Main financial results in 2013
| USD million | 2013 | 2012 | Change,% |
|---|---|---|---|
| Revenue | 9,135.7 | 8,138.1 | 12.3 |
| Operating costs | 8,514.2 | 7,780.4 | 9.4 |
| Operating profit | 621.5 | 357.7 | 73.7 |
| Profit before income tax | 430.3 | 357.7 | 20.3 |
| Income tax | 200.0 | 191.4 | 4.5 |
| Profit for the year | 230.3 | 166.3 | 38.5 |
| EBITDA | 1,000.0 | 671.3 | 49.0 |
| EBITDA margin,% | 10.9 | 8.2 | 2.7 p.p. |
| EBITDAR | 1,602.2 | 1,238.3 | 29.4 |
| EBITDAR margin,% | 17.5 | 15.2 | 2.3 p.p. |
| Net debt/EBITDA | 2.1 | 3.1 | -32.3 |
The growth of main operating indicators of Aeroflot Group by 14.0% resulted in an increase of IFRS revenue by 12.3% year-on-year in 2013 to USD 9,135.7 million. Profit for the year was USD 230.3 million, which is 38.5% more than in 2012. High profit for the year was achieved through revenue growth and good control of costs, which grew more slowly than revenue (by 9.4%), as well as through operating improvements by subsidiary airlines.
Main financial results of AEROFLOT GROUP SUBSIDIARY AIRLINES in 2013 Before intercompany elimination
| JSC Aeroflot | Total for airline subsidiaries | |||||
|---|---|---|---|---|---|---|
| USD million | 2013 | 2012 | Change | 2013 | 2012 | Change |
| Revenue | 6,949.1 | 5,997.2 | 15.9% | 2,401.0 | 2,130.5 | 12.7% |
| EBITDA | 845.8 | 604.4 | +241.4 | 88.1 | -64.3 | +152.4 |
| Operating profit | 542.6 | 372.2 | +170.4 | 13.7 | -145.8 | +159.5 |
| Profit for the year | 281.2 | 229.8 | +51.4 | -105.3 | -186.6 | +81.3 |
The main positive result in 2013 was the achievement of aggregate operating profit by subsidiary airlines. The financial results of subsidiaries continue to pull down the net income of the whole Group, but most subsidiary airlines have substantially reduced their losses.
Revenue
Revenue from passenger flights accounted for 85.1% of the Group’s total revenue in 2013. The share of airline agreements revenue was 5.8%. Cargo flights brought 3.4% of revenues.
Revenue from passenger flights in 2013 amounted to USD 7,779.7 million, which is 15.2% higher year-on-year. The significant increase was mainly due to a growth in passenger traffic volumes. The Group transported 31.4 million passengers in 2013, which is 14.3% more than in 2012.
Revenue from cargo flights was USD 307.0 million, which is 15.6% less than in 2012, reflecting the decision in 2013 to cease operations of cargo aircraft and limit cargo services to the baggage compartments of passenger aircraft.
Airline agreements revenue totalled USD 530.2 million in 2013, which is 5.5% higher than a year earlier.
Revenue
| USD million | 2013 | 2012 | Change,% |
|---|---|---|---|
| Scheduled passenger flights | 7,240.4 | 6,247.0 | 15.9 |
| Cargo flights | 307.0 | 363.7 | -15.6 |
| Charter passenger flights | 539.3 | 507.5 | 6.3 |
| Airline agreements revenue | 530.2 | 502.5 | 5.5 |
| Other revenue | 518.8 | 517.4 | 0.3 |
| Total | 9,135.7 | 8,138.1 | 12.3 |
Aeroflot group revenue Breakdown,%
Operating costs
The Group’s operating costs grew more slowly than revenue (by 9.4% and 12.3%, respectively) thanks to efficient cost control.
Group operating costs in 2013 were USD 8,514.2 million, showing growth of USD 733.8 million or 9.4% year-on-year. The increase was mainly due to an increase in traffic in 2013.
Aircraft fuel is the largest item in Group costs (29.2% of the total costs), followed by aircraft and passenger servicing (17.0%) and staff costs (16.7%).
