Interim 2023 Results
29.08.2023
Globaltrans Investment PLC (the “Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”), (LSE/MOEX ticker: GLTR) today announces its financial and operational results for the six months ended 30 June 2023.
In this announcement, the Group has used certain measures not recognised by International Financial Reporting Standards (“IFRS”) or EU IFRS (referred to as “non-IFRS measures”) as supplemental measures of the Group’s operating performance. The management believes that these non-IFRS 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. However, these non-IFRS measures have limitations as analytical tools, and you should not consider them in isolation or place undue reliance on them. Similarly titled measures are used by other companies for a variety of purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing these measures as reported by us to the same or similar measures as reported by other companies. 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-IFRS 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-IFRS 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
Overall industry freight rail turnover rose 1.4% year on year. Relatively stable pricing environment sustained in both gondola and tank car segments.
Globaltrans again demonstrated operational excellence with the Empty Run Ratio for gondola cars reduced to 39%. Freight Rail Turnover remained unchanged year on year and Average Price per Trip was up 3% year on year.
Robust financial results with an Adjusted Revenue increase of 2% year on year to RUB 43.3 billion and an Adjusted EBITDA decline of 6% year on year to RUB 25.4 billion reflecting ongoing cost pressures.
Total CAPEX adjusted for M&A was RUB 6.1 billion.
Strong Free Cash Flow of RUB 11.9 billion. Net cash position at RUB 10.5 billion.
Dividends remain suspended.
Start of re-domiciliation to Abu Dhabi Global Market aimed at corporate structure improvement along with the unblocking of certain intra-group transactions, including the upstreaming of dividends, has been approved by shareholders at an Extraordinary General Meeting.
Commenting on Globaltrans’ interim 2023 results, CEO Valery Shpakov said:
“Globaltrans again delivered robust results despite the challenging environment. In the first half, we were able to capitalise on our logistical strengths and further improve our gondola Empty Run Ratio. Our Free Cash Flow remained strong with robust cash generation and moderate expansion expenditure allowing us to finish the first half with a solid net cash position.
Creating shareholder value remains a priority and we therefore initiated a re-domiciliation of the holding company to the Abu Dhabi Global Market with the aim of streamlining our corporate structure and unblocking certain intra-group transactions. I would like to thank our shareholders for their support of this initiative, demonstrated at the recent Extraordinary General Meeting.
As you would expect, we continue to maintain our discipline and focus. We entered the second half of the year as a strong, efficient, and well-managed business, one that is well positioned to continue to deliver as we progress towards our value creation goals.”
FINANCIAL RESULTS
Robust financial results, strong Free Cash Flow and net cash position, dividends on hold
Revenue rose 7% year on year to RUB 52.0 billion with Adjusted Revenue (a key component) increasing 2% year on year to RUB 43.3 billion in H1 2023 reflecting stable Freight Rail Turnover and solid average pricing.
Robust Adjusted EBITDA at RUB 25.4 billion was 6% lower year on year largely due to accelerated cost inflation despite careful control of overall costs.
Total CAPEX adjusted for M&A was RUB 6.1 billion (a decline of 51% year on year).
Strong Free Cash Flow of RUB 11.9 billion (H1 2022: RUB 6.4 billion).
Profit for the period rose to RUB 20.9 billion (H1 2022: RUB 12.3 billion) reflecting the sizable impairment of rolling stock in the year-earlier period and a profit on the sale of the Group’s shareholding in its leasing subsidiary Spacecom[1] in the current year.
Net cash position was RUB 10.5 billion with Net Debt to LTM Adjusted EBITDA at (0.2)x[2].
Dividend payments continue to be suspended due to the technical limitations regarding upstreaming cash to the holding company incorporated in Cyprus.
OPERATIONAL PERFORMANCE
Operational efficiency further improved, average pricing was solid, all Service Contracts remain intact
Continued operational excellence with the Empty Run Ratio for gondola cars significantly improved to 39% in H1 2023 (H1 2022: 42%) driven by logistics adjustments and Service Contracts. Total Empty Run Ratio (for all types of rolling stock) stood at 48% (H1 2022: 50%).
The Group’s Freight Rail Turnover remained largely unchanged year on year in H1 2023 (up 2% year on year including Engaged Fleet) with the robust performance in the rail tank segment compensating for the volatility in the gondola segment logistics.
Solid average pricing with Average Price per Trip 3% higher year on year reflecting relatively stable industry demand.
The Group maintained its focus on Service Contracts[3] and client retention. Service Contracts remain intact contributing about 61% of the Group’s Net Revenue from Operation of Rolling Stock in H1 2023.
H1 2023 MARKET REVIEW
Relatively stable industry demand supported by logistics transformation
Overall industry freight rail turnover (in tonnes-km) rose 1.4% year on year with volumes (in tonnes) up 0.8% year on year.
A moderate rise in the proportion of long-distance routes supported increased demand for railcars.
Recovery in non-oil (bulk) cargo volumes
Overall non-oil (bulk) cargo volumes rose 1.3% year on year in H1 2023 largely supported by 1.8% and 5.2% year-on-year increases in coal and construction materials volumes respectively. In the metallurgical segment, volumes continued to recover but still remained below levels in the year-earlier period (down 1.4% year on year)[4].
Gondola market rates recovered from the levels of the second half of 2022 but were still below first half 2022 levels.
Demand in the oil products and oil segment was relatively steady
Overall industry oil products and oil volumes slipped 1.5% year on year in H1 2023.
Market pricing remained robust.
RECENT UPDATE
Relatively stable industry demand and pricing continued so far in H2 2023 but with low visibility
Overall industry freight rail turnover rose 2.7% year on year in July 2023. Visibility remains low.
Solid market pricing prevails in both gondola and tank segments but with the potential for volatility going forward.
Accelerated cost pressures with regulated RZD tariffs for the traction of empty railcars (a key driver of the largest Operating Cash Cost component) up about 23% in total over H2 2022 and H1 2023[5].
Globaltrans continues to target the acquisition and leasing of railcars subject to industry conditions and fleet requirements
The Group intends to take an opportunistic approach to the purchase and lease of railcars in the near term as the retirement of owned fleet is expected to be insignificant over the coming 18 months.
Between 2025 - 2029 the Group expects its owned fleet retirements to average about 3,500 units per year.
Re-domiciliation is in progress
Re-domiciliation to the Abu Dhabi Global Market (ADGM) was approved at the Extraordinary General Meeting (EGM) on 16 August 2023.
Expected to unblock the ability to carry out certain intra-group transactions, including the upstreaming of dividends, which are currently allowed only to a very limited extent. It will not however directly trigger restoration of dividend payments to shareholders.
Expected that listings on both the London Stock Exchange and Moscow Exchange along with the current depositary programme could be maintained post re-domiciliation. Listing of GDRs on any alternative stock exchanges is not being considered at present.
The current international standard of corporate governance, including the number of independent directors, as well as transparency practices will be maintained.
It is anticipated that the tax on the upstreaming of dividends upon re-domiciliation to ADGM will be 15%, the same level as currently following the recent increase from 5 to 15% on dividends to Cypriot public companies[6].
The fundamental rights of shareholders will not be affected by the re-domiciliation, in part due to the fact that the legislation in Cyprus and the applicable ADGM regulations are both grounded in English law.
The process is expected to take about six months[7].
DOWNLOADS
Condensed consolidated interim financial information (unaudited) for six months ended 30 June 2023
Selected operational information for the six months ended 30 June 2023
ANALYST AND INVESTOR EVENT
The release of the Group’s financial and operational results will be accompanied by an analyst and investor event hosted by Valery Shpakov, CEO, and Alexander Shenets, CFO.
