6 Apr 2017 11:10
ROSSETI Achieves Record IFRS Results in 2016
PJSC ROSSETI (LSE: RSTI), the management company of Russia's largest and the world's third largest power grid, hereby announces the consolidated IFRS results of ROSSETI Group, which exceed the results of all previous periods.
The Group's 2016 consolidated revenue was RUB 904 billion, up 17.9% y-o-y. The Group also achieved a record net profit of RUB 98.3 billion, up 20.5% y-o-y. Adjusted net profit increased to RUB 144.8 billion (up 43.5% y-o-y).
Adjusted net profit margin reached 16%, a 2.8 p.p. increase y-o-y
2016 EBITDA was RUB 265.2 billion, with adjusted EBITDA at RUB 323.3 billion, up 6.5% and 18.4% y-o-y, respectively.
The net debt to EBITDA ratio decreased from 2x in 2015 to 1.8x in 2016.
These figures were the result of measures implemented to improve the efficiency of management and operations of subsidiaries and ensure the financial stability and loss-free operations of all Group companies.
"ROSSETI works for its consumers and shareholders, improving the reliability and availability of power supply, and securing financial stability and profitability across the Group. Introduction of new management tools, the cost cutting policy and comprehensive approach in engaging federal and regional authorities allowed the Group to achieve record results of all times in 2016. In 2017, we will continue our efforts to improve the operating and financial performanc", Oksana Shatokina, Deputy Director General for Economic Affairs, commented on the IFRS statements.
ROSSETI is currently expecting guidelines from federal authorities regarding the amount of dividends to be paid for 2016.
Key performance indicators and highlights in 2016
Key operating results:
· Electricity transmission: 742.7 billion kWh (2015: 720.5 billion kWh)
· Network connection: 16,780 MW (2015: 19,705 MW)
· Electricity sales: 2,195 billion kWh (2015: 1,541 billion kWh)
Key IFRS financial results:
Indicator | 2016 | 2015 | Change |
RUB billion | RUB billion | % | |
Revenue, including: | 904.0 | 766.8 | 17.9 |
- Electricity transmission: | 725.5 | 650.4 | 11.5 |
- Electricity and capacity sales | 74.7 | 55.9 | 33.6 |
Operating expenses | 788.3 | 652.5 | 20.8 |
Operating expenses (net of impairment of fixed assets and accounts receivable) | 730.2 | 628.8 | 16.1 |
EBITDA | 265.2 | 248.9 | 6.5 |
Adjusted EBITDA | 323.3 | 273.1 | 18.4 |
Adjusted EBITDA margin | 35.8% | 35.6% | 0.2 p.p. |
Net profit | 98.3 | 81.6 | 20.5 |
Adjusted net profit | 144.8 | 100.9 | 43.5 |
Adjusted net profit margin | 16.0% | 13.2% | 2.8 p. p. |
Net cash flow from operations | 175.6 | 156.7 | 18.9 |
In 2016, ROSSETI's revenue increased by RUB 137.2 billion, or 17.9% y-o-y, to RUB 904.0 billion. Revenue from electricity transmission increase by 11.5%, to RUB 725.5 billion. Revenue from electricity and capacity sales increased by 33.6%, to RUB 74.7 billion, which is mainly the result of increased sales by FGC UES Group (part of ROSSETI Group).
Operating expenses:
Indicator | 2016 | Share in total expenses | 2015 | Share in total expenses | Change, y-o-y |
RUB billion | RUB billion | ||||
Uncontrollable expenses, including | 524.4 | 66.5% | 407.0 | 62.4% | 28.8% |
Electricity transmission services | 131.0 | 16.6% | 119.3 | 18.3% | 9.8% |
Electricity for compensation of losses | 111.5 | 14.1% | 101.2 | 15.5% | 10.2% |
Electricity for sale | 46.0 | 5.8% | 31.2 | 4.8% | 47.4% |
Depreciation and amortization | 113.8 | 14.4% | 100.5 | 15.4% | 13.2% |
Taxes and charges, other than income tax | 20.8 | 2.6% | 17.6 | 2.7% | 18.2% |
Impairment of fixed assets | 38.5 | 4.9% | -5.1 | -0.8% |
|
Impairment of accounts receivable | 19.6 | 2.5% | 28.8 | 4.4% | -31.9% |
Provisions | 9.6 | 1.2% | 3.9 | 0.6% | 146.2% |
Other | 33.6 | 4.3% | 9.6 | 1.5% | 250.1% |
Controllable expenses, including | 263.9 | 33.5% | 245.5 | 37.6% | 7.5% |
Payroll expenses | 173.6 | 22.0% | 162.9 | 25.0% | 6.6% |
Other | 90.3 | 11.5% | 82.6 | 12.7% | 9.3% |
Total operating expenses | 788.3 |
| 652.5 |
| 20.8% |
Total operating expenses excl. impairment of fixed assets and accounts receivable | 730.2 |
| 628.8 |
| 16.1% |
The Group posted RUB 788.3 billion in operating expenses in 2016, up 20.8% y-o-y (2015: RUB 652.5 billion). Below is the analysis of the key factors.
