Magnit

Earnings Release • Jul 26, 2018

MAGNIT PJSC (MGNT)

26-Jul-2018 / 10:00 MSK Dissemination of a RegulatoryAnnouncement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.

Press Release | Krasnodar|July 26, 2018

PJSC "Magnit" Announces Unaudited 2Q 2018 Results

Krasnodar, Russia(26 July, 2018): Magnit PJSC (MOEX and LSE: MGNT), one of Russia's leadingretailers announces its unaudited 2Q 2018 results prepared in accordance with IFRS 1 .

During 2Q 2018 Magnit a dded (net) 335 stores. The total store bas e as of June 30, 2018 reached 16,960 stores (12,503 convenience stores, 244 hypermarkets, 213 "Magnit Fami ly" stores a nd 4,000 drogerie stores). Addi;on of s el l ing s pace in 1H 2018 was 190 thousa nd s q. m. compared to 252 thousa nd s q. m.in 1H 2017.

Revenue increas ed by 7.2% from 555 bi l l ion RUR in 1H 2017 to 595 bi l l ion RUR in 1H 2018 on the back of 11.7% s el l ing s pace growth a nd nega;ve LFL sales dynamics (-4.5% in 1H 2018).

LFL performa nce in 1H 2018 was influenced by low food infla;on a nd Easter calendarisa;on (prior to the salary payment), lower number of stores opened aCer redesign (414 vs. 830 res pec;vely), as wel l as intensifying compe;;on a nd ca nnibal isa;on.

Gross Profit decreas ed y-o-y a nd stood at 147 bi l l ion RUR in 1H 2018. Gross Margin in 1H 2018 was 24.7%. The decreas e was due to (1) price investments; (2) extensive promo held in May a nd June a nd (3) s hrinkage growth ca us ed by incorrect promo volume projec;ons. As part of the Compa ny's strategic pla n, ma nagement is taking steps to a ddress the promo iss ue.

EBITDA in 1H 2018 was 44 bi l l ion RUR. EBITDA margin in 1H 2018 was 7.4%. EBITDA res ult was driven by the gross profit dynamics, increas e of the leas e expens e due to the higher s hare of leas ed stores as wel l as one-off write-offs of inventory a nd accrued provisions in the amount of 1.5 bi l l ion RUR. Nega;ve impact was par;al ly offs et by the improvement of payrol l a nd other opera;ng expens es. EBITDA a djusted for one-off effects would be 7.7% in 1H 2018 a nd 8.2% in 2Q 2018.

Net Income in 1H 2018 was 18 bi l l ion RUR down from 21 bi l l ion RUR in 1H 2017 on the back of lower EBITDA par;al ly offs et by the improvement of interest a nd tax expens e. Net Income Margin in 1H 2018 was 3.0%.

Olga Naumova, Magnit's ChiefExecu;ve Officer, said:

"We have ambious goals and those will not be achieved overnight. The management team is currently working hard to deliver a comprehensive plan for transformaon of the business. Magnit has important fundamental advantages that serve as a solid base for improvement including strong brand recognion, well-established market presence and scale, as well as a sophiscated logiscs system. In the new Board and my colleagues in management, we have a world-class leadership team and I am confident that together we will deliver growth and regain leadership."

Elena Milinova, Chief Financial Officer, added:

"We see immediate opportunies to improve efficiency by introducing changes to category management, promo planning, quality of ordering projecons and customer engagement. Addionally, we are expecng posive effects from further opmisaon of payroll, overhead and banking costs. We expect to see the first benefits resulng from these measures as soon as in the 4Q 2018"

2Q 2018 Monthly Opera+ng Metrics:

