Kazakhstan’s KCell Announced Year-end Report January-December 2016

Kazakhstan's Kcell Q2 Net Income Drops 87 Pct On Tax Provision

Year-end Report January-December 2016

Almaty, 27 January 2017 – Kcell Joint Stock Company (“Kcell” or the “Company”) (LSE, KASE: KCEL), the leading provider of mobile telecommunications services in Kazakhstan by market share in terms of revenue and subscribers, announces its results for the financial year ended 31 December 2016. 

Fourth quarter

·    Net sales decreased by 3.5 percent to KZT 38,223 million (39,604). Service revenue down 8.1 percent to KZT 34,779 million (37,841).

·    EBITDA, excluding non-recurring items, declined by 15.1 percent to KZT 14,485 million (17,062) with EBITDA margin of 37.9 percent (43.1). In December 2016, a KZT 3,962 million one-off adjustment was related to a tax provision. The KZT 2,027 million provision relates to previous years and reported as non-recurring item. KZT 362 million reported as an operating expense. KZT 745 million reported as a corporate income tax and KZT 829 million reported as an interest expense.

·    Operating income, excluding non-recurring items, decreased by 23.4 percent to KZT 8,355 million (10,909).

·    Net financial items of KZT -3,380 million (2,860).

·    Net income decreased by 84.9 percent to KZT 1,051 million (6,966).

·    Free cash flow amounted to KZT -12,301 million (5,821).

·    During the quarter, the customer base increased by 81 thousand to 9,986 thousand (9,905).

 

Full year

·    Net sales decreased by 12.7 percent to KZT 147,037 million (168,424). Service revenue down 12.7 percent to KZT 137,337 million (157,288).

·    EBITDA, excluding non-recurring items, decreased by 29.1 percent to KZT 57,989 million (81,787). The EBITDA margin decreased to 39.4 percent (48.6).

·    Operating income, excluding non-recurring items, was down 41.0 percent to KZT 33,740 million (57,213).

·    Net financial items of KZT -8,285 million (7,811).

·    Net income declined by 64.2 percent to KZT 16,684 million (46,632).

·    Free cash flow was down to KZT -13,293 million (32,400).

·    During the reporting year, the customer base decreased to 9,986 thousand (10,357).

Financial highlights

KZT in millions, except key ratios,
per share data and changes

Oct-Dec

2016

Oct-Dec

2015

Chg

(%)

Jan-Dec

2016

Jan-Dec

2015

Chg

(%)

Revenue

 38,223

 39,604

3.5

147,037

168,424

-12.7

of which service revenue

 34,779

 37,841

8.1

137,337

157,288

-12.7

EBITDA excl. non-recurring items

 14,485

 17,062

15.1

57,989

81,787

29.1

Margin (%)

37.9

43.1

39.4

48.6

Operating income

 6,267

 6,624

5.4

31,041

52,601

-41.0

Operating income excl. non-recurring items

 8,355

 10,909

23.4

33,740

57,213

-41.0

Net income attributable to owners of the parent company

 

 1,051

 

 6,966

 

84.9

16,684

46,632

-64.2

Earnings per share (KZT)

 5.3

 34.8

84.9

83.4

233.2

-64.2

CAPEX-to-sales (%)

23.1

19.4

34.7

11.0

Free cash flow

-12,301

5,821

-13,293

32,400


Comments by Arti Ots, CEO

“2016 was extremely challenging for Kcell, although at the end of the year we saw early signs of market stabilisation. Overall revenue for the full year declined compared with the previous year, but fourth quarter revenue rose quarter-on-quarter marking the third consecutive quarterly increase. The revenue improvement was partially driven by demand for contract phones, whilst services revenue was lower.

We are now seeing a positive interconnect balance with revenue exceeding costs and we expect this situation to continue in 2017. 

The accelerated rollout of 4G/LTE services is fully on track. By year-end, our 4G/LTE services covered 34 percent of the population. We are also seeing a significant growth in data traffic in the 4G network. The strategic network sharing partnership with Beeline Kazakhstan, in place since August 2016, has been progressing well, with both parties fulfilling their commitments.

We have also undertaken a number of technical improvements in order to further augment the quality of our network and customer services. In addition, we have successfully migrated our post-paid subscribers to a new billing system.

As we move into 2017, there are positive signs of economic recovery in Kazakhstan, with an easing in consumer price inflation and indications of growth in the economy.

In the coming year we will continue to implement a broad range of service and technology improvements in order to maintain our leading market position and provide additional value both to our customers and our shareholders.”

27 January 2017

Arti Ots

CEO

 

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