TIDMTNW
RNS Number : 1496J
Teleset Networks PCL
25 March 2010
Press Announcement
+------------------------------+---------------------------------------+
| FOR IMMEDIATE RELEASE | 25 March 2010 |
+------------------------------+---------------------------------------+
Teleset Networks continues to build leading position in the Volga region
Teleset Networks ("Teleset" or "the Company"), a leading alternative fixed-line
telecom operator in the Volga region of the Russian Federation, announces
results for the year ended 31 December 2009.
In 2009 the Company achieved strong financial results. The stable performance of
Teleset Networks despite the unfavourable economic circumstances testifies to
its sustainability and high potential.
The functional currency of the subsidiaries of Teleset Networks is the Russian
ruble whereas the presentational currency is the US dollar. As a result of the
substantial devaluation of the ruble, the presentation of the Company's results
in US dollars does not reflect the true underlying performance of Teleset
Networks, which is both steady and encouraging.
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| | 2008, | 2009, | Growth | 2008, | 2009, | Growth |
| | USD | USD | | RUR | RUR | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| Operating | 30,623,447 | 30,915,390 | 1.0% | 764,946,145 | 987,230,423 | 29% |
| revenue | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| Operating | (18,287,108) | (18,778,570) | -2.7% | (456,795,499) | (599,661,709) | -31% |
| expenses | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| Operating | 12,796,874 | 12,812,695 | 0.1% | 319,654,395 | 409,151,633 | 28% |
| profit | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| EBITDA | 17,179,461 | 18,376,839 | 7.0% | 429,127,474 | 586,833,113 | 37% |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| Net | 8,562,435* | 8,728 | 1.9% | 213,881,920* | 278,713,970* | 30% |
| profit | | 004* | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| EBITDA | 56% | 59% | | | | |
| margin | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
| Net | 28% | 28% | | | | |
| profit | | | | | | |
| margin | | | | | | |
+-----------+--------------+--------------+--------+---------------+---------------+--------+
* Net profit attributable to the equity holders of the holding company.
"Following a very encouraging performance in 2009, we will continue to strive
for even higher levels of customer service and product quality, thereby winning
market share and increasing revenues".
Yiannis Demetriou, Chief Executive Officer
CONTACTS
+-----------------------------------------+--------------------+
| Teleset Networks | +357 22 450 790 |
+-----------------------------------------+--------------------+
| Yiannis Demetriou | |
+-----------------------------------------+--------------------+
| | |
+-----------------------------------------+--------------------+
| Astaire Securities - Nominated Adviser | +44 20 7448 4400 |
| & Broker | |
+-----------------------------------------+--------------------+
| Shane Gallwey | |
+-----------------------------------------+--------------------+
| | |
+-----------------------------------------+--------------------+
| Bankside Consultants - Financial PR | +44 20 7367 8888 |
| adviser | |
+-----------------------------------------+--------------------+
| Simon Bloomfield or Andy Harris | |
+-----------------------------------------+--------------------+
Chairman's statement
During 2009, Teleset Networks successfully responded to business challenges,
created by a volatile economy, by drawing on the Group's financial strength,
flexibility and disciplined execution. All areas of operation, in Kazan,
Naberezhnye Chelny and Ulyanovsk, continued to gain market share and achieved
growth in revenues, earnings and cash flow for the year. Under the
circumstances, the results achieved were above expectations, which is a
testament to the strength of the business and our market position.
Customer base
Our success reflects the strong demand of our customers for modern and
innovative communication products and services with businesses and private
consumers wanting more connectivity, higher access speeds to the Internet, new
service applications and richer content at competitive pricing. Teleset Networks
is well positioned to satisfy this demand.
At 31 December 2009 the number of broadband users, which remain our main revenue
growth engine, had increased by 70 per cent year-on-year to more than 44,900. At
the same date, the total number of our telephone subscribers was 161,300.
In the global enterprise market, customers are looking for communication
companies able to provide a full range of strategic capabilities. Looking ahead,
we anticipate growth in demand for communication products and services that will
enable companies to run their businesses effectively and with greater capital
efficiency, reduce travel expenses, save energy costs and connect their global
workforces and supply chains. The investment we have made in our network
infrastructure will help us maintain our network superiority, stay ahead of the
needs of our customers and create additional value for our shareholders.
Board of directors and employees
In April 2009 Mr. Georgui Horozov, a Non-Executive Director representing the
Black Sea Trade and Development Bank ("BSTDB"), resigned from the Board
following his departure from BSTDB. We thank him for his commitment and
contribution to the successful development of the Company.
I would also like to thank my other Board colleagues for their invaluable input
in building up Teleset Networks' future.
My special gratitude goes to our employees who, as a result of their dedication
to work, drive and commitment, are the cornerstone of the Company's continuing
success.
Future prospects
I am confident that Teleset Networks has a bright long-term future. This
confidence emanates from the knowledge that we are offering high-quality
services at competitive prices in every market segment. By offering superior
broadband and entertainment services to fit today's digital lifestyle, the
Company is in an ideal position to benefit from a buoyant market.
Philippos Vatiliotis, Non-executive Chairman
Chief Executive's statement
Our experience during 2009 demonstrates the resilience of the growth in global
demand to stay connected, by phone or by Internet. Businesses and private
consumers are looking for more convenience while communicating and searching for
information, as well as for higher speeds, more mobility and expanded access to
Internet applications.
Through our continued focus on meeting this demand, the Company achieved strong
results for 2009. We grew revenues and earnings per share. We strengthened our
position in key customer segments and improved the quality of service. At the
same time, we maintained our efforts to control expenses and to improve business
processes, and our success in attaining all our targets is reflected in our
financial performance for the year.
New horizons
In 2009 we considerably increased our foothold in the fast growing broadband
market where our customer base increased by an outstanding 70 per cent. At 31
December 2009, the Company served over 44,900 broadband subscribers in its areas
of operation. Broadband remains a major revenue driver and considerably boosted
our financial performance.
As for fixed-line telephony, at 31 December 2009 Teleset Networks served 161,300
telephone subscribers. Customer churn caused by a slowdown in the economy was
limited and, whilst we do not expect any substantial growth in this market, we
expect it to remain a stable and reliable source of revenue.
The cable TV service continued to attract new subscribers. In 2009 our focused
marketing efforts led to a 59 per cent year-on-year increase in cable TV
subscriptions.
Another contributor to the Company's growth was incremental revenue after the
launch of a zonal network at the end of 2008. It started to generate revenue
during 2009 and we anticipate that this will become an increasingly significant
source of revenue in the future.
We have been concentrating our efforts on attracting new business clients and
building strong relationships with them. Corporate customers represent an
increasing proportion of our subscriber base and increased to 12 per cent by 31
December 2009. Although business clients constitute just a small proportion of
the total subscriber numbers, this is a crucial segment with a much higher ARPU
than that achievable with residential customers.
Maintaining customer focus
2009 was a year of customer focus for Teleset Networks. Our emphasis on customer
service, tailored marketing and client loyalty programmes throughout the year
enabled us to attract new customers as well as limit customer churn and mitigate
the impact of recession in a highly competitive environment.
An important contributor to this success was the launch of a unified call-centre
for Kazan and Naberezhnye Chelny. Now all our customers, whether residential or
corporate, fixed-line or broadband subscribers, can access comprehensive advice
on our services, tariffs and the latest technologies. We are continuing to
invest in new call-centre capacity in line with the growth in the number of
subscribers.
