ROSTELECOM PJSC (RKMD) ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER OF 2018 15-May-2018 / 13:02 CET/CEST Dissemination of a Regulatory Announcement, 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 first quarter of 2018
THE DIGITAL TRANSFORMATION DELIVERS STRONG REVENUE GROWTH OF 8% Moscow, Russia - May 15, 2018 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia's national telecommunications operator, today announces its consolidated financial results for the first quarter of 2018 prepared in accordance with IFRS[1]. KEY ACHIEVEMENTS
FIRST QUARTER 2018 FINANCIAL HIGHLIGHTS
Key figures for 1Q 2018, RUB mln
Mikhail Oseevsky, President of Rostelecom, commented: "The Q1 2018 results came in line with our expectations. Our revenue is growing at a solid average annual rate of more than 5 per cent, which is an outstanding performance for our industry. Our operating business keeps improving, demonstrating OIBDA and net income growth. This is driven by the expansion of our digital segment, which grew by more than 20% in the first quarter of 2018 and currently accounts for 53% of our top-line. We are also increasing our competitive positions in the key pay-TV and broadband segments, thanks to a growing subscriber base and higher ARPU. Furthermore, we are delighted to have recorded 65% of new user connections in the pay-TV market. This, in turn, was achieved by promoting new services such as video surveillance, where we saw the subscriber base doubling in the reporting period. Higher demand for cloud services, data centers and information security solutions is also contributing to our top-line. We continue to successfully implement the Russian government's state projects of high strategic importance. Public funding enabled us to expand the number of high-speed connections in Russian healthcare centres and across remote areas during the first quarter. Rostelecom was also responsible for handling video surveillance for the presidential election in March 2018. In March, we updated our strategy and dividend policy, which confirmed that the on-going digital transformation of the business a key part of the roadmap for 2018-2022 and a key component for a robust business development strategy. We are a trusted digital partner for families, business and the State, and a credible provider of a wide range of high quality products and services in telecommunication, IT and other areas. To achieve this, Rostelecom is focusing on the creation of a solid ecosystem for its products and services, with a focus on higher quality customer care. We are also enhancing our technological platform, increasing the capability of our human resources function and improving operational efficiency across the business. Our strategy is fully aligned with the Russian State's "Digital economy" programme, where Rostelecom plays one of the key roles. The consistent implementation of our new strategic goals will contribute to higher dividend payments to our shareholders as we aim to deliver an industry leading dividend yield."
Sergei Anokhin, Senior Vice-President and Chief Financial Officer, added: "Rostelecom's strong results for the first quarter of 2018 reflect our highly confident outlook for future developments of the digital segment. We expect our performance to continue to improve across all key financial indicators. We therefore revise our full year forecast for revenue growth, and anticipate an increase of more than 2 per cent. OIBDA margin is expected to be above 31.5% in 2018 with CAPEX of RUB 60-65 billion, excluding the implementation of government programmes."
KEY OPERATING HIGHLIGHTS
The B2C subscriber base grew by 2% to 12.0 million, whilst the number of subscribers connected by fibre optic increased by 7% year-on-year to 7.8 million (65% of the subscriber base);
The number of IPTV subscribers increased by 12% to 5.0 million;
KEY EVENTS RELATING TO 1Q 2018 AND AFTER THE END OF THE REPORTING PERIOD Business news
Rostelecom released outdoor surveillance camera solutions to ensure the security of private households and open areas surrounding buildings, within its "Video Surveillance" service; A brand-new cloud-based offering was introduced to provide greater security and faster performance of web resources; the launch of this solution will allow Rostelecom to expand the range of information security services and offer customers new protection mechanisms; A number of nationwide initiatives were launched to promote high speed Internet connection and IPTV, including "Cinemania", "Gainful film collection", "Movies for you", "Year of cinema 2018", "2018 CPE" and others; A pilot project based on the 4K technology for the HoReCa segment was launched in Saint-Petersburg; Rostelecom improved the functionality of its services and enhanced its offering for corporate and state clients within the following product lines: "Hosted PBX", "Web conferencing", "Managed communication services", "Virtual Data Centre", and "Information security"; Special offers within the MVNO project were launched, including:
This led to a growth in subscriber base to 0.9 million users;
During the first quarter of 2018, the Company took the lead with around 65% of new subscriptions in the pay-TV market[8]; The "Video Surveillance" client base doubled over the reporting period; Rostelecom was appointed as the operator of the Unified Biometric System under the Decree of the Government of the Russian Federation from February 22, 2018 #293-r; Rostelecom introduced a beta-version of the Unified Biometric System; Rostelecom and Positive Technologies started cooperation on the development of web security applications; Jointly with Nokia and "Skolkovo" Fund, Rostelecom launched Russia's first open pilot site based on the new generation 5G network in the "Skolkovo" innovation centre; Rostelecom successfully delivered the video surveillance of Russia's presidential election on March 18, 2018. More than 46,000 IP-cameras were installed to monitor the election process; the contract was worth RUB 2.7 billion; Rostelecom signed an agreement with Rosselkhoznadzor (the Federal Service for Veterinary and Phytosanitary Surveillance) to cooperate in conversion of veterinary paperwork and clients' connection to the veterinary certification electronic platform "The federal information system Mercury"; The integrated spatial information platform ("Geodata Information System" (GIS) "Zemlya" (the Earth), developed by Rostelecom, was launched in Russia's Arkhangelsk region; More than 66 million Russians citizens had registered to the Unified System of Identification and Authentication (USIA) by February 2018; Rostelecom signed an agreement that facilitates traffic monitoring and the provision of DDoS attacks protection services on the Technoserv Cloud platform;
Other News
