15.05.2007, 07:59
Financial Results of JSC SITRONICS
OREANDA-NEWS. On May 14, 2007 JSC SITRONICS (“Sitronics” or “The Company”) (LSE:SITR), a leading provider of telecommunications, IT and microelectronic solutions in emerging markets of Russia and the Commonwealth of Independent States, with a growing presence in Central and Eastern Europe, the Middle East and Africa, announced its unaudited consolidated US GAAP financial results for the year ended December 31, 2006, reported the press-centre of JSC SITRONICS.
HIGHLIGHTS
Consolidated revenues up 69% year on year to US$ 1,61 billion
OIBDA[1] before non-recurring inventory write-down up 19% year on year to
US$ 183.6 million with adjusted OIBDA margin of 11%
Total assets almost triple to US$ 1,65 billion
Sales to companies unaffiliated with the Sistema group up from 68% to 77% of total revenues
Acquisition of 51,0% of Intracom Telecom for US$ 150,6 million
Strategic alliances signed with STMicroelectronics and Cisco Systems
US$ 200 million Eurobond placement
Sale of 3,67% of share capital to EBRD for US$ 80 million
Evgeny Utkin, President of SITRONICS, commented: “2006 was a year of fundamental and far reaching change for SITRONICS, as we increased the scale and reach of our operations through both organic expansion and major acquisitions. We have entered 35 new markets and more than doubled the number of countries in which we operate. We are now exporting our solutions to 60 countries around the world. We also launched a wide range of new products and services during 2006 and entered into alliances with some of the world’s leading technology companies, in order to enable the Group to benefit from continued growth moving forward.
“We made significant progress in the further broadening and diversification of our customer base, while maintaining the integrated nature of our business and increasingly benefiting from the resulting synergies and economies of scale. Our operating businesses therefore ended the year with even stronger market positions.
“We also reorganized our capital structure during the year and successfully raised substantial loan financing ahead of our IPO, which was successfully completed after the end of the year.”
OPERATING REVIEW
SITRONICS generated a 69% year on year increase in consolidated revenues in 2006, following healthy organic growth and the acquisition of Intracom Telecom, a provider of advanced telecommunications solutions and services for fixed and wireless operators in Eastern Europe and the Middle East.
SITRONICS expanded into 35 new countries during 2006, including Armenia, Azerbaijan, Turkmenistan, Moldova, Egypt, Jordan, the United Arab Emirates, Turkey and Poland. Innovative new projects, such as wireless access and transmission systems, IPTV solutions, smart cards, and the start of the transition to 0.18 micron technology, combined with the signing of strategic alliances with worldwide technology market leaders such as STMicroelectronics and Cisco Systems to further strengthen SITRONICS’ market positions.
Revenues from companies outside the Sistema group increased as a percentage of total revenues from 68% in 2005 to 77% in 2006.
SITRONICS enhanced its relationships with the governments of Russia, the Ukraine and Kazakhstan during 2006, with Russian President Vladimir Putin visiting the Company’s facilities in Zelenograd in October 2006.
SITRONICS also developed a number of new products and services during the year, such as wireless access, IPTV and content delivery network systems in the Telecommunications Solutions segment; an interactive multimedia system for e-learning in the Information Technologies segment; and SIM cards, Metro (subway) fare cards and packaged microchips in the Microelectronic Solutions segment.
OIBDA, when adjusted for a non-recurring and non-cash write-down of Intracom Telecom inventories was up 19% year on year, following a particularly strong performance in the last quarter of the year.
Operating income totaled US$ 128,2 million, compared to US$ 142,2 million in 2005, as depreciation and amortization charges increased year on year to US$ 44,0 million from US$ 11,5 million in 2005, reflecting increased capital expenditure across all business segments.
Net non-operating expenses amounted to US$ 30,0 million in 2006, compared to US$ 11,9 million in 2005, and included a currency exchange rate loss of US$ 9,0 million srising from the impact of the significant appreciation of the Czech Crone on the Telecommunication Solutions segment’s US dollar denominated accounts receivable. SITRONICS now hedges its currency fluctuation exposure in order to minimize the impact of such exchange rate volatility.
The effective tax rate increased year on year to 32,9% from 27,0% in 2005, due to losses, non-recoverable for tax purposes, incurred by certain SITRONICS operating subsidiaries. Minority interests in the profits of subsidiaries decreased to US$ 4,6 million from US$ 26,0 million in 2005, which was primarily due to the acquisition of the remaining shares of SITRONICS TS Czech Republic in July 2005.
SITRONICS’ net income therefore declined year on year from US$ 69,2 million in 2005 to US$ 61,3 million in 2006. The number of issued shares increased during the year to 7,997,247,990 from 1,886,771,000 following the additional share issues to Sistema and the European Bank for Reconstruction and Development. SITRONICS’ basic and diluted earnings per share amounted to US$ 0,01, compared to US$ 0,04 in 2005.
FINANCIAL REVIEW
Net cash used in operating activities in 2006 increased to US$ 145,5 million from US$ 58,6 million in 2005. Negative cash flows from operating activities were primarily due to an increase in the scale of the business, which resulted in increased accounts receivable and inventory levels and a decrease in advances received from customers, as services related to advances received in 2005 were performed in 2006.
Net cash used in investing activities was US$ 207,4 million in 2006 and included capital expenditure of US$ 87,8 million, compared to US$ 47,4 million in 2005. The cash used to acquire businesses, primarily Intracom Telecom, increased to US$ 103,6 million in 2006 from US$ 28,7 million in 2005.
Cash flow from financing activities in 2006 amounted to US$ 345,9 million, compared to US$ 56,7 million in 2005, which primarily reflected proceeds from the issue of Eurobonds in February 2006 and the issue of common stock to Sistema and the European Bank for Reconstruction and Development .
SITRONICS’ debt, excluding capital leases and derivatives, amounted to US$ 498,5 million at the end of 2006, compared to US$ 112,1 million at the end of 2005. The increase in borrowings included US$ 218,0 million of debt assumed in the acquisition of Intracom Telecom and the issue of Eurobonds in February 2006.
SITRONICS Finance S. A., a wholly owned subsidiary of SITRONICS, issued US$ 200,0 million of loan notes at 99,7% of par value and bearing interest at 7,875% per annum in March 2006. The notes are fully and unconditionally guaranteed by SITRONICS and mature in March 2009. Interest payments fall due on the notes semi-annually in arrears, in March and September of each year. The notes are listed on the London Stock Exchange.
In March 2006, SITRONICS issued to Sistema 5,817,000,000 voting common shares with a par value of 1 RUB for US$ 206,8 million, with US$ 56,8 million paid in 2005 and US$ 150,0 million paid in 2006.
In October 2006, SITRONICS issued an additional 293,476,990 common shares with a par value of 1 RUB to the European Bank for Reconstruction and Development for US$ 80,0 million. These shares are puttable to Sistema.
Capital expenditure increased by 85% year on year in 2006 from US$ 47,4 million to US$ 87,8 million, which reflected the launch of new technologies and products. CAPEX is expected to approximately double to US$ 150 million in 2007 as SITRONICS continues to invest in the shift to new technologies in the Microelectronic Solutions, and infrastructure projects in the IT Solutions and Telecommunications Solutions segments.
OTHER INFORMATION
Dividends / Appropriation of earnings
As indicated in the Initial Public Offering prospectus, SITRONICS does not intend to pay dividends for the years ended December 31, 2007, 2008 or 2009 but will reinvest its earnings into the further development of the business.
Financial Results Announcements
SITRONICS will publish its financial results on a semi-annual basis in 2007, for the six months ended June 30 and twelve months ended December 31, respectively. SITRONICS intends to provide an update on trading for the three months ended March 31 and September 30, in June and December 2007, respectively. These trading updates will include a statement of total Company revenues and OIBDA, as well as a summary operating review for the period.
HIGHLIGHTS
Consolidated revenues up 69% year on year to US$ 1,61 billion
OIBDA[1] before non-recurring inventory write-down up 19% year on year to
US$ 183.6 million with adjusted OIBDA margin of 11%
Total assets almost triple to US$ 1,65 billion
Sales to companies unaffiliated with the Sistema group up from 68% to 77% of total revenues
Acquisition of 51,0% of Intracom Telecom for US$ 150,6 million
Strategic alliances signed with STMicroelectronics and Cisco Systems
US$ 200 million Eurobond placement
Sale of 3,67% of share capital to EBRD for US$ 80 million
Evgeny Utkin, President of SITRONICS, commented: “2006 was a year of fundamental and far reaching change for SITRONICS, as we increased the scale and reach of our operations through both organic expansion and major acquisitions. We have entered 35 new markets and more than doubled the number of countries in which we operate. We are now exporting our solutions to 60 countries around the world. We also launched a wide range of new products and services during 2006 and entered into alliances with some of the world’s leading technology companies, in order to enable the Group to benefit from continued growth moving forward.
“We made significant progress in the further broadening and diversification of our customer base, while maintaining the integrated nature of our business and increasingly benefiting from the resulting synergies and economies of scale. Our operating businesses therefore ended the year with even stronger market positions.
“We also reorganized our capital structure during the year and successfully raised substantial loan financing ahead of our IPO, which was successfully completed after the end of the year.”
OPERATING REVIEW
SITRONICS generated a 69% year on year increase in consolidated revenues in 2006, following healthy organic growth and the acquisition of Intracom Telecom, a provider of advanced telecommunications solutions and services for fixed and wireless operators in Eastern Europe and the Middle East.
SITRONICS expanded into 35 new countries during 2006, including Armenia, Azerbaijan, Turkmenistan, Moldova, Egypt, Jordan, the United Arab Emirates, Turkey and Poland. Innovative new projects, such as wireless access and transmission systems, IPTV solutions, smart cards, and the start of the transition to 0.18 micron technology, combined with the signing of strategic alliances with worldwide technology market leaders such as STMicroelectronics and Cisco Systems to further strengthen SITRONICS’ market positions.
Revenues from companies outside the Sistema group increased as a percentage of total revenues from 68% in 2005 to 77% in 2006.
