Sistema PJSFC Financial Results 4Q 2017 and full year 2017

Transcription

1 Sistema PJSFC Financial Results 4Q 07 and full year 07 Andrey Dubovskov President and CEO Vladimir Travkov Vice-president, Chief Financial Officer 3 April 08

2 DISCLAIMER Certain statements in this presentation may contain assumptions or forecasts in respect to forthcoming events within Sistema PJSFC. The words expect, estimate, intend, will, could and similar expressions identify forward-looking statements. 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 above-mentioned date or to reflect the occurrence of unanticipated events. Many factors could cause Sistema s actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, deteriorating economic and credit conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.

3 FINANCIAL REVIEW 07 3

4 KEY HIGHLIGHTS 07 REVENUE RUB bn +3.5% +8.4% Q 06 4Q 07 ADJ OIBDA RUB bn +8.0% +3.8% Q 06 4Q 07 Strong portfolio performance in 07 - Revenue growth driven by publicly-traded assets (MTS and Detsky Mir), Medsi and hospitality business - All key assets profitable on adj. OIBDA level. MTS, Detsky Mir, Medsi and Steppe improved margins, MTS Bank returned to profits CASH POSITION AT CORPORATE CENTRE NET FIN LIABILITIES AT CORP CENTRE, RUB bn -33.6% RUB bn +65.8% M M07 07 FASTEST GROWING ASSETS (BY REVENUE GROWTH IN 07) RUB bn 54.5%.8%.9%.% 4.0% Hospitality assets Strategic transactions - Detsky Mir s RUB.9 bn IPO in Q 07 - SSTL-RCom merger deal completed in 4Q 07 Settlement with Rosneft / Bashneft - A settlement agreement (SA) fulfilled and RUB 00 bn paid out to Bashneft - Financial liabilities at Corporate Centre including the SA indebtedness at RUB 7.0 bn, up 70.3% during 07 Cash position at comfortable level - Cash position at Corporate Centre largely flat vs. end of 06, reflecting strong cash returns from portfolio companies Source: Management accounts Total borrowings, liability to Rosimushchestvo, liability to Rusnano (repaid at YE 07) and liability under Settlement Agreement less cash at the Corporate Centre level 4

5 FINANCIAL REVIEW: REVENUES REVENUE 07 IFRS, RUB bn Detsky Mir: 7.% like-for-like sales growth and ramp-up of new stores (04 new stores opened in 07) MTS: mobile revenue growth in Russia both in 07 and 4Q 07 Revenue 06 Growth at Detsky Mir Growth at MTS Growth at Segezha and Steppe Growth at Medsi Based on the IAS 8 standard Including the negative effect of deconsolidation of Moscapstroy since 3Q 06 of RUB 3.3 billion Decline at RTI Other Revenue 07 Segezha Group: growth in paper sales due to strong demand in global markets Medsi: stronger vertical integration, ramp-up of new clinics and higher capacity utilisation REVENUE 4Q 07 IFRS, RUB bn RTI: Rescheduling of contract work by clients Revenue 4Q 06 Growth at MTS Growth at Detsky Mir Growth at Steppe, Segezha, Medsi Growth net of decline at other assets Revenue 4Q 07 5

6 FINANCIAL REVIEW: OIBDA ADJ. OIBDA 07 IFRS, RUB bn MTS: strong revenue, recovery of demand for international roaming, lower sales of sim-cards MTS Bank: new strategy with tighter risk control and improved scoring, resulting in lower provision charges OIBDA 06 Growth at MTS Detsky Mir and Medsi Growth at MTS Bank Decline at Segezha Group Decline net of growth at other assets OIBDA 07 Detsky Mir: further improvement of operational efficiency with adj. SG&A/Revenue down by 0.9 p.p. in 07 (to.8%) and by 0.5 p.p. in 4Q 07 (to.4%) ADJ. OIBDA 4Q 07 Medsi: continued expansion with increase in patient visits and higher average check IFRS, RUB bn Segezha Group: Pressures from stronger RUB and cost inflation during the year 4.6 OIBDA 4Q 06 Growth at MTS Growth at MTS Bank Growth at Detsky Mir, RTI and improvement at Corp Centre Decline net of growth at other assets OIBDA 4Q 07 Based on the IAS 8 standard 6

7 CASH FLOWS AT THE CORPORATE CENTRE IN 07 Management accounts, RUB bn MTS dividends Cash returns from non-mts assets MTS share buyback 34. Detsky Mir IPO Other monetisations SG&A costs and taxes.8 Interest expenses Dec 06 Dividends and cash returns Monetisations Net debt raising Investments Payment under SA Expenses Sistema's dividends Other outflows net of inflows 3-Dec 07 Strong cash generation with RUB 34.0 bn of dividends and cash returns and RUB 34. bn of proceeds from asset monetisations Cash position impacted by first payment under the Settlement Agreement of RUB 0 bn maid in December 07 Largest investments include capital calls in funds, investments in agriculture, high-tech and real estate Other net outflows include RUB. bn of FX-revaluation effect, RUB.6 bn of one-off costs related to SSTL RCom merger and RUB.5 bn paid for own shares in April 07 Excluding RUB. bn of dividends from Detsky Mir unfrozen in Q 08 7

