X5 Retail Group N.V.
Consolidated Statement
of Financial Position
at 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
Note |
31 December 2022 |
31 December 2021 |
|
---|---|---|---|
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 10 | 315,612 | 332,144 |
Right-of-use assets | 11 | 508,543 | 502,325 |
Investment properties | 12 | 4,573 | 4,461 |
Goodwill | 13 | 112,929 | 105,028 |
Other intangible assets | 14 | 38,327 | 39,006 |
Investments in associates and joint ventures | − | 50 | |
Other non-current assets | 4,164 | 4,209 | |
Deferred tax assets | 30 | 27,482 | 23,047 |
1,011,630 | 1,010,270 | ||
Current assets | |||
Inventories | 15 | 208,661 | 166,840 |
Indemnification asset | 7,35 | 6,391 | 435 |
Trade, other accounts receivable and prepayments | 17 | 21,382 | 20,190 |
Current income tax receivable | 1,622 | 4,057 | |
VAT and other taxes receivable | 18 | 9,007 | 8,802 |
Short-term financial investments | 9 | 50,067 | 50,092 |
Cash and cash equivalents | 9 | 43,255 | 26,062 |
340,385 | 276,478 | ||
Total assets | 1,352,015 | 1,286,748 | |
EQUITY AND LIABILITIES | |||
Equity attributable to equity holders of the parent | |||
Share capital | 22 | 2,458 | 2,458 |
Share premium | 46,127 | 46,127 | |
Retained earnings | 84,125 | 38,926 | |
Other capital reserves | 432 | − | |
Share-based payment reserve | 29 | − | 118 |
133,142 | 87,629 | ||
Total equity | 133,142 | 87,629 | |
Non-current liabilities | |||
Long-term borrowings | 21 | 147,386 | 206,571 |
Long-term lease liabilities | 11 | 519,317 | 507,099 |
Deferred tax liabilities | 30 | 6,954 | 928 |
Other non-current liabilities | 7, 28 | 6,206 | 1,670 |
679,863 | 716,268 | ||
Current liabilities | |||
Trade accounts payable | 238,641 | 212,949 | |
Short-term borrowings | 21 | 87,146 | 87,767 |
Interest accrued | 1,143 | 1,792 | |
Short-term lease liabilities | 11 | 71,843 | 70,264 |
Short-term contract liabilities | 20 | 3,767 | 2,392 |
Current income tax payable | 6,020 | 3,014 | |
Provisions and other liabilities | 19 | 130,450 | 104,673 |
539,010 | 482,851 | ||
Total liabilities | 1,218,873 | 1,199,119 | |
Total equity and liabilities | 1,352,015 | 1,286,748 |
X5 Retail Group N.V.
Company Statement
of Profit or Loss
for the year ended
31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
Note | 2022 | 2021 | |
---|---|---|---|
Revenue | 24 | 2,605,232 | 2,204,819 |
Cost of sales | 25 | (1,970,036) | (1,643,502) |
Gross profit | 635,196 | 561,317 | |
Selling, general and administrative expenses | 25 | (519,757) | (467,468) |
Net impairment losses on financial assets | 17 | (346) | (154) |
Lease/sublease and other income | 26 | 23,025 | 23,877 |
Operating profit | 138,118 | 117,572 | |
Finance costs | 27 | (73,727) | (57,815) |
Finance income | 27 | 5,310 | 5860 |
Net foreign exchange (loss)/gain | (2,032) | 399 | |
Profit before tax | 67,669 | 60,742 | |
Income tax expense | 30 | (22,481) | (18,004) |
Profit for the year | 45,188 | 42,738 | |
Profit for the year attributable to: | |||
Equity holders of the parent | 45,199 | 42,738 | |
Non-controlling interests | (11) | − | |
Basic earnings per share for profit attributable to the equity holders of the parent (expressed in RUB per share) |
23 | 665.78 | 629.55 |
Diluted earnings per share for profit attributable to the equity holders of the parent (expressed in RUB per share) |
23 | 665.78 | 629.54 |
X5 Retail Group N.V.
Consolidated Statement
of Comprehensive Income
for the year ended
31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
2022 | 2021 | ||
---|---|---|---|
Profit for the year | 45,188 | 42,738 | |
Total comprehensive income for the year, net of tax | 45,188 | 42,738 | |
Total comprehensive income for the year attributable to: | |||
Equity holders of the parent | 45,199 | 42,738 | |
Non-controlling interests | (11) | − |
X5 Retail Group N.V.
Consolidated Statement
of Cash Flows
for the year ended
31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
Note | 2022 | 2021 | |
---|---|---|---|
Profit before tax | 67,669 | 60,742 | |
Adjustments for: | |||
Depreciation, amortisation and impairment of property, plant and equipment, right-of-use assets, investment properties, other intangible assets and goodwill | 25 | 164,731 | 150,278 |
Gain on disposal of property plant and equipment, investment properties and intangible assets and gain on derecognition of right-of-use assets | (2,276) | (3,345) | |
Finance costs, net | 27 | 68,417 | 57,229 |
Net impairment losses on financial assets | 17 | 346 | 154 |
Impairment of prepayments | 17 | 412 | 221 |
Share-based compensation expense | 29 | 13 | 89 |
Net foreign exchange loss/(gain) | 2,032 | (399) | |
Other non-cash items | (576) | 559 | |
Net cash from operating activities before changes in working capital | 300,768 | 265,528 | |
Increase in trade, other accounts receivable and prepayments and VAT and other taxes receivable | (1,388) | (1,198) | |
Increase in inventories | (37,060) | (22,447) | |
Increase in trade payable | 22,833 | 42,108 | |
Increase in other accounts payable and contract liabilities | 21,539 | 13,952 | |
Net cash flows from operations | 306,692 | 297,943 | |
Interest paid | (73,067) | (56,561) | |
Interest received | 5,276 | 60 | |
Income tax paid | (17,977) | (13,980) | |
Net cash flows from operating activities | 220,924 | 227,462 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchase of property, plant and equipment and initial direct costs associated with right | (59,554) | (76,574) | |
Acquisition of businesses, net of cash acquired | 7 | (5,495) | (1,771) |
Proceeds from disposal of property, plant and equipment, investment properties and intangible assets | 3,192 | 4,392 | |
Purchase of other intangible assets | (14,121) | (15,482) | |
Proceeds from short-term financial investments | 30,000 | − | |
Payments for financial investments | 9 | (30,000) | (50,000) |
Net cash flows used in investing activities | (75,978) | (139,435) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from loans | 21 | 148,974 | 132,345 |
Repayment of loans | 21 | (210,615) | (99,585) |
Purchase of treasury shares | − | (34) | |
Payments of principal portion of lease liabilities | 11 | (66,014) | (64,610) |
Dividends paid to equity holders of the parent | 22 | − | (50,006) |
Net cash flows used in financing activities | (127,655) | (81,890) | |
Effect of exchange rate changes on cash and cash equivalents | (98) | (83) | |
Net increase in cash and cash equivalents | 17,193 | 6,054 | |
MOVEMENTS IN CASH AND CASH EQUIVALENTS | |||
Cash and cash equivalents at the beginning of the year | 9 | 26,062 | 20,008 |
Net increase in cash and cash equivalents | 17,193 | 6,054 | |
Cash and cash equivalents at the end of the year | 9 | 43,255 | 26,062 |
X5 Retail Group N.V.
Consolidated Statement
of Changes In Equity
for the year ended
31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Number of shares |
Share capital |
Share premium |
Share-based payment reserve |
Other capital reserves |
Retained earnings |
Total shareholders equity |
Non- controlling interests |
Total | |
---|---|---|---|---|---|---|---|---|---|
Balance as at 1 January 2021 | 67,882,444 | 2,458 | 46,086 | 104 | − | 46,194 | 94,842 | − | 94,842 |
Profit for the period | − | − | − | − | − | 42,738 | 42,738 | − | 42,738 |
Total comprehensive income for the period | − | − | − | − | − | 42,738 | 42,738 | − | 42,738 |
Dividends (Note 22) | − | − | − | − | − | (50,006) | (50,006) | − | (50,006) |
Share-based payment compensation (Note 29) |
− | − | − | 89 | − | − | 89 | − | 89 |
Transfer and waiving of vested equity rights (Note 29) |
6,252 | − | 41 | (75) | − | − | (34) | − | (34) |
Balance as at 31 December 2021 | 67,888,696 | 2,458 | 46,127 | 118 | − | 38,926 | 87,629 | − | 87,629 |
Balance as at 1 January 2022 | 67,888,696 | 2,458 | 46,127 | 118 | − | 38,926 | 87,629 | − | 87,629 |
Profit for the period | − | − | − | − | − | 45,199 | 45,199 | (11) | 45,188 |
Total comprehensive income for the period | − | − | − | − | − | 45,199 | 45,199 | (11) | 45,188 |
Share-based payment compensation (Note 29) |
− | − | − | (3) | − | − | (3) | − | (3) |
Transfer (Note 29) | − | − | (38) | 38 | − | − | − | − | |
Modification of share-based payments (Note 29) |
− | − | − | (77) | − | − | (77) | − | (77) |
Acquisition of subsidiaries (Note 7) | − | − | − | − | − | − | − | 2,609 | 2,609 |
Purchase commitments for non-controlling interests’ shares (Note 7) | − | − | − | − | (2,204) | − | (2,204) | − | (2,204) |
Impact of changes in non-controlling interests with purchase commitments (Note 7) | − | − | − | − | 2,598 | − | 2,598 | (2,598) | − |
Balance as at 31 December 2022 | 67,888,696 | 2,458 | 46,127 | − | 432 | 84,125 | 133,142 | − | 133,142 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
01
Principal activities and the Group structure
These consolidated financial statements are for the economic entity comprising X5 Retail Group N.V. (the “Company”) and its subsidiaries, as set out in Note 6 (the “Group”).
X5 Retail Group N.V. is a joint stock limited liability company established in August 1975 under the laws of the Netherlands. The principal activity of the Company is to act as a holding company for a group of companies that operate retail grocery stores. The Company’s address and tax domicile is Zuidplein 196, 1077 XV Amsterdam, the Netherlands.
The main activity of the Group is the development and operation of grocery retail stores. As at 31 December 2022 the Group operated a retail chain of 21,323 proximity stores, supermarket, hypermarket, hard discounter, online hypermarket stores, dark kitchens, “Krasny Yar” & “Slata” stores and joint dark stores under the brand names “Pyaterochka”, “Perekrestok”, “Karusel”, “Chizhik”, “Perekrestok Vprok”, “Mnogo Lososya”, “Krasny Yar” and “Slata” (each representing separate format) in major population centres in Russia, including but not limited to Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don, Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg, Krasnoyarsk, Irkutsk (31 December 2021: 19,121 proximity stores, supermarket, hypermarket, hard discounter, online hypermarket stores and dark kitchens under the brand names “Pyaterochka”, “Perekrestok”, “Karusel”, “Chizhik”, “Perekrestok Vprok” and “Mnogo Lososya”), with the following number of stores:
31 December 2022 |
31 December 2021 |
|
---|---|---|
“Pyaterochka” − Proximity store | 19,164 | 17,972 |
“Perekrestok” − Supermarket | 971 | 990 |
“Krasny Yar” & “Slata” stores | 595 | — |
“Chizhik” — Hard discounter | 517 | 72 |
“Mnogo Lososya” — Dark kitchen | 54 | 48 |
“Karusel” − Hypermarket | 12 | 33 |
Joint dark stores | 7 | — |
“Perekrestok Vprok” — Online hypermarket | 3 | 6 |
Total stores | 21,323 | 19,121 |
As at 31 December 2022 and 31 December 2021 the principal shareholder exerting significant influence over the Company was CTF Holdings S.A. (“CTF”). As at 31 December 2022 and 31 December 2021 CTF directly owned 47.87% and 47.87% of total issued shares in the Company respectively. CTF is not an ultimate controlling party for the Group. As at 31 December 2022 and 31 December 2021 the Company’s shares were listed on the London and Moscow Stock Exchanges in the form of Global Depositary Receipts (GDRs) with each GDR representing an interest of 0.25 in an ordinary share (Note 22).
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
02
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
2.1 Basis of preparation
These consolidated financial statements for the year ended 31 December 2022 have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) as adopted by the European Union and with Part 9 Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared under the historical cost convention, except for financial assets and financial liabilities (including derivative instruments) that have been measured at fair value. The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. Management prepared these consolidated financial statements on a going concern basis. In making this judgment management considered the Group’s financial position, current intentions, profitability of operations, access to financial resources (Note 31) and the potential impact of COVID 19 and the sanctions being imposed against certain entities and individuals in Russia. On 31 May 2023, the Management Board authorised the consolidated financial statements for issue. Publication is on 31 May 2023.
2.2 Basis of consolidation
Subsidiaries are those investees, including structured entities, that the Group controls because the Group (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than majority of voting power in an investee. In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date) and are deconsolidated from the date on which control ceases.
The acquisition method of accounting is used to account for the acquisition of businesses other than those acquired from parties under common control. The consideration transferred is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of exchange, including fair value of assets or liabilities from contingent consideration arrangements but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transaction costs related to the acquisition and incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt as part of the business combination are deducted from the carrying amount of the debt and all other transaction costs associated with the acquisition are expensed. The date of exchange is the acquisition date where a business combination is achieved in a single transaction. However, when a business combination is achieved in stages by successive share purchases, the date of exchange is the date of each exchange transaction; whereas the acquisition date is the date on which acquirer obtains control of the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless the cost cannot be recovered. The Company and all of its subsidiaries use uniform accounting policies consistent with the Group’s policies.
