Our digital segment has shown a steady growth as we proceed with our programme of business transformation and migration to a new business model of an

Transcription

1 Our digital segment has shown a steady growth as we proceed with our programme of usiness transformation and migration to a new usiness model of an integrated digital service provider 94 PJSC ROSTELECOM Annual report

2 Annual report PJSC ROSTELECOM 95

3 FINANCIAL Financial Performance 96 PJSC ROSTELECOM Annual report

4 Introduction Company Profile Strategic Review Operational Highlights FINANCIAL Corporate Governance Information for Shareholders and Investors Appendices In, we continued our strategic efforts of changing the revenue structure to capture digital revenue pools through investments and transformation of usiness processes. Throughout, in terms of financial management, we had to navigate Rostelecom through times full of microeconomic challenges. FX volatility, rising orrowing costs and midterm interest rates were the largest challenges in managing corporate finance. We had to work hard and put in a lot of efforts, and I think we did well and even exceeded some targets. For example, to mitigate FX risk, all procurement was undertaken, whenever possile, in Russian roules. Floating federal-level procurement tenders for customer premises equipment helped us reduce the initial price y 40% 60% in some regions. In det and liquidity management, we successfully overcame macroeconomic challenges. As at the end of, Det/ OIBDA stood at 1.8x, a level we see as optimal and comfortale for the Company. Our total det and its average cost remained almost flat throughout. We successfully placed a ond issue which ecame a enchmark for the Russian det market. We also extended credit facilities with large anks. Short-term liquidity management, I think, was also up to the mark. All these factors helped us not only to have our credit ratings reaffirmed y S&P and Fitch ut also to have their outlooks upgraded. Management of operating expenses was one of our key focuses throughout. As a result of our meticulous, ongoing work, laour productivity has notaly improved, oth in terms of revenue per employee ratio and across individual processes/areas. We made some of the staff redundant and launched a multi-level optimisation initiative which, comined with a nation-wide operational efficiency project, had a cumulative positive effect of over RUB 14 illion in cost savings over the three years (including ) that the programme has een around. We continued optimising our real estate portfolio and estalished a dedicated fund to manage the asset disposal process. In 2017, Rostelecom will continue on its fast-paced journey of change and transformation into a digital service provider. It means that the Company will focus on developing new products and optimising its organisational structure, while the task of Finance will e to quickly adapt to these new processes and maximise its contriution to value creation. This sounds too pessimistic, I expect macroeconomic environment to improve and have a positive effect on Rostelecom s performance. Kai-Uwe Mehlhorn, Senior Vice President and CFO Annual report PJSC ROSTELECOM 97

5 FINANCIAL Figure 39. Share of digital segment, % Content 39% 44% and digital services 60% a a a f e d c f 2020F c d e e d f c In, the Company s revenue grew y RUB 91 million to RUB illion. Digital services 31 accounted for 44% of revenue. Broadand (a) Pay TV () VPN (c) VAS and cloud services (d) Telephony (e) Other (f) Tale 7. Key financial highlights Item vs, % Revenue, RUB m 298, , , OIBDA, RUB m 102, ,839 96,772-4 % of revenue 34.3% 33.9% 32.5% Operating profit, RUB m 39,994 38,586 39, % of revenue 13.4% 13.0% 13.4% Net profit, RUB m 13,182 14,391 12, % of revenue 4.4% 4.8% 4.1% CAPEX, RUB m 53,810 62,726 61,857-1 % of revenue 18.0% 21.1% 20.8% Net det, RUB m 171, , , Net det / OIBDA FCF, RUB m 27,313 21,962 13, Including roadand, Pay TV, VPN, VAS and cloud services. 98 PJSC ROSTELECOM Annual report

6 Introduction Company Profile Strategic Review Operational Highlights FINANCIAL Corporate Governance Information for Shareholders and Investors Appendices Figure 40. Revenue in, RUB m Figure 41. OIBDA and OIBDA margin in Figure 42. Operating expenses in, RUB m Figure 43. Operating profit in, RUB m 298, , , , , , , , ,610 39,994 38,586 39, OIBDA, RUB m OIBDA margin, % Figure 44. Net income and net income margin in Figure 45. Free cash flow (FCF) in, RUB m Figure 46. Net det and net det / OIBDA in Figure 47. CAPEX in 13,182 14, ,313 21, , , , , ,249 13, ,135 53, Net income, RUB m Net income margin, % Net det, RUB m Net det / OIBDA CAPEX, RUB m CAPEX/Revenue, % Annual report PJSC ROSTELECOM 99

