ANNUAL REPORTOF ALLEGRO.EU S.A. GROUP
for the year ended 31 December 2020

TABLE OF CONTENTSMANAGEMENT REPORT6NOTES TO THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

224

I.

GENERAL INFORMATION

7

8.

Segment information

224

1.

Definitions

8

2.

Introduction

3.

9.

Revenues from contracts with customers

228

10.

Financial income and financial costs

10

238

11.

Income tax

239

Forward-looking Statements

11

12.

Earnings per share

242

4.

Presentation of Financial Information

12

NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

244

II.

BUSINESS REPORT

17

13.

Intangible assets

244

1.

Selected consolidated financial and operational highlights

18

14.

Property, plant and equipment

248

2.

Management’s discussion and analysis of financial condition and result of operations

20

15.

Loans granted

250

16.

Inventory

251

3.

Summary of key developments

41

17.

Trade and other receivables

252

Prepayments

253

4.

Remuneration Report

45

18.

5.

Expectations For The Group in FY 2021 and the Medium Term

59

19.

Consumer loans

255

6.

Recent Trading

61

20.

Cash and cash equivalents

258

21.

Borrowings

259

III.

NON-FINANCIAL REPORT

63

22.

Leases262

1.

Business Model, Operations, and Corporate Governance

64

23.

Deferred tax

266

2.

Risk Management System, Risk Factors, and Regulatory Matters

88

24.

Liabilities to employees

270

3.

Approach to Corporate, Environment, and Social Responsibility

143

25.

Trade and other liabilities

274

26.

Written put option liability

FINANCIAL REPORT

188

275

27.

Financial assets and financial liabilities

277

IV.

FINANCIAL STATEMENTS

189

NOTE TO THE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

280

1.

Responsibility Statement

190

28.

Note to the consolidated statements of changes in equity

280

2.

Audit Report

192

NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

286

3.

Consolidated Financial Statements of Allegro.eu S.A. Group

198

29.

286

Consolidated statement of comprehensive income

198

RISKS

290

Consolidated statement of financial position

200

30.

Critical estimates and judgments

290

Consolidated statement of changes in equity

202

31.

Financial risk management

295

Consolidated statement of cash flows

204

32.

Capital management

305

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

206

UNRECOGNISED ITEMS

306

1.

206

33.

Contingent liabilities

306

Assets pledged as security

308

General information

Cash flow information

2.

Basis of preparation

207

34.

3.

Summary of significant accounting policies

208

35.

Commitments

308

4.

Composition of the board of directors

216

36.

Events occurring after the reporting year

309

5.

Business combinations

218

OTHER INFORMATION

310

6.

Group structure

222

37.

Related party transactions

310

7.

Approval of the consolidated financial statements

223

38.

Employment

311

39.

Emoluments of the management

312

40.

Audit fee

315

ACCELERATING THE RETAIL FLYWHEEL

Dear
Shareholders,

It is with great pleasure that I write this first letteras the CEO of Allegro as a listed company.
2020 presented unprecedented challenges for allof us, with the most acute global crisis in many
decades disrupting our lives and business operations from top to bottom. When the pandemic firsthit, our first priority was of course the safety of ouremployees and their families, as well as the safetyof our customers and merchants. I’m extremely
proud of our team for adapting so quickly to the
new reality and modifying our working practices tocontinue our – now even more – important job ofdelivering everyday essentials and (much needed)
entertainment to customers. With offline stores
suddenly closed in the spring, our customers reliedon Allegro more than ever to supply them with thesegoods, delivered in the safest possible way. Given the
many challenges in our society and in recognition of
the relatively fortunate position in which we foundourselves, we launched numerous initiatives to givesomething back, including considerable donations
to the local healthcare system, countless hoursof volunteering, free SMART! subscriptions for all
customers during the first lock-down, and support
packages for our merchants when they were mostneeded. Aside from the many hours committed, thetotal monetary value of Allegro’s contribution so
far to fight COVID-19 amounts to PLN 490m – all ofthese significant and valuable contributions would
not have been possible without the hard work andpassion of the employees of Allegro, of whom I’mimmensely proud.

4

From a business perspective, the development of
e-commerce accelerated significantly during 2020,
which acted as a material tailwind to our growth.
Every month, more new customers shop with us
and the value of their shopping on a per-customer
basis continues to grow: the number of active buyers
grew by 14% YoY to 13 million today. On average,
they spent nearly PLN 2,700 in 2020, up by 36%
compared to 2019. Customers can now choose
from over 200m offers at low prices from over 120k
sellers – often delivered the next day and, in the
majority of cases, for free, mainly thanks to thebenefits of the SMART! program, the popularityof which continues to grow and outperform our
expectations. Customers clearly enjoy shoppingwith us, as evidenced by our market-leading NPS
score of over 70, which ranks us among the mostpopular consumer brands globally.
Importantly, continually delighting our customers
with constant improvements and innovations acrossour business has allowed us to outperform ourfinancial expectations. In 2020, GMV – the valueof products sold on our platform, which is the key
figure for any retail company – grew by 54% YoY andreached a total of PLN 35.1bn.

Letter from the CEO

While we look back at our financial results in 2020
with some satisfaction, we are not resting on ourlaurels. We are maintaining a continued focus on
driving resilient growth over the long term, supported by significant investments in our platform.
E-commerce in Poland, and in the region, is still lessthan 12% of total retail sales. This is materially below
many countries in Western Europe and across theworld. We are still early in our growth curve, and thispresents a fantastic opportunity for us to continue
to deliver strong performance for our investors. We
want to be at the forefront of closing this gap byfocusing on attracting even more consumers andoffering them an ever improving experience at eachstep along the shopping path. And we can only dothis with an equally relentless focus on attracting
more sellers to offer even more choice to these
consumers at the most attractive prices. All thewhile, technology remains the backbone of all ourefforts, and we continue to leverage R&D investments to scale our operations, notably through AI
and machine learning.
On top of our core marketplace, 2021 will see us
scale up new products like Allegro Pay and Allegro
Biznes. Increasingly, physical infrastructure will
form a second backbone to our operations, andwe will make the necessary investments to scale up
new logistics and fulfilment services for our sellers,
which will in turn improve the delivery experiencefor our customers. We will also explore international
opportunities where we think we can add value as
we have done in Poland. Against the backdrop of
intensifying competition, we are highly confident
that the return on these investments will make ourbusiness sustainably stronger.

To deliver on our plans, we will continue to invest in
our team across Poland, attracting top talent fromwithin the country and beyond. We seek to remainamong the most attractive employers in Poland,
offering development opportunities in the mostinnovative area of the economy, as well as a diverse
workplace and a dynamic meritocracy where thebest and brightest can fulfil their potential and havea meaningful impact.
Last but not least, last October we debuted on the
Warsaw Stock Exchange and made our mark as thelargest ever IPO in Poland and last year’s largest
Tech IPO in Europe. This allowed for all our amazing
employees at the time of the IPO to become shareholders and gave them the opportunity to share in
our future success. Thank you for your confidence
and for joining us on this journey!
We truly value the trust you have placed in us, andon behalf of the entire Allegro team I would like towish you a healthy and fulfilling year.

François Nuyts

On top of serving customers, merchants, employees and shareholders, we also want our long-term
growth to be sustainable and responsible to thewider society. We have updated our CSR & Sustainability Strategy for 2020-2023, targeting reductions inenergy consumption and carbon dioxide emissions
related to the delivery of our orders. As an industry
leader, Allegro joined the UN Global Compact, theworld’s largest corporate sustainability initiative andactively engages in the regulatory debates in Poland
and in the EU to help create a legal framework that
supports consumers, SMEs and European tech.
Allegro holds the Chairperson’s position in the European Tech Alliance, which represents the interestsof European companies in Brussels.

5

I.
Generalinformation

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the year ended 31 December 2020

1.

Definitions
Unless otherwise required by the context, the following definitions shall apply throughout the document:“GMV”

Gross merchandise value.

“Group”

Allegro.eu and its consolidated subsidiaries.

“GUS”

Statistics Poland (Główny Urząd Statystyczny).

“IAS”

International Accounting Standards as adopted by the EU.

“IFRS”

International Financial Reporting Standards, as adopted by the EU.

“IFRS 15”International Financial Reporting Standard 15 ‘Revenue from contracts with customers’.

“IPO”

The initial public offering of the shares of the Company on the WSE.

“IT”

Information Technology.

“Key Managers”

Individuals, in addition to the Board of Directors, considered relevant to establishing that
the Group has the appropriate expertise for the management of the business“Locker”

Automated Parcel Machine.

“Luxembourg”

The Grand Duchy of Luxembourg.

“MBM”

Management Board Member of a major operating company: Allegro.pl or Ceneo.pl“NPS”

Net promoter score.

“OC&C”

OC&C Strategy Consultants SP.

“OSA”

Official Allegro Store (Oficjalny Sklep Allegro), Allegro.pl 1P activity“Permira”

Depending on the context, any of, or collectively, Permira Holdings Limited, Permira Debt
Managers Limited, Permira Advisers (London) Limited, Permira Advisers LLP and each of
Permira Holdings Limited’s subsidiary undertakings from time to time, including the various
entities that individually act as advisers or consultants in relation to the funds advised and/or managed by Permira.

“1P”

First-party.

“3P”

Third-party.

“AI”

Artificial intelligence.

“AIP”

Allegro Incentive Plan.

“Allegro.pl”

Allegro.pl sp. z o.o.

“Board of Directors”
or “Board”

Board of directors of the Company.

“CAGR”

Compound Annual Growth Rate.

“PLN”or “złoty”

Polish złoty, the lawful currency of Poland.

“Ceneo.pl”

Ceneo.pl sp. z o.o.

“Poland”

The Republic of Poland.

“Cinven”

Depending on the context, any of, or collectively, Cinven Partnership LLP, Cinven Holdings
Guernsey Limited, Cinven (Luxco 1) S.A. and their respective “associates” (as defined in
the UK Companies Act 2006) and/or funds managed or advised by any of the foregoing.

“QoQ”

Quarter over quarter“Report”

This annual report of the Company.

Allegro.eu (formerly Adinan Super Topco S.à r.l.), a public limited liability company (société
anonyme), incorporated and existing under the laws of Luxembourg, with its registeredoffice currently at 1, rue Hildegard von Bingen, L-1282 Luxembourg, Grand Duchy of
Luxembourg, registered with the Luxembourg Trade and Companies’ Register (Registre deCommerce et des Sociétés, Luxembourg) under number B214830.

“SKU”

Stock keeping unit.

“Company” or“Allegro.eu”“SME”

Small and medium-sized enterprise.

“sp. z o.o.”Limited liability company (spółka z ograniczoną odpowiedzialnością).

“Competition Act”

The Polish Act on the Protection of Competition and Consumers of 16 February 2007
(unified text: Journal of Laws of 2020 item 1076, as amended).

“UOKiK”

Polish Office for Competition and Consumer Protection (Urząd Ochrony Konkurencji
i Konsumentów).

“EC”

European Commission.

“UOKiK President”

The President of the Office for Competition and Consumer Protection.

“EU”

European Union.

The Warsaw Interbank Offered Rate is the average interest rate estimated by leading banks
in Warsaw that the average leading bank would be charged if borrowing from other banks.
Unless specified otherwise, this refers to three-month WIBOR for loans for a three-month
period.

“Euro” or “EUR”

Euro, the single currency of the participating member states in the Third Stage of theEuropean Economic and Monetary Union of the Treaty Establishing the European
Community, as amended from time to time.

“WIBOR”“FinTech”

Financial technology.

“WSE”

The Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A.) and,
unless the context requires otherwise, the regulated market operated by such a company.

“full-stack”

Refers to both front-end (user facing) and back-end (internal databases and systems
architecture) technology development.

“FY”

A financial year of the Company ending on 31 December of the relevant civil year.

“WSE Best
Practices”

Code of Best Practice for WSE-listed companies (attachment to Resolution No.
17/1249/2015 of the Exchange Board dated 19 May 2015 and adopted in accordance with§29.1 of the Exchange Rules), being a set of rules and recommendations concerning
corporate governance prevailing on the WSE.

“YoY”

Year over year.

8

I.General information

9

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the year ended 31 December 2020

2.

3.

Introduction
This is the annual report of Allegro.eu, a public limited liability company (société anonyme), incorporated
under the laws of the Grand Duchy of Luxembourg,
having its registered office at 1, rue Hildegard vonBingen, L – 1282 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Tradeand Companies Register (Registre de Commerce etdes Sociétés, Luxembourg) under number B214830.
This Report summarizes consolidated financial andoperating data of Allegro.eu and its subsidiaries.
Allegro.eu is a holding company (together with all of
its subsidiaries, the “Group”). The Group operates
the leading online marketplace in Poland, Allegro.
pl, and the leading price comparison platform in
Poland, Ceneo.pl. Allegro.pl and Ceneo.pl are theGroup's key operating companies and are both
entities incorporated under the laws of Poland. The
Group also operates eBilet, which is the leading
event ticket sales site in Poland.
The shares of the Company have been traded on
the Warsaw Stock Exchange since 12 October 2020.

10

Forward-looking Statements

At the date of the Report, (i) 31.39% of the issued
shares of the Company are controlled by CidinanS.à r.l., a private limited liability company (société
à responsabilité limitée) incorporated and existingunder the laws of the Grand Duchy of Luxembourg,
having its registered office at 4, rue Albert Borschette,
L-1246 Luxembourg, Grand Duchy of Luxembourg
and registered with the Luxembourg Trade andCompanies' Register (Registre de Commerce et desSociétés, Luxembourg) under number B204672(“Cidinan S.à r.l. ”), representing the interests of
Cinven & Co-Investors, (ii) 31.39% by Permira VI
Investment Platform Limited, representing theinterests of Permira & Co-Investors, and (iii) 6.98%
by Mepinan S.à r.l., a private limited liability company(société à responsabilité limitée) incorporated andexisting under the laws of the Grand Duchy of Luxembourg, having its registered office at 163, rue duKiem, L-8030 Strassen, Grand Duchy of Luxembourg
and registered with the Luxembourg Trade andCompanies' Register (Registre de Commerce et desSociétés, Luxembourg) under number B246319(“Mepinan S.à r.l. ”), representing the interests of
Mid Europa Partners Funds. The remaining 30.24%
is owned by other shareholders. The number ofshares held by each investor is equal to the numberof votes, as there are no privileged shares issued
by the Company.

I.General information

This Report includes forward-looking statements,
which include all statements other than statementsof historical facts, including, without limitation, any
statements preceded by, followed by or that include
the words “targets,” , “guidance,” “believes,” “expects,”“aims,” “intends,” “will,” “may,” “anticipates,” “would,”“could”, or similar expressions or the negative thereof.
Such forward-looking statements involve known andunknown risks, uncertainties and other importantfactors beyond the Group’s control that could cause
the Group’s actual results, its financial situation andresults of operations or prospects of the Group tomaterially differ from any of those expressed or
implied by such forward-looking statements. Suchforward-looking statements are based on numerous
assumptions regarding the Group’s present andfuture business strategies and the environment inwhich it currently operates and will operate in the
future. Among the important factors that could
cause the Group’s actual results, financial situation,
results of operations or prospects to differ fromthose expressed in such forward-looking statements
are those factors discussed in the “Management’s
Discussion and Analysis of Financial Condition and
Result of Operations” section and elsewhere in thisReport. These forward-looking statements speak
only as of the date of this Report.

The Group has no obligation and has made no undertaking to disseminate any updates of or revisions
to any forward-looking statements contained inthis Report, unless it is required to do so underapplicable laws or the WSE Rules.
Investors should be aware that several importantfactors and risks may cause the actual results of theGroup to differ materially from the plans, objectives,
expectations, estimates, and intentions expressedin such forward-looking statements.
The Group makes no representation, warranty, or
prediction that the factors anticipated in such forward-looking statements will be present, and suchforward-looking statements represent, in each case,only one of many possible scenarios, and should
not be viewed as the most likely or typical scenario.
The Group has not published and does not intend
to publish any profit estimates or forecasts.

11

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the year ended 31 December 2020

4.

THE GROUP HAS DEFINED THE APMS AS
FOLLOWS:

Presentation of Financial
Information
Unless otherwise stated, the financial informationin this Report has been prepared in accordancewith International Financial Reporting Standards
as adopted by the European Union. The significant
IFRS accounting policies applied in the financial
information of the Group are applied consistently
in the financial information in this Report.

HISTORICAL FINANCIAL
INFORMATIONThis Report includes the consolidated financial information of the Group as of 31 December 2020 and forthe twelve-month periods ended 31 December 2020
and 31 December 2019, which have been derived
from the annual consolidated financial statementsof the Group as of 31 December 2020 and for thetwelve-month periods ended 31 December 2020
and 31 December 2019 (“Financial Statements”),
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, and included elsewhere in this Report.
PricewaterhouseCoopers, Société coopérative has
audited the Financial Statements.

12“Active Buyers” represents, as of the end ofa period, each unique email address connectedwith a buyer that has made a purchase on Allegro.
pl or Allegrolokalnie.pl (excluding eBilet.pl) in thepreceding twelve months;“Adjusted EBITDA” means operating profit before
depreciation and amortization further adjusted to
exclude transaction costs, monitoring costs, market
strategy preparation costs, employee restructuringcosts, regulatory proceeding costs, group restructuring costs, donations to various public benefit
organizations, certain bonuses for employees, theManagement Investment Plan, funds spent on sanitary protection of employees, and the incentive
programs for employees;“Adjusted EBITDA/GMV” means Adjusted EBITDA
divided by GMV;

ALTERNATIVEPERFORMANCEMEASURES“Adjusted EBITDA/net revenue” means Adjusted
EBITDA divided by net revenue;

The Group has included certain alternative performance measures (“APMs”) in this Report, including, among others, Active Buyers, GMV, GMV per
Active Buyer, Adjusted EBITDA, Adjusted EBITDA/
net revenue, Adjusted EBITDA/GMV, total capital
expenditure, capitalized development costs, othercapital expenditure, net debt, net leverage, andworking capital.

I.General information“Adjusted net profit” means net profit (loss) adjusted for the same one-off items as those described for
Adjusted EBITDA above, net of the tax impact, andfurther adjusted for any one-off financial expenses,
such as early repayment fees and deferred amortized costs arising on refinancing arrangements, netof their tax implications;“capitalized development costs” means thecosts that are capitalized and have been incurredin relation to the production of software containing
new or significantly improved functionalities by thetechnology department and incurred before thesoftware is launched commercially or the technology
is applied on a serial basis;“GMV” means gross merchandise value, which represents the total gross value of goods and tickets
sold on the platforms: Allegro. pl, Allegrolokalnie.pl,and eBilet.pl (including value added taxes);“GMV per Active Buyer” represents GMV for thetwelve months preceding the end of a period (excluding eBilet’s tickets sales) divided by the numberof Active Buyers at the end of such period;“net debt” means the sum of borrowings and leaseliabilities minus cash and cash equivalents;“net leverage” means net debt divided by Adjusted
EBITDA for the preceding twelve months;“other capital expenditure” means the costs
related to building the relevant capacity of data
centers, equipping employees with appropriate
equipment (i.e. workstations), office equipment (e.g.
fit-out and IT devices) and copyrights;“Take Rate” represents the ratio of marketplacerevenue divided by GMV after deducting the GMV
generated by 1P retail sales (grossed up for VAT);“total capital expenditure” means cash outflows
in respect of property, plant, and equipment andintangible assets, and comprises capitalized development costs and other capital expenditure; and“working capital” means the sum of the changes
in inventory, trade and other receivables, tradeand other liabilities and the liabilities to employees
during the period.

13

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the year ended 31 December 2020

The Group presents the APMs because the Group’s
management believes that they assist investors andanalysts in comparing the Group’s performance andliquidity across reporting periods. The Group presents GMV as a measure of the total value of goods
sold over a certain period, which allows for growth
to be compared over different periods, including
weekly, monthly, quarterly, and annually. The Groupconsiders Adjusted EBITDA to be a useful metric forevaluating the Group’s performance as they facilitatecomparisons of the Group’s core operating resultsfrom period to period by removing the impact of,among other things, its capital structure, asset base,tax consequences and specific non-recurring costs.
The Group uses Adjusted EBITDA for the purposes ofcalculating Adjusted EBITDA/net revenue and Adjusted EBITDA/GMV. The Group presents total capital
expenditure split between capitalized development
costs and other capital expenditure in order to show
the amount of expenditures, including, among otherthings, staff costs and costs of contractors andthird party service providers, incurred in relation
to the production of new or improved software
before it is put to use on Allegro.pl, Ceneo.pl. eBilet.
pl, and Allegro Lokalnie Platform. The Group believes
this split is important for investors to understandits amortization of intangible assets. The Group
presents net debt and net leverage because theGroup believes these measures provide indicatorsof the overall strength of its balance sheet and canbe used to assess, respectively, the impact of theGroup’s cash position and its earnings as compared
to its indebtedness. The Group monitors working
capital to evaluate how efficient it is at managing its
cash provided by operating activities.

The APMs are not accounting measures within thescope of IFRS and may not be permitted to appear
on the face of Financial Statements or footnotes
thereto. These APMs may not be comparable tosimilarly titled measures of other companies. Neither
the assumptions underlying the APMs have been
audited in accordance with IFRS or any generally
accepted accounting standards. In evaluating theAPMs, investors should carefully consider the Financial Statements included in this Report.
The APMs have limitations as analytical tools. For
example, Adjusted EBITDA and related ratios do notreflect: the Group’s cash expenditures, or future requirements, for capital expenditures or contractual
commitments; changes in, or cash requirements for,the Group’s working capital needs; interest expense,
income taxes or the cash requirements necessary
to service interest or principal payments, on theGroup’s debt; or the impact of certain cash charges
resulting from matters that the Group does notconsider to be indicative of its ongoing operations.
In evaluating Adjusted EBITDA, investors are encouraged to evaluate each adjustment and the reasons
the Group considers it appropriate as a method of
supplemental analysis. In addition, investors should
be aware that the Group may incur expenses similar
to the adjustments in this presentation in the future
and that certain of these items could be considered
recurring in nature. The Group’s presentation of
Adjusted EBITDA should not be construed as aninference that the Group’s future results will be unaffected by unusual or non-recurring items. Adjusted
EBITDA has been included in this Report because it
is a measure that the Group’s management uses toassess the Group’s operating performance.
Investors are encouraged to evaluate any adjustments to IFRS measures and the reasons the Groupconsiders them appropriate for supplemental
analysis. Because of these limitations, as well as
further limitations discussed above, the APMs presented should not be considered in isolation or asa substitute for performance measures calculated
in accordance with IFRS.

14

I.General information

15

II.
Business
reportALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.

Selected consolidated
financial and operational
highlights
FY 2020

FY 2019

Change %Q4 2020(unaudited)

Q4 2019(unaudited)

FY 2020

FY 2019

Change %Q4 2020(unaudited)

Q4 2019(unaudited)

Change %Net cash inflow/(outflow)from operating activities

1,509.9

1,246.5

21.1%

344.9

344.5

0.1%

Net cash inflow/(outflow)from investing activities(218.2)(202.9)

7.5%

48.6

(36.0)

33.0%

Change %Cash Flow, PLN m

Income Statement, PLN m
Net revenue

3,997.8

2,592.3

54.2%

1,299.0

805.6

61.2%

EBITDA

1,586.8

1,325.4

19.7%

513.5

380.6

34.9%

Adjusted EBITDA

1,750.0

1,338.1

30.8%

533.5

384.3

38.8%

EBIT

1,123.0

886.1

26.7%

394.9

267.3

47.7%

Net cash inflow/(outflow)from financing activities(510.5)(1,433.8)(64.4%)

163.1(112.5)(245.1%)

Profit / (Loss) before
Income tax

616.7

513.0

20.2%

324.7

166.3

95.2%

Net increase/(decrease) incash and cash equivalents

781.2(390.2)(300.2%)

460.1

196.0

134.7%Net Profit / (Loss)

418.6

393.1

6.5%

260.6

123.9

110.2%

Adjusted Net Profit

731.8

403.7

81.3%

287.6

127.0

126.5%

13.0

11.4

14.2%

13.0

11.4

14.2%

31.12.2020

31.12.2019

Change %GMV per Active Buyer (PLN)

2,698.6

1,984.9

36.0%

2,698.6

1,984.9

36.0%

Assets15,147.9

14,278.0

6.1%

GMV (PLN in millions)35,110.9

22,801.0

54.0%

10,851.2

6,888.0

57.5%

Equity8,089.6

6,683.6

21.0%

9.27%

9.26%

0.01 pp

9.44%

9.14%

0.30 pp

Net Debt

4,326.0

6,018.6(28.1%)

KPIs
Active Buyers (millions)

Take Rate (%)

18

II. Business report19ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

2.

Management’s discussion
and analysis of financial
condition and result of
operations

GMV and Active buyers

2.1.
Key performance indicators
The following KPIs are measures used by the Group's
management to monitor and manage operationaland financial performance.

FY 2020

FY 2019

Change%Q4 2020

Q4 2019

Change
%

13.0

11.4

14.2%

13.0

11.4

14.2%

GMV per Active Buyer (PLN)

2,698.6

1,984.9

36.0%

2,698.6

1,984.9

36.0%

GMV (PLN in millions)35,110.9

22,801.0

54.0%

10,851.2

6,888.0

57.5%

Take Rate (%)

9.27%

9.26%

0.01pp

9.44%

9.14%

0.30ppAdjusted EBITDA (PLN in millions)

1,750.0

1,338.1

30.8%

533.5

384.3

38.8%

Adjusted EBITDA/net revenue (%)

43.8%

51.6%

(7.84pp)

41.1%

47.7%

(6.63pp)

Adjusted EBITDA/GMV (%)

4.98%

5.87%

(0.88pp)

4.92%

5.58%

(0.66pp)

KPIs (unaudited)
Active Buyers (millions)

20

II. Business report

In FY 2020, GMV reached PLN 35,110.9 million,+54.0% YoY, whereas in Q4 2020 GMV reached PLN
10,851.2 million, which represented a +57.5% YoY
increase. During FY 2020 the Group's GMV growth
was positively impacted by a considerable shift toonline shopping by Polish consumers in response to
the COVID-19 pandemic. YoY GMV growth remained
broadly consistent between 22% and 33% between
June 2019 and February 2020 before increasing
to 47% in March, 85% in April and 73% in May. In
response to the COVID-19 pandemic, the Group
implemented an offer providing all buyers on its
marketplace free deliveries and returns using theGroup's SMART! program for free for three months
between mid-March and mid-June 2020. Following
the end of the 1st Polish lockdown restrictions related to the COVID-19 pandemic in May 2020, the Group
continued to see increased demand from buyers for
its marketplace services. The Group believes that
this may be indicative of an accelerated shift towards
online shopping being sustainable in the longer
term once the pandemic crisis has passed. Since
mid-October the Group saw a renewed accelerationin GMV growth as an increasing number of COVID-19
infections led the Polish Government to reintroduce
some of the lockdown measures, including shutting
down Polish shopping centres during 7-27 November
2020. Unlike the Q2 lockdown, “non-essential” stores
having outside entrances were permitted to stay
open, reducing the overall disruption to offline retail.

Following the reopening of shopping malls, GMV
growth remained elevated compared to the pre-pandemic levels as increased demand from buyers for
its marketplace services continued. Further factors
supporting GMV growth during FY 2020 period
were outperformance of Group plans in relation
to SMART! new subscribers intake as well as strong
SMART! Week and Black Week campaigns. The YoY
GMV performance was held back by 1.3 ppts ofgrowth for FY 2020 and 2.8 ppts of growth for Q42020 due to a decrease in ticket sales at eBilet due tolockdown restrictions on events attendance during
the year reducing the demand for tickets.
SMART! subscribers growth reflected a substantial
conversion of buyers who had benefited from free
SMART! subscriptions offered by the Group during
the Q2 lockdown deciding to purchase a subscription during H2 2020, as well as additional marketing
efforts in the form of a “Annual for PLN 39” promotion launched during Black Week and into theChristmas period, launch of SMART! Student loyalty
program in October and SMART! cash on delivery
payment method in November. Buyers holding
SMART! subscriptions tend to spend more thannon-subscribers due to the benefit of free delivery.
Growth in Active Buyers was strong both during
and post lockdowns with 1.6 million buyers added
during the year, of which 0.4 million added in Q42020, to reach 13.0 million LTM Active Buyers at 31
December 2020 for a total YoY increase of 14.2%.
GMV per Active Buyer grew by 36% in FY 2020,
having increased by 9.5% QoQ in Q4 2020, andreached PLN 2,699. The combination of growth in
Active Buyers and GMV per Active Buyer produced
a 55.3% increase in LTM GMV to PLN 35,055 million(excluding eBilet).

21

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Adjusted EBITDA
The Group's Adjusted EBITDA increased by PLN
411.9 million, or 30.8% YoY, during FY 2020, from
PLN 1,338.1 million for FY 2019 to PLN 1,750.0 million
for FY 2020. In Q4 2020 Adjusted EBITDA increased
by PLN 149.2 million, or 38.8% YoY, from PLN 384.3
million for Q4 2019 to PLN 533.5 million for Q4 2020.
This was achieved due to Group GMV growing by
54% YoY in FY 2020 and 57.5% YoY in Q4 2020 thatdrove revenue growth of 54.2% YoY in FY 2020 and
61.2% in Q4 2020. The take-rate was broadly stable
during FY 2020 as a whole. During the year take-rates
were initially held down by the Group’s initiatives
supporting merchants during Q2 2020 Covid-19
first lockdown, with a visible quarterly progressionthat started in Q3 2020 and accelerated during Q42020; following the introduction of price changes
that had been delayed during the Q2 lockdown.
Operating expenses grew by 90.3% YoY in FY 2020,
including 157.9% YoY growth in net costs of delivery. The growth in operating expenses reflected
investment in the business to facilitate fast GMV
growth and strategic investments in incremental
SMART! subscribers that drove higher net delivery
costs, as well as contributing to a significant increasein marketing expenditure during the Free SMART!
campaign in Q2 2020. In Q4 2020 the operating
leverage effect has had a positive impact on all
SG&A costs lines as a percentage of revenue which
moderated somewhat the margin drag from risingexpenditure on SMART! deliveries.

The management believes that whilst these investments in the SMART! subscriber base drove Adjusted
EBITDA/GMV margin decline in FY 2020 by 88 basis
points from 5.87% in FY 2019 to 4.98% in FY 2020,
they contributed to achieving sequential EBITDA
growth in the period under review, and will continue
to support sustainably higher profitability in the
future.

Reconciliation of Adjusted EBITDA
PLN m (unaudited)

FY 2020

FY 2019

Change%Q4 2020

Q4 2019

Change%EBITDA

1,586.8

1,325.4

19.7%

513.5

380.6

34.9%

1.8

3.3

(44.8%)

(1.0)

0.4

(335.4%)

Regulatory proceeding costs [2]

4.9

2.9

66.8%

2.3

2.0

14.7%

Group restructuring costs

7.2

0.9

714.3%

4.4

0.2

1,650.0%

Donations to various public benefit
organisations [4]

6.9

–

n/a

2.4

–

n/a

Bonus for employees and funds spent on
sanitary protection of employees [5]

3.3

–

n/a

0.4

–

n/a

Allegro Incentive Plan [6]

25.4

–

n/a

10.9

–

n/a

52.2

4.3

1,108.0%–

1.1(100.0%)Transaction costs [8]

61.6

1.4

4,403.9%

0.7

–

n/a

Adjusted EBITDA

1,750.0

1,338.1

30.8%

533.5

384.3

38.8%

Monitoring costs [1]

In Q4 2020 the Group recognized an additional
PLN10.9m charge in respect of a grant of the Company’s shares for employees, with the majority ofAllegro.eu’s IPO and refinancing costs having beenrecognised in Q3 and included in EBITDA adjustments. The following table presents a reconciliation
between Reported and Adjusted EBITDA for theperiods under review:

Management Investment Plan

1.

2.

3.
4.
5.
6.
7.

8.

22

II. Business report

[3]

[7]

Represents expenses incurred in relation to performance of advisory services by the shareholders of the Group,
including travel expenses and expenses for services provided for projects outside the scope of supervisory
responsibilities.
Represents legal costs mainly related to regulatory proceeding, legal fees and settlement costs – the Polishcompetition authority, the OCCP, conducted an inspection at Allegro’s offices in June 2017 related to antitrust
proceedings against Allegro.pl concerning the alleged abuse of a dominant position by Allegro.pl on the Polishmarket for online B2C intermediary sales services and other proceedings.
Represents legal and financial due diligence expenses with respect to not concluded acquisitions of target companies
along with other legal expenses.
Represents donations made by the Group to support several public organizations during the COVID-19 pandemic..
Represents expenses incurred by the Group to buy employees’ sanitary protections and to pay employees’ bonuses
for the purchase of equipment necessary to enable them to work remotely during the COVID-19 pandemic.
Represents a one-off grant to employees of shares awarded at the Group’s IPO.
Cost of share based compensation related to incentive elements of The Management Investment Plan (“Investment
Opportunities”) in which management participated indirectly through investing in shares in the Adiman SCSP Trustand directly via type C and D shares issued by Allegro.eu. This Management Investment Plan (“MIP”) ceased toexist at its full settlement at the moment at the Group’s IPO. The increase in share based compensation expense
recognized in FY 2020 is the result of new investments in the MIP being made with the assistance of non-recourse
loans.
Represents costs of advisory and consultancy incurred during the IPO process in 2020 (PLN 61,139 thousand)and the acquisition of a 20% minority interest in eBilet (PLN 430 thousand). In 2019 the Group incurred only costs
related to the original acquisition of eBilet in April 2019 (PLN 1,367 thousand).

23

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

2.2.
Review of Allegro.eu Groupfinancial and operational results

2.2.1.
Review of Q4 2020 results

Results of Operations
The following table presents the Group’s summary
consolidated statements of comprehensive income
data for Q4 2020.

Consolidated statement of comprehensive income,PLN m (unaudited)

Q4 2020

Q4 2019

Change %Amortisation and Depreciation(118.6)(113.3)

4.7%

Amortisation(102.2)(98.9)

3.3%

Depreciation(16.5)(14.4)

14.4%

Operating profit

394.9

267.3

47.7%

Net Financial result(70.2)(100.9)(30.4%)

Financial income

3.7

1.2

193.9%

Financial costs(73.7)(104.5)(29.5%)

Foreign exchange (profits)/losses

(0.2)

2.4

(106.4%)

Profit before Income tax

324.7

166.3

95.2%

Income tax expenses(64.1)(42.4)

51.3%

Net Profit

260.6

123.9

110.2%

11.1

(8.7)

(227.9%)

271.6

115.3

135.7%

Other comprehensive income/(loss)
Total comprehensive income for the period

Consolidated statement of comprehensive income,PLN m (unaudited)

Q4 2020

Q4 2019

Change %Net revenue

1,299.0

805.6

61.2%

Marketplace revenue

1,012.9

623.5

62.4%

Advertising revenue

118.3

71.4

65.7%

Price comparison revenue

63.2

47.7

32.3%

Retail revenue

98.4

57.0

72.6%

Other revenue

6.2

6.0

3.8%

Operating expenses(785.4)(425.1)

84.8%

Payment charges(42.5)(34.7)

22.6%

Cost of goods sold

(102.4)(61.3)

67.0%

Net costs of delivery(272.2)(97.4)

179.5%

Marketing service expenses(168.9)(104.8)61.1%

Staff costs net(133.2)(81.5)

63.4%

IT service expenses net(19.2)(12.5)

53.7%

Other expenses net(42.3)(27.4)

54.5%

Net impairment losses on financial and contract assets

(4.1)

(5.5)

(26.5%)

Transaction costs

(0.7)

–

n/a

Operating profit before amortisation and depreciation(EBITDA)

513.5

380.6

34.9%

24

II. Business report

Net Revenue
Net revenue increased by PLN 493.3 million, or 61.2%,
from PLN 805.6 million for Q4 2019 to PLN 1,299.0
million for Q4 2020. This increase resulted primarily
from increases in marketplace revenue, advertising
revenue and retail revenue.

The significant drop in ticket sales at the eBilet unit
resulting from continuous COVID-19 restrictions on
mass events subtracted 14 basis points from the
YoY Take Tate evolution in the period under review.
GMV growth trends and their drivers have been
discussed in the Key Performance Indicators section
above.

MARKETPLACE REVENUE
ADVERTISING REVENUE
Marketplace revenue increased by PLN 389.4 million,
or 62.4%, from PLN 623.5 million for Q4 2019 to PLN
1,012.9 million for Q4 2020. This increase resulted
primarily from a 57.5% year-on-year GMV growththat was supported by a 30 basis point increase in
the Group's Take Rate. Q4 2020 saw a continuation of
gradual Take Rate increases that was already visible
in Q3 2020 as the previously delayed changes insuccess fees and introduction of courier co-financing
earlier in the year contributed positively to Take
Rate growth, offsetting the negative impact fromthe mostly fixed-fee non-transactional Take Ratecomponents that grew below the GMV growth andhence declined as percentage of GMV.

Advertising revenue increased by PLN 46.9 million,
or 65.7%, from PLN 71.4 million for Q4 2019 to PLN
118.3 million for Q4 2020. This increase resulted
primarily from the strong performance of sponsoredoffer ads due to an acceleration in traffic growth on
the Group's websites as well as a higher numberof merchants purchasing sponsored Ads offers as
Polish consumers shifted significantly to e-commerce as a result of the COVID-19. The increase wasalso the result of improved performance of digitaladvertising due to self-service scalability and higher
sales to strategic clients.

25

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

PRICE COMPARISON REVENUENET COSTS OF DELIVERYIT SERVICE EXPENSES

Price comparison revenue increased by PLN 15.4
million, or 32.3%, from PLN 47.7 million for Q4 2019
to PLN 63.2 million for Q4 2020. This increase resulted primarily from higher revenue from cost-per-click
fees, which was largely driven by a higher average
cost per click as well as a higher number of site visits
resulting in increased clicks.

IT service expenses increased by PLN 6.7 million,
or 53.7%, from PLN 12.5 million for Q4 2019 to PLN
19.2 million for Q4 2020. This increase resulted primarily from new licenses related to the introductionof new software solutions and increased IT costs
due to higher technical platform costs, including
external cloud usage, due to the growing storage
requirements for the increasing number of active
offers on the Group’s e-commerce marketplace.

Retail revenue increased by PLN 41.4 million, or 72.6%,
from PLN 57.0 million for Q4 2019 to PLN 98.4 million
for Q4 2020. 1P retail sales represented 1.0% of total
GMV in Q4 2019 and 1.1% of total GMV in Q4 2020
with the increase in share mainly due to the increasing
impact of the Smart! Week and Black Week campaigns
from year to year for which 1P provides an important
share of the attractive offers made available to drive
demand.

Net costs of delivery increased by PLN 174.9 million, or 179.5%, from PLN 97.4 million for Q4 2019
to PLN 272.2 million for Q4 2020. This increase
resulted primarily from an increased number ofbuyers on the Group’s e-commerce marketplace
who were members of the SMART! program. Thiswas partly due to ongoing conversion of buyers
who had benefited from a free SMART! subscriptions offered by the Group during the Q2 lockdown
deciding to purchase a subscription during Q4, as
well as additional marketing efforts in the form of“Annual for PLN 39” promotion launched during
Black Week into the Christmas period, the launch ofa SMART! Student loyalty program in October 2020,
and a SMART! cash on delivery payment method in
November. Lower unit costs per package resulting
from scale benefits drove a 2.8% decline in grossdelivery costs per shipped package compared tothe prior year quarter.

Operating Expenses

MARKETING SERVICE EXPENSES

Operating expenses increased by PLN 360.3 million,or 84.8%, from PLN 425.1 million for Q4 2019 to PLN
785.4 million for Q4 2020. This increase resulted
primarily from increased net costs of delivery, marketing service expenses, and staff costs.

Marketing service expenses increased by PLN 64.0
million, or 61.1%, from PLN 104.8 million for Q4 2019
to PLN 168.9 million for Q4 2020. This expense
item has risen broadly in line with GMV whilst improvements in efficiency of spending have led tohigher share of GMV from acquired traffic and better
return on marketing investment in pay per click(PPC) services compared to the prior year period.

RETAIL REVENUEPAYMENT CHARGES
Payment charges increased by PLN 7.8 million, or
22.6%, from PLN 34.7 million for Q4 2019 to PLN 42.5
million for Q4 2020. This increase resulted from higher sales on the Group’s e-commerce marketplace,
substantially offset by lower rates from third-party
providers due to discounts negotiated in the second
quarter of 2019 that increase once agreed volume
thresholds are reached.
COST OF GOODS SOLD
Cost of goods sold increased by PLN 41.1 million,
or 67.0%, from PLN 61.3 million for Q4 2019 to PLN
102.4 million for Q4 2020. This increase resulted
primarily from increased sales through the Group’s
1P retail business operations with margins improved
slightly by 3.5 percentage points as a result of introducing an optimized algorithm helping to address
correction of price defects more cost efficiently.

26

STAFF COSTS
Staff costs increased by PLN 51.7 million, or 63.4%,
from PLN 81.5 million for Q4 2019 to PLN 133.2 million for Q4 2020. This increase resulted partly fromthe recruitment of new employees as headcount at
31 December was 26% higher than at 30 December
2019, as well as an increase in base salaries andhigher annual bonus provisions due to the Group’s
strong performance. The total expenditure increase
included PLN 10.9 million remaining cost related to
the value of shares granted to employees at the IPO.

II. Business report

Operating Profit before Amortization
and Depreciation
Operating profit before amortization and depreciation increased by PLN 133.0 million, or 34.9%, fromPLN 380.6 million for Q4 2019 to PLN 513.5 million
for Q4 2020 as a result of the factors describedabove. The number includes PLN 20.0 million of
one-off EBITDA adjustments reported in the period,
including PLN 10.9 million in value of share grants
to employees in connection with the IPO, comparedto PLN 3.8 million one-offs reported in the prioryear period.

OTHER EXPENSES
Other expenses increased by PLN 14.9 million, or
54.5%, from PLN 27.4 million for Q4 2019 to PLN
42.3 million for Q4 2020. This increase resulted
primarily from higher consultancy and contractor
costs in connection with the development of new
products and projects and increased insurance
costs related to D&O. The line includes a net PLN
5.6 million of costs included as one-off costs in the
Adjusted EBITDA reconciliation, mainly restructuringcosts and regulatory proceedings costs.

AMORTIZATION
Amortization increased by PLN 3.3 million, or 3.3%,
from PLN 98.9 million for Q4 2019 to PLN 102.2
million for Q4 2020. This increase resulted primarily
from an increase in intangibles associated withcapitalized development costs of projects that werecompleted and put into use in the twelve months
since the end of the prior period.

DEPRECIATIONNET IMPAIRMENT LOSSES ON FINANCIAL AND
CONTRACT ASSETS
Net impairment losses on financial and contract
assets decreased by PLN – 1.5 million, or – 26.5%
from PLN 5.5 million for Q4 2019 to PLN 4.1 million
for Q4 2020. This decrease resulted primarily frombetter debt collection and reversal of provisions
made for 3 month delayed payment granted to small
and medium sized merchants as part of the Group’s
merchant support package during the Q2 lockdown.

TRANSACTION COSTS
Transaction costs were PLN 0.7 million versus nil for
Q4 2019 due to some small remaining IPO-related
one-off costs as reserves were reconciled with final
invoices.

Depreciation increased by PLN 2.1 million, or 14.4%,
from PLN 14.4 million for Q4 2019 to PLN 16.5 million
for Q4 2020. This increase resulted primarily fromthe depreciation of computers and office equipment
related to growth of the organization and scale ofthe server park required to support the marketplaceplatform.

Operating Profit
Operating profit increased by PLN 127.6 million, or
47.7%, from PLN 267.3 million for Q4 2019 to PLN
394.9 million for Q4 2020 as a result of the factors
discussed above.

27

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Net Financial Result
Net financial result decreased by PLN 30.7 million,
or 30.4%, from a cost of PLN 100.9 million for Q4
2019 to a cost of PLN 70.2 million for Q4 2020. Thisdecrease resulted primarily from lower loan interest
margin charged on the Group’s new long term loan
facilities following the refinancing completed in mid
October 2020, and lower interest reference rates
which together reduced borrowing costs.

The following table presents a breakdown of income
tax expenses for the periods indicated.
Deferred borrowing costs on the Group’s previous
loan facilities were written off due to their early repayment as part of the refinancing and the PLN 10.7
million recognized in Q4 relates to the portion of thetotal attributed to the fourth quarter from the totalof PLN 143.4 million. The following table presents
a breakdown of the Group’s financial income andfinancial costs for the periods indicated.

PLN m (unaudited)

Q4 2020

Q4 2019

Change %Current income tax on profits(93.8)(61.5)

52.5%(Increase)/Decrease in net deferred tax liability

29.7

19.1

55.3%

Income tax expense(64.1)(42.4)

51.3%

PLN m (unaudited)

Q4 2020

Q4 2019

Change %Interest from deposits

0.4

0.8

(46.5%)Net Profit

Adjusted net profit

Other financial income

3.3

0.5

573.5%–

2.4(100.0%)

3.7

3.6

1.4%

Interest paid and payable for financial liabilities(42.5)(98.8)(57.0%)

Deferred borrowings cost write off(10.7)–

n/a

Net profit increased by PLN 136.6 million, or 110.2%,
from PLN 123.9 million for Q4 2019 to PLN 260.6
million for Q4 2020, as a result of the same factors
driving Adjusted EBITDA growth discussed above,in addition supported by a significant decline infinancial costs as well as lower effective tax ratecompared to Q4 2019.

The Group's Adjusted net profit increased by PLN
160.7 million, or 126.5% YoY, from PLN 127.0 million
for Q4 2019 to PLN 287.6 million for Q4 2020 when
PLN 20 million of EBITDA adjustments, PLN 10.8 million of remaining one-off financial expenses related
to the Group’s refinancing and PLN 3.7 million oftax effect on the above adjustments are excluded.

Interest rate hedging instrument(15.2)(3.6)

322.7%

Second Lien facility early repayment cost

(0.1)

–

n/a

Interest on leases

(0.7)

(0.9)

(20.3%)

Revolving facility availability fee

(0.9)

(0.9)

(3.0%)Net exchange losses on foreign currency transactions

(0.2)

–

n/a

Other financial costs

(3.6)

(0.3)

1,049.1%

Financial costs(73.9)(104.5)(29.5%)Net financial result(70.2)(100.9)(30.4%)Net exchange gains on foreign currency transactions
Financial income

Profit before Income Tax

Income Tax Expenses

Profit before income tax increased by PLN 158.4
million, or 95.2%, from PLN 166.3 million for Q4
2019 to PLN 324.7 million for Q4 2020 as a result of
the factors discussed above.

Income tax expenses increased by PLN 21.7 million,
or 51.3%, from PLN 42.4 million for Q4 2019 to PLN
64.1 million for Q4 2020. This increase resulted
primarily from an increase in operating profit before
one-off expenses which increased the taxable base.
The Group's effective tax rate was 25.5% and 19.8%
for Q4 2019 and Q4 2020, respectively, comparedto the Polish standard corporate income tax rateof 19% for each period.

28

II. Business report

The following table presents a reconciliation between reported and adjusted net profit for theperiod under review.
Reconciliation of Adjusted net profit PLN m (unaudited)

Q4 2020

Q4 2019

Change %Net profit

260.6

123.9

110.2%EBITDA adjustments

20.0

3.7

432.7%Net financial result adjustment

10.8

–

n/a

Second Lien facility early repayment cost (1)

0.1

–

n/a

Deferred borrowings cost write off (2)

10.7

–

n/a

Tax impact of adjustments

(3.7)

(0.7)

412.9%

Adjusted net profit

287.6

127.0

126.5%

1.
2.

Represents early repayment charges of the Second Lien Facility before the due date.
As a result of the Board of Director’s decision, taken on 28 September, to refinance its existing borrowing facilities
using a new borrowing facility and proceeds of a primary share offering pursuant to the Group’s IPO, the carrying
value of the existing borrowing facilities was modified to reflect an earlier expected full repayment date of 14
October 2020. As a result of this decision, the carrying value of the existing borrowing facilities at amortized cost
increased by PLN 143.4 million and an equivalent amount of deferred borrowings cost was recognized as a noncash financial expense. The amount represents part of the total costs recognized in Q4 2020.

29

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Other Comprehensive Income

Total Comprehensive Income

Other comprehensive income increased by PLN 19.8
million, or 227.9%, from negative PLN 8.7 million
for Q4 2019 to PLN 11.1 million for Q4 2020. This
increase resulted primarily from falls in the valuationof financial liabilities relating to the Group's fixedinterest rate swap contracts.

Total comprehensive income increased by PLN 156.4
million, or 135.7%, from PLN 115.3 million for Q4
2019 to PLN 271.6 million for Q4 2020 as a result of
the factors discussed above.

2.2.2.
Review of FY 2020 results
Results of Operations
The following table presents the Group’s summary
consolidated statements of comprehensive income
data for the twelve months ended 31 December
2020.
Consolidated statement of comprehensive income,
PLN m

FY 2020

FY 2019

Change %Net revenue

3,997.8

2,592.3

54.2%

Marketplace revenue

3,231.0

2,099.7

53.9%

Advertising revenue

337.8

207.1

63.1%

Price comparison revenue

190.0

145.8

30.3%

Retail revenue

216.6

115.2

88.0%

Other revenue

22.4

24.5

(8.6%)(2,411.0)(1,266.9)

90.3%

Payment charges(152.9)(133.7)

14.3%

Cost of goods sold(222.7)(120.4)85.0%

Net costs of delivery(692.5)(268.5)157.9%

Marketing service expenses(564.7)(306.9)84.0%

Staff costs net(490.1)(294.4)

66.5%

IT service expenses net(61.4)(39.9)

53.7%

Other expenses net(125.8)(79.3)

58.6%

Net impairment losses on financial and contract assets(39.4)(22.4)

76.2%

Transaction costs(61.6)(1.4)

4,404.0%

1,586.8

1,325.4

19.7%

Operating expenses

Operating profit before amortisation and depreciation(EBITDA)30

II. Business report

Consolidated statement of comprehensive income,
PLN m

FY 2020

FY 2019

Change %Amortisation and Depreciation(463.8)(439.3)

5.6%

Amortisation(400.2)(383.6)

4.3%

Depreciation(63.6)(55.7)

14.1%

Operating profit

1,123.0

886.1

26.7%

Net Financial result(506.3)(373.0)35.7%

Financial income

17.0

9.6

76.1%

Financial costs(519.1)(384.0)35.2%

Foreign exchange (profits)/losses

(4.2)

1.3

(417.9%)Profit before Income tax

616.7

513.0

20.2%

Income tax expenses(198.1)(120.0)65.2%

Net Profit

418.6

393.1

6.5%

Other comprehensive income/(loss)(74.7)(3.2)

2,210.2%

Total comprehensive income for the period

343.8

389.8

(11.8%)Net Revenue
Net revenue increased by PLN 1,405.5 million, or
54.2%, from PLN 2,592.3 million for FY 2019 to PLN
3,997.8 million for FY 2020. This increase resulted
primarily from organic growth in marketplace revenue, advertising revenue and retail revenue.

MARKETPLACE REVENUE
Marketplace revenue increased by PLN 1,131.2
million, or 53.9%, from PLN 2,099.7 million for FY
2019 to PLN 3,231.0 million for FY 2020. This increase resulted primarily from 54.0% GMV growth.
Following a strong start to the year with growth in
GMV in the mid-twenties similar to 2019, unusuallyhigh demand for e-commerce began in the middle ofMarch as a result of the COVID-19 pandemic, which
saw the Polish government introduce lockdown
measures including closure of all non-essential
physical retail stores from Mid-March to Mid-May.
This demand was further supported by the Group

providing its SMART! subscription services for free
for three monthly cycles starting from mid-March,
resulting in more buyers receiving free delivery
and responding by increasing their purchases on
the Group's e-commerce marketplace. Once thegovernment relaxed the lockdown the Group discontinued the free SMART! assistance. Demandremained strong post this first lockdown with growth
rates remaining at elevated levels throughout theJune-October period as buyers continued to rely on
e-commerce more than previously. From mid-October the Group saw a renewed acceleration in GMV
growth as a second wave of COVID-19 infections
led the Polish Government to reintroduce some of
the lockdown measures, including shutting down all
but essential stores in the Polish shopping centres
during 7-27 November 2020. Despite the reopeningof shopping malls for the December pre-Christmas
shopping period, GMV growth dropped only marginally as increased demand from buyers for theGroup’s marketplace services continued.

31

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

In addition to the demand factors related to the
COVID-19 pandemic described above, growth was
also supported by the Group’s strategy to focus
on the Retail Basics of price, selection and delivery
experience, its investment in expanding the SMART!
subscriber base, many improvements to user experience and marketplace functionality and marketinginvestments to bring in more traffic and acquire
more active buyers. As a result of these factors, thenumber of Active Buyers increased by 14.2% and
GMV per Active Buyer increased by 36.0% comparedto the twelve months ended 31 December 2019.
The Group's Take Rate increased marginally during
the year by 1bp YoY from 9.26% in FY 2019 to 9.27% in
FY 2020. This small increase was achieved thanks toongoing monetization initiatives, including increases
in success fee and the introduction of merchantsco-financing of PLN 3.99 per courier delivery on
eligible SMART! shipments. The growth in the Take
Rate would have been higher, except that in H1 2020
we actively supported new merchants navigating
COVID-19 with promotional take rates and delayedplanned Take Rate increases for the period of thefirst wave lockdown. In addition, markedly higher
GMV resulted in fixed and semi-fixed fees forminga smaller part of total marketplace revenue relative
to variable revenue streams from success fees,
thereby reducing the average Take Rate per unitof GMV. Furthermore, the significant drop in ticket
sales at the eBilet unit, resulting from continuous
COVID-19 restrictions on mass events, subtracted
an additional 7bp from the Take Rate evolution for
the full financial year.

ADVERTISING REVENUE

Higher advertising revenue was also the result of
improved performance of digital advertising due toself-service products and higher sales to strategicclients and brands.

PRICE COMPARISON REVENUE
Price comparison revenue increased by PLN 44.2
million, or 30.3%, from PLN 145.8 million for FY
2019 to PLN 190.0 million for FY 2020. This increase
resulted primarily from higher revenue from payper-click fees, which were generated from a higher
number of site visits resulting in a higher numberof clicks and a higher average price per click. The
COVID-19 pandemic was a significant factor in theacceleration of growth in visits during 2020.

RETAIL REVENUE
Retail revenue increased by PLN 101.4 million, or
88.0%, from PLN 115.2 million for FY 2019 to PLN
216.6 million for FY 2020. 1P retail sales represented
0.6% of total GMV in FY 2019 and 0.7% of total GMV
in FY 2020. This increase in retail revenue resulted
primarily from higher demand on selected categories, including supermarket, kids, health and beautyand electronics, all of which experienced additional
demand associated with the COVID-19 pandemic
and related lock-downs. Retail sales volumes wereincreasingly focused on the elimination of pricedefects and the participation of 1P in the key campaigns of “SMART! week promotion” at the turn ofSeptember and October, as well as the “Black Week
promotion” at the end of November, both of which
delivered significantly higher sales than in 2019.

Operating Expenses
Operating expenses increased by PLN 1,144.1 million,or 90.3%, from PLN 1,266.9 million for FY 2019 to
PLN 2,411.0 million for FY 2020. This increase resulted primarily from increased net costs of delivery,
marketing service expenses, staff costs and one offcosts related to the Group’s IPO and its Management
Investment Plan.

PAYMENT CHARGES
Payment charges increased by PLN 19.2 million, or
14.3%, from PLN 133.7 million for FY 2019 to PLN
152.9 million for FY 2020. This increase resulted
from higher sales on the Group's e-commercemarketplace, substantially offset by lower transaction rates paid to third-party providers due todiscounts negotiated in the second quarter of 2019that increase as agreed volume thresholds are met.

COST OF GOODS SOLD
Cost of goods sold generated from retail revenues
increased by PLN 102.3 million, or 85.0%, from PLN
120.4 million for FY 2019 to PLN 222.7 million for FY
2020. This increase resulted primarily from increased
sales through the Group's 1P retail business with
margins improved slightly by 1.7 percentage points
as a result of an optimized algorithm helping toaddress correction of price defects more cost efficiently and general improvements in purchasing
processes.

NET COSTS OF DELIVERY
Advertising revenue increased by PLN 130.8 million,
or 63.1%, from PLN 207.1 million for FY 2019 to PLN
337.8 million for FY 2020. This increase resulted
primarily from the strong performance of sponsored offer ads supported by an acceleration intraffic growth on the Group's websites and deeper
penetration of the merchant base. The resulting
higher volumes were further supported by increasing average cost-per-click as merchant marketing
spend followed Polish consumers online as theyshifted significantly to e-commerce as a result of
the COVID-19 pandemic.

32

Net costs of delivery increased by PLN 424.0 million,or 157.9%, from PLN 268.5 million for FY 2019 to PLN
692.5 million for FY 2020. This increase resulted
primarily from an increased number of buyers on theGroup's e-commerce marketplace who enjoyed freeshipping benefits as members of the SMART! program. Additional demand caused by the COVID-19
pandemic further boosted the number of purchases
per SMART! subscriber and further contributed tothe acceleration of growth in net costs of delivery.

II. Business report

Lower unit costs per package resulting from scale
benefits drove a 11.2% YoY decrease in gross delivery
costs per shipped package.

MARKETING SERVICE EXPENSES
Marketing service expenses increased by PLN 257.7
million, or 84.0%, from PLN 306.9 million for FY
2019 to PLN 564.7 million for FY 2020. This increase
included a 66.8% increase in variable marketing
spend of PLN140.6 million, and particularly pay-perclick advertising, plus PLN 82.8 million related to
net costs of delivery for free SMART! subscriptions
provided by the Group to any buyer who wishedto utilize SMART! services, including free delivery,
during a three-month period at the height of the
COVID-19 pandemic. As the Group made no direct
incremental fees from either buyers or merchantsfrom providing the SMART! services to these buyers,
the net costs of delivery were classified as marketing expenses. No similar material amounts wererecorded in FY 2019. This expense line included
6.9 mPLN of one-off costs related to donations tovarious public benefit organizations.

STAFF COSTS
Staff costs increased by PLN 195.7 million, or 66.5%,
from PLN 294.4 million for FY 2019 to PLN 490.1
million for FY 2020. This increase resulted partiallyfrom the recruitment of new employees as headcount as of the year end was 26% higher YoY, aswell as an increase in base salaries and increased
annual bonus provisions following the Group's
strong performance. However, PLN 80.9 million of
the higher staff costs were mainly related to sharebased compensation expenses from two programs;
Certain managers received non-recourse loans fromthe Group to invest in the Management Investment
Plan that was settled at the IPO (52.2 mPLN) andmost employees of the Group received a grant ofpublicly traded shares in Allegro.eu to be delivered
one year after the IPO (25.4 mPLN). Staff costs also
included non-recurring expenditure of PLN 3.3
million related to COVID-19 support for employees.

33ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

IT SERVICE EXPENSES

TRANSACTION COSTS

Operating Profit

IT service expenses increased by PLN 21.4 million,
or 53.7%, from PLN 39.9 million for FY 2019 to PLN
61.4 million for FY 2020. This increase resulted primarily from new licenses related to the introductionof new software solutions and increased IT costs
due to higher technical platform costs, including
external cloud usage, due to the growing storage
requirements for the increasing number of active
offers on the Group's e-commerce marketplace.

Transaction costs increased by PLN 60.2 million,
from PLN 1.4 million for FY 2019 to PLN 61.6 million
for FY 2020 due to IPO-related one-off costs ofadvice and professional services amounting to PLN
61.2 million and costs of acquiring the remaining
20% minority interest in eBilet Polska sp. z o.o. of
PLN 0.4 million.

Operating profit increased by PLN 236.9 million, or
26.7%, from PLN 886.1 million for FY 2019 to PLN
1,123.0 million for FY 2020 as a result of the factors
discussed above, including the negative impact of
IPO-related one-off expenses.

Operating Profit before Amortization
and Depreciation

Net financial result increased by PLN 133.3 million,
or 35.7%, from a cost of PLN 373.0 million for thetwelve months ended 31 December 2020 to a costof PLN 506.3 million for the twelve months ended
31 December 2020.

OTHER EXPENSES
Other expenses increased by PLN 46.5 million, or
58.6%, from PLN 79.3 million for FY 2019 to PLN
125.8 million for FY 2020. This increase resulted
primarily from higher consultancy and contractor
costs in connection with the development of new
products and projects and increased insurance
costs related to a new public company Directors
and Officers policy. This expense line includes a net
PLN 13.9 million of costs included as one-off costsin the Adjusted EBITDA reconciliation bridge, mainly
restructuring costs and regulatory proceedings
costs.

NET IMPAIRMENT LOSSES ON FINANCIAL AND
CONTRACT ASSETS
Net impairment losses on financial and contract
assets increased by PLN 17.0 million, or 76.2% fromPLN 22.4 million for FY 2019 to PLN 39.4 million for FY
2020. This increase resulted primarily from increased
provisioning for bad debts related to increased sales
on the Group's e-commerce marketplace as well as
an additional provision arising from the extensionof payment terms for SME merchants from 14 to 60
days in response to the COVID-19 pandemic. This
payment extension lasted for four billing periods
and ended in August 2020. The launch of a trial of
Allegro Pay was not a significant contributor to thegrowth in Net impairment losses as only PLN 1.2
million of reserves were necessary against the year
end loan book of PLN 52.0 million

34

Operating profit before amortization and depreciation increased by PLN 261.4 million, or 19.7%, from
PLN 1,325.4 million for FY 2019 to PLN 1,586.8 million
for FY 2020 as a result of the factors describedabove, including the negative impact of IPO-related
one-off expenses.

NET FINANCIAL RESULTThis increase resulted primarily from recognitionof a non-cash charge to financial expenses in theamount of PLN 143.4 million due to the Group’s
decision to refinance its borrowings at IPO in October 2020, representing the unamortized value oforigination costs and related expenses, incurred
at inception of the Group’s borrowings facilities in2017 and as a result of their upsize in 2019, which
could no longer be amortized over the full term of
the original facilities. In addition, early repaymentof the second lien facility triggered a liability to pay
PLN 26.0 million in fees. These expenses were offset
by lower interest expenses resulting from lower
margins paid due to Group’s continuous deleveraging as well as significantly lower interest cost in
Q4 2020 as a result of refinancing at lower averageinterest rate margins.
The following table presents a breakdown of theGroup's financial income and financial costs for theperiods indicated.

AMORTIZATION
Amortization increased by PLN 16.6 million, or 4.3%,
from PLN 383.6 million for FY 2019 to PLN 400.2
million for FY 2020. This increase resulted primarily
from an increase in intangibles associated withcapitalized development costs of projects that werecompleted and put into use in the twelve months
since the end of the prior period, such as the firstphases of projects aimed at improving delivery
experience and productization.

DEPRECIATION
Depreciation increased by PLN 7.8 million, or 14.1%,
from PLN 55.7 million for FY 2019 to PLN 63.6 million
for FY 2020. This increase resulted primarily fromthe depreciation of computers and office equipment
related to growth of the organization.

II. Business report

PLN m

FY 2020

FY 2019

Change %Interest from deposits

2.8

8.0

(65.7%)

Other financial income

3.3

1.6

104.0%

Valuation of financial assets

10.9

—

n/a

—

1.3

n/a

17.0

10.9

55.0%

Interest paid and payable for financial liabilities(297.1)(361.1)(17.7%)

Deferred borrowings cost write off(143.4)—n/aInterest rate hedging instrument(41.9)(14.8)

183.3%

Second Lien facility early repayment cost

(26.0)—

n/aInterest on leases

(3.0)

(3.8)

(21.1%)

Revolving facility availability fee

(3.3)

(3.2)

3.6%

Net exchange losses on foreign currency transactions

(4.2)

—

n/a

Other financial costs

(4.4)

(1.1)

298.5%

Financial costs(523.3)(384.0)36.3%

Net financial result(506.3)(373.0)35.7%

Net exchange gains on foreign currency transactions
Financial income

35

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Profit before Income Tax
Profit before income tax increased by PLN 103.7
million, or 20.2%, from PLN 513.0 million for thetwelve months ended 31 December 2019 to PLN
616.7 million for the twelve months ended 31 December 2020 as a result of the factors described above.

Income Tax Expenses
Income tax expenses increased by PLN 78.2 million,
or 65.2%, from PLN 120.0 million for the twelve
months ended 31 December 2019 to PLN 198.1
million the twelve months ended 31 December 2020.
This increase resulted primarily from an increasein operating profit excluding non-recurring items
mainly related to the Group’s IPO which increased
the taxable base.

The Group's effective tax rate was 23.4% and 32.1%
for the twelve months ended 31 December 2019 and2020, respectively, compared to the Polish standard
corporate income tax rate of 19% for each period.
The effective tax rate increased in 2020 as a resultof non tax deductible IPO expenses and other tax
losses incurred by one of the Group's Luxembourg
subsidiaries in the combined amount of PLN 266.0
million, for which no deferred tax asset is recognized
as this entity is not likely to generate taxable incomein the foreseeable future. This has resulted in PLN
50.5 million of additional tax expense in the period,
calculated at the Polish standard corporate income
tax rate of 19%, that would have otherwise been
avoided if those tax losses were tax deductible.
The following table presents a breakdown of income
tax expenses for the periods indicated.

The following table presents a reconciliation between reported and adjusted net profit for theperiod under review.

PLN m

FY 2020

FY 2019

Change %Net profit

418.6

393.1

6.5%

EBITDA adjustments

163.2

12.8

1180.0%Net financial result adjustment

169.4

–

n/a

Second Lien facility early repayment cost (1)

26.0

–

n/a

Deferred borrowings cost write off (2)

143.4

–

n/a

Tax impact of adjustments(19.3)(2.2)

792.9%

Adjusted net profit

731.8

403.7

81.3%

1.
2.

PLN m

FY 2020

FY 2019

Change %Current income tax on profits(261.0)(160.8)

62.3%

62.8

40.9

53.8%

(198.1)(120.0)65.2%(Increase)/Decrease in net deferred tax liability
Income tax expense

Represents early repayment charges of the Second Lien Facility before the due date.
As a result of the Board of Director’s decision, taken on 28 September, to refinance its existing borrowing facilities
using a new borrowing facility and proceeds of a primary share offering pursuant to the Group’s IPO, the carrying
value of the existing borrowing facilities was modified to reflect an earlier expected full repayment date of 14
October 2020. As a result of this decision, the carrying value of the existing borrowing facilities at amortized cost
increased by PLN 143.4 million and an equivalent amount of deferred borrowings cost was recognized as a noncash financial expense

Net Profit

Adjusted net profit

Other Comprehensive Income

Total Comprehensive Income

Net profit increased by PLN 25.5 million, or 6.5%,
from PLN 393.1 million for the twelve months ended
31 December 2019 to PLN 418.6 million for the twelve
months ended 31 December 2020 as a result of thefactors discussed above, including the impact of
IPO-related one-off expenses and refinancing costs.

Adjusted net profit increased by PLN 328.2 million,
or 81.3%, from PLN 403.7 million for the twelve
months ended 31 December 2019 to PLN 731.8
million the twelve months ended 31 December 2020
when PLN 163.2 million of EBITDA adjustments, PLN
169.4 million of one-off financial expenses related
to the Group’s refinancing and PLN 19.3 million oftax effect on the above adjustments are excluded.

Other comprehensive income decreased by PLN
71.5 million, or 2210.2%, from negative PLN 3.2
million for the twelve months ended 31 December
2019 to negative PLN 74.7 million for the twelve
months ended 31 December 2020. This decrease
resulted primarily from adverse changes in the valuation of financial liabilities relating to the Group's
fixed interest rate swap contracts. The COVID-19
pandemic resulted in a substantial fall in market
interest rates and medium-term bond yields that
increased the mark-to-market liability on the Group's
hedged interest rate positions that were taken out
to reduce exposure to interest rate volatility.

Total comprehensive income decreased by PLN
46.0 million, or 11.8%, from PLN 389.8 million for
the twelve months ended 31 December 2019 to
PLN 343.8 million for the twelve months ended 31
December 2020 as a result of the factors discussed
above.

36

II. Business report37ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

2.2.3.
Review of Cash Flow performance

The following table summarizes net cash flows fromoperating, investing and financing activities for thefinancial years and fourth quarter periods ended 31
December 2020 and 31 December 2019:

Q4 2020(unaudited)

Q4 2019(unaudited)

Change%Cash Flow, PLN m

FY 2020

FY 2019

Change%Net cash inflow/(outflow) from operating
activities

1,509.9

1,246.5

21.1%

344.9

344.5

0.1%

Profit before tax

616.7

513.0

20.2%

324.7

166.3

95.2%

Income tax paid

(121.1)(163.1)(25.8%)(27.9)(57.0)(51.1%)

Amortization and depreciation

463.8

439.3

5.6%

118.6

113.3

4.7%

Net interest expense

508.3

375.5

35.4%

68.6

100.2

(31.5%)

Changes in net working capital(34.9)

72.3(148.3%)(152.3)21.0

823.7%

Other operating cash flow items

77.1

9.6

703.1%

13.2

0.6

2,100.0%

Net cash inflow/(outflow) from investing
activities(218.2)(202.9)

7.5%

48.9

(36.0)

33.0%

Capitalized development costs(149.3)(94.4)

58.2%(43.2)(24.7)

74.9%

Other capital expenditure(81.2)(48.6)

66.9%(21.4)(14.2)

50.8%

Acquisition of subsidiaries(11.8)(63.0)(81.3%)

(7.4)

–

n/a

Other investing cash flow

24.1

3.1

677.4%

23.1

2.9

695.5%Net cash inflow/(outflow) from financing
activities(510.5)(1,433.8)(64.4%)

163.1(112.5)(245.1%)

Proceeds from capital increase

972.3

–

n/a

972.3

–

n/a

Repayment of share premium–(2,736.0)

n/a

–

–

n/a

Borrowings received–

1,959.5

n/a

–

–

n/a

(1,056.7)(215.8)389.7%(711.7)–n/aInterest paid

(275.9)(375.0)(26.4%)(38.6)(94.2)(59.0%)

Other financing cash flow

(150.2)(66.5)

125.9%(58.9)(18.2)

222.8%Net increase/(decrease) in cash
and cash equivalents

781.2(390.2)(300.2%)

460.1

196.0

134.7%

Borrowings repaid

38

II. Business report

Net cash from operating activities

Net cash used in financing activities

Net cash from operating activities increased by
PLN 263.4 million or 21.1% YoY during FY 2020 andincreased by PLN 0.4 million or 0.1% YoY for Q4
2020. The Group’s outflow into working capital of
PLN 30.5 million in FY 2020 compared to a PLN 72.3
million cash inflow in FY 2019 results mainly fromthe increase in receivables from increased sales andoutflows to fund consumer loans granted by Allegro
Pay, partially offset by increases in trade liabilities.
Net interest expense increased by PLN 132.8 million
or 35.4% YoY during FY 2020 mainly due to deferredborrowings costs, connected with the refinancing,that was recognised as a non-cash financial expense.
Other operating cash flow items increased by PLN
67.5 million or 703.1% YoY during FY 2020 reflectedshare based compensation for managers who had
invested in the Management Investment Plan as well
as shares granted to employees at the IPO.

Net cash used in financing activities was PLN 510.5
million for FY 2020. This was primarily connectedwith debt refinancing that decreased the nominal
amount of loans, net of arrangement fees paid, by
PLN 711.7 million in addition to recurring principal
repayments of PLN 345.0 million made earlier thisyear. This was offset by the proceeds of a primaryshare offering pursuant to the Group’s IPO in theamount of PLN 972.3 million that the Group received. The Group paid the interest amounted to
PLN 275.9. The significant outflow in the year ended
31 December 2019 was primarily connected witha share premium repayment of PLN 2,736.0 million
to the Group's shareholders which was partially
offset by a PLN 1,959.5 million inflow of cash inconnection with the upsizing of the Group's seniorterm loan facilities. The Group repaid the principal in
the amount of PLN 215.8 million along with interest
amounting to PLN 375.0.

Net cash used in investing activities
Net cash used in investing activities was PLN 218.2
million during FY 2020 which represents a YoY
increase of 7.5%. The Group's total cash used ininvesting activities increased by PLN 12.9 million,or 33,0%, from PLN 36.0 million for the quarter
ended 31 December 2019 to PLN 48.9 million for
the quarter ended 31 December 2020. The increase
has been primarily driven by increasing capitalized
development costs relating to development of theAllegro platform as more software developers areadded to the technology team to work on extending
the functionality of the platform.

39

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.

2.2.4.
Indebtedness

As of 31 December 2020, the Group's total borrowings (principal adjusted by amortised cost) were PLN
5,437.8 million. In addition, the Group had PLN 500.0
million committed under a revolving facility, which
was undrawn as of 31 December 2020.
On 14 October 2020 the Group completed its refinancing transaction by drawing the full amountof borrowings under the PLN 5,500.0 million New
Senior Facility, receiving a net amount of PLN 5,440.0
million, and, together with the Company utilising its
net proceeds from the initial public offering of theCompany’s shares of PLN 972.3 million, applied theavailable funds to the repayment and discharge infull of all indebtedness outstanding under Original
Facilities in the amount of PLN 6,151.7 million.

As a result of the Group completing the refinancing
transaction, the gross balance of outstanding bankborrowings fell by PLN 651.7 million from PLN 6,151.7
million to PLN 5,500 million.
The refinancing enabled the Group to reduce net
leverage to 2.5x for the year ending 31 December
2020, a reduction from net leverage of 3.4x as of
30 September 2020, thereby enabling the Group to
increase its operational flexibility and to substantially reduce the interest rate that it pays on its debt.

PLN m (unaudited)

June 2020

September 2020

December 2020

Adjusted EBITDA LTM

1,514.7

1,600.8

1,750.0

Borrowings at amortized cost

6,169.5

6,163.1

5,437.8

78.5

77.4

73.3

Cash

(574.8)(725.2)(1,185.1)

Net Debt

5,673.2

5,515.3

4,326.0

Leverage

3.7x

3.4x

2.5x

Equity6,923.9

6,806.9

8,089.6

Net debt to Equity

81.9%

81.0%

53.5%

Lease liabilities

40

II. Business report

Summary of key
developments

3.1.
Initial Public Offering

3.2.
Refinancing

Allegro.eu completed the initial public offering of its
shares on the WSE and its ordinary shares began
trading on the WSE on 12 October 2020. The listing was Poland’s largest ever IPO, with an implied
initial market capitalization of PLN 44 billion at thesubscription price of PLN 43.00 per share. Allegro.
eu ended the year as the largest listed company in
Poland by market capitalization.

On 29 September 2020 an agreement was signed
between Adinan Midco S.à r.l., a private limited
liability company (société à responsabilité limitée)incorporated and existing under the laws of theGrand Duchy of Luxembourg, having its registeredoffice at 1, rue Hildegard von Bingen, L-1282 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies’
Register (Registre de Commerce et des Sociétés,Luxembourg) under number B209013 (the “Credit
Facility Borrower”) and the consortium of lenders,
resulting in commitments for (i) a PLN 5,500.0 million
senior secured term loan facility (the “New Senior
Facility”) and (ii) a PLN 500.0 million (equivalent)
multi-currency revolving credit facility (“New RCF”
and together with the New Senior Facility, the “New
Facilities”).

On the day of listing, all employees who were
employed by the Group as at the listing date, andwho did not hold any shares pursuant to historicinvestment arrangements, were granted a one-off
share award of 233 shares with a value equivalent
to PLN 10,019 at the subscription price, vesting 360
days after the listing date.
As part of the initial public offering the Group raised
PLN 972.3 million net proceeds which helped toreduce the balance sheet leverage and enabled
the completion of the Group’s refinancing at more
attractive financial terms.