The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Pending specific guidance from IFRSs regarding accounting for put options not giving present ownership interest in the non-controlling share of subsidiaries the Group accounts for such transactions as follows:
- Determine the amount that would have been recognised for the non-controlling interest (NCI), including an update to reflect allocations of profit or loss, allocations of changes in OCI and dividends declared for the reporting period, as required by IFRS 10 Consolidated financial statements.
- Derecognise the NCI as if it was acquired at the acquisition date or reporting date for the subsequent periods.
- Recognise a financial liability at the present value of the amount payable on exercise of the NCI put in accordance with IFRS 9 Financial Instruments with no separate accounting for the unwinding of the discount due to the passage of time.
- The difference between (b) and (c) is accounted for as an equity transaction within “Other reserves” in equity.
- When the NCI put is exercised the amount recognised as the financial liability at that date is extinguished by the payment of the exercise price.
Purchases of subsidiaries from parties under common control are accounted for using the pooling of interest method (also referred as “the predecessor values method”).
Under this method the consolidated financial statements of the combined entity are presented as if the businesses had been combined from the beginning of the earliest period presented or, if later, the date when the combining entities were first brought under common control. The assets and liabilities of the subsidiary transferred under common control are at the predecessor entity’s carrying amounts.
The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in these consolidated financial statements. Any difference between the carrying amount of net assets, including the predecessor entity’s goodwill, and the consideration for the acquisition is accounted for in these consolidated financial statements as an adjustment to other reserve within equity.
2.3 Foreign currency translation and transactions
- Functional and presentation currency The functional currency of the Group’s entities is the national currency of the Russian Federation, the Russian Rouble (“RUB”). The presentation currency of the Group is the Russian Rouble (“RUB”), which management believes is the most useful currency to adopt for users of these consolidated financial statements.
- Transactions and balances Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the official exchange rate of the Central Bank of Russian Federation (“CBRF”) at the respective reporting dates. Foreign exchange gains and losses resulting from the settlement of the transactions and from the translation of monetary assets and liabilities into the functional currency at period-end official exchange rates of the CBRF are recognised in profit or loss. Translation at period-end rates does not apply to non-monetary items.
2.4 Segment reporting
Operating segment is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Management Board. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. The Group identifies retail chains of each format and dark kitchens (Note 1) as separate operating segments in accordance with the criteria set forth in IFRS 8. Reportable segments whose revenue, result or assets are ten percent or more of all the segments are reported separately.
2.5 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment, where required. Cost includes expenditure that is directly attributable to the acquisition or construction of the item.
Costs of minor repairs and maintenance are expensed when incurred. Costs of replacing major parts or components of property, plant and equipment are capitalised and the replaced parts are retired. Capitalised costs are depreciated over the remaining useful life of the property, plant and equipment or part’s estimated useful life whichever is sooner.
Leasehold improvements are capitalised when it is probable that future economic benefits associated with the improvements will flow to the Group and the cost can be measured reliably.
At each reporting date management assesses whether there is any indication of impairment of property, plant and equipment including construction in progress. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs of disposal and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in the consolidated statement of profit or loss. An impairment loss recognised for an asset in prior years is reversed if there has been a favourable change in circumstances affecting estimates used to determine the asset’s value in use or fair value less costs of disposal.
Gains and losses on disposals determined by comparing the proceeds with the carrying amount are recognised in profit or loss.
Land and assets under construction are not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives. Buildings are divided into foundation and frame with a depreciation period of 40–50 years and other parts of 7–8 years. Other parts mainly include fixtures and fitting.
The depreciation periods, which approximate the estimated useful economic lives of the respective assets, are as follows:
Useful lives | |
---|---|
Buildings (foundation and frame) | 40–50 years |
Buildings (other parts) | 7–8 years |
Machinery and equipment | >1—10 years |
Refrigerating equipment | 7–10 years |
Vehicles | 4–7 years |
Other | 3–5 years |
The residual value of an asset is the estimated amount that the Group would currently obtain from the disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The assets’ residual values and useful lives are reviewed, and adjusted prospectively if appropriate, at each reporting date.
2.6 Investment properties
Investment properties consist of buildings held by the Group to earn rental income or for capital appreciation, or both, and which are not occupied by the Group. The Group recognises the part of owned shopping centres that are leased to third party retailers as investment properties, unless they represent insignificant portions of the property and are used primarily to provide auxiliary services to retail customers not provided by the Group rather than to earn rental income. After purchase or construction of the building the Group assesses the main purpose of its use and, if the main purpose is to earn rental income or for capital appreciation, or both, the building is classified as investment property.
Investment properties are stated at cost less accumulated depreciation and provision for impairment, where required. If any indication exists that investment properties may be impaired, the Group estimates the recoverable amount as the higher of value in use and fair value less costs of disposal. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with it will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Transfers are made to (or from) investment properties only when there is a change in use. Transfers between investment property and owner occupied property do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.
Depreciation on items of investment properties is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives. The depreciation periods, which approximate the estimated useful economic lives of the respective assets, are 40–50 years.
Investment properties are derecognised either when they have been disposed of (i.e. , at the date the recipient obtains control) 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 recognised in profit or loss in the period of derecognition. The amount of consideration to be included in the gain or loss arising from the derecognition of investment property is determined in accordance with the requirements for determining the transaction price in IFRS 15.
Fair value determined for the disclosure purposes (Note 12) represents the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The measurement is classified in level 3 of the fair value hierarchy.
2.7 Intangible assets
-
Goodwill
Goodwill is carried at cost less accumulated impairment losses. Goodwill represents the excess of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date over the fair value of the net assets of the acquired subsidiary at the date of exchange. Goodwill is not deductible for tax purposes.
The Group tests goodwill for impairment at least annually and whenever there are indications that goodwill may be impaired. Goodwill is tested on the operating segment level.
-
Brand and private labels
Brand and private labels acquired in a business combination are recognised initially at fair value. Private labels are amortised using the straight-line method over their useful lives. The useful life of “Pyaterochka” brand is estimated to be indefinite-lived as there is no foreseeable limit to the period over which the brand is expected to generate net cash inflows for the Group. In 2021 and 2022 the Group revised the useful live of brand “Karusel” in view of continuing operating segment reorganisation and determined that the remaining useful life of 5 years and 3 months as of 31 December 2021 and 31 December 2022, respectively, fairly reflects the period over which the Group expects net cash inflows from the asset.
Useful lives Brands “Krasny Yar”, “Baton”, “Slata”, “KhlebSol” 3 years Private labels 1–8 years -
Software and other intangible assets
Expenditure on acquired patents, licenses and software development is capitalised and amortised using the straight-line method over their useful lives ranging from 1 to 10 years (5 on average).
Research costs related to software development are expensed as incurred. Software development expenditures on an individual project are recognised as an intangible asset when the following criteria are met:
- It is technically feasible to complete the intangible asset so that the asset will be available for use or sale;
- The Group intends to complete the asset and use or sell it;
- There is an ability to use or sell the asset;
- It can be demonstrated how the asset will generate probable future economic benefits;
- Adequate technical, financial and other resources to complete the development and to use or sell the asset are available;
- The expenditure attributable to the asset during its development can be reliably measured.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is ready for use.
-
Impairment of intangible assets
Where an indication of impairment exists, the recoverable amount of any intangible asset, including goodwill, is assessed and, when impaired, the asset is written down immediately to its recoverable amount. Goodwill and intangible assets not yet available for use are tested for impairment at least annually and whenever impairment indicators exist.
2.8 Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
GROUP AS A LESSEE
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. , the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. The Group’s right-of-use assets comprise leased land and buildings with depreciation periods mostly ranging from 5 to 45 years.
Right-of-use assets obtained as part of acquisition of business are recognised at an amount equal to the lease liabilities and lease payments made at or before the acquisition date and adjusted to reflect the favourable terms of the lease relative to market terms.
Where an indication of impairment exists, the recoverable amount of any right-of-use assets is assessed and, when impaired, the asset is written down to its recoverable amount (Note 3).
Sale and leaseback
When the Group sells an asset and immediately reacquires the use of the asset by entering into a lease with the buyer, such an operation is treated as sale and leaseback transaction. a sale occurs when control of the underlying asset passes to the buyer. a lease liability is recognised, the associated non-current asset is derecognised, and a rightof- use asset is recognised at the proportion of the carrying value relating to the rights retained. Any gain or loss arising relates to the rights transferred to the buyer.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
Lease liabilities obtained as part of acquisition of business are recognised at the present value of the remaining lease payments at the date of acquisition.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
In the consolidated financial statement of cash flows payments of principal portion of lease liabilities are recognised as cash outflows related to financing activities, payments of interest portion of the lease liabilities are recognised within operating cash flows.
Short-term leases
The Group applies the short-term lease recognition exemption to its short-term leases of assets other than land and buildings (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Lease payments on shortterm leases are recognised as expense on a straight-line basis over the lease term.
GROUP AS A LESSOR
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in Lease/sublease and other income in the consolidated statement of profit or loss.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rent is recognised as income in the period in which it is earned.
2.9 Inventories
Inventories at distribution centres and retail outlets are stated at the lower of cost and net realisable value. Cost comprises direct costs of goods, transportation and handling costs. Cost is determined by the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The Group provides for estimated inventory losses (shrinkage) between physical inventory counts on the basis of a percentage of cost of sales. The provision is adjusted to actual shrinkage based on regular inventory counts. The provision is recorded as a component of cost of sales. The Group also provides for aged stock provision where the net realisable value is below cost.
2.10 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
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Financial assets
Initial recognition and measurement
The Group classifies its financial assets as those to be measured subsequently at amortised cost, fair value through other comprehensive income or fair value through profit and loss. The classification depends on the financial asset’s contractual cash flow characteristics and the business model for managing the financial assets.
With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Refer to the accounting policies in section 2.24 (a) Revenue from contracts with customers.
Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date, if required under IFRS. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. , the date that the Group commits to purchase or sell the asset.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. , removed from the Group’s consolidated statement of financial position) when:
- The rights to receive cash flows from the asset have expired; or
- The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortised cost (debt instruments);
- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);
- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
- Financial assets at fair value through profit or loss.
Financial assets at amortised cost (debt instruments) is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:
- The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade and other receivables the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
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Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings. For more information refer to Note 2.11 and Note 2.12.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled 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 the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
2.11 Borrowings
Borrowings are initially recognised at their fair value, net of transaction costs, and are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of profit or loss over the period of the borrowings using the effective interest method. 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. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets.
The commencement date for capitalisation is when (a) the Group incurs expenditures for the qualifying asset; (b) it incurs borrowing costs; and (c) it undertakes activities that are necessary to prepare the asset for its intended use or sale.
Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.
The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditure on qualifying assets. Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average interest cost is applied to the expenditures on the qualifying assets), except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs incurred less any investment income on the temporary investment of those borrowings are capitalised.
After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest (“EIR”) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the consolidated statement of profit or loss.
2.12 Trade and other payables
Trade and other payables are accrued when the counterparty performs its obligation under the contract and are carried at amortised cost using the effective interest method. Trade payables are recognised initially at fair value and measured subsequently at amortised cost.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments used for meeting short term cash commitments.
2.14 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured as the best estimate of the expenditure required to settle the present obligation at the reporting date.
2.15 Value added tax
Output VAT related to sales is payable to tax authorities on the earliest of (a) collection of the receivables from customers or (b) delivery of the goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the VAT invoice and fulfilment of other conditions in compliance with Russian tax legislation.
The tax authorities permit the settlement of VAT on a net basis. VAT related to sales and purchases is recognised in the consolidated statement of financial position on a gross basis and disclosed separately as an asset and liability, except for VAT, presented within other non-current assets. Where a provision has been made for the impairment of receivables, the impairment loss is recorded for the gross amount of the debtor, including VAT.
2.16 Employee benefits
Wages, salaries, bonuses, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by the employees of the Group. The Group’s entities contribute to the Russian Federation’s state pension and social insurance funds in respect of their employees. These contributions are accrued when incurred. The Group’s commitment ends with the payment of these contributions.
2.17 Share-based payments
Stock unit plan
The Group receives services from Supervisory Board members as consideration for conditional rights to receive the value of the GDRs in cash after vesting period of 3 years and fulfilment of service conditions. Share-based payment transactions under the stock unit plan are accounted for as cash-settled transactions.
The fair value of the services received in exchange for the grant of the conditional rights is recognised as an expense over the vesting period with the corresponding increase in short term liabilities (Provisions and other liabilities) and in long term liabilities (Other non-current liabilities) and measured by reference to the market price of the GDRs which is determined at grant date. The liabilities are remeasured at each reporting date and at settlement date so that the ultimate liabilities equal to the cash payment on settlement date.
Service conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be nonvesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award. No expense is recognised for awards that do not ultimately vest because service conditions have not been met.
The cumulative expense recognised for cash-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
2.18 Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction in equity from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recognised as share premium.
2.19 Dividends
Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared on or before 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 authorised for issue.
2.20 Treasury shares
Where any group company purchases the Company’s equity share capital, the paid consideration, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any received consideration, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
2.21 Earnings per share
Earnings per share are determined by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of participating shares outstanding during the reporting period. Diluted earnings per share are calculated by adjusting the earnings and the number of shares for the effects of dilutive options.
2.22 Taxes
Current tax is the amount expected to be paid to, or recovered from, the state budget in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if consolidated financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within operating expenses.
Current income tax liabilities (assets) are measured in accordance with IAS 12 Income Taxes and IFRIC 23 Uncertainty over Income Tax Treatments, based on legislation that is enacted or substantively enacted at the reporting date, taking into consideration applicable tax rates and tax exemptions.