8 CASH FLOWS AT THE CORPORATE CENTRE IN 4Q 07 Management accounts, RUB bn MTS dividends Cash returns from non-mts assets MTS share buyback Other monetisations SG&A costs and taxes Interest expenses Sept 06 Dividends and cash returns Monetisations Payment under SA Expenses Investments Sistema's dividends Net debt repayment Other outflows net of inflows 3-Dec 07 Largest investments of 4Q 07 include investments in agriculture, high-tech and investment funds Other net outflows include one-off costs related to SSTL RCom merger of RUB.6 bn and a RUB 0.4 bn FX-revaluation effect During the quarter Sistema paid out an interim 9M07 dividend of RUB 0.68 per share. Dividends totalling RUB 4. bn were not paid to the majority shareholder Vladimir Evtushenkov based on his request. Numbers may not add up due to rounding Payment of dividends completed in January 08 8

9 CORPORATE CENTRE S FINANCIAL LIABILITIES CORPORATE CENTRE S FINANCIAL LIABILITIES DURING 07 Management accounts, RUB bn RUB debt raised RUB and USD liabilities repayment FXrevaluation Liability under SA Dec 06 3 Dec 07 RUB debt USD debt Liabilities to Rosimuschestvo and Rusnano Liabilities under SA MATURITY PROFILE AND STRUCTURE ANALYSIS Debt (USD, RUB) Liability to Rosimushchestvo Liabilities under SA 5.4 Liabilities on SSTL shares 0% RUB bonds 0% Eurobonds 0% Financial liabilities at Corporate Centre up by 70.3% in 07 driven by liability under the Settlement Agreement (SA) Financing to repay the SA-related indebtedness secured in Q 08 at single-digit interest rates In Q 08 Sistema obtained waivers from creditors in connection with technical defaults announced in 3Q 07 FX-Debt and USD-denominated liability to Rosimuschestvo are presented at RUB/USD exchange rate as of 3 December 07. Liability to Rusnano for Mikron shares repaid in Settlement Agreement 35% Bank loans and other 5% 9

10 CONSOLIDATED FINANCITAL LIABILITIES CONSOLIDATED FINANCIAL LIABILITIES : COMPOSITION BY BORROWERS AND MATURITY PROFILE Management accounts, RUB bn Q 06 3Q 07 4Q Thereafter MTS Corp Centre Other Settlement Agreement STRUCTURE ANALYSIS Debt and other liabilities Settlement Agreement 3% 6% 64% 67% 3% 4% 60% 33% 7% 3% 4Q 06 3Q 07 4Q 07 USD RUB Other Settlement Agreement 9% % 8% 78% 3% % 65% 4Q 06 3Q 07 4Q 07 Long-term Short-term Settlement Agreement Settlement Agreement 3% Eurobonds % RUB bonds 7% Liabilities on SSTL shares 4% Bank loans and other 55% Consolidated financial liabilities up 4.% during 07 and 7.3% in 4Q 07 driven by liability under the Settlement Agreement, as well as borrowings at MTS and the Corporate Centre Include financial liabilities at Corporate Centre and total borrowings at portfolio companies in accordance with IFRS 0

11 SG&A EXPENSES AND CAPEX GROUP SG&A EXPENSES CORPORATE CENTRE S SG&A EXPENSES GROUP CAPEX IFRS, RUB bn Management accounts, RUB bn IFRS, RUB bn % 0.0.4% MTS Segezha Other Detsky Mir Corporate Centre SG&A at Corporate Centre Corporate SG&A/Group revenue MTS Segezha Other assets Group SG&A costs under control with consolidated SG&A/Revenue ration down to.9% from.3% in 06 Improvements of SG&A/Revenue ratio at: - MTS: down to 0.6% from 0.7% - Hospitality assets: down to 6.0% from 7.9% - Detsky Mir: down to.8% from 3.7% SG&A down YoY reflecting lower compensation costs in 07, including freeze of LTI payments Corporate Centre s SG&A/Revenue ratio decreased from.9% in 06 to.4% in 07 Group CAPEX decreased by 5.0% YoY, driven mainly by MTS (-.3% YoY) CAPEX at Segezha Group up by 0.5% YoY mainly due to strong investments in the expansion of capacity in sack paper and plywood production

12 MANAGEMENT UPDATE

13 SETTLEMENT AGREEMENT WITH ROSNEFT/BASHNEFT: KEY TERMS AND EXECUTION PURPOSE OF THE SETTLEMENT AGREEMENT (SA) To settle by mutual agreement the dispute in case No А /07, as well as other litigations between the claimants and the defendants related to the ownership and/or control of Bashneft and/or its affiliates by Sistema and Sistema-Invest PAYMENTS BY SISTEMA FINANCING COLLATERAL UNWINDING OF INJUNCTIONS RUB 0 bn Paid on Dec 07 Released dividend from MTS and Bashkirian Power Grid Co (BPGC) + Sistema s cash DIVIDEND RELEASED MTS (3.8%), BPGC (90.5%), Medsi (00%) BPGC ARREST LIFTED RUB 40 bn Paid on: 7 Feb 08 Targeted credit facility by RDIF and Gazprombank Signed in Feb 08 Maturity: 80 days Detsky Mir (5.%), BPGC (90.5%) 3 Detsky Mir (5.%) Detsky Mir (5.%), BPGC (90.5%) 3 BPGC BPGC 3 RUB 40 bn Paid on 5 March 08 Part of an up to RUB 05 bn credit line from Sberbank Signed in Feb 08 Maturity: 5 years MTS (up to 3.8%) Arrest lifted on 3.8% of MTS Arrest and all other limitations lifted on all other assets under injunction All parties to the SA have withdrawn and waived all legal claims against each other in connection with the Bashneft dispute Sistema can make investments and pay dividends using part of proceeds from asset monetisations w/o creditors approvals. Using funds from other sources for these purposes is possible with creditors approvals Sistema is entitled to repay loans received for the SA execution ahead of schedule and obtain early pledge release from creditors Entered into by Sistema PJSFC, its subsidiary Sistema-Invest, Bashneft, Rosneft and the Republic of Bashkortostan on December 07 The court case under the claim filed by Rosneft and Bashneft in May 07 3 Contemplated pledge of BPGC shares will be possible after the arrest imposed on BPGC shares in 04 is lifted. Sistema is undertaking all reasonable necessary actions to get this arrest lifted. 3

