iso4217:RUB iso4217:RUB xbrli:shares iso4217:EUR xbrli:shares 213800133YYU23T4L791 2022-01-01 213800133YYU23T4L791 2021-01-01 213800133YYU23T4L791 2020-01-01 213800133YYU23T4L791 2022-01-01 2022-12-31 213800133YYU23T4L791 2021-01-01 2021-12-31 213800133YYU23T4L791 2020-01-01 2020-12-31 213800133YYU23T4L791 2022-12-31 213800133YYU23T4L791 2021-12-31 213800133YYU23T4L791 2020-12-31 213800133YYU23T4L791 2020-01-01 2020-12-31 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2020-01-01 2020-12-31 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2021-01-01 2021-12-31 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2022-01-01 2022-12-31 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2022-12-31 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2020-01-01 213800133YYU23T4L791 2020-01-01 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2020-01-01 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2020-01-01 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2020-01-01 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2020-01-01 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2020-01-01 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2021-01-01 213800133YYU23T4L791 2021-01-01 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2021-01-01 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2021-01-01 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2021-01-01 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2021-01-01 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2021-01-01 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2022-01-01 213800133YYU23T4L791 2022-01-01 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2022-01-01 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2022-01-01 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2022-01-01 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2022-01-01 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2022-01-01 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2020-12-31 213800133YYU23T4L791 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2020-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2020-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2020-12-31 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2021-12-31 213800133YYU23T4L791 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2021-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2021-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2021-12-31 ifrs-full:IssuedCapitalMember 213800133YYU23T4L791 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800133YYU23T4L791 2022-12-31 ifrs-full:RetainedEarningsMember 213800133YYU23T4L791 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 213800133YYU23T4L791 2022-12-31 ifrs-full:AdditionalPaidinCapitalMember 213800133YYU23T4L791 2022-12-31 ifrs-full:StatutoryReserveMember 213800133YYU23T4L791 2022-12-31 ifrs-full:IssuedCapitalMember
Annual Report
2022
Delivering
great customer
service
CONTENTS
Overview 2
2022 at a Glance 4
About O’KEY Group 6
Milestones of 2022 16
Strategic Report 18
Strategic Review 20
Russia’s Food Retail Market Overview 24
Delivering on Our Strategy 26
Business Model 28
Sustainable Development 30
Operational Review 48
O’KEY Hypermarket Format 50
DA! Discounter Format 70
Financial Review 78
FY 2022 Financial Highlights 80
Corporate Governance 86
Corporate Governance System 88
General Meeting of Shareholders 90
Board of Directors 92
Committees of the Board of Directors 94
Risk Management 98
Information for Shareholders
and Investors 101
Management & Directors’ Responsibility
Statement 105
Financial Statements 106
Independent Auditors’ Report 108
Consolidated Financial Statements
for the Year Ended 31 December 2022 113
Glossary 160
Abbreviations 162
Contacts 163
20+
202 BN 10 TOP
Overview
YEARS ON THE MARKET
GROUP REVENUE IN 2022 FOOD RETAILER IN RUSSIA
O’KEY Group is one
of the leading Russian food
retailers. The Group’s unique
business model combines
two modern complementary
retail formats (hypermarkets
and discounters) and a fast
growing omnichannel
e-commerce platform
in regions of presence. Annual Report 2022
ABOUT
THE REPORT
The Annual Report 2022 (“the Report”) has been
prepared by O’KEY GROUP S.A. (“O’KEY Group”,
“the Group”, or “the Company”).
This Report discloses information
on the implementation of the Group’s strategy
in 2022, presents the Group’s operating
and financial results, describes the Group’s
corporate governance framework and corporate
social responsibility activities. The Report has been
prepared based on consolidated IFRS financial
statements for 2022.
The Report has been prepared based
on the information available to the Group
as of the time of producing this Report,
including information obtained from third
parties. The Company reasonably believes
that this information is complete and accurate
as of the publication date of this Report. However,
it does not constitute any representation
or warranty that this information will not
be updated, revised, or otherwise amended
in the future.
This Report includes estimates or forward-
looking statements related to operating, financial,
economic, social and other measures that can
be used to assess the performance of O’KEY
GROUP S.A. The Company does not make
any representation or warranty that the results
anticipated by such forward-looking statements
will be achieved. The Company shall not be liable
to any individual or legal entity for any loss
or damage which may arise from their reliance
on such forward-looking statements.
Further information
Further information regarding O’KEY Group’s
strategy, our businesses and performance, and our
approach to governance and risk management can
be found at our corporate website okeygroup.lu.
An archive of annual and strategic reports
as well as a full suite of additional information
materials is available at okeygroup.lu.
DISCLAIMER
The existing global economic environment,
including the current geopolitical climate
and market fluctuations in currency and stock
markets, as well as significant currency
exchange rate variations are probably
having an impact on companies in all sectors
of the economy. We are closely observing
the potential effects of these evolving
macroeconomic circumstances and shifts
in the retail market on O’KEY Group’s financial
and operational performance in the medium
to long term.
Nonetheless, we acknowledge that the grocery
retail industry is among the most resilient
sectors of the economy and is continually
sought after by consumers. Furthermore,
we have confidence in the Group’s efficient
business strategy, which utilizes two
complementary retail formats and a robust
online platform that caters to all customer
requirements and demographics.
This approach establishes a strong foothold
in the market and provides a considerable
buffer against macroeconomic instability.
Our Company is well-equipped to handle
any potential alterations in the supply
chain due to the fact that nearly 80%
of our procurement is obtained from
nearby suppliers and manufacturers.
By actively fostering our proprietary brands,
maintaining our long-standing and productive
partnerships with a significant number
of inventive, advanced, and rapidly expanding
farms and producers, and participating
in regional and national quality initiatives
and programmes that support local suppliers,
we can successfully navigate any market
challenges and uncertainties.
Therefore, O’KEY Group,
withitswell-established andwell-integrated
corporate governance and management
structure, is securely positioned
in the market and poised to withstand
macroeconomic turbulence and market
volatility, while effectively serving the needs
of its stakeholders.
1 The market position provided by Infoline, 2022.
2022 at a Glance
273
+43 YoY
TOTAL NUMBER OF STORES
TOP 10 GROCERY AND E-GROCERY
RETAILER IN RUSSIA 1
RUB
202.2 bn
+8.1% YoY
GROUP REVENUE
RUB
148.8 bn
O’KEY REVENUE
RUB
6.2 bn
+32.6% YoY
TOTAL ONLINE SALES
+26.8 % YoY
DISCOUNTERS LFL REVENUE
+53.1 %
DISCOUNTERS REVENUE GROWTH YOY
RUB
53.3 bn
DISCOUNTERS REVENUE
4—5 Annual Report
Overview
Strategic Report Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
O’KEY Group is one of the leading
Russian food retailers. Since the opening
of our first hypermarket
in St. Petersburg in 2002, we have
continued to strive for excellence.
O’KEY Group develops two clearly
positioned and complementary
retail formats: O’KEY hypermarkets
and DA! discounters. The Company also
operates a fast-growing e-commerce
platform for O’KEY hypermarkets.
This well-balanced combination of formats
allows us to meet different customer
needs and purchasing models in all regions
of presence and in all sales channels.
OUR PURPOSE/MISSION
We strive for excellence
We offer fresh and high-quality
products to each family
We provide a simple and easy
shopping experience
We aim to create an effective
working environment
We take our social responsibility
seriously and act accordingly
About
O’KEY Group
OUR VISION
The new
hypermarket
for the new era
The best value
for money
discounter
r
e
s
u
l
t
s
O
u
t
s
t
a
n
d
i
n
g
s e
r
v
i
c
e
I
n
n
o
v
a
t
i
v
e
n
e
s
s
I m p e
c
c
a
b
l
e
A
t
m
o
s
p
h
e
r
e
o
f
p
r
o
f
e
s
s
i
o
n
a
l
i
s
m
E
f
f
e
c
t
i
v
e
t
e
a
m
Our values
6—7 Annual Report
Overview
Strategic Report Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Highly centralised
logistics: five distribution
centres in Moscow
and St. Petersburg
High standards
of corporate governance:
a transparent ownership
structure, LSE, AIX
and MOEX listings
A proficient management
team with extensive
experience in Russian
and international retail
DA!
DISCOUNTERS
One of the fastest
growing grocery
chains in the market
Our Key Strengths
A flexible business model
based on two competitive
shopping formats
and an e-commerce
platform, covering all
customer segments
and needs
Focus on cutting-
edge IT solutions
and a progressive
infrastructure
Exceptional expertise
in private labels and own
production, empowering
us to build an appealing
customer value proposition
O’KEY
HYPERMARKETS
A well-recognised brand
and market positioning
in major Russian cities
8—9 Annual Report
Overview
Strategic Report Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Investors and shareholders
O’KEY is responsible to its investors
and shareholders and strives to maintain
and increase the Company’s shareholder
value.
Considering current volatility of the rouble
and a number of macroeconomic factors
that create great uncertainty, the Company
refrains from short-term and long-term
forecasts for both operating and financial
performance. At present, the O’KEY
management team is analysing the potential
impact of micro- and macroeconomic
conditions on subsequent operating
and financial results of the Group.
Along with that, we believe that the Group’s
effective business model, which is based
on two complementary retail chains
with clear positioning (hypermarkets
and discounters) as well as on strong
e-commerce, will help respond to all
the headwinds and satisfy customer
needs in various market segments.
Hypermarkets are most suitable for the new
consumer behaviour since they offer a wide
range of products and customers often stock
up. Our discounters build a solid medium-
term basis by using the EDLP pricing model
to meet the trend for conscious consumption
and offer consistently high-quality products
at the lowest market prices.
We will be doing our best to achieve our
medium-term goals by means of supply chain
optimisation and strict cost control.
The Group’s Global Depositary Receipts
(GDRs) are listed on the London Stock
Exchange since November 2010. The GDRs
are also trading on the Moscow Exchange
(MOEX) since December 2020. In March
2023, O’KEY Group also conducted a cross-
listing of its GDRs on the Astana International
Exchange. The Group aims to maintain
all its listings and keep its GDRs available
to all market participants, including those
of individual investors.
Employees
O’KEY Group’s first priority is its people.
The Сompany employs over 20 thousand
people. We take responsibility for providing
residents of regions of the Company’s
presence with jobs as well as for creating
safe, favourable and decent working
conditions for our employees. Besides,
we steadfastly follow the Labour Code
of the Russian Federation.
Over the years, the Company has been
committed to delivering high-standard
corporate governance, personnel
management and training, and, therefore,
gained a high position in the market.
In 2022, O’KEY Group put much effort
into ensuring labour safety for its employees,
improved its corporate voluntary health
insurance and target KPIs under the current
premium programme, continued staff
training as part of O’KEY Academy,
and launched professional skills competitions
and incentive programmes.
In the context of volatility, the Company
continues being committed to its policy
aimed at preserving jobs, providing decent
wages and social benefits, developing
personnel training and motivation
programmes.
Customers
Satisfying customer needs across all market
segments, delivering top-notch services
and creating the value proposition of each
Group format remains the key priority
of O’KEY’s interaction with customers.
Though the economic environment
is unstable, we make every effort to ensure
uninterrupted deliveries, redirect logistics
flows where necessary, fill the shelves
with goods and meet the demand of our
customers.
In the face of growing inflation, we were one
of the first to fix a minimum markup
on a number of essentials. The Company
has introduced a minimum markup policy
to a number of SKUs of socially important
food products (including dairy, vegetables,
and sugar) in 23 cities where O’KEY
is present.
We find it important to pay attention
to the most recent changes in consumption
patterns and needs, including the rush
in demand for certain product categories
and price sensitivity. The Company
is committed to meeting the current rate
of demand and maintaining a minimum
markup on socially important goods
as well as reasonable prices for the entire
product range, while providing a consistently
high level of quality and service.
We are developing new routes and searching
for new efficient ways of working
with suppliers in order to keep the wide
assortment of our products.
A thorough cost control in all areas
of the Group’s business enables
us to ensure a decent price level
and competitiveness of all retail formats
in general. The Company works closely
with the Association of Retail Companies,
the Russian Ministry of Industry and Trade,
and other market regulators and structures
to execute this approach.
Suppliers
When communicating with suppliers,
the utmost attention is given to the formation
of mutually beneficial partnerships. This will
ensure timely and stable supply of high-
quality items as well as presence of various
products on the shelves no matter what.
Since its foundation, O’KEY Group has
been actively engaging local producers:
around 80% of the Company’s purchases
are accounted for by products made
by Russian producers. As such, the share
of imported goods in the Company is small.
For years, the Group has been cooperating
with a substantial number of innovative,
sophisticated and fast-growing farms
and producers. This is specifically relevant
in terms of evolving the Group’s own
brands: the private label range of O’KEY
hypermarkets and DA! discounters totals
1,883 SKUs and 1,322 SKUs respectively.
The Company is also involved in developing
programmes to support local producers
and therefore takes part in regional
and national quality initiatives, namely
“Made in Don Land”, as well as initiatives
for fair certification in the North-West
and Central regions of Russia. Amid economic
volatility, O’KEY Group further cooperates
with them while ensuring regular purchases
and mutual benefits. Changes in the market
environment may lead to changes in supply
chains which are nevertheless quite stable
due to a high proportion of Russian-made
products. The Company makes efforts
to optimise logistical costs and provide
effective inventory management.
In the volatile macroeconomic and geopolitical context we faced
in early 2022, ESG is becoming even more relevant and important.
O’KEY Group sees itself as a socially responsible company
and acts respectively in the interests of all our stakeholders:
employees, customers, suppliers, partners, and shareholders.
Our ESG Approach
in Volatile Environment
10—11 Annual Report
Overview
Strategic Report Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Operational &
Financial Highlights
Figures 2019 2020 2021 2022 2022/2021, %
Group net retail revenue, RUB bn 163.1 172.7 185.2 200.2 8.1%
O’KEY net retail revenue, RUB bn 145.3 146.8 150.4 146.9 (2.3%)
DA! net retail revenue, RUB bn 17.9 26.0 34.8 53.3 53.2%
Group LFL net retail revenue +0.9% +5.4% +3.7% +2.1%
O’KEY LFL net retail revenue (0.4%) +2.5% +1.4% (3.6%)
DA! LFL net retail revenue +14.9% +27.8% +16.3% +26.8%
Total selling space, k m 2 598.3 599.5 625.6 656.2 4.9%
O’KEY selling space, k m 2 529.1 519.4 522.7 525.8 0.6%
DA! selling space, k m 2 69.3 80.2 102.9 130.4 26.7%
Total revenue, RUB bn 165.1 174.3 187.1 202.2 8.1%
OKEY revenue, RUB bn 147.1 148.3 152.3 148.8 (2.3%)
DA! revenue, RUB bn 17.9 26.0 34.8 53.3 53.1%
Group EBITDA, RUB bn 14.1 14.8 15.5 17.0 9.8%
O’KEY EBITDA, RUB bn 14.3 14.0 13.8 13.4 (3.3%)
DA! EBITDA, RUB bn (0.2) 0.8 1.7 3.6 2.2x
12—13 Strategic Report Operational Review Financial Review Corporate Governace Financial Statements
Delivering
great customer
service
Overview
Annual Report 2022
O'KEY
DA!
100 %
ONLINE COVERAGE IN CITIES
OF O'KEY PRESENCE
O’KEY online delivery
Online delivery via partners
O’KEY hypermarket
DA! discounter
O’KEY distribution centre
DA! distribution centre
Number of stores O’KEY Group retail space in 2022, k m 2
Hypermarkets
Discounter stores
Total
Central
152.3
130.4
282.7
South
74.7
74.7
East
114.8
114.8
North-West
184.0
184.0
Total
525.8
130.4
656.2
Murmansk
Syktyvkar
Ufa
Tyumen
Omsk
Novosibirsk
Krasnoyarsk
Irkutsk
Surgut
Ekaterinburg
Orenburg
Astrakhan
Rostov-on-Don
Krasnodar
Sochi
St. Petersburg
CENTRAL FD
SOUTH FD
NORTH-WEST FD
URAL FD SIBERIA FD
VOLGA FD
Nizhny
Novgorod
Togliatti
2
2
2
2
1
1
1
1
1
1
3 3 3
3
4
1
3
24
Voronezh
Lipetsk
Ivanovo
Tula region
Ryazan
region
Tver region
Kaluga
region Moscow
Moscow
region
1
1
2
17 33
8
Vladimir region
3
9
7
15
118
273 TOTAL STORES
5 TOTAL DCs
79
HYPERMARKETS
194
DISCOUNTERS
1 DC
DISCOUNTERS
100%
CENTRALISATION
RATE
4 DCs
HYPERMARKETS
63.4%
CENTRALISATION
RATE
79 78 78 78 78 74 71 69 60 52 42 35 28 77
194
152
118 100 82 67 54 35
2009 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2022 2007
23 17
2008
Our Geography
14—15 Annual Report
Overview
Strategic Report Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Milestones
of 2022
February
The Group acquires four hypermarkets
from X5 Group in the Moscow
metropolitan area
April
The Group re-opens four hypermarkets
in the Moscow metropolitan area under
the updated O’KEY concept
June
The Expert RA rating agency confirms
the “ruA-“ credit rating for O’KEY
March 2023
The Group's GDRs are
admitted to the quotation
list in the main market
segment on the Astana
International Exchange
(AIX)
July
The Group announces an interim
dividend of EUR 8.5 mln.
The DA! chain signs a contract with the
ADG Group to open discount stores in three
Meeting Place neighborhood centres
August
The Group opens a branded flagship
hypermarket after a large-scale
renovation in Sochi
16—17 Strategic Report Operational Review Financial Review Corporate Governace Financial Statements
Delivering
great customer
service
Overview
Annual Report 2022
21,900 206 MLN
EMPLOYEES PURCHASES WITH US IN 2022
Strategic
Report
273 STORES
IN 6 FEDERAL DISTRICTS IN 2022
We strive to build an appealing
value preposition and provide
our customers with the best
quality goods and superior service.
We understand the importance
of a socially responsible business
and implement the best
principles and approaches toward
sustainable development. Annual Report 2022
Strategic
Review
O’KEY Group was able to achieve sound financial
and operational results despite the turbulent
and, at times, adverse market environment
during the year. This encompasses the continued
inflationary pressure, supply chain disruptions,
significant shifts in consumer behaviour, and so
forth. Despite facing these challenges, we were able
to maintain a strong and stable performance in our
hypermarket format and continued to grow across
our discounters and e-commerce business.
In 2022, we were again ranked within the top
Russian food and e-grocery retailers based
on the annual revenue and market share.
Overall, over 2022, we were able to achieve our
operational and financial targets for the year.
Our retail revenue rose by 8.1% to RUB 202.2 bn,
led by the expansion of the two chains
and the growing DA! discounters’ LFL revenue
and O’KEY’s online revenue. Our profitability
remained stable, with the Group’s EBITDA margin
comprising 8.4%.
Our ability to weather all headwinds and maintain
effectiveness is facilitated by our well-balanced
business model and advanced strategy. On the one
hand, O’KEY hypermarkets benefited by obtaining
access to DA! discounters’ expertise in private
labelling and their efficient procurement and direct
import system of fresh products. On the other
hand, DA! discounters take advantage of O’KEY’s
purchasing benefits by obtaining better prices
from private label suppliers due to larger orders.
Moreover, by leveraging the combined strengths
of our e-commerce and hypermarket formats,
we can offer an exceptional customer service
through the implementation of an omnichannel
approach. This also enables us to enhance
the efficiency of the delivery process
and minimise expenses associated with logistics.
Therefore, our business model allows us
to maintain a 100% coverage in all regions
where our hypermarkets are present and align
our activities with the evolving preferences
and behaviour of our clients.
O’KEY HYPERMARKETS
Our largest business unit, the O’KEY
hypermarkets, continued to be the foundation
of our business, contributing to 74% of our
overall revenue. Amid a challenging market
backdrop and unprecedented economic
turbulence, the right focus and a developed
customer value proposition (CVP) enabled us
to deliver steady operational and financial results.
Our hypermarkets experienced a moderate decline
in retail revenue of 2.3% compared to the previous
year, due to a LFL revenue decrease. Nonetheless,
revenue from newly opened O’KEY stores helped
mitigate the decline. The results are attributed
to multiple factors, including the overall
market volatility, a reduction in the population’s
real disposable income, and a falling footfall
of shopping centres where a part of our
hypermarkets is located.
It is crucial to emphasise that our exceptional
teamwork and efficient cost control enabled us
to maintain the profitability of our hypermarkets
over this challenging year. The hypermarkets’
EBITDA margin remained steady at around 9%.
The year of 2022 was crucial both in terms
of further hypermarket network growth
and adapting to the ever-evolving market
landscape. Specifically, to facilitate the expansion
of our business, we acquired four hypermarkets
from X5 Group in the Moscow metropolitan area
and reopened them under the O’KEY concept.
The procurement of 15 k m 2 of recently launched
stores aligns with our strategic objective
of enhancing operational efficiency in our
hypermarket format, and this is to prioritise
development in the key regions of operations.
Over the course of the year, O’KEY continued
to explore its sourcing opportunities with new
local and foreign partners and carried out a great
scope of work to ensure the smooth operation
of its logistic and supply chain. Throughout 2022,
with the ultimate goal of offering a variety of high-
grade products at attractive prices to customers,
we managed to support an extensive and steady
product range on our shelves with 30 k SKUs
in O’KEY hypermarkets on average.
Over the course of 2022, the hypermarket
business effectively modified its operational
strategy to accommodate the ongoing price
inflation of raw materials, the decreased foot traffic,
and the more cautious and rational purchasing
habits of consumers. We substantially enhanced
our product assortment and introduced a variety
of marketing activities to ensure an excellent
value for money for our customers and to entice
them into visiting our hypermarkets. For instance,
we developed and launched 450 new SKUs,
modified a range of non-food items in compliance
with the latest trends in demand, rolled out two
large-scale promotions dedicated to the Company’s
anniversary and the New Year, etc.
We believe that our hypermarkets will
continue to thrive in the current and future
market landscape thanks to our vast sourcing
opportunities, our agile response to the constantly
changing market conditions, the synergy effect
with our discounters and the e-commerce business
as well as the smart management and the prudent
cost control.
DA! DISCOUNTERS
As cost-cautious consumption is increasingly
popular in the current economic volatility,
we saw another strong year of growth in the DA!
discounters format in 2022. The DA! network
underwent an impressive expansion to become
a prominent market player within the Russian
grocery industry with 194 stores in Moscow,
as well as in the Tver, Tula, Kaluga, Ryazan
and Moscow regions.
Consequently, in 2022, the retail revenue
for the format surged by 53.2% YoY
to RUB 53.3 bn, boosted by a 26.8% increase in LFL
revenue and a 26.7% expansion in the selling space.
Moreover, our discounters’ share in the Group’s
net retail revenue grew by 7.8 pps YoY
to 26.6%. Our discounters’ EBITDA margin
continued to grow rapidly and reached 6.8%
in 2022. The significant increase in the earnings
and profitability of the format is achieved through
boosting brand awareness and customer loyalty,
maintaining a consistently superior price-to-quality
ratio, offering fresh and diverse, diverse products
of superior quality, and a focus on the “every day
low price” (EDLP) approach that keeps our
products accessible to all customers.
A key element contributing to the DA!
success is the prudent selection of our own
brands, comprising approximately 50%
of the discounter’s net retail revenue. We carefully
choose manufacturers and give preference
to the innovative, sophisticated, and fast-growing
local producers. Our goal is to establish enduring
and mutually beneficial relationships that promote
impeccable product quality and a packaging design
that mirrors or aligns with our offerings.
Throughout 2022, we maintained a long-term
and fruitful partnership with local suppliers,
enabling us to introduce new SKUs into our
offerings. Additionally, we successfully phased
out necessary imports, ensuring a diverse
selection of products at reasonable prices without
sacrificing our margins.
We suppose that DA! is ideally positioned to grow
in today’s challenging environment and will remain
the key growth driver for the whole Group, being
a unique international format specially tailored
to the needs and desires of Russian customers.
20—21 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
E-COMMERCE
We consider online shopping a significant catalyst
for transformation in the highly competitive retail
sector both in the way it affects conventional offline
formats and simultaneously emerging as a promising
sales channel in its own right. The online grocery
market in Russia witnessed a significant growth
in 2022, with a YoY increase of 63% to reach
RUB 625 bn. Furthermore, the proportion of online
sales in the overall food and beverage retail sales
increased by 3% in the same period.
As one of the pioneers of online retail in Russia,
O’KEY Group is in a favourable position
to capitalise on these progressing trends.
Therefore, in 2022, we fortified the synergy of our
hypermarket format with the online and discounter
formats by applying an omnichannel approach,
acquiring private label expertise, and an efficient
procurement system within a significantly changed
environment. This strategy proved its efficiency
with O’KEY’s total online sales rising by 32.6% YoY
to RUB 6.2 bn in 2022. Our e-commerce customer
base increased by 32% to 601,000 active
customers with 1,306,000 online orders fulfilled.
We utilised both our own services and partner
capacities to deliver 28,000 tonnes of products
in 2022, which marks a 40% increase from
the previous year.
Therefore, we believe online shopping will continue
to expand and, consequently, we intend to develop
the e-commerce platform in 2023 and beyond.
COMMITMENT TO THE HIGHEST
STANDARDS OF CORPORATE GOVERNANCE
AND SUSTAINABLE DEVELOPMENT
Throughout the year, we strived to maintain
the high level of our corporate governance system,
which is based on the principles of professionalism,
accountability, equality, and transparency
in compliance with the best international
and Russian practices. Furthermore, the year
of 2022 saw the recognition of our unwavering
commitment to exemplary corporate governance,
efficient risk management, strategic oversight,
and openness coupled with a well-established
operational and financial position, as Expert RA
awarded our principal operating subsidiary, O’KEY
Group S.A., a “ruA-” rating with a stable outlook.
Despite the current market fluctuations,
we are dedicated to actively communicating
and accommodating the interests of all our
investors and shareholders. To further solidify
our position, we arranged a listing of our GDRs
on the Astana International Exchange in early
2023. This strategic move is intended to increase
the liquidity of our stock and provide access
to a wider range of individual and institutional
investors.
Our dedication to sustainable development,
a fundamental aspect of our values, persevered
in 2022. Throughout the year, we endeavoured
to deliver exceptional results in our routine
activities, delivering families fresh and high-
quality products, along with a convenient
and hassle-free shopping experience.
In the reporting year, the Group placed particular
emphasis on employee education, with more than
13,000 employees receiving training.
In the social sector, we entered into another
long-term partnership with the “Dari Edu”
charitable foundation. In the environmental area,
the YoY energy consumption trend has shown
a reduction by 4%.
Outlook
Despite the challenges faced by various
sectors of the economy, we recognise that
the grocery retail industry remains highly resilient
and is continually sought after by customers.
Additionally, we believe in the Group’s efficient
business approach, which includes two
complementary retail formats and an omnichannel
online platform that addresses the needs of all
customer segments. With the integration of this
approach and a proven corporate governance
structure alongside the streamlined operational
management, our ability to maintain a sound
foothold in the market and minimise the impact
of any economic fluctuations are assured.
22—23 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Russia’s Food
Retail Market
Overview
The Russian food retail market grew
to RUB 21.0 tn in 2022 or by 13.4% YoY compared
to RUB 18.6 tn in 2021, according to Infoline.
The overall number of food stores in various
formats exceeded 91.2 k (plus 7.8 k stores YoY),
and their total space comprised 33.2 mln m 2
(plus 2.3 mln m 2 YoY) by the end of 2022.
According to Infoline, discounters and convenience
stores continued to to grow the footprint
of the sector. The aggregate share of discounters
and convenience stores increased by 2.1 pps
to 73.8%, while their total selling space grew
by 10.5% YoY and reached 24.5 mln m 2 in 2022.
Top 10 food retailers in Russia (by net retail revenue)
X5
Group
Top 10 food retailers in Russia
Other
61.5% 38.5%
Magnit Mercury Retail
Group
Lenta Svetofor Auchan VkusVill METRO O’KEY Group Monetka
13.2%
10.6%
5.6%
2.2% 1.9% 1.2% 1.1% 1.0% 1.0% 0.8%
Source: Infoline.
ONLINE GROCERY MARKET IN RUSSIA
1 Infoline research 2022.
2022, according to Infoline, the Russian e-grocery
market continued its rapid growth having
increased by 63% YoY. The total size of the online
food retail market exceeded RUB 625 bn
and reached approximately 3% of the Russian food
retail market (plus 0.9 pps YoY) in 2022.
Food delivery has already become part of daily
life in cities with a population of over a million.
However, nowadays more and more customers
in the regions of Russia switch to online shopping
for the first time and form the habit for buying
food and general FMCG merchandise via online.
According to Infoline, the Russian online food
market has huge growth potential and may reach
RUB 925 bn in 2023.
During 2022, according to Infoline, O’KEY
was ranked the 8th largest grocery retailer online.
This statistics excludes the food delivery operators
from the calculation base to avoid double counting.
RUB
625 bn
RUSSIAN E-GROCERY MARKET VALUE 1
Top grocery retailers by online sales in Russia
Retailer RUB bn
VkusVill 79.0
METRO 66.6
X5 Group 65.4
Lenta & Utkonos 41.2
Magnit 29.1
Auchan 20.9
Azbuka Vkusa 7.6
O’KEY Group 6.2
Globus 5.7
Myasnov 3.2
Source: Infoline research 2022, net of VAT, including own delivery and via grocery aggregators/food delivery operators.
24—25 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Delivering
on Our Strategy O’KEY hypermarkets DA! discounters E-commerce
BUSINESS DEVELOPMENT:
• Novel concept stores aim
to offer the most convenient
and up-to-date shopping
experience along with a well-
balanced product assortment
with a focus on fresh and ultra-
fresh categories
• Carry on the format
development keeping up
with the most innovative
market trends
• Look for the best opportunities
to expand the business:
developing new enhanced
hypermarkets; make use
of the latest technologies
and solutions in retail,
supply, and logistics; extend
the network in high-priority
regions and optimise
the store portfolio
• Growth and expansion in all
of the Central Federal District
and the surrounding regions
• Introducing and evolving DA!
discounters as a key growth
trigger for the Group’s top-
and bottom-line by steadily
transforming and adapting
its range to diverse consumer
demands
• Further advancement
of the omnichannel approach,
which makes it possible
to raise sales volumes
by covering all customers
segments and needs
• Developing a partnership
with specialised delivery
operators to seek
for operational efficiencies
DELIVER THE BEST VALUE PROPOSITION:
• Raise the operational efficiency
• Increase the share of private
label products and own
products in total sales
• Focus on the “every day low
price” approach
• Offer the most competitive
pricing on the market without
compromising the quality
• Taking the lead in developing
the PLs portfolio for the whole
Group
• Integrate IT solutions
with partners to synergise
on additional operational
and cost efficiency
• Enhance the productivity
of e-commerce operations
BENEFIT FROM SYNERGIES BETWEEN THE FORMATS:
• Develop synergies
with the discounter business
in joint procurement
and direct import of fresh
products, as well as benefiting
from the private label insight
• Evolve synergies
with e-commerce by using
an omnichannel approach.
Benefit from the increased
number of orders placed
through the website
and the mobile app
• Benefit from synergies
with O’KEY hypermarkets
by leveraging their advantages
when purchasing a branded
assortment, and when gaining
price benefits by purchasing
additional volumes in
private labels
• A more efficacious
business organisation
and logistics system
with O’KEY hypermarkets
serving as pick-up points
and an omnichannel delivery
platform for online orders.
It helps to maximise
the efficiency of the
delivery model and lower
logistics costs
O’KEY Group’s operational activity
pivots around two shopping formats,
namely hypermarkets and discounters,
and a sound e-commerce platform
with an omnichannel approach.
The strategic priorities depend
on the format. However, all formats
are focused on building a tempting
value proposition and providing
our customers with the best quality
products and superior service.
