Detsky Mir is preparing for an IPO
16.01.2017 3380

Detsky Mir is preparing for an IPO

Detsky Mir Group announced its intention to conduct an initial public offer of shares (IPO) on the Moscow stock exchange. The selling shareholders are Sistema PJSC, the Russian-Chinese Investment Fund (RKIF) through investment companies Floette Holdings Limited and Exarzo Holdings Limited, as well as some representatives of Detsky Mir and Sistema management. AFK Sistema intends to maintain strategic control over the company's activities in the medium term, remaining the owner of its controlling stake.

Detsky Mir Public Joint-Stock Company (the “Company” and, together with its subsidiaries, the “Group” or “Detsky Mir”), the largest specialized operator in the sale of children's goods in Russia, announces its intention to conduct an initial public offer (hereinafter - “Offer”) of ordinary shares of the Company (hereinafter referred to as “Shares”).


  • An offer is made for Shares (i) outside the United States in accordance with Regulation S of the US Securities Act 1933, as amended and supplemented (hereinafter, the “Securities Act”), and (ii) within the United States States of America to certain qualified institutional purchasers in accordance with and compliance with the 144A Rule of the Securities Act.
  • It is expected that under the Offer exclusively existing shares will be offered. Selling shareholders are PJSC AFK Sistema (hereinafter referred to as Sistema), the Russian-Chinese Investment Fund (RKIF) through investment companies Floette Holdings Limited and Exarzo Holdings Limited, as well as some representatives of the management of the Company and Sistema (collectively - “Selling” shareholders ").
  • Sistema intends to maintain strategic control over the Company's activities in the medium term, while remaining the owner of its controlling stake.
  • Restrictions on the disposal of shares (lock up) will be valid for 365 days for the management of the Company and 180 days for the rest of the Selling Shareholders and the Company.
  • The shares are admitted to trading on the Moscow Exchange and are included in the Third level of the List of securities admitted to trading on the Moscow Exchange, under the DSKY ticker. The company filed an application with the Moscow Exchange for the transfer of Shares to Level 1 based on the results of the Offer and subject to the requirement for a minimum number of shares in free float (10%).
  • Credit Suisse, Goldman Sachs International and Morgan Stanley act as joint global coordinators and joint bookrunners of the Offer. Sberbank CIB and UBS Investment Bank act as joint bookrunners.


  • The undisputed leader in the market of children's goods in Russia - a large, growing and sustainable segment of the consumer market.
  • A fundamental brand in its retail category, high demand among customers and a long presence in the market.
  • A highly diversified range of products ensures a steady flow of customers, as well as growth and sustainability of sales and profitability.
  • The fast-growing direction of online trading and the presence of various sales channels contribute to the sustainable growth of the Company.
  • The business model, characterized by low capital intensity and high generated cash flow, provides a high level of return on capital and a stable payment of dividends.
  • Scalable infrastructure and logistics platform.
  • Strong management team with successful business development experience.

Vladimir Chirakhov, General Director of the Company:

Detsky Mir is the undisputed leader in the specialized market for children's products in Russia. Our market share is more than three times the position of the closest competitor. Over the past three years, we have opened over 270 new stores, and, taking into account preliminary results for the 2016 year, our revenue grew by an average of 30% annually, and EBITDA even faster. And we are convinced that the Company is able to provide high sustainable growth in the future.

Our growth strategy is based on five key factors: opening new stores in Russian cities; expanding our market-leading e-commerce platform; building comparable (like-for-like) revenue and gross margin per square meter; investment in logistics; and continuous improvement of efficiency, aimed at increasing operating profitability and return on invested capital.

Our sector is developing steadily, despite the constraints in the Russian economy. The market for children's goods has grown on average by 8% per year since 2008 and has shown high stability during the crisis years, unlike most segments of the retail sector. At the same time, we were able to demonstrate that the profitability of our business can grow at various stages of the economic cycle. In the future, we will continue to ensure sustainable business growth in the interests of our current and future shareholders. Thanks to the diversified assortment and multi-channel sales strategy, Detsky Mir is able to effectively use new opportunities to expand its business as they become available. ”

Chairman of the Board of Directors of Detsky Mir Group:

“We are pleased to announce our intention to bring Detsky Mir to the public capital markets. The group will be able to fully realize the potential of its legendary brand, a favorable demographic situation and a proven strategy for achieving growth in the interests of new shareholders. We expect Detsky Mir to continue to expand its market share for children's products with the potential to double that share in a few years. Detsky Mir is run by experienced management and has a strong and functioning corporate governance system for a long time, which has recently been further strengthened by providing independent non-executive directors with the posts of chairmen and the general majority in the audit committee and the nomination and remuneration committee. ”