Date: Tuesday, 29 August 2023
Time: 13:00 London / 15:00 Moscow / 08:00 New York
Event language: There will be a simultaneous translation of the webcast with both English and Russian available.
Webcast:https://us06web.zoom.us/webinar/register/WN_Vozf9gbHSiKNpRQ-__Tiwg#/registration
Q&A Session: Please note that this will be a listen-only session. Should you have any questions, please submit them by 11:30 Moscow time on 29 August 2023 to irteam@globaltrans.com.
Replay: A replay of the webcast will be available on the Globaltrans website (www.globaltrans.com) shortly after the end of the live event.
VIRTUAL NON-DEAL ROADSHOW
The results announcement will be followed by a virtual non-deal roadshow. If you are interested in talking to the Company, please contact the IR Team; details are below.
ENQUIRIES
For investors
Mikhail Perestyuk / Daria Plotnikova
+357 25 328 860
For Russian media
Anna Vostrukhova
+357 25 328 863
For international media
Laura Gilbert, Lightship Consulting
+44 7799 413351
Laura.Gilbert@lightshipconsulting.co.uk
ABOUT GLOBALTRANS
Globaltrans Investment PLC (“Company” and together with its consolidated subsidiaries “Globaltrans” or the “Group”) is a leading freight rail transportation group with subsidiary operations across Russia and the CIS countries.
The Company was founded in 2004 by a group of entrepreneurs who combined their freight rail businesses under the single brand Globaltrans. These founders remain key shareholders of the Group.
Throughout its years of operation, the Company has pursued a prudent approach to investment, expanding its fleet both by means of organic growth and through the acquisition of other rail operators. Globaltrans’ total fleet is currently almost three times larger than it was at the time of the Company’s IPO in 2008.
The Group’s dividend policy establishes a transparent and straightforward approach to the payment of dividends and is supported by a long history of delivering attractive shareholder remuneration.
Globaltrans global depositary receipts (GDRs) have been listed on the Main Market of the London Stock Exchange (ticker symbol: GLTR) since May 2008[8] and on the Level One quotation list of the Moscow Exchange since October 2020 (ticker symbol: GLTR).
Due to its vast logistics capabilities, the Group is able to efficiently manage industrial cargo flows, transporting metallurgical cargoes, oil products and oil, coal and construction materials. The Group serves a broad range of clients in Russia and the CIS countries.
Globaltrans has a total fleet (including owned and leased in under finance and operating leases) of about 66 thousand units as of the end of June 2023, of which about 94% are owned by the Company. The core of the fleet is universal gondola cars used for a broad range of bulk cargoes (70% of total fleet) and tank cars for transporting oil products and oil (28% of total fleet). Globaltrans also manages its own fleet of mainline locomotives with 66 units that mostly provide traction for its block trains.
The Group’s logistics management principally aims to provide reliable services, responding promptly and flexibly to customer needs, while achieving a good level of profitability for the business. The main component of the Group’s centralised logistics system is its single dispatching centre that monitors every aspect of Globaltrans’ fleet operation. By effectively managing shipments and routes, Globaltrans ensures high utilisation of its fleet and achieves maximum productivity and quality of service.
Additional information on Globaltrans is available at www.globaltrans.com.
PRESENTATION OF INFORMATION
The information in this announcement is subject to verification, completion and change. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its shareholders, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this announcement. None of the Company nor any of its shareholders, directors, officers or any other person accepts any liability (including, without limitation, any liability for negligence) whatsoever for any loss howsoever arising from any use of the contents of this announcement or otherwise arising in connection therewith. This announcement does not constitute an offer or an advertisement of any securities in any jurisdiction. The distribution of this announcement in other jurisdictions may be restricted by law and any such restrictions should be observed.
The financial information contained in this announcement is derived from the condensed consolidated interim financial information (unaudited) of Globaltrans Investment PLC (“the Company” and together with its consolidated subsidiaries “Globaltrans” or “the Group”) as at and for the six months ended 30 June 2023 and 2022 and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the consolidated Management report and consolidated financial statements for the year ended 31 December 2022, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Cyprus Companies Law, Cap. 113.