The Group's 2016 uncontrollable expenses increased by RUB 117.4 billion, or 28.8%, particularly due to the following factors:
· Electricity transmission services increased by RUB 11.7 billion, or 9.8%, due to the increased cost of services provided by certain territorial grid organizations.
· Expenses for purchasing electricity to compensate for losses rose by RUB 10.3 billion, or 10.2% y-o-y, driven by the increased cost of purchased electricity.
· Expenses for purchasing electricity for sale grew by RUB 14.8 billion, or 47.4%, due to changes in the operation mode of the power grid and increased electricity sales.
· Amortization charges grew by RUB 13.3 billion, or 13.2%, due to the commissioning of new fixed assets as part of the Capex program.
· Taxes and charges increased by RUB 3.2 billion, or 18.2%, in the reporting period, driven by a phase-out of property tax benefits for power grid facilities.
· Losses from the impairment of fixed assets in 2016 were recognized at RUB 38.5 billion following the reduction of estimated future cash flows from the use of grid assets.
· Provisions rose by RUB 5.7 billion due to the recognition of estimated liabilities related to litigations against third-party territorial grid organizations regarding electricity transmission and against utility companies regarding the purchase of electricity to compensate for electricity losses.
· Other expenses increased by RUB 24 billion, driven mainly by cost of services provided by subcontractors and material expenses under construction contracts, as well as by increased fuel costs for mobile and gas-turbine substations.
The Group's controllable expenses rose in 2016 by RUB 18.4 billion, or 7.5%, mainly due to the growth in payroll expenses by RUB 10.7 billion, or 6.6%, driven by the indexation of wages for production staff in accordance with the Sectoral Wage Rate Agreement.
Corporate highlights:
· In accordance with the resolution of the Annual General Meeting of PJSC ROSSETI, a significant amount of dividend was paid for the first time for Q1 2016, in the amount of RUB 1.785 million, and dividends on ordinary shares were paid for the first time in the Company's dividend history.
· The Board of Directors approved the Development Plans of Subsidiaries.
· The Group placed bonds in the amount of RUB 10 billion in favour of Vnesheconombank with a 10year maturity and a 9.15% coupon rate.
· ROSSETI's corporate governance practice was recognised by the Open Government as one of the top three. The Russian Institute of Directors assigned to PJSC ROSSETI a rating of 7++ Developed Corporate Governance Practice.
· PJSC ROSSETI became one of the three most transparent companies with a government-owned interest in the procurement sphere. Expert RA rating agency, after analysing the quality of procurement management, raised the rating of the Group's companies to RKZ 9.
· The Board of Directors highly appreciated the performance of ROSSETI Group's Common Treasury and acknowledged its efficiency for PJSC ROSSETI and the Group.
Events after the reporting date:
· Ordinary shares of PJSC ROSSETI were reclassified as first-level on the Moscow Exchange quotation list
· PJSC ROSSETI was recognised the best company in terms of reliability of its internal control system
· PJSC ROSSETI approved its Power Grid Environmental Policy
· PJSC ROSSETI was recognised one of the top 10 environmentally friendly companies in Russia
2017 Forecast
In order to ensure the financial stability of its subsidiaries and create conditions for their further development, the Group will continue to implement the Development Plans in 2017 to ensure that the key financial and economic indicators of ROSSETI Group are on a positive trend and the operations of its subsidiaries are loss-free.
The annual efforts to reduce the operating expenses of ROSSETI Group have led to the optimization of their size and structure. In order to identify the potential of further cost optimization, the Group carried out an independent audit of the costs of ROSSETI subsidiaries in 2016, which also confirmed the achievement of 2016 targets to reduce specific operating expenses, determined by the Strategy for Development of the Power-Grid Complex of the Russian Federation and Russian Government Directives.
Based on the independent cost audit, the Board of Directors developed and approved the Cost Optimization Action Plan of PJSC ROSSETI and Subsidiaries for 2017-2022, the implementation of which in future periods will ensure the retention of the positive trend of ROSSETI Group's operating performance taking into account the unconditional reliability of electricity transmission and the quality and availability of electricity supply to consumers.
* * *
For further information:
PJSC ROSSETI
Maria Stepanova +7(495) 995 5333 (ext. 3961)
Yulia Martynova +7(495) 995 5333 (ext. 3834)
Horizon
Maria Novokreschenova +7 (495) 225 0335
Yaroslav Gryaznov +7 (495) 225 0335 (ext. 124)
Public Joint-Stock Company ROSSETI (PJSC ROSSETI) is one of the largest electric companies in the world. The company maintains 2.31 million km of power transmission lines, 496,000 substations with transformer capacity of more than 773 GW. The number of employees of the Rosseti Group of Companies is 216,000 people.
