OJSC MegaFon
PJSC MegaFon: In Q3 2019 MegaFon increased its revenue by 1.4% y-o-y (news with additional features)
EquityStory.RS, LLC-News: PJSC MegaFon
/ Key word(s): Quarter Results/9 Month figures
In Q3 2019 MegaFon increased its revenue by 1.4% y-o-y 14 November 2019 Key results for Q3 2019[2] – Revenue increased by 1.4% y-o-y[3] to RUB 90.0 billion – OIBDA increased by 15.8% y-o-y to RUB 39.0 billion[4] – OIBDA Margin was 43.3%[5] – Net profit was RUB 3.2 billion[6] – CAPEX decreased by 37.2% y-o-y to RUB 11.6 billion – Net debt decreased since last quarter to RUB 350.3 billion – The number of mobile subscribers in Russia as of 30 September 2019 increased by 0.1% y-o-y to 75.3 million – The number of data service users in Russia as of 30 September 2019 increased by 6.2% y-o-y to 34.2 million In Q3 2019 MegaFon unveiled a number of new products for its clients. These included providing its clients with a single point of access for wireless services, home internet and MegaFon TV via its convergeant product called “Obyedinyai! (Unite!)”, as well as implementing a flexible system for increasing cashbacks on its “Vklyuchaisya!” (“Connect!”) tariffs. The transformation of MegaFon’s retail network through the introduction of “new generation” stores, focused on the provision of top quality client service and a unique customer experience, is proceeding well and showing promising initial results. The daily average number of clients visiting the upgraded stores in Q3 2019 is up 20%, and the daily average revenue for such stores in Q3 2019 is up between 30% and 40%, in each case as compared with the corresponding figures prior to the stores’ transformation. Total revenue from sales of equipment and accessories is up 36.5% y-o-y. The suppliers which are the most popular with Russian consumers are Huawei/Honor, Samsung, Xiaomi, and Apple. Demand for new Apple models at the end of the quarter was three times higher than the year before[7], and the order backlog for the new models before their launch date in September 2019 was up 20% y-o-y compared to the order backlog in September 2018 for the prior year’s new models. MegaFon continues working on reducing its leverage and using part of its profits to pay down the debt. (As a reminder, the Company’s leverage increased as a result of a series of buy-backs of its shares and GDRs during 2018 and the first half of 2019.) As a result, the Company’s net debt had decreased to RUB 350.3 billion by the end of the reporting period. This enabled MegaFon to reduce the Net debt/LTM OIBDA ratio from 2.88x at the end of Q2 2019 to 2.80x at the end of Q3 2019. MegaFon continues the roll-out of LTE and LTE Advanced networks. At the same time CAPEX in the quarter was lower than the year before because of the completion of major projects for the upgrade of the billing platform and financial software on which the Company had been working in 2018. Gevork Vermishyan, the Group’s Chief Executive Officer, commented on the quarter results as follows:
Nikita Orlov, the Group’s Chief Financial Officer, commented on the quarter financial results as follows:
Financial results
Financial results, Russia only[9]
In Q3 2019 MegaFon’s wireless service revenue decreased by 1.5% y-o-y to RUB 71,236 million, while data revenue increased by 4.3% y-o-y to RUB 27,242 million. The decrease in wireless revenue is largely a result of the one-off increase in the consumption of wireless services during the FIFA World Cup 2018, which included the provision of services related to the World Cup infrastructure, as well as voice, SMS and data transfer services, and MegaFon TV and other VAS-services. In addition to that, the summer holiday season revealed the negative impact on the Company’s financial statements of the scrapping of domestic roaming fees in Russia which took place at the end of 2018. The continuing growth in data revenue has been sustained by MegaFon’s ongoing upgrading of its “Vklyuchaisya!” (“Connect!”) tariff line with new technological offers and partner services aimed at stimulating data consumption. In Q3 2019 wireline service revenue decreased by 7.7% y-o-y to RUB 7,670 million. The main reason for the y-o-y decrease was that Q3 2018 included significant one-off revenue from the provision of telecom infrastructure for the FIFA World