	April	Y-o-Y, %	May	Y-o-Y, %	June	Y-o-Y, %
New Store Openings(NET)	107	n/a	75	n/a	153	n/a
Convenience stores	65	n/a	55	n/a	100	n/a
Hypermarkets	1	n/a	0	n/a	1	n/a
Supermarkets	1	n/a	1	n/a	1	n/a
Drogerie Stores	40	n/a	19	n/a	51	n/a
Number ofStores(EOP)	16,732	n/a	16,807	n/a	16,960	n/a
Convenience stores	12,348	n/a	12,403	n/a	12,503	n/a
Hypermarkets	243	n/a	243	n/a	244	n/a
Supermarkets	211	n/a	212	n/a	213	n/a
Drogerie Stores	3,930	n/a	3,949	n/a	4,000	n/a
New SellingSpace, th. sq. m.	35	n/a	28	n/a	52	n/a
Convenience stores	23	n/a	21	n/a	37	n/a
Hypermarkets	2	n/a	0	n/a	2	n/a
Supermarkets	1	n/a	3	n/a	1	n/a
Drogerie Stores	9	n/a	4	n/a	12	n/a
Total SellingSpace (EOP), th. sq. m.	5,865	13.0%	5,893	12.4%	5,945	11.7%
Convenience stores	4,034	13.6%	4,056	12.9%	4,092	12.1%
Hypermarkets	696	1.6%	696	1.1%	698	1.0%
Supermarkets	232	10.5%	234	10.9%	235	12.6%
Drogerie Stores	903	21.7%	907	20.7%	919	19.7%

Number of Customers, million	355	8.3%	383	9.9%	378	10.5%
Convenience stores	301	8.9%	326	10.6%	320	10.9%
Hypermarkets	21	(0.1%)	21	0.2%	22	3.1%
Supermarkets	12	6.7%	12	5.7%	12	8.4%
Drogerie Stores	22	9.9%	23	12.3%	23	13.3%

Retail Sales , million RUR 2	96,110		4.4% 100,929		3.9% 102,779	7.6%
Convenience stores	73,122	5.8%	77,214	5.0%	78,011	8.5%
Hypermarkets	11,385	(6.3%)	11,522	(7.5%)	12,118	(1.7%)
Supermarkets	5,059	4.2%	5,120	1.5%	5,312	6.8%
Drogerie Stores	6,545	10.2%	7,073	15.9%	7,338	16.8%

2Q and 1H 2018 Key Opera+ng Metrics:

	2Q2018	2Q2017	Y-o-Y, %	1H 2018	1H 2017	Y-o-Y, %
New Store Openings(NET)	335	535	n/a	610	785	n/a
Convenience stores	220	405	n/a	378	593	n/a
Hypermarkets	2	3	n/a	1	3	n/a
Supermarkets	3	1	n/a	5	(4)	n/a
Drogerie Stores	110	126	n/a	226	193	n/a

Number ofStores(EOP)	16,960	14,844	n/a	16,960	14,844	n/a
Convenience stores	12,503	11,114	n/a	12,503	11,114	n/a
Hypermarkets	244	240	n/a	244	240	n/a
Supermarkets	213	190	n/a	213	190	n/a
Drogerie Stores	4,000	3,300	n/a	4,000	3,300	n/a

New SellingSpace, th. sq. m.	115	172	n/a	190	252	n/a
Convenience stores	81	133	n/a	134	199	n/a
Hypermarkets	4	7	n/a	(4)	7	n/a
Supermarkets	5	0	n/a	6	(4)	n/a
Drogerie Stores	25	32	n/a	53	49	n/a

Total SellingSpace (EOP), th. sq. m.	5,945	5,320	11.7%	5,945	5,320	11.7%
Convenience stores	4,092	3,652	12.1%	4,092	3,652	12.1%
Hypermarkets	698	691	1.0%	698	691	1.0%
Supermarkets	235	209	12.6%	235	209	12.6%
Drogerie Stores	919	768	19.7%	919	768	19.7%

Number of Customers, million	1,116	1,018	9.6%	2,121	1,944	9.1%
Convenience stores	947	860	10.2%	1,795	1,636	9.7%
Hypermarkets	64	63	1.1%	123	123	0.6%
Supermarkets	36	34	6.9%	69	65	6.1%
Drogerie Stores	68	61	11.9%	134	121	10.7%

LFL Results:

Formats	# of Stores	Average Ticket	Traffic	Sales
Convenience stores 9,515		(3.3%)	(2.2%)	(5.4%)
Hypermarkets	227	(6.3%)	(0.4%)	(6.7%)
Supermarkets	171	(3.0%)	(2.8%)	(5.7%)
Drogerie Stores	3,093	2.9%	(2.2%)	0.7%
Total	13,006	(3.1%)	(2.1%)	(5.2%)

