Public Joint Stock Magnit : Magnit Reports 11% Sales Growth and Positive LFL Sales Growth in 4Q 2019 Driven by Significant Traffic Improvement

MAGNIT PJSC (MGNT) Magnit Reports 11% Sales Growth and Positive LFL Sales Growth in 4Q 2019 Driven by Significant Traffic Improvement 06-Feb-2020 / 10:00 MSK Dissemination of a Regulatory Announcement 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. MagnitReports 11% Sales Growth and Positive LFL Sales Growth in 4Q 2019 Driven by Significant Traffic Improvement   Krasnodar, Russia (6February, 2020):Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers, announces its 4Q and FY2019 operating and unaudited financial results.   4Q 2019 key operating and financial highlights: Total revenueincreased by 11.0%y-o-yto RUB368.2 billion; Net retail salesreached RUB 357.0billion representing 9.2% y-o-ygrowth; Wholesale revenue increased by 135.2% y-o-yto RUB 11.3 billion primarily driven by distribution of pharmaceutical products; LFL[1]sales growth stood at 0.1%on 0.3%average ticket growth and 0.2% traffic decline; The Company opened228 stores[2]on net basis (115 convenience stores, 6 supermarkets and107drogerie stores). Total store base as of December 31, 2019 reached 20,725 stores; Addition of selling space amounted to 96 thousand sq. m. (or 12.7% y-o-ygrowth); The Company redesigned164 convenience stores and 69drogerie stores. As of December 31, 2019 the share of refurbished and new stores reached 69% and 50% respectively; Gross Profitstood at RUB 79.7 billion with margin of 21.7%(down 198 bps y-o-y) on lower trading margin, higher logistics costs, shrinkage andgrowing share of low-margin wholesale segment partially offset by improved commercial termsand increased share of high-margin drogerie format; Reported EBITDA was RUB 20.0 billion with 5.4% margin down 154 bps y-o-y driven by gross margin dynamics and slightly increasedSG&A expenses partially offset by higher y-o-y other operating income; Net income in 4Q 2019 decreased by 51.2% y-o-y and stood at RUB 4.0billion. Net income margin decreased by 140 bps y-o-y to 1.1%.   FY 2019 key operating and financial highlights: Total revenueincreased by 10.6% y-o-yto RUB1,368.7 billion; Net retail sales reached RUB 1,332.9 billion representing 9.5% y-o-y growth; Wholesale revenue increased by 77.4% y-o-yto RUB 35.8 billion primarily driven by distribution of pharmaceutical products; LFL[3]sales growth stood at 0.4% on 2.8% average ticket growth and 2.3% traffic decline; The Company opened 2,377 stores[4]on net basis (1,195 convenience stores, 6 supermarket and 1,176drogerie stores). Total store base as of December 31, 2019 reached 20,725 stores; Addition of selling space amounted to 814 thousand sq. m. (or 12.7% y-o-y growth); The Company redesigned 2,341 stores, including 1,615 convenience stores, 5 supermarkets and 721drogerie stores; Gross Profit stood at RUB 312.0 billion with a margin of 22.8% (down 114 bps y-o-y)on lower trading margin, higher shrinkage andgrowing share of low-margin wholesale segment partially offset by improved commercial termsand increased share of high-margin drogerie format; Reported EBITDA was RUB 83.1billion with 6.1% margin down 117 bps y-o-y. Adjusted[5] EBITDA margin was 6.8%; Net income decreased by 49.0% y-o-y and stood at RUB 17.1billion. Net income margin decreased by 146 bps y-o-y to 1.3%.   Jan Dunning, President and CEO of Magnit, commented: "In the fourth quarter we continued introducing changes to our assortment, developing category management, implementing measures to improve on-shelf availability and rolling out our loyalty program. Despite lower inflations rates, growing competition and high base of the previous year, we see positive dynamics of LFL sales driven by steadily improving traffic. Importantly, this came as a result of net inflow of new unique customers from other chains and increased visit frequency. And we see this trading momentum continuing in January. Improvement of operating efficiency of existing store base, optimisation of key business processes and strict cost control remain our priorities and are the main growth drivers in 2020. The Company will continue its organic expansion next year with higher return requirements aimed at delivering additional value to our shareholders."     