Transcript Название - Rustocks.com

Sistema Capital Markets Day 2007
London
June 04, 2007
Vladimir Evtushenkov, Chairman of the Board of Directors
Alexander Goncharuk, President
Alexei Buyanov, Senior Vice President and Head of Finance and Investment
Anton Abugov, First Vice President and Head of Strategy and Development
Disclaimer
Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events revenues or performance, and underlying assumptions and other statements,
which are other than statements of historical facts. The words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,”
“predict”, “could”, plan”, “project,” “will,” “may,” “should” and similar expressions identify forward-looking statements. Forward-looking
statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity,
capital resources and capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and
weaknesses, growth in demand for our products; economic outlook and industry trends; developments of our markets; legal trends and the
impact of regulatory initiatives; and the strength of our competitors.
The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further
assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and
other data available from third parties. Although we believe that these assumptions were reasonable when made, these assumptions are
inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control and
we may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in our view, could cause
actual results to differ materially from those discussed in the forward-looking statements include the achievement of the anticipated levels
of revenues, profitability and growth, cost and synergy of our recent acquisitions and restructuring, the timely development and acceptance
of new products, the impact of competition and competitive pricing, the ability to obtain necessary regulatory approvals and the ability to
fund our future operations and capital needs through borrowing or otherwise, the ability to successfully implement any of our business
strategies, the ability to integrate our business and to realize anticipated cost savings and operational benefits from such integration, our
expectations about growth in demand for our products and services, the effects of inflation, interest rate and exchange rate fluctuations, and
our success in identifying other risk to our business and managing the risk of the aforementioned factors, the condition of the economy and
political stability in Russia and the other markets of operations and the impact of general business and global economic conditions.
Neither we, nor any of our respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or
revise any of the forward-looking statements contained in this presentation.
The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change
without notice.
2
Introduction to Sistema
Vladimir Evtushenkov
Career in Sistema
• 2006: Chairman of the Board of Directors
• 2005: President
• 1995 – 2005: Chairman of the Board
• 1993 – 1995: President
• 1993: Founded Sistema
Background
• 2002 to present: member of the Board of Directors of the Russian Chamber of
Commerce and Industry; member of the Government Commission on Science
and Innovation Policy and a member of the Presidential Council on Science
and High Technologies
• 2001 to present: member of the Bureau of the Board of Directors of the
Russian Union of Industrialists and Entrepreneurs, Head of the Union’s
Committee on industrial policy
• 1990 – 1993: Chairman of the Moscow City Committee on Science and
Engineering
• 1987 – 1990: Head of the Central Administration on Science and Engineering
of the Moscow City Executive Committee
• 1982 – 1987: Chief Engineer and subsequently first Deputy General Director
of the Polymerbyt Scientific and Production Association
• 1975 – 1982: Deputy Director and Chief Engineer at the Karacharovo Plastics
Works
Education
• 1980: The School of Economics of the Moscow State University
• 1973: D. Mendeleev Moscow Chemical Engineering Institute
3
Russian Economic Development in 2006
Real GDP Growth, %
