Globaltrans Annual Report and Accounts for 2009
Globaltrans Investment PLC (“the Company” or together with its consolidated subsidiaries “Globaltrans” or “the Group”) (LSE ticker: GLTR), today publishes its Annual Report and Accounts for 2009 (the “Annual Report for 2009”).
Following the release on 12 April 2010 of the Group’s Directors’ report and consolidated financial statement for the year ended 31 December 2009 (“Full Year 2009 Financial Results”), Globaltrans announces that it has published its Annual Report for 2009. The Group’s Full Year 2009 Financial Results are included as Appendix 1 of the Annual Report for 2009.
For the Annual Report for 2009, please click on the URL below: http://www.globaltrans.com/ar09
If this link fails to connect please copy and paste the URL into the address bar of your browser.
Annual Report for 2009 is also available at the corporate website (www.globaltrans.com) and at the registered office of the Company, at Omirou 20, Agios Nikolaos, CY-3095 Limassol, Cyprus, and will shortly be available at the Document Viewing Facility of the UK Listing Authority, located at the Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom.
In compliance with DTR 6.3.5, the following information is extracted from the Annual Report for 2009 and should be read in conjunction with the Globaltrans’ Full Year 2009 Financial Results Announcement issued on 12 April 2010. Together, these constitute the material required by DTR 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report for 2009 and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report for 2009.
Principal Risks and Uncertainties
The following description of principal risks and uncertainties is extracted from page 35 of the Annual Report for 2009.
Effective risk management is critical to achieve the Group’s strategic objectives. Globaltrans has comprehensive risk control and management systems in place to prevent potential adverse effects of changes in its environment or situation.
The Board of Directors has adopted a formal process to identify, evaluate and manage significant risks faced by the Group, and systematically monitors and undertakes an assessment of risks critical to the Group’s performance and strategic delivery.
The Group’s business involves a certain number of risks, the most notable of which are presented below. The order in which the following risks are presented is not intended to be an indication of the probability of their occurrence or the magnitude of their potential effects.
The description of the risks set forth below is presented in the prospectus dated 4 March 2010 (“Risk Factors”, pages 8 – 36), available for viewing on the corporate website of Globaltrans (http://www.globaltrans.com/uploads/media/Globaltrans_prospectus__as_of_4_March_2010_.pdf) or at the UK Listing Authority’s Document Viewing Facility, 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom.
Risks relating to the Group’s business and industry
- The Group is dependent on demand in the Russian rail transportation market, which in turn depends on certain key economic sectors, and accordingly, on economic growth.
- The Group’s business is heavily dependent on services provided by RZD and the ageing railway infrastructure in Russia, Kazakhstan and Ukraine.
- The Group’s customer base is heavily dependent on a few large industrial groups and their suppliers.
- The Group’s controlling beneficial shareholders may have interests that conflict with those of the holders of the GDRs.
- The Group may be subject to increasing competition from other transportation and logistics companies.
- Expansion of the Group’s business may place a strain on its resources.
- The Group’s relationship with RZD and government authorities may deteriorate.
- The Group’s business, financial condition and results of operations are dependent on tariffs set by the Federal Tariff Service.
- The Group is subject to risks relating to the potential postponement or cancellation of certain steps towards the reform of the Russian rail transportation market.
- Insufficient supply of, or increases in the price of, rolling stock may limit the Group’s expansion.
- The Group’s competitive position and prospects depend on the expertise and experience of its key managers.
- The Group’s success depends on its ability to continue to attract, retain and motivate qualified personnel.
- Expansion through acquisition entails certain risks, and the Group may experience problems in integrating and managing such new acquisitions.
- Adverse determination of pending and potential legal actions involving the Company’s subsidiaries could have an adverse effect on the Group’s business, revenues, cash flows and the price of the GDRs.
- A major accident or derailment could result in substantial property loss, business disruption or reputational damage to the Group.
- The Group’s insurance policies may be insufficient to cover certain losses.
- The Group’s information technology systems may fail or be perceived to be insecure.
- The information technology software systems used by the Group could cease to be available.
- The Group’s ownership of a railcar repair and maintenance depot exposes the Group to greater risk with respect to licenses, uncoupling fees, railcar breakdowns, earlier than scheduled repairs, cargo delivery delays and railcar owners’ resulting lost profits.
- The Group is dependent on RZD for the availability and performance of locomotive crews and for the issuance of locomotive permits and approvals.
- The Group faces exposure to risks related to VAT recovery issues.
- There is a shareholders’ agreement in relation to LLC BaltTransServis (“BTS”) which limits the Group’s ability to direct the affairs of BTS in certain ways and which exposes the Group to risk of detrimental actions by the minority BTS shareholder.
Risks relating to the Group’s financial condition
- The Group’s indebtedness, particularly under current market conditions, could adversely affect the Group’s operational and financial condition.
- The Group’s growth strategy requires significant funding.
- Because most of the Group’s borrowings are denominated in US Dollars and most of its expenses and revenue are denominated in Roubles, the Group is subject to foreign exchange risk.
- The Group may be subject to interest rate risk due to floating rate liabilities in relation to its leases and long-term borrowings.
