News Column

Rostelecom Announces Its IFRS Financial and Operating Results for the Second Quarter and First Half of 2014

August 21, 2014

MOSCOW--(BUSINESS WIRE)--



ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE SECOND QUARTER AND FIRST HALF OF 2014

Fixed segment revenue increased by 3% year-on-year, with a 19% reduction in debt since the start of the year

Delivery on key strategic items including early completion of Tele 2 Mobile JV as well as continued modernization of infrastructure and improved product offering

Moscow, RussiaAugust 21, 2014 – Rostelecom OJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the first half and second quarter of 20141 prepared in accordance with International Financial Reporting Standards (‘IFRS’).

FIRST HALF FINANCIAL HIGHLIGHTS FOR CONTINUING OPERATIONS (FIXED LINE BUSINESS)

  • Revenue from continuing operations grew 3% year-on-year in the first six months of 2014 to RUB 145.2 billion;
  • Net income of RUB 10.2 billion (RUB 14.4 billion in the first half of 2013);
  • OIBDA2 of RUB 51.3 billion compared to RUB 53.6 billion in the corresponding period of 2013;
  • OIBDA margin of 35.4% compared to 37.8% in the first half of 2013;
  • Capital expenditure3 of RUB 21.2 billion, or 14.6% of consolidated revenues. This represents a 26% year-on-year decrease (CAPEX was 20.3% of consolidated revenues in the first half of 2013);
  • Net debt4 of RUB 177.7 billion with a net debt/annualized OIBDA ratio of 1.7x as at 30 June 2014.

    Key figures for the first half of 2014

    RUB million   1H 2014   1H 2013   YoY change (continuing operations)   YoY change (consolidated results)
    From continuing operations   Effect from discontinued operations   Total (consolidated results)From continuing operations   Effect from discontinued operations   Total (consolidated results)
    Revenue145,24311,127156,370141,56417,853159,4173%(2%)
    OIBDA51,3492,75754,10653,5555,00458,559(4%)(9%)
    OIBDA margin, %35.4%-34.6%37.8%-36.7%    
    Operating income21,5832,74524,32823,97944424,423(10%)(0%)
    Operating margin, %14.9%-15.6%16.9%-15.3%    
    Net income10,1764,89915,07514,42084513,575(30%)11%
    % of revenue7.0%-9.6%10.2%-8.5%    
    Capital expenditure21,2343,56424,79828,7933,88032,673(26%)(24%)
    % of revenue14.6%-15.9%20.3%-20.5%    
    Net debt177,707(1,548)176,159170,63910,335180,6554%(2%)
    Net debt/annualized OIBDA ratio1.7-1.61.6-1.6    


    1 The data for the first half of 2013 is a combination of the consolidated results of OJSC Rostelecom (according to IFRS), OJSC Svyazinvest and its subsidiary companies, which were merged with Rostelecom on October 1, 2013

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

    3 Here and below, capital expenditure (“CAPEX”) comprises cash spent on fixed assets and intangible assets

    4 Here and below, net debt is calculated as total debt less cash, cash equivalents and short-term investments



    SECOND QUARTER FINANCIAL HIGHLIGHTS FOR CONTINUING OPERATIONS (FIXED LINE BUSINESS)

  • Revenue from continuing operations grew 2% year-on-year in the second quarter of 2014 to RUB 72.6 billion;
  • Net income of RUB 6.1 billion, compared to RUB 8.9 billion in the corresponding period of 2013;
  • OIBDA of RUB 26.2 billion (RUB 27.5 billion in the second quarter of 2013);
  • OIBDA margin of 36.0% compared to 38.7% in the second quarter of 2013;
  • Capital expenditure of RUB 13.6 billion (18.8% of revenue), which is 115% higher than the corresponding period of 2013, when CAPEX represented 8.9% of revenues.

    Key figures for the second quarter of 2014

    RUB million   2Q 2014   2Q 2013   YoY change (continuing operations)   YoY change (consolidated results)
    From continuing operations   Effect from discontinued operations   Total (consolidated results)From continuing operations   Effect from discontinued operations   Total (consolidated results)
    Revenue72,6303,33475,96470,9858,87379,8582%(5%)
    OIBDA26,1701,43727,60727,4971,67329,128(5%)(5%)
    OIBDA margin, %36.0%-36.3%38.7%-36.5%    
    Operating income10,9061,43912,34513,569(711)12,858(20%)(4%)
    Operating margin, %15.0%-16.3%19.1%-16.1%    
    Net income6,1292,0548,1838,878(1,826)7,183(31%)14%
    % of revenue8.4%-10.8%12.5%-8.9%    
    Capital expenditure13,6531,18714,8406,3391,2227,561115%96%
    % of revenue18.8%-19.5%8.9%-9.5%    
    Net debt177,7071,548176,159170,63910,335180,6554%(2%)
    Net debt/annualized OIBDA ratio1.7-1.61.6-1.6    