Real Disposable Income Growth (%)
and Consumer Loans ($ bln)
12%
50
11%
10%
Russia
7,2%
6,9%
3,3%
3,2%
1,1%
0,8%
40
USA
6,4%
3,9%
11%
Germany
China
12%
44
10% 10%
8%
30
8%
21
20
6%
4%
11
10
2,9%
2%
0
2004
2005
Central Bank Reserves ($ bln)
and Inflation (%)
350
300
304
12%
250
150
14%
2005
2006
Retail Markets
and Services Growth (%)
13,0%
12,8%
12,5%
12%
11%
182
200
0%
2004
2006
9%
125
10%
8%
7,0%
6,8%
8,1%
6%
100
4%
50
2%
0
Retail Markets
Services
0%
2004
2005
2006
2004
2005
2006
Benign macroeconomic environment for Sistema businesses
4
Operational Results
Career in Sistema
• 2006 to present: President; Member of the board of Sistema, Sistema
Telecom, Sitronics, Sistema-Hals, Sistema Mass Media
• 2003 – 2006: General Director of Concern Sitronics
• 1998 – 2003: President of Sistema Telecom
• 1995 – 1998: Vice President of Sistema
• 1998 and 2002-2003: Chairman of the Board, MTS
Alexander Goncharuk
Background
• 1991 – 1993 General Director of Insurance Company Leader
• 1987 – 1991: Senior officer at the Main Headquarters of the Navy
Education
• 1987: Grechko Naval Academy
• 1978: Sevastopol Naval Engineering Academy
5
Highlights of 2006
• Consolidated revenues up 43% year on year to $ 10.9 billion
• OIBDA up 36% year on year to $4.0 billion
• Net income up 52% year on year to $813 million
• Total consolidated assets up 54% year on year to $20.1 billion
• Earnings per share up 67% year on year to $94.4
• Successful IPOs and listing on London Stock Exchange:
– $1,060 million raised by Comstar UTS in February 2006
– $432 million raised by Sistema Hals in November 2006
• Acquisition of 25%+1 stake in Svyazinvest for $1.3 billion in December 2006
Solid financial results along with successful investment operations
6
Sistema Consolidated Financials (US GAAP)
Revenues ($ bln)
OIBDA ($ bln)
10,9
4.0
7,6
5,7
2004
3.0
2.5
+36%
+43%
2005
2006
2004
Net Income ($ bln)
2005
2006
Consolidated Debt ($ bln)
B
0,8
BB -
BB 6.9
8
4.5
0,5
0,4
6
+52%
4.4
2
0
2005
3.5
4
2.5
1.9
2004
S&P Credit Rating
2006
1.5
1.8
0.8
2004
Debt
Debt/OIBDA
1.5
0.5
2005
2006
Accelerated growth while maintaining sound financial position
7
Top Management Appointments in 2006
Sistema
Alexander Goncharuk
President
February 2006
Anton Abugov
1st Vice-president
Head of Strategy and
Development
August 2006
Denis Muratov
Vice president
Head of Innovations
February 2006
Telecom
Technology
Banking
Retail
Mass Media
Leonid Melamed
MTS
April 2006
Evgeny Utkin
Sitronics
February 2006
Sergey Zaytsev
MBRD
July 2006
Maxim Yentyakov
Detsky Mir
July 2006
Michael Dounaev
SMM
January 2006
Key management appointments at Sistema and its major businesses were made in 2006
8
Unjustified Discount to Net Asset Value
$ 19.5 bn
Non-listed assets*
(11%)
Publicly traded assets***
(89%)
2.1
-0.9**
28% discount,
or $5.2 bn
18.6
17.4
13.3
Portfolio
Capitalisation
Corporate
Net Debt
NAV
Sistema MCap ***
* Sistema management valuation, **as of March 31 2007, *** Closing prices on 31.05.2007
Sistema stock is traded with 28% discount to Net Asset Value making it deeply undervalued
9
Sistema Portfolio
Public companies
Telecommunications
Mobile
Non-public businesses
Banking
Fixed Line
Telecommunications
CDMA
Mass Media
Technology
Retail
Others
Long Distance
Tourism
Oil &
Petrochemicals
Real Estate
Healthcare
Radars and
Aerospace
Diversified portfolio guaranteeing continued growth over the long term
10
Major Developments in Public Businesses in 2006 – 2007
• Revenue and OIBDA growth by 28%; OIBDA
margin exceeded Vimpelcom’s (50.6% vs. 50.4%)
• Customer base grew by 25% and reached 74 mln
• Mr. Leonid Melamed appointed CEO of MTS; rebranding and management strengthening led to
MCap exceeding $20 bln
• Revenue growth by 23%, OIBDA by 2%
• Broadband client base increased by 67%
• $1.06 bln raised during IPO on LSE in
February 2006
• 25% + 1 stock of Svyazinvest acquired for
$1.3 bln
• Revenue growth by 204%, OIBDA by 500%
• Project development pipeline grew by 20%
• IPO at London Stock Exchange, post-money
valuation over $2 bln
• Sistema-Hals portfolio valuation by Cushman &
Wakefield as of Jan 01, 2007 was 35% up vs.
