GLPR.L Regulatory News (GLPR)

For immediate release 05 September 2017

Global Ports Investments PLC

2017 Interim 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 its interim condensed consolidated financial information (unaudited) for the six-month period ended 30 June 2017.

Interim condensed consolidated financial information (unaudited) is available here: http://www.rns-pdf.londonstockexchange.com/rns/7995P_1-2017-9-5.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

Driven by the revival in imports due to improving consumer demand and the growing containerisation of exports, the Russian container market demonstrated a strong recovery during the first half of 2017 as well as improving capacity utilisation rates.

On the back of this market growth, Global Ports' Consolidated Marine Container Throughput increased 2.2% in the first half of 2017 to 587 thousand TEU compared to the same period last year. Growth in Consolidated Marine Container Throughput accelerated to 4.4% year on year in the second quarter of 2017. The Group also achieved 41.5% growth in Consolidated Marine Bulk Cargo Throughput in the first half of 2017 compared to the same period last year.

The Group continued to focus on developing additional revenue streams, improving operational efficiency, maximising free cash flow generation and deleveraging. As a result of these actions, Global Ports achieved Revenue of USD 162.5 million, Adjusted EBITDA of USD 97.3 million*, Gross profit of USD 82.5 million and strong Free Cash Flow of USD 70.3 million*. The Group reduced Total Debt[1] by a further USD 35.6 million* over the period.

Group financial and operational highlights for the first half of 2017

● The Russian container market demonstrated a healthy recovery with volumes up 15.7% in the first half 2017. Total container throughput in the Russian container market for the six months of 2017 was 2.2 million TEU.

● The Group's Consolidated Marine Container Throughput increased 2.2% to 587 thousand TEU in the first half of 2017 compared to 575 thousand TEU in the first half of 2016. This growth in throughput accelerated to growth of 4.4% year on year in the second quarter of 2017.

● Pricing initiatives introduced in the beginning of 2017 have, after a certain amount of lead-time, led to improving volumes towards the end of the first half of 2017 and after the end of the first half.

● In order to improve the utilisation of available space at its terminals, the Group continued to focus on increasing bulk cargo volumes. As a result, Consolidated Marine Bulk Throughput increased by 41.5% to 1,313 thousand tonnes in the first half of 2017.

● Revenue in the first half of 2017 declined slightly year on year to USD 162.5 million compared to USD 163.7 million in the first half of 2016. This was the result of a 7.1%* decrease in container revenue that was largely offset by the 30.5%* growth in non-container revenue. The decline in container revenue was largely driven by the 9.2%* decline in Revenue per TEU as a result of pricing initiatives introduced in the beginning of the year.

● Adjusted EBITDA in the first half of 2017 decreased 12.8%* to USD 97.3 million* mainly due to the decline in Revenue per TEU and the impact of the Russian rouble appreciation[2] on the Group's largely RUB-denominated cost base when translated into US dollars.

● The Group's capital expenditures on a cash basis were USD 7.9 million in the first half of 2017 which was spent on maintenance and regular improvements in existing capacity as well as to increase the capacity for coal handling at VSC from 1 million tonnes to 2.5 million tonnes. The Group expects its CAPEX for the whole year to be in line with the mid-term guidance provided previously of USD 25-35 million.

● Free Cash Flow remained at a high level with USD 70.3 million* generated during the period, although this was 22.8%* below the level generated in the first half of 2016. This decline was primarily due to a decrease in cash generated from operations from USD 114.3 million to USD 94.4 million.

● The Group continued to focus on deleveraging: Net Debt[3] was reduced by USD 32.3 million* in the first half of 2017. The Group decreased its Total Debt by USD 35.6 million* over the period with Total Debt down more than USD 432 million* since the NCC Group acquisition at the end of 2013.

● In order to optimise its inland terminal network and support further deleveraging, in August 2017 the Group signed an agreement to sell its 100% of Logistika-Terminal (LT), one of the Group's two inland terminals, to PJSC TransContainer for a consideration of 1.9 billion Russian roubles to be paid upon completion of the transaction.

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

Mikhail Loganov, CEO of Global Ports Management, commented:

"We have seen good recovery and improved capacity utilisation in the industry during the first half of 2017 which is driving accelerated container volume growth in our terminals. At the same time, we maintained our focus on developing additional revenue streams from other cargoes. By capitalising on this opportunistic growth in non-container revenue, Global Ports was able to largely compensate for the decline in container revenue in the period.

Our re-alignment of pricing in the beginning of 2017 combined with the negative cost impact of the strengthening rouble adversely impacted our EBITDA margin despite our efficiency improvement initiatives. Nonetheless, we continued to generate strong EBITDA and Free Cash Flow enabling us to decrease Net Debt by more than USD 32 million* in the reporting period.

