rostelecom announces its ifrs financial and operating results for the second quarter of 2017

 

SUCCESSFUL ON-GOING TRANSFORMATION RESULTS IN A STRONG 5% TOPLINE GROWTH

Moscow, Russia - August 3, 2017 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia's national telecommunications operator, today announces its consolidated financial results for the second quarter of 2017 and first half of 2017 prepared in accordance with IFRS[1].

KEY ACHIEVEMENTS

• Record revenue growth of 5% year-on-year;
• Steady growth across all business segments: b2c, b2b/g and b2o;
• The digital segment's[2] contribution to total revenue reached 47%;
• Material OIBDA margin growth to 32.7% in the second quarter of 2017, and an almost doubling of net profit (+77% year-on-year);
• Consistently high growth rates in FTTx optic broadband clients (+13%) and in IPTV subscribers (+18%)
• Rostelecom accounted for more than 80%[3] of new connections in the IPTV market, and for around 50%[4] of total broadband market connections;
• Total fibre optic network coverage reached 32.7 million households by the end of the second quarter of 2017.

 

SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS

• Revenue increased by 5% to RUB 75.2 billion compared to the second quarter of 2016;

• OIBDA[5] increased by 8% year-on-year to RUB 24.6 billion;
• OIBDA margin of 32.7% compared to 31.6% in the second quarter of 2016;
• Net profit grew by 77% to RUB 2.8 billion compared to the second quarter of 2016;
• CAPEX[6] decreased by 16% year-on-year to RUB 12.5 billion (16.6% of revenue) from RUB 14.8 billion (20.6% of revenue) in the second quarter of 2016;
• Free Cash Flow[7] (FCF) improved by 71% to RUB -1.6 billion compared to the second quarter of 2016;
• Net debt[8] increased by 4% since the beginning of the year and amounted to RUB 185.5 billion, resulting in a Net Debt/OIBDA ratio of 1.9x.

 

Key figures for 2Q 2017, RUB mln

RUB million	2Q 2017	2Q 2016	% change, y-o-y
Revenue	75,166	71,794	5%
OIBDA	24,599	22,692	8%
OIBDA margin %	32.7%	31.6%
Operating Income	11,304	8,271	37%
Operating margin %	15.0%	11.5%
Net Income	2,826	1,601	77%
% of revenue	3.8%	2.2%
Capital Expenditure	12,451	14,804	(17%)
% of revenue	16.6%	20.6%
Net debt	185,463	182,533	2%
Net debt/ annualised OIBDA	1.9	1.9
FCF	(1,650)	(5,744)	(71%)

 

FIRST HALF YEAR 2017 FINANCIAL HIGHLIGHTS

• Revenue increased by 1% to RUB 145.6 billion compared to the first half of 2016;

• OIBDA[9] decreased by 3% year-on-year to RUB 46.2 billion;
• OIBDA margin of 31.7% compared to 32.8% in the first half of 2016;
• Net profit increased by 30% to RUB 6.0 billion compared to the first half of 2016;
• CAPEX[10] decreased by 11% year-on-year to RUB 30.2 billion (20.7% of revenue) from RUB 33.8 billion (23.4% of revenue) in the first half of 2016;
• Free Cash Flow[11] (FCF) improved by 52% to RUB -3.9 billion compared to the first half of 2016;

 

Key figures for 1HY 2017, RUB mln

RUB million	1HY 2017	1HY 2016	% change, y-o-y
Revenue	145,602	144,258	1%
OIBDA	46,167	47,362	(3%)
OIBDA margin %	31.7%	32.8%
Operating Income	19,397	16,773	16%
Operating margin %	13.3%	11.6%
Net Income	5,976	4,603	30%
% of revenue	4.1%	3.2%
Capital Expenditure	30,165	33,768	(11%)
% of revenue	20.7%	23.4%
Net debt	185,463	182,533	2%
Net debt/ annualised OIBDA	1.9	1.9
FCF	(3,953)	(8,171)	(52%)

 

 

 

 

 

 

Mikhail Oseevskiy, President of Rostelecom, commented:

This strong set of results is a testament to Rostelecom's successful on-going transformation.

All our business segments have grown starting from retail to operator business. As a result, our operating income before depreciation has returned to growth and we have managed to increase margins in the second quarter of 2017. We managed to almost double net income as well as significantly improve our free cash flow position.

