Analyst and Investor Conference Call for 9M 2020 Unaudited IFRS Financial Results

20 October 2020. Moscow, Russia. – Detsky Mir Group (“Detsky Mir” or “the Company”, MOEX: DSKY), Russia’s largest specialized children’s goods retailer, announces that 9M 2020 Unaudited IFRS Financial Results will be released on November 2, 2020.                  

Detsky Mir will host a brief conference call for investors and analysts on IFRS results.

Please find the details of the conference call below.

Date: Monday, November 2, 2020

Time: 17:00 (Moscow) 14:00 (London) 9:00 (New York)

Speakers:

• Maria Davydova, Chief Executive Officer
• Anna Garmanova, Chief Financial Officer
• Sergey Levitskiy, Head of Strategy and Investor Relations

Russia

+7 495 283 98 58

UK/ International

+44 203 984 98 44 

USA

+1 718 866 46 14

Conference ID

288 543

Online presentation 

Web dial-in and Presentation

 ***

For additional information:

Detsky Mir’s Total Sales Growth Accelerated to 13.5% in Q3

Moscow, Russia, 14 October 2020 – Detsky Mir Group (the “Group”, “Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, announces its operating results for the third quarter ended 30 September 2020.

Q3 2020 Operating Highlights[1]

• Group unaudited consolidated revenue increased by 13.5% year-on-year to RUB 38.5 bn, compared to RUB 34 bn in Q3 2019.
• Online revenue[2] increased 2.4x year-on-year to RUB 8.0 bn.
  • The share of online sales in total revenue of Detsky Mir in Russia increased 2.1x year-on-year to 21.4%.
  • The share of in-store pick-up service amounted to 83%.
• Revenue in Kazakhstan decreased by 26.8% year-on-year to RUB 779 m.
• Like-for-like sales[3] at Detsky Mir stores in Russia and Kazakhstan grew by 3.9%. The number of tickets decreased by 2.1%, while the average ticket grew 6.0%.
• Like-for-like sales at Detsky Mir stores in Russia grew by 4.4%. The number of tickets decreased by 1.5%, while the average ticket grew by 5.9%.
• Detsky Mir opened 10 new branded stores[4] in Q3 2020, as well as two new Zoozavr stores. The Group had 810 stores[5] as of 30 September 2020:
• Total selling space increased by 8.1% year-on-year to approximately 858,000 sq. m.
• The total number of Detsky Mir loyalty cards issued increased by 12.8% year-on-year to 25.9 m, while the number of active loyalty card holders[6] was 10.6 m. Transactions involving a loyalty card accounted for 83% of total sales.

9M 2020 Operating Highlights

• Group unaudited consolidated revenue increased by 9.5% year-on-year to RUB 98.4 bn, compared to RUB 89.8 bn in 9M 2019.
• Online revenue increased 2.5x year-on-year to RUB 22.1 bn.
  • The share of online sales in total net revenue of Detsky Mir in Russia increased 2.3x year-on-year to 23.3%.
  • The share of in-store pick-up service amounted to 81%.
• Revenue in Kazakhstan decreased by 7.2% year-on-year to RUB 2.4 bn.
• Like-for-like sales at Detsky Mir stores in Russia and Kazakhstan grew 3.0%. The number of tickets decreased 2.7%, while the average ticket grew 5.8%.
• Like-for-like sales at Detsky Mir stores in Russia grew 3.2%. The number of tickets decreased 2.5%, while the average ticket grew 5.8%.
• Detsky Mir opened 30 new branded stores[7] in 9M 2020, as well as one new Detmir Pickup store and three new Zoozavr stores.

Q3 2020 Key Events

• In September 2020, the Company started to accept payments via the Faster Payments System (FPS) across its retail stores. Detsky Mir customers are now able to pay for their purchases using a QR code via the FPS across all of Detsky Mir retail stores in Russia.
• In September 2020, the Extraordinary General Meeting of Shareholders approved a final dividend payment of the remaining undistributed profit for Q4 2019 totaling RUB 1.8 bn, or RUB 2.5 per ordinary share.
• In September 2020, PJSFC Sistema (the majority shareholder of the Company) and the Russia-China Investment Fund (RCIF) successfully priced the offering of Detsky Mir shares. The offering size was 185 million existing shares in Detsky Mir, representing 25% of Detsky Mir’s issued share capital. Through this offering, Detsky Mir became the first Russian company with a 100% free float. Sistema and RCIF ceased to hold any ownership interest in the Company.
• In July 2020, the Company launched its first regional distribution center in PNK Park Rostov-on-Don, a Class A+ industrial park developed by PNK Group. Detsky Mir leased 6,000 sq. m of warehousing space for seven years with the option to expand. The project’s CAPEX totals around RUB 100 m.
• Despite the repeated closures of most of Detsky Mir stores in Kazakhstan due to the spread of the coronavirus (COVID-19), the Company promptly launched pickup points for online orders at its retail outlets, which helped maintain its revenue generation and deliver positive financial results.
• Detsky Mir updated its mid-term growth strategy. The Company primarily plans to strengthen its leadership in the children’s goods market while maintaining double-digit growth in total sales via the further rollout of its omnichannel business model. At the same time, the Company sees a solid upside in family digital services, as well as in the pet supplies market. A recording of the online conference where the updated strategy was discussed is available here: Medium-term Strategy.

View the full press release

Maria Davydova, PJSC Detsky Mir Chief Executive Officer, said:

“Detsky Mir has once again proved its high resilience in the face of crisis. We managed to avoid losses in revenue during the active phase of the COVID-19 pandemic in Q2, as well as significantly accelerate sales growth in Q3 2020. In the reporting period, consolidated unaudited revenue increased by 13.5% year-on-year to RUB 38.5 bn. At the same time, we achieved a significant reduction in operating costs, which allows us to expect adjusted EBITDA increase by at least 20% year-on-year in Q3.

“We had a successful back-to-school season, which significantly boosted Company sales. As a result, total sales of back-to-school supplies were up 16.1% year-on-year in Q3 2020. In addition, the share of high-margin categories such as Toys and Fashion products in the total sales of the Detsky Mir chain in Russia increased by 1.3 p.p. year-on-year to 60.7% driven by pent-up demand and effective promotions. We have continued to successfully push private labels across all categories while gradually transitioning to direct import contracts to provide an exclusive and affordable assortment on our shelves. The share of private labels and direct contracts in total sales grew by 2.9 p.p. year-on-year to 49.4% over Q3.