26—27 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
One of the leaders in its segment
with over a 20-year expertise in the
market enhanced by the innovative
store concept
A sound base for e-commerce growth
Among the retail market leaders
in St. Petersburg, commanding
a substantial market share in key
Russian cities
A novel hypermarket approach is being
executed to follow the market
tendencies
A balanced range of goods with
a focus on fresh and ultra-fresh
A reduced number of non-food
products
Superior customer service
A modern shopping environment
Operating in 23 cities in 6 federal
districts of Russia
30 k SKUs
79 O'KEY hypermarkets
across Russia
RUB 148.8 bn revenue
4 new O’KEY stores opened
in the Moscow region
and 1 store reformatted in Sochi
A discount model unique for the
Russian market and based on the
world’s best practices, tailored
to local consumers
The main driver of growth
for the Group
A discount concept with a hinge
on premium
A fast-developing chain of stores in the
best locations, offering superior-quality
products at the best possible prices
Advanced insight into fresh supply and
own brands
A pivot on centralisation and cost
efficiency
Top-of-the-range private label
expertise (own brands account
for circa 50% of the assortment)
Every day low price policy, which
is mostly supported by own brands,
offers a 20–30% cost saving
to our clients
Comfortable and reasonably spacious
layouts and interiors
Operating in 6 regions of the Central
Federal District of Russia
4 k SKUs
194 discounters
+42 stores net in 2022
+53.1% YoY
revenue growth in 2022
DA! discounters’ share in the Group’s
revenue grew to 26.4%
DA! will carry on being the key growth
driver for the Group’s top- and
bottom-line
A high growth potential segment
adhering to a profitable growth
strategy driven by changes
in the consumer behaviour
One of the top 10 online grocery
retailers in Russia
A state-of-art omnichannel mobile
application
Online orders are processed by the
closest hypermarkets in Moscow and
St. Petersburg and in partnership with
delivery operators in all cities
of operation
9 specially dedicated zones for online
orders fulfilment in hypermarkets
in Moscow and 10 zones
in St-Petersburg
An omnichannel approach:
a mobile app, a unified bonus system
and a product range, and delivery
and pick-up options
100% coverage in all regions
of O'KEY hypermarkets presence
>35 k available SKUs
+32.6% YoY total online
sales growth in 2022
601 k active customers
(+34.6% YoY) in 2022
Online sales amounted
to 4.2% of O’KEY retail revenue
in 2022
KEY RESULTS IN 2022
O’KEY hypermarkets DA! discounters E-commerce platform
Business
Model
O’KEY Group has devised a unique business
model pivoting around two straightforwardly
positioned and complementary retail
formats (hypermarkets and discounters)
and a rapid-growing e-commerce platform
with an omnichannel approach.
Such a combination of formats empowers
us to meet the needs of various customer
segments and to keep up to date with the most
recent market trends. Within the Group, all
formats are instrumental parts of the business
model. Consequently, such a business approach
proved its efficiency and is fundamental
for our prospective success.
28—29 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Recognising the significance of socially responsible
businesses, we endeavour to create customised
methods, incorporate global standards
of accountability and community assistance,
and adhere to regulations regarding labour
relations and environmental safety.
At O’KEY Group, we prioritise creating an effective
and positive work environment for our employees.
We believe that our employees are the backbone
of our business, and we are committed to ensuring
their well-being and career growth. We provide
our employees with opportunities to develop
their skills and knowledge through training
and development programmes, and we strive
to create a culture of innovation and collaboration.
In addition to our commitment to our employees,
we take our social responsibility seriously
by acting accordingly. We believe that businesses
have a crucial role to play in society and we strive
to make a positive impact through our operations.
We are committed to sustainable development
and we take steps to minimise our environmental
impact. We also believe that it is important to give
back to the community, and hence we support
various charitable initiatives and organisations that
align with our values.
Overall, we remain committed to delivering
the best possible experience to our customers,
employees, shareholders, investors, suppliers,
and local community representatives. We believe
that by continuing to prioritise sustainability
and innovation, we can continue to grow
and develop our business in a responsible way.
Sustainable
Development
SUSTAINABILITY APPROACH
O’KEY Group is a retail company that has
established a widespread presence in various
regions of Russia. Since its inception,
the Company has been catering to a diverse array
of stakeholders, including customers, employees,
shareholders, investors, suppliers, and local
community representatives. As a company,
we consistently develop strategies for engaging
with regulatory and government authorities,
the media, and NGOs, as we believe that fostering
partnerships is essential for the continuous growth
and development of our business as a whole.
Our commitment to sustainable development
is embedded in our core values. We strive
for excellence in our daily operations by providing
families with fresh and high-quality products,
along with a convenient and hassle-free shopping
experience.
21,900 TOTAL NUMBER OF EMPLOYEES
RUB
293.3 mln
PROCEEDS FROM SALES OF RECYCLABLE
MATERIALS IN 2022
13,044 EMPLOYEES TRAINED IN 2022
RUB
147 mln
SOCIAL SPENDING
30—31 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Suppliers
O’KEY Group sources more than 80%
of its products from local suppliers based in Russia.
This strategy enables us to maintain a stable supply
of essential products. We prioritise supporting
local enterprises and innovative manufacturers
throughout all regions where we operate.
Additionally, the Group is an active participant
in various regional and national quality initiatives,
particularly in the South and Central regions
of Russia.
To further streamline our operations, we have
implemented a unified method of processing
and approving direct import supplies. We have
also established new terms and conditions
of collaboration with the State Veterinary
Authority, which has resulted in substantial cost
savings. These cost savings have allowed us
to invest in new and improved systems to enhance
our supply chain and improve the quality of our
products. By continuing to work closely with local
suppliers and regulatory bodies, we are confident
in our ability to maintain high standards of quality
and efficiency in all our operations.
O’KEY’s mission is to develop and maintain
sound relationships with local suppliers
and producers. This partnership ensures that
we offer our customers a wide range of high-
quality products in important categories such
as poultry meat, dairy products, sausages,
bakery goods, and confectionery. To further
enhance our product assortment, we have
added unique local products with exceptional
quality and organoleptic properties. In order
to achieve this, we conduct specialised trading
and purchasing sessions in all the cities we operate
in, which allows us to set up direct communication
and interaction with potential suppliers. We take
great care in selecting our partner suppliers,
and our main criteria include the quality
of production facilities, a well-implemented
quality control system, and the highest quality
characteristics of the products. Our focus
on these criteria ensures a steady supply of high-
quality products for our customers, which in turn
promotes a mutually beneficial partnership
with our suppliers and local producers.
Employees
The experience and expertise of our employees
are fundamental components of our business
model, and we believe that they are the backbone
of our success. For this reason, we invest in our
employees’ personal and professional growth
and provide them with ample opportunities
to develop their skills and knowledge, so that they
can continue to provide exceptional customer
service to both internal and external customers.
We want to ensure that every employee in our
business understands the crucial role they play
in creating a positive and welcoming environment
for our customers. By doing this, we believe that
we can create a strong service culture that is not
just beneficial for our customers but also for our
employees’ job satisfaction and overall well-being.
Investors and shareholders
In 2022, we continued to strengthen all pillars
of O’KEY Group’s business model, developing both
modern O’KEY hypermarkets and fast-growing
DA! discounters. We are committed to maintaining
our focus on creating value for shareholders,
prioritising loyalty and convenience for our
customers, and ensuring rigorous capital discipline.
O’KEY Group has been listed on the London Stock
Exchange since 2010 and, as of December 2020,
our global depositary receipts are available
to a broader range of investors on the Moscow
Exchange. Our longstanding practice of regularly
returning cash to our shareholders is a testament
to our dedication to their interests.
In March 2023, O’KEY Group’s GDRs started
trading on the Astana International Exchange.
We expect that the listing of O’KEY Group GDRs
on the Astana International Exchange will provide
access to the capital of a fast-growing grocery
retailer to a wider range of investors and will allow
us to share our sustainable and long-term success
with the shareholders.
Customers and local communities
O’KEY has been providing high-quality products
at competitive prices under our own brand.
Our sound product selection process allows
us to ensure that our customers receive
the best value. We support the communities
where we operate by working with non-profit
organisations to provide food aid and financial
assistance to those in need due to natural
disasters or medical emergencies. As we expand,
we remain committed to reinvesting in our
competitiveness to offer the best prices
to our customers while maintaining the highest
standards of quality. We are also a socially
responsible company, spearheading campaigns
to support low-income members of the public
and children with disabilities, and raise consumer
awareness for vulnerable groups. Our goal
is to make a positive impact on the communities
we serve and create a better future for all.
Benefits for our key stakeholders
32—33 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
OUR EMPLOYEES
O’KEY Group’s HR Policy is poised
to steadily improve onboarding, learning,
development, and acknowledgement
of Company employees. We aspire
to create a productive work
environment and empower professional
and personal potential in accordance
with the Company’s HR strategy. Systems-
level and holistic HR management
and sensitivity to people and their needs
make O’KEY an attractive employer.
O’KEY Group’s HR strategy pillars are:
• creating a culture of engagement
and effectiveness;
• introducing modern technologies
and automating HR services;
• building an effective organisational structure
and management team;
• building a positive employer brand
in the Russian labour market;
• providing systemic turnover management;
• introducing the best HR practices.
Major HR and staff management
events in 2022
• Successful staff development helped
the Company amid labour market restructuring
and increasing competition for top talent.
We used the most efficacious recruitment
sources: employee recommendations,
the websites of Headhunter and Avito.
• More in-depth and automated HR analytics
and transfer of most HR reports to Power
BI allowed more and more managers
to access analytical tools. To that end, retail
managers make more consistent and efficient
decisions since they have real-time data
on the department performance and key
HR metrics.
• We restructured the project to partially
automate recruitment using the Skillaz platform
and adapted it to higher workload. This enabled
us to leverage internal processes and fill store
vacancies faster.
• We launched a mobile version of the O’KEY
Academy corporate learning portal, so that
employees have access to convenient digital
training.
• We automated trainings for managers
to learn occupational health and safety (OHS)
disciplines.
• The Company provided OHS procedures as part
of HR practices.
• To improve safety, we conducted a test run
of an e-workplace — Occupational Health
and Safety Control System (OHSCS).
We moved to a new office in St. Petersburg
to provide a more comfortable work environment.
The office features corporate colours, ergonomic
furniture, recreational areas, coffee points,
and lunch rooms.
Given 2022, our 2023 focus will be on programmes
to further develop a service culture, enhance our
performance, protect the health of our employees,
and strengthen our employer’s brand.
In 2023, we will focus on:
• automating recruitment and ensuring better
onboarding;
• automating the OHS procedures;
• making online training more available for all
employees and developing the O`KEY Academy
distance learning platform;
• elevating mentorships and enhancing knowledge
transfer from experts to performers;
• developing the talent pool and upskilling.
Key indicators
Below are O’KEY Group’s key personnel metrics.
21,900 O’KEY GROUP TOTAL HEADCOUNT IN 2022
(AS OF THE YEAR-END 2022)
Gender distribution, people
Female
Male
28%
72%
Age distribution, people
2,374
18–25
26–35
36–45
46–55
56+
5,357
6,990
5,136
2,057
34—35 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Staff training and development
The Company’s success hinges on its people.
In the reporting year, we proceeded
with the personal and professional growth of our
employees. Throughout 2022, we received
354 training applications from employees;
18% of those trained at talent pool faculties
took a higher position.
2022 staff training
and development highlights
• Over 7,600 newcomers completed
an introductory course on the O’KEY Academy
portal.
• Over 122,000 e-learning courses were taken
by all Company employees.
• Over 2,700 electronic knowledge checks
were successfully passed by employees.
• 20 new online courses and training videos
were launched.
• We managed to simplify employee access
to the external learning platform for wine
merchants as well as the external platform
for online trainings using new mechanisms.
Talent Pool Academy
Over the year of 2022, O’KEY Group launched
its Talent Pool Academy in a new format.
The Company restructured the learning portal,
developed new training programmes, and added
new sections with a sophisticated architecture.
The new-format Talent Pool Academy has three
faculties:
• ROST’OK department head faculty for line
manager positions;
• Leadership School deputy head faculty
for middle manager positions;
• School with Meaning store manager faculty
for the hypermarket manager position.
13,044 EMPLOYEES TRAINED
7,531 EMPLOYEES TRAINED FACE-TO-FACE
3,893 EMPLOYEES PARTICIPATED IN WEBINARS
> 120 k E-COURSES COMPLETED
125 O’KEY ACADEMY COURSES AVAILABLE
35 O’KEY ACADEMY TESTS AVAILABLE
16,353 O’KEY ACADEMY LEARNING PORTAL USERS
Corporate culture
Effective
team
O’KEY values
Professional
environment
Outstanding
results
Excellent
service
Innovation
The year of 2022 marked the annual assessment
of the Regional Centre management team followed
by projects to drive up the centre’s performance.
Throughout 2023, we are to further better
cooperation with staff from federal offices.
Namely, we will launch a face-to-face training
system involving internal experts, assess personnel
in key departments, ameliorate and automate
the adaptation system for external and internal
employees, launch an onboarding chat bot
for future employees before they actually come
to work, and enhance the reporting system.
We create an environment for every employee
to elevate their skills and competencies
as well as gain knowledge and experience.
Consequently, major learning growth vectors
for 2023 will be:
• creating and rolling out a new-format
mentorship system;
• developing, launching, and automating new
training programmes for the O’KEY Talent Pool
Academy faculties;
• widening the O’KEY Academy knowledge base
and updating its design;
• releasing a mobile app.
Starting from 2018, O’KEY has regularly held
the “100% Professional” skills competition.
Since 2021, it has been covering e-commerce
employees, namely, pickers, and providing team
competitions for pick points. We summed up
“100% Professional” results in the first quarter
of 2022. In light of COVID-19 risks, the competition
was mainly online.
The year of 2022 saw a number of events
to champion the corporate culture. For example,
in May 2022 the Company awarded employees
who had spent 20 years in the Company
since the first store opening in St. Petersburg.
We made commemorative gold badges for them.
The ceremony took place in December 2022
with Honor Ilavsky, Regional Sales Director (North-
West and Centre), where a total of 28 employees
were awarded.
In late 2022, we kicked off a motivational
contest for F&V 1 teams from all stores, poised
to hike category sales. Employees from the F&V
Department received a bonus.
1 Fruit and vegetables.
To build our HR brand, we work hard
on the Company’s social media dedicated to our
employees and their work. This enables O’KEY
Group to consistently digitalise a number
of operations with the brand and recruitment.
The Group’s corporate culture fosters a healthy
lifestyle. In 2022, O’KEY’s team partnered with ZSD
Fontanka Fest in St. Petersburg for the third
time, involved the staff and encouraged a healthy
lifestyle and the ethos of sport. ZSD is a race
and a bike ride along the central part
of the Western High-Speed Diameter (WHSD).
O’KEY’s staff took part in the 10.5-kilometre
and half-marathon races, while 38 employees joined
the bike ride.
In 2023, the department will mainly prioritise:
• devising and starting off successful non-
financial incentive programmes (“100%
Professional” and seasonal competitions among
store teams);
• building the Company’s digital brand to recruit
the most productive IT specialists;
• promoting the corporate online sports
programme and competitions between stores.
36—37 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Staff retention and motivation
To retain the best specialists, the Company
fruitfully combines financial and non-financial
incentives and strives to provide a competitive pay.
The Company’s KPI system takes into account both
individual and corporate goals. The performance
defines the amounts of bonuses, which
are a certain percentage of the pay. Non-financial
incentives encompass a talent pool programme
and career growth based on a comprehensive
performance assessment.
Over the course of 2022, we updated the bonus
system for earning departments. Under
the current bonus programme in alignment
with the Company’s financial development
plan, a list of target KPIs for better efficiency
was also updated. The system changes mostly
affected store employees.
In addition to improving the incentive system
for retail positions, we conducted a large-scale
analysis of the remuneration market. To comply
with the internal policy, the Company undertook
measures to align the remuneration level
with the market pay.
In 2023, we plan to further adapt the motivation
system to the external economic climate
and the Company’s goals at hand. Furthermore,
we will introduce a new software product —
an automated time tracker — and revise internal
processes to boost productivity.
Compensation and benefits
O’KEY Group provides social support
to its employees in compliance with applicable laws
and implements additional programmes to create
the most comfortable working environment:
• voluntary health insurance (VHI) policies
co-financed at 80%;
• discounts in Group stores and accumulation
of points;
• free meals for some departments;
• New Year gifts to employees’ children;
• financial assistance to employees experiencing
hardship in life;
• financial support towards fitness club
memberships.
In the year under review, the Company’s
expenditures on social benefits, including VHI
policies, children’s New Year holidays, financial
assistance, and meals totalled RUB 142 mln. O’KEY
Group employees receive bonuses in all Company
stores: spending on bonus points and discounts
through the employees’ cards amounted
to RUB 33 mln.
In 2022, our VHI service package and quality
avoided a significant cost increase. The Company
also expanded the list of reasons for providing
financial assistance to employees.
The year of 2023 will mark the same fringe benefits
and more partner programmes.
Reporting violations
The Group’s employees feel free to call
the compliance hotline or use other feedback
channels to make good-faith reports of violations.
O’KEY Group is focused on resolving ethics
and labour law violations as well as cases
of misunderstanding between employees
and the management. Since 2019, the Company has
had a Whistleblowing Policy in place.
We operate several whistleblowing channels: a call
centre, dedicated manager-employee meeting
hours, and morning meetings.
189 reports
RECEIVED IN 2022 COMPARED TO 242 IN 2021
100 %
OF REPORTS ADDRESSED AND FOLLOWED UP
BY FEEDBACK
2022 highlights
Dedicated assessment of working conditions
and occupational risks in every workplace
34 occupational injuries,
including two severe ones
0 fatalities
Monitoring
the workplace
Monitoring
employee
health
Training
employees
in workplace
safety
Investigating
injuries
Taking
preventive
measures
Supporting labour
inspections conducted
by governmental
supervisory authorities
What we do
HEALTH AND SAFETY
O’KEY Group is committed
to reducing work-related hazards
as well as providing safe workplace
and comfortable customer experience.
We crave zero injuries at all production facilities
and constantly improve our occupational
health and safety management system.
The Group’s approach hinges on full compliance
with Russian laws. In the meantime, our core
regulatory document is the Labour Protection
and Occupational Health, Environmental, Industrial
and Fire Safety Policy.
We track and rigorously investigate all
occupational injuries that involve our employees
and customers. 2022 marked 42 occupational
injuries across the Group, 21% less against 2021
(53 occupational injuries), including:
• 39 minor injuries (the investigation classified 5
of them as non-occupational);
• 3 severe injuries (the investigation classified 1
of them as non-occupational).
Number
of occupational injuries
2020 2021 2022
44
53
42
Number
of incidents
Customers
Third-party
organisations
O'KEY Group
employees
106 173
41
2022 2021
44
146
163
38—39 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Most common causes in 2022:
• negligence and haste — 20 cases;
• violated OHS requirements — 10 cases;
• ill health — 7 cases.
The Company also monitors and investigates
all customer and contractor incidents.
We updated related procedures to receive earlier
warnings and prevent similar incidents going
forward. Total number of incidents involving
O’KEY employees, customers and third-party
organisations went down by 23%. Moreover,
our Lost Time Injury Frequency Rate (LTIFR)
reduced from 1.76 in 2021 to 1.48 in 2022.
Advanced approaches to monitoring working
conditions and health, identifying causes during
the investigation, training employees in workplace
safety as well as taking preventive measures mainly
generated such a decline.
We regularly audit occupational health and safety
in our stores and distribution centres for compliance
with Russian health and safety laws. In 2022,
governmental supervisory authorities (State Labour
Inspectorate, prosecution service, Investigative
Committee, administrations in cities of presence)
conducted off-site inspections of Group stores,
most of which passed with flying colours.
Supporting inspections of governmental supervisory authorities
Indicator 2020 2021 2022
Number of supported inspections 11 7 6
Number of violations 7 2 2
including OHS violations 5 1 1
Indicator 2020 2021 2022
Penalties (RUB) 576,000 362,000 210,000
including OHS penalties (RUB) 346,000 130,000 50,000
2,649 EMPLOYEES TRAINED IN OCCUPATIONAL
HEALTH AND SAFETY
1,053 EMPLOYEES TRAINED IN FIRE SAFETY
1,704 EMPLOYEES TRAINED IN FIRST AID IN CASE
OF OCCUPATIONAL INJURIES
Dedicated assessment of working conditions
and occupational risks took place throughout
O’KEY.
O’KEY Group 2023 plans:
• beefing up the OHS management system;
• making a dedicated assessment of working
conditions and occupational risks in new
workplaces;
• proceeding with workplace safety
and first aid trainings;
• implementing the Occupational Health
and Safety Control System (OHSCS),
an automated toolkit for our OHS management
system efficacy. It helps to plan, establish
responsibility, identify resources, take measures
and analyse the entire occupational health
and safety management system.
ENVIRONMENTAL RESPONSIBILITY
Our clients are increasingly conscious
of environmental issues. The retail industry
is impacted by shifts in environmental
regulations and investor evaluations
that are based on environmental,
social, and governance (ESG) criteria.
Consequently, it has become necessary
for businesses to adopt environmentally
responsible practices in order to secure
their position in the market sustainably.
At O’KEY Group, we prioritise resource
conservation and minimising our carbon
footprint, and thus we implement
various strategies to achieve this.
Since 2019, our Company has been implementing
the Live Green corporate policy, which serves
as a guiding force for our operations. This
policy motivates us to initiate projects that
align with our core values. We are constantly
seeking out innovative methods to reduce
resource consumption and we are advocating
for ESG principles amongst our customers
to improve our sustainability initiatives. Working
with environmental and social NGOs provides us
with a platform to launch awareness campaigns
that serve this purpose.
Reducing the use of disposable
plastic packaging
O’KEY Group has launched various initiatives
to reduce the use of disposable plastic
packaging across its operations. The Company
has been gradually introducing eco-friendly
alternatives to replace traditional plastic
packaging. For instance, O’KEY Group has
launched an initiative to replace plastic bags
with paper or reusable bags. The Company has
also introduced eco-friendly packaging for fruits
and vegetables, such as using biodegradable
mesh bags or cardboard trays. We offer this type
of packaging not only at the cash desk, but also
in the department of loose-weight products,
thereby accustoming customers to the new
social norm.
At our stores, we offer bio bags that are fully
biodegradable within a year. These bio bags
are just as strong and high-quality as traditional
plastic bags, and they are safe to use with food
items. By introducing this initiative, O’KEY Group
continues to lead the way in the Russian food retail
by offering a unique biodegradable solution.
The Group started partnering with NGOs
and suppliers. O’KEY Group collaborates with non-
governmental organisations and suppliers
to launch initiatives aimed at reducing plastic
waste. For instance, the Company works
with NGOs to raise awareness about the negative
impact of plastic waste and encourages customers
to use eco-friendly alternatives.
40—41 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
O’KEY is also working on reducing the amount
of packaging used for products. This includes
exploring ways to optimise product packaging
to reduce the use of plastic and other materials.
The Company has implemented waste segregation
and recycling programmes to ensure that waste
is disposed of responsibly. This includes setting
up separate waste collection bins for recyclable
materials such as plastic, paper, and glass.
Overall, O’KEY Group’s initiatives to reduce
the use of disposable plastic packaging
are aligned with its commitment to environmental
responsibility and sustainability.
To demonstrate our commitment to responsible
consumption and retail practices, we conduct
regular internal audits to ensure strict
compliance with the Russian environmental
regulations. Additionally, we perform a quarterly
monitoring of atmospheric and noise pollution
in the intermediate zone to guarantee that
our stores do not negatively impact the local
community’s living conditions.
Energy efficiency
At O’KEY, we prioritise the energy efficiency
of our operations and continuously work towards
reducing our overall energy consumption.
We closely monitor environmental data, including
energy use in our supermarkets, and undertake
measures to minimise energy usage. To achieve
this, we have implemented various initiatives
such as replacing outdated luminescent lighting
with modern recuperators and energy-efficient
LED lights and LED signboards. We have also
replaced outdated refrigeration elements
and HVAC systems with state-of-the-art, energy-
saving devices. Furthermore, we have adopted
energy-efficient building management systems
(BMS) to maximise energy efficiency.
The energy-saving measures we implemented have
yielded impressive results. By installing LED lamps
in parking lots and replacing some of the interior
lighting with LED fixtures, as well as implementing
a “Smart House” system that automatically
controls the interior lighting and disconnects
part of the ventilation systems at night,
we were able to reduce energy consumption
by nearly 15% in the stores where these measures
were implemented.
The YoY trend has shown a reduction
in consumption by 4 %.
2020 2021 2022
Total amount
of consumed energy,
kWh
382,930 387,849 374,289
LFL 377,670 380,726 364,612
Waste management
The Waste Management Policy is applied across
all of our stores at O’KEY Group to regulate our
waste management processes.
2020 2021 2022
Proceeds from sales
of recyclable materials,
RUB mln
241.7 389.4 293.3
At our Company, we prioritise reducing the amount
of waste that ends up in landfills by implementing
separate waste collection. We take additional
steps by transporting biological waste and lamps
to specialised facilities, while recyclable waste such
as polythene film, plastic boxes, and wastepaper
is compressed and sold for further recycling.
Additionally, we collect and sell banana boxes,
waste oil, pallets, and metal scrap for recycling
purposes.
To ensure responsible waste management, our
main operational sites feature water treatment
facilities that include petrol and sand catchers
to filter stormwater from parking areas. Before
being discharged into public sewers, we employ
grease catchers that filter wastewater from our
production facilities.
OUR COMMUNITIES
O’KEY extends support to disadvantaged
communities within its operational
regions. This includes individuals
and families who face financial hardship,
single mothers, those belonging to large
families, elderly individuals who require
assistance, and children with disabilities.
Our aid efforts in 2022 were carried
out independently and in collaboration
with various stakeholders, including
non-profit organisations, volunteers,
and charitable foundations. These
partnerships allowed us to distribute funds
and food to those in need more effectively.
Supporting vulnerable groups
Being a socially responsible corporation, our aim
is to assist disadvantaged communities and hike
consumer awareness regarding the significance
of caring for those who require the most help.
We donated RUB 6,862 k to charities in 2022.
The high inflation rate and unstable economic
conditions had adverse effects on various
social groups. In collaboration with charitable
foundations and customers, O’KEY hypermarkets
conducted initiatives to gather essential items
for economically disadvantaged communities.
The campaigns were aimed at aiding low-income
families with children, the elderly, disabled
individuals, and those facing the difficult choice
between purchasing food or medicine.
Several “Basket of Kindness” campaigns
were conducted in various regions of the country
with the aim of assisting individuals in need.
As part of this initiative, designated boxes
were placed in supermarkets where patrons
could donate food. The groceries were made
available in a straightforward and uncomplicated
manner. Such assistance has been and will
continue to be crucial for individuals facing
difficult circumstances. Foodbank Rus is a Russian
charitable organisation that provides direct
support to local communities and serves
as an exemplary model for transparent
and effective social outreach efforts.
We also entered into a long-term partnership
with the “Dari Edu” charitable foundation to instal
boxes in our stores on a permanent basis to collect
food products with an extra shelf life. On a regular
basis, volunteers from the foundation empty
the boxes and donate food to those in need.
In 2022, we installed 10 boxes, while in 2023
the partnership will be expanded to many regions
of the network’s presence.
42—43 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Support for children
Supporting children is a top priority for O’KEY
Group. Our objective is to foster creative abilities
of children with disabilities.
Throughout 2022, we provided charitable aid
to the “Step Forward” International Art Festival
for such children in line with our primary
objective. The festival is a sustainable platform
that showcases the artistic potential of children
with disabilities. Renowned artists, academic
symphony orchestras, and conductors participated
in the concert programmes alongside these
children. O’KEY donated RUB 1 mln to the festival
to assist these children in realising their full
potential, building self-assurance, and fulfilling
their cherished aspirations.
Support with treatment
Since 2016, O’KEY Group has been dedicated
to providing financial assistance for medical
treatment for children and adults with cancer.
O’KEY Group is a long-time partner of AdVita,
a St. Petersburg-based charitable foundation that
specialises in helping and has been one of its loyal
charity partners for a long time. We have installed
donation boxes next to our counters in our
hypermarkets in St. Petersburg, so that our
customers can aid those in need.
For several years now, the funds collected through
these donation boxes have been utilised primarily
for diagnosis and treatment. Various medications
and laboratory supplies are purchased, especially
for the laboratory of the Raisa Gorbacheva
Memorial Research Institute of Children
Oncology, Hematology, and Transplantation, which
is a participant in the programme.
40 DONATION BOXES PLACED IN HYPERMARKETS
Over RUB
1.7 mln
RAISED THROUGH DONATION BOXES IN 2022
RUB
15.8 mln
RAISED SINCE 2016
Support for veterans
Since 2002, O’KEY has been showing its support
for veterans of the Great Patriotic War
through an annual campaign. This initiative aims
to honor and provide aid to those who fought
for the country’s freedom and peace.
Throughout the years, we have extended our
assistance to the veterans in all the regions where
we operate. As part of our efforts, we distribute
gift cards to them ahead of this significant holiday.
This gesture allows them to make purchases in our
stores, which we hope would make their lives more
comfortable. In 2022, we were able to provide
around 3,300 veterans with such gifts, a testament
to our unwavering commitment to serving those
who have served our country.
Priorities of O’KEY
charity programmes
Major charity
partners in 2022
Directions of help
Help people in hardship
Help veterans of the Great
Patriotic War
Support children’s artistic
endeavours
AdVita
“Step Forward” festival
Local charity foundations
Various humanitarian
organisations that help
people in need
Providing financial assistance
Collaborating with foundations
and non-profit organisations
to feature fundraising activities
and grocery donations
Providing assistance with food
supplies
44—45 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
PREVENTING CORRUPTION
O’KEY Group remains committed
to honesty, openness, and integrity.
The Group’s ever-improving anti-
corruption system combines
organisational, economic, legal,
and informational measures.
We have zero tolerance to corruption:
the Company and all of its employees
must comply with the relevant laws
and ethical business practices.
The Anti-Corruption Policy policy enshrines
applicable law enforcement procedures
as per Federal Law No. 273-FZ “On Combating
Corruption”. Adhering to our rules and policies,
we audited various focus areas of the Company
in the reporting year. We investigated every
report received from our employees or partners,
identified the causes, developed corrective
measures or undertook actions.
In addition, the Company operates various
risk management and business data
privacy tools to avoid breaking the law
and incurring financial and reputational losses.
We use a dedicated Red Flag Report system
in which we can track and identify unlawful
affiliation as well as any anomalies or violations
of the Company’s Anti-Corruption Policy. Thanks
to this tool, we can respond to confirmed
corruption cases much faster.
Over the course of 2022, we proceeded
with the procurement transparency methods
developed in 2021. Our Anti-Corruption
Department staff regularly analyses purchases
in chain stores using loyalty programmes
to identify internal and external fraud based
on partner reports prepared in accordance
with the Company’s requirements. These
staff monitor the commercial procurements
and electronic bidding on CisLin and Tender.pro
e-commerce platforms. Thus, we rule out possible
fake competition for counterparties taking part
in the bidding.
In the reporting year, we also undertook routine
measures to instill confidence of employees
and contractors. The Company actively joined
general meetings and negotiations with suppliers
to promote a culture of zero tolerance
to corruption in any form.
The Group has an ever-improving anti-corruption
portal in line with the strategy to simplify
and expedite investigations related to anonymous
warnings, disputes, or legal requests.
Throughout 2022, we completely moved the ultra
fresh (meat/fish) commercial procurements
to an automated trading platform. We also
automated the analysis of in-store purchases
under the loyalty programmes for internal
and external fraud.
We keep a close eye on all logistical
and financial transactions. The year of 2022 saw
the implementation of a Remote Acceptance
programme to remotely monitor the goods
accepted in distribution centres (DCs) and involve
an independent expert to recheck any suspicious
actions.
The Company aspires to partner with those
counterparties who follow the principles
of legality and anti-corruption laws. Every
contract with a counterparty includes a binding
anti-corruption clause; otherwise, it will not
be negotiated.
