4
2020 at a glance
7
OVERVIEW
8 Our vision
8 Our purpose/mission
9 Our values
10
Financial and Operational Highlights
13 Our key strengths
14 Business model
16 Our geography
16 Our history
18 Key events 2020
18 COVID-19
situation response
26 Delivering
on our strategy
28 Market overview
35 OPERATIONAL RESULTS
36 O’KEY hypermarket format
50 E-commerce
54 DA! Discounter Format
61
FINANCIAL REVIEW
62 FY 2020 financial highlights
ABOUT
O’KEY GROUP
O’KEY Group is one of the
leading Russian food retailers.
Since the opening of our first
hypermarket in St. Petersburg
in 2002, we have continued to
strive for excellence.
The Group operates in three
complementary formats: O`KEY
hypermarkets, discounters
under the DA! brand and the
e-commerce platform to deliver
the best products right to the
customers’ doors. As of the end
of 2020, the Group operated
195 stores across the country,
and covered all regions of its
presence with online delivery.
Further information regarding O’KEY
Group’s strategy, our businesses and
performance, approach to governance
and risk management can be found
at our corporate website
www.okmarket.ru/en/
An archive of annual and strategic
reports as well as a full suite of
additional information materials is
available at www.okeygroup.lu
77
CORPORATE SOCIAL
RESPONSIBILITY
80 Our employees
86 Health and Safety
88 Preventing Corruption
90 Our communities
92 Environmental Responsibility
95 CORPORATE GOVERNANCE
96 Corporate governance system
98 The general meeting of shareholders
100 Board of Directors
104 Committees of the Board of Directors
108 Executive management
112
Information for Shareholders
and Investors
116 FINANCIAL STATEMENT
116 O’KEY GROUPS S.A. Consolidated
Financial Statements
182 GLOSSARY
183 ABBREVIATIONS
184 CONTACTS
About the Report
The Annual Report 2020 (“the
Report”) has been prepared by
O’KEY GROUP S.A. (“O’KEY
Group”, the ”Group”, or “the
Company”).
This Report discloses
information on the
implementation of the Group’s
strategy in 2020, presents
the Group’s operating and
financial results, describes the
Group’s corporate governance
framework and corporate
social responsibility activities.
The Report has been prepared
based on consolidated IFRS
financial statements for 2020.
The Report has been prepared
based on the information
available to the Group as at
the time when this Report
was prepared, including
information obtained from
third parties. The Company
reasonably believes that this
information is complete and
accurate as at the publication
date of this Report; however,
it does not make any
representation or warranty
that this information will
not be updated, revised, or
otherwise amended in the
future.
This Report includes
or estimates forward-
looking statements related
to operating, financial,
economic, social and other
measures that can be used
to assess the performance
of O’KEY GROUP S.A. The
Company does not make any
representation or warranty
that the results anticipated
by such forward-looking
statements will be achieved.
The Company shall not be
liable to any individual or legal
entity for any loss or damage
which may arise from their
reliance on such forward-
looking statements.
Delivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
2020 at a glance
195
Total number
of stores
Group revenue
RUB 174.3 bn
+5.6% YoY
Discounters revenue
+45.3% YoY
Online revenue
+28.4%
YoY
4
#8
grocery retailer
in Russia1
TOP-10
Online grocery retailer
in Russia1
(cid:1) Source: Market position provided by Infoline, 2020
Group EBITDA
RUB 14.8 bn
Discounters LFL
+27.8%
Share of online
in O’KEY revenue
3.7%
in Moscow
2.1%
in St. Petersburg
5
O’KEY GroupDelivering great customer serviceAnnual report 2020 O’KEY Group is one of the largest
Russian grocery retailers. Today,
our hypermarkets are represented
in major cities of Russia, and
our discounters – in Moscow and
the region. We are pioneers in
e-commerce covering all cities of
our presence.
18
years of experience on the market
195
stores across Russia
RUB 174.3 bn
revenue
Overview
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Our
vision
Our purpose/
mission
A trendsetting
hypermarket
providing
answers for the
future
The best value
for money
discounter
An e-commerce
platform
which delivers
value for all
stakeholders
We strive for
excellence in
quality and
service
We deliver
fresh and
high-quality
products for
each family
We provide a
simple, easy
and attractive
shopping
experience in
all our formats
We aim to
create an
effective and
desirable
working
environment
We take
our social
responsibility
seriously and
act accordinly
E N E S S
T I V
A
V
N O
IN
OUTSTA
N
D
I
N
Our
values
E
F
F
E
C
T
I
V
E
T
E
A
M
ATMOSPH E R E
OF PROFESSIO N A L I
S M
G
R
E
S
U
L
T
S
E
C
I
V
R
E
S
E
L
B
A
C
IM PEC
8
9
O’KEY GroupDelivering great customer serviceAnnual report 2020
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Operational and Financial
Highlights
OPERATIONAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
NET RETAIL REVENUE, RUB BN
LFL NET RETAIL REVENUE, %
SELLING SPACE, K M²
REVENUE, RUB BN
EBITDA, RUB BN
RUB
172.7
bn
+5.9%
+4.5 pps
5.4%
+0.2%
599.5
k m²
RUB
174.3
bn
+5.6%
RUB
14.8
bn
+5.5%
159.4
163.1
172.7
5.4
584.9
598.3
599.5
165.1
174.3
14.1
14.8
(3.3)
0.9
2018
2019
2020
2018
2019
2020
2018
2019
2020
2019
2020
2019
2020
Group
EBITDA
margin
8.5%
RUB
146.8
bn
+1.0%
145.8
145.3
146.8
2.5%
2.5
519.4
k m²
–1.8%
528.1
529.1
519.4
(4.3)
(0.4)
RUB
148.3
bn
+0.8%
147.1
148.3
RUB
14.0
bn
–1.6%
14.3
14.0
2018
2019
2020
2018
2019
2020
2018
2019
2020
2019
2020
2019
2020
RUB
26.0
bn
+45.3%
+ 12.99 pps
26.0
17.9
13.6
12.7
14.9
27.8%
27.8
80.2
k m²
69.3
80.2
+15.8%
56.8
RUB
26.0
bn
+45.3%
26.0
17.9
RUB
0.8
bn
0.8
(0.2)
2018
2019
2020
2018
2019
2020
2018
2019
2020
2019
2020
2019
2020
P
U
O
R
G
Y
E
K
O
'
!
A
D
10
P
U
O
R
G
Y
E
K
O
'
!
A
D
11
O’KEY GroupDelivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
O’KEY
hypermarkets:
strong brand and
market positioning in
major Russian cities
DA!
discounters:
one of the fastest
growing grocery
chains in the market
Our key strengths
Flexible business model
based on two competitive
shopping formats and an
e-commerce platform,
covering all customer
segments and needs
Focus on cutting-edge IT
solutions and progressive
infrastructure
Exceptional expertise in
private labels and own
production, enabling to
build appealing customer
value proposition
Highly centralised
logistics:
five distribution
centres in Moscow and
St. Petersburg
High standards
of corporate governance:
a transparent ownership
structure, a London
Stock Exchange and
Moscow Exchange
listing, international
investors and a strong
management team with
extensive experience
in Russian and
international retail
A track record of steady
dividends: Since listing
on the London Stock
Exchange in 2010, the
Group continues to pay
dividends, confirming its
commitment to growth of
market capitalisation and
bolstering its investment
case
12
13
O’KEY GroupDelivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Business model
SYNERGIES BETWEEN THREE PILLARS
O’KEY Group has
developed a unique
business model based
on three pillars: two
clearly positioned and
complementary retail
formats (hypermarkets
and discounters), and a
fast-growing e-commerce
platform based on a
network of stores.
This combination of
formats covers our
customer segments and
needs, and can effectively
capitalise on the most
relevant consumer
trends. Inside the Group
we consider each format
as an integral part of our
business model. This
approach has proved its
efficiency and helps us
develop the business and
profit from synergies.
DA! discounters leveraging O’KEY’s advantages
when purchasing branded assortments, and
obtaining price advantages by purchasing
additional volumes in private labels
O’KEY hypermarkets gaining access to
DA!’s private label expertise and its system
for procurement and direct imports of
fresh products
O’KEY hypermarkets serving as pick-up points
for online orders, which helps to maximise the
efficiency of the delivery model and reduce
logistics costs
DA! discounters
O’KEY hypermarkets
E-commerce platform
• Main growth driver of the business
• Fast-growing chain of stores in the most convenient
locations providing food and non-food items at the
most attractive prices
• Exceptional private label expertise (own brands
account for approximately 50% of the assortment)
• Comfortable and reasonably spacious layouts and
interiors
in 6
regions of
Central Federal
district
~2.8 k
SKUs
KEY RESULTS AND PERSPECTIVES:
+45.3%
RUB 784 mln
EBITDA showed
positive in 2020
YoY net retail revenue
growth in 2020
• A competitive format supported by the innovative
store concep
Strong base for e-commerce growth
•
• One of the retail market leaders in St. Petersburg,
and a strong presence in other major Russian cities
• A wider and deeper range of goods, with a focus on
fresh and ultra-fresh
• Superior customer service
• Modern shopping environment
• High growth potential format adhering to a profitable
strategy driven by changes in consumer behaviour
• А pioneer in e-grocery since 2015
• Among Russia’s top-10 online grocery retailers
• Online orders are fulfilled by the closest hypermarkets,
or in partnership with other operators
• Award-winning website and an updated mobile app
• Omnichannel bonus system
in 23
cities in
six Federal
districts
30 k
SKUs
100%
coverage in all regions
of presence
>30 k
available SKUs
New store concept based on best
practices is expected to strengthen
market position and bolster long-term
LFL growth
+28.4%
YoY sales growth
in 2020
1.6%
share of online
in O'KEY revenue
14
15
O’KEY GroupDelivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Our geography
O’KEY RETAIL SPACE IN 2020, ths sq m
195
Total stores
77
Hypermarkets
118
Discounter
stores
184.0
80.2
212.5
132.3
86.4
116.6
80.2
599.5
519.4
North-West FD
Central and Volga FDs
South FD
Urals and Siberia FDs
Total
DISTRIBUTION CENTERS
DA! DISCOUNTER
O’KEY HYPERMARKET
DA! DISTRIBUTION CENTER
O’KEY DISTRIBUTION CENTER
69
7
Tver region
Moscow region
1
Yaroslavl region
1
Ivanovo
8
Kaluga region
9
6
Tula region
1
Ryazan region
Lipetsk
2
Voronezh
Our
history
2001-2007
O’KEY GROUP
founded
FIRST O’KEY
HYPERMARKET
opened in St. Petersburg
Strategy to establish
REGIONAL MARKET
LEADERSHIP
19
13
MOSCOW
2
1
1
Murmansk
24
2
St. Petersburg
1
Syktyvkar
3
Nizhny Novgorod
C E N T R A L F D
3
Rostov-on-Don
2
Saratov
N O RT H- W EST F D
V O L G A F D
1
Togliatti
1
3
Ufa
Orenburg
2
Surgut
SIBERIA F D
2
Krasnoyarsk
1
Irkutsk
U R A LS F D
3
Ekaterinburg
3
Tyumen
2
Novosibirsk
1
Omsk
4
S O U T H F D
2
Astrakhan
Krasnodar
1
Sochi
O’KEY ONLINE DELIVERY
ONLINE DELIVERY VIA PARTNERS
2009-2014
RAPID EXPANSION
in Moscow and key
regional markets
IPO on the London
Stock Exchange
2007-2009
Focus on
EXPANSION
in Russia’s
key regional
markets
TOP-10
retailer by
revenue
6 new regions
2017
O’KEY-AUTO AND 24 HOUR DELIVERY SERVICE
launched for the hypermarket segment
SALE OF SUPERMARKET BUSINESS
2018-2019
OMNICHANNEL MOBILE APP launched providing a
unified approach to communications with customers
in stores and online
DISCOUNTER’S REVENUE under the DA! brand
reached 8.5% of the Group revenue
100 DISCOUNTER STORES under the DA! brand
operating across Russia
118
100
82
67
78
78
78
77
2020
Discounter DA! revenue
reached 15% of the Group
revenue
O’KEY new branding
and new store concept
presented
100% online coverage
across cities of presence
GDR listing on the
Moscow exchange
2015-2016
ONLINE SALES
PLATFORM
launched for
market-leading
hypermarket
NEW
DISCOUNTER
FORMAT under
the DA! brand
MOBILE APP
launched for iOS
and Android
launched
54
74
35
71
NUMBER OF STORES
DA!
O'KEY
17
23
28
35
60
69
52
42
16
17
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
O’KEY GroupDelivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Key events 2020
O’KEY Group was the first
Russian food retailer to
fully stop selling primary oil
plastic bags, in line with its
Live Green corporate policy.
The Company kick-started
cooperation with the iGooods
service, to deliver hypermarket
items to customers in five cities
where O`KEY has a presence.
RAEX affirmed the credit
rating of O’KEY LLC, the
main operating subsidiary
of O’KEY Group S.A. , as
‘ruA-’ with a Stable outlook,
reflecting the Group’s
stable position within the
Russian food retail market.
O’KEY Private
Label became
the winner of
the prestigious
Private Label
Awards 2020.
O’KEY Group entered into agreement
with Sbermarket, a nationwide food and
essentials delivery service, to deliver
online orders from O’KEY hypermarkets
across 20 Russian cities, thus covering all
regions of Group’s operations.
O`KEY Group started
trading of its global
depositary receipts
(GDRs) on Moscow
Exchange, continuing
to maintain its primary
listing on the London
Stock Exchange.
JANUARY
APRIL
MAY
JULY
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
O’KEY Group launched a
nationwide social programme,
“Stay healthy with us, we take
care of the rest”, which it placed
zero margin on certain ultra-
fresh category products.
The Group acquired
a Karusel hypermarket
in Saint Petersburg from
X5 Retail Group, and
rebranded and relaunched
it under the O’KEY brand.
The new O’KEY
hypermarket concept was
introduced to the public.
The first hypermarket
under the new concept
was opened in Rostokino,
Moscow.
The Group launched its milestone
“Kind Purchase” charitable fundraising
campaign aimed at helping seriously
ill children, in partnership with
Rusfond, one of the oldest charitable
foundations in Russia.
O’KEY Group issued RUB 5 bn
bonds with the purpose of
refinancing the 001Р-01 series
of bonds traded on Moscow
Exchange and due to mature in
April 2021.
COVID-19
situation response
At the beginning of 2020, the Group promptly addressed the situation regarding the spread of COVID-19
and undertook the measures necessary to maintain the safe and smooth operation of its stores
and supply chain. These measures allowed O’KEY Group to overcome the challenges the market faced
and fully satisfy consumer demand by creating a safe, convenient, and pleasurable shopping experience
across all formats and sales channels.
SAFETY OF CUSTOMERS
AND EMPLOYEES
SUPPLY CHAIN AND STORE
REPLENISHMENT
E-COMMERCE AND ONLINE
ORDERS
SOCIAL
RESPONSIBILITY
• Disinfection of store surfaces and store ventilation
systems, hand sanitiser dispensers, masks and gloves
• Plastic screens at cash desks to protect customers
• Timely increase in stock levels to meet
the anticipated rise in demand
• Ensuring sufficient safety stock of high-
and employees, and visual floor markers reminding them
to practice social distancing
demand, entry-level products in distribution
centres
• Prompt multiplying of the number of assemblers,
couriers and contact centre operators at the online
okeydostavka store to address customers’ increased
demand for online orders
• Optimising our IT infrastructure: increasing server
• Strict sanitary control in own production areas, including
• Optimising interactions with suppliers
capacity
germicidal lamps for air disinfection in deli and bakery areas
• Strict monitoring of store, warehouse and office staff with
mandatory temperature checks and COVID-19 testing,
and free vaccination programme
• Remote working for most office employees, and taxi cost
compensation for those involved into fieldwork
and increasing the efficiency of logistics
operations
• Rearranging staff activity to provide the fastest
replenishment of the most popular goods
• Successfully managing the increase in orders, their
processing and customer traffic without losing
the quality of service, thanks to our advanced
network of stores and logistics infrastructure
• Our social initiative Stay healthy with us, we’ll take
care of the rest with zero mark-up for a wide range
of ultra-fresh products
• Our social initiative Older People Hour, providing
priority service in the morning hours for elderly
customers
• Material support of employees: extra payments
during the crisis months, and financial assistance
to families of employees who suffered from
COVID-19
18
19
O’KEY GroupDelivering great customer serviceAnnual report 2020 O’KEY Group
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
T
N
E
M
E
T
A
T
S
O
E
C
20
DEAR STAKEHOLDERS,
2020 has undoubtfully brought
unprecedented challenges
to all sectors of the economy;
nevertheless, we continued
growing the business and achieving
our strategic goals. I am happy
to present to you the solid
operational and financial
results of the Group that
were accomplished over the course
of the year. O’KEY Group’s net
retail revenue showed positive
dynamics of 5.9% YoY growth,
primarily driven by a 5.4% YoY
LFL increase in net retail revenue,
and supported by outstanding
growth of the DA! discounter
business, where net retail revenue
increased by 45.3% YoY. Our
financial position and debt profile
remain solid: Group EBITDA
grew by 5.5% to RUB 14.8 bn with
an EBITDA margin of 8.5%.
The Group’s strategy is built
around our customers’ needs
and we maintain a keen focus
on delivering to them goods
of the highest quality at reasonable
prices, along with impeccable
service. Our business model
embraces three well-balanced
pillars: O’KEY hypermarkets, DA!
discounters, and a fast-growing
e-commerce platform.
Our hypermarkets provide
a well-chosen, deep assortment
range, based on freshness
and own production, along with
superior customer service, while
our discounter stores offer
goods for everyday shopping
with a good value-for-money
proposition and a focus on our
private label products. Our online
business benefits from the scale
of O’KEY’s store chain, and we
continue to invest in providing
a seamless shopping environment
and customer experience across
our hypermarkets, mobile app
and web site.
base and boost the liquidity
of our shares.
Such a combination of clearly
positioned and complementary
formats enables us to cover all
customer segments, and profit
from synergies such as economies
of scale, joint product development,
a shared procurement system
with access to private label
expertise, the identification
of the best suppliers, and the use
of direct imports.
A milestone in 2020 was the start
of a large transformation of our
hypermarket business aimed
at improving its competitiveness.
We introduced a new hypermarket
concept, which is based on both
O’KEY’s own innovations
and the best international practices.
Hypermarkets using the new
format stand out for an even
greater focus on fresh and ultra-
fresh goods and more efficient
use of selling space. The first one
was opened in October 2020,
in the Europolis shopping mall
in Rostokino, Moscow.
In 2020, our DA! discounters
again showed excellent results,
with 27.8% LFL revenue growth.
As expected, DA! broke even and
delivered positive EBITDA in 2020.
The Group has a long-established
practice of making regular returns
of cash to shareholders, and in 2020
we as usual declared a dividend,
maintaining our commitment to
creating shareholder value. We
successfully initiated a listing
on Moscow Exchange to provide
access to O`KEY’s GDRs to a wider
range of investors. The new listing
will be complementary to our
listing on the London Stock
Exchange, where our GDRs have
traded since 2010, and is expected
to diversify the Group’s shareholder
O’KEY Group is commited
to sustainability and takes
into account the opinions
and requests of all involved
parties. We engage with all major
stakeholders, from employees
and customers to shareholders
and local communities. We take
responsibility for reducing our
environmental impact, including
work on more sustainable packaging
options and on optimising the use
of our delivery fleet. We also
develop long-term partnership
with NGOs and charities
to contribute to the well-being
of some of the most vulnerable
groups in society.
5.9%
O’KEY Group’s
net retail
revenue growth
8.5%
Group EBITDA
margin
Сontinue
21
Delivering great customer serviceAnnual report 2020
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
O’KEY HYPERMARKETS
O`KEY hypermarkets remain
in demand among consumers thanks
to their ability to meet customers’
needs, offering them a well-chosen
and wide product range, competitive
prices and delivering great customer
service.
to develop our e-commerce business
as a tool to maintain customer loyalty
and satisfaction.
We steadily minimised our
environmental footprint by refusing
to use primary oil plastic bags
and by introducing new eco-friendly
packaging options.
Despite the economic instability
and epidemiological situation,
in 2020 O’KEY hypermarkets
showed sustainable operational
and financial results. The net retail
revenue of O’KEY hypermarkets grew
by 1.0% YoY to RUB 146,788 mln,
whereas the LFL revenue increased
by 2.5% YoY. O’KEY hypermarkets’
EBITDA stood at RUB 14.0 bn with
an EBITDA margin of 9.5% in 2020.
During the year, we continued
to develop our fresh and ultra-fresh
categories and further strengthened
our quality and safety standards. We
also enhanced customer experience
by modernising stores, improving
layouts and re-launching our loyalty
programme offering additional
benefits. We also continued
Our newly implemented hypermarket
concept will significantly strengthen
O’KEY’s market positioning , bolster
long-term LFL growth trends,
and improve the economics of trading
space utilisation. We plan to renovate
our stores in the next few years.
In the future, we will also continue
to ensure that customer service
quality and store presentation are
above industry standards. In addition,
we plan to continue implementing
new initiatives that will contribute
to further growth, continue to develop
our loyalty programme as a supporting
tool to maintain customer loyalty,
and look for opportunities to expand
our business, picking the best
possible locations.
Our newly implemented
hypermarket concept will
significantly strengthen O’KEY’s
market positioning, bolster
long-term LFL growth trends,
and improve the economics of
trading space utilisation.
22
“
DA! DISCOUNTERS
Our DA! discounter business remains
the main growth driver of the Group.
It has been delivering strong
and stable growth of over 30% YoY
in the past few years.
Our every day low price and best
value-for-money proposition again
proved its effectiveness, even during
the challenges of 2020.
In this year, our discounters showed
impressive net retail revenue
growth of 45.3% YoY, reaching
a 15% share of overall business
revenue. The growth was led
by a remarkable 27.8% LFL revenue
dynamic supported by both LFL
ticket and traffic growth, of 2.2% YoY
and 25.1% YoY, respectively.
During the year, we opened
18 discounters net of closures
in Moscow and the Moscow region
which brought the total number
of stores to 118 and increased selling
space by 16% YoY.
During the year, DA! continued
to enhance its fresh and ultra-fresh
offer: the share of these categories
amounted to 40% of sales. We also
remained focused on our private
label assortment and quality. The DA!
own brands reached 1,105 SKUs,
generating approximately 50%
of DA! revenue.
In line with our expectations, the DA!
business broke even and delivered
EBITDA of RUB 784 mln in 2020.
Being focused on our strategic
goals, we will continue expansion
of the discounter business,
and expect to open up to 40 new
DA! stores in the Central Federal
District of Russia in 2021, carefully
selecting locations for every store.
It is anticipated that the share
of discounters in the Group’s revenue
will continue to grow, thus supporting
the Group’s growth and increasing
operational profitability. At the same
time, we will maintain the quality
of supply based on our own brands,
with careful selection of suppliers
and strict quality control.
E-COMMERCE REVIEW
O’KEY is one of the top-10 online
grocery retailers in Russia. We
profit from the Group’s strong
chain of hypermarkets that helps
us to streamline our delivery model
and reduce logistics costs: seven
O’KEY stores in Moscow and seven
in St. Petersburg serve as pick-up
points for online orders.
In 2020, net revenue of this segment
increased by 28.4% and reached 1.6%
of O`KEY's revenue.
During the year, the Group developed
its own delivery service while
increasing its presence in regions
through partnerships with specialised
delivery services. We signed
an agreement with SberMarket under
which our partner began to accept,
pick and deliver orders from O’KEY
stores. We also started to work with
iGooods.
Such collaborations enable O’KEY
to gain additional sales channels
and attract more customers.
We see great potential for further
development of our e-commerce
business and will continue to invest
in and develop our online channel,
focusing, first of all, on Moscow
and St. Petersburg as key cities
within our presence. We will
continue to deploy hypermarkets
as pick-up points for online orders
and as a platform for express
delivery. At the same time, we plan
to develop further cooperation with
partners to supply our products
to more locations.
OUTLOOK
As the economic environment is
becoming more difficult, customers
are more becoming cost-conscious
and rational in their shopping habits.
Our response is to deliver the best
quality-price ratio in the market in all
our formats. We are also committed
to supporting customer demand for a
healthy lifestyle, in particular, through
our high-quality fresh and ultra-fresh
products offerings.
We see a strong potential
in developing our current business
model. Through our format mix based
on modern hypermarkets, discounters
and a strong e-commerce platform
we expect to not just meet the needs
of all customer segments, but also
to maximise synergies between
the three formats. We believe that
the right strategy in action, along
with our deep management expertise,
will enable us to fully capitalise
on the opportunities in a changing
market landscape.
To achieve our strategic goals we
need continual improvements to
succeed in this competitive market
environment. We will enhance our
market positioning and improve
the economics of trading space
utilisation. First, building a well-
chosen deep product range based
on freshness and own brands, as a
main competitive advantage. Second,
ensuring customer service quality
and store presentation are well above
industry standards. And third, further
developing our loyalty programme
and e-commerce as supporting
tools to maintain customer loyalty.
In the future, we will continue
to expand our business, optimise
internal processes and enhance our
product assortment with a clear focus
on quality. We also remain committed
to our obligations to key stakeholders,
and will continue to develop mutually
beneficial relationships with them.
We see our hypermarkets as
a competitive format that will always
be in demand due to a significantly
wider and deeper range of goods,
and superior customer experience.
Within the next few years, we plan
to expand our new hypermarket
concept in our key regions, starting
with five to seven stores in 2021.
At the same time, we will further
expand the DA! discounter chain
in Moscow and neighbouring
regions. We will also continue
to grow our e-commerce business
with a strategic focus on meeting
the real needs of our customers
and delivering the same quality
of customer experience that we offer
at O’KEY stores.
Finally, I would like to commend
the Group’s employees, whose
relentless work has allowed O’KEY
to provide customers with superior
service, without interruption, even
during the most acute months
of the COVID-19 crisis. I would
also like to express gratitude
to the management team, whose
expertise and strategic thinking
helped the Group to maintain its
market positions and achieve its goals.
ARMIN
BURGER
Chief Executive
Officer
23
O’KEY GroupDelivering great customer serviceAnnual report 2020 The Group’s strategy is built around
developing a modern food retailer
in Russia, operating in hypermarket
and discounter formats
and developing its competitive
e-commerce platform. As a Group,
we are always focused on creating
value for our customers, partners
and shareholders.
85%
O’KEY share in revenue
15%
DA! share in revenue
Top 8
food retailer in Russia
Top 10
food retailer in online
Strategic review
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Delivering
on our strategy
O’KEY Group’s operational activity is based on two shopping formats, hypermarkets
and discounters, and a strong e-commerce platform. The strategic priorities depend
on the format, however in each business we do our best to provide customers with high-
quality goods, an outstanding value proposition and impeccable service.
S
T
E
K
R
A
M
R
E
P
Y
H
Y
E
K
O
'
S
R
E
T
N
U
O
C
S
I
D
!
A
D
E
C
R
E
M
M
O
C
-
E
26
BUSINESS
DEVELOPMENT
DELIVER THE BEST VALUE
PROPOSITION
BENEFIT FROM
SYNERGIES BETWEEN
THE FORMATS
● Expand the new hypermarkets
concept with better operational
efficiency and sustainability
● Identify the best opportunities
to grow business
● Maintain an excellent shopping
experience with the help of our
modern design and well-trained
personnel
● Focus on providing excellent
value for money to our customers
● Introduce new products
and expand our product
assortment with a focus on fresh
and ultra-fresh products
● Increase the share of private
label products and own products
in total sales
● Develop synergies with
the discounter business in joint
procurement and direct import
of fresh products, as well as
profiting from our private label
expertise
● Growth and expansion: open
up to 40 discounters in Moscow
and the surrounding regions
annually
● Focus on the “every day low
● Develop the wide portfolio
price” concept
● Offer the most competitive
pricing on the market without
compromising quality
● Expand the product assortment
in the fresh and ultra-fresh
categories
of private label goods: improve
the recipes and packaging,
increase the share of private
labels in the total SKU range
and sales, and ensure the best
possible quality by carefully
selecting our private label
producers
● Benefit from synergies with
O’KEY hypermarkets when
purchasing branded assortments
● Expand the delivery zone, which
includes opening up new pick
up points
● Maintain partnerships with
specialised services to reach all
our customers
● Release our updated mobile app
● Expand our express delivery
service which has proved
to be in demand from customers
● A more efficient business
organisation and logistics with
O’KEY hypermarkets serving
as pick up points and a delivery
platform for online orders
27
Delivering great customer serviceAnnual report 2020O’KEY Group
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Market overview
RUSSIA’S FOOD RETAIL MARKET
The Russian food retail market is
the world’s 9th largest in monetary
terms, and is expected to grow
on average by 4.8% annually
between 2020 and 2024. It is
anticipated that within this
period, the share of discounters
and e-commerce in the Russian
grocery retail market will increase.
GROCERY RETAIL MARKET SIZE IN 2020, USD BN
TOP FOOD RETAILERS IN RUSSIA (BY NET RETAIL REVENUE)
1,649.6
1,451.9
4.8%
Expected growth of
the Russian food retail
market between 2020
and 2024
570.0
405.6
298.0
285.1
280.3
264.3
257.6
202.4
62.6
12.8
8.8
6.6
37.4
Top 10 food retailers in Russia
Other
37.4%
+4.1 p.p.
The market share of the top
10 grocery retailers in Russia In 2020
2.7
1.5
1.3
1.2
1.1
0.8
0.8
USA
China
India
Japan
Germany
France
Brazil
United
Kingdom
Russia
Mexico
X5 Retail
Group
Magnit
DKBR
Lenta
Auchan
Svetofor METRO
O’KEY
Group
Monetka
Vkusvill
Source: IDG research
Source: Infoline research 2020, excluding grocery aggregators and food delivery operators.
28
29
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
According to Infoline, in 2020
the food retail market grew
to 16.4 tn RUB. Meanwhile,
the speed of expansion of the top
200 Russian FMCG retailers
continued to decelerate: their
total selling space increased
by 4% YoY to 28.54 mln m2
(in 2019, it increased by 7.9%),
with their total number of stores
growing by approximately 4.2 k
and exceeding 74.8 k.
O’KEY Group seeks to fully meet
the needs of different customers.
Our strategy includes the well-
balanced development of two
main offline formats, hypermarkets
and discounters, and a strong
e-commerce platform.
The market situation remained
challenging for hypermarkets
in Russia, with their total number
in Russia decreasing by 5.7%
to 1,079. However, customers
remained attracted by a wide
assortment and superior shopping
experience. Therefore, we see it as
a necessity to continuously improve
our hypermarkets’ efficiency,
and to be highly competitive
and attractive to customers, which
includes having an outstanding
product assortment. To achieve
these goals, we introduced and are
rolling out a new hypermarket
concept aimed at increasing our
competitiveness.
The popularity of discounters
among the top-200 FMCG retailers
continued to grow: in 2020, their
total selling space increased by 7%,
and their share of the selling space
among top-200 FMCG retailers
increased by 1.6 p.p. (to 57%).
The total number of discounter
stores of the top-200 FMCG chains
as of December 31, 2020, was about
42.5 k, with a total retail space
of over 16.2 mln m2. In line with
this trend, the Group continued
to develop its DA! discounters,
focusing on a unique value-for-
money concept and a high share
of own brands in the assortment.
In 2020, we rolled out 21 discounter
stores in the Central Federal district
and aim to continue expansion
at a comparable rate in 2021, with
a focus on profitability.
ONLINE GROCERY MARKET
IN RUSSIA
In 2020, the online grocery retail
market in Russia grew rapidly,
largely due to the COVID-19
pandemic and changes
in consumer behaviour. Food
delivery had already been part
of daily life in large cities, but
in the circumstances of lockdown,
many more customers switched
to online shopping for the first
time and formed a habit that
remained after the main restrictions
were lifted. For instance,
in Q4 2020, online food sales
reached RUB 50 bn, which
exceeded the volume for the full
year of 2019.
According to Infoline, the online
grocery market (excluding food
baskets and ready meals) grew
by 375% in the reporting year
and approached RUB 144 bn.
In the reporting year, the online
grocery retail market in Russia
accounted for 0.9% of the total
grocery market, compared with
0.2% in 2019. According to Infoline,
the Russian market for online
food sales still has a huge growth
potential and may exceed RUB 1 tn
by 2025.
TOP ONLINE GROCERY RETAILERS IN RUSSIA, 2020,
TURNOVER, RUB BN
21.9
16.4
14.9
13.9
12.6
11.9
RUB
144 bn
total online
market volume
7.2
4.0
3.7
2.6
X5 Retail
Group
Utkonos
VkusVill METRO
OZON Wildberries
Azbuka
Vkusa
Source: Infoline research 2020, excluding grocery aggregators and food delivery operators.
Auchan
O’KEY
Lenta
30
31
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
ECONOMIC ENVIRONMENT
In 2020, the Russian economy
showed signs of downturn caused
by the pandemic, lockdown
measures and unstable oil prices.
According to Rosstat, the real GDP
of Russia fell by 3.1% in 2020,
though this was less than forecast
by the government (forecast
decline of 4.2%). The population
of Russia decreased by more than
0.5 mln to 146.2 mln people, which
was the largest decline in 15 years.
The total number of unemployed
increased by 24.7%, and amounted
to 4.3 mln (5.8% of the working-
age population) by the end of 2020.
Real disposable income declined
by 3.5% YoY, however it is expected
to gradually recover within the next
few years: growing by 3% in 2021, by
2.4% in 2022 and by 2.5% in 2023.
Consumer markets also showed
negative dynamics due to the
coronavirus pandemic, the
economic crisis, lockdown and other
restrictions. In 2020, food retail
trade turnover in monetary terms
increased by 1.8% YoY (in 2019 it
showed an increase of 7.1% YoY). In
real terms, food retail trade turnover
declined by 2.6% YoY (while in 2019
it showed growth of 1.8% YoY).
During 2020, the retail industry
was indirectly stimulated by large-
scale measures to support various
demographics, including families
with children, pensioners and the
unemployed. This included, in
particular, monthly payments to
low-income families with children
aged 3-7 years introduced in the
middle of the year (average size
of the payment was RUB 5.5 k
per child, per month). Also, the
minimum wage in 2020 increased
by 7.5% to RUB 12,130 per month,
and in 2021 it further increased by
5.5% to RUB 12,792 per month.
According to the Sberbank “Ivanov
Consumer Confidence Index”, price
sensitivity remained high among
customers: in Q4 2020, it was 68%
which was just below the 69%
registered a year earlier. In line with
the high price sensitivity, trading-
down on food intensified: 66% of
respondents were trying to save on
food purchases. At the same time,
product quality was mentioned
among the most important factors
and cited by 65-66% of Sberbank
respondents.
It was noted that product
assortment became a factor of a
greater importance to customers: it
was cited as significant by 54% of
Sberbank respondents compared
with 49% in 2019. Meanwhile,
O’KEY hypermarkets continuously
improved their assortment,
providing customers with all they
need in a single location, including
the freshest food and a wide variety
of high-quality products, while DA!
discounters concentrate on offering
a wide choice of high-quality
private labels.
REAL GDP IN 2016–2020,
RUB BN
87,179.3
91,445.1
85,616.1
89,626.5
88,650.8
RUSSIA’S CONSUMER PRICE INDEX, %
22.4
20.3
18.0
15.8
15.8
15.7
16.2
14.5
8.3
6.9
7.3 6.8
5.7 6.3
CPI, YoY
Food CPI, YoY
5.8 4.6 4.2 3.4 2.6 2.2 2.4 3.0
3.9
5.1 3.8 4.1 2.8 1.2 0.9 0.4 1.6 3.6
5.8 6.0
5.0
5.2 5.0
3.5
4.3
3.4
3.6 4.3 5.8
3.1 3.6 4.4
2.4
2.0
1 Q'15
1 Q'16
1 Q'17
1 Q'19
1 Q'20
4 Q'20
Source: Rosstat
13.2
9.4 10.5
7.3
7.6 7.7
6.4
9.6
0
1 Q'14
RUSSIA’S CONSUMER CONFIDENCE INDEX IN 2016-2020, %
-14
-15
-18
-19
-9
-8
-11
-11
-14
-16
-15
-17
-13
-13
-11
0
-26
-30
-30
-22
-26
2016
2017
2018
2019
2020
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 4Q 20
Source: Rosstat
REAL DISPOSABLE INCOME AND REAL WAGES IN 2016-2020, %
Real wage
Real disposable income
10.2
5.9
7.6
6.3
0.3
1.2
0
-0.6
1.8
2.4
3.4
3.1
1
6.2
4.6
4.1
2.6
1.3
3.3
3
0.1
-0.7
-1
-0.2
0.2
0
0.9
1.1
1
-0.8
-2.2
-2.6
-5.2
-3.8
-5.6
-0.1
1.8
-7.9
-5.3
1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 4Q 20
OUTLOOK
It is anticipated that in 2021,
the Russian economy will show
signs of growth, which will
be possible thanks to oil price
recovery, the mass vaccination
programme and the gradual lifting
of restrictions in most sectors
of the economy. According
to the forecast of the Ministry
of Economic Development, real
GDP will grow by 3.3% in 2021. Real
wages are expected to grow by 2.2%
starting from beginning of 2021.
