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Sistema PJSFC (SSA)
SISTEMA ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2018
03-Apr-2019 / 10:15 MSK
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SISTEMA ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2018
Moscow, Russia - 3 April 2019 - Sistema PJSFC ("Sistema" or the "Company",
together with its subsidiaries, "the Group") (LSE: SSA, MOEX: AFKS), a
publicly-traded diversified Russian holding company, today announces its
unaudited consolidated financial results in accordance with International
Financial Reporting Standards (IFRS) for the fourth quarter 2018 and audited
consolidated financial results in accordance with International Financial
Reporting Standards (IFRS) for full year ended 31 December 2018.
SUCCESSFUL DELIVERY AGAINST STRATEGIC AND OPERATIONAL GOALS
· Sustained revenue growth1 due to strong results from the majority of
portfolio companies.
· At least double digit OIBDA growth at MTS, Detsky Mir, Segezha Group,
Agroholding Steppe, Medsi, RTI, BPGC and hospitality assets under new IFRS
standards, driven by excellent operating results and financial discipline.
· Added operational scale in real estate development and increased sector
attractiveness for investors: In February 2019, Sistema sold 51% of JSC Leader
Invest to Etalon Group, while retaining a 49% stake in the company. Following
this transaction, Sistema acquired 25% of Etalon Group for USD 226.6 million.
The transactions create a top-3 player in the Moscow and St Petersburg
markets, bring together complementary development portfolios, allow Leader
Invest's projects to leverage Etalon's general contracting capacity and
regional sales network to accelerate construction and sales, and realise
significant synergies in construction as well as reduction of administrative
expenses.
· Increased and crystalized value of pharmaceuticals business: In December
2018, Sistema acquired a stake in a leading pharmaceutical company, OBL Pharm,
for RUB 1.83 billion. Sistema made the acquisition as a member of a consortium
of investors that also included VTB Bank and members of the OBL Pharm
management team. The strategic aim of the transaction is the merger of OBL
Pharm with Sistema's pharmaceutical holding, Binnopharm, and utilisation of
synergies in marketing and sales, combining R&D functions and reducing
administrative costs. The medium-term goal of the combined company is to
become a top-5 Russian pharmaceuticals producer in the non-state segment, the
fastest-growing segment in the Russian pharma market.
· Strengthened position in the fast-growing e-commerce market: In February
2019, Sistema acquired 18.7% of Russia's leading multi-category online
retailer, Ozon Holdings, from MTS for RUB 7.9 billion. The decision to
increase the stake is based on Sistema's strategic bet on growth prospects for
e-commerce and market consolidation through investments in the market leader.
· MTS Bank divestment to maximise synergies between telecommunications and
banking businesses: In February 2019, Sistema sold 39.5% of PJSC MTS Bank to
PJSC MTS for RUB 11.4 billion. As a result of the transaction, Sistema's stake
in MTS Bank declined to 5.0% and MTS's stake increased from 55.2% to 94.7%.
MTS's consolidation of MTS Bank will facilitate deeper integration of the bank
with MTS and rapid development of an ecosystem of digital bank services.
· Debt portfolio optimisation via an active presence on the public bond
market: In February-March 2019, Sistema successfully returned to the local
capital market. The Corporation repurchased series 001P-07 bonds in the amount
of RUB 482.2 million out of the total of RUB 10 billion during a tender offer,
and completed a secondary placement of this amount, issued a RUB 10 billion
001P-090 series bond and successfully closed the books on a RUB 10 billion
001P -10 series issue. The placements generated significant investor interest
in Sistema's debt securities and demonstrated positive market perception of
the Corporation's investment case. The funds raised will be used to refinance
existing debt.
· Dividend payments: In March 2019, Sistema's Board of Directors resolved to
recommend to the Annual General Meeting of Shareholders to be held on 29 June
2019 to pay dividends based on 2018 results in the amount of RUB 1,061.5
million (which corresponds to RUB 0.11 per ordinary share or RUB 2.2 per GDR).
FY 2018 FINANCIAL RESULTS
· Consolidated revenue[1] increased by 12.1% year-on-year to RUB 777.4
billion.
· Excluding the impact of new IFRS standards,[2] Group revenue increased by
11.1% year-on-year to RUB 770.2 billion.
· Adjusted OIBDA[3] increased by 34.3% year-on-year to RUB 265.3 billion; the
adjusted OIBDA margin was 34.1%.
· Excluding the impact of new IFRS standards, adjusted OIBDA increased by
11.3% year-on-year to RUB 219.8 billion; the adjusted OIBDA margin was 28.5%.
· Adjusted net profit attributable to Sistema was RUB 1.1 billion.
· Excluding the impact of new IFRS standards, adjusted net profit attributable
to Sistema declined by 98.5% to RUB 0.1 billion.
4Q 2018 FINANCIAL RESULTS
· Group revenue increased by 15.5% year-on-year to RUB 225.1 billion.
· Excluding the impact of new IFRS standards, Group revenue increased by 12.7%
year-on-year to RUB 219.8 billion.
· Adjusted OIBDA increased by 45.5% year-on-year to RUB 66.8 billion; the
adjusted OIBDA margin was 29.7%.
· Excluding the impact of new IFRS standards, adjusted OIBDA increased by
15.5% year-on-year to RUB 53.0 billion; the adjusted OIBDA margin was 23.8%.
· Adjusted net profit attributable to Sistema was RUB 391 million.
· Excluding the impact of new IFRS standards, the adjusted net loss
attributable to Sistema was RUB 2.0 billion.
· Net financial liabilities[4],[5] at the Corporate Centre were RUB 213.4
billion as of 31 December 2018.
· Cash position5 at the Corporate Centre as of 31 December 2018 was RUB 9.8
billion.
SISTEMA'S CURRENT STRATEGIC IMPERATIVES
· Maximise shareholder value and reduce market capitalisation discount to NAV
· Attract third-party capital to enhance investment resources
· Reduce gross debt at the Corporate Centre to RUB 140-150 billion
Andrey Dubovskov, President and Chief Executive Officer of Sistema, said:
"Sistema delivered impressive financial and operating results in 2018. Group's
revenue for the year increased by 12% to RUB 777 billion on the back of robust
growth of our key assets. Most assets grew at significantly above the average
growth rates of the markets in which they operate. Notably, MTS, Detsky Mir,
Segezha Group, Agroholding Steppe and Medsi strengthened their leadership
positions in their respective industries. MTS is not only increasing revenue
from mobile services and smartphone sales, but is also entering new, adjacent
high-growth markets including IT outsourcing, Internet of Things, cloud
services, e-sports and web-based event ticket sales. Detsky Mir continues to
grow its business in Russia and Kazakhstan, and has expanded to Belarus and
launched a pet supplies business - all while increasing profitability. Segezha
Group continues to expand its product lines, focusing on demand from
high-opportunity export markets. Agroholding Steppe is now a top-6 Russian grain
exporter and continues to demonstrate strong growth across all its main business
segments. Steppe also launched its own retail brand as it aims to grow closer to
consumers. Based on FY 2018 performance, Medsi has established itself as the
leading private healthcare business in Russia by revenue and one of the
fastest-growing healthcare businesses globally.
"Group adjusted OIBDA increased by 34% thanks to double-digit OIBDA growth at
all key portfolio companies. The new IFRS accounting standards had a significant
impact on the results of MTS and Detsky Mir, though on a like-for-like basis
these companies also delivered strong OIBDA growth.
"In late 2018 and early 2019 we completed a number of strategic transactions,
demonstrating that we continue to add value to our assets in an environment
where we have limited investment resources. As part of a consortium of investors
we acquired a leading Russian pharmaceutical company, OBL Pharm, and plan to
merge it with our pharmaceutical holding, Binnopharm, significantly increasing
the value of that business. In future we plan to bring the combined company to
the public markets. As a result of transactions involving Leader Invest and
Etalon Group, we have changed the landscape of the Russian residential property
market, establishing a company that is a top-3 developer in the Moscow and St
Petersburg markets by construction volumes and sales. Additionally, we continued
to increase our exposure to Ozon, the leading multi-category online retailer.
This transaction represents Sistema's strategic investment in the fast-growing
e-commerce industry through a company that is poised to consolidate this highly
fragmented market.
"We have somewhat modified the Group strategy adopted last year to reflect
current market conditions, though our key objectives remain unchanged: maximise
shareholder value and reduce the discount between market capitalisation and net
asset value, attract third-party capital to diversify and expand our investment
resources, and reduce gross debt to RUB 140-150 billion. In the coming years our
focus will be on growing the value of four portfolio companies - Agroholding
Steppe, Segezha Group, Medsi and Ozon. We are targeting valuations of USD 1-2
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