TIDMAURR
RNS Number : 7151C
Aurora Russia Limited
04 May 2012
Aurora Russia Limited
Trading Update
Aurora Russia Limited ("Aurora Russia" or "the Company")
announces a trading update ahead of its year end results for the
year ended 31 March 2012 which are expected to be released by the
end of June.
Strategy
As announced on 5 August 2011, the Board is committed to a clear
exit strategy for the Company's investments.
The Company and the Manager are in discussions with potential
strategic buyers and financial buyers for the assets. Advisers have
been appointed as part of the process.
With respect to exiting through the IPO market, the appetite for
IPOs remains lacklustre but progress has been made in evaluating
the viability of listing Superstroy, OSG and Unistream and whether
or not the IPO route is the best route for shareholders. The
Company reserves its judgement at this time, but believes that if
the IPO market rebounds the opportunity to seek listings for these
assets might still be a viable route to provide, at least, a
partial exit for shareholders.
The Company will make a further announcement on progress in
relation to the realisation strategy when appropriate.
The Manager
With the support of the Board, the Manager continues to work on
the Company's clear exit strategy for its investments. In keeping
with the strategy of the Company and to reflect the timeline
indicated regarding the disposal of the investments, the Manager
agreed with the Board to an amendment to the management agreement
regarding its notice period. The notice period has now been reduced
from a rolling two year notice period to a rolling six month notice
period with notice able to be given no earlier than 31 October
2013.
Portfolio companies
Each of the Company's investments continues to make good
progress. All of the investments have shown strong revenue growth
and are performing well. We believe that it is critical when
selling an investment that it continues to perform well and grow in
line or faster than its peers in the market. OSG, Unistream and
Superstroy are market leading companies and we are confident that
they present strategic buyers with an opportunity to enter the
market with a strong market share and a platform for continued
growth. Flex Bank (rebranded from Flexinvest Bank), although small,
is making good progress and provides a simple and stable platform
for any banking group wishing to enter the Russian market.
The Russian economy is performing well compared to the UK and
other developed economies and the IMF has recently increased its
forecast for GDP growth in Russia in 2012 from 3.9% to 4%. The RUR
6% is stronger against GBP and 8% stronger against USD since 30
September 2011. As of the March reporting date the MICEX was up 6%
since September reporting date and the MICEX Consumer index was up
9%.
Investments
OSG
OSG has the same year end as the Company so its results below
are those reflected in the unaudited management accounts for the
year ending 31 March 2012.
GBPm Mar Mar Growth
2011 2012
Revenue 14.8 18.9 27%
Gross profit 6.2 7.1 14%
EBITDA 2.1 2.1 0%
For the year ended 31 March 2012, OSG had a 27% growth in
revenues from GBP14.8 million to GBP18.9 million. Despite this
strong growth in revenues, EBITDA remained the same as in the
previous year at GBP2.1 million with the EBITDA margin going from
14% to 11%. The reduction in margin was primarily due to high
collection costs the company incurred in the regions of Russia
where storage volumes increased by 71%, driven mainly by
significant new business from Sberbank, the largest bank in Russia,
MTS, the largest mobile operator in Russia, and X5, the largest
retailer in Russia. During the financial year, the company won a
tender for the first time with the Government of Russia which it
hopes will open up further opportunities for Government work,
potentially an enormous source of new business. In the final
quarter of its financial year ended 31 March 2012, OSG's EBITDA
margins had recovered reaching 13% representing GBP0.7 million of
EBITDA, which was 1% higher than the 12% seen in its final quarter
in 2011, representing GBP0.5 million of EBITDA.
As at the end of March 2012 OSG had 3.3 million boxes in storage
showing 31% annual growth compared to March 2011. Net debt stood at
GBP6.4 million comprising bank debt and finance leases on racking
and vehicles of GBP5.0 million plus a GBP1.4 million reserve for
management options issued under the employee stock option
programme.
As OSG needs capital to continue to grow, it is continually
looking at ways to finance this growth and is currently in
discussions with a number of parties to this end. It has recently
secured a facility for RUR 80 million from J&T Bank in Russia
on competitive terms.
Superstroy
As with the remaining investments, Superstroy's fiscal year is
the calendar year. Year end unaudited results were as follows:
RURm Dec 2010 Dec 2011 Growth
Revenue 6,863 8,826 29%
Gross Profit 2,051 2,590 26%
EBITDA 245 185 -24%
Superstroy performed well for the year ended 31 December 2011
and, like other Russian retailers, it has had a very strong first
quarter of the year. Sales grew year on year by 29% from RUR6.9
billion to RUR8.8 billion and gross profit 26% from RUR2.1 billion
to RUR2.6 billion. EBITDA was down 24% from RUR 245 million to
RUR185 million principally due to the opening of its largest store
in Yekaterinburg in April 2011 which incurred large preopening
costs and other non recurring project costs of approximately RUR70
million. Without these one off costs EBITDA would have risen by 4%
to RUR255 million.
