EquityStory.RS, LLC-News: PJSC MegaFon / Key word(s): Quarter Results/Half
Year Results
PJSC MegaFon: In Q2 2019 MegaFon reported strong increase in revenue 4.5%
and in OIBDA 20.6%
2019-08-08 / 10:00 MSK
The issuer is solely responsible for the content of this announcement.
*In Q2 2019 MegaFon reported strong increase in revenue 4.5% and in OIBDA
20.6%*
Moscow, Russia (8 August 2019) - PJSC "MegaFon" ("MegaFon" or the "Company"
and, together with its consolidated subsidiaries, the "Group"), a
pan-Russian operator of digital opportunities, announces its financial[1]
and operating results for Q2 2019.
*Key results for Q2 2019*
In Q2 2019 MegaFon demonstrated steady growth in its key performance
indicators[2] while maintaining its loyal subscriber base. The operating
results show that MegaFon is pursuing the right strategy towards its digital
transformation goal:
· Revenue increased by 4.5% y-o-y[3] to RUB 85.6 billion
· OIBDA including the impact of IFRS 16 increased by 20.6% y-o-y to RUB
38.9 billion, at the same time MegaFon demonstrated steady growth in
organic OIBDA of 4.7% y-o-y to RUB 33.8 billion
· OIBDA Margin including the impact of IFRS 16 was 45.4% and organic OIBDA
Margin was 39.4%
· Net profit including the impact of IFRS 16 was RUB 2.9 billion and
organic Net profit was RUB 3.8 billion
· CAPEX increased by 1.2% y-o-y to RUB 16.4 billion
· Free Cash Flow to Shareholders[4] decreased by 22.7% y-o-y to RUB 6.1
billion. The decrease is mainly due to the increase in finance costs
resulting from the additional debt financing taken out to finance the
buy-back of shares and GDRs of the Company from non-affiliated
shareholders
· Net debt decreased since last quarter to RUB 360.6 billion
· The number of mobile subscribers as of 30 June 2019 increased by 0.1%
y-o-y to 77.6 million[5]
· The number of data service users as of 30 June 2019 increased by 6.9%
y-o-y to 34.4 million[5]
In June 2019, the Company completed the buy-back of the remaining shares
held by non-affiliated shareholders. Shares of MegaFon are no longer trading
on the London or the Moscow stock exchanges. The buy-back was partly carried
out using debt financing which increased the Company's total debt over the
period of the buy-back process. The Company used part of its profit to
service the debt.
The concentration of greater control over the Company by its main
shareholder in the second quarter enabled MegaFon to significantly increase
its operational efficiency, and to continue to invest in its network,
accelerate implementation of new projects and launch new digital products
and services as part of its strategy of digital transformation:
· It embarked upon a revolutionary transformation of the telecom-retail
business, launching a new type of store called "The store of the Future"
with an initial investment of RUB 1.5 billion
· It signed an agreement with Alibaba, Mail.Ru and the Russian Direct
Investment Fund for the creation of the AliExpress Russia e-commerce joint
venture
· It created an international consortium for the construction of a unique
transcontinental underwater high-speed fiber optic line, which will
connect Helsinki to Tokyo
· It continued to invest in the widening of its network and the
development of its infrastructure. As of 30 June 2019 MegaFon maintains
its leading position in regard to the number of base stations in Russia -
it has more than 240,000 base stations covering all communication
standards, including 100,000 base stations supporting LTE and LTE
Advanced[6]. For the third year in a row MegaFon's mobile internet has
been named by Ookla the fastest in Russia
*Gevork Vermishyan, the Group's Chief Executive Officer,* commented on the
quarter results as follows:
« MegaFon's transformation into an operator of digital
opportunities has continued in line with our development
strategy announced in May 2017; and I am pleased to announce
the results for the quarter. A number of events occurred in Q2
2019 which facilitated the further strengthening of our
digital leadership position. We continued to actively expand
our digital products and services portfolio adding real value
for MegaFon's subscribers and corporate clients which helped
spur further growth in the operating and financial KPIs of the
Company.
The key event of Q2 2019 was the completion of the buy-back of
MegaFon's remaining shares from its non-affiliated
shareholders. Since 3 June 2019 they are no longer traded on
the Moscow stock exchange.
