NEWS

Full-Year 2016 results and enhanced dividend policy

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 2016 along with an enhanced dividend policy.

Certain financial information which is derived from the management accounts is marked in this announcement with an asterisk {*}. Information (non-GAAP and operational measures) requiring additional explanation or defining is marked with initial capital letters and the explanations or definitions thereto are provided at the end of this announcement. The presentational currency of the Group’s financial results is Russian rouble (“RUB”).

The respective financial information for the full year 2015 has been restated to reflect the harmonisation of the Group’s accounting policy in respect of capitalisation of capital repairs and associated spare parts. Historically due to the low numbers of these repairs, they were expensed as incurred.

Financial highlights: Solid recovery across key metrics and continued deleveraging

• Adjusted Revenue recovered 5% year on year to RUB 44.2 billion* supported by the strong performance of the gondola business.
• Excellent cost control maintained with Total Operating Cash Costs up just 1% year on year, well below the rise in the Group’s Freight Rail Turnover and regulated RZD tariffs^[1].
• Operating profit increased 24% year on year to RUB 10.8 billion.
• Adjusted EBITDA recovered well, up 10% year on year to RUB 17.7 billion* with the Adjusted EBITDA Margin expanding to 40%* (2015: 38%*).
• Strong Free Cash Flow of RUB 8.9 billion* (2015: RUB 9.6 billion*) despite the RUB 2.9 billion increase in the Group’s capital expenditure^[2].
• Profit for the year increased 37% year on year to RUB 6.1 billion. Profit attributable to owners of the Company^[3] rose 113% year on year to RUB 4.5 billion supported by the good performance of the wholly-owned gondola business.
• One of the strongest balance sheets in the industry with Net Debt to Adjusted EBITDA improved to 0.7x* (2015 end: 1.0x*).
• Net Debt down 29% to RUB 11.5 billion* compared to the end of the previous year. Almost 100% of debt denominated in RUB.

Enhanced dividend policy and strong 2016 dividend proposed

Following the end of the active investment phase in fleet expansion and client partnerships to create the current operational platform, Globaltrans has since 2013 focussed on debt reduction, repaying RUB 16.9 billion of total debt. With the ratio of Net Debt to Adjusted EBITDA reduced to 0.7x* at the end of 2016, the deleveraging phase is now successfully completed and the Group will further focus on balancing capital allocation for investments to grow the business with returns to shareholders.

The enhanced dividend policy enables the Group to invest when it identifies value accretive growth opportunities and, when such opportunities are limited, to return a substantial portion of free cash flow to shareholders.

Therefore, depending on the actual Leverage Ratio^[4] of the Group as at the end of each financial year and subject to applicable laws and regulations and the Articles of Association of Globaltrans, the Board^[5] will recommend the payment of dividends in the amounts of not less than the following proportions of Attributable Free Cash Flow^[6] of the Group for such financial year:

In addition, given the current low level of debt, the Board has proposed a strong dividend for 2016 of RUB 7.0 billion or RUB 39.2 per share/global depositary receipt^[7] in order to optimise the capital structure and bring leverage to a more efficient level.

Operational highlights: market outperformance, pricing recovery, key contracts renewed

• Continued market outperformance and business volumes growth with further market share gains.
• The Group’s Freight Rail Turnover (including Engaged Fleet) rose 8% year on year to 182.0 billion tonnes-km^[8] while the overall Russian market increased only 2% year on year.
• The Group’s market share of overall Russian freight rail turnover increased to 7.8% (2015: 7.3%)^[9].
• Average Price per Trip improved – up 6% year on year.
• Proven success of multi-year partnership concept with two major contracts further extended – Rosneft (end March 2021) and Metalloinvest (end of 2019).
• Long-term service contracts strongly support the business, contributing 62% of the Group’s Net Revenue from Operation of Rolling Stock in 2016.
• Further gains in operational efficiency with the Empty Run Ratio for gondola cars improved to 38% (2015: 39%) and the Total Empty Run Ratio (for all types of rolling stock) down to 48% (2015: 51%). Improved railcar turnover with the Average Number of Loaded Trips per Railcar up 1% year on year, while the Average Distance of Loaded Trips rose 6% year on year.
• Total Fleet increased to 68,511 units (2015 end: 67,729 units) primarily reflecting the acquisition of gondola cars from the secondary market and new petrochemical tank containers^[10].

Outlook

• Industry outlook remains positive for the gondola car segment but weak for the rail tank car segment.
• Solid volume performance in the bulk cargo segment in the first months of 2017 along with continued industry-wide scrappage of old gondola cars is expected to support pricing in this segment.
• Volume and pricing environment in the oil products and oil segment is expected to remain weak.
• Ongoing overall cost pressures are expected to continue.
• A further c.20k gondola cars (or c.4% of total sector gondola fleet^[11]) and c.14k rail tank cars (or c.5% of total sector rail tank car fleet) are expected to reach the end of useful life by the end of 2017^[12].
• Operational efficiencies and cost discipline will remain a strong focus of the management team.
• Investigating accretive consolidation opportunities in a fragmented industry remains a priority. The Group is further reviewing niche projects and selective acquisitions of gondola cars from the secondary market which meet stringent return criteria.
• The Group will continue to monitor the regulatory environment including initiatives in respect of the supervision of price increases for rail operators’ services.

Commenting on returns to shareholders, Chairman Michael Zampelas, said:
“In recent years, after sizable investments into business expansion, we focused on paying down debt, particularly as economic instability and volatility increased from 2013. This was the right approach and proved our ability to adapt to market realities. Now, with debt levels low and strong free cash flow, we are setting out a dividend policy for the future that is aimed at providing returns to shareholders that are closely linked to Leverage and Attributable Free Cash Flow.

This will enable balanced capital allocation so that we can use cash and the strength of our balance sheet to pursue growth when conditions allow as well as return more cash to shareholders when investment opportunities are limited. We believe that reviewing our capital allocation plans every six months is a winning formula that will provide the best outcome for all stakeholders, ensuring efficient use of capital both for returns to shareholders and the long-term growth of the business. Along the same lines, the Board has proposed a strong dividend for 2016 in order to optimise our current capital structure as we move to this new dividend policy.

We believe the market remains attractive for opportunistic expansion and this structure allows us to retain the flexibility required for return-oriented growth.”

Commenting on Globaltrans’ Full-Year 2016 results, CEO Valery Shpakov, said:
“I am pleased to say that in 2016 we have stayed competitive and once more outperformed the market even while the wider macroeconomic pressures have continued. Our large and modern fleet and long-term contracts allowed us to truly capitalise on the recovery in the gondola segment. This outperformance translated into a strong set of results, despite the weaker market for oil product and oil transportation. In the end, we delivered an increase in Adjusted EBITDA and improved Adjusted EBITDA Margin, which were real accomplishments considering the current market context.

Among our other achievements was the renewal of the multi-year contracts with both Metalloinvest and Rosneft. These contracts have now been renewed multiple times since they were first agreed and highlight the value that we create for our customers. I am proud of the trust our clients have put in our team and services. It also reflects the talent we have in efficiently managing a large fleet across a vast area with complex logistics. This skill is developed over many years and contributes significantly to our business at every level from customer retention and acquisition right down to day-to-day cost efficiency.

We are moderately optimistic about the year ahead. The overall Russian railcar fleet continues to decline improving the supply-demand balance. In addition, during these first months of 2017, demand remained solid. While there are still some headwinds in the oil products and oil segment, I am as confident as ever in our team’s ability to mitigate the external pressures we may face and deliver outstanding service and create value for both our clients and investors.”

Downloads

To view the related materials, please use the links below:

• The full version of Full-Year 2016 Results Announcement;
• The Full-Year 2016 Results Presentation;
• The consolidated Management report and consolidated financial statements (audited) for the year ended 31 December 2016;
• The Group’s selected operational information for the year ended 31 December 2016.

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, Chief Executive Officer and Alexander Shenets, Chief Financial Officer.

Date:                Monday, 3 April 2017
Time:                11.00 London / 6.00 New York (EDT) / 13.00 Moscow

To participate in the conference call please dial one of the following numbers and ask to be put through to the "Globaltrans" call:

UK toll free:      0808 109 0700
International:     +44 20 3003 2666

As there will be simultaneous translation for the first part of the call (slide presentation), you should state whether you prefer to listen in English or Russian. 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.

