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ROSTELECOM PJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2020

·18-min read

ROSTELECOM PJSC (RKMD)
11-Nov-2020 / 09:31 MSK
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), 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 THIRD quarter and NINE MONTHS OF 2020

 

Q3 2020 Revenue growth of 13%; 17% increase in OIBDA [1] ; FCF [2] up 26%

FY 2020 guidance upgraded to >=9% Revenue & OIBDA growth

Moscow, Russia - November 11, 2020 - Rostelecom P JSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the third quarter and nine months of 2020 prepared in accordance with IFRS [3] .

In accordance with the accounting policy of the Group, the acquisition of Tele2 Russia has been recognized as a business combination under common control. According to this method the merger of businesses arising from a transfer of entity stakes under common control of the Group's shareholders, is presented as if the merger took place in the earliest period of the statements, or, if later, effective from the date that common control was put into effect; for this purpose comparatives are revised. Rostelecom's consolidated financial statements for 2019 have therefore been revised to incorporate Tele2 Russia's performance as if the acquisition had been completed on 1 January 2019.

THIRD QUARTER 2020 FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

Key figures for 3Q 2020

 

NINE MONTHS OF 2020 FINANCIAL HIGHLIGHTS

 

Key figures for 9M 2020

 

Mikhail Oseevskiy, President of Rostelecom, commented:

"We delivered robust financial and operational growth in the third quarter of 2020. Growth across the Group remained on track with revenue up by 13%, OIBDA up 17% and FCF also up by 26%. Our key strategic business segments - mobile and digital services - continue to be successful as we remain focused on delivering Rostelecom's digital transformation strategy, which sets out our ambition to be the largest integrated digital company in Russia. Our ambitious digital economy projects, spanning a large variety of promising sectors, reinforce this solid growth trajectory. We continue to expand the industries we serve by entering new high-potential markets, building strong management teams to drive our robust marketing strategy to deliver growth into new and adjacent market segments. Through targeted M&A deals and partnerships, we are creating high-performing teams with diverse competencies to build on our competitive advantage. The acquisition of   utilities software developers Forkam and Fastech; the expansion of our product ecosystem with Elvis Plus, the leading security system integrator; the strengthening of our position in video content terrestrial delivery, all have significant potential to   expand and diversify products and solutions that sit within the growing ecosystem of Rostelecom business clusters.

We continue to develop smart digital solutions for business, government, and private users, and we will soon announce a refreshed strategy which will slightly recalibrate our focus. Built on strong recent achievements, the Rostelecom brand today represents a solid portfolio of fast-growing and high-potential businesses, that are currently undervalued by the market. Our key effort builds on delivering commercial and operational success, within these new business clusters, in order to unlock their potential and ultimately, the true value of our company. In addition to this strong focus on new growth projects and strengthening our position on the digital frontier, we plan to maintain an attractive dividend yield, which, coupled with steady business growth, shapes a unique long-term investment opportunity."

Vladimir Kirienko, First Vice-President of Rostelecom, commented:

"The recent achievements in key markets and across our business segments continue to translate into strong and steady growth while strengthening the long-term digital leadership of Rostelecom. Our constantly evolving digital offering continues to yield impressive results. The demand for cyber security solutions has increased more than two and a half times, while data centers and cloud/IaaS both have both doubled. E-government, video-webcast, smart household products and cloud telephony are performing increasingly well too. The introduction of new timely options and offerings within our digital product family has been well received by customers. Our strategic nation-wide convergent approach is paying off with increased clients' loyalty and growing sales. An example of this was the launch in cooperation with Tele2 of a new offer "Everywhere online" that provides our clients with special subscription deals for the Wink entertainment platform which is becoming increasingly popular. In October, we broke Wink's own concurrent viewers record with 3 million users watching the live stream of Khabib Nurmagomedov's fight with Justin Gaethje, final match in Khabib's storied career..  

For our corporate clients, we launched "Technologies PRO", a new tariff offering for remote working with an expanded product line and added services such as personal manager, antivirus, cloud storage on Yandex. Disk and other, in addition to the core broadband service. I would also like to mention the launch of an innovative solution for monitoring solid domestic waste, which using video surveillance cameras and AI enables customers to assess the condition of waste collection sites, schedule and compliance with standards. The environmental protection services market is growing worldwide, and as the leading digital provider in the country, we realise the role we have to play, but also the significant opportunity in developing smart innovative products and solutions to help businesses, the government and households reduce their environmental impact."

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

"Our strong third quarter financial results reflect our plan for 2020 and we continue to deliver on our business targets. Despite the increased restrictions caused by the second wave of the pandemic, coupled with uncertainty surrounding macroeconomic dynamics, the considerable achievements made during the first three quarters, allows us to increase the forecast for key 2020 indicators. The management team therefore expects an increase in consolidated revenue of at least 9%, an increase in OIBDA of at least 9%; and !APEX to stay within the range of 100-110 billion rubles excluding state programmes."

 

KEY OPERATING HIGHLIGHTS

Fixed-line business

 

 

 

 

 

 

Mobile business

 

 

 

 

 

KEY EVENTS RELATING TO 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD

Business news

Tele2 has reaffirmed its rating of the best company in overall customer satisfaction [9] .

Other news


OPERATING REVIEW

Revenue analysis

 

Revenue structure by services

Revenue structure by customer segments

 

In the third quarter of 2020, revenue increased by 13% to RUB 135 billion, compared to the third quarter of 2019, as a result of the following factors:

During the nine months of 2020, revenue increased by 12% to RUB 383.9 billion, year-on-year, as a result of the following factors:

Operating income analysis

Operating expenses structure

 

RUB million

3Q 2020

3 Q 2019

  change, y-o-y

Revenue

134 , 988

119 , 621

13%

OIBDA

53,677

45 , 73 6

17%

OIBDA margin %

39 . 8%

38 . 2%

-

Operating Income

23 , 087

18 , 724

23%

Operating margin %

17 . 1%

15 . 7%

-

Net Income

11 , 988

9 , 140

31%

% of revenue

8 . 9%

7 . 6%

-

Capital Expenditure

24,325   

  18,755

30 %

% of revenue

1 8.0 %

15 . 7 %

-

Net debt

410 , 027

322 , 744

2 7 %

Net debt / OIBDA

2 . 2

1 . 9

-

FCF

19,512

15,455

4 , 057

RUB million

9M 2020

9M 201 9

  change, y-o-y

Revenue

383 , 880

342 , 858

12%

OIBDA

149 , 559

130 , 078

1 5 %

OIBDA margin %

39 . 0%

37 . 9%

-

Operating Income

60 , 591

51 , 490

18%

Operating margin %

15 . 8%

15 . 0%

-

Net Income

27 , 431

22 , 670

21%

% of revenue

7 . 1%

6 . 6%

-

Capital Expenditure

70 , 976     

  62,794

13%

% of revenue

18 . 5 %

18 . 3 %

-

Net debt

410 , 027

322 , 744

2 7 %

Net debt / OIBDA

2 . 2

1 . 9

-

FCF

4 , 734

14 , 556

(9 , 822)

Number of subscribers (million):

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

Internet access

13 . 4

13 . 1

3%

13 . 4

0,4%

B2C: Broadband

12 . 3

12 . 0

3%

12 . 3

0,3%

B2B: Broadband + VPN

1 . 1

1 . 0

6%

1 . 1

2%

Pay TV

10 . 7

10 . 3

4%

10 . 7

1%

Incl . IPTV

5 . 9

5 . 5

8%

5 . 8

2%

Hosted PBX

0 . 147

0 . 090

62%

0 . 139

5%

Local telephony services

14 . 5

16. 0

(9%)

14.9

(3%)

ARPU [6] ( RUB ):

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

  Internet access

 

 

 

 

 

      B2C: Broadband  

390

396

(1 % )

395

(1 % )

      B2B: Broadband + VPN

3 , 231

3 , 475

(7 % )

3 , 3 44

(3%)

Pay TV (B2C)

2 4 5

248

(1 % )

2 48

(1%)

       Incl . IPTV

298

31 1

(4 % )

309

(4%)

Hosted PBX

1 , 119

1 , 200

(7%)

1,148

( 3% )

Blended ARPU [7]

5 37

  536

0 . 1%

5 45

(1%)

 

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

Data Traffic, incl. MVNO,Pb

1 , 351

875

55%

1 , 216

11%

Churn , %

(7 . 3%)

(8 . 8%)

(1 . 5 p.p. )

(9 . 0%)

(1 . 7   p.p. )

Growth of active mobile data users, %

25 . 5%

47 . 4%

(21 . 9   p.p. )

28 . 1%

(2 . 6   p.p. )

