DJ Sistema PJSFC: Sistema announces financial results for the first quarter 2020
Sistema PJSFC (SSA)
Sistema PJSFC: Sistema announces financial results for the first quarter
2020
10-Jun-2020 / 10:00 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 first quarter 2020
Moscow, Russia - 10 June 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 first quarter
2020 ended 31 March 2020.
KEY GROUP HIGHLIGHTS
· Investments in Ozon. Sistema invested an additional RUB 3 billion in
Ozon to continue the implementation of its aggressive growth strategy.
· Establishing a new venture capital fund. The Company launched Sistema
SmartTech, a start-up fund focused on 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.
· Development of one of the largest private laboratories in Russia. In
January 2020, Sistema-Biotech signed an investment agreement with the
International Medical Cluster Foundation to construct a multidisciplinary
biotechnology R&D laboratory and centre for preclinical testing of
cutting-edge developments and technologies in Skolkovo. The
Sistema-Biotech laboratory will focus on genetic research, the production
of diagnostic kits, cell-based biomedical products, biobanks and the
production of biopharmaceuticals.
· Secondary placement of series 001P-05 bonds. In February 2020, the Group
successfully completed a secondary placement of series 001P-05
exchange-traded bonds. During the tender offer, RUB 3.5 billion of bonds
out of the total RUB 10 billion issue were repurchased. The Company placed
all repurchased bonds through the secondary placement with a coupon rate
of 6.85% at 100% of the nominal value.
CORPORATE EVENTS AFTER THE END OF THE REPORTING PERIOD
· Appointment of Sistema's new President. In April 2020, Vladimir
Chirakhov was appointed President of Sistema.
· Dividends for 2019. In May 2020, the Board of Directors of Sistema
recommended that the Annual General Meeting of Shareholders distribute RUB
1.25 billion as the final dividend for FY 2019 (RUB 0.13 per ordinary
share or RUB 2.6 per GDR). The Annual General Meeting of Shareholders will
be held on 27 June 2020.
· New bonds issue. In May 2020, Sistema placed 10-year exchange-traded
bonds of series 001?-13 of RUB 15 billion at a 6.60% coupon rate with a
4-year put option.
· In May 2020, recognising increased focus on ESG in modern corporate
culture, Sistema's Board of Directors approved an amended version of the
Corporate Governance Code consistent with the best international ESG
practices and reflecting the Corporation's commitment to best in class ESG
performance.
INITIATIVES TO COMBAT COVID-19
· Over RUB 1 billion of investments to combat COVID-19 related to medical
aid, the production of personal protective equipment, employee healthcare
and supporting the customers of the Group's companies.
· Increasing the capabilities for COVID-19 diagnostics. In April 2020,
Sistema-Biotech obtained a registration certificate issued by Russian
healthcare regulator Roszdravnadzor for its coronavirus detecting test
system. In May 2020, Sistema-Biotech signed a contract with the healthcare
department of the Moscow city government to supply 1 million test systems.
Sistema-Biotech has also launched clinical and laboratory trials of a new
rapid response test system able to detect the COVID-19 virus within 30
minutes and within the workplace.
· Creation of a Support Centre for medical personnel focused on providing
organisational and financial support to healthcare workers during and in
the aftermath of the coronavirus pandemic. RUB 500 million was raised to
support the social initiative StranaBezVirusa; 25,000 COVID-19 diagnostic
test systems have been distributed for free to approximately 10 Russian
regions; 200,000 protective suits purchased from China were provided for
hospital staff in Moscow and the Moscow region.
· Leveraging digital technologies against COVID-19. MTS and Medsi have
launched free online consultations with primary care doctors and
pediatricians through their SmartMed telemedicine service across Russia.
Medsi has also launched its quality of patient care monitoring system
utilising artificial intelligence at its Clinical Hospital in Otradnoe,
which was converted to admit patients with pneumonia and COVID-19. Over
1,500 patients were admitted in two months.
1Q 2020 FINANCIAL HIGHLIGHTS
· Consolidated revenue[1] increased by 6.3% year-on-year to RUB 158.9
billion.
· Adjusted OIBDA[2] grew by 1.5% year-on-year to RUB 54.0 billion.
· Adjusted OIBDA margin amounted to 34.0%.
· Adjusted net loss attributable to Sistema was RUB 9.4 billion.
