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Press releases | Archive 2002

Financial results for the first six months 2002: RBC's IT and media business gains momentum on the back of Russia's market growth

Business Highlights

  • RBC maintains Russia's leading business media and IT solutions position.
  • Total revenue climbs to $13.4m in the first six months 2002.
  • Revenues from IT services outweigh revenues from media, reaching 54% and 46% respectively.
  • Total capital goes up from $9m in 2001 to $25m in the first half of 2002, due to $12.7m in net IPO proceeds and $3.3m in retained earnings.

Consolidated key figures

$' 000 1H2001* 2001 1H2002 Relative to 2001
Revenues 6.106 16.954 13.410 79%
Operating profit 1.934 6.891 3.581 52%
Net profit 1.703 6.302 3.277 52%
*All figures for the first six months 2001 were calculated on the basis of the full year 2001 audited results and provided for comparison purposes only.

Chairman's Statement

"Our business continued to grow and the company delivered a strong performance in the first six months of 2002," said German Kaplun, Chairman and CEO of RBC Information Systems. "The growth of IT outpaced the growth of the media side of the business, reflecting current market conditions. In spite of the continued weakness in Western markets in this period, the Russian economy performed well. Healthy economic growth brought about increased advertising and IT spending. We expect continuous robust growth of the company throughout the end of the year due to strong RBC brand recognition and unique cross-selling opportunities."

Strategic Aims and Achievements

The need to improve economic performance is forcing large and medium-sized Russian companies to automate their business processes by utilizing CRM and ERP products. RBC continued to develop its partner relations with Siebel, SAP and Navision. A combination of RBC's strong sales force and first-class products of internationally acknowledged vendors resulted in the installation of several systems. The company expects an increasing need for this type of products at both large and medium-sized organizations of the governmental and industrial sectors. In anticipation of this growth, RBC stepped up sales and internal personnel training.

During the first half of 2002, RBC significantly increased and substantially diversified its advertising client base, signing advertising contracts with companies in the automotive industry, construction, retail trade, medicine and education.

To broaden it's information delivery channel, the company started a Business TV project. This will allow for RBC's content leverage along with expansion and diversification of the advertising client base. The Business TV project is scheduled to go live at the end of 2Q, 2003.

Additionally, RBC considerably strengthened its position on the media market. Against the backdrop of the generally stable political and economic situation in Russia, the media business benefited from sustainable growth in the segment of small and medium-sized enterprises, which formed the backbone of RBC's subscribers for business information.

Revenues

IT Services. Revenues from IT Services were $7.2m, increasing from 42% of the total sales in the first half 2001 to 54% in the first six months 2002, reflecting the rapid growth of the Russian IT market primarily through implementation of state-of-the-art software solutions to solve business problems, rather than through hardware acquisitions. Increased marketing activity and IT products range also contributed to revenue growth.

RBC is planning to release its own off-the-shelf products to cater for the needs of small and medium-sized businesses. According to RBC management, the competitive advantage of these products will be its price.

In response to market demand for offshore programming, RBC has begun the process of establishing an international subsidiary.

Media Services. Revenues in Media Services were $6.2m, up from last year, but represented a smaller share of total sales, primarily due to the faster growth of IT Services.

In spite of intensified competition, RBC's unique prime business audience allowed the company to maintain stable advertising prices.

The company launched a number of new information products, such as Energy Newswire and a database on Russian enterprises, which complemented the existing business information coverage and increased customer loyalty. The larger number of published news items, while maintaining per-news-item cost, allowed for an overall increase in newswire subscription fees of 23%. After this increase, the price for this type of products is still substantially lower than those of RBC's main competitors.

The company is planning to launch Russian Business TV at the end of 2Q, 2003 to accommodate demand for business news and market analysis and use the channel as a strong advertising revenue generator.

Expenses

Cost of sales grew slightly faster than revenues and reached $8m due to the seasonality of the business, the hiring of new staff and salary increases at the beginning of 2002. The distribution costs of $2m included IPO-related expenses, which will not recur in the second half of the year.

The above-mentioned factors put RBC's six months net profit margin under pressure, but the company expects the margin to recover by the end of 2002.

Tax Position

In spite of changes in the tax system, which came into force at the beginning of 2002 and canceled the VAT privileges of media companies, RBC continues to optimize its tax structure and expects its overall effective tax rate to be in line with sales dynamics.

Outlook 2002

RBC expects the current growth to continue. Total revenues 2002 are projected to increase 60% as compared to 2001, based on existing contracts, Russia's continuous economic expansion, increasing RBC brand recognition, performance of key IT and information products and the implementation of new projects.

The acceleration of revenues in the second half of the year will improve the net profit margin to a level comparable with 2001.

"We are satisfied with our current business and convinced that RBC will meet its objectives operationally and financially for the full year 2002. The company remains optimistic about 2003 and sees at the moment no signs of a business downturn," said Mr.Kaplun.

Shares Eligible for Future Sale

On April 18, 2002, 16 million shares of common stock related to the firm's initial public offering (IPO) were sold on RTS and MISEX. Separately, in connection with the firm's ongoing policy of facilitating the orderly entry of shares into the market, an additional 2% of common stock may become eligible for sale in the period of six months after the placement and an additional 10% of common stock on October 18, 2002. All of the above-referenced shares are subject to compliance with volume restrictions.

Cautionary Note Regarding Forward-Looking Statements

This press release contains statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that the company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the firm's future results, see "Risk Factors" in the company's IPO Circular on www.rbcinfosystems.com. RBC assumes no obligation to update any forward-looking information contained in this document.


Press and investor contacts:
Egor Timofeev
Tel: +7 (495) 363-1111
Email: pr@rbc.ru
Web: www.rbcholding.com