Rosinter Restorants : 8/29/2019 Rosinter Restaurants increased consolidated revenue by 1.8% in financial statements for 1h 2019

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PRESS RELEASE

ROSINTER RESTAURANTS INCREASED CONSOLIDATED REVENUE BY 1.8% IN FINANCIAL

STATEMENTS FOR 1H 2019

Moscow, August 29, 2019: Rosinter Restaurants Holding PJSC (Rosinter or Rosinter Restaurants or the

Company) is one of the major operators in the casual dining restaurant segment in Russia (MICEX-RTS: ticker ROST) announces its operating and financial performance for 1H 2019, in accordance with IFRS.

FINANCIAL AND OPERATING HIGHLIGHTS IN 1H 2019

• Consolidated revenues increased by 1.8% and amounted to MRUB 3,763.
• Consolidated gross operating revenues [1] increased by 1.8% in 1H 2019 compared to 1H 2018 and amounted to MRUB 3,622. The revenues growth related to the aggressive strategy to open new locations in 2018.
• EBITDA before impairment and write-offs[2] amounted to MRUB 1,171 in 1H 2019. The application of the new accounting standard IFRS 16 "‟Lease‟‟ from 1 January 2019 had an effect on EBITDA before impairment and write-offs. Adjusted [3] to IAS 17 EBITDA before impairment and write-offs amounted to MRUB 105. The adjusted to IAS 17 EBITDA margin decreased by 1% in 1H 2019 compared to 1H 2018 and amounted to 2.8%.
• Net loss for 1H 2019 amounted to MRUB 149. Net loss without effect of IFRS 16 amounted to MRUB 260 compared to MRUB 128 in 1H 2018. The indicator was changed due to increase of direct costs, financial expense which were compensated by decrease of selling, general and administrative expenses and start-up expenses. Moreover, the restaurants, which were opened in 2018, will achieved its projected capacity in 2H 2019 while the costs had been recognized in the financial results for 1H 2019.

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Sergey Zaitsev, CEO, Rosinter Restaurants Holding PJSC:

"We were able to increase consolidated revenues by 1.8% - to MRUB 3,763 amid continuing decrease in consumer demand. The Company's systemic revenues [4] amounted to MRUB 6,227 including MRUB 2,464 of franchising partners' income.

Under adverse market conditions our priorities remain an improvement of operational efficiency and implementation of a number of initiatives that are intended to stimulate and diversify sales for further business growth. Development of our own and partner delivery systems, Honored Guest loyalty program are among them. Rosinter continues working on the renewal of the key brands, upgrading not only restaurants interiors but also the menu in accordance with current trends.

We have seriously revised the approach to the remuneration of restaurant staff and are now implementing projects aimed to increase the monetary incentives for the management of restaurants. All these initiatives, in addition to strict cost control and the thorough analysis of the effectiveness of each location will have a positive impact on operational performance of the Rosinter restaurant concepts in the future".

Alexey Shorohov, CFO, Rosinter Restaurants Holding PJSC:

"In 2018 the development of Rosinter was concentrated on transport hubs and the majority of restaurants were launched at the end of the first half 2018. It should be taken into account for analysis of financial performance the fact that the new opened locations usually do not make profit at the initial stage and that it takes time to achieve planned figures. In addition, we faced with influence of circumstances beyond our control such as redistribution of passenger traffic at transport hubs during the period from September 2018 to May 2019. These factors had negative impact on financial performance but at the end of the first half of 2019 restaurants demonstrated positive trends. The first half of 2019 has generally showed an increase in operating revenues of restaurants at transportation hubs by 9.4%, which allows us to expect a positive impact on EBITDA in the future".

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In this press-release we use indicators for the 1H 2019 without the IFRS 16 effect due to absence of comparative data from previous comparable periods.

