26 Apr 2017 07:00
Kcell JSC
Results for January - March 2017
Almaty, 26 April 2017 - Kcell Joint Stock Company ("Kcell" or the "Company") (LSE, KASE: KCEL), the leading provider of mobile telecommunications services in Kazakhstan by market share in terms of revenue and subscribers, announces its interim results for January - March 2017.
First quarter
· Net sales increased by 0.1 percent to KZT 35,517 million (35,470). Service revenue down 1.5 percent to KZT 33,022 million (33,514).
· EBITDA, excluding non-recurring items, decreased by 12.1 percent to KZT 13,126 million (14,928). The EBITDA margin was at 37.0 percent (42.1).
· Operating income, excluding non-recurring items, down 20.4 percent to KZT 7,496 million (9,415).
· Net finance cost increased to KZT 2,683 million (750).
· Net income decreased by 42.7 percent to KZT 3,799 million (6,625).
· CAPEX-to-sales ratio of 16.7 percent (82.2, 8.9 excluding KZT 26 billion for frequencies).
· Free cash flow increased to KZT 1,748 million (-13,494).
· During the quarter, the subscriber base remained stable quarter-on-quarter at 9,979 thousand, and increased by 124 thousand subscribers year-on-year (9,855).
Financial highlights
KZT in millions, except key ratios,per share data and changes | Jan-Mar 2017 | Jan-Mar 2016 | Chg (%) | Jan-Dec 2016 |
Revenue | 35,517 | 35,470 | 0.1 | 147,037 |
of which service revenue | 33,022 | 33,514 | -1.5 | 137,337 |
EBITDA, excl. non-recurring items | 13,126 | 14,928 | -12.1 | 57,989 |
Margin (%) | 37.0 | 42.1 |
| 39.4 |
Operating income | 7,496 | 9,058 | -17.2 | 31,041 |
Operating income, excl. non-recurring items | 7,496 | 9,415 | -20.4 | 33,740 |
Net income attributable to owners of the parent company | 3,799 | 6,625 | -42.7 |
16,684 |
Earnings per share (KZT) | 19.0 | 33.1 | -42.7 | 83.4 |
CAPEX-to-sales (%) | 16.7 | 82.2 |
| 34.7 |
Free cash flow | 1,748 | -13,494 |
| -13,293 |
In this report, comparative figures are provided in parentheses following the operational and financial results and refer to the same item in the first quarter of 2016, unless otherwise stated.
Comments by Arti Ots, CEO
"During the first quarter of 2017, the market started to show signs of improvement as all operators increased pricing and reduced some off-net allowances. Our tariff adjustments contributed to a significant reduction in the service revenue decline, which was just 1.5 percent compared to the same quarter last year. At the same time, we saw growth of almost 100 percent in our high-end contract phone segment, which is sold through our own retail outlets.
We continue to roll out and improve our 4G network, resulting in 22 percent growth in 4G users over the previous quarter, whilst 4G data traffic now accounts for 25 percent of our total data traffic.
Indications of economic growth in Kazakhstan have also continued into 2017, as demonstrated by the appreciation of Kazakhstani tenge.
The Board of Directors has recommended an annual dividend for 2016 in the amount of KZT 11,678 million, or KZT 58.39 per ordinary share. This represents 70 percent of the Company's net income for 2016, in line with the policy we outlined at the time of our IPO.
We continue to focus on delivering the highest levels of technology and on developing innovative products and services in order to maintain our market leading position and provide value to our customers and our shareholders."
Almaty, 26 April 2017
Conference call
Kcell will host an analyst conference call on 26 April 2017 at 9:00 London time / 14:00 Almaty / 11:00 Moscow. The conference call will be held in English, audio webcast will be available at
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4547
Dial in details are as follows:
UK Toll Free: Standard International Dial-in: Russia Toll Free: Russia Local Call number: | 0800 279 6840 +44 330 336 9105 8 800 500 9283 +7 495 213 1767 |
USA Toll Free: | 888 394 8218 |
USA Dial-In:
Conference ID | +1 719 325 2363
9255694 |
A presentation will be available on the Company website shortly before the conference call on www.investors.kcell.kz./en
A replay will be available at: http://kcell260417-live.audio-webcast.com
Enquiries:
Kcell |
|
Investor Relations |
|
Irina Shol | Tel: +7 727 2582755 ext. 1002 Investor_relations@kcell.kz |
|
|
Media Natalya Eskova |
Tel: +7 727 2582755 Pressa@kcell.kz |
|
|
|
|
International Media |
|
Instinctif Partners | Tel: +44 207 457 2020 |
Kay Larsen / Galyna Kulachek / Adrian Duffield |
|
Review of the first quarter 2017
Net sales
Net sales increased by 0.1 percent to KZT 35,517 million (35,470). Service revenue decreased by 1.5 percent to KZT 33,022 million (33,514).
