Independent auditor’s report on the consolidated financial ... Group IFRS FY 2018 ENG.pdf · Interest paid (3,350,704) (3,605,671) Net cash from operating activities 11,603,674

Independent auditor’s report on the consolidated financial statements of

JSC Dixy Group and its subsidiaries for 2018

March 2019

Independent auditor’s report on the consolidated financial statements of

JSC Dixy Group and its subsidiaries

2

Contents

Page Independent auditor’s report 3

Appendices

Consolidated statement of financial position 6 Consolidated statement of comprehensive income 7 Consolidated statement of cash flows 8 Consolidated statement of changes in equity 9 Notes to the consolidated financial statements 10

3

Ernst & Young LLC Sadovnicheskaya Nab., 77, bld. 1 Moscow, 115035, Russia Tel: +7 (495) 705 9700 +7 (495) 755 9700 Fax: +7 (495) 755 9701 www.ey.com/ru

ООО «Эрнст энд Янг» Россия, 115035, Москва Садовническая наб., 77, стр. 1 Тел.: +7 (495) 705 9700 +7 (495) 755 9700 Факс: +7 (495) 755 9701 ОКПО: 59002827

A member firm of Ernst & Young Global Limited

Independent auditor’s report To the Shareholders those charged with governance and Board of Directors of JSC Dixy Group Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of JSC Dixy Group and its subsidiaries (hereinafter, the “Group”), which comprise the consolidated statement of financial position as at 31 December 2018, and the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2018 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of management and the Audit Committee for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

http://www.ey.com/russia

4

A member firm of Ernst & Young Global Limited

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The Audit Committee are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

JSC Dixy Group

Consolidated statement of comprehensive income

for the year ended 31 December 2018

(in thousands of Russian rubles, unless otherwise indicated)

The accompanying notes are an integral part of these consolidated financial statements. 7

Note 2018 2017

Revenue 18 298,655,726 282,811,309 Cost of sales 19 (221,500,159) (206,918,500) Gross profit 77,155,567 75,892,809

Selling, general and administrative expenses 20 (73,561,065) (74,586,619) Other operating income 21 1,175,877 665,521 Operating profit 4,770,379 1,971,711

Finance income 14,345 51,722 Finance costs (3,383,734) (3,688,188) Foreign exchange (loss)/gain, net (194,661) 15,653 Impairment of goodwill – (5,165,994) Profit/(loss) before income tax 1,206,329 (6,815,096)

Income tax expense/(credit) 22 (264,792) 800,787 Profit/(loss) for the year 941,537 (6,014,309)

Total comprehensive income/(loss) for the year 941,537 (6,014,309)

Attributable to: Equity holders of the parent 941,537 (6,014,309) Non-controlling interest – –

941,537 (6,014,309)

Earning/(loss) per ordinary share attributable to the equity holders of the parent, basic and diluted (in Russian rubles per share) 23 12.39 (52.08)

JSC Dixy Group

Consolidated statement of cash flows




Note 2018 2017 Cash flows from operating activities Profit/(loss) before income tax 1,206,329 (6,815,096) Adjustments for: Depreciation and impairment of property, plant and equipment

and investment property 5, 6 5,681,592 7,386,456 Amortization of intangible assets 8 405,424 1,629,805 Amortization of initial lease costs 20 60,244 71,497 Amortization of unfavorable lease agreements 20 (2,691) (21,452) Gain on disposals of property, plant and equipment and intangible

assets 20 (74,486) (47,559) Increase in provision for impairment of prepayments and capital

advances 20 17,878 48,770 Increase in provision for impairment of trade and other receivables 11, 20 1,975 49,676 Write down/(reversal) of inventory to net realizable value 10 20,028 (56,954) Finance costs 3,383,734 3,688,188 Finance income (14,345) (51,722) Impairment of goodwill – 5,165,994 Foreign exchange loss/(gain), net 194,661 (15,653) Operating cash flows before working capital changes 10,880,343 11,031,950

(Increase)/decrease in trade and other receivables (336,806) 2,624,924 (Increase)/decrease in inventories (978,542) 1,721,107 Decrease in operating lease deposits 146,858 114,416 Decrease in taxes recoverable and prepayments 207,961 1,268,185 Increase/(decrease) in trade and other payables other than

payables for property, plant and equipment 4,437,486 (4,157,067) Increase in tax liabilities other than income tax Note (1), (2) 930,119 753,678 Increase in advances from customers 62,951 51,993 Cash generated from operations 15,350,370 13,409,186

Income tax (paid)/recoverable Note (1), (2) (395,992) 341,293 Interest paid (3,350,704) (3,605,671) Net cash from operating activities 11,603,674 10,144,808 Cash flows from investing activities Purchase of property, plant and equipment (1,381,488) (2,544,124) Proceeds from sale of property, plant and equipment 219,324 179,886 Proceeds from sale of intangible assets 102 5,566 Initial lease costs paid (24,700) 17 Interest received 14,345 51,722 Purchases of intangible assets 8 (522,087) (294,993) Net cash used in investing activities (1,694,504) (2,601,926) Cash flows from financing activities Proceeds from loans and borrowings 23,214,657 49,068,607 Repayment of loans and borrowings (21,536,261) (47,391,437) Buy-out of shares (10,841,439) (8,419,052) Finance lease payments 15 (372,844) (326,021) Net cash used in financing activities (9,535,887) (7,067,903) Net increase in cash and cash equivalents 373,283 474,979

Cash and cash equivalents at the beginning of the year 12 4,579,305 4,104,326

Cash and cash equivalents at the end of the year 12 4,952,588 4,579,305

Notes to the consolidated statement of cash flows for the year ended 31 December 2018: (1) The amounts are shown net of a non-cash transaction related to offsetting income tax prepayments against VAT

and a trade levy in the amount of 542,909. Notes to the consolidated statement of cash flows for the year ended 31 December 2017: (2) The amounts are shown net of a non-cash transaction related to offsetting income tax prepayments against VAT

and a trade levy in the amount of 627,340.

JSC Dixy Group

Consolidated statement of changes in equity




Note

Attributable to equity holders of the Parent Share capital

Additional paid-in capital

Treasury shares

Retained earnings Total

At 31 December 2016 1,248 20,443,341 (790,531) 9,377,142 29,031,200 Total comprehensive loss for the year – – – (6,014,309) (6,014,309) Buy-out of shares 13 – – (8,546,509) – (8,546,509) At 31 December 2017 1,248 20,443,341 (9,337,040) 3,362,833 14,470,382

Total comprehensive income for the year – – – 941,537 941,537 Buy-out of shares 13 – – (10,841,439) – (10,841,439)

At 31 December 2018 1,248 20,443,341 (20,178,479) 4,304,370 4,570,480

JSC Dixy Group

Notes to the consolidated financial statements



10

1 Corporate information CJSC “Company Uniland Holding” was incorporated in January 2003 in Moscow, Russian Federation for the purpose of consolidation and reorganization of entities under common control. In March 2007, CJSC “Company Uniland Holding” was reorganized into an Open Joint Stock Company and renamed to Dixy Group (the “Company”). In 2016, according to requirements of Russian legislation, the Company changed its legal form to Public Joint Stock Company. In 2019, according to the requirements of Russian legislation, the Company changed its legal form to JSC Dixy Group on the basis of the decision of the general meeting of shareholders of the Company on the termination of the public status. The address of the Company’s registered office is Russia 123112, Moscow, 1 Krasnogvardeyskiy proezd, 15, floor 7, office 7.16, 7.17. The PJSC Dixy Group and its subsidiaries (the “Group”) operate in the retail sales business. The Group’s principal activities include trading of consumer goods through 2,707 stores within the Russian Federation. 24 May 2007, shares of PJSC Dixy Group were included into listing on the Russian Stock Exchange. On 28 June 2018, trades of the Company’s ordinary shares were suspended at PJSC Moscow Exchange. On 25 January 2019, a record was made in the Unified Register of Legal Entities on the change in the legal form from PJSC Dixy Group to JSC Dixy Group. As at 31 December 2018, Dixy Holding Limited (Cyprus), owned 51.29% (2017: 51.29%) of the ordinary shares in JSC Dixy Group. The Group is ultimately controlled by Mr. Igor Kesaev. These consolidated financial statements of the Group were signed and authorized for release by the General Director and the Chief Financial Officer of JSC Dixy Group on 1 March 2019. 2.1 Basis of preparation The Group’s companies maintain their accounting records and prepare their statutory financial statements in accordance with the regulations on accounting and reporting of the country in which the particular Group company is resident. The consolidated financial statements are based on the statutory accounting records with adjustments and reclassifications recorded for the purpose of fair presentation in accordance with International Financial Reporting Standards (“IFRS”). The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. In 2018 and 2017, the functional currency of all of the Group’s operating companies was determined to be the Russian ruble. The consolidated financial statements are presented in Russian rubles and all values are rounded to the nearest thousand except when otherwise indicated.

JSC Dixy Group

Notes to the consolidated financial statements (continued)

11

2.1 Basis of preparation (continued) Statement of compliance The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Basis of consolidation These consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2018 and for the year then ended. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee; and

• The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee;

• Rights arising from other contractual arrangements;

• The Group’s voting rights and potential voting rights. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. As at 31 December 2018 and 31 December 2017, the principal operating consolidated subsidiaries of JSC Dixy Group were: Ownership, % Company Country Nature of operations 2018 2017

JSC DIXY Yug Russia Retail 100% 100% LLC Victoria Baltiya Russia Retail 100% 100%

JSC Dixy Group


12

2.2 Changes in classification of comparative information The amount of other operating income from sales of recyclable materials and property, plant and equipment was reclassified to other operating income in the consolidated statement of comprehensive income in order to improve presentation. The amounts of selling, general and administrative expenses and other operating income for 2017 were adjusted accordingly.