For the first 3 months of 2012 Superstroy had 21% growth in
revenues from RUR1.614 billion for the same period in 2011 to
RUR1.952 billion in 2012 with like-for-like growth of 8%. Due to
the seasonality of the DIY market in Russia, the first quarter of
the year is the weakest. March 2012 YTD EBITDA is slightly negative
at -RUR2.2 million however it has performed very well against a
budget of -RUR24 million and against March 2011 YTD of -RUR64
million. The company outperformed its net income budget by RUR46.5
million or approximately GBP1 million in the first quarter showing
a loss of -RUR51.9 million against its budget for the period of
-RUR98.4 million.
The company's net debt stood at RUR774 million at 31 March 2012,
RUR187 million less than the RUR961 million on 31 March 2011.
Unistream
Unistream's year end unaudited accounts for the year ended 31
December 2011 showed the following:
RUR m 2010 2011 Growth
Volumes (bn) 119.4 137.7 15%
Revenue 2,078 2,325 12%
Op Income 961 1,166 21%
EBITDA 67 167 149%
Unistream grew its volumes by 15% in 2011 from RUR119.4 billion
to RUR137.7 billion and its revenue by 12% from RUR2.1 billion to
RUR2.3 billion. Unistream had its most profitable year yet showing
profit before tax of RUR135 million up 256% from RUR36.6 million in
2010. EBITDA was up from RUR67 million to RUR167 million.
In the first three months of 2012 volumes continued to grow at
15% from RUR25.0 billion to RUR28.8 billion. Total revenues were
RUR476 million increasing 9% compared to the prior year period.
Unistream's operating income grew by 8% YoY driven mainly by the
growth of volumes though its own points of sale which grew at
17.6%. For the first 3 months of the current year the company
showed a loss of RUR50 million compared to a loss of RUR30 million
over the same period in 2011. The increased size of the first
quarter loss is primarily related to increases in costs related to
growth, however, the budget for 2012 shows continued growth in
profitability over 2011. Due to seasonality the company has always
registered a loss in the first quarter of the year. The first
quarter is always the weakest quarter of the year as many new
immigrants come to Russia once the construction season starts.
Unistream has now distributed c. 1.3 million loyalty cards to
its customers. The company is securing distribution through
retailers and is strengthening its internet, mobile phone and
payment terminal offerings.
Money transfer through retail chains such as the mobile phone
retailers in Russia has been an area of enormous growth over the
past 12 months. According to Unistream's management it now accounts
for approximately 25% of the total money transfer market in Russia
and by the end of 2012 could be as high as 35-40%. To date
Unistream has not been in this market but rather in the traditional
bank market. However, the company is now entering the retail market
and has won two important tenders to distribute its money transfer
product through Megafon which operates 1500 retail stores in Russia
and Rostelecom which has 2000 locations and is one of the largest
retailers in Russia.
Unistream grew its outbound market share by 1.2% to 16.9% in Q4
2011.
The company has no debt.
Flexinvest Bank
31 Mar 2011 31 Mar 2012
Assets
RURm
Mortgages 351 275
Corp loans 20 30
Credit cards 0 138
Other loans 4 1
Cash 124 211
License 126 126*
Bonds 119 47
Other assets 94 76
Total Assets 838 903
*held at cost rather than its current value
In the last quarter of 2011 Flexinvest Bank rebranded itself as
Flex Bank and began to issue Master Card credit cards and take
retail deposits. The Manager proposed to the Board early last year
to revise the bank's strategy from being a mortgage bank to
providing a simple credit card product funded with retail deposits.
At 31 March deposits reached RUR 160 million and the limit on its
credit card portfolio reached RUR 210 million. The strategy has
been a great success and the bank has already surpassed its 2012
budget on deposits and its July 2012 budget on its credit card
portfolio. At 24 April 2012, Flex Bank had 1,300 cards outstanding
with a total limit of RUR273 million and deposits also at RUR273
million. The bank outsources where possible and has an internet
banking offering. All of its credit card customers now come through
the internet and the bank has the ability to scale its business
without any further investment at this stage.
Enquiries:
Aurora Russia Limited
Geoff Miller +44 (0) 7408 830719
Numis Securities Limited
Nominated Adviser: Hugh Jonathan +44 (0)20 7260 1000
Corporate Broking: Rupert Krefting /
Nathan Brown
FTI Consulting
Ed Gascoigne-Pees +44 (0) 20 7269 7132
Jack Hickey
This information is provided by RNS
The company news service from the London Stock Exchange
END
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