Revenue from voice services decreased by 9.6 percent to KZT 19,630 million (21,703). Data revenue increased by 15.9 percent to KZT 10,999 million (9,488). Revenue from value-added services was up 2.9 percent to KZT 2,391 million (2,324). Other revenue grew by 27.7 percent to KZT 2,497 million (1,955).
KZT in millions, except percentages | Jan-Mar 2017 | % of total | Jan-Mar 2016 | % of total |
Voice services | 19,630 | 55.3 | 21,703 | 61.2 |
Data services | 10,999 | 31.0 | 9,488 | 26.8 |
Value added services | 2,391 | 6.7 | 2,324 | 6.5 |
Other revenues | 2,497 | 7.0 | 1,955 | 5.5 |
Total revenues | 35,517 | 100.0 | 35,470 | 100.0 |
Voice service revenue
Revenue from voice services decreased by 9.6 percent to KZT 19,630 million (21,703). Voice traffic was up 0.1 percent to 5,545 million minutes (5,539), while ARMU decrease to KZT 2.2 (2.7).
Interconnect revenue increased by 11.1 percent to KZT 5,252 million (4,727). This increase mainly resulted from an offering more off-net minutes in bundled offers.
Data service revenue
Data revenue grew by 15.9 percent to KZT 10,999 million (9,488). Data traffic increased by 67.4 percent to 42,320,845 GB (25,275,756). Growth in data traffic was offset by offering of bundled packages with lower tariffs per MB, which led to a decrease in average revenue per MB (ARMB) to KZT 0.3 (0.4).
Value-added service revenue
Revenue from value-added services increased by 2.9 percent to KZT 2,391 million (2,324), largely as a result of introduction of new services.
Other revenue
Other revenue grew by 27.7 percent to KZT 2,497 million (1,955), mainly driven by higher handsets sales.
EXPENSES
Cost of sales
Cost of sales rose by 8.9 percent to KZT 22,579 million (20,728), primarily due to higher network capacity expenses driven by increased traffic volumes, as well as higher interconnect cost of KZT 5,631 million (5,205).
Selling and marketing expenses
Selling and marketing expenses increased by 5.0 percent to KZT 2,637 million (2,513). This was primarily driven by an increase in staff cost.
General and administrative expenses
General and administrative expenses were down 4.7 percent to KZT 2,977million (3,122).
EARNINGS, FINANCIAL POSITION AND CASH FLOW
EBITDA, excluding non-recurring items, decreased by 12.1 percent to KZT 13,126 million (14,928). The EBITDA margin was 37.0 percent (42.1).
Net finance cost increased to KZT 2,683 million (750), and was mainly related to net interest expenses.
Income tax expense decreased by 39.8 percent to KZT 1,013 million (1,683).
Net income attributable to owners of the parent company was down 42.7 percent to KZT 3,799 million (6,625) and earnings per share decreased to KZT 19.0 (33.1).
CAPEX decreased to KZT 5,928 million (29,157) and the CAPEX-to-sales ratio was 16.7 percent (82.2). Last year increase was attributable to the acquisition of new frequencies for KZT 26 billion. CAPEX-to-sales ratio, excluding KZT 26 billion for new frequencies, was 8.9 percent.
Free cash flow increased to KZT 1,748 million (-13,494).
Key milestones for the first quarter of 2017
January 2016
· Kcell became the official mobile operator of the 28th World Winter Universiade. The 28th World Winter Universiade was held in Almaty from 29 January to 8 February 2017. 2000 athletes from 58 countries took part in the Universiade. Kcell provided the high-quality mobile communication signal within sports facilities and launched the single reference contact center to provide the participants and guests of the Universiade with all the necessary background information, including competition schedule and locations of sports facilities.
April
· The Board of Directors approved a decision to convene the Annual General Meeting of shareholders ("AGM") on 24 May 2017. The Board of Directors has recommended the annual dividend ("Dividend") in the amount of KZT 11,678 million, or KZT 58.39 per ordinary share. This represents 70 percent of the Company's net income for the 12 months ending 31 December 2016 ("the Period").
The proposed record date of Shareholders entitled to receive the dividends is 25 May 2017 (01:00 Almaty time). If approved at the AGM on 24 May 2017, the proposed Dividend will be paid starting from 1 June 2017.
