DJ EQS-News: PJSC MegaFon: MegaFon reports results for Q4 and the full year 2018
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PJSC MegaFon: MegaFon reports results for Q4 and the full year 2018 (news
with additional features)
2019-03-21 / 10:00 MSK
The issuer is solely responsible for the content of this announcement.
*MegaFon reports results for Q4 and the full year 2018*
*Moscow, Russia (21 March 2019) - PJSC "MegaFon" ("MegaFon" or the "Company"
and, together with its consolidated subsidiaries, the "Group") (MOEX: MFON),
a pan-Russian operator of digital opportunities, announces its financial[1]
and operating results for Q4 and the full year 2018.*
*Key financial and operating highlights for the full year 2018[2]*
- Revenue increased by 4.3% y-o-y[3] to RUB 335,549 million
- OIBDA[4] increased by 1.8% y-o-y to RUB 124,042 million
- OIBDA Margin4 was 37.0% versus 37.9% in 2017
- Net Profit[5] increased by 2.7% y-o-y to RUB 21,068 million
- CAPEX increased by 45.5% y-o-y to RUB 81,456 million
- Free Cash Flow to Shareholders decreased by 86.2% y-o-y to RUB 4,869
million
- Net Debt as of 31 December 2018 was RUB 294,318 million
- The number of mobile subscribers as of 31 December 2018 decreased by 0.3%
y-o-y to 76.9 million[6]
*Key financial and operating highlights for Q4 2018*
- Revenue increased by 4.5% y-o-y to RUB 88,412 million
- OIBDA[7] decreased by 4.5% y-o-y to RUB 27,561 million
- OIBDA Margin7 was 31.2% versus 34.1% in Q4 2017
- Net Profit decreased by 62.7% y-o-y to RUB 1,133 million
- CAPEX increased by 72.9% y-o-y to RUB 38,260 million
- Free Cash Flow to Shareholders decreased by 231.3% y-o-y to RUB (17,071)
million
Gevork Vermishyan, the Group's Chief Executive Officer, commented on the
financial and operating results as follows:
*«* *Financial results*
2018 has been a year of big changes and good results for
MegaFon. Our digital leadership strategy has proved to be
the right choice in the current economic conditions and has
enabled us to move steadily forward towards meeting our
long-term goals. We finished our year with good financial
results and achieved our previously announced KPIs.
Our consolidated service revenue for 2018 increased by 4.7%
y-o-y to RUB 307 billion, in line with our forecast.
Consolidated OIBDA (after taking into account the positive
impact of the new revenue recognition standard IFRS 15)
increased by 1.8% y-o-y to RUB 124 billion. Eliminating the
positive impact of IFRS 15, full year 2018 Organic OIBDA
still increased by 0.2% y-o-y to RUB 122 billion.
Consolidated CAPEX for the year reached a record RUB 81.5
billion, and was used for further LTE network expansion,
improving the reliability of our network and IT
infrastructure, and compliance with the Yarovaya data
storage law.
*B2C*
Our commitment to leadership in quality of service and to
continued development of our product portfolio has enabled
us to actively develop a digital ecosystem for all
categories of clients. Using big data analysis we have been
able to offer our clients the best innovations, such as:
· Our clients were the first to be able to touch pay for
services and goods from their mobile accounts via Apple
Pay, Google Pay and Samsung Pay by using a Mastercard
token.
· We launched a smart service that enables each client to
switch on by one click a personalised set of discounts,
bonuses, additional minutes and internet packages, films,
music, books and media.
· Our tariff line "Vklyuchaisya!" ("Connect!") which we
refreshed in Spring 2018 is now a bestseller. By the end
of the year more than 20.7 million subscribers had opted
for that tariff.
· Our service "MegaFon.Travel" assists clients in planning
trips and at the same time enables them to get cashback on
a mobile account.
· The userbase of "MegaFon.TV" exceeded 5.3 million people
by the end of the year.
*B2X*
We strive to be the number one supporter for entrepreneurs,
private businesses and state companies. Focusing on the
development of IoT and big data services we now offer the
most effective solutions for our clients' business
development and improvement:
· "Mobile Connect" verifies customers on a website by
mobile numbers in just one click, which increases sales
conversion for e-commerce.
· "Business cloud" gives businesses easy access to virtual
platforms, cloud storage, databases, graphic maps and big
data services.
· "Upravlyai!" ("Manage!") is the first flexible tariff
for businesses in the market with a 7% cashback and an
opportunity to customise telecom service for each
employee.
· Our Narrow Band IoT (NB/IoT) solutions meet all the
requirements of businesses and form an important part of
the future digital economy as they guarantee security,
quality and safety of data, even if data gets transmitted
via 2G and 3G networks.
· "Digital managing company" is an integrated housing and
utilities solution, both for business and tenants.
· "MegaFon.Business" is a unique online service for small
and medium-size businesses which permits easy on-click
management of VAS-services using partner and MegaFon
offers.