14 SISTEMA S STRATEGIC FOCUS Maximising shareholder return and reducing Sistema s MCap discount to NAV Executing the Settlement agreement Executing the Strategic and structural Deleveraging and building Settlement Agreement optimisation up investment resource Financing the liability of RUB 80 bn Unwinding of injunction measures Withdrawal of filed claims Diversify investment resource Sharpen digital focus Optimise structure/motivation Strengthen the balance sheet Monetise selected assets STRATEGIC INITIATIVES Diversify the source of investment by expanding into management of third-party capital - Attract co-investors at the Corporate Centre level (large investment transactions) - Develop own funds within the Corporate Centre as an additional investment tool and source of income Enhance digital focus and the share of tech investments in the portfolio - Set-up Digital vertical to capture growth opportunities in tech-driven sectors - Promote digital transformation in portfolio companies: MTS, Detsky Mir, Medsi and other Investment process and portfolio structure 3 Optimise Corporate Centre s structure and motivation - Sistema s business leaders Managing Partners to fully share risks and returns with shareholders - Introduce agile approach to management and optimise headcount Costs and cash conversion 4

15 DIVERSIFICATION OF INVESTMENT SOURCES BY MANAGING THIRD-PARTY CAPITAL Via Corporate Centre APPROACH Investments in large assets, incl. those with strong turnaround potential and large high-tech companies INVESTMENT CRITERIA Mainly in Russia Stage: mature business Stake: 50% + share Size: > $00 mn Target IRR: 5% in RUB POTENTIAL PARTNERS Co-investments from partners to generate management fees 80% of Sistema s investments Via PE / VC funds Investments in promising tech and digital businesses, incl. start-ups (large and small stakes) In Russia and abroad Stage: A and higher Stake: >5% Fund size: > $50 mn Target IRR: >0% in USD, hurdle rate: 5% Bringing in a limited partner (LP) is a prerequisite for launching a fund Via portfolio companies Growth of business and market shares via M&A, entering new segments with synergy opportunities In Russia and abroad (if consistent with strategy) Industrial or financial partner if relevant DEVELOPMENT OF OWN FUNDS Sistema will develop own funds that will raise and manage external capital based on the standard 0%/% fee model Capital calls from Sistema and limited partners to be triggered by decisions of investment committee (comprised of Sistema s investment experts) and BoD Limited partners Investment Committee BoD Fund Fees Management Company Advisory Board 00% Corporate Centre will continue to focus on large investments mainly within Sistema s current sectors of presence and will attract co-investors in new projects to generate management fees Sistema will gradually strengthen its investment funds franchise to generate additional source of capital and income 5

16 MANAGING THIRD-PARTY CAPITAL: SISTEMA S VENTURE FUNDS INVESTMENT FOCUS CAPITAL DEPLOYED TARGET SIZE / RETURN CO-INVESTORS SELECTED INVESTMENTS VC fund (Russia and world) AI, machine learning, cognitive tech, VR/AR, IoT, SDN technology Series A RUB 4.7 bn RUB 0 bn 5-30% in RUB Sberbank Viktor Rashnikov Russia s leading multi-category online retailer A developer of face recognition solutions A developer of educational VR/AR products VC fund (India, Southeast Asia) Consumer tech, incl. e-commerce, AI, machine learning, VR/AR, IoT, Series B-C RUB.5 bn RUB 7 bn 3x cash-oncash in US$ Soft commitments from Russian and Indian investors Advanced Enterprise Digital Rights Management Solution Prepaid gift cards and storedvalue card tech solutions Online and mobile fashion discovery and shopping app PE/VC fund (Russia, CIS, EU, Israel) IT, robotics, software and cloud tech, renewable energy, microelectronics Series A-D RUB 0.3 bn RUB 6 bn >6% in US$ Rusnano Corporation Developer of unique construction 3D printers Developer of technologies for marker monitoring of horizontal well inflow profiles Sistema s funds provide access to unique asset mix with a strong focus on technology-driven industries High-profile co-investors brought into Sistema_VC and Rusnano Sistema SICAR RUB equivalent as of 3 March 08 6

17 MANAGING THIRD-PARTY CAPITAL: PRIVATE EQUITY AND ASSET MANAGEMENT INVESTMENT FOCUS CAPITAL DEPLOYED TARGET SIZE / RETURN CO-INVESTORS SELECTED INVESTMENTS International investment platform in Europe and US Russia s top-6 asset manager by volume of mutual funds under management Real estate in Europe and US Mid-cap private equity in Europe (industrials, healthcare) Sistema Capital actively manages mutual funds and investment accounts Investments in public equity, debt, derivatives, other RUB 8. bn IRR: >5% in EUR and US$ Assets under management Russian and international investors Russian and international investors Performance of mutual funds managed by SC RUB bn SC-Reserve.FX Eurobond fund, USD European leader in castings of thin-walled large engine blocks Leader in castings for wind energy and drive tech Real estate assets (shopping centers) in Germany First exits: two portfolios of retail property in Germany exited in H 07 with IRRs of 8% and 36% in EUR +0.4% +7.% +5.% SC-Reserve - Bonds fund, RUB +7.3% +.% +4.3% SC-Mobile. Bonds. FX - Eurobond fund, USD % SC-Mobile. Bonds - Bond fund, RUB % Strong private equity and asset management franchises established in both Russia and developed markers (Europe, US) High returns generated in asset management and first exits from PE investments completed in 07, generating IRRs of 8-36% in EUR RUB equivalent as of 3 March 08 7