The key driver to our success this quarter is the growing capabilities of our digital business segment, which is underpinned by the most extensive network infrastructure in Russia. We continue to take the lead with a lion's share of pay-TV and broadband market subscribers, actively promote cloud services, data centre and cyber security services, thrive on the synergies from interaction with Tele2 in the joint use of communication channels and offer our network capacity to other telecom operators.

In addition to the Company's operational success during the quarter, a number of additional developments took place during the second quarter, including the approval of the Company's 2016 dividend payment. We believe that the proposed level of RUB 5.39 per share maintains our high dividend yield and remains broadly in-line with our current dividend policy sticking to a key principle to allocate more than three quarters of the free cash flow for dividends, and not less than RUB 45 billion within a period of three years, without the need to increase the company's debt burden. 

On the whole we are delighted with the performance in the second half of 2017 and believe we have gained momentum for company's further development. We continue to work hard on the digital transformation and the development of our digital services. We have identified the key growth areas of our digital strategy, which correspond to the priorities of business development. Those are big data and artificial intelligence, biometric technologies, Internet of things and industrial Internet of things, 5G networks, robotics and biotechnology, radio engineering and electronic component base, information security. Our main goal is to create an information space based on the knowledge, advanced, safe and technologically independent services needed for the transition to a qualitatively new level of business development."

Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added:

"The impressive results of the second quarter of 2017 prove that we are delivering on our digital transformation plan. This strategy, along with Russia's economic stability and growth prospects, which are opening up thanks to the growing digitalization trends in the state and private sectors, enables us to confidently confirm our forecast for the year in general in terms of key financial indicators.

We therefore maintain our full year forecast of delivering revenue growth of approximately 1%, and an increase in OIBDA within 1%. We also expect a CAPEX to Revenue ratio of 18.5% excluding the implementation of the Bridging the Digital Divide project."

 

 

 

 

 

KEY OPERATING HIGHLIGHTS

1. The number of broadband subscribers grew by 5% to 12.6 million in 2Q 2017 compared to the corresponding period of last year;

      The B2C subscriber base grew by 5% to 11.8 million, whilst the number of subscribers connected by fibre optic increased by 12% year-on-year to 7.5 million (63% of the subscriber base).

2. The number of pay-TV subscribers grew by 6% year-on-year to 9.5 million households;

      The number of IPTV subscribers increased by 18% year-on-year to 4.6 million.

3. The number of MVNO subscribers reached 0.5 mln.
4. The number of local telephony subscribers decreased by 7% year-on-year to 19.9 million.

 

Number of subscribers (million):	2Q 2017	2Q 2016	% change, y-o-y	1Q 2017	% change, y-o-y
Broadband	12.6	12.0	5%	12.5	1%
Residential	11.8	11.3	5%	11.7	1%
Corporate clients	0.8	0.7	4%	0.8	0,3%
Pay TV	9.5	9.0	6%	9.4	1%
Incl. IPTV	4.6	3.9	18%	4.4	3%
MVNO subscribers	0.5	-	-	0.2	107%
Local telephony services	19.9	21.4	(7%)	20.3	(2%)

 

KEY EVENTS RELATING TO 2Q 2017 AND AFTER THE END OF THE REPORTING PERIOD

Business news

• Rostelecom continues to expand its range of services:

    The subscribers of the "Gaming" tariff plan can now enjoy a Russian frigate "Admiral Makarov" in the popular naval game "World of Warships";

    The Videocomfort service was modernized in terms of functionality: the role system became optional, IP filtration and demo-regime options are now provided. The national WiFi service now allows multi selling with a refined personal page and a possibility to login via the state services web portal;

    Rostelecom's website www.rt.ru now provides a Shop Window and the possibility to book toll free 8-800 phone numbers;

    Rostelecom launched the "Corporate TV" option for healthcare facilities and the pilot project "TV for Hotels";

    The package of the "Virtual storage" services and the "Virtual Data Processing Centre" introduced;

    A new web-site was launched for the managed telecommunication services: the navigation and user experience have improved considerably;

    Rostelecom managed to connect approximately 230,000 subscribers through the promotion of "Unlimited Russia" and "Unlimited Kazakhstan" tariff options; the average call duration and ARPU have increased.