On 14 October 2020 the Company completed the refinancing of its earlier borrowings. The full amount ofborrowings under the New Senior Facility was drawn,
receiving a net amount of PLN 5,440.0 million after
deduction of PLN 60.0 million arrangement fees andexpenses, and, together with the Company utilising
its net proceeds from the initial public offering of theCompany’s shares of PLN 972.3 million PLN, applied
the available funds to the repayment and discharge
in full of all indebtedness outstanding under original
borrowing facilities in the amount of PLN 6,151.7
million. As a result of the Group completing therefinancing transaction, the balance of outstandingbank borrowings fell by PLN 651.7 million from PLN
6,151.7 million to PLN 5,500 million.

41

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.3.
COVID-19 Impact
The final maturity date for the New Senior Facility
is October 2025 and the final maturity date for the
New RCF is October 2025 (subject to two 12 monthextensions at the request of the Company or Credit
Facility Borrower and with the consent of the relevant New RCF Lender(s)). There are no repayments
due on the New Senior Facility prior to the final due
date on 14 October 2025.
The New Facilities will initially bear interest at a rate
per annum equal to WIBOR (or EURIBOR or LIBOR,
as applicable at the Credit Facility Borrower’s option)(in each case subject to a zero floor) and an initial
margin of: (i) in relation to New Senior Facility, of
2.25% per annum and (ii) in relation to the New RCF,
of 1.80% per annum.
As a result of the refinancing, the Group recognizeda non-cash charge to financial expenses in its financial statements for FY 2020 in the amount of PLN
143.4 million. This amount reflects the unamortizedvalue of origination costs and related expenses,
incurred at origination of the refinanced facilities in2017 and as a result of their upsize in 2019, which
will no longer be amortized over the full term of therefinanced facilities. In addition, the early repaymentof the portion of the refinanced facilities triggereda liability to pay PLN 26.0 million in early payment
fees which was also recognized as financial expensein FY 2020 accounts.
The refinancing enabled the Group to reduce net
leverage to 2.5x for the year ending 31 December
2020, a reduction from net leverage of 3.4x as of
30 September 2020, thereby enabling the Group to
increase its operational flexibility and to substantially reduce the interest rate that it pays on its debt.

42

3.4.
Growth in SMART!

During FY 2020 the Group’s financial results werepositively impacted by an accelerated shift to online
shopping by Polish consumers in response to the
COVID-19 pandemic. Year-over-year GMV growth
for the twelve months ended 31 December 2020
was 54.0%, as compared to GMV growth of 25.4%
for the twelve months ended 31 December 2019.
The impact of the COVID-19 pandemic on consumer
behavior led to significant increases in GMV perbuyer growth during FY 2020, which impacts thecomparability to the Group’s results of operations
between FY 2020 and FY 2019. The end to lockdowns
and a gradual return to normal once the national
vaccination program has been rolled is likely to
reduce GMV growth rates in the future relative tothose seen in 2020 although much of the increased
buyer engagement may be sustained going forward.
In response to the COVID-19 pandemic, the Groupinvested heavily in supporting consumers with provision of goods whilst staying safe at home by providing all buyers on its marketplace free deliveries
and returns using the Group’s SMART! program forfree for three months between mid-March and midJune 2020. This resulted in PLN 82.8 million costs ofdelivery for free SMART! subscriptions provided by
the Group during FY 2020, that was classified as marketing expense. Including this amount, the Group
spent a total of PLN 775.3 million in FY 2020, net of
SMART! subscription revenues, facilitating online
shopping with free deliveries to Polish households.
At the onset of the pandemic in Poland in March 2020,
in order to support its merchant base through theeconomic disruption, the Group initiated a scheme
to support merchants on the Group’s platform byextending payment terms for Polish SMEs for up to
60 days, postponed the implementation of a new
method for calculating fees for Allegro sellers andadded a 3% cashback credit for merchants andoffering 90 days of 0% fees for newly onboarded merchants. This final measure was continued
throughout the remainder of 2020.

II. Business report

The spread of COVID-19 has led the Group to modify
its operational practices, in full compliance withactions required by authorities or those that it
determines are in the best interests of its employees, buyers, merchants and other stakeholders.
The Group has implemented a work-from-homepolicy which has been followed by nearly all of theGroup’s employees. For the Group’s employees
who work in the Group’s warehouse and/or cannot
work remotely, the Group has implemented additional protective procedures, including equipping
employees with personal protective equipment(e.g. masks, gloves, disinfectants, hand sanitizers
and face shields), implementing social distancing,staggering employees working hours across three
shifts throughout the day, increasing the frequencyof cleaning in the Group’s facilities, and installing
thermal imaging cameras.
Throughout the pandemic the Group continued
to support society providing uninterrupted andsafe shopping from home. Dynamic increases inonline shopping were well handled by logistics infrastructure with continuous improvement in delivery
predictability and speed.
In addition, the Group made PLN 6.9 million donations to support several public organizations during
the COVID-19 pandemic. Please refer to section
Approach to Corporate, Environment, and Social
Responsibility of this Report for further details.

The SMART! loyalty program has been a major commercial success throughout FY 2020, with dynamic
growth in the number of subscribers during the yearthat significantly exceeded the Group plans. Thishas been partly achieved thanks to the measures
implemented by the Group at the onset of the COVID-19 pandemic in Poland during the second quarter,
providing all buyers on its marketplace free deliveries
and returns using the Group’s SMART! program forfree for three months between mid-March and midJune 2020. A substantial part of those free SMART!
trialists have subsequently been converted to paid
subscription after the first lockdown in Poland ended,with membership growing strongly. In order to drive
higher conversion, the Group launched additional
promotional measures, with an „Annual for PLN 39”
SMART! promotion launched during the summer andagain during Black Week that lasted until Christmas.
The annual SMART! week promotion” at the turnof September and October has been a particularsuccess in 2020 during which the GMV transacted on
the platform tripled vs. a similar campaign in 2019. In
addition, the Group launched a new SMART! Student
program in October 2020.
The dynamic growth in SMART! subscribers and orders
led to a corresponding increase in GMV generated by
the program subscribers. The extra GMV driven by
growth in SMART! subscribers and their increasing
engagement has been a major contributor to theacceleration of the marketplace flywheel since theprogram launched, with acceleration in the numbersof merchants and active offers and improvement inquality as more merchants strive to join SMART! andincrease sales. Moreover, the Group has establishedthrough rigorous testing that relatively less engaged
buyer segments increase their spending even more
quickly when they sign up to SMART! than the moreengaged segments who were generally first to sign
up to SMART!. Accordingly, the Group expects the
GMV uplift from SMART! memberships to continue
to grow, relative to the corresponding increase indelivery expenses, as penetration of the Active Buyerbase increases over time. The program brought significant GMV uplift for Allegro merchants, who started
contributing to the cost of courier deliveries with theco-financing fees for courier deliveries introducedin April 2020.

43

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.5.
Allegro Pay

3.6.
Acquisitions

During the first half of 2020 the Group developed its
own proprietary consumer finance lending solutions
for buyers to use when making purchases on theGroup’s e-commerce marketplace. The FinTech
experts and developer teams acquired with theacquisition of the FinAi business by the Group in
January 2020, together with the Group’s existing
technology resources, have developed integrated
solutions that are expected to provide an excellent
user experience. Using the sub-brand Allegro Pay,
the new proprietary lending solutions moved into
user testing during the third quarter of 2020 and
the Group completed commercial tests during thefourth quarter of 2020 with PLN 77 million loan sales
and PLN 53 million outstanding consumer loan balance at end Q4 2020. During the beta testing phasethe product received an outstanding NPS score of
85 for the overall product experience. Expectedcredit losses were 2.1% of the outstanding grossloans at FY 2020 year-end.

On 27 January 2020 Allegro.pl sp. z o.o. finalized
the purchase of 100% of FinAi shares for PLN 7
million in cash. This transaction brought a teamof experts with core FinTech capabilities, including
market, machine-learning, artificial intelligence andcredit scoring expertise, as well as risk management,
regulatory and legal knowledge. The Group expects
such competencies and capabilities to be importantenablers for further growth of its financial services
offering, including Allegro Pay launched in 2020.
In the future, the Group may seek to leverage theexpertise it has acquired with FinAi to develop
additional financial services products for either
buyers or merchants or, potentially, to be utilizedin transactions conducted outside of the Group’s
e-commerce marketplace.

The Group believes that the Allegro Pay proprietarylending solutions will greatly improve the user experience with consumer credit solutions available
for the Group’s e-commerce marketplace buyers,
leading to potentially better lending decision making
and a wider take up of consumer credit solutions bybuyers. The near term plans for 2021 include scaling
the eligibility for the product to most Allegro buyers,
further improving and shortening the activation
procedures, and implementing a 1-click purchaseand payment process. Furthermore, the Groupintends to seek dedicated external financing forAllegro Pay to be available by the end of 2021.

44

On 27 October 2020 Allegro Logistyka sp. z o.o. purchased 100% shares in Opennet sp. z o.o. for a cash
consideration of PLN 12.3 million. The payment was
divided into two tranches – PLN 8.4 million was
settled at the date of the transaction, the remaining
PLN 3.9 million is being payable until December
2022. Opennet is a leading provider of technology
solutions for logistics, including automated parcel
machines in Poland. Together with Opennet, Allegro
Logistyka acquired this know-how and the team ofqualified developers that will support the development of the Group’s planned last mile solutions.

4.

Remuneration Report
The section of the Report constitutes the remuneration report of Allegro.eu in relation to the financial
year ending on 31 December 2020, which has been
prepared by the Remuneration and Nomination
Committee of the Company and adopted by the
Board of Directors in accordance with the Luxembourg law of 24 May 2011 on the exercise of certain
rights of shareholders and implementing the directive (EU) 2017/828 of the European Parliament andof the Council of 17 May 2017 amending directive
2007/36/EC as regards the encouragement of longterm shareholder engagement, as amended (the“Law”), and in particular article 7ter of the Law.

4.1.
Adoption of theRemuneration Policy

4.2.
Purpose and scope of theRemuneration Policy
The purpose of the Remuneration Policy provisions
is to set out the principles governing the remuneration of the directors of the Company (eacha “Director”) and key managers of the Group (eacha “Key Manager”) so as to contribute to the implementation of the long-term business strategy,
long-term interests, sustainability, and stability of
the Group. It takes into account the interests of
the Group’s shareholders and other stakeholders(including customers, business partners, employees,
and society). This goal is to be favoured, in particular, by the amount, principles, and structure of the
remuneration of the Directors and Key Managers.
The remuneration principles take into account thecurrent financial situation of the Group.

The Remuneration Policy of the Company (the“Remuneration Policy”) was adopted by the Boardof Directors on 28 September 2020 upon proposal
from the Remuneration and Nomination Committee
and approved by the general meeting on 29 September 2020 in accordance with the Luxembourg
law of 1 August 2019, amending the law.

II. Business report45

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

4.3.
Remuneration of
Executive Directors andKey Managers
The Remuneration Policy is intended to attract,
motivate, and retain Directors and Key Managers
who have the highest level of competence andexperience. Remuneration for Directors and Key
Managers is determined considering market pay
rates for persons performing functions of board
members, including entities with a similar profile ofactivity and scope of conducted activity, taking into
account the needs and capabilities of the Company
and its subsidiaries, individual qualifications, andthe level of experience of individual Directors, aswell as their scope of competence.
The Remuneration and Nomination Committee
consider the opinion of an independent advisor in
the field of remuneration of Executive Directors andKey Managers. The appointed advisor in 2020 was
hkp Group. The advice and recommendations of theexternal advisers were used as a guide, but do notserve as a substitute for thorough consideration of
the issues by each Committee member. Advisers
attended Committee meetings occasionally, as andwhen required by the Committee.
The Group has its operations in Poland and is listed on
the Warsaw Stock Exchange, but it competes with top
international market players in the highly demanding
tech and e-commerce industry. Hence, to maintainthe firm’s current competitive advantage and build
future business success we need to be in a position to
recruit top talent in Poland and beyond (e.g. European
market). In order to compete for the best talent, theGroup provides competitive pay levels and structures
based on objective market data.
Given this particular context, the Group has used
two peer groups to define pay ranges for Directors
and Key Managers:•

46

Peer Group 1 consists of the constituent companies of the WIG 20 Index, which Allegro isa part of and in which Allegro currently has thehighest market capitalization. The choice of thispeer group reflects the location of the Group’s
operations and takes into account local market
practice for Director and Key Manager roles.

•

Peer Group 2 consists of European listed companies in the e-commerce and technology sectors
selected by the Remuneration and Nomination
Committee. The choice of this peer group is essential in order to assure Allegro’s attractivenessas an employer to highly qualified individuals
from Poland and throughout Europe.

The Executive Directors and the Key Managers did
not receive any remuneration (fixed or variable) fromany other entity of the Group other than listed inthis Remuneration Report.
The total Remuneration Package for Executive Directors and Key Managers consist of the following
components:

4.3.1.
Fixed remuneration
Executive Directors and Key Managers are entitledto a fixed base salary for the work specified foreach individual in their appointment letter and/or
employment contract with the Company and/or
its subsidiaries. Where a Director or Key Manager
performs functions for more than one entity within
the Group, they may receive fixed base salaries fromeach entity for the respective functions performed.
The base salary varies depending on their functionsin the Board of Directors, supervisory boards, ormanagement boards of the Company’s subsidiaries,
additional functions in the Group, and the scope of
their competence. Base salary levels are reviewed
annually with effect from 1 April and are comparedto the market benchmarks to ensure that the Groupremains competitive.
Executive Directors and Key Managers are entitledadditional benefits including the right to use a selected healthcare package and life and disability
insurance financed by the employer (fringe benefits).
The Company provides to the Executive Directors
and Key Managers, at its own expense, insurance
against any damage resulting from claims arisingfrom the liability of members of the bodies of a capital company (D&O liability insurance). The Company
does not provide any retirement schemes beyond
what is required by local labour law requirements.

II. Business report

4.3.2.
Short-term variable remuneration
In addition to the base salary, Executive Directors
and Key Managers may receive a discretionary
annual bonus. The purpose of this offering is to:•drive behavior and communicate the key priorities for the year,•

motivate employees and incentivize delivery of
performance over the one year operating cycle.

The amount of the annual bonus depends on:•

the amount of the annual base salary,•

the target size of the bonus as a percentage ofannual base salary that ranges from 60% to 100%
depending on the performed function.

•

results against agreed corporate performance
criteria that determines the size of the relevant
Corporate Bonus Pool expressed as a percentageof the target bonus of 100% and accrued for eachparticipant in the pool (see below for detailed rules)••

a modifier based on individual performancethat can boost or reduce the bonus based on
corporate performance within a range of +25%
and – 100%, considering the following criteria:•

realization of goals and tasks,•

attitude and way of performing work,•

skills development and knowledge sharing

any other objectives as may be determined by
the Committee from time to time

Executive Directors and Key Managers may receive
an annual bonus from the Corporate Bonus Pool ofthe entity in which they performed their function,
which is calculated according to the criteria set out
below. For the avoidance of doubt, the Executive
Directors who are employed both at Allegro.pl andAllegro.eu are entitled to an annual bonus from theAllegro.pl pool for the 2020 financial year in addition
to their Director fees received from Allegro.eu.

Corporate Bonus Pool
Operating Company’s bonus pool is based on the company’s performance
criteria realisation. Annual targets for a given year as agreed with theBoard of Directors and the Committee.
Company Performance Index is a base for determining a company’s bonus
pool. It is driven by target achievement of two KPIs:

Performance criteria

Allegro.pl and Allegro Pay:
• GMV – weight 50% where 100% performance = annual budget• EBITDA – weight 50% where 100% performance = annual budget
Ceneo.pl:• Revenue – weight 50% where 100% performance = annual budget• EBITDA – weight 50% where 100% performance = annual budget
eBilet: No bonus pool for 2020. Starting from 2021 bonus pool will bebased on eBilet and Allegro.pl figures:• 60% eBilet CPI (EBITDA / GMV)
• 40% Allegro.pl CPI (EBITDA / GMV)

Min/Max payout (Cap) as of Base
SalaryMin = 0%;100% = annual budget
Max = no limit for GMV and 150% Cap for EBITDA

Bonus threshold

87.5% of company performance criteria realisation, separately for each KPI.

Bonus pool acceleration

Linear (8% of bonus for 1% of target realization)

Payout frequency

Annually after annual results confirmation

47

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

4.3.3.
Long–term variable remuneration
The Group is introducing the Allegro Incentive Plan
(AIP), a discretionary benefit offered to its Executive
Directors, Key Managers and employees. AIP isa long-term incentive plan based on the Company’s
shares, approved by shareholders of the Company
on 20 September 2020 and adopted by the Boardof Directors on 7 October 2020. The objective of
the AIP is to align the Directors' interests with thatof the Group and to contribute to the actual longterm financial standing and stability of the Groupand long-term shareholder value creation. The
provisions of the scheme can only be modified by
the Shareholders Meeting and the Remuneration
and Nomination Committee is responsible for thedetailed rules of the scheme, for approving grant

Allegro Incentive Plan
proposals made by Management, and for deciding
on the size of awards for Executive Directors andKey Managers.
The first grant under AIP is planned for April 2021.
Executive Directors and Key Managers may beoffered variable remuneration under the AIP in theform of Performance Share Units (“PSU”). Selected
employees of the Group may be also offered thevariable remuneration in the form of Restricted
Stock Units (“RSU”) Both plans details are presented
in the table below:

Vesting andRelease of Awards

RSUs will vest and Shares be released in the ordinary course in three annual tranches – 25%,
25%, and 50% respectively on the first, second, and third anniversaries of the date of grant,
subject to continued employment.
PSUs will notionally vest in the ordinary course in three annual tranches – 25%, 25%, and 50%
respectively on the first, second, and third anniversaries of the date of grant, but will only bereleased on the third anniversary of grant, subject to continued employment and satisfactionof the relevant performance conditions applicable to such PSU.
The Remuneration and Nomination Committee may grant awards subject to a different vesting
period and release schedule, at its discretion. Any part of an AIP award which is not releasedin accordance with its terms will immediately lapse.

Malus andClawback

The Remuneration and Nomination Committee, may reduce the number of Shares undera PSU or within the period of two years after a PSU has been released, require the repaymentof some or all of the Shares so released (net of any tax), if certain events occur, including(i) the Participant's gross misconduct, fraud or dishonesty or that of someone else at theirdirection, in each case, resulting in material losses to the Group or causing the Group’smaterial reputational damage and (ii) a material error in the assessment of the performance(including material misstatement of accounts in the case of clawback) upon which the valueof the award was granted or number of Shares were released.
If a Participant ceases to be employed within the Group:• by reason of (i) gross misconduct or (ii) resignation where the Participant joins a competitor(as determined by the Remuneration and Nomination Committee from time to time) withintwelve months of the date on which they so cease to be employed (the „Termination Date”),
they will be considered a „bad leaver”; and• for any other reason, they will be considered a „good leaver.”Allegro Incentive Plan
EligibilityAwards may be granted to Directors and certain selected employees of the Group at thediscretion of the Remuneration and Nomination Committee

Forms of Awards

Awards under the AIP may be granted in the form of PSU or RSU which give the participantsa right to receive Shares without payment on completion of a vesting period and, in the caseof PSUs, subject to the satisfaction of performance conditions. The AIP rules also include
flexibility for the Remuneration and Nomination Committee to grant other forms of awards,
such as share options.

Overall Plan Limits

In any ten-year period, not more than 10% of the issued share capital of the Issuer may be
issued or transferred out of treasury for the purposes of awards granted under the AIP and
any other discretionary employees’ share plans adopted by the Company. This limit does notinclude management investment into the Company or awards that have been made or grantedon or prior to Admission (including conditional upon Admission) or have lapsed.

Individual Limits

The aggregate total market value of Shares over which an award is granted may not exceed
200% of annual base salary or 300% in exceptional circumstances (as measured at the dateof grant).
The Remuneration and Nomination Committee will determine the value of awards to be granted
to each Participant in any financial year.

Source of SharesAwards under the AIP may be granted over newly issued Shares, Shares held in treasury, orShares purchased in the market (including Shares held in an employee benefit trust).

Timing of Awards

The first awards under the AIP are expected to be granted in April 2021. Thereafter, awards will
normally be granted within the six-week period after the Issuer announces its annual results.
However, the Remuneration and Nomination Remuneration and Nomination Committee may
grant awards outside this period at its discretion. No awards may be granted more than ten
years after the AIP was adopted, unless by further decision of the Shareholders' Meeting.

Performance
Conditions

Awards in the form of PSUs will be subject to performance conditions which will be determinedby the Remuneration and Nomination Committee at the time of grant. Awards will vest between
0% (if the performance conditions are not met) to 200% (at maximum level) based on theextent to which the performance conditions are met.
Any performance condition may be amended or substituted if one or more events occur
which cause the Remuneration and Nomination Committee to consider that an amended
or substituted performance condition would be more appropriate. Any such amended or
substituted performance condition will, in the reasonable opinion of the Remuneration and
Nomination Committee, not be materially more or less difficult to satisfy.

48

II. Business report

Leaving the GroupFor PSU awards:• if a Participant is a „bad leaver,” any outstanding awards lapse (vested and unvested portions)and any Shares received under the AIP in the twelve months prior to the Termination Date(and, if applicable, in the period between the Termination Date and the date on which theParticipant joins a competitor) must (on a net of tax basis) be repaid to the Company; and• if a Participant is a „good leaver”:• subject to the bullet point below, the vested portion of the award will be released on thescheduled release date unless the Remuneration and Nomination Committee determinesthat the award will be released at, or immediately before, the Termination Date. The
number of Shares that may be released shall be determined by reference to the extent
to which the performance conditions have been met as at the release date, capped at100% of the Shares that have vested at the Termination Date; and• in the event an individual is dismissed by the Group (other than for gross misconduct) within
six months following a change to the majority of (A) the Board or (B) the management
board of Allegro.pl, within any twelve month-period, the treatment is as for the bullet
point above save that:• the vested portion shall be calculated by reference to completed months served fromthe date of grant to the Termination Date as a proportion of the three-year vesting
period (as opposed to the annual vesting schedule); and• the Shares will be released on or around the Termination Date unless no additional
tax liability for the Participant would be triggered if the Shares were released on thescheduled release date.
For RSU awards:• if a Participant is a „bad leaver,” no further awards shall vest and any Shares received underthe AIP in the twelve months prior to the Termination Date must (on a net of tax basis) be
repaid to the Issuer; and• if a Participant is a „good leaver,” no further awards shall vest unless the Remuneration and
Nomination Committee exercises its discretion otherwise.
For both PSUs and RSUs, if a Participant who is considered a „good leaver” on their Termination
Date later breaches their restrictive covenants, any outstanding awards held by them at that time
would lapse and they would have to repay (on a net of tax basis) to the Company any Sharesdelivered to them under the AIP in the twelve-month period immediately prior to the breach.

49

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

On 17 December 2020 the Remuneration and
Nomination Committee agreed the performance
conditions for PSU grant scheduled for April 2021:
Performance conditions are based on Company
Performance Index based on 3 year EBITDA and
GMV perspective and defined in relation to 3Y CAGR
to ensure sustainable return for shareholders andrepeatability of the model in the following years.

The PSU Performance 2021-2023 targets:•

GMV – weight 50%, based on Allegro.pl and eBilet
figures;•

EBITDA – weight 50%, based on consolidated
Group figures.

Under the rules of the PSU plan, The Remuneration
and Nomination Committee has flexibility to choose
other performance conditions than those selected
for the 2021 grant if it considers other measures may
be more appropriate to the particular circumstances
impacting the Group at the relevant point in time.
Accordingly, the performance measures selected
may vary from annual grant to annual grant.
The assumptions for setting the targets for PSU
performance conditions are:•

PSU 200% (max level) to be aligned with 3Y plantargets;•

PSU 100% (target level) to be above market
forecasted growth;•

PSU 0% (threshold level) to be at the minimum
growth level.

Management Investment Plan

Under the MIP, the management participated indirectly through various classes of shares of Adiman
SCSp and directly via type C and D shares issued by
Adinan Super Topco (currently: Allegro.eu). Managers
paid the fair value of the issued shares at the grant
date with any difference to nominal value being paid
to share premium.
At IPO in October 2020, the management’s holdings
from their investments made under the MIP wereconverted into ordinary shares of Allegro.eu on
the basis of the market capitalization of the Group
derived from the listing price of 43 zloty per shareand applying the terms of the MIP. The resulting
shareholdings from the management’s investments
represent returns on their individual investments
made at fair value and are not classified as remuneration for work performed by the Group and are
not covered by this Remuneration Report.
This general conclusion is modified in relation to
two elements of the MIP’s terms which delivered
value to the management in a form that qualifies
to be treated as equity settled share based compensation in accordance with IFRS 2 – Share Based
Compensation. These two elements were:i) where certain managers were given non-recourse
loans to purchase part of their shares, the non-recourse loans together with the shares issued areconsidered to create an option under IFRS 2. It gives
the party receiving the loan the right upon an exit
event to choose not to repay the loan, but instead
to relinquish their rights to the shares.

Applying IFRS 2 to these two elements, the benefits
were fair valued at grant date and amortized overthe expected vesting period. The expected vesting
period at the relevant grant date was either Juneor December 2021 and represented the assumed
maturity date of the option at the grant date. The
ratchet feature, which was granted to both key
Management and selected other managers, wasalso valued under IFRS 2 at inception of the MIP.
The expenses that were recognized by the Group
as a result of these two terms from the MIP werecharges of a non-cash nature.

Where these non-cash charges required under IFRS
2 are attributable to Board Members and Key Managers of the Group, the relevant amounts are presented
below. They are considered to be components ofreturns the managers received from their MIP investments that can be classified as remuneration
for work performed as opposed to returns madeon investments made at fair value. These figures arepresented separately as non-cash payments andare excluded from remuneration presented in thefurther part of this Remuneration Report.
Non-cash equity settled share based compensation
recognized under IFRS2 from fair value investments
made under the MIP (in kPLN)

Name of the Director

Company

Position

Darren Huston

Allegro.eu

Chairman, Non–Executive Director

3,772.1

Francois Nuyts

Allegro.eu

Executive Director

3,044.6

Jon EastickAllegro.eu

Executive Director

130.9

Piotr Szybiak

Allegro.eu

Key Manager, MBM

109.7

Damian Zapłata

Allegro.eu

Key Manager, MBM

109.7

Wojciech Bogdan

Allegro.eu

Key Manager, MBM

1,737.5

Marcin Łachajczyk

Allegro.eu

Key Manager, MBM

38.7

2020

ii) most managers were also entitled to participate
in a ‘ratchet feature’ where, if upon an exit eventthe ultimate shareholder return amount was atleast 3 times their initial investment amount, thenManagement’s B shares were entitled to share ina further amount of 1% of the shareholder receipts.

The Executive Directors, Chairman, and Key Managers participated in the Management Investment
Plan ("MIP") that ceased to operate at the date of
the Group’s IPO.

50

II. Business report51

ALLEGRO.EU S.A. GROUPANNUAL REPORT
for the years ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

4.3.4.
Remuneration statement for Executive
Directors and Key Managers
Remuneration statement for Executive Directors
and Key Managers for 2020 (in kPLN)

Fixed Remuneration

Name of Director

Company

Position

Base SalaryFees

Proportion of fixed and variable
remuneration

Variable Remuneration

Other Benefits

One yearvariable*

Extraordinary
item

Multi year
variablePensionExpenses

Total Remuneration

Fixed

Variable

Allegro.eu

Executive Director(01.09.2020 –)

—

74.1

—

—

—

—

—

74.1

100%

0%

Allegro.pl

Group CEO, MBM(01.08.2018 –)

3,349.0—

39.3

7,304.2———

10,692.632%68%

Allegro.eu

Executive Director(01.09.2020 –)

—

74.1

—

—

—

—

—

74.1

100%

0%

Allegro.pl

Group CFO, MBM(01.09.2020 –)1,065.6—

41.3

1,336.3———

2,443.3

45%

55%

Piotr Szybiak

Allegro.pl

CTO, MBM(01.12.2015 –)

996.9

—

65.8

1,251.4———

2,314.1

46%

54%

Damian Zapłata

Allegro.pl

CCO, MBM(01.12.2017 –)1,065.6—

64.2

1,633.2———

2,763.0

41%

59%

Wojciech Bogdan

Allegro.pl

CDO, MBM(01.05.2020 –)

680.0

—

4.1

1,112.3——

1,796.5

38%

62%

Marcin Łachajczyk

Ceneo.pl

Managing Director, MBM(01.01.2013 –)

579.8

—

60.3

573.1

—

—

1,213.1

53%

47%

Francois Nuyts

Jon Eastick—*Bonus amounts based on accrued values as final awards based on the rules of short-term variable compensation for 2020 are yet to be determined and paid out at the date of this Report.

52

II. Business report53ALLEGRO.EU S.A. GROUPANNUAL REPORT
for the years ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

4.4.
Remuneration of Non-Executive Directors
The Non-Executive Chairman of the Board is entitledto an all-inclusive fixed fee. Other Non-Executive
Directors received varying fixed fees that depend on
the function performed, in particular Non-Executive
Directors performing functions in committees areentitled to additional fees.

Non-Executive Directors are not be entitled to any
form of variable remuneration and none of theirremuneration components are linked to

The amount of remuneration of Non-Executive
Directors was determined taking into accountthe objective of ensuring their independence andtheir competence in supervision over the Group’s
activities.

•

options or other derivatives or any other variable
components; or•the Group’s results.

The independent Non-Executive Directors did notreceive any variable remuneration (including any
shares, award shares, performance bonus).

Remuneration statement for Non-Executive Directors for 2020 (in kPLN)
Fixed Remuneration
Name of Director(date of appointment – resignationfrom the Board of Directors)

Position

Base Salary

Fees

Other Benefits

One yearvariable

Multi year
variable

Extraordinary
item

PensionExpenses

Total Remuneration

Fixed

Variable

Darren Huston(12.05.2017 –)Allegro.eu

Chairman,
Non—Executive Director

—

479.5

—

—

—

—

—

479.5

100%

0%

Carla Smits-Nusteling(01.09.2020 –)Allegro.eu

Independent
Non—Executive Director

—

182.2

—

—

—

—

—

182.2

100%

0%

David Barker(01.09.2020 –)Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Nancy Cruickshank(01.09.2020 –)Allegro.eu

Independent
Non—Executive Director

—

160.0

—

—

—

—

—

160.0

100%

0%

Paweł Padusiński
(01.09.2020 –)Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Richard Sanders(01.09.2020 –)Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Daniele Arendt(05.05.2017 – 12.10.2020)

Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0

—

—

Adinan Midco

Director

160.0

—

—

—

—

—

—

160.0

100%

0%

Séverine Michel(05.05.2017 – 12.10.2020)

Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Cédric Pedoni(05.05.2017 – 12.10.2020)

Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Gilles Willy Duroy(17.10.2019 – 12.10.2020)

Allegro.eu

Non—Executive Director

—

—

—

—

—

—

—

0.0

—

—

Gautier Laurent(05.05.2017 – 12.10.2020)

54

Company

Proportion of fixed and variable
remuneration

Variable Remuneration

II. Business report55

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Other related party transactions with
Non-Executive Directors of the Groupprior to the IPO
Since Group inception through to 2020, the Chairman of the Board of Directors provided, through his
personal consulting company, BlackPines CapitalPartners Ltd (“BlackPines”), several consulting services to the Company which were not related to the
Chairman's directorship mandate. The consultancy
fees paid by the Company to BlackPines covered theperformance of services in connection with strategic
advice to the Board of Directors and strategic andoperational guidance, directives and direction to
the Company’s CEO and executive team, and similar
assistance to the Company and any company of theGroup through the personal services of Mr. Huston,pursuant to the general direction of the Board of
Directors. This contract was discontinued prior to
the IPO. These fees are disclosed as related party
transactions in the Note 37 to the Consolidated
Financial Statements.
No other Non-Executive Director provided services to the Group for which they received financial
compensation in the period from inception of theCompany to the its IPO.

4.5.
Comparative information on the remuneration
and Company’s performance
The table below illustrates the annual remunerationof Directors and Key Managers, of the performanceof the Company and of the average total annual
remuneration of employees of the Company and
the Group other than Directors and Key Managers
in 2020.

As this is the first year of reporting obligations for
the Company post IPO, so the Group will provide
comparative data going forward.

Information Regarding
the 2020 (in kPLN)

Annual Change
Director's total remuneration (from all legal entities)
Francois Nuyts

CEO, Executive Director

10,766.6

Jon Eastick

CFO, Executive Director

2,517.4

Darren Huston

Chairman, Non-Executive Director

479.5

Carla Smits-Nusteling

Independent Non-Executive Director

182.2

David Barker

Non-Executive Director

Nancy Cruickshank

Independent Non-Executive Director

Paweł Padusiński

Non-Executive Director

0.0Richard Sanders

Non-Executive Director

0.0Daniele Arendt

Non-Executive Director

0.0

Non-Executive Director

160.0

Séverine Michel

Non-Executive Director

0.0

Cédric Pedoni

Non-Executive Director

0.0

Gilles Willy Duroy

Non-Executive Director

0.0

Piotr Szybiak

Key Manager, MBM

2,314.1

Damian Zapłata

Key Manager, MBM

2,763.0

Marcin Łachajczyk

Key Manager, MBM

1,213.1

Wojciech Bogdan

Key Manager, MBM

1,796.5

GMV (mPLN)

Information Regarding the 2020
35,110.9

EBITDA – Allegro segment (kPLN)

1,530,326.0

EBITDA – Ceneo segment (kPLN)

134,552.0

Revenue – Ceneo segment (kPLN)

280,528.0

Average annual remuneration of
employees other than Directors and Key
Managers
Total Remuneration

II. Business report

160.0

Gautier Laurent

Company's Performance

56

0.0

Information Regarding the 2020 (in kPLN)
124.5

57

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

4.6.
Diversity and Inclusion
The Company is strongly committed to be an equal
opportunities employer, where every employee isrespected and supported to reach their highest
potential. The Company fosters a work environment
where people can speak up to remove barriers to
success, collaborate, and put the best ideas into
practice. To emphasise the importance of the matterthe Diversity Policy was adopted by the Board of
Directors on 17 December 2020.
The main measures to ensure diversity are:For further details concerning Diversity and Inclusionin the Company please refer to section Approach to
Corporate, Environment, and Social Responsibilityof this Report.

4.7.
Application of theRemuneration Policy
The remuneration paid to the Directors and Kay
Managers of the Company is in line with the objectives of the Remuneration Policy of the Company
and does not deviate from the Remuneration Policy.

•

The adoption of a policy to counteract discrimination and harassment,

The remuneration of Directors is:•

The adoption of a Stay Fair Code of Conduct,••

The adoption of a whistleblowing policy,

sufficient and conform to the Director’s dedication, qualification, and responsibilities but it does
not compromise their independence;•

The provision of training programs that promote
diversity,•

sufficient to attract and retain directors withthe talent and profile desired by the Company;•

Seeking to treat all of its employees equally,
regardless of sex, gender identity, age, race,
employment form, political views, sexual orientation, disability, health, nationality, ethnic origin,religion, denomination, non-denominational
status, belief, union membership, family status or
lifestyle, including when evaluating performanceand making hiring and promotion decisions.

•competitive, which is achieved by establishinga remuneration package in line with market
standards of comparable sectors and companies•

Supporting women choosing careers in thetechnology industry,•Supporting diversity when selecting membersof the Board,•

Supporting diversity and integration initiatives,•

Increasing the possibility of changing positions
within the company,

•

58

•

5.

Expectations For The Groupin FY 2021 and the Medium
Term
The Group provides the following update with regards
to the targets and expectations discussed in the"Management's Discussion and Analysis of Financial
Condition and Result of Operations" section of theCompany’s Prospectus dated 22 September 2020.
This update takes account of potentially intensifiedcompetition in 2021. It doesn’t include downside
risks from proposed Polish digital advertising tax
if voted into law.

FY 2021takes into account the current financial situationof the Company.

GMV

Medium Term

2019 Actual2020 Actual

Prospectus

UpdateProspectus

Update25%

54%High 20s%
Low 30s%

Low–to–mid 30s%

Low–to–mid 20s%

Mid 20s%

YoY growth

YoY growth

2019­‑21
CAGR

2019‑21CAGR

YoY growth

YoY growth= Highteens%
YoY growth

Revenue

31%

54%

Mid 30s%

High 30s%

Marginally> GMV
GrowthMarginally> GMV
GrowthYoY growth

YoY growth

2019‑21CAGR

2019‑21CAGR

YoY growth

YoY growth= High20s%

Monitoring activities and reporting on theireffects.

YoY growth

II. Business report59ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

FY 20212019 Actual2020 Actual

Prospectus

UpdateProspectus

Update

20%

31%

More
in–lineMid
Teens%

Broadly= GMV
GrowthBroadly= GMV
GrowthYoY growth

YoY growthWith 2019
growthYoY growth

YoY growth

YoY growthPLN
560–600m

PLN
550–650m(in 2022E);
mid–term~5% ofrevenue

PLN
700–950m
in
2022–23E;
then~5–6% ofrevenue [3]Adjusted EBITDA [1]Capex [2]Medium Term

5.5% ofrevenue

5.8% ofrevenuePLN
425–475m

1.

Adjusted EBITDA defined as EBITDA pre transaction costs, management fees (monitoring fees), stock-based
compensation, restructuring costs and other one-off items
2. Represents cash capex and does not include leased assets (which are presented in balance sheet)
3. After Delivery Experience roll-out

60

II. Business report

6.

Recent Trading
During the two months ended 28 February 2021,
GMV performance has been satisfactory to meet the
expectations for 2021 set out by the Group in section 5 above. For these two months, absolute GMV
is below the levels recorded in Q4 2020, reflecting
normal seasonality, while year on year GMV growthcontinues at the unusually high levels experienced
since the start of the COVID-19 pandemic in Poland
in March 2020.

The Group accordingly expects to see lower year on
year growth rates from March 2021 onwards as prioryear GMV begins to reflect the impact of COVID-19.

61

III.
Nonfinancial
reportALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.

Business Model, Operations,and Corporate Governance

1.1.
Business Model
Scope of business activity
Allegro is the go-to commerce platform for Polish consumers and has delivered strong revenue
growth, profitability and cash flow at scale. The
Group operates a leading online marketplace in Poland, Allegro.pl, and the price comparison platformin Poland, Ceneo.pl (Source: OC&C).
Allegro.pl is the most recognized e-commerce brandin Poland (Source: Gemius). As of 31 December
2020, the Group's e-commerce marketplace had
approximately 13 million Active Buyers who connected with over 128,000 merchants. Allegro.pl
attracts visits from an average of 21 million internet
users per month, which is equivalent to 66% of
Polish residents ages 16 and above, and 78% of allinternet users in Poland. Allegro.pl is among the
top 100 websites in the world by visits per month(Source: SimilarWeb). Merchants on the Group's
e-commerce marketplace sell across a variety of
categories including automotive, home and garden,
books, media, collectibles and art, fashion and shoes,
electronics, kids, health and beauty, sports andleisure, and supermarket. Merchants primarily sell
new products to buyers on the Group's e-commercemarketplace in the business-to-consumer businessmodel ("B2C"). Consumer-to-consumer trade ("C2C")
represented less than 4% of the Group's net revenue
for the twelve months ended 31 December 2020.

64

The Group's e-commerce marketplace generates
revenue primarily through facilitating 3P transactions between buyers and merchants and charging
merchants commissions and other related fees. The
Group provides a range of supporting services tomerchants to grow their sales using the platform,
such as tools to monitor sales performance andmanage offer competitiveness, integration witha range of payment providers, standardized delivery
solutions and free-delivery programs, sales incentives for quality performance, marketing campaign
support, and merchant finance solutions. In addition,
the Group earns advertising revenue by providing
various types of advertising opportunities to brands
and merchants on the platform. The Group also has
its own limited-scale, 1P retail operations that generate revenue by selling products directly to buyers on
the e-commerce marketplace. The Group's 1P retailbusiness is intended to be a supplement to the 3P
business, representing 0.7% of the Group's grossmerchandise value ("GMV") for the year ended 31
December 2020, used mainly to remedy uncompetitive price points and important missing selection
among the offers available from the 3P business.

III. Non-financial report

Ceneo.pl is the multi-category price comparisonsite in Poland. Ceneo.pl is an established brand that
attracted an average of 26 million monthly users in2020 (Source: Google Analytics). As of December
2020, 20,000 online retail stores were registeredon Ceneo.pl and information on 24 million productoffers was available to consumers using the pricecomparison service.
The Group also operates eBilet, which is the event
ticket sales site in Poland, facilitating sales of a broad
range of entertainment, cultural, family, and sports
events, with approximately 2.3 million tickets sold in
the year ended 31 December 2019. In 2020, eBilet's
ticket sales business was severely disrupted by the
shutdown of the live entertainment events industry
in response to the COVID-19 pandemic.
The Group also generates revenue from dataprocessing, hosting and related activities; otherinformation technology and computer service activities; computer facilities management activities;
software-related activities and computer consultancy activities.

Key features of the Group’s businessplatform and growth strategy
THE GROUP'S SUPERIOR VALUE PROPOSITIONBENEFITS FROM THE FLYWHEEL EFFECT THATIS UNDERPINNED BY AN UNPARALLELED
FOCUS ON RETAIL BASICS.
The Allegro platform creates powerful network effects that benefit both buyers on the demand side
as well as merchants on the supply side, which theGroup refers to as the "flywheel." As more merchantsjoin the platform, the breadth of the products offered increases and price competitiveness improves,which in turn leads to increases in the number ofbuyers browsing and purchasing on the Group's
e-commerce marketplace. Conversely, as morebuyers browse for and buy products, merchants
become increasingly attracted to the Group's e-commerce marketplace.

The flywheel effect is powered by the Group's
relentless focus on improving and actively stimulating key retail basics – namely, breadth of productassortment, price competitiveness, and superior
shopping and delivery experience. It is accelerated
by platform innovations that make it easier to shop
online and drive improved sales conversion, suchas the utilization of machine-learning based recommendations and personalizations, the developmentof mobile entry points to the platform, the use of
mass-scale testing on consumer usage preferences,improvements to the speed of product delivery
and access to convenient delivery innovations, thedevelopment of on – and off-platform marketing
tools, the addition of new seamless payment options,and providing consumer finance products.
On the supply side, the Group is a leading online
gateway for merchants in Poland and a popularroute for merchants to approximately 13 million
Active Buyers (as of 31 December 2020). The Group
serves a large proportion of the total merchant basein Poland thanks to its unique value proposition
that includes: access to a large buyer base; the
SMART! loyalty program; ease-of-use; compelling
economics; a comprehensive range of merchanttools and value-added services (including marketing tools and support, free classroom and webinar
trainings, courses through Allegro Academy (a digital
entrepreneurship education program launched in2020) and trade analytics tools to monitor sales
performance and manage offer competitiveness);
access to a range of payment providers; unique delivery solutions; incentives for quality performance;and merchant finance. The Group's merchant baseranges from large brands, such as P&G and Reckitt
Benckiser, to retailers, such as MediaMarkt andCarrefour, to in particular Polish SMEs. The Group
believes that this wide variety of merchants allows
it to offer the broadest assortment of products
at attractive prices, without dependence on any
individual merchants. The Group has significantly
professionalized its merchant approach over the
past three years, developing a dedicated accountmanagement team of 50 product category specialists for the largest 3,000 merchants and focusing on
the improvement and automation of key merchantprocesses.

65

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

CONTINUOUS PLATFORM INNOVATION,
INCLUDING A FOCUS ON DELIVERY AND THE
SMART! LOYALTY PROGRAM, DRIVING AN
IMPROVING USER EXPERIENCE FOR BUYERS
AND MERCHANTS.
The Group has a culture of innovation with an aim to
improve the buyer and merchant experience on theplatform to drive sustained growth, with the delivery
experience and the SMART! loyalty program being
key areas of focus for the Group in recent years.
The SMART! loyalty program launched in August
2018 aims to offer a great value for money proposition. It is a PLN 49 per year (or PLN 8.99 permonth in 2020, rising to PLN 10.99 in January 2021)
subscription program that includes free delivery
and free returns as the program foundation, and isenhanced with commercial add-ons like daily SMART!
deals, dedicated SMART! Week shopping events,
exclusive pre-sales of top entertainment events,
access to exclusive product premiers, and otherbenefits. SMART! has proven successful at addressing a crucial historic impediment for e-commerce
growth, namely the impact of the cost of delivery
on the price competitiveness of goods purchased
online as compared to products purchased offline. In
addition, because SMART! is a subscription program,it naturally addresses the more highly engaged
proportion of the Group's buyer base, impacting
further the way they choose to engage in online
shopping and solidifying the Group's position as
the place where these buyers start their shopping
journey.
Delivery experience has also been a key area of
innovation with the Group successfully transitioningin less than three years to a managed and integrated
3P delivery network that also leverages the Group's
3P asset-light model. The Group's 3P delivery network delivers products quickly, reliably, and cheaply
without physically touching the inventory that moves
from Merchant to Buyer. In 2020, Allegro introduced
a delivery promise indicating what day the productwould be delivered and expanded access to a growing nationwide network of out-of-home pick-up/
drop-off locations and lockers and courier delivery
options provided by its delivery partners.

66

The Group's delivery experience is differentiatedfrom other Polish offerings for both buyers andmerchants. To manage the 3P fulfillment and delivery
network, the Group has developed "HUB," which isa unique, machine-learning powered, proprietary
software platform that integrates the Allegro platform, a range of logistics providers and over 128,000
merchants on the Group's e-commerce marketplace
as of 31 December 2020. "HUB" allows a simple andintuitive delivery promise and full package tracking
to be provided to buyers, while for the Group, its
merchants and carriers, "HUB" provides a tool tomanage end-to-end delivery performance, statuscommunication and settlements. Merchants areable to take advantage of the smart logistic networkthat is simple to use and provides a range of delivery
options, while benefiting from more competitivedelivery costs through the Group's frameworkagreements with key logistics players, including,among others, InPost, DPD, UPS, and the Polish state
postal service (Poczta Polska). As of 31 December
2020, a significant majority of delivery volumes were
processed through the Group's contracts and tools.
The Group's 3P delivery network proved resilient to
the distortions in the e-commerce value chain that
resulted from the COVID-19 pandemic lockdowns,
which produced significant peaks in growth of transactions in the second quarter, when all non-essential
offline retail was closed for a two month period,
and again in Q4 when covered shopping centerswere closed for most of November. During these
periods, and also during the traditional December
pre-Christmas peak in demand, the distribution
network worked with only minor delivery timeextensions in select categories.

III. Non-financial report

THE GROUP'S DISTINCTIVE BUYER – AND
MERCHANT-CENTRIC CULTURE IS NURTUREDBY ITS EXPERIENCED MANAGEMENTTEAM AND HIGH PERFORMING TEAM OFEMPLOYEES.
The Group is led by a highly experienced andentrepreneurial management team with complementary skill sets and proven track records ofdriving innovation. The management team is fully
focused on measuring and improving KPIs and hasa clear understanding of how to manage those KPIs
to positively impact the flywheel. The Chairman,
CEO, and the rest of the executive leadership teambring extensive experience at leading e-commerce,
technology, consulting, and financial institutions.
Combining global expertise and local knowledge
has enabled the team to build what the Group is
today – the number one e-commerce site in Poland,as recognized not only by buyers and merchants,
but also by its employees.
The Group's management team has built a creative
workplace for its employees, fostering a diverse,collegial, and entrepreneurial culture underpinnedby teamwork, commitment, continuous professional
development, and the maximization of value for all
stakeholders. As a result of the continuous innovation, testing, checking, improving, and raising the barin recruiting, Allegro is a demanding organization
with a high level of caring, and the Group believes
that this results in high employee engagement
and top talent acquisition. In a survey conductedin April 2020, approximately 93% of the Group's
employees said they would recommend Allegro asa great place to work, approximately 91% said they
consider it an inclusive workplace and approximately
90% said they believe it has open communications.
Most importantly, the Group has achieved a 78%
engagement index in 2020, which is higher than
the 73% average in the new technology industry
for companies with over 1,000 employees globally(Source: CAMP). The Group has access to a richmarket for technology talent in Poland and it has
assembled the largest tech development team in
Poland, with more than 3,150 staff working fromfive tech hubs across the country, of which morethan 1000 are engineers .

ENHANCED BUYER AND MERCHANT
EXPERIENCE AS A FOUNDATION FOR
FURTHER EXPANSION AND GROWTHThe Group aims to offer buyers and merchants
continuously improving, unparalleled value. The
Group will seek to achieve this through a combination of a focus on retail basics relating to its
platform in Poland, supported by complementarystrategic initiatives, and potentially supplemented
by international expansion.
The Group continues to develop and invest in thebuyer and merchant experience. In particular,
the Group is focusing on a number of initiatives,
including:•further automating and optimizing key merchantprocesses, as well as developing and enhancing
merchant tools and value-added services;•advancing the Group's search, discovery andsales conversion;•

improving engagement with the Group's mobile
web and app users;•

expanding product assortment breadth witha focus on bringing more Polish and international merchants onto the platform;•

improving price competitiveness by reducing thenumber of products where the Allegro platform
does not offer the lowest price either offline oronline; and•enhancing SMART! and improving delivery experience for buyers.

FURTHER EXPANSION OF SMART! AND
DELIVERY SERVICESThe SMART! loyalty program has achieved significant
success with 2.1 million active paying subscribers
as of 30 June 2020, a number which has continued
to grow very strongly during the second half of2020. However, Management believes that there issignificant room for further growth in the numberof SMART! subscribers and in the share of GMV
covered by SMART! benefits such as free delivery.

67ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The Group intends to continue to develop andenhance the SMART! offering by further improving
delivery speed and experience parameters, supplementing SMART! with a consumer finance FinTech
offering and adding off-platform services to increase
SMART! user engagement.
The Group aims to continue to build on its successes
in delivery experience, by increasing the proportionof one/two-day delivery share with a particular focus
on next day delivery, further growing the networkof out-of-home lockers and pick-up/drop-off points,
expanding into innovative delivery services including
scaling up of same day deliveries and the introduction of "ultra-fast" or "instant" deliveries. These
initiatives are being undertaken with the Group's
continued focus on its 3P merchant-fulfilled modelthat has proven to be an effective, asset-light approach. However, where software and integration
driven 3P solutions will not deliver sufficient progressin the delivery experience of the buyers, the Groupwill also make capital investments to improve its
capabilities. Two main capital investment initiatives
to support delivery experience have been identified
to be scaled up in 2021:•

68

The commercial launch of Allegro Fulfillment
services. Allegro Fulfillment will be used asa supplementary tool in select cases, such as forinternational sellers and other select merchants,
in an effort to improve delivery time and ensure
delivery promise accuracy. Dedicated logistics
locations known as Fulfilment Centers will beestablished to hold Merchants’ inventory on a 3P
basis and Allegro Fulfillment staff will receive,
store, pick, and ship that inventory on behalf ofthe Merchants in exchange for processing fees.
By running fulfillment centers at scale and withlate cutoff times, Allegro Fulfillment aims to drivea significant increase in GMV with more next day
delivery options, more domestic sellers included
and faster deliveries, and to grow net revenue asa result of revenue generated from fees charged
to merchants for fulfillment services as well asdelivery cost savings due to transport optimization and increased package consolidation. The
Group expects that Allegro Fulfillment will leadto a significantly increased direct contribution to
net revenue by the fifth year after its launch withcapital investment peaking in 2022 and 2023. A
dedicated logistics center for Fulfillment services
is planned to open in 2021.

•

Investing in the roll-out of a proprietary parcel
locker network. In order to provide the Group
with a capability to deliver to popular locker last
mile solutions that are fully integrated end-toend with the Group’s marketplace platform andApp, the Group intends to begin rolling out its
own proprietary locker network in 2021. This
investment will initially enable the Group to develop the full scope of competencies necessary
to build, manage, and integrate such a network.
The final scale of the investment and number oflockers to be built is yet to be determined andwill depend on the delivery experience improvements and returns on investment deliveredby the initial pilot phase roll-out. The Group is
in final negotiations to purchase 3,000 locker
machines from an established manufacturer
and plans to install up to 1,500 units in 2021
and the balance in 2022.

FURTHER EXPANSION OF ADVERTISING AND
PRICE COMPARISON
Advertising and price comparison are highly profitable, complementary, and fast-growing parts of
the Group's business. The Group has significant
reach due to the high level of user engagement
with, and visits to, the marketplace platform andthis has underpinned strong growth in the Group's
advertising revenue. The Group believes that there issignificant potential to increase advertising revenue
through further monetization of that broad reach,
improvements in ad technology and favorable online
advertising market trends. Unlike traditional display
advertisers, the Group believes that it is well positioned to capture a large share in digital advertising
via scalable, automated and AI-driven advertisingsolutions leveraging the Group's traffic and data.
Some of the Group's key Allegro Ads initiatives
include sponsored offers (to increase penetrationof the service among merchants on the Group's
e-commerce marketplace); internal digital display (todrive GMV on the platform); data-driven campaigns
or "DMP" (development of data-driven tool enablinghighly targeted CPM campaigns); external networkads (further scalability of the Group's integration
with Google and Facebook Ads to drive traffic to
the Group's e-commerce marketplace) and othercontent-based solutions (to create branded content
as a self-service).

III. Non-financial report

Ceneo is a leading price comparison platform in
Poland and among the most successful comparisonsites in Europe in terms of site visits, with 30.0%
revenue growth in 2020 versus 2019. The Groupbenefits from Ceneo as a result not only of theincreased traffic that is directed to the Group's
e-commerce marketplace, but also from insightsthat can be used to improve retail basics and an
expanded advertising reach.

RAISING AMBITION IN FINTECHOver the years, the Group has built a successful
financial services business using a third-party model
offering a range of buyer and merchant products
through partnerships and other forms of collaboration with leading financial players, including BNPParibas, mBank, PayPo, PayU, Przelewy24, and PZU.
The Group has achieved moderate penetration withminimal investment to date. The Group believes that
there is significant upside potential in integrating
the Group's financial services with its e-commercemarketplace, which is expected to drive both buyer
and merchant engagement, improve conversion
rates and further accelerate the flywheel. The Group
believes there is significant potential in integrating
its financial services with its core platform to better
address the market opportunity in Poland, which isestimated to be approximately PLN 300 billion ofadvances across consumer credit and corporate
operating credit (Source: OC&C).
Based on its analysis of the market opportunity,
the Group acquired the FinTech company FinAi in
January 2020, which brought a team of experts
with core FinTech capabilities, including market,
machine-learning, artificial intelligence, and credit
scoring expertise, as well as risk management, regulatory and legal knowledge. The Group expects
such competencies and capabilities to be importantenablers for further growth of its financial services
offering.

In August 2020, the Group launched Allegro Pay,
Allegro's own FinTech offering, with beta-testing ofa pilot launch offer concluded at the end of 2020.
Allegro Pay provides a simple user experience forbuyers (less than one minute to sign-up, one click
to pay and less than 15 seconds to buy) driving
conversion, data-driven credit decisions, and has
been built on top of the existing Allegro platform.
Buyer reaction to Allegro Pay has been very positive
with NPS scores of 85 being recorded, while cost ofrisk on the subset of buyers targeted for the beta
testing was at a comparatively low level of 2.1%.
Allegro Pay will be scaled up and further improvedin 2021 and is expected to become the leading
financial services product, in terms of the value ofloans written, during the course of the next year.
The Group expects loans provided by Allegro Pay toreach at least PLN 1 billion, and for the loan book toreach at least PLN 500 million, by the end of 2021. In
addition to Allegro Pay, the Group has a clear productroadmap ahead with a focus on consumer productsin the near term with the potential for the offering
to be expanded to include merchant financing, B2B
payments and financing, and insurance offerings
over time.

BROADENING PLATFORM AND GEOGRAPHICEXPANSIONThe Group believes that there are various opportunities to strengthen its current business footprint
into certain related opportunities which include
B2B as well as adjacent verticals in which Allegro
is not currently active or runs subscale operations,or through expanding value chain solutions suchas logistics or financial services supporting buyers
and merchants. The Group will also continue toconsider, and may complement its organic initiatives
with, opportunistic acquisitions. The Group has an
execution track record in bolt-on M&A, including
recent acquisitions of eBilet, FinAi, and OpenNet.

69

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

In addition, the Group has the ambition to growoutside of Poland in the medium term. International
expansion could bring benefits to both Polish buyers
and merchants, as well as to international ones. The
Group believes that the introduction of a sharedand more diverse buyer and merchant pool would
further increase the product assortment breadthon the Group's e-commerce marketplace and theprice competitiveness of products available tobuyers both locally and internationally, and also
allow for seamless access to multiple geographiesfrom a Polish and non-Polish merchant perspective.

Technology Platform
The Group is a technology business with a worldclass technology development team (including AI/
machine learning teams, product teams, and design
teams) based in five tech hubs across Poland. The
Group's technology platform is designed using
a domain-driven design paradigm that allows thewhole platform to be split into logical componentsthat reflect business processes. This design assuresthe lowest possible dependencies between domains to support the fast flow of business processdevelopment.
The Group has a scalable and modular technology
platform built in-house that is business-focused,easy to deploy, and maintain. The microservice,container-based architecture enables the rapid,
frequent, and reliable delivery of large, complex
applications, through both desktop internet browsers as well as mobile devices.

The Group seeks to offer a high level of infrastructure and data security, based on a layered
approach. Each security layer, including distributed
denial-of-service attack protection, bot detection
systems, web application firewalls and other tools
protect the platform. The Group is committed tothe security of consumers' experience on its marketplaces. The Group undertakes administrative andtechnical measures to protect its systems and theconsumer data those systems process and store.
The Group has developed policies and procedures
designed to manage data security risks. The Group
employs technical security defenses that are being
periodically reviewed by internal and external auditors, penetration testers, and security researchers.
Additionally, the Group takes part in an open bug
bounty program and uses third parties to assist in
its security practices as well as prevent and detectfraud.

1.2.
Group Structure
As of 31 December 2020, the Group comprised ofAllegro.eu, previously Adinan Super Topco (Parent)
as well as intermediate holding company Adinan
Midco with their registered office in Luxembourg
and companies conducting operating activities inthe territory of Poland – Allegro.pl, Ceneo.pl, Trade
Analytics Instytut Badań Ecommerce, eBilet Polska,
Allegro Finance, AllegroPay, and OpenNet together
with their non-operating subsidiary company Allegro
Logistyka. Each of the Polish Operating Companies
and their subsidiaries have their registered offices
located in Poland. In addition, Allegro.pl owns theAllegro All For Planet Foundation, which is not consolidated due to its immateriality.
The chart below presents the structure of the Groupas of 31 December 2020.

Sales and Marketing
The Group has strong brands, including Allegro,
Ceneo, and eBilet, and continues to raise brandawareness among both buyers and merchants
by enhancing and expanding its service offerings
and fostering rapid adoption through increased
brand affinity, public relations and strategic partnerships. The Group also leverages its direct sales
force and account management teams to facilitate
the acquisition and support of larger merchants.
Direct marketing, especially online, has also been an
effective merchant acquisition channel. This includes
display advertising, search engine marketing, social
media and direct mail campaigns.

Allegro.eu S.A. Luxembourg

Adinan Midco S.à r.l.
Luxembourg, 100%

Allegro.pl Sp. z o.o.
Poland, 100%

Allegro Logistyka Sp. z o.o.
Poland, 100%OpenNet Sp. z o.o.
Poland, 100%eBilet Polska Sp. z o.o.
Poland, 100%

Allegro Finance Sp. z o.o.
Poland, 100%

Trade Analytics Instytut Badań
Ecommerce Sp. z o.o.
Poland, 100%

Fundacja Allegro All For Planet
Poland, 100%

In 2020 Ceneo.pl sold 50% of shares in Trade Analytics Instytut Badań Ecommerce to Allegro.pl.
As a result of the merger and liquidations performed
within the Group on 21 December 2020, Adinan
Topco, Adinan Holdco, Adinan Bondco, and Adinan
Seniorco were absorbed into Allegro.eu and Adinan
Midco.

70

III. Non-financial report

Ceneo.pl Sp. z o.o.
Poland, 100%

Allegro Pay Sp. z o.o.
Poland, 100%71

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.3.
Management
The table below sets out the name, age, position,
year of appointment and the year in which thecurrent term expires for each of the directors of
the Company.

Name

Age

Year appointed
for the current
term to the Board of Directors

Darren Huston

55

2020

2026

—

Non—Executive Chairman

François Nuyts

48

2020

2026

—

Executive
Director

Jonathan Eastick

54

2020

2026

—

Executive
Director

David Barker

53

2020

2026

—

CinvenRichard Sanders

49

2020

2026

—

PermiraPaweł Padusiński

43

2020

2026

—

Mid Europa
Partners

Nancy Cruickshank

50

2020

2026

—

Independent
Non—Executive Director

Carla Smits-Nusteling

54

2020

2026

—

Independent
Non—Executive Director

Danielle Arendt-Michels

60

2020

—

12 October 2020

CinvenGautier Laurent

37

2020

—

12 October 2020

CinvenSéverine Michel

43

2020

—

12 October 2020

PermiraCédric Pedoni

45

2020

—

12 October 2020

PermiraGilles Willy Duroy

37

2020

—

12 October 2020

Mid Europa
Partners

Year term
expires

Resigned on

Representing

Darren Huston

Jonathan Eastick

Darren Huston is the Chairman of the Group. Mr.
Huston joined the Group as Executive Chairman
in January 2017 and was appointed as a memberof the Board of Director on 12 May 2017 and upon
the conversion of Allegro.eu into a public limited
liability company (société anonyme), Mr. Huston
was appointed as a Director as of 27 August 2020.
Previously, Mr. Huston was CEO of Booking.com
and Group CEO of the Priceline Group and he has
also held various roles with Microsoft (including as
CEO of Microsoft Japan), Starbucks and McKinsey &Company. Mr. Huston is also the CEO and Founderof BlackPines Capital Partners. Mr. Huston has over
25 years of managerial and leadership experience.

Jon Eastick is the CFO of the Group. Mr. Eastickjoined the Group as CFO in February 2018 and was
appointed as a member of the Board of Directors on
1 September 2020. Mr. Eastick is also a member ofthe management board of Allegro.pl and a memberof the management board of Ceneo.pl. Previously,
he was a director at Ernst & Young. Mr. Eastick hasover 25 years of experience in finance and management, including over 16 years of experience in CFO
roles at Netia, Polska Telefonia Cyfrowa, and Lucent
Technologies Poland.

Mr. Huston holds an MBA degree from Harvard University and an MA in Economics from the Universityof British Columbia.

Mr. Eastick holds a Bachelor of Science in International Trade and Development Economics from
London School of Economics and Political Scienceand is a British Chartered Accountant.

François Nuyts

David Barker

François Nuyts is the CEO of the Group. Mr. Nuyts
joined the Group as CEO in August 2018 and was
appointed as a member of the Board of Directors
on 1 September 2020. Mr. Nuyts is also a member ofthe management board of Allegro.pl and a memberof the management board of Ceneo.pl. Previously,
Mr. Nuyts held various leadership roles with Amazon
across Western Europe (England, France, Spain, andItaly) where he was a part of its rapid expansion. Mr.
Nuyts has over 20 years of experience in management and strategy consulting, including roles withAccenture and Kellogg's.

David Barker led Cinven's investment in Allegro andhas been a member of the supervisory boards of theAllegro.pl and Ceneo.pl operating companies since2017. He was appointed a member of the Board of
Directors on 1 September 2020. Mr. Barker joined
Cinven in 1996 and is a partner and a member of
the Investment Committee at Cinven. He has been
involved in many of Cinven's technology, media, andtelecom investments.
Mr. Barker holds a BA degree from Cambridge
University.

Mr. Nuyts holds an MBA degree from Babson College
MA.

72

III. Non-financial report73ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Richard Sanders

Nancy Cruickshank

Danielle Arendt-Michels

Cédric Pedoni

Richard Sanders led Permira's investment in Allegroand has been a member of the supervisory boardsof the Allegro.pl and Ceneo.pl operating companies since 2017. He was appointed a member ofthe Board of Directors on 1 September 2020. Mr.
Sanders joined Permira in 1999 and is a partner anda member of the Investment Committee. At Permira,
Mr. Sanders is the Co-Head of Technology and has
extensive experience in the sector.

Nancy Cruickshank was appointed a member ofthe Board of Directors on 1 September 2020. Ms.
Cruickshank is currently SVP Chief Digital Officer
at Carlsberg, having held a NED position with thecompany for 18 months prior to joining the executive
team. Ms. Cruickshank is also on the board of Bango
Plc and Flutter Entertainment Plc. Previously, she
was CEO and Founder of MyShowcase, a fresh andcontemporary beauty retailer enabled by smart
technology. Ms. Cruickshank has worked in the digital industry for almost 20 years, including launching
Conde Nast online in 1996, overseeing TelegraphMedia Group's digital business and developing the
fashion and beauty market leader, Handbag.com
between 2001 and 2006, leading to a successful
sale to Hearst Corporation in 2006.

Danielle Arendt-Michels was appointed a memberof the board of managers of the Company on 5 May
2017 as a class A manager and her mandate wasconverted into a class A directorship mandate on
27 August 2020 following the conversion of Allegro.
eu into a public limited liability company (société
anonyme). Ms. Arendt-Michels resigned as a Director
on 12 October 2020.

Cédric Pedoni was appointed a member of the boardof managers of the Company on 5 May 2017 asa class B manager and his mandate was converted
into a class B directorship mandate on 27 August2020 following the conversion of Allegro.eu intoa public limited liability company (société anonyme).
Mr. Pedoni resigned as a Director on 12 October
2020.

Ms. Cruickshank holds a Bachelor of History fromthe University of Leeds.

Gautier Laurent

Gilles Willy Duroy

Gautier Laurent was appointed a member of theboard of managers of the Company on 5 May 2017as a class A manager and his mandate was converted
into a class A directorship mandate on 27 August2020 following the conversion of Allegro.eu intoa public limited liability company (société anonyme).
Mr. Laurent resigned as a Director on 12 October
2020.

Gilles Willy Duroy was appointed a member of theboard of managers of the Company on 17 October
2019 as a class B manager and his mandate wasconverted into a class B directorship mandate on
27 August 2020 following the conversion of Allegro.
eu into a public limited liability company (société
anonyme). Mr. Duroy resigned as a Director on 12
October 2020.

Mr. Sanders holds an MA degree from Oxford University and an MBA degree from Stanford University.

Paweł Padusiński

Carla Smits-Nusteling

Paweł Padusiński led Mid Europa Partners' investment in Allegro and has been a member of thesupervisory boards of the Allegro.pl and Ceneo.pl
operating companies since 2017. He was appointed
a member of the Board of Directors on 1 September
2020. Mr. Padusiński is a partner and the head of
the Warsaw office at Mid Europa Partners where hehas worked since 2005. Prior to joining Mid Europa
Partners, Mr. Padusiński worked in the corporate
finance department at PricewaterhouseCoopers
LLP in Warsaw.

Carla Smits-Nusteling was appointed a memberof the Board of Directors on 1 September 2020.
Ms. Smits-Nusteling is currently Chairwoman of
the Board of Tele2 AB, Non-Executive Director and
Audit Chair of Nokia Corporation, Non-Executive
Director and Audit Chair of ASML, lay judge of theEnterprise Court of the Amsterdam Court of Appeal,
and a Board Member of Stichting Continuiteit Ahold
Delhaize, a foundation organized under the lawsof the Netherlands to safeguard the interests ofKoninklijke Ahold Delhaize N.V. Ms. Smits-Nustelingwill step down from the ASML board on 29 April
2021 when her second term expires. Previously,
Ms. Smits-Nusteling was CFO and member of theBoard of Management of Royal KPN N.V. and sheheld several finance and business related positions
at Royal KPN N.V. and PostNL.

Mr. Padusiński holds an M.Sc. in Finance & Banking
and Strategic Management from the Warsaw Schoolof Economics.

Séverine Michel
Séverine Michel was appointed a member of theboard of managers of the Company on 5 May 2017as a class B manager and her mandate was converted into a class B directorship mandate on 27
August 2020 following the conversion of Allegro.
eu into a public limited liability company (société
anonyme). Ms. Michel resigned as a Director on 12
October 2020.

Ms. Smits-Nusteling holds a Master's degree inBusiness Economics from the Erasmus Universityof Rotterdam and an Executive Master of Financeand Control degree from the VU University of
Amsterdam.

74

III. Non-financial report75ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Key Managers
In addition to the executive management on the
Board of Directors of Allegro.eu, the following KeyManagers are considered relevant to establishingthat the Group has the appropriate expertise forthe management of the business.

Marcin Łachajczyk

Piotr Szybiak

Marcin Łachajczyk is the General Manager of Ceneo.
pl. Mr. Łachajczyk joined Ceneo in January 2009 andwas appointed its General Manager in January 2013.
Mr. Łachajczyk has over 15 years of experience inbusiness management and product development
and has experience in developing business in international markets. He is an expert in the field ofdigital transformation and optimization of businessprocesses in e-commerce and a specialist in data
analysis and building strategies in e-commerce.

Piotr Szybiak is the Chief Technology Officer ofAllegro. Mr. Szybiak joined Allegro in 2001 and was
appointed as Chief Technology Officer in 2015. Mr.
Szybiak is also a member of the management boardof Allegro.pl operating company. Mr. Szybiak hasover 20 years of experience in IT management andsoftware development.

Mr. Łachajczyk holds an engineering degree from theSilesian University of Technology and a postgraduate
degree in project management from WSB Universities. He has also completed an executive education
program at Harvard Business School.

Mr. Szybiak holds a Master's degree in Computer
Science from Poznan University of Technology andan MBA from Poznań University of Economics andBusiness.

Damian Zapłata

Wojciech Bogdan

Damian Zapłata is the Chief Commercial Officer ofAllegro. Mr. Zapłata joined Allegro as Chief Commercial Officer in December 2017 and is also a memberof the management board of Allegro.pl operatingcompany. Previously, Mr. Zapłata has been a Partner
at McKinsey & Company, a Managing Director in
Loyalty Partners Polska (part of American Express
Inc.) and General Manager and President of theBoard of First Data Poland S.A.

Wojciech Bogdan is the Chief Data Officer of Allegro.
Mr. Bogdan joined Allegro in May 2020 as Chief Data
Officer and is also a member of the management
board of Ceneo.pl operating company. Previously,
Mr. Bogdan was a Partner at McKinsey & Company
where he led the Retail and Consumer Practice inCentral and Eastern Europe. He has over 20 years ofbusiness consulting experience in retail, consumer
and telecommunication sector, as well as big data
and AI application.

Mr. Zapłata holds a Master's degree in Economics
from European University Viadrina and an MBAfrom INSEAD.

76

Mr. Bogdan holds a Master's degree in Economics
from University of Gdańsk.

III. Non-financial report77ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.4.
Board Committees

1.5.
Shareholders of
the Company

The Group has the following committees: (i) anaudit committee (the "Audit Committee") and (ii)a remuneration and nomination committee (the"Remuneration and Nomination Committee").

Audit Committee
The tasks of the Audit Committee include financial controls (supervision of internal and external
auditing, monitoring of financial reporting) as wellas supervision of persons entrusted with the management of the Group (internal control system). In
particular, its duties and responsibilities include:(i) the determination of the audit plan for a periodof several years as well as the scope of the internaland external audits, (ii) discussion of the audit
reports with the internal and external auditors aswell as with the management, and the monitoringof their implementation, (iii) the assessment of theperformance of the internal and external auditors
as well as their cooperation with one another andsupport of the Company's Board in the nomination of the external auditors to be proposed to theshareholders' meeting for election, (iv) checking
the independence of the internal audit department
from the Group and the units to be audited as wellas the approval of the guidelines for the work of theinternal audit department, (v) the assessment of
the consolidated financial statements, the statutoryfinancial statements and the management report of
the Company as well as the decision whether they
can be recommended to the Company's Board forsubmission to the shareholders' meeting and (vi)the assessment and further development of theinternal control system.

Based on the most recent available information, tothe best of Management’s knowledge, the Group’s
shares are held by the following entities.

Remuneration and Nomination
Committee
The tasks of the Remuneration and Nomination
Committee consist of (i) the preparation and periodical review of the Group's compensation policy
and principles and the performance criteria related
to compensation and the periodical review of theirimplementation as well as the submission of proposals and recommendations to the Company's Boardand (ii) the preparation of all relevant decisions of
the Company's Board in relation to the nominationof the members of the Company's Board as well as
submission of proposals and recommendations
to the Company's Board. The Company's Board
may delegate further powers and duties to theRemuneration and Nomination Committee. The chief
executive officer and/or the chief financial officerof the Company or any member of the Company's
Board may be invited as an observer from time totime to meetings of the Remuneration and Nomination Committee.
The Remuneration and Nomination Committee
consists of Nancy Cruickshank, Darren Huston (whoserves as chairperson of the Remuneration and
Nomination Committee), and Carla Smits-Nusteling.

Number of shares% of shares in theshare capital

Number of votes at
the General Meeting% of votes at theGeneral Meeting

Cidinan S.à r.l.

321,246,322

31.39%

321,246,322

31.39%

Permira VI
Investment Platform
Limited321 246 322

31.39%

321 246 322

31.39%

Mepinan S.à r.l.

71 388 074

6.98%

71 388 074

6.98%

309 375 096

30.24%

309 375 096

30.24%

1 023 255 814

100.00%

1 023 255 814

100.00%

Name

Free Float
Total

Under the terms of their underwriting agreement,
Cidinan S.à r.l., Permira VI Investment Platform
Limited, and Mepinan S.à r.l. are subject to a 180
day lock-up period expiring on 11 April 2021 andManagement’s shareholdings (included in Free Float)
received at IPO as settlement of investments madein the Management Investment Plan are subject toa 360 day lockup period expiring on 7 October 2021.

The Audit Committee consists of David Barker, Nancy
Cruickshank, and Carla Smits-Nusteling (who serves
as chairperson of the Audit Committee).

78

III. Non-financial report79ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.6.
Compliance with corporate governancerecommendations and principles contained in theBest Practice for the Warsaw Stock Exchange listedcompanies
As the Group’s shares are only admitted to tradingon the WSE, the Group has not opted to comply with
the Ten Principles of Corporate Governance of the
Luxembourg Stock Exchange.

I.R.2. Where a company pursues sponsorship,charity or other similar activities, it should publish
information about the relevant policy in its annual
activity report.

I.Z.1.10. financial projections, if the company has
decided to publish them, published at least in thelast 5 years, including information about the degreeof their implementation;

In accordance with the WSE Rules, the Company asa public entity listed on the Warsaw Stock Exchange
should observe the principles of corporate governance set out in the WSE Best Practices. The WSE Best
Practices is a set of recommendations and rules ofprocedure for governing bodies of publicly listedcompanies and their shareholders. The WSE Rules
and resolutions of the WSE management board andits council set forth the manner in which publicly
listed companies disclose information on their compliance with corporate governance rules and thescope of information to be provided. If a certain rule
is not complied with by a publicly listed company ona permanent basis or has been breached incidentally,such publicly listed company is required to disclose
this fact in the form of a current report.

The principle is not applied.

The principle is not applicable.

Comments of the Company: The Company
cannot guarantee that the above principle will be
implemented and does not intend to introduce thesponsorship policy at present as the sponsorship
activity is negligible for the Group's operations.
However, it is not excluded that the Company will
introduce and publish such policy in the future.

Comments of the Company: The Company does
not intend to publish financial projections, therefore
this principle is not applicable to the Company.

The practices where the Group is not in compliancewith the WSE Best Practices are discussed below.