At the same time, the Russian
government will continue
to provide assistance to the most
affected sectors of the economy,
as well as invest in a number
of projects, stimulating growth.
We believe that the future will
bring us new opportunities
and we aim to constantly develop
our business in order to profit
from them and remain among
the leading retailers. In the current
market environment, we intend
to remain cautious on the outlook
for the Russian retail market
and its growth opportunities.
We plan to continue to grow our
business in all three segments with
a focus on operational efficiency
and quality, ensuring that a wide
assortment of goods is available
to our customers at competitive
prices.
32
33
Source: Rosstat
Delivering great customer serviceAnnual report 2020O’KEY Group Our three complementary
formats, O`KEY hypermarkets, DA!
discounters and the e-commerce
platform, ensure fulfillment of all
customers’ needs. We aspire to
deliver the highest quality at the
best price and a unique customer
experience.
+5.4%
Group LFL revenue growth
+45.3%
DA! retail revenue growth
1.6%
e-commerce revenue share
Operational results
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
O’KEY hypermarket
format
The O’KEY hypermarkets business, as a core pillar of our
Group’s business model, remains a competitive and high growth
potential format. Due to our well-balanced value proposition
and competitive advantages, we remain among biggest players
in the Russian food retail market.
Our hypermarkets offer customers a well-chosen and wide product range, which
is designed to meet all their needs at competitive prices. In the recent years, we
have made significant progress in transforming the chain. In 2020, we introduced
our new hypermarket concept that looks to the future of food retail and meets
latest market trends, combining best international practices and O’KEY’s
own experience. The new concept is aimed to enhance the hypermarkets’
competitiveness, and further improve customer service and the efficiency
of trading space.
KEY PERFORMANCE INDICATORS
NUMBER OF STORES
SELLING SPACE,
K M2
NET RETAIL REVENUE,
RUB BN
77
78
78
78
77
540
532
528
529
519
166.8 164.1
145.8 145.3 146.8
NET RETAIL REVENUE,
%
LFL NET RETAIL REVENUE,
%
2.5
4.5
1.6
1.0
(0.4)
(1.6)
(3.2)
20181
2019
2020
LFL TRAFFIC,
%
(0.4)
(3.4)
(4.3)
20181
2019
2020
LFL average ticket, %
LFL AVERAGE TICKET,
%
0.3
19.5
(1.8)
(5.3)
(4.8)
1.9
1.3
1.4
0.5
(14.2)
20181
2019
2020
20181
2019
2020
20181
2019
2020
20181
2019
2020
20181
2019
2020
(cid:2) Note: O'KEY operational performance indicators are presented excluding the effect of supermarkets sold in 2018.
36
Annual report 2020
Delivering great customer service
HYPERMARKETS
BUSINESS 2020
AT A GLANCE
6.8 k m2
Average store
selling space
135 mln
Clients shopped
with us
30 k SKUs
Average product
range
85%
Hypermarkets
share
in O’KEY Group
revenue
37
O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
PERFORMANCE OVERVIEW
In 2020, we continued to focus
on delivering enhanced customer
experience, maintaining high
operational efficiency, impeccable
quality of assortment and best service
in every store of our chain. Our new
hypermarket concept was designed
to leverage our expertise
and implement the latest solutions
in modern food retail, with focus
on fresh and ultra-fresh categories
as the main traffic drivers for all
O’KEY stores. At the same time, we
were enhancing our own production
and private label products,
and offering digital solutions
for a more enjoyable customer
experience across our chain.
We continued to evolve our unique
value proposition, which includes:
● a wide range of competitively
priced, high quality products,
including fresh food, own bakery,
delicatessen and non-food items;
● locations near key traffic
intersections, with easy access
via public transportation and/or
within highly populated residential
districts;
● modern shopping environment
with an appealing ambiance;
● omnichannel bonus system
to accumulate and spend loyalty
points;
● large number of cash registers,
including self-scanning
and self-checkout.
The right focus and developed
customer value proposition
(CVP) enabled us to show decent
operational and financial results
in 2020 despite the challenges
caused by economic instability
and the epidemiological situation:
O`KEY net retail revenue rose
by 1.0% YoY to RUB 146,788 mln,
on the back of a 2.5% increase in LFL
net retail revenue. Starting from
Q2 2020 and until the year end,
we observed changes in consumer
behaviour caused by the pandemic:
customers visited stores less
frequently, but tended to stockpile
while shopping in order to minimise
visits. As a result, O`KEY LFL traffic
was down by 14.2% YoY, while
the average LFL ticket rose by 19.5%,
driven mainly by more items per
basket. As expected, December
saw strong customer demand, with
accelerated net retail revenue growth
of 5.3% YoY.
As at 31 December 2020, the total
number of hypermarkets was 77,
with total selling space of 519 k m2.
In 2020, we introduced to customers
a new store in St. Petersburg
and a redesigned store in Moscow
that uses our new design concept.
We also doubled the size
of the store in Sestroretsk in the St.
Petersburg region.
During the reporting year, we
developed our fresh and ultra-fresh
categories, which included further
implementation of new standards
and operational improvements
in the fresh departments. We
continued to enhance customers’
shopping experience by rezoning
and modernising stores,
and improving the quality of own
production, deli, bakery, private
labels, and fruit and vegetable
range. To further improve shopping
experience and customer service, we
continued implementation of digital
solutions in our hypermarkets,
such as self-checkout scanners
integrated with our loyalty system,
electronic price tags for some product
categories, and self-checkout cash
desks. Another important milestone
was the introduction of an updated
loyalty programme for our customers,
which offers additional benefits
and an enhanced shopping experience.
We were able to maintain a high
standard of service and product
availability, which helped to maintain
a high frequency of visits despite
the pandemic.
NEW HYPERMARKET CONCEPT
>500 SKUs
of ready-to-eat
products
400 SKUs
of fresh fruits,
vegetables, berries
and greens, from
seasonal to exotic
500 SKUs
of ultra-fresh products
(fresh fish, poultry,
seafood, meat, etc.)
Watch a movie
about the new
O’KEY
hypermarket
concept.
In October 2020, we opened
the first new concept hypermarket
in the Europolis shopping
mall in Moscow. Within
the new concept, layout is
improved and the approach
to the product range is reimagined.
The innovations are aimed
at further improving product
offerings and the shopping
experience, as well as making sure
selling space is used as effectively
as possible.
The new concept focuses even
more strongly on fresh and ultra-
fresh categories as main traffic
drivers, providing them in a new
upgraded design and layout.
In the renewed store, the space
allocated to fresh and ultra-fresh
categories was expanded by 50%.
The store features even more
impressive bakery, deli, cheese,
sausages, meat and seafood
counters. We reimagined the non-
food category and re-designed
the display, focusing on high-
quality and most popular items.
Our non-food range includes items
for home and garden and children’s
goods, as well as skincare products,
make up, and seasonal goods, with
the focus on the durable quality
of the assortment. We reduced
selling space allocated for non-
food products by 80%, while
improving the look and feel of this
section. The non-food area got
a new attractive design, modern
displays and promo stalls.
In the updated hypermarkets, we
continue to pay special attention
to customer experience. We
significantly improved layouts,
reimagined our approach
to the product range, widened
the aisles and updated our zoning
and display standards, helping
customers get their shopping done
faster. Similar items are displayed
together, as well as complementary
items and ready-made solutions.
Next to the ready-to-eat section,
we launched a comfortable café
area where customers can have
a meal or enjoy a cup of coffee,
warm up food and charge
their devices. The new store
also features innovative IT
solutions that have already been
implemented across the chain,
such as self-checkout scanners
and cash desks, as well as a newly
implemented digital sommelier
service, and electronic screens
for more efficient in-store
navigation and communication
with customers.
The hypermarket segment will
continue to be the core pillar
of the Group’s business model
in 2021 and in the medium term.
In 2021, we will continue
to gradually upgrade O`KEY
hypermarkets in line with the new
concept. We expect that this fresh
start will strengthen O’KEY’s
market position and create
a foundation for long-term.
At the same time, we plan to make
improvements across the whole
chain, by enhancing our own
production and private label ranges,
increasing operational efficiency,
maintaining a high quality
of goods and introducing new
digital solutions.
38
39
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
LOYALTY PROGRAMME
Our loyalty programme acts
in line with our strategic
priorities and helps to provide
our customers with multiple
options for purchasing goods
of the highest quality on the most
attractive terms. The loyalty
programme integrates innovative IT
solutions, such as machine learning
and personalisation analytics
software, and provides customers
with individual offers based
on their own spending patterns
and purchase history.
In 2020, we introduced an updated
cumulative loyalty programme
that is designed to reward
customer loyalty and enable them
to engage with us as their preferred
hypermarket. It enables customers
to accumulate and use bonuses
both online and offline. Customers
can also choose between a digital
and plastic format loyalty card.
Throughout the year, O’KEY
was working on the digital
customer experience. We fully
updated the okmarket.ru website
and created a new mobile app
for offline customers, which will
be launched in 2021. In a personal
account, on the website, or
in the mobile app customers can
now access information regarding
PLANS
their card, bonuses, history
of purchases, and promo offers
for online and offline stores.
We also enhanced our presence
on social media, and fully
relaunched O’KEY digital promo
activities. We launched direct
personal accounts on the main
digital advertising platforms,
significantly optimised the cost
of digital advertising and increased
the coverage of digital
advertising messages.
Throughout 2020, we collaborated
with other non-food retailers
and other partners to attract traffic
amidst the COVID-19 pandemic,
by making co-promotions
in particular. This included a cross-
promo with a non-food retailer
Hoff, and a cross-promo with taxi
services to motivate customers
restraining from using public
transport. We also collaborated with
shopping malls to attract customers,
creating joint regional promotions
with the use of social networks.
In 2020, we maintained a high
level of customer loyalty. Trade
turnover of loyalty clients was 5%
higher than 2019. The share
of loyal customers grew to 89%
in total turnover.
LOYALTY
PROGRAMME
IN 2020
12 mln
loyalty cards
102.7 mln
loyalty
transactions
76% of all transactions
RUB
145.5 bn
loyalty revenue
89% of O'KEY revenue
● develop theme clubs, such
as a kids’ club and a wine
connousseurs’ club, using
more specific data on family
composition and eating habits;
● promote and develop the new
mobile app to be launched
in March 2021 that would
develop convenient customer
services and customer feedback
tools and internal tools
for gathering information;
● re-launch and develop
co-branded loyalty card
in cooperation with banks;
● optimisation of omnichannel
communication with customers
to optimise costs;
● improve the analytical tools
for optimising the selection
of personal offers, working with
attraction, retention and outflow
risks.
PRIVATE LABEL
The wide selection of O’KEY
private label (PL) items is
a competitive advantage of our
hypermarkets. Our principle
is to offer customers goods
of superior quality at better price
(15–25% cheaper than branded
alternatives).
In 2020 we continued to actively
develop the private label product
lines. We actively worked to expand
assortment in our “That’s What
You Need!” and “O’KEY” brands:
in total, 833 new SKUs were added
to the two brands, including 423
seasonal non-food products, while
101 SKUs were relaunched.
OUR VARIETY OF PRIVATE LABEL PRODUCTS HAS THREE MAJOR BRANDS
COVERING THE ENTRY, MEDIUM AND PREMIUM PRICE SEGMENTS.
That’s what
you need!
entry segment
O’KEY
medium segment
O'KEY
Selection
premium segment
914
SKUs
1,484
SKUs
84
SKUs
2,482
private label SKUs
available in O’KEY
hypermarkets
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With the ultimate goal of offering
premium goods in all categories,
we continued to develop “O'KEY
Selection”, a brand that is
distinguished by better affordability
of premium products with quality
comparable to other brands.
In 2020, the share of private
label products under the brands
“That’s what you need!”, “O’KEY”
and "O'KEY Selection" in O’KEY net
retail revenue increased to 8% (vs
7.2% in 2019).
Throughout 2020 we renewed our
packaging for all three major PL
brands in order to increase sales
and brand awareness, especially
in the entry and medium segments
where we renewed the logos. As
at the end of 2020, new design
was developed for 958 "That’s what
you need!" SKUs, 899 "O’KEY" SKUs
and 59 "O'KEY Selection" SKUs.
We created a new unit specialised
in niche and rare articles to better
satisfy customers’ needs.
In 2020, O’KEY continued
to strengthen its private label
quality and maintain high quality
standards. The Company conducts
regular checkups at the production
facilities and conducts test
samples in independent
and accredited laboratories under
the “Trademark O’KEY – Customers’
guarantee” programme.
Our efforts in this area are regularly
recognised with various quality
awards. In 2020, ten "O’KEY"
and "O'KEY Selection" private
label products won golden medals
at the prestigious international
Quality Guarantee 2020
competition, four products received
silver medals, and four products
received diplomas.
In 2020, O'KEY's own brand became
the winner of the prestigious Private
Label Awards 2020 held within
the International Private Label Show
(IPLS). It was recognised as the Best
Private Label in “Online”, having
received the highest award in this
category. Experts assessed brands
not only by quality, formulation
and available product range, but also
by their presence in various online
channels, brand recognition among
internet users, brand credibility, as
well as the demand for respective
private label products.
Golden medals
● O’KEY Camembert Cheese
● Cream Cheese Light
(Litere)
● O’KEY lightly salted fillet-
pieces of herring in oil
● O’KEY Oat Flakes
● O’KEY Canned Green Peas
● O’KEY Lemon Slice
Marmalade
● O’KEY White-pink
Marshmallow
● O'KEY Sunflower Halva
● O'KEY Selection Caramel
Cashew with Crispy
Cinnamon
● O'KEY Selection Salted
Fried Pistachios
Silver medals
● O’KEY Mango
● O’KEY Brie Cheese
● O’KEY Kupecheskaya
Baked Ham
PLANS
We will continue to focus
on developing our private label
brands. In particular, we intend to
review our private label assortment
from the perspective of “More
Quality, Less Quantity”, and further
develop the assortment, with the
intention of growing sales and
profitability in each category.
O’KEY and DA! discounters
collaborate to develop common
own brands, starting with the non-
food category (cosmetics, health
care, etc.). The goal is to introduce
high-quality products under own
brands for each product category
and, at the Group level, benefit
from the economies of scale.
We will further develop "O'KEY"
and "O'KEY Selection" brands with
new designs and packaging.
Diplomas
● O’KEY Mackerel
● O’KEY Cottage Cheese 9%
● O’KEY White Salted Pork
Lard
● That’s What You Need!
Pork Knuckle
(cid:3) The contest is held by the Gorbatov’s
All-Russian Meat Research Institute
(VNIIMP) under the Russian
Academy of Sciences and supported
by the Committee of the Federation
Council on agricultural and food
policy and the Ministry of Agriculture
of the Russian Federation.
OWN PRODUCTION
The “time is a luxury” lifestyle trend
creates demand for high-quality,
ready-to-eat food of impeccable
freshness. Reflecting this trend,
O’KEY hypermarkets offer a wide
assortment of our own production,
which includes a range of freshly
prepared salads, hot meals, pastries
and confectionery. The Company
constantly enhances its own
production range and the quality
of goods on offer, striving to meet
customer needs and maintain
the highest level of customer
satisfaction.
We provide the best customer
experience for the consumers
of products of our own production.
In our stores, planograms are
used for a better store layout
and customer convenience. Inside
our stores, there are “sit and eat”
facilities where customers can
enjoy a hot drink or a meal.
Moreover, every day our clients can
benefit from evening promotions
and discounts.
Our own production unit 2020
at a glance:
● we significantly upgraded our
own production assortment
by introducing over 150 new
SKUs and expanding our range
of convenience foods, sandwiches,
hot meals, and a healthy
assortment of bakery products;
● we continued to educate our chefs
and technologists to improve their
culinary and baking skills;
● we launched the “Tandoor”
project within the O’KEY Bakery
segment;
● at the renovated hypermarket
of the new concept, we
implemented a unique café
concept where products of our
own production are served.
The new concept is distinguished
by superior service and a better
assortment range.
In 2020, the Company participated
in the “Quality guarantee”1 contest
with its own produce. Five of our
products (Smoked Mackerel Salad
of our own production, Fyodorovsky
bread, Monastyrsky bread, Berries
Cheesecake, and Buckwheat
Noodles with Vegetables)
were awarded silver medals
and diplomas.
OUR OWN PRODUCTION HIGHLIGHTS
Special supplier system, separate from general suppliers
> 2,000
total unique SKUs
up to 500 SKUs
in each store
150
new products
introduced
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FRESHNESS APPROACH
To ensure compliance with our
“Ultra Freshness” approach, we
adhere strictly to our internal
production standards. We control
our production at all stages, from
storage at distribution centres
to it being served in hypermarkets.
Quality control includes daily
optical and hygiene checks; teams
of trained experts selectively check
the quality and correctness of our
own produce.
Control of raw
materials from
suppliers
during delivery
to hypermarkets
and storage
1
Degustation,
optical
freshness
check, shelf-
life control
THE QUALITY
CONTROL SYSTEM
FOR OUR OWN
PRODUCTION
INCLUDES
2
4
Staff education,
hygiene control
and process
control
3
System
of quality
checks
PLANS
In 2021, we intend to:
● create six centres of own
production centralisation based
on existing store infrastructures;
● further improve the excellence
of products of our own
production and develop
the assortment;
● continue to increase
the proportion of raw materials
and ingredients requiring little
preparation;
stores, from raw materials
to customer feedback;
● conduct quality audits
● continue our employee training
of suppliers of materials used
for our own production;
● implement the café concept
where our own produce will
be served;
● standardise the quality
and technology processes
for our own production in our
programme;
● develop new formats of trade
and e-commerce, such as
“ready to eat”, “ready to cook”,
and “grab&go”.
QUALITY AND SAFETY
O’KEY Group focuses
on maintaining the highest quality
goods in its stores. Our quality
management system encompasses
all stages of operations and is
improved on an ongoing
basis, with customers’ needs
and current market trends taken
into consideration. We strictly
comply with Russian quality
and food safety legislation
and the HACCP system. Our
quality management system
is complemented by internal quality
standards which often go beyond
the necessary requirements.
Quality and safety in O’KEY
are supported by a dedicated
quality control department.
The standard measures include
preliminary quality control
procedures, assortment monitoring
both in stores and warehouses,
and internal and external auditing
of stores and the supply chain.
The high quality and safety of our
own production and private labels is
confirmed by laboratory control.
include withdrawing products
from the stores, returning them
to the producer, and ceasing
a contract with a supplier.
In 2020, due to the COVID-19
pandemic, O’KEY quickly adapted
its operational processes to the new
reality, which included adopting
new hygienic standards for a safe
customer experience and complying
with new government requirements.
O’KEY Group participates
in regional and national quality
initiatives, such as “Made in Don
Land” and North-Western
and Central regional voluntary
certification initiatives. This
demonstrates the high quality
of goods and the Company’s
compliance with leading standards.
O’KEY takes part in ACORT quality
committee initiatives, such as
communication with authorities
on legislative issues, quality
product testing and benchmarking,
and round tables regarding
quality standards.
In case of any incidents regarding
quality and safety, O’KEY reacts
with an immediate and thorough
audit and comprehensive measures
aimed at preventing similar cases
in the future. The actions may
In 2020 the Company undertook
the following actions related
to quality development:
● O’KEY continued the transition
to electronic veterinary control
under the State information
system Mercury (all related
processes were documented
and implemented
into the system; we collaborated
with suppliers to minimise
discrepancies in veterinary
documents);
● O’KEY launched the Tandoor
and Shaverma projects, with
the HACCP system implemented;
● 6.2 k SKUs were audited
for compliance with legal
regulations (labeling
and necessary documents)
via the e-portal for suppliers;
● O’KEY stores successfully
underwent 57 surveillance audits
conducted by the authorities;
● the Company optimised
its business processes
in accordance with the legislative
changes in the certification
and declaration of directly
imported goods;
● the Company developed close
cooperation with suppliers
to fully comply with new laws
adopted in 2020 (“About organic
product”, “Wine production
and viticulture”);
● O’KEY successfully underwent
annual audits under the “Made
in Don Land” programme,
and confirmed the validity
of the certificates.
PLANS
The Company plans to continue
improving its quality management
system and food safety control
procedures going forward. In order
to have freshness and quality as
our distinctive features, we will
revise and further improve quality
standards for fresh and ultra-fresh
categories. We will also improve
our suppliers’ auditing system
by using a risk-oriented approach,
concentrating on ultra-fresh
categories, our own production,
and private labels.
O’KEY Group plans to review
regulatory documents with service
contractors, and to implement
a quality benchmarking procedure
to become the market leader
from quality perspective.
We will concentrate on employees'
development by implementing
an updated quality training
programme for those involved
in the quality support processes
and by educating internal auditors
within the Company’s quality
management system.
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Annual report 2020
Delivering great customer service
SUPPLY CHAIN
The O'KEY has a well-balanced
supply chain which serves as
our competitive advantage
and allows us to meet customers’
needs in all regions of operation.
In 2020, we continued
to improve the productivity
and effectiveness of our supply
chain, focusing on cutting-edge
digital solutions and transparency
of communications with suppliers.
The O’KEY logistics system
includes four distribution centres:
two are located in Moscow,
and two in St. Petersburg. The
federal distribution centres
based in Moscow distribute fresh
products, fruits and vegetables,
FMCG, non-food and alcohol
products to all stores across the
country. One regional distribution
centre in St. Petersburg specialises
in FMCG and non-food, and the
other one – in fruits and vegetables,
and fresh products. This supply
chain organisation enables O’KEY
Group to balance logistical costs,
stock management and a high level
of service.
In 2020, we:
● finished the rollout
of the ORACLE RPAS (Retail
Predictive Application Server)
solution for all categories;
● increased the centralisation rate
of the fresh category by 5.3%
and of the non-food category
by 4.4%;
LOCATION AND SERVICE AREAS OF O’KEY
DISTRIBUTION CENTRES (DCs)
● launched the Yard Management
system which ensures the timely
arrival and departure of vehicles
and increases on-time deliveries;
● launched the Suppliers’ portal
to increase transparency;
● tested the new forecast system
to improve the accuracy
of forecasting;
● launched a new distribution
center for non-food products
with a total area of over
18,000 sq.m. in Litvinovo,
the Moscow region,
and increased O`Key's storage
capacity in the region by a third.
4
Overall number
of O’KEY DCs
2
Moscow
53.8 k m2
and 18.1 k m2
2
St. Petersburg
21.8 k m2
and 7.6 k m2
61%1
+2.5% YoY
Centralisation rate
O’KEY DISTRIBUTION CENTER
Murmansk
St. Petersburg
MOSCOW
Lipetsk
Ivanovo
Voronezh
C E N T R A L F D
Rostov-on-Don
Syktyvkar
N O RT H- W EST F D
V O L G A F D
Surgut
U R A LS F D
SIBERIA F D
Krasnoyarsk
Tyumen
Omsk
Novosibirsk
Nizhny Novgorod
Ekaterinburg
Togliatti
Ufa
Orenburg
Saratov
S O U T H F D
Astrakhan
Krasnodar
Sochi
Categories :
Fruits
and vegetables
Fresh
FMCG
Non-Food
Alcohol
(cid:4)
In 2020, we changed the approach to calculating the centralisation level: direct deliveries are
now taken into account, even if they are carried out by suppliers through the DC.
Irkutsk
PLANS
In 2021, we plan to develop
the warehouse infrastructure
and supply models. In particular,
we will launch a digital supply
chain model that allows us
to simulate the supply routes
of goods based on the demand
forecast. We will also increase
the performance of the complete
set at the distribution centres,
and implement the voice picking
system at our distribution centres.
We also intend to complete
the analysis of our new
warehouse management and new
forecasting systems in the market,
and to decide whether to update or
to replace the existing systems.
In addition, we plan to implement
a new transport operations
management system (TMS), which
will help reduce transport logistics
costs due to more efficient routing
of flights.
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IT SOLUTIONS
O’KEY draws on the latest
developments in the retail
industry as it continues its
transformation. The Group believes
that new digital technologies
and mobile applications are
a necessary element for those
who want to be at the forefront
of the industry. Modern IT solutions
help O’KEY to develop new ways
to reach customers, analyse their
needs and preferences, and provide
other beneficial opportunities.
The Group’s operational activity
is supported by a multi-faceted IT
infrastructure embracing all major
aspects of the business. It uses
widely recognised software that
allows us to increase productivity,
gain customer loyalty and achieve
our strategic goals.
In 2020, we continued
the implementation and extension
of cutting-edge IT solutions.
We expect that innovative IT
technologies will further contribute
to our business efficiency
and enhance general business
processes in the future.
In 2020, we:
● completed rollout of Oracle
RPAS auto-ordering system
and covered ultra fresh and non-
food categories;
● launched a new bonus loyalty
programme, with the use
of modern data analysis solutions
and CRM Manzana, providing
customers with targeted,
personalised offers;
● finished rollout of JDA
software used for category
management, which is specialised
in planograms optimisation,
taking into account shelf size,
PLANS
packaging, display standards,
presentation stocks, and real
sales – the correct presentation
of products along with systematic
approach to assortment planning
contributes to increased sales;
● improved supply chain efficiency
by implementing a Yard
Management solution for our
federal distribution center
in Litvinovo, with the software
is used to control and optimise
traffic flows in the warehouse
complex, correctly check
distribution in the loading/
unloading windows and reduce
transport downtime;
● continued to upgrade store
servers to SET 10;
● implemented several modules of
the new ERP platform, finalising
the master data in Axapta 12
except for finance functionality;
● implemented a vendor portal
and with master data information
management;
● modernised IT infrastructure
in the data centre and in stores,
improving IT operations’ stability
and performance.
ERP
• Microsoft
Dynamics
AXAPTA 2012
Supply chain
• Manhattan WMS
• Oracle RPAS
• Yard
Management
Category
management
• JDA Software
• Oracle RPAS
Cash register
Online store
HR System
• Crystal Service
Integration
• POS platform CSI
solution (SET 10)
• IBM Web-
Sphere
Commerce
(CMS, Promo)
• Boss HR
application
Customer
relations
• CRM
Manzana
In 2021, we intend to continue
the implementation and extension
of innovative IT technologies,
which will contribute
to maintaining our market position
and our competitiveness.
In particular, we will improve
customer engagement through
implementing campaign
management and customer
personal offers. In store operations,
we will implement advanced
task management combined with
automated task generation based
on real time analytics. We will
also implement voice picking
technology in DCs to improve
supply chain productivity.
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Annual report 2020
Delivering great customer service
E-commerce
O’KEY Group is one of the leaders in the Russian
e-commerce food market, offering its customers a wide
assortment of high-quality products at affordable
prices. Our priorities remain meeting customers’ needs
and maintaining transparent communication with them,
and we are continuously improving our service. O’KEY
Group was the first Russian retailer to launch its own
delivery service back in 2015, and has been actively growing
it ever since, with e-commerce becoming one of the pillars
of the Company’s business model.
In 2020, e-commerce in Russia
and worldwide faced a surge
in consumer demand, caused
by the COVID-19 pandemic
and related restrictions. As part
of its adaptation to the new
business environment, O’KEY
Group rapidly increased
its throughput capacities
and demonstrated a flexible
approach to business,
which was supported by our
offline infrastructure. Taking
into consideration customers’
requests, we improved
the quality of the delivery service
and optimised existing business
processes to enable the possibility
of future rapid scaling.
O’KEY Group remains among
the top ten market players
by revenue in the online food
retail industry. Our online net
revenue increased by 28.4% YoY
and reached RUB 2.3 bn, with 760 k
online orders fulfilled.
3.7%
E-commerce
share of revenue
in Moscow
2.1%
E-commerce
share of revenue
in St. Petersburg
O’KEY e-commerce
business benefits
from synergies
with the existing
offline format.
The combination with
hypermarkets gives
access to a wide range
of high-quality goods
and to a professional
team of employees.
Orders are
assembled directly
in the hypermarkets;
this allows us to scale
the process quickly
and efficiently.
18.7 k
tonnes delivered in 2020
+25% on 2019 (15 k tonnes)
760 k
orders
+26% on 2019 (602 k orders)
275 k
active customers
+49% on 2019
(184 k active customers)
100%
online coverage
in the cities of presence
Grocery e-commerce has huge
growth potential: thousands
of customers, especially in big
cities, switched to online delivery
during the lockdown, and it is
expected that many will continue
to use this service in the future.
An important trend
in the e-commerce market is
the unification of the online
and offline customer bases.
In response to this development,
O’KEY continues to develop
its “one retail” concept
to give customers a seamless
purchase experience.
Another leading trend is speed
of delivery: customers often
demand items within one to two
hours, and are willing to pay more
to get their orders quickly. This
requires market players to improve
their logistics systems and deploy
cutting-edge IT solutions.
Reflecting this trend, in 2020 O’KEY
successfully piloted a new express
delivery service, delivering orders
within 90 minutes, which we plan
to expand in the future.
O’KEY continues to develop its
e-commerce system in order
to provide superior service
and facilitate the purchase process
for our customers. Every initiative
is thoroughly reviewed before
implementation. In 2020, we:
● optimised the operation of all
online store systems (website,
mobile app, back office) to ensure
stable functioning during
the sharp rise in demand;
● implemented automatic scanning
of the Internet to detect illegal
use of the O’KEY brand;
● launched a new cash register
software in Putilkovo
hypermarket which allows to put
through orders and sell labelled
products more rapidly;
● transitioned to a new version
of portable data terminal;
● implemented an accounting
system for employees’ working
shifts;
● activated data security solutions
(WAF and DDOS security);
● improved the application used
for assembling orders;
● optimised the data exchange
between online and offline
channels in order to reduce
the share of non-available
products.
In 2020, we significantly increased
the coverage of our online
delivery services.
O’KEY Group is
also a member
of the Association
of Internet Trade
Companies, which
promotes fair
competition, innovation
and the positive
development
of the industry
in Russia.
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O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
COLLABORATION WITH
PARTNERS
E-COMMERCE LOGISTICS
AND INFRASTRUCTURE
One of key priorities
of the Company was to expand
omnichannel capabilities
by tapping into synergies with
partners. In 2020, O’KEY leveraged
integrations with specialised
services to secure additional
sales channels, increase product
delivery footprint, and reach out
to new audiences.
We signed a cooperation agreement
with SberMarket that now
accepts, assembles and delivers
orders from O’KEY hypermarkets.
Initially, the SberMarket service
covered O’KEY hypermarkets
in four cities (Omsk, Ufa, Rostov-
on-Don, and Nizhny Novgorod),
and by the end of the year
the coverage area was expanded
to a further 20 cities where
the chain operates hypermarkets.
We also kick-started cooperation
with the iGooods service, which
now delivers O’KEY hypermarket
items to customers in five cities
(Yekaterinburg, Tyumen, Surgut,
Rostov-on-Don and Krasnodar).
The Company has 12 pick points
in Moscow and St. Petersburg,
spread equally between the two
cities. In September 2020,
the Rostokino pick point in Moscow
was reopened after reconstruction,
which allowed us to increase
the volume of processed orders
in the pick point by 35%, reducing
logistics costs and shorten
the delivery time.
Our delivery fleet comprises around
140 transport vehicles that go
on routes each day in the two cities.
In 2020, we extended the Moscow
and St. Petersburg delivery zones,
which enabled us to increase
the volume of incoming orders,
and to better meet customers’
needs. The delivery service vehicles
in Moscow and St. Petersburg
were rebranded, which promoted
brand awareness of O’KEY.
In the logistics function,
in 2020 O’KEY optimised the
operational accounting approach
to transport services, which
enabled the Company to reduce
the document flow, improve
transparency and cut delivery
expenses while maintaining
the high quality of our service.
We continued to actively
implement technology:
the Company purchased a pilot
batch of portable data terminals,
for assembling and completing
orders, with pre-installed own-
developed software. The user-
friendly and simple software
interface allows us to facilitate
the training of new employees
and to increase the general
efficiency of operations.
MOBILE APP AND WEBSITE
The popularity of the O’KEY mobile
app continues to grow among our
customers: in Q4 2020, over 47%
of online orders were made through
it. The application successfully
handled the sharp rise of customer
orders due to the COVID-19
pandemic, as the level of app
productivity and resilience
was rapidly increased.
Our mobile app offers customers
a vast range of features, from
the option to share a basket
between users, to a voice assistant
service. In 2020, we continued
to expand the app’s functionality
and implemented the new loyalty
programme and information about
personalised offers.
47%
online orders
are made vie
the mobile
application
Annual report 2020
Delivering great customer service
THE O’KEY MOBILE APP ALLOWS
CUSTOMERS TO:
● purchase goods;
● use search and filters;
● use easy templates;
● view promotions;
● pay online;
● view order history;
● view offline catalogues;
● locate the nearest store and see the
available product assortment;
● create an electronic loyalty card;
● access shopping history, both in the form
of a detailed receipt and overall monthly
expenses;
● check accumulated loyalty points and
personalised offers;
● use the voice assistant;
● view personalised offers – a new service.
Our e-commerce platform offers
various payment options:
● online, on placing the order
on the web-site (the money is
first reserved, and is then debited
at the moment when the order is
delivered to the customer);
● cash payment at the moment
of order delivery;
● card / Apple Pay / Google Pay
payment at the moment of order
delivery.
We intend to update our mobile app
and in 2020 developed its MVP1,
both for iOS and Android platforms.
A large proportion of orders
are made via the okeydostavka
website, which offers various
features. In their personal accounts,
customers can view available
promotions and coupons (valid both
online and in offline stores), check
their active balance and purchase
statistics, and accumulate bonus
points from online and offline
purchases. The website is adapted
for mobile devices to increase
conversion rates.
In 2020, we continued to improve
the website usability including
the optimisation of product search.
For the convenience of online store
customers, we launched an English
version of the okeydostavka site
and O’KEY mobile app.
PLANS
In 2021, we will continue to expand
the coverage of our online delivery
zone and the digital presence
of the brand, elaborate the “one
retail” concept, and develop cross-
partner relationships with other
market players.
Ring Road. We will also launch
an e-commerce pick point
in the hypermarket in Noginsk,
which will be accessible by 600 k
potential customers and decrease
logistics costs in the region.
We have already expanded
the availability of online
delivery to the radius of 100
km from the Moscow Ring
Road and the Saint Petersburg
Among other plans
of O’KEY Group:
● further purchase of new portable
data terminals with pre-installed
special software;
● release of the updated mobile
app;
● expansion of the 90-minutes
express delivery service;
● continued transition
to the microservice architecture
to ensure a high level
of speed and fault tolerance
of the systems;
● creation of the new-concept
online store website.
52
53
O’KEY ONLINE DELIVERY
ONLINE DELIVERY VIA PARTNERS
(cid:5) MVP (minimum viable product) – a basic version of a mobile application with core functionalities
SIBERIA FDURALS FDNORTH-WEST FDVOLGA FDSOUTH FDCENTRAL FDIrkutskKrasnoyarskNovosibirskOmskTyumenEkaterinburgOrenburgTogliattiSaratovRostov-on-DonKrasnodarUfaNizhny NovgorodSurgutSyktyvkarSt. PetersburgMurmanskAstrakhanSochiMOSCOWIvanovoVoronezhLipetskO’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Annual report 2020
Delivering great customer service
DA! Discounter
Format
Our DA! discounter business remains one of the fastest growing grocery chains
in the market, and the main growth driver for the Group. During the year, its net
retail revenue showed solid growth of 45.3% YoY, to a large extent driven by
impressive LFL growth of 27.8% YoY, supported by positive average ticket and
traffic dynamics.
