OREANDA-NEWS. September 20, 2011. DIXY Group (RTS, MICEX: DIXY) - one of Russia's leading retailers of foods and everyday products - announces consolidated unaudited IFRS results for the first half of 2011.

Main Events of the First Half of 2011

1)         In June 2011 DIXY Group acquired 100% of shares of Victoria Group (please see http://www.dixy.ru/uploads/2011-06-20 DIXY Release ENG.pdf). As a result of this transaction, the DIXY Group increased turnover by more than 50% and became the third largest among Russian national food retail operators by revenue, selling area and number of stores. Acquisition of Victoria retail chain significantly strengthened the DIXY Group's competitive positions in the two key regional markets: Russia's Central and Northwestern Federal Districts and allowed to gain access to new regional markets in Kaliningrad and Tula regions. Due to a significant increase of scale in the trade operations, DIXY Group will be able to significantly improve purchasing terms and to realize the existing potential with regard to optimization of logistics and transportation costs at the united Company.

2)         DIXY Group started to implement new marketing strategy encompassing full marketing operation flow including, pricing, assortment management, loyalty programs, standards of service and communications, external and internal design of stores. In the first half of 2011 the Company started a redesign of the DIXY chain's brand identity, and on 1 June 2011 launched a nationwide advertising campaign aimed to develop a more striking, modern, and memorable company brand and clearer positioning (please see http://www.dixy.ru/uploads/2011-05- 31 Dixy Press-Release ENG.pdf ).

3)         DIXY Group shares were included into the RTS Index (RTSI) and into the MICEX Consumer Goods and Services Index (MICEX CGS) based on capitalization and liquidity criteria.

Key Results of the First Half of 2011

During the first half of 2011, the combined Company opened 94 new DIXY stores, including 93 neighborhood stores (DIXY and Kvartal) and 1 supermarket Victoria. All new stores were opened in the Central, North-Western and Urals Federal Districts through long-term lease agreements, except for one acquired store (DIXY format in Yaroslavl).

In the first half of 2011 the combined Company demonstrated positive revenue dynamics year- on-year (revenue growth of 27.6% according to the DIXY Group consolidated financial statements), as well as a significant increase in gross margin, EBITDA margin and net profit margin over the same period last year.

Positive revenue dynamics for the combined Company is a result of the increase of selling space of the DIXY Group on the pro-forma basis (including Victoria Group results from the beginning of the year) by 10% (including 11% growth of selling space of the DIXY Group standalone and 6% increase of the Victoria Group standalone selling space) and like-for-like (LFL) sales growth over the same period last year. During the first half of 2011, DIXY Group LFL sales grew by 7.8% in RUR (7.6% for the first quarter, and 8.0% for the second quarter of 2011).

Victoria Group LFL sales during the first half of 2011 grew by 6.1% in RUR (5.4% for the first quarter, and 6.9% for the second quarter of 2011). You can find details at http://www.dixy.ru/uploads/Release DIXY 7mo sales ENG v12.pdf

Significant increase in gross margin and EBITDA margin for the first half of 2011 is a result of improved pricing and flexible front margin management started from the beginning of 2011, as well as a positive effect of the efforts aimed at decreasing cost of sales and focus on operational costs management. Sales per square meter of selling space on the combined Company level have increased by 11% over the same period last year.

In the first half of 2011 DIXY Group continued to implement initiatives launched by the new marketing team that joined DIXY in autumn of 2010. These initiatives include optimization of assortment and floor space, improvement of external and internal design of stores and their clearer positioning, as well as improvement of customer service and marketing communications. These efforts have led to an increased number of middle class consumers visiting DIXY Group stores and to a progressive acceleration of sales growth over the same period last year throughout the first half of 2011.

The efficiency of the promotional activities targeting sales growth was made possible also by means of increased levels of centralization of deliveries (rate of deliveries through own distribution centers) and logistical service (success of delivery rate). DIXY format centralization rate has reached 84% in the second quarter of 2011, and general logistics service level has reached 88%.

DIXY Group Financial Results for the First Half of 2011

DIXY Group unaudited consolidated IFRS results for the first half of 2011 include Victoria Group IFRS results, beginning from the date of acquisition on 15 June 2011. This type of reporting of consolidated financial results for DIXY Group will be used in all future releases. However, in order to facilitate understanding of the combined Company business, we present in the current release several additional types of IFRS financial results reporting.

