ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: Rostelecom announces its IFRS financial and operating
results for the first quarter of 2020
19-May-2020 / 09:32 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
rostelecom announces its ifrs financial and operating results
for the first quarter of 2020[1]
Revenue growth of 10%; 12% increase in OIBDA[2]; mobile revenue up 16%
Moscow, Russia - May 19, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), the largest digital integrated service provider in Russia, today
announces its consolidated financial results for the first quarter of 2020
prepared in accordance with IFRS[3], with an overview also provided on how
on the Company has responded to the COVID-19 pandemic, and what impact it is
having on the business.
In accordance with the accounting policy of the Group, the acquisition of
Tele2 Russia has been recognized as a business combination under common
control. According to this method the merger of businesses arising from a
transfer of entity stakes under common control of the Group's shareholders,
is presented as if the merger took place in the earliest period of the
statements, or, if later, effective from the date that common control was
put into effect; for this purpose comparatives are revised. Rostelecom's
consolidated financial statements for 2019 have therefore been revised to
incorporate Tele2 Russia's performance as if the acquisition had been
completed on 1 January 2019.
COVID-19
The unprecedented situation caused by the COVID-19 (coronavirus) pandemic
has created a dynamic and intense environment for people and organizations
around the world, including Rostelecom's employees and clients. Amid
constraints around physical movement, the stability of ICT infrastructure
and the prevalence of digitalization are playing an increasingly important
role. As a company of strategic importance to the Russian Federation, it is
essential that Rostelecom continues to provide reliable services to support
the Russian economy, millions of Russian families that require our
infrastructure as well as a significant number of organizations across the
country.
To ensure business continuity and to enable Rostelecom to navigate the
impact of COVID-19, Rostelecom has taken the following actions.
Protecting employees
- Starting from March 16, 2020, a work from home policy has been
implemented to limit the majority of office employees' exposure to the
virus without compromising their ability to remain connected, productive
and to work securely. This has required adding extra capacity and
technology equipment to permit a large-scale transition. To date, around
60,000 employees have been working from home. All staff have been provided
with remote access to their workplaces, corporate mail, IT systems and
smart solutions for audio and video conferencing. IT infrastructure has
been re-organized, partially based on the Company's internal network and
owned programmes such as Tionix Virtual Desktop (VDI), located in
Rostelecom's data centers.
- On-site staff responsible for the continuity of business processes and
front-line employees have been provided with sets of personal protective
equipment, including masks, gloves and sanitizers.
- Continuous monitoring systems have been put in place to ensure
occupational safety and to protect the health protection of our people and
their families.
- A permanent remote working policy is under development for after the
Covid-19 pandemic. The initiative will generate more attractive working
conditions for staff and allow significant cost savings on office rent and
maintenance going forward.
Ensuring business resilience
- Complex organizational and technical measures have been developed to
ensure that national telecommunications infrastructure [1] remains
resilient. The investment programme has been recalibrated to support
priority projects, such as improving the strength and capacity of networks
and IT infrastructure in response to pent-up demand in consumer broadband
caused by self-isolation restrictions. Going forward, this will provide a
strong buffer for the increase in client base and traffic.
- Internal business processes have been transformed to accelerate the
digitalisation of operations, including the shift to electronic signatures
and paperless operations.
- Rostelecom's crisis action planning and response was formulated on the
basis of a set of COVID-19 scenarios that reflect economic developments
and impact on all client groups, including businesses, individual
customers and state clients. The forecasted reduction in economic activity
across a number of business streams, including SMEs, complimentary
services for people and certain state projects might have certain impact
on Rostelecom's business growth. At the same time, this potential negative
effect will be counterbalanced by the anticipated significant growth in
B2B and B2G demand for digital solutions for remote working, online
learning and other services.
- These forward-looking scenario planning models currently assume no job
cuts thanks to the optimization of OpEx and the deferral of other
non-critical investment projects.
- In the current environment, the management team has been focusing on the
Company's performance, ensuring that it maintains a reasonable level of
debt and ensuing that it is able to meet it dividend commitments as stated
in the Company's dividend policy.
- The Company will present revised guidance under the new perimeter of
consolidation over the coming reporting periods, as the industry is still
experiencing a high level of uncertainty regarding self-isolation, the
scope of government aid provided to households and industries hit by the
pandemic and the its macro-economic implications.
Supporting clients
Rostelecom has adapted its product line to respond to the pandemic, ensuring
that it remains a strategic and reliable digital partner to its key client
audiences.
- for SMEs Rostelecom:
- lifted the blocking of certain services [2] with zero account
- added 100 extra minutes of mobile connectivity and 10Gb of Internet
capacity [3] for existing clients
- introduced a 60-day test period for mobile and virtual telephony [4]
for new clients.
- Rostelecom also developed a set of services for remote working [5] for
large clients, including:
1) access to public and corporate resources based on broadband, VPN and
virtual data;
2) reliable and seamless connection based on Hosted PBX, 8-800 toll free
numbers and mobile services; and
3) remote control and information security services.
- A brand-new heat-detection solution [6] was introduced based on thermal
imaging cameras and software that can be integrated with any corporate
system. The service has been introduced by a number of companies,
including ALROSA [7];
- A new "Dedicated virtual conference room" product was developed that
provides companies with the possibility to roll out an owned virtual
server with all the software required for their needs;
- Audio and video conferencing capacity was more than doubled;
- The "Rostelecom Liceum" digital service was commissioned and developed
for primary school students. The service is available for RUB 1 across all
Russian regions providing access to two platforms "School" and
"Development";
- Rostelecom started to support the public COVID-19 information contact
centre ???????????????.??, which provides guidance to support people
during the coronavirus pandemic;
- Free access to five best culture and art TV channels was provided and a
collection of more than 5000 national and international movies, series,
kids, entertainment and educational content on the digital platform Wink
[8];
- maximum Internet speed capacity [8] was increased for those who work and
study from home;
- for Tele2 Russia mobile clients:
- Hotline traffic limits were reset and access was provided to the
public COVID-19 information contact centre ???????????????.??;
- provided free access to messengers to those stranded abroad;
- Extra data added to the data plans of those following guidelines
around self-isolation.
KEY ACHIEVEMENTS
- Revenue grew by 10% year-on-year;
- Mobile services grew by 16% year-on-year;
- Sales in digital services increased by 63% year-on-year;
- OIBDA grew by 12%;
- Free Cash Flow (FCF) [4] improved more than twofold.
FIRST QUARTER 2020 FINANCIAL HIGHLIGHTS
- Revenue grew by 10% to RUB 121.6 billion;
- OIBDA up by 12% to RUB 47.1 billion;
- OIBDA margin grew by 0.7 p.p. to 38.7%;
- Net profit increased by 1% to RUB 7.7 billion;
- CAPEX[5] excluding state programmes decreased by 15% to RUB 22.0 billion
(18.1% of revenue) compared to 1Q 2019;
- Free Cash Flow (FCF) improved more than twofold to RUB (5.9) billion;
and
- Net debt[6] increased by 18% since the beginning of the year to RUB
392.8 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.
Key figures for 1Q 2020, RUB mln
RUB million 1Q 2020 1Q 2019 change, y-o-y
Revenue 121,613 110,225 10%
OIBDA 47,082 41,865 12%
OIBDA margin % 38.7% 38.0% -
Operating Income 18,947 16,764 13%
Operating margin % 15.6% 15.2% -
Net Income 7,712 7,667 1%
% of revenue 6.3% 7.0% -
Capital Expenditure 21,997 25,749 (15%)
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