Press Release | St. Petersburg | 24 October 2022

LENTA REPORTS TOTAL SALES GROWTH OF 15.7% AND ONLINE SALES GROWTH OF 137.2% IN 9M 2022

Q3 2022 Highlights1,2

•    Total Sales increased by 7.2% y-o-y to RUB 126.8 billion
•    Retail Sales reached RUB 125.1 billion, representing 7.8% y-o-y growth
•    Like-for-Like (LFL) Sales increased by 1.3%, driven by 4.6% LFL Average Ticket growth
•    Online Sales grew by 98.2% y-o-y to RUB 8.8 billion
•    The Company opened 18 small-format stores on a gross basis
•    Total Selling Space increased by 3.2%, reaching 1,780.3 thousand sq. m.
•    Gross Profit decreased by 5.0% y-o-y to RUB 26.5 billion. Gross Margin decreased by 268 bps to 20.9%
•    EBITDA was RUB 7.5 billion with a 6.0% EBITDA Margin
•    Capex stood at RUB 1.9 billion, up 26.3%
•    The Net Debt to EBITDA (LTM) ratio stood at 1.8x vs. 1.4x as of 31 December 2021

1. Including Utkonos results starting from 1 February 2022
2. Please note that all Financial Highlights are based upon pre–IFRS 16 figures

Q3 & 9M 2022 OPERATING RESULTS, y-o-y

Sales3

Stores and Selling Space

LFL Results6

Online Sales3

For Q3 2022 monthly operating results, please refer to Appendix 1

3. Including Utkonos results from the date of consolidation (1 February 2022)

4. Includes only Utkonos Retail Sales (B2C)

5. Wholesales includes Utkonos wholesales (B2B)

6. LFL results include the results of Billa stores for September but do not include the results of Semya stores.

7. Lenta Online includes Click & Collect

8. Includes both Utkonos retail sales (B2C) and wholesales (B2B)

Q3 2022 OPERATING RESULTS

In Q3 2022, Total Sales increased by 7.2% to RUB 126.8 billion. Lenta’s Retail Sales in Q3 2022 increased by 7.8% to RUB 125.1 billion, compared to RUB 116.1 billion in Q3 2021, driven by 1.3% LFL Retail Sales growth and 3.2% Total Selling Space organic expansion. Overall Sales Density in Q3 2022 improved by 2.0% year-over-year.

In Q3 2022, we oversaw the change in customers’ behavior driven primarily by the decrease in real disposable income and the decline in consumer confidence. Our customers now tend to buy a product from a lower price segment and reduce their expenses on non-food categories and entertainment goods. Meanwhile, the growth rate in the Online channel is slowing down.

In Q3 2022, the total Number of Tickets increased by 10.7% thanks to the above-mentioned organic expansion and gradual improvement in the performance of our Lenta Mini stores, while the Average Ticket size decreased by 2.7% primarily due to the increasing share of small-format stores’ sales in total Retail Sales.

Wholesale Sales, which now includes Utkonos B2B sales from the date of the consolidation, represented 1.3% of Total Sales and decreased by 21.8% compared to the corresponding period of the previous year.

In Q3 2022, the Average Ticket continued to be the driver of LFL Sales growth. LFL Sales growth decelerated to 1.3% in Q3 2022. Total Retail LFL Traffic stood at a negative 3.2%. The Total Retail LFL Average Ticket increased by 4.6%, offsetting negative LFL Traffic.

In Q3 2022, Lenta continued to improve its loyalty program and actively worked on assortment tailoring and promo recovery. In Q3 2022, 2.4 million new loyalty cards were activated, with the total number of loyalty cards issued reaching to 25.5 million. Transactions using loyalty cards slightly increased compared to Q2 2022 and accounted for 96.1% of total Retail Sales, excluding Utkonos.

Hypermarket Sales represented 80.9% of total Retail Sales in Q3 2022. Hypermarkets delivered 1.8% Sales growth, positive LFL Sales growth of 2.3%, and an increase of 5.6% in the LFL Average Ticket, driven primarily by inflation. Lenta continues to improve the efficiency of in-store operations, which led to a sales density improvement of 5.4% year-over-year.