that as of June 30, 2006
• Revenue growth by 68%, OIBDA by 11%
• External (outside Sistema group) sales share
reached 78%
• Acquired 51% of Intracom Telecom (Greece)
• Established a strategic alliance with Cisco and
STMicroelectronics (0.18µ)
11
Major Developments in Fast Growing Private Businesses
• Revenue growth by 90%, OIBDA by 71%
• Explosive growth of retail business: the
portfolio increased 5 times to over $350 mln;
the total retail market doubled
• Reached Top30 by total assets and Top20 in
the most rapidly growing car loans and
mortgages sectors
• Revenue growth by 61%, OIBDA by 75%
• Total sales area exceeded 100,000 square meters,
29 new stores opened bringing a number of stores
to 65
• A desirable tenant for middle and upper middle
class shopping centers
• Revenue growth by 106%, OIBDA by 125%
• Stream-TV is the largest pay-TV operator in
Russia with 15% market share. Presence in 37
cities, 3.5 million households passed
• Mobile TV (DVBH): pilot project in Moscow;
acquisition of licenses in 17 largest cities of
Russia
• Maxima advertising agency in top10 media
buyers in Russia; presence in Ukraine,
Belarus, Kazakhstan
• Revenue growth by 176%, OIBDA – 8 times
• Significant market position strengthening after
acquisition of the Cosmos Hotel and Riviera
and Skyway tour operators (Intourist is #1 tour
operator in RF)
– 99 retail outlets (12 in Moscow, 23 in StPete, 33 subsidiaries in regions)
– 2,300 hotel rooms under management
12
Sistema Value Added to Businesses in 2006
• New KPIs approach and
business specific KPIs
developed
• Management compensation
linked to KPIs
KPIs
Government
Relations
• Global satellite
navigation system
GLONASS
• The Center for
Management in
Crisis Situations for
the Ministry of
Emergencies
Strategic
Partnerships
• ST Microelectronics
• Cisco
•
•
•
•
M&A
Support
Svyazinvest
Intracom Telecom
UCN Cable TV
Sale of Rosno (Sistema’s
own M&A activity)
Access
to capital
Management
Support
• Sistema invested
over $5 bln in
2006 in its
business lines
Strengthening mgmt teams of
• Telecoms
• Rosno
• Retail
Sistema holding structure proved beneficial to our portfolio businesses
13
Sistema Management’s Top Priority
• We have streamlined and segmented our portfolio to focus capital and
management resources on the most value adding businesses
• Sistema management sees as its top priority achieving fair valuation of Sistema
shares by the market
• We will grow the share of non public businesses in our portfolio as well as
improve our management approach including new KPIs and incentive
principles
14
Finance
Alexei Buyanov
Career in Sistema
• 2002 to present: SeniorVice President and Head of the Finance and
Investment Complex; Member of the Board of the following companies:
MTS, Sistema Telecom, MBRD, East-West United Bank, Sistema-Hals,
Detsky Mir Center
• 1998 – 2002: Vice President of MTS
• 1996 – 1997: Vice President and First Vice President at Sistema-Invest
• 1994 – 1996: various positions at the Property Complex
Background
• 1992 – 1994: researcher at the Institute of Mechanics Problems (IMP) of
the Russian Academy of Sciences
Education
• 1992: Moscow Physics and Engineering Institute
15
Financial Highlights
US GAAP, $ mln
Consolidated
2003
2004
2005
2006
3 760
5 711
7 594
10 863
Profit & Loss
Revenues
Growth (y-o-y)
Depreciation and amortisation
Operating Income (1)
Growth (y-o-y)
Margin
Net Income
Growth (y-o-y)
Margin
(2)
OIBDA
Margin
51,9%
-521
1 106
-800
1 665
29.4%
50,5%
29,2%
387
10.3%
1 627
43.3%
32,9%
-1 024
1 934
43,1%
-1 290
2 733
16,2%
25,5%
41,3%
25,2%
411
534
813
6,2%
7,2%
29,9%
7%
52,2%
7,5%
2 465
43,2%
2 958
4 023
37%
37%
Balance Sheet
Total Assets
6 840
8 779
13 091
20 131
Total Debt
2 685
3 065
4 371
6 874
Net Debt
Shareholders’ Equity
2 402
2 561
3 888
6 330
989
1 436
3 234
4 521
935
-2 273
1 464
1 904
-2 064
381
1 793
-4 276
2 462
2 116
-5 372
3 317
Cash Flow
Cashflow from Operations
Cashflow from Investments
Cashflow from Financing
Notes: (1) Operating Income is calculated as revenues less operating costs, plus income from equity investees and net gain or
