DJ Sistema PJSFC: SISTEMA ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FY 2019
Sistema PJSFC (SSA)
Sistema PJSFC: SISTEMA ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER
AND FY 2019
07-Apr-2020 / 10:45 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.
*SISTEMA ANNOUNCES FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR
2019*
Moscow, Russia - 7 April 2020 - Sistema PJSFC ("Sistema" or the "Company",
together with its subsidiaries and associates, "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
2019 and audited consolidated financial results in accordance with
International Financial Reporting Standards (IFRS) for full year ended 31
December 2019.
KEY GROUP HIGHLIGHTS IN 2019
- Successful public offering of Detsky Mir shares with the proceeds of RUB
12.5 billion. In November 2019, Sistema and Russia-China Investment Fund
(RCIF) successfully completed the offering of 175 million Detsky Mir
shares at RUB 91 per share. As a result of the transaction, ownership
stakes of Sistema and RCIF in Detsky Mir were reduced to 33.4% and 9.0%,
respectively. The public offering has substantially increased the
company's free float, enhancing liquidity and further improving Detsky
Mir's investment proposition.
- Merger of assets and ongoing expansion in the pharmaceuticals business.
In October 2019, OBL Pharm and Binnopharm merged under the Alium brand. As
of the end of 2019, Sistema owned a 26.3% stake in the merged company. In
August 2019, Sistema also acquired equity stakes in pharmaceutical assets
Sintez and Biocom. In combination with Sintez and Biocom, Alium has
potential to become a top-3 Russian pharmaceutical company in the
commercial (non-state) segment.
- Creating a residential real estate leader in Moscow and
Saint-Petersburg. In 2019, Sistema became the largest shareholder in the
leading residential development company Etalon Group that subsequently
consolidated a 100% stake in Leader-Invest, a large player in the Moscow
residential development market, previously owned by Sistema.
- Strengthening the Group's position in e-commerce. In 2019, Sistema
gradually increased its share in Ozon by acquiring stakes from other
shareholders, including an 18.7% stake from MTS. Following the debt to
equity conversion in December 2019, Sistema's stake in Ozon increased to
42.999%. Sistema's building up of its holdings in Ozon is driven by the
expectation of further growth in the e-commerce market and the Company's
strategy of increasing its presence in the sector by investing in the
leading multi-category online retailer.
- Optimisation of debt portfolio. Throughout the year, the Company was
active in capital market transactions aiming to diversify and optimise its
debt portfolio. As a result, the Company has significantly extended its
debt duration and shaped a comfortable repayment schedule. It has also
increased the share of RUB-denominated financing to more than 95%. As of
the end of 2019, the financial obligations of the Corporate Centre
decreased by RUB 34.0 billion to RUB 189.2 billion.[1]
- Credit ratings upgrade. In 2019, the international credit rating
agencies S&P Global Ratings and Fitch Ratings upgraded Sistema's corporate
credit ratings to ??- with a stable outlook, Expert RA rating agency
increased the Company's rating to ruA with a stable outlook.
- Dividends. Sistema's Annual General Meeting of Shareholders held in June
2019 approved the distribution of RUB 1,1 billion, or RUB 0.11 per
ordinary share (RUB 2.2 per GDR), in dividends for FY 2018.
- Buy-back programme In September 2019, the Company launched a RUB 3.0
billion buy-back programme. In February 2020, the programme was extended
until 31 December 2020.
CORPORATE EVENTS AFTER THE END OF THE REPORTING PERIOD
- Investing in technologies of the future. In early 2020, the Company
established Sistema SmartTech, a start-up fund specialising in early stage
investment. Sistema SmartTech will primarily invest in projects of Russian
origin, operating in a variety of sectors and demonstrating growth
potential through the creation of new market niches.
- COVID-19 pandemic. Sistema keeps to a holistic approach to the
management of its assets during the uncertainty surrounding the
coronavirus outbreak. Protecting the safety and well-being of its
employees and the employees of portfolio companies remains the top
priority. Sistema is implementing plans for continuous business operation
across the Group and its subsidiaries, while taking every necessary
measure to protect the health and safety of its people. Sistema is closely
monitoring the economic impact of the COVID-19 pandemic and its potential
impact on the Group's operating activity.
SUSTAINABLE DEVELOPMENT
- Progressing in sustainable development. In 2019, Sistema began the
process of streamlining its sustainable development activities and
reporting across the Group. In 2019, the Board of Directors approved Group
ESG (Environment, Social and Governance) strategy and action plan. The
company has focused on strengthening its in-house expertise and initiated
a proactive engagement with the sustainability analyst community. The
Company formed a working group, which also includes dedicated teams
representing portfolio companies, to share expertise and monitor
performance.
- Ratings improvement. In 2019, Sistema re-affirmed its position in the
FTSE4Good index, having improved its rating to BB in MSCI ESG Rating from
B in 2018, and improving its position in the risk rating of Sustainalytics
(Low Risk, 15.3), taking 37th place in the ranking of 578 diversified
financial companies, as of February 2020. Since 2016, Sistema has been one
of the leaders in the ESG ratings of the Russian Union of Industrialists
and Entrepreneurs (RSPP), and since 2019 it has been included in the newly
launched ESG indices MOEX-RSPP.
FY 2019 FINANCIAL HIGHLIGHTS
- Consolidated revenue[2] increased by 5.1% year-on-year and amounted to
RUB 656.9 billion.
- Adjusted OIBDA[3] totaled RUB 223.9 billion, a decrease of 0.9%
year-on-year.
- Adjusted OIBDA margin was 34.1%.
- Adjusted net profit attributable to Sistema amounted to RUB 53.4
billion.
4Q 2019 FINANCIAL HIGHLIGHTS
- Consolidated revenue increased by 2.7% year-on-year to RUB 181.1
billion.
- Adjusted OIBDA amounted to RUB 52.7 billion, decreasing by 4.6%
year-on-year.
