Moscow, Russia - 15 June 2021 - Sistema PJSFC ("Sistema", the "Corporation", or together with its subsidiaries and affiliates, the "Group") (LSE: SSA, MOEX: AFKS), a Russian publicly traded investment company, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the first quarter of 2021 (1Q 2021) ending 31 March 2021.
KEY GROUP HIGHLIGHTS IN 1Q 2021 AND AFTER THE END OF THE REPORTING PERIOD
Segezha Group IPO. In April 2021, Segezha Group completed an IPO on Moscow Exchange. The company raised RUB 30 billion, which will be used to finance its investment programme and optimise its debt portfolio. At the time of the IPO, the company's market capitalisation was RUB 125.5 billion, with a free float of 23.9%. The Corporation's stake is 72.0%1.
Development of the pharmaceutical business. In February 2021, Sistema and its financial partner VTB contributed their 56.2% stake in OJSC Sintez to the equity of Binnopharm Group with the aim of creating a unified pharmaceutical holding. Concurrently, Sistema, VTB and a consortium of investors consisting of the Russia-China Investment Fund (a fund established by the Russian Direct Investment Fund and China Investment Corporation) and major Middle East funds ("the Сonsortium") contributed an 85.6% stake in JSC Alium to the equity of Binnopharm Group. In March 2021, Sistema acquired a 32.4% stake in Sintez from JSC National Immunobiological Company, controlled by Rostec Corporation, and in May 2021 contributed this stake to the authorised capital of Binnopharm Group.
New dividend policy. In May 2021, the Board of Directors approved a new dividend policy, according to which the Corporation will strive to pay dividends once a year in the amount of at least RUB 0.31 per share in 2021, RUB 0.41 per share in 2022 and RUB 0.52 per share in 2023. In addition to the basic dividend, the Board of Directors has recommended that, starting from 2022, Sistema distribute 10% of the absolute growth in its adjusted OIBDA for the previous year to shareholders in the event that the Corporation delivers absolute OIBDA growth of more than 5% for the previous year and that the net debt / OIBDA ratio does not exceed 3.0x as of the end of the preceding year.
Active debt capital markets programme. In February 2021, the Corporation completed a secondary placement of series 001P- 07 exchange-traded bonds. The Corporation repurchased RUB 2.8 billion in bonds out of the total of RUB 10 billion in the issue through a tender offer. All bonds repurchased during the tender offer the Corporation sold through a secondary placement at 99.55% of the nominal price. Also in February 2021, Sistema placed RUB 5 billion of series 001P-18 series and RUB 12.5 billion of series 001P-19 bonds with coupon rates of 6.90% per annum and 7.35% per annum, respectively. In April 2021, the Corporation placed RUB 10 billion of series 001P-20 bonds with a semi-annual coupon rate of 8.20% per annum.
Improved credit rating outlook. In May 2021, S&P affirmed Sistema's rating at BB and revised its outlook upward to positive. The upgrade of S&P's outlook reflects the Corporation's success in increasing the share of liquid assets and growing the overall value of the portfolio as a result of the IPOs of Ozon and Segezha Group. S&P also noted the resilience of Sistema's diversified portfolio, which delivered impressive operational results in 2020 despite the global COVID-19 pandemic, as well as steady cash flows at the Corporate Centre level. The 'positive' outlook means that the rating may be upgraded over the next 12-18 months.
Sistema's stock buyback. Launched on 17 September 2019, the programme provides for the repurchase of up to RUB 3.0 billion worth of the Corporation's ordinary shares by a wholly owned subsidiary of Sistema. The maximum number of shares to be repurchased under the Programme is capped at 300 million. As of 15 June 2021, 128.8 million shares had been repurchased for a total of RUB 1.9 billion.
MTS stock buyback. In March 2021, Sistema, Sistema's wholly owned subsidiary Sistema Finance S.A. and LLC Sistema Telecom
Assets concluded a sale and purchase agreement for shares and American depositary shares of PJSC MTS as part of the new MTS share buyback programme totalling up to RUB 15 billion and running to 31 December 2021. Through the programme, in
May 2021, Sistema's wholly owned subsidiary Sistema Finance S.A. sold 7,457,468 shares of PJSC MTS in the form of American depository shares for a total consideration of approximately RUB 2.368 billion to LLC Bastion, a wholly owned subsidiary of MTS. In June 2021 Sistema Finance S.A. sold 6,847,936 ordinary shares of MTS and 1,216,644 shares of MTS in the form of American depository shares to LLC Bastion, respectively, for the total amount of approximately RUB 2.648 billion. As of 04 June 2021,
Sistema's effective stale in MTA amounted to 50.3023%
PROGRESS IN ESG
New ESG policies approved. In May 2021, Sistema's Board of Directors approved an Environmental Policy and a Human Rights Policy. These documents detail the Corporation's approach to sustainability management and set benchmarks for portfolio companies.
1 Taking into account the partial exercise of the over-allotment option in connection with stabilisation procedure after the IPO of Segezha Group PJSC and the exercise of the option by Mikhail Shamolin, President of Segezha Group PJSC.
IFRS financial results for 1Q 2021
1Q 2021 FINANCIAL HIGHLIGHTS
Consolidated revenue grew by 8.4% year-on-yearto RUB 171.5 billion.
Adjusted OIBDA2increased by 6.1% year-on-year to RUB 56.9 billion.