The Company consistently trains its employees
in anti-corruption, advocating zero tolerance
in accordance with the Company’s Anti-Corruption
Policy. To ensure transparency, employees
of the Economic Security Department regularly
join procurement commissions. All potential
conflicts of interest are reported to the internal
audit and security departments of hypermarkets
and supermarkets which assess corruption risks.
All employees of O’KEY Group can go through
the Anti-Corruption Policy policy and relevant
procedures when being hired. If specific
procedures change, new versions of documents
are sent to employees for review. The Company’s
staff undertakes to respond to all corruption
cases without delay. We guarantee confidentiality
of persons who report corruption. Anonymous
hotline numbers are available to all employees
and suppliers in every branch and on the Group’s
website.
Information posters about zero-tolerance
behaviour in our offices remind employees
to report any suspicious actions or incidents
to the relevant hotline.
Internal measures External measures
• New employees are checked for corruption risks prior
to employment.
• All employees sign a pledge to follow the Anti-
Corruption Policy.
• Employees from the Procurement and Real Estate
departments as well as in our stores take anti-corruption
courses and attend briefings.
• Employees exposed to higher corruption risk,
for example, from the Procurement and Real Estate
departments, fill out declarations.
• Contracts are monitored every six months.
• Critical business processes (e.g., receipts, write-offs
and returns) are subject to oversight procedures using
IT monitoring software.
• Appeals are addressed via feedback channels.
We thoroughly inspect all potential suppliers and service
providers prior to contracting, namely:
• documentation;
• financial health (balance sheets, assets, turnover, debts,
credits, and court proceedings);
• absence of affiliation to our other suppliers
or employees;
• the customer base and turnover should match
the declared tax history;
• local suppliers are additionally monitored;
• our suppliers sign a binding agreement in which they
accept all Anti-Corruption Policy clauses;
• if suppliers and contractors violate the Anti-Corruption
Policy, O’KEY is entitled to terminate their contracts
immediately.
These measures imply compliance tests
for employees and suppliers to make transactions
more transparent and better detect violations.
The year of 2022 marked six violations
of the Company’s rules and standards, with four
of them reported via the hotline. The Anti-
Corruption Unit of the Risk Department promptly
investigated all the facts and reports. We did not
identify violations in three cases, confirmed one
other case, and fired the employee liable.
The reporting period saw two confirmed
cases of violating the Anti-Corruption Policy
by the Company’s employees, and one case
by a counterparty. We fired our employees
and took internal measures against
the counterparty.
In 2022, we updated a number of anti-corruption
procedures to obtain earlier warnings
and prevent such incidents. In 2023, we plan
to further implement and enhance our action
plans to develop a culture of zero tolerance
of the Company’s employees and suppliers
to corruption in any form.
In addition, next year O’KEY Group will go
on moving commercial procurement procedures
for the remaining areas to an automated
trading platform. In doing so, we will accomplish
the completion of our Remote Acceptance
programme.
The Group also prearranges a DLP Systems
programme to automatically respond to violations
of anti-corruption policies and procedures
as well as better protect the Company
from internal and external economic threats.
46—47 Annual Report Overview Strategic
Report
Operational Review Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
RUB 53 BN RUB 6.2 BN
26% DA! DISCOUNTERS REACHED
OF GROUP REVENUE
4.2% E-COMMERCE SHARE
IN O’KEY REVENUE
Operational
Review
RUB 147 BN
74% O’KEY SHARE IN GROUP REVENUE
Our three complementary
formats, O’KEY hypermarkets,
DA! discounters, and the e-commerce
platform, ensure the fulfilment
of all customers’ needs. We aspire
to maintain a high operational
efficiency and the best service
in every store. We have online
delivery in all cities of our presence. Annual Report 2022
As part of the strategic programme to enhance
the competitiveness of its hypermarkets,
the Company is upgrading its O’KEY stores.
The newly transformed stores show good
progress in terms of traffic growth and sales
density. We intend to gradually upgrade
stores in key regions and locations depending
on the competitive environment.
Apart from the new design, this means
implementing a new approach towards the product
range, the customer service, and the experience.
We focused on the fresh and ultra-fresh
categories, own brands and own production,
and the wine and deli selection.
The Group believes that hypermarkets will remain
competitive in the future on the basis of intelligent
management of this format.
Over 2022, we were able to respond effectively
and adapt our business to the new conditions
together with a focus on delivering an enhanced
customer experience, maintaining high operational
efficiency, an impeccable quality of our goods,
and the best service in every store of our chain.
The right focus and a developed customer value
proposition (CVP) enabled us to deliver steady
operational and financial results.
In the reporting year, we continued to evolve our
unique value proposition by the following efforts:
• we fortified the synergy of our hypermarket
format with online and discounter formats
by applying an omnichannel approach, acquiring
private label expertise and an efficient
procurement system within a significantly
changed environment;
• we modified the range of non-food items in our
assortment due to the trends in demand;
• in our own production business, we optimised
our assortment of products and made a shift
towards regular matrix adoption;
• we managed to deliver high operational
and financial standards across our hypermarkets
business despite the impact of external
challenges.
As of 31 December 2022, the total number
of hypermarkets was 79, with a total selling
space of 526 k m 2 . In 2022, we solidified our
position in the Central Federal District of Russia
by acquiring four Karusel hypermarkets in Moscow
and the Moscow region from X5 Group.
The acquisition of 15 k m 2 of stores newly opened
in April 2022 is part of the strategy to ameliorate
the efficiency of our hypermarket business
and to prioritise development in key regions
of operations.
O’KEY is proceeding with the hypermarket
transformation programme as a part of the Group’s
strategy related to strengthening its market
position and supporting its sustainable long-
term growth. The programme aims at rebalancing
the assortment with a specific focus on the fresh
and ultra-fresh categories, enhancing the quality
and range of our food and non-food products
under our own brands, maintaining an impeccable
quality of the assortment and the best service,
and renovating hypermarkets.
Our newly transformed hypermarkets are showing
reasonably good progress in terms of customer
traffic and sales density. In 2023 and further,
we will rollout gradually the reformatting
programme across all our hypermarket chain.
O’KEY
Hypermarket
Format
PERFORMANCE
OVERVIEW
At the heart of our business
are the O’KEY hypermarkets that provide
our customers with a well-curated
and extensive selection of products
aimed at creating a compelling value
proposition. By focusing on our customers’
requirements, we have positioned
ourselves as major players in the Russian
food retail industry. We firmly believe
that hypermarkets will continue
to be a competitive and potentially
lucrative format, and we have made
notable strides in revamping the chain
and implementing our innovative
hypermarket model in recent years.
Our approach incorporates the best
practices from the food retail sector
and upholds quality standards
across the spectrum, ranging
from assortment strategies to customer
service and store layout design.
Hypermarkets business in 2022 at a glance
123 mln
CLIENTS SHOPPED WITH US
79 HYPERMARKETS
RUB
146.9 bn
NET RETAIL REVENUE
526 k m 2
SELLING SPACE
50—51 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
2023 priorities
Throughout 2023, we will continuously boost
the operational efficiency of our hypermarkets
and contribute to the enhanced product range
and shopping experience. We strive to meet all
customer needs, ensure the stable presence
of goods on our shelves, and see to the highest
quality and freshness both in the offline and online
channels, which implies a multichannel approach
to our business.
We believe that this is the model for hypermarkets
to follow going forward, which will remain
the basis of the Group’s business model
in 2023 and in the medium term.
In 2023, we are to update our loyalty programme
for customers, offer keen prices, maintain
impeccable product quality, and introduce
advanced digital solutions.
The year of 2023 is also distinguished by the desire
to further improve our operational efficiency
under the current conditions.
We will continue to upgrade our stores in a variety
of cities, and plan to roll out a new concept in our
hypermarkets based in the Central and Siberia
regions.
SUPPLY CHAIN
O’KEY operates a well-balanced supply
chain which allows us to serve our
customers’ needs in all our regions
of operation. In 2022, we continued
to enhance our supply chain via upgrading
our existing distribution centres,
improving our logistic operations,
implementing cutting-edge digital
solutions, and building transparent
relationships with suppliers.
The O’KEY logistics system encompasses
four distribution centres: two federal
centres in Moscow and two regional centres
in St. Petersburg. A total floor space
is 101.3 square m 2 as of December 2022.
The federal distribution centres are based
in Moscow and distribute fresh products, fruits,
and vegetables, FMCG, non-food, and alcohol
products to all stores across the country.
The regional distribution centres are located
in St. Petersburg, one of them specialising
in FMCG and non-food, and the other in fruits
and vegetables and fresh products. This supply
chain organisation enables O’KEY Group to balance
between logistical costs, stock management,
and a high level of service.
Location and Service Areas of O’KEY Distribution Centres (DCs)
In 2022, we made several improvements and optimised our highly customisable
WMS system at O’KEY’s warehouses, which enables us to respond promptly
to rapid changes in the business environment. This project aims to provide
storage and warehousing services to third parties.
Plans
Over the course of 2023, we intend to:
• fully launch the 3PL project;
• further develop our WMS system in order to hike the efficiency of internal
logistics processes of the DCs;
• automatise our working time management system;
• optimise the process of DCs topology as well as the claims
management using video analytics.
CENTRAL FD
SOUTH FD
NORTH-WEST FD
VOLGA FD
URAL FD SIBERIA FD
Murmansk
St. Petersburg
Syktyvkar
Ufa Tyumen
Omsk
Novosibirsk Krasnoyarsk
Irkutsk
Surgut
Ekaterinburg
Astrakhan
Rostov-
on-Don
Krasnodar
Sochi
Nizhny
Novgorod
Moscow
Togliatti
OVERALL NUMBER OF DCs: 4
(53.8 k m 2 and 18.1 k m 2 )
Moscow: 2
Fruits
and vegetables
Fresh
FMCG
Non-food
Alcohol
Categories:
(21.8 k m 2 and 7.6 k m 2
)
St. Petersburg: 2
Fruits
and vegetables
Fresh
Non-food
FMCG
Categories:
CENTRALISATION RATE: 63.4% +2.4%
52—53 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
PRIVATE LABELS
O’KEY private labels (PLs) have earned
an excellent reputation for outstanding
quality and a wide selection of goods.
Over the years, we have been successful
in our strategy of the rapid development
of own brands, delivering on a more
balanced assortment and offering
our clients goods of superior quality
at a better price (15–20% cheaper
than branded alternatives).
Our variety of private label products has three
major brands covering the entry, medium,
and premium price segments, as well as several
own brands in the pet food and C&D categories.
Throughout 2022, we worked hard to ensure
an excellent value for money for our customers.
Despite challenges the Company faced
in the reporting year, in Q3 2022 we managed
to introduce the new Selezione Italiana brand
in the premium price segment together
with the Fresh market. We are also taking every
effort to develop our O’KEY Selection brand
originally introduced in 2021 and now recovering
after a significant assortment reduction following
the geopolitical circumstances.
With the ultimate goal of offering a variety of high-
grade products at attractive prices to customers,
O’KEY continued to enhance the quality
and to update the existing range of its private
labels. In 2022, the share of private label products
in net retail revenue from respective product
categories was flat YoY at 10.5% and amounted
to 6.0% of O’KEY’s product range. During
the year, we developed and launched 450 new
SKUs, including such items as hot drinks, variety
of snacks, spices, and sweets. At the same time,
400 SKUs were delisted due to raw material issues.
We continued the renewal of packaging for all
major private label brands in order to enhance
customer loyalty and awareness for our
private labels. At the end of 2022, new designs
were developed and applied for 99% of SKUs
under the brand “O’KEY DAILY,” and over 80%
for C&D and pet food in Fantasy Brands.
Therefore, during the year we strived to reposition
our private labels and roll out a new assortment
structure in order to assure the attractiveness
of our private labels for customers across all price
segments.
In the course of 2022, we worked hard to increase
the volumes and profitability of direct imports
resulting in the share of import growing to 1.3%
of the net retail revenue of O’KEY hypermarkets,
together with newly introduced exclusive own
brands and products, such as Elvons, Sally,
Natur Bravo, etc.
One of O’KEY’s core priorities
is to provide customers with affordable
and high-quality food, while
creating a convenient and comfortable
shopping experience. Therefore, in 2022,
we continuously improved and ensured
our private label quality by conducting
regular checks both at the production
facilities and in independent
and accredited laboratories under
the “Trademark O’KEY – Customers’
Guarantee” programme.
1 ”O’KEY DAILY” is applied for food categories, “That’s what you need!” is applied for wine and non-food categories.
O’KEY DAILY (That’s what you need!) 1
Entry segment: 359 SKUs
O’KEY Selection
Premium segment: 94 SKUs
O’KEY
Medium segment: 1,055 SKUs
Fantasy Brands (pet food & C&D)
375 SKUs
1,883 private label SKUs available in O’KEY hypermarkets
54—55 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Our efforts in this area are regularly recognised
by various quality awards received throughout
the year. Over the course of 2022, O’KEY
and the selection of O’KEY’s private label products
won 13 gold medals at a prestigious international
Quality Guarantee 2022 competition 1 where seven
products received silver medals and six products
received a diploma.
OWN PRODUCTION
In recent years, there has
been a significant increase in demand
for ready-to-eat and ready-to-cook
food products, which has become one
of the few segments experiencing
such a surge. This category of products
has been in high demand due to the fact
that many people are working from home,
leading to a significant increase in sales.
Additionally, the trend of valuing time
as a luxury has led to a demand for high-
quality, fresh, and ready-to-eat food.
O’KEY hypermarkets have responded
to these trends by offering an extensive
selection of freshly prepared salads, hot
meals, pastries, and confectionery.
We provide the best customer experience
for products we make ourselves. Inside our stores,
there are special departments with ready-to-eat
and ready-to-cook food, as well as “sit and eat”
facilities where customers can enjoy a hot drink
or meal or even charge their phones. Moreover,
every day our clients can benefit from evening
promotions and discounts.
In 2022, we revised our approach
to the assortment management of our own
production making a shift towards matrix
clustering. Moreover, we introduced a product
matrix for our ready-to-eat products and divided
our product range across clusters depending
on regional product preferences, consumers’
buying ability, shelf space, and equipment
availability.
During the reporting year, we also managed
to optimise the product assortment for our
own production, placing a special emphasis
on value-added and popular SKUs such as fast-
food and fried foods and the “to go” assortment.
Our key priority is to further better the excellence
of our own production. Therefore, we keep
working on developing and launching standardised
recipes for our self-manufactured products in all
our stores.
Plans
Our strategic priority in our own brands
development is ensuring the highest quality
of products along with a diverse assortment.
In 2023, we will continue to do our utmost
to progress the development of private label
products in terms of quality, packaging layout
and number of SKUs in order to hike profitability.
We will further expand new design and packaging
to all our brands and will apply the “every day low
price” model to all SKUs under our private labels.
We also intend to diversify our private label
assortment in the medium and premium segments
and offer them at affordable prices.
O’KEY and DA! discounters will continue
to collaborate in order to develop common own
brands and achieve benefits in mutual negotiations
with suppliers.
• Mascarpone 80% O’KEY
• Preserved Calmar O’KEY
• Preserved Seafood Cocktail
in oil O’KEY
• Preserved Octopus in oil
O’KEY
• Zephyr (Russian marshmallow)
with vanilla O’KEY
• Turkey leg O’KEY DAILY
(2 suppliers)
• Turkey breast fillet O’KEY
DAILY
• Milk UHT 3.2% O’KEY
• Raspberry jam O’KEY
• Chevapchichi Balkan O’KEY
• Barbecue pork belly O’KEY
• Condensed milk 8.5%
380g O’KEY
• Wafer with strawberry O’KEY
• Cheese Litere 50% O’KEY
• Blue Cheese O’KEY
• Cashew fried O’KEY Selection
• Herring fillet in oil O’KEY
• Butter cookies O’KEY
• Turkey wings O’KEY DAILY
• Butter Fermerskaya
• Collection 82.5% DA!
• Smoked fish sliced O’KEY
• Preserved Shrimps O’KEY
• Preserved Mussel in oil O’KEY
• Herring fillet in oil with greens
O’KEY
• Turkey breast fillet O’KEY
DAILY
Gold medals Silver medals Diplomas
1 The contest is held by the V.M Gorbatov Federal Science Centre of Food Systems under the Russian Academy of Sciences
and supported by the Committee of the Federation Council on Agricultural and Food Policy and the Ministry of Agriculture
of the Russian Federation.
56—57 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
Own production highlights
135 SKUs
TOTAL NUMBER OF UNIQUE SKUs
IN THE READY-TO-EAT SEGMENT
147 SKUs
TOTAL NUMBER OF UNIQUE SKUs
IN THE BAKERY SEGMENT
+2.2 %
LFL NET RETAIL REVENUE
IN THE BAKERY SEGMENT
20 SKUs
NEW PRODUCTS INTRODUCED
IN THE READY-TO-EAT SEGMENT
26 SKUs
NEW PRODUCTS INTRODUCED IN BAKERY
Among other achievements of O’KEY Group
in 2022:
• continuing to boost the production of raw
materials and ingredients requiring little
preparation;
• proceeding with conducting employee training,
introducing the position of regional manager
to train and supervise personnel locally;
• standardising the quality and technology
process, from raw materials to customer
feedback, regular tasting, and quality control.
The quality of our own production has been
attested by industry awards. In 2022, O’KEY
participated in the Quality Guarantee 2022
contest: our products were awarded two gold
and three silver medals, as well as 3 SKUs received
special MEAT OSCAR awards.
Freshness approach
We strictly adhere to our “ultra freshness”
approach, and implement a quality control system
to ensure that only high-quality fresh goods reach
our shelves. O’KEY upholds strict product safety
and quality standards through all the supply
chain, from storage at distribution centres
to serving at hypermarkets. Quality control
includes daily visual and hygiene checks, and teams
of trained experts selectively check the quality
and standards of our own produce.
The quality control system for our own production includes:
Plans
In 2023, we intend to:
• continue to develop the regular product matrix
and adopt matrix clustering;
• make a special emphasis on the development
of regional assortment;
• develop a special situational approach to promo
assortment in different categories such
as breakfast, dinner and take and go;
• redesign our product packaging in self service
areas.
Control of raw materials from suppliers during
delivery to hypermarkets and storage
Degustation, visual freshness
check, shelf-life control
System of quality checks
Staff education, hygiene control,
and process control
58—59 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
QUALITY AND SAFETY
At O’KEY, we are committed to maintaining
the utmost standards of safety and quality
throughout our entire supply chain,
with a focus on providing our customers
with the freshest and highest-quality
products possible. To ensure top-
quality goods across all of our stores
and to meet the evolving needs of our
customers, we implement a risk analysis
and critical control points (HACCP)
approach. Our quality control system
covers every aspect of our operations,
from production to consumption,
and is complemented by internal standards
that often exceed industry requirements.
By adhering to these rigorous standards,
we strive to deliver unparalleled
quality and safety to our customers.
O’KEY maintains quality and safety
through a dedicated Quality Control Department,
which upholds internal quality standards that align
with both Russian Federation legal requirements
and global best practices in retail.
O’KEY’s Quality Management System (QMS) is built
upon the principles of risk analysis and Quality
Control Department (HACCP) to ensure the safety
of our products. Our QMS adheres to key hygiene
control measures at all stages of food production.
As legislation and market dynamics evolve,
we continuously refine our approaches to quality
control, aligning our QMS with cross-functional
targets, customer needs, and business objectives.
We also regularly update our additional quality
standards to align with global retail best practices
and the specific requirements of our business.
Standard measures for ensuring quality and safety
at O’KEY include conducting preliminary quality
control procedures, monitoring product
assortment in both stores and warehouses,
and conducting external and internal audits of our
stores and supply chain. Our own production
and private label products undergo laboratory
monitoring to confirm their high quality and safety.
One of the key components to guarantee constant
product quality is to ensure compliance
with the requirements of internal processes;
therefore, we conduct internal quality audits
of our hypermarkets on the regular basis. In 2022,
we worked hard to implement a new approach
to store audits and to scale a system of our
stores evaluation, which is based on the legal
quality requirements, the best practices,
and the internal QMS.
During 2022, we checked 11,437
SKUs in different accredited
laboratories under the Quality
Control Programme aiming
to deliver steady quality to our
customers.
In the reporting year, we also implemented a brand-
new system of customers’ feedback based
on the products quality. The system is meant
to collect comments from customers’ across all
communication channels, allowing us to be online
and thus be reactive to the customers feedback.
Taking advantage of firsthand market trends,
we are able to efficiently improve and develop our
business processes or products lines.
We also run initiatives to improve our
employee’s quality control system skills.
Throughout 2022, a special course Fruit
and Vegetable product awareness. Seasonal
assortment was provided for all our employees
at the stores.
The Company actively participates in regional
and national quality initiatives. O’KEY successfully
passed the inspection audit and received
an “excellent” status as part of the voluntary
certification “Made on Don” in the Southern
region of Russia. Moreover, the Company took
part in ACORT quality committee initiatives, such
as communication with authorities on legislative
issues, participation in round tables with state
control bodies, and contributing to new normative
documents developing procedures.
During the recent year, O’KEY stores successfully
underwent 18 planned and unscheduled
surveillance audits conducted by the authorities.
In the year of 2022, we continued to improve
the quality of our own production. Focused
on that, we developed and updated the Company’s
regulatory documents, including seven internal
standards and technical instructions regarding
the quality of our own baked products, meat,
and fish. Together with commercial and operational
teams, we implemented 787 technical specifications
for dishes (compared to 386 in 2021).
We also applied a new shelf-life confirmation
method for 63 SKUs, including the semi-ready
products category.
Over the course of 2022, the Company
continued its project for the risk evaluation
and quality audit of products from our suppliers.
In the reporting year, we conducted 28 audits
of our own production at suppliers’ facilities.
We also conducted 98 audits of our private label
products suppliers. In 2023, we will continue to do
so to ensure the quality of our products for our
customers.
Following the current legislative requirements,
O’KEY changed from declaration of goods through
external service providers and to self-declaration,
which resulted in increased efficiency of the whole
declaration process as well as cost savings. During
the year, we conducted all necessary laboratory
tests in terms of our own products and acquired
5 declarations for 154 new SKUs.
We developed and launched an approval
mechanism for all our meat suppliers through
the ART-TRADE platform and will benefit
from the final inspection information placed
on the labels of our products by the Quality
Control Department before they are supplied
directly to the stores and distribution centres.
This will enable us to download necessary data
in time, avoid suppliers’ technical mistakes,
and meet all related deadlines. Over 2022,
the ART-TRADE platform ensured 17,531 SKUs
were accepted and supplied to our stores.
During the year of 2022, we kicked off a new
project aimed at the automatisation of production
acceptance at O’KEY’s distribution centres, which
allows us to make this process more efficient,
aligned, and integrated into the Company’s
logistics system.
60—61 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
In the reporting year, the Company also faced
temporary changes in import regulations in Russia
and adopted its import system in terms of quality
permission documentation.
Along with that, in collaboration with DA!
discounters, we developed and agreed
on criteria for the quality of imported products
in the category “Fruits and Vegetables”.
Our efforts in the quality control
area are regularly recognised
by various awards. In 2022, O’KEY
and O’KEY Selection private
label products and our ready-to-
eat and ready-to-cook products
won 15 gold and ten silver
medals, as well as seven Quality
diplomas and ten “Meat Oscars”
at a prestigious international
Quality Guarantee 2022 competition.
Plans
The Company intends to continue enhancing
its quality management system and food safety
control procedures, going forward in terms
of supplied branded goods, own production,
private labels, imports as well as operations
at its distribution centres.
In 2023, we are to:
• implement and roll-out a quality control system
and a HACCP system at our distribution centres;
• continue collaborating with the ART-TRADE
portal in terms of the approval of newly
introduced suppliers;
• expand our employee’s development
and training regarding the quality control
system, for those who are involved in the quality
support process;
• continue to conduct suppliers’ quality audits
and periodical laboratory control for own
branded and own produced products;
• continue to develop the shelf-life confirmation
for ready and semi-ready products of our own
production;
• implement the PL Suppliers Quality Scorecard
system based on dynamic collaboration;
• develop online sales and delivery of our own
production;
• extend our QMS to the regions involved
in the Company’s “Bake off” project;
• update our Production Control programme
by transferring laboratory control from stores
to DCs aiming at business efficiency and costs
reduction.
LOYALTY PROGRAMME
During 2022, the Company focused
on creating a new loyalty programme
based on discounts. We are planning a pilot
launch of the programme in 2023 in one
of the cities where O’KEY operates
with the intention of covering the whole
stores network a month later.
Over 2022, we rolled out two large-scale
promotions dedicated to the Company’s
anniversary and the New Year.
As part of the “20th O’KEY anniversary”
promotion, we started off a series of instant gift
cards lotteries for customers with over RUB2,000
in purchases, as well as a weekly partnership
lottery for every one-time RUB1,000 spent in our
stores or in partners’ stores. To participate
in the lottery, an O’KEY discount card needs to be
be provided. Customers receiving tickets as part
of the weekly lottery got a chance to win the main
prize: a HAVAL car.
The second one, the “Calendar of Miracles”
promotion, offered customers the opportunity
to open boxes in a special advent calendar
and receive gift cards from partners or O’KEY
discount coupons.
Throughout the year, O’KEY was working on rolling
out innovative offerings with personalised
promotions by utilising the predictive analytics
method. This option enables the involvement
of new clients, inspiring them to recurrent
visits as well as increasing the average bill
in active clients. In the year of 2022, we worked
on a project to develop a personalised approach
to the communication of promotions.
Striving for excellence in sustainable development
and promoting ESG principles, in 2022 O’KEY
kicked off an initiative to eliminate paper sales
receipts and also in order to switch to electronic
receipts. In the reporting year we:
• optimised the time of sending electronic checks
to our customers: now it takes several minutes
compared to several hours earlier;
• found a way to duplicate electronic checks
by mail with the call centre’s employees being
involved in the process.
Plans
Over the course of 2023, we are launching a new
loyalty programme that provides customers
with a differentiated level of discount
with the loyalty card.
We also intend to further develop our campaign
management system by using various channels
of communication with clients: slip checks, digital,
app, SMS, selected social media, etc. In the year
of 2022, we accomplished good results focusing
on advantages of the push-notifications system
both in our mobile app and on our website.
We are to find the best way to reach our clients,
bolster the efficiency of our interactions
with customers and optimise communication costs.
62—63 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
IT SOLUTIONS
O’KEY keeps up with the latest
advancements in the constantly changing
retail industry. We employ modern
digital technologies and mobile apps that
are vital to stay ahead in the industry.
With advanced IT solutions, O’KEY can
connect with customers, study their
requirements and tastes, and create new
opportunities for growth. The Group’s
hypermarkets utilise a comprehensive
IT infrastructure that caters to all
aspects of our operations. Our pioneering
software helps us boost efficiency
and accomplish our strategic objectives
by raising customer satisfaction
and enhancing our service standards.
The reliability and resiliency of IT services became
even more significant in 2022, driven by new
threats, volatile prices, assortments, currency
exchange rates, hard-to-predict demand anomalies
and changes in buying behaviour. Therefore,
we significantly bolstered our computing
power, implemented additional ways to back up
and quickly recover key systems, and strengthened
our cybersecurity tools and regulations.
To further develop omnichannel, we implemented
online access for our customers to specific
categories of non-food products with a wide range
of consumer properties, considerably widening
the range of the online sales channel.
In addition to expanding our own online
channel, we continue to develop partnerships
with marketplaces and online delivery operators,
integrating our IT landscapes and business
processes to provide customers with a variety
of convenient ways to order, deliver, and pay.
Over the year of 2022, O’KEY has streamlined
the logistics process by extending the Pick-by-
Voice system to all of the distribution centres.
This reinforced the order-picking performance
of hypermarkets, which in turn resulted
in swifter turnaround times and improved
customer satisfaction. We also optimised our
algorithms for determining available quantities
and long-term planning of replenishment
waves, which had a substantial impact
on the accuracy and efficiency of order picking
at the distribution centres.
We firmly believe that these improvements will
not only enhance the customer experience,
but also have a positive impact on our sales.
Our commitment to improving logistics
and implementing innovative solutions
is a testament to our dedication towards delivering
the best possible experience to our customers.
Plans
Throughout 2023, our development plans
encompass, but are not limited to:
1. Launching a new loyalty programme that
provides customers with a differentiated
level of discount with the loyalty card.
We use the flexibility of our omnichannel
capabilities, and for the convenience
of our loyal customers we have
implemented a quick and the most convenient
way to find out a product price by simply
scanning a barcode in O’KEY hypermarkets
and the mobile application.
2. We continue to develop synergies between
O’KEY hypermarkets and DA! discounters,
and we have implemented a number of solutions
aimed to significantly increase the efficiency
of both chains in working with the assortment,
import operations, logistics, etc. In 2023,
we plan to launch a new intragroup-3PL
technology which allows us to balance
the logistics workload between the distribution
centres of the two chains.
3. We continue the ongoing development of our
IT infrastructure. Hence, in 2023, we will place
even more emphasis on the import substitution
of platform solutions and workstations.
The same emphasis we keep on the development
of long-term relationships primarily with our
long-standing Russian partners and vendors:
POS software and equipment, HRM, Yard
Management System (YMS) and Transportation
Management System (TMS). We also
actively support our partners who carry out
the transfer of foreign best-of-breed solutions
into the perimeter of the Russian import-
independent stack: Warehouse Management
Systems (WMS), Demand Forecasting
and Supply Chain Management (SCP),
Customer Relations Management (CRM), etc.
In the reporting year, O’KEY Group introduced
a new cross-platform mobile solution designed
to simplify store management. This innovative
augmented management solution makes
it possible to assess the full current store
performance quickly based on the information
gathered from all the systems. This enables
store managers to assign tasks and focus their
employees on what’s essential. The mobility
and speed of store field management with this
unique mobile solution complement the high-
level analytics of the BI system, the transactional
completeness of the ERP system,
and the transparency of operational management
of the task management system.
Over 2022, we focused on three areas:
Implementing new high-tech
solutions
Responding quickly to shifts
in the external environment
Developing the efficiency
of business operations
64—65 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
E-COMMERCE
O’KEY Group is one of the leaders
in the Russian e-commerce food market,
with the online business becoming
one of the key parts in the Company’s
customer value proposition. We strive
to grow our digital presence,
further develop our omnichannel
approach, and expand our ability
to be with customers at every stage
of their shopping journey.
1 Source: Infoline research 2022, excluding grocery aggregators and food
delivery operators.
Major factors which contributed to the development
of the e-grocery market in 2022 were the economic
turbulence, the volatile situation on the Russian consumer
market, and the unprecedentedly high inflation rates.
In 2022, the Russian online grocery market sales grew
by 63% YoY to RUB 625 billion, while the share of online
sales in the total food and beverage retail sales rose
by 3% YoY. 1 The Russian food retail market is distinguished
by the prevailing share of online purchases and a number
of factors which force customers to refrain from switching
to online channels entirely. In line with this trend, O’KEY
Group demonstrated a flexible approach to business
and continued to develop its omnichannel online platform,
which provides customers with the opportunity to use
multiple sales channels to make a single purchase
at favorable prices within the whole product range.
In compliance with
the All-Russian
customer survey,
the O’KEY online
store was declared
the best online store
in the “Hypermarket”
category according
to buyers. 1
28 k
TONNES DELIVERED IN 2022
+40% YoY
RUB
6.2 bn
TOTAL ONLINE SALES IN 2022
+32.6% YoY
Shopping behaviour has shifted to the omnichannel retail
experience. Therefore, O’KEY’s e-commerce business
is developing in synergy with the existing offline format.
The combination with hypermarkets provides our customers
with access to a vast assortment of high-quality goods,
including fresh and ultra-fresh products and to a professional
team of employees.
Throughout 2022, rising prices and falling real disposable
incomes fortified the trend towards rational consumption.
Price has become extremely much more important than
quality for Russian consumers when purchasing both
non-food products and a number of food items. Moreover,
some customers were limited to consuming only the most
necessary things.
Besides, essential trends on the Russian e-commerce market
were the unification of online and offline customer bases,
the constantly rising share of grocery private label products
in online sales, the growing contribution of online channels
of major grocery retail networks, the better numbers
of relatively small online purchases, as well as the need
for customers to receive orders “right here, right now”
using the fast delivery service.