STRATEGIC PRIORITIES OF DA!:
Own brands
development
Growth
and expansion
Achieving
superior financial
results
DA! stores offer a well-balanced assortment of high-quality goods, including
those in the fresh category, at competitive prices. Our discounters adhere to an
“every day low price” policy, largely supported by our own brand products. The
private label range offers clear cost advantages of 20-30% against branded goods
of comparable quality, which creates a very strong appeal for price-sensitive
customers. A positive shopping experience is facilitated by the convenient
location of our stores, high customer service standards, modern equipment and
spacious interiors. Taking into consideration quality specifics and packaging
of equivalent products, we see ourselves as a main player in terms of price
leadership.
KEY FIGURES OF 2020
LFL NET RETAIL
REVENUE, %
NET RETAIL
REVENUE,
RUB BN
NET RETAIL
REVENUE,
%
LFL TRAFFIC,
%
LFL AVERAGE
TICKET, %
+27.8
26
+45.3
+9.5
+8.6
+25.1
+14.9
+12.7
13.6
17.9
+32 +31.7
+2.2
+5.8
+1.2
NUMBER
OF STORES
118
100
82
2018
2019
2020
SELLING SPACE,
K M2
80.17
69.25
56.8
DISCOUNTER BUSINESS
AT A GLANCE
700 m2
Average store
selling space
15%
Discounter
share in Group
revenue 2020
20%
Share of
owned space
18
Net store
opening
in 2020
RUB 26 bn
Net retail
revenue
in 2020
118
discounters
Total number
of stores
2,800
SKUs
Average
product range
1,105
Private label
SKUs
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
54
55
O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
PERFORMANCE
In 2020, DA! showed record top-
line growth for the past three
years: net retail revenue grew
by 45.3% YoY to RUB 25,950 mln
as a result of a 27.8% LFL
net retail revenue growth
and a 15.8% increase in selling
space. In the reporting year,
DA! discounters reached a 15%
share of the Group’s revenue,
and continued to lead the Group’s
performance. In 2020, the Group
opened 18 discounters, net
of closures, across the Central
Federal district, bringing the total
number of DA! stores to 118.
In 2020, DA! became profitable
at the EBITDA level RUB 784 mln,
which proved the success
of the Group’s approach
to the discounter business.
To ensure robust growth, DA!
discounters continued to effectively
manage their balanced assortment
and own brand portfolio,
and maintain their fair value
for money proposition, including
a competitive pricing policy,
throughout the year. 86 private
label SKUs were added to our
portfolio during 2020.
“Every day low price” –
a strong value-for-money
proposition
RUB 26.0 bn
+45.3% YoY
Net retail revenue
in 2020
DA! discounters profit from
synergies with O’KEY hypermarkets
in procurement, imports
and relations with suppliers
and producers. This creates
economies of scale, increases our
purchasing power and supports
a high level of quality in the goods
we source.
DA! strives to be a fast-mover
in a competitive environment,
identifying trends and reacting
quickly to meet customer needs.
Our commitment is to maintain
the high productivity of our
internal operations and logistics,
and provide customers with
the best assortment and supply
solutions. In 2020, we:
● enhanced logistics system
to provide customers with
the freshest goods;
● optimised our standard
planograms to have more sales-
related and consumer-friendly
merchandising;
● tested local supplies
of traditional dairy products
and continued to work with
some of them;
● opened an additional warehouse
for frozen products to respond
to fluctuating demand and high
season;
● optimised the bulk food facilities
in our confectionery and frozen
sections, and introduced nuts
and dried fruits in the bulk food
section.
To ensure a high level of
productivity, DA! also introduces
IT solutions into its operational
activity. In 2020, we:
● implemented modern data
storage, providing higher speed,
availability and recovery, based
on MetroCluster technology;
● modernised the L3 network,
connecting all distributed
company sites (including all
stores and DCs);
● made numerous changes to our
ERP, BI and POS systems
to increase efficiency;
● added a new cloud provider
to expand computer power
for new projects and to provide
geographical redundancy.
FRESH OFFER
DA! discounters keep up with
the general trend towards fresh
and ultra-fresh products, offering
a wide range of dairy, fresh meat
and poultry, fruits and vegetables.
In 2020, the share of fresh
and ultra-fresh products in DA!
sales amounted to approximately
40%. Our range of fresh products
includes own-brand SKUs,
some of them under the “farm
label”, which represents regional
and traditional production
of outstanding quality. Another
feature of our discounters is a wide
(over 40 SKUs) range of freshly
baked pastries.
In order to ensure freshness
of goods, we practice direct import
and deliver fruits and vegetables
to all our stores on daily basis.
PRIVATE LABELS
According to our research,
customers tend to turn towards
cost-conscious consumption,
which is driven by fundamental
macroeconomic factors: they seek
high-quality products at attractive
prices, comparable to branded
goods. Therefore, one of our
strategic priorities is strengthening
our own-brand offer while following
the latest trends in the retail
industry and seeking to meet
customers’ changing preferences.
DA! own brands:
20-30%
cheaper than
branded products
of the same quality
56
57
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
We carefully select manufacturers
and develop long-term mutually
beneficial collaborations with
them to provide the best quality of
goods and ensure packaging design
DEVELOPING OWN BRAND
1
Thorough selection of
manufacturers – innovative
young companies ready to offer
a special quality product at
the best price, and to meet our
requirements
is close or similar to the branded
assortment.
2
Joint development of product
and packaging, close or similar
to branded assortment in terms
of quality
3
Strict quality control
Private label products continue
to significantly contribute to our
turnover and grow better in sales
than branded products. In 2020, PLs
comprised around 40% of our total
number of SKUs and accounted
for around 50% of DA! revenue. In
the reporting year, we introduced
86 new private label SKUs and
revisited 155 existing private label
SKUs regarding their layout and
design. Our assortment of private
label SKUs reached 1,105 SKUs.
For our private label, we use 91
registered brands that are applied
as umbrella brands for different
categories and quality levels.
>1,105
SKUs
under 91
own brands
~50%
of DA! revenue
Our priority is to guarantee the
consistent high quality of our
private label goods on daily
basis. We strictly comply with
legal requirements and organise
additional quality checks at the
supplier and product levels.
Producers of our private label
products undergo external audits
based on GFSI (Global Food Safety
Initiative) requirements, with
frequency of such audits depending
on previous audit results and the
potential risk factors of the goods.
In addition, we initiate checks in
external independent accredited
laboratories to evaluate and ensure
the quality of the product. The
frequency of laboratory checks
varies from one to twelve per year,
and is based on the potential risk
of the product category and may
depend on the product.
In 2020, the number of checks was
increased to improve the quality
and high safety level.
Two-level quality check:
supply level –
GFSI certification
product level –
laboratory checks
Our goal is to further optimise and
extend the private label assortment,
raising the share of own brands
in the total number of SKUs. In
the future, we will continue to
introduce new PL products and
improve the packaging layout.
PLANS
The success of our discounter
business underpins our motivation
to further expand the chain of
DA! stores: in 2021, we intend to
open up to 40 new discounters.
We will do our upmost to maintain
the high efficiency of our internal
operations, and further improve our
assortment and supply solutions to
strengthen our positioning.
We will also continue to develop
our packaging layout schemes and
expand the private label portfolio,
focusing on quality, packaging
layout and number of SKUs. In
particular, we see potential in
developing and introducing private
label products with higher added
value characteristics, such as
special origin, production method
or ingredients.
We will also implement and
start using a modern, highly
customisable WMS, which will
enable us to respond promptly
to rapid changes in the business
environment.
58
59
Delivering great customer serviceAnnual report 2020O’KEY Group In 2020, O'KEY Group delivered
strong financial results thanks
to the resilience of its business
model and the success of the three-
format strategy. The Group’s
financial position and debt
profile remained solid despite
unprecedented challenges
the whole economy faced
over the year.
+5.6%
revenue growth
RUB 14.8 bn
EBITDA
8.5%
EBITDA margin
Financial review
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Annual report 2020
Delivering great customer service
FY 2020 financial
highlights
Group revenue increased
by 5.6% YoY to
O`KEY revenue rose
by 0.8% YoY to
Group EBITDA grew
by 5.5% YoY to
DA! discounters EBITDA
improved to positive
RUB 174,341 mln
RUB 148,341 mln,
driven by 2.5% LFL retail revenue
growth
RUB 14,832 mln,
and EBITDA margin stood at 8.5%
RUB 784 mln
in FY 2020 from negative
RUB 215 mln in FY 2019, driven
by the strong revenue performance
and efficiency growth
DA! revenue soared
by 45.3% YoY to
Group gross profit
increased by 5.4% to
Group SG&A expenses, %
declined by 0.5 pps YoY to
Group net debt position
improved slightly YoY to a
RUB 26,000 mln,
led by 27.8% LFL revenue growth
and selling-space expansion
RUB 39,288 mln,
and gross margin amounted to 22.5%
in FY 2020
18.8%
in FY 2020
3.6x
total interest bearing liabilities
(net of cash) to EBITDA ratio, as
of December 31, 2020
62
63
O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
GROUP NET RETAIL REVENUE AND LFL REVENUE IN 12M 2020
GROUP REVENUE
RUB mln
O`KEY Group
O`KEY hypermarkets
DA! discounters
For more details, please refer to the Group’s
Q4 2020 Trading Update.
12M 2020
12M 2019
YoY, %
172,738
146,788
25,950
163,154
145,298
17,856
5.9%
1.0%
45.3%
LFL
revenue,%
5.4%
2.5%
27.8%
RUB mln
Total Group revenue
Retail revenue
Rental income
FY 2020
174,341
172,738
1,603
FY 2019
165,086
163,154
YoY, %
5.6%
5.9%
1,932
(17.0%)
GROUP PROFIT AND LOSSES HIGHLIGHTS IN FY 20201
RUB mln
Total Group revenue
O`KEY
DA!
Gross profit
Gross profit margin, %1
Selling, general and administrative expenses
SG&A, as % of revenue
Other operating (expenses)/income, net
Operating profit
Finance costs, net
Foreign exchange (loss)/gain
Net profit (loss)
Group EBITDA
Group EBITDA margin, %
O’KEY EBITDA
O’KEY EBITDA margin, %
DA! EBITDA
DA! EBITDA margin, %
FY 2020
174,341
148,341
26,000
39,288
22.5%
FY 2019
165,086
147,175
17,911
37,260
22.6%
(32,792)
(31,790)
18.8%
(1,457)
5,039
19.3%
(569)
4,901
(4,884)
(4,965)
(1,787)
(1,444)
14,832
8.5%
14,048
9.5%
784
3.0%
938
747
14,061
8.5%
14,277
9.7%
(215)
(1.2%)
YoY, %
5.6%
0.8%
45.3%
5.4%
(0.1pp)
3.2%
(0.5pp)
2.6x
2.8%
(1.6%)
n/a
n/a
5.5%
-
(1.6%)
(0.2pp)
n/a
4.2pp
(cid:6)
64
In the reporting period, the Group has reclassified certain expenses relating to self-produced catering from selling, general and administrative
expenses to cost of goods sold. For comparison purposes, the respective changes in the presentation have been applied to FY 2019 profit and loss
statement. The changes do not have any effect on EBITDA and Net Income.
Other costs
Total Group SG&A
Group retail revenue rose
by 5.9% YoY to RUB 172,738 mln
in FY 2020. This growth was driven
by strong LFL performance of DA!
and thier selling space expansion,
supported by O`Key's positive LFL
performance.
Rental income decreased
by 17% (or by RUB 329 mln) YoY
to RUB 1,603 mln in FY 2020,
mainly due to leaseholders’
businesses shutting down during
the pandemic.
In FY 2020, total Group
revenue increased by 5.6% YoY
to RUB 174,341 mln.
GROUP GROSS PROFIT
In FY 2020, the Group’s
gross profit rose by 5.4% YoY
to RUB 39,288 mln, driven primarily
by retail revenue growth.
The Group’s gross margin decreased
by 0.1 pps YoY to 22.5%, on the back
of a decline in rental income
and higher shrinkage costs, as
a percentage of revenue. However,
this was largely offset by more
efficient procurement and lower
logistics costs, as a percentage
of revenue.
Rental income, as a percentage
of total revenue, declined
by 0.2 pps YoY, as explained above.
In FY 2020, shrinkage costs
grew, as a percentage of revenue,
by 0.2 pp YoY, primarily due to the
cancellation of returns to suppliers
of products with a shelf-life of less
than 30 days. As the new regulation
was enacted in June 2019, it resulted
in a lower comparable base of 2019
vs 2020. Besides, the total share
of ‘fresh’, ‘ultra-fresh’ products,
and fruit and vegetables, as the
key categories of the company’s
customer proposition, was up by
0.7 pp YoY to 46.4% of O`KEY’s net
retail revenue in FY 2020.
Commercial margin improved
by 0.2 pps YoY in FY 2020,
driven by constant assortment
optimisation and customer
proposition enhancement, as well
as operational and commercial
synergies between the two formats.
Logistics costs, as a percentage
of revenue, decreased
by 0.1 pps YoY, due to ongoing
logistics processes optimisation.
GROUP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
RUB mln
Personnel costs
Depreciation and amortisation
Communication and utilities
Advertising and marketing
Repairs and maintenance costs
Insurance and bank commissions
Operating taxes
Security expenses
Legal and professional expenses
Materials and supplies
Variable lease expenses and expenses relating to short-term
and low-value leases
FY 2020
13,607
8,204
3,720
2,124
1,345
1,026
735
712
685
435
161
38
32,792
%
of revenue
7.8%
4.7%
2.1%
1.2%
0.8%
0.6%
0.42%
0.4%
0.4%
0.25%
0.1%
0.0%
18.8%
FY 2019
13,006
8,100
3,612
2,267
1,284
916
579
705
637
312
347
23
31,790
%
of revenue
7.9%
4.9%
2.2%
1.4%
0.8%
0.6%
0.35%
0.4%
0.4%
0.19%
0.2%
0.0%
19.3%
YoY, pps
(0.1pp)
(0.2pp)
(0.1pp)
(0.2pp)
-
-
0.07pp
-
-
0.06pp
(0.1pp)
-
(0.5pp)
65
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Group SG&A expenses
increased by 3.2% YoY
to RUB 32,792 mln in FY 2020.
However, SG&A expenses, as
a percentage of revenue, decreased
by 0.5 pps YoY to 18.8% in FY 2020.
Personnel costs, as a percentage
of revenue, dropped by 0.1 pps YoY
to 7.8% in FY 2020, due mainly
to the increased efficiency
of store operations and a ramp-up
in the DA! business, partially offset
by extra bonuses to store staff
during the pandemic.
Communication and utilities
expenses increased by 3.0% YoY
to RUB 3,720 mln, but reduced,
as a percentage of revenue,
by 0.1 pps YoY in FY 2020, resulted
from the revenue growth.
Advertising and marketing
expenses declined, as a percentage
of revenue, by 0.2 pps YoY
to 1.2%, as the Group revised its
advertising activities in response
to the consumer behaviour change.
The mix was optimised from
traditional media towards a higher
share of digital and personal
communication, reflecting
customers’ consumption shifts
during the pandemic.
Operating tax expenses increased
by 26.9% YoY to RUB 735 mln,
and by 0.07 pps YoY, mainly as
a result of an increase in cadastral
value of property owned, as well as
the store expansion programme.
Materials and supplies
expenses increased
by 39.4% YoY to RUB 435 mln,
and by 0.06 pps YoY, due mainly
to RUB 141 mln pandemic related
expenses for sanitary measures
and protective materials acquired
for our stores and offices in FY 2020.
The Group brought variable
lease expenses, as a percentage
of revenue, down by 0.1 pps YoY
in FY 2020, thanks to the rent
rate re-negotiations, as well as
temporary rental deductions
received during lockdown.
Depreciation and amortisation
(D&A) expenses remained
almost flat YoY, and decreased,
as a percentage of revenue,
by 0.2 pps YoY in FY 2020.
GROUP EBITDA AND EBITDA
MARGIN
Group EBITDA grew by 5.5% YoY
to RUB 14,832 mln in FY 2020,
led by revenue growth and cost
savings. The Group’s EBITDA margin
remained flat YoY at 8.5% in FY 2020.
DA! EBITDA turned to positive
RUB 784 mln in FY 2020, compared
with negative RUB 215 mln
in FY 2019.
O’KEY EBITDA reduced
by 1.6% YoY and amounted
to RUB 14,048 mln in FY 2020.
The decline was driven mainly
by the abovementioned drop
in rental income and less of non-
cash gains from lease agreement
modification (according to IFRS 16)
recognised in FY 2020 as compared
to FY 2019.
OTHER OPERATING
EXPENSES AND OPERATING
PROFIT
Group other operating expenses
amounted to RUB 1,457 mln in FY
2020 compared RUB 569 mln in FY
2019. The increase was attributable
primarily to the disposal of non-
current assets related to store
and land plots portfolio revision
and optimisation in the reporting
period. This amounted to a net
loss of RUB 485 mln in FY 2020,
compared to a RUB 47 mln gain
in FY 2019.
Additionally, a one-off gain
of RUB 377 mln from lease
agreements modification
was received in FY 2019. In FY 2020,
the gain amounted to only
RUB 56 mln, as the main effect from
IFRS 16 standard implementation
was recognised in FY 2019. Both
items have a non-cash nature.
The Group’s operating profit rose
by 2.8% YoY to RUB 5,039 mln
in FY 2020, on the back
of EBITDA growth partially offset
by the increase in other operating
expenses.
GROUP FINANCE COSTS,
FOREIGN EXCHANGE
AND NET PROFIT
A substantial part of interest costs
were attributable to lease liabilities
(accounted under IFRS 16). Net
finance costs decreased by 1.6% YoY
to RUB 4,884 mln in FY 2020, led
mainly by lower interest expense
on lease liabilities due to a decline
in lease liabilities amount,
and a decrease in the weighted
average interest rate in FY 2020.
In FY 2020, net foreign exchange
loss amounted to RUB 1,787 mln,
compared with a RUB 938 mln
gain in FY 2019. The loss mainly
related to intragroup US-dollar-
denominated loans, and to lease
contracts nominated in foreign
currencies, while losses from import
operations had a relatively small
impact on the Group’s results.
The Group recorded a net loss
of RUB 1,444 mln in FY 2020,
compared with a RUB 747 mln net
profit in FY 2019. The loss is mostly
attributable to the aforementioned
foreign currency loss in FY 2020.
66
GROUP CASH FLOW
RUB mln
Net cash from/ (used in) operating activities
Net cash used in/ (from) investing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate on cash and cash equivalents
FY 2020
FY 2019
11,946
(3,755)
(5,988)
2,202
4
11,078
(1,352)
(12,922)
(3,196)
(9)
Net cash from operating activities
amounted to RUB 11,946 mln
in FY 2020, compared with
RUB 11,078 mln in FY 2019.
The increase was largely
a result of retail revenue growth
and efficient working capital
management.
Net cash used in investing activities
amounted to RUB 3,755 mln
in FY 2020, compared with
RUB 1,352 mln cash used in FY 2019.
In 2020, the Group invested
over RUB 1,800 mln (excluding
VAT) into the development
of its hypermarket business
and over RUB 1,900 mln (excluding
VAT) into the expansion of its
discount store operation. In 2019,
the Group sold two land plots
and received cash proceeds
totalling RUB 1,553 mln partially
offsetting its capital expenditures
in that year, which led to the high
comparison base for FY 2020.
Net cash used in financing activities
amounted to RUB 5,988 mln
in FY 2020 compared with
RUB 12,922 mln in FY 2019.
The decline was mainly attributable
to the advanced repayment of long-
term loans in FY 2019.
Net increase in cash amounted
to RUB 2,202 mln in FY 2020,
versus a RUB 3,196 mln cash
decrease in FY 2019.
As of December 31, 2020, the Group
had RUB 12,400 mln of undrawn,
committed borrowing facilities
available in Russian roubles
on a fixed and floating rate basis
until March 2021-November 2024
in respect of which all conditions
have been met. Proceeds from these
facilities may be used to finance
operating and investing activities if
necessary.
GROUP NET DEBT POSITION
RUB mln
EBITDA
Total debt
Short-term debt1
Long-term debt
Cash & cash equivalents
Net Debt
Total Lease Liabilities
Short-term lease liabilities
Long-term lease liabilities
Total Interest-Bearing Liabilities (Net of сash & сash equivalents)
Total Interest-Bearing Liabilities (Net of сash & сash equivalents) / EBITDA
As of 31
As of 31
December 2020
December 2019
14,832
36,227
4,419
31,808
7,714
28,513
24,639
4,472
20,167
53,152
3.6x
14,061
31,719
1,629
30,090
5,507
26,212
25,123
3,950
21,173
51,335
3.7x
[1] Short-term debt does not include interest accrued on loans and borrowings.
Group financial position remained
stable during the reporting period.
As of December 31, 2020, our net
debt to EBITDA ratio reduced to
3.6x from 3.7x as of December 31,
2019.
As of December 31, 2020 and during
the 12-month period then ended,
the Group complied with all of its
loan covenants.
67
Delivering great customer serviceAnnual report 2020O’KEY Group In 2020, the Company ensured
the effective functioning of
its risk management system by
identifying and assessing risks in
a timely manner, developing and
implementing measures to manage
those risks. Senior management
devoted significant attention to
managing key risks that have a
high impact and a high probability.
The Board of Directors reviewed
information on managing the
Company’s key risks on a quarterly
basis.
14
key risks monitored and managed
RAEX ‘ruA-’
credit rating with Stable outlook
Risk management
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Our risk management system is
aimed at providing a reasonable
guarantee that the Company’s
strategic goals will be achieved
in a timely manner and that
the level of risks faced
by the Group remains acceptable
for management and shareholders.
We operate a unified approach
to risk management through
the Group Risk Standard, which
comprises a range of relevant tools
and methodologies aimed at early
risk detection and risk mitigation.
The Board of Directors has overall
responsibility for the establishment
and oversight of the Group’s
risk management framework.
The Group’s Audit Committee
oversees how management
monitors compliance with
the Group’s risk management
policies and procedures,
and reviews the adequacy
of the risk management framework
in relation to the risks faced
by the Group. Internal Audit assists
the Group’s Audit Committee
in its oversight role. Internal Audit
undertakes both regular and ad
hoc reviews of risk management
controls and procedures, the results
of which are reported to the Audit
Committee. The Group, through its
training and management standards
and procedures, aims to develop
a disciplined and constructive
control environment in which
all employees understand their
roles and obligations. Identified
risk areas are monitored quarterly
and followed by a coordinated
improvement programme.
In 2020, the Company ensured
the effective functioning
of its risk management system
by identifying and assessing risks
in a timely manner, developing
and implementing measures
to manage those risks. Senior
management devoted significant
attention to managing key risks
that have a high impact and a high
probability. The Board of Directors
reviewed information on managing
the Company’s key risks
on a quarterly basis.
In 2020, the Company continued
to develop its risk management
system:
● A declaration and provision
on the Company’s risk appetite
were approved by the Board
of Directors. Risk appetite
establishes the level of risk
that is acceptable in terms
of achieving the Company’s
goals and facilitates effective
decision-making while taking
risks into account.
● The Company’s bylaws
establishing a unified
methodology and procedure
for cooperation
and responsibility regarding risk
management were updated. No
significant changes were made
to the Company’s corporate
governance system in 2020
overall as a result of changes
to the risk management system.
MAP OF PRINCIPLE RISKS
The Board
of Directors
● Overall responsibility for the
establishment and oversight of
the Group’s risk management
framework
The Audit Committee
● Oversees how management
monitors compliance with
the Group’s risk management
policies an procedures
● Reviews the adequacy of the
risk management framework in
relation to the risk faced by the
Group
Executive management
(CEO and Management Board)
● Oversees implementation of, and
adherence to, risk management
policies.
● Monitors and manages risks
relevant to job function
● Carries out risk identification and
reporting
● Performs operational risk
management
Internal Audit
● Assists the Group’s Audit
Committee in its oversight role
● Undertakes both regular and ad
hoc reviews of risk management
controls and procedures, the
results of which are reported to
the Audit Committee
k
s
i
r
e
h
t
f
o
y
t
i
l
i
b
a
b
o
r
P
Expected
Likely
(perceived)
Hazard
(possible)
Low-
probability
Remote
STRATEGIC RISKS
1. Economic outlook
2. Competition risk
3. Political risk
4. Regulatory risk
4
1
2
5
6
14
9
11
7
8
12
3
10
13
Immaterial
Minimum
Medium
Material
Irretrievable
Materiality (affect) of the risk
OPERATIONAL RISKS
5. Changing customer expectations
6. Employee recruitment and
retention
7. Supply chain risk
8. IT Platform Development
9. IT security threats
FINANCIAL RISKS
10. Providing sufficient level of
financing
11. Tax regulations
12. Changes in working capital
13. Risk of misstatements in
financial statements
14. Risks of currency and interest
rates volatility
70
71
O’KEY GroupDelivering great customer serviceAnnual report 2020
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
PRINCIPLE RISKS
Below we describe the key risks
that could have a material adverse
effect on our business, our financial
and operational performance and,
as a result, could affect our share
price and our reputation. Additional
risks not known to us or those
risks that we currently consider
immaterial, may also impair our
business operations. We do not
expect to incur any risks that may
jeopardise the continuity of our
business.
STRATEGIC RISKS
Name of Risk
Definition & Potential Impact
Mitigating Actions
1
2
Economic
outlook
Competition
risk
Our business is affected by uncertainties associated
with changing economic conditions, particularly
in the current environment of global economic
instability. Therefore, we may face reduced customer
demand as the income and purchasing power of
our customers’ decreases under the impact of the
weaker macroeconomic environment exacerbated by
declining oil prices and sustained ruble volatility, as
well as the coronavirus pandemic.
The retail sector in Russia is highly competitive. We
face strong competition from other retailers (Russian
and international), some of which are larger and have
greater resources. Retail chains compete mainly
over store locations, product ranges, price, service
and store conditions. Some competitors might be
more effective and faster in capturing certain market
opportunities, which in turn may negatively impact
our market share and our ability to achieve our
performance and expansion targets.
3
Political risk
Political developments may adversely impact the
macroeconomic environment and the market in which
our company operates. Although political stability
in Russia has improved, Russia is still a state whose
political, economic and financial systems are rapidly
developing and changing.
4
Regulatory risk Our operations are subject to various government
regulations and industry specific legislation with
respect to quality, packaging, health and safety,
labelling, distribution and other standards. Some
regulations are still being developed in Russia.
Current and future government regulations or
changes thereto may require us to change the way we
run our operations and could result in cost increases.
Failure to comply with regulations can also lead to
reputational damage.
We closely monitor the changes in the
macroeconomic environment, income levels,
consumer confidence index and other indicators.
Therefore, if significant unfavorable developments
occur, we are ready to take corrective steps and adjust
our business model.
We are focused on enhancing our customer
value proposition through the introduction of a
competitive pricing policy, the implementation
of effective marketing initiatives and assortment
structure improvement. In the reporting year we
launched the new hypermarket concept and opened a
renewed O’KEY store in Rostokino, Moscow.
We are constantly developing delivery service, which
includes cooperation with partners. In 2020, we
expanded the O’KEY delivery service to further 20
cities where the chain operates hypermarkets.
We rapidly expand our DA! discounters chain,
opening each year 20+ stores in Central FD. We
keep looking for the best possible opportunities
to expand the hypermarkets business, and in 2020
we opened a new hypermarket in St. Petersburg
which boosted O`KEY’s position in the strategically
important region.
Although these risks are outside the control of the
Group, O’KEY monitors political developments
closely and maintains strong relationships with
various national industry bodies.
We aim to ensure compliance with all applicable
regulations by monitoring regulatory developments
and changes, and following up and responding to
changes in regulations and standards in a timely
manner.
The new requirements for the marking of products
(photo products, perfumes, shoes and car tyres)
significantly influenced all market players.
To keep up with the new regulations, during 2020 we
timely developed and implemented essential changes
in the Company’ main business processes (such
as goods ordering/receiving/return, stocktaking),
updated relevant internal policies, procedures and
information systems.
OPERATIONAL RISKS
Name of Risk
Definition & Potential Impact
Mitigating Actions
Changing
customer
expectations
We strive to provide our customers with a wide range
of goods and services, at competitive prices. However,
we recognise that our customers’ shopping habits
and expectations are influenced by the economic
environment and will change over time.
5
6
Employee
recruitment
and retention
7
Supply chain
risk
8
9
IT Platform
Development
IT security
threats
To maximise the efficiency and relevance of such
assessments, we monitor internal and external reports
on retail market development and changes in O’KEY
positioning.
Following the changes in customer behaviour caused
by the pandemic, in 2020 we rapidly ramped up our
e-commerce throughput capacities. We also tapped
into synergies with specialised delivery services to
reach out to new audiences.
We also continued to develop our fresh and ultra-
fresh categories and introduced a new hypermarket
concept with focus on them.
To improve motivation, we have developed coaching
in our stores, the Performance Appraisal system
that is conducted on a regular basis and rewards
employees based on their individual results.
We also promote internal opportunities for career
development via regular trainings and special
programmes.
We constantly work to enhance the effectiveness of
our supply chain operations at distribution centers,
stores and head office levels.
Thus, the effectiveness of our supply chain
management and sustainable long-term relationships
with suppliers helped us timely secure the loading
of our distribution centers. That allowed us to avoid
any potential shortages that might be caused by the
pandemic and increased demand for certain goods in
the beginning of 2020.
We also started to implement the Transportation
Management System in order to improve planning
and management of goods’ delivery to hypermarkets.
We expanded our DC Litvinovo in Moscow by adding
extra space of 11 k m2.
We implement cutting-edge IT solutions
(applications and systems) that cover major business
processes and positively improve the work of our
store and head office processes.
We employ a number of measures, including
employee training, comprehensive monitoring of our
networks and systems, and maintenance of backup
and protective systems (such as firewalls, virus
scanners and others) in attempt to reduce the threats
to our IT & business infrastructure.
Competition for highly qualified management
and store personnel remains intense in Russia. To
meet our expansion plans we need highly skilled
employees. Our future success depends in part on our
continued ability to hire, and retain new employees.
We understand that any inability to attract and retain
highly qualified employees and key personnel in the
future could have a material adverse effect on our
business.
Our financial performance depends in part on
reliable and effective supply chain management. We
rely on third parties to supply us with merchandise
and services. The third parties that supply us with
merchandise and services also have other customers
and may not have sufficient capacity to meet all of
their customers’ needs, including ours, during periods
of excess demand. Shortages and delays could
materially harm our business. Unanticipated increases
in prices could also adversely affect our performance.
Furthermore, we may be exposed to risk of delays and
interruptions to our supply chain because of natural
disasters, in case we are unable to identify alternative
sources of supply in a timely manner.
Execution of our strategic targets requires adaptation
of current IT infrastructure to the changing business
needs. As the business grows the complexity of
processes supporting it and diversity of tasks around
such growth are increasing. Delayed or inappropriate
decisions on development of the infrastructure can
lead to failures in meeting Group goals and impede
attainment of longer-term goals.
We are observing an increase in IT security threats
and higher levels of professionalism in computer
crime. Our systems and solutions, as well as those
of our counterparties remain potentially vulnerable
to attacks. Depending on their nature and scope,
such attacks could potentially lead to the leakage
of confidential information, improper use of our
systems, manipulation and destruction of data, sales
downtimes and supply shortages, which in turn could
adversely affect our reputation, competitiveness, and
business, financial and operational performance.
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O’KEY GroupDelivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
FINANCIAL RISKS
Name of Risk
Definition & Potential Impact
Mitigating Actions
10
Providing
sufficient level
of financing
Recent changes in the macroeconomic situation
might result in a liquidity squeeze and tightening
of lending policies by Russian banks. Given the
expansion programme in the coming periods, issues
with availability of external financing or significant
changes in its cost can negatively impact our Group’s
ability to execute its expansion programme.
11
Tax regulations
Russian tax law has complex tax rules, which may be
interpreted in different ways and tax rules are subject
to frequent changes. Examinations by tax authorities
and changes in tax regulations could adversely
affect our business, and financial and operational
performance.
Changes in tax law could result in higher tax expense
and payments. Furthermore, legislative changes could
materially impact tax receivables and liabilities as
well as deferred tax assets and deferred tax liabilities.
We maintain available lines of credit to close
potential liquidity gaps.
We diversify and enlarge the list of collaborating
banks to increase our control over the availability
and cost of financing. Our securities are listed on the
London Stock Exchange and Moscow Exchange, that
allows us to utilise the secondary placement of shares
as an alternative way of financing.
In 2020, RAEX (Expert RA) has affirmed O`KEY LLC,
the main operating subsidiary of O`KEY Group S.A. ,
a credit rating of ‘ruA-’. The outlook of the rating is
Stable.
The rating reflects the Group’s stable position in
Russian food retail and strong liquidity metrics, as
well as high quality of corporate governance and risk
management.
Additionally, we closed order book on rub 5 bn bonds
with purpose to refinance 001Р-01 series bonds traded
at the Moscow Exchange with maturity in April 2021.
Our tax and legal specialists review compliance with
applicable tax regulations, current interpretations
issued by the authorities and judicial precedents
resulting from tax disputes. This work is conducted
on a regular basis and in a consistent manner and
ensures we are aware of any changes that we may
need to enforce.
12
Changes
in working
capital
Inability to control and manage elements of the
working capital can result in negative changes for the
operating cash flow and lead to liquidity gaps and
excessive reliance on external financing.
We exercise constant control over the working
capital, which is detailed in our monetary policy. The
aim of this policy is to minimise prepayment balances
and control of overdue receivables.
Risk of
misstatements
in financial
statements
We face exposure to risks relating to failures in
proper financial reporting and the classification of
accounting entries, and risks of making inaccurate
accounting estimates.
We are also taking steps to improve stock
management efficiency by establishing and
monitoring KPIs and organising training sessions for
store employees.
We regularly monitor internal controls over financial
reporting to prevent misstatements in financial
statements. We have a qualified team of finance
professionals who prepare our financial statements,
and our consolidated IFRS financial statements
preparation process is largely automated.
For a description of financial risks and exposure
calculations, please refer to the note 28 and 30 in the
Group Consolidated Financial Statements.
Risks of cur-
rency and
interest rates
volatility
We are exposed to fluctuations in exchange rates
because of loans received in USD and contractual
obligations in USD and EUR. Although measures are
taken to minimise this risk, there can be no assurance
that exchange rate and interest rate fluctuations will
not negatively influence our results.
Certain currency and interest rate risks are controlled
through switching payments into roubles, setting caps
or hedged using derivative financial instruments.
On 31 December 2020, 100% of the portfolio are
fixed interest rate loans and approximately 97% of
the portfolio are RUB loans.
13
14
74
INTERNAL CONTROL
AND RISK MANAGEMENT
SYSTEM
Regarding the internal controls
in the area of accounting
and financial reporting,
the following should be noted:
● Staff involved in the Company's
accounting and financial reporting
are appropriately qualified
and are kept up-to-date with
relevant changes in International
Financial Reporting Standards
('IFRS'). Additionally, specific
training and written guidance
on particular matters is provided
where needed. Written guidance,
regularly updated for business
developments and regulatory
changes, is available to all
relevant staff members
and provides a summary
of the Company's accounting
and financial reporting policies
and procedures.
● Controls have been established
in the processing of accounting
transactions to ensure
appropriate authorisations
for transactions, effective
segregation of duties
and the complete and accurate
recording of financial information.
● Completeness and timely
recording of financial information
is ensured through regular
reviews, monitoring of specific
key performance indicators,
validation procedures
by functional leaders and as
an additional check, the process
of internal and external audit.
● The Company relies
on a comprehensive system
of financial information
and oversight. Strategic plans,
business plans, budgets
and the interim and full-
year consolidated accounts
of the Company are drawn
up and brought to the Board
for approval. The Board
also approves all significant
investments. The Board receives
monthly financial reports setting
out the Company's financial
performance in comparison
to the approved budget and prior
year figures.
● Any weaknesses in the system
of internal controls identified
by either internal or external
auditors are promptly addressed.
● The external auditors
perform a limited review
of the Company's half-year
consolidated financial statements
and a full audit of the annual
consolidated financial
statements.
In accordance with
the requirements of IFRS, we
disclose detailed information
on the market, credit and foreign
exchange risk to which it is exposed,
as well as strategy for managing
the risks.
75
O’KEY GroupDelivering great customer serviceAnnual report 2020 We engage with all major
stakeholders, from employees
and customers to shareholders
and local communities. We take
responsibility for reducing our
environmental impact, including
work on more sustainable packaging
options and on optimising the use
of our delivery fleet.
