Rostelecom announces its IFRS financial and operating results for the first quarter of 2019

Print version

DIGITAL SEGMENT[1] GROWTH OF 10%; 12% INCREASE IN OIBDA[2]; NET PROFIT UP 46%

Moscow, Russia – May 15, 2019 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the first quarter of 2019 prepared in accordance with IFRS[3].

Key achievements

  • Revenue grew by 3% year-on-year in the first quarter of 2019 despite a high comparable base due to non-recurring items reported in the first quarter of 2018; revenue was up 6% on a like-for like basis;
  • The digital segment sales increased by 10% in the reporting quarter, while its contribution to total revenue reached 56%;
  • OIBDA grew by 12% in the first quarter of 2019 to RUB 26.4 billion;
  • Net profit increased by 46% in the first quarter of 2019 to RUB 5.6 billion;
  • The retail customer segment, which accounts for 45% of the Company's revenues, demonstrated the best dynamics having increased by 3.4% year-on-year; other business segments also grew by 3% year-on-year;
  • Consistently growing ARPU across broadband and IPTV segments.

First quarter 2019 financial highlights

  • Revenue grew by 3% to RUB 78.7 billion compared to the first quarter of 2018;
  • OIBDA up by 12% to RUB 26.4 billion;
  • OIBDA margin grew by 2.6 p.p. to 33.5% compared to the first quarter of 2018;
  • Net profit increased by 46% to RUB 5.6 billion compared to the first quarter of 2018;
  • CAPEX[4] increased by 48% to RUB 22.3 billion (28.4% of revenue) from RUB 15.1 billion (19.8% of revenue) in the first quarter of 2018;
  • Free Cash Flow (FCF) of RUB (14.6)[5] billion compared to RUB (5.8) billion in the first quarter of 2018;
  • Net debt[6] increased by 12% since the beginning of the year to RUB 208.4 billion, resulting in a Net Debt/OIBDA ratio of 2.0x.

Key figures for 1Q 2019, RUB mln

RUB million

1Q 2019

1Q 2018

change, y-o-y

Revenue

78,667

76,203

3%

OIBDA

26,381

23,551

12%

OIBDA margin %

33.5%

30.9%

-

Operating Income

9,709

8,357

16%

Operating margin %

12.3%

11.0%

-

Net Income

5,631

3,864

46%

% of revenue

7.2%

5.1%

-

Capital Expenditure

22,343

15,125

48%

% of revenue

28.4%

19.8%

-

Net debt

208,369

191,788

9%

Net debt/ annualised OIBDA

2.0

1.9

-

FCF

(14,583)

(5,848)

(8,735)

Mikhail Oseevskiy, President of Rostelecom:

“The strong first quarter of 2019 came in line with our expectations, resulting in growth across key financial indicators. Total revenue increased by 3%, but one of the most significant achievements this quarter was the significant improvement in OIBDA, up 12%, growth in OIBDA margin by 2.6 percentage points to 33.5% and a 46% increase in net income. These achievements were mainly driven by the expansion of our digital services ecosystem across key client groups and an increase in revenues per user. We remain committed to the digital transformation of our business with digital and content services forming the basis of our strategy. The team has set ambitious priorities and we are proud of our leading positions in our key markets.

Rostelecom continues to use its network infrastructure to launch the type of innovative digital services that are transforming the Company. Last month we introduced Rostelecom Health, a mobile app and website that provides quick, online around-the-clock medical consultation with GPs and specialist doctors, available by appointment. Our new service allows our clients to seek expert medical help from a GP or Doctor via an online chat or videocall, any day of the week and anywhere, this way avoiding travelling and queues. Individual and family schemes are available within the new platform so to enable users to take care of their loved ones.

We have also continued to expand our Smart Home” offering, completing the sale of 100,000 cameras for cloud-based home surveillance systems that enable customers to monitor their properties from any part of the world.