1 Source: Retail.ru, a portal for retailers and suppliers conducting
all-Russian retail market research over the past 23 years.
4.2 %
E-COMMERCE SHARE
IN O’KEY RETAIL REVENUE
26 PICK-UP AND
COLLECTION POINTS
IN 2022
2x YoY
66—67 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
O’KEY Group is a member
of the Association of Internet
Trade Companies, which promotes
fair competition, innovation,
and positive development
of the industry in Russia.
One of the Group’s priorities is to expand
the omnichannel capabilities by tapping
into synergies with partners. Collaboration
with food delivery operators in all regions
of our operation enabled us to provide even more
customers with fresh and high-quality products
at competitive prices in the fastest delivery time
possible.
1,306 k
ORDERS
+39% YoY
601 k
ACTIVE CUSTOMERS
+35% YoY
100 %
ONLINE COVERAGE
IN THE CITIES OF O’KEY OPERATION
All indicators exclude deliveries via operators
O’KEY Group is well positioned to respond to all
recent e-commerce food market trends and strives
to anticipate all customer needs and expectations.
O’KEY was the first Russian online grocery retailer
to launch its own delivery service back in 2015.
Currently, the Group is one of the top 15 leaders
by revenue in the online food retail industry.
Over the course of 2022, O’KEY succeeded
in realising growth opportunities
of the e-commerce product market. O’KEY’s
total online revenue went up by 32.6% YoY
to RUB 6.2 billion with its share amounting
to 4.2% of O’KEY’s net retail revenue. Despite
the challenges of 2022, the Group managed
to hike its e-commerce customer base by 35%
to 601 k active customers and complete
1,306 k online orders, which is 39% higher
than in 2021.
In the year of 2022, O’KEY continued to stay
ahead of major market trends and progressed
in leveraging cutting-edge technology solutions
and innovations in order to further advance
its e-commerce business and remain proactive
regarding its customers’ needs. E-commerce
is an efficient tool to attract new customers
and to retain and make current customers
more loyal.
68—69 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
DA!
Discounter
Format
The increasing emphasis on cost-effectiveness
has given rise to a new store format, which
encouraged us to reinvigorate our DA! discount
concept with a premium appeal. The DA!
business continues to be a leading expanding
supermarket chain in the Russian market, playing
a crucial role in driving the Group’s revenue
growth. Over the year, DA!’s net retail sales saw
a significant increase of 53.2% YoY, with LFL rising
by 26.8% in the same period.
DA! discounters leverage the best international
practices, cutting-edge in-house innovations
and state-of-the-art technologies within
the retail industry. At the same time, DA!
stores are specifically tailored to meet unique
preferences and demands of our target audience.
Our business model has consistently demonstrated
its efficiency year after year, and we have
garnered significant recognition from our loyal
customer base.
DA! stores have a well-balanced product range,
covering all customer needs in terms of food
items and the most popular non-food items.
We achieve this by integrating our supply chain
with O’KEY hypermarkets and securing the most
advantageous procurement arrangements with our
vendors, allowing us to provide our customers
with exceptional value for their money. Additionally,
our strategic store placement, exceptional
customer service, state-of-the-art equipment,
and expansive shopping areas grant DA! a distinct
competitive advantage.
DA! discounters adhere to the “every day low
price” policy, which is largely supported by our own
brand products. Our proprietary brands provide
evident cost benefits of 20–30% in comparison
to equivalent quality branded products, effectively
catering to price-sensitive customers. These
exclusive brands are meticulously crafted
and solely available at DA! stores.
Over the past few years, the discount
segment of DA! has demonstrated substantial
and consistent growth, with at least 30% YoY
increase. We are confident that this trend will
continue, and foresee a double-digit revenue
growth in the near future.
KEY FIGURES OF 2022
2020 2021 2022
Number of stores 118 152 194
Selling space, k m 2 80.17 102.9 130.4
Net retail revenue, RUB bn 26.0 34.8 53.3
Net retail revenue, % +45.3 +34.3 +53.2
LFL net retail revenue, % +27.8 +16.3 +26.8
LFL average ticket, % +25.1 +6.6 +13.2
LFL traffic, % +2.2 +9.1 +12.0
DISCOUNTER BUSINESS IN 2022 AT A GLANCE
RUB
53.3 bn
NET RETAIL REVENUE
+53.2% YoY
670 m 2
AVERAGE STORE SELLING SPACE
26.6 %
DA! SHARE IN GROUP RETAIL REVENUE
194 DISCOUNTERS: TOTAL NUMBER OF STORES
+42 stores net YoY
3,400 SKUs AVERAGE PRODUCT RANGE
> 1,300 PRIVATE LABEL SKUs
The DA! network has shown robust growth, transforming from a relatedly small local network to the major
fast mover of the Russian grocery market with 194 stores in Moscow, as well as in Tver, Tula, Kaluga, Ryazan
and Moscow regions.
Strategic priorities of DA!
Developing own brands Growing and expanding Achieving superior
financial results
70—71 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
PERFORMANCE
+53.2 %
DA! DISCOUNTERS NET RETAIL REVENUE IN 2022
+26.7 %
DA! DISCOUNTERS SELLING SPACE IN 2022
DA! discounters’ key principles
• We continue to adhere to the concept
of a highly convenient store, meeting all needs
of our customers and providing the highest
possible level of service. We strive that
our clients spend their time in our stores
with smiles and pleasure.
• Our customers’ wishes and rights are our main
values and guidelines.
• We welcome any feedback from store visitors
and consider every complaint or claim without
any exception in the shortest possible time,
providing a prompt response.
• We value our customers’ convenience: our wide
aisles and block layouts make shopping faster
and more efficient. Our personnel are always
open and friendly to the customer.
• We value our customers’ time: we adhere
to the principle of prompt and friendly service.
• Cleanliness in stores, correctness of price tags,
friendliness and smartness of our personnel,
convenience and speed of the whole shopping
process ensure our customers’ loyalty.
• We strive to respond to all current market
trends as quickly as possible and are successful
in offering our customers novelties in our
product range on a weekly basis.
• We adhere to the “every day low price” policy,
largely supported by our own brand products,
which offers clear cost advantages of 20–30%
against branded goods of comparable quality.
• We are focused on supplying our customers
with the freshest goods by improving
quality control across the supply chain
and by expanding our assortment in the fresh
and ultra-fresh categories.
In 2022, we:
• opened 42 new stores net of closures;
• increased our product range to 3,441 SKUs
with emphasis on fresh and ultra-fresh
products and ready-to-eat products;
• introduced 86 new SKUs under our
private labels;
• continued the digital transformation
of the chain through the development
of a variety of IT infrastructure projects
and the implementation of new software
programmes;
• considerably improved the quality
management system of our bakery segment;
• optimised the storage system and shelf
space in our distribution centre in Stupino
in Moscow region.
In our discounters’ marketing policy, we strive
to get closer to our clients and seek to meet
all their changing preferences. According
to the latest marketing research, our main
customers are represented by young families
with dependent children or young childless
families, as well as working families of middle
and older age with a middle level of income.
All of them are partly promo-oriented but
are willing to try fashionable new products.
Likewise, 68% of our assortment is evaluated
by customers as optimal and mostly good,
which is 17% higher than the average figures
in the whole discounter segment.
DA! discounters’ profit from synergies with O’KEY
hypermarkets in procurement, imports
and relations with suppliers and producers,
which is mainly the result of increased purchasing
power, maintaining the economies of scale
effect as well as improving the quality of goods
we source.
To ensure robust growth, DA! discounters
remained focused on managing their balanced
assortment and own brand portfolio and continued
offering the best value for money to clients.
In terms of our approach towards collaboration
with suppliers, we strive to work directly
with manufacturers rather than with importers
and distributors. We also aim to build long-
term partnerships with our suppliers for our
private labels, while our own brand product
sales often exceed even A-branded product
sales. On the other hand, we contribute
to the development of local manufacturers
by tapping into synergies with them and ensuring
large-scale purchases.
FRESH OFFER
DA! discounters keep up with the general trend
towards fresh and ultra-fresh products, offering
a wide range of dairy, fresh meat and poultry,
fruits and vegetables. In 2022, the share of fruits
and vegetables, fresh and ultra-fresh products
in the discounter’s sales mix exceeded 60%.
Our range of fresh products includes own brand
SKUs, some of them under the “farm label” which
represents regional and traditional production
of outstanding quality. Another feature of our
discounters is a wide (over 40 SKUs) range
of freshly baked pastries. In order to ensure
freshness of our goods, we practice direct import
and deliver fruits and vegetables to all our stores
on daily basis.
72—73 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
PRIVATE LABELS AND OWN PRODUCTION
We strive to offer all relevant private labels
across all our product range (with the exceptions
of cigarettes, sensitive goods and baby food)
in order to motivate our customers to recurrent
visits to our shops.
We have achieved impressive results in optimising
our operating and advertising costs and applying
the “every day low price” concept. Therefore, our
private label products are less expensive than
popular alternatives of comparable quality. We also
enhance constantly our supply chain, giving
emphasis to cost generating functions and passing
all cost-saving advantages to our customers
while maintaining good margins. All these factors
enable us to build an appealing customer value
preposition and maintain relatively lower prices
than our competitors in the Russian discounter
format.
DA! OWN BRANDS:
20-30 %
CHEAPER THAN BRANDED PRODUCTS
OF THE SAME QUALITY
We are focused on the prudent selection of our
own brands manufacturers and strive to develop
long-term mutually beneficial collaborations
with them in order to provide an impeccable
quality of goods and ensure perfect packaging
design close or similar to the branded assortment.
To ensure all our private label manufacturers
meet the highest quality standards, we only work
with innovative manufacturers who share our
commitment to quality.
Developing own brand
1 2 3
Thorough selection of manufacturers:
innovative young companies ready to offer
a special quality product at the best price
and to meet our requirements
Joint development of products
and packaging, close or similar
to branded assortment in terms
of quality
Strict quality control
Private label products remain one of the key
drivers of DA!’s financial results and show better
sales growth than our branded products.
In 2022, PLs accounted for around 50%
of DA! revenue. We are continuously working
on extending the range and improving the quality
and packaging of our own branded products.
In 2022, we introduced 86 new SKUs.
Our assortment of private label SKUs reached
1,322 SKUs. For our private label, we use more
than 90 registered brands as umbrella brands
for different categories and quality levels.
Products under our private labels (brands)
48.8 %
SHARE IN DA! REVENUE IN 2022
1,322 SKUs
UNDER OWN BRANDS
38.4 %
SHARE IN NUMBER OF SKUs
86 NEW PRIVATE LABEL SKUs
We will do our upmost to further optimise and extend the private label assortment,
improve its quality and strengthen our positioning.
QUALITY AND SAFETY
Another important feature of our DA! discounters’
network is the constant excellent quality of goods
in all stores. We aim to win the trust of our
customers through the freshness and quality
of our product range, maintaining an efficient
quality management system which encompasses all
stages of operation and is improved on an ongoing
basis. We strictly follow all provisions of Russian
legislation in terms of quality and safety,
as well as the requirements of the HACCP system.
The main focus of our attention is the impeccable
quality of our private label products. In addition
to complying with all requirements provided
by legislation and related standards, we conduct
quality audits of all our private label suppliers
and their products.
Our private label products’ producers undergo
external audits according to the Global Food
Safety Initiative (GFSI) requirements.
The Global Food Safety Initiative is a business-driven
initiative for the continuous improvement of food
safety management systems with the ambition
to ensure confidence in the delivery of safe
food to consumers worldwide. The GFSI
includes the definition and control of minimum
requirements for food safety certification
programmes and a robust benchmarking process.
GFSI benchmarking and recognition of existing
private standards is actively used for food safety
certification programmes with the objective
to enhance confidence, acceptance
and implementation of third-party certification
along with the entire food supply chain.
The frequency of these audits depends on results
of previous audits and on the assessment
of potential risks. We also arrange laboratory
checks with a frequency varying from one to twelve
per year, based on the potential risk of the product
category and on precise product features.
74—75 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
SUPPLY CHAIN
DA! maintains smooth operations across all
its supply chain and stores, which enables us
to ensure the robust growth of our network
and to quickly meet the bulk of customers’ needs.
In the reporting year we continued to improve
the productivity and effectiveness of our supply
chain by applying the best digital solutions,
improving both collaboration with suppliers
and our logistic capabilities.
The DA! supply chain includes one distribution
centre, which is designed to serve a large number
of stores efficiently. The distribution centre
with an area of 60 k km 2 is based in Stupino district
of the Moscow region and provide services for all
194 DA! stores. We also operate two external
warehouses located in the Moscow region
and used for long-term storage.
We deliver products in the fresh, vegetable
and fruit categories on a daily basis with no
stockholding at our warehouse. This unique
delivery model helps us to maintain a high level
of freshness and the utmost product availability
across our discounters.
Location and service areas of DA!
distribution centre (DC)
IT SOLUTIONS
The DA! discounters format draws on the latest
developments in the retail industry. We believe
that new digital technologies are a necessary
element for those who want to be at the forefront
of the industry.
2022 turned out to be a hard year in terms
of the availability of technologies and equipment
for the Russian business. Our IT team quickly
prepared an import substitution matrix for all
the software and hardware. These alternative
solutions were piloted and implemented during
the year. At the moment, all the main part of our
IT landscape has a tested substitute that we get
either in Russia or from the friendly countries.
This will allow the Company to continue growing
steadily in the changing geopolitical environment.
In parallel, we pursued with our investments
into key IT projects to improve the efficiency
and transparency of our business processes.
A number of improvements were made
to the logistics platform and store back-office
systems, which resulted in costs reduction
and improvement of product availability
on the shelf. The big data processing system
was upgraded, helping us accelerate receiving
of the key metrics needed for decision-making
processes in terms of the business management.
In 2023, we will continue critical business
processes optimisation projects, as well as planned
import substitution of outdated solutions.
PLANS
We see great potential in developing our private
labels by offering our customers significant saving
options in comparison with branded peers without
compromising quality or price. The success of our
own brands underpins our motivation to further
develop this direction of the discounters’ business:
We will redesign packages of another 150–200
private label SKUs in order to meet all up-to-
date consumer trends and wishes and will focus
on popular fresh and ultra-fresh products to keep
the traffic of our DA! discounters high. We also
intend to develop further our highly competitive
wine and pastries product ranges.
In 2023, we intend to continue strengthening
DA! discounters’ security by the implementation
of a new Alternative Transients Programme
(ATP), Endpoint Detection and Response (EDR)
and Network Traffic Analysis (NTA) solutions
and plan to roll out a new Security Operations
Centre for processing alerts received through
these tools. We are also going to launch the second
stage of our warehouse management system,
including implementation of the Go live technology.
We believe that employment and extension
of innovative IT technologies in our DA!
discounters’ business will contribute to maintaining
our market position and competitiveness.
We will continue to develop our Stupino
distribution centre: we will optimise the shelf space
in our dry goods storage zone and further enhance
the use of the “Chestny ZNAK” system by starting
the scanning of goods at checkout in our DC.
In 2023, we are also going to continue developing
the health and safety system in our discounters
chain.
For instance, we plan to:
• implement a new schedule of laboratory
testing, which will embrace our entire product
range including the fresh, ultra-fresh, non-
food categories as well as pet food and C&D
products;
• roll out a new schedule of our supplier
audits both by our own experts and by our
contractors, and increase the number of audits
from 10–12 to 16–20 per month;
• develop and approve a food safety and
quality manual to be applied in our stores
as well as Regulations on the Selection and
Evaluation of Suppliers;
• constantly update the conditions of contracts
and supplement agreements with regard
to the quality and safety requirements
and in compliance with the Regulations
on the Selection and Evaluation of Suppliers.
1 DC in Stupino
60 k m 2
194 stores
Stupino
Fruits and vegetables
Fresh
FMCG
Non-food
Alcohol
Categories:
76—77 Annual Report Overview Strategic Report Operational
Review
Financial Review Corporate Governace Financial Statements 2022
Delivering
great customer
service
2.2 X
DA! EBITDA GROWTH YoY
Financial
Review
Throughout 2022, O’KEY Group
delivered throughout financial
results thanks to the resilience
of its business model and the success
of the multiformat strategy.
We also kept the costs, margins,
and the debt levels under control,
which translated into solid results
and a sound balance sheet.
RUB 17.0 BN
GROUP EBITDA
9 %
O’KEY EBITDA MARGIN Annual Report 2022
1 All results are according to IFRS 16, unless stated otherwise.
FY 2022
Financial
Highlights 1
RUB
202.2 bn
+8.1% YoY
TOTAL GROUP REVENUE
RUB
46.8 bn
+11.1%
GROUP GROSS PROFIT
23.2 %
+0.7 pps YoY
GROSS MARGIN
RUB
17.0 bn
+9.8% YoY
GROUP EBITDA
RUB
3.6 bn
DA! DISCOUNTERS EBITDA
+2.2 times YoY
EBITDA MARGIN REACHED 6.8%
8.4 %
+0.1 pps YoY
EBITDA MARGIN
RUB
5.8 bn
+15.2% YoY
GROUP OPERATING PROFIT
RUB
242 mln
+16.2% YoY
GROUP NET PROFIT
Group Profit and Losses Highlights for FY 2022
RUB mln FY 2022 FY 2021 ∆ YoY, %
Total Group revenue 202,171 187,097 8.1%
• O`KEY 148,824 152,260 (2.3%)
• Discounters 53,347 34,837 53.1%
Gross profit 46,808 42,119 11.1%
• Gross profit margin, % 23.2% 22.5% 0.7pps
SG&A (40,390) (35,718) 13.1%
• SG&A as % of revenue 20.0% 19.1% 0.9pps
• Other operating expenses, net (667) (1,410) (52.7%)
Operating profit 5,751 4,991 15.2%
• Finance expenses, net (5,642) (4,798) 17.6%
• Foreign exchange gain 313 206 51.9%
Net profit 242 208 16.2%
Group EBITDA 17,020 15,504 9.8%
• Group EBITDA margin, % 8.4% 8.3% 0.1pps
O`KEY EBITDA 13,377 13,839 (3.3%)
• O`KEY EBITDA margin, % 9.0% 9.1% (0.1pps)
DA! EBITDA 3,643 1,665 2.2x
• DA! EBITDA margin, % 6.8% 4.8% 2pps
80—81 Annual Report Overview Strategic Report Operational Review Financial
Review
Corporate Governace Financial Statements 2022
Delivering
great customer
service
GROUP SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
RUB mln FY 2022 % of revenue FY 2021 % of revenue ∆ YoY, pps
Personnel costs 16,850 8.3% 15,388 8.2% 0.1
Depreciation and amortisation 10,662 5.3% 8,904 4.8% 0.5
Communication and utilities 4,587 2.3% 4,037 2.2% 0.1
Advertising and marketing 2,296 1.1% 1,992 1.1% -
Repairs and maintenance 1,582 0.8% 1,399 0.7% 0.1
Insurance and bank commissions 1,260 0.6% 1,094 0.6% -
Operating taxes 766 0.4% 652 0.3% 0.1
Security expenses 785 0.4% 730 0.4% -
Legal and professional expenses 651 0.3% 709 0.4% (0.1)
Materials and supplies 460 0.2% 409 0.2% -
Operating leases 448 0.2% 353 0.2% -
Other costs 43 - 51 - -
Total SG&A 40,390 20.0% 35,718 19.1% 0.9
The Group’s total SG&A expenses saw a jump
of 13.1% YoY to RUB 40,390 mln in FY 2022.
The SG&A expenses as a percentage
of the revenue grew by 0.9 pps YoY to 20.0%
in FY 2022, driven mainly by depreciation
and amortisation, personnel and utilities expenses.
During FY 2022, personnel costs increased
by 9.5% YoY to RUB 16,850 mln and,
as a percentage of the revenue, by 0.1 pps YoY
to 8.3%. The growth was mainly due to new
store openings in both chains, as well as wages
indexation in hypermarkets.
In FY 2022, the D&A expenses rose by 19.7% YoY
to RUB 10,662 mln, and by 0.5 pps YoY to 5.3%
of the revenue, driven primarily by the discounter
chain growth.
The communication and utilities expenses hiked
by 13.6% YoY to RUB 4,587 mln, and by 0.1 pps,
as a percentage of the revenue, on the back
of utilities tariffs inflation, as well as new store
openings.
The advertising and marketing expenses
grew by 15.2% YoY to RUB 2,296 mln, mainly
due to the planned replacement of advertising
equipment in hypermarkets.
The repairs and maintenance expenses went up
by 13.1% YoY to RUB 1,582 mln, or by 0.1 pps YoY
to 0.8% of revenue, largely due to new store
openings.
GROUP EBITDA AND EBITDA MARGIN
The Group’s EBITDA grew by 9.8% YoY
to RUB 17,020 mln, while the EBITDA margin
improved by 0.1 pps YoY to 8.4% in FY 2022.
The O`KEY hypermarkets EBITDA declined slightly
by 3.3% YoY, to RUB 13,377 mln in FY 2022, mainly
on the back of a 2.3% YoY net retail revenue
decrease, and the above-mentioned cost inflation,
partially offset by an increase in the gross profit.
In FY 2022, the O`KEY hypermarkets EBITDA
showed 9.0%, 0.1pps down from 9.1% FY 2021.
The DA! discounters EBITDA
demonstrated a 2.2x YoY growth to RUB 3,643 mln
in FY 2022, compared with RUB 1,665 mln
in FY 2021. As the business continued to ramp up,
the DA! EBITDA margin improved by 2.0 pps YoY
and reached 6.8% in FY 2022.
GROUP REVENUE
RUB mln FY 2022 FY 2021 ∆ YoY, %
Total Group revenue 202,171 187,097 8.1%
• Retail revenue 200,201 185,172 8.1%
• Rental income 1,970 1,925 2.3%
In FY 2022, the Group retail revenue experienced
an increase of 8.1% YoY to RUB 200,201 mln
led by the expansion of the two chains,
as well as DA! discounters’ LFL revenue
and O`KEY’s online revenue growth.
The Group’s rental income increased by 2.3% YoY
and amounted to RUB 1,970 mln in FY 2022.
The total Group revenue saw an increase
of 8.1% YoY to RUB 202,171 mln in FY 2022.
GROUP NET RETAIL REVENUE AND LFL REVENUE
IN 12M 2022
RUB mln 12M 2022 12M 2021 YoY, % LFL 2022/2021, %
O`KEY Group 200,201 185,172 8.1% 2.1%
• O`KEY hypermarkets 146,904 150,383 (2.3%) (3.6%)
• DA! discounters 53,297 34,789 53.2% 26.8%
For more details,
please refer to the Group’s Q4
and 12M 2022 Trading Update.
GROUP GROSS PROFIT
In FY 2022, the Group gross profit rose
by 11.1% YoY to RUB 46,808 mln, while the gross
margin improved by 0.7 pps YoY to 23.2%.
The improvement was led by the Group’s
effective procurement and logistics management,
timely efforts in reshaping its product supply,
as well as the operational synergy between
the formats.
Over the year of 2022, thanks to our long-term
partnership with local suppliers, we introduced
new SKUs into our offerings. Additionally,
we successfully phased out necessary imports,
ensuring a diverse selection of products
at reasonable prices without sacrificing
our margins.
82—83 Annual Report Overview Strategic Report Operational Review Financial
Review
Corporate Governace Financial Statements 2022
Delivering
great customer
service
GROUP NET DEBT POSITION
RUB mln As of 31 December 2022 As of 31 December 2021
EBITDA 17,020 15,504
Total debt 45,486 37,817
• Short-term debt 1 9,961 6,172
• Long-term debt 35,525 31,645
Cash & cash equivalents 11,779 9,448
Net debt 33,707 28,369
Total lease liabilities 22,545 24,063
Short-term lease liabilities 5,621 4,986
Long-term lease liabilities 16,924 19,077
Total interest-bearing liabilities
(net of сash & сash equivalents)
56,251 52,432
Total interest-bearing liabilities
(net of сash & сash equivalents) / EBITDA
3.30x 3.38x
1 Short-term debt does not include interest accrued on loans and borrowings.
The Group’s financial position remained
strong during the reporting period.
As of 31st December 2022, the total
interest-bearing liabilities (net of cash)
to EBITDA ratio decreased to 3.30x
from 3.38x as of 31st December 2021.
As of 31st December 2022 and during
the twelve-month period until
December 2022 inclusive, the Group
complied with all of its loan covenants.
The Group’s audited report,
including the full set of audited
IFRS financial statements, can
be found at https://okeygroup.
lu/investors/result-center/
ifrs-statements/.
GROUP NET PROFIT
The other operating expenses (net of incomes)
decreased by 52.7% YoY to RUB 667 mln
in FY 2022. The decrease was mainly attributable
to a year-on-year decline in non-current
assets impairment in the hypermarket segment
in FY 2022.
The net finance expenses saw a hike of 17.6% YoY
to RUB 5,642 mln in FY 2022, driven mainly
by an increase in the weighted average interest
rate over the course of 2022. In addition, a part
of the interest expenses was attributable
to the non-current lease liabilities (under IFRS 16),
which increased in FY 2022.
Throughout FY 2022, the Group recorded a net
foreign exchange gain of RUB 313 mln, compared
to RUB 206 mln in FY 2021. The Group’s net foreign
exchange gain was mainly attributable to lease
contracts in foreign currencies, as well as foreign
exchange gain from import operations, while
the USD-denominated intercompany loans
with different functional currencies which
were eliminated on consolidation had a relatively
small impact on the Group’s results. The foreign
exchange gain/loss is of non-cash nature.
In the year of 2022, the Group’s net profit grew
by 16.2% YoY to RUB 242 mln.
GROUP CASH FLOW
RUB mln FY 2022 FY 2021
Net cash from operating activities 12,958 13,813
Net cash used in investing activities (6,468) (3,927)
Net cash used in financing activities (3,885) (8,137)
Net increase in cash and cash equivalents 2,605 1,749
Effect of exchange rate on cash and cash equivalents (274) (15)
Net cash from operating activities amounted
to RUB 12,958 mln compared to RUB 13,813 mln
in FY 2021. The decrease was driven mainly
by boosted investments in inventory stock
in order to secure a high level of on-shelf
products availability in the Group’s stores
and online over 2022.
Net cash used in investing activities amounted
to RUB 6,468 mln in FY 2022 in comparison
with a RUB 3,927 mln of cash used in FY 2021.
In 2022, the Group invested approximately
RUB 2.6 bn (excluding VAT) in the development
of the hypermarket business, including
the purchase of 4 stores in the Moscow
region, and over RUB 4.0 bn (excluding VAT)
in the development of the discounters chain.
Net cash used in financing activities amounted
to RUB 3,885 mln in FY 2022, compared
with the RUB 8,137 mln of net cash used in financing
activities in FY 2021. The dynamics resulted
from the Group’s regular credit portfolio
refinancing, in particular a new bond issue in 2022.
As of 31st December 2022, the Group had
RUB 16,467 mln of available credit lines in Russian
roubles with fixed and floating interest rates,
in respect of which all conditions had been met.
If necessary, proceeds from these facilities may
be used to finance operating and investing
activities.
84—85 Annual Report Overview Strategic Report Operational Review Financial
Review
Corporate Governace Financial Statements 2022
Delivering
great customer
service
12 YEARS ruA- OF DIVIDEND PAYMENTS CREDIT RATING BY EXPERT RA
Corporate
Governance
O’KEY Group maintains
its commitment to creating
shareholder value. O’KEY
Group S.A. has a primary
listing on the London Stock
Exchange and secondary listings
on the Moscow Exchange
and the Astana International
Exchange.
SINCE 2010 ON LSE
SINCE 2020 ON MOEX Annual Report 2022
OUR CORPORATE GOVERNANCE PRINCIPLES
Professionalism
We strive to appoint individuals with relevant
skills and experience to the Board of Directors
and its committees in order to enable them to carry
out their respective duties and responsibilities
effectively. The Board is supplied, in a timely
manner, with information in a form and of a quality
appropriate to allow it to perform its duties.
Accountability
The Board of Directors is accountable to O’KEY
Group’s General Meeting of Shareholders
and is responsible for:
• formulating the Group’s strategy;
• establishing and maintaining systems which
ensure due consideration of key decisions
by experienced individuals, including
in the areas of remuneration and incentives,
internal control, and risk management;
• holding the management accountable
for the successful implementation
of the Group’s strategy.
Equality
O’KEY Group’s corporate governance system
is designed to protect the shareholders’ rights
and ensure equal treatment of all shareholders.
Transparency
We strive to ensure the appropriate disclosure
of reliable information on all significant issues
related to our operations, including the financial
status, social performance, operating results,
and ownership.
Corporate
Governance
System
O’KEY GROUP S.A. is a company incorporated
under the Laws of the Grand Duchy
of Luxembourg with Global Depositary Receipts
listed on the London Stock Exchange, the Astana
International Exchange and the Moscow Exchange.
Since the company was incorporated under
the laws of Luxembourg and is located
on the territory of Luxembourg,
the company in its activities is subject
to the requirements of Luxembourg law.
The company is not required to comply
with the UK Corporate Governance Code
and the Russian Corporate Governance Code,
however the company complies with the rules
and guidance of financial market regulators,
within which the company’s securities are traded
(Financial Conduct Authority (FCA) for LSE,
Central Bank of Russia for MOEX and Astana
Financial Services Authority (AFSA) for AIX).
O’KEY Group is committed to managing
and conducting its operations in accordance
with the applicable regulations of Luxembourg,
the London Stock Exchange, the Astana
International Exchange, and the Moscow Exchange
with respect to disclosure under the Rules.
We recognise the obligation to our shareholders
to adopt the highest standards of governance
and control, both at the Board level and within
our management teams, and we aim to establish
and support a corporate governance framework
that is suitable for the development of our business
and meets the requirements of our shareholders.
The most significant decisions affecting the life
of the Company and the rights of shareholders,
including the approval of financial statements
and annual reports, the appointment of directors,
the amendments of Articles and the approval
of final dividends for finincial years are subject
to review and approval at meetings of
shareholders.
The Board of Directors and its committees provide
overall guidance for the business and strategic
planning for the Group. It sets strategic goals
and oversees their implementation by the CEO
and senior management of the Group.
The Management Board and the Chief Executive
Officer are responsible for day-to-day operations
of the companies of the Group and implement
the strategy approved by the Board of Directors.
88—89 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
CONTROL SYSTEM
IN EMPLOYEE SHARE
SCHEME
The Company does not have an employee share
scheme allowing employees to acquire equity
in the Company.
VOTING RIGHTS
Each share issued and outstanding
in the Company bears one vote.
The Articles do not provide for any voting
restrictions.
In accordance with the Articles, a record date
for the admission to a general meeting may
be set by the Board (Article 15 of the Articles).
Only those shareholders as the shareholders
on any such record date shall be entitled
to be notified of and to vote at any general
meeting and any adjournment thereof,
or to give any such consent as the case may be.
In accordance with the Articles, the Board may
determine such other conditions that must
be fulfilled by shareholders for them to take
part in any meeting of shareholders in person
or by proxy (Article 15 of the Articles).
SHAREHOLDERS’
AGREEMENTS
WITH TRANSFER
RESTRICTIONS
The Company has no information about
any agreements between shareholders which may
result in restrictions on the transfer of securities
or voting rights.
APPOINTMENT
OF DIRECTORS,
AMENDMENT
OF THE ARTICLES
The rules governing the appointment
and replacement of directors and the amendment
of the Articles are set out under the Luxembourg
Company Law and the Articles (in particular,
Articles 8, 15 and 16).
The consolidated version of the Articles
is published under the Shareholders section
of the Company website and is available at https://
okeygroup.lu/investors/shareholders/documents/.
SIGNIFICANT
AGREEMENTS
OR ESSENTIAL
BUSINESS
CONTRACTS
The Board is not aware of any significant
agreements to which O’KEY GROUP S.A.
is a party and which take effect, alter or terminate
upon a change of control of the Company
following a takeover bid. The Board has considered
essential business contracts and has concluded
that there are not any significant agreements.