We continue to pursue our goal to become the leader in customer service in the
cities we operate, launching a client satisfaction programme with a view to
measuring and improving our service. At the same time, we introduced programmes
designed to increase the level of the professional competence and communication
skills of our employees. This was achieved largely by the inauguration of the
corporate educational centre providing a library and training opportunities for
management and support staff.
During 2009 we made further progress in strengthening direct sales. The number
of commercial agents offering the services of Teleset Networks was significantly
increased. All agents receive substantial training and are admitted to the sales
only after they pass an exam to prove that they have the required level of
knowledge and skill.
Since the summer of 2009, our clients have been able to subscribe to our
services both separately and as part of a range of tailor-made packages from
which they can benefit from significant financial incentives. Our ability to
offer bundled solutions at attractive prices increases customer loyalty and
strengthens our market position in both corporate and business sectors.
For clients subscribing to several services, Teleset Networks provides single
billing for all services.
In 2009 we also concluded new contracts with a number of banks and payment
systems providers, significantly expanding the number and range of places where
our subscribers can pay their monthly bills and credit their accounts.
As part of a continuous effort to attract and retain customers and to generate
incremental revenues from our network, last year saw significant progress with
the introduction of new products and services. For example, we have been
successful with developing end-user Wi Fi sales, enabling our customers to enjoy
internet access anywhere in their apartments or offices without the need for
cables.
Results
Despite the financial downturn, the results we achieved for 2009 were above
management's expectations.
The functional currency of the subsidiaries of Teleset Networks is the Russian
ruble whereas the presentational currency is the US dollar. As a result of the
substantial devaluation of the ruble, the presentation of the Company's results
in US dollars does not reflect the strength of the underlying performance of
Teleset Networks, which we believe is both excellent and demonstrates a
significantly better operational performance than our peers.
For the year ended 31 December 2009, Teleset's operating revenue was US$ 30.9
million, an increase of 1 per cent over the previous year (2008: US$ 30.6
million). In rubles operating revenue grew by 29 per cent to over RUR 987.2
million (2008: RUR 764.9 million).
Net profit for the period was US$ 8.7 million, an increase on 2008 of 1.9 per
cent (2008: US$ 8.6 million). In functional currency terms, the increase was 30
per cent to RUR 278.7 million (2008: RUR 213.9 million).
EBITDA, taken in RUR, also demonstrates impressive progress. Compared to 31
December 2008 it grew by 37 per cent and at 31 December 2009 was RUR 586.8
million (or US$ 18.4 million).
EBITDA margin increased to 59 per cent for the period (2008: 56 per cent).
Internet services continue to generate sustainable income which in 2009 was US$
9.4 million or 30.3 per cent of total revenues.
An important contributor to the Group's income remains telephony rental fees
which were US$ 9.6 million, constituting 30.9 per cent of total income for the
period.
Revenues generated by the operation of the zonal network constituted a
considerable portion of the total revenues - 13.2 per cent or over US$ 4
million.
+------------------------+------------+-------------+---------+
| | US$ | RUR | Share |
| | | | in |
| | | |revenue |
+------------------------+------------+-------------+---------+
| Telephony - Connection | 191,172 | 6,104,753 | 0.6% |
| fees | | | |
+------------------------+------------+-------------+---------+
| Telephony - Rental | 9,560,337 | 305,293,110 | 30.9% |
| fees | | | |
+------------------------+------------+-------------+---------+
| Telephony - Traffic | 2,467,405 | 78,792,384 | 8.0% |
| fees | | | |
+------------------------+------------+-------------+---------+
| ISDN - Connection fees | 75,423 | 2,408,505 | 0.2% |
+------------------------+------------+-------------+---------+
| ISDN - Rental and | 1,933,964 | 61,757,853 | 6.3% |
| traffic fees | | | |
+------------------------+------------+-------------+---------+
| Internet services | 9,377,642 | 299,459,055 | 30.3% |
+------------------------+------------+-------------+---------+
| IP Services | 430,126 | 13,735,343 | 1.4% |
+------------------------+------------+-------------+---------+
| Sundry income | 2,791,282 | 89,134,845 | 9.0% |
+------------------------+------------+-------------+---------+
| Revenue for Zonal, LD, | 4,088,039 | 130,544,576 | 13.2% |
| ILD | | | |
+------------------------+------------+-------------+---------+
| Total operating | 30,915,390 | 987,230,423 | 100.0% |
| revenue | | | |
+------------------------+------------+-------------+---------+
Operation of acquired companies
The Teleset Networks Group continues to encompass four companies: Teleset and
TNPKO in Kazan, Teleset branch in Naberezhnye Chelny and STS in Ulyanovsk.
The integration of our latest acquisition, STS in Ulyanovsk, was successfully
completed as planned in March 2009. The corporate billing, financial accounting
and informational systems, as well as business processes and standards, were all
introduced in the company.
In 2009 we made no further acquisitions and concentrated on fortifying the
companies acquired previously.
Prospects
Following a very encouraging performance in 2009, we will continue to strive for
even higher levels of customer service and product quality, thereby winning
market share and increasing revenues.
As we move into 2010, there are signs of an improving economic landscape but
much uncertainty remains. Nevertheless, we are confident in the Company's
operations and optimistic about the future. The experience and skills we have
developed in marketing and sales, together with our strong technology and
innovation in products and services, will keep Teleset Networks at the forefront
of the telecom industry of the Volga region.
