Globaltrans Annual Report and Accounts for 2010
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 2010 (the “Annual Report for 2010”).
Following the release on 4 April 2011 of the Group’s Directors’ report and consolidated financial statement for the year ended 31 December 2010 (“Full Year 2010 Financial Results”), Globaltrans announces that it has published its Annual Report for 2010. The Group’s Full Year 2010 Financial Results are included as Appendix 1 of the Annual Report for 2010.
For the Annual Report for 2010, please click here.
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The Annual Report for 2010 is also available for viewing at the Company’s 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 National Storage Mechanism of the UK Listing Authority, located at www.hemscott.com/nsm.do.
In compliance with DTR 6.3.5, the following information is extracted from the Annual Report for 2010 and should be read in conjunction with the Globaltrans’ Full Year 2010 Financial Results Announcement issued on 4 April 2011. 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 2010 and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report for 2010.
Principal Risks and Uncertainties
The following description of principal risks and uncertainties is extracted from pages 36 - 37 of the Annual Report for 2010.
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. Additional risks that are not known to the Group at this time, or that it currently believes are immaterial, could also have a material adverse effect on the Group’s business, financial condition, results of operations or future prospects and the trading price of the GDRs.
- 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;
- The Group may be subject to increasing competition from other transportation and logistics companies;
- The Group’s relationship with RZD and government authorities may deteriorate;
- Expansion through acquisition entails certain risks, and the Group may experience problems in integrating and managing such new acquisitions;
- 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 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 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 business, financial condition and results of operations are dependent on tariffs set by the Federal Tariff Service;
- 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;
- Failure to meet customers’ expectations could damage the Group’s customer relationships and business reputation;
- The Group may be adversely affected by wage increases in Russia;
- 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.
Compliance and shareholder risks
- The Group’s controlling beneficial shareholders may have interests that conflict with those of the holders of the GDRs;
- 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;
- 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.
- Expansion of the Group’s business may place a strain on its resources;
- 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;
- The Group is subject to foreign exchange risk, because part 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 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.
Related Party Transactions
The following description of related party transactions is extracted from page 35 of the Annual Report for 2010.
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 Group is controlled by Transportation Investments Holding Limited (“the Parent”) incorporated in Cyprus, which owns 50.10% of the Company’s shares. Envesta Investments Limited owns 14.45% (including the holding of GDRs of the Company) of the Company’s shares. Further, the Directors of the Company control 0.14% of the Company’s shares through their holdings of GDRs. The remaining 35.31% of the shares represent the free market-float and are held by external investors through GDRs.
The following table sets forth the summary of transactions which were carried out with related parties for the years ended 31 December 2010 and 2009.
|Sales of goods and services||118.8||134.4|
|Purchase of goods and services||(28.2)||(32.8)|
|Additions of property, plant and equipment||0.7||1.3|
|Key management salaries and other short term employee benefits||(8.6)||(16.6)|
* Includes remuneration of executive directors paid by the subsidiaries of the Group.
The following table sets forth the year-end balances with related parties.
|Consideration payable to the Parent for the acquisition of AS Spacecom|
and AS Spacecom Trans (formerly AS Intopex Trans)
The following table sets forth the Group’s borrowings and finance leases guaranteed by related parties.
|Borrowings guaranteed by related parties||48.2||-|
|Finance lease and sale and leaseback contracts guaranteed by related parties||60.7||-|
The following table sets forth the Group’s operating lease commitments under non-cancellable operating leases with related parties.
|Group as lessor||8.9||0.0**|
|Group as lessee||12.4||17.2|
Directors Responsibility Statements
Each of the Directors confirms to the best of his or her knowledge that:
(a) the consolidated financial statements (presented on pages 8 to 52 of Appendix 1 of the Annual Report for 2010) 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 financial position, financial performance and cash flows of the Company and the undertakings included in the consolidation taken as whole; and
(b) the Management Report (presented on pages 12 to 45 of the Annual Report for 2010) includes a fair review of the development and performance of the business and the position 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, Director and 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 with operations in Russia by the size of owned rolling stock fleet (based on publicly available information) and the first 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 clients in Russia, the CIS countries and the Baltics.
Group’s fleet of rolling stock owned and leased under finance and operating leases amounted to 50,714 units at the end of 2010, including 29,568 gondola cars, 20,598 rail tank cars, 58 locomotives and 490 other railcars.
The Group’s Freight Rail Turnover in 2010 amounted to 97.4 billion tonnes-km with 63.8 million tonnes of freight transported. In 2010 the Group’s Adjusted Revenue amounted to USD 903.0* million with Adjusted EBITDA reaching USD 390.9* million.
Globaltrans' global depositary receipts (ticker symbol: GLTR) are listed on the Main Market of the London Stock Exchange 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.