Deferred income tax is provided using the reporting liability method for temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. In accordance with the initial recognition exception, deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill and subsequently for goodwill which is not deductible for tax purposes. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period in which the asset is realised or the liability is settled, based on tax rates which are enacted or substantially enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax assets and liabilities are netted within the consolidated group of taxpayers (CGT) and within individual companies of the Group for the entities that are not members of the CGT.
The Group considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Group concludes it is probable that the taxation authority will accept an uncertain tax treatment, the Group determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings.
If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates. The Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty: the most likely amount or the expected value.
If an uncertain tax treatment affects current tax and deferred tax (for example, if it affects both taxable profit used to determine current tax and tax bases used to determine deferred tax), the Group makes consistent judgements and estimates for both current tax and deferred tax.
The Group’s uncertain tax positions are reassessed by management at the end of each reporting period. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period, any known court or other rulings on such issues, and relevance and effect of a change in facts and circumstances or of new information in the context of applicable tax laws. Liabilities for penalties, interest and taxes other than on income are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period. Adjustments for uncertain income tax positions are recorded within the income tax charge and included in current income tax payable line of the consolidated statement of financial position. Interest incurred in relation to taxation is included in finance costs in the consolidated statement of profit or loss. Provisions are maintained, and updated if necessary, for the period over which the respective tax positions remain subject to review by the tax and customs authorities, being 3 years from the year of filing.
2.23 Fair value measurement
Fair values of financial instruments measured at amortised cost are disclosed in Note 34. 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 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, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised 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 recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
2.24 Income and expense recognition
Income and expenses are recognised on an accrual basis as earned or incurred. Recognition of the principal types of income and expenses is as follows:
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Revenue from contracts with customers
The Group is in the retail business and sells its goods both through stores operated by the Group and through franchisees (agents) acting as a principal. The revenue recognised by the Group meets the definition of revenue from contracts with customers as per IFRS 15. The Group recognises revenue when control of goods and services is transferred to the customer, generally for the retail customers it is occurred in the stores at the point of sale. Payment of the transaction price is due immediately when the customer purchases goods.
The Group has loyalty points programmes, which allow customers to accumulate points that can be redeemed for free products. The loyalty points give rise to a separate performance obligation as they provide a material right to the customer. a portion of the transaction price is allocated to the loyalty points awarded to customers based on relative stand-alone selling price and recognised as a contract liability until the points are redeemed. Revenue is recognised upon redemption of products by the customer.
When estimating the stand-alone selling price of the loyalty points, the Group considers the likelihood that the customer will redeem the points. The Group updates its estimates of the points that will be redeemed on a monthly basis and any adjustments to the contract liability balance are charged against revenue.
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Cost of sales
Cost of sales includes the purchase price of the products sold and other costs incurred in bringing the inventories to the location and condition ready for sale, i.e. retail outlets. These costs include costs of purchasing, storing, rent, salaries and transporting the products to the extent it relates to bringing the inventories to the location and condition ready for sale.
The Group receives various types of allowances from suppliers in the form of volume discounts and other forms of payment. In accounting for supplier bonuses received by the Group, the Group determined that these bonuses are a reduction in prices paid for the product and are reported as part of the cost of sales as the related inventory is sold. Bonuses receivable from suppliers in cash are presented as trade receivables.
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Interest income and expense
Interest income and expense are recognised on an effective yield basis.
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Selling, general and administrative expenses
Selling expenses consist of salaries and wages of stores employees, store expenses, variable lease expenses, depreciation of stores, utilities, advertising costs and other selling expenses. General and administrative expenses include costs of salaries and wages of support office employees, depreciation of support offices, impairment and amortisation charges of non-current assets and other general and administrative expenses. Selling, general and administrative expenses are recognised on an accrual basis as incurred.
2.25 Contract liability
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
2.26 Impairment of non-current assets other than goodwill
The Group periodically assesses whether there is any indication that non-current assets may be impaired. If any such indicators exist, the Group estimates the recoverable amount of the asset. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which it belongs. Individual stores are considered separate cash-generating units for impairment testing purposes. Impairment loss is recognised whenever the carrying amount of an asset or the related cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the consolidated statement of profit or loss. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
2.27 Fair value of assets and liabilities at the acquisition date
A primary valuation of assets and liabilities of acquired companies was performed on a provisional basis. Once the valuation is finalised, any adjustments arising are recognised retrospectively.
2.28 Indemnification asset
The indemnification asset equivalent to the fair value of the indemnified liabilities is included in net assets acquired in the business combination if the selling shareholders of the acquiree agreed to compensate possible claims or contingencies. Subsequent measurement of the indemnification asset and contingent liability does not have any impact on future earnings, unless the indemnification asset becomes impaired.
2.29 Offsetting of financial assets and financial liabilities
Accounts receivable and accounts payable are offset and the net amount is presented in the consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts and intends to settle on a net basis.
2.30 Long-term employee benefits
The Group recognises the liability and respective expenses in relation to long-term employee benefits when there is a present obligation as a result of past events and a reliable estimate of the obligation can be made. The Group recognises the net total of the following amounts in profit or loss:
- Service cost;
- Net interest on the net defined benefit liability;
- Remeasurements of the net defined benefit liability.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
03
Critical accounting estimates and judgements
in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
Management also makes certain judgements, apart from those involving estimations, in the process of applying accounting policies. Judgements that have the most significant effect on the amounts recognised in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities include:
Impairment of goodwill
The Group tests goodwill for impairment at least annually. The recoverable amount of a cash-generating unit has been determined based on the higher of fair value less costs to sell or value-in-use calculations. These calculations require the use of estimates as further detailed in Note 13.
Identifying a business combination
The Group enters into transactions to acquire integrated set of assets and operations of retail stores. The Group determines whether such transactions represent a business combination or assets acquisitions. The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs. All acquisitions of assets and operations of retail stores occurred in 2022 and 2021 were treated by the Group as business combinations.
Litigations
The Group exercises considerable judgment in measuring and recognising 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. Judgement 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.
Tax legislation
Russian tax, currency and customs legislation is subject to varying interpretations (Note 35).
Deferred tax assets and liabilities
Group’s management judgment is required for the calculation of current and deferred income taxes. Deferred tax assets are recognised to the extent that their utilisation is probable. The utilisation 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 utilisation of deferred tax assets, including past operating results, the operational plan, expiration of tax losses carried forward, and tax planning strategies. In the event that an assessment of future utilisation indicates that the carrying amount of deferred tax assets must be reduced, this reduction is recognised in profit or loss.
IAS 12 requires a deferred tax liability to be recognised for all taxable temporary differences associated with investments in subsidiaries unless: (a) the parent, investor, joint venturer or joint operator is able to control the timing of the reversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. The Group exercises significant judgment in assessing the amount of taxable temporary differences associated with investments in subsidiaries (unremitted earnings) that will not reverse in the foreseeable future.
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.
Property, plant and equipment
The Group’s management determines the estimated useful lives and related depreciation charges for its plant and equipment (Note 10). The estimation of the useful life of the asset is a matter of judgement based on the experience of the entity with similar assets. Management increases the depreciation charge where useful lives are less than previously estimated lives or it writes-off or writes-down technically obsolete or non-strategic assets that have been abandoned or reclassified as held for sale.
The Group periodically assesses whether there is any indication that property, plant and equipment may be impaired. The Group performs assets impairment testing (Note 10). The Group estimates the recoverable amount of the asset or cash generating unit and if it is less than the carrying amount of an asset or cash generating unit an impairment loss is recognised in the consolidated statement of profit or loss. For the year ended 31 December 2022 the Group recognised an impairment loss in the amount of RUB 4,905 (year ended 31 December 2021: a net impairment loss in the amount of RUB 3,105).
Investment property
The Group’s management determines the estimated useful lives and related depreciation charges for its investment properties (Note 12). Management increases the depreciation charge where useful lives are less than previously estimated lives or it writes-off or writes-down technically obsolete or non-strategic assets that have been abandoned or reclassified as held for sale.
The Group periodically assesses whether there is any indication that investment property may be impaired. The Group performs assets impairment testing (Note 12). The Group estimates the recoverable amount of the asset or cash generating unit and if it is less than the carrying amount of an asset or cash generating unit an impairment loss is recognised in the consolidated statement of profit or loss. For the year ended 31 December 2022 the Group recognised a net impairment loss in the amount of RUB 232 (year ended 31 December 2021: a net impairment gain in the amount of RUB 343).
Right-of-use assets
The Group periodically assesses whether there is any indication that right-of-use assets may be impaired. The Group performs assets impairment testing (Note 11). The Group estimates the recoverable amount of the asset or cash generating unit and if it is less than the carrying amount of an asset or cash generating unit an impairment loss is recognised in the consolidated statement of profit or loss. For the year ended 31 December 2022 the Group recognised a net impairment loss in the amount of RUB 1,451 (year ended 31 December 2021: a net impairment loss in the amount of RUB 630).
Inventories provisions
The Group provides for estimated inventory shrinkage on the basis of historical shrinkage as a percentage of cost of sales. This provision is adjusted at the end of each reporting period to reflect the historical trend of the actual physical inventory count results. The Group also provides for aged stock where the net realisable value is below cost (Note 15).
Revenue recognition — Loyalty programmes
The Group estimates the amount of obligations related to customer loyalty programmes by allocating transaction price to loyalty points based on the standalone selling price of the points. The standalone selling price of the points is reduced for the expected amount of the points that will expire unredeemed.
The Group estimates the stand-alone selling price of the loyalty points awarded under loyalty programmes. The stand-alone selling price of the loyalty points issued is calculated by multiplying to the estimated redemption rate and to the monetary value assigned to the loyalty points. In estimating the redemption rate, the Group considers breakage which represents the portion of the points issued that will never be redeemed. The Group applies statistical projection methods in its estimation using customers’ historical redemption patterns as the main input. The redemption rate is updated monthly and the liability for the unredeemed points is adjusted accordingly. The Group ensures that the value assigned to the loyalty points is commensurate to the stand-alone selling price of the products eligible for redemption (i.e. , the value of each point is equivalent to the stand-alone selling price of any product eligible for redemption divided by number of points required).
Points issued under the loyalty programmes normally expires in six months from their recognition. However due to periodic changes in customer redemption patterns estimates of the stand-alone selling price are subject to significant uncertainty.
Any significant changes in customers’ redemption patterns will impact the estimated redemption rate. As at 31 December 2022, the estimated liability for unredeemed points was RUB 3,487 (31 December 2021: RUB 2,146).
Provision for expected credit losses of trade
and other receivables
The Group uses a provision matrix to calculate ECLs for trade and other receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (by customer type). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade and other receivables are written-off if past due for more than 3 years and are no subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
The provision matrix is initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e. , gross domestic product) 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 assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade and other receivables is disclosed in Note 17.
Brand and private labels
The Group periodically assesses whether there is any indication that brand and private labels may be impaired. The Group performs assets impairment testing of brands with indefinite useful lives at least annually (Note 14). The Group estimates the recoverable amount of the asset and if it is less than the carrying amount an impairment loss is recognised in the consolidated statement of profit or loss. For the year ended 31 December 2022 the Group did not recognise any impairment of brand and private labels (year ended 31 December 2021: Nil).
Lease term of contracts with extension options and termination options
In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. For leases of retail stores the most relevant factors are profitability and revenue of particular stores, the value to the business in a particular region and investment strategy. For leases of distribution centres and offices the most relevant factors are the value to the business, significance of termination penalties and significance of leasehold improvements’ remaining value. At commencement of the lease such considerations generally result in determining the lease term equal to the non-cancellable lease period including the period covered by an option to terminate. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
Incremental borrowing rates for calculation
of lease liability
Incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Because there are normally no absolutely similar to lease agreements borrowings, which interest rates are observable in open market, the Group derives incremental borrowing rates from both internal and external data sources applying significant judgement in such calculations. The Group estimates incremental borrowing rates by adjusting Russian government risk-free bonds in a relevant currency by the risk-premium inherent to the Group which in turn is determined by comparing Group’s rate of borrowing with Russian government risk- free bonds of the same duration. Incremental borrowing rates are calculated on a monthly basis.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
04
Adoption of new and revised standards and interpretations
and new accounting pronouncements
In the preparation of these consolidated financial statements, the Group followed the same accounting policies and methods of computation as compared with those applied in the previous year, except for the adoption of new standards and interpretations and revision of the existing standards as of 1 January 2022. Standards, Interpretations and amendments effective 1 January 2022 did not have a material impact on the financial position or performance of the Group.
The following amendments to IFRSs effective for the financial year beginning on or after 1 January 2022 do not have a material impact on the Group and do not result in change of the Group’s accounting policy:
- Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements 2018–2020.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective:
Standards issued but not yet effective in the European Union |
Effective for annual periods beginning on or after |
---|---|
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current, Classification of Liabilities as Current or Non-current — Deferral of Effective Date and Non-current Liabilities with Covenants | 1 January 2024 |
Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 — Comparative Information | 1 January 2023 |
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies | 1 January 2023 |
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates | 1 January 2023 |
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction | 1 January 2023 |
IFRS 17 Insurance Contracts including Amendments to IFRS 17 | 1 January 2023 |
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback | 1 January 2024 |
The Group expects that the adoption of other pronouncements listed above will not have a significant impact on the Group’s results of operations and financial positions in the period of initial application except for amendments to IAS 12 Income Taxes.
The amendments to IAS 12 Income Taxes may require to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The impact for the Group would be the recognition of additional deferred tax assets and liabilities attributable to right-of-use assets and lease liabilities. The Group does not expect significant effect of the amendments to IAS 12 on its consolidated financial statements.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
05
Segment reporting
The Group identifies retail chains of each format and (see Note 1) as separate operating segments in accordance with the criteria set forth in IFRS 8.