OPERATING REVIEW Revenue analysis Revenue structure by services
Revenue structure by customer segments
In the first quarter of 2018, revenue increased by 8% to RUB 76.2 billion, compared to the first quarter of 2017 on a like-for-like basis, as a result of the following factors:
Operating income analysis Operating expenses structure
In the first quarter of 2018, operating expenses increased by 10% compared to the corresponding period of 2017 on a like for like basis and amounted to RUB 67.8 billion, largely due to the following factors:
Operating profit in the first quarter of 2018 decreased by 3% to RUB 8.4 billion compared to the corresponding period on a like for like basis. OIBDA for the first quarter of 2018 increased to RUB 23.2 billion. The OIBDA margin was 30.4% in the first quarter of 2018 compared to 33.0% in the corresponding period of 2017 on a like for like basis. Net Income Analysis In the first quarter of 2018, profit before tax reached RUB 4.9 billion, a 14% increase compared to the corresponding period in 2017 on a like for like basis. The increase in profit before tax in the first quarter of 2018 mainly resulted from the following factors:
Income tax in the first quarter of 2018 increased by 10% to RUB 1.0 billion. Income tax dynamics reflects the increase in profit before tax. The effective income tax rate was 21% in the first quarter of 2018, compared to the rate of 20% set by the Tax Code. Net profit increased by 15% in the first quarter of 2018 and totalled RUB 3.9 billion on a like for like basis. Financial review Consolidated net operating cash flow in the first quarter of 2018 decreased by 44% to RUB 8.3 billion compared to the corresponding period in 2017. This decrease was mainly caused by changes in working capital which were mainly driven by an increase in accounts receivable related to one-off projects. Consolidated cash outflow for investments in non-current assets decreased by 15% to RUB 15.1 billion in the first quarter of 2018. Excluding the state programmes, this figure decreased by 27% to RUB 12.5 billion (16.4% of revenue). These trends were driven in the first quarter of 2018 by an uneven distribution of capital expenditure across the calendar year in accordance with the terms of signed contracts. Consolidated free cash flow totalled RUB (5.8) billion in the first quarter of 2018. The consolidated free cash flow dynamics were driven by changes in the working capital, as well as the income tax refund in the first quarter of 2017. As at March 31, 2018, the Group's total debt increased by 5% compared to the beginning of the year, and amounted to RUB 200.9 billion. Over 99% of the Group's total debt was rouble-denominated as at March 31, 2018. As at March 31, 2018, the Group's consolidated net debt amounted to RUB 191.8 billion. The net debt /OIBDA ratio stood at 1.9x for the past twelve months ended in first quarter of 2018.
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: + 1 323 794 2551 Confirmation Code (ENG): 6592693 Confirmation Code (RUS): 7669038
A webcast of the conference call 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=5547.
A replay of the conference call will be available on the Company's website http://www.rostelecom.ru/ir/results_and_presentations/financials/IFRS/2018/1/ in due course.
* * *
APPENDICES
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.
APPENDIX 2: IFRS 9, 15 and 16 STANDARDS APPLICATION
The Group initially adopted IFRS 9, 15 and 16 using the modified retrospective approach. For analytical purposes only, some information for 2017 is given in the IR materials on a comparative basis as if the standards were applied to the corresponding period of 2017.
The key changes related to the application of these standards are listed below:
* Expenses related to the operating leases have been capitalized and are reflected in the accounting balance sheet under the title "Right-of-use assets (RoU)". The RoU related liabilities are reflected in relative balance lines under same titles; * The expenses related to the conclusion and implementation of contracts with customers have been capitalized and are reflected under "Revenue from Contracts with Customers"; * Assets for contracts with customers in arrears on payments for services rendered, but yet not invoiced, were excluded from the accounts receivable balance; * Revenues from the sale of goods or provision of services of not sufficient individual value to customers, have been deferred; * Recurring advances, containing the financing component, have been discounted; * Impairment provisions of financial assets are recognised on the basis of expected credit losses. APPENDIX 3: Statement of Comprehensive Income for the first three months of 2018
APPENDIX 4: Statement of Cash Flows for the first three months of 2018
APPENDIX 5: Statement of Financial Position for the first three months of 2018
Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 12.7 million fixed-line broadband subscribers and over 9.9 million pay-TV subscribers, over 5.0 million of which are subscribed to Rostelecom's IPTV services. In the first quarter of 2018, the Group generated RUB 76.2 billion of revenues, RUB 23.2 billion of OIBDA (30.4% of revenue) and RUB 3.9 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:
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:
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] Here and below the like for like basis means that the IFRS standards 9, 15 and 16 were applied to the financial results of the first quarter of 2017. Details are reflected in Appendix 2. [4] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA. [5] Here and below, capital expenditure ("CAPEX") comprises cash spent on fixed assets and intangible assets. [6] 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, plus interest received [7] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets). [8] Estimates from the analytical agency Telecom Daily [9] The Group initially adopted IFRS 15 and IFRS 16 using the modified retrospective approach. Under this approach, the comparative information is not restated. The Group applied IFRS 9 from 1 January 2018 and has not restated comparative information for 2017 for financial instruments in the scope of IFRS 9. [10] The Group initially adopted IFRS 15 and IFRS 16 using the modified retrospective approach. Under this approach, the comparative information is not restated. The Group applied IFRS 9 from 1 January 2018 and has not restated comparative information for 2017 for financial instruments in the scope of IFRS 9. |
ISIN: | US7785291078 |
Category Code: | QRF |
TIDM: | RKMD |
LEI Code: | 2534001D752JPNM0H170 |
Sequence No.: | 5543 |
EQS News ID: | 686019 |
End of Announcement | EQS News Service |
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