In 2022, Lenta put on hold a significant number of store openings due to the macroeconomic conditions and market uncertainties. During Q3 2022, 18 new small-format stores were opened. Lenta also closed 16 underperforming stores to optimize operations, bringing the total number of small-format stores to 557 as of the end of Q3. In the reporting period, small-format stores demonstrated decent year-over-year Sales Growth of 31.8%, driven by acquisitions made in 2021 and organic expansion. Small-format stores’ LFL Sales decreased by 6.8% as a result of a 3.7% decrease in the LFL Average Ticket and a 3.2% decline in LFL Traffic. This quarter-on-quarter decline in the performance of small-format stores was driven by the high base effect associated with clearance sales at Billa stores prior to the chain’s integration with Lenta in September 2021.

In Q3 2022, Lenta’s Online channel continued to demonstrate very strong sales growth. Total Online Sales including Utkonos sales during the period amounted to RUB 8.8 billion, an increase of 98.2% year-over-year, while Total Online Orders were up 57.9% and amounted to 3.8 million. The Average Ticket for Lenta Online was RUB 2,077 an increase of 9.5% year-over-year. The share of online sales via Partners decreased significantly following Partners’ revision of their approach to the development of their online offering. Lenta Online demonstrated considerable sales growth thanks to increases in the Average Ticket, the size of the customer base and the number of orders. In Q3 2022, Online Sales constituted 6.9% of Lenta’s Total Sales, compared to 3.7% in the corresponding period of the previous year. In Q3 2022, Lenta continued to expand Unkonos online offering and launched Utkonos Mini sales at several partners’ platforms.

Q3 & 9M 2022 FINANCIAL HIGHLIGHTS, pre–IFRS 16

Key Financial Results, pre–IFRS 16

For Q3 & 9M 2022 financial highlights prepared in accordance with IFRS 16, please refer to Appendix 2

Total Sales demonstrated strong growth of 7.2% and amounted to RUB 126.8 billion, compared to RUB 118.2 billion in Q3 2021.
In Q3 2022, Gross Profit (pre–IFRS 16) decreased by 5.0% year-over-year to RUB 26.5 billion. Gross Margin dropped by 268 bps to 20.9%; the decrease in Gross Margin was driven mainly by higher investments in traffic retention, increased promo share, and a shift in the sales product mix toward lower margin goods.
The decline in Gross Profit and 10.0% increase in Total SG&A led to a 27.1% decrease in EBITDA (pre–IFRS 16) year-over-year. In Q3 2022, Lenta’s EBITDA Margin stood at 6.0%. EBITDA Margin declined by 281 bps compared to the previous year, primarily due to lower Gross Margin and the growth of SG&A as a percentage of Total Sales, which resulted from an increased share of stores in the ramp-up stage, the growing share of Lenta’s own online, and the Utkonos acquisition.

Selling, General, and Administrative (SG&A) expenses, pre–IFRS 16

For Q3 & 9M 2022 SG&A expenses in accordance with IFRS 16, please refer to Appendix 2

In Q3 2022, Total Selling, General, and Administrative expenses (pre–IFRS 16) increased by 10.0% year-over-year to RUB 24.9 billion. SG&A as a percentage of Total Sales increased by 49 bps to 19.7%. This growth was mainly driven by higher lease expenses as well as increased D&A.

In Q3 2022, Payroll expenses rose by 8.0% year-over-year, while personnel expenses as a percentage of Total Sales increased by 5 bps. These dynamics was primarily driven by a higher share of stores in the ramp-up stage and Utkonos acquisition which were offset by improved labor productivity in our hypermarkets.

D&A increased by 17.1% primarily due to the acquisition of Utkonos warehouses as well as the consolidation of Billa and Semya. D&A as a percentage of Total Sales decreased by 30 bps.

Lease expenses as a percentage of Total Sales rose by 36 bps, primarily due to the expansion of small format stores with higher share of leased premises.

Store Operations as percentage of Total Sales decreased by 10 bps year-over-year, mainly driven by 15 bps decline in repairs and maintenance and a 3 bps decrease in security costs, while cleaning costs increased by 8 bps.