General Meeting
of Shareholders
The General Meeting of Shareholders is O’KEY
GROUP S.A.’s supreme governing body. General
Meetings of Shareholders are convened and held
in accordance with Luxembourg legislative
requirements and the Articles of O’KEY Group
S.A. According to the Articles of O’KEY Group
S.A., the Annual General Meeting shall be held
within six months of the end of each financial
year in the Grand Duchy of Luxembourg
at the registered office of the Company,
or at any such other place in the Grand
Duchy of Luxembourg as may be specified
in the convening notice of the meeting.
The next Annual General Meeting will be held
before 30 June 2023. A convening notice
specifying the date, time, address of the meeting
and the agenda will be sent and published no later
than fourteen days before the meeting.
SPECIAL CONTROL RIGHTS
All the issued and outstanding shares
of the Company have equal voting rights
and there are no special control rights attached
to the shares of the Company.
The Caraden Shareholder (as defined
in the Articles) has, under the condition
of holding a minimum amount of shares
in the Company, a specific right with respect
to the appointment and removal of directors,
as at least one director (designated
as the Caraden Director) must be appointed
from a list of candidates proposed by the Caraden
Shareholder and may be removed at the initiative
of the Caraden Shareholder (additional
information may be found under Article 8
of the Articles).
The supporting vote of the Caraden Shareholder
is required, under certain conditions, to amend
the provisions of the Articles relating to: (i)
the rights and prerogatives of the Caraden
Shareholder; and (ii) the appointment, removal,
replacement, rights, prerogatives, and positive
vote of the Caraden Director (additional
information may be found under Article 16.4
of the Articles).
TRANSFER RESTRICTIONS
As of 31 December 2022 and the date hereof,
to the knowledge of the Company all shares
in issue in the Company are freely transferable,
provided that the transfer formalities set out
under Article 6 of the Articles are fulfilled.
90—91 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
Meetings of the Board of Directors
Member Board of Directors
(4 meetings)
Audit Committee
(5 meetings)
Remuneration Committee
(1 meeting)
Heigo Kera 4 attended 5 attended attended
Dmitrii Troitskii 4 by proxy not a member by proxy
Dmitry Korzhev 4 attended 4 attended
1 by proxy
not a member
Boris Volchek 4 by proxy 2 attended,
3 by proxy
by proxy
Mykola Buinyckyi 4 attended 5 attended not a member
Information about the members of the board of Directors of O’KEY Group S.A.
as at 31 December 2022 is available at the Company’s web-site
at https://www.okeygroup.lu/about/corporate-governance/board-of-directors/.
Board
of Directors
1 The rules governing the appointment and replacement of directors are set out under the Law of 10 August 1915
on Commercial Companies, as amended, and the Articles (in particular, Articles 8, 15 and 16). The consolidated version
of the Articles is published under the Shareholders section of the Company website, available at https://okeygroup.lu/
investors/shareholders/documents/.
The Company’s Board of Directors plays
the key role in organising an efficient corporate
governance system. The Board is vested
with the broadest powers to manage the business
of the Company and to authorise and perform all
acts of disposal and administration falling within
the purposes of the Company.
The Board is responsible for taking strategic
decisions in respect to the operation
and development of the Group, as well as
overseeing the risk management and internal audit
functions of the Group. Decisions related to day-
to-day operations of the Group are delegated
to the management.
The Board is also a management body of O’KEY
GROUP S.A. and is authorised to take all decisions
in respect to O’KEY GROUP S.A., unless they
are reserved for the General Meeting. The Board
is not authorised to issue or buy back shares
without the approval of the shareholders meeting.
Repurchase by the Company of its own shares
is subject to the conditions set out in the Company
Law and the Articles. There are five members
of our Board, including one independent director.
The General Meeting of Shareholders appoints
Board members by a simple majority of votes cast,
for a period not exceeding six years or until their
successors are elected. 1
Our current Board of Directors was elected
at the General Meeting of Shareholders
held on 13 October 2015 and re-appointed
on 24 June 2020.
MEETINGS OF THE BOARD OF DIRECTORS
Meetings of the Board of Directors are held
regularly in compliance with the approved work
schedule for the year. The Board’s work schedule
is determined on the basis of strategic planning
and the reporting cycle. Whenever an urgent
matter needs to be considered, extraordinary
Board meetings are organised, or, if a personal
meeting cannot be organised due to a short
notice, the Board can adopt a circular resolution
by a unanimous vote. It is the Chair’s responsibility
to determine the Board’s work plan and to include
additional items in the plan.
In 2022, the Board of Directors worked
on the following key tasks:
• preparation of the financial statements
and annual report, and review of the results
for the year 2021;
• approval of the budget and business strategy
for the year 2022;
• review of the quarterly financial results,
approval of financial statements for six months
of 2022, and monitoring of compliance with
the risk management strategy;
• declaration of interim dividends;
• determination of the Group’s strategic
and operational priorities.
92—93 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
The committee’s remit includes:
• reviewing the IFRS financial statements
for integrity and transparency;
• analysing financial reporting processes,
including carrying out regular reviews
and making recommendations;
• recommending the appointment
and remuneration of the Company’s
external auditor to the Board of Directors
and maintaining an ongoing relationship
with the external auditor;
• analysing and supporting the internal audit
system and risk management procedures,
including drafting recommendations for their
improvement.
Activities in 2022
During the reporting period, the Audit Committee
held five meetings where it:
• fulfilled oversight responsibilities relating
to the integrity of the Company’s annual
financial statements;
• fulfilled oversight responsibilities relating
to the integrity of the Company’s half yearly
financial statements;
• reviewed reports prepared by the Internal
Audit Department;
• reviewed the effectiveness of the Company’s
risk management and internal control systems;
• reviewed policies and procedures published
by the Company;
• monitored reports per the Company’s
Whistleblowing Policy;
• planned and agreed the scope of the audit
of financial statements for the year ended 2022
with the external auditor of O’KEY Group;
• reviewed and approved provisions of non-
audit services for the Company by the external
auditor;
• approved the internal audit plan
for the year 2022.
Plans for 2023
The Audit Committee and the Company will
continue to focus on the following areas in 2023:
• how the Company’s management monitors
compliance with the Group’s risk management
policies and procedures, and the adequacy
of the risk management framework in relation
to the risks faced by the Group;
• optimising internal business processes involved
in the preparation of financial reporting.
Committees
of the Board
of Directors
The primary role of the committees is to provide
assistance to the Board in preparing and adopting
decisions in its respective functional areas,
as well as to ensure that matters brought
for consideration by the Board of Directors
are scrutinised prior to the Board meetings.
There are two committees of the Board
of Directors: the Audit Committee
and the Remuneration Committee.
AUDIT COMMITTEE
Audit Committee members
As of 31 December 2022, the Audit Committee
comprised:
• Mykola Buinyckyi, Committee Chairman,
Independent Director of the Board of Directors;
• Boris Volchek, Committee Member, Non-
executive Director of the Board of Directors;
• Dmitry Korzhev, Committee Member, Non-
executive Director of the Board of Directors;
• Heigo Kera, Committee Member, Chairman
of the Board of Directors;
• Ilya Ilin, Committee Member, non-director,
external consultant;
• Irina Nikiforova, Committee Member, non-
director, external consultant.
Key areas
The Audit Committee oversees the internal audit
function, the effectiveness of risk management,
and the internal controls of the Company
and the Group. It also approves and monitors
the performance of the internal audit plan
for the year. The Audit Committee assists
the Board of Directors in fulfilling its oversight
responsibilities relating to the financial statements,
including periodically reporting to the Board
of Directors on its activities and the adequacy
of internal control systems over financial reporting.
According to the Statute of the O’KEY Audit
Committee, the Audit Committee shall consist
of not fewer than three current members
of the Board of Directors and shall be chaired
by an independent director.
94—95 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
REMUNERATION
Members of the Board of Directors of O’KEY
Group S.A. receive remuneration in the amount
approved by the General Meeting of Shareholders.
Members of the Board and its committees may
be compensated for the expenses they incur
in the course of their duties, in accordance
with the Business and Travel Expenses Policy
of O’KEY Group S.A.
DIVERSITY
O’KEY Group is working on the adoption
of a diversity policy. However, as can be seen
from the information on the senior management
team, O’KEY Group aims to employ members
of the team most suitable and qualified for their
post and function, irrespective of their age,
gender, or origin. The requirements of educational
and professional backgrounds are such
as to ensure that the members of the team posess
the skills and experience necessary to perform
their functions effectively.
REMUNERATION COMMITTEE
Committee members
• Heigo Kera, Committee Chairman, Chairman
of the Board of Directors;
• Boris Volchek, Committee Member, Non-
executive Director of the Board of Directors;
• Dmitrii Troitskii, Committee Member, Non-
executive Director of the Board of Directors;
• Ilya Ilin, Committee Member, non-director,
external consultant;
• Irina Nikiforova, Committee Member, non-
director, external consultant.
The committee’s remit includes:
• reviewing the compensation policy;
• advising on any benefit or incentive schemes;
and
• making proposals to the full Board of Directors
regarding the remuneration of executive
directors and management (including the Chief
Executive Officer).
Activities in 2022:
During the reporting period, the Remuneration
Committee held one meeting, where it:
• reviewed the report on the remuneration,
bonuses and expenses of the Board;
• reviewed the amount of remuneration
to be allocated to the management of the Group
in 2022;
• approved the Remuneration Committee Report;
• suggested the total maximum amount
of remuneration of directors for 2022
to be submitted for the approval
of the shareholders of the Company.
Plans for 2023:
In 2023, the Group plans to keep the Remuneration
and Bonus Policy in line with 2022.
96—97 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
PRINCIPLE RISKS
Below we are describing the key risks that could
have a material adverse effect on our business,
our financial and operational performance
and, as a result, could affect our share price
and our reputation. Additional risks not known
to us or those risks that we currently consider
immaterial, may also impair our business
operations. We do not expect to incur any risks
that may jeopardise the continuity of our business.
No. Risk Definition & potential impact
1 Economic outlook Our business may be affected by uncertainties associated with changing economic
conditions, particularly in the current environment of global economic instability, including
oil prices, financial markets volatility, as well as substantial currency exchange fluctuations.
Therefore, we may face reduced customer demand as the income and purchasing power
of our customers decreases under the impact of weaker macroeconomic environment,
exacerbated by declining oil prices and sustained rouble volatility.
2 Competition risk The retail sector in Russia is highly competitive. We face strong competition from other
retailers (Russian and international), some of which are larger and have greater resources.
Retail chains compete mainly over store locations, product ranges, price, service, and store
conditions. Some competitors might be more effective and faster in capturing certain
market opportunities, which in turn may negatively impact our market share and our ability
to achieve our performance and expansion targets.
3 Political risk Political developments may adversely affect the macroeconomic environment and the market
in which our Company operates. The current geopolitical situation and global economics
turbulence may affect companies across all the sectors of the Russian economy, including
our business.
4 Regulatory risk Our operations are subject to various government regulations and industry specific
legislation with respect to quality, packaging, health and safety, labelling, distribution
and other standards. Some regulations are still being developed in Russia. Current
and future government regulations or changes thereto may require us to change the way
we run our operations and could result in cost increases. Failure to comply with regulations
can also lead to reputational damage.
5 Changing customer
expectations
We strive to provide our customers with a wide range of goods and services at competitive
prices. However, we recognise that our customers’ shopping habits and expectations
are influenced by the economic environment and will change over time.
6 Employee
recruitment
and retention
Competition for highly qualified management and store personnel remains intense in Russia.
To meet our expansion plans, we need highly skilled employees. Our future success depends
in part on our continued ability to hire and retain new employees. We understand that
any inability to attract and retain highly qualified employees and key personnel in the future
could have a material adverse effect on our business.
7 Supply chain risk Our financial performance depends in part on reliable and effective supply chain
management. We rely on third parties to supply us with merchandise and services. The third
parties that supply us with merchandise and services also have other customers and may not
have sufficient capacity to meet all of their customers’ needs, including ours, during periods
of excess demand. Shortages and delays could materially harm our business. Unanticipated
increases in prices could also adversely affect our performance. Furthermore, we may
be exposed to the risk of delays and interruptions to our supply chain because of natural
disasters, in case we are unable to identify alternative sources of supply in a timely manner.
8 IT platform
development
Execution of our strategic targets requires adaptation of current IT infrastructure
to the changing business needs. As the business grows, the complexity of processes
supporting it and the diversity of tasks around such growth are increasing. Delayed
or inappropriate decisions on the development of the infrastructure can lead to failures
in meeting Group goals and impede attainment of longer-term goals.
9 IT security threats We are observing an increase in IT security threats and higher levels of professionalism
in computer crime. Our systems and solutions, as well as those of our counterparties remain
potentially vulnerable to attacks. Depending on their nature and scope, such attacks could
potentially lead to the leakage of confidential information, improper use of our systems,
manipulation and destruction of data, sales downtimes and supply shortages, which
in turn could adversely affect our reputation, competitiveness, and business, financial
and operational performance.
Risk
Management
We believe that effective risk management
underpins the successful delivery of our
strategy. So the Company’s goals will be achieved
in a timely manner and that the level of risks
faced by the Group remains acceptable
for management and shareholders. Our unified
approach to risk management through the Group
Risk Standard is supported by formal policies
and procedures, clearly delegated authority levels,
and comprehensive reporting. As of the date
of the approval of this Annual Report, our
framework is integrated into both our business
planning and viability assessment processes.
Our Board of Directors is ultimately responsible
for the Group’s risk management and internal
controls with a view to maintaining the Group’s
risk management framework. The Group’s Audit
Committee is responsible for the regular review/
audit of the Group’s operations, activities, systems
and processes, in order to evaluate and provide
reasonable, independent, and objective
assurance and consulting services designed
to add value and improve the Group’s operations.
The Internal Audit assists the Group’s Audit
Committee in its oversight role. The Internal Audit
undertakes both regular and ad hoc reviews of risk
management controls and procedures and reports
its findings and recommendations to the Audit
Committee. The Group, through its training
and management standards and procedures,
aims to develop a disciplined and constructive
control environment in which all employees
understand their roles and obligations. Identified
risk areas are monitored quarterly and followed
by a coordinated improvement programme.
The current situation places new challenges
for the Russian economy, the business community,
and O’KEY Group in particular. Our well-balanced
business model offers a significant hedge against
market volatility. The key factors above have
been reviewed in the context of our current
position and strategic plan. Nevertheless,
due to the current unprecedented global
geopolitical and economic turbulence, we withhold
from identifying and assessing the key risks
that could have a material adverse effect on our
business.
Audit Committee
• Oversees how management monitors compliance
with the Group’s risk management policies
and procedures
• Reviews the adequacy of the risk management
framework in relation to risks faced by the Group
Board of Directors
• Overall responsibility for the establishment and oversight
of the Group’s risk management framework
Internal Audit
• Assists the Group’s Audit
Committee in its oversight role
• Undertakes both regular
and ad hoc reviews of risk
management controls
and procedures, the results
of which are reported
to the Audit Committee Executive management
(CEO and Management Board)
• Oversees implementation of, and adherence to, risk
management policies
• Monitors and manages risks relevant to job function
• Carries out risk identification and reporting
• Performs operational risk management
98—99 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
Information
for Shareholders
and Investors
No. Risk Definition & potential impact
10 Providing
sufficient level
of financing
Recent changes in the macroeconomic situation might result in a liquidity squeeze
and tightening of lending policies by Russian banks. Given the expansion programme
in the coming periods, issues with availability of external financing or significant changes
in its cost can negatively impact our Group’s ability to execute its expansion programme.
11 Tax regulations The Russian tax law has complex tax rules, which may be interpreted in different ways and tax
rules are subject to frequent changes. Examinations by tax authorities and changes in tax
regulations could adversely affect our business, and financial and operational performance.
Changes in the tax law could result in higher tax expense and payments. Furthermore,
legislative changes could materially impact tax receivables and liabilities as well as deferred
tax assets and deferred tax liabilities.
12 Changes in working
capital
Inability to control and manage elements of the working capital can result in negative
changes for the operating cash flow and lead to liquidity gaps and excessive reliance
on external financing.
13 Risk
of misstatements
in financial
statements
We face exposure to risks relating to failures in proper financial reporting
and the classification of accounting entries, and risks of making inaccurate accounting
estimates.
14 Risks of currency
and interest rates
volatility
We are exposed to fluctuations in exchange rates because of loans received
in USD and contractual obligations in USD and EUR. Although measures are taken to minimise
this risk, there can be no assurance that exchange rate and interest rate fluctuations will not
negatively influence our results.
INTERNAL CONTROL AND RISK
MANAGEMENT SYSTEM
With respect to internal control over financial
reporting, our financial procedures include a range
of system, transactional and management
oversight controls. Regarding the internal controls
in the area of accounting and financial reporting,
the following should be noted.
• Staff involved in the Company’s accounting
and financial reporting are appropriately
qualified and kept up-to-date with relevant
changes in the International Financial Reporting
Standards (IFRS). Additionally, specific training
and a written guidance on particular matters
are provided where needed. The written
guidance, regularly updated for business
developments and regulatory changes,
is available to all relevant staff members
and provides a summary of the Company’s
accounting and financial reporting policies
and procedures.
• Controls have been established
in the processing of accounting transactions
to ensure appropriate authorisations
for transactions, the effective segregation
of duties, and the complete and accurate
recording of financial information.
• Completeness and timely recording of financial
information are ensured through regular
reviews, monitoring of specific key performance
indicators, validation procedures by functional
leaders and as an additional check, the process
of internal and external audit.
• The Company relies on a comprehensive system
of financial information and oversight. Strategic
plans, business plans, budgets and the interim
and full-year consolidated accounts
of the Company are drawn up and brought
to the Board of Directors for approval.
The Board also approves all significant
investments. The Board receives monthly
financial reports setting out the Company’s
financial performance in comparison
to the approved budget and prior year figures.
• Any weaknesses in the system of internal
controls identified by either internal or external
auditors are promptly and fully addressed.
• The external auditors perform a limited review
of the Company’s half-year consolidated
financial statements and a full audit
of the annual consolidated financial statements.
In accordance with the IFRS requirements,
we disclose detailed information on the market,
credit and foreign exchange risks to which
it is exposed, as well as strategy for managing
the risks.
SHARE CAPITAL
O’KEY Group S.A. share capital
amounts to EUR 2,690,740, divided
into 269,074,000 ordinary shares of a nominal
value of EUR 0.01 each. As of the date of this
report, the Company’s share capital has remained
unchanged since 30 November 2010.
All shares issued by the Company have
equal rights as provided for by the law
of 10 August 2015 on commercial companies,
as amended (the “Company Law”) and as set forth
in the Articles, save for the special rights granted
to the Caraden Shareholder.
The Company does not hold any of its own
shares and has not acquired them during
the 2022 financial year.
SIGNIFICANT SHAREHOLDINGS
As of 31 December 2022, the two major indirect
shareholders of the Group are its founders:
• Mr. Dmitrii Troitskii (who indirectly owns
approximately 34.54% of the outstanding
share capital of O’KEY Group S.A.); and
• Mr. Boris Volchek (who indirectly owns
approximately 34.14% of the outstanding
share capital of O’KEY Group S.A.).
Share Capital Structure
as of 31 December 2022,
Direct Holdings
NISEMAX Co Limited
GSU Limited
Free-float and other holders
16.75%
34.14%
49.11%
100—101 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
O’KEY Group S.A. GDR Price Performance
and Trading Volumes on MOEX in 2022
Close price, RUB Daily trading volume, k GDRs
03.01.2022 03.02.2022 03.03.2022 03.04.2022 03.05.2022 03.06.2022 03.07.2022 03.08.2022 03.09.2022 03.10.2022 03.11.2022 03.12.2022
0
10
20
30
40
50
0
2,000
4,000
6,000
8,000
10,000
Source: Moscow Exchange. Note: Trades on MOEX were temporary suspended
by the stock exchange for the period from
February 28 till 30 March, 2022.
O’KEY Group S.A. GDRs Trading Information
on Moscow Exchange
In 2022, the cumulative liquidity of O’KEY
GDRs grew 5-fold on MOEX compared to 2021,
despite a temporary suspension of trades
on MOEX in March 2022.
2021 2022
Annual maximum price, RUB 66.77 44.98
Annual minimum price, RUB 41.80 17.20
Year-end price, RUB 41.80 24.37
Trading volume (mln units) 22.1 110.9
Source: MOEX, market transactions.
CREDIT RATINGS
Expert RA
Credit rating ruA-
Outlook Stable
Last rating date 22 June 2022
In June 2022, Expert RA affirmed the Company’s
credit rating of ‘ruA-’ with a stable outlook.
The rating reflects the Group’s solid and stable
operational and financial position in the market,
low exposure to market risks, and high standards
of corporate governance, risk management,
strategic control and transparency.
GLOBAL DEPOSITARY RECEIPTS (GDRs)
1 CUSIP (Committee on Uniform Security Identification Procedures), an identification number given to the issue of shares
for the purposes of facilitating clearing.
2 ISIN (International Securities Identification Number), an international identification number of the share.
Global Depositary Receipts are issued in respect
of ordinary shares at a ratio of one ordinary share
per one GDR. The GDRs are listed on the London
Stock Exchange. In December 2020, the GDRs also
were listed and started trading on the Moscow
Exchange. In March 2022, the London Stock
Exchange temporary suspended admission
to trading for a number of issuers, including
the GDRs of O’KEY Group S.A.
The Company’s depositary bank is The Bank of New
York Mellon.
As of 31 December 2022, GDRs represented
50.22% of O’KEY Group S.A. share capital.
No other securities have been issued
by the Company.
STOCK EXCHANGE
As of 31 December 2022, O’KEY Group S.A.
GDRs were listed on both the London Stock
Exchange and the Moscow Exchange and traded
on the Moscow Exchange.
After the reporting date, the Group’s GDRs have
been admitted to the quotation list in the main
market segment on the Astana International
Exchange and started to trade under the ticker
“OKEY” in March 2023. The Group intends to
keep both its primary listing on the London Stock
Exchange and its secondary listing on the Moscow
Exchange. O’KEY Group does not plan to issue new
shares in connection with its AIX listing.
Trading Floor of O’KEY Group S.A. GDRs
Trading floor Ticker code
London Stock Exchange OKEY
Moscow Exchange OKEY
Astana International Exchange OKEY
O’KEY Group S.A. Securities Identification Numbers
CUSIP 1 Code
Regulation S GDRs 670866201
Regulation S GDRs 670866110
Rule 144A GDRs 670866102
ISIN 2 Code
Regulation S GDRs US6708662019
Regulation S GDRs US6708661102
Rule 144A GDRs US6708661029
102—103 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
Management
& Directors’
Responsibility
Statement
We confirm to the best of our knowledge
that the consolidated financial statements
provide a true and fair view of the assets,
liabilities, financial position, and profit or loss
of O’KEY Group S.A. and the companies
included in the consolidation as required
by the International Financial Reporting
Standards as adopted by the European Union,
and that the consolidated management report
provides a true and fair view of the development
and performance of the business and the position
of O’KEY Group S. A. and the companies
included in the consolidation taken as a whole,
and that the consolidated management
report provides a true and fair view, and that
the consolidated management report
describes the principal risks and uncertainties
which O’KEY Group S.A. and the companies
included in the consolidation taken
as a whole are exposed to.
Luxembourg, 14 April 2023
Dmitry Korzhev
Member of the Board of Directors
Mykola Buinyckyi
Member of the Board of Directors
Heigo Kera
Chairman
Konstantin Arabidis
CFO
ANALYST COVERAGE
As of the end of 2022, three equity research
analysts from leading Russian banks followed
the Company on a regular basis. O’KEY’s IR team
monitors and communicates analyst consensus
to the Company’s top management.
Company Analyst Phone number
Aton Victor Dima +7 (495) 213-03-44
Gazprombank Marat Ibragimov +7 (495) 980-41-87
Sberbank CIB Mikhail Krasnoperov +7 (495) 933-98-38
Source: Company.
DIVIDENDS
Dividend Policy
To determine the recommended amount
of dividends that will be payable, the Group’s
Board of Directors abides by the Dividend
Policy. The General Meeting of Shareholders,
upon the recommendation of the Board
of Directors, determines how the remainder
of annual net profits of the Company should
be disposed of, including through stock dividend,
it being understood that the remaining net
profits of the Company left after the payment
of dividends shall be used for the business
development of the Company and its subsidiaries
and the development of the retail business
of the Group in Russia. Interim dividends may
be declared and paid (including through staggered
payments) by the Board of Directors, subject
to observing the terms and conditions provided
by law either through a cash dividend or through
an in kind dividend.
Period Record date Amount of dividend per GDR
(USD cents, gross)
Amount of accrued
dividend (gross)
Interim dividends 2011 12.09.2011 9.9481 USD 26,767,750.59
Interim dividends 2012 23.02.2012 10.254 USD 27,590,847.96
Interim dividends 2013 15.02.2013 18.953 USD 50,997,595.22
Interim dividends 2014 18.02.2014 22.670 USD 60,999,075.80
Interim dividends 2014 17.10.2014 7.433 USD 20,000,270.42
Interim dividends 2015 11.09.2015 8.920 USD 24,001,400.80
Interim dividends 2016 08.07.2016 8.548 USD 23,000,445.52
Interim dividends 2017 20.01.2017 9.167 USD 24,666,013.58
Interim dividends 2018 25.01.2018 12.367 USD 33,276,381.58
Interim dividends 2019 03.10.2019 0.05635 USD 15,162,319.90
Interim dividends 2020 04.11.2020 0.028275 USD 7,608,067.35
Interim dividends 2021 Not declared and distributed
Interim dividends 2022 01.08.2022 EUR 0.03159 EUR 8,500,047.66
Taxation
As a rule, the Company withholds 15% WHT
from the dividend paid from Luxembourg
for distribution to the holders of GDRs.
This information is provided for information
purposes only. Potential and current investors
should seek the advice of professional consultants
on tax matters related to investments in the shares
and GDRs of the Company.
104—105 Annual Report Overview Strategic Report Operational Review Financial Review Corporate
Governace
Financial Statements 2022
Delivering
great customer
service
Financial
Statements
The Independent Auditors’
Report and the consolidated
financial statements of O’KEY
GROUP S.A. for the year ended
31 December 2022. Annual Report 2022
Opinion
We have audited the consolidated financial
statements of O’KEY GROUP S.A. (the “Company”)
and its subsidiaries (the “Group”), which comprise
the consolidated statement of financial position
as at 31 December 2022, and the consolidated
statement of comprehensive income, consolidated
statement of changes in equity and consolidated
statement of cash flows for the year then
ended, and notes to the consolidated financial
statements including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated
financial statements (pages 114 to 159)
present fairly, in all material respects,
the consolidated financial position of the Company
as at 31 December 2022, and of its consolidated
financial performance and its consolidated cash
flows for the year then ended in accordance
with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance
with the Law of 23 July 2016 on the audit
profession (“Law of 23 July 2016”)
and with International Standards on Auditing
(“ISAs”) as adopted for Luxembourg
by the “Commission de Surveillance du Secteur
Financier” (“CSSF”). Our responsibilities under
the Law of 23 July 2016 and ISAs as adopted
for Luxembourg by the CSSF are further described
in the «Responsibilities of “Réviseur d’Entreprises
Agréé” for the Audit of the Consolidated
Financial Statements» section of our report.
We are also independent of the Group
in accordance with the International Ethics
Standards Board for Accountants’ Code of Ethics
for Professional Accountants (IESBA Code)
as adopted for Luxembourg by the CSSF
together with the ethical requirements that
are relevant to our audit of the consolidated
financial statements, and have fulfilled our other
ethical responsibilities under those ethical
requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our
professional judgment, were of most significance
in our audit of the consolidated financial
statements of the current period. These matters
were addressed in the context of the audit
of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter How our audit addressed the key audit matter
RECOGNITION OF BONUSES FROM SUPPLIERS
Refer to Notes 4, 20 and 33 to the consolidated
financial statements of the Group.
The Group receives various types of bonuses
from suppliers relating to purchase of goods
for resale. The bonuses are provided
in the form of volume discounts, slotting fees
and other counter payments. Recognition
of these bonuses leads to a significant
reduction of the cost of goods sold
and inventory value. While the major
portion of the bonuses is recognized
and settled within the year, a material
amount of RUB2,031,406 thousand remains
outstanding within trade and other receivables
as at the reporting date.
Recognition of bonuses from suppliers that
are not settled as at the reporting date was one
of the matters of most significance in our audit
because their impact on the Group’s cost
of goods sold, inventory and trade and other
receivable balances is material, the number
of underlying contracts with suppliers
is large and their terms can be complex.
Further, calculation of the period-end accrual
for certain supplier bonuses and allocation
of bonuses to inventory cost requires making
estimates and applying judgments.
Our audit procedures to address the key audit matter included
the following:
• Understanding, evaluation of design and testing of relevant control
activities that the Group has established in relation to recognition
of bonuses from suppliers.
• Understanding and evaluation of the accounting policy applied
by the Group for accounting for bonuses from suppliers.
• Reading significant contracts with suppliers and understanding
of the terms that entitle the Group to bonuses from suppliers.
• Performing a retrospective analysis of prior year bonuses receivable
against subsequent settlements to assess accuracy of the Group’s
estimates in the current year.
• Performing analytical procedures over the accuracy and existence
of the bonuses recognized in the current year based on historical
data.
• Agreeing bonuses receivable as at the reporting date to external
confirmations obtained from suppliers on a sample basis,
or alternative procedures through tracing the amounts recognized
against underlying agreements and other relevant documentation.
• Performing analytical procedures to assess allocation of bonuses
to the goods that remain in stock at the reporting date.
• Confirming that the accounting policy for offsetting of bonuses
receivable from suppliers against trade payables is in line with IFRS
and that the factual offsetting is in line with the accounting policy.
• Considering adequacy of disclosures of information about
the bonuses from suppliers in the consolidated financial statements
of the Group
NON-CURRENT ASSETS IMPAIRMENT ASSESSMENT
Refer to Notes 4, 14, 15 and 16
to the consolidated financial statements
of the Group.
As at 31 December 2022, the carrying value
of the Group’s non-current assets for which
IAS 36 requires an assessment of whether
there is any indication of impairment exceeds
55% of total assets. These non-current assets
are primarily attributable to the Group’s
stores in operation and groups of assets held
for future stores construction.
As at the reporting date, the Group
assessed whether there is any indication
that the carrying value of the non-
current assets may not be recoverable
or the impairment recognized in prior
periods may not exist or may have decreased
and tested for impairment or reversal
of impairment those cash-generating
units (CGUs) represented by individual
stores and groups of assets held for future
stores construction where such indications
were noted.
As at 31 December 2022 the recoverable
amount of the CGUs was determined based
on value in use.
Based on the results of the impairment tests
performed as at 31 December 2022 and during
the year ended 31 December 2022,
the impairment loss of RUB105 000 thousand
were identified and recognized.
This is one of the key audit matters
due to the magnitude of the carrying value
of the non-current assets that require
the assessment of any indication of impairment,
judgement exercised by the Group
in determining whether or not there is a specific
indication of impairment and judgements
applied in the calculation of the recoverable
amount of these assets.
In addition, strong competition in the Russian
retail market, political, economic tension,
due to the Ukraine-Russian crisis underpin
the uncertainty of accounting estimates
and the risk of significant adjustments
in future periods to the carrying value
of the Group’s non-current assets recognized
in the consolidated financial statements.
Our audit procedures to address the key audit matter included
the following:
• We obtained understanding and evaluated the design of the Group’s
relevant control activities around the impairment review.
• We also considered the Group’s approach to determination of CGUs
and identification of indication that these CGUs represented
by the Group’s stores or groups of assets held for future stores
construction may be impaired or impairment recognised in prior
periods may not exist or may have decreased.
• For those significant CGUs where indication of impairment
was identified or where there was an indication that an impairment
loss recognized in prior periods may no longer exist or may have
decreased, we assessed whether the value in use approach applied
by the Group to determine recoverable amount in each particular
case is appropriate in the circumstances. We further obtained
and analyzed underlying calculations prepared by the Group
for the impairment tests.