Vladimir Chirakhov, President and Chief Executive Officer of Sistema, said:
"Despite the negative impact of the COVID-19 pandemic and subsequent
lockdown measures in our core markets, Sistema increased both its revenue
and adjusted OIBDA in 1Q 2020 as a result of the strong performance of the
Group's portfolio of diversified assets.
Although there remains a substantial uncertainty about the length of the
pandemic and economic recovery, our portfolio companies are pressing ahead
with investment programmes: MTS is investing in network construction;
Segezha Group has entered the active construction phase of a plywood
production mill in the Kostroma region; Steppe enhances presence in crop
production and dairy farming segments and pursues its strategy of increasing
land bank; Medsi is preparing to open a new medical centre in Michurinsky
prospekt in Moscow; Detsky Mir continues to open new stores; and Ozon is
focused on building fulfilment centres and the expansion of its delivery
infrastructure.
While lockdown measures have challenged our portfolio companies operating in
consumer-facing markets, they managed to promptly restructure business
processes and strengthen both online sales and client communication
channels. MTS raised online smartphone sales by 70% compared to the
pre-lockdown period. Detsky Mir increased its share of online sales up to
25% from total sales in 1Q 2020 and up to 42% in April. Etalon Group was one
of the first companies in the real estate market to launch online bookings
and sales of apartments. Finally, Ozon, which operates solely online, has
not only managed to maintain record growth in GMV but has significantly
increased it to 115% year-on-year in 1Q 2020 and up to almost 200% in April.
Sistema's assets demonstrated resilience in the face of the global pandemic
measures, successfully adjusting their business processes to the new
environment. And while we may see a stronger impact of COVID-19 on the
performance of some of our portfolio companies in the second quarter 2020, I
am convinced that this crisis will allow our assets to further increase
efficiency and continue market consolidation. Likewise, at the Corporate
Centre level, we have focused on costs optimisation and introduced measures
to reduce SG&A, which will be fully reflected in 2021 results."
***
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 (CEST) / 5:00 pm (Moscow time) to
present and discuss the 1Q 2020 results.
To participate in the conference call, please dial:
Russia
+7 495 213 1767
8 800 500 9283 (toll free)
UK
+44 330 336 9125
0800 358 6377 (toll free)
US
+1 646-828-8193
888-394-8218 (toll free)
Conference ID: 7407014
Link to webcast: https://webcasts.eqs.com/sistema20200610 [1]
Or quote the conference call title: "Sistema First Quarter 2020 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 million) 1Q 2020 1Q 2019 Change
Revenue 158,885 149,465 6.3%
Adj. OIBDA 54,045 53,234 1.5%
Operating profit 23,172 24,649 (6.0%)
Net profit/ (loss) attributable to (10,214) 16,641 -
Sistema
Adj. net profit / (loss) attributable (9,409) 15,713 -
to Sistema
In 1Q 2020, Sistema's consolidated revenue increased by 6.3% year-on-year to
RUB 158.9 billion primarily driven by strong performance of MTS due to
revenue growth amid strong dynamics of mobile services revenue, increased
smartphone sales and MTS Bank's contribution; BPGC due to revenue growth as
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a result of higher electricity transmission tariffs, an increase in utility
connection services and higher rental payments; and Medsi due to significant
revenue growth from the Voluntary Health Insurance (VHI), Mandatory Health
Insurance (MHI) and individual patients segments.
Adjusted OIBDA increased by 1.5% year-on-year driven by improved results at
BPGC due to an increase in revenue while costs remained flat compared with
1Q 2019; at Medsi due to an increase in revenue; and at Steppe due to
positive dynamics in its key operating segments. The dynamics of the Group's
adjusted OIBDA was also impacted by the decrease in OIBDA of Segezha Group,
as well as by the reflection of Sistema's share in the increase of Ozon's
net loss: in 1Q 2020, the Group's share in Ozon's net loss amounted to RUB
2.4 billion compared to RUB 1.1 billion in 1Q 2019.
Year-on-year adjusted net income dynamics is primarily accounted for by the
recognition of the gain from the divestiture of Sistema's 51% stake in
Leader Invest and subsequent revaluation of investments in associates
(remaining 49% stake in Leader Invest) in the first quarter 2019.
The Group's selling, general and administrative expenses (SG&A) increased by
7.7% year-on-year to RUB 30.5 billion in 1Q 2020 primarily driven by higher
SG&A at MTS due to increase in headcount as MTS enhances presence in the
digital areas. The SG&A/revenue increased slightly year-on-year and amounted
to 19.2%.
