X5 reports 19.2% revenue growth in Q2 2023

X5 Retail Group N.V.

15 August 2023

 

X5 reports 19.2% revenue growth in Q2 2023, 7.8% adj. EBITDA margin pre-IFRS 16

+19.2 % y-o-y  
Revenue growth in Q2 2023
driven by solid like-for-like (LFL) ¹ sales and selling space expansion

+83.7 % y-o-y
Digital business (express delivery, Vprok.ru, 5Post and Mnogo Lososya) net sales growth in Q2 2023
Digital business net sales amounted to RUB 27.0 billion, which comprised 3.5% of consolidated Q2 2023 revenue.

24.4 %           -137 b.p.
Gross margin under IFRS 16 in Q2 2023
(-139 b.p. to 24.1% pre-IFRS 16²)
driven by the aggressive expansion of the Chizhik hard discounter format into regional markets, the consolidation of Krasny Yar and Slata, as well as the transformation of Pyaterochka's CVP

11.9 %               -212 b.p.
Adjusted EBITDA³ margin under IFRS 16 in Q2 2023
(-179 b.p. to 7.8% pre-IFRS 16)

3.4 %                        -72 b.p.
Net profit margin under IFRS 16 in Q2 2023
(-11 b.p. to 3.8% pre-IFRS 16)

2.71x  
Net debt/EBITDA ratio under IFRS 16 as of 30 June 2023 (vs. 2.58x as of 31 December 2022)
(1.10х as of 30 June 2023 vs. 1.02х as of 31 December 2022 pre-IFRS 16 )

Amsterdam, 15 August 2023 - X5 Retail Group N.V. ("X5" or the "Company", LSE and MOEX ticker: FIVE), a leading Russian food retailer that operates the Pyaterochka, Perekrestok and Chizhik retail chains, today released its interim report for the three months (Q2) and six months (H1) ended 30 June 2023, in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The interim report has been reviewed by the Company's independent auditor but has not been audited.

Igor Shekhterman, X5 Chief Executive Officer, commented:

"During the first half of 2023, X5 focused on adapting its customer value proposition while continuing to pursue its dynamic expansion on the domestic grocery market. Our current priority is developing and expanding our Pyaterochka proximity stores and Chizhik hard discounters as well as improving efficiency and transforming the existing store base of our Perekrestok supermarket format to increase like-for-like sales.  In Q2 2023, X5 demonstrated strong revenue growth of 19.2%, driven both by organic development and M&A.

We continued to develop our Pyaterochka proximity store network and adapt its CVP to changing market conditions, including by expanding the low-price segment that has proven attractive to our customers. This and other measures have resulted in traffic gains, with Pyaterochka's like-for-like traffic increasing by 7.2% year-on-year in Q2 2023.

In a major milestone during the reporting period, Pyaterochka launched operations in the Russian Far East, becoming the first nationwide food retailer to establish a presence in this territory.

In line with our strategy, we continued the active expansion of our Chizhik hard discounter format. The expansion of this format serves an important social function by providing a wide range of customers with access to affordable, high-quality food, while creating new jobs and expanding opportunities for local suppliers. At the end of Q2 2023, Chizhik had 809 stores across 27 regions of Russia, with plans to accelerate the rate of new store openings in H2 2023.

Our strategic priorities for Perekrestok include revamping our CVP to focus on the supermarket's unique assortment and presence in large cities, and prioritising LFL growth over new store openings. Perekrestok is particularly attractive to customers on the go thanks to its varied assortment of fresh and ultra-fresh products, take-out and dine-in meal options, and basics covering all customer needs through both private labels and branded products. Our new store formats also feature a high level of service and a pleasant ambiance that transform the shopping experience. We aim to drive sales growth by focusing on Perekrestok's online services, particularly express delivery.

X5's digital businesses posted solid growth in Q2 2023, with net sales increasing by 83.7 % year-on-year and accounting for 3.5% of consolidated revenue for the quarter. We continue to actively develop our express delivery services, both internally through our retail stores and dark stores, and externally through partnerships with leading delivery aggregators. The number of online orders increased 2.8x year-on-year in Q2 2023. During this period, we launched a joint pilot project between Avito Delivery, a leading Russian online classified ads platform, and X5's e-commerce delivery service 5Post to offer parcel drop-off and pick-up options at select 5Post locations. The pilot may be scaled up in the future to enable customers to drop off and collect Avito orders at more than 13,000 additional pickup points and more than 5,000 multi-parcel lockers located in X5's Pyaterochka and Perekrestok retail chain stores.

A key driver of customer engagement is our unified loyalty programme, X5 Club, which enables customers to earn and redeem bonus points for various X5 Group services on a single platform. In Q2 2023, X5 Club was expanded to include X5's express delivery services, the ready-to-eat digital service Mnogo Lososya, and the online media platform Food.ru. As of June, our loyalty programme counted more than 72 million members, while its sales penetration reached 76%. We plan to further develop the loyalty programme as part of our aim to drive new efficiency gains, create a highly tailored customer experience and offer better insights into customer needs.