With the current market backdrop showing signs of improvement, we are confident that Global Ports' well invested assets, operational skills and high-quality service 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 six months ended 30 June 2017;

● 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/7995P_-2017-9-5.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 condensed consolidated financial information (unaudited) for the six months ended 30 June 2017 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:

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

· Brian Bitsch, Chief Commercial Officer, 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: Tuesday, 5 September 2017

Time: 13.00 UK / 8.00 US (east coast) / 15.00 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

+7 495 989 4769

+7 916 991 7396

Email: ir@globalports.com

Global Ports Media Relations

Anna Vostrukhova

+7 495 989 4769

E-mail: media@globalports.com 

Teneo Blue Rubicon

Laura Gilbert / Zoё Watt

+44 20 7240 2486

E-mail: globalports@teneobluerubicon.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[4] and Moby Dik[5] in the Russian Baltics, and Vostochnaya Stevedoring Company in the Russian Far East) and two container terminals in Finland[6] (Multi-Link Terminals in Helsinki and Kotka). Global Ports also owns inland container terminals Yanino Logistics Park[7] and Logistika-Terminal[8], both located in the vicinity of St. Petersburg, and has a 50% stake in the major oil products terminal Vopak E.O.S.[9] in Estonia.

Global Ports' Revenue for the first half of 2017 was USD 162.5 million and Adjusted EBITDA was USD 97.3 million*. Consolidated Marine Container Throughput was 587 thousand TEU in the first half of 2017.

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 76 ports and 117 inland services facilities, giving the company a global presence in 59 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 six months ended 30 June 2017

The financial information presented in this appendix is extracted from the condensed consolidated financial information (unaudited) of the Global Ports for the six month period ended 30 June 2017, 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 3 (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 Condensed Consolidated Financial Information (unaudited) 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 demonstrated a rapid recovery in the first half of 2017 rising 15.7% y-o-y primarily driven by 21.8% growth in the handling of laden import containers. The throughput of laden export containers at Russian container terminals continued to grow rapidly in the first half of 2017 (+9% y-o-y), mainly due to increased exports and the wider use of containers in Russia.

Overall marine container throughput by Russian terminals reached 2.17 million TEU in the first six months of 2017 compared to 1.88 million TEU for the same period of 2016. As a result of market growth, average container handling capacity utilisation[10] for the market improved to approximately 57% in July 2017 compared to 47% in 2016.

Container throughput in the Far East and South of Russia demonstrated higher growth rates of 29.9% y-o-y and 17.3% y-o-y respectively, underpinned by the deficit of shipping capacity on the Asia-Europe route that is handled through the Baltic basin. The Russian Baltic Basin, where six of the Group's seven marine terminals are located, remained the key container gateway to Russia handling 51.0% of the total containers in Russia in the first half of 2017, although with a slower growth rate of 10.3% y-o-y.

Containerised exports in the first half of 2017 were 0.67 million of laden TEU representing growth of 8.8% compared to the first half of 2016.

The Group's Consolidated Marine Container Throughput increased 2.2% to 587 thousand TEU in the reporting period compared to 575 thousand TEU in the first half of 2016. After a lead time following the introduction of pricing initiatives in the beginning of 2017, the Group delivered 4% growth in container volumes in the second quarter of 2017, with growth accelerating further to 17% y-o-y in July-August 2017.

Traditional Ro-ro handling increased 61.0% to 10.7 thousand units in the first half of 2017, from 6.6 thousand units in the first half of 2016.

The Group's car handling volumes decreased in the first half of 2017 by 17.5% to 38 thousand cars, compared to 46 thousand cars in the first half of 2016.

In order to improve the utilisation of the available space at its terminals the Group continued to focus on increasing bulk cargo volumes in 2017. As a result, Consolidated Marine Bulk Throughput increased 41.5% in the first half of 2017 by 385 thousand tonnes to 1,313 thousand tonnes compared to 928 thousand tonnes in the first half of 2016. 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 handling capacity at VSC to 3 million tonnes, 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 3.6% y-o-y to 88 thousand TEU in the first half of 2017, 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 six-month period ended 30 June 2017 and 30 June 2016

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 six months ended 30 June 2017 and 2016.

Revenue

The following table sets forth the components of the consolidated Revenue for the first six months of 2017 and 2016.

In the six months ended 30 June 2017 revenue declined slightly by USD 1.2 million or 0.8% y-o-y to USD 162.5 million[11]. The decline in container handling revenue was offset by an increase of other revenue due to the reasons described below.