20.3 k
total number of employees
71.5 k
online trainings for staff in 2020
78.4 mln
of eco-friendly bags sold in 2020
Corporate Social Responsibility
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Annual report 2020
Delivering great customer service
O’KEY believes that social responsibility is an essential factor
of long-term development for any business. Instead of considering
only financial and operational results, we develop a responsible
approach towards society.
O’KEY Group operates in different geographical areas of Russia, from
large cities to small towns and affects various stakeholders, such as
business partners, local communities, governmental bodies, media
and NGOs. We continuously develop different communication tools
with our stakeholders, which helps us to create and sustain mutually
beneficial partnerships, ensures continuous progress and promotes general
business development.
OUR KEY STAKEHOLDERS ARE:
customers
and partners
shareholders
and financial
community
employees
government
and local
authorities
local
communities
media
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Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Our employees
O’KEY’s HR policy is focused on the continuous improvement its HR processes and services, including
onboarding, training and development, and professional recognition of the Company’s specialists.
We create a productive working environment and open up new opportunities for employees to realise
their professional and personal potential. We pay particular attention to teamwork, and strengthening
and developing interaction within teams, because we recognise the influence of the working
atmosphere on customer service and the efficiency of our operating processes.
We adhere to the principle
of gender diversity and offer equal
opportunities for men and women.
When hiring employees, we base
our choices on education, relevant
experience and willingness
to develop professional skills.
We treat our employees equally,
regardless of their age, gender or
nationality.
Key focus areas of the HR strategy:
● creating a culture of engagement
and effectiveness;
● introducing modern technologies
and automating HR services;
● building an effective
organisational structure
and management team;
● creating a positive image
of the O’KEY brand
in the Russian labour market;
● systematic staff turnover
management;
● implementing the best HR
practices.
The Company continues to focus
on intentional management
of quality of work and service,
positively transforming the role
of the leader and forming
a culture of mentoring in our
stores. At the same time, we seek
to improve labour productivity
and effectiveness, and to automate
all processes, including HR.
In 2020, we completed
the transition to the “BOSS-
Kadrovik” HR system. This new
system automates all key HR
processes, from HR activities
and payroll calculations,
to managing compensation
and benefits, as well as managers’
and employees’ online accounts.
In the reporting year, we added
modules for managing personnel
costs and budgeting, health
and safety, and HR reporting.
Additional services in employees'
personal accounts were added,
such as vacation management
and requesting documents.
To improve store productivity,
O`KEY Group employees are given
various tasks, and staff schedules
vary according to business needs.
The introduction of the “BOSS-
Kadrovik” system has allowed
store managers to plan work
hours more flexibly, and to predict
the sizes of wage bills, which
has proved especially important
for the effective, active operation
of stores during the COVID-19
period.
The Company is working
to continuously improve processes
affecting operational efficiency.
In order to increase efficiency
in 2020, a number of changes took
place in the management structure
of our hypermarkets. About 300
internal candidates grew their
careers within the new structure;
and new training programmes
have been developed for each
position level. This has allowed us
to ensure a qualitative transition
and successful work throughout
the winter holiday season
2020–2021.
In 2021, we will focus
on programmes that will contribute
to the further development of our
service culture and the leadership
potential of our team. We
are dedicated to continually
improving workflows, protecting
the health of our employees,
and strengthening the O`KEY
and DA! employer brands.
The focuses of our attention will
be:
● quality of employee adaptation
and training;
● development of distance learning
at the O`KEY Academy;
● providing a high level of service
in stores for internal and external
customers;
● development of internal
information about the objectives,
activities and results
of the Company's work;
● employee health support;
● management of professional
development through regular
feedback work;
● committees for continuous
improvement of processes.
KEY INDICATORS
In 2020, the average number
of Group employees amounted
to 20,285 people. 17,655 of these
were employees of O`KEY,
and 2,620 were employees of DA!
discounter business. We managed
to reduce staff turnover ratio by 3.5
pps YoY in our hypermarkets.
AVERAGE NUMBER
OF GROUP EMPLOYEES,
PEOPLE
BREAKDOWN OF STAFF
BY GENDER, %
O'KEY
DA!
Female Male
2,620
34.2
65.8
17,655
BREAKDOWN OF STAFF
BY AGE, %
18-25 26-35 36-45 46-55 56+
8.3
11.3
22.6
27.1
30.7
In 2020, we faced
challenges from
the COVID-2019
pandemic. Our priority
has been to protect
the health of our
employees and to safely
serve customers with
our traditionally high
level of service. See
COVID-19 Situation
Response.
We sought to save
jobs as much as
possible. Moreover,
in order to support
citizens during
the period of self-
isolation, we provided
temporary employment
opportunities in our
stores for employees
in the non-food
retail and service
sectors. In the periods
of the first and second
waves of the pandemic,
we cooperated with
25 partner companies,
whose staff had
the opportunity
to temporarily work
in our stores.
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Delivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
CORPORATE CULTURE
O`KEY values
Effective
team
Outstanding
results
Professional
environment
Excellent
service
Innovation
In 2020, the key focuses in devel-
oping corporate culture were con-
stantly informing employees about
the necessary measures of protec-
tion and prevention of COVID-19,
the rules of work and movement
in cities where the Company oper-
ates, supporting O`KEY’s corporate
atmosphere and traditions, and ser-
vice for our customers.
Moreover, we developed social
media accounts: we developed
a corporate channel on the VK
social network dedicated to our
employees and their work,
and launched an account with sim-
ilar content on Instagram. It is
expected that the development
of the Company's presence on social
networks will allow us to translate
most of the work with the brand
and recruitment into a digital format
in the coming years.
We continued to develop the "100%
Professional" skills competi-
tion, which was launched in 2018.
In the reporting year, most
of the activities were transferred
online; we also removed certain
stages and added additional com-
petitions for children and fan teams.
We significantly increased the prize
pool, at the same time increasing
the number of competitive profes-
sions from four to seven supporting
almost all key professions in retail.
In 2020, the “100% Professional”
contest was awarded the “Audience
Award” in the category “Play Hard”
in the All-Russian WOW HR award.
2018
3 professions
cashier
baker
cook
12 winners
2019
4 professions
cashier
salesperson
baker
cook
16 winners
2020
7 professions
cashier
salesperson
baker
cook
meat scaler
seafood department
employee
baker-confectioner
401 winners
STAFF TRAINING AND DEVELOPMENT
In 2020, O`KEY continued to pay
great attention to the personal
and professional growth of its
employees and engage in training
and development of personnel as
a key factor of success.
In the reporting year, due to long-
term quarantine, we were forced
to quickly change the training
system, and introduce new
approaches and formats: for a few
months, training was fully
transferred to an online format.
98%1
of personnel
were trained
71.5 k
online courses
undertaken
Key projects in 2020:
● launching, and the full
functioning of, the “Experts
of directions” project
to increase the professionalism
of the management of the Fresh
departments and own
production;
● development
and implementation of training
and development programmes
for the e-commerce division;
● training employees in the new
position of “Deputy Head
of Department” to support
business efficiency
and continuity during the period
of COVID-19.
In 2020, for the first time,
employees of the commercial
department of federal offices
were evaluated in an online format.
In 2021, the main priorities in terms
of personnel development will be:
● implementing a results-oriented
culture;
● further development
of management in the Company's
retail division, and training
programmes in the e-commerce
department;
● transition of the entire evaluation
system into an online format;
● development of training for office
employees;
● improvement of adaptation
programmes;
● federalisation of all training
programmes.
(cid:7) The indicator is the same as it was in 2019, but this result was achieved in conditions of quarantine and restrictions regarding the organisation
of in-person events.
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Delivering great customer serviceAnnual report 2020 Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
REPORTING VIOLATIONS
In order to promote
an environment of transparency
and trust, O`KEY has developed
a whistleblowing policy which,
for several years, has been used
to address violations of ethics
and labour laws, and interactions
between employees and managers.
The Company operates several
channels for reporting violations:
a call centre, dedicated manager-
employee meeting hours,
and morning kick-offs.
STAFF RETENTION AND MOTIVATION
O`KEY effectively uses modern
tools of material and intangible
motivation and provides employees
with competitive wages, which
allows us to attract and retain
the best specialists. In 2020
and 2021, in order to maintain
a competitive level of employee
salaries, the Company is conducting
a phased review.
The Company has a KPI system that
takes into account both individual
and corporate goals. Bonuses, which
are a certain percentage of salary,
are determined by the results.
In 2020, the Company updated
the premium system in stores
and made changes to the KPIs.
Moreover, changes have been made
to the cashier employee award
system. The employee premium
now increases with productivity
growth, resulting in cashiers'
premiums increasing by 15–20%.
COMPENSATION AND BENEFITS
O`KEY provides necessary social
support to its employees in full
compliance with the requirements
of applicable laws, and also
implements additional programmes
aimed at creating the most
comfortable environment for our
staff.
O’KEY provides the following
employee benefits:
● voluntary health insurance
policies co-financed at 80–90%;
● discounts in Group stores;
● free meals for employees
of distribution centres;
● holiday gifts for children;
● financial assistance to employees
in a difficult life situation;
● instalments on payment
for membership of fitness clubs.
In 2020, a main Company priority
was supporting employees during
the pandemic, taking care of their
health and material well-being:
● additional payments have been
arranged (a sick leave supplement
has, where appropriate, been
added to the salaries of store
and distribution centre
employees);
● material support: supplements
to the salaries of employees
of stores and distribution centres
during the most difficult spring
period; financial assistance
to the families of employees
affected by COVID-19;
● moral support: maximum
possible transfer of employees
from in-store to remote work,
payment for taxi travel during
the pandemic to reduce the risks
of infection, and organisation
of testing and vaccination.
333
calls were received
in 2020
100%
of reports were worked out
and processed for Company
feedback
These results were made possible
through effectively raising staff
awareness of HR administration
processes and the Company’s
standards.
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Health and Safety
O’KEY strives constantly to reduce work-related hazards, providing safe working
conditions for every employee and a comfortable experience for each customer.
In 2021, O’KEY Group plans
to implement a new occupational
safety management system,
complete the professional
risks assessments throughout
the Company, conduct a special
assessment of working conditions
in newly created workplaces
and train employees in safe working
methods and first aid.
The Group has an efficient
and effective occupational health
and safety management system,
which fully complies with Russian
legislative norms. The main
regulating document is the Labour
Protection and Occupational
Health, Environmental, Industrial
and Fire Safety Policy, valid until
2023.
and distribution centres. In 2020,
103 comprehensive inspections
of our premises were conducted
to assess labour protection.
The number of such inspections
decreased as the auditors
were working remotely during
the peak of the pandemic. 3,625
workplaces (61%) were assessed
for occupational risks.
We conduct regular occupational
health audits in our stores
All occupational injuries involving
our employees and customers
are tracked and systematically
investigated. The total number
of accidents amounted 44 in 2020
(compared with 25 in 2019), with
one of them severe (a head injury
in a fall). The increase in the number
of accidents was mainly due
to a large number of temporary
workers that were hired to replace
employees sick with COVID-19
or in quarantine and who did
not complete their training
in occupational safety.
WHAT WE DO
monitor
workplace
conditions
monitor
employee health
train employees
in safe working
practices
investigate
injury incidents
take measures
to prevent
similar incidents
in the future
accompany
labour
protection
inspections
conducted
by governmental
supervisory
authorities
KEY 2020 RESULTS
All workplaces
working conditions
were specially
assessed
44
occupational
injuries
0
fatalities
1,004 people
trained
in occupational
safety
917 people
trained in fire
safety
728 people
trained in first
aid in case
of occupational
injuries
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Preventing
Corruption
O’KEY Group has a zero-tolerance attitude to any kind of corruption. We
aim to provide a high level of transparency in all operations and procedures
at all levels, continue to improve anti-corruption tools and promote training
on the topic for employees.
The Company’s corruption
prevention activities are regulated
by its anti-corruption policy
and comply with Federal Law N
273-FZ "On Combating Corruption".
Any suspicious behaviour,
including information reported
inside the Company or from our
partners via a hotline, is thoroughly
investigated according to our
rules and policies, and appropriate
measures are taken.
We use various tools to secure
our confidential commercial
information, e.g. “Red Flag”
reports that enable instant action
on information security incidents
and contribute to the rapid
discovery of any anomalies
and violations of the Company’s
policies. To ensure transparency,
employees of the Economic
Security department regularly
participate in the tender
committees for non-commercial
procurement.
In the reporting year, we
implemented several new
methodologies and tools to ensure
transparency of procurement
procedures. Since 2020, selective
monitoring of commercial
purchases has been regularly
performed on the CisLinc trading
e-platform. On the online-platform,
we posted an announcement
for counterparties and contractors
that involves contact information
to address and report misconduct
or suspicious behaviour
during electronic auctions.
We also reinforced control
over the warehouse and logistics
operations.
The above-mentioned measures
increased transparency
of operations and facilitated a more
comprehensive review of decisions.
We also renewed our information
posters about correct behaviour
in our offices, shopping facilities
and warehouses, and reminded
employees of contact details
to report any suspicious behaviour
or facts related to corruption.
Internal
anti-corruption measures
External
anti-corruption measures
• all employees voluntarily sign a commitment to follow
the anti-corruption policy;
• prior to hiring, potential employees are screened for risks
of corruption;
•
the activity of employees in our procurement and real estate
departments is constantly monitored;
• contract development is monitored and analysed every six
months;
• control procedures for critical business processes (such as
receiving, write-offs/scrapping and returns) are implemented
and conducted via IT monitoring software;
•
thematic briefings and trainings are held for employees
in the procurement and real estate departments and in our
stores.
• all potential suppliers and service providers are thoroughly
checked before obtaining any contracts, by verifying their:
– records and documentation,
– financial health (balance sheets, assets, turnover, debts, credits,
and court proceedings),
– absence of affiliation to our other suppliers or our employees,
– customer base, turnover matching with the declared tax
history;
•
local suppliers are placed under additional monitoring;
• our suppliers sign an obligatory agreement where they accept all
the clauses related to anti-corruption policy;
•
in the event that suppliers and contractors do not comply
with the policy, O’KEY is entitled to terminate their contracts
immediately.
All potential conflicts of interest
are immediately reported to our
internal audit and security
departments. For this purpose,
we maintain a confidential
whistleblower e-mail address
and hotline to which anyone can
report a complaint.
In 2020, we received several
messages related to violation
of the Company’s rules
and standards. All messages
were promptly investigated
by the risk department’s anti-
corruption team.
In 2020, we investigated four cases
related to the violation of our anti-
corruption policy in accordance
with our standardised process.
One case involving an employee
was handed over to the police;
in two cases involving breach
of the anti-corruption policy
by the contractors, contracts
were terminated; in one
remaining case, internal
measures were undertaken.
Furthermore, we updated related
procedures to receive earlier
warnings and to eliminate further
occurrences of similar incidents.
Anonymous
hotline numbers
are displayed
openly for all
employees
and service
providers in all
our stores as well
on our website.
In 2021, we plan to continue
transferring the commercial buying
process for several categories onto
an automated trading platform. We
also intend to implement measures
to increase trust of employees
and contractors, and to involve
more employees in the culture
of zero-tolerance towards all forms
of corruption. This will also simplify
and speed up investigations related
to anonymous warnings, disputes or
legal requests.
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Our communities
O’KEY aims to improve the quality of life in local communities in its areas of operation. In 2020,
due to the challenging epidemiological and macroeconomic situation, we launched new
initiatives to help people in a difficult life situation. At the same time, we continued to unfold
several social investment initiatives in line with our key charity priorities, helping children
with serious illnesses, people in difficult life situation and veterans of the Great Patriotic War.
For this purpose, we continued to develop partnerships with different stakeholders, such as
local authorities, non-governmental organisations, the media and our customers.
Priorities of O’KEY
charity programmes
Major charity
partners in 2020
Directions
of help
● help people in difficult life
situations
● Rusfond
● AdVita
● participation
● help children with serious illnesses
● help veterans of the Great
in the #WeAreTogether
initiative
Patriotic war
● targeted assistance
● notification of consumers
about the problem and their
involvement in participation
● attraction of benefactors
SUPPORTING VULNERABLE GROUPS
In 2020, O’KEY hypermarkets
in several regions, including
Krasnodar, Tyumen, Ivanovo,
and Voronezh, took part
in the federal charity initiative
#WeAreTogether, which
was organised by the All-Russia
People's Front and aimed at helping
people in need (the poor, senior
citizens, disabled people, and large
families who found themselves
in a difficult life situation due
to the COVID-19 pandemic
and the economic crisis).
The initiative at O’KEY
hypermarkets was called "The Cart
of Good". Customers could
purchase goods with a long shelf
life and transfer them to special
carts located at the store entrance.
This food was then taken
and transferred to the people
in need by the volunteers of the All-
Russia People's Front.
For a selfless contribution
to the organisation
of the #WeAreTogether campaign,
O’KEY Group was awarded
a medal, signed by the President
of the Russian Federation.
We have an ongoing programme
for helping vulnerable groups.
O’KEY hypermarkets offer holders
of state social cards an additional
3% discount at our stores
in Moscow and the Moscow region,
and various discounts for retired
people in Krasnoyarsk, Murmansk,
Syktyvkar, Tyumen and two stores
in St. Petersburg. The discount does
not apply to alcohol and tobacco
products. In St. Petersburg, we
also offer additional discounts
on children’s goods to holders
of a special social card for new
mothers.
TREATMENT SUPPORT
Since 2017, O’KEY Group has
actively cooperated with Rusfond,
one of the oldest Russian charitable
foundations providing targeted
assistance to children in need
of treatment and rehabilitation.
Over these years, thanks to our
customers we have raised
over RUB 34 mln, with all funds
being used to provide treatment
for a total of 76 children from
across Russia and to facilitate
90
the development of the national
bone marrow donor register
programme.
In the reporting year, O’KEY held
the milestone fifth national Kind
Purchase charitable campaign
which ran from 22 October
to 19 November 2020. Customers
could participate by purchasing
products under O’KEY or Selection
of O’KEY private labels (over 1,500
SKUs counted) or Kind Purchase
themed bags featuring a drawing
by the winner of the children’s
drawing competition held by O`KEY
in 2019. A part of the proceeds
from the sale of the private labels
and bags was allocated to treatment
and rehabilitation of the little
patients.
Another committed charity partner
of O’KEY Group is AdVita, a St.
Petersburg-based charity fund
specialised in helping children
and adults suffering from cancer.
In our hypermarkets in St.
Petersburg, donation boxes are
placed next to counters so that
our customers can help these
people in need. The funds raised
through the donation boxes
were mainly used for diagnostic
and treatment programmes. These
included the purchase of various
reagents and consumables
for the laboratories of the Raisa
Gorbacheva Memorial Research
Institute of Children Oncology,
Hematology and Transplantation.
RUB 7.7 mln
raised through joint
charity campaigns with
Rusfond in 2020
RUB 34 mln
raised since 2017
76
children received
treatment since 2017
40
donation
boxes placed
in hypermarkets
RUB 1.8 mln
raised through
donation boxes
in 2020
RUB 12.5 mln
raised since 2016
VETERANS SUPPORT
O'KEY has been supporting
veterans of the Great Patriotic
War since 2002, holding an annual
campaign to support those who
helped to achieve freedom
and peace of the country. In 2020,
we held a campaign devoted
to the 75th anniversary of the Great
Victory: over 5,000 veterans across
Russia received O’KEY gift cards.
In the reporting year, O’KEY also
participated in the all-Russia "Red
Carnation" campaign, organised
by the Memory of Generations
charity foundation. The campaign
was organised to provide veterans
of the Great Patriotic War and other
military operations with high-
tech medical care, medicaments
and rehabilitation equipment.
Our customers could contribute
to the support of veterans
by purchasing commemorative
badges with the red carnation
symbol at the counters.
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Environmental
Responsibility
Growing environmental awareness of customers, amendments to environmental
legislation and changes in investors’ approaches to ESG mean that
the environmental responsibility of business is a necessity for keeping long-
term market positions. O’KEY Group promotes a responsible approach and tries
to minimise its environmental footprint by implementing a range of measures:
the Company has had its Live Green corporate policy in action since 2019.
We ensure strict compliance with
Russian environmental legislation
through regular internal audits. We
also perform quarterly monitoring
of atmospheric and noise pollution
in the buffer zone to make sure that
our stores have no negative impact
on the living conditions of local
communities.
Within the framework of the policy,
we implement initiatives to reduce
our environmental impact,
and conduct campaigns together
with environmental and social
NGOs, such as the All-Russian
Society for Nature Conservation.
In 2020, O’KEY was the first
Russian retailer to fully stop selling
primary oil plastic bags. Instead, our
customers are offered two major
packaging options: biodegradable
corn starch, and 100%-recycled
plastic bags. We also offer reusable
shopping bags of different materials
and capacities, from heavy-duty
paper bags to jute, cotton, nylon
and PVC durable items.
78.4 mln
pcs.
of alternative
packaging sold
in 2020
ENERGY EFFICIENCY
WASTE MANAGEMENT
In December 2020, we launched
a campaign aimed at supporting
maintenance and the protection
of wild animals in the care
of the All-Russian Society
for Nature Conservation: arctic
foxes, elks from the Ilmen Reserve,
and snow leopards on the verge
of extinction. During the campaign,
soft toys representing these animals
were sold in O’KEY hypermarkets,
with part of revenue allocated
to the society. At the same time,
for a purchase worth over 1.2 k RUB,
customers received an eco-
Christmas tree decoration. Both
the decoration and the packaging
were made of FSC -certified
materials, confirming their
sustainability.
We care about the energy efficiency
of our business and make efforts
to gradually reduce our total energy
consumption. O’KEY controls
the energy use in its supermarkets.
We equip our stores with modern
recuperators and energy-efficient
LED lights and LED signboards,
replace outdated refrigeration
elements and conditional systems
with leading-edge, energy-
saving devices, and implement
energy efficient BMSs (building
management systems). As a result
of these measures, in 2020 our total
energy consumption YoY decreased
by 2%.
ENERGY CONSUMPTION
(NET), K KWT/H
-1.7%
401,116
389,648
382,930
Waste management processes
in O’KEY Group are regulated
by our waste management policy,
which is implemented across
the Company.
In all our stores, we implement
separate waste collection processes
to reduce the amount of waste
buried in landfills. Furthermore,
biological waste and lamps are
transported to special factories,
recyclable waste, such as polythene
film, plastic boxes and wastepaper,
is pressed and sold for further
recycling. We collect and sell
for recycling banana boxes, waste
oil, pallets and scrap metal.
Our key operational locations have
water-treatment facilities, including
petrol and sand catchers, which
filter stormwater from parking
zones, and grease catchers, which
filter waste water from our own-
production facilities, before it is
disposed into the public sewers.
PROCEEDS FROM
SALES OF RECYCLABLE
MATERIALS, RUB MLN
2018
2019
2020
-4.2%
221.4
252.3
241.7
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(cid:8) FSC (Forest Stewardship Council ®) – an international non-profit organisation that promotes responsible, socially oriented and sustainable
management of the world’s forests.
2018
2019
2020
Delivering great customer serviceAnnual report 2020 O’KEY Group maintains its
commitment to creating shareholder
value. In 2020, in addition to our
existing listing on the London Stock
Exchange, we successfully conducted
a listing on Moscow Exchange to
provide access to O`KEY's global
depositary receipts (GDRs) to a wider
range of investors. In 2020 we as usually
declared a dividend, along with our
long-established practice of regularly
returning cash to shareholders.
Since 2010
on LSE
Since 2020
on MOEX
10 years
of dividend payments
Corporate Governance
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Corporate
governance system
O’KEY Group S.A. is a company incorporated under the Laws of the Grand
Duchy of Luxembourg with Global Depositary Receipts (GDRs) listed
on the London Stock Exchange and Moscow Exchange, and as such is not
required to comply with the UK Corporate Governance Code.
O’KEY Group is committed
to managing and conducting
its operations in accordance
with applicable regulations
of Luxembourg and the London
Stock Exchange. In December
2020 the Depositary receipts
of O’KEY Group S.A. were admitted
to trading at the Moscow Exchange
and from then on O’KEY Group
S.A. will ensure compliance with
corporate governance requirements
of Russian legislation or MOEX
rules which may become applicable
to O’KEY Group S.A. As of the date
of this annual report Russian
corporate governance rules do not
apply to O’KEY Group S.A.
We recognise our obligation
to our shareholders to adopt
highest standards of governance
and control, both at the Board level
and within our management teams,
and aim to establish and support
a corporate governance framework
that is suitable for the development
of our business and meets
the requirements of our
shareholders.
The most significant decisions
affecting the life of the Company
and the rights of shareholders,
including the approval of financial
statements and the Annual Report,
appointment of the Directors,
amendments of the Articles,
approval of the final dividend
for the financial year, are
subject to review and approval
at the Shareholders meeting.
The Board of Directors and its
committees provide overall
guidance for the business
and strategic planning
for the Group. It sets strategic goals
and oversees their implementation
by the CEO and senior management
of the Group.
The Management Board
and the Chief Executive Officer
are responsible for the day-to-
day operations of the companies
of the Group and implement
the strategy approved by the Board
of Directors.
OUR CORPORATE GOVERNANCE PRINCIPLES:
PROFESSIONALISM
We strive to appoint individuals with relevant skills and experience to the Board of Directors
and its committees in order to enable them to discharge their respective duties and responsibilities
effectively. The Board is supplied, in a timely manner, with information in a form and of a quality
appropriate to allow it to discharge its duties.
ACCOUNTABILITY
The Board of Directors is accountable to O’KEY Group’s General Meeting
of Shareholders and is responsible for:
● formulating the Group’s
● establishing and maintaining
● holding management
strategy;
EQUALITY
systems, which ensure
due consideration of key
decisions by experienced
individuals, including
in the areas of remuneration
and incentives, internal
control and risk management;
accountable
for the successful
implementation
of the Group’s strategy.
O’KEY Group’s corporate governance system is designed
to protect shareholders’ rights and ensure equal treatment of all
shareholders.
TRANSPARENCY
We strive to ensure the appropriate disclosure of reliable
information on all significant issues related to our operations
including financial status, social performance, operating results
and ownership.
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The general meeting
of shareholders
TRANSFER RESTRICTIONS
As of 31 December 2020,
and the date hereof,
to the knowledge of the Company
all shares in issue in the Company
are freely transferable, provided
that the transfer formalities set out
under Article 6 of the Articles are
fulfilled.
The Company has no information
about any agreements between
the shareholders which may result
in restrictions on the transfer
of securities or voting rights, as
mentioned under Article 11 (1)
(g) of the Directive 2004/25/
EC of the European Parliament
and of the Council of 21 April 2004
on takeover bids.
The General Meeting
of Shareholders is O’KEY
Group S.A.’s supreme governing
body. The General Meetings
of Shareholders are convened
and held in accordance with
Luxembourg legislative
requirements and the Articles
of O’KEY Group S.A. According
to the Articles of O’KEY
Group S.A. , the annual General
Meeting shall be held within six
(6) months of the end of each
financial year in the Grand Duchy
of Luxembourg at the registered
office of the Company, or
at any such other place in the Grand
Duchy of Luxembourg as may
be specified in the convening notice
of the meeting.
The next annual General
Meeting will be held before
30 June 2021. A convening notice
specifying the date, time, address
of the meeting and the agenda will
be sent and published no later than
fourteen days before the meeting.
SIGNIFICANT
AGREEMENTS OR
ESSENTIAL BUSINESS
CONTRACTS
The Board is not aware
of any significant agreements
to which O’KEY Group S.A. is
a party and which take effect,
alter or terminate upon a change
of control of the Company
following a takeover bid. The Board
has considered essential business
contracts and concluded that there
is none.
SPECIAL CONTROL
RIGHTS
All the issued and outstanding
shares of the Company have equal
voting rights and there are no
special control rights attached
to shares of the Company.
The Caraden Shareholder (as
defined in the Articles) has, under
the condition of holding a minimum
amount of shares in the Company,
a specific right with respect
to the appointment and removal
of Directors as at least one Director
(designated as the Caraden
Director) must be appointed from
a list of candidates proposed
by the Caraden Shareholder
and may be removed at the initiative
of the Caraden Shareholder
(additional information may
be found under Article 8
of the Articles).
The supporting vote of the Caraden
Shareholder is required,
under certain conditions,
to amend the provisions
of the Articles relating to: (i)
the rights and prerogatives
of the Caraden Shareholder;
and (ii) the appointment,
removal, replacement, rights,
prerogatives and positive vote
of the Caraden Director (additional
information may be found under
Article 16.4 of the Articles).
CONTROL SYSTEM
IN EMPLOYEE SHARE
SCHEME
SHAREHOLDERS’
AGREEMENTS WITH
TRANSFER RESTRICTIONS
The Company does not have
an employee share scheme allowing
employees to acquire equity
in the Company.
The Company has no information
about any agreements between
shareholders, which may result
in restrictions on the transfer
of securities or voting rights.
VOTING RIGHTS
Each share issued and outstanding
in the Company bears one vote.
The Articles do not provide
for any voting restrictions.
In accordance with the Articles,
a record date for the admission
to a general meeting may
be set by the Board (Article
15 of the Articles). Only
those Shareholders as shall
be shareholders of record
on any such record date shall
be entitled to be notified
of and to vote at any general
meeting and any adjournment
thereof, or to give any such consent
as the case may be.
In accordance with the Articles,
the Board may determine such
other conditions that must
be fulfilled by Shareholders
for them to take part in any meeting
of shareholders in person or
by proxy (Article 15 of the Articles).
APPOINTMENT
OF THE DIRECTORS,
AMENDMENT
OF THE ARTICLES
The rules governing
the appointment and replacement
of the directors and the amendment
of the Articles are set out under
Luxembourg Company Law
and the Articles (in particular
Articles 8, 15 and 16).
The consolidated
version
of the Articles is
published under
the Shareholders
section
of the Company
website and is
available at:
okeygroup.lu/
sharedocs
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Board of Directors
The Company’s Board of Directors
plays the key role in organising
an efficient corporate governance
system. The Board is vested with
the broadest powers to manage
the business of the Company
and to authorise and perform all
acts of disposal and administration
falling within the purposes
of the Company.
The Board is responsible for taking
strategic decisions in respect
of the operation and development
of the Group, as well as overseeing
the risk management and internal
audit functions of the Group.
The decisions related to the day-
to-day operations of the Group are
delegated to the management.
The Board is also a management
body of O’KEY Group S.A.
and is authorised to take all
decisions in respect of O’KEY
Group S.A. , unless they are
reserved for the General Meeting.
The Board is not authorised
to issue or buy back shares without
approval of the shareholders
meeting. The repurchase
by the Company of its own shares
is subject to the conditions
set out in the Company Law
and the Articles. There are
five members of our Board,
including one independent
director. The General Meeting
of Shareholders appoints the Board
members by a simple majority
of votes cast, for a period not
exceeding six years or until their
successors are elected .
Our current Board of Directors
was elected at the General Meeting
of Shareholders held on 13 October
2015 and re-appointed on June 24,
2020.
MEETINGS OF THE BOARD OF DIRECTORS
Meetings of Board of Directors
are held regularly in compliance
with the approved work schedule
for the year. The Board’s
work schedule is determined
on the basis of strategic
planning and the reporting cycle.
Whenever an urgent matter needs
to be considered, Extraordinary
Board meetings are organised,
or, if a personal meeting cannot
be organised due to short notice,
the Board can adopt a circular
resolution by a unanimous vote. It is
the Board Chairman’s responsibility
to determine the Board’s work plan
and to include additional items
in the plan.
In 2020, the Board of Directors
worked on the following key tasks:
● preparation of the financial
statements and annual report,
and review of the results
for the year 2019;
● approval of the budget
and business strategy for the year
2020;
● review of the quarterly financial
results, approval of financial
statements for six months
of 2020 and monitoring
of compliance with risk
management strategy;
● determination of the Group’s
strategic and operational
priorities.
MEETINGS OF THE BOARD OF DIRECTORS
Board of Directors
Audit Committee
Remuneration Committee
Member
Heigo Kera
Dmitrii Troitskii
Dmitry Korzhev
Boris Volchek
Mykola Buinyckyi
(3 meetings)
attended 3
3 by proxy
attended 3
3 by proxy
attended 3
(4 meetings)
attended 4
not a member
(1 meeting)
attended
by proxy
attended 3, 1 by proxy
not a member
attended 1, 3 by proxy
by proxy
attended 4
not a member
(cid:9) The rules governing the appointment and replacement of the Directors are set out under the Law of 10 August 1915 on Commercial Companies,
as amended, and the Articles (in particular Articles 8, 15 and 16). The consolidated version of the Articles is published under the Shareholders
section of the Company website, available at: http://okeygroup.lu/sharedocs
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MEMBERS OF THE BOARD OF DIRECTORS OF O’KEY GROUP S.A.
AS AT 31 DECEMBER 2020
Heigo Kera
Group Chairman
Member of the Audit Committee
Head of the Remuneration
Committee
Dmitrii Troitskii
Director
Member of the Remuneration
committee
Boris Volchek
Caraden Director
Member of the Audit
and Remuneration Committes
Dmitry Korzhev
Director
Member of the Audit
Committee
Mykola Buinyckyi
Independent Director
Head of the Audit
Committee
Election
First elected to the Board
of Directors in June 2010,
and repeatedly re-elected since
then
Election
First elected to the Board
of Directors in June 2010
and repeatedly re-elected since
then
Election
First elected to the Board
of Directors in June 2010
and repeatedly re-elected since
then
Education
University degree, Tallinn
Technical University (Estonia)
Skills and Experience
2015–2017: CEO of O’KEY
effective 1 May 2015
2008-present: owner
and a Member of the Board
of Directors of Silverko Consult
OU
2002–2008: consultancy services,
including research on retail
markets in Belarus, Kazakhstan
and China
Committee Membership
Head of the Remuneration
Committee
Member of the Audit Committee
Shares in O’KEY
Mr. Kera does not hold shares
of O’KEY Group S.A.
Education
University degree, State Marine
Technical University of St.
Petersburg
Skills and Experience
2005–2007: Member of the Board
of Directors of the Ochakovo
Dairy Plant
Education
University degree, Leningrad
Institute of Railway Engineers
(now St. Petersburg State
University of Communications)
Skills and Experience
1995-present: President
of the Union Group of companies
2005–2012: Member
of the Supervisory Board of Bank
St. Petersburg
2000-present: General Director
of St. Petersburg Automobile
Museum
2005-present: Development
Director of Capital Group JSC
(formerly Neva-Rus CJSC)
Committee Membership
Member of the Remuneration
Committee
Shares in O’KEY
Mr. Troitskii indirectly owns ca.
29.044% of the shares of O’KEY
Group S.A.
Committee Membership
Member of the Remuneration
Committee
Member of the Audit Committee
Shares in O’KEY
Mr. Volchek indirectly owns
ca. 29.046% of the shares
of O’KEY Group S.A.
Election
First elected to the Board
of Directors in June 2010
and repeatedly re-elected since
then
Election
Elected to the Board of Directors
in October 2015. He previously
served on the Board between
2010–2013
Education
University degree, State Marine
Technical University of St.
Petersburg
Skills and Experience
2005–2009: Member
of the Supervisory Board of Bank
Saint Petersburg
Education
University degree, The University
of Edinburgh, UK
A fellow of the Chartered Institute
of Management Accountants
A Member of the Institute
of British Management
2005-present: General Director
of Sovmestniy Capital CJSC
Joint diploma in management
accounting
2015–2019: Director of Capital
Group JSC
2019-present: Commercial
Director of Capital Group JSC
Committee Membership
Member of the Audit Committee
Shares in O’KEY
Mr. Korzhev indirectly owns ca.
10.31% of the shares of O’KEY
Group S.A.
Skills and Experience
Over 35 years in international
financial management and over 20
years’ experience in Russia
Seven years as a management
consultant with Coopers &
Lybrand
Committee Membership
Head of the Audit committee
Shares in O’KEY
Mr. Buinyckyi does not hold shares
of O’KEY Group S.A.
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Committees of the Board
of Directors
The primary role of the Committees
is to provide assistance to the Board
in preparing and adopting decisions
in its respective functional
areas, as well as to ensure that
matters brought for consideration
by the Board of Directors are
scrutinised prior to the Board
meetings.
There are two committees
on the Board of Directors: the Audit
Committee and the Remuneration
Committee.