In parallel to pursuing business expansion through organic growth, in Q2 2023 X5 secured an agreement to acquire Tamerlan, the operator of three retail chains in southern Russia. This acquisition will enable us to expand our presence in this region, while giving local customers more opportunities to benefit from the wide selection and affordable prices at X5 stores. We will maintain our strategy of seeking attractive inorganic growth opportunities as market conditions continue to evolve.

Throughout this time, X5 has remained committed to its sustainability strategy as guided by the UN Sustainable Development Goals, with food security becoming a primary focus. In June 2023, the Company published its third annual Sustainability Report. Among the report's key highlights, X5 collected and distributed more than 518 tonnes of food to approximately 199,000 people in need through the Basket of Kindness food drive in 2022. And in July of this year, X5 marked the one-year anniversary of its food-sharing initiative, which saw the Company donate more than 13 tonnes of food to more than 26,000 people in the project's first 12 months of operation. Moving forward, we plan to scale up our food assistance programmes while continuing our work to reduce the environmental impact of our operations.

I would like to express my gratitude to our partners and investors for their continued trust and cooperation during the current challenging environment. I would also like to extend my appreciation to all of X5's employees, who have shown flexibility and dedication as we work to adjust quickly to meet customers' needs. This effort forms the foundation of our customer-focused approach, and drives our continued success as the domestic food retailer of choice."

Profit and loss statement highlights⁴

RUB mln	IFRS 16			Pre-IFRS 16
	Q2 2023	Q2 2022	change, y-o-y, % or multiple	Q2 2023	Q2 2022	change, y-o-y, % or multiple
Revenue	772,043	647,950	19.2	772,043	647,950	19.2
incl. net retail sales5	768,609	646,164	18.9	768,609	646,164	18.9
Pyaterochka (incl. express delivery)	616,986	534,319	15.5	616,986	534,319	15.5
Perekrestok (incl. express delivery)	100,401	95,345	5.3	100,401	95,345	5.3
Chizhik	26,586	6,818	4x	26,586	6,818	4x
Gross profit	188,394	167,016	12.8	185,835	164,957	12.7
Gross profit margin, %	24.4	25.8	(137) b.p.	24.1	25.5	(139) b.p.
Adj. EBITDA	92,086	91,013	1.2	60,512	62,376	(3.0)
Adj. EBITDA margin, %	11.9	14.0	(212) b.p.	7.8	9.6	(179) b.p.
EBITDA	92,446	90,152	2.5	60,872	61,515	(1.0)
EBITDA margin, %	12.0	13.9	(194) b.p.	7.9	9.5	(161) b.p.
Operating profit	52,700	51,578	2.2	41,169	41,519	(0.8)
Operating profit margin, %	6.8	8.0	(113) b.p.	5.3	6.4	(108) b.p.
Net profit	26,307	26,762	(1.7)	29,489	25,442	15.9
Net profit margin, %	3.4	4.1	(72) b.p.	3.8	3.9	(11) b.p.

RUB mln	IFRS 16			Pre-IFRS 16
	H1 2023	H1 2022	change, y-o-y, % or multiple	H1 2023	H1 2022	change, y-o-y, % or multiple
Revenue	1,468,407	1,252,180	17.3	1,468,407	1,252,180	17.3
incl. net retail sales6	1,462,090	1,247,940	17.2	1,462,090	1,247,940	17.2
Pyaterochka (incl. express delivery)	1,165,898	1,023,512	13.9	1,165,898	1,023,512	13.9
Perekrestok (incl. express delivery)	201,843	191,910	5.2	201,843	191,910	5.2
Chizhik	45,330	10,917	4x	45,330	10,917	4x
Gross profit	355,625	317,446	12.0	350,784	313,429	11.9
Gross profit margin, %	24.2	25.4	(113) b.p.	23.9	25.0	(114) b.p.
Adj. EBITDA	163,009	161,192	1.1	100,748	104,908	(4.0)
Adj. EBITDA margin, %	11.1	12.9	(177) b.p.	6.9	8.4	(152) b.p.
EBITDA	162,637	159,708	1.8	100,376	103,424	(2.9)
EBITDA margin, %	11.1	12.8	(168) b.p.	6.8	8.3	(142) b.p.
Operating profit	83,216	77,768	7.0	60,501	58,625	3.2
Operating profit margin, %	5.7	6.2	(54) b.p.	4.1	4.7	(56) b.p.
Net profit	36,003	29,261	23.0	41,661	30,464	36.8
Net profit margin, %	2.5	2.3	12 b.p.	2.8	2.4	40 b.p.