- The Group may be subject to credit risk due to its dependence on key customers and suppliers.
- The Company is a holding company and its ability to pay dividends or meet costs depends on the receipt of funds from its subsidiaries.
Risks relating to the Group’s presence in the Russian Federation and other emerging markets
The Group’s business, and substantially all of its assets, are located in Russia and certain other emerging markets. Emerging markets, such as the Russian Federation, Kazakhstan and Ukraine, are subject to greater risks than more developed markets, including significant economic, political and social, and legal and legislative risks, and the global financial and economic crisis could have a particularly significant adverse effect on emerging markets such as Russia, Kazakhstan and Ukraine.
Common Control and Related Party Transactions
The following description of common control and related party transactions is extracted from page 34 of the Annual Report for 2009.
Common control transaction
In December 2009, the parent entity of the Company (Transportation Investments Holding Limited) has contributed its 55.56% shareholding in Ingulana Holdings Limited, Cyprus to the Company for the consideration of 29,411,764 ordinary shares of the Company that were issued to the parent entity at the same time at the price of USD 8.50 per share including a share premium of USD 8.40 per share. The total consideration for the acquisition amounted to USD 250 million. Ingulana Holdings Limited is a special purpose vehicle which held a 90% share and a majority controlling interest in LLC BaltTransServis (“BTS”).
The acquisition of 55.56% of Ingulana Holdings Limited, and consequently a 50% economic interest and majority controlling interest in BTS, has been accounted for as a common control transaction using the predecessor basis. The carrying value of its net assets as of 1 December 2004 was used to account for the common control transaction reserve, since this was the date common control has been established.
Further, in December 2009 Ingulana Holdings Limited transferred its 90% share in BTS to its 90% subsidiary, Ultracare Holdings Limited, a special purpose vehicle incorporated in Cyprus. At the same time the 10% minority shareholder of BTS (a 10% shareholder of Ultracare Holdings Limited) also transferred its 10% share in BTS to this holding company. This transaction did not result in any gain or loss of control for Globaltrans in relation to BTS, nor did it result in any gain or loss on the transfer of shares of BTS. Following the transaction and as at 31 December 2009, Globaltrans held an effective 50% controlling stake in BTS.
For further details please refer to Note 32 of the consolidated financial statements on page 57 of Appendix 1 “Directors’ report and consolidated financial statements” of this Annual report.
Related party transactions
The Group considers parties to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 “Related Party Disclosures”. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties may enter into transactions, which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.
The following table sets forth the summary of transactions which were carried out with related parties for the years ended 31 December 2009 and 2008.
Sales of services
Purchase of goods and services
Acquisition of property, plant and equipment
Disposals of property, plant and equipment
Key management salaries and other short term employee benefits
The following table sets forth the year-end balances with related parties.
Loans from related parties
The parent (consideration payable for the acquisition of AS Spacecom and AS Intropex Trans)
The following table sets forth the Group’s borrowings and finance leases guaranteed by related parties.
Borrowings guaranteed by related parties
Finance lease and sale lease back contracts guaranteed by related parties
The following table sets forth the Group’s operating lease commitments under non-cancellable operating leases with related parties.
Group as lessor
Group as lessee
*USD 17 thousand.
**Includes remunerations of executive directors paid by the subsidiaries of the Group.
***USD 19 thousand.
****USD 30 thousand.
*****USD 6 thousand.
Directors Responsibility Statements
Each of the Director's confirms to the best of his or her knowledge that:
(a) the consolidated financial statements (presented on pages 9 to 60 of Appendix 1 of the Annual Report for 2009) have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as whole; and
(b) the Management Report (presented on pages 16 to 41 of the Annual Report for 2009) includes a fair review of the development and performance of Globaltrans Investment PLC and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Sergey Maltsev, Chief Executive Officer
Mikhail Loganov, Director
Globaltrans Investor Relations
+357 25 503 153
NOTES TO EDITORS
Globaltrans (Globaltrans Investment PLC together with its subsidiaries - "Globaltrans" or "the Group") is the largest privately owned freight rail transportation group operating in Russia by the size of owned rolling stock fleet (based on publicly available information) and the first and only such group to have an international listing.
Globaltrans Investment PLC is incorporated in Cyprus and has operating subsidiaries in Russia, Ukraine and Estonia. The Group provides freight rail transportation, railcar leasing, and certain ancillary services to more than 450 clients in Russia, the CIS countries and the Baltics.
As of the end of 2009 Group’s fleet of rolling stock owned and leased under finance and operating leases amounted to 37,217 units, including 18,846 rail tank cars, 17,821 gondola cars, 60 locomotives and 490 other railcars.
The Group’s freight rail turnover in 2009 amounted to 80.9 billion tonnes-km with 52.8 million tonnes of freight transported. In 2009 the Group’s Adjusted Revenue achieved USD 685.3 million with Adjusted EBITDA in amount of USD 284.5 million.
Globaltrans' global depositary receipts are listed on the Main Market of the London Stock Exchange under the ticker GLTR since May 2008.
To learn more on Globaltrans, please visit www.globaltrans.com.
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.