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Interim 2018 Results and Approval of Interim and Special Interim Dividends

28.08.18

Globaltrans Investment PLC (the “Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”), (LSE ticker: GLTR) today announces its financial and operational results for the six months ended 30 June 2018 along with the approval of interim and special interim dividends.

In this announcement, the Group has used certain measures not recognised by EU IFRS or IFRS (referred to as “non-GAAP measures”) as supplemental measures of the Group’s operating performance. The management believes that these non-GAAP measures provide valuable information to readers, because they enable them to focus more directly on the underlying day-to-day performance of the Group’s business. The Company also reports certain operational information to illustrate the changes in the Group’s operational and financial performance during the reporting periods. Certain financial information which is derived from the management accounts is marked in this announcement with an asterisk {*}. Information (non-GAAP and operational measures) requiring additional explanation or defining is marked with initial capital letters and the explanations or definitions thereto are provided at the end of this announcement. The presentational currency of the Group’s financial results is the Russian rouble (“RUB”).

 

Further growth in financials, margin expansion and continued low leverage

  • Total revenue increased 14% year on year to RUB 43.4 billion.
  • Adjusted Revenue rose 19% year on year to RUB 30.1 billion supported by strong market conditions.
  • Excellent cost discipline maintained with Total Operating Cash Costs up only 2% year on year despite ongoing cost pressures.
  • Operating profit was up 42% year on year to RUB 13.6 billion.
  • Strict cost control alongside strong revenue growth drove Adjusted EBITDA Margin expansion to 55% and a 37% year-on-year increase in Adjusted EBITDA to RUB 16.5 billion.
  • Profit for the period rose 47% year on year to RUB 9.8 billion.
  • Free Cash Flow rose 6% year on year to RUB 8.6 billion despite greater expansion CAPEX largely due to a strong increase in cash generated from operations. Attributable Free Cash Flow was up 5% year on year to RUB 7.5 billion.
  • Net Debt increased 18% to RUB 13.4 billion compared to the end of 2017. Leverage remained stable at a low level with Net Debt to Adjusted EBITDA for the twelve months ended 30 June 2018 at 0.4x.
  • 100% of debt is denominated in RUB, the Company’s functional currency.

 

Distribution of 109% of Attributable Free Cash Flow approved in respect of first half of 2018

  • The Board has approved a total interim payment to shareholders of RUB 8.2 billion or RUB 45.9 per share/Global Depositary Receipt (“GDR”), including:

    • An interim dividend of RUB 3.8 billion or RUB 21.1 per ordinary share/GDR which is in line with the Group’s dividend policy[1] and equates to 50% of the Group’s Attributable Free Cash Flow for the first half of 2018; and
    • special interim dividend of RUB 4.4 billion or RUB 24.8 per ordinary share/GDR in order to maintain the Group’s efficient capital structure.

  • The shareholder dividend record date is set as 4 September 2018. The GDRs will be marked as ex-dividend on 3 September 2018.
  • The dividend will be paid in US dollars in the total amount of approximately 66.98 US cents per one ordinary share/GDR not later than 7 September 2018 with conversion executed at the Central Bank of Russia’s official exchange rate for the Russian rouble as of 24 August 2018 (1 USD: 68.5259 RUB). Holders of GDRs will receive the dividend approximately three business days after the payment date.

 

Ongoing operational excellence, two new long-term contracts signed

  • High fleet efficiency with Empty Run Ratio for gondola cars maintained at lowest level for five years.

    • Empty Run Ratio for gondola cars improved to 37% (38% in H1 2017) with Total Empty Run Ratio reduced to 45% (47% in H1 2017).

  • Further improvement in average pricing.

    • Average Price per Trip up 25% year on year primarily reflecting the strong gondola market.

  • Further milestone reached as the outsourcing partner for blue-chip companies.

