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SISTEMA PUBLICFINANCIAL CORPORATION

(AFKS)
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Sistema PJSFC : Sistema announces financial -2-

04/08/2021 | 03:02am EDT

In 2020 Sistema's consolidated revenue increased by 5.7% year-on-year to RUB 691.6 billion, driven by revenue growth at key assets: at MTS thanks to higher mobile services revenue and strong growth in new business segments (Fintech, Media and B2B Digital & Cloud); at Segezha Group as a result of revenue growth due to increased sales volumes of paper packaging and sawn timber as well as higher prices for plywood and sawn timber; at Agroholding Steppe thanks to increased revenue in all key segments; and at Medsi as a result of a higher average cheque as Medsi delivered COVID-19 diagnostics and treatment, as well as expansion of the out-patient network in Moscow and the acquisition of clinics in Izhevsk.

Group Adjusted OIBDA[5] grew by 5.5% year-on-year to RUB 236.3 billion in 2020 primarily due to increases in adjusted OIBDA at portfolio companies: at MTS following revenue growth, despite a significant decrease in revenues from international roaming and the creation of provisions at MTS and MTS Bank; at Segezha Group following revenue growth and despite higher logistics costs and pressure on prices for most products during the year; at Steppe due to increased operational efficiency at new land assets, the execution of an effective trading strategy, and growth of sales prices for own agricultural produce, increased profitability in the Agrotrading segment and positive dynamics in international trading, as well as growth of production volumes in the Dairy Farming segment and successful execution of a time arbitrage strategy in the Sugar and Grocery Trading segment; and at Medsi following revenue and thanks to participation in a JV with Capital Group to build the Nebo residential complex.

In 2020 adjusted net profit decreased by 70.0% year-on-year to RUB 16.0 billion. The dynamics of net profit year-on-year were influenced by the sale of 100% shares in Leader-Invest and its deconsolidation, the public offering of18.3% of Detsky Mir shares, deconsolidation and reclassification of the remaining stake in Detsky Mir (33.4%) as investment in associates in 2019.

Group SG&A costs grew by 4.5% in 2020 primarily due to increased SG&A at the Corporate Centre as a result of the impact of higher costs and bonus payments connected to monetisations and capital markets transactions, as well as the renewal of the LTI programme previously suspended in 2018. Group SG&A costs were also impacted by higher SG&A at Segezha Group due to higher fees charged by logistics companies amid the COVID-19 pandemic, and the effect of currency fluctuations.

Group capex increased by 8.6% year-on-year to RUB 127.8 billion in 2020 as a result of increased investment at MTS in network development, and also impacted by the FX-denominated component of capex in the context of rouble depreciation, as well as expansion and modernisation of production capacities at Segezha Group. OVERVIEW OF PORTFOLIO COMPANIES MTS LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA

(RUB mln)[6]                               4Q 2020 4Q 2019 Change     FY 2020 FY 2019 Change 
Revenue                                    133,707 124,441 7.4%       494,926 470,605 5.2% 
Adj. OIBDA[7]                              52,097  50,913  2.3%       214,895 212,818 1.0% 
Adj. OIBDA margin                          39.0%   40.9%   (1.9 p.p.) 43.4%   45.2%   (1.8 p.p.) 
Operating income                           25,728  26,461  (2.8%)     112,638 116,623 (3.4%) 
Adj. net profit attributable to Sistema[8] 6,940   2,777   149.9%     31,753  25,403  25.0% 

In 4Q 2020, MTS's revenue increased by 7.4% year-on-year to RUB 133.7 billion, driven by growth of mobile services revenue, sales of handsets and fixed-line revenue growth. For FY 2020, revenue grew by 5.2% year-on-year to RUB 494.9 billion, mainly due to growth in mobile services revenue in part on the back of repricing in 1Q 2020. In addition to the key Telecom segment, other business segments also delivered growth including Fintech, Media and B2B Digital & Cloud, which accounted for approximately a third of MTS's revenue growth.

In 4Q 2020, adjusted OIBDA totalled RUB 52.1 billion, up 2.3% year-on-year on the back of revenue growth, despite the creation of operating provisions. For FY 2020, adjusted OIBDA increased by 1.0% year-on-year to RUB 214.9 billion, following revenue. Growth was dampened by a decrease in high-margin revenue from international roaming and the creation of provisions at MTS and MTS Bank.

The adjusted OIBDA margin in 4Q 2020 and FY 2020 was 39.0% and 43.4%, respectively.

In 4Q 2020, adjusted net profit increased significantly by 149.9% year-on-year to RUB 6.9 billion, due to a non-cash loss on the sale of the business in Ukraine in 4Q 2019, as well as FX revaluation and a positive effect from derivatives. For FY 2020, adjusted net profit increased by 25.0% year-on-year to RUB 31.8 billion due to stable revenue from the telecom business, lower net interest expenses on the back of lower interest rates, and also the effect of FX derivatives used to manage FX risk.

Capex. In FY 2020, capex increased year-on-year, mainly due to increased investments in network development and due to the impact of the FX-denominated portion of capex during a period of rouble depreciation.