AUDIT COMMITTEE
AUDIT COMMITTEE
MEMBERS
KEY AREAS
As of 31 December 2020, the Audit
Committee comprised:
● Mykola Buinyckyi, Head of
the Committee, Independent
Director of the Board
of Directors;
● Boris Volchek, Committee
Member, Non-executive Director
of the Board of Directors;
● Dmitry Korzhev, Committee
Member, Non-executive Director
of the Board of Directors;
● Heigo Kera, Committee
Member, Chairman of the Board
of Directors;
● Ilya Ilin, Committee Member,
Non-director, external
consultant;
● Irina Nikiforova, Committee
Member, Non-director, external
consultant.
The Audit Committee oversees
the internal audit function,
the effectiveness of risk
management and the internal
controls of the Company
and the Group. It also approves
and monitors the performance
of the internal audit plan
for the year. The Audit
Committee assists the Board
of Directors in fulfilling its
oversight responsibilities relating
to the financial statements,
including periodically reporting
to the Board of Directors on its
activities and the adequacy
of internal control systems
over financial reporting.
According to the Statute of O’KEY
Audit Committee, the Audit
Committee shall consist of not
fewer than three current members
of the Board of Directors and shall
be chaired by an independent
director.
THE COMMITTEE’S REMIT
INCLUDES:
● reviewing the IFRS financial
statements for integrity
and transparency;
● analysing financial reporting
processes, including carrying
out regular reviews and making
recommendations;
● recommending appointment
and remuneration
of the Company’s external
auditor to the Board of Directors
and maintaining an ongoing
relationship with the external
auditor;
● analysing and supporting
the internal audit system
and risk management
procedures, including drafting
of recommendations for their
improvement.
ACTIVITIES IN 2020
PLANS FOR 2021
During the reporting period,
the Audit Committee held four
meetings where it:
● fulfilled oversight responsibilities
relating to integrity
of the Company’s annual financial
statements;
● fulfilled oversight responsibilities
relating to integrity
of the Company’s half yearly
financial statements;
● reviewed reports prepared
by Internal Audit department;
● reviewed effectiveness
of the Company’s risk
management and internal control
systems;
● reviewed policies and procedures
published in the Company;
● monitored reports per
the Company’s Whistleblowing
Policy;
● planned and agreed the scope
of the audit of financial
statements for year ended
2020 with the external auditor
of O’KEY Group;
● reviewed and approved
provisions of non-audit services
for the Company by the external
auditor;
● approved the Internal Audit plan
for the year 2021.
The Audit Committee
and the Company continue to focus
on following areas in 2021:
● how the Company’s management
monitors compliance with
the Group’s risk management
policies and procedures,
and reviews the adequacy
of the risk management
framework in relation to the risks
faced by the Group;
● optimising of internal business
processes involved in preparation
of financial reporting.
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REMUNERATION COMMITTEE
REMUNERATION
DIVERSITY
COMMITTEE MEMBERS
● Heigo Kera, Head of the
Committee, Chairman
of the Board of Directors;
● Boris Volchek, Committee
Member, Non-executive Director
of the Board of Directors;
● Dmitrii Troitskii, Committee
Member, Non-executive Director
of the Board of Directors;
● Ilya Ilin, Committee Member,
Non-director, external
consultant;
● Irina Nikiforova, Committee
Member, Non-director, external
consultant.
THE COMMITTEE’S REMIT
INCLUDES:
● reviewing the compensation
policy;
● advising on any benefit or
incentive schemes; and
● making proposals to the full
Board of Directors regarding
the remuneration of Executive
Directors and management
(including Chief Executive
Officer).
ACTIVITIES IN 2020:
PLANS FOR 2021:
In 2021 the Group plans to keep
the remuneration and bonus policy
in line with 2020.
During the reporting period,
the Remuneration Committee held
one meeting, where it:
● reviewed the report
on the remuneration, bonuses
and expenses of the Board and its
Committees:
● reviewed the amount
of remuneration to be allocated
to the management of the Group
in 2019;
● approved the Remuneration
Committee Report;
● suggested the total maximum
amount of remuneration
of Directors for 2020
to be submitted for the approval
of the shareholders
of the Company.
Members of the Board of Directors
of O’KEY Group S.A. receive
remuneration of the amount
approved by the General
Meeting of Shareholders.
Members of the Board and its
Committees may be compensated
for the expenses they incurred
in the course of their duties,
in accordance with the business
and travel expenses policy
of O’KEY Group S.A.
O’KEY Group is working
on adoption of a diversity policy.
However, as can be seen from
the information on the senior
management team, O’KEY Group
aims to employ the members
of the team most suitable
and qualified for their post
and function, irrespective
of their age, gender or origin.
The requirements of educational
and professional backgrounds
are such as to ensure that
the members of the team possess
the skills and experience necessary
to perform their functions
effectively.
CHANGES MADE TO THE SENIOR
MANAGEMENT TEAM IN 2020
Name
Olga Kuzyakina
Igor Shatsky
Date
01/06/2020
04/09/2020
Change
Real Estate Director
Logistics Director
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Executive
management
O’KEY Management Board brings
together the best professionals
with broad expertise and deep
understanding of the Russian
retail market. Within the country
and worldwide, we recruit the most
enthusiastic managers whose
vision and perspective contribute
to the development of our business.
In 2020, we further strengthened
our team with professionals with
solid retail backgrounds.
Armin Burger
Chief Executive Officer
Konstantin Arabidis
Chief Financial Officer
Pavel Lokshin
Chief Operating Officer
Ivan Dropuljic
Chief Commercial Officer
Election
a member of the Management
Board since 2013
Education
University of Freiburg, department
of Economics
Skills and experience
1990–1998: Various positions
in Aldi GmbH
1999–2008: CEO of Hofer KG,
Sattledt, Austria
2008–2011: Member
of the Supervisory Board Aldi Süd
2012–2013: CEO and a Member
of the Supervisory Board
of Praktiker AG
Election
a member of the Management
Board since 2016
Election
a member of the Management
Board since 2019
Election
a member of the Management
Board since 2017
Education
Peter the Great St. Petersburg
Polytechnic University,
department of Technical
Cybernetics
St. Petersburg University,
department of Economics
Skills and experience
Before 2012: Various positions
in PwC
2012–2016: Various positions
in O’KEY Group
Member of ACCA
Education
Moscow Aviation Technological
University, department
of Economics
London Business School, Senior
Executive Programme
Skills and experience
2001–2012: Various positions
in METRO Cash & Carry
2013–2016: CEO of K-Rauta
Russia
2016–2018: CEO of Perekrestok
Express
Education
University of Zagreb, Department
of Economics
Skills and experience
Before 2007: Various positions
at Pik Vrbovec and Jamnica
2007–2012: Fresh Food Director
at Kaufland Croatia
2012–2017: Purchasing
and Marketing Director, Member
of the Board of Kaufland Croatia
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Elena Polozova
Human Resources Director
Olga Surnina
Marketing Director
Olga Kuzyakina
Real Estate Director
Elena Remennikova
E-Commerce Director
Igor Shatsky
Logistics Director
Svetlana Goncharuk
Supply Chain Director
Election
a member of the Management
Board since 2015
Election
a member of the Management
Board since 2019
Election
a member of the Management
Board since 2020
Election
a member of the Management
Board since 2015
Election
a member of the Management
Board since 2020
Election
a member of the Management
Board since 2020
Education
Lipetsk State Technical University,
Department of Psychology
Education
Almaty Technological University,
department of Economics
Moscow International Higher
School of Business (MIRBIS),
MBA
Skills and experience
2003–2013: HR Business partner
in Magnit
2013–2015: Senior HR, O’KEY
KIMEP, MA, department
of Economics
Chartered Institute of Marketing
Post Graduate Professional
Diploma, UK
Skills and experience
2010–2013: Marketing Director
at Nokia International South CIS
Branch
2013–2016: Marketing and PR
Director at Nautica
2016–2018: Head of Own
Production in Magnit
2018–2019: Marketing Director
Russia & CIS at JSC Arnest
Education
PHD, Skolkovo Executive MBA
Heinrich Heine Universitat
(Germany, Dusseldorf)
Samara State University
Skills and experience
2001–2007: Metro Cash&Carry,
Project manager
2007–2010: Cushman &Wakefield,
Associate partner
2010–2013: Real estate director
in Castorama
2013–2020: Real estate director
in Aton Investment Group
Education
Saint-Petersburg Trade
and Economics University named
by Friedrich Engels
Education
National Research Nuclear
University MEPhI, MBA
in Logistics
Stockholm School of Economics
Executive MBA
Skills and experience
2000–2009: Federal purchasing
director, X5 Retail Group
2010–2011: Chief Commercial
Director, Utkonos
2011–2012: CEO of AMF
international delivery of flowers
and presents
Skills and experience
2011–2014: Various positions
in SolPro and OZK Group
2014–2019: Director for Logistics
and Supply Chain processes
development at DIXY Group
2019–2020: Logistics
and Transport Director in Auchan
Education
National University of Food
Technologies, Kiev
Skills and experience
2005–2011: Various positions
in Supply Chain, Orangina
Schweppes (Rosinka, Kiev)
2011–2015: X5 Retail Group,
Supply Chain, Replenishment
In O’KEY since 2015, since 2017 –
Head of Supply Chain Department
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Information
for Shareholders
and Investors
SIGNIFICANT
SHAREHOLDINGS
The three major indirect
shareholders of the Group are its
founders:
● Mr. Dmitrii Troitskii (who
indirectly owns approximately
29.046% of the outstanding share
capital of O’KEY Group S.A.);
● Mr. Dmitry Korzhev (who
indirectly owns approximately
10.31% of the outstanding share
capital of O’KEY Group S.A.);
● Mr. Boris Volchek (who indirectly
owns approximately 29.53%
of the outstanding share capital
of O’KEY Group S.A.)
SHARE CAPITAL
O’KEY Group S.A. share capital
amounts to EUR 2,690,740 divided
into 269,074,000 ordinary shares
of a nominal value of EUR 0.01
each. As at the date of this report,
the Company’s share capital
has remained unchanged since
30 November 2010.
All shares issued by the Company
have equal rights as provided
for by the law of 10 August 1915
on commercial companies, as
amended (the “Company Law”)
and as set forth in the Articles,
save for the special rights granted
to the Caraden Shareholder.
The Company does not hold
any of its own shares and has not
acquired it during the 2020 financial
year.
SHARE CAPITAL
STRUCTURE – DIRECT
HOLDINGS
NISE MAX
Co Ltd.
GSU Ltd.
Freefloat
25.63%
44.84%
STOCK EXCHANGE
As of 31 December 2020, O’KEY
Group S.A. GDRs were traded
on the London Stock Exchange
and on the Moscow Exchange.
GLOBAL DEPOSITARY
RECEIPTS (GDRS)
The Company’s depositary bank is
The Bank of New York Mellon.
Global Depositary Receipts (GDRs)
are issued in respect of ordinary
shares at a ratio of one ordinary
share per one GDR. The GDRs
are traded on the London Stock
Exchange. On December 9, 2020,
the GDRs were admitted to trading
on the Moscow Exchange,
the trading started on December 14,
2020.
As of 31 December 2020, GDRs
represented 38.171% of O’KEY
Group S.A. share capital.
No other securities have been
issued by the Company.
TRADING FLOOR OF O’KEY GROUP S.A. GDRS
Trading floor
London Stock Exchange
Moscow Exchange
Ticker code
OKEY
OKEY
29.53%
O’KEY GROUP S.A. SECURITIES IDENTIFICATION NUMBERS
CUSIP1
Regulation S GDRs
Rule 144A GDRs
ISIN2
Regulation S GDRs
Rule 144A GDRs
Code
670866201
670866102
Code
US6708662019
US6708661029
112
113
(cid:10) CUSIP (Committee on Uniform Security Identification Procedures) – identification number given to the issue of shares for the purposes of
facilitating clearing.
ISIN (International Securities Identification Number) – international identification number of the share.
(cid:11)
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
O’KEY GROUP S.A. SHARE PRICE PERFORMANCE AND TRADING VOLUMES IN 2020
DIVIDENDS
GDR Price, US$
1.5
1.0
0.5
0.0
Volume, GDR ths
14-Dec-20
O’Key Group’s
GDRs
started trading
on MoEx
2,400
1,600
800
0
9-Nov-20,
9-Dec-20
MoEx listing
announcement
and approval
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
O’KEY GROUP S.A. GDRS TRADING INFORMATION (MARKET TRANSACTIONS)
Annual maximum price, USD
Annual minimum price, USD
Year-end price, USD
Trading volume (mln units)
CREDIT RATINGS
Credit rating
Outlook
Last rating date
RAEX
ruA-
Stable
03 July 2020
2020
1.4
0.5
0.9
15.6
2019
2.1
1.2
1,3
9.2
Source: Bloomberg
In July 2020 RAEX (Expert RA)
affirmed the Company’s credit
rating of ‘ruA-’ with a stable
outlook. The rating reflects the
Group’s stable position within
the Russian food retail market, its
strong liquidity and debt repayment
capacity as well as high standards
of corporate governance and risk
management.
ANALYST COVERAGE
Six equity research analysts from
leading international and Russian
banks follow the Company on a
regular basis. O’KEY’s IR team
monitors and communicates analyst
consensus to the Company’s top
management.
Company
Analyst
Phone number
Aton
Victor Dima
+7 (495) 213-03-44
Gazprombank
Marat Ibragimov
+7 (495) 980-41-87
Goldman Sachs
Maxim Nekrasov
+7 (495) 645-40-13
J. P. Morgan
Elena Jouronova
+7 (495) 967-38-88
Raiffeisen Bank
Egor Makeev
+7 (495) 221-98-51
Sberbank CIB
Mikhail Krasnoperov
+7 (495) 933-98-38
Source: Bloomberg
DIVIDEND POLICY
To determine the recommended
amount of dividends that will
be payable, the Group’s Board
of Directors abides by the
dividend policy. The general
meeting of shareholders, upon
recommendation of the Board
of Directors, determines how
the remainder of the annual net
profits of the Company should be
disposed of, including by way of
stock dividend, it being understood
that the remaining net profits of
the Company left after payment of
dividends shall be used for business
development of the Company
and its subsidiaries and the
development of the retail business
of the Group in Russia. Interim
dividends may be declared and
paid (including by way of staggered
payments) by the Board of
Directors, subject to observing the
terms and conditions provided by
law either by way of a cash dividend
or by way of an in kind dividend.
Period
Record date
Amount of dividend per GDR
(USD cents, gross)
Amount of accrued dividend
(USD, gross)
Interim dividends 2011
Interim dividends 2012
Interim dividends 2013
Interim dividends 2014
Interim dividends 2014
Interim dividends 2015
Interim dividends 2016
Interim dividends 2017
Interim dividends 2018
Interim dividends 2019
Interim dividends 2020
12.09.2011
23.02.2012
15.02.2013
18.02.2014
17.10.2014
11.09.2015
08.07.2016
20.01.2017
25.01.2018
03.10.2019
04.11.2020
9.9481
10.254
18.953
22.670
7.433
8.920
8.548
9.167
12.367
0.05635
0.028275
26,767,750.594
27,590,847.96
50,997,595.22
60,999,075.80
20,000,270.42
24,001,400.80
23,000,445.52
24,666,013.58
33,276,381.58
15,162,319.90
7,608,067.35
TAXATION
As a general rule, the Company
withholds 15% WHT from the
dividend paid from Luxembourg for
distribution to the holders of GDRs.
This information is provided
for information purposes only.
Potential and current investors
should seek the advice of
professional consultants on tax
matters related to investments
in the shares and GDRs of the
Company.
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Financial statement
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
O’KEY GROUPS S.A.
Consolidated Financial
Statements
for the year ended 31 December 2020 and Independent Auditor’s Report
’000 RUB
Non-current liabilities
Loans and borrowings
Lease liabilities
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
Current liabilities
Loans and borrowings
Interest accrued on loans and borrowings
’000 RUB
ASSETS
Non-current assets
Investment property
Property, plant and equipment
Construction in progress
Right-of-use assets
Intangible assets
Deferred tax assets
Other non-current assets
TOTAL NON-CURRENT ASSETS
Current assets
Inventories
Trade and other receivables
Prepaid income tax
Prepayments
Other current assets
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Equity and liabilities
Equity
Share capital
Legal reserve
Additional paid-in capital
Hedging reserve
Retained earnings
Translation reserve
TOTAL EQUITY
Note
31 December 2020
31 December 2019
Lease liabilities
13
14
14
15
16
12
18
19
20
17
21
22
1,897,449
41,252,458
2,784,595
20,601,991
1,269,804
4,709,712
507,746
1,249,969
41,962,175
2,976,838
21,512,397
1,292,185
4,175,871
831,632
Trade and other payables
Current income tax payable
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
Total equity and liabilities
Revenue
Cost of goods sold
Gross profit
73,023,755
74,001,067
General, selling and administrative expenses
Other operating income and expenses, net
16,460,125
3,042,208
58,882
1,092,150
63,250
7,713,568
28,430,183
15,219,769
4,141,984
180,966
895,033
42,662
5,507,079
25,987,493
Operating profit
Finance income
Finance costs
Foreign exchange (loss)/gain
(Loss)/profit before income tax
Income tax benefit/(expense)
(Loss)/profit for the year
101,453,938
99,988,560
OTHER COMPREHENSIVE INCOME/(LOSS)
119,440
10,597
8,555,657
(155,056)
3,185,645
1,761,152
119,440
10,597
8,555,657
(155,518)
5,233,827
1,204,897
Items that will never be reclassified to profit or loss:
Exchange differences on translation to presentation currency
Items that are or may be reclassified subsequently to profit or loss:
Change in fair value of hedges and reclassification from hedging reserve
Income tax on items within other comprehensive income/(loss)
Other comprehensive income/(loss) for the year, net of income tax
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR
(LOSS)/EARNINGS PER SHARE
13,477,435
14,968,900
Basic and diluted (loss)/earnings per share (in RUB per share)
Note
31 December 2020
31 December 2019
24
25.28
12
24
24
25.28
26
34
6
8
9
10
10
11
12
12
23
31,808,417
20,166,661
559,741
52,534,819
4,418,673
204,467
4,472,445
25,928,027
418,072
35,441,684
87,976,503
30,089,758
21,172,587
527,796
51,790,141
1,629,220
211,181
3,949,756
27,182,739
256,623
33,229,519
85,019,660
101,453,938
99,988,560
Revised
174,341,169
165,086,202
(135,053,236)
(127,826,275)
39,287,933
37,259,927
(32,792,114)
(31,790,218)
(1,457,222)
5,038,597
86,846
(4,971,224)
(1,786,951)
(1,632,732)
188,668
(1,444,064)
(568,606)
4,901,103
89,803
(5,054,947)
937,678
873,637
(126,679)
746,958
556,255
(390,471)
577
(115)
556,717
(887,347)
(194,398)
38,880
(545,989)
200,969
(5.4)
2.8
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Delivering great customer serviceAnnual report 2020O’KEY Group Legal
reserve
Additional
paid-in capital
Hedging
reserve
Retained
earnings
Translation
reserve
Total
equity
’000 RUB
CASH FLOWS FROM OPERATING ACTIVITIES
Note
2020
2019
-
-
-
(194,398)
38,880
(155,518)
5,474,381
1,595,368
15,755,443
Cash receipts from customers
746,958
-
746,958
-
-
-
-
(390,471)
(390,471)
-
-
(194,398)
38,880
(390,471)
(545,989)
Other cash receipts
Interest received
Cash paid to suppliers and employees
Taxes other than on income
Other cash payments
VAT paid
Income tax paid
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
201,037,196
191,108,706
462,954
53,117
698,981
49,475
(185,135,037)
(175,781,669)
(696,595)
(668,837)
(91,602)
(43,199)
(3,507,733)
(3,494,010)
(176,610)
(791,615)
11,945,690
11,077,832
Purchase of property, plant and equipment and initial direct costs associated with right-of-
use assets (excluding VAT)
(3,625,557)
(2,508,942)
Purchase of intangible assets (excluding VAT)
Repayment of loan granted to related party
Proceeds from sale of subsidiaries
31
(481,331)
346,025
(410,157)
-
-
1,552,785
Proceeds from sale of property, plant and equipment and intangible assets (excluding VAT)
5,773
14,612
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayment of loans and borrowings
Interest paid on loans and borrowings
Repayment of principal amount of lease liabilities
Interest paid on lease liabilities
Dividends paid
Other financial payments
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at the end of the year
(3,755,090)
(1,351,702)
11,450,000
13,252,720
(7,125,405)
(15,843,795)
(2,893,597)
(2,885,956)
(4,455,487)
(4,083,535)
(2,031,117)
(2,286,559)
(604,118)
(328,472)
(987,512)
(87,453)
(5,988,196)
(12,922,090)
2,202,404
(3,195,960)
5,507,079
8,712,253
4,085
(9,214)
7,713,568
5,507,079
22
21
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Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
’000 RUB
Note
Balance at 1 January 2019
Share
capital
119,440
COMPREHENSIVE INCOME FOR THE YEAR
10,597
8,555,657
Profit for the year
OTHER COMPREHENSIVE LOSS
Foreign currency translation
differences
Change in fair value
of hedges and reclassification
from hedging reserve
Income tax on items within
other comprehensive income
Total other comprehensive
loss
Total comprehensive income
for the year
-
-
-
-
-
-
-
-
-
-
-
-
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY IN EQUITY
CONTRIBUTIONS BY AND DISTRIBUTIONS TO OWNERS
Dividends declared
22
Total transactions with
owners recorded directly
in equity
-
-
-
-
-
-
-
-
-
-
-
-
(155,518)
746,958
(390,471)
200,969
-
-
(987,512)
(987,512)
-
-
(987,512)
(987,512)
Balance at 31 December 2019
119,440
10,597
8,555,657
(155,518)
5,233,827
1,204,897
14,968,900
Balance at 1 January 2020
119,440
10,597
8,555,657
(155,518)
5,233,827
1,204,897
14,968,900
COMPREHENSIVE LOSS FOR THE YEAR
Loss for the year
OTHER COMPREHENSIVE INCOME
Foreign currency translation
differences
Change in fair value
of hedges and reclassification
from hedging reserve
Income tax on items within
other comprehensive income
Total other comprehensive
income
Total comprehensive loss
for the year
-
-
-
-
-
-
-
-
-
-
-
-
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY IN EQUITY
CONTRIBUTIONS BY AND DISTRIBUTIONS TO OWNERS
Dividends declared
22
Total transactions with
owners recorded directly
in equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
577
(115)
462
(1,444,064)
-
(1,444,064)
-
-
-
-
556,255
556,255
-
-
577
(115)
556,255
556,717
462
(1,444,064)
556,255
(887,347)
-
-
(604,118)
(604,118)
-
-
(604,118)
(604,118)
Balance at 31 December 2020
119,440
10,597
8,555,657
(155,056)
3,185,645
1,761,152
13,477,435
118
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Background
(A) THE GROUP AND ITS OPERATIONS
These consolidated financial
statements for the year ended
31 December 2020 have been
prepared for O’KEY GROUP S.A.
(the “Company”) and its
subsidiaries (together referred to as
the “Group”).
The Company was incorporated
and is domiciled in Luxembourg.
The Company is a public limited
company (société anonyme)
and was set up in accordance
with Luxembourg regulations.
The main part of the Group is
located and conducts its business
in the Russian Federation.
The Company does not have
an immediate parent or an ultimate
controlling party.
As at 31 December 2020 and 2019,
the Company’s major indirect
shareholders are Mr. Troitskii,
Mr. Volchek and Mr. Korzhev.
As at 31 December 2020 and 2019,
as well as throughout the years then
ended, 38.172% of the Company’s
shares were admitted to trading
on the London Stock Exchange
in the form of global depositary
receipts (“GDRs”). Starting
14 December 2020, the Company’s
GDRs are also traded on Moscow
Exchange.
The Company’s registered address
is at 6, rue Jean Monnet, L-2180
Luxembourg.
The Group’s principal business
activity is operation of retail
chains in Russia under the brand
names “O’KEY” (hypermarkets)
and “Da!” (discounter stores).
At 31 December 2020, the Group
operated 195 stores including 118
discounter stores (31 December
2019: 178 stores including 100
discounter stores) in major Russian
cities, including but not limited
to Moscow and towns in Moscow
region, St. Petersburg, Murmansk,
Nizhniy Novgorod, Rostov-on-Don,
Krasnodar, Lipetsk, Ekaterinburg,
Novosibirsk, Krasnoyarsk, Ufa,
Astrakhan and Surgut.
(B) BUSINESS ENVIRONMENT
The Group’s operations are
primarily located in the Russian
Federation which displays certain
characteristics of an emerging
market. Its economy is particularly
sensitive to oil and gas prices.
The legal, tax and regulatory
frameworks continue to develop
and are subject to varying
interpretations and frequent
changes which together with
other legal and fiscal impediments
contribute to the challenges faced
by entities operating in the Russian
Federation. The Russian economy
continued to be negatively
impacted by ongoing
political tension in the region
and international sanctions
against certain Russian companies
and individuals.
Further, on 11 March 2020,
the World Health Organisation
declared the outbreak of COVID-19
a global pandemic. In response
to the pandemic, the Russian
authorities implemented
numerous measures attempting
to contain the spreading
and impact of COVID-19, such
as travel bans and restrictions,
quarantines, shelter-in-place
orders and limitations on business
activity, including closures. These
measures have, among other things,
severely restricted economic
activity in Russia and have
negatively impacted, and could
continue to negatively impact
businesses, market participants,
clients of the Group, as well as
the Russian and global economy
for an unknown period of time.
In response to the COVID-19
downturn, the Group promptly
addressed the situation with
the spread of COVID-19
and undertook necessary measures
to maintain safe and smooth
While there is still a high degree
of uncertainty regarding the further
pandemic development and its
duration, management of the Group
continues to evaluate related risks
and believes in further positive
development of the Group’s
performance including its
expansion plans. The Group
successfully refinanced its maturing
borrowings and ensured its stable
liquidity position by increasing cash
balances and retaining available
undrawn credit facilities. In July
2020, the rating agency Expert RA
affirmed the credit rating of ‘ruA-’
with a Stable outlook for LLC
O’KEY, the Group’s entity operating
the hypermarkets business, based
on the improvement in the Group's
revenue and profitability indicators.
Coupled with the continuous
operational improvement, the above
evidenced that the COVID-19
outbreak did not have any notable
impact on the Group’s activities.
Management of the Group
continues to follow applicable
government policies
and recommendations and will do
utmost to continue the Group’s
operations in the best and safest
possible way. However,
the future effects of the current
situation are difficult to predict
and management’s current
expectations and estimates could
differ from actual results.
operations of its stores and supply
chain, with focus on safety
of customers and employees,
supply chain and store
replenishment, e-commerce
and online orders, as well as social
responsibility initiatives. These
measures allowed the Group
to overcome the challenges
the market faced in 2020, and fully
satisfy consumer demand
by creating a safe, convenient,
and pleasurable shopping
experience across all its formats
and sales channels.
As the Group primarily operates
in the food retail market, overall
customer demand did not
encounter significant deterioration,
and even on the contrary for certain
types of goods. Further, entities
supplying food and essential goods
for individuals fell out of scope
of the restrictions imposed
by Russian government authorities
to contain the virus. However
in Q2 2020 due to local restrictions
imposed in some of the Russian
regions, a temporary drop of traffic
in shopping malls was noted, which
subsequently started to recover
in the second half of the year
with no considerable impact
on the Group’s overall performance.
Also, starting from Q2 2020 and till
the year end, changes in consumer
behavior caused by the pandemic
were observed. The customers
shopped less frequently, but tended
to stockpile in order to minimise
visits.
As a result of the pandemic,
the Group has incurred certain
unforeseen expenses related
to COVID-19 (purchase
of sanitisers, masks and gloves,
plastic screens at cash
desks to protect customers
and employees) that led
to some increase in the several
lines within Group’s general,
selling and administrative expenses
detailed in Note 8.
Further, as presented in Note
6, rental income of the Group
decreased due to pandemic
restrictions and related impact
on the tenants business. This
was partially compensated by rent
concessions received from
some of the landlords in response
to the decrease of traffic
in shopping malls.
Overall, the Group’s operating
business model proved its flexibility
and resilience in the turbulent
macroeconomic environment
caused by the pandemic, which is
supported by sustainable growth
of revenue in the hypermarkets
segment and an impressive increase
of sales in the discounters segment,
as disclosed in Note 6.
The negative impact
of the COVID-19 downturn
on the overall economic
environment has been
considered by the Group
in assessing impairment of its
non-current assets, as detailed
in Note 14, updating fair values
of the investment properties
held by the Group disclosed
in Note 13, as well in the analysis
of the financial risks including
the credit and liquidity risks
to which the Group is exposed, as
disclosed in Note 28.
Underpinned by the COVID-19
turmoil and oil price plunge
in the first quarter 2020 that did
not fully recover later in the year,
Russian Rouble has weakened
relative to major foreign currencies
compared to the 2019 year-end.
This resulted in significant foreign
exchange losses in the reporting
period (Note 11).
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Basis of preparation
(A) STATEMENT OF COMPLIANCE
These consolidated financial
statements have been
prepared in accordance with
International Financial Reporting
Standards (“IFRSs”) as adopted
by the European Union under
the historical cost convention, as
modified by the initial recognition
of financial instruments based
on fair value, and by the revaluation
of investment properties
and financial instruments at fair
value.
These consolidated financial
statements were authorised
for issue by the Board of Directors
on 26 March 2021.
Any changes to these consolidated
financial statements after issue
require approval of the Board
of Directors.
Functional
and presentation
currency
The functional currency of each
of the Group’s consolidated entities
is the currency of the primary
economic environment in which
the entity operates. The functional
currency of the Company
and the Group’s subsidiaries
outside of the Russian Federation
is the US Dollar (“USD”)
and the functional currency
of the Group’s Russian subsidiaries
in the Russian Rouble (“RUB”).
The consolidated financial
statements are presented in RUB,
which is the Group’s presentation
currency. All financial information
presented in RUB has been
rounded to the nearest thousand,
except when otherwise indicated.
The results and financial
position of the Group entities,
which functional currencies are
different from RUB, are translated
into the presentation currency as
follows:
● assets and liabilities for each
statement of financial position
presented are translated
at the closing rate at the end
of the respective reporting
period;
● income and expenses
are translated at the date
of transaction;
● components of equity are
translated at the historic rate;
● and all resulting exchange
differences are recognised
in other comprehensive income.
At 31 December 2020
the principal rates of exchange
used for translating
foreign currency balances
were USD 1 = RUB 73.8757;
EUR 1 = RUB 90.6824 (31 December
2019: USD 1 = RUB 61.9057;
EUR 1 = RUB 69.3406).
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Use of estimates
and judgments
The preparation of consolidated
financial statements in conformity
with IFRSs requires management
to make estimates and assumptions
that affect the application
of accounting policies
and the reported amounts of assets,
liabilities, income and expenses.
Actual results may differ from those
estimates.
Estimates and underlying
assumptions are reviewed
on an ongoing basis. Revisions
to accounting estimates are
recognised in the period in which
the estimates are revised
and in any future periods affected.
Management also exercises
certain judgements, apart from
those involving estimations,
in the process of applying
the accounting policies. Judgments
that have the most significant
effect on the amounts recognised
in the consolidated financial
statements and estimates that
can cause a significant adjustment
to the carrying amount of assets
and liabilities within the next
financial year include:
Tax legislation. The Group is subject
to taxation in several jurisdictions.
The major part of the tax burden
refers to the Russian tax legislation,
which is subject to varying
interpretations when being applied
to the transactions and activities
of the Group. Significant judgement
is required in determining
whether the tax positions
and interpretations the Group
has taken can be sustained. Refer
to Note 30.
Bonuses from suppliers. The Group
receives various bonuses from
suppliers which represent
a significant reduction in cost
of goods sold and inventory cost.
The calculation of these amounts is
in part dependent on an estimation
of whether the amounts due under
agreements with suppliers have
been earned at the reporting date
based on inventory purchased
and other conditions. In particular,
estimates and judgements are
applied in determining the period-
end accrual for the supplier
bonuses that are conditional
on the volume of promotional
or marketing activities provided.
The allocation of the bonuses
to inventory cost also has
some element of judgement
in relation to the attribution
of the bonuses earned to the cost
of specific goods received from
suppliers based on the proportion
of goods purchased.
Determination of recoverable
amount of non-current assets.
For those non-current assets
where impairment indicators exist
as at reporting date, the Group
estimates the recoverable
amount being the higher of their
value in use and fair value less
costs of disposal. For details
of impairment assessment
performed as at 31 December
2020 refer to Notes 14–16.
Recoverability of deferred tax asset.
Significant judgment is required
in assessment of recoverability
of deferred tax asset on tax losses
of LLC Fresh Market, the Group’s
entity that develops a discounter
chain and does not yet generate
profit. The Group performs analysis
of future taxable profit to cover
the accumulated tax losses
on the basis of the long-term
budget for the entity. Recognition
of the deferred tax asset is
contingent on the ability
of the Group management
to adhere to the long-term budget.
Refer to Note 12.
Lease term. In determining the lease
term, management considers
all facts and circumstances that
create an economic incentive
to exercise an extension option, or
not exercise a termination option.
Extension options (or periods
after termination options) are
only included in the lease term
if the lease is reasonably certain
to be extended (or not terminated).
If the contractual lease term does
not align with the economics
of the transaction, management
considers whether there are
any non-contractual enforceable
rights beyond the written
agreement to determine the lease
term with reference to mutual
understanding between the parties,
respective laws and regulations
and other relevant factors.
The assessment is reviewed if
a significant event or a significant
change in circumstances occurs
which affects this assessment
and that is within the control
of the lessee.
denominated in other currencies
from 4 to 6% (2019: from 8 to 10%
and from 4 to 5%, respectively).
An increase in the discount rate
by 100 basis points at the reporting
date would have decreased
the balances of right-of-use
assets and lease liabilities
by RUB 854,900 thousand
and RUB 811,287 thousand,
respectively (31 December
2019: by RUB 911,480 thousand
and RUB 847,748 thousand,
respectively).
A decrease of the discount
rate by 100 basis points
at the reporting date would have
increased the balances of right-
of-use assets and lease liabilities
by RUB 793,945 thousand
and RUB 729,732 thousand,
respectively (31 December 2019:
by RUB 988,408 thousand
and RUB 914,723 thousand,
respectively).
This analysis assumes that all other
variables, in particular lease term,
remain constant.
The Group leases land and trade
and other premises based
on the lease agreements with
various termination and extension
options. To determine the lease
term the management has applied
judgement in performing its
‘reasonably certain’ assessment
and determined that it is reasonably
certain that the extension options
will be exercised or termination
options will not be exercised during
the lease period which is based
on the Group’s business plan with
the respective planning horizon.
Most extension options in leases
of trade premises have been
included in the lease liability,
because the Group is unlikely
to replace the assets within
the Group’s planning horizon.
The lease term is reassessed if
an option is actually exercised
(or not exercised) or the Group
becomes obliged to exercise (or
not exercise) it. The assessment
of reasonable certainty is
only revised if a significant
event or a significant change
in circumstances occurs, which
affects this assessment, and that is
within the control of the lessee.
During the financial year, the Group
has performed a detailed review
of performance of the Group’s
discounter stores being the Group’s
most dynamic business segment,
with the focus on the mature
stores that operate in leased
premises under lease agreements
with extension options, to assess
whether any of the stores
demonstrate such sustained growth
that creates an economic incentive
for the Group to continue to lease
the underlying premises with
reasonable certainty for longer
periods as compared to the lease
terms previously determined.
As the result of this detailed
review, the Group reassessed
the available extension options
for some of the lease agreements
to extend the leases in accordance
with the discounters segment’s
planning horizon. The financial
effect of revising the lease terms
to reflect the effect of exercising
extension and termination options
was included in the ‘Modifications
and reassessments’ captions
in Notes 15 and 25.
An increase in the lease
term by 1 year for the leases
assuming extension options
at the reporting date would have
increased the balances of right-
of-use assets and lease liabilities
by RUB 2,220,886 thousand
and RUB 2,378,052 thousand,
respectively (31 December 2019:
by RUB 1,891,481 thousand
and RUB 2,089,398 thousand,
respectively).
A decrease of the lease term
by 1 year for the leases assuming
extension options at the reporting
date would have decreased
the balances of right-of-use
assets and lease liabilities
by RUB 2,225,313 thousand
and RUB 2,447,850 thousand,
respectively (31 December 2019:
by RUB 2,028,915 thousand
and RUB 2,252,736 thousand,
respectively).
This analysis assumes that all other
variables, in particular incremental
borrowing rate, remain constant.
