X5 Retail Regulatory News (FIVE)

X5 reports 18.6% revenue growth in Q2 20229.6% adj. EBITDA margin pre-IFRS 16

Key highlights:

+18.6 % y-o-y

Revenue growth in Q2 2022driven by solid like-for-like (LFL)1 sales and selling space expansion

+38.4 % y-o-y

Digital business (express delivery, Vprok.ru, 5Post and Mnogo Lososya) net sales growth in Q2 2022Digital business net sales amounted to RUB 14.7 billion, which comprised 2.3% of consolidated Q2 2022 revenue

25.8 % +14 b.p.

Gross margin under IFRS 16 in Q2 2022(+19 b.p. to 25.5% pre-IFRS 162)driven predominantly by lower logistics costs and a reduction in shrinkage

14.0 % +92 b.p.

Adjusted EBITDA3 margin under IFRS 16 in Q2 2022(+132 b.p. to 9.6% pre-IFRS 16)

4.1% +140 b.p.

Net profit margin under IFRS 16 in Q2 2022(97 b.p. to 3.9% pre-IFRS 16)

2.58x

Net debt/EBITDA ratio as of 30 June 2022 (under IFRS 16)(1.11x pre-IFRS 16)

Amsterdam, 2 August 2022 - X5 Retail Group N.V. ("X5" or the "Company", LSE and MOEX ticker: FIVE), a leading Russian food retailer that operates the Pyaterochka, Perekrestok and Chizhik retail chains, today released its unaudited condensed consolidated interim financial information for the three months (Q2) and six months (H1) ended 30 June 2022, in accordance with International Financial Reporting Standards as adopted by the European Union.

Igor Shekhterman, X5 Chief Executive Officer, commented:

"During the first half of 2022, we focused on ensuring the operational stability of our business, including by making necessary adjustments to logistics and assortment. We also made price investments into socially important categories of goods to offset accelerating inflation, which, coupled with lower bonuses from suppliers, led to a slight decline in the commercial margin. This decline was offset by a positive operating leverage effect, as well as by our successful implementation of stringent cost control measures. As a result, in Q2 2022, we achieved exceptionally strong margins and are well positioned to continue with our price investment approach, as well as to accelerate investments into future growth, including into major projects like the development of the Chizhik and Pyaterochka retail networks.

"Against the backdrop of strong margins posted in Q2 2022, we anticipate that ongoing price investments and the adaptation of our product assortment - including the diversification of our supplier base and the development of X5's private labels, which are seeing growing customer demand - will contribute to margins stabilising at lower levels in H2 2022. We also plan the resumption of investments into business growth and expansion.

"In the second half of the year, X5 will focus on enhancing its customer value proposition, boosting like-for-like sales and growing its market share.

"We will prioritise the expansion of our Chizhik hard discounter format, which saw a 30-fold increase in revenue year-on-year in H1 2022 and is showing results above our expectations. We aim to accelerate Chizik expansion plans and open over 400 new hard discounter stores in 2022. We believe that Chizhik serves an important function by providing a wide range of customers with access to affordable and reasonably priced basic goods, and one of our main goals at this time is to accelerate the development of this format.

"We will also continue to develop the Pyaterochka proximity store network, where we aim to open over 1,400 proximity stores (gross) for the full year 2022. Further, we will focus on developing our consolidated online business including through new partnerships with profitability, efficiency and customer convenience in mind.

"At the same time, the changing market conditions are offering new opportunities for growth, including through M&A. For example, in June, X5 acquired 15 PRISMA supermarkets in St Petersburg. This move will see the stores integrated into X5's Perekrestok supermarket network and will expand X5's customer offering. Moving forward, we will continue to look for attractive inorganic growth opportunities arising in the market."

Profit and loss statement highlights4

Revenue

Revenue growth reached 18.6% year-on-year in Q2 2022. Net retail sales increased by 18.7%, driven by a combination of 7.1% selling space growth and 11.7% LFL sales growth, while X5's digital business sales grew by 38.4% y-o-y.

Selling space by format, square metres (sqm)

Q2 and H1 2022 LFL store performance by format, % change y-o-y

In Q2 2022, LFL sales performance accelerated year-on-year to 11.7%, supported by solid LFL results at Pyaterochka and Perekrestok at 12.3% and 9.0%, respectively, on the back of accelerating inflation.

The LFL basket was the main driver of LFL sales in Q2 2022, with LFL traffic in positive territory at 0.6% year-on-year, and with Pyaterochka showing 0.9% year-on-year growth.

For more details on net retail sales performance, please refer to X5's Q2 2022 Trading Update.

Gross profit margin

Gross profit margin under IFRS 16 increased by 14 b.p. year-on-year to 25.8% (increased by 19 b.p. year-on-year to 25.5% pre-IFRS 16) in Q2 2022, mainly driven by lower logistics costs due to the positive operating leverage effect and a reduction in shrinkage as a result of operating improvements.

Gross profit margin for H1 2022 decreased by 24 b.p. under IFRS 16 (decreased by 19 b.p pre-IFRS 16), affected primarily by a decline in commercial margin on the back of price investments. The latter was a result of the decreased level of suppliers' promo activity, driven predominantly by the current market environment, including the withdrawal of certain suppliers.

Selling, general and administrative (SG&A) expenses (excl. D&A&I and the impact of the Karusel transformation)

In Q2 2022, SG&A expenses excluding D&A&I, LTI, share-based payments and the impact of the Karusel transformation under IFRS 16 as a percentage of revenue decreased by 86 b.p. to 12.7% (decreased by 120 b.p. to 16.7% pre-IFRS 16), mainly driven by lower staff costs, utilities, other store costs and third-party services as a result of operating leverage as well as cost control measures.

Staff costs (excluding LTI and share-based payments) as a percentage of revenue decreased by 39 b.p. year-on-year in Q2 2022 to 7.7%, mainly due to the operating leverage effect on the back of accelerated revenue growth in Q2 2022, as well as operational improvements.

LTI and share-based payment expenses amounted to RUB 685 million in Q2 2022, mostly attributed to the reinstated LTI programme, which is currently being redesigned.

Lease expenses under IFRS 16 as a percentage of revenue in Q2 2022 increased by 11 b.p. year-on-year to 0.7%, mainly due to a higher number of revenue-linked leases and reverse franchising agency fees. The decrease in pre-IFRS 16 lease expenses by 31 b.p. to 4.5% was caused by a positive operational leverage effect and measures taken to reduce lease expenses, partially compensated by a higher number of revenue-linked leases.

Utilities costs as a percentage of revenue in Q2 2022 decreased by 15 b.p. year-on-year to 1.7%, mainly due to colder than usual weather conditions in May-June, as well as improved control of climate equipment settings and optimisation initiatives.

Other store costs under IFRS 16 as a percentage of revenue in Q2 2022 decreased by 14 b.p. year-on-year (falling by 15 b.p. pre-IFRS 16), mainly due to the positive operating leverage effect.

Third-party service expenses under IFRS 16 as a percentage of revenue in Q2 2022 decreased by 35 b.p. year-on-year to 0.5% (down 34 b.p. to 0.5% pre-IFRS 16), mainly due to lower marketing expenses.

Other expenses under IFRS 16 as a percentage of revenue in Q2 2022 decreased by 5 b.p. year-on-year to 1.1% (up 2 b.p. to 1.4% pre-IFRS 16), mainly due to lower business travel expenses offset under pre-IFRS 16 by increased reverse franchising agency fees.

In H1 2022, SG&A expenses excluding D&A&I, LTI, share-based payments and the impact of the Karusel transformation under IFRS 16 as a percentage of revenue decreased by 58 b.p. to 13.4% (decreased by 95 b.p. to 17.5% pre-IFRS 16), mainly driven by lower staff costs, utilities, other store costs and third-party services.

Lease/sublease and other income8

As a percentage of revenue, the Company's income from leases, subleases and other operations under IFRS 16 totalled 0.9%, a decrease of 13 b.p. year-on-year in Q2 2022 (a decrease of 12 b.p. to 0.8% pre-IFRS 16), due to lower fixed lease/sublease fees as percentage of revenue on the back of accelerated revenue growth in Q2 2022 under pre-IFRS 16.

