DJ ROSTELECOM PJSC: Rostelecom announces its IFRS financial and operating results for the second quarter and half year 2020
ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: Rostelecom announces its IFRS financial and operating
results for the second quarter and half year 2020
05-Aug-2020 / 09:48 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 second quarter and FIRST half year of 2020
Q2, 2020 Revenue growth of 13%; 15% increase in OIBDA[1]; net revenue up 32%
Moscow, Russia - August 5, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), the largest digital integrated service provider in Russia, today
announces its consolidated financial results for the second quarter and
first half year of 2020 prepared in accordance with IFRS[2].
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.
Q2 2020 KEY ACHIEVEMENTS
- Consolidated revenue grew by 13% year-on-year;
- Mobile services grew by 16% year-on-year;
- Sales in digital services increased by 68% year-on-year;
- OIBDA grew by 15%;
- Net profit increased by 32% year-on-year.
Q2 2020 FINANCIAL HIGHLIGHTS
- Revenue grew by 13% to RUB 127.3 billion compared to the second quarter
of 2019
- OIBDA up by 15% to RUB 48.8 billion;
- OIBDA margin grew by 0.8 p.p. to 38.3%;
- Net profit increased by 32% to RUB 7.7 billion;
- CAPEX[3] stood at RUB 24.7 billion (19.4% of revenue) from RUB 18.3
billion (16.2% of revenue) in the second quarter of 2019;
- FCF[4] stood at RUB (8.8) billion compared to RUB 14.6 billion in the
second quarter of 2019;
- Net debt[5] increased by 22% since the beginning of the year to RUB
407.1 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.
Key figures for 2Q 2020, RUB mln
RUB million 2Q 2020 2Q 2019 change, y-o-y
Revenue 127,279 113,012 13%
OIBDA 48,800 42,476 15%
OIBDA margin % 38.3% 37.6% -
Operating Income 18,557 16,002 16%
Operating margin % 14.6% 14.2% -
Net Income 7,731 5,863 32%
% of revenue 6.1% 5.2% -
Capital Expenditure 24,661 18,290 35%
% of revenue 19.4% 16.2% -
Net debt 407,118 325,010 25%
Net debt/ annualised OIBDA 2.2 2.0 -
FCF (8,832) 14,619 (23,451)
FIRST HALF YEAR 2020 FINANCIAL HIGHLIGHTS
? Revenue increased by 11% to RUB 248.9 billion compared to the first half
of 2019;
? OIBDA increased by 14% year-on-year to RUB 95.9 billion compared to the
first half of 2019;
? OIBDA margin grew by 0.7 p.p. to 38.5% compared to the first half of
2019;
? Net profit increased by 14% to RUB 15.4 billion compared to the first
half of 2019;
? CAPEX excluding state programmes stood at RUB 46.7 billion (18.7% of
revenue) compared to RUB 44.0 billion (19.7% of revenue) in the first half
of 2019;
? FCF was at RUB (14.8) billion compared to RUB (0.9) billion in the first
half of 2019;
? Net debt increased by 22% since the beginning of the year to RUB 407.1
billion, resulting in a Net Debt/OIBDA ratio of 2.2x
Key figures for 1HY 2020, RUB mln
RUB million 6M 2020 6M 2019 change, y-o-y
Revenue 248,892 223,237 11%
OIBDA 95,883 84,341 14%
OIBDA margin % 38.5% 37.8% -
Operating Income 37,504 32,766 14%
Operating margin % 15.1% 14.7% -
Net Income 15,443 13,530 14%
% of revenue 6.2% 6.1% -
Capital Expenditure 46,658 44,039 6%
% of revenue 18.7% 19.7% -
Net debt 407,118 325,010 25%
Net debt/ annualised OIBDA 2.2 2.0 -
FCF (14,778) (899) (13,879)
Mikhail Oseevskiy, President of Rostelecom, commented:
"Our strong financial and operating results for the second quarter of this
year evidence our resilience and successful passage through a difficult
spring and early summer period, where the general population and business as
a whole have faced unprecedented challenges relating to quarantine measures,
the widespread transition to online and severe economic uncertainty.
"The strategic direction provided by Rostelecom's digital transformation has
enabled us to embed digital services into our DNA. Our market offer is
therefore sustainable and has significant potential based on the need to
meet the demands of a new modern reality.
"Completing the consolidation of Tele2 Russia's mobile business was timely.
The transaction has made us a truly integrated digital provider, which is a
unique position to be in both in terms of the breadth of services assembled
under the Rostelecom brand and the opportunities open to Rostelecom to serve
the needs of clients in the 21st Century with new digital services.
"I therefore consider our second quarter achievements in terms of growth in
revenue, OIBDA and net profit in the second quarter by 13%, 15% and 32%
respectively, as a great achievement by the entire Rostelecom team. We are
seeing the first signs of recovery in economic activity for our clients,
many of whom are projecting a return to growth in the coming quarters. This
will lead to an expansion of work being carried out to digitize various
industries and aspects of people's daily lives. By the year-end we plan to
go to the board of directors and present to the market an updated strategy
that will set more precise goals, taking into account the inclusion of Tele2
Russia as a fully consolidated member of the group, and illustrate new
initiatives that can create additional value for shareholders. "
Vladimir Kirienko, First Vice-President of Rostelecom, said:
"In the second quarter, top-line growth accelerated to 13%. The double-digit
growth rates were achieved thanks to the expansion of the mobile segment and
the rapid growth of digital services. Some service categories, such as,
information security services, continue to show exponential growth: in the
reporting quarter, revenues in this area grew 2.5 times, in part due to the
active development of mass cybersecurity services.