“Given high volatility in consumer behavior, our omnichannel proposition drives steady sales growth for our retail chain and online store. In Q3, we managed to maintain strong growth in online sales: sales via the Detsky Mir online store and mobile app increased 2.4 times year-on-year with a 21.4% share of total sales in Russia. The top online performer was back-to-school supplies (+239%). Toys also demonstrated solid growth, with online sales in this category up almost 2.4 times year-on-year.

“Approximately 80% of online revenue came from in-store pickup at Detsky Mir retail stores, confirming the popularity of this service with our customers. Our new mobile app has also been increasingly gaining traction with our customers since its launch in late 2019, already generating over 60% of the total online sales.

“We continue to expand our logistics infrastructure to match the growth in our online channel. In July, we opened our first regional distribution center in Rostov-on-Don, which has already achieved a daily production rate of 1,000 orders and met its profitability targets by the end of the third quarter. We also launched a super-express delivery service from Detsky Mir stores. Customers in 250 cities across Russia can now receive their order within two hours of placing it on our website. Moreover, a good number of deliveries in Moscow are fulfilled by our own courier service.

“The successful secondary public offering (SPO) of PJSC Detsky Mir was another key highlight of the year. We highly appreciate the positive response to our Business from the global stock market, and are pleased that this offering will allow better stock liquidity and a more geographically diversified investor base. In accordance with the Company’s new profile, we expect that independent directors will take up most of the seats on the Board, unlocking additional growth in the Company’s value in the interests of all shareholders.

“Our Company quickly responds to the new challenges associated with the spread of the coronavirus (COVID-19). All necessary epidemiological safety measures are observed in retail stores: the health of all personnel is monitored, personal protective equipment for employees (masks, gloves, antiseptics) have been purchased, special markings have been applied to help our customers maintain social distancing, disinfection efforts have been stepped up across all our sales areas and buildings, and hand sanitizers are available to customers at store entrances. Online store couriers and distribution center employees are also equipped with all necessary personal protective equipment. As of 14 October 2020, all Detsky Mir stores have continued normal operation.”

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 792 Detsky Mir stores located in 306 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 13 Zoozavr stores as of 30 September 2020. The total selling space was approximately 858,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: Free float[8] – 100%.

Websites: detmir.ru, elc-russia.ru, ir.detmir.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, impact of COVID-19 pandemic on macroeconomic situation on the markets of presence and financial results of Detsky Mir and its subsidiaries, as well as many other risks specifically related to Detsky Mir and its operations.

([1]) The Company’s consolidated financial measures for 2019–2020 and related interim periods are based on proforma financial information prepared as if IFRS 16 “Leases” had not been adopted, and thus do not represent IFRS measures.

([2]) This channel includes online orders at www.detmir.ru, including in-store pick-up.

([3]) Hereinafter like-for-like RUB sales growth, like-for-like number of tickets growth and like-for-like average ticket growth are based on stores in operation for at least 12 full calendar months. A store is included in the calculation of the monthly like-for-like if the difference between the worked periods in comparable months does not exceed three business days.

([4]) In Q3 2020, in order to improve profitability on the back of the accelerated opening of the compact-format Detmir Pickup stores, the Group decided to close ELC and ABC branded stores, the share of which in the total revenue of the Group comprised less than 0.5% in 1H 2020.

([5]) Including five Detmir Pickup stores as well as thirteen Zoozavr stores.

([6]) Cardholders who made at least one purchase at Detsky Mir during the last 12 months to 30 September 2020 are considered active.

([7]) In 9M 2020, Detsky Mir closed four stores.

([8]) Excluding quasi-treasury shares and shares held by management and directors (0.8% of total shares).

Detsky Mir’s Shareholders Approved a Dividend Payment of the Remaining Undistributed Net Profit for Q4 2019

Moscow, Russia, 22 September 2020 – PJSC Detsky Mir (“Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, announces the results of its Extraordinary General Meeting of Shareholders (EGM) that took place on 18 September 2020.

The EGM passed the following resolutions by absentee vote:

1. Approve a final dividend payment of the remaining undistributed profit for Q4 2019 of RUB 1,847,500,000, or RUB 2.5 per ordinary share. Thus, the total amount of paid dividends based on the results for FY 2019 will amount to RUB 7,803,840,000 (100% of net profit under RAS), or RUB 10.6 per ordinary share. 

2. Set the record date for dividend for 29 September 2020.

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 784 Detsky Mir stores located in 303 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 27 ELC, 3 ABC and eleven Zoozavr stores as of 31 August 2020. The total selling space was approximately 855,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: Free float[1] – 100%.  

Websites: detmir.ru, elc-russia.ru, ir.detmir.ru

([1]) Excluding quasi-treasury shares and shares held by management and directors (0.8% of total shares)

Detsky Mir Grows Online Back-to-School Sales 3.5-fold in August 2020

Moscow, Russia, 1 September 2020 – Detsky Mir Group (the “Group”, “Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, is disclosing its sales performance for August 2020.

In August, the Company continued to demonstrate strong growth in total sales, with Group unaudited revenue up by 15.1% year-on-year. The Detsky Mir chain increased its LFL sales growth to 7.5% year-on-year vs. 2.5% in 1H 2020. Back-to-school has become a key total sales driver, with total sales in this category up 23.6% year-on-year.

At the same time, Detsky Mir maintained explosive growth in online sales in August: sales via the Detsky Mir online store and mobile app increased 2.6 times year-on-year. The strong online performance was led by back-to-school (+247%): Drawing Supplies (+512%), Writing Supplies (+452%), School Accessories (+300%) and School Apparel and Footwear (+226%). Toys have also demonstrated strong growth, with online sales in this category up by almost 2.6 times year-on-year.

Over 90% of online revenue came from in-store pickup of online orders at Detsky Mir retail stores. The Company continues to offer a high level of service when processing orders in-store: 95% of online orders picked in-store are handed to the customer at checkout within 60 minutes of the online purchase.

