Geography

MRSK Holding financial results for 2011

27.04.2012
Moscow, Russia - MRSK Holding (LSE: ), the largest electricity distribution company in Russia and one of the largest electricity distribution companies in the world by length of distribution lines and installed transformer capacity, announces its audited financial results in accordance with International Financial Reporting Standards (IFRS) for the year to 31 December 2011.

Key financial indicators:
• Revenue1 increased by 13% yoy
• Operating profit was up by 9% yoy
• Net profit increased by 14% yoy
• Dividends paid were up by 171% yoy to RUB 1.67 bln(2010: RUB 0.616 bln)

1Including government subsidies (0.243 bln. rubles)

Achievements in key initiatives:
• The strategy for the development of MRSK Holding approved until 2015 with long-term plans until 2020
• MRSK Holding’s global depositary receipts (GDRs) listed on the London Stock Exchange with aim to expand the international investor base
• The programme of cost reduction approved by the Boards of Directors of all interregional distribution grid companies
• A substantial increase in the investment programme resulting from new construction and the upgrade of of electricity grid network

Nikolay Shvets, CEO of MRSK Holding, commented:
“MRSK made good progress towards achieving stable financial position in 2011. Our results for the year, including revenue, operating profit and net profit have demonstrated strong operational and financial performance. We have reached significant milestones in adopting a long term development strategy, obtaining a GDR listing on the London Stock Exchange and executing on a large scale programme of capital investments into upgrading our grid network and new construction.

We are focused on being a high quality and reliable supplier of electricity to customers across Russia. We are confident that our commitment to the modernisation of the electricity distribution grid infrastructure, pursuant to our investment programmes, will increase the operational efficiency of our facilities.

Looking forward we expect to continue executing on the adopted strategy of operational improvements, joint initiatives with leading international partners and prudent financial discipline.”

FINANCIAL SUMMARY

In billions, RUB
2011
(audited)
2010
(audited)
Change
Revenue
634.6
559.5
13%
EBITDA
116.5
102.5
13.7%
EBITDA margin
18.4%
18.3%
Operating profit
59.3
54.2
9%
Operating margin
9.3%
9.7%
 

Net profit
39.0
34.1
14%
Net profit margin
6.1%
6.1%
 

Earnings per share
0.53
0.51
4%
Net cash flows used in investing activities
(121.9)
(83.2)
46.4%
Net cash flows generated by operating activities
89.3
76.4
17%

Revenues increased by 13% year on year following the growth in electricity distribution revenues. Electricity distribution revenues were up by 16% year on year to RUB 552.6 billion primarily as a result of a 15% increase in tariffs. Technological connection revenues decreased by 6.5% year on year following the change in customer billing. Where previously customers made direct payments towards the capital investment component in addition to a connection fee this component has been removed and added to transmission and distribution tariffs in 2011.

Total operating expenses increased by 14% year on year, following a significant growth in revenues. The increase was primarily related to higher electricity distribution expenses and personnel costs.

EBITDA was up by 13.7% year on year. EBITDA margin was 18.4%, compared to 18.3% in the previous period despite the growth in operating expenses.

Net profit increased by 14% year on year with net profit margin totaling 6.1%.

In line with its adopted strategy on dividend policy MRSK Holding is committed to gradually increase dividend payments to its shareholders. In 2011 MRSK Holding paid out RUB 1.67 billion in dividends, compared to RUB 0.616 billion in 2010, a 171% increase year on year.

Net cash flows generated from operating activities in 2011 totaled RUB 89.3 billion (2010: RUB 76.4 billion), following the growth in operating profit and changes in working capital.

Net cash flows used in investing activities reached RUB 121.8 billion in 2011, compared to RUB 83.2 billion in the previous period. Capital expenditures increased 46.4% year on year and totaled RUB 141.3 billion(2010: RUB 88.7 billion) following the execution of an intensive investment programme in the construction of electricity distribution networks.

Net cash flows received from financing activities reached RUB 56.4 billion in 2011 (RUB 2.5 billion).

