Board of Directors of PJSC “Detsky Mir” recommended paying RUB 2.6 bn in dividends for FY2016

26 April 2017. Moscow, Russia.  – The Board of Directors of PJSC “Detsky Mir” (“Detsky Mir”, or “the Company) (MOEX: DSKY), Russia’s largest specialized children’s goods retailer, recommended the General Shareholders’ Meeting to approve dividend payments for the financial year 2016.

The Board of Directors recommended paying RUB 2,571,720,000 in dividends, or RUB 3.48 per Detsky Mir Group ordinary share, which are going to be paid in Q3 2017.

Total amount of dividends paid to shareholders of Detsky Mir Group in 2016 was RUB 4,426,610,000:

1. RUB 1,308,030,000 or RUB 1.77 per Detsky Mir Group ordinary share, paid in Q3 2016 for FY2015;
2. RUB 3,118,580,000 or RUB 4.22 per Detsky Mir Group ordinary share, paid as interim dividends in Q4 2016 for the nine months ended 30 September 2016.

Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:

“We are pleased that our efforts to develop the business and improve its efficiency allow our shareholders to achieve a high level of dividend payments. In 2017, we also plan to pay interim dividends for the nine months of 2017.”

Detsky Mir Group announces unaudited financial results for the first quarter 2017

Detsky Mir Group (“Detsky Mir”, “the Group” or “the Company”) (MOEX: DSKY), Russia’s largest specialized children’s goods retailer, announces its unaudited financial results in accordance with International Financial Reporting Standards (IFRS) for the first quarter ended 31 March 2017.

KEY FINANCIAL RESULTS FOR 1Q 2017

• Group Revenue increased by 28.3% to RUB 21.1bn, vs. RUB 16.4bn in 1Q 2016;
• In accordance with the methodology of calculation of like-for-like comparisons, which would be closer to methodologies used in operating and financial reporting of publicly traded food retailers in Russia, like-for-like sales at Detsky Mir stores in Russia grew by 11.2%[1] , with the number of tickets growing by 13.3% and a decline in the average ticket price by 1.9%;
• Gross profit increased by 17.9% year-on-year to RUB 6.5bn, with a gross margin of 30.7%;
• Selling, administrative and other operating expenses as a share of revenue[2] decreased year-on-year from 28.4% to 25.4% driven by increased operational efficiency;
• Adjusted EBITDA[3] increased by 37.6% to RUB 1.1bn for 1Q 2017 vs RUB 0.8bn for 1Q 2016; the EBITDA margin reached 5.3%. EBITDA[4] amounted to RUB 0.8bn;
• Adjusted profit for the period[5] increased by 34.4% year-on-year to RUB 137mln; Profit for the period amounted to RUB (89)mln;
• Net debt /Adjusted EBITDA LTM ratio amounted to 1.9x at the end of 1Q 2017.

Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:

“Despite the continued contraction of retail turnover, Detsky Mir Group successfully implements its strategy of attracting new customers and consolidating the market.

The variety of goods and affordable prices help maintain good growth rates. We reached a double-digit growth rate in the number of transactions (the number of checks) in like-for-like stores of Detsky Mir chain in Russia, which was amounted to 13.3%. The consolidated unaudited revenue grew by 28.3% to RUB 21.1bn. The implementation of the multichannel sales strategy is a priority and has a significant impact on the chain’s business development. In the first quarter of 2017, the unaudited revenue of the online store almost doubled year-on-year: from RUB 491m to RUB 900m. One of the main components of the multichannel sales strategy is omni-pricing”, which was implemented in 2016 through the reduction of prices in our brick-and-mortar stores to the level of the online store in order to offer the same prices to our customers.

In the first quarter of 2017, Detsky Mir Group successfully achieved all targets for reaching the double-digit adjusted EBITDA margin in the full-year 2017. Adjusted EBITDA grew by 37.6% year-on-year.

