Comstar UTS Announces Financial Results for the Twelve Months Ended December 31, 2005.MOSCOW -- "COMSTAR COMSTAR COMmon System for Technical Analysis and Reporting - United TeleSystems" ("Comstar UTS (Universal Timesharing System) Amdahl's version of Unix System V. Release 4.0 is POSIX compliant. ") (LSE LSE - Language Sensitive Editor : CMST CMST Capacitated Minimum Spanning Tree (problem) CMST Characterization, Monitoring, and Sensor Technology CMST Center for Mathematics, Science, and Technology ), today announced its unaudited consolidated US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial results for the twelve months ended December 31, 2005. HIGHLIGHTS --Consolidated revenues up 31% year on year to US$ 907.6 million --OIBDA(1) up 44% year on year to US$ 358.8 million --Operating income up 55% year on year to US$ 268.4 million --Net income up 39% year on year to US$ 105.9 million Semyon Rabovsky, Chief Executive Officer of Comstar UTS, commented: "These are the first results for Comstar UTS as a publicly listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → , following the successful completion of our IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. and listing on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. in February 2006. We entered a new stage in our development with the merger of Sistema's fixed-line telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. assets under Comstar UTS in 2005, and can already see the operating and financial benefits of this integration in the full year financial results that we are publishing today. We continue to work on the further integration of our businesses, and to pursue our regional expansion in order to deliver on our strategy and generate increased shareholder returns. We have a clear objective and priority in 2006 to create a leading telecommunications company See telecom company. with a unique offering of integrated triple-play services for residential and corporate customers in Moscow and beyond." FINANCIAL SUMMARY (US$ millions) 2005 2004 Growth Revenues 907.6 695.1 30.6% Operating income 268.4 173.7 54.5% Margin 30% 25% - Net Income 105.9 76.1 39.1% Margin 11.7% 11.0% - OIBDA 358.8 249.9 43.6% Margin 39.5% 35.9% - FINANCIAL AND OPERATING REVIEW Comstar UTS reported 31% year on year revenue growth to US$ 907.6 million for the full year ended December 31, 2005, compared to US$ 695.1 million in 2004. The revenue growth was primarily organic with existing businesses generating 26% year on year growth of US$ 181.1 million. Newly consolidated subsidiaries, which were acquired during 2005, contributed US$ 31.4 million of additional revenues. Comstar UTS's alternative telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. business segment reported a 32% year on year increase in revenues to US$ 372.8 million in 2005, from US$ 282.4 million in 2004. The traditional business segment's revenues were up 33% year on year to US$ 639.7 million, from US$ 480.9 million in 2004. The growth was driven by both regulatory tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic hikes, as well as growing demand for unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. data transmission services. Revenue for these latter services almost doubled year on year to US$ 51.0 million (US$26.9 million). OIBDA OIBDA Operating Income Before Depreciation & Amortization for the full year was up 44% year on year to US$ 358.8 million, from US$ 249.9 million in 2004. The full year OIBDA margin increased year on year to 39.5%, from 35.9% in 2004, due to the higher proportion of fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). . The OIBDA margin was affected in the fourth quarter of 2005 by a decrease in alternative segment OIBDA due to the impact of the consolidation of Comstar UTS subsidiary MTU-Intel with Sistema Multimedia. Initial investments in advertising and content acquisition, in order to develop the StreamTV IPTV (Internet Protocol TV) Also called "TV over IP," IPTV delivers scheduled TV programs and video-on-demand (VOD) via the IP protocol and digital streaming techniques used to watch video on the Internet. broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). digital platform and service, were the primary reason for the decline. The Group's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased by 55% year on year to US$ 268.4 million in 2005, from US$ 173.7 million in 2004. Comstar UTS continued to benefit from economies of scale as major expenses are fixed. Consolidated net income increased by 39% year on year to US$ 105.9 million in 2005, from US$ 76.1 million in 2004, with the net income margin consequently increasing from 11% to 12%. The Group's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. (including capital leases) increased to US$ 134.9 million as at December 31, 2005, from US$ 124.4 million as at the end of 2004, with short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. increasing by US$ 8.3 million to US$ 100.7 million. The ratio of total debt to OIBDA decreased year on year from 0.87 as at December 31, 2004 to 0.65 as at December 31, 2005. Comstar UTS's capital expenditure, excluding acquisitions, increased to US$ 254.7 million, compared to US$ 229.1 million in 2004. Alternative fixed-line telecommunications Revenues from the alternative segment were up 32% year on year to US$ 372.8 million, from US$ 282.4 million for the prior