29 Aug 2014 07:06
JSC ROSSETI
FINANCIAL RESULTS FOR FIRST HALF OF 2014
29 August 2014, Moscow, Russia - JSC ROSSETI (LSE: RSTI) ("ROSSETI" or the "Company"), the largest electricity transmission and distribution grid company in Russia, today announces its interim condensed consolidated IFRS results for the six months ended 30 June 2014.
Key financial indicators:
· Revenue: RUB 379.5 bn (1H2013: RUB 349.4 bn)
· EBITDA: RUB 113.7 bn (1H2013: RUB 67.0 bn)
· Adjusted EBITDA[1]: RUB 121.9 bn (1H2013: RUB 115.0 bn)
· Adjusted EBITDA margin: 32.1% (1H2013: 32.9%)
· Net profit / (loss): RUB 31.5 bn (1H2013: RUB (2.1) bn)
· Adjusted net profit [2]: RUB 38.1 bn (1H2013: RUB 36.3 bn)
· Net cash flows generated by operating activities: RUB 63.8 bn (1H2013: RUB 67.6 bn)
Key corporate highlights:
· Admission to trading of global depositary receipts of the Company on the Moscow Stock Exchange.
· Transfer of the guaranteed electricity supplier functions to certain subsidiaries of ROSSETI.
· Confirmation of the Ba1 credit rating and change of outlook from "developing" to "stable" by Moody's.
· Assignment of a long-term credit rating BBB- by Standard & Poor's.
· Development of the consolidated investment programme for 2015-2019.
· Change of the English version of the Company's name for ''JSC ROSSETI''.
Commenting on the 1H 2014 financial results, Andrey Demin, First Deputy Director General for Economic Affairs and Finance of ROSSETI, said:
"We are pleased with the results of the first half of 2014. ROSSETI demonstrated a significant increase in EBITDA and net profit as a result of the improving operating efficiency and revenue growth, including revenue from electricity transmission services, which was higher than the growth of operating expenses. We see a positive effect of the consistent implementation of our strategy aimed at increasing operating efficiency, gradual reduction of costs and optimisation of our investment programme. In the second half of the year, we will make every effort to further increase profitability and improve cost management, while fulfilling all our obligations under the approved investment programme".
FINANCIAL SUMMARY
Indicators | 1H2014 | 1H2013 | Change |
billions, RUB | billions, RUB | % | |
Revenue | 379.5 | 349.4 | 8.6 |
Operating expenses | (331.7) | (318.7) | 4.1 |
incl. amortisation | (61.1) | (56.8) | 7.6 |
Operating profit | 50.6 | 32.6 | 55.2 |
EBITDA | 113.7 | 67.0 | 69.7 |
Adjusted EBITDA | 121.9 | 115.0 | 6.0 |
Net profit/(loss) | 31.5 | (2.1) | - |
Adjusted net profit | 38.1 | 36.3 | 5.0 |
Net cash flows from operating activities | 63.8 | 67.6 | (5.6) |
Net debt | 467.9 | 367.1 | (27.5) |
In 1H 2014, the Company's revenue increased by 8.6% y-o-y to RUB 379.5 bn (1H 2013: RUB 349.4 bn), driven by higher revenue from electricity transmission services as a result of the growth of the electricity transmission tariff from 1 July 2013.
Operating expenses totaled RUB 331.7 bn, representing an increase of 4.1% y-o-y (1H 2013: RUB 318.7 bn). The growth of operating expenses was mainly related to the increase in the cost of electricity transmission services provided by territorial grid organizations due to the increase in their tariffs. Other major factors include the increase in personnel expenses related to the indexation of salaries in accordance with the Industry Agreement dated 1 July 2013, as well as to the increase in headcount due to the commissioning of new facilities as part of the investment programme); the increase in provisions accrued for estimated liabilities, mainly due to legal cases related to contracts for electricity transmission services provided by territorial grid organizations; and the increase in accumulated amortisation due to the launch of new property, plant and equipment as part of the investment programme. Additionally, the reporting period saw an increase in the cost of electricity purchased for sale by certain subsidiaries acting as guaranteed suppliers, which was also due to the growth of electricity tariffs.