Cash balances stood at RUB 48.9 billion at the end of 2011(2010: RUB 24.9 billion). The Company’s net debt was RUB 146.9 billion at the end of 2011(2010: RUB 122.9 billion). The percentage of long-term debt in the total debt portfolio increased substantially from 81.6% in 2010 to 86.2% in 2011 in line with the Company’s prudent financial policy aimed at extending the maturity of its total debt.


* * *
A conference call on the full year 2011 financial results for investors and analysts will be held today at 2:00PM London / 5:00PM Moscow / 9:00AM New York.
Participant dial-in:
International dial-in: +44 (0) 1452 557 535
UK dial-in: 0800 694 8016
Russia dial-in: 8108 002 232 2044
USA dial-in: 1866 691 1171
Conference ID: 75379781

The call will be recorded and there will be a replay facility available for 14 days until 10th May 2012 as follows:
International dial-in: +44 (0) 1452 550 000
UK dial-in: 0800 953 1533
USA dial-in: 1866 247 4222
Replay access number: 75379781#


For further information:
MRSK Holding
Maria Stepanova, Head of IR +7(495) 995 53 33 ext 64 27

FTI Consulting
Larisa Millings / Marc Cohen +44 20 7831 3113
Oleg Leonov / Maria Shiryaevskaya +7 495 795 0623

MRSK Holding is the largest electricity distribution company in Russia and, the Company believes, one of the largest electricity distribution companies in the world by length of distribution lines and installed transformer capacity. MRSK Holding holds interests in and manages 11 interregional and five regional distribution grid companies in Russia. As at 31 December 2011, MRSK Holding together with its subsidiaries owned and operated approximately 2.1 million kilometres of electricity distribution lines with a total installed transformer capacity of approximately 402 GVA. Through its subsidiaries, the Company operates in 69 regions of Russia, covering an area of approximately 7.7 million square kilometres occupied by approximately 85 percent of Russia's total population according to Rosstat. The Company reported revenues of RUB 634.6 billion and net profit of RUB 39 billion for 2011.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of MRSK Holding. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industry, as well as many other risks specifically related to MRSK Holding and its operations.


MRSK Holding
Consolidated Statement of Comprehensive Income for the year ended 31 December 2011
(in millions of Russian roubles, unless otherwise stated)

 
Year ended
31 December 2011
Year ended
31 December 2010
Revenue and government subsidies
634,608
559,496
Operating expenses
(577,214)
(507,080)
Other income, net
1,860
1,803
Results from operating activities
59,254
54,219
Finance income
3,226
2,853
Finance costs
(9,069)
(10,890)
Net finance costs
(5,843)
(8,037)
Share of profit of equity accounted investees (net of income tax)
244
355
Profit before income tax
53,655
46,537
Income tax expense
(14,689)
(12,400)
Profit for the year
38,966
34,137
Other comprehensive income


Change in fair value of available-for-sale financial assets
(264)
323
Change in fair value of available-for-sale financial assets transferred to profit or loss
(232)
(496)
Income tax on other comprehensive income
105
42
Other comprehensive income for the year, net of income tax
(391)
(131)
Total comprehensive income for the year
38,575
34,006
Profit attributable to:


Owners of the Company
23,438
22,168
Non-controlling interest
15,528
11,969
Total comprehensive income attributable to:


Owners of the Company
23,047
22,037
Non-controlling interest
15,528
11,969
Earnings per share


Basic and diluted earnings per ordinary share
RUB 0.53
RUB 0.51 

MRSK Holding
Consolidated Statement of Financial Position as at 31 December 2011
(in millions of Russian roubles, unless otherwise stated)


31 December 2011
31 December 2010
ASSETS
 

 

Non-current assets
 

 

Property, plant and equipment
687,489
603,241
Intangible assets
4,368
3,635
Investments in equity accounted investees
1,280
1,052
Non-current accounts receivable
16,818
15,705
Other investments and financial assets
9,837
9,905
Deferred tax assets
2,599
2,413
Total non-current assets
722,391
635,951
 