    Sergey Kalugin, Rostelecom’s President, commented: “We continue to make good progress in implementing our strategic initiatives. Improvements have already been made in a number of areas and there are signs of qualitative changes taking place within the Company as we aim to transform our business. The quality of our customer service is improving, our network infrastructure is being modernised and our product line is developing as a result of improving packages and attractive tariff plans.

    We have also made significant progress in our mobile strategy by completing all the legal formalities to form a JV with Tele2 Russia several months ahead of schedule. This is a clear signal to the market that we are focused on execution and we are delivering on our objectives efficiently. We certainly still have a lot of work to do, but our recent achievements give us optimism and confidence that we will be able to rise to the challenge and to fulfil the goals set out in our strategy.”

    Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added: “We achieved revenue growth in our core business on the back of larger broadband and pay-TV subscriber bases, and the video surveillance project we undertook during the Unified State Exam. This is an excellent result given the reduced demand for traditional telecommunications services. We have also significantly reduced our debt burden, which is one of our strategic priorities, particularly at a time of volatility in the capital markets and increasing cost of financing. This will ease pressure on the Company’s financial expenses and provide opportunities for net profit to grow in the future. Despite the current complex economic situation and macro-economic uncertainty, we maintain our financial forecasts for 2014, as our current results and our expectations for the second half of the year give us confidence that we will fulfil our plan for 2014.”

    KEY OPERATING HIGHLIGHTS

    1. As a result of Rostelecom’s strategy to improve service quality, modernise its network infrastructure and to promote bundles and attractive tariff plans, the number of broadband and pay-TV subscribers grew in the reporting period:

  • The number of broadband subscribers grew 7% year-on-year to RUB 10.9 million subscribers
  • The B2C subscriber base grew by 8% to 10.1 million, while the number of subscribers connected by fibre optic increased by 27% year-on-year to 4.5 million (41% of the subscriber base).
  • The number of pay-TV subscribers grew by 7% year-on-year to 7.7 million
  • The number of IPTV subscribers increased by 29% to 2.4 million

    2. The number of local telephony subscribers decreased 6.6% year-on-year to 25.6 million as a result of changes in end-users’ preferences in how telephone calls are made and the migration of the corresponding traffic to other operators’ networks

    3. The mobile subscriber base fell by 54% year-on-year to 6.3 million subscribers due to the deconsolidation of the mobile subsidiaries after the first stage of the deal to create a JV with Tele2 Russia was completed.

    Number of subscribers (million)

      2Q 2014   2Q 2013   % change, y-o-y   1Q 2014   % change, y-o-y
    Broadband Internet 10.910.17% 10.8 1%
    Residential 10.19.48% 10.0 1%
    Corporate clients 0.70.74% 0.7 0%
    Pay-TV 7.77.27% 7.6 1%
    IPTV 2.41.929% 2.3 4%
    Local telephony services 25.627.4(7%) 26.0 (2%)
    Mobile communication services 6.3 13.8 (54%) 14.8 (57%)


    SIGNIFICANT EVENTS RELATING TO THE SECOND QUARTER 2014 AND AFTER THE END OF THE REPORTING PERIOD

    Business News

  • Rostelecom secured a number of government contracts, including:
  • A RUB 0.6 billion contract with the Federal Education and Science Supervision Agency for organising video surveillance across the Russian Federation during the Unified State Exam in 2014.
  • A 10-year contract with the Federal Communications Agency (Rossvyaz) worth RUB 163 billion to help to bridge the ‘digital gap’;
  • On April 2, 2014, Rostelecom shareholders elected a new Board of Directors at an Extraordinary General Meeting (‘EGM’), and also approved amendments to the Company’s charter. David Benello was elected as the Company’s first foreign independent director;
  • At the Company’s Annual General Meeting of Shareholders (‘AGM’), which was held on June 30, 2014, Rostelecom shareholders approved a 2013 dividend payment of RUB 8,824 million, or 25% of RAS net profit for 2013, which amounts to 37% of IFRS net profit for 2013, including:
  • A dividend of RUB 4.848555414552 per Class A preferred share;
  • The dividend per ordinary share was calculated as follows: the total sum of RUB 8,824 mln, excluding the accrued dividends on the Class A preferred shares, divided by the amount of Rostelecom ordinary shares outstanding as at July 14, 2014 (the dividend per ordinary share amounted to RUB 3.115959860078);
  • On August 6, 2014, Rostelecom and Tele2 completed the second and final stage of the deal to form a JV;
  • In August 2014, Rostelecom launched a national marketing campaign around its triple play promotion which encompasses its Home Internet, IPTV and Home Telephone packages.

    Other News

  • Rostelecom’s President Sergey Kalugin became a shareholder of the Company. He acquired 339,480 ordinary shares in Rostelecom for approximately RUB 30 million, which is equivalent to 0.0117% of the Company’s share capital.

    OPERATING REVIEW

    Revenue Analysis

    Revenue structure by services

    RUB million   2Q 2014   2Q 2013   % change, y-o-y   1H 2014   1H 2013   % change, y-o-y
    Local telephony services 20,084 22,403 (10%)41,076 44,133   (7%)
    Intra-zone telephony services 3,684 4,186 (12%)7,446 8,420 (12%)
    DLD/ILD telephony services 3,609 4,248 (15%)7,578 8,943 (15%)
    Interconnection and traffic transit services 7,405 6,283 18%14,103 12,118 16%
    Broadband Internet 14,811 13,483 10%29,799 26,997 10%
    Pay-TV 3,534 2,700 31%6,959 5,488 27%
    Data services (VPN, data centres, wholesale Internet sales) 5,619 5,700 (1%)11,619 11,080 5%
    Rent of channels 2,881 3,405 (15%)5,517 6,790 (19%)
    Other revenue 11,003 8,579 28%21,146 17,596 20%
    Total revenue from continuing operations72,63070,9852%145,243141,5643%
    Effect of discontinued operations 3,334 8,873 - 11,127 17,853 -
    Mobile services3,5839,939-12,82219,442-
    Other(249)(1,066)-(1,695)(1,589)-
    Total consolidated revenue 75,964 79,858 (5%) 156,370 159,417 (2%)


    Revenue structure by customer segments

    RUB million   2Q 2014   2Q 2013   % change, y-o-y   1H 2014   1H 2013   % change, y-o-y
    Residential customers 33,917 34,782 (2%)68,660 69,656 (1%)
    Corporate customers 17,586 15,932 10%34,561 32,920 5%
    Governmental customers 11,165 9,997 12%21,514 20,543 5%
    Operators 9,962 10,273 (3%)20,508 18,445 11%
    Total revenue from continuing operations72,63070,9852%145,234141,5643%
    Effect from discontinued operations 3,334 8,873 - 11,127 17,853 -
    Total consolidated revenue 75,964 79,858 (5%) 156,370 159,417 (2%)


    In the second quarter of 2014, revenue from continuing operations increased by 2% year-on-year to RUB 72.6 billion due to:

  • 28% growth in other revenues due to growth in income from renting duct infrastructure and from laying equipment, and also from a decision taken to sell customer-premises equipment rather than providing them for rent. Income from providing video surveillance during the Unified State Exam in 2014 also contributed to this growth (an increase of RUB 2.4 billion);
  • A 10% rise in revenues from broadband services due to an increase in the number of subscribers (an increase of RUB 1.3 billion);
  • 18% growth in interconnection and traffic transit services by attracting additional international voice traffic volumes from mobile operators (an increase of RUB 1.1 billion);
  • 31% revenue growth from pay-TV services due to a rise in the number of IPTV subscribers (an increase of RUB 0.8 billion).

    Revenue dynamics were impacted by declining revenue from international, inter-city, intra-zonal and local telephony services. This is due to changes in end-users’ preferences in how telephone calls are made and the corresponding migration of traffic to other operators’ networks.

    In the first half of 2014, revenue from continuing operations increased by 3% year-on-year to RUB 145.2 billion, largely due to growth in broadband, pay-TV and interconnection and international traffic transit services, as well as an increase in other revenues.

    Revenue from mobile services in the second quarter and first half of 2014 decreased largely due to the deconsolidation of the mobile subsidiaries, which were transferred to the JV with Tele2 Russia when the first stage of the deal was completed.

