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Sistema JSFC

April 3, 2017

Sistema announces financial results for the fourth quarter and full year 2016

Moscow, Russia April 3, 2017 Sistema PJSFC (Sistema or the Company, together with its subsidiaries, the Group) (LSE: SSA, MOEX: AFKS), a publicly-traded diversified holding company operating primarily in Russia and the CIS, today announces its consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the fourth quarter and full year ended December 31, 2016.

STRATEGIC PROGRESS

  • Continued revenue growth and resilient margins at MTS
  • Superior growth at Detsky Mir and non-public assets, resulting in significant increase in their contribution to the total OIBDA of the portfolio and cash returns to the Corporate Centre
  • Successful asset monetisations, including profitable divestment of SG-trans, MTS share sales and landmark Detsky Mir IPO after the end of the reporting period

STRONG FINANCIAL PERFORMANCE FOR FULL YEAR 2016

  • Consolidated revenues up 2.8% YoY to RUB 697.7 billion    
  • Adjusted OIBDA[1]up 5.7% YoY to RUB 183.7 billion, with an adjusted OIBDA margin of 26.3%
  • Contribution from non-public assets and Detsky Mir to portfolios adjusted OIBDA up to 15.2% vs. 6.0% in 2015
  • Detsky Mir and Segezha Group delivered 31% and 29% YoY revenue increase, respectively, with OIBDA margins of 10.3% and 20.1%, respectively
  • 4x growth of revenue and OIBDA at agricultural assets
  • Adjusted profit attributable to Sistema of RUB 1.7 billion, versus a loss in 2015
  • 33% reduction in the Corporate Centres total financial liabilities

SOLID FOURTH QUARTER FINANCIAL RESULTS

  • Revenues up 1.6% YoY to RUB 186.7 billion
  • Adjusted OIBDA up 14.8% to RUB 40.7 billion
  • As of December 31, 2016, cash position[2] at the Corporate Centre level was RUB 13.5 billion. Proceeds of RUB 12.9 billion from Detsky Mirs IPO and of RUB 4.7 billion from MTS buyback to support the Corporate Centres cash position in the first quarter of 2017
  • Net debt[3]at the Corporate Centre level amounted to RUB 83.5 billion as of December 31, 2016. Total debt at the Corporate Centre level reduced by 16.9% during the year to RUB 97.0 billion.

SHAREHOLDER REMUNERATION AND DIVIDEND POLICY

  • Progressive dividend payments and shareholder returns:
  • RUB 7.8 billion final dividend for 2016 recommended by the Board of Directors. The total amount of the interim and final dividends for 2016 is expected to be RUB 11.5 billion, which is equivalent to a dividend yield of 6% based on Sistemas weighted average share price in 2016
  • New dividend policy targeting minimum annual dividend per share and minimum dividend yield introduced in April 2016. On 1 April 2017 Sistemas Board of Directors approved increases of minimum annual dividend yield to 6% from 4% and minimum dividend per share to RUB 1.19 from RUB 0.67

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

In 2016, Sistema delivered solid strategic progress as we continued to create value within our portfolio, successfully monetise our investments, optimise debt and increase cash distributions to our shareholders.

We have continued to capitalise on MTSs market leadership in Russia and resilient cash flows and to focus on shareholder remuneration, while boosting the performance of our other portfolio companies, represented by Detsky Mir and non-public assets, which together contributed over 15% to the portfolios OIBDA and over 35% of total dividends and regular cash returns received by the Corporate Centre. 

In 2016, Detsky Mir and Segezha Group delivered 31% and 29% revenue growth respectively and strong OIBDA margins. Agricultural assets increased their total land bank 2.3 times to 315,000 hectares, rapidly gained scale across key business lines and delivered strong aggregated OIBDA thanks to both M&A and enhanced business processes. Another business that is becoming a visible part of the portfolio is the real estate segment which focuses on monetising Sistema Group properties and selected new projects. In 2016, it delivered RUB 12.8 of revenues with an OIBDA margin of 41%.

We also saw a 14.4% revenue growth at our healthcare business Medsi. We continue to believe in excellent market opportunities for this business and are investing in building new modern medical facilities.

