Krasnodar, Russia (25 July, 2019): Magnit PJSC (MOEX and LSE: MGNT), one of Russia’s leading retailers, announces sales growth of 11.4% in 2Q 2019.

2Q 2019 key operating and financial highlights:

Total revenue¹ increased by 11.4% from RUB 307.8 billion in 2Q 2018 to RUB 342.9 billion in 2Q 2019.
Net retail sales reached RUB 333.3 billion representing 10.8% growth YoY.
Wholesale revenue increased by 26.7% up to RUB 7.4 billion primarily driven by contribution from SIA Group.
LFL² sales growth improved to 1.7% on 4.1% average ticket growth and 2.3% traffic decline, compared to 0.6% LFL sales growth in 1Q 2019.
The Company opened 661 stores³ on net basis (322 convenience stores and 340 drogerie stores as well as 1 supermarket closure) compared to 335 stores (220 convenience stores, 5 supermarkets and 110 drogerie stores) opened in 2Q 2018. Total store base reached 19,884 stores as of June 30, 2019.
Addition of selling space in 2Q 2019 amounted to 218 thousand sq. m. (or 16.7% growth YoY) compared to 115 thousand sq. m. in 2Q 2018.
During the reported quarter the Company redesigned 509 convenience stores and 256 drogerie stores (compared to 264 convenience stores and 30 drogerie stores in 2Q 2018). As of June 30, 2019 the share of stores operating under the new concept reached 63% and 40% respectively.
Gross Profit⁴ in 2Q 2019 stood at RUB 82.2 billion with margin of 24.0%. The impact of the fire at the Voronezh DC on gross margin was 29 bps. Adjusted for this one-off factor, gross margin in 2Q 2019 was flat YoY due to better commercial terms despite higher shrinkage and logistics costs.
EBITDA in 2Q 2019 was RUB 24.2 billion with 7.1% margin. The decline of 87 bps YoY was caused by gross margin dynamics, LTI provisions and increased operating expense.
Net income in 2Q 2019 decreased by 39.5% YoY and stood at RUB 6.3 billion. Net income margin decreased by 154 bps YoY to 1.8%.

¹ Since 2019 the Company reviewed revenue composition and reclassified income from advertising services and rental income from respective cost centres into revenue line. Changes were applied retrospectively and had impact on all ratios calculated as percentage of revenue.

² LFL calculation base includes stores, which have been opened for 12 months since its first day of sales. LFL sales growth and average ticket growth are calculated based on sales turnover including VAT.

³ The number of stores does not include pharmacies.

⁴ Note during 2018 and 1H 2019 the Company extended list of expenses related to cost of sales, including expenses for the processing of goods at distribution centres (payroll, utilities, etc.), penalties for goods for resale, cost of sales for promo campaigns. The Company applied changes retrospectively and recalculated comparable data for 2018.

Key events in 2Q and after the reported period:

The AGM elected a new Board of Directors consisting of 9 members including 5 independent non- executive directors. Charles Ryan was elected a Chairman of the Board of Directors.
Magnit paid dividends for FY 2018 in the total amount of c. RUB 17 billion.
Jan Dunning, the President of Magnit, assumed the role of the Chief Executive Officer.
Ruslan Ismailov was appointed Director of Retail Chain Management and Anton Zavalkovsky — Director for Real Estate Management and Non-Commercial Purchasing.
Part of the distribution center in Voronezh was damaged by the fire accident for the total amount of RUB 1.2 billion.
10,000,000 exchange-traded bonds with an interest rate of 7.85% per annum were placed on MoEx for the total amount of Rub 10 billion. RAEX Rating Agency (Expert RA) assigned credit rating of ruAA- to this bond issue.
Magnit made LTI payments to the management for FY2018 for the total amount of 105,258 shares representing c. 0.1% of share capital.
Over 1.4 million cards have been issued in regions of Yaroslavl and Chelyabinsk covered by the pilot cross-format loyalty program. Penetration in sales reached 59% during first two months.
Two Magnit City pilot stores in the ultra-small format have been opened in Moscow and Krasnodar.

Jan Dunning, President and CEO of Magnit, commented:

“We are continuing our transformation journey. Despite the challenging macro environment, we are showing some good dynamics in sales growth, like-for-like sales and EBITDA margin as the transformation has gained traction. There are still many challenges facing us this year but I am confident that with our renewed focus on the key issues and emphasis on working as one team, we will successfully continue the promising trends in our operational results.”

Magnit reports 11.4% sales growth in 2Q 2019