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Lenta

August 27, 2015

Lenta Publishes Reviewed IFRS Financial Results for the Half Year Ended 30 June 2015

St. Petersburg, Russia; 27 August 2015– Lenta Ltd (“Lenta” or the “Company”), one of the largest retail chains in Russia, today announces its reviewed consolidated IFRS results for the half year ending 30 June 2015.

1H 2015 Financial Highlights:

  • Total sales grew 33.8% to RUB 114.9bn (1H 2014: RUB 85.9bn);
  • Adjusted EBITDA[1] of RUB 11.7bn, up 44.6% (1H 2014: RUB 8.1bn) with a margin of 10.2% (1H 2014: 9.5%);
  • Gross margin of 21.7% (+0.3p.p. vs. 1H 2014) rose due to supply chain improvements while investing in prices;
  • Adjusted SG&A decreased to 11.2% of sales (-0.9p.p. vs. 1H 2014) primarily due to operational improvements and cost control measures;
  • Total SG&A decreased 0.4p.p. despite an increase in the share of leased selling space and associated rental expenses and a higher depreciation expense as a result of our continuous investments in growth.
  • Total SG&A as % of sales of the same store base[2] decreased by 1.4p.p. vs 1H 2014;
  • Capital expenditures of RUB 11.8bn, in line with investments made in 1H 2014 (RUB 11.8bn) linked to a larger number of new leased stores to be opened in 2015;
  • Net cash generated from operating activities, before net interest and income taxes paid, of RUB 5.1bn compared to RUB 4.5bn in 1H 2014 (an increase of 14.2%) driven by EBITDA growth;
  • Net interest expenses of RUB 5.1bn, an increase of 76.0% compared to 1H 2014 (RUB 2.9bn) due to higher interest rates and additional borrowing in the reporting period;
  • Net Profit[3] of RUB 3.0bn, up 10.7% (1H 2014: RUB 2.7bn) with a margin of 2.6% mainly affected by increased interest expenses; and
  • Net Debt of RUB 59.5bn as of 30 June 2015 (Net debt/Adjusted EBITDA of 2.4x) reflecting prudent financial policy and the successful primary capital increase in March 2015.

1H 2015 Operational Highlights:

  • Eight hypermarkets and three supermarkets opened during 1H 2015;
  • Total number of hypermarkets at 30 June 2015 was 116, with 27 supermarkets in operation; selling space was c. 751,447 sq.m. as of 30 June 2015 (+38.6% vs. 30 June 2014);
  • Like-for-like (“LFL”)[4] sales growth of 11.5% vs 1H 2014;
  • LFL traffic growth of 4.7% combined with a 6.5% increase in LFL ticket; and
  • 33% increase in the number of active loyalty cardholders y-o-y to a total of 7.6mm as of 30 June 2015.

 Material events in 1H 2015 and after the reported period:

  • In March Lenta completed a primary capital increase of 35.2 million new GDRs via an accelerated bookbuilding, raising gross proceeds of US$225.3 million;
  • Lenta has signed a Rub 15bn three-year revolving loan facility with VTB Bank;
  • Lenta has signed a Rub 37.3bn unsecured loan agreement with VTB Bank with a seven-year term replacing a secured loan which was due to 2018;
  • Lenta has signed an amendment to Rub 4.6bn loan agreement with the European Bank for Reconstruction and Development (EBRD);
  • Fitch Ratings has assigned Lenta with long-term foreign and local currency Issuer Default Ratings of ‘BB-‘ and a National Long-term rating of ‘A+(rus)’, both with a positive outlook;
  • S&P Ratings Services upgraded the long-term credit rating of Lenta Ltd. and its main operating company Lenta LLC to BB- with a stable outlook; and
  • Lenta has issued Rub 5bn bonds on MoEx with a 10 years maturity and a 2.5 year put option. The semi-annual coupon was set at 12.4%.

 Lenta’s Chief Executive Officer, Jan Dunning said:

 “Lenta continues to deliver industry-leading growth in sales and selling space despite a challenging consumer and macro environment.

We achieved significantly higher profitability during the first half of 2015 compared to the same period of the previous year, with Adjusted EBITDA growth of around 45% and an EBITDA margin improvement of around 80 basis points. These improvements are testament to Lenta’s operational excellence, as they were driven primarily by efficient cost control and supply chain improvements which we consider sustainable in the future. This will enable us to continue actively investing in prices in the second half of the year wherever necessary to provide best offers to our customers and remain very price competitive across all key regions.  

Lenta’s balance sheet has also been strengthened with a significant fall in leverage, a reduction in interest rates and an increase in the amount of undrawn debt available to fund expansion. Our healthy financial position, higher profitability and greater cash generation enables us to maintain our store opening guidance for 2015 to open at least 25 hypermarkets and provides us with even more confidence in our plans to successfully drive the further expansion of Lenta”.

[1] Adjusted EBITDA is reported EBITDA as set out in Note 6 of the IFRS financial statements adjusted for non-recurring one-off items such as changes in accounting estimates and one-off non-operating costs and income

[2]Stores opened up to 31 December 2013

[3] Net Profit equates to “Profit for the year” in the attached IFRS Financial Statements

[4] Lenta’s stores are included in the LFL store base starting 12 months after the end of the month they are opened

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