GLPR.L Regulatory News (GLPR)

For immediate release 17 March 2017

Global Ports Investments PLC

2016 Full-Year Results

Global Ports Investments PLC ("Global Ports" or the "Company", together with its subsidiaries and joint ventures, the "Group" or the "Global Ports Group"; LSE ticker: GLPR) today announces its operational results and publishes full-year results for the financial year ended 31 December 2016.

http://www.rns-pdf.londonstockexchange.com/rns/7810Z_1-2017-3-17.pdf

http://www.rns-pdf.londonstockexchange.com/rns/7810Z_2-2017-3-17.pdf

Certain financial and operational information which is derived from the management accounts is marked in this announcement with an asterisk {*}. Information (including non-IFRS financial measures) requiring additional explanation or terms which begin with capital letters and the explanations or definitions thereto are provided at the end of this announcement. 

SUMMARY

While there were elements of a recovery in the Russian container market in the second half of 2016, resulting in a 3.8% year on year increase in volumes in that period, the recovery for the full year remained subdued with an overall increase of 1%.

Global Ports' Consolidated Marine Container throughput declined 19%* in 2016 to 1,128 thousand TEU* largely driven by the disciplined commercial strategy of the Group against a backdrop of growing competition and low capacity utilisation rates[1] in the Russian container industry. Global Ports' Consolidated Marine Container Throughput volumes in the second half of 2016 decreased by 3.6% compared to the first half of 2016.

In the reporting period, the Group continued to focus on developing additional revenue streams, improving operational efficiency, free cash flow generation and deleveraging. As a result of these actions, Global Ports' Adjusted EBITDA was USD 224.3 million* with a healthy Adjusted EBITDA margin of 67.7%* and strong Free Cash Flow of USD 178 million*. The Group decreased its Total Debt[2] by a further USD 104.2 million* over the period.

Group financial and operational highlights for 2016

● The Russian container market turned from negative in the first half of 2016 (-1.9% year on year) to positive in the second half of 2016 (+3.8% year on year). This resulted in a 1% year on year increase overall in 2016. Total container throughput in the Russian container market for 2016 was 3.8 million TEU, while capacity utilisation across the industry remained below 50%.

● The Group's Consolidated Marine Container Throughput declined 19%* to 1,128 thousand TEU* in 2016 compared to 1,393 thousand TEU* in 2015. The decline in throughput was largely driven by the Group's focus on providing a premium quality service and maintaining a disciplined commercial strategy during the period against a backdrop of increasing competition in a market with low capacity utilisation.

● In order to improve utilisation of available space at its terminals, the Group continued to focus on increasing bulk cargo volumes in 2016. As a result, Consolidated Marine Bulk Throughput in 2016 increased by 884 thousand tonnes*, or 66.7%*, reaching a record for the Group of 2.21 million tonnes*, compared to 1.32 million tonnes* in 2015.

● Consolidated Inland Container Throughput increased 58.4%* year on year to 174 thousand TEU* in 2016, due to ongoing containerisation in Russia and the Group's efforts to attract container volumes for exporting cargoes out of Russia.

● Consolidated Inland Bulk Throughput increased 11.1% in 2016, to 304 thousand tonnes*, compared to 273 thousand tonnes* in 2015.

● Revenue in 2016 was 18.3% lower than in 2015 at USD 331.5 million while full-year Adjusted EBITDA declined 22.9%* to USD 224.3 million*, mainly due to lower container throughput and a 2.4% decrease in average revenue per TEU[3], which was partially offset by growth in other cargo throughput.

● The Group's capital expenditures on a cash basis amounted to USD 18.0 million in 2016, well below the USD 25-35 million guidance provided. The low level of CAPEX was achieved without compromising service quality, reliability or the safety of operations at the Group's already well invested terminals.

● Free Cash Flow remained at a high level, with USD 178 million* generated during the period, although this was 24.8%* below what was generated in 2015. This decline was primarily due to a decrease in cash generated from operations.

● The Group continued to focus on deleveraging: Net Debt[4] was reduced by USD 100.3 million* in 2016. The Group decreased its Total Debt by USD 104.2 million* over the period with Total Debt down nearly USD 400 million* since the NCC Group acquisition at the end of 2013.

