sistema pjsfc investor presentation€¦ · 5 176.4 181.1 4q 2018 4q 2019 successful monetisations...

2019 г.

2019

Sistema PJSFC

Investor Presentation

детский

2

DISCLAIMER

Certain statements in this presentation may contain assumptions or forecasts in respect to forthcoming events within Sistema PJSFC. Thewords “expect”, “estimate”, “intend”, “will”, “could” and similar expressions identify forward-looking statements. We wish to caution youthat these statements are only predictions and that actual events or results may differ materially. We do not intend to update thesestatements to reflect events and circumstances occurring after the above-mentioned date or to reflect the occurrence of unanticipatedevents. Many factors could cause Sistema’s actual results to differ materially from those contained in our projections or forward-lookingstatements, including, among others, deteriorating economic and credit conditions, our competitive environment, risks associated withoperating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema andits operations.

3

Cosmos Hotel Group100%

Business-Nedvizhimost100%

FORESTRY

Steppe Agroholding

85%

Major agriculture holding and one of Russia’s largest land owners

LSE: SSA MOEX: AFKS

Sistema is a publicly-traded investment holding with an

asset portfolio representing companies across 15

sectors in Russia

Vladimir Evtushenkov Founder and main shareholder (59.2%),Chairman of the Board

Andrey Dubovskov President and CEO

50.007%*

Leading public telecommunications operator in Russia

MOEX: MTSSNYSE: MBT

25%1

One of the largest public development construction companies in Russia

SISTEMA: PORTFOLIO OVERVIEW

MOEX: DSKY LSE: ETLNMOEX: ETLN

AGRICULTURE

Segezha Group

98%

Largest vertically integrated forestry holding in Russia

PRIVATE HEALTHCARE

Medsi

97%

Russia’s largest national healthcare chain

Ozon

43%

Leading multi-category online sales platform

E-COMMERCE

PUBLIC ASSETS

33%

Leading public children goods retailer in Russia

KEY NON-PUBLIC ASSETS

OTHER ASSETS

Sintez Biocom47% 2 75%2

PHARMACEUTICALS

Alium26%

POWER GRIDS

Bashkir Power Grid Company91%

RENTAL PROPERTIES

HOSPITALITY FASHION RETAIL

Concept Club43%

Kronstadt Group96%

RTI87%

HIGH TECH

PE FUNDS VC FUNDS

1 Shareholding of Sistema and its affiliates 2Joint stake with financial partner

4

FINANCIAL REVIEW 4Q 2019

5

176.4 181.1

4Q 2018 4Q 2019

SUCCESSFUL MONETISATIONS AND DECREASE IN CORPORATE CENTRE’S

FINANCIAL OBLIGATIONS

1Hereinafter results for 4Q 2019 and FY 2019 are presented to reflect the reclassification of of Detsky Mir, Leader Invest and RTI’s microelectronics business as discontinued operations.2Hereinafter please see Appendix A of the press release on 4Q 2019 financial results.3Source: Management accounts4Including total borrowings, liability to Rosimushchestvo net of interest, finance lease less cash at the Corporate Centre level

Consolidated revenue

-4.6%

+2.7%

RUB bln

RUB bln

Results of portfolio companies

- Revenue growth in 2019 of 5.1%1 year-on-year, mainlydriven by strong results of MTS, Medsi, Steppe, BPGCand RTI.

- Adjusted OIBDA in FY 2019 slightly declined year-on-year amid a negative impact of weak global conditionson the growth rate of the Group’s key non-public assets(Segezha Group, Steppe).

RUB bln

Key events in 4Q 2019 and after the reporting period

- Decrease in the net financial liabilities of the CorporateCentre by 13.9% year-on-year to RUB 183.8 bln.

- Successful public offering of Detsky Mir shares with theproceeds of RUB 12.5 bln. In November 2019, Sistemaand the Russia-China Investment Fund (RCIF) sold 175mln shares at RUB 91 per share. Sistema’s ownershipstake in Detsky Mir was reduced to 33.4%.

- Increase of Sistema’s stake in Ozon to 42.999% followingthe debt to equity conversion in December 2019.

- Completion of a merger of OBL Pharm and Binnopharminto the pharmaceutical holding Alium. As of 31December 2019, Sistema’s stake in Alium amounted to26.3%.

- Launch of Sistema SmartTech, a start-up fundspecialising in early stage investment.

Adj.2 OIBDA

+5.1%

-0.9%

-13.9%

625.0656.9

FY 2018 FY 2019

226.0 223.9

FY 2018 FY 2019

55.3 52.7

4Q 2018 4Q 2019

Net financial liabilities at Corporate Centre3,4

213.4 199.0 183.8

4Q 2018 3Q 2019 4Q 2019

6

625.0

656.924.6

6.9 4.6 1.8 1.9 -7.9

Revenue

FY 2018

MTS Steppe Medsi BPGC RTI Other assets, net Revenue

FY 2019

226.0 223.9

8.9 2.3 1.0 0.5 -0.8

- 6.7-7.3

Adj. OIBDA

FY 2018

MTS Medsi Segezha RTI Steppe Other assets, net Adj. OIBDA

FY 2019

MTS: growth in revenue from mobile serviceas well as other complementary segments,including financial services, systemintegration services, and software sales.OIBDA growth was primarily due toincreased revenue of the core business,which compensated for the negativeimpact of abolishing of intra-networkroaming.

Segezha Group: increased revenues dueto an increase in paper packaging pricesin Russia as well as growth in the plywoodproduction volume resulting from thesecond line of the Kirov plywoodproduction facility reaching full operatingcapacity. Adjusted OIBDA growth was dueto reduced production costs.

Steppe: strong positive revenue dynamicsdue to increased export of traditional andniche crops, positive dynamics in the DairyFarming segment and sales growth in theSugar and Grocery Product Tradingsegment. Decrease in OIBDA as a result ofdecline in global grain prices and theeffect of revaluation of biological assets,which was partly offset by the improvedperformance of key business segments.

Medsi: Revenue growth resulted fromincrease in the volume of servicesprovided. Significant growth in adjustedOIBDA was due to higher revenue and theimpact of participation in the MichurinskyProject LLC.

FINANCIAL REVIEW: FY 2019

Revenue: FY 2019

RUB bln+5.1%

2

-0.9%

-14.0

1

Change in equity pick-up in

Ozon’s net loss

Adj. OIBDA: FY 2019

RUB bln

1Group OIBDA was impacted by reflection of Sistema’s share in Ozon’s net loss increase of RUB 6.7 billion .2Numbers may not add up due to rounding.

2

7

176.4

181.15.02.1 0.7 -2.3

-1.1 0.3

Revenue 4Q

2018

MTS RTI Medsi Business

Nedvizhimost

Segezha Other assets, net Revenue 4Q

2019

55.352.7

0.3 0.2 0.2 -2.3-0.5 -0.6

Adj. OIBDA 4Q

2018

RTI Medsi MTS Business

Nedvizhimost

BPGC Other assets, net Adj. OIDBA 4Q

2019

MTS: revenue growth backed byincrease in mobile service revenue aswell as increased consumption of MTSBank’s fintech products.

Segezha Group: decrease in revenuemainly due to negative global prices forpaper packaging. Despite revenuedecline, minor decrease in adjustedOIBDA due to efficient cost control.

Medsi: significant growth in revenue dueto an increase in Voluntary HealthInsurance revenue and revenue fromindividual patients. OIBDA growth in linewith revenue.

Business Nedvizhimost: decrease inrevenue amid a decline in sales of landplots in the Moscow region andcommercial real estate as the Companyhas completed optimization of its realestate portfolio.

RTI: growth in revenue due to theincreased volume of activity under largelong-term contracts.

FINANCIAL REVIEW: 4Q 2019

Revenue: 4Q 2019

RUB bln+2.7%

1Group OIBDA was impacted by reflection of Sistema’s share in Ozon’s net loss increase of RUB 1.9 billion and in Detsky Mir Profit for December 2019 of RUB 594 bln2Numbers may not add up due to rounding

1

2

2

Adj. OIBDA: 4Q 2019

-4.6%RUB bln

8

4.85,46.7

12.5

+0.6

-3.2 -1.3 -2.4-6.1

1.4

-1.7

1.15.2

30 Sep 2019 Dividends and

cash returns

Monetisations Net other

revenue

Net repayment

of financial

liabilities

Investments Shares

buyback

SG&A incl.taxes Interest

expenses

31 Dec 2019

CASH FLOWS AT THE CORPORATE CENTRE

1 Management accounts. Numbers may not add up due to rounding.

RUB bln

1

+13.0

-12.6+14.2

MTS dividends for 6M 2019

Detsky Mir dividends

Other dividends

Placement of Detsky Mir shares

Sale of MTS-Bank

Other monetizations

Investment in Ozon

Other investments

Main cash inflows in 4Q 2019 were due to dividend payments by MTS (RUB 6.7 bln as of 1H 2019) and proceeds from placement of Detsky Mir shares (RUB12.5 bln), as well as other dividends and cash returns from assets.

The change in overall financial liabilities was due to the placement of series 001P-12 bonds (RUB 10 bln), attraction and repayment of bank loans as partof debt portfolio optimization, as well as payment of RUB 3.8 bln under the put option to Rosimuschestvo.

The total volume of investments in 4Q 2019 was RUB 4.9 bln, including RUB 3.2 bln of convertible loans to Ozon, which were converted at the end of 2019.

Interest expenses as a result of interest payments on loans and coupon payments on local rouble bonds.

In 4Q 2019, the Corporation also purchased its own shares totalling RUB 1.3 bln under the share buyback programme.

-4.9

9

15.8 10.0

38.3

9.4 9.8

7.20.3

11.0

17.8

69.6

2020 2021 2022 2023 Thereafter

182.4 195,9805468 190,9979954 182.0

10.1

-7.9 -4.7 -0.311.37.2

203.8189.2

30 Sep 2019 31 Dec 2019

Corporate Centre’s financial liabilities1

CORPORATE CENTRE’S FINANCIAL LIABILITIES

1Here and hereinafter the Corporate Centre’s financial liabilities are presented based on management accounts

2 In charts as of the end of 4Q 2019, FX debt and the USD-denominated liability to Rosimuschestvo for shares of SSTL net of interest are presented at the RUB/USD exchange rate as of 31 December 2019. USD-

denominated debt includes financial leases3RUB bonds 001Р-04 and 001Р-05 expiring 2020; 001Р-07 expiring 2021, 001Р-01, 001Р-06, 001Р-09, 001Р-10 expiring 2022; 001Р-11 expiring 2023; 001Р-08 and 001Р-12 expiring 2024.

USD debt2RUB debt

Debt (RUB)Local bonds with put-option3

10.0

23.3

49.3

Comfortable repayment scheduleAs of 31 December 2019

27.2

Net RUB debt repayments

FX revaluationFX debt repayments

Liability to Rosimuschestvo2

Liability to Rosimushchestvo2

High activity in the capital market allowed Sistema toextend the maturity profile of its debt portfolio andestablish a comfortable repayment schedule.

In 4Q 2019 the Corporation reduced financial liabilitiesquarter-on-quarter by 7.2% to RUB 189.2 bln.

As of 31 December 2019, the share of rouble-denominated financing exceeds 95% of the financialliabilities of the Corporate Center.

Structure analysis1

79.4

Bank loans and other

52%

RUB bonds

44%

Liabilities to Rosimuschestvo

4%

RUB bln

RUB bln

10

384.5 391.5 359.8

223.2 203.8189.2

41.7 40.6

42.6

29.020.3

19.7

54.855.4

35.0

733.2711.6

646.3

4Q 2018 3Q 2019 4Q 2019

MTS Corporate Centre Segezha RTI Other

Bank loans

and other

58%

RUB bonds

34%

Eurobonds

7%

Liability to

Rosimuschestvo

1%

80% 87% 88%

16% 10% 8%

4% 3% 4%

4Q 2018 3Q 2019 4Q 2019

RUB USD Other

Structure analysis1,2

Consolidated financial liabilities1,2: composition by borrower and maturity profile

CONSOLIDATED FINANCIAL LIABILITIES

138.0

67.4

100.8

77.9

150.7

111.6

2020 2021 2022 2023 2024 Thereafter

Debt and other liabilities

84% 76% 79%

16% 24% 21%

4Q 2018 3Q 2019 4Q 2019

Long-term liabilities Short-term liabilities

1 Including financial liabilities at the Corporate Centre, financial leases and total borrowings at portfolio companies in accordance with IFRS. 2 Management accounts data is presented as of 31 December 2019.3 Includes debt of Detsky Mir in the amount of RUB 21.5 billion.4 Includes debt of Detsky Mir in the amount of RUB 20.9 billion.

RUB bln

RUB bln

34

11

19,1%

21,4%

Group SG&A/Group revenue

22.524.6

2.8

2.70.4

1.20,7

0.95,6

7.11,7

2.3

4Q 2018 4Q 2019

MTS Segezha Steppe

RTI Corp. Centre Other

SG&A EXPENSES

5.6

7.1

3.2%

3.9%

4Q 2018 4Q 2019

Corporate Centre SG&A

Corporate Centre SG&A/Group revenue

The Corp. Centre SG&A/Group revenue ratioremained almost unchanged in 4Q 2019

year-on-year, amounting to 3.9%.

The total SG&A of the Corporate Centre grew year-on-year on the back of monetisation of

assets.

SG&A/Revenue, %IFRS, RUB bln RUB bln

Group SG&A expenses1

33.7

38.8

SG&A expenses: Corporate Centre1

Group SG&A grew by 15.2% year-on-year in 4Q 2019. The SG&A/revenue ratio

increased year-on-year to 21.4%,primarily as a result of increased SG&A at

MTS and the Corporate Centre inabsolute terms.

1 Management accounts.

SG&A expenses: portfolio companies1

+2.3 p.p.

Key assets SG&A/revenue ratio remainedalmost unchanged in FY 2019 year-on-

year.

+0.7 p.p.

15.8%

11.4%

12.4%

19.9%

18.5%

16.1%

15.1%

14.5%

19.6%

17.6%

RTI

Medsi

Steppe

Segezha

MTS

FY 2018 FY 2019

12

FOCUS ON SUSTAINABILITY IN SISTEMA

Approach to sustainability management

- For Sistema, sustainability is an integral element of its activities, investmentstrategy and long-term success. The Corporation was one of the firstRussian companies to join the UN Global Compact in 2002.

- At all stages of its investment activities and asset ownership Sistema takesinto account not only financial and operating aspects but also materialESG factors to create long-term value for shareholders and otherstakeholders.

- As a responsible investor, Sistema makes efforts to promote thesustainability practices in Sistema Group companies, including:

- compliance with high standards of corporate governance andprinciples of responsible business conduct,

- improvement of their sustainability management approaches andperformance,

- minimisation of negative and maximisation of positive impactthrough innovation, services, products and investments in localcommunities.

- In 2019, MTS joined GSMA-led Climate Initiative to developdecarbonisation pathway for mobile sector and was also awarded ascore of “awareness” (C) by the CDP disclosure system (among the topseven Russian companies out of the 60+ scored).

In 2019, Sistema confirmed its inclusion in theFTSE4Good Index Series, which covers companiesthat demonstrate high sustainability performance

As of February 2020, Sistema holds a Low risk score(15.3) in Sustainalytics ESG Risk Rating (#37 out of 578in Diversified Financials Industry Group)

In 2019, Sistema improved its position and receiveda rating of BB (on a scale of AAA-CCC) in the MSCIESG Ratings assessment, compared to B in 2018

Since 2016, Sistema has been included in theleaders’ group of the ESG ratings compiled by theRussian Union of Industrialists and Entrepreneurs(RSPP) and since 2019 has been a constituent of thenew MoEx-RSPP ESG exchange indices

In 2019, 1,165,075 people from 75 Russian regions and 30 countries received medical and social assistance, access to modern educational and cultural programs, as well as an opportunity to develop personal potential in the field of high technology.

Education and Technology Social Environment and Volunteering Culture and Arts

Sistema Foundation in support of social development

Sustainalytics ESG Risk Rating

FTSE4Good Index

MSCI ESG Ratings

MoEx-RSPP ESG ratings and indices

13

KEY PORTFOLIO ASSETS

14

122.0 127.1

4Q 2018 4Q 2019

MTS: GROWTH IN CORE BUSINESS, NEW DIGITAL STRATEGY AND

FOCUS ON SHAREHOLDER RETURN

1 MTS’s results reflect reclassification of the Ukrainian business as part of discontinued operations since 4Q 2019. The result s for 4Q 2018 and FY 2018 have been revised to reflect the results of this reclassification.2 Here and hereafter net profit is presented in Sistema’s share.3 Here and hereafter net debt includes financial leasing.

Revenue

OIBDA

Adj.net profit

Keyhighlights

50.5 50.7

4Q 2018 4Q 2019

REVENUE, RUB bln

OIBDA, RUB bln

0.3%

4.1%

increased in 4Q 2019 backed by growth in mobile service revenue in Russia as well as increasedconsumption of MTS Bank’s fintech products. In FY 2019, revenue growth was related to increasedrevenue from mobile services as well from other complementary areas, including financial services,system integration services, and software sales.

decreased in 4Q 2019 and FY 2019 primarily due to increased debt service expenses, operations withderivatives, and non-monetary losses from the sale of assets, including the Ukrainian business inDecember 2019.

in 4Q 2019 remained unchanged year-on-year. In FY 2019, OIBDA grew due to increased revenue inthe core business, which compensated for the negative impact of abolishing intra-network roaming.

In December 2019, MTS sold its telecommunications business in Ukraine. In December 2019, as a resultof the transaction, special dividends in the amount of RUB 13.25 per share (RUB 26.5 per ADR) wereapproved at the extraordinary general meeting of shareholders .

In December 2019, MTS increased its stake in MTS Bank to 99.7% as a result of the purchase of 4.5% ofshares from Sistema for a total of RUB 1.4 bln.

In March 2020, the Board of Directors of MTS approved a buyback programme of a total amount upto RUB 15 bln.

Digitalstrategy

Outlookfor 2020

MTS forecasts revenue growth of 3% and expects OIBDA to remain flat year-on-year. Capitalexpenditure will amount to around RUB 90 bln.

In October 2019, MTS’s Board of Directors approved a new MTS Group strategy for 2020-2022 CLV 2.0(Customer Lifetime Value 2.0). The new strategy focuses on the creation of an ecosystem of digitalservices around the core telecommunications business.

Number of My MTS users,mln

44.0%

14.1 15.417.7 19.5 20.3

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

RUB bln1 4Q 2019 4Q 2018 YoY FY 2019 FY 2018 YoY

Revenue 127.1 122.0 4.1% 476.1 451.5 5.5%

OIBDA 50.7 50.5 0.3% 211.5 202.6 4.4%

OIBDA margin 39.9% 41.4% (1.5) p.p. 44.4% 44.9% (0.4) p.p.

Adj. net profit2 2.8 8.7 (68.2%) 25.4 33.0 (22.9%)

Net debt3 321.7 300.5 7.1% 321.7 300.5 7.1%

Capex 30.4 31.1 (2.2%) 91.7 92.0 (0.3%)

15

487,0 500,0516,0 521,0 522,0 523,1 526,5 529,7 533,1

2013 2014 2015 2016 2017 2018 2019 2020E 2023E

Highlights

• #1 player in the Russian children’s goods market with unrivalled brand

• Asset light business model with strong ROIC and cash conversion

• Landmark IPO in Moscow in Feb 2017: first Russian IPO with full

international marketing since 2014

• Successful SPO in November 2019 in the amount of 175 million shares, resulting in free-float increase up to 57.6%

Key 2019 business initiatives and plans

• Increasing offline store network with 101 stores opened in 2019 in

Russia, Kazakhstan and Belarus. Detsky Mir intends to launch operations in Kyrgyzstan in 2020

• Strengthening online offering through the launch of pilot marketplace

and the full-feature mobile application, as well as next day delivery service available in 30 large Russian cities

Strategy

• Expand in white space across large and small cities in Russia, Kazakhstan and Belarus aimed at leadership position in the market

• Grow e-commerce platform to establish the leading online market

position

• Invest in assortment and prices to drive customer traffic and loyalty

• Focus on execution excellence to achieve superior operating

efficiency

DETSKY MIR GROUP AT A GLANCE

RUB bn

33.4%9.0% 57.6%

Free-float

622743 843

2017 2018 2019 2022E

7% 8% 10% 13% 17% 20% 23% 26%16% 17% 24%

32%44% 51%

59% 65%

2012 2013 2014 2015 2016 2017 2018 2019

Total Children's Retail Market Specialized Children's Goods Sales Channel

Detsky Mir Market Shares in Russia, %

Children’s goods market is resilient to macroeconomic challenges

Detsky Mir is the largest specialty children’s goods retailer

Detsky Mir plans to open c. 300 new stores in the next 3-4 years

1,143+No. stores

16

743842

4Q 2018 4Q 2019

4.65.2

4Q 2018 4Q 2019

DETSKY MIR: REVENUE GROWTH ACCELERATION IN FY 2019

34.338.9

4Q 2018 4Q 2019

NUMBER OF STORES6

REVENUE, RUB bln

ADJ. EBITDA, RUB bln

Revenue

9.7%

12.5%

13.4%

1The results in line with Detsky Mir’s financial statement. The results of Detsky Mir are not consolidated in the financial statement of Sistema PJSFC since November 2019. The results of Sistema PJSFC for 4Q

2019 and 12М 2019 are presented taking into account reclassification of Detsky Mir in discontinued operations.2 Adjustment for bonuses based on shares and money payments under the programme of long-term management incentive (LTI).3 100% of profit4 Under IAS 175 Like-for like (LfL) growth in RUB terms. Includes only the results of Detsky Mir stores in Russia and Kazakhstan which are compared, having operated for at least 12 full calendar months.6 Number of Detsky Mir stores, including ELC, ABC and Zoozavr as of the end of 4Q 2018 and 4Q 2019, respectively.

grew in 4Q 2019 and FY 2019 year-on-year driven primarily by stronger growth in LfL sales in in Russia andKazakhstan, as well as by the ramp-up to full operating capacity of the stores opened in 2017-2018. Revenue fromonline sales rose by 65.2% year-on-year to RUB 14.5 bln.

increased in 4Q 2019 and FY 2019 year-on-year due to robust revenue performance and an increase inoperational efficiency of the business, mainly as a result of optimization of commercial lease terms and marketingexpenses. Share of SG&A expenses in revenue dropped from 21.8% in FY 2018 to 20.8% in FY 2019.

Adj.

EBITDA

Retail

network

and online

sales

In 2019, 101 new Detsky Mir stores were opened, with 56 of the stores opened in 4Q 2019. In 2020, the companyplans to strengthen its leading position in Kazakhstan, continue its expansion in Belarus and enter the Kyrgyzstanmarket. In November 2019, the company launched next-day delivery of online orders from its retail stores inRussia’s 30 largest cities priced at RUB 99. The company also launched a pilot version of marketplace in theClothes and Shoes category.

grew in 4Q 2019 and FY 2019 following OIBDA dynamics, and net debt/adj. EBITDA decreased year-on-year to1.2х (under IAS 17) primarily due to effective working capital management.

Adj.

net profit

4.86.1

7.0

FY 2017 FY 2018 FY 2019

DIVIDENDS, RUB bln

+21% CAGR

Key

highlights

In December 2019, the company paid interim dividends based on the results of 9M 2019 in the amount of RUB 3.7bln (RUB 5.06 per share). Total amount of dividends distributed in 2019 was RUB 7.0 bln (dividend yield of 10.4%).

In November 2019, Sistema PJSFC, together with the Russia-China Investment Fund (RCIF), placed 175 mln DetskyMir shares for RUB 15.9 bln (RUB 91 per share). As a result of the transaction, ownership stakes of Sistema and RCIFin Detsky Mir amounted to 33.4% and 9.0%, respectively.

In March 2020, the Board of Directors of Detsky Mir appointed Maria Davydova as the Company’s CEO. Previouslyshe served as the Company’s Deputy Commercial CEO. Detsky Mir CEO Vladimir Chirakhov was appointedChairman of the Board of Directors of the Company.


Revenue 38.9 34.3 13.4% 128.8 110.9 16.1%

Adj. EBITDA2 7.5 6.8 10.4% 23.8 21.1 12.7%

Adj. EBITBDA margin 19.4% 19.9% (0.5) p.p. 18.5% 19.0% (0.6) p.p.

Adj. net profit3 2.8 2.6 9.7% 7.3 6.3 14.9%

SG&A/revenue4 20.7% 20.8% (0.1) p.p. 20.8% 21.8% (1.0) p.p.

Net debt 17.5 18.1 (3.6%) 17.5 18.1 (3.6%)

Like-for-like growth5 5.0% 3.5% 1.5 p.p. 7.2% 4.7% 2.5 p.p.

Traffic growth 7.9% 5.9% 2.0 p.p. 8.5% 7.2% 1.3 p.p.

Average ticket growth (2.7%) (2.3%) (0.4) p.p. (1.2%) (2.3%) 1.1 p.p.

Capex 0.9 2.5 (62.5%) 3.5 3.8 (7.6%)

17

SEGEZHA GROUP: LEADING FORESTRY HOLDING

Finland

33,4

15,8

7,32,0

11,0

1,5 1,6

-0,2

Paper&paper sacks Wood processing Plywood Other

Revenue Adj. OIBDA

Strategy

• Expansion of capacity and improvements in operating efficiency as

a result of the large-scale Investment programme

• Accretive M&A in Russia and globally

€/cu m (Film-faced, DDP Germany)

€ /tonne

RUB bn

Highlights

• Russia’s largest vertically-integrated forestry holding

• One of the top forest leaseholders in Russia: allowable cut ≈ 7.8 mn

cubic metres

• High share of in-house raw wood supply in key products provides

ability to control production costs

• ≈ 70% of revenues generated by exports

Sack paper Sawn timber

Glued timber andprefabricated home kits

Birch plywood and particleboard

338 346 404 505 506 517 522543

779

Austria ItalyFrance SpainSwedenCzech Republic

TurkeySegezha

Fisher International data (2019), Indufor data (2019)

334 342400

510

Segezha Russia Latvia Finland

Segezha PPM modernization to

decrease costs by ~30% due to energy

costs optimization

Share of wood in manufacturing costs of Segezha’s key products

61%35%

61% 38%

Leadership in production costs: sack paper

Leadership in production costs: plywood

Segezha’s 2019 revenue and OIBDA by business segment

18

SEGEZHA GROUP: GLOBAL FOOTPRINT1

435

260

240

192

Romania

Turkey

Czech Republic

Italy

France

Germany

DenmarkNetherlands

Ireland

Karelia

Finland

Arkhangelsk region

Vologda region

Kirov region

Krasnoyarsk

region

Rostov region

Production facilities and offices in 11 countries

Sawn timber, Russia1,000 cu m/a

Sack paper, Global 1,000 t/a

Large size birch plywood, Global ‘000 cu m

Paper sacks, Europemln sacks

#2

#5

#2

#3

775

755

375

333

180

Oinashan

BillerudKorsnas

Segezha Group

Mondi

West Rock 1,155

Segezha Group

UPM

Sveza

Latvijas Finieris

Syktyvkarsky PM

560

260

260

Smurfit Kappa

1,262

Mondi 5, 228

Segezha Group

Gascogne

Stora enso

2

1 Internal research of Segezha Group as of 31.12.2019. Data on sack paper, large size birch plywood, sawn timber based

product capacity. Data on paper sacks based on actual product output in 2019.2 Includes global paper sack production capacity of Mondi

1 600

1 240

1 200

850

450

Titan

Segezha Group

ULK

RusLes (ex)

VLP

Kostroma region

19

SEGEZHA GROUP: SUSTAINED GROWTH IN KEY MARKETS

Mln tonnes Mln cu m Mln cu m

2018 2019 2020 2021 2022 2023 2018 2019 2020 20222021 2023 20222018 2019 2020 2021 2023

‘000 tonnes Mln cu m

9.3 10.0 9.8

Global demand for sack paper Global demand for birch plywood Global demand for timber

Demand for paper sacks in Russia Demand for paper sacks in Europe

Scarcity in supply; increased capacities do not meet the needs of growing consumption.

Due to active replacement of paper bags with polymer bags, paper consumption is expected to decrease by at least 390,000 tons.

CAGR:1.3%

7,2 7,2 7,5 7,5 7,5 7,6 7,8 8,0

2024 2025

Mean prices will grow due to the growing share of non-standard product specifications. In Europe, the replacement of tropical plywood with birch plywood due to decrease in production in Indonesia and Malaysia has led to shortages of raw wood materials and rising prices.

Supply surplus on the market is expected until 2027.

CAGR:2%

2024 2025

4,886 4,936 5,042 5,150 5,261 5,375 5,491 5,610350 349 357 368

371 379 382 386

CAGR:1.4%

By 2020, consumption growth is expected to exceed production growth rates.

The growing shortage of affordable and high-quality raw materials will negatively impact production growth worldwide (Europe, Western Canada, the US, Northwest of Russia)

2024 2025

In 2020 demand for sacks is expected to decrease by 9 % due to economic slowdown amid coronavirus outbreak and transfer of major market players to polymer packaging

It is highly probable that in 2020-2021 imports will continue to decline due to higher exchange rates

786 771 701 771 775 779 783 787

2018 2019 2020 2021 2022 2023 2024 2025

CAGR:0,4%

In 2020 economic slowdown amid coronavirus outbreak may cause demand decrease by 0,3 mln sacks. Higher competition with polymer packaging will have additional pressure due to lower feedstock prices. Capacity surplus in Europe currently stands at 35%.

Moderate demand growth will be supported mainly by the construction segment

CAGR:0.3%

6071 5946 5 663 5 918 5 935 5 953 6 031 6 049

2018 2019 2020 2021 2022 2023 2024 2025

20

SEGEZHA GROUP: KEY INVESTMENT PROJECTS

• New sawmill in Karelia region at the site of Segezha PPM

• Capacity: 235,000 cu m of sawn logs

• The mill will supply Segezha PPM with wood chips

• Launch: 2021

≈RUB

5.2 bn

Segezha sawmill

• Capacity increase: 50,000 cu m

• Currently there is no CLT market in Russia. If it were to follow the same growth path as in the EU, the demand could be ~0.5 mn cu m by 2030 (source: Poyry)

• Launch: 2020

≈RUB

3 bn

Cross-laminated timber (CLT) mill

• New plywood mills in Kostroma region (greenfield)

• Capacity increase: 125,000 cu m;

• Launch: 2021

≈RUB

12 bn

Expansion of plywood capacities

Financials

• New pulp mill in Krasnoyarsk region (Segezha Group AAC in the region 2.8 mn cu m as of April 2018)

• Capacity: ≈700-1000 thsd t of bleached kraft pulp (65-80% is softwood)

• Key advantages: (i) softwood resource in Krasnoyarsk region (total AAC is 76 mn cu m, 63% softwood), (ii) Proximity to Southeast Asia markets, (iii) Growing global market of softwood

pulp

• Launch: 2023

≈RUB

100 bn

Pulp mill in Krasnoyarsk

Current situation

• Capacity increase: 484,000 t

• After the proposed investments, Segezha PPM will be one of the largest and most modern sack and kraft paper mills in Europe, producing both white and unbleached sack

/ kraft paper

• Launch: 2023

≈RUB

70 bn

Modernisation of Segezha Pulp & Paper Mill

21

SEGEZHA GROUP: GROWTH OF FINANCIAL INDICATORS IN 2019

DESPITE UNFAVOURABLE MARKET ENVIRONMENT

Revenue increased in FY 2019 primarily due to an increase in Russian paper packaging prices seen throughoutthe year and growth in the volume of plywood production resulting from the second line of the Kirovplywood production facility reaching full operating capacity. These developments compensated forthe effect from the reduction of global prices for paper, plywood and sawn timber. The main driver of adecrease in revenue in 4Q 2019 was a decline in paper prices.

Adj.

OIBDA

Business

expansion

grew in FY 2019 mainly owing to reduced production costs. A slight decline in adjusted OIBDA in 4Q2019 followed a decline in revenue. The adjusted OIBDA margin grew by 1.6 p.p. to 26.2% year-on-yearin 4Q 2019 due to reduced level of costs, especially SG&A expenses.

Adj. net

profit

in FY 2019 and 4Q 2019 amounted to RUB 5.0 bln and RUB 0.7 bln, respectively. Growth in adjusted netprofit in FY 2019 year-on-year was affected by currency exchange differences and debt revaluationas of reporting date.

In January 2020, Segezha Group purchased from Pin Arctic Oy Company (Finland) Karelian WoodCompany LLC, a logging and wood processing enterprise near the city of Kostomuksha in the Republicof Karelia, with the output capacity of up to 250,000 cu m of sawn wood per year and the annualallowable cut of over 200,000 cu m.

Debt

markets

Successful debut placement of RUB 10 bln three-year bonds series 001P-01R with a coupon rate of7.1%.

7.6

5.0

1.8

0.5

3.5

0.2

0.4

-0.2

Paper &

packaging

Wood

processing

Plywood and

boards

Other

Revenue OIBDA

REVENUE and OIBDA bysegments in 4Q 2019RUB bln

33.4

15.8

7.3

2.0

11.0

1.5

1.6

-0.2

Paper &

packaging

Wood

processing

Plywood and

boards

Other

Revenue OIBDA

REVENUE and OIBDA bysegments in FY 2019,RUB bln

RUB bln 4Q 2019 4Q 2018 YoY FY 2019 FY 2018 YoY

Revenue 14.8 15.9 (7.0%) 58.5 57.9 1.0%

Adj. OIBDA 3.9 3.9 (1.1%) 14.0 13.0 7.8%

Adj. OIBDA margin 26.2% 24.7% 1.6 p.p. 23.9% 22.4% 1.5 p.p.

Adj. net profit 0.8 0.8 (2.8%) 5.0 0.1 9272.1%

Net debt 39.4 38.7 1.8% 39.4 38.7 1.8%

Capex 2.1 1.6 30.1% 6.3 6.4 (1.5%)

FX-denominated rev. 73.9% 75.0% (1.1) p.p. 73.1% 72.7% 0.4 p.p.

Own consumption 65.7% 64.0% 1.7 p.p. 69.5% 58.8% 10.7 p.p.

Total forestry, thsd cu m 1,205.7 1,229.0 (1.9%) 4,908.8 4,489.0 9.4%

22

244 254

FY 2018 FY 2019

SEGEZHA GROUP: GROWTH IN PRODUCTION AND SALES OF

PAPER, PLYWOOD AND SAWN TIMBER IN FY 2019

Trends across key segments Sales

1 34% of paper produced was supplied to own converting facilities to produce paper packaging.2 Including 69.8 mln consumer paper bags.

PAPER , thsd tonnes1

+4.1%

1284 1238

FY 2018 FY 2019

PAPER SACKS2, mln units

-3.6%

120

182

FY 2018 FY 2019

PLYWOOD, thsd cu m

+52.0%

931 1005

FY 2018 FY 2019

SAWN TIMBER, thsd cu m

+8%

In FY 2019, plywood production grew by 41.1% to 191.5 thsd cu m due to commissioning of the newplywood production facility in the Kirov region in July 2018, with sales increasing by 52.0% to 182.1thsd cu m. In 2019, Segezha Group launched five new products, including Segezha PlyForm, aunique product for formwork construction. In 4Q 2019, production grew by 17.2% year-on-year to 50thsd cu m due to the low base effect – in 4Q 2018, the new production line of the facility did notoperate at full capacity. In 4Q 2019, birch plywood sales rose by 31.9% year-on-year to 51.4 thsd cum. The Company continued expansion of its presence in the high-margin markets of the UnitedStates and Canada, as well as the development of Asian markets (South Korea and India) to sellhigh-margin plywood.

Sack

paper

Paper output reached the record volume of 389.6 thsd tonnes in FY 2019, a 3.8% increase mainly dueto strong results for 1H 2019. Sales of paper grew by 4.1% year-on-year to 254 thsd tonnes on the backof increased production volumes. The increased volume was distributed among both existing clientsas well as over 100 new clients in 70 countries. In 4Q 2019, paper production volume was 99.51 thsdtonnes, 4.5% less than in 4Q 2018, while sack paper sales decreased by 2.2%, to 79.3 thsd tonnesfollowing a decrease in production volumes.

Paper

sacks

Plywood

Sawn

timber

In FY 2019, the production volume of paper sacks and bags decreased by 1.8% to 1,262.3 mln units,while the sales volume declined by 3.6% to 1,237.8 mln units as a result of a weaker demand forpaper sacks from the construction industry in Europe. In 4Q 2019, production of paper sacks andbags decreased by 8.5% year-on-year to 249.5 mln units, and sales volume decreased by 11.4% to249.6 mln units. In 4Q 2019, the average sales per unit in Russia and Europe increased partly due togrowth in sales of high-margin products (packaging for powdered milk, pet foods and seeds), whichled to revenue growth year-on-year.

In FY 2019, sawn timber production increased by 9.8% to 1,014.4 thsd cu m due to improvedperformance of the Company’s sawmill operations. Accordingly, sawn timber sales increased in FY2019 by 8% and totalled 1,005.3 thsd cu m for the year. In 4Q 2019, sawn timber production rose by22.7% to 275.2 thsd cu m, and sawn timber sales grew by 45.3% to 351 thsd cu m followingproduction growth and as a result of selling down sawn timber inventories from 3Q 2019. Productiongrowth was also boosted by raw materials supply chain improvements resulting from increasedshare of own logging.

23

INVESTMENT APPEAL OF THE RUSSIAN CROP FARMING SEGMENT

234

292

194 214260 276

251216

186160 160

182 181

100

200

300

400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Russia Argentina Brazil USA Western Europe

175 174 130 120 100 80 80

USA EU -25 Kazakhstan Argentina Canada Ukraine Russia

5,44,1 3,3 3,2 3,1 3,1 2,7 1,8

China Ukraine Canada India USA Russia Turkey Australia

Wheat yield, t/ha

$ /t, 2016-2017

K $ / ha, 2018-2019

0.5 – 3 4 - 7 4 - 75 – 20

5 – 40

Source: US Department of Agriculture, Rosstat, Agroholding Steppe

*all data is shown for land with above-average crop yields

• Russian agricultural land market remainsfragmented, however, the process ofconsolidation continues, especially in themost attractive Southern region

• The price of arable land has the potential togrow 5-fold compared to global peers,especially given recent Russian Roubledepreciation, which pushes down dollar-denominated prices and increasing returnsper ha

• The cost of wheat growing in Russia remainrecord lows due to implementation ofmodern technologies and depreciation ofthe rouble, given high share of Rouble costs

• Modernisation of the industry andadvanced technologies have significantlyincreased average crop yields andimproved the stability of harvests

• Smaller and less efficient companies areleaving the market, which opens up greatopportunities for consolidation

• Dollar wheat prices are rebounding from 10-year lows and coupled with lower $-

denominated land prices there is a goodpotential for expanding land holdings

SRW, year average $/t Average 2007-2019 price = 220 $

Land is cheaper than in other countries

The lowest cost of wheat growing

Significant yield growth potential

Prices growth potential

Price recovery

24

AGROHOLDING STEPPE: RUSSIA IS A GLOBAL LEADER IN CROP

FARMING AND AGRICULTURAL EXPORTS

Source: FAOSTAT, US Department of Agriculture, Rosstat, Agroholding STEPPE

Share of global wheat production, 2018

Russia’s wheat export volumes (by crop years), m tonnes

Production output in Russia in 2018, m tonnes

Share of global wheat exports in 2017

1. Russia is one of the world's largest producers of grain

3. Russia is also one of the leading grain exporters ...

1. … and especially wheat

4.… with strong potential for further growth

1,9 4,7

13,617,0

22,4

42,1

72,1

Rye Oat Sunflower Barley Potatoes Sugar

beet

Wheat

6%

9%

13% 13%15%

20%

Australia Ukraine Canada EU USA Russia

1822 24

28

4136

55

2013/14 2014/15 2015/16 2016/17 2017/18 2018/2019 … Potential

18%

14%

10%

7%5%4%3%

39%

Russia

India

China

USAFrance

Canada

Ukraine

Rest of the world

25

Land: 380,000 ha

- incl. RZ Agro: 106,000 ha

Gross output: >1.4 m tonnes

Profit margins: >30%

5 dairy farms, Total livestock > 10, 000 head

40,000 t of milk a year (existing farms)Milk yield > 10,000 l/cow

Profit margins: >30%

144 ha of greenhouses (Yuzhny Agricultural Complex)

Gross output: > 45,000 tonnes of tomatoes and cucumbers

Profit margins: >15% (growth potential)

780 ha of intensive orchards (Sady Kubani brand)

Gross output: 22,000 t of

table apples

Profit margins: up to 70%

84.6%

100% 100%100%100% (assets of Steppe )

50%(RZ Agro)

Steppe AgroHolding is a major diversified player in the Russian agricultural industry, with significant growth

and value creation potential that can be realised through synergies across segments.

AGROHOLDING STEPPE: PRESENCE IN HIGH-POTENTIAL SEGMENTS

AND VERTICAL INTEGRATION

Land bank: Steppe: 527k ha, incl. RZ Agro: 106k ha

Production: ≈ 1.4 mn tonnes

Field crop production Dairy farming Vegetables and fruit

production

Sugar and grocery

trading

5 dairy farms, >10 K head of livestock

45 K tonnes of milk / yearYield of ca. 10 tonnes / cow

Greenhouses with total area of 130 haOrchards: 760 ha, SadyKubani brand

Production: >45 K tonnesof vegetables a year and 22 K tonnes of apples a year

Wholesale trade of sugar and cerealsSale of sugar and cereals under Agroholding "STEPPE“ brand

Sales volume: > 300 K tonnes

Own and third-party grain trading (deep + shallow water)

Export: ≈ 2.1 mn tonnes

Grain trading

26

AGROHOLDING STEPPE: STRATEGY FOR EXPANSION OF LAND

HOLDINGS

Geographical footprint of Steppe

AgroHolding

3,1

6,3

4,5 4,5

Russia's average Krasnodar Stavropol Rostov

Regions of Steppe's presence

• Quality land in the most attractive agricultural regions of Russia (Krasnodar, Rostov and Stavropol)

• Unique share of land in ownership compared to Russian peers: 64%

• Proximity to sea and river grain terminals

• Significant potential for increasing production, crop yields and

OIBDA in all M&A deals

• Focus on acquisition of assets at attractive prices vs peers

Source: Rosstat, Agroholding STEPPE

Wheat yield, t/ha

!

R u s s i a

Steppe AgroHolding

Expansion of Sistema's land holdings Geographical footprint

Russia's best agricultural regions

99

380 401

527>600

+38

+178

+65 +21 +15

+111

12-13 14-15 2016 2017 2018 2019 2020 Mar

2020… 2020E

JV RZ Agro

Steppe AgroHolding

'000 ha

27

AGROHOLDING STEPPE: GROWTH IN THE DAIRY FARMING

SEGMENT

3,883 4,230 4,908

7,172

9,000 9,000 9,000

9,8 9,79,5

10,09,8

10,3 10,4

9,00

9,50

10,00

10,50

0

5

10

2016 2017 2018 2019 2020 2021 2022

Milk cows, K head Milk yield per cow, K l/year

69%31%

Товарное молоко

Нетоварное молоко

• Today, Steppe AgroHolding is the most competitive enterprise inRussia and its efficiency exceeds that of the top 10 market players

by 47%; If other enterprises start implementing efficiencyenhancement measures, they will need 4-5 years in order to reach

the current results of Steppe AgroHolding.

• Consumption of milk and dairy products in Russia is about 38m t, outof which 17% is imported

• The raw milk output in Russia has remained approx. the same, about31m t, in the last 5 years

• The number of milk cows is gradually decreasing as cattlepopulations of individual farmers are shrinking and inefficient

producers are leaving the market, which is partially offset byincreased milk yields

• The share of market-grade milk in Russia's total milk output is 69%,which leads to a shortage of quality milk for processing (need to

import milk)

• Import substitution potential, inefficient producers leaving the market

and deficit of raw milk create favourable conditions for developingmodern high-quality dairy farms

Commissioning of new farms

Milk suitable for processing

Low quality milk

Russia's milk market, mn t Cow numbers and milk yield per cow in Russia

Share of market-grade milk in Russia Dairy farming results at Steppe AgroHolding

40

Growth potential 38,0-40,0

31,6 31,6 30,5 30,8 30,8 30,8 30,2 30,640

7,9 8,4 9,4 9,2 7,9 7,0 6,6 6,4

0

10

20

30

40

2011 2012 2013 2014 2015 2016 2017 2018 … 2020

Milk import Milk production

Growth potential 38,0-40,0 9,0 8,9 8,4 8,3 8,1 8,0 8,0 7,9

4,3 4,5 4,5 4,8 5,15,5 5,9

6,1

( 1,0)

1,0

3,0

5,0

7,0

0,0

2,0

4,0

6,0

8,0

2011 2012 2013 2014 2015 2016 2017 2018

Milking cows herd Yeild / cow in agri enterprises, tn / cow

28

176.3

306.7

FY 2018 FY 2019

STEPPE: REVENUE GROWTH ON THE BACK OF INCREASED EXPORT

AND DEVELOPMENT OF SUGAR TRADING

Revenue

OIBDA

CAPEX

In FY 2019, grew year-on-year due to increased export of traditional and niche crops, positive

dynamics in the Dairy Farming segment and strong development and sales growth in theSugar and Grocery Trading segment.

1 RZ Argo is accounted for as an investment in a joint venture in Agroholding Steppe’s IFRS financial statements.

amounted to RUB 1.9 bln in FY 2019, where key investment areas included implementation ofprojects on the construction of dairy farms, gradual buyout of land shares to increase the

proportion of owned land bank, development of logistics and renewal of farm machineryfleet.

decreased year-on-year in FY 2019 as a result of a reduction in global grain prices and theeffect of revaluation of biological assets, which was partly offset by improved performance of

key business segments. In 4Q 2019, OIBDA grew compared to 4Q 2018 due to an increase insales and a decline in carry-overs to 2020.

SUGAR & GROCERYTRADING, thsd tonnes

+74.0%

Net debt increased in FY 2019 due to implementation of the capital expenditure programme and aninventory build-up in the Sugar and Grocery Trading segment.

Key

highlights

Expansion of land bank to 416 thsd hectares as of the end of 2019.Substantial growth in gross crop yields.

Record gross apple yield.

REVENUE, RUB bln

+28.5%

24.231.0

FY 2018 FY 2019


Revenue 9.7 9.6 0.4% 31.0 24.2 28.5%

OIBDA 0.4 0.2 122.2% 4.1 4.9 (16.4%)

OIBDA margin 4.1% 1.9% 2.3 p.p. 13.2% 20.3% (7.1) p.p.

Net (loss)/ profit (1.3) (1.0) n/a (0.6) 1.1 n/a

Net debt 21.1 17.2 22.4% 21.1 17.2 22.4%

Capex 0.7 0.9 (18.4%) 1.9 1.9 2.1%

29

STEPPE: STRONG OPERATIONAl PERFORMANCE ACROSS KEY

BUSINESS SEGMENTS

Field crops

Agrotrading

APPLE HARVESTMILK PRODUCTION

thsd tonnes thsd tonnes

OrchardsDairy farmingAgrotradingField crops

Land bank416 thsd hectares

Orchards area780 hectares

Forage-fed cows≈ 5,850 cows

Exports in FY 20191,198 thsd tonnes

EXPORTS

thsd tonnes

Dairy farming

Orchards

Steppe’s gross harvest increased by 14.3% in FY 2019, and gross harvest of high-margin crops increased due to theuse of advanced agricultural technologies.

Export volumes in the Agrotrading segment for FY 2019 totalled 1,198 thsd tonnes (+7.4% year-on-year), makingSteppe a TOP-8 largest exporter in Russia in the first half of the grain season 2019/2020.

The Dairy Farming segment reported solid growth: gross milk yield in FY 2019 was around 57 thsd tonnes (+22% year-on-year), forage-fed cow productivity grew by 8.0% year-on-year, and forage-fed herd included around 5,850 cows

at the end of the reporting period.

In FY 2019, the Orchards segment produced a record gross yield of 30.7 thsd tonnes (1.7x year-on-year) and wascharacterised by a high quality of table apples.

12.3 14.0 16.2

26.3 28.3 29.9

4Q 20194Q 2018 3Q 2019

Price per litre, RUB

Production, thsd tonnes

18.5

30.7

GROSS HARVEST 1

thsd tonnes

+14.3%

1 Including data of Agroholding Steppe and RZ Agro

Sugar and grocery

tradingSales volumes in the Sugar and Grocery Trading segment increased substantially in FY 2019 and amounted to 306.7thsd tonnes (+74.0% year-on-year).

+7.4%

FY 2019FY 2019

1.7x

1,1551,320

FY 2018 FY 2019

1,115

1,198

FY 2018 FY 2019

30

MEDSI AT A GLANCE: THE LEADING PRIVATE HEALTHCARE GROUP IN RUSSIA

Nyagan

Nizhnevartovsk

Barnaul

Perm

Moscow

Bryansk

Volgograd

1

61

1

11 29

х

2

– # of medical facilities

17.3mn

9.5mn

~242,000sq m

4,500

Revenues Adj. OIBDA Adj. Net profit

Services provided, annually

Patient visits, annually

Physiciansemployed

Area of facilities

Highlights

• Leading provider of private healthcare in Russia, offering a

complete range of services for children and adults

‒ Medsi is #1 in Russia‒ One of Russia’s most recognizable healthcare brands

‒ 20+ yeas of successful operations

• Diversified infrastructure: 46 medical facilities, incl. 37 clinics, 4

clinical and diagnostic centers, 2 hospitals, 3 wellness centersand sanatoriums

• Fast-growing business with an extensive investment

programme underway

RUB bn

St. Petersburg

17,7

25,8

2018 2019

25.8%

3,6

5,9

2018 2019

1,1

2,9

2018 2019

64.3% 175.3%

Key performance indicators

4

Izhevsk

31

19%7%

STRUCTURAL CHANGES UNDERPIN A STEADY GROWTH OF PRIVATE HEALTHCARE MARKET IN RUSSIA

Healthcare spend (% of GDP) 2

1Voluntary health insurance (VHI), mandatory health insurance (MHI), Source: BusinesStat2Both government and voluntary, including spending on medical services and goods (pharma)

Source: For OECD – OECD (2017 for France, Germany, the UK, Poland; 2016 for the US, Russia; 2015 for Brazil, South Africa, China, India)

Private healthcare sector

RUB

552 bn

RUB

213 bn

By revenues in Moscow

By revenues in Russia Top 10 Top 10

3.9%5.0% 5.3% 6.7%

9.7%11.4%11.3%

17.1%

average: 8.9%

Industry revenue breakdown by segments (2017)

21

179

308

1 580

102

144

111

408

Moscow

Russia

Grey market MHI VHI Out-of-pocket

10%CAGR ‘17-22E:

RUB 541 bn

RUB 2,310 bn

8%

Medsi market

10%CAGR ‘17-22E: 8%

1. Russian market is experiencing robust growth… 2. …with significant headroom for further expansion

3. … and great potential for market consolidation … 4. … while Medsi is focused on the most attractive segment

157 168 179 190 234346 376 408 442

653129 138 144 152213

1 472 1 521 1 580 1 652

2 089

2015 2016 2017 2018 . 2022

Grey market Out-of-pocket VHI State

Healthcare services market breakdown (RUB bn) 1

32

MEDSI: GROWTH OF FINANCIAL INDICATORS AMID

STRONG PERFORMANCE ACROSS KEY SEGMENTS

increased in 4Q 2019 year-on-year on the back of significant growth in the volume ofVoluntary Health Insurance (VHI) segment revenue to RUB 2.2 bln (+20.3%) and

increased individual patient revenue to RUB 1.8 bln (+22.4%). Revenue growth in FY 2019resulted from growth in the volume of services provided.

65%

29%

3% 3%Insurance

Individuals

Corporate

Others

36%

24%

34%

6%Clinics*

Hospitals

CDC

Other

By clients

By assets

Revenue in 4Q 2019

Revenue

Adj.

OIBDA

Adj. net

profitincreased in 4Q 2019 and FY 2019 mainly due to OIBDA dynamics.

grew in 4Q 2019 year-on-year and in FY 2019 due to higher revenue and participation in

the Michurinsky Project LLC, a joint venture with Capital Group, to build the Nebobusiness class residential project on Michurinsky Prospect (+ RUB 0.06 bln in 4Q 2019, and +

RUB 1.1 bln for FY 2019).

The adjusted OIBDA margin grew in FY 2019 backed by capacity utilisation, higher

efficiency per sq m of medical facilities, an increase in treatment volumes at openedclinics, as well as the effect from participation in the Michurinsky Project.

1Adj. OIBDA, the adj. OIBDA margin and adj. net profit are adjusted for accruals related to the LTI programme2Сapex excluding M&A

* Primary care clinics

Key

highlights

The company is continuing the construction of the new multifunctional medical centre onMichurinsky Prospect with a total area of over 34,000 sq m, with the launch scheduled for2020. The medical centre will include a Clinical Diagnostic Centre for children and adults, adaytime in-patient clinic, and a 24-hour in-patient clinic with a centre for high-tech surgery.

Medsi is expanding its network of out-patient clinics in three districts outside central Moscow.


Revenue 6.2 5.6 12.0% 22.3 17.7 25.8%

Adj. OIBDA1 1.9 1.6 14.7% 5.9 3.6 64.3%

Adj. OIBDA margin1 30.1% 29.4% 0.7 p.p. 26.5% 20.3% 6.2 p.p.

Adj. net profit1 1.0 0.9 10.4% 2.9 1.1 175.3%

Net debt 3.4 2.0 69.2% 3.4 2.0 69.2%

Capex2 1.4 1.1 30.5% 4.3 2.9 49.0%

Patient v isits, thsd 2,572 2,348 9.5% 9,593 8,501 12.8%

Serv ices provided, thsd 4,594 4,125 11.4% 17,334 14,532 19.3%

Average ticket, thsd RUB 2.4 2.4 2.2% 2.3 2.1 11.5%

33

2.3 2.6

4Q 2018 4Q 2019

MEDSI: GROWTH IN VOLUME OF SERVICES PROVIDED

Services provided

(capacity)2

5.2 mln

Out-patient visits2

2.6 mln

Number of doctors

3.3 thsd

Number of facilities1

42

4.1 4.6

4Q 2018 4Q 2019

235.7 235.3

4Q 2018 4Q 2019

mln mln

thsd sq m %

UTILISATION, CLINICS

PATIENT VISITS SERVICES PROVIDED

1Metrics in the table here and hereafter are presented as of December 31, 2019.2Metrics are for 4Q 2019, where capacity is calculated as the number of possible out-patient visits at Medsi facilities, and visits are calculated as the actual number of patient visits within the indicated period.

FLOOR SPACE

0% 0 p.p.

+11.4%

+9.5%

%UTILISATION, HOSPITALS

2.4 2.4

4Q 2018 4Q 2019

RUB thsdAVERAGE CHEQUE

+2.2%

50% 50%

4Q 2018 4Q 2019 4Q 2018 4Q 2019

98%

+14.3 p.p.

Growth in capacityutilisation of in-patient

treatment facilities isrelated to an increase inthe volume oftreatments providedacross all channels, withMandatory HealthInsurance as the maindriver.

84%

34

OZON: INVESTMENTS TO CAPTURE MARKET SHARE AND

PROVIDE INNOVATIVE SERVICES TO CUSTOMERS

• Ozon operated Russia’s largest network of parcel lockers with 6,897 own automated pick-up points,which accounts for 23% of total delivery volume.

• In 4Q 2019, Ozon launched a logistics marketplace focused on growing partner pick-up pointnetwork, installing parcel lockers and developing partner deliveries.

• As of the end of FY 2019, around 6,500 companies actively sold their products at Ozon, with another15,000 companies in the process of joining the platform.

• 6.2 mln orders (around 20% of total delivery volume in FY 2019) were made by subscribers of OzonPremium.

• Over 50,000 Ozon.Card bank cards were issued. The card offers cashback on all purchases at Ozonand at any other store. Average order frequency for cardholders is 4x per month.

• Financial services ecosystem expansion: in 4Q 2019, Ozon launched “trust limit”, an own instalmentsystem which customers can use to pay for purchases in instalments. The service should increasethe average cheque and the frequency of customer orders.

• Referral programme: Ozon launched its first referral programme in Russia which could cover over 30mln Russian citizens from its starting point. The participants of the programme will act as Ozon’sambassadors to their friends and acquaintances.

Ozon’s transformation: from pure online store into trade and logistics platform with own services ecosystem

Key achievements in 2019

Record growth of GMV: +93% year-on-year in FY 2019, which is 3-4x higher than the market growth rate.

Assortment expansion through marketplace: Ozon’s assortment exceeded 5 mln SKUs, which is threetimes more than in 2018. Over 70% of the assortment accounts for products of the marketplace sellers.

Record growth of last-mile infrastructure: Ozon’s pickup point network, including own and third-partypickup points and parcel lockers, increased threefold to 16,651 locations.

41.8

80.7

FY 2018 FY 2019

+93%

Ozon.ru GMV (incl. VAT), RUB bln

Оzon – key highlights

#1Brand recognitionin e-commerce

#1Multicategory playerin Russian e-commerce1

1 Data Insight

35

3,52.8 FY 2018

FY 2019

PHARMA ASSETS (ALIUM AND SINTEZ)

Revenue in 4Q 2019 and FY 2019 grew year-on-year due to growth in retail sales as well as the launch of promotion system in pharmacies and pharmacy chains,and increase in export (with Uzbekistan, Kyrgyzstan and Turkmenistan as main export destinations). In addition, revenue growth year-on-year was impacted by the

consolidation of Biocom. In FY 2019, two new lines of soft and hard pharmaceuticals were launched, and the facility for production of substances for antibioticswas upgraded OIBDA in FY 2019 showed growth year-on-year following revenue dynamics.

Net profit decreased in 4Q 2019 and FY 2019 year-on-year, primarily due to increased interest payments resulting from taking out a loan to purchase shares of

Biocom (RUB 3 bln).

PRODUCTION VOLUMES OFPHARMACEUTICAL PRODUCTS, mln units

Sintez2

2 Management accounts. The results of Biocom are consolidated in the financial statements of Sintez for FY 2019 starting from August 2019. Figures for FY 2018 are shown on a stand-alone basis from Sintez accounts. The

results of Sintez are not consolidated in the financial statements of Sistema PJSFC. The table shows 100% net profit .

Alium1

Revenue in 4Q 2019 grew year-on-year due to growth in sales of promoted products (Maksilak, Neobutin). In addition, Alium’s results were impacted by theconsolidation of Binnopharm’s results starting from 1 September 2019.

OIBDA in 4Q 2019 remained almost unchanged year-on-year. A decrease in OIBDA in 2019 year-on-year was due to increased expenses for the promotion of new

products.

Net profit decreased in 4Q 2019 and FY 2019 as a result of OIBDA dynamics, higher depreciation charges associated with the commissioning of a new factory inFebruary 2019, new debt taken on for OBL Pharm’s shares buy-out in December 2018, and due to decision to no longer capitalise loan interest from the beginning

of 2019. Net debt rose in 4Q 2019 due to the consolidation of Binnopharm’s debt portfolio from September 1, 2019 .

In February 2020, Andrey Belashov was appointed Alium’s CEO. Mr Belashov previously served as Alium’s Vice President for Business Development, Marketing andSales.

1Management accounts. The results of Binnopharm are consolidated in the financial statements of OBL Pharm for FY 2019 starting from September 1, 2019. Figures for FY 2018 are shown on a stand-alone basis from OBL

Pharm accounts. Sistema’s effective stake in OBL Pharm stands at 26.3% as of December 31, 2019. The results of OBL Pharm and Binnopharm are not consolidated in the financial statements of Sistema PJSFC. The table

shows 100% net profit.

68.7 76.2

REVENUE, RUB bln

1.9

6.9

2.3

7.6

4Q FY

2018

2019

+23.0%

+10.3%

Sintez Biocom


Revenue 2.3 1.9 23.0% 7.6 6.9 10.3%

OIBDA 0.6 0.6 8.8% 1.9 2.1 (12.1%)


Net profit 0.2 0.4 (53.4%) 0.7 1.5 (51.6%)

Net debt 5.7 4.8 18.5% 5.7 4.8 18.5%


Revenue 2.8 2.3 23.1% 9.2 7.4 23.7%

OIBDA 0.4 0.6 (21.4%) 1.8 1.5 19.7%


Net profit 0.1 0.5 (71.9%) 0.8 1.0 (13.4%)

Net debt 4.7 5.4 (12.3%) 4.7 5.4 (12.3%)

36

1.3% 1.4%

10.3% 9.3%

4Q 2018 4Q 2019

Trasmission Distribution

BPGC

LOSSES ON GRIDS,%

REVENUE grew in 4Q 2019 year-on-year and FY 2019 as a result of higher electricity transmission tariffs and changes in the methodology of accounting for revenue fromtechnological connection services.

OIBDA decreased in 4Q 2019 year-on-year due to an increase in the cost of services provided by PJSC “FGC UES” and increased labour costs. OIBDA dynamics werealso affected by growth of other operating income in FY 2019 due to one-off financial transactions on the settlement of operational disputes. The OIBDA margindecreased in 4Q 2019 and FY 2019 year-on-year due to negative dynamics of OIBDA.

Net profit decreased in 4Q 2019 year-on-year as a result of OIBDA dynamics and growth of depreciation charges.

POWER GRID NETWORK (BPGC) AND ADVANCED TECHNOLOGIES (RTI)

REVENUE in 4Q 2019 and FY 2019 grew significantly year-on-year due to greater volume of activity on large long-term contracts.

Adjusted OIBDA in 4Q 2019 and FY 2019 grew year-on-year due to an increase in revenue.

Adjusted net profit in FY 2019, compared to a net loss in FY 2018, was due to retirement of assets in 2Q 2019.

Reduction of NET DEBT is due to the transfer of part of RTI Group’s debt together with microelectronics assets to ELEMENT LLC, as well as repayment of RTI’s loan debt ofRUB 1 bln. In addition, RTI’s accounts contain earmarked funds for the execution of the state defence order of RUB 5.7 bln, which are not included in the calculation ofnet debt.

RTI1

1RTI’s results for 4Q 2019 and FY 2019 reflect reclassification of RTI’s microelectronics assets as part of discontinued operations, and results for 4Q 2018 and FY 2018 have been revised to reflect the results of this

reclassification. In February 2019, RTI Microelectronics, an RTI Group company, signed a legally binding agreement with Rostec State Corporation and JSC Roselectronica to create a combined microelectronics

components company called ELEMENT LLC. In July 2019, ELEMENT LLC was created where the parties contributed their controlling stakes in 19 microelectronics component development, production and design

companies.

29.0

19,4

4Q 2018 4Q 2019

NET DEBT, RUB bln


Revenue 6.0 5.3 13.2% 20.9 19.1 9.4%

OIBDA 1.7 2.2 (22.1%) 6.2 6.4 (2.6%)


Net profit 0.7 1.1 (35.6%) 2.7 2.9 (7.9%)

Capex 1.1 1.2 (7.4%) 3.6 3.8 (6.0%)


Revenue 10.8 8.7 24.7% 24.7 22.9 8.1%

Adj. OIBDA 3.8 3.5 9.3% 5.4 4.9 9.5%

Adj. OIBDA margin 35.3% 40.2% (5.0) p.p. 21.8% 21.5% 0.3 p.p.

Adj. net profit / (loss) 1.5 1.9 (21.6%) 3.2 (0.5) n/a

Net debt 19.4 29.0 (33.0%) 19.4 29.0 (33.0%)

37

HOSPITALITY (СOSMOS HOTEL GROUP) AND RENTAL ASSETS

HOSPITALITY ASSETS1

Growth in REVENUE and OIBDA in 4Q 2019 year-on-year as a result of the Company’s actions to increase ADR.

Negative dynamics of REVENUE and OIBDA in FY 2019 resulted from the high base effect against the background of the 2018 FIFA World Cup and a decrease in theincoming tourist flow.

ADJUSTED NET LOSS year-on-year in 4Q 2019 and FY 2019 decreased due to optimisation of the debt portfolio.

In FY 2019, share of revenue from hotels outside Russia grew from 22% to 24% amid decreased revenue from Russian hotels. In 4Q 2019, the share of foreign currencyrevenue dropped by 1.3 p.p. mainly due to changes in foreign exchange rates, while share of revenue from hotels outside Russia decreased by 0.5%.

ADR for the Group’s hotel portfolio increased from RUB 3.1 thsd to RUB 3.2 thsd year-on-year in 4Q 2019. The average occupancy in 4Q 2019 dropped by 0.6 p.p. andreached 64.1% year-on-year due to a decline in the incoming tourist flow.

In 4Q 2019, the Company commenced a program of modernization and design refurbishment of the Cosmos hotel complex. Completion is planned for 2023.

ADR DYNAMICS2, RUB thsd

BUSINESS NEDVIZHIMOST1

In 4Q 2019 and FY 2019, REVENUE from Sistema’s rental assets declined year-on-year due to a decrease in sales volumes of land plots in Moscow region and commercialreal estate as the Company has completed optimization of its real estate portfolio.

Adj. OIBDA and the OIBDA margin showed a decrease year-on-year in 4Q 2019 mainly due to lower revenue.

A decline in adj. net profit in 4Q 2019 was conditioned by the OIBDA dynamics.

PORTFOLIO OF ASSETS UNDEROWNERSHIP

13.5

3.4

2.5

13.5

3.3

2.3

Abroad

Russia

Hotel Cosmos

4Q 2018 4Q 2019

1 Management accounts2 Average Daily Rate – average price for a room/night

19%

13%

81%

87%

31-Dec-18

31-Dec-19

Country property Commercial property


Revenue 1.2 1.2 2.7% 5.0 5.3 (5.0%)

Adj. OIBDA 0.2 0.0 1273.7% 1.3 1.3 (4.8%)

Adj. OIBDA margin 15.0% 1.1% 13.8 p.p. 24.9% 24.8% 0.1 p.p.

Adj. net (loss) / profit1 (0.1) (0.5) n/a (0.2) (0.5) n/a

Net debt1 3.5 4.1 (14.6%) 3.5 4.1 (14.6%)

Room capacity 4,132 4,049 2.0% 4,132 4,049 2.0%


Revenue 2.3 4.6 (50.3%) 7.1 7.9 (9.9%)

Adj. OIBDA 1.0 3.3 (68.3%) 4.5 4.6 (2.2%)

Adj. OIBDA margin 46.3% 72.5% (26.2) p.p. 63.3% 58.3% 5.0 p.p.

Adj. net profit 1.1 2.6 (57.2%) 3.3 3.1 5.9%

Net debt/ (cash position) 1.1 (0.2) n/a 1.1 (0.2) n/a

38

External Relations Department

Tel. +7 (495) 730 66 00

www.sistema.com

[email protected]

IR blog: http://www.sistema.com/investors-shareholders/ir-blog/

Twitter: https://twitter.com/Sistema_PJSFC

http://www.sistema.com/

mailto:[email protected]

http://www.sistema.com/investors-shareholders/ir-blog/

https://twitter.com/Sistema_PJSFC

sistema pjsfc investor presentation€¦ · 5 176.4 181.1 4q 2018 4q 2019 successful monetisations...

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