OREANDA-NEWS. October 13, 2011. OJSC Pharmacy Chain 36.6 [RTS:APTK;MICEX:RU14APTK1007] - the leading Russian pharmaceutical retailer announces unaudited H1 2011 financial results prepared in accordance with the International Financial Reporting Standards (IFRS).

H1 2011 group highlights

Consolidated EBITDA from ongoing operations increased by 18% versus the relative period of 2010 and reached RUR 1007.3 mln;

Group revenue (net) from ongoing operations increased by 10.9% and reached RUR 10 810.8 mln versus RUR 9 749.4 mln in H1 2010;

Gross profit from ongoing operations increased by 16.8% to RUR 4 798.0mln compared to RUR 4 107.2 mln in H1 2010;

Gross profit margin from ongoing operations in H1 2011 increased up to 44.4% compared to 42.1% in the same period of 2010;

Group underlying Net profit from ongoing operations before minority interest and loss on early loan repayment reached RUR 184.1mln compared to the net loss of RUR 224.6 mln in H1 2010;

As of the end of H1 2011 Pharmacy Chain 36.6 operated 983 stores, 19 ELC stores, 10 stand-alone optical outlets and 19 additional optical departments within pharmacies.

Retail unit

Revenue

Net sales of the Retail unit in H1 2011 increased by 8.0% in ruble terms from RUR 6 725.6mln to RUR 7 264.6 mln. In Q2 2011 net sales reached RUR 3 551.5 mln versus RUR 3 309.4 mln in Q2 2010.

In accordance with the provisions of the Tax Code, from 1 January 2011, changes restricting utilisation of the special tax regime — Imputed Earnings Tax (IET) for pharmaceutical organizations have taken effect. Thus all regional retail companies of the Group Pharmacy Chain 36.6 have switched to a common tax regime, effecting an exclusion of VAT from the Gross Sales. In order to provide comparable statistics of sales performance of retail segment in Q2 and H1 2011 versus Q2 and H1 2010, hereinafter in this part of the press-release Sales figures are given in Gross Sales including VAT.

As of the end of H1 2011 Gross sales of the Retail Unit (including VAT) grew up by 14.6% versus H1 2010.

Like-for-like[1] gross sales in H1 2011 increased by 17.2% in ruble terms compared to the relative period of 2010. Average check (including VAT) in like-for-like stores increased by 24.8% and reached RUR 304.1 in H1 2011.

Gross profit and gross margin

Gross profit in the Retail unit increased by 16.5% from RUR 2 042.7 mln in H1 2010 to RUR 2 380.6 mln in H1 2011. Gross profit margin reached 32.8% versus 30.4 % in H1 2010. Gross profit margin growth is a result of increase of high-marginal products (parapharmaceutical and private label goods) share in the total turnover.

Selling, general and administrative expenses (SG&A)

In H1 2011 selling, general and administrative expenses increased by 11.4% in ruble terms and reached RUR 2 447.8 mln versus RUR 2 197.3 mln in the same period of 2010. SG&A growth in absolute values reflected a considerable tax pressure boost on wage fund in Q1 2011 (an increase of social tax rates since 2011).

In H1 2011 SG&A expenses as a percentage to sales increased by 1.0% and reached 33.7% versus 32.7% in H1 2010.

Trade accounts payable

As of the end of H1 2011 trade accounts payable increased by 3.5% and reached RUR 3 023.7 mln compared to those as of the beginning of 2011.

Inventory

By the end of H1 2011 inventory average turnover period grew up to 84 days versus 77 days as of the end of H1 2010.The inventory increase in day terms is a result of planned stock increase in pharmacies, the main part of which is due to the increase of working stock of private label products.

In absolute terms, inventory also increased by 8.8% and reached RUR 2 469.8 compared to the same period of 2010 mln, which is also caused by retail sales growth.

Other businesses

Veropharm

For the latest update on H1 2011 performance please refer to the official press-release of the company as of September 14th, 2011 at www.pahrmacychain366.ru.

ELC

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) increased by 40.1% and reached RUR 113.7mln, versus RUR 81.2 mln in the same period of 2010.

In 2010 year 7 new ELC stores were opened in Moscow, sales of these stores result in significant revenue growth in 2011 year.

As of the end of H1 2011 ELC Net loss decreased by 62.0% and equaled to RUR 1.0 mln compared to RUR 2.7 mln in H1 2010.

In Q2 2011 ELC Net profit increased by 78.9% and reached RUR 3.4 mln versus RUR 1.9 mln in the same period of 2010

As of the end of H1 2011, the unit operated 19 stores.

Group financial debt

As of the 30th of June 2011 Group Financial Debt increased by 6.5% and reached RUR 10 215.0 mln versus RUR 9 587.3 mln as of the 31st of March 2011.

As of the end of H1 2011 Group Financial Net Debt (after deduction of monetary funds remains in the accounts) equaled to RUR 9 648.4 mln.

As of the 30th of June 2011 the Retail and Corporate units debt equaled to RUR 9 503.5 mln, including 97% of the debt denominated in RUR; Veropharm debt stood at RUR 711.5 mln, which is 100% denominated in RUR.

In H1 2011 OJSC Pharmacy Chain 36.6 continued credit portfolio optimization for the purpose of replacement of debts denominated in US Dollars and short-term financial debts. At the 2nd of June 2011 Moscow bank of Sberbank opened to OJSC Pharmacy Chain 36.6 nonrevolving creditline with a limit of RUR 4 150 bln for the period of 5 years. The above agreement has allowed OJSC Pharmacy Chain 36.6 not only to refinance debt due to Consortium of investors denominated in US Dollars completely but also to raise investment appeal of the Company.

Group financial costs

Consolidated financial costs in H1 2011 increased by 21.1% and reached RUR 702.5 mln versus RUR 580.0 mln in H1 2010.

Investments

In H1 2011 the Group invested in fixed and intangible assets RUR 177.7 mln, out of which retail investments equaled to RUR 35.3 mln.

Veropharm investments reached RUR 140.8mln.

ELC investments reached RUR 1.6 mln.

Group net profit

Group Net profit from ongoing operations before loss on early repayment reached RUR 184.1 mln in H1 2011 compared to the net loss of RUR 224.6 mln in the same period of 2010.

Group underlying Net loss from ongoing operations (before minority interest) in H1 2011 reached RUR 304.4 mln versus RUR 224.6 mln in the same period of 2010. Net group loss increase is due to the early loan repayment commission paid to the Consortium of Investors[2] in Q2 2011.

[1] The L-F-L reporting is executed for a selection of comparable stores, which are:

opened or acquired 24 months prior to the current reporting period, and

not closed in the current reporting period.

The L-F-L stores equaled to 828 units as of the end of H1 2011.

[2] At the 2nd of June 2011 Moscow bank of Sberbank opened to OJSC Pharmacy Chain 36.6 nonrevolving credit line with a limit of RUR 4 150 bln for the period of 5 years. The above funds were used for the repayment of the loan due to Consortium of investors denominated in US Dollars.