"Our cloud services, data centre services, smart solutions in the field of
urban infrastructure management and state electronic services remain in
demand. The popularity of the Rostelecom Key solution and converged packages
is also growing. Rostelecom's solid growth trajectory is the fruit of hard
work from a professional team that has built high levels of trust from our
customers. Customers have appreciated how quickly Rostelecom has been able
to adapt to changes and put customers first by offering convenient and
useful services in a timely manner. We have managed to support our clients
in recent months both by adapting the terms of service provided within the
framework of current contracts and by creating new popular digital services.
We have as an example developed a new product that remotely screens the
temperature of employees using thermal imaging, our products typically
integrate themselves seamlessly into clients' existing corporate systems.
This service has already been used by a number of companies such as ALROSA
and LUKOIL. Another unique digital solution recently offered to the market
is "Retail Hub", a product that uses algorithms and AI to enable retail
chains to update information on electronic displays and to help focus the
attention of buyers on the right products online, thereby expanding the
range of purchases and increasing the average ticket. Our Tele2 colleagues
have also gone to great lengths to provide subscribers with a large range of
convenient remote services and remote ways of connecting to them. Our main
priority is to remain close to clients, surround them with important and
useful services, while remaining reliable and trusted partners when it comes
to meeting their digital needs both in the present and future.
Sergey Anokhin, Senior Vice-President and Chief Financial Officer, added:
"We have comfortably made it through the first half of this year in terms of
our financial performance and we have continued to implement our strategy.
However, despite the noticeable relaxation of quarantine restrictions and
the first signs of recovery in economic activity, there remains significant
uncertainty about the future development of the pandemic and macroeconomic
indicators. Based on this, the management team maintains a conservative view
when it comes to forecasting growth rates for 2020. We expect an increase in
consolidated revenue of at least 5%, an increase in OIBDA of at least 5%;
and we expect to keep ?APEX within 100-110 billion rubles excluding state
programmes."
KEY OPERATING HIGHLIGHTS
Fixed-line business
Number of 2Q 2020 2Q change, y-o-y 1Q 2020 change,
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DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -2-
subscribers 2019 y-o-y
(million):
Internet access 13.4 13.0 3% 13.2 1%
B2C: Broadband 12.3 12.0 2.5% 12.2 1%
B2B: Broadband 1.1 1.0 7% 1.1 2%
+ VPN
Pay TV 10.7 10.2 4% 10.5 2%
Incl. IPTV 5.8 5.4 7% 5.7 2%
Hosted PBX 0.139 0.084 66%- 0.128 9%
Local telephony 14.9 16.5 (10%) 15.3 (3%)
services
ARPU[6] (RUB): 2Q 2Q 2019 change, 1Q 2020 change, y-o-y
2020 y-o-y
Internet
access
B2C: Broadband 395 398 (1%) 397 (1%)
B2B: Broadband 3,344 3,510 (5%) 3,368 (1%)
+ VPN
Pay TV (B2C) 248 248 (0%) 257 (4%)
Incl. IPTV 309 315 (2%) 319 (3%)
Hosted PBX 1,148 1,175 (2%) 1,118 3%
Blended 545 544 0% 551 (1%)
ARPU[7]
Mobile business
2Q 2020 2Q 2019 change, 1Q 2020 change,
y-o-y y-o-y
Data Traffic, 1,216 733 66% 1,087 12%
incl. MVNO,Pb
Churn, % (9.0%) (8.1%) 0.9 p.p. (9.2%) (0.2 p.p.)
Growth of 28.1% 52.0% (23.9 p.p.) 36.1% (8,0 p.p.)
active mobile
data users , %
1) The total number of Internet subscribers among households grew by 2.5%
to 12.3 million in the second quarter of 2020 compared to the
corresponding period of last year; ARPU was RUB 395.
2) The total number of B2B Internet and VPN subscribers increased by 7%
year-on-year to 1.1 million; ARPU was RUB 3,344.
3) The number of pay-TV subscribers grew by 4% to 10.7 million households
compared to the corresponding period of last year with average ARPU of RUB
248 across B2C;
? The number of IPTV subscribers increased by 7% to 5.8 million, and ARPU
across B2C reached RUB 309;
4) The number of active mobile users grew by 28.1% year-on-year while
mobile data traffic jumped by 66%; at the same time churn of cellular
customer base stood at 9.0%.
5) The number of local telephony subscribers decreased by 10% to 14.9
million.