President of AFK Sistema Mikhail Shamolin:

“Using the power of its legendary brand, Detsky Mir has in recent years managed to implement the strategy of creating a market leader in the segment of goods for children. Today, Detsky Mir has a network of more than 500 stores in 178 cities in Russia and Kazakhstan and is developing a rapidly growing area of ​​online trade. At the same time, the Company's business model allows generating significant cash flow, ensuring high rates of return on invested capital and a stable level of dividend payments. The IPO will enable a new generation of shareholders to benefit from the continued growth of Detsky Mir's business. AFK Sistema firmly believes in the development prospects of Detsky Mir and will retain its majority stake in the Company following the results of the initial offering. "

Director General of the Russian Direct Investment Fund and Co-CEO of the Russian-Chinese Investment Fund Kirill Dmitriev:

Detsky Mir is a true success story in the retail market for children's products in Russia and Kazakhstan. During our presence as a shareholder, the Group has shown an impressive growth trajectory and profitability, and we expect that growth will continue in the future. From our point of view, Detsky Mir is ideally suited for the public capital market due to its key strength - a combination of high growth rates and profitability for investors interested in high-quality assets in the children's goods market in Russia. We intend to remain the owner of a significant stake and increase the profitability of our investment together with new investors of the Company. ”

President and Co-CEO of the Russian-Chinese Investment Fund Bin Hu:

“Over the past few years, Detsky Mir has built up an excellent reputation among Russian consumers and in the industry as a whole, and has demonstrated successful growth and an efficiency strategy. The company has also successfully completed an internal transformation program led by a highly qualified management team and thanks to the strong support of shareholders. Now Detsky Mir is ready to increase its financial independence in order to take full advantage of favorable factors in the industry and opportunities in international markets. The planned IPO is an important step for the Company on the path of expansion of activity and growth. RCIF is proud to be a shareholder of the Company and will continue to support its strategic initiatives. ”

Detsky Mir Group of Companies - the largest specialized retail operator in the sale of children's goods in Russia with a diversified product portfolio including toys, goods for babies, clothes and shoes, furniture and other categories. The group is a leader in terms of network size and revenue in the highly fragmented children's goods market in Russia. According to Ipsos Comcon in 2015, the Company's estimated share was 32% (24% in 2014 year) in the specialized retail market for children's goods in Russia and 13% (10% in 2014 year) of the entire market for children's goods (including hyper- and supermarkets) . For comparison, according to Ipsos Comcon in 2015, the group's closest competitor had a market share of specialized retailers of 9% and 4% of the entire market for children's goods.

The Detsky Mir brand, whose history began in 1947 with the opening of the first store under this name in the center of Moscow, is a serious market advantage. In subsequent years, all large stores of children's goods in the USSR bore the name 

"Children's World", which thus became closely associated with the entire industry of children's goods in the country. The highest level of brand recognition remains to this day, as evidenced by recent consumer surveys conducted by Ipsos Comcon, in which 97% of respondents recognize the Detsky Mir brand among all offered

As of December 31 of 2016, the Detsky Mir retail chain consisted of 525 stores. The network included 468 stores in Russia and 12 in Kazakhstan under the Detsky Mir brand, as well as 45 stores under the ELC brand in Russia. ELC stores offer a wide range of educational, developmental and other toys for both newborns and children up to 14 years old. The total area of ​​retail premises of the network as of December 31 of 2016 of the year was approximately 596 000 sq. m. Detsky Mir, headquartered in Moscow (the place of foundation), has gradually developed its presence outside the capital since the 2003 of the year. To date, stores located outside of Moscow generate approximately 70% of the total revenue of the network. The group focuses on the development of the network in cities with populations over 50 000 people and today is already present in 171 from about 300 cities that meet this requirement, based on Rosstat data as of December 31 2016. Detsky Mir has stores in all the 20 largest cities in Russia and in the 7 largest cities in Kazakhstan.

In addition to retail stores, Detsky Mir offers its entire range of products for purchase through the Internet on websites и Since launching in 2011, e-commerce has been steadily demonstrating significant growth rates. The Company's management is convinced that Detsky Mir brand recognition and customer loyalty are the most important factors in increasing market share in the rapidly growing e-commerce segment. In 2015, the Company completed the deployment of the “pick-up” service from stores of a network of goods ordered in online stores. The group is constantly improving its online offer by expanding its assortment and further integration with the offline platform. Over the 9 months of the 2016 of the year, Detsky Mir recorded more than 63 million visits to the website of the online store and completed more than 1 million online orders.