    Operating Income Analysis

    Operating expenses structure (excluding amortization)

    RUB million   2Q 2014   2Q 2013   % change, y-o-y   1H 2014   1H 2013   % change, y-o-y
    Personnel costs 22,232 20,564 8%44,718 42,312 6%
    Interconnection charges 11,454 9,838 16%22,283 18,894 18%
    Materials, repairs and maintenance, utilities 6,480 5,612 15%12,783 11,368 12%
    Other operating income (2,825) (2,918) (3%)5,381 5,634 (4%)
    Other operating expenses 9,869 10,392 (5%)20,241 21,069 (4%)
    Total operating expenses from continuing operations47,21043,4889%94,64488,0098%
    Effect of discontinued operations 1,895 7,242 - 8,370 12,850  
    Total consolidated operating expenses 49,105 50,730 (3%) 103,014 100,859 2%


    In the second quarter of 2014, operating expenses excluding amortization grew by 9% year-on-year to RUB 47.2 billion. This was influenced by the following factors:

  • A 16% year-on-year increase in interconnection charges to RUB 11.5 billion due to growth in the amount of traffic passing through the Company’s network, which is accompanied by a corresponding increase in income. A rise in the number of content payments following growth in the TV subscriber base also contributed to this;
  • An 8% year-on-year increase in personnel costs to RUB 22.2 billion due to allocating non-cash expenses related to management’s long-term incentive programme of RUB 750 million entirely in the second quarter of 2014;
  • A 15% year-on-year increase in materials, repairs and utilities expenses to RUB 6.5 billion due to the cost of equipment for providing universal telecommunications services, which Rostelecom plans to recover in subsequent reporting periods. The expansion of Rostelecom’s network also led to an increase in the installation of equipment, which contributed to higher costs.
  • Additional income from selling a building in Moscow, which has had a positive effect on the net value of other income and expenses.

    Operating expenses from continuing activities in the first half of 2014 grew by 8% year-on-year. The same factors that influenced operating expenses in the second quarter also affected operating expenses for the first half of 2014.

    In the second quarter, OIBDA from continuing operations reached RUB 26.2 billion, compared to RUB 27.5 billion in the corresponding period of 2013. OIBDA was RUB 51.3 billion in the first half of 2014, compared to RUB 53.6 billion in the first half of 2013. The OIBDA margin in the second quarter and first half of 2014 reached 36.0% and 35.4%, respectively. OIBDA in the first half and second quarter of 2014 was impacted by:

  • The increased presence of growing, but lower margin, broadband and pay-TV segments in the revenue structure;
  • The lagged impact that initiatives taken by management to optimise operating expenses will have on the Company’s financial results.

    In the second quarter of 2014, depreciation and amortisation expenses increased by 4% year-on-year to RUB 14.5 billion. Depreciation and amortisation expenses for the first half of 2014 fell by 2% year-on-year to RUB 29.0 billion.

    The Company’s operating income from continuing activities decreased by 20% year-on-year in the second quarter of 2014 to RUB 10.9 billion. Operating income for the first half of 2014 fell by 10% to RUB 21.6 billion.

    The main factor influencing operating expenses, OIBDA and operating income of discontinued operations was the deconsolidation of the mobile subsidiaries which were transferred to the JV with Tele2 Russia after the first stage of the deal was completed.

    Net Income Analysis

    In the second quarter, profit before tax from continuing operations decreased by 30% year-on-year to RUB 7.5 billion and in the first half of 2014, this figure fell by 28% year-on-year to RUB 13.1 billion. The following had an impact on profit before income tax in the second quarter and first half of 2014:

  • Growth in operating expenses;
  • An increase in financial expenses due the lower level of interest capitalisation in capital construction than in corresponding periods of 2013.

    In the second quarter of 2014, income tax contributions from continuing operations fell by 24% year-on-year to RUB 1.4 billion. The Company’s income tax contributions during the first half of 2014 totalled RUB 2.9 billion, a 22% year-on-year decrease. Income tax dynamics largely reflect a change in profit before income tax. The effective income tax rate was 19% in the second quarter of 2014 and 22% in the first half of 2014 compared to the 20% rate specified by the Tax Code. The higher effective tax rate in the first half of 2014 was due to the non-accrual of tax (failure to deduct for tax purposes) on some expenses.

    The Group’s net profit from continuing operations totalled RUB 6.1 billion in the second quarter and RUB 10.2 billion in the first half of 2014. This represents a year-on-year decrease of 31% and 29%, respectively.

    In the first half of 2014, the income received from the disposal of the mobile business (which is reflected in ‘other income and expenses’), influenced consolidated net profit dynamics.

    Financial Review

    Consolidated net operating cash flow decreased 25% year-on-year in the first half of 2014 to RUB 35.5 billion. Consolidated free cash flow fell 19% year-on-year to RUB 11.8 billion. This was influenced by an increase in accounts receivable from state organisations due to the irregular receipt of money from the state sector during the calendar year.

