Fix Price Company Review: first half results 2021 of the year

Обзор Fix Price: first half results 2021 of the year

Fix Price Group Ltd. (MCX: FIXP) — international network of fixed price discounters, registered in Cyprus, but leading business in the countries of the former USSR both in the form of its own stores, as well as franchising. In the Russian fixed price retail market, the company occupies a position, close to monopoly.

About Fix Price

Глобальные депозитарные расписки группы компаний залистились на Московской бирже в конце февраля 2021 of the year, on Londonskaya - a little later. The GDR holding ticker FIXP, and they belong to the first level of listing - to liquid securities.

The peculiarity of the dynamics of the holding's GDR - despite the furor around the listing, GDRs began to fall already on the second day of their turnover on the stock exchange, and the fall continued. Его прекращение совпало с публикацией компанией результатов за первое полугодие 2021 года — хоть и, according to some parameters, weaker, than in 2020 year. This publication gave confidence, that cheap goods stores will not lose their increased popularity due to the lack of real prospects to defeat the coronavirus and the economic crisis.

history of the company. The company was founded in 2007 году в Химках под названием ООО «Бэст Прайс» предпринимателями Сергеем Ломакиным и Артемом Хачатряном, who already had experience in the retail industry: before that, they sold the Kopeyka discount chain. The top manager of the company, Dmitry Kirsanov, also previously worked at Kopeyk.

The concept was created on the basis of successfully existing discounters in North American countries, in which all goods are sold at the same price - more often for one American or Canadian dollar. Sales at low prices made possible, including, by lowering purchase prices to record lows, for example, from Chinese suppliers. It always gave high margins, as well as non-perishable products, of which the retailer's food assortment consists, since suppliers are often willing to sell such products at reduced prices. В результате ориентация на экономного покупателя дала о себе знать в 2014 year, when the country came under sanctions: profit increased by more than 50%.

IN 2016 году сеть перешла к формату «три цены». This, apparently, was caused by the steady depreciation of the ruble. In the future, the number of price categories increased, at the same time, the share of Russian food products increased against the background of the sanctions and counter-sanctions regime and the depreciation of the ruble.

Предусмотрительно в 2011 году компания включилась в производство собственных брендов. Практически все время существования компании наблюдался рост числа магазинов в регионах — с 2010 года Fix Price стал продавать франшизу, while opening as own, and franchise stores in neighboring countries.

Намерение провести первичное размещение ценных бумаг появилось у группы компаний в 2018 year. IPO планировалось на 2019 year, and reasons, почему оно состоялось только в 2021 year, unclear, поскольку финансовые показатели в 2019 And 2020 году были положительные.

Состав группы компаний Fix Price. The parent company of the holding is Kolmaz Holdings Ltd. - offshore company, formed practically at the same time, when Best Price LLC was founded: in 2007 year. The remaining companies mainly control the geographical segmentation of the market.

Акционеры и ключевые фигуры Fix Price. The main shareholders of the company are its founders: Artem Khachatryan, which owns through Luncor Overseas S.A., and Sergei Lomakin, which owns through the companies LF Group DMCC and SBP Foundation. De facto, they are the majority shareholders of the group of companies.

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The key figure in the management of the holding is the CEO Dmitry Kirsanov. Khachatryan and Lomakin rarely appear in public. Khachatryan and Lomakin Fix Price is not the only business.

The structure of the group of companies Fix Price Group Ltd.

Country of registration Activity profile
Kolmaz Holdings Ltd. Cyprus holding company
Best Price LLC Russia Retail and wholesale operations
Best Price Export LLC Russia Wholesale operations
Best Price Kazakhstan LLP Kazakhstan Retail operations
LLC "Fix Price West" Belarus Retail operations
FIXPRICEASIA LLC Uzbekistan Retail operations

Shareholder structure of the Fix Price Group Ltd.

Sergey Lomakin 35,4%
Artem Khachatryan 35,7%
Top managers 1,9%
Free-float 27%

35,4%

Geography of network distribution.