Cup. Revenue from sales of equipment and accessories in Q3 2019 increased by 36.5% y-o-y to RUB 11,085 million, as a result of an increase in sales of smartphones, including those in the high-end price range, such as Samsung and the new model of Apple smartphone launched in September, as well as marketing initiatives aimed at promoting purchases of Honor and Huawei smartphones. Also, the increase in revenue was helped by MegaFon’s opening of “new-generation” retail outlets focused on the provision of top quality client service and a unique customer experience. OIBDA and OIBDA Margin In Q3 2019 OIBDA Margin increased by 5.4 p.p. y-o-y to 43.3%. Virtually all of this increase resulted from the adoption of IFRS 16. MegaFon’s organic OIBDA Margin decreased slightly by 0.5 p.p. y-o-y to 37.4%. The main reason for the decrease in the organic OIBDA Margin was the increase in low-margin sales of equipment and accessories. Net profit CAPEX Free Cash Flow to Shareholders[12] Net debt EPS New accounting standards On transitioning to IFRS 16 MegaFon recognised a right-of-use asset and a lease liability in respect of its operating leases – both in the amount of RUB 88,679 million as at 1 January 2019. The Company continues to fine tune its information systems to streamline the accounting for leases under IFRS 16. The effects of the transition to IFRS 16 are unaudited and certain management estimates and calculations may be subject to change up till the date of the issuance of the Company’s 2019 annual financial statements. Wireless subscribers in Russia as of
The data service user base in Russia increased by 6.2% y-o-y to 34.2 million at 30 September 2019 as a result of MegaFon’s continued marketing initiatives and the development of the “Vklyuchaisya!” (“Connect!”) tariff line and other products to attract data consuming subscribers. The share of data service users continued to grow and reached 45.4% of the overall subscriber base in Russia. Data operating indicators in Russia
ARPDU decreased in Q3 2019 by 1.9% y-o-y to RUB 260 as a result of a number of promotional initiatives which were undertaken during the period such as increasing the amount of data services available under the “Vklyuchaisya!” (“Connect!”) line of products. While these initiatives decreased ARPDU, at the same time DSU increased in Q3 2019 by 2.9 gigabytes, or 31.7% y-o-y, to 11.9 gigabytes.
Investors: Notes to editors Disclaimers, statement regarding inside information and forward looking statements The above discussion and analysis should be read in conjunction with the Group’s consolidated financial statements which are available for download on the Group’s website at: http://corp.megafon.com/investors/ Certain statements and/or other information included in this document may not be historical facts and may constitute “forward looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 2(1)(e) of the U.S. Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plans”, “forecast”, “project”, “will”, “may”, “should” and similar expressions may identify forward looking statements but are not the exclusive means of identifying such statements. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues, operations or performance, capital expenditures, financing needs, our plans or intentions relating to the expansion or contraction of our business as well as specific acquisitions and dispositions, our competitive strengths and weaknesses, the risks we face in our business and our response to them, our plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industry and the political, economic, social and legal environment in which we operate, and other information that is not historical information, together with the assumptions underlying these forward looking statements. By their very nature, forward looking statements involve inherent risks, uncertainties and other important factors that could cause our actual results, performance or achievements to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the political, economic, social and legal environment in which we will operate in the future. We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. We expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect actual results, changes in assumptions or in any other factors affecting such statements.
