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Expert RA Rates Obuv Rossii as ruBBB+
Expert RA Rating Agency assigned the ruBBB+ level credit rating to Obuv Rossii, a non-financial entity, with a stable outlook.
Obuv Rossii Group is a federal footwear company founded in 2003 with its head office in Novosibirsk. According to Discovery Research Group, Obuv Rossii Group is a leader in the mid-price segment of the footwear market, and according to the results of the first six months of 2019, the Group rated second on the Russian footwear retail market due to the number of stores.
The rating analysis was carried out according to IFRS consolidated statements of OR PJSC, the consolidating parent company. As on 30 September 2019, the own retail chain numbered 723 stores and 172 more in the franchise. The chain is presented in more than 360 cities, which has a positive effect in the assessment of the geographical expansion of the Company and improves the competitiveness of the Group's brands as compared with small players on the undersaturated footwear market. Obuv Rossii's retail brands are presented on the market under the trademarks Westfalika, Rossita, Lisette, Emilia Estra and Peshekhod.
Since IPO of October 2017, the Company has doubled its retail chain and its profitability remained stable at a high level. The EBITDA margin for the period from 30.06.2018 to 30.06.2019 made up 24.5% compared with 23.1% of the previous year. High margin of the Company has a positive effect on the rating. However, there has been a decline in like-for-like indicators in 2018 and near-zero growth during nine months of 2019. In the future, the Company expects to restore the growth of LFL sales, also through the change of strategy.
Over the next three years, the Company plans to concentrate its efforts on optimisation and increasing profitability of stores of the existing chain. The Group sees the success of the strategy in the income growth expectations and EBITDA of new stores of the chain. In 2015-2016, Obuv Rossii already came through chain optimisation cycle after the triple growth of the chain in 2010-2013 from 111 to 452 stores, and now expects to repeat this cycle in 2020-2021. A three-year cycle to reach a target revenue of 60% in the first year of work and 100% in the third year is characteristic of an Obuv Rossii's medium-sized store.
The Agency positively assesses the expected liquidity of the Group. As at the reporting date, the Company maintained high levels of absolute and day-to-day liquidity indicators: 0.27 and 2.7 correspondingly.
Conservative estimates of the Agency for the Russian footwear market growth prospects in 2019-2020 owing to weak dynamics of real disposable income in Russia and increased level of debt load of the Company are the factors that restrain the rating score. In 2020, Obuv Rossii plans to increase revenue and EBITDA with the stores opened in 2018-2019, which is expected to bring the leverage ratio back to the level lower than 3.2 and completely refinance short-term debt.
Corporate risks sector supports the level of rating. High-level information transparency of the Company, corporate governance arrangements observing the rights of all stakeholders and the quality of risk management organisation have a positive effect on rating. Five of seven members of the Board of directors are independent directors. There are Internal audit and Internal control Departments in the Company; risk analysis is carried out with risks mapping.
The volume of the Company's assets according to consolidated financial statements as on 30.06.2019 made up RUB 24.6 bn, capital – RUB 13.1 bn, revenue for the period from 30.06.2018 to 30.06.2019 made up RUB 12.44 bn, net profit for the same period – RUB 1.3 bn.
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