DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE SECOND QUARTER OF 2018
Dow Jones received a payment from EQS/DGAP to publish this press release.
ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING
RESULTS FOR THE SECOND QUARTER OF 2018
02-Aug-2018 / 13:10 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
rostelecom announces its ifrs financial and operating results for the SECOND
quarter of 2018
PAY-TV SUBSCRIBER BASE EXCEEDED 10 MILLION USERS
Moscow, Russia - August 2, 2018 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), Russia's national telecommunications operator, today announces its
consolidated financial results for the second quarter of 2018 prepared in
accordance with IFRS[1],[2].
KEY ACHIEVEMENTS
- Revenue grew by 3% year-on-year in the second quarter of 2018 with
average annual revenue growth of 5% over the last four quarters;
- The digital segment's[3] contribution to total revenue reached 53%;
- Pay-TV subscriber base exceeded 10 million users;
- 1 million clients use Rostelecom's mobile communication services;
- Consistently high growth rates in FTTx Broadband clients (+7%) and in
IPTV subscribers (+11%), while ARPU continues to grow in our core
broadband and IPTV segments;
- Increase in revenues from VAS and cloud services amounted to 34% in the
second quarter of 2018, as a result of "Smart City" projects, and the
promotion of cloud services and data centre services.
SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS
- Revenue grew by 3% to RUB 77.4 billion compared to the second quarter of
2017;
- OIBDA[4] of RUB 23.7 billion;
- OIBDA margin of 30.6%;
- Net profit increased by 9% to RUB 3.1 billion compared to the second
quarter of 2017;
- CAPEX[5] increased by 16% to RUB 14.4 billion (18.7% of revenue) from
RUB 12.5 billion (16.6% of revenue) in the second quarter of 2017;
- Consolidated Free Cash Flow (FCF) improved to RUB (0.8) billion[6]
compared to RUB (1.6) billion in the second quarter of 2017;
- Net debt[7] increased by 7% since the beginning of the year and amounted
to RUB 193.5 billion, resulting in a Net Debt/OIBDA ratio of 2.0x.
Key figures for 2Q 2018, RUB mln
RUB million 2Q 2018 2Q 2017 % change, y-o-y
Revenue 77,365 75,166 3%
OIBDA 23,659 24,599 (4%)
OIBDA margin % 30.6% 32.7% -
Operating Income 8,342 11,304 (26%)
Operating margin % 10.8% 15.0% -
Net Income 3,094 2,826 9%
% of revenue 4.0% 3.8% -
Capital Expenditure 14,442 12,451 16%
% of revenue 18.7% 16.6% -
Net debt 193,497 185,463 4%
Net debt/ annualised OIBDA 2.0 1.9 -
FCF (832) (1,644) +RUB 812 million
FIRST HALF YEAR 2018 FINANCIAL HIGHLIGHTS
? Revenue increased by 5% to RUB 153.6 billion compared to the first half
of 2017;
? OIBDA increased by 1% year-on-year to RUB 46.9 billion compared to the
first half of 2017;
? OIBDA margin of 30.5% compared to 31.7% in the first half of 2017;
? Net profit increased by 16% to RUB 7.0 billion compared to the first
half of 2017;
? CAPEX decreased by 2% year-on-year to RUB 29.6 billion (19.3% of
revenue) from RUB 30.2 billion (20.7% of revenue) in the first half of
2017;
? Free Cash Flow (FCF) of RUB (6.7) billion compared to RUB (4.0) billion
in the first half of 2017;
Key figures for 1HY 2018, RUB mln
RUB million 1HY 2018 1HY 2017 % change, y-o-y
Revenue 153,568 145,602 5%
OIBDA 46,852 46,168 1%
OIBDA margin % 30.5% 31.7%
Operating Income 16,699 19,397 (14%)
Operating margin % 10.9% 13.3%
Net Income 6,958 5,976 16%
% of revenue 4.5% 4.1%
Capital Expenditure 29,567 30,165 (2%)
% of revenue 19.3% 20.7%
Net debt 193,497 185,463 4%
Net debt/ annualised OIBDA 2.0 1.9
FCF (6,680) (3,953) -RUB 2,727 million
Mikhail Oseevsky, President of Rostelecom, commented:
"The Q2 2018 results came in line with our expectations. Rostelecom has
gained momentum: revenue has been growing at a solid average annual rate of