As of 1 September 2020, all Detsky Mir stores have continued normal operation.

Maria Davydova, PJSC Detsky Mir Chief Executive Officer, said:

“Every year, Detsky Mir provides a seamless and stress-free back-to-school shopping experience for parents. In August, we sold a record amount of school uniform products – over 5 million items. As a result, our total sales have accelerated to 15.1% year-on-year in August.

The detmir.ru online store and Detsky Mir retail stores offer everything school students need: apparel, footwear, school kits, backpacks, stationery and even furniture products. Customers have the choice of both private labels and major brands. Our private labels fully meet Russia’s stringent quality standards and enjoy increased popularity with customers. This year, our Chessford private brand was named the Best School Uniform at the children’s goods industry’s Golden Bear Cub National Awards. The share of private labels and direct imports in total back-to-school sales grew by 11 p.p. year-on-year to 85.2% in August 2020.”

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 782 Detsky Mir stores located in 302 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 43 ELC, 9 ABC and eleven Zoozavr stores as of 30 June 2020. The total selling space was approximately 855,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[1] – 20.38%; Russian-Chinese Investment Fund (RCIF)[2]– 4.62%, Free float – 75%- 1 share.

Lear more at www.detmir.ru, elc-russia.ru, ir.detmir.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, impact of COVID-19 pandemic on macroeconomic situation on the markets of presence and financial results of Detsky Mir and its subsidiaries, as well as many other risks specifically related to Detsky Mir and its operations.

([1]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([2]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.

Detsky Mir Group Adjusted EBITDA Increased by 48% YoY in June 2020

Moscow, Russia, 25 August 2020 – 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 second quarter and the first half ended 30 June 2020.

Q2 2020 Financial Highlights[1]

• Group unaudited consolidated revenue increased by 2.9% year-on-year to RUB 28.8 bn, compared to RUB 28 bn in Q2 2019.
• Online revenue[2] increased 3.2x year-on-year to RUB 8.7 bn.
  • The share of online sales in total revenue of Detsky Mir in Russia increased 3.1x year-on-year to 31.1%.
  • The share of courier delivery service grew by 10.8 p.p. year-on-year to 23%.
• Revenue in Kazakhstan decreased by 17.3% year-on-year to RUB 634 m.
• Like-for-like sales[3] at Detsky Mir stores in Russia and Kazakhstan grew by 0.8%. The number of tickets decreased by 11.3%, while the average ticket grew 13.7%.
• Like-for-like sales at Detsky Mir stores in Russia grew by 1.1%. The number of tickets decreased by 11.0%, while the average ticket grew by 13.5%.
• Detsky Mir opened 12 new branded stores[4] in Q2 2020. The Group had 850 stores[5] as of 30 June 2020:
  • Three Detsky Mir stores have been temporarily closed in Russia. The Belarusian retail chain Detmir and Kazakhstan’s Detsky Mir remained open.
• Total selling space increased by 10.1% year-on-year to approximately 855,000 sq. m.
• Gross profit decreased by 6.6% year-on-year to RUB 8.9 bn, with a gross margin of 30.8%.
• SG&A as a percentage of revenue[6] decreased by 3.1 p.p. year-on-year, driven by increased operational efficiency.
• Adjusted EBITDA[7] increased by 2.9% year-on-year to RUB 3.6 bn; the adjusted EBITDA margin was flat year-on-year to 12.3%. EBITDA[8] totaled RUB 3.5bn (+4.4% year-on-year).
• Adjusted net profit[9] amounted to RUB 1.4 bn (-29.4% year-on-year). Net profit totaled RUB 1.4 bn (-28.6% year-on-year).
• The net debt[10]/adjusted EBITDA LTM ratio improved to 1.6x as of 30 June 2020. 

1H 2020 Financial Highlights

• Group unaudited consolidated revenue increased by 7.1% year-on-year to RUB 59.9 bn, compared to RUB 55.9 bn in 1H 2019.
• Online revenue increased 2.7x year-on-year to RUB 14.1 bn.
  • The share of online sales in total net revenue of Detsky Mir in Russia increased 2.5x year-on-year to 24.6%.
  • The share of courier delivery service grew by 4.6 p.p. year-on-year to 19.9%.
• Revenue in Kazakhstan decreased by 6.1% year-on-year to RUB 1,601 m.
• Like-for-like sales at Detsky Mir stores in Russia and Kazakhstan grew 2.5%. The number of tickets decreased 3.0%, while the average ticket grew 5.7%.
• Like-for-like sales at Detsky Mir stores in Russia grew 2.4%. The number of tickets decreased 3.1%, while the average ticket grew 5.7%.
• Detsky Mir opened 20 new branded stores[11] in 1H 2020, as well as one new Detmir Pickup store and one new Zoozavr store.
• Gross profit increased by 2.1% year-on-year to RUB 18 bn, with a gross margin of 30%.
• SG&A as a percentage of revenue decreased by 1.6 p.p. year-on-year, driven by increased operational efficiency.
• Adjusted EBITDA increased by 9.1% year-on-year to RUB 5.8 bn; the adjusted EBITDA margin improved by 0.2 p.p. to 9.7%. EBITDA totaled RUB 5.4 bn (+8.4% year-on-year).
• Adjusted net profit amounted to RUB 1.4 bn (-42.5% year-on-year). Net profit totaled RUB 1.1 bn (-49.7% year-on-year).

Q2 2020 Key Events

• In June 2020, the Annual General Meeting of Shareholders approved a dividend for 2019 totaling RUB 2.2 bn, or RUB 3.0 per ordinary share.
• In June 2020, PJSFC Sistema (the majority shareholder of the Company) and the Russia-China Investment Fund (RCIF) successfully priced the offering of Detsky Mir shares. The offering size was 118 million existing shares in Detsky Mir, representing 15.9% of Detsky Mir’s issued share capital. The offering increased the Company’s free float to 75%-1 share. PJSFC Sistema has a remaining ownership interest of 20.38%, and RCIF has a remaining interest of 4.62% in the Company.
• As of 31 May 2020, 38 Detsky Mir stores in Russia, as well as all 58 ELC and ABC stores were temporarily closed due to the spread of the coronavirus (COVID-19).
• As of 30 April 2020, 83 Detsky Mir stores in Russia, as well as all 58 ELC and ABC stores were temporarily closed due to the spread of the coronavirus (COVID-19). In Kazakhstan, 36 stores were temporarily closed, although pickup points for online orders were set up at most of the closed locations.
• In April 2020, Detsky Mir successfully issued its series BО-06 exchange-traded bond with a nominal value of RUB 3 bn, a coupon of 7.0% p.a. and a 3-year put option.

