7.7%

TOTAL REVENUE growth

1H 2021 Key Operational and Financial Highlights

• Total revenue increased by 7.7% y-o-y to RUB 822.2 billion;
• Net retail sales reached RUB 801.6 billion increasing 7.7% y-o-y;
• LFL[1] sales growth of 4.7% driven by 4.7% average ticket growth;

7.0%

EBITDA margin

• The Company opened 926 stores[2] on gross basis (549 convenience stores, two supermarkets and 375 drogeries). As part of the Company's ongoing efficiency improvement campaign, 146 stores were closed resulting in a net store addition of 780. As of June 30, 2021 the total store base was 22,344;
• Selling space increase of 252 thousand sq. m. bringing total selling space to 7,748 thousand sq. m. (6.3% y-o-y growth);
• The Company redesigned 243 stores (219 convenience stores and 24 supermarkets). As at June 30, 2021, 74% of convenience stores, 34% of supermarkets and 59% of drogeries are either new or refurbished;
• Gross profit increased by 7.3% y-o-y to RUB 192.6 billion with a margin of 23.4% as a result of better promo margin, lower shrinkage and favorable format mix partially offset by slightly higher supply chain costs and promotional share;
• Cash SG&A[3] expenses as a percentage of sales increased by 16 bps to 17.6% on higher marketing costs and negative impact of stores in the 'ramp-up' phase partially offset by lower rent costs.

1.2x

net debt / ebitda ratio

• EBITDA was RUB 57.9 billion with a 7.0% margin driven by gross margin dynamics and strict cost control;
• Net income of RUB 22.9 billion with a margin of 2.8%;
• As of June 30, 2021 Net Debt was RUB 136.1 billion. Net Debt / EBITDA ratio was 1.2x.

BBB

Magnit's rating by MSCI

Key events after the reported period

• Magnit started making ready-to-eat products for its convenience stores in Magnit Family supermarkets;
• Magnit rented a new distribution center in Moscow region to improve the efficiency of its logistics in the region;
• MSCI increased Magnit's ESG rating score up to the BBB level;
• The Board considered shareholders' proposals regarding the nomination of candidates to be elected to the PJSC Magnit Board of Directors at the upcoming EGM of PJSC Magnit to be held on September 9, 2021 and approved the list of candidates;

IAS 17

IFRS 16

RUB mln

1H 2021

1H 2020

Change

1H 2021

1H 2020

Change

Total Revenue

822,230

763,361

7.7%

822,230

763,361

7.7%

Retail

801,592

743,959

7.7%

801,592

743,959

7.7%

Wholesale

20,638

19,403

6.4%

20,638

19,403

6.4%

Gross Profit

192,571

179,522

7.3%

192,586

179,522

7.3%

Gross Margin, %

23.4%

23.5%

-10 bps

23.4%

23.5%

-9 bps

SG&A, % of Sales

-20.4%

-20.5%

4 bps

-18.9%

-19.1%

15 bps

EBITDA pre LTI[4]

58,603

53,570

9.4%

95,038

88,194

7.8%

EBITDA Margin pre LTI, %

7.1%

7.0%

11 bps

11.6%

11.6%

1 bps

EBITDA

57,928

53,220

8.8%

94,363

87,845

7.4%

EBITDA Margin, %

7.0%

7.0%

7 bps

11.5%

11.5%

-3 bps

EBIT

34,695

30,137

15.1%

49,107

42,772

14.8%

EBIT Margin, %

4.2%

3.9%

27 bps

6.0%

5.6%

37 bps

Net Finance Costs

-5,371

-7,274

-26.2%

-20,601

-22,994

-10.4%

FX Gain/ (Loss)

444

-824

-153.9%

454

-920

-149.4%

Profit before Tax

29,768

22,039

35.1%

28,959

18,858

53.6%

Taxes

-6,820

-4,995

36.5%

-6,660

-4,359

52.8%

Net Income

22,948

17,044

34.6%

22,300

14,500

53.8%

Net Income Margin, %

2.8%

2.2%

56 bps

2.7%

1.9%

81 bps

23.4%

Gross margin

in 1H 2021

44 bps

y-o-y reduction of shrinkage

Total revenue in 1H 2021 increased by 7.7% driven by net retail sales growth by 7.7% and wholesale revenue increase by 6.4%. Wholesale operations accounted for 2.5% of total sales.