Our audit procedures were carried out with the involvement of internal
valuation experts and included:
• Reviewing the adequacy and consistency of methods applied
to measurement of value in use, and the calculations’ mathematical
accuracy.
• Evaluating the reasonableness of the Group’s key assumptions
and forecasts in the prior period, in order to assess the accuracy
of the Group’s forecasts for future periods.
• Verifying the appropriateness of budgets of the CGUs for projected
periods used in the measurement of value in use through inquiries
of the Group, corroborating the Group’s explanations, examining
supporting documentation and comparing inputs against available
external industry data.
• Analyzing and assessing in detail the key assumptions that
significantly affect future cash flows of the CGUs and the discount
rate applied by the Group to measure the recoverable amount,
by comparing it to the weighted-average cost of capital
determined for the Group with due regard to its inherent risks,
as well as considering whether the Ukraine-Russian crisis had
an impact on these key assumptions by analyzing the Group’s
performance and the Russian retail industry dynamics in the current
year.
• Re-performing sensitivity analysis of the results of the Group’s
assessment to reasonably possible changes to key assumptions.
We have tested the presentation and disclosure of information about
the impairment test as carried out by the Group in the consolidated
financial statements for its consistency with requirements of IAS
36 and its adequacy in the context of the consolidated financial
statements as a whole.
Independent
Auditors’ Report
To the Shareholders of O’KEY GROUP S.A.
Report on the Audit of the consolidated
Financial Statements
MOORE Audit S.A.
5, rue de Turi
L-3378 Livange
T +352 26 26 84 1
F +352 26 26 84 99
E mail@moore-audit.lu
108—109 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
Key audit matter How our audit addressed the key audit matter
RECOVERABILITY OF DEFERRED TAX ASSETS RECOGNIZED FOR THE CARRYFORWARD OF UNUSED TAX LOSSES
Refer to Notes 4, 12 and 33 to the consolidated
financial statements of the Group.
As at 31 December 2022, the carrying
value of the Group’s deferred tax assets
amounts to RUB5,245,595 thousand,
including RUB3,414,362 thousand arising
on the accumulated tax losses carried forward
by LLC Fresh Market that develops the Group’s
chain of discounter stores under the DA! brand
starting from 2015.
A deferred tax asset shall be recognized
for the carryforward of unused tax losses
to the extent that it is probable that future
taxable profit will be available against which
the unused tax losses can be utilized.
The Group performed the assessment
of and concluded on the recoverability
of the deferred tax assets. This analysis
was based on the long-term financial
projections for LLC Fresh Market, which
includes estimates of its future profits.
This area was significant to our audit because
of the history of tax losses generated
by LLC Fresh Market, the complexity
and subjectivity of the recoverability
assessment and long-term budgeting
process, which is based on assumptions
that are inherently uncertain and affected
by the expected pace of new openings
of the discounters. In addition, we considered
the overall impact of the Ukraine crisis
on the Russian economy that increases
the degree of uncertainty of these
assumptions.
The audit procedures we have performed to address the key audit
matter consisted of the following:
• Understanding and evaluation of design of relevant control activities
that the Group has in place in relation to recognition of current
and deferred income taxes and long-term budget preparation.
• Comparing the Group’s forecasts in the long-term budget
prepared in prior year to actual performance to assess adequacy
of the Group’s estimates in the current year.
• Assessing accuracy of the deferred tax calculations.
• Considering whether there are any limitations to the amount
and timing of utilization of the unused tax loss as established
by the Russian tax legislation.
• Obtaining the long-term budget prepared by the Group
for LLC Fresh Market and challenging the expected future profits
and assumptions regarding future earnings as reflected therein,
including by comparing to actual results to date and industry trends.
• Considering to what extent the Ukrainian-Russian crisis
impacted the performance of LLC Fresh Market in the current
year by analyzing its revenue and consumer behavior, expenses
and the pace of new stores openings, as well as its impact
on the ability of the discounters segment to adhere to the long-term
budget.
• Analyzing the treatment of differences between accounting and tax
books in the planning of future taxable profit.
• Considering adequacy of disclosures on the deferred tax positions
and assumptions used in assessing recoverability of the deferred
tax assets from tax losses carry forward in the consolidated financial
statements.
Other Matter
The consolidated financial statements
as of 31.12.2021 have been audited by another
réviseur d’entreprises agréé which has issued
an unmodified opinion as at.11.04.2022.
Other information
The Board of directors is responsible for the other
information. The other information comprises
the information stated in the annual report
including the directors’ report but does not
include the consolidated financial statements
and our report of “Réviseur d’Entreprises Agréé”
thereon.
Our opinion on the consolidated financial
statements does not cover the other information
and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated
financial statements, our responsibility is to read
the other information and, in doing so, consider
whether the other information is materially
inconsistent with the consolidated financial
statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated.
If, based on the work we have performed,
we conclude that there is a material misstatement
of this other information, we are required to report
this fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and Those Charged
with Governance for the consolidated Financial Statements
The Board of Directors is responsible
for the preparation and fair presentation
of the consolidated financial statements
in accordance with IFRSs as adopted
by the European Union, and for such internal control
as the Board of Directors determines is necessary
to enable the preparation of consolidated
financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements,
the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis
of accounting unless the Board of Directors
either intends to liquidate the Group or to cease
operations, or has no realistic alternative but
to do so.
Those charged with governance are responsible
for overseeing the Group’s financial reporting
process
Responsibilities of the “Réviseur d’Entreprises Agréé”
for the Audit of the consolidated Financial Statements
The objectives of our audit are to obtain
reasonable assurance about whether
the consolidated financial statements as a whole
are free from material misstatement, whether
due to fraud or error, and to issue a report
of “Réviseur d’Entreprises Agréé” that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with the Law
of 23 July 2016 and with ISAs as adopted
for Luxembourg by the CSSF will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in the aggregate, they could reasonably
be expected to influence the economic decisions
of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with the Law
of 23 July 2016 and with ISAs as adopted
for Luxembourg by the CSSF, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error,
design and perform audit procedures
responsive to those risks, and obtain audit
evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk
of not detecting a material misstatement
resulting from fraud is higher than for one
resulting from error, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control
relevant to the audit in order to design
audit procedures that are appropriate
in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness
of the Group’s internal control.
• Evaluate the appropriateness of accounting
policies used and the reasonableness
of accounting estimates and related disclosures
made by the Board of Directors.
• Conclude on the appropriateness of Board
of Directors’ use of the going concern basis
of accounting and, based on the audit evidence
obtained, whether a material uncertainty
exists related to events or conditions
that may cast significant doubt on the Group’s
ability to continue as a going concern. If
we conclude that a material uncertainty exists,
we are required to draw attention in our
report of “Réviseur d’Entreprises Agréé”
to the related disclosures in the consolidated
financial statements or, if such disclosures
are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence
obtained up to the date of our report
of “Réviseur d’Entreprises Agréé”. However,
future events or conditions may cause
the Group to cease to continue as a going
concern.
110—111 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
• Evaluate the overall presentation, structure
and content of the consolidated financial
statements, including the disclosures,
and whether the consolidated financial
statements represent the underlying
transactions and events in a manner that
achieves fair presentation.
• Obtain sufficient appropriate audit
evidence regarding the financial information
of the entities and business activities
within the Group to express an opinion
on the consolidated financial statements.
We are responsible for the direction,
supervision and performance of the Group
audit. We remain solely responsible for our
audit opinion.
We communicate with those charged
with governance regarding, among other matters,
the planned scope and timing of the audit
and significant audit findings, including
any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance
with a statement that we have complied
with relevant ethical requirements regarding
independence, and to communicate with them
all relationships and other matters that may
reasonably be thought to bear on our
independence, and where applicable, actions taken
to eliminate threats or safeguards applied.
From the matters communicated with those
charged with governance, we determine those
matters that were of most significance in the audit
of the consolidated financial statements
of the current period and are therefore the key
audit matters. We describe these matters in our
report unless law or regulation precludes public
disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter
should not be communicated in our report because
the adverse consequences of doing so would
reasonably be expected to outweigh the public
interest benefits of such commucation.
Report on Other Legal and Regulatory Requirements
The directors’ report (pages 20 to 104) is consistent
with the consolidated financial statements and has
been prepared in accordance with applicable legal
requirements.
MOORE Audit S.A.
Raphael Loschetter
Réviseur d’Entreprises Agréé
Livange, 14 April 2023
Consolidated
Financial
Statements for the Year Ended 31 December 2022
CONTENTS
Consolidated Financial Statements 114
Consolidated Statement of Financial Position 115
Consolidated Statement of Profit or Loss and Other Comprehensive Income 116
Consolidated Statement of Changes in Equity 117
Consolidated Statement of Cash Flows 118
Notes to the Consolidated Financial Statements
1. Background 118
2. Basis of preparation 119
3. Functional and presentation currency 120
4. Use of estimates and judgments 120
5. New or revised standards and interpretations adopted by the Group 122
6. Segment information 122
7. Principal subsidiaries 124
8. General, selling and administrative expenses 124
9. Other operating income and expenses, net 125
10. Finance income and finance costs 125
11. Foreign exchange gain 125
12. Income tax 126
13. Investment property 128
14. Property, plant and equipment and construction in progress 129
15. Right-of-use assets 132
16. Intangible assets 133
17. Prepayments 133
18. Other non-current assets 134
19. Inventories 134
20. Trade and other receivables 134
21. Cash and cash equivalents 135
22. Equity 135
23. Earnings per share 135
24. Loans and borrowings 136
25. Lease liabilities 137
26. Trade and other payables 138
27. Reconciliation of movements of liabilities to cash flows arising from financing activities 138
28. Financial risk management 140
29. Capital commitments 145
30. Contingencies 146
31. Related party transactions 146
32. Fair value disclosures 148
33. Significant accounting policies 148
34. Events subsequent to the reporting date 159
112—113 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION AS AT 31 DECEMBER 2022
’000 RUB Note 31 December 2022 31 December 2021
ASSETS
Non-current assets
Investment property 13 1,474,333 1,947,218
Property, plant and equipment 14 42,609,851 41,617,139
Construction in progress 14 1,326,017 1,772,089
Right-of-use assets 15 19,216,816 20,190,899
Intangible assets 16 1,205,515 1,330,376
Deferred tax assets 12 5,245,595 4,895,412
Other non-current assets 18 1,801,139 959,428
Total non-current assets 72,879,266 72,712,561
Current assets
Inventories 19 23,916,987 19,877,175
Trade and other receivables 20 2,930,220 3,590,570
Prepaid income tax 59,282 59,055
Prepayments 17 1,177,461 1,159,164
Cash and cash equivalents 21 11,779,334 9,447,998
Non-current assets held for sale 13 305,000 -
Total current assets 40,168,284 34,133,962
Total assets 113,047,550 106,846,523
’000 RUB Note 31 December 2022 31 December 2021
EQUITY AND LIABILITIES
EQUITY 22
Share capital 119,440 119,440
Legal reserve 10,597 10,597
Additional paid-in capital 8,555,657 8,555,657
Retained earnings 3,325,409 3,393,474
Translation reserve 1,454,205 1,774,457
Total equity 13,465,308 13,853,625
NON-CURRENT LIABILITIES
Loans and borrowings 24 35,525,212 31,644,919
Lease liabilities 25 16,924,142 19,077,160
Deferred tax liabilities 12 532,644 514,428
Total non-current liabilities 52,981,998 51,236,507
CURRENT LIABILITIES
Loans and borrowings 24 9,960,796 6,171,694
Interest accrued on loans and borrowings 24 215,737 149,445
Lease liabilities 25 5,620,662 4,985,877
Trade and other payables 26 30,636,945 29,954,756
Current income tax payable 166,104 494,619
Total current liabilities 46,600,244 41,756,391
Total liabilities 99,582,242 92,992,898
Total equity and liabilities 113,047,550 106,846,523
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of,
the consolidated financial statements set out on pages 7 to 65
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
’000 RUB Note 2022 2021
Revenue 6 202,170,726 187,097,352
Cost of goods sold (155,362,939) (144,978,269)
Gross profit 46,807,787 42,119,083
General, selling and administrative expenses 8 (40,389,935) (35,718,427)
Other operating income and expenses, net 9 (666,903) (1,409,812)
Operating profit 5,750,949 4,990,844
Finance income 10 438,380 68,430
Finance costs 10 (6,080,150) (4,866,815)
Foreign exchange gain 11 312,806 205,888
Profit before income tax 421,985 398,347
Income tax (expense) 12 (180,455) (190,518)
Profit for the year 241,530 207,829
OTHER COMPREHENSIVE (LOSS)/INCOME
Items that will never be reclassified to profit or loss:
Exchange differences on translation to presentation currency (320,252) 13,305
Items that are or may be reclassified subsequently to profit
or loss:
Derecognition of hedge/change in fair value of hedge - 193,820
Income tax on items within other comprehensive income 12 - (38,764)
Other comprehensive income 170,999 -
Other comprehensive (loss)/income for the year, net
of income tax
(149,253) 168,361
Total comprehensive income for the year 92,277 376,190
EARNINGS PER SHARE
Basic and diluted earnings per share (in RUB per share) 23 0.9 0.8
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of,
the consolidated financial statements set out on pages 7 to 65
114—115 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 2022
’000 RUB Share
capital
Legal
reserve
Additional
paid-in capital
Hedging
reserve
Retained
earnings
Translation
reserve
Total equity
Balance at 1 January 2021 119,440 10,597 8,555,657 (155,056) 3,185,645 1,761,152 13,477,435
COMPREHENSIVE
INCOME FOR THE YEAR
Profit for the year - - - - 207,829 - 207,829
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation differences
- - - - - 13,305 13,305
Derecognition of hedge - - - 193,820 - - 193,820
Income tax on items within
other comprehensive
income
- - - (38,764) - - (38,764)
Total other comprehensive
income
- - - 155,056 - 13,305 168,361
Total comprehensive
income for the year
- - - 155,056 207,829 13,305 376,190
Balance
at 31 December 2021
119,440 10,597 8,555,657 - 3,393,474 1,774,457 13,853,625
’000 RUB Note Share
capital
Legal
reserve
Additional
paid-in capital
Hedging
reserve
Retained
earnings
Translation
reserve
Total equity
Balance at 1 January 2022 119,440 10,597 8,555,657 - 3,393,474 1,774,457 13,853,625
COMPREHENSIVE
INCOME AND (LOSS)
FOR THE YEAR
Profit for the year - - - - 241,530 - 241,530
OTHER COMPREHENSIVE
INCOME AND (LOSS)
Foreign currency
translation differences
- - - - - (320,252) (320,252)
Other comprehensive
income
- - - - 170,999 - 170,999
Total other
comprehensive income
and (loss)
- - - - 170,999 (320,252) (149,253)
Total comprehensive
income for the year
- - - - 412,529 (320,252) 92,277
TRANSACTIONS
WITH OWNERS
RECORDED DIRECTLY
IN EQUITY
Dividends declared 22 - - - - (480,594) - (480,594)
Total transactions
with owners recorded
directly in equity
- - - - (480,594) - (480,594)
Balance
at 31 December 2022
119,440 10,597 8,555,657 - 3,325,409 1,454,205 13,465,308
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of,
the consolidated financial statements set out on pages 7 to 65
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
’000 RUB Note 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 231,986,614 215,729,790
Other cash receipts 663,715 728,693
Interest received 442,130 63,156
Cash paid to suppliers and employees (215,153,159) (197,644,782)
Taxes other than on income (763,441) (637,466)
Other cash payments (51,033) (50,286)
VAT paid (3,509,800) (3,976,782)
Income tax paid (657,281) (398,860)
Net cash from operating activities 12,957,745 13,813,463
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(excluding VAT)
(6,290,524) (4,909,241)
Purchase of intangible assets (excluding VAT) (331,473) (561,541)
Proceeds from sale of subsidiaries - 180,000
Proceeds from sale of investment property
(excluding VAT)
148,966 1,135,430
Proceeds from sale of property, plant and equipment
(excluding VAT)
5,438 228,414
Net cash used in investing activities (6,467,593) (3,926,938)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings 17,772,121 13,133,144
Repayment of loans and borrowings (9,958,485) (11,550,024)
Interest paid on loans and borrowings (3,966,907) (2,930,762)
Repayment of principal amount of lease liabilities (5,094,982) (4,660,511)
Interest paid on lease liabilities (2,075,250) (1,917,591)
Dividends paid 22 (480,594) -
Other financial payments and proceeds (80,560) (211,319)
Net cash used in financing activities (3,884,657) (8,137,063)
Net increase in cash and cash equivalents 2,605,495 1,749,462
Cash and cash equivalents at the beginning of the year 21 9,447,998 7,713,568
Effect of exchange rate fluctuations on cash and cash
equivalents
(274,159) (15,032)
Cash and cash equivalents at the end of the year 21 11,779,334 9,447,998
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of,
the consolidated financial statements set out on pages 7 to 65
116—117 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2022
1 Background
(a) The Group and its operations
These consolidated financial statements
for the year ended 31 December 2022 have been
prepared for O’KEY GROUP S.A. (the “Company”)
and its subsidiaries (together referred
to as the “Group”).
The Company was incorporated and is domiciled
in Luxembourg. The Company is a public limited
company (société anonyme) and was set up
in accordance with Luxembourg regulations.
The main part of the Group is located
and conducts its business in the Russian
Federation.
The Company does not have an immediate parent
or an ultimate controlling party.
As at 31 December 2022 and 2021, the Company’s
major indirect shareholders are Mr. Troitskii,
Mr. Volchek.
As at 31 December 2022 global depository receipts
(”GDRs”) represented 50.22% of the Company’s
shares, 38.172% of the Company’s shares
in the form of GDRs were listed on the London
Stock Exchange (as at 31 December 2021 GDRs
represented 41.89% of the Company’s shares,
38.172% of the Company’s shares were admitted
to trading on the London Stock Exchange
in the form of GDRs). On 15 February 2022,
some ordinary shares were converted
into GDRs and as a result, GDRs share reached
50.22% in the Company’s shares, 38.172%
of the Company’s shares were admitted to trading
on the London Stock Exchange in the form
of GDRs. In March 2022, the London Stock
Exchange temporally suspended the admission
to trading of the Group’s GDRs, which has not
been resumed as of the date of these consolidated
financial statements. Starting 14 December 2020,
the Company’s GDRs are also traded on Moscow
Exchange. As of the date of these consolidated
financial statements the Group’s GDRs and bonds
remain admitted to trading on Moscow Exchange.
The Company’s registered office is 25C Boulevard
Royal, L-2449 Luxembourg.
The Group’s principal business activity is operation
of retail chains in Russia under the brand names
“O’KEY” (hypermarkets) and “Da!” (discounter
stores). At 31 December 2022, the Group
operated 273 stores including 194 discounter
stores (31 December 2021: 230 stores including
152 discounter stores) in major Russian cities,
including but not limited to Moscow and towns
in Moscow region, St. Petersburg, Murmansk,
Nizhniy Novgorod, Rostov-on-Don, Krasnodar,
Lipetsk, Ekaterinburg, Novosibirsk, Krasnoyarsk,
Ufa, Astrakhan and Surgut.
(b) Business environment
The Group’s operations are primarily located
in the Russian Federation which displays
characteristics of an emerging market.
Its economy is particularly sensitive to oil and gas
prices. The legal, tax and regulatory frameworks
continue to develop and are subject to varying
interpretations and frequent changes which
together with other legal and fiscal impediments
contribute to the challenges faced by entities
operating in the Russian Federation. The Russian
economy continued to be negatively impacted
by ongoing political tension in the region
and international sanctions against certain Russian
companies and individuals.
In 2022 ongoing political tension in the region
escalated as a result of further developments
of the situation with Ukraine which have negatively
impacted commodity and financial markets,
and increased volatility, particularly with regard
to foreign exchange rates. Since February 2022,
several packages of sanctions have been
imposed by USA, UK, and EU countries against
several Russian sectors of economy, enterprises
and individuals. Additionally, a number
of multinational brands and foreign companies
had to suspend their operations in Russia and/
or with Russian counterparties. However, no
sanctions have been imposed against the Company,
nor any of its subsidiaries, nor its major indirect
shareholders.
The Bank of Russia key rate also was volatile during
the reporting period. As a part of comprehensive
measures to ensure the stability of credit
institutions, the Bank of Russia raised the key
rate to 20% p.a. in February 2022. Nevertheless,
as the macroeconomic environment started
to stabilise, the Bank of Russia has been gradually
lowering the key rate. In December 2022, the key
rate was lowered further to 7.5% p.a. compared
to 8.5% in December 2021.
In March and April 2022, the Group temporarily
kept its promotional activity in the hypermarkets
limited on the back of the current economic
environment. The Group also temporarily
increased stock purchase volumes to secure
sufficient stock levels, ensure full on-shelf
availability of essential goods and goods under
the brands which availability in the Russian market
was not guaranteed. After March 2022, the Group
revised its portfolio of suppliers and made
necessary adjustments to its supply chain
and logistics in order to secure the uninterrupted
supply of products on offer. Moreover, the Group
has historically been focused on domestic supply
with around 80% of assortment sourced locally.
Moreover, the grocery retail is one of the most
sustainable sectors of the economy and will always
be in demand by customers.
Despite the volatility on the capital market,
the Group’s financial position and ability to attract
financing remained solid in the reporting period
as the grocery retail sector remains highly resilient
and demanded by consumers. In June 2022, Expert
RA credit rating agency affirmed the credit rating
of O’Key LLC, the main operating subsidiary
of the Company, at “ruA-”, outlook Stable.
The rating reflects the Group’s solid and stable
operational and financial position in the market,
low exposure to market risks, and high standards
of corporate governance, risk management,
strategic control and transparency. According
to Expert RA, the qualitative assessment
of the Group’s liquidity is high, which is attributable
to low leverage and diversified financing structure.
It is not possible to determine how long
the increased volatility in the financial market will
last or at what level it will eventually level out.
It is not possible for the management to predict
with any degree of certainty an impact of this
uncertainty on the Group’s operations. Whilst
these uncertainties may affect the future dividend
income of the shareholders in the medium term,
they do not affect the Group’s ability to continue
its operations in the foreseeable future.
COVID-19. In the reporting period, the Group
continued to undertake necessary measures
to maintain safe and smooth operations
of its stores and supply chain during the continuing
COVID-19 pandemic. While the business conditions
in the context of the pandemic were stable and no
significant governmental restrictions were in place,
there is still a significant uncertainty regarding
future developments of the COVID-19 situation,
in particular, its duration and the risk that
the Russian authorities would impose additional
restrictions in subsequent periods, including
due to emerging new variants of the virus.
As such, the future effects of the current situation
are difficult to predict and management’s
current expectations and estimates could differ
from actual results.
2 Basis of preparation
(a) Statement of compliance
These consolidated financial statements have
been prepared in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted
by the European Union under the historical cost
convention, as modified by the initial recognition
of financial instruments based on fair value,
and by the revaluation of investment properties
and financial instruments at fair value.
These consolidated financial statements
were authorised for issue by the Board
of Directors on 14 April 2023.
Any changes to these consolidated financial
statements after issue require approval
of the Board of Directors.
118—119 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
3 Functional and presentation currency
The functional currency of each of the Group’s
consolidated entities is the currency
of the primary economic environment in which
the entity operates. The functional currency
of the Company and the Group’s subsidiaries
outside of the Russian Federation is the US
Dollar (“USD”) and the functional currency
of the Group’s Russian subsidiaries is the Russian
Rouble (“RUB”). The consolidated financial
statements are presented in RUB, which
is the Group’s presentation currency. All financial
information presented in RUB has been rounded
to the nearest thousand, except when otherwise
indicated.
The results and financial position of the Group
entities, which functional currencies are different
from RUB, are translated into the presentation
currency as follows:
• assets and liabilities for each statement
of financial position presented are translated
at the closing rate at the end of the respective
reporting period;
• income and expenses are translated at the date
of transaction;
• components of equity are translated
at the historic rate; and
• all resulting exchange differences
are recognised in other comprehensive income.
At 31 December 2022 the principal rates
of exchange used for translating foreign
currency balances were USD 1 = RUB 70.3375;
EUR 1 = RUB 75.6553 (31 December 2021:
USD 1 = RUB 74.2926; EUR 1 = RUB 84.0695).
4 Use of estimates and judgments
The preparation of consolidated financial
statements in conformity with IFRSs requires
management to make estimates and assumptions
that affect the application of accounting policies
and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ
from those estimates.
Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised
in the period in which the estimates are revised
and in any future periods affected.
Management also exercises certain judgements,
apart from those involving estimations,
in the process of applying the accounting policies.
Judgments 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 within the next
financial year include:
Tax legislation. The Group is subject to taxation
in several jurisdictions. The major part of the tax
burden refers to the Russian tax legislation,
which is subject to varying interpretations when
being applied to the transactions and activities
of the Group. Significant judgement is required
in determining whether the tax positions
and interpretations the Group has taken can
be sustained. Refer to Note 30.
Bonuses from suppliers. The Group receives
various bonuses from suppliers which
represent a significant reduction in cost of goods
sold and inventory cost. The calculation of these
amounts is in part dependent on an estimation
of whether the amounts due under agreements
with suppliers have been earned at the reporting
date based on inventory purchased and other
conditions. In particular, estimates and judgements
are applied in determining the period-end accrual
for the supplier bonuses that are conditional
on the volume of promotional or marketing
activities provided. The allocation of the bonuses
to inventory cost also has some element
of judgement in relation to the attribution
of the bonuses earned to the cost of specific goods
received from suppliers based on the proportion
of goods purchased.
Determination of recoverable amount
of non-current assets. For those non-current
assets where impairment indicators exist
as at reporting date, the Group estimates
the recoverable amount being the higher of their
value in use and fair value less costs of disposal.
For details of impairment assessment performed
as at 31 December 2022 refer to Notes 14-16.
Recoverability of deferred tax asset.
Significant judgment is required in assessment
of recoverability of deferred tax asset on tax
losses of LLC Fresh Market, the Group’s entity
that develops a discounter chain and does not
yet generate profit. The Group performs analysis
of future taxable profit to cover the accumulated
tax losses on the basis of the long-term budget
for the entity. Recognition of the deferred tax
asset is contingent on the ability of the Group
management to adhere to the long-term budget.
Refer to Note 12.
Lease term. In determining the lease term,
management considers all facts and circumstances
that create an economic incentive to exercise
an extension option, or not exercise a termination
option. Extension options (or periods after
termination options) are only included
in the lease term if the lease is reasonably certain
to be extended (or not terminated).
If the contractual lease term does not align
with the economics of the transaction,
management considers whether there are any non-
contractual enforceable rights beyond the written
agreement to determine the lease term
with reference to mutual understanding between
the parties, respective laws and regulations
and other relevant factors. The assessment
is reviewed if a significant event or a significant
change in circumstances occurs which affects
this assessment and that is within the control
of the lessee.
The Group leases land and trade and other
premises based on the lease agreements
with various termination and extension options.
To determine the lease term the management has
applied judgement in performing its ‘reasonably
certain’ assessment and determined that
it is reasonably certain that the extension
options will be exercised or termination options
will not be exercised during the lease period
which is based on the Group’s business plan
with the respective planning horizon.
Most extension options in leases of trade premises
have been included in the lease liability, because
the Group is unlikely to replace the assets within
the Group’s planning horizon.
The lease term is reassessed if an option is actually
exercised (or not exercised) or the Group
becomes obliged to exercise (or not exercise) it.
The assessment of reasonable certainty is only
revised if a significant event or a significant change
in circumstances occurs, e.g. asset reconstruction,
renovation and other, which affects this
assessment, and that is within the control
of the lessee.
For lease agreements of trade and other premises
with various extension and termination options,
where the lease period is based on the Group’s
business plan with the respective planning horizon,
the Group also performs its ‘reasonably certain’
reassessment and determines that it is reasonably
certain that the extension options will be exercised
or termination options will not be exercised closer
to the end of the lease term, usually six months
before the end of the lease. Six-month period
is considered to be sufficient to make a decision
to vacate the property or continue with the lease.
The financial effect of revising the lease terms
to reflect the effect of exercising extension
and termination options was included
in the ‘Modifications and reassessments’ captions
in Notes 15 and 25.
An increase in the lease term by 1 year
for the leases assuming extension options
at the reporting date would have increased
the balances of right-of-use assets and lease
liabilities by RUB 3,862,759 thousand
and RUB 3,863,779 thousand, respectively
(31 December 2021: by RUB 3,356,000 thousand
and RUB 3,849,350 thousand, respectively).
A decrease of the lease term by 1 year
for the leases assuming extension options
at the reporting date would have decreased
the balances of right-of-use assets and lease
liabilities by RUB 3,689,575 thousand
and RUB 4,252,993 thousand, respectively
(31 December 2021: by RUB 3,396,092 thousand
and RUB 3,946,326 thousand, respectively).
This analysis assumes that all other variables,
in particular incremental borrowing rate, remain
constant.
Discount rates used for determination of lease
liabilities. The Group uses its incremental
borrowing rate as a base for calculation
of the discount rate because the interest rate
implicit in the lease cannot be readily determined.
In 2022, the Group’s incremental borrowing rate
applied to lease liabilities denominated in Russian
Roubles ranged from 10 to 20%, and for contracts
denominated in other currencies from 5
to 6% (2021: from 6 to 9% and from 2 to 5%,
respectively).
An increase in the discount rate by 100 basis
points at the reporting date would have
decreased the balances of right-of-use assets
and lease liabilities by RUB 578,512 thousand
and RUB 606,158 thousand, respectively
(31 December 2021: by RUB 683,997 thousand
and RUB 672,583 thousand, respectively).
A decrease of the discount rate by 100 basis
points at the reporting date would have
120—121 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
i ncreased the balances of right-of-use assets
and lease liabilities by RUB 623,506 thousand
and RUB 653,263 thousand, respectively
(31 December 2021: by RUB 900,502 thousand
and RUB 866,895 thousand, respectively).
This analysis assumes that all other variables,
in particular lease term, remain constant.
5 New or revised standards and interpretations
adopted by the Group
The following amendments to standards became
effective from 1 January 2022, but did not have
any material impact on the Group:
• The Group applied “Onerous Contracts—
Cost of Fulfilling a Contract” (amendments
to IAS 37) from 1 January 2022. This resulted
in a change in accounting policy to measure
onerous contracts. Previously, the Group only
considered the additional costs of fulfilling
the contract when determining whether
the contract is onerous. The revised policy
provides for the inclusion of both additional
costs and the allocation of other direct costs.
• The Group has analysed all contracts existing
as at 1 January 2022 and determined that
none of them will be identified as onerous
when applying the revised accounting policy,
the change will not affect the initial equity
balances as at 1 January 2022.
6 Segment information
Operating segments are components that engage
in business activities that may earn revenues
or incur expenses, whose operating results
are regularly reviewed by the chief operating
decision maker (CODM) and for which discrete
financial information is available. The CODM
is the person or group of persons who allocate
resources and assess the performance
for the entity. The CODM has been determined
as the CEO of the Group and the Board
of Directors of the Company.
The Group is engaged in management of retail
stores located in the Russian Federation. Although
the Group is not exposed to concentration
of sales to individual customers, all of the Group’s
sales are made in the Russian Federation.
As such, the Group is exposed to the economic
development in Russia, including the development
of the Russian retail industry. The Group has no
significant non-current assets outside the Russian
Federation.
The Group identified its operating segments
in accordance with the criteria set in IFRS 8,
Operating Segments, and based on the way
the operations of the Group are regularly reviewed
by the CODM to analyse performance and allocate
resources within the Group.
The Group has two operating segments that also
represent reportable segments: “O’Key” and “Da!”.
Each segment has similar format of their stores
which is described below:
• O’Key – chain of modern style hypermarkets
under the “O’KEY” brand;
• Da! – chain of discounter stores in Moscow
and Central region.
The core assortment of goods in the stores
of each segment is different, and the segments
are managed separately. For each of the segments,
the CODM of the Group reviews internal
management reports at least on a monthly basis.