5% in the last 12 months. Our digital segment, which currently accounts for
53% of our top-line, has contributed significantly to this growth. Our
growth engine is delivering and we are also increasing our competitive
positions in the key pay-TV and broadband segments, thanks to a growing
subscriber base and higher ARPU. This was achieved by promoting new services
such as "Smart Home" video surveillance, where we saw the subscriber base
grow three-fold in the reporting period. Higher demand for cloud services,
data centers and information security solutions is also contributing to our
top-line and is coming from corporate and government clients. We are
strengthening our competences in the key growing areas, including cyber
security business stream, which is why we acquired Solar Security, a
technological leader in target monitoring and information security
operational management. Solar Security will make a substantial contribution
to this strength and will allow us to boost our presence in the market
thanks to its reputation for delivering a reliable and trustworthy suite of
services and products. Solar Security will evolve into Russia's national
cybersecurity operator which will cover three key areas, including
"Services", "Brand new products" and "Full-scale cybersecurity solutions".
We continue to successfully implement the Russian government's state
projects of high strategic importance. Public funding enabled us to further
expand the number of high-speed connections in Russian healthcare centres
and across remote areas during the second quarter. We also successfully
delivered the video surveillance of the Unified State Exam, which
contributed over RUB 1 billion of revenue.
Serving as regional sponsor to World Cup 2018 has had a significantly
marketing contribution for Rostelecom. We were deploying Wi-Fi spots in the
majority of sites, provided the Organisation Committee and FIFA with video
conferencing services, arranged for steady Internet connection in the
stadiums and launched a number of remarkable promotion campaigns during the
World Cup. We did our best to ensure comfort and provide high quality
services for fans from all over the world, to maintain our reputation of one
of the leading digital providers.
In June this year the AGM approved that 100% of net income would be
distributed across shareholders at RUB 5.05 per a preferred and ordinary
share, which resulted in a high level of dividend yield. We strongly believe
that consistent implementation of our robust business development strategy
will pave the way for further attractive dividend payments."
Sergei Anokhin, Senior Vice-President and Chief Financial Officer, added:
"Rostelecom's results for the second quarter of 2018 reflect our confident
outlook for future developments of the digital segment. We expect our
performance to continue to improve across all key financial indicators. We
therefore confirm our full year forecast for revenue growth, and anticipate
an increase of more than 2%. OIBDA margin is expected to be above 31.5% in
2018 with CAPEX of RUB 60-65 billion, excluding the implementation of
government programmes."
KEY OPERATING HIGHLIGHTS
1) The total number of Internet subscribers grew by 2% to 13.0 million in
the second quarter of 2018 compared to the corresponding period of last
year;
? The B2C subscriber base grew by 1% to 12.0 million, whilst the number of
subscribers connected by fibre optic increased by 6% year-on-year to 7.9
million (66% of the subscriber base);
2) The number of pay-TV subscribers grew by 5% to 10.0 million households
compared to the corresponding period of last year;
? The number of IPTV subscribers increased by 11% to 5.1 million;
3) The number of MVNO subscriber base reached 1 million users, a more than
two-fold increase within 1 year;
4) The number of local telephony subscribers decreased by 8% to 18.3
million.
Number of 2Q 2018 2Q 2017 % change, 1Q 2018 % change,
subscribers y-o-y y-o-y
(million):
Internet access 13.0 12.8 2% 12.9 0.1%
B2C: Broadband 12.0 11.8 1% 12.0 0.03%
B2B: Broadband 1.0 0.9 2% 1.0 2%
+ VPN
Pay TV 10.0 9.5 5% 9.9 1%
Incl. IPTV 5.1 4.6 11% 5.0 2%
MVNO 1.0 0.5 107% 0.9 10%
subscribers
Local telephony 18.3 19.9 (8%) 18.7 (2%)
services
KEY EVENTS RELATING TO 2Q 2018 AND AFTER THE END OF THE REPORTING PERIOD
Business news
? Rostelecom continues to develop and expand its range of services:
- Rostelecom's "Smart Home" video surveillance service was upgraded with 5
new detectors and safety actuators, and customers now also have the option
to buy smart periphery online. Users now have access to smarter solutions to
further automate their households to increase comfort and security;
(MORE TO FOLLOW) Dow Jones Newswires
August 02, 2018 06:11 ET (10:11 GMT)
DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -2-
? The ability to archive video footage for 14 and 30 days is now included in
the "Smart Home" video surveillance service;
- Further enhancements were made to the functionality of Rostelecom's 4Game
option of the "Gaming" tariff plan;
? In B2B/G segments, Rostelecom increased product functionality and expanded
its product offering for "Hosted PBX", "Web conferencing", "Managed
communication services", "National Wi-Fi", "Virtual Data Centre", and
"Information security";
- Special offers within the MVNO project were launched, including:
? 2 successful promotional campaigns aimed at increasing demand for
communication services (offered through the "Mobile gifts" and
"Compliment" promotions);
? New clients are offered a special 20% discount when switching to
Rostelecom and they can keep existing phone numbers (the "Welcoming"
offer);
? The traffic in Interactive TV applications was reset;
? Brand-new convergent products were launched in Saint-Petersburg, Komi
Republic and Chelyabinsk;
? A number of roaming options were introduced for clients using Rostelecom
services when travelling.
The initiatives listed above helped increase Rostelecom's subscriber base to
1 million users;
? Rostelecom continues to grow its digital segment:
? During the second quarter of 2018, the pay-TV subscriber base surpassed 10
million users;
- The Company has gained around 70% of new subscriptions in the IPTV market
in the second quarter of 2018[8];
- Rostelecom successfully delivered the video surveillance of the Unified
State Exam, which contributed over RUB 1 billion of revenue;
? The "Smart Home" video surveillance client base tripled over the reporting
period;
- Sales of Rostelecom's Antivirus service doubled in the last 12 months,
with the number of users growing at an equivalent rate;
? Rostelecom launched pilot sites for a new generation 5G network located in
Innopolis in the Republic of Tatarstan and the State Hermitage museum in
Saint-Petersburg; these launches were added to the 5G network in Skolkovo in
Moscow in the first quarter of 2018;
? Rostelecom signed/renewed a number of large contracts, including
agreements with Roseestr (The Federal Service for State Registration,
Cadastre and Cartography), Federal Treasury, Moscow Center for Education
Quality of the Education Department of the city of Moscow, Gazprombank,
State Firefighter Service of the Tulskaya region and other;
? Rostelecom's loyalty programme was awarded two prizes at the 2018
Loyalty Awards Russia ceremony;
? As part of FIFA World Cup 2018:
- Rostelecom provided videoconferencing services for the Russian Organising
Committee office and FIFA headquarters in Zurich. The service was also
delivered in hosting cities, including in the International Exhibition
Centre, FIFA headquarters, and at stadiums and operational centres;
- Rostelecom set up W-Fi networks for fans in 5 participating hosting
cities;
- The Company arranged a ticket lottery for "Bonus" programme users, and a
"Football Mania" campaign for its clients;
? Rostelecom broadcasted the "Match! Ultra" TV channel within its TV package
offering (the channel was 100% dedicated to World Cup);
- Rostelecom's provided Internet access across 8 FIFA World Cup 2018
stadiums, including in Kaliningrad, Nizhny Novgorod, Samara, Saransk,
Rostov-on-Don, Volgograd, Sochi, Ekaterinburg;
? Voice interconnects were upgraded so as to allow for 90% transmission of
the Tele2 Russia DLD traffic through Rostelecom's network;
? The revenue from O2O project (the infrastructure operator) increased by
2.3 times;
? More than 20% of partnering operators were connected to the Operator's
personal account;
? Rostelecom negotiated with the management of TIC (IRAN), OmanTel (Oman),
Afgantelecom (Afghanistan), Gmobile (Mongolia) on further cooperation
development and strengthening Rostelecom's positions as the key transit
operator in the regions;
Other News
? The AGM approved the Company's dividend payout, which amounted to RUB
14.050 bln, or 100% of 2017 net income in accordance with IFRS. This is to
be paid in cash, and rewarded as follows:
- RUB 5.05 per Class A preferred share[9];
- RUB 5.05 per ordinary share[10].