● The Group successfully refinanced most of its debt portfolio by issuing a USD 350 million Eurobond due January 2022, a USD 350 million Eurobond due September 2023 and three 5-year tranches of Russian rouble denominated bonds swapped to USD for an aggregate amount of approximately USD 209 million*. This allowed Global Ports to its maturity profile, as well as increase the share of fixed-rate borrowings to almost 100%* of its portfolio.

● In line with statements made in March 2015, the Group continues to prioritise deleveraging over dividend distribution.

Vladislav Baumgertner, CEO of Global Ports Management, commented:

"While we began to see some encouraging signs starting in the second half of 2016, the Russian container market remained sluggish for the year as a whole. Within this context we focused on developing additional revenue streams from other cargoes as well as improving efficiencies within our business. While these other cargoes represent a minor part of our business, it is noteworthy that our handling volumes of bulk increased 67% last year. We have further thoroughly analysed our business processes and drawn a clear roadmap to achieving additional efficiency gains in our operations going forward.

The Group successfully continued the deleveraging process with the repayment of nearly USD 400 million* in debt since the NCC acquisition in 2013, which is a testament to the Group's ability to generate cash even in difficult markets. Through the issuance of local bonds and Eurobonds we have been able to hedge a large part of our interest rate risk and increase the Group's financial flexibility while extending our debt maturity profile.

There are some early signs of improvement in both consumer sentiment and the broader macro-economic environment in Russia. After 21 months of decline, we began to see gradual market growth starting last May, which reached around 9% in the January - February 2017 period year on year. In order to stimulate handling volumes so as to benefit from this market growth, we introduced significantly more pricing initiatives in the start of 2017 than in prior periods. Given this and the intensifying pressure on prices as a result of the high level of unutilised capacity in the market, we currently anticipate declines in our revenues per TEU moving from an approximately three percent[5] decline last year toward a double digit decline over the current year.

I am convinced, that, Global Ports' well invested assets, operational skills and high service quality will ensure that we are well positioned to capitalise on any ongoing market recovery."

Further information is available in the following Appendices:

● Appendix 1: Results of operations for Global Ports for the twelve months ended 31 December 2016;

● Appendix 2: Reconciliation of Additional data (Non IFRS) to the Consolidated Financial Information;

● Appendix 3: Definitions and Presentation of Information; and

● Appendix 4: Investor Presentation. http://www.rns-pdf.londonstockexchange.com/rns/7810Z_-2017-3-17.pdf

Other

Pursuant to Article 2.1(i) (ii) of the Transparency Directive (2004/109/EC) and Rule 6.4.2 of the Disclosure and Transparency Rules of the UK Financial Services Authority, the Company confirms that it has chosen the United Kingdom as its Home State.

Downloads

The consolidated financial statements 2016 for Global Ports are available for viewing and downloading at www.globalports.com.

Analyst and Investor Conference call

The publication of these results will be accompanied by an analyst and investor conference call hosted by:

· Vladislav Baumgertner, Chief Executive Officer, Global Ports Management LLC;

· Mikhail Loganov, Chief Financial Officer, Global Ports Management LLC;

· Evgeny Zaltsman, Head of Business Development, Global Ports Management LLC;

· Douglas Smith, Chief Operational Officer, Global Ports Management LLC;

· Arnout Dirk Lugtmeijer, General Manager of Vopak E.O.S.;

· Dirk van Assendelft, General Manager of Multi-Link Terminals;

· Alexander Iodchin, Managing Director of Global Ports Investments PLC.

Date: Friday, 17 March 2017

Time: 14.00 UK / 10.00 US (east coast) / 17.00 Moscow

To participate in the conference call, please dial one of the following numbers and ask to be put through to the "Global Ports" call:

Standard International Access: +44 (0) 20 3003 2666

UK Toll Free: 0808 109 0700

USA Toll Free: +1 866 966 5335

Russia Toll Free: 8 10 8002 4902044

ENQUIRIES

Global Ports Investor Relations

Mikhail Grigoriev / Yana Gabdrakhmanova

+7 495 989 4769

Email: ir@globalports.com

Global Ports Media Relations

Anna Vostrukhova

+7 495 989 4769

E-mail: media@globalports.com 

Teneo Blue Rubicon

Laura Gilbert / Sabine Pirone

+44 20 7240 2486

E-mail: globalports@teneostrategy.com

NOTES TO EDITORS

Global Ports Investments PLC is the leading operator of container terminals in the Russian market.

