2020 August 24, 10:05
M.Video-Eldorado Group grew EBITDA by 20.3% to RUB 13.3 bn in 1H 2020
24 August 2020, Moscow, Russia.PJSC M.Video (M.Video-Eldorado Group, the Company, or the Group; MOEX: MVID), Russia’s largest consumer electronics retailer by revenue and part of SAFMAR Group owned by Mikhail Gutseriev, releases its condensed consolidated unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS) for the six months ended 30 June 2020.
M.Video-Eldorado Group’s key financial highlights for 1H 2020:
1H 2020 performance highlights and events:
M.Video-Eldorado Group’s President and Chairman of the Management Board Alexander Tynkovan:
"The Group’s strong financial performance in one of the most challenging periods since its inception is a real testament to the professionalism of our team and the efficiency of the ONE RETAIL model bridging the gap between the online and in-store shopping experience via a smartphone. I would like to thank each and every one of our employees for their dedication, resilience and perseverance during these difficult months.
On top of revenue and market share growth in 1H 2020, we also achieved high business efficiency, with the Company's EBITDA margin reaching 7.7% and adjusted net profit standing at RUB 5.3 billion despite all the spring headwinds. We can be considered one of the few Russian online retailers whose strong business model enables us to fuel sales growth while maintaining healthy profitability and driving profits.’
M.Video-Eldorado Group’s Chief Financial Officer Ekaterina Sokolova:
‘Our rapid transformation into an online business has relied on the strategic projects implemented over the recent years, from improving in-store pick-up services and enhancing the mobile platform for sellers to developing financial analytics and planning capabilities. We succeeded in accelerating these projects despite the limitations caused by the pandemic. By transforming our cost structure with a greater focus on the online segment and adopting a dynamic sales-driven approach to budgeting, we positioned the Group to deliver strong performance, and maintain and strengthen its financial standing while boosting liquidity and reducing leverage.’
In 1H 2020, the Group's revenue increased by 7.8% year-on-year to RUB 173,934 million thanks to:
The Company's gross profit in the reporting period increased by 7.0% year-on-year to RUB 44,651 million, while the gross margin dropped by 0.2 percentage points year-on-year to 25.7% due to changes in the category mix associated with evolving consumer preferences amid restrictions caused by the COVID-19.
EBITDA under “IAS 17” increased by 20.3% year-on-year to RUB 13,354 million, while EBITDA margin increased by 0.8 percentage points year-on-year to 7.7% in 1H 2020. These performance improvements were driven by the efficient management of our selling, general and administrative (SG&A) expenses (excluding depreciation and amortization), which declined, as a percentage of revenue, by 1.6 percentage points to the level 18.9%.
Key drivers behind improvements in OPEX efficiency:
Due to the COVID-19 outbreak and related restrictions, regulatory requirements and measures to protect employees, customers and partners, in 1H 2010 the Group also incurred additional costs and losses worth of an estimated RUB 248 million. This negative effect includes additional costs on PPE and disinfection, as well as actual losses under leases and subleases of the premises owned by the Group.
Operating profit under “IAS 17” increased by 20.7% year-on-year to RUB 9,372 million in 1H 2020 driven by stronger revenue and EBITDA. Depreciation and amortization expenses under “IAS 17” increased from RUB 3,335 million in 1H 2019 to RUB 3,982 million in 1H 2020 due to business expansion and investments in further development of the IT platform.
The Group's adjusted net profit under “IAS 17” increased by 44.2% year-on-year to RUB 5,327 million in 1H 2020 compared to RUB 3,695 million in 1H 2019 as a result of revenue growth and the above-mentioned efficiency improvements
As at 30 June 2020, the Group’s total debt was up by RUB 6,574 million to RUB 68,225 million, while cash and cash equivalents as at the end of the reporting period increased by RUB 19,670 million year-on-year to RUB 25,327 million. The growth in total debt in the reporting period was caused by measures to strengthen the Group's liquidity. The Group's net debt decreased by RUB 13,096 million year-on-year.
As a result, net debt / EBITDA (LTM, “IAS 17”) as at 30 June 2020 was 1.48x, down by 0.83x year-on-year. All the Group’s debt is denominated in roubles.
M.Video-Eldorado Group Key Consolidated Unaudited Financial Highlights for 1H 2020, RUB mn (excl. VAT)
Key events after the reporting date
In July, the Group repaid RUB 21,554 million of loans ahead of schedule to refinance a part of its debt portfolio and received RUB 15,005 million in tranches secured at a lower interest rate.
Effect of “IFRS 16” on the financial statements of the Group M.Video-Eldorado
The implementation of IFRS 16, which came into effect on 1 January 2019, impacted the Group’s EBITDA, operating profit and net profit.
Effect on EBITDA
The Group’s EBITDA was significantly higher under the new “IFRS 16” as the bulk of lease expenses previously recognized in selling, general and administrative expenses are now recognized, under “IFRS 16”, as the Company’s balance sheet debt as well as loan interest expenses in the statement of profit or loss.
In 1H 2020, lease and utility expenses under “IFRS 16” were lower by RUB 7,589 million. The Group's EBITDA under “IFRS 16” is RUB 21,983 million compared to RUB 13,354 million under “IAS 17” over the same period. EBITDA margin under “IFRS 16” amounted to 12.6%, which is 4.9 percentage points higher than the EBITDA margin of 7.7% under “IAS 17”.
Effect on net profit
The Group’s net profit in 1H 2020 was affected by additional expenses in the amount of RUB 7,874 million arising from depreciation of leased assets under “IFRS 16”. The effect of these additional depreciation expenses was fully offset by the removal of long-term lease expenses from operating expenses as mentioned above.
At the same time, financial costs increased by RUB 2,819 million under “IFRS 16” due to additional interest expenses on lease liabilities in 1H 2020. The implementation of “IFRS 16” also resulted in lower income tax expenses due to lower profit before tax.
As a result, the Group's adjusted net profit in 1H 2020 under “IFRS 16” amounted to RUB 3,777 million compared to RUB 5,327 million under “IAS 17”. Adjusted net margin under “IFRS 16” was 2.2% compared to 3.1% under “IAS 17” in 2019.
M.Video-Eldorado Group (PJSC M.video) is Russia’s largest consumer electronic retailer uniting the M.Video and Eldorado brands in the market for home appliances and electronics. The companies’ total annual turnover exceeds RUB 430 billion, including VAT (FY 2019). The M.Video-Eldorado Group is the only Russian publicly-traded company in the electronics retail sector. The company's shares are traded on Moscow Exchange (ticker: MVID).
The Group operates Russia’s largest online platform for consumer electronics and household appliances commanding a market share of over 30%. As of June 30, 2020, the Group also operates 512 stores under the M.Video brand, 505 stores under the Eldorado brand and 20 m_mobile stores in more than 250 cities across Russia with a total selling space of 1,450 thousand square meters. The Group has 100% online coverage in all cities of operation.
 Results for 2019 were restated due to the deconsolidation of Marketplace LLC (goods.ru). As a result of amendments in the shareholder agreement relating to Marketplace LLC in 2017, the Group lost control over the marketplace goods.ru, but obtained joint control over the Marketplace LLC. Accordingly, the Group had to discontinue consolidation of LLC “MARKETPLACE” and recognize the investment in LLC “MARKETPLACE” as an investment in a joint venture using equity method starting from the date when control was lost. As a result, the Group adjusted the comparative information in the consolidated statements for the year ended 31 December 2019. The Group also made respective adjustments to the consolidated statement of profit or loss and other comprehensive income and consolidated statement of cash flows for the half-year ended 30 June 2019.
 Hereinafter net profit is adjusted for losses in associates and joint ventures.
 Adjusted for losses in associates and joint ventures