Improvements in operating efficiency continue to play the key role in increasing business profitability. The management’s efforts to further improve labour productivity and optimise rental payments have reduced SG&A expenses as a percentage of revenue by 300 bps.  Adjusted income increased by 34.4% year-on-year.

Detsky Mir Group will continue rapid development in 2017 and will open at least 70 new stores.”

KEY FINANCIAL & OPERATING HIGHLIGHTS  – 1Q2017 VS 1Q2016 (UNAUDITED)

Key Operating Highlights

Key Financial Highlights

Additional information is available on the Company’s corporate website www.corp.detmir.ru

***

Conference call information

Detsky Mir’s management will host a conference call today at 4:00 pm (Moscow time) / 2:00 pm (London time) / 9:00 am (New York time) to present and discuss 1Q2017 results.

The dial-in numbers for the conference call are:

Russia

+7 495 221 6523

UK

+44 203 043 24 40

USA

+1 877 887 41 63

PIN: 44788326#

The conference title: “Detsky Mir Group – 1Q 2017 Unaudited IFRS Financial Results”.

For additional information:

Detsky Mir Group (MOEX: DSKY) is Russia’s largest specialized children’s goods retailer. The company operates a network of 525 stores, including 468 Detsky Mir stores in Russia and 12 in Kazakhstan located in 178 different cities, as well as 45 ELC (Early Learning Centre) stores in Russia. The total selling space as at 31 December 2016 was approximately 596,000 square meters.

In accordance with the audited Financial Statements under IFRS Group revenue amounted to RUB 79.5bn for the full year 2016. Adjusted EBITDA totaled RUB 8.2bn and Adjusted profit for the period amounted to RUB 3.8bn for 2016.

Detsky Mir Group’s shareholder structure is as follows: PJSC Sistema[14]  – 52.10%; Russia-China Investment Fund (RCIF) [15] – 14.03%; Other shareholders owning less than 5% of the shares – 33.87%.

Lear more at www.detmir.ru, corp.detmir.ru or elc-russia.ru.

Disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Detsky Mir. You can identify forward looking statements by terms such as “expect”, “believe”, “anticipate”, “estimate”, “intend”, “will”, “could,” “may” or “might” the negative of such terms or other similar expressions. Detsky Mir wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Detsky Mir does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Detsky Mir, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries Detsky Mir operates in, as well as many other risks specifically related to Detsky Mir and its operations.

Attachment A

EBITDA is calculated as profit for the period before income tax expense, foreign exchange loss, finance expense, finance income, depreciation and amortisation. EBITDA margin is calculated as EBITDA for a given period divided by revenue for such period expressed as a percentage. Our EBITDA may not be similar to EBITDA measures of other companies; is not a measurement under accounting principles generally accepted under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of profit and loss. We believe that EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of businesses and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under IFRS, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. EBITDA is commonly used as one of the bases for investors and analysts to evaluate and compare the periodic and future operating performance and value of companies.

Adjusted EBITDA and Adjusted profit for the period are used to evaluate financial performance of the Group. This represents an underlying financial measure adjusted for a one-off gains and losses. We believe that adjusted measures provide investors with additional useful information to measure our underlying financial performance, particularly from period to period, because these measures are exclusive of certain one-off gains and losses.

EBITDA and Adjusted EBITDA can be reconciled to our consolidated statements of profit and loss as follows:

Adjusted profit for the period can be reconciled to our consolidated statements of profit and loss as follows:

([1]) Alternative like-for-like average ticket growth, like-for-like number of tickets growth and like-for-like revenue growth based on the stores that have been in operations for at least 12 full calendar months.

([2]) Selling, general and administrative expenses exclude D&A expenses and adjusted for share-based compensation and cash bonuses under the LTI program

([3]) Adjusted EBITDA is calculated as profit for the period before income tax, FX loss, net finance expense, D&A; adjusted for share-based compensation and cash bonuses under the LTI program. See Attachment A.

([4]) See Attachment A for definitions and reconciliation of EBITDA to IFRS financial measures.