The Group’s condensed consolidated interim financial information (unaudited), selected operational information as at and for the six months ended 30 June 2023 and 2022 along with historical financial and operational information are available at Globaltrans’ corporate website (www.globaltrans.com).
The presentation currency of the Group’s consolidated financial statements is the Russian rouble (“RUB”). In this announcement, the Group has used certain measures not recognised by EU IFRS or IFRS (referred to as “non-IFRS measures”) as supplemental measures of the Group’s operating performance. The management believes that these non-IFRS 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 management accounts is marked in this announcement with an asterisk {*}.
Information (non-IFRS 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-IFRS measures to the closest EU IFRS measures are included in the body of this announcement. These non-IFRS financial measures have limitations as analytical tools, and you should not consider them in isolation or place undue reliance on them. Similarly, titled measures are used by other companies for a variety of purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing these measures as reported by us to the same or similar measures as reported by other companies.
Rounding adjustments have been made in calculating some of the financial and operational information included in this announcement. As a result, numerical figures shown as totals in some tables may not be exact arithmetic aggregations of the figures that precede them.
The Group has obtained certain statistical, market and pricing information that is presented in this announcement on such topics as the Russian freight rail transportation market and related subjects from the following third-party sources: Federal State Statistics Service of Russian Federation (“Rosstat”), JSC Russian Railways (“RZD”) and the Federal Antimonopoly Service (“FAS”). The Group has accurately reproduced such information and, as far as it is aware and is able to ascertain from information published by such third-party sources, no facts have been omitted that would render the reproduced information inaccurate or misleading. The Group has not independently verified this third-party information. In addition, the official data published by Russian governmental agencies may be substantially less complete or researched than that of more developed countries.
All non-IFRS financial and operational information presented in this announcement should be used only as an analytical tool, and investors should not consider such information in isolation or in any combination as a substitute for analysis of the Group’s consolidated financial statements and condensed consolidated interim financial information reported under EU IFRS, which are available the Globaltrans’ corporate website www.globaltrans.com.
FORWARDING LOOKING INFORMATION
This announcement may contain 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”, “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, Globaltrans’ 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 Globaltrans’ actual results of operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which Globaltrans operates may differ materially from those described in or suggested by the forward-looking statements contained in this announcement. In addition, even if Globaltrans’ 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 Globaltrans, 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 Globaltrans 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] In February 2023 Globaltrans completed the restructuring of its rail tank segment with the intra-group acquisition of 5,800 rail tanks by BaltTransServis from Spacecom (incl. Spacecom Trans), a 65.25% owned leasing subsidiary of Globaltrans and the subsequent disposal of Globaltrans’ shareholding in Spacecom (incl. 680 units) to its minority shareholder.
[2] For the last twelve months ended 30 June 2023.
[3] As of the end of H1 2023 Globaltrans had six Service Contracts.
[4] Coal including coke; metallurgical cargoes including ferrous metals, scrap metal and ores; construction materials including cement.
[5] Regulated RZD tariffs for the traction of empty railcars rose 11% from 1 June 2022 and 10% from 1 January 2023.
[6]The withholding tax on upstreaming dividends from Russia to Cyprus increased from 5% to 15% for public companies which meet certain criteria as Russia suspended the double taxation treaty with Cyprus in August 2023.
[7]The completion of the re-domiciliation to Abu Dhabi Global Market (“Re-domiciliation”) is subject to certain regulatory approvals and other consents and there can be no guarantee that these will be granted. Furthermore, potential legislative or regulatory changes and/or other external factors may impact the Re-domiciliation and the Company’s ability to achieve its intended objectives.
[8]Imposed suspension of GDRs trading on the London Stock Exchange continued as of the date of publication.