KEY EVENTS RELATING TO 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Business news
? Rostelecom continues to develop and expand its range of products and
services:
? A new unique AI algorithms and machine learning driven digital product
"Retail Hub" was launched for customers operating in the retail space. The
new solution allows retail chains to smartly control information on
digital displays and analyse customer attention to effectively expand
product lines and ultimately increase the average bill;
? Rostelecom has launched a unique comprehensive solution for
high-precision remote body temperature measurement [1] for offices, which
can be easily integrated with companies' access control systems. A number
of companies including ALROSA [2] and LUKOIL have already tested the new
product;
? As part of Rostelecom's measures to support corporate clients amid the
COVID-19 pandemic, Rostelecom has developed a set of integrated offerings
[3] to support businesses' remote operations, including access to public
and corporate resources, based on broadband, VPN and virtual data centre
services. It also includes reliable and seamless communication based on
Hosted PBX, 8-800 toll free numbers and mobile, as well as remote control
and information security services;
? The Wink platform regular upgrade included:
? IPTV firmware update with an improved interface and TV display
notifications;
? Addition of "Audiobooks" to the platform (in partnership with Litres);
? Launch of voice control functions in partnership Mail.ru Group (voice
assistant Marusya and smart column Kapsula);
? Integration with Tele2 Russia for Wink subscription and digital
payments directly from Tele2 accounts;
? Premiers of exclusive content, including online music streams within
WinkLive featuring Russian signers, WWII short film "Short stay", new
foreign movies and series by English interpreters and voiceover artists
Dmitry Puchkov (known by the pseudonym Goblin), Kurazh Bambey and other.
? Expanded functionality and added options with the Rostelecom Key
solution, to enable:
? integrated home video surveying subscription with the mobile app;
? access to utility meter data management via the app;
? the use of emergency access codes for entrance door control in case
of entryphone or platform malfunctioning;
? the use of the newly launched Key IOS app for entryphone and
driveway access gate control using Apple Watch;
? As part of the convergent solution development, Rostelecom has:
? launched a pilot solution to enable contactless sim card sales via
the ID.Abonent app;
? introduced a Welcome promotion for new MNP users;
? provided access to cloud games as part of mobile services to clients
(in partnership with GFN.RU);
? launched the PC Core platform which allows clients to efficiently
manage traffic consumption;
? Rostelecom signed exclusive agreement with MATCH TV to be able to
provide its OTT clients with additional packages including MATCH, Super
MATCH, KHL HD as part of its B2B TV services;
? Rostelecom continues to grow its digital segment in Q2 2020:
? As part of cybersecurity services:
? Revenues grew by 2.5 times, mainly through the proactive development
of cyber security services for wider customer groups;
? Rostelecom upgraded a number of its cyber security products and
launched a new Red Teaming platform. The platform imitates cyber attacks
taking into account clients' owned IT infrastructure to provide a threat
analysis and assess the efficiency of existing defence measures and
mechanisms. This enables clients to better understand and identify the
gaps in its preparedness for potential attacks;
? Rostelecom continues to grow its cloud services and data processing
centres segments for B2B:
? Sales of the Virtual PBX offering increased by 62% in the second
quarter of 2020;
? Revenues from data centre services grew twofold;
? As part of the Virtual Data Centre offering:
? revenues grew by 169%;
? improved efficiency and user functionality of service management on
the portal, including the optimised generation of reports, access to
reserve copies and a download function for orders;
? launch of Technical Account Manager function for better usability;
? introduction of special COVID-19 related functions, including
StopCoronavirus entry access permits and remote learning and
videoconferencing platforms TrueConf and Vinteo;
? introduction of Customer Data Integration (CDI) on the digital
government platfrom for contractor data synchronisation;
? Rostelecom started the construction of the first Russian Tier IV data
centre in Moscow with a 2,000 rack capacity;
? The newly acquired DataLine has been certified as Cloud Verified
partners of VMware. As part of the development of its products and
services, DataLine has:
? Upgraded its vCloud Director (Cloud-152) and hypervisor cloud
services;
? Added two-factor authorisation and VDI settings mechanisms (powered by
Citrix);
? Upgraded the Kubernetes clusters, located in clients' owned
facilities;
? Added new types of databases as part of the DBaaS service, such as
Cassandra, Redis, RabbitMQ;
? Rostelecom signed a partnership with VTB Group to provide a full range
of data centre solutions, including broadband communication channels and
the provision of server racks and hardware in data centres;
? Sales of Rostelecom home CCTV cameras with cloud storage increased by
30%, which contributed to revenue growth of the Smart Home ecosystem
services by 34%;
? Wink platform active subscriber base grew by 1.7 fold;
? B2C Broadband service revenues in the B2C segment grew by 10%;
? Sales from the Antivirus service increased by 14%;
? Two additional video surveillance solutions were implemented for Yandex,
including the installation of:
? highway cameras connected to Rostelecom platform for Yandex Taxi in
ten Russian cities (using video analytics algorithms), and
? public cameras in 50 Russian cities with live broadcasting on the
Yandex.Weather website;
? Rostelecom signed a number of large contracts to provide communication
services with Russia's State Analytical Centre, Ministry of Labour and
Social Affairs, State Commission for Radio Frequencies, Federal Agency For
Fishery, Yakust Information technologies centre, VTB Bank, Vozrozhdenie
Bank, Home Credit bank and other entities;
? Following the acquisition of DataLine, Rostelecom strengthened its
market position and became a leader in IaaS with an almost a quarter of
the Russian market share, according to TMT Consulting;
? Rostelecom was ranked first among data centre providers in Russia,
according to IKS Consulting. Following the acquisition of DataLine the
Company's market share reached 26% by the number of racks commissioned in
Russia;
? The Company has been ranked [4] at the top of the independent J'son &
Partners Consulting rating by the number of pay-TV B2B clients;
? Rostelecom also leads [5] by the number of video-surveillance cameras
for B2B clients, according to TelecomDaily;
? Rostelecom was ranked [6] number one by the number of hosted PBX clients
according to TMT Consulting Rating
? Rostelecom has been ranked [7] first in the 8-800 toll-free services
according to TMT consulting
? Rostelecom has become a leader in revenues from broadband [8] service
for;
? The Company's Virtual PBX service and "Remote body temperature
measurement" was included in the list of the best solutions by the
International Telecommunication Union;
? Rostelecom's contact centre started to provide access to a direct
communication channel for the clients of Moscow Transport Authority;
? Rostelecom provided video surveillance for the 2020 Russian
constitutional referendum;
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DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -3-
? Revenues from Rostelecom's O2O[8] project increased by 42% in the second
quarter of 2020;
? Rostelecom launched the next generation Transit Europe - Asia [9] (TEA)
project. Round Trip Delay will not surpass 85 m/s from Moscow to
Vladivostok, and 55 m/s from Moscow to Khyagt.