Revenue from container handling declined 7.1%, or USD 9.7 million, from USD 136.0 million* in the six months ended 30 June 2016 to USD 126.3 million* in the six months ended 30 June 2017. This decline was driven by a 9.2%* decline in consolidated Revenue per TEU, which was partially offset by 2.2% growth in consolidated container throughput.

Other revenue increased by 30.5%, or USD 8.4 million, from USD 27.7 million* in the six months ended 30 June 2016 to USD 36.2 million* in the six months ended 30 June 2017. This increase was due to the growth in Revenue from coal and other bulk cargo handling driven by the growth in bulk throughput described above as well as growth in revenue from other services, primarily related to Russian rouble-priced railway services at VSC[12] and the higher volumes of such services provided by VSC due to increased container throughput.

The share of non-container revenue in consolidated revenue of the Group increased from 16.9%* in the six months ended 30 June 2016 to 22.3%* in the six months ended 30 June 2017.

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

Cost of sales

The following table sets out a breakdown by expense of the Cost of sales for the six months ended 30 June 2017 and 2016:

Cost of sales increased by USD 24.9 million, or 45.2%, from USD 55.1 million in the six months ended 30 June 2016 to USD 79.9 million in the six months ended 30 June 2017. This increase was driven by a USD 11.4 million non-cash item Impairment of property, plant and equipment and intangible assets as well as the USD 3.0 million or 19.3% growth in Depreciation of property, plant and equipment from USD 15.7 million in the six months ended 30 June 2016 to USD 18.8 million in the six months ended 30 June 2017. The growth of Depreciation of property, plant and equipment was primarily driven by the appreciation of the Russian rouble mentioned below.

Cash Cost of Sales increased 30.6%, or USD 10.1 million, to USD 43.2 million* in the six months ended 30 June 2017 from USD 33.1 million* in the six months ended 30 June 2016. As the vast majority of the Group's Cash Cost of Sales items are nominated in Russian roubles, the volatility of the exchange rate has a significant impact on costs presented in US dollars. The average exchange rate of the Russian rouble appreciated against the US dollar by 21.4%* in the first half of 2017 compared to the first half of 2016. Cash Cost of Sales adjusted for foreign exchange rate change grew 7.6%*[13] on the back of 2.2% growth in container throughput and 41.5% growth in Consolidated Marine Bulk Throughput.

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. For LT, the inland terminal near St.-Petersburg, the fair value of property, plant and equipment has been assessed using comparative market method taking into account the agreement for its sale signed in August 2017. Based on the procedure above the impairment charges of USD 11.4 million for LT were recognised. The impairment charge was fully allocated to property, plant and equipment.

Gross profit

Gross profit decreased by USD 26.1 million, or 24.0%, from USD 108.7 million in the six months ended 30 June 2016 to USD 82.5 million in the six months ended 30 June 2017. This decrease was due to the factors described above.

Administrative, selling and marketing expenses

Administrative, selling and marketing expenses increased by USD 3.2 million, or 16.3%, from USD 19.4 million in the six months ended 30 June 2016 to USD 22.6 million in the six months ended 30 June 2017. This was primarily due to the increase of USD 2.6 million or 21.8% in Staff costs, as well as an increase of USD 0.6 million*, or 7.8%*, in Other expenses which were partially offset by USD 0.8 million or 24.6% decrease in Legal, consulting and other professional services. As a substantial part of the Group's Administrative, selling and marketing expenses are nominated in Russian roubles, the volatility of the exchange rate has a significant impact on costs presented in US dollars. The average exchange rate of the Russian rouble appreciated against the US dollar by 21.4% in the first half of 2017 compared to the first half of 2016. Administrative, selling and marketing expenses adjusted for foreign exchange rate change declined 2.7%*13 in the first half of 2017 compared to the first half of 2016.

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 2.2 million in the first half of 2016 to a loss of USD 10.1 million in the first half of 2017. 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 10.6 million.

Other gains/(losses)-net

Other gains/(losses)-net amounted to a loss of USD 35.8 million in the first half of 2017, compared to a loss of USD 31.3 million in the first half of 2016. This was primarily due to currency exchange losses that increased to USD 36.1 million in the first half of 2017, compared to currency exchange losses of USD 31.3 million in the first half of 2016. This increase was primarily the result of the recycling of derivative losses previously recognised through other comprehensive income.

Operating profit

Operating profit decreased by USD 46.1 million or 76.6% from USD 60.2 million in the first half of 2016 to USD 14.1 million in the first half of 2017 due to the factors described above.

