OREANDA-NEWS. DIXY Group (RTS, MICEX: DIXY) - one of Russia’s leading retailers of foods and everyday products - announced consolidated audited IFRS results for the full year of 2012.

Key Highlights of the fourth quarter and the full year of 2012:

• In the fourth quarter of 2012, the Company opened 156 stores on net basis, bringing the number of organic openings to 380 stores net in the full year of 2012. As of December 31, 2012, the Company operated 1,499 stores in Central, North-West and Urals Federal Districts.

• The total Selling Space increased by 26% year-on-year to 514,934 sq.m. as of December 31, 2012.

• Consolidated Revenue increased by 43.7% (35.8% in USD) year-on-year to RUR 147.0 bln (USD 4.7 bln) in the full year of 2012, and by 18.4% (19.0% in USD) year-on-year to RUR 40.3 bln (USD 1.3 bln) in the fourth quarter of2012.

• Consolidated Gross Profit grew by 52.0% (43.7% in USD) year-on-year to RUR 42.2 bln (USD 1.4 bln) in the full year of 2012, and by 20.9% (21.5% in USD) year-on-year to RUR 11.8 bln (USD 378.4 mln) in the fourth quarter of2012.

• Gross Margin improved by 160 bp year-on-year to 28.7% in the full year of 2012, and by 60 bp to 29.2% in the fourth quarter of 2012.

• Consolidated EBITDA increased by 30.0% (22.9% in USD) year-on-year to RUR 8.4 bln (USD 271.1 mln) in the full year of 2012, and stood flat year-on-year at RUR 2.2 bln (USD 71.3 mln) in the fourth quarter of 2012.

• Consolidated Operating Profit grew by 29.8% (22.6% in USD) year-on-year to RUR 4.5 bln (USD 144.2 mln) in the full year of 2012, and by 8.0% (8.6% in USD) year-on-year to RUR 1.3 bln (USD 41.1 mln) in the fourth quarter of 2012.

• Consolidated Net Profit amounted to RUR 1,052 mln (USD 33.8 mln) in the full year of 2012 compared to RUR 1,102 mln (USD 37.5 mln) in the full year of 2011.

The Company opened organically 156 stores on net basis in the fourth quarter of 2012, and 380 stores net for the full year of 2012 compared to 216 openings in the full year of 2011.

In November 2012, the Company completed the integration process of ex-Victoria’s neighborhood stores. As a result, all 144 stores scheduled for the integration were transferred successfully into DIXY operational chain in FY2012.

In 4Q 2012, the corporate restructuring process was started. The project aims to streamline the Company’s legal structure, reduce the number of legal entities inside the Group, and improve the back office efficiency. In the course of the restructuring, more than 450 neighborhood stores were transferred to a single operational legal entity in October and November of 2012. After the change of the legal entity name, the stores had to renew their alcohol licenses, and were not able to sell spirits most of the time in the fourth quarter of 2012. The licenses were renewed successfully in December 2012.

The Company made significant progress in DIXY neighborhood stores market repositioning. 75 DIXY stores were modernized and 350 stores were restyled in FY2012. The assortment optimization, promo campaigns and investments in the brand equity stayed in focus throughout the last year. In September 2012, a new private label program under “fl” brand was launched for DIXY stores. This private label program is considered to be one of the Company’s main strategic initiatives and an effective marketing tool to increase customer loyalty and contribute to the Company’s midterm and long-term growth.

The Company also continued to develop its own logistic infrastructure, investing in distribution facilities and the truck fleet. In October 2012, the Company launched its largest and the most advanced distribution facility based in Moscow Region and able to supply potentially up to 450 stores. The Company maintained the high rate of centralization (deliveries through own distribution centers) for its neighborhood stores at the level of 83% in FY2012.

