DJ Sistema PJSFC: Sistema announces financial results for the third quarter 2020
Sistema PJSFC (SSA)
Sistema PJSFC: Sistema announces financial results for the third quarter
2020
03-Dec-2020 / 10:00 MSK
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Sistema announces financial results for the third quarter 2020
Moscow, Russia - 03 December 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 third
quarter 2020 ended 30 September 2020.
KEY GROUP HIGHLIGHTS IN 3Q 2020
· Offering of Detsky Mir shares. In September 2020, Sistema and the
Russia-China Investment Fund (RCIF) fully exited Detsky Mir shareholding
through a public offering of Detsky Mir shares, resulting in an increase
of Detsky Mir free float up to almost 100%. Proceeds to Sistema amounted
to RUB 16.9 billion.
· MTS share buyback. As part of the MTS's share buyback programme of up to
RUB 15 billion, Sistema's wholly-owned subsidiary Sistema Finance S.A sold
7,445,927 ordinary shares of PJSC MTS to a wholly-owned subsidiary of MTS
LLC Bastion for RUB 2.5 billion.
· Optimisation of the debt portfolio. In September 2020, Sistema and
Sberbank signed an agreement that fully released Sistema's stake in MTS
from pledge. A loan secured by a pledge of 16% MTS shares was signed in
February 2018.
· Operations in the debt market. In September 2020, Sistema placed RUB 10
billion series 001?-15 bonds at a 6.70% coupon rate and with a 4-year put
option. In July 2020, the Corporation placed RUB 10 billion series 001?-14
bonds at a 6.35% coupon rate and with a 2.75-year put option. In July
2020, Sistema also repurchased its series 001P-06 exchange-traded bonds in
the amount of RUB 4.4 billion, and series 001P-09 bonds in the amount of
RUB 6.2 billion.
· Credit ratings upgrades. In September 2020, S&P upgraded Sistema's
rating from BB- to BB with stable outlook, and Expert RA upgraded
Sistema's rating by two notches from ruA to ruAA- with stable outlook.
CORPORATE EVENTS AFTER THE END OF THE REPORTING PERIOD
· IPO of Ozon. In November 2020, Ozon held an initial public offering
(IPO) of its American Depositary Shares (ADSs) on NASDAQ and obtained
listing of the ADSs on the Moscow Exchange. Gross proceeds to the company,
including the underwriters' overallotment option and the concurrent
private placement, where Sistema participated and invested USD 67.5
million, amounted to approximately USD 1.25 billion. Upon completion of
the initial public offering of Ozon, fulfilment of the private placement
agreement and conversion of the convertible loans previously provided to
Ozon, Sistema's total stake in Ozon will amount to at least 33.1%[1].
· Secondary placement of series 001?-04 bonds. In November 2020, the
Corporation held a secondary placement of series 001?-04 exchange-traded
bonds. During the tender offer, the Corporation repurchased bonds in the
amount of RUB 4.3 billion out of the total RUB 6.5 billion issue. All
bonds repurchased during the tender offer were placed through secondary
bond placement at a 6.35% coupon rate at 100.15% of the nominal value.
· Placement of series 001?-16 bonds and 001?-17 bonds. In November 2020,
Sistema completed the book-building process for RUB 5 billion series
001?-16 bonds with a put-option in 2.25 years and RUB 14 billion series
001?-17 bonds with a put-option in 4.5 years. As a result of the
book-building, the coupon rate was set at 6.10% per annum for series
001?-16 bonds and at 6.75% per annum for series 001?-17 bonds.
· MTS share buyback. As part of the MTS's share buyback programme of up to
RUB 15 billion, Sistema's wholly-owned subsidiary Sistema Finance S.A sold
14,534,801 ordinary shares of PJSC MTS to a wholly-owned subsidiary of MTS
LLC Bastion for RUB 4.8 billion.
PROGRESS IN ESG
· Attracting ESG financing. In November 2020, Sistema for the first time
attracted ESG-financing from Sberbank. The RUB 10 billion credit line
comes with an option to tie the interest rate on each loan to
sustainability performance (Sustainability Improvement Loan). Under this
agreement, integration of ESG factors into Sistema's investment process
and the adoption of the Corporation's Environmental Policy were set as
KPIs to measure Sistema's sustainability performance. This pioneering
transaction, first between a Russian bank and a Russian borrower,
positions Sistema among the leaders of sustainable investing in Russia.
3Q 2020 FINANCIAL HIGHLIGHTS
· Consolidated revenue[2] grew by 9.6% year-on-year and stood at RUB 184.9
billion.
· Adjusted OIBDA[3] increased by 14.0% year-on-year and amounted to RUB
71.7 billion.