We are gaining industry recognition for delivering cloud-based services. We were ranked number one by TMT Consulting for the number of hosted PBX clients in 2018, a year in which Rostelecom’s market share more than doubled from 11% to 24%. Among key factors contributing to our successful promotion of the hosted PBX service, apart from the Plus Account offer, are our omni-channel tactics to attract new clients, tailored approach to targeting and advertising in each region, as well as a transparent and straightforward pricing, underpinned by the multifunctional nature of the service.

We remain committed to delivering on our digital strategy, developing digital solutions and friendly ecosystems of services while investing in human capital. Our superior network infrastructure and highly motivated team will continue to underpin our leading positions in providing digital services to all types of clients.

Sergey Anokhin, Senior Vice-President and Chief Financial Officer:
Rostelecoms results for the first quarter of 2019 reflect our confident outlook for the future development of the digital segment. In addition to expanding our digital segment, we are introducing measures aimed at improving internal efficiency. We expect our performance to continue to improve across all key financial indicators. Therefore, we reiterate our guidance for the full year of 2019 and we anticipate an increase in revenue and OIBDA of no less than 2.5%, based on CAPEX of RUB 65-70 billion, including the regulatory CAPEX amounting to RUB 7 billion, excluding the implementation of government programmes.

Key operating highlights

Number of subscribers (million):

1Q 2019

1Q 2018

change, y-o-y

4Q 2018

change, y-o-y

Internet access

13.0

12.9

0.5%

13.0

(0.1%)

B2C: Broadband

12.0

12.0

0.1%

12.0

(0.1%)

B2B: Broadband + VPN

1.0

1.0

5%

1.0

(1%)

Pay TV

10.2

9.9

3%

10.2

0.2%

Incl. IPTV

5.4

5.0

8%

5.3

1%

MVNO subscribers

1.3

0.9

43%

1.2

6%

Local telephony services

17.0

18.7

(9%)

17.4

(2%)

ARPU[7] (RUB):

1Q 2019

1Q 2018

change, y-o-y

4Q 2018

change, y-o-y

Internet access

B2C: Broadband

397

376

6%

392

1%

B2B: Broadband + VPN

3,266

3,029

8%

3,160

3%

Pay TV (B2C)

249

238

5%

251

(1%)

Incl. IPTV

317

308

3%

328

(3%)

Blended ARPU[8]

543

510

7%

549

(1%)

Total subscriber base and ARPU

  1. The total number of B2C Internet subscribers grew by 0.1% to 12.0 million in the first quarter of 2019 compared to the corresponding period of last year; ARPU was up 6% year-on-year to RUB 397.
  2. The total number of B2B Internet and VPN subscribers increased by 5% year-on-year to 1.0 million; ARPU grew by 8% year-on-year to RUB 3,266.
  3. The number of pay-TV subscribers grew by 3% to 10.2 million households compared to the corresponding period of last year with ARPU of RUB 249, up 5% year-on-year;
    • The number of IPTV subscribers increased by 8% to 5.4 million with ARPU of RUB 317;
  4. The number of MVNO subscribers increased by 43% and reached 1.3 million users;
  5. The number of local telephony subscribers decreased by 9% to 17.0 million.

Press release on 1q 2019 financial results



[1] Broadband + Pay TV + VAS and cloud services.
[2] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA. Note that the company changed the methodology of OIBDA calculation since 3q 2018 by excluding expenses related to non-government pension insurance. Historical OIBDA numbers for 2018 were recalculated in line with the renewed methodology.
[3] International financial reporting standards.
[4] Here and below, capital expenditure (CAPEX) comprises cash spent on fixed assets and intangible assets.
[5] Here and below, starting from 2019, Free Cash Flow (FCF) is calculated as net cash from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets, plus interest received, plus subsidy from government. Comparative statements of 2018 are given as they were disclosed in the corresponding period.
[6] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).
[7] Average revenue per user
[8] Blended ARPU includes revenue from broadband, IPTV and digital cable TV