X5 Retail Regulatory News (FIVE)

X5 reports 26.8% revenue growth in Q1 2016

ü Revenue growth remained strong; revenue increased by 26.8% year-on-year (y-o-y) on the back of strong like-for-like (LFL) sales and solid selling space expansion.

ü Pyaterochka was the main driver of growth: net retail sales rose by 32.3% y-o-y.

ü X5 added a total of 377 new stores vs. 156 new stores during the same period last year, delivering selling space growth of 181.0 th. sq. m., driven principally by organic expansion.

ü Gross margin decreased by 31 bp y-o-y to 24.3% in Q1 2016. Promo activities and price investments during the period were in line with previous quarters, while the Q1 2015 gross margin was positively affected by sales of stock purchased in Q4 2014 to lock in the lower prices.

ü SG&A expenses (excl. D&A&I) as a percentage of revenue improved by 42 bp y-o-y to 17.8%, influenced by the operating leverage effect.

ü EBITDA grew by 25.6% y-o-y and reached RUB 16,493 mln in Q1 2016. EBITDA margin slightly decreased by 6 bp y-o-y in Q1 2016 and totalled 7.1% on the back of the strong addition of new selling space (31.0% y-o-y increase).

ü The Company's net debt/EBITDA ratio remained at a comfortable level of 2.47x as of 31 March 2016.

Amsterdam, 28 April 2016 - X5 Retail Group N.V. ("X5" or the "Company"), a leading Russian food retailer (LSE ticker: FIVE), today released the Company's unaudited condensed consolidated interim financial information for the three months (3M) ended 31 March 2016, in accordance with International Financial Reporting Standards as adopted by the European Union.

Profit and loss statement highlights (1)

(1) 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

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

Net retail sales

Q1 2016 average ticket, customer visits and basket by format, % change y-o-y

Total net retail sales growth was a solid 26.7% y-o-y on the back of:

§ 7.8% increase in LFL sales; and

§ 18.9% y-o-y increase from net new space, resulting from a 31.0% y-o-y rise in selling space.

Pyaterochka, benefitting from its continued appeal to value-seeking customers and strong opening programme, was the key driver for X5's Q1 growth: net retail sales increased by 32.3% y-o-y.

Selling space by format, square meters (sq. m.) 

In Q1 2016, X5 demonstrated solid LFL traffic growth of 2.0% y-o-y, driven by the strong performance of Pyaterochka and steady traffic improvement at Perekrestok. LFL traffic was positive in each month of the quarter.

Q1 2016 LFL(4)(5) store performance by format, % change y-o-y

For more details on net retail sales growth please refer to the 'Q1 2016 Trading update'.

(3) 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 LFL calculation starting from the day of the store's opening. We include all stores that fit our LFL criteria in each reporting period.

(4) LFL figures for February and Q1 2016 were adjusted for additional trading day in February as 2016 is a leap year. Unadjusted LFL Sales for February: X5 - 11.7%, Pyaterochka - 14.2%, Perekrestok - 5.7%, Karusel - 6.1%; for Q1 2016: X5 - 8.9%, Pyaterochka - 11.4%, Perekrestok - 5.4%, Karusel - (0.4%)

Gross profit margin

The Company's gross profit margin decreased by 31 bps y-o-y to 24.3% in Q1 2016. Q1 2015 gross margin was positively affected by sales of stock purchased in Q4 2014 to lock in the lower prices.

Selling, general and administrative (SG&A) expenses (excl. D&A&I)

In Q1 2016, SG&A expenses excluding D&A&I as a percentage of revenue were down y-o-y by 42 bp to 17.8% mainly due to improved staff costs, utilities and other expenses.

Staff costs as a percentage of revenue were reduced y-o-y by 15 bp in Q1 2016 to 7.8%, due to the positive operating leverage effect.

Lease expenses as a percentage of revenue in Q1 2016 increased y-o-y by just 1 bp to 4.6%. Higher operating leverage offset the effect of the large number of stores in ramp-up phase due to accelerated new store openings, which caused an increase in the share of leased space in the total real estate portfolio. As a percentage of X5's total real estate portfolio, leased space accounted for 62% as of 31 March 2016, compared to 59% as of 31 March 2015.

Utilities costs, third party service expenses and other store costs changed immaterially as a percentage of revenue in Q1 2016 compared to Q1 2015.

In Q1 2016, other expenses as a percentage of revenue decreased by 30 bp y-o-y, primarily due to higher provisions accrued in Q1 2015.