EBITDA and EBITDA margin

D&A&I

Depreciation, amortisation and impairment costs under IFRS 16 decreased as a percentage of revenue by 82 b.p. year-on-year to 6.0% (down 33 b.p. year-on-year to 3.1% pre-IFRS 16) in Q2 2022, totalling RUB 38,574 million (RUB 19,996 million pre-IFRS 16). This was mainly driven by a lower number of refurbishments compared to the same period of the previous year and higher discount rates under IFRS 16 due to increased interest rates in Russian capital markets on the back of a key interest rate increase. In H1 2022, depreciation, amortisation and impairment costs under IFRS 16 decreased by 46 b.p. year-on-year to 6.5% (decreased by 8 b.p. year-on-year to 3.6% pre-IFRS 16), totalling RUB 81,940 million (RUB 44,799 million pre-IFRS 16).

Non-operating gains and losses

Net finance costs under IFRS 16 in Q2 2022 increased by 29.0% year-on-year to RUB 18,253 million (up 42.4% year-on-year to RUB 5,972 million pre-IFRS 16), driven by increasing interest rates in Russian capital markets on the back of a key rate increase and increasing interest on lease liabilities.

The positive net FX result totalled RUB 6,231 million (RUB 2,352 million under pre-IFRS 16) in Q2 2022, compared with positive RUB 897 million (positive RUB 390 million under pre-IFRS 16) in Q2 2021 due to appreciation of the rouble and the effect from revaluation of foreign exchange lease liabilities. As a result, the positive FX effect of 1.0% of revenue (0.4% of revenue pre-IFRS 16) partially compensated negative pressure on net profit margin.

In H1 2022, the effective tax rate under IFRS 16 was 35.5% (35.0% under pre-IFRS 16), up from 27.4% in H1 2021 (26.7% under pre-IFRS 16) due to the one-off effect from provisions made in Q2 2022.

Consolidated cash flow statement highlights

In Q2 2022, the Company's net cash from operating activities before changes in working capital under IFRS 16 increased by RUB 19,420 million (up RUB 17,117 million under pre-IFRS 16) and totalled RUB 89,817 million (RUB 61,603 million under pre-IFRS 16), reflecting business growth. The positive change in working capital under IFRS 16 of RUB 5,699 million in Q2 2022 as compared to Q2 2021 was driven by a higher decrease in account receivables due to lower bonuses from suppliers and a higher increase in other accounts payable driven by deferred social tax payments.

Working capital highlights (under IFRS 16)

Net interest and income tax paid under IFRS 16 in Q2 2022 increased by 4.6% year-on-year (down 17.2% year-on-year pre-IFRS 16) and totalled RUB 19,536 million (RUB 7,245 million pre-IFRS 16), driven by lower income tax paid due to prepayments made in previous periods.

As a result, net cash flow generated from operating activities under IFRS 16 totalled RUB 75,980 million in Q2 2022, up from RUB 52,710 million in Q2 2021 (RUB 60,256 million, up from RUB 36,666 million in Q2 2021 pre-IFRS 16).

In H1 2022, net cash flows generated from operating activities under IFRS 16 totalled RUB 102,136 million, up 9.7% from RUB 93,130 million in H1 2021 (and totalled RUB 70,490 million, up 15.4% from RUB 61,079 million in 2021 pre-IFRS 16), driven by EBITDA growth and positive change in working capital.

In Q2 2022, adjusted net cash used in investing activities, which generally consists of payments for property, plant and equipment, under IFRS 16 decreased to RUB 15,058 million (to RUB 15,143 million under pre-IFRS 16) due to a lower number of refurbishments, the calendarisation of store openings and capex optimization. For H1 2022, adjusted net cash used in investing activities under IFRS 16 decreased to RUB 37,025 million (RUB 37,267 million under pre-IFRS 16) from RUB 42,366 million (RUB 42,790 million under pre-IFRS 16) in H1 2021.

Net cash used in financing activities under IFRS 16 totalled RUB 105,309 million (RUB 89,500 million pre-IFRS 16) in Q2 2022, compared with RUB 28,338 million (RUB 11,870 million pre-IFRS 16) in Q2 2021. In H1 2022, net cash used in financing activities under IFRS 16 increased to RUB 82,343 million from RUB 57,849 million (and increased to RUB 50,455 million from RUB 25,374 million pre-IFRS 16) in H1 2021.

