M.Video-Eldorado increases its adjusted net profit under IAS 17 by 18% to RUB 6.4 billion

PJSC M.video (M.Video-Eldorado Group, the Company, or the Group; MOEX: MVID), Russia’s leading e-commerce and consumer electronics retailer, announces its condensed unaudited consolidated financial results under International Financial Reporting Standards (IFRS) for the six months ended June 30, 2021.

1H 2021 M.VIDEO-ELDORADO GROUP FINANCIAL HIGHLIGHTS
• The Group’s revenue increased by 22.3% year-on-year to RUB 212,776 million, driven by a rise in total online sales (up 48.8% year-on-year), average ticket growth on the web platform and an increase in the number of active identified customers, who had a higher average ticket and purchase frequency.
• Gross profit rose by 13.1% year-on-year to RUB 50,505 million (RUB 50,536 million under IFRS 16), while gross margin stood at 23.7%.
• Selling, general and administrative expenses (SG&A), excluding depreciation and amortization, amounted to RUB 40,731 million (RUB 30,535 million under IFRS 16), having increased as a percentage of revenue by 0.3 percentage points (p.p.) year-on-year to 19.1%. The key drivers behind this were the cost of advertising, warehousing services and bank charges. The low base of the pandemic-ridden 2020 also had a massive impact on the dynamics of expenses as a percentage of revenue.
• The Group’s EBITDA rose by 37.1% to RUB 18,311 million (RUB 28,765 million under IFRS 16). The indicator includes one-off income from the sale of the goods.ru marketplace (RUB 3,571 million) and the write-off of a subsidized loan (RUB 2,520 million) obtained in 2020 as part of the government program to support companies most affected by COVID-19. The Group met all the obligations it undertook under the program. EBITDA margin was 8.6% (13.5% under IFRS 16).
• The Group’s adjusted EBITDA decreased 8.1% year-on-year to RUB 12,368 million (RUB 22,822 million under IFRS 16). Adjusted EBITDA margin4 totaled 5.8% (10.7% under IFRS 16).
• The Group’s adjusted net profit increased by 18% year-on-year to RUB 6,390 million (RUB 5,604 million under IFRS 16).
• The Group’s net debt as of June 30, 2021, was RUB 64,070 million (up 58% vs. December 31, 2020), with net debt/ adjusted EBITDA4 at 1.9x (vs. 1.4x as of December 31, 2020).
• In preparing its recommendations to shareholders on the distribution of profit and dividend payments, the Company plans not to take into account a number of one-off expenses and income in 1H 2021 and is ready to propose that the Board of Directors consider distributing RUB 6.39 billion as dividends.

Alexander Izosimov, CEO of M.Video-Eldorado Group, commented:
“M.Video–Eldorado continues to implement its strategy, demonstrating strong GMV growth while maintaining a solid financial position. We have made significant progress in developing digital products by continuing to invest in creating a seamless shopping experience, extensive leveraging of data analytics, maximum leveraging of cloud solutions and staff digital competencies. Over 11 million customers are already using our OneRetail technologies to choose products and place orders, while the growing average ticket and purchase frequency underscore the unique, positive customer experience we provide.

“As a result, we have gained a competitive edge and tripled our total online sales over the past two years. At the same time, the Group remains within the financial constraints stipulated by our strategy, keeping the mid-term outlook for EBITDA margin at 5%-7%, capex below 2% of GMV and the net debt/EBITDA ratio under 2x.

“The Company enjoyed very strong results in the first half of the year. However, EBITDA and net profit exceeded targets due to a number of one-off factors, which we took into account when recommending that the Board of Directors consider paying out interim dividends in the amount of RUB 6.4 billion for 1H 2021.”

BUSINESS OVERVIEW AND KEY EVENTS AFTER THE REPORTING DATE

• In July and August, growth of the Group’s total sales slowed as expected due to the extremely high base of Q3 2020, which was driven by deferred demand for quite a few categories of household appliances and electronics after the easing of lockdown restrictions that began in the summer of 2020. In the same months, the Group’s total online sales continued to show double-digit growth, with sales through the mobile platform increasing thanks to its enhanced capabilities and improved personalization of price offers, as well as more convenient credit programs available in the app.
• M.Video-Eldorado appointed management for its OneRetail business unit as a platform to manage both brands. The team, headed by Managing Director Dagmara Ivanova, was mostly hired from among existing employees.
• M.Video-Eldorado continued expanding its distribution network, adding another 70,000 cubic meters to its overall distribution center capacity, opening new facilities in Samara, Krasnodar and Krasnoyarsk, and doubling its storage area in Yekaterinburg and Vladivostok. These additions further develop the chain’s fulfilment capabilities, enabling faster restocking of stores and accelerated home delivery times amid growth in GMV and online sales, with delivery times for select online orders expected to be four times quicker.
• The Company welcomed new hires, including Alina Ryzhenkova in the role of HR Director for M.Video-Eldorado Group (previously Vice President for Organizational Development at MTS), and Andrey Pavlovich, who joined the Company as Director for Logistics and Fulfilment (previously Operations Director at X5 Group’s Perekrestok Vprok).
• In August, the Group successfully closed the order book on its second 2021 offering of three-year exchange-traded bonds worth RUB 9 billion with a coupon of 8.1% p.a.