CAPEX grew by 31.9% year-on-year and amounted to RUB 28.1 billion in 1Q
2020, mainly driven by CAPEX growth at MTS related to network development,
as well as investments in the capacity increase at Segezha Group.
OVERVIEW OF PORTFOLIO COMPANIES[3]
MTS
LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA
(RUB million[4]) 1Q 2020 1Q 2019 Change
Revenue 119,608 109,832 8.9%
Adj. OIBDA[5] 51,836 54,025 (4.1%)
Adj. OIBDA margin5 43.3% 49.2% (5.9 p.p.)
Operating profit 26,816 30,428 (11.9%)
Adj. net profit attributable to 9,031 7,076 27.6%
Sistema[6]
In 1Q 2020, MTS's revenue grew by 8.9% year-on-year to RUB 119.6 billion
driven by growth in mobile service revenue, backed by an increase in tariffs
and a spike in smartphone sales in expectation of rouble depreciation.
Moreover, MTS Bank positively contributed to the growth in the group
revenue.
In 1Q 2020, adjusted OIBDA slightly decreased year-on-year and amounted to
RUB 51.8 billion. Revenue growth in the key telecoms sector had a positive
effect on OIBDA, while negative dynamics were primarily due to income from
assets disposal: the sale of a stake in Ozon to Sistema PJSFC in 1Q 2019[7],
and the sale of MGTS real estate venues to JSC Business Nedvizhimost.
Adjusted OIBDA margin amounted to 43.3% in 1Q 2020, which is 5.9 p.p. less
than in 1Q 2019.
In 1Q 2020, growth in adjusted net profit by 27.6% year-on-year to RUB 9.0
billion was primarily due to a positive revaluation effect related to the
use of derivative instruments to manage the currency position of MTS Group.
A negative effect on the dynamics of the net profit growth year-on-year was
driven by 1Q 2019 income related to discontinued operations in Ukraine.
In 1Q 2020, the amount of capital expenditure increased primarily due to
increased levels of investment in the network development. In the first
three months of 2020, MTS Group commissioned 3,800 base stations in 69
Russian regions.
Outlook for 2020. MTS expects a slight growth in revenue in 2020 in the
range of 0-3%, a possible OIBDA decline by up to 2%, while capital
expenditure is estimated to remain flat at RUB 90 billion.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Special dividend. In February 2020, MTS completed the payment of the special
dividend totalling RUB 26.48 billion, or RUB 13.25 per share.
Share buyback programme. In March 2020, MTS's Board of Directors approved a
buyback programme of a total of RUB 15 billion until the end of 2020.
Dividend for 2019. In April 2020, the Board of Directors recommended the
final dividend for 2019 of RUB 20.57 per share to be approved at the Annual
General Meeting of Shareholders on 24 June 2020.
New bond issues. In May 2020, MTS successfully placed exchange-traded series
001?-15 bonds in the amount of RUB 5.0 billion with a maturity of 6.5 years,
as well as RUB 7.0 billion seven-year exchange-traded series 001?-16 bonds.
The coupon rates of both issues amounted to 6.60%.
In early June 2020, MTS placed two-year exchange-traded series 001?-17 bonds
in the amount of RUB 10.0 billion with a coupon rate of 5.50%
COVID-19. Since the end of March 2020, MTS has observed increased traffic on
its fixed and mobile networks. A sharp drop in revenue from international
roaming is expected, and approximately a third of retail outlets remain
closed.
MTS is supporting medical professionals in the fight against the spread of
the virus. MTS is also developing new complex product offerings, combining
TV, books, music, telemedicine and fitness apps to support clients and
retain their loyalty after the crisis.
Segezha Group
LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING
(RUB million) 1Q 2020 1Q 2019 Change
Revenue 14,332 14,487 (1.1%)
OIBDA 2,627 3,970 (33.8%)
OIBDA margin 18.3% 27.4% (9.1
p.p.)
Operating profit 1,091 2,714 (59.8%)
Net profit/(loss) attributable to (5,221) 2,730 -
Sistema
In 1Q 2020, Segezha Group's revenue slightly decreased by 1.1% year-on-year
primarily due to a decline in global paper prices. Growth in the sales of
plywood and sawn timber contributed positively to the revenue dynamics.
Segezha Group's OIBDA amounted to RUB 2.6 billion in 1Q 2020. The
year-on-year decline was due to lower paper prices compared to record high
levels in 1Q 2019. Higher share of low-margin products sales (sawn timber
and plywood) in product mix also contributed to negative OIBDA dynamics.
