ENRU

Full-Year 2018 Results, Final and Special Final Dividends proposed

01.04.2019

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 2018 along with the proposed final and special final 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

  • Significant rise in 2018 revenues and profits; better pricing and cost control supported margin expansion;
  • Adjusted EBITDA up 28% year on year to RUB 33.1 billion, Adjusted EBITDA Margin improved to 54%;
  • Owned Fleet increased 7% to support two new long-term contract wins; Total Fleet at a record 69,023 units, setting strong platform for 2019;
  • Leverage held at a low level with Net Debt to Adjusted EBITDA at 0.56x reflecting strong cash generation and Free Cash Flow despite significant rise in CAPEX;
  • Final and special final dividends of a combined RUB 8.3 billion (RUB 46.5 per share/GDR) proposed, for an above target total shareholder payment for 2018 of RUB 16.5 billion (RUB 92.4 per share/GDR[1]);
  • Total first-half 2019 interim dividend of RUB 8.3 billion targeted.

Commenting on Globaltrans’ results for 2018, CEO Valery Shpakov said: “This has been an outstanding year for Globaltrans. These record results demonstrate that we can control costs, generate cash and deliver robust operational performance. It is this combination that allows us to invest into business development, provide shareholders with such attractive returns while keeping our leverage low. Long-term industry fundamentals remain strong which I believe will create further development opportunities for the Group. By expanding our fleet during 2018 to support our new contract wins, we have set a strong platform as we head into 2019.”

Chairman and Chief Strategy Officer Sergey Maltsev added: “We are very proud that 2018 marks Globaltrans’ 10th year as a London-listed company. Our ability to continuously deliver in terms of financial performance, operational success and rewards for shareholders is evident in these results and show that the strategy we have built over the decade is the right one. We have set industry standards, developed first-class services and created value for customers, shareholders and employees. By controlling costs and generating high levels of cash, we were again in a position to propose generous dividends for 2018. This year has begun well and, provided the current outlook for the sector remains broadly unchanged, the Board is targeting a total interim dividend of RUB 8.3 billion for the first half of 2019 as we continue to focus on delivering strong shareholder returns alongside a robust overall performance.”

Financial and operational performance

Strong financial performance, margin expansion achieved and low leverage maintained.

  • Total revenue increased 11% year on year to RUB 86.8 billion;
  • Adjusted Revenue rose 17% year on year to RUB 60.9 billion supported by strong market conditions;
  • Cost discipline maintained despite inflationary pressures with the rise in Total Operating Cash Costs at 6% year on year;
  • Operating profit was up 33% year on year to RUB 26.9 billion;
  • Strict cost control alongside strong revenue growth drove an expansion in the Adjusted EBITDA Margin to 54% (2017: 50%) leading to a 28% year-on-year increase in Adjusted EBITDA to RUB 33.1 billion;
  • Profit for the year rose 42% year on year to RUB 19.6 billion;
  • Cash generated from operations increased 19% year on year to RUB 32.6 billion. Free Cash Flow remained robust at RUB 12.3 billion despite the substantial increase in Total CAPEX[2] (RUB 12.9 billion, up 165% year on year);
  • Leverage held at a low level with Net Debt to Adjusted EBITDA at 0.56x (2017 end: 0.44x). Net Debt rose 64% year on year to RUB 18.6 billion mostly reflecting significantly increased CAPEX. Nearly 100% of debt is denominated in RUB, the Company’s functional currency.

Strong dividend payments proposed reflecting solid Attributable Free Cash Flow and low Leverage.

  • The Board has proposed final and special final dividends to shareholders of a combined RUB 8.3 billion or RUB 46.5 per share/GDR[3];
  • The total shareholder payment in respect of 2018 will be ahead of target at RUB 16.5 billion or RUB 92.4 per share/GDR (including the already paid interim and special interim and proposed final and special final dividends), a 3% increase compared to the total payment in respect of 2017;
  • Final dividend payments are subject to shareholders’ approval at the Annual General Meeting called for 22 April 2019;
  • The shareholder dividend record date is set as 18 April 2019. The GDRs will be marked as ex-dividend on 17 April 2019.

