Moscow, Russia – April 2, 2015 – Sistema JSFC (“Sistema” or the “Company”, together with its subsidiaries, “the Group”) (LSE: SSA), a publicly-traded diversified holding company operating primarily in Russia and the CIS, today announces its audited consolidated US GAAP financial results for the fourth quarter and the full year ended December 31, 2014 . Following its transfer to the Russian Federation in December 2014 of shares in JSOC “Bashneft”, Bashneft’s results are treated as a disposal, reported as discontinued operations and excluded from the Group’s financial results for all periods presented. The Group’s financial results for the fourth quarter and the full year of 2014 were impacted by the rouble depreciating significantly against the US dollar.

FULL YEAR HIGHLIGHTS

Consolidated revenues up 7.2%YoY to RUB 631.9 billion (US$ 16.6 billion)

Adjusted OIBDA down 6.9% YoY to RUB 165.2 billion (US$ 4.4 billion), with an adjusted OIBDA margin of 26.1%

Adjusted net income attributable to the Group of RUB 44.2 billion (US$ 1.2 billion)

FOURTH QUARTER HIGHLIGHTS

Revenues up 2.1% YoY to RUB 182.9 billion (US$ 3.9 billion)

Adjusted OIBDA of RUB 29.9 billion (US$ 616.0 million)

Net debt at the Corporate Holding level amounted to RUB 40.0 billion (US$ 711 million) as at December 31, 2014

Cash position at the Corporate Holding level amounted to RUB 28.8 billion (US$ 512 million)

BASHNEFT

On November 7, 2014, the Arbitrazh (Commercial) Court of the City of Moscow (“Arbitrazh Court”) ruled in favor of the civil claim filed by the First Deputy General Prosecutor of Russia seeking to return the shares of JSOC Bashneft (“Bashneft”) held by Sistema and its wholly owned subsidiary Sistema-Invest (“Bashneft Shares”) to the Russian Federation.

In December 2014, the Bashneft Shares, owned by Sistema and Sistema-Invest, were transferred to the Russian Federation.

In December 2014, Sistema filed a civil claim with the Arbitrazh Court for the recovery of damages from LLC Ural-Invest (“Ural Invest”), suffered by Sistema as a result of loss of the Bashneft Shares.

In February 2015, the Arbitrazh Court ruled in favour of Sistema’s claim against Ural-Invest.

In March 2015, Sistema and Ural-Invest signed a settlement agreement, to the effect that all property owned by Ural-Invest, i.e. cash assets of approximately RUB 46.5 billion, will be transferred to Sistema, of which Sistema has agreed to invest RUB 4.6 billion in the socially important projects of URAL Charitable Fund. On March 30, 2015 the Arbitrazh Court approved the settlement agreement signed by Sistema and Ural-Invest.

KEY CORPORATE HIGHLIGHTS FOR 2014

Sistema’s wholly-owned subsidiary LLC LesInvest (“LesInvest”) acquired 100% of OJSC Segezha Pulp and Paper Mill and 100% of LLC Derevoobrabotka-Proekt. In the fourth quarter of 2014, LesInvest contributed RUB 7.2 billion and RUB 1.1 billion to the Group’s consolidated revenue and OIBDA. According to management accounts, total revenues of the newly acquired business amounted to RUB 24.7 billion in 2014, with an OIBDA margin of 12.9%.

Acquired a 10.8% stake in OZON Holdings Limited (“OZON”), one of Russia’s largest e-commerce businesses, for US$ 75 million. MTS also acquired a 10.8% stake in OZON at the same price.

Acquired a 40% stake in a holding company that owns Concept Group, one of Russia’s leading fashion clothing retailers by revenue growth, for a total consideration of approximately RUB 1 billion.

Acquired 2,474,818 ordinary shares of MTS Bank’s additional share issue for RUB 9.46 billion.

Acquired 38.75% and 11.25% stakes in CJSC NVision Group (“NVision”) in two transactions. As a result, the Group’s shareholding in NVision increased to 100%.

Acquired 49% of the ordinary shares of CJSC Business Nedvizhimost from CJSC MGTS-Nedvizhimost, for RUB 3.1 billion. As a result, Sistema’s ownership in CJSC Business Nedvizhimost increased to 100%.  

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

“In spite of the severe challenges and macroeconomic difficulties faced by Sistema in 2014, we have yet again demonstrated the resilience of our business model by generating a 7.2% year-on-year rouble top-line growth. We remain a diversified and balanced investment company with our developing assets contributing more than 40% of the Group’s total revenues in the fourth quarter. Our companies are now more resilient to withstand downturns than they were in 2008 with a comfortable net debt/adjusted OIBDA ratio of below 2 in the reporting year.

Despite the fact that the Group’s results were largely impacted by certain non-cash one-off items and the deconsolidation of Bashneft, we reported strong operating and financial results, particularly Detsky mir demonstrated excellent performance. As of the end of 2014, we have started to consolidate our pulp and paper asset LesInvest, which brought RUB 7.2 billion of revenues and RUB 1.1 billion of OIBDA in the fourth quarter alone. We are seeing the first results of our restructuring of Targin, which earned RUB 23.5 billion of revenues and improved its OIBDA margin from 8% in 2013 to 13% in 2014.

Our reshaped investment portfolio includes a number of strong promising businesses, offering a unique exposure to Russia’s growing sectors. In 2014, despite all the challenges, we continued implementing our strategy and acquired stakes in OZON Holdings Limited and Concept Group, giving us access to the e-commerce and clothes retail sectors. We also entered the pulp and paper market by investing in industry leaders with exciting prospects and substantial turnaround potential.

Looking ahead, we are optimistic about the prospects of the Russian market and are focused on developing and enhancing our investment portfolio both organically and through M&A, driving high returns, and continuing to reward our shareholders.”

Conference call information

Sistema’s management will host an analyst conference call today at 10.00 am (EST)/ 3.00 pm (London time) / 4.00 pm (CET)/ 5.00 pm (Moscow time) to present and discuss the fourth quarter and full year 2014 results.

The dial-in numbers for the conference call are:
UK/ International: +44 (0)20 3427 1900
US: +1 646 254 3363
Conference ID: 1369878
Alternatively you can quote the conference call title: “Sistema Fourth Quarter and Full Year 2014 Financial Results”.
A replay of the conference call will be available on the Company’s website www.sistema.com for 7 days after the event.
For further information, please visit www.sistema.com or contact:
Investor Relations
Evgeniy Chuikov
Tel: +7 (495) 692 11 00
ir(at)sistema.ru

Public Relations
Sergey Kopytov
Tel.: +7 (495) 228 15 27