Dividends. In 2020, MTS paid regular dividends of RUB 29.5 per ordinary share (RUB 59.0 per ADR), as well as special dividends of RUB 13.25 per ordinary share (RUB 26.5 per ADR) in 1Q 2020 related to the sale of VF Ukraine. OUTLOOK FOR 2021 For 2021 MTS forecasts at least 4% revenue growth, at least 4% OIBDA growth, and cash capex of approximately RUB 100-110 billion. KEY HIGHLIGHTS IN 4Q 2020 AND AFTER THE END OF THE REPORTING PERIOD Appointment of new President and CEO. In March 2021, MTS appointed Vyacheslav Nikolaev as President and CEO. He was previously MTS's First Vice President of Customer Experience, Marketing and Ecosystem Development. 5G rollout. In March 2021, MTS launched Russia's first large-scale 5G pilot user network in the 4.9GHz band at 14 popular locations across Moscow. Partnership with Yandex Plus. MTS announced a partnership with Yandex Plus allowing MTS Premium users access to Yandex Plus on special conditions and Yandex Plus users access to MTS Premium. Stock buyback. On 18 March 2021, MTS's Board of Directors approved the repurchase of up to RUB 15 billion worth of ordinary shares (including ADSs) by the end of 2021. ESG progress. In March 2021, MTS's Board of Directors approved the creation of a new ESG Committee. The committee will be responsible for overseeing the implementation and execution of sustainability principles, as well as for helping MTS's management bodies to form an overarching ESG strategy. MTS also placed its first social bonds, totalling RUB 5 billion. The funds will be used to bring internet access to nearly 5 thousand socially significant facilities across eight Russian regions. SEGEZHA GROUP LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING

(RUB mln)                                      4Q 2020 4Q 2019 Change   FY 2020 FY 2019 Change 
Revenue                                        18,809  14,757  27.5%    68,987  58,495  17.9% 
OIBDA                                          6,174   3,871   59.5%    17,457  13,993  24.8% 
OIBDA margin                                   32.8%   26.2%   6.6 p.p. 25.3%   23.9%   1.4 p.p. 
Operating income                               4,572   2,207   107.2%   11,185  8,333   34.2% 
Adj. net profit/(loss) attributable to Sistema 4,059   817     397.1%   (1,324) 5,040   - 

Segezha Group's revenue increased by 27.5% year-on-year to RUB 18.8 billion in 4Q 2020. Growth was mainly driven by higher sales volumes of paper packaging and higher prices for paper packaging, sawn timber and plywood amid a recovery in the construction industry. For FY 2020, Segezha Group increased revenue by 17.9% to RUB 69.0 billion, due to an increase in sales volumes of paper packaging and sawn timber, as well as an increase in prices for plywood and sawn timber. Positive revenue dynamics were significantly impacted by changes in average exchange rates year-on-year. In 2020, the EUR and USD strengthened against the RUB by 14% and 11%, respectively. In 4Q 2020, the EUR and USD strengthened by 29% and 20%, respectively. The share of FX-denominated earnings stood at 72.0% in FY 2020, and 70.8% for 4Q 2020.

Segezha Group's OIBDA in 4Q 2020 grew by 59.5% year-on-year to RUB 6.2 billion, following revenue growth and thanks to effective cost-control and the effect of RUB depreciation. In FY 2020, OIBDA increased by 24.8% year-on-year to RUB 17.5 billion, due to growth in prices for plywood and sawn timber and despite increasing logistics costs and pressure on prices for the majority of Segezha's products during the year.

The OIBDA margin increased by 6.6 p.p. year-on-year to 32.8% in 4Q 2020 and by 1.4 p.p. to 25.3% in FY 2020.

Adjusted net profit in 4Q 2020 grew by 397% year-on-year following OIBDA growth and due to the effect of exchange-rate differences from revaluation of the company's FX-denominated debt. For FY 2020, Segezha recorded a net loss due to revaluation of FX-denominated debt. Excluding currency impacts, net profit for FY 2020 grew by 170% year-on-year.

In 4Q 2020, capital expenditure amounted to RUB 2.2 billion, and was focused on construction of a CLT plant, purchases of logging equipment, implementation of SAP S/4HANA, upgrades of existing production facilities and the purchase of converting lines.

In 2020, paper production increased by 3.6% year-on-year to 402.0 thousand tonnes[9] in 2020, mainly due to measures taken to boost efficiency.

(MORE TO FOLLOW) Dow Jones Newswires

April 08, 2021 03:01 ET (07:01 GMT)

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Financials (USD)
Sales 2021 10 347 M - -
Net income 2021 327 M - -
Net Debt 2021 10 054 M - -
P/E ratio 2021 17,9x
Yield 2021 1,04%
Capitalization 4 591 M 4 588 M -
EV / Sales 2021 1,42x
EV / Sales 2022 1,31x
Nbr of Employees -
Free-Float 31,9%
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Number of Analysts 9
Average target price 0,56 $
Last Close Price 0,48 $
Spread / Highest target 28,6%
Spread / Average Target 15,8%
Spread / Lowest Target -24,4%
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Managers and Directors
NameTitle
Vladimir Sanasarovich Chirakhov President, Chief Executive Officer & Director
Vladimir Petrovich Evtushenkov Chairman
Vladimir Semenovich Shukshin VP, Head-Information Technologies & Security
Ali Mussayevich Uzdenov Chief Investment Director
Robert Sedrakovich Kocharyan Independent Director
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