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Financial Corporation "Sistema"

August 30, 2018

Sistema announces financial results for the second quarter 2018

Moscow, Russia – 30 August 2018– Sistema PJSFC (“Sistema” or the “Company”, together with its subsidiaries, “the Group”) (LSE: SSA, MOEX: AFKS), a publicly-traded diversified holding company, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the second quarter ended 30 June 2018.

SUCCESSFUL DELIVERY ON STRATEGIC AND OPERATIONAL GOALS

  • Continued revenue growth due to strong execution across all key portfolio companies
  • MTS, Detsky Mir, Segezha Group, Medsi, hospitality and real estate assets delivered at minimum double-digit OIBDA growth due to strong operating results, cost discipline and the impact of new IFRS standards 15 and 16
  • In July 2018, Sistema refinanced three loans from Sberbank maturing in 2019-2020 totalling RUB 24 billion with a new three-year unsecured line of credit from Sberbank
  • In July 2018, Sistema completed repayment of the RUB 40 billion loan arranged by the Russian Direct Investment Fund (RDIF) and financed by Gazprombank in February 2018 for the execution of obligations under the settlement agreement with PJSOC Bashneft, Rosneft and the Republic of Bashkortostan
  • The repayment removing the pledge from Sistema’s shareholding in PJSC Detsky Mir (52.099%) was completed using RUB 5 billion of the Corporation’s own funds and a new 3-year RUB 15 billion unsecured loan from Otkritie Bank

SECOND QUARTER 2018 FINANCIAL RESULTS

  • Group revenue[1]up 10.1% YoY to RUB 182.1 billion
  • Excluding the effect of the new IFRS standards[2], Group revenue up 9.4% YoY to RUB 180.9 billion
  • Adjusted OIBDA[3]up 32.3% YoY to RUB 66.0 billion, with an adjusted OIBDA margin of 36.2%
  • Excluding the effect of the new IFRS standards, adjusted OIBDA up 10.8% YoY to RUB 55.2 billion, with an adjusted OIBDA margin of 30.5%
  • Adjusted net loss attributable to Sistema3 of RUB 1.3 billion
  • Excluding the effect of the new IFRS standards, adjusted net loss attributable to Sistema3 of RUB 0.6 billion

Andrey Dubovskov, President and Chief Executive Officer of Sistema, said: 

“Sistema continues to deliver strong financial and operating results. In the second quarter of 2018, Group revenue increased by 10% due to excellent growth across key portfolio companies. Notably, MTS, Detsky Mir, Segezha Group, Agroholding Steppe and Medsi again confirmed leadership in their respective industries and posted impressive revenue growth. Additionally, Russia hosted the FIFA World Cup in June and early July 2018 and as a result our subsidiary companies welcomed new customers. Our hospitality business, Cosmos Group, took full advantage of the additional tourist traffic and saw average occupancy at its hotels increase to 61.9% in the quarter (a year-on-year increase of 8.3 percentage points), while MTS saw a slight boost in revenue from guest roaming charges.

“Adjusted Group OIBDA increased by 32% thanks to double-digit OIBDA growth rates at MTS, Segezha Group, Medsi and our hospitality and real estate assets, as well as triple-digit OIBDA growth at Detsky Mir. The new IFRS standards had a meaningful impact on the results of MTS and Detsky Mir, though excluding the effect of the new standards OIBDA at our two publicly traded assets still grew significantly and Detsky Mir improved its OIBDA margin thanks to increased operational efficiency.

“Sistema portfolio companies are implementing major investment programmes that will expand capacity and facilitate entry into attractive business segments. MTS continues to build out its network in Russia and Ukraine and break into new markets in line with its digital strategy. Leveraging the expertise of its system integrator subsidiary NVision Group, MTS entered the IT outsourcing market to offer its corporate customers systems integration solutions, network infrastructure maintenance, and business applications management. In July, Segezha officially launched the second production line of the Vyatsky Plywood Mill, growing the facility’s capacity and expanding the line of high-margin products to include extra large long-grain plywood. In August 2018, RTI commissioned a new modular payload assembly workshop at the Yaroslavl Radio Factory, thereby making the company one of the key players in the area of advanced spacecraft development.

“We are actively developing our investment funds, sourcing unique investment opportunities globally. As part of this strategy, in August, Sistema Asia Fund invested in Faaso’s, an Indian food preparation and delivery service that owns a large-scale network of kitchens in 15 cities in India.

“Sistema is working to optimise its debt load, and has now extended the tenure of the loan portfolio, established a more manageable repayment schedule, reduced the average interest rate and overall debt load and removed pledge from assets. In July, the Company refinanced RUB 24 billion in loans from Sberbank and completed repayment of the RUB 40 billion RDIF/Gazprombank loan using the Company’s own funds and a new unsecured loan from Otkritie Bank.

“Our manageable debt repayment schedule, growing dividends from our portfolio companies and success in asset monetisations allow us to fully focus on our core competency – increasing shareholder value by growing high-potential companies and transforming them into market leaders.”

***

Conference call information

Sistema’s 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 second quarter 2018 results.

To participate in the conference call, please dial: 

Russia

+7 495 646 9190

8 10 8002 8675011 (toll free)

United Kingdom

+44 330 336 9411 

0800 279 7204 (toll free)

United States

+1 323 994 2093

888 599 8686 (toll free)

Conference ID: 7348147

Or quote the conference call title: “Sistema Second Quarter 2018 Financial Results”.

A replay of the conference call will be available on Sistema’s website www.sistema.comfor at least seven days after the event.

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

Investor Relations

Nikolai Minashin

Tel: +7 (495) 730 66 00

n.minashin@sistema.ru

Public Relations

Sergey Kopytov

Tel.: +7 (495) 228 15 32

kopytov@sistema.ru 

Download press release


[1]Here and hereafter in this press release Sistema’s consolidated results and results of its subsidiaries for 2Q 2018 and 6M 2018 are presented in accordance with new accounting standards IFRS 9, 15 and 16 unless specified otherwise. Results for MTS Bank and Binnopharm are not presented excluding the impact of the new standards. However, Sistema estimates that the impact on the consolidated Group results of these subsidiaries’ transition to the new IFRS standards is not material. The results for 2Q 2017 and 6M 2017 are presented without the impact of new IFRS standards 9, 15 and 16. Here and hereafter in this press release Sistema’s consolidated results for 2Q 2017 and 6M 2017 are restated to reflect deconsolidation of SG-Trading JSC and disposal of operating business of Sistema Shyam TeleServices Ltd. (SSTL)

[2]Here and hereafter mentions of new IFRS standards refer to IFRS 9, 15 and 16.

[3]See Attachment A for definitions of adjusted OIBDA, adjusted operating income, adjusted profit attributable to Sistema, consolidated total debt and consolidated net debt and their reconciliation to IFRS financial measures.

 

 

 

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