OIBDA margin declined by 9.1 p.p. year-on-year to 18.3% in 1Q 2020.
Net loss amounted to RUB 5.2 billion in 1Q 2020. The year-on-year dynamics
were driven by currency exchange differences from the revaluation of the
company's FX-denominated debt.
Paper output decreased by 1.6% year-on-year to 99,300 tonnes[8] in 1Q 2020
due to scheduled repair works. Paper sales grew by 1.8% year-on-year to
66,000 tonnes due to reduced stock inventory. The additional volume of paper
was sold largely to existing clients.
The production volume of paper sacks and bags grew by 4.6% year-on-year to
334.3 million units[9] due to the launch of a new line for the production of
industrial paper packaging in Salsk in November 2019. Sales increased by
12.1% year-on-year to 313.4 million units following the growth in production
volume, while a share of the output produced in the low winter season will
be sold in summer and autumn. Decreased sales of paper packaging in the
European market and in the Middle East and North Africa became a negative
factor.
Plywood production increased by 3.1% year-on-year to 49,500 cu m in 1Q 2020
due to the new plywood production facility in the Kirov region, commissioned
in July 2018, reaching its full production capacity.
Plywood sales grew by 30.7% year-on-year to 48,900 cu m in 1Q 2020, which
corresponds to the production level in 1Q 2019. The growth in sales was
supported by favourable market conditions at the beginning of 2020 and the
expansion of the product range.
Sawn timber output increased by 13.4% year-on-year to 245,200 cu m in 1Q
2020 on the back of the acquisition of Karelian Wood Company LLC, a logging
and wood processing enterprise located in the Republic of Karelia, at the
beginning of 2020. The volume of sawn timber sales increased by 9.0%
year-on-year to 207,100 cu m in 1Q 2020 backed by the subsequent production
increase. The additionally produced stock of sawn timber is sold to new
clients in Finland.
Sustainable development. Based on the 2019 performance, Segezha Packaging,
Segezha Group's European paper packaging operation, has been awarded a
Silver Medal sustainability rating by the EcoVadis for the second
consecutive year. The platform assesses corporate, social and ecological
responsibility.
In 1Q 2020, 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.
As part of its sustainable forestry policy, Segezha Group has initiated a
project focused on the development of seed plantation centres, in order to
produce containerised tree seedlings.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Business development. In January 2020, Segezha Group purchased the Karelian
Wood Company LLC, a logging and wood processing enterprise, from Finland's
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Pin Arctic Oy Company. The facility is located near the city of Kostomuksha
in the Republic of Karelia. It has an output capacity of up to 250,000 cu m
of sawn timber per year, and an annual allowable cut of over 200,000 cu m.
Debut in the debt market. In January 2020, the Group successfully placed
three-year series 001P-01R bonds in the volume of RUB 10 billion with a
coupon rate of 7.1%. The company was assigned a ruA- credit rating by Expert
RA.
Commencing construction of a plywood production mill in Galich, Kostroma
Region. The mill's design capacity is 130,000 cu m of large-sized birch
plywood per year.
Launch of the second phase of pellet production at Lesosibirsky LDK. The
total pellet production capacity increased from 70,000 to 110,500 tonnes per
year.
In April 2020, Segezha Group made a donation to the Segezha Central District
Hospital for the purchase of medical equipment to fight coronavirus,
including ambulances with portable ventilators.
Agriculture Holding Steppe
ONE OF RUSSIA'S LARGEST AGRICULTURE HOLDINGS AND LAND OWNERS
(RUB million)[10] 1Q 2020 1Q 2019 Change
Revenue 5,475 6,282 (12.8%)
OIBDA 1,115 829 34.5%
OIBDA margin 20.4% 13.2% 7.2 p.p.
Operating profit 756 597 26.5%
Net profit attributable to Sistema 122 117 4.5%
In 1Q 2020, Steppe's revenue decreased by 12.8% year-on-year as a result of
a decline in crop carry-overs. This negative effect was partially offset by
positive dynamics in the Dairy and Orchards segments.
Steppe's OIBDA demonstrated a remarkable increase by 34.5% year-on-year in
1Q 2020 and amounted to RUB 1.1 billion despite the decrease in revenue. The
increase is due to increased production and efficiency in the Dairy segment,
an increase in apple sales during high season in the Orchards segment, as
well as positive dynamics in the Agrotrading, Sugar and Grocery Trading
segments. OIBDA margin grew by 7.2 p.p. year-on-year and amounted to 20.4%.