Discount rates used
for determination of lease liabilities.
The Group uses its incremental
borrowing rate as a base
for calculation of the discount rate
because the interest rate implicit
in the lease cannot be readily
determined. In 2020, the Group’s
incremental borrowing rate applied
to lease liabilities denominated
in Russian Roubles ranged from
8 to 10%, and for contracts
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
New and amended
standards
and interpretations
adopted by the Group
The following amended standards
became effective from 1 January
2020, but did not have any material
impact on the Group:
● Amendments to the Conceptual
and effective for acquisitions
from the beginning of annual
reporting period that starts on or
after 1 January 2020).
on 26 September 2019
and effective for annual periods
beginning on or after 1 January
2020);
● Definition of materiality –
● COVID-19-Related Rent
Framework for Financial
Reporting (issued on 29 March
2018 and effective for annual
periods beginning on or after
1 January 2020).
Amendments to IAS 1 and IAS
8 (issued on 31 October 2018
and effective for annual periods
beginning on or after 1 January
2020).
● Definition of a business
● Interest rate benchmark
– Amendments to IFRS 3
(issued on 22 October 2018
reform - Amendments to IFRS
9, IAS 39 and IFRS 7 (issued
Concessions – Amendment
to IFRS 16 (issued on 28 May
2020 and effective for annual
periods beginning on or after
1 June 2020, with earlier
application permitted).
Segment information
Operating segments are
components that engage
in business activities that may
earn revenues or incur expenses,
whose operating results are
regularly reviewed by the chief
operating decision maker (CODM)
and for which discrete financial
information is available. The CODM
is the person or group of persons
who allocate resources and assess
the performance for the entity.
The CODM has been determined
as the CEO of the Group
and the Board of Directors
of the Company.
The Group is engaged
in management of retail
stores located in the Russian
Federation. Although the Group
is not exposed to concentration
of sales to individual
customers, all of the Group’s
sales are made in the Russian
Federation. As such, the Group
is exposed to the economic
development in Russia, including
the development of the Russian
retail industry. The Group has no
significant non-current assets
outside the Russian Federation.
The Group identified its operating
segments in accordance with
the criteria set in IFRS 8, Operating
Segments, and based on the way
the operations of the Group are
regularly reviewed by the CODM
to analyse performance and allocate
resources within the Group.
● the components’ activities
are mainly limited to Russia
which has a uniform regulatory
environment.
The CODM assesses
the performance of the operating
segments based on revenue
and earnings before interest, tax,
depreciation and amortisation
adjusted for certain one-off
items outlined below (“EBITDA”).
The “EBITDA” term is not defined
in IFRS. Other information
provided to the CODM is measured
in a manner consistent with that
in the consolidated financial
statements. The accounting policies
used for the segment reporting are
the same as the accounting policies
applied for the consolidated
financial statements (Note 34).
Basis of segmentation used in these
consolidated financial statements
is consistent with that used
in the prior year.
The Group has two operating
segments that also represent
reportable segments: “O’Key”
and “Da!”. Each segment has similar
format of their stores which is
described below:
● O’Key – chain of modern style
hypermarkets under the “O’KEY”
brand;
● Da! – chain of discounter stores
in Moscow and Central region.
The core assortment of goods
in the stores of each segment is
different, and the segments are
managed separately. For each
of the segments, the CODM
of the Group reviews internal
management reports at least
on a monthly basis.
All business components
within each reportable segment
demonstrate similar characteristics:
● the products and customers;
● the business processes are
integrated and uniform:
the components manage their
operations centrally. Purchasing,
logistics, finance, HR and IT
functions are centralised;
126
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Delivering great customer serviceAnnual report 2020O’KEY Group Principal subsidiaries
Details of the Company’s significant subsidiaries at 31 December 2020 and 31 December 2019, all wholly owned
are as follows:
Subsidiary
LLC O’KEY
LLC Fresh Market
JSC Dorinda
LLC O’KEY management
LLC O’KEY Logistics
Country
Russian Federation
Russian Federation
Russian Federation
Russian Federation
Russian Federation
Nature of operations
Retail
Retail and real estate
Real estate
Managing company
Import operations
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
The segment information for the years ended 31 December 2020 and 31 December 2019 is as follows:
’000 RUB
External revenue
2020
O’Key
2019
2020
Da!
2019
2020
Total
2019
Sales of trading stock
141,494,065
139,237,309
25,949,806
17,856,390
167,443,871
157,093,699
Sales of self-produced catering products
5,294,242
6,060,468
-
-
5,294,242
6,060,468
Revenue from contracts with customers
146,788,307
145,297,777
25,949,806
17,856,390
172,738,113
163,154,167
Rental income
Total revenue
1,553,026
1,876,935
50,030
55,100
1,603,056
1,932,035
148,341,333
147,174,712
25,999,836
17,911,490
174,341,169
165,086,202
Inter-segment revenue
186,055
226,517
1,975,627
684,158
2,161,682
910,675
EBITDA
14,048,236
14,276,746
783,732
(215,315)
14,831,968
14,061,431
A reconciliation of EBITDA to (loss)/profit for the year is as follows:
’000 RUB
EBITDA
Revaluation of investment property
(Loss)/gain from disposal of non-current assets
Impairment of non-current assets
Loss from write-off of receivables
Impairment of receivables
Depreciation and amortisation
Finance income
Finance costs
Foreign exchange (loss)/gain
Other one-off items
(Loss)/profit before income tax
Income tax benefit/(expense)
(Loss)/profit for the year
Note
9, 13
9
9
9
9
8
10
10
11
12
2020
2019
14,831,968
14,061,431
(191,500)
(484,879)
(265,544)
(236,635)
(75,025)
(75,454)
46,885
(821,009)
(191,353)
(19,382)
(8,203,742)
(8,100,015)
86,846
(4,971,224)
(1,786,951)
(336,046)
(1,632,732)
188,668
(1,444,064)
89,803
(5,054,947)
937,678
-
873,637
(126,679)
746,958
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129
Delivering great customer serviceAnnual report 2020O’KEY Group Other operating income
and expenses, net
’000 RUB
Gain from modification of leases
Net (loss)/gain from disposal of non-current assets
Impairment of non-current assets
Impairment of receivables
Loss from write-off of receivables
Loss from revaluation of investment property
Sundry income and expense, net
Total other operating income and expenses, net
Note
34
15, 25
14
13
2020
2019
56,092
(484,879)
(265,544)
(75,025)
(236,635)
(191,500)
(259,731)
376,864
46,885
(821,009)
(19,382)
(191,353)
(75,454)
114,843
(1,457,222)
(568,606)
Sundry income and expenses,
net for 2020 include a loss
of RUB 203,905 thousand
which represents an adjustment
to the deal price for the sale
of the supermarket business to X5
Retail Group completed in 2018.
This amount decreased the total
consideration due by the Group
and finalises settlements
with the buyer in respect
of the supermarket business sale.
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
General, selling
and administrative
expenses
Note
34
14–16
’000 RUB
Personnel costs
Depreciation and amortisation
Communication and utilities
Advertising and marketing
Repairs and maintenance costs
Insurance and bank commissions
Operating taxes
Security expenses
Legal and professional expenses
Materials and supplies
Variable lease expenses and expenses relating to short-term and low value
leases
Other costs
Total general, selling and administrative expenses
Total employee benefits expense
for the year ended 31 December
2020 included in the cost
of goods sold and general, sell-
ing and administrative expenses is
RUB 16,390,792 thousand (2019:
15,565,287 thousand).
(2019: ca. 22 thousand employ-
ees on average). Approximately
95% of the employees (2019:
95% of the employees) are
store and warehouse employees
and the remaining part is office
employees.
During the year ended 31 December
2020 the Group employed ca.
20 thousand employees on average
Due to the COVID-19 downturn,
the Group renegotiated lease pay-
ments with some of the lessors,
2020
13,607,430
8,203,742
3,719,594
2,124,128
1,344,905
1,026,333
734,678
711,905
685,233
434,625
161,148
2019
Revised
13,006,218
8,100,015
3,612,468
2,267,354
1,284,257
916,097
579,078
705,023
636,930
312,044
347,241
38,393
23,493
32,792,114
31,790,218
which resulted in the decrease
of variable lease expenses.
Fees billed to the Group
by PricewaterhouseCoopers,
Société coopérative, the Company’s
independent auditors, and affiliated
companies thereof are as follows:
’000 RUB
Fees for statutory audit of annual and consolidated accounts
Fees charged for other assurance services
Fees charged for tax advisory services
Total auditors’ remuneration
2020
18,586
5,677
443
24,706
2019
14,406
4,561
5,505
24,472
130
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Finance income
and finance costs
2020
2019
68,314
18,532
86,846
(3,005,532)
(1,965,692)
(4,971,224)
(4,884,378)
70,193
19,610
89,803
(2,832,305)
(2,222,642)
(5,054,947)
(4,965,144)
’000 RUB
Recognised in profit or loss
Interest income on bank deposits
Other finance income
Total finance income
Interest expense on loans and borrowings
Interest expense on lease liabilities (Note 25)
Total finance costs
Net finance costs recognised in profit or loss
During 2020 the Group
has capitalised borrowing
costs in the amount
of RUB 201,029 thousand (2019:
RUB 222,356 thousand) arising
on financing directly attributable
to the construction of the Group’s
new stores. The capitalisation rate
was 8.1% (2019: 8.8%).
Foreign exchange (loss) /
gain
The Group’s risk management
policy is to receive loans
and borrowings in the same
currency in which revenues
are generated (RUB). As
at 31 December 2020, the share
of the Group’s USD-denominated
loans and borrowings approximated
3% of total loans and borrowings
(31 December 2019: 3%).
The Group’s exposure to currency
risk is disclosed in Note 28.
’000 RUB
Foreign exchange loss on financial items
Foreign exchange gain on financial items
Net foreign exchange (loss)/gain on financial items
Foreign exchange loss on operating items
Total foreign exchange (loss)/gain
2020
(2,490,019)
1,040,625
(1,449,394)
(337,557)
(1,786,951)
2019
(275,625)
1,244,560
968,935
(31,257)
937,678
Substantial amount of the foreign
exchange losses relates to USD-
denominated intercompany
loans between Group entities
with different functional
currencies which are eliminated
on consolidation. Another major
part of the foreign exchange loss
arose on lease contracts in foreign
currencies. The residual impact is
attributable to import operations.
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Delivering great customer serviceAnnual report 2020O’KEY Group (B) RECOGNISED DEFERRED TAX ASSET ON TAX LOSS CARRIED FORWARD
Deferred tax asset recognised
in respect of tax loss carried
forward relates to the losses
accumulated by the Group’s
subsidiary LLC Fresh Market
that develops a discounter chain
and does not yet generate profit.
Starting from 1 January 2017
the amendments to the Russian
tax legislation became effective
in respect of tax loss carry forwards.
The amendments affect tax
losses incurred and accumulated
since 2007 that have not been
utilised. The 10-year expiry period
for tax loss carry-forwards that
was in effect prior to 2017 no longer
applies, and the accumulated tax
losses can now be carried forward
for utilisation in future periods
without any time limitation,
with exception of limitation
on utilisation of tax loss carry
forwards that applies during
the period from 2017 to 2021.
The amount of losses that can
be utilised each year during this
period is limited to 50% of annual
taxable profit.
The Group determined that
future taxable profits will
be available at LLC Fresh Market
in the foreseeable future against
which its accumulated losses
can be utilised. In making
this assessment the Group
considered that according
to the discounter chain’s long-
term budget the deferred tax
asset of RUB 3,182,029 thousand
on accumulated losses
generated by LLC Fresh Market
as at 31 December 2020 will
be utilised in full by 2028. In 2020
the Group corrected its long-
term plan for opening of new
stores by adjusting the pace
of new openings. This revision
was made based on the more
selective approach to choosing
suitable locations for new stores
with reference to the Group’s
accumulated experience as well as
changes in customer behaviour.
Recognition of the deferred tax
asset is contingent on the ability
of the Group management
to adhere to the key assumptions
made in the long-term budget.
These key assumptions
in the discounter chain’s long-term
budget covering 2021–2028 include
annual expansion by approximately
20–50 new discounter stores per
year; annual growth in revenue
comparable with past dynamics
of the discounter chain; and gradual
decrease of share of semi-fixed
costs due to economies of scale.
In addressing the sensitivity
of the timing of full utilisation
of the deferred tax asset
attributable to LLC Fresh Market,
the Group estimated that if the pace
of openings of new discounter
stores in each of the years from
2021 to 2028 is lower by 20% as
compared to the chain expansion
rate reflected in the segment’s
long-term budget, with all other
assumptions held constant,
the timing of full utilisation
of the deferred tax asset would
shift from 2028 to 2029. The Group
believes that any such shift does
not affect the probability that
the deferred tax asset would
be fully utilised, since the tax losses
can be carried forward indefinitely
and have no expiry date under
the Russian tax legislation.
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Income tax
INCOME TAX RECOGNISED IN PROFIT OR LOSS
’000 RUB
Current tax expense
Deferred tax benefit
Total income tax benefit/(expense)
2020
(313,343)
502,011
188,668
2019
(295,433)
168,754
(126,679)
RECONCILIATION BETWEEN THE TAX BENEFIT/(EXPENSE) AND PROFIT OR LOSS
MULTIPLIED BY APPLICABLE TAX RATE
The income tax rate applicable
to the majority of the Group’s
2020 and 2019 income is 20%,
the income tax rate established
by the Russian tax legislation.
A reconciliation between
the expected and the actual
taxation benefit/charge is provided
below.
’000 RUB
(Loss)/profit before income tax
Theoretical income tax at applicable tax rate of 20%
Effect of income taxed at different rates
Tax effect of items which are not deductible for taxation purposes:
Inventory shrinkage expenses
Other non-deductible expenses
Adjustments to current income tax for previous periods
Income tax benefit/(expense) for the year
2020
(1,632,732)
326,546
(102,701)
(82,077)
(35,507)
82,407
188,668
2019
873,637
(174,727)
(14,697)
(81,931)
(40,223)
184,899
(126,679)
DEFERRED TAX ASSETS AND LIABILITIES
(A) DEFERRED TAXES IN RESPECT OF SUBSIDIARIES
The Group has not recorded
a deferred tax liability in respect
of temporary differences
of RUB 27,357,614 thousand
(31 December 2019:
RUB 26,827,800 thousand)
associated with investments
in subsidiaries as the Group is able
to control the timing of the reversal
of those temporary differences
and does not intend to reverse
them in the foreseeable future. If
the temporary difference reversed
in form of distributions remitted
to the Company, then an enacted
tax rate of 5–15% would apply.
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
(C) MOVEMENT IN TEMPORARY DIFFERENCES DURING THE YEAR
Differences between IFRS
and statutory taxation
regulations in Russia and other
countries give rise to temporary
differences between the carrying
amount of assets and liabilities
for financial reporting purposes
and their tax bases. The tax
effect of the movements in these
temporary differences is detailed
below.
Investment property
(A) RECONCILIATION OF CARRYING AMOUNT
31 December 2020
’000 RUB
’000 RUB
1 January 2020
Recognised
in profit or loss
Recognised in other
comprehensive
income
Tax effect of deductible/ (taxable) temporary differences and tax loss carry forwards
Investment property
Property, plant and equipment
Construction in progress
Right-of-use assets
Intangible assets
Other non-current assets
Inventories
Trade and other receivables and payables
Long-term investments
Lease liabilities
Tax loss carry-forwards
Net deferred tax assets
Recognised deferred tax assets
Recognised deferred tax liabilities
95,094
(1,356,590)
(281,641)
(3,277,162)
(109,967)
240,783
326,963
139,734
5,785
5,024,469
2,840,607
3,648,075
4,175,871
(527,796)
38,300
(163,631)
23,278
315,203
18,183
(23,207)
(5,680)
54,790
-
(96,647)
341,422
502,011
-
-
-
-
-
-
-
(115)
-
-
-
(115)
133,394
(1,520,221)
(258,363)
(2,961,959)
(91,784)
217,576
321,283
194,409
5,785
4,927,822
3,182,029
4,149,971
4,709,712
(559,741)
’000 RUB
1 January 2019
Recognised
in profit or loss
Recognised in other
comprehensive
income
31 December 2019
Tax effect of deductible/ (taxable) temporary differences and tax loss carry forwards
Investment property
Property, plant and equipment
Construction in progress
Right-of-use assets
Intangible assets
Other non-current assets
Inventories
Trade and other receivables and payables
Long-term investments
Lease liabilities
Tax loss carry-forwards
Net deferred tax assets
Recognised deferred tax assets
Recognised deferred tax liabilities
80,003
(917,436)
(234,732)
(4,182,804)
(115,105)
84,760
397,994
118,059
6,613
5,845,558
2,357,531
3,440,441
4,120,362
(679,921)
15,091
(439,154)
(46,909)
905,642
5,138
156,023
(71,031)
(17,205)
(828)
(821,089)
483,076
168,754
-
-
-
-
-
-
38,880
-
-
38,880
95,094
(1,356,590)
(281,641)
(3,277,162)
(109,967)
240,783
326,963
139,734
5,785
5,024,469
2,840,607
3,648,075
4,175,871
(527,796)
In the context of the Group’s
current structure, tax losses
and current tax assets of different
Group companies may not be offset
against current tax liabilities
and taxable profits of other Group
companies and, accordingly,
taxes may accrue even where
there is a consolidated tax loss.
Therefore, deferred tax assets
and liabilities are offset only when
they relate to the same taxable
entity.
Investment properties at fair value as at 1 January 2019
Transfer from property, plant and equipment and construction in progress
Expenditure on subsequent improvements
Fair value gains less losses
Investment properties at fair value as at 31 December 2019
Investment properties at fair value as at 1 January 2020
Transfer from property, plant and equipment and construction in progress
Expenditure on subsequent improvements
Fair value gains less losses
Investment properties at fair value as at 31 December 2020
Note
9
14
9
1,047,000
274,302
4,121
(75,454)
1,249,969
1,249,969
836,801
2,179
(191,500)
1,897,449
The trade premises of the Group
included in investment property
are subject to operating leases. As
at 31 December 2020 the Group’s
investment property comprises
three buildings and six land
plots (31 December 2019: three
buildings and two land plots).
In 2020 the Group revised its
plans for several land plots
and considered them unattractive
for future stores development.
As a result, four land plots
were transferred to the Investment
property line.
(B) MEASUREMENT OF FAIR VALUE
The investment properties are
valued annually on 31 December
at fair value, by an independent,
professionally qualified valuator
who has recent experience
in valuing similar properties
in the Russian Federation.
The carrying values of investment
properties at 31 December
2020 and 31 December 2019
agree to the valuations reported
by the external valuators with
the use of a combination
of the market approach with
reference to comparable prices
for orderly transactions with similar
properties and the income approach
with reference to estimates
of future cash flows, supported
by the terms of any existing lease
and other contracts and by external
evidence such as current market
rents for similar properties
in the same location and condition,
and using discount rates that
reflect current market assessments
of the uncertainty in the amount
and timing of the cash flows.
The principal assumptions
underlying the estimation
of the fair value with reference
to the income approach are
those relating to: the annual net
rent rate of RUB 830–11,342
per sq. m. (31 December 2019:
RUB 917–14,793 per sq. m.);
expected occupancy of 89.9–100%
in the subsequent years
(31 December 2019: 92.9–100%);
and appropriate discount rate
of 14.8% – 15.0% (31 December
2019: 10.6% – 14.0%).
These valuations are regularly
compared to actual market yield
data and actual transactions
by the Group, and those reported
by the market.
The fair value measurement
of investment property has been
categorised as a Level 3 fair value
based on the inputs to the valuation
technique used.
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Property, plant
and equipment
and construction
in progress
Machinery
and
equipment,
auxiliary
facilities
and other
fixed assets
Total
property,
plant and
equipment
Construction
in progress
Total
property,
plant and
equipment
and
construction
in progress
Land
Buildings
Leasehold
improvements
4,975,059
38,907,212
7,916,794
15,657,993
67,457,058
3,621,918
71,078,976
92,816
8,807
-
907,009
1,008,632
2,247,373
3,256,005
-
1,135,840
660,259
221,441
2,017,540
(2,017,540)
-
(166,348)
-
-
-
(166,348)
(107,954)
(274,302)
(338)
(9,183)
(37,398)
(776,591)
(823,510)
(766,959)
(1,590,469)
4,901,189
40,042,676
8,539,655
16,009,852
69,493,372
2,976,838
72,470,210
4,901,189
40,042,676
8,539,655
16,009,852
69,493,372
2,976,838
72,470,210
60,679
-
(760,741)
443,312
672,825
-
-
1,527,408
2,031,399
2,272,857
4,304,256
798,813
385,190
1,856,828
(1,856,828)
-
-
-
(760,741)
(76,060)
(836,801)
(65,732)
(10,741)
(181,439)
(801,906)
(1,059,818)
(282,539)
(1,342,357)
4,135,395
41,148,072
9,157,029
17,120,544
71,561,040
3,034,268
74,595,308
’000 RUB
COST
Balance at 1 January
2019
Additions
Transfers
Transfer
to investment
property
Disposals
Balance
at 31 December 2019
Balance at 1 January
2020
Additions
Transfers
Transfer
to investment
property
Disposals
Balance
at 31 December 2020
DEPRECIATION AND IMPAIRMENT LOSSES
’000 RUB
Land
Buildings
Leasehold
improvements
Machinery
and
equipment,
auxiliary
facilities
and other
fixed assets
Total
property,
plant and
equipment
Construction
in progress
Balance at 1 January
2019
Depreciation
for the year
Impairment losses
Disposals
Balance
at 31 December 2019
Balance
at 1 January 2020
Depreciation
for the year
-
-
-
-
-
-
(8,592,043)
(3,135,766)
(11,929,087)
(23,656,896)
(1,307,099)
(673,037)
(1,796,354)
(3,776,490)
(821,009)
-
-
(821,009)
2,874
2,240
718,084
723,198
(10,717,277)
(3,806,563)
(13,007,357)
(27,531,197)
(10,717,277)
(3,806,563)
(13,007,357)
(27,531,197)
-
(1,318,813)
(1,083,731)
(1,203,509)
(3,606,053)
-
-
-
-
-
-
-
Total
property,
plant and
equipment
and
construction
in progress
(23,656,896)
(3,776,490)
(821,009)
723,198
(27,531,197)
(27,531,197)
(3,606,053)
Impairment losses
(15,871)
Disposals
-
-
881
-
-
(15,871)
(249,673)
(265,544)
72,497
771,161
844,539
-
844,539
Balance
at 31 December 2020
NET BOOK VALUE
(15,871)
(12,035,209)
(4,817,797)
(13,439,705)
(30,308,582)
(249,673)
(30,558,255)
At 1 January 2019
4,975,059
30,315,169
4,781,028
3,728,906
43,800,162
3,621,918
47,422,080
At 31 December 2019
4,901,189
29,325,399
4,733,092
3,002,495
41,962,175
2,976,838
44,939,013
At 31 December 2020
4,119,524
29,112,863
4,339,232
3,680,839
41,252,458
2,784,595
44,037,053
Depreciation expense
of RUB 3,606,053 thousand has
been charged to selling, general
and administrative expenses (2019:
RUB 3,776,490 thousand).
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
IMPAIRMENT ASSESSMENT
At the end of each reporting period,
the Group assesses whether there is
any indication that its non-current
assets including property, plant
and equipment, right-of-use assets
and other non-current assets may
be impaired. Where the non-
current assets relate to the Group’s
stores, these stores are treated as
separate CGUs, and impairment
assessment is performed in respect
of the aggregate carrying value
of the non-current assets
attributable to these CGUs
with reference to their actual
and anticipated performance
and other relevant factors, including
impact of COVID-19 on each
particular CGU where noted, as
outlined in Note 1.
For the CGUs subject to impairment
testing, recoverable amount
was determined based on either
value-in-use or fair value less costs
of disposal approach, depending
on characteristics of particular
CGUs.
Value in use calculations
were prepared using cash flow
projections based on financial
budgets and forecasts approved
by management covering a one-year
period. Cash flows beyond the one-
year period are extrapolated using
an expected growth rate for each
particular CGU which depends
on its maturity and other relevant
factors. The discount rates are
post-tax and reflect management’s
estimate of the risks specific
to the Group.
Fair value less costs of disposal
calculations were based
on available information about most
recent prices in an active market
for similar assets in the comparable
location and condition,
and other relevant information.
For determination of market values,
an independent appraiser who
holds recognised and relevant
professional qualifications and has
recent experience in the valuation
of assets in the same location
and category was engaged
by the Group.
As the result of the impairment
test performed as at 31 December
2020, the Group recognised
an impairment loss in the amount
of RUB 265,544 thousand,
in respect of certain land plots
and associated construction
in progress, all of which
belonging to O’Key segment
(2019: impairment loss
of RUB 821,009 thousand
was recognised, primarily
in respect of mature low-
performing CGUs, with the loss
of RUB 784,009 thousand
attributable to O’Key segment
and RUB 37,000 thousand to Da!
segment).
The total recoverable amount
of the impaired assets determined
based on the fair value less
costs of disposal approach as
of 31 December 2020 amounted
to RUB 2,501,185 thousand. No
impairment was identified for assets
which recoverable amount
was determined based on value
in use approach as of 31 December
2020.
The total recoverable amount
of the impaired CGUs determined
based on value in use as
of 31 December 2019 amounted
to RUB 874,010 thousand. No
impairment was identified for assets
which recoverable amount
was determined based on fair value
less costs of disposal approach as
of 31 December 2019.
The post-tax discount rate used
in the assessment under the value
in use approach as at 31 December
2020 was 10.9% (31 December 2019:
11.8%). If the revised estimated
post-tax discount rate applied
to the discounted cash flows
of the CGUs had been 200 basis
points higher than management’s
estimates, the Group would need
to reduce the carrying value
of property, plant and equipment
by RUB 312,000 thousand (2019:
if the estimated post-tax discount
rate had been 100 basis points
higher than management’s
estimates, the Group would need
to recognise additional impairment
of RUB 70,909 thousand).
PLEDGED ASSETS
At 31 December 2020, 4
stores with carrying value
of RUB 2,305,513 thousand have
been pledged to third parties as
collateral for bank borrowings
(31 December 2019: 4 stores
were pledged with carrying value
of RUB 2,386,084 thousand).
Right-of-use assets
The Group leases various trade
premises, land and other assets.
Rental contracts are typically made
for fixed periods of 3 to 49 years
but may have extension and early
termination options. Lease terms
are negotiated on an individual
basis and contain a wide range
of different terms and conditions.
The table below presents the right-
of-use assets by class of underlying
assets:
’000 RUB
Balance at 1 January 2019
Additions
Modifications and reassessments
Depreciation for the year
Disposals
Balance at 31 December 2019
Balance at 1 January 2020
Additions
Modifications and reassessments
Depreciation for the year
Disposals
Balance at 31 December 2020
Trade premises
17,448,977
596,249
30,932
(3,006,754)
-
15,069,404
15,069,404
776,708
1,713,826
(3,211,079)
(13,583)
14,335,276
Land
5,281,087
101,915
62,627
(271,509)
(686,173)
4,487,947
4,487,947
158,862
64,312
(239,137)
(83,208)
Other
2,496,115
12,899
48,826
Total
25,226,179
711,063
142,385
(602,794)
(3,881,057)
-
1,955,046
1,955,046
467,585
98,043
(686,173)
21,512,397
21,512,397
1,403,155
1,876,181
(642,735)
(4,092,951)
-
(96,791)
4,388,776
1,877,939
20,601,991
impairment assessment has been
performed as disclosed in Note
14. No impairment attributable
to the right-of-use assets
was identified as at 31 December
2020 and 31 December 2019.
The group ‘Other’ is mostly
represented by office premises
and warehouses.
Modifications and reassessments
for the year ended
31 December 2020 were driven
by the reassessment during
the year of extension options
for some of the Group’s leases
of trade premises under the mature
discounter stores that demonstrate
steady performance, as well as
by the modification of a number
of other leases, primarily
attributable to the Group’s trade
premises, that changed either
the consideration for the lease,
contractual lease term, or both, with
no change in scope of the leases.
Depreciation expense
of RUB 3,986,627 thousand (2019:
RUB 3,748,850 thousand) has
been charged to general, selling
and administrative expenses.
Right-of-use assets are assessed
for indication of potential
impairment as at each reporting
date. For those assets where
impairment indicators exist,
the Group estimates recoverable
amount being the higher of their
value in use and fair value less
costs of disposal, on either
individual asset or CGU level.
No indicators of impairment
were identified for the Group’s
right-of-use assets that are
attributable to individual leased
assets and do not relate to stores
in operation as at 31 December
2020 and 2019. For those right-of-
use assets that relate to the Group’s
stores and are therefore assessed
for impairment on the store level
together with the other non-current
assets attributable to the stores,
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Delivering great customer serviceAnnual report 2020O’KEY Group Prepayments
’000 RUB
Prepayments for goods
Prepayments for variable lease payments – third parties
Prepayments for services
VAT on prepayments
Other prepayments
Total prepayments
Note
31 December 2020
31 December 2019
363,358
65,320
245,045
156,333
262,094
1,092,150
265,207
126,066
306,152
89,902
107,706
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Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Intangible assets
’000 RUB
COST
Balance at 1 January 2019
Additions
Disposals
Balance at 31 December 2019
Balance at 1 January 2020
Additions
Disposals
Balance at 31 December 2020
AMORTISATION AND IMPAIRMENT LOSSES
Balance at 1 January 2019
Amortisation for the year
Disposals
Balance at 31 December 2019
Balance at 1 January 2020
Amortisation for the year
Disposals
Balance at 31 December 2020
CARRYING AMOUNTS
At 1 January 2019
At 31 December 2019
At 31 December 2020
Software
Other intangible
assets
1,745,665
556,076
(290,016)
2,011,725
2,011,725
507,457
(552,515)
1,966,667
(556,514)
(543,522)
288,551
(811,485)
(811,485)
(577,860)
551,964
(837,381)
1,189,151
1,200,240
1,129,286
181,247
18,253
(6,491)
193,009
193,009
90,108
(16,012)
267,105
(76,184)
(31,153)
6,273
(101,064)
(101,064)
(33,202)
7,679
(126,587)
105,063
91,945
140,518
Total
1,926,912
574,329
(296,507)
2,204,734
2,204,734
597,565
(568,527)
2,233,772
(632,698)
(574,675)
294,824
(912,549)
(912,549)
(611,062)
559,643
(963,968)
1,294,214
1,292,185
1,269,804
Amortisation
of RUB 611,062 thousand has
been charged to selling, general
and administrative expenses (2019:
RUB 574,675 thousand).
No indicators of impairment
were identified for the Group’s
intangible assets as at 31 December
2020 and 31 December 2019.
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Other non-current assets
Inventories
’000 RUB
Note
31 December 2020
31 December 2019
FINANCIAL ASSETS WITHIN OTHER NON-CURRENT ASSETS
Long-term refundable deposits to lessors
TOTAL FINANCIAL ASSETS WITHIN OTHER NON-CURRENT ASSETS
OTHER NON-CURRENT ASSETS
Prepayments for non-current assets
Long-term loans to entities under control of shareholder group
31
Total other non-current assets
201,269
201,269
306,477
-
507,746
232,801
232,801
252,806
346,025
831,632
’000 RUB
Goods for resale
Raw materials and consumables
Write-down to net realisable value
Total inventories
The Group tested the inventories
for obsolescence and wrote
down the inventories to their
net realisable value, which
resulted in a decrease
of the carrying value of inventories
by RUB 534,420 thousand as
at 31 December 2020 (31 December
2019: RUB 509,794 thousand).
The write down to net realisable
value was determined by applying
percentages of discount on sales
and write-offs of slow-moving
goods to the appropriate aging
31 December 2020
31 December 2019
16,176,223
818,322
(534,420)
16,460,125
14,967,315
762,248
(509,794)
15,219,769
of the goods. The percentages
of discount were based
on the management’s best
estimate following the experience
of the discount sales.
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Trade and other
receivables
’000 RUB
31 December 2020
31 December 2019
FINANCIAL ASSETS WITHIN TRADE AND OTHER RECEIVABLES
Trade receivables
Bonuses receivable from suppliers
Receivables from sale of supermarkets
Other financial receivables
TOTAL FINANCIAL ASSETS WITHIN TRADE AND OTHER RECEIVABLES
OTHER RECEIVABLES
VAT receivable
Prepaid taxes other than income tax
Total trade and other receivables
The Group’s exposure to credit
and currency risks and credit loss
allowance as at 31 December 2020
and 31 December 2019 related
to trade and other receivables are
disclosed in Note 28.
256,780
1,953,121
-
311,961
2,521,862
465,439
54,907
3,042,208
486,626
2,027,894
120,686
371,395
3,006,601
1,088,358
47,025
4,141,984
Cash and cash
equivalents
’000 RUB
Cash on hand
Bank current accounts
Term deposits
Cash in transit
Total cash and cash equivalents
Term deposits had original
maturities of less than three
months.
The Group’s exposure to currency
risk related to cash and cash
equivalents is disclosed in Note 28.
31 December 2020
31 December 2019
234,215
2,694,611
4,607,909
176,833
7,713,568
229,328
1,703,444
2,512,259
1,062,048
5,507,079
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declared were recognised
as distribution to owners
in the consolidated statement
of changes in equity. Dividends
per share for the year ended
31 December 2020 amounted
to RUB 2.2 (USD 0.0282750) (2019:
RUB 3.7 (USD 0.05635)).
(Loss)/earnings per share
Basic (loss)/earnings per share are
calculated by dividing the profit
or loss attributable to owners
of the Company by the weighted
average number of ordinary
shares in issue during the year.
The Company has no dilutive
potential ordinary shares; therefore,
the diluted (loss)/earnings per share
equals the basic (loss)/earnings per
share.
(Loss)/earnings per share is
calculated as follows:
‘000 RUB
(Loss)/profit for the year
Weighted average number of ordinary shares in issue (thousands)
Basic and diluted (loss)/earnings per ordinary share (in RUB per share)
2020
(1,444,064)
269,074
(5.4)
2019
746,958
269,074
2.8
Equity
As at 31 December 2020
and 31 December 2019,
the Company’s authorised,
issued and fully paid share
capital of RUB 119,440 thousand,
the RUB equivalent
of EUR 2,691 thousand, is
represented by 269,074,000
ordinary shares with a par value
of 0.01 EUR each. Each share
is entitled to one vote, except
as may be otherwise provided
by the Articles of incorporation or
by applicable law.
10% of the issued share capital.
The legal reserve is not available
for distribution to the shareholders.
As at 31 December 2020 and 2019,
the legal reserve was formed in full.
Additional paid-in capital
represents the excess
of contributions received over par
value of shares issued. There
were no movements in additional
paid-in capital during the years
ended 31 December 2020
and 31 December 2019.
In accordance with Luxembourg
Company Law, the Company is
required to transfer a minimum
of 5% of its net profits for each
financial year to a legal reserve.
This requirement ceases
to be necessary once the balance
of the legal reserve reaches
In October 2020, the Company
declared and paid interim
dividends to shareholders in t
he amount of RUB 604,118 th
ousand (USD 7,608 thousand)
(2019: RUB 987,512 thousand,
the equivalent
of USD 15,162 thousand). Dividends
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Loans and borrowings
’000 RUB
Currency
Maturity
Carrying value
Maturity
Carrying value
31 December 2020
31 December 2019
2022–2025
3,970,588
2025
4,500,000
2022–2024
12,837,829
2021–2023
10,538,462
2022–2024
15,000,000
2021–2024
15,051,296
31,808,417
30,089,758
2021
2021
2021
529,412
1,578,594
1,175,155
2020
2020
On demand
1,132,624
On demand
-
464,258
213,006
949,106
NON-CURRENT LOANS AND BORROWINGS
Secured bank loans
Unsecured bank facilities
Unsecured bonds
TOTAL NON-CURRENT LOANS
AND BORROWINGS
CURRENT LOANS AND BORROWINGS
Secured bank loans
Unsecured bank facilities
Unsecured bonds
Unsecured loans from related parties
(Note 31)
Unsecured loans from third parties
TOTAL CURRENT LOANS
AND BORROWINGS
Unsecured bonds interest
Unsecured loans interest
INTEREST ACCRUED ON LOANS
AND BORROWINGS
TOTAL CURRENT LOANS
AND BORROWINGS, INCLUDING
INTEREST ACCRUED
Total loans and borrowings
RUB
RUB
RUB
RUB
RUB
RUB
USD
RUB
RUB
RUB
Information about property,
plant and equipment pledged as
collateral for the Group’s loans
and borrowings is disclosed
in Note 14.