The increase in both EBITDA and net profit were driven by the revenue growth which was faster than the growth of operating expenses, as well as by the decrease in financial expenses related to the reduction of losses from impairment of investments (particularly the recognition of impairment losses from the decline in the market value of equity investments in OJSC "INTER RAO UES" as of 30 June 2013).
In 1H 2014, adjusted EBITDA grew by 6.0% y-o-y to RUB 121.9 bn (1H 2013: RUB 115.0 bn), supported by the increased operating efficiency and higher profit before tax, which was primarily driven by the increase in revenue from electricity transmission services.
The Company's adjusted net profit amounted to RUB 38.1 bn, a 5.0% increase y-o-y (1H 2013: RUB 36.3 bn). This is attributed to revenue growth, including revenue from electricity transmission services, which was higher than the growth of operating expenses.
Total assets grew by 2.2% YTD to RUB 1,988 bn (YE2013: RUB 1,946 bn) as a result of the increase in property, plant and equipment following the launch of new facilities as part of the investment programme, the increase in reserves due to the transition of certain subsidiaries to their own accounts for repair works, and the increase in cash on settlement accounts (on 30 June 2014, cash and cash equivalents grew by 45% YTD to RUB 89.7 bn from RUB 61.9 bn as of 31 December 2013).
In 1H 2014, net debt amounted to RUB 467.9 bn (1H 2013: RUB 367.1 bn). The increase was due to the growth of the loan portfolio as the Company attracted loan facilities to finance its investment programme.
Outlook
On 3 April 2014, the Government of the Russian Federation approved the Strategy for electricity grid development (decree № 511-r dated 3 April 2013), which is aimed at decreasing operating expenses in the industry by 15% by 2017 compared to 2012, adjusted for inflation, per unit of electric equipment services and maintenance. Additionally, according to the approved strategy, investment expenses are expected to decline by 30% by 2017 compared to 2012, while electricity losses are expected to be scaled back by 11% compared to 2012.
Further improvement in operating efficiency remains ROSSETI' priority for 2014 as the Company aims to outpace the decrease in operating expenses set by the strategy for electricity grid development and achieve a target of 16.9% in 2017, compared to 2012 and adjusted for inflation, per unit of electric equipment services and maintenance. ROSSETI expects to meet the targets for the decrease in investment expenses and electricity losses set by the strategy.
Additionally, according to the Government directive, in 2014 the Company will decrease administrative and management expenses by at least 15% y-o-y on both the Company and subsidiary level.
* * *
The Company will hold a conference call for investors and analysts at 1:00 PM Moscow/ 10:00 PM London / 5:00 AM EDT on 29 August 2014.
Participant dial-in:
Russian version
UK dial-in: | +44 (0) 20 3427 1916 |
Russia dial-in: | +7 (495) 213 0977 |
USA dial-in: | +1 (212) 444 0896 |
Confirmation code: | 8812399 |
English version
UK dial-in: | +44 (0) 20 7784 1036 |
Russia dial-in: | +7 (495) 705 9450 |
USA dial-in: | +1 (646) 254 3367 |
Confirmation code: | 9535015 |
Participants are advised to dial in 5-10 minutes prior to the start time.
The call will be recorded and there will be a replay facility available until 11 September 2014 as follows:
UK dial-in: | +44 (0) 20 3427 0598 |
Russia dial-in: | +7 (495) 705 9453 |
USA dial-in: | +1 (347) 366 9565 |
Replay passcode: | Russian version: 8812399 |
English version: 9535015
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For enquiries: |
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JSC ROSSETI
Maria Stepanova, Head of IR +7(495) 995 5333 (ext. 3961)
Yulia Martynova, IR +7 (495) 995 5333 (ext. 3834)
FTI Consulting
Maria Shiryaevskaya +7 (495) 795 0623
Olga Lundquist +7(495) 795 0623
About the Company
JSC ROSSETI is the largest electricity transmission and distribution grid company in Russia. It is also one of the largest electricity transmission and distribution grid companies in the world by length of electricity lines and installed transformer capacity. JSC ROSSETI holds interests in and manages 15 distribution grid companies and Federal Grid Company in Russia. The Company together with its subsidiaries owns and operates 2.25 million kilometers of electricity transmission and distribution lines with a total installed transformer capacity of 743 GVA. The Company operates in 74 regions of Russia covering an area of 13.6m sq. km.