2017 (before

adjustment) Adjustment 2017

(as adjusted)

Selling, general and administrative expenses (73,921,098) (665,521) (74,586,619) Other operating income – 665,521 665,521

2.3 Changes in accounting policies and disclosures The accounting policies adopted in the preparation of the consolidated financial statements for the year ended 31 December 2018 are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2017, except for the adoption of new standards and interpretations. Adoption of new standards IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers that represents a single guidance for revenue recognition and supersedes the following standards: IAS 18 Revenue, IAS 11 Construction Contracts, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC-31 Revenue – Barter Transactions Involving Advertising Services. The core principle of the standard is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

• Step 1: Identify the contract(s) with a customer;

• Step 2: Identify the performance obligations in the contract;

• Step 3: Determine the transaction price;

• Step 4: Allocate the transaction price to the performance obligations in the contract;

• Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. The new standard is effective for annual periods beginning on or after 1 January 2018 with early adoption permitted.

JSC Dixy Group


13

2.3 Changes in accounting policies and disclosures (continued) Adoption of new standards (continued) The standard is applied either: 1. Retrospectively to each previous reporting period presented in the financial statements. In

this case, the entity may elect to use any of the following practical expedients:

• The entity need not to restate completed contracts that begin and end within the same annual reporting period;

• For contracts with variable considerations, an entity can use the transaction price at the date of the contract completion rather than estimating the amount of variable considerations in comparative reporting periods;

• For period presented before the initial application date, an entity cannot disclose the amount of the transaction price allocated to the remaining performance obligations or an explanation of when that revenue will be recognized.

2. Retrospectively recognizing the cumulative effect of initial application. In this case,

the entity is required to provide additional disclosures in the reporting periods that include the date of initial application:

• The amount of a change in each line item for the current reporting period resulted from the adoption of IFRS 15 compared with previous accounting standards;

• Clarify significant changes. The Group operates in the retail sector. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods at a point of sale. Other revenue streams are simple and do not require complex judgments or calculations. Adoption of IFRS 15 had no significant impact on the consolidated financial statements of the Group. Customers loyalty programme Until 2018, the Group did not use a loyalty program. In 2018, the “Plyusuy” loyalty program that introduces bonus cards was implemented at pilot stores. The loyalty programme points give rise to a separate performance obligation because they provide a material right to the customer and a portion of the transaction price needs to be allocated to the loyalty points awarded to customers. The Group assessed the effect of adjustments related to the loyalty program as at 31 December 2018 as insignificant; therefore, the effect of the standard was not disclosed. Principal versus agent consideration Kaliningrad Region is a special economic zone. Imported goods are exempt from customs duties and VAT. For mutual benefit, LLC Victoria Baltiya concluded commission agreements with some of the suppliers. Pursuant to the requirements of the Federal Law On the Fundamental Principles of State Regulation of Trade in the Russian Federation, LLC Victoria Baltiya has the right to commission trade in non-food products only.

JSC Dixy Group


14

2.3 Changes in accounting policies and disclosures (continued) Adoption of new standards (continued) The Group is reasonably convinced that sales of commissioned goods represent the same business process as sales of own goods. The Group believes that it retains control of goods until they are transferred to customers. The Group is not deemed an agent due to the following:

• The Group is responsible for the execution of the agreement.

• The Group is liable to the principal for any loss, shortage or damage to the principal’s property held by the Group.

• The Group determines the selling price of the product at its discretion.

• Fees received by the Group do not represent commission fees, nor is the interest agreed upon. The Group is allowed to set the selling price at its discretion. The margin received by the Group depends on the selling price.

Before and after the adoption of IFRS 15, the Group concluded, based on the existence of credit risk and the nature of reimbursement under the agreement, that it is exposed to significant risks and benefits associated with the sale of goods to customers, and recognized such agreements as if it were a principal. The Group has determined that it retains control of goods until they are transferred to a customer. Accordingly, the Group does not act as an agent under the agreements, and the adoption of the standard has not changed the role of a principal. IFRS 9 Financial Instruments The Group adopted IFRS 9 Financial Instruments which replaced IAS 39 Financial Instruments: Recognition and Measurement from 1 January 2018. IFRS 9 brings together all three phases of the financial instruments accounting project: classification and measurement, impairment, and hedge accounting. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. Requirements for hedge accounting are generally applied prospectively, with some limited exceptions. The Group made an assessment that adoption of IFRS 9 had no significant impact on to the Group’s consolidated statement of financial position as of 1 January 2018. The Group has assessed the impact of IFRS 9 to the Group’s consolidated financial statements as follows: (а) Classification and measurement IFRS 9 introduces a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. IFRS 9 includes three principal classification categories for financial assets: measured at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. It eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available-for-sale financial assets. The Group analyzed contractual cash flows that relate to these instruments and concluded that they meet the criteria for amortized cost measurement under IFRS 9. Therefore, no reclassification for these instruments is required.

JSC Dixy Group


15

2.3 Changes in accounting policies and disclosures (continued) Adoption of new standards (continued) Currently the Group has only trade and other receivables. Trade and other receivables mainly consists of receivables from suppliers on volume bonuses and marketing services, receivables from wholesale customers. (b) Impairment IFRS 9 introduces a new impairment model that requires the recognition of allowances for impairment based on expected credit losses rather than incurred credit losses under IAS 39. Expected credit losses are used to measure credit risk related to assets. This will require judgments about how changes in economic factors affect expected credit losses determined on a probability weighted basis. The new impairment model is applicable to the Group’s financial assets, including, but not limited to, trade and other receivables, cash and cash equivalents. Allowance is measured on either of the following bases:

• Based on 12-month expected losses that are expected credit losses resulting from default events on a financial instrument, which may occur within the 12 months after the reporting date; or

• Based on lifetime expected credit losses resulting from all possible default events over the expected life of a financial instrument.

The Group has chosen to apply the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade and other receivables. The Group’s cash and cash equivalents have low credit risk based on the external credit ratings of banks and financial institutions. The Group assessed the change in the provision for losses related to trade receivables and other financial assets measured at amortized cost as not significant, no adjustment of retained earnings is made. (c) Hedge accounting The Group does not have any hedge relationships that are currently designated as effective hedge relationships and therefore applying the hedging requirements of IFRS 9 had no impact on Group’s financial statements. IFRIC Interpretation 22 Foreign Currency Transactions and Advance Considerations The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transactions for each payment or receipt of advance consideration. This Interpretation does not have any impact on the Group’s consolidated financial statements.

JSC Dixy Group


16

2.3 Changes in accounting policies and disclosures (continued) Adoption of new standards (continued) Amendments to IAS 40 – Transfers of Investment Property The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. These amendments do not have any impact on the Group’s consolidated financial statements. Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions

The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The Group’s has no share-based payment transactions. Therefore, these amendments do not have any impact on the Group’s consolidated financial statements. Amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts The amendments address concerns arising from implementing the new financial instruments standard, IFRS 9, before implementing IFRS 17 Insurance Contracts, which replaces IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying IFRS 9 and an overlay approach. These amendments are not relevant to the Group. Amendments to IAS 28 Investments in Associates and Joint Ventures – Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice The amendments clarify that an entity that is a venture capital organisation, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. If an entity that is not itself an investment entity, has an interest in an associate or joint venture that is an investment entity, then it may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which: (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent. These amendments do not have any impact on the Group’s consolidated financial statements.

JSC Dixy Group


17

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards when they become effective. IFRS 16 Leases In January 2016, the IASB issued a new standard IFRS 16 Leases. IFRS 16 introduces a single model for the identification of lease agreements and their accounting treatment by both lessors and lessees. Following the adoption, the new standard supersedes IAS 17 Leases and all respective clarifications. IFRS 16 distinguishes between lease agreements and service agreements on the basis of whether there is an identified asset controlled by the customer. Operating and finance leases are no longer separated by the lessee. Instead, a model is used whereby the right-of-use asset and the respective liability should be accounted for (reported on the balance sheet) by the lessee for all lease agreements, subject to applicable practical expedients. In addition, the classification of cash flows will also be changed, since payments under operating lease agreements are classified as cash flows from operating activities in accordance with IAS 17, while IFRS 16 states that lease payments should be split between repayment of principal and interest, which should be recorded as cash flows from financing and operating activities, respectively. On top of that, disclosure requirements in IFRS 16 have been significantly expanded. The Group intends to apply a modified retrospective approach, according to which the cumulative effect of the initial application of the standard be recognized at the date of initial application, i.e. 1 January 2019:

• The Group recognizes the cumulative effect of the initial application of the standard as an adjustment to retained earnings as at the date of the initial application.

• For leases previously designated as operating under IAS 17, the Group recognizes a lease liability at the date of the initial application. The Group measures such lease liability at the present value of the remaining lease payments discounted using the interest rate on the Group’s borrowings at the date of initial application.

• For leases previously designated as operating under IAS 17, the Group recognizes a right-of-use asset at the date of initial application in the amount of the lease liability adjusted for advances under such leases recorded in the statement of financial position immediately before the date of initial application.

• The Group applies IAS 36 Impairment of Assets with respect to the right-of-use asset as at the date of the initial application.

