ENRU

Full-Year 2019 Results, Final Dividends proposed, Targeted 2020 Interim Dividends re-affirmed

30.03.2020

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 2019 along with the proposal of final and special final dividends for 2019 and confirmation of the interim dividend targeted for 2020.

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 financial and operating measures) requiring additional explanation or defining is marked with initial capital letters and the explanations or definitions are provided at the end of this announcement. Reconciliations of the non-GAAP measures to the closest EU IFRS measures are included in the body of this announcement. The presentational currency of the Group’s financial results is the Russian rouble (“RUB”).

Key highlights

  • Excellent financial results and market outperformance against a volatile industry backdrop underscores the strength of Globaltrans’ operating model.
  • New three-year service contract with Gazprom Neft signed bringing the share of Net Revenue from Operating of Rolling Stock derived from service contracts to 66%.
  • Growth in Average Price per Trip with Market Share increasing to 7.8% (2018: 7.4%).
  • Adjusted EBITDA Margin expanded to 57% (2018: 54%) with Adjusted EBITDA up 20% year on year outpacing Adjusted Revenue growth of 13%.
  • Strong 2019 final dividends of RUB 8.3 billion or RUB 46.55 per share/Global Depositary Receipt (“GDR”) proposed in line with objective to return excess capital to shareholders in order to maintain an efficient capital structure.
  • Attractive interim dividends for 2020 of about RUB 8.3 billion targeted, reflecting Group’s strong shareholder remuneration capacity due to its high cash generation, low leverage and discretionary expansion CAPEX needs.

Commenting on Globaltrans’ Full-Year 2019 results, CEO Valery Shpakov said:
“Globaltrans delivered outstanding results in 2019, which is further proof of the strength of our operating model. We grew our market share and outperformed the industry while maintaining our track record of delivering profitable growth. This momentum enabled us to extend important service contracts, secure an additional new long-term partnership as well as to step up growth in our niche operations.

Our approach to capital allocation is unchanged and we will continue returning excess capital to shareholders, evidenced by the strong pay-out for 2019 and the level of interim dividend targeted for 2020. We recognise the importance to our shareholders of receiving a reliable dividend stream.

While the market environment has become more difficult, and COVID-19 is now an additional factor generating uncertainty, our proven business model and entrepreneurial ‘can do’ culture give me confidence that we are well placed to navigate the current volatility and deliver another year of progress on our plans.”

Financial and operational performance

Excellent financial results, continued strong cash generation and low leverage.

  • Total revenue rose 9% year on year to RUB 95.0 billion.
  • Operating profit rose 19% year on year to RUB 32.1 billion.
  • Profit for the year climbed 16% year on year to RUB 22.7 billion.
  • Cash flows from operating activities (before changes in working capital) up 19% year on year to RUB 39.5 billion.
  • Adjusted Revenue up 13% year on year to RUB 68.8 billion supported by growth across all key business segments.
  • Total Operating Cash Costs increased 5% year on year due to cost inflation and higher Empty Runs.
  • Adjusted EBITDA Margin expanded to 57% (2018: 54%) with Adjusted EBITDA up 20% year on year to RUB 39.6 billion.
  • Strong Free Cash Flow at RUB 12.8 billion (up 4% year on year) despite a RUB 4.1 billion build-up of working capital (of which RUB 1.9 billion* was one-off) and RUB 1.1 billion increase in Total CAPEX.
  • Leverage continued to be held at a low level with Net Debt to Adjusted EBITDA at 0.60x at the end of 2019 (2018 end: 0.56x).

Strong final 2019 dividends proposed and targeted 2020 interim dividend re-affirmed as Group continues to pursue objective of maintaining an efficient capital structure.

  • The Board has proposed 2019 final and special final dividends to shareholders of a combined RUB 8.3 billion or RUB 46.55 per share/GDR.
  • As targeted, the total dividends in respect of 2019 will be slightly ahead of the previous year at RUB 16.6 billion or RUB 93.1 per share/GDR (including already paid interim and special interim dividends). This equates to 152% of the Group’s Attributable Free Cash Flow for 2019.
  • Final dividend payments are subject to shareholders’ approval at the Annual General Meeting (“AGM”) called for 30 April 2020.
  • The shareholder dividend record date is set as 30 April 2020. The GDRs will be marked as ex-dividend on 29 April 2020.
  • Subject to shareholders’ approval, final and special final dividends will be paid in USD with conversion from RUB to be executed at the average of the official exchange rates of the Central Bank of Russia for the eight business days in Russia from 20 to 29 April 2020 inclusive. Holders of GDRs will receive the dividend approximately three business days after the payment date, which will be not later than 30 business days after the approval of the dividends by the AGM.

Market outperformance, market share gains, strong pricing and major service contracts extended.

  • Market outperformance in Transportation Volumes[1] (up 3.5% year on year compared to the overall Russian market decline of 0.9% year on year).
    • Market Share increased to 7.8% (2018: 7.4%).
    • Volumes grew in the segments for bulk (up 3% year on year) and oil products and oil (up 6% year on year).
    • Freight Rail Turnover1 increased 0.6% year on year mainly reflecting a 3% year-on-year decline in Average Distance of Loaded Trip on the back of changed client logistics.
    • Average Number of Loaded Trips per Railcar decreased 3% year on year primarily due to changed client logistics and a deterioration in average speeds on the Russian Railways (“RZD”) rail network, caused mainly by ongoing major rail infrastructure modernisation projects.
  • Strong pricing maintained with Average Price per Trip up 9% year on year.
    • Broadly stable Average Price per Trip in the second half of 2019, despite headwinds in the gondola segment and supported by healthy pricing in tank cars.
  • New long-term contract secured with Gazprom Neft, major service contracts extended. Service contracts contributed 66% of the Group’s Net Revenue from Operation of Rolling Stock.
    • New three-year service contract to the end of June 2022 signed with Gazprom Neft, a long-standing client that contributed 5% of the Group’s 2019 Net Revenue from Operation of Rolling Stock.
    • MMK service contract extended until the end of September 2022; Globaltrans will continue to transport at least 70% of MMK’s rail freight.
    • Metalloinvest service contract extended until the end of 2020; Globaltrans will transport at least 70% of Metalloinvest’s rail freight, providing both parties with flexibility and aligning the contract with general market practice.
    • Volumes serviced under the contract with TMK increased to a minimum of 75%.
    • Net Revenue from Operation of Rolling Stock from new five-year contracts signed with TMK and ChelPipe Group in 2018 was up 60% year on year.
  • Operational excellence maintained despite volatility in clients’ logistics.
    • Substantial shift in clients’ logistics patterns drove anticipated increase in Empty Run Ratio for gondola cars in the first half of 2019, which remained stable thereafter.
    • As anticipated, the Empty Run Ratio for gondola cars increased to 42% (2018: 38%) yet remained one of the lowest on the Russian market.
    • Total Empty Run Ratio (for all types of rolling stock) rose to 49% (2018: 46%).
    • Share of Empty Run Kilometers paid by Globaltrans remained stable year on year at 89%.
  • Total Fleet increased 2% to 70,720 units with the share of Owned Fleet at 96%.
    • Limited acquisitions in 2019 with 2,502 units delivered in the year, driving Owned Fleet to 67,669 units[2].
    • Leased-in Fleet reduced 16% compared to the end of 2018 to 3,051 units (mostly tank cars).
    • Average Rolling Stock Operated was up 6% year on year to 56,845 units.

Market overview

Overall demand in 2019 remained solid despite monthly volume volatility.

  • Overall Russia’s freight rail turnover was up 0.2% year on year while volumes decreased 0.9% year on year.
  • Non-oil (bulk) cargo volumes were relatively stable, down 0.7% year on year.
    • Net increase in overall gondola capacity was about 6% or 31.7 thousand units[3] compared to the end of 2018.
    • Pressure on spot market pricing increased during the second half of 2019.
  • Broadly balanced supply and demand in oil products and oil segment.
    • Volumes in oil products and oil segment were down 1.9% year on year reflecting scheduled repair and maintenance works at some refineries, a decrease in heavy fuel oil volumes combined with the launch of new pipelines.
    • Healthy pricing environment supported by ongoing fleet scrappage with a net decrease in overall oil products and oil tank capacity of about 2% or 3.7 thousand units[4].
  • Average speeds on the RZD rail network remained under pressure, caused by ongoing major rail infrastructure modernisation projects.

Recent developments, market update and management priorities

Market update: mixed start to 2020.

