NEWS

Interim 2020 Results and Approval of Interim and Special Interim Dividends

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 2020 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 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

Industry outperformance, good Free Cash Flow generation and continued strong dividend payments against a backdrop of unprecedented economic conditions due to the COVID-19 pandemic.

• The Group’s Freight Rail Turnover rose 4.9% year on year despite an overall market decline supported by a powerful operating model enabling swift switching between cargo groups.
• Efficient cost measures resulted in Total Operating Cash Costs being held relatively stable (up 1% year on year).
• Adjusted EBITDA was RUB 14.7 billion (down 27% year on year).
• Good Free Cash Flow generation supported by a high degree of discretionary CAPEX with Free Cash Flow^[1] at RUB 6.9 billion, down 15% year on year.
• Low leverage maintained with Net Debt to LTM Adjusted EBITDA at 0.75x^[2] with significant improvement in the average effective interest rate to 7.2% (31 December 2019: 8.1%).
• Robust interim and special interim dividends for 2020 approved in line with target announced in March 2020 for a total of RUB 8.3 billion or RUB 46.55 per share/GDR.
• Strong total combined 2020 dividend targeted of about RUB 13.3 billion (including the already approved interim dividends) subject to no significant adverse changes.
• Secondary listing of GDRs planned on Moscow Exchange for the second half of 2020.
• Execution of share buyback^[3] (of up to 5% of the share capital) is on track.

Commenting on Globaltrans’ Interim 2020 results, CEO Valery Shpakov said:
“We have all lived through unprecedented times in the first half of 2020, marked by the COVID-19 pandemic, widespread national lockdowns and a sharp decline in economic activity across the globe. Our first priority during this period was to protect the health and safety of our employees and ensure business continuity for our customers. I am pleased to report that we have successfully navigated these challenges, fulfilling our obligations to clients and staff and delivering on our promises.

Our powerful operating model and efficient logistics capabilities enabled us to respond quickly to market volatility, swiftly migrating between different cargoes and outperforming the overall rail industry. Balanced fleet composition and exposure to different markets enabled us to partially mitigate gondola segment headwinds. Our focus on cost optimisation meant operating cash costs were held steady despite cost pressures.

Our free cash flow generation, helped by the discretionary nature of our expansion CAPEX, remained strong and, together with our low leverage, made it possible for us to approve solid interim dividends fully in line with our target announced in March 2020. This builds on our already long track record of taking a consistent approach to shareholder remuneration and delivering on our dividend guidance. Our focus on dividends remains unchanged with robust final dividends targeted for the whole of 2020.”

Financial and operational performance

Solid financial performance given the challenging backdrop: good Free Cash Flow, efficient cost control and continued low leverage.

• Total revenue was down 25% year on year to RUB 35.4 billion. Adjusted Revenue declined 16% year on year to RUB 28.9 billion with lower revenues from the gondola segment partially compensated by relatively stable revenue from the tank car segment and growing revenues from specialised containers and railcar leasing businesses.
• Total Operating Cash Costs increased just 1% year on year supported by efficient cost optimisation measures.
• Operating profit decreased 37% year on year to RUB 10.5 billion.
• Adjusted EBITDA was 27% lower year on year at RUB 14.7 billion while the Adjusted EBITDA Margin narrowed to 51% (H1 2019: 59%).
• Profit for the period declined 41% year on year to RUB 7.0 billion.
• Strong Free Cash Flow^[4] at RUB 6.9 billion (down 15% year on year) reflected a decline in Net cash from operating activities that was partially offset by a targeted cut in expansion CAPEX.
• Total CAPEX (including maintenance)^[4] was down 53% to RUB 3.3 billion; about RUB 4 billion of Total CAPEX is expected for the second half of 2020.
• Leverage continued to be held at a low level with Net Debt to Adjusted EBITDA at 0.75x for the twelve months to 30 June 2020 (2019 end: 0.60x).

Continued robust dividend payments: strong interim dividend delivered as targeted; outlook is for a solid total 2020 dividend.