Events after the Reporting Period

• As of 25 August 2020, all Detsky Mir stores remained open to customers.
• In August 2020, the Board of Directors recommended that PJSC Detsky Mir’s shareholders approve a dividend payment of the remaining undistributed profit for Q4 2019 of RUB 1.8 bn or RUB 2.5 per ordinary share. The total amount of paid dividends for FY 2019 may amount to RUB 7.8 bn (100% of net profit under RAS), or RUB 10.6 per ordinary share.
• In July 2020, the Company launched its first regional distribution center in PNK Park Rostov-on-Don, a Class A+ industrial park developed by PNK Group. Detsky Mir leased 6,000 sq. m of warehousing space for seven years with the option to expand. The project’s CAPEX totals around RUB 100 m.

Maria Davydova, PJSC Detsky Mir Chief Executive Officer, said:

“Detsky Mir has been successfully dealing with the current COVID-19 crisis. In the second quarter, our team has not only successfully recovered the revenue losses suffered in April but also increased adjusted EBITDA by 2.9%. In July, we fully brought our business back to normal, returning to double-digit growth in total sales at 13.9% year-on-year, despite a high base in July 2019 (+18% year-on-year). At the same time, we expect EBITDA for July 2020 to be up by at least 25% year-on-year.

This solid performance was driven by the Company’s successful omnichannel journey, which allowed us to quickly adapt to new market conditions. Following the lifting of lockdown measures and customers returning to normality, Detsky Mir’s online sales have continued to show strong growth. For example, the share of online sales in Detsky Mir’s total revenue increased by more than 2.5 times year-on-year in July 2020, reaching 25.3% of the Detsky Mir chain’s total revenue in Russia.

In response to new market opportunities and challenges, our team decided to update the Company’s medium-term development strategy. Detsky Mir is above all focused on maintaining its leadership in the children’s goods segment and sustaining double-digit sales growth by further evolving its omnichannel business model.

We have set ourselves the ambitious target of growing the share of online sales to 45% in the medium term by developing direct delivery and in-store fulfillment of online orders. We have set our sights on offering next-day delivery on at least 80% of all online orders by building out a robust regional logistics network. In addition, we plan to significantly expand our assortment of children’s products to 2.4 million SKUs through the development of our own marketplace.

Our key priority is to deliver a superior customer experience in all sales channels, in part by achieving leadership across all e-comm products in terms of mobile app and online store usability. We also see an excellent opportunity to expand into the market for digital services targeted at children by leveraging the traffic generated by our detmir.ru online store.

We plan to open at least 800 Detmir Pickup stores, our new compact store format, by the end of 2024, enabling increased penetration in smaller towns and locations while also improving the delivery service for online orders. At the same time, we remain committed to the Company’s targets announced in early March: we are planning to open at least 300 stores in the Detsky Mir chain’s traditional format and maintain our double-digit adjusted EBITDA margin.

Finally, we took a decision to scale up the Zoozavr chain, with medium-term plans to open at least 500 retail outlets and achieve a 30% share of online sales in pet supplies. Our goal is to become a leader in this segment with a double-digit market share.”

View the full press release

Mid-Term Guidance

The Company’s management confirms its store opening guidance, with at least 300 stores in the Detsky Mir chain’s traditional format on the horizon in Russia, Kazakhstan and Belarus. The Group also plans to open 800 Detmir Pickup stores – our new compact store format – along with 500 Zoozavr pet supplies stores. 

Detsky Mir expects to maintain double-digit growth in total sales in the medium term by developing its omnichannel business model, with the share of online sales reaching 45% in the children’s goods category and 30% in the pet supplies category. The Company’s goal is leadership in both markets.

Detsky Mir’s strategic priority is to offer an affordable and wide product assortment, which will be ensured in part by a focus on private labels and the full-scale launch of our own marketplace. Within 3 to 5 years, the product assortment in the children’s goods segment is expected to grow from 150 thousand to 2.4 million SKUs.

Detsky Mir is constantly improving its customer experience across all sales channels, with a medium-term target of achieving an overall NPS score of 70%[12] and gaining user experience leadership over online peers. Furthermore, the Company will consider entering the market for digital services and other non-children’s product categories.  

The Company will continue to build out its logistics network to support the fast and cheap delivery of online orders. Between 2021 and 2024, Detsky Mir expects to launch five new distribution centers: three leased regional centers and two Company-owned, federal-level centers. While the level of investment required for each federal distribution center should be no more than RUB 2.5 bn, CAPEX per regional warehouse will amount to about RUB 100 m.  On top of this, Detsky Mir’s total IT infrastructure CAPEX is not expected to exceed RUB 4 bn in the medium term. 

The Group will continue to improve its operational efficiency to maintain its double-digit adjusted EBITDA margin (excluding the impact of IFRS 16 “Leases”) in the medium term.

The Company expects to confirm its dividend recommendation of 100% of net profit under Russian Accounting Standards (RAS). At the same time, Detsky Mir expects its financial year-end net debt/adjusted EBITDA ratio to stay below 2x throughout the entire forecast period.

***

Conference Call Information

Date: Tuesday, August 25, 2020

Time: 16:00 (Moscow) 14:00 (London) 9:00 AM (U.S. Eastern time)

To register for the event please follow the link below.

Detsky_Mir_Webcast

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 782 Detsky Mir stores located in 302 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 43 ELC, 9 ABC and eleven Zoozavr stores as of 30 June 2020. The total selling space was approximately 855,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[13] – 20.38%; Russian-Chinese Investment Fund (RCIF)[14]– 4.62%, Free float – 75%- 1 share. 