Current assets


Inventories
12,907
11,219
Other investments and financial assets
8,728
9,649
Current tax assets
4,516
3,051
Trade and other receivables
81,682
83,046
Cash and cash equivalents
48,853
24,890
Total current assets
156,686
131,855
Total assets
879,077
767,806

MRSK Holding
Consolidated Statement of Financial Position as at 31 December 2011
(in millions of Russian roubles, unless otherwise stated)


31 December 2011
31 December 2010
EQUITY AND LIABILITIES
 

 

Equity
 

 

Share capital
45,039
45,039
Share premium
6,036
6,036
Treasury shares
(1,786)
(1,786)
Reserve for prepayment for shares
9,382
-
Other reserves
280
671
Retained earnings
207,790
184,635
Total equity attributable to equity holders of the Company
266,741
234,595
Non-controlling interest
177,136
161,246
Total equity
443,877
395,841
 



Non-current liabilities


Loans and borrowings
168,831
120,649
Trade and other payables
30,081
17,068
Employee benefits
9,660
9,039
Deferred tax liabilities
32,478
28,017
Total non-current liabilities
241,050
174,773
 



Current liabilities


Loans and borrowings
26,954
27,139
Trade and other payables
161,920
167,145
Provisions
4,757
1,977
Current tax liabilities
519
931
Total current liabilities
194,150
197,192
Total liabilities
435,200
371,965
Total equity and liabilities
879,077
767,806

MRSK Holding
Consolidated Statement of Cash Flows for the year ended 31 December 2011
(in millions of Russian roubles, unless otherwise stated)


Year ended
31 December 2011
Year ended
31 December 2010
OPERATING ACTIVITIES


Profit for the year
38,966
34,137
Adjustments for:


Depreciation and amortization
54,075
46,025
Finance costs
9,069
10,890
Finance income
(3,226)
(2,853)
Loss on disposal of property, plant and equipment
106
252
Share of profit of equity accounted investees (net of income tax)
(244)
(355)
Gain on bargain purchase
-
(449)
Other non-cash transactions
545
(604)
Income tax expense
14,689
12,400
Operating profit before working capital changes and reserves
113,980
99,443
Change in trade and other receivables
(6,970)
(2,878)
Change in financial assets related to employee benefit fund
(11)
(157)
Change in inventories
(1,565)
31
Change in trade and other payables
6,285
4,859
Change in employee benefit liabilities
621
1,041
Change in provisions
2,780
1,057
Cash flows from operations before income taxes and interest paid
115,120
103,396
Income taxes paid
(12,186)
(11,190)
Interest paid
(13,596)
(15,783)
Net cash flows from operating activities
89,338
76,423

MRSK Holding
Consolidated Statement of Cash Flows for the year ended 31 December 2011
(in millions of Russian roubles, unless otherwise stated)


Year ended
31 December 2011
Year ended
31 December 2010
INVESTING ACTIVITIES


Acquisition of property, plant and equipment and intangible assets
(124,836)
(75,681)
Proceeds from sale of property, plant and equipment
1,087
784
Acquisition of investments and placement of bank deposits
(9,367)
(11,837)
Proceeds from disposal of investments and withdrawal of bank deposits
10,076
3,625
Acquisition of subsidiaries net of cash acquired
-
(1,075)
Dividends received
20
35
Interest received
1,202
934
Net cash flows used in investing activities
(121,818)
(83,215)
FINANCING ACTIVITIES


Proceeds from loans and borrowings
139,724
132,166
Repayment of loans and borrowings
(87,002)
(129,148)
Proceeds from shares issued
10,687
7,965
Own shares acquired
-
(1,779)
Dividends paid
(1,670)
(616)
Repayment of finance lease liabilities
(5,296)
(6,123)
Net cash flows from financing activities
56,443
2,465
Net increase/(decrease) in cash and cash equivalents
23,963
(4,327)
Cash and cash equivalents at beginning of year
24,890
29,217
Cash and cash equivalents at end of year
48,853
24,890



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