Moscow, Russia – 3 April 2019 – Sistema PJSFC (“Sistema” or the “Company”, together with its subsidiaries, “the Group”) (LSE: SSA, MOEX: AFKS), a publicly-traded diversified Russian holding company, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the fourth quarter 2018 and audited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for full year ended 31 December 2018.

SUCCESSFUL DELIVERY AGAINST STRATEGIC AND OPERATIONAL GOALS

• Sustained revenue growth¹due to strong results from the majority of portfolio companies.
• At least double digit OIBDA growth at MTS, Detsky Mir, Segezha Group, Agroholding Steppe, Medsi, RTI, BPGC and hospitality assets under new IFRS standards, driven by excellent operating results and financial discipline.
• Added operational scale in real estate development and increased sector attractiveness for investors: In February 2019, Sistema sold 51% of JSC Leader Invest to Etalon Group, while retaining a 49% stake in the company. Following this transaction, Sistema acquired 25% of Etalon Group for USD 226.6 million. The transactions create a top-3 player in the Moscow and St Petersburg markets, bring together complementary development portfolios, allow Leader Invest’s projects to leverage Etalon’s general contracting capacity and regional sales network to accelerate construction and sales, and realise significant synergies in construction as well as reduction of administrative expenses.
• Increased and crystalized value of pharmaceuticals business: In December 2018, Sistema acquired a stake in a leading pharmaceutical company, OBL Pharm, for RUB 1.83 billion. Sistema made the acquisition as a member of a consortium of investors that also included VTB Bank and members of the OBL Pharm management team. The strategic aim of the transaction is the merger of OBL Pharm with Sistema’s pharmaceutical holding, Binnopharm, and utilisation of synergies in marketing and sales, combining R&D functions and reducing administrative costs. The medium-term goal of the combined company is to become a top-5 Russian pharmaceuticals producer in the non-state segment, the fastest-growing segment in the Russian pharma market.
• Strengthened position in the fast-growing e-commerce market: In February 2019, Sistema acquired 18.7% of Russia's leading multi-category online retailer, Ozon Holdings, from MTS for RUB 7.9 billion. The decision to increase the stake is based on Sistema’s strategic bet on growth prospects for e-commerce and market consolidation through investments in the market leader.
• MTS Bank divestment to maximise synergies between telecommunications and banking businesses: In February 2019, Sistema sold 39.5% of PJSC MTS Bank to PJSC MTS for RUB 11.4 billion. As a result of the transaction, Sistema’s stake in MTS Bank declined to 5.0% and MTS’s stake increased from 55.2% to 94.7%. MTS’s consolidation of MTS Bank will facilitate deeper integration of the bank with MTS and rapid development of an ecosystem of digital bank services.
• Debt portfolio optimisation via an active presence on the public bond market: In February-March 2019, Sistema successfully returned to the local capital market. The Corporation repurchased series 001P-07 bonds in the amount of RUB 482.2 million out of the total of RUB 10 billion during a tender offer, and completed a secondary placement of this amount, issued a RUB 10 billion 001P-090 series bond and successfully closed the books on a RUB 10 billion 001P-10 series issue. The placements generated significant investor interest in Sistema’s debt securities and demonstrated positive market perception of the Corporation’s investment case. The funds raised will be used to refinance existing debt.
• Dividend payments:In March 2019, Sistema’s Board of Directors resolved to recommend to the Annual General Meeting of Shareholders to be held on 29 June 2019 to pay dividends based on 2018 results in the amount of RUB 1,061.5 million (which corresponds to RUB 0.11 per ordinary share or RUB 2.2 per GDR).

FY 2018 FINANCIAL RESULTS

• Consolidated revenue[1] increased by 12.1%year-on-year to RUB 777.4 billion.
• Excluding the impact of new IFRS standards,[2] Group revenue increased by 11.1% year-on-year to RUB 770.2 billion.
• Adjusted OIBDA[3] increased by 34.3%year-on-year to RUB 265.3 billion; the adjusted OIBDA margin was 34.1%.
• Excluding the impact of new IFRS standards, adjusted OIBDA increased by 11.3% year-on-year to RUB 219.8 billion; the adjusted OIBDA margin was 28.5%.
• Adjusted net profit attributable to Sistema was RUB 1.1 billion.
• Excluding the impact of new IFRS standards, adjusted net profit attributable to Sistema declined by 98.5% to RUB 0.1 billion.

4Q 2018 FINANCIAL RESULTS

• Group revenue increased by 15.5% year-on-year to RUB 225.1 billion.
• Excluding the impact of new IFRS standards, Group revenue increased by 12.7% year-on-year to RUB 219.8 billion.
• Adjusted OIBDA increased by 45.5%year-on-year to RUB 66.8 billion; the adjusted OIBDA margin was 29.7%.
• Excluding the impact of new IFRS standards, adjusted OIBDA increased by 15.5% year-on-year to RUB 53.0 billion; the adjusted OIBDA margin was 23.8%.
• Adjusted net profit attributable to Sistema was RUB 391 million.
• Excluding the impact of new IFRS standards, the adjusted net loss attributable to Sistema was RUB 2.0 billion.
• Net financial liabilities[4],[5] at the Corporate Centre were RUB 213.4 billion as of 31 December 2018.
• Cash position⁵ at the Corporate Centre as of 31 December 2018 was RUB 9.8 billion.