- Adjusted OIBDA margin stood at 29.1%.
- Adjusted net profit attributable to Sistema was RUB 26.8 billion.
Andrey Dubovskov, President and Chief Executive Officer of Sistema, said:
"In 2019, Sistema delivered sustained growth in its public and key
non-public assets, significantly lowered its financial obligations both at
Group level and at the Corporate Centre, continued to invest in
high-potential businesses, and conducted several successful monetisations.
In 2019, the revenue of the Group increased by 5.1% year-on-year to RUB
656.9 billion thanks to the contribution of MTS, Agroholding Steppe, Medsi,
BPGC and RTI. Adjusted OIBDA of the Group in 2019 remained largely unchanged
year-on-year and amounted to RUB 223.9 billion. The results of the Group
were affected by OIBDDA dynamics a of export-oriented businesses, impacted
by weaker global environment.
We continued to expand our presence in segments where we identified a
significant potential for growth due to market consolidation. Acquisition of
a stake in Etalon Group, one of the leading residential real estate
developers, and its further integration with Leader-Invest, our developer in
Moscow, allowed us to create one of the biggest players in the property
markets of Moscow and Saint Petersburg. The merger of pharmaceutical assets
Binnopharm and OBL Pharm under Alium brand, and the acquisition of a stake
in Sintez, have created the opportunity to establish a TOP-3 player in the
commercial (non-state) segment of the pharmaceutical market. Having
increased our holdings in Ozon through acquisition of stakes from other
shareholders and providing equity financing, Sistema PJSFC is supporting the
development of Russia's largest multi-category online platform which is
rapidly increasing its market share.
Among the key achievements of the last year was the successful SPO of Detsky
Mir, which allowed us to significantly increase its free float and
liquidity, and expand the investor base. Proceeds from this transaction and
other monetizations along with the dividend flow from portfolio companies
were used to reduce the overall Group debt load. Financial liabilities at
the Corporate Centre were reduced by RUB 34.0 billion rubles to RUB 189.2
billion. Deleveraging and derisking of the debt portfolio will help the
Corporation to navigate the turbulence caused by the coronavirus pandemic
and the worsening macroeconomic situation.
Faced with unprecedented challenges, Sistema has promptly taken measures to
protect our employees, clients and partners. The Corporation, together with
its portfolio companies, is actively engaged in the fight against the spread
of coronavirus, and has invested approximately RUB 1 billion in antiviral
initiatives as of early April 2020. We are investing in the development of
modern and accessible test kits, repurposing Medsi hospital for treating
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COVID-19 patients, and deploying industrial facilities to produce protective
equipment. Our pharmaceutical assets are addressing heightened demand for
antiviral drugs and antibiotics. All of our portfolio companies are
adjusting their operations to ensure the continued provision of
uninterrupted services. With internet traffic increasing, MTS is taking all
necessary measures to enhance the network capacity. To support its
customers, MTS has launched a number of special promotions and free services
that help subscribers organize their lives and leisure time in
self-isolation. Ozon is experiencing a sharp increase in the number of
orders and is strengthening its network of couriers to provide customers
with items they need, as well as popularizing safe contactless manner of
delivery.
It is difficult to assess the full gravity or the duration of the crisis, as
well as the time it will take to eliminate its social and economic
consequences, and the potential impact on the operational and financial
performance of our portfolio companies. However, I am confident that at this
time of uncertainty there is a source of strength in our diversified
portfolio that includes assets in sectors resilient in the face of the
deteriorating economic situation including telecommunications (MTS),
children's goods retail (Detsky Mir), power grid market (BPGC);
export-focused businesses that benefit from the weakening of the ruble
(pulp&paper business Segezha Group and our agriculture holding Steppe), as
well as companies that in this crisis are key to fulfil customer's everyday
needs, and are operating at expanded capacity. (Ozon)."
***
Conference call information
Sistema's management will host a conference call today at 10:00 am (New York
time) / 3:00 pm (London time) / 4:00 pm (CET) / 5:00 pm (Moscow time) to
present and discuss the FY 2019 results.
To participate in the conference call, please dial:
Russia
+7 495 705 9270
8 10 800 2796 5011 (toll free)
UK
+44 330 336 9401
0800 279 4827 (toll free)
US
+1 929 477 0630
866 519 2796 (toll free)
Participant PIN code: 963235
Link to webcast: https://webcasts.eqs.com/sistema2020040717
Conference call title: "Sistema Fourth Quarter and Full Year 2019 Financial
Results".
A replay of the conference call will be available on Sistema's website
www.sistema.com for at least seven days after the event.
For further information, please visit www.sistema.com or contact:
Investor Relations Public Relations
Nikolai Minashin Sergei Kopytov
Tel.: +7 (495) 730 66 00 Tel.: +7 (495) 228 15 32
n.minashin@sistema.ru kopytov@sistema.ru
SISTEMA RESULTS REVIEW
(RUB 4Q 2019 4Q 2018 Change FY 2019 FY Change
million) 2018
Revenue 181,117 176,400 2.7% 656,861 625,03 5.1%
2
Adj. OIBDA 52,742 55,293 (4.6%) 223,929 226,02 (0.9%)
7
Operating 7,219 25,334 (71.5%) 86,417 108,57 (20.4%)
profit 8
Net profit/ 7,682 (15,806) - 28,597 (45,89 -
(loss) 8)
attributable
to Sistema
Adj. net 26,837 (200) - 53,379 1,114 4,693.7%
profit /
(loss)
attributable
to Sistema
Sistema's consolidated revenue increased by 5.1% year-on-year in FY 2019 to
RUB 656.9 billion, driven by improved revenue at key assets: at MTS due to
growth in mobile services as well as other complementary areas including
financial services, system integration services, and software sales; at
Steppe due to increased exports of traditional and niche crops, positive
dynamics in the Dairy Farming segment, and sales growth in the Sugar and
Grocery Product Trading segment; and at Medsi due to growth of services
provided across key segments.