• Rostelecom's MVNO subscriber base has topped half a million users;
• The Anitvirus service sales grew 2.5 times in the reporting period;
• The "NPVR" service user base grew by 62% resulting in a more than two-fold growth in revenue from this service;
• The blended ARPU continues to grow steadily, having increased by more than 8% to RUB 487 in second quarter of 2017;
• Rostelecom successfully delivered the video surveillance of the Unified State Exam in 2017, which contributed RUB 1 billion of revenue, 20% higher than its contribution during the second quarter of 2016;
• Rostelecom increased the total fibre optic network coverage to 32.7 million households;
• Tele2 has completely switched to Rostelecom's communication channels, which provides both companies with more synergies in terms of operational expenses and revenues;
• During the second quarter, the Company accounted for more than 80%[12],[13] of new subscriptions in the IPTV market and over 50%[14] in the broadband market;
• Rostelecom signed a number of large contracts, including contracts with Gazpromneft, Roseestr (The Federal Service for State Registration, Cadastre and Cartography), Federal informatization centre of the Central Election Commission of the Russian Federation, Rosselkhozbank (Russian Agricultural Bank), SME Bank (JSC Russian Bank for Small and Medium Enterprises Support) and others;

Other News

 

• Rostelecom's AGM approved a dividend payment following the results of 2016. The dividends were paid as follows:

    RUB 5.39 per Class A preferred share;

    RUB 5.39 per ordinary share

• Rostelecom has approved a new stock option programme for the mid and senior management;
• Rostelecom placed bonds equal to RUB 10 billion at a record low coupon rate of 8.65% per annum;
• Rostelecom was assigned an AA(RU) credit rating with a stable outlook by the Analytical Credit Rating Agency (ACRA);
• Rostelecom signed credit facility agreements with:
  • Sberbank PJSC for a total of RUB 50 billion for a period of 7 years,
  • Alfa Bank JSC for a total of RUB 20 billion for a period of 5 years.

 

 

 

OPERATING REVIEW

Revenue analysis

Revenue structure by services

RUB million	2Q 2017	2Q 2016	% change, y-o-y	1HY 2017	1HY  2016	% change
Broadband	17,610	16,562	6%	35,138	33,004	6%
TV services	6,809	5,728	19%	13,452	11,341	19%
Fixed telephony	19,763	22,074	(10%)	40,162	45,070	(11%)
Wholesale services	20,308	18,207	12%	37,672	37,954	(1%)
Rent of channels	2,367	2,646	(11%)	4,770	5,490	(13%)
Interconnect and traffic transit services	8,958	7,272	23%	15,701	16,125	(3%)
VPN	5,707	5,207	10%	10,780	10,202	6%
Rent and maintenance of telecommunications infrastructure	3,277	3,083	6%	6,421	6,138	5%
VAS and cloud services	4,957	4,249	17%	8,599	7,349	17%
Other telecommunications services	3,736	3,173	18%	7,138	6,208	15%
Other non-telecommunications services	1,982	1,801	10%	3,441	3,332	3%
Total	75,166	71,794	5%	145,602	144,258	1%

 

Revenue structure by customer segments

RUB million	2Q 2017	2Q 2016	% change, y-o-y	1HY 2017	1HY  2016	% change
Residential customers	33,756	33,049	2%	67,723	66,695	2%
Corporate customers / Government customers	25,897	24,961	4%	49,249	48,329	2%
Operators	14,343	12,663	13%	26,333	27,115	(3%)
Other	1,169	1,121	4%	2,297	2,119	8%
Total	75,166	71,794	5%	145,602	144,258	1%

In the second quarter of 2017, the revenue increased by 5% year-on-year to RUB 75.2 billion as a result of the following factors:

• a 6% increase in revenue from broadband services due to an increased number of subscribers and higher ARPU;
• a 19% increase in revenue from pay-TV services due to growth in the "Interactive TV" segment subscriber base, an increase in the consumption of VoD services and higher ARPU;
• a 10% increase in revenue from VPN, due to higher services consumption by Russian Post, Rosreestr and larger channel communications component at the Unified State Exam, etc.;
• a 23% increase in interconnect and traffic transit services, including due to larger volume of Tele2 traffic through Rostelecom's networks, as well as attraction of additional volumes of traffic from Megafon, VimpelCom and other telecom operators;
• a 17% increase in revenue from VAS and cloud services related to the 'Smart City' project, data-centres and cloud services promotion.