4Q and FY 2012 Key Financial Highlights, year-on-year

in RUR million

4Q 2012

4Q 2011

Change

Total Revenue

40,309

34,048

18.4%

Retail Revenue

39,960

33,645

18.8%

Gross Profit

11,761

9,724

20.9%

Gross Margin, %

29.2%

28.6%

60 bp

SGNA

10,483

8,541

22.7%

SGNA, % of Sales

26.0%

25.1%

90 bp

Operating Profit

1,278

1,183

8.0%

Operating Margin, %

3.2%

3.5%

(30 bp)

Net Profit

271

315

(13.9%)

Net Profit Margin, %

0.7%

0.9%

(20 bp)

EBITDA

2,217

2,248

(1.4%)

EBITDA Margin, %

5.5%

6.6%

(110 bp)

in RUR million

Consolidated

Pro-forma

FY 2012

FY 2011

Change

FY 2011

Change

Total Revenue

147,023

102,317

43.7%

121,800

20.7%

Retail Revenue

145,658

101,383

43.7%

120,555

20.8%

Gross Profit

42,150

27,732

52.0%

33,748

24.9%

Gross Margin, %

28.7%

27.1%

160 bp

27.7%

100 bp

SGNA

37,666

24,275

55.2%

29,558

27.4%

SGNA, % of Sales

25.6%

23.7%

190 bp

24.3%

130 bp

Operating Profit

4,485

3,456

29.8%

4,190

7.0%

Operating Margin, %

3.1%

3.4%

(30 bp)

3.4%

(30 bp)

Net Profit

1,052

1,102

(4.5%)

1,403

(25.0%)

Net Profit Margin, %

0.7%

1.1%

(40 bp)

1.2%

(50 bp)

EBITDA

8,429

6,483

30.0%

7,826

7.7%

EBITDA Margin, %

5.7%

6.3%

(60 bp)

6.4%

(70 bp)

Revenues

Consolidated Revenue increased by 43.7% (35.8% in USD) year-on-year to RUR 147.0 bln (USD 4.7 bln) in the full year of 2012. Revenue increased by 20.7% (14.1% in USD) year-on-year on pro-forma basis driven mainly by organic store openings and helped by 4.8% like-for-like sales growth in FY2012.

DIXY neighborhood stores revenue, which was the main driver of growth, increased by 40.0% (32.3% in USD) year- on-year to RUR 96.5 bln (USD 3.1 bln). Victoria supermarkets revenue grew pro-forma by 22.8% (16.1% in USD) year-on-year to RUR 16.6 bln (USD 534.0 mln), while Megamart compact hypermarkets revenues increased by 27.5% (20.5% in USD) to RUR 10.9 bln (USD 349.3 mln) in the full year of 2012.

Gross Profit

Consolidated Gross Profit increased by 20.9% (21.5% in USD) year-on-year in the fourth quarter of 2012 amounting to RUR 11.8 bln (USD 378.4 mln), and by 52.0% (43.7% in USD) year-on-year to RUR 42.2 bln (USD 1.4 mln) in the full year of 2012.

Consolidated Gross Margin improved by 60 bp year-on-year to 29.2% of sales in the fourth quarter, and by 160 bp to 28.7% of sales in the full year of 2012, driven mainly by enhanced purchasing power and stronger product mix.

Consolidated Cost of goods sold decreased by 70 bp year-on-year to 68.4% of sales in the fourth quarter, and by 150 bp to 68.9% of sales in the full year of 2012.

Consolidated Shrinkage costs reduced by 10 bp year-on-year to 1.6% of sales in the fourth quarter, and by 20 bp year-on-year to 1.7% of sales for the full year of 2012 due to more efficient shrinkages management.

Consolidated Transportation costs as a percentage of sales increased by 10 bp year-on-year in the fourth quarter and by 20 bp year-on-year in the full year of 2012 to 0.8% of sales, mainly due to gasoline price inflation. However, the increase was partially offset by reduced share of outsourced transportation services and by high level of centralization in the full year of 2012.

Operating Expenses

Consolidated Selling, General & Administrative Expenses increased by 22.7% (23.3% in USD) year-on-year to RUR 10.5 bln (USD 337.3 mln) in the fourth quarter, and by 55.2% (46.6% in USD) year-on-year to RUR 37.7 bln (USD 1.2 mln) in the full year of 2012. SGNA as a percentage of sales increased by 90 bp year-on-year to 26.0% in the fourth quarter, and by 190 bp year-on-year to 25.6% in the full year of 2012. This increase was mainly driven by staff and operating lease expenses growth.

