Magnit

Earnings Release • Jul 25, 2016

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PJSC MAGNIT - Unaudited 1H 2016 Financial Results

PR Newswire

London, July 25

Press Release

Krasnodar

July 25, 2016

PJSC “Magnit” Announces Unaudited 1H 2016 Results

Krasnodar, July 25, 2016: PJSC “Magnit”, Russia’s largest food retailer (the “Company”; MOEX and LSE: MGNT) announces its unaudited 1H 2016 results prepared in accordance with IFRS[1].

During 1H 2016 the Company added (net) 799 stores (308 convenience stores, 9 hypermarkets, 15 “Magnit Family” stores and 467 drogerie stores) and increased its selling space by 19.07% in comparison to 1H 2015 from 3,928.00  thousand sq. m. to 4,677.20 thousand sq. m. The total store base as of June 30, 2016 reached 12,888 stores (9,902 convenience stores, 228 hypermarkets, 170 “Magnit Family” stores and 2,588 drogerie stores).

Revenue increased by 14.67% YoY from 454,808.63 million RUR in 1H 2015 to 521,527.58 million RUR in 1H 2016.

Gross profit increased by 11.81% from 127,060.41 million RUR to 142,062.99 million RUR. Gross margin in 1H 2016 amounted to 27.24%.

EBITDA increased from 48,627.66 million RUR in 1H 2015 to 51,598.98 million RUR in 1H 2016. EBITDA margin in the 1H of 2016 was 9.89%. EBITDA margin in the 2Q of 2016 was 11.95%.

1H 2016 net income increased from 25,265.66 million RUR in 1H 2015 to 26,105.37  million RUR in 1H 2016. Net income margin for 1H 2016 was 5.01%.

According to Rosstat, general inflation in June 2016 amounted to 0.4% compared to 0.2% in June 2015, in 6M 2016 it was 3.3% compared to 8.5% in 6M 2015.

Food inflation in June 2016 amounted to 0.1% compared to -0.4% in June 2015, in 6M 2016 it was 3.2% compared to 10.8% in 6M 2015

2Q and 1H 2016 Key Operating Highlights:

	2Q 2016	2Q 2015	Growth Rate	1H 2016	1H 2015	Growth Rate
Number of opened stores, NET	454	608	n/a	799	1,017	n/a
convenience stores	187	309	n/a	308	546	n/a
hypermarkets	3	5	n/a	9	11	n/a
magnit family	13	6	n/a	15	13	n/a
drogerie stores	251	288	n/a	467	447	n/a
Total number of stores	12,888	10,728	n/a	12,888	10,728	n/a
convenience stores	9,902	8,890	n/a	9,902	8,890	n/a
hypermarkets	228	201	n/a	228	201	n/a
magnit family	170	110	n/a	170	110	n/a
drogerie stores	2,588	1,527	n/a	2,588	1,527	n/a
Selling space, eop, th. sq. m.	4,677.20	3,928.00	19.07%	4,677.20	3,928.00	19.07%
convenience stores	3,236.13	2,866.25	12.90%	3,236.13	2,866.25	12.90%
hypermarkets	660.51	589.81	11.99%	660.51	589.81	11.99%
magnit family	187.05	122.73	52.41%	187.05	122.73	52.41%
drogerie stores	593.52	349.21	69.96%	593.52	349.21	69.96%
Selling space growth, th. sq.m.	153.57	195.27	n/a	263.48	337.36	n/a
convenience stores	73.25	111.56	n/a	116.57	192.94	n/a
hypermarkets	6.86	12.78	n/a	21.37	30.72	n/a
magnit family	15.02	6.61	n/a	16.87	13.66	n/a
drogerie stores	58.45	64.31	n/a	108.68	100.04	n/a
Number of customers, million	971.04	851.22	14.08%	1,864.57	1,617.61	15.27%
convenience stores	825.26	729.07	13.19%	1,579.27	1,387.21	13.84%
hypermarkets	66.86	66.90	(0.07)%	132.27	127.91	3.41%
magnit family	31.72	24.43	29.85%	61.38	45.32	35.43%
drogerie stores	47.21	30.82	53.18%	91.64	57.17	60.31%

LFL Results

Formats	2Q 2016 - 2Q 2015[2]
# of Stores	Average Ticket	Traffic	Sales
Convenience Stores	8,413	(1.00)%	2.05%	1.02%
Hypermarkets	199	(1.17)%	(10.08)%	(11.12)%
Magnit Family	106	(1.04)%	(6.60)%	(7.57)%
Drogeries	1,376	10.17%	(5.33)%	4.30%
Total	10,094	(1.95)%	0.55%	(1.41)%

Formats	6M 2016 - 6M 20154
# of Stores	Average Ticket	Traffic	Sales
Convenience Stores	8,329	(0.36)%	2.21%	1.85%
Hypermarkets	198	(2.48)%	(7.86)%	(10.15)%
Magnit Family	106	(2.31)%	(4.03)%	(6.25)%
Drogeries	1,361	10.86%	(4.00)%	6.42%
Total	9,994	(1.51)%	1.00%	(0.52)%