The main region of coverage is Russia. However, there is a decline, albeit a small one, its share of coverage in recent years.

The largest gain since 30 June 2020 on 30 June 2021 года показали Казахстан и Латвия, for the first half of the year 2021 года — Узбекистан и Казахстан. This can be associated with a severe blow, that the coronavirus has inflicted and continues to inflict on the purchasing power of the population of these countries.

Already in the middle 2020 года Всемирный банк прогнозировал, that the country's economy will shrink for the first time since the late nineties, followed by moderate, if not weak, recovery. The pandemic caused the deepest crisis in Kazakhstan since the collapse of the USSR, purchasing power decreased, and increased demand for cheap goods.

An even more severe crisis has occurred and is occurring in Uzbekistan, where, due to restrictions, there is an outflow of labor migrants from Russia, as well as internal unemployment. Latvia had a purchasing power crisis even before the pandemic, but during the pandemic, the price of food began to rise. All these factors increase the demand for cheap goods in these countries..

Kazakhstan showed huge growth, the reasons are clear enough. The negative growth in Belarus is connected, apparently, with government policy on coronavirus, when for a long time the authorities generally denied it due to their own sentiments, had nothing to do with the real situation in the country, while a significant part of the population believed this propaganda, despite the general destabilization of the political situation. Strong growth in Latvia can be justified by, that in the European Union, fears about the collapse of economies against the backdrop of a pandemic are quite strong.

Total number of Fix Price stores by country

2020 Share in 2020 1п2020 Fate in 1p2020 1п2021 Fate in 1p2021 Change for year Change for 6 Months
Russia 3891 93,38% 3589 95,12% 4204 91,69% 17,14% 8,04%
Belarus 152 3,65% 116 3,07% 180 3,93% 55,17% 18,42%
Kazakhstan 89 2,14% 52 1,38% 138 3,01% 165,38% 55,06%
Uzbekistan 15 0,36% 0 0,00% 38 0,83% 153,33%
Latvia 14 0,34% 10 0,27% 19 0,41% 90,00% 35,71%
Georgia 4 0,10% 4 0,11% 4 0,09% 0,00% 0,00%
Kyrgyzstan 2 0,05% 2 0,05% 2 0,04% 0,00% 0,00%
Total 4167 100% 3773 100% 4585 100% 21,52% 10,03%

Number of own Fix Price stores by country

2020 Share in 2020 1п2020 Fate in 1p2020 1п2021 Fate in 1p2021 Change for year Change for 6 Months
Russia 3507 93,72% 3251 96,67% 3775 92,10% 16,12% 7,64%
Belarus 143 3,82% 67 1,99% 171 4,17% 155,22% 19,58%
Kazakhstan 77 2,06% 45 1,34% 115 2,81% 155,56% 49,35%
Uzbekistan 15 0,40% 0 0,00% 38 0,93% 153,33%
Total 3742 100% 3363 100% 4099 100% 21,89% 9,54%

Number of Fix Price franchise stores by country

2020 Share in 2020 1п2020 Fate in 1p2020 1п2021 Fate in 1p2021 Change for year Change for 6 Months
Kazakhstan 12 2,82% 7 1,71% 23 4,73% 228,57% 91,67%
Latvia 14 3,29% 10 2,44% 19 3,91% 90,00% 35,71%
Russia 384 90,35% 338 82,44% 429 88,27% 26,92% 11,72%
Belarus 9 2,12% 49 11,95% 9 1,85% −81,63% 0,00%
Georgia 4 0,94% 4 0,98% 4 0,82% 0,00% 0,00%
Kyrgyzstan 2 0,47% 2 0,49% 2 0,41% 0,00% 0,00%
Total 425 100% 410 100% 486 100% 18,54% 14,35%
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How does Fix Price make money?

Products and services. Всего в ассортименте на текущий момент 5855 Goods, 80% единиц ассортимента стоит меньше 100 rubles. Most non-food items are made in China, due to their low purchase cost, high business margins are achieved. Groceries make up just under a third of the assortment, they are all non-perishable, which also results in high margins..