• As targeted, the Board approved interim and special interim dividends for the first half of 2020 for a combined RUB 8.3 billion or RUB 46.55 per share/GDR^[5] reflecting good Free Cash Flow and low leverage.
• The record date is set as 8 September 2020 with GDRs marked as ex-dividend on 4 September 2020.
• Total interim 2020 dividends equates to 135% of the Group’s Attributable Free Cash Flow^[6] for the first six months of 2020.
• Total 2020 combined dividend targeted of about RUB 13.3 billion subject to no significant adverse changes, which includes:
  • RUB 8.3 billion of already approved total interim dividends for the first six months of 2020; and
  • About RUB 5.0 billion of targeted total final 2020 dividends in respect of the second half of 2020.

Powerful operating model supported industry outperformance, with efficient fleet management in a challenging environment.

• Continued industry outperformance.
  • Strong Freight Rail Turnover growth (up 4.9% year on year) despite overall market decline (down 5.3% year on year).
  • Transportation Volume decline limited to 3.4% year on year compared to an overall market decline of 4.5% year on year.
• Powerful gondola operating model provides for flexibility and responsiveness to market changes.
  • Freight Rail Turnover in bulk cargo segment rose 8% year on year due to efficient contracting and migration between freight segments.
  • The unprecedented COVID-19 lockdowns reduced fuel consumption in Russia which alongside crude oil production cuts agreed under the OPEC+ agreement drove the Group’s Freight Rail Turnover down 12% year on year in the oil products and oil segment.
  • Changed client logistics and the diversification of the client base lead to a 9% year-on-year rise in Average Distance of Loaded Trip with the average Number of Loaded Trips per Railcar down 6% year on year.
  • Average Rolling Stock Operated was up 2% year on year.
• The oil products and oil segment and long-term service contracts underpinned the Group’s Net Revenue from Operation of Rolling Stock.
  • Net Revenuefrom Operation of Rolling Stock from the oil products and oil segment was broadly stable (down 1% year on year) largely due to the value-added efficient service offering combining tank cars and locomotives.
  • In the bulk cargo segment Net Revenue from Operation of Rolling Stock declined 25% year on year mainly reflecting weaker pricing in the gondola segment.
  • Long-term service contracts contributed 64% of Net Revenue from Operation of Rolling Stock in the first six months of 2020^[7].
  • Average Price per Trip declined 14% year on year with continued weak pricing in the gondola segment partially offset by solid pricing in tank cars.
• Efficient fleet management in a challenging environment.
  • Powerful and sizeable operating model enabled the Group both to adapt to the substantial volatility in client cargo flows and routes stemming from the unprecedented COVID-19 lockdowns and to increase Freight Rail Turnover.
  • The Empty Run Ratio for gondola cars rose to 46% (H1 2019: 43%) yet remained one of the lowest on the Russian market.
  • Total Empty Run Ratio (for all types of rolling stock) remained relatively stable at 52% (H1 2019: 51%).
  • Share of Empty Run Kilometers paid by Globaltrans rose to 99% (H1 2019: 90%) due to the changed cargo mix and gondola segment headwinds.
• Total Fleet increased 2% to 72,361 units compared to the end of 2019 with the share of Owned Fleet at 94%.

Market update

H1 2020: Demand was under pressure from the unprecedented economic conditions and the spread of COVID-19.

• In the first six months of 2020 Russia’s overall freight rail turnover and volumes were down 5.3% and 4.5% year on year respectively. A rise in export volumes in 2Q 2020 helped to partially mitigate volatility in domestic demand due to COVID-19 lockdowns.
• Overall non-oil (bulk) cargo volumes decreased 4% year on year.
  • Largely driven by sizeable decline in coal volumes.
  • Additions of new gondola cars fell about 45% year on year bringing net additions in the first six months of 2020 to about 1.8% (or 9.9k units)^[8] compared to the end of 2019.
  • Continued pricing pressure in the gondola segment, which was more pronounced in spot leasing rates.
• Oil products and oil segment was under significant pressure with COVID-19 lockdowns affecting fuel consumption and the OPEC+ agreement cutting crude oil production.
  • Overall freight rail volumes were down 7% year on year in the first six months of 2020, mostly due to the industry performance in Q2 2020.
  • Overall tank car capacity was stable compared to the end of 2019 with unit scrappages (about 1.3k units) offsetting new additions (about 1.3k units)^[9].
  • Operator pricing environment remained relatively stable with pressure on spot leasing rates.

