TIDMAURR
RNS Number : 8047L
Aurora Russia Limited
05 August 2011
5 August 2011
Aurora Russia Limited
Company update and meetings with shareholders
Aurora Russia Limited ("the Company") announces that it will,
ahead of the upcoming Extraordinary General Meeting to be held on
24 August 2011, be undertaking a series of meetings with
shareholders to update them on the Company's strategy to deliver
value and provide an update on the recent performance of the
investee companies.
Company strategy
The Board believes that it is best placed to address the
concerns of, and deliver value to, shareholders. In the Board's
view, further changes to the Board are unnecessary, may be
disruptive and add no value to the process of realising the
Company's investments.
The Board is committed to addressing the issues that have led to
disappointing share price performance through:
-- a clearly articulated exit strategy;
-- a minimum goal of delivering at least the current NAV within
a reasonable timeframe; and
-- enhanced disclosure and communication with shareholders.
Exit Strategy
The Board will focus on realising value from what is a mature
portfolio. Three investments are considered to be potential IPO
candidates and this option will be actively pursued, alongside a
potential trade sale of each.
Action is currently being taken towards all exits and the exit
strategy will be driven by a desire to optimise value for all
shareholders.
Realisation Targets
The Board recognises uncertainty has undermined confidence and
therefore is now seeking to set out clear goals that can be
objectively assessed. An exit strategy will be put in place for
each investment on a two year time horizon, with a goal of
achieving at least the current NAV for each investment. The Board
believes that the current NAV reflects a realistic assessment of
the potential value within the investments that could be realised
on a two year timeframe.
For those investments where an IPO is potentially an option, the
Company will begin a process to engage an investment bank for each
of the investments to advise on potential valuation, timing and the
optimum market on which to list. Where trade sale negotiations are
entered into in parallel, these will be viewed against the
potential value of an IPO. Where IPO is not seen as an option the
Manager has been asked to prepare a detailed assessment of a two
year exit strategy.
The Board believes that any attempt to accelerate the value
realization beyond this timeframe will be sub-optimal for all but
the shareholders that require cash immediately.
Disclosure and transparency
In future the Company will provide a detailed quarterly summary
of investee company performances. These will include as
comprehensive a set of hard numbers from which investors can take a
view on valuation, including revenue and EBITDA versus prior year
periods.
The Chairman of the Board, Chairman of the Audit and Valuation
Committees and the Manager will hold a quarterly call for investors
and analysts and will conduct regular roadshows.
Independence of the Board
The two management representatives are no longer on the Board
and the decision-making process for the Company is now clearly
independent of both the Manager and of any particular
shareholder.
The Manager
There have been changes within the Manager. A process has been
agreed by all parties to resolve outstanding issues and this
process is being overseen by the Chairman of the Board of Aurora
Russia Limited. Whilst these changes have been coincident with the
EGM requisition, the issues are separate.
Portfolio company update
OSG
1H 1H
GBPm 2010 2011 %
Revenue 6.3 8.4 32
EBITDA 0.71 1.00 34
EBITDA Margin 11% 11%
OSG continues to grow strongly. Revenues have increased by 32%
and EBITDA by 34% for the first half of 2011, compared to the prior
year period. The growth in revenues has been driven by recurring
storage revenues and a return in the growth of services revenues
which was 48% in 1H 2011 YoY.
OSG is also pleased to announce that it has recently secured
4-year lease financing to purchase racking and has now racked
capacity for an additional 700,000 boxes.
OSG has a number of options to fund its growth which are to be
further developed in September.
Superstroy
1H 1H
RURb 2010 2011 %
Revenue 2.89 3.84 33
EBITDA -0.02 -0.06 N/A
EBITDA Margin -1% -2%
Superstroy's revenues increased by 33% for the first half of
2011, compared to the prior year period. In the 1H like for like
growth (LFL) was 17%. The company opened its largest hypermarket
with a trade space of 22,000sqm in April 2011 which depressed
EBITDA due to preopening costs. It is expected that future revenues
from this hypermarket will have a positive effect on EBITDA in
future results. The new store hit break-even in May 2011, its
second month of operation. Although EBITDA for 1H remained negative
due to the seasonality of the construction market in Russia, the
company is expected to have positive EBITDA in 2011. In May and
June Superstroy showed positive EBITDA.
Superstroy has strong relationships with Russian banks where it
has facilities to fund its working capital requirements and growth.
Currently it is looking at opportunities with 3 financial
institutions to fund a logistics warehouse which it expects will
lead to improved margins.
Unistream
1H 1H
RURb 2010 2011 %
Volumes 47.7 58.1 22
Revenue 0.92 1.01 11
0.41 0.51
Op Income 45% 50%
EBITDA -0.01 0.03
EBITDA Margin -1% 3% 24
Unistream's volumes grew 22% in the 1H 2011 YoY from RUR47.7b to
RUR58.1b. Total commissions were RUR1.01b increasing 11% compared
to the prior year period. However, Unistream's operating profit
grew by 22% YoY driven by the growth of volumes though its own
points of sale which therefore reduced the payment of commissions
to counterparties. For the first half of the year the company
produced EBITDA of RUR0.03bn which was ahead of its budget.
Unistream experiences strong seasonality as its migrant customers
generally travel to Russia in the spring for the start of the
construction season.
Since it began its loyalty card programme in August 2010, the
company has distributed 700,000 loyalty cards. This is important as
it increases customer retention, enables the company to understand
its customers better and will lead to further revenue streams for
the company.
Flexinvest Bank and Kreditmart
Total Assets 31 Dec 1H
GBPm 2010 2011
Net Loans 7.7 7.5
Goodwill 2.7 2.7
Cash 4.5 2.4
Other Assets 2.2 2.0
Bonds 1.1 3.4
As at 30 June 2011, Flexinvest and Kreditmart had total assets
of GBP17.9m. Of this, the net loan book accounted for GBP7.5m and
is sufficiently reserved with GBP0.9m of provisions. GBP3.4m is
invested in liquid Russian blue-chip bonds.
Flexinvest is implementing its revised strategy to focus on its
credit card product funded by short-term retail deposits. The
success of this strategy will be reviewed at the beginning of 2012.
During the first half of 2011, the bank received approval from
MasterCard to issue its cards, agreed with Rosbank to be the
sponsoring bank and United Card Services as the processing company.
The bank has developed its front-end system incorporating
Experian/Interfax's decision making system and a cloud based
application which once implemented will also work as a CRM data
base. The Central Bank of Russia has recently approved the new
trademark "Flex Bank" and the first cards are being issued this
month ready for launch in earnest in September.
For further information please contact:
Aurora Russia
Geoff Miller +44 (0) 7408830719
John Whittle
Numis Securities
Hugh Jonathan
Nominated Adviser +44 (0) 20 7260 1263
Rupert Krefting / Nathan Brown
Corporate Broking +44 (0) 20 7260 1435/1426
Financial Dynamics
Ed Gascoigne-Pees +44 (0) 20 7269 7132
This information is provided by RNS
The company news service from the London Stock Exchange
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