· Adjusted OIBDA margin rose by 1.5 p.p. year-on-year to 38.8%.
· Adjusted net profit attributable to Sistema amounted to RUB 2.6 billion.
Vladimir Chirakhov, President and Chief Executive Officer of Sistema, noted:
"In the third quarter 2020, Sistema demonstrated strong business growth,
increasing its revenue by 9.6% and adjusted OIBDA by 14.0% year-on-year due
to the exceptional performance of its portfolio companies. MTS continued to
strengthen its leadership in the telecom market by actively developing
segments that are complementary to its core business, including fintech,
media, and B2B digital and cloud-based services. Segezha Group achieved
record revenue and OIBDA figures due to increases in production and sales
volumes, and against the backdrop of a weakening rouble. Steppe achieved an
impressive increase in revenue and OIBDA, on the back of an increase in its
gross harvest and agricultural products sales amid an increase in grain
prices. The growth in Medsi's financial performance was driven by deferred
demand for medical services caused by the lifting of lockdown restrictions,
and ongoing work to diagnose, treat and rehabilitate COVID-19 patients.
Our pharmaceutical holding Binnopharm Group, which is engaged in the
production of the Sputnik V vaccine and drugs for the treatment of COVID-19,
saw significant growth in its financial performance as a result of strong
sales growth in all segments: retail, tender and export. In October 2020,
Binnopharm Group announced new strategic development priorities aimed at
significantly increasing the scale of its business. The diversification of
sales channels, new product development and updating the portfolio of
medical products will become the main drivers of further growth.
The strong results of our portfolio companies during the first nine months
of 2020 have created a solid basis for the Corporation's management to
recommend to the Board of Directors to double the amount of dividends for FY
2020, provided that the positive trends continue in the fourth quarter. We
are also continuing to work on modifying our dividend policy, and will
present our proposals to the Board of Directors over the course of 2021. By
then, we hope that further progress will have been made in the global fight
against the COVID-19 pandemic, and the global and domestic economic outlook
will sufficiently improve to provide a better visibility of future cash
flows from our portfolio companies.
Crystallising the value of our private assets is an integral part of our
portfolio strategy. On this front, I am delighted to highlight the initial
public offering of American Depositary Shares (ADSs) of Ozon on NASDAQ with
simultaneous listing of the ADSs on MOEX in November 2020. This offering
raised gross proceeds of approximately USD 1.25 billion, including
underwriters' overallotment option and the concurrent private placement, and
generated exceptionally strong interest from the international investment
community. We are delighted that a wide range of investors - including
Russian retail investors - now have the opportunity to share in the success
of this outstanding company."
***
Conference call information
Sistema's management will host a conference call today at 09:00 am (New York
time) / 2:00 pm (London time) / 3:00 pm (CEST) / 5:00 pm (Moscow time) to
present and discuss the 3Q 2020 results.
To participate in the conference call, please dial:
Russia
+7 495 283 98 58
UK
+44 203 984 9844
US
+1 718 866 4614
Germany
+49 30 25 555 323
Sweden
+46 10 551 30 20
Conference ID: 657738
Link to webcast: https://mm.closir.com/slides?id=657738 [1]
Or quote the conference call title: "Sistema Third 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) 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
Revenue 184,890 168,682 9.6% 498,260 473,457 5.2%
Adj. OIBDA 71,662 62,861 14.0% 180,159 171,044 5.3%
Operating profit 40,535 29,357 38.1% 86,824 79,353 9.4%
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Net profit/ 2,334 (2,266) - (7,299) 20,915 -
(loss)
attributable to
Sistema
Adj. net profit / 2,598 3,363 (22.7%) (4,876) 26,541 -
(loss)
attributable to
Sistema
In 3Q 2020, Sistema's consolidated revenue grew by 9.6% year-on-year due to
increases in revenue across key assets. At MTS, revenue increased as a
result of growth in mobile service revenue and the robust performance of the
Fintech, Media and B2B Digital & Cloud segments. Segezha Group saw revenue
increase amid growth in output and sales of paper and sawn timber, and
backed by rouble depreciation, while revenue growth at Agroholding Steppe
was largely driven by increased sales volumes in agricultural products in
the Crop Production and Agrotrading segments, higher grain prices, and
positive dynamics in the Dairy Farming segment. At Medsi, revenue increased
as a result of deferred demand for medical services, growth in revenue from
COVID-19 diagnostics and treatment, and the development of home care
services.
Adjusted OIBDA[4] rose by 14.0% year-on-year to RUB 71.7 billion backed by
increases in the adjusted OIBDA of subsidiaries including: MTS, following
revenue growth due to reduction of commercial and personnel expenses;
Segezha Group, driven by revenue increase as a result of an increase in the
share of higher-margin products and amid rouble depreciation; as well as
gains from the sale of Detsky Mir shares in September 2020.
Adjusted net profit decreased by 22.7% year-on-year and amounted to RUB 2.6
billion in 3Q 2020.
The Group's selling, general and administrative expenses (SG&A) declined by
10.5% year-on-year in 3Q 2020 mainly driven by a decline in the Corporate
Centre's SG&A as a result of the high base effect - bonuses were paid out in
3Q 2019 due to the monetisation of assets, and the reduction of commercial
and personnel expenses at MTS.
CAPEX increased by 4.8% year-on-year and amounted to RUB 30.6 billion in 3Q
2020 due to increased investment by MTS in network development, growth in
the foreign currency component amid rouble depreciation, and the expansion
of production capacities at Segezha Group.
OVERVIEW OF PORTFOLIO COMPANIES
*******************************
MTS
LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA
(RUB 3Q 2020 3Q Change 9M 9M Change
million)[5 2019 2020 2019
]
Revenue 129,048 123,04 4.9% 366,3 349,04 5.0%
5 86 2
Adj. 58,804 57,435 2.4% 161,8 160,82 0.6%
OIBDA[6] 12 9
Adj. OIBDA 45.6% 46.7% (1.1 44.2% 46.1% (1.9
margin p.p.) p.p.)
Operating 33,451 33,377 0.2% 85,85 89,018 (3.5%)
profit 9
Adj. net 9,436 9,197 2.6% 24,81 22,626 9.7%
profit 2
attributab
le to
Sistema[7]
In 3Q 2020, MTS's revenue grew by 4.9% year-on-year to RUB 129.0 billion,
primarily backed by an increase in mobile service, and the strong
performance of the Fintech, Media, and B2B Digital & Cloud segments.
In 3Q 2020, adjusted OIBDA increased by 2.4% year-on-year and amounted to
RUB 58.8 billion, driven by revenue growth and reduced commercial and
personnel expenses, and despite a fall in revenue from international
roaming.
Adjusted OIBDA margin amounted to 45.6% in 3Q 2020.
In 3Q 2020, adjusted net profit rose by 2.6% year-on-year largely due to
steady revenue from the core telecom business and lower net interest
expenses on the back of lower interest rates.
CAPEX. In 3Q 2020, capital expenditure grew year-on-year primarily as a
result of increased investments in the network development and growth in the
foreign currency component of the capital expenditure amid rouble
depreciation.
OUTLOOK FOR 2020
MTS forecasts revenue growth of over 3% and OIBDA growth of up to 2%.
Capital expenditure will remain at the level of RUB 90 billion, including
the realised effect from the use of derivative financial instruments.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
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. Business
clients and large industrial enterprises will be the first to use the 5G
network.
Dividends. In September 2020, the Extraordinary General Meeting of
Shareholders approved dividends for 1H 2020 to the amount of RUB 8.93 per
ordinary share.
Credit rating upgrade. In September 2020, S&P upgraded its credit rating on
MTS to the BBB- investment grade.
Partnership with Spotify. MTS has announced a partnership with the Spotify
streaming service. As part of an exclusive offer, MTS subscribers receive a
free subscription to Spotify Premium for six months.
Forestry Holding Segezha Group
LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING
(RUB million) 3Q 2020 3Q Change 9M 9M Change
2019 2020 2019
Revenue 18,966 13,74 38.0% 50,17 43,73 14.7%
5 7 8
Adj. OIBDA 5,079 2,469 105.8% 11,28 10,22 10.4%
4 1
Adj. OIBDA 26.8% 18.0% 8.8 22.5% 23.4% (0.9
margin p.p. p.p.)
Operating 3,509 998 251.7% 6,612 6,126 7.9%
profit
Adj. net (loss) / (3,319) 247 - (5,38 4,302 -
profit attributable to 3)
Sistema
In 3Q 2020, Segezha Group's revenue rose by 38.0% year-on-year and amounted
to RUB 19.0 billion primarily due to a surge in the volumes of sales and
production of paper and sawn timber. The growth of the average FX rate
against the rouble year-on-year, - EUR by 20%, USD by 14% - had a
significant impact on the dynamics of export revenues.
Segezha Group's adjusted OIBDA increased more than twofold year-on-year and
amounted to RUB 5.1 billion in 3Q 2020 following the growth in revenue due
to increased share of higher-margin products, and amid rouble depreciation.
Adjusted OIBDA margin grew by 8.8 p.p. year-on-year to 26.8% in 3Q 2020.
Adjusted net loss amounted to RUB 3.3 billion in 3Q 2020, largely driven by
the negative effect of FX differences from the revaluation of the company's
FX-denominated debt.
