DJ PJSC ROSTELECOM: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF 2016
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PJSC ROSTELECOM / Annual Financial Report
PJSC ROSTELECOM: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING
RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF 2016
06-March-2017 / 13:11 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS,
LLC - a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
*ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE
FOURTH QUARTER AND FULL YEAR OF 2016*
*Free Cash Flow rose to RUB 15.6 billion for the fourth quarter and revenue
was RUB 297.4 billion for the full year*
*Moscow, Russia *- March 6, 2017 - Rostelecom PJSC (MOEX: RTKM, RTKMP;
OTCQX: ROSYY), Russia's national telecommunications operator, today
announces its consolidated financial results for the fourth quarter and the
full year of 2016 prepared in accordance with IFRS[1].
*KEY ACHIEVEMENTS*
*- *Revenue, OIBDA margin and CAPEX to revenue ratio are in-line with
Management's guidance for 2016;
- Revenue grew by RUB 91 billion to RUB 297.4 billion in 2016;
- FCF grew by 72% to RUB 15.6 billion for the fourth quarter 2016, which
resulted in RUB 13.3 billion FCF for the full year 2016;
- The digital segment's[2] contribution to total revenue reached 44%;
- Rostelecom accounted for around 50%[3] of new connections in pay-TV
market, and for more than 50%[4] in the broadband market;
- Total fibre optic network coverage reached 32.2 million households by the
end of 2016;
- Broadband of FTTx (+17%) and pay-TV subscribers (+24%) growth rates remain
consistently high;
- The B2B/G segment grew by 2.5% in 2016.
*FOURTH QUARTER 2016 FINANCIAL HIGHLIGHTS*
*- *Revenue declined by 0.8% year-on-year to RUB 80.4 billion compared to
the fourth quarter of 2015;
- OIBDA[5] decreased by 5.6% to RUB 24.4 billion compared to the fourth
quarter of 2015;
- OIBDA margin of 30.3% compared to 31.9% in the fourth quarter of 2015;
- Net profit decreased by 13% to RUB 3.6 billion compared to the fourth
quarter of 2015;
- CAPEX[6] decreased by 22% to RUB 15.1 billion (18.7% of revenue) from RUB
19.3 billion (23.9% of revenue) in the fourth quarter 2015;
- Free Cash Flow (FCF)[7] increased by 72% to RUB 15.6 billion compared to
the corresponding period of last year;
- Net debt[8] increased by 2% since the beginning of 2016 and amounted to
RUB 177.5 billion, resulting in a Net Debt / Annualised OIBDA ratio of 1.8x.
*Key figures for the fourth quarter 2016*
_RUB million_ *4Q 2016* *4Q 2015* *% change, y-o-y*
*Revenue* *80, 407 * *81, 019 * *(0.8%)*
OIBDA *24, 372 * *25, 812 * *(6%)*
_OIBDA margin %_ *30.3%* *31.9%*
*Operating Income* *11, 248 * *9, 258 * *21%*
_Operating margin %_ *14.0%* *11.4%*
*Net Income* *3, 586 * *4,117 * *(13%)*
_% of revenue_ *4.5%* *5.1%*
*Capital Expenditure* *15, 060 * *19, 343 * *(22%)*
_% of revenue_ *18,7% * *23.9% *
*Net debt* *177, 481 * *173, 670 * *2%*
*Net debt/ annualised *1.8* *1.7*
OIBDA*
*FCF* *15, 618* *9,074 * *72%*
*FULL YEAR 2016 FINANCIAL HIGHLIGHTS*
- Revenue increased by RUB 91 million to RUB 297.4 billion for the full year
of 2016;
- OIBDA decreased by 4% to RUB 96.8 billion compared to the corresponding
period of last year;
- OIBDA margin of 32.5% compared to 33.9% in 2015;
- Net profit decreased by 15% year-on-year to RUB 12.2 billion;
- CAPEX decreased by 1% to RUB 61.9 billion (20.8% of revenue) from RUB 62.7
billion (21.1% of revenue) in 2015;
- FCF amounted to RUB 13.3 billion compared to RUB 22.0 billion in 2015.