Adjusted OIBDA in FY 2019 slightly declined by 0.9% year-on-year to RUB
223.9 billion amid a negative impact of weak global conditions on the OIBDA
dynamics of the Group's key non-public assets (Segezha Group, Agroholding
Steppe). Group adjusted OIBDA dynamics was also affected by a net loss at
Ozon, accounted for using the equity method (investment in associates), of
RUB 7.8 billion.
The Group's selling, general and administrative expenses (SG&A) for FY 2019
increased by 8.4% to RUB 129.0 billion. The SG&A/revenue ratio at key assets
remained almost unchanged year-on-year. In FY 2019, the Corporate Centre
SG&A/Group revenue ratio increased by 0.5 p.p to 2.0% as a result of an
increase in Corporate Centre expenses related to the monetisation of assets.
Adjusted net profit amounted to RUB 53.4 billion in FY 2019, compared to RUB
1.1 billion in FY 2018. The dynamics of net profit year-on-year were
influenced by the sale of 100% shares in Leader-Invest and its
deconsolidation, the public offering of 18.3% of Detsky Mir shares and
reclassification of the remaining stake in Detsky Mir (33.4%) as investment
in associates.
Sistema's CAPEX slightly decreased year-on-year to RUB 38.8 billion in 4Q
2019 and RUB 117.6 billion in FY 2019, respectively.
OVERVIEW OF PORTFOLIO COMPANIES[4]
MTS
LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA
(RUB 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
million)[5]
Revenue 127,064 122,022 4.1% 476,106 451,466 5.5%
OIBDA 50,685 50,509 0.3% 211,513 202,564 4.4%
Operating 26,217 26,584 (1.4%) 115,235 107,178 7.5%
profit
Adj. net 2,777 8,731 (68.2%) 25,403 32,951 (22.9%)
profit
attributable
to Sistema
In 4Q 2019, MTS's revenue grew by 4.1% year-on-year to RUB 127.1 billion
backed by an increase in mobile service revenue as well as increased
consumption of MTS Bank's fintech products. In FY 2019, revenue increased by
5.5% year-on-year to RUB 476.1 billion. The results were related to
increased revenue from mobile service in Russia as well as growing revenue
in other complementary areas, including financial services, system
integration services, and software sales.
In 4Q 2019, OIBDA remained in line with last year's figures and amounted to
RUB 50.7 billion. In FY 2019, OIBDA grew by 4.4% year-on-year to RUB 211.5
billion primarily due to increased revenue of the mobile business, which
compensated for the negative impact of abolishing intra-network roaming.
OIBDA margin in 4Q 2019 amounted to 39.9%, which is 1.5 p.p. less than in FY
2018.
A decrease in adjusted net profit in 4Q 2019 and FY 2019 to RUB 2.8 billion
and RUB 25.4 billion, respectively, was mainly due to increased interest
expenses, operations with derivatives, and non-cash losses from the sale of
assets, including the Ukrainian business in December 2019
KEY EVENTS IN 4Q AND AFTER THE END OF THE REPORTING PERIOD
New strategy. In October 2019, MTS's Board of Directors approved a new MTS
Group strategy for 2020-2022 CLV 2.0 (Customer Lifetime Value 2.0). The new
strategy focuses on the creation of an ecosystem of digital services around
its core telecommunications business.
Sale of Vodafone Ukraine. MTS sold its subsidiary in Ukraine in December
2019.
Increasing stake in MTS Bank. In December 2019, MTS increased its stake in
MTS Bank to 99.7% as a result of the purchase of 4.5% of shares from Sistema
for a total of RUB 1.4 billion.
Payment of special dividends. In February 2020, MTS completed the payment of
special dividends for a total amount of RUB 26.48 billion: RUB 13.25 per
share (RUB 26.5 per ADR).
In March 2020, the Board of Directors of MTS approved a buyback programme of
a total of RUB 15 billion.
ADJUSTED OUTLOOK FOR 2020
MTS forecasts revenue growth of 3% and expects OIBDA to remainflat
year-on-year . Capital expenditure will amount to around RUB 90 billion.
Segezha Group
LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING
(RUB million) 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
Revenue 14,757 15,872 (7.0%) 58,495 57,889 1.0%
Adj. OIBDA 3,871 3,915 (1.1%) 13,993 12,984 7.8%
Operating profit 2,207 2,781 (20.6%) 8,333 8,178 1.9%
Adj. net 817 840 (2.8%) 5,040 54 9272,1%
profit/(loss)
attributable to
Sistema
In 4Q 2019, Segezha Group's revenue decreased by 7,0% year-on-year to RUB
14.8 billion on the back of a decline in prices for paper packaging. Despite
the downward trend in global prices for paper, plywood and sawn timber the
company's revenue for FY 2019 totalled RUB 58.5 billion, marking a 1%
increase from FY 2018. This was mainly achieved due to an increase in
Russian paper packaging prices throughout the year as well as growth in the
plywood production volume resulting from the second line of the Kirov
plywood production facility reaching full operating capacity.
Segezha Group's adjusted OIBDA amounted to RUB 3.9 billion in 4Q 2019,
decreasing by 1.1% year-on-year. Adjusted OIBDA for FY 2019 grew by 7.8%
year-on-year and amounted to RUB 14.0 billion. Positive dynamics were due to
reduced production costs.
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The adjusted OIBDA margin grew by 1.6 p.p. year-on-year to 26.2% in 4Q 2019.
Adjusted OIBDA margin for FY 2019 increased by 1.5 p.p. year-on-year to
23.9%, mainly due to reduced level of costs, especially SG&A expenses.
Adjusted net profit decreased by 2.8% year-on-year to RUB 817 million in 4Q
2019. Adjusted net profit for FY 2019 amounted to RUB 5.0 billion.
Significant growth in adjusted net profit year-on-year was mostly achieved
due to revaluation of FX-denominated debt.
