AFK Sistema : Sistema announces financial results for the first quarter 2017

05/06/2017

Sistema announces financial results for the first quarter 2017

Moscow, Russia- 5 June 2017 - Sistema PJSFC ('Sistema' or the 'Company', together with its subsidiaries, 'the Group') (LSE: SSA, MOEX: AFKS), a publicly-traded diversified holding company operating primarily in Russia and the CIS, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the first quarter ended 31 March 2017.

OPERATIONAL AND STRATEGIC PROGRESS

• Resilient performance underscoring strength and diversity of the portfolio
• All key portfolio assets profitable at the adjusted OIBDA level: Group adjusted OIBDA margin improved YoY
• Largest asset, MTS, increased OIBDA YoY and improved OIBDA margin to 39.7%
• Strong revenue growth at Detsky Mir, Leader Invest, Medsi and hospitality assets
• MTS Bank delivered on strategy and reported positive bottom-line
• Successful asset monetisations including landmark IPO of Detsky Mir and MTS share sale

SOLID FIRST QUARTER FINANCIAL RESULTS

• Revenues largely stable YoY at RUB 163.4 billion
• Consolidated revenues of Russian portfolio companies up 0.9% YoY
• Adjusted OIBDA[1] up 3.2% to RUB 44.4 billion; adjusted OIBDA margin improved to 27.2% from 26.2% a year earlier
• Adjusted profit attributable to Sistema of RUB 1.6 billion
• As of 31 March 2017, cash position[2] at the Corporate Centre level was RUB 20.5 billion
• Net debt[3] at the Corporate Centre level amounted to RUB 73.8 billion as of 31 March 2017

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

'In the first quarter of 2017 Sistema delivered strongly against its key strategic objectives, which was reflected in solid results across our portfolio, successful asset monetisations and continued investment momentum.

'Consolidated revenues of our Russian portfolio companies increased by 1% and their OIBDA was up by 4% year-on-year. While our largest asset, MTS, confirmed its position as Russia's leading telecom operator and notably improved its OIBDA margin, our children's goods retailer Detsky Mir, healthcare group Medsi and real estate developer Leader Invest posted particularly robust growth, once again demonstrating Sistema's expertise at establishing and growing market leaders in various core sectors of the Russian economy.

'One of our key achievements during the quarter was Detsky Mir's RUB 19 billion IPO, which reopened the Russian public issuance market for global investors, being the first Russian IPO with full scale international marketing since 2014. Over 90% of the offering was subscribed by foreign investors. Proceeds from the transaction for Sistema reached 13 billion roubles which together with other inflows further strengthened our investment resources.

'During the quarter and thereafter we continued to see strong investment momentum in agriculture, with acquisition of around 36,000 hectares of high quality land in southern Russia which brought our total agricultural land bank to over 350,000 hectares. Our investment pipeline of large projects remains extensive, as we continue to identify and pursue the best opportunities to create value in our core Russian market.

'In May 2017, Sistema received a legal claim filed by Rosneft and PJSOC Bashneft for the recovery of damages in the amount of RUB 106.6 billion allegedly incurred by the plaintiffs due to the reorganisation of Bashneft. Soon thereafter the plaintiffs filed a motion to increase the amount of the claim to RUB 170.6 billion. The plaintiffs' actions have seriously damaged Sistema's market capitalisation. Nevertheless, Sistema is confident that the claims of the plaintiffs are unfounded and unlawful and Sistema will vigorously defend its interests by all legal means.

'During ownership of Bashneft, Sistema developed it into one of the best oil companies, creating enormous value for all of Bashneft's stakeholders, including the Russian Federation as the recipient of taxes and Bashneft's subsequent owner. All corporate actions mentioned in the claim were aimed at maximising Bashneft's value ahead of a possible IPO on international markets, in line with Sistema's business model. Bashneft's reorganisation was carried out for that purpose in full compliance with Russian laws.

'In the interests of all Sistema's shareholders and other stakeholders and to safeguard our reputation, we are committed to maintaining full transparency around this claim and our defence against it. Accordingly, on our web-site we have established a dedicated public portal containing relevant information, which we will update as the matter progresses.'

Conference call information

Sistema's management will host an analyst conference call today at 10:00 am (EST)/ 3:00 pm (London time) / 4:00 pm (CET)/ 5:00 pm (Moscow time) to present and discuss the first quarter 2017 results.

The dial-in numbers for the conference call are:

Russia

+7 495 213 1767

8 800 500 9283 (toll free)

United Kingdom

+44 330 336 9105

0800 368 0935 (toll free)

United States

+1 719 325 2202

888 389 5986 (toll free)

Conference ID: 7384037

Alternatively, you can quote the conference call title: 'Sistema First Quarter 2017 Financial Results'.

A replay of the conference call will be available on the Company's website www.sistema.com for seven days after the event.

For further information, please visit www.sistema.com or contact:

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[1] See Attachment A for definitions and reconciliation of adjusted OIBDA and adjusted profit to IFRS financial measures.

[2] Including highly liquid deposits and liquid financial investments, based on management accounts. See Attachment A for reconciliation to IFRS financial measures.

[3] Including highly liquid deposits and liquid financial investments, based on management accounts. See Attachment A for reconciliation to IFRS financial measures.