*Key figures for the full year of 2016*
_RUB million_ *FY 2016* *FY 2015* *% change,
y-o-y*
*Revenue* *297,446 * *297,355 *0.03%*
*
OIBDA *96,772 * *100,839 *(4%)*
*
_OIBDA margin, %_ *32.5%* *33.9%*
Operating income *39,836 * *38,586 * *3%*
_Operating margin, %_ *13.4%* *13.0%*
Net income *12,249 * *14,391 * *(15%)*
_% of revenue_ *4.1%* *4.8%*
*Capital Expenditure* *61,857 * *62,726 * *(1%)*
_% of revenue_ *20.8% * *21.1% *
*Net debt* *177,481 * *173,670 *2%*
*
*Net debt/ annualised *1.8* *1.7*
OIBDA*
*FCF* *13,298 * *21,962 * *(39%)*
The President of Rostelecom, Mikhail Oseevsky commented:
'Rostelecom made good progress with the delivery of its strategy in 2016. We
continue to successfully transform the business by growing the digital
segment steadily. Revenue growth from our cloud and other digital services
underpin this transformation, as does our ability to compete in the key
broadband and pay TV markets. Our ARPU is growing and our share of new
additions is 50%. It is mainly thanks to these achievements, which were
delivered despite the on-going stagnation in traditional services, that
Rostelecom's revenues increased slightly in 2016.
_Rostelecom remains a backbone company for the country's entire telecoms
industry, to the extent that it influences both the quality of people's
lives and it drives the development of Russia's digital economy. Rostelecom
has significantly restructured its business, transforming it into a provider
of digital services, but there is still room for improvement.'_
_Vladimir Kirienko, Senior Vice-President and Chief Operational Officer
added: _
'We have expanded our market proposition in 2016, by introducing attractive
new tariff options. In addition, based on the MVNO agreement with Tele2, we
launched commercial mobile services under our own brand based on Tele2's
vast network infrastructure. Rostelecom's mobile service is now accessible
on the Tele2 Russia network countrywide, which provides us with further
opportunities to increase client loyalty in the mass market segment and
strengthen our competitive positions in the corporate and state consumer
markets, which breaks new ground for the further promotion of M2M/IIoT
services.
_I would also like to highlight our great success in the B2B space,
following a breakthrough in our ability to enhance relations with large
corporates as well as small and medium size businesses. This resulted in
solid revenue growth of 2.5% year-on-year for the segment. Our success in
this arena is due to our intensified efforts in delivering a number of
tailored digital solutions to our clients, based on a modernized fibre optic
infrastructure and an improving customer experience.' _
_Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added:
_
'In 2016, we started to apply new technology to improve operational
efficiency and we are seeing tangible results. This has led to greater cost
reduction in certain areas, and the optimization of personnel costs in
particular. The Company's Management undertook the first practical step
towards implementing a corporate real estate fund strategy late in 2016,
through the creation of a sub-fund in a joint venture with Sberbank. This
has been done as part of our initiative to monetize the Company's real
estate portfolio. Our business processes and operations are becoming more
and more optimized, helping to improve internal efficiency. One such
initiative includes the introduction of lean manufacturing principles and
the development of an advanced production system. Another prominent example
of the type of innovations we are introducing include new automated
statistical reporting functions, which has yielded RUB 100 million savings,
as well as the introduction of a credit scoring system, which has driven a
reduction in accounts receivable through a more focused approach in dealing
with client groups using big data solutions and artificial intelligence.
_'These achievements led to rapid growth in free cash flow generation in the
fourth quarter, and by the end of 2016 we managed to ensure considerable FCF
generation, which is integral to maintaining our dividend pay-out in line
with current dividend policy._
_'We have also delivered on our 2016 guidance. In 2017 we expect to see some
macro improvements, we will continue to transform our business and we are
accelerating our transition towards being an exemplary model of what a
digital services provider should look like. Therefore, in 2017, we expect to
generate revenue growth of around 1%, with OIBDA margin growth of up to 1%,
and CAPEX to revenue ratio of 18.5%, excluding the implementation of the BDD
project.'_
*KEY OPERATING HIGHLIGHTS*
*1. *The number of broadband subscribers grew by 6% to 12.3 million in the
fourth quarter of 2016, compared to the corresponding period of last year;
- The B2C subscriber base grew by 6% to 11.6 million, whilst the number of
subscribers connected by fibre optic increased by 16% year-on-year to 7.41
million (61% of the subscriber base).
2. The number of pay-TV subscribers grew by 8% to 9.3 million households in
the fourth quarter of 2016, compared to the corresponding period of last
year.
- The number of IPTV subscribers increased by 24% to 4.2 million;
3. The number of local telephony subscribers decreased by 7% to 20.5
million.
