VolgaTelecom Presents FY 2009 Audited IFRS Financial Statements
OREANDA-NEWS. June 04, 2010. OJSC VolgaTelecom [(RTS: NNSI, NNSIP; MICEX: VTEL, VTELP; ADR OTC
The Company got unqualified audit report in regard to consolidated financial statements drawn up in accordance with IFRS requirements.
VolgaTelecom’s purposeful operation in 2009 within the framework of adopted antirecession strategy intended at enhancing operating efficiency and increasing free cash flow made it possible to ensure the gain in sales revenue, to increase profitability of operations and to improve the Company’s financial standing.
The growth of the Company’s net profit accounted for 42.4% vs. the prior year.
VolgaTelecom’s basic financial performances for 2009
|
Indicator |
2009 |
2008 |
Change |
|
2009/2008 | |||
|
Sales revenue, RUB million |
32, 759 |
32, 063 |
2.2% |
|
Communications services sales revenue, RUB million |
31, 394 |
30, 757 |
2.1% |
|
Net operating expenses, RUB million1 |
25, 788 |
26, 595 |
-3.0% |
|
Operating profit, RUB million |
6, 971 |
5, 468 |
27.5% |
|
Net profit, RUB million |
4, 181 |
2, 936 |
42.4% |
|
EBITDA, RUB million2 |
14, 411 |
12, 010 |
20.0% |
|
EBITDA margin, % 3 |
44.0% |
37.5% |
6.5 percentage points |
|
OIBDA, RUB million 4 |
14, 474 |
12, 155 |
19.1% |
|
OIBDA margin, %5 |
44.2% |
37.9% |
6.3 percentage points |
|
Operating profit ratio, % 6 |
25.6% |
19.7% |
5.9 percentage points |
|
Net profit ratio, % 7 |
15.3% |
10.6% |
4.7 percentage points |
|
Operating profit margin, % 8 |
21.3% |
17.1% |
4.2 percentage points |
|
Net profit margin, % 9 |
12.8% |
9.2% |
3.6 percentage points |
Sales revenue
|
Indicator |
2009, RUB MLN |
2008, RUB MLN |
Change |
2009 |
2008 |
|
| |||||
|
Intrazonal telephony services |
4, 557 |
4, 829 |
-5.6 |
13.9 |
15.1 |
|
Local telephony services |
11, 512 |
10, 934 |
5.3 |
35.1 |
34.1 |
|
Mobile radio telephony, wire broadcasting, radio broadcasting and TV services |
739 |
703 |
5.0 |
2.3 |
2.2 |
|
Mobile radio telephony (cellular) services |
4, 532 |
4, 658 |
-2.7 |
13.8 |
14.5 |
|
Telegraphy, data transmission network and telematic services (Internet access) |
5, 915 |
5, 095 |
16.1 |
18.1 |
15.9 |
|
Interconnect and traffic transit services |
4, 069 |
4, 427 |
-8.1 |
12.4 |
13.8 |
|
Other services of core operations |
70 |
111 |
-36.9 |
0.2 |
0.3 |
|
Total communications services sales revenue |
31, 394 |
30, 757 |
2.1 |
95.8 |
95.9 |
|
Fees on assistance services |
510 |
548 |
-7.0 |
1.6 |
1.7 |
|
Revenue from non-telecommunications services |
855 |
758 |
13.0 |
2.6 |
2.4 |
|
Sales revenue - total |
32, 759 |
32, 063 |
2.2 |
100.0 |
100.0 |
For 12 months of 2009 sales revenue amounted to RUB 32, 759 million having increased by 2.2% vs. 2008.
Sales revenue dynamics was ensured through:
1. The development of Internet broadband access services: at 2009 year-end the number of broadband access services users (without regard to national projects) accounted for 994, 000 with 28% increase vs. similar period of the prior year.
2. Increase in tariffs for local telephony services since March 01, 2009 (SL provision for use, provision of local call) pursuant to Russia’s Federal Tariff Service Order No 305-c/10 of November 28, 2008 and as a result – the growth of current payments.