? Rostelecom offered an electronic voting option to its investors at the
AGM;
? Analytical Credit Rating Agency (ACRA) affirmed AA(RU) credit rating
with a stable outlook;
? National Media Group and Rostelecom launched a JV to produce and acquire
content, launch joint TV channels and promote owned and external TV
channels;
? Rostelecom acquired 100% of the share capital of Solar Security, a
technological leader in target monitoring and information security (IS)
operational management. Solar Security will evolve into Russia's national
cybersecurity operator which will cover three key areas, including
"Services", "Brand new products" and "Full-scale cybersecurity solutions".
OPERATING REVIEW
Revenue analysis
Revenue structure by services
RUB million 2Q 2Q 2017 % change, 1HY 2018 1HY % change
2018 2017
y-o-y
Broadband 19,65 17,589 12% 38,836 35,096 11%
3
TV services 8,488 6,809 25% 16,663 13,452 24%
Fixed telephony 17,71 19,763 (10%) 36,000 40,162 (10%)
7
Wholesale 19,39 20,225 (4%) 38,794 37,536 3%
services 5
Rent of 2,386 2,367 1% 4,682 4,770 (2%)
channels
Interconnect 7,913 8,958 (12%) 16,288 15,701 4%
and traffic
transit
services
VPN 5,723 5,627 2% 11,247 10,652 6%
Rent and 3,374 3,273 3% 6,577 6,414 3%
maintenance of
telecommunicati
ons
infrastructure
VAS and cloud 7,470 5,555 34% 14,707 9,449 56%
services
Other 2,836 3,538 (20%) 5,446 6,796 (20%)
telecommunicati
ons services
Other 1,805 1,686 7% 3,122 3,111 0.4%
non-telecommuni
cations
services
Total 77,36 75,166 3% 153,568 145,60 5%
5 2
Revenue structure by customer segments
RUB million 2Q 2Q % change, 1HY 1HY 2017 % change
2018 2017 2018
y-o-y
Residential 34,36 33,756 2% 68,447 67,723 1%
customers 1
Corporate 28,10 25,897 9% 55,121 49,249 12%
customers / 9
Government
customers
Operators 13,70 14,343 (4%) 27,690 26,333 5%
4
Other 1,192 1,169 2% 2,310 2,297 1%
Total 77,36 75,166 3% 153,568 145,602 5%
5
In the second quarter of 2018, revenue increased by 3% to RUB 77.4 billion,
compared to the second quarter of 2017, as a result of the following
factors:
? a 34% increase in revenue from VAS and cloud services, mainly due to
proceeds from the development of "Smart City" projects, data-centres and
the promotion of cloud services;
? a 25% increase in revenue from pay-TV services due to growth in the IPTV
subscriber base, higher ARPU, as well as the application of new IFRS
standards;
? a 12% rise in revenue from broadband services due to an increased number
of subscribers, higher ARPU, as well as the application of new IFRS
standards;
In the first half of 2018, revenue increased by 5% to RUB 153.6 billion,
compared to the first half of 2017, as a result of the following factors:
? a 56% increase in revenue from VAS and cloud services, mainly due to
proceeds from the video surveillance services provided during the
presidential election in Russia, as well as the development of "Smart
City" projects, data-centres and the promotion of cloud services;
? a 11% rise in revenue from broadband services due to an increased number
of subscribers, higher ARPU, as well as the application of new IFRS
standards;
? an 24% increase in revenue from pay-TV services due to growth in the
IPTV subscriber base, higher ARPU, as well as the application of new IFRS
standards;
? a 3% rise in revenue from wholesale services, due to higher revenue from
interconnect and traffic transit services and VPN in the first quarter of
2018;
Operating income analysis
Operating expenses structure
RUB million 2Q 2Q % 1HY 1HY %
2018 2017 cha 2018 2017 change,
nge y-o-y
,
y-o
-y
Personnel costs (23,21 (22,46 3% (46,937 (46,37 1%