18 FINANCIAL STRATEGY: DELEVERAGING PRIORITISED CORP CENTRE S NET LIABILITIES / DIVIDENDS GROUP NET FIN LIABILITIES / ADJ. OIBDA RUB bn INTEREST PAID AT CORPORATE CENTRE Ratio of net fin. liabilities at Corporate Centre, incl. the liability under SA, to the sum of dividends and cash returns from portfolio companies and MTS share buyback Net consolidated indebtedness, incl. the liability under SA, liability to Rosimushchesvo and Rusnano to Group adj. OIBDA FINANCING UPDATE E 3 Subject to the pace of deleveraging in 08 Liability under Settlement Agreement (SA) successfully repaid - A 5-year RUB 05 credit facility raised from Sberbank in March 08 (RUB 40 bn used for a SA payment) - A 80-day RUB 40 bn target facility raised from RDIF and Gazprombank Financial position remains comfortable and the debt profile fully restored - Domestic bonds totaling RUB 5 bn issued in January and March with strong investor demand - All necessary waivers related to previous incompliance with conditions of credit agreements obtained in Q 08 Leverage metrics increased and the flexibility in making investments and paying dividends reduced Sistema prioritises deleveraging and will work to actively reduce financial liabilities at the Corporate Centre level 8

19 FOCUS ON CASH RETURNS FROM PORTFOLIO AND ASSET MONETISATIONS Dividends and cash returns, RUB bn 9 CASH RETURNS FROM ASSETS MTS Other assets KEY ASSETS RETURNING CASH TO SISTEMA Improved OIBDA margin, strong FCF Constant focus on shareholder return RENTAL ASSETS Continued monetisation of property bank Growth of rental rates & profitability Revenue growth of % in 07 Declared dividends up 8% YoY in 07 Growth driven by bigger capacity and weaker RUB Will resume cash returns in 08 Extensive portfolio of unique projects Cash from sales up % YoY in 07 Expanded land bank and strong harvesting track record with focus on efficiencies Dividends from MTS stable YoY in-line with the operators dividend policy Dividends from non-mts portfolio companies are growing steadily, contributing to further diversification of cash flows Monetisatisation of assets to intensify in Divestments, RUB bn MONETISATION OF INVESTMENTS IPO CANDIDATES WITHIN THE PORTFOLIO IPO-ready from Strategy 00 Sistema may bring in co-investors via private placements of the 00 assets before IPOs 00 0 Equity value target for all IPO candidates is US$ - bn A number of key assets will be IPO-ready starting from 00 and may bring in financial and strategic investors before that Management accounts. Including Detsky Mir s dividends unfrozen in February 08, excluding MTS shares buyback 3 Excluding inflows from deposits of Ural-Invest 9

20 KEY PORTFOLIO ASSETS 0

21 МТS: DELIVERING ON DIGITAL STRATEGY AND STRONG FINANCIAL RESULTS STRUCTURE OF REVENUE IN RUSSIA RUB bn 4Q 06 Mobile service Fixed line RUB bn Integrated services 75. Handset sales 4Q RUB bn 78.0 RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % Adj. OIBDA % % Adj. OIBDA margin 37.9% 36.9%.0p.p. 40.3% 38.5%.8p.p. Adj. Profit % % Net debt % % CAPEX % (.3%) FREE CASH FLOW RUB bn MY MTS APP. CUSTOMERS mn +40.% Q'6 Q'7 Q'7 3Q'7 4Q'7 Here and thereafter profit is presented in Sistema s share The share in total subscriber base of Russia s Big4 telecom operators as of end of 4Q Numbers for active users and retail stores are presented as of 3 December 07 Market share in Russia 3.0% Revenue growth and OIBDA margin improvement > In 4Q 07, MTS s strong revenue growth was driven by the Russian mobile business, which grew by 3.8% YoY, and strong handset sales, which increased by 0.0% YoY. > In addition to revenue growth, factors affecting adj. OIBDA and adj. OIBDA margin included decline in SIM-card sales in Russia, higher gross margins on handset sales and a.4% decrease of MTS s retail network during the year to 5,696 stores at year-end 07. Digital strategy > In 07 MTS launched and continued to develop the MTS Money Wallet service, which brings together a variety of means of payment electronic wallet, bank cards and customers mobile account balances in a single platform. In 4Q 07, more than. million users, or 5% of MTS customers, used My MTS app. > New markets entered: e-sports (via acquisition of the Gambit Esports club) and online ticketing (through the acquisition of control in the leading players in the Russian event ticketing industry, Ticketland.ru and Pononimanlu.ru) Focus on shareholder returns Total 07 traffic, minutes bn My MTS 3-month active users. mn Retail stores 5,696 > As well as dividends, MTS has additionally launched a share repurchase programme totalling up to RUB 0 bn. To date, MTS has repurchased from Sistema and minority shareholders shares worth RUB 9.8 bn.