Yiannis Demetriou, Chief Executive Officer
Consolidated statement of financial position
Year ended 31 December 2009
+---------------------+--------+------------------------+------------------------+
| | | 2009 | 2008 |
+---------------------+--------+------------------------+------------------------+
| | Note | USD | USD |
+---------------------+--------+------------------------+------------------------+
| ASSETS | | | |
+---------------------+--------+------------------------+------------------------+
| Non-current | | | |
| assets | | | |
+---------------------+--------+------------------------+------------------------+
| Property, | 1 | 32,417,143 | 32,209,568 |
| plant and | | | |
| equipment | | | |
+---------------------+--------+------------------------+------------------------+
| Intangible | 2 | 27,561,007 | 28,559,091 |
| assets | | | |
+---------------------+--------+------------------------+------------------------+
| | | 59,978,150 | 60,768,659 |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Current | | | |
| assets | | | |
+---------------------+--------+------------------------+------------------------+
| Inventories | 4 | 2,421,964 | 3,185,603 |
| | | | |
+---------------------+--------+------------------------+------------------------+
| Trade | 5 | 6,672,901 | 6,826,416 |
| and | | | |
| other | | | |
| receivables | | | |
+---------------------+--------+------------------------+------------------------+
| Current | | | 370,120 |
| tax | | - | |
| asset | | | |
+---------------------+--------+------------------------+------------------------+
| Cash | | 24,066,960 | 22,588,307 |
| at | | | |
| bank | | | |
| and in | | | |
| hand | | | |
+---------------------+--------+------------------------+------------------------+
| | | 33,161,825 | 32,970,446 |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Total | | 93,139,975 | 93,739,105 |
| assets | | | |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| EQUITY | | | |
| AND | | | |
| LIABILITIES | | | |
+---------------------+--------+------------------------+------------------------+
| Equity attributable | | | |
| to owners of the | | | |
| parent | | | |
+---------------------+--------+------------------------+------------------------+
| Share | 6 | 4,335,361 | 4,335,361 |
| capital | | | |
+---------------------+--------+------------------------+------------------------+
| Other | | 27,759,033 | 28,084,984 |
| reserves | | | |
+---------------------+--------+------------------------+------------------------+
| Retained | | 26,501,405 | 17,773,401 |
| earnings | | | |
+---------------------+--------+------------------------+------------------------+
| | | 58,595,799 | 50,193,746 |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Minority | | 4,754,586 | 4,023,233 |
| interest | | | |
+---------------------+--------+------------------------+------------------------+
| Total | | 63,350,385 | 54,216,979 |
| equity | | | |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Non-current | | | |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
| Borrowings | 7 | 16,805,856 | 22,770,642 |
+---------------------+--------+------------------------+------------------------+
| Deferred | | 2,986,988 | 3,107,243 |
| tax | | | |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
| Deferred | 9 | 78,260 | 90,013 |
| income | | | |
+---------------------+--------+------------------------+------------------------+
| | | 19,871,104 | 25,967,898 |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Current | | | |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
| Trade | 8 | 3,691,371 | 5,737,582 |
| and | | | |
| other | | | |
| payables | | | |
+---------------------+--------+------------------------+------------------------+
| Deferred | 9 | 12,754 | 13,707 |
| income | | | |
+---------------------+--------+------------------------+------------------------+
| Borrowings | 7 | 6,000,000 | 7,802,939 |
+---------------------+--------+------------------------+------------------------+
| Current | | 214,361 | |
| tax | | | - |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
| | | 9,918,486 | 13,554,228 |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Total | | 29,789,590 | 39,522,126 |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
| | | | |
+---------------------+--------+------------------------+------------------------+
| Total | | 93,139,975 | 93,739,105 |
| equity | | | |
| and | | | |
| liabilities | | | |
+---------------------+--------+------------------------+------------------------+
On 24 March 2010 the Board of Directors of Teleset Networks Public Company
Limited authorised these financial statements for issue.
+--------------------------------------+--------------------------------------+
| | |
+--------------------------------------+--------------------------------------+
| .................................... | .................................... |
+--------------------------------------+--------------------------------------+
| Philippos Vatiliotis | Yiannis Demetriou |
+--------------------------------------+--------------------------------------+
| Non-Executive Chairman | Chief Executive Officer |
+--------------------------------------+--------------------------------------+
Consolidated income statement
Year ended 31 December 2009
+--------------+--------+--------------------------+--------------------------+
| | | | |
+--------------+--------+--------------------------+--------------------------+
| | | 2009 | 2008 |
+--------------+--------+--------------------------+--------------------------+
| | Note | USD | USD |
+--------------+--------+--------------------------+--------------------------+
| | | | |
+--------------+--------+--------------------------+--------------------------+
| Revenue | 11 | 30,915,390 | 30,623,447 |
+--------------+--------+--------------------------+--------------------------+
| Operating | | (18,778,570) | (18,287,108) |
| expenses | | | |
+--------------+--------+--------------------------+--------------------------+
| Other | | 675,875 | 460,535 |
| income | | | |
+--------------+--------+--------------------------+--------------------------+
| Operating | 12 | 12,812,695 | 12,796,874 |
| profit | | | |
+--------------+--------+--------------------------+--------------------------+
| Finance | 13 | 1,310,756 | 1,689,764 |
| income | | | |
+--------------+--------+--------------------------+--------------------------+
| Finance | 13 | (1,450,053) | (2,532,820) |
| costs | | | |
+--------------+--------+--------------------------+--------------------------+
| Profit | | 12,673,398 | 11,953,818 |
| before | | | |
| tax | | | |
+--------------+--------+--------------------------+--------------------------+
| | | | |
+--------------+--------+--------------------------+--------------------------+
| Income | | (3,114,189) | (3,138,748) |
| tax | | | |
+--------------+--------+--------------------------+--------------------------+
| Profit | | 9,559,209 | 8,815,070 |
| for | | | |
| the | | | |
| year | | | |
+--------------+--------+--------------------------+--------------------------+
| | | | |
+--------------+--------+--------------------------+--------------------------+
| Attributable | | | |
| to: | | | |
+--------------+--------+--------------------------+--------------------------+
| | | 8,728,004 | 8,562,435 |
| Owners | | | |
| of the | | | |
| parent | | | |
+--------------+--------+--------------------------+--------------------------+
| | | 831,205 | 252,635 |
| Minority | | | |
| interest | | | |
+--------------+--------+--------------------------+--------------------------+
| | | 9,559,209 | 8,815,070 |
+--------------+--------+--------------------------+--------------------------+
| | | | |
+--------------+--------+--------------------------+--------------------------+
| Earnings | 14 | | |
| per | | | |
| share | | | |
| (cent) | | | |
+--------------+--------+--------------------------+--------------------------+
| Basic | | 5.54 | 5.58 |
| earnings | | | |
| per | | | |
| share | | | |
+--------------+--------+--------------------------+--------------------------+
| Diluted | | 5.18 | 5.15 |
| earnings | | | |
| per | | | |
| share | | | |
+--------------+--------+--------------------------+--------------------------+
Consolidated statement of comprehensive income
Year ended 31 December 2009
+---------------+--------+-----------------------+--------------------------+
| | | | |
+---------------+--------+-----------------------+--------------------------+
| | | 2009 | 2008 |
+---------------+--------+-----------------------+--------------------------+
| | Note | USD | USD |
+---------------+--------+-----------------------+--------------------------+
| | | | |
+---------------+--------+-----------------------+--------------------------+
| Profit | | 9,559,209 | 8,815,070 |
| for | | | |
| the | | | |
| year | | | |
+---------------+--------+-----------------------+--------------------------+
| | | | |
+---------------+--------+-----------------------+--------------------------+
| Comprehensive | | | |
| income | | | |
+---------------+--------+-----------------------+--------------------------+
| Exchange | | (630,543) | (10,841,881) |
| difference | | | |
| arising on | | | |
| the | | | |
| translation | | | |
| and | | | |
| consolidation | | | |
| of foreign | | | |
| subsidiaries | | | |
+---------------+--------+-----------------------+--------------------------+
| Deferred | | 126,107 | 2,092,638 |
| taxation | | | |
| on the | | | |
| translation | | | |
| of foreign | | | |
| operations | | | |
+---------------+--------+-----------------------+--------------------------+
| Other | | (504,436) | (8,749,243) |
| comprehensive | | | |