Global Ports' terminals are located in the Baltic and Far East Basins, key regions for foreign trade cargo flows. Global Ports operates five container terminals in Russia (Petrolesport, First Container Terminal, Ust-Luga Container Terminal[6] and Moby Dik[7] in the Russian Baltics, and Vostochnaya Stevedoring Company in the Russian Far East) and two container terminals in Finland[8] (Multi-Link Terminals in Helsinki and Kotka). Global Ports also owns inland container terminals Yanino Logistics Park[9] and Logistika-Terminal, both located in the vicinity of St. Petersburg, and has a 50% stake in the major oil products terminal AS Vopak E.O.S.[10] in Estonia.

Global Ports' Revenue for 2016 was USD 331.5 million and Adjusted EBITDA was USD 224.3 million*. Consolidated Marine Container Throughput was 1,128 thousand TEU* in 2016.

Global Ports' major shareholders are Transportation Investments Holding Limited (operating under the brand name of N-Trans), one of the largest private transportation and infrastructure groups in Russia (30.75%), and APM Terminals B.V. (30.75%), whose core expertise is the design, construction, management and operation of ports, terminals and inland services. APM Terminals operates a global terminal network of 73 ports and 140 inland services facilities, giving the company a global presence in 69 countries. 20.5% of Global Ports shares are traded in the form of global depositary receipts listed on the Main Market of the London Stock Exchange (LSE ticker: GLPR).

For more information please see: www.globalports.com

LEGAL DISCLAIMER

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Global Ports. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. Global Ports wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Global Ports does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Global Ports, including, among others, general political and economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries Global Ports operates in, as well as many other risks related to Global Ports and its operations.

Appendix 1: Results of operations for Global Ports for the twelve months ended 31 December 2016

The financial information presented in this appendix is extracted from the consolidated financial statements of the Global Ports for the twelve month period ended 31 December 2016, prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). This appendix also includes certain non-IFRS financial information, identified using capitalised terms below. For further information on the calculation of such non-IFRS financial information, see Appendix 2 (Definitions and Presentation of Information) and the section entitled "Non-IFRS Measures: Adjusted EBITDA and Adjusted EBITDA Margin" below. Readers of this appendix should read the entire announcement together with the Global Ports Group Consolidated Financial Statements also released on the date hereof, and not just rely on the summary information set out below.

Certain financial and operational information which is derived from the management accounts is marked in this announcement with an asterisk {*}.

Rounding adjustments have been made in calculating some of the financial and operational information included in this presentation. As a result, numerical figures shown as totals in some tables may not be exact arithmetic aggregations of the figures that precede them.

Operating Information

The table below sets out the container and bulk cargo throughput of the Group's terminals for the periods indicated. Gross throughput is shown on a 100% basis for each terminal, including terminals held through joint ventures and accounted for using the equity method.

The Russian container market in the second half of 2016 demonstrated signs of gradual recovery: after a 1.9% year on year decline in the first half of 2016, the market rose 3.8% year on year in the second half of 2016, resulting in an overall 1% increase in throughput at container terminals in Russia in 2016 compared to 2015.

The throughput of laden export containers at Russian container terminals continued its rapid growth in 2016, mainly due to the greater use of containers in Russia and increased exports driven by the depreciation of the Russian rouble.

Containerised exports in 2016 amounted to 1,054 thousand of laden TEU which represents growth of 12.5% compared to 2015. Approximately 122 thousand TEUs of empty containers were imported into Russia in 2016 to support laden export, which is 1.7 times more than in 2015. The import of empty containers represented 7.5% of total import volumes in 2016 and contributed to overall container throughput volumes.

The growth of throughput in the Russian Baltic Basin in 2016 was 1.5% year on year. The throughput in the Russian Far Eastern Basin, where one of the Group's marine terminals is located, declined 3.2% in 2016.

The Group's Consolidated Marine Container Throughput decreased 19.0%, to 1,128 thousand TEU in 2016, compared to 1,393 thousand TEU in 2015. The decline in throughput was largely driven by increased competition on the market with low capacity utilisation rates, as well as the Group's commercial strategy of focusing on maintaining pricing discipline.