Liquidity update

The Company's net debt/EBITDA ratio under IFRS 16 was 2.58x (1.11x pre-IFRS 16) as of 30 June 2022.

The Company's debt pre-IFRS 16 is 100% denominated in Russian roubles.

As of 30 June 2022, the Company had access to RUB 442,948 million in available credit limits with major Russian and international banks.

1. LFL comparisons of retail sales between two periods are comparisons of retail sales in local currency (including VAT) generated by the relevant stores. The stores that are included in LFL comparisons are those that have operated for at least 12 full months. Their sales are included in the LFL calculation starting from the day of the store's opening. We include all stores that fit our LFL criteria in each reporting period.

2. The pre-IFRS 16 financial measures are calculated by adjusting the applicable IFRS measures to include fixed lease expenses and fixed non-lease components of lease contracts, and to exclude any gain on derecognition of right-of-use assets and lease liabilities, depreciation of right-of-use assets and interest on lease liabilities and gain/loss from sale of asset undersale and leaseback operations for the proportion of the rights retained recognised under IFRS 16.

3. Adjusted EBITDA is EBITDA before costs related to the LTI programme, share-based payments, other one-off remuneration payment expenses and the impact of the Karusel transformation.

4. Please note that, in this and other tables and in the text of this press release, immaterial deviations in the calculation of % changes, subtotals and totals are due to rounding.

5. Net retail sales represent revenue from the operations of X5-managed stores net of VAT. This number differs from revenue, which includes proceeds from wholesale operations, direct franchisees (royalty payments) and other revenue.

6. Including Mnogo Lososya.

7. Including Vprok.ru Perekrestok dark stores and Mnogo Lososya dark kitchens.

8. Mainly consists of lease/sublease income, income from the sale of recyclable materials and other one-off gains.

9. Adjusted for repayment of short-term financial investments.

10. Adjusted short-term financial investments.

NOTE TO EDITORS

X5 Retail Group N.V. (LSE and MOEX: FIVE; RAEX, ruAA+) is a leading Russian food retailer. The Company operates proximity stores under the Pyaterochka brand, Perekrestok supermarkets and Chizhik hard discounters. X5 provides an omnichannel experience to its customers, integrating retail stores and e-commerce through its businesses: express delivery, Vprok.ru, 5Post and Mnogo Lososya.

As of 30 June 2022, X5 had 19,779 Company-operated stores.It has the leading market position in both Moscow and St. Petersburg and a significant presence in the European part of Russia. Its store base includes 18,558 Pyaterochka proximity stores, 986 Perekrestok supermarkets and 153 Chizhik hard discounters. The Company operates 48 DCs and 4,347 Company-owned trucks across the Russian Federation.

X5 is one of the largest employers in Russia. The Company employs over 325 thousand people.

For the full year 2021, revenue totalled RUB 2,204,819 million (USD 29,935 million*), EBITDA pre-IFRS 16 reached RUB 161,024 million (USD 2,186 million*), and net profit pre-IFRS 16 for the period amounted to RUB 48,513 million (USD 659 million*). In H1 2022, revenue totalled RUB 1,252,180 million (USD 16,412 million**), adjusted EBITDA pre-IFRS 16 reached RUB 104,909 million (USD 1,375 million**), and net profit pre-IFRS 16 amounted to RUB 33,731 million (USD 399 million**).

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal", "believe", or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Group N.V.'s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

Any forward-looking statements made by or on behalf of X5 Group N.V. speak only as of the date of this announcement. Save as required by any applicable laws or regulations, X5 Group N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

* FX rate: 73.6541 USD/RUB ** FX rate: 76.2975 USD/RUB

For further details please contact:

Varvara Kiseleva

Head of Corporate Finance and IR

Tel.: +7 (495) 662-88-88 ext. 27-300

e-mail: Varvara.Kiseleva@x5.ru

Maria Yazeva

Investor Relations Officer

Tel.: +7 (495) 662-88-88 ext. 13-147

e-mail: Maria.Yazeva@x5.ru