Staff expenses increased by 28.7% (29.3% in USD) year-on-year to RUR 5.5 bln (USD 176.1 mln), and by 61.2% (52.4% in USD) year-on-year to RUR 19.1 bln (USD 613.0 mln) in the full year of 2012. Staff expenses as a percentage of sales grew by 110 bp to 13.6% in the fourth quarter of 2012, and by 140 bp year-on-year to 13.0% in the full year of 2012, led mainly by the large number of newly opened stores, especially in the fourth quarter of 2012, as well as wages indexation for in-store personnel in the full year of 2012.

Operating lease expenses grew by 38.5% (39.1% in USD) year-on-year to RUR 2.1 bln (USD 68.3 mln), and by 65.4% (56.3% in USD) year-on-year to RUR 7.5 bln (USD 240.2 mln) in the full year of 2012. Operating lease expenses as a percentage of sales grew by 80 bp to 5.3% in the fourth quarter of 2012, and by 70 bp year-on-year to 5.1% in the full year of 2012, mainly due to the pressure from newly opened stores, and the growing share of rented space.

Utilities, Repair and Maintenance expenses increased by 5.1% (5.6% in USD) year-on-year to RUR 804.0 mln (USD 25.9 mln), and by 50.6% (42.4% in USD) year-on-year to RUR 3.1 bln (USD 100.3 mln) in the full year of 2012. Utilities, Repair and Maintenance expenses as a percentage of sales reduced by 20 bp to 2.0% in the fourth quarter of 2012, but increased by 10 bp year-on-year to 2.1% in the full year of 2012, driven mainly by utilities price inflation and growing fleet of own trucks.

EBITDA increased by 30.0% (22.9% in USD) year-on-year to RUR 8.4 bln (USD 271.1 mln) in the full year of 2012, and stood flat year-on-year at RUR 2.2 bln (USD 71.3 mln) in the fourth quarter of 2012. EBITDA margin decreased year-on-year by 110 bp to 5.5% in the fourth quarter of 2012, and by 60 bp to 5.7% in the full year of 2012, mainly due to the pressure from the newly opened immature stores and the integration of ex-Victoria stores, resulting in the increase of operating expenses as a percentage of sales.

Operating and Net Profits

Depreciation and Amortization expenses decreased by 7.6% (7.1% in USD) year-on-year to RUR 984.0 mln (USD 31.7 mln) in the fourth quarter of 2012, and increased by 37.0% (29.4% in USD) year-on-year to RUR 3.9 bln (USD 126.8 mln) in the full year of 2012. The D&A expenses increase was mainly attributable to the depreciation of Victoria equipment and intangible assets amortization, as well as to the growing scale of the business.

Operating Profit increased by 8.0% (8.6% in USD) year-on-year to RUR 1.3 bln (USD 41.1 mln) in the fourth quarter of 2012, and by 29.8% (22.6% in USD) year-on-year to RUR 4.5 bln (USD 144.2 mln) in the full year of 2012. However, Operating margin decreased year-on-year by 30 bp to 3.2% of sales in fourth quarter of 2012, and to 3.1% in the full year of 2012, as a result of the above mentioned EBITDA margin decline.

Finance costs grew year-on-year by 77.2% (78.1% in USD) to RUR 810.0 mln (USD 26.1 mln) in the fourth quarter of 2012, and by 95.2% (84.5% in USD) to RUR 2.5 bln (USD 81.0 mln) in the full year of 2012, due to the increased borrowings raised mainly to re-finance Victoria acquisition related debt.

Consolidated Income tax expense decreased year-on-year by 45.9% (45.7% in USD) to RUR 217.0 mln (USD 7.0 mln) in the fourth quarter of 2012, and by 11.3% (16.1% in USD) to RUR 928.0 mln (USD 29.8 mln) in the full year of2012.

Consolidated Net Profit decreased by 13.9% (13.5% in USD) to RUR 271.0 mln (USD 8.7 mln) in the fourth quarter, but stood flat year-on-year at RUR 1.1 bln (USD 33.8 mln) for the full year of 2012.

Cash Flows and Debt

Consolidated Net Cash from Operating Activities decreased by 23.8% (28.0%% in USD) to RUR 4.0 bln (USD 128.3 mln) in the full year of 2012.

As of December 31, 2012, Total Financial Debt to EBITDA ratio stood at the level of 3.4, and Total Financial Debt amounted to RUR 29.1 bln (USD 958.8 mln), while Net Debt amounted to RUR 25.5 bln (USD 838.8 mln) as of December 31, 2012.