    Net cash used in investing activities reached a positive value of RUB 9.4 billion. This was largely due to receiving funds from closing the first stage of the deal to create a JV with Tele2 Russia (due to the cancellation of intra-group debt of the subsidiary companies which was transferred to the JV). Consolidated investments grew 96% year-on-year in the second quarter of 2014 to RUB 14.8 billion, and fell by 24% year-on-year in the first half of 2014 to RUB 24.8 billion. The investment dynamics were partly affected by management’s policy of improving the effectiveness of investment activities, including optimising tender procedures and relationships with suppliers, which led to a low base effect in the second quarter of 2013. The uneven implementation of CAPEX programmes across the calendar year also had an impact.

    The changes in net cash received from financing activities are related to the repurchase of shares from shareholders who voted against the Company’s reorganisation.

    At the end of the second quarter of 2014, the Group’s total debt decreased by 19% since the start of 2014 to RUB 185.5 billion. This is due to transferring part of the debt to the JV with Tele2 Russia, as well as repaying a number of loans. More than 99% of the Group’s total debt was rouble-denominated as at June 30, 2014.

    As at June 30, 2014, the Group’s net debt amounted to RUB 176.2 billion with a net debt / OIBDA ratio of 1.6x at the end of the second quarter.

    OTHER INFORMATION: CONFERNENCE CALL

    Rostelecom’s management will hold a conference call today at 6.00PM (Moscow), 4.00PM (CET), 3.00 PM (UK) and 10.00 AM (NYT). To participate in the conference call, please dial:

    Russia: +7 495 705 9451

    UK/International: +44 (0)20 3427 1918

    USA: +1 646 254 3363

    Access code: 5375021

    A replay of the conference call will be available on the Company’s website http://www.rostelecom.ru/ir/results_and_presentations/financials/IFRS/ in due course.

    ***

    For more information please visit http://www.rostelecom.ru/en/ir or contact:

    “Rostelecom Investor Relations / Rostelecom IR” application is now available to download for free from the Apple App Store and Google Play

    Investor Relations Department

    Tel. +7 (499) 995 97 80

    ir@rt.ru

    APPENDICES

    1. Reconciliation of OIBDA;

    2. Accounting policy specifics affecting Rostelecom’s results for the second quarter of 2014;

    3. Statement of Comprehensive Income for the first half of 2014;

    4. Statement of Cash Flows for the first half of 2014;

    5. Statement of Financial Position for the first half of 2014.

    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. 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.

    Non-cash expenses related to the long-term management incentive programme, implying accruals in personnel costs line starting from Q2, 2014, are not taken into account in the calculation of OIBDA.

    RUB million   2Q 2014   2Q 2013   % change, y-o-y   1H 2014   1H 2013   % change, y-o-y
    Operating income from continuing operations 10,90613,569(20%)21,58323,979(10%)
    Plus depreciation and amortisation from continuing operations 14,51413,9284%29,01629,576(2%)
    Non-cash expenses related to the long-term management incentive programme 750100%750100%
    OIBDA from continuing opeations26,17027,497(5%)51,34953,555(6%)
    OIBDA margin from continuing operations, %36.0%38.7%35.4% 37.8%
    Effect from discontinued operations 1,437 1,631 - 2,757 5,004 -
    Consolidated OIBDA 27,607 29,128 (8%) 54,106 58,559 (9%)
    Consolidated OIBDA margin, % 36.3% 36.5%   34.1% 36.7%  


    APPENDIX 2: ACCOUNTING POLICY SPECIFICS AFFECTING ROSTELECOM’S RESULTS FOR THE SECOND QUARTER OF 2014

    1. Reorganisation through mergers

    The reorganisation in the form of merging OJSC Svyazinvest and 20 other companies (either directly or indirectly controlled by Rostelecom and/or Svyazinvest) is a transaction under common control. In accordance with the Company’s accounting policy under IFRS, such transactions are accounted for as if the acquisition was completed at the beginning of the earliest period that is presented in the financial statements, but not earlier than the date at which common control of the acquired company was established. For this reason, the comparative information, which is presented in the current financial statements, has therefore been revised to include data of the merged companies.

    2. Spinning off the mobile business

    In relation to Rostelecom Board of Directors’ decision to create a joint venture with Tele2 Russia by contributing its mobile assets to the JV, T2 RUS Holding, and following the EGM’s approval on 30 December to spin off its integrated mobile assets into CJSC RT-Mobile, the Company presents results from continuing and discontinued operations separately in accordance with IFRS 5.