([5]) Adjusted for additional bonus accruals under the LTI program (together with related tax effects). See Attachment A.

([6]) Alternative like-for-like average ticket growth, like-for-like number of tickets growth and like-for-like revenue growth based on the stores that have been in operations for at least 12 full calendar months.

([7]) LfL growth includes only DM stores in Russia that were in operations for one full prior calendar year. For example, the like-for-like comparison of retail sales between 1Q 2017 and 1Q 2016 would include revenue of all Detsky Mir stores that were opened prior to 31 December 2015 and that were in operation during the entirety of 2016 and 1Q 2017.

([8]) Online store includes all online orders on the website – www.detmir.ru, including home delivery to customers and in store pick-up

([9]) Selling, general and administrative expenses exclude D&A expenses adjusted for share-based compensation and cash bonuses under the LTI program

([10]) See Attachment A for definitions and reconciliation of EBITDA to IFRS financial measures.

([11]) Adjusted EBITDA is calculated as profit for the period before income tax, FX loss, net finance expense, D&A; adjusted for share-based compensation and cash bonuses under the LTI program. See Attachment A.

([12]) Adjusted for the one-off effect relating to additional bonus accruals under the LTI program (together with related tax effects). See Attachment A.

([13])Adjusted Net debt is calculated as total borrowings less cash and cash equivalent / adjusted for the loan issued to CJSC “DM-Finance” (Sistema’s subsidiary) in 2013, fully repaid on February 27, 2017

([14]) PJSC Sistema is a publicly-traded diversified Russian holding company serving over 100 million customers in the sectors of telecommunications, high technology, pulp and paper, radio and space technology, banking, retail, mass media, tourism and healthcare services. Founded in 1993. Sistema’s global depositary receipts are listed under the symbol SSA on the London Stock Exchange. Sistema’s ordinary shares are listed under the ticker AFKS on Moscow Exchange.

([15]) RCIF is an equity fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), hold its stake in PJSC Detsky Mir through its funds: FLOETTE HOLDINGS LIMITED and EXARZO HOLDINGS LIMITED.

The conference call for analysts and investors to discuss the unaudited IFRS Financial Results of Detsky Mir Group for 1Q 2017

The conference call for analysts and investors to discuss the unaudited IFRS Financial Results of Detsky Mir Group for 1Q 2017

26 April 2017. Moscow, Russia. Detsky Mir Group (MOEX: DSKY), Russia’s largest children’s goods retailer – announces the unaudited IFRS Financial Results of 1Q 2017 will be published May 3, 2017. On the same day, Detsky Mir Group will also hold a conference call for investors and analysts on the results.

Details of the conference call:

Date: Wednesday, May 3, 2017

Time: 16:00 (Moscow) 14:00 (London) 09:00 (New York)

Speakers:

Anna Garmanova, Chief Financial Officer

Alex Voskoboinik, Head of Investor Relations

Sergey Levitskiy, Head of Capital Markets & Business Valuation

Please find Dial-in below:

Russia

+7 495 221 6523

UK

+44 203 043 24 40

USA

+1 877 887 41 63

PIN: 44788326#

Press release on the financial results and the corresponding presentation will be published at 10.00 am (Moscow time) and posted on the website: www.corp.detmir.ru.

***

For additional information contact:

Alexey Voskoboinik

Head of Investor Relations

Office: +7-495-781-0808 (25-82)


Cell: +7-915-129-9905

avoskoboinik@detmir.ru

Sergey Levitskiy

Head of Capital Markets & Business Valuation

Office: +7-495-781-0808 (23-15)


Cell: +7-903-971-4365

slevitskiy@detmir.ru

About Detsky Mir Group:

Detsky Mir Group (MOEX: DSKY) is Russia’s largest specialized children’s goods retailer. The company operates a network of 525 stores, including 468 Detsky Mir stores in Russia and 12 in Kazakhstan located in 178 different cities, as well as 45 ELC (Early Learning Centre) stores in Russia. The total selling space as at 31 December 2016 was approximately 596,000 square meters.