During 2016 and the first quarter of 2017 we maintained strong momentum in asset monetisation. The IPO of Detsky Mir in February 2017 achieved a solid valuation of 9.2 EV/2016 EBITDA, representing a six-fold increase in the companys valuation between 2012 and 2016. Together with other notable monetisations including sales of stakes in MTS and the successful disposal of 50% in SG-trans this IPO allowed us to raise additional funds for reinvestment, deleveraging and distribution to shareholders.

Sistemas monetisation pipeline remains strong. We continue to work on a number of capital-raising transactions for the portfolio companies, including potential IPOs in agriculture, forestry, real estate and other sectors.

Our strategic progress positions Sistema firmly to continue investing in the Russian market and to increase cash distributions to shareholders. Today, we are pleased to announce that our Board of Directors has proposed a final dividend for 2016 of RUB 7.8 billion, which together with the interim dividend represents a 6% dividend yield based on Sistemas average share price in 2016. Simultaneously the Board has updated our dividend policy to increase our minimum targeted dividend yield from 4% to 6% and minimum dividend per share from RUB 0.67 to RUB 1.19, which confirms our confidence in our strategy, our assets and our home market.

Vsevolod Rozanov, Senior Vice President and Chief Financial Officer of Sistema, said:

In 2016, Group adjusted OIBDA increased 5.7%, driven in particular by growth in our retail, paper and packaging, agriculture and real estate businesses, and resulting in a solid margin of 26.3%. A significant contribution to increased profitability came from improvements at MTS Bank, confirming that we have defined the right strategy for the asset.

In 2016, Sistema generated RUB 59.6 billion at the Corporate Centre level through dividends, regular cash returns and monetisations of MTS and SG-trans shares. Together with accumulated cash at the beginning of the year, this allowed us to reduce total financial liabilities, which contracted by RUB 67 billion during the year.

"Our deleveraging and debt optimisation program was successful in 2016. We repaid a significant portion of FX-denominated liabilities, bringing the share of FX-debt in our total financial liabilities down to 46% vs. 61% as of the beginning of the year. This year we continued to optimise our debt portfolio by placing five-year local bonds totalling RUB 15 billion at a very comfortable rate of 8.9% (on first ten coupons) to refinance more expensive bank and public debt.

Our portfolio companies have also demonstrated increased financial maturity, with Segezha Group and Agroholding Steppe successfully raising bank debt to finance CAPEX and M&A, affirming the markets confidence in our assets and their strategy.

Our cash position remained comfortable as of the end of the reporting year and in the first quarter of 2017 it was further strengthened by proceeds of RUB 12.9 billion from Detsky Mirs IPO and of RUB 4.7 billion from the MTS share buyback, which will support implementation of our strategy going forward.

Conference call information

Sistemas management will host a conference call today at 10:00 am (New York time) / 3:00 pm (London time) / 4:00 pm (CET) / 5:00 pm (Moscow time) to present and discuss the 2016 results.

The dial-in numbers for the conference call are:

Russia

+7 495 213 1767

8 800 500 9283 (toll free)

United Kingdom

+44 330 336 9105

0800 368 0934 (toll free)

United States

+1 719 325 2385

1 888 349 9618 (toll free)

Conference ID: 9721951

Alternatively, you can quote the conference call title: Sistema Fourth Quarter and Full Year 2016 Financial Results.

A replay of the conference call will be available on the Companys website www.sistema.comfor 7 days after the event.

For further information, please visit www.sistema.com or contact:

Investor Relations

Yuri Krebs

Tel: +7 (495) 730 66 00

y.krebs@sistema.ru

Public Relations

Sergey Kopytov

Tel.: +7 (495) 228 15 27

kopytov@sistema.ru

Download full version of press release


[1]See Attachment A for definitions and reconciliation of adjusted OIBDA and adjusted net income to IFRS financial measures.

[2]Including highly liquid deposits and liquid financial investments, based on management accounts. See Attachment A for reconciliation to IFRS financial measures.

[3]Including highly liquid deposits and liquid financial investments, based on management accounts. See Attachment A for reconciliation to IFRS financial measures.

 

 

 

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