The asset portfolio of PJSC ROSSETI includes 37 subsidiaries and affiliates, including 14 interregional and a main network company. The controlling shareholder of the company is the state represented by the Federal Agency for State Property Management of the Russian Federation, which owns 87.9% of the share capital.
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 PJSC 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 PJSC ROSSETI and its operations.
| Notes |
| Year ended31 December 2016 |
| Year ended31 December 2015 |
Revenue | 8 |
| 903,981 |
| 766,812 |
Operating expenses | 10 |
| (788,324) |
| (652,538) |
Other income, net | 9 |
| 27,800 |
| 22,069 |
Results from operating activities |
|
| 143,457 |
| 136,343 |
Finance income | 12 |
| 13,915 |
| 16,238 |
Finance costs | 12 |
| (37,187) |
| (38,865) |
Net finance costs |
|
| (23,272) |
| (22,627) |
Share of loss of associates and joint ventures(net of income tax) |
|
| (343) |
| (4) |
Profit before income tax |
|
| 119,842 |
| 113,712 |
Income tax expense | 13 |
| (21,501) |
| (32,110) |
Profit for the year |
|
| 98,341 |
| 81,602 |
Other comprehensive income |
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
|
Net change in fair value of available-for-sale financial assets | 16 |
| 53,153 |
| 7,825 |
Allowance for foreign currency translation differences |
|
| (204) |
| (151) |
Income tax related to items that may be reclassified subsequently to profit or loss | 17 |
| (10,628) |
| (1,565) |
Total items that may be reclassified subsequently to profit or loss |
|
| 42,321 |
| 6,109 |
Items that will never be reclassified subsequently to profit or loss |
|
|
|
|
|
Remeasurements of the defined benefit liability | 24 |
| 1,936 |
| (5,186) |
Income tax related to items that will never be reclassified subsequently to profit or loss | 17 |
| (129) |
| 998 |
Total items that will not be reclassified subsequently to profit or loss |
|
| 1,807 |
| (4,188) |
Other comprehensive income for the year, net of income tax |
|
| 44,128 |
| 1,921 |
Total comprehensive income for the year |
|
| 142,469 |
| 83,523 |
Profit attributable to: |
|
|
|
|
|
Owners of the Company |
|
| 74,615 |
| 64,036 |
Non-controlling interest |
|
| 23,726 |
| 17,566 |
Total comprehensive income attributable to: |
|
|
|
|
|
Owners of the Company |
|
| 109,880 |
| 65,917 |
Non-controlling interest |
|
| 32,589 |
| 17,606 |
Earnings per share |
|
|
|
|
|
Basic and diluted earnings per ordinary share (in RUB) | 22 |
| 0.39 |
| 0.40 |
| Notes |
| 31 December 2016 |
| 31 December 2015 |
|
ASSETS |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment | 14 |
| 1,798,568 |
| 1,734,044 |
|
Intangible assets | 15 |
| 16,804 |
| 18,532 |
|
Investments in associates and joint ventures |
|
| 936 |
| 1,489 |
|
Non-current accounts receivable | 19 |
| 51,262 |
| 16,572 |
|
Other investments and financial assets | 16 |
| 85,351 |
| 31,928 |
|
Deferred tax assets | 17 |
| 7,069 |
| 8,579 |
|
Total non-current assets |
|
| 1,959,990 |
| 1,811,144 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Inventories | 18 |
| 33,143 |
| 33,921 |
|
Other investments and financial assets | 16 |
| 12,620 |
| 36,777 |
|
Current income tax prepayments |
|
| 6,339 |
| 4,201 |
|
Trade and other receivables | 19 |
| 167,616 |
| 162,624 |
|
Cash and cash equivalents | 20 |
| 86,970 |
| 97,090 |
|
Total current assets |
|
| 306,688 |
| 334,613 |
|
Total assets |
|
| 2,266,678 |
| 2,145,757 |
|
| Notes |
| 31 December 2016 |
| 31 December 2015 |
EQUITY AND LIABILITIES |
|
|
|
|
|
Equity | 21 |
|
|
|
|
Share capital |
|
| 198,071 |
| 163,154 |
Share premium |
|
| 212,978 |
| 212,978 |
Treasury shares |
|
| (2,702) |
| (2,713) |
Reserve for issue of shares |
|
| 1,678 |
| 33,473 |
Other reserves |
|
| 33,165 |
| (2,100) |
Retained earnings |
|
| 521,300 |
| 448,120 |
Total equity attributable to equity holders of the Company |
|
| 964,490 |
| 852,912 |
Non-controlling interest |