I.Z.1.3. a chart showing the division of duties andresponsibilities among members of the management
board drawn up according to principle II.Z.1;
The principle is not applied.
Comments of the Company: The Company does
not comply with this principle, as it was designed forcompanies in which management and supervisory
functions are vested in separate boards. As theCompany's Board comprises both executive andnon-executive Directors, it is difficult for the Board toprovide a chart with the specified scope of duties ofeach individual member of the Board. The Company
does not rule out that it may decide to comply withthis principle in the future.

IV.R.2. If justified by the structure of shareholders
or expectations of shareholders notified to thecompany, and if the company is in a position toprovide the technical infrastructure necessary fora general meeting to proceed efficiently using electronic communication means, the company should
enable its shareholders to participate in a general
meeting using such means, in particular through:1. real-life broadcast of the general meeting;
2. real-time bilateral communication where shareholders may take the floor during a general
meeting from a location other than the general
meeting;

Comments of the Company: The Company
partially applies this principle, as due to technicaland organizational issues, the Company does not
currently plan to implement measures enabling theactive participation of shareholders in the general
meeting of the Company outside its seat in Luxembourg. The Company does not exclude the possibilityof implementing such measures in the future.
IV.R.3. Where securities issued by a company aretraded in different countries (or in different markets)and in different legal systems, the company should
strive to ensure that corporate events related tothe acquisition of rights by shareholders take placeon the same dates in all the countries where suchsecurities are traded.
The principle is not applicable.
Comments of the Company: Shares issued by theCompany are listed only on the market operated by
the Warsaw Stock Exchange.

3. exercise of the right to vote during a general
meeting either in person or through a plenipotentiary.
The principle is applied.

80

III. Non-financial report81ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.7.
Certain relationships and related party transactions

According to IAS 24 “Related Party Disclosures,”entities and persons are considered to be related
to a company if the entity or a close relative of theperson:•controls the company or is involved in its joint
management, exercises significant influence
over this company or holds a key position in the
management of the company or a parent entity;•

is a member of the same group of companies;•

is associated with the company within the meaning of IAS 28 “Investments in Associates andJoint Ventures” or a joint venture in which thecompany is a partner within the meaning of IAS
31 “Interests in Joint Ventures”;•

to the same extent as the company is a joint
venture of the same third parties;•

is a company that is controlled by a related party,
is significantly influenced by it or is subject toa joint management, in which a related party ofthat company is involved or in which such a person holds a key position in the management; or•is a pension fund established for the benefitof the employees of the company or for the
benefit of an entity related to that company for
payments after termination of the employment
relationship.

82

Material transactions and legal relationships which
existed between the Group and the above-mentioned related persons and entities in the financial
years 2017 to 2019, as well as in the current financial
year 2020, that are required to be reported in connection with IAS 24 “Related Party Disclosures” areset forth in Note 35 (Related Party Transactions) to
the Annual Financial Statements.
The Group has entered into the following transactions with its shareholders and their affiliates.

Fees for Advisory Services Provided by
Shareholders and Other FeesThe Group has previously entered into advisory
services agreements with each of Cinven, Permira,
and Mid Europa Partners (or in each case, theiraffiliates), whereby such entities have agreed toprovide certain advisory and consulting services
which the Group requests. These services haveincluded advising and consulting services relating
to business activities of the Group, analysis of theGroup’s business activities in relation to the e-commerce environment in the Polish and European
markets, monitoring the performance of the Groupand associated advisory services and certain otheragreed services.

Alter Domus Master Services
Agreements
The Company and Business Office Services S.à r.l. (anaffiliate of Alter Domus Luxembourg S.à r.l., which
is a Permira portfolio company, (“Alter Domus”))
have entered into a services agreement pursuant towhich several services are provided to the Company,
including the provision of approximately 80 square
meters of dedicated furnished office space. These
services benefits the Group since 1 October 2020.
The term of the agreement is set at twelve months
and is renewable. The agreement may be terminatedat any time during the initial or the subsequent term,
subject to a notice period of three months.
The Group also entered into a Master Services
Agreement with Alter Domus on 21 September 2020
pursuant to which Alter Domus has agreed, witheffect as of 12 October 2020, to provide the Group
with a certain number of services including amongst
others (i) accounting and reporting compliances
services, (ii) corporate and secretarial administration
services, (iii) directors services, (iv) domiciliation
services, (v) corporate tax compliance services, (vi)
VAT compliance services and (vii) country-by-country
reporting services.

RTB House Cooperation Agreements
Allegro.pl sources retargeting services from RTB
House S.A., a Cinven funds portfolio company (since
January 2019), under the Framework Cooperation
Agreement dated 31 October 2017, as amended.

III. Non-financial report

Genesys Software Licenses
Allegro.pl uses various pieces of software under license from Genesys Telecommunications Laboratories B.V., a Permira portfolio company. Maintenanceand related services are provided by Whirly sp. z o.o.,a local IT company that distributes Genesys software.

Other Arrangements with Related
PartiesCertain current or former executive directors (orentities under their control) have entered into contracts through which they agree to provide strategic,
operational and financial advisory services in exchange for a monthly flat fee retainer and additional
remuneration.

Distributions to Shareholders
Following a refinancing transaction in May 2019, theGroup distributed available share premium in an
amount of PLN 2.7 billion to its shareholders. The
outflow from the decrease in capital was fundedby the net proceeds from the Existing Senior Term
Facilities and by available cash balances held by
the Group.

Investment Opportunities
The Group has historically operated certain investment opportunities for the Company’s Board andkey employees of the Group.

83ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

1.8.
Legal proceedings
From time to time, the Group may be involved in various claims and legal proceedings relating to claims
arising out of its operations. Current proceedings,
including those during the twelve months preceding
the date of this Report, and proceedings that are
pending or threatened of which the Group is awarethat may have significant effects on the Group aredescribed below.
The Group is aware of certain pending legal disputes
between individuals associated with Bola Investment
Limited ("Bola") and a third party individual (“Claimant”) relating to the ownership of a minority stake ofshares in eBilet sp. z o.o. that was the former ownerof eBilet Polska sp. z o.o. ("eBilet Polska"). eBilet
Polska has been part of the Group since April 2019.
eBilet sp. z o.o. is not, and has never been, part of
the Group. Based on information available to theGroup as of the date of this Report, the Group has
no reason to believe that the outcome of the pending
disputes known to the Group would have a material
impact on the Group.
The Group has become aware that the Claimant has
filed against Bola and Allegro.pl a lawsuit with theRegional Court in Poznań demanding annulment ofagreements concerning the purchase of shares in
eBilet sp. z o.o. allegedly concluded between Bolaand Allegro.pl. However, until now Allegro.pl has
not been served by the Regional Court in Poznań
with any documents, and to the best knowledge ofthe Group the Regional Court has not made any
substantive decisions, with regard to this matter.

84

Proceedings Before the UOKiK President
ANTITRUST PROCEEDINGS RELATED TO
ALLEGED ABUSE OF A DOMINANT POSITIONBY FAVORING OWN SALES ACTIVITY ON THE
PLATFORM
Pursuant to the Competition Act, on 6 December
2019, the UOKiK President commenced antitrust
proceedings against Allegro.pl concerning the alleged abuse of a dominant position by Allegro.pl on
the Polish market for online B2C intermediary sales
services by favoring its own 1P retail sales activity on
its platform, in particular the activity of the OSA, overthe sales activities of 3P Sellers operating on theplatform. The UOKiK President claims that Allegro.
pl favored 1P retail sales by granting OSA accessto information, functionalities, and promotions
unavailable to 3P Sellers. The proceedings werepreceded by a preliminary investigation stage, which
the UOKiK President commenced in June 2017.
Allegro.pl began 1P retail sales on its e-commercemarketplace in September 2015, following a testing
period that ran from May through August 2015.
On 31 January 2020, in response to the initiationof the antitrust proceedings, Allegro.pl provided
the UOKiK President with evidence and arguments
indicating that it does not hold a dominant position
and that it did not favor 1P retail sales for a numberof reasons, in particular: (i) it did not favor OSA
in search results; (ii) new functionalities on theplatform (which were sometimes only available toOSA) were tested by OSA before either being madeavailable to others (if the test results were positive)
or being abandoned (if the results were not positive);and (iii) Allegro.pl promoted OSA to a limited extent,necessary to generate interest among buyers and/or to fill in the gaps on the platform.

III. Non-financial report

On 16 April 2020, Allegro.pl submitted additional
economic analyses to the UOKiK President, including
an economic report prepared by external antitrust
economists that supports the above arguments.
The economic report also points out that OSA
has brought benefits for 3P Sellers and improved
the platform's attractiveness and as a result has
pro-competitive effects. The Group believes that
Allegro.pl had ceased most of the actions criticizedby the UOKiK President by the end of 2017, and allsuch actions had ceased by the end of 2019.
In August 2020 the UOKiK President requested from
Allegro.pl documents from 2015 to 2017 relating
to: questions and complaints sent by 3P Sellers
regarding OSA; search algorithm and access to datacollected by Allegro.pl; Allegro.pl's documents on
various aspects of OSA's activity and Allegro.pl
actions towards OSA; and sales targets of Allegro.
pl's employees. The UOKiK President also requested
information on supermarkets and hypermarkets
that were active as sellers on the platform in 2019and 2020. Allegro.pl is expecting further requests for
information from the UOKiK President in the future.
Such proceedings usually last between one andthree years. Allegro.pl is cooperating fully with the
UOKiK President, not only by answering questions,but also by proactively providing relevant evidence.
If the UOKiK President is satisfied with Allegro.pl's
responses, the proceedings will end. If the UOKiK
President decides to pursue the case, he must issue
a "statement of objections" justifying the charges
and Allegro.pl will then have the right to respond. If
the UOKiK President decides that Allegro.pl holds
a dominant position and has abused it, he will issue
an infringement decision, with or without a fine. The
UOKiK President may also order the effects of theinfringement to be remedied.
In precedent cases establishing new theories ofharm (into which Allegro.pl believes the "self-preferencing" alleged in these antitrust proceedings
would fall), it is generally expected that the antitrust
authority will not impose fines. If a fine is to be
imposed, then in accordance with the Competition
Act, it could be as high as 10% of the turnover ofAllegro.pl in the financial year preceding the decision.

Fines in the past cases involving abuse of a dominant position by major Polish companies with thehighest turnover levels have generally ranged from
0.01% to 1.1% of the annual turnover of the company
concerned.
The Group expects that if the UOKiK President wereto issue a decision imposing the payment of a fine,such decision would not be immediately enforceable.
A final decision by the UOKiK President would only
become enforceable after two rounds of appeal
proceedings before the relevant courts have been
completed. In the past, similar proceedings generally
took two to five years from the date of the decision.
As of the date of this Report, it is not possible toassess the probability of the UOKiK President ultimately deciding to impose a fine against Allego.pl,
the probability of such a fine being upheld against
Allegro.pl by the relevant courts or the quantum of
exposure, and therefore the Group has not createdany provision.

PROCEEDINGS AGAINST ALLEGRO.PL TO
INVESTIGATE WHETHER ALLEGRO.PL'STERMS AND CONDITIONS CONTAIN ABUSIVE
CLAUSESOn 15 September 2020, the Group received a formal
notification that, pursuant to the Competition Act,
the UOKiK President commenced proceedings
against Allegro.pl on 9 September 2020 to investigate whether clauses used by Allegro.pl enabling
it to change its terms and conditions (including in
the general terms and conditions and in the SMART!
terms and conditions) constitute abusive clauses
with consumers. On 15 September 2020, Allegro.plalso received a request for information with respect
to these proceedings. In November 2020 Allegro.plpresented to the UOKiK President arguments thatthe above mentioned clauses are not abusive andproposed draft commitments. In February 2021
Allegro.pl received a new request for information
with respect to these proceedings. Allegro.pl is
expecting further requests for information fromthe UOKiK President in the future.

85

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

If the UOKiK President recognizes any clauses as
abusive, it would be expected to issue a decisionprohibiting the use of such a clause in Allegro.pl's
terms and conditions, with or without a fine. It mightalso request the Group to remedy the effects of theinfringement. If a fine were to be imposed, then inaccordance with the Competition Act, it could be
as high as 10% of the turnover of Allegro.pl in thefinancial year preceding the decision for each of
the clauses recognized as abusive. In past cases
involving major Polish companies with the highest
turnover levels that were found to use abusive
clauses in their terms and conditions, fines havegenerally not exceeded 1% of the annual turnoverof the company concerned for an abusive clause.
If during the course of the investigation Allegro.pl
offers adequate commitments to rectify the alleged
infringement, in particular by amending the clauses
under investigation, and/or to remedy the effectsof the alleged infringement, the case may end witha commitment arrangement with the UOKiK President and no fine imposed.
The Group expects that if the UOKiK President wereto issue a decision imposing a fine, such decision
would not be immediately enforceable. A final decision by the UOKiK President would only become
enforceable after two rounds of appeal proceedings
before the relevant courts have been completed. In
the past, similar proceedings against other Polishcompanies generally took two to five years from thedate of the decision. As of the date of this Report,
it is not possible to assess the probability of the
UOKiK President ultimately deciding to impose a fine
against Allego.pl, the probability of such a fine being
upheld against Allegro.pl by the relevant courts or
the quantum of exposure, and therefore the Group
has not created any provision.

86

EXPLANATORY PROCEEDINGS RELATED TO
THE COOPERATION BETWEEN ALLEGRO.PL
AND SELLERS

EXPLANATORY PROCEEDINGS RELATED TO
EBILET PROCEDURE OF TICKETS RETURNSDURING COVID-19 PANDEMIC

On 3 September 2020, the UOKiK President statedin a press release that he initiated explanatory
proceedings into Allegro.pl's rules of cooperation
with sellers in order to determine whether Allegro.
pl gains unjustified advantages at the expense of its
clients. According to this press release, the UOKiK
President will analyze in particular the conditionsof charging and reimbursing fees and the rules fordetermining their amount. As part of the explanatory
proceedings, the UOKiK President will also analyze
the principles of functioning of the SMART! program.
On 14 September 2020, the Group received a formal
notification that, pursuant to the Competition Act,
the UOKiK President has commenced explanatory
proceedings into Allegro.pl's rules of cooperation
with sellers. In October 2020 Allegro.pl received
questions related to the above mentioned matter.
Allegro.pl is expecting to receive requests for information from the UOKiK President within these
explanatory proceedings relating to its cooperation
with clients in the future.

On 22 February 2021, the Group received a formal notification that the UOKiK President hascommenced explanatory proceedings in order toestablish whether eBilet has infringed collective
consumers’ interests. In the same document the
UOKiK President included questions to eBilet related to its policy of ticket returns during COVID-19
pandemic, in particular proposing vouchers insteadof cash refunds.

These explanatory proceedings are a preliminary
step that does not have to lead to the initiationof formal proceedings against Allegro.pl. If the
UOKiK President decides to pursue the matters
covered by these explanatory proceedings, hemust open antitrust proceedings against Allegro.
pl. If the UOKiK President decides that Allegro.pl's
behavior was illegal, he will issue an infringement
decision, with or without a fine, and may also order
the effects of the infringement to be remedied. If
a fine were to be imposed, then in accordance with
the Competition Act, it could be as high as 10% of
Allegro.pl's turnover in the financial year preceding
the infringement decision, for each infringement.
If during the course of the investigation Allegro.pl
offers adequate commitments to rectify the alleged
infringement and/or to remedy its effects, the casemay end with a commitment arrangement with the
UOKiK President and no fine imposed.

III. Non-financial report

These explanatory proceedings are a preliminary
step that does not have to lead to the initiationof formal proceedings against eBilet. If the UOKiK
President decides to pursue the matters coveredby these explanatory proceedings, he must open
formal proceedings against eBilet. If the UOKiK President decides that eBilet’s behavior was illegal, he will
issue an infringement decision, with or without a fine,and may also order the effects of the infringement
to be remedied. If a fine were to be imposed, thenin accordance with the Competition Act, it could be
as high as 10% of eBilet’s turnover in the financial
year preceding the infringement decision, for each
infringement. If during the course of the investigation eBilet offers adequate commitments to rectify
the alleged infringement and/or to remedy its effects,
the case may end with a commitment arrangementwith the UOKiK President and no fine imposed.

INFORMAL INFORMATION REQUESTS FROMTHE UOKIK PRESIDENT
In the past, the UOKiK President has informally asked
the Group for information about its operations,and may issue similar requests in the future. Such
requests may relate to the protection of competition
and/or protection of consumers.
Recent UOKiK President's requests to Allegro.pl
related to (i) the reasons for changes in Allegro.pl's
terms and conditions, as well as the provision of
information to customers about, and the automatic
acceptance of, such changes; (ii) Allegro.pl's commission refund policy; and (iii) automatic renewalsof featured offers in search results.
If the UOKiK President is not satisfied with the response to such informal requests for information,
he can issue additional informal requests and/or
initiate explanatory, antitrust, or consumer protection proceedings.
Appeal against the UOKiK President's decision
relating to Allegro.pl's alleged failure to provide
in its terms and conditions a detailed descriptionof the rules applicable to the blocking of a buyer's
account(s) when the seller applies for a refund of
the commission due to the buyer's fault
On 9 February 2016, the UOKiK President issued
decision No. DDK 1/2016, stating that Allegro.pl
infringed collective consumer interests by failingto provide in its terms and conditions a detailed
description of the rules applicable to the blocking
of a buyer's account(s) when the seller applies fora refund of the commission due to the buyer's fault.
The UOKiK President, however, has not imposed any
fine on Allegro.pl for this infringement.
Allegro.pl appealed against the decision of the
UOKiK President to the Competition Court andsubsequently to the Court of Appeal. The appeal
is pending. Allegro.pl no longer blocks a buyer's
account(s) when the seller applies for the return ofthe commission due to the buyer's fault.

87ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

2.

Risk Management System,
Risk Factors, and Regulatory
Matters

Risk management policy

Roles and responsibilities

The Group has defined its risk management policyin order to facilitate a common understanding by
all employees and ensure a consistent approachin measuring and mitigating various types of risks.
The policy sets out the framework structure of risk
management, the scope of the system, and its rules.
It describes the risk management approach appliedby the Group and the individual system components.

The existing process ensures accountability for risk
management. The scopes of responsibilities andcompetencies of the individuals involved in the process are set out below. All employees of the Groupare responsible for risk identification and reporting.

Board of Directors
Audit Committe

2.1.
Risk Management System
The Group operates a risk management system
where all employees participate in performing risk
management and internal control activities. The risk
management system is designed in a way allowing us
to identify, measure, manage, and monitor the risks
that might affect the achievement of our strategic,
operational, financial, reporting, and compliance objectives across all business and corporate functions,as well as development projects teams.
An inherent quality of any actions taken by the Groupis the uncertainty of process implementation andachievement of the goals set. The impact of such
uncertainty on processes and their goals is defined
as a risk. The purpose of risk management is toincrease the probability that the Group achieves
its objectives and delivers its projects by taking
measures to mitigate the risk to an acceptable level.

Risk Committe•

minimising the risks affecting the achievementof goals and implementation of tasks;•

taking full advantage of the business opportunities and mitigating the risk of lost opportunities;

•

•

•

II LineI LineThe purposes of the systemic risk management
approach adopted by the Group include:

III Line

Financial
Controlling

Compliance

All employees

improving the effectiveness of internal processes by relying on and constantly improving theexisting corporate governance;

Risk owners
and coordinators

Security &Data Privacy

Risk
ManagerInternal
Audit

Fraud
Prevention

efficient use of financial, human, and material
resources as well as prevention of financial
losses; andRevenue
Assurance

improving service quality.

The following roles and teams have been designatedas part of the adopted risk management model:

88

III. Non-financial report•

Board of Directors,•

Risk Owner,•

Audit Committee,•

Risk Coordinator,•

Risk Committee,•

Employee.

•

Risk Manager,

89

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Risk management process

Role

Summary of responsibilities within Risk Management

Board ofDirectors• Oversight of corporate risk,• Determining the scope of risk management,• Determining the directions of the risk management system development, and• Establishing the risk appetite levels.

Audit
Committee• Oversight of Group’s system of internal controls, including the risk management framework andthe work of the Internal Audit function.
• Evaluation of the effectiveness of internal control and risk management systems;• Preliminary evaluation of documents concerning internal control and risk management systems;• Evaluation of the results of internal controls, therein internal audits, and schedules of eliminationof detected errors in selected areas• Performing regular reviews of risk reports.

Risk Committee• Defining risk management strategies and submitting them to the Board for approval.
• Reviewing operational risks and providing the management with information on the operationalrisk appetite and tolerance.
• Identifying and assessing the risk to which the organisation is exposed as well as providing
resources that are required for risk management in general and for the management of thatparticular risk.
• Performing gap analysis to find out whether or not a risk has been omitted during the identification
process.
• Monitoring the Group’s risk profile – its current and potential exposure to all types of risks.
• Reviewing and assessing the probability that the effects of those risks will materialise and of all
mitigating measures that affect those risks• Reviewing the risk owners and management of specific risks so as to ensure common
understanding of roles and responsibilities.
• Ensuring the development of risk culture and awareness in the entire company.
• Undertaking relevant activities to protect health and lives, reduce material losses, recoverbusiness processes, and sustain reputation in case of security incidents or a crisis.

Risk Manager• Keeping a register of risks for the Company that should be updated at least once a year or more
frequently, in line with the risk management rules.
• Ensuring the proper functioning of the risk management process in each organisational unit,• Ensuring communication in the entire risk management process,• Providing up-to-date information on risk management to the Management,• Creating and improving the risk management system documentation,• Determining the scope rights and responsibilities for risk management in the units,• Developing, implementing and coordinating the risk management strategy in cooperation with
the Management, and verifying the risk mitigation plans.
• Supporting and educating Group employees to build risk awareness and adherence to the risk
management policy and procedures.
• Maintaining Group Risk Register.

Risk Owner• Management of assigned risks, including the acceptance of the periodic risk assessment intheir respective area,• Accepting the risk mitigation plans.

Risk
Coordinator• Risk reporting as part of risk management, including periodic assessment of the risk assigned,• Defining and implementation of risk mitigation plans;• Implement and maintain Key Risk Indicators

Employee• Performing regular internal control activities being an integral part of business processes;• Providing required information for risk evaluation and risk monitoring purposes;• Taking active part in the process of risk identification and evaluation.

90

III. Non-financial report

Proper identification of the environment affecting
the organization and its risks is the basis for theeffective implementation of the risk management
process and affects each stage of the process. The
analysis of the internal and external environmentis the basis for risk assessment and may take into
account relations with external stakeholders, trends
affecting the organization's goals, governance andorganizational structure, organizational culture,norms, standards, and guidelines adopted by theorganization.

•

Risk identification and measurement processes– risks are identified in every functional areaof Group’s operations, recorded in the Group
Risk Register, and evaluated in accordancewith methodology placed in risk management
procedure•

Risk mitigation and control – for every risk recorded in the risk register, Risk Owners define
their internal control activities designed andimplemented to mitigate existing risks.

An important part of Group’s risk management andinternal control systems are the following key setsof risk management processes:•

Risk evaluations – performed by Risk Owners
are collected by Risk Manager in the system inorder to update the Group risk register and prepare regular risk reports. The Risk Committee
performs reviews of risk reports on a quarterly
basis.

•

Risk monitoring – Risk Owners are responsible for
ongoing risk monitoring. Their work is overseenby the Risk Officer as part of the periodic risk
assessment and by the internal audit.

91ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Risk assessment approach
The risks identified by the Group are scored based on
their potential impact and probability of occurrence.
Depending on the risk assessment, we determine
the level of each registered risk in the risk matrix inaccordance with the approach presented below. In
line with our risk management policy, the main goalof our Risk Management is to maximize the value
for the Group through appropriately adjusted costs
related to the minimization of the risk level basedon the frequency of assessment and the possibilityof greater focus on the risks scored higher.

Probability

Very high(5)5Such approach to management, instead of eliminating the risk, gives reasonable, but not absolute,certainty that the Group is able to achieve its business goals.

The following table presents how we address risk
management responses in conjunction with various
risk scoring results.

Risk
level

15

20

16 – 25High

5*,
10 – 15

Risk categorised as “High” have a very high or high impact on the achievement of theGroup’s business objectives. Probability of risk assigned to these risks is medium, high, orvery high. Risks assigned to this group are considered for internal audit annual planningpurposes in order to obtain independent assurance that the risk was accurately assessedby Risk Owners and internal controls are performed as expected. Risks assigned to thisgroup obligatorily have a business continuity plan and a mitigation plan. Risks assigned tothis group are assessed quarterly.

Medium

5–9This group includes risks having high, material, or mild impact on the achievement of theGroup’s objectives. Probability of risk assigned to these risks is low, medium, or high. Risks
assigned to this group are assessed every six months. Excluding risks where the impact is
rated as 5, which are automatically considered to be “high” level.

Low

1–4

This group includes risks having material, mild, or insignificant impact on the achievement of
the Group’s objectives. Probability of risk assigned to these risks is minor, low, and medium.
Risks assigned to this group are assessed annually.

25

High
(4)

4

Medium
(3)

3

Low
(2)

2

4

6

8

10

Minor
(1)

1

2

3

4

5*

Insignificant
(1)

Mild
(2)

Material
(3)

High
(4)

Very high
(5)

8

12

6

9

16

12

Risk management responses

Risk classified in this group may have a very high or high impact on the achievement of theGroup’s business objectives. Probability of risk assigned to these risks is high and very high.
These risks are considered for internal audit annual planning purposes in order to obtain
independent assurance that the risk was accurately assessed by Risk Owners and internal
controls are performed as expected. Risks assigned to this group obligatorily have a business
continuity plan and a mitigation plan. Risks assigned to this group are assessed monthly.

Very
high

10

Risk
score

20

15
*

Any risk the impact of which is rated at 5 is defined as a high risk by default.
A risk mitigation plan must be developed for that risk, should it materialise.

Impact*92

Any risk the impact of which is rated at 5 is defined as a high risk by default.
A risk mitigation plan must be developed for that risk, should it materialise.

III. Non-financial report93ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

2.2.
Risk Factors
Risks Related to the Group's Businessand Industry
THE POLISH RETAIL MARKET AND THE
E-COMMERCE SEGMENT ARE HIGHLYCOMPETITIVE AND THE GROUP'S ABILITY
TO COMPETE SUCCESSFULLY DEPENDS ON
A LARGE VARIETY OF FACTORS BOTH WITHIN
AND BEYOND THE GROUP'S CONTROL.
The Polish retail industry, including the e-commerce
segment, is fragmented and characterized by intensecompetition. The Group competes with a diverse
group of offline and multichannel retail companies
such as RTV Euro AGD, Biedronka, Empik, SMYK,
and LPP, e-commerce companies such as Alibaba,
Amazon, and eBay that sell products from a large
number of categories, and specialist e-commercecompanies such as Zalando, eobuwie.pl and Oponeo.
Competition continues to intensify, including thedevelopment of new business models and the entryof new and well-funded competitors. The Group's
competitors may enter into business combinations oralliances and large and well-established companies
in other geographies or market segments may seek
to expand their presence and investment in Poland.
Some of the Group's current and potential competitors have greater resources, global presences,longer histories, more users, and/or greater brandrecognition than the Group, and they may secure
better terms from vendors, adopt more aggressive
pricing, and devote more resources to technology,
infrastructure, fulfillment, and marketing than theGroup. Multinational e-commerce competitors thatso far have not deployed the asset heavy businessmodels in Poland that they feature in other countries
may choose to do so in the future, utilizing theirdelivery and logistics infrastructure that alreadyexists in Poland or elsewhere in Europe to shortendelivery times. These multinational competitors
may also decide to deploy loyalty and free shipping
programs similar to those currently offered by theGroup and may step up efforts to attract the Group's
merchant base to list products on their platforms.
The Group's reputation, its brand and its business94

may be adversely affected by aggressive marketingand the communications strategies of its competitors. New market entrants may appear and someof the Group's current smaller competitors may be
acquired by, receive investment from, or enter into
strategic relationships with well-established andwell-financed companies or investors who would
enhance their competitive positions.
In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices continue
to increase the Group's competition. The internet
facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or
lesser known businesses to compete against theGroup. As a result of any of the above factors, ora combination thereof, the Group's product andservice offerings may not be successful, the Groupmay fail to gain or may lose business, and the Groupmay be required to increase the Group's spendingor lower its margins, any of which could materiallyreduce the Group's profits.
The Group believes that its ability to compete effectively will depend on factors both within and beyond
the Group's control, including but not limited to:•

the Group's reputation and brand and its local
scale, relative to those of the Group's competitors;•

the size and composition of the Group's buyer
base and whether the Group is able to increase
repeat purchases from buyers;•

the composition of the Group's merchant base,and the merchant base's subsequent impact on
the selection and price of products the Groupfeatures on its sites;

III. Non-financial report•

whether the Group is able to offer a convenient,
efficient, and reliable e-commerce experience
for the Group's buyers and merchants, and toadapt to evolving consumer preferences;•whether the Group's platform is perceived as an
attractive distribution channel for the Group's
merchants, including the perceived competitiveness by merchants of the Group's current
or future commission rates;•

whether the Group has efficient and cost-effective advertising and marketing efforts to acquire
new buyers and merchants;•

the development and management of new andexisting technologies in a timely manner;•

whether the Group's fulfillment operations,
including distribution, payment, and customer
service are efficient, reliable, and offer a satisfying service quality;•

the legal framework on e-commerce and related
legislation governing liability, obligations, andsupervisory oversight of the Group; and•whether the Group is able to offer convenient
payment methods for every buyer and merchant.

Any failure to properly address these factors andto successfully compete against current or futurecompetitors could negatively affect the Group's
ability to attract and retain buyers and merchants
and necessitate the introduction of lower pricing
for the Group's services, which could, in turn, havea material adverse effect on the Group's business,financial condition, and results of operations.

AMAZON INC. HAS RECENTLY ANNOUNCEDITS INTENTION TO INTENSIFY ITS ACTIVITY
DIRECTLY COMPETITIVE TO ALLEGRO IN THE
POLISH E-COMMERCE SEGMENT AND THIS
MAY LEAD TO A MATERIAL CHANGE IN OURFINANCIAL PERFORMANCE IN TERMS OFGROWTH, MARGINS AND CASH FLOWS IN THE
FUTUREOn 26 January 2021, Amazon Inc. (“Amazon”) announced that it is to launch an Amazon.pl website
and invited merchants to register on its dedicatedseller central platform. Also during January Amazon
announced that it had signed a five year contract
with InPost to provide delivery services to Inpost’s
network of automatic parcel machines (also referred
to as “lockers”). As this Report was finalised, Amazon
Inc. launched its Amazon.pl website on the eveningof 1 March 2021.
Since 2016 Amazon has served the Polish e-commerce segment in competition to Allegro via a Polishlanguage translation of its German website, Amazon.
de. Polish consumers have access to the European
selection available on Amazon.de. They may browse
these offers in Polish, pay using Polish zloty payment
solutions and contact customer services provided in
Polish. Moreover, the network of fulfilment centers
operated by Amazon in Poland chiefly to serve theGerman e-commerce segment make it possible todeliver a significant part of Amazon.de selection
with next day or two day service. This baseline levelof competition from Amazon is part of the highly
competitive e-commerce segment environment inwhich the Group has successfully grown its GMV,
profits and cash flows during the past several years.
In this context, the Group sees Amazon’s recent
announcements as a clear indicator that the competitive environment will intensify in the coming
months and years.

95ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

It is not possible for the Group to accurately estimate
the potential impact of intensified competition from
Amazon on its financial and operational performance. As with any other competitor, the level ofinvestment in gaining customers and winning sales,
together with its chosen marketing mix, will have anindirect impact on the Group’s performance. Furthermore, Amazon’s intentions as to its Prime service
and the pricing thereof, are still not clear. Whilst the
take rates published for Polish marketplace services
are generally higher than those charged by Allegro,
Amazon may provide incentives that reduce thisgap to the Group’s pricing.
The Group believes that the development strategy
that it has pursued over the past several years has
prepared it well to meet intensified competition from
Amazon. In preparing its budgets and expectations
for financial performance of the Group for 2021 andbeyond, the Group has used its judgement to makereasonable assumptions about the level of increased
competition from Amazon and the resulting impact
on its results and operations. However, the Groupmay be incorrect in its planning assumptions andthe impact of intensified competition from Amazon
may have a materially more adverse effect on theGroup’s business, financial condition, and resultsof operations than currently assumed.

THE GROUP’S BUSINESS DEPENDS ON
A STRONG BRAND, WHICH THE GROUP MIGHTNOT BE ABLE TO MAINTAIN OR ENHANCE
THROUGH ITS INVESTMENTS TO INCREASE
BRAND AWARENESS, AND UNFAVORABLEFEEDBACK FROM MERCHANTS OR BUYERS,
OR NEGATIVE PUBLICITY COULD MATERIALLY
ADVERSELY AFFECT ITS BRAND.
The Group believes that the Allegro brand underwhich it operates has significantly contributed to
the growth of its business. The Group believes thatthe strong awareness of the Allegro brand in Poland
contributes to higher unpaid traffic on its websites
and lower marketing costs as approximately 72% of
the traffic on its websites during the first six monthsof 2020 was generated by consumers directly typing in Allegro websites or was related to customer
relationship management, social media, or searchengine optimization channels. Therefore, the Group
believes that maintaining and enhancing the Allegro
brand is critical to the Group’s ability to expand andretain its base of buyers, merchants, and brands.
The Group has invested significant amounts of
its revenue to increase brand awareness, user
acquisition, and buyer and merchant loyalty, andexpects to continue to spend significant amounts
in the future to attract new, and retain existing,buyers and merchants. For example, the Grouphas incurred and will continue to incur significant
expenses in marketing through a broad range of
media to attract website traffic, increase buyer andmerchant loyalty and encourage repeat purchases
in order to increase revenue and maintain its brandawareness and recognition.
These expenses include substantial outlays for offline marketing, in particular television advertising,and online marketing such as paid search engine
marketing or affiliate programs, under which theGroup pays third parties to refer visitors fromthird-party websites to the Group’s websites. The
Group’s decisions regarding investments in user
acquisition are driven by its analysis of the profit
contribution generated from buyers and merchantsthat the Group acquired in earlier periods.

96

III. Non-financial report

There can be no assurance that the Group’s assessment of user acquisition investment and resulting
net revenue from such buyers and merchants,
including those relating to the effectiveness of theGroup’s marketing expenditures, will prove to becorrect or that the Group’s marketing efforts andother promotional activities will achieve what theGroup considers an optimal mix of advertising tactics at a cost that the Group considers economically
viable. Furthermore, the Group cannot guaranteethat certain methods of advertising that it currently
utilizes will not become less effective or that potential increased competition in the retail market will
not result in a decreased return on the Group’s
marketing investment. The Group’s online partners
might be unable to deliver the anticipated numberof user visits or impressions, or visitors that are
attracted to the Group’s websites by such campaigns
might not make purchases as anticipated. Moreover,changes to search engines’ algorithms or terms ofservices could exclude the Group’s websites from,or rank them lower in, search results.
The Group’s brand may be adversely affected
if its public image or reputation is tarnished bynegative publicity. Product recalls, product liability
claims, breaches of corporate social responsibility,
the presence of counterfeit goods that violate theGroup’s terms and conditions or other fraudulent
activity in the Group’s e-commerce marketplacethat is not detected by its anti-fraud technology
could significantly harm the Group’s reputation
and business. User complaints or negative publicity about its websites, products, delivery times,
returns processes, the working conditions of its
employees (or those of the employees of any of its
subcontractors or suppliers), user data handling andsecurity practices, or customer support, including
on internet-based platforms such as blogs, online
ratings, review services and social media websites,
could have a significant negative impact on theGroup’s reputation and on the popularity of theGroup’s websites.
If the Group is unable to maintain or enhance its
brand image, if its brand image is damaged bynegative publicity, or if its brand is not acceptedby consumers, this could have a material adverse
effect on its business, financial condition and resultsof operations.

THE GROUP'S SUCCESS DEPENDS ON THE
CONTINUED GROWTH OF E-COMMERCE AND
THE CORRESPONDING SHIFT FROM OFFLINETO ONLINE SHOPPING IN THE MARKETS IN
WHICH IT OPERATES.
The Group depends on the continued development
and growth of the Polish retail market, including
online retail and the e-commerce segment in which it
currently operates as well as corresponding markets
and segments in other geographies it may seek
to enter in the future. Based on projections from
OC&C made during the second quarter of 2020, thePolish retail market is projected to grow at a CAGR
of 3% from an estimated PLN 621 billion in 2019 to
PLN 724 billion in 2024 and online retail in Poland,
which remains underpenetrated relative to othercountries, is projected to grow at a CAGR of 18%
from PLN 52 billion in 2019 to PLN 118 billion in
2024. The Group's short – and medium-term outlook
is based on its belief that it can facilitate actual
growth that exceeds these projections. There is no
guarantee, however, that the Polish retail market andonline retail in Poland will grow at rates projectedby OC&C, the growth rates that the Group believes
may occur, or at all. Slowing growth, stagnation, or
contraction in the market and segment in which theGroup operates in Poland, or in geographies where
it may operate in the future, could have a material
adverse effect on its business, financial condition,and results of operations.

DETERIORATION IN POLAND'S ECONOMIC
CONDITIONS OR A WORSENING GLOBALECONOMY COULD MATERIALLY ADVERSELY
AFFECT THE GROUP'S BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS.
The Group conducts its operations in Poland andtherefore the macroeconomic situation in Poland
has a material impact on the business, financial
condition and results of operations of the Group.
The economic situation in Poland depends ona number of factors, including Polish government
attempts to influence the economy, such as setting
levels of taxation, formulating government budgets
and regulating the currency supply, interest rates
and the labor market.

97

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The Polish demographic situation, macroeconomic
conditions in Europe and globally and inflow of funds
from the European Union also affect the economic
situation in Poland.
Whilst the lockdown measures that have been introduced by the Polish Government in response to
the COVID-19 pandemic have created a tailwind of
demand for the e-commerce segment, a prolonged
economic slowdown in Poland resulting from theongoing COVID-19 pandemic or other causes would
damage the Group's operations. Due to uncertainties as to the speed of the vaccine roll-out acrossthe EU and in Poland and to certain doubts as towhether vaccines will be effective against all theemerging variants of the virus, it is not possible
either to predict when lock-downs affecting the retailsector will finally cease or to estimate how deep the
cumulative economic damage to the economy will
be before the recovery begins.
The degree and the pace of economic recovery following the COVID-19 pandemic are not fully known.
Higher unemployment, reduced disposable income
and lower consumption, as well as fluctuations in
the financial markets (including the currency market),should these occur, may significantly adversely affectthe financial conditions of the Group's merchants
and buyers. Negative economic developments may
have an adverse impact on consumer confidence
and discretionary consumer spending, including
on sales on the Group's e-commerce marketplace,from which the Group generates the majority of its
revenue. There is also a risk of tax or social security payment increases or new para-taxes (tax like
instruments) being imposed in order to address
public debt levels that have recently increased
significantly as a result of the COVID-19 pandemic.
Tax or social security increases or the introduction
or new para-taxes may lead to increases in theprices of products sold on the Group's e-commercemarketplace or the prices of services the Grouppurchases or may reduce buyers' income available
for discretionary spending, which could also weaken
demand for the products offered on the Group's
platform.

98

The Group's business, as well as the successful
implementation of its strategy, is highly dependent on the financial condition of its merchants andbuyers and their continued and increased use of
the Group's e-commerce marketplace and other services. The financial condition of Polish households,
including the Group's buyers, is highly correlatedwith the unemployment rate. An increase in the unemployment rate in Poland could reduce consumer
spending and lead to reduced use of the Group's
e-commerce marketplace and other services.
Any deterioration of economic conditions in Poland
may have a material adverse effect on the business,financial condition and results of operations of theGroup.

IF THE GROUP IS NOT ABLE TO MAINTAIN
AND CONTINUALLY IMPROVE USER
EXPERIENCES WITH THE ALLEGRO PLATFORM,
ITS BUSINESS, RESULTS OF OPERATIONSOR FINANCIAL CONDITION COULD BE
MATERIALLY ADVERSELY AFFECTED.
The Group believes that its success as a company
active in the retail market depends upon providing
consumers with a wide selection of products froma variety of merchants at competitive prices. If theGroup does not attract merchants to offer the products and brands in demand by the Group’s buyers,
if the Group is unable to present such products on
its website in an effective way and at competitive
prices or if buyers and merchants regard the Group’s
delivery, returns and/or payment processes as inconvenient, the Group may be unable to attract new
buyers and merchants, may lose existing buyers andmerchants or may be faced with reduced volumesof purchases on its websites. If the Group or any
third-party users fail to provide accurate information on its platforms, such as, product informationon the Group’s e-commerce marketplace or pricecomparison information on Ceneo.pl, it may lose
consumer confidence and may receive a higher number of complaints and its business and operations
may be materially adversely affected. Any of theforegoing would have a material adverse effect on
the Group’s business, financial condition and resultsof operations.

III. Non-financial report

SYSTEM INTERRUPTIONS THAT MAKE
THE GROUP'S PLATFORM UNAVAILABLE,
WHETHER CAUSED BY TECHNOLOGYFAILURES, THIRD-PARTY PROVIDER FAILURES,
DELIBERATE ATTACKS OR UNINTENTIONALEVENTS MAY CAUSE A DECREASE IN
TRANSACTION VOLUMES, RESULT IN
THE LOSS OF PERSONAL INFORMATIONOR OTHERWISE HARM THE GROUP'SREPUTATION.
The Group has made and expects to continue tomake substantial investments in data centers andequipment and related network infrastructure tohandle the traffic on the Group's websites and implemented systems, in order to assure the quality
and availability of all IT-supported processes. Additionally, the Group invests, and expects to continue
to invest, in its platform and back-office security.
However, the ability of the Group's IT systems tohandle the demand of an unexpected spike intraffic to the Group's websites cannot be assured.
In addition, the operation of these systems is both
expensive and complex, and any interruptions ofsuch systems could result in operational failures.
If the Group's user base or the amount of traffic
on the Group's websites grows more quickly than
anticipated, the Group may be required to incur
material additional costs to enhance the underlying
network infrastructure to avoid operational failures.
Inadequate performance of the Group's IT systems,
whether due to system failures, unavailability ofdata centers, distributed denial-of-service attacks,
computer viruses, physical or electronic break-ins,
undetected errors, design faults, sabotage, humanerror or other unexpected events or causes, could
affect the security or availability of the Group's
websites, prevent users from accessing the Group's
websites and result in limited capacity, reduced
demand, processing delays and loss of revenue
from transactions.
The Group operates websites, networks and otherdata systems through which it collects, maintains,transmits and stores information about its buyers,merchants and others, including credit card information and personal information, as well as otherconfidential and proprietary information.

The Group also employs third-party service providers that store, process and transmit proprietary,
personal and confidential information on its behalf.
Furthermore, the Group relies on encryption andauthentication technology licensed from third parties in order to securely transmit confidential andsensitive information, including credit card details
and personal data. Although the Group takes steps
to protect the security, integrity and confidentialityof the information it collects, stores or transmits, it
regularly records attempts to break into its systems
and the Group and its service providers might nothave the resources or technical sophistication to
anticipate or continue to prevent all types of attacks and techniques used to obtain unauthorizedaccess to its systems. Therefore, the Group cannot
guarantee that inadvertent or unauthorized use or
disclosure will not occur, or that third parties will
not gain unauthorized access to this information
despite the Group's efforts. Advances in computercapabilities, new technological discoveries or other developments could increase the frequency or
likelihood of security breaches. In addition, security
breaches can also occur as a result of non-technicalissues, including intentional or inadvertent breaches
by employees or by persons with whom the Grouphas commercial relationships. Any compromise orbreach of the Group's security measures, or thoseof the Group's third-party service providers, could
violate applicable privacy, data security and otherlaws, and cause significant legal and financial risks,
adverse publicity and a loss of confidence in theGroup's security measures. Although the Group
maintains a certain level of privacy, data breachand network security liability insurance, the Group
cannot be certain that its coverage will be adequate
for liabilities that actually might incur or that insurance will continue to be available to the Group on
economically reasonable terms, or at all. The Groupalso may need to devote significant resources toprotect against security breaches or to address
problems caused by breaches, diverting resourcesfrom the growth and expansion of its business.
The occurrence of any of the foregoing risks could
have a material adverse effect on the Group's business, financial condition, and results of operations.

99ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE GROUP MAY BE UNABLE TO
SUCCESSFULLY IMPLEMENT STRATEGICOBJECTIVES SUCH AS ENHANCING
SMART!, DEVELOPING AND LAUNCHING
NEW CONSUMER FINANCE PRODUCTS,
EXPANDING INTERNATIONALLY, INCREASINGFULFILLMENT SERVICES OR PURSUINGACQUISITIONS.
The Group might elect to pursue new business opportunities, develop new product offerings, expand
internationally or acquire other businesses, anyof which could prove to be non-cost-effective orotherwise unsuccessful. Any such initiative that is
not favorably received by users could damage theGroup's reputation and brand, and any expansion
or alteration of the Group's operations could requiresignificant additional expenses and divert management and other resources, which could in turnmaterially and adversely affect the Group's business,financial condition and results of operations.
SMART!
Following its launch in 2018, the SMART! loyalty
program has achieved rapid buyer uptake and financial success as the Group has invested heavily
in its development. SMART! had 2.1 million active
and paying subscribers as of 30 June 2020 and thisbase has continued to grow dynamically over thesecond half of 2020. The SMART! program offers
buyers certain perks and therefore carries therisk of subscriber abuse (e.g. sharing of accounts,
excessive ordering and returns). The Group's outlook has been prepared with the expectation ofcontinued managed growth in the SMART! programand could therefore be impacted by lower or higher
than expected adoption of the program by buyers.
In addition, as SMART! has proven to be a popular
program for Polish consumers, there is a risk thata competitor could introduce a similar offering,
thereby eroding the attractiveness of the SMART!
program. In particular, Amazon may decide to offer
its similar Prime loyalty program to Polish consumers
at some point in the future.

100

If the Group is unable to successfully manage theanticipated growth and the related costs of the
SMART! program, or if the benefits of the SMART!
program are abused by a significant number ofbuyers, it could result in a material adverse effecton the Group's business, financial condition, andresults of operations.
Consumer Finance ProductDuring the second half of 2020, the Group launcheda trial phase of Allegro Pay, a new consumer financeproduct offering lines of credit of up to PLN 4,000
with payment options ranging from 30 days up
to 20 monthly installments to eligible buyers at
checkout for purchases that they make throughthe Group's e-commerce marketplace. The trial
phase was completed at the end of 2020 and a more
extensive roll-out to a much wider group of buyers in
2021, together with implementation of a road-map
of further improvements to the Allegro Pay product,is expected to lead to significant acceleration of
consumer lending by the Group in 2021 and beyond.
The financial and operational impact of Allegro Pay
on the Group depends on a series of importantfactors, including the effective management of
the related credit risk. To assess the credit risk of
a consumer seeking a loan under the Group's consumer finance offering, the Group uses, among otherindicators, credit reports from external suppliers
and an internally developed risk model in order tohelp predict the consumer's ability to repay theprincipal balance and interest related to the credit.
However, this risk model may not accurately predictthe creditworthiness of the consumer due to, among
other things, inaccurate assumptions about theparticular consumer or the economic environment.
The accuracy of the risk model and the Group's
ability to manage credit risk related to the Group's
consumer finance offering may also be affected bylegal or regulatory changes (e.g. bankruptcy laws
and minimum payment regulations), competitors'
actions, changes in consumer behavior, availabilityof funding resources, changes in the economic environment and other factors. If the Group is unable
to satisfactorily monitor and manage the credit risk
inherent in its loans, it could result in a material
adverse effect on the Group's business, financial
condition and results of operations.

III. Non-financial report

In addition, the launch of Allegro Pay may not resultin the anticipated incremental increase in purchasingof merchandise by consumers and the Group may
therefore fail to realize the expected additional
commission income from merchants. The Group
may also be unable to obtain funding for its consumer loans at rates that are competitive enoughto allow the Group to profit on its consumer financeproduct. The Group may be unable to securitize
its loan book in the future or may not be able tosecuritize the loan book on terms that eliminate any
recourse to the Group, which may lead to increased
indebtedness to fund the loan book that may leadto the Group discontinuing consumer finance services or seeking to operate at higher leverage levels
than it currently expects. The Group's operations infinancial services may also expose it to additional
regulatory review, including by the UOKiK President,
the Polish Financial Supervision Authority (Komisja
Nadzoru Finansowego), the General Inspector of
Financial Information (Generalny Inspektor Informacji Finansowej) and the Personal Data Protection
Office (Urząd Ochrony Danych Osobowych), may be
adversely impacted by changes to the Act of 12 May
2011 on Consumer Credit, the Act of 21 July 2006 on
Supervision Over Financial Market and the Act of 29
August 1997 – The Banking Law, and such activity
may be subject to additional risks including risk
relating to money laundering, bribery and corruption
and terrorist financing.
International Expansion
The Group's growth strategy includes possible
expansion of its operations into new geographies.
Such expansion may involve risks related to theGroup's lack of experience in operating in such
geographies and differing commercial and social
norms and customs. Expansion of the Group's
operations in such geographies could also involve
significant additional business, regulatory andlegal risks. These risks include, but are not limited
to: changes in economic, political or regulatory
conditions; difficulties in managing geographicallydiverse operations; changes in business regulation;effects of foreign currency movements; difficulties
in enforcing contracts; ensuring adherence to theGroup's compliance and ethical standards; andcultural and language barriers.

Moreover, there is no assurance that the Group will
be able to accurately anticipate the level of demandfor its products and services in new geographies
where the Group may seek to expand operations
and the Group may need to develop a new brand or
repurpose its existing brand for use in new geographies. Expansion into new geographies is also likely
to involve significant investment in infrastructure,
which may not deliver the anticipated returns for
the Group. If the Group launches an international
expansion initiative that fails to generate satisfactory
returns, it could have a material adverse effect on
the Group's business, financial condition and resultsof operations.
Allegro Fulfillment
In order to further improve the consumer experience and to support international sellers andselect merchants, the Group is likely to introduce
its own fulfillment services ("Allegro Fulfillment")
as a supplement to its third-party merchant-fulfillment model. The first Fulfillment Center aimed at
supporting 3P sellers will go live in 2021, which intime, and depending on the initial performance ofAllegro Fulfillment, will be extended by additional
investments in following Fulfillment Centers nearmost populated areas. If the Group fails to properly
execute its fulfillment services strategy, including
overinvesting or underinvesting in the infrastructure necessary to stock the merchant’s co-locatedinventory in the delivery centers, failing to expandin timely manner or otherwise failing to meet buyer
and merchant demand, it could have a material
adverse effect on the Group's business, financial
condition and results of operations.

101ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Roll-out of a proprietary last-mile locker
network
The Group has been studying the potential positive
impacts of investing in the roll-out of its own networkof lockers as part of its strategy to improve delivery
experience for consumers. By fully integrating thelocker software into its marketplace platform andfully aligning first-mile, Allegro Fulfillment and lastmile operations with deliveries to this proprietary
locker network, the Group believes that considerable gains can be achieved in terms of next day
delivery capability and improved user experience.
The Group has begun investing in a team dedicated to managing the site acquisition and locker
installation and operation and is securing supplyof high quality lockers. The roll-out is expected totake several years and the target size of the locker
network is yet to be established and will depend on
the project’s delivery of consumer facing operational
objectives as alternative methods of delivery, including delivery to third party locker networks remain
viable alternatives of high quality but with less next
day delivery potential. If the Group fails to properly
execute the locker roll-out or fails to effectively
integrate an end-to-end consumer experience thatmaterially improves next day delivery capabilities,
returns from this investment may not be satisfactory
and this could result in a material adverse effect on
the Group's business, financial condition and resultsof operations.
Acquisitions
The Group may engage in opportunistic acquisitionsof other companies, businesses or assets, either in
Poland or abroad. Acquisitions involve numerous
risks, any of which could harm the Group's business,
including but not limited to: difficulties in integrating
the technologies, operations, existing contracts andpersonnel of acquired businesses; difficulties insupporting and transitioning customers or suppliersof an acquired company; diversion of financial andmanagement resources from existing operations
or alternative acquisition opportunities; failure
to realize the anticipated benefits or synergies ofa transaction; failure to identify all of the problems,
liabilities or other shortcomings or challenges of an
acquired company or technology, including issues
related to intellectual property, regulatory compli-

102

ance, accounting practices or employee or customer
issues; risks of entering new markets in which theGroup has limited or no experience; potential lossof key employees, customers and suppliers fromeither the Group's current business or an acquiredcompany's business; inability to generate sufficient
net revenue to offset acquisition costs; additionalcosts or equity dilution associated with funding theacquisition; and potential write-offs or impairment
charges relating to acquired businesses. If, in thecontext of any future acquisition, the Group fails
to properly assess the merits of the acquisition
target, incur costs that later prove to be unjustified,fails to integrate the acquisition into the Group'sbusiness properly and in a cost-efficient manner,or incurs liabilities that prove to be larger than
anticipated, it could have a material adverse effecton the Group's business, financial condition andresults of operations.

THE GROUP’S EXPECTATIONS, ASSUMPTIONS,AND JUDGMENTS UNDERLYING ITS STATEDNEAR – AND MEDIUM-TERM FINANCIAL
OUTLOOK AND OTHER FORWARD-LOOKINGPERFORMANCE MEASURES MAY PROVEINACCURATE, AND AS A RESULT THE GROUP
MAY BE UNABLE TO SUCCESSFULLY MEET ITSEXPECTATIONS OR ACHIEVE ITS TARGETEDFINANCIAL RESULTS.
Various expectations are presented in this Report
relating to the Group’s near – and medium-term
financial outlook in respect of GMV, net revenue,
Adjusted EBITDA, capital expenditure, and otherforward-looking performance measures. The
information in respect of the Group’s near – andmedium-term financial outlook and other forward-looking performance measures represent
the Group’s targets only and should not be relied
upon to predict or forecast actual near – and medium-term results or future events. Such targets
and beliefs are unaudited and reflect a number ofassumptions relating to future GMV, net revenue,
Adjusted EBITDA, capital expenditures and otherforward-looking performance measures, any ofwhich may not be borne out due to both known andunforeseen risks, uncertainties and other importantfactors beyond the control of the Group that could
affect actual results.

III. Non-financial report

Such targets and the underlying assumptions andjudgments carry an inherent degree of uncertainty
and may not take into account all relevant considerations. If the assumptions upon which the estimateddata is based prove to be inaccurate, growth rates
may be lower than targeted or the Group’s position
in its industry may be less favorable than expected,
which in turn may have a material adverse impact
on the Group’s business, financial condition andresults of operations in the near – and medium-term.

INEFFECTIVE PROTECTION OF CONFIDENTIAL
INFORMATION MIGHT MATERIALLY WEAKENTHE GROUP’S MARKET POSITION.
The Group’s key employees and officers have accessto sensitive confidential information relating to theGroup’s business such as insights about strategic
developments, business case planning and coretechnology. In the event that competitors, third
parties or the general public gain access to suchconfidential information, whether on purpose or
by accident, the Group’s market position could bematerially weakened. This could have a material
adverse effect on the Group’s business, financial
condition and results of operations.

THE GROUP MAY BE UNABLE TO MANAGE ITSANTICIPATED GROWTH EFFECTIVELY.
The rapid growth of the Group’s business to datehas placed, and any future growth is expected
to continue to place, significant demands on theGroup’s management and its operational and financial infrastructure. As the Group seeks to growits business, it will need to continue to improveand upgrade its systems and infrastructure to deal
with the greater scale and complexity of operations(including, for example, any additional complexities
due to any increased international presence asa result of geographic expansion or increased use
of fulfillment centers as a result of the launch of
Allegro Fulfillment, in particular its IT systems andits fulfillment infrastructure. Such expansion will
require the Group to commit substantial management, operational and other resources in advanceof any increase in the size of the business, with noassurance that its revenue and profit will increase
accordingly.

Continued growth could in particular strain theGroup’s ability to maintain reliable service levels for
the Group’s merchants and buyers; to attract, train,
motivate and retain highly skilled employees; andto continue to develop and to enhance the Group’s
operational, financial and management controls. Any
failure to effectively manage the increasing size andcomplexity of the Group’s business resulting fromfuture growth could have a material adverse effecton its business, financial condition and results ofoperations.

USER BEHAVIOR IN RESPONSE TOTECHNOLOGICAL DEVELOPMENTS IS
RAPIDLY EVOLVING AND FAILURE TO
SUCCESSFULLY ADAPT TO THESE CHANGESCOULD HAVE A MATERIAL ADVERSE EFFECT
ON THE GROUP’S BUSINESS, RESULTS OF
OPERATIONS OR FINANCIAL CONDITION.
The e-commerce segment is characterized by rapid
technological development, and new advances intechnology can increase competitive pressure. The
Group’s success depends on its ability to continually
improve its technological platform in order to remain competitive. For example, 5G cellular network
technology is rapidly being rolled out in countries
around the world, including Poland, enhancing theneed for the Group’s websites to be optimized formobile use and faster, more reliable load times.
In addition, machine learning and other forms ofartificial intelligence are transforming aspects of
e-commerce ranging from optimizing search results and pricing to providing customer support
and coordinating delivery logistics. The Group may
be unable to continue to innovate at its historicalpace or at the level of its competitors. Any failure
to adopt and apply new technological advances ina timely manner could decrease the attractivenessof the Group’s websites to buyers and merchants
and therefore limit the Group’s growth. Any such
failure could have a material adverse effect on theGroup’s business, financial condition and resultsof operations.

103ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE GROUP'S BUSINESS IS BASED ON
E-COMMERCE PLATFORMS FOR COMMERCIAL
TRANSACTIONS IN WHICH ALMOST ALL
ACTIVITY DEPENDS ON THE PLATFORMS'
MERCHANTS AND BUYERS AND IS THEREFORELARGELY OUTSIDE OF THE GROUP'S
CONTROL.
The Group's business is mainly dependent on merchants and buyers listing and purchasing items andservices on its platform. Except for the Group's
comparatively smaller first-party retail business,
the Group has limited influence over which items
will be listed, and does not make pricing or otherdecisions relating to the products bought and soldon its platform. The Group's future revenue depends
on continued demand for the types of goods thatmerchants offer on its marketplace. The popularityof certain categories of items, such as computerand electronic products, cellular telephones, toys,
apparel and sporting goods, among consumers mayvary over time due to perceived availability, subjective value, and trends of consumers and society ingeneral. A decline in the demand for certain items
sold through the Group's e-commerce marketplace
without an increase in demand for different items
could reduce the overall volume of transactions on
the Group's platforms, resulting in reduced revenue. Certain of the principal drivers of the Group'sbusiness are largely outside of its control, and theGroup depends on the continued preference for
the Group's online services by millions of individual
users.
The Group seeks to create a marketplace where
products are offered at competitive prices. The
Group does not control the pricing strategies of its
merchants, however, which could affect the Group's
revenue and its ability to effectively compete on
price with the other distribution channels usedby the Group's merchants, including other online
retailers and brick-and-mortar stores. Manufacturers may attempt to enforce minimum resale pricemaintenance arrangements to prevent distributors
from selling on the Group's websites or at prices thatwould make its site attractive relative to other alternatives. Retailers and brands may determine thatthey can more competitively price their products
through other distribution channels and may choosesuch other channels instead of listing products on
the Group's e-commerce marketplace.

104

If any of the foregoing were to occur, the Group'sbusiness, results of operations and financial conditions could be materially adversely affected.

THE LOSS OF OR A FAILURE TO HIRE AND
RETAIN HIGHLY SKILLED SENIOR MANAGERS
AND OTHER KEY PERSONNEL OR A FAILURE
TO MAINTAIN GOOD RELATIONSHIPSWITH THE GROUP'S WORKFORCE COULD
MATERIALLY ADVERSELY AFFECT THE
GROUP'S BUSINESS.
The Group's future success depends, in part, on theperformance of its senior management team, which
possesses significant experience in the Group's
industry. The loss of any members of senior management could harm the Group's business.
In addition, the competence and commitment of theGroup's employees are important factors for theGroup's successful development and managementof opportunities and risks. Therefore, the Group's
success also depends on its ability to attract, train,
motivate and retain highly qualified individuals, whilebuilding its corporate culture. A lack of qualified
and motivated personnel could impair the Group's
development and growth or harm its reputation. The
Group faces significant and increasing competition
from local, European and global competitors for
qualified personnel, including those in information
technology positions. The loss of qualified personnel,
high employee turnover, or persistent difficulties infilling job vacancies with suitable applicants could
have a material adverse effect on the Group's
ability to compete effectively in its business andconsiderable expertise could be lost by the Group oraccess thereto gained by the Group's competitors. In
addition, to attract or retain qualified personnel, theGroup might have to offer increased compensation
packages and other benefits which could lead tohigher personnel costs. Any failure to attract, train,
motivate or retain skilled personnel at reasonable
costs could result in a material adverse effect on theGroup's business, financial condition and results ofoperations.

III. Non-financial report

The Group has previously offered the Company's
Board and key employees of the Group investment
opportunities in the Group in order to attract andretain highly qualified individuals. These investments crystallized at the Group’s IPO in October
2020, though conversion into ordinary shares of
the Group, tradable on the Warsaw Stock Exchange.
Each participating manager had the opportunity tosell a minority of their ordinary shares at the IPO
and the remaining shareholdings are subject toa lock-up period that expires twelve months after
the IPO in October 2021. The Group can provide
no assurance that, following the crystallization ofthese investments, continued employment will beconsistent with the expectations, personal goals
or career goals of all of those individuals who were
invested in the Group and the Group may therefore
see an increase in attrition of highly skilled individuals in the future. Management intends to implement
incentive schemes, including share-based incentive
schemes, starting from 2021, to ensure that totalcompensation remains competitive.
Personnel expenses represent a significant cost
factor for the Group's business. Although noneof the Group's employees is currently subject toany collective bargaining agreement, there canbe no assurance that labor disputes, work stoppages, strikes or similar actions will not occur inthe future which might urge the Group to adopt or
negotiate a collective bargaining agreement. Any
material disagreements between the Group andits employees could disrupt the Group's operations,lead to a loss in revenue and users and increase
the Group's operating costs. In addition, there is
no guarantee that collective bargaining would bepossible on terms that are satisfactory to the Group.
If the Group's operations are affected over a longer
period of time by labor disputes or if the Group
were forced to enter into a collective bargaining
agreement at unfavorable terms, this could havea material adverse effect on the Group's business,financial condition and results of operations.

THE GROUP'S E-COMMERCE MARKETPLACE
DEPENDS ON A NUMBER OF THIRD-PARTYSERVICE PROVIDERS FOR THE DISTRIBUTION
OF MERCHANTS' PRODUCTS TO BUYERS. ANY
INABILITY OR REFUSAL OF SUCH PROVIDERS
TO DELIVER OR STORE FOR COLLECTION
PRODUCTS SOLD THROUGH THE GROUP'S
E-COMMERCE MARKETPLACE IN A SAFE AND
TIMELY MANNER OR ANY CHANGES IN THEIRSHIPPING TERMS AND COSTS OR SERVICEQUALITY COULD SIGNIFICANTLY HARM THE
REPUTATION OF THE GROUP'S E-COMMERCE
MARKETPLACE.
For distribution of the merchandise that the Group's
buyers purchase online, the Group's e-commercemarketplace depends on the services of a number ofthird-party logistics providers. Changes in shipping
terms and costs, for example due to higher fuelcosts, or the inability or refusal of third-party service
providers to deliver the products sold through theGroup's e-commerce marketplace in a safe andtimely manner could potentially harm the reputationof the Group's e-commerce marketplace and havean adverse effect on the Group's business. The
Group has long-term agreements with a numberof third-party logistics providers. These service
level agreements have the aim of securing package volumes needed for the Group's operations at
predictable costs and at required service quality;
however, certain of these agreements are scheduled
to expire in 2021 and there can be no assurance
that they will be renewed on acceptable terms.
Although the Group provides large volumes and istherefore attractive to third-party service providers,
there are a limited number of third-party service
providers who can provide services to the Groupat the necessary scale. Any deterioration in thefinancial condition of any third-party service provider,or any deterioration in the Group's relationships
with third-party service providers, could have an
adverse impact on the quality of the Group's logistics
processes and distribution costs and could havea material adverse effect on the Group's business,financial condition and results of operations.

105ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Moreover, in addition to traditional delivery services,many of the Group's buyers choose out-of-homedelivery options such as InPost 24/7 parcel lockers
or other pick-up/drop-off locations across Poland,
including Żabka stores, Orlen gas stations and Ruch
kiosks. Parcel lockers, as a specific out-of-home delivery solution, are a system of postal deposit boxes
that online shoppers can use to collect packages 24hours a day, seven days a week and are a populardelivery option for Polish consumers. InPost is thelargest supplier of parcel lockers in Poland. The
Group has entered into a long-term frameworkagreement with InPost for the delivery of parcels
to lockers, however, any potential future decreases
in cooperation or service charge increases could
affect the attractiveness of this delivery option. This
could affect buyers' willingness to make a purchaseon the Group's e-commerce marketplace, which inturn could lead to an adverse effect on the Group's
sales as well as the quality of the Group's logistics
processes and distribution costs and could havea material adverse effect on the Group's business,financial condition and results of operations.

THE ONGOING COVID-19 PANDEMIC,
INCLUDING THE RESULTING GLOBALECONOMIC UNCERTAINTY AND MEASURESTAKEN IN RESPONSE TO THE PANDEMIC,
AND OTHER FUTURE POTENTIAL NATURALDISASTERS OR OUTBREAKS, COULD
MATERIALLY IMPACT THE GROUP’S BUSINESSAND FUTURE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
A novel strain of coronavirus causing COVID-19
disease (“COVID-19”), first identified in China in late2019, has spread throughout the world. On 11 March
2020, the World Health Organization confirmedthat its spread and severity had escalated to thepoint of pandemic. COVID-19 infections reached
Poland in March 2020 and the Polish authorities
have implemented numerous measures to try tocontain the virus, such as travel bans and restrictions, lockdowns, quarantines and shutdowns ofbusiness and workplaces, social distancing, limitingor banning social gatherings and mass events. The
measures have so far been intensified and eased
three times as the infection rates have increased
and eased again.

Since late December 2020 a vaccination program
started to roll-out across Poland and the EU butmaterial impact on the scale of preventative measures imposed by the authorities is yet to be visible.
As a result of these restrictions, GDP growth in
Poland fell from 3.6% in 2019 to – 2.8% in 2020 [1],the first economic recession in Poland since theearly 1990s. This slow down has weakened retailsales growth and severely weakened businesses is
the sectors most impacted by the restrictions, while
stretching the resources of the Polish Government
to provide financial support. Whilst the fall in generaldemand is a clear drag on the e-commerce segment,
periodic restrictions on non-essential offline retail,ranging from customer density limits to shut down ofcovered shopping centers and even all non-essential
offline retail, together with buyers reluctance torisk social contact and infection while shopping,has overall created a net increase in demand for
e-commerce since the pandemic first arrived in
Poland.
As of the date of this Management Report, it remains
unclear how soon the vaccination program will produce sufficient falls in infection rates to allow thepermanent removal of the restrictions describedabove. Moreover, new strains of the COVID-19 virus
have appeared and it remains unclear to what extent
the efficacy of the available vaccines is reduced
against these new strains, if at all, and whether thisissue may extend the length of the pandemic crisis.
As the period affected by lock-down restrictions is
extended, economic damage to affected businesses
and consumers increases and may start to visibly
reduce activity of both Merchants and Consumers
on the Group’s marketplace. Moreover, it is notpossible to accurately predict to what extent theadditional demand initially seen by the e-commerce
segment due to the pandemic and the related
restrictions will remain once the pandemic andthe restrictions have passed. The post pandemic
demand trajectory for e-commerce accordingly
depends on the speed of economic recovery after
restrictions are finally eased and the degree to which
consumers’ preferences have permanently shifted
towards online shopping.

It is not possible for the Group to predict the interaction of these factors with any certainty andtherefore our plans and expectations may prove to
be materially different from actual outcomes andresult in materially different growth rates, financial
and operating performance.
The spread of COVID-19 has led the Group to modify
its operational practices, and it may take further
actions required by authorities or that it determines
are in the best interests of its employees, buyers,merchants and other stakeholders. The Group has
implemented a work-from-home policy which has
been used by nearly all of the Group’s employees.
For the Group’s employees who work in the Group’s
warehouse and/or cannot work remotely, the Grouphas implemented additional protective procedures,
including equipping employees with personal protective equipment (e.g. masks, gloves, disinfectants,
hand sanitizers, and face shields), implementingsocial distancing, staggering employees working
hours across three shifts throughout the day, increasing the frequency of cleaning in the Group’s
facilities, and installing thermal imaging cameras.
There is no certainty that such measures will be
sufficient to mitigate the risks posed by COVID-19,
and the implementation of such measures (or theirinsufficiency) could result in increased employee
absences due to illness and harm the Group’s ability
to perform some of its critical functions and serve
its users.
As the length of the pandemic crisis extends into
2021 and possibly longer, the impact of extended
working from home on the majority of the Group’s
workforce may start to have a visible negative impact
on productivity. The Group’s business requires thecreation of diverse teams to solve complex businessand engineering problems to improve the user experience available on the marketplace and consistent
progress over time is an important growth driver for
the Group. Home working and close-collaboration
over video conferencing links is clearly suboptimalcompared to teaming at the office using purpose
designed facilities and this may lead to a slower rateof progress in the development of the marketplaceplatform over time and slow the Group’s growth.

The Group is investing heavily in expanding its
workforce and in leasing and fitting out of larger
offices to house this workforce once social distancing
restrictions and high risk of infection from COVID-19
have passed. There is a risk that many employees
may strongly prefer to continue home working orthat continued restrictions reduce the acceptabledesk density in the offices, significantly reducing thecost efficiency of office space relative to the market
norms before the pandemic. If this should occur,
it may have a significant impact on the Group’s
financial results and operating performance.
While the COVID-19 pandemic has led to growing
GMV to date, the Group’s eBilet ticket sales business,
which represented 1.0% and 0.2% of the Group’s
GMV for the years ended 31 December 2019 and2020 respectively, has been disrupted by the shutdown of the live entertainment events industry
in response to the COVID-19 pandemic. If the live
entertainment events industry does not returnsufficiently for the eBilet business to return to its
pre-COVID-19 pandemic levels of profitability in themedium term, the Group may be required to impair
the carrying value of its investment and write off
certain amounts of net assets. If the impact of the
COVID-19 pandemic on the eBilet business persists,
the Group may need to revisit its plans regarding
eBilet to address such a situation.
The degree to which COVID-19 impacts the Group’sbusiness, results of operations, and financial position will depend on future developments of theissues described above and, which, as of the dateof this Report, are highly uncertain and cannot be
predicted.

[1] Source: https://tradingeconomics.com/poland/gdp-growth-annual

106

III. Non-financial report107ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

FRAUDULENT ACTIVITY BY THE GROUP'S
USERS MAY RESULT IN DISPUTESCONCERNING THE CONTENT OF THE GROUP'S
PLATFORM AND COULD NEGATIVELYIMPACT ITS OPERATING RESULTS, BRAND
AND REPUTATION AND CAUSE THE USE OFSERVICES TO DECREASE SIGNIFICANTLY.
The Group is subject to the risk of fraudulent activity
on its platforms by the Group's users, including, forexample, selling counterfeit goods, not delivering
goods after being paid and using stored credit
card and payment information on compromised
accounts to make purchases. Although the Grouphas implemented measures to detect and reduce
the occurrence of fraudulent activities, such as
cooperating with brands and responding to user
reports in order to remove listings of counterfeit
products, monitoring user transactions and activities to detect suspicious activity and implementing
anti-bot mechanisms, in order to combat bad buyer
experiences and increase buyer satisfaction, there
can be no assurance that these measures will be
sufficient to accurately detect, prevent or deter fraud.
As the Group's e-commerce marketplace sales grow,the cost of remediating fraudulent activity, including
buyer reimbursements, may materially increase
and could negatively affect the Group's operating
results. In addition, users may commit fraud or otherillegal activities when using any platform the Group
operates, which could harm the Group's reputation,
expose the Group to civil or criminal liability andaffect the Group's financial performance.
The Group cannot rule out the possibility that anyof the foregoing may occur and cause harm to theGroup's business or reputation in the future. If anyof the foregoing were to occur, the Group's business,
results of operations and financial condition could
be materially adversely affected.

108

CHANGES IN THE NUMBER OF BUYERS
RETURNING GOODS COULD INCREASE THE
GROUP'S COSTS AND HARM ITS BUSINESS.
The Group's return policies are consistent with Polish consumer regulations and provide that a buyer
can return a purchase where the merchant is anentrepreneur (i.e. a person conducting business or
professional activity rather than a private person
not conducting business), provided that the buyer
notifies the merchant within 14 days of receiving thegoods and ships the item within 14 days of providing
such notification. If the Group fails to manage andmeet buyer expectations with regard to the purchased products or if the return rates of the Group's
buyers increase for other reasons (e.g. changes inbuyers behavior or the abuse of the Group's return
policy by persons not actually willing to purchase theGroup's products), this could increase the Group's
costs (relating to returns for SMART! purchases) and
the Group could lose current or potential buyers
or merchants, which would impact its marketplacerevenue and retail revenue. Certain of the Group's
retail competitors offer more flexible return policies.
Moreover, the Group's buyers may expect the period
in which purchases can be returned to be extended
from the present 14 days. In such a case, the Group
cannot exclude the possibility that consumers dissatisfied with the 14 days return period will decideto buy products from the Group's competitors whooffer the possibility of returns after 14 days, which
could cause the loss of the Group's buyers. These
factors could have a material adverse effect on theGroup's business, financial condition and results ofoperations.

III. Non-financial report

THE GROUP WILL REQUIRE A SIGNIFICANTAMOUNT OF CASH TO SERVICE ITS DEBT ANDSUSTAIN ITS OPERATIONS. THE GROUP'SABILITY TO GENERATE OR RAISE SUFFICIENT
CASH DEPENDS ON MANY FACTORS BEYOND
THE GROUP'S CONTROL.
The Group's ability to make principal or interest
payments when due on the Group's indebtedness,
including the Group's obligations under the New Facilities Agreement, to the extent required to be paidin cash, and to fund the Group's ongoing operations
or planned capital expenditures, will depend on theGroup's future performance and ability to generate
cash, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, legal,
regulatory and other factors, as well as other factors
discussed in these "Risk Factors", many of which arebeyond the Group's control. If at the maturity of theGroup's credit facilities or any other debt that theGroup may incur, the Group does not have sufficient cash flows from operations and other capital
resources to pay the Group's debt obligations, or tofund the Group's other liquidity needs, the Groupmay be required to refinance or restructure theGroup's indebtedness. Furthermore, the Group mayneed to refinance all or a portion of its indebtedness
on or prior to their stated maturity. If the Group isunable to refinance or restructure all or a portion of
the Group's indebtedness or obtain such refinancing
or restructuring on acceptable terms, the Groupmay be forced to sell assets, or raise additional
debt or equity financing in amounts that could besubstantial or the holders of the Group's debt may
accelerate the Group's debt and, to the extent suchdebt is secured, foreclose on the Group's assets.
The type, timing and terms of any future financing,
restructuring, asset sales or other capital raisingtransactions will depend on the Group's cash needs
and the prevailing conditions in the financial markets.
The Group cannot provide assurance that it will beable to accomplish any of these measures in a timely
manner or on commercially reasonable terms, if
at all. In such an event, the Group may not havesufficient assets to repay all of the Group's debt. In
addition, the terms of the New Facilities Agreement
may limit the Group's ability to pursue any of thesemeasures.