_Number of *% *%
subscribers *4Q 2016* *4Q 2015* change, *3Q 2016* change,
(million):_ y-o-y* y-o-y*
Broadband *12.3 * 11.6 _6%_ 12.2 _1%_
Residential *11.6 * 10.9 _6%_ 11.4 _1%_
Corporate *0.8 * 0.7 _3%_ 0.7 _1%_
clients
Pay TV *9.3* 8.6 _8%_ 9.2 _2%_
Including IPTV 4.2 3.4 _24% _ 4.0 _5%_
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DJ PJSC ROSTELECOM: ROSTELECOM ANNOUNCES ITS IFRS -2-
Local *20.5 * 22.1 _(7%)_ 20.9 _(2%)_
telephony
services
*KEY EVENTS RELATING TO THE FULL YEAR OF 2016 AND AFTER THE END OF THE
REPORTING PERIOD*
_Business News _
- A growing range of services:
- Introduced a new 'Unlimited Russia' tariff plan - the first of its kind,
offering calls to any fixed network across the country with no limits on the
number of calls nor their duration;
- In cooperation with the Wargaming company (founder of the online game
'World of Tanks') launched a special broadband tariff plan called 'Gaming';
- Increased the number of HD-channels to 70 in IPTV packages, introduced a
new video content package type 'ABC Studios Best TV Series' and updated the
'Your ideal HD' TV-package;
- Launched an 'Interactive TV' smartphone app and video portal itv.rt.ru;
- Launched an 'Interactive TV for hotels' service and the SAP SuccessFactors
service on a cloud platform, as well as the 'New Telephony' service and
'Operated Wi-Fi' for corporate users;
- Began providing mobile services under its own brand based on the Tele2
network under an MVNO agreement; now Rostelecom customers can access the
Rostelecom mobile proposition through the Tele2 network across the country.
- Rostelecom remains a reliable partner to the state:
- Successfully organised the video surveillance of the Unified State Exam in
2016;
- Successfully organised the video surveillance of elections for the State
Duma in 15 federal regions of Russia;
- Signed an agreement for the creation of an integrated geo-information
system for the Nenets Autonomous District;
- Rostelecom won the tender to introduce the domestic 'MyOffice Mail'
product for the Moscow Department for Information Technology.
- Modernizing our networking infrastructure in order to provide high quality
digital services:
- Covered 32.2 million households with its fibre optic network;
- Completed the construction of the sub-marine Kamchatka-Sakhalin-Magadan
fibre optic network; almost 500 thousand people in the Kamchatka and Magadan
region, who used to receive their service via satellite, can now benefit
from unlimited high-speed Internet access.
- Rostelecom continued to secure a substantial share of new subscriptions.
The Company has strengthened its competitive position in the broadband and
pay-TV markets; Rostelecom accounted for around 50%[9] of new subscriptions
in the pay-TV market and over 50%[10] in the broadband market in 2016;
- In developing fast-growth segments to drive revenue, Rostelecom started
broadcasting a teleshopping channel 'BOOM-TV', which was created under a JV
with South Korean partners;
- To further expand its participation in the digital segment, Rostelecom
signed a number of large contracts, including with the Judicial Department's
information-analytics centre, Russian Postal Service, SAP and Pepsico, as
well as deals on the implementation of 'Smart City' projects, VPN, etc.
- Rostelecom signed long-term contracts with MTS, Vimpelcom and Megafon for
the lease of its network infrastructure, thereby monetising its leading
position as the major telecoms infrastructure operator in the country.
*Other News*
*- *In order to optimise its debt portfolio, Rostelecom:
- Placed bonds equal to RUB 15 billion at a record low coupon rate of 9.2%
per annum;
- Signed a non-revolving credit facility agreement with VTB Bank for RUB 35
billion, which will be used primarily to refinance existing commitments.
- To improve its competitiveness across its markets, Rostelecom acquired the
telecommunications assets of Morton Group, AIST and Sibitex;
- The Company's Board of Directors approved the launch of a new long-term
incentive programme and a new corporate pension provision system to further
enhance personnel motivation. The Board of Directors also considered
initiatives regarding the implementation of a Production System in the
company. These steps will contribute to improving business efficiency and
will accelerate Rostelecom's transition into a digital service provider;
- Noting improvements in the macroeconomic situation in Russia, both Fitch
and S&P lifted its outlook on Rostelecom credit rating to 'stable';
- In order to identify new ideas and adopt innovative technologies,
Rostelecom's Venture Fund closed a number of investment deals with software
provider Brain4Net and Raidix, a leading Russian developer of network
solutions for telecoms operators RDP.RU, as well as with Transportation
Information Technologies (TransInfoTech), an e-Freight management operator
engaged in the tracking of international cargo transportation.