RUB million

3Q 2020

3Q 2019

change

9 M 2020

9 M 2019

Change

Mobile services

  45 , 813   

  40 , 189   

14%

129 , 684   

  112 , 551   

15%

Broadband

  22 , 564   

  20 , 941   

8%

  66 , 751   

  62 , 589   

7%

Digital services

  19,322   

  11 , 944   

62 %

46,855      

  28 , 562   

64 %

TV services

  9 , 438   

  9 , 234   

2%

  28 , 212   

  27 , 892   

1%

Wholesale services

18 , 652   

  17 , 18 8   

9%

  54 , 64 6   

  51 , 78 7   

6%

VPN

  7 , 375   

  6 , 217   

19%

  21 , 506   

  17 , 856   

20%

Interconnect and traffic transit services

  4 , 488   

  4 , 631   

(3%)

  13 , 210   

  15 , 599   

(15%)

Rent and maintenance of telecommunications infrastructure

  4 , 191   

  3 , 866   

8%

  12 , 410   

  11 , 049   

12%

Rent of channels

  2 , 598   

  2 , 474   

5%

  7 , 520   

  7 , 283   

3%

Fixed telephony

  13 , 400   

  14 , 933   

( 10% )

  41 , 264   

  45 , 939   

(10%)

Other services

5,799   

  5 , 191   

12 %

  16,468   

  13 , 53 8   

22 %

Total

134 , 988

119 , 621

13%

383 , 880

342 , 858

12%

 

 

 

 

 

 

 

RUB million

3Q 2020

3Q 2019

change

9M 2020

9M 2019

change

Residential customers

65 , 944

61 , 916

7%

192 , 471

182 , 557

5%

B2B / State clients

46,971

38 , 209

23 %

128,273

102 , 528

25 %

Operators

20 , 563

18 , 344

12%

59 , 593

54 , 668

9 %

Other

1,510

1 , 152

31%

3,543

3 , 10 5

14%

Total

134 , 988

119 , 621

13%

383 , 880

342 , 858

12%

RUB million

3Q 2020

3Q 2019

  change

9M 2020

9M 2019

  change

Personnel costs

(31 , 829)

(28 , 580)

11%

(96 , 086)

(85 , 121)

13%

Depreciation, Amortization and impairment losses

(29 , 587)

(25 , 845)

14%

(85 , 536)

(75 , 038)

14%

Interconnection charges

...

RUB million

3Q 2020

3 Q 2019

  change, y-o-y

Revenue

134 , 988

119 , 621

13%

OIBDA

53,677

45 , 73 6

17%

OIBDA margin %

39 . 8%

38 . 2%

-

Operating Income

23 , 087

18 , 724

23%

Operating margin %

17 . 1%

15 . 7%

-

Net Income

11 , 988

9 , 140

31%

% of revenue

8 . 9%

7 . 6%

-

Capital Expenditure

24,325   

  18,755

30 %

% of revenue

1 8.0 %

15 . 7 %

-

Net debt

410 , 027

322 , 744

2 7 %

Net debt / OIBDA

2 . 2

1 . 9

-

FCF

19,512

15,455

4 , 057

RUB million

9M 2020

9M 201 9

  change, y-o-y

Revenue

383 , 880

342 , 858

12%

OIBDA

149 , 559

130 , 078

1 5 %

OIBDA margin %

39 . 0%

37 . 9%

-

Operating Income

60 , 591

51 , 490

18%

Operating margin %

15 . 8%

15 . 0%

-

Net Income

27 , 431

22 , 670

21%

% of revenue

7 . 1%

6 . 6%

-

Capital Expenditure

70 , 976     

  62,794

13%

% of revenue

18 . 5 %

18 . 3 %

-

Net debt

410 , 027

322 , 744

2 7 %

Net debt / OIBDA

2 . 2

1 . 9

-

FCF

4 , 734

14 , 556

(9 , 822)

Number of subscribers (million):

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

Internet access

13 . 4

13 . 1

3%

13 . 4

0,4%

B2C: Broadband

12 . 3

12 . 0

3%

12 . 3

0,3%

B2B: Broadband + VPN

1 . 1

1 . 0

6%

1 . 1

2%

Pay TV

10 . 7

10 . 3

4%

10 . 7

1%

Incl . IPTV

5 . 9

5 . 5

8%

5 . 8

2%

Hosted PBX

0 . 147

0 . 090

62%

0 . 139

5%

Local telephony services

14 . 5

16. 0

(9%)

14.9

(3%)

ARPU [6] ( RUB ):

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

  Internet access

 

 

 

 

 

      B2C: Broadband  

390

396

(1 % )

395

(1 % )

      B2B: Broadband + VPN

3 , 231

3 , 475

(7 % )