Key events in 4Q and after the reported period: Magnitannounced dividends for 9M 2019 in the total amount of c. RUB 15 billion or RUB 147.19 per one ordinary share; Two issues of the exchange-traded bonds in a value of RUB 10 billion each with an interest rate of 6.9% and 6.6% per annum correspondingly were placed on MoEx. Analytical Credit Rating Agency ACRA assigned credit rating AA (RU) to the both bond issues; Magnit issued over 33 million loyalty cards with the number of active users reaching around 20 million. Company-wide the share of tickets with the use of the loyalty cards was 39% with penetration in sales reaching 58%[6]. In the pilot regions the share of tickets was above 50% with penetration in sales reaching 64%; In November Magnit opened its first superstore-a revamped Magnit Family hypermarket; S&P Global Ratings has affirmed the rating of Magnit at "BB" with stable outlook; In November Magnitjoined the Consumer Goods Forum highlighting the Company's commitment to implement sustainable business practices; Over 350 suppliers participated in Magnit Commercial Conference held in Sochi where Jan Dunning together with other management team members shared 2020 plans and discussed recent Company's developments; Andrey Bodrov, who joined Magnit in September 2019 as the Chief Investment Officer, was included in the Management Board.   4Q & FY 2019 Operating Results Retail Sales   4Q 2018 4Q 2019 Change Change, % FY 2018 FY 2019 Change Change, % Total Net Retail Sales, million RUB 326,857 356,953 30,096 9.2% 1,216,851 1,332,929 116,078 9.5% ConvenienceStores[7] 244,523 270,384 25,861 10.6% 917,853 1,020,400 102,546 11.2% Supermarkets[8] 56,226 53,834 -2,391 -4.3% 207,434 200,096 -7,338 -3.5% DrogerieStores 25,951 31,193 5,242 20.2% 91,000 109,670 18,671 20.5% OtherFormats[9] 157 1,541 1,384 n/a 564 2,763 2,199 389.9% Number of Tickets, million 1,113 1,218 105 9.5% 4,370 4,690 320 7.3% Convenience stores 935 1,022 87 9.3% 3,690 3,963 273 7.4% Supermarkets 101 95 -6 -5.7% 395 379 -16 -4.2% Drogerie Stores 76 95 19 24.9% 283 339 56 19.8% Other Formats 1 5 5 n/a 2 10 8 n/a Average Ticket[10], RUB 294 293 -1 -0.2% 278 284 6 2.1% Convenience stores 261 264 3 1.1% 249 258 9 3.5% Supermarkets 558 567 9 1.6% 525 528 3 0.7% Drogerie Stores 340 327 -13 -3.8% 322 324 2 0.6% Other Formats 307 275 -32 -10.3% 289 271 -18 -6.3%     Stores and Selling Space   4Q 2018 4Q 2019 Change Change, % FY 2018 FY 2019 Change Change, % NumberofStores (EOP) 18,348 20,725 2,377 13.0% 18,348 20,725 2,377 13.0% ConvenienceStores 13,427 14,622 1,195 8.9% 13,427 14,622 1,195 8.9% Supermarkets 467 473 6 1.3% 467 473 6 1.3% DrogerieStores 4,454 5,630 1,176 26.4% 4,454 5,630 1,176 26.4% StoreOpenings (Gross) 996 321 -675 -67.8% 2,384 2,841 457 19.2% ConvenienceStores 645 204 -441 -68.4% 1,595 1,630 35 2.2% Supermarkets 12 6 -6 -50.0% 23 9 -14 -60.9% DrogerieStores 339 111 -228 -67.3% 766 1,202 436 56.9% StoreClosures 40 93 53 132.5% 334 464 130 38.9% ConvenienceStores 31 89 58 187.1% 293 435 142 48.5% Supermarkets 2 0 -2 -100.0% 7 3 -4 -57.1% DrogerieStores 7 4 -3 -42.9% 34 26 -8 -23.5% StoreOpenings (Net) 956 228 -728 -76.2% 2,050 2,377 327 16.0% ConvenienceStores 614 115 -499 -81.3% 1,302 1,195 -107 -8.2% Supermarkets 10 6 -4 -40.0% 16 6 -10 -62.5% DrogerieStores 332 107 -225 -67.8% 732 1,176 444 60.7% Total Selling Space (EOP), th.sq.m 6,425 7,238 814 12.7% 6,425 7,238 814 12.7% ConvenienceStores 4,444 4,952 508 11.4% 4,444 4,952 508 11.4% Supermarkets 942 948 6 0.7% 942 948 6 0.7% DrogerieStores 1,036 1,302 267 25.8% 1,036 1,302 267 25.8% Other Formats 3 36 33 n/a 3 36 33 n/a Selling Space Addition (Net), th.sq.m 332 96 -237 -71.2% 670 814 144 21.5% ConvenienceStores 239 52 -187 -78.3% 486 508 22 4.5% Supermarkets 11 8 -3 -31.0% 11 6 -5 -44.7% DrogerieStores 81 23 -58 -71.9% 171 267 96 55.8% Other Formats 1 13 12 n/a 1 33 32 n/a     LFL results 4Q 2019 LFL composition, % AverageTicket Traffic Sales Total 0.3% -0.2% 0.1% Convenience stores 1.0% 0.2% 1.2% Supermarkets 1.8% -7.1% -5.4% Drogerie Stores -2.9% 4.8% 1.8%   FY 2019   LFL composition, % AverageTicket Traffic Sales Total 2.8% -2.3% 0.4% Convenience stores 3.6% -2.2% 1.3% Supermarkets 1.6% -6.1% -4.6% Drogerie Stores 1.5% 1.6% 3.1%     Trading performance Total sales in 4Q 2019 grew by 11.0% y-o-y and stood at RUB 368.2 billion. Better result compared to the previous quarter was achieved thanks to accelerated retail sales and LFL sales growth partly offset by lower selling space growth (12.7% in 4Q 2019 vs 17.2% in 3Q 2019). Net retail sales in 4Q 2019 grew by 9.2% y-o-y (9.8% including VAT) and amounted to RUB 357.0 billion driven by a combination of 12.7% selling space growth and 0.1% LFL sales growth. LFL sales growth in 4Q 2019 turned positive and stood at 0.1% predominantly on significant LFL traffic improvement to -0.2% from -3.4% in 3Q 2019 and 0.3% LFL average ticket growth. LFL sales in 4Q 2019 improved compared to 3Q 2019 despite high base of 4Q 2018. LFL traffic demonstrated steady improvement each consecutive month of the quarter and turned positive in December demonstrating the best monthly result in 2019. This improvement was driven by an increase in the number of unique customers and visit frequency - the latter was even more pronounced in the end of the quarter showing gradual improvements throughout the reported period. In 4Q 2019 the Company continued seeing net inflow of customers from other players, mainly from larger formats and traditional retail. Positive LFL traffic dynamics was recorded across all formats and turned positive in the core convenience format first time since 3Q 2016. This was well supported by further improvements in assortment and shelf availability as well as ongoing loyalty card roll out. Since the start of the pilotMagnit issued about 33 million cards with the number of active users exceeding 60%. The Company is carefully monitoring the efficiency of its loyalty program in the three pilot regions where it was launched in March 2019 and is the most mature. In these regionsthe share of tickets with the use of the loyalty cards was above 50% with penetration in sales reaching 64%. The frequency of visits of loyalty card users in the pilot regions increased by 3%[11]. The share of customers shopping in Magnit stores of different format increased by 15 p.p. to 52%. Company-wide, the share of tickets with the use of the loyalty cards was 39% with penetration in sales reaching 58%. LFL ticket remained positive, although deteriorated from 2.8% in 3Q 2019 to 0.3% in 4Q 2019. While on-shelf inflation continued deceleratingin the reported period in line with the overall dynamics in the country, lower average number of articles in the basket was the key factor ofreductionof ticket growth and was especially visible in the last month of the year. "The Nutcracker" promo campaign held in December 2018 stimulated larger baskets and created high base effect for December 2019. Decline of the average number of SKUs and lower on-shelf inflation was partly compensated by on-going trading up effects. In the reported quarter promo intensity was the strongest within 2019 putting further pressure on basket size. The Company recorded y-o-y and q-o-q growth of promo share in 4Q 2019 following overall stronger promo intensity in the sector. Promo growth was partially driven by seasonal