As at the day of the initial application of IFRS 16 Leases, the Group reassessed sublease agreements that had been classified as operating leases under IAS 17 and are effective as at the date of initial application in order to determine whether to classify such subleases as operating or financial leases.

JSC Dixy Group


18

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) IFRS 16 Leases (continued) On initial application of IFRS 16 Leases, the Group also applied the following practical expedients for leases previously classified as operating under IAS 17.

• The Group applies the same discount rate for leases having reasonably similar characteristics (leases with a similar remaining lease term, for a similar type of underlying assets and a similar economic environment) estimated as ranging from 8.79% to 9.12%.

• The Group does not recognize the lease liability and the right-of-use asset for leases of vehicles, equipment and other assets (except for leases of stores, warehouses, office space and parking sites) that expire within 12 months from the date of initial application.

According to the Group’s preliminary estimates, a one-time increase in non-current assets and financial liabilities will amount to 79,000,000-87,000,000 as at 1 January 2019. The adoption of IFRS 16 Leases will result in a higher EBITDA of the Group, as well as in higher depreciation expenses. IFRS 17 Insurance Contracts In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. This standard is not applicable to the Group. IFRIC Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately;

• The assumptions an entity makes about the examination of tax treatments by taxation authorities;

• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;

• How an entity considers changes in facts and circumstances.

JSC Dixy Group


19

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. The Group will apply the interpretation from its effective date. Since the Group operates in a complex multinational tax environment, applying the Interpretation may affect its consolidated financial statements. In addition, the Group may need to establish processes and procedures to obtain information that is necessary to apply the Interpretation on a timely basis. Amendments to IFRS 9 – Prepayment Features with Negative Compensation Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments should be applied retrospectively and are effective from 1 January 2019, with earlier application permitted. These amendments have no impact on the consolidated financial statements of the Group. Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective.

JSC Dixy Group


20

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) Amendments to IAS 19 – Plan Amendment, Curtailment or Settlement The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to:

• Determine current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event;

• Determine net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognised in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognised in other comprehensive income. The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 January 2019, with early application permitted. These amendments will apply only to any future plan amendments, curtailments, or settlements of the Group. Amendments to IAS 28 – Long-term interests in associates and joint ventures The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests. The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures. The amendments should be applied retrospectively and are effective from 1 January 2019, with early application permitted. Since the Group does not have such long-term interests in its associate and joint venture, the amendments will not have an impact on its consolidated financial statements.

JSC Dixy Group


21

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) Annual Improvements 2015-2017 Cycle (issued in December 2017) These improvements include: IFRS 3 Business Combinations The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These amendments will apply on future business combinations of the Group. IFRS 11 Joint Arrangements A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These amendments are currently not applicable to the Group but may apply to future transactions. IAS 12 Income Taxes The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application is permitted. When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. Since the Group’s current practice is in line with these amendments, the Group does not expect any effect on its consolidated financial statements. IAS 23 Borrowing Costs The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. Since the Group’s current practice is in line with these amendments, the Group does not expect any effect on its consolidated financial statements.

JSC Dixy Group


22

2.4 Significant accounting judgments, estimates and assumptions The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. Judgments Provision for expected credit losses of trade receivables and other receivables The Group uses a provision matrix to calculate ECLs for trade receivables and other receivables. The provision rates are based on days past due for groupings of various receivables that have similar loss patterns. The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The information about the ECLs on the Group’s trade receivables and contract assets is disclosed in Note 11. Property lease classification – Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

JSC Dixy Group


23

2.4 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions (continued) Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses are recognized in profit or loss in those expense categories consistent with the function of the impaired asset. For assets excluding goodwill an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation gain. The following assets have specific characteristics for impairment testing. Goodwill Goodwill is tested for impairment annually as at 30 September and when circumstances indicate that the carrying amount may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

JSC Dixy Group


24

2.3 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) Useful lives of property, plant and equipment and intangible assets The Group assesses the remaining useful lives of items of property, plant and equipment and intangible assets at least at each financial year end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Allowance for trade and other receivables The Group maintains an allowance for trade and other receivables to account for estimated losses resulting from the inability of counterparties to make required payments. When evaluating the adequacy of an allowance for trade and other receivables, management bases its estimates on the ageing of trade and other receivable balances and historical write-off experience, customer credit worthiness and changes in customer payment terms. If the financial condition of customers were to deteriorate, actual write-offs might be higher than expected. As at 31 December 2018, allowances for trade and other receivables have been created in the amount of 472,193 (2017: 470,218). Volume-related allowances, promotional and marketing allowances The Group regularly enters into agreements with suppliers that entitle the Group to discounts on the purchases subject to meeting certain purchase volumes and marketing activities specified in these agreements. The Group creates allowances based on assessment of fulfillment of purchase volumes and services actually rendered by the Group that relate to promotional and marketing activities. Litigations The Group exercises considerable judgment in measuring and recognizing provisions and the exposure to contingent liabilities related to pending litigations or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the final settlement. Because of the inherent uncertainties in this evaluation process, actual losses may be different from the originally estimated provision. These estimates are subject to change as new information becomes available, primarily with the support of internal specialists, if available, or with the support of outside consultants, such as actuaries or legal counsel. Revisions to the estimates may significantly affect future operating results. Current taxes Russian tax, currency and customs legislation is subject to varying interpretations and changes occur frequently. Group’s management interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities (refer to Note 24).

JSC Dixy Group


25

2.4 Significant accounting judgments, estimates and assumptions (continued) Estimates and assumptions (continued) Deferred tax assets Group’s management judgment is required for the calculation of current and deferred income taxes. Deferred tax assets are recognized to the extent that their utilization is probable. The utilization of deferred tax assets will depend on whether it is possible to generate sufficient taxable income in respective tax type and jurisdiction. Various factors are used to assess the probability of the future utilization of deferred tax assets, including past operating results, the operational plan, expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position, results of operations and cash flows may be negatively affected. In the event that an assessment of future utilization indicates that the carrying amount of deferred tax assets must be reduced, this reduction is recognized in profit or loss (refer to Note 22). 2.5 Summary of significant accounting policies Current versus non-current classification The Group presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is:

• Expected to be realized or intended to be sold or consumed in the normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realized within twelve months after the reporting period; or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current. A liability is current when:

• It is expected to be settled in normal operating cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the reporting period; or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

JSC Dixy Group


26

2.5 Summary of significant accounting policies (continued) Fair value measurement Fair values of financial instruments measured at amortized cost are disclosed in Note 25. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability; or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 – quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2 – valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3 – valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Property, plant and equipment The Group’s property, plant and equipment, except for assets acquired prior to 1 January 2003, are stated at historical cost less accumulated depreciation and any impairment in value. Property, plant and equipment acquired before 1 January 2003 is stated at cost, restated to the equivalent purchasing power of the Russian ruble at 31 December 2002, less accumulated depreciation and any impairment in value.

JSC Dixy Group


27

2.5 Summary of significant accounting policies (continued) Property, plant and equipment (continued) At each reporting date management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, management of the Group companies estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount, and the difference is recognized as an expense (impairment loss) in profit or loss. An impairment loss recognized for an asset in previous years is reversed if there is any indication that impairment loss may no longer exist or may have decreased. After initial recognition property, plant and equipment is measured at purchase or construction cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment loss. Such cost includes the cost of replacing part of the property, plant and equipment when that cost is incurred, if the recognition criteria is met. Depreciation is calculated using the straight-line basis over the useful life of the asset as follows:

Useful lives

in years

Buildings 30 Renovation of stores 5 Equipment 3-8

Land is not depreciated. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Costs of minor repairs and maintenance are expensed when incurred. Cost of replacing major parts or components of property, plant and equipment items are capitalized and the replaced part is derecognized. Renovations and permanent improvements to leased premises are capitalized and depreciated over the expected lease term but not exceeding their useful lives. Management expects that all short term lease agreements can be prolonged. This group of assets is depreciated from the month of store opening. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognized. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalized during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed. Investment properties Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at historical cost less provisions for depreciation and impairment.

JSC Dixy Group


28

2.5 Summary of significant accounting policies (continued) Investment properties (continued) Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition. Transfers are made to (or from) investment property only when there is a change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment for method of depreciation and useful lives. Operating leases Where the Group is a lessee in a lease, which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments (including initial lease costs) are charged to profit or loss on a straight-line basis over the period of the lease. When assets are leased out under an operating lease, the lease payments receivable are recognized as rental income on a straight-line basis over the lease term. Finance lease liabilities Where the Group is a lessee in a lease, which transferred substantially all the risks and rewards incidental to ownership to the Group, the assets leased are capitalized in property, plant and equipment at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between settlement of outstanding liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest cost is charged to the profit or loss over the lease term so as to produce constant periodic rate of interest on remaining balance of the liability. The assets acquired under finance leases are depreciated over the shorter of their useful life or lease term. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the acquirer’s share of the net identifiable assets, liabilities and contingent liabilities of the acquired subsidiary or associate at the date of exchange. Goodwill on acquisitions of subsidiaries is presented separately in the consolidated statement of financial position. Goodwill on acquisitions of associates is included in the investment in associates. Goodwill is carried at cost less accumulated impairment losses, if any. The Group tests goodwill for impairment at least annually. These calculations require the use of estimates as further detailed in Note 7. Goodwill is allocated to the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the business combination. Such units or groups of units represent the lowest level at which the Group monitors goodwill and are not larger than a segment. Gains or losses on disposal of an operation within a cash generating unit to which goodwill has been allocated include the carrying amount of goodwill associated with the operation disposed of, generally measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit which is retained.