Main cost items
| Cost items (USD million) | 2013 | 2012 | Change,% |
|---|---|---|---|
| Aircraft fuel | 2,484.5 | 2,287.5 | 8.6 |
| Staff costs | 1,423.9 | 1,241.8 | 14.7 |
| Aircraft and passenger servicing | 1,444.8 | 1,274.2 | 13.4 |
| Aircraft maintenance | 639.7 | 583.5 | 9.6 |
| Sales and marketing | 402.2 | 353.6 | 13.7 |
| Operating lease expenses | 602.1 | 567.0 | 6.2 |
| Depreciation and amortisation | 334.7 | 269.1 | 24.4 |
| Administration and general expenses | 272.0 | 255.2 | 6.6 |
| Passenger services | 214.0 | 177.3 | 20.7 |
| Communication expenses | 185.4 | 150.9 | 22.9 |
| Food and beverages on board | 154.6 | 93.5 | 65.3 |
| Cost of duty free goods sold | 6.0 | 58.1 | −89.7 |
| Custom duties | 43.8 | 44.6 | −1.8 |
| Insurance expenses | 39.0 | 40.5 | −3.7 |
| Other expenses | 267.5 | 383.6 | −30.3 |
| Total | 8,514.2 | 7,780.4 | 9.4 |
The fastest growing cost items in 2013 were passenger services (20.7%), food and beverages on board (65.3%), communication expenses (22.9%), depreciation and amortisation (24.4%), staff costs (14.7%) and sales and marketing expenses (13.7%). The increase of these cost items reflects growth of business scale, efforts to maintain a high quality of service and an increase in the number of personnel as a result of fleet expansion.
EBITDA
Group EBITDA increased by 1.5 times in 2013, to USD 1,000.0 million. EBITDA margin increased from 8.2% in 2012, to 10.9% in 2013 due to effective cost control by the Group, increase of fuel efficiency of the Group fleet and increase of productivity and synergies from the multi-brand structure, which is being implemented by Aeroflot Group.
EBITDAR
Group EBITDAR also increased in 2013 by 29.4% to USD 1,602.2 million. EBITDAR margin increased from 15.2% in 2012 to 17.5% in 2013 due to the optimisation of operating lease costs of Group airlines and favourable leasing rate trends.
Finance income and costs
Finance income of the Group in 2013 totalled USD 84.3 million, down by 49.3% from 2012. The decline was due to change in foreign exchange gain and other finance income, which was at a high level in 2012 as a consequence of one-off renegotiation of finance lease contracts at OJSC AK Rossiya.
Finance costs amounted to USD 276.7 million. The increase of finance costs by more than 1.5 times was due to foreign exchange losses in 2013, reflecting greater volatility on currency markets.
| FINANCE INCOME (USD million) | 2013 | 2012 | Change,% |
|---|---|---|---|
| Gain on derivative financial instruments | 56.9 | 13.3 | 327.8 |
| Interest income on bank deposits and security deposits | 17.0 | 13.9 | 22.3 |
| Gain on disposal of investments | 10.4 | — | — |
| Foreign exchange gain | — | 89.2 | — |
| Other finance income | — | 50.0 | — |
| Total finance income | 84.3 | 166.4 | −49.3 |
| FINANCE COSTS (USD million) | 2013 | 2012 | Change,% |
| Foreign exchange loss | 105.1 | — | — |
| Interest expense | 104.3 | 110.9 | −6.0 |
| Loss on derivative financial instruments | 37.4 | 11.2 | 233.9 |
| Loss on change in fair value of derivative financial instruments | 29.5 | 33.0 | −10.6 |
| Loss on disposal and impairment of investments | — | 10.0 | |
| Other finance costs | 0.4 | 1.6 | −75.0 |
| Total finance costs | 276.7 | 166.7 | 66.0 |
There was also substantial impact on the finance income and costs by the results associated with derivative financial instruments (hedging of fuel prices and of foreign exchange risk to ensure balance of the currency structure of the Group’s revenue and expenditure).