Lease/sublease and other income

As a percentage of revenue, the Company's income from lease, sublease and other operations decreased in Q1 2016 by 17 bp y-o-y and totalled 0.7%, as sales density dynamics at Pyaterochka stores outpaced X5 income dynamics from lease and sublease operations.

EBITDA and EBITDA margin

As a result of the factors discussed above, EBITDA in Q1 2016 totalled RUB 16,493 mln, or 7.1% of revenue, compared to RUB 13,130 mln, or 7.2% of revenue in Q1 2015.

D&A&I

Depreciation, amortisation and impairment costs in Q1 2016 totalled RUB 5,087 mln, decreasing y-o-y as a percentage of revenue by 3 bp to 2.2%. This was driven by the operating leverage effect and a decreasing share of owned stores in X5's total real estate portfolio.

Non-operating gains and losses

Net finance costs in Q1 2016 increased y-o-y by 13.6% to RUB 4,482 mln due to the higher level of weighted average gross debt. The weighted average effective interest rate on X5's total debt for Q1 2016 decreased from 13.6% for Q1 2015 to 11.8% for the reporting period due to refinancing of Mosprime-linked loans, improved credit ratings and the lower CBR Key Rate. In March 2016, X5 issued BO-05 series exchange-listed corporate bonds in the total amount of RUB 5 bln at a 10.9% coupon rate with a 2.5-year put option.

In Q1 2016, income tax expense increased by 71.3% vs Q1 2015 and reached RUB 1,931 mln. The main reason for this increase was movements in income tax provisions.

Consolidated cash flow statement highlights

The Company's net cash from operating activities before changes in working capital increased by RUB 3,115 mln, or by 22.9%, and totalled RUB 16,688 mln in Q1 2016, whereas the change in working capital decreased by 43.4% and amounted to RUB 6,307 mln.

Net interest and income tax paid in Q1 2016 were broadly on the same level as in Q1 2015. The effect from the increased level of gross debt as of 31 March 2016 compared to 31 March 2015 was offset by lower weighted average effective interest rate on X5's debt for Q1 2016.

As a result, in Q1 2016, net cash flows generated from operating activities totalled RUB 5,726 mln, compared to a RUB 2,251 mln cash outflow in the same period of 2015.

Net cash used in investing activities, which generally consists of payments for property, plant and equipment, totalled RUB 14,935 mln in Q1 2016 compared to RUB 7,820 mln for the same period last year, and reflects higher expenditures on store expansion and refurbishment. Х5 added 181.0 th. sq. m. of selling space in Q1 2016, a 65.3% increase compared to the same period last year. Moreover, 359 stores were refurbished in Q1 2016, compared to 344 stores in Q1 2015.

Net cash generated from financing activities totalled RUB 4,749 mln in Q1 2016, compared to net cash used in financing activities of RUB 10,440 mln for Q1 2015. The increase was related to the drawdown of available credit lines and bonds issued to finance the Company's investment programme.

Liquidity update

As of 31 March 2016, the Company's total debt amounted to RUB 148,991 mln, of which 30.9% was short-term debt and 69.1% long-term debt. The Company's debt is 100% denominated in Russian Roubles.

As of 31 March 2016, the Company had access to RUB 157,590 mln of undrawn credit lines with major Russian and international banks.

Note to Editors:

X5 Retail Group N.V. (LSE: FIVE, Fitch - 'BB', Moody's - 'Ba3', S&P - 'BB-') is a leading Russian food retailer. The Company operates several retail formats: the chain of proximity stores under the Pyaterochka brand, the supermarket chain under the Perekrestok brand, the hypermarket chain under the Karusel brand and Express convenience stores under various brands.

As of 31 March 2016, X5 had 7,397 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 6,636 Pyaterochka proximity stores, 486 Perekrestok supermarkets, 91 Karusel hypermarkets and 184 convenience stores. The Company operates 35 DCs and 1,462 Company-owned trucks across the Russian Federation.

For the full year 2015, revenue totalled RUB 808,818 mln (USD 13,268 mln), Adjusted EBITDA reached RUB 59,413 mln (USD 975 mln), and net profit for the period amounted to RUB 14,174 mln (USD 233 mln). In Q1 2016, revenue totalled RUB 231,611 mln (USD 3,104 mln), EBITDA reached RUB 16,493 mln (USD 221 mln), and net profit amounted to RUB 5,054 mln (USD 68 mln).

X5's Shareholder structure is as follows: Alfa Group - 47.86%, founders of Pyaterochka - 14.43%, X5 Directors - 0.06%, treasury shares - 0.02%, free float - 37.64%.

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 Retail 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 Retail Group N.V. speak only as of the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail 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.