X5 Group (Пятерочка). Годовой отчет за 2021 год

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X5 Group’s 2021 Annual Report
complies with UK and Russian
Federation listing requirements,
as well as the Dutch Corporate
Governance Code.

This document looks at our performance from
a number of different perspectives. It provides an
analysis of our financial and operating performance,
reports on progress perspectives our strategic
goals and gives an overview of our ESG
performance and priorities, which are discussed
in greater detail in the 2021 Sustainability Report.

Report boundary and scope

This report covers the period from 1 January 2021 to 31
December 2021, and looks at X5 Group’s business
model and strategy, market and consumer trends,
operating and financial performance, environmental,
social and governance (ESG) achievements and the
results of key business units.

Key business units include Pyaterochka proximity
stores, Perekrestok supermarkets, Chizhik hard
discounter stores and Karusel hypermarkets. Our key
digital businesses include express delivery, Vprok.ru
Perekrestok, 5Post, Mnogo Lososya, the food.ru media
platform and X5 Bank. X5 Group’s consolidated
financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS). IFRS
financial results in this report are presented according
to IFRS 16 as well as old pre-IFRS 16 standards.
Significant events after the reporting date are also
covered in this report.

Alternative performance measures

Alternative performance measures (APMs) that are not
defined or specified under IFRS requirements are also
used in this report. These APMs provide important
insights into the performance of our business.
A glossary with explanations of how each APM is
calculated, why we use it and how it can be reconciled
to a statutory measure, where relevant, is provided on
pages 93–97.

Assurance

The Supervisory Board, with the support of the Audit
and Risk Committee, is responsible for X5 Group’s
internal controls to provide reasonable assurance
against material misstatement and loss.

Materiality

The management of X5 Group has determined the
material issues to address in this report based on its
understanding of stakeholder interests, the economic
and competitive landscape in Russia, our business
model, risks and opportunities. Significant financial
issues and material non-financial topics are all
considered material issues.

The tools used to inform decisions about the material
issues facing the Company include internal analysis
and reporting mechanisms, market research, external
polling and research products, as well as feedback
received directly from key stakeholders. X5’s
sustainable development strategy, which was
developed in line with the United Nations Sustainable
Development Goals (UN SDGs) and was approved in
2019, was also used to define the Company’s material
issues.

Management believes that this report accurately
covers how X5 Group interacts with and creates value
for its stakeholders.

Financial and non-financial information

X5 Group’s financial, operating and ESG performance is
reviewed on a regular basis by the Company’s
management and Supervisory Board. Key areas of the
Company’s non-financial performance include
innovation, consumer safety, environmental impact,
investments in local communities, the provision of a
safe and enriching workplace for our employees,
business conduct and relations with suppliers.

Supervisory Board approval

The Supervisory Board of X5 Group has confirmed
that it believes this report provides a balanced
overview of all material issues concerning the
Company’s performance for the reporting period, as
well as an accurate reflection of its updated strategic
goals. The Board approved the 2021 Annual Report for
publication on 19 May 2022.

Overview

About this report

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Our approach,

values and

goals

We are confident that X5 Group can create value for a wide
range of stakeholders by developing as a profitable,
sustainable business. We believe that the key to success lies
in always putting the customer at the centre of our decision-
making, offering high-quality modern food retail services at
our offline stores and via out digital businesses.

We are the market leader by size, and we aim to use this to
create positive change by strengthening and adapting our
offline food retail formats, implementing innovative
technologies to power digital services as well as promoting
good practices like creating standards for sustainable
packaging, increasing the use of renewable energy and
implementing company-wide programmes to support local
communities.

Our sustainability strategy is aligned with the UN SDGs that
we have determined as being most relevant to our business:
Zero Hunger, Good Health and Well-being, Decent Work and
Economic Growth, as well as Responsible Consumption and
Production.