The Group's car handling volumes decreased in 2016 by 4.6% to 96 thousand cars, compared to 101 thousand cars 2015 as a 17.8% year on year decline in car throughput in the first half of 2016 was partially offset by 12.1% year on year growth in the second half of the reporting period.

Traditional Ro-ro handling increased 14.4% to 15 thousand units in 2016, from 13.1 thousand units in 2015.

In order to improve the utilisation of the available space at its terminals the Group continued to focus on increasing bulk cargo volumes in its terminals in 2016. As a result, Consolidated Marine Bulk Throughput increased in 2016 by 884 thousand tonnes, or 66.7%, to 2,210 thousand tonnes, a record level in the Group's history, compared to 1,326 thousand tonnes in 2015. The growth in Consolidated Marine Bulk Throughput was primarily driven by the growth in export coal handling at VSC as well as growth in scrap metal and other export bulk cargo handling at PLP. In response to high demand for coal handling services and as a part of the original plan to bring coal handing capacity at VSC to 3 million tons, the Group is increasing its handling capacity of coal from 1.0 million tonnes in 2015 to c. 2.5 million tonnes of coal before the end of 2017.

Consolidated Inland Container Throughput increased 58.4% year on year to 174 thousand TEU in 2016, due to the ongoing containerisation in Russia and increased use of containers for exporting cargoes out of Russia.

Results of operations of Global Ports for the twelve-month period ended 31 December 2016 and 31 December 2015

The following table sets out the principal components of the Group's consolidated income statement and certain additional non-IFRS data of the Group for the twelve months ended 31 December 2015 and 2016.

Revenue

The following table sets forth the components of the consolidated Revenue for 2016 and 2015.

Revenue decreased by USD 74.2 million, or 18.3%, from USD 405.7 million in 2015 to USD 331.5 million in 2016[11] primarily for the reasons described below.

Revenue from container handling declined 21.0%, or USD 71.5 million, from USD 341.3 million* in 2015 to USD 269.8 million* in 2016. This decline was driven by a 19.0% decline in consolidated container throughput as well as a 2.4%* decline in Revenue per TEU.

Other Revenue declined 4.2%, or USD 2.7 million, from USD 64.4 million* in 2015 to USD 61.7 million* in 2016 as growth in Revenue from coal and other bulk cargo handling driven by the growth in bulk throughput described above was offset by the decline in revenue from other services, primarily related to Russian rouble-priced railway services at VSC[12] and lower volumes of such services provided by VSC due to decreased container throughput.

The share of non-container revenue in consolidated revenue of the Group increased from 16%* in 2015 to 19%* in 2016.

In order to increase the attractiveness of its ports, starting from 2017 Global Ports has introduced Russian rouble-based pricing for services offered to Russian freight-forwarders.

Cost of sales

The following table sets out a breakdown by expense of the Cost of sales for 2015 and 2016:

Cost of sales increased by USD 9.7 million, or 5.5%, from USD 176.4 million in 2015 to USD 186.1 million in 2016. This increase was primarily driven by a 44.7%, or USD 20.8 million, increase in Impairment of property, plant and equipment and intangible assets from USD 46.7 in 2015 to USD 67.5 million, due to the reasons described below.

Cash cost of sales decreased 2.8%, or USD 2.1 million, to USD 71.0 million in 2016 from USD 73.1 million in 2015. This change was the result of the Group's continued focus on efficiency, a decline in container throughput and the related decrease in costs (primarily Staff costs and Fuel, Electricity and gas expenses). These decreases were partially offset by growth in expenses related to the 66.7% growth in Consolidated Marine Bulk Throughput, the 58.4% increase in Consolidated Inland Container Throughput and the 11.1% increase in consolidated inland bulk throughput described above, as well as CPI in Russia, which was 5.4%[13] in 2016.

Impairment of property, plant and equipment and intangible assets

The Group follows its accounting policies to test goodwill and other non-financial assets for possible impairment or reversal of impairment. Based on the current world-wide economic circumstances and taking into account developments within the Russian Federation, the Group performed a test of the estimated recoverable amount of the cash-generating units (CGUs) compared to their carrying value and recognised an impairment charge of USD 67.5 million for FCT CGU in 2016, resulting in the carrying amount of the CGU being written down to its recoverable amount.