All business components within each reportable
segment demonstrate similar characteristics:
• the products and customers;
• the business processes are integrated
and uniform: the components manage their
operations centrally. Purchasing, logistics,
finance, HR and IT functions are centralised;
• the components’ activities are mainly limited
to Russia which has a uniform regulatory
environment.
The CODM assesses the performance
of the operating segments based on revenue
and earnings before interest, tax, depreciation
and amortisation adjusted for certain one-off items
outlined below (“EBITDA”). The “EBITDA” term
is not defined in IFRS. Other information provided
to the CODM is measured in a manner consistent
with that in the consolidated financial statements.
The accounting policies used for the segment
reporting are the same as the accounting policies
applied for the consolidated financial statements
(Note 33).
Basis of segmentation used in these consolidated
financial statements is consistent with that used
in the prior year.
The segment information for the years ended 31 December 2022 and 31 December 2021 is as follows:
’000 RUB O’Key Da! Total
2022 2021 2022 2021 2022 2021
EXTERNAL
REVENUE
• Sales
of trading
stock
141,192,389 144,630,730 53,296,838 34,788,867 194,489,227 179,419,597
• Sales
of self-
produced
catering
products
5,711,789 5,752,677 - - 5,711,789 5,752,677
Revenue
from contracts
with customers
146,904,178 150,383,407 53,296,838 34,788,867 200,201,016 185,172,274
Rental income 1,919,460 1,877,061 50,250 48,017 1,969,710 1,925,078
Total revenue 148,823,638 152,260,468 53,347,088 34,836,884 202,170,726 187,097,352
Inter-segment
revenue
415,786 319,596 1,697,088 1,925,606 2,112,874 2,245,202
EBITDA 13,377,419 13,839,469 3,642,982 1,664,997 17,020,401 15,504,466
A reconciliation of EBITDA to profit for the year is as follows:
’000 RUB Note 2022 2021
EBITDA 17,020,401 15,504,466
Revaluation of investment property 9, 13 (135,000) (97,796)
Net loss from disposal of non-current assets and net impairment
of non-current assets
9 (215,749) (996,429)
Loss from write-off of receivables and impairment of receivables 9 (197,916) (317,855)
Depreciation and amortisation 8 (10,661,819) (8,904,143)
Finance income 10 438,380 68,430
Finance costs 10 (6,080,150) (4,866,815)
Foreign exchange gain 11 312,806 205,888
Other one-off items (58,968) (197,399)
Profit before income tax 421,985 398,347
Income tax (expense) 12 (180,455) (190,518)
Profit for the year 241,530 207,829
122—123 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
7 Principal subsidiaries
Details of the Company’s significant subsidiaries at 31 December 2022 and 31 December 2021, all 100%
owned are as follows:
Subsidiary Country Nature of operations
LLC O’KEY Russian Federation Retail
LLC Fresh Market Russian Federation Retail and real estate
JSC Dorinda Russian Federation Real estate
LLC O’KEY management Russian Federation Managing company
LLC O’KEY Logistics Russian Federation Import operations
O’KEY Investments Ltd Cyprus Financing
8 General, selling and administrative expenses
’000 RUB Note 2022 2021
Personnel costs 16,850,253 15,387,753
Depreciation and amortisation 14-16 10,661,819 8,904,143
Communication and utilities 4,586,749 4,036,544
Advertising and marketing 2,295,894 1,992,459
Repairs and maintenance costs 1,582,106 1,398,746
Insurance and bank commissions 1,259,641 1,094,159
Security expenses 784,885 730,438
Legal and professional expenses 651,024 708,968
Operating taxes 765,669 651,760
Materials and supplies 460,448 408,653
Variable lease expenses and expenses relating to short-term and low value leases 448,245 353,397
Other costs 43,202 51,407
Total general, selling and administrative expenses 40,389,935 35,718,427
Total employee benefits expense for the year
ended 31 December 2022 included
in the cost of goods sold and general,
selling and administrative expenses
is RUB 20,719,462 thousand (2021:
18,405,339 thousand).
During the year ended 31 December 2022
the Group employed 21 thousand employees
on average (2021: 20 thousand employees
on average). Approximately 95% of the employees
(2021: 95% of the employees) are store
and warehouse employees and the remaining part
is office employees.
Fees billed to the Group by the independent auditors for statutory and consolidated audits and other
advisors are as follows:
’000 RUB 2022 2021
Fees for statutory audit of annual and consolidated accounts 21,768 18,796
Fees charged for other assurance services (other advisors) 9,011 5,249
Fees charged for tax advisory services (other advisors) 9,622 2,025
Total auditors’ remuneration 40,401 26,070
9 Other operating income and expenses, net
’000 RUB Note 2022 2021
Gain from modification of leases 15, 25 6,720 82,725
Net loss from disposal of non-current assets (110,658) (244,010)
Reversal of impairment of non-current assets 14,15 - 293,164
Impairment of non-current assets 14 (105,000) (1,045,583)
Reversal of impairment /Impairment of receivables 2,729 (58,304)
Loss from write-off of receivables (200,645) (259,551)
Loss from revaluation of investment property 13 (135,000) (97,796)
Loss from disposal of right-of-use assets (91) -
Sundry income and expense, net (124,958) (80,457)
Total other operating income and expenses, net (666,903) (1,409,812)
10 Finance income and finance costs
’000 RUB 2022 2021
RECOGNISED IN PROFIT OR LOSS
Interest income on bank deposits 438,380 68,430
Total finance income 438,380 68,430
Interest expense on loans and borrowings (4,006,800) (2,990,720)
Interest expense on lease liabilities (Note 25) (2,073,350) (1,875,913)
Reclassification from hedging reserve - (182)
Total finance costs (6,080,150) (4,866,815)
Net finance costs recognised in profit or loss (5,641,770) (4,798,385)
During 2022 the Group has capitalised borrowing costs in the amount of RUB 61,051 thousand
(2021: RUB 81,673 thousand) arising on financing directly attributable to the construction of the Group’s
new stores. The capitalisation rate was 9.9% (2021: 7.7%).
11 Foreign exchange gain
The Group’s risk management policy
is to receive loans and borrowings in the same
currency in which revenues are generated
(RUB). As at 31 December 2022, there are no
USD-denominated loans and borrowings
(31 December 2021: the share of the Group’s USD-
denominated loans and borrowings approximated
3% of total loans and borrowings). The Group’s
exposure to currency risk is disclosed in Note 28.
’000 RUB 2022 2021
Foreign exchange loss on financial items (4,277,117) (461,167)
Foreign exchange gain on financial items 4,815,285 600,713
Net foreign exchange gain on financial items 538,168 139,546
Foreign exchange (loss) gain on operating items (225,362) 66,342
Total foreign exchange gain 312,806 205,888
124—125 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
In 2022 substantial amount of the net
foreign exchange gain relates to USD-
denominated intercompany loans between Group
entities with different functional currencies which
are eliminated on consolidation. The residual net
foreign exchange gain is attributable to lease
contracts in foreign currencies while foreign
exchange losses arose mainly from import
operations.
In 2021 substantial amount of the net foreign
exchange gain relates to lease contracts in foreign
currencies. Another major part of the net foreign
exchange gain arose on import operations.
The residual impact is attributable to USD-
denominated intercompany loans between Group
entities with different functional currencies which
are eliminated on consolidation.
12 Income tax
Income tax recognised in profit or loss
’000 RUB 2022 2021
Current tax expense (512,422) (460,295)
Deferred tax benefit 331,967 269,777
Total income tax (expense) (180,455) (190,518)
Reconciliation between the tax expense and profit
or loss multiplied by applicable tax rate
The income tax rate applicable to the majority of the Group’s 2022 and 2021 income is 20%, the income
tax rate established by the Russian tax legislation. A reconciliation between the expected and the actual
taxation benefit/charge is provided below.
’000 RUB 2022 2021
Profit before income tax 421,985 398,347
Theoretical income tax at applicable tax rate of 20% (84,397) (79,669)
Effect of income taxed at different rates 76,856 (17,561)
Tax effect of items which are not deductible for taxation purposes:
• Inventory shrinkage expenses (47,481) (64,151)
• Other non-deductible expenses (70,257) (84,771)
Adjustments to current income tax (55,176) 55,634
Income tax (expense) for the year (180,455) (190,518)
Deferred tax assets and liabilities
(a) Deferred taxes in respect of subsidiaries
The Group has not recorded a deferred tax
liability in respect of temporary differences
of RUB 27,729,964 thousand (31 December 2021:
RUB 28,053,090 thousand) associated
with investments in subsidiaries as the Group
is able to control the timing of the reversal
of those temporary differences and does not
intend to reverse them in the foreseeable future.
If the temporary difference reversed in form
of distributions remitted to the Company, then
an enacted tax rate of 5-15% would apply.
(b) Recognised deferred tax asset
on tax loss carried forward
Deferred tax asset recognised in respect
of tax loss carried forward relates to the losses
accumulated by the Group’s subsidiary LLC Fresh
Market that develops a discounter chain and does
not yet generate profit.
Starting from 1 January 2017 the amendments
to the Russian tax legislation became
effective in respect of tax loss carry forwards.
The amendments affect tax losses incurred
and accumulated since 2007 that have not been
utilised. The 10-year expiry period for tax loss
carry-forwards that was in effect prior to 2017 no
longer applies, and the accumulated tax losses can
now be carried forward for utilisation in future
periods without any time limitation, with exception
of limitation on utilisation of tax loss carry forwards
that applies during the period from 2017 to 2024.
The amount of losses that can be utilised each
year during this period is limited to 50% of annual
taxable profit.
The Group determined that future taxable
profits will be available at LLC Fresh Market
in the foreseeable future against which
its accumulated losses can be utilised. In making this
assessment the Group considered that according
to the discounter chain’s long-term budget
the deferred tax asset of RUB 3,414,362 thousand
on accumulated losses generated by LLC Fresh
Market as at 31 December 2022 will be utilised in full
by 2028. In 2022 no corrections to the Group’s long-
term plan for number of opening of new stores
were made. The Group is following its long-term
budget approved in prior years with insignificant
changes on revenue and expenses planned for 2023
in order to reflect changes noted in 2022 with no
impact on total net profit in monetary terms.
Recognition of the deferred tax asset is contingent
on the ability of the Group management
to adhere to the key assumptions made
in the long-term budget. These key assumptions
in the discounter chain’s long-term budget
covering 2023-2028 include annual expansion
by approximately 45-50 new discounter stores
per year; annual growth in revenue comparable
with past dynamics of the discounter chain;
and gradual decrease of share of semi-fixed costs
due to economies of scale.
In addressing the sensitivity of the timing of full
utilisation of the deferred tax asset attributable
to LLC Fresh Market, the Group estimated that
if the pace of openings of new discounter stores
in each of the years from 2023 to 2028 is lower
by 20% as compared to the chain expansion rate
reflected in the segment’s long-term budget,
with all other assumptions held constant,
the timing of full utilisation of the deferred tax
asset would shift from 2028 to 2029. The Group
believes that any such shift does not affect
the probability that the deferred tax asset would
be fully utilised, since the tax losses can be carried
forward indefinitely and have no expiry date under
the Russian tax legislation.
(c) Movement in temporary
differences during the year
Differences between IFRS and statutory taxation
regulations in Russia and other countries give rise
to temporary differences between the carrying
amount of assets and liabilities for financial
reporting purposes and their tax bases. The tax
effect of the movements in these temporary
differences is detailed below.
’000 RUB 1 January
2022
Recognised
in profit or loss
Recognised in other
comprehensive income
31 December
2022
TAX EFFECT OF DEDUCTIBLE/ (TAXABLE) TEMPORARY DIFFERENCES AND TAX LOSS CARRY FORWARDS
Investment property 152,953 27,000 - 179,953
Property, plant and equipment (1,464,399) 160,630 - (1,303,769)
Construction in progress (73,423) (138,082) - (211,505)
Right-of-use assets (2,909,161) 298,242 - (2,610,919)
Intangible assets (96,079) (10,020) - (106,099)
Other non-current assets 145,591 (187,748) - (42,157)
Inventories 267,631 (9,586) - 258,045
Trade and other receivables and payables 139,571 300,553 440,124
Long-term investments 5,785 - - 5,785
Lease liabilities 4,812,607 (123,477) - 4,689,130
Tax loss carry-forwards 3,399,908 14,455 - 3,414,363
Net deferred tax assets 4,380,984 331,967 - 4,712,951
Recognised deferred tax assets 4,895,412 - - 5,245,595
Recognised deferred tax liabilities (514,428) - - (532,644)
126—127 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
’000 RUB 1 January
2021
Recognised
in profit or loss
Recognised in other
comprehensive income
31 December
2021
TAX EFFECT OF DEDUCTIBLE/ (TAXABLE) TEMPORARY DIFFERENCES AND TAX LOSS CARRY FORWARDS
Investment property 133,394 19,559 - 152,953
Property, plant and equipment (1,520,221) 55,822 - (1,464,399)
Construction in progress (258,363) 184,940 - (73,423)
Right-of-use assets (2,961,959) 52,798 - (2,909,161)
Intangible assets (91,784) (4,295) - (96,079)
Other non-current assets 217,576 (71,985) - 145,591
Inventories 321,283 (53,652) - 267,631
Trade and other receivables and payables 194,409 (16,074) (38,764) 139,571
Long-term investments 5,785 - - 5,785
Lease liabilities 4,927,822 (115,215) - 4,812,607
Tax loss carry-forwards 3,182,029 217,879 - 3,399,908
Net deferred tax assets 4,149,971 269,777 (38,764) 4,380,984
Recognised deferred tax assets 4,709,712 - - 4,895,412
Recognised deferred tax liabilities (559,741) - - (514,428)
In the context of the Group’s current structure, tax losses and current tax assets of different Group
companies may not be offset against current tax liabilities and taxable profits of other Group companies
and, accordingly, taxes may accrue even where there is a consolidated tax loss. Therefore, deferred tax
assets and liabilities are offset only when they relate to the same taxable entity.
13 Investment property
(a) Reconciliation of carrying amount
’000 RUB Note
Investment properties at fair value as at 1 January 2021 1,897,449
Transfer from property, plant and equipment and construction in progress
and right-of-use assets
14,15 1,338,629
Expenditure on subsequent improvements 7,844
Fair value gains less losses 9 (97,796)
Disposals (1,198,908)
Investment properties at fair value as at 31 December 2021 1,947,218
Investment properties at fair value as at 1 January 2022 1,947,218
Fair value gains less losses 9 (135,000)
Reclassification to non-current assets held for sale (305,000)
Other changes (32,885)
Investment properties at fair value as at 31 December 2022 1,474,333
The trade premises of the Group included in investment property are subject to operating leases.
As at 31 December 2022 the Group’s investment property comprises three buildings and four land plots
(31 December 2021: three buildings and six land plots).
In the reporting period the Group entered
into active negotiations with a third party
in respect of a sale of two of the Group’s
investment properties represented by a land
plots and concluded that as at 31 December 2022,
it was highly probable that the sale would
be shortly completed. The underlying two land
plots were therefore remeasured at its current
fair value less costs to sell with reference
to its expected selling price and reclassified
to non-current assets held for sale.
(b) Measurement of fair value
The investment properties are valued annually
on 31 December at fair value, by an independent,
professionally qualified valuator who has
recent experience in valuing similar properties
in the Russian Federation.
The carrying values of investment properties
at 31 December 2022 and 31 December 2021 agree
to the valuations reported by the external
valuators with the use of a combination
of the market approach with reference
to comparable prices for orderly transactions
with similar properties and the income approach
with reference to estimates of future cash flows,
supported by the terms of any existing lease
and other contracts and by external evidence
such as current market rents for similar properties
in the same location and condition, and using
discount rates that reflect current market
assessments of the uncertainty in the amount
and timing of the cash flows.
The principal assumptions underlying
the estimation of the fair value with reference
to the income approach are those relating to:
the annual net rent rate of RUB 912-1,829 per
sq. m. (31 December 2021: RUB 898 –11,872 per
sq. m.); expected occupancy of 82 – 100%
in the subsequent years (31 December 2021: 88,0 –
100%); and appropriate discount rate of 10,15% –
13,5% (31 December 2021: 12,4% – 16,4%).
These valuations are regularly compared to actual
market yield data and actual transactions
by the Group, and those reported by the market.
The fair value measurement of investment
property has been categorised as a Level 3 fair
value based on the inputs to the valuation
technique used.
14 Property, plant and equipment and construction in progress
’000 RUB Land Buildings Leasehold
improvements
Machinery
and equipment,
auxiliary
facilities
and other
fixed assets
Total
property,
plant and
equipment
Construction
in progress
Total property,
plant and
equipment and
construction
in progress
COST
Balance
at 1 January
2021
4,135,395 41,148,072 9,157,029 17,120,544 71,561,040 3,034,268 74,595,308
Additions 480,093 706,457 - 1,097,733 2,284,283 3,393,564 5,677,847
Transfers - 470,374 1,473,980 851,649 2,796,003 (2,796,003) -
Transfer
to investment
property
(Note 13)
(583,790) - - (16,753) (600,543) (516,557) (1,117,100)
Disposals (296,659) (29,930) (44,292) (780,078) (1,150,959) (140,411) (1,291,370)
Balance
at 31 December
2021
3,735,039 42,294,973 10,586,717 18,273,095 74,889,824 2,974,861 77,864,685
128—129 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
’000 RUB Land Buildings Leasehold
improvements
Machinery
and equipment,
auxiliary
facilities
and other
fixed assets
Total
property,
plant and
equipment
Construction
in progress
Total property,
plant and
equipment and
construction
in progress
COST
Balance
at 1 January
2022
3,735,039 42,294,973 10,586,717 18,273,095 74,889,824 2,974,861 77,864,685
Additions - 5,768 10,346 2,761,363 2,777,477 3,041,853 5,819,330
Transfers - 433,262 2,355,033 557,341 3,345,636 (3,345,636) -
Disposals - (546) (115,203) (929,780) (1,045,529) (37,290) (1,082,819)
Balance
at 31 December
2022
3,735,039 42,733,457 12,836,893 20,662,019 79,967,408 2,633,789 82,601,197
DEPRECIATION AND IMPAIRMENT LOSSES
Balance
at 1 January
2021
(15,871) (12,035,209) (4,817,797) (13,439,705) (30,308,582) (249,673) (30,558,255)
Depreciation
for the year
- (1,355,776) (1,157,987) (1,457,892) (3,971,655) - (3,971,655)
Transfers
to investment
property
(Note 13)
15,871 - - 11,709 27,580 - 27,580
Reversal
of impairment
through profit
or loss
- 150,000 49,299 - 199,299 - 199,299
Impairment
losses
(92,484) - - - (92,484) (953,099) (1,045,583)
Disposals 92,484 3,550 22,746 754,377 873,157 - 873,157
Balance
at 31 December
2021
- (13,237,435) (5,903,739) (14,131,511) (33,272,685) (1,202,772) (34,475,457)
Balance
at 1 January
2022
- (13,237,435) (5,903,739) (14,131,511) (33,272,685) (1,202,772) (34,475,457)
Depreciation
for the year
- (1,397,560) (1,924,340) (1,748,345) (5,070,245) (5,070,245)
Impairment
losses
- - - - - (105,000) (105,000)
Disposals - 257 103,920 881,197 985,373 - 985,373
Balance
at 31 December
2022
- (14,634,738) (7,724,160) (14,998,659) (37,357,557) (1,307,772) (38,665,329)
NET BOOK VALUE
At 1 January
2021
4,119,524 29,112,863 4,339,232 3,680,839 41,252,458 2,784,595 44,037,053
At 31 December
2021
3,735,039 29,057,538 4,682,978 4,141,584 41,617,139 1,772,089 43,389,228
At 31 December
2022
3,735,039 28,098,719 5,112,734 5,663,360 42,609,851 1,326,017 43,935,868
Depreciation expense of RUB 5,070,245 thousand has been charged to selling, general and administrative
expenses (2021: RUB 3,971,655 thousand).
Impairment assessment
At the end of each reporting period, the Group
assesses whether there is any indication that
its non-current assets including property, plant
and equipment, right-of-use assets and other
non-current assets may be impaired. Where
the non-current assets relate to the Group’s
stores, these stores are treated as separate
CGUs, and impairment assessment is performed
in respect of the aggregate carrying value
of the non-current assets attributable
to these CGUs with reference to their actual
and anticipated performance and other relevant
factors.
For the CGUs subject to impairment testing,
recoverable amount was determined based
on value-in-use.
Value in use calculations were prepared using
cash flow projections based on financial budgets
and forecasts approved by management
covering a one-year period. Cash flows beyond
the one-year period are extrapolated using
an expected growth rate for each particular CGU
which depends on its maturity and other relevant
factors. The discount rates are post-tax and reflect
management’s estimate of the risks specific
to the Group.
As the result of the impairment test
performed as at 31 December 2022, the Group
recognised an impairment loss in the amount
of RUB 105,000 thousand in respect of certain
construction in progress belonging to O’Key
segment (31 December 2021: impairment
loss of RUB 953,099 thousand, in respect
of construction in progress, belonging
to O’Key segment).
The total recoverable amount of the impaired
assets determined based on the value in use
approach as at 31 December 2022 amounted
to RUB 585,474 thousand.
The post-tax discount rate used
in the assessment under the value in use
approach as at 31 December 2022 was 12.3%
(31 December 2021: 11.9%). If the revised estimated
post-tax discount rate applied to the discounted
cash flows of the CGUs had been 100 basis
points higher than management’s estimates,
the Group would need to reduce the carrying
value of property, plant and equipment
by RUB 40,000 thousand (2021: if the estimated
post-tax discount rate had been 200 basis
points higher than management’s estimates,
the Group would need to reduce the carrying
value of property, plant and equipment
by RUB 133,000 thousand).
Pledged assets
At 31 December 2022, trade stores with carrying
value of RUB 7,788,521 thousand have been pledged
to third parties as collateral for bank borrowings
(31 December 2021: trade stores were pledged
with carrying value of RUB 8,020,647 thousand).
130—131 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
15 Right-of-use assets
The Group leases various trade premises, land and other assets. Rental contracts are typically made
for fixed periods of 3 to 49 years but may have extension and early termination options. Lease terms
are negotiated on an individual basis and contain a wide range of different terms and conditions.
The table below presents the right-of-use assets by class of underlying assets:
’000 RUB Trade
premises
Land Other Total
Balance at 1 January 2021 14,335,276 4,388,776 1,877,939 20,601,991
Additions 1,126,071 - 137,217 1,263,288
Modifications and reassessments 2,987,565 (154,938) 268,302 3,100,929
Depreciation (3,533,798) (202,601) (725,315) (4,461,714)
Reversal of impairment through profit or loss - 93,865 - 93,865
Transfers to investment property (Note 13) - (249,109) - (249,109)
Disposals - (158,351) - (158,351)
Balance at 31 December 2021 14,915,114 3,717,642 1,558,143 20,190,899
Balance at 1 January 2022 14,915,114 3,717,642 1,558,143 20,190,899
Additions 2,199,768 - 133,059 2,332,827
Modifications and reassessments 1,906,936 (176,191) (60,020) 1,670,725
Depreciation (4,092,331) (168,111) (717,193) (4,977,635)
Balance at 31 December 2022 14,929,487 3,373,340 913,989 19,216,816
The group ‘Other’ is mostly represented by office
premises and warehouses.
Modifications and reassessments for the year
ended 31 December 2022 were driven
by the ‘reasonably certain’ reassessment
of the lease term for some of the Group’s
leases of trade premises in discounter
segment, with extension and termination
options, six months before the end of the lease,
as well as by the modification of a number of other
leases, that changed either the consideration
for the lease, contractual lease term, or both.
Depreciation expense of RUB 4,970,334 thousand
(2021: RUB 4,287,507 thousand) has been
charged to general, selling and administrative
expenses. During 2022 the Group has
capitalised depreciation of right of use assets
in the amount of RUB 7,301 thousand (2021:
RUB 174,207 thousand).
Right-of-use assets are assessed for indication
of potential impairment as at each reporting date.
For those assets where impairment indicators
exist, the Group estimates recoverable amount
being the higher of their value in use and fair value
less costs of disposal, on either individual asset
or CGU level.
No indicators of impairment were identified
for the Group’s right-of-use assets that
are attributable to individual leased assets
and do not relate to stores in operation
as at 31 December 2022 and 2021.
For those right-of-use assets that relate
to the Group’s stores and are therefore
assessed for impairment on the store level
together with the other non-current assets
attributable to the stores, impairment
assessment has been performed as disclosed
in Note 14. No impairment attributable
to the right-of-use assets was identified
as at 31 December 2022 and 31 December 2021.
No reversal of impairment as at 31 December 2022
was made. As the result of the impairment test
performed as at 31 December 2021, the Group
recognised an impairment reversal in the amount
of RUB 93,865 thousand, in respect of right of use
asset related to the leased land plot for trade
premise, which belongs to O’Key segment.
16 Intangible assets
’000 RUB Software Other intangible assets Total
COST
Balance at 1 January 2021 1,966,667 267,105 2,233,772
Additions 639,930 68,999 708,929
Disposals (642,539) (19,672) (662,211)
Balance at 31 December 2021 1,964,058 316,432 2,280,490
Balance at 1 January 2022 1,964,058 316,432 2,280,490
Additions 836 228 103,282 939,510
Disposals (826,268) (110,254) (936,522)
Balance at 31 December 2022 1,974,018 309,460 2,283,478
AMORTISATION AND IMPAIRMENT LOSSES
Balance at 1 January 2021 (837,381) (126,587) (963,968)
Amortisation for the year (618,459) (26,522) (644,981)
Disposals 642,510 16,325 658,835
Balance at 31 December 2021 (813,330) (136,784) (950,114)
Balance at 1 January 2022 (813,330) (136,784) (950,114)
Amortisation for the year (584,211) (37,029) (621,240)
Disposals 481,320 12,071 493,391
Balance at 31 December 2022 (916,221) (161,742) (1,077,963)
CARRYING AMOUNTS
At 1 January 2021 1,129,286 140,518 1,269,804
At 31 December 2021 1,150,728 179,648 1,330,376
At 31 December 2022 1,057,797 147,718 1,205,515
Amortisation of RUB 621,240 thousand has been charged to selling, general and administrative expenses
(2021: RUB 644,981 thousand).
No indicators of impairment were identified for the Group’s intangible assets
as at 31 December 2022 and 31 December 2021.
17 Prepayments
’000 RUB 31 December 2022 31 December 2021
Prepayments for goods 514,967 379,413
Prepayments for variable lease payments – third parties 118,645 44,890
Prepayments for services 299,642 441,122
VAT on prepayments 44,462 174,532
Other prepayments 199,745 119,207
Total prepayments 1,177,461 1,159,164
132—133 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
18 Other non-current assets
’000 RUB 31 December 2022 31 December 2021
FINANCIAL ASSETS WITHIN OTHER NON-CURRENT ASSETS
Long-term refundable deposits to lessors 570,419 336,248
Total financial assets within other non-current assets 570,419 336,248
OTHER NON-CURRENT ASSETS
Prepayments for non-current assets 1,230,720 623,180
Total other non-current assets 1,801,139 959,428
19 Inventories
’000 RUB 31 December 2022 31 December 2021
Goods for resale 22,846,326 19,369,928
Raw materials and consumables 1,736,759 1,133,862
Write-down to net realisable value (666,098) (626,615)
Total inventories 23,916,987 19,877,175
The Group tested the inventories for obsolescence and wrote down the inventories to their net realisable
value, which resulted in a decrease of the carrying value of inventories by RUB 666,098 thousand
as at 31 December 2022 (31 December 2021: RUB 626,615 thousand). The write down to net realisable
value was determined by applying percentages of discount on sales and write-offs of slow-moving goods
to the appropriate aging of the goods. The percentages of discount were based on the management’s
best estimate following the experience of the discount sales.
20 Trade and other receivables
’000 RUB 31 December 2022 31 December 2021
FINANCIAL ASSETS WITHIN TRADE AND OTHER RECEIVABLES
Trade receivables 332,773 311,490
Bonuses receivable from suppliers 2,031,406 2,169,396
Other financial receivables 210,178 256,338
Total financial assets within trade and other receivables 2,574,357 2,737,224
OTHER RECEIVABLES
VAT receivable 338,689 818,993
Prepaid taxes other than income tax 17,174 34,353
Total trade and other receivables 2,930,220 3,590,570
The Group’s exposure to credit and currency risks and credit loss allowance as at 31 December 2022
and 31 December 2021 related to trade and other receivables are disclosed in Note 28.
21 Cash and cash equivalents
’000 RUB 31 December 2022 31 December 2021
Cash on hand 302,561 230,731
Bank current accounts 3,010,675 2,913,701
Term deposits 8,043,004 5,980,805
Cash in transit 423,094 322,761
Total cash and cash equivalents 11,779,334 9,447,998
Term deposits had original maturities of less than three months.
The Group’s exposure to currency risk related to cash and cash equivalents is disclosed in Note 28.
22 Equity
As at 31 December 2022 and 31 December 2021,
the Company’s authorised, issued and fully
paid share capital of RUB 119,440 thousand,
the RUB equivalent of EUR 2,691 thousand,
is represented by 269,074,000 ordinary shares
with a par value of 0.01 EUR each. Each share
is entitled to one vote, except as may be otherwise
provided by the Articles of incorporation
or by applicable law.
In accordance with Luxembourg Company Law,
the Company is required to transfer a minimum
of 5% of its net profits for each financial year
to a legal reserve. This requirement ceases
to be necessary once the balance of the legal
reserve reaches 10% of the issued share capital.
The legal reserve is not available for distribution
to the shareholders. As at 31 December 2022
and 2021, the legal reserve was formed in full.
Additional paid-in capital represents the excess
of contributions received over par value
of shares issued. There were no movements
in additional paid-in capital during the years ended
31 December 2022 and 31 December 2021.
In July 2022, the Company approved
an interim dividend on all shares in issue
of EUR 8,500 thousand (0.03159 Euro per
share), the equivalent of RUB 480,594 thousand
at the official exchange rate as of the date
of the approval. The corresponding payments
were made to the shareholders in August 2022
in full. Dividends declared were recognised
as distribution to owners in the consolidated
statement of changes in equity. No dividends
were declared and paid in 2021.
23 Earnings per share
Basic earnings per share are calculated by dividing the profit or loss attributable to owners
of the Company by the weighted average number of ordinary shares in issue during the year.
The Company has no dilutive potential ordinary shares; therefore, the diluted earnings per share equals
the basic earnings per share.
Earnings per share is calculated as follows:
‘000 RUB 2022 2021
Profit for the year 241,530 207,829
Weighted average number of ordinary shares in issue (thousands) 269,074 269,074
Basic and diluted earnings per ordinary share (in RUB per share) 0.9 0.8
134—135 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
24 Loans and borrowings
’000 RUB Currency 31 December 2022 31 December 2021
Maturity Carrying value Maturity Carrying value
NON-CURRENT LOANS AND BORROWINGS
Secured bank loans RUB 2024-2027 10,652,941 2025-2027 11,694,919
Unsecured bank facilities RUB 2024-2026 13,500,000 2023-2025 9,950,000
Unsecured bonds RUB 2024-2026 11,372,271 2023-2024 10,000,000
Total non-current loans and borrowings 35,525,212 31,644,919
CURRENT LOANS AND BORROWINGS
Secured bank loans RUB 2023 729,412 2022 1,158,824
Unsecured bank facilities RUB 2023 3,033,333 2022 1,033,333
Unsecured bonds RUB 2023 6,195,201 2022 2,837,671
Unsecured loans from third parties RUB 2023 2,850 2022 2,850
Unsecured loans from related parties (Note 31) USD - On demand 1,139,016
Total current loans and borrowings 9,960,796 6,171,694
Unsecured bonds interest RUB 209,488 144,483
Secured bank loans RUB 2,034 2,398
Unsecured loans interest RUB 4,215 2,564
Interest accrued on loans and borrowings 215,737 149,445
Total current loans and borrowings,
including interest accrued
10,176,533 6,321,139
Total loans and borrowings 45,701,745 37,966,058
Information about property, plant and equipment
pledged as collateral for the Group’s loans
and borrowings is disclosed in Note 14.