    The Group’s continuing operations results are presented as if the mobile business was deconsolidated on the reporting date. Intragroup transactions between continuing and discontinued operations are not excluded from the continuing operations, but are presented as turnover from third parties.

    The results from the discontinued operations present the sum of the results of the mobile business operations and the losses from eliminating intragroup operations. A full transcript of the components can be found in Note 12 of the Group’s consolidated IFRS financial statements.

    Upon completion of the first stage of the deal, Rostelecom received 45% of the voting rights, and 26% of the economic share of T2 RUS Holding.

    The investment in T2 RUS Holding is reflected in Rostelecom’s consolidated IFRS financial statement dated March 31, 2014 as an investment in an associated company. The initial recognition of the investment is made on value, which is based on the fair value of the assets, which were transferred to T2 RUS Holding’s share capital. The fair value of the transferred assets was determined by an independent auditor and amounted to RUB 26,874 billion. Subsequent investments will be reflected in the financial results using the equity method in accordance with IFRS 28.

    APPENDIX 3: STATEMENT OF COMPREHENSIVE INCOME FOR THE FIRST HALF OF 2014

        Six-month period ended 30 June 2014 (unaudited)
       

    Continuing operations

      Effect from discontinued operations

    Note 12

      Total
     
    Revenue145,24311,127156,370
    Operating expenses
    Wages, salaries, other benefits and payroll taxes (44,718) (1,700) (46,418)
    Depreciation, amortization and impairment losses (29,016) (12) (29,028)
    Interconnection charges (22,283) (2,772) (25,055)
    Materials, utilities, repairs and maintenance (12,783) (726) (13,509)
    Gain/(loss) on disposal of property, plant and equipment and intangible assets 1,206 (23) 1,183
    Bad debt expense (1,576) (156) (1,732)
    Other operating income 5,381 71 5,452
    Other operating expenses   (19,871) (3,064) (22,935)
    Total operating expenses, net   (123,660)(8,382)(132,042)
    Operating profit   21,5832,74524,328
    Income from associates 172 - 172
    Finance costs (7,961) (203) (8,164)
    Other investing and financial (loss)/gain, net (355) 2,659 2,304
    Foreign exchange   (317) 90 (227)
    Profit before income tax   13,1225,29118,413
    Income tax expense   (2,946) (392) (3,338)
    Profit for the period   10,1764,89915,075
     
    Other comprehensive income
    Items that may be reclassified subsequently to profit and loss:
    Exchange differences on translating foreign operations   8 - 8
    Other comprehensive income for the period, net of tax   8-8
    Total comprehensive income for the period   10,1844,89915,083
     
    Profit attributable to:
    Equity holders of the Group 10,074 4,899 14,973
    Non-controlling interests 102 - 102
     
    Total comprehensive income/(loss) attributable to:
    Equity holders of the Group 10,102 4,899 15,001
    Non-controlling interests 82 - 82
     
    Earnings per share attributable to equity holders of the Group – basic (in Roubles)   4.392.146.53
    Earnings per share attributable to equity holders of the Group – diluted (in Roubles)   4.382.136.52
        Six-month period ended 30 June 2013 (restated)
       

    Continuing operations

      Effect from discontinued operations

    Note 12

      Total
     
    Revenue141,56417,853159,4 17
    Operating expenses
    Wages, salaries, other benefits and payroll taxes (42,312) (2,646) (44,958)
    Depreciation, amortization and impairment losses (29,576) (4,559) (34,135)
    Interconnection charges (18,894) (4,016) (22,910)
    Materials, utilities, repairs and maintenance (11,368) (1,026) (12,394)
    Gain/(loss) on disposal of property, plant and equipment and intangible assets 87 (118) (31)
    Bad debt expense (704) (70) (774)
    Other operating income 5,634 39 5,673
    Other operating expenses   (20,452) (5,013) (25,465)
    Total operating expenses, net   (117,585)(17,409)(134,994)
    Operating profit   23,97944424,423
    Income from associates 36 - 36
    Finance costs (7,245) (523) (7,768)
    Other investing and financial gain/(loss) 1,881 (686) 1,195
    Foreign exchange loss, net   (450) (86) (536)
    Profit/(loss) before income tax   18,201(851)17,350
    Income tax (expense)/benefit   (3,781) 6 (3,775)
    Profit/(loss) for the period   14,420(845)13,575
     
    Other comprehensive income
    Items that may be reclassified subsequently to profit and loss:
    Exchange differences on translating foreign operations   48 - 48
    Other comprehensive income for the period, net of tax   48-48
    Total comprehensive income for the period   14,468(845)13,623
     
    Profit/(loss) attributable to:
    Equity holders of the Group 14,369 (843) 13,526
    Non-controlling interests 51 (2) 49
     
    Total comprehensive income attributable to:
    Equity holders of the Group 14,413 (843) 13,570
    Non-controlling interests 55 (2) 53
     
    Earnings/(loss) per share attributable to equity holders of the Group – basic (in Roubles)   5.48(0.32)5.16
    Earnings/(loss) per share attributable to equity holders of the Group – diluted (in Roubles)   5.48(0.32)5.16


    DISCONTINUED OPERATIONS

    The following table illustrates information about consolidated income statement of a discontinued operations for the six months ended 30 June 2014, 30 June 2013.