| income after | | | |
| tax | | | |
+---------------+--------+-----------------------+--------------------------+
| | | | |
+---------------+--------+-----------------------+--------------------------+
| Total | | 9,054,773 | 65,827 |
| comprehensive | | | |
| income for | | | |
| the year | | | |
+---------------+--------+-----------------------+--------------------------+
| | | | |
+---------------+--------+-----------------------+--------------------------+
| Attributable | | | |
| to: | | | |
+---------------+--------+-----------------------+--------------------------+
| Owners | | 8,323,420 | (212,700) |
| of the | | | |
| parent | | | |
+---------------+--------+-----------------------+--------------------------+
| Minority | | 731,353 | 278,527 |
| interest | | | |
+---------------+--------+-----------------------+--------------------------+
| | | 9,054,773 | 65,827 |
+---------------+--------+-----------------------+--------------------------+
Consolidated statement of changes in equity
Year ended 31 December 2009
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | Attributable to the owners of the | | |
| | parent | | |
+---------------+---------------------------------------------------------------------------------------------------+-----------------------+--------------------------+
| | Share | Other | Retained | Total | Minority | Total |
| | capital | reserves | earnings | | interest | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | USD | USD | USD | USD | USD | USD |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| At 1 | 3,082,011 | 28,112,295 | 9,210,966 | 40,405,272 | | 40,405,272 |
| January | | | | | - | |
| 2008 | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Comprehensive | | | | | | |
| income | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Profit | | | 8,562,435 | 8,562,435 | 252,635 | 8,815,070 |
| for | - | - | | | | |
| the | | | | | | |
| year | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Exchange | | (10,867,773) | | (10,867,773) | 25,892 | (10,841,881) |
| differences | - | | - | | | |
| on the | | | | | | |
| translation | | | | | | |
| of foreign | | | | | | |
| operations | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Deferred | | 2,092,638 | | 2,092,638 | | 2,092,638 |
| taxation | - | | - | | - | |
| on the | | | | | | |
| translation | | | | | | |
| of foreign | | | | | | |
| operations | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Total | | (8,775,135) | 8,562,435 | (212,700) | 278,527 | 65,827 |
| comprehensive | - | | | | | |
| income for | | | | | | |
| 2008 | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Other | | | | | | |
| equity | | | | | | |
| changes | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Issue | 630,726 | 9,240,296 | | 9,871,022 | | 9,871,022 |
| of | | | - | | - | |
| share | | | | | | |
| capital | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Exchange | 622,624 | (622,624) | | | | |
| difference | | | - | - | - | - |
| from the | | | | | | |
| conversion | | | | | | |
| of share | | | | | | |
| capital | | | | | | |
| into Euros | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Equity | | 130,152 | | 130,152 | | 130,152 |
| share | - | | - | | - | |
| based | | | | | | |
| payments | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Acquisitions | | | | | 3,744,706 | 3,744,706 |
| through | - | - | - | - | | |
| business | | | | | | |
| combinations | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | 1,253,350 | 8,747,824 | | 10,001,174 | 3,744,706 | 13,745,880 |
| | | | - | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| At 31 | 4,335,361 | 28,084,984 | 17,773,401 | 50,193,746 | 4,023,233 | 54,216,979 |
| December | | | | | | |
| 2008/ 1 | | | | | | |
| January | | | | | | |
| 2009 | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Comprehensive | | | | | | |
| income | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Profit | | | 8,728,004 | 8,728,004 | 831,205 | 9,559,209 |
| for | - | - | | | | |
| the | | | | | | |
| year | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Exchange | | (505,728) | | (505,728) | (124,815) | (630,543) |
| differences | - | | - | | | |
| on the | | | | | | |
| translation | | | | | | |
| of foreign | | | | | | |
| operations | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Deferred | | 101,144 | | 101,144 | 24,963 | 126,107 |
| taxation | - | | - | | | |
| on the | | | | | | |
| translation | | | | | | |
| of foreign | | | | | | |
| operations | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Total | | (404,584) | 8,728,004 | 8,323,420 | 731,353 | 9,054,773 |
| comprehensive | - | | | | | |
| income for | | | | | | |
| 2009 | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Other | | | | | | |
| equity | | | | | | |
| changes | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| Equity | | 78,633 | | 78,633 | | 78,633 |
| share | - | | - | | - | |
| based | | | | | | |
| payments | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
| At 31 | 4,335,361 | 27,759,033 | 26,501,405 | 58,595,799 | 4,754,586 | 63,350,385 |
| December | | | | | | |
| 2009 | | | | | | |
+---------------+---------------------+--------------------------+-----------------------+--------------------------+-----------------------+--------------------------+
Consolidated statement of cash flows
Year ended 31 December 2009
+--------------------------------------------+------+-------------+--------------+
| | | | |
+--------------------------------------------+------+-------------+--------------+
| | | 2009 | 2008 |
+--------------------------------------------+------+-------------+--------------+
| |Note | USD | USD |
+--------------------------------------------+------+-------------+--------------+
| Operating activities | | | |
+--------------------------------------------+------+-------------+--------------+
| Profit before tax | | 12,673,398 | 11,953,818 |
+--------------------------------------------+------+-------------+--------------+
| Adjustments: | | | |
+--------------------------------------------+------+-------------+--------------+
| Depreciation of property, plant and | 1 | 5,318,466 | 4,193,706 |
| equipment | | | |
+--------------------------------------------+------+-------------+--------------+
| Share based payment | | 78,633 | 130,152 |
+--------------------------------------------+------+-------------+--------------+
| Amortisation of computer software | 2 | 75,895 | 62,236 |
+--------------------------------------------+------+-------------+--------------+
| Amortisation of number capacity | 2 | 169,783 | 126,645 |
+--------------------------------------------+------+-------------+--------------+
| Loss / (profit) from the sale of property, | | 6,551 | (85,397) |
| plant and equipment | | | |
+--------------------------------------------+------+-------------+--------------+
| Interest income | 13 | (1,310,756) | (1,689,764) |
+--------------------------------------------+------+-------------+--------------+
| Interest expense and other finance costs | 13 | 921,108 | 1,904,575 |
+--------------------------------------------+------+-------------+--------------+
| | | 17,933,078 | 16,595,971 |
+--------------------------------------------+------+-------------+--------------+
| Changes in working capital: | | | |
+--------------------------------------------+------+-------------+--------------+
| Inventories | | 1,383,790 | (1,083,343) |
+--------------------------------------------+------+-------------+--------------+
| Trade and other receivables | | 1,473,660 | 983,619 |
+--------------------------------------------+------+-------------+--------------+
| Trade and other payables | | (3,031,260) | (3,587) |
+--------------------------------------------+------+-------------+--------------+
| Deferred income | | (12,706) | 103,720 |
+--------------------------------------------+------+-------------+--------------+
| Cash flows from operations | | 17,746,562 | 16,596,380 |
+--------------------------------------------+------+-------------+--------------+
| Tax paid | | (2,428,801) | (3,378,875) |
+--------------------------------------------+------+-------------+--------------+
| Net cash from operating activities | | 15,317,761 | 13,217,505 |
+--------------------------------------------+------+-------------+--------------+
| | | | |
+--------------------------------------------+------+-------------+--------------+
| Investing activities | | | |
+--------------------------------------------+------+-------------+--------------+
| Payment for purchase of intangible assets | 2 | (165,900) | (113,159) |
+--------------------------------------------+------+-------------+--------------+
| Payment for purchase of property, plant | 1 | (6,172,245) | (7,494,452) |
| and equipment | | | |
+--------------------------------------------+------+-------------+--------------+
| Acquisition of subsidiaries, net cash | | - | (15,682,259) |
| outflow on acquisition | | | |
+--------------------------------------------+------+-------------+--------------+
| Proceeds from disposal of property, plant | 1 | 335,630 | 268,039 |
| and equipment | | | |
+--------------------------------------------+------+-------------+--------------+
| Interest received | | 1,310,756 | 1,689,764 |
+--------------------------------------------+------+-------------+--------------+
| Net cash used in investing activities | | (4,691,759) | (21,332,067) |
+--------------------------------------------+------+-------------+--------------+
| | | | |
+--------------------------------------------+------+-------------+--------------+
| Financing activities | | | |
+--------------------------------------------+------+-------------+--------------+
