Rostelekom Net Income dropped on 62.8% in 2015 and EBITDA Margin showed almost no change
14 Mar 2016 • About Rostelekom (
$RKMD) • By InTwits
Rostelekom reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Rostelekom has high CAPEX intensity: 5 year average CAPEX/Revenue was 24.7%. At the same time it's a lot of higher than industry average of 13.2%.
- CAPEX is quite volatile: 34,936 in FY2015, 43,361 in FY2014, 42,702 in FY2013, 53,507 in FY2012, 92,321 in FY2011
- The company has business model with low profitability: ROIC is at 8.2%
- It operates with high leverage: Net Debt/EBITDA is 1.8x while industry average is 1.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Rostelekom ($RKMD) key annual financial indicators
| mln. RUB | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 296,015 | 295,341 | 290,736 | 298,937 | 297,355 | -0.5% |
| SG&A | 10,917 | | | | 5,174 | |
| EBITDA | 120,798 | 117,381 | 113,476 | 98,746 | 99,185 | 0.4% |
| Net Income | 46,240 | 32,677 | 23,872 | 37,520 | 13,944 | -62.8% |
Balance Sheet
|
|---|
| Cash | 7,177 | 13,629 | 7,960 | 16,945 | 7,165 | -57.7% |
| Short Term Debt | 78,487 | 65,016 | 33,209 | 52,142 | 58,305 | 11.8% |
| Long Term Debt | 84,527 | 152,874 | 184,600 | 137,872 | 126,620 | -8.2% |
Cash flow
|
|---|
| Capex | 82,776 | 93,665 | 68,487 | 57,666 | 62,726 | 8.8% |
Ratios
|
|---|
| Revenue growth | 7.4% | -0.2% | -1.6% | 2.8% | -0.5% | |
| EBITDA growth | 19.1% | -2.8% | -3.3% | -13.0% | 0.4% | |
| EBITDA Margin | 40.8% | 39.7% | 39.0% | 33.0% | 33.4% | 0.3% |
| Net Income Margin | 15.6% | 11.1% | 8.2% | 12.6% | 4.7% | -7.9% |
| SG&A, % of revenue | 3.7% | | | | 1.7% | 1.7% |
| CAPEX, % of revenue | 28.0% | 31.7% | 23.6% | 19.3% | 21.1% | 1.8% |
| ROIC | 15.5% | 11.2% | 9.7% | 8.7% | 8.2% | -0.5% |
| ROE | 19.5% | 13.2% | 11.0% | 17.2% | 5.7% | -11.4% |
| Net Debt/EBITDA | 1.3x | 1.7x | 1.8x | 1.8x | 1.8x | 0.0x |
Revenue and profitability
Rostelekom's Revenue decreased slightly on 0.53% in 2015. EBITDA Margin showed almost no change in 2015.
Net Income marign decreased on 7.9 pp from 12.6% to 4.7% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 the company had CAPEX/Revenue of 21.1%. CAPEX/Revenue dropped on 10.6 pp from 31.7% in 2012 to 21.1% in 2015. It's average CAPEX/Revenue for the last three years was 21.3%.The company invested a big chunk of EBITDA (63.2%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (8.17%) and ROE (5.73%). ROIC showed almost no change in 2015. ROE dropped on 11.4 pp from 17.2% to 5.7% in 2015.
Leverage (Debt)
Debt level is 1.8x Net Debt / EBITDA and 1.9x Debt / EBITDA. Net Debt / EBITDA increased on 0.040x from 1.8x to 1.8x in 2015. Debt decreased on 2.7% in 2015 while cash dropped on 57.7% in 2015.
Valuation
Rostelekom's trades at EV/EBITDA 1.8x and P/E 0.0x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 4.9x with the industry average at 4.7x.