In accordance with the audited Financial Statements under IFRS Group revenue amounted to RUB 79.5bn for the full year 2016. Adjusted EBITDA totaled RUB 8.2bn and Adjusted profit for the period amounted to RUB 3.8bn for 2016.

Detsky Mir Group’s shareholder structure is as follows: PJSC Sistema[1]  – 52.10%; Russia-China Investment Fund (RCIF) [2] – 14.03%; Other shareholders owning less than 5% of the shares – 33.87%. 

Lear more at www.detmir.ru, corp.detmir.ru or elc-russia.ru.

([1]) PJSC Sistema is a publicly-traded diversified Russian holding company serving over 100 million customers in the sectors of telecommunications, high technology, pulp and paper, radio and space technology, banking, retail, mass media, tourism and healthcare services. Founded in 1993. Sistema’s global depositary receipts are listed under the symbol SSA on the London Stock Exchange. Sistema’s ordinary shares are listed under the ticker AFKS on Moscow Exchange.

([2]) RCIF is an equity fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), hold its stake in PJSC Detsky Mir through its funds: FLOETTE HOLDINGS LIMITED and EXARZO HOLDINGS LIMITED.

Detsky Mir Group announces operating results for the first quarter 2017

Detsky Mir Group (“Detsky Mir”, “the Group” or “the Company”) (MOEX: DSKY), Russia’s largest specialized children’s goods retailer, announces its operating results for the first quarter ended 31 March 2017.                

KEY OPERATING RESULTS FOR 1Q 2017

• Group unaudited retail revenue increased by 26.8% to RUB 20.8bn, vs. RUB 16.4bn in 1Q 2016;
• In accordance with the methodology of calculation of like-for-like comparisons, which would be closer to methodologies used in operating and financial reporting of publicly traded food retailers in Russia, like-for-like sales at Detsky Mir stores in Russia grew by 11.2%[1], with the number of tickets growing by 13.3% and a decline in the average ticket price by 1.9%;
• Group stores amounted to 521[2] with total retail floorspace of approximately 596,000 sq. m. In the first quarter of 2017, two Detsky Mir branded stores[3] were opened.

Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:

“In 1Q 2017, Detsky Mir reaffirmed its leadership in the Russian children’s goods market. Its consolidated unaudited retail revenue grew by 26.8% to RUB 20.8bn, mainly due to the growing maturity of stores opened in 2016 and 2015, and also to the 11.2% like-for-like sales growth and a double-digit increase of LfL number of customers.

Its dominant market position enables Detsky Mir to sign exclusive agreements with the biggest manufacturers of children’s goods. In 1Q, it signed a direct contract with the Japanese company Epoch for supply of the new promising brand Aquabeads, which has already demonstrated high sales in Germany.

Detsky Mir will continue its expanding in 2017 by opening at least 70 new super- and hypermarkets.

Going public was an important milestone for the company, which was highly recognised by the international investment community. Detsky Mir will strive to unlock the full potential of its legendary brand to develop the business in the interests of its shareholders”.

([1])Alternative like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth based on the stores that have been in operations for at least 12 full calendar months.

([2]) The number of ELC stores amounted to 41 due to the relocation of retail properties. The opening of new stores is scheduled for the second half of 2017.

([3]) In 1Q 2017, two Detsky Mir stores were closed for further relocation.

([4]) LfL growth includes only DM stores in Russia that were in operations for one full prior calendar year. For example, the like-for-like comparison of retail sales between 1Q 2017 and 1Q 2016 would include revenue of all Detsky Mir stores that were opened prior to 31 December 2015 and that were in operation during the entirety of 2016 and 1Q 2017.

Detsky Mir announces book closing of exchange-traded bonds of rub 3 bn with the coupon rate of 9.50%

Detsky Mir Group (MOEX: DSKY / “Detsky Mir” or “the Company”), Russia’s largest specialized children’s goods retailer, announces the successful book closing of its series BО-04 exchange-traded bond issue with a nominal value of RUB 3 bn and a coupon rate set at 9.50% p.a.