loss on sale of subsidiaries. (2) OIBDA represents the sum of operating income, depreciation and amortisation
Sistema’s financial performance consistently improving year after year
16
Segmental Analysis
Segment ($ mln)
Revenue
OIBDA
Telecommunications
Technology
Insurance
Banking
Other Businesses (inc. corporate)
AGGREGATE TOTAL
Intra-segment eliminations
Consolidated TOTAL
7 476
1 611
639
228
1 372
11 326
-328
10 862,8
3 576
172,5
46,4
37,2
468,2
4 301
-184
4 023,5
% Margin
47,8%
10,7%
7,3%
16,3%
34,1%
38,0%
37,0%
Net Debt
(Cash)
Net Debt, %
55,9%
7,9%
-1,7%
2,7%
23,7%
88,5%
11,5%
100%
3 543
505
(112)
163
1 502
5 601
729
6 330
2006 Revenue Breakdown – Telecom Contribution
Incumbent fixed
(MGTS)
9,3%
12%
Telecom
Technology
Insurance
Banking
Other
2%
6%
Alternative fixed 5,7%
14%
66%
Wireless
(MTS)
85%
Telecom business is the key revenue driver
17
Diversification
2006
2005
Others
27%
Others
35%
Revenue
Telecom
65%
Telecom
73%
Others
13%
Others
21%
OIBDA
Telecom
87%
Others
26%
Telecom
79%
Others
37%
Assets
Telecom
74%
Telecom
63%
Contribution of non-telecommunication segment continues to increase
18
Capital Allocation
Uses of Cash
Business line
Sources of Cash
Access to
Operating
Third Party
FCF
Capital
Sistema's
Holdco Cash
Impact
CapEx
M&A
MTS
Moderate
Possible
Positive
Established
+
Comstar
Moderate
Yes
Positive
Established
+
TariffDriven
None
Positive
Established
+
Moderate
Yes
Break-even
Established
+/-
High
Yes
Break-even
Established
+/-
MBRD
Moderate
Possible
Break-even
Established
+/-
Intourist
High
Yes
Break-even
Established
+/-
Detsky Mir
High
Yes
Negative
Established
-
Mass Media
High
Yes
Negative
None
-
Radar and Aerospace
High
Yes
Negative
None
-
Healthcare
High
Yes
Negative
None
-
Bashkir oil
None
Yes
Positive
Established
+
MGTS
Sitronics
Sistema-Hals
Sistema is focused on growing non public assets
19
Credit Ratings
Agency
Rating
Outlook
Date
S&P
Fitch Ratings
Moody’s
BBB+
B1
Positive
Positive
Stable
01/02/2007
28/04/2006
19/11/2003
MTS
S&P
Moody’s
BBBa3
Positive
Positive
01/02/2007
10/05/2007
MGTS
S&P
Moody’s
BBBa3
Positive
Stable
01/02/2007
19/01/2006
Comstar
S&P
Moody’s
BBBa3
Positive
Stable
01/02/2007
10/05/2007
Sitronics
Fitch
Moody’s
BB3
Stable
Stable
14/02/2006
16/02/2006
MBRD
Fitch
Moody’s
B
B1
Positive
Stable
19/02/2007
14/12/2004
Sistema
20
Debt Level
$ mln, US GAAP
Telecommunications
Technology
Insurance
Banking
Mass Media
Real Estate
Retail
Corporate and Other
Total
2006
3908,9
505,3
1,3
399,1
17,7
359,7
90,9
1590,6
6873,6
2004
2138,7
27,5
0,5
7,3
890,9
3064,9
2005
3076,4
96,5
1,0
150,0
13,8
39,0
45,5
948,4
4370,6
Loans vs Bonds
2003
1845,8
33,8
3,2
802,6
2685,4
Debt structure
Others
20%
Non-public
55%
Public
45%
Corporate
23%
Telecommunications
57%
Debt portfolio is allocated among all divisions
21
Strong Financial Position
•
•
•
•
•
Strong liquidity position
Prudent approach to leverage
Easy access and well established reputation in capital markets
Credit profile confirmed by rating agencies
Maturity profile matching the company’s investment cycle
OIBDA/Interest Expense
Total Debt/OIBDA
18,0x
11,5x
1,64x
1,67x
1,71x
1,20x
2002
2003
2004
1,46x
2005
11,5x
8,2x
6,9x
2006
2002
2003
2004
2005
2006
Strong financial position confirmed by solid ratings
22
Portfolio Management Indicators
Return on Total Assets(1)
36% 31%
2004
27%
2005
Return on Equity(2)
24%
2006
34%
2004
23%
23%
2005
2006
Notes:
1. Calculated as OIBDA / Average Total Assets
2. Calculated as Net Income / Average Book Equity
Efficient use of assets and good measure of corporate profitability
23
Sistema Strategy
Career in Sistema
• 2006: First Vice president and Head of the Strategy and Development
Group; a Member of the Board of Sitronics, Svyazinvest, Sky Link
Background
• 2003 – 2006: Managing Director at Rosbank
• 1997 – 2006: Strategy adviser to Tatar-American Investments and Finance
Group (TAIF)
• 1999: Adviser to RAO UES
• 1998 – 2002: Director of Corporate Finance at UFG
Anton Abugov
Education
• 1998: National Economy Academy under the Government of the Russian
Federation
24
Sistema Strategy Highlights
1. Invest in our fast-growing non-public businesses
2. Acquire more non-public assets in the industries we are already present in
3. Take businesses public only after extracting maximum value for existing
shareholders
4. Become a strategic partner of the State: supplier of goods and services and coinvestor in PPP projects
5. Explore technology and services convergence in telecommunications
25
Sistema Management Approach
1. Portfolio segmentation by asset type: public/private, controlling/minority
holdings, start-up/rapidly growing/mature
2. Investment principles, a management model and incentives for the management
tailored to different types of assets
3. Set of customized KPIs for all Business Lines
• Simplicity and measurability with only 5-7 indicators
• Maximizing the shareholder value creation
• Benchmarking to market and competitors
4. Recruitment of the best managers and specialists available in the market; stock
option motivation schemes
• All monetary incentives linked to meeting the KPIs
• Phantom stock options on Sistema and our subsidiaries’ shares as well as deferred
stock bonus
26
Customised KPIs for Sistema businesses (part 1)
Shareholders’ goals (for 4 years, to 2010, incl. M&A)
Category
1. Return on
capital
Possible indicators
Applicable to
Sistema companies
TSR > TSRindex and COE
• All public
• MTS, Comstar-UTS, Sistema-Hals,
Sitronics
ROE > COE
• Non-public or financial
institutions
• MBRD
IRR (2007-10) > WACC
• Non-public, at an early
stage of development
• Medsi
ROIC > WACC
• Other non-public
• Detsky Mir, SMM, RTIS, Intourist
$ … mln in 2010
• Non-public
• MBRD, Detsky Mir, SMM, RTIS,
Intourist, Medsi
Not specified
• Public
• MTS, Comstar, Sistema-Hals,
Sitronics
Топ-N in 2007-10
• If the market can be
estimated
• MTS, Comstar-UTS, Sintronics,
Sistema-Hals, Detsky Mir, MBRD,
SMM, Intourist, Medsi
Not specified
• If the market cannot be
estimated or multibusiness holdings
• RTIS
2. Capitalisation
3. Market
position
Return on capital becomes the priority indicator for Sistema
27
Сustomised KPIs for Sistema businesses (part 2)
Operational targets (for 2 years, to 2008, organic growth only)
Category
4. Revenue
5. OIBDA
margin
6-7. Specific
criteria
Possible indicators
Applicable to
Sistema companies
Increase % >
Market/Competitors/Index
• Reliable information on market
and competition available
• MTS, Comstar, Sistema
Hals, Sitronics
Portfolio NAV growth (%)
• When US GAAP revenues are non
indicative
• Sistema Hals
Assets growth (%)
• Financial institutions
• MBRD
> $ … mln
• Other businesses
> Market/
Competitors/Index
• Reliable information on market
and competition available
• MTS, Comstar
Cost/Income ratio
• Bank
• MBRD
> …%
• No reliable information available
• All except MTS
NPS > …%
(net promoter score)
• Companies in consumer and
service markets
• MTS, Comstar, DM,
MBRD, SMM, Intourist,
Medsi
Other industry specific
• Other businesses
Businesses must improve their competitive positions and outperform competitors rather
than just meet business plan targets
28
New Reward & Incentives Scheme
SHORT-TERM
MOTIVATION
INSTRUMENTS
Annual
Cash Bonus
• Linked to
individual KPIs
LONG-TERM MOTIVATION INSTRUMENTS
Sistema
Phantom
Stock Option
• The right to
receive cash
deferred by 3
years conditioned
to Sistema
performance
Sistema
Stock
Bonus
• Stock bonus
deferred by 3
years conditioned
to Sistema
performance
Sistema
Subsidiaries
Stock Option
• The right to acquire
shares of receive
cash deferred by 3
years conditioned
to business longterm KPIs
Sistema has adopted a new motivation system for all managers through the entire
Corporation aimed at creating strong incentives to grow the shareholder value
29
Sistema Portfolio Transformation (Strategic Goal)
Current
Portfolio
“А Big Deal”
(e.g. petrochemicals)
Fast Growth of
Non-listed
Companies
Proactive search and
investments in new nonlisted opportunities
2007 – 2009
Public Companies
(including Bashkirian Oil)
2007 – 2010 г.