SITRONICS enhanced its relationships with the governments of Russia, the Ukraine and Kazakhstan during 2006, with Russian President Vladimir Putin visiting the Company’s facilities in Zelenograd in October 2006.
SITRONICS also developed a number of new products and services during the year, such as wireless access, IPTV and content delivery network systems in the Telecommunications Solutions segment; an interactive multimedia system for e-learning in the Information Technologies segment; and SIM cards, Metro (subway) fare cards and packaged microchips in the Microelectronic Solutions segment.
OIBDA, when adjusted for a non-recurring and non-cash write-down of Intracom Telecom inventories was up 19% year on year, following a particularly strong performance in the last quarter of the year.
Operating income totaled US$ 128,2 million, compared to US$ 142,2 million in 2005, as depreciation and amortization charges increased year on year to US$ 44,0 million from US$ 11,5 million in 2005, reflecting increased capital expenditure across all business segments.
Net non-operating expenses amounted to US$ 30,0 million in 2006, compared to US$ 11,9 million in 2005, and included a currency exchange rate loss of US$ 9,0 million srising from the impact of the significant appreciation of the Czech Crone on the Telecommunication Solutions segment’s US dollar denominated accounts receivable. SITRONICS now hedges its currency fluctuation exposure in order to minimize the impact of such exchange rate volatility.
The effective tax rate increased year on year to 32,9% from 27,0% in 2005, due to losses, non-recoverable for tax purposes, incurred by certain SITRONICS operating subsidiaries. Minority interests in the profits of subsidiaries decreased to US$ 4,6 million from US$ 26,0 million in 2005, which was primarily due to the acquisition of the remaining shares of SITRONICS TS Czech Republic in July 2005.
SITRONICS’ net income therefore declined year on year from US$ 69,2 million in 2005 to US$ 61,3 million in 2006. The number of issued shares increased during the year to 7,997,247,990 from 1,886,771,000 following the additional share issues to Sistema and the European Bank for Reconstruction and Development. SITRONICS’ basic and diluted earnings per share amounted to US$ 0,01, compared to US$ 0,04 in 2005.
FINANCIAL REVIEW
Net cash used in operating activities in 2006 increased to US$ 145,5 million from US$ 58,6 million in 2005. Negative cash flows from operating activities were primarily due to an increase in the scale of the business, which resulted in increased accounts receivable and inventory levels and a decrease in advances received from customers, as services related to advances received in 2005 were performed in 2006.
Net cash used in investing activities was US$ 207,4 million in 2006 and included capital expenditure of US$ 87,8 million, compared to US$ 47,4 million in 2005. The cash used to acquire businesses, primarily Intracom Telecom, increased to US$ 103,6 million in 2006 from US$ 28,7 million in 2005.
Cash flow from financing activities in 2006 amounted to US$ 345,9 million, compared to US$ 56,7 million in 2005, which primarily reflected proceeds from the issue of Eurobonds in February 2006 and the issue of common stock to Sistema and the European Bank for Reconstruction and Development .
SITRONICS’ debt, excluding capital leases and derivatives, amounted to US$ 498,5 million at the end of 2006, compared to US$ 112,1 million at the end of 2005. The increase in borrowings included US$ 218,0 million of debt assumed in the acquisition of Intracom Telecom and the issue of Eurobonds in February 2006.
SITRONICS Finance S. A., a wholly owned subsidiary of SITRONICS, issued US$ 200,0 million of loan notes at 99,7% of par value and bearing interest at 7,875% per annum in March 2006. The notes are fully and unconditionally guaranteed by SITRONICS and mature in March 2009. Interest payments fall due on the notes semi-annually in arrears, in March and September of each year. The notes are listed on the London Stock Exchange.
In March 2006, SITRONICS issued to Sistema 5,817,000,000 voting common shares with a par value of 1 RUB for US$ 206,8 million, with US$ 56,8 million paid in 2005 and US$ 150,0 million paid in 2006.
In October 2006, SITRONICS issued an additional 293,476,990 common shares with a par value of 1 RUB to the European Bank for Reconstruction and Development for US$ 80,0 million. These shares are puttable to Sistema.
Capital expenditure increased by 85% year on year in 2006 from US$ 47,4 million to US$ 87,8 million, which reflected the launch of new technologies and products. CAPEX is expected to approximately double to US$ 150 million in 2007 as SITRONICS continues to invest in the shift to new technologies in the Microelectronic Solutions, and infrastructure projects in the IT Solutions and Telecommunications Solutions segments.
OTHER INFORMATION
Dividends / Appropriation of earnings
As indicated in the Initial Public Offering prospectus, SITRONICS does not intend to pay dividends for the years ended December 31, 2007, 2008 or 2009 but will reinvest its earnings into the further development of the business.
Financial Results Announcements
SITRONICS will publish its financial results on a semi-annual basis in 2007, for the six months ended June 30 and twelve months ended December 31, respectively. SITRONICS intends to provide an update on trading for the three months ended March 31 and September 30, in June and December 2007, respectively. These trading updates will include a statement of total Company revenues and OIBDA, as well as a summary operating review for the period.
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