JSC Dixy Group


29

2.5 Summary of significant accounting policies (continued) Other intangible assets All Group’s other intangible assets have definite useful lives and primarily include capitalized computer software and favorable operating lease agreements. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets are amortized using the straight-line method over their useful lives:

Useful lives in

years

Software licenses 5-10 Favorable lease agreements – over the lease term 5-10

Amortization periods and methods for intangible assets with finite useful lives are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the profit or loss in the expense category consistent with the function of the intangible asset. If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less costs to sell. Capital advances Capital advances include amounts prepaid for property, plant and equipment and are measured at cost. Payments for purchases of property, plant and equipment are presented net of VAT in the consolidated statement of cash flows. Initial lease costs Initial lease costs include lump sum amounts paid to the lessors under operating leases of stores and warehouses either for the right to conclude the lease or to finance construction and repair works on the leased assets. Initial lease costs are capitalized and charged to profit or loss on a straight-line basis over the period of lease. Income taxes Income taxes have been provided for in the consolidated financial statements in accordance with Russian legislation enacted by the reporting date. The income tax charge comprises current tax and deferred tax and is recognized in profit or loss unless it relates to transactions that are recognized, in the same or a different period, in other comprehensive income or directly in equity. Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable profits or losses for the current and prior periods. A liability is also recorded for any uncertain tax positions for which tax obligation is considered to be probable. This liability is released to profit or loss after three years. A provision for taxes, other than on income, is set up and recorded within selling, general and administrative expenses.

JSC Dixy Group


30

2.5 Summary of significant accounting policies (continued) Income taxes (continued) Deferred income tax is provided using the balance sheet method for tax losses carried forward and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for the purposes of the consolidated financial statements. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill. Deferred tax balances are measured at tax rates enacted or substantively enacted at the reporting date, which are expected to apply to the period when the temporary differences will reverse or the tax losses carried forward will be utilized. Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and tax losses carried forward are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilized. Deferred income tax is provided on post acquisition retained earnings of subsidiaries, except where the Group controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or otherwise in the foreseeable future. Inventories Inventories are recorded at the lower of cost and net realizable value. Cost of inventory is determined on the first in first out basis. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. Cash transferred from stores to bank but not yet credited to bank accounts as of the reporting date is recorded as cash in transit. Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when the rights to receive cash flows from the asset have expired. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the profit or loss.

JSC Dixy Group


31

2.5 Summary of significant accounting policies (continued) Share capital Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown in equity as a deduction from the proceeds. Additional paid-in capital Additional paid-in capital represents accumulated contributions made by shareholders and share premium for new shares issue transactions. Additional contributions of shareholders other than proceeds from issue of the Company’s equity instruments are recorded at the fair value of the consideration received. Treasury shares Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in additional paid-in capital. Dividends Dividends on ordinary shares are recognized as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date. Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the consolidated financial statements are authorized for issue. Value added tax The Russian tax legislation permits settlement of value added tax (“VAT”) on a net basis. VAT is payable upon invoicing and delivery of goods, performing work or rendering services, as well as upon collection of prepayments from customers. VAT on purchases, even if they have not been settled at the reporting date, is deducted from the amount of VAT payable upon collection of documents required for tax deduction. Where provision has been made for impairment of receivables, impairment loss is recorded for the gross amount of the debtor, including VAT. Borrowings Borrowings are recognized initially at fair value (which is the present value of the proceeds received determined using the prevailing market rate of interest for a similar instrument, if significantly different from the transaction price), net of transaction costs incurred. In subsequent periods borrowings are stated at amortized cost using the effective interest method; any difference between fair value of the proceeds (net of transaction costs) and the redemption amount is recognized as interest expense over the contractual term of the borrowings. The borrowing costs incurred on qualifying assets are capitalized and amortized over useful life of qualifying asset. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

JSC Dixy Group


32

2.5 Summary of significant accounting policies (continued) Trade and other payables Trade and other payables are recognized when the counterparty performed its obligations under the contract and are carried at amortized cost using the effective interest rate method. Provisions for liabilities and charges Provisions for liabilities and charges are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost. Foreign currency translation The consolidated financial statements are presented in Russian rubles, which is the Group’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the consolidated financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recognized in the functional currency at the exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All resulting differences are taken to the profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. As at 31 December 2018, the principal rates of exchange used for translating foreign currency balances were US$ 1 = RR 69.4706 (2017: US$ 1 = RR 57.6002) and EUR 1 = RR 79.4605 (2017: EUR 1 = RR RR 68.8668). Employee benefits Employee benefits for the services provided during a reporting period are recognized as an expense in that reporting period. All employee benefit plans represent defined contribution plans. State pension plan The operating entities of the Group contribute to the state pension, medical and social insurance funds on behalf of all its current employees. Any related expenses are recognized in profit or loss as incurred.

JSC Dixy Group


33

2.5 Summary of significant accounting policies (continued) Employee benefits (continued) Bonuses For each year, the Group’s management establishes bonus programs for middle and senior management. Bonuses are generally dependent on the achievement of certain financial performance criteria of individual business units and the Group as a whole and are calculated and accrued in the period in which recognition criteria are met. Other expenses The Group incurs employee costs related to the provision of benefits such as health insurance costs. These amounts principally represent an implicit cost of employment and, accordingly, have been charged to selling, general and administrative expenses. Revenue recognition The Group recognizes revenue from sales of goods to retail customers at the point of sale in its stores and to wholesale customers at the point of sale in its distribution and trade centers. Retail sales are paid in cash and using bank cards. Revenue is recognized at the fair value of the consideration received or receivable, net of VAT. Rental income is recognized on a straight-line basis over the lease term. Marketing income is recognized in the period when the services are rendered. Marketing services are provided mainly to those counterparties that do not supply goods. 3 Segment information For management purposes, the Group is organized into business units based on format of its stores and has three reportable business segments as follows:

► Dixy – representing retail sales through a chain of neighborhood stores, which are present in Central, North-West and Ural regions.

► Megamart – representing retail sales through chains of compact hypermarkets and economy supermarkets (Minimart), which are present in Ural region.

► Victoria – representing retail sales through a chain of compact hypermarkets and neighborhood stores in Kaliningrad and Moscow region.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Transfer prices between segments are set on an arm’s length basis in a manner similar to transactions with third parties. During the years ended 31 December 2018 and 2017 there were no material transfers between reportable operating segments.

JSC Dixy Group


34

3 Segment information (continued) Segment information for the main reportable business segments of the Group for the years ended 31 December 2018 and 2017 is set out below: 2018 Dixy Megamart Victoria Group Total segment revenue 240,132,399 18,947,969 39,575,358 298,655,726 Segment results (1,571,510) 1,811,191 966,648 1,206,329 Depreciation and amortization

of property, plant and equipment, investment property and other intangible assets 4,735,795 285,495 1,065,726 6,087,016

Other non-cash expenses Amortization of initial lease

costs and unfavorable lease rights 30 – 57,523 57,553

2017 Dixy Megamart Victoria Group Total segment revenue 225,245,766 19,392,399 38,173,144 282,811,309 Segment results (9,736,707) 1,986,421 935,190 (6,815,096) Depreciation and amortization

of property, plant and equipment, investment property and other intangible assets 6,283,977 312,698 2,419,586 9,016,261

Other non-cash expenses Amortization of initial lease

costs and unfavorable lease rights 1,283 – 48,762 50,045

4 Balances and transactions with related parties Transactions between related parties may not be executed on the same terms, conditions and amounts as transactions between unrelated parties. The management considers that the Group has appropriate procedures in place to identify, account and properly disclose transactions with related parties. The nature of the related party relationships for those related parties with whom the Group entered into significant transactions or had significant balances outstanding as at 31 December 2018 and 31 December 2017 are detailed below:

Entities under common control of

the ultimate controlling party 2018 2017

Capital advances 717 59,236 Operating lease deposits – 40,000 Trade receivables 3,656 73,852 Other receivables 1,491 2,201 Trade and other payables 1,787,962 955,742

JSC Dixy Group


35

4 Balances and transactions with related parties (continued) Outstanding balances at the year-end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2018 and 31 December 2017 the Group has not recorded any impairment of receivables from related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. The income and expense items with related parties for the years 2018 and 2017 were as follows:

Entities under common control of

the ultimate controlling party 2018 2017

Revenue 206,807 1,037,710 Profit from disposal of property, plant and equipment 102,655 95,575 Transportation expenses (878,060) (199,958) Maintenance of software (26,301) (27,720) Other expenses (126,594) (26,527) Compensation to key management personnel Short-term employee benefits During 2018, compensation paid to fourteen (2017: nineteen) directors for their services in full or part time executive management positions is made up of a contractual salary, a performance bonus depending on operating results and social contributions. Salaries and bonuses represent short-term employee benefits as defined in IAS 19 Employee Benefits. Total compensation to key management personnel included in selling, general and administrative expenses in the consolidated statement of comprehensive income as at 31 December 2018 and 31 December 2017 amounted to 173,131 and 286,699 respectively. Purchase of goods During 2018 and 2017, the Group purchased goods for resale in the normal course of business for 11,123,800 (2017: 9,152,846) from entities under common control of its ultimate controlling party. Purchase of property, plant and equipment During 2018, the Group purchased trucks in the normal course of business for 166,953 (2017: 13,379), from entities under common control of the ultimate controlling party.

