• Print page
  • Recommend

Financial Perfomance Review

Financial performance highlights in 2011-2013

RUB million (without VAT) 2013 2012 2011
Net revenue 148,042 133,593 111,937
Gross profit 38,360 32,955 27,537
As % of net revenue 25.91% 24.67% 24.60%
Operating expenses 31,593 27,583 22,936
As % of net revenue 21.34% 20.65% 20.49%
Operating profit (EBIT) 6,767 5,372 4,601
As % of net revenue 4.57% 4.02% 4.11%
EBITDA 9,400 7,525 6,239
As % of net revenue 6.35% 5.63% 5.57%
Net profit 5,729 4,141 3,374
As % of net revenue 3.87% 3.10% 3.01%


Our overall net revenue growth was 10.8% to 148 billion RUB in 2013. This was due to both new stores openings and vast internet expansion as well as sales’ increase from reconstructed stores.

Our new stores openings comprised of 42 new stores opened in 2012, 40 new stores opened in 2013, and 35 internet cites commenced their operations in addition to existing 17 cities – all contributing to the positive revenue generation in 2013.

The revenue includes a one-time positive impact of 536 million RUB due to a change in estimate on M.video Bonus program loyalty points breakage from the first half of 2013. In prior years we were unable to assess the breakage of the points but in 2013 we had enough history to allow us to estimate this number. The breakage of points refers to those loyalty points which expire prior to achieving the level needed to convert into a certificate which is able to be used for purchases. This benefit is also in our Gross Margin, our EBITDA and about 400 million, due to reducing for taxes, in Net Profit.

Gross profit

As a percentage of revenue, Gross Margin grew by 1.24% to 25.91%, or 38.4 billion RUB. If we take out the positive effect of the loyalty breakage, the growth in Gross Margin happened primarily due to the change in the sales mix increases in higher margin small home appliance and services and certain efficiencies in logistics costs and lower provisions for inventory allowance.

Furthermore despite competition and the market pricing putting downward pressure on the GM, the Company enjoyed being active partner of suppliers and being able to counteract the effects of these reductions. In particular, we continued involving our vendors in promo campaigns which allowed us to minimize negative effects from promo on the GM result.

Selling, general and administrative expenses

Our selling, general and administrative expenses (SG&A) increased by 14.3% to 33.6 billion RUB in 2013 from 29.4 billion RUB in 2012. As a percentage of revenue the expenses increased by 0.7% from 22% in 2012 to 22.7% in 2013.

Overall SG&A increase was mainly from Warehouse Services, Transportation to Customers, Depreciation & Amortization and less Lease expenses.

Selling, general and administrative expenses in 2012-2013,
RUB million and as % of net revenue

  Year ended
  31 December 2013 31 December 2012
Payroll and related taxes 9,678 6.5% 8,742 6.5%
Lease expense (net of sublease income) 7,422 5.0% 6,480 4.9%
Advertising and promotional expenses 3,942 2.7% 3,665 2.7%
Warehouse services (including related lease expense) 2,204 1.5% 1,757 1.3%
Utilities 1,491 1.0% 1,331 1.0%
Bank charges 1,034 0.7% 779 0.6%
Transportation to customers 984 0.7% 754 0.6%
Other SG&A* 4,178 2.8% 3,715 2.8%
Depreciation & amortization 2,633 1.8% 2,153 1.6%
Total 33,566 22.7% 29,376 22.0%

Payroll remained constant as a % of revenue. The actual increase in Payroll relates to the opening of new stores while HQ costs have been kept almost at the same level as in 2012 due to some saving exercises. Nevertheless with an increase of 1% like-for-like sales the gains we achieved in efficiencies had been taken away by wage inflation.

Lease expenses and Utilities costs are up slightly by 0.17% as a percentage of revenue as compared to 2012. There are two points that impact our costs. Annual escalations which exceeded the like-for-like sales and the depreciation of the Russian Ruble over 2013 as some 40% of our leases are denominated in currencies other than the Russian Ruble.

Advertising & Promotional expenses are down slightly as we were looking at how to get effective advertising for less money or limit the less effective advertising.

Warehouse expenses increased as we had tariff increases and more goods passing through the warehouses. The sales mix change with white goods’ share increase means more quantity of goods movement; increase in goods storage and handling volume was 13% as compared to 2012. We also opened a new CDC (Central Distribution Center) near Moscow.

