magnit 1 h2016_reviewed

INVESTOR PRESENTATION

1H 2016 FINANCIAL RESULTS published on August 24, 2016

Magnit at a Glance

Magnit at a Glance

Source: Company, Thomson Reuters, Company’s calculations based on IFRS accounts for 1H2016

2

2 397 Cities & Towns

№1 Russian Food Retail

Chain by Revenue

and Number of Stores

12 888 Total Number

of Stores

4 677 thous.sq.m.

Selling Space

34 DCs

5 836 Trucks

Multi-format Business Model

Comprising Convenience, Hypermarkets,

“Magnit Family” & Drogerie Stores

№3 Retailer in Europe

in Market

Capitalization $16bn Market

Capitalization

>7% Share in Russian

Grocery Sector

(As of FY 2015)

Shareholder Structure as of 1H 2016

61,4% Free-float

35,1% Sergey Galitskiy, CEO

0,8% Lavreno Ltd. (Cyprus)

0,1%

As of June 30, 2016

As of June 30, 2016

2,7% Other

Magnit at a Glance

Key Metrics

3

Source: Company’s estimates and calculations

522bn 14,7 %

5,01%

Net

Margin

9,89%

EBITDA

Margin

1,1

Net debt/

LTM EBITDA

1000-1100 80 1200

P =

Revenue growth

Y-o-Y

Guidance for FY2016

Figures for 1H 2016

14-16% Sales Growth Rub

10-10,5%

EBITDA Margin

67bn Capex Rub

New Convenience Stores New Hypermarkets New Drogerie Stores

Magnit at a Glance

Strategy

4

Growth

Value Efficiency

Multi-format Organic

Store Growth

Geographic

Scope

Density of Store

Coverage

Low

Prices

High

Quality

Assortment Cost

Management

Vertical

Integration

Centralization

65

Magnit at a Glance

Russian Food Retail Market

5

Market Composition by Format

RUB 13 410bn Market

Size

FY 2015 % Modern

Retail

Penetration

Non-Modern Modern

Source: INFOLine, as of December 31, 2015

65% 35%

Top-7 Retail Chains

22,5%

Modern Non-Chain

Stores

16,5%

Other chains

26%

Traditional Trade

28%

Open Markets

7%

Magnit at a Glance

Magnit vs Peers

6 Source: Companies, INFOLine, Thomson Reuters, Magnit’s Estimates

Number

of Stores, eop 2015

Selling Space

thous. sq.m., eop

2015

Revenue

RUB bn, eop 2015

Market Cap

US$ bn, eop 2015

Market Share

%, eop 2015

7

6

2

2

1

3

2

Not public

Not public

950,6

808,8

272,3

252,8

162,5

415,6

225,0

12089

7 020

2 708

172

146

96

87

Magnit

X5

Dixy

Lenta

Okey

Auchan

Metro

4 414

3 333

908

882

593

836

661

19,0

5,1

0,5

3,3

0,5

2 588 Drogerie Stores 92 511 658 745 237 238

107

9 902 Convenience Stores

228 Hypermarkets

170 Magnit Family

34 Distribution Centers

6 44 33 52 12 12 11

8 63 38 64 15 30

10

358

1684 2667 2961 972 895

365

Operational Overview

Geographical Coverage

7 Source: Company,

as of June 30, 2016

2 397 Cities

& Towns

7 Federal

Regions

North

Caucasus Southern Volga North

West

Urals Siberia Central

1 8 10 8 2 3 2


Logistics System

8 Source: Company,

as of June 30, 2016

12 888 Total Number

of Stores

1 351 thous.sq.m.

Warehousing Space

34 DCs

5 836 Trucks

10

8

8

3

1

2

2

Central

Volga

Southern

Urals

North Caucasus

North West

Siberia

3684

3957

2293

1179

462

826

487

464,141

283,871

310,387

142,533

40,799

73,601

35,438

Centralization Ratio

%

90

10

92

8

Convenience Stores

1H2016 Future Targets

73

27

80

20

Hypermarkets

Delivered from DC

Delivered from supplier

Delivered from DC

Delivered from supplier


Suppliers

9 Source: Company,

as of June 30, 2016

5 800 Domestic

Suppliers

4 600 Local Suppliers

1 200 Federal Suppliers

Assortment

55% 45%


Direct Import

10

Source: Company,

Direct Import – as of December 31, 2015;