? Tele2 Russia continues to proactively develop its business,
demonstrating agility and flexibility amid the new reality. The Company
has introduced a number of products and remote services, including:
? A special tariff for gamers;
? Contactless sim card delivery in the Moscow region;
? New "My Tele2" product with a user self-registration option;
? Sim-card delivery together with Yandex.Taxi;
? Possibility to raplace sim-cards remotely;
? Simplified sim-card registration on the Public Services Portal;
? Newly launched digital space "Stay at home" for mobile users of all
operators to support them during the coronavirus times;
The high quality of Tele2's services have been recognised by the industry
for the second consecutive year with an "Oscar" for client relationship
management, and the "Silver Mercury" award in six nominations for creative
marketing communications.
Other news
? Rostelecom acquired [10] Forkam, a digitization provider for utility
companies;
? Rostelecom acquired an interest in SIGN.ME [11] to add an e-signature
solution to its digital services ecosystem;
? The Board of Directors has convened the AGM, approved the nominations to
the new Board and recommended that the AGM approves a dividend payment
[12] for 2019 of RUB 5 per share;
? Rostelecom announced a three-year bond [13] with a total nominal value
of RUB 10 billion, at a coupon rate of 6.75% per annum;
? Rostelecom's ordinary shares have been consolidated [14] under a single
ticker RTKM;
? ACRA affirmed [15] AA(RU) to Rostelecom and to its bond issues;
? Fitch Ratings have upgraded Tele2's credit rating to BBB- with a stable
outlook;
? All-Russia People's Front, Roscongress and Rostelecom all launched a
hotline volunteer service WeTogether;
? Rostelecom Contact Centre has opened Coronavirus hotlines for SMP
support and repatriating Russian citizens.
OPERATING REVIEW
Revenue analysis
Revenue structure by services
RUB million 2Q 2020 2Q change 6M 2020 6M Change
2019 2019
Mobile services 42,908 37,131 16% 83,871 72,363 16%
Broadband 22,195 20,606 8% 44,187 41,648 6%
Digital services 15,013 8,922 68% 27,533 16,618 66%
TV services 9,285 9,327 (0%) 18,774 18,658 1%
Wholesale services 18,223 17,590 4% 35,993 34,600 4%
VPN 7,105 6,414 11% 14,130 11,639 21%
Interconnect and 4,475 5,064 (12%) 8,723 10,968 (20%)
traffic transit
services
Infrastructure 4,155 3,726 12% 8,219 7,183 14%
products and
services
Rent of channels 2,488 2,386 4% 4,921 4,810 2%
Fixed telephony 13,675 15,155 (10%) 27,864 31,006 (10%)
Other services 5,980 4,280 40% 10,669 8,345 28%
Total 127,279 113,01 13% 248,892 223,23 11%
2 7
Revenue structure by customer segments
RUB million 2Q 2020 2Q 2019 change 6M 2020 6M 2019 change
Residential 63,719 60,610 5% 126,527 120,641 5%
customers
B2B / State 42,313 33,341 27% 81,302 64,319 26%
clients
Operators 20,184 18,100 12% 39,029 36,324 7%
Other 1,063 962 10% 2,034 1,953 4%
Total 127,279 113,012 13% 248,892 223,237 11%
In the second quarter of 2020, revenue increased by 13% to RUB 127.3
billion, compared to the second quarter of 2019, as a result of the
following factors:
? a 68% increase in revenue from digital services, mainly due to the
larger sales of e-government solutions, promotion of cloud and data centre
services, Smart City projects and cyber security services;
? a 16% increase in revenue from mobile services due to a higher volume of
mobile data consumption and standard voice services;
? a 40% increase in revenue from other services, mainly driven by money
transfer commissions and mobile communication payments, as well as
integrated projects with large state and corporate clients;
? an 8% increase in revenue from broadband services due to a higher number
of subscribers.