THE INTERESTS OF THE COMPANY’SSIGNIFICANT SHAREHOLDERS MAY
CONFLICT WITH THE INTERESTS OF OTHERSHAREHOLDERS.
As a result of their ownership of shares of theCompany and their representation on the Boardof Directors, significant shareholders, have, and willcontinue to have, directly or indirectly, the ability to
influence the Company’s legal and capital structure,
the outcome of matters requiring action by shareholders, and other major decisions regarding theGroup’s operations. Any conflicts between senior
management and the Group’s significant shareholders, could adversely affect the Group and its
operations. Further, the significant shareholders
may have other business interests and portfolio
companies that may conflict with investors’ interests
as shareholders (or compete with the Group) andmay conflict with potential transactions the Groupmay wish to undertake. In addition, any circumstances relating the significant shareholders’ ownershipor beneficial ownership in the Group or in theirother portfolio companies may negatively affect theGroup’s business and operations, including its image,brand or its ability to refinance its indebtedness
to the extent that financial institutions deem suchownership as materially adverse to their willingness
to undertake any such refinancing or other capital raising. There can be no assurances that theinterests of the Group’s significant shareholders
will be consistent with the interests of the othershareholders or the Group, or that the significant
shareholders will exercise their rights for the benefitof all shareholders.

109ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE GROUP IS DEPENDENT ON THIRD-PARTYPROVIDERS FOR ITS MARKETING, CLOUD AND
OFFICE INFRASTRUCTURE SOFTWARE AND
ON SOCIAL NETWORKING AND MESSAGINGSERVICES FOR COMMUNICATING WITH ITSUSERS.
The Group depends on third-party providers for thesoftware the Group uses to operate its business.
For example, the Group presently licenses businesssoftware from Google and any change in the availability of such software, could cause a significant
interruption to the Group’s business. The Groupalso relies on social networking and messaging
services, including telephone and chat services, tocommunicate with its users. Changes to the terms
and conditions of these services could limit theGroup’s promotional capabilities, and there could
be a decline in the use of such social networking
services by existing and potential buyers and merchants. Increasingly the Group uses cloud based
services to run analysis and store data utilised by its
core marketplace and price comparison platforms.
Any interruption in availability of cloud services
could degrade the quality of the user experience on
the platforms while rapid increases in costs could
cause the Group to increase capital investment to
reduce dependence on cloud based services. Aninterruption to the Group’s business as a resultof the unavailability of software or the Group’s inability to communicate with its users using social
networking and messaging services, including telephone and chat services, could negatively impact
the Group’s reputation and have a material adverse
effect on the Group’s business, financial condition
and results of operations.

THE GROUP DEPENDS ON PRZELEWY24 AND
PAYU FOR ITS PAYMENT PROCESSING AND
ANY DETERIORATION IN ITS RELATIONSHIPSWITH SUCH THIRD-PARTY SERVICEPROVIDERS OR ANY FAILURE OF SUCHSERVICES TO FUNCTION PROPERLY, COULDHAVE A MATERIAL ADVERSE EFFECT ON ITS
BUSINESS, RESULTS OF OPERATIONS OR
FINANCIAL CONDITION.
The Group is dependent on Przelewy24 and PayU
for its payment processing, which together process
the vast majority of the payments on the Group’s
e-commerce marketplace. Any disruption in theavailability of their service could affect whether sales
are able to be processed on the Group’s e-commerce marketplace as well as the timely paymentof funds to the Group’s vendors. Disruptions in thefunctioning of the Group’s e-commerce marketplace
could negatively impact the Group’s reputation,
diminish the value of its brands and have a materiallyadverse effect on its business, result of operations
and financial condition.
Furthermore, any malfunction with respect to eitherof their payment processing functions could lead
to user claims that purchases or payments were
not properly authorized or were transmitted inerror, as well as risks that buyers have insufficient
funds and the risk of fraud. While the Group has
implemented a fraud detection system based onmachine learning tools, any failure to avoid or limit
losses from fraudulent transactions could damage
the Group’s reputation and result in increased legal
expenses and fees.
If the Group is unable to depend on Przelewy24
and PayU as a result of a disruption to the payment
system or a termination of the Group’s contractual
arrangements with these payment services providers, the Group may incur additional costs or facea decrease in transaction revenue, which could havea material adverse effect on its business, results ofoperations and financial condition.

110

III. Non-financial report

THE GROUP’S 1P RETAIL BUSINESS IS
SUBJECT TO PROFITABILITY, INVENTORY
AND REGULATORY RISKS AND THESE MAY
INCREASE IF THE RELATIVE SIZE OF THE
1P RETAIL BUSINESS IN RELATION TO THE
3P MARKETPLACE BUSINESS INCREASESSIGNIFICANTLY.

Each of these risks will be enhanced if the size of
the Group’s 1P retail business grows, especially if
the growth is significant relative to the Group’s 3P
e-commerce marketplace business. Any of theserisks, if they materialize, could have a material
adverse effect on the Group’s business, result of
operations and financial condition.

Potential significant growth of the Group’s 1P retailbusiness could expose the Group to profitability risk,
inventory risk and regulatory risk.

THE GROUP IS SUBJECT TO VARIOUS RISKS
WHICH MAY NOT BE ADEQUATELY INSURED.

The Group’s 1P retail business has less favorable
structure economics, including lower EBITDA/Net
Revenue, than the Group’s 3P business. As a result,if increased competition or other factors cause theGroup to significantly increase its 1P retail businessas a percentage of its overall business, the Groupmay be less profitable than it has been historically.
The Group’s merchants may also decrease theiractive offers on the Group’s platform as a result ofa real or perceived threat of direct competition fromthe Group’s 1P retail business. Although the Groupseeks to improve the structural economics of its 1P
retail operations, it expects its 1P retail business toremain less profitable compared to its 3P business.
Inventory risk may adversely affect the Group’s operating results because of seasonality, quick changes
in product cycles and pricing, defective products,
changes in user demand and user spending patterns, changes in consumer tastes with respect toits products, spoilage and other factors. The Groupseeks to predict these trends, as overstocking or
understocking products the Group sells could leadto lower sales, missed opportunities or excessive
markdowns, each of which could have a material impact on the Group’s financial and operating results.
While the Group strives to follow all relevant rules
and principles in relation to consumer protection
and the fair treatment of merchants, the Group’s
1P retail business could also be subject to enhanced regulatory review in relation to allegationsof infringement of consumer protection rules oranticompetitive business practices.

The Group is exposed to risks due to external factors beyond its control, including, but not limited
to, accidents, vandalism, natural hazards, acts ofterrorism, damage and loss caused by fire, power
failures or other events, that could potentially lead tothe interruption of the Group’s business operations,personal injuries, damage to third-party property or
the environment. For example, the Group relies on
third-party data center providers, whose facilities
could suffer catastrophic failure as a result of physical damage or cyberattack and subject the Groupto losses beyond those for which it is insured. In
addition, the Group’s activities relating to the direct
sale of goods involve specific risks such as fire, falls
from height, objects falling from storage shelving
and during movement, or traffic movements which
could result in damage to equipment, damage tothe property of third parties and personal injury
or death. Accidents or other incidents that occur
at the Group’s warehouse or involve the Group’s
personnel or operations could result in claims fordamages against the Group and could damage theGroup’s reputation. Although the Group insuresitself against such losses to a level and at a cost it
deems appropriate, the Group’s insurance policies
are subject to exclusions and limitations, and theGroup cannot guarantee that all material events ofdamage or loss will be fully or adequately coveredby an applicable insurance policy. As a result, theamount of any costs, including fines or damages
that the Group might incur in such circumstances,
could substantially exceed any insurance the Group
has to cover such losses. In addition, the Group’s
insurance providers could become insolvent. In
case of any of these events occurring, alone or in
combination, they could have a material adverse
effect on the Group’s business, financial condition
and results of operations.

111

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Risks Related to Regulation, Legal andIntellectual Property Matters
THE GROUP MIGHT BE SUBJECT TO FINESAND FOLLOW-ON CLAIMS FOR DAMAGESIN RELATION TO ALLEGED OR ACTUAL
ANTICOMPETITIVE BEHAVIOR OR PRACTICESNEGATIVELY IMPACTING CONSUMERS
AND CANNOT GUARANTEE THAT THEUOKIK PRESIDENT OR THE EC WILL NOT
DEEM CERTAIN OPERATIONS THE GROUPCONDUCTS TO VIOLATE EU AND/OR POLISH
COMPETITION OR CONSUMER PROTECTIONLAWS.
The Group may be subject to civil claims for damages
in relation to the alleged or actual infringement ofcompetition or consumer law. A damages action canbe triggered by a stand-alone action or by an actionthat follows a public enforcement decision such asa decision of the UOKiK President or the European
Commission. To ensure effective enforcement ofsuch claims, a private enforcement legal framework has been under development in recent years
throughout the European Union to, among otherthings, introduce a directive harmonizing rules on
numerous issues arising in competition damages
claims and introduce collective redress mechanisms.
This framework seeks to strengthen the positionof private claimants seeking damages by removing
substantive and procedural obstacles for claimants
to prove an infringement and establish damages.
The number of such claims is also growing in Poland(both stand-alone cases and cases based on a priorinfringement decision of the UOKiK President or of
the EC), increasing the existing or potential liability
to which the Group is exposed.
The UOKiK President is empowered under the Polish Act of 16 February 2007 on Competition andConsumer Protection (unified text: Journal of Lawsof 2020, Item 1076, as amended) (the "Competition
Act") to initiate administrative proceedings concerning the protection of competition or the protectionof consumers, including abusive clauses in standard
agreements with consumers. Additionally, both the
UOKiK President and the EC may instigate proceedings pursuant to the Articles 101 and 102 of theTreaty on the Functioning of the European Union(the "TFEU").

112

Pursuant to the Competition Act, on 6 December
2019, the UOKiK President commenced antitrust
proceedings against Allegro.pl concerning the alleged abuse of a dominant position by Allegro.plon the Polish market for online B2C intermediarysales services by favoring its own 1P retail sales
activity on its platform, in particular the activity of
the Official Allegro Store, over the sales activitiesof third-party merchants ("3P Sellers") operating
on its platform. The proceedings were precededby a preliminary investigation stage that the UOKiK
President commenced in June 2017. The antitrust
proceedings are still in the evidence-gathering stage
and the outcome is uncertain. Allegro.pl is expecting
further requests for information from the UOKiK
President in the future.
On 3 September 2020, the UOKiK President statedin a press release that he initiated explanatory proceedings into Allegro.pl's rules of cooperation withsellers in order to determine whether Allegro.pl gains
unjustified advantages at the expense of its clients.
On 14 September 2020, the Group received a formal
notification that, pursuant to the Competition Act,
the UOKiK President has commenced explanatory
proceedings into Allegro.pl's rules of cooperation
with sellers.
On 15 September 2020, the Group received a formal
notification that, pursuant to the Competition Act,
the UOKiK President has commenced proceedings
against Allegro.pl to investigate whether Allegro.pluses or has used abusive clauses in its terms andconditions.
See section 3.1.8 Legal Proceedings for further
information on regulatory proceedings relating toAllegro.pl.

III. Non-financial report

Claims and investigations by regulatory agencies
such as the UOKiK President or the EC, even if
without grounds, typically are very expensive todefend, require significant management time andinvolve negative publicity. If a UOKiK President or
EC investigation were to conclude with a result
adverse to the Group or if the Group were to enter
into a settlement arrangement, the Group may
be subject to significant fines, penalties and othersanctions, or could be forced to change its businesspractices substantially. Alternatively, if the Group
were to enter into a commitment arrangement,
the Group may be required to change its businesspractices substantially in order to implement thecommitments. Both the UOKiK President and theEC have the power to impose fines of up to 10% of
the turnover of the company concerned in the last
financial year for breach of competition rules or,in the case of the UOKiK President, for breach of
consumer protection rules. Fines imposed by theEC may also be calculated based on the turnover ofthe group to which the company concerned belongs,
with fines of up to 10% of group turnover in thelast financial year for breach of competition rules.
Any adverse determinations could also result insignificant adverse publicity or reputational harm,and could result in, or complicate, other inquiries,
investigations or lawsuits in future antitrust or otherinvestigations, consumer protection or other investigations. Furthermore, the Group can provide noassurance as to the timing of the above mentioned
proceedings relating to Allegro.pl, or that the UOKiK
President or the EC will not initiate further regulatory
proceedings.
Such fines, any adverse decisions in proceedings,
changes to the way in which the Group can operate,or negative publicity generated therefrom, may havea material adverse effect on the Group's business,financial condition and results of operations.

THE GROUP IS SUBJECT TO A VARIETY
OF REGULATIONS, INCLUDING BUT
NOT LIMITED TO DATA PROTECTIONSLAWS, CONSUMER PROTECTION LAWS,REGULATIONS GOVERNING E-COMMERCE
AND COMPETITION LAWS, AND FUTURE
REGULATIONS MIGHT IMPOSE ADDITIONALREQUIREMENTS AND OTHER OBLIGATIONSON THE GROUP'S BUSINESS.
Laws and regulations applicable to e-commerce, as
well as laws and regulations of broader applicationthat apply to the Group's business (in particular,
competition law), and to public companies generally,
are evolving at a rapid pace and can be subject
to differing interpretation. Given the extensive
scope and timing of the changes, the Group cannot
guarantee that its practices have complied or willcomply fully with all applicable laws and regulations
and their interpretation. Any failure, or perceived
failure, by the Group to comply with any of theselaws or regulations could result in damage to theGroup's reputation and a loss of revenue, and any
legal or enforcement action brought against theGroup as a result of actual or alleged noncompliancecould further damage its reputation and result in
substantially increased legal expenses and/or penalties. In addition, legislative and regulatory bodies
or self-regulatory organizations may extend thescope of current laws or regulations, enact new laws
or regulations or issue revised rules or guidance
regarding privacy, data protection and consumer
protection.
Adverse changes in laws or regulations applicable to the Group could cause the Group to incur
substantial costs or require the Group to change
its business practices and could compromise its
ability to pursue its growth strategy effectively. For
example, the European Union has adopted theGeneral Data Protection Regulation (EU) 2016/679("GDPR"), which became effective on 15 May 2018.
The GDPR imposes additional obligations on companies regarding the handling of personal data andprovides certain individual privacy rights to persons
whose data is stored.

113

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Compliance with existing, proposed and recently enacted laws (including implementation of the privacy
and process enhancements called for under GDPR)
and regulations can be costly, and any compliance
failure may also give rise to civil liability, administrative orders to stop processing personal data(including injunctive relief), fines or even criminal
charges, and could subject the Group to legal andreputational risks. The Group collects, stores anduses data in the ordinary course of its operations
that is protected by data protection laws. Although
the Group takes precautions to protect subscriber
data in accordance with the privacy requirements
provided for under applicable laws, the Group may
fail to do so and certain subscriber data may beleaked as a result of human error, willful misconduct or technological failure or otherwise be used
inappropriately. The Group works with independentand third-party suppliers, partners, dealers, service
providers and call centers, and the Group cannot
eliminate the risk that such third parties could also
experience system failures involving the storing or
the transmission of proprietary information. Violation of data protection laws or regulations by theGroup or one of the Group's partners or suppliers
may result in fines, reputational harm or temporary
or definitive limitations (including a ban) on dataprocessing and could have a material adverse effecton the Group's business, results of operations or
financial condition.
A variety of local and international laws and regulations govern the collection, use, retention, sharing
and security of consumer data, and these laws andregulations are changing especially rapidly. Data
protection is a particularly sensitive and politicallycharged issue in Europe, and any actual or alleged
failure by the Group to comply with applicable laws
or regulations could have a significant adverse effect on the Group's reputation and popularity withexisting and potential buyers and merchants. Local
and international governmental authorities continue
to evaluate the privacy implications inherent in theuse of cookies and other methods of online tracking
for behavioral advertising and other purposes. Certain governments have enacted or are considering
measures that could significantly restrict the abilityof companies to engage in these activities, such as byregulating the level of consumer notice and consent
required before a company can employ cookies orother electronic tracking tools.

114

Additionally, some providers of consumer devices
and web browsers have implemented, or haveannounced plans to implement, means to make iteasier for internet users to prevent the placementof cookies or to block other tracking technologies,
which, if widely adopted, could result in a significant
reduction in the effectiveness of the use of cookies
and other methods of online tracking. New laws,
regulations, or developments in industry practiceor consumer behavior might result in the loss of ora substantial reduction in the Group's ability to use
such practices to effectively market products, ormight adversely affect the Group's ability to attract
new merchants or buyers on cost-effective terms.
The realization of any of such risks, alone or in
combination, could have a material adverse effecton the Group's business, financial condition andresults of operations.

THE USE OF OPEN SOURCE SOFTWARE COULD
INCREASE THE GROUP’S RISK THAT HACKERS
COULD GAIN UNAUTHORIZED ACCESS TO THE
GROUP’S SYSTEMS AND THE GROUP COULD
BE SUBJECT TO LITIGATION IF THIRD PARTIESCHALLENGE THE GROUP’S RIGHTS TO USE
SUCH SOFTWARE ON AN EXCLUSIVE BASIS.
Some of the Group’s software and systems contain
open source software, which may pose certain risks
to the Group’s software and solutions. The licenses
applicable to open source software typically requirethat the source code subject to the license be madeavailable to the public and that any modifications orderivative works to open source software continue
to be licensed under open source licenses. Although
the Group does not intend to use or modify open
source software without holding the necessary
licenses, the Group could, however, face claims
from third parties alleging the infringement of
their intellectual property rights, or demanding
the release or license of the open source softwareor derivative works developed by the Group using
such software (which could include the Group’s
proprietary source code) or otherwise seeking toenforce the terms of the applicable open source
license. These claims could result in litigation, require
the Group to purchase a license, publicly release theaffected portions of the Group’s source code, limit
the licensing of the Group’s technologies or ceaseoffering the implicated solutions.

III. Non-financial report

In addition, use of certain open source software canlead to greater risks than use of third-party commercial software, as open source licensors generally
do not provide contractual protections with respect
to the software. Also, the licensors are not obliged
to maintain their software or provide any support.
There is a certain risk that the authors of the open
source software cease updating and attending to
the software. Engineering the software updates by
the Group could be expensive and time-consuming.
The use of open source software can also present
additional security risks because the source codefor open source software is publicly available, which
could make it easier for hackers and other third
parties to determine how to breach the Group’s
sites and systems that rely on open source software.
The realization of any of such risks, alone or in
combination, could have a material adverse effecton the Group’s business, financial condition andresults of operations.

THE CONTROL AND PREVENTIONMECHANISMS OF THE GROUP’S COMPLIANCESTRUCTURE MIGHT NOT BE SUFFICIENT TOADEQUATELY PROTECT THE GROUP FROM ALL
LEGAL OR FINANCIAL RISKS.
A management system for governance, risk andcompliance, which includes standards of conduct,
corruption prevention, competition law compliance,
prevention of conflicts of interest, information anddata protection, prevention of unlawful discrimination and protection of company property andknow-how has been established in the Group’s main
operating subsidiaries: Allegro.pl and Ceneo.pl. In
addition, Allegro.pl and Ceneo.pl have introduced
a binding code of conduct for compliance with thecorporate social responsibility regulations for the
suppliers of the group. The supplier’s codes may also
be accepted. Based on the recommendations of thePolish Ministry of Finance, Allegro.pl and Ceneo.pl
have established a complex verification process invendor creation. A review of financial documents,
registration documents and the correctness ofbank accounts should filter out unsuitable service
providers.

Guidelines such as procurement policy, tender
procedure, controlling procedure and legal procedure have also been introduced and are intended
to minimize all unauthorized practices, violationsof the law, corruption and fraud, especially withregard to purchasing practices, or other adverse
consequences of non-compliance within the Group.
In addition, all purchasing processes in Allegro.pl
and Ceneo.pl are based on integrated IT systems
that allow full transparency of liability creation.
A breach of the regulations can certainly damage
the Group’s reputation and significantly impair theGroup’s business, financial and earnings position.
This policy and the oversight of the Group’s internal
compliance and legal departments might not be
sufficient to prevent all unauthorized practices, legal
infringements, corruption and fraud, in particular inpurchasing practices, or other adverse consequences of noncompliance within the Group’s organization
or by or on behalf of the Group’s employees. Any
failure in compliance could harm the Group’s reputation and have a material adverse effect on theGroup’s business, financial condition and resultsof operations.

ADVERSE JUDGMENTS OR SETTLEMENTSRESULTING FROM LEGAL PROCEEDINGSCOULD EXPOSE THE GROUP TO MONETARYDAMAGES AND LIMIT THE GROUP’S ABILITY
TO OPERATE THE GROUP’S BUSINESS.
The Group may become involved from time totime in private actions, investigations and various
other legal proceedings by employees, suppliers,
competitors, government agencies or others. The
results of any such litigation, investigations and otherlegal proceedings are inherently unpredictable. Anyclaims against the Group, whether meritorious or not,could be time-consuming, result in costly litigation,
damage the Group’s reputation, require significant
amounts of management time and divert significant
resources. If any of these legal proceedings were
to be determined adversely to the Group, or if theGroup were to enter into a settlement arrangement,
the Group could be exposed to monetary damages
or limits on the Group’s ability to operate the Group’sbusiness, which could have a material adverse effecton the Group’s business, financial condition andresults of operations.

115

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

INTERPRETATION OF POLISH LAWS AND
REGULATIONS MAY BE UNCLEAR AND POLISHLAWS AND REGULATIONS MAY CHANGE.
Although the Company is an entity formed under thelaws of Luxembourg, the key operating companiesof the Group have been established and operate
under Polish law. The Polish legal system is based on
statutory law enacted by the parliament of Poland.
A significant number of regulations relating to the issue of and trading in securities, shareholders' rights,
foreign investments, issues related to corporate
operation and corporate governance, commerce,taxes and business activity have been introduced
and changed in recent years and/or may be changedin the future. For example, in July 2020, new restrictions on FDI in certain Polish companies came into
force. Certain Polish regulations have been subject
to different interpretations and may in the future
be interpreted in an inconsistent manner. Moreover,
not all court decisions are published in official journals and, as a matter of general rule, they are notbinding in other cases and are therefore of limited
importance as legal precedent. In recent years, thePolish government has proposed or implemented
a number of changes to the judicial system. Someof those changes have attracted the attention of EU
institutions and have been questioned by membersof the Polish legal community who perceive themas potential threats to both judicial independence
and the rule of law. Ongoing tensions between
the government and the judiciary may potentiallyindirectly result in some additional delays to theproceedings. If the stability of the Polish judicial
system deteriorates, it may make the outcome ofvarious legal proceedings in which the Group isor may be involved in relation to its business lesspredictable than it is presently. The Group cannot
provide assurance that its interpretation of Polishlaws and regulations will not be challenged and any
successful challenge could result in fines or penalties
or could require the Group to modify its practices,
all of which could have a material adverse effecton the Group's business, financial condition andresults of operations.

116

INTERPRETATION OF LUXEMBOURGISH LAWS
AND REGULATIONS MAY BE UNCLEAR AND
LUXEMBOURGISH LAWS AND REGULATIONS
MAY CHANGE.
As the Company and Adinan Midco S.à r.l. are both
entities incorporated and governed by the laws of
Luxembourg, both entities must comply with all
relevant Luxembourgish laws and regulations. The
Luxembourgish legal system is based on statutory
law enacted by the parliament of Luxembourg. A significant number of regulations relating to the issueof securities, shareholders' rights, issues related
to corporate operation and corporate governance,
taxes and business activity have been introduced
and changed in recent years and/or may be changedin the future. Certain Luxembourgish regulations
have been subject to different interpretations andmay in the future be interpreted in an inconsistentmanner.

THE GROUP USES STANDARDIZED SALES,
PURCHASE AND SUPPLY AGREEMENTS
AS WELL AS STANDARDIZED TERMS
AND CONDITIONS IN THE MAJORITY OF
SITUATIONS WHERE IT IS POSSIBLE TO DO SO,
WHICH INCREASE THE POTENTIAL THAT SOME
OR ALL CONTRACT TERMS USED THEREIN
MAY BE INVALID OR UNENFORCEABLE IF ANY
CLAUSE IS HELD TO BE VOID.
The Group maintains legal relationships with a large
number of persons, including merchants, suppliers
and manufacturers. In this context, the Group alsouses standardized documents, standard-form contracts and standardized terms and conditions in thevast majority of cases where it is possible to do so. Ifsuch documents, contracts or terms and conditions
are found to contain provisions that are disadvantageous to the Group, or if clauses in such documents
or contracts are declared invalid and thus displaced
by statutory provisions that are unfavorable to theGroup, a large number of standardized documents,
contracts or terms and conditions could be affected.
Additionally, standardized terms under Polish law
have to comply with the statutory law on generalterms and conditions, which means they are subject
to rigid fairness control by the courts regarding theircontent and the way they, or legal concepts described
therein, are presented to the other contractual partyby the person using them.

III. Non-financial report

The standard is even stricter if they are used visà-vis consumers. As a general rule, standardized
terms are invalid if they are not transparent, clearly
worded, or if they are unbalanced or discriminate
against the other party inappropriately. Due to frequent changes to the legal framework, particularly
regarding court decisions relating to general terms
and conditions, the Group may be unable to avoid
risks from the use of such standardized contractual terms. The invalidity or unenforceability of thestandardized documents, standard-form contracts
and standardized terms and conditions that theGroup uses could have material adverse effects
on the Group's business, financial condition andresults of operations.

THE INABILITY TO ACQUIRE, USE OR
MAINTAIN THE GROUP’S INTELLECTUAL
PROPERTY RIGHTS, INCLUDING ALLEGROAND CENEO TRADEMARKS AND DOMAINNAMES FOR ITS SITES COULD SUBSTANTIALLY
HARM THE GROUP’S BUSINESS, RESULTS OF
OPERATIONS OR FINANCIAL CONDITION.
The Group believes the Group’s user data (asa part of the Group’s trade secrets and databases),
copyrights, trade secrets, patents, proprietary
technology and similar intellectual property are
critical to the Group’s success, and the Group relies
on trademark, copyright, patent and trade secretprotection, agreements and other methods with
the Group’s employees and others to protect theGroup’s proprietary rights. In addition, the Grouphas developed, and the Group anticipates that
it will continue to develop, a substantial numberof programs, processes and other know-how ona proprietary basis (but partly based on open source
codes) that are of key importance to the successful
functioning of the Group’s business, however knowhow has an unclear and vague legal status, with nodirect regulations on this matter. The Group might
not be able to obtain effective intellectual property
protection in every country in which the Group is
active or in which such protection is relevant, and theGroup’s efforts to protect the Group’s intellectual
property could require the expenditure of significant
financial, managerial and operational resources.
A large part of the Group’s intellectual property
rights could be challenged or invalidated throughadministrative processes or litigation, and the Group

cannot be certain that others will not independently
develop or otherwise acquire equivalent or superior
technology or intellectual property rights. In addition, the Group may consider revising its current
intellectual property policies, especially concerning
its intellectual property strategy outside of Poland.
The Group is the registrant of Polish trademarks for
its operating businesses, including Allegro and Ceneo, and has also registered internet domain names
containing “Allegro,” “Ceneo” and other operating
business names for the Group’s websites. The Group
has also registered the trademarks and respective
domain names in certain international jurisdictions.
With respect to several of these trademarks theGroup has endeavored to enter into coexistenceagreements for specific countries or situations. The
Group has also registered selected internet domainnames for some of its operating entities. Domainnames are generally regulated by internet regulatory
bodies and are also subject to trademark laws andother related laws of each country. If the Group does
not have or cannot obtain or maintain on reasonable
terms the ability to use its trademarks or a major
private brand in a particular country, or to use orregister its domain name, the Group could be forced
either to incur significant additional expenses tomarket the Group’s services within that country,
including the development of a new brand and thecreation of new promotional materials, or to electnot to offer its services in that country.
Furthermore, the regulations governing domainnames and laws protecting marks and similar proprietary rights could change in ways that block orinterfere with the Group’s ability to use relevant
domains or the Group’s current brand. In addition,
the Group might not be able to prevent third parties from registering, using or retaining domainnames that interfere with the Group’s consumer
communications or infringe or otherwise decrease
the value of the Group’s marks, domain names
and other proprietary rights. Regulatory bodies
may establish additional generic or country-code
top-level domains or may allow modifications of
the requirements for registering, holding or using
domain names. As a result, the Group might not beable to register, use or maintain the domain namesthat utilize the name “Allegro” in all of the countries
in which the Group currently conducts business or
intends to conduct business in the future.

117

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The Group might be required to spend significant
resources to monitor and protect its intellectual
property rights. The Group may not be able to discover or determine the extent of any infringement,
misappropriation or other violation of the Group’s
intellectual property rights and other proprietary
rights. The Group may initiate claims or litigation
against others for infringement, misappropriation or
violation of the Group’s intellectual property rights or
proprietary rights or to establish the validity of suchrights. Despite the Group’s efforts, the Group may beunable to prevent third parties from infringing upon,
misappropriating or otherwise violating the Group’s
intellectual property rights and other proprietary
rights. Any litigation, whether or not it is resolved in
the Group’s favor, could result in significant expense
to the Group and divert the efforts of the Group’s
technical and management personnel.
In addition, the Group has received in the past,and the Group anticipates receiving in the future,communications alleging that certain items posted on, or sold through, the Group’s sites violate
third-party copyrights, marks and trade names orother intellectual property rights or other proprietary rights. Brand and content owners and otherproprietary rights owners have actively asserted
their purported rights against online companies,
including Allegro. In addition to litigation from rights
owners, the Group may be subject to regulatory,
civil or criminal proceedings and penalties if governmental authorities believe the Group has aided andabetted in the sale of counterfeit or other unlawful
products. Such claims, whether or not meritorious,
could result in significant additional expenses andredirect management attention.
The realization of any of such risks, alone or in
combination, could have a material adverse effecton the Group’s business, financial condition andresults of operations.

118

THE GROUP COULD FACE LEGAL AND
FINANCIAL LIABILITY FOR THE SALE OFITEMS THAT INFRINGE ON THE INTELLECTUAL
PROPERTY AND DISTRIBUTION RIGHTSOF OTHERS AND FOR INFORMATION AND
MATERIAL DISSEMINATED THROUGH ITS
PLATFORMS.
Although the Group's terms of use clearly prohibit
the sale of counterfeit items or any items infringing
upon third parties' intellectual property rights on theGroup's platform and the Group has implemented
solutions to exclude goods and services that havebeen determined to violate its terms of use, theGroup is not able to detect and remove every itemthat may infringe on the intellectual property rightsof third parties. As a result, the Group has received
in the past, and anticipates that it will receive inthe future, complaints alleging that certain items
listed or sold through the Group's platform infringe
third-party copyrights, trademarks or other intellectual property rights. Content owners and otherintellectual property rights owners have been active
in defending their rights against online companies,
including the Group. The Group has taken steps tocooperate with intellectual property rights owners
to seek to eliminate allegedly infringing items listed
on its marketplace. The Group's policies prohibit thesale of goods that may infringe third-party intellectual property rights, and the Group may suspend theaccount of any merchant who infringes third-party
intellectual property rights. Despite these measures,some owners of intellectual property rights may
consider the Group's efforts insufficient, and theGroup anticipates that it will continue to receive
legal claims from content and intellectual property
owners alleging violations of their rights, which could
result in substantial monetary awards, penalties or
costly injunctions against the Group.
It is also possible that third parties could bring claims
against the Group for defamation, libel, invasion ofprivacy, negligence or other claims based on thenature and content of the materials disseminatedthrough the Group's platforms, particularly materials disseminated by the Group's merchants. Whileapplicable regulations require hosting providers
to have actual knowledge of any illegal content
on their platforms in order to have any potential
liability, certain regulations are vague and unclear
with respect to the e-commerce platform provider's
responsibility to actively monitor transactions ortake action to prevent infringing activities.

III. Non-financial report

If the Group or other online services providers
are held liable or potentially liable for information
carried on or disseminated through their platforms,
the Group may have to implement measures toreduce its exposure to this liability. Any measures theGroup may need to implement may involve spending
substantial resources and/or discontinuing certain
services. Any costs that the Group incurs as a resultof liability or asserted liability could have a material
adverse effect on its business, results of operations
and financial condition.
The Group could also face legal and financial liability for the alleged infringement of the intellectual
property of third parties related to the conduct ofits business.

In July 2016, the General Anti-Avoidance Rule("GAAR") entered into force, which, to a certain
extent, may be applied retroactively (as described
below). Therefore, since July 2016 any reference tothe Polish tax regulations, including for the purposeof this Report, includes the GAAR.
The Group cannot exclude the possibility that further
tax law amendments will be introduced in Poland
or that new tax burdens will be imposed on e-commerce activities.
Tax laws in Poland may also need to be amended inorder to implement new EU legislation.

CHANGES IN POLISH TAX REGULATIONS MAY
HAVE AN ADVERSE EFFECT ON THE GROUP'SRESULTS OF OPERATIONS AND FINANCIAL
CONDITION.

The instability of the Polish tax system stems not only
from changes in the law, but also from the relianceby tax regulators on court interpretations, which
are also subject to potential changes and reversals.
The lack of well-established regulations results inunclear and inconsistent interpretations, which leadto uncertainties and conflicts in application.

The Polish tax system is characterized by change
and uncertainty as tax regulations are frequently
amended, subject to numerous and sometimes
contradictory interpretations.

As a result, the Group faces the risk that its activity
in selected areas could be unsuited to the changing regulations and the changing practice in theirapplication.

In recent years, a number of new tax regulations havecome into force that were prepared in a relatively
short time and implemented with short grace periods. Other tax reporting or compliance obligations or
new tax regulations may be introduced, which could
also affect the Group's operations. Certain of theseregulations have had (e.g. voluntary and mandatory
split payment regulations), and may have (e.g. new
regulations relating to pay and refund withholding
tax mechanisms), an impact on the Group's business and financial condition, including cash flows.
Due to the short lead times in publishing laws or
secondary legislation, the Group may not always
have sufficient time to program new requirements
into its systems, or may be unable to determine
what changes need to be made, prior to the newlaws coming into force. This may lead to fines or
penalties for non-compliance.

There is also a risk that the tax rulings already obtained and applied by the Group in Poland will bechanged or deprived of their protective power, which
could lead to tax exposure for the Group.
Due to the fact that potential disputes with thePolish tax authorities cannot be ruled out, the tax
authorities could challenge the tax settlements ofcompanies in the Group regarding non-time-barred
tax liabilities (including the due performance ofthe tax remitter's obligations by companies in theGroup) and determine tax arrears for these entities,
which may have a material adverse effect on thebusiness, financial standing, growth prospects or
results of the Group.

119ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Tax settlements, together with other areas of legal
compliance (e.g. customs duty) may be subject toreview and investigation at any time by the tax
authorities and additional tax assessments withpenalty interest and penalties may be imposed
within five years from the end of the year in which
a tax is due. In certain cases, the limitation period
might be extended.
In view of these frequent changes, which may havea retroactive effect, and the existing uncertainty,
the lack of a uniform interpretation of tax law andthe relatively long statute of limitations for tax liabilities, the risk of challenging the application of tax
regulations in Poland may be higher than found in
the legal systems of other countries. Additionally,
these changes in tax regulations have had and may
in the future have negative effects on the Group'sbusiness, financial condition, results of operations
and prospects. Further, the lack of stability in the
Polish tax regulations may hinder the Group's ability
to effectively plan for the future and to implement
the Group's business plan.
Moreover, with respect to any cross-border businessof the Group, international agreements, including
double tax treaties, to which Poland is a party also
have an effect on the Group's business. Different
interpretations of the double tax treaties by the tax
authorities, as well as any changes to these treaties,
may have a material adverse effect on the Group'sbusiness, financial standing or results.

120

DIGITAL SERVICES TAXES HAVE BEEN
PROPOSED, PARTIALLY IMPLEMENTED, AND
MAY BE BROADENED BY POLAND, SOME OF
THE EU MEMBER STATES, THE EUROPEAN
UNION OR THE OECD, AND OTHER TAXES MAY
BE IMPOSED ON THE E-COMMERCE SEGMENT
OR E-COMMERCE PLATFORMS.
Tax authorities worldwide are currently reviewing
the appropriate treatment of companies engaged
in e-commerce and/or the digitalized economy. It is
likely that in the future countries might attempt toimpose new digital services taxes or sales taxes on
the Group's business or levy additional income orother taxes relating to the Group's activities.
In particular, in 2018, the European Commission
proposed new rules specifically targeted at digital business activities to tax them in a "fair andgrowth-friendly way" in the European Union. The
Commission made two legislative proposals: (i) the
first initiative aimed to reform corporate tax rules
so that profits are registered and taxed in countries
where businesses have significant interaction withusers through digital channels (so-called long-term
solution) and (ii) the second proposal responded tocalls from several Member States for an interim tax
that covers the main digital activities that currently
are not subject to tax altogether in the European
Union. In 2019, the European Union suspended its
works till the end of 2020 and decided to wait for
an international consensus expected to be reachedby the OECD forum. Such a consensus is yet to beachieved and the OECD is still conducting advanced
international negotiations to ensure large and highly
profitable multinational enterprises, including digitalcompanies, pay tax wherever they have significant
consumer-facing activities and generate their profits.
In view of the lack of international consensus and inview of the need to support the EU’s borrowing andrepayment capacity, the European Council tasked
the Commission with putting forward proposals
for additional measures to raise tax revenues. The
digital levy is one such measure. In January 2021
the European Commission commenced the public
consultation on a digital levy.

III. Non-financial report

Moreover, certain countries already have introduced
their own local legislation on taxing digital services(e.g. France and Italy) and others do not exclude
drafting their own proposals shall the OECD negotiations fail. The Polish Ministry of Finance presented in
February 2021 its own detailed proposal for legislation on taxing i.a. digital advertising services and thespecific risks relating to this particular proposal are
set out in a separate point below. The implemented
and/or proposed digital services taxes differ significantly in their structure. Numerous local initiatives inthis respect (instead of one internationally approved
framework) may result in overlapping solutions andthus, may significantly increase the tax burden on
businesses subject to these new taxes.
The Group notes that while the motivation for these
digital services taxes is to minimize tax optimization
schemes by multinational businesses able to optimize their tax affairs across borders, the Group's key
operating companies currently carry out businessactivities in Poland and its entire income is subject
to Polish corporate income tax irrespective of where
the income is earned. However, if taxes similar to
those described above were to be imposed on
the Group with no offsetting relief in the future,
the Group may be put at a material competitive
disadvantage because offline sellers would not be
subject to such new digital services taxes and small
Polish e-commerce businesses would be exempt
from digital services tax (as their total annual
worldwide revenue may by lower than minimum
revenue thresholds), and also at a disadvantage tointernational e-commerce platforms that provide
services in Poland but had previously optimized
their tax affairs and achieved a lower average tax
rate than the Group on their European profits andwill pay only the new digital services tax in Poland
on the same basis as the Group.

While the Group believes that imposing new taxesof this type on wholly domestically focused digital
services businesses like the Group is unjustified, it
can provide no assurance that it will be successful
in its efforts to convince the relevant legislative
authorities in the European Union or in Poland that
the Group's objections are justified. Accordingly, any
future developments leading to the imposition ofdigital services taxes in Poland could have a material
adverse effect on the Group's effective tax burdens
and in certain cases may lead to double taxation of
the Group's revenue and put the Group at a significant competitive disadvantage to its competitors.
Furthermore, the Group cannot predict the effect ofany future attempts to impose sales, income or othertaxes specifically on the e-commerce segment. New
or revised taxes, in particular sales taxes, VAT andsimilar taxes, would likely increase the cost of doing
business online and decrease the attractiveness ofadvertising and selling products over the internet.
New taxes could also lead to significant increases
in administrative costs necessary to capture data,collect and remit taxes and ensure compliance.
Any of these events occurring could, alone or in
combination, have a material adverse effect on theGroup's business, financial condition and results ofoperations.

Moreover, it is worth noting that Governments areseeking or funding to cover costs related to COVID-19
related crisis. Digital companies, seen as winners of
the economy’s digitalisation, may be among targetsof new taxes.

121ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE POLISH GOVERNMENT HAS PROPOSEDLEGISLATION TO IMPOSE A LEVY ON
REVENUES FROM ADVERTISING, INCLUDINGDIGITAL ADVERTISING OVER THE INTERNET,
WHICH, IF BROUGHT INTO LAW, MAY
HAVE A MATERIAL NEGATIVE IMPACT ON
THE GROUP’S PROFITS, CASH FLOWS AND
RELATIVE COMPETITIVE POSITION
In February 2021 the Ministry of Finance publisheda draft bill imposing a levy on conventional advertising services (in press, TV, cinema, outdoor) andon internet advertising services. These levies arecharged on sales of advertising services as definedin the bill and the rules for calculating the amounts
due and definition of services subject to the levy
differ between conventional and internet advertising.
In respect to internet based digital advertising, thedraft bill proposes that levy shall be imposed onlarger businesses (with annual global sales overEUR 750 million and with Polish annual sales frominternet advertising services over EUR 5 million).
The levy shall amount to 5% of the internet digitaladvertising revenues to the extent it is attributable
to advertising viewed by consumers based in Poland,
regardless of the country of establishment of thelegal entity invoicing those advertising revenues. The
draft bill is proposed to enter into force as of 1 July
2021 and the formal legislative process for this billhas not started as at the date of this report.
Should this draft bill be brought into law as drafted,in the Group’s assessment additional operating
expenses associated with paying the levy may be atleast PLN 27.3 million over the first twelve months
and may be higher depending on the interpretationof the applicability of certain definitions to certainof our revenue streams by the tax authorities. To
the extent that the Group tries to pass on these
additional costs to its advertising customers, thepresently rapid rate of growth seen in our advertising revenues may be adversely affected. Likewise,
to the extent that the Group’s own suppliers ofinternet marketing services try to pass these costs
back to the Group, costs of marketing are likely torise, returns on marketing investment are likely tofall and may lead to fewer visits, transactions andlower revenues from the marketplace platform.

122

The Group’s price comparison business, Ceneo,
would also be liable to pay this levy on the majorityof its revenues and this may result in additional
operating expenses of at least PLN 17.4 million overthe first twelve months after introduction.
Many of the same objections raised in relation
to the risks of Digital Services Tax also apply to
the Polish advertising levy proposal. The levy as
proposed is neither a tax deductible expense nor
offsetable against corporate income tax, thereby
leaving businesses that have to pay the levy discriminated against in terms of tax burden relative
to businesses in other sectors. As a result, in theGroup’s assessment, it will be left at a significant
disadvantage to the offline retail segment, which is
not directly affected by the levy. Moreover, the levy
as drafted does not propose any effective means
for the Polish tax authorities to enforce collection
and audit filings from non-Polish entities such as
multinational e-commerce, search engine and social
networking businesses who bill their advertising
services from legal entities outside of Poland. As
a result, in the Group’s assessment, it will also beleft at a significant disadvantage in terms of tax
burden versus these multinational e-commercecompetitors, many of whom already enjoy a much
lower effective tax rate than the Group due to many
years of effective cross-border tax planning notavailable to a single country focused business, andpresently pay little tax in Poland.
The Group notes that there have been numerous
negative position papers filed by various businessassociations within the public consultations of thebill. At this time it is not possible to assess whether
the proposed Polish advertising levy bill is likely topass into law as drafted, with significant amendments, or at all. However, it is clear that the current
draft of the bill would have a material negative impact on the Group’s profits, cash flows and relativecompetitive position.

III. Non-financial report

AN INCREASED FOCUS BY THE RELEVANTTAX AUTHORITIES ON RELATED PARTY
TRANSACTIONS MAY CAUSE THE GROUP'S
POLICIES TO UNDERGO MORE SCRUTINY,AND THE GROUP MAY BE SUBJECT TO TAXAUDITS AND CHALLENGES IN RELATION TO
SUCH TRANSACTIONS.
When concluding and performing related-party
transactions, the Group takes special care to ensurethat such transactions comply with the applicabletransfer pricing regulations. However, due to thespecific nature of related-party transactions, thecomplexity and ambiguity of legal regulations governing the methods of examining the applied prices,
as well as the difficulties in identifying comparable
transactions for reference purposes, no assurance
can be given that specific companies in the Groupwill not be subject to inspections or other investigative activities undertaken by the tax authorities.
The tax authorities may have a different view of
the Group's compliance with transfer pricing andmay attempt to challenge the arm's-length natureof some of the Group's related party transactions.
Should the methods of determining arm's-length
terms for the purpose of the above transactions
be challenged, resulting in, for example, the assessment of additional taxable income, this may havea material adverse effect on the Group's business,financial condition, results of operations and theprice of the shares.
Moreover, an increased focus by the Polish tax authorities on related party transactions may cause theGroup's policies to undergo more scrutiny, and theGroup may be subject to tax audits and challenges
in relation to such transactions.

POLISH TAX RULINGS MAY BE SUBJECT TO
REVIEW.
Poland applies a tax ruling system that generally protects taxpayers or tax remitters, or in certain cases
the groups of taxpayers or tax remitters, against
negative tax consequences of their actions if: (i)a tax ruling is obtained prior to the tax effect of anaction or prior to an action which is subject to a tax
ruling, (ii) the taxpayer or tax remitter complies withthe tax treatment of the action confirmed in a tax
ruling and (iii) the matter subject to a tax ruling is not
subject to tax proceedings initiated, conducted or
ended by the tax authorities at the time the tax rulingapplication is filed. Tax rulings can protect a taxpayer
or tax remitter against negative tax consequences
only if facts presented for the purpose of a tax rulingtruly and accurately describe a real action subject
to such tax ruling and its circumstances.
The tax authorities may review the facts presented
by the taxpayer or tax remitter and compare themwith what subsequently occurs. If they find that thefacts are different or not adequate, then a tax rulingwill not protect the taxpayer or tax remitter against
negative tax consequences. The Group has obtained
many individual tax rulings in Poland and has been
applying them in day-to-day tax settlements. Even if
the Group believes that the facts are properly presented for the purpose of the tax rulings it obtained,
the tax authorities could still attempt to challenge
what subsequently occurs (or has occurred) as not
being in compliance with the facts described by
the Group for the purpose of its tax rulings and,
therefore, challenge the tax protection which might
result from such rulings. Tax rulings that relate to any
matters subject to or challenged under the GAAR
are not binding and will not protect a taxpayer or
tax remitter against negative tax consequences. If
the Polish tax authorities were successful in challenging the application of certain tax rulings that
the Group relied upon, this could have a material
adverse impact on the Group's business, financial
condition and results of operations.

123ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE INTERPRETATION OF POLISH TAX LAWSRELATED TO THE TAXATION OF INVESTORSMAY BE INCONSISTENT, AND SUBJECT TO
CHANGE, AND IT IS POSSIBLE THAT A NONPOLISH INVESTOR MAY BE SUBJECT TO
POLISH TAX AS A RESULT OF INVESTMENT
IN THE OFFER SHARES UNDER THE CURRENTPOLISH TAX LAWS.
The Polish legal system, and specifically Polish tax
law, is characterized by frequent changes, ambiguity and inconsistent application; therefore, judicial
decisions relating to the application of Polish tax
law regulations are frequently inconsistent. Thisapplies in particular to issues relating to the taxation of income generated by investors in relation totheir acquisition, holding and disposal of shares ina non-Polish company admitted to organized tradingon the WSE. In particular, Polish regulations on thesource of income may treat income from the Offer
Shares as earned in Poland and subject to Polishincome tax unless the respective double tax treaty
to which Poland and the investor's residency state
applies. Furthermore, no assurance may be giventhat amendments to tax laws that are unfavorable
to investors will not be introduced or that the tax
authorities will not establish a different interpretation of tax provisions that is unfavorable to investors,
which could have an adverse effect on effective tax
burdens and the actual profit of investors from theirinvestment in the Shares.
As a result of the above factors, the risk connectedwith Polish tax law may be greater than in othercountries. This risk could have material adverse
effects on the Offering in Poland.

TAX AUTHORITIES ARE CURRENTLY
UNDERTAKING TAX AUDITS IN THE GROUP’S
MAIN OPERATING COMPANIES WHICH MAY,
ALONG WITH ANY FUTURE TAX AUDITS,RESULT IN ADDITIONAL COSTS FOR THE
GROUP.
Based on publicly available information, the Group
notes that tax audits in Poland in recent years havebeen carefully targeted and are increasingly effective.
In particular, the audits have been targeted on large
taxpayers or taxpayers from particular businesssectors based on the information obtained by tax
authorities from standard audit files, such as JPK(jednolity plik kontrolny) files, which are the Polishequivalent of the SAF-T international standard forelectronic exchange of reliable accounting data fromorganizations to national tax authorities. Since 1
July 2018, all Polish taxpayers have been obliged toprovide JPK files at the request of tax authorities
during VAT proceedings, verification activities ortax and custom audits.
Polish tax authorities have recently focused on,among other things, corporate income tax andtransfer pricing settlements, and have paid special attention to any group restructuring actions,intra-group settlements, new or innovative offerings
and their terms and conditions, as well as debt
financing.
The Group performs in-depth, detailed legal and tax
analysis before carrying out any reorganizations andtransactions, and making innovative offerings. Moreover, whenever possible, the Group has obtained
individual tax rulings confirming the correctness ofthe tax treatment to be adopted or actually adopted.
Therefore, the Group believes that all transactions
performed in the past have been correctly categorized for tax purposes, in particular in line withbinding legal and tax provisions.
At present, the Group is undergoing four separate tax
audits – two in Ceneo.pl (regarding CIT settlements
for FY2016/2017 and FY2018) and two in Allegro.pl(regarding CIT settlements for FY2016/2017 andFY2018). The audits commenced in December 2020
and are still in the initial phase. In the current tax
environment, the Group cannot exclude the risk thatthe tax authorities (e.g. during these tax audits) may
take a different approach to tax treatments fromthe ones adopted by the Group.

124

III. Non-financial report

Should the Group become aware of the tax authorities taking a different approach on one ormore issues during the course of these audits, theGroup will reassess its approach to the topic creating
controversy and may conclude, depending on its
assessment of the merits of the tax authorities’ arguments, that provisions for additional tax liabilities,
penalties and interest, should be created, having
a negative impact on the Group’s financial results.
Tax inspections, which are often lengthy, may force
the Group to engage its resources and, as a result,
to bear additional costs. Moreover, the results of
tax inspections themselves might prove different
than subsequent resolutions of the administrative
courts (in case the resolutions of tax authorities
are appealed).
Any tax audit could produce findings unfavorable
to the Group and, if upheld following due process,may have a material adverse effect on the Group'sbusiness, financial condition and operational results.

IMPLEMENTATION OF THE 2021 EU VAT
E-COMMERCE PACKAGE MAY RESULT IN
ADDITIONAL TAX EXPOSURE FOR THE GROUPDUE TO A HIGH LEVEL OF UNCERTAINTYRESULTING FROM THE LACK OF VAT AND
CUSTOMS DUTY GUIDELINES AS WELL AS
THE LACK OF TIMELY LOCAL IMPLEMENTINGREGULATIONS.
On 1 July 2021, the 27 member states of the European Union will implement new rules governing the
VAT obligations for B2C e-commerce sellers and electronic interfaces, including marketplaces. The 2021
EU VAT e-commerce package implements significant
changes based on which electronic interfaces, including marketplaces, that facilitate cross-bordersales to consumers via third parties will be treatedas "deemed suppliers" and VAT collectors in certain
cases. This full liability regime will make electronicinterfaces, including marketplaces, responsible forcharging and collecting VAT on deemed suppliertransactions.

The new deemed supplier regime will apply in cases
when the electronic interface, including the relevant marketplace, is facilitating a B2C distance saleof goods imported from third territories or third
countries in consignments of an intrinsic value notexceeding EUR 150 (PLN 692) or the supply of goods
within the European Community by a taxable person
not established within the European Community
to a non-taxable person. There is scope for theelectronic interface, including the relevant marketplace, to opt-out of this scheme in certain cases,
and the VAT obligations to be transferred to thedelivery company of the seller. However, all EU andnon-EU platforms selling goods and services online
to European consumers will be affected by the VAT
reform, irrespective of the sales channel they use.
Following the introduction of the new legislation,in order to conduct VAT settlements of merchants'
sales, the Group will have to rely on information
provided by the merchants. This information may
include mistakes or could turn out to be false. It
may also result in additional exposure to tax risks,even if the Group follows safeguard provisions andconducts business checks.
In addition, the rules may not be fully clear in time
for the Group to properly implement them or theGroup may need to make assumptions about interpretation of the rules that may subsequently prove
to be incorrect. The new regulations are general andunprecedented. Legal certainty and detailed guidelines are necessary for successful implementation of
the new provisions by the platforms, including theGroup. In addition, implementation of the 2021 EU
VAT e-commerce package is requiring a significant
and time-consuming IT development by the Group.
The 2021 EU VAT e-commerce package may havea negative impact on the Group's compliance practices and financial reporting obligations. The change
may also have an adverse impact on the Group's
cash-flows (e.g. in the case of pre-financing VAT paidby the Group to the tax authorities). If the Group fails
to manage these risks adequately, or if one or moreof these risks materializes, this could have a material
adverse effect on the Group's reputation, business,financial condition and results of operations.

125

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

THE GROUP MAY HAVE EXPOSURE TO
GREATER THAN ANTICIPATED TAX LIABILITIES.
As of the date of this Report, the Group has a limited
presence in jurisdictions outside of Poland. Its presence abroad may result either from its own retail
activity (within the 1P model) or from its merchants
and/or buyers making cross-border transactions(within the 3P model). The Group may, however, be
subject to different forms of taxation or reporting
obligations in other jurisdictions, including, but notlimited to, income tax, value added tax or sales tax.
Tax law and administration is complex and often
requires the Group to make subjective determinations. Changes in tax laws or their interpretation
or application or changes in the amount of taxes
imposed on companies could increase the Group's
future tax burden. If the Group fails to manage
these risks adequately, or if one or more of theserisks materializes, this could have a material adverse
effect on the Group's reputation, business, financial
condition and results of operations.

THE GROUP FACES THE RISK THAT ITSACTIVITY AND/OR TRANSACTIONS IN
SELECTED AREAS COULD BE REVIEWEDUNDER THE GENERAL ANTI-AVOIDANCE RULE.
The GAAR regulations apply to all tax benefits gained
following the date the GAAR entered into force asa general anti-tax abuse law, in addition to existinganti-abuse regulations related to mergers, spinoffs,
qualified exchanges of shares and exempt dividend
distributions. Under certain conditions the tax authorities may also review past transactions under
the GAAR. The GAAR allows the tax authorities todisregard a legally valid transaction (relationship)
for tax purposes if the primary aim or one of the
primary aims of the transaction was tax avoidance,
where "tax avoidance" is interpreted as "an act (orseries of acts) applied primarily in order to receivea tax benefit, which in certain circumstances defeats
the object and purpose of the tax act, provided themanner of conduct in a particular case was artificial."

126

Conduct will be considered artificial if, under the
existing circumstances, it would not be applied bya reasonable entity who is guided by goals being inline with the laws and it is connected with lawful
purposes other than tax benefits contradictory to
the object and purpose of a taxable act. In order
to assess if a particular act was artificial, attention
should be paid especially to: (i) unjustified divisionof an operation, (ii) the involvement of intermediary
entities without business substance, (iii) elements
directed to achieve a result identical or similar to
the initial state of facts, (iv) elements that cancel
or exclude each other, (v) economic risk exceeding
the planned benefits other than tax benefits tothe degree that it must be decided that a rational
entity would not have chosen to act that way, (vi)situations where the tax benefit obtained is notreflected in an economic risks borne by the entity
or in its cash flow, (vii) profit before tax which isinsignificant in comparison to the tax benefit which
does not result directly from the actually incurred
economic loss and (viii) engaging the entity which
does not conduct a real business activity or does
not play significant economic function or which has
its seat or place of residence in a territory applying
harmful tax competition.
A tax benefit refers to a situation in which: (i) a tax
liability has not arisen, the date when a tax liability
arises has been deferred or the tax liability has
been reduced, or a tax loss has been incurred oroverstated; or (ii) a tax loss has arisen or its amountis overstated; or (iii) a tax overpayment or a rightto claim a tax refund has arisen, or the amount ofa tax overpayment or tax to be refunded has been
increased; or (iv) there is no obligation to collect
the tax by a tax remitter if this obligation resultsfrom the circumstances indicated in point (i) above.
The Group faces the risk that its activity and/ortransactions in selected areas could be reviewed
under the GAAR, including transactions performed
before the GAAR regulations entered into force.
Any potential decisions regarding GAAR could be
unfavorable to the Group and may have a material
adverse effect on the Group's business, financial
condition and operational results.

III. Non-financial report

ALLEGRO.PL FACES RISKS RELATED TO ITSSTATUS AS A POSTAL OPERATOR.

Risks Related to the Offering and Shares

Allegro.pl has recently been classified as a postal
operator and in that capacity its operations are
subject to various industry regulations and ongoingoversight from the Polish authority charged withregulating postal operators, the Office of Electronic
Communications (Urząd Komunikacji Elektronicznej,"UKE").

THE FREE FLOAT OF THE SHARES IS EXPECTEDTO REMAIN LIMITED FOR AT LEAST A PERIOD
OF 180 DAYS AFTER THE LISTING DATE DUE
TO APPLICABLE LOCK-UP ARRANGEMENTS,
WHICH MAY HAVE A NEGATIVE IMPACT ON
THE LIQUIDITY OF AND MARKET PRICE FOR
THE SHARES.

Continued growth in this segment of the Group's
operations as a result of initiatives to improve theGroup's logistics and other services could entail
additional regulatory requirements. Any failure by
the Group to comply with applicable laws and regulations could result in penalties, which could havea material adverse effect on the Group's business,financial condition and results of operations.

It is expected that, immediately after the completionof the offering of the Company's shares on the WSE
during the IPO, a minimum of 18.26% of the issued
shares of the Company will be publicly held by investors who are not subject to any lock-up arrangements (assuming no exercise of the Over-Allotment
Option). The majority shareholders, such as Cidinanor Permira, have entered into lock-up arrangements
pursuant to which they have agreed not to dispose of
their shares in the Company for a period of 180 days
following the first listing date of the shares without
the written consent of the Global Coordinators (asdefined in the listing prospectus of the Company)(such consent not to the unreasonably withheld ordelayed) and subject to certain customary exceptions. Further lock-up arrangements apply to shares
held by the Directors, the Senior Managers, andother members of management and the recipientsof shares awarded pursuant to the Allegro Incentive
Plan following the offering of the Company's shareson the WSE during the IPO.

The regulatory environment for postal and courier
services within the European Union is currently
undergoing changes and certain proposed new
EU-wide legislation relating to, among other things,
cross-border, universal postal services and cybersecurity requirements is anticipated. Any such
regulatory changes may have a direct impact on theGroup's operations or an indirect impact throughthe Group's suppliers. Moreover, the Group cannot
rule out the possibility that in the future new taxes
or similar payments may be imposed on postal
operators such as Allegro.pl, in order to support
the financial performance of the Polish public postal operator's universal postal service. Under the
existing postal regulations, if Allegro.pl generates
revenue from universal postal service or equivalentpostal services (other than courier services) it may
be required to participate in such support. Failure
by the Group to manage these risks adequately
or the occurrence of one or more of these risks
could have a material adverse effect on the Group's
reputation, business, financial condition and resultsof operations.

Therefore, the free float of the Company's shares is
expected to remain limited during the periods wheresuch lock-up agreements are applicable. This may
have a negative impact on the liquidity of the sharesand may result in a low trading volume, which could
adversely affect the then-prevailing market prices
for the shares.

127ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

FUTURE SALES OR THE POSSIBILITY OF
FUTURE SALES OF A SUBSTANTIAL NUMBER
OF THE SHARES BY THE SHAREHOLDERS
AFTER THE EXPIRATION OF THE LOCK-UPPERIOD MAY MATERIALLY ADVERSELY AFFECT
THE MARKET PRICE OF THE SHARES.
After the expiration of the lock-up period of 180
days following the listing date of the Company's
shares on the WSE (the "Listing Date") for the majority shareholders of the Company and 360 days
following the Listing Date for the Individual Selling
Shareholders, the majority shareholders of theCompany and the Individual Selling Shareholders
may sell substantial numbers of their shares on the
public market. There could also be a perception on
the market that such sales could occur due to the
expiry of the applicable lock-up period or the waiver
thereof. In addition, such sales could make it moredifficult for the Company to raise capital through theissuance of equity securities in the future.

DIVIDENDS AND GAINS FROM DISPOSITIONS
OF THE SHARES MAY, IN CERTAIN
CIRCUMSTANCES, BE SUBJECT TO POLISH TAX
WHEN RECEIVED OR EARNED BY NON-POLISHTAX RESIDENTS.
Investors who do not reside within the territory of
Poland are required to pay tax exclusively on income
obtained within the territory of Poland (i.e. on Polishsource income). Income earned in the territory of
Poland includes, among other items, income fromsecurities and financial derivatives that are admitted to public trading in the territory of Poland on
the regulated exchange market, including income
generated from the disposal of such securities orfinancial derivatives, and the exercise of the rights
arising from any of the above. On account of the factthat the shares are traded on the WSE, dividends
and gains from dispositions of the shares may, incertain circumstances, be subject to Polish tax when
received or earned by non-Polish tax residents. Thisis primarily the case where an exemption or a double
taxation treaty does not apply between Poland andthe country where the investor is a tax resident.

2.3.
Regulatory Matters
Introduction
The Group's operations are subject to numerous
laws, rules and regulations resulting from both EU
and domestic laws in Poland.
The regulatory requirements applicable to theGroup's business activities are subject to change,as they are continuously adapted at the national,
European, and international level. If the Group fails
to comply with any of these laws and regulations, theGroup may be subject to civil liability, administrative
orders, fines, or even criminal sanctions. Such failure
may also have an adverse impact on the Group's
reputation.
Below, we outlined selected information on certain
aspects of the regulatory and legal environment thatare applicable to Group’s key business activities.
Such information is not intended to provide a comprehensive or complete description of the regulatory
and legal requirements in the relevant jurisdiction.

Revisions of the E-Commerce Directive
and the Upcoming Digital Services Act
Package
In December 2020 the European Commission has
published two regulatory proposals relevant for
digital services and e-commerce platforms: Digital
Services Act (DSA) and Digital Markets Act (DMA),
formerly referred to as ex ante rules . Both draft
regulations introduce heavy financial penalties fora failure to comply.
Digital Services Act redefines platform’s obligations
regarding fighting illegal content (notice and action
mechanism, trusted flaggers), increases platforms’
obligations regarding transparency vs. users (incl.
on recommendations and advertising, content moderation, automated decision making), introduces
sellers’ verification (traceability) obligations, andintroduces reporting obligations vs national competent authorities and the European Commission.
Digital Market Act – introduces obligations and limitations to certain business’ practices for “gatekeeper
platforms” such as prohibition to combine data
between gatekeeper’s services; with third party
data, data from users on consent, prohibition ofself-preferencing practices, prohibition from limiting
business users’ access to users and business users’right to sell outside (lower prices), limits in bundlingof services, data sharing obligations, and limits touse of data.
Although currently Allegro does not fall under the
gatekeeper definition, this act may apply for Allegro
in the future, especially in case of further M&A or
if the gatekeeper criteria are lowered during thelegislation process.
The legislative process is expected to take approximately 1.5 years, but may prolong if consensus is
not achieved. The legal acts will be applicable notearlier than in 2023.

128

III. Non-financial report129ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Possible New EU Legal Framework for AI
The European Commission perceives artificial intelligence AI as an area of strategic importance anda key driver of economic development. There are
ongoing discussions on the European approach
to AI which may result in new EU-wide regulations
being proposed and adopted which is tentatively
expected in the first quarter of 2021. These regulations may increase compliance requirements withrespect to the algorithmic decision-making and thedevelopment of machine learning-based solutions.

•

Transparency: individuals must be informed
about the processing of their personal data.

•

Security: adequate technical and organizational
measures need to be implemented to ensure
the security of personal data.

•

Storage limitation: personal data may not beretained for longer than necessary and should
be deleted after such period.

•

Data subject rights: individuals have several
rights under the GDPR such as a:

Data Privacy•

right to access (obtain a copy of their personal data);

GENERAL REGULATIONS•

right to rectify any incorrect personal data;

As part of its regular operations, the Group processes significant quantities of personal data. Therefore,
the Group has implemented robust privacy policies
and IT solutions to ensure compliant processing of
personal data.

•

right to request erasure of any personal datawhen no longer needed;•right to data portability (receive the personal
data in a structured format so it can be usedby another service provider); and•right to object to the use of personal dataon in particular situations.

The General Data Protection Regulation that enteredinto force in May 2018 sets out the general framework for the European data privacy regime. Under
the GDPR, the definition of personal data includes
information such as name, identification number,email address, location data, online identifiers such
as Internet protocol addresses and cookie identifiers,
or any other type of information that can identify
a living individual.

•

The GDPR sets out, among others, the following key
principles and obligations that apply to the Groupand its operations:•Lawfulness: any use/processing of personal datarequires a specific legal basis. Use of personal
data is permissible, for example: to the extent
this is required to perform a contract; if theindividual has given its consent; or if the organization has a legitimate interest.

•

Fairness and proportionality: processing of
personal data must be fair, proportionate andcompatible with the purpose for which the data
were collected.

130

Use of third-party service providers: in the eventthe personal data is processed by a service
provider (data processor) on behalf of a data
controller, this processing needs to be governedby a contract between the data controller andthe data processor. Such contracts must include certain mandatory clauses, such as forexample on the subject-matter and duration of
the processing; the right to audit, not engaging
other third-party providers without consent, etc.

•

Personal data breaches: depending on thebreach, the competent supervisory authority
and/or the data subject may need to be informed of a personal data breach within 72
hours after becoming aware of such breach.

•Record keeping: organizations must maintaina record containing a description of all theirdata processing activities.

•

The transfer of personal data to entities outside
the EEA is subject to specific requirements.

III. Non-financial report

Fines for breach of the GDPR may be significant,depending on circumstances of an individual breach.
In the worst case scenario they can go as high as
4% of the turnover of the Group. Moreover, thesupervisory authority may restrict further use ofdata in question, which could potentially impact
the Group’s operations. At the local level the GDPR
is supplemented by the Polish Data Privacy Act
of 10 May 2018 and various other pieces of local
legislation.
The following items illustrate selected areas of data
privacy protection which are of particular relevancein the e-commerce sector:••

Email advertising: Subject to certain exceptions, email advertisements (e.g. newsletters,
product recommendations or sales announcements) may only be sent to addressees who
have given their explicit prior consent. The EU
rules governing email marketing are set forthin the GDPR and, operating as a lex specialis inrelation to the GDPR, in the so-called e-Privacy
Directive (Directive 2002/58/EC as amended).
The general rule under the e-Privacy Directive,is that the use of email for direct marketing
purposes is only permitted in respect of
subscribers or users (of the public electronic
communications services concerned) who havegiven their prior consent (opt-in).
Web analysis: Web analysis technologies
such as cookies or tracking tools (e.g. Google
Analytics) enable the operator of a website topersonalize its offers and marketing to better
match the users’ interests. Even though mostweb analysis tools anonymize or pseudomize
collected data and do not allow for a subsequent
allocation of data to individual data subjects, theuse of such tools may still be subject to data
privacy laws. For example, the use of cookies
is regulated by the Directive on Privacy andElectronic Communications which provides foran opt-in regime pursuant to which the use of
cookies requires an informed consent of thewebsite user.

Cybersecurity
In the EU, the cybersecurity regime has been harmonized under the EU Directive 2016/1148/EU of
the European Parliament and of the Council of 6
July 2016 concerning measures for a high common
level of security of network and information systems
across the Union (the "NIS Directive") which enteredinto force on 8 August 2016. The NIS Directive requires "essential service operators" within criticalinfrastructure sectors, such as the energy, transport
or banking sector, as well as "digital service providers"(e.g. online marketplaces), to carefully review existing
network security mechanisms, to implement "stateof-the-art" security measures which shall ensure
a level of security for their infrastructure appropriate
to the risk of the respective entity as well as toestablish proper notification measures to promptly
notify the competent authority of any incident which
has a substantial impact on the services offered in
the European Union.
The NIS Directive is further supplemented by
the Commission Implementing Regulation (EU)2018/151 of 30 January 2018 laying down rules for
its application as regards further specification of
the elements to be taken into account by digital
service providers for managing the risks posed tothe security of network and information systems
and of the parameters for determining whether anincident has a substantial impact.
The NIS Directive has been implemented in Poland
by the Act of 5 July 2018 on the National Cybersecurity System, which sets out detailed obligations within
the framework of the NIS Directive and provides forpenalties for breaches that may be imposed by thePolish Minister of Digitalization.

131

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

While fines for individual breaches that may be
imposed would normally not exceed PLN 20,000
per breach, in the unlikely event the Group is foundin notorious breach, that could result in:•direct and serious cybersecurity threat to defense, state security, public order and safety,
or human life or health; or•threat of causing serious proprietary damage
or substantial disturbance in performance ofessential services,

fines may be up to PLN 1.0 million.
In December 2020 the European Commission published a proposal for a directive of the European
Parliament and of the Council on measures fora high common level of cybersecurity across theUnion, repealing the NIS Directive. At this stage, theproposal does not include major changes in theGroups cybersecurity related obligations. Worthnoting that postal operators are included in thescope of the NIS Directive as important entities,
which may imply additional obligations related toensuring services security.

Protection of Competition andConsumers
Due to the nature of the Group’s business, the Groupis subject to various regulations on competition andconsumer protection.

132

PROTECTION OF COMPETITION
Competition restricting practices (anti-competitive agreements and abuse of dominance) areprohibited under the Competition Act and the
TFEU. The protection of competition is monitored
at the European level by the European Commission
and at the domestic level by the UOKiK President.
The UOKiK President also has the right to apply
EU competition law directly (Article 101 and 102
TFEU) if the infringement affects trade between EU
member states.
Article 6 of the Competition Act prohibits agreements/concerted practices between undertakings(or associations of undertakings) that have as theirobject or effect the elimination, restriction, or otherinfringement of competition. An exemplary statutory list of dominant position abuses includes, inparticular:•

directly or indirectly fix purchase or selling prices
or any other trading conditions;•limit or control production, sale, as well as technical development or investments;•

share markets for the sale of goods or sourcesof supply;•

apply dissimilar or onerous contract terms tosimilar transactions with third parties, thereby
placing them at a competitive disadvantage;•

make the conclusion of contracts subject to theacceptance or fulfillment by the other party ofother obligations that by their nature or according to the customary usage have no connection
with the subject of such contracts;•

restrict access to the market to undertakings notcovered by the agreement, or eliminate themfrom the market; and•fix the terms and conditions of bids by undertakings entering a tender, or by those undertakings
and a tender organizer, including, in particular,
the scope of works, or price (bid rigging).

III. Non-financial report

Article 9 of the Competition Act prohibits abuseof a dominant position within a relevant market.
A dominant position is held by an undertaking if
it enables it to prevent effective competition in
the relevant market and to act independently ofcompetitors, contracting parties and consumers toa significant degree. In Poland there is a presumptionof a dominant position if an undertaking has a market share exceeding 40% (the party can rebut thispresumption). An exemplary statutory list of such
infringements includes, in particular:•

directly or indirectly imposing unfair prices, including unreasonably high or abnormally low
prices, long payment terms, or other unfair
trading conditions for the purchase or sale ofgoods;•

limiting production, market sale, or technicaldevelopment to the prejudice of customers or
consumers;•

applying dissimilar or onerous contract terms tosimilar transactions with third parties, thereby
placing them at a competitive disadvantage;•

making the conclusion of contracts subject
to the acceptance or fulfillment by the otherparty of other obligations that, by their natureor according to the customary usage, have noconnection with the subject of such contracts;•

preventing the development of the conditions
necessary for the competition to emerge ordevelop;•imposing onerous contract terms that result inunjustified benefits gained by the undertaking;and•sharing of markets according to the criteria ofterritory, product range, or entity.

PROTECTION OF CONSUMERS
Under the Competition Act, the UOKiK President,
acting in public interest, is responsible for implementing the consumer protection policy. The UOKiK
President conducts proceedings concerning (i)practices infringing collective consumer interestsand (ii) abusive clauses in standard agreementswith consumers. The Group must also comply withvarious consumer protection laws regulated at the
EU level.
Article 24 of Competition Act prohibits practices
infringing collective consumer interests (i.e., practices that are unlawful activities (in violation of thelaw or good practice) of an entrepreneur resulting
in harm to the interests of an unspecified numberof consumers). An exemplary statutory list of such
infringements includes, in particular:•a breach of the obligation to provide reliable, correct, and complete information to consumers;•

unfair market practices or acts of unfair competition; and•proposing financial services to consumers wheresuch services do not correspond to the needs
established with regard to those consumers’
characteristics or proposing such services ina manner inconsistent with the nature of theservices in question (the so-called misspelling).

The UOKiK President also conducts proceedings
intended to determine whether standard form
contracts with consumers contain any abusive
clauses and whether a prohibition on the use ofsuch clauses should be imposed (Article 23a of theCompetition Act).

133

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

POTENTIAL SANCTIONS FOR BREACH OFCOMPETITION OR CONSUMER LAWS
The UOKiK President may issue a decision andimpose a fine of up to 10% of the individual company's turnover generated in the year preceding
the imposition of the fine for, inter alia, (i) breach ofPolish (or EU) competition law, (ii) recognizing thepractice as infringing collective consumer interestsor (iii) recognizing the provisions of a standard form
contract as abusive. The UOKiK President may also(i) enforce abandonment of the practice/abusive
clause and/or (ii) order the company to remedy theeffects of an infringement. Additionally, if a company
fails to comply with the UOKiK President's decision,
the UOKiK President may impose a fine of up to
EUR 10,000 (approximately PLN 46,148) per eachday of such delay.
The UOKiK President may also impose a fine on
individuals (management) of up to PLN 2.0 million,
if it is found they contributed deliberately to theviolation of laws on anticompetitive agreements(except for bid-rigging, which is a criminal offence),collective consumer interests or to the use of abusive contractual clauses (up to PLN 5.0 million in
consumer cases in the financial sector). This sanction
cannot be imposed on individuals in case of abuseof dominance.
An agreement/provision that amounts to an infringement is invalid in its entirety or in relevant part.
In specific circumstances, the Competition Act provides for a possibility of concluding the proceedings
by means of a commitment decision. The company
may propose a commitment implementation thatwill allow it to eliminate the practice or its effects
and the UOKiK President, recognizing that the proposed commitment will enable it to achieve theseobjectives, may impose, by way of an administrativedecision, an obligation to implement this commitment. At the same time, the company avoids fines
being imposed for the infringement.

134

POTENTIAL UPCOMING CHANGES TO THE
POLISH COMPETITION AND CONSUMER LAW
The UOKiK President may, in all proceedings, impose on a company a fine of up to EUR 50.0 million(approximately PLN 230.7 million) for any failure toprovide information, for providing false or misleading information or for a lack of cooperation during
any inspection or search conducted by the UOKiK
President in connection with the proceedings.
Additionally, the EC has the power to impose finesof up to 10% of the turnover of the company concerned in the last financial year for breach of EU
competition rules. This 10% limit may be also basedon the turnover of the group to which the company
concerned belongs.
The Group may be subject to civil claims for damages
in relation to the alleged or actual infringement ofcompetition or consumer law. A damages action
can be triggered by a stand-alone action or by anaction that follows a public enforcement decisionsuch as a decision of the UOKiK President or the
EC. To ensure effective enforcement of such claims,
a private enforcement legal framework has been
under development in recent years throughout theEuropean Union to, among other things, introduce
a directive harmonizing rules on numerous issues
arising in competition damages claims and introduce
collective redress mechanisms. This framework
seeks to strengthen the position of private claimants seeking damages by removing substantive
and procedural obstacles for claimants to prove an
infringement and establish damages.

III. Non-financial report

In January 2021 the UOKiK President proposed
amendments to the Polish Competition and Consumer Law aiming to implement Directive (EU) 2019/1
of the European Parliament and of the Council of
11 December 2018 to empower the competition
authorities of the Member States to be more effective enforcers and to ensure the proper functioningof the internal market. The amendments include
among others:•

New powers of the UOKiK President (i) to impose
fines for antitrust infringement not only on the
direct infringer but also on the controlling parent
company and its managers and (ii) to impose
structural remedies.