Steppe's CAPEX amounted to RUB 0.4 billion in 1Q 2020. Key investment areas
included the renewal of the farm machinery fleet and the construction of
dairy farms.
Steppe's net profit in 1Q 2020 amounted to RUB 122 million, which is 4.5%
higher year-on-year.
Land bank of Steppe in 1Q 2020 increased to 532,000 hectares as a result of
the consolidation of land assets in the Rostov region. The total area of
orchards reached 780 hectares. The average export price of wheat sales in 1Q
2020 remained at the level of 1Q 2019.
Export volumes in the Agrotrading segment have slightly decreased
year-on-year since the beginning of the 2019/2020 season and amounted to
1,103,000 tonnes in 1Q 2020. The decline in export volumes was offset by
executing transactions with a higher margin.
The Dairy Farming segment reported solid growth: gross milk yield increased
by 31% year-on-year to 17,300 tonnes in 1Q 2020, while cow productivity grew
by 5.6% year-on-year. The herd amounted to 6,014 lactating cows at the end
of the reporting period.
Sales volumes in the Sugar and Grocery Trading segment increased
substantially by 6% year-on-year in 1Q 2020 and amounted to 69,000 tonnes.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
In May 2020, Steppe acquired three agricultural enterprises in the Stavropol
region, including a dairy farm which, following renovation, will have the
capacity to accommodate 9,000 heads of lactating cows (18,900 heads of
cattle) and will become the largest dairy farm in Russia, with milk
production volume exceeding 100,000 tonnes per year. The deal has also
increased Steppe's land bank by 28,000 hectares.
In May 2020, Steppe sold 100% of shares of the Yuzhny agricultural
enterprise, which specialises in tomato and cucumber production, to focus on
the key business segments - crop production, agrotrading and dairy.
The Ministry of Agriculture of Russia included Steppe Agroholding in the
list of strategically important agricultural enterprises in the crop
producers category.
COVID-19. Growing demand for grocery products in March 2020 had a positive
impact on the performance of the Sugar and Grocery Trading segment.
Medsi
LEADING PRIVATE HEALTHCARE OPERATOR IN RUSSIA
(RUB million) [11] 1Q 2020 1Q 2019 Change
Revenue 5,902 5,190 13.7%
Adj. OIBDA 1,117 883 26.5%
Adj. OIBDA margin 18.9% 17.0% 1.9 p.p.
Operating profit 624 160 290.8%
Adj. net profit attributable to Sistema 333 211 58.3%
Medsi's revenue increased by 13.7% year-on-year in 1Q 2020 and amounted to
RUB 5.9 billion. Revenue growth in 1Q 2020 was due to an 11% year-on year
increase in revenue from the Voluntary Health Insurance (VHI) segment to RUB
2.6 billion, alongside growth in the individual patients segment by 13%
year-on-year to RUB 1.7 billion and the Mandatory Health Insurance (MHI)
segment by 18.6% year-on-year to RUB 1.5 billion.
Adjusted OIBDA increased by 26.5% year-on-year to RUB 1.1 billion in 1Q 2020
on the back of the growth in revenue.
Medsi's adjusted OIBDA margin rose by 1.9 p.p, year-on-year and amounted to
18.9%.
In 1Q 2020, adjusted net profit grew significantly by 58.3% year-on-year to
RUB 333 million. This was driven by increased adjusted OIBDA.
Revenue from the Clinical-Diagnostic Centre (CDC) in Belorusskaya amounted
to RUB 753 million in 1Q 2020. OIBDA reached RUB 272 million at an OIBDA
margin of 36%.
Revenue from the CDC in Krasnaya Presnya totalled RUB 698 million. OIBDA
reached RUB 227 million at an OIBDA margin of 33%.
Net debt increased in 1Q 2020 due to the use of credit lines to finance
CAPEX programmes, including the construction of a medical centre on
Michurinsky Prospekt in Moscow. Debt to OIBDA LTM remains at a comfortable
level of 0.7x.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
In March 2020, Medsi acquired ASPEC clinic network in Izhevsk, which
includes a CDC with a daytime in-patient clinic, an adult clinic, a
children's clinic, and a women's health clinic with a total area of 4,344 sq
m.