During the first six months of 2020, revenue increased by 11% to RUB 248.9
billion, compared to the first six months of 2019, as a result of the
following factors:
? a 16% increase in revenue from mobile services due to a higher volume of
mobile data consumption and standard voice services;
? a 66% increase in revenue from digital services, mainly due to larger
sales of e-government solutions, promotion of cloud and data centre
services, Smart City projects and cyber security services;
? a 60% increase in revenue from broadband services due to a higher number
of subscribers;
? a 21% increase in revenue from VPN services, mainly due to higher demand
from state and corporate clients.
Operating income analysis
Operating expenses structure
RUB million 2Q 2020 2Q 2019 change 6M 2020 6M chang
2019 e
Personnel costs (32,067) (27,986) 15% (64,257) (56,5 14%
41)
Depreciation, (28,821) (25,258) 14% (55,949) (49,1 14%
Amortization and 93)
impairment
losses
Interconnection (23,339) (21,277) 10% (44,628) (41,4 8%
charges 74)
Materials, (9,075) (7,838) 16% (18,114) (16,2 12%
repairs and 33)
maintenance,
utilities
Gain on the 946 781 21% 2,305 1,436 61%
disposal of PPE
and intangible
assets
Impairment loss (1,303) (1,258) 4% (2,466) (2,49 (1%)
of financial 4)
assets measured
at amortized
cost
Other operating 4,655 5,185 (10%) 10,312 9,712 6%
income
Other operating (19,718) (19,359) 2% (38,591) (35,6 8%
expenses 84)
Total operating (108,722 (97,010) 12% (211,388) (190, 11%
expenses ) 471)
In the second quarter of 2020, operating expenses increased by 12% compared
to the corresponding period of 2019 and amounted to RUB 108.7 billion,
largely due to the following factors:
? a 15% increase (of RUB 4.1 bln) in personnel costs, mainly due to an
increase in the number of employees within the digital business segments;
? a 14% increase (of RUB 3.6 bln) in depreciation, amortization and
impairment losses, due to higher payments associated with new objects,
impairment of intangible assets and lease;
? a 10% increase (of RUB 2.1 bln) in interconnection charges, due to
higher traffic caused by the pandemic and the massive transition to remote
working;
? a 16% increase (of RUB 1.2 billion) in materials, mainly due to an
increase in expenditure on personal protective equipment amid pandemic,
and the consolidation of expenses on electricity supplies for Rostelecom's
recently acquired subsidiary DataLine.
During the first six months of 2020, operating expenses increased by 11%
compared to the corresponding period of 2019 and amounted to RUB 211.4
billion, largely due to the following factors:
? a 14% increase (of RUB 7.7 bln) in personnel costs, mainly due to an
increase in the number of employees within the digital business segments;
? a 14% increase (of RUB 6.8 bln) in depreciation, amortization and
impairment losses, due to higher payments associated with new objects, the
impairment of intangible assets and leases;
? an 8% increase (of RUB 3.2 bln) in interconnection charges, due to
higher traffic caused by the pandemic and the massive transition to remote
working;
? an 8% increase (of RUB 3.0 bln) in other operating expenses, due to the
implementation of Smart City projects, as well as the provision of
equipment within B2B and B2G projects, higher agent payments for financial
services in mobile commerce, recalculation of quality bonus payments;
? a 12% increase (of RUB 1.9 billion) in materials, mainly due to an
increase in expenditure on personal protective equipment amid pandemic,
and the consolidation of expenses on electricity supplies for DataLine
subsidiary.
Operating profit in the second quarter of 2020 increased by 16% year-on-year
to RUB 18.6 billion and by 14% to RUB 37.5 billion in the six months of
2020, compared to the corresponding periods of 2019.
OIBDA for the second quarter and six months of 2020 increased by 15%
year-on-year to RUB 48.8 billion and by 14% to RUB 95.9 billion
respectively. OIBDA dynamics were driven by revenue growth and the
above-mentioned factors, affecting operating expenses. The OIBDA margin
increased by 0.8 p.p. to 38.3% in the second quarter of 2020 compared to the
corresponding period of 2019. The OIBDA margin increased by 0.7 p.p. to
38.5% during the first six months of 2020 compared to the corresponding
period of 2019.
Net Income Analysis
In the second quarter of 2020, profit before tax increased by 28% to RUB
10.0 billion, compared to the corresponding period in 2019. During the first
six months of 2020, profit before tax increased by 16% to RUB 20.1 billion,
compared to the corresponding period in 2019. These dynamics were mainly
influenced by higher operating profit in the corresponding periods of 2020.
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DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -4-
Income tax in the second quarter of 2020 was RUB 2.3 billion compared to RUB
1.9 billion in the second quarter of 2019. Income tax in the six months of
2020 was RUB 4.6 billion compared to RUB 3.8 billion in the six months of
2019.
Net profit in the second quarter of 2020 increased by 32% and totalled RUB
7.7 billion, compared to the corresponding period last year, and in the six
months of 2020 - by 14% to RUB 15.4 billion versus the six months of 2019.
Financial review
Net operating cash flow in the second quarter of 2020 decreased by 52% to
RUB 15.8 billion, compared to the corresponding period of 2019. The decrease
in net operating cash flow in the second quarter of 2020 was mainly due to
the change in the working capital, which was mainly driven by an increase in
accounts receivable. This was caused by a lower base in the second quarter
of 2019 due to the receipt of one-off repayments for the provision of
high-speed Internet connection to healthcare centres in Russia. These
dynamics in working capital also reflect a decrease in accounts payable as
well as replacement of short-term liquidity management measures with
long-term financial instruments. Net operating cash flow in the six months
of 2020 decreased by 33% to RUB 32.8 billion, compared to the corresponding
period of 2019. The decrease in net operating cash flow during the first six
months of 2020 was driven by the factors affecting the dynamics of net
operating cash flow in the second quarter of 2020.