•

Fine for antitrust infringement can be calculated
taken into account the turnover of the whole
capital group to which the infringer belongs;•

Fine for antitrust infringement on the businessassociation can be calculated based on theturnover of all its members, which in certain
cases are jointly and severally liable for thepayment.

•

Limitation of the scope of Legal Professional
Privilege.

•

Suspension of limitation period by any action of
the OCCP related to the case.

General EU Consumer Protection Rules
Online retailers who offer their goods and services
to consumers must comply with various consumer
protection laws. Throughout the European Union,
consumer protection is extensively regulated on
the basis of, among other legislation, the following
EU directives:•

Council Directive 93/13/EEC of 5 April 1993 on
unfair terms in consumer contracts;•

Directive 1999/44/EC of the European Parliamentand of the Council of 25 May 1999 on certain
aspects of the sale of consumer goods andassociated guarantees;•

E-Commerce Directive 2000/31/EC;•

Directive 2002/58/EC of the European Parliamentand of the Council of 12 July 2002 concerning theprocessing of personal data and the protectionof privacy in the electronic communications
sector (Directive on Privacy and Electronic
Communications);•

Directive 2005/29/EC of the European Parliamentand of the Council of 11 May 2005 concerning
unfair business-to-consumer commercial practices in the internal market (Unfair Commercial
Practices Directive);•

Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on
consumer rights (the “Directive on Consumer
Rights”) which replaced the Directive 97/7/EC
of the European Parliament and of the Councilof 20 May 1997 on the protection of consumers
in respect of distance contracts with effect asof 13 June 2014; and•Directive (EU) 2019/2161 of the European Parliament and the Council of 27 November 2019
amending Council Directive 93/13/EEC and
Directives 98/6/EC, 2005/29/EC and 2011/83/EUof the European Parliament and of the Council as
regards the better enforcement and modernization of Union consumer protection rules. Local
legislation implementing that directive shall be
adopted and published by 28 November 2021
and enter into force from 28 May 2022.

135

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The aforementioned EU directives on consumer
protection and the national laws which implement
or complement these directives impose extensive
duties and responsibilities on online retailers, including the following:•

Online purchases constitute "distance contracts"that are subject to specific consumer protection.
Pursuant to the Directive on Consumer Rights,
with effect from 13 June 2014, consumers havethe statutory right to withdraw from a distancecontract within 14 days after receipt of goods (orwithin a period of twelve months and 14 days
after receipt of goods if the consumer has notbeen properly informed about its statutory rightof withdrawal). Withdrawal must be exercisedby distinct declaration towards the seller (e.g.
in writing, by email or phone). The return ofthe goods without further comment does notconstitute a valid declaration of withdrawal any
longer. If the statutory right of withdrawal is
exercised, within 14 days, the purchaser must
return the goods and the seller must reimburse
the purchase price including shipping costs (ifany) except that the seller must not reimburse
the supplementary costs, if the consumer has
expressly opted for a type of delivery other thanthe least expensive type of standard delivery
offered by the seller (e.g. express delivery).
The purchaser, on the other hand, has to bear
the costs for the return of goods unless theseller has failed to inform the purchaser accordingly or the seller has expressly agreed toassume these costs. The purchaser also has tocompensate the seller for any loss in value ofthe returned goods, if such loss is due to thepurchaser handling the goods in a way that was
not required to examine the condition, featuresand functionalities of the goods and the seller
has informed the purchaser about its statutory
right of withdrawal.

••

Online retailers must comply with extensive
and formalized information requirements. They
have to provide their (potential) customers withdetailed and accurate information, inter alia, on
the offered goods, on the way a binding contract
can be concluded, on price and payment details,on their return policy, on the statutory rightto withdraw from a contract (irrespective ofany more beneficial return policy that may beafforded by the online retailers, on their generalterms of sale and on statutory warranties). EU
directives and national laws set out detailed
criteria on when, where and by which means
this information has to be provided. Online
retailers have to implement these requirementsin the design and structure of their online shops,
in their ordering and payment processes andin their delivery systems. Due to changes inlegislation, online retailers have to adapt their
shop design on an ongoing basis. For example,
as a result of the Directive on Consumer Rights,
they had to implement a "button solution" pursuant to which a binding purchase can only
be completed by clicking on a button that is
explicitly labeled "buy now" (or similar) andwhich can be found in the immediate proximity of a summary of certain key information
relating to the purchase. Failure to comply withthese information requirements may give riseto civil liability, administrative orders (including
injunctive relief) or fines and may in some cases
result in an extension of warranty periods oreven in the invalidity of the affected customer
contracts.
Advertising, including promotional games,
newsletters and personalized product recommendations, is heavily regulated, in particular
if distributed through email. An advertisement
must not be misleading, constitute an unreasonable nuisance or make use of harassment,
coercion or undue influence. These criteria leave
wide room for interpretation and the assessment of courts and other competent bodies isoften hard to foresee.

The abovementioned directives have been implemented pursuant to the Polish Civil Code of 23
April 1964, the Polish Act on Consumer Rights of
30 May 2014 and other legislation. Consumer-related
legislation has historically been subject to frequent
amendment and these regulations may be revisedin the coming years.

136

III. Non-financial report

Product Safety

Postal Services

Retailers who place products on the market in theEuropean Union have to ensure that the products
are safe. This is also the purpose of the Directive
2001/95/EC of the European Parliament and of theCouncil of 3 December 2001 on general productsafety (the "Directive on Product Safety") according
to which manufacturers must put on the market
products which comply with the general safety
requirement. In addition, they must provide consumers with the necessary information in order
to assess a product's inherent threat, particularly
when this is not directly obvious and they musttake the necessary measures to avoid such threats(e.g. withdraw products from the market, informcustomers, recall products which have already been
supplied to customers, etc.). In this context it is important to know that under the Directive on Product
Safety – just like under most other European and/or
national legislation on product safety – an importer(i.e. in most cases also a retailer) of a product thatwas produced in a country outside of the European
Union qualifies as the manufacturer of the product.

As part of development of the Group's services, on
16 April 2020, Allegro.pl was registered in the register
maintained by the UKE as a postal operator.

According to the Directive on Product Safety distributors are obliged to supply products that comply
with the general safety requirement, to monitor thesafety of products on the market and to provide thenecessary documents ensuring that the products
can be traced. If the manufacturers or the distributors discover that a product is dangerous, they must
notify the competent authority and, if necessary,cooperate with them.
In Poland, the Directive on Product Safety has been
implemented through Act of 12 December 2003 on
general products safety and amendments of thePolish Civil Code of 23 April 1964. Further details
are determined in various acts and governmental
regulations on the safety of specific products/
product groups.
It is worth noting that the European Commission
announced the revision of the Directive on Product
Safety is planned for the second quarter of 2021.
Given the important role that online marketplaces
play in the distribution of goods additional obligations and possibly liability can be introduced.

Provision of postal services is governed by:•

Directive 97/67/EC of the European Parliamentand of the Council of 15 December 1997 on common rules for the development of the internalmarket of Community postal services and theimprovement of quality of service, which has
been implemented in Poland under the Postal
Act of 23 November 2012; and•the Regulation (EU) 2018/644 of the European
Parliament and of the Council of 18 April 2018
on cross-border parcel delivery services.

In the Group's capacity as postal operator, the Groupwill be subject to various ongoing regulatory andreporting duties and will be subject to ongoing supervision by the President of the UKE. The Group
may also be subject to certain specific duties related
to state security, national defense, and public orderand safety matters (including crime prevention) andwill need to cooperate on that with various Polishstate security agencies.
Whenever the Polish public postal operator (Poczta
Polska) incurs losses on its universal postal service,
it may request that the President of the UKE ordersthat such losses shall be compensated by thoseof the remaining postal operators whose revenue
from universal postal service or equivalent services(excluding courier services) in a given financial year
exceeds PLN 1.0 million. Such operators would thenparticipate in such losses on a pro rata basis inaccordance with a formula set out in the Postal Act
and each operator's share cannot exceed 2% of theamount by which its revenue generated by suchservices exceeds PLN 1.0 million.
If the Group is found in breach of its various regulatory duties, the Group may be exposed to a fine of
up to 2% of part of Allegro.pl's turnover generated
from postal activities (or EUR 500,000 (PLN 2.3
million) if the Group's breach occurs within firsttwelve months of rendering postal services).

137ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Furthermore, breach of certain reporting duties
under the Regulation (EU) 2018/644 may result infines up to 2% of Allegro.pl’s total turnover.
The Postal Services Directive is currently evaluated to later on 2021 reflect changes on the postal
services market including the rapid growth of the
e-commerce sector.

Marketing and Use of Explosives
Precursors
Under the new Regulation (EU) 2019/1148 of 20
June 2019 on the marketing and use of explosives
precursors, amending Regulation (EC) No 1907/2006
and repealing Regulation (EU) No 98/2013, which
entered into force in February 2021, online marketplaces such as us will need to:•ensure that users selling regulated explosive
precursors know their obligations (Art 7.3);•

take measures to help users comply with verification obligations (Art 8.4); and•have in place measures to detect suspicioustransactions and report attempted or suspicious transactions within 24 hours (Art 9.2 & 9.4).

The Group has introduced processes and necessary
T&C changes to ensure compliance with this Regulation and Polish implementing laws.

138

Payment Services and AML
Requirements

At the national level, the payment services are primarily regulated by the Act on Payment Services of
19 August 2011 (Journal of Laws of. 2020 item. 794, as
amended) (the "APS"). APS contains provisions which
are national implementation of the Directive (EU)2015/2366 of the European Parliament and of theCouncil of 25 November 2015 on payment services
in the internal market, amending Directives 2002/65/
EC, 2009/110/EC and 2013/36/EU and Regulation(EU) No 1093/2010, and repealing Directive 2007/64/
EC (PSD2).

Under the APS, the provision of payment services isa licensable activity (unless one of the exemptions
provided for in the APS applies). Only entities listed
in Article 4.2 of the APS, in the specific conditions
set out in the APS, may become payment services
providers. Payment services may be provided bya payment institution. The term "payment institution"
covers NPIs in Poland and institutions licensed inother EU Member States to provide payment services ("EU payment institutions"). In order to begin
providing payment services in Poland as an NPI, anauthorization from the PFSA is required. In case of
acquiring services, the President of the National Bankof Poland must issue an opinion before the relevant
authorization is granted (opinion is issued upon the
PFSA's request). The authorization (and the opinion)
can be obtained based on an application filed with
the PFSA by the legal entity with a registered officein Poland that intends to provide payment services
in Poland. In the authorization, the scope of payment
services that may be provided by an NPI is specified.
The PFSA may withdraw the authorization at any timein the circumstances described in the APS (however,other supervisory measures are also available to
the PFSA, including power to: request to dismiss or
to suspend the managing person responsible forirregularities, limit the scope of NPI's activity, impose
a fine on the managing person or on the NPI itself).
The authorization expires if an NPI has not started
payment services activity within twelve months fromthe day authorization has been granted, as well as incase an NPI does not provide payment services overa period of six consecutive months or more. Expiry
must be expressly stated in the PFSA's decision.

The payments services and issuance of electronicmoney is supervised by the PFSA to the extent andsubject to the conditions stipulated in the Act onfinancial market supervision of 21 July 2006 ( Journal of Laws 2020, item. 2059, as amended). In thesame time, the President of the NBP supervises thepayment systems within the meaning of Article 1.1of the Act of 24 August 2001 on settlement finality
in payment and securities settlement systems andthe rules of oversight of these systems ( Journal ofLaws of 2019, item 212, as amended), the payment
schemes within the meaning of the APS, as well as
participates in the PFSA's supervision of: (i) national
payment institutions which provide the acquiring
service; (ii) entities which operate securities settlement systems; and (iii) entities which operate
securities clearing systems.

Certain requirements laid down in the APS must be
satisfied by an entity that intends to provide payment
services in Poland. If an NPI wants to provide mostof the payment services (listed in Articles 3.1–3.5 of
the APS), it must have share capital of at least EUR
125,000 or its equivalent in złoty. Contributions
to cover the share capital may not originate froma credit facility or loan or be in any way encumberedor originate from illegal or undisclosed sources. The
NPI must also hold the required amount of own
funds (the minimum requirement for own funds
specified in the APS). Depending on the scope ofservices, the NPI is obliged to have relevant instruments for the purpose of securing claims arisingfrom the activities conducted by the NPI (e.g. bankguarantee, third-party liability insurance, insurance
guarantee).

As is the case for many other e-commerce businesses, the Group's operations are heavily dependent
on the provision of payment services. While payment services have historically been provided bythird-party payment services providers, the Grouplaunched its own payment services in the second
half of 2020, making applicable payment services
regulations directly applicable to the Group. Allegro
Finance sp. z o.o. is registered as a "small payment
institution" ("SPI") and a subsequent application
for a "national payment institution" ("NPI") license
in Poland may also be considered. The SPI and NPI
licenses are described below.
Payment services in Poland are regulated and ingeneral, companies undertaking such activities require authorization from the PFSA, in which the PFSA
specifies the payment services that the payment
institution is authorized to provide.

III. Non-financial report

The NPI is supervised by the PFSA, which results inreporting and other obligations under the APS for
the NPI. Among other things, the NPI is obliged tosubmit its audited annual financial statements (and if
consolidated – also the consolidated annual financial
statements) and interim financial statements to the
PFSA in the time limit laid down in the APS.
Direct or indirect disposals of shares in an NPI is
subject to the limitations set out in the APS. PFSA
has to be notified of the intention to acquire or
take up, directly or indirectly, shares of an NPI ina number sufficient to reach or exceed 20%, 30%, or
50%, respectively, of the total number of votes at thedecision-making body or a share in the share capital,
or if, by virtue of the acquisition, such an NPI would
become a subsidiary or co-subsidiary of that entity.
Similar obligation is imposed on a potential seller,in case it intends to dispose, directly or indirectly,of a qualifying holding in the NPI.
In case of an SPI, the account information service
provider (conducting solely account information
service, the "AISP") and the payment services office,the license from the PFSA is not required, howeverwith the exception of AISP, such entities can perform
its activities only in Poland and after being entered in
the register kept by the PFSA. The activity of SPI, AISP,
and payment services offices is a "regulated activity"
within the meaning of the Act on Entrepreneur lawof 6 March 2018 (consolidated text, Journal of Laws
2021, item. 162, as amended), which basically meansthat they may only be taken up following entry in theregister and submission of a statement on fulfillmentof requirements for such business laid down in therelevant legal act (in this case APS).
In case of SPIs, some limitations as to maximum
amount of funds per user and types of payment
services that the SPI is allowed to conduct apply,
furthermore, the average of the total amount of payment transactions for the previous twelve months
made by the SPI, including through agents, cannot
exceed the amount equivalent to EUR 1.5 million
per month. The SPI is also supervised by the PFSA,
and certain reporting and other obligations underthe APS may apply.

139

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The NPI, the SPI, the payment services offices andbranches of the EU payment institutions are among
other entities considered "obliged entities" (institutions) within the meaning of the Act of 1 March 2018
on Counteracting Money Laundering and Terrorist
Financing (consolidated text – Journal of Laws 2020,
item. 971, as amended) and therefore obligations
related to AML/CFT are directly applicable to them(e.g. obligation to conduct financial security measures, including customer due diligence; appointing
senior management responsible for the fulfillmentof the obligations set out in the Act; and designating
AML Compliance officer).
It is also worth mentioning that the PFSA may issue
the recommendations on good practices for theprudent and stable management of NPIs in order toprotect the interests of users or holders of electronicmoney.
Breach of various duties under the APS may resultin significant fines, including criminal liability.
In the context of Financial Services it is worth
noting that on 24 September 2020 the European
Commission published the Digital Operational Resilience Act (DORA) [3]. The proposal aims to bring
the requirements relating to ICT risk managementin the financial services sector and guidelines issued
separately by the European Banking Authority (EBA),
the European Insurance and Occupational Pensions
Authority (EIOPA), and the European Securities andMarket Authority (ESMA), under one roof. As a payments institution regulated under PSD2, Allegro iscompliant with the PSD2 and the EBA Guidelines on
operational risk and major incident reporting. This
framework is already quite robust and includes manyof the requirements laid out in DORA. Additionally,certain cybersecurity related obligations may beintroduced.

OUTSOURCING SERVICESINTERIM FDI REGIME

In order to facilitate cooperation between banks
and payment services providers and users of theGroup's e-commerce marketplace, the Group isproviding certain services to banks and payment
services, which constitutes qualified outsourcing
regulated under, respectively, the Polish Banking
Act of 29 August 1997 (consolidated text – Journalof Laws 2019, item 1357, as amended) and the APS.

GeneralForeign Investor

The below amendments to the Polish the Act on
the Control of Certain Investments of 24 July 2015
entered into force on 24 July 2020 and will remainbinding for two years from that date.

The FDI Regime will recognize as a "Foreign Investor":•in the case of natural persons, those who are
not citizens of an EU/EEA/OECD country; andThe revised interim foreign investment regime (the"FDI Regime") was introduced in response to thenegative effects that COVID-19 pandemic may haveon valuations of Polish businesses. Any transactionthat falls within the scope of the FDI Regime will
have to be notified to the UOKiK President, who has
the right to object to the contemplated transaction.

•in the case of other entities, those that do nothave their registered seat in an EU/EEA/OECD
country or have not had their registered seatin EU/EEA/OECD country for two years or more.

In that capacity, the Group's activities may fall under
supervision of the PFSA.

PACKAGING WASTE
In relation to the Group's activities, in particular retail
activities, the Group is subject to various reporting,recycling and other obligations under Polish Act on
Waste of 14 December 2012 (consolidated text –Journal of Laws 2020, item 797, as amended) and thePolish Act of 13 June 2013 on dealing with packaging
and packaging waste (consolidated text – Journalof Laws 2020, item 1114, as amended). These acts
implement, among others, the European Parliamentand Council Directive 94/62/EC of 20 December
1994 on packaging and packaging waste.
The European Commission will reflect on the modernization of the Directive as part of the European
Green Deal, which aims at making the EU climate
neutral in 2050. Reaching this target will require
action by all sectors of the economy, including
investing in environmentally friendly technologies
supporting industry to innovate. This may imply
further obligations on retailers and possibly onother entities.

The FDI Regime will apply to all WSE-listed companies
that have their registered offices in the territoryof Poland and whose revenue from the sale ofgoods or services in Poland in any two financial
years preceding the notification was at least EUR
10.0 million (PLN 46.1 million). As the Company isincorporated in Luxembourg, therefore, a numberof restrictions under the FDI Regime will not apply
to trading in the Company's shares.
However, the FDI Regime may apply to some of theGroup's Polish operating companies due to theirsoftware-related activities. In such case, indirectacquisition of a dominant position over such Polish
operating companies (including by way of acquiring
a dominant position over the Group) by a Foreign
Investor (as defined below) will be a transaction thathas to be notified under the FDI Regime.

In the case of indirect investments (e.g. throughsubsidiaries or special purpose vehicles), the entity(or person) at the top of the Foreign Investors groupstructure is considered pursuant to the above criteria. Similarly, if the investment is made by portfolio
managers or other agents, the client is taken into
account.
Notification
The notification should be filed before the signingof a preliminary agreement obliging an investor to
make the acquisition or, in the case of the acquisitionof a WSE-listed company by way of a public tender
offer, before the tender offer is announced.
Once the notification has been filed, the Foreign
Investor may sign the preliminary agreement or
announce the tender offer, which will be conditionalon receipt of clearance from the President of UOKiK.
Timetable
After the notification, the UOKiK President has 30
business days to either (i) approve the transactionor (ii) initiate control proceedings. The control
proceedings may last up to 120 calendar days (theclock stops whenever UOKiK requests additional
information, so in practice the actual timing may
be even significantly longer).

[4] Proposal for a regulation of the European Parliament and of the Council on digital operational resilience for thefinancial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No
909/2014

140

III. Non-financial report141ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Reasons for Objections

Consequences of Non-Compliance

The President of UOKiK may object to a transaction
if:

Any transaction made in breach of the FDI Regime(without notification or without approval) will benull and void and the investor will be unable toexercise its rights (including any voting rights) under
the shares acquired. In case of taking control overa parent company of a Polish protected entity; only
the latter sanction will apply.

•

the investor does not complete the notification
fully or fails to provide the additional information/documents/explanations requested by the
President of UOKiK; or•the transaction leads to at least a potential threat
to public order, public safety, or public health;•

it is not possible to determine whether theinvestor has its registered seat (or citizenship)in an EU/EEA/OECD member state; or•the transaction could have a negative impact on
projects or programs which are of EU interest.

Investment made without approval is a criminal
offence subject to a penalty of imprisonment fromsix months to five years and a fine of up to PLN
50.0 million.
Moreover, anyone managing the subsidiary or
exercising voting rights on behalf of a Foreign Investor, who fails to notify the President of UOKiKof the foreign investment of a certain kind (such asa cross-border merger outside of Poland) is liable
to a fine of up to PLN 5.0 million, a term of imprisonment of six months to five years or both of thesesanctions jointly.

3.

Approach to Corporate,
Environment, and Social
Responsibility

3.1.
Corporate, Environmental, and Social Responsibility
Allegro’s sustainability strategy for 2020-2023

The Group’s CSR & Sustainability Strategy continues
our important social and educational programs withan added strong emphasis on environmental issues.
The motto of our strategy is #SustainableTogether,because by cooperating with customers, merchants,business partners, employees, and other stakeholders we actively strive to reach the Sustainable
Development Goals. Allegro, as a marketplace, hasa significant impact on the Polish economy andsociety. Through R&D and technology investments,
we create a flywheel effect that scales up muchbeyond our own direct contribution.

142

III. Non-financial report

Our innovations and initiatives develop the resilienceand growth of our customers and merchants, aswell as business partners.
Our approach focuses on the environmental aspects of e-commerce operations, while constantly
increasing our ambitions and identifying further
goals to be achieved. The strategy was approved
and adopted by the Board of Directors. The resultsof implementation are monitored on the continuous
basis and are presented to the management as wellas published in the annual CSR report.

143

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Principal non-financial risks

The Group’s CSR & Sustainability Strategy comprisesof 4 pillars:

Allegro as a platform to
make sustainable choices

Allegro as the place to dobusiness

Enabling our customers
to make moresustainable choices:

Improving themerchant’s experienceand supporting
prospective
entrepreneurs:

1.1. W e help ourcustomers to makeresponsible choices
through exposure
and promotion ofsustainable products
1.2. W e help ourcustomers to lower
the carbon footprintof the products’delivery process
1.3. W e ensure safety
and comfort of ourcustomers, protect
their privacy, andconsumer rights

2.1. We help merchants
grow in a sustainableway
2.2. W e foster
entrepreneurship
through education
2.3. W e support micro,
small, and mediumsized enterprises
2.4. W e advance theclimate agenda in
the supply chain anddeliveries

Allegro as a good citizen

Having a significant
impact on society,contributing to thePolish economy,
improving themanagement of ourown footprint – all inthe spirit of corporate
citizenship:
3.1. W e invest in skills of
the youth
3.2. We are here to
support communities
we operate in3.3. W e manage
our business ina responsible way
3.4. We green ouroperations

Allegro as the best placefor employee development

Creating a demanding
but caring working
environment for
employees in which
diverse people canthrive:4.1. W e support ouremployees in
professional
and personal
development

Map of risks

Environmental
Risk

Although e-commerce is more green than the alternatives, we are aware theGroup’s operations pose a negative environmental impact (e.g. CO2 emission,
packaging waste). The growth of our business, without implementing carbon
emission and energy reduction programs, as well as sustainability initiatives,
could result in a negative environmental impact. New regulatory framework
related to the EU Green Deal and environmental transition may imply further
obligations on retailers and possibly on other entities. The ongoing climatechanges have the potential to generate substantive changes in operations,revenue, or expenditure. Carbon-neutral initiatives and sustainable technology
solutions, e.g. eco-packaging, may increase the costs of our operations.

Environmental
Responsibility

Social Risk

The Group's brand may be adversely affected if its public image or reputation istarnished by negative publicity. Product recalls, product liability claims, breachesof corporate social responsibility, the presence of counterfeit goods that violate
the Group's terms and conditions or other fraudulent activity in the Group's
e-commerce marketplace that is not detected by its anti-fraud technology could
significantly harm the Group's reputation and business. User complaints ornegative publicity about its websites, products, delivery times, returns processes,
the working conditions of its employees (or those of the employees of any of
its subcontractors or suppliers), user data handling and security practices, or
customer support, including on internet-based platforms such as blogs, online
ratings, review services and social media websites, could have a significant
negative impact on the Group's reputation and on the popularity of the Group's
websites.

Responsibility
Towards
Customers andMerchants

Risk Related
To HumanRights

The control and prevention mechanisms of the Group's compliance structure
might not be sufficient to adequately protect the Group from all human rights
violations such as unequal employee treatment (hiring, remuneration, training
and promotion, etc.) or other violations in case third-party partners and suppliers.

Respecting
Human Rights

LabourPractices

The loss of qualified personnel, high employee turnover, or persistent difficulties infilling job vacancies with suitable applicants could have a material adverse effecton the Group's ability to compete effectively in its business and considerable
expertise could be lost by the Group or access thereto gained by the Group's
competitors. In addition, to attract or retain qualified personnel, the Group might
have to offer increased compensation packages and other benefits which could
lead to higher personnel costs. Any failure to attract, train, motivate or retain
skilled personnel at reasonable costs could result in a material adverse effecton the Group's business, financial condition and results of operations.
The work-related hazards and hazardous situations and the risk of a work-related
injury or ill health, including accidents and occupational diseases could alsomaterially adversely affect the Group’s business.
The COVID-19 pandemic has profound implications for employees who are
required to continue operating in the workplace (especially at the warehouse).
Employees remote working could have not ergonomic and appropriate workspaces at home.

Responsibility
for theworkplace

Risk Of
Corruption
And Other
Violation

The incidents of corruption or bribery (kickback, facilitation payment, payment
extortion, cyber extortion), conflicts of interests or other inappropriate behaviour
could affect the Group as well as failure to provide proper protection of customers’
personal data

Business ethics

Risk Ofcybersecurity
and private
data breaches

The Group relies on third-party data center providers, whose facilities could
suffer as a result of a cyberattack. Cybersecurity, management of private dataand ensuring a sufficient level of security for our infrastructure are importantparts of our operations.

Business ethics

4.3. W e care about
the well-being of
our staff and their
engagement

The strategy comprises 86 initiatives helping theoperationalization of efforts. Goals and key KPIs
have been defined in each pillar and are monitored
regularly.

III. Non-financial reportMore about
management insectionPrincipal risks

4.2. W e create equal
opportunities
in a challenging
business
environment

3.5. W e make our value
chain resilient,
responsible, and
green

144

Measuring and disclosing ESG performance, risks,and controls is essential to gain the trust of stakeholders and generate maximum value from themarket. We recognise the below risks as the primaryarea of ESG activities.

145

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.2.
Responsibility for the workplace

Non-financial indicators
Our main achievements in 2020:

3.2.1.
Workplace+72

NPS in customer satisfaction survey+128k

professional (“B2C”) merchants on Allegro

200 million

active offers on Allegro

962,087

unique users who visited in 2020 Allegro Academy e-learning platform and attended at least
one from 50 available educational courses

PLN 6.9 million

donations made by the Allegro.eu Group to support several public organizations during the
COVID-19 pandemic

PLN 19.4 million

raised through charity initiatives Charytatywni.Allegro.pl91%

of employees perceive Allegro as a workplace where everyone is respected regardless ofgender, age, or any other dimension of diversity

200

employees got involved in two editions of our voluntary charity projects #pomagamyboumiemy(77 initiatives)

HR Policy
The Group’s ambition is to be a career platform
for diverse, talented, and ambitious teams andindividuals, who thrive in a fast-paced, changeable
and complex environment. Our employees are committed to high performance, continuously looking
for development opportunities and aspiring to thenext big challenge wherever it comes from.

We create a demanding, but caring working environment, support the professional and personal
development of our employees and create equal
opportunities in what we do.
The table below presents our employment structure.

Form of Employment

2020

2019

Permanent employment contracts

79.4%

79.2%

Fixed-term employment contracts

20.6%

20.8%

2020

2019

Permanent employment contracts – Women

32.1%

32.0%

Fixed-term employment contracts – Women

9.7%

9.6%

Permanent employment contracts – Men

47.2%

47.2%

Fixed-term employment contracts – Men

10.9%

11.2%

Employees and other workers

2020

2019

Employment contract

2,721

2,194

Contractors (B2B)

240

17

Workers who are not employees (work agencies & outsourced service)

198

268

Place of Employment

2020

2019

Poznań

51.3%

57.0%

Warsaw

30.7%

25.5%

Wrocław

7.2%

8.2%

Kraków

3.7%

2.3%

Toruń

3.5%

3.8%

Błonie

2.6%

2.6%

Other

1.0%

0.5%

Form of Employment – GenderLong-term sustainability goals
The Group’s long-term sustainability goals are tohelp our customers to make responsible choices,
through exposure and promotion of sustainableproducts by optimizing Allegro.pl product searchbased on fair and transparent criteria. We areworking on a dedicated space for those looking foreco-products because we want to make it easierfor buyers to find certified offers and to promotesellers in this market segment.

We aim to raise awareness of the best practices
in sustainable packaging and logistics giving bothsellers and the buyers knowledge and tools to promote circular use of resources in our value chains.
We intend to encourage more merchants to use
eco-packaging.
We stress education for our merchants and customers on developing e-learning platform Allegro
Academy.
The Group introduces annual GHG (greenhousegas) emissions monitoring and agenda to achieve
reducing average GHG emissions per GMV.

146

III. Non-financial report147ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Annual engagement survey
We conduct an annual satisfaction survey among
all of our employees. We treat it as a fundamental
source of information about our workplace. By
analysing the survey results, we are able to better
understand what drives employee engagement, as
well as the gaps to be covered.

The survey is confidential and we benchmark ourselves against the best tech companies in the world.
In 2020, we have reached the highest engagementscore in Allegro's history.

Annual engagement survey [1]2020

New Tech
1000+ 2020 [2]2019

Engagement score

78%

73%

73%

Company Confidence

91%

78%

78%

Performance

89%

80%

—

Teamwork & Ownership

88%

71%

88%

Learning & Development

85%

76%

Collaboration & Communication

85%

CultureAnti-discrimination and Anti-mobbing
PolicyThe Group has created an inclusive work environment, working towards bias and prejudice mitigation,
where people with different views and experiences
can grow. We introduced Anti-discrimination andAnti-mobbing Policy and Irregularity Reporting Procedure in 2016. The policy requires all employees,
in particular those in managerial positions, to treat
their colleagues with dignity and behave ethically. All
employees are familiarized with the above policies
during onboarding and refresher training is provided
for all employees and contractors.

A diversity policy was introduced at Allegro in 2020,
outlining good practices and processes that foster
a diverse and creative workplace. We also organise
anti-mobbing and anti-discrimination training tofacilitate recognising and preventing undesired
behaviours and build positive relations between
employees.

Anti-discrimination and anti-mobbing policy

2020

2019

% of participants of anti-discrimination and anti-mobbing training – annual reminder

88.8%

92.8%

83%

% of participants of anti-discrimination and anti-mobbing training – onboarding(all new employees)

100%

100%

n/a

83%

Reported cases of discrimination and mobbing

5

2

85%

n/a

76%

Enablement

84%

73%

80%

Management

83%

n/a

83%

Alignment & Involvement

79%

77%

71%

Leadership

79%

67%

71%

Feedback & Recognition

75%

64%

76%

BaZa Action

64%

49%

65%

Participation in the survey

94%

75–90% [3]94%[1] Data for Allegro.pl[2] Culture Amp reports[3] Participation rate: 70% of Culture Amp customers (our supplier of BaZa) have response rates between 75% and 90%

148

III. Non-financial report149ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Remuneration
In Allegro, we aim to attract and retain high performing and talented individuals from the local market
and beyond. We are targeting top people with great
potential to grow. Our employee value propositionis based on the high scale and complexity of the
projects we face, wide development opportunities
we provide, and competitive compensation package
we offer to the candidates and employees.

Training
The remuneration policy is intended to attract, motivate and retain employees who have the highest
level of competence and experience. The basis of it
is an equal treatment of employees and the policy
provides a framework to pay equal compensation
to everyone performing the same roles.

Ratio of average remuneration of women to men [1]

2020

2019

Women’s remuneration against average remuneration

95.2%

95.7%

Men’s remuneration against average remuneration

102.7%

101.5%

Women’s remuneration against men (Men=100%)

91.9%

92.9%

[1] Weighted average by the size of the group per each Corporate Level in functional areas

The key factor impacting differences in pay between
genders can be attributed to underrepresentationof female employees in technology roles and insenior roles. The Group has developed a thoroughintervention plan focusing on:••

stimulating more gender balanced pipeline ofexternal candidates to technology roles andfor senior positions in general (both external
and internal recruitment processes);ensuring we operate an objective, fact andevidence based performance evaluation andpromotion process and as a consequencea reward review process;••focusing on increasing representation in important external organizations promoting diversity
and inclusion supporting a social dialogue asa an important technology employer in Poland;
ongoing education and engagement of Allegro
employees on this topic, raising awarenessand ensuring strong support throughout theorganization.

All of the above are designed to systematicallyaddress the identified challenges and aiming toclose the pay gap.

Allegro’s learning and development objective is to set
up an effective framework for embedding a cultureof long-term career planning, self-development,
identifying and deploying talent in roles with mutual benefit for both individuals and Allegro. The
Group operates a training platform for employees
and contractors, which is used for administration,
tracking, and automation of training session delivery.

Another important aspect of the development
provision is financial support by Allegro for studies
and professional qualifications at top universities,
attendance at conferences and individual coaching.
In 2020, 64% of employees took part in at least one
training, and 289 internal training sessions wereorganised with a total of 5,342 participants.

Employees have access to a variety of soft skills andtechnical training modules, as well as managerial
training sessions and programs. The learning curriculum is constantly updated to address identified
development gaps in line with Allegro’s strategic
direction as well as to meet employees’ expectations.

Training

2020

2019

Number of training participants

5,342

4,416

% of training participants – women

45%

32%

% of training participants – men

55%

68%

Number of unique participants

1,500

1,386

% of employees took part in at least one training

64%

74%

Number of employees women took part in at least one training

675

443

Number of employees men took part in at least one training

825

943

Internal training

2020

2019

Number of internal training sessions

501

443

Average rating of the training – 4.5 (on a scale of 1 to 5)

4.5

4.5

Number of internal trainers

171

191

In 2020 women took part in more training sessions
than in the previous year and in general womenparticipated in training more often than men. 41.8%
of Allegro’s workforce are female and as many as
45% of all training participants are female.

150

III. Non-financial report151ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Performance Review Process at Allegro
The Performance Management process provides
the framework for consistent evaluation of individual performance based on objective, factual, andevidence based feedback in relation to achievementof business goals and demonstrated behaviours.
Employee performance review employees’ happens
twice a year.

Safe Workplace
The promotion process is closely aligned with theperformance review and is based on objective assessment of level of competency and skills outlinedin Allegro Factors for promoted employees (Impact,
Managing Complexity, Leading People, Communicating with Clarity, and Knowledge and Professional
Mastery).

Performance review [1]

2020

2019

% of employees evaluated

93.9%

92.5%

% of employees evaluated – women

86.4%

85.2%

% of employees evaluated – men

99.3%

97.5%

The aim of the Occupational Safety and Health Policy
is to ensure safe and ergonomic working conditions
through:•prevention of accidents and occupational diseases,•

ongoing monitoring of the working environmentand close cooperation in this regard with theadministration team,•systematic updating of occupational risk,•

engaging employees in activities for health andsafety, and•raising awareness of health and ergonomics.

The Group has monitored the effects of the Occupational Safety and Health Policy and numberof occupational accidents. In 2020 only one minor
accident was recorded.

[1] Excluding eBilet and employees on trial period

Number of accidents
Career path

2020

2019

% of women promoted to managerial positions

1.7%

1.4%

% of women promoted to director positions

0.26%

0.00%

% of women promoted to C-level positions

0.00%

0.00%

2020

2019

% of men promoted to managerial positions

2.79%

2.89%

% of men promoted to director positions

0.13%

0.00%

% of men promoted to C-level positions

0.00%

0.00%

Career path

Everyone meeting the criteria of minimum 3 monthsof service is included in the performance evaluation
process, including the employees returning fromthe leave of absence (i.e. long term sickness leave,parental leave, maternity leave). Such employees
usually are not working long enough to receivea performance rating. This is the main reason forthe difference to 100%, in particular amongst female
employees.

152

III. Non-financial report

2020

2019

Minor accidents

1

5

Serious accidents

01

Fatal accidents

00

The Health Action (Akcja Zdrowie)
The Group cares about its employees health andwellbeing. In order to foster a healthy lifestyle,leading to reduced absenteeism and increased
productivity and quality of work the Group introduced an annual campaign in the form of a series
of workshops, consultations, and webinars. In 2020,
the initiative was organised on the training platform and focused on remote work as part of the#zdaninazdalną program. It involved consultations
with psychologists, physiotherapists, nutritionists,
workouts for a good start of a day, yoga training,and 13 webinars.

Recordings and materials continue to be available toemployees. The webinars concerned health, hygiene,
and ergonomics of remote work, diet and nutrition,body immunity, yoga, relaxation and mental resilience, as well as coping with pandemics and beyond.

153

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Safety at the offices and warehouseduring the pandemic
The spread of COVID-19 has led the Group to modify
its operational practices, and it may take further
actions required by authorities or that it determines
are in the best interests of its employees, buyers,merchants and other stakeholders. The Group has
implemented a work-from-home policy which has
been applied to nearly all of the Group's employees.
For the Group's employees who work in the Group's
warehouse and cannot work remotely, the Grouphas implemented additional protective procedures,
including equipping employees with personal protective equipment (e.g., masks, gloves, disinfectants,
hand sanitizers and face shields), implementing social distancing, staggering employees working hours
across three shifts throughout the day, increasing
the frequency of cleaning in the Group's facilities,
and installing thermal imaging cameras.
We equipped all offices with personal protective
equipment, we recommend Home Office for those
employees whose office presence is not essential(over 95% of office staff). Our employees received
PLN 1000 Allegro platform vouchers to purchasehome office equipment of their choosing (e.g. officechairs, screens, headphones) in order to improvetheir working from home experience. We havemigrated all training from offline to online andadded special classes for managers on managing
and organizing people working from home, as
well as group-wide training on time organization
while working from home. We facilitate events andinternal competitions to help employees socialize
and adjust processes to the situation. We test all
our kindergarten and nursery teachers before weopen kindergarten and nursery after each government mandated lockdown. We provided tests toour employees in case they have contact with ill
people and have contact with other employees. We
made surveys to check employees' well-being andtheir needs and the actions taken above address
many of them.

Benefits Provided to Employees
The Group understands the contemporary labour
market and the needs of employees to balance
work and private life. That is why we are constantly
developing the catalogue of benefits that we offer
to our team in the My Benefit System. Employees
can choose benefits to be paid monthly with credit points they were granted. The employer paid
benefits are: medical care for the employee andtheir relatives, the sports card for an employee
and possibly accompanying person, the childcare
benefit is dedicated for monthly co-financing ofa kindergarten, a nursery or a nanny (as well WOW
nursery and kindergarten for employees in Poznan),
the transport benefit or a company parking, a bus
pass or petrol, the restaurant card and Transferof points to the Bank of Points to purchase onetime benefits for their collected points, e.g. in such
categories as Culture, Tourism, Sport and recreation,
Children. Employees can also choose life insurance.
The other benefits offered by the Group include
Company Social Fund (i.a. kindergarten allowance,
holiday allowance, Christmas bonus, but also one-off
grants in difficult life/financial situations, repayable
home loans. Employees receive Allegro Coupons for
St. Nicholas’ Day, educational gifts for Children’s Day
and have access to fruit and vegetables in offices.
Allegro organises Special Children’s Day Events
every year for parents who work at Allegro andtheir children in all locations. In 2020, due to thecoronavirus pandemic, we were unable to organize Children’s Day, so all employees were given an
additional day off.

WOW KINDERGARTEN AND NURSERY IN
POZNAŃ FOR CHILDREN OF ALLEGRO.PL
EMPLOYEESThe company WOW kindergarten and nursery forchildren, located in the Group’s Poznan office canaccommodate 57 children in three kindergarten
groups and 20 in the nursery. The educational
program focuses on comprehensive developmentof children who take part in numerous music andmotor activities (eurhythmics classes, dancing, taekwondo, music therapy), language classes (English
and Spanish), and art activities. The program is madeeven more attractive thanks to shows and creative
workshops devoted to, among others, a healthy
lifestyle, ecology and sustainable development. In
2020, as part of supporting parents who stayed
alone at home with their children, the kindergarten
and nursery staff prepared interesting ideas forspending time together during the quarantine.

Sharing Knowledge
Allegro offers many opportunities to share knowledge, both inside and outside the organisation. An
internal technology conference for the IT department is held once a year. In 2020, 700 people fromthe Allegro team took part in the online conference,
37 of them as speakers. As part of Allegro Tech
initiative, employees attend as speakers a number ofopen events (i.a. Allegro Tech Talks, Allegro UX Talks,
and Mission: change your industry). During 2020, 135
Allegro experts delivered over 75 presentations in
Poland and abroad.

MENTORING PROGRAM
The Group runs a mentoring program as well asa ‘cross-team tourism’ program. Every person
who joins the program is supervised by a mentor.
‘Tourism’ consists in a temporary change of theemployee’s placement for between 2 weeks and 3
months. Its main purposes are:1. Supporting sharing knowledge between teams
so that the visitor can get to know a different
business area and apply this knowledge to theircurrent project upon their return.
2. Retaining talent. If an employee is consideringchanging their job, they can first check how theywould fit into another project and eventuallychange the team permanently.
3. Helping switch industries. The program is open
to every employee, provided that both the current and the target superior consent and that
benefits for all parties are demonstrated.

We conducted an audit of the security of offices
and warehouses in terms of safety and compliancewith recommendations against coronavirus andimplemented the recommendations resulting from it.

154

III. Non-financial report155ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Recruitment and Onboarding
The Group utilises a behavioral and standardized
competency interview throughout its recruitment
process, allowing for an objective evaluation of applicants. Additionally, to support recruiters in selecting
candidates in a neutral and unbiased manner, wehave created the Hiring Squad (HS). It is a group of
experts in various fields (Developer, UX, ProductManager, HR) and at various career levels (mid-level,
senior, manager). Their task is to make the final
selection of the person who will be employed in the
recruitment process. The work samples used in theselection process further increase its objectivity.

New joiners

Onboarding
Feedback is also our unique practice. Each of therecruiters, independently, prepares their own feedback about the candidates at each stage of therecruitment process. It informs the Hiring Squad's
decisions about employment. Feedback is also
provided to the candidates once the recruitment
process is completed, regardless of the result. We
put special emphasis on feedback communicated topeople whom we have not decided to employ. We
point to gaps in competencies and suggest educational materials that may help to bridge them, should
the given person decide to apply again in the future.

2020

2019

% of new joiners – women

42.2%

43.7%

% of new joiners – men

57.8%

56.3%

2020

2019

% of new joiners aged under 30

58.2%

62.6%

% of new joiners aged 31–40

33.5%

34.6%

% of new joiners aged 41-50

7.5%

2.3%

% of new joiners aged 51–60

0.8%

0.4%

% of new joiners aged 60+

0.0%

0.0%

Employee turnover rate [1]

2020

2019

Employee turnover rate [1]

8.9%

10.5%

Employee turnover rate – women

9.3%

12.1%

Employee turnover rate – men

8.5%

9.4%

New joiners

Allegro's onboarding program allows you to get toknow the company and prepare new employees andcontractors for work. For several years, however,
the onboarding program has also been available topeople returning to work after a long absence. This
includes, among others, parents whose parental
leaves exceeded one year. The topics of the workshops and presentations concern the functioning of
the company: caring for customers and merchants,
products, technologies and HR. Employees also
learn about the company's policies and rules, andreceive theoretical and practical training in using thecompany's internal systems. In 2020, 694 people
took part in the three-day onboarding process,including 42 people returning after a long absence.

e-Xperience Internship Program at
AllegroEach year, Allegro opens its doors to people who arestarting their careers, allowing them to learn more
about how an e-commerce platform works and build
experience. The duration of the program is 3 months,
and it is organised during the summer holidays. It is
paid, and the best people have a chance to stay at thecompany for longer. In 2020, 53 people took part in
the Allegro e-Xperience internship program, of which
as many as 70% were employed after the program
ended. All participants are assigned a mentor who
supports them throughout the program. They cantake part in the training we offer, and also try theirhand at working independently on real projects andtackling problems of one of the largest technology
companies in Poland. The Summer e-Xperience
program is recommended by 100% of the people
who took part in it.

[1] Employee turnover rate (%) = employees who leave the organization /average number of employees over the
analyzed period. The average staff turnover rate in 2019 in Poland is from 16% to 18% according to external reports
Mercer and Korn Ferry published in 2020.

156

III. Non-financial report157

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.2.2.
Diversity in the workplace

Diversity indicators••

DIVERSITY POLICY APPLIES TO ALLEMPLOYEES. AT ALLEGRO:•

We care greatly about ensuring that every Allegro employee has the right to a safe working
environment free from discrimination, harassment, bullying or other forms of intimidationand violence. Fostering such an environment
increases employee engagement improves
well-being and creates a strong performance
culture. To ensure Allegro culture embraces
these values we introduced a policy against
discrimination and mobbing that applies to all
employees. We also have the Stay Fair Code of
Conduct and Whistleblowing and ensure ways
to report irregularities.

2019% of employees – women

41.8%

41.6%

% of employees – men

58.2%

58.4%

% of new joiners – women

42.2%

43.7%

% of new joiners – men

57.8%

56.3%

% of employees with disabilities

0.7%

0.9%

% of employees with disabilities – women

0.5%

0.5%

% of employees with disabilities – men

0.3%

0.4%

% of employees aged under 30

38.4%

37.4%

% of employees aged 31–40

49.7%

51.6%

% of employees aged 41-50

11.1%

10.4%

% of employees aged 51–60

0.6%

0.4%

% of employees aged 60+

0.1%

0.1%

% of women aged under 30

40.7%

38.9%

% of women aged 31–40

49.8%

51.8%

% of women aged 41-50

9.4%

9.1%

% of women aged 51–60

0.2%

0.2%

% of women aged 60+

0.0%

0.0%

% of men aged under 30

36.8%

36.3%

% of men aged 31–40

49.7%

51.6%

% of men aged 41-50

12.4%

11.3%

% of men aged 51–60

1.0%

0.5%

% of men aged 60+

0.2%

0.2%

% of foreign employees

1.1%

0.8%

% of foreign employees – women

0.3%

0.2%

% of foreign employees – men

0.8%

0.6%

Women’s remuneration against average remuneration

95.2%

95.7%

Men’s remuneration against average remuneration

102.7%

101.5%

Women’s remuneration against men (Men=100%) [7]

91.9%

92.9%

Allegro.eu

Diversity & Inclusion Policy at Allegro.eu
In 2020 Allegro.eu implemented The Diversity
Policy. Allegro.eu’ entities are strongly committed
to be an equal opportunities employer, where
every employee is equally valued, respected andsupported to fulfil their potential. Allegro fosters
an environment where people can speak up to
remove barriers to success and collaborate to put
the best ideas into practice. The company follows
the principle of gender equality in our HR processes
such as recruitment, promotion, access to training
programs, promotion opportunities, remuneration,
reconciliation of professional and family obligations,protection from mobbing and unjustified dismissal.

2020

•

We actively support diversity and inclusion initiatives. Between 2018 and 2020 we organised
or took part in around 30 events dedicatedto the topic, including the Poznań Mentoring
Walk, Women in Tech, Hackathon Accessibility,
Mission – switch the industry, and the Allegro
mentoring program.
We want to make sure our employees understandthe importance of inclusion and diversity in the
Allegro working environment. In 2019/2020 weorganised 42 training sessions dedicated toinclusion and diversity and trained 391 people.
Our original lecture on hidden biases and how
they affect diversity was shown at GeeCon, thebiggest IT conference.
Our recruitment process is based on objective
and substantive assessment criteria and its
main part is behavioural interview. Its individual
stages are organised according to establishedframework and rules to ensure a consistentexperience for all candidates, regardless of theirgender, ethnicity, beliefs, etc.

[7] Weighted average by the size of the group per each Corporate Level in functional areas

158

III. Non-financial report159

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Diversity indicators

2020

2019

Managers

Diversity indicators

2020

2019

Experts & Professionals% of managers – women

28.0%

29.0%

% of experts & professionals – women

37.5%

34.5%

% of managers – men

72.0%

71.0%

% of experts & professionals – men

62.5%

65.5%

% of managers aged under 30

8.7%

10.1%

% of experts & professionals aged under 30

37.5%

35.8%

% of managers aged 31–40

61.0%

62.6%

% of experts & professionals aged 31–40

53.2%

54.8%

% of managers aged 41–50

28.3%

26.1%

% of experts & professionals aged 41-50

9.1%

9.2%

% of managers aged 51–60

2.0%

1.1%

% of experts & professionals aged 51–60

0.2%

0.2%

% of managers aged 60+

0.0%

0.0%

% of experts & professionals aged 60+

0.0%

0.0%

% of managers aged under 30 – women

8.8%

10.9%

% of experts & professionals aged under 30 – women

33.6%

32.7%

% of managers aged 31–40 – women

56.8%

52.5%

% of experts & professionals aged 31–40 – women

58.2%

59.2%

% of managers aged 41–50 – women

34.4%

36.6%

% of experts & professionals aged 41-50 – women

8.2%

8.1%

% of managers aged 51–60 – women

0.0%

0.0%

% of experts & professionals aged 51–60 – women

0.0%

0.0%

% of managers aged 60+ – women

0.0%

0.0%

% of experts & professionals aged 60+ – women

0.0%

0.0%

% of managers aged under 30 – men

8.7%

9.7%

% of experts & professionals aged under 30 – men

39.8%

37.5%

% of managers aged 31–40 – men

62.6%

66.8%

% of experts & professionals aged 31–40 – men

50.2%

52.5%

% of managers aged 41–50 – men

25.9%

21.9%

% of experts & professionals aged 41-50 – men

9.6%

9.8%

% of managers aged 51–60 – men

2.8%

1.6%

% of experts & professionals aged 51–60 – men

0.3%

0.2%

% of managers aged 60+ – men

0.0%

0.0%

% of experts & professionals aged 60+ – men

0.0%

0.0%

93.3%

92.0%

Women experts & professionals remuneration against averageexperts & professionals remuneration [9]

93.1%

94.3%

102.1%

101.3%

102.9%

101.7%

90.8%

88.9%

Men experts & professionals remuneration against averageexperts & professionals remuneration [9]Women experts & professionals remuneration against men
experts & professionals remuneration (Men =100%) [9]

90.1%

92.5%

Women managers’ remuneration against average managers’ remuneration
Men managers’ remuneration against average managers’ remuneration

[8]

[8]

Women managers’ remuneration against men managers’ remuneration(Men = 100%) [8][8] Weighted average by the size of the group per each Corporate Level in functional areas

160[9] Weighted average by the size of the group per each Corporate Level in functional areas

III. Non-financial report161ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Diversity indicators

2020

2019

Board members – women2

n/a

Board members – men

6n/a

Board members aged under 30

0n/a

Board members aged 31–40

0n/aBoard members aged 41–50

4n/a

Board members aged 51–60

4n/a

Board members aged 60+

0

n/a

2020

2019

Board members

Diversity indicators
Share of returns after parental leave

3.3.
Business ethics – a­ nti‑corruption and bribery policy
and respecting human rights
3.3.1.
Anti-corruption and bribery policy
A management system for governance,risk and compliance
The Group treats its risk management system very
seriously and established a compliance framework
as shown below to be sure that all necessary measures have been implemented:

Protect

DetectReact

Regulatory Affairs

Reporting:

Crisis management

Risk Management• anonymously via system to CSO

Disciplinary sanctions
Remediation

Employees who went on parental leave

92

74

Employees who returned to work after parental leave

68

71

Policies• personally via system to CSO

Training, communication,awareness session• personally to HR, Legal, CSO

Employees who returned to work after parental leave in the previous year andremained in employment for 12 months after the return

66

59

Employees who went on parental leave – women78

59

Employees who returned to work after parental leave – women

54

54

Employees who returned to work after parental leave in the previous year andremained in employment for 12 months after the return – women

52

49

Employees who went on parental leave – men

14

15

Employees who returned to work after parental leave – men

14

17

Employees who returned to work after parental leave in the previous year andremained in employment for 12 months after the return – men (%)

14

10

In 2020, 93% of employees who returned to work
after parental leave in the previous year remainedin employment for 12 months after the return, incase of women it was 96%, in case of men – 82%.

162

III. Non-financial report

Support
Process integration
Lessons learned• personally via mail to Chairman
Compliance controls
Monitoring and compliance approvals
Compliance audits
Compliance investigations
Internal audits

In addition to matters describes in section "Riskmanagement system", we note that a management
system for governance, risk and compliance, which
includes standards of conduct, corruption prevention, competition law compliance, prevention of
conflicts of interest, information and data protection,
prevention of unlawful discrimination and protection of company property and know-how has been
established in both the Group's main operating
subsidiaries: Allegro.pl and Ceneo.pl.

In addition, Allegro.pl and Ceneo.pl have introduced
a binding code of conduct for compliance with thecorporate social responsibility ("CSR") regulations
for the suppliers of the group. The suppliers codeshould be accepted by each Key Vendor, beinga vendor whose annual sales to Allegro exceed
PLN 100,000. Based on the recommendations of
the Polish Ministry of Finance, Allegro.pl and Ceneo.
pl have established a complex verification process
in vendor creation. A review of financial documents,
registration documents and the correctness ofbank accounts should filter out unsuitable service
providers.

163

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Guidelines such as procurement policy, tender
procedure, controlling procedure and legal procedure have also been introduced and are intended
to minimize all unauthorized practices, violationsof the law, corruption and fraud, especially withregard to purchasing practices, or other adverse
consequences of non-compliance within the Group.

Allegro has introduced the following regulations
and processes:•

Anti-corruption rules•

Regulations for accepting and offering gifts andbenefits

At Allegro.pl, we operate in a transparent mannerand to the highest ethical standards, among all
thanks to our policies and regulations.

•

Diversity policy•

Procedure in the event of an inspection

The Allegro Code of Ethics consists of:•Procedure for concluding agreements••

Tax governance policy

Transparency policy•

Policy against discrimination and mobbing•

Vendor verification procedure•

Whistleblowing procedures•

Sponsorship activity regulations•

Antitrust Compliance Policy•

Training policy•

Anti-money laundering and countering terrorism
financing policies•

The Ethics Committee oversees compliance with
the Code of Ethics, examining and resolving thereported violations.

Security policy

2020

2019

Policy on anti-money laundering and combating terrorist financing and export
control, and financial sanctions manual00Transparency Policy

22Reported cases were checked and they were not any violation.

Employee Training on Ethical Standards•

HR Director or HR Business Partner•

Head of Legal or a designated lawyer•

The company has introduced mandatory training incompliance and ethics. An ethics and compliancetraining and communication plan has also beendeveloped and is being implemented.

Manager of the division the reported violation
concerns•

Representative of employees selected by the
Employee Representation•

CSO

III. Non-financial report

All employees are obligatorily trained on all policies
during the onboarding session. All of the employees are obligated to sign that they will adhere topolicies. Additionally we are providing obligatory
training from policies to every employee, including
contractors every year.

Reporting the complaints and grievances

Composition of the Ethics Committee

The Code of Ethics is periodically reviewed and isavailable to employees.

164

The Allegro irregularity reporting system is dedicated to the company's employees and contractors.
It relies on the guidelines for handling complaints
and grievances related to non-compliance with theCode of Ethics. The whistleblowing system uses
a dedicated internet platform, a form on the company's website and a designated email address.
The whistleblowing system includes protecting
whistleblowers.

The channels used to train employees in ethics
include e-learnings, email, a dedicated internal
platform (Intranet), meetings, posters and otherforms of communication.

New employees get to know our Code during a session of the mandatory OnBoarding Stay Safe / Stay
Fair training. Once a year our employees participate
in training devoted to our Code of Ethics policies(Transparency policy, Policy against discriminationand mobbing, Whistleblowing procedures, Antitrust
Compliance Policy, Anti-money laundering andcountering terrorism financing policies, Security
policy) and personal data protection, in order toimprove their knowledge, build competence andraise awareness.

165

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.4.
Responsibility Towards Customers and Merchants

3.3.2.
Respecting Human Rights
Vendor relations
Allegro runs its business ethically and expects thesame from its vendors and business partners. In
case the total value of contracts with the given
vendor exceeds PLN 100,000, our business partners
are obliged to sign the Allegro Code of Ethics andAllegro asks them whether they have an adequate
code of ethics or internal regulations of their own.
The Code of Conduct presents a set of guidelines thatset out the minimum level of ethical and behavioral
standards that should be abided by our suppliers
and business partners. The guidelines should not
be deemed contractual obligations as such, but they
may be regarded as such if there exists a legallybinding contractual relationship between the parties
in a related scope.
In 2020, we worked with over 2,000 reliable vendors
offering products and services. We want to makesure that they share similar values and principles
in their daily business.

If the total value of contracts with the given vendor
exceeds PLN 100,000, they are enrolled in an ongoing monitoring and evaluation program and are
required to accept and sign the Code of Conduct andthe Vendor and Business Partner Questionnaire, as
well as submit a written declaration of compliancewith the principles of UN's Global Compact initiative.
This enables us to verify their conduct in its ethical,
social and environmental aspects. Allegro had over
430 such vendors in 2020.
Responsibilities of vendors and business partners
based on ten United Nations Global Compact
principles:•

Compliance•

Respecting human rights•

Ensuring the highest standards and work conditions for employees•

Protecting the natural environment

EMPLOYEE REPRESENTATION
Allegro employees are not covered by collective
bargaining agreements and are represented by the
Employee Representation.

166

III. Non-financial report

Agreements and Regulations in force
Allegro.pl documents concerning customers andmerchants that are currently in force:•

Use of databases of Allegro.pl and available inAllegro•Terms and conditions of the “Allegro SMART!”
service for the Sellers•

Allegro User Agreement with appendices•

Forbidden and restricted items;•

Rules on creating Transaction description;•

Allegro Lokalnie•

Policy on technical breaks and compensation
for technical failures;••

General Terms and Conditions of the Cooperation Related to the Mail Order Sales of Medicinal
Products

Fees and commissions;••Allegro Community

Privacy protection policy;••

General Terms and Conditions of Delivery Service

Junior account principles;•

Terms and conditions of PayU service;•

General Terms and Conditions of the Delivery
Service for Allegro Lokalnie•Terms and conditions of Przelewy 24 service;•

Charity Listings•

Notes of guidance on agreement renouncementand draft renouncement statement;••

General Terms and Conditions of the Cooperation Related to the Sales of Vouchers Exchangeable for Medical Services

Buyer Protection Program.

••

Data processing Agreement

Adding Products

167

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Customer Safety

BUYER PROTECTION PROGRAM (BPP)

The safety and convenience of customers and merchants are of key importance to Allegro. Allegro
customers’ safety is ensured by:Thanks to the guaranteed seamless shopping experience at every stage of the process, as manyas 90% of our customers consider shopping on
the Allegro platform safe. They can rely on therecommendations and comments submitted byother customers. To make sure its customers canenjoy even better protection, Allegro introduced
the Buyer Protection Program, which guarantees
they will recover their money in the event of any
problems with their purchase.

•

Buyer Protection Program•

Rights Protection Cooperation Program•

Limiting the sale of counterfeit items on theplatform•

Reporting rights infringements and quick reaction to such reports•

Cooperation with government agencies towithdraw products that do not meet certain
standards or are not allowed on the market:•••

Memorandum of Understanding on thesale of counterfeit goods via the internet
signed under the auspices of the European
Commission
Cooperation with the Office of Competition
and Consumer Protection as well as municipal
and district Consumer Ombudsmen, including
joint consultations, opinions and analyses
Anti-Smog Coalition together with the Polish
Smog Alert and the Office of Competition andConsumer Protection•

Rules on Forbidden and Restricted Items•

Program The Safe Online Shopping (Bezpieczne
z@kupy w sieci)•

THE RIGHTS PROTECTION COOPERATIONPROGRAM

Protection extends to all Allegro transactions andlistings on Allegro Lokalnie, where payment wasmade by bank transfer or via the platform. Customers who experienced issues with a transaction on
Allegro (eg, did not receive the purchased products
or a refund after withdrawing from the contract, or
the received product does not fit the description or
has arrived damaged) are eligible for a refund of up
to PLN 10,000. In 2020, the reporting procedure wassimplified to the bare minimum. It suffices to complete an online form, which becomes even simpler
if the issue was reported in a discussion started on
the platform. The program is more convenient tocustomers, thanks to the fact that there is no need
to attach identity documents (in cases of no doubt,
i.e. in 85% of cases).
In 2020, in an NPS (Net Promoter Score) survey
carried out among customers using the BPP, Allegro
achieved a result of +71.32 (the highest possible
score being 100). This means that most customers
recommend Allegro as a safe place to shop, and the
BPP program is well received.

My Sales Quality – transparent ratings from buyers

Buyer Protection Program at Allegro

2020

2019

% of customers who consider shopping on Allegro safer or just as safe as on otherplatforms

93.03%

92.0%

NPS among Allegro customers using the BPP+71.32+66.73

Average number of transactions on Allegro.pl per one BPP refund

7,440

12,030

Average time it takes to receive a refund

5 days

5 days12h

12h

Average time it takes to receive a refund – SMART! services users

168

III. Non-financial report

The Rights Protection Cooperation Program
was created to eliminate illegal items and service
offers from Allegro.
We verify reports regarding violations of:•industrial property rights (for example, sellingcounterfeit items)•

copyright (for example, the use of images without
the copyright owner’s permission).

We protect:•brand owners’ rights•

sellers – often unaware of violations – from legal
consequences•

buyers from purchasing goods which violate
the law

In addition, we want to raise awareness of intellectual property rights, their protection, and violations.

ANTI-SMOG COALITION
One of the main environmental issues in Poland is
the quality of the air we breathe with many Polishcities appearing high on the rankings of most polluted cities in Europe. Allegro has a long-standing
commitment to environmental initiatives. With its
Rights Protection Cooperation Program, Allegro
has decided to take action to improve air quality
by eliminating non-conforming home boilers fromthe market.
The so-called ‘fumers’ do not meet the standards
provided for in the new environmental regulations
and are the main source of the so-called low-height
emissions, i.e., air pollution from single-family andterraced houses. To expand its proactive engagement, Allegro signed a cooperation agreement with
the Ministry of Development, the Polish Smog Alert,
and the UOKIK President in March 2020. Allegro
supports eliminating products from the market
that do not meet the parameters required by law.
Additionally, in order to assure a higher level of
security Allegro implemented new provision to its
Terms & Conditions stating that offering furnaces
is possible only when accompanied by required
documentation (certificates).

To protect buyers, Allegro cooperates with ownersof exclusive rights under the Rights Protection Cooperation Program, with over 1,700 brands currently
on board. We also partner with the leading brands
by enforcing the Memorandum of Understandingon the sale of counterfeit goods via the Internet.

Results of anti-Smog Coalition

2020

Number of removed offers concerning boilers not meeting the legal requirements
and violating the Allegro User Agreement

300

169

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Customer Experience

As wildlife protection is extremely important for Allegro, we have been cooperating for years with PTOP
Salamandra – Polish Nature Conservation Society.
Our main goal is to eliminate offers of endangered
species (CITES) and help combating illegal wildlife
trafficking. Thanks to the cooperation in 2020 there
were only 196 offers identified by our partners andsubsequently removed from the platform.

The Customer Experience team stays available tothe customers at all times, quickly and efficiently
answering questions and providing support. They
communicate in various channels: the Allegro Helptab, email, the traditional contact form, Allegro chat,
via the callback service (requesting a call from a consultant), Whatsapp, and Messenger. Seniors who
would like to create an account or find out more
about shopping on Allegro can call a dedicatedHotline for Seniors.

THE BEZPIECZNE Z@KUPY W SIECIPROGRAMIn 2020, we launched the Allegro Gadane community,a new platform where buyers and sellers are offered
access to insights and feedback submitted by otherusers. In its first year of operation, Allegro Gadane
recorded over 2 million visits, and thanks to the content posted by the community, as many as 200,000
issues were resolved. Thanks to gamification (e.g.
ranks, rankings, etc.) and friendly interactions withothers, several hundred committed users answering
questions have formed into a group that devotes
time to helping others.

The Bezpieczne Z@kupy w Sieci program is addressed to schoolchildren aged 13–18 and students,
one of the most active age groups shopping online.
Participants learn about the most common threats
in online shopping, how to verify sellers, how tosafely pay for purchases in cyberspace and how toprotect against identity theft. In 2020 we organised
25 workshops, most of them online for over 2,600
participants.

At Allegro, we regularly survey customer satisfaction. Every customer who interacts with us may
complete an online survey, in which they can share
their opinion about the quality of service and about
how their specific issue was resolved.
The high satisfaction of buyers has earned us thebest-in-class Net Promoter Score (NPS) of 72, whichputs us on par with the most popular consumer
brands like Starbucks (77), YouTube (59), and Spotify(46) .
The platform’s rules and regulations are paramountfor Allegro, which is why we constantly monitor
merchants and offers, and examine all issues as they
are reported. For example: The Buyer Protection
Program, feedback or starting a Discussion with themerchant (using a communication platform where
the buyer and the merchant can solve a problem
directly with each other or, at the customer’s request,
also with the assistance of an Allegro employee).

ADVERTISING AND MARKETINGRESPONSIBILITY
Discussions

Selling and displaying advertisements is regulatedby:•Terms and conditions of selling and displaying
ads on Allegro.pl•

Terms and conditions of ADs

Number of opened discussions% of discussions resolved successfully2019

3.9 million

1.4 million

97%

96%

OUT-OF-COURT PROCEDURES FORCONSUMERSThe company ensures the message stays clear andunambiguous across all channels of communication
with the customer, including marketing materials,
and the company's business model has been built
around acting in the best interest of the customer.

170

2020

A User being a consumer may initiate out-of-court
proceedings to solve a Complaint and enforce claims
before the Permanent Arbitration Consumer Courtat the Provincial Inspector of Trade Inspection in
Poznań. Information on how to initiate such proceedings and on the procedures applicable to disputesettlement can be found at http://www.uokik.gov.
pl in the “Consumer dispute settlement” tab (Polish: “Rozstrzyganie sporów konsumenckich”). The
consumer User may also use the EU ODR platform
available at: http://ec.europa.eu/consumers/odr/.
Detailed information on how to file a complaint canbe found here.

III. Non-financial report

171

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Supporting Customers During the
COVID-19 Pandemic
Buying products on-line is the easiest and mostconvenient way to shop in the current situation.
To support everyone who is socially distancing
themselves during the pandemic, and to ensure
access to a variety of products and make shopping
safer, Allegro prepared a special aid package for its
customers. From 17 March to the middle of June
2020, Poles were able to conveniently shop, andsave money, thanks to a monthly Allegro SMART!
subscription offered free of charge, involving freedelivery to a pickup point or by courier. Customers
really appreciated the option of contactless and safe
shopping. Allegro SMART! was available for free tothose who had not yet subscribed, and its current
users were offered free of charge extensions.
A total of over 2.5 million buyers used the free
SMART! package, saving around PLN 325 million
on delivery costs.

HOTLINE FOR SENIORS
Allegro launched a dedicated hotline to help seniors
shop online from April to the end of June 2020. As
restrictions were again imposed in December, thehotline was reactivated. To better respond to theneeds of seniors, Allegro partnered with the National
Institute of Silver Economy (KIGS).
The dedicated hotline for current and future
customers (616 271 777) is a practical real-timeguide around the world of shopping on Allegro. The
hotline is open daily from 8:00 to 20:00 (except onholidays). The questions most frequently asked
by seniors were about setting up an account on
Allegro, searching for products, buying, paying,choosing a delivery method, etc. To use Allegro.pl,seniors need a device connected to the internet (e.g.
a computer or a smartphone) and an email address.

172

Responsibility Towards Merchants
Over 128,000 professional merchants are doing
business on Allegro, most of which are small andmedium-sized enterprises – a very important pillarof the Polish economy. They create jobs and area source of income for families all around Poland.
Allegro has been investing in educating merchants
and customers.
Subscription offers access to a number of tools
supporting sales on Allegro, which make it easier
to manage merchants’ business and make it more
effective.

ALLEGRO’S PROGRAMS AND TOOLS FOR
MERCHANTS

The Super Seller program – dedicated to all Sellers,
who run a business on Allegro. Sellers who perform
well based on objective measures such as sales
volume, speed of delivery, buyer quality ratings, andefficiency of complaints handling, receive an indexed
quality rating that qualifies them as Super Sellers.
The program allows us to assure the best quality ofservices provided by our Sellers. The key benefit forthe merchants is the Super Seller tag attached to
the listed offers allowing for Buyer recognition. In
addition, Super Sellers receive a package of Allecoins
automatically added to their offers.
Merchant Development program – targeted atmature accounts from the VIP and TOP Brand Sellers
group. The main goal of the project is to accelerate
the development dynamics of the largest and highly
specialized partners.

Allegro’s ambition is to build a convenient spacefor merchants with a wide set of features, which
will allow them to manage sales on the platform
effectively. We implement a variety of programsfor existing as well as new Sellers, so that they candiscover the available tools, learn how to manage
their offers and boost their business with programs
designed for their segment, life cycle, activities on
the platform, etc.

The Activation programs – aimed at supporting
Seller development with awarding selected activities
on the platform.

The Welcome program – dedicated to new merchants who want to start selling on Allegro. The
main goal of this program is to eliminate the entry
barriers and encourage merchants to start selling
faster. New sellers receive professional support andaccess to various tools, as well as discounts andcommission refunds.

Send with Allegro is a new order fulfilment tool. Allegro has introduced a new deferred payment service
for transactions between businesses. It enables
sellers to sell and buy with an extended invoice
payment due date. Trade Analytics is an analytical
tool that allows merchants to find answers to themost frequently asked questions about selling on
Allegro. Sellers can also use dedicated programs.

III. Non-financial report

SALES QUALITY: SELLERS WITH SUCCESS ANDSELLER QUALITY ADMIN
A tool for managing sales and monitoring sales
trends. We precisely calculate all metrics and display information about merchants sales quality. At
a glance they will recognize strengths as well as
weaknesses they need to work on. The available
information makes it easier to control the salesquality and helps merchants to grow their businesson Allegro.
Sales rating is an opinion about a transaction submitted by the buyer. They can include a descriptivecomment to the rating. Thanks to the sales statement, merchants can check which areas of theirbusiness are buyers’ opinion and which are worth
improving.
Most Allegro processes are automated, which makes
it possible to achieve economies of scale, and to
personalise the educational or advertising offer
to meet and exceed the merchants’ expectations.

Allegro’s tools and services for merchants are e.g.:
Allegro Ads, Allegro Finance, Promote your offers,
Streamline your sales, Post listings, Loans andleasing for businesses, My sales quality and Free
on-line training.

173

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Educational Program
In addition to training and webinars, the Allegro
Academy activates merchants and helps them growtheir businesses.

ALLEGRO ACADEMY
Allegro Academy is a free online education program.
In 2020, an educational platform offering free online
courses was created, which is currently available intwo languages – Polish and English. The platform
is free for all Allegro.pl users, who can take on-line
courses, sign up for webinars or listen to podcasts.
The course content includes videos by experts andanimations, manuals, articles, mind maps, and additional materials. At akademia.allegro.pl, Allegro
employees and external experts cover many topics,
from selling on Allegro, through advertising andpromotion, to personal development and shopping
safely online.

This is a unique tool on the market, thanks to its
range and selection of topics, as well as popularity
with the target audience. It is free for everyone.
Here are a few examples of courses that are offered:
Shopping safely online – 8 rules, Start selling on
Allegro and many other courses on how to increase
sales on the platform, including Visual design for
the Allegro platform, Zero waste packaging, Online
analytics, Professional communication in business,
and Crises in communication with customers. The
courses added in 2020 include: My own business andhow to go about it?, Starting a business – step by step,
How to learn English?, Your rights as a shopper, Howto find a job that meets your expectations?, Living
in harmony with nature, and Understanding GDPR.
The courses contain over 400 videos from experts
and animations, manuals, articles, mind maps, andadditional materials.

TRAINING AND WEBINARSThe Allegro Academy was created to share knowledge, help the businesses selling on Allegro grow,and support buyers. In our numerous courses,
webinars and podcasts, over 128,000 professionalmerchants on Allegro will find practical information
about sales, advertising and promotion, as well as
personal development. Thanks to the great variety
of topics, input of internal and external experts, andan attractive format, businesses from all around
Poland, mainly small and medium-sized companies,
will find out how to grow their business.
Allegro Academy
Number of Allegro Academy courses

The main objective is to create a space for Merchants,
where we not only share the knowledge, but alsoenable interaction. A space where Merchants canshare their opinions or doubts and discuss themwith an expert. The meetings organised by Allegro
should encourage a sense of Partnership, help us
build new solutions and give Merchants confidence
that their voice is being heard.

2020

50 (incl. 7 in English)

Number of tutorials for merchants and buyers

60

Number of webinars

177

Number of webinar participants

18,791

Number of unique users who visited the Allegro Academy

962,087

YouTube channel views

876,700

Hours of videos watched on the YouTube channel
Number of experts in the Allegro Academy
Average rating (out of 10)

174

Support For Merchants During the
COVID-19 Pandemic
Allegro has launched a series of projects supporting
Poles in the fight against the coronavirus pandemic.
Entrepreneurs, both current Allegro merchants aswell as new businesses, were offered access to the
Merchant Support Package, helping them weather
the difficult time or start selling on the platform.
The Merchant Support Package included, among
all, postponing payments, or lifting fees altogether
for new businesses on the platform for the initial 3months. This helps many stores that were closed
overnight due to the lockdown to quickly resume
operations and start selling online. The three-monthfree aid package allowed many companies to improve their financial standing and stability of theiroperations.
For new stores, selling on the Allegro platform
was a much faster and easier solution to continue
operating than launching their own on-line store.
Allegro has also offered a similar solution to small
and often local businesses, which could sell their“basic necessities” with zero commission in the Local
Marketplace category on Allegro Lokalnie. The valueof the offered package was PLN 46 million in thefirst half of 2020.
There was no slowing down in the second half ofthe year, as 34,000 new businesses appeared on
the platform, which we supported financially andthrough educational initiatives. Allegro even formed
a dedicated team to support the merchants at the
beginning of their journey with Allegro. The valueof this aid package amounted to PLN 109 million in
the second half of 2020.

INTERNAL COMPLAINT-HANDLING SYSTEM
Allegro.pl shall ensure the operation of an internal
complaint-handling system within the meaning of
Article 11.1. of Regulation (EU) 2019/1150 of theEuropean Parliament and of the Council of 20 June2019 on promoting fairness and transparency forbusiness users of online intermediation services.
Complaints of the Users which relate to the issues
listed in this regulation can be made through https://na.allegro.pl/skarga. In 2020, we received 1,282
complaints out of almost 2,000,000 total requests
to customer service.

