DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2020
ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING
RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2020
11-Nov-2020 / 09:31 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 THIRD quarter and NINE MONTHS OF 2020
Q3 2020 Revenue growth of 13%; 17% increase in OIBDA[1]; FCF[2] up 26%
FY 2020 guidance upgraded to >=9% Revenue & OIBDA growth
Moscow, Russia - November 11, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP;
OTCQX: ROSYY), the largest digital service provider in Russia, today
announces its consolidated financial results for the third quarter and nine
months of 2020 prepared in accordance with IFRS[3].
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.
THIRD QUARTER 2020 FINANCIAL HIGHLIGHTS
- Revenue grew by 13% to RUB 135 billion compared to the third quarter of
2019;
- mobile services revenue grew 14% year-on-year;
- digital services revenue grew 62% year-on-year;
- OIBDA up by 17% to RUB 53.7 billion;
- OIBDA margin grew by 1.5 p.p. to 39.8%;
- Net profit increased by 31% to RUB 12 billion;
- CAPEX[4] excluding state programmes stood at RUB 24.3 billion (18% of
revenue) compared to RUB 18.8 billion (15.7% of revenue) in the third
quarter of 2019;
- FCF increased by 26% to RUB 19.5 billion;
- Net debt[5] increased by 23% since the beginning of the year to RUB 410
billion, resulting in a Net Debt/OIBDA ratio of 2.2x.
Key figures for 3Q 2020
RUB million 3Q 2020 3Q 2019 change, y-o-y
Revenue 134,988 119,621 13%
OIBDA 53,677 45,736 17%
OIBDA margin % 39.8% 38.2% -
Operating Income 23,087 18,724 23%
Operating margin % 17.1% 15.7% -
Net Income 11,988 9,140 31%
% of revenue 8.9% 7.6% -
Capital Expenditure 24,325 18,755 30%
% of revenue 18.0% 15.7% -
Net debt 410,027 322,744 27%
Net debt/ OIBDA 2.2 1.9 -
FCF 19,512 15,455 4,057
NINE MONTHS OF 2020 FINANCIAL HIGHLIGHTS
? Revenue increased by 12% to RUB 383.9 billion compared to the nine
months of 2019;
? OIBDA increased by 15% year-on-year to RUB 149.6 billion;
? OIBDA margin grew by 1 p.p. to 39%;
? Net profit increased by 21% to RUB 27.4 billion;
? CAPEX stood at RUB 71 billion (18.5% of revenue) compared to RUB 62.8
billion (18.3% of revenue) in the nine months of 2019;
? FCF stood at RUB 4.7 billion compared to RUB 14.6 billion in the nine
months of 2019;
? Net debt increased by 23% since the beginning of the year to RUB 410
billion, resulting in a Net Debt/OIBDA ratio of 2.2x.
Key figures for 9M 2020
RUB million 9M 2020 9M 2019 change, y-o-y
Revenue 383,880 342,858 12%
OIBDA 149,559 130,078 15%
OIBDA margin % 39.0% 37.9% -
Operating Income 60,591 51,490 18%
Operating margin % 15.8% 15.0% -
Net Income 27,431 22,670 21%
% of revenue 7.1% 6.6% -
Capital Expenditure 70,976 62,794 13%
% of revenue 18.5% 18.3% -
Net debt 410,027 322,744 27%
Net debt/ OIBDA 2.2 1.9 -
FCF 4,734 14,556 (9,822)
Mikhail Oseevskiy, President of Rostelecom, commented:
"We delivered robust financial and operational growth in the third quarter
of 2020. Growth across the Group remained on track with revenue up by 13%,
OIBDA up 17% and FCF also up by 26%. Our key strategic business segments -
mobile and digital services - continue to be successful as we remain focused
on delivering Rostelecom's digital transformation strategy, which sets out
our ambition to be the largest integrated digital company in Russia. Our
ambitious digital economy projects, spanning a large variety of promising
sectors, reinforce this solid growth trajectory. We continue to expand the
industries we serve by entering new high-potential markets, building strong
management teams to drive our robust marketing strategy to deliver growth
into new and adjacent market segments. Through targeted M&A deals and
partnerships, we are creating high-performing teams with diverse
competencies to build on our competitive advantage. The acquisition of
utilities software developers Forkam and Fastech; the expansion of our
product ecosystem with Elvis Plus, the leading security system integrator;
the strengthening of our position in video content terrestrial delivery, all
have significant potential to expand and diversify products and solutions
that sit within the growing ecosystem of Rostelecom business clusters.