Out-patient network development in Moscow. Medsi opened the first Smart 500
clinic on Pokryshkin Street in Moscow. This new format of "convenience"
clinics, with an area of 500 sq m, includes 12-15 rooms for out-patient
medical care for children and adults, laboratory and functional diagnostics
facilities, and ultrasound. Medsi plans to open a family clinic with
advanced diagnostics in Maryino in the summer of 2020, with a total area of
4,400 sq m.
The construction of the medical centre on Michurinsky Prospekt continues,
with the opening planned for late 2020.
COVID-19. Since the second half of March, there has been a sharp drop in
patient flow due to self-isolation and social distancing restrictions. Medsi
is at the forefront of the fight against COVID-19: the hospital in Otradnoe
has been repurposed as an in-patient infectious diseases' unit, a
comprehensive COVID-19 diagnostics programme has been launched, COVID-19
testing is carried out in clinics and at patients' homes, and telemedical
support for out-patient treatment is underway.
Business Nedvizhimost
RENTAL ASSETS WITH A UNIQUE POOL OF PROPERTIES
(RUB million) 1Q 2020 1Q 2019 Change
Revenue 988 739 33.7%
OIBDA 272 113 140.2%
OIBDA margin 27.5% 15.3% 12.2 p.p.
Operating profit 155 13 1,107.2%
Net profit/(loss) attributable to 188 (38) -
Sistema
Revenue from the rental assets of Business Nedvizhimost increased by 33.7%
year-on-year and amounted to RUB 1.0 billion in 1Q 2020. Positive dynamics
year-on-year were due to growth in the rental real estate portfolio as a
result of the acquisition of 54 ATS buildings from PJSC MGTS by JSC Business
Nedvizhimost in 2019.
In 1Q 2020, OIBDA grew significantly by 140.2% year-on-year to RUB 272
million; OIBDA margin increased by 12.2 p.p. year-on-year to 27.5%. This was
driven by revenue growth and the optimisation of maintenance costs for
rental assets.
Business Nedvizhimost's net profit increased to RUB 188 million on the back
of positive OIBDA dynamics.
KEY EVENTS IN 1Q AND AFTER THE END OF THE REPORTING PERIOD
The exchange-traded bonds programme. In March 2020, JSC Business Real Estate
registered 001P series exchange-traded bonds programme of a total of RUB 20
billion.
RTI
LEADING DEVELOPER OF HIGH-TECH SOLUTIONS
(RUB million) 1Q 2020 1Q 2019 Change
Revenue 3,708 3,826 (3.1%)
Adj. OIBDA[12] (165) 163 -
Adj. OIBDA margin - 4.3% -
Operating loss (294) (421) -
Adj. net loss attributable to Sistema (1,557) (1,223) -
In 1Q 2020, RTI's revenue decreased slightly by 3.1% year-on-year to RUB 3.7
billion due to expected revenue fluctuations. Typically, most of RTI's
revenue falls on the second half of the year.
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Adjusted OIBDA decreased year-on-year in 1Q 2020 due to the financial
results of Element LLC, a joint venture with the Rostec State Corporation
specialising in microelectronics.
In 1Q 2020, adjusted net loss increased year-on-year due to the negative
adjusted OIBDA.
The decrease in net debt by 32.1% year-on-year to RUB 19.8 billion[13] was
due to the transfer of part of RTI Group's debt together with the
microelectronics assets to Element LLC, as well as repayment of a debt loan
of RUB 1.0 billion. RTI's accounts include RUB 5.0 billion of funds
earmarked for the execution of the works under state defense contracts,
which are not included in the calculation of net debt.
BPCG
ONE OF RUSSIA'S BIGGEST POWER GRID COMPANIES
(RUB million) 1Q 2020 1Q 2019 Change
Revenue 5,841 5,348 9.2%
OIBDA 1,910 1,428 33.8%
OIBDA margin 32.7% 26.7% 6,0 p.p.
Operating profit 1,210 770 57.0%
Net profit attributable to Sistema 886 585 51.5%
Revenue of BPGC in 1Q 2020 grew by 9.2% year-on-year to RUB 5.8 billion.
This was due to an increase in the electricity transmission tariff from 01
July 2019, growth in utility connection services - including in connection
with changes in accounting policy - and an increase in rental payments.
In 1Q 2020, OIBDA and OIBDA margin grew by 33.8% and 6.0 p.p. year-on-year,
respectively. This significant increase in OIBDA was due to revenue growth,
while costs remained flat compared to the previous year. A decrease in grid
losses had a significant impact.