Gross Profit in 1H 2021 increased by 7.3% y-o-y to RUB 192.6 billion with a margin of 23.4% as a result of better promotional margin, lower shrinkage and favorable format mix. This was partially offset by slightly higher supply chain costs and higher penetration of Magnit's loyalty program. Format mix positively impacted gross margin, with the share of Magnit's high-margin drogerie business growing to 8.8% in 1H 2021 and 2.5% share of wholesale operations (flat y-o-y). Promotional intensity was slightly higher y-o-y due to weak comparatives and normalizing shopping patterns, with different consumption trends (including forward buying of dry food) in the same period of the last year. This resulted in a gross profit margin reduction of 10 bps y-o-y, reflecting a strong comparative performance during the prior year, and one-off effects of the last year comparable period.

During the 1H 2021 the number of active loyalty card users exceeded 50 million. Company-wide, the share of tickets using the loyalty card was 50% with sales penetration of 65%. The loyalty program continues to deliver positive cross-format gains with sustainable growth of customers visiting 2+ store formats (41% of Magnit customer base at the end of the reported period).

Transportation expenses grew by 13 bps y-o-y due to a continued increase of on-shelf availability and higher transportation costs driven by the increase in container shipping tariffs in the international and domestic markets.

Alongside the growing share of fresh products and overall improvement of on-shelf availability, shrinkage as a proportion of sales decreased further by 44 bps y-o-y. This was driven by ongoing optimization of supply chain processes, renegotiation of quality standards with suppliers and other initiatives.

IAS 17

IFRS 16

RUB mln

1H 2021

1H 2020

Change

1H 2021

1H 2020

Change

Staff costs

75,429

70,255

7.4%

75,429

70,255

7.4%

as a % of sales

9.2%

9.2%

-3 б.п.

9.2%

9.2%

-3 б.п.

Rent

35,348

33,636

5.1%

863

896

-3.7%

as a % of sales

4.3%

4.4%

-11 б.п.

0.1%

0.1%

-1 б.п.

Deprecitation & amortization

23,234

23,083

0.7%

45,256

45,072

0.4%

as a % of sales

2.8%

3.0%

-20 б.п.

5.5%

5.9%

-40 б.п.

Utilities

15,420

14,112

9.3%

15,420

14,112

9.3%

as a % of sales

1.9%

1.8%

3 б.п.

1.9%

1.8%

3 б.п.

Advertising

3,934

2,316

69.8%

3,934

2,316

69.8%

as a % of sales

0.5%

0.3%

18 б.п.

0.5%

0.3%

18 б.п.

Other expenses

3,521

2,831

24.4%

3,521

2,831

24.4%

as a % of sales

0.4%

0.4%

6 б.п.

0.4%

0.4%

6 б.п.

Bank Services

3,891

3,653

6.5%

3,891

3,653

6.5%

as a % of sales

0.5%

0.5%

-1 б.п.

0.5%

0.5%

-1 б.п.

Repair & maintenance

3,299

2,895

13.9%

3,299

2,895

13.9%

as a % of sales

0.4%

0.4%

2 б.п.

0.4%

0.4%

2 б.п.

Taxes, other than income tax

1,447

1,579

-8.4%

1,447

1,579

-8.4%

as a % of sales

0.2%

0.2%

-3 б.п.

0.2%

0.2%

-3 б.п.

Packaging & raw materials

2,523

1,966

28.3%

2,523

1,966

28.3%

as a % of sales

0.3%

0.3%

5 б.п.

0.3%

0.3%

5 б.п.

Total SG&A

168,045

156,327

7.5%

155,583

145,576

6.9%

as a % of sales

20.4%

20.5%

-4 б.п.

18.9%

19.1%

-15 б.п.

Cash SG&A (excl. D&A)

144,811

133,244

8.7%

110,327

100,504

9.8%

as a % of sales

17.6%

17.5%

16 б.п.

13.4%

13.2%

25 б.п.

17.6%

Cash SG&A expenses

in 1H 2021

7.0%

ebitda margin in 1H 2021

2.8%

Net income margin

in 1H 2021

SG&A costs were controlled and remained almost flat y-o-y as a percent of sales (20.4%).

Cash SG&A expenses as a percentage of sales increased by 16 bps to 17.6% on higher marketing costs and negative impact by stores in the 'ramp-up' phase partially offset by lower rent costs.

Advertising expenses increased by 18 bps y-o-y to 0.5% as a percent of sales on higher marketing activities including digital marketing and loyalty campaigns.

