Krasnodar, Russia (15 March, 2019): Magnit PJSC (MOEX and LSE: MGNT), one of Russia’s leading retailers announces its audited FY 2018 results prepared in accordance with IFRS.

Key figures presented in this press release immaterially differ from the numbers under management accounts announced by Magnit on February 7, 2019.

Key operating and financial highlights for 2018:

Revenue increased by 8.2% from 1,143 billion RUR in 2017 to 1,237 billion RUR in 2018.
The company opened 2,049 stores on net basis (1,302 convenience stores, 731 drogerie stores and 16 supermarkets). Total store base reached 18,399 stores as 2018 year-end.
Addition of selling space in 2018 amounted to 669 thousand sq. m. (or 11.6% growth YoY) compared to 687 thousand sq. m. in 2017.
LFL1 sales declined (2.5%) composed of 0.1% growth of average ticket and (2.6%) traffic decline, but demonstrated positive dynamics towards the end of the year.
Gross Profit2 margin in 2018 was 24.0%. Margin contraction of 136bps vs previous year was a result of a combination of investments into prices, higher share of wholesale segment as well as share of fresh & food segment in total sales, sell off of slow-moving assortment accumulated in 2017 and first half of 2018 and higher transportation costs, offset partially by improved commercial terms from suppliers.
SG&A expenses as percentage of sales improved by 59bps to 20.3%. The main driver of improvement were payroll expenses due to increased productivity being partly offset by higher rent and bank services.
EBITDA3 in 2018 was 89.9 billion RUR. Full year EBITDA margin was 7.3% or 75bps lower than a year ago driven by gross margin dynamics partly mitigated by increased operating efficiency.
Net finance costs decreased by 17.3% to RUR 10.3 billion compared to 2017 (RUR 12.5 billion) due to a reduction of interest rates despite higher net debt.
Other income was 11.1% higher in 2018 vs 2017 and reached RUR 7.8 billion. As a percentage of revenue it showed marginal improvement by 2bps.
Income tax for 2018 was RUR 9.2 billion. Effective tax rate was 21.4% vs 21.8% in 2017.
As a result, we achieved net income of RUR 33.9 billion and margin of 2.7% in 2018 went down YoY by 4.7% and 37bps respectively.
Capital expenditures of RUR 53.8 billion for 2018 were 28.5% less than in 2017. This was a result of lower number of openings and redesigned stores and more efficient capital deployment for new store openings.
Net cash generated from operating activities before net interest and income taxes paid decreased modestly by 0.1% to RUR 78.8 billion as a result of positive working capital movements offset by lower profit before income tax.
As of 31 December 2018 Net Debt was RUR 137.8 billion. Compared to the end of 2017 it was RUR 29.7 billion higher due to buy-back program and debt inherited with SIA acquisition. Net Debt

/ EBITDA was 1.5x.

Olga Naumova, Magnit’s Chief Executive Officer, said:

"Magnit as a company went through many changes in 2018. After ownership changes early on in 2018, a new Supervisory Board and management team started work in the first half of 2018. From mid-year 2018 we started a turnaround program, with many internal processes and policies being introduced and implemented. At our Capital Markets Day in September we announced our new strategy concentrating on improving the performance of our existing business. We thus embarked on several new projects laying the foundation for our transformation including development our new CVP’s for all formats, revamping our category management, planning the launch of a comprehensive cross format loyalty program and developing new procedures for effective inventory management. These projects are now in either pilot phases or being launched and we should see positive results later this year and in 2020.

Despite the challenging macro environment of 2018 with slow macro growth and stagnating consumer purchasing power we were able to post a top line 8.2% growth for the full year, an EBITDA margin of 7.3% for 2018 and first indications of LFL growth in the fourth quarter of the year. These results give us a solid base for our transformation program for this year and allowed us to pay dividends as well as launch a significant share buyback program, which was successfully concluded in March this year.

Late last year we also closed our deal of acquiring SIA, a whole sale pharma business. This transaction was very important as we were able to acquire a solid platform enabling our rapid growth of the highly profitable Magnit Cosmetics format and the launch of our Magnit Pharmacy format. I am delighted to say the initial integration of SIA into Magnit and pilots have gone in line with plans been and now over 2000 cosmetic stores or around 50% of the total shops are already serviced through the platform and the launch of our planned 2000 pharmacies has commenced successfully.

We also embarked on a major effort in launching a culture change basing it on customer centricity and decentralized front office, allowing for faster decision making and more localized customer value propositions.

A lot is happening at Magnit but I am confident that together with Jan and our strong management team we will be successful in our transformation during 2019 and will deliver on our promises in the coming years."

Magnit announces audited FY 2018 results