ADMINISTARTIVE AND LEGAL UPDATE
Tax inspection
The Company is undergoing tax inspection that covers the period of 2011-2015. The tax audit has not been concluded yet and the Company therefore has not received any official claims. At the end of 2016, the Company has made a provision of KZT 3,962 million based on the preliminary assessment.
The January - March 2017 financial statements have been reviewed by the external auditors, their report will be available on the Kcell website starting from 15 May 2017.
The information was submitted for publication at 09:00 ALMT on 26 April 2017.
| Financial Information
Interim Report January-June 2017 20 July 2017 Interim Report January-September 2017 19 October 2017
|
Questions regarding the reports: Kcell JSC Investor Relations Timiryazev str. 2g 050013 Almaty Tel. +7 727 2582755 ext.1002 www.investors.kcell.kz
|
| Definitions
EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization. Equals operating income before depreciation, amortization and impairment losses and before income from associated companies.
CAPEX: Capital expenditures and advances paid for property, plant and equipment as well as software and licenses including investments in tangible and intangible non-current assets, but excluding goodwill and fair value adjustments recognized in acquisitions, and excluding the recording of assets retirement obligations.
ARMB: Average revenue per MB. |
Condensed Consolidated Statement of Comprehensive Income
KZT in millions, except per share data, number of shares and changes | Jan-Mar 2017 | Jan-Mar 2016 | Chg (%) | Jan-Dec 2016 |
Revenues | 35,517 | 35,470 | 0.1 | 147,037 |
Cost of sales | -22,579 | -20,728 | 8.9 | -91,866 |
Gross profit | 12,938 | 14,741 | -12.2 | 55,171 |
Selling and marketing expenses | -2,637 | -2,513 | 5.0 | -10,988 |
General and administrative expenses | -2,977 | -3,122 | -4.7 | -14,150 |
Other operating income and expenses, net | 172 | -49 |
| 1,008 |
Operating income | 7,496 | 9,058 | -17.2 | 31,041 |
Finance costs and other financial items, net | -2,683 | -750 |
| -8,285 |
Income after financial items | 4,813 | 8,308 | -42.1 | 22,756 |
Income taxes | -1,013 | -1,683 | -39.8 | -6,073 |
Net income | 3,799 | 6,625 | -42.7 | 16,684 |
Other comprehensive income |
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to owners of the parent | 3,799 | 6,625 | -42.7 | 16,684 |
|
|
|
|
|
Earnings per share (KZT), basic and diluted | 19.0 | 33.1 | -42.7 | 83.4 |
Number of shares (thousands) |
|
|
|
|
Outstanding at period-end | 200,000 | 200,000 |
| 200,000 |
Weighted average, basic and diluted | 200,000 | 200,000 |
| 200,000 |
EBITDA |
13,126 | 14,571 | -9.9 | 55,290 |
EBITDA excl. non-recurring items | 13,126 | 14,928 | -12.1 | 57,989 |
Depreciation, amortization and impairment losses |
-5,630 | -5,513 | 2.1 | -24,249 |
Operating income excl. non-recurring items | 7,496 | 9,415 | -20.4 | 33,740 |
Condensed Consolidated Statement of Financial Position
KZT in millions | 31 Mar 2017 | 31 Dec 2016 |
Assets |
|
|
Intangible assets | 41,593 | 42,842 |
Property, plant and equipment | 96,894 | 95,322 |
Other non-current assets | 86 | 86 |
Long-term receivables | 1,106 | 1,163 |
Total non-current assets | 139,679 | 139,413 |
Inventories | 2,848 | 3,587 |
Trade and other receivables | 32,238 | 29,554 |
Cash and cash equivalents | 10,044 | 8,477 |
Total current assets | 45,130 | 41,617 |
Total assets | 184,809 | 181,031 |
Equity and liabilities |
|
|
Share capital | 33,800 | 33,800 |
Retained earnings | 42,679 | 38,880 |
Total equity attributable to owners of the parent | 76,479 | 72,680 |
Long-term borrowings | 34,000 | 8,000 |
Deferred tax liabilities | 5,544 | 6,012 |
Other long-term liabilities | 1,355 | 1,285 |
Total non-current liabilities | 40,899 | 15,298 |
Short-term borrowings | 31,274 | 57,415 |
Trade payables and other current liabilities | 36,157 | 35,638 |
Total current liabilities | 67,431 | 93,053 |