Revenue structure. The share of retail and wholesale sales remains stable at the retailer. Retail sales growth was significantly higher, than from wholesale, how in 2020 year, так и в первом полугодии 2021 of the year.

Wholesale sales at pick-up points in Russia are carried out in all constituent entities of the Federation, except for Chukotka Autonomous Okrug.

Revenue structure of the group of companies, million rubles

2019 Share in 2019 2020 Share in 2020 The change
Retail sales 123,194 86,22% 166,025 87,35% 34,77%
Wholesale 19,686 13,78% 25,034 13,17% 27,17%
Total 142,88 100% 190,059 100% 33,02%

Revenue structure of the group of companies for half a year, million rubles

1п2019 Fate in 1p2019 1п2020 Fate in 1p2020 1п2021 Fate in 1p2021 Change in 1H2021-1H2020
Retail sales 55 482 86,57% 71 506 86,29% 93 026 87,66% 30,10%
Wholesale 8606 13,43% 11 363 13,71% 13 090 12,34% 15,20%
Total 64 088 100% 82 869 100% 106 116 100% 28,05%

Финансовые показатели Fix Price.

By reducing the purchasing power of the population, caused by the pandemic and the economic crisis, in 2020 году операционные показатели компании были стабильными и наблюдался рекордный прирост среднего чека. The decrease in traffic can be attributed to the overall decrease in store attendance in quarantine mode. Online sales in the Fix Price network are not developed, what can be considered the weak side of the group of companies.

Вместе с тем в 2020 году рост финансовых показателей несколько застопорился — это можно связать с увеличением транспортных расходов и себестоимости поставок из Китая, was in lockdown.

In the first half of the year 2021 года наблюдалось небольшое снижение роста показателей — возможно, shoppers have moved to higher-end stores on a wave of optimism about the prospects for an easing pandemic crisis.

There is a significant increase in the number of stores, franchised, - just during the expansion to the CIS countries. In the first half of the year alone, their number increased by 18,54%. Coverage has grown in Russia itself: Fix Price stores are present in almost all regions, except for Chukotka and Magadan region, in the first half of the year, their number increased by 47.

Торговая площадь магазинов за первое полугодие 2021 года также выросла, at the same time, the growth in the area of ​​franchised stores exceeds the growth in the area of ​​own stores.

Operating indicators of the group of companies

2018 2019 2020
Revenue 18,60% 15,40% 15,80%
Average check 7,10% 7,30% 17,80%
Traffic 10,70% 7,60% −1,70%

Dynamics of financial indicators of a group of companies, million rubles

2018 2019 The change 2020 The change
EBITDA 14 194 27 150 91,28% 36 788 35,50%
Gross profit 33 886 45 961 35,63% 61 515 33,84%
Net profit 9128 13 173 44,31% 17 575 33,42%
Revenue 108 724 142 880 31,42% 190 059 33,02%
Gross margin 31,20% 32,20% 3,21% 32,40% 0,62%

Operating indicators in half-years

1п2019 1п2020 1п2021
Operating revenue 18,6% 13,3% 11,9%
Traffic 10,3% −4,5% 9%
Average check 7,5% 18,7% 2,6%

The dynamics of changes in the number of stores in recent years

2020 Share in 2020 1п2020 Fate in 1p2020 1п2021 Fate in 1p2021 Change for year Change for 6 Months
Stores managed by the company 3742 89,80% 3363 89,13% 4099 89,40% 21,89% 9,54%
Franchise Stores 425 10,20% 410 10,87% 486 10,60% 18,54% 14,35%
Total 4167 100% 3773 100% 4585 100% 21,52% 10,03%

Dynamics of changes in store area, м²

1п2020 Fate in 1p2020 2020 Share in 2020 Change for 6 Months 1п2021 Fate in 1p2021 Change for year
Stores managed by the company 712 317 88,85% 797 352 89,64% 10,05% 877 518 89,19% 23,19%
Franchise Stores 89 393 11,15% 92 174 10,36% 15,43% 106 401 10,81% 19,03%
Total 801 710 100% 889 526 100% 10,61% 983 919 100% 22,73%
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Plans

The group of companies continues to adapt to the pandemic situation, which is not going to stop. In the plans, first of all, expansion of the product range against the backdrop of a continuing decline in the purchasing power of the population.

