LNTA.L Regulatory News (LNTA)

Lenta Doubles its Total Selling Space Ahead of Schedule

The company has achieved its objective, set three years ago at IPO

St. Petersburg, Russia; 24 November, 2016 - Lenta Ltd (LSE, MOEX: LNTA), one of the largest retail chains in Russia, is pleased to announce the early achievement of its strategic objective to double selling space before the end of 2016.

Lenta has doubled its total selling space to 1,019,968 sq.m, achieving one of the most important strategic targets established at its IPO in March 2014.

Lenta is Russia's fastest growing hypermarket operator and became the country's largest hypermarket chain measured by selling space in 2015. During the first 9 months of 2016, Lenta opened over 60% of the net selling space added in the hypermarket segment by the Top-150 retailers, up from 35% in 20151. Today Lenta accounts for approximately 20% of all hypermarket selling space in Russia2.

Lenta has opened 87 hypermarkets since the beginning of 2014. During this period the company has entered 30 new cities while also strengthening its position in the 45 cities where it was already present. Lenta now has hypermarkets in 32 of the 36 Russian cities with a population above 500,000 and expects to be present in all cities with a population above one million before the end of 2016.

The company expects to open at least 26 more hypermarkets before the end of 2016, including 10 stores through the acquisition of Kesko's food retail business in Russia, which is projected to be completed on 30th November, 2016.

In addition to hypermarkets, Lenta is also rapidly developing its supermarket format. The first pilot supermarket store was opened in Moscow in 2013 - since then the company has opened 43 stores, including 33 stores since its IPO in 2014. Lenta expanded its supermarket business to St Petersburg in 2015 and will open its first supermarkets in Siberia within the next few months. The company plans to open at least twice as many supermarkets this year as in 2015 and to significantly accelerate this rate of openings in 2017.

Lenta has also invested in its distribution network, opening new distribution centres in Moscow, Yekaterinburg, Rostov-on-Don and Tolyatti during the last 3 years. Lenta's supply chain network now has the capacity to serve over 250 hypermarkets and 250 supermarkets, providing a strong foundation for future growth.

Total capital investment by Lenta in the 3 year period 2014-16 is expected to exceed RUB 120 billion3. Lenta's robust low price-low cost business model has enabled the company to increase its rate of investment in 2016 despite the challenging economic environment. In addition to providing 12,0004 new jobs directly since its IPO, Lenta's continued expansion supports many more jobs among its local suppliers and in the construction industry at a time when employment and incomes in the wider economy are under pressure.

Lenta's Chief Executive Officer, Jan Dunning commented: "At the beginning of 2014, we set ourselves the goal of doubling retail space within three years. Many felt that this target was too ambitious, but we were completely confident because we had a clear understanding of how to achieve it. For us, it is important to deliver not just rapid growth, but successful growth - successful for our customers, business partners and shareholders. In the context of such rapid expansion, we continue to be one of the most efficient food retailers in Russia and aim to retain this position.

[1] Lenta share of net selling space added in hypermarket segment in 2015 and 2016 derived from Infoline data.

2 Based on Infoline data.

3 Based on the guidance of RUB 45-50bn for 2016, adjusted upward for the acquisition of Kesko's food retail business in Russia.

4 Calculated as the increase in the number of FTE (full time equivalent) employees between February 28, 2014 and October 30, 2016.

In 2012, just over a year before our IPO, Lenta was Russia's seventh largest retailer in terms of total sales - since then, our expansion enabled us to become the fourth largest retailer in terms of total sales in the third quarter of 20165. We have also become Russia's largest hypermarket operator in terms of selling space, up from third place at the time of our IPO.

The Russian retail market presents the most efficient operators with huge potential for future growth combined with attractive returns. In early 2017 we will present a new long-term strategy, in which we will explain our plans to enable Lenta to realize its full market potential".

In February 2017, after the announcement of the 2016 full year financial results, Lenta intends to hold a strategy presentation open to all investors, at which the company will set out its new long-term goals.

About Lenta

Lenta is the largest hypermarket chain in Russia (in terms of selling space) and the country's fifth largest retail chain (in terms of 2015 sales). The Company was founded in 1993 in St. Petersburg. Lenta operates 165 hypermarkets in 75 cities across Russia and 43 supermarkets in Moscow and St. Petersburg, with a total of approximately 1,019,968 sq.m of selling space. The average Lenta hypermarket store has selling space of approximately 5,900 sq.m. The average Lenta supermarket store has selling space of approximately 1,000 sq.m. The Company operates seven owned distribution centres.

The Company's price-led hypermarket formats are differentiated in terms of their promotion and pricing strategies as well as their local product assortment. The Company employed approximately 34,134 people as of 30 June 20166.

The Company's management team combines a mix of local knowledge and international expertise coupled with extensive operational experience in Russia. Lenta's largest shareholders include TPG Capital and the European Bank for Reconstruction and Development, both of which are committed to maintaining high standards of corporate governance. Lenta is listed on the London Stock Exchange and on the Moscow Exchange and trades under the ticker: 'LNTA'.

A brief video summary on Lenta's business and its Big Data initiative can be seen here.

5 Based on public data on total quarterly sales in the third quarter of 2016.

6 FTE (full-time equivalent). Average FTE for 1H 2016 was 33,758 employees.