Lear more at www.detmir.ru, elc-russia.ru, ir.detmir.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, impact of COVID-19 pandemic on macroeconomic situation on the markets of presence and financial results of Detsky Mir and its subsidiaries, as well as many other risks specifically related to Detsky Mir and its operations.

([1])The Company’s consolidated financial measures for 2019–2020 and related interim periods are based on proforma financial information prepared as if IFRS 16 ‘Leases’ had not been adopted, and thus do not represent IFRS measures.

([2]) This channel includes online orders at www.detmir.ru, including in-store pick-up.

([3]) Hereinafter like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth are based on stores in operation for at least 12 full calendar months. The store is included in the calculation of the monthly like-for-like, if the difference between the worked periods in comparable months does not exceed three business days.

([4]) In Q2 2020, Detsky Mir closed two stores.

([5]) Including 52 ELC and ABC stores, five Detmir Pickup stores as well as eleven Zoozavr stores.

([6]) Hereinafter, selling, general and administrative expenses is calculated as selling, general and administrative expenses adjusted for depreciation and amortization expenses, additional share-based compensation expense and cash bonuses under the LTI program.

([7]) Hereinafter, adjusted EBITDA is calculated as profit for the period before income tax expense, foreign exchange (loss)/gain, gain on acquisition of controlling interest in associate, finance expense, finance income, depreciation and amortization, adjusted for share-based compensation expense and cash bonuses under the LTI program. See Attachment A.

([8]) Hereinafter, see Attachment A for definitions and reconciliation of EBITDA to IFRS financial measures.

([9]) Hereinafter, adjusted net profit is calculated as profit for the period adjusted for the share-based compensation expense and cash bonuses under the LTI program. See Attachment A.

([10]) Hereinafter, net debt is calculated as total borrowings (defined as long term loans and borrowings and short-term loans and borrowings and current portion of long-term loans and borrowings) less cash and cash equivalents. Lease liabilities are not included in the calculation of net debt. Adj. EBITDA LTM is calculated as adj. EBITDA for the last 12-months period.

([11]) In 1H 2020, Detsky Mir closed four stores.

([12]) Net Promoter Score is a metric used in customer experience programs. NPS measures the loyalty of customers to a company.

([13]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([14]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.

The Board of Directors Recommended Shareholders to Approve a Dividend Payment of the Remaining Undistributed Profit for Q4 2019

Moscow, Russia, 17 August 2020 – Detsky Mir Group (“Detsky Mir”, the “Group” or the “Company”, MOEX: DSKY), Russia’s largest specialized children’s goods retailer, announces that its Board of Directors at a meeting on 14 August 2020 resolved to convene the Extraordinary General Meeting of Shareholders (EGM). The EGM will be held by absentee vote, and the deadline for receipt of completed ballots is 18 September 2020. The record date for the EGM is 25 August 2020.

The Board of Directors recommended that PJSC Detsky Mir’s shareholders to approve a dividend payment of the remaining undistributed profit for Q4 2019 of RUB 1,847,500,000, or RUB 2.5 per ordinary share. Thus, the total amount of paid dividends based on the results for FY 2019 may amount to RUB 7,803,840,000 (100% of net profit under RAS), or RUB 10.6 per ordinary share.

The Board of Directors recommended that the EGM set the record date for dividend for 29 September 2020.

The EGM materials will be available on the Company’s website (ir.detmir.ru), as well as on Interfax’s website (e-disclosure.ru) and by request at the Company’s corporate secretariat: 3 3rd Nizhnelikhoborsky proyezd, Bld. 6, 127238, Moscow after 28 August 2020.

Shareholders may register to participate in the EGM, fill out the electronic ballot form and vote via the electronic voting service online (www.aoreestr.ru/shareholders/e-voting).

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 782 Detsky Mir stores located in 302 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 43 ELC, 9 ABC and eleven Zoozavr stores as of 30 June 2020. The total selling space was approximately 855,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[1] – 20.38%; The Capital Group Companies, Inc. – 5.64%; Russian-Chinese Investment Fund (RCIF)[2][3]– 4.62%, Free float – 69.36%. 

Websites: detmir.ru, elc-russia.ru, ir.detmir.ru

([1]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([2]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.

Detsky Mir to Announce Q2&H1 2020 IFRS Financial Results and Hold a Strategy Update session

Moscow, Russia, 7 August 2020 – Detsky Mir Group (the “Group”, “Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, announces that its unaudited financial results in accordance with International Financial Reporting Standards (IFRS) for the second quarter and the first half ended 30 June 2020 will be released on August 25th, 2020.

Detsky Mir will host a Zoom video conference to discuss its Q2&H1 results immediately followed by a Strategy Update session.

The Strategy Update session will be hosted by the senior executive team of Detsky Mir and will include the Company’s medium-term vision and goals, key strategic growth initiatives and ongoing digital transformation of the business.

Please find the details of the conference call below.

Date: Tuesday, August 25, 2020

Time: 16:00 (Moscow) 14:00 (London) 9:00 AM (U.S. Eastern time)

To register for the event please follow the link below.

Detsky_Mir_Webcast

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 782 Detsky Mir stores located in 302 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 43 ELC, 9 ABC and eleven Zoozavr stores as of 30 June 2020. The total selling space was approximately 855,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[1] – 20.38%; The Capital Group Companies, Inc. – 5.64%; Russian-Chinese Investment Fund (RCIF)[2][3]– 4.62%, Free float – 69.36%. 

Websites: detmir.ru, elc-russia.ru, ir.detmir.ru

([1]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([2]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.

Detsky Mir’s Total Sales Increased by 22.1% in June 2020

Moscow, Russia, 16 July 2020 – Detsky Mir Group (the “Group”, “Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, announces its operating results for the second quarter ended 30 June 2020.