*Strategic partnerships*
In order to build up momentum on the development of new
digital services, we are actively searching for and finding
new partners. The last year has been marked by a number of
transactions, mergers and new partnerships which will
contribute significantly to the development of the national
digital economy:
· Together with the international e-commerce leader
Alibaba Group, the Russian Direct Investment Fund (RDIF)
and Mail.Ru Group, we signed a letter of intent aimed at
creating an e-commerce joint venture in Russia.
· We believe that our joint venture "MF Technologies" will
combine the best expertise of MegaFon, Gazprombank, Rostec
and USM Holdings, and will enable us to create new
breakthroughs in cross-industry digital, telecom, finance
and hi-tech industries solutions.
· Our obtaining a 25% share in the Svyaznoy/Euroset
combined company, the largest retail company in the world
offering hi-tech tailored services - should enable us not
only to earn profit in the future, but also to focus on
developing our own omnichannel network.
*New opportunities: development of digital infrastructure
and an ecosystem for clients*
Being a digital company, first of all, means "having a
developed ecosystem of digital services for clients and the
best technical solutions for using these services". We are
proud that for the second year in a row MegaFon received
'The fastest mobile internet in Russia' title from Ookla as
the operator with the highest speed of data transfer and
downloads based on independent tests taken by data users on
their devices in all mobile networks in Russia. The key to
our success is having the largest LTE network in Russia with
more than 49,600 base stations. As of the end of the year,
our LTE network reached 79% of the population of Russia
spanning the entire country. Our roaming networks also
enabled our clients to use LTE services in 119 countries
around the world.
We believe that our continued efforts on improving our
connection quality and increasing our network coverage, as
well as our investments in our core network, at a time when
internet traffic and revenues from digital services are
growing, are important factors for future development of the
company and our successful transformation into a digital
operator of the future.
In addition to demonstrating the technical excellence of
MegaFon network during the FIFA World Cup last year, we were
the first in Russia to reach a data transfer speed of 1
Gbit/sec on a smartphone and launched our Enhanced Voice
Service technology for developing a high quality VoLTE
(Voice over LTE) service. In Moscow more than 30% of voice
traffic is already being transmitted via VoLTE technology.
We continue expanding our international network. Last year,
in partnership with Kazakhtelecom and Interoute, we
connected Hong Kong and Frankfurt via a 8 Terabit/sec
fiber-optic line and completed our project with China Mobile
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by launching a 100 Gbit/sec backbone line. Our backbone
network exceeded 136,000 kilometers and we intend to
continue to expand it.
*5G: Towards the future*
To prepare for the transition to 5G we have been testing our
infrastructure and elements of the new generation networks.
In 2018:
· together with Nokia we successfully tested fiber-optic
equipment intended for 5G implementation, which will
enable us to implement and test services in areas such as
artificial intelligence (AI), augmented reality (AR),
virtual reality (VR), internet of things (IoT), and cloud
solutions;
· working with Qualcomm Technologies Inc. and Nokia, we
showcased 5G equipment on our network in Moscow,
St-Petersburg and Kazan;
· in partnership with the Moscow City IT Department and
Huawei, we presented an innovative cross-industry telecom
and healthcare solution - providing remote scan and
genetic sequencing on 5G networks;
· we were the first in the country to live air a football
match in VR format.
*Digital economy and infrastructure for new generation
State*
Global digitalisation is the key factor for economic growth
on which the government and businesses are now focusing. We
have put together a unique pool of expertise, assets,
partners and experience in completing large-scale high-tech
projects to drive implementation of the best ideas and
practices in respect of Digital Economy and Digital City
strategies. To better manage processes in line with the
State strategy, we, together with our partners, are
developing new solutions and services for managing the
infrastructure of digital cities, communal and utilities
services, and municipal entities. Our solution "Digital
region management" is among the best IT solutions for
processing and structuring data. In 2018 we signed a number
of important agreements:
· with the Saratov, Pskov and Ulyanovsk regional
authorities for pilot Digital Economy projects;
· with the Moscow, St-Petersburg and Sochi city
authorities, as well as the Novgorod, Ryazan, and Tula
regional authorities and the Republic of Kalmykia, on
implementing so-called Smart City solutions for state,
healthcare, and tourism.
We continue to implement Smart City projects in the
Chelyabinsk and Bryansk regions as well as in Tatarstan's
Innopolis.
*Completion of Tender Offer*
When the tender offer for our ordinary shares and GDRs was
announced in July 2018, we noted that implementation of many
of the bold strategies described above was not consistent
with our remaining a public company, because of the
uncertainties presented by our efforts to become a leader in
the new digital economy.
