Rostelecom financial and operating results for the second quarter and first half of 2021

Print version 05.08.2021

Second quarter revenue increased by 9%, OIBDA[1] up 15%, net profit up 46% and FCF[2] increased by RUB 10.7 billion

Moscow, Russia – August 5, 2021 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the second quarter and first half of 2021 prepared in accordance with IFRS.

Second quarter 2021 key financial highlights

• Revenue grew by 9% to RUB 138.6 billion compared to 2Q 2020;
• OIBDA up 15% to RUB 55.9 billion;
• OIBDA margin up 2.0 p.p. to 40.4%;
• Net profit up 46% to RUB 11.2 billion;
• CAPEX[3] excluding state programs decreased by 2% year-on-year to RUB 24.4 billion (17.6% of revenue);
• FCF of RUB 1.1 billion following a marked improvement of RUB 10.7 billion;
• Net Debt[4] (including lease liabilities[5]) increased by 6% YTD, amounting to RUB 493.8 billion, resulting in a Net Debt/OIBDA ratio of 2.4x.

First half year 2021 financial highlights

• Revenue increased by 9% to RUB 270.5 billion compared to the first half of 2020;
• OIBDA increased by 16% year-on-year to RUB 111.4 billion compared to the first half of 2020;
• OIBDA margin grew by 2.6 p.p. to 41.2% compared to the first half of 2020;
• Net profit increased by 52% to RUB 23.0 billion compared to the first half of 2019;
• CAPEX excluding state programs increased by 11% year-on-year to RUB 51.6 billion (19.1% of revenue) in the first half of the year;
• FCF of RUB 3.2 billion following a marked improvement of RUB 19.1 billion;
• Net Debt (including lease liabilities) increased by 6% YTD, amounting to RUB 493.8 billion, resulting in a Net Debt/OIBDA ratio of 2.4x.

Key figures for 2Q 2020, RUB mln

RUB million	2Q 2021	2Q 2020	change, y-o-y
Revenue	138,589	127,279	9%
OIBDA	55,938	48,801	15%
OIBDA margin %	40.4%	38.3%	-
Operating Income	21,798	18,939	15%
Operating margin %	15.7%	14.9%	-
Net Income	11,174	7,649	46%
% of revenue	8.1%	6.0%	-
Capital Expenditure excl. state programs	24,373	24,778	(2%)
% of revenue	17.6%	19.5%	-
Net debt (incl. lease liabilities)	493,849	494,114	(-0.1%)
Net debt/ OIBDA	2.4	2.7	-
FCF	1,134	(9,566)	10,700

Key figures for 1HY 2020, RUB mln

RUB million	6M 2021	6M 2020	change, y-o-y
Revenue	270,547	248,892	9%
OIBDA	111,375	95,882	16%
OIBDA margin %	41.2%	38.5%	-
Operating Income	44,470	38,248	16%
Operating margin %	16.4%	15.4%	-
Net Income	22,984	15,102	52%
% of revenue	8.5%	6.1%	-
Capital Expenditure excluding state programmes	51,554	46,651	11%
% of revenue	19.1%	18.7%	-
Net debt (incl. lease liabilities)	493,849	494,114	(-0,1%)
Net debt/ annualised OIBDA	2.4	2.7	-
FCF	3,222	(15,924)	19,146

Mikhail Oseevskiy, President of Rostelecom:

"We continued to perform well across all financial and operational indicators during the second quarter of 2021, demonstrating solid double-digit growth in revenue from digital and mobile services, OIBDA and net income. For the second quarter in a row, we have significantly improved our free cash flow position, which helps create a base from which to grow future dividend payments. The most important development during the quarter was the adoption of our updated strategy. Our strategic priority for the next five years is to further evolve into an integrated provider of digital services solutions with an emphasis on smart growth in our traditional business and focused leadership in digital clusters such as data centres and cloud services, cybersecurity, online medicine, digital regions and government digital services. To this end, we plan to gradually embark on a new business model which will be organised by clusters and segments. Our quarterly reporting will reflect that new structure to help us track the execution of our strategy by clusters and segments. We have a strong team capable of meeting our strategic goals which encompass growth as well as the realisation of further material cost reductions. This will underpin our sustainable development while creating additional value for all shareholders and stakeholders."

Vladimir Kirienko, First Vice-President of Rostelecom:

“The growth objectives set in our new strategy are very ambitious, but the results we have achieved during our digital transformation in recent years instil in us a confidence that by 2025 Rostelecom will cross the RUB 700 billion mark in terms of revenue, increase OIBDA by 1.5x and at least doubling net profit. These are ambitious strategic goals, but the momentum we have built with a close-knit professional team and the support of our shareholders will enable us to achieve them. A priority is to focus on our fast-growing digital segments, where we can build a strong leadership position and deliver an attractive return on investment.”

Sergey Anokhin, Senior Vice-President and Chief Financial Officer:

“The Company has demonstrated further sustainable growth as well as effective cost control which resulted in a solid set of positive financial results in the second quarter and the first half of 2021. Rostelecom has already started reaping benefits from the launch of transformation programmes stipulated in the renewed strategy, including those related to curbing cost increases at a time when we are actively growing the business. This will create additional shareholder value and attractive returns on capital. We exceeded our expectations for the first half of 2021 and the moderate macroeconomic risk outlook enables us to look more optimistically at our anticipated results for the second half of the year. As a result of this, we are improving our previously published forecast for 2021. We are raising our outlook on consolidated OIBDA and now expect it to grow by 8-10%, and can review it once more at the third quarter 2021 results; our revenue outlook remains intact at a minimum 5% growth and we expect СAPEX of approximately RUB 110-115 billion, excluding the implementation of state programs.”

Key operating highlights

Fixed business

Number of subscribers (million):	2Q 2021	2Q 2020	change, y-o-y
Internet access	13.5	13.4	1%
B2C: Broadband	12.4	12.3	0.4%
B2B: Broadband + VPN	1.1	1.1	4%
Pay TV	10.8	10.7	2%
Incl. IPTV	6.3	5.8	8%
Hosted PBX	0.185	0.139	33%
Local telephony services	13.3	14.9	(11%)

ARPU[6] (RUB):	2Q 2021	2Q 2020	change, y-o-y
Internet access
B2C: Broadband	396	395	0.5%
B2B: Broadband + VPN	3,623	3,344	8%
Pay TV	254	248	2%
Incl. IPTV	302	309	(2%)
Hosted PBX	969	1,148	(16%)
Blended ARPU[7]	553	545	2%

Mobile business

	2Q 2021	2Q 2020	change, y-o-y
Data Traffic, incl. MVNO,Pb	1,597	1,216	31%
Churn, %	(7.2%)	(9.0%)	(1.8 p.p.)
Growth of active mobile Internet users, %	19.7%	28.1%	(8.4 p.p.)

1. The total number of Internet subscribers among households grew by 0.4% to 12.4 million in the second quarter of 2021 compared to the corresponding period of last year. ARPU also increased by 0.5% year-on-year to RUB 396;
2. The total number of Internet and VPN subscribers in B2B increased by 4% year-on-year to 1.1 million; ARPU increased by 8% year-on-year to RUB 3,623;
3. The number of pay-TV subscribers grew by 2% to 10.8 million users compared to the corresponding period of last year, with average ARPU of RUB 254 in B2C;
   • the number of IPTV subscribers increased by 8% to 6.3 million, and ARPU was RUB 302 in B2C;
4. The number of active mobile Internet users increased by 19.7% year-on-year during 2Q 2020. Year-on-year growth in mobile Internet data traffic reached 31% during the second quarter of 2021; while cellular customer base churn decreased to 7.2%;
5. The number of local telephony subscribers decreased by 11% to 13.3 million.

Press-release on 2q 2021 financial results