"Ribbon" (MOEX: LNTA) — Russian grocery retailer, which operates one of the largest hypermarket chains in Russia. The company develops various formats: hypermarkets, supermarkets, online referral, as well as a new format for convenience stores under the Mini Lenta brand.
In mid-February, Lenta presented financial results for 2021 year and announced its own dividend plans. Key points:
- retailer's revenue increased by 18,6% with 124,172 billion to 147,316 billion rubles due to the growth of selling space;
- EBITDA added 22,2% to 11,414 billion rubles through an ambitious development program and M&A-deals;
- net profit fell by 30,5% to 4,102 billion rubles against the background of one-time income in the fourth quarter 2020 of the year;
- free cash flow in 2021 year fell by 84% to 2,7 billion rubles after the acquisition of two regional networks;
- net debt multiplier / EBITDA» (IAS 17) decreased from 1,5 to 1,4.
Financial results
Network growth and LFL sales. In the fourth quarter 2021 operating results were quite good thanks to M&A-deals, further development of Lenta's online business and the growth of small format stores - in the last reporting period, the company opened 85 new stores near the house "Mini Lenta".
The above drivers resulted in the following performance: total sales area increased by 15,6% with 1519 to 1755 thousand square meters compared to the same period last year. LFL sales increased 7% against the backdrop of strong growth in the average check, which exceeded its past data by 10,4%. Online business revenue increased by 128% to 7 billion rubles due to increased demand.
As for M&A-deals, then "Tape" in 2021 bought two small regional companies - the Moscow network "Billa Russia" for 215 million euros with the total number of supermarkets 159 pieces and the Perm network "Family" for 2,35 billion rubles, which governs 75 shops of different formats. Besides, Lenta announced the acquisition of Utkonos, the leading e-grocery platform for 20 billion rubles. The deal will close on 2022 year.
Revenue and EBITDA. Lenta's revenue increased by 18,6% on the back of the acquisition of Billa and Semya chains and triple-digit growth in the online business. Besides, the key format of the company — hypermarkets — also demonstrated good performance, continuing to increase market share and improve its efficiency: for example, by allocating zones for the assembly of online orders.
EBITDA in the fourth quarter 2021 year increased by 22,2% with 9,343 to 11,414 billion rubles compared to the same period last year. A negative point in the results should be considered a strong increase in total costs, who added 21,8% against the backdrop of increased company costs for personnel and rent.
Revenue by format, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Hypermarkets | 111,599 | 121,662 | 9% |
| Small formats | 10,187 | 23,152 | 127,3% |
| wholesale revenue | 2,386 | 2,503 | 4,9% |
| total revenues | 124,172 | 147,316 | 18,6% |
Net income and FCF. Net profit, as opposed to revenue and EBITDA, fell by 30,5% with 5,906 billion to 4,102 billion rubles. The main reason is a one-time factor: in the fourth quarter 2020 Lenta recorded a reversal of an impairment loss of approximately 3 billion rubles against almost zero result in the ended period.
Free cash flow and leverage showed neutral results. free cash flow in 2021 year against the background of two large M&A-deals, described above, fell on 84% with 17 billion to 2,7 billion rubles, net debt multiplier / EBITDA ”according to IAS 17 decreased to 1,4 thanks to a reduction in net debt by 4%.
General indicators, billion rubles
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Revenue | 124,172 | 147,316 | 18,6% |
| Comparable sales | 4% | 7% | 3 p.p.. |
| EBITDA | 9,343 | 11,414 | 22,2% |
| EBITDA margin | 7,5% | 7,7% | 2 p.p.. |
| Net profit | 5,906 | 4,102 | −30,5% |
| net debt | 57,143 | 55,088 | −4% |
| net debt / EBITDA | 1,5 | 1,4 | — |
Dividends and comparison with competitors
One of Lenta's main drivers is the new dividend policy. The retailer intends to distribute more 100% earned free cash flow, if the multiplier is "net debt / EBITDA" will be lower 1,0, to 100% FCF, if this ratio is 1,0 to 1,5, and no more 50% FCF, if more 1,5. These distributions will only start after 2023 of the year.
Recall, that the company has never paid dividends before, but if we nevertheless calculate the possible dividend for 2021 year under the new dividend policy, then the shareholders could receive 4,45 Р на 1 GDR or 22,3 R per share provided 100% FCF distributions, since the current value of the multiplier "net debt / EBITDA» flat 1,4. Predicted dividend yield — 2,6%.
At the same time, investors should take into account one more fact - now the company is carrying out an increase in the authorized capital by 23 590 795 ordinary shares. This corporate event is associated with the acquisition of the Utkonos online retailer, to be purchased with new shares. In calculations, presented above, this increase has been taken into account.
They are traded on the Moscow Exchange as Lenta GDR with the ticker LNTA, and ordinary shares of the retailer with the ticker LENT. Their current ratio: 1 ordinary stock = 5 GDR.
Comparison with competitors
| EV / EBITDA | P / E | LFL sales | net debt / EBITDA | |
|---|---|---|---|---|
| ribbon | 3,47 | 5,94 | 7% | 1,40 |
| Magnet | 5,00 | 9,07 | 9,9% | 1,48 |
| X5 Group | 4,54 | 11,53 | 9% | 1,50 |
| Fix Price | 11,99 | 17,52 | 3,2% | 0,83 |
| OK | 3,00 | −25,33 | 6,9% | 2,32 |
Outcome
Lenta posted good results in the fourth quarter: revenue increased by 18,6%, EBITDA - on 22,2%, but the lack of dividends and the general market negative, associated with the strengthening of the sanctions policy of the West against Russia, have led to, that the shares have almost completely fallen out of the view of investors, who do not want to sit for two years without dividend payments.
But still, when viewed with a medium-term planning horizon, how much the company can pay 2024 year? If we take into account the forecasts of the retailer's management, then FCF through business growth and M&A-transactions should be no lower than the data of the coronavirus year - in 2020 year free cash flow amounted to almost 20 billion rubles. Under the new dividend policy, this implies the distribution 40 Р на 1 GDR or 200 R per ordinary share. Forecast dividend yield in 2024 year may be higher 23,5%.