Our shareholders seem to have agreed with us, because the
overwhelming number of public shareholders tendered their
shares or GDRs into the tender offer. Following completion
of the tender offer, in October 2018 we delisted our GDRs
from the London Stock Exchange. As a result of the tender
offer, our wholly-owned subsidiary MegaFon Finance became
legally obligated to make a mandatory tender offer to all
remaining shareholders. In January 2019, our Board of
Directors approved the making of the mandatory tender offer
and recommended that our shareholders accept the mandatory
tender offer. The mandatory tender offer was directed to
persons holding a total of 131,212,843 outstanding ordinary
shares (all references to ordinary shares include ordinary
shares then represented by GDRs), or 21.16% of the
outstanding ordinary shares. As of 7 March 2019, the
expiration date of the mandatory tender offer, a total of
126,246,094 ordinary shares, representing 20.36% of the
outstanding ordinary shares of MegaFon, had been tendered by
the Company's shareholders.
Following completion of the settlements under the mandatory
tender offer, MegaFon Finance is holding in the aggregate
265,862,631 ordinary shares, representing 42.88% of the
outstanding ordinary shares, and which together with the
ordinary shares held by its affiliates constitute
615,033,251 ordinary shares, or 99.2% of the outstanding
ordinary shares of MegaFon. Accordingly, MegaFon Finance is
entitled to require the remaining shareholders to sell their
shares to it, and is considering whether or not to proceed
with this step. If it chooses not to require the remaining
shareholders to sell their shares to it, then each of the
remaining shareholders has the right to require MegaFon
Finance to purchase his or her shares.
We expect the status of the remaining outstanding ordinary
shares to be resolved by mid-to late-summer 2019. Whether or
not the remaining shares are purchased, MegaFon will become
effectively a wholly-owned subsidiary of LLC "AF Telecom
Holding", which is currently the Company's majority
shareholder. We look forward to a closer cooperation with
the AF Telecom and its controlling shareholders going
forward, because we believe that they share the same vision
for MegaFon's future as we do, and are fully supportive of
our efforts to achieve our goals.
*»*
*Financial results[8]
(In millions of RUB, except as indicated)*
*Three Months* *Full Year*
*Q4 *Q4 *Q4 *2018* *2017* *2018/
2018* 2017* 2018/ 2017*
Q4 2017*
Revenue 88,412 84,641 4.5% 335,549 321,810 4.3%
Wireless 71,073 67,602 5.1% 276,076 264,352 4.4%
Services
Including 26,903 23,544 14.3% 100,936 89,748 12.5%
data
revenue
Wireline 8,277 9,111 (9.2%) 30,941 28,759 7.6%
Services
Sales of 9,062 7,928 14.3% 28,532 28,699 (0.6%)
equipment
&
accessori
es
OIBDA 27,561 28,865 (4.5%) 124,042 121,850 1.8%
OIBDA 31.2% 34.1% (2.9 37.0% 37.9% (0.9
Margin p.p.) p.p.)
Net 1,133 3,037 (62.7%) 21,068 20,519[9 2.7%
Profit ]
Net 1.3% 3.6% (2.3 6.3% 6.4% (0.1
Profit p.p.) p.p.)
Margin
CAPEX 38,260 22,133 72.9% 81,456 55,985 45.5%
CAPEX / 43.3% 26.1% 17.2 24.3% 17.4% 6.9 p.p.
Revenue p.p.
*Financial results, Russia only[10]
(In millions of RUB, except as indicated)*
*Three Months* *Full Year*
*Q4 *Q4 *Q4 *2018* *2017* *2018/
2018* 2017* 2018/ 2017*
Q4 2017*
Revenue 87,051 83,490 4.3% 330,485 317,430 4.1%
Wireless 69,723 66,461 4.9% 271,051 260,009 4.2%
Services
Including 26,314 23,101 13.9% 98,884 88,216 12.1%
data
revenue
Wireline 8,267 9,102 (9.2%) 30,905 28,724 7.6%
Services
Sales of 9,061 7,927 14.3% 28,529 28,697 (0.6%)
equipment
&
accessori
es
OIBDA 27,158 28,738 (5.5%) 122,628 121,806 0.7%
OIBDA 31.2% 34.4% (3.2 37.1% 38.4% (1.3
Margin p.p.) p.p.)
Net 1,160 3,389 (65.8%) 22,422 23,3529 (4.0%)
Profit
Net 1.3% 4.1% (2.8 6.8% 7.4% (0.6
Profit p.p.) p.p.)
Margin
*Revenue*
Total revenue in Q4 2018 increased by 4.5% y-o-y to RUB 88,412 million.
Total revenue for the full year 2018 increased by 4.3% y-o-y and reached RUB
335,549 million, while our service revenue for the full year grew by 4.7% to
RUB 307,017 million, fully in line with our guidance. Revenue from Russia
remained the major component in this segment, accounting for over 98.5% of
total revenue for Q4 and the full year.
In Q4 2018 our wireless revenue, including data revenue, increased by 5.1%
y-o-y to RUB 71,073 million. For the full year 2018 wireless revenue grew by
4.4% to RUB 276,076 million, driven by continued growth in mobile data
revenue which increased by 14.3% y-o-y to RUB 26,903 million in Q4 2018 and
by 12.5% y-o-y to RUB 100,936 million for the full year 2018.