promotions, deeper discounts not fully covered by suppliersand continuous passive matrix sell-offas well as Company's initiative to communicate positive changes in the stores to customers. Active roll-out of the loyalty program with faster than expected growth of penetration was another addition to promo share growth. The growth rate of promo share started to decelerate in December compared to October and November. In January 2020 Magnit's promo activity was still higher y-o-y, but significantly reduced compared to the previous quarter without losing competitiveness as LFL sales and traffic growth continued improving vs previous months across all business segments. Store network development and performance by format Convenience segment generated 75.7% of total net retail sales in the reported quarter. In 4Q 2019 Magnit opened (net) 115 convenience stores (compared to 614 in 4Q 2018) adding 52 thousand sq. m. Last year the Company redesigned 1,615 convenience stores compared to 1,126 in 2018 with the greater focus on Moscow and the North-West region. Sales in the convenience format grew by 10.6% driven by selling space growth of 11.4% and LFL sales growth of 1.2% in 4Q 2019. LFL traffic turned positive for the first time during last 3 years and stood at 0.2%. LFL average ticket growth decelerated to 1.0% in 4Q 2019. Supermarkets accounted for 15.1% of the Group's net retail sales. During 4Q 2019 Magnit opened 6 supermarkets (compared to 10 in 4Q 2018) adding 8 thousand sq. m. of selling space. Sales growth in this segment was -4.3% on the back of y-o-y selling space growth of 0.7% and negative LFL sales of 5.4%. Although the segment lagged behind performance of smaller formats, trading in 4Q showed gradual monthly improvements in the LFL stores, including bothtraffic and ticket. Share of the drogerie format in the total net retail sales continued growing and reached record high of 8.7% in the reported quarter. During 4Q 2019 Magnit opened 107 cosmetics stores (compared to 332 in 4Q 2018) and added 23 thousand sq. m. of selling space. For the full year of 2019 the Company opened record high number of 1,176 cosmetics stores vs 732 in 2018 strengthening its position as a market leader in the segment. Sales growth in the drogerie format in 4Q 2019 was 20.2% on the back of selling space growth of 25.8% and LFL sales growth of 1.8%. LFL traffic increased to 4.8% from 1.6% in 3Q 2019 - the highest result during last 4 years. LFL average ticket growth was -2.9% as a result of higher visit frequency combined with smaller baskets. Magnit continued its renovation program with 164 convenience stores and 69 drogerie stores being redesigned during the fourth quarter. As a result, the combined share of refurbished and new stores was 69% for convenience and 50% for drogerie format.   4Q 2019 Monthly Operating Results Retail Sales   October Change November Change December Change Total net retail sales, million RUB 109,824 10.0% 110,872 10.0% 136,256 8.0% Convenience Stores 84,410 11.8% 85,028 10.9% 100,945 9.3% Supermarkets 15,646 -5.6% 16,250 -3.0% 21,939 -4.1% Drogerie Stores 9,371 21.8% 9,103 24.0% 12,720 16.5% Other Formats 398 n/a 491 n/a 652 n/a Number of tickets, million 402 9.1% 388 9.2% 428 10.1% Convenience stores 340 9.2% 328 9.0% 354 9.7% Supermarkets 30 -7.2% 30 -6.2% 35 -4.0% Drogerie Stores 30 24.4% 29 26.4% 36 24.1% Other Formats 1 n/a 2 n/a 2 n/a Average ticket[12], RUB 273 0.8% 286 0.7% 319 -1.9% Convenience stores 248 2.4% 260 1.7% 285 -0.4% Supermarkets 516 1.7% 546 3.4% 630 -0.2% Drogerie Stores 311 -2.1% 315 -1.9% 350 -6.1% Other Formats 267 -12.7% 271 -12.2% 284 -7.4%   Within the fourth quarter sales growth decelerated from 10.0% in October to 8.0% in December driven by the slowdown of selling space growth from 16.2% in October to 12.7% in December due to fewer store openings. Average ticket decreased by 1.9% y-o-y butwas improving every month of the quarter from RUB 273 in October to RUB 319 in December - the highest result in 2019. The number of tickets were also improving month by month reaching 428 million in December vs 402 million in October which represents growth of 10.1% in December y-o-y. Monthly LFL performance fully repeats this trend with December LFL traffic growth demonstrating the best monthly result in 2019. Adjusted for negative quality of days effect, LFL sales growth in December 2019 would be better by c. 1 p.p.   