Sistema announces financial results for the second quarter 2020

Moscow, Russia – 03 September 2020 – Sistema PJSFC ("Sistema" or the "Company", together with its subsidiaries and associates, "the Group") (LSE: SSA, MOEX: AFKS), a publicly-traded diversified Russian holding company, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the second quarter 2020 ended 30 June 2020.

 

KEY GROUP HIGHLIGHTS

  • Appointment of Sistema's new President. Vladimir Chirakhov was appointed President of Sistema in April 2020.

  • Successful placements of Detsky Mir shares. In June 2020 and September 2020, Sistema and the Russia-China Investment Fund (RCIF) held two successful offerings of Detsky Mir shares, resulting in an increase of Detsky Mir free float up to almost 100% and full exit of Sistema and  RCIF from the Detsky Mir shareholdings. In June 2020, procceds to Sistema amounted to RUB 8.9 billion, in September 2020 to RUB 16.9 billion.

  • New bonds issue. In May 2020, Sistema successfully placed series 001Р-13 bonds in the amount of RUB 15 billion at a 6.60% coupon rate with a 4-year put option

  • Dividends for 2019. In June 2020, the Annual General Meeting of Shareholders of the Company approved the distribution of RUB 1.25 billion in dividends for 2019.

CORPORATE EVENTS AFTER THE END OF THE REPORTING PERIOD

  • Full exit from the Detsky Mir shareholding. In September 2020, Sistema and RCIF sold their remaining stakes in Detsky Mir through offering resilting

  • Increased efficiency in managing pharmaceuticals business. In July 2020, in order to improve efficiency in the management of pharmaceutical assets, Sistema established ALIUM GROUP and transferred its equity stakes in Sintez and Alium to be managed by ALIUM GROUP[1]

  • New bonds issues. In July 2020, the Corporation placed RUB 10 billion series 001Р-14 exchange-traded bonds at a 6.35% coupon rate with a 2.75-year put option. Additionally, the Company repurchased its series 001P-06 bonds in the amount of RUB 4.4 billion and series 001P-09 bonds in the amount of RUB 6.2 billion. In September 2020, the Corporation placed RUB 10 billion series 001P-15 exchange-traded bonds at a 6.70 coupon rate and with a 4-year put option.

  • Optimisation of the debt portfolio. In September 2020, Sistema and Sberbank signed an agreement whereby Sistema's stake in MTS has been fully released from pledge. A loan secured by a pledge of 16% MTS shares was raised by Sistema in February 2018. The outstanding loan amount is RUB 37.9 billion with maturity in 2025.

  • MTS share buyback. As part of the MTS’s share buyback programme of up RUB 15 billion, Sistema's wholly-owned subsidiary Sistema Finance S.A. in July 2020 sold 2,587,059 ordinary shares of PJSC MTS to a wholly-owned subsidiary of MTS LLC Bastion for RUB 834 million.

INITIATIVES TO COMBAT COVID-19

  • Production of COVID-19 vaccine. Pharmaceutical plant Binnopharm[2], part of Alium Group, became the only production facility in Russia to be engaged in the manufacturing of the world's first licensed vaccine against COVID-19 ("Sputnik V"), in partnership with the Gamaleya Scientific Research Institute of Epidemiology and Microbiology. Binnopharm's production capacity enables it to produce around 1.5 million doses of the vaccine per year. Mass production of the vaccine is scheduled to start at the end of 2020.

  • Production of pharmaceutical products to fight COVID-19. Over 40 pharmaceutical products produced by Sintez and Alium were recommended by the Ministry of Health of the Russian Federation as medications for the treatment and prevention of COVID-19 and its co-morbidities.

  • Increasing capabilities for COVID-19 diagnostics. In April 2020, Sistema-Biotech obtained a registration certificate issued by the Russian healthcare regulator Roszdravnadzor for its highly accurate laboratory-based coronavirus detecting test system and, in May 2020, signed a contract with the healthcare department of the Moscow city government to supply 1 million test systems. Sistema-Biotech has also launched clinical and laboratory trials of a new rapid response system able to detect COVID-19 within 30 minutes and within the workplace and public places, obtaining a registration certificate issued by Roszdravnadzor in July 2020. In August, the Company also registered two new test systems able to improve the efficiency and speed of laboratory operations.

  • Medical help against COVID-19. Medsi has provided a full range of diagnosis and treatment measures, including comprehensive out-patient examinations (computer tomography, PCR analyses and quality testing for coronavirus antibodies); at-home care for COVID-19 patients; repurposing its in-patient unit as a hospital where, since 1 April, more than 2,000 patients have been cured of COVID-19 and pneumonia; remote consulting and rehabilitation services for patients recovered from COVID-19 and pneumonia via the SmartMed telemedical service.

  • Creation of a Support Centre for medical personnel focused on providing organisational and financial support to healthcare workers during and in the aftermath of the pandemic. Over RUB 1.5 billion were raised to support the social media initiative #StranaBezVirusa; Sistema donated 25,000 COVID-19 diagnostic test systems to approximately ten Russia regions, alongside donations of pharmaceuticals, personal protective equipment, thermal cameras, lung ventilators, ambulance cars, and other new equipment; 200,000 protective suits were purchased from China and donated to frontline hospital staff in Moscow and the Moscow region.

PROGRESSING IN ESG

  • In May 2020, Sistema's Board of Directors approved an amended version of the Corporate Governance Code consistent with international best practices in ESG (Environmental, Social and Governance) and reflecting the Corporation's commitment to best-in-class ESG performance.

  • In June 2020, Sistema’s Board of Directors approved Sistema PJSFC’s new Sustainability Policy, which codifies the Corporation's approach to sustainability and responsible investment management.

  • Sistema was confirmed as a constituent of the FTSE4Good Index Series for the fifth year in a row following the June 2020 index review. This attests to Sistema’s commitment to responsible investing and portfolio management and to improvement of sustainability practices and reporting at the Group level and within portfolio companies.

2Q 2020 FINANCIAL HIGHLIGHTS

  • Consolidated revenue[3] remained largely unchanged year-on-year and stood at RUB 155.1 billion.

  • Adjusted OIBDA[4] amounted to RUB 54.8 billion, a slight decrease of 0.6% year-on-year.

  • Adjusted OIBDA margin was 35.4%.

  • Adjusted net profit attributable to Sistema amounted to RUB 1.9 billion.

 Vladimir Chirakhov, President and Chief Executive Officer of Sistema, said:

 

“In the second quarter 2020, despite the very considerable impact felt by the Russian and the global economy as a result of the pandemic, Sistema’s diversified portfolio proved resilient and delivered stable results. Year-on-year we posted only a minor reduction in consolidated revenues as weaker performance of Business Nedvizhimost, Cosmos Hotel Group and Medsi under the impact of the lockdown was offset by strong revenue dynamics at MTS and Segezha.

 

MTS delivered outstanding results despite the loss of international roaming revenue and reinforced its market leadership. Segezha Group achieved a year-on-year increase in revenue on the back of further improvement in efficiencies both in production and marketing and despite softer global markets for its products. Medsi successfully adapted its operations to combat COVID-19 and while it saw revenue contracting year-on-year, the results far exceeded our initial expectations.  

  

We are now looking ahead with cautious optimism as we see some encouraging signs of recovery across our portfolio, particularly at the level of portfolio companies hit most severely during the second quarter – our hospitality, healthcare and rental businesses.

 

Despite market dislocations, Sistema continues to monetise assets in line with its strategy and value creation model. Sistema has now fully exited Detsky Mir via two market transactions in June and September. The history of Sistema’s shareholding in Detsky Mir showcases the transformative value that Sistema can add to its portfolio companies and illustrates the investment proposition that the Group offers to its investors.

 

We are also proud that Detsky Mir has become the first Russian company that has achieved almost a 100% free float. This is a significant milestone in the development of the Russian capital markets and corporate governance.

 

I had the privilege of serving as the company’s CEO for eight years, and being part of the team that made this transformation a reality. I am confident that Detsky Mir will continue to go from strength to strength and I wish the management team every success for the future.”

 

Sistema’s management will host a conference call today at 10:00 am (New York time) / 3:00 pm (London time) / 4:00 pm (CEST) / 5:00 pm (Moscow time) to present and discuss the 2Q 2020 results.

 

***

 

To participate in the conference call, please dial:

 

Russia

+7 495 213 1767

8 800 500 9283 (toll free)

 

UK

+44 330 336 9125

0800 358 6377 (toll free)

 

US

+1 929-477-0324

800-289-0571 (toll free)

 

Conference ID: 7127461

 

Link to webcast: https://webcasts.eqs.com/sistema20200903

 

Or quote the conference call title: "Sistema Second Quarter 2020 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

Nikolai Minashin

Tel.: +7 (495) 730 66 00

n.minashin@sistema.ru

Public Relations

Sergei Kopytov

Tel.: +7 (495) 228 15 32

kopytov@sistema.ru


Download full press release



[1] ALIUM GROUP now manages stakes of the Corporation in the pharmaceutical companies Sintez (owns Biocom) and Alium (unites Obolenskoye and Binnopharm under the Alium brand).


[2] In addition to Russia’s Gamaleya Scientific Research Institute of Epidemiology and Microbiology (Gamaleya Scientific Research Institute), where the vaccine was developed.


[3] Hereinafter results for 2Q 2019 are presented to reflect the reclassification of assets of Detsky Mir, Leader Invest, MTS’s business in Ukraine and RTI’s microelectronics business as part of discontinued operations.


[4] Hereinafter please see Appendix А of the press-release for 2Q 2020.



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