• Discount Retail Consulting GmbH

Spain: Financial Results DIA Group H1 2020

Discount Retail Chain DIA Group, that operates in Spain, Portugal, Brazil and Argentina (owned by Russian LetterOne), published its financial results for the second quarter and first half of 2020. Sales and EBITDA figures evoluted positive, thanks to the effective response to the COVID-19 crisis and the initial results of the transformation initiatives launched that have continued after the confinement.

Financial position strengthened in the first half of 2020, with an improvement in working capital, the generation of positive cash and a reduction in net debt.

Country-level leadership empowered and complying with the strategic roadmap during the first half of 2020 - accelerated deployment of the online service in all countries, launch of new Private Label branded products and improvement of the assortment.

MAIN FINANCIAL DATA 2Q20 (all figures are in US DOLLAR):

  • Net Sales: $ 2,141 million (2Q19: $ 2,014 million), an increase of 6.3% thanks to the positive effect of transformation initiatives and consumer behavior in relation to confinement due to COVID-19, despite the reduction of the network stores and the adverse monetary effects caused by the Brazilian and Argentine currencies.

  • Like-for-Like Sales : 14.9% increase, with all markets positive for the first time since Q4 2016, driven by an increase in the average size of the shopping basket that offset the decrease of the number of tickets.

  • Spain: +20% (LFL)

  • Portugal: +9.2% (LFL)

  • Brasil: +14.7% (LFL)

  • Argentina: +4.0% (LFL)

  • Gross Profit, Margin: $474 million, 22% (2Q19: $357 million, 17.7%) which represents an increase of 4.4% as a percentage of net sales, due to increased sales and the first positive results of the operational excellence program launched in H2 2019.

  • Personnel costs: $225 million, 10.5%, which represents a slight increase since the impact of the personnel efficiency measures implemented in 2019 have been offset by the payment of the bonus and the personnel needs related to the COVID-19 situation.

  • Operating Expenses: decrease of 1.4% as a percentage of net sales, thanks to the adoption of cost reduction measures and the decrease in investment in advertising during the confinement caused by COVID-19.

  • Adjusted EBITDA: $71 million, 3.3% (2Q19: -$79 million, -3.9%), driven by the increase in sales volume and the improvement in the gross margin brought about by a firm discipline of costs.

  • Net Income: -$53 million, -2.4% (2Q19: -$314 million, -15.6%) with an improvement in interest expenses and the negative monetary effect of $19 million, 0.9%.

  • Stable available liquidity at $512 million (1Q20: $500 million) with an improvement in the debt maturity profile after the refinancing agreement reached in 2019.

  • Net Financial Debt: drops to $1,475 million.

MAIN FINANCIAL DATA 1H 2020 UPDATE OF THE 1H 2020 TRANSFORMATION ROADMAP

  • Optimization of the commercial assortment: Implementation in around 500 stores in Spain during the H1 2020, prioritizing the supply of fresh fruits and vegetables.

  • Private Label Brand: Development and introduction of new products in Spain and Brazil within the framework of a new proposal that combines quality, quality / price ratio and more attractive packaging.

  • Online sales and express delivery: In operation in all four countries after its introduction has been accelerated to meet customer demand during the COVID-19 lockdown period and beyond, and as a priority to meet customer purchasing trends long-term. In close cooperation with Amazon.

  • Franchises: Introduction of an improved franchise model based on incentives and focused on the customer, implemented in 470 stores in Spain, and the launch of an adapted offer in other markets.

  • Operations: Focused on cost efficiency and the reduction of complexity in the relationship with suppliers, stocks, logistics and management of purchases and supplies; start of new logistics plans and renegotiation of rentals in all markets.

  • Store location optimisation: With 409 stores less than 2019. Having a total of 6.400 stores.

Regarding the results, the President of DIA, Stephan DuCharme, has stated: "The financial results for the second quarter demonstrate the positive impact of the response adopted to the situation of COVID-19 and the transformation of the business that we have been executing. Clients are responding to our attractive proximity offer and our new online sales capabilities , and the positive figures for comparable sales (like-for-like) in June and July after the confinement are a good indicator of this progress. We have controlled costs in light of increasing demands across the sector for protection and staffing measures, thanks to efficiency decisions made in 2019, along with key financial indicators - such as improving working capital and positive cash flows - moving in the right direction. Looking ahead, during the second half of the year, we will continue to deploy transformation initiatives within the framework of the adopted roadmap, focusing on the fundamental pillars of our franchise model and improved commercial value proposition, which are supported by the optimization of efficiency. operational. "



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