OREANDA-NEWS. December 01, 2014. Sistema JSFC (“Sistema” or the “Company”, together with its subsidiaries, “the Group”) (LSE: SSA), the largest publicly-traded diversified holding company in Russia and the CIS, announces its unaudited consolidated US GAAP financial results for the third quarter ended September 30, 2014.

BASHNEFT RELATED EVENTS

On September 24, 2014, a civil claim was filed with the Arbitrazh (Commercial) Court of the City of Moscow by the First Deputy General Prosecutor seeking the return to federal ownership of all shares in Bashneft held by Sistema and Sistema-Invest.

On November 7, 2014, the Arbitrazh (Commercial) Court of the City of Moscow issued a written decision, ruling in favour of the civil claim seeking the return of Bashneft shares to the Russian Federation. On November 12, 2014, Sistema’s Board of Directors has decided not to appeal this decision and is focusing on filing claims as a buyer in good faith to recover damages from the counterparties and/or their legal successors (Ural-Invest LLC) that sold the Bashneft shares to Sistema and Sistema-Invest.

In response to these events the Company has launched an internal review of its investment strategy, portfolio composition and corporate costs in order to optimise the Company’s current and future performance.

FINANCIAL HIGHLIGHTS

Consolidated revenues increased by 5.6% YoY in rouble terms, and were down 4.3% YoY in dollar terms to USD 8.9 billion

Adjusted OIBDA grew by 2.2% YoY in rouble terms, and decreased by 7.3% YoY in dollar terms to USD 2.3 billion, with an adjusted OIBDA margin of 26.0%

Net income attributable to Sistema amounted to USD 379.2 million

Net debt at the Corporate Holding level amounted to USD 536 million; cash position at the Corporate Holding level amounted to USD 1,139 million as at September 30, 2014.

CORPORATE HIGHLIGHTS FOR THE THIRD QUARTER AND FOLLOWING THE REPORTING PERIOD

In October 2014, Sistema completed the purchase of a 40% stake in a holding company that owns Concept Group, one of Russia’s leading fashion clothing retailers by revenue growth, for a total consideration of approximately RUB 1 billion.

In October 2014, Sistema signed a binding agreement with OJSC MTS Bank, to acquire 2,474,818 ordinary shares of the bank’s additional share issue for RUB 9,460,684,754.

In September 2014, Sistema’s subsidiary LLC LesInvest completed the deal to acquire 100% of OJSC Segezha Pulp and Paper Mill and 100% of LLC Derevoobrabotka-Proekt, together with all of their debt obligations to the Bank of Moscow.

Sistema paid dividends on Sistema's shares of RUB 19.9 billion, representing a payment of RUB 2.06 per ordinary share in the third quarter of 2014.

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

“The reporting period and recent weeks have been the most challenging the Company has faced. Despite our key investments posting a steady performance with consolidated revenue increasing 5.6% to 321 billion roubles and OIBDA growing 2.2% to 83 billion roubles, our results have largely been overshadowed by the events surrounding Bashneft which have unfolded in recent months.

It is clear that this episode has a significant impact on Sistema. A substantive review of our future strategy has already commenced with internal analysis and consultations regarding our future portfolio, corporate costs and investment capacity. Whilst these discussions are still preliminary, we hope that, subject to a swift resolution of the aforementioned legal issues, a more focused holding structure will emerge allowing us to invest further in Russia”.