Q2 2020 Operating Highlights[1]

• Group unaudited consolidated revenue increased by 2.9% year-on-year to RUB 28.8 bn, compared to RUB 28 bn in Q2 2019.
• Online revenue[2] increased 3.2x year-on-year to RUB 8.7 bn.
  • The share of online sales in total revenue of Detsky Mir in Russia increased 3.1x year-on-year to 31.1%.
  • The share of courier delivery service grew by 10.8 p.p. year-on-year to 23%.
• Revenue in Kazakhstan decreased by 18.2% year-on-year to RUB 627 m.
• Like-for-like sales[3] at Detsky Mir stores in Russia and Kazakhstan grew by 0.8%. The number of tickets decreased by 11.3%, while the average ticket grew 13.7%.
• Like-for-like sales at Detsky Mir stores in Russia grew by 1.1%. The number of tickets decreased by 11.0%, while the average ticket grew by 13.5%.
• Detsky Mir opened 12 new branded stores[4] in Q2 2020. The Group had 850 stores[5] as of 30 June 2020:
  • Three Detsky Mir stores have been temporarily closed in Russia. The Belarusian retail chain Detmir and Kazakhstan’s Detsky Mir remained open.
• Total selling space increased by 10.1% year-on-year to approximately 855,000 sq. m.
• The total number of Detsky Mir loyalty cards issued increased by 12.9% year-on-year to 25.1 m, while the number of active loyalty card holders[6] was 10.5 m. Transactions involving a loyalty card accounted for 86% of total sales.

1H 2020 Operating Highlights

• Group unaudited consolidated revenue increased by 7% year-on-year to RUB 59.8 bn, compared to RUB 55.9 bn in 1H 2019.
• Online revenue increased 2.7x year-on-year to RUB 14.1 bn.
  • The share of online sales in total net revenue of Detsky Mir in Russia increased 2.5x year-on-year to 24.5%.
  • The share of courier delivery service grew by 4.6 p.p. year-on-year to 19.9%.
• Revenue in Kazakhstan decreased by 6.1% year-on-year to RUB 1,601 m.
• Like-for-like sales at Detsky Mir stores in Russia and Kazakhstan grew 2.5%. The number of tickets decreased 3.0%, while the average ticket grew 5.7%.
• Like-for-like sales at Detsky Mir stores in Russia grew 2.4%. The number of tickets decreased 3.1%, while the average ticket grew 5.7%.
• Detsky Mir opened 20 new branded stores[7] in 1H 2020, as well as one new Detmir Pickup store and one new Zoozavr store.

Q2 2020 Key Events

• In June 2020, the Annual General Meeting of Shareholders approved a final dividend for 2019 totaling RUB 2.2 bn, or RUB 3.0 per ordinary share.
• In June 2020, PJSFC Sistema (the majority shareholder of the Company), and the Russia-China Investment Fund (RCIF) successfully priced the offering of Detsky Mir shares. The offering size was 118 million existing shares in Detsky Mir, representing 15.9% of Detsky Mir’s issued share capital. The offering increased the Company’s free float to 75%. PJSFC Sistema has a remaining ownership interest of 20.38% and RCIF has a remaining interest of 4.62% in the Company.
• As of 31 May 2020, 38 Detsky Mir stores in Russia, as well as all 58 ELC and ABC stores were temporarily closed due to the spread of the coronavirus (COVID-19).
• As of 30 April 2020, 83 Detsky Mir stores in Russia, as well as all 58 ELC and ABC stores were temporarily closed due to the spread of the coronavirus (COVID-19). In Kazakhstan, 36 stores were temporarily closed, although pickup points for online orders were set up at most of the closed locations.
• In April 2020, Detsky Mir successfully issued its series BО-06 exchange-traded bond with a nominal value of RUB 3 bn, a coupon of 7.0% p.a. and a 3-year put option.

Events after the Reporting Period

• As of 15 July 2020, 38 Detsky Mir stores in Kazakhstan were temporarily closed due to the tightening of measures to stop the spread of the coronavirus (COVID-19), although pickup points for online orders were set up at most of the closed locations.
• In July 2020, Denis Gurov was appointed as Logistics Director and a member of the Company’s Management Board. Denis has over 16 years of retail and logistics experience (DIXY Group, Pharmacy Chain 36.6, DHL). As Logistics Director at Detsky Mir Group, Denis will be responsible for further expanding the Group’s logistics capacity by launching regional distribution centers across a series of large Russian cities, as well as for developing delivery services.
• In June 2020, the number of downloads of the Detsky Mir mobile application exceeded three million and more than 15 million application launches on mobile devices were recorded. Half of all online orders are now completed through the mobile application. The application has one of the highest ratings among all free applications in Russia, boasting a rating of 4.6 on the App Store and 4.7 on Google Play.
• The Company continued to implement projects aimed at increasing the speed of express delivery and the last-mile increased the Company’s Boxberry, PickPoint and Yandex.Taxi.

Maria Davydova, PJSC Detsky Mir Chief Executive Officer, said:

“Detsky Mir’s Q2 results clearly confirm the high level of efficiency and professionalism within our team. We succeeded in boosting sales growth to 22.1% and maintaining high margins in June, which allowed us to offset the losses in revenue caused by the coronavirus pandemic in April. We fully expect the Q2 adjusted EBITDA to be higher year-on-year.

Our key priority now is the further rollout of the online channel. Thanks to our omnichannel approach, we were able to meet the increased demand in remote sales, which is evidenced by sharp growth in online sales. The share of online sales in Detsky Mir’s total revenue more than tripled year-on-year to RUB 8.7 billion in Q2 2020, reaching 31.1% of the Detsky Mir chain’s total revenue in Russia.

During lockdown, customer preferences shifted to online shopping, but since the lifting of lockdown in June, Russian citizens have been getting back to their normal way of life, driving a 16.5% increase in LFL sales in Russia and Kazakhstan, along with a 4.2% LFL average ticket growth. Over the first 12 days of July, we were able to maintain a strong level of total sales growth at 24%.

Throughout Q2, we also witnessed mixed dynamics in individual product groups. Essentials like baby food and diapers were the fastest growing categories in April, increasing their share in the chain’s total revenue by 5.9 p.p. year-on-year to 41%. At the same time, apparel and footwear demonstrated explosive growth in May and June on the back of pent-up demand and the approaching summer season, with a 6.5 p.p. year-on-year increase in the share of this category in total sales (to 32.7%).

We have continued successfully pushing private labels across all categories, gradually transitioning to direct import contracts to provide a best price guarantee to our customers. The share of private labels and direct contracts in total sales has grown by 5.7 p.p. year-on-year to 47.9% over Q2. In diapers, the Baby Go and Manu private labels demonstrated positive dynamics, with a 1.8 p.p. year-on-year increase in the share of sales in this product group (to 7.7%).

