ENRU

Full-Year 2014 Results

30.03.2015

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 year ended 31 December 2014.

The presentation currency of the Group’s consolidated financial statements was changed from US Dollars to Russian Roubles (“RUB”) effective from the results for the year ending 31 December 2014. The Company believes that the presentation of financial results in RUB, which is the functional currency of the Company as well as its Cypriot and Russian subsidiaries, provides greater transparency in the light of recent volatility of the RUB exchange rate and provides shareholders with a more accurate reflection of the Company’s underlying performance. In accordance with relevant accounting standards, comparative financial information for the year ended 31 December 2013 is provided in RUB.

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.

Financial highlights

In the context of a challenging year for the rail freight transportation sector, Globaltrans produced a solid overall financial performance in 2014.

  • The Group generated RUB 41,890 million* of Adjusted Revenue, a decline of 7% year on year largely reflecting the weak pricing environment in the gondola segment;
  • The Group’s targeted approach to cost-cutting helped to keep the rate of increase in the Total Operating Cash Costs at 2% year on year, below the growth of the Group’s Freight Rail Turnover, mitigating the impact of inflation;
  • Adjusted EBITDA fell 16% year on year to RUB 17,560 million* while the Adjusted EBITDA Margin slipped to 42%* from 46%* in 2013;
  • The business again produced solid cash flow in 2014 generating RUB 11,907 million* in Free Cash Flow, down 13% year on year;
  • Profit for the year was negatively affected by the impairment of goodwill in the amount of RUB 5,828 million[1]. As a result, the Group reported Profit for the year of RUB 571 million against RUB 8,068 million for 2013. Profit for the year removing the impact of the impairment of goodwill was RUB 6,399 million* in 2014, a decline of 21% year on year;
  • The Group continued its strategy of deleveraging and reduced Net Debt by 21% year on year to RUB 23,658 million* at the end of 2014. Net Debt to Adjusted EBITDA stood at a level of 1.3x* (2013 end: 1.4x*). The Group’s share of RUB denominated debt further increased to 98% with the share of debt with a fixed interest rate at 90%* at the end of 2014.

Operational highlights

  • Freight Rail Turnover (including Engaged Fleet) increased 3% year on year to 159.7 billion tonnes-km in 2014 while the Group’s Transportation Volumes remained stable year on year at 102.7 million tonnes[2];
  • The Group’s Market Share was maintained at 8.4%. All railcars remained fully deployed, with Average Rolling Stock Operated up 1% year on year;
  • In the Group’s priority segments of metallurgical cargoes[3] and oil products and oil, Freight Rail Turnover (including Engaged Fleet) increased 6% and 2% respectively;
  • Strong operational efficiency was maintained with the Empty Run Ratio for gondola cars remaining flat year on year at 38% in 2014 and with the Total Empty Run Ratio further improved to 51% (2013: 53%);
  • Average Price per Trip remained under pressure mainly due to the weak pricing environment in the gondola segment, declining 7% year on year to RUB 26,804 in 2014;
  • All key service contracts were successfully extended with more than 60% of the Group’s Net Revenue from Operation of Rolling Stock covered by long-term service contracts in 2014:
    • the Metalloinvest service contract was extended by a further 19 months to the end of 2016;
    • the MMK service contract was extended by an additional 12 months to the end of February 2019; and
    • the Rosneft service contract was successfully renegotiated and extended to the end of March 2016.

Dividends

Appropriate shareholder remuneration has always been a priority for the Board, as demonstrated by the Group’s consistent distribution track record since listing on the London Stock Exchange in 2008. However, dividend decisions are always made considering a broad framework of factors impacting the Group’s performance and outlook. Due to the current environment categorised by excessive interest rates on RUB borrowings and continued downward pressure on pricing, primarily in the gondola segment, the Board has recommended not to pay a dividend in respect of the 2014 financial year and to apply cash for debt repayments. This decision will enable Globaltrans to focus on further debt reduction and position the Group to take advantage of opportunities that the market may present in the future. The Board will revisit the decision regarding the dividend in the next twelve months.

Comments

Sergey Maltsev, CEO of Globaltrans Investment PLC, said:
“In what has been a challenging year for both the rail freight transportation sector and Russia in general, the Group was nonetheless able to maintain its market share and produce a respectable overall performance. This achievement was a result of our balanced fleet supported by our long-term service contracts, which together provided a solid footing for us to navigate the challenges of 2014. The resilience of our operational performance was encouraging with the Group delivering growing freight rail turnover while demonstrating a high level of operational efficiency. Our initiatives on cost reduction resulted in our operational cash costs rising below the level of our increased freight rail turnover therefore offsetting the inflationary impacts.

As we move into 2015, business conditions remain difficult. We continue to keep a tight rein on costs and are maintaining our focus on extracting value from our best-in-class logistics. In an environment characterised by continued downward pressure on pricing and high interest rates, our good level of free cash flow makes it possible for us to pay down debt thus maintaining a strong balance sheet and our ability to capitalise on any opportunities that may arise.

We firmly believe that the long-term prospects for the freight rail industry are positive as 87% of goods in Russia are transported by rail[4]. The industry remains highly fragmented and ripe for consolidation by players like us with strong operational capabilities and low leverage.”

Downloads

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 Sergey Maltsev, Chief Executive Officer and Alexander Shenets, Chief Financial Officer.

Date: Monday, 30 March 2015
Time: 14.00 London / 9.00 New York (EDT) / 16.00 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 (0) 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
+357 25 328 860
irteam@globaltrans.com

For international media
Lightship Consulting
Laura Gilbert/Zoë Watt
+44 20 7240 2486
globaltrans@stockwellgroup.com

NOTES TO EDITORS
Globaltrans is a leading private 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 large Russian industrial groups in the metals and mining and the oil products and oil sectors.

The Group has a Total Fleet of about 66 thousand units of rolling stock with an average age of 8.7 years[5]. Universal gondola cars and rail tank cars constitute the backbone of the Group’s fleet. About 92% of the Total Fleet is owned by the Group. In 2014, the Group’s Freight Rail Turnover (including Engaged Fleet) was 159.7 billion tonnes-km. The Group’s Market Share was 8.4% of overall Russian freight rail transportation volumes.

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

LEGAL DISCLAIMER
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of Globaltrans. 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. Globaltrans wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Globaltrans does 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 projections or forward-looking statements of Globaltrans, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Globaltrans operates in, as well as many other risks specifically related to Globaltrans and its operations.

[1] In 2014, the Group recognised an impairment of goodwill in amount of RUB 5,828 million related to acquisitions of captive rail operators completed in 2012 and 2013. The impairment primarily reflects increased cost of capital in Russia, deterioration of economic conditions, as well as the continued weak pricing environment in the gondola segment.

[2] The Group’s Freight Rail Turnover (excluding Engaged Fleet) was up 3% year on year with Transportation Volume up 1% year on year in 2014.

[3] Including ferrous metals, scrap metal and iron ore.

[4] The share of the overall Russian freight turnover in 2014, excluding pipeline traffic.

[5] Average age of the Group’s Owned Fleet as of 31 December 2014.

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