Magnit : FY 2023 IFRS Audited Financial Statements

Independent auditor's report

on the consolidated financial statements of

PJSC Magnit and its subsidiaries

for 2023

May 2024

Independent auditor's report

on the consolidated financial statements of

PJSC Magnit and its subsidiaries

	Contents	Page
Independent auditor's report	3
Appendices
Statement of management's responsibilities for the preparation and approval of
the consolidated financial statements for the year ended 31 December 2023	8
Consolidated statement of financial position	9
Consolidated statement of profit and loss and other comprehensive income	10
Consolidated statement of cash flows	11
Consolidated statement of changes in equity	12
Notes to the consolidated financial statements
1.	Corporate information	13
2.	Basis of preparation of the financial statements	14
3.	Summary of significant accounting policies	14
4.	Summary of changes in accounting policies and disclosures	31
5.	Significant accounting judgements and estimates	33
6.	Balances and transactions with related parties	36
7.	Business combination	37
8.	Property, plant and equipment	41
9.	Lease	44
10.	Intangible assets	46
11.	Goodwill	47
12.	Other long-term and short-term financial assets	50
13.	Inventory	51
14.	Long-term receivables, and short-term trade and other receivables	52
15.	Advances paid	53
16.	Cash and cash equivalents	53
17.	Share capital, share premium and treasury shares	54
18.	Dividends declared	55
19.	Short-term trade and other payables	55
20.	Taxes payable excluding income tax	56
21.	Loans and borrowings	56
22.	Government grants	57
23.	Short-term contract liabilities	57
24.	Revenue from contracts with customers	58
25.	Cost of sales	58
26.	Selling, general and administrative expenses	58
27.	Finance costs	59
28.	Interest income	59
29.	Other income	59
30.	Other expenses	59
31.	Income tax	60
32.	Earnings per share	62
33.	Share-based payments	62
34.	Contingencies, commitments and operating risks	65
35.	Financial risk management objectives and policies	67
36.	Subsequent events	71

2

ООО «ЦАТР - аудиторские услуги»	TSATR - Audit Services LLC
Россия, 115035, Москва	Sadovnicheskaya Nab., 75
Садовническая наб., 75	Moscow, 115035, Russia
Тел.:	[phone]	Tel: +7	495 705 9700
	[phone]	+7	495 755 9700
Факс:	[phone]	Fax: +7	495 755 9701
ОГРН:	1027739707203	www.b1.ru
ИНН:	7709383532
ОКПО: 59002827
КПП:	770501001

Independent auditor's report

To the Shareholders and the Board of Directors of

PJSC Magnit

Opinion

We have audited the consolidated financial statements of PJSC Magnit and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at

31 December 2023, and the consolidated statement of profit and loss and other comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for 2023, and notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2023 and its consolidated financial performance and its consolidated cash flows for 2023 in accordance with International Financial Reporting Standards (IFRSs).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs).

Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Code of professional ethics for auditors and the Independence rules of auditors and audit organizations that are relevant to our audit of the consolidated financial statements in the Russian Federation together with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code).

We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and

in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements.

The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Key audit matter

How our audit addressed the key audit matter

Recognition of vendors allowances

The Group receives various types of allowances from vendors in the form of volume rebates and other forms of payments that effectively reduce the cost of goods purchased from the vendor. We considered this matter to be of most significance in our audit because the recognition of vendor allowance requires judgement from management in the assessment of the level of fulfilment of the Group's obligations under the vendor agreements and because these allowances are a substantial part of cost of sales and inventories.

Information about accounting policy for vendor allowances is disclosed in Note 3 to the consolidated financial statements.

We assessed the judgements used by the Group's management in the assessment of the level of fulfilment of the Group's obligations under the vendor agreements. We compared a sample of accruals of volume rebates and other rebates, recorded based on management assumptions, to supporting documents from vendors and vendor agreements. We also compared the outstanding allowances receivable to the direct confirmations from vendors on a sample basis. We tested cut-off of vendor allowances recorded during a period shortly before and after year-end to supporting documents from vendors. We reviewed the information on vendor allowances disclosed in the consolidated financial statements.

Valuation of goods for resale

The Group has significant balance of goods for resale. In accordance with IAS 2 Inventories, inventories are recorded at the lower of cost and net realizable value. In estimating the carrying amount of goods for resale, the Group's management uses judgments to estimate the net realizable value of goods for resale and the amount of handling costs to be included in the carrying amount of goods for resale. As a result, we believe that this matter is one of most significance in our audit.

Information on goods for resale is disclosed in Note 13 to the consolidated financial statements.

We assessed the assumptions used by the Group's management in the valuation of goods for resale. We assessed the Group's methodology in respect of valuation of net realizable value, analyzed the dynamics of goods for resale turnover ratios taking into consideration seasonality and other applicable factors. We compared carrying values of goods for resale with subsequent sales proceeds by certain type of goods. We verified the mathematical accuracy of goods for resale net realizable value calculation. We assessed the process of allocation of handling costs to the carrying amount of goods for resale. We analyzed the structure of costs included in the value of goods for resale. We compared the amount of costs with supporting documents received from suppliers and the Group's internal documents.

We reviewed the information on goods for resale disclosed in the consolidated financial statements.

4

Key audit matter

How our audit addressed the key audit matter

Impairment testing of property, plant and equipment and right-of-use assets

Impairment testing for property, plant and equipment and right-of-use assets was one of the key audit matters because the balance of property, plant and equipment and right-of-use assets forms a significant portion of the Group's assets at the reporting date, and the process of management's assessment of the recoverable amount is complex and requires significant judgments, including judgements about future cash flows, capital expenditures and the discount rate.

Information about property, plant and equipment, right-of-use assets and results of impairment testing is disclosed in Notes 8 and 9 to the consolidated financial statements.

Our audit procedures included an assessment of key management assumptions used by the Group, including those in respect of forecasted revenue and operating expenses.

We also analyzed discount rates used by management of the Group, including the engaging of our internal valuation experts.

We also performed the sensitivity analysis of the impairment test with respect to changes in the key assumption and assessed the Group's disclosures of these assumptions to which impairment testing is most sensitive, i.e., those that have the most significant impact on the recoverable amount of property, plant and equipment and right-of-use assets.

We reviewed the information about property, plant and equipment, right-of-use assets and results of impairment testing disclosed in the consolidated financial statements.

Impairment testing of goodwill from acquisition of the DIXY Group

As at 31 December 2023, the balance of goodwill is 73,552,409 thousand rubles, including

65,661,817 thousand rubles related to acquisition of DIXY Group companies (hereinafter DIXY Group).

Impairment testing of goodwill was one of the key audit matters because assessment of the recoverable amount of cash generating units to which goodwill is allocated includes numerous assumptions made by the Group's management, including the estimated effect of synergies, determination of a cash- generating unit for impairment testing purposes, forecasted revenue and gross margin, long-term growth rates and discount rates and other.

Information about goodwill is disclosed in Note 11 to the consolidated financial statements.

Our audit procedures included an assessment of assumptions used by the Group and reasonableness of forecasted data.

We assessed the judgment used by management in testing goodwill for impairment with respect to goodwill allocation to the relevant cash-generating units.

We also performed the sensitivity analysis of the impairment test with respect to changes in the key assumptions and assessed the Group's disclosures of those assumptions that have the most significant impact on the recoverable amount of cash generating units to which goodwill is allocated.

We reviewed the information about goodwill disclosed in the consolidated financial statements.

Other information included in the Annual report of PJSC Magnit for 2023

Other information consists of the information included in the Annual report of PJSC Magnit for 2023, other than the consolidated financial statements and our auditor's report thereon. Management is responsible for the other information. The Annual report of PJSC Magnit for 2023 is expected to be made available to us after the date of this auditor's report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

5

Responsibilities of management and the Board of Directors for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Group's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

►

►

►

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

6

►

►

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units of the group as a basis for forming our opinion on the consolidated financial statements of the group. We are responsible for the direction, supervision and review of audit work performed for group audit purposes. We remain fully responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The partner in charge of the audit resulting in this independent auditor's report is Ananyev Iliya Yurievich.

Ananyev Iliya Yurievich,

acting on behalf of TSATR - Audit Services Limited Liability Company on the basis of power of attorney dated 25 March 2024,

partner in charge of the audit resulting in this independent auditor's report (main registration number 21906101744)

15 May 2024

Details of the auditor

Name: TSATR - Audit Services Limited Liability Company

Record made in the State Register of Legal Entities on 5 December 2002, State Registration Number 1027739707203. Address: Russia 115035, Moscow, Sadovnicheskaya naberezhnaya, 75.

TSATR - Audit Services Limited Liability Company is a member of Self-regulatory organization of auditors Association "Sodruzhestvo". TSATR - Audit Services Limited Liability Company is included in the control copy of the register of auditors and audit organizations, main registration number 12006020327.

Details of the audited entity

Name: PJSC Magnit

Record made in the State Register of Legal Entities on 12 November 2003, State Registration Number 1032304945947. Address: Russia 350072, Krasnodar, Solnechnaya street, 15/5.

7

PJSC Magnit and its subsidiaries

Statement of management's responsibilities for the preparation

and approval of the consolidated financial statements

for the year ended 31 December 2023

The following statement is made with a view to the respective responsibilities of management in relation to the consolidated financial statements of PJSC Magnit and its subsidiaries ("the Group").

Management is responsible for the preparation of these consolidated financial statements that present fairly the financial position of the Group as at 31 December 2023 and the results of its operations, cash flows and changes in net assets for the year 2023, in compliance with International Financial Reporting Standards ("IFRS").

In preparing the consolidated financial statements, management is responsible for:

►

►

Selecting and applying accounting policies;

Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• Providing additional disclosures when compliance with the specific requirements of IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's consolidated financial position and financial performance;
• Making an assessment of the Group's ability to continue as a going concern.