(excluding the 0) 2) ) 9)
option
programme)
Option programme (920) 436 - (1,678) 430 -
related expenses
Depreciation, (14,39 (13,73 5% (28,475 (27,20 5%
Amortization and 7) 1) ) 1)
impairment
losses
Interconnection (13,63 (13,54 1% (27,776 (24,32 14%
charges 2) 7) ) 2)
Materials, (6,057 (5,682 7% (12,395 (11,86 4%
repairs and ) ) ) 5)
maintenance,
utilities
Gain on the 976 642 52% 1,394 796 75%
disposal of PPE
and intangible
assets
Impairment loss (1,629 (841) 94% (2,803) (1,497 87%
of financial ) )
assets measured
at amortized
cost
Other operating 3,415 3,233 6% 6,994 6,365 10%
income
(MORE TO FOLLOW) Dow Jones Newswires
August 02, 2018 06:11 ET (10:11 GMT)
DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -3-
Other operating (13,56 (11,91 14% (25,193 (22,53 12%
expenses 9) 1) ) 2)
Total operating (69,02 (63,86 8% (136,86 (126,2 8%
expenses 3) 2) 9) 05)
In the second quarter of 2018, operating expenses increased by 8% compared
to the corresponding period of 2017 and amounted to RUB 69.0 billion,
largely due to the following factors:
? a 14% increase (of RUB 1.7 billion) in other operating expenses, partly
related to equipment supplies for B2B/G projects and further promotion of
Rostelecom's services;
? a change in allowance for the option programme (by RUB 1.4 billion) due
to similar accruals later in 2017 as well as reversal of reserves under
previous option programme in the second quarter 2017;
? a 94% increase (of RUB 0.8 billion) in impairment loss of financial
assets measured at amortized cost, mainly due to increased cost on
potential credit losses;
? a 5% increase (of RUB 0.7 billion) in depreciation, amortization and
impairment losses, mainly due to new IFRS standards application;
In the first half of 2018, the operating expenses increased by 8% compared
to the corresponding period of 2017 and amounted to RUB 136.9 billion due to
the following factors:
? a 14% increase (of RUB 3.5 bln) in interconnection charges, mainly due
to higher expenditure on interconnect and traffic transit services in the
first quarter of 2018, as a result of an increase in corresponding income;
? a 12% increase (of RUB 2.7 bln) in other operating expenses, mainly due
to organizing of the video surveillance of Russia's presidential election
in the first quarter of 2018, equipment supplies for B2B/G projects, as
well as the promotion of services;
? a change in allowance for the option programme (by RUB 2.1 billion) due
to later similar accruals in 2017 as well as reversal of reserves under
previous option programme in the second quarter 2017;
? a 87% increase (of RUB 1.3 bln) in the impairment loss of financial
assets measured at amortized cost, mainly due to one-off write-offs from
the previous periods.
Operating profit decreased by 26% year-on-year to RUB 8.3 billion in the
second quarter of 2018, compared to the corresponding period of 2017.
Operating profit decreased by 14% year-on-year to RUB 16.7 billion in the
first half of 2018.
OIBDA for the second quarter of 2018 decreased by 3.8% year-on-year to RUB
23.7 billion. OIBDA for the first half of 2018 increased by 1.5% to RUB 46.9
billion. The OIBDA margin stood at 30.6% in the second quarter of 2018
compared to 32.7% in the corresponding period of 2017. The OIBDA margin was
at 30.5% in the first half of 2018 compared to 31.7% in the corresponding
period of 2017.
Net Income Analysis
In the second quarter of 2018, profit before tax decreased by 1% to RUB 4.5
billion, compared to the corresponding period in 2017. In the first half of
2018, profit before tax increased by 9% to RUB 9.4 billion.
