DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF 2018
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ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING
RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF 2018
12-March-2019 / 10:02 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 FOURTH quarter AND FULL YEAR of 2018
DIGITAL SEGMENT CONTRIBUTION UP TO 57% OF TOTAL REVENUE IN 4Q 2018
Moscow, Russia - March 12, 2018 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), the largest digital service provider in Russia, today announces its
consolidated financial results for the fourth quarter and the full year of
2018 prepared in accordance with IFRS[1],[2].
KEY ACHIEVEMENTS
- Meeting guidance on key financial indicators for 2018;
- 2018 revenue growth of 5% year-on-year;
- The digital segment's[3] contribution to total revenue reached 57% in 4Q
2018;
- Consistently high growth rates in FTTx Broadband clients (+6%) and in
IPTV subscribers (+9%), while ARPU continues to grow in our core broadband
and IPTV segments;
- Increase in revenues from VAS and cloud services of 42% in 2018, as a
result of "Smart City" projects, Internet video broadcasting, the
development of data centre services and the promotion of cloud services;
- OIBDA[4] grew by 4% to RUB 100.9 billion in 2018;
- Net profit increased by 7% to RUB 15.0 billion in 2018.
FOURTH QUARTER 2018 KEY FINANCIAL HIGHLIGHTS
- Revenue grew by 4% to RUB 87.3 billion compared to the fourth quarter of
2017;
- OIBDA grew by 2% to RUB 26.0 billion;
- OIBDA margin of 29.8% compared to 30.5% in the fourth quarter of 2017;
- Net profit of RUB 2.4 billion compared to RUB 4.2 billion in the fourth
quarter of 2017;
- CAPEX[5] increased by 48% to RUB 27.3 billion (31.3% of revenue) from
RUB 18.5 billion (21.9% of revenue) in the fourth quarter of 2017;
- Free Cash Flow (FCF) of RUB 18.1 [6] billion compared to RUB 17.3
billion in the fourth quarter of 2017;
- Net debt[7] increased by 3% since the beginning of the year to RUB 186.7
billion, resulting in a Net Debt/OIBDA ratio of 1.9x.
Key figures for 4Q 2018, RUB mln
RUB million 4Q 2018 4Q 2017 change, y-o-y
Revenue 87,257 84,113 4%
OIBDA 26,038 25,628 2%
OIBDA margin % 29.8% 30.5% -
Operating Income 8,167 9,312 (12%)
Operating margin % 9.4% 11.1% -
Net Income 2,351 4,169 (44%)
% of revenue 2.7% 5.0% -
Capital Expenditure 27,287 18,462 48%
% of revenue 31.3% 21.9% -
Net debt 186,712 181,594 3%
Net debt/ annualised OIBDA 1.9 1.9 -
FCF 18,063 17,283 780
FULL YEAR 2018 FINANCIAL HIGHLIGHTS
? Revenue increased by 5% to RUB 320.2 billion compared to the full year
of 2017;
? OIBDA increased by 4% to RUB 100.9 billion compared to the full year of
2017;
? OIBDA margin of 31.5% and at a comparable level to the full year of
2017;
? Net profit increased by 7% to RUB 15.0 billion compared to the full year
of 2017;
? CAPEX increased by 20% year-on-year to RUB 73.2 billion (22.9% of
revenue) from RUB 60.8 billion (19.9% of revenue) in 2017;
? Free Cash Flow (FCF) of RUB 14.8 billion compared to RUB 20.4 billion
for the full year 2017.
Key figures for the full year of 2018, RUB mln
RUB million 12M 2018 12M 2017 change, y-o-y
Revenue 320,239 305,329 5%
OIBDA 100,900 96,688 4%
OIBDA margin % 31.5% 31.7% -
Operating Income 35,800 37,885 (6%)
Operating margin % 11.2% 12.4% -
Net Income 15,012 14,050 7%
% of revenue 4.7% 4.6% -
Capital Expenditure 73,179 60,752 20%
% of revenue 22.9% 19.9% -
Net debt 186,712 181,594 3%
Net debt/ annualised OIBDA 1.9 1.9 -
FCF 14,751 20,385 (5,634)
Mikhail Oseevskiy, President of Rostelecom, commented:
"2018 was a milestone year for Rostelecom. We started to implement our 2022
strategy, with a strong focus on improving our products and services
ecosystem, enhancing efficiency, the further modernisation of our
technological platform, and of course, the development of our team.