Advertising costs during Q3 2022 were up 18.4% year-over-year, due to increased investments in our growing online business and expenses related to support for small-format in the ramp-up stage.

Cash Flow Statement, pre–IFRS 16

For the Q3 & 9M 2022 cash flow statement prepared in accordance with IFRS 16, please refer to Appendix 2

Capital Expenditures in Q3 2022 amounted to RUB 1.9 billion, an increase of 26.3% year-over-year. This increase resulted from the opening of new stores and expenses related to the integration of Billa, Semya, and Utkonos’s online business.

The Company’s Profit before Income Tax for Q3 2022 was RUB 1.7 billion, which was 68.6% lower than in Q3 2021. The decrease in Profit before income tax was mainly the result of a 53.7% year-over-year decline in Operating Profit as well as net FX losses incurred compared to the net FX gain received in Q3 2021.

In Q3 2022, Net Cash generated from Operating Activities (pre–IFRS 16) amounted to RUB 8.8 billion, compared to RUB 10.2 billion the previous year. These dynamics resulted from the decrease in Profit before income tax, which was offset by the much higher positive movement of Working Capital and higher D&A.

Net Cash used in Investing Activities was 1.7 billion compared to 23.1 billion for the same period of the previous year. In Q3 2021 Net Cash used in Investing Activities was primarily related to the acquisition of Billa and Semya.

In Q3 2022, Net Cash generated from Financing Activities amounted to RUB 3.0 billion, compared to Net Cash used in Financing Activities of RUB 0.2 billion in Q3 2021.

Free Cash Flow for Q3 2022 was RUB 7.1 billion, which was RUB 20.0 billion higher than in Q3 2021, mainly due to lower Net Cash used in Investing Activities.

Debt Position and Leverage

Lenta’s cash position at the end of Q3 2022 was RUB 23.3 billion. Gross Debt decreased by 2.2% compared to 31 December 2021 and stood at RUB 86.5 billion as of 30 September 2022. Net Debt (pre–IFRS 16) increased by RUB 8.1 billion compared to year-end 2021 and stood at RUB 63.2 billion.

All the Company’s debt has fixed interest rates and is fully ruble-denominated, matching its revenue structure. The LTM weighted average effective interest rate for Lenta’s debt portfolio for the period ended 30 September 2022 was 7.6%, compared to 6.8% for the twelve-month period ended 30 September 2021.

Lenta’s Net Debt to EBITDA ratio was 1.8x as of 30 September 2022 vs. 1.4x as of 31 December 2021.

For further information, please contact:

About Lenta

Lenta IPJSC (LSE: LNTA, MOEX: LENT) is a leading Russian multi-format food and FMCG retailer. The company operates hypermarkets, supermarkets, and recently launched a new proximity store format under the brand Mini Lenta. It also provides customers the option to shop online via its own Lenta Online services, Online Partners and the Utkonos platform. Lenta is Russia’s largest hypermarket operator and the fourth largest food retailer overall by Sales. The company was founded in 1993 in St. Petersburg and as of September 30, 2022, operated 254 hypermarkets and 557 supermarkets and Lenta Mini stores in over 200 cities and towns across Russia, with almost 1.78 million square meters of Selling Space. The average Lenta hypermarket has approximately 5,500 square meters of Selling Space, the average Lenta supermarket has 800 square meters, and the Mini Lenta format is 500 meters on average. The company operates 14 distribution centers to supply all its stores. 2021 Revenues were RUB 484 billion (approximately USD 6.5 billion).

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 Lenta'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 Lenta speak only as of the date of this announcement. Except as required by any applicable laws or regulations, Lenta 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.

Appendix 1

Q2 2022 MONTHLY OPERATING RESULTS

Sales3

Stores and Selling Space

Online Sales

3. Including Utkonos results from the date of consolidation (1 February 2022)

4. Includes only Utkonos Retail Sales (B2C)

5. Wholesales includes Utkonos wholesales (B2B)

6. Lenta Online includes Click & Collect

7. Includes both Utkonos retail sales (B2C) and wholesales (B2B)

Appendix 2

Q3 & 9M 2022 FINANCIAL HIGHLIGHTS, IFRS 16

Key Financial Results, IFRS 16