DJ Sistema PJSFC: Sistema announces financial results for the second quarter 2020
Sistema PJSFC (SSA)
Sistema PJSFC: Sistema announces financial results for the second quarter
2020
03-Sep-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 second quarter 2020
Moscow, Russia - 03 September 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 second
quarter 2020 ended 30 June 2020.
KEY GROUP HIGHLIGHTS
· Appointment of Sistema's new President. Vladimir Chirakhov was appointed
President of Sistema in April 2020.
· Successful placements of Detsky Mir shares. In June 2020 and September
2020, Sistema and the Russia-China Investment Fund (RCIF) held two
successful offerings of Detsky Mir shares, resulting in an increase of
Detsky Mir free float up to almost 100% and full exit of Sistema and RCIF
from the Detsky Mir shareholdings. In June 2020, procceds to Sistema
amounted to RUB 8.9 billion, in September 2020 to RUB 16.9 billion.
· New bonds issue. In May 2020, Sistema successfully placed series 001?-13
bonds in the amount of RUB 15 billion at a 6.60% coupon rate with a 4-year
put option
· Dividends for 2019. In June 2020, the Annual General Meeting of
Shareholders of the Company approved the distribution of RUB 1.25 billion
in dividends for 2019.
CORPORATE EVENTS AFTER THE END OF THE REPORTING PERIOD
· Full exit from the Detsky Mir shareholding. In September 2020, Sistema
and RCIF sold their remaining stakes in Detsky Mir through offering
resilting
· Increased efficiency in managing pharmaceuticals business. In July 2020,
in order to improve efficiency in the management of pharmaceutical assets,
Sistema established ALIUM GROUP and transferred its equity stakes in
Sintez and Alium to be managed by ALIUM GROUP[1].
· New bonds issues. In July 2020, the Corporation placed RUB 10 billion
series 001?-14 exchange-traded bonds at a 6.35% coupon rate with a
2.75-year put option. Additionally, the Company repurchased its series
001P-06 bonds in the amount of RUB 4.4 billion and series 001P-09 bonds in
the amount of RUB 6.2 billion. In September 2020, the Corporation placed
RUB 10 billion series 001P-15 exchange-traded bonds at a 6.70 coupon rate
and with a 4-year put option.
· Optimisation of the debt portfolio. In September 2020, Sistema and
Sberbank signed an agreement whereby Sistema's stake in MTS has been fully
released from pledge. A loan secured by a pledge of 16% MTS shares was
raised by Sistema in February 2018. The outstanding loan amount is RUB
37.9 billion with maturity in 2025.
· MTS share buyback. As part of the MTS's share buyback programme of up
RUB 15 billion, Sistema's wholly-owned subsidiary Sistema Finance S.A. in
July 2020 sold 2,587,059 ordinary shares of PJSC MTS to a wholly-owned
subsidiary of MTS LLC Bastion for RUB 834 million.
INITIATIVES TO COMBAT COVID-19
· Production of COVID-19 vaccine. Pharmaceutical plant Binnopharm[2], part
of Alium Group, became the only production facility in Russia to be
engaged in the manufacturing of the world's first licensed vaccine against
COVID-19 ("Sputnik V"), in partnership with the Gamaleya Scientific
Research Institute of Epidemiology and Microbiology. Binnopharm's
production capacity enables it to produce around 1.5 million doses of the
vaccine per year. Mass production of the vaccine is scheduled to start at
the end of 2020.
· Production of pharmaceutical products to fight COVID-19. Over 40
pharmaceutical products produced by Sintez and Alium were recommended by
the Ministry of Health of the Russian Federation as medications for the
treatment and prevention of COVID-19 and its co-morbidities.
· Increasing capabilities for COVID-19 diagnostics. In April 2020,
Sistema-Biotech obtained a registration certificate issued by the Russian
healthcare regulator Roszdravnadzor for its highly accurate
laboratory-based coronavirus detecting test system and, in May 2020,
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 system
able to detect COVID-19 within 30 minutes and within the workplace and
public places, obtaining a registration certificate issued by
Roszdravnadzor in July 2020. In August, the Company also registered two
new test systems able to improve the efficiency and speed of laboratory
operations.
· Medical help against COVID-19. Medsi has provided a full range of
diagnosis and treatment measures, including comprehensive out-patient
examinations (computer tomography, PCR analyses and quality testing for
coronavirus antibodies); at-home care for COVID-19 patients; repurposing
its in-patient unit as a hospital where, since 1 April, more than 2,000
patients have been cured of COVID-19 and pneumonia; remote consulting and
rehabilitation services for patients recovered from COVID-19 and pneumonia
via the SmartMed telemedical service.
· 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 pandemic. Over RUB 1.5 billion were raised to support
the social media initiative StranaBezVirusa; Sistema donated 25,000
COVID-19 diagnostic test systems to approximately ten Russia regions,
alongside donations of pharmaceuticals, personal protective equipment,
thermal cameras, lung ventilators, ambulance cars, and other new
equipment; 200,000 protective suits were purchased from China and donated
to frontline hospital staff in Moscow and the Moscow region.
PROGRESSING IN ESG
· In May 2020, Sistema's Board of Directors approved an amended version of
the Corporate Governance Code consistent with international best practices
in ESG (Environmental, Social and Governance) and reflecting the
Corporation's commitment to best-in-class ESG performance.
· In June 2020, Sistema's Board of Directors approved Sistema PJSFC's new
Sustainability Policy, which codifies the Corporation's approach to
sustainability and responsible investment management.
· Sistema was confirmed as a constituent of the FTSE4Good Index Series for
the fifth year in a row following the June 2020 index review. This attests
to Sistema's commitment to responsible investing and portfolio management
and to improvement of sustainability practices and reporting at the Group
level and within portfolio companies.
2Q 2020 FINANCIAL HIGHLIGHTS
· Consolidated revenue[3] remained largely unchanged year-on-year and
stood at RUB 155.1 billion.
· Adjusted OIBDA[4] amounted to RUB 54.8 billion, a slight decrease of
0.6% year-on-year.
· Adjusted OIBDA margin was 35.4%.
· Adjusted net profit attributable to Sistema amounted to RUB 1.9 billion.
Vladimir Chirakhov, President and Chief Executive Officer of Sistema, said:
"In the second quarter 2020, despite the very considerable impact felt by
the Russian and the global economy as a result of the pandemic, Sistema's
diversified portfolio proved resilient and delivered stable results.
Year-on-year we posted only a minor reduction in consolidated revenues as
weaker performance of Business Nedvizhimost, Cosmos Hotel Group and Medsi
under the impact of the lockdown was offset by strong revenue dynamics at
MTS and Segezha.
MTS delivered outstanding results despite the loss of international roaming
revenue and reinforced its market leadership. Segezha Group achieved a
year-on-year increase in revenue on the back of further improvement in
efficiencies both in production and marketing and despite softer global
markets for its products. Medsi successfully adapted its operations to
combat COVID-19 and while it saw revenue contracting year-on-year, the
results far exceeded our initial expectations.
We are now looking ahead with cautious optimism as we see some encouraging
signs of recovery across our portfolio, particularly at the level of
portfolio companies hit most severely during the second quarter - our
hospitality, healthcare and rental businesses.
Despite market dislocations, Sistema continues to monetise assets in line
with its strategy and value creation model. Sistema has now fully exited
Detsky Mir via two market transactions in June and September. The history of
Sistema's shareholding in Detsky Mir showcases the transformative value that
Sistema can add to its portfolio companies and illustrates the investment
proposition that the Group offers to its investors.
We are also proud that Detsky Mir has become the first Russian company that
has achieved almost a 100% free float. This is a significant milestone in
the development of the Russian capital markets and corporate governance.
I had the privilege of serving as the company's CEO for eight years, and
being part of the team that made this transformation a reality. I am
confident that Detsky Mir will continue to go from strength to strength and
I wish the management team every success for the future."
***
Conference call information
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DJ Sistema PJSFC: Sistema announces financial -2-
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 2Q 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
+1 929-477-0324
800-289-0571 (toll free)
Conference ID: 7127461
Link to webcast: https://webcasts.eqs.com/sistema20200903 [1]
Or quote the conference call title: "Sistema Second Quarter 2020 Financial
Results".
A replay of the conference call will be available on Sistema's website
www.sistema.com [2] for at least seven days after the event.
For further information, please visit www.sistema.com [2] 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) 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
Revenue 155,124 155,930 (0.5%) 313,370 304,774 2.8%
Adj. OIBDA 54,843 55,195 (0.6%) 108,497 108,184 0.3%
Operating profit 23,395 25,519 (8.3%) 46,289 49,996 (7.4%)
Net profit/ 581 6,540 (91.1%) (9,633) 23,179 -
(loss)
attributable to
Sistema
Adj. net profit / 1,935 7,466 (74.1%) (7,475) 23,179 -
(loss)
attributable to
Sistema
In 2Q 2020, Sistema's consolidated revenue remained largely unchanged
year-on-year and amounted to RUB 155.1 billion. This was primarily due to
the strong performance of MTS, driven by growth in mobile service revenue
and the revenue of MTS Bank and Segezha Group, as a result of revenue
increases on the back of growth in the production and sales of paper,
plywood and sawn timber, and the impact of rouble depreciation on export
revenue.
Adjusted OIBDA[5] slightly decreased by 0.6% year-on-year, driven by the
decreased OIBDA of the hospitality segment and the Group's rental business,
compensated by the increased OIBDA of MTS, following revenue growth and
reduced commercial and personnel expenses, and the significantly improved
financial performance of ?zon.
Adjusted net profit amounted to RUB 1.9 billion in 2Q 2020. Year-on-year
dynamics was primarily impacted by a high base effect in 2019 when Sistema
recognised a RUB 4.1 billion gain from divestiture of high-tech assets and a
RUB 2.8 billion gain from completion of the fair value appraisal of the
remaining equity stake in Leader Invest upon its deconsolidation as a result
of the sale of 51% stake to Etalon Group.