As at 31 December 2020 the Group
had RUB 12,400,000 thousand
(31 December 2019:
RUB 15,947,280 thousand)
of undrawn committed borrowing
facilities available in RUB on fixed
and floating rate basis until March
2021-November 2024 in respect
of which all conditions have
been met. Proceeds from these
facilities may be used to finance
operating and investing activities, if
necessary.
During 2016–2017 the Group placed
unsecured bonds on Moscow
exchange bearing coupon rates
of 9.55% – 9.65% p.a.
The following issues of unsecured
bonds were also placed
by the Group on Moscow exchange
in 2019–2020:
● an issue made in April
2019 in the amount
of RUB 5,000,000 thousand
bearing coupon rate of 9.35% p.a.
and maturing in April 2029 with
an option for the bondholders
to claim early repayment
in April 2022;
● an issue made in December
2019 in the amount
of RUB 5,000,000 thousand
bearing coupon rate of 7.85% p.a.
and maturing in November 2024;
● an issue made in November
2020 in the amount
of RUB 5,000,000 thousand
bearing coupon rate of 7.50%
p.a. and maturing in October
2030 with an option
for the bondholders to claim
early repayment in November
2023.
2021
2,888
2020
2,850
4,418,673
1,629,220
COMPLIANCE WITH LOAN COVENANTS
203,426
1,041
204,467
210,112
1,069
211,181
4,623,140
1,840,401
36,431,557
31,930,159
The Group monitors compliance
with loan covenants on an ongoing
basis. Where noncompliance is
unavoidable in management’s view,
the Group requests waiver letters
from the banks before the year-
end, confirming that the banks
waive their rights to demand early
redemption.
complied with all its loan
covenants.
At 31 December 2020
and 31 December 2019 and during
the years then ended the Group
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Lease liabilities
Trade and other payables
2020
2019
’000 RUB
31 December 2020
31 December 2019
’000 RUB
Balance at 1 January
Additions
Modifications and reassessments
Repayment
Interest expense
Foreign exchange loss/(gain)
Balance at 31 December
Non-current lease liabilities
Current lease liabilities
Interest expense in the amount
of RUB 1,965,692 thousand (2019:
RUB 2,222,642 thousand) has been
charged to finance costs.
Total cash outflow
for leases in 2020 amounted
to RUB 6,648,964 thousand (2019:
RUB 6,677,365 thousand).
Some property leases contain
variable payment terms that are
linked to sales generated by a store.
Variable payment terms are used
for a variety of reasons, including
minimising the fixed costs base
for newly established stores.
Variable lease payments that
depend on sales are recognised
in profit or loss in the period
in which the condition that triggers
those payments occurs.
Expense relating to variable lease
payments not included in lease
liabilities included in selling,
general and administrative expenses
for 2020 was RUB 143,515 thousand
(2019: RUB 333,751 thousand).
Expenses relating to short-
term leases and to leases
of low-value assets that are
not included in lease liabilities,
both included in selling, general
and administrative expenses,
amounted to RUB 2,055 thousand
(2019: RUB 1,083 thousand)
and RUB 15,578 thousand (2019:
RUB 12,483 thousand), respectively.
25,122,343
29,227,792
FINANCIAL LIABILITIES AT AMORTISED COST
1,403,155
1,820,089
689,806
(234,479)
Trade payables
Other financial payables
(6,486,604)
(6,370,094)
TOTAL FINANCIAL LIABILITIES AT AMORTISED COST
2,031,117
749,006
24,639,106
20,166,661
4,472,445
2,286,559
(477,241)
25,122,343
21,172,587
3,949,756
FINANCIAL LIABILITIES AT FAIR VALUE
Interest rate swap liability
TOTAL FINANCIAL LIABILITIES AT FAIR VALUE
Payables to staff
Taxes payable other than income tax
Advances received from lessees
Contract liability related to gift cards
Total trade and other payables
The Group’s contract liabilities
relate to contracts with customers
for periods of less than one
year. RUB 100,111 thousand
of revenue was recognised
23,252,925
265,984
24,147,521
302,402
23,518,909
24,449,923
193,821
193,821
1,116,824
710,438
283,339
104,696
194,398
194,398
1,250,477
791,610
396,220
100,111
25,928,027
27,182,739
in the current reporting period
related to the contract liabilities as
at 31 December 2019, all of which
related to gift cards.
The Group’s exposure to currency
and liquidity risks related to trade
and other payables is disclosed
in Note 28.
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Reconciliation
of movements
of liabilities to cash flows
arising from financing
activities
The table below sets out an analysis
of liabilities from financing
activities and the movements
in the Group’s liabilities from
financing activities for each
of the periods presented. The items
of these liabilities are those
that are reported as financing
in the consolidated statement
of cash flows:
’000 RUB
Note
Loans and
borrowings
Lease
liabilities
Interest rate
swap liability
Dividends
payable
Balance at 1 January 2020
31,930,159
25,122,343
194,398
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayment of loans and borrowings
Interest paid on loans and borrowings
Repayment of principal amount of lease
liabilities
Interest paid on lease liabilities
Dividends paid
Other financial payments
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES
NON-CASH CHANGES
Additions to lease liabilities
Modifications and reassessments of lease
liabilities
Accrued interest
Dividends declared
Changes in fair value of interest rate swap
22
25
25
22
26
11,450,000
(7,125,405)
(2,893,597)
-
-
-
(328,472)
-
-
-
(4,455,487)
(2,031,117)
-
-
1,102,526
(6,486,604)
-
-
1,403,155
1,820,089
3,206,561
2,031,117
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(577)
Total
57,246,900
11,450,000
(7,125,405)
(2,893,597)
(4,455,487)
(2,031,117)
-
-
-
-
-
-
(604,118)
(604,118)
-
(328,472)
(604,118)
(5,988,196)
-
-
-
604,118
-
1,403,155
1,820,089
5,237,678
604,118
(577)
’000 RUB
Effect of changes in foreign exchange
rates
Note
Loans and
borrowings
Lease
liabilities
Interest rate
swap liability
Dividends
payable
192,311
749,006
-
-
Total
941,317
TOTAL NON-CASH CHANGES
3,398,872
6,003,367
Balance at 31 December 2020
Balance at 1 January 2019
36,431,557
24,639,106
34,523,103
29,227,792
(577)
193,821
26,229
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayment of loans and borrowings
Interest paid on loans and borrowings
Repayment of principal amount of lease
liabilities
Interest paid on lease liabilities
Dividends paid
Other financial payments
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES
NON-CASH CHANGES
Additions to lease liabilities
Modifications and reassessments of lease
liabilities
Accrued interest
Dividends declared
Changes in fair value of interest rate swap
Effect of changes in foreign exchange
rates
TOTAL NON-CASH CHANGES
Balance at 31 December 2019
22
25
25
22
26
13,252,720
(15,843,795)
(2,885,956)
-
-
-
(87,453)
-
-
-
(4,083,535)
(2,286,559)
-
-
(5,564,484)
(6,370,094)
-
-
689,806
(234,479)
3,054,661
2,286,559
-
-
-
-
(83,121)
(477,241)
2,971,540
2,264,645
31,930,159
25,122,343
-
-
-
-
-
-
-
-
-
-
-
168,169
-
168,169
194,398
604,118
10,005,780
-
-
-
-
-
-
61,264,484
63,777,124
13,252,720
(15,843,795)
(2,885,956)
(4,083,535)
(2,286,559)
(987,512)
(987,512)
-
(87,453)
(987,512)
(12,922,090)
-
-
-
987,512
-
-
689,806
(234,479)
5,341,220
987,512
168,169
(560,362)
987,512
6,391,866
-
57,246,900
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Financial risk
management
’000 RUB
Loans issued
Long-term refundable deposits to lessors
Trade and other receivables
Cash and cash equivalents
Total
Note
Carrying amount
31 December 2020
31 December 2019
18
20
21
63,250
201,269
2,521,862
7,479,353
10,265,734
388,688
232,801
3,006,601
5,277,751
8,905,841
(A) OVERVIEW
The risk management function
within the Group is carried out
with respect to financial risks,
operational risks and legal risks.
Financial risk comprises market
risk (including currency risk,
interest rate risk and other price
risks), credit risk and liquidity risk.
The primary function of financial
risk management is to establish
risk limits and to ensure that
any exposure to risk stays within
these limits. The operational
and legal risk management
functions are intended to ensure
the proper functioning of internal
policies and procedures in order
to minimise operational and legal
risks.
(B) CREDIT RISK
Credit risk is the risk of financial
loss to the Group if a customer
or counterparty to a financial
instrument fails to meet its
contractual obligations, and arises
principally from the Group’s
cash and cash equivalents, trade
receivables, bonuses receivable
and other financial receivables.
RISK MANAGEMENT
FRAMEWORK
The Board of Directors has overall
responsibility for the establishment
and oversight of the Group’s risk
management framework.
The Group’s risk management
policies are established to identify
and analyse the risks faced
by the Group, to set appropriate risk
limits and controls, and to monitor
risks and adherence to limits.
Risk management policies are
reviewed regularly to reflect
changes in market conditions
and the Group’s activities.
The Group, through its training
and management standards
and procedures, aims to develop
a disciplined and constructive
control environment in which all
employees understand their roles
and obligations.
The Group’s Audit Committee
oversees how management
monitors compliance with
the Group’s risk management
policies and procedures
and reviews the adequacy of the risk
management framework in relation
to the risks faced by the Group.
The Group’s Audit Committee
is assisted in its oversight role
by Internal Audit. Internal Audit
undertakes both regular and ad
hoc reviews of risk management
controls and procedures, the results
of which are reported to the Audit
Committee.
Due to the fact that the Group’s
principal activities are located
in the Russian Federation,
the credit risk is mainly associated
with its domestic market. The credit
risks associated with foreign
counterparties are considered
to be remote, as there are only
few foreign counterparties
and they were properly assessed
for creditworthiness.
and receivables connected
to provision of services. Other
receivables are primarily
represented by bonuses receivable
from suppliers. The Group
manages credit risk in respect
of those bonuses receivable
by maintaining a stable suppliers
base and monitoring collectability
of amounts due on an ongoing
basis.
To measure the ECL for trade
and other receivables, those have
been grouped based on shared
credit risk characteristics
and the days past due.
The expected loss rates are
based on the payment profiles
of sales over a period of 36
months before 31 December
2020 and 31 December 2019
and the corresponding historical
(II) TRADE AND OTHER
RECEIVABLES
The Group has no considerable
balance of trade receivables
because the majority of its
customers are retail consumers,
who are not provided with
any credit. The Group’s trade
receivables primarily include
receivables from tenants
’000 RUB
Trade receivables
Bonuses receivable from suppliers
Other financial receivables
credit losses experienced within
this period. The historical loss
rates are adjusted to reflect current
and forward-looking information
on macroeconomic factors affecting
the ability of the customers
to settle the receivables.
The ECL for bonuses receivable
from suppliers is determined
on portfolio level based
on historical default percentages
applied to the total amount
of bonuses receivable from
suppliers, adjusted to reflect
relevant current and forward-
looking information.
The credit loss allowance as
at 31 December 2020 determined
with the use of provision matrix is
summarised in the table below.
Gross amount
ECL
Carrying amount
271,003
2,012,244
322,098
(14,223)
(59,123)
(10,137)
256,780
1,953,121
311,961
(I) EXPOSURE TO CREDIT
RISK
exposure to credit risk
at the reporting date was:
The carrying amounts of financial
assets in the consolidated
statement of financial position
represent the Group’s maximum
credit risk exposure. The maximum
Total
2,605,345
(83,483)
2,521,862
When preparing the provision
matrix for the balances receivable
as at 31 December 2020,
the Group considered the extent
to which the COVID-19 outbreak
in the reporting period has
affected the industry in which
the Group operates and its
debtors and concluded that there
was no notable deterioration
of the debtors’ credit profile
that would require a significant
adjustment to the calculated
expected credit loss rates
with regard to forward-looking
information.
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The credit loss allowance as at 31 December 2019 determined with the use of provision matrix is summarised
in the table below.
31 December 2020
’000 RUB
Trade receivables
Bonuses receivable from suppliers
Other financial receivables
Total
Gross amount
ECL
Carrying amount
’000 RUB
492,657
2,087,713
388,185
2,968,555
(6,031)
(59,819)
(16,790)
(82,640)
486,626
2,027,894
371,395
2,885,915
FINANCIAL LIABILITIES AT AMORTISED COST
Secured bank loans
4,500,000
5,390,612
Unsecured bonds
16,378,581
19,246,035
14,417,464
16,875,293
118,716
1,970,788
1,092,285
644,810
622,575
4,627,086
16,652,672
1,472,420
14,310,588
Carrying
amount
Contractual
cash flows
Demand
and less than
6 months
From 6
to 12 months
From 1
to 5 years
More than 5
years
(III) CASH AND CASH
EQUIVALENTS
The Group assesses credit risk
for cash and cash equivalents based
on external ratings that are available
publicly. Cash and cash equivalents
are mainly held with banks which
are rated from Ba2 to Ba3 based
on Moody’s rating.
(C) LIQUIDITY RISK
Liquidity risk is the risk that
the Group will encounter difficulty
in meeting the obligations
associated with its financial
liabilities that are settled
by delivering cash or another
financial asset. The Group’s
approach to managing liquidity is
to ensure, as far as possible, that it
will always have sufficient liquidity
to meet its liabilities when due,
under both normal and stressed
conditions, without incurring
unacceptable losses or risking
damage to the Group’s reputation.
Liquidity risk management is
a responsibility of the Treasury
under the supervision
of the Group’s Financial Director.
The Group’s liquidity risk
management objectives are as
follows:
● Maintaining financial
independence: a share of one
creditor in debt portfolio should
not exceed 30%;
● Maintaining financial stability:
the Net Debt / EBITDA ratio
should not exceed 5.5, where
Net Debt is the total of long-
term and short-term loans
and borrowings and lease
liabilities less cash and cash
equivalents as presented
in the consolidated financial
statements;
● Monitoring of compliance with
debt covenants;
● Planning: timely preparation
of operating, investing
and financing cash flow forecasts
on rolling basis.
(I) EXPOSURE TO LIQUIDITY
RISK
The table below shows liabilities
at 31 December 2020 by their
remaining contractual maturity.
The amounts disclosed
in the maturity table are
the contractual undiscounted
cash flows, including gross
loan commitments. Such
undiscounted cash flows may
differ from the amount included
in the consolidated statement
of financial position because
the consolidated statement
of financial position amounts are
based on discounted cash flows.
Where the amount payable is
not fixed, the amount disclosed
is determined by reference
to the conditions existing
at the end of the reporting period.
Foreign currency payments are
translated using the spot exchange
rate at the end of the reporting
period.
Unsecured bank
facilities
Unsecured loans
from related parties
Unsecured loans
from third parties
1,132,624
1,140,319
1,140,319
-
2,888
2,888
38
2,850
-
-
Lease liabilities
24,639,106
37,344,787
3,289,905
3,287,534
15,796,555
14,970,793
Trade and other
payables
23,518,909
23,518,909
23,518,909
-
FINANCIAL LIABILITIES USED IN HEDGING ACTIVITY
Interest rate swap
193,821
193,821
101,458
92,363
-
-
-
-
Total
84,783,393
103,712,664
31,232,418
6,122,552
51, 386,901
14,970,793
As at 31 December 2020,
the Group’s current liabilities
exceeded its current assets
by RUB 7,011,501 thousand
(31 December 2019:
RUB 7,242,026 thousand).
An excess of current liabilities
over current assets is usual
for the retail industry. The Group
uses excess of trade and other
payables over inventory to finance
its operating and investing
activities. The Group has
reviewed its cash flow forecasts
in the context of current
and projected market conditions,
as well as available undrawn credit
facilities disclosed in Note 24,
and is confident that it will be able
to meet its obligations as they fall
due.
31 December 2019
’000 RUB
Carrying
amount
Contractual
cash flows
Demand
and less than
6 months
From 6
to 12 months
From 1
to 5 years
More than 5
years
FINANCIAL LIABILITIES AT AMORTISED COST
Secured bank loans
4,500,000
5,819,674
163,800
Unsecured bonds
15,474,414
19,082,129
1,064,508
11,003,754
12,833,879
411,143
165,600
674,893
872,318
4,668,813
17,342,728
11,550,418
Unsecured bank
facilities
Unsecured loans
from related parties
Unsecured loans
from third parties
949,106
1,107,620
1,107,620
-
2,885
2,885
35
2,850
-
-
-
-
-
-
-
821,461
-
-
-
-
Lease liabilities
25,122,343
37,163,992
3,167,963
3,418,869
16,477,389
14,099,771
Trade and other
payables
24,449,923
24,449,923
24,449,923
-
-
FINANCIAL LIABILITIES USED IN HEDGING ACTIVITY
Interest rate swap
194,398
194,398
47,644
49,337
97,417
-
-
Total
81,696,823
100,654,500
30,412,636
5,183,867
50,136,765
14,921,232
158
159
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
exposure is kept to an acceptable
level by keeping the proportion
of financial assets and liabilities
in foreign currencies to total
financial liabilities at an acceptable
level. From time to time the Group
converts assets and liabilities from
one currency to another.
EXPOSURE TO CURRENCY
RISK
The Group’s exposure to currency
risk in relation to the USD,
the major foreign currency
for the Group’s Russian
subsidiaries, was as follows based
on notional amounts:
31 December 2020
31 December 2019
31,955
60,981
(466,669)
(432,400)
(806,133)
122,503
22,574
(762,074)
(454,412)
(1,071,409)
The Group’s exposure to currency
risk in relation to the EUR was as
follows based on notional amounts:
(I) CURRENCY RISK
The Group holds its business
in the Russian Federation
and mainly collects receivables
nominated in Russian Roubles.
However, financial assets
and liabilities of the Group are also
denominated in other currencies,
primarily US Dollar, as well as Euro.
Thus, the Group is exposed
to currency risk, which may
materially influence the financial
position and financial results
of the Group through the change
in carrying value of financial
assets and liabilities and amounts
on foreign exchange rate gains or
losses. The Group ensures that its
(D) MARKET RISK
Market risk is the risk that changes
in market prices, such as foreign
exchange rates, interest rates
and equity prices will affect
the Group’s income or the value
of its holdings of financial
instruments. The objective
of market risk management is
to manage and control market
risk exposures within acceptable
parameters, while optimising
the return. Management sets
limits on the value of risk that may
be accepted. However, the use
of this approach does not prevent
losses outside of these limits
in the event of more significant
market movements.
’000 RUB
Trade and other receivables
Cash and cash equivalents
Lease liabilities
Trade and other payables
Total
Apart from the above, the Group’s
exposure to the currency risks
in relation to the USD arises
on USD denominated intragroup
loans between the Group entities
with different functional currencies.
While these intragroup loans are
eliminated upon consolidation,
related foreign exchange gains
and losses are recognised
in the consolidated profit or loss.
Refer to Note 11.
’000 RUB
Trade and other receivables
Cash and cash equivalents
Lease liabilities
Trade and other payables
Total
related to the Group’s entities
whose functional currency is
the RUB and is based on foreign
currency exchange rate variances
that the Group considered
to be reasonably possible at the end
of the reporting period. The analysis
assumes that all other variables,
in particular interest rates, remain
constant.
would have decreased/
increased equity and profit or
loss by RUB 545,742 thousand
(31 December 2019: 11% weakening/
strengthening of the RUB against
the EUR would have decreased/
increased equity and profit or loss
by RUB 235,650 thousand).
This analysis was performed
only for the foreign currency
denominated monetary
balances in the consolidated
statement of financial position
’000 RUB
FIXED RATE INSTRUMENTS
Cash and cash equivalents
Loans issued
Loans and borrowings
Lease liabilities
VARIABLE RATE INSTRUMENTS
Loans and borrowings
CASH FLOW SENSITIVITY
ANALYSIS FOR VARIABLE
RATE INSTRUMENTS
A change of 500 basis points
in interest rates at the reporting
date would have increased /
(decreased) equity and profit or
loss by the amounts shown below.
This analysis assumes that all other
variables, in particular foreign
currency rates, remain constant.
(II) INTEREST RATE RISK
The Group is exposed to the effects
of fluctuations in the prevailing
levels of market interest rates on its
financial position and cash flows.
PROFILE
At the reporting date the interest
rate profile of the Group’s interest-
bearing financial instruments
at their carrying amounts was:
31 December 2020
31 December 2019
7,302,520
-
4,215,703
388,688
(36,431,557)
(26,929,124)
(24,639,106)
(25,122,343)
-
(5,001,035)
The analysis was performed
on the same basis for 2019.
’000 RUB
31 DECEMBER 2020
Interest rate swap
31 December 2020
31 December 2019
Cash flow sensitivity (net)
2,013
330
(2,491,676)
(239,375)
(2,728,708)
-
1
(2,015,019)
(127,253)
(2,142,271)
31 December 2019
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
500 bp increase
500 bp decrease
500 bp increase
500 bp decrease
Profit or loss
Equity
375,000
375,000
(250,052)
375,000
124,948
(375,000)
(375,000)
250,052
(375,000)
(124,948)
305,341
305,341
-
690,010
690,010
(346,819)
(346,819)
-
(704,532)
(704,532)
SENSITIVITY ANALYSIS
A 20% weakening/
strengthening of the RUB against
the USD at 31 December 2020
would have decreased/
increased equity and profit or
loss by RUB 161,227 thousand
(31 December 2019: 11% weakening/
strengthening of the RUB against
the USD would have decreased/
increased equity and profit or loss
by RUB 117,855 thousand).
A 20% weakening/
strengthening of the RUB against
the EUR at 31 December 2020
160
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Delivering great customer serviceAnnual report 2020O’KEY Group Capital commitments
The Group has capital
commitments to acquire property,
plant and equipment, mostly
relating to construction of stores,
and intangible assets amounting
to RUB 742,609 thousand as
at 31 December 2020 (31 December
2019: RUB 653,698 thousand).
The Group has already allocated
the necessary resources in respect
of these commitments. The Group
believes that future net income
and funding will be sufficient
to cover these and any similar
commitments.
Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
(E) OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group may enter into sales
and purchase agreements
with the same counterparty
in the normal course of business.
The related amounts receivable
and payable do not always
meet the criteria for offsetting
in the consolidated statement
of financial position. This is
because, while generally there
is an intention to settle on net
basis, the Group may not have
any currently legally enforceable
right to offset recognised
amounts, because the right
to offset may be enforceable only
on the occurrence of future events.
In particular, in accordance with
the Russian civil law an obligation
can be settled by offsetting
against a similar claim if it is due,
has no maturity or is payable
on demand, unless otherwise stated
in the agreement.
The following table sets out
the carrying amounts of recognised
financial instruments that are
subject to the above agreements.
’000 RUB
31 DECEMBER 2020
Gross amounts before offsetting
Amounts offset
Net amounts presented in the consolidated statement of financial position
Amounts related to recognised financial instruments that do not meet some or all
of the offsetting criteria
Net amount
’000 RUB
31 DECEMBER 2019
Gross amounts before offsetting
Amounts offset
Net amounts presented in the consolidated statement of financial position
Amounts related to recognised financial instruments that do not meet some or all
of the offsetting criteria
Net amount
Trade and other
receivables
Trade and other
payables
4,718,504
(2,196,642)
2,521,862
(1,258,042)
25,715,551
(2,196,642)
23,518,909
(1,258,042)
1,263,820
22,260,867
Trade and other
receivables
Trade and other
payables
6,245,621
(3,239,020)
3,006,601
(1,688,369)
27,688,943
(3,239,020)
24,449,923
(1,688,369)
1,318,232
22,761,554
The net amounts presented
in the consolidated statement
of financial position disclosed
above form part of trade and other
receivables and trade and other
payables, respectively. Other
amounts included in these line
items do not meet the criteria
for offsetting and are not subject
to the agreements described above.
Amounts offset comprise
mainly trade payables for goods
and bonuses receivable from
suppliers.
(F) CAPITAL MANAGEMENT
The Group’s policy is to maintain
a strong capital base so as
to maintain investor, creditor
and market confidence
and to sustain future development
of the business. Neither
the Company nor its subsidiaries
are subject to externally imposed
capital requirements, except
for statutory requirement
in relation to minimum level
of share capital and requirement
in respect of positive net assets
of LLC “O’KEY” for external loan
agreement; the Group follows all
requirements.
162
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Contingencies
(A) LEGAL PROCEEDINGS
From time to time and in the normal
course of business, claims
against the Group are received.
On the basis of its own
estimates and both internal
and external professional advice,
the management is of the opinion
that no material losses will
be incurred in respect of claims
outstanding.
(B) TAX CONTINGENCIES
Russian tax legislation which
was enacted or substantively
enacted at the end of the reporting
period, is subject to varying
interpretations when being applied
to the transactions and activities
of the Group. Consequently, tax
positions taken by management
and the formal documentation
supporting the tax positions may
be challenged by tax authorities.
Russian tax administration is
gradually strengthening, including
the fact that there is a higher
risk of review of tax transactions
without a clear business purpose or
with tax incompliant counterparties.
Fiscal periods remain open
to review by the authorities
in respect of taxes for three
calendar years preceding the year
when decisions about the review
was made. Under certain
circumstances reviews may cover
longer periods.
Russian transfer pricing (TP)
legislation is generally aligned with
the international TP principles
developed by the Organisation
for Economic Cooperation
and Development (OECD),
although it has specific features.
The TP legislation provides
for the possibility of additional
tax assessment for controlled
transactions (transactions between
164
related parties and certain
transactions between unrelated
parties) if such transactions are
not on an arm’s-length basis.
The management has implemented
internal controls to comply with
current TP legislation.
and interpretations that it has taken
can probably be sustained, there
is a possible risk that an outflow
of resources will be required
should such tax positions
and interpretations be challenged
by the tax authorities.
Tax liabilities arising from
controlled transactions are
determined based on their
actual transaction prices. It is
possible, with the evolution
of the interpretation of the TP
rules, that such prices could
be challenged. The impact
of any such challenge cannot
be reliably estimated.
The Group includes companies
incorporated outside of Russia.
The tax liabilities of the Group are
determined on the assumption that
these companies are not subject
to Russian profits tax, because
they do not have a permanent
establishment in Russia. This
interpretation of relevant
legislation may be challenged.
As Russian tax legislation does
not provide definitive guidance
in certain areas, the Group applies
its judgement in interpretations
of such uncertain areas.
While management currently
estimates that the tax positions
The impact of any of the challenges
mentioned above cannot be reliably
estimated currently; however,
it may be significant to the financial
position and/or the overall
operations of the Group.
In addition to the above
matters, management estimates
that as at 31 December 2020,
the Group has other possible
obligations of approximately
RUB 1,900,000 thousand
(31 December 2019:
RUB 1,900,000 thousand) from
exposure to other than remote
tax risks arising from certain
transactions. These exposures
are estimates that result from
uncertainties in interpretation
of applicable legislation
and related documentation
requirements. Management will
vigorously defend the Group's
positions and interpretations that
were applied in determining taxes
recognised in these consolidated
financial statements if these are
challenged by the authorities.
Related party
transactions
Parties are generally considered
to be related if the parties are under
common control or if one party has
the ability to control the other party
or can exercise significant influence
or joint control over the other party
in making financial and operational
decisions. In considering
each possible related party
relationship, attention is directed
to the substance of the relationship,
not merely the legal form. Related
parties may enter into transactions
which unrelated parties might
not, and transactions between
related parties may not be effected
on the same terms, conditions
and amounts as transactions
between unrelated parties.
Related parties of the Group fall
into the following categories:
● The Company’s major indirect
shareholders (Note 1);
● Other related parties under
control of the major indirect
shareholders;
● Members of the Board
of Directors of the Company
and other key management
personnel.
(A) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management received
the following remuneration
during the year, which is included
in personnel costs:
’000 RUB
SHORT-TERM EMPLOYEE BENEFITS:
Salaries and short-term bonuses
Social security contributions
Other short-term payments
LONG-TERM EMPLOYEE BENEFITS:
Long-term service bonus
Total
2020
2019
403,752
16,874
4,621
50,071
475,318
343,763
13,855
17,234
38,000
412,852
In addition, members
of the Company’s Board
of Directors received
remuneration in the amount
of RUB 77,031 thousand for the year
ended 31 December 2020 (2019:
RUB 59,442 thousand) which is
included in legal and professional
expenses.
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
(B) TRANSACTIONS WITH OTHER RELATED PARTIES
(I) REVENUE
’000 RUB
Sale of services
Total
2020
1,883
1,883
Income
Receivables
2019
31 December 2020
31 December 2019
2,335
2,335
35
35
122
122
All outstanding balances
with other related parties are
to be settled in cash within six
months of the reporting date. None
of the balances are secured or
impaired.
(III) LOANS
AND BORROWINGS
’000 RUB
Loans and borrowings
The loans from other related
parties are denominated in USD,
bear interest at 8% per annum
and are payable on demand but
not later than 2026 (31 December
2019: payable on demand but
not later than 2021). In 2020
accrued and fully paid interest
amounted to RUB 89,853 thousand
and the rest of the movement
(II) EXPENSES
’000 RUB
Variable lease expenses and expenses relating to short-term and low value leases
Interest expense on lease liabilities
Interest expense on loans and borrowings
Other services received
Total
LEASES WITH OTHER
RELATED PARTIES
Lease liabilities under related party
arrangements were as follows:
2020
98,180
95,919
89,854
-
283,953
Expenses
2019
90,515
122,124
79,058
10,424
302,121
(IV) LOANS GIVEN
’000 RUB
Loans given (Note 18)
Interest receivable
Total
The long-term loans to entities
under control of shareholder
group in the amount
of RUB 346,025 thousand
were early settled in 2020 in cash.
31 December 2020
31 December 2019
1,132,624
949,106
of the loan is attributable to foreign
currency translation difference
within other comprehensive loss.
31 December 2020
31 December 2019
-
53,784
53,784
346,025
33,196
379,221
’000 RUB
Lease liabilities due to other related parties, including:
Current lease liabilities
Non-current lease liabilities
31 December 2020
31 December 2019
934,736
436,924
497,812
1,272,328
382,636
889,692
Terms of the leases with other
related parties are such that
the Group pays rentals which
include the reimbursement
of all operating expenses
related to the hypermarkets
leased and nearby leased
areas and a certain percentage
of the Group’s retail revenue
from the operation of these
hypermarkets.
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
Fair value disclosures
Fair value measurements are
analysed and categorised by level
in the fair value hierarchy as
follows:
● (i) Level 1 are measurements
at quoted prices (unadjusted)
in active markets for identical
assets or liabilities;
● (ii) Level 2 measurements
for the asset or liability, either
directly (that is, as prices) or
indirectly (that is, derived from
prices); and
● (iii) Level 3 measurements
are valuations not based
on observable market data (that
is, unobservable inputs).
using the fair value hierarchy.
If a fair value measurement
uses observable inputs that
require significant adjustment,
that measurement is a Level 3
measurement. The significance
of a valuation input is assessed
against the fair value measurement
in its entirety.
are valuations techniques with
all material inputs observable
Management applies judgement
in categorising financial instruments
(A) RECURRING FAIR VALUE MEASUREMENTS
Recurring fair value measurements
are those that the accounting
standards require or permit
in the statement of financial
position at the end of each
reporting period.
Financial instruments carried
at fair value. Interest swaps
are carried in the consolidated
statement of financial position
at their fair value. Fair value
of the swaps was determined based
on observable market data (Level
2 fair value), including forward
interest rates. The Group has no
financial assets and liabilities
measured at fair value based
on unobservable inputs (Level 3 fair
value).
Investment property. Fair value
of the investment property is
updated by the Group annually
on 31 December applying
the income approach and market
approach. Refer to Note 13.
(В) NON-RECURRING FAIR VALUE MEASUREMENTS
As at 31 December 2020,
recoverable amount
of some of the Group’s non-current
assets tested for impairment
was determined on the basis
of the fair value less costs
of disposals approach. Refer
to Note 14.
Significant accounting
policies
The principal accounting
policies set out below have
been consistently applied to all
the periods presented in these
consolidated financial statements
and have been applied consistently
by Group entities.
(A) BASIS OF CONSOLIDATION
(I) SUBSIDIARIES
Subsidiaries are those investees,
that the Group controls
because the Group (i) has power
to direct the relevant activities
of the investees that significantly
affect their returns, (ii) has
exposure, or rights, to variable
returns from its involvement
with the investees, and (iii)
has the ability to use its power
over the investees to affect
the amount of the investor’s
returns. The financial statements
of subsidiaries are included
in the consolidated financial
statements from the date that
control commences until the date
that control ceases. The accounting
policies of subsidiaries have been
changed when necessary to align
them with the policies adopted
by the Group.
(II) TRANSACTIONS
ELIMINATED
ON CONSOLIDATION
Intra-group balances
and transactions, and any unrealised
gains arising from intra-group
transactions, are eliminated
in preparing the consolidated
financial statements. Unrealised
losses are also eliminated unless
the cost cannot be recovered.
Loans between Group entities
and related foreign exchange
gains or losses are eliminated
upon consolidation. However,
where the loan is between Group
entities that have different
functional currencies, the foreign
exchange gain or loss cannot
be eliminated in full and is
recognised in the consolidated
profit or loss, unless the loan
is not expected to be settled
in the foreseeable future and thus
forms part of the net investment
in foreign operation. In such a case,
the foreign exchange gain or loss is
recognised in other comprehensive
income.
(С) ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE BUT FOR WHICH FAIR
VALUE IS DISCLOSED
Fair value was determined
by the Group for initial recognition
of financial assets and liabilities
which are subsequently measured
at amortised cost.
Fair value of the Group’s financial
assets and liabilities measured
at amortised cost approximates
168
their carrying amounts. Fair
value of the Group’s bonds
listed on Moscow exchange
was determined based on active
market quotations (Level 1 fair
value). Fair value of the Group’s
other financial assets and liabilities
at amortised cost belongs to Level
2 measurements in the fair value
hierarchy.
There were no transfers between
the levels of the fair value hierarchy
or changes in valuation techniques
for fair value measurements during
2020 and 2019.
(B) FOREIGN CURRENCY
(I) FOREIGN CURRENCY
TRANSACTIONS
AND BALANCES
Monetary assets and liabilities
are translated into each entity’s
functional currency at the official
exchange rate of the Central
Bank of the Russian Federation
(“CBRF”) at the respective end
of the reporting period. Foreign
exchange gains and losses
resulting from the settlement
of the transactions and from
the translation of monetary assets
and liabilities into each entity’s
functional currency at year-end
official exchange rates of the CBRF
including foreign exchange gains
and losses on borrowings and cash
and cash equivalents, as well as
any other foreign exchange gains
and losses are recognised in profit
or loss as a separate line item.
Translation at year-end rates does
not apply to non-monetary items
that are measured at historical cost.
Non-monetary items measured
at fair value in a foreign currency,
including equity investments, are
translated using the exchange
rates at the date when the fair
169
Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
value was determined. Effects
of exchange rate changes on non-
monetary items measured at fair
value in a foreign currency are
recorded as part of the fair value
gain or loss.
(II) FOREIGN OPERATIONS
The assets and liabilities of foreign
operations are translated
to RUB at the exchange rates
at the reporting date. The income
and expenses of foreign operations
are translated to RUB at exchange
rates at the dates
of the transactions.
Foreign currency differences
are recognised directly in other
comprehensive income. Since
1 January 2005 the Group’s date
of transition to IFRSs, such
differences have been recognised
in the foreign currency translation
reserve. When a foreign operation
is disposed of such that control
is lost, the cumulative amount
in the translation reserve related
to that foreign operation is
reclassified to profit or loss as part
of the gain or loss on disposal.
When the Group disposes of only
part of its interest in a subsidiary
that includes a foreign operation
while retaining control, the relevant
proportion of the cumulative
amount is reattributed to non-
controlling interests.
(C) FINANCIAL INSTRUMENTS
(I) NON-DERIVATIVE
FINANCIAL ASSETS
AND FINANCIAL LIABILITIES
– INITIAL RECOGNITION
Non-derivative financial
instruments represented by cash
and cash equivalents, loans given,
trade and other receivables
and lease receivables are initially
recorded at fair value adjusted
for transaction costs. Fair value
at initial recognition is best
evidenced by the transaction
price. A gain or loss on initial
recognition is only recorded if
there is a difference between
fair value and transaction price
which can be evidenced by other
observable current market
transactions in the same instrument
or by a valuation technique whose
inputs include only data from
observable markets. After the initial
recognition, an ECL allowance
is recognised for financial assets
measured at amortised cost
(AC), resulting in an immediate
accounting loss.