TRANSACTION DETAILS

• On April 4, 2017 PJSC Detsky Mir opened order book for the RUB 3 bln Series BO-04 bond issue with the initial price guidance of 9.85-10.10% p.a.
• During the marketing investor demand significantly exceeded the bond issue size that allowed the issuer to revise the marketing range twice from the initial level down to 9.50-9.55% p.a.
• The book was closed at lower end of the final range with more than 2x oversubscription. More than 50 orders for the total amount of over RUB 12 bn have been received from a wide range of investors.
• The final coupon rate was set at 9.5% p.a., which was below the Central Bank of Russia key rate and corresponded to the spread of 150-160 bps to govt curve – a record level for single B rated issuers.
• The settlement of the bond is scheduled on April 7, 2017 at PJSC Moscow Exchange. JSC VTB Capital, JSC Raiffeisenbank and JSC Sberbank CIB acted as Lead Arrangers of the transaction.  Gazprombank (JSC) will act the the placement agent.

Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:

 “This deal is a logical next step for the Company in its work for entering the public capital markets.  We are focused on improving the business efficiency and try to use all opportunities for that , including optimization of the debt portfolio structure and reduction of the cost of debt. Strong investor demand for our bond once again confirms high evaluation of the growth potential and credit quality of the Company.”

Anna Garmanova, PJSC Detsky Mir Chief Financial Officer, pointed out:

“The placement of the bond issue is one more important event in the Company’s history. We are encouraged by the significant interest from capital debt market towards our bonds. The investors well appreciated the ability of the Company to show the high growth rate and the strong profitability of the business while keeping the debt burden at relatively low level. Already at the early stage of the marketing process the order book was 4x oversubscribed. Proceeds from the placement will be used for refinancing of the current credit portfolio aiming at its further diversification and cost reduction.”

S&P GLOBAL RATINGS ASSIGNED ITS CORPORATE CREDIT RATING TO PJSC “DETSKY MIR”

S&P Global Ratings (“S&P”) assigned its ‘B+’ long-term corporate credit rating to PJSC Detsky Mir (“the Company”) (MOEX: DSKY); Outlook Stable.

According to the report, S&P states that, among other factors, the rating is assigned due to the Company’s leading position in the retail market of children’s goods, demonstrating sound profitability and a competitive pricing policy translating into robust double-digit like-for-like annual sales growth rates.

Additional information is available on the website: www.standardandpoors.com.

***

For additional information:

Detsky Mir Group (MOEX: DSKY) is Russia’s largest specialized children’s goods retailer. The company operates a network of 525 stores, including 468 Detsky Mir stores in Russia and 12 in Kazakhstan located in 178 different cities, as well as 45 ELC (Early Learning Centre) stores in Russia. The total selling space as at 31 December 2016 was approximately 596,000 square meters.

In accordance with the audited Financial Statements under IFRS Group revenue amounted to RUB 79.5bn for the full year 2016. Adjusted EBITDA totaled RUB 8.2bn and Adjusted profit for the period amounted to RUB 3.8bn for 2016.

Detsky Mir Group’s shareholder structure is as follows: Sistema[1]  – 52.10%; Russia-China Investment Fund (RCIF) [2] – 14.03%; Other shareholders owning less than 5% of the shares – 33.87%.

Lear more at www.detmir.ru, corp.detmir.ru or elc-russia.ru.

Disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Detsky Mir. You can identify forward looking statements by terms such as “expect”, “believe”, “anticipate”, “estimate”, “intend”, “will”, “could,” “may” or “might” the negative of such terms or other similar expressions. Detsky Mir wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Detsky Mir does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Detsky Mir, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries Detsky Mir operates in, as well as many other risks specifically related to Detsky Mir and its operations.