Gross profit

Gross profit decreased by USD 83.9 million, or 36.6%, from USD 229.3 million in 2015 to USD 145.4 million in 2016. This decrease was due to the factors described above.

Administrative, selling and marketing expenses

Administrative, selling and marketing expenses decreased by USD 5.7 million, or 13.4%, from USD 42.3 million in 2015 to USD 36.7 million in 2016. This was primarily due to the decrease of USD 3.6 million or 13.9% in Staff costs, as well as a decrease of USD 1.5 million, or 25.9%, in other Administrative, selling and marketing expenses.

Share of (loss)/profit of joint ventures accounted for using the equity method

Share of (loss)/profit of joint ventures accounted for using the equity method changed from a profit of USD 3.8 million in 2015 to a loss of USD 40.4 million in 2016. This change was mainly due to unfavourable results from Vopak E.O.S (Estonia), which were caused primarily by a structural deterioration of the business environment in which the terminal operates, which is heavily dependent on the flows of Russian oil products, and contributed to an impairment of the Group's investment in Vopak E.O.S of USD 39.2 million.

Other gains/(losses)-net

Other gains/(losses)-net amounted to a loss of USD 68.8 million in 2016, compared to a loss of USD 6.0 million in 2015. This was primarily due to currency exchange losses that increased to USD 65.5 million in 2016, compared to currency exchange losses of USD 5.7 million in 2015. This increase was primarily the result of the recycling of derivative losses previously recognised through other comprehensive income and the depreciation of the Russian rouble in 2016[14].

Operating profit

Operating profit changed from a profit of USD 184.8 million in 2015 to a loss of USD 0.5 million in 2016 due to the factors described above.

Finance costs-net

Finance costs-net changed from a loss of USD 215.1 million in 2015 to a profit of USD 110.3 million in 2016. This change was primarily due to the change of foreign exchange loss on financing activities from USD 151.0 million in 2015 to USD 142.6 million profit in 2016, resulting mostly from the revaluation of US dollar-denominated borrowings in the Group's subsidiaries[15] and the positive change in the fair value of derivative instruments in the amount of USD 64.4 million.

Profit/(loss) before income tax

Profit before income tax changed to a profit of USD 109.9 million in 2016 from a loss of USD 30.3 million due to the factors described above.

Income tax (expense)/credit

In 2016, income tax expense was USD 48.6 million, compared to USD 3.4 million in 2015. The Group's effective tax rate, calculated as income tax expense divided by profit before income tax, was 44.2% in 2016. The difference in the effective tax rate from the normally applicable Russian statutory tax rate of 20% was largely driven by the effect of expenses and losses not deductible for tax purposes, withholding tax on undistributed profits and non‑taxable results of joint ventures.

Profit/(loss) for the period

Profit for the period amounted to a profit of USD 61.3 million in 2016 compared to a loss of USD 33.7 million in 2015 due to the factors described above.

Liquidity and capital resources

General

As at 31 December 2016, the Group had USD 119.3 million in cash and cash equivalents.

The Group's liquidity needs arise primarily in connection with the repayments of principal and interest payments, and capital investment programmes of each of its operations as well as their operating costs. In the period under review, the Group's liquidity needs were met primarily by cash flows generated from operating activities as well as through borrowings. The management of the Group expects to fund its liquidity requirements in both the short and medium term with cash generated from operating activities and borrowings.

As a result of the shareholding or joint venture agreements at Moby Dik, the Finnish Ports, Yanino and Vopak E.O.S., the cash generated from the operating activities of each of the entities in those businesses is not freely available to fund the other operations and capital expenditures of the Group or any other businesses within the Group and can only be lent to an entity or distributed as a dividend with the consent of the other shareholders' to those arrangements.

As at 31 December 2016, the Group had USD 1,119.6 million of total borrowings, of which USD 78.7 million comprised current borrowings and USD 1,040.9 million comprised non‑current borrowings. As at 31 December 2016, the Group had no undrawn borrowing facilities. See also "-Capital resources".

Cash flows

The following table sets out the principal components of the Group's consolidated cash flow statement for 2015 and 2016.

Net cash from operating activities

Net cash from operating activities decreased by USD 52.2 million, or 21.0%, from USD 248.0 million in 2015, to USD 195.8 million 2016. The decrease in net cash from operating activities was primarily due to a USD 78.6 million, or 26.4% decline in the cash generated from operations in 2016 compared to 2015 which was partially offset by the USD 31.6 million or 52.9% decline in tax paid in 2016 compared to 2015.