This dynamics was influenced by the following factors:
? lower operating profit;
? improved associated companies' financial results, mainly from the joint
venture with Tele2 Russia;
? lower financial expenses, mainly due to a higher base in the second
quarter of 2017;
The increase in profit before tax in the first half of 2018 mainly resulted
from the following factors:
? lower financial expenses, mainly due to a higher base in the first half
of 2018;
? improved associated companies' financial results, mainly from the joint
venture with Tele2 Russia;
Income tax in the second quarter of 2018 decreased by 19% to RUB 1.4
billion. Income tax in the first half of 2018 decreased by 7% to RUB 2.4
billion.
The effective income tax rate was 32% in the second quarter of 2018, and 26%
in the first half of 2018 compared to the 20% rate set by the Tax Code. A
higher income tax rate in the second quarter of 2018 and the first half of
2018 was driven by the non-deductible expenses for taxation purposes.
Net profit increased by 9% in the second quarter of 2018 and totalled RUB
3.1 billion, and by 16% to RUB 7.0 billion in the first half of 2018.
Financial review
Consolidated net operating cash flow in the second quarter of 2018 increased
by 18%, to RUB 11.7 billion, compared to the corresponding period of 2017,
and decreased by 19% to RUB 20.0 billion in the first half of 2018. The
increase in consolidated net operating cash flow in the second quarter of
2018 was partly caused by changes in working capital, which was mainly
driven by lower level of accounts payable. This decrease in accounts payable
was due to an earlier annual bonuses payout, compared to 2017. A decrease in
accounts receivables for retail and corporate customers was also a factor
for changes in working capital. The decrease in consolidated net operating
cash flow in the first half of 2018 is mainly due to changes in working
capital, partly caused by an increase in accounts receivables for one-off
projects in the first quarter of 2018. Changes in tax payments / refunds had
also an impact on consolidated net operating cash flow in the first half of
2018.
Consolidated cash outflow for investments in non-current assets increased by
16% to RUB 14.4 billion in the second quarter of 2018. Excluding the state
programmes, this figure increased by 3% to RUB 12.0 billion (15.5% of
revenue). Consolidated cash outflow for investments in non-current assets
decreased by 2% to RUB 29.6 billion in the first half of 2018. Excluding the
state programmes, this figure decreased by 15% to RUB 24.5 billion (16.0% of
revenue). These trends were driven by an uneven distribution of capital
expenditure across the calendar year in accordance with the terms of signed
contracts.
Consolidated free cash flow improved in the second quarter of 2018 and
totalled RUB (0.8) billion compared to RUB (1.7) billion in the
corresponding period of 2017. Consolidated free cash flow in the first half
of 2018 totalled RUB (6.7) billion compared to RUB (4.0) billion in the
first half of 2017.
As at June 30, 2018, the Group's total debt increased by 6% compared to the
beginning of the year, and amounted to RUB 203.6 billion. Over 99% of the
Group's total debt was rouble-denominated as at June 30, 2018.
As at June 30, 2018, the Group's consolidated net debt amounted to RUB 193.5
billion. The net debt /OIBDA ratio stood at 2.0x for the past twelve months
ended in the first half of 2018.
OTHER INFORMATION: CONFERENCE CALL
Rostelecom's management will hold a conference call and webcast today at
6.00 PM (Moscow), 5.00 PM (CET), 4.00 PM (UK) and 11.00 AM (NYT). To
participate in the conference call, please dial:
Russia: +7 495 646 9190
UK/ International: +44 (0)330 336 9411
USA: + 1 929 477 0324
Confirmation Code (ENG): 9118937
Confirmation Code (RUS): 9118897
A webcast of the conference call will only be available in English. To
access the webcast please follow the link:
https://webcasts.eqs.com/rostelecom20180802 [1].
A replay of the conference call will be available on the Company's website
https://www.company.rt.ru/ir/results_and_presentations/financials/IFRS/2018/
2/ [2] in due course.
* * *
APPENDICES
1) Reconciliation of OIBDA;
2) IFRS 9, 15 and 16 standards application;
3) Statement of Comprehensive Income for the first six months of 2018;
4) Statement of Cash Flows for the first six months of 2018;
5) Statement of Financial Position for the six three months of 2018.
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 million 1Q 2018 1Q 2017 % 1HY 2018 1HY 2017 %
change, change,
y-o-y y-o-y
Operating 8,342 11,304 (26%) 16,699 19,397 (14%)
income
Plus 14,397 13,731 5% 28,475 27,201 5%
amortisation
Plus 920 (436) - 1,678 (430) -
non-cash
expenses
related to
the
long-term
management
incentive
programme
OIBDA 23,659 24,599 (4%) 46,852 46,168 1%
OIBDA 30.6% 32.7% 30.5% 31.7%
margin, %
APPENDIX 2: IFRS 9, 15 and 16 STANDARDS APPLICATION
The Group initially adopted IFRS 9, 15 and 16 using the modified
retrospective approach starting from the first quarter of 2018.
The key changes related to the application of these standards are listed
below:
* Expenses related to the operating leases have been capitalized and are
reflected in the accounting balance sheet under the title "Right-of-use
assets (RoU)". The RoU related liabilities are reflected in relative balance
lines under same titles;
* The expenses related to the conclusion and implementation of contracts
with customers have been capitalized and are reflected under "Revenue from
Contracts with Customers";
* Assets for contracts with customers in arrears on payments for services
(MORE TO FOLLOW) Dow Jones Newswires
August 02, 2018 06:11 ET (10:11 GMT)
rendered, but yet not invoiced, were excluded from the accounts receivable
balance;
* Revenues from the sale of goods or provision of services of not sufficient
individual value to customers, have been deferred;
* Recurring advances, containing the financing component, have been
discounted;
* Impairment provisions of financial assets are recognised on the basis of
expected credit losses.
APPENDIX 3: Statement of Comprehensive Income for the first six months of
2018
Six-month period ended 30 June
(unaudited)
2018 2017*
Revenue 153,568 145,602
Operating expenses
Wages, salaries, (48,615) (45,949)
other benefits and
payroll taxes
Depreciation, (28,475) (27,201)
amortization and
impairment losses
Interconnection (27,776) (24,322)
charges
Materials, (12,395) (11,865)
utilities, repairs
and maintenance
Gain on disposal of 1,394 796
property, plant and
equipment and
intangible assets
Impairment loss of (2,803) (1,497)
financial assets
measured at
amortized cost
Other operating 6,994 6,365
income
Other operating (25,193) (22,533)
expenses
Total operating (136,869) (126,206)
expenses, net
Operating profit 16,699 19,396
Gain/(loss) from 198 (1,739)
associates and joint
ventures
Finance costs (8,355) (9,468)
Other investing and 1,074 371
financial gain, net
Foreign exchange (219) 41
(loss)/gain, net
Profit before income 9,397 8,601
tax
Income tax expense (2,439) (2,626)
Profit for the 6,958 5,975
period
Other comprehensive
income/(loss)
Items that may be
reclassified
subsequently to
profit or loss
Exchange differences 178 (41)
on translating
foreign operations,
net of tax
Other comprehensive 178 (41)
income/(loss) for
the period, net of
tax
Total comprehensive 7,136 5,934
income for the
period
Profit attributable
to:
Equity holders of 6,705 5,739
the Group
Non-controlling 253 236
interests
Total comprehensive
income attributable
to:
Equity holders of 6,897 5,696
the Group
Non-controlling 239 238
interests
Earnings per share 2.97 2.55
attributable to
equity holders of
the Group - basic
(in roubles)
Earnings per share 2.94 2.55
attributable to
equity holders of
the Group - diluted
(in roubles)
* The Group initially adopted IFRS 15 and IFRS 16 using the modified
retrospective approach. Under this approach, the comparative information is
not restated. The Group applied IFRS 9 from 1 January 2018 and has not
restated comparative information for 2017 for financial instruments under
the IFRS 9 standard.