JSC Dixy Group


36

5 Property, plant and equipment Movements in the carrying amount of property, plant and equipment in 2018 were as follows:

Land Buildings Renovation of

stores Equipment

Assets under construction

and uninstalled equipment Total

Cost At 31 December 2017 1,325,314 26,732,816 14,136,321 28,009,584 102,186 70,306,221 Additions 4,934 46,222 – – 1,012,333 1,063,489 Transfers – 54,893 420,162 542,959 (1,018,014) – Transfers (from)/to

investment property – (2,883,848) (5,781) – – (2,889,629) Disposals (966) (177,905) (268,375) (835,997) (3,822) (1,287,065) At 31 December 2018 1,329,282 23,772,178 14,282,327 27,716,546 92,683 67,193,016

Accumulated depreciation and impairment

At 31 December 2017 – 5,182,930 12,099,344 19,905,082 – 37,187,356 Disposals – (78,658) (261,559) (801,938) – (1,142,155) Depreciation charge – 805,003 1,002,411 3,534,087 – 5,341,501 Impairment – – 137,675 – – 137,675 Transfers (from)/to

investment property – (104,828) (2,349) – – (107,177) At 31 December 2018 – 5,804,447 12,975,522 22,637,231 – 41,417,200 Net book value At 31 December 2018 1,329,282 17,967,731 1,306,805 5,079,315 92,683 25,775,816

At 31 December 2017 1,325,314 21,549,886 2,036,977 8,104,502 102,186 33,118,865 Movements in the carrying amount of property, plant and equipment in 2017 were as follows:

Land Buildings Renovation of

stores Equipment

Assets under construction

and uninstalled equipment Total

Cost At 31 December 2016 1,323,879 26,979,770 14,610,269 27,842,404 156,553 70,912,875 Additions 1,471 – – – 1,841,154 1,842,625 Transfers – 394,994 193,916 1,306,611 (1,895,521) – Transfers (from)/to

investment property – (606,269) 27,821 – – (578,448) Disposals (36) (35,679) (695,685) (1,139,431) – (1,870,831) At 31 December 2017 1,325,314 26,732,816 14,136,321 28,009,584 102,186 70,306,221 Accumulated

depreciation and impairment

At 31 December 2016 – 4,272,414 10,633,614 16,778,454 – 31,684,482 Disposals – (661) (605,733) (1,159,424) – (1,765,818) Depreciation charge – 923,725 1,520,865 4,286,052 – 6,730,642 Impairment – – 549,369 – – 549,369 Transfers (from)/to

investment property – (12,548) 1,229 – – (11,319) At 31 December 2017 – 5,182,930 12,099,344 19,905,082 – 37,187,356 Net book value At 31 December 2017 1,325,314 21,549,886 2,036,977 8,104,502 102,186 33,118,865

At 31 December 2016 1,323,879 22,707,356 3,976,655 11,063,950 156,553 39,228,393

JSC Dixy Group


37

5 Property, plant and equipment (continued) Losses on impairment of renovation of stores are calculated based on assumptions used in goodwill impairment testing models separately for each store. For stores previously considered loss-making reversal is recognized in impairment with an opposite sign. The carrying amount of equipment held under finance lease contracts at 31 December 2018 was 580,127 (2017: 894,444). Additions in 2018 and 2017 amounted to nil. The leased assets are pledged as security for the related finance lease liabilities (refer to Note 15). There were no borrowing costs capitalized during the year ended 31 December 2018 and 2017. 6 Investment property Carrying amount of transfers from property, plant and equipment to investment property was 2,782,452 in 2018 (2017: 567,129). In early 2018 the Group leased its own warehouse. Depreciation charge for 2018 amounted to 202,416 (2017: 106,445). Gains and losses related to investment property 2018 2017

Income from lease of investment property 1,228,403 897,730 Direct operating expenses (including repairs and maintenance) (224,974) (125,759) Direct operating expenses (including repairs and maintenance)

that do not generate rental income (11,512) (10,089)

Operating income from investment property 991,917 761,882 The Group has no restrictions on the sale of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements. As at 31 December 2018, the fair values of the investment properties amounted to 7,524,229 (2017: 4,060,087).

JSC Dixy Group


38

7 Goodwill Management of the Group performs goodwill monitoring for internal management purposes by the groups of cash-generating units, which are equivalent to the operating segments Dixy and Victoria. There were no movements in the carrying amount of goodwill in 2018: Dixy Victoria Total Cost At 31 December 2017 13,688,146 4,023,505 17,711,651 At 31 December 2018 13,688,146 4,023,505 17,711,651 Accumulated impairment losses At 31 December 2017 5,212,119 – 5,212,119 At 31 December 2018 5,212,119 – 5,212,119 Net book value At 31 December 2018 8,476,027 4,023,505 12,499,532

At 31 December 2017 8,476,027 4,023,505 12,499,532 The recoverable amount of CGUs was determined based on value-in-use calculations. These calculations use cash flow projections based on five-year financial budgets approved by management. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rates do not exceed the long-term average growth rate for the industry in which the CGUs operate. The Group performed the annual testing at 30 September 2018, and an additional testing at 31 December 2018. No goodwill impairment was identified during the testing. The key assumptions used for value-in-use calculations for each CGU to which the recoverable amount is most sensitive were as follows: 2018 Dixy Victoria

Average annual rate of growth within 5 years 4.6% 3.8% EBITDA margin (A) 3.0% 5.4% Growth rate beyond five years 4.0% 4.0% Working capital / revenue in five years -2.9% -2.9% After-tax discount rate 13.9% 13.9% CAPEX/ revenue (B) 1.0% 0.7%

(A) EBITDA margin applied to the cash flow projections increases from 3.0% for 2019 to 3.4% for 2023 for Dixy CGU and from 5.4% for 2019 to 5.8% for 2023 for Victoria CGU.

(B) CAPEX / revenue margin applied to the cash flow projections increases from 1.0% for 2019 to 1.8% for 2023 for Dixy CGU and from 0.7% for 2019 to 1.8% for Victoria CGU.

JSC Dixy Group


39

7 Goodwill (continued) 2017 Dixy Victoria

Average annual rate of growth within 5 years 4.9% 4.9% EBITDA margin (C) 3.3% 6.5% Growth rate beyond five years 4.0% 4.0% Working capital / revenue in five years -3.8% -3.8% After-tax discount rate 14.1% 14.1% CAPEX / revenue (D) 0.4% 2.5%

(C) EBITDA margin applied to the cash flow projections increase from 3.3% for 2018 to 3.8% for 2022 for Dixy CGU and from 6.5% for 2018 to 7.0% for 2022 for Victoria CGU.

(D) CAPEX/ revenue is presented as actual for 2017 for comparison. Average annual rate of growth within 5 years While determining the projected movements in revenue, management referred to market expectations of analysts as at the date of analysis for each CGU. Forecast revenue of Dixy CGU was revised taking into account the closure of 12 stores in 2018. Management does not expect significant changes in number of stores for Dixy CGU in 2019. Forecast revenue of Victoria CGU was revised taking into account the disposal of 4 stores in December 2018. Management forecasts no significant changes in the number of stores and assumes several new strategic measures, such as differentiation from competitors, improvement of store management efficiency, and focus on customers’ needs in their forecast. EBITDA margin forecast The margin forecast is based on the actual performance with the assortment matrix and the expenses efficiency analysis. The efficiency of expenses remains a priority for the Group, including the improvement of commercial terms under contracts, increase in turnover and control over balances and losses. Growth rate beyond five years The rate is based on the long-term consumer price index forecast that has remained unchanged since 2017. Forecast working capital Projected target value of Working capital / revenue ratio has been changed from -3.8% to -2,9% to reflect movements in average market indicators of peer companies, and is now a more realistic assumption. Discount rate The discount rate in 2018 projections was lower than that in 2017 projections due to a decrease in the cost of debt after the revision of the CBR key rate in 2018.

JSC Dixy Group


40

7 Goodwill (continued) Forecast CAPEX The forecast CAPEX to revenue ratio is based on realistic capital expenditures varying from period to period; previously, the Group assumed that capital expenditures replaced depreciated property, plant and equipment. Stores are redecorated where necessary; the costs of redecoration are not included in the budget of capital expenditures. Sensitivity to changes in assumptions The effect of the key assumptions on the recoverable amount is analyzed below. Average annual growth in revenue A 0.5% decrease in the revenue growth rate in 2020-23 will not result in any impairment of Dixy CGU or Victoria CGU. EBITDA margin forecast A decrease in terminal margin by 1% will not result in any impairment of Dixy CGU or Victoria CGU. Growth rate beyond five years A decrease in the growth rate beyond five years from 4% to 3% will not result in any additional impairment of Dixy CGU or Victoria CGU. Sensitivity to changes in assumptions Working capital forecast If revenue is constant, a forecast increase in the working capital to revenue ratio in five years from -2.9% to -1.9% will not result in any impairment of Dixy CGU or Victoria CGU. Discount rate An increase in the after-tax discount rate from 13.9% to 14.9% will not result in any impairment of Dixy CGU or Victoria CGU. CAPEX / Revenue A forecast increase in the CAPEX to revenue ratio by 0.5% for each year and beyond will not lead to any impairment of Dixy CGU or Victoria CGU.