Profit for the year
Group profit for the year increased by 38.5% in 2013, to USD 230.3 million. Substantial increase of profit for the year compared with 2012 enabled a 12.2% increase in basic earnings per share, which amounted to 23.9 US cents in 2013 compared with 21.3 US cents in 2012.
Yield
Yield rates on international routes increased in 2013, but remained almost unchanged on domestic routes. Maintenance and slight growth of yield rates at a time of major increase in business volumes confirm the efficiency of the fare policy, assisted by an extensive and attractive passenger route network, which has enabled the growth of transit passenger traffic.
Passenger TRAFFIC YIELDS, US CENTS/PKM
CARGO TRAFFIC YIELDS, US CENTS/TKM
Cash flows
Operating cash flow
Cash flows from operating activities increased by 68.1% in 2013, to USD 908.9 million. Total cash flows in 2013, not including depreciation and cash flows from investing and financing activities, increased by 81.6%, from USD 295.1 million to USD 536.0 million. Profit before income tax for 2013 rose by 20.3%, to USD 430.3 million. Cash flows effects from changes in working capital increased by USD 38.0 million, to USD 9.7 million. Foreign exchange gain of USD 89.2 million in 2013 was followed by a loss of USD 105.1 million on this item in 2013 due to a gradual weakening of the rouble against other world currencies in 2013 (in particular, the rouble depreciated against the dollar from RUB 30.3727 on 1 January 2013 to RUB 32.7292 on 31 December 2013).
Capital expenditures, net cash flows from operating activities and depreciation and amortisation, mln usd
Major non-cash adjustments to reconcile profit before income tax with cash flows from operating activities are related to:
- a change in provisions by USD 61.0 million, mainly due to provision for expenses needed to bring the aircraft to the required condition before their return at the end of the operating lease period; and
- increase of depreciation and amortisation by 24.4% compared with 2012 by USD 65.6 million, primarily due to growth in the historical cost of fixed assets in 2013 by 12.6%.
Free cash flow
Free cash flow in 2013 amounted to USD 796.0 million, which is 37.0% more than in 2012 (+214.9 million). The change reflects increase in cash flows from operating activities by USD 368.3 million in 2013 and reduction of cash flows from investing activities from USD 40.5 million in 2012 to USD −112.9 million in 2013.
The major factors causing reduction of cash flows from investing activities in 2013 compared with 2012 were substantial cash flows in 2012 from:
- receipt of payment for sale of shares owned by JSC Aeroflot in the CJSC Aerofirst for USD 36.2 million;
- the sale of fixed assets for USD 87.5 million (fixed asset sales in 2013 generated USD 2.1 million);
- return of prepayments for aircraft in the amount of USD 292.6 million following the receipt of five Airbus A330 aircraft and three Airbus A321 aircraft, obtained under a finance lease (in 2013 this item was worth USD 244.4 million in connection with the receipt of four Boeing 777 aircraft, obtained under a finance lease).
Capital expenditures in 2013 were USD 149.8 million, which is 16.7% less than in 2012.
net cash flows from operating activities and free cash flow, mln usd
The internal funding ratio (the ratio of cash flow from operations to capital expenditures) was 606.7% in 2013, up from 300.7% in 2012.
CASH AND CASH EQUIVALENTS
Net cash and cash equivalents increased by 14.9% in 2013 to USD 570.1 million, partly due to the effect of exchange rate changes in the amount of USD −38.2 million (the figure in 2012 was USD 23.6 million).