The Group's selling, general and administrative expenses (SG&A) declined by
4.1% year-on-year to RUB 28.1 billion in 2Q 2020 mainly driven by decreased
SG&A at MTS, hospitality and healthcare assets. The SG&A/Group revenue ratio
decreased slightly year-on-year by 0.7 p.p. and amounted to 18.1%.
CAPEX decreased by 5.1% year-on-year and amounted to RUB 26.8 billion in 2Q
2020, primarily due to CAPEX reduction at MTS as a result of delays with
equipment supply and the postponement of the MTS's ecosystem development
projects against the backdrop of the pandemic.
OVERVIEW OF PORTFOLIO COMPANIES
*******************************
MTS
LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA
(RUB 2Q 2020 2Q Change 6M 2020 6M Change
million 2019 2019
)[6]
Revenue 117,73 116,165 1.3% 237,3 225,997 5.0%
0 39
Adj. OIBDA[7] 51,171 49,368 3.7% 103,0 103,394 (0.4%)
07
Adj. OIBDA 43.5% 42.5% 1.0 43.4% 45.8% (2.3
margin p.p. p.p.)
Operating 25,592 25,213 1.5% 52,40 55,641 (5.8%)
profit 8
Adj. net 6,346 6,353 (0.1%) 15,37 13,429 14.5 %
profit 6
attributable
to Sistema[8]
MTS's revenue increased by 1.3% year-on-year to RUB 117.7 billion in 2Q
2020, driven by growth in mobile service revenue on the back of a tariff
increase in 1Q 2020 and growth in the revenue of MTS Bank.
In 2Q 2020, adjusted OIBDA grew by 3.7% year-on-year and amounted to RUB
51.2 billion, backed by revenue increase and reduced commercial and
personnel expenses. This was despite a fall in revenue from international
roaming and the creation of additional reserves by MTS Bank.
Adjusted OIBDA margin increased by 1.0 p.p. year-on-year in 2Q 2020 and
stood at 43.5%.
In 2Q 2020, adjusted net profit was flat in 2Q 2020 compared with 2Q 2019
primarily due to steady revenue flow from the core telecom business and
lower net interest expenses. The indicator was negatively impacted by the
creation of additional reserves by MTS Bank and the revaluation effect
related to the use of derivative instruments for managing the FX position.
CAPEX. In 2Q 2020, capital expenditure decreased year-on-year mainly due to
delays with equipment supply and the postponement of ecosystem development
projects against the backdrop of the pandemic.
OUTLOOK FOR 2020
MTS forecasts slight revenue growth of 0-3% in 2020, a possible decline in
OIBDA of up to -2%, and that capital expenditure will remain at RUB 90
billion.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Dividends for FY2019. In June 2020, the Annual General Meeting of
Shareholders approved dividends for FY 2019 to the amount of RUB 20.57 per
ordinary share.
Dividends for 6M 2020. In July 2020, the Board of Directors recommended that
the Annual General Meeting of Shareholders distribute 6M 2020 dividends of
RUB 8.93 per ordinary share. The Annual General Meeting of Shareholders will
be held on 7 September 2020.
Russia's first 5G license. In July 2020, MTS was granted Russia's first
license for 5G operations in the 24.25-24.65 GHz mmWave band under the
5G/IMT-2020 standard. The license covers 83 Russian regions.
COVID-19. The COVID-19 outbreak and subsequent border closures led to a fall
in revenue from international roaming, increased reserves at MTS Bank due to
increased credit risks, and a slowing down in retail sales at MTS stores.
There was a positive impact from the reduction in operating expenses at
offices closed during the lockdown period.
Forestry Holding Segezha Group
LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING
(RUB 2Q 2020 2Q Change 6M 6M Change
million) 2019 2020 2019
Revenue 16,879 15,50 8.9% 31,21 29,992 4.1%
5 1
Adj. OIBDA 3,578 3,782 (5.4%) 6,204 7,752 (20.0%)
Adj. OIBDA margin 21.2% 24.4% (3.2 19.9% 25.8% (5.9
p.p.) p.p.)
Operating profit 2,012 2,419 (16.8%) 3,103 5,128 (39.5%)
Adj. net 3,156 1,325 138.2 % (2,06 4,055 -
profit/(lo 4)
ss)
attributab
le to
Sistema
In 2Q 2020, Segezha Group's revenue increased by 8.9% year-on-year to RUB
16.9 billion primarily due to an increase in the volume and price of sawn
timber sales, as well as growth in the sales of paper and plywood. Growth of
the average FX rate year-on-year had a positive impact on export revenue
dynamics.
Segezha Group's adjusted OIBDA amounted to RUB 3.6 billion in 2Q 2020.
Adjusted OIBDA decreased by 5.4% year-on-year in 2Q 2020, mainly due to the
decline in paper prices year-on-year as a result of a temporary drop in
demand across international markets amid the COVID-19 pandemic. The decrease
in adjusted OIBDA was also caused by an increase in logistics costs due to
higher transport tariffs against the backdrop of the pandemic.
Adjusted OIBDA margin declined moderately by 3.2 p.p. year-on-year to 21.2%
in 2Q 2020.
Adjusted net profit increased more than twofold year-on-year to RUB 3.2
billion in 2Q 2020, driven by currency exchange differences from the
revaluation of the company's FX-denominated debt.