Data service user is defined as a subscriber who has consumed any amount of data traffic within preceding month. Diluted EPS is calculated by adjusting both numerator and denominator in the EPS calculation so as to reflect the effect of including the additional shares that would have been outstanding if all options and other rights to acquire shares had been converted into actual shares. DSU (Monthly Average Data Services Usage per User) is calculated by dividing the total number of megabytes transferred by our network during a given period by the average number of data services users during such period and dividing the result by the number of months in such period. EPS (Earnings per Share) means an amount of the Group’s profit allocated to one share of its stock, and is calculated by dividing Net profit for a reporting period by the weighted average number of shares outstanding during the period. No earnings are allocated to treasury shares. Free Cash Flow to Shareholders means cash from operating activities, less cash paid for purchases of property, equipment and intangible assets and interest paid, increased by proceeds from sales of property and equipment and interest received. It is a financial measure which should be considered as supplementary but not as an alternative to the information provided in the Group’s financial statements. Group means PJSC “MegaFon” together with its consolidated subsidiaries. Previously, the Group had consolidated the financial position and the results of operations of its subsidiary, Mail.Ru Group Limited (“Mail.Ru”), from the beginning of 2017. As of June 2018, the Group concluded that it no longer had the ability to direct relevant activities of Mail.Ru, and therefore no longer had control over that company. Accordingly, the Group ceased to consolidate the financial position and the results of operations of Mail.Ru, with effect from the end of Q2 2018. Net debt means the difference between (a) cash, cash equivalents, and principal amount of deposits and (b) principal amount of loans and borrowings less unamortised debt issuance fees. It is a financial measure which should be considered as supplementary but not as an alternative to the information provided in the Group’s financial statements. Net profit is profit for the period attributable to equity holders of the Group. Organic Net profit is Net profit, and organic Net profit Margin is Net profit Margin, in each case excluding the impact of IFRS 16 adoption. MegaFon adopted this new IFRS standard, effective 1 January 2019. For convenience of use, throughout the financial year 2019, MegaFon will be presenting its financial results “as reported”, i.e. including the impact of IFRS 16, and “organically”, i.e. excluding the impact of the adoption of IFRS 16. OIBDA (Operating Income Before Depreciation and Amortisation) is a financial measure not defined by IFRS, should be considered as supplementary and not as an alternative to the information provided in the financial statements of the Group. OIBDA Margin means OIBDA as a percentage of revenue. OIBDA and OIBDA Margin are widely used by investors, analysts and rating agencies as a measure to evaluate and compare current and future operating performance and to determine the value of companies within the telecommunications industry. However, the Group’s definition of OIBDA and OIBDA Margin may not be directly comparable to similarly named financial measures and disclosures by other companies. Organic OIBDA is OIBDA, and organic OIBDA Margin is OIBDA Margin, in each case excluding the impact of IFRS 16 adoption. LTM OIBDA means last twelve months OIBDA. Wireless Subscriber is defined as each SIM card that is activated in our billing system or has had at least one chargeable traffic event (that is, use of voice, VAS or data transfer services) within the preceding three months, whether chargeable to the subscriber or to a third party (for example, interconnection charges payable by other operators). Where an individual person holds more than one SIM card, each SIM card is included as a separate subscriber. [2] . See Schedule 1 for definitions of the terms used. Due to rounding actual numbers and calculations for financials and KPIs may differ from those set forth in this release. [3] . Year over year (“y-o-y”) stands for the same periods in the current and previous year on a quarterly basis. [4] . OIBDA is shown including the positive impact of IFRS 16. Organic OIBDA remained stable y-o-y at RUB 33.7 billion. [5] . OIBDA Margin is shown including the positive impact of IFRS 16. Organic OIBDA Margin was 37.4%. [6] . Net profit is shown including the impact of IFRS 16. Organic Net profit was RUB 4.0 billion. [7] . The volume of sales of new Apple models in the 20 days following their launch in September 2019 was compared to the volume of sales in the 20 days following the launch of last year’s models in September 2018. [8] . The amounts are presented as reported results from continuing operations grossed up for the intragroup amounts between the Group and Mail.Ru Group. [9] . Еxcluding mutual settlements with “TT mobile” CJSC, “AQUAFON-GSM” CJSC and “OSTELEKOM” CJSC. [10] . The amounts are presented as reported results from continuing operations grossed up for the intragroup amounts between the Group and Mail.Ru Group. [11] . This is shown without taking into account the effect of the IFRS 16 implementation. [12] . This is shown without taking into account the effect of the IFRS 16 implementation. Additional features: Document: http://n.eqs.com/c/fncls.ssp?u=EJCRUCTFSK Document title: MegaFon Q3 2019 Interim condensed IFRS Financial Statements
14.11.2019 MSK Dissemination of a Corporate News, transmitted by EquityStory.RS, LLC – a company of EQS Group AG. |