Net profit of BPGC in 1Q 2020 rose by 51.5% year-on-year to RUB 0.9 billion
amid positive OIBDA dynamics.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Upgrade of distribution networks. In 1Q 2020, the Company continued its
comprehensive reconstruction of distribution networks in the Ufa city
district. During the reporting period, 12 distribution points and 1
transformer substation were upgraded, and 2 km of cable lines were laid.
Construction of large infrastructure projects. In 1Q 2020, BPGC continued
construction of a 110 kV "Uizan-Baynazarovo" in the Beloretsk region,
Romanovka, as well as a TPS-4 in Ufa.
Inclusion of LLC Bashkirenergo in the list of strategically important
enterprises within the fuel and energy sector of Russia. The enterprise has
a leading position in the Republic of Bashkortostan and is regularly counted
among the leading enterprises in the region.
Cosmos Hotel Group[14]
ONE OF RUSSIA'S LEADING HOTEL MANAGEMENT COMPANIES
(RUB million) 1Q 2020 1Q 2019 Change
Revenue 811 1,083 (25.1%)
Adj. OIBDA[15] 24 7 222.9%
Adj. OIBDA margin15 2.9% 0.7% 2.2
p.p.
Operating loss (1,261) (302) -
Adj. net loss attributable to (428) (621) -
Sistema15
In 1Q 2020, the revenue of the Cosmos Hotel Group decreased by 25.1%
year-on-year to RUB 0.8 billion due to a sharp drop in revenue from foreign
hotels and the Cosmos hotel complex due to the coronavirus pandemic.
Adjusted OIBDA of the Cosmos Hotel Group remained largely unchanged in 1Q
2020 despite negative revenue dynamics. This was mainly due to cost
optimisation.
Adjusted OIBDA margin grew by 2.2 p.p. year-on-year and amounted to 2.9% in
1Q 2020.
Adjusted net loss year-on-year in 1Q 2020 decreased due to the optimisation
of the debt portfolio.
In 1Q 2020, the share of revenue from hotels outside Russia decreased by 4
p.p. year-on-year and amounted to 12.7%. FX revenue from hotels outside of
Russia decreased by 32% year-on-year in 1Q 2020 due to a sharp decline in
occupancy in March.
ADR[16] for the Group's hotel portfolio increased year-on-year from RUB 3.1
thousand to RUB 3.7 thousand in 1Q 2020 due to the ADR growth of Cosmos
hotel complex, Cosmos Collection Izumrudny Les and Cosmos Collection Altay
Resort hotels resulting from increased room capacity.
Average occupancy decreased by 9 p.p. year-on-year to 45.9% in 1Q 2020 due
to a drop in tourist flow in February-March caused by the spread of
coronavirus. The decline in occupancy was offset by ADR growth. As a result,
the hotel portfolio's RevPAR[17] remained unchanged year-on-year and
amounted to RUB 1.7 thousand.
KEY EVENTS IN 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Modernisation of Cosmos hotel complex. Cosmos Hotel Group continues the
modernisation and design refurbishment of the Cosmos hotel complex. The
project is due to be completed in 2023.
Corporate
(RUB million) 1Q 2020 1Q 2019 Change
OIBDA (4,198) (1,548) -
Net loss (11,793) (2,474) -
Corporate Centre's financial 207,808 231,485 (10.2%)
liabilities[18]
The Corporate Centre comprises Sistema and companies that control and manage
Sistema's interests in its subsidiaries and associates.
Negative dynamics of OIBDA was partly attributable to Ozon's net loss
accounted for using the equity method (investment in associates).
Financial liabilities of the Corporate Centre decreased significantly
year-on-year by 10.2 % to RUB 207.8 billion.
The share of SG&A in Sistema's revenue in 1Q 2020 remained largely unchanged
year-on-year at 1.0 %.
As of 31 March 2020, the share of rouble-denominated financing exceeds 95%
of the financial liabilities of the Corporate Centre.
In February 2020, Sistema's wholly-owned subsidiary Sistema Finance S.A.
entered into an equity commitment agreement to provide financing for the
amount of up to EUR 263 million in connection with the 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 other equity investors will participate in the financing of
the deal totaling EUR 263 million alongside Sistema Finance.
***
For further information, please visit www.sistema.com [2] 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 [3].