We also signed a number of milestone partnership agreements,
including the creation of the AliExpress Russia joint venture
and the memorandum of understanding for the construction of
the high-speed fiber optic line in the Arctic Ocean, all of
which we believe will bring us closer to our goal of national
digital leadership. We continue working on achieving
technological leadership and I am proud to note that MegaFon
has organised the first ever 5G international videocall in
Russia.
Also I can't help mentioning that MegaFon got 'the fastest
mobile internet in Russia' award from Ookla for the third year
in a row.
»
*Nikita Orlov, the Group's Chief Financial Officer*, commented on the
quarter financial results as follows:
« In Q2 2019 MegaFon achieved good financial results. Total
revenue continued to grow, reaching RUB 85.6 billion, or 4.5%
growth y-o-y. Service revenue was up 3.3% to RUB 78.8 billion.
The increase in our service revenue was driven by the
continued growth of data revenue and our active promotion of
digital services which is now an area of particular focus.
Accordingly, our digital revenue increased by 30.2% y-o-y.
Increasing our operational efficiency remains one of our key
strategic tasks. Our continued success in the realisation of
this particular task contributed to the growth of our OIBDA,
including the impact of IFRS 16, by 20.6% to RUB 38.9 billion
and our organic OIBDA by 4.7% y-o-y to RUB 33.8 billion in Q2
2019.
However, due to the increase in finance costs resulting from
the additional financing required to carry out the three
rounds of share and GDR buy-backs completed during 2018 and 1H
2019, our Net profit, including the impact of IFRS 16,
amounted to RUB 2.9 billion and organic Net profit amounted to
RUB 3.8 billion.
»
*Key corporate events*
*Completion of Buy-back*
In June 2019 LLC MegaFon Finance, a 100% subsidiary of MegaFon,
completed the buy-back of the remaining ordinary shares from
non-affiliated shareholders of the Company, acquiring 4,966,749
ordinary shares of MegaFon, which constituted approximately
0.8% of the issued ordinary shares and brought its total
holding to 29.68% of MegaFon's issued ordinary shares. This
also meant that, at 30 June 2019, the shares which it held,
together with the shares held by its affiliated companies,
constituted 100% of all the issued ordinary shares of MegaFon.
*Network developments*
MegaFon, together with Rostelecom and Nokia, organised a call
between St. Petersburg and Helsinki in the run-up to the 2019
St. Petersburg International Economic Forum (SPIEF), which was
the first ever 5G international videocall in Russia.
Also at SPIEF MegaFon announced the creation of a digital 5G
laboratory at St. Petersburg State University.
In addition to its work on 5G, MegaFon continues to actively
improve its 4G network quality. MegaFon, assisted by Qualcomm
Technologies Inc. and Nokia, was the first operator in Russia
to achieve a speed of 1.6 Gbps on a user's smartphone. At this
speed a user can download full HD videos in a few seconds.
Ookla named MegaFon the operator with the fastest mobile
internet in Russia for the third year in a row, with average
download speeds of 27.31 Mbps and average upload speeds of
11.88 Mbps. Ookla's independent speedtests are performed
worldwide every year. In Russia the evaluation is based on more
than 8.4 million tests carried out in 1H 2019 on 1.64 million
handsets with the Speedtest application.
*New partnerships*
In June 2019 MegaFon, Alibaba Group, an e-commerce company,
Mail.Ru Group and the Russian Direct Investment Fund signed an
agreement to form an e-commerce joint venture aimed at
integrating key social network and e-commerce platforms for
consumers and enterpreneurs in Russia and the CIS. This
bringing together of the unique expertise and resources of all
the JV partners is expected to accelerate the development of
the digital economy in Russia.
During the SPIEF MegaFon and the Finnish infrastructure
operator Cinia Oy signed a memorandum of understanding to
establish an international consortium for the construction of a
new underwater high-speed fiber optic line from Helsinki to
Tokyo. The new line will traverse the Arctic Ocean covering
10,000 km and is expected to provide the fastest signal
transfer rates on the Europe-Asia route. The aim of the project
is to connect three continents, reaching approximately 85% of
the world's population, which will enable MegaFon to assume a
digital leadership role in developing network infrastructure
for users in the Far East and areas bordering the Arctic region
MegaFon and Fort Ross Ventures, a company which is part of the
Sberbank group, signed a strategic partnership agreement for
sharing technologies and innovations, and conducting a joint
search for investment targets.
*New products and services*
In line with MegaFon's digital strategy, the growth of the
Company's B2B and B2G client base depends upon MegaFon's
developing and launching ever more sophisticated solutions and
ICT (information and communications technology) projects. In Q2
2019 MegaFon launched a number of new products and services,
including through an expansion of its digital ecosystem and in
some cases in partnership with others.
MegaFon's new service 'VideoAnalytics' is a solution for
automatic monitoring client sites and premises for security
purposes based on the Internet-of-Things (IoT) technologies.
As part of its BPaas (Business-Processes as a Service) product
line, MegaFon unveiled its 'Digital lawyer assistant' - an
automated solution for generating agreements, letters and other
legal documents using high-quality text-recognition scanners
operating at six seconds per page and providing 90% accuracy.
MegaFon also upgraded its Content Delivery Network (CDN)
service by integrating its infrastructure with the content
distribution network of an international provider of cloud and
edge-solutions, G-Core Labs. The partnership's solution enables
clients to significantly speed up their websites and ensure
prompt delivery of content even during peak loads on the
networks, such as those occurring as a result of large-scale
online broadcasts, advertising campaigns, software upgrades and
DDoS-attacks.
MegaFon created its own ecology monitoring platform based on
IoT which automatically gathers and analyses environmental data
to detect and prevent unwanted environmental changes and
emergencies.
MegaFon and the government of St. Petersburg together
demonstrated a working model of a city infrastructure
management system for Kronstadt. The geosystem will enable the
city to forecast population growth and its future needs, and
use predictive analytics to generate optimal city construction
plans, plans for social and transport infrastructure, etc.
*Financial results
(In millions of RUB, except as indicated)*
*Excluding IFRS 16
impact*
*Q2 2019* *Q2 *Q2 *Q2 2019* *Q2 2019/
2018[7]* 2019/ Q2 2018*
Q2 2018*
Revenue 85,640 81,945 4.5% 85,640 4.5%
Wireless 72,055 68,317 5.5% 72,055 5.5%
Services
Including 13.5% 13.5%
data
revenue 28,021 24,682 28,021
Wireline 6,699 7,899 (15.2%) 6,699 (15.2%)
Services
Sales of 6,886 5,729 20.2% 6,886 20.2%
equipment
&
accessori
es
OIBDA 38,904 32,261 20.6% 33,774 4.7%
OIBDA 45.4% 39.4% 6.0 p.p. 39.4% 0.0 p.p.
Margin
Net 2,937 6,154 (52.3%) 3,769 (38.8%)
profit
Net 3.4% 7.5% (4.1 4.4% (3.1 p.p.)
profit p.p.)
Margin
CAPEX 16,424 16,227 1.2% 16,424 1.2%
CAPEX / 19.2% 19.8% (0.6 19.2% (0.6 p.p.)
Revenue p.p.)
*Excluding IFRS 16
impact*
*6m 2019* *6m *6m *6m 2019* *6m 2019/
20187* 2019/ 6m 2018*
6m 2018*
Revenue 165,768 158,404 4.6% 165,768 4.6%
Wireless 138,380 132,705 4.3% 138,380 4.3%
Services
Including 10.9% 10.9%
data
revenue 53,153 47,923 53,153
Wireline 13,140 14,350 (8.4%) 13,140 (8.4%)
Services
Sales of 14,248 11,349 25.5% 14,248 25.5%
equipment
&
accessori
es
OIBDA 74,130 62,827 18.0% 63,963 1.8%
OIBDA 44.7% 39.7% 5.0 p.p. 38.6% (1.1 p.p.)
Margin
Net 5,124 12,191 (58.0%) 6,805 (44.2%)
profit
Net 3.1% 7.7% (4.6 4.1% (3.6 p.p.)
profit p.p.)
Margin
CAPEX 24,387 24,718 (1.3%) 24,387 (1.3%)
CAPEX / 14.7% 15.6% (0.9 14.7% (0.9 p.p.)
Revenue p.p.)
*Financial results, Russia only[8]
(In millions of RUB, except as indicated)*
*Excluding IFRS 16
impact*
*Q2 2019* *Q2 *Q2 *Q2 2019* *Q2 2019/
2018[9]* 2019/ Q2 2018*
Q2 2018*
Revenue 84,294 80,735 4.4% 84,294 4.4%
Wireless 70,719 67,116 5.4% 70,719 5.4%
Services
Including 13.3% 13.3%
data
revenue 27,427 24,212 27,427
Wireline 6,690 7,890 (15.2%) 6,690 (15.2%)
Services
Sales of 6,885 5,729 20.2% 6,885 20.2%
equipment
&
accessori
es
OIBDA 38,092 31,953 19.2% 33,004 3.3%
OIBDA 45.2% 39.6% 5.6 p.p. 39.2% (0.4 p.p.)
Margin
Net 2,900 6,721 (56.9%) 3,718 (44.7%)
profit
Net 3.4% 8.3% (4.9 4.4% (3.9 p.p.)
profit p.p.)
Margin
*Excluding IFRS 16
impact*
*6m 2019* *6m *6m *6m 2019* *6m 2019/
20189* 2019/ 6m 2018*
6m 2018*
Revenue 163,149 156,105 4.5% 163,149 4.5%
Wireless 135,781 130,424 4.1% 135,781 4.1%
Services
Including 10.6% 10.6%
data
revenue 51,987 47,014 51,987
Wireline 13,122 14,333 (8.4%) 13,122 (8.4%)
Services
Sales of 14,246 11,348 25.5% 14,246 25.5%
equipment
&
accessori
es
OIBDA 72,628 62,223 16.7% 62,545 0.5%
OIBDA 44.5% 39.9% 4.6 p.p. 38.3% (1.6 p.p.)
Margin
Net 5,275 13,084 (59.7%) 6,942 (46.9%)
profit
Net 3.2% 8.4% (5.2 4.3% (4.1 p.p.)
profit p.p.)
Margin
*Revenue*
Total revenue in Q2 2019 increased by 4.5% y-o-y to RUB 85,640 million.
Revenue from Russia remained the major component, accounting for over 98.4%
of total revenue.
In Q2 2019 MegaFon's wireless service revenue increased by 5.5% y-o-y to RUB
72,055 million, while data revenue increased by 13.5% y-o-y to RUB 28,021
million. The continuous growth that the Company has been observing over the
last two years is the result of both positive trends in the market and
MegaFon's focus on developing its innovative product offerings and solutions
such as upgrading the "Vklyuchaisya!" ("Connect!") tariff line and extending
it through new offers and partner services (such as providing access to
MegaFon TV content, cashbacks from mobile top-ups, and cashback usage to pay
for additional services) as well as other special offers aimed at
stimulating data consumption (including by subscribers who are roaming) and
"revenue per user" growth.
The Company's revenue from VAS services such as mobile finance services,
MegaFon TV and other digital products increased by 13.2% y-o-y in Q2 2019
largely as a result of the positive response to MegaFon's marketing
initiatives as well as changes to its pricing policies for some VAS services
following its Big Data market analysis undertaken in 2018 and early 2019.
In Q2 2019 wireline service revenue decreased by 15.2% y-o-y to RUB 6,699
million. The main reason for the y-o-y decrease was that Q2 2018 included
significant one-off revenue from the provision of telecom infrastructure for
the FIFA World Cup.
Revenue from sales of equipment and accessories in Q2 2019 increased by
20.2% y-o-y to RUB 6,886 million, as a result of an increase in sales of
Samsung smartphones during the quarter as well as the Company's work on
streamlining its distribution network.
*OIBDA and OIBDA Margin*
OIBDA in Q2 2019 including the impact of the adoption of IFRS 16 increased
by 20.6% y-o-y to RUB 38,904 million. Organic OIBDA in Q2 2019 increased by
4.7% y-o-y to RUB 33,774 million. The increase was supported by the 4.5%
increase in revenue and effective management of operating expenses.
In Q2 2019 OIBDA Margin increased by 6.0 p.p. y-o-y to 45.4%. Virtually all
of this increase resulted from the adoption of IFRS 16. MegaFon's organic
OIBDA Margin remained stable y-o-y at 39.4% despite the increase in organic
OIBDA as Q2 2018 OIBDA Margin included a significant one-off item.
*Net profit*
Net profit in Q2 2019 including the impact of IFRS 16 was RUB 2,937 million.
Eliminating the negative impact of IFRS 16 in the amount of RUB 832 million,
organic Net profit was RUB 3,769 million. The increase in finance costs[10]
resulting from the additional loans raised to finance the Tender Offer for
shares and GDRs completed in September 2018, the Mandatory Offer completed
in Q1 2019 and the buy-back of shares from the remaining non-affiliated
shareholders completed in Q2 2019 had a significant impact on Net profit.
*CAPEX*
CAPEX in Q2 2019 increased by 1.2% y-o-y to RUB 16,424 million. The major
investment projects in Q2 2019 remained the continued roll-out of LTE and
LTE Advanced networks: more than 4,300 new base stations have been put into
operation in Q2 2019, including approximately 3,800 LTE / LTE Advanced base
stations.
*Free Cash Flow to Shareholders[11]*
Free cash flow to shareholders in Q2 2019 decreased by RUB 1,783 million
y-o-y to RUB 6,084 million. The decrease is mainly due to the increase in
finance costs resulting from additional debt financing required to carry out
the three rounds of share and GDR buy-backs mentioned above.
*Net debt11*
Net debt decreased from RUB 363,294 million as of 31 March 2019 to RUB
360,601 million as of 30 June 2019. MegaFon's Net debt/LTM OIBDA ratio was
2.88x.
*EPS*
Basic and diluted EPS decreased from RUB 10 per share for Q2 2018 to RUB 7
per share for Q2 2019 as a result of the decrease in Net profit.
*New accounting standards*
Effective from 1 January 2019 MegaFon adopted the new accounting standard
IFRS 16 'Leases'. The standard requires lessees to present right-of-use
assets and lease liabilities on the balance sheet for all leases (with
limited exceptions). As a result of this MegaFon's operating expenses for Q2
2019 decreased by RUB 5,130 million, while its finance costs and
depreciation increased - all of which decreased the Company's Net profit by
RUB 832 million in Q2 2019, net of tax.
On transitioning to IFRS 16 MegaFon recognised a right-of-use asset and a
lease liability in respect of its operating leases - both in the amount of
RUB 88,679 million as at 1 January 2019.
The Company continues to fine tune its information systems to streamline the
accounting for leases under IFRS 16. The effects of the transition to IFRS
16 are unaudited and certain management estimates and calculations may be
subject to change up till the issuance of the Company's 2019 annual
financial statements.
*Wireless subscribers in Russia as of*
*30 June 2019* *30 June 2018* *Change*
Number of wireless 75,909 75,878 0.0%
subscribers (K)
of which data service 33,495 31,400 6.7%
users (K)
Share of data service 44.1% 41.4% 2.7 p.p.
users
The Russian wireless subscriber base remained stable y-o-y at 75.9 million
users as of 30 June 2019. The Company regards this as a good result as the
subscriber base in 2018 was positively affected by the one-off effect of
SIM-card purchases by visiting World Cup fans.
The data service user base in Russia increased by 6.7% y-o-y to 33.5 million
at 30 June 2019 as a result of MegaFon's continued marketing initiatives
such as those relating to Samsung smartphone sales promotions and
development of the "Vklyuchaisya! 3.0" ("Connect! 3.0") tariff line and
other products attracting data consuming subscribers. The share of data
service users continued to grow and reached 44.1% of the overall subscriber
base in Russia.
*Data operating indicators in Russia*
*Q2 *Q2 *Q2 2019/ *6m *6m *6m 2019/
2019* 2018* Q2 2018* 2019* 2018* 6m 2018*
ARPDU 273 258 5.8% 260 252 3.2%
(RUB)
DSU (MB) 11,261 8,777 28.3% 11,089 8,667 27.9%
ARPDU increased in Q2 2018 by 5.8% y-o-y to RUB 273 as a result of the
Company's efforts at developing and promoting products and offers
stimulating data consumption and generating data revenue growth such as the
upgraded tariff line "Vklyuchaisya! 3.0" ("Connect! 3.0") and "Gigateka".
DSU increased in Q2 2019 by 2.4 gigabytes, or 28.3% y-o-y, to 11.0 gigabytes
also resulting from MegaFon's focus on developing and promoting data usage
offers.
*For more information*
Media:
pr@megafon.ru +7 925 696-05-07
Investors:
ir@megafon.ru +7 495 926-20-12
*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, the first operator in the world to launch commercial operation of
an LTE Advanced (4G) data network and was the first operator in Russia to
complete 5G international videocall. 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
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.
*Net debt *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, and organic Net profit Margin is Net
profit Margin, in each case excluding the impact of IFRS 16 adoption.
MegaFon adopted this new IFRS standard, effective 1 January 2019. For
convenience of use, throughout the financial year 2019, MegaFon will be
presenting its financial results "as reported", i.e. including the impact of
IFRS 16, and "organically", i.e. excluding the impact of the adoption of
IFRS 16.
*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 excluding the impact of IFRS 16 adoption.
*LTM OIBDA *means last twelve months OIBDA.
*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
(In millions of RUB, except as indicated)*
*OIBDA*
*Q2 *Q3 2018* *Q4 2018* *Q1 2019* *Q2 2019*
2018[12
]*
Operating profit 15,973 16,988 10,584 13,978 17,035
Depreciation 12,229 12,473 12,325 16,204 16,770
Amortisation 3,914 4,017 4,527 4,946 5,091
Loss on disposal 145 176 125 98 8
of non-current
assets
OIBDA 32,261 33,654 27,561 35,226 38,904
IFRS 16 effect - - - (5,037) (5,130)
Organic OIBDA 32,261 33,654 27,561 30,189 33,774
*OIBDA Margin as percentage of revenue*
*Q2 *Q3 2018* *Q4 2018* *Q1 2019* *Q2 2019*
201812*
Operating 19.5% 19.1% 12.0% 17.4% 19.9%
profit
Depreciation 14.9% 14.1% 13.9% 20.2% 19.6%
Amortisation 4.8% 4.5% 5.1% 6.2% 5.9%
Loss on 0.2% 0.2% 0.2% 0.2% 0.0%
disposal of
non-current
assets
OIBDA Margin 39.4% 37.9% 31.2% 44.0% 45.4%
IFRS 16 effect - - - (6.3%) (6.0%)
Organic OIBDA 39.4% 37.9% 31.2% 37.7% 39.4%
Margin
*Net profit and Net profit Margin*
*Q2 *Q3 2018* *Q4 2018* *Q1 2019* *Q2 2019*
201812*
Net profit 6,154 7,744 1,133 2,187 2,937
IFRS 16 - - - 849 832
effect
Organic Net 6,154 7,744 1,133 3,036 3,769
profit
Net profit 7.5% 8.7% 1.3% 2.7% 3.4%
Margin
IFRS 16 - - - 1.1% 1.0%
effect Margin
Organic Net 7.5% 8.7% 1.3% 3.8% 4.4%
profit Margin
*Net debt as of*
*30 Jun *30 Sep *31 Dec *31 Mar *30 Jun
2018* 2018* 2018* 2019* 2019*
Cash and 14,553 36,916 27,214 17,152 19,072
cash
equivalents
Bank 21,912 4,119 4,352 - -
deposits
(principal
amount)
Loans and (251,208) (317,417) (325,884) (380,446) (379,673)
borrowings
(principal
amount)
less
unamortised
fees and
discounts
Net debt (214,743) (276,382) (294,318) (363,294) (360,601)
*Free cash flow to shareholders*
*Q2 2018* *Q3 2018* *Q4 2018* *Q1 *Q2
2019[13]* 201913*
Net cash flows 25,363 34,842 20,785 34,652 25,667
from operating
activities
Purchase of (11,522) (15,187) (30,411) (15,681) (11,356)
property,
equipment and
intangible
assets
Proceeds from 341 7 6 2 29
sale of
property and
equipment
Interest 209 434 583 585 289
received
Interest paid (6,524) (5,870) (8,034) (7,493) (8,545)
Free cash flow 7,867 14,226 (17,071) 12,065 6,084
to
shareholders
[1] . Based on the interim unaudited condensed consolidated financial
statements for 1H 2019 reviewed by JSC KPMG.
[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] . This is shown without taking into account the effect of the IFRS 16
implementation.
[5] . 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.
[6] . Based on Roskomnadzor, as of 30 June 2019.
[7] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group.
[8] . ?xcluding mutual settlements with "TT mobile" CJSC, "AQUAFON-GSM" CJSC
and "OSTELEKOM" CJSC.
[9] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group.
[10] . This is shown without taking into account the effect of the IFRS 16
implementation.
[11] . This is shown without taking into account the effect of the IFRS 16
implementation.
[12] . The amounts are presented as reported results from continuing
operations grossed up for the intragroup amounts between the Group and
Mail.Ru Group.
[13] . This is shown without taking into account the effect of the IFRS 16
implementation.
2019-08-08 MSK Dissemination of a Corporate News, transmitted by
EquityStory.RS, LLC - a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Archive at www.dgap.de
853953 2019-08-08 MSK
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(END) Dow Jones Newswires
August 08, 2019 03:00 ET (07:00 GMT)