Cash outflow for investments in non-current assets, excluding state
programmes, increased by 35% to RUB 24.7 billion (19.4% of revenue) in the
second quarter of 2020. Including state programmes this indicator grew by
25% to RUB 27.6 billion (21.7% of revenue). During the first six months of
2020, cash outflow for investments in non-current assets, excluding state
programmes, increased by 6% to RUB 46.7 billion (18.7% of revenue) while
remaining flat at RUB 53.6 billion (21.5% of revenue), state programmes
included.
Free cash flow in the second quarter of 2020 was RUB (8.8) billion compared
to RUB 14.6 billion in the second quarter of 2019. Free cash flow during the
first half of 2020 was RUB (14.8) billion compared to RUB (0.9) billion
during the corresponding period of 2019.
Free Cash Flow (RUB, billion)
As at June 30, 2020, the Group's total debt has increased by 23% compared to
the beginning of the year and amounted to RUB 444.8 billion, partially
driven by the fundraising achieved to help complete the consolidation of
Tele2. 100% of the Group's total debt remained rouble-denominated as at June
30, 2020
As at June 30, 2020, the Group's net debt increased by 22% compared to the
beginning of the year and amounted to RUB 407.1 billion. The net debt /OIBDA
ratio over the last 12 months stood at 2.2x as at 30 June 2020.
OTHER INFORMATION: CONFERENCE CALL
Rostelecom's management will hold a conference call and webcast today at
4.00 PM (Moscow), 3.00 PM (CET), 2.00 PM (UK) and 9.00 AM (NYT). To
participate in the conference call, please dial:
UK/ International: +44 (0)330 336 9411
USA: +1 323 794 2575
Russia: +7 495 646 9190
Confirmation Code (ENG): 5636312
Confirmation Code (RUS): 3918926
A webcast of the conference call will only be available in English. To
access the webcast please follow the link:
https://webcasts.eqs.com/register/rostelecom20200805/en [16].
A replay of the conference call will be available on the Company's website
https://www.company.rt.ru/en/ir/results_and_presentations/financials/IFRS/20
20/2 [17].
* * *
APPENDICES
1) Reconciliation of OIBDA;
2) Statement of Comprehensive Income for the six months of 2020;
3) Statement of Cash Flows for the six months of 2020;
4) Statement of Financial Position for the six months of 2020.
APPENDIX 1: RECONCILIATION OF OIBDA
OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company
defines as operating income before depreciation and amortisation as well as
some certain expenses. We believe that OIBDA provides useful information to
investors because it is an indicator of the strength and performance of our
business operations, including our ability to finance capital expenditures,
acquisitions and other investments and our ability to incur and service
debt.
The following indicators are not taken into account in the calculation of
OIBDA:
? Expenses related to the long-term management incentive programme,
implying accruals in personnel costs line;
? Expenses related to non-government pension insurance .
RUB million 2Q 2020 2Q 2019 change 6M 2020 6M 2019 change
Operating income 18,557 16,002 16% 37,504 32,766 14%
Plus amortisation 28,821 25,258 14% 55,949 49,193 14%
Plus expenses 1,096 946 16% 1,810 1,833 (1%)
related to the
long-term
management
incentive
programme
Plus expenses 326 270 21% 620 549 13%
related to
non-government
pension insurance
OIBDA 48,800 42,476 15% 95,883 84,341 14%
OIBDA margin, % 38.3% 37.6% 38.5% 37.8%
APPENDIX 2: Statement of Comprehensive Income for the six months of 2020
Six-month period ended 30
June (unaudited)
2020 2019 (restated)
Revenue 248,892 223,237
Operating expenses
Wages, salaries, other benefits and (64,257) (56,541)
payroll taxes
Depreciation, amortization and (55,949) (49,193)
impairment losses
Interconnection charges (44,628) (41,474)
Materials, utilities, repairs and (18,114) (16,233)
maintenance
Gain on disposal of property, plant 2,305 1,436
and equipment and intangible assets
Impairment loss of financial assets (2,466) (2,494)
measured at amortized cost
Other operating income 10,312 9,712
Other operating expenses (38,591) (35,684)
Total operating expenses, net (211,388) (190,471)
Operating profit 37,504 32,766
Share of net profit/(loss) of 309 (228)
associates and joint ventures
Finance costs (18,213) (16,696)
Other investing and financial gain, 1,545 755
net
Foreign exchange (loss)/gain, net (1,074) 739
Profit before income tax 20,071 17,336
Income tax expense (4,628) (3,806)
Profit for the period 15,443 13,530
Other comprehensive income/(loss)
Other comprehensive income/(loss) to
be reclassified to profit or loss in
subsequent periods
Exchange differences on translation 237 (244)
of foreign operations
Other comprehensive income/(loss) 237 (244)
for the period, net of tax
Total comprehensive income for the 15,680 13,286
period
Profit attributable to:
Equity holders of the Group 14,957 13,162
Non-controlling interests 486 368
Total comprehensive income
attributable to:
Equity holders of the Group 15,194 12,906
Non-controlling interests 486 381
Earnings per share attributable to 5.12 5.74
equity holders of the Group - basic
(in roubles)
Earnings per share attributable to 5.08 5.60
equity holders of the Group -
diluted (in roubles)
APPENDIX 3: Statement of Cash Flows for the six months of 2020
Six-month period ended 30
