VolgaTelecom Releases Audited 2009 IFRS Financial Statement
OREANDA-NEWS. June 28, 2010. VolgaTelecom [(RTS: NNSI, NNSIP; МICEX: VTEL, VTELP; ADR OTC
The audit of the Company’s financial statement was conducted by independent audit firm KPMG. The consolidated financial statement includes assets, liabilities and results of the activities of VolgaTelecom and its subsidiaries.
The company received the audit report with respect to its consolidated financial statement, which was compiled in accordance with IFRS requirements with no reservations.
VolgaTelecom’s concerted efforts in 2009 as part of its anti-crisis strategy aimed at raising operating efficiency and raising free cash flow, make it possible to increase revenue, raise profitability and improve the Company’s financial condition.
The Company’s net profit increased by 42.4% compared with the same period last year.
The highlights of VolgaTelecom’s financial results for full-year 2009 are summarized in the table below.
|
Indicator |
2009 |
2008 |
Change |
|
2009/2008 | |||
|
Revenue, RUR, mln |
32,759 |
32,063 |
2.2% |
|
Revenue from telecom services, RUR, mln |
31,394 |
30,757 |
2.1% |
|
Operating expenses, net RUR, mln1 |
25,788 |
26,595 |
-3.0% |
|
Operating profit, RUR, mln |
6,971 |
5,468 |
27.5% |
|
Net profit, RUR, mln |
4,181 |
2,936 |
42.4% |
|
EBITDA, RUR, mln 2 |
14,411 |
12,010 |
20.0% |
|
EBITDA margin, % 3 |
44.0% |
37.5% |
6.5% |
|
OIBDA, RUR, mln 4 |
14,474 |
12,155 |
19.1% |
|
OIBDA margin, %5 |
44.2% |
37.9% |
6.3% |
|
Operating profit margin, % 6 |
25.6% |
19.7% |
5.9% |
|
Net profit margin, % 7 |
15.3% |
10.6% |
4.7% |
|
Operating profit margin, % 8 |
21.3% |
17.1% |
4.2% |
|
Net profit margin, % 9 |
12.8% |
9.2% |
3.6% |
Revenue breakdown
|
Indicator |
2009, RUR, mln |
2008, RUR, mln |
Change |
2009 proportion in revenue, % |
2008 proportion in revenue, % |
|
2009/2008, % | |||||
|
Intrazonal telephony |
4,557 |
4,829 |
-5.6 |
13.9 |
15.1 |
|
Local telephony |
11,512 |
10,934 |
5.3 |
35.1 |
34.1 |
|
Mobile radio communication, wire broadcasting, radio broadcasting
|
739 |
703 |
5.0 |
2.3 |
2.2 |
|
Mobile (cellular) telephony |
4,532 |
4,658 |
-2.7 |
13.8 |
14.5 |
|
Telegraph, datacom and telematic services (Internet access)
|
5,915 |
5,095 |
16.1 |
18.1 |
15.9 |
|
Interconnect and traffic transmission |
4,069 |
4,427 |
-8.1 |
12.4 |
13.8 |
|
Other main activities
|
70 |
111 |
-36.9 |
0.2 |
0.3 |
|
Total revenue from telecom services |
31,394 |
30,757 |
2.1 |
95.8 |
95.9 |
|
Services under outsourcing agreements |
510 |
548 |
-7.0 |
1.6 |
1.7 |
|
Revenue from non-core activities
|
855 |
758 |
13.0 |
2.6 |
2.4 |
|
Total revenue |
32,759 |
32,063 |
2.2 |
100.0 |
100.0 |
Revenue for full-year 2009 amounted to RUR 32,759 mln, which represents a 2.2% increase year-on-year.
Key revenue drivers:
Expansion of broadband Internet access: as of year-end 2009 the number of broadband Internet users (not including national projects) amounted to 994,000, which implies a 28% increase compared with the year-earlier period.
A local voice tariff hike effective March 1, 2009 (subscriber line leasing for local calls) in accordance with Order No. 305-c/10 of the Federal Tariff Service of Russia dated November 28, 2008, and, as a result, growth in current payments.
Mobile replacement, which had an influence on intrazonal telephony, as revenue derived from intrazonal telephony decreased by 5.6% compared with the level recorded in 2008, mainly as a result of a decline in F2F traffic (-10%) and also in F2M traffic (-4%).
Cancellation of service fees at interconnection points (as of March 1, 2008), an intensification of competition on the wholesale market, a decrease in volumes of DLD/ILD traffic in wire networks determined revenue trends from the interconnection and transmission of traffic; the decline of revenue in this item stood at 8.1% compared to the year-earlier period.