    • New five-year contracts signed:

      • TMK, a leading global manufacturer and supplier of steel pipes for the oil and gas industry.
      • ChelPipe Group, a leading Russian manufacturer of pipe products and provider of integrated solutions for fuel and energy companies.

    • Volumes to significantly increase to 70% of their freight rail transportation needs in the near term.
    • Both contracts perfectly complement Globaltrans’ logistics patterns.

  • Owned Fleet expanded in response to strong demand and new long-term contracts.

    • 1,802 units (including 1,202 gondola cars, 300 petrochemical tank containers and 300 flat cars) acquired in the first six months of 2018.
    • Owned Fleet increased 3% compared to the end of 2017 to 62,846 units[2].

  • Freight Rail Turnover and Transportation Volumes declined 6% and 5% year on year respectively due to:

    • Temporary reduction in Average Rolling Stock Operated which declined 3% year on year or by 1,507 units, reflecting an intentional reduction in the number of Leased-in Fleet over the last twelve months. Higher leasing rates lead to the continued substitution of expensive leased-in gondolas by newly acquired units.
    • The reduction of Leased-in Fleet was not fully offset by the purchase of 1,802 new units most of which were commissioned at the end of the first half of 2018. In addition about 2,100 units (mostly gondola cars) are expected to be purchased in the second half of 2018.
    • Changed client logistics largely accounted for the 3% decline in the Average Number of Loaded Trips per Railcar. Average Distance of Loaded Trip remained relatively stable.

 

Strong market backdrop with continued rise in demand

  • Higher demand with 4% year-on-year increase in overall Russian freight rail turnover and overall transportation volumes up 3% year on year in the first six months of 2018.
  • Bulk cargoes drove growth with non-oil cargo market volumes up 4% year on year outpacing supply growth and supporting continued favourable pricing conditions. The net increase in overall gondola capacity (about 12,600 units or 2.5% over the first half of 2018)[3] was absorbed by rising demand.
  • The oil products and oil segment stabilised with market volumes unchanged year on year and the pricing environment remaining relatively stable. The market continues to benefit from the scrappage of old capacity combined with a very low level of new additions (net capacity down about 2,500 units or 1% over the first half of 2018)3.

 

Industry outlook and management objectives for the second half of 2018

  • Favourable gondola market is expected to remain a key feature subject to economic conditions. The relatively weak conditions in the oil products and oil segment are likely to continue.
  • Ongoing cost pressures are expected in the second half of 2018, specifically for repair and maintenance due to an increase in the number of repairs and higher prices for certain spare parts that are in short supply as well as an increase in employee benefit expense.
  • The management team will continue to focus on maintaining industry-leading logistics and operational efficiency along with strong cost discipline in the face of ongoing inflationary pressures. Further development of long-term client relationships remains a priority.
  • Globaltrans will proceed with selective, demand-based investments in line with strict return criteria.

    • Acquisition of about 2,100 units (mostly gondola cars) targeted for the second half of 2018 bringing the total number for 2018 up to 3,900 units.
    • Moderate demand-based organic growth with focus on gondola segment going forward.
    • Investigation of both new attractive niche projects to supplement core businesses and accretive consolidation opportunities.

  • Prudent capital allocation to continue.

    • Provided the current outlook for the sector remains broadly unchanged, Globaltrans expects the total annual dividend for 2018 (which includes final, interim and special dividends) to be about RUB 16 billion, similar to that paid in respect of 2017.

 

Commenting on Globaltrans’ results for the first six months of 2018, CEO Valery Shpakov said:

“Even in the context of a very successful first half for the freight rail transportation market as a whole, Globaltrans delivered impressive results, maintaining its operational excellence and efficiency. Our best-in-class and reliable services enabled us to attract TMK and ChelPipe as long-term partners, adding to the existing group of blue-chip clients we work with on a similar basis. Under these five-year contracts, volumes from the two companies will increase substantially in the near term. Both have transportation requirements that fit perfectly into our operating model and, importantly, complement the Group’s logistics patterns. We are delighted to have them on board.