								% Change,		p.p.
(RUB) thousands		6M 2019			6M 2018			change,
				Y-o-Y
									Y-o-Y
Net revenue	3,763,280	100.0 %	3,697,155	100.0 %	1.8 %	-
Incl. Revenue from restaurants	3,628,032	96.4 %	3,556,934	96.2 %	2.0 %	0.2 %
Incl. Revenue from franchising	102,291	2.7 %	107,105	2.9 %	(4.5)%	(0.2)%
Cost of sales	3,359,755	89.3 %	3,110,213	84.1 %	8.0 %	5.2 %
Incl. Food and beverages	796,872	21.2 %	782,285	21.2 %	1.9 %	-
Incl. Payroll and related taxes	813,236	21.6 %	771,655	20.9 %	5.4 %	0.7 %
Incl. Rent	1,101,303	29.3 %	926,777	25.1 %	18.8 %	4.2 %
Gross profit	403,525	10.7 %	586,942	15.9 %	(31.2)%	(5.2)%
SG&A Expenses	398,253	10.6 %	475,858	12.9 %	(16.3)%	(2.3)%
Start-up expenses for restaurants	36,161	1.0 %	81,469	2.2 %	(55.6)%	(1.2)%
Other gains	10,364	0.3 %	9,774	0.3 %	6.0 %	-
Other losses	32,671	0.9 %	39,059	1.1 %	(16.4)%	(0.2)%
Incl. Loss on disposal of non-current assets	16,397	0.4 %	27,474	0.7 %	(40.3)%	(0.3)%
(Loss)/profit from operating activities before	(53,196)	(1.4)%	330	-	(16230.2)%	(1.4)%
impairment
Loss from impairment of operating assets	13,776	0.4 %	10,497	0.3 %	31.2 %	0.1 %
Loss from operating activities after impairment	(66,972)	(1.8)%	(10,167)	(0.3)%	558.7 %	(1.5)%
Financial expenses, net	181,504	4.8 %	131,201	3.5 %	38.3 %	1.3 %
Foreign exchange gain/(loss), net	1,776	-	(4,240)	(0.1)%	(141.9)%	0.1%
Loss before income tax		(246,700)	(6.6)%		(145,608)	(3.9)%		69.4 %		(2.7)%
Income tax (expense)/benefit	(13,494)	(0.4)%	17,751	0.5 %	(176.0)%	(0.9)%
Net loss		(260,194)	(6.9)%		(127,857)	(3.5)%		103.5 %		(3.4)%
(Loss)/profit from operating activities before impairment	(53,196)	(1.4)%	330	-	(16230.2)%	(1.4)%
Depreciation and amortization	141,946	3.8 %	114,344	3.1 %	24.1 %	0.7 %
Loss on disposal of non-current assets		16,397	0.4 %		27,474	0.7 %		(40.3)%		(0.3)%
EBITDA before impairment and write-offs		105,147	2.8 %		142,147	3.8 %		(26.0)%		(1.0)%

Consolidated revenues amounted to MRUB 3,763 in 1H 2019 increased by 1.8% compared to 1H 2018.

The restaurants' revenue also increased by 2.0% compared to 1H 2018.

The trend of growth in restaurant revenue in 1H 2019 driven by the result of mixed impact of the following factors: the decrease in revenues of comparable restaurants [5] (4.7%) and positive impact from the opening of new and updated restaurants (7.8%). Moreover, the revenue changed due to insignificant impact of the exit from non-profitable locations in 1H 2018 (1.1%). All indicators were measured as percentage of revenue.

Cost of sales increased by 5.2% in comparison with 1H 2018 - which was result of increase in rent cost amounted to 4.2%, increase in payroll costs amounted to 0.7%. All indicators were measured as percentage of revenue.

Increase in rent cost was mainly driven by the opening of new restaurants in transport hubs in May-June 2018 which had an impact on the financial result in 2H 2018 and 2019.

The payroll costs increased due to implementation of a new motivation program for restaurants management which aims to increase the efficiency in restaurant performance.

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At the same time the Company managed to keep the level of food cost - indicator stood at 21.2% in 1H 2018 and 1H 2019. It was achieved by the implementation of the initiatives of the cooperation with suppliers for purchase price optimization. Moreover, food cost, measured as percentage of revenue, was affected by increase in price due to increase of VAT rate to 20% from 1 January 2019.

Gross profit margin was equal to 10.7% in 1H 2019, decrease by 5.2% as percentage of revenue compared to the 15.9% in 1H 2018 and generally related to the increase rent and payroll costs.