2Q and 1H 2016 Key Financial Results, million RUR

	2Q 2016	2Q 2014	Growth Rate	1H 2016	1H 2015	Growth Rate
Net sales	266,224.83	236,052.37	12.78%	521,527.58	454,808.63	14.67%
convenience stores	197,517.70	175,837.64	12.33%	385,027.44	338,433.76	13.77%
hypermarkets	39,483.14	40,640.38	(2.85)%	78,956.03	79,371.13	(0.52)%
magnit family	13,978.32	10,734.92	30.21%	27,493.41	20,336.82	35.19%
drogerie stores	14,044.64	8,253.35	70.17%	27,981.92	15,556.35	79.87%
wholesale	1,201.03	586.08	104.93%	2,068.78	1,110.57	86.28%
Gross profit	77,027.06	67,944.14	13.37%	142,062.99	127,060.41	11.81%
Gross margin,%	28.93%	28.78%	n/a	27.24%	27.94%	n/a
EBITDAR	41,152.03	35,386.26	16.29%	69,960.92	62,291.36	12.31%
EBITDAR margin, %	15.46%	14.99%	n/a	13.41%	13.70%	n/a
EBITDA	31,809.57	28,232.43	12.67%	51,598.98	48,627.66	6.11%
EBITDA margin, %	11.95%	11.96%	n/a	9.89%	10.69%	n/a
EBIT	25,676.26	23,199.53	10.68%	39,496.13	38,594.03	2.34%
EBIT margin, %	9.64%	9.83%	n/a	7.57%	8.49%	n/a
Net income	17,862.09	15,787.82	13.14%	26,105.37	25.265.66	3.32%
Net income margin, %	6.71%	6.69%	n/a	5.01%	5.56%	n/a

2Q and 1H 2016 Key Financial Results, US$ million[3]

	2Q 2016	2Q 2015	Growth Rate	1H 2016	1H 2015	Growth Rate
Net sales	4,040.54	4,483.06	(9.87)%	7,423.00	7,923.94	(6.32)%
convenience stores	2,997.77	3,339.47	(10.23)%	5,480.17	5,896.39	(7.06)%
hypermarkets	599.23	771.83	(22.36)%	1,123.79	1,382.85	(18.73)%
magnit family	212.15	203.88	4.06%	391.32	354.32	10.44%
drogerie stores	213.16	156.75	35.99%	398,27	271.03	46.95%
wholesale	18.23	11.13	63.79%	29.45	19.35	52.20%
Gross profit	1,169.06	1,290.38	(9.40)%	2,022.01	2,213.72	(8.66)%
Gross margin,%	28.93%	28.78%	n/a	27.24%	27.94%	n/a
EBITDAR	624.57	672.05	(7.06)%	995.77	1,085.28	(8.25)%
EBITDAR margin, %	15.46%	14.99%	n/a	13.41%	13.70%	n/a
EBITDA	482.78	536.18	(9.96)%	734.42	847.22	(13.31)%
EBITDA margin, %	11.95%	11.96%	n/a	9.89%	10.69%	n/a
EBIT	389.69	440.60	(11.55)%	562.16	672.41	(16.40)%
EBIT margin, %	9.64%	9.83%	n/a	7.57%	8.49%	n/a
Net income	271.10	299.84	(9.59)%	371.56	440.19	(15.59)%
Net income margin, %	6.71%	6.69%	n/a	5.01%	5.56%	n/a

Note: net revenue in US$ terms is calculated using the average exchange rate for the period.

For further information, please contact:

Timothy Post	Head of Investor Relations Email: post@magnit.ru Office: +7-861-277-4554 x 17600 Mobile: +7-961-511-7678 Direct Line: +7-861-277-4562
Investor Relations Office	MagnitIR@magnit.ru Direct Line: +7-861-277-4562 Website: ir.magnit.com/
Media Inquiries	Media Relations Department press@magnit.ru

Company description:

Magnit is Russia's largest food retailer. Founded in 1994, the company is headquartered in the southern Russian city of Krasnodar. As of June 30, 2016, Magnit operated 34 distribution centers and 12,888 stores (9,902 convenience, 398 hypermarkets, and 2,588 drogerie stores) in 2,397 cities and towns throughout 7 federal regions of the Russian Federation.

In accordance with the unaudited IFRS management accounts for 1H 2016, Magnit had revenues of RUB 522 billion and an EBITDA of RUB 52 billion. Magnit's local shares are traded on the Moscow Stock Exchange (MOEX: MGNT) and its GDRs on the London Stock Exchange (LSE: MGNT) and it has a credit rating from Standard & Poor's of BB+. Measured by market capitalization, Magnit is one of the largest retailers in Europe.

[1] Based on management accounts

4 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, 2015.

[3] Based on the average exchange rate for 2Q 2016 - 65.8883 RUB per 1 USD, 2Q 2015 –52.6543 RUB per 1 USD, 1H 2016 - 70.2583 RUB per 1 USD, 1H 2015 –57.3968 RUB per 1 USD