Aggregated consolidated statement of cash flows
| USD million | 2013 | 2012 | Change | Change. % |
|---|---|---|---|---|
| Profit before income tax | 430.3 | 357.7 | 72.6 | 20.3 |
| Depreciation and amortisation | 334.7 | 269.1 | 65.6 | 24.4 |
| Change in provisions | 57.6 | −3.4 | 61.0 | — |
| Foreign exchange loss/(gain) | 105.1 | −89.2 | 194.3 | — |
| Other adjustments | 106.9 | 165.8 | −58.9 | −35.5 |
| Change in working capital | 9.7 | −28.3 | 38.0 | — |
| Restricted cash | −1.9 | — | −1.9 | — |
| Income tax paid, net | −133.5 | −131.1 | −2.4 | 1.8 |
| Net cash flows from operating activities | 908.9 | 540.6 | 368.3 | 68.1 |
| Purchases of property, plant and equipment and intangible assets | −138.5 | −167.1 | 28.6 | −17.1 |
| Purchases of investments | −11.3 | −12.7 | 1.4 | −11.0 |
| Proceeds from sale of investments (including equity accounted investments) | 7.2 | 24.8 | −17.6 | −71.0 |
| Proceeds from sale of subsidiary | — | 36.2 | −36.2 | — |
| Proceeds from sale of property, plant and equipment | 2.1 | 87.5 | −85.4 | −97.6 |
| Dividends received | 1.8 | 3.4 | −1.6 | −47.1 |
| (Prepayments made)/return of prepayments for aircraft, net | 19.8 | 76.4 | −56.6 | −74.1 |
| Return/(payment) of lease security deposits, net | 6.0 | −8.0 | 14.0 | — |
| Net cash flows (used in)/received from investing activities | −112.9 | 40.5 | −153.4 | — |
| Free cash flow | 796.0 | 581.1 | 214.9 | 37.0 |
| Proceeds from borrowings | 204.1 | 605.5 | −401.4 | −66.3 |
| Repayment of borrowings | −457.8 | −703.9 | 246.1 | −35.0 |
| Proceeds from sales of treasury shares/(Purchase of treasury shares), net | 11.1 | 9.7 | 1.4 | 14.4 |
| Repayment of the principal element of finance lease liabilities | −307.5 | −291.9 | −15.6 | 5.3 |
| Interest paid | −89.7 | −75.3 | −14.4 | 19.1 |
| Dividends paid | −40.5 | −62.2 | 21.7 | −34.9 |
| Other cash flows (used in)/received from financing activities | −3.6 | 16.5 | −20.1 | — |
| Net cash flows used in financing activities | −683.9 | −501.6 | −182.3 | 36.3 |
| Effect of exchange rate fluctuations on cash and cash equivalents | −38.2 | 23.6 | −61.8 | — |
| Net increase in cash and cash equivalents | 73.9 | 103.1 | −29.2 | −28.3 |
| Cash and cash equivalents at the beginning of the year | 496.2 | 393.1 | 103.1 | 26.2 |
| Cash and cash equivalents at the end of the year | 570.1 | 496.2 | 73.9 | 14.9 |
Aggregated consolidated statement of financial position
| USD million | As of 31.12.2013 | As of 31.12.2012 | Change | Change,% |
|---|---|---|---|---|
| ASSETS | ||||
| Cash and short-term investments | 578.4 | 501.0 | 77.4 | 15.4 |
| Other current assets | 1,910.7 | 1,831.5 | 79.2 | 4.3 |
| Total current assets | 2,489.1 | 2,332.5 | 156.6 | 6.7 |
| Property, plant and equipment | 2,712.5 | 2,435.9 | 276.6 | 11.4 |
| Other non-current assets | 1,189.8 | 1,477.5 | −287.7 | −19.5 |
| Total non-current assets | 3,902.3 | 3,913.4 | −11.1 | −0.3 |
| TOTAL ASSETS | 6,391.4 | 6,245.9 | 145.5 | 2.3 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | 2,076.8 | 2,246.0 | −169.2 | −7.5 |
| Non-current liabilities | 2,650.0 | 2,373.6 | 276.4 | 11.6 |
| Total equity | 1,664.6 | 1,626.3 | 38.3 | 2.4 |
| TOTAL LIABILITIES AND EQUITY | 6,391.4 | 6,245.9 | 145.5 | 2.3 |
Non-current assets
The value of non-current assets of Aeroflot Group increased by 0.3% in 2013 to USD 3,902.3 million. The change was mainly due to an increase in value of the item ‘Property, plant and equipment ‘ by USD 276.6 million due to the receipt of four Boeing 777 aircraft under a financial lease. A reduction in the item ‘Other non-current assets’ was mainly due to the reclassification of a part of assets from ‘Derivative financial instruments’ to ‘Current assets’ , as well as the reclassification of prepayments for aircraft, delivery of which is expected in 2014, to short-term prepayments.