22 DETSKY MIR: OVERDELIVERING ON BUSINESS EXPANSION TARGETS AND FURTHER EFFICIENCY IMPROVEMENTS REVENUE RUB bn 5.3 4Q'6 Adj. OIBDA margin 0.% 0.3% Q'7.0% Q'6 5.9% SELLING SPACE (THSD M ) AND NUMBER OF STORES Q'7 3.7%.8% Dec-6 3-Mar-7 30-Jun-7 30-Sep-7 3-Dec-7 Retail space, thsd sq m ADJ. OIBDA 9.9% 0.4% Adj. SG&A/Revenue Stores In 07, Detsky Mir closed 4 stores to relocate them. LfL growth in RUB terms. LfL growth includes only DM stores in Russia that have been in operations for at least full calendar months. 3 As of 30 December 07 RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % Adj. OIBDA % % Adj. OIBDA margin 4.% 4.% 0.p.p.0% 0.3% 0.7p.p. Adj. profit.4.6 (.7%) % Net debt 0.4. (4.4%) 0.4. (4.4%) SGA/revenue.4%.8% (0.5 p.p.).8% 3.7% (0.9 p.p.) Like-for-like growth 7.% 9.0% (.8p.p.) 7.%.3% (5.p.p.) Traffic growth 4.% 7.% 6.9p.p..% 6.0% 6.p.p. Average ticket dynamics -6.0%.7% (7.7p.p.) -4.4% 5.9% (0.3p.p.) CAPEX % % Market share in Russia (07) 0% Continued revenue and OIBDA margin growth > Detsky Mir continued to consolidate the market for children s goods in Russia, growing its market share from 7% to 0% over the course of 07. > In 4Q 07 and in 07 revenue increased due to the roll-out of new stores and the strongest growth in like-for-like sales among Russia s publicly traded retailers (+7.% YoY both). > E-commerce continued to be the fastest-growing sales channel, with revenue growth in 4Q 07 of 79.6% YoY. Online sales accounted for 4.8% of total sales in 07, and developing the e-commerce platform is one of management s top priorities for 08. > Adj. OIBDA margin of 4.% in 4Q 07 is a result of continued improvements to operational efficiency on the back of stronger labour productivity and strict control of rental costs. Adj. SG&A/revenue ratio declined by 0.5 p.p. YoY to.4% in 4Q 07. Business expansion and growth plans > Detsky Mir plans to open at least 50 new stores in 08-0, with a targeted IRR of at least 40%, and to lead the market among children s goods retailers in 08 in terms of like-for-like sales growth. Shareholder returns E-commerce revenue CAGR (0-7) % Detsky Mir loyalty cardholders 3 8. mn Dividends declared in 07 RUB 4.8 bn > Management plans to recommend that all net profit for 07 be distributed to shareholders in the form of dividends, which would represent a dividend yield averaged over 07 of 6.8%.

23 SEGEZHA GROUP: CONTINUED GROWTH DESPITE EXTERNAL PRESSURES Main operating performance: sales PAPER SACKS SACK PAPER mn FY06 FY 07 SAWN TIMBER thsd m thsd tonnes -6.% +0.% FY 06 FY Revenue 70 PLYWOOD thsd m 3 Adj. OIBDA FY 06 FY Paper&paper sacks Wood processing Plywood Other FY 06 FY % +3.% REVENUE AND ADJUSTED OIBDA BY BUSINESS SEGMENTS IN 07 RUB bn Including sales of paper and paper board Metrics in the tables hereinafter are presented as of 0 April 08 RUB bn 4Q 07 4Q 06 YoY YoY Revenue.4..0% % Adj. OIBDA % (8.%) Adj. OIBDA margin 8.% 6.%.0p.p. 6.% 0.% (3.8p.p.) Adj. Profit % 0..0 (95.9%) Net debt % % CAPEX % % Share of FX-denom. revenues 7.6% 6.0% 5.5p.p. 69.6% 67.4%.p.p. Own forestry consumption 57.8% 64.0% (9.7p.p.) 6.7% 63.0% (.3p.p.) Total forestry, 000 m (6.%) % Results and key events of 07 Revenue increased mainly due to higher sales of sack paper (on the back of a strong growth of demand globally) and plywood. Revenue growth was impacted by: - lower sales of paper sacks in Russia due to increased competition; - temporary decline in demand in the Russian sack market; - strengthening of the RUB vs key foreign currencies (69.6% of Segezha Group s revenues are denominated in foreign currencies). Adj. OIBDA in 4Q 07 increased on the back of higher revenue and due to implementation of the efficiency plan. Decrease in adj. OIBDA and profit in 07 was mainly due to FX-rate pressures as well as inflation of logistics and raw material costs. Segezha s main investments in 07 were the upgrade of the Segezha PPM and construction of the Kirov Plywood Mill (KPM) with capacity of 86,000 cu m of plywood per year, which together accounted for more than 8% of Segezha Group capex in 07. In 4Q 07 a new paper machine was launched at the Segezha Mill, boosting output capacity to 39,000 tonnes per year. KPM is expected to launch in H 08. Mikhail Shamolin appointed as President Leased forest fund 6.8 mln ha Exports destinations 88 countries Capacity in sack paper 360 thsd tonnes Capacity in paper sacks.5 bn pcs Capacity in plywood 99.5 thsd m 3 In March 08 Mikhail Shamolin, previously President of Sistema, was named President of Segezha Group. 3