Formats	# of Stores	Average Ticket	Traffic	Sales
Convenience stores 9,049		(1.8%)	(3.0%)	(4.7%)
Hypermarkets	227	(4.7%)	(1.2%)	(5.8%)
Supermarkets	171	(1.8%)	(2.8%)	(4.5%)
Drogerie Stores	3,026	3.7%	(3.1%)	0.4%
Total	12,473	(1.7%)	(2.9%)	(4.5%)

2Q and 1H 2018 Key Financial Results, million RUR

2Q2018 - 2Q2017³

1H 2018 - 1H 2017³

Net sales		306,701 288,042		6.5% 595,263 555,025		7.2%
Convenience stores		228,348 214,535		6.4% 443,648 411,817		7.7%
Hypermarkets	35,025	36,940	(5.2%)	68,882	71,737	(4.0%)
Supermarkets	15,490	14,870	4.2%	30,184	28,727	5.1%
Drogerie Stores	20,956	18,326	14.4%	42,031	36,960	13.7%
Wholesale	6,883	3,372	104.1%	10,517	5,784	81.8%
Gross Profit	75,206	78,476		(4.2%) 147,108 148,298		(0.8%)
Gross Margin, %	24.5%	27.2%	n/a	24.7%	26.7%	n/a
EBITDAR	36,257	38,896	(6.8%)	69,347	70,517	(1.7%)
EBITDAR Margin, %	11.8%	13.5%	n/a	11.6%	12.7%	n/a
EBITDA	23,600	27,795	(15.1%)	44,100	48,790	(9.6%)
Adjusted EBITDA	25,100	27,795	(9.7%)	45,600	48,790	(6.5%)
EBITDA Margin, %	7.7%	9.6%	n/a	7.4%	8.8%	n/a
Adjusted EBITDA Margin, % 8.2%		9.6%	n/a	7.7%	8.8%	n/a
EBIT	14,986	19,432	(22.9%)	26,713		32,342 (17.4%)
EBITMargin, %	4.9%	6.7%	n/a	4.5%	5.8%	n/a
Net Income	10,362	13,205	(21.5%)	17,767		20,748 (14.4%)
Net Income Margin, %	3.4%	4.6%	n/a	3.0%	3.7%	n/a

1. Based on management accounts.

2. Excluding wholesale.

3. LFL calculation base includes stores (all formats), which have been opened 12 months prior to the last month of the reporting period. i.e. by June 1, 2017.

Notes:

1. This announcement contains inside informa;on which is disclosed in accordancewith theMarket Abuse Regula;on which came into effect on 3 July 2016.

2. Please note that theremay be smallvaria;ons in calcula;on of totals, subtotals and/ or percentage change due to rounding of decimals.

For further informa+on, please contact:

Dina Svishcheva Investor Rela;ons Emai l: Chistyak@magnit.ru Office: +7-861-277-4554 x 15101

Media Inquiries

Media Rela;ons Department Emai l: press@magnit.ru

Note to editors:

Publ ic Joint Stock Compa ny "Magnit" is one of Russia's lea ding retai lers. Founded in 1994, the compa ny is hea dquartered in the s outhern Russia n city of Kras nodar. As of June 30, 2018, Magnit operated 37 distribu;on centers a nd 16,960 stores (12,503 convenience, 244 hypermarkets, 213 s upermarkets a nd 4,000 drogerie stores) in 2,808 ci;es a nd towns throughout 7 federal regions of the Russia n Federa;on.

In accorda nce with the una udited IFRS ma nagement accounts for 1H 2018, Magnit ha d revenues of RUB 595 bi l l ion a nd a n EBITDA of RUB 44 bi l l ion. Magnit's local s hares are tra ded on the Moscow Excha nge (MOEX: MGNT) a nd its GDRs on the London Stock Excha nge (LSE: MGNT) a nd it has a credit ra;ng from Sta ndard & Poor's of BB.

ISIN: US55953Q2021 Category Code: MSCU TIDM: MGNT LEICode: 2534009KKPTVL99W2Y12 OAM Categories:2.2. Inside information Sequence No.: 5785 EQS News ID: 708069

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