3 , 3 44

(3%)

Pay TV (B2C)

2 4 5

248

(1 % )

2 48

(1%)

       Incl . IPTV

298

31 1

(4 % )

309

(4%)

Hosted PBX

1 , 119

1 , 200

(7%)

1,148

( 3% )

Blended ARPU [7]

5 37

  536

0 . 1%

5 45

(1%)

 

3Q 2020

3 Q 201 9

change, y-o-y

2Q 2020

  change, y-o-y

Data Traffic, incl. MVNO,Pb

1 , 351

875

55%

1 , 216

11%

Churn , %

(7 . 3%)

(8 . 8%)

(1 . 5 p.p. )

(9 . 0%)

(1 . 7   p.p. )

Growth of active mobile data users, %

25 . 5%

47 . 4%

(21 . 9   p.p. )

28 . 1%

(2 . 6   p.p. )

RUB million

3Q 2020

3Q 2019

change

9 M 2020

9 M 2019

Change

Mobile services

  45 , 813   

  40 , 189   

14%

129 , 684   

  112 , 551   

15%

Broadband

  22 , 564   

  20 , 941   

8%

  66 , 751   

  62 , 589   

7%

Digital services

  19,322   

  11 , 944   

62 %

46,855      

  28 , 562   

64 %

TV services

  9 , 438   

  9 , 234   

2%

  28 , 212   

  27 , 892   

1%

Wholesale services

18 , 652   

  17 , 18 8   

9%

  54 , 64 6   

  51 , 78 7   

6%

VPN

  7 , 375   

  6 , 217   

19%

  21 , 506   

  17 , 856   

20%

Interconnect and traffic transit services

  4 , 488   

  4 , 631   

(3%)

  13 , 210   

  15 , 599   

(15%)

Rent and maintenance of telecommunications infrastructure

  4 , 191   

  3 , 866   

8%

  12 , 410   

  11 , 049   

12%

Rent of channels

  2 , 598   

  2 , 474   

5%

  7 , 520   

  7 , 283   

3%

Fixed telephony

  13 , 400   

  14 , 933   

( 10% )

  41 , 264   

  45 , 939   

(10%)

Other services

5,799   

  5 , 191   

12 %

  16,468   

  13 , 53 8   

22 %

Total

134 , 988

119 , 621

13%

383 , 880

342 , 858

12%

 

 

 

 

 

 

 

RUB million

3Q 2020

3Q 2019

change

9M 2020

9M 2019

change

Residential customers

65 , 944

61 , 916

7%

192 , 471

182 , 557

5%

B2B / State clients

46,971

38 , 209

23 %

128,273

102 , 528

25 %

Operators

20 , 563

18 , 344

12%

59 , 593

54 , 668

9 %

Other

1,510

1 , 152

31%

3,543

3 , 10 5

14%

Total

134 , 988

119 , 621

13%

383 , 880

342 , 858

12%

RUB million

3Q 2020

3Q 2019

  change

9M 2020

9M 2019

  change

Personnel costs

(31 , 829)

(28 , 580)

11%

(96 , 086)

(85 , 121)

13%

Depreciation, Amortization and impairment losses

(29 , 587)

(25 , 845)

14%

(85 , 536)

(75 , 038)

14%

Interconnection charges

...

(23,987)

(21,583)

11%

(68,615)

(63,057)

9%

Materials, repairs and maintenance, utilities

(10,352)

(8,153)

27%

(28,466)

(24,386)

17%

Gain on the disposal of PPE and intangible assets

1,536

1,048

47%

3,841

2,484

55%

Impairment loss of financial assets measured at amortized cost

(669)

(745)

(10%)

(3,135)

(3,239)

(3%)

Other operating income

4,968

5,231

(5%)

15,280

14,943

2%

Other operating expenses

(21,981)

(22,270)

(1%)

(60,572)

(57,954)

5%

Total operating expenses

(111,901)

(100,897)

11%

(323,289)

(291,368)

11%

In the third quarter of 2020, operating expenses increased by 11% compared to the corresponding period of 2019 and amounted to RUB 111.9 billion, largely due to the following factors:

  • a 14% increase (of RUB 3.7 bln) in depreciation, amortization and impairment losses, due to higher payments associated with new objects, impairment of intangible assets and lease;

  • an 11% increase (of RUB 3.2 bln) in personnel costs, partly due to an increase in the number of employees within the digital business segments;

  • an 11% increase (of RUB 2.4 bln) in interconnection charges, due to higher traffic caused by the pandemic and the massive transition to remote working and learning;

  • a 27% increase (of RUB 2.2 billion) in materials, repairs and maintenance, utilities, mainly due to an increase in expenditure on personal protective equipment amid the pandemic, and the consolidation of expenses on electricity supplies for Rostelecom's recently acquired subsidiary DataLine, reflected in this line item.