Right now, we see an excellent opportunity to consolidate the children’s goods market, thanks in part to the upcoming completion of projects to develop our logistics infrastructure, expand our product assortment and improve our customer service and user experience.”

For additional information:

The Detsky Mir Group of Companies (MOEX: DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 782 Detsky Mir stores located in 302 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 43 ELC, 9 ABC and eleven Zoozavr stores as of 30 June 2020. The total selling space was approximately 855,000 square meters.

 Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[8] – 20.38%; The Capital Group Companies, Inc. – 5.64%; Russian-Chinese Investment Fund (RCIF)[9]– 4.62%, Free float – 69.36%. 

Websites: detmir.ru, elc-russia.ru, ir.detmir.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, impact of COVID-19 pandemic on macroeconomic situation on the markets of presence and financial results of Detsky Mir and its subsidiaries, as well as many other risks specifically related to Detsky Mir and its operations.

([1]) The Company’s consolidated financial measures for 2019–2020 and related interim periods are based on proforma financial information prepared as if IFRS 16 “Leases” had not been adopted, and thus do not represent IFRS measures.

([2]) This channel includes online orders at www.detmir.ru, including in-store pick-up.

([3]) Hereinafter like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth are based on stores in operation for at least 12 full calendar months. The store is included in the calculation of the monthly like-for-like, if the difference between the worked periods in comparable months does not exceed three business days.

([4]) In Q2 2020, Detsky Mir closed two stores.

([5]) Including 52 ELC and ABC stores, five Detmir Pickup stores as well as eleven Zoozavr stores.

([6]) Cardholders who made at least one purchase at Detsky Mir during the last 12 months to 30 June 2020 are considered active.

([7]) In 1H 2020, Detsky Mir closed four stores.

([8]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([9]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.

Detsky Mir Mobile App Hits 3 Million Downloads Six Months after Launch

Moscow, Russia, 29 June 2020 – Detsky Mir Group (“Detsky Mir” or the “Company”, MOEX: DSKY), Russia’s largest specialized children’s goods retailer, announces that its mobile app has been gaining traction with customers, with more than 3 million downloads over the first six months after its launch. 

In December 2019, Detsky Mir Group launched a mobile app for customers, allowing them to shop online using the Company’s loyalty card.

Over the first six months since launch, the app has been opened over 15 million times on our customers’ mobile devices, with its daily active audience already exceeding 300,000 users.

“Detsky Mir” is also the highest rated free app in Russia, with a score of 4.6 on the App Store and 4.7 on Google Play. Download statistics show that Android mobile devices account for about 70% of installations and iOS devices for about 30%.

Online shoppers enjoy the app’s attractive design, huge assortment of children’s goods and dedicated category for pet supplies. They also value the discounts, promotions and delivery options offered, as well as the chance to use their bonus card when ordering.

Over the six months since launch, more than 5 million orders have been made via the mobile app, accounting for more than half of all online orders. Mobile app users’ favorite products are apparel and footwear, toys, baby food and care products.

Detsky Mir’s loyalty program members can manage their bonus card from the app, with options to check their current balance, bonuses applied and transaction history. The Company is planning to launch a User Account linked to the detmir.ru website and streamline the checkout process in the near future.

“The launch of the mobile app is Detsky Mir’s latest step towards enhancing its digital proposition. The app has been gaining traction with customers, with the audience growing even faster during the pandemic – half of online orders are now being made via the mobile app. All this motivates our team of designers, developers and marketing experts to speed up the product’s further development,” noted Mikael Geletsian, Digital Product Director at Detsky Mir Group.

For additional information:

  Julia Polikarpova

  Head of Public Relations

  Tel.: +7 495 781 08 08, ext. 2041

  upolikarpova@detmir.ru

Detsky Mir Group Adjusted EBITDA Increased by 40% in May 2020

Moscow, Russia, 15 June 2020 – Detsky Mir Group (the “Group”, “Detsky Mir” or the “Company”, MOEX: DSKY), the largest specialized children’s goods retailer in Russia and Kazakhstan, is disclosing select operational and unaudited financial performance metrics for April and May 2020, in connection with the gradual lifting of emergency lockdown and quarantine measures in Russia related to the COVID-19 epidemic[1].

May 2020 Financial Highlights[2]

• The Group’s net consolidated unaudited revenue increased by 6.7% year-on-year to RUB 10.1bn.
• Online revenue[3] grew by 3.3x year-on-year to RUB 3.1 bn.
  •  The share of online sales in total net revenue of Detsky Mir in Russia increased 3x relative to May-19 to 32%.
  • At the same time, the share of courier delivery service grew by 9.6 p.p. year-on-year to 22.4%.
• As of 31 May 2020, the majority of the Group’s 851 stores[4] remained open to customers.
  • In Russia, 38 Detsky Mir stores, as well as all 58 ELC and ABC stores were temporarily closed
  • The Company fully reopened its entire retail chain in Kazakhstan.
  • All Detmir stores in Belarus continued to operate as normal.
• Gross margin increased by 0.6 p.p. relative to May-19 to 29.6%, mainly thanks to a substantial rise in the share of “Fashion and Footwear” category (growth of 7.6 p.p. relative to May-19 to 35%). The share of sales of high-margin goods grew thanks to pent-up demand and the upcoming summer season.
• SG&A[5] as a percentage of revenue decreased by 1.6 p.p. relative to May-19 to 20.1%.
  • Thanks to the anti-crisis measures undertaken, the Company reduced its leasing costs as a percentage of revenue by 0.9 p.p. relative to May-19.
  • Personnel costs as a percentage of revenue decreased by 0.1 p.p. relative to relative to May-19.
  • The high growth of free traffic in the online channel allowed to optimize marketing expenses as a percentage of revenue by 0.04 p.p. relative to May-19.
• Adjusted EBITDA margin increased by 2.4 p.p. relative to May-19 to 10.0%.
  • Adjusted EBITDA[6] increased by 40% year-on-year to RUB 1,005 m.
  • EBITDA[7] increased by 38.7% year-on-year to RUB 959 m.
• Net debt[8] as of 31 May 2020 totalled RUB 26.4bn. Net debt/adjusted EBITDA LTM[9] ratio was 1.8x against 2.1x at the end of May-19.