Detsky Mir has developed logistics and IT platforms that support a network growth strategy nationwide. The group operates two distribution centers in the Moscow Region: its own center in Bekasovo, with an area of ​​70 000 sq. m and rented distribution center in Krekshino with an area of ​​20 000 sq. For the most efficient inventory management, Detsky Mir uses modern, SAP-based warehouse management systems and automatic replenishment of inventories adapted to the needs of the Company. In accordance with the Company's network development strategy, especially in Siberia and the Urals, Detsky Mir made a preliminary decision to create a new distribution center (own or leased) in the Urals in 2018.

In accordance with the dividend policy adopted by Detsky Mir, the Company allocates at least 50% of annual net profit (based on full-year IFRS statements) to pay dividends, provided that the Group does not need additional financial resources for investment or execution their obligations as they fall due. The decision on the payment of dividends must be approved by the general meeting of shareholders after the relevant recommendation of the Board of Directors of the Company.


2013 (US GAAP) 2014 (IFRS) 2015 (IFRS) 9M 2015 (IFRS) 9M 2016 (IFRS)
Number of stores (end of period) 252 322 425 370 464
Trading area (thousand sq. M, at the end of the period) 320 390 491 435 533
Revenue (million rubles)


Comparable growth1

36 001



45 446



60 544



39 967



54 226



Gross profit (million rubles)

Gross margin

13 908


17 263


21 904


13 842


18 075


Skorr. EBITDA (RUB million)2


Profitability by speed EBITDA

2 771



4 463



6 185



2 968



4 711



Skorr. net profit (million rubles)3 1 153 1 685 2 189 679 1 756
Skorr. net debt (million rubles)4 5 062 2 806 10 618 10 840 11 498

Notes to the financial indicators: The historically consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The International Financial Reporting Standards as amended by the Council on International Financial Reporting Standards (“IFRS”) began to be applied by the Group from 1 on January 2014. IFRS financial results for 2015 were the first consolidated financial statements prepared in accordance with IFRS (with comparative information for 2014).

1 Comparable growth in ruble terms. Comparable growth is calculated solely on the basis of the activities of Detsky Mir stores in Russia. Comparison of comparable results includes Detsky Mir stores, which functioned for the full previous calendar year.

2 Adjusted EBITDA is calculated as EBITDA, adjusted for the one-time factor associated with the retirement of the building occupied by the Yakimanka Children's Gallery in 2014, as well as additional costs for compensation in the form of shares and additional bonuses in the form of cash as part of the long-term staff motivation program. EBITDA is defined as follows: (i) is not an official US GAAP indicator for 2013 and 2014. and is calculated as net profit before income tax, foreign exchange losses, income from controlling interest in associates, interest and depreciation expenses; and (ii) is not an official IFRS indicator for 2014 and 2015 years, as well as for 9 months of 2015 and 2016 years. and is calculated as profit for the period before deduction of income tax, losses from exchange rate differences, income from controlling interest in associates, financial expenses, financial income and depreciation.

3 Skorr. net profit is calculated as net profit adjusted for the one-time effect from the disposal of the building occupied by the Yakimanka children's gallery in 2014 (together with related tax effects), the depreciation of goodwill in 2015 and the accrual of additional bonuses as part of a long-term staff motivation program (together with related tax effects).

4 Skorr. net debt is calculated as the total amount of borrowings net of cash and cash equivalents, adjusted for the amount of receivables for the loan issued by DM-Finance CJSC (a subsidiary of Sistema) in 2013.

Information on preliminary results for 2016

According to our preliminary estimates, we expect revenue for the year ending December 31 2016 to be in the range of approximately 79,2 billion rubles. to 79,8 billion rubles, which is approximately 30% higher than the revenue for 2015, which amounted to 60,5 billion rubles. According to our estimates, gross profit margin will decrease to approximately 34% in 2016 compared to 36,2% in 2015. According to our preliminary estimates, in 2016 the growth in comparable revenue was approximately 10,8% against the background of a growth in the comparable average check by about 6,2%; and a growth in the comparable number of checks by about 4,4%. We expect our rental and utility costs as a percentage of revenue to decrease to about 10% in 2016 compared to 11,7% in 2015. We also expect that labor costs as a percentage of revenue will drop to about 9 % in 2016 compared to 11,2% a year earlier. We expect the adjusted EBITDA margin for 2016 to be approximately the same as for 2015.

Detsky Mir Group announced its intention to conduct an initial public offering of shares (IPO) on the Moscow stock exchange. The selling shareholders are Sistema JSFC, Russian-Chinese ...

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