year. Revenue growth from existing businesses was US$ 59.1 million, or 21%, with subsidiaries acquired in 2005 contributing a further US$ 31.4 million of revenues for the year. Alternative segment OIBDA increased by 12% year on year to US$ 94.8 million (US$ 84.6 million). The full year OIBDA margin therefore fell from 30.0% to 25.4%, which was due to the previously described impact of the combination of Comstar UTS subsidiary MTU-Intel with Sistema Multimedia in the fourth quarter, and investments by the consolidated company in advertising and content acquisition for StreamTV. Total residential customer revenues in the alternative segment grew by 85% year on year to US$ 68.9 million (US$ 37.3 million). This growth reflected the substantial increase in the Stream ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line subscriber base during the year, up from 102,516 subscribers at the end of 2004 to 249,542 subscribers at the end of 2005. The StreamTV service, which was launched in September 2005, already contributed US$ 750,000 of revenues to the full year 2005 results. ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. for Stream ADSL subscribers was US$ 18.6 (US$ 22.8) and StreamTV ARPU was US$ 27.9. Revenues from corporate clients in the alternative segment, excluding acquired businesses, were up 13% year on year to US$ 148.9 million (US$ 131.5 million), which was in line with expectations. Revenues from operators increased by 6% year on year to US$ 109.6 million (US$ 103.5 million), which was also in line with expectations and reflected the relative maturity of the wholesale market. Total alternative segment capital expenditure increased by 43% year on year to US$ 52.4 million, from US$ 36.7 million in 2004, and was primarily driven by larger scale corporate customers. CAPEX for the segment is expected to grow in line with the overall growth in the corporate customer subscriber base. Traditional fixed-line telecommunications Traditional segment revenues were up 33% year on year to US$ 639.7 million (US$ 480.8 million). Traditional segment OIBDA increased by 60% to US$ 266.8 million (US$ 167.5 million) and the full year OIBDA margin consequently increased year on year from 34.8% to 41.7%. Residential customer revenues in the segment were up 41% year on year to US$ 241.0 million (US$ 171.4 million) in 2005, and were principally driven by higher monthly tariffs This is a list of tariffs and trade legislation:
ARPL Average Revenue Per Line ARPL Annual Review of Population Law ARPL Anti-Referral Payments Law ARPL A Retrieval Process Language ARPL Atmospheric Research Pty Ltd (Australia) was US$ 5.2 (US$ 3.6). Segment revenues from corporate clients were up 17% year on year to US$ 189.0 million (US$ 161.7 million). Revenues generated from voice services remained stable year on year at US$ 129.2 million (US$ 125.4 million), with the major growth driver for corporate client revenues being line rental, which was up 75% year on year to US$ 33.7 million (US$ 19.2 million). Revenues from operators grew by 42% year on year to US$ 209.7 million (US$ 147.7 million) and was largely due to the increase in revenues from the rental of lines by the public data transmission network (PDTN) to the alternative segment, which resulted from the increased demand for ADSL services marketed under the Stream brand. Traditional segment capital expenditure in 2005 increased to US$ 205.7 million (US$ 192.4 million in 2004). Maintenance CAPEX in 2005 was US$ 53.5 million, with the remainder of the CAPEX accounted for by the ongoing digitalization digitalization /dig·i·tal·iza·tion/ (dij?i-tal-i-za´shun) the administration of digitalis or one of its glycosides in a dosage schedule designed to produce and then maintain optimal therapeutic concentrations of its cardiotonic of the MGTS MGTS Message Generator Traffic Simulator MGTS Message Generation Test System network. ACQUISITIONS AND DIVESTITURES In September 2005, Comstar UTS acquired a 45% equity stake in Metrocom, which is a leading alternative fixed-line telecommunications company in St.Petersburg, for a total cash consideration of US$ 12.2 million. In October 2005, Comstar UTS acquired 89.4% of the ordinary shares and 31.9% of preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Tyumenneftegazsvyaz, the leading alternative fixed-line telecommunications company in the Tyumen region with more than 55,000 residential customers, for a total cash consideration of US$ 9.1 million. In November 2005, Sistema completed the consolidation of its fixed-line telecommunications operators under Comstar United TeleSystems. As a result of this consolidation, as at December 31, 2005, Comstar UTS owned majority stakes in all of Sistema's fixed-line businesses, including 99% of MTU-Inform, 100% of Telmos, 100% of MTU-Intel (including 100% of Golden Line), and 55.62% of MGTS. The consolidation was effected by means of a new share issue by Comstar UTS. Upon completion of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , Sistema and its wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. had a 79.3% equity interest in Comstar UTS shares. MGTS and its wholly owned subsidiaries owned a further 20.7% of Comstar UTS. In December 2005, Comstar acquired two companies in Saratov - Conversiya-Svyaz and Overta - for a total cash consideration of US$ 10 million. Both companies are leading alternative operators in the region and