Robust operational performance with extended portfolio of long-term contracts, increased average pricing and sizeable rise in Owned Fleet.

  • New long-term contracts are already delivering benefits.
    • New five-year contracts signed with TMK[4] and ChelPipe Group[5], which are both leading manufacturers of pipe products;
    • Both contracts envisage significant increases in serviced volumes to 70% of client’s freight rail transportation needs and perfectly complement Globaltrans’ logistics patterns;
    • Operations with both clients sizeably expanded since start of contracts with combined volumes for both clients up 40% in the second half of 2018 compared to the first half of the same year;
    • 60% of Net Revenue from Operation of Rolling Stock was contributed by long-term contracts in 2018 (Rosneft, Metalloinvest, MMK, TMK and ChelPipe Group).
  • Continued strong pricing.
    • Better pricing reflected in 20% year-on-year rise in Average Price per Trip to RUB 41,859 primarily due to the strong gondola market and slightly improved pricing in the rail tank car segment.
  • Increased fleet underpins new contracts, setting strong platform for 2019.
    • Owned Fleet increased 7% compared to the end of 2017 to 65,405 units with Total Fleet at a record 69,023 units;
    • 4,747 units (mostly gondola cars)[6] were acquired in 2018 compared to 1,332 units in the previous year with all additional units put into operation during 2018;
    • Fleet rebalancing successfully completed with purchases of gondola cars over 2018 more than offsetting a reduction in expensive leased-in gondola fleet. Share of Owned Fleet rose to 95% compared to 92% at the end of 2017.
  • Operational excellence maintained.
    • Empty Run Ratio for gondola cars stood at 38% (2017: 37%) with Total Empty Run Ratio at 46% (2017: 45%);
    • Share of Empty Run Kilometers paid by Globaltrans rose to 89% (2017: 86%) due to changes in logistics patterns of some clients.
  • Transportation Volumes and Freight Rail Turnover came under pressure (down 4% and 9% year on year respectively)[7] impacted by the gondola fleet rebalancing, changed client logistics and a reduction in average speeds on the Russian Railways (“RZD”) rail network.
    • Bulk cargo volumes affected by a temporary 2% year-on-year reduction in the average gondola fleet operated (due to intentional substitution of expensive leased-in gondola cars with newly acquired units commissioned in 2018);
    • Changed client logistics contributed to a 4% year-on-year reduction in Average Distance of Loaded Trip;
    • Average Number of Loaded Trips per Railcar decreased 4% year on year largely due to a reduction in average speeds on the RZD rail network over the course of 2018, caused by ongoing major rail infrastructure modernisation projects.
  • Improved performance of oil products and oil segment.
    • The rail tank fleet in operation was increased by transferring some leased-out units into operation and increasing the number of leased-in rail tank cars;
    • Freight Rail Turnover and Net Revenue from operation of rail tank cars increased 3% and 12% year on year respectively.

Market overview

Market backdrop remains positive with further rise in demand.

  • The overall freight rail turnover in Russia rose 4% year on year in 2018 with transportation volumes up 2% year on year;
  • Bulk cargoes again drove growth in 2018 largely on the back of increased transportation volumes of coal (up 4% year on year) and metallurgical cargoes (up 5% year on year)[8]. Rising demand absorbed the net increase in overall gondola capacity of about 7% or 33,000 units during 2018[9]. Strong customer demand and tight gondola availability supported continued favorable pricing conditions in the gondola segment;
  • The segment for rail transportation of oil products and oil stabilised with volumes slightly higher compared to the previous year. The market continues to benefit from the scrappage of old capacity combined with a very low level of new additions (net capacity down about 2% or 6,000 units over 2018). The pricing environment in this segment improved slightly.

Outlook

Management targeting moderate demand-based investments and attractive interim dividend in respect of first half 2019.