APPENDIX 4: Statement of Cash Flows for 1HY 2018
Six-month period ended 30 June
(unaudited)
2018 2017
Cash flows from
operating activities
Profit before tax 9,397 8,601
Adjustments to
reconcile profit
before tax to cash
generated from
operations
Depreciation, 28,475 27,201
amortization and
impairment losses
Gain on disposal of (1,394) (796)
property, plant and
equipment and
intangible assets
Impairment loss of 2,803 1,497
financial assets
measured at
amortized cost
(Gain)/loss from (198) 1,739
associates and joint
ventures
Finance costs 8,291 9,405
excluding finance
costs on pension and
other long-term
social liabilities
Other investing and (1,074) (371)
financial gain, net
Foreign exchange 219 (41)
loss/(gain), net
Share-based 1,645 (382)
motivation program
Changes in net
working capital
Increase in accounts (12,391) (9,545)
receivable and
contract assets
Increase/(decrease) 520 (65)
in employee benefits
(Increase)/decrease (565) (236)
in inventories
Increase/(decrease) 2,417 (2,544)
in accounts payable,
provisions and
accrued expenses
Decrease in other (5,871) (1,206)
liabilities
Cash generated from 32,274 33,257
operations
Interest paid (8,905) (8,624)
Income tax refund - 1,514
Income tax paid (3,407) (1,355)
Net cash from 19,962 24,792
operating activities
Cash flows from
investing activities
Purchase of (29,567) (30,165)
property, plant and
equipment and
intangible assets
Proceeds from sale 2,634 1,420
of property, plant
and equipment and
intangible assets
Acquisition of (3,370) (7,264)
financial assets
Proceeds from 3,518 3,919
disposals of
financial assets
Interest received 291 335
Dividends received - 1
Purchase of (2,019) (64)
subsidiaries and
business, net of
cash acquired
Proceeds from - 139
disposal of
subsidiaries, net of
cash disposed
Acquisition of (3,471) -
equity accounted
investees
Net cash used in (31,984) (31,679)
investing activities
Cash flows from financing activities
Proceeds from bank and corporate loans 330,883 269,120
Repayment of bank and corporate loans (316,172) (258,150)
Proceeds from bonds 10,000 10,000
Repayment of bonds (11,209) (9,285)
Repayment of vendor financing payable (11) (5)
Repayment of other non-current financing (1) (2)
liabilities
Options settlement repayments - (209)
Repayment of lease liabilities (1,128) (61)
Acquisition of non-controlling interest - (2,255)
Dividends paid to non-controlling (35) -
shareholders of subsidiaries
Net cash from financing activities 12,327 9,153
Effect of exchange rate changes on cash (4) (135)
and cash equivalents
Net increase in cash and cash equivalents 301 2,131
Cash and cash equivalents at beginning of 3,815 4,257
the period
Cash and cash equivalents at the end of 4,116 6,388
the period
APPENDIX 5: Statement of Financial Position for the 1HY of 2018
30 June 31 December
2018 2017
(unaudited) (audited)*
Assets
Non-current assets
Property, plant and equipment 347,240 348,430
Investment properties 157 159
Goodwill and other intangible assets 60,382 59,820
Right of use assets 19,340 -
Trade and other accounts receivable 7,966 8,352
Investments in associates and joint 69,638 65,879
ventures
Other financial assets 1,422 1,600
Other non-current assets 6,034 4,352
Deferred tax assets 817 647
Contract assets 423 -
Contract costs 11,847 -
Total non-current assets 525,266 489,239
Current assets
Inventories 6,747 6,169
Contract assets 8,989 -
Trade and other accounts receivable 48,660 47,813
Prepayments 4,518 3,455
Prepaid income tax 2,091 159
Other financial assets 5,963 5,963
Other current assets 3,032 2,619
Cash and cash equivalents 4,116 3,815
Held for sale assets 1,047 997
Total current assets 85,163 70,990
Total assets 610,429 560,229
Equity and liabilities
Equity attributable to equity holders
of the Group
Share capital 93 93
Additional paid-in capital 91 91
Treasury shares (60,419) (65,556)
Retained earnings and other reserves 303,738 311,494
Total equity attributable to equity 243,503 246,122
holders of the Group
(MORE TO FOLLOW) Dow Jones Newswires
August 02, 2018 06:11 ET (10:11 GMT)
