Dear colleagues, shareholders, investors and partners,
It was an honor for me to take over the helm of M.Video–Eldorado Group at one of the key moments in its history. The events of the past year have tested the strength of retail as a whole and set in motion processes that will result in a profound transformation of our industry. Amid the COVID-19 pandemic, we are facing new challenges: health risks, explosive demand for online shopping and ultrafast delivery, and supply chain disruptions. Under these conditions, the Group’s competitive advantages—our flexible hybrid business model, innovative leadership, efficient fulfillment infrastructure and a committed team of employees—have shone especially bright. As a result, we have overcome challenges, achieved excellent results and set the stage for continued profitable growth.

2020 results confirmed the resiliency of our hybrid business model and its focus on technology

The Group’s GMV increased 15% from 2019 to RUB 505 billion, and our number of active, identified customers increased to 19 million. At the same time, we enjoyed strong financial results: adjusted EBITDA grew by 7% to RUB 28 billion, and our adjusted EBITDA margin was 6.8%, which remains one of the best results among global retailers in the consumer electronics segment, especially in light of the extraordinary business conditions that we experienced in 2020.

However, the year’s defining outcome was undoubtedly the accelerated transformation of our business into a leading e-commerce platform. The Group’s total online sales more than doubled to a record RUB 300 billion, accounting for 60% of GMV, up from 33% in 2019. The mobile platform’s turnover grew 2.5x to RUB 154 billion, and the number of installations of the M.Video and Eldorado mobile customer apps nearly reached 7.8 million, a 5.5x increase from the previous year. The explosive growth in our online business was reflected in the jump in the Company’s market share in the online segment of the Russian consumer electronics market to 33%, up from 20% in 2019. At the same time, the size of total online turnover put M.Video– Eldorado among some of the largest players in Russian e-commerce—not only in our segment but also in Russian retail as a whole.

These results are a testament to our focused efforts to combine technology with the expansion of our retail network, which today consists of more than 1,000 stores throughout the country and a unique logistics infrastructure with more than 1 million square meters in total fulfillment area. This business model, which we call hybrid, enables us to adapt quickly to changing market conditions and to maximize our competitive advantages. We successfully launched new services such as remote video consultations, introduced flexible modes of operations at our stores and considerably strengthened our last-mile capabilities thanks to new delivery and ordering partnerships.

OneRetail’s mobile technologies are the foundation of our sustainable growth in new market conditions

Our achievements in 2020 created a strong foundation for the further sustainable growth of our business, and two factors that we expect to drive this growth are the dynamics of our market and the rapid development of the Group’s business.

The Russian market for household appliances and electronics remains one of the most attractive and most promising in the world. According to GfK estimates, it may grow by about 30% in the next three years—from its current RUB 2 trillion to RUB 2.7 trillion. The main driver of this growth, as expected, will be e-commerce, but at the same time, both traditional and online shoppers will continue to use the possibilities offered by brick-and-mortar stores as pickup points or to test out products (even during the pandemic, more than 90% of M.Video–Eldorado customers purchasing appliances and electronics are interacting with our stores in one way or another). This means that our hybrid business model will continue to create a competitive advantage for us in terms of both customer service and business efficiency.

The smartphone is becoming an increasingly important tool for making purchases, which means it is therefore a key instrument in the competition for customers. In developing the Group as a digital company, we rely on our OneRetail technology platform, which includes a customer mobile app and a sales consultant mobile app, as well as the M.Video and Eldorado websites.

OneRetail technologies have solved the main problem facing retail companies: identifying customers. Today e-com players are able to identify customers through mobile apps or web-based personal accounts. OneRetail enables us to do this across all sales channels, including in stores through the consultant app, which has access to the same data as the customer app. This enables a seamless customer experience in a single retail space regardless of the sales channel, and it allows us to create a truly personalized shopping experience.

Our Hacking Retail strategy is the pathway to doubling our business

We believe that further expansion of the OneRetail platform with a focus on mobile technologies is the key to gaining unquestioned leadership in the market and to creating what is known as a destination brand. This vision

is reflected in our new medium-term strategy, which we call Hacking Retail or Retail Transformation. As part of the strategy, we have determined the Group’s key goals: doubling our business to RUB 1 trillion in GMV by 2025,

maintaining an EBITDA margin in the range of 5%–7% and paying out dividends at the level of at least 100% of IAS 17–based net profit while keeping debt at a comfortable level.

First of all, we aim to create a user-friendly technological environment for customers in which they can meet any need related to household appliances and electronics. To do this, we are planning a major expansion of our assortment from 75 thousand SKUs up to 250 thousand SKUs in the medium term. We are going to accomplish this by using a marketplace model and also by increasing the share of innovative and premium products in sales and expanding our range of available services. We can not only offer customers a wide range of products but also make the most of our advantages by

providing customers with expert support—a factor that plays a special role in the consumer electronics market. Last year, we made 5 million deliveries and completed almost 500 thousand installations of appliances and equipment in customers’ homes. Our engineers and consultants are trusted experts, and we intend to use this to strengthen our connection with customers and entice them to come back to us again and again.