Paper output increased by 3.8% year-on-year to 104,800 tonnes[9] in 2Q 2020
mainly driven by improved efficiencies. The volume of paper sales increased
by 26.5% to 73,500 tonnes, primarily as a result of inventory reduction.
Additional volume was sold to existing customers and new customers in Peru,
Iran, Chile, Argentina, Azerbaijan, and Uzbekistan.
The output volume of paper sacks declined by 4.6% year-on-year to 337.8
million units[10] due to weaker demand in the product sales markets. This
negative effect was partially offset by an increased share of higher margin
products in the product portfolio.
In 2Q 2020, paper sacks sales volumes decreased by 5.9% year-on-year to
344.9 million units, mainly due to the suspension of operations in the
construction industry and the temporary closure of retail businesses amid
the COVID-19 pandemic.
Plywood output grew by 6.3% year-on-year to 49,500 cu m in 2Q 2020 due to
the ahead of schedule completion of overhaul maintenance works at the Vyatka
plywood plant, as well as the debottlenecking of production.
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In 2Q 2020, plywood sales volume increased by 0.6% year-on-year to 45,100 cu
m.
Sawn timber output increased by 22.0% year-on-year to 299,300 cu m due to
the acquisition in early 2020 of the Karelian Wood Company LLC, a logging
and wood processing enterprise in the Republic of Karelia. The repurposing
of production capacities at the Sokol Wood Processing Plant from glulam to
sawn timber in 2Q 2020 also had a significant impact. This was due to the
commissioning of a new splicing line at the plant, which will help to
increase the production capacity of glulam products at the Sokol Wood
Processing Plant by 20%.
In 2Q 2020, sales of sawn timber rose by 32.1% year-on-year to 326,600 cu m
following the increase in production volumes.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Boosting energy efficiency in plywood output. In order to increase the
energy efficiency of production at the Vyatka plywood plant in the Kirov
region, Segezha Group completed a two-year project to expand the output of
fuel briquettes and switch to waste-free plywood production.
Expanding pellet production capacity. In April 2020, the second line of
pellet production at Lesosibirsky LDK was launched. This increased Segezha
Group's total pellet production capacity to 110,500 tonnes per year.
Segezha Group will invest RUB 500 million to introduce white sack paper
production at its Segezha PPM (Pulp and Paper Mill) in Karelia. The launch
of the equipment, which will have a capacity of 350 tonnes per day, is
planned for 1Q 2021.
Agriculture Holding Steppe
ONE OF RUSSIA'S LARGEST AGRICULTURE HOLDINGS AND LAND OWNERS
(RUB 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
million)[11]
Revenue 2,743 3,526 (22.2%) 7,579 9,186 (17.5%)
OIBDA 1,970 1,764 11.7% 2,694 2,347 14.8%
OIBDA margin 71.8% 50.0% 21.8 p.p. 35.5% 25.6% 10.0 p.p.
Operating 1,758 1,444 21.7% 2,236 1,868 19.7%
profit
Net profit 1,717 645 166.1 % 1,839 762 141.4%
attributable
to Sistema
OIBDA incl. 1,954 1,606 21.7% 3,069 2,434 26.1%
AGK Yuzhny
[12]
Steppe's revenue decreased by 22.2% year-on-year to RUB 2.7 billion in 2Q
2020 as a result of reduced carry-over inventory. This was partially offset
by increased sales in the Dairy Farming and Orchards segments.
Steppe's OIBDA increased by 11.7% year-on-year to RUB 2.0 billion in 2Q
2020, despite the decline in revenue, due to strategic measures to improve
trading efficiency in the Agrotrading and Sugar and Grocery Product Trading
segments, production increases in the Dairy Farming segment, the positive
revaluation of biological assets, and growth in apple sales during high
season in the Orchards segment.
OIBDA margin grew by 21.8 p.p. year-on-year and amounted to 71.8%.
Steppe's CAPEX amounted to RUB 0.5 billion in 2Q 2020, representing a -6.8%
decrease year-on-year. The bulk of the investment was directed towards the
renewal of the farm machinery fleet and preparation for the crop season,
buyout of land shares, and the construction of dairy farms.
Steppe's net profit significantly grew year-on-year, amounting to RUB 1.7
billion in 2Q 2020.
Land bank of Steppe in 2Q 2020 expanded to 560,000 hectares as a result of
the acquisition of land assets in the Stavropol region. The average export
price of wheat sales in 2Q 2020 remained at the level of 2Q 2019.
The total area of orchards amounted to 780 hectares.
Export volumes in the Agrotrading segment slightly decreased year-on-year
and amounted to 1,105,000 tonnes during the 2019/2020 season. At the same
time, a more efficient trading strategy was applied in 1H 2020, which helped
offset the effect of volume reduction and contribute to the increase in
OIBDA.
The Dairy Farming segment demonstrated stable growth: gross milk yield rose
by 27% year-on-year to 17,200 tonnes in 2Q 2020. Productivity per lactating
cow increased by 1.6% year-on-year, and the lactating herd consisted of
6,361 cows at the end of the reporting period.