3. Mobile substitution affecting intrazonal telephony services revenue: intrazonal telephony services revenue demonstrated 5.6% drop vs. 2008 mainly due to the decrease in F2F (-10%) and F2M (-4%) traffic.
4. Abolishment of fee for connection points servicing (since March 01, 2008), increase in competition in wholesale market, reduction in volumes of DLD/ILD traffic in wire networks affected the dynamics of interconnect and traffic transit services revenue; drop in revenue of this item accounted for 8.1% vs. 2008.
5. At 2009 year-end mobile radio telephony (cellular) services revenue amounted to RUB 4, 532 million, which is by 2.7% lower vs. 2008. At the same time due to well-balanced tariff policy and active marketing actions the Company was able to ensure the increase in the subscribers’ base of mobile telephony services users by 8.5% (at 2009 year-end the subscribers’ base accounted for 3.8 million users).
Expenses
|
Indicator |
2009, RUB MLN |
2008, RUB MLN |
Change |
2009 |
2008 |
|
| |||||
|
Personnel costs |
8 624 |
8 738 |
-1,3 |
31,7 |
31,5 |
|
Depreciation and amortization |
7 502 |
6 687 |
12,2 |
27,5 |
24,1 |
|
Telecom operators’ services costs |
3 611 |
3 789 |
-4,7 |
13,3 |
13,6 |
|
Materials, repair and maintenance, public utility services |
2 810 |
2 752 |
2,1 |
10,3 |
9,9 |
|
Other operating expenses |
4 691 |
5 798 |
-19,1 |
17,2 |
20,9 |
|
Total operating expenses |
27 238 |
27 764 |
-1,9 |
100,0 |
100,0 |
Efficient cost management was the main driver of the Company’s profitability growth in 2009. Major factors that had effect on the dynamics of the Company’s expenses were as follows:
1. Purposeful activities of reducing operating expenses within the framework of realized strategic initiatives of development and adopted antirecession measures of optimal spending of financial resources.
2. Optimization of pattern of intraoperators’ interaction with backbone Internet providers of reducing the cost of pass-band and of reducing the amount of costs for outside entities works.
The Company’s activities of increasing free cash flow resulted in the need of optimal spending of funds, as well as in the use of crisis phenomena for the reduction of cost of works. The Company managed to reduce the amount of costs for materials and repair which allowed for compensating the increase in tariffs for electric power and public utility services.
Depreciation and amortization
Growth in expenses was related to the investment program realized by the Company and large scale commissioning of property, plant and equipment at the end of 2008.
Other operating expenses
Inter alia the following expenses were reduced in the group of other operating expenses: the costs for information and consulting services of outside entities, advertizing expenses, other services of outside entities related to management, expenses for establishing the provision for doubtful debts, charity expenses and other operating expenses. Furthermore, other loss reduced due to reflecting in 2008 balance sheet of unused licenses put out of operation and of works on some software products.
Investments
The amount of capital investments in 2009 has reduced almost tree-fold vs. 2008 and accounted for RUB 3, 871 million. The priorities of the Company’s investment policy were:
Modern communications services (arrangement of õDSL access, arrangement of FTTx/Ethernet access, construction of Softswitch-based communications networks);
Data transmission network and infrastructure;
Construction and upgrade of mobile communications network;
IT investments.
In 2009 the Company put into operation 56,300 fixed-line telephony lines, at 2009 year-end digitalization of fixed-line telephony network accounted for 81.1%. At the year-end 226, 000 Internet broadband access ports were put into operation.