Decrease in selling, general and administrative costs by 16.3% related to the improving of efficiency of business processes managing.

The decrease of the start-upexpenses by 55.6% in comparison with 1H 2018 resulted from the intensive development of the restaurant chain in 2018.

Other costs decreased by 16.4% due to reduction in loss on disposal of non-current assets mainly. The change of the indicator related to the completion of updating Rosinter's portfolio program in 2018.

The increase of net financial expenses by MRUB 50 in comparison with 1H 2018 related to the interest capitalization on target loans attracted for renovation and construction of restaurants in 2018.

Net loss in 1H 2019 amounted to MRUB 260 compared to MRUB 128 in 1H 2018. Net loss was a result of factors mentioned above, including the fact that restaurants, which were opened in 2018, will achieved its projected capacity in 2H 2019 while the costs had been recognized in the financial results for 1H 2019.

The application of the new accounting standard IFRS 16 ''Lease'' and its effect on the financial statement for the 1H 2019

The Group has adopted IFRS 16 Leases from 1 January 2019 which has significant effect on the financial indicators. Under IFRS 16, lease expenses excluded from cost and SG&A, instead of it the cost of amortization right-of-use asset and interest expenses on lease liabilities were recognized. IFRS 16 was impact on financial statement for 1H 2019 as following:

• gross profit from operations increased by MRUB 184 million;
• EBITDA before impairment and write-offs increased by MRUB 1,171, that higher than adjusted (by impact of IFRS 16) EBITDA before impairment and write-offs by MRUB 1,066.
• Depreciation expenses of right-of-use asset increased by MRUB 883.
• Financial expenses increased by MRUB 424 due to interest expenses on lease liabilities.
• Foreign exchange gain increased by MRUB 394 due to revaluation of liabilities in foreign currency under currency lease agreements.

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Cash flow statement

(RUB) thousands		6M 2019		6M 2018		% Change
			Y-o-Y
Net cash flow generated from/ (used in) operating activities	207,407	(221,952)	(193.4)%
Incl. Cash flow before changes in operating assets and liabilities	81,388	135,168	(39.8)%
Incl. Changes in operating assets and liabilities	351,075	(181,785)	(293.1)%
Incl. Financial and tax cash outflow	(225,054)	(175,335)	28.4 %
Net cash flow used in investing activities	(184,290)	(364,681)	(49.5)%
Net cash flow from financing activities	(36,401)	567,674	(106.4)%
Effect of exchange rates on cash and cash equivalents	5,496	1,765	211.4 %
Net decrease in cash and cash equivalents		(7,792)		(17,195)		(54.7)%
Cash & Cash equivalents at beginning of period	148,385	152,376	(2.6)%
Cash & Cash equivalents at end of period	140,593	135,181	4.0 %

The operating cash flow amounted to MRUB 207 in 1H 2019 as a result of the increase in payables.

Net investment cash outflow decreased by 49.5% in 1H 2019 compared to 1H 2018, due to the Company's implementation of its plans to upgrade and expand the restaurant chain in 2018.

Net financial cash outflow amounted to MRUB 36 compared to net financial cash inflow of MRUB 365 in 1H 2018. This trend is related to the cash inflow under long-termloan agreements in 1H 2018. The raised funds were applied for implementation of the strategic chain development and upgrading plan.

1. Unaudited operating revenue (with VAT) includes only total gross sales of corporate restaurants and canteens and does not include revenue from premises sublease, franchise operations and other revenue items.
2. EBITDA is calculated by adding back depreciation and amortization to profit from operating activities after impairment. EBITDA measures are not measurements of our operating performance under IFRS and should not be considered as an alternative to profit for the year, operating profit or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of our liquidity. Our approach to calculating EBITDA may differ from the approach of other companies.
3. Adjusted figures - financial indicators were corrected on the effect from the adoption of the new IFRS 16 "Lease" for comparability of previous periods data, as IFRS 16 applied in the first time from 1 January 2019 and comparable information didn't revised.
4. Systemic revenue - is the total revenue of corporate and franchise restaurants, is calculated by the Company itself and is not an indicator of the audited consolidated financial statements.
5. Comparable restaurants - restaurants, which had operated for 18 months as of 30 June 2019.

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