| Proceeds from issue of share capital | | - | 9,871,022 |
+--------------------------------------------+------+-------------+--------------+
| Repayments of borrowings | | (7,767,725) | (1,955,964) |
+--------------------------------------------+------+-------------+--------------+
| Proceeds from borrowings | | - | 9,877,415 |
+--------------------------------------------+------+-------------+--------------+
| Interest and other finance costs paid | | (921,108) | (1,904,575) |
+--------------------------------------------+------+-------------+--------------+
| Net cash (used in) / from financing | | (8,688,833) | 15,887,898 |
| activities | | | |
+--------------------------------------------+------+-------------+--------------+
| | | | |
+--------------------------------------------+------+-------------+--------------+
| Net increase in cash and cash equivalents | | 1,937,169 | 7,773,336 |
+--------------------------------------------+------+-------------+--------------+
| Cash and cash equivalents: | | | |
+--------------------------------------------+------+-------------+--------------+
| At beginning of the year | | 22,588,296 | 15,024,993 |
+--------------------------------------------+------+-------------+--------------+
| Effect of exchange rate fluctuations on | | (458,505) | (210,022) |
| cash held | | | |
+--------------------------------------------+------+-------------+--------------+
| At end of the year | | 24,066,960 | 22,588,307 |
+--------------------------------------------+------+-------------+--------------+
Notes to the consolidated financial statements
Year ended 31 December 2009
1. Property, plant and equipment
+--------------+-------------+-------------------+-----------+-------------+-------------+
| | Land and | Telecommunication | Motor | Furniture, | Total |
| | premises | equipment | vehicles | fixtures | |
| | | | | and | |
| | | | | computer | |
| | | | | hardware | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| | USD | USD | USD | USD | USD |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Cost | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 1 January | 5,804,918 | 37,191,933 | 1,032,056 | 4,705,161 | 48,734,068 |
| 2008 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Additions | 650,829 | 4,953,634 | 216,977 | 1,673,012 | 7,494,452 |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Disposals | (61,771) | (101,185) | (78,907) | (28,537) | (270,400) |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Exchange | (1,111,431) | (8,340,410) | (146,296) | (376,554) | (9,974,691) |
| differences | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Acquisitions | 303,375 | 9,491,413 | 43,132 | 500,116 | 10,338,036 |
| through | | | | | |
| business | | | | | |
| combinations | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Transfers | 10,479 | 904,814 | (4,214) | (911,079) | - |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 5,596,399 | 44,100,199 | 1,062,748 | 5,562,119 | 56,321,465 |
| December | | | | | |
| 2008/ 1 | | | | | |
| January 2009 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Additions | 306,499 | 5,215,445 | 126,027 | 524,274 | 6,172,245 |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Disposals | (93,738) | (421,759) | (146,193) | (316,608) | (978,298) |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Exchange | (194,234) | (1,423,706) | (239,458) | (1,325,570) | (3,182,968) |
| differences | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 5,614,926 | 47,470,179 | 803,124 | 4,444,215 | 58,332,444 |
| December | | | | | |
| 2009 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Depreciation | | | | | |
| | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 1 January | 605,885 | 14,052,971 | 534,615 | 3,061,382 | 18,254,853 |
| 2008 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Charge for | 211,770 | 3,466,186 | 142,982 | 372,768 | 4,193,706 |
| the year | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| On disposals | (450) | (7,768) | (66,727) | (12,813) | (87,758) |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Exchange | (151,960) | (3,881,456) | (84,660) | (110,917) | (4,228,993) |
| differences | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Acquisitions | 984 | 5,563,221 | 28,667 | 387,217 | 5,980,089 |
| through | | | | | |
| business | | | | | |
| combinations | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 666,229 | 19,193,154 | 554,877 | 3,697,637 | 24,111,897 |
| December | | | | | |
| 2008/ 1 | | | | | |
| January 2009 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Charge for | 233,410 | 4,408,916 | 157,941 | 518,199 | 5,318,466 |
| the year | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| On disposals | - | (250,261) | (106,582) | (279,274) | (636,117) |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Exchange | (21,987) | (1,138,175) | (142,640) | (1,576,143) | (2,878,945) |
| differences | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 877,652 | 22,213,634 | 463,596 | 2,360,419 | 25,915,301 |
| December | | | | | |
| 2009 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| Net book | | | | | |
| amount | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 4,737,274 | 25,256,545 | 339,528 | 2,083,796 | 32,417,143 |
| December | | | | | |
| 2009 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
| At 31 | 4,930,170 | 24,907,045 | 507,871 | 1,864,482 | 32,209,568 |
| December | | | | | |
| 2008 | | | | | |
+--------------+-------------+-------------------+-----------+-------------+-------------+
In the cash flow statement, proceeds from sale of property, plant and equipment
comprise:
+-------------------------------------------------+---------------------+---------------------+
| | 2009 | 2008 |
+-------------------------------------------------+---------------------+---------------------+
| | USD | USD |
+-------------------------------------------------+---------------------+---------------------+
| Net book amount | 342,181 | 182,642 |
+-------------------------------------------------+---------------------+---------------------+
| (Loss) / profit from the sale of property, | (6,551) | 85,397 |
| plant and equipment | | |
+-------------------------------------------------+---------------------+---------------------+
| Proceeds from disposal of property, plant and | 335,630 | 268,039 |
| equipment | | |
+-------------------------------------------------+---------------------+---------------------+
Bank borrowings are secured on premises and equipment to the value of USD
9,923,162 (2008: USD 16,540,661) (Note 7).
2. Intangible assets
+--------------------------+-------------+-----------+-------------+-------------+
| | Goodwill | Computer | Number | |
| | (Note | software | capacity | Total |
| | 3) | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| | USD | USD | USD | USD |
+--------------------------+-------------+-----------+-------------+-------------+
| Cost | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| At 1 January 2008 | 8,689,341 | 779,385 | 8,389,641 | 17,858,367 |
+--------------------------+-------------+-----------+-------------+-------------+
| Additions | - | 113,159 | - | 113,159 |
+--------------------------+-------------+-----------+-------------+-------------+
| Exchange differences | (3,271,796) | (59,399) | (2,119,030) | (5,450,225) |
+--------------------------+-------------+-----------+-------------+-------------+
| Acquisitions through | 11,810,442 | - | 4,823,695 | 16,634,137 |
| business combinations | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2008/ 1 | 17,227,987 | 833,145 | 11,094,306 | 29,155,438 |
| January 2009 | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Additions | - | 165,900 | - | 165,900 |
+--------------------------+-------------+-----------+-------------+-------------+
| Exchange differences | (573,697) | (167,832) | (369,444) | (1,110,973) |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2009 | 16,654,290 | 831,213 | 10,724,862 | 28,210,365 |
+--------------------------+-------------+-----------+-------------+-------------+
| | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Amortisation | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| At 1 January 2008 | - | 374,007 | 82,998 | 457,005 |
+--------------------------+-------------+-----------+-------------+-------------+
| Charge for the year | - | 62,236 | 126,645 | 188,881 |
| (Note 12) | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Exchange differences | - | (21,297) | (28,242) | (49,539) |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2008/ 1 | - | 414,946 | 181,401 | 596,347 |
| January 2009 | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Charge for the year | - | 75,895 | 169,783 | 245,678 |
| (Note 12) | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Exchange differences | - | (88,342) | (104,325) | (192,667) |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2009 | - | 402,499 | 246,859 | 649,358 |
+--------------------------+-------------+-----------+-------------+-------------+
| | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| Net book amount | | | | |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2009 | 16,654,290 | 428,714 | 10,478,003 | 27,561,007 |
+--------------------------+-------------+-----------+-------------+-------------+
| At 31 December 2008 | 17,227,987 | 418,199 | 10,912,905 | 28,559,091 |
+--------------------------+-------------+-----------+-------------+-------------+
The average remaining useful life of number capacity is 72 years,
3. Goodwill
Goodwill acquired in a business combination is allocated to the cash generating
units (CGU's) that are expected to benefit from that business combination.
Goodwill represents the premium paid over the fair value of the net assets
obtained during the acquisition of TNPKO, Svyazinvest and OOO Simbirsky
Telecommunications Systems.
The Group tests goodwill for impairment annually, or more frequently if there
are indications that goodwill might be impaired. Goodwill is allocated to the
Group's cash generating units (CGUs) for impairment test purposes as follows:
+-----------------------------+------------+-------------+------------+-------------+
| | Carrying | Recoverable | Carrying | Recoverable |
| | amount | amount | amount | amount |
+-----------------------------+------------+-------------+------------+-------------+
| | 2009 | 2009 | 2008 | 2008 |
+-----------------------------+------------+-------------+------------+-------------+
| | USD | USD | USD | USD |
+-----------------------------+------------+-------------+------------+-------------+
| TNPKO | 3,767,415 | 14,404,337 | 3,897,192 | 13,260,825 |
+-----------------------------+------------+-------------+------------+-------------+
| Svyazinvest | 3,274,284 | 11,350,785 | 3,387,074 | 16,111,410 |
+-----------------------------+------------+-------------+------------+-------------+
| OOO Simbirsky | 9,612,591 | 11,612,979 | 9,943,721 | 10,256,555 |
| Telecommunications Systems | | | | |
+-----------------------------+------------+-------------+------------+-------------+
| | 16,654,290 | 37,368,101 | 17,227,987 | 39,628,790 |
+-----------------------------+------------+-------------+------------+-------------+
The recoverable amount of each of the above CGUs has been determined based on
value-in-use calculations. These calculations use cash flow projections based
on financial budgets approved by management covering a five-year period. The
Management prepares the financial budgets based on past performance experience
and its expectations for business and market developments. Cash flows beyond
the five-year period are extrapolated using the best estimate of the expected
growth rate. The growth rate does not in any case exceed the long-term average
growth rate for the business in which the CGU operates, and it is consistent
with the macroeconomic factors of the country of operation. The discount rate
used does not include the tax effects and reflects specific risks relating to
the CGU.
The key assumptions used for the value-in-use calculations are as follows:
+----------------------------------+----------+-------------+--------------------+
| | TNPKO | Svyazinvest | OOO Simbirsky |
| | | | Telecommunications |
| | | | Systems |
+----------------------------------+----------+-------------+--------------------+
| Average annual increase in | 7% | 6.6% | 8.1% |
| operating revenue | | | |
+----------------------------------+----------+-------------+--------------------+
| | | | |
+----------------------------------+----------+-------------+--------------------+
| Growth rate for cash flows after | -1.56% | -1.69% | -0.95% |
| the five-year period | | | |
+----------------------------------+----------+-------------+--------------------+
| | | | |
+----------------------------------+----------+-------------+--------------------+
| Discount rate | 10% | 10% | 10% |
+----------------------------------+----------+-------------+--------------------+
The impairment tests for goodwill show no impairment losses of goodwill either
for 2009 or for 2008.
Sensitivity analysis
Impairment losses will start occurring if any of the above assumptions are
individually changed to the following values:
+----------------------------------+----------+-------------+--------------------+
| | TNPKO | Svyazinvest | OOO Simbirsky |
| | | | Telecommunications |
| | | | Systems |
+----------------------------------+----------+-------------+--------------------+
| Average annual increase in | 1.6% | -0.2% | 6.1% |
| operating revenue | | | |
+----------------------------------+----------+-------------+--------------------+
| | | | |
+----------------------------------+----------+-------------+--------------------+
| Growth rate for cash flows after | -18.7% | -56.7% | -4% |
| the five-year period | | | |
+----------------------------------+----------+-------------+--------------------+
| | | | |
+----------------------------------+----------+-------------+--------------------+
| Discount rate | 21.0% | 28.0% | 13.2% |
+----------------------------------+----------+-------------+--------------------+
Goodwill will be fully impaired if any of the above assumptions are individually
changed to the following values:
+---------------------------------+----------+-------------+--------------------+
| | TNPKO | Svyazinvest | OOO Simbirsky |
| | | | Telecommunications |
| | | | Systems |
+---------------------------------+----------+-------------+--------------------+
| Average annual increase in | -0.6% | -3.5% | -6.3% |
| operating revenue | | | |
+---------------------------------+----------+-------------+--------------------+
| | | | |
+---------------------------------+----------+-------------+--------------------+
| Growth rate for cash flows | -48.3% | -100% | -100% |
| after the five-year period | | | |
+---------------------------------+----------+-------------+--------------------+
| | | | |
+---------------------------------+----------+-------------+--------------------+
| Discount rate | 27.5% | 45.5% | 49.5% |
+---------------------------------+----------+-------------+--------------------+
4. Inventories
+------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------+-----------+-----------+
| | USD | USD |
+------------------------------------------------+-----------+-----------+
| Materials for telephone network and exchanges | 1,765,986 | 2,256,605 |
+------------------------------------------------+-----------+-----------+
| Spare parts and consumables | 654,011 | 881,120 |
+------------------------------------------------+-----------+-----------+
| Goods for sale and cards | 1,967 | 47,878 |
+------------------------------------------------+-----------+-----------+
| | 2,421,964 | 3,185,603 |
+------------------------------------------------+-----------+-----------+
The cost of inventories recognised as expense and included in "operating
expenses" amounted to USD 871,171 (2008: USD 627,282).
Inventories are stated at cost.
5. Trade and other receivables
+------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------+-----------+-----------+
| | USD | USD |
+------------------------------------------------+-----------+-----------+
| Trade receivables | 5,894,649 | 5,546,135 |
+------------------------------------------------+-----------+-----------+
| Less: Provision for impairment of receivables | (698,651) | (342,605) |
+------------------------------------------------+-----------+-----------+
| Trade receivables - net | 5,195,998 | 5,203,530 |
+------------------------------------------------+-----------+-----------+
| Deposits and prepayments | 153,023 | 301,660 |
+------------------------------------------------+-----------+-----------+
| Taxes paid in advance | 169,286 | 224,313 |
+------------------------------------------------+-----------+-----------+
| Other receivables | 1,154,594 | 1,096,913 |
+------------------------------------------------+-----------+-----------+
| | 6,672,901 | 6,826,416 |
+------------------------------------------------+-----------+-----------+
Concentrations of credit risk with respect to trade receivables are limited due
to the Group's large number of customers. The Group's historical experience in
collection of accounts receivable falls within the recorded allowances. Due to
these factors, management believes that no additional credit risk beyond amounts
provided for collections losses is inherent in the Group's trade receivables.
Ageing of past due but not impaired:
+------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------+-----------+-----------+
| | USD | USD |
+------------------------------------------------+-----------+-----------+
| 30-90 days | 713,745 | 312,871 |
+------------------------------------------------+-----------+-----------+
| 90-120 days | 169,615 | 81,781 |
+------------------------------------------------+-----------+-----------+
| 120-180 days | 133,644 | 70,657 |
+------------------------------------------------+-----------+-----------+
| More than 180 days | 711,263 | 635,555 |
+------------------------------------------------+-----------+-----------+
| | 1,728,267 | 1,100,864 |
+------------------------------------------------+-----------+-----------+
The Group has recognized a loss of USD 356,046 (2008: USD 257,721) for the
impairment of its trade receivables during the year ended 31 December 2009.
Allowance for bad and doubtful debts:
+------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------+-----------+-----------+
| | USD | USD |
+------------------------------------------------+-----------+-----------+
| On 1 January | (342,605) | (84,884) |
+------------------------------------------------+-----------+-----------+
| Impairment losses recognised on receivables | (356,046) | (257,721) |
+------------------------------------------------+-----------+-----------+
| At 31 December | (698,651) | (342,605) |
+------------------------------------------------+-----------+-----------+
The fair values of trade and other receivables due within one year approximate
to their carrying amounts as presented above.
6. Share capital
+-----------------------------+-------------+-----------+-------------+-----------+
| | 2009 | 2009 | 2008 | 2008 |
+-----------------------------+-------------+-----------+-------------+-----------+
| | Number | | Number | |
| | of | USD | of | USD |
| | shares | | shares | |
+-----------------------------+-------------+-----------+-------------+-----------+
| Authorised | | | | |
+-----------------------------+-------------+-----------+-------------+-----------+
| Ordinary shares of ?0,02 | 202,500,000 | 6,290,824 | 202,500,000 | 6,290,824 |
| each | | | | |
+-----------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-----------------------------+-------------+-----------+-------------+-----------+
| Issued and fully paid | | | | |
+-----------------------------+-------------+-----------+-------------+-----------+
| On 1 January | 157,556,715 | 4,335,361 | 137,556,715 | 3,082,011 |
+-----------------------------+-------------+-----------+-------------+-----------+
| Issue of shares | - | - | 20,000,000 | 630,726 |
+-----------------------------+-------------+-----------+-------------+-----------+
| Exchange difference arising | - | - | - | 622,624 |
| on the conversion of the | | | | |
| share capital into Euros | | | | |
+-----------------------------+-------------+-----------+-------------+-----------+
| At 31 December | 157,556,715 | 4,335,361 | 157,556,715 | 4,335,361 |
+-----------------------------+-------------+-----------+-------------+-----------+
7. Borrowings
+-----------------------------------------------+------------+------------+
| | 2009 | 2008 |
+-----------------------------------------------+------------+------------+
| | USD | USD |
+-----------------------------------------------+------------+------------+
| Current borrowings | | |
+-----------------------------------------------+------------+------------+
| Bank loans | 6,000,000 | 7,802,939 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Non current borrowings | | |
+-----------------------------------------------+------------+------------+
| Bank loans | 16,805,856 | 22,770,642 |
+-----------------------------------------------+------------+------------+
| | 16,805,856 | 22,770,642 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Total | 22,805,856 | 30,573,581 |
+-----------------------------------------------+------------+------------+
Maturity of non-current borrowings
+-------------------------------------------------+------------+------------+
| Between one to two years | 5,871,461 | 5,886,511 |
+-------------------------------------------------+------------+------------+
| Between two and five years | 10,934,395 | 13,894,792 |
+-------------------------------------------------+------------+------------+
| After five years | - | 2,989,339 |
+-------------------------------------------------+------------+------------+
| | 16,805,856 | 22,770,642 |
+-------------------------------------------------+------------+------------+
The bank loans and overdrafts are secured as follows:
· By mortgage and pledge against movable and immovable property of the Group
for USD 36,752,503 (2008: USD 37,354,508).
· Cross guarantees from Group companies.
The weighted average effective interest rates at the reporting date were as
follows:
+-------------------------------------------------+----------+---------+
| | 2009 | 2008 |
+-------------------------------------------------+----------+---------+
| Bank loans | 3.2% | 6.2% |
+-------------------------------------------------+----------+---------+
The fair values of borrowings approximate to their carrying amounts as presented
above.
8. Trade and other payables
+------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+------------------------------------------------+-----------+-----------+
| | USD | USD |
+------------------------------------------------+-----------+-----------+
| Trade payables | 404,567 | 1,025,933 |
+------------------------------------------------+-----------+-----------+
| Advances from customers | 759,615 | 941,613 |
+------------------------------------------------+-----------+-----------+
| Accruals | 753,856 | 846,719 |
+------------------------------------------------+-----------+-----------+
| Other creditors | 1,773,333 | 2,923,317 |
+------------------------------------------------+-----------+-----------+
| | 3,691,371 | 5,737,582 |
+------------------------------------------------+-----------+-----------+
The fair values of trade and other payables due within one year approximate to
their carrying amounts as presented above.
9. Deferred income
+------------------------------------------------+----------+---------+
| | 2009 | 2008 |
+------------------------------------------------+----------+---------+
| | USD | USD |
+------------------------------------------------+----------+---------+
| Government grants | 91,014 | 103,720 |
+------------------------------------------------+----------+---------+
| | 91,014 | 103,720 |
+------------------------------------------------+----------+---------+
| To be recognised in profit or loss: | | |
+------------------------------------------------+----------+---------+
| After more than one year | 78,260 | 90,013 |
+------------------------------------------------+----------+---------+
| Within one year | 12,754 | 13,707 |
+------------------------------------------------+----------+---------+
| | 91,014 | 103,720 |
+------------------------------------------------+----------+---------+
10. Segmental reporting
The Directors currently identify 2 geographic areas as the Group's operating
segments. These operating segments are monitored and strategic decisions are
made on the basis of segment operating results. Both segments derive revenue
from same products and services as the overall Group.