Private Label – as of June 30, 2016

11 % Share

of Revenue 611 PL

SKUs M 84% Food

Items

Private Label

9 % International

Direct Import 757 Open

Contracts


Employees

11 Source: Company,

as of June 30, 2016

259 389 Employees

31 650 Average

Monthly

Salary 11% Wage Rate

Increase

P =

190 420 In-store

Personnel

36 592 People Engaged

in Distribution

19 923 People in Regional

Branches

10 031 People Employed

by Head Office

1000 employees

2 423 Other


Competitive Attributes

12

43-45 % of Family

Budget

Spent on Food

Location Quality

(of Products)

Assortment Reliability Atmosphere Prices

5 000 People —

Minimum

Population

(1 500–1 600 Families)

4 000-9 500 Monthly

Family Food

Budget P =

Overlap “Good”

Cannibalization

Magnit #1

Magnit #2

500m

Competitor #1 Competitor #2

Competitor #3

500m

Sales Catchment Area

Source: Company’s Estimates

Convenience Store


Convenience Store

14 Source: Company,

as of June 30, 2016

457 sq.m.

Total

327 sq.m.

Selling Space

89% Food

11% Non-food

25% Owned

75% Leased

Format Description Key Operational Statistics Opening

Size of the Store Average Ticket Payback

Store Ownership Structure

Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 1H2016 –1H2015,%

243,80 P = $3,47

245 306 P = $4 024

-0,36 Average

Ticket, RUB

2,21 Traffic

1,85 Sales

2,7

3 years

If Leased

If Owned

Cost of New Store

per sq.m. of Total Space, thousand RUB

Time to Maturity

6 months

4-6 years

Owned 35-105

Leased 10-19

Hypermarket


Hypermarket

16 Source: Company,

as of June 30, 2016

80% Food

20% Non-food

73% Owned

27% Leased

Format Description Key Operational Statistics

Size of the Store Average Ticket


Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 1H2016 – 1H2015,%

596,91 P = $8,5

272 278 P = $4 467

1,1

6 503 sq.m.

Total

2 897 sq.m.

Selling Space

-2,48 Average

Ticket, RUB

-7,86 Traffic

-10,15 Sales

Opening

Payback

6-9 years

Cost of New Store


Owned 56-98

Leased 31-41

8-15 months

Time to Maturity

S: up to 3 000

M: 3 000-6 000

L: over 6 000

Magnit Family


Magnit Family

18 Source: Company,

as of June 30, 2016

2 148 sq.m.

Total

1 100 sq.m.

Selling Space

84% Food

16% Non-food

37% Owned

63% Leased




Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 1H2016 – 1H2015,%

447,9 P = $6,4

349 703 P = $5 737

1,9

6-9 years

Cost of New Store


Owned 71-112

Leased 31-54

8-15 months

-2,31 Average

Ticket, RUB

-4,03 Traffic

-6,25 Sales

Time to Maturity

Drogerie Store


Drogerie Store

20 Source:

Company, as of June 30, 2016

290 sq.m.

Total

229 sq.m.

Selling Space

100% Non-food

13% Owned

87% Leased




Sales Mix

Traffic

tickets/sq.m./day

Sales Density

sales/sq.m./year

LFL 1H2016 – 1H2015,%

305,3 P = $4,4

114 924 P = $1 885

10,86 Average

Ticket, RUB

-4,00 Traffic

6,42 Sales

0,9

3 years

If Leased

If Owned

Cost of New Store


Time to Maturity

6 months

Owned 20-70

Leased 9-16

4-6 years

80%

20%

Size

of the Store sq.m.

Average

Ticket

Traffic

Tickets/ sq.m./day

Density

Sales/ sq.m./year

Sales

Mix

LFL 1H2016-

1H2015 %

Store Owner-

ship Structure

Payback Years

Cost of New

Store per sq.m.

of Total Space

Time

to Maturity Months

• Total

• Selling Space

• Food

• Non-food

• Av.ticket

• Traffic/ Sales

• Owned

• Leased

13%

87%

37%

63%

73%

27%

25%

75%


Format Summary

21 Source: Company, as of June 30, 2016; * Excludes selling space designated for leases

Hypermarket

Drogerie

Store

Magnit

Family

457

6 503

290

2 148

327

2897*

229

1 100

Owned

RUB 35-105k

Leased

RUB 10-19k

2,7

1,1

0,9

1,9

P.243,8

$3,5

P.596,9

$8,5

P.305,3

$4,4

P.447,9

$6,4

P.245 306

$4 024

P.272 278

$4 467

P. 114 924

$1 885

P.349 703

$5 737

89%

11% Convenience

store

6

8-15

6

8-15

3 (if leased)

6-9

3 (if leased)

6-9

4-6 (if owned)

4-6 (if owned)

Owned

RUB 56-98k

Leased

RUB 31-41k

Owned

RUB 20-70k

Leased

RUB 9-16k

Owned

RUB 71-112k

Leased

RUB 31-54k

84%

16%

100%

-0,36

-2,48

10,86

-2,31

2,21

-7,86

-4,00

-4,03

1,85

-10,15

6,42

-6,25

Financial Overview

Summary P&L

SG&A is presented net of Depreciation & Amortization (except for Depreciation of production fixed assets which was included in the Cost of sales) Source: Company’s calculations based on IFRS accounts for 1H2015 – 1H2016 Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 22

RUB MN 1H2015 1H2016 1H2015 / 1H2016

Y-o-Y Growth

Net sales 454,808.63 521,527.57 14.7%

Cost of sales (327,748.22) (379,464.58) 15.8%

Gross profit 127,060.41 142,062.99 11.8%

Gross margin, % 27.94% 27.24%

SG&A (79,406.25) (92,661.97) 16.7%

Other income, net 937.45 2,138.69 128.1%

EBITDA 48,627.66 51,599.85 6.1%

EBITDA margin,% 10.69% 9.89%

Depreciation & Amortization (10,033.63) (12,101.38) 20.6%

EBIT 38,594.03 39,498.47 2.3%

Net finance costs (5,865.82) (6,853.38) 16.8%

Profit before tax 32,728.21 32,645.09 -0.3%

Taxes (7,462.55) (6,537.85) -12.4%

Effective tax rate 22.80% 20.03%

Net income 25,265.66 26,107.24 3.3%

Net margin, % 5.56% 5.01%

20

25 26

1H2014 1H2015 1H2016

349 455

522

1H2014 1H2015 1H2016

Financial Overview

Revenue & Costs

23 Source: Company’s calculations based on IFRS accounts for 1H2014-1H2016

27,8 27,9 27,2

10,5 10,7 9,9

5,6 5,6 5,0

0

5

10

15

20

25

30

1H2014 1H2015 1H2016

Revenue Dynamics RUB bn

Net Income Dynamics RUB bn

Margin Dynamics SG&A Expense Structure

Revenue — 522 RUB bn

Gross

Margin

EBITDA

Margin

Net

Margin

%

+30,3%

11,5% -0,5%

+14,7% +29,0%

+3,3%

LFL LFL

Sales Growth, RUB

Sales Growth, RUB

2,07 (0,42) ― Packaging & Raw Materials

1,84 (0,37) ― Repair & Maintenance

50,08 (10,05) ― Payroll & Related Taxes

1,56 (0,31) ― Taxes, Other than Income Tax

11,50 (2,31) ― Deprecation & Amortization

25,81 (5,18) ― Rent & Utilities

3,00 (0,60) ― Other

in SG&A,% in Revenue, %

2,51 (0,50) ― Advertising

1,63 (0,33) ― Bank Services

20%

104 703 RUB mn

27,83 27,94 27,24 -0,42 -0,11 -0,60 -0,16 0,64 0,06

15

17

19

21

23

25

27

29

31

33

GM1H2014

Trading Margin Transport Losses GM1H2015

Trading Margin Transport Losses GM1H2016

Financial Overview

Gross Margin Bridge

24 Source: Company’s calculations

EBITDA Margin Bridge

% of Sales

% of Sales

+11 b.p. -70 b.p.

+22 b.p. -80 b.p.

10,47 10,69 9,89

-0,29 -0,22 -0,06 -0,70 -0,75 -0,04 -0,04

0,11 0,59 0,09 0,43 0,09 0,21

0

2

4

6

8

10

12

EBITDA1H2014

GrossMargin

Payroll & Taxes Rent & Utilites Advertising Taxes otherthan income tax

Other EBITDA1H2015

GrossMargin

Payroll & Taxes Rent & Utilites Advertising Repair &Maintenance

Packaging &Raw Materials

Other EBITDA1H2016

49 065

36 336

11 551

-5 777

-2 239 -5 735

-4 755 -24 434

-351 -19 299

1 972

Financial Overview

Free Cash Flow

25 Source: Company’s calculations based on IFRS accounts for 1H2015-1H2016

Working Capital Analysis

The Average Days Payable to

Suppliers is 38 Days.