have a combined total of 38,000 residential customers and 350 corporate customers. In line with its strategic expansion in the Moscow region, Comstar also acquired CTK CTK Christ The King (school; various locations) CTK Ceská Tisková Kancelár (Czech News Agency) CTK Composite Tool Kit CTK Configuration Toolkit CTK Chance to Kill (video games) Contrast Telecom in December 2005, which is a leading Internet service provider Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. with more than 7,000 residential customers and 520 corporate customers, for a total consideration of US$ 5.6 million. The operating results for all of these companies were fully consolidated in Comstar UTS's financial results from the beginning of the year of acquisition. Pre-acquisition earnings of these subsidiaries were deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. from net income for 2005. RECENT EVENTS AFTER THE END OF THE REPORTING PERIOD Comstar UTS finalised the acquisition of 100% of the outstanding share capital of Unitel in February 2006 for a total cash consideration of US$ 3.5 million. Unitel is an alternative wireless fixed-line telecommunications company serving customers in the Moscow region. The acquisition of Unitel reflects Comstar UTS strategy to expand its operations in the Moscow region. In February 2006, Comstar UTS acquired the remaining 1% minority stake in MTU-Inform for a total cash consideration of US$ 2.63 million. The price paid was in line with the independent valuation by ZAO ZAO Zakrytoe Aktsionernoe Obschestvo (Russian: Closed Joint Stock Corporation) ZAO Zenith Angle Offset ZAO Aluminium Doped Zinc Oxide (material for producton of organic light-emitting diodes) KPMG KPMG Klynveld Peat Marwick Goerdeler (accounting firm) KPMG Kaiser Permanente Medical Group KPMG Keiner Prüft Mehr Genau (German) KPMG Kommen Prüfen Meckern Gehen (part of KPMG International), which was made in conjunction with the restructuring of Comstar UTS at the end of 2005. Following its restructuring, Comstar UTS launched a public share purchase offer in December 2005 to the holders of MGTS ordinary shares at RUR 490 per share (equivalent to approximately US$ 17.1 at the official exchange rate as of the announcement date). The offer was completed in March 2006 with Comstar UTS acquiring an additional 3,363,532 MGTS ordinary shares and thereby increasing its equity stake in MGTS to a 49.86% economic interest and a 59.83% voting interest Voting interest in business and accounting is a percentage of voting stock owned. This notion is different from economic interest that refers to a percentage of all the equity issued, including preferred stock, warrants, and so on. . Subsequently to the mandatory tender offer, Comstar UTS acquired an additional 3.82% of MGTS's ordinary shares in March 2006 for a total cash consideration of US$ 71.5 million (RUR 2.01 billion). The shares were acquired through a series of transactions and Comstar UTS thereby increased its economic interest in MGTS to 53.04% and its voting interest to 63.65%. In March 2006, Comstar UTS announced the terms of its second public share purchase offer to the holders of MGTS common shares. The price offered was set at RUR 490 per share (equivalent to approximately US$ 17.6 at the official exchange rate as of the announcement date). The results of the offer are expected to be published on completion at the end of May 2006. For further information, please visit www.comstar-uts.com Comstar UTS is a leading provider of integrated communications services in Moscow and the Moscow region in terms of revenues and subscribers and also offers communications services in other regions of Russia and the Commonwealth of Independent States Commonwealth of Independent States (CIS), community of independent nations established by a treaty signed at Minsk, Belarus, on Dec. 8, 1991, by the heads of state of Russia, Belarus, and Ukraine. Between Dec. 8 and Dec. . Comstar UTS had over 4.2 million subscribers at December 31, 2005. Comstar UTS offers voice, data and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , pay-TV and various value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. to corporate, operator and residential subscribers, using its alternative and traditional fixed-line networks. Comstar UTS had combined operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of US$ 907.6 million for the twelve months of 2005 and Comstar UTS' assets totalled US$ 1.64 billion at September 30, 2005. Comstar UTS ordinary shares are listed on the Moscow Stock Exchange and on the London Stock Exchange under the symbol "CMST". Some of the information in this press release may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of Comstar UTS. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might" the negative of such terms or other similar expressions. Comstar UTS wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Comstar UTS does not intend to update these statements to reflect events and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Comstar UTS, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Comstar UTS operates in, as well as many other risks specifically related to Comstar UTS and its operations.
(1) OIBDA is defined as operating income before depreciation and
amortization. Please see the Appendix to this statement for a full
definition of OIBDA and a reconciliation of OIBDA to operating
income.