What does respect mean to us? It means
acceptance of different opinions and the ability to
establish dialogue and cooperation even when we
disagree. It means mutual support and gratitude
for assistance and effort.

This reflects a sincere desire to help, the ability to
put oneself in the place of another person and the
willingness to ask what would be better for them,
what they would like to receive. We look out for
one another, and that helps us do our job right the
first time.

When we speak openly and from the heart. We
talk about problems and challenges honestly.
We’re not afraid to make mistakes; instead, we
learn from them. We protect our reputation and
that of the Company.

When we see new opportunities and new growth
points in everything we do. When we derive
satisfaction from bold, ambitious goals.

WHAT DOES THIS
MEAN IN PRACTICE?

Values

Approach

Our values provide guidance in our
professional life and give us a road map for
our decision-making.

They help us to better understand one another,
achieve success and derive satisfaction from
working together. All of X5’s business divisions
share the same values.

We show respect when we are involved in
discussions, solving problems or providing feedback.

We take into account the interests, opinions and
feelings of our colleagues when making decisions
and when interacting with one another.

We help our colleagues, going beyond the scope
of our responsibilities if necessary.

We look for solutions that meet
the customer’s needs.

In any situation, we put ourselves in the position
of the customer.

We build long-term relationships with customers.

We abide by our agreements.

We give our co-workers information in full.

We have zero tolerance for corruption.

We set ambitious goals for ourselves that require a
substantial effort to achieve.

We take responsibility for our actions and do not shift
blame onto others.

We commend our co-workers for their achievements
and allow them to make mistakes.

1 Customers are not just patrons at our stores but also our co-workers.

Respect

Customer-oriented

approach

Honesty and

integrity

Desire for

achievement

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STRATEGIC REPORT

OVERVIEW

OUR APPROACH, MISSION AND GOALS

Sustainability goals

Planet

Communities

Health

Employees

X5 Group’s four key UN SDGs are Zero Hunger,
Good Health and Well-being, Decent Work and
Economic Growth, and Responsible
Consumption and Production. In addition, we
have determined secondary goals that our
business contributes to: Gender Equality,
Affordable and Clean Energy, Reduced
Inequalities, Sustainable Cities and Communities,
Climate Action, Life Below Water and Life on
Land.

With these key areas in mind,
the Supervisory Board has approved
a detailed set of targets for 2023
and the business processes needed
to achieve them, as well as a set of
ambitious “30×30” goals that we aim
to reach by 2030.

The larger boxes
indicate our primary
goals;
the smaller boxes —
our secondary goals

Reduction in GHG
emissions (Scope 1 + Scope
2)

Increase in the number
of families receiving Basket
of Kindness support every year

# 1

Employer in ranking of
Russian food retailers

Organisation of a healthy and
safe workplace for all employees

Promote responsible
programmes and
principles across the
supply chain among
suppliers

Expansion of healthy
lifestyle assortment

Share of renewable energy
used in X5 operations

Reduction in ratio of
waste generated to retail
sales

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2021 key

highlights

We successfully navigated a changing market
landscape in 2021 thanks to successful
implementation aimed at strengthening X5’s
existing business while preparing for the future
of retail. X5 Group continues to thrive even as
competition intensifies from digital platforms,
niche players and new formats like hard
discounters.

Thanks to our robust business processes, combined with
an entrepreneurial spirit that is part of our DNA, X5 Group
is adapting and competing in a changing market while
delivering on our financial, operating and sustainability targets.

One of the ways that we adapted during 2021 was with the
official launch of the Chizhik hard discounter, which was
announced in 2020 as a pilot project. The Chizhik CVP will
address the needs of rational shoppers in difficult
macroeconomic conditions while providing the promise
of reliable quality customers trust X5 Group to deliver. We have
also continued to grow our digital businesses and expand our
presence at every stage of the customer journey: during the
year we launched the Food.ru media platform, acquired Mnogo
Lososya dark kitchens and launched our own X5 Bank financial
services.