Bank charges growth in 2013 was due to the higher use of credit/debit cards in 2013 as compared to 2012. In 2012 we started the year at about 9% of revenue coming from cards and finished that year at 26%. In 2013 we were constant throughout the year at about 26% of revenue. This growth is directly attributable to the use of cards due to the banks introducing loyalty point programs. Customers now tend to use cards instead of the ATMs to get cash to make payments.

Transportation to customers grew in line with the home delivery growth due to the internet expansion in 2013.

Amongst Other SG&As Security and Repairs/Maintenance costs showed minor reductions as we focused on these types of expenses in 2013 budgeting process.

Depreciation & Amortization were up due to the IT systems which came on line in 2012 and 2013 and the reconstruction of stores.

Other operating income and expenses

Other operating income (net of expenses) increased by 10% from 1.8 billion RUB in 2012 to almost 2 billion RUB in 2013 due to more stores and higher sales. The other operating income mostly consists of Consumer Credit commissions, Delivery income and Advertising income. We cannot recover 100% of the delivery cost but as sales increase, particularly in internet we see noticeable increases in the delivery income.

Operating profit

Operating profit increased by 26% from 5.4 billion RUB in 2012 to 6.8 billion RUB in 2013. Operating profit and Net income growth can be directly attributed to the growth in the Gross Margin offset slightly by the SG&A growth, including Depreciation. We also had some positive impacts on the tax rate (see below Income tax expense).

Net finance income

M.video had a net finance gain in the third consecutive year as during those years we did not have loans denominated in foreign currencies and used only short-term borrowings for new stores openings that allowed us to end the years in a net interest earned position.

In 2013 net financing costs or interest were down slightly year on year as in 2012 we delayed the annual dividend while we contemplated an acquisition. This money was kept in interest bearing deposits.

Income tax expense

The effective income tax rate for 2013 reduced to 23.1% as compared to 25.4% in 2012. This is considered as a viable rate for the future periods. The reduction in effective tax rate was achieved through control of non-deductible expenses while EBIT (earnings before income tax) increased by 26% in 2013.

Net profit for the year

Net profit for the year increased by 39% from 4.1 billion RUB in 2012 to 5.7 billion RUB in 2013.

EBITDA/EBITDAR dynamics in 2012-2013


EBITDA increased by 25% from 7.5 billion RUB in 2012 to 9.4 billion RUB in 2013. EBITDA margin was 6.3% as compared to 5.6% in 2012. If we were to adjust for the Loyalty breakage adjustment the Company was able to attain its 6% EBITDA target in 2013.

Assets and liabilities

Like in the previous years, our balance sheet continues to be relatively straightforward and easy to understand with the assets dominated by Fixed Assets, Inventory and Cash. Our liabilities are primarily Trade Accounts payable.

Fixed Assets are a result of the expansion of our store network and reconstruction of stores while Intangibles are the improvements in the IT systems. We continue to invest in our store systems and Omni Channel web platform.

Managing the level of our Working Capital continued to be one of the main focuses of the top managers. Dealing with our suppliers we continued to use Inventories/Account Payables parity principle which had been in place since 2009. This gives us financial strength by having sufficient cash balances and net income from financing instruments. Inventories to Account Payables shows a current ratio of 1.14 as compared to 1.10 in 2012.

Cash balances and short term investments increased by 4 billion RUB from 7.6 billion RUB in 2012 to 11.5 billion RUB in 2013.

2013 Trade conversion cycle, days

2012 Trade conversion cycle, days

Cash flows

Cash flow from operations

The Company continues to generate massive cash piles from its operations. In 2013 the amount of net cash received from operations increased by 6.7 billion RUB due to significant positive changes in Working Capital (WC).

Almost 10.5 billion RUB of cash generated by operations with a bit over 4 billion RUB in Fixed Assets and Intangibles allows us to pay generous dividends.

Cash flow from investing activities

In 2013 M.video invested almost 4.4 billion RUB in CAPEX programs or approximately 400 million RUB more as compared to 2012. As in the previous year the financing of opening new stores and our IT systems’ improvements dominated the investments.

Cash flow from financing activities

In 2013 the net cash used in financing activities represented the dividends paid in the total amount of 2.5 billion RUB as compared to 6.3 billion RUB in 2012.

Dividend history 2009-2013

Net cash

The Group increased its net cash balance by 4 billion RUB due to positive changes in Working Capital, from 7.5 billion RUB in 2012 to 11.5 billion RUB in 2013.