  • RZD regulated infrastructure and locomotive tariffs increased 3.5% year on year in 2020.
  • Overall Russia’s freight rail turnover in January - February 2020 was down 3% mainly affected by weak coal and oil products and oil volumes due to abnormal weather conditions and weak export markets.
  • The recent RUB depreciation is expected to stimulate commodity exports.
  • Ongoing expansion of Russian rail network throughput capacity and optimisation measures towards the Eastern Russia set to drive export volumes to Asian markets.
  • Large “national” infrastructure projects are expected to support demand for rail transportation in 2020 and onwards.
  • Pricing pressure in the gondola segment is expected to increase in the second quarter of 2020.
  • Pricing conditions in the tank segment remain healthy.
  • Average network speeds deteriorated due to temporary infrastructure constraints on the back of the ongoing expansion of the rail network in Russia’s Far East and overall transportation volumes volatility.
  • The freight rail market may experience reduced demand stemming from the effects of COVID-19. The Company cannot predict the full impact of COVID-19 on its markets, business or prospects although there may be a material adverse impact from the rapidly evolving situation.

Globaltrans is well positioned to navigate current market volatility; strong interim 2020 dividend re-affirmed.

  • Powerful operating model, large service contracts with solid blue-chip clients.
    • Continued solid operational performance with a slight year-on-year increase in the Group’s Freight Rail Turnover in January - February 2020 in a declining market overall.
    • Net Revenue from Operation of Rolling Stock declined about 10% year on year in January - February 2020 with the healthy tank car segment partially mitigating the impact of weaker gondola segment.
    • Service contracts contributed 66% of the Group’s Net Revenue from Operation of Rolling Stock in 2019.
  • Decrease in Total CAPEX targeted in 2020.
    • Total CAPEX (on cash basis; including maintenance CAPEX) is expected to decrease about 40% to about RUB 9 billion (2019: 14.0 billion).
      • Expansion CAPEX is fully discretionary (intention to purchase fewer than 1,000 units in 2020 - specialised containers and flat cars).
      • Maintenance CAPEX level will depend largely on the price of wheel pairs.
  • Attractive interim 2020 dividend outlook re-affirmed.
    • Strong interim 2020 dividend outlook re-affirmed in amount of about RUB 8.3 billion payable in September 2020.
    • Robust cash generation, discretionary expansion CAPEX and low leverage support Globaltrans’ ability to pay strong dividends.

Downloads

All of the above materials along with a selection of historical operational and financial information are available on Globaltrans’ corporate website (www.globaltrans.com).

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: Monday, 30 March 2020
Time: 14.00 Moscow / 12.00 London / 07.00 New York (EDT)

To participate in the conference call please dial one of the following numbers:

UK toll free:      0808 109 0701
International:     +44 (0) 20 3003 2701
Russia:              +7 (8) 495 249 9842

Please use the following pin numbers to select your preferred language for the call:
English:              8188226#
Russian:             2448853#

There will be a simultaneous translation for the first part of the call (slide presentation), with both English and Russian available using the pin numbers provided. 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@globaltrans.com

For international media
Lightship Consulting
Laura Gilbert
+44 7799 413351
Laura.Gilbert@lightshipconsulting.co.uk

NOTES TO EDITORS
Globaltrans (together with its consolidated subsidiaries “Globaltrans” or the “Group”) is a leading freight rail transportation group with operations across Russia, the CIS and the Baltic countries. The Group operates one of the largest railcar fleets in the region, comprised mainly of universal gondola cars capable of carrying a wide range of bulk cargoes, and tank cars for oil products and oil. The Group’s sophisticated logistics capabilities add value to more than 500 customers including leading industrial groups serviced under extensive outsourcing contracts.

The Group had a Total Fleet of 70.7 thousand units at the end of 2019 of which about 96% were in ownership with an average age of 11.5 years. In 2019, the Group’s Freight Rail Turnover (including Engaged Fleet) was 161.5 billion tonnes-km with the total revenue amounting to RUB 95.0 billion.

Globaltrans is an entrepreneur founded and led group with its Global Depositary Receipts (ticker symbol: GLTR) listed on the Main Market of the London Stock Exchange since May 2008.

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] Excluding Engaged Fleet. The Group’s Transportation Volumes and Freight Rail Turnover including Engaged Fleet were up 3.5% and 1.7% year on year respectively.

[2] In 2019 the Group took delivery of 2,502 units (including 1,154 specialised containers, 700 flat cars, 638 gondola cars and 10 locomotives) and disposed of 238 units (mostly tank and flat cars).

[3] Estimated by the Company. Net change in Russia’s overall fleet of gondola cars as of 31 December 2019 compared to the end of 2018.

[4] Estimated by the Company. Net change in Russia’s overall fleet of tank cars for oil products and oil as of 31 December 2019 compared to the end of 2018. This includes only additions of new tank cars and excludes units reregistered in Russia from other countries.

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