(II) NON-DERIVATIVE
FINANCIAL ASSETS
– CLASSIFICATION
AND SUBSEQUENT
MEASUREMENT
All of the Group’s non-
derivative financial assets belong
to the AC measurement category.
The classification and subsequent
measurement of debt financial
assets depends on: (i) the Group’s
business model for managing
the related assets portfolio and (ii)
the cash flow characteristics
of the asset.
The business model reflects how
the Group manages the assets
in order to generate cash flows –
whether the Group’s objective is:
(i) solely to collect the contractual
cash flows from the assets
(“hold to collect contractual
cash flows”,) or (ii) to collect
both the contractual cash flows
and the cash flows arising from
the sale of assets (“hold to collect
contractual cash flows and sell”) or,
if neither of (i) and (ii) is applicable,
the financial assets are classified
as part of “other” business model
and measured at FVTPL.
Business model is determined
for a group of assets (on a portfolio
level) based on all relevant evidence
about the activities that the Group
undertakes to achieve the objective
set out for the portfolio available
at the date of the assessment.
Factors considered by the Group
in determining the business
model include the purpose
and composition of a portfolio,
past experience on how the cash
flows for the respective assets
were collected, how risks are
assessed and managed, how
the assets’ performance is
assessed and how managers are
compensated.
Where the business model is
to hold assets to collect contractual
cash flows or to hold contractual
cash flows and sell, the Group
assesses whether the cash flows
represent solely payments
of principal and interest (“SPPI”).
Where the contractual terms
introduce exposure to risk or
volatility that is inconsistent
with a basic lending arrangement,
the financial asset is classified
and measured at FVTPL. The SPPI
assessment is performed on initial
recognition of an asset and it is not
subsequently reassessed.
(IV) FINANCIAL ASSETS
– WRITE-OFF
Financial instruments are
reclassified only when
the business model for managing
the portfolio as a whole
changes. The reclassification has
a prospective effect and takes place
from the beginning of the first
reporting period that follows after
the change in the business model.
(III) FINANCIAL ASSETS
IMPAIRMENT – CREDIT LOSS
ALLOWANCE FOR ECL
The Group assesses, on a forward-
looking basis, the ECL for debt
instruments measured at AC.
The Group measures ECL
and recognises net impairment
losses on financial assets at each
reporting date. The measurement
of ECL reflects: (i) an unbiased
and probability weighted amount
that is determined by evaluating
a range of possible outcomes,
(ii) time value of money and (iii)
all reasonable and supportable
information that is available without
undue cost and effort at the end
of each reporting period about
past events, current conditions
and forecasts of future conditions.
Debt instruments measured at AC
are presented in the consolidated
statement of financial position net
of the allowance for ECL.
The Group applies the IFRS 9
simplified approach to measuring
expected credit losses which uses
a lifetime expected loss allowance
for trade and lease receivables.
For other financial assets the Group
applies a three stage model
for impairment, based on changes
in credit quality since initial
recognition.
Non-derivative financial assets
are written-off, in whole or in part,
when the Group exhausted
all practical recovery efforts
and has concluded that there
is no reasonable expectation
of recovery. The write-off
represents a derecognition event.
The Group may write-off financial
assets that are still subject
to enforcement activity when
the Group seeks to recover amounts
that are contractually due, however,
there is no reasonable expectation
of recovery.
(V) FINANCIAL ASSETS
– DERECOGNITION
The Group derecognises financial
assets when (a) the assets are
redeemed or the rights to cash
flows from the assets otherwise
expire or (b) the Group has
transferred the rights to the cash
flows from the financial assets or
entered into a qualifying pass-
through arrangement whilst (i)
also transferring substantially
all the risks and rewards
of ownership of the assets or
(ii) neither transferring nor
retaining substantially all the risks
and rewards of ownership but not
retaining control.
Control is retained if
the counterparty does not have
the practical ability to sell the asset
in its entirety to an unrelated third
party without needing to impose
additional restrictions on the sale.
(VI) FINANCIAL LIABILITIES –
MEASUREMENT CATEGORIES
Financial liabilities are classified
as subsequently measured at AC,
except for (i) financial liabilities
at FVTPL: this classification is
applied to derivatives and other
financial liabilities designated as
such at initial recognition and (ii)
financial guarantee contracts
and loan commitments, if any (iii)
financial liabilities at FVOCI: this
classification is applied to financial
instruments carried at fair value
(swaps).
(VII) FINANCIAL LIABILITIES
– DERECOGNITION
Financial liabilities are
derecognised when they
are extinguished (i.e. when
the obligation specified
in the contract is discharged,
cancelled or expires).
An exchange between the Group
and its original lenders of debt
instruments with substantially
different terms, as well as
substantial modifications
of the terms and conditions
of existing financial liabilities, are
accounted for as an extinguishment
of the original financial liability
and the recognition of a new
financial liability. The terms
are substantially different if
the discounted present value
of the cash flows under the new
terms, including any fees paid net
of any fees received and discounted
using the original effective interest
rate, is at least 10% different
from the discounted present
value of the remaining cash flows
of the original financial liability.
In addition, other qualitative
factors, such as the currency that
the instrument is denominated
in, changes in the type of interest
rate, new conversion features
attached to the instrument
and change in loan covenants are
also considered. If an exchange
of debt instruments or modification
of terms is accounted for as
an extinguishment, any costs
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or fees incurred are recognised
as part of the gain or loss
on the extinguishment. If
the exchange or modification
is not accounted for as
an extinguishment, any costs or
fees incurred adjust the carrying
amount of the liability and are
amortised over the remaining term
of the modified liability.
Modifications of liabilities that
do not result in extinguishment
are accounted for as a change
in estimate using a cumulative
catch up method, with any gain or
loss recognised in profit or loss,
unless the economic substance
of the difference in carrying values
is attributed to a capital transaction
with owners.
(VIII) OFFSETTING
FINANCIAL INSTRUMENTS
Financial assets and liabilities are
offset and the net amount reported
in the consolidated statement
of financial position only when
there is a legally enforceable right
to offset the recognised amounts,
and there is an intention to either
settle on a net basis, or to realise
the asset and settle the liability
simultaneously. Such a right of set
off (a) must not be contingent
on a future event and (b) must
be legally enforceable in all
of the following circumstances: (i)
in the normal course of business,
(ii) in the event of default and (iii)
in the event of insolvency or
bankruptcy.
(IX) CASH AND CASH
EQUIVALENTS
(XIII) CAPITALISATION
OF BORROWING COSTS
Cash and cash equivalents include
cash in hand, deposits held at call
with banks, and other short-term
highly liquid investments with
original maturities of three months
or less. Cash and cash equivalents
are carried at AC because: (i)
they are held for collection
of contractual cash flows and those
cash flows represent SPPI, and (ii)
they are not designated at FVTPL.
(X) TRADE AND OTHER
RECEIVABLES
Trade and other receivables are
recognised initially at fair value
and are subsequently carried at AC
using the effective interest method.
(XI) TRADE AND OTHER
PAYABLES
Trade payables are accrued when
the counterparty performs its
obligations under the contract
and are recognised initially at fair
value and subsequently carried
at AC using the effective interest
method.
(XII) LOANS
AND BORROWINGS
Loans and borrowings are
recognised initially at fair value,
net of transaction costs incurred
and are subsequently carried at AC
using the effective interest method.
General and specific borrowing
costs directly attributable
to the acquisition, construction
or production of assets that are
not carried at fair value and that
necessarily take a substantial time
to get ready for intended use or sale
(qualifying assets) are capitalised as
part of the costs of those assets.
The commencement date
for capitalisation is when (a)
the Group incurs expenditures
for the qualifying asset; (b) it
incurs borrowing costs; and (c)
it undertakes activities that are
necessary to prepare the asset
for its intended use or sale.
Capitalisation of borrowing costs
continues up to the date when
the assets are substantially ready
for their use or sale.
The Group capitalises
borrowing costs that could
have been avoided if it had
not made capital expenditure
on qualifying assets. Borrowing
costs capitalised are calculated
at the Group’s average funding
cost (the weighted average interest
cost is applied to the expenditures
on the qualifying assets),
except to the extent that funds
are borrowed specifically
for the purpose of obtaining
a qualifying asset. Where this
occurs, actual borrowing costs
incurred on the specific borrowings
less any investment income
on the temporary investment
of these borrowings are capitalised.
(D) TRANSACTIONS WITH OWNERS
(I) ORDINARY SHARES/SHARE
CAPITAL
of shares issued is recorded as
additional paid-in capital in equity.
Ordinary shares are classified
as equity. Incremental costs
directly attributable to issue
of ordinary shares are recognised
as a deduction from equity, net
of any tax effects. Any excess
of the fair value of consideration
received over the par value
(II) DISTRIBUTIONS
TO OWNERS/
CONTRIBUTIONS FROM
OWNERS
Dividends are recorded as
a liability and deducted from
equity in the period in which
they are declared and approved.
Any dividends declared after
the reporting period and before
the consolidated financial
statements are authorised for issue
are disclosed in the subsequent
events note.
(E) PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION IN PROGRESS
(I) RECOGNITION
AND MEASUREMENT
Items of property, plant
and equipment, except for land, are
measured at cost less accumulated
depreciation and impairment
losses. The cost of property, plant
and equipment at 1 January 2005,
the date of transition to IFRSs,
was determined by reference to its fair
value at that date.
Cost includes expenditure that is
directly attributable to the acquisition
of the asset. The cost of self-
constructed assets includes the cost
of materials and direct labour, any other
costs directly attributable to bringing
the asset to a working condition
for their intended use, the costs
of dismantling and removing the items
and restoring the site on which
they are located, and capitalised
borrowing costs. Purchased software
that is integral to the functionality
of the related equipment is capitalised
as part of that equipment.
Any gain or loss on disposal of an item
of property, plant and equipment is
determined by comparing the proceeds
from disposal with the carrying amount
of property, plant and equipment, and is
recognised net within “other operating
income and expense” in profit or loss.
(II) SUBSEQUENT COSTS
The cost of replacing part of an item
of property, plant and equipment is
recognised in the carrying amount
of the item if it is probable that
the future economic benefits
embodied within the part will
flow to the Group and its cost can
be measured reliably. The carrying
amount of the replaced part is
derecognised. The costs of the day-
to-day servicing of property, plant
and equipment are recognised in profit
or loss as incurred.
(III) DEPRECIATION
Land and construction in progress
are not depreciated. Other items
of property, plant and equipment are
depreciated from the date that they
are installed and are ready for use, or
in respect of internally constructed
assets, from the date that the asset
is completed and ready for use.
Depreciation is based on the cost
of an asset less its residual value.
Significant components of individual
assets are assessed and if a component
has a useful life that is different from
the remainder of that asset, that
component is depreciated separately.
Depreciation is recognised in profit
or loss on a straight-line basis
over the estimated useful lives
of each part of an item of property,
plant and equipment, since this most
closely reflects the expected pattern
of consumption of the future economic
benefits embodied in the asset. Leased
assets are depreciated over the shorter
of the lease term and their useful
lives unless it is reasonably certain
that the Group will obtain ownership
by the end of the lease term.
The estimated useful lives of significant
items of property, plant and equipment
for the current and comparative periods
are as follows:
Buildings
Machinery
and equipment,
auxiliary facilities
Leasehold
improvements
30 years
2–20 years
the lowest
of the useful
life or the term
of underlying lease
Other fixed assets
2–10 years
Depreciation methods, useful
lives and residual values are
reviewed at each financial year end
and adjusted if appropriate.
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(F) INVESTMENT PROPERTY
Investment property is property
held by the Group to earn rental
income or for capital appreciation
or both, including land held
for a currently undetermined future
use, and which is not occupied
by the Group. Properties that are
mainly occupied by the Group
and insignificant portion of which
is leased out to third parties mainly
for offering additional customer
service are presented within
property, plant and equipment.
Investment property, including
assets under construction
for future use as investment
property, is initially recognised
at cost, including transaction costs,
and subsequently remeasured
at fair value with any change
therein recognised in profit or
loss within “other operating
income and expenses”. If fair
value of investment property
under construction is not reliably
determinable, the Group measures
that investment property under
construction at cost until either
its fair value becomes reliably
determinable or construction is
completed (whichever is earlier).
Fair value of the Group’s
investment property is the price
that would be received from
sale of the asset in an orderly
transaction, without deduction
of any transaction costs. The best
evidence of fair value is given
by current prices in an active market
for similar property in the same
location and condition. Market
value of the Group’s investment
property is determined based
on reports of independent
appraisers, who hold recognised
and relevant professional
qualifications and who have
recent experience in the valuation
of property in the same location
and category.
When the use of a property
changes such that it is reclassified
as property, plant and equipment,
its fair value at the date
of reclassification becomes its
deemed cost for subsequent
accounting.
Earned rental income is recorded
in profit or loss for the year within
revenue.
(G) INTANGIBLE ASSETS
(I) INTANGIBLE ASSETS
Intangible assets that are acquired
by the Group have finite useful
lives and are measured at cost
less accumulated amortisation
and accumulated impairment
losses. Intangible assets primarily
include capitalised computer
software, patents and licenses.
Acquired computer software,
licenses and patents are capitalised
on the basis of the costs incurred
to acquire and bring them to use.
(II) SUBSEQUENT
EXPENDITURE
Subsequent expenditure is
capitalised only when it increases
the future economic benefits
embodied in the specific asset
to which it relates. All other
expenditure is recognised
in the profit or loss as incurred.
software
other intangible
assets
1–7 years
1–5 years
Amortisation methods, useful
lives and residual values are
reviewed at each financial year end
and adjusted if appropriate.
(III) AMORTISATION
Amortisation is based on the cost
of the asset less its estimated
residual value.
Amortisation is recognised
in profit or loss on a straight-line
basis over the estimated useful
lives of intangible assets from
the date that they are available
for use since this most closely
reflects the expected pattern
of consumption of future economic
benefits embodied in the asset.
The estimated useful lives
for the current and comparative
periods are as follows:
(H) LEASES
At inception of a contract,
the Group assesses whether
a contract is, or contains, a lease.
A contract is, or contains, a lease
if the contract conveys the right
to control the use of an identified
asset for a period of time
in exchange for consideration.
To assess whether a contract
conveys the right to control the use
of an identified asset, the Group
assesses whether:
● The contract involves the use
of an identified asset –
this may be specified explicitly
or implicitly and should
be physically distinct asset. If
the supplier has a substantive
substitution right, then the asset
is not identified;
● The Group has the right to obtain
substantially all of the economic
benefits from use of the asset
throughout the period of use;
and
● The Group has the right to direct
the use of the asset.
The Group has the right when it
has the decision-making rights
that are most relevant to changing
how and for what purpose
the asset is used. In rare cases
where the decision about how
and for what purposes the asset is
used is predetermined, the Group
has the right to direct the use
of the asset if either:
● The Group has the right
to operate the asset; or
● The Group designed the asset
in a way that predetermines
how and for what purpose it will
be used.
The finance cost is charged to profit
or loss over the lease period so
as to produce a constant periodic
rate of interest on the remaining
balance of the liability for each
period. The right-of-use asset
is depreciated over the shorter
of the asset's useful life
and the lease term on a straight-line
basis.
The estimated useful lives of right-
of-use asset are as follows:
Trade premises
3–17 years
Land
Other
2–47 years
1–5 years
At the commencement date,
lease liabilities are measured
at an amount equal to the present
value of the following lease
payments:
● fixed payments (including
in-substance fixed payments),
less any lease incentives
receivable;
● variable lease payments that
are based on an index or a rate,
initially measured using the index
or rate as at the commencement
date;
● amounts expected to be payable
by the Group under residual
value guarantees;
● the exercise price of a purchase
option if the Group is reasonably
certain to exercise that option;
and
● payments of penalties
for terminating the lease, if
the lease term reflects the Group
exercising that option.
Leases are recognised as a right-
of-use asset and a corresponding
liability at the date at which
the leased asset is available
for use by the Group. Each lease
payment is allocated between
the liability and finance cost.
The following variable payments
are not included in the calculation
of lease liability:
● payments under land lease
agreements, the calculation
of which depends
on the cadastral value of the land
plot and other coefficients
established by government
decrees;
● payments for utilities and other
services, determined upon
the fact of consumption;
● variable lease payments that
depend on turnover.
Extension options (or period
after termination options) are
only included in the lease term
if the lease is reasonably certain
to be extended (or not terminated).
Lease payments to be made under
reasonably certain extension
options are also included
in the measurement of the liability.
The lease payments are discounted
using the interest rate implicit
in the lease. If that rate cannot
be readily determined, the Group’s
incremental borrowing rate is used,
being the rate that the Group would
have to pay to borrow the funds
necessary to obtain an asset
of similar value to the right-of-
use asset in a similar economic
environment with similar terms,
collateral and conditions.
The right-of-use assets are
measured at cost comprising
the following:
● the amount of the initial
measurement of the lease
liability;
● any lease payments made at or
before the commencement
date less any lease incentives
received;
● any initial direct costs.
The lease liability is measured
at amortised cost using the effective
interest method. The carrying
amount of liability is remeasured
to reflect any reassessment,
lease modification or revised
in-substance fixed payments. It
is remeasured when there is (i)
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a change in future lease payments
arising from a change in an index or
a rate;(ii) a change in the lease term
depending on the reassessment
of whether the Group will exercise
extension or termination options;
and (iii) lease modifications, when
the modification is not accounted
for as a separate lease. When
the lease liability is remeasured,
a corresponding adjustment is made
to the carrying amount of the right-
of-use asset or is recorded in profit
or loss if the carrying amount
of the right-of-use asset has been
reduced to zero.
Payments associated with short-
term leases and leases of low-value
assets are recognised on a straight-
line basis as an expense in profit or
loss. Short-term leases are leases
with a lease term of 12 months or
less. Low-value assets comprise
IT-equipment and refrigeration
equipment.
Some property leases contain
variable payment terms that are
linked to sales generated by a store.
Such variable lease payments
are recognised in profit or loss
in the period in which the condition
that triggers those payments occurs.
The Group presents right-
of-use assets and lease
liabilities in the separate lines
in the consolidated statement
of financial position.
Lease payments including
repayment of principal lease
liability and accrued interest
are classified consistently with
payments of other financial
liabilities in the consolidated
statement of cash flows.
Lease payments which were not
included in the measurement
of the lease liabilities (including
certain variable payments, short-
term leases and leases of low-value
assets) are presented as operating
cash flows.
into the smallest group of assets
that generates cash inflows from
continuing use that are largely
independent of the cash inflows
of other assets or groups of assets
(the “cash-generating unit”).
An impairment loss is recognised
if the carrying amount of an asset
or its cash-generating unit exceeds
its recoverable amount. Impairment
losses are recognised in profit or
loss within other operating income
and expenses. Impairment losses
recognised in respect of cash-
generating units are allocated
to reduce the carrying amount
of assets in the unit (group of units)
on a pro rata basis.
Impairment losses recognised
in prior periods are assessed at each
reporting date for any indications
that the loss has decreased or
no longer exists. An impairment
loss is reversed if there has been
a change in the estimates used
to determine the recoverable
amount. An impairment loss is
reversed only to the extent that
the asset’s carrying amount does
not exceed the carrying amount
that would have been determined,
net of depreciation or amortisation,
if no impairment loss had been
recognised.
In testing a cash-generating unit
for impairment, the Group identifies
all the corporate assets that relate
to the cash-generating unit under
review. If a portion of the carrying
amount of a corporate asset can
be allocated on a reasonable
and consistent basis to that unit,
the Group compares the carrying
amount of the unit, including
the portion of the carrying amount
of the corporate asset allocated
to the unit, with its recoverable
amount. If a corporate asset cannot
be allocated on a reasonable
and consistent basis to the cash-
generating unit, the Group assesses
the impairment of this corporate
asset on an individual basis.
(I) INVENTORIES
Cost of goods for resale includes
costs of purchase (comprising
of the purchase price, including
import duties and other non-
recoverable taxes, transport
and handling costs, and any other
directly attributable costs, less
relevant supplier discounts,
bonuses and similar items), as well
as other costs such as internal
handling, packaging and transport
to the extent that it directly
relates to bringing the goods
to the location and condition ready
for sale.
incurred in the converting them
into products ready for sale.
Where the goods for resale
assume conversion, which is
the case for the Group’s self-
produced catering products,
their cost also includes items
specifically attributable to units
of production (for example, direct
labour, direct expenses and sub-
contracted work), as well as
a systematic allocation of fixed
and variable production overheads
The cost of inventories is based
on the moving weighted average
principle.
Inventories are measured
at the lower of cost and net
realisable value. Net realisable
value is the estimated selling price
in the ordinary course of business,
less the estimated costs
of completion and selling expenses.
(J) IMPAIRMENT OF NON-FINANCIAL ASSETS
The carrying amounts
of the Group’s non-financial
assets, other than investment
property and deferred tax assets,
are reviewed at each reporting
date to determine whether there
is any indication of impairment.
If any such indication exists, then
the asset’s recoverable amount is
estimated.
The recoverable amount of an asset
or cash-generating unit is
the greater of its value in use and its
fair value less costs of disposal.
In assessing value in use,
the estimated future cash flows
are discounted to their present
value using a pre-tax discount
rate that reflects current market
assessments of the time value
of money and the risks specific
to the asset or cash-generating
unit. For the purpose of impairment
testing, assets that cannot be tested
individually are grouped together
(K) EMPLOYEE BENEFITS
(I) SHORT-TERM EMPLOYEE
BENEFITS
Wages, salaries, contributions
to the state pension and social
insurance funds, paid annual
leave and sick leave, bonuses,
and non-monetary benefits
(such as health services) are
measured on an undiscounted
basis and accrued in the year
in which the associated services
are rendered by the employees
of the Group. The Group has no
(L) PROVISIONS
A provision is recognised if, as
a result of a past event, the Group
has a present legal or constructive
obligation that can be estimated
reliably, and it is probable
that an outflow of economic
benefits will be required to settle
the obligation. Provisions are
determined by discounting
legal or constructive obligation
to make pension or similar benefit
payments beyond the payments
to the statutory defined
contribution scheme.
A liability is recognised
for the amount expected to be paid
under short-term bonus if
the Group has a present legal or
constructive obligation to pay
this amount as a result of past
service provided by the employee,
and the obligation can be estimated
reliably.
(II) LONG-TERM EMPLOYEE
BENEFITS
Long-term employee benefits
represent long-term service
bonuses. Long-term employee
benefits are expensed evenly
during the periods in which they are
earned by employees.
the expected future cash flows
at a pre-tax rate that reflects
current market assessments
of the time value of money
and the risks specific to the liability.
The unwinding of the discount is
recognised as a finance cost.
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(M) REVENUE
Revenue is income arising
in the course of the Group’s
ordinary activities. Revenue
is recognised in the amount
of transaction price.
Transaction price is the amount
of consideration to which
the Group expects to be entitled
in exchange for transferring
control over promised goods or
services to a customer, excluding
the amounts collected on behalf
of third parties.
Revenue is recognised net of VAT,
returns and discounts.
(I) REVENUE FROM
CONTRACTS WITH
CUSTOMERS
Revenue from contracts with
customers is represented by sales
of trading stock, including retail
sales of goods and sales of self-
produced catering products.
The major source of sales of trading
stock is retail revenue.
Revenue from sale of goods
and self-catering products
is recognised when control
of the goods and products has
transferred to the customer,
normally for the customers it is
occurred in the store at the point
of sale. No element of financing
is deemed present, as payment
(N) COST OF GOODS SOLD
Cost of goods sold includes
the cost of goods for resale
and self-produced catering
products sold to customers.
The Group receives various
types of bonuses from suppliers
of the transaction price is due
immediately.
In accordance with the Russian
consumer protection legislation,
the customers have the right
of return of goods in a range
of categories within 14 days
after the purchase. Such
estimated returns are assessed
at each reporting date. Based
on historical data about returns,
it is probable that a significant
reversal in the cumulative revenue
recognised will not occur.
Gift cards and award points issued
by the Group are recorded as
a contract liability within trade
and other payables upon sale when
prepaid by customers until they are
redeemed or expire.
In the reporting period, the Group’s
hypermarkets business maintained
a loyalty program where retail
customers were able to accumulate
award points on purchases
of certain goods which entitled
them to a discount on future
purchases in the hypermarkets.
Also, from time to time, the Group
holds promotional campaigns
where the Group provides discount
coupons to the customers that
purchase goods with total value
above a pre-determined amount.
The discount coupons entitle
the customers to a free purchase
or a discount on selected goods
immediately after the campaign
ends. Such award points
and coupons represent a material
right to the customers and give
rise to a separate performance
obligation to deliver the customers
additional or discounted goods.
The total transaction price is
allocated on the portfolio basis
to the initial and the additional
performance obligations
on a relative stand-alone selling
price basis. The estimated stand-
alone selling price of the award
points is determined with
reference to the extent to which
future performance is not
expected to be required because
the customer does not redeem
the points awarded.
(II) RENTAL INCOME
The Group leases out trade
premises under operating lease.
Rental income from investment
property is recognised in profit
or loss on a straight-line basis
over the term of the lease. When
assets are leased out under
an operating lease, the lease
payments receivable are recognised
as rental income on a straight-line
basis over the lease term. Lease
incentives granted are recognised
as an integral part of the total rental
income.
of goods, primarily in the form
of volume discounts, slotting fees
and counter services to suppliers
related to the purchases made.
These bonuses decrease the cost
of the goods and are recorded
as reduction of cost of sales as
the related goods are sold.
Losses from inventory shortages are
recognised in cost of goods sold.
(O) FINANCE INCOME AND COSTS
Finance income comprises interest
income on issued loans and bank
deposits. Interest income is
recognised as it accrues in profit
or loss, using the effective interest
method.
Finance costs comprise interest
expense on borrowings and lease
liabilities and unwinding
of the discount on provisions,
if any. Borrowing costs that
are not directly attributable
to the acquisition, construction or
production of a qualifying asset are
recognised in profit or loss using
the effective interest method.
(P) INCOME TAX
Income taxes have been provided
in the consolidated financial
statements in accordance with
the respective legislation enacted
or substantively enacted by the end
of the reporting period. Income tax
comprises current and deferred
tax. Current tax and deferred tax
are recognised in profit or loss
except to the extent that they are
recognised in other comprehensive
income or directly in equity
because they relate to transactions
that are also recognised, in the same
accounting period, in other
comprehensive income or directly
in equity.
Current tax is the expected tax
payable or receivable on the taxable
profit or loss for the year, using
tax rates enacted or substantively
enacted at the reporting date,
and any adjustment to tax payable
or receivable in respect of previous
years. Taxes other than on income
are recorded within general, selling
and administrative expenses or cost
of sales, based on their function.
Deferred tax is recognised
in respect of tax loss carried
forward and temporary
differences between the carrying
amounts of assets and liabilities
for financial reporting purposes
and the amounts used for taxation
purposes. Deferred tax is not
recognised for the following
temporary differences: the initial
recognition of assets or
liabilities in a transaction that
is not a business combination
and that affects neither
accounting nor taxable profit
or loss, and differences relating
to investments in subsidiaries
to the extent that it is probable
that they will not reverse
in the foreseeable future.
A deferred tax asset is recognised
for unused tax losses, unused tax
credits and deductible temporary
differences, to the extent that it is
probable that future taxable profits
will be available against which they
can be used. Deferred tax assets
are reviewed at each reporting
date and are reduced to the extent
that it is no longer probable
that the related tax benefit will
be realised.
The measurement of deferred tax
reflects the tax consequences that
would follow the manner in which
the Group expects, at the end
of the reporting period, to recover
or settle the carrying amount of its
assets and liabilities.
Deferred tax is measured
at the tax rates that are expected
to be applied to the temporary
differences when they reverse,
based on the laws that have been
enacted or substantively enacted
by the reporting date. Deferred
tax assets and liabilities are offset
if there is a legally enforceable
right to offset current tax assets
and liabilities, and they relate
to income taxes levied by the same
tax authority on the same taxable
entity, or on different tax entities,
but they intend to settle current tax
liabilities and assets on a net basis
or their tax assets and liabilities will
be realised simultaneously.
In accordance with the tax
legislation of the Russian
Federation, tax losses and current
tax assets of a company
in the Group may not be set off
against taxable profits and current
tax liabilities of other Group
companies, therefore deferred tax
assets and liabilities are offset only
within the individual companies
of the Group.
In determining the amount
of current and deferred tax
the Group takes into account
the impact of uncertain tax
positions and whether additional
taxes, penalties and late-payment
interest may be due. The Group
believes that its accruals for tax
liabilities are adequate for all
open tax years based on its
assessment of many factors,
including interpretations of tax
law and prior experience. This
assessment relies on estimates
and assumptions and may involve
a series of judgments about future
events. New information may
become available that causes
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Delivering great customer serviceAnnual report 2020O’KEY Group Overview Strategic Review Operational Results Financial Review Risk Management Corporate social responsibility Corporate governance Financial statement
the Group to change its judgment
regarding the adequacy of existing
tax liabilities; such changes to tax
liabilities will impact the tax
expense in the period that such
a determination is made.
(Q) EARNINGS PER SHARE
Earnings per share are calculated
by dividing the profit or
loss attributable to ordinary
shareholders of the Company
by the weighted average number
of participating shares outstanding
during the year.
Changes in presentation
In the reporting period, the Group
has reconsidered its approach
to classification of certain
expenses relating to sales of self-
produced catering products
in the consolidated statement
of profit or loss and other
comprehensive income. As
the result, such expenses previously
presented within selling, general
and administrative expenses
are now presented within cost
of goods sold. The Group believes
that the revised presentation
better reflects the function
of the related expenses and results
in the consolidated financial
statements providing more relevant
information about the Group’s
financial performance.
Outlined in the following table
are effects from the change
in presentation made
on the consolidated profit or
loss amounts for the year ended
31 December 2019 presented as
comparatives in these consolidated
financial statements:
(R) SEGMENT REPORTING
Operating segments are reported
in a manner consistent with
the internal reporting provided
to the Group’s chief operating
decision maker. The chief
operating decision-maker is
responsible for allocating resources
and assessing performance
of the operating segments.
Operating segments whose
revenue, results or assets are ten
percent or more of all the segments
are reported separately.
’000 RUB
Cost of goods sold
Gross profit
2019 – as originally
presented
Reclassifications
2019 – as revised
(125,986,668)
(1,839,607)
(127,826,275)
39,099,534
(1,839,607)
37,259,927
General, selling and administrative expenses
(33,629,825)
1,839,607
(31,790,218)
The change in presentation did not
affect the Group’s profit or loss
for the year.
(S) VALUE ADDED TAX
Input VAT is generally reclaimable
against sales VAT when the right
of ownership on purchased goods
is transferred to the Group or
when the services are rendered
to the Group. The tax authorities
permit the settlement of VAT
on a net basis. VAT related to sales
and purchases which has not
been settled at the balance sheet
date (VAT deferred) is recognised
in the consolidated statement
of financial position on a gross basis
and disclosed separately as an asset
and liability. Where provision
has been made for the ECL
of receivables, the impairment loss
is recorded for the gross amount
of the debtor, including VAT.
(T) PRESENTATION OF THE CONSOLIDATED STATEMENT OF CASH FLOWS
The Group reports cash flows from
operating activities using direct
method. Cash flows from investing
activities are presented net of VAT.
VAT paid to suppliers of non-
current assets and VAT in proceeds
from sale of non-current assets are
presented in line “VAT paid” within
cash flows from operating activities.
(U) NEW ACCOUNTING PRONOUNCEMENTS
Certain new standards
and amendments to standards have
been issued by the International
Accounting Standards Board (IASB)
that are mandatory for annual
periods beginning on or after
1 January 2021. However, none
of these standards and amendments
have been adopted by the European
Union and therefore do not yet
apply to the Group.
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181
Delivering great customer serviceAnnual report 2020O’KEY Group Abbreviations
ACORT – Association of retail trade
companies
CEO – Chief Executive Officer
CJSC – Closed joint stock company
CRM – Client Relationship
Management
DC – Distribution centre
EBITDA – Earnings before
interest, taxes, depreciation and
amortisation
FD – Federal district
FMCG – Fast-moving consumer
goods
FY – Financial year
m² – Square metre
GDR – Global depositary receipt
HR – Human resources
IFRS – International Financial
Reporting Standards
NGO – Non-governmental
organisation
p.p. – Percentage point
Q – Quarter of the year
IPO – Initial Public Offering
RAEX – Expert RA rating agency
IT – Information Technology
RUB – Russian rouble
JSC – Joint Stock Company
k – A thousand
KPI – Key Performance Indicators
LLC – Limited Liability Company
WMS – warehouse management
system
YoY – Year Over Year
Retail Predictive Application Server
(RPAS) – Configurable software
platform for developing forecasting
and planning applications
Selling space – The area inside
stores used to sell products,
excluding areas rented out to third
parties, own–production areas,
storage areas and the space
between store entry and the cash
desk line
SKU (stock keeping unit) –
A number assigned to a particular
product to identify the price,
product options and manufacturer
of the merchandise
Stakeholder – Any individual,
group, or party with an interest
in an organisation and the outcomes
of its actions
Traffic – The number of tickets
issued for the period under review
Glossary
Average ticket – The figure
calculated by dividing total sales,
net of VAT, at all stores during
the relevant year by the number
of tickets in that year
Business Intelligence (BI) –
comprises the strategies
and technologies used
by enterprises for the data analysis
of business information.[1] BI
technologies provide historical,
current, and predictive views
of business operations.
Content management system
(CMS) – computer software
used to manage the creation
and modification of digital content
Corporate Social Responsibility
– Responsible attitude
in managing our impact
on a range of stakeholders:
customers, colleagues, investors,
suppliers, the community
and the environment
ERP (Enterprise Resource Planning)
– A modular software system
designed to integrate the main
functional areas of an organisation’s
business processes into a unified
system
Global Food Safety Initiative (GFSI)
– A private organisation, established
and managed by the international
trade association the Consumer
Goods Forum under Belgian law
in May 2000, the GFSI maintains
a scheme to benchmark food safety
standards for manufacturers as well
as farm assurance standards
HACCP (Hazard Analysis
and Critical Control Points) –
A systematic preventive approach
to food safety from biological,
chemical, and physical hazards
in production processes that
can cause the finished product
to be unsafe, and designs
measurements to reduce these risks
to a safe level
LFL (like–for–like) – The method
of comparing current year sales
figures to prior year’s sales figures
excluding the expansion effect
Net revenue – The amount
of a company’s gross revenue plus
all negative revenue items
Planogram – A diagram that
shows how and where specific
retail products should be placed
on retail shelves or displays in order
to increase customer purchases
Point of Sale (POS) platform
– A system which allows
the processing and recording
of transactions between a company
and their consumers, at the time
in which goods and/or services are
purchased
Private label (PL) – Brand owned
not by a manufacturer or producer,
but by a retailer or supplier, who
gets its goods made by a contract
manufacturer under its own label
Real disposable income – The post-
tax and benefit income available
to households after an adjustment
has been made for price changes
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183
Delivering great customer serviceAnnual report 2020 Contacts
Contacts for media
Alla Golovatenko
Head of Public Relations
phone: +7 (495) 663-66-77, ext. 496
email: Alla.Golovatenko@okmarket.ru
Сontacts for investors
Natalya Belyavskaya
Head of Investor Relations
phone: +7 (495) 663-66-77, ext. 266
email: Natalya.Belyavskaya@okmarket.ru
Aleksandra Uspenskaya
Head of Corporate
phone: +7 (495) 663-66-77
email: Aleksandra.Lysova@okmarket.ru
Marina Shagulina
Luxemburg Administrative Officer
phone: +352 (24) 52-70-84
email: Marina.Shagulina@okeygroup.lu
184
Addresses
Luxembourg,
2180 Luxembourg,
6 rue Jean Monnet
117534, Moscow,
Kirovogradskaya, 23A bld. 1
195027, St. Petersburg,
Shaumyan avenue, 8
okeygroup.lu
Depositary
Bank of New York Mellon
U.S.A. , 10286 New York,
101 Barclay Street
bnymellon.com
Auditor
PricewaterhouseCoopers,
Société cooperative
Luxembourg,
2182 Luxembourg,
2 rue Gerhard Mercator
phone: +352 (49) 48-48-1
pwc.lu