JSC Dixy Group


41

8 Other intangible assets Movements in the carrying amount of intangible assets in 2018 were as follows:

Trademarks Licenses

Favorable operating lease

agreements Total

Cost At 31 December 2017 1,326,508 2,802,964 1,275,031 5,404,503 Additions – 522,087 – 522,087 Disposals – (231,867) (21,929) (253,796) At 31 December 2018 1,326,508 3,093,184 1,253,102 5,672,794 Amortization and impairment At 31 December 2017 1,326,508 1,216,112 453,940 2,996,560 Amortization charge – 377,029 28,395 405,424 Disposals – (231,837) (21,929) (253,766) At 31 December 2018 1,326,508 1,361,304 460,407 3,148,218 Carrying amount At 31 December 2018 – 1,731,880 792,696 2,524,576

At 31 December 2017 – 1,586,852 821,091 2,407,943 Movements in the carrying amount of intangible assets in 2017 were as follows:

Trademarks Licenses

Favorable operating lease

agreements Total

Cost At 31 December 2016 1,326,508 2,561,872 1,593,708 5,482,088 Additions – 294,993 – 294,993 Disposals – (53,901) (318,677) (372,578) At 31 December 2017 1,326,508 2,802,964 1,275,031 5,404,503 Amortization and impairment At 31 December 2016 142,517 833,008 730,928 1,706,453 Amortization charge – 410,165 35,649 445,814 Disposals – (27,061) (312,637) (339,698) Write-off 1,183,991 – – 1,183,991 At 31 December 2017 1,326,508 1,216,112 453,940 2,996,560 Carrying amount At 31 December 2017 – 1,586,852 821,091 2,407,943

At 31 December 2016 1,183,991 1,728,864 862,780 3,775,635 Trademarks represent “Kvartal” trademark acquired through the acquisition of OJSC GK Victoria in 2011 and used by the Group for convenience stores in Kaliningrad region. Useful life of “Kvartal” trademark was assessed as indefinite because the Group concluded after analysis of its current market position in Kaliningrad region that it is impossible to determine the period this trademark would benefit the Group. For impairment testing “Kvartal” trademark was allocated to the CGU Kvartal-Kaliningrad, which is a part of the operating and reportable segment Victoria.

JSC Dixy Group


42

8 Other intangible assets (continued) Based on the impairment analysis, management did not identify any indications that CGU to which Kvartal-Kaliningrad trademark relates might be impaired. However due to changes introduced in the design of Kvartal stores which resembles that of Victoria stores, management decided on impairment of “Kvartal” trademark. This trademark is not included in the near-term development strategy as a separate format, but remains part of the Group’s portfolio. Losses on impairment of favorable lease agreements are calculated based on assumptions used in goodwill impairment testing models separately for each store. Due to closing of loss-making stores in 2017, impairment is not stated individually, as these assets are fully amortized. 9 Taxes recoverable and prepayments 2018 2017

Prepayments (net of allowance for impairment of 274,057 (2017: 261,603)) 622,454 752,735

Prepaid expenses 143,962 142,072 Taxes prepaid 49,766 137,005 VAT recoverable 7,698 17,907

Total taxes recoverable and prepayments 823,880 1,049,719 10 Inventories 2018 2017 Goods for resale (net of write-down to net realizable value of

564,261 (2017: 544,233)) 19,053,042 18,110,648 Raw and other materials (at cost) 62,957 46,837

Total inventories at the lower of cost and net realizable value 19,115,999 18,157,485 Inventory write-down due to losses in 2018 comprised 8,496,807 (2017: 7,146,671). No inventory is pledged as at 31 December 2018 and 2017. 11 Trade and other receivables 2018 2017 Trade receivables (net of allowance for impairment of trade

receivables of 268,728 (2017: 300,608) 1,551,938 1,425,947 Other receivables (net of allowance for impairment of other

receivables of 203,465 (2017: 169,610) 656,649 447,809

Total trade and other receivables 2,208,587 1,873,756 Trade and other receivables as at 31 December 2018 and 2017 are denominated mainly in Russian rubles. Impairment testing is performed at each reporting date in accordance with the matrix of credit losses designed using the Group’s historical data.

JSC Dixy Group


43

11 Trade and other receivables (continued) Trade receivables As at 31 December 2018 and 2017, trade receivables of 268,728 (2017: 300,608) were impaired. Movements in the trade receivables provision for expected credit losses were as follows: At 1 January 2017 315,584 Reversed (52,632) Accrued 37,656 At 31 December 2017 300,608

Reversed (46,760) Accrued 14,880

At 31 December 2018 268,728 At 31 December, the ageing analysis of trade receivables was as follows:

Carrying amount

Of which neither impaired nor past due on

the reporting date

Of which neither impaired as at the reporting date

nor past due in the following periods Between 31 and 90 days

Between 91 and 180 days


More than 360 days

2018 1,551,938 1,312,174 159,154 29,200 24,350 27,060 2017 1,425,947 1,061,132 237,862 27,896 21,756 77,301 Trade receivables as at 31 December 2018 and 2017 had different payment terms ranging from 5 to 60 days of payment period. Because of different payment terms, the Group considered it inappropriate to calculate loss ratios for such categories as bonuses from suppliers, wholesale, returns, sale of assets and claims, both in aggregate and on an individual basis. Bonuses from suppliers receivable are subject to offset against trade payables after the reconciliation and provided there is a sufficient amount of trade payables to be offset. Wholesale receivables are insignificant and are generally settled within 30 days. When revising the terms of the offsets or the amount of wholesale receivables, the assessment will be performed in accordance with the matrix of credit losses applicable to the respective category. Other receivables As at 31 December 2018 and 2017 other receivables of 203,465 (2017: 169,610) were impaired based on the loss ratios for the respective category, for which an allowance for expected credit losses was created. Movements in the other receivables provision for expected credit losses were as follows: At 1 January 2017 104,958 Reversed (6,113) Accrued 70,765 At 31 December 2017 169,610

Reversed (21,064) Accrued 54,919

At 31 December 2018 203,465

JSC Dixy Group


44

11 Trade and other receivables (continued) Other receivables (continued) At 31 December, the ageing analysis of other receivables was as follows:

Carrying amount


the reporting date





More than 360 days

2018 656,649 528,251 98,156 4,067 13,792 12,383 2017 447,809 313,058 51,772 12,799 17,342 52,838 The Group used the following loss ratios:


the reporting date





More than 360 days

Loss ratios 2.27%-5.71% 2.56%-16.55% 100% 100% 100% Loss ratios are based on the aging analysis data for different groups of receivables with a similar loss structure and similar probability of default over a certain time horizon. The calculation shows the probability-weighted result and takes into account information about past events, current circumstances and forecast economic conditions that is available at the reporting date. 12 Cash and cash equivalents 2018 2017

Cash on hand – Russian rubles 544,962 609,263 Russian ruble denominated bank balances due on demand 1,483,639 1,264,863 US dollars denominated bank balances due on demand 1,099 501 Cash on deposit accounts are mostly nominated in Russian rubles 35,001 32,000 Cash in transit – Russian rubles 2,887,887 2,672,678

Total cash and cash equivalents 4,952,588 4,579,305 13 Share capital and equity Share and additional paid-in capital As at 31 December 2018, the Group had 124,750,000 (2017: 124,750,000) authorized ordinary shares of which 60,428,647 (2017: 28,536,856) ordinary shares were held as treasury stock. All shares are fully paid. Ordinary shares have par value of 0.01 Russian ruble per share. The shares rank equally. Each share carries one vote. During 2018, the Group bought out 31,891,791 shares for 10,841,439 (2017: 25,967,277 shares for 8,546,509).

JSC Dixy Group


45

13 Share capital and equity (continued) Dividends No dividends were paid by JSC Dixy Group in 2018 and 2017. No dividends were declared or paid subsequent to 31 December 2018 up to the date of authorization of these consolidated financial statements for issue. In accordance with Russian legislation, dividends may only be declared from accumulated undistributed and unreserved earnings as shown in Russian statutory financial statements. As at 31 December 2018 and 2017, the Company had 25,113,643 and 27,528,077 of accumulated earnings, respectively. 14 Borrowings The Group’s borrowings mature as follows: 2018 2017 Borrowings due: - within 1 year 23,280,057 16,250,688 - between 1 and 5 years 11,996,504 17,314,447

Total borrowings 35,276,561 33,565,135 Terms and conditions in respect of borrowings are detailed below:

Source of financing

Maturity date

Maturity date

Currency

Interest rate

Interest rate

Carrying amount of collateral

Carrying amount of collateral

2018 2017 2018 2017 2018 2017 2018 2017

Long-term bank loans

2020 2019-2020 RR 8.55%- 8.95%

8.70%- 10.20% – – 11,996,504 17,314,447

Short-term bank loans

2019 2018 RR 7.94%- 8.70%

8.55%- 10.45% – – 22,945,335 16,250,688

Bank overdrafts 2019 – RR 8.00% – – – 334,722 –

35,276,561 33,565,135

The Group does not apply hedge accounting and has not entered into any hedging arrangements in respect of its interest rate exposures. In accordance with terms and conditions of certain borrowing agreements, the Group has to maintain certain ratios – maximum level of Net Financial Debt / EBITDA, minimum level of EBITDA / Net interest expense. As at 31 December 2018 and 2017, the Group was in compliance with externally imposed capital requirements. As at 31 December 2018 and 2017, the carrying amount of borrowings approximated their fair value.