Sales volumes in the Sugar and Grocery Trading segment grew by 3%
year-on-year to 142,000 tonnes in 1H 2020, and higher-margin transactions
were carried out as part of time arbitrage strategy.
Medsi
LEADING PRIVATE HEALTHCARE OPERATOR IN RUSSIA
(RUB 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
million)
Revenue 4,593 5,511 (16.7%) 10,495 10,701 (1.9%)
Adj. 1,156 1,638 (29.4%) 2,273 2,520 (9.8%)
OIBDA[13]
Adj. OIBDA 25.2% 29.7% (4.5 p.p.) 21.7% 23.6% (1.9 p.p.)
margin
Operating 377 923 (59.2%) 1,001 1,083 (7.6%)
profit
Adj. net 325 927 (64.9%) 659 1,138 (42.1%)
profit
attributab
le to
Sistema
Medsi's revenue decreased by 16.7% year-on-year to RUB 4.6 billion in 2Q
2020 due to a drop in patient flow as a result of restrictions related to
COVID-19. The decline in revenue was partially offset by revenues generated
from repurposing the hospital in Otradnoe as an in-patient infectious
diseases unit, COVID-19 testing, and the development of out-patient
treatment and telemedical support services.
Adjusted OIBDA decreased by 29.4% year-on-year to RUB 1.2 billion following
the fall in revenue and the high base effect in 2Q 2019. Provisions for 2018
and 1Q 2019 for a total of RUB 0.3 billion were released as a result of
changes in methodology of provisioning related to accounts receivable.
Medsi's adjusted OIBDA margin declined by 4.5 pp. year-on-year and amounted
to 25.2%.
Adjusted net profit amounted to RUB 0.3 billion in 2Q 2020 on the back of
adjusted OIBDA dynamics, an increase in depreciation, and a growth in
interest expense.
Revenue from the Clinical-Diagnostic Centre (CDC) in Belorusskaya amounted
to RUB 420 million in 2Q 2020. OIBDA reached RUB 118 million at an OIBDA
margin of 28%.
Revenue from the CDC in Krasnaya Presnya reached RUB 541 million. OIBDA
totalled RUB 113 million at an OIBDA margin of 21%.
Net debt increased year-on-year in 2Q 2020 due to the drawing down 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.
The average cheque in 2Q 2020 grew by 76.2% to approximately RUB 4,100 due
to the rising share of cost-intensive services in the outpatient coronavirus
diagnostics segment, as well as the high cost of an average COVID-19
treatment in the hospital in Otradnoe.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Continued network expansion. The construction of a new Multifunctional
Centre on Michurinsky Prospekt, with more than 34,000 sq m of space, is
nearing completion, with the opening planned for 1Q 2021. The medical centre
will include a CDC for children and adults, a daytime in-patient clinic, and
a 24-hour in-patient clinic with a centre for high-tech surgery.
In September 2020, Medsi plans to open three clinics in Moscow: a family
clinic with advanced diagnostics in Maryino with a total area of 4,400 sq m,
and two Smart 500 clinics on Poletayev Street and Aviatsionnaya Street with
a total area of 498 sq m and 675 sq m respectively.
Medsi acquired a 12.5% stake in Third Opinion Platform LLC, a developer of
artificial intelligence-based healthcare services. Third Opinion has
developed a line of products for recognising pathological changes in medical
images, including bone marrow smears, fundus images, chest radiographs, CT
scans, and mammograms.
Medsi is one of the first private clinics to collect biomaterials for the
diagnosis of SARS-CoV-2 coronavirus infection, the causative agent of the
COVID-19, in six clinics in the Moscow region. The test is available for
patients with signs of respiratory infection and healthy individuals who
wish to be tested for COVID-19. All clinics have enhanced security measures
for both patients and medical staff.
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, and
a comprehensive COVID-19 diagnostics programme is being carried out in
Moscow and the regions. COVID-19 testing is conducted 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 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
million)
Revenue 996 1,738 (42.7%) 1,984 2,477 (19.9%)
OIBDA 414 1,623 (74.5%) 686 1,736 (60.5%)
OIBDA 41.6% 93.4% (51.8 34.6% 70.1% (35.5
margin p.p.) p.p.)
Operating 273 1,504 (81.9%) 427 1,517 (71.8%)
profit
Net profit 88 1,098 (92.0%) 276 1,059 (74.0%)
attributabl
e to
Sistema
In 2Q 2020, revenue from Business Nedvizhimost's rental assets decreased by
42.7% year-on-year to RUB 996 million due to the completion of the
commercial real estate sales programme. Revenue was also affected by the
provision of rent payment holidays and discounts for tenants who have
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experienced financial difficulties as a result of the COVID-19 pandemic.
In 2Q 2020, OIBDA and OIBDA margin declined year-on-year and amounted to RUB
0.4 billion and 41.6% respectively. The decrease was caused by the revenue
dynamics and a change in revenue structure in favour of lower margin rental
revenue.