Huge strides have been made in expanding and developing our digital
products, entering new markets, launching the biometric platform, improving
digital solutions for medicine and education sectors, and advancing our
cybersecurity capabilities. Today, we don't just develop products and
services, we stimulate emotions, create opportunities for education and
healthcare, we cultivate a sense of security and we free up our clients'
time by helping them streamline business processes. We help clients of any
scale to grow their business, and support the government in providing
improved services to its citizens.
Together with our brand refresh, which was a milestone event for us last
year, we introduced a range of new digital products and tariff lines, in
response to market changes and Rostelecom's priorities.
Our brand-new service and multimedia platform Wink was recently added to our
private client ecosystem, marking an evolutionary stage in the development
of IPTV, which is today popular among millions of families across the entire
country. Wink is a truly comprehensive platform, comprising of a mobile app,
a website and a Smart TV app, more than 200 TV channels and more than 12
thousand films and episodes already available to Rostelecom's clients, as
well as a set of value added services including NPVR and Parental control
options.
Products in our new tariff line were developed and named around the need of
the typical family: "For Internet", "For Safety", "For Fun", "All together"
and "Gaming". We have also improved our product offering with exclusive
tariff plans. One of the latest developments is the launch of the "Cloud"
tariff, together with Yandex, which offers high speed internet access and
massive cloud storage capacity on Yandex.Disk, that is growing monthly by
1tb.
For entrepreneurs, we launched an updated platform "Plus Account" that
ensures high speed Internet connectivity and mobile communication, with
extra services also available, including a Hosted PBX, SMS advertising,
Wi-Fi, video surveillance and TV for business.
Last year, we carried out many successful projects. One of them was video
surveillance at the presidential election in Russia, where thousands of
Rostelecom engineers in mobile teams oversaw the seamless functioning of our
systems, once again reinforcing our competence, excellence and
professionalism, as well as Rostelecom's status as a credible partner. In
2018, we completed another large-scale project to connect healthcare centres
to the Internet, demonstrating our capability to run complex infrastructure
programmes across the entire country. Public funding enabled us to further
expand the number of high-speed connections in remote areas, and we also
completed construction of an underwater sector of the fibre-optic
communication line in Kuril Islands. The JV with Nokia marks another
significant event last year and represents an important milestone when it
comes to setting the backdrop for developing innovative technologies, as
does the launch of the 5G pilot sites for a new generation 5G network
located in Skolkovo, the State Hermitage museum and Innopolis.
Our growing digital segment gained further momentum, which now contributes
more than 55% to our total revenue. Growth in our subscriber base coupled
with higher ARPU, led to a significant increase in revenues from our core
pay-TV and broadband segments, where we are leaders in the market.
Additional products and services that we actively promote are in growing
demand, and we also registered a twofold growth in revenues from Corporate
TV and national Wi-Fi services. The Information security segment grew
fourfold, and the number of "Smart Home" ecosystem subscriber base grew by
sixteen times, resulting in a 24-fold growth in revenues.
The achievements listed above represent only some of our recent
achievements. Our digital transformation has transformed the business and
contributed to a very solid financial performance in 2018. Our revenue grew
by 5%, while OIBDA increased by 4%, and net income - by 7%. Overall, we
delivered a strong performance, and will continue to expand our digital
business segments and improve efficiency.
I am delighted to reflect on a year that confirms Rostelecom's
transformation into a dynamic and courageous digital player. We are
maintaining our strong leadership in the market, our core objective of
pursuing sustainable and accretive growth is enhancing shareholder value,
which is reinforced by attractive dividend returns."
Sergey Anokhin, Senior Vice-President of Rostelecom and CFO of Rostelecom,
added:
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"The results in 2018 underpin our positive outlook for Rostelecom and our
potential to pursue further grow in our digital segment. In addition to
expanding our digital footprint, we are introducing measures that are
improving internal efficiency. We expect our performance to continue to
improve across all key financial indicators and we are therefore setting
ourselves the following targets for 2019: revenue and OIBDA growth of at
least 2.5%, and CAPEX in the range of RUB 65 to RUB 70 billion, taking into
account RUB 7 billion of regulatory CAPEX and excluding the implementation
of government programmes".
KEY OPERATING HIGHLIGHTS
Number of 4Q 2018 4Q 2017 change, y-o-y 3Q 2018 change,
subscribers y-o-y
(million):
Internet 13.0 12.9 1% 13.0 0.1%
access
B2C: Broadband 12.0 12.0 0.4% 12.0 0.02%
B2B: Broadband 1.0 0.9 6% 1.0 1%
+ VPN
Pay TV 10.2 9.8 4% 10.1 1%
Incl. IPTV 5.3 4.8 9% 5.1 3%
MVNO 1.2 0.8 43% 1.1 12%
subscribers
Local 17.4 19.1 (9%) 17.8 (3%)
telephony
services
Total subscriber base
1) The total number of Internet subscribers grew by 1% to 13.0 million in
the fourth quarter of 2018, compared to the corresponding period of last
year;
2) The number of pay-TV subscribers grew by 4% to 10.2 million households
compared to the corresponding period of last year;
? The number of IPTV subscribers increased by 9% to 5.3 million;
3) The MVNO subscriber base increased by 43% to reach 1.2 million users;
4) The number of local telephony subscribers decreased by 9% to 17.4
million.
Subscriber base in the household segment
KEY EVENTS RELATING TO FY2018 AND AFTER THE END OF THE REPORTING PERIOD
Business news
? Rostelecom continues to develop and expand its range of products and
services:
- In September 2018, Rostelecom announced its new positioning and brand;
? Rostelecom launched "Wink", an OTT multimedia platform: by the end of 2018
the application was downloaded by more than 1.2 million users on mobile and
SmartTV gadgets;
- The Company launched Rostelecom Lyceum, a platform that will enhance the
quality, safety and availability of supplementary education in Russia;
- As part of its information security offering:
? Rostelecom launched a single platform based on a high-tech Telco Cloud
solution;
? Rostelecom launched a commercial cyberattack monitoring and management
centre;
As a result, revenues from information security services grew by 4 times in
2018;
- In partnership with Yandex, Rostelecom launched a new "Cloud" tariff plan
with high speed Internet access (of up to 250 Mbps) and increased cloud
storage capacity on Yandex.Disk (with a +1Tb monthly addition);
- As part of the "Gaming" tariff plan development, Rostelecom improved
connectivity with game servers and Internet speed increased to 800 Mbps. A
number of gaming options were improved in some famous computer games,
including in World of Warplanes (a special fighter aircraft Yak-3T) by
Wargaming; Warface by Games.Mail.ru; Blade and Soul, Point Blank, Lineage2
and AION by 4Game;
- As part of the "Smart Home" ecosystem:
? Rostelecom extended its product line through the launch of 9 new types
of cameras and 6 new smart periphery devices;
? Rostelecom launched a mobile app with a new interface and a dashboard
functionality;
? Complementary services were introduced, including home security systems
(together with Golfstream), and installation;
? The fresh "Under control" package now includes a motion sensor, a door
sensor, an RGB lamp and a socket;
? Rostelecom introduced a package offer, comprised of Broadband and Video
Surveillance services.
As a result, Rostelecom's "Smart Home" client base grew by 16 times in 2018,
which translated to a 24 times increase in revenues;
? 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";
- Within the MVNO project:
? The IPTV traffic was reset;
? A number of convergent services were launched in Saint-Petersburg, Komi
and Chelyabinsk;
? Rostelecom introduced a number of attractive roaming options for
travelling clients;
? The Company introduced the possibility to purchase a landline number in
addition to a main mobile number in an additional 16 cities, which
increased total enrolment across 200 localities;
? Voice interconnect was upgraded in the Chuvash Republic, and voice
traffic routing plans were expanded in Kaluga, Vologda, Kaliningrad,
Petrozavodsk and Krasnodar. This led to fewer missed calls and increased
quality of voice communication;
? Rostelecom launched two new functions for its mobile users: "Call me
back" and "Recharge my account".