24 AGROHOLDING STEPPE: RECORD HARVEST AND HIGH OPERATIONAL AND FINANCIAL RESULTS PRODUCTION thsd tonnes 547 Field crop production,04 Apple orchards , APPLE PRODUCTION thsd tonnes Vegetable growing VEGETABLES PRODUCTION thsd tonnes Dairy farming Q 06 3Q 07 4Q 07 Production, thsd tonnes Price per litre, RUB Q 06 3Q 07 4Q 07 Cucumbers MILK PRODUCTION thsd tonnes Including Steppe and RZ Agro Excluding the results of the RZ Agro joint venture (Steppe owns 50% of RZ Agro) Tomatoes Agroholding Steppe RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % Adj. OIBDA 0.. (88.6%) % Adj. OIBDA margin 3.8% 55.6% (5.8p.p) 39.4% 34.% 5.p.p. Adj. (Loss)/Profit (0.7) 0.6 n/a % Net debt % % CAPEX (8.4%) % Total land bank 380 thsd ha Strong operational results Dairy cows herd 4,300 Apple orchards 780 ha Greenhouses area 44 ha > Record harvest of.4 mn tonnes (incl. 70,000 tonnes of wheat), +30% increase vs 06, driven by expansion of the land bank and use of modern agriculture technologies. A portion of 07 harvest allocated for sale in Q 08 to maximise revenue: carryover inventory at YE 07 at 5,000 tonnes, more than 6x higher than a year earlier. > Milk production grew by 9.0% YoY to 40,000 tonnes in 07, driven by expansion of the herd and high yields. Total apple harvest up by 37.4% YoY to,000 tonnes on the back of higher yields as well as younger orchards achieving their fruit-bearing targets. Tomato production increased by 8.6% YoY to 3,00 tonnes, while cucumber production decreased by.% YoY to,800 tonnes due to amended production programme. > Revenues up by.% in 07, despite pressures stemming from lower global wheat prices and strengthening of the RUB. > Adj. OIBDA in 07 up 40.6% YoY. The decline in adj. OIBDA and the net loss in 4Q 07 were the result of a fair value loss of biological assets by RUB 0.7 bn (excluding the fair value loss, adj. OIBDA was RUB 0.9 bn) and an increase in carryover inventory. CAPEX and land bank expansion > In 07 Steppe continued to invest in renewal of its stock of equipment and construction of a new,800-head dairy farm. The new farm is expected to reach full capacity in 0 and yield 0,000 tonnes of milk per year. In 07 Steppe s land bank increased by 65,000 ha. to a total of 380,000 ha. 4

25 MEDSI: SIGNIFICANT GROWTH DRIVEN BY IMPROVED CAPACITY UTILISATION AND CONTINUED EXPANSION REVENUE IN 07 By clients 6% 3% Insurance 55% 36% Individuals Corporate Other By assets 8% 5% Clinics 4% % 7% 7% Hospitals CDC at Belorusskaya Children clinics CDC at Krasnaya Presnya Other RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % Adj. OIBDA % x Adj. OIBDA margin 8.7% 8.5% 0.p.p. 6.9% 6.3% 0.6p.p. Adj. Profit/(Loss) 0.3 (0.) n/a 0.8 (0.7) n/a Net debt/cash 0.7 (.3) n/a 0.7 (.3) n/a Patient visits, 000,73,976 5,0% 7,90 7,34 8,0% Services provided, 000 3,38 3,080 9,8%,359,483 7,6% Average bill, 000 RUB.5.3 6,7%.5.3 4,8% FLOOR SPACE thsd % 5.8% Q 06 4Q 07 PATIENT VISITS mn.9. 4Q 06 4Q 07 CAPACITY UTILISATION 5.% 5.6% 4Q 06 4Q 07 mn 5.9% 9.% 3..5 p.p. SERVICES PROVIDED 3.4 4Q 06 4Q 07 Metrics in the tables hereinafter are presented as of 3 December 07 Capacity metric, calculated as the number of possible ambulance visits of Medsi s facilities Number of facilities 39 Out-patient visits,033 thsd Services provided (capacity) 7,00 thsd Doctors employed.5 thsd > In 4Q 07 revenue growth was driven by an increase in patient visits and a higher average check as Medsi delivered a broader array of integrated services and high-tech surgeries. Revenue from the mandatory medical insurance segment, derived primarily from high-tech services, increased more than 5x in 07 to RUB. bn. > CDC at Krasnaya Presnya increased capacity utilisation to 3% in 07 and delivered 8% of Medsi s total revenue, with OIBDA margin of.8% in 4Q 07. Assets acquired in 07, including the MEDEM clinic in St Petersburg and the Medlife chain in Perm, accounted for 7.8% of Medsi s revenue in 4Q 07. > Adj. OIBDA and adj. OIBDA margin increased year-on-year by 36.3% and 0. p.p., respectively. For 07, the OIBDA margin was 6.9%, vs 6.3% in 06. > Adj. profit attributable to Sistema was RUB 837 mn in 07, vs a loss in 06. > Medsi continues to invest in the expansion of its business in Moscow and in the Russian regions. In 07 the company opened 3 new clinics in Moscow, completed the aforementioned regional acquisitions and sold or closed non-utilised facilities for a net increase in facility space of,800 sq m. 5