([1]) Sistema is a publicly-traded diversified Russian holding company serving over 100 million customers in the sectors of telecommunications, high technology, pulp and paper, radio and space technology, banking, retail, mass media, tourism and healthcare services. Founded in 1993. Sistema’s global depositary receipts are listed under the symbol SSA on the London Stock Exchange. Sistema’s ordinary shares are listed under the ticker AFKS on Moscow Exchange.

([2]) RCIF is an equity fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), hold its stake in PJSC Detsky Mir through its funds: FLOETTE HOLDINGS LIMITED and EXARZO HOLDINGS LIMITED.

Option Exercise Notice

Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful.

Public Joint Stock Company “Detsky mir”

Option Exercise Notice

PJSC Detsky Mir confirms that Goldman Sachs International Limited, as stabilizing manager, has exercised the Over-allotment Option in respect of 9,012,333 shares of PJSC Detsky Mir at the Offer Price. PJSC Sistema sold 6,245,518 Shares in the Over-allotment option, and retained a 52.1% stake in Detsky Mir. Russia-China Investment Fund (Floette Holdings Limited and Exarzo Holdings Limited) sold 2,766,815 shares of PJSC Detsky Mir in the Over-allotment option and retained a 14.0% stake in Detsky Mir.

For additional information:

Disclaimer

This announcement is not and does not form part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein are not registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. PJSC Detsky mir does not intend to register any portion of the offering of any securities referred to herein in the United States or to conduct a public offering of the securities in the United States.

This communication does not constitute an offer of the securities to the public in the United Kingdom. No prospectus has been or will be approved in the United Kingdom in respect of the securities. This communication is being distributed to and is directed only at (i) persons who are outside the United Kingdom; (ii) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended from time to time (the “Order”); (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order; (iv) certified high net worth individuals and certified and self-certified sophisticated investors as described in Articles 48, 50 and 50A, respectively of the Order; and (v) persons to whom this communication may otherwise be lawfully communicated (all such persons together being referred to as “Relevant Persons”). Any investment activity to which this communication relates will only be available to and will only be engaged with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

The conference call for analysts and investors to discuss audited financial results of Detsky Mir Group for FY2016

Detsky Mir Group (MOEX: DSKY), Russia’s largest children’s goods retailer – announces the consolidated financial results of FY2016 will be published March 2, 2017. On the same day, Detsky Mir Group will also hold a conference call for investors and analysts on the results.

Details of the conference call:

Date: Thursday, March 2, 2017

Time: 16:00 (Moscow) 13:00 (London) 08:00 (New York)

Speakers:

Vladimir Chirakhov, CEO

Anna Garmanova, CFO

Alex Voskoboinik, Head of IR

Please find Dial-in below:

Russia

+7 495 705 94 72

UK

+44 203 043 24 39

USA

+1 866 907 59 24

PIN: 61918599#

Press release on the financial results and the corresponding presentation will be published at 10.00 am (Moscow time) and posted on the website: www.corp.detmir.ru.

***

For additional information contact:

Alexey Voskoboinik

Head of Investor Relations

Office: +7-495-781-0808 (25-82)


Cell: +7-915-129-9905

avoskoboinik@detmir.ru

Sergey Levitskiy

Head of Capital Markets and Business Valuation

Office: +7-495-781-0808 (23-15)


Cell: +7-903-971-4365

slevitskiy@detmir.ru

About Detsky Mir Group:

Detsky Mir Group (MOEX: DSKY) –  Russia’s largest children’s goods retailer operated a network of 525 stores, comprising 468 stores in Russia and 12 stores in Kazakhstan operating under the “Detsky mir” brand located in 171 cities in Russia and in seven cities in Kazakhstan, and 45 ELC stores in Russia. Total selling space as at 31 December 2016 was approximately 596 thousand square metres.

the websites: www.detmir.ru, corp.detmir.ru, elc-russia.ru

Detsky Mir named one of Russia’s most transparent private companies

Detsky Mir Group, the largest children’s goods retailer in Russia and Kazakhstan, has been acknowledged as having among Russia’s most open and transparent procurement procedures by the National Procurement Transparency Rating (NPTR).