Paper output increased by 16.4% year-on-year to 102,710 tonnes[8] in 3Q 2020
primarily due to improved operating efficiencies and the postponement of
planned annual equipment maintenance works from 3Q to 4Q 2020.
Paper sales increased by 58.1% to 81,200 tonnes following the growth of
production volumes and as a result of inventory reduction. Additional volume
was sold to existing customers.
The output volume of paper sacks declined by 1.0% year-on-year to 335.6
million units amid a fall in demand in the Russian market during the
COVID-19 pandemic.
Sales of paper sacks increased by 4.9% year-on-year to 358.9 million
units[9] due to an increase in sales volumes, on the back of a recovery in
demand from the European construction industry, following a downturn in 1H
2020 due to the COVID-19 pandemic. The recovery in demand has allowed for a
reduction in warehouse inventory.
In 3Q 2020, birch plywood output amounted to 45,800 cu m, a decrease of 2.7%
year-on-year. Plywood sales volume declined by 21.1% year-on-year to 38,100
cu m in 3Q 2020 largely due to the weakening of demand within the main
sectors of plywood consumption during the COVID-19 pandemic. Revenue from
plywood sales remained flat compared with 3Q 2019 due to an increased share
of higher-margin products in sales to key markets, and the promotion of a
new plywood type in Australia, New Zealand and North America.
Sawn timber output increased by 17.2% year-on-year to 325,600 cu m following
the acquisition of Karelian Wood Company LCC, a logging and woodworking
enterprise, in early 2020, and due to an increase in production volumes at
existing enterprises. Output was also significantly impacted by the
redistribution of production capacity at the Sokol PPM from glulam products
to sawn timber, due to the commissioning of a new splicing line. The new
line will increase glulam production capacity at the Sokol PPM by 20%.
In 3Q 2020, sales of sawn timber rose by 55.9% year-on-year to 339,300 cu m
on the back of the increase in output. Year-on-year growth was also driven
by an uneven distribution of revenue in the segment between 3Q and 4Q 2019.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Launch of a new technical powdered lignosulphonates production facility. In
August 2020, the Sokol PPM launched a new production facility for technical
powdered lignosulphonates, which are used in the production of black carbon
for cement manufacturing and road construction, with an annual capacity of
21,000 tonnes.
Launch of a new splicing line of glued products. In July 2020, a new
splicing line of glued products, with a capacity of 25 cu m per hour, was
launched at the Sokol Wood Processing Plant in the Vologda region. The new
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line will boost output of finished glued products by 20% to 100,000 cu m per
year.
Completion of CLT plant construction. In October 2020, the first panel was
produced at a new cross-laminated timber (CLT) plant in the Vologda region.
The capacity of the new production line will amount to 50,000 cu m. The CLT
plant is at the final stage of construction, and is scheduled for launch in
December 2020.
Agriculture Holding Steppe
ONE OF RUSSIA'S LARGEST AGRICULTURE HOLDINGS AND LAND OWNERS
(RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
million)[10],[
11]
Revenue 14,712 9,917 48.4% 22,292 19,103 16.7%
OIBDA 2,199 1,216 80.9% 4,893 3,563 37.3%
OIBDA margin 14.9% 12.3% 2.7 p.p. 21.9% 18.7% 3.3 p.p.
Operating 1,358 720 88.5% 3,594 2,589 38.8%
profit
Net (227) (42) - 1,612 720 124.1%
(loss)/profit
attributable
to Sistema
Steppe's revenue grew by 48.4% year-on-year and amounted to RUB 14.7 billion
in 3Q 2020. The significant increase was driven primarily by revenue
increase in the Crop Production and Agrotrading segments as a result of
increased sales volumes of agricultural products and higher grain prices.
Revenue growth was also driven by positive dynamics in the Dairy Farming
segment as a result of higher production volumes due to an increase in the
number of highly productive lactating cows and the improved efficiency of
dairy farms, in addition to increases in the sales volume and price of
sugar.
In 3Q 2020, Steppe's OIBDA increased by 80.9% year-on-year to RUB 2.2
billion as a result of an impactful sales strategy for own agricultural
products, improved operating efficiency in the Agrotrading segment, and a
successful time arbitrage strategy in the Sugar and Grocery Product Trading
segment.
OIBDA margin amounted to 14.9% in 3Q 2020.
Steppe's CAPEX amounted to RUB 0.9 billion in 3Q 2020. Capital investments
were focused primarily on the renewal of agricultural machinery fleet,
building and modernising dairy farms, and buying out of land shares.
In 3Q 2020, Steppe's net loss amounted to RUB 0.2 billion.
Land bank of Steppe in 3Q 2020 amounted to 560,000 hectares.