We achieved growth across all our key financial metrics which, when combined with our tight grip on costs, drove further margin expansion. Since the start of the year we have focused on replacing increasingly expensive leased-in railcars with newly acquired gondola cars. This will continue and over the course of 2018 we expect to purchase up to 3,900 railcars of various types to strengthen our position in the growing market and support our new long-term contracts. In terms of outlook, as we move into the second half, the market environment remains favourable.”

 

Commenting on returns to shareholders, Chairman and Chief Strategy Officer Sergey Maltsev said:

“We completed the first half of the year with excellent results. Our business continues to develop successfully and gain momentum. In response to the strong market growth and the recent expansion of our long-term contract portfolio we decided to extend our investment program for 2018, targeting gondola cars and the development of our niche petrochemical project.

The Group’s robust free cash flow and low leverage continue to support our ability to provide shareholders with strong returns. Based on the good first-half financial performance, the Board approved interim and special interim dividends of RUB 8.2 billion in total. We anticipate that in the second half of the year our CAPEX will remain moderate and, provided the market remains broadly unchanged, we expect to be able to pay around RUB 16 billion in respect of the full year 2018, including these interim payments.”

 

DOWNLOADS

The full text of Interim 2018 Results announcement;

The related Interim 2018 Results Presentation;

The condensed consolidated interim financial information (unaudited) for the six months ended 30 June 2018;

The selected operational information for the six months ended 30 June 2018.

 

ANALYST AND INVESTOR CONFERENCE CALL

The release of the Group’s financial and operational results will be accompanied by an analyst and investor conference call hosted by Valery Shpakov, CEO and Alexander Shenets, CFO.

Date: Tuesday, 28 August 2018

Time: 12.00 London / 07.00 New York (EDT) / 14.00 Moscow

To participate in the conference call please dial one of the following numbers and ask to be put through to the "Globaltrans" call:

UK toll free:      0808 109 0700

International:     +44 20 3003 2666

As there will be simultaneous translation for the first part of the call (slide presentation), you should state whether you prefer to listen in English or Russian. During the Q&A session, all participants will hear both languages. There will also be a webcast of the call available through the Globaltrans website (www.globaltrans.com). Please note that this will be a listen-only facility.

 

 

ENQUIRIES

Globaltrans Investor Relations

Mikhail Perestyuk / Daria Plotnikova

+357 25 328 860

irteam(at)remove-this.globaltrans.com

 

For international media

Lightship Consulting

Laura Gilbert

+44 7799 413351

Laura.Gilbert@lightshipconsulting.co.uk

 

NOTES TO EDITORS

Globaltrans is a leading freight rail transportation group with operations in Russia, the CIS and the Baltic countries. The Group’s main business is the provision of freight rail transportation services. Globaltrans provides services to more than 500 customers and its key customers include a number of prominent Russian industrial groups in the metals and mining and the oil products and oil sectors.

The Group had a Total Fleet of about 66 thousand units at 30 June 2018. Universal gondola cars and rail tank cars constitute the backbone of the Group’s fleet. About 95% of the Total Fleet is owned by the Group with an average age of 11 years.

In the first six months of 2018, the Group’s Freight Rail Turnover (including Engaged Fleet) was 82.7 billion tonnes-km with the total revenue amounting to RUB 43.4 billion.

Globaltrans' global depositary receipts (ticker symbol: GLTR) have been listed on the Main Market of the London Stock Exchange since May 2008. Globaltrans was the first freight rail transportation group with operations in Russia to have an international listing. To learn more about Globaltrans, please visit www.globaltrans.com

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[1] As per the Group’s dividend policy adopted on 31 March 2017 and amended on 24 August 2018, which is available at www.globaltrans.com.

[2] In the first six month of 2018 the Group disposed of 206 units of rolling stock (including sales to third parties).

[3] Estimated by the Company.

Last updated: 21.11.2018