During the nine months of 2020, operating expenses increased by 11% compared to the corresponding period of 2019 and amounted to RUB 323.3 billion, largely due to the following factors:

  • a 13% increase (of RUB 11 bln) in personnel costs, mainly due to an increase in the number of employees within the digital business segments;

  • a 14% increase (of RUB 10.5 bln) in depreciation, amortization and impairment losses, due to higher payments associated with new objects, the impairment of intangible assets and leases;

  • a 9% increase (of RUB 5.6 bln) in interconnection charges, due to higher traffic caused by the pandemic and the massive transition to remote working and learning;

  • a 17% increase (of RUB 4.1 billion) in materials, repairs and maintenance, utilities, mainly due to an increase in expenditure on personal protective equipment amid pandemic, and the consolidation of expenses on electricity supplies for DataLine subsidiary, reflected in this line item;

  • a 5% increase (of RUB 2.6 bln) in other operating expenses, due to the implementation of Smart City projects, as well as the provision of equipment within B2B and B2G projects, higher agent payments for financial services in mobile commerce, recalculation of quality bonus payments.

Operating profit in the third quarter of 2020 increased by 23% year-on-year to RUB 23.1 billion and increased by 18% year-on-year to RUB 60.6 billion for the nine months of 2020.

OIBDA for the third quarter and nine months of 2020 increased by 17% year-on-year to RUB 53.7 billion and by 15% year-on-year to RUB 149.6 billion respectively. OIBDA dynamics were driven by revenue growth and the above-mentioned factors, affecting operating expenses. The OIBDA margin increased by 1.5 p.p. at 39.8% in the third quarter of 2020 and by 1.0 p.p. to 39% during the nine months of 2020 compared to the corresponding periods of 2019.

 

Net Income Analysis

In the third quarter of 2020, profit before tax increased by 38% to RUB 15.4 billion, and by 24% to RUB 35.5 billion in the nine months of 2020, compared to the corresponding periods in 2019. These dynamics in the third quarter and the nine months of 2020 were mainly influenced by higher operating profit and foreign exchange losses arising on the weakening of the exchange rate in 2020.

Income tax in the third quarter of 2020 was RUB 3.4 billion compared to RUB 2 billion in the third quarter of 2019. Income tax in the nine months of 2020 was RUB 8 billion compared to RUB 5.8 billion in the nine months of 2019. The income tax dynamics was partly driven by higher year-on-year expenditures, which are not deductible for tax purposes.

Net profit increased by 31% in the third quarter of 2020 to RUB 12 billion, compared to the corresponding period last year, and in the nine months of 2020 - by 21% to RUB 27.4 billion versus the nine months of 2019.

Financial review

Net operating cash flow in the third quarter of 2020 increased by 32% to RUB 45.9 billion, compared to the corresponding period of 2019. The increase in net operating cash flow in the third quarter of 2020 was mainly due to the increase in operating cash flow, as well as the contraction in the working capital driven by higher payables and other liabilities. These in turn were related to the reflection of deferred revenues from a number of B2G contracts. Net operating cash flow in the nine months of 2020 decreased by 5% to RUB 78.8 billion, compared to the corresponding period of 2019, which was due to the factors that influenced this dynamic in the first six months of 2020.

Cash outflow for investments in non-current assets, excluding state programmes, increased by 30% to RUB 24.3 billion (18% of revenue) in the third quarter of 2020. Including state programmes this indicator grew by 39% to RUB 30.2 billion (22.4% of revenue). During the nine months of 2020, cash outflow for investments in non-current assets, excluding state programmes, increased by 13% to RUB 71 billion (18.5% of revenue) while increasing by 11% to RUB 83.8 billion (21.8% of revenue), state programmes included.

Free cash flow in the third quarter of 2020 increased by 26% to RUB 19.5 billion compared to the third quarter of 2019. Free cash flow during the nine months of 2020 was RUB 4.7 billion compared to RUB 14.6 billion during the corresponding period of 2019.

 

 

 

 

 

 

 

Free Cash Flow (RUB, billion)

 

 

As at September 30, 2020, the Group's total debt has increased by 23% compared to the beginning of the year and amounted to RUB 443.3 billion, partially driven by the fundraising achieved to help complete the consolidation of Tele2. 100% of the Group's total debt remained rouble-denominated at that date.

As at September 30, 2020, the Group's net debt increased by 23% compared to the beginning of the year and amounted to RUB 410 billion. The net debt /OIBDA ratio over the last 12 months stood at 2.2x at that date.

OTHER INFORMATION: CONFERENCE CALL

Rostelecom's management will hold a conference call and webcast today at 4.00 PM (Moscow), 2.00 PM (CET), 1.00 PM (UK) and 8.00 AM (NYT). To participate in the conference call, please dial:

UK/ International:  +44 (0) 330 336 9411

USA:    +1 323-794-2590

Russia:    +7 495 646 9190

 

Confirmation Code (ENG):  6177573

Confirmation Code (RUS):  1719269

 

 

A webcast of the conference call will only be available in English. To access the webcast please follow the link: https://www.webcast-eqs.com/register/rostelecom20201111/en.

 

A replay of the conference call will be available on the Company's website  https://www.company.rt.ru/en/ir/results_and_presentations/financials/IFRS/2020/3/.

 

* * *

APPENDICES

  1. Reconciliation of OIBDA;

  2. Statement of Comprehensive Income for the nine months of 2020;

  3. Statement of Cash Flows for the nine months of 2020;

  4. Statement of Financial Position for the nine months of 2020.


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 some certain 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.

The following indicators are not taken into account in the calculation of OIBDA:

  • Expenses related to the long-term management incentive programme, implying accruals in personnel costs line;

  • Expenses related to non-government pension insurance.

 

RUB million

3Q 2020

3Q 2019

change

9M 2020

9M 2019

change

Operating income

23,087

18,724

23%

60,591

51,490

18%

Plus amortisation

29,587

25,845

14%

85,536

75,038

14%

Plus expenses related to the long-term management incentive programme

716

888

(19%)

2,526

2,721

(7%)

Plus expenses related to non-government pension insurance

287

279

3%

906

829

9%

OIBDA

53,677

45,736

17%

149,559

130,078

15%

OIBDA margin, %

39.8%

38.2%

 

39.0%

37.9%

 

 

 


APPENDIX 2: Statement of Comprehensive Income for the nine months of 2020.

 

 

Nine-month period ended
30 September
(unaudited)

 

2020

2019
(restated)[10]

Revenue

383,880

342,858

 

 

 

Operating expenses

 

 

Wages, salaries, other benefits and payroll taxes

(96,086)

(85,121)

Depreciation, amortization and impairment losses

(85,536)

(75,038)

Interconnection charges

(68,615)

(63,057)

Materials, utilities, repairs and maintenance

(28,466)

(24,386)

Gain on disposal of property, plant and equipment and intangible assets

3,841

2,484

Impairment loss of financial assets measured at amortized cost

(3,135)

(3,239)

Other operating income

15,280

14,943

Other operating expenses

(60,572)

(57,954)

Total operating expenses, net

(323,289)

(291,368)

Operating profit

60,591

51,490

Share of net profit/(loss) of associates and joint ventures

448

(37)

Finance costs

(26,142)

(25,148)

Other investing and financial gain, net

2,164

1,444

Foreign exchange (loss)/gain, net

(1,602)

733

Profit before income tax

35,459

28,482

Income tax expense

(8,028)

(5,812)

Profit for the period

27,431

22,670

 

 

 

Other comprehensive income/(loss)

 

 

Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods

 

 

Exchange differences on translation of foreign operations

526

(192)

Other comprehensive income/(loss) for the period, net of tax

526

(192)

Total comprehensive income for the period

27,957

22,478

 

 

 

Profit attributable to:

 

 

Equity holders of the Group

26,645

22,044

Non-controlling interests

786

626

 

 

 

Total comprehensive income attributable to:

 

 

Equity holders of the Group

27,171

21,839

Non-controlling interests

786

639

 

 

 

Earnings per share attributable to equity holders of the Group - basic (in roubles)

8.68

9.55

Earnings per share attributable to equity holders of the Group - diluted (in roubles)

8.60

9.40

 

APPENDIX 3: Statement of Cash Flows for the nine months of 2020.

 

 

 

Nine-month period ended
30 September
(unaudited)

 

 

2020

2019
(restated)[11]

 

Cash flows from operating activities

 

 

 

Profit before tax

35,459

28,482

 

 

 

 

 

Adjustments to reconcile profit before tax to cash generated from operations

 

 

 

Depreciation, amortization and impairment losses

85,536

75,038

 

Gain on disposal of property, plant and equipment and intangible assets

(3,841)

(2,484)

 

Impairment loss of financial assets measured at amortized cost

3,135

3,239

 

Share of net profit/(loss) of associates and joint ventures

(448)

37

 

Finance costs excluding finance costs on employee benefit obligations

26,108

25,100

 

Other investing and financial gain, net

(2,164)

(1,444)

 

Foreign exchange loss/(gain), net

1,602

(733)

 

Share-based motivation program

2,586

2,668

 

Increase in accounts receivable and contract assets

(22,186)

(13,561)

 

Increase in employee benefits

574

632

 

Increase in inventories

(2,601)

(1,814)

 

(Decrease)/increase in accounts payable, provisions and accrued expenses

(1,205)

7,844

 

Increase in contract costs, prepayments and other assets

(12,791)

(10,163)

 

Decrease in other liabilities

(1,387)

(964)

 

Cash generated from operations

108,377

111,877

 

 

 

 

 

Interest paid

(25,178)

(24,511)

 

Income tax refund

1,005

72

 

Income tax paid

(5,439)

(4,428)

 

Net cash from operating activities

78,765

83,010

 

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment and intangible assets

(83,842)

(75,518)

 

Proceeds from sale of property, plant and equipment, intangible assets and assets held for sale

4,495

4,064

 

Acquisition of financial assets

(8,157)

(5,611)

 

Proceeds from disposals of financial assets

3,072

3,699

 

Interest received

494

442

 

Subsidy from Government

4,822

2,558

 

Dividends received

402

237

 

Purchase of subsidiaries and business, net of cash acquired

(115,131)

(3,666)

 

Proceeds from disposal of subsidiaries, net of cash disposed

(74)

-

 

Acquisition of equity accounted investees

(125)

(543)

 

Net cash used in investing activities

(194,044)

(74,338)

 

 

Cash flows from financing activities

 

 

 

Issue of share capital

66,000

-

 

Proceeds from bank and corporate loans

701,971

431,337

 

Repayment of bank and corporate loans

(658,998)

(423,558)

 

Proceeds from bonds

40,000

15,000

 

Repayment of bonds

(2,034)

(12,207)

 

Repayment of vendor financing payable

(2)

(9)

 

Proceeds from other non-current financing liabilities

(29)

-

 

Repayment of lease liabilities

(12,330)

(8,904)

 

Acquisition of non-controlling interests

(36)

(904)

 

Dividends paid to shareholders of the Group

(16,751)

(11,725)

 

Dividends paid to non-controlling shareholders of subsidiaries

(1,305)

(810)

 

Net cash from / (used in) financing activities

116,486

(11,780)

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(283)

(74)

 

Net increase/(decrease) in cash and cash equivalents

924

(3,182)

 

 

 

 

 

Cash and cash equivalents at beginning of the period

19,955

10,492

 

Cash and cash equivalents at the end of the period

20,879

7,310

 

 

 

 

 

 

 

 

 

 

APPENDIX 4: Statement of Financial Position for the nine months of 2020.

 

 

30 September

2020

(unaudited)

31 December

2019

(restated)[12]

Assets

 

 

Non-current assets

 

 

Property, plant and equipment

545,235

522,681

Goodwill and other intangible assets

135,607

127,110

Right of use assets

61,667

49,228

Trade and other accounts receivable

7,308

5,646

Investments in associates and joint ventures

9,130

8,892

Other financial assets

4,258

2,667

Other non-current assets

11,694

10,119

Deferred tax assets

10,399

10,246

Contract assets

1,506

866

Contract costs

15,730

14,647

Total non-current assets

802,534

752,102

 

 

 

Current assets

 

 

Inventories

12,770

9,793

Contract assets

14,650

4,480

Contract costs

684

920

Trade and other accounts receivable

58,504

49,181

Prepayments

11,698

7,845

Prepaid income tax

961

868

Other financial assets

12,397

8,886

Other current assets

6,612

6,264

Cash and cash equivalents

20,879

19,955

Asset classified as held for sale

776

749

Total current assets

139,931

108,941

Total assets

942,465

861,043

 

 

 

Equity and liabilities

 

 

Equity attributable to equity holders of the Group

 

 

Share capital

95

93

Treasury shares

(14,374)

(53,391)

Retained earnings and other reserves

195,157

264,231

Total equity attributable to equity holders of the Group

180,878

210,933

Non-controlling interests

4,201

4,585

Total equity

185,079

215,518

 

 

 

Non-current liabilities

 

 

Loans and borrowings

396,838

280,571

Lease liabilities

55,339

42,394

Employee benefits

6,455

5,881

Deferred tax liabilities

42,994

38,381

Accounts payable and accrued expenses

8,775

1,486

Contract liabilities

15,681

17,472

Provisions

5,291

4,418

Other non-current liabilities

24,064

19,052

Total non-current liabilities

555,437

409,655

 

 

 

Current liabilities

 

 

Loans and borrowings

46,465

81,277

Lease liabilities

11,072

9,971

Accounts payable and accrued expenses

84,349

86,527

Income tax payable

2,046

2,692

Contract liabilities

33,399

31,353

Provisions

8,086

7,283

Other financial liabilities

898

164

Other current liabilities

15,634

16,603

Total current liabilities

201,949

235,870

Total liabilities

757,386

645,525

Total equity and liabilities

942,465

861,043

 

 


PJSC Rostelecom is the largest integrated digital services and products provider, operating in all segments of the telecommunications market in Russia. The Company serves millions of households, state and private enterprises across the country.

Rostelecom is Russia's undisputed market leader, providing high-speed Internet access and pay-TV. The total number of broadband users stands at over 13.4 mln users, it has more than 10.7 mln pay-TV customers, over 5.9 mln of which are subscribed to Rostelecom's IPTV services. Tele2 Russia, a Rostelecom subsidiary, is a major player in the mobile market with over 44 mln subscribers and the industry-leading NPS, a customer satisfaction benchmark.

During the nine months of 2020, the Group generated RUB 383.9 bln of revenues, RUB 149.6 bln of OIBDA (39% of revenue) and RUB 27.4 bln of net income.

The Group is the leading provider of telecommunications services to government bodies and corporates of all levels.

Rostelecom is a key strategic innovator that provides solutions in the following fields: E-Government, cybersecurity, data-centres and cloud computing, biometry, healthcare, education and housing & utility services.

The Group's stable financial position is confirmed by its credit ratings. Rostelecom has been 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:

  • Assessment of PAO Rostelecom's (the Company) future operating and financial results as well as forecasts of the present value of future cash flows and related factors;

  • The Company's plans to take ownership stakes in other organisations;

  • the Company's anticipated capital expenditures and plans to construct and modernize its network;

  • the Company's expectations as to the growth in demand for its services, plans relating to the expansion of the range of its services and their pricing;

  • the Company's plans with respect to improving its corporate governance practices;

  • the Company's expectations as to its position in the telecommunications market and forecasts on the development of the market segments within which the Company operates;

  • economic outlook and industry trends;

  • the Company's expectations as to the regulation of the Russian telecommunications industry and assessment of impact of regulatory initiatives on the Company's activity;

  • other statements regarding matters that are not historical facts.

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:

  • risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;

  • risks relating to Russian legislation, regulation and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunications industry, securities industry as well as currency and exchange controls relating to Russian entities and their official interpretation by regulatory bodies;

  • risks relating to the Company, including the achievement of the anticipated results, levels of profitability and growth, ability to create and meet demand for the Company's services including their promotions, and the ability of the Company to remain competitive in a liberalized telecommunications market;

  • technological risks associated with the functioning and development of the telecommunications infrastructure, technological innovations as well as the convergence of technologies;

  • other risks and uncertainties. For a more detailed discussion of these and other factors, see the Company's Annual Report and the Company's other public filings.

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] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA

[2] Here and below 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.

[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, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).

[6] Average revenue per user

[7] Blended ARPU includes revenue from broadband, IPTV and digital cable TV

[8] Operator to Operator

[9] According to Romir holding data

[10] The amounts shown here do not correspond unaudited management interim condensed consolidated statement of profit or loss and comprehensive income for the nine-month period ended 30 September 2019 and reflect application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share

[11] The amounts shown here do not correspond unaudited management interim condensed consolidated statement of cash flows for the nine-month period ended 30 September 2019 and reflect application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share

[12] The amounts shown here do not correspond to the consolidated financial statements for the year ended 31 December 2019 and reflect adjustments made in connection with the completion the valuation of acquired net assets, with obtained control over them in 2019 and application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share

ISIN:

US7785291078

Category Code:

QRT

TIDM:

RKMD

LEI Code:

2534001D752JPNM0H170

Sequence No.:

87613

EQS News ID:

1147143

 

End of Announcement

EQS News Service