27/11/2017

Sistema announces financial results for the third quarter 2017

Moscow, Russia – 27 November 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 unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the quarter ended 30 September 2017.

OPERATIONAL AND STRATEGIC PROGRESS

  • Continued revenue growth thanks to robust performance by Detsky Mir, Medsi and Segezha
  • Solid OIBDA performance driven by MTS, Detsky Mir and Agroholding Steppe
  • Cost control maintained across the portfolio and at the Corporate Centre, with consolidated SG&A flat YoY
  • Board of Directors recommended declaring dividends totalling RUB 6.56 billion for 9M 2017 to be paid before 22 December 2017, subject to approval by a shareholder meeting

THIRD QUARTER FINANCIAL RESULTS

  • Group revenues up 2.1% YoY to RUB 180.6 billion.
  • Adjusted OIBDA[1] up 1.6% YoY to RUB 55.6 billion with an adjusted OIBDA margin of 30.8%
  • Adjusted profit attributable to Sistema1 of RUB 5.2 billion
  • Net debt[2] at the Corporate Centre level of RUB 99.5 billion as of 30 September 2017
  • Cash position2 at the Corporate Centre level as of 30 September 2017 amounted to RUB 20.4 billion, excluding RUB 9.8 billion[3] in FY 2016 dividends from MTS and BPGC frozen as part of Sistema’s legal dispute with Rosneft

COURT CASE

  • RUB 106.6 billion claim against Sistema and Sistema-Invest filed in the Republic of Bashkortostan Arbitration Court in May 2017 by Rosneft and Bashneft, and joined later by the Republic of Bashkortostan to recover damages allegedly incurred by Bashneft during its reorganisation in 2014. The size of the claim was later increased to RUB 170.6 billion
  • In August 2017, the Bashkortostan Arbitration Court partially satisfied the claim, determining the size of the damages allegedly incurred by Bashneft to be RUB 136.3 billion. The court’s decision has not come into effect
  • Sistema has appealed the court’s decision, which the Company believes to be entirely baseless and unlawful
  • Appeal hearings commenced at the Eighteenth Arbitration Court of Appeal in Chelyabinsk on 13 November 2017 and are scheduled to continue on 4 December 2017
  • Further information on the case and Sistema’s position is available on the Company’s website at www.sistema.com/investoram-i-akcioneram/informacija-ob-iske-k-afk-sistema/

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

“Our financial results for the quarter reflect the high quality of our assets and their robust strategies. Consolidated revenue at our Russian subsidiaries grew by 4.1%.

“Our publicly traded assets, Detsky Mir and MTS, continue to lead the way in their respective industries. Both companies reported strong quarters of revenue and adjusted OIBDA growth as they continue to deliver on their strategies.

“Segezha Group’s operational efficiency programme and continued investment to expand its production facilities are bearing fruit. The company delivered 15% revenue growth and stable OIBDA year-on-year despite continued pressure from the stronger rouble.

“Our healthcare chain, Medsi, also posted a substantial increase in revenue and adjusted OIBDA, as it achieved stronger vertical integration and increased average capacity utilisation by 4.5 percentage points year-on-year to 47.6%. Medsi is successfully expanding in the fast-growing market for high-quality medical care in Russia both through organic growth and by acquiring and turning around assets in the regions.

“In October, we completed the merger of Sistema Shyam TeleServices’ telecommunications business with Reliance Communications (RCom), a large telecommunications operator in India. As a result, SSTL now owns a 10% equity stake in RCom.

“In October, the Board of Directors recommended an interim dividend of RUB 0.68 per share for the first nine months of 2017, reflecting the continued strong performance of our portfolio companies.

“We continue to defend our interests in the appeals courts following the Republic of Bashkortostan Arbitration Court’s ruling in the Bashneft case. We consider both the claim and the court’s decision to be baseless and unlawful. As part of the appeal process we have filed a motion to have the case re-heard in accordance with the rules of courts of first instance. We are confident in our position and continue to do everything we can to minimise consequences for Sistema and its stakeholders.”

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

“In the third quarter of 2017, our adjusted OIBDA increased by 1.6% year-on-year to RUB 55.6 billion, with an adjusted OIBDA margin of 30.8%. Significant contributions to this growth came from MTS, as well as Detsky Mir and Agroholding Steppe. We continue to keep our SG&A costs under control both across our portfolio companies and at the Corporate Centre: in the third quarter of 2017, consolidated SG&A expenses were flat year-on-year.

“In the reporting quarter, we successfully reduced leverage at the Corporate Centre by paying off a USD 97 million liability to the Russian State Agency for Federal Property Management.

“Our cash position declined as a result of paying down the liability to the Government, distributing dividends for 2016, and making targeted investments to grow specific portfolio companies.

“Overall, Sistema continues to do business as usual. We are executing on all our financial commitments in full and plan to do so in the future.”

***

Conference call information

Sistema’s management will host a conference call today at 9:00 am (New York time) / 2:00 pm (London time) / 3:00 pm (CET) / 5:00 pm (Moscow time) to present and discuss the third quarter 2017 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 358 6377 (toll free)

United States

+1 323 794 2093

866 548 4713 (toll free)

Conference ID: 6690177

Alternatively, you can quote the conference call title: “Sistema Third Quarter 2017 Financial Results”.

A replay of the conference call will be available on Sistema’s website www.sistema.com for at least seven 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 32

kopytov@sistema.ru

Download full version of press release


[1] See Attachment A for definitions and reconciliation of adjusted OIBDA and adjusted profit attributable to Sistema 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] Net of applicable taxes

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Contact PR

Sergey Kopytov
Managing PR Director
Tel.: +7 (495) 228 15 27
kopytov@sistema.ru

Eleonora Veitsman
PR Director
Tel.: +7 (495)  730-17-05
Veitsman@sistema.ru