June (unaudited)
2020 2019 (restated)
Cash flows from operating activities
Profit before tax 20,071 17,336
Adjustments to reconcile profit
before tax to cash generated from
operations
Depreciation, amortization and 55,949 49,193
impairment losses
Gain on disposal of property, plant (2,305) (1,436)
and equipment and intangible assets
Impairment loss of financial assets 2,466 2,494
measured at amortized cost
Share of net profit/(loss) of (309) 228
associates and joint ventures
Finance costs excluding finance 18,190 16,663
costs on employee benefit
obligations
Other investing and financial gain, (1,545) (755)
net
Foreign exchange loss/(gain), net 1,074 (739)
Share-based motivation program 1,814 1,796
Increase in accounts receivable and (14,419) (8,406)
contract assets
Increase in employee benefits 398 450
Increase in inventories (923) (1,148)
Decrease in accounts payable, (15,550) (522)
provisions and accrued expenses
Increase in contract costs, (7,403) (7,938)
prepayments and other assets
Increase/(decrease) in other (4,131) 1,008
liabilities
Cash generated from operations 53,377 68,224
Interest paid (16,489) (16,331)
Income tax refund 7 72
Income tax paid (4,068) (3,863)
Net cash from operating activities 32,827 48,102
Cash flows from investing activities
Purchase of property, plant and (53,600) (53,733)
equipment and intangible assets
Proceeds from sale of property, 2,977 2,268
plant and equipment, intangible
assets and assets held for sale
Acquisition of financial assets (3,501) (3,669)
Proceeds from disposals of financial 1,748 3,262
assets
Interest received 351 296
Subsidy from Government 2,667 2,168
(MORE TO FOLLOW) Dow Jones Newswires
August 05, 2020 02:49 ET (06:49 GMT)
DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -5-
Dividends received 159 206
Purchase of subsidiaries and (114,810) (1,000)
business, net of cash acquired
Proceeds from disposal of (74) -
subsidiaries, net of cash disposed
Acquisition of equity accounted (25) (502)
investees
Net cash used in investing (164,108) (50,704)
activities
Cash flows from financing activities
Issue of share capital 66,000 -
Proceeds from bank and corporate loans 501,818 283,596
Repayment of bank and corporate loans (457,976) (282,578)
Proceeds from bonds 40,000 15,000
Repayment of bonds (1,861) (5,115)
Repayment of vendor financing payable (2) (6)
Proceeds from other non-current financing (7) -
liabilities
Repayment of lease liabilities (7,484) (5,359)
Acquisition of non-controlling interests (20) (905)
Dividends paid to shareholders of the Group - (5,739)
Dividends paid to non-controlling (270) (431)
shareholders of subsidiaries
Net cash from / (used in) financing 140,198 (1,537)
activities
Effect of exchange rate changes on cash and (357) (89)
cash equivalents
Net increase/(decrease) in cash and cash 8,560 (4,228)
equivalents
Cash and cash equivalents at beginning of 19,955 10,492
the period
Cash and cash equivalents at the end of the 28,515 6,264
period
APPENDIX 5: Statement of Financial Position for the six months of 2020
30 June 31 December
2020 2019
(unaudited) (restated)
Assets
Non-current assets
Property, plant and equipment 529,047 522,681
Goodwill and other intangible assets 134,351 127,110
Right of use assets 57,892 49,228
Trade and other accounts receivable 6,887 5,646
Investments in associates and joint 9,116 8,892
ventures
Other financial assets 4,087 2,667
Other non-current assets 12,509 10,119
Deferred tax assets 10,496 10,246
Contract assets 1,090 866
Contract costs 15,382 14,647
Total non-current assets 780,857 752,102
Current assets
Inventories 11,091 9,793
Contract assets 8,821 4,480
Contract costs 687 920
Trade and other accounts receivable 57,873 49,181
Prepayments 9,885 7,845
Prepaid income tax 2,419 868
Other financial assets 9,123 8,886
Other current assets 6,136 6,264
Cash and cash equivalents 28,515 19,955
Asset classified as held for sale 767 749
Total current assets 135,317 108,941
Total assets 916,174 861,043
Equity and liabilities
Equity attributable to equity holders of
the Group
Share capital 95 93
Treasury shares (14,374) (53,391)
Retained earnings and other reserves 199,184 264,231
Total equity attributable to equity 184,905 210,933
holders of the Group
Non-controlling interests 4,896 4,585
Total equity 189,801 215,518
Non-current liabilities
Loans and borrowings 384,364 280,571
Lease liabilities 51,269 42,394
Employee benefits 6,279 5,881
Deferred tax liabilities 41,721 38,381
Accounts payable and accrued expenses 1,240 1,486
Contract liabilities 14,885 17,472
Provisions 4,980 4,418
Other non-current liabilities 22,404 19,052
Total non-current liabilities 527,142 409,655
Current liabilities
Loans and borrowings 60,392 81,277
Lease liabilities 11,211 9,971
Accounts payable and accrued expenses 69,694 86,527
Income tax payable 1,875 2,692
Contract liabilities 31,213 31,353
Provisions 7,922 7,283
Other financial liabilities 1,172 164
Other current liabilities 15,752 16,603
Total current liabilities 199,231 235,870
Total liabilities 726,373 645,525
Total equity and liabilities 916,174 861,043
Rostelecom [18] is the largest integrated digital services and products
provider, operating in all segments of the telecommunications market in
Russia. The Company serves millions of households, state and private
enterprises across the country.