*OPERATING REVIEW*
*Revenue Analysis*
*Revenue structure by services*
*4Q *4Q *% change, *FY *FY *%
_RUB million_ 2016* 2015 y-o-y* 2016* 2015* change,
* y-o-y*
Broadband *17,2 16,4 _5%_ *66,7 63,880 _5%_
70* 95 70*
TV services *6,28 5,17 _22%_ *23,5 19,368 _22%_
7* 0 99*
Fixed telephony *21,2 23,9 _(12%)_ *87,3 99,105 _(12%)_
01* 98 14*
Wholesale *21,9 22,7 _(4%)_ *79, 78,266 _1%_
services 12* 21 010*
_Rent of _2,48 _2,9 _(15%)_ _10,5 _11,714_ _(10%)_
channels_ 2_ 13_ 38_
_Interconnection _10,8 _11, _(6%)_ _35,1 _34,717_ _1%_
and traffic 56_ 582_ 02_
transit services_
_VPN_ _5,33 _5,3 _1%_ _20,8 _19,711_ _6%_
1_ 01_ 23_
_Rent and _3,24 _2,9 _11%_ _12,5 _12,124_ _3%_
maintenance of 3_ 25_ 46_
telecommunication
s infrastructure_
VAS and cloud *6,40 5,90 _8%_ *18,2 14,224 _28%_
services 0* 9 45*
Other *4,94 4,12 _20%_ *14,7 14,499 _2%_
telecommunication 1* 5 41*
s services
Other *2,39 2,60 _(8%)_ *7,76 8,014 _(3%)_
non-telecommunica 7* 1 7*
tions services
*Total* *80,4 *81, *(0.8%)* *297, *297,355 *0.03%*
07* 019* 446 * *
*Revenue structure by management units*
*4Q *4Q *% change, *FY *%
_RUB million_ 2016* 2015 y-o-y* 2016* *FY 2015* change,
* y-o-y*
Residential 34,69 34,2 _1%_ 135,269 136,764 _(1%)_
customers 6 04
Corporate 100,763 98,319 _2,5%_
customers/ 28,40 28,4 _0%_
Governmental 6 03
customers
Operators 16,23 17,2 _(6%)_ 57,008 57,143 _(0,2%)_
8 47
Other 1,067 1,16 _(8%)_ 4,407 5,129 _(14%)_
4
*Total* *80,4 *81, *(0.8%)* *297,446 *297,355* *0.03%*
07* 019* *
In the fourth quarter of 2016, revenue decreased by 0.8% year-on-year to RUB
80.4 billion. Revenue dynamics in the fourth quarter of 2016 were largely
influenced by the following key factors:
- a 22% increase in revenue from pay-TV services due to the growth of the
IPTV subscriber base, and a rise in the consumption of VoD services as well
as in NPVR and higher ARPU;
- 5% growth in revenue from broadband services due to an increased number of
subscribers as well as increased APRU of FTTx;
- an 8% increase in revenue from VAS and cloud services mainly due to the
development of the 'Smart City' projects;
- a 12% reduction in revenue from fixed-line telephony services.
For the full year of 2016, revenue increased by 0.03% year-on-year to RUB
297.4 billion. Revenue dynamics in 2016 were influenced by the following
factors:
- a 22% increase in revenue from pay-TV services due to the growth of the
IPTV subscriber base, and a rise in the consumption of VoD services and
higher ARPU;
- a 28% increase in revenue from VAS and cloud services due to an increase
in revenue from cloud services, data centre services and the development of
the 'Smart City' projects;
- 5% growth in revenue from broadband services due to an increased number of
subscribers as well as to an increased APRU of FTTx;
- a 12% decrease in revenue from fixed-line telephony services.