We remain focused on implementing our strategy while
adapting to a changing market in order to deliver value
for our shareholders and all of X5 Group’s stakeholders.

5.1

Like-for-like sales

y-o-y

1.67

Net deb EBITDA

pre-IFRS 16 as of
31 December 2021

26.8

MLN

Digital services MAUs

+78% y-o-y

27.0

MLN

Parcels delivered by 5Post

4× growth y-o-y

7.3

EBITDA margin

pre-IFRS 16

47.9

RUB

BLN

Digital business sales

+140% y-o-y

+11.5% y-o-y

2,205

RUB

BLN

Revenue

2021 financial and operating highlights

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2021 strategic highlights

Leadership in the food market

We confidently maintained our leadership position in
Russia’s food market, despite a wave of consolidation
by other large players and the growing role of niche
players and digital ecosystems. X5 Group’s overall
share of food retail revenue in 2021 was

(

2020), thanks to 11.5% year-on-year growth in our total
revenue and 140.0% year-on-year growth in digital
business net sales.

Growth in the top line was supported by both a 7.3%
expansion in selling space and a 5.1% increase in like-
for-like (LFL) sales. Our 62.6 million active users of
loyalty cards, which are a key element of our ability to
offer each customer a more personalised experience
tailored to their needs, accounted for 86% of net retail
sales in 2021, and we were also successful at
increasing sales densities to RUB 271.5 ths/sqm, a rise
of 3.5% year-on-year.

Our leadership is largely a function of our ability to
successfully serve our customers and create value for
them every time they visit an X5 Group store or use an
X5 Group online service, and this is reflected in
customer feedback: X5 brands are among Russia’s top
brands, with Pyaterochka in first place according to a
Romir and BCG survey conducted in 2021.

Our suppliers are another key stakeholder group that
contribute to our success, and for whom we seek to
create value as business partners. According to a
supplier survey by the market research agency
Advantage, Perekrestok was ranked the best partner
among the top 15 food retailers for the second year
running. Pyaterochka improved its position in this
survey vs 2020 and is now in second place.

12.7% 12.6%

Leadership in digitalisation

Digitalisation is one of the central elements of our
efforts to continuously strengthen our existing
business by helping us achieve greater efficiency and
become even better at putting our customers at the
centre of our decision-making. Digitalisation continues
to benefit our bottom line, and had a RUB 18 billion
positive effect on X5 Group’s EBITDA pre-IFRS 16
of RUB 161.0 billion in FY 2021.

As we build out our consumer-facing digital
businesses and the Food.ru media platform, we
continue to attract more existing and potential guests,
whose customer journey often starts online: X5
Group’s MAUs rose to 26.8 million in 2021, a 78%
increase year-on-year.

ESG leadership

ESG performance was another area where we excelled
in 2021. Throughout the year we sought to lead the
industry in this field, driving the adoption of sustainable
packaging standards, developing new ways to reduce
food waste and expanding programmes aimed at
supporting the communities where we operate. X5
Group has now established a Sustainable
Development and Innovation Committee at the
Supervisory Board level with responsibility for guiding
our ESG strategy and monitoring implementation. X5
was the first company in the Russian food retail sector
to publish its inaugural GRI-compliant, externally
verified sustainability report in 2021, continued to
enhance its ESG databook for investors and improved
key ESG ratings (MSCI ESG, S&P Global, CDP).

Maintaining profitability and commitment
to shareholders

As we continue to invest in our offline and digital
businesses, we are delivering value for shareholders:
X5 Group's adjusted ROIC pre-IFRS 16 for 2021 was
17.1%, we maintained an EBITDA margin pre-IFRS 16
of 7.3%.

17.1

X5 Group's adjusted ROIC
(pre-IFRS 16) for 2021

12.7

X5 Group’s share on the
Russian food retail market
in 2021

1 ROIC before adjustments (pre-IFRS 16) equals 15.6%.

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