Net cash used in investing activities

Net cash used in investing activities increased by USD 15.8 million, or 161.1%, from USD 9.8 million in 2015 to USD 25.6 million in 2016. The increase in net cash used in investing activities was primarily due to the fact that net cash used in investing activities in 2015 contained proceeds from the sale of property, plant and equipment of USD 8.7 million, compared to USD 1.0 million in 2016, as well as an increase in Purchases of property, plant and equipment from USD 11.7 million in 2015 to USD 18.0 million in 2016. Despite the USD 6.3 million, or 53.8%, increase in 2016, Purchases of property, plant and equipment remained lower than the previously announced guidance of USD 25-35 million because the Group's modern and already well-invested terminals allowed lower capital investments without compromising efficiency and safety of operations.

Net cash used in financing activities

Net cash used in financing activities decreased by USD 16.5 million, or 8.6%, from USD 192.4 million in 2015 to USD 175.9 million in 2016. The decrease in net cash used in financing activities was primarily due to a decrease in interest paid and proceeds from derivative financial instruments[16], by USD 5.9 million or 7.9% from USD 74.4 million in 2015 to USD 68.5 million in 2016 as well as a decrease in net proceeds and repayment of borrowings and finance lease principal payments by USD 11.4 million or 9.7% from USD 118.0 million in 2015 to USD 106.6 million in 2016.

Capital resources

The Group's financial indebtedness consists of bank borrowings, bonds, loans from third parties, finance leases liabilities and net derivative financial instruments and was USD 1,066.9 million as at 31 December 2016. As of that date, all of the Group's bank borrowings were secured by pledges on property, plant and equipment, equity interests in certain Group members, assignments of certain contractual rights and by guarantees and suretyships granted by certain Group members. Certain of these borrowings contain covenants requiring the Group and the borrower to maintain specific indebtedness to Adjusted EBITDA and other ratios, as well as covenants having the effect of restricting the ability of the borrower to transfer assets, make loans and pay dividends to other members of the Group. For more information concerning these borrowings, see Note 22 to the 2016 Annual Consolidated Financial Statements.

The weighted average interest rate of the Group's debt portfolio is 6.7%, including the effects of swap arrangements.

As at 31 December 2016, the Group had leverage of Net debt to Adjusted EBITDA ratio of 4.2* (compared to a ratio of 3.6* as at 31 December 2015).

The following table sets out the maturity profile of the Group's total borrowings (including finance leases) and net derivative financial instruments as at 31 December 2016.

As at 31 December 2016, the carrying amounts of the Group's borrowings were denominated in the following currencies:

As at 31 December 2016, the carrying amounts of a majority of the Group's borrowings denominated in Russian roubles, in the amount of USD 253.2 million, were swapped into U.S. dollars.

Appendix 2: Reconciliation of Additional data (Non IFRS) to the Consolidated Financial Information for the twelve month period ended 31 December 2016

Reconciliation of Adjusted EBITDA to Profit for the period

Reconciliation of Adjusted EBITDA margin to Revenue

Reconciliation of cost of sales adjusted for impairment to Cost of sales

Reconciliation of Total Operating Cash Costs to Cost of sales and administrative, selling and marketing expenses

Reconciliation of operating profit adjusted for impairment to Revenue

Reconciliation of profit for the period adjusted for impairment to Profit for the period

Reconciliation of Cash Costs of Sales to Cost of sales

Reconciliation of Cash Administrative, Selling and Marketing expenses to Administrative, selling and marketing expenses

Reconciliation of Net Debt and Total Debt to Borrowings

Reconciliation of Free Cash Flow to Net cash from operating activities

Appendix 3: Definitions and Presentation of Information

DEFINITIONS

Terms that require definitions are marked with capital letters in this announcement and the definitions of which are provided below in alphabetical order.