Current assets
Current assets increased by 6.7% to USD 2,489.1 million. This change was mainly due to an increase in the following items:
- ‘Cash and cash equivalents’ by USD 73.9 million. Increase of this item was due to an increase of sums held on account at banks and of term deposits up to 90 days;
- ‘Account receivables and prepayments’ by USD 148.2 million. Trade account receivables grew in 2013 due to an increase of trade receivables from agents relating to passenger flights as volumes of sales grew.
A reduction in the item ‘Assets classified as held for sale’ (part of current assets) by USD 60.1 million was due to the sale by JSC Aeroflot of shares in CJSC Aerofirst in January 2013.
assets structure,%
Equity
Total equity capital, including minorities, increased by 2.4% or USD 38.3 in 2013, to USD 1,664.6 million
The biggest contribution to change of equity was from growth in retained earnings, which changed mainly due to income of USD 251,7 million for 2013 (profit for the period attributable to company shareholders).
Detailed information on share capital is presented in Note 33 to the Consolidated Financial Statements.
| Return on equity | Unit | 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|
| Profit for the year Including non-controlling interest. | million USD | 230.3 | 166.3 | 491.3 | 253.2 | 85.8 |
| Equity (average) Including non-controlling interest. | million USD | 1,645.5 | 1,515.3 | 1,279.6 | 1,080.4 | 971.6 |
| ROE Including non-controlling interest. | % | 14.0 | 11.0 | 38.4 | 23.4 | 8.8 |
Current liabilities
In 2013 current liabilities decreased by 7.5%, or USD 169.2 million. Accounts payable increased by USD 116.0 million, mainly due an increase in procurement, increase of staff-related liabilities by USD 35.9 million and a growth in finance lease obligations by USD 19.1 million. There was a substantial decrease of short-term borrowings and the current portion of long-term borrowings (by USD 312.4 million), mainly due to redemption of an exchange bond issue in 2013.
A reduction in ‘Liabilities directly related to assets classified as held for sale’ by USD 25.5 million was caused by the sale of Aeroflot’s interest in CJSC Aerofirst in January 2013.
Non-current liabilities
Non-current liabilities grew by 11.6% or 276.4 million in 2013 to a level of USD 2,650.0 million. The change was mainly due to the growth of finance lease liabilities by 18.3% or USD 300.1 million due to the addition of four Boeing 777 aircraft to the fleet.
Loans and borrowings
Aeroflot Group has taken loans at both fixed and floating rates of interest. They are mainly intended for the replenishment of working capital.
The main change of loan liabilities in 2013 was from repayment of series BO-01 and BO- 02 exchange bonds with total nominal value of USD 376.8 million and the placement of series BO-03 with nominal value of USD 152.8 million and interest rate of 8.3% per annum.
Loan portfolio of Aeroflot Group on 31 December 2013 (USD million)
| Bank name | Interest rate | Currency | Short-term loans and borrowings | Long-term loans and borrowings |
|---|---|---|---|---|
| Bond series BO-03 | 8.3% | RUB | 3.1 | 152.8 |
| Bank BFA | 11.9%, 12.4% | RUB | 77.3 | 15.3 |
| AB Rossiya | 10.6% | RUB | — | 45.8 |
| CitiBank | Libor + 3.5% | USD | 24.3 | 20.4 |
| Sberbank of RF | 11.0%, 11.5% | RUB | 18.4 | 15.3 |
| OJSC ALFA-BANK | 13.0% | RUB | 30.5 | — |
| Other | — | USD | — | 6.3 |
| Total | — | — | 153.6 | 255.9 |
Liquidity
The Group maintains its liquidity at a satisfactory level. As of 31 December 2013 cash and short-term investments amounted to USD 578.4 million, which is 15.4%, more than a year earlier. Cash flows from operating activities were USD 908.9 million, increased from USD 540.6 million a year earlier. The current ratio on 31 December 2013 was 1.2, up from 1.0 on 31 December 2012.