As at 31 December 2022 the Group had
RUB 16,466,667 thousand (31 December 2021:
RUB 18,550,000 thousand) of undrawn
committed borrowing facilities available
in RUB on fixed and floating rate basis
until March 2023-August 2027 in respect of which
all conditions have been met. Proceeds from these
facilities may be used to finance operating
and investing activities, if necessary.
In 2022 the Group repaid bonds issued
during 2019-2020 and due in 2023-2025
in the amount of RUB 3,750,293 thousand.
In 2021 the Group repaid bonds issued
during 2016-2017 and due in 2021 in the amount
of RUB 1,175,155 thousand.
The following issues of unsecured bonds were also
placed by the Group on Moscow exchange
in 2019-2022:
• an issue made in April 2019 in the amount
of RUB 5,000,000 thousand bearing coupon
rate of 9.35% p.a. and maturing in April 2029
with an option for the bondholders to claim
early repayment in April 2022. In October
and November 2021 bonds were partially repaid
in the amount of RUB 2,162,329 thousand.
In April 2022 bonds were partially repaid
in the amount of RUB 2,445,494 thousand.
An option for the bondholders to claim early
was prolonged till April 2025 bearing coupon
rate of 9.9% p.a;
• an issue made in December 2019 in the amount
of RUB 5,000,000 thousand bearing
coupon rate of 7.85% p.a. and maturing
in November 2024;
• an issue made in November 2020 in the amount
of RUB 5,000,000 thousand bearing coupon
rate of 7.50% p.a. and maturing in October 2030
with an option for the bondholders to claim
early repayment in November 2023.
In December 2022 bonds were partially repaid
in the amount of RUB 1,304,799 thousand;
• an issue made in November 2022 in the amount
of RUB 8,500,000 thousand bearing
coupon rate of 11.5% p.a. and maturing
in November 2032 with an option
for the bondholders to claim early repayment
in May 2026.
Compliance with loan covenants
The Group monitors compliance with loan covenants
on an ongoing basis. Where noncompliance
is unavoidable in management’s view, the Group
requests waiver letters from the banks before
the year-end, confirming that the banks waive their
rights to demand early redemption.
At 31 December 2022 and 31 December 2021
and during the years then ended the Group
complied with all its loan covenants.
25 Lease liabilities
’000 RUB 2022 2021
Balance at 1 January 24,063,037 24,639,106
Additions 2,170,785 1,225,111
Modifications and reassessments 1,631,120 3,018,204
Repayment (7,170,232) (6,578,102)
Interest expense 2,075,250 1,917,591
Foreign exchange gain (225,247) (158,873)
Disposals 91 -
Balance at 31 December 22,544,804 24,063,037
Non-current lease liabilities 16,924,142 19,077,160
Current lease liabilities 5,620,662 4,985,877
Interest expense in the amount
of RUB 2,073,350 thousand
(2021: RUB 1,875,913 thousand) has been
charged to finance costs.
Total cash outflow for leases
in 2022 amounted to RUB 7,612,899 thousand
(2021: RUB 7,014,011 thousand).
Some property leases contain variable payment
terms that are linked to sales generated
by a store. Variable payment terms are used
for a variety of reasons, including minimising
the fixed costs base for newly established stores.
Variable lease payments that depend on sales
are recognised in profit or loss in the period
in which the condition that triggers those
payments occurs.
Expense relating to variable lease payments
not included in lease liabilities included
in selling, general and administrative
expenses for 2022 was RUB 420,488 thousand
(2021: RUB 337,885 thousand).
Expenses relating to short-term leases
and to leases of low-value assets that
are not included in lease liabilities, both
included in selling, general and administrative
expenses, amounted to RUB 577 thousand
(2021: RUB 1,371 thousand) and RUB 27,180 thousand
(2021: RUB 14,140 thousand), respectively.
136—137 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
26 Trade and other payables
’000 RUB 31 December 2022 31 December 2021
FINANCIAL LIABILITIES AT AMORTISED COST
Trade payables 26,771,109 27,109,929
Other financial payables 184,761 190,008
Total financial liabilities at amortised cost 26,955,870 27,299,937
Payables to staff 1,397,271 1,387,210
Taxes payable other than income tax 1,683,457 785,391
Advances received from lessees 520,096 407,139
Contract liability related to gift cards 80,251 75,079
Total trade and other payables 30,636,945 29,954,756
The Group’s contract liabilities relate to contracts
with customers for periods of less than one year.
RUB 75,079 thousand of revenue was recognised
in the current reporting period related
to the contract liabilities as at 31 December 2021,
all of which related to gift cards.
The Group’s exposure to currency and liquidity
risks related to trade and other payables
is disclosed in Note 28.
27 Reconciliation of movements of liabilities to cash
flows arising from financing activities
The table below sets out an analysis of liabilities from financing activities and the movements
in the Group’s liabilities from financing activities for each of the periods presented. The items of these
liabilities are those that are reported as financing in the consolidated statement of cash flows:
’000 RUB Note Loans
and borrowings
Lease liabilities Dividends
payable
Total
Balance at 1 January 2022 37,966,058 24,063,037 - 62,029,095
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans
and borrowings
17,772,121 - - 17,772,121
Repayment of loans
and borrowings
(9,958,485) - - (9,958,485)
Interest paid on loans
and borrowings
(3,966,907) - - (3,966,907)
Repayment of principal
amount of lease liabilities
- (5,094,982) - (5,094,982)
Interest paid on lease
liabilities
- (2,075,250) - (2,075,250)
Dividends paid - - (480,594) (480,594)
Other financial payments (80,560) - - (80,560)
Total cash flows
from financing activities
3,766,169 (7,170,232) (480,594) (3,884,657)
’000 RUB Note Loans
and borrowings
Lease liabilities Dividends
payable
Total
NON-CASH CHANGES
Additions to lease
liabilities
25 - 2,170,785 - 2,170,785
Modifications
and reassessments
of lease liabilities
25 - 1,631,120 - 1,631,120
Accrued interest 10,25 4,067,851 2,075,250 - 6,143,101
Disposals 25 - 91 - 91
Difference between
the par value of the placed
bond and the actual cost
of the bond redemption
(income)
(19,572) - - (19,572)
Dividends declared 22 - - 480,594 480,594
Effect of changes
in foreign exchange rates
(78,761) (225,247) - (304,008)
Total non-cash changes 3,969,518 5,651,999 480,594 10,102,111
Balance
at 31 December 2022
45,701,745 22,544,804 - 68,246,549
’000 RUB Note Loans
and borrowings
Lease liabilities Interest rate
swap liability
Total
Balance at 1 January 2021 36,431,557 24,639,106 193,821 61,264,484
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans
and borrowings
13,133,144 - - 13,133,144
Repayment of loans
and borrowings
(11,550,024) - - (11,550,024)
Interest paid on loans
and borrowings
(2,930,762) - - (2,930,762)
Repayment of principal
amount of lease liabilities
- (4,660,511) - (4,660,511)
Interest paid on lease
liabilities
- (1,917,591) - (1,917,591)
Other financial payments (211,319) - - (211,319)
Total cash flows
from financing activities
(1,558,961) (6,578,102) - (8,137,063)
NON-CASH CHANGES
Additions to lease liabilities 25 - 1,225,111 - 1,225,111
Modifications
and reassessments of lease
liabilities
25 - 3,018,204 - 3,018,204
Accrued interest 10,25 3,072,393 1,917,591 - 4,989,984
Derecognition of hedge - - (193,821) (193,821)
Effect of changes
in foreign exchange rates
21,069 (158,873) - (137,804)
Total non-cash changes 3,093,462 6,002,033 (193,821) 8,901,674
Balance
at 31 December 2021
37,966,058 24,063,037 - 62,029,095
138—139 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
28 Financial risk management
(a) Overview
The risk management function within the Group
is carried out with respect to financial risks,
operational risks and legal risks. Financial risk
comprises market risk (including currency risk,
interest rate risk and other price risks), credit
risk and liquidity risk. The primary function
of financial risk management is to establish risk
limits and to ensure that any exposure to risk stays
within these limits. The operational and legal risk
management functions are intended to ensure
the proper functioning of internal policies
and procedures in order to minimise operational
and legal risks.
Risk management framework
The Board of Directors has overall responsibility
for the establishment and oversight of the Group’s
risk management framework.
The Group’s risk management policies
are established to identify and analyse the risks
faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence
to limits. Risk management policies are reviewed
regularly to reflect changes in market conditions
and the Group’s activities. The Group, through
its training and management standards
and procedures, aims to develop a disciplined
and constructive control environment in which all
employees understand their roles and obligations.
The Group’s Audit Committee oversees how
management monitors compliance with the Group’s
risk management policies and procedures
and reviews the adequacy of the risk management
framework in relation to the risks faced
by the Group. The Group’s Audit Committee
is assisted in its oversight role by Internal
Audit. Internal Audit undertakes both regular
and ad hoc reviews of risk management controls
and procedures, the results of which are reported
to the Audit Committee.
(b) Credit risk
Credit risk is the risk of financial loss to the Group
if a customer or counterparty to a financial
instrument fails to meet its contractual obligations,
and arises principally from the Group’s cash
and cash equivalents, trade receivables, bonuses
receivable and other financial receivables.
(i) Exposure to credit risk
The carrying amounts of financial assets
in the consolidated statement of financial position
represent the Group’s maximum credit risk
exposure. T he maximum exposure to credit risk
at the reporting date was:
’000 RUB Note Carrying amount
31 December 2022 31 December 2021
Long-term refundable deposits to lessors 18 570,419 336,248
Trade and other receivables 20 2,574,357 2,737,224
Cash and cash equivalents 21 11,476,773 9,217,267
Total 14,621,549 12,290,739
Due to the fact that the Group’s principal activities
are located in the Russian Federation, the credit
risk is mainly associated with its domestic
market. The credit risks associated
with foreign counterparties are considered
to be remote, as there are only few foreign
counterparties and they were properly assessed
for creditworthiness.
(ii) Trade and other receivables
The Group has no considerable balance
of trade receivables because the majority
of its customers are retail consumers, who
are not provided with any credit. The Group’s
trade receivables primarily include receivables
from tenants and receivables connected
to provision of services. Other receivables
are primarily represented by bonuses receivable
from suppliers. The Group manages credit
risk in respect of those bonuses receivable
by maintaining a stable suppliers base
and monitoring collectability of amounts
due on an ongoing basis.
To measure the ECL for trade and other
receivables, those have been grouped
based on shared credit risk characteristics
and the days past due.
The expected loss rates are based on the payment
profiles of sales over a period of 36 months
before 31 December 2022 and 31 December 2021
and the corresponding historical credit losses
experienced within this period. The historical loss
rates are adjusted to reflect current and forward-
looking information on macroeconomic factors
affecting the ability of the customers to settle
the receivables.
The ECL for bonuses receivable from suppliers
is determined on portfolio level based on historical
default percentages applied to the total amount
of bonuses receivable from suppliers, adjusted
to reflect relevant current and forward-looking
information.
The credit loss allowance
as at 31 December 2022 determined
with the use of provision matrix is summarised
in the table below.
’000 RUB Gross amount ECL Carrying amount
Trade receivables 339,854 (7,081) 332,773
Bonuses receivable from suppliers 2,045,886 (14,480) 2,031,406
Other financial receivables 223,556 (13,378) 210,178
Total 2,609,296 (34,939) 2,574,357
The credit loss allowance as at 31 December 2021 determined with the use of provision matrix
is summarised in the table below.
’000 RUB Gross amount ECL Carrying amount
Trade receivables 332,703 (21,213) 311,490
Bonuses receivable from suppliers 2,185,494 (16,098) 2,169,396
Other financial receivables 285,470 (29,132) 256,338
Total 2,803,667 (66,443) 2,737,224
When preparing the provision matrix
for the balances receivable as at 31 December 2021,
the Group considered the extent to which
the COVID-19 outbreak in the reporting period
has affected the industry in which the Group
operates and its debtors and concluded that
there was no notable deterioration of the debtors’
credit profile that would require a significant
adjustment to the calculated expected credit loss
rates with regard to forward-looking information.
(iii) Cash and cash equivalents
The Group assesses credit risk for cash and cash
equivalents based on external ratings that
are available publicly. Cash and cash equivalents
are mainly held with banks which are rated
from Baa3 to Ca based on Moody’s rating.
The Group operates in retail industry which
assumes that cash from the customers flows
to the Group normally at the point of sale
at the moment when the revenue is recognized.
Therefore, cash flow risk is considered as remote.
(c) Liquidity risk
Liquidity risk is the risk that the Group
will encounter difficulty in meeting
the obligations associated with its financial
liabilities that are settled by delivering
cash or another financial asset.
The Group’s approach to managing liquidity
is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions,
without incurring unacceptable losses or risking
damage to the Group’s reputation.
Liquidity risk management is a responsibility
of the Treasury under the supervision
of the Group’s Financial Director. The Group’s
liquidity risk management objectives are as follows:
• Maintaining financial independence: a share
of one creditor in debt portfolio should not
exceed 30%;
• Maintaining financial stability: the Net
Debt / EBITDA ratio should not exceed 5.0
(at some agreements 5.5), where Net Debt
is the total of long-term and short-term
loans and borrowings and lease liabilities
140—141 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
less cash and cash equivalents as presented
in the consolidated financial statements;
• Monitoring of compliance with debt covenants;
• Planning: timely preparation of operating,
investing and financing cash flow forecasts
on rolling basis.
(i) Exposure to liquidity risk
The table below shows liabilities
at 31 December 2022 by their remaining
contractual maturity. The amounts disclosed
in the maturity table are the contractual
undiscounted cash flows, including gross
loan commitments. Such undiscounted cash
flows may differ from the amount included
in the consolidated statement of financial
position because the consolidated statement
of financial position amounts are based
on discounted cash flows. Where the amount
payable is not fixed, the amount disclosed
is determined by reference to the conditions
existing at the end of the reporting period.
Foreign currency payments are translated
using the spot exchange rate at the end
of the reporting period.
31 December 2022
’000 RUB Carrying
amount
Contractual
cash flows
Demand and less
than 6 months
From 6
to 12 months
From 1
to 5 years
More than
5 years
FINANCIAL LIABILITIES AT AMORTISED COST
Secured bank loans 11,384,387 14,479,556 533,576 1,257,448 12,688,532
Unsecured bonds 17,776,960 21,540,117 2,008,245 5,700,389 13,831,483
Unsecured bank facilities 16,537,548 20,482,625 764,537 3,780,026 15,938,062
Unsecured loans from third parties 2,850 2,894 44 2,850 - -
Lease liabilities 22,544,804 33,037,739 3,747,596 3,559,353 14,094,751 11,636,039
Trade and other payables 26,955,870 26,955,870 26,955,870 - - -
Total future payments, including
future principal and interest
payments
95,202,419 116,498,801 34,009,868 14,300,066 56,552,828 11,636,039
As at 31 December 2022, the Group’s current
liabilities exceeded its current assets
by RUB 6,431,960 thousand (31 December 2021:
RUB 7,622,429 thousand). An excess of current
liabilities over current assets is usual for the retail
industry. The Group uses excess of trade
and other payables over inventory to finance
its operating and investing activities. The Group
has reviewed its cash flow forecasts in the context
of current and projected market conditions,
as well as available undrawn credit facilities
disclosed in Note 24, and is confident that it will
be able to meet its obligations as they fall due.
31 December 2021
’000 RUB Carrying
amount
Contractual
cash flows
Demand and less
than 6 months
From 6
to 12 months
From 1
to 5 years
More than
5 years
FINANCIAL LIABILITIES AT AMORTISED COST
Secured bank loans 12,856,141 16,689,291 1,029,019 1,120,722 12,677,323 1,862,227
Unsecured bonds 12,982,154 14,587,568 3,449,979 386,904 10,750,685 -
Unsecured bank facilities 10,985,897 12,689,941 673,762 1,162,315 10,853,864 -
Unsecured loans from related
parties
1,139,016 1,146,213 1,146,213 - - -
Unsecured loans from third parties 2,850 2,891 41 2,850 - -
Lease liabilities 24,063,037 34,892,651 3,425,963 3,408,019 14,897,149 13,161,520
Trade and other payables 27,299,937 27,299,937 27,299,937 - - -
Total future payments, including
future principal and interest
payments
89,329,032 107,308,492 37,024,914 6,080,810 49,179,021 15,023,747
(d) Market risk
Market risk is the risk that changes in market
prices, such as foreign exchange rates, interest
rates and equity prices will affect the Group’s
income or the value of its holdings of financial
instruments. The objective of market risk
management is to manage and control market risk
exposures within acceptable parameters, while
optimising the return. Management sets limits
on the value of risk that may be accepted. However,
the use of this approach does not prevent losses
outside of these limits in the event of more
significant market movements.
(i) Currency risk
The Group holds its business in the Russian
Federation and mainly collects receivables
nominated in Russian Roubles. However, financial
assets and liabilities of the Group are also
denominated in other currencies, primarily
US Dollar, Euro.
Thus, the Group is exposed to currency risk,
which may materially influence the financial
position and financial results of the Group
through the change in carrying value of financial
assets and liabilities and amounts on foreign
exchange rate gains or losses. The Group ensures
that its exposure is kept to an acceptable level
by keeping the proportion of financial assets
and liabilities in foreign currencies to total financial
liabilities at an acceptable level. From time to time
the Group converts assets and liabilities from one
currency to another.
Exposure to currency risk
The Group’s exposure to currency risk in relation
to the USD, the major foreign currency
for the Group’s Russian subsidiaries, was as follows
based on notional amounts:
’000 RUB 31 December 2022 31 December 2021
Trade and other receivables 1,754 1,320
Cash and cash equivalents 28,950 29,101
Lease liabilities - (324,892)
Trade and other payables (279,002) (389,016)
Total (248,298) (683,487)
The Group’s exposure to currency risk in relation to the EUR was as follows based on notional amounts:
’000 RUB 31 December 2022 31 December 2021
Trade and other receivables 1 1,636
Cash and cash equivalents 2 288
Lease liabilities (1,459,682) (2,142,710)
Trade and other payables (102,224) (233,153)
Total (1,561,903) (2,373,939)
Sensitivity analysis
A 20% weakening/strengthening of the RUB
against the USD at 31 December 2022 would have
decreased/increased equity and profit or loss
by RUB 49,660 thousand (31 December 2021: 20%
weakening/strengthening of the RUB against
the USD would have decreased/increased equity
and profit or loss by RUB 136,697 thousand).
A 20% weakening/strengthening of the RUB
against the EUR at 31 December 2022 would have
decreased/increased equity and profit or loss
by RUB 312,381 thousand (31 December 2021: 20%
weakening/strengthening of the RUB against
the EUR would have decreased/increased equity
and profit or loss by RUB 474,788 thousand).
142—143 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
This analysis was performed only for the foreign
currency denominated monetary balances
in the consolidated statement of financial position
related to the Group’s entities whose functional
currency is the RUB and is based on foreign
currency exchange rate variances that the Group
considered to be reasonably possible at the end
of the reporting period. The analysis assumes that
all other variables, in particular interest rates,
remain constant.
(ii) Interest rate risk
The Group is exposed to the effects of fluctuations
in the prevailing levels of market interest rates
on its financial position and cash flows.
Profile
At the reporting date the interest rate profile
of the Group’s interest-bearing financial
instruments at their carrying amounts was:
’000 RUB 31 December 2022 31 December 2021
FIXED RATE INSTRUMENTS
Cash and cash equivalents 11,053,679 8,894,506
Loans and borrowings (38,849,812) (37,966,058)
Lease liabilities (22,544,804) (24,063,037)
VARIABLE RATE INSTRUMENTS
Loans and borrowings (6,851,933) -
Cash flow sensitivity analysis for variable rate instruments
A change of 500 basis points in interest rates at the reporting date would have increased / (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables,
in particular foreign currency rates, remain constant.
’000 RUB Profit or loss Equity
500 bp increase 500 bp decrease 500 bp increase 500 bp decrease
31 DECEMBER 2022
Variable rate instruments (342,597) 342,597 - -
Cash flow sensitivity (net) 342,597 (342,597) - -
(e) Offsetting of financial assets
and financial liabilities
The Group may enter into sales and purchase
agreements with the same counterparty
in the normal course of business. The related
amounts receivable and payable do not always
meet the criteria for offsetting in the consolidated
statement of financial position. This is because,
while generally there is an intention to settle on net
basis, the Group may not have any currently legally
enforceable right to offset recognised amounts,
because the right to offset may be enforceable only
on the occurrence of future events. In particular,
in accordance with the Russian civil law an obligation
can be settled by offsetting against a similar claim
if it is due, has no maturity or is payable on demand,
unless otherwise stated in the agreement.
The following table sets out the carrying amounts of recognised financial instruments that are subject
to the above agreements.
’000 RUB Trade and other receivables Trade and other payables
31 DECEMBER 2022
Gross amounts before offsetting 4,528,600 28,910,113
Amounts offset (1,954,243) (1,954,243)
Net amounts presented in the consolidated statement
of financial position
2,574,357 26,955,870
Amounts related to recognised financial instruments that do
not meet some or all of the offsetting criteria
(1,148,843) (1,148,843)
Net amount 1,425,514 25,807,027
’000 RUB Trade and other receivables Trade and other payables
31 DECEMBER 2021
Gross amounts before offsetting 4,319,091 28,881,804
Amounts offset (1,581,867) (1,581,867)
Net amounts presented in the consolidated statement
of financial position
2,737,224 27,299,937
Amounts related to recognised financial instruments that do
not meet some or all of the offsetting criteria
(1,728,810) (1,728,810)
Net amount 1,008,414 25,571,127
The net amounts presented in the consolidated
statement of financial position disclosed above
form part of trade and other receivables
and trade and other payables, respectively. Other
amounts included in these line items do not meet
the criteria for offsetting and are not subject
to the agreements described above.
Amounts offset comprise mainly trade payables
for goods and bonuses receivable from suppliers.
(f) Capital management
The Group’s policy is to maintain a strong
capital base so as to maintain investor, creditor
and market confidence and to sustain future
development of the business. Neither the Company
nor its subsidiaries are subject to externally
imposed capital requirements, except for statutory
requirement in relation to minimum level of share
capital and requirement in respect of positive net
assets of LLC “O’KEY” for external loan agreement;
the Group follows all requirements.
29 Capital commitments
The Group has capital commitments
to acquire property, plant and equipment,
mostly relating to construction of stores,
and intangible assets amounting
to RUB 1,363,338 thousand as at 31 December 2022
(31 December 2021: RUB 586,007 thousand).
The Group has already allocated the necessary
resources in respect of these commitments.
The Group believes that future net income
and funding will be sufficient to cover these
and any similar commitments.
144—145 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
30 Contingencies
(a) Legal proceedings
From time to time and in the normal course
of business, claims against the Group are received.
On the basis of its own estimates and both internal
and external professional advice, the management
is of the opinion that no material losses will
be incurred in respect of claims outstanding.
(b) Tax contingencies
Russian tax legislation which was enacted
or substantively enacted at the end
of the reporting period, is subject to varying
interpretations when being applied
to the transactions and activities of the Group.
Consequently, tax positions taken by management
and the formal documentation supporting
the tax positions may be challenged by tax
authorities. Russian tax administration is gradually
strengthening, including the fact that there
is a higher risk of review of tax transactions
without a clear business purpose or with tax
incompliant counterparties. Fiscal periods remain
open to review by the authorities in respect
of taxes for three calendar years preceding
the year when decisions about the review
was made. Under certain circumstances
reviews may cover longer periods.
Russian transfer pricing (TP) legislation is generally
aligned with the international TP principles
developed by the Organisation for Economic
Cooperation and Development (OECD), although
it has specific features. The TP legislation provides
for the possibility of additional tax assessment
for controlled transactions (transactions between
related parties and certain transactions between
unrelated parties) if such transactions are not
on an arm’s-length basis. The management
has implemented internal controls to comply
with current TP legislation.
Tax liabilities arising from controlled transactions
are determined based on their actual transaction
prices. It is possible, with the evolution
of the interpretation of the TP rules, that such
prices could be challenged. The impact of any such
challenge cannot be reliably estimated.
The Group includes companies incorporated
outside of Russia. The tax liabilities of the Group
are determined on the assumption that these
companies are not subject to Russian profits
tax, because they do not have a permanent
establishment in Russia. This interpretation
of relevant legislation may be challenged.
As Russian tax legislation does not provide
definitive guidance in certain areas, the Group
applies its judgement in interpretations
of such uncertain areas. While management
currently estimates that the tax positions
and interpretations that it has taken can
probably be sustained, there is a possible risk
that an outflow of resources will be required
should such tax positions and interpretations
be challenged by the tax authorities.
The impact of any of the challenges mentioned
above cannot be reliably estimated currently;
however, it may be significant to the financial
position and/or the overall operations
of the Group.
In addition to the above matters, management
estimates that as at 31 December 2022, the Group
has other possible obligations of approximately
1.1% of revenue (31 December 2021: 1.3%
of revenue) from exposure to other than remote
tax risks arising from certain transactions.
These exposures are estimates that result
from uncertainties in interpretation of applicable
legislation and related documentation
requirements. Management will vigorously defend
the Group’s positions and interpretations that
were applied in determining taxes recognised
in these consolidated financial statements if these
are challenged by the authorities.
31 Related party transactions
Parties are generally considered to be related if
the parties are under common control or if one
party has the ability to control the other party
or can exercise significant influence or joint
control over the other party in making financial
and operational decisions. In considering each
possible related party relationship, attention
is directed to the substance of the relationship,
not merely the legal form. Related parties may
enter into transactions which unrelated parties
might not, and transactions between related
parties may not be effected on the same terms,
conditions and amounts as transactions between
unrelated parties.
Related parties of the Group fall into the following categories:
1. The Company’s major indirect shareholders (Note 1);
2. Other related parties under control of the major indirect shareholders;
3. Members of the Board of Directors of the Company and other key management personnel.
(a) Transactions with key management personnel
Key management received the following remuneration during the year, which is included in personnel costs:
’000 RUB 2022 2021
SHORT-TERM EMPLOYEE BENEFITS:
Salaries and short-term bonuses 395,924 449,958
Social security contributions 24,781 16,386
Other short-term payments 58,968 20,000
LONG-TERM EMPLOYEE BENEFITS:
Long-term service bonus - 170,497
Total 479,672 656,841
In addition, members of the Company’s Board of Directors received remuneration in the amount
of RUB 67,051 thousand for the year ended 31 December 2022 (2021: RUB 62,264 thousand) which
is included in legal and professional expenses.
(b) Transactions with other related parties
(i) Revenue
’000 RUB Income Receivables
2022 2021 31 December 2022 31 December 2021
Sale of services 1,760 1,751 473 2,871
Total 1,760 1,751 473 2,871
All outstanding balances with other related parties are to be settled in cash within six months
of the reporting date. None of the balances are secured or impaired.
(ii) Expenses
’000 RUB Expenses
2022 2021
Variable lease expenses and expenses relating to short-term and low value leases 33,265 91,219
Interest expense on lease liabilities 127,593 61,423
Interest expense on loans and borrowings 56,100 84,239
Other services received 11,375 56,875
Total 228,333 293,756
(iii) Leases with other related parties
Lease liabilities under related party arrangements were as follows:
’000 RUB 31 December 2022 31 December 2021
Lease liabilities due to other related parties, including: 1,651,238 514,100
Current lease liabilities 444,160 468,815
Non-current lease liabilities 1,207,078 45,285
146—147 Annual Report Overview Strategic Report Operational Review Financial Review Corporate Governace Financial
Statements
2022
Delivering
great customer
service
Terms of the leases with other related parties are such that the Group pays rentals which include
the reimbursement of all operating expenses related to the hypermarkets leased and nearby leased areas
and a certain percentage of the Group’s retail revenue from the operation of these hypermarkets.
(iv) Loans and borrowings
’000 RUB 31 December 2022 31 December 2021
Loans and borrowings - 1,139,016
The loans from other related parties are denominated in USD, bear interest at 12% per annum have been
fully paid on 31 August 2022. In 2022 accrued and fully paid interest amounted to RUB 56,100 thousand.
32 Fair value disclosures
Fair value measurements are analysed
and categorised by level in the fair value hierarchy
as follows:
1. Level 1 are measurements at quoted prices
(unadjusted) in active markets for identical
assets or liabilities;
2. Level 2 measurements are valuations techniques
with all material inputs observable for the asset
or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices); and
3. Level 3 measurements are valuations not
based on observable market data (that is,
unobservable inputs).
Management applies judgement in categorising
financial instruments using the fair value hierarchy.
If a fair value measurement uses observable
inputs that require significant adjustment,
that measurement is a Level 3 measurement.
The significance of a valuation input is assessed
against the fair value measurement in its entirety.
(a) Recurring fair value measurements
Recurring fair value measurements are those
that the accounting standards require or permit
in the statement of financial position at the end
of each reporting period.
Investment property. Fair value of the investment
property is updated by the Group annually
on 31 December applying the income approach
and market approach. Refer to Note 13.
(b) Non-recurring fair
value measurements
As at 31 December 2022, recoverable amount
of some of the Group’s non-current assets tested
for impairment was determined on the basis
of the fair value less costs of disposals approach.
Refer to Note 14.
(c) Assets and liabilities not
measured at fair value but
for which fair value is disclosed
Fair value was determined by the Group for initial
recognition of financial assets and liabilities which
are subsequently measured at amortised cost.
Fair value of the Group’s financial assets
and liabilities measured at amortised cost
approximates their carrying amounts. Fair value
of the Group’s bonds listed on Moscow exchange
was determined based on active market quotations
(Level 1 fair value). Fair value of the Group’s other
financial assets and liabilities at amortised cost
belongs to Level 2 measurements in the fair value
hierarchy.
There were no transfers between the levels
of the fair value hierarchy or changes in valuation
techniques for fair value measurements
during 2022 and 2021.
33 Significant accounting policies
The principal accounting policies set out below have been consistently applied to all the periods
presented in these consolidated financial statements and have been applied consistently by Group
entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are those investees, that the Group
controls because the Group (i) has power to direct
the 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 the investor’s returns. The financial statements
of subsidiaries are included in the consolidated
financial statements from the date that control
commences until the date that control ceases.
The accounting policies of subsidiaries have
been changed when necessary to align them
with the policies adopted by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions,
and any unrealised gains arising from intra-
group transactions, are eliminated in preparing
the consolidated financial statements. Unrealised
losses are also eliminated unless the cost cannot
be recovered.
Loans between Group entities and related foreign
exchange gains or losses are eliminated upon
consolidation. However, where the loan is between
Group entities that have different functional
currencies, the foreign exchange gain or loss
cannot be eliminated in full and is recognised
in the consolidated profit or loss, unless the loan
is not expected to be settled in the foreseeable
future and thus forms part of the net investment
in foreign operation. In such a case, the foreign
exchange gain or loss is recognised in other
comprehensive income.
(b) Foreign currency
(i) Foreign currency transactions and balances
Monetary assets and liabilities are translated
into each entity’s functional currency at the official
exchange rate of the Central Bank of the Russian
Federation (“CBRF”) at the respective end
of the reporting period. Foreign exchange
gains and losses resulting from the settlement
of the transactions and from the translation
of monetary assets and liabilities into each entity’s
functional currency at year-end official exchange
rates of the CBRF including foreign exchange
gains and losses on borrowings and cash and cash
equivalents, as well as any other foreign exchange
gains and losses are recognised in profit or loss
as a separate line item.
Translation at year-end rates does not apply
to non-monetary items that are measured
at historical cost. Non-monetary items measured
at fair value in a foreign currency, including
equity investments, are translated using
the exchange rates at the date when the fair
value was determined. Effects of exchange rate
changes on non-monetary items measured at fair
value in a foreign currency are recorded as part
of the fair value gain or loss.
(ii) Foreign operations
The assets and liabilities of foreign operations
are translated to RUB at the exchange rates
at the reporting date. The income and expenses
of foreign operations are translated
to RUB at exchange rates at the dates