Forward-looking statements
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of JSC ROSSETI. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might" the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do 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 our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industry, as well as many other risks specifically related to JSC ROSSETI and its operations.
Group of companies "Russian Grids"
Consolidated Interim Condensed Statement of Profit and Loss and Other Comprehensive Incomefor the six months ended 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
Six months ended30 June 2014 Unaudited | Six months ended30 June 2013 Unaudited | ||||
Revenue | 379,526 | 349,371 | |||
Operating expenses | (331,698) | (318,671) | |||
Other income, net | 2,814 | 1,913 | |||
Results from operating activities | 50,642 | 32,613 | |||
Finance income | 5,194 | 5,285 | |||
Finance costs | (13,990) | (35,511) | |||
Net finance costs | (8,796) | (30,226) | |||
Share of profit of equity accounted investees (net of income tax) | 1 | 12 | |||
Profit before income tax | 41,847 | 2,399 | |||
Income tax expense | (10,307) | (4,486) | |||
Profit/(loss) for the period | 31,540 | (2,087) | |||
Other comprehensive income | |||||
Items that may be reclassified subsequently to profit or loss: | |||||
Net change in fair value of available-for-sale financial assets | 18 | (109) | |||
Foreign currency translation reserve | (76) | 81 | |||
Income tax on items that may be reclassified subsequently to profit or loss | (4) | 20 | |||
Total items that may be reclassified subsequently to profit or loss | (62) | (8) | |||
Items that will not be reclassified to profit or loss: | |||||
Remeasurements of the defined benefit liability | 1,112 | 1,032 | |||
Income tax on items that will not be reclassified to profit or loss | (136) | (131) | |||
Total items that will not be reclassified to profit or loss | 976 | 901 | |||
Other comprehensive income for the period, net of income tax | 914 | 893 | |||
Total comprehensive income/(loss) for the period | 32,454 | (1,194) | |||
Profit/(loss) attributable to: | |||||
Owners of the Company | 22,724 | (1,840) | |||
Non-controlling interest | 8,816 | (247) | |||
Total comprehensive income/(loss) attributable to: | |||||
Owners of the Company | 23,327 | (947) | |||
Non-controlling interest | 9,127 | (247) | |||
Profit/(loss) per share | |||||
Basic and diluted profit/(loss) per ordinary share (in RUB) | 0.14 | (0.01) |
Group of companies "Russian Grids"
Consolidated Interim Condensed Statement of Financial Position as at 30 June 2014 (Unaudited)(in millions of Russian roubles, unless otherwise stated)
30 June 2014 Unaudited | 31 December 2013
| ||||
ASSETS | |||||
Non-current assets | |||||
Property, plant and equipment | 1,625,968 | 1,595,862 | |||
Intangible assets | 15,853 | 16,557 | |||
Investments in equity accounted investees | 1,209 | 1,202 | |||
Non-current accounts receivable | 9,822 | 7,442 | |||
Other investments and financial assets | 25,931 | 27,309 | |||
Deferred tax assets | 4,666 | 9,012 | |||
Total non-current assets | 1,683,449 | 1,657,384 | |||
Current assets | |||||
Inventories | 27,521 | 23,920 | |||
Other investments and financial assets | 41,600 | 53,306 | |||
Current tax assets | 6,391 | 5,568 | |||
Trade and other receivables | 139,253 | 143,944 | |||
Cash and cash equivalents | 89,742 | 61,917 | |||
Total current assets | 304,507 | 288,655 | |||
Total assets | 1,987,956 | 1,946,039 |
Group of companies "Russian Grids"
Consolidated Interim Condensed Statement of Financial Position as at 30 June 2014 (Unaudited)(in millions of Russian roubles, unless otherwise stated)
30 June 2014 Unaudited | 31 December 2013
| ||||
EQUITY AND LIABILITIES | |||||
Equity | |||||
Share capital | 163,154 | 163,154 | |||
Share premium | 212,978 | 212,978 | |||
Treasury shares | (2,819) | (2,819) | |||
Other reserves | (5,662) | (6,265) | |||
Retained earnings | 421,435 | 398,711 | |||
Total equity attributable to equity holders of the Company | 789,086 | 765,759 | |||
Non-controlling interest | 303,021 | 295,932 | |||
Total equity | 1,092,107 | 1,061,691 | |||
Non-current liabilities | |||||
Loans and borrowings | 498,253 | 492,229 | |||
Trade and other payables | 18,393 | 14,487 | |||
Employee benefits | 27,700 | 28,971 | |||
Deferred tax liabilities | 39,045 | 38,715 | |||
Total non-current liabilities | 583,391 | 574,402 | |||
Current liabilities | |||||
Loans and borrowings | 59,370 | 57,808 | |||
Trade and other payables | 240,651 | 241,266 | |||
Provisions | 12,407 | 10,397 | |||
Current tax liabilities | 30 | 475 | |||
Total current liabilities | 312,458 | 309,946 | |||
Total liabilities | 895,849 | 884,348 | |||
Total equity and liabilities | 1,987,956 | 1,946,039 |
Group of companies "Russian Grids"
Consolidated Interim Condensed Statement of Cash Flows for the six months ended 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
Six months ended30 June 2014 Unaudited | Six months ended30 June 2013 Unaudited | ||||
OPERATING ACTIVITIES | |||||
Profit/(loss) for the period | 31,540 | (2,087) | |||
Adjustments for: | |||||
Depreciation, amortization and impairment | 61,139 | 56,752 | |||
Finance costs | 13,990 | 35,511 | |||
Finance income | (5,194) | (5,285) | |||
Profit/(loss) on disposal of property, plant and equipment | (113) | 1,128 | |||
Share of profit of equity accounted investees(net of income tax) | (1) | (12) | |||
Loss on disposal of subsidiaries | - | 12 | |||
Other non-cash transactions | (28) | 154 | |||
Income tax expense | 10,307 | 4,486 | |||
Operating profit before working capital changes and reserves | 111,640 | 90,659 | |||
Change in trade and other receivables | 1,793 | 10,509 | |||
Change in financial assets related to employee benefit fund | 332 | 71 | |||
Change in inventories | (3,612) | (5,210) | |||
Change in trade and other payables | (17,979) | (553) | |||
Change in employee benefit liabilities | (1,264) | (256) | |||
Change in provisions | 2,010 | (3,793) | |||
Cash flows from operations before income taxes and interest paid | 92,920 | 91,427 | |||
Income taxes paid | (7,039) | (6,256) | |||
Interest paid | (22,123) | (17,576) | |||
Net cash flows from operating activities | 63,758 | 67,595 | |||
Six months ended30 June 2014 Unaudited | Six months ended30 June 2013 Unaudited | ||||
INVESTING ACTIVITIES | |||||
Acquisition of property, plant and equipment and intangible assets | (63,090) | (86,003) | |||
Proceeds from sale of property, plant and equipment | 1,627 | 2,115 | |||
Acquisition of investments and placement of bank deposits | (19,393) | (32,874) | |||
Proceeds from sale of investments and withdrawal of bank deposits | 33,079 | 62,586 | |||
Interest received | 4,651 | 3,349 | |||
Net cash flows used in investing activities | (43,126) | (50,827) | |||
FINANCING ACTIVITIES | |||||
Proceeds from loans and borrowings | 50,671 | 86,076 | |||
Repayment of loans and borrowings | (43,038) | (69,997) | |||
Purchase of non-controlling interest in subsidiaries | - | (764) | |||
Proceeds from shares issued | - | 500 | |||
Dividends paid | (9) | - | |||
Payment of finance lease liabilities | (431) | (1,000) | |||
Net cash flows from financing activities | 7,193 | 14,815 | |||
Net increase in cash and cash equivalents | 27,825 | 31,583 | |||
Cash and cash equivalents at the beginning of the period | 61,917 | 59,815 | |||
Cash and cash equivalents at the end of the period | 89,742 | 91,398 |
[1] Adjusted EBITDA is calculated as EBITDA excluding losses from impairment of available-for-sale investments, promissory notes and accounts receivable;
[2] Adjusted net profit is calculated as net profit for the period excluding losses from impairment of available-for-sale investments, promissory notes, accounts receivable and deferred income tax expense related to them.