Business Nedvizhimost's net profit decreased year-on-year to RUB 88 million
in 2Q 2020 due to the decline in revenue and OIBDA. Furthermore, Business
Nedvizhimost received additional income from the sale of a non-core asset in
2Q 2019.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
In August 2020, the Company successfully placed the debut bond issue for RUB
4 billion at a 7.90 coupon rate with a 4-year put option. Funds from the
placement will be used to refinance the current debt portfolio and implement
investment projects. RAEX rating agency assigned Business Nedvizhimost a
ruA- rating with a stable forecast.
RTI
LEADING DEVELOPER OF HIGH-TECH SOLUTIONS
(RUB million) 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
Revenue 4,713 4,639 1.6% 8,421 8,465 (0.5%)
Adj. 43 83 (48.3%) (122) 246 -
OIBDA[14]
Adj. OIBDA 0.9% 1.8% (0.9 p.p.) - 2.9% -
margin
Operating (1,206) (1,161) - (1,499) (1,582) -
loss
Adj. net (891) 2,744 - (2,448) 1,521 -
(loss)/profit
attributable
to Sistema
In 2Q 2020, RTI's revenue increased by 1.6% year-on-year and amounted to RUB
4.7 billion. Historically, most of RTI's revenue falls in the second half of
the year.
Adjusted OIBDA declined year-on-year in 2Q 2020, primarily due to the impact
of the financial results of Element LLC, a joint venture with the Rostec
State Corporation in microelectronics.
Adjusted OIBDA margin decreased by 0.9 p.p. year-on-year to 0.9% in 2Q 2020
following the dynamics of adjusted OIBDA.
In 2Q 2020, adjusted net loss compared to adjusted net profit in 2Q 2019 was
due to the disposal of assets that took place in 2Q 2019.
Net debt remained largely unchanged year-on-year, amounting to RUB 20.0
billion. As of the end of 2Q 2020, RTI's accounts also include additional
funds of RUB 4.0 billion earmarked for the execution of state defence
contracts, which are not included in the calculation of net debt.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
The Scientific and Research Institute for Long-Distance Radio
Communications, part of RTI, is developing a terahertz hardware-software
system for the remote, non-invasive diagnosis of oncological and autoimmune
diseases. The software utilises a database of neural networks to detect
cancerous cells and provide appropriate recommendations.
BPCG
ONE OF RUSSIA'S BIGGEST POWER GRID COMPANIES
(RUB 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
million)
Revenue 4,540 4,574 (0.7%) 10,381 9,922 4.6%
OIBDA 1,229 1,331 (7.7%) 3,139 2,760 13.8%
OIBDA 27.1% 29.1% (2.0 p.p.) 30.2% 27.8% 2.4 p.p.
margin
Operating 526 678 (22.5%) 1,735 1,449 19.8%
profit
Net profit 373 504 (26.1%) 1,259 1,089 15.6%
attributabl
e to
Sistema
Revenue of BPGC decreased by 0.7% year-on-year to RUB 4.5 billion in 2Q 2020
due to a reduction in capacity and net electricity supply. This was a result
of lower energy consumption by small and medium-sized businesses amid the
COVID-19 restrictions, as well as a decrease in energy consumption in the
oil and gas sector due to the implementation of the OPEC+ program.
In 2Q 2020, OIBDA declined by 7.7% to RUB 1.2 billion in line with the
decrease in revenue and due to increasing costs, including wage indexation.
The OIBDA margin stood at 27.1%, 2.0 p.p. lower year-on-year, on the back of
rising costs, including labour costs.
Net profit of BPGC decreased year-on-year in 2Q 2020 as a result of the
OIBDA dynamics and a decline in financial income.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Dividends for 2019. In May 2020, BPGC's Annual General Meeting resolved to
distribute RUB 1.3 billion in final dividends for 2019.
Modernisation of distribution networks. BPGC continued its comprehensive
reconstruction of distribution networks in the Ufa city district. During the
reporting period, 33 distribution points and 18 transformer substations were
upgraded, and 5.2 km of cable lines were laid.
Completion of large infrastructure construction projects. BPGC has recently
completed several large infrastructure construction projects, including the
110 kV overhead lines Uizan-Baynazarovo in the Beloretsk region and the
power substation "Romanovka" in Ufa.
Cosmos Hotel Group[15]
ONE OF RUSSIA'S LEADING HOTEL MANAGEMENT COMPANIES
(RUB million) 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
Revenue 192 1,441 (86.7%) 1,003 2,524 (60.3%)
Adj. OIBDA[16] (193) 349 - (169) 354 -
Adj. OIBDA - 24.3% - - 14.1% -
margin
Operating (366) 32 - (1,628) (274) -
profit/(loss)
Adj. net loss (428) (308) - (857) (929) -
attributable to
Sistema
In 2Q 2020, the revenue of Cosmos Hotel Group decreased year-on-year to RUB
192 million due to hotel closures and a sharp drop in occupancy caused by
the COVID-19 pandemic. Hotels outside Russia were the earliest to close, at
the end of 1Q 2020. Hotels in Russia closed or operated in "sleep mode" from
April, and gradually resumed operation in late May - early June.
Adjusted OIBDA decreased year-on-year on the back of the decline in revenue.