JSC Dixy Group


46

15 Finance lease Minimum lease payments under finance leases and their present values were as follows:

Due in 1 year Due between 2 and 5 years Total

Minimum lease payments at 31 December 2018 396,383 150 396,533 Less future finance charges (31,363) (150) (31,513) Present value of minimum lease payments at

31 December 2018 365,020 – 365,020 Minimum lease payments at 31 December 2017 462,147 401,108 863,255 Less future finance charges (85,149) (27,404) (112,553) Present value of minimum lease payments at

31 December 2017 376,998 373,704 750,702 The Group entered into finance leases for various items of equipment (refer to Note 5). The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets. Finance lease payables are stated in Russian rubles. 16 Trade and other payables 2018 2017

Trade payables 24,510,188 22,316,758 Payables to factoring banks 4,186,051 1,754,808 Payables to employees 1,275,416 1,218,403 Other liabilities and accruals 4,303,720 4,823,814

Total trade and other payables 34,275,375 30,113,783 As at 31 December 2018 and 2017, trade and other payables are denominated in Russian rubles, except for trade and other payables in the amount of 436,806 (2017: 345,413), denominated in euro and trade and other payables in the amount of 612,349 (2017: 717,153), denominated in US dollars. Trade and other payables are normally settled within 5-55 days. 17 Tax liabilities, other than income taxes 2018 2017

VAT payable 901,853 863,122 Payroll taxes payable 627,085 258,208 Other taxes 128,122 148,520

Total taxes payable other than income taxes 1,657,060 1,269,850 VAT payable and payroll taxes payable are settled normally within 15-90 days after the reporting date.

JSC Dixy Group


47

18 Revenue 2018 2017

Sales of goods 295,226,310 280,311,861 Sublease income 2,295,183 2,005,982 Marketing income 1,134,233 493,466

Total revenue 298,655,726 282,811,309 19 Cost of sales Note 2018 2017

Sales of goods 210,756,487 197,641,684 Write down of inventory due to losses 10 8,496,807 7,146,671 Transportation costs 2,246,865 2,130,145

Total cost of sales 221,500,159 206,918,500 20 Selling, general and administrative expenses Note 2018 2017

Staff costs 30,468,412 29,559,156 Operating lease expenses 22,455,836 22,087,242 Depreciation and impairment of property, plant and

equipment, investment property and amortization and impairment of intangible assets 5, 6, 8 6,087,016 9,016,261

Utilities 4,435,836 4,146,200 Repair and maintenance costs 3,413,513 3,043,855 Bank charges 1,826,757 1,557,179 Advertising costs 1,412,437 1,532,873 Taxes other than income tax 797,277 958,446 Supplies and materials 995,139 919,685 Information, consulting and other services 674,940 660,855 Security services 271,447 294,841 Transportation and handling costs 209,784 194,987 Insurance 180,434 176,024 Telecommunication expenses 111,935 147,119 Amortization of initial lease costs 60,244 71,497 Increase in provision for impairment of trade and other

receivables 11 1,975 49,676 Increase in provision for impairment of prepayments and

capital advances 9 17,877 48,770 Other operating expenses 140,206 121,953

Total selling, general and administrative expenses 73,561,065 74,586,619 Included in staff costs are statutory social security and pension contributions of 6,297,741 (2017: 6,161,209). Operating lease expenses relate to cancellable and non-cancellable operating leases with terms from 1 to 15 years. Amortization of unfavorable operating lease agreements is included in other operating expenses in the amount of 2,691 (2017: 21,452).

JSC Dixy Group


48

21 Other operating income 2018 2017

Net profit from realization of recyclable materials 825,391 617,962 Gain from assignment of lease rights 276,000 – Gain on disposals of property, plant and equipment and intangible

assets 74,486 47,559

Total other operating income 1,175,877 665,521 22 Income taxes Income tax expense/(benefit) comprises the following: 2018 2017

Current tax expense 647,218 373,072 Adjustment in respect of income tax of previous years (212,104) (457,966) Deferred income tax charge – origination and reversal of temporary

differences (170,322) (715,893)

Total income tax expense/(benefit) for the year 264,792 (800,787) In 2013 due to changes in current tax practice in respect of tax deductibility related to certain types of shortages and application of tax credits the Group resubmitted amended tax returns to tax authorities which resulted in adjustment to the previous years’ current income tax. In 2017 and 2018, the part of claimed tax credits (according to submitted amended tax returns) has been confirmed by tax authorities, which resulted in adjustments of current tax recognized in the consolidated financial statements. Profit/(loss) before taxation for financial reporting purposes is reconciled to tax expense/(benefit) as follows: 2018 2017

Profit/(loss) before income tax 1,206,329 (6,815,096) Theoretical tax expense/(benefit) at statutory rate of 20% 241,266 (1,363,019) Tax effect of items which are not deductible or assessable for

taxation purposes Non-deductible shrinkage of inventories 88,458 110,083 Adjustment of income tax of previous years, including: (212,104) (457,966) - Reimbursement of income tax on shrinkage of inventories – (340,059) - Adjustments of income tax in respect of previous years (212,104) (117,907) Trademarks – (488,114) Impairment of goodwill – 1,033,199 Non-deductible expenses 147,172 365,030

Income tax expense/(benefit) for the year 264,792 (800,787)

JSC Dixy Group


49

22 Income taxes (continued) Deferred tax balances are computed by applying the statutory tax rate enacted at the reporting date to the differences between the tax base of assets and liabilities and the amounts reported in the consolidated financial statements and are comprised of the following as at 31 December: 2018 2017

Deferred tax assets 1,168,371 1,369,065 Accounts payable and receivable 942,398 953,810 Tax losses carried forward 81,004 269,405 Inventories 144,969 145,850 Deferred tax liabilities 83,869 (287,147) Property, plant and equipment 357,650 (26,874) Other intangible assets (273,781) (260,273)

Net deferred tax asset 1,252,240 1,081,918 Reflected in the consolidated statement of financial position as follows: 2018 2017

Total deferred tax asset 1,640,271 1,568,179 Total deferred tax liabilities (388,031) (486,261)

Net deferred tax asset 1,252,240 1,081,918 Applicable tax rate is set at 20%; it is based on the income tax rates at the Group companies’ jurisdictions. In 2018 and 2017 there were no significant income or loss generated in the companies outside the Russian Federation. Deferred tax assets and liabilities are calculated for all temporary differences under the balance sheet method using the principal tax rate of 20%. As at 31 December 2018 and 2017, deferred tax assets and liabilities were attributable to the following positions:

31 December

2017 Recognized in profit or loss

31 December 2018

Tax effect of deductible/(taxable) temporary differences and tax losses carried forward

Accounts payable and receivable 953,810 (11,412) 942,398 Tax losses carried forward 269,405 (188,401) 81,004 Property, plant and equipment (26,874) 384,524 357,650 Other intangible assets (260,273) (13,508) (273,781) Inventories 145,850 (881) 144,969

Net deferred tax asset 1,081,918 170,322 1,252,240

JSC Dixy Group


50

22 Income taxes (continued)

31 December

2016 Recognized in profit or loss

31 December 2017

Tax effect of deductible/(taxable) temporary differences and tax losses carried forward

Accounts payable and receivable 1,106,952 (153,142) 953,810 Tax losses carried forward 57,610 211,795 269,405 Property, plant and equipment (335,859) 308,985 (26,874) Other intangible assets (762,128) 501,855 (260,273) Inventories 299,450 (153,600) 145,850

Net deferred tax asset 366,025 715,893 1,081,918 Temporary differences in property, plant and equipment represent timing differences due to different useful lives and fair value adjustments on business combinations. Temporary differences in inventories represent timing differences of recognition of cost of goods sold. Temporary differences in accounts payable and receivable represent timing differences of recognition of certain expenses and vendors rebates. Temporary differences in other intangible assets represent different recognition approach of trademarks, licenses and favorable operating lease agreements. The Group does not expect to sell its investments in subsidiaries in foreseeable future. Starting from 2010, all intragroup dividend payments are tax-free in Russia and portion of retained earnings in jurisdictions other than Russian Federation is immaterial. Therefore, the Group did not recognize deferred tax liability in respect of taxable temporary differences related to undistributed investments in subsidiaries amounted to 220,495 (2017: 710,792). The Group did not recognize a deferred tax asset in respect of deductible temporary differences related to investments in subsidiaries of 944,499 (2017: 1,260,558). 23 Earnings or losses per share Basic earnings/losses per share are calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding treasury shares. The Company has no dilutive potential ordinary shares; therefore, the diluted earnings/losses per share equal its basic earnings/losses per share. Earnings or losses per share are calculated as follows: Note 2018 2017

Earning/(loss) for the year attributable to ordinary shareholders 941,537 (6,014,309)

Weighted average number of ordinary shares in issue 13 76,016,206 115,489,438 Earning/(loss) per ordinary share attributable to the

equity holders of the parent, basic and diluted (expressed in Russian ruble per share) 12.39 (52.08)

JSC Dixy Group


51

24 Contingencies, commitments and operating risks Operating environment Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the government. The Russian economy has been negatively impacted by sanctions imposed on Russia by a number of countries. The Ruble interest rates remained high. The combination of the above resulted in reduced access to capital, a higher cost of capital and uncertainty regarding economic growth, which could negatively affect the Group’s future financial position, results of operations and business prospects. Management believes it is taking appropriate measures to support the sustainability of the Group’s business in the current circumstances. Litigation There are no current legal proceedings or other claims outstanding, which could have a material effect on the result of operations or financial position of the Group and which have not been accrued or disclosed in these consolidated financial statements. Capital expenditure commitments At 31 December 2018, the Group had contractual capital expenditure commitments in respect of property, plant and equipment amounting to 50,813 (2017: 963,725). Operating lease commitments The Group leases premises for operation of its stores. Some of these leases are non-cancelable. These leases have remaining terms of between 1 and 15 years. Most leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. Future minimum rental payments under non-cancellable operating leases as at 31 December were as follows: 2018 2017 Committed to pay - within 1 year 5,147,642 4,215,956 - between 1 and 5 years 3,882,937 2,534,990 – more than 5 years 1,055,735 3,296,006

Total non-cancellable operating lease liabilities 10,086,314 10,046,952 Tax legislation The Group’s main subsidiaries, from which the Group’s income is derived, operate in Russia. Russian tax, currency and customs legislation is subject to varying interpretations and changes which can occur frequently. Management interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities.