  • Industry outlook generally positive.
    • Favorable market environment continued into 2019; market performance during the year will be dependent on economic conditions;
    • Long-term industry fundamentals remain strong supported by the ongoing modernisation of rail infrastructure and plans to increase production of key industrial commodities.
  • Focus on cost management and operational efficiency.
    • Mitigating continued pressure on costs related to higher regulated RZD tariffs for the traction of empty rail cars[10] and increased costs for certain spare parts;
    • Adapting fleet management to meet changed client logistics patterns and demand on more profitable routes. This is likely to result in an increased Empty Run Ratio for gondola cars to over 40% which is reflected in the commercial terms with clients.
  • Moderate demand-based investments subject to strict return criteria.
    • Gondola car investment expected to be limited, demand-lead and subject to prices for new rolling stock;
    • Further development of niche projects with a combined acquisition of about 1,500 flat cars and specialised containers anticipated for 2019;
    • Up to 10 new diesel locomotives expected to be acquired in 2019 for fleet modernisation purposes;
    • Increased maintenance CAPEX expected in 2019 largely reflecting a scheduled rise in the number of changes of wheel pairs and an increase in the cost of certain spare parts.
  • Attractive interim dividend targeted in respect of the first half of 2019.
    • Prudent capital allocation to be maintained providing attractive shareholder returns subject to leverage;
    • A total interim dividend (regular and special) of RUB 8.3 billion is targeted in respect of the first half of 2019 provided the current outlook for the sector remains broadly unchanged.

Downloads

All of the above 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: Monday, 1 April 2019
Time: 11.30 London / 06.30 New York (EDT) / 13.30 Moscow

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

Russia:           +7 (8) 495 249 9843
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.

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

For international media
Laura Gilbert
Lightship Consulting
+44 7799 413351
[email protected] 

NOTES TO EDITORS
Globaltrans 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 prominent Russian industrial groups in the metals and mining and the oil products and oil sectors.

The Group had a Total Fleet of about 69 thousand units at the end of 2018. Universal gondola cars and rail tank cars constitute the backbone of the Group’s fleet. About 95% of the Total Fleet is owned by the Group with an average age of 11 years.

In 2018, the Group’s Freight Rail Turnover (including Engaged Fleet) was 158.9 billion tonnes-km with the total revenue amounting to RUB 86.8 billion.

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.

[1] Global Depositary Receipt (“GDR”); The total shareholder payments in respect of 2018 include the already paid interim and special interim dividends in the amount of RUB 8.2 billion and proposed final and special final dividends in the amount of RUB 8.3 billion.

[2] Total CAPEX (a non-GAAP financial measure) calculated on a cash basis as the sum of “Purchases of property, plant and equipment” (which includes maintenance CAPEX), “Purchases of intangible assets”, “Acquisition of subsidiary undertakings – net of cash acquired” and “Finance lease principal payments” (as a part of the capital expenditures was financed with a finance lease).

[3] Subject to shareholders’ approval, final and special final dividends will be paid in USD with conversion from RUB to be executed at the official exchange rate for RUB of the Central Bank of Russia as of 19 April 2019. The respective Annual General Meeting was called for 22 April 2019.

[4] TMK is a leading global manufacturer and supplier of steel pipes for the oil and gas industry, operating 27 production sites in the United States, Russia, Canada, Romania, Oman and Kazakhstan.

[5] ChelPipe Group is a leading Russian manufacturer of pipe products and provides integrated solutions for fuel and energy companies.

[6] In 2018, the Group acquired 4,747 units (including 3,862 gondola cars, 481 flat cars and 404 containers) and disposed of 592 units, of which 334 were written off.

[7] Excluding Engaged Fleet.

[8] Coal including coke; Metallurgical cargoes including ferrous metals, scrap metal and ores.

[9] Estimated by the Company.

[10] RZD regulated infrastructure tariff for the traction of empty railcars increased 9.77% year on year for gondola cars and 3.56% year on year for all other types of railcars from the beginning of 2019.

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