Appendix 1: Peers in Fixed Line Telecommunications
Below we provide Rostelekom benchmarking against other companies in Fixed Line Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telefonica Sa ($TDE) | | -0.8% | -8.5% | -23.8% | 26.4% |
| Alternative Networks ($AN.) | | -2.1% | -0.4% | 17.5% | 9.2% |
| Adept Telecom ($ADT) | | -7.7% | -4.1% | -0.8% | 5.8% |
| Verizon Communications Inc ($VZC) | | 4.5% | 4.1% | 5.4% | 3.6% |
| Telecom Egypt ($TEEG) | | 1.6% | 11.0% | 9.2% | 0.2% |
| |
|---|
| Median (12 companies) | 190.6% | -2.1% | -4.1% | -1.6% | -0.2% |
|---|
| Rostelekom ($RKMD) | | -0.2% | -1.6% | 2.8% | -0.5% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kt Corp ($KTCD) | 81.6% | 75.5% | 76.0% | 77.9% | 77.9% |
| Verizon Communications Inc ($VZC) | 58.6% | 60.1% | 62.8% | 60.7% | 60.1% |
| Telecom Egypt ($TEEG) | 45.0% | 41.4% | 41.9% | 44.2% | 41.6% |
| Alternative Networks ($AN.) | 38.1% | 39.0% | 39.2% | 41.2% | 41.3% |
| Adept Telecom ($ADT) | 35.9% | 32.2% | 34.5% | 36.4% | 37.6% |
| |
|---|
| Median (5 companies) | 51.8% | 49.4% | 50.9% | 43.9% | 41.6% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 45.9% | 46.0% | 42.4% | 37.6% | 39.2% |
| Verizon Communications Inc ($VZC) | 26.5% | 25.6% | 40.3% | 28.4% | 37.3% |
| BT Group ($BT.A) | 27.6% | 31.2% | 32.0% | 31.9% | 33.5% |
| Koninklijke Kpn Nv ($0O8F) | 39.5% | 35.9% | 34.1% | 39.1% | 33.2% |
| Hellenic Telecom.Organization S.A. ($OTES) | 33.0% | 32.0% | 28.8% | 35.4% | 31.3% |
| |
|---|
| Median (12 companies) | 32.2% | 32.0% | 32.0% | 31.7% | 29.5% |
|---|
| Rostelekom ($RKMD) | 40.8% | 39.7% | 39.0% | 33.0% | 33.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 20.7% | 21.9% | 27.5% | 25.3% | 26.5% |
| Telecom Egypt ($TEEG) | 7.0% | 5.1% | 6.8% | 13.0% | 21.4% |
| Telefonica Sa ($TDE) | 14.5% | 15.2% | 17.0% | 19.1% | 18.7% |
| Orange Polska Sa ($OPLD) | 17.5% | 16.6% | 16.9% | 17.6% | 16.9% |
| Hellenic Telecom.Organization S.A. ($OTES) | 14.2% | 11.7% | 14.8% | 15.4% | 16.9% |
| |
|---|
| Median (12 companies) | 13.2% | 13.5% | 13.7% | 12.9% | 14.2% |
|---|
| Rostelekom ($RKMD) | 28.0% | 31.7% | 23.6% | 19.3% | 21.1% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| BT Group ($BT.A) | 23.3% | 23.6% | 27.0% | 34.7% | 37.5% |
| Alternative Networks ($AN.) | 36.7% | 35.2% | 33.7% | 28.5% | 20.2% |
| Verizon Communications Inc ($VZC) | 7.8% | 8.0% | 16.7% | 10.1% | 19.3% |
| O2 Czech Republic As ($O2CZ) | 13.1% | 11.8% | 11.7% | 7.2% | 14.5% |
| Adept Telecom ($ADT) | 11.9% | 11.6% | 15.5% | 13.2% | 14.3% |
| |
|---|
| Median (12 companies) | 11.2% | 9.6% | 8.5% | 7.7% | 6.7% |
|---|
| Rostelekom ($RKMD) | 15.5% | 11.2% | 9.7% | 8.7% | 8.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telefonica Sa ($TDE) | 3.0x | 2.5x | 2.5x | 3.6x | 4.2x |
| Koninklijke Kpn Nv ($0O8F) | 2.4x | 3.8x | 3.4x | 3.0x | 3.6x |
| Verizon Communications Inc ($VZC) | 1.4x | 1.7x | 0.8x | 2.8x | 2.1x |
| Ooredoo Qsc ($ORDS) | 1.7x | 1.6x | 1.7x | 2.0x | 2.0x |
| BT Group ($BT.A) | 1.7x | 1.7x | 1.6x | 1.6x | 1.6x |
| |
|---|
| Median (12 companies) | 1.7x | 1.6x | 1.1x | 1.4x | 1.2x |
|---|
| Rostelekom ($RKMD) | 1.3x | 1.7x | 1.8x | 1.8x | 1.8x |