The key driver behind the growth continued to be the success of the tariff
line "Vklyuchaisya!" ("Connect!") which has been refined with certain
modifications, such as introduction of a new tariff plan "Vklyuchaisya!
Smotri+" ("Connect! Watch plus"), as well as the tariff line for B2X clients
"Upravlyai!" ("Manage!"). In Q4 2018 a number of marketing initiatives
called "Back to school", "Gigateka", and "Buy one Samsung smartphone get
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another one free" pushed data consumption up as the number of subscriptions
to the "Vklyuchaisya!" ("Connect!") tariff increased. The one-time surge in
wireless services consumption during the FIFA World Cup also had a positive
impact on wireless revenue for the full year 2018.
VAS-revenue, including revenue from digital products and services such as
mobile finance services and MegaFon.TV, showed excellent results during the
year, also driving wireless revenue up. VAS revenue increased by 9.1% y-o-y
in 2018 as a result of revisions to our pricing policies following a
multiple-factor analysis of the market and our service portfolio values. The
FIFA World Cup also had a noticeable impact on MegaFon.TV revenue as traffic
was five times higher than usual during the period of the event.
In Q4 2018 wireline service revenue decreased by 9.2% y-o-y to RUB 8,277
million. This is mainly a result of revenue at the end of 2017 being boosted
by a one-off recognition of revenue on a long-term construction contract
with a B2X client and from additional services provided in 2017 during the
final draw for the 2018 FIFA World Cup. Full year 2018 wireline service
revenue increased by 7.6% y-o-y to RUB 30,941 million. The key contributors
to the growth were the increased revenue from the FIFA World Cup
infrastructure development, supplying goods and services under the "Safe
City" projects of the State's Digital Economy Programme, and other
information and communication technology (ICT) contracts with B2G clients.
Revenue from sales of equipment and accessories in Q4 2018 increased by
14.3% y-o-y to RUB 9,062 million resulting from equipment being bundled with
sales of services under the end-of-the-year marketing initiatives "Back to
school", "Gigateka", and "Buy one Samsung smartphone get another one free"
and a boost in revenue from sales of the new smartphone Honor as well as
newly launched models of Samsung, Xiaomi and Apple handsets. This surge in
sales, however, was insufficient to offset the impact of the reduction in
the number of our retail outlets in line with our strategy announced in
2017. Accordingly full year 2018 revenue from sales of equipment and
accessories decreased by 0.6% y-o-y to RUB 28,532 million.
*OIBDA and OIBDA Margin*
OIBDA in Q4 2018 decreased by 4.5% y-o-y to RUB 27,561 million. This takes
into account the positive impact from the adoption of the new accounting
standard, "IFRS 15 - Revenue from Contracts with Customers", in the amount
of RUB 370 million. Organic OIBDA in Q4 2018 decreased by 5.8% y-o-y to RUB
27,191 million.
The increase in total revenue of 4.5% was offset by an increase in
advertising expenses as we promoted new marketing initiatives, a significant
increase in spectrum expenses following the revision of charges by the
regulator, higher personnel expenses resulting from an increase in the
number of highly skilled professionals being engaged to work on implementing
our digital ecosystem strategy, and salaries indexation.
OIBDA Margin in Q4 2018 decreased by 2.9 p.p. y-o-y to 31.2%. Organic OIBDA
Margin decreased by 3.3 p.p. y-o-y to 30.8%, in both cases mainly due to the
increase in spectrum fees and personnel expenses mentioned above.
Full year 2018 OIBDA increased by 1.8% y-o-y to RUB 124,042 million, and
full year 2018 Organic OIBDA increased by 0.2% y-o-y to RUB 122,117 million
as the growth in revenue of 4.3% over last year only slightly exceeded the
growth in costs described above. OIBDA Margin in 2018 decreased by 0.9 p.p.
y-o-y to 37.0% and Organic OIBDA Margin decreased by 1.5 p.p. y-o-y to 36.4%
- all for the same reasons.
*Net Profit[11]*
Net Profit in Q4 2018 decreased by 62.7% y-o-y to RUB 1,133 million. After
eliminating the positive impact of IFRS 15 of RUB 296 million, Organic Net
Profit decreased by 72.4% y-o-y to RUB 837 million. The decreases in each
case were mainly the result of the decreases in OIBDA and Organic OIBDA,
offset in part by foreign exchange gains from deposits held in foreign
currencies.
Net profit for the full year 2018 increased by 2.7% to RUB 21,068 million
while Organic Net Profit decreased by 4.8% y-o-y to RUB 19,528 million. Both
Net Profit and Organic Net Profit were pushed up by foreign exchange gains
resulting from timely currency risks management.
*CAPEX*
CAPEX in Q4 2018 increased by 72.9% y-o-y to RUB 38,260 million and for the
full year 2018 by 45.5% to RUB 81,456 million, both driven by the continued
roll-out of our networks of all technologies, initiatives aimed at
improvement of the quality of services and customer experience, as well as
network resilience improvements, development of our billing platform and
investment in equipment required to comply with the Yarovaya (data storage)
law.