Given this plan, can be predicted, that Fix Price will pay more attention to products while reducing the share of non-food products. Given the uncertainty of the prospects for the victory of medicine over the coronavirus and, respectively, uncertainty about the economic crisis, can be considered a positive moment. Maybe, such a strategy will lead to an increase in store traffic, because during a crisis, it is cheap goods and, first of all, products that are in demand.

Группа компаний огласила планы довести количество магазинов в стране до 15 thousand, without announcing a deadline, for which this indicator will be reached. For comparison: в США насчитывается около 35 тысяч магазинов фиксированных цен. Truth, an amendment should be made, that there is more population, than in Russia, - respectively, and a larger consumer market.

In an indirect form, the top management of the company declares, that the potential of the Russian market will be reached in 10-15 years, what can be considered a signal rather for long-term investors, than for medium-term and especially short-term.

Риски Fix Price

Fix Price is practically a monopolist in the Russian market of fixed price stores, but competition cannot be completely ruled out.. In this case, it comes from another segment - hard discounters., the number of which in Russia is increasing. These shops, more like a warehouse, saving on everything, offer even lower prices, how Fix Price.

Naturally, under conditions of total austerity, hard discounters will flourish. Если уже к сентябрю 2020 года в России работало 139 600 hard discounters, then due to uncertainty and a pandemic, their number will only increase.

At the same time, hard discounters have significantly lower operating costs., than fixed price stores: if the former are more like a hangar with goods, laid out in containers, with A4 price tags, then the latter are still full-fledged stores. Moreover, Russian retail giants are also entering the hard discount market, such as X5 Retail Group, launched a chain of stores "Chizhik".

Risk, typical for absolutely all discounters, and for Russian retail in general, — restriction of the influx of migrants in connection with the coronavirus. Even on the eve of the initial public offering, the company was forced to state, that he prefers to cooperate with foreign workers, because you can save on cheap labor.

Political risks include a possible further deterioration of Russia's relations with Western countries. Fix Price - offshore company, on which the sanctions will have an immediate effect. The deterioration of relations is fraught not only with a general difficulty in the company's business, but also by a reduction in the number of franchise stores opened in Latvia and Georgia - countries, with close ties to the US and Western Europe.

Итоги Fix Price

What worries you, that the company's shares began to fall on the stock exchange immediately after the initial offering and only relatively recently showed signs of recovery. In all probability, the matter is in the evaluation of the company according to the upper limit: shares were too expensive compared to its multiples.

The second factor is the main structure of demand for the company's shares. Most of it was provided by investors from the US and Britain, where in the first half of the year there was a decline in the stock market despite good macroeconomic indicators.

In addition, at the beginning of the year, there was some optimism in society about the results of the fight against coronavirus., as a result, investors could switch from stocks of "poor shops" to stocks of companies, growth-oriented. However, now this optimism has been replaced by pessimism.: there is a fourth wave of coronavirus.

Due to the constant emergence of new strains of coronavirus, the timing of the end of the economic crisis and the restoration of the purchasing power of the population is unclear., therefore discounters will be more popular.

Can be predicted, что во втором полугодии 2021 года финансовые показатели у сети магазинов Fix Price окажутся лучше, than in the first half, when the population had some hope for reducing the crisis. However, investors, even despite technical signs of a recovery in the dynamics of the company's shares, pay attention to the competitive environment: growth in the opening of new hard discounters can be considered the main risk factor for the group of companies.

In a situation with the prospects for continued growth in the shares of the Fix Price chain of stores, the catchphrase “the worse, all the better", which at different times was used by the Blancs, Dostoevsky, Chernyshevsky, Lenin, Trotsky, Mao, and in general all and sundry.

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