 

In the first half of 2017, the revenue increased by 1% year-on-year to RUB 145.6 billion as a result of the following factors:

• a 6% increase in revenue from broadband services due to an increased number of subscribers and higher ARPU;
• a 19% increase in revenue from pay-TV services due to growth in the "Interactive TV" segment subscriber base and an increase in the consumption of VoD services and higher ARPU;
• a 17% increase in revenue from VAS and cloud services related to the 'Smart City' project, data-centres and cloud services promotion.

 

 

Operating income analysis

Operating expenses structure

RUB million	2Q 2017	2Q 2016	% change, y-o-y	1HY 2017	1HY 2017	% change, y-o-y
Personnel costs	(22,026)	(22,797)	(3%)	(45,949)	(46,724)	(2%)
Depreciation, Amortization and impairment losses	(13,731)	(13,849)	(1%)	(27,201)	(29,481)	(8%)
Interconnection charges	(13,547)	(11,652)	16%	(24,322)	(24,463)	(1%)
Materials, repairs and maintenance, utilities	(5,682)	(5,421)	5%	(11,865)	(11,306)	(5%)
Gain on the disposal of PPE and intangible assets	642	463	39%	796	961	(17%)
Reserves for bad debt expenses	(841)	(1,284)	(35%)	(1,497)	(1,740)	(14%)
Other operating income	3,233	2,589	25%	6,365	7,525	(15%)
Other operating expenses	(11,910)	(11,572)	3%	(22,532)	(22,257)	(1%)
Total operating expenses	(63,862)	(63,523)	1%	(126,205)	(127,485)	(1%)

In the second quarter of 2017, operating expenses increased by 0.5% compared to the corresponding period of 2016 and amounted to RUB 63.9 billion due to the following factors:

• a 16% increase (by RUB 1.9 bln) in interconnection charges, due to growth in corresponding income and higher expenditure on the content due to larger pay-TV subscriber base;
• a 3% decrease (by RUB 0.8 bln) in personal costs, mainly due to option plan reserve recovery;
• a 25% increase (by RUB 0.6 bln) in other operating income, mainly due to the underfunding of the "Bridging the Digital Divide" project in the second quarter of 2016;
• a 35% decrease (by RUB 0.4 bln) in the reserves for bad debt expenses due to the one-off effect of the change in the methodology used to collect receivables in the second quarter of 2016;

In the first half of 2017, the operating expenses decreased by 1% compared to the corresponding period of 2016 and amounted to RUB 126.2 billion due to the following factors:

• a 8% decrease (by RUB 2.3 bln) in depreciation, amortization and impairment losses, due to rescheduling of the useful life of the fixed assets;
• a 2% decrease (by RUB 0.8 bln) in personal costs, mainly due to option plan reserve recovery;
• a 15% decrease (by RUB 1.2 bln) in other operating income, mainly due to the higher subscriber base in the first quarter of 2016 and the cancellation of certain obligations[15];
• a 5% increase (by RUB 0.6 bln) in the expenses on the materials, repairs and maintenance, including due to higher utilities expenditures;

Operating profit increased by 37% year-on-year to RUB 11.3 billion in the second quarter of 2017, compared to the corresponding period of 2016. Operating profit increased by 16% year-on-year to RUB 19.4 billion in the first half of 2017.

OIBDA for the second quarter of 2017 increased by 8% year-on-year to RUB 24.6 billion. OIBDA for the first half of 2017 decreased by 3% to RUB 46.2 billion. The OIBDA margin increased by 1.1. p.p. to 32.7% in the second quarter of 2017 compared to the corresponding period of 2016. The OIBDA margin was at 31.7% in the first half of 2017 compared to 32.8% in the corresponding period of 2016.

 

Net Income Analysis

In the second quarter of 2017, profit before tax more than doubled and reached RUB 4.6 billion compared to the corresponding period in 2016. In the first half of 2017, profit before tax increased by 42% to RUB 8.6 billion.

The two fold growth of profit before tax in the second quarter of 2017 was mainly driven by the following factors:

• higher operating income;
• a decrease in losses from associates, mainly from the joint venture with Tele2 Russia;
• higher finance costs due to one-off non-cash expenses resulted from write-off of the financial asset;
• a decrease in negative foreign exchange rate differences in the reporting period.