7 FINANCIAL REVENUE BY PRODUCT In, Rostelecom s revenue grew 0.03% to RUB illion. Revenue from Pay TV showed much higher growth (+22%), in line with a sustainale trend of recent years. In, revenue from VAS and cloud services increased 28%, while revenue from roadand was up 5%, also keeping pace with the upward trend. By contrast, revenue from fixed-line services were declining for many years. Tale 8. Revenue y product in, RUB m Product vs, % Broadand 60,364 63,880 66, TV services 15,250 19,368 23, Fixed-line telephony 109,710 99,105 87, Wholesale services, including: 77,895 78,266 79, lease of channels 11,758 11,714 10, interconnection and traffic transfer 33,177 34,717 35, VPN 19,711 19,711 20, lease and maintenance of telecommunications infrastructure 13,248 12,124 12, VAS and cloud services 11,384 14,224 18, Other telecommunications services 16,554 14,499 14, REVENUE BY SEGMENT Other non-telecommunications services 7,780 8,014 7,767-3 Tale 9. Revenue y segment in, RUB m* Following a decline in, B2B/G had a sizeale revenue growth (+2.5% or RUB 2.4 illion in ). Segment vs, % B2C 136, , ,269-1 B2B/G 104,500 98, , B2O 58,092 57,143 57, Other revenue 5,129 4, * Before, revenue was segmented y customer. 100 PJSC ROSTELECOM Annual report

8 Introduction Company Profile Strategic Review Operational Highlights FINANCIAL Corporate Governance Information for Shareholders and Investors Appendices BREAKDOWN OF OPERATING EXPENSES Operating expenses less depreciation increased 2% year-on-year to reach RUB illion in. Interconnection charges grew 5% (+RUB 2.3 illion). Other operating expenses declined 11% y RUB 1.7 illion, mostly as part of the Bridging the Digital Divide project. With BDD project compensations excluded, other operating income increased 94%. Staff optimisation measures rought laour expenses down y 1% (RUB 0.7 illion). Depreciation charges decreased 8% to RUB 55.6 illion for 12M, driven mostly y reassessment of PPE useful life. Tale 10. Breakdown of operating expenses in, RUB m Operating expenses vs, % Personnel costs (89,929) (91,081) (90,340) -1 Interconnection charges (47,429) (49,825) (52,161) +5 Materials, repairs and maintenance, utilities (25,828) (25,125) (24,917) -1 Gain on disposals of PPE and intangile assets 1,475 2,133 4, Bad det expense (2,006) (882) (2,775) +214 Other operating income 12,950 14,630 12, Other operating expenses (47,553) (48,020) (49,332) +3 Depreciation, amortisation and impairment losses (60,623) (60,599) (55,589) -8 Total (258,943) (258,769) (257,610) -0.4 Annual report PJSC ROSTELECOM 101

9 FINANCIAL OIBDA Figure 48. OIBDA margin in, % OIBDA margin Revenue Payroll Interconnection charges Materials, repairs and maintenance Other income and expenses OIBDA margin Figure 49. Dynamics of OIBDA in, RUB n OIBDA Revenue Payroll Interconnection charges Materials, repairs and maintenance Other income and expenses OIBDA Tale 11. OIBDA in 32 Item vs, % OIBDA 102, ,839 96,772-4 OIBDA/Revenue, % OIBDA is not an indicator calculated under US GAAP or IFRS. The Company calculates OIBDA as operating profit efore depreciation and non-cash expenses. 102 PJSC ROSTELECOM Annual report

10 Introduction Company Profile Strategic Review Operational Highlights FINANCIAL Corporate Governance Information for Shareholders and Investors Appendices DEBT Total det of Rostelecom had marginal changes year-on-year and amounted to RUB illion as at the end of. As at 31 Decemer, rouledenominated payales accounted for over 99% of the Company s total det. Figure 50. Structure of total det Interest rate (excl. %) Currency (excl. %) Instrument (excl. %) a a a c 14% Fixed rate (a) 86% Key rate () 99.7% RUB (a) 0.3% Other () 70% Loans (a) 26% Bonds () 4% Other (c) Tale 12. Total det of Rostelecom in, RUB m Figure 51. Total det maturity, RUB n Item vs, % 68.0 Total det, RUB m 190, , , Net det, RUB m 171, , , Net det / OIBDA LTM, % and onwards Annual report PJSC ROSTELECOM 103