The non-IFRS financial measures defined below are presented as supplemental measures of the Group's operating performance, which the Group uses as key performance indicators of the Group's business and to provide a supplemental tool to assist in evaluating current business performance. The Group believes these metrics are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Russian market and global ports sector. These non-IFRS financial measures are measures of the Group's operating performance that are not required by, or prepared in accordance with, IFRS. All of these non-IFRS financial measures have limitations as analytical tools, and investors should not consider any one of them in isolation, or any combination of them together, as a substitute for analysis of the Group's operating results as reported under IFRS and should not be considered as alternatives to revenues, profit, operating profit, or any other measures of performance derived in accordance with IFRS or as alternatives to cash flow from operating activities or as measures of the Group's liquidity. In particular, the non IFRS financial measures should not be considered as measures of discretionary cash available to the Group businesses.

Adjusted EBITDA (a non-IFRS financial measure) for Global Ports Group is defined as profit for the period before income tax expense, finance (income)/costs-net, depreciation of property, plant and equipment, amortisation of intangible assets, share of profit/(loss) of joint ventures accounted for using the equity method, other gains/(losses)-net and impairment of goodwill and property, plant and equipment and intangible assets.

Adjusted EBITDA Margin (a non-IFRS financial measure) is calculated as Adjusted EBITDA divided by revenue, expressed as a percentage. 

Average Storage Capacity is a storage capacity available at Vopak E.O.S. oil products terminals, averaged for the beginning and end of the year.

Baltic Sea Basin is the geographic region of northwest Russia, Estonia and Finland surrounding the Gulf of Finland on the eastern Baltic Sea, including St. Petersburg, Ust-Luga, Tallinn, Helsinki and Kotka.

Consolidated Marine Container Throughput is defined as combined marine container throughput by consolidated marine terminals: PLP, VSC, FCT and ULCT.

Consolidated Marine Bulk Throughput is defined as combined marine bulk by consolidated terminals: PLP, VSC, FCT and ULCT.

Consolidated Inland Container Throughput is defined as combined container throughput by consolidated inland terminals: LT.

Consolidated Inland Bulk Throughput is defined as combined bulk throughput by consolidated inland terminals: LT.

Container Throughput in the Russian Federation Ports is defined as total container throughput of the ports located in the Russian Federation, excluding half of cabotage cargo volumes. Respective information is sourced from ASOP ("Association of Sea Commercial Ports", www.morport.com).

Cash Costs of Sales (a non-IFRS financial measure) are defined as cost of sales, adjusted for depreciation and impairment of property, plant and equipment, amortisation and impairment of intangible assets.

Cash Administrative, Selling and Marketing expenses (a non-IFRS financial measure) are defined as administrative, selling and marketing expenses, adjusted for depreciation and impairment of property, plant and equipment, amortisation and impairment of intangible assets.

CD Holding group consists of Yanino Logistics Park (an inland terminal in the vicinity of St. Petersburg), CD Holding and some other entities. The results of CD Holding group are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below Adjusted EBITDA).

Far East Basin is the geographic region of southeast Russia, surrounding the Peter the Great Gulf, including Vladivostok and the Nakhodka Gulf, including Nakhodka on the Sea of Japan.

First Container Terminal (FCT) is located in the St. Petersburg harbour, Russia's primary gateway for container cargo and is one of the first specialised container terminals to be established in the USSR. The Global Ports Group owns a 100% effective ownership interest in FCT. The results of FCT are fully consolidated.

Finnish Ports segment consists of two terminals in Finland, MLT Kotka and MLT Helsinki (in the port of Vuosaari), in each of which Container Finance currently has a 25% effective ownership interest. The results of the Finnish Ports segment are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Free Cash Flow (a non-IFRS financial measure) is calculated as Net cash from operating activities less Purchase of PPE.

Functional Currency is defined as the currency of the primary economic environment in which the entity operates. The functional currency of the Company and certain other entities in the Global Ports Group is US dollars. The functional currency of the Global Ports Group's operating companies for the years under review was (a) for the Russian Ports segment, the Russian rouble, (b) for Oil Products Terminal segment, and for the Finnish Ports segment, the Euro.

Gross Container Throughput represents total container throughput of a Group's terminal or a Group's operating segment shown on a 100% basis. For the Russian Ports segment it excludes the container throughput of the Group's inland container terminals - Yanino and Logistika Terminal.

Logistika Terminal (LT) is an inland container terminal providing a comprehensive range of container freight station and dry port services at one location. The terminal is located to the side of the St. Petersburg - Moscow road, approximately 17 kilometres from FCT and operates in the Shushary industrial cluster. The Global Ports Group owns a 100% effective ownership interest in LT. The results of LT are fully consolidated.