SISTEMA’S CURRENT STRATEGIC IMPERATIVES

• Maximise shareholder value and reduce market capitalisation discount to NAV
• Attract third-party capital to enhance investment resources
• Reduce gross debt at the Corporate Centre to RUB 140-150 billion

Andrey Dubovskov, President and Chief Executive Officer of Sistema, said:

“Sistema delivered impressive financial and operating results in 2018. Group’s revenue for the year increased by 12% to RUB 777 billion on the back of robust growth of our key assets. Most assets grew at significantly above the average growth rates of the markets in which they operate. Notably, MTS, Detsky Mir, Segezha Group, Agroholding Steppe and Medsi strengthened their leadership positions in their respective industries. MTS is not only increasing revenue from mobile services and smartphone sales, but is also entering new, adjacent high-growth markets including IT outsourcing, Internet of Things, cloud services, e-sports and web-based event ticket sales. Detsky Mir continues to grow its business in Russia and Kazakhstan, and has expanded to Belarus and launched a pet supplies business – all while increasing profitability. Segezha Group continues to expand its product lines, focusing on demand from high-opportunity export markets. Agroholding Steppe is now a top-6 Russian grain exporter and continues to demonstrate strong growth across all its main business segments. Steppe also launched its own retail brand as it aims to grow closer to consumers. Based on FY 2018 performance, Medsi has established itself as the leading private healthcare business in Russia by revenue and one of the fastest-growing healthcare businesses globally.

“Group adjusted OIBDA increased by 34% thanks to double-digit OIBDA growth at all key portfolio companies. The new IFRS accounting standards had a significant impact on the results of MTS and Detsky Mir, though on a like-for-like basis these companies also delivered strong OIBDA growth.

“In late 2018 and early 2019 we completed a number of strategic transactions, demonstrating that we continue to add value to our assets in an environment where we have limited investment resources. As part of a consortium of investors we acquired a leading Russian pharmaceutical company, OBL Pharm, and plan to merge it with our pharmaceutical holding, Binnopharm, significantly increasing the value of that business. In future we plan to bring the combined company to the public markets. As a result of transactions involving Leader Invest and Etalon Group, we have changed the landscape of the Russian residential property market, establishing a company that is a top-3 developer in the Moscow and St Petersburg markets by construction volumes and sales. Additionally, we continued to increase our exposure to Ozon, the leading multi-category online retailer. This transaction represents Sistema’s strategic investment in the fast-growing e-commerce industry through a company that is poised to consolidate this highly fragmented market.

“We have somewhat modified the Group strategy adopted last year to reflect current market conditions, though our key objectives remain unchanged: maximise shareholder value and reduce the discount between market capitalisation and net asset value, attract third-party capital to diversify and expand our investment resources, and reduce gross debt to RUB 140-150 billion. In the coming years our focus will be on growing the value of four portfolio companies – Agroholding Steppe, Segezha Group, Medsi and Ozon. We are targeting valuations of USD 1-2 billion for each of these companies. We view these companies – which we ultimately contemplate to bring to capital markets – as catalysts to enhance Sistema’s valuation and the key to reducing the discount.

“Given the need to strike a balance between decreasing debt, continuing to invest and delivering returns to shareholders, the Board of Directors has recommended that the General Meeting of Shareholders approve dividends for the full year 2018 in the amount of RUB 1.1 billion, or RUB 0.11 per share. As we previously stated, after the debt load has been substantially reduced, the Company will return to the question of dividend payments, with the aim of strengthening our investment case.”

Conference call information

Sistema’s management will host a conference call today at 10:00 am (New York time) / 3:00 pm (London time) / 4:00 pm (CET) / 5:00 pm (Moscow time) to present and discuss the FY 2018 results.

To participate in the conference call, please dial:

Russia

+7 495 213 1767

8 800 500 9283 (toll-free)

UK

+44 330 336 9125

0800 358 6377 (toll-free)

US

+1 323 794 2588

888 394-8218 (toll-free)

Conference ID: 2565520

Link to webcast: https://webcasts.eqs.com/sistema20190403

Or quote the conference call title: “Sistema Fourth Quarter and Full Year 2018 Financial Results”.

A replay of the conference call will be available on Sistema’s website www.sistema.comfor at least seven days after the event.

For further information, please visit www.sistema.com or contact:

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[1] Here and hereinafter, consolidated results of Sistema and its subsidiaries for the fourth quarter 2018 and for 2018 are presented in accordance with new accounting standards IFRS 9, 15 and 16 unless specified otherwise. Results for 4Q 2017 and full year 2017 are presented without the impact of new IFRS standards 9, 15 and 16. Results of Binnopharm are not presented excluding the impact of the new IFRS standards. However, Sistema estimates that the effect of the transition to the new standards at this subsidiary on the consolidated results of the Group is not material. Results of RTI and consolidated results of Sistema for the fourth quarter of 2018 and for 2018 are presented to reflect the reclassification of RTI's microelectronics assets as discontinued operations. Here and hereafter in this press release, consolidated results of Sistema for the fourth quarter of 2017 and for 2017 are restated to reflect the results of this reclassification. In February 2019 RTI Microelectronics, which is part of RTI Group, concluded a legally binding agreement envisaging the creation of a combined company in the field of microelectronics components. The parties will contribute to the combined company in total controlling stakes in 19 enterprises in the areas of development, production and design centres of microelectronics components.

[2] Here and hereinafter, new standards refer to IFRS 9, 15 and 16

[3] Here and hereinafter see Appendix A for definitions and reconciliations of adjusted OIBDA, adjusted operating income, adjusted net profit attributable to Sistema, consolidated debt and consolidated net debt with IFRS financial performance.

[4] Including all borrowing and liabilities to Rosimuschestvo, finance leases and liabilities under the Settlement Agreement after deducting cash at the Corporate Centre level.

[5] Management accounts