Adjusted OIBDA marginwas 33.2%.
Adjusted net loss attributable to Sistema wasRUB 2.4 billion.
Vladimir Chirakhov, President and Chief Executive Officer of Sistema, said:
"In the first quarter of 2021 Sistema accelerated growth of its financial indicators and increased revenue and adjusted OIBDA by 8% and 6% year-on-year, respectively. This growth was due to the strong results of our key consolidated portfolio companies. MTS demonstrated solid growth of its core business, despite lower revenue from international roaming, and achieved significant progress in developing an ecosystem of digital services. Our export-oriented assets Segezha Group and Agroholding Steppe delivered strong performance amid favourable macroeconomic conditions - recovery in demand from the construction industry and growth in global grain prices. Medsi achieved significant positive dynamics in revenue and OIBDA, driven by both routine medical care and services related to COVID-19.
"Our non-consolidated portfolio companies have also delivered strong performance. Ozon achieved 134.5% year-on-year growth in GMV on the back of significant increase in both the active customer base and order frequency. This was mainly thanks to the marketplace development supported by a four-foldyear-on-year increase in the number of sellers. Binnopharm Group grew its revenue by 38% and increased OIBDA four-foldyear-on-year thanks to higher sales in both hospital and retail segments, as well as successfully capturing synergies between the holding's businesses.
"We continue the transformation of our portfolio while making new sectors of the Russian economy accessible for Russian and international investors via IPOs of our portfolio companies. In April 2021, we completed the IPO of Segezha Group, as a result of which the company raised RUB 30 bln and achieved a market capitalisation of RUB 125.5 bln. The proceeds will allow the company to reduce debt leverage and implement a number of major investment projects which should significantly contribute to the scale of the business.
"Over recent months the Corporation has made significant process in developing its pharmaceuticals business, after combining stakes in our pharma assets into Binnopharm Group. We are continuing to scale the business, including through M&A transactions, as part of our strategy to create one of the country's leading pharmaceuticals producers. To achieve this Binnopharm Group may also raise external capital through a variety of instruments, including a potential IPO or debt placements.
"We strongly believe that the Corporation's success should translate into growth in dividend income for our shareholders. Under the new dividend policy adopted by the Board in May, we are offering fixed dividends which will be growing every year and total approximately RUB 3 billion in 2021, approximately RUB 4 billion in 2022 and approximately RUB 5 billion in 2023. Furthermore, starting from 2022 provided Sistema delivers strong financial results and maintains financial discipline, the Corporation will additionally distribute to shareholders 10% of the absolute growth of OIBDA3 for the previous year."
Here and hereinafter, see Appendix A of the financial results press release for 1Q 2021.
Adjusted OIBDA calculated on the basis of the Corporation's consolidated IFRS financial statements.
IFRS financial results
for 1Q 2021
SISTEMA RESULTS REVIEW
Net (loss) attributable to Sistema
Adj. net (loss) attributable to Sistema
Sistema's consolidated revenue increased by 8.4% year-on- year to RUB 171.5 billion, driven by revenue growth at key assets: at MTS thanks to higher consumption of core telecommunications and financial services, increased sales of handsets and accessories, as well as the positive contribution of digital and cloud solutions for business and media products; at Segezha Group as a result of higher prices for sawn timber and plywood amid a recovery in demand from the construction industry, as well as the depreciation of the rouble; at Agroholding Steppe thanks to increased revenue in all key segments; and at Medsi thanks to a recovery in demand for routine medical care amid continued demand for services related toCOVID-19.
Group adjusted OIBDA 5 increased by 6.1% year-on-year to RUB
56.9 billion, primarily due to increases in adjusted OIBDA at portfolio companies: at MTS following revenue growth, despite a significant decrease in revenues from international roaming; at Segezha Group stemming from higher prices for plywood and sawn timber, measures to contain production costs and a weaker rouble; at Steppe due to an effective commercial strategy for exports of its own and third-party agricultural
products, an increase in prices for wheat and corn prior to the imposition of export duties, as well as an increase in production and growth in the number of high-yielding dairy cows in the Dairy Farming segment; and at Medsi following revenue dynamics.
The year-on-year contraction in adjusted net loss was mainly due to growth in operating profit and the effect of the significant FX loss in the first quarter of 2020.
Group SG&A costs were nearly unchanged year-on-year. The Corporate Centre's SG&A increased due to the accrual of payments under the LTI programme, which had been suspended in 2018 and was reinstated in 2020.
Group capex increased by 34.5% year-on-year to RUB 37.7 billion as a result of an increase in investments at MTS in network development with a focus on expanding 4G capacity, as well as an increase in capex at Segezha Group. Investments were aimed at purchasing logging equipment, upgrading the Segezha Pulp and Paper Mill, introducing an SAP S/4HANA system and purchasing converting lines.
Here and hereinafter results for 1Q 2020 are presented to reflect the divestiture of AGK Yuzhny.
Group adjusted OIBDA for 1Q 2021 reflects the Group's share in the reduction of Ozon's net loss in the amount of RUB 0.1 billion (the net loss for 1Q 2021 was RUB 2.3 billion versus RUB 2.4 billion for 1Q 2020). As of 28 May 2021, 8.4 mln shares were issued to be used in Ozon's management inventive programme. In the event that all options under the programme are exercised, the effective share of Sistema, including Sistema VC, would amount to 32.4%.
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