As of 30 September 2020, the gross harvest of Steppe grew by 6.8%
year-on-year to 1,238,000 tonnes. Despite adversary weather conditions,
Steppe managed to deliver high volume of the harvest. The average export
price of wheat sales rose by 20.3% year-on-year in 3Q 2020.
The total area of orchards amounted to 780 hectares.
Sales volumes of wheat in the Agrotrading segment increased by 15.1%
year-on-year and amounted to 817,000 tonnes in 9M 2020. Higher wheat sale
prices and improvements in operational efficiencies due to the adoption of
an efficient trading strategy helped to increase the OIBDA in the segment.
The Dairy Farming segment demonstrated stable growth: gross milk yield rose
by 28% year-on-year amounting to approximately 18,000 tonnes in 3Q 2020.
Productivity per lactating cow increased by 4.4% year-on-year, and the
lactating herd consisted of 6,526 cows at the end of the reporting period.
Sales volumes in the Sugar and Grocery Trading segment rose by 7,4%
year-on-year to 244,000 tonnes in 9M 2020. OIBDA growth was facilitated by
higher-margin transactions undertaken as part of a time arbitrage strategy.
In 3Q 2020, the sale price of sugar increased by 32.2% year-on-year.
Medsi
LEADING PRIVATE HEALTHCARE OPERATOR IN RUSSIA
(RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
million)
Revenue 6,749 5,382 25.4% 17,244 16,084 7.2%
Adj. 1,835 1,516 21.0% 4,107 4,036 1.8%
OIBDA[12]
Adj. OIBDA 27.2% 28.2% (1.0 p.p.) 23.8% 25.1% (1.3 p.p.)
margin2
Operating 1,163 766 51.7% 2,164 1,849 17.0%
profit
Adj. net 963 780 23.5% 1,622 1,918 (15.4%)
profit
attributab
le to
Sistema
In 3Q 2020, Medsi's revenue grew by 25.4% year-on-year to RUB 6.7 billion
due to deferred demand for medical services following the lifting of
COVID-19 restrictions introduced in 2Q 2020, the resumption of routine
medical care services, and revenues from the repurposing of the Otradnoe
hospital as an in-patient infectious diseases' unit. Revenue was also
positively impacted by increased demand for COVID-19 testing, and growth in
home care and telemedical support services.
Adjusted OIBDA increased by 21.0% year-on-year to RUB 1.8 billion following
the growth in revenue in 3Q 2020.
In 3Q 2020, Medsi's adjusted OIBDA margin slightly declined by 1.0 p.p.
year-on-year and amounted to 27.2%.
Adjusted net profit increased by 23.5% year-on-year in 3Q 2020 on the back
of adjusted OIBDA dynamics and amounted to RUB 1 billion.
Revenue from the Clinical Diagnostic Centre (CDC) in Belorusskaya amounted
to RUB 766 million in 3Q 2020. OIBDA totalled RUB 328 million and OIBDA
margin was 43%.
Revenue from the CDC in Krasnaya Presnya stood at RUB 811 million. OIBDA
reached RUB 279 million at an OIBDA margin of 34.4%.
Net debt rose year-on-year in 3Q 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.
In 3Q 2020, the average cheque increased by 34.6% year-on-year to RUB 3,100
due to the rising share of cost-intensive services in the outpatient
coronavirus diagnostics segment, and the high average cost of a COVID-19
treatment at the hospital in Otradnoe.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Network expansion. In September and October 2020, Medsi opened three new
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.
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.
Active growth of SmartMed users. The number of downloads of the SmartMed
telemedical application, and the number of service users, is growing
rapidly. The share of appointments made through the application has reached
35-40% of total bookings. A new version of the application has been released
that enables in-app payments.
COVID-19. In August 2020, a Centre for diagnostics and the treatment of
health complications caused by COVID-19 was opened at the CDC in
Belorusskaya.
In October 2020, Medsi launched clinical studies of the "Sputnik V" vaccine
against COVID-19. Free vaccinations have been made available at the CDC in
Solyanka.
During the recent new wave of COVID-19 infections, the hospital in Otradnoe
has again been repurposed as an in-patient infectious diseases unit focusing
on comprehensive COVID-19 diagnostics.
Business Nedvizhimost
RENTAL ASSETS WITH A UNIQUE POOL OF PROPERTIES
(RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
million)
Revenue 2,140 2,368 (9.6%) 4,124 4,845 (14.9%)
OIBDA 635 1,712 (62.9%) 1,321 3,448 (61.7%)
OIBDA 29.7% 72.3% (42.6 32.0% 71.2% (39.1
margin p.p.) p.p.)