Stores and Selling Space   October Change November Change December Change Number of Stores (EOP) 20,577 n/a 20,665 n/a 20,725 n/a Convenience stores 14,533 n/a 14,584 n/a 14,622 n/a Supermarkets 468 n/a 469 n/a 473 n/a Drogerie Stores 5,576 n/a  5,612 n/a  5,630 n/a  Store Openings (Gross) 135 n/a 117 n/a 69 n/a Convenience stores 78 n/a 79 n/a 47 n/a Supermarkets 1 n/a 1 n/a 4 n/a Drogerie Stores 56 n/a  37 n/a  18 n/a  Store Closures 55 n/a 29 n/a 9 n/a Convenience stores 52 n/a 28 n/a 9 n/a Supermarkets 0 n/a 0 n/a 0 n/a Drogerie Stores 3 n/a  1 n/a  0 n/a  Store Openings (Net) 80 n/a 88 n/a 60 n/a Convenience stores 26 n/a 51 n/a 38 n/a Supermarkets 1 n/a 1 n/a 4 n/a Drogerie Stores 53 n/a  36 n/a  18 n/a  Total Selling Space (EOP), th. sq. m. 7,173 16.2% 7,209 14.7% 7,238 12.7% Convenience stores 4,913 15.5% 4,936 13.7% 4,952 11.4% Supermarkets 942 0.9% 944 1.1% 948 0.7% Drogerie Stores 1,290 31.6% 1,299 28.7% 1,302 25.8% Other Formats 27 n/a 30 n/a 36 n/a Selling Space Addition (Net), th. sq. m. 30 n/a 36 n/a 30 n/a Convenience stores 14 n/a 23 n/a 16 n/a Supermarkets 1 n/a 1 n/a 5 n/a Drogerie Stores 11 n/a  8 n/a  4 n/a  Other Formats 4 n/a 3 n/a 6 n/a     Financial results for 4Q and FY2019 (IAS 17) million RUB 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change Total revenue 368,206 331,641 11.0% 1,368,705 1,237,015 10.6% Retail 356,953 326,857 9.2% 1,332,929 1,216,851 9.5% Wholesale 11,253 4,784 135.2% 35,777 20,164 77.4% Gross Profit 79,747 78,399 1.7% 311,999 296,074 5.4% Gross Margin, % 21.7% 23.6% -198 bps 22.8% 23.9% -114 bps SG&A, % of sales -20.9% -20.5% -38 bps -21.3% -20.5% -79 bps EBITDA adjusted[13] 20,410 23,077 -11.6% 92,963 89,557 3.8% EBITDA Margin adjusted 5.5% 7.0% -142 bps 6.8% 7.2% -45 bps EBITDA pre LTI[14] 20,410 23,077 -11.6% 85,100 89,557 -5.0% EBITDA Margin pre LTI, % 5.5% 7.0% -142 bps 6.2% 7.2% -102 bps EBITDA 19,957 23,077 -13.5% 83,101 89,557 -7.2% EBITDA Margin, % 5.4% 7.0% -154 bps 6.1% 7.2% -117 bps EBIT 7,595 13,612 -44.2% 36,313 53,040 -31.5% EBIT Margin, % 2.1% 4.1% -204bps 2.7% 4.3% -163 bps Profit before tax 3,939 10,675 -63.1% 21,999 42,699 -48.5% Taxes 103 -2,390 -104.3% -4,864 -9,133 -46.7% Net Income 4,042 8,286 -51.2% 17,135 33,566 -49.0% Net Income Margin, % 1.1% 2.5% -140 bps 1.3% 2.7% -146 bps Total revenue in 4Q 2019increased by 11.0% and stood at RUB368.2 billion. Net retail sales in 4Q 2019 grew by 9.2% y-o-y (9.8% including VAT) and amounted to RUB 357.0 billion driven by a combination of 12.7% selling space growth (228 storeadditions) and 0.1% LFL sales growth.Wholesale revenue in 4Q 2019 increased by 135.2% up to RUB 11.3 billion primarily driven by distribution of pharmaceutical products. Share of wholesale segment increased from 1.4% in 4Q 2018 to 3.1% in 4Q 2019. Gross Profit in 4Q 2019 stood at RUB 79.7 billion with a margin of 21.7% down by 198 bps y-o-y on lower trading margin, higher logistics costs, shrinkage and increased share of low-margin wholesale segment partially offset by improved commercial terms and increased share of high-margin drogerie format. Y-o-y growth of supply-chain costs was driven by an increase in the number of transport operations to serve higher inventory volumes and growing on-shelf availability. Shrinkage increasedy-o-y, although improved q-o-qdue to management initiatives related to renegotiation of