      Six-month period ended 30 June 2014
      Discontinued operations   Intragroup transactions   Total
    Revenue15,108(3,981)11,127
    Operating expenses
    Wages, salaries, other benefits and payroll taxes (1,700) - (1,700)
    Depreciation, amortisation and impairment losses (12) - (12)
    Interconnection charges (5,941) 3,169 (2,772)
    Materials, utilities, repairs and maintenance (729) 3 (726)
    Loss on disposal of property, plant and equipment (23) - (23)
    Bad debt expense (156) - (156)
    Other operating income 71 - 71
    Other operating (expenses)/income (3,873) 809 (3,064)
    Total operating (expenses)/income, net(12,363)3,981(8,382)
    Operating profit/(loss)2,745-2,745
    Finance (costs)/income (776) 573 (203)
    Other investing and financial gain/(losses) 10,205 (7,546) 2,659
    Foreign exchange gain 90 - 90
    Profit/(loss) before income tax12,264(6,973)5,291
    Income tax expense (392) - (392)
    Profit/(loss) for the period11,872(6,973)4,899
      Six-month period ended 30 June 2013
      Discontinued operations   Intragroup transactions   Total
    Revenue21,077(3,224)17,853
    Operating expenses
    Wages, salaries, other benefits and payroll taxes (2,646) - (2,646)
    Depreciation, amortisation and impairment losses (4,559) - (4,559)
    Interconnection charges (6,512) 2,496 (4,016)
    Materials, utilities, repairs and maintenance (1,041) 15 (1,026)
    Loss on disposal of property, plant and equipment (118) - (118)
    Bad debt expense (70) - (70)
    Other operating income 38 1 39
    Other operating (expenses)/income (5,728) 715 (5,013)
    Total operating (expenses)/income, net(20,636)3,227(17,409)
    Operating profit4413444
    Finance (costs)/income (1,462) 939 (523)
    Other investing and financial gains/(loss) 665 (1,351) (686)
    Foreign exchange (loss)/gain, net (95) 9 (86)
    Profit/(loss) before income tax(451)(400)(851)
    Income tax benefit 6 - 6
    Profit/(loss) for the period(445)(400)(845)


    APPENDIX 4: STATEMENT OF CASH FLOWS FOR THE FIRST HALF OF 2014

        Six-month period ended 30 June
        2014 (unaudited)   2013 (restated)
    Cash flows from operating activities
    Profit before income tax 18,413 17,350
    Adjustments to reconcile profit before tax to cash generated
    from operations:
    Depreciation, amortization and impairment losses 29,028 34,135
    Gain/(loss) on disposal of property, plant and equipment and intangible assets (1,183) 31
    Bad debt expense 1,732 774
    Income from associates (172) (36)
    Finance costs excluding finance costs on pension and other long-term social liabilities 7,784 7,396
    Other investing and financial gain (2,304) (1,195)
    Foreign exchange loss, net 227 536
    Share-based motivation program 750 -
    Changes in net working capital:
    Increase in accounts receivable (5,392) (2,809)
    Increase in employee benefits 109 85
    (Increase)/decrease in inventories (673) 429
    (Decrease)/increase in accounts payable, provisions and accrued expenses (201) 4,327
    Change in other assets and liabilities   (2,121) (899)
    Cash generated from operations45,99760,124
    Interest paid (8,270) (8,263)
    Income tax paid   (2,214) (4,644)
    Net cash from operating activities   35,51347,217
    Cash flows from investing activities
    Purchase of property, plant and equipment and intangible assets (24,798) (32,673)
    Proceeds from sale of property, plant and equipment and intangible assets 1,714 667
    Acquisition of financial assets (321) (3,718)
    Proceeds from disposals of financial assets 25,583 5,671
    Interest received 228 10
    Special dividends from disposed former mobile subsidiaries 7,003 -
    Dividends received 10 3
    Purchase of subsidiaries, net of cash acquired   (29) (21)
    Net cash from/(used in) investing activities   9,390(30,061)
        Six-month period ended 30 June
        2014 (unaudited)   2013 (restated)
    Cash flows from financing activities
    Sale of treasury shares 815 6,375
    Purchase of treasury shares (13,844) (2,820)
    Proceeds from bank and corporate loans 193,130 172,833
    Repayment of bank and corporate loans (223,233) (219,914)
    Proceeds from bonds - 30,000
    Repayment of bonds (2,440) (1,215)
    Proceeds from promissory notes 12 -
    Repayment of promissory notes (12) -
    Repayment of vendor financing payable (5) 15
    Repayment of other non-current financing liabilities (4) (6)
    Repayment of finance lease liabilities (1) (501)
    Acquisition of non-controlling interest - (20)
    Dividends paid to shareholders of the Group (12) (427)
    Dividends paid to non-controlling shareholders of subsidiaries   - (230)
    Net cash used in financing activities   (45,594)(15,910)
     