The following significant operating functions are decentralised by formats:
- Category management, including purchasing, pricing, assortment management, promotion management;
- Distribution centres logistics;
- Development function.
The formats’ general managers are determined as segment managers in accordance with IFRS 8. The chief operating decision-maker has been determined as the Management Board. The Management Board reviews each format’s internal reporting in order to assess performance and allocate resources.
Upon adoption of IFRS 16 the Management Board started to assess the performance of the operating segments based on a measure of sales and adjusted earnings before interest, tax, depreciation, amortisation and impairment pre-IFRS 16 (EBITDA pre-IFRS 16). EBITDA pre-IFRS 16 is calculated by adjusting EBITDA to include fixed lease expenses, fixed non-lease components of lease contracts, exclude gain on derecognition of right-of-use assets and lease liabilities and exclude adjustment of gain/loss from sale of asset under sale and leaseback operations for the proportion of the rights retained. Adjusted capital expenditures include additions of property, plant and equipment, investment properties and intangible assets adjusted to replace capitalised depreciation of right-ofuse assets with capitalisation of fixed lease expenses, acquisitions of property, plant and equipment, investment properties and intangible assets through business combinations as well as goodwill acquired through such business combinations.
The accounting policies used for segments are the same as accounting policies applied for these consolidated financial statements. In 2022 a new methodology of overhead expenses allocation was used for more accurate measurements of segments’ performance. The comparative figures for earlier periods have been adjusted in order to provide meaningful comparative information.
The segment information for the year ended 31 December 2022, comparative figures for earlier periods and reconciliation of EBITDA pre-IFRS 16 to profit for the year is provided as follows:
YEAR ENDED 31 DECEMBER 2022 | Pyaterochka | Perekrestok |
Other segments |
Corporate centre |
Total |
---|---|---|---|---|---|
Revenue (Note 24) | 2,124,617 | 386,199 | 94,416 | − | 2,605,232 |
EBITDA pre-IFRS 16 | 170,538 | 28,251 | (5,963) | (6,038) | 186,788 |
Fixed lease expenses and fixed non-lease components of lease contracts | 113,742 | ||||
Gain on derecognition of right-of-use assets and lease liabilities | 2,551 | ||||
Reversal of adjustment for the proportion of the rights retained under sale and leaseback operations (Note 11) | (232) | ||||
Depreciation, amortisation and impairment | (164,731) | ||||
Operating profit | 138,118 | ||||
Finance cost, net | (68,417) | ||||
Net foreign exchange result | (2,032) | ||||
Profit before income tax | 67,669 | ||||
Income tax expense | (22,481) | ||||
Profit for the year | 45,188 | ||||
Adjusted capital expenditure | 46,077 | 10,024 | 25,909 | − | 82,010 |
31 December 2022 Inventories |
169,190 | 28,136 | 11,335 | − | 208,661 |
YEAR ENDED 31 DECEMBER 2021 | Pyaterochka | Perekrestok |
Other segments |
Corporate centre |
Total |
---|---|---|---|---|---|
Revenue (Note 24) | 1,795,018 | 351,100 | 58,701 | − | 2,204,819 |
EBITDA pre-IFRS 16 | 145,495 | 24,241 | (4,369) | (4,343) | 161,024 |
Fixed lease expenses and fixed non-lease components of lease contracts | 104,141 | ||||
Gain on derecognition of right-of-use assets and lease liabilities | 2,940 | ||||
Reversal of adjustment for the proportion of the rights retained under sale and leaseback operations (Note 11) | (255) | ||||
Depreciation, amortisation and impairment | (150,278) | ||||
Operating profit | 117,572 | ||||
Finance cost, net | (57,229) | ||||
Net foreign exchange result | 399 | ||||
Profit before income tax | 60,742 | ||||
Income tax expense | (18,004) | ||||
Profit for the year | 42,738 | ||||
Adjusted capital expenditure | 72,079 | 18,656 | 7,189 | − | 97,924 |
31 December 2021 Inventories |
137,489 | 25,638 | 3,713 | − | 166,840 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
06
Subsidiaries
Details of the Company’s significant subsidiaries at 31 December 2022 and 31 December 2021 were as follows:
Company | Country |
Nature of operations |
Ownership (%) 31 December 2022 |
Ownership (%) 31 December 2021 |
---|---|---|---|---|
Agrotorg LLC | Russia | Retailing | 100 | 100 |
Trade House PEREKRIOSTOK JSC | Russia | Retailing | 100 | 100 |
Agroaspect LLC | Russia | Retailing | 100 | 100 |
X5 Nedvizhimost CJSC | Russia | Assets holding company | 100 | 100 |
KOPEYKA-MOSCOW Ltd | Russia | Retailing | 100 | 100 |
Krasnoborskoe LLC | Russia | Assets holding company | 100 | 100 |
PEREKRIOSTOK-2000 LLC | Russia | Assets holding company | 100 | 100 |
Beta Estate LLC | Russia | Assets holding company | 100 | 100 |
X5 FINANSE LLC | Russia | Bond issuer | 100 | 100 |
Agro-Avto LLC | Russia | Assets holding company | 100 | 100 |
X5 Corporate Center LLC | Russia | Assets holding company | 100 | 100 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
07
Acquisition of businesses
Acquisitions in 2022
Acquisition of Krasny Yar and Slata
In 4th quarter 2022 the Group acquired 70% of shares of Smart LLC (Krasny Yar) and Mayak LLC (Slata) operating retail chains in Eastern Siberia and provided put options for the remaining 30% non-controlling interests. At acquisition date the retail chains operated 594 stores under brands “Krasny Yar”, “Baton”, “Slata”, “KhlebSol”.
Since the put options do not give present ownership interest in the shares subject to put and in the absence of particular guidance of accounting for put options over NCI in current IFRSs the Group made an accounting policy choice (Note 2.2) to account for the initial recognition and further changes in fair value of put option liability along with NCI in Other reserves within equity. As at 31 December 2022 purchase commitments for non-controlling interests’ shares under put option liability in amount of RUB 2,204 were included in other non-current liabilities in the consolidated statement of financial position.
In the year ended 31 December 2022 the acquired business contributed revenue of RUB 14,482 from the date of acquisition. Net loss from the date of acquisition comprised RUB 37. If the acquisitions had taken place at the beginning of the year, revenue of the Group would have been RUB 2,663,257. The Group considers impracticable to disclose the impact of the acquisition on the Group’s net profit, since before the acquisition the acquired businesses did not prepare financial statements in accordance with the Group’s accounting policy.
The Group assigned provisional fair values to net assets Details of assets and liabilities of acquired business and the related goodwill were as follows: acquired. The Group will finalise the purchase price allocation within 12 months from the acquisition date which is not yet finished at the date of approval of these consolidated financial statements.
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisitionby- acquisition basis. For the non-controlling interests in Krasny Yar and Slata the Group elected to recognise the non-controlling interests at fair value.
The fair value of the non-controlling interest in Smart LLC and Mayak LLC, non-listed companies, was estimated by applying a proportionate share to the valuation of the companies which in its turn was made on the basis of revenue and EBITDA multiples. The fair value measurements were based on significant inputs that are not observable in the market.
The purchase consideration for the reporting period comprised RUB 5,013 and RUB 1,073 as cash consideration and deferred consideration respectively.
The goodwill recognised is attributable to: i) the business concentration in the Russian regions; ii) expected cost synergies from the business combination and iii) acquired traffic from existing customers. The goodwill related to this acquisition was allocated to other segments in amount of RUB 7,674.
Details of assets and liabilities of acquired business and the related goodwill were as follows:
Provisional fair values at the acquisition date |
|
---|---|
Property, plant and equipment (Note 10) | 2,342 |
Other intangible assets (Note 14) | 1,863 |
Right-of-use assets (Note 11) | 19,061 |
Indemnification asset | 5,986 |
Inventories | 4,761 |
Trade, other accounts receivable and prepayments | 753 |
VAT and other taxes receivable | 148 |
Cash and cash equivalents | 531 |
Lease liabilities (Note 11) | (18,960) |
Deferred tax liabilities (Note 30) | (424) |
Trade accounts payable | (5,361) |
Provisional fair values at the acquisition date |
|
---|---|
Short-term borrowings (Note 21) | (1,819) |
Interest accrued | (5) |
Short-term contract liabilities (Note 20) | (26) |
Current income tax payable | (2,115) |
Provisions and other liabilities | (5,714) |
Net assets acquired | 1,021 |
Goodwill (Note 13) | 7,674 |
Non-controlling interests measured at fair value | (2,609) |
Purchase consideration | 6,086 |
Net cash outflow arising from the acquisition | 4,482 |
Other acquisitions
In 2022 the Group acquired 100% of several businesses of other retail chains in Russian regions. The acquisitions were individually immaterial.
In the year ended 31 December 2022 the acquired businesses contributed revenue of RUB 3,391 from the date of acquisition. If the acquisitions had taken place at the beginning of the year, revenue of the Group would have been RUB 2,607,521. The Group considers impracticable to disclose the impact of this factor on the Group’s net profit, since before the acquisition the acquired businesses did not prepare financial statements in accordance with the Group’s accounting policy.
The Group assigned provisional fair values to net assets acquired. The Group will finalise the purchase price allocation within a 12-month period from the acquisition date which is not yet finished at the date of approval of these consolidated financial statements.
The purchase consideration for the reporting period comprised consideration paid in cash of RUB 648.
The goodwill recognised was attributable to: i) the business concentration in the Russian regions; ii) expected cost synergies from the business combination and iii) acquired traffic from existing customers. The goodwill related to these acquisitions was allocated to Pyaterochka segment in amount of RUB 502.
During the 12 months ended 31 December 2022 the Group transferred RUB 369 as deferred payments for the prior periods acquisitions.
Details of assets and liabilities of acquired businesses and the related goodwill were as follows:
Provisional fair values at the acquisition date |
|
---|---|
Property, plant and equipment (Note 10) | 339 |
Right-of-use assets (Note 11) | 3,574 |
Deferred tax assets (Note 30) | 128 |
Trade, other accounts receivable and prepayments | 5 |
VAT and other taxes receivable | 52 |
Cash and cash equivalents | 4 |
Lease liabilities (Note 11) | (3,507) |
Current income tax payable | (106) |
Provisions and other liabilities | (343) |
Net assets acquired | 146 |
Goodwill (Note 13) | 502 |
Purchase consideration | 648 |
Net cash outflow arising from the acquisition | 644 |
Acquisitions in 2021
During 2021 the Group acquired 100% of several businesses of other retail chains in Russian regions. The acquisitions were individually immaterial.
In the year ended 31 December 2021 the acquired businesses contributed revenue of RUB 5,996 from the date of acquisition. As the businesses were not acquired as separate legal entities, it is impracticable to disclose net profit from the date of acquisition. These businesses did not prepare relevant financial information immediately before the acquisition, therefore, it is impracticable to disclose revenue and net profit of the Group for the year ended 31 December 2021 as though the acquisition date had been the beginning of that period.
The purchase consideration for the reporting period comprised consideration paid in cash of RUB 1,021 and RUB 265 as deferred consideration measured at fair value.
The goodwill recognised was attributable to: i) the business concentration in the Russian regions; ii) expected cost synergies from the business combination and iii) acquired traffic from existing customers. The goodwill related to these acquisitions was allocated to Pyaterochka segment in amount of RUB 1,063, Perekrestok segment in amount of RUB 35 and other segments in amount of RUB 20.
During the 12 months ended 31 December 2021 the Group transferred RUB 750 as deferred payments for the prior periods’ acquisitions.
At 31 December 2021 the Group assigned provisional fair values to net assets acquired, in estimating provisional fair values of acquired assets. In 2022 the Group completed the purchase price allocation, which resulted in no changes in fair values at the acquisition date:
Finalised fair values at the acquisition date |
|
---|---|
Other intangible assets (Note 14) | 10 |
Right-of-use assets (Note 11) | 3,928 |
Deferred tax assets (Note 30) | 244 |
Indemnification asset | 6 |
Trade, other accounts receivable and prepayments | 22 |
Lease liabilities (Note 11) | (3,928) |
Current income tax payable | (34) |
Provisions and other liabilities | (80) |
Net assets acquired | 168 |
Goodwill (Note 13) | 1,118 |
Purchase consideration | 1,286 |
Net cash outflow arising from the acquisition | 1,021 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
09
Cash and cash equivalents,
short-term financial investments
The bank accounts represent current accounts. Interest income on overnights / term deposits was immaterial. Cash in transit is cash transferred from retail outlets to bank accounts and bank card payments being processed.
The Group assessed credit quality of outstanding cash and cash equivalents balances as high and considered that there was no significant individual exposure. The maximum exposure to credit risk at the reporting date was the carrying value of cash and bank balances.
Short-term financial investments at 31 December 2022 and 31 December 2021 represent irrevocable bank deposits in Russian Roubles with maturity not more than a year that earn interest income at the rates in the range of 8.0%—9.0% per annum.
31 December 2022 |
31 December 2021 |
|
---|---|---|
Bank current account — Roubles | 14,336 | 2,733 |
Bank current account − other currencies | 1,577 | 49 |
Cash in transit — Roubles | 17,457 | 14,997 |
Cash in hand — Roubles | 9,759 | 8,278 |
Deposits — Roubles | 126 | 5 |
Total | 43,255 | 26,062 |
Short-term financial investments | 50,067 | 50,092 |
Total | 50,067 | 50,092 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
10
Property, plant and equipment
Land and buildings | Machinery and equipment | Refrigerating equipment | Vehicles | Other | Construction in progress | Total | |
---|---|---|---|---|---|---|---|
COST | |||||||
At 1 January 2021 | 316,545 | 65,987 | 72,728 | 25,673 | 59,090 | 7,274 | 547,297 |
Additions | − | − | − | − | − | 79,716 | 79,716 |
Transfers | 31,764 | 16,375 | 11,208 | 5,795 | 13,140 | (78,282) | − |
Disposals | (7,360) | (5,536) | (4,098) | (921) | (3,835) | (282) | (22,032) |
At 31 December 2021 | 340,949 | 76,826 | 79,838 | 30,547 | 68,395 | 8,426 | 604,981 |
Additions | − | − | − | − | − | 56,258 | 56,258 |
Transfers | 18,548 | 10,400 | 6,454 | 4,468 | 9,553 | (49,423) | − |
Transfer to investment property | (1,605) | − | − | − | − | − | (1,605) |
Assets from acquisitions | 697 | 815 | 663 | 64 | 408 | 34 | 2,681 |
Disposals | (11,858) | (3,689) | (2,386) | (1,671) | (2,619) | (115) | (22,338) |
At 31 December 2022 | 346,731 | 84,352 | 84,569 | 33,408 | 75,737 | 15,180 | 639,977 |
ACCUMULATED DEPRECIATION AND IMPAIRMENT | |||||||
At 1 January 2021 | (114,675) | (29,788) | (31,974) | (11,513) | (36,480) | (160) | (224,590) |
Depreciation charge | (28,408) | (10,709) | (9,513) | (4,044) | (10,865) | − | (63,539) |
Impairment charge | (3,160) | (872) | (585) | (27) | (196) | (131) | (4,971) |
Reversal of impairment | 1,829 | 9 | 4 | 22 | 2 | − | 1,866 |
Disposals | 4,539 | 5,161 | 3,946 | 808 | 3,745 | 198 | 18,397 |
At 31 December 2021 | (139,875) | (36,199) | (38,122) | (14,754) | (43,794) | (93) | (272,837) |
Depreciation charge | (29,678) | (11,789) | (9,842) | (4,917) | (11,295) | − | (67,521) |
Impairment charge | (4,766) | (567) | (300) | − | (234) | (81) | (5,948) |
Reversal of impairment | 1,043 | − | − | − | − | − | 1,043 |
Transfer to investment property | 911 | − | − | − | − | − | 911 |
Disposals | 10,351 | 3,424 | 2,246 | 1,394 | 2,457 | 115 | 19,987 |
At 31 December 2022 | (162,014) | (45,131) | (46,018) | (18,277) | (52,866) | (59) | (324,365) |
Net book value at 31 December 2022 | 184,717 | 39,221 | 38,551 | 15,131 | 22,871 | 15,121 | 315,612 |
Net book value at 31 December 2021 | 201,074 | 40,627 | 41,716 | 15,793 | 24,601 | 8,333 | 332,144 |
Net book value at 1 January 2021 | 201,870 | 36,199 | 40,754 | 14,160 | 22,610 | 7,114 | 322,707 |
Depreciation charge, impairment charge and reversal of impairment were included in selling, general and administrative expenses in the consolidated statement of profit or loss for the years ended 31 December 2022 and 31 December 2021.
Construction in progress predominantly related to the development of stores through the use of sub-contractors.
The buildings are mostly located on leased land. No loans were collateralised by land and buildings including investment property as of 31 December 2022 and 31 December 2021.
Impairment test
At the end of 2022 management performed an impairment test of property, plant and equipment, right-of-use assets, other intangible assets and investment property. The approach for determination of the recoverable amount of an asset was different for each class of property, plant and equipment, right-of-use assets, other intangible assets and investment property.
The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally at the individual store/unit level (cash generating unit − CGU). The variability of these factors depends on a number of conditions, including uncertainty about future events and changes in demand.
The impairment review has been carried out by comparing recoverable amount of the individual store/unit with their carrying values. The recoverable amount of store/unit is determined as the higher of fair value less cost of disposal or value in use.
The resulting impairment charge arose primarily from underperforming stores and Karusel transformation. At the same time the Group recognised the reversal of previously recorded impairment charges due to improved performance of certain stores. Due to the great number of CGUs being tested for impairment it is considered impracticable to disclose detailed information for each individual CGU.
Fair value of land and buildings and construction in progress is determined by management internal specialists by reference to current observable prices on an active market subsequently adjusted for specific characteristics of respective assets. The fair value measurement of these assets is classified at level 3 of the fair value hierarchy.
Value in use
For property, plant and equipment, right-of-use assets, other intangible assets and investment property the discounted future cash flow approach is applied and covers a 10-year period from 2023 onwards. The Group believes that use of 10 year forecast better reflects expected future cash flows of its cash generating units due to cyclical nature of their renovation expenditures. The future cash flows are based on the current budgets and forecasts approved by the management. For the forecast period, the data of the strategic business plan is extrapolated based on the consumer price indices as obtained from external resources and key performance indicators inherent to the strategic plan. One of the main assumptions used for the forecast period is revenue growth being in the range from 4.00% to 6.91% in accordance with the internal forecasts based on budget and consumer price index projections (31 December 2021: 4.00% to 7.86%). For the years beyond the forecast period the long-term consumer price index forecast of 4.00% at 31 December 2022 is used (31 December 2021: 4.00%). The projections are made in the functional currency of the Group’s entities, being Russian Rouble, on a pre-tax basis and discounted at the Group pre-tax weighted average cost of capital which is then adjusted to reflect the risks specific to the respective assets (cash-generating units (CGUs)) − 15.92% (31 December 2021: 13.39%). Inflation rates are in line with the consumer price index forecast published by the Ministry of Economic Development of Russian Federation. The Group’s management believes that all of its estimates are reasonable and consistent with the internal reporting and reflect management’s best knowledge.
The result of applying discounted cash flows model reflects expectations about possible variations in the amount and timing of future cash flows and is based on reasonable and supportable assumptions that represent management’s best estimate of the range of uncertain economic conditions. If the revised estimated discount rate consistently applied to the discounted cash flows had been 200 b.p. higher than management’s estimates, the Group would need to reduce the carrying value of property, plant and equipment, right-of-use assets, investment property and intangible assets by RUB 1,994 (31 December 2021: RUB 1,544), if 200 b.p. lower − increase by RUB 1,581 (31 December 2021: RUB 1,198). If the annual revenue growth rate used in calculations of value in use had been 200 b.p. higher, the Group would need to increase the carrying value of property, plant and equipment, right-ofuse assets, investment property and intangible assets by RUB 157 (31 December 2021: RUB 809), lower − decrease by RUB 164 (31 December 2021: RUB 1,026).
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
11
Leases
Group as a lessee
The Group has lease contracts for land and buildings used in its operations. Leases of land and buildings generally have fixed lease terms between 5 and 45 years and contain extension options provided by the law. However vast majority of lease contracts include cancellation options on 2–12 months’ notice.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor.
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:
Right-of-use assets (land and buildings) |
Lease liabilities |
|
---|---|---|
At 1 January 2022 | 502,325 | (577,363) |
Additions | 64,489 | (64,059) |
Acquisition of businesses (Note 7) | 22,635 | (22,467) |
Depreciation expense | (75,958) | − |
Impairment charge | (3,239) | − |
Reversal of impairment | 1,788 | − |
Derecognition (decrease in the scope of the lease and terminations of lease agreements) | (3,497) | 6,048 |
Interest accrued | − | (49,880) |
Payments | − | 115,894 |
Effect of changes in foreign exchange rates | − | 667 |
At 31 December 2022 | 508,543 | (591,160) |
Right-of-use assets (land and buildings) |
Lease liabilities |
|
---|---|---|
At 1 January 2021 | 480,511 | (548,501) |
Additions | 96,964 | (96,555) |
Acquisition of businesses (Note 7) | 3,928 | (3,928) |
Depreciation expense | (74,601) | − |
Impairment charge | (1,596) | − |
Reversal of impairment | 966 | − |
Derecognition (decrease in the scope of the lease and terminations of lease agreements) | (3,847) | 6,787 |
Interest accrued | − | (40,572) |
Payments | − | 105,182 |
Effect of changes in foreign exchange rates | − | 224 |
At 31 December 2021 | 502,325 | (577,363) |
The expenses related to short-term leases for the year ended 31 December 2022 amounted to RUB 100 (31 December 2021: 97). The expense related to variable lease payments not included in the measurement of lease liabilities for the year ended 31 December 2022 amounted to RUB 19,825 (31 December 2021: 14,444). Variable lease payments are mainly linked to sales generated from a store. Variable payment terms are used for a variety of reasons, including minimising the fixed costs base.
The total cash outflow for leases for the year ended 31 December 2022 amounted to RUB 135,546 (2021: RUB 119,238).
Maturity analysis of the lease liabilities is disclosed in the Note 31.
As at 31 December 2022 potential future cash outflows of RUB 3,529 (undiscounted) (31 December 2021: 3,134) have not been included in the lease liability because it was assessed reasonably certain that the leases will be terminated.
In an ordinary course of the business the Group constantly arranges for leases of new premises and land. As at 31 December 2022 and 31 December 2021 the Group had a certain number of leases to which the Group was committed but the lease did not commence. The Group assesses that the amount of future cash outflows to which the lessee is potentially exposed is not significant.
In 2022 the Group completed a sale and leaseback transaction in respect of a number of stores located in Bashkortostan. The cash proceeds amounted to RUB 970 recognised in the consolidated statement of cash flows, the loss from sale amounted to RUB 25 recognised in the consolidated statement of profit or loss for the year ended 31 December 2022. When measuring the lease liability, the Group included fixed lease payments per lease agreement and the estimate of variable payments calculated as a percentage of the expected revenue generated from the leased asset. The lease term of the leaseback was 14 years.
In 2021 the Group completed a sale and leaseback transaction in respect of a store located in Saint- Petersburg. The cash proceeds amounted to RUB 594 recognised in the consolidated statement of cash flows and gain amounted to RUB 124 recognised in the consolidated statement of profit or loss for the year ended 31 December 2021. When measuring the lease liability, the Group included fixed lease payments per lease agreement and the estimate of variable payments calculated as a percentage of the expected revenue generated from the leased asset. The lease term of the leaseback was 12 years.
Group as a lessor
The lease arrangements are operating leases, the majority of which are short-term. The future minimum lease and sublease payments receivable under operating leases were as follows:
31 December 2022 |
31 December 2021 |
|
---|---|---|
Within 1 year | 3,382 | 2,928 |
Between 1 and 2 years | 638 | 403 |
Between 2 and 3 years | 432 | 329 |
Between 3 and 4 years | 315 | 272 |
Between 4 and 5 years | 212 | 138 |
Later than 5 years | 364 | 418 |
Total | 5,343 | 4,488 |
The rental income from operating leases recognised in the consolidated statement of profit or loss for the year ended 31 December 2022 amounted to RUB 7,214 (2021: RUB 7,007) (Note 26). The contingent rents recognised in the consolidated statement of profit or loss in the year ended 31 December 2022 amounted to RUB 221 (2021: 202).
Income from subleasing right-of-use assets under operating lease agreement for the year ended 31 December 2022 amounted to RUB 2,763 (2021: RUB 2,618).
Impairment test
At the end of 2022 management performed an impairment test of right-of-use assets. The evaluation performed and reasons for it are consistent with the approach for impairment testing of Property, Plant and Equipment (Note 10).
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
12
Investment properties
Depreciation charge, impairment charge and reversal of impairment are included in selling, general and administrative expenses in the consolidated statement of profit or loss for the years ended 31 December 2022 and 31 December 2021.
The Group’s investment properties consist of land and buildings. Rental income from investment property amounted to RUB 1,165 (2021: RUB 1,140). Direct operating expenses incurred by the Group in relation to investment property amounted to RUB 937 (2021: RUB 796). There were no significant direct operating expenses incurred by the Group in relation to investment property that did not generate rental income.
Management estimates that the fair value of investment property at 31 December 2022 amounted to RUB 6,861 (31 December 2021: RUB 6,700). The fair value was estimated using market approach with key inputs being rent income rates and market value of comparable assets.
Impairment test
At the end of 2022 management performed an impairment test of investment property. The evaluation performed and reasons for it are consistent with the approach for impairment testing of Property, Plant and Equipment (Note 10).
The Group held the following investment properties at 31 December 2022 and 31 December 2021:
2022 | 2021 | |
---|---|---|
COST | ||
Cost at 1 January | 7,909 | 8,356 |
Transfer from fixed assets | 1,605 | − |
Disposals | (467) | (447) |
Cost at 31 December | 9,047 | 7,909 |
ACCUMULATED DEPRECIATION AND IMPAIRMENT | ||
Accumulated depreciation and impairment at 1 January | (3,448) | (3,854) |
DispoDepreciation chargesals | (176) | (169) |
Impairment charge | (483) | (65) |
Reversal of impairment | 251 | 408 |
Transfer from fixed assets | (911) | − |
Disposals | 293 | 232 |
Accumulated depreciation and impairment at 31 December | (4,474) | (3,448) |
Net book value at 31 December | 4,573 | 4,461 |
Net book value at 1 January | 4,461 | 4,502 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
13
Goodwill
Goodwill impairment test
For the purposes of impairment testing, goodwill is allocated to groups of cash-generating units (groups of CGUs) being store chains of each format and dark kitchens. This represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.
The group of CGUs to which goodwill has been allocated is tested for impairment annually or more frequently if there are indications that the particular group of CGUs might be impaired. Goodwill is tested for impairment at the group of CGUs level by comparing carrying values of particular group of CGU assets including allocated goodwill to their value in use. The Karusel group of CGUs started reorganisation in 2019. The reorganisation is expected to be finalised in 2023. The reorganisation resulted in disposal of goodwill allocated to Karusel in amount of RUB 6,567 and its accumulated impairment in the same amount and impairment charge for the year ended 31 December 2022 in amount of RUB 255 (2021: RUB 980).
Movements in goodwill arising on the acquisition of businesses at 31 December 2022 and 31 December 2021 were:
2022 | 2021 | |
---|---|---|
COST | ||
Gross book value at 1 January | 172,099 | 171,202 |
Acquisition of businesses (Note 7) | 8,176 | 1,118 |
Disposals | (6,567) | (221) |
Gross book value at 31 December | 173,708 | 172,099 |
ACCUMULATED DEPRECIATION AND IMPAIRMENT | ||
Accumulated impairment losses at 1 January | (67,071) | (66,312) |
Impairment charge | (275) | (980) |
Disposals | 6,567 | 221 |
Accumulated impairment losses at 31 December | (60,779) | (67,071) |
Carrying amount at 1 January | 105,028 | 104,890 |
Carrying amount at 31 December | 112,929 | 105,028 |
Value in use
For items of land, buildings and construction in progress the discounted future cash flow approach is applied and covers a 10-year period from 2023 onwards. The Group believes that use of 10 year forecast better reflects expected future cash flows of its cash generating units due to cyclical nature of their renovation expenditures. The future cash flows are based on the current budgets and forecasts approved by the management. For the forecast period, the data of the strategic business plan are extrapolated based on the consumer price indices as obtained from external resources and key performance indicators inherent to the strategic plan. One of the main assumptions used for the forecast period is revenue growth being in the range from 4.00% to 6.91% in accordance with the internal forecasts based on budget and consumer price index projections (31 December 2021: 4.00% to 7.86%). For the years beyond the forecast period the long-term consumer price index forecast of 4.00% at 31 December 2022 is used (31 December 2021: 4.00%). The projections are made in the functional currency of the Group’s entities, being Russian Rouble, on a pre-tax basis and discounted at the Group pre-tax weighted average cost of capital which is then adjusted to reflect the risks specific to the respective assets (cash-generating units (CGUs)) — 15.92%
(31 December 2021: 13.39%). Inflation rates are in line with the consumer price index forecast published by the Ministry of Economic Development of Russian Federation. The Group’s management believes that all of its estimates are reasonable and consistent with the internal reporting and reflect management’s best knowledge.
The changes in assumptions applied in the model used for impairment testing do not indicate any trigger for impairment because the fair value less cost of disposal and the value in use are significantly higher than the carrying values of the cash generating unit assets.
The result of applying discounted cash flows model reflects expectations about possible variations in the amount and timing of future cash flows and is based on reasonable and supportable assumptions that represent management’s best estimate of the range of uncertain economic conditions.
The allocation of carrying amounts of goodwill to each group of CGUs was as follows:
Pyaterochka | Perekrestok | Other | Total | |
---|---|---|---|---|
31 December 2022 | ||||
Goodwill | 81,258 | 23,334 | 8,337 | 112,929 |
31 December 2021 | ||||
Goodwill | 80,756 | 23,334 | 938 | 105,028 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
14
Other intangible assets
The majority of additions of software are represented with internally generated development costs. Brand and private labels includes brand “Pyaterochka” with the carrying amount of RUB 4,029 (31 December 2021: RUB 4,029), brand “Karusel” with the carrying amount of RUB 42 (31 December 2021: RUB 298) and brands “Krasny Yar”, “Baton”, “Slata”, “KhlebSol” with the carrying amount of RUB 1,630.
Amortisation charge, impairment charge and reversal of impairment are included in selling, general and administrative expenses in the consolidated statement of profit or loss for the years ended 31 December 2022 and 31 December 2021.
Impairment test
At the end of 2022 management performed an impairment test of brands.
For private labels the evaluation performed and reasons for it are consistent with the approach for impairment testing of property, plant and equipment (Note 10). For brands, which are tested annually for impairment, evaluation performed is consistent with the approach for goodwill (Note 13).
Also the Group recognised an impairment of software which was no longer used.
Other intangible assets comprise the following:
Brand and private labels | Software and other | Total | |
---|---|---|---|
COST | |||
At 1 January 2021 | 16,843 | 42,302 | 59,145 |
Additions | − | 16,520 | 16,520 |
Acquisition of businesses (Note 7) | − | 10 | 10 |
Disposals | − | (415) | (415) |
At 31 December 2021 | 16,843 | 58,417 | 75,260 |
Additions | − | 12,221 | 12,221 |
Assets from acquisitions | 1,725 | 138 | 1,863 |
Disposals | − | (5,057) | (5,057) |
At 31 December 2022 | 18,568 | 65,719 | 84,287 |
ACCUMULATED AMORTISATION AND IMPAIRMENT | |||
At 1 January 2021 | (12,439) | (15,949) | (28,388) |
Amortisation charge | (76) | (7,846) | (7,922) |
Impairment charge | − | (352) | (352) |
Disposals | − | 408 | 408 |
At 31 December 2021 | (12,515) | (23,739) | (36,254) |
Amortisation charge | (352) | (10,291) | (10,643) |
Impairment charge | − | (3,918) | (3,918) |
Disposals | − | 4,855 | 4,855 |
At 31 December 2022 | (12,867) | (33,093) | (45,960) |
Net book value at 31 December 2022 | 5,701 | 32,626 | (45,960) |
Net book value at 31 December 2021 | 4,328 | 34,678 | 39,006 |
Net book value at 1 January 2021 | 4,404 | 26,353 | 30,757 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
15
Inventories
At 31 December 2022 inventories in the amount of RUB 208,661 were accounted at the lower of cost and net realisable value (31 December 2021: RUB 166,840). Write- off of inventory to net realisable value at 31 December 2022 amounted to RUB 2,877 (31 December 2021: RUB 3,021). At 31 December 2022 and 31 December 2021 inventories consisted mainly of goods for resale.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
16
Financial instruments by category
31 Dec 2022 | 31 Dec 2021 | |
---|---|---|
FINANCIAL ASSETS AT AMORTISED COST | ||
Assets as per consolidated statement of financial position | ||
Short-term financial investments | 50,067 | 50,092 |
Trade and other receivables excluding prepayments | 15,462 | 15,338 |
Cash and cash equivalents | 43,255 | 26,062 |
Total | 108,784 | 91,492 |
31 Dec 2022 | 31 Dec 2021 | |
---|---|---|
FINANCIAL ASSETS AT AMORTISED COST | ||
Assets as per consolidated statement of financial position | ||
Lease liabilities | 591,160 | 577,363 |
Borrowings | 234,532 | 294,338 |
Interest accrued | 1,143 | 1,792 |
Trade, other current and non-current payables excluding statutory liabilities and advances | 324,382 | 290,074 |
Total | 1,151,217 | 1,163,567 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
17
Trade, other accounts receivable
and prepayments
31 Dec 2022 | 31 Dec 2021 | |
---|---|---|
Trade accounts receivable | 13,123 | 11,499 |
Other receivables | 3,117 | 4,658 |
Allowance for expected credit losses of trade and other receivables | (778) | (819) |
Total trade and other accounts receivable | 15,462 | 15,338 |
Prepayments | 4,631 | 4,327 |
Advances made to trade suppliers | 2,076 | 1,086 |
Allowance for impairment of prepayments and advances | (561) | 1,086 |
Total prepayments | 5,920 | 4,852 |
Total | 21,382 | 20,190 |
The carrying amounts of the Group’s trade and other receivables were primarily denominated in Russian Roubles. Trade receivables and other receivables are non-interest bearing and are generally on terms of 30 to 90 days.
Trade receivables
Trade receivables are mainly bonuses from suppliers of goods for resale with a low historic default rate. The maximum exposure to credit risk at the reporting date was the carrying amount of each class of receivable. The Group did not hold any collateral as security.
Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:
Expected credit loss rate at 31 December 2022 |
Estimated total gross carrying amount at default 31 December 2022 |
Expected credit loss 31 December 2022 |
Expected credit loss rate at 31 December 2021 |
Estimated total gross carrying amount at default 31 December 2021 |
Expected credit loss 31 December 2021 |
|
---|---|---|---|---|---|---|
Not overdue − 1 month | 0.16% | 12,582 | 20 | 0.28% | 11,018 | 31 |
1–6 months | 2.80% | 214 | 6 | 3.91% | 256 | 10 |
6–12 months | 40.32% | 62 | 25 | 45.16% | 62 | 28 |
Over 1 year | 75.85% | 265 | 201 | 71.17% | 163 | 116 |
Total | 13,123 | 252 | 11,499 | 185 |
Movements on the allowance for expected credit losses of trade receivables were as follows:
2022 | 2021 | |
---|---|---|
At 1 January | (185) | (472) |
Addition of allowance for expected credit losses | (308) | (110) |
Release of allowance for expected credit losses | 30 | 104 |
Trade receivables written off as uncollectable | 211 | 293 |
At 31 December | (252) | (185) |
The creation and release of the allowance for expected credit losses have been included in net impairment losses on financial assets in the consolidated statement of profit or loss.
Other receivables
The maximum exposure to credit risk at the reporting date was the carrying amount of each class of receivable. The Group did not hold any collateral as security.
Set out below is the information about the credit risk exposure on the Group’s other receivables using a provision matrix:
Expected credit loss rate at 31 December 2022 |
Estimated total gross carrying amount at default 31 December 2022 |
Expected credit loss 31 December 2022 |
Expected credit loss rate at 31 December 2021 |
Estimated total gross carrying amount at default 31 December 2021 |
Expected credit loss 31 December 2021 |
|
---|---|---|---|---|---|---|
Not overdue − 1 month | 0.41% | 1,930 | 8 | 0.85% | 2,695 | 23 |
1–6 months | 11.98% | 668 | 80 | 9.07% | 739 | 67 |
6–12 months | 43.37% | 83 | 36 | 44.12% | 204 | 90 |
Over 1 year | 92.20% | 436 | 402 | 44.51% | 1,020 | 454 |
Total | 3,117 | 526 | 4,658 | 634 |
Movements on the allowance for expected credit losses of other receivables were as follows:
2022 | 2021 | |
---|---|---|
At 1 January | (634) | (609) |
Addition of allowance for expected credit losses | (270) | (356) |
Release of allowance for expected credit losses | 202 | 208 |
Trade receivables written off as uncollectable | 176 | 123 |
At 31 December | (526) | (634) |
The creation and release of the allowance for expected credit losses have been included in net impairment losses on financial assets in the consolidated statement of profit or loss.
Prepayments and advances made to trade suppliers
The creation and release of the allowance for impaired prepayments have been included in general and administrative costs in the consolidated statement of profit or loss.
The individually impaired prepayments mainly related to debtors that expected financial difficulties or there was likelihood of the debtor’s insolvency. It was assessed that a portion of the prepayments was expected to be recovered.
Movements on the allowance for expected credit losses of other receivables were as follows:
2022 | 2021 | |
---|---|---|
At 1 January | (561) | (500) |
Addition of allowance for prepayments and advances to trade suppliers impairment | (545) | (372) |
Release of allowance for prepayments and advances to trade suppliers impairment | 133 | 151 |
Prepayments and advances to trade suppliers written off as uncollectable | 186 | 160 |
At 31 December | (787) | (561) |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
18
VAT and other taxes receivable
31 December 2022 | 31 December 2021 | |
---|---|---|
VAT receivable | 8,794 | 8,462 |
Other taxes receivable | 213 | 340 |
Total | 9,007 | 8,802 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
19
Provisions and other liabilities
31 December 2022 | 31 December 2021 | |
---|---|---|
Other accounts payable and accruals | 34,212 | 31,896 |
Accrued salaries and bonuses | 28,266 | 26,153 |
Accounts payable for property, plant and equipment | 15,837 | 16,191 |
Taxes other than income tax | 37,872 | 21,261 |
Advances received | 1,796 | 1,680 |
Payables to landlords | 1,771 | 1,443 |
Provisions and liabilities for tax uncertainties (Note 35) | 10,696 | 6,049 |
Total | 130,450 | 104,673 |
There were no significant amounts of other payables to foreign counterparties as at 31 December 2022 and 31 December 2021.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
20
Contract liabilities
31 December 2022 | 31 December 2021 | |
---|---|---|
Short-term contract liabilities | ||
Short-term contract liabilities related to loyalty programmes | 3,487 | 2,146 |
Advances received from wholesales customers | 42 | 40 |
Advances received from other customers | 238 | 206 |
Total | 3,767 | 2,392 |
Movements in short-term contract liabilities related to loyalty programmes comprise the following:
2022 | 2021 | |
---|---|---|
At 1 January | 2,146 | 1,955 |
Deferred during the year | 11,949 | 2,146 |
Recognised at acquisition of businesses (Note 7) | 26 | − |
Recognised as revenue during the year | (10,634) | (1,955) |
At 31 December | 3,487 | 2,146 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
21
Borrowings
In December 2022 the Group issued RUB 20,000 exchange-registered corporate bonds series 002P-02 with 8.90% coupon rate with put-option in 2.5 years and RUB 14,000 exchange-registered corporate bonds series 002P- 03 with 8.68% coupon rate with call-option in 2.25 years.
The weighted average effective interest rate on X5’s total borrowings for the year ended 31 December 2022 comprised 8.64% per annum (year ended 31 December 2021: 6.56%).
All borrowings at 31 December 2022 are shown net of related transaction costs of RUB 129 which are amortised over the term of the loans using the effective interest method (31 December 2021: RUB 119).
Borrowing costs capitalised for the year ended 31 December 2022 amounted to RUB 13 (for year ended 31 December 2021: RUB 24). The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation was approximate to weighted average effective interest rate for the period.
Change in total borrowings in amount of RUB 59,806 in 2022 equals to the proceeds from borrowings in amount of RUB 148,974, repayment of borrowings in amount of RUB 210,615 (the Consolidated Statement of Cash Flows), increase due to acquisitions during the year recorded as part of the purchase price allocation (Note 7) in the amount of RUB 1,819 and other non-cash movements in amount of RUB 70 plus amortisation of transaction costs in amount of RUB 86. Changes in lease liabilities which also form liabilities arising from financing activities are disclosed in the Note 11.
The Group had the following borrowings at 31 December 2022 and 31 December 2021:
FAIR VALUE | CARRYING VALUE | |||||
---|---|---|---|---|---|---|
Final maturity year | 2022 | 2021 | 2022 | 2021 | ||
CURRENT | ||||||
RUB Bonds X5 Finance series BО-07 | − | 5,023 | − | 5,000 | ||
RUB Bonds X5 Finance series 001P-06 | − | 9,920 | − | 9,999 | ||
RUB Bonds X5 Finance series 001P-05 | − | 5,017 | − | 4,999 | ||
RUB Bonds X5 Finance series 001Р-10 | − | 9,875 | − | 9,998 | ||
RUB Bonds X5 Finance series 001Р-07 | − | 4,967 | − | 4,999 | ||
RUB Bonds X5 Finance series BО-05 | 2023 | 9 | − | 9 | − | |
RUB Bonds X5 Finance series BО-04 | − | 2,091 | − | 2,150 | ||
RUB Bonds X5 Finance series BО-06 | − | 1,201 | − | 1,201 | ||
RUB Bonds X5 Finance series 001Р-11 | − | 9,726 | − | 9,994 | ||
RUB Bonds X5 Finance series 001Р-08 | − | 4,915 | − | 4,998 | ||
RUB Bonds X5 Finance series 001Р-09 | − | 4,915 | − | 4,998 | ||
RUB Bonds X5 Finance series 001P-01 | 2023 | 96 | − | 96 | − | |
RUB Bonds X5 Finance series 001P-03 | 2023 | 51 | − | 48 | − | |
RUB Bonds X5 Finance series 001Р-12 | 2023 | 9,906 | − | 9,996 | − | |
RUB Bonds X5 Finance series 001P-02 | 2023 | 7 | − | 8 | − | |
RUB Bilateral Loans | 2023 | 76,989 | 29,431 | 76,989 | 29,431 | |
Total current borrowings | 87,058 | 87,081 | 87,146 | 87,767 |
Change in total borrowings in amount of RUB 32,391 in 2021 equals to the proceeds from borrowings in amount of RUB 132,345, repayment of borrowings in amount of RUB 99,585 (the Consolidated Statement of Cash Flows) and other non-cash movements in amount of RUB 447 plus amortisation of transaction costs in amount of RUB 78. Changes in lease liabilities which also form liabilities arising from financing activities are disclosed in the Note 11.
In accordance with a few loan agreements, the Group maintains an optimal leverage ratio by tracking covenant: the maximum level of Net Debt/EBITDA pre-IFRS 16 (4.00/4.25 during 2 quarters after acquisition). At 31 December 2022 the Group complied with this covenant and Net Debt/EBITDA pre-IFRS 16 was equal to 1.02 (31 December 2021: 1.67). Metric EBITDA specified in all loan agreements is equal to EBITDA pre-IFRS 16 (for calculation please refer to Note 5).
FAIR VALUE | CARRYING VALUE | |||||
---|---|---|---|---|---|---|
Final maturity year | 2022 | 2021 | 2022 | 2021 | ||
NON-CURRENT | ||||||
RUB Bonds X5 Finance series BО-05 | − | 8 | − | 9 | ||
RUB Bonds X5 Finance series 001P-01 | − | 98 | − | 96 | ||
RUB Bonds X5 Finance series 001P-02 | − | 7 | − | 8 | ||
RUB Bonds X5 Finance series 001P-03 | − | 43 | − | 48 | ||
RUB Bonds X5 Finance series 001P-12 | − | 9,609 | − | 9,989 | ||
RUB Bonds X5 Finance series 002P-01 | 2024 | 9,860 | 9,951 | 9,992 | 9,998 | |
RUB Bonds X5 Finance series 002P-02 | 2025 | 19,972 | − | 19,956 | − | |
RUB Bonds X5 Finance series 002P-03 | 2025 | 13,930 | − | 13,969 | − | |
RUB Bilateral Loans | 2025 | 101,279 | 179,255 | 103,469 | 186,423 | |
Total non-current borrowings | 145,041 | 198,971 | 147,386 | 206,571 | ||
Total borrowings | 232,099 | 286,052 | 234,532 | 294,338 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
22
Share capital
As at 31 December 2022 the Group had 190,000,000 authorised ordinary shares (31 December 2021: 190,000,000) of which 67,888,696 ordinary shares were outstanding (31 December 2021: 67,888,696) and 4,521 ordinary shares in amount of RUB 41 were held as treasury stock (31 December 2021: 4,521 ordinary shares in amount of RUB 41). The nominal par value of each ordinary share is EUR 1.
Dividends approved for distribution at the General Meeting in May 2021 have been paid in the amount of RUB 30,006 during the year ended 31 December 2021 (RUB 441.99 per share).
In December 2021 interim dividends proposed by the Supervisory Board for the nine months ended 30 September 2021 have been paid in amount of RUB 20,000 (RUB 294.60 per share).
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
23
Earnings per share
Basic earnings 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.
Earnings per share were calculated as follows:
2022 | 2021 | |
---|---|---|
Profit attributable to equity holders of the parent | 45,199 | 42,738 |
Weighted average number of ordinary shares in issue | 67,888,696 | 67,886,315 |
Effect of share options granted to employees, number of shares | − | 1,801 |
Weighted average number of ordinary shares for the purposes of diluted earnings per share | 67,888,696 | 67,888,116 |
Basic earnings per share for profit (expressed in RUB per share) | 665.78 | 629.55 |
Diluted earnings per share for profit (expressed in RUB per share) | 665.78 | 629.54 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
24
Revenue
2022 | ||||
---|---|---|---|---|
Pyaterochka | Perekrestok | Other segments | Total | |
Revenue from sale of goods through own stores (at a point of time) | 2,089,270 | 385,025 | 87,798 | 2,562,093 |
Revenue from sale of goods through franchisees (at a point of time) | 33,523 | 470 | − | 33,993 |
Revenue from wholesale of goods (at a point of time) | 572 | 104 | 3,571 | 4,247 |
Revenue from other services (over time) | 1,252 | 600 | 3,047 | 4,899 |
Total | 2,124,617 | 386,199 | 94,416 | 2,605,232 |
2021 | ||||
---|---|---|---|---|
Pyaterochka | Perekrestok | Other segments | Total | |
Revenue from sale of goods through own stores (at a point of time) | 1,770,731 | 348,553 | 51,858 | 2,171,142 |
Revenue from sale of goods through franchisees (at a point of time) | 22,946 | 389 | − | 23,335 |
Revenue from wholesale of goods (at a point of time) | 372 | 1,596 | 3,558 | 5,526 |
Revenue from other services (over time) | 969 | 562 | 3,285 | 4,899 |
Total | 1,795,018 | 351,100 | 58,701 | 2,204,819 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
25
Expenses by nature
2022 | 2021 | |
---|---|---|
Cost of goods sold | 1,893,469 | 1,580,063 |
Staff costs (Note 28) | 248,368 | 218,948 |
Lease expenses (Note 11) | 19,925 | 14,541 |
Depreciation, amortisation | 153,950 | 145,554 |
Impairment of non-current assets | 10,781 | 4,724 |
Other store costs | 34,693 | 31,430 |
Utilities | 54,147 | 47,935 |
Net impairment losses on financial assets | 346 | 154 |
Other | 74,460 | 67,775 |
Total | 2,490,139 | 2,111,124 |
Other expenses included impairment of prepayments in amount to RUB 412 in 2022 (2021: RUB 221)
The fees listed below related to the procedures applied to the Group by accounting firms and external auditors as referred to in article 1(1) of the Dutch Accounting Firms Oversight Act (Dutch acronym: Wta):
2022 | 2021 | |
---|---|---|
Audit of financial statements | 77 | 70 |
Other assurance services performed by other companies being part of external auditor’s network | 4 | 7 |
Non-audit services by other companies being part of external auditor’s network | 48 | 43 |
Total | 129 | 120 |
In addition to the statutory audit of the financial statements the members of the group, comprising the external auditor entity in Russia provided non-audit services in the areas of retail pricing proof and business trainings.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
26
Lease/sublease and other income
2022 | 2021 | |
---|---|---|
Lease/sublease income (Note 11) | 7,214 | 7,007 |
Income from sales of waste | 8,391 | 8,412 |
Gain on derecognition of right-of-use assets and lease liabilities | 2,551 | 2,940 |
Other | 4,869 | 5,518 |
Total | 23,025 | 23,877 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
27
Finance income and costs
2022 | 2021 | |
---|---|---|
Interest expense on lease liabilities | 49,877 | 40,562 |
Interest expense on borrowings | 22,535 | 16,412 |
Interest income | (5,248) | (154) |
Other finance costs, net | 1,253 | 409 |
Total | 68,417 | 57,229 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
28
Staff costs
Wages and salaries include expenses for outstaffing and outsourcing services. Wages and salaries in 2022 included expenses of RUB 2,171 related to the long-term incentive programme (LTI) for key employees, including members of the Management Board, other key management and other key employees (2021: RUB 2,535). The liability for LTI in amount of RUB 3,869 (including social security costs) was included in other non-current liabilities in the consolidated statement of financial position as at 31 December 2022 (31 December 2021: RUB 1,525) and in amount of RUB 105 (including social security costs) in provisions and other liabilities in the consolidated statement of financial position (31 December 2021: RUB 2,403).
Social security costs in 2022 included pension contributions amounted to RUB 35,178 (2021: RUB 32,052).
The number of employees as at 31 December 2022 amounted to 353,196 (31 December 2021: 340,928).
2022 | 2021 | |
---|---|---|
Wages and salaries | 194,883 | 171,225 |
Social security costs | 53,472 | 47,634 |
Share-based payments expense | 13 | 89 |
Total | 248,368 | 218,948 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
30
Income tax
2022 | 2021 | |
---|---|---|
Current income tax charge | 21,186 | 22,190 |
Deferred income tax charge / (benefit) | 1,295 | (4,186) |
Income tax charge for the year | 22,481 | 18,004 |
The theoretical and effective tax rates are reconciled as follows:
2022 | 2021 | |
---|---|---|
Profit before taxation | 67,669 | 60,742 |
Theoretical tax at the effective statutory rate | 13,534 | 12,148 |
Tax effect of items which are not deductible or assessable for taxation purposes | ||
Current tax on dividends distributed by the Group’s subsidiaries | − | 5,305 |
Change in deferred tax liability associated with investments in subsidiaries | − | (1,580) |
Expenses on inventory shortage | 400 | 337 |
Unrecognised tax loss carry forwards for the year | 16 | 153 |
Adjustments in respect of current income tax of previous years | (6) | 14 |
Effect of income taxable at rates different from standard statutory rates | 1,600 | − |
Deferred tax expenses arising from deferred tax asset write down | 1,599 | − |
Other non-deductible expense | 5,338 | 1,627 |
Income tax charge for the year | 22,481 | 18,004 |
As at 31 December 2022 37 Russian subsidiaries of the Group were the members of the CGT (consolidated group of taxpayers) with X5 Corporate Center LLC acting as a responsible CGT member. At 1 January 2023 the CGT agreement was terminated and the former members of the CGT started accounting for income tax on standalone basis.
Deferred income tax
Deferred tax assets and liabilities and the deferred tax charge in the consolidated statement of profit or loss were attributable to the following items for the year ended 31 December 2022:
1 January 2022 |
Credited / (debited) to profit and loss |
Deferred tax on business combinations (Note 7) |
31 December 2022 |
|
---|---|---|---|---|
tax effects of deductible temporary differences and tax loss carry forwards | ||||
Tax losses available for carry forward | 5,369 | (2,675) | − | 2,694 |
Right-of-use assets and lease liabilities | 20,115 | 697 | 128 | 20,940 |
Property, plant and equipment and investment property | 333 | 309 | − | 642 |
Other intangible assets | 53 | 111 | − | 642 |
Inventories | 2,426 | 133 | 20 | 2,579 |
Accounts receivable | 31 | 239 | − | 270 |
Accounts payable | 10,487 | 2,802 | 103 | 13,392 |
Other | 437 | 261 | 5 | 703 |
Gross deferred tax assets | 39,251 | 1,877 | 256 | 41,384 |
Less offsetting with deferred tax liabilities | (16,204) | 2,430 | (128) | (13,902) |
Recognised deferred tax assets | 23,047 | 4,307 | 128 | 27,482 |
1 January 2022 |
Credited / (debited) to profit and loss |
Deferred tax on business combinations (Note 7) |
31 December 2022 |
|
---|---|---|---|---|
tax effects of taxable temporary differences | ||||
Right-of-use assets and lease liabilities | (53) | 3 | (29) | (79) |
Property, plant and equipment and investment property | (8,404) | (3,233) | (217) | (11,854) |
Investments into subsidiary | − | − | − | − |
Other intangible assets | (6,806) | 397 | (288) | (6,697) |
Inventories | − | (10) | − | (10) |
Accounts receivable | (1,698) | (50) | (18) | (1,766) |
Accounts payable | (2) | (338) | − | (340) |
Other | (169) | 59 | − | (110) |
Gross deferred tax assets | (17,132) | (3,172) | (552) | (20,856) |
Less offsetting with deferred tax liabilities | 16,204 | (2,430) | 128 | 13,902 |
Recognised deferred tax assets | (928) | (5,602) | (424) | (6,954) |
The temporary differences associated with investments in the Group’s subsidiaries, for which a deferred tax liability was not recognised at 31 December 2022 amounted to RUB 35,252 (2021: Nil).
Management believes that the future taxable profits in tax jurisdictions that suffered a loss in the current or preceding years will be available to utilise the deferred tax asset of RUB 2,694 recognised at 31 December 2022 for the carry forward of unused tax losses (31 December 2021: RUB 5,369).
The Group estimated unrecognised potential deferred tax assets in respect of unused tax loss carry forwards at 31 December 2022 of RUB 7,984 (31 December 2021: RUB 3,206). At 31 December 2022 and 31 December 2021 unused tax losses had no time restrictions for carry forward.
Deferred tax assets and liabilities and the deferred tax charge in the consolidated statement of
profit or loss were attributable to the following items for the year ended 31 December 2021:
1 January 2022 |
Credited / (debited) to profit and loss |
Deferred tax on business combinations (Note 7) |
31 December 2022 |
|
---|---|---|---|---|
tax effects of deductible temporary differences and tax loss carry forwards | ||||
Tax losses available for carry forward | 5,487 | (118) | − | 5,369 |
Right-of-use assets and lease liabilities | 18,506 | 1,365 | 244 | 20,115 |
Property, plant and equipment and investment property | 276 | 57 | − | 333 |
Other intangible assets | 52 | 1 | − | 53 |
Inventories | 2,293 | 133 | − | 2,426 |
Accounts receivable | 27 | 4 | − | 31 |
Accounts payable | 7,997 | 2,490 | − | 10,487 |
Other | 396 | 41 | − | 437 |
Gross deferred tax assets | 35,034 | 3,973 | 244 | 39,251 |
Less offsetting with deferred tax liabilities | (14,576) | (1,628) | − | (16,204) |
Recognised deferred tax assets | 20,458 | 2,345 | 244 | 23,047 |
1 January 2022 |
Credited / (debited) to profit and loss |
Deferred tax on business combinations (Note 7) |
31 December 2022 |
|
---|---|---|---|---|
tax effects of taxable temporary differences | ||||
Right-of-use assets and lease liabilities | (11) | (42) | − | (53) |
Property, plant and equipment and investment property | (9,559) | 1,155 | − | (8,404) |
Investments into subsidiary | (1,580) | 1,580 | − | − |
Other intangible assets | (4,880) | (1,926) | − | (6,806) |
Accounts receivable | (1,149) | (549) | − | (1,698) |
Accounts payable | (4) | 2 | − | (2) |
Other | (162) | (7) | − | (169) |
Gross deferred tax liabilities | (17,345) | 213 | − | (17,132) |
Less offsetting with deferred tax liabilities | 14,576 | 1,628 | − | 16,204 |
Recognised deferred tax liabilities | (2,769) | 1,841 | − | (928) |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
31
Financial risk management
Financial risk management is a part of integrated risk management and internal control framework described in "Corporate Governance" section of this Annual Report. The primary objectives of the financial risk management are to establish risk limits, and then ensure that exposure to risks stays within these limits.
Financial risk management is carried out by the Group’s centralised Finance Department. The Finance Department monitors and measures financial risks and undertakes steps to limit their influence on the Group’s performance.
-
Market risk
Currency risk
Interest rates risk
-
Credit risk
Financial assets, which are potentially subject to credit risk, consisted principally of cash and cash equivalents and short-term financial investments held in banks, trade and other receivables (Note 9 and Note 17). Due to the nature of its main activities (retail sales to individual customers) the Group had no significant concentration of credit risk. Cash was placed in financial institutions which were considered at the time of deposit to have low risk of default (Note 9).
The Group has policies in place to ensure that in case of credit sales of products and services to wholesale customers and reverse franchise schemes only those counteragents with an appropriate credit history are selected. Although collection of receivables could be influenced by economic factors, management believes that there was no significant risk of loss to the Group beyond the allowance already recorded. In accordance with the Group treasury policies and exposure management practices, counterparty credit exposure limits were continually monitored and no individual exposure was considered significant.
-
Liquidity risk
YEAR ENDED 31 DECEMBER 2022 | During 1 year | In 1 to 5 years | Over 5 years |
---|---|---|---|
Lease liabilities | 122,886 | 418,196 | 318,224 |
Borrowings | 104,323 | 157,776 | − |
Trade payables | 238,641 | − | − |
Other financial liabilities | 80,086 | 5,655 | − |
Total | 545,936 | 581,627 | 318,224 |
YEAR ENDED 31 DECEMBER 2021 | During 1 year | In 1 to 5 years | Over 5 years |
---|---|---|---|
Lease liabilities | 111,953 | 389,062 | 289,176 |
Borrowings | 107,339 | 223,397 | − |
Trade payables | 212,949 | − | − |
Other financial liabilities | 75,683 | 1,442 | − |
Total | 507,924 | 613,901 | 289,176 |
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
33
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group manages total equity attributable to equity holders recognised under IFRS requirements. The Group is in compliance with externally imposed capital requirements.
In accordance with a few loan facilities the Group maintains an optimal leverage ratio by tracking covenant: the maximum level of Net Debt/EBITDA pre-IFRS 16 (4.00/4.25 during two quarters after acquisition). Net debt is calculated as the sum of short-term and long-term borrowings less cash and cash equivalents. Reconciliation of EBITDA pre-IFRS 16 to operating profit is presented in Note 5. This ratio is included as covenants into some of Group’s loan agreements (Note 21). At 31 December 2022 and 31 December 2021 the Group complied with the requirements under the loan facilities.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
34
Fair value of financial instruments
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 best evidence of fair value is price in an active market. An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
The estimated fair values of financial instruments have been determined by the Group using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value.
Financial assets carried at amortised cost
Liabilities carried at amortised cost
The fair value of bonds is based on quoted market prices. Fair values of other liabilities are determined using valuation techniques.
The fair value of bonds traded on the MOEX and the SE is determined based on active market quotations and amounted to RUB 53,831 at 31 December 2022 (31 December 2021: RUB 77,366). The measurement is classified in level 1 of the fair value hierarchy. The carrying value of these bonds amounted to RUB 54,074 at 31 December 2022 (31 December 2021: RUB 78,484) (Note 21). The fair value of long-term borrowings amounted to RUB 101,279 at 31 December 2022 (31 December 2021: RUB 179,255). The measurement is classified in level 3 of the fair value hierarchy and is determined based on expected cash flows discounted using interest rate of similar instruments available on the market. The sensitivity analysis shows that the increase/decrease of the market interest rate by 10% leads to the decrease/increase of fair value of long-term borrowings by RUB 1,304 at 31 December 2022 (31 December 2021: RUB 2,470). The fair value of short-term borrowings was not materially different from their carrying amounts.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
35
Commitments and contingencies
Capital expenditure commitments
Legal contingencies
The Group has been and continues to be the subject of legal proceedings and adjudications from time to time. Management believes that 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 at 31 December 2022.
Tax contingencies, commitments and risks
Russian tax, customs, and currency legislation allows for various interpretations and is subject to frequent amendments. Relevant regional and federal authorities can challenge the Group management interpretation of legislation provisions in the context of the Group’s transactions and operations. The Group includes companies incorporated outside Russia. These companies are subject to tax at the rates prescribed by the legislation of the jurisdiction where the companies are tax residents. According to the Russian legislation, foreign companies of the Group are not subject to profit tax except for cases of withholding tax (i.e. dividends, interest, capital gain, etc.), since tax obligations of the foreign companies of the Group are determined on the assumption that the foreign companies of the Group are not Russian tax residents.
The Russian transfer pricing legislation is to the large extent aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development. Starting from 1 January 2019, a significant number of domestic transactions was excluded from the transfer pricing control in Russia. Only transactions between Russian companies that apply different tax rates on profits or special tax regimes are subject to the rules, and only if income from those transactions exceeds RUB 1 billion per year. Moreover, starting from 1 January 2022, a threshold of RUB 120 million applies for cross-border transactions to be classified as controlled for transfer pricing purposes.
Recent trends of interpretation and application of particular provisions of the Russian tax legislation highlight the fact that tax authorities can enter the more rigid position with regards to the interpretation of the legislation and tax calculations. Therefore, tax authorities can dispute lawfulness of transactions and accounting methods that were previously out of question. As a result, material additional taxes, penalties and fines can be charged. It is impossible to forecast the amount of potential claims and to evaluate the probability of an unfavourable outcome. Generally, tax audits can cover three calendar years preceding the year in which the decision on the performance of audit is adopted. In certain circumstances a tax audit can cover earlier tax periods.
In May 2021 the Federal Law on denunciation of the Double Tax Treaty (DTT) with the Netherlands was adopted, as a result respective DTT expired starting from 2022. These changes do not apply retrospectively to income paid prior to 2022.
MLI standards came into effect on 1 January 2021. The MLI requires the setting of minimum standards — rules that must be observed in order to benefit from reduced rates under a tax treaty. The Russian Federation adopted the following standards:
The principal purpose test means that tax treaty benefits may not be applied if obtaining them was the principal purpose of a transaction.
The simplified limitation on benefits means that reduced rates under a tax treaty may be enjoyed only by "qualified persons" (individuals, a state or political subdivision thereof, public companies, pension funds, non-profit organizations, etc.) and other persons who are not "qualified persons" if they carry on "active business" and the income received is connected to that business. The term "active business" does not include activities of holding companies, intragroup financing, making or managing investments (except for professional participants in the market), etc.
It follows from the above that where income is paid to a foreign company which qualifies for reduced rates or exemption from taxation only on the basis of the provisions of a tax treaty with a specific state, it is essential to ensure compliance both with local law and with the provisions of the MLI as a document that regulates the application of DTTs between specific countries.
In the first half of 2022 the Russian authorities took an array of measures meant to support the population and businesses due to the impact of economic sanctions imposed on the Russian Federation in response to the military operation initiated on 24 February 2022, including a number of tax initiatives which are aimed to shield the business and relevant to the Group:
Management regularly reviews the Group’s taxation compliance with applicable legislation, laws and decrees and current interpretations published by the authorities in the jurisdictions in which the Group has operations. Furthermore, management regularly assesses the potential financial exposure relating to tax contingencies not only for the periods open for tax audit but also for which the three years’ tax inspection right has expired but which, under certain circumstances, may be challenged by the regulatory bodies. From time to time potential exposures and contingencies are identified and at any point in time a number of open matters may exist.
Management estimates that possible exposure in relation to the aforementioned risks, as well as other profits tax and non-profits tax risks (e.g. imposition of additional VAT liabilities), that are more than remote, but for which no liability is required to be recognised under IFRS, could be several times more than accrued liabilities and provisions reflected on the statement of financial position at that date. This estimation is provided for the IFRS requirement for disclosure of possible taxes and should not be considered as an estimate of the Group’s future tax liability.
Notes to the сonsolidated
financial statements
for the year ended 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
36
Subsequent events for the Group
X5 Retail Group N.V.
Company Statement
of Financial Position
at 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
Note |
31 December 2022 |
31 December 2021 |
|
---|---|---|---|
ASSETS Non-current assets |
|||
Financial fixed assets | 38 | 172,552 | 75,516 |
Other non-current assets | 6 | 9 | |
Deferred tax assets | 43 | − | 379 |
172,558 | 75,904 | ||
Current assets | |||
Amounts due from group companies | 3,339 | 3,549 | |
Prepaid expenses | 20 | 8 | |
Other receivables | 20 | 50,627 | |
· Short-term financial investments | 9 | − | 50,092 |
· Other | 20 | 535 | |
Cash and cash equivalents | 1,378 | 5 | |
4,757 | 54,189 | ||
Total assets | 177,315 | 130,093 | |
EQUITY AND LIABILITIES | |||
Paid up and called up share capital | 39 | 5,136 | 5,707 |
Share premium account | 39 | 46,127 | 46,127 |
Share-based payment reserve | 39,41 | − | 118 |
Translation reserve | 39 | (2,678) | (3,249) |
Other capital reserve | 39 | (2,166) | − |
Retained earnings, excluding undistributed profit for the year |
39 | 38,926 | − |
Undistributed profit for the year | 39 | 45,199 | 38,926 |
Total equity | 130,544 | 87,629 | |
Non-current liabilities | |||
Loans from group companies | 40 | − | 1,829 |
Other non-current liabilities | 21 | − | |
21 | 1,829 | ||
Current liabilities | |||
Loans from group companies | 40 | − | 446 |
Amounts due to group companies | 46,006 | 39,698 | |
Accrued expenses and other liabilities | 459 | 491 | |
Current income tax | 285 | − | |
46,750 | 40,635 | ||
Total liabilities | 46,771 | 42,464 | |
Total equity and liabilities | 177,315 | 130,093 |
X5 Retail Group N.V.
Company Statement
of Profit or Loss
at 31 December 2022
expressed in millions of Russian Roubles, unless otherwise stated
Igor
Shekhterman
CHIEF EXECUTIVE OFFICER
31 May 2023
The financial statements are unaudited
Note |
31 December 2022 |
31 December 2021 |
|
---|---|---|---|
Other income | 203 | 877 | |
General and administrative expenses | 42 | (594) | (817) |
Operating (loss)/profit | (391) | 60 | |
Finance income | 2,788 | 885 | |
Finance costs | (64) | (347) | |
Net foreign exchange loss | (674) |