quality standards with suppliers, changes in delivery schedule and other supply chain solutions. Despite the fact that on-shelf availability and ongoing assortment revision were the key priorities of the management in 2019 which resulted in higher frequency of deliveries, increased complexity of operations and exposure to additional shrinkage level, transportation costs and shrinkage demonstrated significant improvement compared to the previous quarter coming from implementation of a number of supply-chain initiatives, such as new delivery schemes, development of fresh platforms, fleet restructuring, renegotiation of vendor terms, etc. Shrinkage as a % of sales was steadily improving during the year and demonstrated 60bps improvement in 4Q 2019 compared to 1Q2019 while on-shelf availability exceeded 90% in the last months of the year. Drogerie format reached record high share of net retail sales of 8.7% compared to 7.9% a year ago, which had a positive impact on the gross margin. On the other side, growth of this format combined with better on-shelf availability resulted in higher inventory level. SG&A costs remained under control - some y-o-y increasewas driven by increased depreciation and amortization expenses,inflation in electricity and cleaning tariffs and rental expenses compensated by a reduction in staff costs, advertising and packaging expenses. Personnel costs slightly improved both y-o-y and q-o-q thanks to continuous automation of key business processes and optimization of the headcount. Growth in cleaningexpenseswas primarily driven by a country-wide growth in tariffs as well as some additional focus on this important element of the new CVP resulting in higher standards and frequency of cleaning. Increase in electricity costswas related to annual indexation in July 2019. Marketing and advertising expenses decreased y-o-y on the back of more efficient tactics and tools of promo campaigns. Packaging and raw materials expense continued to decrease on improving purchasing terms and lower write-offs on the back of limits optimization. Other operating expenses increased predominantly due to insurance costs as a resultof introduction of insurance program covering allnetwork of stores and distributioncentres. Depreciation of assets in 4Q 2019 was RUB 12.4billion, 30.6% higher than in 4Q 2018. Under the new methodology, the Company has adjusted useful life of assets in line with the period of corresponding lease agreements. As a result, useful life of reconstructions has been decreased from 30 years to 10 years and depreciation has been recalculated accordingly.Depreciation of assets was also impacted by the non-cash impairment provision in the amount of RUB 1.0 billion as a result of impairment test of operating stores. Rental costs increased by 33 bps to 4.5% of sales driven by growing share of leased selling space (77.2% in 4Q 2019 versus 74.5% a year ago) partially offset by improvements of lease terms with landlords resulting in lower rental costs per sq. m of selling space. Reported EBITDA was RUB 20.0 billion with 5.4% margin down 154 bps y-o-y driven by gross margin dynamics and slightly increasedSG&A expenses partially offset by higher y-o-y other operating income. LTI expenses in the reported period stood at 0.12% of sales - as a result EBITDA pre-LTI was 5.5%, while for the full year of 2019 LTI expenses amounted to 0.15% of total sales leading to EBITDA pre-LTI of 6.2%. In the fourth quarter the Company didn't record any significant one-off costs, while for the full year accident at Voronezh DC, changes in the management structure, passive stock sell-off and consulting fees contributed 0.57% of sales leading to EBITDA margin of 6.1% and Adjusted EBITDA margin of 6.8% for 2019. Net finance costs increased by 50.0% to RUB 3.9 billion compared to 4Q 2018 (RUB 2.6billion) due toa combination of larger average