Rostelecom announces its IFRS financial and operating results for the second quarter of 2015

Print version 19.08.2015

Moscow, Russia – August 19, 2015 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the second quarter and first half of 2015 prepared in accordance with IFRS.

HIGHLIGHTS

• Strong second quarter OIBDA margin of 35.1%;
• The digital segment^[1] increased its share of overall revenue to 39%;
• Rostelecom’s share in new broadband subscriptions exceeded 50% in the second quarter^[2];
• Over 50% of Rostelecom’s customers are now subscribed to fibre optic tariff plans;
• An additional 1.4 million households were passed with fibre in the second quarter of 2015, resulting in total fibre optic network coverage of 28 million households.

SECOND QUARTER 2015 FINANCIAL HIGHLIGHTS

Here and below the numbers for 2014 refer to continuing operations unless stated otherwise.

• Revenue of RUB 72.1 billion compared to RUB 72.6 billion in the second quarter of 2014. This was partly due to changes in the volume of interconnection and traffic transit services provided to other operators; 
• OIBDA^[3] amounted to RUB 25.3 billion compared to RUB 26.2 billion in the second quarter of 2014; 
• OIBDA margin of 35.1% compared to 36.0% in the corresponding period of 2014; 
• Net profit of RUB 6.1 billion compared to RUB 7.6 billion in the second quarter of 2014. This was mainly due to the high base of the second quarter of 2014 when deferred taxes relating to the disposal the Company’s mobile assets to create the JV with Tele2 Russia were written off; 
• CAPEX^[4] decreased by 19% year-on-year to RUB 11.1 billion (15.4% of revenue) from RUB 13.7 billion (18.8% of revenue) in the second quarter of 2014. This was linked to CAPEX being unevenly distributed across the calendar year; 
• Consolidated Free Cash Flow (FCF^[5]) increased to RUB 6.1 billion compared to RUB (0.6) billion in the second quarter of 2014. This positive trend was largely a result of a reduction in accounts receivable following the part repayment of debt owed by Rossvyaz relating to the provision of universal telecommunications services in previous reporting periods. Lower levels of CAPEX in the second quarter of 2015 was also a factor; 
• Net debt^[6] fell by 1.7% since the beginning of the year and amounted to RUB 168.2 billion, resulting in a Net / Debt Annualised OIBDA of 1.7x. 

Key figures for the second quarter of 2015

RUB million	2Q. 2015	2Q. 2014	% change, y-o-y
Revenue	72,130	72,631	(0.7%)
OIBDA	25,353	26,172	(3%)
OIBDA margin, %	35.1%	36.0%
Operating income	10,116	10,908	(7%)
Operating margin, %	14.0%	15.0%
Net income	6,129	7,601	(19%)
% of revenue	8.5%	10.5%
Capital expenditure	11,119	13,653	(19%)
% of revenue	15.4%	18.8%
Net debt	168,207	177,707	(5%)
Net debt/annualized OIBDA ratio	1.7	1.7

FIRST HALF 2015 FINANCIAL HIGHLIGHTS

• Revenue of RUB 143.8 billion compared to RUB 145.2 billion in the corresponding period of 2014. This was in part due to the one-off gains from providing services during the Sochi Winter Olympics in the first quarter of 2014;
• OIBDA amounted to RUB 49.9 billion compared to RUB 51.3 billion in the first half of 2014;
• OIBDA margin of 34.7% compared to 35.4% in the corresponding period of the previous year;
• Net profit amounted to RUB 8.2 billion compared to RUB 10.2 billion in the first half of 2014;
• CAPEX increased by 29% year-on-year to RUB 27.4 billion (19.1% of revenue)^[7], compared to RUB 21.2 billion (14.6% of revenue) in the first half of 2014. This was due to the low base of the first half of 2014 after part of the CAPEX attributable to the start of 2014 was paid in December 2013;
• Consolidated FCF amounted to RUB 6.5 billion^[8] compared to RUB 12.4 billion in the first half of 2014 partly due to higher levels of CAPEX during the reporting period;
• Net debt declined by 1.7% since the start of the year to RUB 168.2 billion.

Key figures for the first half of 2015

RUB million	1H 2015	1H 2014	% change, y-o-y
Revenue	143,840	145,243	(1%)
OIBDA	49,846	51,349	(3%)
OIBDA margin, %	34.7%	35.4%
Operating income	19,384	21,583	(10%)
Operating margin, %	13.5%	14.9%
Net income	8,228	10,176	(19%)
% of revenue	5.7%	7.0%
Capital Expenditure	27,405	21,235	(29%)
% of revenue	19.1%	14.6%
Net debt	168,207	177,707	(5%)
Net debt/annualized OIBDA ratio	1.7	1.7

“Our results for the second quarter of 2015 demonstrate how we are continuing to implement our strategy, modernise our network and enhance customer service. A key element of our strategy is to build our digital offering, and the success we are having in this area is evidenced by the fact that the digital segment now contributes noticeably more to the Company’s overall revenue than our traditional voice services. More than half of Rostelecom’s customers now subscribed to fibre optic tariff plans and this has been made possible by the substantial roll-out of our fibre optic networks. Moving forward, this infrastructure will significantly enhance our ability to serve growing client demand for digital services.

We continued to diversify our business in the second quarter, which is one of our strategic priorities. We have recently established attractive joint ventures, such as the teleshopping channel we are launching with our Korean partners, and the data centre JV with InterRAO, both of which are examples of the many promising growth opportunities we are looking at.”

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

“The efforts we have made to enhance internal efficiency have helped us to achieve a high OIBDA margin of 35.1% in the second quarter despite pressures resulting from structural changes in our business. As a result of the growth in our subscriber base and the higher revenues we have seen from our digital segment in the first half of 2015, we are maintaining our full year guidance.” 

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