OUT-OF-COURT PROCEDURES FOR
MERCHANTS
Allegro.pl may attempt to amicably settle the disputewith User pursuing business activity, using Allegro
to offer items to consumers, through an independent mediator, upon prior consent of Allegro.pl for
mediation. Should the User, referred to in theprevious sentence, propose mediation to Allegro.
pl and after Allegro.pl has accepted this proposal,
mediation will be conducted by a mediator from theEuropean mediation institute, in accordance withthe mediation rules applied by the institute. Allegro.
pl shall bear a reasonable part of the total costs ofmediation which will be each time determined by theparties. The list of mediators and mediation rules areavailable at contact address: eiminstytut@gmail.com

8,800
51 (5 external)
8.34

III. Non-financial report

175

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.5.
Environmental Responsibility

Customer & Data Privacy, Cybersecurity
and Data Protection
The Group’s rules and policies includes, i.a.:•

Security policy (including cybersecurity)•

Incidents Management Process•

NDA circulation procedure•

Rules on storing personal data at Allegro.pl
sp. z o.o.

•Procedure for exercising the right of Allegro.pl
users' data•

Procedure for notification of personal data
breaches to the Personal Data Protection Office•Business Continuity Policy

Security and cybersecurity are on high-level priority
management. We conduct a bi-annual Cybersecurity
Maturity Assessment to verify the actual security
level and to find a way to improve. When last conducted in 2019, Allegro was assessed above market
average. Allegro has private and public Bug Bounty
programs, and performs many pentests using external companies and internal resources. Allegro
invests in cybersecurity organisation and technical improvements. Allegro has its own Computer
Security Incident Response Team (CSIRT) which iscooperating within organisations and outside tohandle security incidents.

Additionally Allegro performs audits to verify compliance with GDPR. The last audit was conducted
between September and December 2020 and has
not identified any material issues.
During 2020 there were no serious incidents or data
breaches. The most serious incident in 2020 which
was reported to PUODO regarded a lost registeredletter containing the employment contract. The
unpacked envelope and documents were found in
the waste paper box, in the addressee's residential
block, which indicates that someone might havegained access to his personal data including salary.
In light of ENISA guidelines followed by the Group incase of Data Protection Incidents, we were obliged
to report it.
All employees including contractors are trained
during onboarding sessions and then on yearly basis
about Security policy and GDPR rules (general info
and inside policies and procedures). Additionally weincrease security awareness using many occasions,by dedicated info or come competition, like Safe
Internet Day, Personal Data Protection Day, GDPR
anniversary.
Customer and transaction security is one of themost important aspects so we have implemented
dedicated tools and teams working with frauds on
a Platform on a daily basis.

Environmental management

Allegro’s CSR & Sustainability Strategy sets environmental goals to help customers to make responsible
choices, through exposure and promotion of sustainable products as well as the lower footprint of
products' delivery process. We green our operations
and make our value chain resilient, responsible andgreen. Our ambition is to continuously reduce ournegative impact on the environment, primarily by
reducing emissions. We aim for it to be lower andlower each year.

Q22 office building (current offices in Warsaw)
obtained a BREEAM “Excellent” certificate withvery high results in this category in Poland [11]. Pixel(headquarters in Poznan) obtained a BREEAM “VeryGood” certificate level. BREEAM is an international
scheme that provides independent third party certification of the assessment of the sustainability
performance of individual buildings, communities
and infrastructure projects.

Carbon and energy reduction programs regarding
targets: lead the effort to reduce emissions related
to deliveries of Allegro orders, introduction of fulfilment centres – handling shipments and returns,
etc. for small businesses, introduction of reusable
packaging, reducing environmental impact of single
use packaging materials, measure emissions of deliveries and Renewable Energy program – investment
in RE generation in new and existing logistic facilities.

There are many ecological solutions in Pixel in
Poznan, e.g.: rainwater tank to watering greenery;recuperator in the air handling system; an extensive
BMS system allowing for ongoing control of parameters from the entire building (temperature or media
consumption); dry-coolers for chillers, reusablefilters that collect pollen and pollutants from theair, installation of comfort ventilation; chilled water
installation, a meadow on the roof etc.
Electric vehicle charging stations will be installed atour new warehouse. The warehouse is also in theprocess of receiving a BREEAM Certificate at theGood Level and this procedure should be completedby March 2021.
Our data center is implementing a project withthe aim to improve energy efficiency together withbuilding a photovoltaic installation and using off-heatat the data processing center. All the undertaken
actions aim at the increase in savings of electricalenergy and reduction of air pollution emission. An
intelligent energy management system helps toreduce CO2 emission by an estimated 1,017 [tonnes/ year].

We are fully compliant with GDPR. We respect all
rights of the data subject due to GDPR. We automate
some of them and are available via self-service likeobtaining a copy of data, correction of data, etc.
We closely monitor PUODO and EROD decisions,guidelines and then verify and adjust our approach
if necessary.
Cybersecurity and Data Privacy Breaches

Environmental approach

2020

2019

Cyber security breaches

00Data Privacy breaches (reported to authorities)

10[11] The BREEAM ratings range from Acceptable (In-Use scheme only) to Pass, Good, Very Good, Excellent to Outstanding.

176

III. Non-financial report

177ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Environmental indicators
Compared to 2019, GHG (market-based) emissions
increased by 10.91% in 2020. Scope 1 direct emissions decreased by 29.51% as a result of lower fuelconsumption. Scope 2 emissions increased by
13.58% due to higher consumption of purchased
electricity. Scope 3 emissions increased 8.42%, mainly driven by more shipments and more packaging
being launched.

Source of GHG emissions [t CO2e]Compared to 2019, total GHG (market-based) emissions per GMV (mPLN) decreased by 27.98% in 2020.
This decrease resulted primarily from strong operation growth and increased electricity consumption
at the data center.

2020

2019

190.92

226,84

Diesel

14.18

4.20

Petrol

21.00

48.71

7,882.21

7,042.43

582.15409.58340.99188.20End-of-Life Treatment of Sold Products

6.41

3.29

Downstream Leased Assets

87.04

79.32

1,248.02

1,249.88

Waste Generated in Operations

4.93

0.23

Business Travel

73.55

649.21

Downstream Transportation and Distribution

1,285.38

639.70Total emission

11,736.78

10,582.60

0.33

0.46

Scope 1Natural gas

Scope 2
Electricity
Heat
Scope 3

GHG emission [t CO2e] [1]

2020

2019

226.10320.75

Scope 2 (location-based)

8,286.30

7,509.56

Scope 2 (market-based)

8,464.35

7,452.01

Scope 3

3,046.33

2,809.84

Scope 1+2+3 (location-based)

11,558.73

10,640.15

Scope 1+2+3 (market-based)

11,736.78

10,582.60

Scope 1

Purchased Goods and Services

Fuel – and Energy-Related Activities Not Included in Scope 1 or Scope 2

Total emissions (t CO2e) in relation to GMV (m PLN)
[1] The greenhouse gases identified and included in the calculation are CO2, CH4 and N2O, which have been expressed
as CO2 equivalent. No biogenic CO2 emissions have been identified. The emissions in 2019 were selected as thebase year. The sources of emission factors were KOBIZE publications (The National Centre for Emissions Management) for gasoline, diesel oil, natural gas, electricity and heat. For other emission sources the DEFRA database(Department of Environment, Food and Rural Affairs in the British Government) and the Ecoinvent 3.6 databasewere used. GWP factors were adopted based on the Fourth Assessment Report (AR4). Calculations were madefor each subsidiary and the results were consolidated according to operational control. 100% of emissions fromindividual locations of the Allegro Group were taken into account. The amount of emissions from the productionof consumed electricity was calculated according to two methods: location-based (electricity-related emissions
calculated using country average emission factor) and market-based (electricity-related emissions calculated using
the energy seller specific emission factor). In the case of the location-based method, the average emission factor
for Poland was used. In the market-based method, indicators for energy suppliers were used.

178

III. Non-financial report

Calculations of the GHG emissions were preparedin accordance with the standards: The Greenhouse
Gas Protocol A Corporate Accounting and ReportingStandard Revised Edition, GHG Protocol Scope 2
Guidance, and Corporate Value Chain (Scope 3)
Accounting and Reporting Standard.

179

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

The table below presents our consumption indicators of energy, materials, water, waste and travels.

Energy consumption

Packaging used in a warehouse [ton]

2020

2019

35,297.50

Cardboard packaging – 70% of recycled paper

234.85117.05

6,032.60

4,244.37

Original stretch film – unrecycled

48.80

22.40

3,445.61

4,092.44

Half-pallet wood

9.97

10.98

Petrol [GJ]

303.24703.42

100% recycled foil fillers are 100% recyclable, HDPE foil

7.30

3.50

Diesel [GJ]

191.34609.9948,273.99

44,947.72

2020

2019

Waste

2020

2019

Electricity (in MWh)

10,639.22

9,763.99

Waste [t]183.76

10.59

Heating (in GJ)

6,032.60

4,244.37

Natural gas (m3) – warehouse

94,296.82

111,754.36

Petrol (l)9,066.31

21,031.32

Diesel (l)5,297.29

16,887.84

Water consumption (m3)

4,627.03

9,771.57

2020

2019

2020

2019

Paper (reams)

2,438.00

3,080.00

Flight [km]292,295.00

3,047,158.00

Envelopes [pcs]70,000190,000

Train [km]552,543.00

2,389,917.00

Ticket paper [kg]1,671.90

2,531.20

2020

2019

Electricity [GJ]

38,301.20

Heating [GJ]Natural gas [GJ] – warehouse

Total energy consumption [GJ]

Utilities consumption

Materials purchased in the offices

Datum from 2019 does not include warehouse waste.

Business travel

No refrigerants were released in 2019 and 2020.

180

III. Non-financial report

181

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

3.6.
Social impact
Allegro's social impact spans technological education, including youth education, charity work andemployee involvement in social activities.
Allegro All For Planet Foundation operates as partof the Group. Through the activity of Allegro All For
Planet, since 2008 we have been trying to increase
the ecological awareness of Poles and promote
environmentally friendly behaviour.

Tech education

We combine ecology and sustainable transportwith technology. We promote bicycles as the most
eco-friendly means of transport, develop bicycle
infrastructure, promote a healthy lifestyle, andspark discussions on these topics. We engage ourengineers, bicycle activists and local governmentsin the foundation’s activities.
The social impact activities have been outlined in
the 2020–2023 Allegro CSR & Sustainability strategy.
The main goals are:Invest In Skills Of The
Youth• Long-term educational programs for the youth (open-ended or selected groups) to foster
entrepreneurial and tech skills• Educational and mentoring initiatives for the youth• Cooperation with universities to increase the applicability of university courses anddevelopment of skills that increase students’ employability

Support Communities
We Operate In• Continuation and scaling of Allegro Charytatywni• Continuation and scaling of existing initiatives• Cooperation with selected charities• Local fundraising on Allegro Lokalnie• More extensive employee volunteering programs• Participation in Hackathons that address issues affecting Allegro’s stakeholders(e.g. senior users, disabled people) and support sustainable development(e.g. climate change, smart cities)

Social, Charity And
Sponsorship Activities
Policy• Creating and introducing the social, charity and sponsorship activities policy, which will
identify the scope of activities and outline how Allegro.eu operates in this area.

182

III. Non-financial report

Education, especially technological education, is
one of the priorities in our activities. Allegro Tech is
a community of over 1,000 technology experts whoshare their knowledge and experience with others.
Allegro Tech Talks is one of the main initiatives ofAllegro Tech, now a permanent event in the IT industry calendar. It is a series of meetings during which
Allegro experts talk about projects implemented in
our organisation, problems that we sometimes faceand original solutions that we implement.
The Hackathon events organised by Allegro areintended primarily for students and prospective employees. The company supports the development of
their competences and helps them gain experiencein programming under the supervision of mentors.
In 2020, we were a partner of the HackYeah Online
hackathon, focused on the fight against COVID-19.
In November 2020, the Strong Women = Strong
Tech – how to build a career in the technology sector
meeting took place at the Gov.Tech Festival, where
Allegro developers and project managers used theirknowledge and experience to talk about how to starta career in technology, and how to form diverse
teams also in IT.

LONG-TERM EDUCATIONAL PROGRAMS FORYOUTH
As part of partnership and knowledge sharing activities, since 2018 Allegro has been a strategic partnerof the Polish Development Fund's (PFR) School of
Pioneers (Szkoła Pionierów) initiative, an intensive
educational and mentoring program for young andbeginning entrepreneurs in the new tech industry.
The aim of the program is to help people starting
their careers create innovative projects that, in thelong term, may be commercialised and launched on
the Polish market, and then globally. Since August
2019, Allegro has also been the partner of the Central
House of Technology, supporting the education of
the youth and sharing practical knowledge. Allegro
is the partner of the “Technology” educational path,and the company experts are happy to share theirknowledge at meetings and workshops organised
for the young, based on the STEAM method (Science,
Technology, Engineering, the Arts, Mathematics).
Since 2018, 150 Pioneers have completed the educational program. In 2020, there were 50 such
persons formed into 12 founding teams, who took
part in workshops across 28 different topics.

183

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

Charity Actions
CHARYTATYWNI.ALLEGRO.PL – ALLEGROCHARITY PLATFORM

ALLEGRO'S HELP TO FIGHT THE
CONSEQUENCES OF THE PANDEMIC

Allegro Charity (Charytatywni.Allegro.pl) is a virtual
platform where any public benefit organisation canraise funds for social initiatives that it considers
important. There are no fees or commissions. We
provide the necessary technological solutions andget involved in selected initiatives as a partner.
Allegro customers who want to support a person
or initiative can auction their own items for a fundraising goal of their choice, and buy unique items
at charity auctions. During selected charity events,
customers can also make a direct donation, usually
into a Virtual Collection Box or in the form of a PayU
fast transfer.

Allegro actively facilitates the organisation ofcharity activities by making available the tools forinternet auctions free of charge. In response to thepandemic, Allegro has created a comprehensive
support program for Polish healthcare, leveraging
its vast experience in this field primarily throughcooperation with the Great Orchestra of Christmas
Charity Foundation, a partner of Allegro for overtwenty years.

In 2020, we managed to raise almost PLN 19.4 million
in 838,500 offers for 2,400 fundraising goals of 401
NGOs.

Allegro organised a fundraiser for the purchase ofnecessary equipment to protect the lives and healthof Poles. We raised PLN 213,865 for the Intervention
Fund of the Great Orchestra of Christmas Charity
Foundation. With the raised funds, the Foundation
purchased the most necessary equipment for thehealthcare sector. A PLN 2 million donation allowed
the Great Orchestra of Christmas Charity Foundation to acquire 24 ventilators for Polish hospitals.
During the first wave of the epidemic, Allegro funded
2 fully-equipped testing laboratories in Warsaw andPoznań, purchased and delivered 365,000 masks
and 8,000 litres of disinfectants to over 40 hospitals
and healthcare facilities throughout Poland. The
Group also donated 10 3D printers for junior highschool students in Sopot, which allow for producing
400 face shields for doctors and nurses each day.
Allegro also delivered fresh fruit and vegetables tohospitals in five cities. 22 tons of fruit were donated.
The donation of PLN 1 million made to the Lekarze
Lekarzom Foundation allowed to stock 31 hospitals
with personal protective equipment: 78,800 FFP3
and FFP2 masks and 4,000 pairs of gloves.

GdańskGdyniaSkorzewo

Bydgoszcz
Wałcz

Murowana Goślina
Gorzów Wielkopolski

Puszczykowo

Świecie

Nidzica

Poznań

Zielona Góra

Konin

SekłakKraśniewo

Tłuszcz

Komorów

WołominGrodzisk Mazowiecki

Broniszewice

Piastów pod Warszawą

Bolesławiec

StarachowiceCzęstochowa
Opole

LublinSandomierz
KielceRadwanowice

Siennica

Pruszków

Pleszew

Zastruże pod Wrocławiem

Białystok

Warszawa

Łódź

WrocławŁomżaOtwockNowy Białynin

TorzymLesznoNowe Miasto Lubawskie

Toruń

Skórzewo

Skwierzyna

Grudziądz

Chełmża

Oborniki

Augustów

Olsztyn

Nebrowo Wielkie

Zła Wieś

SzczecinWęgorzewo

Malbork

SzczecinekMyśleniceKraków

Tomaszów Lubelski
Czermin
MielecBochnia
Nowy Targ

Social initiativesof Allegro employees

Fruits and vegetables
for hospitals

Personal protective
equipment for hospitals

184

III. Non-financial report

185

ALLEGRO.EU S.A. GROUPCONSOLIDATED MANAGEMENT REPORT
for the years ended 31 December 2020

ALLEGRO FOR WOŚPDREAM DINNER (KOLACJA MARZEŃ)For years, Allegro has been helping the Great
Orchestra of Christmas Charity. Allegro auctions
supporting the Great Orchestra of Christmas Charity are record-breaking in terms of popularity. In
its activity associated with the 29th WOŚP Finale,
Allegro focuses on 6 main areas: Allegro auctions
for WOŚP, Rzeczy od serca – a video social platform
encouraging stars, celebrities, athletes, writers, politicians and all Allegro customers to auction itemsin the WOŚP fundraiser and record videos with
their description, a virtual collection box, streaming,
participation in the finale at the Studio and assisting
the Allegro Staff, joined by volunteers from Allegro.
Allegro got involved in 2020 for the 20th time. We
managed to raise PLN 14.9 million, thanks to 195,000
items auctioned by sellers, PLN 752,000 PLN in thevirtual collection box and 386 videos posted on
Rzeczyodserca.pl.

In 2020 was the 7th edition of the countrywide
campaign organised by the Mam Marzenie Foundation and Allegro. Anyone can help by bidding in
an auction of a dinner with a celebrity or by making
a donation. All of the money raised in the campaign
is used to finance the dreams of those the Mam
Marzenie Foundation takes care of.

ANY GIFT CAN BE NOBLE (KAŻDA PACZKA
MOŻE BYĆ SZLACHETNA)
The Any Gift Can Be Noble (Każda paczka możebyć szlachetna) project has been launched to support the Wiosna NGO, the owner of the Noble Gift
(Szlachetna Paczka) social initiative. This year, theNoble Gift and Allegro launched the Any Gift Can
Be Noble Christmas social campaign and a charity
fundraiser on Allegro (from 1 to 27 December) to
support Noble Gift's mission. In the campaign volunteers purchase items, which are donated to support
families in a difficult financial situation. Donors andvolunteers received materials from the Noble Giftteam encouraging them to shop for families in needdirectly on Allegro. PLN 535,331 was raised during
the fundraiser on Allegro.pl.

HELPING THE HEROES WITH SIEPOMAGA(SIEPOMAGA BOHATEROM)
A fundraiser organised by the Warsaw Uprising Museum to support the Warsaw Insurgents financially.

GIFT A TEDDY BEAR/PODARUJ MISIA(PODARUJMISIA.ALLEGRO.PL)
The 15th edition of the Gift a Teddy Bear initiative!
By buying teddy bears, donors support those under
the care of the TVN's You are not alone (Nie jesteś sam) Foundation. The funds raised during the
campaign finance the treatment and rehabilitationof sick children. This year, once again, teddy bearoutfits were designed by designers and celebrities.

LOCAL CHARITY AND SOCIAL COLLECTIONSON ALLEGRO LOKALNIE
Allegro Lokalnie allows to create fundraisers since2020. Every Allegro Lokalnie customer can support
local charities and social initiatives while shoppingon the platform. Organisations operating on a smaller scale can also receive support. Allegro customers
can put an item on auction in a specific fundraiser. It
suffices to search for the given initiative and specify
what percentage of the proceeds (10% to 100%)
will be contributed to the chosen fundraising goal.

Employee Engagement Program

They can also purchase an item that supports a specific initiative, and after paying for it, the money
will be donated to the fundraiser. Customers canchoose from over 150 initiatives supporting, forexample, orphanages, shelters, local schools, andmunicipalities.

#POMAGAMY_BO_UMIEMY – ALLEGROEMPLOYEE ENGAGEMENT PROGRAM
Employees have been involved in volunteering foryears. They support not only well-known national
initiatives such as WOŚP or Noble Gift (Szlachetna
Paczka), but also engage in numerous local charitable and educational efforts. In response to thecurrent social and internal needs, Allegro createda special charity fund in 2020 worth PLN 1,6 million(2 editions), which serves to support employees'
initiatives in the fight against the coronavirus. As
part of the #pomagamy_bo_umiemy campaign,
Allegro employees could select organisations andinstitutions and propose specific actions to help
those in greatest need, especially people affectedby the pandemic. Help was provided to seniors,children and adolescents, people with disabilities,
the homelessness or socially excluded, and also to
local communities, patients, hospices and social
welfare homes, as well as healthcare workers.

5 months after introducing fundraisers, the organisations raised over PLN 170,000 in 178 fundraisers.
In as many as 65% of all completed fundraisers
the entire amount needed to finance the goal wasreached.
The auctioned item will be visible both on Allegro
Lokalnie and Allegro.pl, enabling the offers to reachover 18 million customers.
Comparing the amounts raised by other crowdfunding platforms in the initial months of their operation,
the fundraising campaigns on Allegro Lokalnie arehighly effective.

MAM SWOJE ALLE PROGRAM
The Mam swoje Alle program was also launched in2020. It’s an educational project created by Allegroin partnership with the Zwolnieni z Teorii Foundation,
the aim of which is to develop and promote entrepreneurial competencies among students (over the ageof 12) who, through the Allegro Lokalnie fundraisers,
can raise funds for a goal of their choice.

77 projects were executed during the two editionsof the #pomagamy_bo_umiemy campaign, thanks
to the engagement of 200 Allegro employees. They
channelled real help to people and institutions mostaffected by the COVID-19 pandemic.

Indicators – Social and Charity Activities

2020

2019

Donations made by the Allegro.eu to support several public organizations
during the COVID-19 pandemic

PLN 6.9 million—

Charytatywni.Allegro.pl platform– raised amount:

PLN 19.4 million

PLN 14,1 million

including Wielka Orkiestra Świątecznej Pomocy

PLN 14.9 million

PLN 12.0 million

838,500

884,025

Charytatywni.Allegro.pl platform – number of organisations

401

455

Number of people enrolled in the School of Pioneers PFR

50

50

PLN 170,000—

Allegro Lokalnie Collections –– number of collections (since July 2020)

178—#pomagamyboumiemy employee engagement campaign – two editions

77 projects
200 employees—

Charytatywni.Allegro.pl platform – number of offers

Allegro Lokalnie Collections – amount raised (since July 2020)

186

III. Non-financial report

187

IV.
Financialstatements

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020

1.

Responsibility
Statement

Allegro.eu
Société anonyme
1, rue Hildegard von Bingen, L – 1282 Luxembourg,
Grand Duchy of Luxembourg
R.C.S. Luxembourg: B214.830

RESPONSIBILITY STATEMENT

The Board of Directors confirms that, to the best of its knowledge:
These annual 2020 Consolidated Financial Statements which have been prepared in accordance with
the International Financial Reporting Standards as adopted by the European Union, give a true and fairview of the assets, liabilities, financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole, and that the Management report includes a fair review ofthe development and performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks anduncertainties that they face.
Approved by the Board and signed on its behalf by:

190

Darren Huston

François Nuyts

Director

Director

191

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020

Audit report
Audit report
To the Shareholders ofAllegro.eu S.A.
To the Shareholders ofAllegro.eu S.A.

Report on the audit of the consolidated financial statements
Report on the audit of the consolidated financial statements
Our opinion

Our opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of theconsolidated financial position of Allegro.eu S.A. and its subsidiaries (the “Group”) as at
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the
consolidated financial position of Allegro.eu S.A. and its subsidiaries (the “Group”) as atyear then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
31 December 2020, and of its consolidated financial performance and its consolidated cash flows for theEuropean Union.
year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by theUnion.
Our opinionEuropean
is consistent
with our additional report to the Audit Committee.
Ouraudited
opinion is consistent with our additional report to the Audit Committee.
What we have
What we have audited
The Group’s consolidated financial statements comprise:
The Group’s consolidated financial statements comprise:the consolidated statement of financial position as at 31 December 2020;
the consolidated
statement ofstatement
comprehensive
incomefor thethenended; 2020;• the consolidatedof financial
positionasyear
at 31
Decemberthe consolidated
statementofchangesinequity
for
the
year
then
ended;• the consolidated statement of comprehensive income for the year then ended;
the consolidated
statement ofstatement
cash flows
the yearthen ended;• the consolidatedof forchangesin equity
for theandyear then ended;
the notes
totheconsolidated
financialstatements,
which
a summaryof significant• the consolidated statement of cash flows for the yearinclude
then ended;andaccounting policies.
• the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Basis for opinion
•
•
•
•
•

Basis for opinion
We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as
We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Ouron the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as
responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted
adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our
for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseur
responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted
d’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseurd’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We are independentof the Group in accordance with the International Code of Ethics for Professional

Accountants, including International Independence Standards, issued by the International Ethics
We are independent of the Group in accordance with the International Code of Ethics for Professional
Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together
Accountants, including International Independence Standards, issued by the International Ethics
with the ethical requirements that are relevant to our audit of the consolidated financial statements. We
Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together
have fulfilled our other ethical responsibilities under those ethical requirements.
with the ethical requirements that are relevant to our audit of the consolidated financial statements. We
our other
ethical we
responsibilities
those
requirements.
To the best haveof ourfulfilledknowledge
and belief,
declare that under
we havenot ethicalprovidednon-audit services thatare prohibited under Article 5(1) of the EU Regulation No 537/2014.
To the best of our knowledge and belief, we declare that we have not provided non-audit services thatare prohibited under Article 5(1) of the EU Regulation No 537/2014.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352
4948481, F : +352 494848
2900, www.pwc.lu
Cabinet de révisionagréé.
Expert-comptable(autorisation
gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518
192

The non-audit services that we have provided to the Company and its controlled undertakings, if
applicable, forthe report
year then ended, are disclosed in Note 40 to the consolidated financial statements.
Audit
Key audit matters
To the Shareholders ofAllegro.eu
S.A. matters that, in our professional judgment, were of most significance in
Key audit matters
are those
our audit of the consolidated financial statements of the current period. These matters were addressedin the context of our audit of the consolidated financial statements as a whole, and in forming ourReportondothethe consolidated
opinion thereon,
and wenot audit
provide ofa separate
opinion on thesefinancial
matters. statements
Our opinion
Key audit matter

How our audit addressed the Key audit matter

Marketplacerevenuerecognition
Our audit
proceduresfinancial
over revenue
recognition
In ouropinion,the accompanying
consolidated
statements
give aincluded,
true and fair view of theandaccounting
for
Smart!
amongothers:consolidated financial position of Allegro.eu S.A. and its subsidiaries (the “Group”) as at
Program 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the
WeInternational
understoodFinancial
and assessed
the overall
IT control• withyear then ended in accordance
Reporting Standards(IFRSs)as adopted by the
The Group’s
consolidated
revenueenvironmentandthecontrols
inplace;
European Union.
amounted to PLN 3,997.8 million in• We tested the operating effectiveness of controls around
Ourareopinionis consistent2020. Theremultiplerevenuewith our additional report to the Audit Committee.
system development, program changes and IT dependent
streams as described in the Note 9.2.
business controls to establish that changes to the system
What we have audited
were appropriately authorized and also developed andMarketplaceTherevenueto financial statements comprise:Group’samounted
consolidated
implemented properly;
3,231 million and accounted for
80.8% of revenueof the Groupfor • ofWe
testedposition
selected
controls 2020;in the marketplace• the consolidated
statement
financial
as internal
at 31 December
the year ended31
December
2020.
revenueprocess inthe areas
like
offersregistering,• the consolidated statement ofcomprehensive
incomefor theyear
thenlisting
ended;
processingof transactions,feesended;calculation, client• the consolidated statement ofchanges in equity
for the year thenAs part of •thetherevenue
generating
payments
registration,
selling
consolidated
statement ofcash flows
for the year
then blockade;ended; andactivity the• impact
oftheSmart!
the notes to theconsolidated
financialstatements,
which
includea summaryof significant• We used automated revenue testingfor detailed
tests ofdeliveries (loyalty
program)shows aaccounting
policies.
marketplace sales transactions which includes automatic
cost of PLN 692.5 million presented
matching of billing records with payments;
as an expense"Net cost
Basis for inopinionof delivery" in operating expenses • We reconciled billing records to trial balance;
as it exceed
subscription
feein accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
We theconducted
our audit• We analysed journal entries impacting marketplace revenue
earned. Disclosure
regarding
Smart!
on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as
to identify any entries that might not be justified;program andkey judgement
applied by the “Commission de Surveillance du Secteur Financier” (CSSF). Our
adoptedfor Luxembourg
9.1 andwere includedin the Noteunderresponsibilities
the EU• Regulation
No contract
537/2014,liabilities
the Law andof 23 refund
July 2016
and ISAs
We tested
liabilities
to as adopted
9.5 in theforconsolidated
financial
Luxembourg by the CSSF
are further
described
in the “Responsibilities
the “Réviseur
determinewhether
appropriate
amounts have ofbeen
statements.d’entreprises agréé” for the auditof the consolidated
recognised
during thefinancial
period; statements” section of our report.
• We assessed
the adequacyof theandassumptions
bythe audit evidence
we have obtained
is sufficientappropriateused
to provide
a basisApplication We
of believe
revenuethat
recognition
theManagement
intheprocessofdeterminationoffor our opinion.
policies to marketplacerevenue andsignificant judgement relating to application of IFRS 15;
Smart! Program is complex and
We are independent
the Group
accordancethe
withmanagement
the International
Code of Ethics
involves estimates
as well of as• Wein evaluatedjudgments
relatedfortoProfessional
Accountants,
includingIndependenceStandards,
issuedbytheInternational Ethics
management
judgment related
to theInternational
Smart! accounting policies; we have also consideredBoard
for Accountants(IESBACode)asadoptedfor
Luxembourgbythe and
CSSF together
definition ofStandards
a customer
or agentvs.
whether there were any changes in facts
with the ethical requirements thatarerelevant
to
our
audit
of
the
consolidated
financialstatements.
We
principal considerations.
circumstances as compared to the prior period when thehave fulfilled our other ethical responsibilities
under
those
ethicalrequirements.
accounting policy was developed;
To the best of our knowledge
we declarethatandwe completenesshave not provided
non-audit services that• andWebelief,
assessedadequacyof disclosures.
are prohibited under Article 5(1) of the EU Regulation No 537/2014.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

193

2

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020

Key audit matter
Audit report

Key audit matter

How our audit addressed the Key audit matter

In addition,Tothe
large numberof of
the Shareholders
transactions,Allegro.eu
high automationof
S.A.
revenuerecognitionandsophistication of systems andprocesses Reportused byonthe
the Group
audit of the consolidated financial statements
increase the overall complexity.
Our opinion
We identified marketplace revenue
recognition In andaccountingfor
our opinion,
the accompanying
consolidated financial statements give a true and fair view of theSmart! programas key audit
matterconsolidated
financial
position of Allegro.eu S.A. and its subsidiaries (the “Group”) as at
as the application
revenue
31 Decemberof2020,and of its consolidated financial performance and its consolidated cash flows for therecognition year
standard
is complex
andthen endedin accordancewith International Financial Reporting Standards (IFRSs) as adopted by theandinvolves significant
European judgement
Union.
estimates.
Our
opinionandis consistentouraudit
additional
reportincluded,
to the Audit
Committee.
Initial Public
Offering
related with
Our
procedures
amongothers:transactions
What we have audited• We obtained and reviewed Board of Directors resolutions
In October The
2020Group’s
the Group
becamerelatedto capitalcomprise:
restructuring;consolidated financial
statements
listed on the Warsaw Stock• We analysed triggers for the change of functional currency
Exchange which
precededstatementby a• thewasconsolidatedof
positionassessed
as at 31 December
2020;
of financial
the Company,
the Management’s
judgment
seriesof• theAllegro.eu
consolidatedcapitalstatement ofcomprehensive
income
for
the
year
then
ended;
on the PLN being a new functional currency,
and analysed
restructuring• thesteps
includingconsolidated
statement ofin equityfor change
the yearofthen
ended; currency;
thechanges
accounting
for thethe functionalchanging of• thecurrency
thefunctional
consolidated
statement of cash flows for the year then ended; andfrom euro • tothePolishzloty• We analysed
related costs
and include
the allocation
betweennotes tothe andconsolidated
financialIPO
statements,
which
a summaryof significant
conversion of allshares into
one new
the amount recognised in equity and profit or loss;
accounting
policies.
class of shares. The conversion of• We reperformed the calculation of EPS and compared it
shares andBasischangeof functionalfor opinion
with the management’s calculation;
currency are disclosed in the Note 28
tothe Weconsolidated
financialconducted our
audit in accordancewith theRegulation
No 537/2014,
the Law of 23 July 2016
• We analysed
theEU
contractualfeaturesof the management
statements.onThewere
the transactions
audit profession(Law ofinvestment
23 July 2016)
with International
Standards
on modelsAuditing (ISAs) as
plan,andreviewed
the underlying
valuation
recorded inequityfor resulting
in by theadopted
Luxembourg“Commission
de Surveillance
Secteur Financier” (CSSF). Our
used
and the respective
accountingdutreatment;
reduction ofresponsibilities
share capitalunderby PLNthe EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted• Weareassessed
andincompletenessof disclosures.
425.7 million,
increase of bycapitalfor Luxembourg
the CSSF
furtheradequacy
described
the “Responsibilitiesof the “Réviseur
reserve byd’entreprises
865.7 million
andagréé” forthe audit of the consolidated financial statements” section of our report.
reduction of retained earnings by
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
PLN 440.0 million.
for our opinion.
The conversion of shares impacted
We ofareearnings
independentof the Group in accordance with the International Code of Ethics for Professional
the calculation
per share
Accountants,
including(“EPS”) disclosed in the Note 12. TheInternational Independence Standards, issued by the International Ethics
Standards
Board forAccountants (IESBA Code) as adopted for Luxembourg by the CSSF together
numberofordinaryshareswiththeethicalrequirementsthat are relevant to our audit of the consolidated financial statements. We
decreased
after
the
share
have
fulfilledourother
ethicalresponsibilities under those ethical requirements.
conversion, which in substance wastreated as reverse stock split andTo the best of our knowledge and belief, we declare that we have not provided non-audit services thatwas reflected retrospectively in theare prohibited under Article 5(1) of the EU Regulation No 537/2014.
EPS calculation.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
194

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

How our audit addressed the Key audit matter

Audit report
The Initial Public
Offering (IPO) led
also to the termination of the previous
Shareholders ofmanagementTo theinvestment
plan
Allegro.eu
generating a charge S.A.
of PLN 52.2
million.

onrestructuring
the audit of the consolidated financial statements
Details of Report
the capitalwere described in Note 28 to theopinionconsolidatedOurfinancialstatements.
In ourwere
opinion,the accompanying
consolidated financial statements give a true and fair view of the
The transactions
identified
as a
consolidated
financial
positionofAllegro.eu S.A. and its subsidiaries (the “Group”) as at
key audit matter for our audit as they31
December
2020,
and
of
its
consolidated
financial performance and its consolidated cash flows for the
had a significant impact on the overall
year
then
ended
in
accordance
withInternational
Financial Reporting Standards (IFRSs) as adopted by thefinancial position of the Group andEuropean
Union.
required management judgments.
Our opinion is consistent with our additional report to the Audit Committee.
Other information
What we have audited
The Board of
Directors
responsiblefinancial
for the otherinformation.
The other information comprises the
TheGroup’s isconsolidated
statements
comprise:information stated in the annual report including the management report but does not include theconsolidated• financial
statements
and our audit
report position
thereon.as at 31 December 2020;
the consolidated
statementof financial• the consolidated statement of comprehensive income for the year then ended;
Our opinion•onthe
theconsolidated
consolidatedstatement
financial statements
not forcover
and we doof changes doesin equity
the theyearother
then information
ended;
not express•anythe
formof
assurance
conclusion
thereon.
consolidated statement of cash flows for the year then ended; and• the notes to the consolidated financial statements, which include a summary of significant
In connection with our audit of the consolidated financial statements, our responsibility is to read theaccounting policies.
other information identified above and, in doing so, consider whether the other information is materiallyinconsistentBasiswith theconsolidated financial statements or our knowledge obtained in the audit, orfor opinion
otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
that there isWea material
misstatement
this other information,
are required
to report thatfact. ofWe
conducted
our audit inofaccordancewith the EUwe
Regulation
No 537/2014,
the Law
23 July 2016
have nothingtoreportin
thisregard.
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
Responsibilitiesof the under
BoardtheofEU
Directors
andchargedwithgovernance
forISAs
the as adopted
responsibilities
Regulation
No those
537/2014,
the Lawof 23
July 2016 andconsolidated
financialstatementsfor Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseurd’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
The Board of Directors is responsible for the preparation and fair presentation of the consolidated
financial statementsin thataccordance
IFRSsweashave
adoptedby theEuropean
Union,
and fortosuch
We believe
the auditwith
evidenceobtainedis sufficientandappropriate
provide a basis
internal control
as
the
Board
of
Directors
determinesisnecessary
toenablethepreparationoffor our opinion.
consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
We are independent of the Group in accordance with the International Code of Ethics for Professional
Accountants, including International Independence Standards, issued by the International Ethics
In preparingStandards
the consolidated
financialstatements,
the Code)
Board offorby
assessingBoard forAccountants(IESBAas Directors
adopted isforresponsible
Luxembourg
the CSSF together
the Group’swith
abilitytocontinue
asa
going
concern,disclosing,asapplicable,
matters
relatedto going
the ethical requirements that are relevant to our audit of the consolidated financial
statements. We
concern andhave
using
the going
concernbasis
of accountingunderunlessthe Board
Directors either intends
fulfilled
our other
ethicalresponsibilities
those
ethical of
requirements.
to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
To the best of our knowledge and belief, we declare that we have not provided non-audit services thatThose charged
with governanceare 5(1)responsible
overseeing
the Group’s financial reportingare prohibited
under Articleof the EUfor
Regulation
No 537/2014.
process.
PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu

3

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

195

4

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020

Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the consolidated
financial statements
Audit report
The objectives of our audit are to obtain reasonable assurance about whether the consolidated
To the Shareholders offinancial statements as a whole are free from material misstatement, whether due to fraud or error,
Allegro.eu S.A.
and to issue an audit report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with the
EU Regulation No 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by
Report on the audit of the consolidated financial statements
the CSSF will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in the aggregate, they could reasonably be
Our opinion
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements give a true and fair view of theconsolidated financial position of Allegro.eu S.A. and its subsidiaries (the “Group”) as at
As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and
31 December 2020, and of its consolidated financial performance and its consolidated cash flows for thewith ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintainyear then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by theprofessional scepticism throughout the audit. We also:
European Union.
• identify andassess istherisks of withmaterial
misstatement
oftothefinancial statements,
Our opinion
consistent
our additional
reporttheconsolidated
Audit Committee.
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit
evidence
is sufficient and appropriate to provide a basis for our opinion. The risk ofWhat
we havethat
auditednot detecting a material misstatement resulting from fraud is higher than for one resulting fromGroup’sfinancialstatements
comprise:error, asThefraud
may consolidated
involve collusion,forgery,
intentionalomissions, misrepresentations, or theoverride of internal control;• the consolidated statement of financial position as at 31 December 2020;
the consolidated
statementof comprehensive
the toyear
then audit
ended;• obtain an• understandingof internal
control
relevant to theincome
audit infor
order
designprocedures•
theconsolidated
statementofchangesinequity
for
the
year
then
ended;
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the• theofconsolidated
statementof cash flows for the year then ended; andeffectivenessthe Group’s internal
control;• the notes to the consolidated financial statements, which include a summary of significant
policies.of accounting policies used and the reasonableness of accounting• evaluate theaccounting
appropriatenessestimates and related disclosures made by the Board of Directors;
Basis for opinion• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016accounting and, based on the audit evidence obtained, whether a material uncertainty exists
on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as
related to events or conditions that may cast significant doubt on the Group’s ability to continue as
adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Oura going concern. If we conclude that a material uncertainty exists, we are required to draw attention
responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted
in our audit report to the related disclosures in the consolidated financial statements or, if suchfor Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseur
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
d’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
evidence obtained up to the date of our audit report. However, future events or conditions may
cause theGroupto ceaseto continue
as a going
concern;We
believethat theaudit evidence
we haveobtained is sufficient and appropriate to provide a basis

for our opinion.
• evaluate the overall presentation, structure and content of the consolidated financial statements,
includingWe
thearedisclosures,
whethertheconsolidated
statements
theProfessional
independentandof theGroup inaccordancewith financial
the International
Code represent
of Ethics forunderlying
transactions
andeventsinamannerthat
achievesfairpresentation;
Accountants, including International Independence Standards, issued by the International Ethics
Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together• obtain sufficient
audit evidencethefinancialof thefinancial
entities statements.
andwith the appropriate
ethical requirementsthat areregarding
relevant toouraudit ofinformation
the consolidatedWe
businesshave
activities
withintheGroup
toexpressanopiniononthe
consolidated
financialstatements.
fulfilled our other ethical responsibilities under those ethical requirements.
We are responsible for the direction, supervision and performance of the Group audit. We remainsolely responsible
forofour
opinion.and belief, we declare that we have not provided non-audit services thatTo the best
ourauditknowledge
are prohibited under Article 5(1) of the EU Regulation No 537/2014.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
196

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

5

We communicate with those charged with governance regarding, among other matters, the planned
scope and Audit
timing reportof the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
To thethoseShareholdersof governance with a statement that we have complied with relevant
We also provide
charged with
Allegro.eu S.A.
ethical requirements regarding independence, and communicate to them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.

Report on the audit of the consolidated financial statements

From the matters communicated with those charged with governance, we determine those mattersthat were ofOur
mostopinion
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 audit report unless law or
In our opinion, the accompanying consolidated financial statements give a true and fair view of theregulation precludes public disclosure about the matter.
consolidated financial position of Allegro.eu S.A. and its subsidiaries (the “Group”) as at
31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the
yearthen ended
in andaccordancewith International
Financial Reporting Standards (IFRSs) as adopted by theReport on
other
legal
regulatory
requirements
European Union.
The Business report is consistent with the consolidated financial statements and has been prepared in
is consistent
with our additional report to the Audit Committee.
accordanceOur
withopinion
applicablelegal requirements.
What we have audited
The corporate governance statement is included in the management report. The information required
by Article 68ter Paragraph (1) Letters c) and d) of the Law of 19 December 2002 on the commercial
The Group’s consolidated financial statements comprise:and companies register and on the accounting records and annual accounts of undertakings, as
amended, iswith theconsolidated
financialand has2020;
been prepared in• consistent
the consolidated
statementof financial
positionstatements
as at 31 December
accordance•withapplicable
legal
requirements.
the consolidated statement of comprehensive income for the year then ended;• the consolidated statement of changes in equity for the year then ended;
We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the• the consolidated statement of cash flows for the year then ended; andShareholders on 27 August 2020 and the duration of our uninterrupted engagement, including• the notes to the consolidated financial statements, which include a summary of significant
previous renewals and reappointments, is 4 years.
accounting policies.

Basis for opinion
PricewaterhouseCoopers, Société coopérative
Luxembourg, 3 March 2021
RepresentedWeby conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016
on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as@g
adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our
responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted
for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseurd’entreprises agréé” for the audit of the consolidated financial statements” section of our report.
@sig
Véronique Lefebvre
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We are independent of the Group in accordance with the International Code of Ethics for Professional
Accountants, including International Independence Standards, issued by the International Ethics
Standards Board for 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. We
have fulfilled our other ethical responsibilities under those ethical requirements.
To the best of our knowledge and belief, we declare that we have not provided non-audit services thatare prohibited under Article 5(1) of the EU Regulation No 537/2014.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg
T : +352 494848 1, F : +352 494848 2900, www.pwc.lu
Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)
R.C.S. Luxembourg B 65 477 - TVA LU25482518

197

6

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

3.

Note

Consolidated
Financial Statementsof Allegro.eu S.A. Group

01.01–31.12.2020

01.01–31.12.2019

Amortisation and Depreciation(463,789)(439,303)

Amortisation(400,215)(383,575)

Depreciation(63,574)(55,728)

1,123,043

886,087(506,336)(373,038)

Financial income

16,965

10,983Financial costs(523,301)(384,021)

Profit before Income tax

616,707513,049(198,147)(119,974)

Net Profit

418,560

393,075

Other comprehensive income(74,712)(3,234)– Items that may be reclassified to profit or loss

(73,774)(3,234)Gain/(Loss) on cash flow hedging(104,980)(20,203)

Cash flow hedge – Reclassification from OCI to profit or loss

38,926

17,580

Deferred tax relating to these items(7,152)(801)

Exchange differences on translation of foreign operations

(568)

190

– Items that will not be reclassified to profit or loss

(938)

—

Remeasurements of post-employment benefit obligations(1,137)—

199—

343,848

389,84101.01–31.12.2020

01.01–31.12.2019

Operating profit
Net Financial result

Income tax expenses

For the year ended 31 December 2020

Consolidated statement of comprehensive income
Note

10

11

01.01–31.12.2020

01.01–31.12.2019

3,997,811

2,592,306(2,410,979)(1,266,916)

Payment charges(152,889)(133,730)

Cost of goods sold

(222,675)(120,364)

Net costs of delivery(692,509)(268,530)

Marketing service expenses(564,670)(306,921)

Staff costs net(490,109)(294,415)

Net profit for the period is attributable to:418,560

393,075(608,854)(373,070)

Shareholders of the Parent Company

419,160

391,392

118,745

78,653

(600)

1,683

(61,398)(39,949)(61,398)(40,027)01.01–31.12.2020

01.01–31.12.2019—78

Total comprehensive income for the period is attributable to:343,848

389,841(125,782)(79,290)

Shareholders of the Parent Company

344,448

388,158(156,336)(94,930)

Non-controlling interests

(600)

1,683

30,554

15,64001.01–31.12.2020

01.01–31.12.2019

Basic(0.43)(0.85)

Diluted(0.43)(0.85)

Revenue

9

Operating expenses

Staff costs grossCapitalisation of development costs
IT service expenses net
IT service expenses grossCapitalisation of development costs
Other expenses net
Other expenses grossCapitalisation of development costs
Net impairment losses on financial and contract assets

30(39,378)(22,350)

Transaction costs

8(61,569)(1,367)

1,586,832

1,325,390

Operating profit before amortisation and depreciation

198

IV. Financial statements

Deferred tax relating to these items
Total comprehensive income for the period
Note

Non-controlling interests
Note

Note

Earnings per share for profit attributable to the ordinary
equity holders of the company (in PLN)

12

199

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Consolidated statement of financial position

EQUITY AND LIABILITIESASSETS

EquityNote

31.12.2020

31.12.2019

Share capital

28

10,233434,246

7,073,667

5,141,141—

568(95,484)(22,278)

(938)

—

—

(33,633)

Retained earnings

682,958

758,784

Net result

419,160

391,392

8,089,596

6,670,220—

13,4228,089,596

6,683,642

Capital reserve
Exchange differences on translating foreign operations

Non-current assets

Note

31.12.2020

31.12.2019

Goodwill

13

8,639,249

8,631,342

Actuarial gain/(loss)

Other intangible assets

13

4,407,024

4,627,122

Other reserves

Property, plant and equipment

14

150,820

147,709

Loans granted

15

—

9,324

Consumer loans

19

4,728

—

Deferred tax assets

23

281

9,712

Non-controlling interests

360

360

Total equity

13,202,462

13,425,569

Investments
Total non-current assets

Cash flow hedge reserve

Equity allocated to shareholders of the Parent

Non-current liabilities

Note

31.12.2020

31.12.2019

Borrowings

21

5,437,223

6,001,174

Lease liabilities

22

45,35959,764Current assets

Note

31.12.2020

31.12.2019

Inventory

16

24,61920,051

Written put option liability

26—

21,002

Trade and other receivables

17

646,409396,801

Other financial liabilities

31

97,29836,893

Prepayments

18

36,496

26,911

Deferred tax liability

23

579,078643,508

Consumer loans

19

47,244—

Liabilities to employees

24

5,370

22,562Other financial assets

4,788

4,804

Liabilities related to business combinations

5

3,893

—

Income tax receivables

802—

6,168,221

6,784,903

1,185,060

403,877

1,945,418

852,444

15,147,880

14,278,013

Cash and cash equivalents
Total current assets
TOTAL ASSETS

20

Total non-current liabilities

Current liabilities

Note

31.12.2020

31.12.2019

Borrowings

21

577

335,741

Lease liabilities

22

27,907

25,774

Written put option liability

26—

22,208Other financial liabilities

31

—

2,032

155,022

14,938

Income tax liability
Trade and other liabilities

25

557,629

349,161

Liabilities to employees

24

148,928

59,614890,063

809,468

15,147,880

14,278,013

Total current liabilities
TOTAL EQUITY AND LIABILITIES

200

IV. Financial statements

201

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the years ended 31 December 2020 and 31 December 2019
all amounts expressed in PLN’000 unless indicated otherwise

Consolidated statement of changes in equity

Share Capital

Capital reserve

Exchangedifferences ontranslating foreign operations

830,015

7,421,901

378(18,854)—5,256

546,093271,904

9,056,693—

9,056,693

Profit/(loss) for the period

—

—

—

—

—

—

—

391,392

391,392

1,683

393,075

Other comprehensive income

—

—

190

(3,424)

—

—

—

—

(3,234)—(3,234)

Total comprehensive income for the period

—

—

190

(3,424)———

391,392

388,158

1,683

389,841

Transfer of profit/(loss) from previous years

—

—

—

—

—

—

271,904(271,904)———(395,820)(2,280,918)

—

—

—

—

(59,213)—(2,735,951)—(2,735,951)

Share base payment

—

—

—

—

—

4,321

—

—

4,321

—

4,321

Non-recourse loans

51

158

—

—

—

—

—

—

209

—

209

Issue of written put option over non-controlling interest

—

—

—

—

—

(43,210)——(43,210)—(43,210)(395,769)(2,280,760)

—

—

—

(38,889)

212,691(271,904)(2,774,631)—(2,774,631)

Business combination

—

—

—

—

—

—

—

—

—

11,73911,739Transactions with minority owners in their capacity

—

—

—

—

—

—

—

—

—

11,73911,739As at 31.12.2019434,246

5,141,141

568(22,278)—(33,633)

758,784

391,392

6,670,220

13,422

6,683,642

As at 01.01.2020

434,246

5,141,141

568(22,278)—(33,633)

758,784

391,392

6,670,220

13,422

6,683,642

Profit/(loss) for the period

—

—

—

—

—

—

—

419,160

419,160(600)

418,560

Other comprehensive income

—

—

(568)

(73,206)

(938)

—

—

—

(74,712)—(74,712)

Total comprehensive income for the period

—

—

(568)

(73,206)

(938)

—

—

419,160

344,448(600)

343,848

Transfer of profit/(loss) from previous years

—

—

—

—

—

—

391,392(391,392)———

34,297405,743———(440,040)

—

—

—

—

232

972,094

—

—

—

—

—

—

972,326—

972,326(459,997)

459,997

—

—

—

—

—

—

—

—

—

1,455

13,385

—

—

—

—

—

14,840—14,840Shares based compensation (see note 8)

—

—

—

—

—

52,191——

52,191—

52,191

Shares granted to employees (see note 8)

—

—

—

—

—

25,428——25,428—25,428As at 01.01.2019

Redemption of share capital and share premium

Transactions with owners in their capacity as owners

Change of the functional currency (see note 28)
Increase of capital (see note 28)
Conversion and decrease of the share capital (see note 28)
Non-recourse loans (see note 28)

Exercise of the awards by the employees

Cash flow hedge
reserve

Actuarial gain/(losses)

87,196

Other reserves

Retainedearnings

Net result

Equity allocatedto shareholdersof the Parent

Non-controllinginterests

Total(87,196)——

IPO costs in equity—(5,889)

—

—

—

—

—

—

(5,889)—(5,889)Written put option liability valuation (see note 26)

—

—

—

—

—

3,210

—

—

3,210

—

3,210

Purchase of non-controlling interest – exercise of the put option on NCI(see note 5)

—

—

—

—

—

40,000(27,178)—

12,822(12,822)—(424,013)

1,932,526———

33,633(75,826)(391,392)

1,074,928(12,822)

1,062,106

10,233

7,073,667—(95,484)(938)—

682,958

419,160

8,089,596—

8,089,596

Transactions with owners in their capacity as owners
As at 31.12.2020

202

203

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Consolidated statement of cash flows

Note

01.01–31.12.2020

01.01–31.12.2019(230,541)(143,026)

Cash flows from investing activities
Payments for property, plant & equipment and intangible assets

Note

Loans granted

15(18,771)(442)

Repayment of loans granted

15

42,934

3,242

—

317

(11,827)(62,978)(218,205)(202,887)

Note01.01–31.12.2020

01.01–31.12.2019

Proceeds from capital increase28

972,326—01.01–31.12.2020

01.01–31.12.2019

Profit before income tax

616,707513,049

Inflows from sale of non-financial assets

Amortisation and depreciation

463,789

439,303

Acquisition of subsidiary (net of cash acquired)

Net interest expense

508,351

375,503

Net cash inflow/(outflow) from investing activities

5

Revolving facility availability fee

10

3,311

3,195

Net (gain)/loss from exchange differences

29.2

4,075

(1,536)

Interest on lease liability

29.2

3,028

3,835

Net (gain)/loss on measurement of financial instrument

10(10,933)—

Non-cash employee benefits expense – share based payments

38

77,6194,321

Repayment of share premium

28—(2,735,951)

—

(263)

Borrowings received

29.2

—

1,959,516

Borrowings repaid

29.2(1,056,693)(215,803)

Interest paid

29.2

(275,853)(375,017)

Early repayment fee

10(26,000)—

Lease payments

29.2(29,129)(28,680)

Revolving facility availability fee payments(2,523)(3,767)

Interest rate hedging instrument settlements(38,926)(17,580)(40,000)—

Payments from other financial activities(7,815)(16,520)

Payments related to issuance of new shares(5,889)—(510,502)(1,433,802)01.01–31.12.2020

01.01–31.12.2019

Net increase/(decrease) in cash and cash equivalents

781,183(390,150)

Cash and cash equivalents at the beginning of the financial year

403,877

794,027

1,185,060

403,877

Net (gain)/loss on sale of non-current assets(Increase)/Decrease in trade and other receivables andprepayments

29.3(260,544)(81,608)(Increase)/Decrease in inventories

29.3(4,568)(11,789)(Increase)/Decrease in consumer loans

29.3(51,972)—

Increase/(Decrease) in trade and other liabilities

29.3

210,956

120,955

Increase/(Decrease) in liabilities to employees

29.3

71,18344,704

Cash provided by operating activities

1,631,002

1,409,669

Income tax paid

(121,112)(163,130)

Net cash inflow/(outflow) from operating activities

1,509,890

1,246,539

Cash flows from financing activities

Payments for acquisition of non-controlling interest

5

Net cash inflow/(outflow) from financing activities

Note

Cash and cash equivalents at the end of the financial year

204

IV. Financial statements

205

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

NOTES TOTHE CONSOLIDATEDFINANCIAL STATEMENTS
1.
General information

2.
Basis of preparation
The Consolidated Financial Statements of Allegro.eu
S.A. Group for the year ended 31 December 2020
were prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted
by the European Union, binding as at 31 December
2020.
These Consolidated Financial Statements were prepared on the historical cost basis except for certain
financial assets and liabilities (including derivative
instruments) measured at fair value.

Allegro.eu S.A. Group (‘Group’) consists of Allegro.eu
Société anonyme (‘Allegro.eu’ or ‘Parent’), previously
Adinan Super Topco S.à r.l., and its subsidiaries.
Allegro.eu and the other members of the Group
were established for an unspecified period.

•

online marketplace;•advertising;•

online price comparison services;

The Parent was established as a limited liability
company (société à résponsabilité limitée) in Luxembourg on 5 May 2017. The Parent was transformed
into a joint-stock company (société anonyme) on 27
August 2020. The name was changed from AdinanSuper Topco S.à r.l. to Allegro.eu on 27 August 2020.

•

retail sale via mail order houses or via theInternet;•

online tickets distribution;•

web portal operations;

The Group is registered in Luxembourg, and its
registered office is located at 1, rue Hildegard vonBingen, Luxembourg. The Parent’s shares have been
listed on the Warsaw Stock Exchange (‘WSE’) since
12 October 2020.

•

consumer lending to marketplace buyers;•

software and solutions for delivery logistics;•

data processing, hosting and related activities;

The Group operates in Poland through Allegro.pl
sp. z o.o., Ceneo.pl sp. z o.o., eBilet Polska sp. z o.o.,Allegro Pay Sp. z o.o. and OpenNet Sp. z o.o. The
Group’s core activities comprise:•other information technology and computer
service activities;•

computer facilities management activities;•

software-related activities;•

computer consultancy activities.

The Consolidated Financial Statements were prepared on the assumption that the Group would
continue as a going concern for at least 12 months
subsequent to the date of the authorization of these
Consolidated Financial Statements. In making thisgoing concern assumption Management took into
consideration the impact of the COVID-19 crisis on
the Group’s business, noting that operations havecontinued with minimal disruption since most staff
moved to home working mode on 12 March 2020
and that the Group’s sales increased in the context
of the imposition of COVID-19 related lock-down
measures by the Polish government.
The summary of the main accounting policies
applied in the preparation of these Consolidated
Financial Statements is presented in the note 3.
These accounting policies were applied by the Groupconsistently in all periods presented, unless indicated otherwise.

There were no changes in accounting policies in
the period covered by the Consolidated Financial
Statements of Allegro.eu S.A. ended 31 December
2020.
The Group has changed presentation of prepayments in the consolidated statement of financial
positions comparing to the previously published
Consolidated Financial Statements for the year
ended 31 December 2019. Prepayments were previously included in “Trade and other receivables”
and in these Consolidated Financial Statements arepresented in separate line item due to the fact thatthe item became more material. The comparatives
were appropriately amended to ensure presentationconsistent with current year.
The Group has changed presentation of net impairment losses on financial and contract assets in the
consolidated statement of comprehensive income
comparing to the previously published Consolidated
Financial Statements for the year ended 31 December 2019. Net impairment losses on financial andcontract assets were previously included in “Other
expenses net” and in these Consolidated Financial
Statements are presented in separate line item dueto the fact that the item became more material.
The comparatives were appropriately amended toensure presentation consistent with current year.

These Consolidated Financial Statements wereprepared for the year ended 31 December 2020
with comparative amounts for the year ended 31
December 2019.

206

IV. Financial statements

207

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise3.
Summary of significant accounting policies

The presentation and functional
currency
The presentation currency of the Consolidated
Financial Statements is the Polish zloty (‘PLN’).

3.1
Basis of preparation

The results and financial position of Group companies that have a functional currency different fromthe presentation currency are translated into thepresentation currency as follows:

Compliance with IFRS•

assets and liabilities for each balance sheet
presented are translated at the closing rate at
the date of that balance sheet,•income and expenses for each statement of
profit or loss and statement of comprehensive
income are translated at average exchange rates(unless this is not a reasonable approximationof the cumulative effect of the rates prevailingon the transaction dates, in which case income
and expenses are translated at the dates of thetransactions), and•all resulting exchange differences are recognisedin other comprehensive income.

The Consolidated Financial Statements of the Group
were prepared in accordance with the International
Financial Reporting Standards (IFRS) as adopted by
the European Union, binding as at 31 December
2020. These Consolidated Financial Statements wereprepared on the historical cost basis, except certain
financial assets and liabilities (including derivative
instruments) measured at fair value.

31.12.2020

31.12.2019

EUR/PLN

4.61484.2585

USD/PLN

3.7584

3.7977

GBP/PLN

5.13274.9971

CHF/PLN

4.2641

3.9213

CZK/PLN

0.17530.1676

Measurement of items denominatedin foreign currencies
Foreign currency transactions are translated into
the functional currency using the National Bankof Poland’s (‘NBP’) exchange rates prevailing at thedates of the transactions or on valuation dates (whenitems are re-measured). Foreign exchange gains andlosses arising from settlement of those transactions
and from translation at the exchange rate prevailingas at the reporting period end date are recognised
on a net basis in the profit or loss. Measurement as
at the balance sheet date, used the NBP exchange
rate prevailing as at the reporting period end date.

208

Average exchange rates are presented in the tablebelow:

31.12.2020

31.12.2019

EUR/PLN

4.47424.3018

USD/PLN

3.90453.8440

GBP/PLN

5.02404.9106

CHF/PLN

4.1772

3.8731CZK/PLN

0.16870.1676

IV. Financial statements

As at 31 December 2019 the Group included entities whose functional currency was Euro (‘EUR’),
therefore the financial statements of Allegro.eu(previously: Adinan Super Topco), Adinan Topco andAdinan Holdco required translating into the Group
presentation currency. The share capital and sharepremium of the Parent company were translated
from the functional currency to the presentation
currency using the historical exchange with theresulting forex exchange gains/loss being recognizedin other comprehensive income.
In 2020 the Parent changed the functional currency
from EUR to PLN. The decision was supported by
the resolution of the extraordinary shareholders
meeting concluded on 29 September 2020. The
Group operates mainly in Poland and Polish złoty is
the currency in which the Group usually generates
and spends cash. Furthermore, on 12 October 2020
the Group debuted on the Warsaw Stock Exchange
in Poland.
As at 31 December 2020 the functional currency
for all the Group’s entities and the presentation
currency of these Consolidated Financial Statements
is PLN.

209

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Consolidation
The Consolidated Financial Statements were prepared on the basis of the financial statements of
the Parent, Allegro.eu, and the financial statementsof entities controlled by the Parent, prepared as at
and for the period ended 31 December 2020.
On 21 December 2020 Adinan Topco S.à r.l., Adinan
Holdco S.à r.l., Adinan Bondco S.à r.l. and Adinan Seniorco S.à r.l. ceased to exist as a result of intra-groupmergers and liquidations, more information in thenote 6.
Except for share and per share amounts and unlessotherwise stated, these Consolidated Financial
Statements have been prepared in PLN thousands,
and all amounts are stated in PLN thousands. All
material balances and transactions between related entities, including material unrealised profits
resulting from such transactions, have been fully
eliminated.
Subsidiaries are consolidated under the acquisition
accounting method from the moment that the Group
has assumed control over them, and will cease to beconsolidated when the Group loses control. According to IFRS 10 “Consolidated Financial Statements”,
the Group controls an entity when it is exposed, or
has rights, to variable returns from its involvementwith the entity and has the ability to affect those
returns through its power over the entity.

The Group accounts for business combinations
under the acquisition method. The consideration
for the acquired subsidiary constitutes the fairvalue of the assets transferred, liabilities incurredin respect of former owners of the target company
and equity instruments issued by the Group. The
consideration includes the fair value of any asset or
liability resulting from a contingent consideration
arrangement. Identifiable assets, liabilities and contingent liabilities acquired as a result of a businesscombination are initially measured at fair value asat the acquisition date.
The Group recognises non-controlling interests
either at fair value or at the proportional share ofidentifiable net assets in the fair value; the methodof recognition is selected for each business combination individually.
The excess of the sum of the consideration, valueof all non-controlling interests in the acquired
entity, and fair value of shares previously held in
the acquired entity as at the acquisition date overthe fair value of identifiable net assets acquired isrecognised as goodwill. If the sum of the consideration, non-controlling interests recognised andinterest previously held is lower than the fair valueof net assets of the subsidiary acquired as a resultof a bargain purchase, the difference is recognised
directly in the profit or loss.
Transaction costs from acquisitions are recognizedin profit or loss when incurred.

210

IV. Financial statements

3.2.
Changes in accounting policies
3.2.1.
New and amended standards and interpretations adopted by the GroupIn these Consolidated Financial Statements amendments to the following standards were applied:
Amendments to the Conceptual Framework
for Financial Reporting – issued on 29 March2018 and effective for annual periods beginningon or after 1 January 2020. The revised Conceptual
Framework includes a new chapter on measurement; guidance on reporting financial performance;
improved definitions and guidance – in particular thedefinition of a liability; and clarifications in important
areas, such as the roles of stewardship, prudence
and measurement uncertainty in financial reporting.
The amendments to Conceptual Framework do nothave a significant impact on these Consolidated
Financial Statements.
Amendments to IFRS 3 “Business Combination” – issued on 22 October 2018 and effective foracquisitions from the beginning of annual reporting period that starts on or after 1 January 2020.
The amendments revise definition of a business.
A business must have inputs and a substantive
process that together significantly contribute to
the ability to create outputs. The new guidance
provides a framework to evaluate when an input
and a substantive process are present, including
for early stage companies that have not generated
outputs. An organised workforce should be present
as a condition for classification as a business if areno outputs. The definition of the term ‘outputs’ isnarrowed to focus on goods and services provided
to customers, generating investment income andother income, and it excludes returns in the form oflower costs and other economic benefits.

It is also no longer necessary to assess whether
market participants are capable of replacing missing
elements or integrating the acquired activities andassets. An entity can apply a ‘concentration test’.
The assets acquired would not represent a business
if substantially all of the fair value of gross assets
acquired is concentrated in a single asset (or a groupof similar assets).
The amendment to this standard had impact on the
conclusion regarding the acquisition of FinAi S.A.
(currently: Allegro Pay Sp. z o.o.) which occurred in2020. The Group concluded the purchase does notmeet the definition of the business. More information see note 5.
Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting
Policies”, Changes in Accounting Estimates andErrors” – issued on 31 October 2018 and effective
for annual periods beginning on or after 1 January
2020. The amendments clarify the definition of material and how it should be applied by including in
the definition guidance that until now has featured
elsewhere in IFRS. In addition, the explanations
accompanying the definition have been improved.
Finally, the amendments ensure that the definitionof material is consistent across all IFRS Standards.
Information is material if omitting, misstating or
obscuring it could reasonably be expected to influence the decisions that the primary users of general
purpose financial statements make on the basis of
those financial statements, which provide financial
information about a specific reporting entity.
The amendments to these standards do not havea significant impact on these Consolidated Financial
Statements.

211

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Amendments to IFRS 9 “Financial Instruments”,
IAS 39 “Financial Instruments: Recognition andMeasurement” and IFRS 7 “Financial Instruments: Disclosures” – issued on 26 September
2019 and effective for annual periods beginningon or after 1 January 2020. The amendments were
triggered by replacement of benchmark interest
rates such as LIBOR and other inter-bank offered
rates (‘IBORs’). The amendments provide temporary relief from applying specific hedge accounting
requirements to hedging relationships directly
affected by the IBOR reform. Cash flow hedge accounting under both IFRS 9 and IAS 39 requires the
future hedged cash flows to be ‘highly probable’.
Where these cash flows depend on an IBOR, therelief provided by the amendments requires anentity to assume that the interest rate on which
the hedged cash flows are based does not change
as a result of the reform. Both IAS 39 and IFRS 9
require a forward-looking prospective assessment
in order to apply hedge accounting. While cash
flows under IBOR and IBOR replacement rates are
currently expected to be broadly equivalent, which
minimises any ineffectiveness, this might no longer
be the case as the date of the reform gets closer.
Under the amendments, an entity may assume thatthe interest rate benchmark on which the cash flowsof the hedged item, hedging instrument or hedged
risk are based, is not altered by IBOR reform. IBOR
reform might also cause a hedge to fall outside
the 80–125% range required by retrospective test
under IAS 39. IAS 39 has therefore been amended
to provide an exception to the retrospective effectiveness test such that a hedge is not discontinued
during the period of IBOR-related uncertainty solely
because the retrospective effectiveness falls outside
this range.

However, the other requirements for hedge accounting, including the prospective assessment,
would still need to be met. In some hedges, thehedged item or hedged risk is a non-contractually specified IBOR risk component. In order forhedge accounting to be applied, both IFRS 9 and
IAS 39 require the designated risk component tobe separately identifiable and reliably measurable.
Under the amendments, the risk component only
needs to be separately identifiable at initial hedge
designation and not on an ongoing basis. In thecontext of a macro hedge, where an entity frequently
resets a hedging relationship, the relief applies fromwhen a hedged item was initially designated withinthat hedging relationship.
Any hedge ineffectiveness will continue to be recorded in profit or loss under both IAS 39 and IFRS 9. The
amendments set out triggers for when the reliefs
will end, which include the uncertainty arising frominterest rate benchmark reform no longer being
present. The amendments require entities to provide additional information to investors about their
hedging relationships that are directly affected bythese uncertainties, including the nominal amount ofhedging instruments to which the reliefs are applied,
any significant assumptions or judgements madein applying the reliefs, and qualitative disclosuresabout how the entity is impacted by IBOR reform
and is managing the transition process.
The Group has interest rate hedging instrumentsthat hedge 3,075,866 PLN of 5,500,000 PLN ofGroup’s borrowings by changing the floating rate
for a fixed rate. The Group did not take into accountthe uncertainty according to the IBOR reform intesting the hedge effectiveness.

Amendments to IFRS 16 “Leases” – issued on
28 May 2020 and effective for annual periods beginning on or after 1 June 2020. Earlier applicationis permitted, including in financial statements not
authorised for issue at 28 May 2020 and the Grouphas decided to early adopt this amendment. The
amendments provided lessees (but not lessors)with relief in the form of an optional exemption
from assessing whether a rent concession related to
COVID-19 is a lease modification. Lessees can electto account for rent concessions in the same way
as they would if they were not lease modifications.
In many cases, this will result in accounting for theconcession as a variable lease payment.
The practical expedient only applies to rent concessions occurring as a direct consequence of the
COVID-19 pandemic and only if all of the following
conditions are met: the change in lease payments
results in revised consideration for the lease thatis substantially the same as, or less than, the consideration for the lease immediately preceding thechange; any reduction in lease payments affects
only payments due on or before 30 June 2021; andthere is no substantive change to other terms andconditions of the lease. If a lessee chooses to apply
the practical expedient to a lease, it would apply
the practical expedient consistently to all lease
contracts with similar characteristics and in similar
circumstances. The amendment is to be applied
retrospectively in accordance with IAS 8, but lessees
are not required to restate prior period figures or
to provide the disclosure under paragraph 28(f)of IAS 8.
The amendments to this standard do not havea significant impact on these Consolidated Financial
Statements.

The Group does not have any other assets or liabilities affected by floating interest rates and therefore
the amendments have no impact on the Group.

212

IV. Financial statements

213

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

3.2.2.
Standards and interpretations published but not yet applicable, which early had notbeen early applied by the GroupIFRS 14 “Regulatory Deferral Accounts” – issued
on 30 January 2014 and effective for annual periods
beginning on or after 1 January 2016. IFRS 14 permits first-time adopters to continue to recogniseamounts related to rate regulation in accordancewith their previous GAAP requirements when they
adopt IFRS. However, to enhance comparability
with entities that already apply IFRS and do notrecognise such amounts, the standard requiresthat the effect of rate regulation must be presented
separately from other items. An entity that alreadypresents IFRS financial statements is not eligible toapply the standard.
The European Commission has decided not tolaunch the endorsement process of this interim
standard and to wait for the final standard. The
standard will not have any impact on the Group’s
Consolidated Financial Statements.
Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in
Associates and Joint Ventures” – issued on 11
September 2014 and effective for annual periods
beginning on or after a date to be determined by the
IASB. These amendments address an inconsistency
between the requirements in IFRS 10 and those in
IAS 28 in dealing with the sale or contribution ofassets between an investor and its associate or joint
venture. The main consequence of the amendments
is that a full gain or loss is recognised when a transaction involves a business. A partial gain or loss isrecognised when a transaction involves assets that
do not constitute a business, even if these assets
are held by a subsidiary.

The Group is in the process of assessing the impactof the amendments on its Consolidated Financial
Statements but so far the Group has not entered into
the type of the transactions covered by this amendment. The effective date is deferred indefinitely until
the research project on the equity method will beconcluded.
IFRS 17 "Insurance Contracts" – issued on 18 May
2017 and effective for annual periods beginning on orafter 1 January 2023. IFRS 17 replaces IFRS 4, which
has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors
to compare and contrast the financial performanceof otherwise similar insurance companies. IFRS 17 isa single principle-based standard to account for all
types of insurance contracts, including reinsurance
contracts that an insurer holds.
As at the date of preparing these Consolidated
Financial Statements, the new standard has not
yet been approved by the European Union.
The Group is in the process of assessing the impactof the amendments on its Consolidated Financial
Statements. IFRS 17 is effective for annual reporting
periods beginning on or after 1 January 2023.
Amendments to IAS 1 “Presentation of Financial Statements” – issued on 23 January 2020 andeffective for annual periods beginning on or after
1 January 2023. These narrow scope amendments
clarify that liabilities are classified as either current
or non-current, depending on the rights that exist
at the end of the reporting period.

As at the date of preparing these Consolidated
Financial Statements, the change has not yet been
approved by the European Union. The Group is in theprocess of assessing the impact of the amendmentson its Consolidated Financial Statements.
Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and
IFRS 3, and Annual Improvements to IFRSs
2018-2020 – amendments to IFRS 1, IFRS 9, IFRS
16 and IAS 41 (issued on 14 May 2020 and effective
for annual periods beginning on or after 1 January
2022. The amendments relate to ‘Proceeds before
intended use’ and ‘Onerous contracts’.
As at the date of preparing these Consolidated
Financial Statements, the change has not yet been
approved by the European Union.
The Group is currently assessing the impact of
the amendments on its Consolidated Financial
Statements.
Amendments to IFRS 17 “Insurance Contracts”
and an amendment to IFRS 4 “Insurance Contracts” (issued on 25 June 2020 and effective forannual periods beginning on or after 1 January 2023.
The amendments include a number of clarifications
intended to ease implementation of IFRS 17, simplify
some requirements of the standard and transition.
The amendments relate to eight areas of IFRS 17, andthey are not intended to change the fundamental
principles of the standard.

As at the date of preparing these Consolidated
Financial Statements, the change has not yet been
approved by the European Union.
The Group is currently assessing the impact of
the amendments on its Consolidated Financial
Statements.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16 – issued on 27 August 2020 and effective
for annual periods beginning on or after 1 January
2021. The Phase 2 amendments address issues
that arise from the implementation of the reforms,
including the replacement of one benchmark withan alternative one.
As at the date of preparing these Consolidated
Financial Statements, the change has not yet been
approved by the European Union.
The Group is currently assessing the impact of
the amendments on its Consolidated Financial
Statements.

As at the date of preparation of these Consolidated
Financial Statements, the approval of this amendment is deferred by the European Union.

214

IV. Financial statements

215

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

4.
Composition of the board of directors
At at 31 December 2019 the Board of Managers
comprised:•

Danielle Arendt-Michels•

Gilles Willy Duroy•

Darren Huston•

Gautier Laurent•

Severine Michel•

Cedric Pedoni

On 1 September 2020 the shareholders meeting of
the Parent appointed each of the following persons
as Board Members: Francois Nuyts, Jonathan Eastick,David Barker, Paweł Padusiński, Richard Sanders,
Carla Smits-Nusteling and Nancy Cruickshank, withimmediate effect.
As of 12 October 2020, the following persons resigned from the Group Board of Directors: Danielle
Arendt-Michels, Gautier Laurent, Severine Michel,
Cedric Pedoni and Gilles Willy Duroy.

216

The composition of the Board of Directors at thedate of these Consolidated Financial Statements,
was as follows:•

David Barker•

Nancy Cruickshank•

Jonathan Eastick (Group Chief Financial Officer)•

Darren Huston (Chairman of the Board)•

Francois Nuyts (Group Chief Executive Officer)•

Paweł Padusiński

•Richard Sanders•

Carla Smits-Nusteling

The composition of the Board of Directors remained
unchanged until the date of these Consolidated
Financial Statements.

IV. Financial statements

217

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

5.
Business combinations
The amounts in this note are provided in PLN and
not in thousand PLN.
In the year ended 31 December 2020 and in thecomparative period ended 31 December 2019,
the Group entered into business combinations as
described below:

Costs related to the purchase transaction in theamount of PLN 1,367 thousand, were recognizedin the consolidated statement of comprehensive
income as Transaction Costs for the year ended 31
December 2019. For the year ended 31 December
2020 the Group recognized PLN 430 thousand suchcosts.

Acquisition of eBilet Polska sp. z o.o.

Foundation of Allegro Finance Sp. z o.o.