Paper output reached the record volume of 389.6 thsd [6] tonnes in FY 2019,
a 3.8% increase compared to FY 2018. Sales of paper grew by 4.1%
year-on-year to 254 thsd tonnes on the back of increased production volumes.
Production and sales volume of paper sacks and bags decreased slightly as a
result of weaker demand for paper sacks from the construction industry in
Europe.
Plywood production increased by 41.1% year-on-year to 191.5 thsd cu m in FY
2019 due to the commissioning of the new plywood production facility in the
Kirov region in July 2018.
Plywood sales grew by 31.9% and 52.0% year-on-year to 51.4 thsd cu m and
182.1 cu m in 4Q 2019 and FY 2019, respectively. In 2019, the Company
launched five new products, including Segezha PlyForm, a unique product for
formwork construction.
Sawn timber output increased by 9.8% year-on-year to 1014.4 thsd cu m in FY
2019. Sales growth stood at 8% year-on-year. The key factors for positive
dynamics included improved performance of the company's sawmill operations,
and raw materials supply chain improvements resulting from an increased
share of own logging.
Sustainable development. In 2019, all enterprises of Segezha Group confirmed
their compliance with the FSC (Forest Stewardship Council) standards: the
total share of certified forests was 86%.
Also in 2019, four Segezha Group enterprises were certified in accordance
with the standards of the voluntary forestry certification PEFC (The
Programme for the Endorsement of Forest Certification). Three of them,
Segezha Pulp & Paper Mill, PLO Onegales, and PAO Onegales, achieved
sustainable forest management certification, while Onega Sawmills received
the PEFC supply chain certificate.
In 2019, the Company increased the forest restoration expenditure by 75% and
increased the restoration area by 14% year-on-year.
KEY EVENTS AFTER THE END OF THE REPORTING PERIOD
Acquisition of Karelian Wood Company LLC, a logging and wood processing
enterprise, in January 2020, with the output capacity of up to 250,000 cu m
of sawn wood per year and the annual allowable cut of over 200,000 cu m.
Debut in the debt market. In January 2020, the Group successfully placed
three-year bonds series 001P-01R for a total of RUB 10 billion with a coupon
rate of 7.1%.
Agriculture Holding Steppe
ONE OF RUSSIA'S LARGEST AGRICULTURE HOLDINGS AND LAND OWNERS
(RUB 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
million)[7]
Revenue 9,654 9,612 0.4% 31,044 24,161 28.5%
OIBDA 397 179 122.2% 4,103 4,909 (16.4%)
Operating (152) (411) - 2,283 3,261 (30.0%)
profit / (loss)
Net (1,303) (1,038) - (584) 1,095 -
(loss)/profit
attributable to
Sistema
Steppe's revenue amounted to RUB 9.7 billion in 4Q 2019, remaining in line
with the 2018 figures. Revenue for FY 2019 grew by 28.5% year-on-year to RUB
31.0 billion. A significant increase in revenue was due to increased export
of traditional and niche crops, positive dynamics in the Dairy Farming
segment, and strong development and sales increase in the Sugar and Grocery
Product Trading segment.
Steppe's OIBDA showed significant growth year-on-year and amounted to RUB
397 million in 4Q 2019 due to an increase in sales and a decline in
carry-overs to 2020. OIBDA for FY 2019 totalled RUB 4.1 billion, decreasing
by 16.4% year-on-year as a result of a decline in global grain prices and
the effect of revaluation of biological assets, which was partly offset by
the improved performance of key business segments.
Steppe's CAPEX amounted to RUB 1.9 billion in FY 2019. Key investment areas
included the construction of dairy farms, gradual buyout of land shares to
increase the proportion of owned land bank, development of logistics and
renewal of farm machinery fleet.
Steppe's net loss in 4Q 2019 and FY 2019 amounted to RUB 1.3 billion and RUB
584 million, respectively. Net loss was realised primarily due to the
implementation of the capital expenditure programme and an inventory
build-up in the Sugar and Grocery Product Trading segment.
Gross harvest increased by 14% year-on-year in FY 2019, while the gross
harvest of high-margin crops increased due to the use of advanced
agricultural technologies.
Export volumes in the Agrotrading segment grew by 7.4% year-on-year and
amounted to 1,198 thsd tonnes in FY 2019, making Steppe one of Russia's 8
largest exporters in the first half of the grain season 2019/2020.
The Dairy Farming segment reported solid growth: gross milk yield increased
by 22% year-on-year to 57 thsd tonnes in FY 2019, while cow productivity
grew by 8.0% year-on-year, and herd amounted to around 5,850 cows at the end
of the reporting period.
The Orchards segment delivered a record gross yield of 30.7 thsd tonnes in
FY 2019 (1.7x year-on-year) and was characterised by a high quality of table
apples.
Sales volumes in the Sugar and Grocery Trading segment increased
substantially by 74% year-on-year in FY 2019 and amounted to 306.7 thsd
tonnes.
KEY EVENTS IN 4Q AND AFTER THE END OF THE REPORTING PERIOD
In March 2020, Steppe increased its land bank under management to 527 thsd
hectares due to acquisition of agricultural enterprise Rodnaya Zemlya (30.3
thsd hectares) and renting the lands of the agricultural enterprise Zerno
Don (80.5 thsd hectares) in the Rostov region.
Medsi
LEADING PRIVATE HEALTHCARE OPERATOR IN RUSSIA
(RUB million)[8] 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
Revenue 6,238 5,571 12.0% 22,322 17,747 25.8%
Adj. OIBDA 1,880 1,639 14.7% 5,916 3,600 64.3%
Operating profit 999 836 19.5% 2,848 693 311.1%
Adj. net profit 1,003 909 10.4% 2,920 1,061 175.3%
attributable to
Sistema
Medsi's revenue increased by 12,0% year-on-year in 4Q 2019 and by 25.8%
year-on-year in FY 2019, amounting to RUB 6.2 billion and RUB 22.3 billion,
respectively. Revenue growth in 4Q 2019 was due to an increase in the volume
of Voluntary Health Insurance segment (VHI) segment revenue by 20.3%
year-on-year to RUB 2.2 billion, as well as an increase in revenue from
individual patients by 22.4% year-on-year to RUB 1.8 billion. Revenue growth
in FY 2019 resulted from growth in the volume of services provided.