Rostelecom is Russia's undisputed market leader, providing high-speed
Internet access and pay-TV. The total number of broadband users stands at
over 13.4 mln users, it has more than 10.7 mln pay-TV customers, over 5.8
mln of which are subscribed to Rostelecom's IPTV services. Tele2 Russia, a
Rostelecom subsidiary, is a major player in the mobile market with over 44
mln subscribers and the industry-leading NPS, a customer satisfaction
benchmark.
During the first six months of 2020, the Group generated RUB 248.9 bln of
revenues, RUB 95.9 bln of OIBDA (38.5% of revenue) and RUB 15.4 bln of net
income.
The Group is the leading provider of telecommunications services to
government bodies and corporates of all levels.
Rostelecom is a key strategic innovator that provides solutions in the
following fields: E-Government, cybersecurity, data-centres and cloud
computing, biometry, healthcare, education and housing & utility services.
The Group's stable financial position is confirmed by its credit ratings.
Rostelecom has been assigned 'BBB-' and 'BB+' international credit ratings
by Fitch Ratings and Standard & Poor's respectively, and AA(RU) by ACRA.
* * *
Certain statements in this press release are forward-looking statements
within the meaning of the U.S. federal securities laws and intended to be
covered by the safe harbours created thereby.
Those forward-looking statements include, but are not limited to:
? Assessment of PAO Rostelecom's (the Company) future operating and
financial results as well as forecasts of the present value of future cash
flows and related factors;
? The Company's plans to take ownership stakes in other organisations;
? the Company's anticipated capital expenditures and plans to construct
and modernize its network;
? the Company's expectations as to the growth in demand for its services,
plans relating to the expansion of the range of its services and their
pricing;
? the Company's plans with respect to improving its corporate governance
practices;
? the Company's expectations as to its position in the telecommunications
market and forecasts on the development of the market segments within
which the Company operates;
? economic outlook and industry trends;
? the Company's expectations as to the regulation of the Russian
telecommunications industry and assessment of impact of regulatory
initiatives on the Company's activity;
? other statements regarding matters that are not historical facts.
Such forward-looking statements are subject to risks, uncertainties and
other factors, which could cause actual results to differ materially from
those expressed or implied by these forward-looking statements. These risks,
uncertainties and other factors include:
? risks relating to changes in political, economic and social conditions
in Russia as well as changes in global economic conditions;
? risks relating to Russian legislation, regulation and taxation,
including laws, regulations, decrees and decisions governing the Russian
telecommunications industry, securities industry as well as currency and
exchange controls relating to Russian entities and their official
interpretation by regulatory bodies;
? risks relating to the Company, including the achievement of the
anticipated results, levels of profitability and growth, ability to create
and meet demand for the Company's services including their promotions, and
the ability of the Company to remain competitive in a liberalized
telecommunications market;
? technological risks associated with the functioning and development of
the telecommunications infrastructure, technological innovations as well
as the convergence of technologies;
? other risks and uncertainties. For a more detailed discussion of these
and other factors, see the Company's Annual Report and the Company's other
public filings.
Many of these factors are beyond the Company's ability to control or
predict. Given these and other uncertainties, readers are cautioned not to
place undue reliance on any of the forward-looking statements contained
herein or otherwise. The Company does not undertake any obligation to
release publicly any revisions to these forward-looking statements (which
are made as of the date hereof) to reflect events or circumstances upon the
annual report publication or to reflect the occurrence of unanticipated
events, except as may be required under applicable laws.
=---------------------------------------------------------------------------
[1] Here and below, please refer to Attachment 1 of this statement for a
full definition of OIBDA
[2] International Financial Reporting Standards
(MORE TO FOLLOW) Dow Jones Newswires
August 05, 2020 02:49 ET (06:49 GMT)
[3] Here and below, capital expenditure ("CAPEX") comprises cash spent on
fixed assets and intangible assets
[4] Here and below, Free Cash Flow (FCF) is calculated as net cash from
operating activity minus CAPEX, plus proceeds from selling fixed assets and
intangible assets, plus interest received, plus subsidy from government
[5] Here and below, Net Debt is calculated as total debt less cash, cash
equivalents and short-term investments (other financial assets).
[6] Average revenue per user
[7] Blended ARPU includes revenue from broadband, IPTV and digital cable TV
[8] Operator to operator
ISIN: US7785291078
Category Code: IR
TIDM: RKMD
LEI Code: 2534001D752JPNM0H170
Sequence No.: 79988
EQS News ID: 1110247
End of Announcement EQS News Service
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