Second, we intend to do everything we can to ensure that the majority of our customers shop exclusively on the OneRetail platform. Why? Because these clients are the most loyal and the most active part of our customer base. They get the most personalized, most innovative service available; as a result, they are going to use our services more often and in larger volumes.

In addition to making purchases more frequently, OneRetail customers also have an average check that is 46% higher than that of traditional customers. Thus, an increase in the share of OneRetail business in our GMV will mean that we are reaching a new level of loyalty, sustainability and monetization of our entire customer base.

At the end of 2020, our OneRetail customers accounted for 42% of the total base of our active identified customers. Our strategic goal is to increase this figure to at least 85%. To do this, we have to provide customers with an opportunity to use the full range of our services on a mobile platform—from expert advice to purchase financing and delivery management.

We expect the rollout of the OneRetail platform at Eldorado to be one of our most important growth drivers. At the same time, we plan to continue to work on improving the personalization of the service and our price offer based on artificial intelligence technologies and the introduction of innovations that simplify the shopping process—for example, a single shopping cart and new payment and credit options, among others.

Stores as part of our logistics infrastructure

Today, at a time when consumers increasingly want to receive their purchases “here and now,” it is critical for retailers to fight to ensure that deliveries are fast and accurate. For us, a decisive advantage in this struggle is our advanced logistics infrastructure, which includes our store network, where about 46% of the Group’s inventory is concentrated. As of the end of 2020, the Group covered 60% of the Russian population and 85% of orders with its 24-hour delivery. Orders that account for 34% of our GMV are available for collection within 15 minutes. Although these results are unsurpassed among Russian retailers, we are going to continue to improve them. As part of our strategy, we have set a goal of increasing the share of orders available 15 minutes after purchase to over 50% of GMV. To achieve this goal, we are going to expand our logistics network and ramp up the opening of new stores that are more digitazed, more flexible and more convenient for our customers. In the medium term, we want to open about 500 new stores and enter 100 new towns, expanding the option of delivery within 24 hours to cover 70% of the Russian population. At the same time, we plan to further develop our lastmile capacities, expanding the delivery options available to customers and our network of partner pickup points.

We believe that the OneRetail platform combined with well-developed infrastructure is the very weapon that will enable us to win the battle for customers and hack traditional retail, blurring the boundaries between online and offline sales channels. OneRetail creates value not only for customers but also for our vendors and suppliers. In an environment that has become increasingly competitive for consumer attention, it is critical for vendors to be able to present their products to customers in the best way possible. And in this, nothing can help them more than our platform, which brings together loyal customers and a wide range of expert customer support tools.

Developing as a sustainable technology company

The accomplishment of our strategic objectives is impossible without continuing the in-depth digitalization of customer service and all of the Company’s business processes. In this regard, we are working hard to carry out a large-scale digital transformation program, building up the Group’s competence in software development and analysis, rebuilding our IT architecture and promoting technological thinking at all levels of the management structure.

Sustainability principles are also an important element of our strategy. Last year, we formulated a sustainable development strategy for the Group and are now moving from managing ESG tasks as a large number of discrete projects to implementing a single ESG program integrated into all aspects of the Group’s operations. During the year, we analyzed the key stages of value creation for all Group stakeholders and focused on three areas in which we can have the greatest impact on the world around us: the Planet, People and Communities, and Contomers and technologies. For each of these areas, we have formulated a number of goals; to achieve these goals, we are carrying out specific projects that you can learn about in detail in this report.

The combination of a clear strategy and technological thinking with a constant drive for the sustainability of our business gives us every opportunity to further strengthen our leadership in Russian retail based on our competitive advantages and profound expertise in the consumer electronics retail market. At the same time, we intend to share the Company’s success with our shareholders by paying out at least 100% of the Group’s net profit in the form of dividends, while increasing the size of our business and improving our financial results.

As such, I would like to note that in March 2021 Safmar Group (the Company’s majority shareholder) took an important step towards making our shares an even more attractive investment proposition: it successfully placed 13.5% of PJSC shares totaling RUB 17.6 billion via an SPO. The offering, which attracted significant interest from both international and Russian investors, increased share liquidity and their availability to a wide range of investors as we continue to implement initiatives to create shareholder value.

Without doubt, our successes in 2020 and the further development of M.Video–Eldorado would have been impossible without the involvement and hard work of our employees and partners. I would like to thank our entire team, our vendors and merchants, as well as the Group’s shareholders for their unsurpassed professionalism, trust and commitment to doing everything for the achievement of our shared success