Russian retailer "Magnit " announces unaudited 1Q2009 operating and financial results

OJSC «Magnit» (the “Company”; RTS, MICEX and LSE: MGNT) is pleased to release its 1Q2009 unaudited operating and financial results prepared in accordance with IFRS (1).

During 1Q2009 the Company added 94 stores (net) and increased its selling space by 26.6 % relative to 1Q2008 from 674.9 thousand sq. m. to 854.3 thousand sq. m. at the end of 1Q2009.

Net revenue of the Company increased by 35.8% YoY from 28,170.7 million RUR in 1Q08 to 38,263.13 million RUR in 1Q09. Net revenue increase was due to increase in selling space as well as 14.05% increase of like-for-like sales (excl. VAT).

Gross margin improved from 20.8% in 1Q08 to 23.3% in 1Q09 primarily due to better purchasing terms as well as an in-house logistics function improvement.

EBITDA increased by 100.7% from 1,718.4 million RUR in 1Q08 to 3,450.1 million RUR in 1Q09.

Net income for 1Q09 increased by 160.4% and amounted to 1800.6 million RUR vs. 691.5 million RUR in 1Q08.

Sergey Galitsky, the Company s CEO, provided the following comments on the published 2007 results:

“Good first quarter numbers are the results of the previous operation of the company. Since inception of the retail chain we have been concentrating on cost saving.

Development of warehousing and transportation logistics, optimization of product mix and technological processes on the store level enabled us to get a good profit and EBITDA margin. However our investors should not expect the trend of the beginning of the year to continue. We consider it possible and necessary to invest into price attractiveness of our stores”.

 

(1) Management accounts

Key Operating and Financial Highlights for 1Q2009:

		1Q 2009	1Q 2008	Growth rate
Stores opened, NET		94	41	n/a
Total number of stores		2,676	2,238	n/a
Selling space, sq. m.		854,260	674,935	26.6%
Number of customers, mn		197.8	176.9	11.8%
Net sales, mn RUR		38,263.1	28,170.7	35.8%
Net sales, mn US$		1,127.7	1,161.2	(2.9)%
Gross profit, mn RUR		8,909.7	5,868.8	51.8%
Gross profit, mn US$		262.6	241.9	8.6%
Gross margin, %		23.3%	20.8%	n/a
EBITDAR, mn RUR		4,803.2	2,547.9	88.5%
EBITDAR, mn US$		141.6	105.0	34.8%
EBITDAR margin, %		12.6%	9.0%	n/a
EBITDA, mn RUR		3,450.1	1,718.4	100.8%
EBITDA, mn US$		101.7	70.8	43.6%
EBITDA margin, %		9.0%	6.1%	n/a
EBIT, mn RUR		2,704.5	1,270.1	112.9%
EBIT, mn US$		79.7	52.4	52 .1%
EBIT margin, %		7.1%	4.5%	n/a
Net profit, mn RUR		1,800.6	691.5	160.4%
Net profit, mn US$		53.1	28.5	86.2%
Net profit margin, %		4.7%	2.5%	n/a
LFL growth 1Q09 to 1Q0 8 (2)
	Number of tickets	0.37%
	Average ticket (excl. VAT), RUR	13.68%
	Revenue, RUR	14.05 %

Note: net revenue in US$ terms is calculated using the daily exchange rate.

(2) Applicable to 1,849 stores opened by July 01, 2007. Thus, LFL analysis is based on the stores that have been operating not less than six months, i.e. achieved the mature level of sales.

Company description:

Based in Krasnodar, in the Southern region of Russia, Open Joint Stock Company “Magnit” is a holding company for a group of entities that operate in the retail trade under the “Magnit” name. The chain of “Magnit” stores is one of the leading operators in the Russian food retail market. As of December 31, 2008 the chain consisted of 2,568 convenience stores and 14 hypermarkets in 856 locations in the Russian Federation.

Approximately two-thirds of the Company s stores are located in cities with a population of less than 500 thousand. Most of its stores are located within the Southern, Central and Volga regions. The Company also operates stores in the North-Western and Urals regions.

As of December 31, 2008 the Company operated an in-house logistics system consisting of 9 distribution centers, employing automated stock replenishment systems and a fleet of 1,165 vehicles.

In accordance with the audited IFRS consolidated financial statements for 2008, the Company posted consolidated revenues of approximately US$ 5,348 million and a consolidated EBITDA of around US$ 402 million

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