We continue to develop smart digital solutions for business, government, and
private users, and we will soon announce a refreshed strategy which will
slightly recalibrate our focus. Built on strong recent achievements, the
Rostelecom brand today represents a solid portfolio of fast-growing and
high-potential businesses, that are currently undervalued by the market. Our
key effort builds on delivering commercial and operational success, within
these new business clusters, in order to unlock their potential and
ultimately, the true value of our company. In addition to this strong focus
on new growth projects and strengthening our position on the digital
frontier, we plan to maintain an attractive dividend yield, which, coupled
with steady business growth, shapes a unique long-term investment
opportunity."
Vladimir Kirienko, First Vice-President of Rostelecom, commented:
"The recent achievements in key markets and across our business segments
continue to translate into strong and steady growth while strengthening the
long-term digital leadership of Rostelecom. Our constantly evolving digital
offering continues to yield impressive results. The demand for cyber
security solutions has increased more than two and a half times, while data
centers and cloud/IaaS both have both doubled. E-government, video-webcast,
smart household products and cloud telephony are performing increasingly
well too. The introduction of new timely options and offerings within our
digital product family has been well received by customers. Our strategic
nation-wide convergent approach is paying off with increased clients'
loyalty and growing sales. An example of this was the launch in cooperation
with Tele2 of a new offer "Everywhere online" that provides our clients with
special subscription deals for the Wink entertainment platform which is
becoming increasingly popular. In October, we broke Wink's own concurrent
viewers record with 3 million users watching the live stream of Khabib
Nurmagomedov's fight with Justin Gaethje, final match in Khabib's storied
career..
For our corporate clients, we launched "Technologies PRO", a new tariff
offering for remote working with an expanded product line and added services
such as personal manager, antivirus, cloud storage on Yandex. Disk and
other, in addition to the core broadband service. I would also like to
mention the launch of an innovative solution for monitoring solid domestic
waste, which using video surveillance cameras and AI enables customers to
assess the condition of waste collection sites, schedule and compliance with
standards. The environmental protection services market is growing
worldwide, and as the leading digital provider in the country, we realise
the role we have to play, but also the significant opportunity in developing
smart innovative products and solutions to help businesses, the government
and households reduce their environmental impact."
Sergey Anokhin, Senior Vice-President and Chief Financial Officer, added:
"Our strong third quarter financial results reflect our plan for 2020 and we
continue to deliver on our business targets. Despite the increased
restrictions caused by the second wave of the pandemic, coupled with
uncertainty surrounding macroeconomic dynamics, the considerable
achievements made during the first three quarters, allows us to increase the
forecast for key 2020 indicators. The management team therefore expects an
increase in consolidated revenue of at least 9%, an increase in OIBDA of at
least 9%; and ?APEX to stay within the range of 100-110 billion rubles
excluding state programmes."
KEY OPERATING HIGHLIGHTS
Fixed-line business
Number of 3Q 2020 3Q change, y-o-y 2Q 2020 change,
subscribers 2019 y-o-y
(million):
Internet access 13.4 13.1 3% 13.4 0,4%
B2C: Broadband 12.3 12.0 3% 12.3 0,3%
B2B: Broadband 1.1 1.0 6% 1.1 2%
+ VPN
Pay TV 10.7 10.3 4% 10.7 1%
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DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -2-
Incl. IPTV 5.9 5.5 8% 5.8 2%
Hosted PBX 0.147 0.090 62% 0.139 5%
Local telephony 14.5 16.0 (9%) 14.9 (3%)
services
ARPU[6] (RUB): 3Q 2020 3Q 2019 change, y-o-y 2Q 2020 change,
y-o-y
Internet
access
B2C: Broadband 390 396 (1%) 395 (1%)
B2B: Broadband 3,231 3,475 (7%) 3,344 (3%)
+ VPN
Pay TV (B2C) 245 248 (1%) 248 (1%)
Incl. IPTV 298 311 (4%) 309 (4%)
Hosted PBX 1,119 1,200 (7%) 1,148 (3%)
Blended 537 536 0.1% 545 (1%)
ARPU[7]
Mobile business
3Q 2020 3Q 2019 change, 2Q 2020 change,
y-o-y y-o-y
Data Traffic, 1,351 875 55% 1,216 11%
incl. MVNO,Pb
Churn, % (7.3%) (8.8%) (1.5 p.p.) (9.0%) (1.7 p.p.)
