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Financial Corporation "Sistema"

April 26, 2012

Financial results for the fourth quarter and audited financial results for the full year ended December 31, 2011

Moscow, Russia – April 26, 2012 – Sistema JSFC (“Sistema”, the “Group” or the “Company”) (LSE: SSA), the largest diversified public financial corporation in Russia and the CIS, today announces its unaudited consolidated US GAAP financial results for the fourth quarter and audited financial results for the full year ended December 31, 2011.

The Group’s consolidated results for the fourth quarter of 2011 and the full year were impacted mainly by non-cash one-off items (“one-offs”) primarily related to the US$ 346 million loss from impairment of SSTL licences following India’s Supreme Court ruling to cancel 122 licences, including 21 licences of SSTL, and US$ 349 million of SSTL goodwill write-off.

Full Year Highlights

Consolidated revenues up 23.0% to US$ 33 billion

OIBDA without one-offs up 16.2% YoY to US$ 8.3 billion, with an OIBDA margin of 25.1%

Net income attributable to the Group of US$ 218.0 million and without one-offs of US$ 996.8 million

Net cash position at the Corporate Holding level amounted to US$ 564.4 million compared to net debt of US$ 684.5 million

Fourth Quarter Highlights

Revenues up 15.3% YoY to US$ 8.4 billion

OIBDA without one-offs up 24.0% YoY to US$ 2.1 billion, with an OIBDA margin of 25.3%

Net loss attributable to Sistema of US$ 530.2 million and without one-offs net income of US$ 261.4 million


Established OJSC RTI, with the participation of the Bank of Moscow, and sold Sistema’s stake of approximately 63% in SITRONICS to OJSC RTI.

Reorganised OJSC Sistema-Invest by merging it into CJSC Bashkir Integrated Energy Systems, CJSC UNKH-EnergoInvest, CJSC UNPZ-EnergoInvest and CJSC Novoil-EnergoInvest, which were previously owned by the Bashkir Oil and Energy group of companies.

Intourist and Thomas Cook Group Plc completed a transaction to establish a joint venture involving Intourist’s tour operating and retail business.

In August and October completed two buyback programmes of MTS’ and Sistema's shares for a total of approximately US$ 90 million.

Acquisition of 17.14% stake in SSTL by the Russian Government for c.US$ 600 million.

Sold 100% stake in CJSC Sistema-Inventure (24.4% of the charter capital of MGTS) to MTS for RUB 10.56 billion.

Approved new dividend policy with dividend payments to be equal to a minimum of 10% of the Company’s consolidated net income under US GAAP and 10% minimal special dividend from cash proceeds from exits and disposals.

Acquired 100% stake in OJSC Donskoe from the State for RUB 476.5 million. Donskoe is located in the Rostov region of the Russian Federation and occupies 25.4 thousand hectares of land.

Acquired 100% stake in OJSC “First Cavalry Army Stud Farm” from the State for RUB 303 million. OJSC “First Cavalry Army Stud Farm” is located in the Rostov region of the Russian Federation and occupies 21.5 thousand hectares of agricultural land, including 17.5 thousand hectares of arable land.

Approved a new management and organisational structure in line with the new investment company model.

Appointed Mikhail Shamolin as President and CEO of Sistema.

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

«In 2011, Sistema began a transition to an investment company model aimed at strengthening our competitive advantage and improving returns on our investments. This was a milestone year in our development as we reshaped Sistema’s structure, enhanced our investment approach, strengthened the management team and entered promising new investments.

Our investments have enjoyed a strong year, delivering a 23% increase in revenues and substantial growth in net income, excluding one-off effects. Foremost, these results are underpinned by excellent organic growth in our Core Assets portfolio, primarily in the oil and telecoms segments, where Bashneft increased production by 6.8% and benefited from stable oil prices, while MTS successfully implemented its strategy of monetizing the subscriber base, resulting in the strongest profitability in the sector.

In 2011 our Developing Assets focused on aggressive expansion of their operations, which led to a 17% increase in their revenues. These results reflect Sistema’s objective of making these businesses a material part of our investment case. As such, RTI and Detsky mir now account for over 8% of our total revenues, while Medsi and Binnopharm delivered maiden annual and quarterly profits, respectively. In 2012 this strategy will be supported by a strong profitability drive as several of these companies expect to report substantial improvements in OIBDA by year end.

Recent newsflow with regards to SSTL licences has been a concern both to us and our shareholders. However, we are determined to resolve the situation and to that end are taking all necessary actions to protect our investment and minimize our exposure should the uncertainty remain. Moreover, we are currently working on a number of transactions to both develop our existing businesses and further broaden our portfolio and with latest events such as our joint venture with RZ Agro, Medsi’s merger with Moscow Government’s healthcare assets and RTI’s possible acquisition of NVision, we are confident of Sistema’s prospects for growth in 2012».

Conference call information

Sistema’s management will host an analyst conference call today at 8 am (New York time) / 1 pm (London time) / 2 pm (CET) / 4 pm (Moscow Time) to present and discuss the fourth quarter and full year 2011 results.

The dial-in numbers for the conference call are:
UK/International:        + 44 20 7190 1530

US:                          + 1 480 629 9771

And quote the conference call title: “Sistema 4Q and Full year 2011 Financial Results”.

A replay of the conference call will be available on the Company’s website for 7 days after the event.




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