The largest digital services provider in Russia

Rostelecom announces its IFRS financial and operating results for the fourth quarter and full year of 2015

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Free Cash Flow rose to RUB 22.0 billion with net profit growing by 9% y-o-y to RUB 14.4 billion

Moscow, Russia – March 14, 2016 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the fourth quarter and the full year of 2015 prepared in accordance with IFRS1.

KEY ACHIEVEMENTS

  • Revenue, OIBDA margin and CAPEX to revenue ratio are in-line with Management’s guidance for 2015;
  • The digital segment’s2 contribution to total revenue exceeded 40%;
  • Total fibre optic network coverage reached 30.7 million households by the end of 2015;
  • Net profit increased by 9% year-on-year to RUB 14.4 billion;
  • FCF3 amounted to RUB 22.0 billion in 2015.

FOURTH QUARTER 2015 FINANCIAL HIGHLIGHTS
Here and below the numbers refer to continuing operations unless stated otherwise.

  • Revenue grew by 3% year-on-year to RUB 81.0 billion;
  • OIBDA4 amounted to RUB 25.8 billion compared to RUB 25.0 billion in the fourth quarter of 2014;
  • OIBDA margin of 31.9% compared to 31.6% in the corresponding period of last year;
  • Net profit of RUB 4.1 billion compared to a net loss of RUB 2.0 billion in the fourth quarter of 2014;
  • CAPEX5 decreased by 10% to RUB 19.3 billion (23.9% of revenue) from RUB 21.5 billion (27.3% of revenue) in the fourth quarter 2014;
  • Consolidated Free Cash Flow (FCF) of RUB 9.1 billion compared to RUB 11.1 billion in the corresponding period of last year;
  • Net debt6 remained flat year-on-year and amounted to RUB 173.7 billion, resulting in a Net Debt / Annualised OIBDA ratio of 1.7x.

FULL YEAR 2015 FINANCIAL HIGHLIGHTS

  • Revenue of RUB 297.4 billion compared to RUB 298.9 billion in 2014;
  • OIBDA amounted to RUB 100.8 billion compared to RUB 102.5 billion in 2014;
  • OIBDA margin of 33.9% compared to 34.3% in 2014;
  • Net profit increased by 9% year-on-year to RUB 14.4 billion;
  • CAPEX increased by 17% to RUB 62.7 billion (21.1% of revenue) from RUB 53.8 billion (18.0% of revenue) in 2014; CAPEX excluding the “Bridging the Digital Divide” project amounted to RUB 59.5 billion (20% of revenue);
  • FCF amounted to RUB 22.0 billion compared to RUB 27.3 billion in 2014.

Sergei Kalugin, President of Rostelecom, commented:
Rostelecom made good progress with the delivery of its strategy in 2015. Having reached nearly 31 million households passed, Rostelecom is nearing the conversion of its last mile network to fibre optic, which means that the bulk of our CAPEX commitment to this capital-intensive project is almost fulfilled. We also launched our first OTT solution, which allows users to access our content proposition, irrespective of the internet provider they use. Furthermore, the introduction of our new customer care standards have led to remarkable improvements in the overall quality of our services.

Last year, Rostelecom’s Board of Directors approved some amendments to our Group’s strategy, which identified our most promising and fast-growing segments. We are determined to build our presence in these segments, which include data centres, cloud services, OTT video, geodata and IIoT. 

In December, we presented to the investment community our achievements to date and our strategic business plan that will take us to 2020. This is all part of our drive to improve Rostelecom’s investment case, which has been further strengthened by the adoption of a new dividend policy, which sets out the FCF pay-out ratio at no less than 75% but not less than RUB 45 billion cumulatively for three years.

We continue to develop our business in line with market demands and customer needs, offering new digital services and products. 2016 will see the nationwide launch of a 4-Play offering. In addition, Rostelecom will undergo a transformation, which will include the implementation of innovative management tools as well as the development of its own production system.

Our focus on enhancing internal efficiencies, implementing innovative solutions in business development and building our digital offering is making Rostelecom a truly customer-focused service company. These improvements will contribute to the growth of the Company’s fundamental value and it maximises free cash flow, the bulk of which Rostelecom plans to distribute as dividends.

Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added:
The Company’s operational and financial results for 2015 demonstrate that we have accomplished a great deal this year. We are pleased to have boosted our revenue from the digital segments, and increased its overall contribution to Rostelecom’s revenue to 40%. Furthermore, Rostelecom has implemented cost reductions, managed to increase its net profit and generated RUB 22 billion in free cash flow.

Rostelecom’s revenue and investment in 2015 were in line with the Company’s guidance for 2015, with the OIBDA margin coming in at the higher range of our guidance. Weexpect a 1-2% growth in revenue with OIBDA remaining flat year-on-year. If you exclude our BDD project, we expect a CAPEX to revenue ratio of less than 19%.”


Full press-release



1 International financial reporting standards
2 The digital segment comprises broadband, pay-TV, VPN, VAS and cloud services
3 Here and below, FCF is calculated as free cash flow from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets
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, net debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets)