FY 2010 |
FY 2009 |
% change y-o-y |
| Operating Profit |
545.1 |
467.8 |
17% |
| Finance Costs (Net) |
(146.2) |
(154.1) |
(5%) |
| Net FX Result |
(13.0) |
(45.7) |
(72%) |
| Share of Loss of Associates |
0.4 |
(4.0) |
n/a |
| Profit before Tax |
386.3 |
264.0 |
46% |
| Income Tax Expense |
(115.1) |
(98.6) |
17% |
| Net Profit |
271.2 |
165.4 |
64% |
| Net Margin, % |
2.4% |
1.9% |
|
Finance Costs
Net finance costs for 2010 decreased by 5% year-on-year in USD terms and 9% in RUR terms due to lower interest rates on borrowings. The effective annualised interest rate on X5’s total debt for the full year 2010 was approximately 7% compared to 8% in 2009.
Foreign Exchange (FX) Gain/(Loss)
The Company posted a USD 13 million net FX loss for 2010. This is a primarily non-cash item, resulting from revaluation of the Company’s long-term
USD-denominated debt. In the second half of 2010 X5 significantly reduced its FX exposure by bringing down USD-denominated debt to USD 391 million from USD 1.1 billion a year ago.
Income Tax
In 2010 X5’s effective tax rate amounted to 30% versus 37% a year ago. X5’s effective tax rate is higher than the statutory tax rate for three main reasons: inventory shrinkage is not tax deductible in Russia, ESOP cost is only partially tax deductible and FX loss is only partially tax deductible. The year-on-year decrease in FX loss reported in 2010, among other things, had a positive impact on the effective tax rate for the year.