Big Deal
Public Companies
(not inclusive Oil)
25%
30%
75%
90%
55%
New
Private
15%
Public 45%
10%
Non-Listed
(from current
Portfolio)
15% 10%
Public Bashkirian Oil
15%
15%
Non-Listed
(from current
Portfolio)
Sistema will strive to raise the non-listed companies share in our Portfolio to make the stock
more attractive. We will invest in our current growth opportunities with potential new
investments closer to 2010
30
Waves of Growth
IV
III
II
I
Sitronics
Sisitema Hals
(Round Table 2)
Banking
Retail
Mass Media
(to follow)
Radar & Aerospace
Travel
Health Care
Petrochemicals
Telecommunications
(Round Table 1)
1995
2003
2005
2007
Sistema’s diversified portfolio ensures steady growth of the Corporation. We will give
some of the highlights of the 4th wave further in this presentation
31
Radars and Aerospace: CRTIS Results and Outlook
Revenues and OIBDA ($ mln)
+92%
Major Developments in 2006
249
124
67
24
11
3
2004
2005
• CRTIS market segment share up from 10,5% to 16%**.
• Government-ordered defense R&D accounted for $72 mln.
• Started implementation of the The Center for Management
in Crisis Situations project as a main contractor of the
Ministry of Emergencies (together with Sitronics)
• Expanded into civil and civil-defense B2G areas (contracts
with Ministries and Federal Agencies other than Defense)
2006
B2G Contract Portfolio to 2015 ($ mln)*
Market Trends, Positioning and Strategic Outlook
3000
• Monopoly supplier of strategic missile defense solutions
(radar technology) in the $750 mln market segment of
defense information, communication and navigation
systems (grows at 10-14% per year**)
• Capitalize on over than 60 years of defense R&D in the area
of radar and aerospace technologies
• Expand expertise in the area of large-scale federal projects
like GLONASS
• Invest in developing leading edge products and solutions.