+-----------------------------------+--------------+-----------+--------------+
| 2009 | Tatarstan | Ulyanovsk | Total |
| | region | area | |
+-----------------------------------+--------------+-----------+--------------+
| | USD | USD | USD |
+-----------------------------------+--------------+-----------+--------------+
| Revenue from external customers | 25,734,757 | 5,180,633 | 30,915,390 |
+-----------------------------------+--------------+-----------+--------------+
| Interest income | 1,310,756 | - | 1,310,756 |
+-----------------------------------+--------------+-----------+--------------+
| Interest expense | (916,718) | (4,390) | (921,108) |
+-----------------------------------+--------------+-----------+--------------+
| Profit before taxation | 10,153,981 | 2,519,417 | 12,673,398 |
+-----------------------------------+--------------+-----------+--------------+
| Income tax | (2,558,972) | (526,362) | (3,085,334) |
+-----------------------------------+--------------+-----------+--------------+
| Assets | 88,428,241 | 4,711,734 | 93,139,975 |
+-----------------------------------+--------------+-----------+--------------+
| Liabilities | (29,073,768) | (715,822) | (29,789,590) |
+-----------------------------------+--------------+-----------+--------------+
| Capital expenditure | 5,442,884 | 895,261 | 6,338,145 |
+-----------------------------------+--------------+-----------+--------------+
| Depreciation | 5,227,683 | 336,461 | 5,564,144 |
+-----------------------------------+--------------+-----------+--------------+
+-----------------------------------+--------------+-------------+--------------+
| 2008 | Tatarstan | Ulyanovsk | Total |
| | region | area | |
+-----------------------------------+--------------+-------------+--------------+
| | USD | USD | USD |
+-----------------------------------+--------------+-------------+--------------+
| Revenue from external customers | 28,713,782 | 1,909,665 | 30,623,447 |
+-----------------------------------+--------------+-------------+--------------+
| Interest income | 1,689,764 | - | 1,689,764 |
+-----------------------------------+--------------+-------------+--------------+
| Interest expense | (1,904,575) | - | (1,904,575) |
+-----------------------------------+--------------+-------------+--------------+
| Profit before taxation | 11,160,252 | 793,566 | 11,953,818 |
+-----------------------------------+--------------+-------------+--------------+
| Income tax | (2,760,588) | (181,054) | (2,941,642) |
+-----------------------------------+--------------+-------------+--------------+
| Assets | 89,755,091 | 3,984,014 | 93,739,105 |
+-----------------------------------+--------------+-------------+--------------+
| Liabilities | (37,574,317) | (1,947,809) | (39,522,126) |
+-----------------------------------+--------------+-------------+--------------+
| Capital expenditure | 7,112,504 | 495,107 | 7,607,611 |
+-----------------------------------+--------------+-------------+--------------+
| Depreciation | 4,297,337 | 85,250 | 4,382,587 |
+-----------------------------------+--------------+-------------+--------------+
The Group is not dependent of any specific customer for the generation of
revenue.
11. Revenue
+-------------------------------------------------+------------+------------+
| | 2009 | 2008 |
+-------------------------------------------------+------------+------------+
| | USD | USD |
+-------------------------------------------------+------------+------------+
| Connection fees | 191,172 | 629,495 |
+-------------------------------------------------+------------+------------+
| Rental fees | 9,560,337 | 9,893,433 |
+-------------------------------------------------+------------+------------+
| Traffic fees | 2,467,405 | 2,893,003 |
+-------------------------------------------------+------------+------------+
| ISDN Connection fees | 75,423 | 263,383 |
+-------------------------------------------------+------------+------------+
| ISDN Traffic fees | 1,933,964 | 2,455,443 |
+-------------------------------------------------+------------+------------+
| Internet Services | 9,377,642 | 9,860,239 |
+-------------------------------------------------+------------+------------+
| IP Services | 430,126 | 708,541 |
+-------------------------------------------------+------------+------------+
| Zonal, Long Distance and International Long | 4,088,039 | 1,674,753 |
| Distance fees | | |
+-------------------------------------------------+------------+------------+
| Additional services of telephony | 652,464 | 771,216 |
+-------------------------------------------------+------------+------------+
| Rent of fiber and ducting | 702,083 | 796,371 |
+-------------------------------------------------+------------+------------+
| Sundry Income | 1,436,735 | 677,570 |
+-------------------------------------------------+------------+------------+
| | 30,915,390 | 30,623,447 |
+-------------------------------------------------+------------+------------+
12. Operating profit
+-------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+-------------------------------------------------+-----------+-----------+
| | USD | USD |
+-------------------------------------------------+-----------+-----------+
| Operating profit is stated after (crediting) / | | |
| charging the following items: | | |
+-------------------------------------------------+-----------+-----------+
| Gain from sale of property, plant and equipment | - | (85,397) |
| (Note 1) | | |
+-------------------------------------------------+-----------+-----------+
| Amortisation of computer software (Note 2) | 75,895 | 62,236 |
+-------------------------------------------------+-----------+-----------+
| Amortisation of number capacity (Note 2) | 169,783 | 126,645 |
+-------------------------------------------------+-----------+-----------+
| Depreciation of property, plant and equipment | 5,318,466 | 4,193,706 |
| (Note 1) | | |
+-------------------------------------------------+-----------+-----------+
| Staff costs | 4,994,854 | 5,056,247 |
+-------------------------------------------------+-----------+-----------+
| Auditor's remuneration | 155,400 | 118,580 |
+-------------------------------------------------+-----------+-----------+
13. Finance income / cost
+-------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+-------------------------------------------------+-----------+-----------+
| | USD | USD |
+-------------------------------------------------+-----------+-----------+
| Interest income | 1,310,756 | 1,689,764 |
+-------------------------------------------------+-----------+-----------+
| Finance income | 1,310,756 | 1,689,764 |
+-------------------------------------------------+-----------+-----------+
| | | |
+-------------------------------------------------+-----------+-----------+
| Net foreign exchange transaction losses | 449,510 | 537,299 |
+-------------------------------------------------+-----------+-----------+
| Interest expense | 921,108 | 1,904,575 |
+-------------------------------------------------+-----------+-----------+
| Other finance expenses | 79,435 | 90,946 |
+-------------------------------------------------+-----------+-----------+
| Finance costs | 1,450,053 | 2,532,820 |
+-------------------------------------------------+-----------+-----------+
| | | |
+-------------------------------------------------+-----------+-----------+
| Net finance costs | (139,297) | (843,056) |
+-------------------------------------------------+-----------+-----------+
14. Earnings per share
+-------------------------------------------------+-------------+-------------+
| | 2009 | 2008 |
+-------------------------------------------------+-------------+-------------+
| Basic earnings per share | | |
+-------------------------------------------------+-------------+-------------+
| Earnings attributable to shareholders (USD) | 8,728,004 | 8,562,435 |
+-------------------------------------------------+-------------+-------------+
| | 157,556,715 | 153,556,715 |
| Weighted average number of ordinary shares in | | |
| issue during the year | | |
+-------------------------------------------------+-------------+-------------+
| | 5.54 | 5.58 |
| Basic earnings per share (cent) | | |
+-------------------------------------------------+-------------+-------------+
+-------------------------------------------------+-------------+-------------+
| | 2009 | 2008 |
+-------------------------------------------------+-------------+-------------+
| Diluted earnings per share | | |
+-------------------------------------------------+-------------+-------------+
| Earnings attributable to shareholders (USD) | 8,728,004 | 8,562,435 |
+-------------------------------------------------+-------------+-------------+
| Effect of potentially dilutive shares (USD) | (49,710) | (128,343) |
+-------------------------------------------------+-------------+-------------+
| | 8,678,294 | 8,434,092 |
+-------------------------------------------------+-------------+-------------+
| | 157,556,715 | 153,556,715 |
| Weighted average number of ordinary shares in | | |
| issue during the year | | |
+-------------------------------------------------+-------------+-------------+
| Effect of potentially dilutive shares | 10,115,621 | 10,142,434 |
+-------------------------------------------------+-------------+-------------+
| | 167,672,336 | 163,699,149 |
+-------------------------------------------------+-------------+-------------+
| | 5.18 | 5.15 |
| Diluted earnings per share (cent) | | |
+-------------------------------------------------+-------------+-------------+
Basic earnings per share is calculated by dividing the profit for the year
attributable to the ordinary shareholders of the parent company by the weighted
average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated after taking into consideration the
effect of all potentially dilutive shares in existence during the year.
15. Events after the end of the reporting year
There were no material events after the end of the reporting year, which have a
bearing on the understanding of the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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