amount of borrowings and higher cost of debt compared to the previous year. The Group revisited tax amounts paid in the previous years and amended tax declarations with regard to deductible expenses. Therefore, effective tax rate was negative in 4Q and 22.1% in FY 2019. As a result, net income in 4Q 2019 decreased by 51.2% y-o-y and stood at RUB 4.0billion. Net income margin decreased by 140 bps y-o-yto 1.1%. Capex in 2019 increased by 9.0% or RUB 4.8 billion and stood at RUB 58.6 billion on the back of accelerated redesign (2,341 stores in 2019 vs 1,352 stores in 2018) and expansion program (2,841 stores on gross basis in 2019 vs 2,384 stores in 2018). Capex in 2019 came below the Company's guidance following stricter return requirements for new projects and lower than expected investment per sq. m. of selling space. Gross debt increased by RUB 19.6 billion and stood at RUB 184.2 billion as of 31 December 2019 due to acceleration of redesign programme and store openings, investments in the buy-back programme and two dividend payments within 2019 vs onewithin 2018. Net debt was RUB 175.3 billion compared to RUB 137.8 billion as of December 31, 2018. The net debt increase was due to higher gross debt and lower cash position related to unfavorable calendarization of payment days in 2019 vs 2018. Company's debt is fully RUB denominated matching revenue structure. As of end of 4Q 2019 it was 65% long-term debt. Net Debt to EBITDA ratio was 2.1x.   31December 2019 30June 2019 31December 2018 Gross Debt, RUB billion 184.2 198.3 164.6 Net Debt, RUB billion 175.3 181.4 137.8 Net Debt/EBITDA 2.1x 2.1x 1.5x     Financial results for 4Q and FY 2019 (IFRS 16)   million RUB 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change Total revenue 368,206 331,641 11.0% 1,368,705 1,237,015 10.6% Retail 356,953 326,857 9.2% 1,332,929 1,216,851 9.5% Wholesale 11,253 4,784 135.2% 35,777 20,164 77.4% Gross Profit 79,747 78,399 1.7% 311,999 296,074 5.4% Gross Margin, % 21.7% 23.6% -198 bps 22.8% 23.9% -114 bps SG&A, % of sales -19.0% -19.6% 58bps -19.8% -19.1% -69 bps EBITDA adjusted 37,485 37,408 0.2% 157,161 144,962 8.4% EBITDA Margin adjusted 10.2% 11.3% -110 bps 11.5% 11.7% -24 bps EBITDA pre LTI 37,485 37,408 0.2% 149,298 144,962 3.0% EBITDA Margin pre LTI, % 10.2% 11.3% -110 bps 10.9% 11.7% -81 bps EBITDA 37,032 37,408 -1.0% 147,299 144,962 1.6% EBITDA Margin, % 10.1% 11.3% -122 bps 10.8% 11.7% -96 bps EBIT 15,422 17,311 -10.9% 58,384 71,809 -18.7% EBIT Margin, % 4.2% 5.2% -103 bps 4.3% 5.8% -154 bps Profit before tax 3,857 6,759 -42.9% 11,874 32,759 -63.8% Taxes 119 -1,606 -107.4% -2,839 -7,145 -60.3% Net Income 3,976 5,153 -22.8% 9,035 25,614 -64.7% Net Income Margin, % 1.1% 1.6% -47 bps 0.7% 2.1% -141 bps   Financial Position Highlights as of 31.12.2019 (IFRS 16) Million RUB FY 2019 FY 2018[15] Inventories 218,874 182,141 Cash and cash equivalents 8,901 26,748       Long-term borrowings 119,632 93,736 Trade and other payables 161,631 131,101 Short-term borrowings and short-term portion of long-term borrowings 64,578 70,837           Improvement of on-shelf availability across all formats, organic growth of the Company's store network (12.7% selling space growth y-o-y), increased share of drogerie format to8.7% of net retail sales leading to lower stock turnover, assortment changes in the large formats as well as supplier inflation resulted in RUB 36.7 billion increase of inventories to RUB 218.9 billion as of December 31, 2019. The Company has changed its accounting policy of vendor rebates allocation as management believes that the new approach provides more relevant information by categories of products and it aligns to the industry practice and aids comparability. The Group has applied changes of vendor rebates allocation between closing inventories and cost of goods sold methodology retrospectively. Impact on the bottom line of the Profit and Loss Statement was RUB 696 million in FY 2019 and RUB299 million in FY 2018. More details will be available in the audited financial statements under IFRS to be released on March 16, 2020.   FY 2020 Guidance Number of store openings (gross/net)   Convenience Stores ~ 700/250 Supermarkets ~ 12/6 Drogerie Stores ~ 1,130/1,100 Number of Redesigns   Convenience Stores ~ 900 Supermarkets ~ 25 Drogerie Stores ~ 380 CAPEX, RUB billion 60-65   In 2020 Magnit plans to open around 1,300 stores of different format on net basis as part of its organic expansion. The Company will continue seeking for small-to-medium size value-accretive M&A opportunities focusing on strengthening its positions in the existing regions. Store opening program of the current year reflects stricter return requirement and greater focus on operating efficiency. Closures include stores in different regions, which do not meet Company's profitability and return criteria. Capital expenditures projections for 2020 reflect reduction of investments in organic expansion and redesign as well as increased spending on efficiency projects focused on business development, such as optimization of supply-chain and IT infrastructure, and others. Efficiency of business operations and proper capital allocation are the key priority of the Company in the current year. The management team will focus on balancing promo investments and obtaining better coverage by suppliers, continuous improvement of supply chain expenses, shrinkage, further optimization of SG&A costs and finance expenses.   Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016. Please note that there may be small variations in calculation of totals, subtotals and/ or percentage change due to rounding of decimals.     For further information, please contact:   Dmitry Kovalenko Director for Investor Relations Email: [e-mail] Office: [phone]   Dina Chistyak Director for Investor Relations Email: [e-mail] Office: [phone] x 15101   Media Inquiries Media Relations Department Email: [e-mail]   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 December 31, 2019, Magnitoperated 38 distributioncentres and 20,725 stores (14,622convenience, 473 supermarkets and 5,630drogerie stores) in 3,742 cities and towns throughout 7 federal regions of the Russian Federation. In accordance with the unaudited IFRS management accountsfor FY 2019, Magnithad revenues of RUB 1,369billion and an EBITDA of RUB83 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 forward-looking statements that may or may not prove accurate. For example, statements regarding expected sales growth rate and 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. [1] 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. [2] The number of stores does not include pharmacies. [3] 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. [4] The number of stores does not include pharmacies. [5] Adjusted for the accident at Voronezh DC, changes in the management structure, passive stock sell-0ff and consulting fees [6] As of December 31, 2019 [7]Convenience Stores include convenience stores and small pilots such as Magnit City and Magnit Evening [8]Supermarkets include Magnit Family supermarkets, superstores and MagnitCash&Carry [9]Other Formats include pharmacies and stores located at Russian Post offices [10]Excluding VAT [11]As of December 31, 2019 [12]Excluding VAT [13]Adjusted for the accident on Voronezh DC, costs related to the management structure, inventory sell-off, consulting fees and LTI expense. [14]Long-Term Incentive Program [15]Inventories, deferred tax and retained earnings have been restated under the new accounting policy described below

ISIN:	US55953Q2021
Category Code:	MSCU
TIDM:	MGNT
LEI Code:	2534009KKPTVL99W2Y12
OAM Categories:	2.2. Inside information
Sequence No.:	45010
EQS News ID:	969315

End of Announcement	EQS News Service