Adjusted OIBDA increased by 14.7% year-on-year to RUB 1.9 billion in 4Q 2019
and by 64.3% year-on-year to RUB 5.9 billion in FY 2019. Significant growth
in adjusted OIBDA was due to higher revenue and the impact of participation
in the Michurinsky Project LLC, a joint venture with Capital Group, to
construct the Nebo business class residential project on Michurinsky
Prospect with a positive effect of RUB 0.06 billion in 4Q 2019 and RUB 1.1
billion in FY 2019.
In 4Q 2019, Medsi's adjusted OIBDA margin was 30.1%, which is by 0.7 p.p.
higher year-on-year. The adjusted OIBDA margin for FY 2019 grew by 6.2 p.p.
year-on-year to 26.5%. The growth was backed by increased capacity
utilisation, higher efficiency per sq m of medical facilities, an increase
in treatment volumes at previously opened clinics, as well as the effect of
participation in the Michurinsky Project.
Adjusted net profit increased by 10.4% year-on-year to RUB 1.0 billion in 4Q
2019 and by 175.3% year-on-year to RUB 2.9 billion in FY 2019 mainly due to
OIBDA growth and the impact of participation in the Michurinsky Project.
Revenue of the Clinical-Diagnostic Centre (CDC) on Belorusskaya amounted to
RUB 739 million in 4Q 2019, and OIBDA reached RUB 332 million, the OIBDA
margin came in at 45%.
Revenue of the CDC in Krasnaya Presnya totalled RUB 711 million, and OIBDA
reached RUB 242 million, with OIBDA margin at 34%.
Growth in capacity utilisation of in-patient treatment facilities is related
to an increase in the volume of treatments provided across all channels,
with MHI as the main driver in FY 2019.
KEY EVENTS IN 4Q AND AFTER THE END OF THE REPORTING PERIOD
The company is continuing the construction of the new multifunctional
medical centre on Michurinsky Prospect with a total area of over 34,000 sq
m, with the launch scheduled for 2020. The medical centre will include a CDC
for children and adults, a daytime in-patient clinic, and a 24-hour
in-patient clinic with a centre for high-tech surgery.
Medsi is expanding its network of out-patient clinics in three districts
outside central Moscow.
In January 2020, Medsi enhanced its presence in the Saint Petersburg market,
having acquired Clinic Na Petrogradskoy Storone. The clinic, with a total
area of 1,560 sq m, provides a full range of clinical services for adults
and children. Since December, the clinic operates a chemotherapy department.
In March 2020, Medsi acquired ASPEC clinic network operating four clinics in
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Izhevsk (Udmurtia), including a CDC with a daytime in-patient clinic, a
clinic for adults, a clinic for children, and a women's wellness clinic with
a total area of 4,344 sq m.
In March 2020, Medsi repurposed its flagship multifunctional in-patient
clinic in Otradnoye as a clinic to provide medical treatment to patients
with the coronavirus infection COVID-19. Medsi was also among the first
private clinics to collect biomaterials for COVID-19 diagnostics.
Business Nedvizhimost
RENTAL ASSETS WITH A UNIQUE POOL OF PROPERTIES
(RUB million)[9] 4Q 2019 4Q 2018 Change. FY 2019 FY 2018 Change
Revenue 2,261 4,551 (50.3%) 7,105 7,886 (9.9%)
Adj. OIBDA 1,047 3,298 (68.3%)] 4,495 4,598 (2.2%)
Operating profit 901 3,132 (71.2%) 4,014 4,184 (4.1%)
Adj. net profit 1,108 2,587 (57.2%) 3,332 3,147 5.9%
attributable to
Sistema
Revenue from rental assets of Business Nedvizhimost amounted to RUB 2.3
billion in 4Q 2019 and to RUB 7.1 billion in FY 2019 respectively. Negative
dynamics year-on-year were due to decrease in sales volumes of land plots in
Moscow region and commercial real estate as the Company has completed
optimization of its real estate portfolio.
Adjusted OIBDA amounted to RUB 1.0 billion in 4Q 2019, a significant
year-on-year decrease was due to the decline in revenue for the reporting
period. In 2019, adjusted OIBDA decreased slightly, 2.2% year-on-year,
amounting to RUB 4.5 billion.
Adjusted OIBDA margin in 4Q 2019 decreased year-on-year to 46.3% due to
revenue decline. In 2019, Adj. OIBDA margin grew by 5 p.p. year-on-year to
63.3% in FY 2019.
Adjusted net profit of Business Nedvizhimost amounted to RUB 1.1 billion in
4Q 2019. Net profit in FY 2019 increased by 5.9% year-on-year to RUB 3.3
billion.
RTI
LEADING DEVELOPER OF HIGH-TECH SOLUTIONS
(RUB 4Q 4Q Change FY 2019 FY 2018 Change
million)[10] 2019?. 2018?.
Revenue 10,844 8,695 24.7% 24,740 22,886 8.1%
Adj. OIBDA 3,826 3,500 9.3% 5,389 4,919 9.5%
Operating 1,201 1,911 (37.2%) (1,770) 921 (292.3%)
profit /
(loss)
Adj. net 1,481 1,888 (21.6%) 3,195 (531) -
profit /(loss)
attributable
to Sistema
In 4Q 2019, RTI's revenue grew by 24.7% year-on-year to RUB 10.8 billion.
Revenue for FY 2019 showed an 8.1% year-on-year increase to RUB 24.7
billion. Revenue growth in FY 2019 was primarily due to the increased volume
of activity under large long-term contracts.