Profit before tax in the first half of 2017 was mainly influenced by the following factors:

• higher operating income;
• a decrease in losses from associates, mainly from the joint venture with Tele2 Russia;

Income tax in the second quarter of 2017 increased by 160% to RUB 1.8 billion. The income tax in the first half of 2017 increased by 81% to RUB 2.6 billion. The income tax dynamics reflects the changes in profit before income tax.

The effective income tax rate was 38% in the second quarter of 2017, and 31% in the first half of 2017 compared to the rate of 20% set by the Tax Code. A higher income tax rate in the second quarter of 2017 was driven by the non-deductible expenses for taxation purposes.

Net profit increased by 77% in the second quarter of 2017 and totalled to RUB 2.8 billion, and by 30% to RUB 6.0 billion in the first half of 2017.

Financial review

Consolidated net operating cash flow in the second quarter of 2017 increased by 20%, to RUB 9.9 billion, compared to the corresponding period of 2016, and by 3% to RUB 24.8 billion in the first half of 2017. This increase in consolidated net operating cash flow in the second quarter of 2017 was partly caused by changes in working capital which was mainly driven by an increase in accounts payable. Lower interest rate payments as well as the decrease in the profit tax payments, also had a positive effect on the Company's cash flow. Significant profit tax refunds in the first quarter of 2017, lower interest rate payments as well as the decrease in the profit tax payments, had a positive effect on the Company's cash flow in the first half of 2017.

Consolidated cash outflow for investments in non-current assets decreased by 17% year-on-year to RUB 12.5 billion in the second quarter of 2017. Excluding the "Bridging the Digital Divide" project, cash outflow decreased by 18% year-on-year to RUB 11.6 billion (15.5% of revenue). Consolidated cash outflow for investments in non-current assets in the first half of 2017 decreased by 11% year-on-year to RUB 30.2 billion. Excluding the "Bridging the Digital Divide" project, cash outflow for investments in non-current assets decreased by 6% year-on-year to RUB 28.8 billion (18.1% of revenue). These trends were driven by the capital expenditure being unevenly distributed across the calendar year in accordance with the terms of signed contracts.

Consolidated free cash flow improved by 71% in the second quarter of 2017 and totalled RUB (1.6) billion compared to RUB (5.7) billion in the corresponding period of 2016. Consolidated free cash flow improved by 52% in the first half of 2017 and totalled RUB (3.9) billion compared to RUB (8.2) billion in the first half of 2016. The free cash flow dynamics were driven by a lower consolidated cash outflow for investments in non-current assets.

As at June 30, 2017, the Group's total debt increased by 7% compared to the beginning of the year, and amounted to RUB 200.0 billion. Over 99% of the Group's total debt was rouble-denominated as at June 30, 2017.

As at June 30, 2017, the Group's consolidated net debt amounted to RUB 185.4 billion. A net debt /OIBDA ratio stood at 1.9x for the past twelve months ended in second quarter of 2017.

OTHER INFORMATION: CONFERENCE CALL

Rostelecom's management will hold a conference call and webcast today at 6.00 PM (Moscow), 5.00 PM (CET), 4.00 PM (UK) and 11.00 AM (NYT). To participate in the conference call, please dial:

Russia:  +7 495 213 1767

UK/ International:  +44 (0)330 336 9105

USA: + 1 719 457 1036

Confirmation Code (ENG): 4950396

Confirmation Code (RUS): 4230488

 

 

A webcast of the conference call in English (simultaneous translation from Russian) will only be available in English. To access the webcast please follow the link: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4815.

 

A replay of the conference call will be available on the Company's website http://www.rostelecom.ru/ir/results_and_presentations/financials/IFRS/2017/2/. in due course.

 

 

* * *

 

APPENDICES

1. Reconciliation of OIBDA
2. Statement of Comprehensive Income for the first six months of 2017
3. Statement of Cash Flows for the first six months of 2017
4. Statement of Financial Position for the first six months of 2017

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 non-cash 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.

Non-cash expenses related to the long-term management incentive programme, implying accruals in personnel costs line starting from Q2, 2014, are not taken into account in the calculation of OIBDA.