In full-year 2009 revenue from the provision of mobile (cellular) telephony amounted to RUR 4,532 mln, which is 2.7% less than in 2008. In addition, thanks to a balanced tariff policy and active marketing efforts, the Company managed to achieve an 8.5% increase in its subscriber base (as of year-end 2009 the number of subscribers stood at 3.8 mln).
Expense breakdown
|
Indicator |
2009, RUR, mln |
2008, RUR, mln |
Change |
2009 proportion in expenses, % |
2008 proportion in expenses, % |
|
2009/2008, % | |||||
|
Payrolls |
8,624 |
8,738 |
-1.3 |
31.7 |
31.5 |
|
Depreciation and amortization |
7,502 |
6,687 |
12.2 |
27.5 |
24.1 |
|
Interconnect |
3,611 |
3,789 |
-4.7 |
13.3 |
13.6 |
|
Materials, repair and maintenance, utilities |
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 control became the main driver for the Company’s profitability in 2009. The main factors which had an impact on the Company’s expense trends can be summed up as follows:
Concerted efforts to reduce operating expenses in line with the implementation of strategic initiatives aimed at developing and adopting anti-crisis measures for the purpose of optimizing expenses.
Optimizing interconnect policies with backbone Internet providers in order to lower the cost of traffic transmission and to reduce costs associated with outsourcing operations.
The Company’s activities aimed at ramping up free cash flow made it necessary to optimize the expenditure of funds, and also to use crisis-related issues as a means of cost-cutting. The Company managed to reduce its costs for materials and repair, which made it possible to offset tariff hikes in energy resources and utilities.
Depreciation and amortization
An increase in expenses is attributable to implementation of the Company’s investment program and major commissioning of plant, property and equipment at the end of 2008.
Other operating expenses
The Group as a whole showed a decrease in other operating expenses, as costs related to information and consulting services provided by outsourcing organizations, advertising expenses, other outsourcing expenses associated with management, expenses for bad debt recovery, charitable activities, and other operating expenses. In addition, other losses decreased due to the fact that unused license were decommissioned and works were terminated for some software products in 2008, as recorded in accounting entries.
Investments
The amount of 2009 capital expenses went down compared with the same period last year, showing nearly a three-fold decline, amounting to RUR 3,871 mln. The main areas of the Company’s investment policy are as follows:
Advanced telecommunications services (rolling out хDSL access, FTTx/Ethernet access, building telecommunications networks using Softswitch technologies);
Datacom network and infrastructure;
Construction and refurbishing of cellular networks;
IT investment.
All in all, 56,300 fixed-line numbers were commissioned in 2009, and the digitalization rate of the company’s telephone network stood at 81.1% as of year-end 2009. In addition, the number of Internet access ports stood at 226,000 units at the end of the year.
Headline financial indicators
|
Indicator |
2009 |
2008 |
Change |
|
2009/2008 | |||
|
Interest debt, RUR, mln10 |
10,404 |
17,027 |
-38.9% |
|
Net debt, RUR, mln11 |
8,371 |
15,349 |
-45.5% |
|
Net debt/EBITDA12 |
0.58 |
1.28 |
-0.70 |
|
Interest payable/EBITDA13 |
0.13 |
0.15 |
-0.02 |
|
ROIC,% 14 |
13.6% |
9.7% |
3.9% |
|
Equity /total assets15 |
0.60 |
0.50 |
+0.10 |
|
Quick ratio16 |
0.63 |
0.38 |
+0.25 |
In order to minimize the consequences of the economic downturn in the economy of the country, the Company implemented the following measures aimed at enhancing the financial stability of its business:
The optimization of cash flows from operating activity was attributable to: cancellation of programs and projects which were terminated or postponed to a later time and maintenance of expenses related to ensuring stable functioning of the network – top priority payments; the transfer of payments under existing contracts to a later period on the condition that there are no outstanding accounts receivable.
The optimization of cash flows from investment activity was attributable to: a decrease in the volumes of the investment program, the cancellation of investment projects, the implementation of which does not affect profitable projects which generate cash flows; conducting negotiations with equipment suppliers on postponing payment deadlines; control over volumes of work in progress.
The organization of financing by using trade credit schemes.
The formation of financial streams by optimizing the loan portfolio, in order to ensure the proper functioning and development of the Company.
These actions enabled the Company to considerably boost generation of free cash flow, which, in turn, made it possible to lower the debt burden, refinancing risks, and improve liquidity.
On the whole, the VolgaTelecom’s full-year 2009 financial results are in line with its targets for major market segments and laying the groundwork for future growth.
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