Rental costs as a percent of sales decreased by 11 bps y-o-y to 4.3% driven by higher sales density, improved lease terms with landlords and the closing of inefficient stores. This was achieved despite the increased share of leased selling space to 78.7% in 1H 2021 vs 77.4% a year ago.

Staff costs as a percent of sales remained flat y-o-y at 9.2%. Higher productivity of in-store personnel, especially in convenience and drogerie formats, on-going automation of business processes partially offset additional pressure from new stores in the 'ramp-up' phase and slightly higher staff rotation due to pandemic last year.

Packaging and raw materials expenses increased by 5 bps y-o-y to 0.3% as a percent of sales reflecting the ongoing provision of means of sanitary protection to customers and employees during the COVID-19 pandemic.

Utilities, repair and maintenance, bank and tax expenses remained broadly flat as a percent of sales y-o-y.

Other costs increased by 6 bps y-o-y to 0.4% as a percent of sales on higher advisory services and software maintenance.

As a result, EBITDA was RUB 57.9 billion with a 7.0% margin, driven by gross margin dynamics and strict cost control. LTI expenses in the reported period stood at 0.08% of sales - as a result EBITDA margin pre-LTI was 7.1%.

Despite the acceleration in store openings (which started in 4Q last year) and their 'ramp-up' period, depreciation as a percent of sales reduced by 20 bps y-o-y to 2.8% as most of the newly opened stores were leased.

As a result, operating profit in 1H 2021 stood at RUB 34.7 billion with 4.2% EBIT margin.

The Company increased its total debt by RUB 99.4 billion in the reported period by means of long-term bank loans and bond issuance to finance accelerated expansion and the acquisition of the Dixy retail chain. This increase happened during the period of growing market rates. As a result, average cost of debt increased to 6.4% (12 bps y-o-y). Higher cost of debt and the total amount of borrowings were netted by the increase in interest income. This led to the decrease of net finance costs in 1H 2021 by 26.2% (or 30 bps) y-o-y to RUB 5.4 billion. The Company's debt profile improved further through an increased share of long-term borrowings and record long debt maturity of 24 months (vs 21 months a quarter ago).

In 1H 2021 the Company reported FX gain in the amount of RUB 0.4 billion related to direct import operations.

Income tax in 1H 2021 was RUB 6.8 billion with effective tax rate of 22.9%.

As a result, net income in 1H 2021 increased by 34.6% y-o-y and stood at RUB 22.9 billion. Net income margin increased by 56 bps y-o-y to 2.8%.

RUB mln

30.06.2021

31.12.2020

30.06.2020

Non-current assets

684,767

678,461

679,086

Inventories

199,744

205,949

219,236

Trade and other receivables

12,329

8,564

9,949

Cash and cash equivalents

129,370

44,700

21,149

Other current assets

6,735

7,718

5,851

Assets

1,032,945

945,392

935,272

Equity

181,798

182,889

188,030

Long-term borrowings

222,930

147,695

117,389

Other long-term liabilities

335,431

330,535

330,867

Trade and other payables

163,443

184,325

138,461

Short-term borrowings and short-term portion of long-term borrowings

42,560

18,392

91,204

Other short-term liabilities

86,783

81,557

69,320

Equity and liabilities

1,032,945

945,392

935,272

11.2

DAYS

y-o-y optimisation of inventories[5]

Despite ongoing improvement to on-shelf availability, the 39 bps increase of share of drogerie format as a percent of net retail sales, supplier inflation and total sales growth of 7.7%, inventories decreased by RUB 19.5 billion vs June 30, 2020 and stood at 199.7 billion. This was driven by a number of projects launched in 2020 including the reduction of slow-moving items, assortment harmonization and IT solutions aimed at better on-shelf availability and promotion forecasting.

Trade and other payables grew by RUB 25.0 billion vs June 30, 2020 and stood at RUB 163.4 billion driven by higher sales and increased payment days. Accounts receivables increased by RUB 2.4 billion vs June 30, 2020 and stood at RUB 12.3 billion due to higher sales and improved commercial terms with suppliers.