JSC Dixy Group


52

24 Contingencies, commitments and operating risks (continued) Tax legislation (continued) The year 2018 saw continued implementation of mechanisms aimed at countering the use of low tax jurisdictions and aggressive tax planning structures for tax evasion, as well as the general setting of certain features of the Russian tax system. In particular, these changes included further development of the concepts of beneficial ownership and tax residency of legal entities (defined by place of actual business activity), as well as the elaboration of the approach to taxation of controlled foreign companies in Russia. Apart from that, the VAT general rate will increase to 20% in 2019, and foreign electronic services providers will be required to register with the Russian tax authorities for VAT purposes. The Russian tax authorities continue to actively cooperate with their foreign counterparts as part of the cross-border tax information exchange so that in international terms corporate activities would be more transparent and require detailed consideration to support the economic objective of the international structure as part of tax control procedures. These changes and recent trends in the applying and interpreting certain provisions of Russian tax law indicate that the tax authorities may take a tougher stance in interpreting legislation and reviewing tax returns. The tax authorities may thus challenge transactions and accounting methods that they have never challenged before. This may result in significant amounts of tax charges, penalties and fines being imposed. It is not possible to determine the amounts of constructive claims or evaluate the probability of their negative outcome. Fiscal periods remain open to review for a period of three calendar years immediately preceding the year of review. Under certain circumstances, reviews may cover longer tax periods. Russian transfer pricing legislation allows the tax authorities imposing additional tax liabilities and related fines if transfer prices/profitability in controlled transactions differ from the market level of prices/profitability. A list of controlled transactions, mainly, includes transactions between related parties. Currently, the transfer pricing control and documentation requirements cover cross-border related party transactions (without any threshold), certain cross-border transactions between non-related parties with commodities and low-tax jurisdictions, as well as domestic related party transactions exceeding RUB 1 billion or even lower. Certain exemptions may apply for domestic transactions where, for example, both taxpayers are located in the same region of Russia, do not have losses, do not have representative offices in other regions, etc. These exemptions may not be relevant for all domestic transactions, though. In addition, the corresponding adjustments for domestic operations are eligible. Starting from 2019 the threshold from which transfer pricing control will apply to cross-border controlled transactions will be set at RUB 60 million. Also domestic transactions in excess of the RUB 1 billion threshold will be controlled only if parties to a controlled transaction apply different profits tax rates, or at least one party to a controlled transaction applies special tax regime, or applies profits tax exemption, or is a party of the reginal investment agreement and in the other specific instances.

JSC Dixy Group


53

24 Contingencies, commitments and operating risks (continued) Tax legislation (continued) The new legislation concerning preparation of the multinational enterprise group (MNE) documentation applies to financial years starting on or after 1 January 2017, with a voluntary country-by-country report (CbCR) filing for financial years starting in 2016. The new law requires preparation of the three-tier transfer pricing documentation (master file, local file, CbCR) and a notification concerning participation in the MNE. These rules apply to the MNE with a consolidated revenue RUB50 billion in a preceding financial year if an ultimate parent entity (UPE) is in Russia, or with the applicable CbCR threshold as established by the home country of the UPE if outside Russia. In 2018 the Group determined its tax liabilities arising from controlled transactions using actual transaction prices. The Group is not subject to the MNE documentation law requirements. The federal executive body in charge of tax and levies oversight and control can review prices/margins in controlled transactions; where it disagrees with prices applied by the Group in those transactions, it can impose additional tax liabilities unless the Group is able to confirm the arm’s length pricing of those transactions by submitting transfer pricing documentation (statutory documentation) that meets the legislation requirements. According to management, as at 31 December 2018, they properly construed the relevant legislation, and the probability that the Group will retain its position with regard to tax, currency and customs law is assessed as high. As at 31 December 2018 and 2017, the Group accrued no provisions for tax positions. 25 Financial risk management The Group’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has trade and other receivables, and cash and cash equivalents that arrive directly from its operations. The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below. Credit risk Financial assets, which potentially subject Group entities to credit risk, consist principally of trade and other receivables and cash and cash equivalents. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that credit sales of goods and services are made to counterparties with an appropriate credit history. The carrying amount of accounts receivable, net of allowance for impairment of receivables, represents the maximum amount exposed to credit risk. Although collection of receivables could be influenced by economic factors, management believes that there is no significant risk of loss to the Group beyond the provisions already recorded. To manage credit risk, the Group maintains its available cash in major Russian banks with high credit rating. Management periodically reviews the creditworthiness of the banks in which it deposits cash.

JSC Dixy Group


54

25 Financial risk management (continued) Offsetting of financial assets and liabilities The Group offsets its financial assets and financial liabilities when all the conditions for offset are met. The effect of offsetting is the following: Gross amount Net amount

Trade and other

receivables Trade and other

payables Amount of

offset Trade and other

receivables Trade and other

payables

2018 3,247,473 (35,314,261) 1,038,886 2,208,587 (34,275,375) 2017 2,832,567 (31,072,594) 958,811 1,873,756 (30,113,783) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise for the Group two types of risk – foreign exchange risk and interest rates risk. Financial instruments affected by market risk include loans, borrowings, cash and cash equivalents and trade and other payables. The sensitivity analyses in the following sections relate to the positions as at 31 December 2018 and 2017. The sensitivity analysis has been prepared on the basis that the amount of the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant at 31 December 2018 and 31 December 2017. Foreign exchange risk Foreign currency denominated liabilities (refer to Note 16) give rise to foreign exchange risk exposure. As at 31 December 2018, the Group does not have significant exposure to foreign exchange risk currently as since 2010 the Group borrows the funds in the rubles and is considering proceeding with such strategy further. The following table demonstrates the sensitivity to a reasonably possible change in the US dollar and euro exchange rates, with all other variables held constant, of the Group’s profit before tax (due to changes in fair values of monetary assets and liabilities).

Increase/ (decrease) in

exchange rate Effect on profit

before tax 2018 US$ (14.00)% 85,145 EUR (14.00)% 60,600 US$ 14.00% (85,145) EUR 14.00% (60,600) 2017 US$ (11.00)% 78,241 EUR (12.50)% 42,959 US$ 11.00% (78,241) EUR 12.50% (42,959)

JSC Dixy Group


55

25 Financial risk management (continued) Interest rate risk As at 31 December 2018 and 2017, the Group did not have loans with floating interest rate. Liquidity risk As at 31 December 2018, the Group’s current liabilities exceeded the Group’s current assets by 32,035,617 (2017: 21,253,539). Typically, the reason for this excess is that the Group uses 1.5-2 times excess of trade and other accounts payable turnover over the inventory turnover for financing of its operating activities. The table below summarizes the maturity profile of the Group’s financial liabilities at 31 December 2018 and 2017 based on contractual undiscounted payments:

At 31 December 2018 On demand or

less than 1 year 1 to 5 years Total

Borrowings 25,464,537 12,572,304 38,036,841 Finance lease liability 396,383 150 396,533 Trade and other payables 34,275,375 31,724 34,307,099

60,136,295 12,604,178 72,740,473

At 31 December 2017 On demand or

less than 1 year 1 to 5 years Total

Borrowings 18,942,292 19,472,192 38,414,484 Finance lease liability 462,147 401,108 863,255 Trade and other payables 30,113,783 – 30,113,783

49,518,222 19,873,300 69,391,522 Capital management The primary objective of the Group’s capital management is to ensure that it continues efforts to reduce cost of capital and maintains healthy capital ratios in order to support its business and maximize shareholder value. he Group’s policy is to keep the Net Financial Debt / EBITDA ratio less than 3.5. The Group includes within net financial debt interest bearing loans and borrowings and finance lease liabilities, less cash and cash equivalents, excluding discontinued operations. EBITDA is calculated as operating profit excluding depreciation of property, plant and equipment, amortization of intangible assets, amortization of initial lease costs, amortization of unfavorable operating lease agreements, movements in provisions for impairment of non-current assets and impairment of goodwill. As at 31 December 2018, the Group’s Net Financial Debt / EBITDA ratio amounted to 2.83 (2017: 2.7). The Group is in compliance with externally imposed capital requirements.

JSC Dixy Group


56

25 Financial risk management (continued) Fair value of financial instruments Set out below are changes in liabilities arising from financing activities:

1 January

2018 Cash flow

Finance costs

Offset of amounts

recovered from insurance

company 31 December

2018 Short-term and long-term

loans 33,565,135 (1,584,637) 3,296,063 – 35,276,561 Short-term and long-term

finance leases 750,702 (460,515) 87,671 (12,838) 365,020 Total liabilities arising from

financing activities 34,315,837 (2,045,153) 3,383,734 (12,838) 35,641,581 The fair values of financial assets and liabilities approximate their carrying amounts. 26 Events after the reporting date There were no significant events after the reporting date.

Documents

Independent auditor’s report on the consolidated financial ... Group IFRS FY 2018 ENG.pdf · Interest paid (3,350,704) (3,605,671) Net cash from operating activities 11,603,674