Finance costs-net

Finance costs-net changed from an income of USD 92.6 million in the first half of 2016 to a cost of USD 11.0 million in the first half of 2017. This change was primarily due to the decrease of foreign exchange gains on financing activities from USD 106.9 million in the first half of 2016 to USD 15.1 million in the first half of 2017, resulting mainly from lower appreciation of the Russian rouble that lead to lower gains from the translation of US dollar-denominated borrowings in the Group's subsidiaries and the positive change in the fair value of derivative instruments in the amount of USD 18.9 million in the first half of 2017 compared to a positive change in the amount of USD 30.2 million in the first half of 2016.

Profit/(loss) before income tax

Profit before income tax decreased to USD 3.0 million in the first half of 2017 from USD 152.9 million in the first half of 2016 due to the factors described above.

Income tax (expense)/credit

In the first half of 2017, income tax expense was USD 14.9 million, compared to USD 39.4 million in the first half of 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

The company reported a loss of USD 11.9 million in the first half of 2017 compared to a profit of USD 113.4 million in the first half of 2016 due to the factors described above.

Liquidity and capital resources

General

As at 30 June 2017, the Group had USD 115.9 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. 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 of 30 June 2017, the Group had USD 1,031.0 million of total borrowings[14], of which USD 56.2 million comprised current borrowings and USD 974.8 million comprised non‑current borrowings. As at 30 June 2017, 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 first half of 2017 and 2016.

Net cash from operating activities

Net cash from operating activities decreased by USD 17.5 million, or 18.3%, from USD 95.7 million in the first half of 2016, to USD 78.2 million in the first half of 2017. The decrease in net cash from operating activities was primarily due to a USD 20.0 million, or 17.5%, decline in the cash generated from operations in the first half of 2017 compared to the first half of 2016 which was partially offset by the USD 5.3 million or 166.5% increase in Dividends received from joint ventures. This growth was driven by increased dividend payments from Moby Dik and a dividend payment from VEOS.

Net cash used in investing activities

Net cash used in investing activities increased by USD 3.6 million, or 34.3%, from USD 10.5 million in the first half of 2016 to USD 14.1 million in the first half of 2017. This increase was primarily driven by a USD 3.3 million or 71.7% increase in Purchases of property, plant and equipment from USD 4.6 million in the first half of 2016 to USD 7.9 million in the first half of 2017. Despite this increase in the reporting period, full year Purchases of property, plant and equipment are expected to be in line with the previously announced guidance of USD 25-35 million. The Group's modern and already well-invested terminals allow lower capital investments without compromising the efficiency and safety of the operations.

Net cash used in financing activities

Net cash used in financing activities decreased by USD 16.4 million, or 19.4%, from USD 84.2 million in the first half of 2016 to USD 67.8 million in the first half of 2017. The decrease in net cash used in financing activities was primarily due to the decrease in net proceeds and repayment of borrowings and finance lease principal payments by USD 20.4 million or 38.3% from USD 53.3 million in the first half of 2016 to USD 33.0 million the first half of 2017, which was partially offset by an increase in sum of interest paid and proceeds from derivative financial instruments[15], by USD 4.1 million or 13.1% from USD 30.8 million in the first half of 2016 to USD 34.9 million in the first half of 2017.

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 reached USD 1,031.0 million as at 30 June 2017. As of that date, all of the Group's bank borrowings were secured by equity interests in certain Group members 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.

The weighted average interest rate of the Group's debt portfolio is 6.8%, including the effects of swap arrangements.

As at 30 June 2017, the Group had leverage of Net debt to Adjusted LTM EBITDA ratio of 4.4* (compared to a ratio of 4.2* as at 31 December 2016).

The following table sets out the maturity profile of the Group's total borrowings (including finance leases) and net derivative financial instruments as at 30 June 2017.

As at 30 June 2017, the carrying amounts of the Group's borrowings were denominated in the following currencies:

As at 30 June 2017, the carrying amounts of a majority of the Group's borrowings denominated in Russian roubles, in the amount of USD 259.9 million, were swapped into US dollars. 

Appendix 2: Reconciliation of Additional data (Non IFRS) to the Consolidated Financial Information for the six month period ended 30 June 2017 

Reconciliation of Adjusted EBITDA to Profit for the period

Reconciliation of Adjusted EBITDA margin

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 LTM EBITDA (a non-IFRS financial measure) is Adjusted EBITDA for the last twelve months, calculated as a sum of Adjusted EBITDA for the first half of 2017 and Adjusted EBITDA for the second half of 2016. 

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.

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).

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

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

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

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

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).

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[16]. 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 here http://www.rns-pdf.londonstockexchange.com/rns/7995P_-2017-9-5.pdf and at www.globalports.com