26 MTS BANK: RETURN TO PROFITS IN 07 DUE TO IMPROVED ASSET QUALITY AND COST OF RISK MTS MONEY CARDS ISSUANCE (ALL TYPES OF CARDS) mn cards +3.4% RUB bn 4Q 07 4Q 06 YoY YoY Revenue % (0.9%) (Loss)/Profit (0.5) (.) n/a 0. (.6) n/a Interest income % (5.4%) Commission income % % Net assets % % ISSUANCE OF POS LOANS: ENHANCED RISK MANAGEMENT IN PLACE 30% 3,000 0% 0% 4Q 06 Q 07 Q 07 3Q 07 4Q 07 0% Issuance, RUB mn (right scale) ACTIVE RETAIL CUSTOMERS mn 0.99 Share of NPL 90+ (left scale) Forecast % Q 06 Q 07 Q 07 3Q 07 4Q 07,000,000 Loans classified as 90 days+ NPLs within months after issuance (07 numbers are based on the model forecast) All metrics in the table exclude results of East-West United Bank (EWUB) and the result of divestment of 47% in EWUB in Q 07 3 Metrics hereinafter are presented as of 3 December 07 in accordance with IFRS 0 Capital adequacy ratio (N.) 8.4% 0.% (.7 p.p.) 8.4% 0.% (.7 p.p.) Total assets 3 RUB 4.4 bn Total loan book, gross RUB 66 bn Customer deposits RUB 4.7 bn Retail deposits RUB 7.7 bn MTS Bank returned to profitability by pursuing a strategy of partnering with MTS and other Sistema portfolio companies In 07, interest income decreased by 5.4% as a result of lower interest rates in Russia and contraction of loan book following the deconsolidation of East-West United Bank. This was partially mitigated by an 8.3% increase in higher-margin retail loans, with retail loans accounting for 59% of the total loan book at the end of the reporting period, vs 53% in 06. In line with the strategy of building a leading digital bank, MTS Bank grew fee and commission income by 67.% in 4Q 07 and by 3.6% in 07. The Bank is actively developing digital channels for servicing its clients, including in the onlinelending segment. In 07 sales of credit cards through digital channels grew from 0.% to 4% of the total number of new cards issued. Digital sales accounted for 7% of total sales in 07. The Bank recorded a net profit in 07 of RUB 69 mn. The loss in 4Q 07 was due to the creation of loan-loss provisions. During the year the bank significantly improved the quality of its loan book and the quality of newly issued loans. MTS Bank continues to deepen its partnerships with MTS and other Sistema companies. In October 07, the Bank signed an Internet Acquiring contract with Ozon, Russia s leading multi-category online retailer. 6

27 REAL ESTATE ASSETS: CREATION OF VALUE LEADER INVEST Cash generation from real estate sales, RUB mn Q 07 Q 07 3Q 07 4Q 07 % 4% 39% Comfort.9.9 mn sqm Business mn sqm 59% Portfolio by class RENTAL ASSETS Ownership Premium % 5% 49% ATS thsd sqm Other thsd sqm 5% 85% Leader Invest sales, m 8.8 Housing Commercial properties Dekart 0.0 Q 07 Q 07 3Q 07 4Q 07 Portfolio by segment Management St Petersburg Leader Invest Rental assets 00% of Zil-South included Leader Invest results for 4Q 07 and 07 are presented in accordance with IFRS 5. 4Q 06 and 06 results are presented in accordance with IAS 8 RUB bn 4Q 07 4Q 06 YoY YoY Revenue (4.0%) % OIBDA.. 0.9% % OIBDA margin 38.0% 9.4% 8.6p.p. 33.0% 34.% (.p.p.) Profit (79.5%) (65.3%) Net debt x x RUB bn 4Q 07 4Q 06 YoY YoY Revenue x % Adj. OIBDA x % Adj. OIBDA margin 73.% 47.% (38.9 p.p.) 48.0% 55.7% (5.p.p.) Adj. Profit х х Net cash.. (.%).. (.%) Leader Invest > Sales volumes in Moscow amounted to 0,000 sq m in 4Q 07, cash collections from sales to RUB.9 bn. > Revenue in 4Q 07 was RUB 3. bn, driven primarily by sales at the Dayev and Serpukhovsky premium-class projects. Revenue decline in 4Q 07 was due to the high base effect as several large projects were delivered in 4Q 06. > Sales portfolio amounted to 09,700 sq m of real estate in Moscow at the end of 4Q 07. Leader Invest launched sales for its business-class project 0 Lobachevsky St., which will have,473 apartments ranging in size from 45.5 to 35 sq m. Sberbank signed an agreement in Q 08 to provide project finance lending of RUB 4.6 bn for the first stage of the project. > In November 07, Standard & Poor s assigned Leader Invest a B/Stable long-term credit rating, citing the company s high levels of profitability among Russian developers as one of the key factors supporting the rating. Rental assets (Business-Nedvizhimost) > Revenue grew by 7.5% YoY due to the sale of an asset during the period. Adj. OIBDA increased 4.x YoY to RUB.8 bn, and adj. profit increased 46.8x to RUB.3 bn. 7