|
| 340,149 |
| 315,983 |
Total equity |
|
| 1,304,639 |
| 1,168,895 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Loans and borrowings | 23 |
| 472,057 |
| 465,439 |
Trade and other payables | 25 |
| 23,698 |
| 22,075 |
Employee benefits | 24 |
| 28,425 |
| 29,473 |
Deferred tax liabilities | 17 |
| 66,835 |
| 60,155 |
Total non-current liabilities |
|
| 591,015 |
| 577,142 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Loans and borrowings | 23 |
| 86,829 |
| 118,832 |
Trade and other payables | 25 |
| 261,754 |
| 267,972 |
Provisions | 26 |
| 14,305 |
| 11,421 |
Current income tax liabilities |
|
| 8,136 |
| 1,495 |
Total current liabilities |
|
| 371,024 |
| 399,720 |
Total liabilities |
|
| 962,039 |
| 976,862 |
Total equity and liabilities |
|
| 2,266,678 |
| 2,145,757 |
|
Notes |
| Year ended31 December 2016 |
| Year ended 31 December 2015 |
OPERATING ACTIVITIES |
|
|
|
|
|
Profit for the year |
|
| 98,341 |
| 81,602 |
Adjustments for: |
|
|
|
|
|
Depreciation and amortization of property, plant and equipment and intangible assets |
|
| 113,766 |
| 100,529 |
10 | |||||
Impairment of property, plant and equipment | 14 |
| 38,503 |
| (5,090) |
Finance costs | 12 |
| 37,187 |
| 38,865 |
Finance income | 12 |
| (13,915) |
| (16,238) |
Loss on disposal of property, plant and equipment |
|
| 751 |
| 2,773 |
Share of loss of associates and joint ventures, net of income tax |
|
| 343 |
| 4 |
Impairment of accounts receivable | 10 |
| 19,562 |
| 28,778 |
Proceeds from subsidiary disposal | 9 |
| (12,318) |
| (12,410) |
Bad debt write-off |
|
| 387 |
| 381 |
Non-cash receipt of property, plant and equipment |
|
| (5,650) |
| (7,687) |
Non-cash settlement of technological connection agreements |
|
| (1,973) |
| (954) |
Other non-cash transactions |
|
| (2,513) |
| 177 |
Income tax expense |
|
| 21,501 |
| 32,110 |
Operating profit before changes in working capital |
|
| 293,972 |
| 242,840 |
Change in trade and other receivables (before impairment) |
|
| (65,734) |
| (25,118) |
Change in inventories (before impairment) |
|
| 919 |
| (6,414) |
Change in trade and other payables |
|
| 23,842 |
| 25,510 |
Change in employee benefit liabilities |
|
| (1,611) |
| (3,965) |
Change in provisions |
|
| 2,884 |
| (7,136) |
Other |
|
| (91) |
| (65) |
Cash flows from operating activities before income tax and interest paid |
|
| 254,181 |
| 225,652 |
Income tax paid |
|
| (20,247) |
| (6,196) |
Interest paid |
|
| (58,370) |
| (62,768) |
Net cash flows from operating activities |
|
| 175,564 |
| 156,688 |
|
|
|
|
|
|
|
Notes |
| Year ended31 December 2016 |
| Year ended 31 December 2015 |
INVESTING ACTIVITIES |
|
|
|
|
|
Acquisition of property, plant and equipment and intangible assets |
|
| (196,178) |
| (174,052) |
Proceeds from the sale of property, plant and equipment |
|
| 5,692 |
| 2,265 |
Acquisition of investments and placement of bank deposits |
|
| (34,636) |
| (188,769) |
Proceeds from disposal of investments and withdrawal of bank deposits |
|
| 59,239 |
| 169,110 |
Dividends received |
|
| 348 |
| 44 |
Interest received |
|
| 11,603 |
| 15,662 |
Acquisition of subsidiaries |
|
| - |
| 1,221 |
Net cash flows used in investing activities |
|
| (153,932) |
| (174,519) |
FINANCING ACTIVITIES |
|
|
|
|
|
Proceeds from loans and borrowings |
|
| 302,878 |
| 153,716 |
Repayment of loans and borrowings |
|
| (327,288) |
| (152,154) |
Proceeds from share premium |
|
| 3,122 |
| 33,473 |
Acquisition of non-controlling interest in subsidiaries |
|
| - |
| (413) |
Dividends paid |
|
| (10,275) |
| (2,032) |
Repayment of finance lease liabilities |
|
| (189) |
| (245) |
Net cash flows from financing activities |
|
| (31,752) |
| 32,345 |
Net increase in cash and cash equivalents |
|
| (10,120) |
| 14,514 |
Cash and cash equivalents at the beginning of year |
|
| 97,090 |
| 82,576 |
Cash and cash equivalents at the end of year | 20 |
| 86,970 |
| 97,090 |