Management is also responsible for:

►

►

►

Designing, implementing and maintaining an effective and sound system of internal controls;

Maintaining appropriate accounting records to ensure compliance of the consolidated financial statements of the Group with IFRS, local legislation and local GAAP;

Preventing and detecting material misstatements due to fraud or error.

The consolidated financial statements of the Group for the year ended 31 December 2023 were approved by management on 15 May 2024.

On behalf of the management as authorised by the Board of Directors:

Chief Executive Officer of PJSC Magnit

A.Y. Meleshina

15 May 2024

8

PJSC Magnit and its subsidiaries

Consolidated statement of financial position

as at 31 December 2023

(In thousands of Russian rubles)

		31 December	31 December
	Notes	2023	2022
Assets
Non-current assets
Property, plant and equipment	8	367,049,986	361,751,315
Advances paid for the purchase and construction of
property, plant and equipment		1,360,729	302,955
Right-of-use assets	9	421,347,372	383,268,776
Intangible assets	10	14,528,192	11,905,489
Goodwill	11	73,552,409	67,029,310
Long-term receivables	14	250,193	353,774
Other long-term financial assets	12	980,759	779,946
Deferred tax assets	31	3,677,242	1,985,035
Other non-current assets	9	2,370,980	-
		885,117,862	827,376,600
Current assets
Inventories	13	233,692,709	219,435,679
Trade and other receivables	14	12,843,948	20,197,184
Advances paid	15	56,595,905	12,728,588
Taxes receivable, excluding income tax		1,210,412	83,529
Short-term net investments in sublease		-	2,001
Other short-term financial assets	12	16,695,642	1,162,698
Advances on income tax		2,100,896	100,037
Cash and cash equivalents	16	221,285,893	314,912,124
		544,425,405	568,621,840
Total assets		1,429,543,267	1,395,998,440
Equity and liabilities
Equity attributable to the shareholders of the parent
Share capital	17	1,020	1,020
Share premium	17	87,230,416	87,230,416
Treasury shares	17	(93,274,746)	(14,403,941)
Share-based payments reserve	33	1,269,344	1,807,119
Foreign currency translation reserve		79,245	47,390
Retained earnings		163,162,053	132,700,300
Total equity		158,467,332	207,382,304
Non-current liabilities
Long-term loans and borrowings	21	280,940,450	273,270,870
Long-term lease liabilities	9	429,537,893	385,528,033
Long-term contract liabilities		1,309,729	-
Long-term government grants	22	2,143,163	2,358,034
Deferred tax liabilities	31	2,112,697	4,436,236
		716,043,932	665,593,173
Current liabilities
Trade and other payables	19	300,292,380	273,971,842
Taxes payable, excluding income tax	20	30,365,965	32,304,140
Income tax payable		4,527,157	1,921,025
Dividends payable	18	27,971,772	-
Short-term advances received		838,867	710,118
Contract liabilities	23	6,529,542	5,421,418
Short-term government grants	22	424,716	389,323
Short-term loans and borrowings	21	121,194,890	147,021,644
Short-term lease liabilities	9	62,886,714	61,283,453
		555,032,003	523,022,963
Total liabilities		1,271,075,935	1,188,616,136
Total equity and liabilities		1,429,543,267	1,395,998,440

The accompanying notes on pages 13-72 are an integral part of these consolidated
financial statements.	9

PJSC Magnit and its subsidiaries

Consolidated statement of profit and loss and other comprehensive income

for the year ended 31 December 2023

(In thousands of Russian rubles)

	Notes	2023	2022
Revenue	24	2,544,688,774	2,351,996,423
Cost of sales	25	(1,965,502,035)	(1,814,993,574)
Gross profit		579,186,739	537,002,849
Rental and sublease income		5,027,525	4,674,825
Selling, general and administrative expenses	26	(477,244,721)	(464,142,008)
Other income	29	30,003,582	26,952,525
Other expenses	30	(1,456,193)	(6,471,668)
Operating profit		135,516,932	98,016,523
Interest income	28	24,202,277	13,337,582
Finance costs	27	(85,232,484)	(68,156,279)
Foreign exchange (loss)/gain		8,249,073	(333,276)
Profit before income tax		82,735,798	42,864,550
Income tax expense	31	(24,058,197)	(14,932,033)
Profit for the year		58,677,601	27,932,517
Profit for the year
Attributable to:
Shareholders of the parent		58,677,601	27,932,517
		58,677,601	27,932,517
Earnings per share (in RUB per share)
- Basic profit for the year attributable to the shareholders
of the parent	32	663.15	284.96
- Diluted profit for the year attributable to the shareholders
of the parent	32	661.03	283.16
Other comprehensive income
Amounts of other comprehensive income that may be
reclassified to profit or loss in subsequent periods
(net of taxes)
Exchange differences on translation functional currency
in presentation currency		31,855	47,390
Other comprehensive income, net of tax		31,855	47,390
Total comprehensive income for the year, net of tax
Attributable to:
Shareholders of the parent		58,709,456	27,979,907
		58,709,456	27,979,907

The accompanying notes on pages 13-72 are an integral part of these consolidated
financial statements.	10