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 the 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
(MORE TO FOLLOW) Dow Jones Newswires
June 10, 2020 03:00 ET (07:00 GMT)
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 million 1Q 2020 1Q 2019
Operating income 23,172 24,649
Provisions for litigation and (274) 175
amounts due under contracts with
clients (RTI)
Accruals related to LTI program at portfolio 19 164
companies
Impairment of hospitality assets 1,109 0
Impairment of non-current assets 319 0
(MTS)
Other non-recurring (income) / (176) 382
loss, net
Adjusted operating income 24,170 25,371
Depreciation and amortisation 29,875 27,864
Adjusted OIBDA 54,045 53,234
Adjusted profit / (loss) attributable to Sistema shareholders can be
reconciled to our consolidated statements of profit and loss as follows:
RUB million 1Q 2020 1Q 2019
Net profit / (loss) (10,214) 16,641
attributable to Sistema
Revaulation of liability 0 (1,722)
with regards to the U.S.
Department of Justice and
the SEC investigation
(MTS)
Accruals related to LTI 18 259
program at portfolio
companies
Provisions for litigation (178) 152
and amounts due under
contracts with clients
(RTI)
Impairment of hospitality 975 0
assets
Impairment of non-current 160 0
assets (MTS)
Other non-recurring (170) 382
(income) / loss, net
Adjusted net profit / (9,409) 15,713
(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 million 31 March 2020 31 December 2019
Long-term borrowings 631,549 491,416
Short-term borrowings 96,766 129,454
Liability to Rosimushchestvo 9,060 7,215
Total borrowings 737,375 628,085
Consolidated finance lease1 20,0182 18,2393
Consolidated total debt 757,393 646,324
Cash and cash equivalents (131,542) (63,669)
Deposits in banks (2,835) (1,741)
Consolidated net debt 623,016 580,915
1 In accordance with the standard IAS 17
2 Including RUB 1,438 million of short-term finance lease
3 Including RUB 1,289 million of short-term finance lease
****
Full press please including financial statements is available on Sistema's
website http://www.sistema.com/investors-shareholders/financial-results/ and
in the Attachment to the current release.
=---------------------------------------------------------------------------
[1] Hereinafter the results for 1Q 2019 are presented taking into account
reclassification of Detsky Mir, Leader-Invest, MTS operations in Ukraine and
RTI microelectronics businesses as discontinued operations.
[2] Hereinafter see Appendix A for the definitions of adjusted OIBDA,
adjusted operating profit, adjusted net profit attributable to Sistema,
consolidated debt and consolidated net debt and their reconciliation to IFRS
financials.
[3] Here and hereafter 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.
[4] MTS results are presented with reclassification of business in Ukraine
as part of discontinued operations from 4Q 2019. The results for 1Q 2019
have been restated to reflect the results of this reclassification.
[5] Adjustment for the one-off write off of non-current assets in the amount
of RUB 0.3 billion in 1Q 2020.
[6] Here and hereafter net profit is presented in Sistema's share.
Adjustments include revaluation of liabilities under SEC investigation and
non-current assets write-off in the first quarter 2020.
[7] In the financial statement of MTS, this income is reflected below
operating profit.
[8] About 34% of paper produced was supplied to converting facilities to
produce paper packaging.
[9] Including 20.5 million consumer paper bags.
[10] RZ Agro is accounted for as an investment in a joint venture in
Agroholding Steppe's IFRS financial statements.
[11] Adjusted OIBDA, adjusted OIBDA margin and adjusted net profit are
adjusted for accruals related to the LTI programme, the effect of clinic
acquisitions in Izhevsk.
[12] As at 31.03.2019, the financial results of microelectronic assets
transferred to Element LLC were recorded in the financial statements as
assets for sale in net profit (or loss). Adjusted OIBDA in 1Q 2020 includes
the net loss of Element LLC, which is accounted for using the equity method
of accounting (classified as investments in associates). Excluding the
results of Element LLC, the adjusted OIBDA of RTI in 1Q 2020 amounted to RUB
0.2 billion.
[13] Including financial lease
[14] Management accounts
[15] Adjustments in 1Q 2020 related to one-off impairment of the hotels
outside of Russia due to COVID-19 pandemic's influence on their financial
performance
[16] Average Daily Rate
[17] Revenue per available room per day
[18] Corporate Centre's financial liabilities here and thereafter are
presented in accordance with management accounts and include, among others,
liability to Rosimushchestvo.
Attachment
File: Sistema 1Q 2020 Financial Results [4]
ISIN: US48122U2042
Category Code: QRF
TIDM: SSA
LEI Code: 213800JSZ2UUK4QQK694
Sequence No.: 68787
EQS News ID: 1066669
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