Moderate uptick in July 2020, however market weakness is expected to continue in H2 2020; solid industry fundamentals despite weak markets.

• Russia’s freight rail turnover in July 2020 was down 1.8% year on year compared to a 5.3% year-on-year decline in the first six months of 2020 as easing of COVID-19 lockdown and restrictions in Russia and abroad stimulated recovery in demand.
• Stabilisation in demand along with continued weak pricing conditions in the gondola segment are expected in the second half of 2020.
• In the tank car segment, operator rates are expected to stay relatively healthy with leasing rates likely to be under pressure due to lower volumes.
• The depreciation in the Russian rouble is expected to continue to support recovery in commodity exports.
• Ongoing expansion of the Russian rail network throughput capacity and optimisation measures towards Russia’s Far East should enable an increase in the transportation of export volumes to Asian markets.
• Large national infrastructure projects are expected to support demand for rail transportation in 2020 and onwards.

Downloads

• Interim 2020 Result­s Announcement (full version)
• Interim 2020 Results Presentation
• Condensed consolidated interim financial information (unaudited) for the six months ended 30 June 2020 
• Selected operational information for the six months ended 30 June 2020

The disclosure materials along with the 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: Tuesday, 1 September 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:            0392886#
Russian:           9184505#

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 above. 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 72.4 thousand units at 30 June 2020 of which about 94% were in ownership with an average age of 11.9 years. 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
This announcement may contain forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as “expect”, “believe”, “estimate”, “anticipate”, “intend”, “will”, “could”, “may”, or “might”, the negative of such terms or other similar expressions. These forward-looking statements include matters that are not historical facts and statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which the Company operates may differ materially from those described in or suggested by the forward-looking statements contained in this announcement. In addition, even if the Company’s results of operations, financial condition, liquidity, prospects, growth strategies and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in future periods. The Company does not intend to update this announcement or reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause actual results to differ materially from those contained in forward looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, market changes in the Russian freight rail market, as well as many of the risks specifically related to the Company and its operations. No reliance may be placed for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness.

^{[1] Free Cash Flow is presented net of principal elements of lease payments for leases with financial institutions for both periods (H1 2019 and H1 2020). During the first half of 2020 the entire financial lease portfolio was refinanced to bilateral loans, therefore principal elements of lease payments were eliminated from both periods for comparison purposes.}

^{[2] Net Debt to Adjusted EBITDA for the twelve months ended 30 June 2020.}

^{[3] The share buyback is executed under the authority granted by shareholders at the Extraordinary General Meeting (“EGM”) on 12 May 2020, which permits the Company to repurchase a total number of GDRs not to exceed 5% of the Company’s share capital. This authority lasts for a period of twelve months following the approval of the buyback programme at the EGM.}

^{[4] Free Cash Flow and Total CAPEX are presented net of principal elements of lease payments for leases with financial institutions for both periods (H1 2019 and H1 2020). During the first half of 2020 the entire financial lease portfolio was refinanced to bilateral loans, therefore principal elements of lease payments were eliminated from both periods for comparison purposes.}

^{[5] Dividends will be paid in US dollars for the total amount of about 62.26525 US cents per one ordinary share/GDR not later than 20 September 2020 with conversion from Russian roubles executed at the average of the official exchange rates of the Central Bank of Russia for the five business days in Russia from 24 to 28 August 2020 inclusive (1 USD: 74.7608 RUB). Holders of GDRs will receive the dividend approximately three business days after the payment date.}

^{[6] Attributable Free Cash Flow is presented net of principal elements of lease payments for leases with financial institutions for both periods (H1 2019 and H1 2020). During the first half of 2020 the entire financial lease portfolio was refinanced to bilateral loans, therefore principal elements of lease payments were eliminated from both periods for comparison purposes.}

^{[7] Including service contracts with Rosneft, Metalloinvest, MMK, Gazprom Neft, TMK and ChelPipe Group.}

^{[8] Estimated by the Company. Net change in Russia’s overall fleet of gondola cars as of 30 June 2020 compared to the end of 2019.}

^{[9] Estimated by the Company. Net change in Russia’s overall fleet of oil products and oil tank cars as of 30 June 2020 compared to the end of 2019. Including only additions of new oil products and oil tank cars and excluding units reregistered in Russia from other countries.}