*Operating Income Analysis*
*Operating expenses structur**e*[11]
*4Q *% *FY *FY *%
_RUB million_ *4Q 2016* 2015 change, 2016* 2015* change,
* y-o-y* y-o-y*
Personnel costs *(21,866)* (22, _(3%)_ *(90,3 (91,08 _(1%)_
570) 40)* 1)
Interconnection *(15,457)* (15, _0%_ *(52,1 (49,82 _5%_
charges 430) 61)* 5)
Materials,
repairs and *(7,613)* (7,7 _(2%)_ *(24,9 (25,12 _(1%)_
maintenance, 42) 17)* 5)
Utilities
Gain on the
disposal of PPE 1,40 *4,556
and *3,193* 9 _127%_ * 2,133 _114%_
intangible
assets
Reserves for bad *(100)* 1,09 _-_ *(2,77 (882) _231%_
debt expenses 5 5)*
Other operating *2,682* 3,83 _(30%)_ *12,94 14,630 _(11%)_
income 3 8*
Other operating *(16,656)* (16, _3%_ *(49,3 (48,02 _3%_
expenses 218) 32)* 0)
*Total operating *(55 *(201, *(198,
expenses* *(55,817)* ,623 *0.3%* 021)* 169)* *2%*
)*
In the fourth quarter of 2016, operating expenses excluding depreciation and
amortisation remained flat compared to the corresponding period of 2015 and
amounted to RUB 55.8 billion. This trend was influenced by the following
factors:
- a 30% decrease (by RUB 1.2 billion) in other operating income, mainly due
to the impact of the Bridging the Digital Divide project;
- a significant recovery of reserves that had been held for bad debt
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DJ PJSC ROSTELECOM: ROSTELECOM ANNOUNCES ITS IFRS -3-
expenses in the fourth quarter of 2015;
*- *a 127% increase (by RUB 1.8 billion) in gain on the disposal of property
assets, mainly due to the completion of a transaction following the creation
of a real estate sub-fund within a JV with Sberbank;
- a 3% decrease (by RUB 0.7 billion) in personnel costs.
In 2016, operating expenses excluding amortisation increased by 2%, compared
to the corresponding period of 2015, and amounted to RUB 202.0 billion. The
following factors influenced this dynamic:
- a 5% increase (by RUB 2.3 billion) in interconnection charges due to an
increase in content costs as a result of a larger pay-TV subscriber base;
- an 11% increase (by RUB 1.7 billion) in other operating income, mainly in
relation to the BDD project; a 94% increase of other operating income
excluding compensation by the government for the BDD project;
- a more than doubling of the gain on the disposal of property assets (by
RUB 2.4 billion), mainly due to the completion of a transaction to create a
real estate sub-fund within a JV with Sberbank;
- significant recovery of reserves that had been held for bad debt expenses
in the fourth quarter of 2015;
- a 1% decrease (by RUB 0.7 billion) in personnel costs, mainly due to
headcount optimisation.
Depreciation and amortisation expenses fell by 17% year-on-year in the
fourth quarter, and by 8% in the full year of 2016 to RUB 13.3 billion and
RUB 55.6 billion, respectively. This largely reflects the revaluation of the
terms of useful life of PPE.
Operating profit grew by 21% year-on-year to RUB 11.2 billion in the fourth
quarter of 2016 compared to the corresponding period of 2015. In the full
year of 2016, operating profit increased by 3% year-on-year to RUB 39.8
billion.
OIBDA for the fourth quarter of 2016 decreased by 6% and the fell by 4% for
the full year of 2016 year-on-year to RUB 24.4 billion and RUB 96.8 billion,
respectively. The OIBDA margin was 30.3% in the fourth quarter of 2016,
compared to 31.9% in the corresponding period of 2015. The OIBDA margin for
the full year of 2016 was 32.5% compared to 33.9% in 2015.
*Net Income Analysis*
In the fourth quarter of 2016, profit before tax increased by 94%
year-on-year to RUB 4.9 billion. Profit before tax for the full year of 2016
increased by 1% to RUB 16.9 billion.
The following factors influenced this dynamic in the fourth quarter of 2016:
- a higher level of operating income;
- a higher comparable base of losses for the fourth quarter of 2015 from the
revaluation of financial instruments;
- lower foreign exchange losses in the reporting period;
- the consolidation of losses from affiliated companies, mainly the
financial results of the JV with Tele2 Russia.
Profit before income tax in the full year of 2016 was mainly influenced by
the consolidation of losses from affiliated companies, the financial results
of the JV with Tele2 Russia, an improvement in financial results from the
revaluation of financial instruments, as well as foreign currency gains.
In the fourth quarter 2016, income tax amounted to RUB 1.3 billion compared
to a reversal of deferred income tax of RUB 1.6 billion in the corresponding
quarter of 2015. In 2016, income tax expenses increased by 93% year-on-year
and totalled RUB 4.7 billion, largely reflecting the revaluation of tax
obligations related to the JV with Tele2 Russia transaction in 2015.