Adjusted OIBDA grew by 9.3% year-on-year to RUB 3.8 billion in 4Q 2019 and
by 9.5% year-on-year to RUB 5.4 billion in FY 2019.
Adjusted OIBDA margin in 4Q 2019 decreased by 5.0 p.p. year-on-year and
amounted to 35.3%, while adjusted OIBDA margin for FY 2019 remained at the
2018 level of 21.8%.
In FY 2019, RTI reported adjusted net profit of RUB 3.2 billion compared to
a net loss a year earlier, which was mostly due to disposal of assets in 2Q
2019.
The decrease in net debt by 33.0% was due to the transfer of part of RTI
Group's debt together with microelectronics assets to Element LLC, as well
as repayments of RUB 1 billion made on RTI's outstanding debt. In addition,
funds totaling RUB 5.7 bln earmarked for work under state contracts are held
on RTI's accounts but not factored into net debt calculations.
KEY EVENTS IN 4Q 2019 AND AFTER THE END OF THE REPORTING PERIOD
Dual-band security inspection system. In 4Q 2019, the Company developed a
prototype system of continuous remote security inspection for places of
public gathering.
The system is designed for discrete remote detection of potentially
dangerous objects and prohibited substances carried by individuals. Using mm
and THz radiation, the system will identify and distinguish potentially
dangerous objects leveraging artificial intelligence elements including
machine learning.
The use of the system is expected at inspection points, mass gatherings and
railway infrastructure.
The market potential of this type of solution is estimated at RUB 200
billion at this stage.
BPGC
ONE OF RUSSIA'S BIGGEST POWER GRID COMPANIES
(RUB million) 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
Revenue 6,033 5,329 13.2% 20,931 19,130 9.4%
OIBDA 1,703 2,186 (22.1%) 6,205 6,369 (2.6%)
Operating profit 1,011 1,560 (35.2%) 3,537 3,872 (8.7%)
Net profit 725 1,127 (35.6%) 2,698 2,930 (7.9%)
attributable to
Sistema
Revenue of BPGC in 4Q 2019 increased by 13.2% year-on-year to RUB 6.0
billion. In FY 2019, revenue increased by 9.4% year-on-year to RUB 20.9
billion. The revenue growth in FY 2019 was due to the increase of
electricity transmission tariffs and changes in the methodology for
accounting revenue from grid connection services.
In 4Q 2019, OIBDA amounted to RUB 1.7 billion, a 22.1% decrease
year-on-year. This decrease was due to an increase in the cost of services
provided by FGC UES and an increase in labour costs. OIBDA in FY 2019
decreased by 2.6% year-on-year to RUB 6.2 billion. OIBDA dynamics were
affected by the growth of other operating income in FY 2019 due to one-off
financial transactions on the settlement of operational disputes.
OIBDA margin decreased by 12.8% year-on-year to 28.2% in 4Q 2019, and by 3.7
p.p. year-on-year to 29.6% in FY 2019 as a result of OIBDA decline.
Net profit of BPGC in 4Q 2019 decreased by 35.6% year-on-year to RUB 725
million due to OIBDA dynamics and growth of depreciation charges. In FY
2019, BPGC's net profit amounted to RUB 2.7 billion, 7.9% lower than in
2018.
KEY EVENTS IN 4Q AND AFTER THE END OF THE REPORTING PERIOD
Kustarevskaya substation. In 4Q 2019 BPGC commissioned the Kustarevskaya
substation, utilizing technical construction methods that represent new
stages in the development of a "smart" energy system.
Upgrade of distribution networks. In 4Q 2019, the Company continued to
implement comprehensive reconstruction of distribution networks in the Ufa
city district. During the reporting period, 43 distribution points and 40
transformer substations were reconstructed, 5 km of cable lines were laid,
and the electrification of the banks of Belaya River in Ufa was completed.
Transition to a two-level model of operational and technological management.
In 2019, Bashkirenergo, a subsidiary of BPGC, successfully completed a
large-scale project to transition to a two-level model of operational and
technological management.
Implementation of IT-projects. In 2019, Bashkirenergo continued to implement
two major IT projects Bashkortostan's power grid: the creation of a system
for exchanging telemetric information with an automated system operator -
the Bashkir RDA and the enterprise Bashkirenergo. The projects involve the
modernization of telemechanics equipment and the organization of
communication channels for telemetric information transmission.
Construction of a large power facility. In 2019, BPGC Engineering, a
subsidiary of BPGC, continued the construction of a large power facility
outside the Republic of Bashkortostan as part of its strategy to enter the
foreign market. The company's specialists have designed and are building a
220kW substation in Revda, Sverdlovsk Oblast.
Cosmos Hotel Group
ONE OF RUSSIA'S LEADING HOTEL MANAGEMENT COMPANIES
(RUB 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
million)[11]
Revenue 1,237 1,204 2.7% 5,034 5,301 (5.0%)
Adj. OIBDA 185 13 1273.7% 1,251 1,314 (4.8%)
Operating profit (1 008) (176) - (481) 555 -
Adj. net loss (77) (549) - (238) (532) -
attributable to
Sistema
In 4Q 2019, the revenue of the Cosmos Hotel Group increased by 2.7%
year-on-year to RUB 1.2 billion. This revenue growth was the result of the
Company's actions to increase ADR[12].
ADR for the Group's hotel portfolio increased from RUB 3.1 thousand to RUB
3.2 thousand in 4Q 2019.
The average occupancy in 4Q 2019 was 64.1% in line with the level of 2018.
In FY 2019, the share of revenue accounted for by hotels outside Russia
increased from 22% to 24% on the back of lower revenues in the segment of
Russian hotels.
In 4Q 2019, the share of FX revenue decreased by 1.3 p.p. year-on-year on
the back of exchange rate differences, while the share of foreign currency
revenue from hotels outside Russia decreased by 0.5%.