Total equity and liabilities | 184,809 | 181,031 |
Condensed Consolidated Statement of Cash Flows
KZT in millions | Jan-Mar 2017 | Jan-Mar 2016 | Jan-Dec 2016 |
Cash flow before change in working capital | 9,875 | 10,698 | 45,299 |
Change in working capital | -3,278 | -4,341 | -14,751 |
Cash flow from operating activities | 6,597 | 6,357 | 30,547 |
Cash CAPEX | -4,849 | -19,851 | -43,840 |
Free cash flow | 1,748 | -13,494 | -13,293 |
Cash flow from financing activities | - | - | -10,501 |
Cash flow for the period | 1,748 | -13,494 | -23,794 |
|
|
|
|
Cash and cash equivalents, opening balance | 8,477 | 31,589 | 31,589 |
Cash flow for the period | 1,748 | -13, 494 | -23,794 |
Exchange rate difference | -181 | 1,047 | 682 |
Cash and cash equivalents, closing balance | 10,044 | 19,143 | 8,477 |
Condensed Consolidated Statement of Changes in Equity
| Jan-Mar 2017 | Jan-Mar 2016 | ||||
KZT in millions | Share capital | Retained earnings | Total equity | Share capital | Retained earnings | Total equity |
Opening balance | 33,800 | 38,880 | 72,680 | 33,800 | 46,646 | 80,446 |
Dividends | - | - | - | - | - | - |
Total comprehensive income | - | 3,799 | 3,799 | - | 6,625 | 6,625 |
Closing balance | 33,800 | 42,679 | 76,479 | 33,800 | 53,271 | 87,071 |
Basis of preparation
As in the annual accounts for 2016, Kcell's consolidated financial statements of and for the three-month period ended 31 March 2017, have been prepared in accordance with International Financial Reporting Standards (IFRSs). This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year. All amounts in this report are presented in KZT millions, unless otherwise stated. Rounding differences may occur.
Non-recurring items
KZT in millions | Jan-Mar 2017 | Jan-Mar 2016 | Jan-Dec 2016 |
Within EBITDA |
|
|
|
Restructuring charges, synergy implementation costs, etc. | - | 357 | 2,699 |
Total | - | 357 | 2,699 |
Investments
KZT in millions | Jan-Mar 2017 | Jan-Mar 2016 | Jan-Dec 2016 |
CAPEX |
|
|
|
Intangible assets | 206 | 26,230 | 32,923 |
Property, plant and equipment | 5,722 | 2,927 | 18,094 |
Total | 5,928 | 29,157 | 51,017 |
Related party transactions
For the first quarter ended 31 March 2017, Kcell purchased services for KZT 1,158 million and sold services for a value of KZT 256 million. Related parties in these transactions were mainly TeliaSonera and its group entities, Turkcell and Fintur Holding B.V.
Net debt
KZT in millions | 31 Mar 2017 | 31 Dec 2016 |
Long-term and short-term borrowings | 65,274 | 65,415 |
Less short-term investments, cash and bank | -10,044 | -8,477 |
Net debt | 55,230 | 56,938 |
Financial key ratios
| 31 Mar 2017 | 31 Dec 2016 |
Return on equity (%, rolling 12 months) | 18.6 | 23.0 |
Return on capital employed (%, rolling 12 months) | 16.4 | 25.9 |
Equity/assets ratio (%) | 41.4 | 40.1 |
Net debt/equity ratio (%) | 72.2 | 78.3 |
Net debt/EBITDA rate (multiple, rolling 12 months) | 1.03 | 1.03 |
Owners' equity per share (KZT) | 382.4 | 363.4 |
Operational data
| Jan-Mar 2017 | Jan-Mar 2016 | Chg (%) | Jan-Dec 2016 |
Subscribers, period-end (thousands) | 9,979 | 9,855 | 1.3 | 9,986 |
Of which prepaid | 9,029 | 8,594 | 5.1 | 9,049 |
MOU (min/month) | 220 | 212 | 3.8 | 228 |
ARPU (KZT) | 1,114 | 1,104 | 1.0 | 1,155 |
Churn rate (%) | 43.4 | 49.0 | -11.4 | 49.3 |
Employees, period-end | 1,831 | 1,809 | 1.2 | 1,821 |
Forward-looking statements
This report contains statements concerning, among other things, Kcell's financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent Kcell's future expectations. Kcell believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. Such important factors include, but may not be limited to: Kcell's market position; growth in the telecommunications industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Kcell and the telecommunications industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, Kcell undertakes no obligation to update any of them in light of new information or future events.