The effective income tax rate was 27% in the fourth quarter of 2016 and 28%
for the full year of 2016, compared to the 20% rate specified by the Tax
Code. The higher effective tax rate was due to the presence of expenses that
are non-deductible for tax purposes.
Net profit in the fourth quarter of 2016 decreased by 13% to RUB 3.6
billion. Net profit for the full year of 2016 decreased by 15% to RUB 12.2
billion, which is due in large part to Tele2 Russia's losses reflected in
Rostelecom's financial results in the amount of RUB 1.9 billion in the
fourth quarter of 2016 and RUB 6.7 billion in for the full year of 2016.
*Financial Review*
Consolidated net operating cash flow totaled RUB 24.8 billion in the fourth
quarter of 2016, compared to RUB 26.2 billion in the corresponding period of
2015. Consolidated net operating cash flow in the full year of 2016 amounted
to RUB 67.2 billion compared to RUB 80.9 billion in the corresponding period
of 2015.
A decrease in consolidated net operating cash flow in the fourth quarter of
2016 was partly caused by changes in working capital. This was driven by a
smaller decrease in accounts receivable, compared to the fourth quarter of
2015, as well as an increase in inventories, caused by a transfer of CPE
from PPE to inventories. The decrease in consolidated net operating cash
flow in 2016 is due to growth of concession agreements assets, increase in
accounts receivable of state-funded organizations and increase in
inventories, also caused by a transfer of CPE from PPE to inventories.
Significant profit tax refunds in the fourth quarter of 2016 and in the full
year of 2016 had a positive effect on the cash flow.
Consolidated free cash flow amounted to RUB 15.6 billion in the fourth
quarter of 2016 compared to RUB 9.1 billion in the corresponding period of
last year. Consolidated free cash flow for the full year 2016 was RUB 13.3
billion compared to RUB 22.0 billion in 2015. The consolidated free cash
flow dynamics were primarily driven by a lower consolidated net operating
cash flow, as well as an increase in proceeds generated from the sale of
property and income tax refunds.
CAPEX for investments in fixed assets decreased by 22% year-on-year to RUB
15.1 billion in the fourth quarter of 2016; this figure decreased by 1.0%
year-on-year to RUB 61.9 billion for the full year of 2016. In the fourth
quarter of 2016 this was due to CAPEX being unevenly distributed across the
calendar year. In 2016, the volume of investments is weighted to the first
half of year. In the full year of 2016, consolidated cash outflow for
investments in fixed assets decreased by 1%. Excluding the 'Bridging the
Digital Divide' project it decreased by 5% to RUB 56.6 billion (19% of
revenue) mainly reflecting the fulfilment of a substantial bulk of the
modernisation project and the installation of Rostelecom's fibre optic
network to 33 million households.
At the end of 2016, the Group's total debt remained at a similar level
compared to the beginning of the year, and amounted to RUB 187.1 billion.
More than 99% of the Group's total debt was rouble-denominated as at
December 31, 2016.
As at December 31, 2016, the Group's net debt amounted to RUB 177.5 billion
with a net debt /OIBDA ratio of 1.8x.
*OTHER INFORMATION: CONFERENCE CALL*
Rostelecom's management will hold a conference call and webcast today at
6.00PM (Moscow), 4.00PM (CET), 3.00 PM (UK) and 10.00 AM (NYT). To
participate in the conference call, please dial:
Russia: + 7 495 213 1767
UK/ International: + 44 (0) 330 336 9105
USA: + 1 719 457 1036
Access code: 9912862
A webcast of the conference call will be available at
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4247 [1]
A replay of the conference call will be available on the Company's website:
http://www rostelecom
ru/en/ir/results_and_presentations/financials/IFRS/2016/4/ in due course.
* * *
*APPENDICES*
*1. Reconciliation of OIBDA;*
*2. Statement of Comprehensive Income for the full year of 2016;*
*3. Statement of Cash Flows for the full year of 2016;*
*4. Statement of Financial Position for the full year of 2016.*
*APPENDIX 1: RECONCILIATION OF OIBDA*
OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company
defines as operating income before depreciation and amortisation as well as
non-cash expenses. We believe that OIBDA provides useful information to
investors because it is an indicator of the strength and performance of our
business operations, including our ability to finance capital expenditures,
acquisitions and other investments and our ability to incur and service
debt.
Non-cash expenses related to the long-term management incentive programme,
implying accruals in personnel costs line starting from Q2, 2014, are not
taken into account in the calculation of OIBDA.
_RUB *% *FY *%
million_ *4Q 2016* *4Q 2015* change, *FY 2016* 2015* change,
y-o-y* y-o-y*
Operating
income *38,58
from *11,248* *9,258* _21%_ *39,836* 6* _3%_
continuing
operations
Plus
depreciati
on and *60,59
amortisati *13,342* *16,138* _(17%)_ *55,589* 9* _(8%)_
on from
continuing
operations
Plus
non-cash
expenses
related to *1,654
the *(218)* *417* _-_ *1,347* * _(19%)_
long-term
management
incentive
programme
*OIBDA * *24,372* *25,812* _(6%)_ *96,772* *100,8 _(4%)_
39*
*OIBDA 30.3% 31.9% 32.5% 33.9%
margin, %*
*APPENDIX 2: Statement of Comprehensive Income for 12M 2016*
*Year ended 31 December *
*2016* *2015*
*Revenue* *297,446* *297,355*
*Operating expenses*
Wages, salaries, other benefits and
payroll taxes (90,340) (91,081)
Depreciation, amortisation and
impairment losses (55,589) (60,599)
Interconnection charges (52,161) (49,825)
Materials, utilities, repairs and
maintenance (24,917) (25,125)
Gain on disposal of property, plant
and equipment and intangible assets 4,556 2,133
Bad debt expense (2,775) (882)
Other operating income 12,948 14,630
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Other operating expenses (49,332) (48,020)
*Total operating expenses, net* *(257,610)* *(258,769)*
*Operating profit* *39,836* *38,586*
Loss from associates and joint
ventures (7,296) (3,583)
Finance costs (17,175) (16,311)
Other investing and financial
gain/(loss), net 1,061 (434)
Foreign exchange gain/(loss), net 515 (1,431)
*Profit before income tax* *16,941* *16,827*
Income tax expense (4,692) (2,436)
*Profit for the year* *12,249* *14,391*
*Other comprehensive (loss)/ income*
*Items that may be reclassified
subsequently to profit and loss:*
Exchange differences on translating
foreign operations (453) 584
*Items that will not be reclassified
to profit and loss:*
Remeasurement of defined benefit
pension plans (379) (412)
Income tax relating to items that
will not be reclassified 76 82
*Other comprehensive (loss)/ income
for the year, net of tax* *(756)* *254*
*Total comprehensive income for the
year* *11,493* *14,645*
*Profit attributable to:*
Equity holders of the Group 11,751 13,944
Non-controlling interests 498 447
*Total comprehensive income
attributable to:*
Equity holders of the Group 10,985 14,182
Non-controlling interests 508 463
Earnings per share attributable to
equity holders of the Group - basic
(in roubles) 5.24 6.20
Earnings per share attributable to
equity holders of the Group -
diluted (in roubles) 5.20 6.11
*APPENDIX 3: Statement of Cash Flows for 12M 2016*
*Year ended 31 December*
*2016* *2015*
*Cash flows from operating
activities*
*Profit before tax* *16,941* *16,827*
_Adjustments to reconcile profit
before tax to cash generated from
operations_
Depreciation, amortisation and
impairment losses 55,589 60,599
Gain on disposal of property, plant
and equipment and intangible assets (4,556) (2,133)
Bad debt expense 2,775 882
Loss from associates and joint
ventures 7,296 3,583
Finance costs excluding finance
costs on pension and other
long-term social liabilities 16,699 15,560
Other investing and financial
(gain)/loss, net (1,061) 434
Foreign exchange (gain)/loss, net (515) 1,431
Share-based motivation program 1,019 1,251
_Changes in net working capital_
(Increase)/decrease in accounts
receivable (3,941) 1,629
Decrease in employee benefits (561) (1,356)
(Increase)/decrease in inventories (2,351) 892
Increase in accounts payable,
provisions and accrued expenses 1,376 268
Increase in other assets and
liabilities (3,131) (25)
*Cash generated from operations* *85,579* *99,842*
Interest paid (18,410) (17,082)
Income tax refund 4,391 2,559
Income tax paid (4,383) (4,469)
*Net cash provided by operating
activities* *67,177* *80,850*
*Cash flows from investing
activities*
Purchase of property, plant and
equipment and intangible assets (61,857) (62,726)
Proceeds from sale of property,
plant and equipment and intangible
assets 7,978 3,838
Acquisition of financial assets (9,736) (15,943)
Proceeds from disposals of
financial assets 10,831 10,442
Interest received 1,029 1,495
Dividends received 22 7
Purchase of subsidiaries, net of
cash acquired (2,438) (1,145)
Proceeds from equity joint ventures
or accounted investees - 322