The Group's adjusted OIBDA in 4Q 2019 showed significant growth year-on-year
to RUB 185 million, while adjusted OIBDA in FY 2019 decreased by 4.8%
year-on-year to RUB 1.3 billion.
The negative dynamics in FY 2019 were impacted by the effect of a high base
on the back of the 2018 FIFA World Cup in Russia, and a decrease in the
incoming tourist flow.
Adj. net loss year-on-year in 4Q 2019 and FY 2019 decreased as a result of
debt portfolio optimization.
KEY EVENTS IN 4Q AND AFTER THE END OF THE REPORTING PERIOD
Modernization of Cosmos hotel complex. In October 2019, the modernisation
and design refurbishment of the Cosmos hotel complex commenced. Completion
of the project is planned in 2023.
Corporate
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DJ Sistema PJSFC: SISTEMA ANNOUNCES FINANCIAL -5-
(RUB million) 4Q 2019 4Q 2018 Change FY 2019 FY 2018 Change
Adj. OIBDA (8,474) (7,350) - (16,867 (11,381) -
)
Adj. net 25,483 (12,689) - 28,013 (34,869) -
profit /
(loss)
Corporate 189,160 223,240 (15.3%) 189,160 223,240 (15.3%)
Centre's
financial
liabilities
[13]
The Corporate Centre comprises Sistema and companies that control and manage
Sistema's interests in its subsidiaries and associates.
Financial liabilities of the Corporate Centre significantly decreased
year-on-year by 15.3% to RUB 189.2 billion.
SG&A in 4Q 2019 grew by 26.2% to RUB 7.1 billion primarily due to increased
expenses at the Corporate Centre level on the back of monetisation of
assets.
As of 31 December 2019, the share of rouble-denominated financing exceeds
95% of the financial liabilities of the Corporate Center.
In February 2020, Sistema' wholly-owned subsidiary Sistema Finance S.A.
entered into an equity commitment agreement to provide financing in the
amount of up to EUR 263 million in connection with acquisition by a group of
purchasers controlled by SCP Group SARL (minority owned by Sistema) of the
German hypermarket chain Real from Metro AG and its affiliates it is
expected that the funding of EUR 263 million will involve participation of
other equity investors, along with Sistema Finance.
***
For further information, please visit www.sistema.com or contact:
Investor Relations Public Relations
Nikolai Minashin Sergey Kopytov
Tel: +7 (495) 730 66 00 Tel.: +7 (495) 228 15 32
n.minashin@sistema.ru kopytov@sistema.ru
Sistema PJSFC is a publicly traded diversified Russian holding company
serving over 150 million customers in the sectors of telecommunications,
high technology, financial services, retail, paper and packaging,
agriculture, real estate, tourism and medical services. The company was
founded in 1993. Revenue in 2019 was RUB 656.9 billion; total assets
equalled RUB 1.3 trn as of 31 December 2019. Sistema's global depositary
receipts are listed under the "SSA" ticker on the London Stock Exchange.
Sistema's ordinary shares are listed under the "AFKS" ticker on the Moscow
Exchange. Website: www.sistema.com.
The Company is not an investment company, and is not and will not be
registered as such, under the U.S. Investment Company Act of 1940.
Some of the information in this press release may contain projections or
other forward-looking statements regarding future events or the future
financial performance of Sistema. You can identify forward looking
statements by terms such as "expect," "believe," "anticipate," "estimate,"
"intend," "will," "could," "may" or "might" the negative of such terms or
other similar expressions. We wish to caution you that these statements are
only predictions and that actual events or results may differ materially. In
addition, there is no assurance that the new contracts entered into by our
subsidiaries referenced above will be completed on the terms contained
therein or at all. We do not intend to update these statements to reflect
events and circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. Many factors could cause the actual
results to differ materially from those contained in our projections or
forward-looking statements, including, among others, general economic
conditions, our competitive environment, risks associated with operating in
Russia, rapid technological and market change in our industries, impact of
COVID-19 pandemic on macroeconomic situation on the markets of presence and
financial results of Sistema and its subsidiaries and associates, as well as
many other risks specifically related to Sistema and its operations.
Appendix A
Operating Income Before Depreciation and Amortisation (OIBDA) and OIBDA
margin. OIBDA represents operating profit before depreciation and
amortisation. OIBDA margin is defined as OIBDA as a percentage of our net
revenues. Our OIBDA may not be similar to OIBDA measures of other companies;
is not a measurement under accounting principles generally accepted under
IFRS and should be considered in addition to, but not as a substitute for,
the information contained in our consolidated statement of profit and loss.
We believe that OIBDA provides useful information to investors because it is
an indicator of the strength and performance of our ongoing business
operations, including our ability to fund discretionary spending such as
capital expenditures, acquisitions of businesses and other investments and
our ability to incur and service debt. While depreciation and amortization
are considered operating costs under IFRS, these expenses primarily
represent the non-cash current period allocation of costs associated with
long-lived assets acquired or constructed in prior periods. OIBDA is
commonly used as one of the bases for investors, analysts and credit rating
agencies to evaluate and compare the periodic and future operating
performance and value of companies.
Adjusted OIBDA, operating profit and profit attributable to Sistema
shareholders. The Company uses adjusted OIBDA, adjusted operating profit and
adjusted profit/(loss) attributable to Sistema shareholders to evaluate
financial performance of the Group. These represent underlying financial
measures adjusted for a number of one-off gains and losses. We believe that
adjusted measures provide investors with additional useful information to
measure our underlying financial performance, particularly from period to
period, because these measures are exclusive of certain one-off gains and
losses.