June 30, 2021

December 31, 2020

June 30, 2020

IAS 17

Total Debt, RUB billion

265.5

166.1

208.6

Long-Term Debt

222.9

147.7

117.4

Short-Term Debt

42.6

18.4

91.2

Net Debt, RUB billion

136.1

121.4

187.4

Net Debt/EBITDA

1.2x

1.1х

2.0х

IFRS 16

Net Debt, RUB billion

498.9

479.0

538.8

Net Debt/EBITDA

2.7x

2.7x

3.3

1.2x

net debt/ebitda
as of June 30, 2021

(IAS 17)

Gross Debt increased by RUB 56.9 billion or by 27.3% compared to the end of 1H 2020 on the back of additional borrowings to finance accelerated expansion and the acquisition of the Dixy retail chain and reached RUB 265.5 billion as at June 30, 2021. Cash position substantially increased to RUB 129.4 billion as at June 30, 2021 compared to RUB 21.1 billion as at June 30, 2020. As a result, Net Debt decreased by 27.4% y-o-y to RUB 136.1 billion as at June 30, 2021.

The Company's debt is fully RUB denominated, matching revenue structure. The Net Debt to EBITDA ratio was 1.2x as at June 30, 2021 vs 2.0x as at June 30, 2021.

32

RUB billion

net Cash generated by operations

The Company's cash flows from operating activities before changes in working capital in 1H 2021 equaled to RUB 59.1 billion, which was RUB 5.1 billion or 9.4% higher y-o-y. The change in working capital improved to RUB -14.9 billion from RUB -28.8 billion in 1H 2020 as a result of a decrease in inventory and higher y-o-y trade and other payables.

Net interest and income tax paid in 1H 2021 increased by RUB 1.7 billion or 15.6% to RUB 12.5 billion. Net interest expenses decreased by 19.1% y-o-y to RUB 5.3 billion in 1H 2021 due to lower average-weighted amount of borrowings and higher average amount of cash on bank accounts during the reported period. Income tax paid for 1H 2021 increased to RUB 7.2 billion.

With this net cash flow from operating activities in 1H 2021 increased by 120.0% to RUB 31.8 billion as a result of positive movement of working capital and lower interest paid.

Net cash used in investing activities predominantly composed of capital expenditures increased by 96.8% to RUB 22.3 billion in 1H 2021 due to acceleration of expansion program.

Total capital expenditures for the first six months of 2021 stood at RUB 25.6 billion vs RUB 12.3 billion in 1H 2020 (up 2.0x y-o-y). Capex is expected to increase further in the second half of the year in line with the calendarization of the store opening and redesign process with the latter accelerating further in the second half of the year.

In 1H 2021 net cash generated from financing activities was RUB 75.2 billion vs RUB 9.1 billion generated in 1H 2020 driven by dynamics of proceeds from borrowings. In 1H 2021 the Company paid dividends in the amount of RUB 24.1 billion[6].

As a result of factors mentioned above net cash position in 1H 2021 increased by RUB 108.2 billion to RUB 129.4 billion as of June 30, 2021.

2,000

stores on gross basis to be opened by magnit organically in 2021

Magnit confirms its full year store opening, redesign and capex guidance published on February 4th, 2021.

In 2021 Magnit plans to open around 2,000 stores of different format on a gross basis as part of its organic expansion and redesign about 700 stores. Capital expenditures is expected to be approximately RUB 60-65 billion[7].

Based on further detailed analysis of the performance of newly acquired Dixy stores, respective instruction of the Federal Antimonopoly Service[8] and overlap with existing network, the Company may potentially take a decision to slightly adjust its organic store opening program in the respective regions. It is expected that any adjustment will not lead to material impact on the Company's development plans.

For further information, please contact:

Dina Chistyak

Director for Investor Relations 
dina_chistyak@magnit.ru

Office: +7 (861) 210 9810 x 15101

Media Inquiries                    Twitter

press@magnit.ru                    @MagnitIR

Note to editors

Public Joint Stock Company "Magnit" is one of Russia's leading retailers. Founded in 1994, the company is headquartered in the southern Russian city of Krasnodar. As of June 30, 2021, Magnit operated 39 distribution centers and 22,344 stores (15,348 convenience, 469 supermarkets and 6,527 drogerie stores) in 3,802 cities and towns throughout 7 federal regions of the Russian Federation.

In accordance with the reviewed IFRS 16 results for 1H 2021, Magnit had revenues of RUB 822.2 billion and an EBITDA of RUB 94.4 billion. Magnit's local shares are traded on the Moscow 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.

Forward-looking statements

This document contains or may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected sales growth rate and/or store openings are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to Magnit as of the date of the statement. All written or oral forward-looking statements attributable to Magnit are qualified by this caution. Magnit does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.