TIDMAURR
RNS Number : 0576G
Aurora Russia Limited
06 May 2011
6 May 2011
AURORA RUSSIA LIMITED
Trading Update
Aurora Russia Limited ('Aurora Russia' or the 'Company') today
announces a trading update ahead of its year-end results for the
twelve months ended 31 March 2011 which are expected to be released
in June 2011.
Highlights for the period include:
- OSG continues its expansion and the company now has 42
warehouse facilities in 7 countries. Its revenue grew 31% in the
year ending 31 March 2011.
- Unistream had c.20% market share in Russia-outbound transfers
in 2010. Unistream's volumes grew 23% year-on-year ("YoY") in Q1
2011.
- Superstroy is the leading DIY company in the Urals Region of
Russia. It grew its revenues by 30% YoY in Q1 2011 following growth
of 17% YoY in 2010. Superstroy has just opened one of the largest
DIY hypermarkets in Russia.
- Flexinvest Bank issued a total of RUR 50.3 million in
mortgages in 2010. It is expanding its product line to include a
credit card product and has received approval from Master Card to
issue its cards.
- Kreditmart's broker fees were RUR28 million in 2010,
representing a 116% increase YoY. However, the market for broking
mortgages remains challenging.
Update on the Russian economy
According to official statistics published by RosStat, Russian
GDP grew 4% in 2010. The IMF has recently improved its Russian GDP
growth forecast for 2011 to 4.8% compared to its January prediction
of 4.5%. Inflation is a concern for policymakers with recent high
commodity prices causing a spike in inflation in February 2011 of
9.5% YoY. The rouble hit 27.8 RUR/$ at the end of April (a two and
a half year high) appreciating 8.5% since the beginning of 2011.
The strength of the rouble is positive for companies such as OSG
and Superstroy who have foreign exchange costs for racking and
inventories respectively.
Updates on Investee Companies
OSG
OSG changed its year end to 31 March (the same as Aurora's year
end) when Aurora purchased a majority stake in the company.
Unaudited accounts for the year ending 31 March 2011 show an
increase in revenues over the year ending 31 March 2010 of 31% from
GBP11.3 million to GBP14.8 million. EBITDA grew to GBP2.1 million
up 24% YoY. Q1 2011 saw revenues grow 33% over Q1 2010, with
services expanding 50% YoY and storage 17% YoY.
Due to OSG's financial performance it is increasingly able to
fund its capital expenditure in Russia and Poland, i.e. its
racking, and currently does this through finance leases. As of 31
March 2011, the outstanding balance of finance leases was GBP2.8
million.
OSG's current storage capacity, once fully racked, allows for a
more than 50% increase in the number of boxes stored.
OSG remains the largest records management company in Russia,
Ukraine and Kazakhstan. The company continues to expand in the CIS
with new warehouses in Yerevan in Armenia and Minsk in Belarus.
Currently the company has 42 warehouse facilities in 7 countries.
We continue to believe in the prospects for a profitable exit from
OSG and are actively pursuing options to secure value for Aurora
Russia shareholders.
Unistream Bank
Unistream's year-end unaudited accounts to 31 December 2010 show
that the company transferred RUR119.4 billion in 2010, 2% more than
in 2009. Revenues for the same period were RUR2.1 billion, a 10%
decrease compared to 2009 due to lower commissions being charged as
a result of increased competition in the Russian/CIS market.
Despite the difficult market conditions, Unistream had similar
EBITDA as in 2009. In Q1 2011 Unistream reported a 23% increase in
volumes YoY, 16% growth in the number of transactions and a 7%
growth in the average transaction value.
Unistream is leading the way in some of the non-traditional
money transfer channels such as transfers via mobile phone and
through self-operated payment terminals, which, though representing
only 3% of the total volume, continue to show strong double-digit
growth rates month-over-month. Unistream's loyalty programme,
launched in August 2010, continues to show positive results with
more than 0.5 million active loyalty cards as of 20 April 2011. So
far, statistics show that of the cards issued up to the end of
December 2010 c.60% were used at least once by the end of April
2011 in money transfer transactions.
Unistream continues to be the leading money transfer company in
Russia with c. 20% market share in Russia-outbound and c.12% in
Russia-inbound remittances in 2010. Russia continues to need
migrant labour to fill jobs, particularly in construction and we
expect future growth in the construction market, spurred on partly
by projects related to the winter Olympics in 2014 and the FIFA
World Cup in 2018.
The company has recently entered into a strategic partnership
with a Russian software development and payment processing company
to ensure that it has access to cutting edge technology. This will
be instrumental in providing the company and its partners with an
integrated solution for payments though the internet, ATM's,
payment terminals and a payment kiosk network.
We believe that Unistream has developed a fundamentally sound
business which is well positioned to benefit from the continuation
of Russian economic growth.
Superstroy
Superstroy's unaudited accounts for the year ending 31 December
2010 showed revenues of RUR6.9 billion, representing an increase of
17% over 2009 revenues. In 2010 the company was profitable with YoY
EBITDA margin 1.3 points higher than the previous year. In Q1 2011
revenues grew 30% YoY, reaching RUR1.6 billion with like-for-like
revenue growth of 19%.