Operating 498 1,596 (68.8%) 926 3,113 (70.3%)
profit
Net profit 469 1,165 (59.8%) 744 2,224 (66.5%)
attributabl
e to
Sistema
Revenue from Business Nedvizhimost's rental assets decreased by 9.6%
year-on-year in 3Q 2020 due to the completion of the 2019 commercial real
estate sales programme.
In 3Q 2020, OIBDA and OIBDA margin amounted to RUB 0.6 billion and 29.7%
respectively. The decline year-on-year was caused by a change in revenue
structure in favour of lower margin rental revenue.
Business Nedvizhimost's net profit decreased year-on-year to RUB 0.5 billion
in 3Q 2020. The dynamics were driven by the decline in OIBDA.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Credit rating. RAEX rating agency assigned Business Nedvizhimost a ruA-
rating with a stable forecast.
Debt capital market debut. In August 2020, the Company successfully placed
the debut bond issue for RUB 4 billion at a 7.9% coupon rate with a 4-year
put option.
Appointment of new CEO. In September 2020, Artemy Marinin was appointed CEO
of Business Nedvizhimost. Mr Marinin has extensive experience in real estate
and construction.
Launch of the "Territoria" project. In 2021, Business Nedvizhimost plans to
launch the "Territoria" project, using 20 buildings acquired from MGTS. The
project will develop a coworking network of 8,000 work places situated
across Moscow.
RTI
LEADING DEVELOPER OF HIGH-TECH SOLUTIONS
(RUB million) 3Q 2020 3Q 2019 Change 9 2020 9M 2019 Change
Revenue 5,240 5,431 (3.5%) 13,661 13,896 (1.7%)
Adj. 64 1,317 (95.2%) (59) 1,564 -
OIBDA[13]
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Adj. OIBDA 1.2% 24.3% (23.0 p.p.) - 11.3% -
margin
Operating (668) (1,388) - (2,168) (2,971) -
loss
Adj. net (1,140) 193 - (3,588) 1,714 -
(loss)/profit
attributable
to Sistema
RTI's revenue decreased by 3.5% year-on-year to RUB 5.2 billion in 3Q 2020
due to a number of new public procurement contracts with RTI Group companies
being postponed.
Adjusted OIBDA declined year-on-year in 3Q 2020, primarily due to the impact
of the financial results of Element LLC, a joint venture with the Rostec
State Corporation in microelectronics, and the effect of a high base: in 3Q
2019, RTI Group companies performed a significant amount of work on a number
of projects that drove a higher adjusted OIBDA margin.
Adjusted OIBDA margin stood at 1.2% in 3Q 2020.
In 3Q 2020, adjusted net loss compared to adjusted net profit in 3Q 2019 was
due to OIBDA dynamics.
Net debt remained largely unchanged year-on-year, amounting to RUB 20.2
billion. As of the end of 3Q 2020, RTI's accounts also include additional
funds of RUB 3.1 billion earmarked for the execution of state defence
contracts, which are not included in the calculation of net debt.
BPCG
ONE OF RUSSIA'S BIGGEST POWER GRID COMPANIES
(RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
million)
Revenue 4,277 4,976 (14.1%) 14,658 14,898 (1.6%)
OIBDA 515 1,742 (70.5%) 3,654 4,502 (18.8%)
OIBDA 12.0% 35.0% (23.0 24.9% 30.2% (5.3
margin p.p.) p.p.)
Operating (192) 1,077 - 1,544 2,526 (38.9%)
profit
Net (103) 883 - 1,155 1,972 41.4%
(loss)/prof
it
attributabl
e to
Sistema
In 3Q 2020, revenue of BPGC decreased by 14.1% year-on-year to RUB 4.3
billion due to a reduction in capacity and net electricity supply. This
resulted from a decrease in energy consumption in the oil and gas sector
following the OPEC+ agreement, and due to reduced economic activity in the
region amid the COVID-19 pandemic.
In 3Q 2020, OIBDA declined year-on-year on the back of the decrease in
revenue, and amounted to RUB 0.5 billion. The decline was also due to an
increase in costs, including salaries indexation, repair costs and costs of
services provided by Federal Grid Company, and was significantly affected by
creating provisions for accounts receivable for a number of counterparties.
OIBDA dynamics were also affected by the reversal of previously accrued
provision on unsettled contractual arrangements with a counterparty in 3Q
2019.
The OIBDA margin amounted to 12.0% in 3Q 2020.
Net loss of BPGC in 3Q 2020 compared to the net profit in 3Q 2019 was driven
by OIBDA dynamics and a decline in financial income.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Appointment of new CEO. In October 2020, Sergey Gurin was appointed CEO of
BPCG. Mr Gurin was Director for Human Resources and Administrative Affairs
at BPCG from 2012.
Modernisation of distribution networks. BPGC actively continued its
comprehensive reconstruction of distribution networks in the Ufa city
district. During the reporting period, 48 distribution points and 33
transformer substations were upgraded, 12 km of cable lines were laid, and
3,700 metering devices installed.
Construction of large infrastructure energy facilities. Construction of the
110 kV overhead lines Uizan-Baynazarovo project in the Beloretsk region, and
the power substation "Romanovka" with the feeding transformer tap from the
110 kV "Dema - Ufimskaya TPS-4" project in Ufa, is ongoing. Work is also
underway to reconstruct and increase capacity by installing upgraded
transformers at the 110 kV Gafuri substation and 110 kV Blagoveschensk
substations.
Cosmos Hotel Group[14]
ONE OF RUSSIA'S LEADING HOTEL MANAGEMENT COMPANIES
(RUB 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
million)
Revenue 885 1,522 (41.8%) 1,889 3,798 (50.3%)
Adj. 281 603 (53.4%) 112 1,063 (89.5%)
OIBDA[15]
Adj. 31.7% 39.6% (7.9 p.p.) 5.9% 28.0% (22.1 p.p.)
OIBDA
margin14
Operating 107 427 (74.9%) (1,521) 524 -
profit/(l
oss)
Adj. net (34) 187 (70.1%) (801) (161) -
(loss)/pr
ofit
attributa
ble to
Sistema14
In 3Q 2020, the revenue of Cosmos Hotel Group decreased to RUB 0.9 billion.
The decline in revenue year-on-year was due to a sharp drop in occupancy
caused by the COVID-19 pandemic.
Adjusted OIBDA declined year-on-year in 3Q 2020 on the back of the decrease
in revenue, while hotels maintained an austerity regime to minimise losses
in the context of the COVID-19 pandemic.
The adjusted net loss was due to the negative adjusted OIBDA dynamics.
In 3Q 2020, the share of revenue from hotels outside Russia amounted to
23.3% compared to 28.8% in 3Q 2019.
In 3Q 2020, ADR[16] for the Group's hotel portfolio grew year-on-year by 8%
from RUB 4,200 to RUB 4,600 primarily due to foreign hotels amid euro
appreciation and resort hotels: Cosmos Collection Izumrudny Les and Cosmos
Collection Altay Resort.
RevPAR[17] of the hotel portfolio decreased from RUB 2,900 to RUB 1,900 as a
result of a collapse in occupancy.
In 3Q 2020, the average occupancy decreased by 34.0 p.p. to 40% due to a
significant drop in demand for hotel services.
KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Modernisation of Cosmos hotel complex. Cosmos Hotel Group continued the
modernisation and refurbishment of the Cosmos hotel complex. The project is
due to be completed in 2023.
Corporate
(RUB million) 3Q 2020 3Q 2019 Change 9M 2020 9M 2019 Change
OIBDA 2,081 (4,134) - (5,511) (8,393) -
Net profit / (2,719) (8,515) - (21,131) (17,718) -
(loss)
Corporate 171,641 203,837 (15.8%) 171,641 203,837 (15.8%)
Centre's
financial
liabilities[18
]
The Corporate Centre comprises Sistema and companies that control and manage
Sistema's interests in its subsidiaries and associates.
The SG&A[19] in Sistema's revenue in 3Q 2020 decreased by 3.5 p.p.
year-on-year to 15.5% as a result of the high base effect - bonuses were
paid out in 3Q 2019 due to the monetisation of assets.
Financial liabilities of the Corporate Centre declined by 15.8% year-on-year
to RUB 171.6 billion as a result of the repayment of rouble-denominated
loans and liability to the Federal Property Management Agency
(Rosimuschestvo).
As of 30 September 2020, the share of rouble-denominated financing accounted
for 97% of the financial liabilities of the Corporate Centre.
***
For further information, please visit www.sistema.com [2] or contact:
Investor Relations Public Relations
Nikolai Minashin Sergey Kopytov
Tel: +7 (495) 730 66 00 Tel.: +7 (495) 228 15 32
n.minashin@sistema.ru kopytov@sistema.ru
Sistema PJSFC is a publicly traded diversified Russian holding company
serving over 150 million customers in the sectors of telecommunications,
high technology, financial services, retail, paper and packaging,
agriculture, real estate, tourism and medical services. The company was
founded in 1993. Revenue in 2019 was RUB 656.9 billion; total assets
equalled RUB 1.3 trillion 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
(MORE TO FOLLOW) Dow Jones Newswires
December 03, 2020 02:00 ET (07:00 GMT)
DJ Sistema PJSFC: Sistema announces financial -5-
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 3Q 2020 3Q 2019 9M 2020 9M 2019
Operating income 40 535 29 357 86 824 79 353
Provisions for amounts due under 381 2 282 991 3 288
contracts with clients at RTI
Accruals related to LTI program 2 175 134 516
at portfolio companies
Impairment of hospitality assets - - 1 109 -
Impairment of non-current assets - - 1 248 -
(MTS)
Other non-recurring (gains) / (5) 2 147 (17) 2 529
losses, net
Adjusted operating income 40 913 33 961 90 290 85 685
Depreciation and amortisation 30 749 28 900 89 869 85 359
Adjusted OIBDA 71 662 62 861 180 159 171 044
Adjusted profit / (loss) attributable to Sistema shareholders can be
reconciled to our consolidated statements of profit and loss as follows:
RUB millions 3Q 2020 3Q 2019 9M 2020 9M 2019
Net profit / (loss) attributable 2 334 (2 266) (7 299) 20 915
to Sistema
Revaluation of the provision for - - - (1 722)
liability with regards to the
Securities and Exchange
Commission investigation (MTS)
Accruals related to LTI program 2 212 130 675
at portfolio companies
Provisions for amounts due under 268 1 985 706 2 861
contracts with clients at RTI
Impairment of hospitality assets - - 975 -
Impairment of non-current assets - - 624 -
(MTS)
Other non-recurring (gains) / (5) 3 431 (11) 3 813
losses, net
Adjusted net profit / (loss) 2 598 3 363 (4 876) 26 541
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 September 2020 30 June 2020
Long-term borrowings 620 256 607 701
Short-term borrowings 73 566 99 411
Liability to Rosimushchestvo 4 644 8 153
Total borrowings 698 466 715 265
Consolidated finance lease1 19 4782 18 5113
Consolidated total debt 717 943 733 776
Cash and cash equivalents (110 382) (128 418)
Deposits in banks (1 499) (1 363)
Consolidated net debt 606 063 603 995
1 In accordance with the standard IAS 17
2 Including RUB 1,654 million of short-term finance lease
3 Including RUB 1,481 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] Assuming 4,472,969 ordinary shares issuable upon exercise of outstanding
vested share-based awards under the employee incentive program of Ozon.
[2] Hereinafter results for 3Q 2019 are presented to reflect the
reclassification of assets of Detsky Mir, MTS's business in Ukraine as part
of discontinued operations, and AGK Yuzhny divestiture.
[3] Hereinafter please see Appendix A of the financial results press-release
for 3Q 2020.
[4] The dynamics of the Group's adj. OIBDA in 3Q 2020 were also affected by
the reflection of the financial result from the sale of Detsky Mir shares in
September 2020 in the amount of RUB 3.7 bln, and the reflection of the
Group's share in reduction of Ozon's net loss in the amount of RUB 0.2 bln
(in 3Q 2020 the loss amounted to RUB 1.6 bln, in 3Q 2019 - RUB 1.8 bln).
[5] MTS's results reflect reclassification of the Ukrainian business as part
of discontinued operations since 4Q 2019. The results for 3Q 2019 and 9M
2019 have been restated to reflect the results of this reclassification.
[6] Adjustment for a one-off asset disposal in the amount of RUB 1.2 bln in
9M 2020.
[7] Here and hereafter net profit is presented in Sistema's share.
[8] Circa 26.7% of paper produced was supplied to Seghezha Group's own
converting facilities to produce paper packaging.
[9] Including 18.8 mln consumer paper bags.
[10] Steppe results are presented net of results of AGK Yuzhny due to its
divestiture in May 2020. Results for 3Q 2019 and 9M 2019 have been restated
to reflect the results of this reclassification. OIBDA, OIBDA margin,
operating profit and net loss of Steppe for 3Q 2020 and 9M 2020 reflect the
adjustment as a result of 3Q 2020 review of fair value clarification of
assets disposed and purchased as part of the buy and sell transactions in 1H
2020.
[11] RZ Agro is accounted for as an investment in a joint venture in
Agroholding Steppe's IFRS financial statements.
[12] Adjustments for accruals related to the LTI programme, the effect of
clinic acquisitions in Izhevsk.
[13] Adj. OIBDA 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, adj. OIBDA of RTI in 3Q
2020 amounted to RUB 0.3 bln.
[14] Based on management accounts
[15] 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.
[16] Average daily rate.
[17] Revenue per available room per day.
[18] Including total borrowings, liability to Rosimushchestvo, financial
lease net of cash and cash equivalents at the Corporate centre level.
[19] Based on management accounts.
Attachment
File: Sistema 3Q 2020 Financial Results [4]
ISIN: US48122U2042
Category Code: QRT
TIDM: SSA
LEI Code: 213800JSZ2UUK4QQK694
Sequence No.: 88945
EQS News ID: 1152473
End of Announcement EQS News Service
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