The major lenders of the Concern and its companies are Joint-Stock Commercial Bank NOVIKOMBANK and Sberbank of Russia.
3.1 Credit policy
The Concern’s credit policy is intended to maintain financial and business operations of the Concern and to optimize its cash flows, including as regards:
- implementing investment projects and federal target programs,
- ensuring financial stability and continuous liquidity
- minimizing the cost and risks of debt financing.
The principles on which the Concern cooperates with financial institutions are as follows:
- implement decisions of the Corporation as regards creation of the banking cooperation system;
- cooperate only with authorized banks designated by the Corporation;
- ensure the creation of the Unified Corporate Automated Treasury System (UCAT).
The lending bank shall be chosen on a competitive basis by sending targeted requests to authorized banks and partner banks, and the successful bidder shall be the one which offers the best lending conditions in terms of the loan pricing and availability of additional conditions
In 2011, the Concern was the first among the integrated structures of Rostec State Corporation who created the Unified Settlement Center on the basis of Joint-Stock Commercial Bank NOVIKOMBANK. This step has helped ensure that the Concern’s financial resources are utilized in a more effective way and improve the budgetary discipline, optimize financial cooperation with external contractors and lower the interest payments.
F25. Scheme of cooperation between the Concern’s companies and financial institutions before and after creation of the Unified Corporate Automated Treasury System
The Concern and its companies approved the regulations on managing the external financing which provide that each such company is required to establish and operate the UCAT after it is connected and activated and such UCAT system so that to have the appropriate functionality.
The UCAT shall be implemented on the basis of orders and directives of the Corporation and is intended to optimize all financial processes of the Concern, mitigate risks through cooperation only with reliable authorized banks and partner banks, as well as to apply management reporting to all financial operations.
The UCAT covers 52 Concern’s companies and 725 bank accounts, including separate accounts opened under Federal Law 275-FZ of 29 December 2012, “On State Defense Order”. The parent company exercises control over, and accepts payments through the UCAT.
F26. Unified Corporate Treasury
In 2015, the Concern created a local Pool Leader which enables effective cash flow management in the Concern’s companies (see Fig. 27). It physically accumulates free cash on its accounts using the loan agreements and further distributes it in a centralized manner among the Concern’s companies under the intragroup financing agreements and/or places it into financial instruments on a consolidated basis.
F27.Scheme of effective financial management
 The standard value is determined by Order 104 of the Russian Ministry of Economic Development of 21 April 2006 (as amended on 31 December 2011) “On Approval of the Guidelines for the Federal Tax Service to Account for and Analyze the Financial Position and Solvency of Strategic Enterprises and Organizations” and Order 215 of Rostec State Corporation of 20 November 2015, “On Budgeting Procedure for Rostec State Corporation and its Organizations for 2016”.
3.2 Financial results
The Concern’s revenue in 2015 increased by 12.9% up to RUB 119 billion. The share of the innovative products in the revenue stood at 33.5%. The growth in the Company’s performance was substantially driven by the growth in revenue from Avionics and EW.
The bulk of the Concern’s revenue (85%) is generated from sales of military products, where, in turn, 70% falls on Avionics (for more details, see Concern’s Divisions). 75% of the total products manufactured by the Concern’s companies is sold on the domestic market, while major part of exports is represented by military products (as part of the military technical cooperation).
The EBITDA has grown by 30.8% YoY 2014 and amounts to RUB 19.7 billion. The EBITDA has shown growth both owing to the steps the Concern’s companies took to improve their performance (staff downsizing, cutting general business expenses and overheads and other costs etc.) and to substantial fluctuations of national currency exchange rates during 2015.
The aggregate net income of the Concern’s companies at the end of 2015 stands at RUB 10.1 billion, which is 22.5% above the same figure of 2014. The substantial growth in the net income is a result of improved performance of the Concern’s companies, additional utilization of production capacities through attracting new contracts (including with foreign customers), additional gains from substantial fluctuations of national currency exchange rates, as well as sale of non-core assets and stocks.
The level of ROA directly depends on a whole range of circumstances, such as production upgrade costs, ongoing stock of products, pricing policies of the Russian Ministry of Defense and many others. At the end of 2015, this figure was 8.4%.
The current liquidity ratio and quick assets ratio amount to 0.24 and 1.32, respectively. The current liquidity ratio is substantially above the standard value1 fixed by Rostec State Corporation for strategic companies.
It is necessary to note that almost all of the Concern’s operational indicators substantially outreach the 2015 target figures.
P28. Concern’s revenue, million RUB
Р29.Concern’s revenue structure in 2015, %
Р30.Concern’s EBITDA, million RUB
Р31.Company’s net income, million RUB
Т8. Target vs actual key operational indicators of the Concern for 2015
|Indicator||2015 (target)||2015 (actual)|
|Net sales (revenue from sales of goods, products, works or services (net of VAT)), million RUB||111,855||119,004|
|Operating income (profit on sales), million RUB||12,206||15,742|
|Net income, million RUB||8,808||10,073|
|EBITDA, million RUB||17,337||19,665|
|Net assets, million RUB||118,223||119,678|
|EBITDA margin, %||15.5||16.5|
|Return on equity (ROE), %||7||8.7|
|Return on assets (ROA), %||5.3||5.3|
|Return on sales (ROS), %||7.87||8.4|
|Current liquidity ratio||1.56||1.32|
|Quick assets ratio||0.11||0.24|
Р32.Concern’s profitability performance profile, %
Р33.Concern’s liquidity ratios
The Concern is a major regional taxpayer. In 2015, its tax payments amounted to RUB 17.7 billion, of which 29% went to the federal budget, 11% to the budget of Moscow and 60% to the budgets of other regions (see Fig. 35).
Р34.Structure of Concern’s tax payments in 2015, %
Р35. Concern’s tax payments, million RUB
3.3 Investment activities
The Concern’s investment program includes 90 investment projects with the total volume of financing of approximately RUB 59.5 billion. The highest volume of investments falls on Avionics and EW: the projects in these lines of business in 2015 took 80% in the total volume of investments (see Fig. 36).
P36.Key lines of investments in 2015, %*
Т9.Structure of investments by types of projects in 2015, %
|Structure of investments by types of projects in 2015, %||Share in
|Reconstruction and upgrade||97.8|
|R&D in key lines of business*||1.9|
|R&D in non-military production as part of the diversification program||0.3|