On 19 April 2019 Allego.pl sp. z o.o. purchased
135,520 shares in eBilet Polska sp. z o.o. (‘eBilet’)composing 80% of the shares outstanding froman unrelated party – Bola Investments Limited fora cash consideration of PLN 95,894 thousand. On 25
September 2020 Allegro.pl purchased 33,880 sharesin eBilet composing the remaining 20% of shares forcash consideration of PLN 40,000 thousand andas at 31 December 2020, Allegro.pl owns 100% of
eBilet’s shares. Both transactions were financed
from the Group’s own funds and as at 31 December
2020 there were no outstanding balances. Pleaserefer to note 26 for further details.

On 16 September 2019 Allegro.pl and Trade Analytics(both Allegro.eu Group companies) founded a newentity – Allegro Finance Sp. z o.o. (“Allegro Finance”)
with its share capital of PLN 600 thousand divided
into 6,000 shares with the value of PLN 100 each.
At the beginning of 2020 all shares were sold toAllegro.pl.

eBilet is one of the largest Polish online ticket
distributors. Its activity includes sales of tickets
for cultural, sport and other entertainment events,
mostly through its online channel. The purchaseopens a new market for the Allegro.eu Group, previously not available on Allegro and Ceneo platforms.
The transaction was accounted for as a businesscombination applying the acquisition method. Basedon the Group’s purchase price allocation, Goodwill
on the acquisition of PLN 48,937 thousand, is attributable mostly to synergies from cooperation with
Allegro. All synergies are expected to occur in eBilet.

218

The core activity of the Company is financial intermediation offered at Allegro website in cooperation
with partners. This transaction does not have an
impact on these Consolidated Financial Statements.

Acquisition of Allegro Pay sp. z o. o.
(previously: FinAi S.A.).
On 27 January 2020 Allegro.pl Sp. z o.o. acquired
100% of shares in FinAi S.A. (currently: Allegro Pay Sp.
z o.o.). The price amounted to PLN 7,000 thousandfor 100% of the company’s shares and the cash
payment was divided into two tranches – PLN 2,000
thousand was settled in 2019 and the remaining
PLN 5,000 thousand in January 2020. Together withlegal entity, the Group acquired the following assets:
cash balance in the amount of PLN 798 thousand
intangible assets of PLN 6,481 thousand, trade andother receivables amounted to PLN 804 thousand,property plant and equipment amounted to PLN 23
thousand and deferred tax asset amounted to PLN
31 thousand as well as trade liabilities in the amountof PLN 740 thousand and liabilities to employees of
PLN 397 thousand.

IV. Financial statements

The company was a financial intermediary start-up
which ceased to trade in September 2019. Together
with Allegro Pay, Allegro.pl acquired existing software applicable to credit analysis of the Allegro
platform Buyers and performance of AML (AntiMoney Laundering), KYC (Know Your Client) checks
and a team of FinTech experts. Allegro.pl expects
such competencies and capabilities to be importantenablers to further development of financial services
penetration on the marketplace platform in the
future.
In order to conclude on the type of the transaction,
the Group preformed concentration test as permitted in IFRS 3 para B7A. The concentration test was
met and the set of acquired activities and assets wasdetermined not to be a business but the purchase of
assets. As Allegro.pl acquired means of production
as opposed to a functioning business, the transaction is treated as a purchase of assets and thepurchase consideration is allocated to net assets
acquired (i.e. financial assets/liabilities are recognized at their fair value and the residual amount isallocated pro-rata to acquired non-financial assets).
No goodwill or gain on a bargain purchase wererecognized. Asset acquisition is recorded at costwhich is allocated over the group of assets basedon relative fair value.
The acquired company was renamed as Allegro
Pay on 31 July 2020, to reflect the brand of theconsumer finance product launched by the company
in cooperation with the Allegro marketplace.

Acquisition of OpenNet Sp. z o.o.
On 27 October 2020 Allegro Logistyka sp. z o.o.
purchased 100% of shares in OpenNet sp. z o.o. fora cash consideration of PLN 12,286 thousand. The
payment was divided into two tranches – PLN 8,393
thousand was settled at the date of the transaction
and the remaining PLN 3,893 thousand is payable in
December 2022. The transaction was financed fromthe Group’s own funds. OpenNet is a leading provider of technology solutions for the logistics industry in
Poland and beyond, including a range of copyrights
for software for automated parcel machines, last
mile courier and pick-up points solutions, and for
fulfillment. OpenNet provides professional softwaredevelopment and maintenance services to a rangeof leading logistic and postal carriers. Together
with OpenNet, Allegro Logistyka acquired a teamof qualified developers. The acquisition opens newopportunities for the Group in terms of logistics
innovations. The transaction was accounted for as
a business combination applying the acquisition
method.
Based on the Group’s purchase price allocation,
Goodwill recognized on the acquisition of PLN 7,907
thousand, is attributable mostly to synergies fromcooperation with Allegro Logistyka. The synergies
are expected to occur mostly in Allegro.pl.
Costs related to the purchase transaction in theamount of PLN 123 thousand, were recognized in
the consolidated statement of profit or loss andother comprehensive income as transaction costs
for the period ended 31 December 2020.

219

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

The effect of accounting for the acquisitions ispresented below:

OpenNet27.10.2020

eBilet19.04.2019

Purchase consideration paid – cash

8,393

95,894

Deferred purchase consideration

3,894

—

—

11,739(4,380)(58,696)

7,907

48,937OpenNet27.10.2020

eBilet19.04.2019

157

5,234

2,015

22,497

Domains—

5,092

Software

1,517

18,687

Other intangibles

—

4,688

Property, plant and equipment—

672

Inventory—

37

Accounts receivable and other receivables

650

2,146

Cash acquired

991

32,916

Lease liabilities

—

(388)

(263)

(22,766)

Income tax provision

—

(11)

Other assets/(liabilities)

—

(823)

Provision for deferred tax(687)(9,285)

Fair value of net assets

4,380

58,696OpenNet27.10.2020

eBilet19.04.2019

Purchase consideration paid

8,393

95,894

Cash and cash equivalents acquired(991)(32,916)

Cash flow used in acquisition

7,402

62,978As at the acquisition dateNon-controlling interest – measured at proportional share in the net assets
Fair value of net assets
Goodwill

Net assets acquired
Trademarks
Customer Relationships

Accounts payable and other liabilities

220

IV. Financial statements

Goodwill is tested for impairment annually or more
frequently, if there is objective evidence of impairment(see note 30.1). Customer relationships, trademarks,
domains and software are amortized over their estimated useful economic life (see note 13).
The revenue and net profit of eBilet since the acquisition date included in the consolidated statementof comprehensive income for the 2019 reporting
period amounted to PLN 19,799 thousand, and
PLN 10,226 thousand respectively. The revenue andnet profit of the Group for the 2019 financial year
would have been PLN 2,598,394 thousand, and PLN
394,856 thousand, respectively if the acquisition ofeBilet had been at the beginning of the financial year.

The revenue and net profit of OpenNet since theacquisition date included in the consolidated
statement of comprehensive income for the 2020
financial year amounted to PLN 610 thousand and
PLN (266) thousand respectively. The revenue andnet profit of the Group for the 2020 financial year
would have been PLN 4,001,257 thousand and PLN
419,713 thousand, respectively if the acquisition
of OpenNet had been as of the beginning of thefinancial year.
eBilet and OpenNet have both been assigned tosegment “Other” as they are not material under
IFRS 8.

221

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

31.12.2020

6.
Group structure
As at 31 December 2020, the Allegro.eu Group comprised Allegro.eu, previously Adinan Super Topco(‘Parent’) as well as intermediate holding company
Adinan Midco with their registered office in Luxembourg and companies conducting operating activities
in the territory of Poland – Allegro.­pl, Ceneo.­pl, Trade
Analytics Instytut Badań ­Ecommerce, eBilet Polska,
Allegro Finance, Allegro Pay and OpenNet together
with their non-operating subsidiary company Allegro
Logistyka. Each of the Polish Operating Companies
and their subsidiaries have their registered offices
located in Poland. In addition, Allegro.pl owns theAllegro All For Planet Foundation, which is not consolidated due to its immateriality.
Key information regarding the members of theGroup, shares held by the Group as at 31 December
2020 and 31 December 2019 and the periods subject
to consolidation is presented below.

31.12.2019

Allegro.eu S.A. (previously Adinan Super Topco S.à r.l.)Luxembourg

Adinan Midco S.à r.l. [1]Luxembourg, 100%

Allegro.eu S.A. (previously Adinan Super Topco S.à r.l.)Luxembourg

Adinan Topco S.à r.l. [4]Luxembourg, 100%

Allegro.pl Sp. z o.o. [1]Poland, 100%

Allegro Logistyka Sp. z o.o. [1]Poland, 100%

Adinan Holdco S.à r.l. [4]Luxembourg, 100%

Adinan Bondco S.à r.l. [4]Luxembourg, 100%OpenNet Sp. z o.o. [2]Poland, 100%

Adinan Seniorco S.à r.l. [4]Luxembourg, 100%eBilet Polska Sp. z o.o. [1]Poland, 100%

Adinan Midco S.à r.l. [4]Luxembourg, 100%

Allegro Finance Sp. z o.o. [1]Poland, 100%

Trade Analytics Instytut Badań
Ecommerce Sp. z o.o. [1]Poland, 100%

Allegro.­pl Sp. z o.o. [4]Poland, 100%

Allegro Logistyka Sp. z o.o. [4]Poland, 100%

Ceneo.pl Sp. z o.o. [1]Poland, 100%

Allegro Finance Sp. z o.o. [5]Poland, 99,98%

Allegro Pay Sp. z o.o. [3]Poland, 100%eBilet Polska Sp. z o.o. [6]Poland, 80%[4] Period covered by consolidation 01.01.2019 – 31.12.2019[5] Period covered by consolidation 30.09.2019 – 31.12.2019[6] Period covered by consolidation 01.05.2019 – 31.12.2019

As a result of the merger and liquidations performed
within the Group on 21 December 2020, holding
companies – Adinan Topco, Adinan Holdco, Adinan
Bondco and Adinan Seniorco ceased to exist. Thistransaction had no impact on these Consolidated
Financial Statements as those were fully owned
subsidiaries consolidated by the Group and its
liquidation was only a simplification of the Groupstructure.

7.
Approval of theconsolidated
financial statements
The Consolidated Financial Statements for the year
ended 31 December 2020 were approved by the
Board of Directors for publication on 3 March 2021.

Trade Analytics Instytut Badań
Ecommerce Sp. z o.o. [4]Poland, 50%[1] Period covered by consolidation 01.01.2020 – 31.12.2020[2] Period covered by consolidation 27.10.2020 – 31.12.2020[3] Period covered by consolidation 27.01.2020 – 31.12.2020

Allegro Finance Sp. z o.o. [5]Poland, 0,02%

Ceneo.pl Sp. z o.o. [4]Poland, 100%

Trade Analytics Instytut Badań
Ecommerce Sp. z o.o. [4]Poland, 50%
222

IV. Financial statements

223

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

NOTES TO THE
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
8.
Segment information
8.1
Description of segments and principal activities

01.01–31.12.2020

TOTAL

Allegro

Ceneo

Other

Eliminations

3,997,811

3,756,433

235,422

5,956

—

—

12,67145,106

168(57,945)

Net revenue

3,997,811

3,769,104

280,528

6,124(57,945)

Operating expenses(2,410,979)(2,238,778)(145,977)(84,169)

57,945

EBITDA

1,586,832

1,530,326

134,551(78,045)—

Amortisation and Depreciation(463,789)

Net financial result(506,336)

TOTAL

Allegro

Ceneo

Other

Eliminations

2,592,306

2,387,049

185,458

19,799

—

—

4,213

30,3291,194(35,736)

Net revenue

2,592,306

2,391,262

215,787

20,993(35,736)

Operating expenses(1,266,916)(1,179,229)(106,273)(17,150)

35,736

EBITDA

1,325,390

1,212,033

109,514

3,843—

Amortisation and Depreciation(439,303)

Net financial result(373,038)

Profit before income tax

513,049

Tax expense(119,974)

Net profit

393,075

External revenue
Inter-segment revenue

Profit before income tax

616,707

Tax expense(198,147)

Net profit

418,56001.01–31.12.2019
External revenue
Inter-segment revenue

Allegro.eu Group has implemented an internal functional reporting system. For management purposes,
the Group is organised into business units based on
their products, and has two reportable operating
segments as follows:••

Allegro activity – segment which operates as the
B2C and C2C e-commerce platform Allegro.pl
providing marketplace services via internet in
Poland and Allegro Pay financial services, andCeneo activity – segment which is the pricecomparison platform in Poland allowing users
to compare consumer products from various
Polish e-stores.

Other segment consists mainly the results of eBilet,
consolidated from May 2019, and Opennet consolidated from October 2020, as well as costs of theholding companies.

224

The reportable operating segments are identified at
the Group level. The Parent, as a holding company isincluded in Other segment. Segment performanceis assessed on the basis of revenue, operating profit
before amortisation and depreciation (‘EBITDA’),as defined in the note 8.2. The accounting policies
adopted are uniform for all segments and consistent
with those applied for the Group. Inter-segment
transactions are eliminated upon consolidation.
Interest income and finance cost are not allocatedto segments, as this type of activity is driven by
the central treasury function, which manages the
cash position of the Group. Both operating segments have a dispersed customer base – no single
customer generates more than 10% of segment
revenue. The Group’s operations are conductedin one geographical area, on the territory of the
Republic of Poland.

IV. Financial statements

The Management Board does not analyse the operating segments in relation to their asset values andliabilities values. The Group’s operating segments
are presented consistently with the internal reporting submitted to the Parent Company’s Management
Board, which is the main body responsible for making strategic decisions. The operating decisions aretaken on the level of the operating entities.

225

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

8.2.
Adjusted EBITDA (non gaap measure)
EBITDA, which is a measure of the operating segments’ profit, is defined as the net profit increasedby the income tax charge, net financial results (i.e.
the finance income and finance costs) and thedepreciation/amortization.
In the opinion of the Management of the Group, Adjusted EBITDA is the most relevant measure of profitof the Group. Adjusted EBITDA excludes the effectsof significant items of income and expenditure that
may have an impact on the quality of earnings. The
Group defines adjusted EBITDA as EBITDA excluding monitoring costs, regulatory proceeding costs,
Group restructuring costs, donations to various
public benefit organizations, certain employee incentives and bonuses, as well as transaction costs
including mostly IPO costs, because these expenses
are mostly of non-recurring nature and are notdirectly related to core operations of the Group.
Adjusted EBITDA is verified and analyzed only at
the Group level.

EBITDA and adjusted EBITDA are not IFRS measuresand should not be considered as an alternative to
IFRS measures of profit/(loss) for the period, as anindicator of operating performance, as a measureof cash flow from operations under IFRS, or as anindicator of liquidity. EBITDA and adjusted EBITDA
are not a uniform or standardized measure andthe calculation of EBITDA and adjusted EBITDA,
accordingly, may vary significantly from company
to company.

[2] Represents legal costs mainly related to regulatory proceeding, legal fees and settlement costs. The regulatory
proceedings are described in the note number 33.2.
[3] Represents legal and financial due diligence expenses with respect to not concluded acquisitions of target companies
along with other legal expenses.
[4] Represents donations made by the Group to support several public organizations during the COVID-19 pandemic.
[5] Represents expenses incurred by the Group to buy employees’ sanitary protections and to pay employees’ bonuses
for the purchase of equipment necessary to enable them to work remotely during the COVID-19 pandemic.
[6] Represents one-off grant to employees of shares awarded at the Group’s IPO.

01.01–31.12.2020

01.01–31.12.2019

1,586,832

1,325,390

1,794

3,252

Regulatory proceeding costs, legal fees and settlement costs [2]

4,890

2,931

Group restructuring costs

7,172

881

Donations to various public benefit organizations [4]

6,892

—

Bonus for employees and funds spent on sanitary protection of employees [5]

3,276

—

Allegro Incentive Plan

25,428—

Management Investment Plan [7]52,191

4,320

Transaction costs [8]61,5691,367

Adjusted EBITDA

1,750,044

1,338,141

EBITDA
Monitoring costs [1]

226

[3]

[6]

[1] Represents expenses incurred in relation to performance of advisory services by the shareholders of the Group(further information is disclosed in the note number 37), including travel expenses and expenses for services
provided for projects outside the scope of supervisory responsibilities.

IV. Financial statements[7] Cost of share based compensation related to incentive elements of The Management Investment Plan (‘MIP’,‘Investment Opportunities’) in which management participated indirectly through investing in shares in the Adiman
SCSP Trust and directly via type C and D shares issued by Allegro.eu. The increase in share based compensation
expense recognized in 2020 is the result of new investments in the MIP being made with the assistance of
non-recourse loans and acceleration of the plan’s previously assumed exit date to the date of the Group’s IPO.
The Management Investment Plan ceased to exist at its full settlement at the Group’s IPO. For more information
please refer to note number 39.
[8] Represents costs of advisory and consultancy incurred during the IPO process in 2020 (PLN 61,139) and theacquisition of a 20% minority interest in eBilet (PLN 430). In 2019 the Group only incurred costs related to theoriginal acquisition of eBilet in April 2019 (PLN 1,367).

227

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

9.
Revenues from contracts with customers
9.1.
Accounting policies

Recognition of revenue

Success fees

Under IFRS 15, revenue is recognised when a customer obtains control of a good or service. Where
multiple goods or services are sold in a single arrangement, the consideration is allocated to each of
the performance obligations based on the relative
stand-alone prices. The consideration includes anestimate of the variable consideration if it is highly
probable that the amount will not result in a significant reversal of revenue should the estimateschange. The transaction price is adjusted for thetime value of money if a contract includes a significant deferred payment component (the Group did
not have such contracts in 2020 and 2019).

Based on its judgment, the Management is of theview that the contract between the Group and theseller should be seen as a contract under which theGroup promises to find purchasers for the seller’s
goods (i.e., the Group’s performance consists onlyof finding a purchaser for the products). As a result, the Group earns revenue from sellers on theplatform and recognises success fees when listed
goods get sold. Transaction revenue at the end ofeach reporting period is reduced by a provision forcommission refund for sellers and discounts andincentives. Policy enables sellers to claim refunds
for transactions that were terminated by the clientsduring 45 days from the initial transaction.

Marketplace revenue

Marketplace revenues are invoiced monthly and falldue after 14 days.

The Group earns two main type of fees: successfees and listing. The listing fee is payable up-front
and is non-refundable. The success fee is payable
when a listed good gets sold.
There is only one performance obligation in a contract with the seller being the selling service. There
does not appear to be any advertising benefit forthe seller that could be separated from the selling
service. It is because there is no indication that theseller can benefit from the advertising on its own
or with other resources that are readily available
as the restricted and monitored contact between
the seller and the buyer prevents any interaction
between them outside the Group website, which isdifferent from any typical advertising arrangement.

228

Price comparison revenue

Other revenue

Revenues are recognized when shoppers click on
a seller’s offer listed along with competing offers
for the same product. The shopper is directed tothe seller’s own website and the merchant pays
a click-through fee for this marketing lead.

Other revenues relate mainly to hosting services
that are recognized over time. Customers of hosting
services are companies owned or previously owned
by Naspers Group, the previous owner of the Group.

Revenues are invoiced monthly in arrears and ingeneral fall due after 14 days.

Customer incentives programs

Advertising revenue
Revenue from advertising services provided is recognised in the reporting period in which the service
is performed. If provision of a service comprises anunquantifiable number of activities performed overa specific time period, revenue is recognised at theend of each month based on the number of views
registered during the period priced at agreed rates.
Revenue from advertising services is recorded netof any estimated discounts, including volume-based
discounts.

The attractiveness of the marketplace to sellers (alsoreferred to as merchants), and therefore revenue
potential for the Group, depends crucially on thenumber of active buyers and their engagementwith the marketplace (e.g. site visits, transactions,and value of purchases made). To increase buyer
activity on the marketplace, the Group has introduced certain programs to incentivize buyers toshop on the marketplace. Allegro seeks to increase
numbers of buyers and their engagement metrics
by incurring costs, at its own risk, that attract traffic
and new buyers such as operating a free of charge
loyalty scheme.

Advertising revenues are invoiced monthly in arrears
and fall due after 14 days.
Listing fees
Based on its judgment, the Management is of theview that the contract between the Group and theseller should be seen as a contract under which
the Group promises to make the seller’s products
available for purchase (i.e., the Group’s performance
includes both listing the products and finding
a purchaser for them). As a result, the Group earns
revenue from sellers on the platform and recognises
listing fees straight line over the duration of thelisting period.

IV. Financial statements

Retail revenue
Revenue from retail sales is recognized when Allegro.pl sells goods purchased for resale by its own
proprietary store via marketplace on the Platform.
The revenue is recognised when control of the goods
has transferred to the customer, being at the point
the goods are delivered to the customer. Delivery
occurs when the goods have been shipped to thecustomer’s specific location. When the customer
initially purchases the goods online the transaction
price received by the Group is recognised as a contract liability until the goods have been delivered
to the customer.

229

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Smart!

Allecoins

Allegro partially covers expenditure for functionalities on the marketplace that buyers may otherwise
see as a barrier to making e-commerce transactions,such as the costs of delivery. To reduce the delivery cost barrier to purchase, the Smart! loyalty
program was introduced in 2018. For an annual
or monthly subscription, the user buys unlimited
free of charge package deliveries for the durationof the subscription, subject to a minimum ordervalue. Inflows from subscriptions are presented asdeferred income and included in comprehensive
income on the time-based model over the durationof the subscription agreement as the number ofpackages the subscriber may order using the Smart!
Free delivery service is unlimited. Allegro arranges
delivery for packages made by Smart! subscribers.
Allegro acts as an agent in case of free deliveries
therefore cost of free delivery is deducted fromsubscription fees paid by Smart! subscribers. Costsof delivery in excess of the subscription fee earned
are presented in “Net costs of delivery” in operating expenses in the statement of comprehensive
income. Although a portion of individual transactions relating to Smart! Program concluded on theGroup’s online marketplace may result in a loss
due to delivery provided to buyers costing morethan the transaction fees earned from sellers, theGroup concluded that these losses are acceptablefrom the business perspective to drive overall buyer
engagement and transaction volumes that generate
positive net revenues earned as a whole.

The Allecoins loyalty program, was implemented toencourage buyers to exhibit specific behaviors (e.g.
purchase via the mobile application, purchases indefined categories). Buyers accumulate coins forpurchases made which entitle them to discounts
on future purchases. A contractual liability for theaward points is recognised at the time of the sale.
The value of discounts earned and redeemed during
the period are classified as discounts and incentives.
Those earned on purchases from Merchants arepresented as adjustment to revenue while a coins
earned as a result of various buyers’ activities on
the Platform (for example downloading mobile app)are presented as Marketing expenses.

9.2.
Disaggregation of revenue from contracts withcustomers

01.01–31.12.2020

01.01–31.12.2019Marketplace revenue

3,230,983

2,099,744

Advertising revenue

337,834

207,071

Price comparison revenue

189,964

145,765

Retail revenue

216,626

115,211

Other revenue

22,40424,515

Net revenue

3,997,811

2,592,306

The element of the revenue generating activity
which is a negative amount being an excess of theCosts of Smart!’ deliveries over the subscription fee
earned is presented as an expense in “Net costs ofdelivery” in operating expenses in the statement ofcomprehensive income.

01.01–31.12.2020

Allegro

Ceneo

Other

Eliminations

Total

Marketplace revenue

3,226,006

—

5,389

(412)

3,230,983

Advertising revenue

292,187

48,856—(3,209)337,834—

226,792—(36,828)

189,964Retail revenue

216,626———

216,626

Other revenue

34,286

4,880

734(17,496)

22,404

Net revenue

3,769,105

280,528

6,123(57,945)3,997,811

Price comparison revenue

230

IV. Financial statements

The division of revenues into segments is presented
below:

231

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

01.01–31.12.2019

Allegro

Ceneo

Other

Eliminations

Total

Marketplace revenue

2,079,945—

19,799—2,099,744

Advertising revenue

165,688

45,499—(4,116)207,071—

166,832—(21,067)

145,765

Retail revenue

115,211———

115,211

Other revenue

30,418

3,456

1,194

(10,553)

24,515

Net revenue

2,391,262

215,787

20,993(35,736)2,592,306

Price comparison revenue

The Group derives revenue from the transfer ofgoods and services over time and at a point in timein the following major operating segments.

01.01–31.12.2020

Timing of revenue recognition:

Allegro

Ceneo

Other

Eliminations

Total

At a point in time (incl. success fee)

2,469,109

228,728

6,123(51,976)

2,651,984

Over time

1,299,996

51,800—(5,969)1,345,827

Net revenue

3,769,105

280,528

6,123(57,945)3,997,811

01.01–31.12.2019

Timing of revenue recognition:
At a point in time (incl. success fee)
Over time
Net revenue

Allegro

Ceneo

Other

Eliminations

Total

1,458,914

167,739

20,993(29,106)

1,618,540

932,348

48,048—(6,630)973,766

2,391,262

215,787

20,993(35,736)2,592,306

9.3.
Contract assets and liabilities
The Group has recognised the following revenue-related contractual liabilities:
Smart! program
deferred income [1]Listing andpromotional
deferred income [2]Otherdeferred income

As at 01.01.2020

28,579

8,538

2,146

Charge/(credited)

28,397(562)(2,146)As at 31.12.2020

56,976

7,976—

Smart! program
deferred income [1]Listing andpromotional
deferred income [2]Otherdeferred income

As at 01.01.2019

17,190

6,431

2,088

Charge/(credited)

11,3892,107

58

As at 31.12.2019

28,579

8,538

2,146

[1] Smart! program – the loyalty program for buyers
Smart! was introduced in 2018. Monthly or annual
subscription fees are paid at the beginning of thesubscription period, with the part relating to future
periods being recognised pro rata in deferred income
at the balance sheet date.
[2] Listing and promotional – the sellers can list theirproducts on the platforms in a form of an announcement. Fees are recorded as revenue during the listing
period.

Contract liabilities are presented in Trade and otherliabilities.
There were no contract assets in 2020 and 2019.

The Group’s operations are conducted in one geographical area, on the territory of the Republicof Poland. The Group has a dispersed customer
base – no single customer generates more than
10% of revenue.

232

IV. Financial statements

233

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Significant changes in contract assets
and liabilities

Transaction price allocated to unsatisfied
performance obligations

There were no significant changes in contract liabilities in the current period resulting from othertransaction than the recognition of the subscription
fees from buyers and recognition of revenue when
the services is provided.

All contracts are for periods of the expected original
duration of one year or less. As permitted under
IFRS15, the entity does not disclose the transaction price allocated to these unsatisfied or partiallyunsatisfied contracts is not disclosed and when it
expects to recognise as revenue such amounts.

Revenue recognised in relation tocontract liabilities
Revenue of PLN 28,579 was recognised in the period from 1 January to 31 December 2020 from the
Smart! program contract liability and PLN 8,538 in
the period from 1 January to 31 December 2020
from listing and promotional deferred income fromthat amounts that were included in the contract
liability balance at the beginning of the period 1
January 2020.

Assets recognized from costs to obtainand fulfil a contract
There were no assets to obtain or fulfil a contract
in 2020 and 2019.

Revenue of PLN 17,190 was recognised in the period from 1 January to 31 December 2019 from the
Smart! program contract liability and PLN 6,431 in
the period from 1 January to 31 December 2019from listing and promotional deferred income fromthat amounts that were included in the contract
liability balance at the beginning of the period 1
January 2019.

234

IV. Financial statements

235

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

9.4
Refund liabilities

9.5
Significant judgment

The value of refund liabilities at the balance sheet date was:
Allecoinscustomer loyalty
program contract
liability [1]Refunds contract
liability [2]Advertising
revenueretrospective
bonuses [3]As at 01.01.2020

21,620

5,398

4,141

Charge/(credited)

11,227

7,491

569

As at 31.12.2020

32,847

12,8894,710

Allecoinscustomer loyalty
program contract
liability [1]Refunds contract
liability [2]Advertising
revenueretrospective
bonuses [3]As at 01.01.2019

17,190

6,431

2,088

Charge/(credited)

4,430(1,033)2,053

As at 31.12.2019

21,620

5,398

4,141

[1] Allecoins customer loyalty program – the ­A llegro
coins program was introduced in January 2017. Increase in the contract liability balance is caused byhigher sale in 2020.
[2] Refunds – this position includes refund commission
and other refunds. Every buyer has the right to return a purchased product to the seller, in which casethe Group is obliged to refund the commission forcancelled transaction. At the end of each reporting
period the Group adjust the transaction revenue forthe expected returns and recognize a provision for
returns of success fee. Refund commission liability
represent the amount of consideration that the Group
expects to repay to sellers using the expected value
method with corresponding adjustment to revenue.
[3] Advertising retrospective bonuses – Allegro paysout retro-bonuses to media houses which promote
ads on Allegro’s web page. The estimated discounts
are recognized as refund liability. Bonuses are paid
after reaching agreed levels of annual spending by
the media house.

236

The refund liabilities recognised as at opening
balances of each reporting period were settled at
amounts which are materially consistent with theamounts recognized.
Refund liabilities are presented in trade and otherliabilities.

IV. Financial statements

In developing its revenue accounting policies toreflect the requirements of IFRS 15 on revenue accounting, the Management considered whether thejudgements used result in its accounting presentation best reflecting the economic substance of thesales transactions and incentive programs related
to the marketplace. The Management identified two
separate groups of contracts – contracts with sellers
and contracts with buyers (Smart! contracts) that
produce separate revenue streams and as a result
the buyer and the seller should be considered as
separate customers. The Smart! program leads toa distinct revenue stream where Allegro provides
a service – arranging (and paying) for deliveries inexchange for a subscription fee from the Smart!
subscriber. The transaction price under the Smart!
contract is allocated only to the performance obligation resulting from the Smart! contract, andthe transaction price under the contract with theseller is allocated only to the performance obligation resulting from the contract with the seller asthese are separate contracts which do not meetthe criteria for combination as they are enteredinto independently with different parties and atdifferent times. Therefore there is no reallocationof the transaction price between these contracts
irrespective of the fact that these contracts are economically linked. Most Smart! contracts with buyers
result in a loss (a negative margin) as delivery costs
will exceed the subscription fee on an individual
Smart! contract level.

Management believes that presentation of the negative margin from Smart! contracts as “Net costs ofdelivery” in operating expenses is most appropriate
as the business purpose of the Smart! program is tomake its marketplace more attractive compared tocompetition, to attract buyers and to boost sales on
its marketplace, so the excess costs of the Smart!
Program are in substance a promotional activity
and should be presented as an expense.

237

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

10.
Financial income and financial costs

11.
Income tax

01.01–31.12.2020

01.01–31.12.2019

Interest from deposits

2,761

8,046

Other financial income

3,271

1,604

Valuation of financial assets

10,933

—

—

1,333

16,965

10,983

Interest paid and payable for financial liabilities(297,099)(361,113)

Deferred borrowing cost write off(143,378)—Interest rate hedging instrument(41,874)(14,781)

Second Lien facility early repayment cost

(26,000)—

Interest on leases(3,028)(3,835)

Revolving facility availability fee(3,311)(3,195)Net exchange losses on foreign currency transactions(4,236)—

Other financial costs(4,375)(1,097)(523,301)(384,021)

Net exchange gains on foreign currency transactions
Financial income

Financial costs

Income tax for the year comprises current and deferred taxation. Income tax is recognized in profit
or loss except to the extent that it relates to items
recognized in other comprehensive income or directly in equity. In such cases, tax is also recognizedin other comprehensive income or directly in equity,
respectively.
The majority of the Group’s taxable income is generated in Poland and is subject to taxation according
to the Corporate Income Tax Act (“CIT”). The CIT rate
in Poland is 19%. In 2020 and 2019 Luxembourg
companies were subject to a 24.94% taxation rate.

11.1.
Income tax expense

Current income tax on profits(Increase)/Decrease in net deferred tax liability

NET FINANCIAL COSTS

On 28 September 2020, the Board of Director’s
decided to refinance the Group’s existing borrowing
facilities with a smaller new borrowing facility andthe proceeds of a primary share offering pursuant
to the Group’s IPO. This decision resulted in the
expected repayment date of existing borrowing
facilities being advanced to 14 October 2020 from2023 and 2024.

238(506,336)(373,038)

The management reviews from time to time theapproach adopted in preparing tax returns where
the applicable tax regulations are subject to interpretation. In justified cases, a provision is established
for the expected tax payable to tax authorities.

Income tax expense

01.01–31.12.2020

01.01–31.12.2019(260,984)(160,828)

62,83740,854(198,147)(119,974)

As a result the carrying value of the existing borrowing facilities at amortized cost increased by
PLN 143,378 mainly due to deferred borrowings
costs write off which was recognized as a non-cash
financial expense.
The repayment of the Second Lien Facility before
the termination due date triggered an additional
PLN 26,000 of early repayment charges.

IV. Financial statements

239

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

11.2.
Significant estimates
In the light of the General Anti-Abuse Rule (“GAAR”),
effective since 15 July 2016, aimed at preventing
the formation and use of artificial legal structures
created to avoid paying taxes in Poland, the Group
conducted an overall analysis of its tax situation inorder to identify and evaluate transactions and operations that could be subject to GAAR, considering
the effect on deferred tax, the tax value of assets
and tax risk provisions.

Tax authorities may inspect accounting books andtax settlements within five years of the end of theyear in which tax returns are filed and they may levy
additional tax, including fines and interest, on theGroup. In the opinion of the Group, there are no
circumstances indicating that significant liabilities
may arise in this respect.

11.4.
Amounts recognised
directly in othercomprehensive income
The deferred tax relating to other comprehensive
income recognized directly in other comprehensive
income amounted to PLN (6,953) in 2020 and to
PLN (801) in 2019.

11.5.
Tax losses

In the opinion of the Management, the analysis
confirmed that current and deferred tax amounts
are properly stated. Nevertheless, the Group is of
the opinion that an inherent feature of GAAR isuncertainty about the Group’s interpretation of tax
law regulations, which can affect the ability to realize
deferred income tax assets in future periods andresult in the payment of additional unaccrued tax
for prior periods.

11.6.
Other
No deferred tax liability is recognised on temporary
differences of PLN 1,357,712 (2019: PLN 1,156,035)
relating to the unremitted earnings of subsidiaries,
as unremitted earnings are not taxable when paid.
On 16 December 2020, the Group received formal
notifications of tax audits against two of the Group’s
entities initiated by the Head of Małopolski Customs
and Tax Office in Cracow of the scope of compliancewith the provisions of the Act of February 15, 1992
on corporate income tax with respect to taxationof income declared in the period from 28 July 2016
to 31 December 2017 and for 2018. The expected
duration of the audits is 3 months.

The unrecognized deferred tax asset on tax lossesof PLN 60,149 (expiring in 2024) were incurred by
Adinan Seniorco in 2019. The subsidiary was not
likely to generate taxable income in the foreseen
future.
In 2020 unrecognized deferred tax asset on tax
losses of PLN 97,200 (expiring in 2025) were incurredby Allegro.eu. Those losses are not likely to be utilized as the Parent will not generate future taxable
income due to the tax exempt nature of income
from dividends from its subsidiaries.

11.3.
Reconciliation of income tax expense to tax paid andpayable01.01–31.12.2020

01.01–31.12.2019

Profit from continuing operations before income tax expense

616,707513,049

Tax (payable)/recoverable at the Polish tax rate of 19%(117,174)(97,479)

Non-deductible expenses(20,976)(10,536)

Unrecognized deferred asset on tax losses(24,242)(15,045)

The effect of LuxCos liquidations(52,234)—

16,4793,086(198,147)(119,974)

Tax effect of amounts which are not deductible in calculating taxable income:The effect of foreign tax rates and regulations
Income tax expense

The line “The effect of LuxCos liquidation” represents
tax impact of liquidation of several entities in Lux
which is consider non-deductible.

240

The line “The effect of foreign tax rates and regulations” is the effect of different tax rates used in
Luxembourg and Poland.

IV. Financial statements

241

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

12.
Earnings per share
The amounts in this note are provided in PLN and
not in thousand PLN.
The Group issued various classes of both ordinary
and preference shares. Subscriber Ordinary Sharesgave a right to return at the level of 11% of thenominal value of the Subscriber Ordinary Sharesissued by the Company which amount shall be paid
once only. Distributions on A1, A2, B and C seriesof Ordinary Shares could only be made once thePreference Shares and the cumulative preference
dividends had been settled in full. B and C series
shares were granted to the Group’s Key Management (Board of Directors and Senior Key Managers)
and selected other managers with a determinedvesting period. The holders of the D1, D2, D3, andD4 Preference Shares were entitled to an annual
cumulative dividend equal to an overall interest
rate of 12.0% of the preference share amount being
nominal value and share premium of preference
shares, respectively.
On 29 September 2020 an extraordinary shareholders meeting of the Parent resolved to createa single new class of shares (‘New Ordinary Shares’)and to convert all the existing shares into the New
Ordinary Shares.

The holders of Preference Shares were entitled
to receive a preferential cumulative dividend andtherefore the net profit attributable to the ownersof the Group was reduced by the dividend interest
due to Preference Shares. The accrued value ofthe preference shares was fully settled with New
Ordinary Shares as a result of the share conversion,
described in detail in note 28, made in connection with the completion of the Group’s IPO. As
a result of this conversion, preference shares were
replaced with New Ordinary Shares and preference
cumulative dividend interest ceased to accrue. As
at 31 December 2020 the Group had no preference
shares.

The change in weighted average number of sharesfor the period ended 31 December 2019 in relation
to the weighted average number of shares disclosed
in the Consolidated Financial Statements for theyears ended 31 December 2019, 31 December 2018and 31 December 2017 was caused by the conversion performed on 29 September 2020.
The PSU program described in details in notenumber 39 have a potential dilutive effect on the
EPS calculation, however was not concluded to bedilutive in 2020.

Basic earnings per share are calculated by dividing
the net profit for the period attributable to ordinary
equity holders of the Parent Company decreased
by preferential cumulative dividend interest, by
the weighted average number of ordinary shares.
Ordinary shares before the conversion corresponded to A1 and A2 shares, and to the New Ordinary
Shares after the conversion. B and C shares were
granted to the Group’s Key Management and selected other managers, with a determined vesting
period and were excluded from the earnings per
share calculation.
B and C series shares were assessed for any potential dilutive effect on the EPS calculation. However,the Group concluded that they were not dilutive.
31.12.2020

31.12.2019

419,160,122

391,391,852

Preference dividend interest(754,495,305)(993,728,453)

Loss for ordinary shareholders(335,335,183)(602,336,601)

Average number of ordinary shares

787,946,396

711,253,184

Loss per ordinary share (basic)(0.43)(0.85)

Loss per ordinary share (diluted)(0.43)(0.85)Net profit attributable to equity holders of the Parent Company

242

IV. Financial statements

243

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

NOTES TO THE
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION

13.
Intangible assets
Goodwillmeasured at historical cost (or initial fair value) lessamortization and impairment losses. Amortization is
calculated on a straight line basis in order to spreadthe license cost over the estimated useful life.

Goodwill arises on the acquisition of business undertakings. Goodwill is not amortized but tested for
impairment annually or more frequently, if there
is objective evidence of impairment. For the purposes of impairment testing, goodwill is allocatedto cash-generating units which are expected to
profit from the synergies of business combination.
Impairment is recognized when the carrying amountof an asset or cash-generating unit is higher than
its recoverable amount. Recoverable amount is
the higher of fair value less costs to sell and thevalue in use.

Trademarks arising from business combinations
are initially measured at fair value using the Royalty Relief Method. Trademarks are measured athistorical cost (or initial fair value) less amortizationand impairment losses. Brands are amortized ona straight line basis for their estimated useful lifeof 15 years.

Licenses, software and copyrights

Customer relationships

Separately purchased licenses are carried at historical cost. Licenses acquired as a result of thebusiness combination are recognized at fair value
at acquisition. Licenses have limited useful life, i.e.
2 to 5 years. The domains “allegro.pl” and “ceneo.­pl”
acquired on 18 January 2017 are amortized over theirestimated useful life of 15 years. The Allegro andCeneo Platform software acquired on 18 January
2017 is amortized over its estimated useful economic
life for 10 years. The eBilet software acquired in April
2019 and Opennet software acquired in October
2020 are amortized over its estimated useful economic life for 15 years. These intangible assets are

Customer relationships arising from business combinations are measured initially at fair value with
the Multi-Period Excess Earnings method (“MPEE”)
and subsequently at cost less amortization. Relationships acquired in the transaction of 18 January
2017 are amortized on a straight line basis for theirestimated useful life of 20 years.

244

Trademarks

Relationships with event organizers acquired in theacquisition of eBilet Polska Sp. z o.o. and Opennet
Sp. z o.o. are amortized on a straight line basis fortheir estimated useful life of 15 years.

IV. Financial statements

Research and development costs

Impairment of non-financial assets

Although the Group does not have any department
dedicated to research and development, such activities are performed throughout the organization.
The Group develops its platform and introduces
new projects in order to satisfy the needs of its
Buyers and Sellers. Development expenditurethat meets the capitalization criteria is recognized
as intangible assets. Research and development
expenditure that does not meet the capitalization
criteria is recognised as an expense as incurred instaff costs. In the reported periods the Development
costs previously recognised as an expense are notrecognised as an asset in a subsequent period. The
Group is not able to estimate the value of researchand development expenditures recognised throughprofit or loss because tracking of costs starts after
formal acceptance of project.

Assets with an undefined useful life and goodwill
are not subject to amortization but tested annuallyfor impairment. Amortized assets are tested for
impairment wherever there is any evidence that
their carrying amount may not be recoverable.
Impairment charges are made at the excess of thecarrying amount of a given asset over its recoverable
amount. Recoverable amount is the higher of fairvalue less costs of effecting sale and value in use.
For the purposes of impairment assessment, assets
are grouped at the lowest level for which there are
separately identifiable cash flows (cash generating
units).
Non-financial assets, other than goodwill, for which
impairment charges were identified, are reviewed forindication of a possible reversal of the impairment
charge at each reporting period end date.

Development work is the practical application of research findings or other knowledge to plan or design
the production of new or substantially improved
materials, devices, products, technological processes, systems or services. The Group’s development
costs relate to production of software containing
new or significantly improved functionalities by thetechnology department and incurred before thesoftware is launched commercially or the technology
is applied on a serial basis.
The value of development work is measured basedon expenditures incurred, in particular staff costs
and related charges for the employees involved ina project, costs of contractors, costs of third party
services and other costs of the project.
The completion of each project is confirmed withan acceptance report, is capitalized in the Group’s
intangible assets and amortized on a straight line
basis for 4-7 years. Unsuccessful developments are
expensed on a one-off basis at the time a decision
is made to terminate the project.
Software under development is tested annually for
impairment. As at the end of 2020 as well as theend of 2019 there was no impairment.

245

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the years ended 31 December 2020 and 31 December 2019
all amounts expressed in PLN’000 unless indicated otherwise

Goodwill

Customer relationships

Trademarks and otherrightsComputer software andlicences

Software development
costs

Intangible assets underdevelopments

Other

Total

8,639,249

2,912,512

1,513,562

1,041,990

255,482

108,985

34,19014,505,970—(568,067)(388,096)(411,181)(69,639)—(22,714)(1,459,697)

8,639,249

2,344,445

1,125,466

630,809

185,843

108,985

11,476(13,046,273)

8,631,342

2,488,330

1,226,702

723,169

99,244

83,175

6,502

13,258,465

—

—

—

15,056—

149,299

12,074

176,429

7,907

2,015

157

1,517

—

—

—

11,596

Transfer from development

—

—

—

607

124,209(123,489)(1,327)—

Amortisation charge—(145,900)(101,393)(109,540)(37,610)—(5,774)(400,217)

8,639,249

2,344,445

1,125,466

630,809

185,843

108,985

11,476

13,046,273

8,582,405

2,888,000

1,503,079

992,606

79,862

40,21417,508

14,103,674—(276,767)(185,540)(194,761)(6,748)—(12,736)(676,552)

8,582,405

2,611,233

1,317,539

797,845

73,114

40,214

4,772

13,427,122

8,582,405

2,611,233

1,317,539

797,845

73,114

40,214

4,772

13,427,122

—

—

—

8,987

—

94,372

6,424

109,783

48,93722,497

10,32623,374———105,134

Disposals

—

—

—

(360)

—

—

(286)

(646)

Transfer from development

—

—

—

203

51,411(51,411)(203)—

Amortisation charge—(145,400)(101,163)(107,240)(25,281)—(4,491)(383,576)

Amortisation decrease

—

—

—

360

—

—

286

646

8,631,342

2,488,330

1,226,702

723,169

99,244

83,175

6,502

13,258,464

8,631,342

2,910,497

1,513,405

1,024,810

131,273

83,17523,443

14,317,945—(422,167)(286,703)(301,641)(32,029)—(16,941)(1,059,481)

8,631,342

2,488,330

1,226,702

723,169

99,244

83,175

6,502

13,258,464

As at 31.12.2020
Cost
Accumulated amortisation and impairment
Net book amountYear ended 31.12.2020
Opening net book amount
Additions
Additions due to business combinations

Closing net book amountAs at 01.01.2019
Cost
Accumulated amortisation and impairment
Net book amountYear ended 31.12.2019
Opening net book amount
Additions
Additions due to business combinations

Closing net book amountYear ended 31.12.2019
Cost
Accumulated amortisation and impairment
Net book amount

The Group did not capitalize any interest expense or exchange rate differences during the periods presented.

246

247

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

14.
Property, plant and equipment
Property, plant and equipment are carried at historical cost less depreciation and impairment losses.
The historical cost includes expenses directly associated with the acquisition of assets. Depreciationof property, plant and equipment is calculated ona straight line basis in order to spread initial valueless expected residual value over the period of
useful life, which for individual classes of property,
plant and equipment are as follows:•

Buildings and structures

•

Systems and network hardware•Motor vehicles

•

Other

The residual value and useful life periods of property,
plant and equipment are reviewed and adjusted
if necessary at the end of each reporting period.
Gains or losses arising from disposal of property,
plant and equipment are determined by comparing
the proceeds and the carrying amounts and arerecognised in other operating income or expenses.
In the current year there were no significant changes.

As at 31.12.2019
Cost

157,798

96,199596

331

254,924

Accumulated depreciation(51,382)(39,274)(181)—(90,837)

Net book amount

106,416

56,925415

331

164,087

Opening net book amount

106,416

56,925415

331

164,087

Additions

12,66733,78777

388

46,919

5–7 years

Additions due to businesscombinations

372

299

—

—

671

5 years

Transfer from assets underconstruction

—

331

—

(331)

—

Disposals – gross book value(3,978)(3,669)——(7,647)

Modification of lease contract(8,188)———(8,188)Depreciation charge(26,014)(29,571)(143)—(55,728)

Depreciation of disposals

3,978

3,617

—

—

7,595

Closing net book amount85,25361,719349

388

147,709

Cost or fair value

158,671

126,947673

388

286,679

10 years

Right-of-use assets are amortized over the lease
contract. The separate presentation of right-of-use
assets is in the note 22.

4–10 years

Other fixed
assetsAssetsunderconstruction

Total

172,569

788

5,414

346,488(101,486)(93,675)(507)—(195,668)

66,231

78,894281

5,414

150,820

Year ended 31.12.2020

Buildings

Computers
and officeequipment

Other fixed
assetsAssetsunderconstruction

Total

Opening net book amount85,25361,719349

388

147,709

Accumulated depreciation(73,418)(65,228)(324)—(138,970)

Additions

9,101

52,690115

5,101

67,007

Net book amount85,25361,719349

388

147,709

Disposals – gross book value(137)(7,162)——(7,299)Transfer from assets underconstruction

—

75

—

(75)

—

Impairment loss

82

20

—

—

102

(27,927)(35,464)(183)—(63,574)

41

6,834

—

—

6,875

Reclassification – gross amount

(370)

370

—

—

—

Reclassification – depreciation

188

(188)

—

—

—

66,231

78,894281

5,414

150,820

As at 31.12.2020
Cost
Accumulated depreciation
Net book amount

Depreciation charge
Depreciation of disposals

Closing net book amount248

Buildings

Computers
and officeequipment

167,717

Year ended 31.12.2019

As at 31.12.2019

IV. Financial statements

249

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

15.
Loans granted

16.
Inventory

at the balance sheet date loans granted comprised:the value of Group inventory was as follows:

31.12.2020

31.12.2019

31.12.2020

31.12.2019

Loans granted – capital

—

8,266

Goods

31,14624,860Loans granted – interest—

94

Allowance for slow-moving goods(6,527)(4,809)Other loans granted

—

964

Total

24,61920,051

Total loans granted

—

9,324

Loans granted are measured at amortised cost.
Loans granted to key managers and selected othermanagers amounted to:

NominalInterests

31.12.2020

31.12.2019

Interest
rate

08.09.2017

—

15

4.00%

—

—

29.09.2017

—

6,750

4.00%

—

63

21.03.2018

—

1,421

4.00%

—

31

08.11.2019

—

80

4.00%

—

—

TOTAL

—

8,266

—

94

31.12.2020

31.12.2019

16.1.
Assigning costs toinventories

16.2.
Amounts recognised in
profit or loss

Goods and materials are stated at the lower of costand net realisable value. Inventories are determinedusing the first in, first out (FIFO) method. Cost ofpurchased inventory is determined after deducting
rebates and discounts. Net realisable value is theestimated selling price in the ordinary course ofbusiness less the estimated costs necessary to
make the sale.

Write-downs of inventories to net realisable value
amounted to PLN 6,527 (PLN 4,809 in previous
period). Write-downs are charged to costs of goods
sold in the statement of comprehensive income.

For more information regarding loans granted to
the key management and selected other managers,
please refer to note 39.
At 31 December 2020 all loans granted had been
repaid.

250

IV. Financial statements

251

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

17.
Trade and other receivables

17.4.
Impairment and risk
exposure

The value of the Group’s trade and other receivables was as follows:
31.12.2020

31.12.2019

Trade receivables, gross

658,197424,460

Impairment of trade receivables(60,114)(40,486)

Trade receivables, net

598,083

383,974

Other receivables

42,24912,827

VAT receivables

6,077

—

646,409396,801

Total

The Group’s receivables comprise amounts due fromcompanies and individuals and their concentrationlevel is low. The Group does not have significant
trade receivables in foreign currencies.

17.1.
Classification as tradereceivables
Trade receivables are amounts due from customers
for goods sold or services performed in the ordinary
course of the Group’s business. They are generally
due for settlement within 14 days and therefore are
all classified as current assets. Trade receivables arerecognised initially at the amount of considerationthat is unconditional. The Group holds the tradereceivables with the objective to collect the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective
interest rate method. Details about the Group’s
impairment policies and the calculation of the loss
allowance are provided in note 31.2 Credit risk.

252

17.2.
Classification as otherreceivables
These amounts generally arise from transactions
outside the usual operating activities of the Group(relate mainly to receivables due from payment
operators). Interest may be charged at commercial
rates where terms of repayment exceed six months.

17.3.
Fair value of trade andother receivables

Information about impairment and the exposure
to credit risk and interest rate risk is disclosed innote 31. Receivables outstanding as at the balance
sheet date were subject to impairment provisions, inaccordance with the Group’s accounting policy. The
receivables impairment allowance was recognizedas part of the bad debt provision expense in thestatement of comprehensive income. In comparison
with to the previous year, the impairment provision
increased by PLN 19,627 for the year ended 31 December 2020 and by PLN 40,486 for the year ended
31 December 2019.

18.
Prepayments
the value of the Group’s prepayments was as follows:

31.12.2020

31.12.2019

Prepayments

36,496

26,911

Total

36,496

26,911

Prepayments are made when the entity incurs costs
before the period to which they relate. Prepayments
are determined at the amount of costs attributableto subsequent reporting periods.

Due to the short-term nature of current receivables,
their fair value is considered to be the same as theircarrying amount.

IV. Financial statements

253

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

19.
Consumer loans

As at the end of 2020 and 2019 the prepayments
mainly consisted of:

31.12.2020

31.12.2019

Licenses

12,4606,816

Insurances

11,539475

Technical support

5,903

9,210

Delivery

4,097

4,766

Other

2,497

5,644

Total

36,496

26,911The significant increase in prepaid insurances wascaused by the new Public Offering of Securities
Insurance (‘POSI’) and an extended Directors andOfficers (‘D&O’) insurance policy.

During the first half of 2020 the Group developed its
own proprietary consumer finance lending solutions
for buyers to use when making purchases on theGroup's e-commerce platform. The FinTech experts,
developer teams and software acquired with theacquisition of the FinAi (currently: Allegro Pay) in
February 2020, together with the Group's existing
technology resources, have developed integrated
solutions that are expected to provide an improved
user experience. Using the sub-brand Allegro Pay,
the new proprietary lending solutions moved into
user testing during the third quarter of 2020 andthis continued during the fourth quarter of 2020.
Consumer credit activities are subject to certain
statutory requirements in Poland. Loan companies
which are not banks or credit institutions are notrequired to be authorized in order to grant consumer
credits.

However, it is a prerequisite for such loan companies
and for loan intermediates to obtain an entry in
the register of loan institutions or, respectively, theregister of loan intermediaries maintained by thePolish Financial Supervision Authority (‘KNF’).
Consumer loans represent loans granted to polishbuyers on the Allegro.pl platform. Loans are granted
for 30 days without interest and instalment loans
for between 5 and 20 months with an interest rate
7.20%. Furthermore, Smart! users may take 3-monthinstalment loan, with zero interest.
All loans are granted on the territory of Poland in
Polish zloty (PLN).
The value of the Consumer loans granted as at 31
December 2020 by maturity were as follows:

31.12.2020

31.12.2019

Consumer loans – long term

4,728

—

Consumer loans – short term

47,244—

Total

51,972—31.12.2020

31.12.2019

30 days

8,956—

3 months

17,278—5 months

4,326—

10 months

9,535

—

20 months

11,877—

Total

51,972—The value of Consumer loans by term at the dateof granting as at 31 December 2020 was as follows:

254

IV. Financial statements

255

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

19.1.
Gross carrying amount and loss allowance

19.2.
19.3.
Classification as consumer Impairment and risk
loans
exposure

The Gross carrying amount is the amortised costof a Consumer loans before adjusting for expectedcredit loss allowance. The provision for the loss
allowance relates to the expected credit losses
under IFRS 9.

The loans are initially recognized at fair value.

The table below shows the gross carrying amount(equal to maximum exposure to credit risk) and
expected credit losses in each stage at 31 December
2020.

•

Loans are categorised into three stages based on theassociated risk, where stage 3 reflects the highest
risk. A description of the stages is included in note 27.

As at 01.01.2020

Stage 1

Stage 2

Stage 3

TOTAL

Consumer loans, gross

—

—

—

—

Expected credit losses

—

—

—

—

Consumer loans as at 01.01.2020

—

—

—

—

Stage 1

Stage 2

Stage 3

TOTAL

—

—

—

—

76,017——76,017

Transfer to stage 1

2

(2)

—

—

Transfer to stage 2

(33)

33

—

—

Transfer to stage 3

—

(1)

1

—

Consumer loans derecognized (repaid)(22,913)(2)—(22,915)

Consumer loans, gross

53,07328

153,102————(1,520)——(1,520)

394

(3)

(1)

390

Expected credit losses(1,126)(3)(1)(1,130)Consumer loans as at 31.12.2020

51,94725—

51,972As at 31.12.2020

Stage 1

Stage 2

Stage 3

TOTAL

Consumer loans, gross

53,07328

153,102

Expected credit losses(1,126)(3)(1)(1,130)Consumer loans as at 31.12.2020

51,94725—

51,972As at 31.12.2020
Opening balance
New consumer loans originatedOpening balance
New consumer loans originatedChanges due to changes in credit risk

256

The Group classifies financial assets into the following categories:

IV. Financial statements

measured at amortized cost for “held tocollect” cash flows model, in which financial
assets originated or acquired are held to maturity in order to collect contractual cash flows where
those cash flows represent solely payments ofprincipal and interest (“SPPI”);•

measured at fair value through other comprehensive income for “held to collect andsell” cash flows model, in which financial assets originated or acquired are held to maturity
in order to collect contractual cash flows, where
those cash flows represent solely payments
of principal and interest (“SPPI”), but they may
also be sold;•measured at fair value through profit or loss
for other than the “held to collect” or the “heldto collect and sell” cash flows model.

Consumer loans outstanding as at the balance
sheet date were subject to impairment provisions.
The impairment policy is described in note 31. The
expected credit loss allowance was recognized aspart of the Impairment losses in the statement ofcomprehensive income.
All loans are denominated in Polish zloty, there is
no exposure to foreign currency risk. There is also
no exposure to price risk as the loans are expected
to be held to maturity.
More information about impairment and the exposure to credit risk and interest rate risk is disclosed
in note 31.

Consumer loans are stated at amortised cost, netof allowances and calculated in accordance with
the Group’s accounting policies. Allowances are
made based upon several factors including, but
not limited to, historical experience and the current
aging of loans.
The Group closely monitors credit quality for all
consumer loans on a recurring basis. The Group
implemented an internally developed risk model tohelp predict the Buyer’s repayment ability.

257

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

20.
Cash and cash equivalents

21.
Borrowings

At the balance sheet date Cash and cash equivalents comprised:

At the balance sheet date borrowings comprised:31.12.2020

31.12.2019

Cash at bank643,238

315,655

Bank deposits

502,535

64,004

Cash equivalents

39,287

24,209—91,185,060

403,877

Cash in hand
Total

20.1.
Classification as bankdeposits

20.3.
Classification as cash atbank

Bank deposits are deposits paying interests at fixed
negotiated rates with maturity of three months
or less from the date of placing the deposit andare repayable within 24 hours’ notice. The Groupdeposits its cash solely in financial institutions withthe rating BBB and above.

Cash at bank comprises cash on demand allocatedin bank.

20.2.
Classification as cash
equivalents

20.4.
Restricted cash
As at 31 December 2020 and 2019 the Group had
no restricted cash.

31.12.2019

Loans

5,437,223

6,001,174

Long term borrowings

5,437,223

6,001,174

Loans

—

335,741

Other

577

—

Short term borrowings

577

335,741

5,437,800

6,336,915

Total borrowings

On 20 December 2016 the Group concluded a “Senior Term and Revolving Facilities Agreement” in theamount of PLN 3,500,000 drawn by Adinan Seniorco
S.à r.l. and a “Second Lien Facility Agreement” in theamount of PLN 1,300,000 drawn by Adinan Bondco
S.à r.l. The Senior Term Loan comprised the Amortizing Term Loan (the “TLA”) of PLN 450,000 and the
Senior Bullet Term Loan (the “TLB”) of 1,550,000.
Under the “Senior Term and Revolving Facilities
Agreement” the Group was also granted a revolving
facility of PLN 340,000 which remained unused.
On 22 May 2019 the Group increased its borrowings
under the Senior Term and Revolving Facilities Agreement by PLN 2,000,000. The TLA nominal amount
was increased by PLN 450,000 to PLN 1,363,500
and the TLB (and together with the TLA, the “Senior
Term Loans”) nominal amount was increased by PLN
1,550,000 to PLN 3,990,000.

Cash equivalents comprise payments in transit
made by the Group’s customers via electronic
payment channels.

258

31.12.2020

IV. Financial statements

The borrowings bore interest of 3M WIBOR andmargins of 3.25% and 3.75% for particular tranchesof the Senior Term facility and 7.00% for the Second
Lien Agreement. The additional borrowing receivedof PLN 1,959,516 was net of PLN 40,484 of consent
and arrangement fees, which have been added tothe calculation of amortized costs of the loan liability.
As at 31 December 2019 the enlarged Senior Term
Loans amounted to PLN 5,353,500 and, together
with the PLN 340,000 Senior Revolving Credit Facility and the PLN 1,300,000 Subordinated Second
Lien Bullet Term Loan, amounted to PLN 6,993,500
of Total Credit Facilities (in nominal amounts) and
6,336,915 at amortised cost.
The Group repaid two tranches of TLB in March and
September 2020 of PLN 172,483 each.

259

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Refinancing Transaction
On 28 September the Board of Directors resolved torefinance the Group’s existing Total Credit Facilities.
On 29 September 2020 the Group entered into
a new loan agreement (‘New Facilities Agreement’)providing commitments for a PLN 5,500,000 seniorsecured term loan facility (the ‘New Senior Facility’)and PLN 500,000 (equivalent) multi-currency revolving credit facility (‘New RCF’ and together with the
New Senior Facility, the ‘New Facilities’).

The repayment of the Second Lien Facility before
the termination due date triggered an additional
PLN 26,000 of early repayment charges.
The maturity date for the New Facilities Agreement
and for the New RCF is October 2025. There are
no repayments due on the New Senior Facility
before the final due date on 14 October 2025. As
a result of the refinancing transaction, the balanceof outstanding bank borrowings were reduced by
PLN 651,732 from PLN 6,151,732 to PLN 5,500,000(in nominal amounts).

On 14 October 2020 the Group completed its refinancing transaction by drawing the full amount ofborrowings under the New Facilities Agreement,
receiving a net amount of PLN 5,440,000 after
deduction of PLN 60,000 arrangement fees andexpenses and, together with Allegro.eu utilizing its
net proceeds from the initial public offering of theCompany’s shares, applied the available funds to therepayment and discharge in full of all indebtedness
outstanding under the existing Total Credit Facilities
in the amount of PLN 6,151,732.

The New Facilities Agreement initially bears interest
at a rate per annum equal to WIBOR or EURIBOR or
LIBOR, as applicable at the Credit Facility Borrower’s
option for the New RCF (in each case subject toa zero floor) and an initial margin of 2.25% per annum, in relation to New Senior Facility and of 1.80%
per annum, in relation to the New RCF.
The loan is measured at amortized cost using theeffective interest rate. Loan origination fees incurredin relation to the loan are included in the calculationof the effective interest rate. As at 31 December 2020
the average effective interest rate is 2.47%, and as
at 31 December 2019 was 6.36%.

The transaction was accounted for as derecognition of the existing borrowings. The new debt wasrecognized at fair value. Immediately before thederecognition of the pre-existing borrowing, thecarrying value of the existing borrowing facilities
at amortized cost increased by PLN 143,378 andan equivalent amount of deferred borrowings cost
was recognized as non-cash financial expense. The
total loss on refinancing amounted to PLN 143,378.

The repayment term for the New Facilities is 2025,
and the schedule of loan amortization is as follows:

Less than 3 months

From 3 to 12 months

From 1 to 5 years

More than 5 years

Total

577

-

-

5,437,223

5,437,800

As of the balance sheet date there were three swap
agreements conducted. The purpose of interest rate
hedging in the Group is to limit the part of interest
cash flow exposed to interest rate fluctuations. (seenote 31.1)

21.1.
Accounting policies
Borrowings are initially recognised at fair value
net of transaction costs incurred. After the initialrecognition, borrowings are stated at amortised
cost under the effective interest rate method. Any
difference between the amount received (net oftransaction costs) and the redemption value is recognised in profit and loss statement over the periodof the respective agreements, using the effective
interest rate method. Borrowings due within one
year are classified as short-term. Otherwise, they
are presented as long-term items.

21.2.
Secured liabilities andassets pledged as security
Lease liabilities are effectively secured as the rights
to the leased assets recognised in consolidated
financial statements revert to the lessor in theevent of default. Loans are secured by a pledge
that imposes certain covenants on the Group. The
pledge states that the Group will not provide anyother security over its assets, and will ensure thatthe described in debt agreements financial ratios
are met. Please refer to note 34 for further details.

21.3.
Compliance with loan
covenants
Under the Senior Term and Revolving Facilities
Agreement, the Group was obliged to maintaincertain financial ratios defined as Consolidated
Senior Net Debt and Consolidated Senior Secured
Net Debt at levels no higher than indicated in theagreements.
Due to the refinancing, Adinan Midco, a memberof the Group signed the New Senior Facilities
Agreement on 29 September 2020. Based on thisagreement, the Group shall ensure Total Net Leverage in respect of any Relevant Period ending ona test date on or after the first test date, shall not
exceed a ratio indicated in the Agreement. As thefirst test date for the covenants is on 30 June 2021,
the Group was not obligated to test the covenants
at 31.12.2020.
Allegro.eu Group complied with the financial covenants of its borrowing facilities during the 2020
and 2019 reporting periods and after the balance
sheet date until the date of authorization of these
consolidated financial statements for the issue. Seenote 32 for details.

21.4.
Risk exposure
Details of the Group’s exposure to risks arising fromcurrent and non-current borrowings are set out innote 31.

For the majority of the borrowings, the fair values
are not materially different to their carrying amounts,
since the interest payable on those borrowings is
close to current market rates.

Following the refinancing, the Group changed settlement dates of the New RCF which do not fall at
the end of each quarter anymore.

260

IV. Financial statements

261

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

22.
Leases22.2.
Amounts recognised in the statement of financial
position

22.1.
Amounts recognised in the statementof comprehensive income

Changes in right-of-use assets during the financial year:

LeasedComputers
and officeequipment

LeasedMotorvehiclesTotal

The economic useful life of right-of-use assets is as follow:

As at 31.12.2020

LeasedBuildings•

Leased Buildings

Cost161,883

1,501

304

163,689•

Leased Computersand office equipment

Accumulated depreciation(99,673)(1,461)(172)(101,306)

3–4 years

Net book amount62,21040

13262,383•

Leased Motor vehicles

1–3 years
LeasedBuildings

LeasedComputers
and officeequipment

LeasedMotorvehicles

Total

Opening net book amount

77,903248

116

78,267

Additions – new leases

8,452

99

115

8,666

942

—

—

942

Depreciation charge(25,087)

(307)

(99)

(25,493)

Closing net book amount62,21040

13262,383Cost

152,489

1,402

189

154,080

Accumulated depreciation(74,586)(1,154)(73)(75,813)

Net book amount

77,903248

116

78,267

Opening net book amount

98,413(287)

9798,223

Additions – new leases

12,640799

77

13,516

Modification of lease contract(8,188)——(8,188)Depreciation charge(24,962)

(264)

(58)

(25,284)

Closing net book amount

77,903248

116

78,267

1–9 years

As at 31.12.2020
31.12.2020

31.12.2019

Depreciation and amortisation(25,493)(25,284)

Interest expenses(3,028)(3,835)

(152)

(332)

(28,673)(29,451)

Short-term leases expenses
Total

Modification of lease contract

As at 31.12.2019

As at 31.12.2019

The right-of-use assets are part of property, plantand equipment in the statement of financial position.

262

IV. Financial statements

263

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

22.3.
Amounts recognised in
the statement of cash flow

Changes in lease liabilities during the financial year:

As at 31.12.2020
Opening lease value
Modification
Lease payments

As at 31.12.201985,538942(26,101)

Opening lease value

106,863

Modification(8,188)

Lease payments(24,843)

Additions – new leases

8,666

Additions – new leases

13,514

Interest expense

3,028Interest expense

3,835Interest payment(3,028)Interest payment(3,835)Currency valuation

4,221

Currency valuation(1,808)

Lease liabilities

73,266

Lease liabilities

85,538The total cash outflow was PLN 29,129 in 2020, and
PLN 28,680 in 2019.

22.4.
The Group’s leasing
activities and theiraccounting treatment
The Group leases various properties and equipment.
Rental contracts are typically made for fixed periodsof 1 to 7 years but may have extension options as
described below. Lease terms are negotiated on an
individual basis and contain a wide range of different
terms and conditions. The lease agreements do not
impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Leases are recognised as right-of-use assets together with a corresponding liability at the date at which
the leased asset is available for use by the Group.
Each lease payment is allocated between the liability
and financial cost. The carrying amount of liability
is remeasured to reflect any reassessment, leasemodification or revised in-substance fixed payments.
The lease term is a non-cancellable period of a lease;periods covered by options to extend and terminate
the lease are only included in the lease term if it
is certain that the lease will be extended or will
not be terminated. The financial cost is charged to
profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remainingbalance of the liability for each period. The rightof-use asset is depreciated over the shorter of theasset’s useful life and the lease term on a straightline basis.

264

IV. Financial statements

Assets and liabilities arising from a lease are initiallymeasured on a present value basis. Lease liabilities
include the net present value of the following lease
payments:•

fixed payments,•

variable lease payment that are based on anindex or a rate,•

amounts expected to be payable by the lessee
under residual value guarantees,•

the exercise price of a purchase option if thelessee is reasonably certain to exercise that
option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be
determined, or the Group’s incremental borrowing
rate.
Right-of-use assets are measured at cost comprising
the following:•

the amount of the initial measurement of leaseliability,•

any lease payments made at or before thecommencement date less any lease incentives
received,•

any initial direct costs, and•restoration costs.

265

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Payments associated with short-term leases andleases of low-value assets are recognised ona straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease termof 12 months or less. Low-value assets compriseIT-equipment and small items of office furniture.
Contracts may contain both lease and non-lease
components. The Group allocates the considerationin the contract to the lease and non-lease components based on their relative stand-alone prices.
However, for leases of real estate for which theGroup is a lessee, it has elected not to separate leaseand non-lease components and instead accounts
for these as a single lease component.

22.5.
Extension and termination
options
Extension and termination options are included
in a number of property and equipment leases
across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts.
The majority of extension and termination options
held are exercisable only by the Group and not by
the respective lessor.
In determining the lease term, the Group considers
all facts and circumstances that create an economic
incentive to exercise an extension option, or not
exercise a termination option. Extension options (orperiods after termination options) are only includedin the lease term if the lease is reasonably certain
to be extended (or not terminated).
The extension options for the right-of-use assets
have not been included in the lease liability, because
the Group could replace the assets without significant cost or business disruption and because it is notreasonably certain that the leases will be extended.

The lease term is reassessed if an option is actually
exercised or the Group becomes obliged to exercise
it. The assessment of reasonable certainty is only
revised if a significant event or a significant change incircumstances occurs, which affects this assessment,
and that is within the control of the lessee.

23.
Deferred tax
Deferred income tax is recognised in relation totemporary differences between the tax value of
assets and liabilities and their carrying amount in
the consolidated financial statements. However, nodeferred tax is recognised if the tax arises as a resultof initial recognition of goodwill or as a result of
initial recognition of an asset or liability as part ofa transaction other than a business combination,
where initial recognition affects neither the accounting nor the taxable profit or loss at the time of thetransaction. Deferred income tax is determinedusing the applicable legal or actual rates (and laws) as
at the reporting period end date, which are expected
to apply at the time of realisation of the relevant
deferred tax assets or payment of deferred tax
liabilities.
Deferred tax assets are recognized also for unused
tax losses and are recognized only when it is probable that taxable income will be generated in the
future, which will allow the temporary differences
or tax credits to be utilised on the same type of tax.
Deferred income tax assets and liabilities are presented net when there is a legally enforceable rightto offset current tax receivables against current tax
liabilities and when the deferred income tax assets
and liabilities relate to income taxes levied by thesame tax authority on the same taxable entity.

23.1.
Deferred tax assets
The deferred tax assets at the balance sheet datecomprised temporary differences attributable to:31.12.2020

31.12.2019

Accrued expenses

54,95928,445

Liabilities to employees

32,46914,818—

9,708

Impairment of trade receivables

9,285

6,500

Other items

13,2209,242

Total deferred tax assets

109,933

68,713

Deferred tax assets pursuant to set-off rules(109,652)(59,001)

281

9,712

Cash flow hedges

Net deferred tax assets

Accruedexpenses

Liabilities to
employees

Other

Offsetting

Total

As at 01.01.2020

28,445

14,81725,451(59,001)

9,712(Charged)/credited to profit or loss

26,514

17,651

4,207(50,651)(2,279)——(7,152)—(7,152)

54,95932,46822,506(109,652)

281

Accruedexpenses

Liabilities to
employees

Other

Offsetting

Total

17,746

6,598

31,167(45,002)10,509

476

—

51

—

527

10,223

8,219(4,966)(13,999)

(523)

—

—

(801)

—

(801)

28,445

14,81725,451(59,001)

9,712(Charged)/credited to OCI
As at 31.12.2020

As at 01.01.2019
Recognized on a businesscombination(Charged)/credited to profit or loss
(Charged)/credited to OCI
As at 31.12.2019

In 2020 no deferred tax asset has been recognized in
respect of unrecognized losses on cash flow hedge
contracts as the subsidiary where such contracts
are recorded is considered unlikely to generatesufficient profit to recover these losses in the future.

266

IV. Financial statements

267

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

23.2.
Deferred tax liabilities

23.3.
Deferred income tax

The deferred tax liabilities at the balance sheet datecomprised temporary differences attributable to:

The deferred income tax calculation is based on
the Group’s best estimates. The Group intends tocontinue to analyse the Group’s deferred income
tax positions at each future balance sheet date.
31.12.2020

31.12.2019

665,658

687,760

Loan valuation

6,080

4,767

Property, plant and equipment

5,237

3,736

Other items

11,755

6,246

688,730

702,509

Intangible assets (business combination fair value adjustment)

Total deferred tax liabilities

Set-off of deferred tax liabilities pursuant(109,652)(59,001)

Net deferred tax liabilities

579,078643,508

The schedule of deferred income tax assets andliabilities is presented as follows:

31.12.2020

31.12.2019

Deferred tax assets

109,933

68,713– long-term

13,525

16,079– short-term

96,40852,634(109,652)(59,001)

281

9,712

31.12.2020

31.12.2019

Deferred tax liability

688,730

702,509– long-term

610,240

640,096– short-term

78,49062,413

Offsetting
Total

Recognition of
intangible assets
in businesscombination

Other

Offsetting

Total

687,760

14,749(59,001)

643,508

687

—

—

687

Charge/(credited) to profit or loss

(22,789)

8,323(50,651)(65,117)

Offsetting(109,652)(59,001)

As at 31.12.2020

665,658

23,072(109,652)

579,078

Total

579,078643,508

Recognition of
intangible assets
in businesscombination

Other

Offsetting

Total

709,726

10,348(45,002)675,072

9,786

27

—

9,813

Charge/(credited) to profit or loss

(31,752)

4,374(13,999)(41,377)

As at 31.12.2019

687,760

14,749(59,001)

643,508

As at 01.01.2020
Recognized on a businesscombination

As at 01.01.2019
Recognized on a businesscombination

268

IV. Financial statements

269

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

24.
Liabilities to employees
The Group makes the following payments to employees that may result in liabilities to employees
at the balance sheet date:•the Group has a legal or constructive obligation
to make such payments as a result of past events;and•short-term liabilities to employees;•

a reliable estimate of the obligation can be made.

•payroll and social security contributions(except retirement and disability pension
insurance);•

paid absences;•

incentive bonuses, cash rewards;•

For benefits in the form of compensated absences,liabilities to employees are recognized for accumulating compensated absences (e.g. unused holiday
leaves) when service is rendered that increases theentitlement to future compensated absences. In thecase of non-accumulating compensated absences(e.g. sick leaves), benefits are recognized when theabsences occur.

fringe benefits;•

post-employment benefits:•

retirement and disability pension contributions;•retirement severance pays.

Short-term liabilities to employees
Accounting for short-term liabilities to employees
does not require making actuarial assumptions todetermine the obligation or the cost and there is no
possibility of any actuarial gain or loss. Moreover,short-term liabilities to employees are measured
on an undiscounted basis.
When an employee has rendered service to theGroup during the accounting period, the Group
recognizes the estimated undiscounted amount ofshort-term benefits to be paid in exchange for that
service as a liability, after deducting any amounts
already paid, and expenses.
Short-term liabilities to employees in the form of
bonus payments are recognized when the following
requirements are satisfied:270

Liabilities to employees in the form of compensatedabsences or bonus payments fall outside the definition of provisions under the IFRS and are presented
as current liabilities in the statement of financial
position under the trade and other liabilities item.