As an illustration of how the construction industry has turned
the corner in the Urals, Superstroy's wholesale revenue showed 66%
growth in Q1 2011 over the same period last year when the
construction sector was still in crisis.
Superstroy relies on debt financing to fund its working capital
and new store openings. As of March 2011, it had net debt of RUR953
million. The increase in debt is driven mostly by pre-opening
costs, investment in working capital and capital expenditure
related to the new hypermarket opened in Yekaterinburg. The cost of
debt has been decreasing steadily and since September 2010 has
dropped from 11% to c.9% p.a. in roubles for 1-2 year
maturities.
Superstroy is the leading DIY company in the Urals Region of
Russia with 47 stores. To strengthen its leadership position in
Yekaterinburg, the capital of the Urals, Superstroy opened its
largest store to date on 22 April this year bringing its total
trade space to c. 110 thousand m(2) . In the first few days of
trading the store has met expectations.
We believe that Superstroy remains well positioned to benefit
from the renewed growth of the DIY market and its leading market
position.
Flexinvest Bank
As of 31 March 2011, Kreditmart and Flexinvest had aggregated
net assets of GBP17.6 million, roughly in line with GBP18.0 million
as of 30 September 2010.
Flexinvest Bank is a fully licensed retail bank and is a member
of the Russian Government's deposit insurance scheme. In 2010 the
bank continued to issue residential mortgages with a total volume
of RUR50.3 million in new loans. In Q1 2011 Flexinvest issued a
total of RUR16 million.
Long term wholesale funding for mortgages continues to be
expensive in Russia. For this reason, at the suggestion of the
bank's management, the board has decided to expand the business
into higher yielding products like credit cards to be financed by
short to medium term retail deposits. On 4 May, MasterCard approved
the bank as an issuer of its cards. Credit card sales and marketing
efforts are scheduled to start in September 2011.
We expect that the potential benefits to Aurora Russia will
become discernible as the bank's expanded product offering is
rolled out.
Kreditmart
Kreditmart's year-end unaudited accounts for 2010 had broker
revenues of RUR28 million. This represents an increase of 116%
compared to 2009 due to the number of mortgage approvals received
growing to 230 from 42 in 2009. Despite ending 2010 with an
operating loss, Kreditmart was able to reduce this by 40% YoY due
to growth in revenue and continuous reduction in costs which
included a recent closure of non-performing branches. Q1 2011 saw
revenue grow 53% on a like-for-like basis (only Moscow
operations).
The Agency for Home Mortgage Lending ("AHML") reports that the
volume of mortgages in Russia more than doubled in 2010 to RUR379
billion. AHML forecasts 2011 volumes at RUR580-640 billion, up
53%-69% YoY in line with Q1 growth achieved by Kreditmart.
The mortgage broker market however remains challenging, with the
vast majority of mortgages being written by the large Russian state
banks at very competitive rates leaving a small percentage
available for smaller commercial banks and Kreditmart. We continue
to monitor the situation at Kreditmart closely and look at options
as to how we can deliver the best value for Shareholders.
Board of Directors
The Board is continuing the process of identifying two new
independent non executive Directors and intends to be in a position
to announce appointments in advance of the Board's approval of the
year-end results.
Improved Disclosure
As part of its continued efforts to improve transparency, Aurora
Russia will henceforth issue quarterly trading updates as well as
interim and final results. These will be issued within 6 weeks of
the end of each quarter of Aurora Russia's financial year. In
addition, Aurora Russia already releases monthly updates on the
Russian economy including news on the Russian private equity market
and its investee companies. These can be found on the company's
website www.aurorarussia.com.
Outlook
Generally speaking, all our businesses should benefit from the
return of growth in the Russian economy, which we hope will provide
a sound platform for our management to deliver value to Aurora
Russia's shareholders. The Manager continues to have discussions
with a number of parties regarding strategic options for its
investments and will update shareholders if any of these
discussions are concluded.
Enquiries:
Aurora Russia Limited
James Cook +7 (495) 644 1662
John McRoberts +7 (495) 644 1662
Numis Securities
Hugh Jonathan
Nominated Adviser +44 (0) 20 7260 1263
Rupert Krefting / Nathan Brown
Corporate Broking +44 (0) 20 7260 1435/1426
Financial Dynamics
Ed Gascoigne-Pees +44 (0) 20 7269 7132
Jack Hickey +44 (0) 20 7269 7196
Notes to editors:
Aurora Russia
Aurora Russia floated on the Alternative Investment Market of
the London Stock Exchange on 24 March 2006. The Company was
established to make equity or equity related investments in small
and mid-sized private Russian companies focused on the financial,
business and consumer services sectors where the Directors of
Aurora Russia believe there is potential for growth together with
viable exit opportunities. The Company provides its investee
companies with the necessary capital to continue to expand and
develop and hands-on operational support to deliver significant
step changes in performance and value creation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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