Proceeds from disposal of equity
accounted investees - 240
Proceeds from disposals of
subsidiaries, net of cash disposed (1) -
Acquisition of equity accounted
investees (2,778) (2,098)
*Net cash used in investing
activities* *(56,950)* *(65,568)*
*Cash flows from financing
activities*
Sale of treasury shares 157 -
Purchase of treasury shares (314) (2,867)
Proceeds from bank and corporate
loans 655,190 546,080
Repayment of bank and corporate
loans (665,936) (550,410)
Proceeds from bonds 15,000 10,000
Repayment of bonds (2,734) (12,112)
Repayment of vendor financing
payable (9) (48)
Repayment of other non-current
financing liabilities (1) (4)
Options settlement repayments (319) (5,361)
Repayment of finance lease
liabilities (160) (57)
Acquisition of non-controlling
interest 9 - (2,349)
Dividends paid to shareholders of
the Group 17 (13,295) (7,676)
Dividends paid to non-controlling
shareholders of subsidiaries (258) (308)
*Net cash used in financing
activities* *(12,679)* *(25,112)*
Effect of exchange rate changes on
cash and cash equivalents (456) 50
*Net (decrease) in cash and cash
equivalents* *(2,908)* *(9,780)*
*Cash and cash equivalents at
beginning of the year* *7,165* *16,945*
*Cash and cash equivalents at the
end of the year* *4,257* *7,165*
*APPENDIX 4: Statement of Financial Position for 12M 2016*
*31 December * *31 December *
*2016* *2015*
*Assets*
*Non-current assets*
Property, plant and equipment 343,667 338,699
Investment property 181 107
Goodwill and other intangible
assets 61,209 60,755
Investments in associates and
joint venture 68,352 74,474
Other financial assets 797 621
Deferred tax assets 606 627
Other non-current assets 11,998 8,241
*Total non-current assets* *486,810* *483,524*
*Current assets*
Inventories 6,444 4,060
Trade and other accounts
receivable 45,884 43,152
Prepayments 2,166 2,822
Prepaid income tax 1,957 927
Other financial assets 5,367 5,719
Cash and cash equivalents 4,257 7,165
Other current assets 2,151 2,600
*Total current assets* *68,226* *66,445*
Held for sale assets 646 1,351
*Total assets* *555,682* *551,320*
*Equity and liabilities*
*Equity attributable to equity
holders of the Group*
Share capital 93 93
Additional paid-in capital 90 87
Treasury shares (67,034) (68,669)
Retained earnings and other
reserves 311,167 314,237
*Total equity attributable to
equity holders of the Group* *244,316* *245,748*
Non-controlling interests 4,317 3,916
*Total equity* *248,633* *249,664*
*Non-current liabilities *
Loans and borrowings 124,510 126,620
Employee benefits 5,217 5,021
Deferred tax liabilities 36,165 30,238
Accounts payable, provisions and
accrued expenses 1,095 3,545
Other non-current liabilities 6,002 5,543
*Total non-current liabilities* *172,989* *170,967*
*Current liabilities*
Loans and borrowings 62,595 59,934
Accounts payable, provisions and
accrued expenses 64,072 62,268
Income tax payable 146 215
Other current liabilities 7,247 8,272
*Total current liabilities* *134,060* *130,689*
*Total liabilities* *307,049* *301,656*
*Total equity and liabilities* *555,682* *551,320*
Rostelecom (www.rostelecom.ru [2]) is one of the largest national
telecommunications operators in Russia and Europe. The Group operates in all
segments of the telecommunications market and covers millions of households
in Russia.
Rostelecom is an undisputable leader of the broadband and pay-TV markets in
Russia with over 12.3 million fixed-line broadband subscribers and over 9.3
million pay-TV subscribers, over 4.2 million of which are subscribed to
Rostelecom's IPTV services.
The Group generated RUB 297.4 billion of consolidated revenues, RUB 96.8
billion of OIBDA (32.5% of revenue) and RUB 12.2 billion of net income in
2016.
The Group is a market leader in providing telecommunications services to
government bodies and corporates of all levels. It is also an important
innovator that provides solutions in the field of medicine, E-Government,
cloud computing, education, security and housing & utility services.
Stable financial position of Rostelecom is confirmed by international credit
ratings by Fitch Ratings at 'BBB-' and Standard & Poor's and 'BB+'
respectively.
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