APPENDIX - NON-GAAP FINANCIAL MEASURES This results statement includes financial information prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (US GAAP), as well as other non-GAAP financial information. The non-GAAP financial information should be considered as an addition to, but not as a substitute for, information prepared in accordance with US GAAP. OIBDA is operating income before depreciation and amortization and the OIBDA margin is defined as OIBDA as a percentage of net revenues. These measures are included in this results statement in order to provide additional information regarding the Group's ability to meet future debt service payments, capital expenditure and working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , and as a metric to evaluate profitability. OIBDA is not a measure of financial performance under US GAAP, and is not an alternative to net income as a measure of operating performance, or to cash flows from operating activities as a measure of liquidity. While depreciation and amortization are considered operating costs operating costs npl → gastos mpl operacionales under GAAP, these items primarily represent the non-cash current period allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of costs arising from the acquisition or development of long term assets in prior periods. OIBDA is commonly used as a criterion for evaluation of operating performance by credit and equity investors and analysts. The calculation of OIBDA may be different from the calculation used by other companies and comparability may therefore be limited. OIBDA can be reconciled to the Group's consolidated statements as follows:
US$ thousands FY 2005 FY 2004
Operating Income 268,351 173,719
Add depreciation
and amortization 90,437 76,138
OIBDA 358,788 249,857
COMSTAR United TeleSystems
CONSOLIDATED INCOME STATEMENT
(Amounts in thousands of U.S. dollars)
Year ended December 31,
------------------------
2005 2004
------------ ----------
(Unaudited)
OPERATING REVENUES $ 907,624 $ 695,133
OPERATING EXPENSES (639,273) (521,414)
------------ ----------
OPERATING INCOME 268,351 173,719
OTHER INCOME (EXPENSES):
Interest income 7,696 7,941
Interest expense (17,961) (18,695)
Foreign currency transactions (loss)/gain (2,219) 4,368
Gain/(loss) from disposal of an affiliate 1,989 (6,610)
------------ ----------
INCOME BEFORE INCOME TAX AND MINORITY
INTERESTS 257,856 160,723
Income tax expense (59,329) (41,076)
Income from affiliates 499 542
Minority interests (93,141) (44,400)
------------ ----------
INCOME FROM CONTINUING OPERATIONS 105,885 75,789
Gain from discontinued operations,
net of income tax charge of $1,430 - 4,182
Loss from disposal of discontinued
operations,
net of income tax charge of $841 - (3,831)
------------ ----------
NET INCOME $ 105,885 $ 76,140
============ ==========
Other comprehensive income/(loss):
Translation adjustment,
net of minority interest of $13,788 and
$34,175, respectively (3,597) 13,538
------------ ----------
Comprehensive income $ 102,288 $ 89,678
------------ ----------
COMSTAR United TeleSystems
CONSOLIDATED BALANCE SHEET
(Amounts in thousands of U.S. dollars)
December 31,
-----------------------
2005 2004
----------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 74,639 $ 67,436
Short-term investments 116,134 105,313
Trade receivables, net 78,310 63,504
Other receivables and prepaid expenses 80,572 60,669
Inventories and spare parts 26,881 23,004
Assets held for resale 15,260 -
Deferred tax assets, current portion 13,432 15,693
----------- ----------
Total current assets 405,228 335,619
----------- ----------
Property, plant and equipment, net 1,144,149 1,031,757
Intangible assets, net 55,355 30,240
Long-term investments 30,510 11,290
Restricted cash 2,272 3,268
Deferred tax assets, long-term portion 3,847 6,274
----------- ----------
TOTAL ASSETS $ 1,641,361 $1,418,448
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 28,707 $ 17,699
Deferred connection fees, current portion 42,598 35,790
Subscriber prepayments 41,228 34,095
Accrued expenses and other current
liabilities 43,409 23,620
Taxes payable 17,837 19,563
Debt, current portion 86,617 85,616
Capital lease obligations, current portion 14,050 6,782
----------- ----------
Total current liabilities 274,446 223,165
----------- ----------
LONG-TERM LIABILITIES:
Deferred connection fees, net of current
portion 110,514 104,087
Debt, net of current portion 102,184 104,482
Capital lease obligations, net of current
portion 30,765 19,917
Post-retirement obligations 16,216 11,513
Property, plant and equipment contributions 102,746 103,822
Deferred tax liabilities, long-term portion 9,005 19,397
----------- ----------
Total long-term liabilities 371,430 363,218
----------- ----------
TOTAL LIABILITIES 645,876 586,383
----------- ----------
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTERESTS 516,114 450,624
SHAREHOLDERS' EQUITY:
Share capital 15,053 72,133
Additional paid-in capital 100,051 43,335
Retained earnings 352,647 250,756
Accumulated other comprehensive income 11,620 15,217
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 479,371 381,441
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,641,361 $1,418,448
=========== ==========
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