Current release discloses in detail the following:

1.         DIXY Group unaudited standalone IFRS financial results, not including Victoria Group results

We also present for reference:

2.         Victoria Group unaudited standalone IFRS financial results

Financial results and their period-on-period comparison are presented for reference, since Victoria Group results cannot be compared period-on-period directly, since Victoria Group results for the first half of 2011 and second quarter of 2010 do not include results of Tula region (retail chain "Semeynaya Kopilka" was acquired on 18.08.2010), reported in 2011.

3.         DIXY Group unaudited consolidated financial results, including Victoria Group results from the date of acquisition on 15 June 2011

Financial results and their period-on-period comparison are presented for reference, since

1)         Victoria Group results are included into DIXY Group results only from 15 June 2011 (acquisition date) and do not have a significant effect on DIXY Group financial results for the first half of 2011,

2)         consolidated results are preliminary because some items, such as goodwill, NMA, PPE, deferred taxes, favorable/unfavorable lease obligations are based on a preliminary auditor estimates, and can be changed later upon finalization of the valuation. All changes will be reflected in the audited IFRS financial statements for the full year of 2011.

3)         Victoria Group results, included into DIXY Group results, cannot be compared directly period-on-period since Victoria Group results for the first half of 2011 and second quarter of 2010 do not include results of Tula region (retail chain "Semeynaya Kopilka" was acquired on 18.08.2010) - these results are reported in 2011.

4.         DIXY Group unaudited pro-forma interim financial statements, including Victoria results from the beginning of the year

Corresponding three reporting forms are presented for reference in the Appendix to this release. Pro-forma financial statements differ from a simple sum of financial results of DIXY Group and Victoria Group in particular because of a change in reporting policy regarding recognition of sales through agent agreements in Kaliningrad region (please refer to Page 6 of the Notes to the Pro-forma Interim Financial Statements that can be found at the DIXY site - please see "Investor Relations", "IFRS Statements" at http://www.dixy.ru/en ir-ifrs/

You can find unaudited IFRS financial statements (three forms) in English in the Appendix to this release. Unaudited IFRS financial statements with notes can be found at the DIXY site - please see "Investor Relations", "IFRS Statements" at http://www.dixy.ru/en ir-ifrs/

1. DIXY GROUP UNAUDITED STANDALONE FINANCIAL RESULTS, NOT INCLUDING VICTORIA GROUP RESULTS

First Half of 2011 Year-on-year

Revenue in RUR increased by 21.8% (28.0% in USD) to RUR 37.4 bln. (USD 1.3 bln).

Gross Profit in RUR increased by 29.3% (35.8% in USD) to RUR 9.4 bln. (USD 328 mln). Gross Margin increased by 140 bp year-on-year to 25.1% of sales compared to 23.7% for the same period of 2010.

EBITDA in RUR increased by 39.4% (46.4% in USD) to RUR 2.5 bln. (USD 86 mln). EBITDA margin increased by 80 bp year-on-year to the level of 6.6% from 5.8% in the same period of 2010.

Net Profit in RUR increased by 340.3% (362.5% in USD) year-on-year and amounted to RUR 555 mln. (USD 19 mln). Net Margin increased by 110 bp year-on-year to 1.5% of sales from 0.4% of sales over the same period last year.

Net Cash from Operating Activities in RUR increased by 63.2% (71.4% in USD) over the same period of 2010 to RUR 1.3 bln. (USD 46 mln).

Second Quarter of 2011 Year-on-year

Revenue in RUR increased by 23.3% (32.4% in USD) to RUR 19.4 bln. (USD 688 mln).

Gross Profit in RUR increased by 33.4% (43.6% in USD) to RUR 5.1 bln. (USD 181 mln). Gross Margin increased by 200 bp year-on-year to 26.3% of sales compared to 34.2% for the same period of 2010.

EBITDA in RUR increased by 48.5% (59.1% in USD) to RUR 1.5 bln. (USD 52 mln). EBITDA margin increased by 130 bp year-on-year to the level of 7.5% from 6.3% in the same period of 2010.

Net Profit in RUR amounted to RUR 390 mln. (USD 14 mln) for a Net Margin of 1.5% of sales compared to a net loss for the same period of 2010.

Net Cash from Operating Activities in RUR increased by 25.1% (35.1% in USD) over the same period of 2010 to RUR 627 mln. (USD 22 mln).