    Net (decrease)/increase in cash and cash equivalents (711) 1,262
    Effect of exchange rate changes on cash and cash equivalents   (20) 16
     
    Cash and cash equivalents at beginning of the period   7,96013,629
    Cash and cash equivalents at the end of the period   7,24914,891


    APPENDIX 5: STATEMENT OF FINANCIAL POSITION FOR THE FIRST HALF OF 2014

          30 June 2014 (unaudited)   31 December 2013
    ASSETS  
    Non-current assets
    Property, plant and equipment 323,050 335,059
    Investment property 121 113
    Goodwill and other intangible assets 59,489 64,346
    Investments in associates 27,955 918
    Other investments 254 520
    Deferred tax assets 351 276
    Other non-current assets   3,991 3,990
    Total non-current assets   415,211405,222
    Current assets
    Inventories 4,614 3,941
    Trade and other accounts receivable 43,489 39,824
    Prepayments 3,454 3,508
    Prepaid income tax 3,902 4,894
    Other investments 504 1,966
    Cash and cash equivalents 7,249 7,960
    Other current assets   708 609
    Total current assets   63,92062,702
    Held for sale assets   33,962 93,048
    Total assets   513,093560,972
    EQUITY AND LIABILITIES
    Equity attributable to equity holders of the Group
    Share capital 97 97
    Additional paid-in capital 1,622 1,658
    Treasury shares (81,382) (68,325)
    Retained earnings and other reserves   294,346 262,967
    Total equity attributable to equity holders of the Group214,683196,397
    Non-controlling interests   3,124 3,359
    Total equity   217,807199,756
    Non-current liabilities
    Loans and borrowings 158,577 184,600
    Employee benefits 9,882 9,774
    Deferred tax liabilities 26,836 26,728
    Accounts payable, provisions and accrued expenses 2,020 1,077
    Other non-current liabilities   5,251 5,127
    Total non-current liabilities   202,566227,306
    Current liabilities
    Loans and borrowings 26,883 33,209
    Accounts payable, provisions and accrued expenses 49,856 73,635
    Income tax payable 17 69
    Other current liabilities   7,028 9,350
    Total current liabilities   83,784116,263
    Held for sale liabilities   8,936 17,647
    Total liabilities   295,286361,216
    Total equity and liabilities   513,093560,972

    ***

    Rostelecom (www.rostelecom.ru) is one of the largest national telecommunications operators in Russia and Europe. The Group operates in all segments of the telecommunications market and covers more than 34 million households.

    Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 10.9 million fixed-line broadband subscribers and over 7.7 million pay-TV subscribers, 2.4 million of which are subscribed to Rostelecom’s IPTV services.

    The Group generated RUB 76.0 billion of consolidated revenues, RUB 27.6 billion of OIBDA (36.3% of revenues) and RUB 8.2 billion of net income in the second quarter of 2014.

    The Group is a market leader in providing telecommunications services to government bodies and corporates of all levels. It is also an important innovator that provides solutions in the field of medicine, E-Government, cloud computing, education, security and housing & utility services.

    Rostelecom was assigned ‘BBB-’ and ‘BB+’ international credit ratings by Fitch Ratings and Standard & Poor’s respectively.

    * * *

    Certain statements in this press release are forward-looking statements within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby.

    Those forward-looking statements include, but are not limited to:

  • Management’s assessment of the Company’s future operating and financial results as well as forecasts of the present value of future cash flows and related factors;
  • 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 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 after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.




    Rostelecom OJSC

    Source: Rostelecom OJSC


  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: Business Wire (UK Regulatory)


    Story Tools






    HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters