MTS depreciated profits – Business – Kommersant

MTS was able to increase revenue in 2022 by 2.6%, to 541.7 billion rubles. An important factor in maintaining the positive dynamics of revenue and profitability was the increase in tariffs, experts say. At the same time, the company’s net profit and free cash flow decreased by 48.7% and 31%, respectively, which in the future, analysts admit, may affect the company’s decision to pay dividends.

At the end of 2022, the MTS Group increased its consolidated revenue by 2.6% by 2021, to 541.7 billion rubles, while adjusted OIBDA decreased by 2%, to 224.3 billion rubles, and net profit fell by 48. 7%, to 32.6 billion rubles, free cash flow excluding MTS Bank and proceeds from the sale of VF Ukraine decreased by 31%, to 37.2 billion rubles. The company’s capital expenditures slightly increased by 0.2% to RUB 111.2 billion, while operating cash flow increased by 33.4% to RUB 190.6 billion. In the fourth quarter, the group’s revenue grew year-on-year by 1.6% to RUB 144.4 billion, OIBDA increased by 0.4% to RUB 55.6 billion, net profit fell by 60% to RUB 54.4 billion. billion rubles, CAPEX grew by 59.3%, to 36.3 billion rubles. The subscriber base of the operator in Russia in 2022 remained at the level of 80 million users.

Net income was impacted by lower OIBDA due to increased staff costs, investment in new destinations and bank reserves, as well as higher finance costs on the back of higher interest rates, higher depreciation due to investment in network and digital destinations, follows from the comments MTS to reporting (.pdf).

These factors partially affected free cash flow, which was also affected by a more intensive M&A policy compared to 2021. In 2022, MTS announced the purchase of control in the developer of video communications services Webinar, the Russian provider of navigation systems Navitel, 67% in the AdTech company Buzzoola.

In terms of financial and operational performance, the company reported slightly better than market expectations, Timur Nigmatullin, an investment consultant at Finam, noted: “OIBDA margins remained above 38% in the fourth quarter. An important factor in maintaining the positive dynamics of revenue and profitability, apparently, was the increase in tariffs (based on the FAS reports, it took place in two rounds – in January and October 2022).” Also, the analyst noted, in the fourth quarter, revenue from communication services grew by 6.4% compared to the same period in 2021, significantly accelerating compared to the annual dynamics in the third quarter (+1.9%). However, the cost of services is growing at a faster pace – more than 10%, which raises questions about the ability to maintain profitability in the medium term.

The analyst also noted that a company’s negative equity is usually a red flag for investors in terms of dividend payouts. “But it should be noted that the capital is still negative under IFRS, according to RAS for the first nine months of 2022 (the latest published data, equity capital amounted to 63.5 billion rubles), it is still in positive territory, and this is a more important indicator in terms of the ability to pay dividends,” Mr. Nigmatullin added.

A decrease in the company’s net profit and free cash flow may affect the decision of MTS to pay dividends for the year, admits a Kommersant source in the telecommunications market: “At the same time, it is possible that the company can pay dividends from credit funds in order to maintain its value in the market” .

Based on the financial results for 2021, MTS approved an annual dividend in June 2022 in the amount of RUB 33.85. per one ordinary share, or 66.3 billion rubles.

MTS did not answer Kommersant’s question about the prospects for paying dividends for 2022.

MTS shares on the Moscow Exchange by 19:14 rose to 260 rubles, which is 2.14% higher than the close of trading last day. At the peak, at 18:45, the shares were trading at a price of 261 rubles.

Julia Silence