At the same time, Cosmos Hotel Group took steps to drastically reduce
operating costs and minimise losses.
Adjusted net loss was due to the negative OIBDA dynamics.
In 2Q 2020, the share of revenue from hotels outside Russia fell to 6%
compared to 22% in 2Q 2019. FX revenue from hotels abroad decreased by 16x
in 2Q 2020, as three months of operations were lost during the high season.
In 2Q 2020, ADR[17] for the Group's hotel portfolio declined year-on-year
from RUB 3,600 to RUB 2,300 due to a lack of revenue from international
hotels.
RevPAR[18] of the hotel portfolio decreased from RUB 2,400 to RUB 500 as a
result of a collapse in occupancy. In 2Q 2020, the average occupancy fell by
53 p.p. to 19% due to the lack of revenue from the international segment and
a significant drop in demand in the Russian market.
KEY EVENTS IN 2Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Modernisation of Cosmos hotel complex. Cosmos Hotel Group continued the
modernisation and design refurbishment of the Cosmos hotel complex. The
project is due to be completed in 2023.
Corporate
(RUB million) 2Q 2020 2Q 2019 Change 6M 2020 6M 2019 Change
OIBDA (3,394) (2,710) - (7,591) (4,259) -
Net profit / (6,620) (6,729) - (18,413) (9,203) -
(loss)
Corporate 198,281 222,076 (10.7%) 198,281 222,076 (10.7%)
Centre's
financial
liabilities[19]
The Corporate Centre comprises Sistema and companies that control and manage
Sistema's interests in its subsidiaries and associates.
Financial liabilities of the Corporate Centre declined significantly
year-on-year by 10.7% to RUB 198.3 billion as a result of the repayment of
rouble-denominated loans.
The share of SG&A[20] in Sistema's revenue in 2Q 2020 increased to 1.0%
year-on-year due to redundancy payments following workforce optimisation.
As of 30 June 2020, the share of rouble-denominated financing accounted for
96% of the financial liabilities of the Corporate Centre.
In February 2020, the Group entered into an equity commitment agreement to
provide financing in the amount of up to EUR 263 million in connection with
the acquisition by a group of purchasers managed by SCP Group SARL, related
party of the Group, of the German hypermarket chain Real from Metro AG and
its subsidiaries (hereinafter - the "Transaction"). The Transaction was
completed in June 2020, whereas the aforementioned equity financing in the
amount of EUR 263 million, was provided by a group of investors (hereinafter
- the "Investors"). Based on the terms of agreements with the Investors,
upon completion of the Transaction the Group does not have any outstanding
material exposure associated with the financing of the Transaction including
material obligations towards the Investors in relation to guaranteed return
of their respective investments, and, therefore, is neither exposed to
significant risks nor entitled to significant rewards associated with the
financing of the Transaction. As a result, no significant financial assets
and/or financial liabilities related to the Transaction have been recognized
on the Group's balance sheet as of 30 June 2020. Upon completion of the
Transaction, Group's commitments entered into in February 2020 were fully
discharged.
***
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,
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DJ Sistema PJSFC: Sistema announces financial -5-
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
ongoing business operations, including our ability to fund discretionary
spending such as capital expenditures, acquisitions of businesses and other
investments and our ability to incur and service debt. While depreciation
and amortization are considered operating costs under IFRS, these expenses
primarily represent the non-cash current period allocation of costs
associated with long-lived assets acquired or constructed in prior periods.
OIBDA is commonly used as one of the bases for investors, analysts and
credit rating agencies to evaluate and compare the periodic and future
operating performance and value of companies.
Adjusted OIBDA, operating profit and profit attributable to Sistema
shareholders. The Company uses adjusted OIBDA, adjusted operating profit and
adjusted profit/(loss) attributable to Sistema shareholders to evaluate
financial performance of the Group. These represent underlying financial
measures adjusted for a number of one-off gains and losses. We believe that
adjusted measures provide investors with additional useful information to
measure our underlying financial performance, particularly from period to
period, because these measures are exclusive of certain one-off gains and
losses.
Adjusted operating profit and adjusted OIBDA can be reconciled to our
consolidated statements of profit and loss as follows:
RUB millions 2Q 2020 2Q 2019 6M 2020 6M 2019
Operating income 23 395 25 519 46 289 49 996
Accruals related to LTI - 177 - 341
program at portfolio
companies
Impairment of hospitality - - 1 109 -
assets
Impairment of non-current 929 - 1 248 -
assets (MTS)
Other non-recurring (gains) 276 - 120 382
/ losses, net
Provisions for amounts due 885 831 610 1 006
under contracts with clients
at RTI
Adjusted operating income 25 484 26 527 49 376 51 724
Depreciation and 29 359 28 668 59 121 56 459
amortisation
Adjusted OIBDA 54 843 55 195 108 497 108 184
Adjusted profit / (loss) attributable to Sistema shareholders can be
reconciled to our consolidated statements of profit and loss as follows:
RUB millions 2Q 2020 2Q 2019 6M 2020 6M 2019
Net profit / (loss) 581 6 540 (9 633) 23 179
attributable to Sistema
Accruals related to LTI - 203 - 462
program at portfolio
companies
Impairment of hospitality - - 975 -
assets
Impairment of non-current 464 - 624 -
assets (MTS)
Other non-recurring (gains) 274 - 122 385
/ losses, net
Provisions for amounts due 616 723 438 875
under contracts with clients
at RTI
Provision for liability with - - - -1 722
regards to the U.S.