Key financial performances
|
Indicator |
2009 |
2008 |
Change |
|
2009/2008 | |||
|
Interest-bearing debt, RUB million10 |
10, 404 |
17, 027 |
-38.9% |
|
Net debt, RUB million11 |
8, 371 |
15, 349 |
-45.5% |
|
Net debt / EBITDA12 |
0.58 |
1.28 |
-0.70 |
|
Interest due / EBITDA13 |
0.13 |
0.15 |
-0.02 |
|
ROIC,% 14 |
13.6% |
9.7% |
3.9 percentage points |
|
Equity / Total assets15 |
0.60 |
0.50 |
+0.10 |
|
Quick ratio16 |
0.63 |
0.38 |
+0.25 |
With a view of minimizing the effects of crisis phenomena in the country’s economy the Company has realized the following measures contributing to the increase in business financial stability:
1. Optimization of cash flows from operating activities through: curtailing of programs and projects the implementation of which could be curtailed or postponed and maintaining the expenses related to ensuring stable operation of the network – first order payments; transfer of payments under existing contracts for later date subject to the lack of overdue accounts payable.
2. Optimization of cash flows of investment activities through: reduction in amounts of investment program, refusal from the investment projects the implementation of which does not affect profitable projects generating cash flow; holding negotiations with the equipment suppliers regarding the transfer of payment dates; control of volumes of work in progress.
3. Organization of financing by using the pattern of credit against goods.
4. Generation of cash flows through generation of optimal credit portfolio ensuring sustainable operation and development of the Company.
These measures made it possible for the Company to improve substantially generation of free cash flow which allowed for reducing the debt load, mitigating refinancing risks and improving the liquidity.
Upon the whole the achieved results for 2009 match VolgaTelecom’s development plans in key market segments and creation of prerequisites for further growth.
Full text of IFRS consolidated financial statements is posted on VolgaTelecom’s site at: www.vt.ru
1 Operating expenses comprise “Personnel costs”, “Depreciation and amortization”, “Outside entities services costs”, “Materials, repair and maintenance, public utility services”, “Other operating expenses” – Income statement.
2 EBITDA is calculated as the sum of “Pretax earnings”, “Depreciation and amortization”, “Financial expense” – Income statement minus “Interest receipts of financial assets” - Note “Other revenue and expenses of financial and investment operations” minus “Interest receipts of pension plan assets” -Note “Other revenue and expenses of financial and investment operations”.
3 EBITDA margin is calculated as EBITDA/ “Sales revenue” – Income statement.
4 OIBDA is calculated as the sum of “Operating profit” and “Depreciation and amortization” – Income statement.
5 OIBDA margin is calculated as OIBDA/ “Sales revenue” – Income statement.
6 Operating profit ratio is calculated as “Operating profit”/”Operating expenses” – Income statement. Operating expenses comprise “Personnel costs”, “Depreciation and amortization”, “Outside entities services costs”, “Materials, repair and maintenance, public utility services”, “Other operating expenses” – Income statement.
7 Net profit ratio is calculated as “Profit for the reporting year”/ “Operating expenses” – Income statement. Operating expenses comprise “Personnel costs”, “Depreciation and amortization”, “Outside entities services costs”, “Materials, repair and maintenance, public utility services”, “Other operating expenses” – Income statement.
8 Operating profit margin is calculated as “Profit from operations”/ “Sales revenue” – Income statement.
9 Net profit margin is calculated as “Profit for the reporting year”/ “Sales revenue” – Income statement.
10 Interest-bearing debt is calculated as the sum of “Non-current financial liabilities” and “Current financial liabilities” – Balance sheet at the period end;
11 Net debt is calculated as the sum of “Non-current financial liabilities” and “Current financial liabilities” – Balance sheet at the period end minus “Cash and cash equivalents” – Balance sheet at the period end minus “Promissory notes and bonds available for sale”.
12 Net debt / EBITDA is calculated as “Net debt”/ EBITDA.
13 Interest due / EBITDA is calculated as “Financial expenses” – Income statement/ EBITDA.
14 ROIC – return on invested capital is calculated as (1-rate of income tax) multiply by (Sum of “Income (loss) before income tax from going concern” and “Financial expenses” – Income statement minus “Interest receipts of financial assets” - Note “Other income and expenses” minus “Interest receipts of pension plan assets” – Note “Other income and expenses” for the period minus “Dividend income” – Note “Other income and expenses”)/ “Invested capital”.
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