*Free Cash Flow to Shareholders*
Free cash flow to shareholders in Q4 2018 decreased by 231.3% y-o-y to RUB
(17,071) million, mainly due to the significant rise in CAPEX described
above which exceeded the increase in operating cash flows.
Free cash flow to shareholders for the full year 2018 decreased by 86.2%
y-o-y to RUB 4,869 million, for the same reasons.
*Net Debt*
Net debt increased by 6.5% from RUB 276,382 million as of 30 September 2018
to RUB 294,318 million as of 31 December 2018 as cash was used to make
payments of CAPEX and operating expenditures which had been deferred until
the end of the year. As of 31 December 2018 our Net debt/OIBDA ratio was
2.37x.
*EPS[12]*
Basic and diluted EPS for Q4 2018 decreased y-o-y from RUB 5 per share for
Q4 2017 to RUB 2 per share for Q4 2018 due to the reduction in Net Profit
described above.
Basic and diluted EPS increased from RUB 34 per share for 2017 to RUB 38 per
share for 2018 mainly because of the reduction in the weighted average
number of shares outstanding following the repurchase of ordinary shares and
GDRs pursuant to the tender offer made in July 2018.
*New accounting standards*
Starting from 1 January 2018 we adopted the new accounting standards IFRS 15
"Revenue from contracts with customers" and IFRS 9 "Financial Instruments".
The adoption of IFRS 9 did not have a material impact on our financial
statements. The key impact for us of the adoption of IFRS 15 was the
capitalisation of costs incurred to acquire new customer contracts, which
increased our Net Profit by RUB 296 million in Q4 2018, net of tax of RUB 74
million (the effect on Net Profit for the full year 2018 amounted to RUB
1,540 million, net of tax of RUB 385 million). We adopted IFRS 15 using the
modified retrospective method, and this increased our deferred costs assets
by RUB 1,707 million and our opening retained earnings by RUB 1,366 million,
net of tax effect.
*Wireless subscribers in Russia as of*
*31 December 2018* *31 December 2017* *Change*
Number of 75,205 75,445 (0.3%)
wireless
subscribers (K)
of which data 32,664 31,544 3.6%
service users (K)
Share of data 43.4% 41.8% 1.6 p.p.
service users
Our Russian wireless subscriber base slightly decreased by 0.3% y-o-y to
75.2 million as of 31 December 2018. Our data service user base in Russia
increased by 3.6% y-o-y to 32.7 million as of 31 December 2018 and reached
43.4% of the overall subscriber base in Russia. This increase is a direct
consequence of our continued focus on developing and promoting our data
services portfolio.
*Data operating indicators*
*Q4 *Q4 *Q4 2018/ *12m *12m *12m
2018* 2017* Q4 2017* 2018* 2017* 2018/ 12m
2017*
ARPDU 271 246 10.2% 260 237 9.7%
(RUB)
DSU (MB) 10,460 7,660 36.6% 9,256 6,524 41.9%
*ARPDU* increased in Q4 2018 by 10.2% y-o-y to RUB 271 and for the full year
2018 by 9.7% y-o-y to RUB 260 as we continued to introduce
data-service-centered products such as "Vklyuchaisya!" ("Connect!"),
"Upravlyai!" ("Manage!"), and roaming options for data users which encourage
data usage by our subscribers.
*DSU* increased in Q4 2018 by 36.6% y-o-y to 10.5 gigabytes and for the full
year 2018 by 41.9% y-o-y to 9.3 gigabytes, as a result of the initiatives
mentioned above, and ever growing smartphone penetration (currently, 70.3%
of the total number of devices registered on our network are smartphones),
while the overall number of high-end 4G-enabled devices registered on
MegaFon's network went up by 32.0% y-o-y to 28.2 million devices.
*For more information*
Investors: Dmitry Kononov, Director of Investor Relations and M&A +7 926 200
6490
dkononov@megafon.ru
Media: Artem Lebedev, Director for Corporate Communications +7 925 696 0677
artem.lebedev@megafon.ru
*Notes to editors*
PJSC "MegaFon" is a pan-Russian operator of digital opportunities, operating
in all segments of the telecommunications markets in Russia, and in the
Republics of Abkhazia, South Ossetia and Tajikistan. MegaFon is a recognised
market leader in the provision of mobile data services, was the first
operator in Russia to launch commercial operation of a third generation (3G)
network and was the first operator in the world to launch commercial
operation of an LTE-Advanced (4G) data network. MegaFon is traded on the
Moscow Exchange under the symbol MFON. Additional information about MegaFon
and the products and services provided by the Group can be found at
http://www.megafon.ru.
*Disclaimers, statement regarding inside information and forward looking
statements*
The above discussion and analysis should be read in conjunction with the
Group's consolidated financial statements which are available for download
on the Group's website at: http://corp.megafon.com/investors/ [1]
Certain statements and/or other information included in this document may
not be historical facts and may constitute "forward looking statements"
within the meaning of Section 27A of the U.S. Securities Act of 1933 and
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Section 2(1)(e) of the U.S. Securities Exchange Act of 1934, as amended. The
words "believe", "expect", "anticipate", "intend", "estimate", "plans",
"forecast", "project", "will", "may", "should" and similar expressions may
identify forward looking statements but are not the exclusive means of
identifying such statements. Forward looking statements include statements
concerning our plans, expectations, projections, objectives, targets, goals,
strategies, future events, future revenues, operations or performance,
capital expenditures, financing needs, our plans or intentions relating to
the expansion or contraction of our business as well as specific
acquisitions and dispositions, our competitive strengths and weaknesses, the
risks we face in our business and our response to them, our plans or goals
relating to forecasted production, reserves, financial position and future
operations and development, our business strategy and the trends we
anticipate in the industry and the political, economic, social and legal
environment in which we operate, and other information that is not
historical information, together with the assumptions underlying these
forward looking statements. By their very nature, forward looking statements
involve inherent risks, uncertainties and other important factors that could
cause our actual results, performance or achievements to be materially
different from results, performance or achievements expressed or implied by
such forward-looking statements. Such forward-looking statements are based
on numerous assumptions regarding our present and future business strategies
and the political, economic, social and legal environment in which we will
operate in the future. We do not make any representation, warranty or
prediction that the results anticipated by such forward-looking statements
will be achieved, and such forward-looking statements represent, in each
case, only one of many possible scenarios and should not be viewed as the
most likely or standard scenario. We expressly disclaim any obligation or
undertaking to update any forward-looking statements to reflect actual
results, changes in assumptions or in any other factors affecting such
statements.
*Schedule 1: Definitions*
*ARPDU (Average Monthly Revenue Per Data Services User) *is calculated for a
given period by dividing the Group's data services revenues for a given
period by the average number of its data services users during that period,
and further dividing the result by the number of months in that period.
*Capital Expenditures (CAPEX)* comprises the cost of purchases of new
equipment, new construction, acquisition of new or upgrades to software,
acquisition of spectrum and other intangible assets, and purchases of other
long-term assets, together with related costs incurred prior to the intended
use of the applicable assets, all accounted for as of the earliest time of
payment or delivery. Long-term assets obtained through business combinations
are not included in the calculation of capital expenditures.
*Data service user* is defined as a subscriber who has consumed any amount
of data traffic within preceding month.
*Diluted EPS* is calculated by adjusting both numerator and denominator in
the EPS calculation so as to reflect the effect of including the additional
shares that would have been outstanding if all options and other rights to
acquire shares had been converted into actual shares.
*DSU (Monthly Average Data Services Usage per User)* is calculated by
dividing the total number of megabytes transferred by our network during a
given period by the average number of data services users during such period
and dividing the result by the number of months in such period.
*EPS (Earnings per Share) *means an amount of the Group's profit allocated
to one share of its stock, and is calculated by dividing Net Profit for a
reporting period by the weighted average number of shares outstanding during
the period. No earnings are allocated to treasury shares.
*Free Cash Flow to Shareholders *means cash from operating activities, less
cash paid for purchases of property, equipment and intangible assets and
interest paid, increased by proceeds from sales of property and equipment
and interest received. It is a financial measure which should be considered
as supplementary but not as an alternative to the information provided in
the Group's financial statements. A reconciliation of free cash flow and
cash from operating activities is provided in Schedule 2.
*Group* means PJSC "MegaFon" together with its consolidated subsidiaries.
Previously, the Group had consolidated the financial position and the
results of operations of its subsidiary, Mail.Ru Group Limited ("Mail.Ru"),
from the beginning of 2017. As of June 2018, the Group concluded that it no
longer had the ability to direct relevant activities of Mail.Ru, and
therefore no longer had control over that company. Accordingly, the Group
ceased to consolidate the financial position and the results of operations
of Mail.Ru, with effect from the end of Q2 2018. Information relating solely
to Mail.Ru can be found at https://corp.mail.ru/en/investors/.
*LTV* means lifetime value of a subscriber, i.e. the present value of the
future cash flows attributed to the subscriber during his/her entire
relationship with the Group.
*Net debt position* means the difference between (a) cash, cash equivalents,
and principal amount of deposits and (b) principal amount of loans and
borrowings less unamortised debt issuance fees. It is a financial measure
which should be considered as supplementary but not as an alternative to the
information provided in the Group's financial statements. A description of
how the metric is calculated is provided in Schedule 2.
*Net Profit *is profit for the period from continuing operations
attributable to equity holders of the Group grossed up for intragroup
amounts between MegaFon Group and Mail.Ru Group.
*Organic Net Profit *is Net Profit excluding the impact of new IFRS
standards. Starting from 1 January 2018, MegaFon has adopted new IFRS
standards, namely: IFRS 9 "Financial instruments" and IFRS 15 "Revenue from
Contracts with Customers". For convenience of comparison with prior periods,
with respect to the financial year 2018, MegaFon shall be presenting its
financial results as reported, i.e. including the impact of IFRS 9 and IFRS
15, and organically, i.e. excluding the impact of adoption of the mentioned
standards.
*OIBDA (Operating Income Before Depreciation and Amortisation) *is a
financial measure not defined by IFRS, should be considered as supplementary
and not as an alternative to the information provided in the financial
statements of the Group. OIBDA Margin means OIBDA as a percentage of
revenue. OIBDA and OIBDA Margin are widely used by investors, analysts and
rating agencies as a measure to evaluate and compare current and future
operating performance and to determine the value of companies within the
telecommunications industry. However, the Group's definition of OIBDA and
OIBDA Margin may not be directly comparable to similarly named financial
measures and disclosures by other companies. A reconciliation of OIBDA to
operating profit is provided in Schedule 2.
*Organic OIBDA* is OIBDA, and *organic OIBDA Margin* is OIBDA Margin, in
each case net of the impact of IFRS 15 adoption. The adoption of IFRS 9 did
not have a material impact on our financial statements.
*Wireless Subscriber* is defined as each SIM card that is activated in our
billing system or has had at least one chargeable traffic event (that is,
use of voice, VAS or data transfer services) within the preceding three
months, whether chargeable to the subscriber or to a third party (for
example, interconnection charges payable by other operators). Where an
individual person holds more than one SIM card, each SIM card is included as
a separate subscriber.
*Schedule 2: Reconciliations of Non-IFRS financial measures[13]
(In millions of RUB, except as indicated)*
*OIBDA*
*Q4 *Q1 2018* *Q2 2018* *Q3 2018* *Q4 2018*
2017*
Operating profit 12,517 14,790 15,973 16,988 10,584
Depreciation 14,086 12,227 12,229 12,473 12,325
Amortisation 2,020 3,658 3,914 4,017 4,527
Loss/(gain) on 242 (109) 145 176 125
disposal of
non-current
assets
OIBDA 28,865 30,566 32,261 33,654 27,561
IFRS 15 effect - (562) (478) (515) (370)
Organic OIBDA 28,865 30,004 31,783 33,139 27,191
*OIBDA Margin as percentage of revenue*
*Q4 2017* *Q1 2018* *Q2 2018* *Q3 2018* *Q4 2018*
Operating 14.8% 19.3% 19.5% 19.1% 12.0%
profit
Depreciation 16.6% 16.0% 14.9% 14.1% 13.9%
Amortisation 2.4% 4.8% 4.8% 4.5% 5.1%
Loss/(gain) on 0.3% (0.1%) 0.2% 0.2% 0.2%
disposal of
non-current
assets
OIBDA Margin 34.1% 40.0% 39.4% 37.9% 31.2%
IFRS 15 effect - (0.8%) (0.6%) (0.6%) (0.4%)
Organic OIBDA 34.1% 39.2% 38.8% 37.3% 30.8%
Margin
*Net Profit and Net Profit Margin*
*Q4 2017* *Q1 2018* *Q2 2018* *Q3 2018* *Q4 2018*
Net Profit 3,037 6,037 6,154 7,744 1,133
IFRS 15 effect - (450) (382) (412) (296)
Organic Net 3,037 5,587 5,772 7,332 837
Profit
Net Profit 3.6% 7.9% 7.5% 8.7% 1.3%
Margin
IFRS 15 effect - (0.6%) (0.5%) (0.5%) (0.3%)
Margin
Organic Net 3.6% 7.3% 7.0% 8.2% 1.0%
Profit Margin
*Net debt as of*
*31 Dec *31 Mar *30 Jun *30 Sep *31 Dec
2017* 2018* 2018* 2018* 2018*
Cash and 20,776 24,345 14,553 36,916 27,214
cash
equivalents
Bank 7,553 4,125 21,912 4,119 4,352
deposits
(MORE TO FOLLOW) Dow Jones Newswires
March 21, 2019 03:00 ET (07:00 GMT)
(principal
amount)
Loans and (262,846) (260,260) (251,208) (317,417) (325,884)
borrowings
(principal
amount)
less
unamortised
fees and
discounts
Net debt (234,517) (231,790) (214,743) (276,382) (294,318)
*Free cash flow to shareholders*
*Q4 2017* *Q1 2018* *Q2 2018* *Q3 2018* *Q4 2018*
Net cash flows 31,403 24,213 25,363 34,842 20,785
from operating
activities
Purchase of (12,599) (19,426) (11,522) (15,187) (30,411)
property,
equipment and
intangible
assets
Proceeds from 250 373 341 7 6
sale of
property and
equipment
Interest 667 235 209 434 583
received
Interest paid (6,722) (5,548) (6,524) (5,870) (8,034)
Free cash flow 12,999 (153) 7,867 14,226 (17,071)
to
shareholders
*Schedule 3: Summarised financial information of the Group
(In millions of RUB, except as indicated)*
*Summarised income statement of the Group for the year ended 31 December*
*2018* *2017*
Revenue 335,541[14] 321,797
Operating expenses (277,091) 14 (263,728)
Operating profit 58,45014 58,069
Non-Operating loss (29,357) (46,480)
Profit before tax from continuing 29,09314 11,589
operations
Income tax expense (7,823) (6,706)
Profit from continuing operations, net of 21,27014 4,883
tax
Profit from discontinued operations, net 11,584 442
of tax
Profit for the year 32,854 5,325
Profit for the year attributable to 35,170 4,551
equity holders of the Group
Basic and diluted, earnings per share for 63 8
the year attributable to equity holders
of the Group
*Summarised financial position of the Group as of*
*31 Dec *31 Dec
2018* 2017*
Non-current assets 422,930 462,602
Current assets 87,079 99,125
