26.05.2011

May 26, 2011, MOSCOW – OJSC Pharmacy Chain 36.6 [RTS:APTK;MICEX:RU14APTK1007] — the leading Russian pharmaceutical retailer announces audited FY 2010 and unaudited Q4 2010 financial results prepared in accordance with the International Financial Reporting Standards (IFRS).

  • Consolidated EBITDA from ongoing operations in 2010 reached RUR 1 738.5 mln compared with 1 421.6 mln in 2009, a 22.3% growth; consolidated EBITDA from ongoing operations in Q4 2010 grew by 51.2% and reached RUR 677.5 mln compared with 448 mln in Q4 2009.
  • Group revenue from ongoing operations decreased by 3.2% in 2010 to RUR 20 061.5 mln as compared with RUR 21 061.5 in FY2009;
  • Group revenue from ongoing operations in Q4 2010 reached RUR 5 764.2 mln versus RUR 5 025.6 mln in Q4 2009, a 14.7% increase y-o-y;
  • Gross profit from ongoing operations for 12M 2010increased by 1.3% to RUR 8 407.2 mln and gross profit from ongoing operations in Q4 2010increased by 16.6% to RUR 2 457.4 mln compared to the relative periods of 2009;
  • Gross profit margin in 2010increased by 1.8% up to 41.2% as a percentage of consolidated sales compared to 39.4% in FY 2009.
  • Group underlying Net loss from ongoing operations before minority interest(excluding gain on minority interest restructuring in consortium of investors in 2009) decreased by 18.6% from RUR 531.2 mln in 2009 to RUR 432.6 mln in 2010.
  • The retail unit organically opened 15 stores and closed 45 stores in 2010, thus operating 989 stores by the end of 2010. The Company as well opened 6 ELC stores within 2010.
Revenue

As compared to the relative period the year before, in 2010 sales of the Retail unit decreased by 11.1% in ruble terms from RUR 15 984.8 mln to RUR 14 207.5 mln driven by the closure of non-performing stores in 2009- first half of 2010. In Q4 2010 versus Q4 2009 sales of the Retail unit increased by 12.5% from RUR 3 618.4 mln to RUR 4 069.4 mln. The sales in Q4 2010 compared to Q3 2010 also grew — by 19.2%.

Like-for-like sales[1] in 2010 versus 2009 decreased by 3.9% in ruble terms driven by the continuing customer traffic decline in the first half of 2010 as a consequence of 2009 economic crisis; meanwhile 2010 demonstrated a progressive tendency of a gradual rehabilitation of the number of purchases (number of receipts) in L-F-L stores compared to 2009. The traffic growth in December 2010 versus the same period of 2009 was the most optimistic within a year of 2010. (+1.9%)[2]. This positive dynamics ofretail sales growth and rehabilitation of the number of receipts in the chain was a result of the properly chosen strategy for 2010 intended for the Company’s profitability and the business operational efficiency. The Company’s strategy aimed at the customers’ return by means of the sound pricing and marketing policy as well as by the progressive increase of the private label goods share in the total turnover.

An average check in 2010 compared with 2009 increased by 6.7% in ruble terms. In Q4 2010 versus Q4 2009 L-f-L sales increased by 11.5% in ruble terms, average check increased by 15.7% in ruble terms.

Gross margin

In 2009 gross margin in the Retail unit reached 31.1% versus 32 % in 2009. The gross margin drop was primarily due to the new governmental price regulation rules on essential medicine came into effect since 1st of April, 2010, and also to the Company`s pricing policy revision directed to reduction of medicines prices.. Thus decline in 2010 gross margin was partially compensated by purchasing terms improvement (products entry prices decrease) and increase of non-medicine (parapharmaceutical products) and private label goods share in total sales turnover.

In Q4 2010 gross margin totaled 33,9% demonstrating a 0.6% growth versus Q4 2009 as well as a 4.7% improvement compared to Q3 2010. The growth was achieved by the sales centers (pharmacies) operational efficiency improvement.

Selling, general and administrative expenses

Selling, general and administrative expenses dropped by 13.2% in ruble terms from RUR 5 342.4 mln in 2009 to RUR 4 639.1 mln in 2010. As a percentage to sales SG&A decreased by 0.7% in 2010 compared to 2009. The essential SG&A reduction reflected continuous implementation of the cost optimization programme realized by the Company. Particularly, within 2010 the logistics, tele- and mobile communication expenses as well as IT outsourcing costs were significantly reduced. Moreover within the reporting period administrative costs were optimized, including regional offices and headquarters staff reduction and the company‘s structure upgrading. Besides a number of actions were taken to improve the stores operational efficiency.

In Q4 2010, selling, general and administrative expenses increased by 8.3% to RUR 1 380.1 from RUR 1 274.8 mln. in Q4 2009, while their share in overall sales decreased by 1.3%.

Trade accounts payable

Compared with 2009, trade accounts payable decreased by 16.5% from RUR 3 498.6 mln to RUR 2 921.5 mln in 2009 thanks to the partial indebtedness repayment to the suppliers in 2010.

Inventory

Average days of turnover increased from 75 days at the end of Q4 2009 to 76 days as of the end of Q4 2010. Compared with Q3 2010 as at the end of Q4 2010 average days of turnover increased from 71 days to 76 days due to the scaled- up seasonal purchases.

In absolute terms, inventory was reduced by 12.8% to RUR 2 634.2 mln as of the end of Q4 2010 compared with RUR 2 335.8 mln as of the end of Q4 2009.

Veropharm

For the latest update on FY 2009 performance please refer to the official press-release of the company as of May 19th, 2010.

ELC

Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) reached RUR 222.3 mln, a 33.8% growth in FY 2010 versus FY 2009 (RUR 166.2 mln) driven primarily by an increase in L-f-L sales and opening of 6 new stores within 2010. In Q4 2010 Early Learning Center revenue consolidated by the Group (which is 50% of the total revenue) grew by 37.2% and reached RUR 89.7 mln versus versus RUR 65.4 mln in Q4 2009.

ELC Net Profit equaled to RUR 17.4 mln in 12M 2010, a 177.6% improvement versus FY 2009. In Q4 2010 ELC Net Profit increased by 54.3% and reached RUR 17.9 mln compared to RUR 11.6 mln in the relative period of 2009.

In FY 2010 EBITDA consolidated by the Group more than tripled (by 221.2%) up to RUR 31.8 mln in ruble terms versus RUR 9.9 mln in 2009.

As of the end of 2010, the unit operated 19 stores, 2 of which were opened in Q4 2010.

Group Financial Debt at the end of 2010 increased by 25.4% to RUR 9 334.9 mln from RUR 7 441.1 mln at the end of 2009. Group Financial Net Debt (after deduction of monetary funds remains in the accounts) stood at RUR 8 498.7 mln at the end of Q4 2010. The additionally attracted bank loans were directed to the indebtedness repayment to the suppliers and Company’s current assets supplement (purchase amounts increase aimed at stock-out reduction in the pharmacies for better customer demand satisfaction)

A share of foreign currency loans (in USD) decreased from 63% as of 31st December 2009 down to 42% as of the end of 2010.

As of 31st December 2009 the Retail and Corporate units debt equaled to RUR 8 918.7 mln, including 43% of the debt denominated in dollars; Veropharm debt stood at RUR 416.5 mln with no debt denominated in dollars. 61.9 % of the Group debt is long-term.

In 2010 versus 2009 consolidated financial costs grew by 7.5% to RUR 1 261.6 mln from RUR 1 174.0 mln.

In 12M 2010 the Group invested in fixed and intangible assets RUR 391.6 mln, out of which retail investments equaled to RUR 164.3 mln, investments on ELC store level were RUR 9.8 mln and Veropharm investments reached RUR 211.9 mln.

[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.

[2] For the detailed information please address Pharmacy Chain 36.6 press- release on preliminary Q4 2010 results of 18th of April