Adjusted operating profit and adjusted OIBDA can be reconciled to our
consolidated statements of profit and loss as follows:
RUB millions 4Q 2019 4Q 2018 12M 2019 12M 2018
Operating income 7,219 25,334 86,417 108,578
Provisions for litigation and 2,227 1,183 5,515 2,260
amounts due under contracts
with clients (RTI)
Accruals related to LTI 72 154 489 868
program at portfolio companies
Non-current assets impairment 2,422 - 2,422 -
(Kronshtadt)
Impairment of rental 2,958 - 2,958 -
properties
Impairment of investment and 3,900 - 6,429 -
other property
Other non-recurring losses, 4,316 - 4,415 1,821
net
Adjusted operating income 23,114 26,671 108,646 113,527
Depreciation and amortisation 29,627 28,622 115,283 112,500
Adjusted OIBDA 52,742 55,293 223,929 226,027
Adjusted profit / (loss) attributable to Sistema shareholders can be
reconciled to our consolidated statements of profit and loss as follows:
RUB millions 4Q 2019 4Q 2018 12M 2019 12M 2018
Net profit / (loss) 7,682 (15,806) 28,597 (45,898)
attributable to Sistema
Provisions for deferred tax 4,308 12,621 4,308 12,621
assets (DTA)
Provision for liability - 1,649 (1,722) 29,527
with regards to the U.S.
Department of Justice and
the SEC investigation,
including revaluation (MTS)
Provisions for litigation 1,414 1,029 4,274 1,966
and amounts due under
contracts with clients
(RTI)
Accruals related to LTI 83 306 679 1,193
program at portfolio
companies
Non-current assets 2,422 - 2,422 -
impairment (Kronshtadt)
Impairment of rental 3,159 - 3,159 -
properties, inc. write-offs
of DTA
Impairment of investment 3,548 - 7,361 -
and other property, inc.
write-offs of DTA
Other non-recurring losses, 4 221 - 4,300 1,704
net
Adjusted net profit / 26 837 (200) 53,379 1,114
(loss) attributable to
Sistema
Consolidated net debt. We define consolidated net debt as consolidated total
debt less cash, cash equivalents and deposits in banks. Consolidated total
debt is defined as total borrowings plus finance lease. The total borrowings
is defined as long-term borrowings, short-term borrowings and liability to
Rosimushchestvo. We believe that the presentation of consolidated net debt
provides useful information to investors because we use this measure in our
management of consolidated liquidity, financial flexibility, capital
structure and leverage.
Consolidated net debt can be reconciled to the borrowings as follows:
RUB millions 31 December 2019 30 September 2019
Long-term borrowings 491,416 522,729
Short-term borrowings 129,454 159,214
Liability to Rosimushchestvo 7,215 11,261
Total borrowings 628,085 693,204
Consolidated finance lease1 18,2392 18,4193
Consolidated total debt 646,324 711,623
Cash and cash equivalents (63,669) (75,260)
Deposits in banks (1,741) (3,247)
Consolidated net debt 580,915 633,116
1 In accordance with the standard IAS 17
2 Including RUB 1,289 million of short-term finance lease
3 Including RUB 2,043 million of short-term finance lease
****
(MORE TO FOLLOW) Dow Jones Newswires
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Full press please is available on Sistema's website
http://www.sistema.com/investors-shareholders/financial-results/ and in the
Attachment to the current release.
=---------------------------------------------------------------------------
[1] Including all borrowing and liabilities to Rosimuschestvo, finance
leases and liabilities under the Settlement Agreement at the Corporate
Centre level
[2] Hereinafter the results for 2019 are presented taking into account
reclassification of Detskiy Mir, Leader-Invest, MTS business in Ukraine and
RTI enterprises in the field of microelectronics as part of discontinued
operations. The results for 2018 have been restated to reflect the results
of this reclassification.
[3] Hereinafter see Annex A: definition of adjusted OIBDA, adjusted
operating profit, adjusted net profit attributable to Sistema, consolidated
debt and consolidated net debt and their reconciliation to IFRS financials
[4] Here and from hereon, revenues are presented on an aggregated basis,
excluding revenues from intra-segment (between entities in the same segment)
transactions, but before inter-segment (between entities in different
segments) eliminations, unless accompanied by the word "consolidated".
Amounts attributable to individual companies, where appropriate, are shown
prior to both intra-segment and inter-segment eliminations and may differ
from respective standalone results due to certain reclassifications and
adjustments.
[5] MTS results for 4Q 2019 and FY 2019 are presented with reclassification
of business in Ukraine as part of discontinued operations. The results for
4Q 2018 and FY 2018 have been restated to reflect the results of this
reclassification.
[6] 34% of produced paper was supplied to the Company's own paper packaging
production facilities
[7] RZ Agro is accounted for as an investment in a joint venture in
Agroholding Steppe's IFRS financial statements.
[8] Adj. OIBDA, the adj. OIBDA margin and adj. net profit are adjusted for
accruals related to the LTI programme.
[9] Management accounts
[10] RTI results for 4Q 2019 and FY 2019 are presented with reclassification
of RTI microelectronics assets as part of discontinued operations. Results
for 4Q 2018 and FY 2018 are restated to reflect the results of this
reclassification. In February 2019, RTI Microelectronics, a member of RTI
Group, together with the State Corporation of Rostech and Rose Electronics,
entered into a legally binding agreement providing for the establishment of
a joint microelectronic components company named Element LLC. In July 2019,
the creation of Element LLC was completed: the parties contributed their
controlling stakes in 19 microelectronics component development, production
and design companies.
[11] Management accounts
[12] Average Daily Rate
[13] Including liability to Rosimushchestvo and finance lease as defined in
IAS 17
Attachment
Document title: Sistema 4Q and FY 2019 financial results_full press release
Document: https://eqs-cockpit.com/c/fncls.ssp?u=CEMPVXVYNG [1]
ISIN: US48122U2042
Category Code: FR
TIDM: SSA
LEI Code: 213800JSZ2UUK4QQK694
Sequence No.: 56991
EQS News ID: 1016921
End of Announcement EQS News Service
1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=0a95a403958623f039c88d7dd1334ca7&application_id=1016921&site_id=vwd&application_name=news
(END) Dow Jones Newswires
April 07, 2020 03:45 ET (07:45 GMT)