MLT Group consists of Moby Dik (a terminal in the vicinity of St. Petersburg) and Multi-Link Terminals Oy (terminal operator in Vuosaari (near Helsinki, Finland) and Kotka, Finland). The results of MLT group are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Moby Dik (MD) is located on the St. Petersburg ring road, approximately 30 kilometers from St. Petersburg, at the entry point of the St. Petersburg channel. It is the only container terminal in Kronstadt. The Global Ports Group owns a 75% effective ownership interest in MD, Container Finance LTD currently has a 25% effective ownership interest. The results of MD are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Net Debt (a non-IFRS financial measure) is defined as a sum of current borrowings and non-current borrowings, derivative financial instruments less cash and cash equivalents and bank deposits with maturity over 90 days.

Oil Products Terminal segment consists of the Group's 50% ownership interest in Vopak E.O.S. (in which Royal Vopak currently has a 50% effective ownership interest). The results of the Oil Products Terminal segment are consolidated in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Petrolesport (PLP) is located in the St. Petersburg harbour, Russia's primary gateway for container cargo. The Group owns a 100% effective ownership interest in PLP. The results of PLP are fully consolidated.

Ro-Ro, roll on-roll off is cargo that can be driven into the belly of a ship rather than lifted aboard. Includes cars, buses, trucks and other vehicles.

Russian Ports segment consists of the Global Ports Group's interests in PLP (100%), VSC (100%), FCT (100%), ULCT (80%) (in which Eurogate currently has a 20% effective ownership interest), Moby Dik (75%), Yanino (75%) (in each of Moby Dik and Yanino Container Finance currently has a 25% effective ownership interest), and Logistika Terminal (100%). The results of Moby Dik and Yanino are accounted in the Global Ports' consolidated financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

TEU is defined as twenty-foot equivalent unit, which is the standard container used worldwide as the uniform measure of container capacity; a TEU is 20 feet (6.06 metres) long and eight feet (2.44 metres) wide and tall.

Total Debt (a non-IFRS financial measure) is defined as a sum of current borrowings, non-current borrowings and derivative financial instruments.

Total Operating Cash Costs (a non-IFRS financial measure) is defined as Global Ports Group's cost of sales, administrative, selling and marketing expenses, less depreciation and impairment of property, plant and equipment, less amortisation and impairment of intangible assets.

Ust Luga Container Terminal (ULCT) is located in the large multi-purpose Ust-Luga port cluster on the Baltic Sea, approximately 100 kilometres westwards from St. Petersburg city ring road. ULCT began operations in December 2011. The Global Ports Group owns an 80% effective ownership interest in ULCT, Eurogate, the international container terminal operator, currently has a 20% effective ownership interest. The results of ULCT are fully consolidated.

Vopak E.O.S. includes AS V.E.O.S. and various other entities (including an intermediate holding) that own and manage an oil products terminal in Muuga port near Tallinn, Estonia. The Group owns a 50% effective ownership interest in Vopak E.O.S.. The remaining 50% ownership interest is held by Royal Vopak. The results of Vopak E.O.S. are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Vostochnaya Stevedoring Company (VSC) is located in the deep-water port of Vostochny near Nakhodka on the Russian Pacific coast, approximately eight kilometers from the Nakhodka-Vostochnaya railway station, which is connected to the Trans-Siberian Railway. The Group owns a 100% effective ownership interest in VSC. The results of VSC are fully consolidated.

Weighted average effective interest rate is the average of interest rates weighted by the share of each loan in the total debt portfolio.

Yanino Logistics Park (YLP) is the first terminal in the Group's inland terminal business and is one of only a few multi-purpose container logistics complexes in Russia providing a comprehensive range of container and logistics services at one location. It is located approximately 70 kilometres from the Moby Dik terminal in Kronstadt and approximately 50 kilometres from PLP. The Global Ports Group owns a 75% effective ownership interest in YLP, Container Finance LTD currently has a 25% effective ownership interest. The results of YLP are accounted in the Global Ports' financial information using equity method of accounting (proportionate share of net profit shown below EBITDA).

Appendix 4: Investor Presentation

An investor presentation is available at www.globalports.com.

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