 

RUB million	1Q 2017	1Q 2016	% change, y-o-y	1HY 2017	1HY 2016	% change, y-o-y
Operating income	11,304	8,271	37%	18,397	16,773	16%
Plus amortisation	13,731	13,849	(1%)	27,201	29,481	(8%)
Plus non-cash expenses related to the long-term management incentive programme	436	(571)	-	430	(1,108)	-
OIBDA	24,599	22,692	8%	46,168	47,362	3%
OIBDA margin, %	32.7%	31.6%		31.7%	32.8%

 

 

APPENDIX 2: Statement of Comprehensive Income for 1HY 2017

 

					Six-month period ended 30 June (unaudited)
		2017		2016
Revenue		145,602		144,258
Operating expenses
Wages, salaries, other benefits and payroll taxes		(45,949)		(46,724)
Depreciation, amortization and impairment losses		(27,201)		(29,481)
Interconnection charges		(24,322)		(24,463)
Materials, utilities, repairs and maintenance		(11,865)		(11,306)
Gain on disposal of property, plant and equipment and intangible assets		796		961
Bad debt expense		(1,497)		(1,740)
Other operating income		6,365		7,525
Other operating expenses		(22,533)		(22,257)
Total operating expenses, net		(126,206)		(127,485)
Operating profit		19,396		16,773
Loss from associates and joint ventures		(1,739)		(3,501)
Finance costs		(9,468)		(8,382)
Other investing and financial gain, net		371		773
Foreign exchange gain/(loss)		41		388
Profit before income tax		8,601		6,051
Income tax expense		(2,626)		(1,448)
Profit for the period		5,975		4,603
Other comprehensive loss
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translating foreign operations		(41)		(344)
Other comprehensive loss for the period, net of tax		(41)		(344)
Total comprehensive income for the period		5,934		4,259
Profit attributable to:
Equity holders of the Group		5,739		4,368
Non-controlling interests		236		235
Total comprehensive income attributable to:
Equity holders of the Group		5,696		4,023
Non-controlling interests		238		236
Earnings per share attributable to equity holders of the Group - basic (in roubles)		2.55		1.95
Earnings per share attributable to equity holders of the Group - diluted (in roubles)		2.55		1.93

 

 

 

APPENDIX 3: Statement of Cash Flows for 1HY 2017

 

					Six-month period ended 30 June (unaudited)
		2017		2016
Cash flows from operating activities
Profit before tax		8,601		6,051
Adjustments to reconcile profit before tax to cash generated from operations:
Depreciation, amortization and impairment losses		27,201		29,481
Gain on disposal of property, plant and equipment and intangible assets		(796)		(961)
Bad debt expense		1,497		1,740
Loss from associates and joint ventures		1,739		3,501
Finance costs excluding finance costs on pension and other long-term social liabilities		9,405		8,141
Other investing and financial gain		(371)		(773)
Foreign exchange gain		(41)		(388)
Share-based motivation program		(382)		838
Changes in net working capital:
Increase in accounts receivable		(9,545)		(6,862)
Decrease in employee benefits		(65)		(13)
Increase in inventories		(236)		(45)
Decrease in accounts payable, provisions and accrued expenses		(2,544)		(1,560)
Change in other assets and liabilities		(1,206)		(2,268)
Cash generated from operations		33,257		36,882
Interest paid		(8,624)		(9,333)
Income tax refund		1,514		234
Income tax paid		(1,355)		(3,624)
Net cash from operating activities		24,792		24,159
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets		(30,165)		(33,768)
Proceeds from sale of property, plant and equipment and intangible assets		1,420		1,438
Acquisition of financial assets		(7,264)		(4,560)
Proceeds from disposals of financial assets		3,919		4,678
Interest received		335		628
Dividends received		1		2
Purchase of subsidiaries, net of cash acquired		(64)		(2,438)
Proceeds from disposal of subsidiaries, net of cash disposed		139		(1)
Acquisition of equity accounted investees		-		(778)
Net cash used in investing activities		(31,679)		(34,799)

 