Total assets 510,009 561,727
Total equity 70,403 165,309
Non-current liabilities 328,003 259,988
Current liabilities 111,603 136,430
Total liabilities 439,606 396,418
Total equity and liabilities 510,009 561,727
*Summarised cash flow information of the Group for the year ended 31
December*
*2018* *2017*
Net cash flows from operating activities 110,028 133,862
Net cash flows used in investing activities (75,720) (103,221)
Net cash flows used in financing activities (48,327) (24,781)
Net change in cash and cash equivalents (14,019) 5,860
[1] . Based on the IFRS consolidated financial statements audited by JSC
"KPMG". As a result of the completion on 9 June 2018 of the transaction to
create a joint venture with JSC "Gazprombank", LLC "Financial Investments"
and LLC "RT-Business Development" (a subsidiary of Rostec), the Group has
ceased to consolidate the financial position and the results of operations
of its subsidiary, Mail.Ru Group Limited. For all the periods presented in
the consolidated income statement of the Group for 12m 2018 the results of
Mail.Ru are presented net under "Discontinued operations" line. Accordingly,
all financial data in this press release refers to the financial data of the
Group exclusive of the Mail.Ru results. Such data was previously reported as
the results of the "telecom segment" and now corresponds to results from
continuing operations of the Group grossed up for the intragroup amounts
between the Group and Mail.Ru Group.
[2] . See Schedule 1 for definitions of the terms used and Schedule 2 for
the reconciliation of Non-IFRS measures. Due to rounding actual numbers and
calculations for financials and KPIs may differ from those set forth in this
release.
[3] . Year over year ("y-o-y") stands for the same periods in the current
and previous year on either a quarterly or yearly basis.
[4] . OIBDA and OIBDA Margin are presented as reported. Organic OIBDA and
organic OIBDA Margin amounted to RUB 122,117 million and 36.4%,
respectively. See Schedule 1 for the definition of organic OIBDA and organic
OIBDA Margin and Schedule 2 for the reconciliation of organic OIBDA and
organic OIBDA Margin.
[5] . Net Profit is presented as reported Profit from continuing operations.
Organic Net Profit amounted to RUB 19,528 million. See Schedule 1 for the
definition of organic Net Profit and Schedule 2 for the reconciliation of
organic Net Profit. Net Profit for 2017 is adjusted to exclude the non-cash
impairment relating to the Euroset joint venture in the amount of RUB 15.9
billion.
[6] . Subscriber data includes subscribers of the Company in Russia and the
subscribers of its subsidiaries: "TT mobile" CJSC in the Republic of
Tajikistan, "AQUAFON-GSM" CJSC in the Republic of Abkhazia and "OSTELEKOM"
CJSC in the Republic of South Ossetia.
[7] . OIBDA and OIBDA Margin are presented as reported. Organic OIBDA and
organic OIBDA Margin amounted to RUB 27,191 million and 30.8%, respectively.
See Schedule 1 for the definition of organic OIBDA and organic OIBDA Margin
and Schedule 2 for the reconciliation of organic OIBDA and organic OIBDA
Margin.
[8] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group.
[9] . Net Profit for 2017 is adjusted to exclude the non-cash impairment
relating to the Euroset joint venture in the amount of RUB 15.9 billion.
[10] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group, and excluding mutual settlements with "TT mobile" CJSC,
"AQUAFON-GSM" CJSC and "OSTELEKOM" CJSC.
[11] . Net Profit for 2017 is adjusted to exclude the non-cash impairment
relating to the Euroset joint venture in the amount of RUB 15.9 billion.
[12] . Net Profit for 2017 is adjusted to exclude the non-cash impairment
relating to the Euroset joint venture in the amount of RUB 15.9 billion.
[13] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group.
[14] . Amounts in the financial statements of the Group are shown net of
intragroup amounts between the Group and Mail.Ru Group, while financial
results discussed in this press-release include intragroup amounts.
Additional features:
Document: http://n.eqs.com/c/fncls.ssp?u=UCESEAPLCG [2]
Document title: Consolidated financial statements for the year ended
December 31, 2018
2019-03-21 MSK Dissemination of a Corporate News, transmitted by
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The issuer is solely responsible for the content of this announcement.
The EquityStory.RS, LLC Distribution Services include Regulatory
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789989 2019-03-21 MSK
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