ENQURIES
Globaltrans Investor Relations
Mikhail Perestyuk / Daria Plotnikova
+357 25 328 860
[email protected]

For international media
Teneo Blue Rubicon
Laura Gilbert / Sabine Pirone
+44 20 7260 2700
[email protected]

NOTES TO EDITORS
lobaltrans is a leading freight rail transportation group with operations in Russia, the CIS and the Baltic countries. The Group’s main business is the provision of freight rail transportation services. Globaltrans provides services to more than 500 customers and its key customers include a number of large Russian industrial groups in the metals and mining and the oil products and oil sectors.

The Group has a Total Fleet of about 68.5 thousand units. Universal gondola cars and rail tank cars constitute the backbone of the Group’s fleet. About 89% of the Total Fleet is owned by the Group with an average age of 10.3 years. In 2016, the Group’s Freight Rail Turnover (including Engaged Fleet) was 182.0 billion tonnes-km. The Group’s market share was 7.8% of overall Russian freight rail turnover. The total revenue of Globaltrans amounted to RUB 69.5 billion in 2016.

Globaltrans' global depositary receipts (ticker symbol: GLTR) have been listed on the Main Market of the London Stock Exchange since May 2008. Globaltrans was the first freight rail transportation group with operations in Russia to have an international listing.

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.

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^{[1] The Group’s Freight Rail Turnover (excluding Engaged Fleet) increased 10% year on year in 2016. The RZD regulated infrastructure and locomotive tariffs (including for the traction of empty railcars) increased 9% year on year from January 2016. Empty Run Costs is the largest component of the Group’s Total Operating Cash Costs.}

^{[2] The Group’s CAPEX on a cash basis (including “Purchases of property, plant and equipment” (which includes maintenance CAPEX), “Purchases of intangible assets” and “Acquisition of subsidiary undertakings – net of cash acquired”).}

^{[3] Adjusted profit attributable to owners of the Company rose 44% year on year. For 2015, it was adjusted to exclude the impact of the impairment of customer relationships related to the service contracts with MMK in the amount of RUB 996 million. For 2016, no adjustments were made.}

^{[4] Leverage Ratio (a non-GAAP financial measure) means the ratio of Net Debt on the last day of a particular financial year to Adjusted EBITDA in respect of that financial year.}

^{[5]The Board reserves the right to recommend to the general shareholder meeting the dividend in the amount calculated on a reasonable basis other than that described in this announcement at its sole discretion. The factors that the Board should consider include but are not limited to: (i) the Group’s needs for business development and strategy implementation purposes; (ii) financial resources for business expansion; (iii) any adverse changes in regulatory, economic and market environment; (iv) the ability of the Company and its subsidiaries to meet their obligations as they fall due; (v) the availability of distributable reserves at the Company and subsidiaries level and (vi) other factors considered by the Board of Directors as important in light of the current circumstances, including maintenance of the Company’s credit ratings.}

^{[6] Attributable Free Cash Flow (a non-GAAP financial measure) means Free Cash Flow less Adjusted Profit Attributable to Non-controlling Interests. Adjusted Profit Attributable to Non-controlling Interests (a non-GAAP financial measure) is calculated as “Profit attributable to non-controlling interests” less share of “Impairment of property, plant and equipment” and “Impairment of intangible assets” attributable to non-controlling interests.}

^{[7] Subject to shareholders’ approval, dividends will be paid in USD with conversion from RUB to be executed at the official RUB exchange rate of the Central Bank of Russia as of the date of the Annual General Meeting, which was called for 24 April 2017.}

^{[8] Globaltrans’ Freight Rail Turnover (excluding Engaged Fleet) increased 10% year on year in 2016.}

^{[9] For the purpose of this announcement the Group’s market share is calculated as a percentage of the overall Russian freight rail turnover. It includes the freight turnover generated by the Engaged Fleet. The Group’s market share of overall Russian transportation volumes was 8.4% in 2016 (2015: 8.3%).}

^{[10] In 2016 the Group acquired 665 gondola cars from the secondary market and 550 new petrochemical tank containers; 278 railcars having reached the end of useful life were scrapped and 422 specialised railcars were sold. The Group’s Total Fleet as of the end of 2015 was restated to include 380 petrochemical tank containers leased-in from third parties.}

^{[11] Overall Russian fleet of respective type as of the end of 2016. Estimated by the Company.}

^{[12] In the 12 months to the end of 2017. Estimated by the Company. Based on the number of railcars of respective type reaching the end of useful life (or extended useful life).}