As a result, Rostelecom's MVNO client base increased to 1.2 million clients,
which has placed Rostelecom first in the virtual mobile operators sector,
with a market share of 56%[8];
? Rostelecom continues to grow its digital segment:
- The number of pay-TV clients exceeded 10.2 million clients (including 5.3
million of IPTV users), and the number of Broadband clients reached 13
million;
? The number of commercial racks in Rostelecom's data centres grew by 11% to
5,870. This translated in a more than 20% revenue increase in the data
centre segment in 2018;
- The Public Services Portal recorded 86 million users, twice as many as in
2017;
- Revenues from "Smart City" projects grew by 46% in 2018;
? More than two-fold increase in revenues from the "Corporate TV" service in
2018;
- The number of National Wi-Fi hotspots increased to 27,500. This generated
a two-fold growth in revenues from this service in 2018;
? Rostelecom became a leader in cloud video surveillance for businesses with
25,000 IP-cameras connected across more than 10,000 organizations in all
Russian regions, which resulted in a nearly 40% growth in revenues in this
segment in 2018;
- The "Antivirus" services revenues increased almost two and half times in
retail segment in the last 12 months;
- Rostelecom launched the Unified Biometric System, one of the key elements
of the remote identification mechanism, that provides remote access to
financial services for citizens;
? Rostelecom launched pilot sites for a new generation 5G network located in
Innopolis in the Republic of Tatarstan, the State Hermitage museum in
Saint-Petersburg and Skolkovo in Moscow;
- A 5G network-based test infrastructure for unmanned vehicles was launched
in Skolkovo;
- Rostelecom successfully provided video surveillance during the
presidential election in Russia on 18 March 2018;
- Rostelecom successfully delivered video surveillance of the Unified State
Exam;
- Rostelecom provided video surveillance on the Single Voting Day at 10,510
district electoral committees and 871 territorial committees, in 11,381
offices in total, under federal and regional contracts;
- The integrated spatial information platform ("Geodata Information System"
(GIS) "Zemlya" (the Earth), developed by Rostelecom, was launched in
Russia's Arkhangelsk region.
? Rostelecom signed or renewed a number of large contracts, including
agreements with Rosreestr (The Federal Service for State Registration,
Cadastre and Cartography), Russia's Pension Fund, the Federal Bailiffs
Service, Pochta Rossii (Russian Mail), the Moscow region Electoral
Committee, the Voronezh region Communications Department, Moscow City
Department for Competitive Policy, Mosenergosbyt, SAP, Huawei, VTB,
Rosselkhozbank (Russian Agricultural Bank), Rosneft, Transneft, X5 Retail
group and others;
? Rostelecom completed the setting up of a corporate data communication
network for Pochta Rossii (Russian Mail), encompassing 37,000 postal
service hubs, including more than 15,000 Pochta Bank's service points;
? Rostelecom secured almost 80% of Tele2's ILD traffic;
? Rostelecom substantially upgraded the voice interconnects which allowed
to transmit more than 90% of Tele2's DLD traffic pass through Rostelecom's
network;
? The underwater sector construction of the fibre-optic communication line
in Kuril Islands was successfully completed;
? Three transcontinental channels of 100Gbps were launched from Europe to
China through Mongolia;
? The capacity of the Transit Europe-Asia (TEA) was upgraded up by 1Tb/s
from Europe to China and to Japan;
? Three-fold growth in revenues from the O2O project (infrastructure
operator) in 2018;
? Sales to regional operators increased by 6% in 2018 as part of the
"Top-7 Interaction" programme.
Other news
? Rostelecom presented its 2022 Strategy and a new dividend policy for
2018-2020;
? Dividends for 2017 were paid at the rate of RUB 5.05 per ordinary share,
and for 9 months of 2018 dividends were paid at the rate of RUB 2.5 per
ordinary share;
? Rostelecom invested in mobile operating system developer Sailfish
(Aurora);
? Acquisition of 100% of shares in Solar Security, a technological leader
in information security (IS) target monitoring and operational management;
? Acquisition of Start2Com, one of the leading developers of settlements
and maintenance solutions;
? Launch of a joint venture (JV) with Nokia to develop innovation
technologies;
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