TIDMAURR
RNS Number : 1628Q
Aurora Russia Limited
14 October 2011
14 October 2011
Aurora Russia Limited
Trading Update
Aurora Russia Limited ("Aurora Russia" or "the Company")
announces a trading update ahead of its interim results for the six
months ended 30 September 2011 which are expected to be released in
mid December.
Strategy
As announced on 5 August 2011, the Board is committed to a clear
exit strategy for its investments and focusing on realising value
from what is a mature portfolio. Three investments are considered
to be potential IPO candidates and this option is being actively
pursued, alongside a potential trade sale of each.
An exit strategy has been put in place for each investment on a
two year time horizon, with a goal of realising, on balance, at
least the current NAV from the portfolio. The Board believes that
the current NAV reflects a realistic assessment of the potential
value within the investments that could be realised on a two year
timeframe.
The Company and the Manager have been engaged in discussions
with market participants in London, Moscow and recently visited
Warsaw to discuss the potential IPO of the three investee companies
deemed substantial enough to be viable IPO candidates. Although the
recent turmoil in the market has put most IPOs on hold, there is
significant interest in each of the investee companies and we will
continue to pursue discussions regarding this route to exit. The
Company would expect to have more substantive news in this regard
early in the New Year.
The Manager
The Company's engagement of the Manager now falls under the
remit of the Management Engagement Committee and will be formally
reviewed from time to time alongside all service providers as part
of the committee's work.
The Manager is supportive of the Company strategy regarding its
two year timeframe in which to exit the Company's investments. The
work now being undertaken by the Manager in this regard is building
on work that was already taking place under the realisation
strategy in place since last year's AGM.
Portfolio company update and progress on realisation
strategy
Each of the Company's investments continues to make progress.
Particularly pleasing is the rapid growth of OSG, Superstroy and
Unistream.
Future quarterly reporting on the investee companies will follow
the format below, with figures from OSG, as an international
business, reported in sterling, whilst updates from other
businesses will be in Russian roubles to give a clear picture of
their underlying operations. In the six months to 30 September 2011
the Russian rouble weakened by 9.8% against sterling and thus the
translation of the figures below into sterling would reduce the
growth of Superstroy and Unistream, but nonetheless have shown
significant growth in the period.
OSG
Aug YTD Aug YTD
GBPm 2010 2011 %
Revenue 8.6 11.4 34
EBITDA 1.0 1.3 30
EBITDA Margin 12% 12%
For the first 8 months of 2011 OSG had 34% growth in revenues
from GBP8.6 million for the same period in 2010 to GBP11.4 million
in 2011. EBITDA has grown by 30% over the same period from GBP1
million to GBP1.3 million. As with many companies in Russia, OSG
generally has a stronger second half of the year and management is
confident that in 2011 this will remain the case.
As of the end of August OSG had 2.9 million boxes in storage
with racked storage capacity utilization at c.80%. Net Debt of the
company stood at GBP4.1million.
The fact that OSG has the number one position in Russia, a
country only beginning to scratch the surface of the potential
market for third party document storage, makes its strategic
position potentially attractive for a trade buyer, but equally the
transparency of its model and its potential for growth would make
an IPO an eminently viable alternative once stock market investor
appetite returns.
Superstroy
Aug YTD Aug YTD
RURb 2010 2011 %
Revenue 4.29 5.66 32
EBITDA 0.08 0.01 Neg
EBITDA Margin 2% 0%
For the first 8 months of 2011 Superstroy had 32% growth in
revenues from RUR4.29 billion for the same period in 2010 to
RUR5.66 billion in 2011 with like-for-like growth of 17%. YTD
EBITDA is close to zero due to substantial pre-opening costs
relating to the opening of its largest hypermarket in April.
Adjusted for these pre-opening costs YTD EBITDA was RUR73 million.
For DIY sales in Russia August usually is a peak month due to
strong seasonality and, not surprisingly, Superstroy's August
EBITDA margin reached 5% helping it to offset negative EBITDA it
accumulated in 1H. It is expected that in the September-December
period Superstroy will continue generating positive EBITDA.
Aurora Russia, in conjunction with the other investors in
Superstroy, is looking at all potential routes to exit. Exposure to
Russian retail is sought after by both trade buyers and investors,
and hence the Company is examining a variety of potential paths to
exit.
Unistream
Aug YTD Aug YTD
RURb 2010 2011 %
Volumes 72.0 84.8 18
Revenue 1.31 1.47 12
Op Income 0.59 0.73
Profit before tax 45% 50%
(PBT) -0.04 0.07
PBT Margin -3.2% 4.5% 23
Unistream's volumes grew 18% in the first 8 months of 2011 YoY
from RUR72 billion to RUR84.8 billion. Total revenues were RUR1.47
billion increasing 12% compared to the prior year period.
Unistream's operating profit grew by 23% YoY driven by the growth
of volumes though its own points of sale which therefore reduced
the payment of commissions to counterparties. Growth of income from
FX operations was 37% YoY. For the first 8 months of the year the
company produced profit before tax of RUR70 million versus an
operating loss of RUR40 million in the same period of last
year.
Since it began its loyalty card programme a year ago, Unistream
has distributed c. 900,000 loyalty cards. Amongst other
information, each loyalty card customer provides Unistream with a
mobile phone number so that the company can send a text message
informing the sender when a recipient has picked up a transfer. The
data collected through the loyalty card programme gives the company
valuable customer information which will assist the company in
adding supplementary revenue streams.
With the global financial system currently under scrutiny the
exit of Unistream will require the business to overcome the
scepticism of investors towards financial businesses. Nevertheless,
its continued good growth and increasing depth of customer
relationship through its loyalty card should ensure a better
reception than most financial businesses in the current
climate.
Flexinvest Bank and Kreditmart
Assets 31 Dec 31 Aug
RURm 2010 2011
Net Loans 364 334
Goodwill 128 128
Cash 213 104
Other Assets 104 90
Bonds 52 150
Total Assets 861 806
As at 31 August 2011, Flexinvest and Kreditmart had total assets
of RUR806 million. Of this, the net loan book accounted for RUR334
million and is sufficiently reserved with RUR40 million of
provisions. RUR150 million is invested in liquid Russian blue-chip
bonds such as Russian Railways, Gazprom, AHML, State owned
Rosselkhozbank and City of Moscow yielding on average 5.9% YTM.
Flexinvest continued to make progress in implementing its new
credit card and deposit products strategy. Since the last update,
the bank issued its first cards to some employees for tests. Also,
it has recently launched a deposit marketing campaign to attract
deposits from the bank's neighborhood. As of September 15 the bank
had collected RUR3.6 million in deposits as a result of this
action.
The bank's web site has been redesigned and the new site went
live in early October. In addition to the new brand and product
information updates, it has an electronic application form which
allows customers to submit their applications online and also,
allow the bank to start advertising on the internet.
Aurora Russia is seeking as cost effective a way as possible to
exit the loss-making business of Kreditmart and a strategy for exit
from Flexinvest will be spelt out to the market early in 2012, once
the initial results of the neighborhood bank initiative are
known.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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