Defined contribution plan – ZUS(retirement and disability pension
contributions)
In compliance with the applicable laws in effect,
the Group pays retirement and disability pension
contributions determined by the gross salary foreach employed employee to the Social InsuranceInstitution (ZUS) (“State plan”). The Group is required
to pay contributions as they fall due only for theperiod of the employee’s employment. The Group
has no legal or constructive obligation to pay future
benefits. If the Group ceases to employ membersof the State plan, it has no obligation to pay thebenefits earned by its own employees in previous
years. For this reason, the State plan is a defined
contribution plan.
The Group’s obligation under those plans for eachperiod is determined by the amounts to be contributed for the year. Under IAS 19, no actuarial
assumptions are required to measure the obligationor the cost and there is no possibility of any actuarial
gain or loss.

IV. Financial statements

Moreover, the obligations are measured on an
undiscounted basis, except where they do not fall
due wholly within a year after the end of the period
in which employees render the related service.

The liability related to employee capital plans as at
31 December 2020 equaled PLN 302 and is includedin Trade and other liabilities.

When an employee has rendered service to theGroup during the period, the Group recognizes
the contribution payable to the defined contribution plan in exchange for that service as a liability,
after deducting any amounts already paid, and an
expense.

Long-term Incentive Program

Defined benefit plan – retirement anddisability severance payments
The Group’s employees or their designated beneficiaries are entitled to retirement and disability
severance payments. Retirement and disability
severance payments are one-off payments madeupon retirement or early retirement due to disability.
In accordance with IAS 19 such severance payments
are a defined benefit plan.
The present value of the aforesaid obligations is calculated by an independent actuary at each reporting
period end date. The resulting obligation is equal
to discounted payments to be made in the future
taking account of staff turnover and refers to theperiod remaining until the reporting period end date.
In 2020 the Group rocognised actuarial gains/losses
and included in other comprehensive income.

Employee capital plans
Employee Capital Plans (“Pracownicze Plany Kapitałowe”, “PPK”) were introduced by new legislationfrom 1 January 2019, pursuant to which employers
are under the obligation to introduce Employee
capital plans in their organization. Employee Capital
Plans constitute a new form of saving under thepension system. The basic contribution financed by
the employee amounts to 2 per cent of gross salary.
In turn, the employer shall pay a contribution in theamount of 1.5 per cent of the employee’s obligatory
contribution, extendable by up to a 2.5% of thevoluntary contribution calculated on the basis of thesalary. Obligations only apply to those employees
who did not opt out of PPK.

Long-term incentive program (“LTI”) is a form ofrecognition bonus granted to key directors andmanagers within the Group. The bonus is paid once,
based on both the Group’s and the participant’s
personal performance, however not earlier thanJune 2021 or until the Group’s Major Shareholders
have exited their investment in the Group or theGroup has been listed on a stock exchange. The
provision is created proportionately to the passageof time and disclosed in the consolidated financial
statements under liabilities to employees. Following
the Group’s IPO in October 2020, the LTI bonus isfully vested and shall be paid out to participants inJune 2021.The LTI is now discontinued.

Share base payment
Share-based payment transactions are treated inaccordance with IFRS 2. The standard encompasses
all arrangements where an entity purchases goods
and services in exchange for issue of an entity’sequity instruments, or cash payments based on thefair value of the entity’s equity instruments, unlessthe transaction is clearly for a purpose other thanpayment for goods and services supplied to theentity receiving them. In accordance with IFRS 2,
the Allegro.eu Group distinguishes between equity
settled and cash settled plans. The financial benefit
from equity settled plans granted on grant date isallocated over the expected vesting period against
equity starting from service commencement date
which could be earlier than the grant date. For equity
settled share based payments, the value of theawards is fixed at the grant date and is remeasured
from the service commencement date until the grant
date is reached. Expenses from cash-settled plans
are also allocated over the expected vesting period,
but against a liability. A description of the existing
equity-settled Management Investment Plan andAllegro Incentive Plan can be found in note 39.

271

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the years ended 31 December 2020 and 31 December 2019
all amounts expressed in PLN’000 unless indicated otherwise

24.1.
Movements in liabilities to employees
The movements in liabilities to employees is presented below:

01.01.2019

ChargedReversed

Utilised

31.12.2019

ChargedReversed

Utilised

31.12.2020

Employee Incentive program (LTI)

9,165

9,946

—

—

19,111

5,752(24,863)——

Provision for pensions and disability pensions

1,889

1,562

—

—

3,451

1,919

—

—

5,370

Long-term liabilities to employees

11,054

11,508——22,562

7,671(24,863)—

5,370

Bonus provision

16,27555,645(3,665)(20,628)

47,628120,389(4,809)(59,708)

103,499

—

—

—

—

—

24,863——24,863

9,291

11,428—(9,291)

11,42812,515—(4,982)

18,960

Provision for pensions and disability pensions

25

6

—

—

31

17

—

—

48

Other

5

523

—

—

528

1,031

—

—

1,559

Short-term liabilities to employees

25,596

67,602(3,665)(29,919)

59,615

158,814(4,809)(64,690)

148,928

Total

36,65079,110(3,665)(29,919)

82,177

166,486(29,672)(64,690)

154,299

Employee Incentive program (LTI)
Unused holiday provision

272

273

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

25.
Trade and other liabilities

26.
Written put option liability

Trade and Other Liabilities at the balance sheet date comprised:the value of written put option liabilities at the balance sheet date was:Note

31.12.2020

31.12.2019

31.12.2020

31.12.2019

342,861

207,146

Written put option liability long-term—

21,002

115,399

70,422

Written put option liability short-term—

22,208

VAT payables

73,44852,259Total—

43,210Social insurance and other tax liabilities

13,695

9,768

Other liabilities

12,226

9,566

Total

557,629

349,161

Trade payables
Contract and refund liabilities

9.3, 9.4

Trade liabilities are usually paid within 30 days ofrecognition. The fair value of trade and other liabilities are considered to be the same as their carrying
amount due to their short-term nature.

25.1.
Classification as tradeliabilities

The written put option liabilities recognized as at 31
December 2019 arose from business combinations
and represented put options for non-controllinginterests in eBilet. The Group had the right to buy(“call options”), and the Seller had the right to sell(“put options”) the remaining 20% of shares in eBilet.

These amounts represent liabilities for goods andservices provided to the Group prior to the end of
the financial year which are unpaid. The amounts
are unsecured and are usually paid within 30 daysof recognition. Trade and other payables are presented as current liabilities unless payment is not
due within 12 months after the reporting period.
They are recognised initially at their fair value andsubsequently measured at amortised cost using
the effective interest method.

274

On 19 April 2019 Allego.pl sp. z o.o. purchased
135,520 shares in eBilet Polska sp. z o.o. composing
80% of the shares outstanding from an unrelated
party – Bola Investments Limited. The parties further
agreed to write a series of put and call options on
the remaining 20% of shares belonging to Bola Investments Limited. On 25 September 2020 A­ llegro­.­plpurchased the remaining 20% of shares and as at
31 December 2020, Allegro.pl owns 100% of eBilet’sshares. As a result of this transaction the Written put
option liability, together with non-controlling interest
was derecognized through Retained Earnings.

Call options may have been exercised for a firsttranche of 10% of shares in each of the years 20212023 and for the second 10% tranche in each of theyear 2022-2026, while put options may have been
exercised for a first tranche of 10% of shares in eachof the years 2020-2023 and for the second 10%
tranche in each of the year 2021-2026. The exercise
price of each option based on EBITDA reported by
eBilet for the year preceding the option exercise
date, multiplied by an amount dependent on i.a.
EBITDA growth rate and accomplishment of certain
operating goals by eBilet.

IV. Financial statements

The minimum exercise price of the call and put
options for both tranches together were agreed at
the level of PLN 22,000. It was reasonable to assume
that the formula for the exercise price approximates
the fair value of eBilet shares.
The put options were to be physically settled only. As
a result, the options gave rise to a financial liability
measured at an amount equal to the present valueof the obligation. As at 31 December 2019 this wasestimated at PLN 43,210. Because the ownershiprisks and rewards of the shares relating to the put
options remained with the non-controlling interest,
the financial liability reduced the Group’s equity.
The criteria “fixed-for-fixed” was not met (the amountof shares is fixed, however the amount of cash is
variable), therefore the options gave rise to a derivative financial asset. Because the options’ exercise
price approximated the fair value, the fair value ofthe derivative financial assets themselves was zero.
After negotiations with the minority owners wereconcluded in September 2020, a cash price for theremaining 20% was established at the level of PLN
40,000 and all call and put options were waived byboth parties. As the result of the acquisition, thewritten put option liability was remeasured to theprice agreed of PLN 40,000 with the gain of PLN
3,210 recognized in equity (‘Other Reserves’). The
put option liability previously recognized in Other
Reserves together with the non-controlling interest
was transferred within equity to Retained earnings.

275

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

26.1.
Accounting policies
Written put options on NCI
The written put options, which gave minority
shareholders the right to sell their shares to theGroup constitute the Group’s obligation to buy its
own equity instruments. This obligation (a financial
liability) is initially measured at the present value ofthe obligation i.e. at the buy-out amount.

Purchased call options on NCI
When a criteria “fixed-for-fixed” is met (the fixedamount of shares for the fixed amount of cash), thepurchased call option is recognized as equity. If thecriteria is not met, the purchased call option gives
rise to a derivative financial instrument measured
at fair value through profit or loss.

26.2.
Judgements and
The financial liability is initially recorded in Groupestimations
equity (i.e. reduces Group equity) when the conditions for exercising the options do not transfer
the ownership risks and rewards related to thoseshares to the Group. When the conditions for exercising the option transfer the ownership risks andrewards related to the shares to non-controllinginterests, the financial liability is initially recordedin correspondence with non-controlling interest (i.e.
reduces non-controlling interest) or in goodwill if
the put option is issued in a business combination.
After initial recognition, in the case when the risks
and rewards related to the shares covered by theput option were not transferred to the Group (i.e.
the NCI continues to be recognized), the financial
liability continues to be measured at the amortizedcost i.e. at the present value of buy-out amount.
The unwinding of the discount is recognised infinancial costs. The financial liability is subject toremeasurement at least once a year, based on thebest current knowledge with regards to the buy-out
amount. Changes to the amount of the financial
liability arising from changes in estimates of the
buy-out amount are recorded in Group equity.
If the put option lapses unexercised, the financial
liability is derecognized against Group equity.

27.
Financial assets and financial liabilities
Classification and measurement
In accordance with IFRS 9 the Group classifies financial assets as: measured at fair value and measured
at amortized cost. The classification is made at the
moment of initial recognition and depends on business model for managing financial assets adopted
by the Group and the characteristics of contractual
cash flows from these instruments.

In 2019 and 2020 all financial assets and liabilities
except for derivative instruments, were initiallyrecognized at fair value including transaction costs
and after the initial recognition at amortised cost.
The Group applies hedge accounting, and derivatives
are classified as cash flow hedges.
The Group holds the following financial instruments:

Exercise price of call and put options
Exercise price of the options was set using a formulabased on performance, which in the view of Management approximated the fair value of shares in eBilet.

Note

Financial assets at amortised cost
Loans granted

Transfer of risk and rewards ofownership related to shares underlying
the put options
Management concluded that risk and rewards ofownership did not transfer to the Group because
call options and put option do not have symmetricalterms and their exercise price approximated thefair value.

31.12.2019

1,882,513

815,166—

9,324

Consumer loans

19

51,972—

Trade receivables and other receivables*

17

640,333

396,801

Cash and cash equivalents

20

1,185,060

403,877

360

360

4,788

4,804

31.12.2020

31.12.2019

5,920,493

6,713,535

Investments
Other financial assets* excluding prepayments and tax-related settlements

Accounting for subsequent changes ofthe financial liability
Management sees conflicting guidance in IFRS 9 and
IFRS 10. In the view of Management, it is more appropriate to follow guidance of paragraph 23 of IFRS
10 to recognize any adjustments related to changes
in the parent’s ownership interest that do not resultin the parent losing control over a subsidiary as
ownership transactions. Therefore, Management
decided to record changes in the financial liability
in equity, except for the unwinding of interest whichis recognized in profit/loss.

31.12.2020

Note

Liabilities at amortised cost
Trade and other liabilities**

25

405,534

247,872

Borrowings

21

5,437,800

6,336,915

Lease liabilities (outside IFRS9 scope)

22

73,26685,538

Written put option liability

26—

43,210Liabilities related to business combination

3,893

—

Hedging derivatives

97,29838,92597,29838,925Derivative financial instruments (cash flow hedge)

31** excluding deferred income and tax-related settlements

276

IV. Financial statements

277

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

The amortised cost of a financial asset or financial liability is defined as the amount at which the financial
liability is measured at initial recognition minus theprincipal repayments, plus or minus the cumulative
amortisation using the effective interest method ofany difference between that initial amount and thematurity amount and, for financial assets, adjusted
for any loss allowance.
The Group derecognises a financial asset when thecontractual rights to the cash flows from the financial
asset expire, or when it transfers the financial asset
and the transfer qualifies for derecognition. Financial
asset transfer occurs when rights to cash flows aretransferred or rights to cash flows are retained
but the entity enters into so-called “pass-througharrangement” which meets the criteria as set out
in IFRS 9. Therefore, derecognition is not limited tothe cases of transfer of rights to cash flows, but tothe broader term of “financial asset transfer”.
The Group transfers a financial asset if it transfers
the contractual rights to receive the cash flows of thefinancial asset, or if it retains the contractual rights
to receive the cash flows of the financial asset, but
assumes a contractual obligation to pay the cash
flows to one or more recipients.
The Group derecognizes a financial liability when its
contractual obligations are discharged or cancelled,
or expire. The Group also derecognizes a financial
liability when its terms are modified and the cash
flow of modified liability are substantially different,
in which case a new financial liability based on themodified terms is recognized at fair value.
Derivative financial instruments designated as hedging instruments are initially recognized at fair valueon the date a derivative contract is entered into andare subsequently re-measured at their current fairvalue. Derivatives are only used for economic hedging purposes and not as speculative investments.
However, where derivatives do not meet the hedge
accounting criteria, they are classified as ‘held for
trading’ for accounting purposes and are accounted
for at fair value through profit or loss.

Cash flow hedges

Hedge ineffectivenessImpairment of financial assets

In August 2018 the Group adopted a cash flow hedge
accounting policy to mitigate potential adverse impacts on the Group's financial performance. The
nominal amounts and the maturities of the hedging
instruments are presented in note 31.1.

Hedge effectiveness is determined at the inceptionof the hedge relationship, and through periodic
prospective effectiveness assessments to ensurethat an economic relationship exists between thehedged item and hedging instrument. The Group
enters into interest rate swaps that have similar
critical terms as the hedged item, such as reference
rate, reset dates, payment dates, maturities andnotional amount. The Group does not hedge 100%of its loans, therefore the hedged item is identified
as a proportion of the outstanding loans up to thenotional amount of the swaps. As all critical terms
matched during the year, the economic relationshipwas 100% effective.

The Company's policy regarding the impairment offinancial assets is in line with the requirements of
IFRS 9, which requires estimation of the expected
loss, regardless of whether or not there were any
impairment indicators. The standard provides the
3-stage classification of financial assets in terms of
their impairment:

The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash
flow hedges are recognized in other comprehensive
income. The gain or loss relating to the ineffective
portion is recognized in the income statement.
When a hedging instrument expires or is sold, orwhen a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing inother comprehensive income at that time remains
in equity and is recognized in the income statement when the planned transaction occurs. Whena planned transaction is no longer expected to occur,
the cumulative gain or loss that was recognized inother comprehensive income is transferred to theincome statement.
The fair values of interest rate swaps used for cash
flow hedge are disclosed in this note. Movementsof the reserve capital are disclosed in Consolidated
Statement of Changes in Equity.

•

the first stage, i.e. balances for which there has
been no significant increase in credit risk since
the initial recognition and for which the expected
loss is determined based on the probability ofdefault within 12 months;•

second stage – balances for which there has
been a significant increase in credit risk since
the initial recognition and for which an expected
loss is determined based on the probability ofdefault throughout the entire loan period;•

the third stage – the balance with the identified
impairment.

Offsetting financial assets and financial
liabilities
Financial assets and financial liabilities are offset
and the net amount is reported in the statementof financial position only if the Group has a legally
enforceable title to offset the recognized amounts
and intends to settle on a net basis, or realize theasset and settle the liability simultaneously.

For trade receivables the Group is using simplified
model, details in note number 31.

The fair value of a hedging derivative is classified
as non-current assets or non-current liabilities if
the remaining maturity of the hedged item is morethan twelve months and as current assets or current
liabilities, if the maturity of the hedged items is lessthan twelve months.
The fair values of the interest rate swaps are calculated by discounting the future cash flows of boththe fixed rate and variable rate interest payments.
The inputs used in determining the fair value fallwithin Level 2 of the fair value hierarchy (inputs
observable for an asset or liability, either directly
or indirectly, other than quoted prices in active
markets for identical assets or liabilities). These
inputs include fixed interest rate, discount rate andthe yield curve.

Effectiveness of cash flow hedge was tested andis 100%. Therefore, all changes were recognized in
Other Comprehensive Income.

278

IV. Financial statements

279

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

NOTE TO THE
CONSOLIDATED STATEMENTOF CHANGES IN EQUITY
28.
Note to the consolidated statements of changes
in equity
The amounts in this note are provided in PLN and
not in thousand PLN.
Allegro.eu was established pursuant to the notarial
deed drawn up on 5 May 2017. All shares were fully
paid up by a contribution in kind evaluated at PLN
8,313,297,585 from which PLN 831,519,555 wasallocated to the share capital of the Parent and PLN
7,481,778,030 was allocated to the share premium of
the Parent. The capital was originally issued in EUR
which also was the functional currency of Parent
company until end of September 2020.
The Group issued various classes of both, ordinary
and preference shares. Subscriber Ordinary Sharesgave a right to return at the level of 11% of the nominal value of the Subscriber Ordinary Shares issued
by the Company which amount shall be paid once
only. Distributions on A, B and C series of Ordinary
Shares could only be made once, Preference Sharesand cumulative Preference Dividends had been
fully paid off. B and C series shares were granted
to key Management and selected other managers
with a determined vesting period. The holders of
the D1, D2, D3, and D4 Preference Shares wereentitled to an annual cumulative dividend equal toon overall interest rate of 12.0% of the preference
share amount being the nominal value and sharepremium of preference shares, respectively.

280

On 15 December 2017 the Shareholders resolved toproceed to distribute an aggregate amount of PLN
46,332,907 out of the D1, D2, D3 and D4 Preference
Share Premium Accounts.
On 23 May 2019, during an Extraordinary General Meeting, the shareholders decided to repurchase 4,692,359,731 D1 Preference Shares and4,692,359,731 D2 Preference Shares and determined
the total cancellation amount to be equal to PLN
1,967,015,789 in the case of the D1 Preference
Shares and PLN 709,721,684 in the case of the D2
Preference Shares. The shareholders resolved theconsequential reduction of the issued share capitalof the Company by an amount of PLN 395,819,313
and the reduction of the share premium by anamount of PLN 2,280,918,160. The outflow from thedecrease in capital was funded by the proceeds fromthe increased Senior Term Loans (see note 21) andby available cash balances held by the Group andhad the effect of eliminating all D1 and D2 Preference
Shares out of the company’s share capital.
As at 31 December 2019, the Group’s share capital
was PLN 434,245,523 divided into 10,295,789,705
shares with a par value of PLN 0.0422 each (0.10Euro each).

IV. Financial statements

In 2020 the Parent changed the functional currency
from EUR to PLN. The decision was supported by the
resolution of the extraordinary shareholders meeting concluded on 29 September 2020. The Group
operates mainly in Poland and Polish złoty is thecurrency in which the Group usually generates andspends cash. Furthermore, on 12 October 2020 theGroup debuted on the Warsaw Stock Exchange in
Poland and The Parent’s ordinary shares were to belisted, so redenomination into polish złoty facilitatedlisting polish złoty redenominated ordinary shares.
After the redenomination the share capital was PLN
468,412 thousand. The meeting of shareholders
resolved to create a single new class of shares(‘New Ordinary Shares’) and to convert all the existing shares into one billion New Ordinary Shares(1,000,000,000). The new nominal value per New
Ordinary Share was established at the level of one
polish grosz, PLN 0.01.

As the result of this conversion the issued capital was
decreased to PLN 10,000,000 without cancellationof shares and without distribution of the reduction
proceeds of PLN 459,997,000, which instead weretransferred to Capital Reserve.
The multiplier used to convert each class of existing
shares into equivalent New Ordinary Shares wascalculated based on the IPO price per New Ordinary
Share established at PLN 43 per share on 28 September 2020 following the close of book building.
The resulting market value of the 1,000,000,000
New Ordinary Shares of PLN 43,000,000,000 was
first attributed to the existing D3 and D4 Preference
Shares at original cost plus accrued cumulative preference dividends with the residual value allocatedto the classes of the ordinary shares. The resulting
attributed values of each class of share was thenused to calculate the allocation of New Ordinary
Shares to each class.

Type

Beforeconversion

Multiplier

After conversion
ORDINARY
SHARES

Subscriber Ordinary Shares

5,000,000

0.0001605

A1 Shares

434,804,791

0.8179355,624,294

A2 Shares

434,804,789

0.8179355,628,890

B1 Shares

23,514,029

0.9922

23,330,750

B2 Shares

23,514,024

0.9922

23,330,996

C1 Shares

5

56,894284,468

C2 Shares

23,923,440

0.815019,496,576

D3 Preference Shares

4,692,359,731

0.0310145,647,454

D4 Preference Shares

4,692,359,729

0.016376,655,967

Total number of shares

10,330,280,538

Pursuant to the Group’s IPO, on 2 October 2020
the General Meeting of Shareholders resolved toapprove a share capital increase within the framework of the Authorized Share Capital, by issuing of
23,255,814 New Ordinary Shares with a nominal
value of PLN 0.01 each to be sold at the IPO subscription price of PLN 43 per share for a total valueof PLN 1,000,000,000 net of broker fees of PLN
27,674,193 related to issuing of the new shares.

1,000,000,000

The transaction costs related to the issuance of the
New Ordinary Shares were deducted from Capital
Reserve in amount PLN 5,889,272.

281

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

The share capital of the Group increased from PLN
10,000,000 to PLN 10,232,558 and PLN 972,093,251
was allocated to capital reserve, when the Parent
received net proceeds, after the deduction of brokerage fees, following completion of the Group’s
IPO on 12 October 2020.

As a result of the transaction described above, atthe balance sheet date the Group’s share capitalcomprised 1,023,255,814 New Ordinary Shares witha nominal value of PLN 0.01 each and a total valueof PLN 10,232,558.
As at 31 December 2020 Allegro.eu S.A. has no
distributable earnings.
At the balance sheet date the immediate owners of
the Parent’s shares were:

31.12.2020

31.12.2019

Name

Ultimate
owner

Share value% of sharecapitalShare value% of sharecapitalCidinan S.à r.l.

Cinven3,212,463

31.4%

193,675,912

44.6%

Permira VI Investment Platform
LimitedPermira3,212,463

31.4%

133,612,276

30.8%

Mepinan S.à r.l.
(previously: Adinan (MEF IV)
Limited)Mid Europa
Partners

713,881

7.0%

43,039,092

9.9%

Adagio Co-Invest L.P.

Permira—0.0%

60,063,636

13.8%

Adiman SCSp

n/a

—

0.0%

3,327,758

0.8%

Other

n/a

3,093,751

30.2%

526,849

0.1%

10,232,558

100%

434,245,523

100%

Total

The largest individual shareholders of the Groupsince The Parent’s inception have been ultimately
owned by the private equity funds: Cinven, Permiraand Mid Europa Partners.(together the “Ultimate
Founding Shareholders”)

282

IV. Financial statements

Impact of redenomination on the equity

Impact of IPO on the equity

Change of the functional currency is accounted forprospectively. Prospective accounting means that
the Group translates all items into the new functional
currency using the exchange rate at the date of
the change. The resulting translated amounts fornon-monetary items are treated as their historicalcost. Also the equity positions are translated to new
functional currency using the exchange rate at thedate of the change of functional currency – that isirrespective of the fact that the entity has previously
used the historical exchange rate to translate theshare capital and capital reserve from functional
currency to presentation currency. No additional
exchange differences should arise on the date of
the change of functional currency; it means no additional exchange differences on translation should
be recognized in other comprehensive income. The
Group has translated the share capital and sharepremium of the Parent from EUR to PLN using theexchange rate at the date of the change of functional
currency, resulting in an increase of the share capitaland share premium as compared to the carrying
amounts presented previously by translating from
EUR functional currency into presentation currency(PLN) using historical exchange rate. Therefore theeffect of the change of carrying amount of the sharecapital and share premium was recognized withcorresponding entry directly in retained earnings.

On 12 October 2020 (‘Listing Date’), the Parent’s
shares debuted on the Warsaw Stock Exchange. The
Initial Public Ofering comprised 213,549,039 shareswith the offer price PLN 43 per share. In addition,
Cidinan S.à r.l., Permira VI Investment Platform
Limited and Mepinan S.à r.l. (together, the ‘Majority
Selling Shareholders’) granted to Morgan Stanley& Co. International plc as Stabilization Manager anover-allotment option to purchase up to 15% of thetotal number of Sale Shares. The over-allotment
option was exercised in full, covering 32,032,356
shares of the Parent. As a result, the total number ofshares sold in the IPO, including the Over-allotment
Option, amounted to 245,581,395 shares, which
represents approx. 24% of the Parent’s issued sharecapital.
The Group recognised PLN 61,569 thousand of costs
related to preparations of the IPO in the financial
year ended 31 December 2020 (recognized in profit/
loss in the line item “Transaction Cost”) and a further
PLN 24,571 thousand related to share based compensations granted to employees under the Allegro
Incentive Plan at the IPO (recognized as an expensein profit/loss in the line item “Staff Cost Gross”).
The amount for the shares granted to employees at
the IPO was recognised as share based compensations in profit or loss with the corresponding entry
in Other reserve. The brokerage fees of PLN 27,674
thousand incurred on the Primary Share issuance of
23,255,814 New Ordinary Shares were recorded toCapital Reserve. The Group recognized PLN 5,889 of
IPO costs directly in equity as they relate to the issueof the new shares. Following the IPO, all loans granted to managers under the Management Investment
Plan, both recourse and non-recourse, were repaid.
The Management Investment Plan was settled infull by the allocation of New Ordinary Shares toManagement and the plan ceased to operate fromthe date of the IPO.

283

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Impact of IFRS 2 on equity
As described further in note 39, the Group’s Managers were granted loans to purchase part of theirshareholdings under the Management Investment
Plan. Some of the loans were made on a non-recourse basis which gives rise to a benefit under
IFRS 2 ‘Share-Based Payment’. In accordance withIFRS 2, the non-recourse loans are technically notrecognized as loans from an accounting perspective,
with their nominal value being offset against corresponding nominal value of shares and equivalent
number of shares, thereby reducing the value ofshare capital.

The nominal value offset against share capital at
31 December 2019 was 1,454,720 equivalent to34,490,836 shares of PLN 0.0422 nominal value(€0.0100). The non-recourse loans were fully paidin 2020 and as the result, as at 31 December 2020
there are no deductions from the equity.
The share capital as at 31 December 2020 and 31
December 2019 is presented below:

31.12.2020

31.12.2019

1,023,255,814

10,295,789,702

1,023,255,814

10,330,280,538—(34,490,836)

Nominal value

0.01000.0422

Share capital

10,232,558

434,245,522

Number of shares
total number of shares issued
shares corresponding to non-recourse loans

284

IV. Financial statements

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

NOTES TO THE
CONSOLIDATED STATEMENTOF CASH FLOWS
29.
Cash flow information
29.1.
Non-cash investing and financing activities
Investing and financing transactions that do not
require the use of cash or cash equivalents are as
follows:
31.12.2020

31.12.2019(8,666)(13,514)

Non-cash borrowings received less paid commissions

5,440,000—

Non-cash borrowings repaid(5,440,000)—(8,666)(13,514)

Lease liabilites / Right-of-use assets

Total

The Group settled refinancing transaction by repaying in cash the difference between previous debt andthe New Facilities less paid commission. Therefore
the non-cash movement amounted to 5,440,000
PLN while cash movement amounted to 711,732 PLN.

286

IV. Financial statements

29.2.
Borrowings and leases reconciliation
This section sets out an analysis of and the movements in borrowings and leases for each of theperiods presented.

Loans

Writtenput option
liability

Other
financialliabilities

Total(85,538)(6,336,915)(43,210)(38,923)(6,504,585)

Principal repaid

26,101

1,056,693——

1,082,794

Interest paid

3,028

275,853——

278,881

Early repayment fee paid—

26,000——26,000

Revolving facility availability fee paid

—

2,523

—

—

2,523

Put option liability paid——

40,000—40,000Interest rate hedging instrument paid

—

—

—

38,92638,926

Payments from other financial activities

—

7,815

—

—

7,815

Cash movements

29,1291,368,884

40,00038,926

1,476,939

Interest accrued(3,028)(297,099)——(300,127)

Revolving facility availability fee accrued—(3,311)——(3,311)

Gain/(Loss) on cash flow hedging

—

—

—

(104,980)(104,980)

Early repayment fee accrued—(26,000)——(26,000)

Additions (new leases)(8,666)———(8,666)

Foreign exchange adjustment(4,221)———(4,221)

Modification on lease contract

(942)

—

—

—

(942)

Put option liability release

—

—

3,210

—

3,210

Deferred borrowing cost write off—(143,378)——(143,378)

Other

—

20

—

7,679

7,699

Non-cash movements(16,857)(469,768)

3,210(97,301)(580,716)

As at 31.12.2020(73,266)(5,437,800)—(97,298)(5,608,364)

Liabilities from financing
activities

Leases

As at 01.01.2020

287

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Changes in inventories

LeasesLoans

Writtenput option
liability

As at 01.01.2019(106,863)(4,625,846)—(38,806)(4,771,515)

Principal repaid

24,844

215,803——240,647

Balances acquired during business combination – eBilet

Interest paid

3,835

375,018——

378,853

Total change

Borrowings received—(1,959,516)——(1,959,516)

Revolving facility availability fee paid

—

3,767

—

—

3,767

Interest rate hedging instrument paid

—

—

—

17,58017,580

Payments from other financial activities—

16,520——16,520Cash movements

28,679(1,348,408)—

17,580(1,302,149)

Consumer loans – current period balance

51,972—

Interest accrued(3,835)(361,113)——(364,948)

Consumer loans – previous period balance——

Revolving facility availability fee accrued—(3,195)——(3,195)51,972—

Gain/(Loss) on cash flow hedging

—

—

—

(20,203)(20,203)(13,514)———(13,514)

Foreign exchange adjustment

1,808

—

—

—

1,808

Modification on lease contract

8,188

—

—

—

8,188

31.12.2020

31.12.2019

Put option liability accrued——(43,210)—(43,210)

Liabilities – current period balance

557,629

349,161

Other

—

1,647

—

2,506

4,153

Liabilities – previous period balance(349,161)(211,604)

Non-cash movements(7,353)(362,661)(43,210)(17,697)(430,921)

Balances acquired during business combination – eBilet—(22,779)

As at 31.12.2019(85,538)(6,336,915)(43,210)(38,923)(6,504,585)

Balances acquired during business combination – Opennet

(264)

—

—

6,530

Unpaid purchase of fixed assets, intangible assets and other

2,852

(488)

Other

(100)

135

210,956

120,955

31.12.2020

31.12.2019

Liabilities from financing
activities

AdditionsOtherfinancialliabilities

Total

31.12.2020

31.12.2019

Inventories – current period balance

24,61920,051Inventories – previous period balance(20,051)(8,225)

—

(37)

4,568

11,78931.12.2020

31.12.2019

Changes in consumer loans

Total change

Changes in trade and other payables

Income tax settled with VAT

29.3.
Changes in net working capital

Total change

Changes in net working capital are set out below:
Changes in trade and other receivables and prepayments

31.12.2020

31.12.2019

Receivables and prepayments – current period balance

682,906

423,712

Receivables and prepayments – previous period balance(423,712)(339,959)

Liabilities to employees – current period balance

154,298

82,176

Balances acquired during business combination – eBilet—(2,145)

Liabilities to employees – previous period balance(82,176)(36,650)

Balances acquired during business combination – Opennet

(650)

—

Actuarial gain/(loss)

(938)

—

Other

2,000

—

Balances acquired during business combination – eBilet

—

(822)

260,544

81,60871,18444,704

Total change

288

IV. Financial statements

Changes in liabilities to employees

Total change

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

RISKS
30.
Critical estimates and judgments

30.1.
Estimated impairment of goodwill

Preparation of financial statements requires theuse of certain critical accounting estimates. It also
requires management to exercise its judgment in theprocess of applying the Group’s accounting policies.
Estimations and judgements are being constantly
verified and are based on historical experienceand other factors, including expectations of future
events that are believed to be reasonable under
the circumstances.

Goodwill results from business combination and is
not subject to amortisation, but is tested each year
for potential impairment, or more often, if there isindication of impairment. For the purpose of impairment testing goodwill is allocated to cash generating
units which are expected to benefit from synergies
achieved as a result of business combination.

The Group assessed that Allegro, Ceneo, eBilet andOpenNet are different and separate cash-generating
units for the purposes of impairment tests (incl.
impairment test of goodwill arising on acquisitionof each of these entities) and analysed them for
impairment of assets at the end of each of the years
ending 31 December 2020 and 31 December 2019.

Impairment arises when the carrying amount ofa given asset or cash generating unit exceeds its
recoverable amount. The impairment testing was
carried out as at 31 December 2020 and 31 December 2019. When determining the recoverable amountof a cash generating unit, the Group applied thevalue in use method assessed using the discounted
cash flow method based on the five year plan andincluding residual value.

The recoverable amount on the cash-generating unit
was determined by calculating the value in use. The
calculations used the projected cash flows before
tax based on past performance and Management’s
expectations of market development for the following five years. The result of each of the four cash
generating units’ tests showed no impairment.

Based on assumptions, the Group makes estimatesconcerning the future. The resulting accounting
estimates will, by definition, seldom equal the related
actual results.
In 2020 the Parent changed the functional currency
from EUR to PLN. The decision was supported by
the resolution of the extraordinary shareholders
meeting concluded on 29 September 2020. The
Group operates mainly in Poland and Polish złoty is
the currency in which the Group usually generates
and spends cash. Furthermore, on 12 October 2020
the Group debuted on the Warsaw Stock Exchange
in Poland.

The existence of coronavirus (COVID-19) was confirmed in early 2020 and has spread across Poland
and most of the world, causing disruptions tobusinesses and economic activity. The pandemic
has had a positive impact on revenues generated
by companies operating in the online marketplaceindustry and a negative impact on online ticket distribution. The Group introduced several assistanceprograms for its Sellers and Buyers. The Groupassessed the impact of COVID-19 on the Group’s
operations and on the results presented in these
Consolidated Financial Statements. The Group
performed an analysis in terms of expected credit
losses and Goodwill impairment.
The estimates and assumptions that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within thenext financial year are addressed below.

Goodwill recognized by the Group and disclosed
in the statement of financial position arose fromthe acquisition of shares of Grupa Allegro sp. z o.o.
by Allegro.pl sp. z o.o., Ceneo sp. z o.o by Ceneo.pl
sp. z o.o., eBilet Polska sp. z o.o. and OpenNet sp.
z o.o. As at 31 December 2020 it amounted to PLN
8,639,249. For more information about the Goodwill
please refer to note 5.
Goodwill on acquisition of Grupa Allegro sp. z o.o. is
PLN 8,140,604, Ceneo sp. z o.o. – PLN 441,801 andeBilet Polska sp. z o.o – PLN 48,937 and OpenNet
sp. z o.o – PLN 7,907. The goodwill of PLN 8,639,249
is the effect of the high profitability of the acquired
enterprises and expected future benefits in the formof estimated cash flows of the acquiree i.e. Grupa
Allegro, Ceneo, eBilet and OpenNet. No part of therecognised goodwill will be deductible for income
tax purposes.

290

IV. Financial statements

The cash flow projections used by the Group to
calculate values in use are prepared based on thefinancial budgets approved by the Group’s directors.
The projections are performed using several key
assumptions. The Group intends to drive future
growth by converting marketplace visitors to buyers
and increase GMV (‘Gross Merchandise Value’) per
buyer with a focus on retail basics of pricing, selection and delivery experience, improving findability
and returns, The Group plans to improve featuresand value added services including proprietaryfinancial lending to drive acquisition and customer
engagement. The lower revenue growth assumptions and lower EBITDA margin assumptions usedby the Group in 2020 in comparison to 2019 reflecta change of assumptions to rely less on low margin
retail revenue to address pricing and selection thanassumed in the prior year.

291

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

The Management noted that the recoverable amounton the cash-generating unit of eBilet could be affected by the business disruption caused by COVID-19,
as the revenue dropped by 20,498 PLN in 2020
comparing to 2019. A goodwill impairment test was
performed and the value in use was calculated using
adjusted assumptions of severe disruptions to mass
events throughout 2021, and a strong recovery
thereafter.

The Management concluded there is no impairment
risk unless severe COVID-19 disruptions of events
continue into 2022 and the medium term.

Future net cash flow of the cash-generating units isbased on the critical assumptions presented above,
each of which involve degree of uncertainty.

The critical assumptions made when calculating
recoverable amount were as follows:

AllegroAllegro31.12.2020

31.12.2019

25.12%

33.65%(0.73 ppt)

(4.55 ppt)

Growth rate outside the forecast period (including inflation)

2.50%

2.50%

Discount rate (pre-tax)

10.30%

10.30%

The average annual rate of growth of revenues during the forecast period
Average annual rise/(fall) in EBITDA growth during the forecast period

31.12.2020

31.12.2019

Decrease of the revenue CAGR by:

3.80 ppt

2.50 ppt

Decline in annual EBITDA margin by:

13.78 ppt

6.21 ppt

Decrease of the marginal growth rate by:

14.73 ppt

7.90 ppt

Growth in the discount pre-tax rate by:

8.55 ppt

5.10 ppt

31.12.2020

31.12.2019

Decrease of the revenue CAGR by:

10.19 ppt

10.31 ppt

Decline in annual EBITDA margin by:

32.17 ppt

7.29 ppt

n/a*

128.00 ppt

31.30 ppt

22.70 ppt

Ceneo

Decrease of the marginal growth rate by:
Growth in the discount pre-tax rate by:Ceneo

31.12.2020

31.12.2019

The average annual rate of growth of revenues during the forecast period

25.04%

21.48%

Average annual rise/(fall) in EBITDA growth during the forecast period

1.18 ppt(0.67 ppt)

Growth rate outside the forecast period (including inflation)

2.50%

2.50%

Discount rate (pre-tax)

10.30%

10.30%

eBilet31.12.2020

31.12.2019

54.69%

20.13%

23.46 ppt

(2.10 ppt)

Growth rate outside the forecast period (including inflation)

2.50%

2.50%

Discount rate (pre-tax)

11.00%

10.30%

The average annual rate of growth of revenues during the forecast period
Average annual rise/(fall) in EBITDA growth during the forecast period* each potential change of growth rate has no impact on the result of the impairment test

eBilet31.12.2020

31.12.2019

Decrease of the revenue CAGR by:

3.60 ppt

8.30 ppt

Decline in annual EBITDA margin by:

19.77 ppt

7.62 ppt

Decrease of the marginal growth rate by:

10.63 ppt

36.50 ppt

Growth in the discount pre-tax rate by:

6.38 ppt

14.30 ppt

31.12.2020

31.12.2019

Decrease of the revenue CAGR by:

6.29 ppt

n/a

Decline in annual EBITDA margin by:

28.33 ppt

n/a

n/a*

n/a

313.26 ppt

n/a

OpenNetDecrease of the marginal growth rate by:
Growth in the discount pre-tax rate by:

OpenNet31.12.2020

31.12.2019

50.29%

n/a(0.38 ppt)

n/a

Growth rate outside the forecast period (including inflation)

2.50%

n/a

Discount rate (pre-tax)

10.30%

n/a

The average annual rate of growth of revenues during the forecast period
Average annual rise/(fall) in EBITDA growth during the forecast period

292

IV. Financial statements

Sensitivity analysis of the aforesaid assumptions
shows that the Group would recognize impairment
if any of the key assumptions is changed as follows:* each potential change of growth rate has no impact on the result of the impairment test

Management is not aware of any reasonably likely
assumptions that might result in business performance outcomes similar or worse than those shownin these sensitivities for the CGUs as of 31 December
2020 and as at 31 December 2019 and therefore
result in a material impairment.

293

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

30.2.
Current and deferredincome tax
Corporate income tax for a reporting period comprises current and deferred tax. Current income
tax is calculated on the basis of taxable income (taxbase) for a given financial year and the binding tax
rate, based on the binding tax regulations.
The Group is obliged to assess the likeliness ofrealising the deferred tax asset. In this assessment
process a series of assumptions is adopted in respect of determining the amount of the deferred tax
asset. The above-mentioned estimations account for
the tax forecasts, historical amounts of tax charged,
current available strategies relating to planning theGroup’s operations and dates, as well as the likeliness of realising particular temporary differences.

30.3.
Impairment of receivables
The impairment allowance is recorded based on the
impairment loss model, according to the expectedcredit losses concept. Losses are recognised as at
the moment of recognising receivables, according to
the default rate assessed for each of the homogenous group of customers and aging of the receivablebalance within the homogenous group.
The default rates are calculated for separate, homogenous group of customers based on historical
data for the previous 48 months. Additionally theGroup calculates individual allowances for receivables where there is indication of impairment.
Detailed information on the impairment losses onreceivables is disclosed in note 31.2 of the additional
notes and explanations.

30.4.
Amortisation of intangible
assetsAmortisation and depreciation are determinedbased on the expected economic useful lives ofintangible assets. Every year the Group verifies
the adopted economic useful lives on the basisof current estimates. In the event of a change tothe economic useful life of an asset, its effect isrecognized as the effect of a change in accounting
estimates.
Sensitivity analysis of amortization of significant
intangible assets is presented below:

period change:
shorter by
5 years

period change:
longer by
5 years

Customer relationships(48,542)

29,125Trademarks and domains(50,452)

25,226

Software(104,199)

34,733

Impact on profit/(loss)(203,193)

89,084

Amortisation period sensitivity analysis of significant
intangibles assets

294

In 2020 the Group revised its amortization rates anddecided to change its estimates on amortizationof development costs. Each project is analysed
separately and the economic useful life for someprojects was extended by 3 years so after the revision the useful lives are determined between 4 to
7 as compared to 4 years previously estimated. It
resulted in decreasing in the amortisation charge
in 2020 by PLN 10,428.

IV. Financial statements

31.
Financial risk management
This note explains the Group’s exposure to financial
risks and how these risks could affect the Group’s
future financial performance.

Risk

Exposure arising from

Measurement

Management

Market risk – interest rateLong-term borrowings at
floating rate
Cash deposits – fixed rate
Consumer loans – fixed rate

Sensitivity analysis

Interest rate swaps,
offsetting cash deposits

Market risk – foreignexchange

Future commercial
transactions
Recognised financial assets
liabilities not denominatedin PLN

Cash flow forecastingSensitivity analysis

Not hedged

Credit risk

Cash and cash equivalents
Receivables
Consumer loans

Credit ratings
Aging analysis

Diversification of bankdeposits, credit limits andletters of credit

Liquidity risk

Borrowings and otherliabilities

Rolling cash flow
forecasts

Availability of committed
credit lines and borrowing
facilities

295

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

31.1.
Market risk

Sensitivity
The Group assesses its exposure to floating interest rate risk and estimates that if the interest ratechanges by 0.1 p.p., its financial costs in respect ofinterest will rise/(fall) by approx. PLN 2,752 annually.

Risk of changes in cash flows resulting
from interest rate changes
Borrowings with floating interest rates expose theGroup to the risk of changes in cash flows. The Groupdynamically assesses its exposure to interest ratechange risk. That risk is partially mitigated by cash
deposits bearing floating interest and by interest
rate swap contracts (“IRS”).
In January 2017 the Group concluded its first IRS
contract hedging PLN 1,225,000 at Wibor 3M fixed
rate – 2.305% with a maturity date of 30 April 2020.
In July 2018 the Group increased its hedged position
to 50% of its floating interest rate gross debt to secure future cash flows. The second contract hedges
PLN 1,131,250 at Wibor 3M fixed rate – 2.411% witha maturity date of 30 July 2022.
At this time the Group determined that it would
apply hedge accounting to its IRS contracts andfollow a policy of seeking to hedge approximately
50% of floating interest risk for at least 49 months
into the future.
In August 2019 the Group entered into a further IRS
contract to exchange floating IRS exposure into fixedinterest rate obligations on between PLN 976,098
and PLN 1,005,357 of the Group's borrowings over
the term of the IRS with a final maturity date of 30
June 2022 and a WIBOR 3M fixed.
On 26 and 29 June 2020 the Group entered into
floating to fixed interest rate hedges on a nominal
value of PLN 2,000,000 for interest payments due
between 30 June 2022 and 30 June 2024. Thosetransactions had the effect of extending cash flow
hedging coverage of floating rate interest risk onborrowings by two years to 30 June 2024.

296

In December 2020 the Group entered into an additional interest rate swap contract to exchange
floating interest rate exposure into fixed interest
rate obligations in respect to an average of PLN
750,000 of the Group's borrowings. The IRS obligation effective date is 30 June 2022 and terminates
on 30 June 2024.
In light of the refinancing described in note 21,
Management considered whether existing hedge
accounting should be continued. As the new loans
fall within the definition of the designated hedged
item and share similar characteristics to the previous loans, the original hedge accounting continues
in place after the refinancing transaction. All thehedges were repurposed to relate to the new debt.
After the refinancing the hedge ratio increased to
56% and therefore the changes in the fair value ofthe hedging instruments representing the difference
between the current hedge ratio and the hedge ratio
determined in the hedge accounting policy (50%) is
recognized prorata through profit and loss insteadof other comprehensive income.
In measuring the fair value of interest rate swaps,
the Group uses the present value of future cash
flow based on observable income curves. At 31
December 2020, the Warsaw Interbank Offer Rate
3 Months (Wibor 3M) had decreased by 150 bps incomparison with 31 December 2019, resulting ininterest rate swap liabilities increasing significantly.

IV. Financial statements

Interest rate change impact on profit/(loss) as at 31.12.2020

change in interest rate (ppt)

-0.3

-0.2

-0.1

0.1

0.2

0.3

Interest cost

16,50011,0005,500(5,500)(11,000)(16,500)

Interest rate swap cost

(9,227)(6,151)(3,076)

3,076

6,151

9,227

Impact on profit/(loss)

7,273

4,849

2,424

(2,424)(4,849)(7,273)

Interest rate change impact on profit/(loss) as at 31.12.2019change in interest rate (ppt)

-0.3

-0.2

-0.1

0.1

0.2

0.3

Interest cost

17,55011,7005,850(5,850)(11,700)(17,550)

Interest rate swap cost

(7,654)(5,103)(2,551)

2,551

5,103

7,654

Impact on profit/(loss)

9,896

6,597

3,299

(3,299)(6,597)(9,896)

Existence of swap contracts of floating to fixed rate
exposes the Group to fair value risk but this does
not have an impact on these Consolidated Financial
Statements as these items are not measured atfair value.

Foreign exchange risk
Foreign exchange risk occurs as a result of sales orpurchases made by the Group in currencies otherthan its functional currency, i.e. PLN. Operatingtransactions concluded in currencies other than
the functional currency are relatively rare due tothe currently limited scope of cross-border activity
and therefore thus the Group’s exposure to theforeign exchange risk is not material. The Group has
not utilized hedging strategies to mitigate currency
risk during the reporting periods covered by these
Consolidated Financial Statements.

297

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

31.2.
Credit risk
Risk management
Financial assets representing the highest exposure
to credit risk are cash, trade receivables and consumer loans. To mitigate that risk, the Group uses
detailed seller (customer) verification and monitoring procedures. The Group uses professional debt
collection companies or engages in debt collection
procedures on its own account. The Group’s receivables comprise amounts due from individuals andbusinesses. The receivables have low concentration.
Surplus cash is deposited by the Group at banks as
deposits or fixed-term deposits.

Impairment of financial assets
The Group has three types of financial assets that are
subject to the expected credit loss model:•

trade receivables•

consumer loans•

cash and cash equivalents

There are no significant concentrations of credit risk,
whether through exposure to individual customers,
specific industry sectors and/or regions.

31.12.2020

31.12.2019

Impairment of receivables

38,21322,350

Impairment of consumer loans

1,165

—

Net impairment losses on financial and contract assets

39,37822,350Trade receivables
The Group applies the IFRS 9 simplified approach
to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables and contract assets. To measure the expectedcredit losses, trade receivables and contract assets
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 48 months before 31 December
2020 and 31 December 2019 respectively and thecorresponding historical credit losses experienced
within this period.

298

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 (such as unemploymentrate). In comparison with the previous year, theimpairment provision increased mainly in line withthe growth of the business resulting in growth ofbalance of accounts receivables.

IV. Financial statements

299

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

On that basis, the loss allowance as at 31 December
2020 and 31 December 2019 was determined as follows for both trade receivables and contract assets:

31.12.2020

Aging of trade receivables, net

31.12.2019

Business%

Individuals%

Business%

Individuals%

Current

486,139

83%

8,374

53%

305,379

83%

7,519

50%

Overdue less than 3 months

91,895

16%

5,786

36%

61,266

17%

6,193

41%

Overdue 3 to 12 months

3,760

1%

1,457

9%

1,931

1%

1,154

8%

Overdue 1 to 3 years

433

0%

238

2%

305

0%

227

2%

582,227100%

15,855100%

368,881100%

15,093

100%

Business

Individuals

Business

Individuals

Business

Individuals

Business

Individuals

Total

Aging of receivables as at 31.12.2020

Trade receivables, gross

Impairment of trade receivables

Probability of default ratio

Trade receivables, net

Current

489,0708,704(2,931)

(330)

1%

4%

486,1398,374

Overdue less than 3 months

95,9796,629(4,084)

(842)

4%

13%

91,895

5,786

Overdue 3 to 12 months

25,807

6,807(22,047)(5,350)

85%

79%

3,760

1,457

Overdue 1 to 3 years

13,44911,753(13,016)(11,515)

97%

98%

433

238

Total

624,305

33,893(42,078)(18,037)

582,227

15,855Business

Individuals

Business

Individuals

Business

Individuals

Aging of receivables as at 31.12.2019

Trade receivables, gross

Impairment of trade receivables

Business

Individuals

Probability of default ratio

Trade receivables, net

Current

307,134

7,759(1,755)

(240)

1%

3%

305,379

7,519

Overdue less than 3 months

64,180

6,942(2,915)

(749)

5%

11%

61,266

6,193

Overdue 3 to 12 months

12,965

5,168(11,034)(4,014)

85%

78%

1,931

1,154

Overdue 1 to 3 years

10,012

10,300(9,707)(10,072)

97%

98%

305

228

394,291

30,169(25,411)(15,075)

368,881

15,094

Total

Carrying amount of the trade and other receivables
balance represents the maximum exposure to thecredit risk.

300

IV. Financial statements

300

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

Cash and cash equivalents

Consumer loans

While cash and cash equivalents are also subject
to the impairment requirements of IFRS 9, theidentified impairment loss was immaterial.

The provision for the loss allowance relates to the
expected credit losses (‘ECL’) under IFRS 9, which
requires estimation of the expected loss, regardless of whether or not there were any impairment
indicators.

A loss allowance in relation to cash and cash equivalents is determined individually for each balance witha given financial institution. In order to assess credit
risk, external credit ratings and publicly available
information on default rates for a given rating of
S&P Global Ratings’s rating agency were used (rating
is disclosed in the Note 20.1). As all cash balances
have a low credit risk as at the reporting date, theGroup applied the practical expedient available
under IFRS 9 and determined the loss allowances
based on 12-month expected credit losses. The
calculation of the loss allowances resulted in an
immaterial amount.
The whole cash and cash equivalents balance is classified to Stage 1 of the impairment loss model i.e. thefinancial instruments that have not had a significant
increase in credit risk since initial recognition or thathave low credit risk at the reporting date
Carrying amount of the cash and cash equivalentsbalance represents the maximum exposure to thecredit risk.
The Group held 38%, 32% and 25% of all its funds
in individual banks with the ratings of A, A+, BBB
respectively. The Group used ratings of S&P Global
Ratings agency.

The expected credit loss of consumer loans is calculated using three main components:

Depending on the risks associated with each loan,
loans are categorised into three stages based on theassociated risk, where stage 3 reflects the highest
risk. IFRS 9 requires to recognize the credit losses
from default events that are expected within 12
months:•if credit risk has not significantly increased sinceinitial recognition (stage 1), and•for which there has been a significant increase incredit risk since the initial recognition (stage 2), or•

which are credit impaired (stage 3).

A significant increase in credit risk (‘SICR’) is verified
according to the likelihood of default and this changes with respect to the date of originating the loan.
The Company considers that a significant increasein credit risk (‘SICR’) occurs when an asset is morethan 30 days past due. Financial instruments are
moved back to stage 1 once they no longer meetthe criteria for a significant increase in credit risk.
The Company defines a financial instrument as indefault when the consumer is more than 90 days
past due (stage 3). For more information pleaserefer to note number 27.

•

probability of default (‘PD’),•loss given default (‘LGD’), and•the exposure at default (‘EAD’).

Where:
Probability of default – determines the probability
that the debtor will be unable to meet its obligation
over a one year time horizon (using practical expedient allowed in IFRS9).
Loss Given Default – the percentage of loss over
the total exposure when a debtor goes into default.
Exposure at Default – reflects the estimated valueof credit exposure.
Due to the short-term nature of consumer loans,
their fair value is considered to be the same as theircarrying amount. Carrying amount of the consumer
loans balance represents the maximum exposure
to the credit risk.
Quality of the portfolio covered by the rating model:

Exposure credit risk by ratings as at
31.12.2020

Consumer loans,gross

Impairment ofconsumer loans

Consumer loans,
net

A

—

—

—

B

434

(9)

425

C

3,497

(74)

3,423

D

17,294(370)

16,924E

19,130(407)

18,723

F

10,290(217)

10,073

G

2,445

(52)

2,393

H

12

(1)

11

53,102(1,130)51,972

Consumer loans as at 31.12.2020

For the purposes of credit risk management, theGroup uses an 8-grade alphanumeric rating scalefrom A to H. Rating categories A-C are low risk, categories D-F are moderate, and G-H reflect increased
risk.

302

IV. Financial statements

303

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

31.3.
Liquidity risk

32.
Capital management

Operations are financed from the Group’s own
resources. The cash retained on bank accounts
make it possible for the Group to settle its obligations as they arise in a timely manner. The Groupalso had access to a revolving borrowing facility of
PLN 340,000 in 2019, rising to PLN 500,000 in 2020
although it has not been utilized and remains fully
available as at the date of signing these financial
statements. Loans were received on 18 January
2017, upon a change of the Group owner in orderto repay liabilities to the previous Group’s related
entities, and to acquire intellectual property rights,
including domains, trademarks and software. In
May 2019 the loans balance was increased in orderto partially fund a return of share capital to theultimate shareholders. Due to the Group’s IPO in
October 2020, leverage was reduced and equity
was increased with proceeds from primary shareissuance.

As a result at 31 December 2020, the Group’s
outstanding bank borrowings amounted to PLN
5,500,000 (in nominal amounts). Considering:•

the generation of positive cash flows from operating activities,•

the long-term nature of borrowings,•

the balance of cash held,•

the current and long-term cash flow analysis.

The Management believes liquidity risk to be minimal
for the Group during the next 12 months.

The Group defines its capital as the equity from theconsolidated statement of financial position.
The main purpose of capital management is toensure the Group’s ability to continue as a going
concern and to maintain safe capital ratios thatwould optimally support the operations of theGroup and increase its shareholder value, bringing
shareholders return on their investment, including
dividend distributions.
The Group manages its capital structure and modifies it in response to changes in economic conditions.
To maintain or correct the capital structure, theGroup may repay capital to shareholders or issue
new shares.
Under the Senior Term and Revolving Facilities
Agreement and Second Lien Facility Agreement
concluded by Adinan Bondco Group members on

Liabilities by maturity, based on undiscounted contractual payments

Loans

Interest
on loansLeaseliability

393,307—

33,362

7,170

—

—

433,839

Borrowings

3 to 12 months——

101,938

20,737——

122,675

1 to 5 years—

5,500,000

406,271

70,8993,893

97,298393,3075,500,000

541,571

98,806

3,893

97,298Otherfinancialliabilities

Total

As at 31.12.2020
Less than 3 months

Total

Other
financialliabilities

Total

31.12.2019(5,437,800)(6,336,916)

Lease liabilities(73,266)(85,538)

6,078,361

Cash

1,185,060

403,877

6,634,875

Net debt(4,326,006)(6,018,577)

Total equity

8,089,596

6,683,642

53%

90%

As at 31.12.2019

Trade andrefundliabilities

Loans

Interest
on loansLeaseliability

Less than 3 months

238,305

172,483

91,593

7,197

—

2,032

511,6103 to 12 months—

163,258

258,907

21,58843,210—486,963

1 to 5 years—

6,151,732

1,025,271

62,577—36,893

7,276,473

238,305

6,487,473

1,375,771

91,362

43,21038,9258,275,046

304

According to Senior facilities agreement signed
by Adinan Midco, a member of the Group, on 29
September 2020, the Group shall ensure Total Net
Leverage in respect of any Relevant Period ending
on test date on or after the first test date, shall not
exceed a ratio indicated in the Agreement. As thefirst test date for the covenants is on 30 June 2021,
the Group was not obligated to test the covenants
as at the end of 2020, however considering theamounts as at 31 December 2020, the Group would
have met this ratio if it had been applicable on thebalance sheet date.

31.12.2020

Liabilities
related tobusiness
combinations

Total

The Group met the required indicators as at theend of 2019.

The gearing ratios at 31 December 2020 and 31
December 2019 were as follows:

Liabilities
related tobusiness
combinations

Trade andrefundliabilities

17 January 2017 as amended on 17 May 2019, theGroup was obliged to maintain its financial ratios
identified as the Consolidated Senior Net Debt andthe Consolidated Senior Secured Net Debt at a levelno higher than indicated in the Agreements.

Net debt to equity ratio

IV. Financial statements

305

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

UNRECOGNISED ITEMS
33.
Contingent liabilities

If the OCCP President recognizes either of theseclauses as abusive, it may issue a decision prohibiting
the use of such a clause in a standard agreement,with or without a fine. It might also request theGroup to remedy the effects of any possible infringement. If a fine is to be imposed, then in accordancewith the Competition Act, it may be up to 10% of theturnover of Allegro.pl in the financial year preceding
the decision for each of the clauses recognized
as abusive. If during the investigation Allegro.pl
offers adequate commitments to put the alleged
infringement to an end, in particular to amend theclauses questioned by the OCCP President, and/or
to remedy the effects of the infringement, the casemight end with a commitment decision with no fine.

33.1.
Guarantees granted to non-group entities
The Group had guarantees which secure its leaseagreements in the amount of PLN 20,000 at the endof 31 December 2020 and PLN 8,769 at the end of
31 December 2019.

As at the date of these financial statements no
specific charges have been made against Allegro.plby the OCCP. A provision was not recognized as inGroup’s view a payment is not probable.

33.2.
Other
The President of the Office of Competition andConsumer Protection (‘OCCP’) is conducting three
separate proceeding concerning Allegro as at thedate of these financial statements as described
below:On 6 December 2019, the President of the Officeof Competition and Consumer Protection opened
antitrust proceedings against Allegro.pl accusing
Allegro of infringing competition law by favoring its
own retail sales activity on its marketplace over thesales activities of third party merchants.
On 3 September 2020, the OCCP President statedin a press release that he initiated explanatory
proceedings into Allegro.pl’s rules of cooperation
with sellers (customers) in order to determine
whether Allegro.pl gains unjustified advantages
at the expense of its clients. These explanatory
proceedings are a preliminary step that does nothave to lead to the initiation of formal proceedings
against Allegro.pl.

306

On 15 September 2020, the Group received a formal
notification that, pursuant to the Competition Act,
the President of Office of Competition and Consumer
Protection commenced proceedings against Allegro.
pl on 9 September 2020 to investigate whether
clauses allowing Allegro to change its terms andconditions (one in the general terms and conditions and one in the SMART! terms and conditions)constitute abusive clauses in standard agreementswith consumers. On 15 September 2020, A­ legro­.­plalso received a request for information within theseproceedings. Allegro.pl is expecting further requests
for information from the OCCP President in the
future.

IV. Financial statements

Management does not consider that any of thesecases under investigation to be abusive and intends
to fully cooperate with OCCP’s investigation. As no
specific infringements have been alleged, it is notpossible to estimate the likelihood of successfully defending proceedings or to estimate the size of a likely
financial penalty if such defence is unsuccessful.

33.3.
Accounting policies
In accordance with the principles applied by theGroup and determined in IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, contingent
liabilities are understood as:•

possible obligations which will arise as a resultof past events, the existence of which will only
be confirmed at the moment of occurrence or
non-occurrence of uncertain future event(s)beyond the full control of the Group, or•

current obligations that arise as a result of past
events but are disclosed in the financial statements, because:•

it is unlikely that meeting the obligation willlead to the necessity of an outflow of funds
embodying economic benefits, or•the amount of the obligation (liability) cannot
be valued reliably enough.

Contingent liabilities are not recognised in the
consolidated statement of financial position, but
information about them is disclosed in Notes, unless the probability of outflow of funds embodying
economic benefits is remote.

307

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

34.
Assets pledged as security

36.
Events occurring after the reporting year

After the Group acceded to the Senior Term andRevolving Facilities Agreement and Second Lien
Facility Agreement in 2017, pledges and security
interest were established on the Group assets.

•share pledge in the shares of Allegro.pl and Ceneo.pl represented in the consolidated financial
statements as net assets in the amount of PLN
8,994,272.

On 29 September 2020, the Group concluded a new
Loan Agreement (“New Loan Agreement”), therefore
pledges and security interest related to previous
loan agreements were released and replaced by
the following:•

registered pledge granted by Allego.pl and Ceneo.pl over key trademarks owned by Allegro.pl
and Ceneo.pl, together with a Polish law power ofattorney in respect of the Allegro.pl and Ceneo.
pl key web domain in amount of PLN 1,226,702(included in the net assets above).

•a Polish law submission to enforcement by eachof Allegro.pl and Ceneo.pl and Allegro.eu.

Explanatory proceedings related toeBilet procedure of tickets returns
during COVID-19 pandemic
On 22 February 2021, the Group received a formal notification that the UOKiK President hascommenced explanatory proceedings in order toestablish whether eBilet has infringed collective
consumers’ interests. In the same document the
UOKiK President included questions to eBilet related to its policy of ticket returns during COVID-19
pandemic, in particular proposing vouchers insteadof cash refunds.

These explanatory proceedings are a preliminary
step that does not have to lead to the initiationof formal proceedings against eBilet. If the UOKiK
President decides to pursue the matters coveredby these explanatory proceedings, he must open
formal proceedings against eBilet. If the UOKiK President decides that eBilet’s behavior was illegal, he will
issue an infringement decision, with or without a fine,and may also order the effects of the infringement
to be remedied. If a fine were to be imposed, thenin accordance with the Competition Act, it could be
as high as 10% of eBilet’s turnover in the financial
year preceding the infringement decision, for each
infringement. If during the course of the investigation eBilet offers adequate commitments to rectify
the alleged infringement and/or to remedy its effects,
the case may end with a commitment arrangementwith the UOKiK President and no fine imposed.

35.
Commitments
35.1.
Capital commitments
As at 31 December 2020, the Group’s future contractual commitments for expenditure on intangible
assets not recognized in the statement of financial
position amounted to PLN 74,295 and were related
to software development. Contractual commitments
as at 31 December 2019 amounted to PLN 24,335.

308

In 2020 the Group entered into various lease agreements for warehouse and offices which have notbeen recognized yet as lease liabilities. The buildings
are still under construction. The expected totalcommitment for future lease payments is estimatedat PLN 333,582.

IV. Financial statements

309

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

OTHER INFORMATION

01.01 – 31.12.2019

As at 31.12.2019

Revenues

ExpensesFinancialincomeFinancial
costs

Receivables

PayablesLoans
grantedMepinan S.a r.l.

—

362

—

—

—

—

—

Adiman SCSp

—

—

—

—

75

—

—

Cinven Partners LLP

—

1,934

—

—

—

—

—

Permira Advisers(London) Ltd

—

1,139

—

—

—

—

—

Loans granted

—

—

371

—

—

—

8,360

BlackPines CapitalPartners Ltd

—

6,004

—

—

—

—

—

Polskie Badania
Internetu sp. z o.o.

—

276

—

238

—

23

—

Fundacja Allegro All
For Planet

—

1,404

—

—

—

—

—

Total

—

11,119

371

238

75

23

8,360

Related party
Shareholder:

37.
Related party transactions
Transactions with related parties referred to settlements of consulting and management services
and loans granted. All transactions were enteredinto on an arm’s length basis. Transactions withBlackPines Capital Partners relate to consultancy
services provided by a Key Group Manager.

The Group made the following related party transactions in the period ended 31 December 2020 and
31 December 2019:

Management:

Associates:
01.01 – 31.12.2020

Related party

Revenues

Expenses

As at 31.12.2020

FinancialincomeFinancial
costs

Receivables

PayablesLoans
grantedShareholder:
Mepinan S.a r.l.

—

206

—

—

—

—

—

Cinven Partners LLP

—

1,013

—

—

—

—

—

Permira Advisers(London) Ltd

—

1,381

—

—

—

—

—

Loans granted

—

—

927

—

—

—

BlackPines CapitalPartners Ltd

—

4,785

—

—

—

—

Management:—

Associates:
Alter Domus
Luxembourg S.à r.l.

—

1,094

—

—

—

1,094

—

Polskie Badania
Internetu sp. z o.o.

—

253

—

—

—

23

—

Fundacja Allegro All
For Planet

31

1,950

—

—

7

—

—

Total

31

10,681

927

—

7

1,117

—

38.
Employment
The table below shows the number of employees
as at the reporting date ended 31 December 2020
and 31 December 2019:31.12.2020

31.12.2019

Number of employees

3,159

2,479

Total

3,159

2,479

The number of employees includes various formsof employment: employment contract, contractors(B2B) and workers who are not direct employees(work agencies & outsourced services).

310

IV. Financial statements

311

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

39.
Emoluments of the management
At the balance sheet date emoluments of the key
management of the Group entities comprised:31.12.2020

31.12.2019

Short-term employee benefits

22,36014,070Management Investment Plan

8,943

4,331

Total

31,303

18,401

Management accordingly owned 91,056,455 shares
relative to the total issued share capital of the Groupplus 34,490,833 shares acquired via non-recourse
loans in 2019. After the conversion, Management
owned 71,448,853 in total (including 33,030,000
of shares acquired via non-recourse loans), fromwhich 7,655,152 shares were sold at the IPO date,resulting in a total holding of 63,793,701 shares at
31 December 2020, all of which are subject to lockup
agreement until October 2021.

Total emoluments of the Group’s Key Management(Board of Directors and Senior Key Managers) include remuneration, benefits, severance costs andsigning bonuses. Key Management of the Group
comprises Board Members of the Parent andBoard Members of the main operating companies,­A llegro.­pl and Ceneo.pl.

Management Investment Plan
Description of the Management
Investment Plan
The Management Investment Plan (‘MIP’) was established by the Ultimate Founding Owners of the
Parent: Cinven, Permira and Mid Europa Partners toenable the Group’s Management (Group Key Management and other selected Managers) to co-invest
in the group while it was privately owned. The MIP
ceased to operate once the Group became a publiccompany at its IPO in October 2020. Management’s
investments in the MIP were converted into New
Ordinary Shares of the listed Parent based on thevaluation established during the IPO book-building
process of 43 zloty per New Ordinary Share anda total market capitalization of PLN 43,000,000 (seealso note 28, Note to the Consolidated Statementof Changes in Equity).

312

Under the MIP, Managers were given loans to purchase part of their shares. The total amount of theloans granted as at 31 December 2019 was PLN
23,250, which funded the purchase of 53,746,505
shares. During 2020 an additional 4,583,620 shareswere acquired by the new manager participants to
the MIP using loans granted in the total amountof PLN 18,770. Part of the loans were made on
a non-recourse basis and part on a recourse basis.
The number of shares acquired with non-recourse
loans amounted to 34,490,833 as at 31 December 2019 and 33,030,000 at the IPO date. On 29
September all existing shares were converted into
a new class of shares (for more information pleaserefer to note 28).

Under the MIP, the Management participated indirectly through various classes of shares of Adiman
SCSp and directly via type C and D shares issued
by Adinan Super Topco S.à r.l.(currently: Allegro.eu).
Managers paid the fair value of the issued sharesat the grant date with difference to nominal value
being paid to share premium. The nominal valueof share capital owned by the management as at
31 December 2020 amounted to PLN 638, and was
divided into 63,793,701 shares. As at 31 December
2019 amounted to PLN 5,295 and was divided into
125,547,288 shares.

IV. Financial statements

The goal of Ultimate Founding Owners was toachieve a successful exit at a currently unknown
future date, either through IPO or other possible
exit routes (e.g. sale of the Group). In all these cases
the Ultimate Founding Owners had drag along andtag along rights towards the MIP participants, whichhold an equity interest in the Allegro.eu Group. In
case of leaving the MIP before exit, the leaver might
partly lose entitlement to certain elements of the
MIP depending on the reason of his or her departure.
The managers were also entitled to participate ina ‘ratchet feature’ where, if upon an exit event (including an IPO) the Ultimate Founding Owners returnamount was at least 3 times their initial investment
amount, then Management’s B shares were entitledto a further amount of 1% of the Ultimate Founding
Owners receipts.

As at 31 December 2020 there were no non-recourse loans, recourse loans or ratchet features still
outstanding with the Group’s managers as the MIP
was settled and discontinued with the transfer of
71,448,853 Ordinary Shares to management upon
the restructuring of the Share Capital (see note 28),
from which 7,655,152 shares were sold in the IPO.

Accounting impact
In accordance with IFRS 2, the MIP was partially accounted for as equity-settled share-based paymenttransactions.
Part of the loans granted to the Group’s Key Management were made on a non-recourse basis, whichgave rise to a benefit under IFRS 2 Share-Based
Payment. The non-recourse loans together withthe shares issued are considered as option under
IFRS 2. It gives the party receiving the loan the rightupon an exit event to choose not to repay the loan,
but instead to relinquish their rights to the shares.
Initially, the expected vesting period at the relevant
grant date was either June or December 2021 andrepresented the assumed maturity date of the option at the grant date. The ratchet feature, which was
granted to Group’s Key Management and selected
other managers, was also valued under IFRS 2 atinception of the MIP. Together these two featuresof the MIP formed an incentive program (‘Program’)under IFRS 2.
The benefits were valued at grant date and amortized over the expected vesting period, recognized
in staff costs and as a corresponding increase inother reserve. As a result of IPO, the Program was
exercised earlier than originally assumed. The totalremaining value of the Program was recognized in
Staff costs until the exit date in October 2020313

ALLEGRO.EU S.A. GROUPCONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
all amounts expressed in PLN’000 unless indicated otherwise

The respective amounts recognized through staff
costs were PLN 52,191 in 2020 and PLN 4,320 in
2019. In the light of IFRS 2, the non-recourse loans
are technically not recognized as loans from an
accounting perspective, therefore the nominal
amounts of non-recourse loans and corresponding
shares were deducted from the Loans granted andEquity (i.e. from the share capital and capital reserve,
respectively) in the presentation of the year end
balances in amounts of PLN 15,971 in 2019 (nil in2020).

Allegro Incentive Plan
The Group has adopted the Allegro Incentive Plan(the ‘AIP’) in 2020. The AIP is a discretionary planunder which awards in the form of performance
share units (‘PSUs’) and restricted stock units (‘RSUs’)
may be granted to employees of the Group (including
the Directors) at the discretion of the Remuneration
and Nomination Committee.
Awards under the AIP may be granted in the form of
PSUs or RSUs which give the participants a right toreceive Shares without payment on completion ofa vesting period and, in the case of PSUs, subject tothe satisfaction of performance conditions. The AIP
rules also include flexibility for the Remuneration
and Nomination Committee to grant other forms ofawards. The first awards under the AIP are expected
to be granted in April 2021. Thereafter, awards will
normally be granted within the six-week period after
the Issuer announces its annual results. However,the Remuneration and Nomination Committee may
grant awards outside this period at its discretion.
In respect to PSUs, the award vests on the third
anniversary of the grant date provided that theCommittee has determined that the applicable
Performance Condition and any other conditions
imposed on the Vesting of the Award have beensatisfied. When the PSU participant is a leaver theaward vests in three tranches; 25% on the firstanniversary of the Grant Date, 25% on the second
anniversary of the Grant Date, and 50% on the third
anniversary of the Grant Date. RSUs vest in a similar
timeframe to PSUs.

314

The AIP has been established by the general meetingof the Group and is in line with the Group’s remuneration policy. In addition, in light of the Group’s
desire to encourage employee share ownership,
all employees (excluding MIP participants) who
were employed by the Group on the Listing Datereceived a free one-off award of Shares under the
AIP with a value of PLN 10 which constitutes 233
shares each. The number of shares was calculated
dividing PLN 10 by the value of the share price at the
IPO date. The award vested immediately at Listing
Date while shares will be delivered to the recipienton the first anniversary of the IPO on 12 October
2021, regardless of whether the recipient is still an
employee on that time. The total grant amounted to
PLN 25,428 and was accounted against the equity
with the corresponding entry to profit/loss (line item
“Staff costs gross”).

Initially, an individual target value in PLN is divided
by the share price to conditionally define the target
number of shares to be received after the performance period. After three years, the final number ofshares is determined by multiplying the conditional
number of shares by the target achievement percentage (0% to 200%). The gain for the participant
is calculated by multiplying the number of shares
received by the share price after three years.
On 18 December 2020 Key Group Directors were
informed about the detailed principles of PSU
program. Under IFRS, this date is considered asa service commencement date, as from this date
the Directors may reasonably expect to benefit
from the future award.

The Group calculated the impact on the 2020 net
result, and concluded it is not material. The calculation was performed based on AIP rules approvedin October 2020 and confirmed by the Group’s
Remuneration Committee of the Board of Directors on 17 December 2020. Individual targets weredivided by the weighted average share price since
the IPO date which was PLN 80.6 (PLN not thousand
PLN) and multiplied by target achievement andshare price at service commencement date which
was PLN 86.1 (PLN not thousand PLN). The target
achievement was calculated based on the Group’s
best expectation of the future results at 136%. The
total grant value was estimated at PLN 25,370.

For RSUs the service commencement date has not
yet started.

Performance Share Units
Performance Share Units are designed for the
Key Directors of the Group. The program will startin April 2021 and may last until September 2030.
Each year participants gain the conditional right toreceive a predefined number of shares following
a 3 year performance period, depending on theextent to which pre-defined cumulated GMV and
EBITDA targets are met. The final number of shares
received depends on the target achievement of
those KPIs and ranges from 0 % to 200 % of theconditionally granted shares. The gain for the participant depends both on the final number of shares
granted and the development of the share priceover the 3 year performance period. The shareprice is not a performance condition. The Group has
made a judgment that the service commencement
date or the grant date has not yet occurred for thesubsequent awards to be granted until 2030 as the
program is discretionary and can be terminated by
Remuneration Committee.

IV. Financial statements

40.
Audit fee
The table below presents the net fees of the PricewaterhouseCoopers audit due for the reporting period
ended on 31 December 2020 on 31 December 2019by type of service:31.12.2020

31.12.2019

Statutory annual audit

1,498

931

Other services

4,929

34

Total

6,427

965

315

Approved by the Board and signed on its
behalf by:Darren Huston

François Nuyts

Director

Director