28 HIGH-TECH (RTI) AND ELECTRIC POWER GRIDS (BPGC) RTI RUB bn 4Q 07 4Q 06 YoY YoY Revenue (30.%) (3.9%) Adj. OIBDA % % Adj. OIBDA margin.4% 8.0% 4.4 p.p. 3.%.%.0 p.p. Adj. profit/(loss).4 (.7) n/a (.6) (4.7) n/a Net debt % % Share of debt related to state defence contracts 0%.4% (.4 p.p.) 0%.4% (.4 p.p.) Results by key business segments Radio-technical systems % 6.% Revenue, RUB bn % Microelectronics 8.% Adj. OIBDA margin > Moderate decline in revenue in 07 was due to 6.8% YoY decrease in revenue from the radiotechnical systems business unit 3 (BU), as well revenue volatility in relation to a major government contract. This was partially mitigated by 5.7% YoY revenue growth in the Microelectronics BU as a result of increased import substitution of electronic components and heightened demand for Mikron s products. Lower revenue YoY in 4Q 07 also reflects nonuniform work stages as part of a major government contract. > Growth in adj. OIBDA is largely connected to strong OIBDA dynamics in the Microelectronics BU. > Net loss for the year and quarter decreased thanks to reduced financial expenses. > RTI's total debt decreased by 8.7% as of the end of the year mostly as a result of the Defence Ministry s gradual transition away from credit financing for defence procurements. RTI also has on its accounts additional funds earmarked for state defence orders amounting to RUB 8.6 bn that are not included in the net debt calculation. > In 4Q 07, RTI Group recorded a one-off charge for provisions on receivables related to an uncompleted project and lawsuit in the total amount of RUB 6.0 bn. Losses on distribution and transmission grids.% 0.38%.43%.9% 4Q'6 Transmission BPGC RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % OIBDA..7 (34.8%) (6.7%) OIBDA margin.8% 36.9% (3.4p.p.) 9.8% 35.% (5.3p.p) Profit (57.7%).4.7 (.5%) CAPEX..6 (.9%) (7.6%) 4Q'7 Distribution > Revenue grew in 4Q 07 and in 07 mainly as a result of the indexation of tariffs for electricity transmission services from July 07. In 4Q 07 it was also driven by increase in paid capacity (+ 3.7% YoY including the effect of changes between tariff plans) and productive supply of electricity (+ 0.8% YoY). > In 4Q 07 OIBDA and profit declined YoY due to the release of provisions related to potential disputes with counterparties in the same period in 06 as well as due to an increase in the cost of network losses as the market price for electricity rose. > In 4Q 07 network losses as a percentage of electricity supplied decreased YoY due to on-going implementation of an automated electricity metering system, as well as increased control over risks and uncontracted use of electricity. > In 07, as part of modernisation of Ufa s electricity grid using Smart Grid technologies, BPGC completed the reconstruction of 87 distribution points and transformer substations, routed 0.3 km of cabling and installed a new metering system, as well as 8,700 individual meters. > In 4Q 07, BPGC put into operation 3 major new substations in Bashkortostan Kustarevskaya, Spartak and Alekseevka. Financial results are shown in accordance with IFRS 5 standards due to early adoption of the standard by RTI. In Sistema Group s consolidated statements, RTI s results are presented in accordance with IAS 8 standard. Debt relating to government procurement (effectively zero interest rate) 3 Formerly known as the Defence Solutions segment 8

29 HOSPITALITY ASSETS AND PHARMACEUTICALS (BINNOPHARM) Hospitality assets RUB bn 4Q 07 4Q 06 YoY YoY Revenue % % OIBDA (0.0) 0.04 n/a % OIBDA margin n/a 4.6% n/a 9.7% 7.5%.p.p. Loss (0.4) (0.3) n/a (0.5) (0.3) n/a Net debt (3.8%) (3.8%) Room capacity 4,040 3,77 7.% 4,040 3,77 7.% Number of hotel rooms by regions 4,040 3, Q 06 4Q 07 Abroad Russia Kosmos hotel > In 07 revenue increased driven by consolidation of RHC, as well as by a higher occupancy rate at Hotel Cosmos, the largest of Sistema s hospitality assets. In 4Q 07, revenue increased YoY following the opening of new 43-room Holiday Inn Express Paveletskaya and the addition of rooms at the Emerald Forest eco-hotel in the Moscow region. > Losses on OIBDA and profit in 4Q 07 were due to seasonal factors in the hospitality sector. In 07 OIBDA and OIBDA margin increased thanks to the consolidation of RHC properties and improved efficiency at Hotel Cosmos. > A number of initiatives under the new Cosmos Group strategy are planned for 08, including renaming the Onego Palace hotel in Petrozavodsk and the Intourist Kolomenskoe in Moscow with the Cosmos brand, and likewise using the Cosmos Collection brand for the Emerald Forest eco-hotel and Altai Resort. > Also in 08, Cosmos Group plans to open 3 new Ramada and Ibis Budget hotels with a total of 434 rooms as well as the group's first two CosmoStay-branded apartment hotels in Moscow with a total of 58 units. > In February 08, Christian Meyer was promoted to the position of President of Cosmos Group. 66.0% 34.0% Binnopharm RUB bn 4Q 07 4Q 06 YoY YoY Revenue %.4.9.8% OIBDA % % OIBDA margin 3.4% 39.0% (6.6p.p) 0.4%.4% (.0p.p) Profit (6.%) % Net debt % % Growth of commercial segment in revenue 37.0% 63.0% Hospital Commercial > In 07 Binnopharm successfully delivered on its strategy to grow the commercial segment, with commercial sales accounting for 63% of total revenue, vs 34% in 06. In 4Q 07 Binnopharm's revenue increased on the back of 3.7% increase in sales of its own products and 87.8% increase in commercial distribution sales. > In 4Q 07 and 07 OIBDA margin declined as government sales of higher-margin drugs fell, though this trend was partially offset by increase in OIBDA from sales of the company's own products as well as distribution products in commercial segment. > In 4Q 07 pricing was approved for Binnopharm products Neurocholine and Erythropoietin 500, and Moxifloxacin received registration. Sales of these products began at the end of Q 08. > In 08 Binnopharm plans to continue developing its product portfolio: the company anticipates it will bring 4 new drugs to market, receive registration of additional 0 new drugs and complete development of a number of other new products. 9

30 IR Department Tel. +7 (495)