Revenue

Revenue growth reached 19.2% year-on-year in Q2 2023. Net retail sales increased by 18.9%, driven by a combination of 10.4% selling space growth and 7.8% LFL sales growth, while X5's digital business sales grew by 83.7% y-o-y.

Selling space by format, square metres (sqm)

	AS AT 30-JUN-23	AS AT 31-DEC-22	CHANGE VS 31-DEC-22, % OR MULTIPLE	AS AT 30-JUN-22	CHANGE Y-O-Y, % OR MULTIPLE
Pyaterochka	7,899,872	7,497,056	5.4	7,271,291	8.6
Perekrestok	1,067,171	1,085,496	(1.7)	1,107,702	(3.7)
Chizhik	239,559	152,370	57.2	44,129	5x
Joint dark stores	10,258	8,087	26.8	5,358	91.5
X5 Group7	9,541,021	9,107,479	4.8	8,643,579	10.4

Q2 and H1 2023 LFL store performance by format, % change y-o-y

In Q2 2023, LFL sales increased by 7.8% year-on-year, supported by Pyaterochka's and Perekrestok's solid LFL results of 8.5% and 4.6%, respectively.

LFL traffic was the main driver of LFL sales in Q2 2023, with the LFL basket in positive territory at 1.1% year-on-year.

	Q2 2023			H1 2023
	SALES	TRAFFIC	BASKET	SALES	TRAFFIC	BASKET
Pyaterochka	8.5	7.2	1.2	7.8	5.6	2.0
Perekrestok	4.6	2.3	2.3	4.3	1.8	2.5
X5 Group8	7.8	6.6	1.1	7.2	5.2	1.9

For more details on net retail sales performance, please refer to X5's Q2 2023 Trading Update.

Gross profit margin

Gross profit margin under IFRS 16 decreased by 137 b.p. year-on-year to 24.4% (down 139 b.p. year-on-year to 24.1% pre-IFRS 16) in Q2 2023, mainly due to the aggressive expansion of the Chizhik hard discounter format into regional markets, the consolidation of Krasny Yar and Slata, as well as the transformation of Pyaterochka's CVP.

Gross profit margin for H1 2023 decreased by 113 b.p. under IFRS 16 (down 114 b.p. pre-IFRS 16) due to the increasing share of the hard discounter format in revenue, the consolidation of Krasny Yar and Slata, as well as the transformation of Pyaterochka's CVP.

Selling, general and administrative (SG&A) expenses (excl. D&A&I and the impact of the Karusel transformation)

	IFRS 16			Pre-IFRS 16
RUB mln	Q2 2023	Q2 2022	change, y-o-y, %	Q2 2023	Q2 2022	change, y-o-y, %
Staff costs	(62,672)	(50,210)	24.8	(62,672)	(50,210)	24.8
% of revenue	8.1	7.7	37 b.p.	8.1	7.7	37 b.p.
incl. LTI and share-based payments	(1,429)	(685)	108.6	(1,429)	(685)	108.6
staff costs excl. LTI and share-based payments as % of revenue	7.9	7.6	29 b.p.	7.9	7.6	29 b.p.
Lease expenses	(6,628)	(4,619)	43.5	(32,912)	(29,054)	13.3
% of revenue	0.9	0.7	15 b.p.	4.3	4.5	(22) b.p.
Utilities	(14,426)	(11,122)	29.7	(14,426)	(11,122)	29.7
% of revenue	1.9	1.7	15 b.p.	1.9	1.7	15 b.p.
Other store costs	(6,440)	(5,784)	11.3	(6,652)	(6,001)	10.8
% of revenue	0.8	0.9	(6) b.p.	0.9	0.9	(6) b.p.
Third-party services	(5,305)	(3,425)	54.9	(5,158)	(3,329)	54.9
% of revenue	0.7	0.5	15 b.p.	0.7	0.5	15 b.p.
Other expenses	(8,249)	(7,514)	9.8	(10,632)	(9,113)	16.7
% of revenue	1.1	1.2	(9) b.p.	1.4	1.4	(3) b.p.
SG&A (excl. D&A&I and the impact of the Karusel transformation)	(103,720)	(82,674)	25.5	(132,452)	(108,829)	21.7
% of revenue	13.4	12.8	68 b.p.	17.2	16.8	36 b.p.
SG&A (excl. D&A&I, LTI, share-based payments and the impact of the Karusel transformation)	(102,291)	(81,989)	24.8	(131,023)	(108,144)	21.2
% of revenue	13.2	12.7	60 b.p.	17.0	16.7	28 b.p.

	IFRS 16			Pre-IFRS 16
RUB mln	H1 2023	H1 2022	change, y-o-y, %	H1 2023	H1 2022	change, y-o-y, %
Staff costs	(123,870)	(100,288)	23.5	(123,870)	(100,288)	23.5
% of revenue	8.4	8.0	43 b.p.	8.4	8.0	43 b.p.
incl. LTI and share-based payments	(2,161)	(1,061)	103.7	(2,161)	(1,061)	103.7
staff costs excl. LTI and share-based payments as % of revenue	8.3	7.9	36 b.p.	8.3	7.9	36 b.p.
Lease expenses	(11,899)	(8,788)	35.4	(64,269)	(57,222)	12.3
% of revenue	0.8	0.7	11 b.p.	4.4	4.6	(19) b.p.
Utilities	(31,294)	(24,989)	25.2	(31,294)	(24,989)	25.2
% of revenue	2.1	2.0	14 b.p.	2.1	2.0	14 b.p.
Other store costs	(12,593)	(11,404)	10.4	(13,018)	(11,840)	9.9
% of revenue	0.9	0.9	(5) b.p.	0.9	0.9	(6) b.p.
Third-party services	(9,449)	(7,939)	19.0	(9,244)	(7,748)	19.3
% of revenue	0.6	0.6	1 b.p.	0.6	0.6	1 b.p.
Other expenses	(16,639)	(15,701)	6.0	(20,902)	(18,677)	11.9
% of revenue	1.1	1.3	(12) b.p.	1.4	1.5	(7) b.p.
SG&A (excl. D&A&I and the impact of the Karusel transformation)	(205,744)	(169,109)	21.7	(262,597)	(220,764)	18.9
% of revenue	14.0	13.5	51 b.p.	17.9	17.6	25 b.p.
SG&A (excl. D&A&I, LTI, share-based payments and the impact of the Karusel transformation)	(203,583)	(168,048)	21.1	(260,436)	(219,703)	18.5
% of revenue	13.9	13.4	44 b.p.	17.7	17.5	19 b.p.

In Q2 2023, SG&A expenses excluding D&A&I, LTI, share-based payments and the impact of the Karusel transformation under IFRS 16 as a percentage of revenue increased by 60 b.p. to 13.2% (up 28 b.p. to 17.0% pre-IFRS 16), mainly driven by increased staff costs, lease expenses, utilities costs and third-party services as a percentage of revenue.

Staff costs (excluding LTI and share-based payments) as a percentage of revenue increased by 29 b.p. year-on-year in Q2 2023 to 7.9%, mainly due to the negative operating leverage effect as well as the hiring of additional store personnel at Perekrestok on the back of the new CVP.

LTI and share-based payment expenses amounted to RUB 1,429 million in Q2 2023, up by 108.6% from RUB 685 million in Q2 2022, driven by the introduction of the LTI programme for new businesses and an increase in accruals for the 2021-2023 LTI programme on the back of updated KPIs and a reassessment of the probability of achieving the KPIs.

Lease expenses under IFRS 16 as a percentage of revenue in Q2 2023 increased by 15 b.p. year-on-year to 0.9%, mainly due to an increase in the number of reverse franchising stores. The 22 b.p. decrease in pre-IFRS 16 lease expenses to 4.3% was caused by a positive operating leverage effect for fixed lease rates.

Utilities costs as a percentage of revenue in Q2 2023 increased by 15 b.p. year-on-year to 1.9%, mainly due to a negative operating leverage effect and increase in tariffs.

Other store costs under IFRS 16 as a percentage of revenue in Q2 2023 decreased by 6 b.p. year-on-year (falling by 6 b.p. pre-IFRS 16), mainly due to the optimisation of store security operations.

Third-party service expenses under IFRS 16 as a percentage of revenue in Q2 2023 increased by 15 b.p. year-on-year to 0.7% (up 15 b.p. to 0.7% pre-IFRS 16), mainly due to the normalisation of marketing expenses vs Q2 2022.

Other expenses under IFRS 16 as a percentage of revenue in Q2 2023 decreased by 9 b.p. year-on-year to 1.1% (down 3 b.p. to 1.4% pre-IFRS 16), due to the reversal of one-off provisions partially offset by the growing share of courier service costs for express delivery.

In H1 2023, SG&A expenses excluding D&A&I, LTI, share-based payments and the impact of the Karusel transformation under IFRS 16 as a percentage of revenue increased by 44 b.p. to 13.9% (up 19 b.p. to 17.7% pre-IFRS 16), mainly driven by higher staff costs, lease expenses and utilities as a percentage of revenue.

Lease/sublease and other income⁹

As a percentage of revenue, the Company's income from leases, subleases and other operations under IFRS 16 totalled 0.8%, representing a decrease of 11 b.p. year-on-year in Q2 2023 (a decrease of 8 b.p. to 0.7% pre-IFRS 16), driven by lower income from sales of recyclables.

EBITDA and EBITDA margin

	IFRS 16			Pre-IFRS 16
RUB mln	Q2 2023	Q2 2022	change, y-o-y, %	Q2 2023	Q2 2022	change, y-o-y, %
Gross profit	188,394	167,016	12.8	185,835	164,957	12.7
Gross profit margin, %	24.4	25.8	(137) b.p.	24.1	25.5	(139) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and the effect of the Karusel transformation)	(102,291)	(81,989)	24.8	(131,023)	(108,144)	21.2
% of revenue	13.2	12.7	60 b.p.	17.0	16.7	28 b.p.
Net impairment gain on financial assets	12	288	(95.8)	12	288	(95.8)
% of revenue	0.00	0.04	(4) b.p.	0.00	0.04	(4) b.p.
Lease/sublease and other income (excl. the effect of the Karusel transformation)	5,971	5,698	4.8	5,688	5,275	7.8
% of revenue	0.8	0.9	(11) b.p.	0.7	0.8	(8) b.p.
Adj. EBITDA	92,086	91,013	1.2	60,512	62,376	(3.0)
Adj. EBITDA margin, %	11.9	14.0	(212) b.p.	7.8	9.6	(179) b.p.
LTI, share-based payments and other one-off remuneration payment expenses and SSC	(1,429)	(685)	108.6	(1,429)	(685)	108.6
% of revenue	0.2	0.1	8 b.p.	0.2	0.1	8 b.p.
Effect of the Karusel transformation	1,789	(176)	n/a	1,789	(176)	n/a
% of revenue	0.23	(0.03)	26 b.p.	0.23	(0.03)	26 b.p.
EBITDA	92,446	90,152	2.5	60,872	61,515	(1.0)
EBITDA margin, %	12.0	13.9	(194) b.p.	7.9	9.5	(161) b.p.

	IFRS 16			Pre-IFRS 16
RUB mln	H1 2023	H1 2022	change, y-o-y, %	H1 2023	H1 2022	change, y-o-y, %
Gross profit	355,625	317,446	12.0	350,784	313,429	11.9
Gross profit margin, %	24.2	25.4	(113) b.p.	23.9	25.0	(114) b.p.
SG&A (excl. D&A&I, LTI, share-based payments and the effect of the Karusel transformation)	(203,583)	(168,048)	21.1	(260,436)	(219,703)	18.5
% of revenue	13.9	13.4	44 b.p.	17.7	17.5	19 b.p.
Net impairment losses on financial assets	(54)	(147)	(63.3)	(54)	(147)	(63.3)
% of revenue	0.00	0.01	(1) b.p.	0.00	0.01	(1) b.p.
Lease/sublease and other income (excl. the effect of the Karusel transformation)	11,021	11,941	(7.7)	10,454	11,329	(7.7)
% of revenue	0.8	1.0	(20) b.p.	0.7	0.9	(19) b.p.
Adj. EBITDA	163,009	161,192	1.1	100,748	104,908	(4.0)
Adj. EBITDA margin, %	11.1	12.9	(177) b.p.	6.9	8.4	(152) b.p.
LTI, share-based payments and other one-off remuneration payment expenses and SSC	(2,161)	(1,061)	103.7	(2,161)	(1,061)	103.7
% of revenue	0.1	0.1	6 b.p.	0.1	0.1	6 b.p.
Effect of the Karusel transformation	1,789	(423)	n/a	1,789	(423)	n/a
% of revenue	0.12	(0.03)	16 b.p.	0.12	(0.03)	16 b.p.
EBITDA	162,637	159,708	1.8	100,376	103,424	(2.9)
EBITDA margin, %	11.1	12.8	(168) b.p.	6.8	8.3	(142) b.p.

D&A&I

Depreciation, amortisation and impairment costs under IFRS 16 decreased as a percentage of revenue by 81 b.p. year-on-year to 5.1% (down 53 b.p. year-on-year to 2.6% pre-IFRS 16) in Q2 2023, totalling RUB 39,746 million (RUB 19,703 million pre-IFRS 16). This was mainly due to the fact that revenue growth outpaced growth in the gross book value of assets. In H1 2023, depreciation, amortisation and impairment costs under IFRS 16 decreased by 114 b.p. year-on-year to 5.4% (down 86 b.p. year-on-year to 2.7% pre-IFRS 16), totalling RUB 79,421 million (RUB 39,875 million pre-IFRS 16).

Non-operating gains and losses

	IFRS 16			Pre-IFRS 16
RUB mln	Q2 2023	Q2 2022	change, y-o-y, % or multiple	Q2 2023	Q2 2022	change, y-o-y, % or multiple
Operating profit	52,700	51,578	2.2	41,169	41,519	(0.8)
Net finance costs	(16,252)	(18,253)	(11.0)	(1,744)	(5,972)	(70.8)
Net FX result	(2,087)	6,231	n/a	(1,086)	2,352	n/a
Profit before tax	34,361	39,556	(13.1)	38,339	37,899	1.2
Income tax expense	(8,054)	(12,794)	(37.0)	(8,850)	(12,457)	(29.0)
Net profit	26,307	26,762	(1.7)	29,489	25,442	15.9
Net profit margin, %	3.4	4.1	(72) b.p.	3.8	3.9	(11) b.p.

	IFRS 16			Pre-IFRS 16
RUB mln	H1 2023	H1 2022	change, y-o-y, % or multiple	H1 2023	H1 2022	change, y-o-y, % or multiple
Operating profit	83,216	77,768	7.0	60,501	58,625	3.2
Net finance costs	(33,015)	(35,319)	(6.5)	(4,904)	(11,782)	(58.4)
Net FX result	(3,498)	2,937	n/a	(1,822)	45	n/a
Profit before tax	46,703	45,386	2.9	53,775	46,888	14.7
Income tax expense	(10,700)	(16,125)	(33.6)	(12,114)	(16,424)	(26.2)
Net profit	36,003	29,261	23.0	41,661	30,464	36.8
Net profit margin, %	2.5	2.3	12 b.p.	2.8	2.4	40 b.p.

Net finance costs under IFRS 16 in Q2 2023 decreased by 11% year-on-year to RUB 16,252 million (down 70.8% year-on-year to RUB 1,744 million pre-IFRS 16), driven by lower finance costs on the back of decreased interest rates in Russian capital markets vs Q2 2022 and lower total debt.

The negative net FX result totalled RUB 2,087 million (RUB 1,086 million under pre-IFRS 16) in Q2 2023, compared with positive RUB 6,231 million (positive RUB 2,352 million under pre-IFRS 16) in Q2 2022, due to the depreciation of the rouble. 

In Q2 2023, income tax expense under IFRS 16 decreased by 37.0% year-on-year (down 29.0% year-on-year pre-IFRS 16) due to the high base effect of Q2 2022 driven by a one-off effect from provisions.

In H1 2023, the effective tax rate under IFRS 16 was 22.9% (22.5% under pre-IFRS 16), down from 35.5% in H1 2022 (35.0% under pre-IFRS 16).

Consolidated cash flow statement highlights

	IFRS 16			Pre-IFRS 16
RUB mln	Q2 2023	Q2 2022	change, y-o-y, % or multiple	Q2 2023	Q2 2022	change, y-o-y, % or multiple
Net cash from operating activities before changes in working capital	90,205	89,817	0.4	58,906	61,603	(4.4)
Change in working capital	16,864	5,699	3x	16,865	5,898	3x
Adj. net interest and income tax paid10	(21,117)	(19,536)	8.1	(6,637)	(7,245)	(8.4)
Interest received on short-term financial investments	2,232	-	n/a	2,232	-	n/a
Net interest and income tax paid	(18,885)	(19,536)	(3.3)	(4,405)	(7,245)	(39.2)
Adj. net cash flows generated from operating activities10	85,952	75,980	13.1	69,134	60,256	14.7
Net cash flows generated from operating activities	88,184	75,980	16.1	71,366	60,256	18.4
Adj. net cash used in investing activities11	(30,354)	(15,058)	101.6	(30,507)	(15,143)	101.5
(Payment for)/Repayment of short-term financial investments	(32,232)	30,000	n/a	(32,232)	30,000	n/a
Net cash (used in)/generated from investing activities	(62,586)	14,942	n/a	(62,739)	14,857	n/a
Net cash used in financing activities	(37,435)	(105,309)	(64.5)	(20,464)	(89,500)	(77.1)
Effect of exchange rate changes on cash and cash equivalents	134	(309)	n/a	134	(309)	n/a
Net increase in cash and cash equivalents	(11,703)	(14,696)	(20.4)	(11,703)	(14,696)	(20.4)

	IFRS 16			Pre-IFRS 16
RUB mln	H1 2023	H1 2022	change, y-o-y, % or multiple	H1 2023	H1 2022	change, y-o-y, % or multiple
Net cash from operating activities before changes in working capital	160,048	160,574	(0.3)	98,353	104,909	(6.2)
Change in working capital	(14,015)	(18,493)	(24.2)	(13,834)	(17,996)	(23.1)
Adj. net interest and income tax paid10	(43,344)	(39,945)	8.5	(15,288)	(16,423)	(6.9)
Interest received on short-term financial investments	2,232	-	n/a	2,232	-	n/a
Net interest and income tax paid	(41,112)	(39,945)	2.9	(13,056)	(16,423)	(20.5)
Adj. net cash flows generated from operating activities10	102,689	102,136	0.5	69,231	70,490	(1.8)
Net cash flows generated from operating activities	104,921	102,136	2.7	71,463	70,490	1.4
Adj. net cash used in investing activities11	(47,430)	(37,025)	28.1	(47,707)	(37,267)	28.0
(Payment for)/Repayment of short-term financial investments	(32,232)	30,000	n/a	(32,232)	30,000	n/a
Net cash used in investing activities	(79,662)	(7,025)	11x	(79,939)	(7,267)	11x
Net cash used in financing activities	(41,354)	(82,343)	(49.8)	(7,619)	(50,455)	(84.9)
Effect of exchange rate changes on cash and cash equivalents	256	(314)	n/a	256	(314)	n/a
Net increase in cash and cash equivalents	(15,839)	12,454	n/a	(15,839)	12,454	n/a

In Q2 2023, the Company's net cash from operating activities before changes in working capital under IFRS 16 increased by RUB 388 million (down RUB 2,697 million under pre-IFRS 16) and totalled RUB 90,205 million (RUB 58,906 million under pre-IFRS 16). The positive change in working capital under IFRS 16 of RUB 16,864 million in Q2 2023 vs. RUB 5,699 million in Q2 2022 was driven by an increase in trade accounts payable due to the effect of the low base of Q1 2023 on the back of earlier stock purchases ahead of Russian holidays on 23 February and 8 March and a negative effect on inventories from additional stock purchases last year.

Working capital highlights

RUB mln	30-Jun-23	31-Dec-22	30-Jun-22
Inventories	207,849	208,661	175,204
Trade, other accounts receivable and prepayments	22,055	21,382	12,921
Trade accounts payable	222,308	238,641	187,672
Provisions and other liabilities	131,061	130,450	97,827
Short-term contract liabilities	1,779	3,767	5,826

Adjusted net interest and income tax paid under IFRS 16 in Q2 2023 increased by 8.1% year-on-year (down 8.4% year-on-year pre-IFRS 16) and totalled RUB 21,117 million (RUB 6,637 million pre-IFRS 16). This was due to the low base effect of income tax paid in Q2 2022 driven by income tax prepayments made in previous periods.

As a result, adjusted net cash flow generated from operating activities under IFRS 16 totalled RUB 85,952 million in Q2 2023, up from RUB 75,980 million in Q2 2022 (RUB 69,134 million, up from RUB 60,256 million in Q2 2022 pre-IFRS 16).

In H1 2023, adjusted net cash flows generated from operating activities under IFRS 16 totalled RUB 102,689 million, up 0.5% from RUB 102,136 million in H1 2022 (totalling RUB 69,231 million, down 1.8% from RUB 70,490 million in H1 2022 pre-IFRS 16).

In Q2 2023, adjusted net cash used in investing activities, which predominantly consists of payments for property, plant and equipment, increased to RUB 30,354 million under IFRS 16 (RUB 30,507 million pre-IFRS 16) due to the low base effect of Q2 2022 driven by capex control measures, as well as the acquisition of Tamerlan in Q2 2023. For H1 2023, adjusted net cash used in investing activities under IFRS 16 increased to RUB 47,430 million (RUB 47,707 million under pre-IFRS 16) from RUB 37,025 million (RUB 37,267 million under pre-IFRS 16) in H1 2022.

Net cash used in financing activities under IFRS 16 totalled RUB 37,435 million (RUB 20,464 million pre-IFRS 16) in Q2 2023, compared with net cash used in financing activities of RUB 105,309 million (RUB 89,500 million pre-IFRS 16) in Q2 2022. In H1 2023, net cash used in financing activities under IFRS 16 decreased to RUB 41,354 million from RUB 82,343 million (decreasing to RUB 7,619 million from RUB 50,455 million pre-IFRS 16) in H1 2022.

Liquidity update

RUB mln	30-Jun-23	% of total	31-Dec-22	% of total	30-Jun-22	% of total
Total debt	228,985		234,532		243,928
Short-term debt	109,997	48.0	87,146	37.2	60,490	24.8
Long-term debt	118,988	52.0	147,386	62.8	183,438	75.2
Net debt (pre-IFRS 16)	201,569		191,277		205,412
Net debt/EBITDA (pre-IFRS 16)	1.10x		1.02x		1.11x
Lease liabilities (IFRS 16)	626,676		591,160		558,072
Net debt/EBITDA (IFRS 16)	2.71x		2.58x		2.58x

The Company's net debt/EBITDA ratio under IFRS 16 was 2.71x (1.10x pre-IFRS 16) as of 30 June 2023.

The Company's debt pre-IFRS 16 is 100% denominated in Russian roubles.

As of 30 June 2023, the Company had access to RUB 442,961 million in available lines of credit with major banks.

Related Party Transactions

For a description of the related party transactions entered into by the Company, please refer to note 8 of the consolidated condensed interim financial statements.

Risks and Uncertainties

X5's risk management programme provides executive management with a periodic in-depth understanding of X5's key business risks and the risk management systems and internal controls in place to mitigate these risks. For a detailed description of key risks that the Company faces, please refer to the 2022 Annual Report. It should be noted that there are additional risks that management believe are immaterial or otherwise common to most companies, or that management is currently unaware of. The Company has assessed the risks for the first half of 2023 and believes that the risks identified are in line with those presented in the 2022 Annual Report. For a description of the financial risks faced by the Company, please refer to note 31 of the audited consolidated financial statements and the Company's 2022 Annual Report.

Interim report

The interim report, including the full set of reviewed IFRS condensed consolidated interim financial statements and notes thereto, is available on X5's corporate website at:

https://www.x5.ru/en/investors/financial-and-operational-results/

Information on Alternative Performance Measures

For more information on Alternative Performance Measures, which provide readers with a more detailed and accurate understanding of the Company's financial and operating performance, please refer to pages 73-76 of the Annual Report 2022.

Notes: 

1.    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 12 full months. Their sales are included in LFL calculations starting from the day of the store's opening. We include all stores that fit our LFL criteria in each reporting period. Express delivery sales from stores and dark stores that have operated for less than 12 full months are also included in LFL calculations.

2.    Pre-IFRS 16 financial measures are calculated by adjusting the applicable IFRS measures to include fixed lease expenses and fixed non-lease components of lease contracts, and to exclude any gain on derecognition of right-of-use assets and lease liabilities, depreciation of right-of-use assets and interest on lease liabilities, and gain/loss from asset sale and leaseback operations for the proportion of rights retained as recognised under IFRS 16.

3.    Adjusted EBITDA is EBITDA before costs related to the LTI programme, share-based payments, other one-off remuneration payment expenses and the impact of the Karusel transformation.

4.    Please note that, in this and other tables and in the text of this press release, immaterial deviations in the calculation of % changes, subtotals and totals are due to rounding.

5.    Net retail sales represent revenue from the operations of X5-managed stores net of VAT. This number differs from revenue, which includes proceeds from wholesale operations, direct franchisees (royalty payments) and other revenue. Including Mnogo Lososya, Vprok.ru, Krasny Yar and Slata

6.    Net retail sales represent revenue from the operations of X5-managed stores net of VAT. This number differs from revenue, which includes proceeds from wholesale operations, direct franchisees (royalty payments) and other revenue. Including Mnogo Lososya, Vprok.ru, Krasny Yar and Slata

7.    Including Vprok.ru dark stores, Mnogo Lososya dark kitchens, and Krasny Yar and Slata stores.

8.    Excluding Krasny Yar and Slata, Vprok.ru and Mnogo Lososya; including Chizhik.

9.    Mainly consists of lease/sublease income, income from the sale of recyclable materials and other one-off gains.

10.  Adjusted for interest received on short-term financial investments

11.  Adjusted for cash used for short-term financial investments

Note to Editors

X5 Retail Group N.V. (LSE and MOEX: FIVE; Expert RA - ruAAA; ACRA - AAA(RU)) is a leading Russian food retailer. The Company operates proximity stores under the Pyaterochka brand, Perekrestok supermarkets and Chizhik hard discounters. X5 provides an omnichannel experience to its customers, integrating retail stores and e-commerce through its businesses Vprok.ru, 5Post and Mnogo Lososya.

As of 30 June 2023, X5 had 22,682 Company-operated stores. It has the leading market position in both Moscow and St Petersburg, as well as a significant presence in the European part of Russia and a growing presence in the Russian Far East. Its store base includes 20,248 Pyaterochka proximity stores, 956 Perekrestok supermarkets, 809 Chizhik hard discounters and 596 Krasny Yar and Slata stores. The Company operates 59 DCs and 4,604 Company-owned trucks across the Russian Federation.

X5 is one of the largest employers in Russia. The Company employs over 358 thousand people.

For the full year 2022, revenue totalled RUB 2,605,232 million (USD 38,005 million*), EBITDA pre-IFRS 16 reached RUB 186,788 million (USD 2,725 million*), and net profit pre-IFRS 16 for the period amounted to RUB 52,248 million (USD 762 million*). In H1 2023, revenue totalled RUB 1,468,407 million (USD 19,095 million**), adjusted EBITDA pre-IFRS 16 reached RUB 100,748 million (USD 1,310 million**), and net profit pre-IFRS 16 amounted to RUB 41,661 million (USD 542 million**).

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal", "believe", or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Group N.V.'s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

Any forward-looking statements made by or on behalf of X5 Group N.V. speak only as of the date of this announcement. Save as required by any applicable laws or regulations, X5 Group N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

*      FX rate: 68.5494 USD/RUB

**    FX rate: 76.8996  USD/RUB

For further details, please contact:

Polina Ugryumova
Head of Corporate Finance and IR
Tel.: [phone] ext. 13-312
e-mail: [e-mail]

Maria Yazeva
Investor Relations Officer
Tel.: [phone] ext. 13-147
e-mail: [e-mail]

 

END