OREANDA-NEWS  On 09 October JSC “The Seventh Continent” announced 1H 2008 financial results prepared in accordance with International Financial Reporting Standards (IFRS) and Auditor’s review of the statements.

The Company’s 1H 2008 net sales increased 33% and reached USD 791.4 mn. compared to USD 593.0 mn. in 1H 2007. Food and non-food sales accounted for 95.4% of total revenues, marketing, rental and other revenues comprised 4.6% of total revenues.

Gross profit[1] reached USD 227.5 mn. and increased 29% YoY. Gross profit margin totaled 28.7% compared to 29.7% in the 1H 2007. Some decline in the gross profit margin is mainly driven by expansion of the hypermarket operations including 3 new hypermarkets opened during the 1H 2008.

Selling, general and administrative expenses amounted USD 172.9 mn. and grew 35% compared to USD 127.8 mn. in 1H 2007. 1H 2008 S,G&A margin reached 21.8% compared to 21.6% in 1H 2007. Major operational expense items such as labour costs and operational lease expense declined as percentage of sales in the comparable periods to 9.5% from 9.9% and to 2.9% from 3.5% respectively.

Consolidated EBITDA reached USD 66.8 mn., with EBITDA margin of 8.4%. EBITDA excluding Finservice bank[2] results reached USD 72.6 mn., with EBITDA margin of 9.2%.

1H 2008 Consolidated net income reached USD 42.3 mn., net income margin stood at 5.4%. Net income excluding Finservice bank results in the 1H 2008 comprised USD 47.0 mn., net income margin stood at 5.9%.

Operating and financial income from banking activities stood for USD 29.5 mn., while operating and financial expenses from banking activities amounted USD 35.5 mn.[3]

As of 30 June 2008 the Company’s total assets stood at USD 1 553.8 mn., including USD 448.0 mn. of current assets and USD 1 105.7 mn. of non-current assets. Total liabilities reached USD 839.7 mn. and shareholders’ equity stood at USD 714.1 mn. Company’s total assets exluding Finservice Bank accounted for USD 1 367.1 mn., including USD 365.8 mn. of current assets and USD 1 001.3 mn. of non-current assets. Total liabilities exluding Finservice Bank reached USD 668.7 mn. and shareholders’ equity stood at USD 698.3 mn.

End of 1H 2008 consolidated debt of the Company was USD 562.6 mn. with Debt to EBITDA (last 12 month) ratio of 3.8. Company’s debt excluding Finservice Bank stood for USD 392.6 mn. with Debt to EBITDA (last 12 month) ratio of 2.6.

[1] 1H 2008 / 2007 gross profit is calculated including the reclassification of the accounting of the Cost of goods sold in the period. In the reported periods the cost of operational expenses engaged in own production in the stores is included into the Cost of goods sold, for the previous periods it was included into the S,G&A expense. The reclassification does not affect the operational profit.

[2] As a result of the additional issue of shares by Finservice Bank the Company’s share of the charter capital of the Bank changed and comprised 25,5% of  the total voting shares of the Bank. Starting with the period ending September 30, 2008, consolidated balance of JSC “The Seventh Continent” will include only proportion of net assets of the Bank, owned by the Company proportionally to ownership of charter capital, in section “other non-current assets”. Consolidated statement of income will include part of the financial result of the Bank for the reported period proportionally to ownership share. The Company’s consolidated debt will not include liabilities of the Bank.

[3] Total of operational and financial income and expenses for JSC “Finservice Bank” are reported in the Profit and Loss Statement for the 1H 2008 as “Operating income and financial income from banking activities” and “Operating expense and financial expense from banking activities”.