30
2500
24 25
20
2500
2000
1500
1000
500
0
403 6
1100
10
15
10
5
0
2004
2005
2006
* 2007-2015 State Arms Development Program
**CRTIS estimates
Total Amount
of Contracts
(till 2015)
Number of
B2G Contracts
CRTIS will continue capitalizing on the R&D expertise, implementing complex B2G projects
and focusing on the leading edge R&D for new markets
32
Travel: Intourist Results and Outlook
Revenues and OIBDA ($ mln)
+176%
98
Major Developments in 2006
• Significant market position strengthening after acquisition of
the Cosmos Hotel and Riviera and Skyway tour operators
(Intourist is top-1 tour operator in Russia)
– 133 retail outlets (102 in ownership, 31 franchisees)
– 2,300 hotel rooms under management
• One of the largest air charter consolidators (over 100,000
passengers in 2006)
270
98
4
21
3
2004
2005
2006
Number of Tourists Serviced (‘000)
(packaged tours)
164
152 165
141
115
Inbound
Outbound
12
2004
Market Trends, Positioning and Strategic Outlook
2005
2006
• Vertical integration strategy in rapidly growing Outbound
segment
– Projected market growth rate >15% (5% of Russians
travel abroad vs. 40% in Germany)
– 3% current market share with the target to multiply it
several times by 2010
– Aggressive capturing the market by building own retail
chain selling up to 50% of own product
– Travel product value proposition via own hotel
management in Russia and abroad
– Alliance with an air charter company to control the fleet
• Retaining the leadership position on the Inbound market
Intourist became top 1 travel company in Russia in 2006 and has ambitious strategic plans
to multiply its market share in several years on the rapidly growing Outbound segment
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Health Care: Medsi Results and Outlook
Revenues and OIBDA ($ mln)
+64%
Major Developments in 2006
• A new holding company Medsi Group created for Sistema’s
health care assets
• New clinics format developed
• Several constructions started
• Medsi II clinic opened in 2005 is recognized by major
insurance companies as the best Moscow clinic for children
16
10
7
5
1
1
2004
2005
Market Trends, Positioning and Strategic Outlook
2006
Services (‘000) and patients (‘000)
1400
1200
1000
800
600
400
200
0
1155
48
794
60
50
40
643
30
20
25
18
10
0
2004
2005
2006
Services
Patients
• Market ($5-8 bln, with Moscow accounting for 35%)
grows more than 20% year-on-year with Top 3 largest clinic
operators owning less than 3% of the market
• Development of a leading private healthcare services
company in Russia with best comprehensive medical care
and largest chain of private clinics
• National healthcare services brand creation
• Strategic partnership with an expert for hospital network
development
• Acquisition of well-run competitors and consolidation of
the market
Medsi is uniquely positioned to take advantage of the paid healthcare market growth
34
Petrochemicals: Bashkirian Oil Assets
Sistema’s Bashkirian Oil Assets
Strategic Outlook
Company
Business
Voting
shares,
%
Position
Bashneft
Upstream
26%
3% of Russian oil production
Ufaneftekhim
Ufa NPZ
29%
Downstream
Novoil
28%
10% of Russian procession
30%
Ufaorgsintez
Petrochemicals
26%
#1 producer of synthetic ethyl spirit,
30-40% of Russian production of
phenol, acetone and polypropylene
Bashkirnefteproduct
Oil product
trade
27%
One of top supplier of oil products
in Volga region
Oil and Petrochemicals Industries in Russia
•
•
•
Nearly half of Russian oil production was exported in 2006 (233 mln
tons of 480 produced)
Leading Oil producers see petrochemicals as their second priority as
crude oil prices stay high
Russian demand for petrochemical products (synthetic rubber,
polyethylene and polypropylene ect.) is growing at 10% pa (official
reporting)
Oil Business
• A strategic asset, generating
satisfactory returns
• Looking for opportunities to increase
our stakes up to controlling to create
a vertically integrated oil company
• Using our business restructuring
expertise to maximize shareholder
value
Opportunity in Petrochemicals
• Strengthening of cooperation with
Nizhnekamskneftekhim (current
supplier of ethanol for Ufaorgsintez)
• Potential alliance with other players
and creation of a leader in
petrochemicals in Russia - in a
technologically advanced sphere
where cash rich oil giants are
reluctant to invest at the moment
Financial investment with an option to develop a leader in technologically advanced
sphere of petrochemicals in Russia
35
Sistema as a partner of the State
Examples of current and potential projects
Project
Sistema role
Transformation of state-owned
clinics to a chain of modern
healthcare centers
Construction of modern command
and control centre for the Ministry
of Emergencies
•
•
•
•
GLONASS
Commercialization of Russian
satellite navigation system
• Major participant of several GLONASS linked
projects (Sitronics and CRTIS)
Security
systems
National video surveillance
system (CCTV) for crime
prevention
• Development of hardware and software
solutions
Digitalization of the TV in Russia
• Supplier of hardware solutions
• Operator of the signal delivery distribution
networks
Healthcare
services
National Crisis
Management
Centre
TV
Construction contractor
IT solution supplier
Operator of the modernized clinics chain
Sistema companies implement entire range of
works from construction to communications and
IT networks setup
Increasing government spending and State investment programs present additional
business opportunities for Sistema businesses
36
Contacts
Investor Relations
tel. +7 (495) 629 2741
www.sistema.com
[email protected]
37