April 2020 Financial Highlights

• The Group’s net consolidated unaudited revenue decreased by 19.9% year-on-year to RUB 7.5 bn.
• Online revenue grew by 3.7x year-on-year to RUB 2.9 bn.
  • The share of online sales in total net revenue of Detsky Mir in Russia increased almost 5x relative to April-19 to 41.6%.
  • At the same time, the share of courier delivery service grew by 14.1 p.p. year-on-year to 25.3%.
• As of 30 April 2020, the majority of the Group’s 846 stores remained open to customers.
  • In Russia, 83 Detsky Mir stores, as well as all 58 ELC and ABC stores were temporarily closed.
  • 36 stores were temporarily closed in Kazakhstan, though facilities for pickups of online orders were organized at most of the closed store locations.
  • All Detmir stores in Belarus continued to operate as normal.
• Gross margin decreased 8.7 p.p. relative to April-19 to 27.8%, mainly due to a significant increase in the share of sales of low-margin products (baby food, diapers).
• SG&A as a percentage of revenue decreased by 2.1 p.p. relative to April-19 to 20.1%. Thanks to the anti-crisis measures taken, the  managed to reduce its leasing and personnel costs as a percentage of revenue by 0.7 p.p. and 1.2 p.p. relative to April-19, respectively.
• Adjusted EBITDA margin decreased by 7.3 p.p. relative to April-19 to 7.8%.
  • Adjusted EBITDA decreased by 58.8% year-on-year and was RUB 580 m.
  • EBITDA decreased by 58.1% year-on-year and totalled RUB 576 m.
• Net debt as of 30 April 2020 totalled RUB 27.9 bn. Net debt/adjusted EBITDA LTM ratio was 2.0x against 1.8x at the end of April-19.

Maria Davydova, PJSC Detsky Mir Chief Executive Officer, said:

“Thanks to the active transformation into an omnichannel business in recent years and the focus on operational efficiency, we have been able to adapt quickly to the current highly turbulent market. In May, we continued to consolidate our online channel, significantly increasing its share in total sales, and our total sales returned to growth. Based on the results of the first 11 days of June, we accelerated the Group’s total sales growth rate to 32.3% year-on-year, and are planning to open all of the 34 stores that remain temporarily closed to customers by the end of this month. Thanks to the timely anti-crisis measures taken to reduce operating expenses, we managed not only to maintain high profitability of our business in April, but also to increase our adjusted EBITDA in May by 40% year-on-year.

As part of the strategy that focuses on the online channel, our key tasks are to expand the assortment of children’s goods, to launch our marketplace full-scale in August, and to strengthen our logistics capabilities by launching regional distribution centers in large cities across Russia. We are also constantly improving the user experience in all of our services and sales channels, guided by the “mobile first” principle aimed at sales promotion via mobile devices. Our main goal is to become one of the key apps on our customers’ smartphones.”

For additional information:

The Detsky Mir Group of Companies (MOEX:DSKY) is a multi-format retailer and the leader in the children’s goods sector in Russia. The Group comprises the Detsky Mir and the Detmir Pickup retail chains, the ELC (Early Learning Centre in Russia) and the ABC retail chains, as well as the Zoozavr pet supplies retail chain. The Company operates a retail chain of 777 Detsky Mir stores located in 298 cities in Russia, Kazakhstan and Belarus, five Detmir Pickup stores, as well as 46 ELC, 12 ABC and eleven Zoozavr stores as of 31 May 2020. The total selling space was approximately 851,000 square meters.

Detsky Mir Group’s shareholder structure as of the date of this announcement is as follows: PJSC AFK Sistema[10] – 33.38%; Russian-Chinese Investment Fund (RCIF) [11]– 7.56%, Free float – 59.06%.  

Websites: detmir.ru, elc-russia.ru, ir.detmir.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, impact of COVID-19 pandemic on macroeconomic situation on the markets of presence and financial results of Detsky Mir and its subsidiaries, as well as many other risks specifically related to Detsky Mir and its operations.     

([1]) This is a one-off disclosure of financial information aimed at providing investors with sufficient information on the Company’s operations during the COVID-19 period. The Company does not plan to provide similar disclosure of results on a monthly basis.

 ([2]) Hereinafter, data are presented without taking into account the application of IFRS standard 16 “Leases”. The Company’s consolidated financial measures for 2019-2020 and related interim periods are based on proforma financial information prepared as if IFRS 16 “Leases” had not been adopted, and thus do not represent IFRS measures.

([3]) Hereinafter, this channel includes online orders at www.detmir.ru, including in-store pick-up.

([4]) Including 58 ELC and ABC stores, five Detmir Pickup stores as well as eleven Zoozavr stores.

([5]) Hereinafter, selling, general and administrative expenses do not include depreciation and amortization expenses, as well as additional share-based compensation expense and cash bonuses under the LTI program.

([6]) Hereinafter, adjusted EBITDA is calculated as profit for the period before income tax expense, foreign exchange loss/gain, finance expense, finance income, depreciation and amortization of fixed assets and intangible assets, adjusted for share-based compensation expense and cash bonuses under the LTI program.

([7]) Hereinafter, EBITDA is calculated as profit for the period before income tax expense, foreign exchange loss/gain, finance expense, finance income, and depreciation and amortization of fixed assets and intangible assets.

([8]) Hereinafter, net debt is calculated as total borrowings (defined as long-term loans and borrowings and short-term loans and borrowings, and current portion of long-term loans and borrowings) less cash and cash equivalents. Lease liabilities are not included in the calculation of net debt.

([9]) Hereinafter, adjusted EBITDA LTM is calculated as adjusted EBITDA for the last 12 months.

([10]) Sistema PJSFC is a publicly-traded diversified Russian holding company serving over 150 million customers in the sectors of telecommunications, children’s goods retail, paper and packaging, healthcare services, agriculture, high technology, banking, real estate, pharmaceuticals and hospitality

([11]) RCIF, an equity investment fund established by the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), holds its stake in PJSC Detsky Mir through its funds: Floette Holdings Limited and Exarzo Holdings Limited.