The NPTR announced the results of its 10th annual survey of public and private procurement in Russia on 7 December at an awards ceremony held at the Chamber of Commerce and Industry. Detsky Mir garnered the highest status of “guaranteed transparency” alongside two other companies: PJSC Tatneft and Gazprom Neft PJSC.

Detsky Mir Group Head of External and Internal Communications Nadezhda Kiseleva said: “Detsky Mir Group is Russia’s leading children’s goods retailer. We set the bar high not only in terms of offering our clients high-quality services and products, but also when it comes to maintaining open and transparent corporate procedures for our partners and the business community as a whole. Information about our procurement activities is freely available on our company website, so that all partners can have confidence in our clear and transparent contractor selection procedure. The NPTR’s rating is the latest confirmation of this.”

The NPTR is an independent private research centre that assesses the transparency and legal compliance of public and private procurement markets. Participants in all categories are rated on a five-point scale – guaranteed, high, average, basic and low transparency – that reflects the maturity and quality of their procurement procedures. Guaranteed and high transparency are considered to be positive evaluations, and basic and low transparency as negative. The NPTR bases its research on data sources including the official Single Procurement Information System (www.zakupki.gov.ru), company websites and participant surveys.

In its decade-long history, the NPTR has served as a tool allowing public scrutiny of public and private spending and has improved the discipline and organisation of procurement procedures.

DETSKY MIR GROUP’S NET INCOME MORE THAN DOUBLED TO RUB 1.7BN

24 November 2016. Moscow, Russia. Detsky Mir Group (“Detsky Mir” or “the Group”), Russia’s largest children’s goods retailer, announces its unaudited financial results under International Financial Reporting Standards (IFRS) for the nine months ended 30 September 2016.

KEY FINANCIAL RESULTS FOR 9 MONTHS 2016 (UNAUDITED)

• OIBDA[1] increased by 58.6% to RUB 4.6bn for 9M 2016 vs RUB 2.9bn for 9M 2015, OIBDA margin[2] reached 8.5%;
  
  
   
• Group revenue increased by 35.7% to RUB 54.2bn for 9M 2016 vs. RUB 40.0bn for 9M 2015;
• Like-for-like sales at Detsky Mir stores in Russia grew by 12.7%[3], with the number of ticket price growing by 4.2% and the average ticket price increasing by 8.2%;
• Gross profit increased by 31.2% year-on-year to RUB 18.1bn for 9M 2016 vs. RUB 13.8bn for 9M 2015; gross margin reached 33.3%;
• Selling, administrative and other operating expenses[4] as a share of revenue decreased by almost 2.5p.p. to 24.8% compared to 27.3% for 9M 2015, driven by increased operational efficiency;
• Net income more than doubled to RUB 1.7bn;
• Net debt[5]/adjusted OIBDA LTM ratio[6] as of 30 September 2016 improved to 1.6x vs 3.2x at the end of             9M 2015.

Vladimir Chirakhov, CEO of “Detsky Mir” PJSC, said:

“Detsky Mir Group has strengthened its leadership of the children’s goods market thanks to revenue growth and continued improvements to operational efficiency. Consolidated revenue increased by 35.7% to RUB 54.2 billion. The main driver behind revenue growth was a double-digit increase in like-for-like sales of Detsky Mir stores in Russia of 12.7% and all stores opened in 2014-2015 operating at full capacity.

In 9M 2016, Detsky Mir increased OIBDA by 58.6% year-on-year, and significantly increased profitability while continuing to restrain price growth in order to attract customers. Operational efficiency played a key role in achieving these successful financial results. The Company’s management team is continuing to implement and introduce international best practices in IT and the development of logistical infrastructure. As a result, SG&A costs as a percentage of revenue declined by almost 2.5 p.p. Net profit more than doubled year-on-year.