Cash flows from financing activities
Sale of treasury shares		-	8
Proceeds from bank and corporate loans		269,120	324,543
Repayment of bank and corporate loans		(258,150)	(313,984)
Proceeds from bonds		10,000	-
Repayment of bonds		(9,285)	(2,734)
Repayment of vendor financing payable		(5)	(5)
Repayment of other non-current financing liabilities		(2)	-
Options settlement repayments		(209)	(231)
Repayment of finance lease liabilities		(61)	(73)
Acquisition of non-controlling interest		(2,255)	-
Dividends paid to non-controlling shareholders of subsidiaries		-	(45)
Net cash used in financing activities		9,153	7,479
Net increase/(decrease) in cash and cash equivalents		2,131	(3,525)
Effect of exchange rate changes on cash and cash equivalents		(135)	(364)
Cash and cash equivalents at beginning of the period		4,257	7,165
Cash and cash equivalents at the end of the period		6,388	3,640

 

 

APPENDIX 4: Statement of Financial Position for 1HY 2017

		30 June 2017 (unaudited)	31 December 2016
Assets
Non-current assets
Property, plant and equipment		339,034	343,667
Investment property		176	181
Goodwill and other intangible assets		59,950	61,209
Trade and other accounts receivable		8,967	7,053
Investments in associates and joint ventures		66,612	68,352
Other financial assets		1,415	797
Deferred tax assets		735	606
Other non-current assets		5,292	4,945
Total non-current assets		482,181	486,810
Current assets
Inventories		6,680	6,444
Trade and other accounts receivable		51,470	45,884
Prepayments		2,337	2,166
Prepaid income tax		472	1,957
Other financial assets		8,214	5,367
Cash and cash equivalents		6,388	4,257
Other current assets		2,262	2,151
Total current assets		77,823	68,226
Held for sale assets		859	646
Total assets		560,863	555,682
Equity and liabilities
Equity attributable to equity holders of the Group
Share capital		93	93
Additional paid-in capital		90	90
Treasury shares		(64,602)	(67,034)
Retained earnings and other reserves		300,716	311,167
Total equity attributable to equity holders of the Group		236,297	244,316
Non-controlling interests		3,138	4,317
Total equity		239,435	248,633
Non-current liabilities
Loans and borrowings		140,724	124,510
Employee benefits		5,152	5,217
Deferred tax liabilities		37,972	36,165
Accounts payable, provisions and accrued expenses		1,592	1,095
Other non-current liabilities		5,857	6,002
Total non-current liabilities		191,297	172,989
Current liabilities
Loans and borrowings		59,341	62,595
Accounts payable, provisions and accrued expenses		64,042	64,072
Income tax payable		21	146
Other current liabilities		6,727	7,247
Total current liabilities		130,131	134,060
Total liabilities		321,428	307,049
Total equity and liabilities		560,863	555,682

 

 

Rostelecom (www.rostelecom.ru) is one of the largest national telecommunications operators in Russia and Europe. The Company operates in all segments of the telecommunications market and covers millions of households in Russia.

Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 12.6 million fixed-line broadband subscribers and over 9.5 million pay-TV subscribers, over 4.6 million of which are subscribed to Rostelecom's IPTV services.

In the first half of 2017, the Group generated RUB 145.6 billion of revenues, RUB 46.2 billion of OIBDA (31.7% of revenue) and RUB 6.0 billion of net income.

The Group is a market leader in providing telecommunications services to government bodies and corporates of all levels.

Rostelecom is an important innovator that provides solutions in the field of E-Government, cloud computing, healthcare, education, security and housing & utility services.

The Group's stable financial position confirmed by its credit ratings. Rostelecom was 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] International financial reporting standards.

[2] The digital segment comprises broadband, pay-TV, VPN, VAS and cloud services.

[3] Company's data, estimates from the analytical agency TMT Consulting

[4] Company's data, estimates from the analytical agency TMT Consulting

[5] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA.

[6] Here and below, capital expenditure ("CAPEX") comprises cash spent on fixed assets and intangible assets.

[7] Here and below free cash flow is FCF is calculated as free cash flow from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets

[8] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).

[9] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA.

[10] Here and below, capital expenditure ("CAPEX") comprises cash spent on fixed assets and intangible assets.

[11] Here and below free cash flow is FCF is calculated as free cash flow from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets

[12] For the IPTV, broadband and Digital cable TV services

[13] Company data, estimates from the analytical agency TMT-consulting

[14] Company data, estimates from the analytical agency TMT-consulting

[15] On the JSC "RTcomm.ru" project to provide satellite internet service to Far East