Growth of 25.5% 47.4% (21.9 p.p.) 28.1% (2.6 p.p.)
active mobile
data users, %
1) The total number of Internet subscribers among households grew by 3% to
12.3 million in the third quarter of 2020 compared to the corresponding
period of last year; ARPU was RUB 390.
2) The total number of B2B Internet and VPN subscribers increased by 6%
year-on-year to 1.1 million; ARPU was RUB 3,231.
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
245 across B2C;
? The number of IPTV subscribers increased by 8% to 5.9 million, and ARPU
across B2C was RUB 298;
4) The number of active mobile Internet users grew by 25.5% year-on-year
while mobile data traffic growth reached 55%; at the same time, cellular
customer base churn decreased to 7.3%.
5) The number of local telephony subscribers decreased by 9% to 14.5
million.
KEY EVENTS RELATING TO 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Business news
? Rostelecom continues to develop and expand its range of products and
services, including:
? A new offer "Everywhere online" providing Tele2's clients with special
subscription deals for the Wink video entertainment platform;
? A new remote working product line "Technologies PRO" launched to expand
the services for Internet broadband customers with a number of products
including dedicated customer support, antivirus, cloud storage on Yandex
Disk and other;
? An innovative solution for monitoring of solid domestic waste was
introduced to the market, enabling the inspection of waste collection
sites, their operation schedules and compliance with standards, using
video surveillance cameras and AI;
? A new MY.GAMES promotion with extra gaming bonuses for broadband
clients;
? Further expansion of cloud gaming products: GFN.RU and GFN Cloud Games
were introduced to subscribers in Ural and Siberia in high quality;
? Regular upgrades were made to the Wink digital platform, including:
? Double-digit growth in the number of Wink users connected via more
than one devices;
? new voice control options for Wink with Marusya voice assistant and
Kapsula smart column;
? Special terms for the "Watching together" shared viewing option
introduced for multi-device watching, connecting people from anywhere in
the country;
? "Movie fan" subscription launched providing clients with 25% discount
even on new films and episodes;
? new addition for video-bloggers and expanded audiobooks catalogue;
? Expanded functionality and added options within the Rostelecom Key
solution for:
? Android users to enjoy expanded functionality within a newly launched
video player;
? clients to use smart access control systems for household facilities,
allowing to control access doors remotely, create keys for gates,
basements, lofts and other entrances;
? new users to start using the service with better registration through
mobile numbers only;
? As part of the further development of its convergent proposition:
? Sales of new tariff plans Premium History, Technologies of benefits
PRO and new Internet options for devices were launched;
? Expanded geography of cloud gaming services;
? Within the Smart Home video surveillance services:
? Sales of home CCTV cameras with cloud storage capacity up by 21%,
contributing 28% to SmartHome ecosystem revenues;
? personal account interface has been redesigned, allowing better client
authorisation and registration process;
? discounts now available to clients with 3, 6 or 12 months upfront
payments;
? Rostelecom continues to grow its digital segment in 3Q 2020:
? As part of cybersecurity services:
? cybersecurity revenues grew by more than 2.5 times;
? new Incident Response Plan (IPR) service was launched, complemented
with the upgraded version of Solar inRights;
? Solar appScreener, app code analiser, has been upgraded;
? Signed agreements to integrate the Identity Management System Solar
inRights within JSC Kalashnikov Concern and Rosatom State Corporation;
? The new version of Solar Dozor, a communication control and
information leaks prevention system, has been introduced to the market;
? New partner, Belorussian Axoft, has been added to Rostelecom's
network, bringing their global IT services distribution capability;
? A strategic partnership was signed with the Singapore regulator
Infocomm Media Development Authority (IMDA) for inclusion of Solar
appScreener in the state grant programme for IT SMEs to provide them
with information security support;
? Rostelecom continues to grow its cloud services and data processing
centres segments for B2B:
? Data Centers revenue grew more than twofold;
? Revenues from the Virtual PBX offering increased by 51%;
? Virtual Data Centre services revenues increased by 105%;
? Rostelecom launched a new datacentre unit in Moscow [1], with a total
capacity of 100 racks.
? The easternmost data centre opened in Sakhalin [2] (with an initial
capacity of 25 racks and a potential for expansion to 180 racks);
? Rostelecom started the construction of the first Russian Tier IV data
centre in Moscow with a 2,000 rack capacity [3].
? B2C fiber broadband revenues grew by 11%;
? Antivirus revenues up by 12%;
? Rostelecom continued to sign big contracts as well as develop
large-scale projects:
? Rostelecom successfully provided video surveillance for the single
election day;
? Rostelecom successfully delivered video surveillance and webcast of
the Unified State Exam (core and additional);
? Rostelecom has agreed with VTB to provide a Single Corporate
Telecommunication Network and WiFi in more than 1,500 branches;
? Rostelecom completed setting up WiFi network across 400 Gazprombank
branches;
? Signed agreement with the Ministry of Digital Development,
Communications and Mass Media to connect its facilities to a Single
Telecommunications Network and provide information security services;
? Highlights of the operator business segment:
? O2O[8] revenues grew by 19% in the third quarter of 2020;
? A Europe-Asia Leased Channel Access agreement signed with a Chinese
partner for 100G;
? 80% of partner operators are now connected through personal accounts for
better efficiency and transparency;
? Rostelecom's subsidiary Tele2's continues steady and dynamic growth:
? Digital cinema tariff options launched for clients as part of
"Everywhere online" with full access to Wink video library;
? Unlimited access to Telegram is now provided to users;
? Tele2 launched a Health & lifestyle website;
? Tele2 started to provide double Internet traffic purchased on
Market.Tele2;
? Tele 2 SIM-cards are now available in Magnit stores and in Wildberries;
? International 5G roaming was launched in Switzerland;
? Tele2 Russia, Rostelecom and Ericsson have demonstrated the potential of
5G to help health protection at CIPR, the Digital industry of industrial
Russia Forum;
? Tele 2 launched an MVNO for a popular Russian blogger Azam Khodzhaev and
GLONASS;
? The total client base of virtual operators with the Tele2 Russia network
surpassed 4.2 million;
? The number of state-of-the-art Ericsson base stations installed has been
increased to 25,000;
? Tele2 network is now available across the Altai Republic;
? Tele2 launched a mobile phone recycling function as part of the
"Remelting" environmental project;
? Tele2 notched five years of operations in the Moscow region. Since the
launch the number of 4G base stations increased by 23 times, while the
construction are now exceeding the 2015 indictors by 1.5 times.
Tele2 has reaffirmed its rating of the best company in overall customer
satisfaction[9].
Other news
? Rostelecom and YADRO have launched a new JV [4] to support digital
transformation with integrated PaaS and IaaS;
? Rostelecom acquired 51% in Fastech [5] and 51% in Forkam [6] - two
digitization solutions providers for utility companies;
? Rostelecom gained interest in the share capital of the leading system
integrator in IT security [7] Elvis Plus;
? Rostelecom shareholders have approved the 2019 dividend payment of RUB 5
per share and the new Board of Directors [8] at the AGM on 7 August 2020;
? Rostelecom announced a bond with a total nominal value of RUB 10
billion, at a coupon rate set at 6.3% per annum [9];
? Rostelecom has released a Special Report [10] on the potential of 5G to
transform national economy;
? Rostelecom supported the national student context Cyber Challenge.
OPERATING REVIEW
Revenue analysis
Revenue structure by services
RUB million 3Q 2020 3Q 2019 change 9M 2020 9M 2019 Change
Mobile services 45,813 40,189 14% 129,684 112,551 15%
Broadband 22,564 20,941 8% 66,751 62,589 7%
Digital services 19,322 11,944 62% 46,855 28,562 64%
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DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -3-
TV services 9,438 9,234 2% 28,212 27,892 1%
Wholesale 18,652 17,188 9% 54,646 51,787 6%
services
VPN 7,375 6,217 19% 21,506 17,856 20%
Interconnect and 4,488 4,631 (3%) 13,210 15,599 (15%)
traffic transit
services
Rent and 4,191 3,866 8% 12,410 11,049 12%
maintenance of
telecommunicatio
ns
infrastructure
Rent of channels 2,598 2,474 5% 7,520 7,283 3%
Fixed telephony 13,400 14,933 (10%) 41,264 45,939 (10%)
Other services 5,799 5,191 12% 16,468 13,538 22%
Total 134,988 119,621 13% 383,880 342,858 12%
Revenue structure by customer segments
RUB million 3Q 2020 3Q change 9M 9M 2019 change
2019 2020
Residential 65,944 61,916 7% 192,47 182,557 5%
customers 1
B2B / State clients 46,971 38,209 23% 128,27 102,528 25%
3
Operators 20,563 18,344 12% 59,593 54,668 9%
Other 1,510 1,152 31% 3,543 3,105 14%
Total 134,988 119,62 13% 383,88 342,858 12%
1 0
In the third quarter of 2020, revenue increased by 13% to RUB 135 billion,
compared to the third quarter of 2019, as a result of the following factors:
? a 62% increase in revenue from digital services, mainly due to the
promotion of cloud and data centre services, larger sales of cyber
security services and e-government solutions, webcast products, as well as
the consolidation of DataLine;
? a 14% increase in revenue from mobile services due to a higher volume of
mobile Internet data consumption and standard voice services;
? an 8% increase in revenue from broadband services due to a higher number
of subscribers, as well as revenues from the Internet connection
contracts;
? a 9% increase in wholesale revenues, namely a 19% increase in revenues
from VPN and 9% - from infrastructure services for operators.
During the nine months of 2020, revenue increased by 12% to RUB 383.9
billion, year-on-year, as a result of the following factors:
? a 64% increase in revenue from digital services, mainly due to larger
sales of e-government solutions, promotion of cloud and data centre
services, Smart City / Smart Region projects and cyber security services,
as well as the consolidation of DataLine in 2020;
? a 15% increase in revenue from mobile services due to a higher volume of
mobile Internet data consumption and standard voice services;
? a 7% increase in revenue from broadband services due to a higher number
of subscribers, as well as revenues from the Internet connection
contracts;
? a 22% increase in revenue from other services, partly driven by sales of
equipment as well as money transfer commissions and mobile communication
payments.
Operating income analysis
Operating expenses structure
RUB million 3Q 2020 3Q 2019 change 9M 2020 9M chan
2019 ge
Personnel costs (31,829) (28,580) 11% (96,086) (85, 13%
121)
Depreciation, (29,587) (25,845) 14% (85,536) (75, 14%
Amortization 038)
and impairment
losses
Interconnection (23,987) (21,583) 11% (68,615) (63, 9%
charges 057)
Materials, (10,352) (8,153) 27% (28,466) (24, 17%
repairs and 386)
maintenance,
utilities
Gain on the 1,536 1,048 47% 3,841 2,48 55%
disposal of PPE 4
and intangible
assets
Impairment loss (669) (745) (10%) (3,135) (3,2 (3%)
of financial 39)
assets measured
at amortized
cost
Other operating 4,968 5,231 (5%) 15,280 14,9 2%
income 43
Other operating (21,981) (22,270) (1%) (60,572) (57, 5%
expenses 954)
Total operating (111,901) (100,897) 11% (323,289) (291 11%
expenses ,368
)
In the third quarter of 2020, operating expenses increased by 11% compared
to the corresponding period of 2019 and amounted to RUB 111.9 billion,
largely due to the following factors:
? a 14% increase (of RUB 3.7 bln) in depreciation, amortization and
impairment losses, due to higher payments associated with new objects,
impairment of intangible assets and lease;
? an 11% increase (of RUB 3.2 bln) in personnel costs, partly due to an
increase in the number of employees within the digital business segments;
? an 11% increase (of RUB 2.4 bln) in interconnection charges, due to
higher traffic caused by the pandemic and the massive transition to remote
working and learning;
? a 27% increase (of RUB 2.2 billion) in materials, repairs and
maintenance, utilities, mainly due to an increase in expenditure on
personal protective equipment amid the pandemic, and the consolidation of
expenses on electricity supplies for Rostelecom's recently acquired
subsidiary DataLine, reflected in this line item.
During the nine months of 2020, operating expenses increased by 11% compared
to the corresponding period of 2019 and amounted to RUB 323.3 billion,
largely due to the following factors:
? a 13% increase (of RUB 11 bln) in personnel costs, mainly due to an
increase in the number of employees within the digital business segments;
? a 14% increase (of RUB 10.5 bln) in depreciation, amortization and
impairment losses, due to higher payments associated with new objects, the
impairment of intangible assets and leases;
? a 9% increase (of RUB 5.6 bln) in interconnection charges, due to higher
traffic caused by the pandemic and the massive transition to remote
working and learning;
? a 17% increase (of RUB 4.1 billion) in materials, repairs and
maintenance, utilities, mainly due to an increase in expenditure on
personal protective equipment amid pandemic, and the consolidation of
expenses on electricity supplies for DataLine subsidiary, reflected in
this line item;
? a 5% increase (of RUB 2.6 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.
Operating profit in the third quarter of 2020 increased by 23% year-on-year
to RUB 23.1 billion and increased by 18% year-on-year to RUB 60.6 billion
for the nine months of 2020.
OIBDA for the third quarter and nine months of 2020 increased by 17%
year-on-year to RUB 53.7 billion and by 15% year-on-year to RUB 149.6
billion respectively. OIBDA dynamics were driven by revenue growth and the
above-mentioned factors, affecting operating expenses. The OIBDA margin
increased by 1.5 p.p. at 39.8% in the third quarter of 2020 and by 1.0 p.p.
to 39% during the nine months of 2020 compared to the corresponding periods
of 2019.
Net Income Analysis
In the third quarter of 2020, profit before tax increased by 38% to RUB 15.4
billion, and by 24% to RUB 35.5 billion in the nine months of 2020, compared
to the corresponding periods in 2019. These dynamics in the third quarter
and the nine months of 2020 were mainly influenced by higher operating
profit and foreign exchange losses arising on the weakening of the exchange
rate in 2020.
Income tax in the third quarter of 2020 was RUB 3.4 billion compared to RUB
2 billion in the third quarter of 2019. Income tax in the nine months of
2020 was RUB 8 billion compared to RUB 5.8 billion in the nine months of
2019. The income tax dynamics was partly driven by higher year-on-year
expenditures, which are not deductible for tax purposes.
Net profit increased by 31% in the third quarter of 2020 to RUB 12 billion,
compared to the corresponding period last year, and in the nine months of
2020 - by 21% to RUB 27.4 billion versus the nine months of 2019.
Financial review
Net operating cash flow in the third quarter of 2020 increased by 32% to RUB
45.9 billion, compared to the corresponding period of 2019. The increase in
net operating cash flow in the third quarter of 2020 was mainly due to the
increase in operating cash flow, as well as the contraction in the working
capital driven by higher payables and other liabilities. These in turn were
related to the reflection of deferred revenues from a number of B2G
contracts. Net operating cash flow in the nine months of 2020 decreased by
5% to RUB 78.8 billion, compared to the corresponding period of 2019, which
was due to the factors that influenced this dynamic in the first six months
of 2020.
Cash outflow for investments in non-current assets, excluding state
programmes, increased by 30% to RUB 24.3 billion (18% of revenue) in the
third quarter of 2020. Including state programmes this indicator grew by 39%
to RUB 30.2 billion (22.4% of revenue). During the nine months of 2020, cash
outflow for investments in non-current assets, excluding state programmes,
increased by 13% to RUB 71 billion (18.5% of revenue) while increasing by
11% to RUB 83.8 billion (21.8% of revenue), state programmes included.
Free cash flow in the third quarter of 2020 increased by 26% to RUB 19.5
billion compared to the third quarter of 2019. Free cash flow during the
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DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -4-
nine months of 2020 was RUB 4.7 billion compared to RUB 14.6 billion during
the corresponding period of 2019.
Free Cash Flow (RUB, billion)
As at September 30, 2020, the Group's total debt has increased by 23%
compared to the beginning of the year and amounted to RUB 443.3 billion,
partially driven by the fundraising achieved to help complete the
consolidation of Tele2. 100% of the Group's total debt remained
rouble-denominated at that date.
As at September 30, 2020, the Group's net debt increased by 23% compared to
the beginning of the year and amounted to RUB 410 billion. The net debt
/OIBDA ratio over the last 12 months stood at 2.2x at that date.
OTHER INFORMATION: CONFERENCE CALL
Rostelecom's management will hold a conference call and webcast today at
4.00 PM (Moscow), 2.00 PM (CET), 1.00 PM (UK) and 8.00 AM (NYT). To
participate in the conference call, please dial:
UK/ International: +44 (0) 330 336 9411
USA: +1 323-794-2590
Russia: +7 495 646 9190
Confirmation Code (ENG): 6177573
Confirmation Code (RUS): 1719269
A webcast of the conference call will only be available in English. To
access the webcast please follow the link:
https://www.webcast-eqs.com/register/rostelecom20201111/en [11].
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
20/3/ [12].
* * *
APPENDICES
1) Reconciliation of OIBDA;
2) Statement of Comprehensive Income for the nine months of 2020;
3) Statement of Cash Flows for the nine months of 2020;
4) Statement of Financial Position for the nine 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 3Q 2020 3Q 2019 change 9M 2020 9M 2019 change
Operating income 23,087 18,724 23% 60,591 51,490 18%
Plus amortisation 29,587 25,845 14% 85,536 75,038 14%
Plus expenses 716 888 (19%) 2,526 2,721 (7%)
related to the
long-term
management
incentive
programme
Plus expenses 287 279 3% 906 829 9%
related to
non-government
pension insurance
OIBDA 53,677 45,736 17% 149,559 130,078 15%
OIBDA margin, % 39.8% 38.2% 39.0% 37.9%
APPENDIX 2: Statement of Comprehensive Income for the nine months of 2020.
Nine-month period ended
30 September
(unaudited)
2020 2019
(restated)[10]
Revenue 383,880 342,858
Operating expenses
Wages, salaries, other (96,086) (85,121)
benefits and payroll taxes
Depreciation, amortization (85,536) (75,038)
and impairment losses
Interconnection charges (68,615) (63,057)
Materials, utilities, repairs (28,466) (24,386)
and maintenance
Gain on disposal of property, 3,841 2,484
plant and equipment and
intangible assets
Impairment loss of financial (3,135) (3,239)
assets measured at amortized
cost
Other operating income 15,280 14,943
Other operating expenses (60,572) (57,954)
Total operating expenses, net (323,289) (291,368)
Operating profit 60,591 51,490
Share of net profit/(loss) of 448 (37)
associates and joint ventures
Finance costs (26,142) (25,148)
Other investing and financial 2,164 1,444
gain, net
Foreign exchange (loss)/gain, (1,602) 733
net
Profit before income tax 35,459 28,482
Income tax expense (8,028) (5,812)
Profit for the period 27,431 22,670
Other comprehensive
income/(loss)
Other comprehensive
income/(loss) to be
reclassified to profit or
loss in subsequent periods
Exchange differences on 526 (192)
translation of foreign
operations
Other comprehensive 526 (192)
income/(loss) for the period,
net of tax
Total comprehensive income 27,957 22,478
for the period
Profit attributable to:
Equity holders of the Group 26,645 22,044
Non-controlling interests 786 626
Total comprehensive income
attributable to:
Equity holders of the Group 27,171 21,839
Non-controlling interests 786 639
Earnings per share 8.68 9.55
attributable to equity
holders of the Group - basic
(in roubles)
Earnings per share 8.60 9.40
attributable to equity
holders of the Group -
diluted (in roubles)
APPENDIX 3: Statement of Cash Flows for the nine months of 2020.
Nine-month period ended
30 September
(unaudited)
2020 2019
(restated)[11]
Cash flows from operating
activities
Profit before tax 35,459 28,482
Adjustments to reconcile
profit before tax to cash
generated from operations
Depreciation, 85,536 75,038
amortization and
impairment losses
Gain on disposal of (3,841) (2,484)
property, plant and
equipment and intangible
assets
Impairment loss of 3,135 3,239
financial assets measured
at amortized cost
Share of net (448) 37
profit/(loss) of
associates and joint
ventures
Finance costs excluding 26,108 25,100
finance costs on employee
benefit obligations
Other investing and (2,164) (1,444)
financial gain, net
Foreign exchange 1,602 (733)
loss/(gain), net
Share-based motivation 2,586 2,668
program
Increase in accounts (22,186) (13,561)
receivable and contract
assets
Increase in employee 574 632
benefits
Increase in inventories (2,601) (1,814)
(Decrease)/increase in (1,205) 7,844
accounts payable,
provisions and accrued
expenses
Increase in contract (12,791) (10,163)
costs, prepayments and
other assets
Decrease in other (1,387) (964)
liabilities
Cash generated from 108,377 111,877
operations
Interest paid (25,178) (24,511)
Income tax refund 1,005 72
Income tax paid (5,439) (4,428)
Net cash from operating 78,765 83,010
activities
Cash flows from investing
activities
Purchase of property, (83,842) (75,518)
plant and equipment and
intangible assets
Proceeds from sale of 4,495 4,064
property, plant and
equipment, intangible
assets and assets held
for sale
Acquisition of financial (8,157) (5,611)
assets
Proceeds from disposals 3,072 3,699
of financial assets
Interest received 494 442
Subsidy from Government 4,822 2,558
Dividends received 402 237
Purchase of subsidiaries (115,131) (3,666)
and business, net of cash
acquired
Proceeds from disposal of (74) -
subsidiaries, net of cash
disposed
Acquisition of equity (125) (543)
accounted investees
Net cash used in (194,044) (74,338)
investing activities
Cash flows from
financing activities
Issue of share 66,000 -
capital
Proceeds from bank 701,971 431,337
and corporate loans
Repayment of bank (658,998) (423,558)
and corporate loans
Proceeds from bonds 40,000 15,000
Repayment of bonds (2,034) (12,207)
Repayment of vendor (2) (9)
financing payable
Proceeds from other (29) -
non-current
financing
liabilities
Repayment of lease (12,330) (8,904)
liabilities
Acquisition of (36) (904)
non-controlling
interests
Dividends paid to (16,751) (11,725)
shareholders of the
Group
Dividends paid to (1,305) (810)
non-controlling
shareholders of
subsidiaries
Net cash from / 116,486 (11,780)
(used in) financing
activities
Effect of exchange (283) (74)
rate changes on cash
and cash equivalents
Net 924 (3,182)
increase/(decrease)
in cash and cash
equivalents
Cash and cash 19,955 10,492
equivalents at
beginning of the
period
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DJ ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS -5-
Cash and cash 20,879 7,310
equivalents at the
end of the period
APPENDIX 4: Statement of Financial Position for the nine months of 2020.
30 September 31 December
2020 2019
(unaudited) (restated)[12]
Assets
Non-current assets
Property, plant and equipment 545,235 522,681
Goodwill and other intangible assets 135,607 127,110
Right of use assets 61,667 49,228
Trade and other accounts receivable 7,308 5,646
Investments in associates and joint 9,130 8,892
ventures
Other financial assets 4,258 2,667
Other non-current assets 11,694 10,119
Deferred tax assets 10,399 10,246
Contract assets 1,506 866
Contract costs 15,730 14,647
Total non-current assets 802,534 752,102
Current assets
Inventories 12,770 9,793
Contract assets 14,650 4,480
Contract costs 684 920
Trade and other accounts receivable 58,504 49,181
Prepayments 11,698 7,845
Prepaid income tax 961 868
Other financial assets 12,397 8,886
Other current assets 6,612 6,264
Cash and cash equivalents 20,879 19,955
Asset classified as held for sale 776 749
Total current assets 139,931 108,941
Total assets 942,465 861,043
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 195,157 264,231
Total equity attributable to equity 180,878 210,933
holders of the Group
Non-controlling interests 4,201 4,585
Total equity 185,079 215,518
Non-current liabilities
Loans and borrowings 396,838 280,571
Lease liabilities 55,339 42,394
Employee benefits 6,455 5,881
Deferred tax liabilities 42,994 38,381
Accounts payable and accrued 8,775 1,486
expenses
Contract liabilities 15,681 17,472
Provisions 5,291 4,418
Other non-current liabilities 24,064 19,052
Total non-current liabilities 555,437 409,655
Current liabilities
Loans and borrowings 46,465 81,277
Lease liabilities 11,072 9,971
Accounts payable and accrued 84,349 86,527
expenses
Income tax payable 2,046 2,692
Contract liabilities 33,399 31,353
Provisions 8,086 7,283
Other financial liabilities 898 164
Other current liabilities 15,634 16,603
Total current liabilities 201,949 235,870
Total liabilities 757,386 645,525
Total equity and liabilities 942,465 861,043
PJSC Rostelecom [13] 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 5.9
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 nine months of 2020, the Group generated RUB 383.9 bln of
revenues, RUB 149.6 bln of OIBDA (39% of revenue) and RUB 27.4 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] 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.
[3] International financial reporting standards.
[4] Here and below, capital expenditure ("CAPEX") comprises cash spent on
fixed assets and intangible assets.
[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
[9] According to Romir holding data
[10] The amounts shown here do not correspond unaudited management interim
condensed consolidated statement of profit or loss and comprehensive income
for the nine-month period ended 30 September 2019 and reflect application of
pooling of interest method applied to T2 RTK Holding LLC acquisition till
100% share
[11] The amounts shown here do not correspond unaudited management interim
condensed consolidated statement of cash flows for the nine-month period
ended 30 September 2019 and reflect application of pooling of interest
method applied to T2 RTK Holding LLC acquisition till 100% share
[12] The amounts shown here do not correspond to the consolidated financial
statements for the year ended 31 December 2019 and reflect adjustments made
in connection with the completion the valuation of acquired net assets, with
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