Inventory Management Days is 57 Days

Working Capital: RUB 34 258 mn as of

30.06.2016

RUB mn

1H 2015

1H 2016

Adjusted for loss from disposal of PPE, provision

for doubtful receivables, foreign exchange loss,

gain on disposal of subsidiary Calculated as additions

+ transfers of PP&E

during the respective

period

Does not include cash flow from

financing activities

51 182

23 519

2 374 -3 505

-16 964

-6 796 -3 903

-21 018

-127 -20 982 15 102

AdjustedEBITDA

Change inWorking capital

Net InterestExpense

TaxesPaid

OCF Capex Other CashFlow

from InvestingActivities

FCF Payment ofDividents

Other CashFlow

from FinancingActivities

CF

Financial Overview

Balance Sheet

Source: Company’s calculations based on IFRS accounts for FY2014 - 1H2016 Please note: there may be small variations in calculation of totals, subtotals, and/or percentage change due to rounding of decimals 26

RUB MN 2014 2015 1H2016

ASSETS

Property plant and equipment 232,968.80 265,995.94 275,088.83

Other non-current assets 6,043.82 6,380.79 6,102.59

Cash and cash equivalents 17,691.54 8,390.90 4,885.52

Inventories 81,475.66 116,471.59 123,665.09

Trade and other receivables 813.26 993.67 672.00

Advances paid 4,849.30 5,295.73 4 147.20

Taxes receivable 69.38 96.67 376.07

Short-term financial assets 475.18 246.78 268.87

Prepaid expenses 242.53 320.91 350.42

Income tax receivable 131.86 - -

TOTAL ASSETS 344,761.33 404,192.98 415,556.59

EQUITY AND LIABILITIES

Equity 143,651.62 165,140.60 186,475.82

Long-term debt 44,410.14 59,411.19 34,959.71

Other long-term liabilities 10,617.70 12,998.59 14,024.63

Trade and other payables 66,794.61 88,372.22 73,498.37

Short-term debt 51,256.67 44,817.12 85,207.60

Dividends payable 14,372.03 16,993.86 7.10

Other current liabilities 13,658.56 16,459.40 21,383.36

TOTAL EQUITY AND LIABILITIES 344,761.33 404,192.98 415,556.59

Financial Overview

Capex Analysis

27

1 CAPEX for 1H2016 amounts to RUB 21,018 mn

Source: Company’s calculations based on IFRS accounts for FY2015, Company’s Estimates for FY2016

Buildings: Complete & under

Construction

Machinery & Equipment Other Assets Land

36 231 15 750 541 1 753

FY 2015 (Actual) 1

RUB 54 bn

FY 2016 (Estimates)

RUB 67 bn

RUB 500 mn

Buildings: Complete & under

Construction

Machinery & Equipment Other Assets Land

41 000 23 000 1 000 2 000

RUB 500 mn

95 667

104 228

120 167

77 975

95 837

115 282

51 257

44 817

85 208

44 410

59 411

34 960

2014 2015 1H2016

Net Debt

Short-term Debt

Long-term Debt

%

Financial Overview

Debt Burden

28 Source: Company’s calculations based on IFRS accounts for FY2014-1H2016

12,9

8,7

7,5

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

2014 2015 1H2016

0,9 0,9

1,1

0

0,5

1

1,5

2

2014 2015 1H2016

Debt Level Dynamics RUB mn

Credit Metrics Credit Profile

EBITDA / Finance Expenses

Net Debt / LTM EBITDA

The Company Has

an Impeccable Credit History

Collaboration with

the Largest Banks

Low Debt Burden:

Net Debt / LTM EBITDA Ratio of 1,1

No Currency Risk: 100%

of Debt is Rub Denominated

Matching Revenue Structure

Insignificant Interest Rate Risk:

Interest Payments are Made

at Fixed Rates Primarily

53,6% 43,0%

70,9%

29% of Debt is Long-term

Approximately 59%

of LT Debt is Rub Bonds

Contact Information

Contact Information

29

Timothy Post

Head of Investor Relations

+7 (961) 511-7678

[email protected]

http://ir.magnit.com

15/2 Solnechnaya Street

Krasnodar, 350072

Russian Federation