Department of Justice and
the U.S. Securities and
Exchange Commission
investigation, including
revaluation (MTS)
Adjusted net profit / (loss) 1 935 7 466 (7 475) 23 179
attributable to Sistema
Consolidated net debt. We define consolidated net debt as consolidated total
debt less cash, cash equivalents and deposits in banks. Consolidated total
debt is defined as total borrowings plus finance lease. The total borrowings
is defined as long-term borrowings, short-term borrowings and liability to
Rosimushchestvo. We believe that the presentation of consolidated net debt
provides useful information to investors because we use this measure in our
management of consolidated liquidity, financial flexibility, capital
structure and leverage.
Consolidated net debt can be reconciled to the borrowings as follows:
RUB millions 30 June 2020 31 March 2020
Long-term borrowings 607 701 631 549
Short-term borrowings 99 411 96 766
Liability to Rosimushchestvo 8 153 9 060
Total borrowings 715 265 737 375
Consolidated finance lease1 18 5112 20 0183
Consolidated total debt 733 776 757 393
Cash and cash equivalents (128 418) (131 542)
Deposits in banks (1 363) (2 835)
Consolidated net debt 603 995 623 016
1 In accordance with the standard IAS 17
2 Including RUB 1,481 million of short-term finance lease
3 Including RUB 1,438 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] ALIUM GROUP now manages stakes of the Corporation in the pharmaceutical
companies Sintez (owns Biocom) and Alium (unites Obolenskoye and Binnopharm
under the Alium brand).
[2] In addition to Russia's Gamaleya Scientific Research Institute of
Epidemiology and Microbiology (Gamaleya Scientific Research Institute),
where the vaccine was developed.
[3] Hereinafter results for 2Q 2019 are presented to reflect the
reclassification of assets of Detsky Mir, Leader Invest, MTS's business in
Ukraine and RTI's microelectronics business as part of discontinued
operations.
[4] Hereinafter please see Appendix - of the press-release for 2Q 2020.
[5] The dynamics of the Group's adj. OIBDA in 2Q 2020 was also affected by
the reflection of the Group's share in reduction of Ozon's net loss in the
amount of RUB 1.2 bln (in 2Q 2020 the loss amounted to RUB 1.5 bln, in 2Q
2019 - RUB 2.7 bln).
[6] MTS's results reflect reclassification of the Ukrainian business as part
of discontinued operations since 4Q 2019. The results for 2Q 2019 have been
revised to reflect the results of this reclassification.
[7] Adjustment for a one-off asset impairment in the amount of RUB 0.9 bln
in 2Q 2020.
[8] Here and hereafter net profit is presented in Sistema's share.
Adjustments include revaluation of liabilities in connection with the SEC
investigation in 1Q 2019 and the adjustment for the impairment of
non-current assets in 2Q 2020.
[9] Circa 34% of paper produced was supplied to Seghezha Group's own
converting facilities to produce paper packaging.
[10] Including 13.4 mln consumer paper bags.
[11] Steppe results are presented net of results of AGK Yuzhny due to its
divestiture in May 2020. RZ Agro is accounted for as an investment in a
joint venture in Agroholding Steppe's IFRS financial statements.
[12] The OIBDA of Steppe including OIBDA of AGK Yuzhny for the period of
ownership by Steppe.
[13] Adjustments for accruals related to the LTI programme, the effect of
clinic acquisitions in Izhevsk.
[14] In 6M 2019, the financial results of microelectronics assets
transferred to Element LLC were recorded in the financial statements in
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discontinued operations. Adj. OIBDA in 2Q 2020 includes 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 2Q 2020 amounted to RUB 0.1 billion. [15]Based on management accounts [16] Adjusted in 1Q 2020 as a result of a one-time write-off due to the COVID-19 pandemic affecting the financial performance of the international hotels. [17] Average daily rate. [18] Revenue per available room per day. [19]Corporate Centre's financial liabilities here and thereafter are presented in accordance with management accounts and include, among others, liability to Rosimushchestvo. [20] Based on management accounts. Attachment File: Sistema 2Q 2020 Financial Results [4] ISIN: US48122U2042 Category Code: IR TIDM: SSA LEI Code: 213800JSZ2UUK4QQK694 Sequence No.: 83436 EQS News ID: 1126955 End of Announcement EQS News Service 1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=bcbcd0d0618110eae2d6cc7ca69da1f2&application_id=1126955&site_id=vwd&application_name=news 2: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=f1efd490ef237092d4033512d119fe99&application_id=1126955&site_id=vwd&application_name=news 3: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=6e566001103bf8b2bd1a5427ea3e04fe&application_id=1126955&site_id=vwd&application_name=news 4: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=0ab79b3b6a44c8b75d4babeabfe1f0a2&application_id=1126955&site_id=vwd&application_name=news
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