Detsky Mir Group is continuing to roll out its geographical expansion programme. In August of 2016 the Company opened its first store in Chita, which is now the easternmost city where we have a presence in Russia.

Kazakhstan remains a key region for future network expansion. Detsky Mir Group has opened its first store in Aktobe. As of the end of the period, Detsky Mir had nine stores in five cities across Kazakhstan.

Detsky Mir remains on track to deliver planned network growth of opening at least 90 stores during 2016. Since the start of the year we have opened 40 new stores, and the rest will be opened during peak sales season in 4Q.”

FINANCIAL PERFORMANCE

9M 2016 VS. 9M 2015 (UNAUDITED)

FINANCIAL PERFORMANCE

IN 12 MONTHS ENDED 30 SEPTEMBER 2016 (UNAUDITED)

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Detsky Mir Group is the largest children’s goods retailer in Russia. The Group includes the nationwide retail chain Detsky Mir, the Early Learning Centre (ELC) retail chain, and two online stores (Detsky Mir and ELC). As of 30 September 2016, Detsky Mir had 420 stores in Russia and Kazakhstan, while the ELC retail chain consisted of 44 stores in Russia. The total retail floorspace of the chain is 533 thousand sq.m. Detsky Mir’s principal shareholders are Sistema JSFC (72.6%) and the Russia-China Investment Fund (23.1%). Websites: www.detmir.ru, corp.detmir.ru, elc-russia.ru

Sistema is a publicly-traded diversified Russian holding company serving over 100 million customers in the sectors of telecommunications, high technology, pulp and paper, radio and space technology, banking, retail, mass media, tourism and healthcare services. Founded in 1993, the company reported revenues of RUB 708.6 billion for 2015 and total assets of RUB 1.3 trillion as of December 31, 2015. Sistema’s global depositary receipts are listed under the symbol SSA on the London Stock Exchange. Sistema’s ordinary shares are listed under the ticker AFKS on Moscow Exchange. Website: www.sistema.com. 

Some of the information in this document may contain projections or other forward-looking statements regarding future events of the Detsky Mir Group and Sistema PJSFC.  Such statements contain phrases like “expected”, “estimated”, “intended”, “will”, “could”, negatives of such statements, and other similar expressions. We would like to warn you that such statements are assumptions only and the actual course of events and their results may differ significantly from such statements. We do not intend to revise such statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Due to numerous factors, the actual results of the Detsky Mir Group and Sistema PJSFC may differ significantly from those stated in our assumptions and projections. Such factors may include general economic conditions, competitive environment in which we operate, risks related to the operations in Russia, rapid technological or market changes in our sphere of business, and many other risks directly related to the Detsky Mir Group and Sistema PJSFC and their activities.

([1]) OIBDA is calculated based on the financial statements under IFRS by adding depreciation and amortization costs to operating income.

([2]) OIBDA margin is OIBDA divided by total revenue

([3]) Here and elsewhere, like-for-like (LFL) sales and average ticket price are calculated in Russian roubles. Trends are presented for the comparative period (9M 2016 to 9M 2015) and include only Detsky Mir stores in Russia.

([4]) Selling, general and administrative expenses and other operating expenses are calculated without depreciation and amortization.

([5]) Net debt is calculated as total borrowings less cash and cash equivalent

([6]) Adjusted OIBDA LTM excludes one-off effects related to the disposal of the Yakimanka building and payments under the long-term incentive scheme.

([7]) Net chain growth since the beginning of 2016 amounted to 39 stores including relocations

([8]) Excluding depreciation and amortization (D&A)

([9]) Excluding D&A, as well as one-off effects related to the disposal of the Yakimanka building and payment of bonuses under the long-term incentive scheme

([10]) Excluding one-off effects related to the disposal of the Yakimanka building and payment of bonuses under the long-term incentive scheme

([11]) Excluding one-off effects related to the disposal of the Yakimanka building, payment of bonuses under the long-term incentive scheme and other non-operating one-off costs