Page 69 - RusRPTOct19

VEON has changed its dividend policy to pay out at least 50% of equity free cash flow (FCF) minus spectrum payments (vs the previous ‘progressive dividend payment’, which was subject to equity FCF performance). The new dividend policy goes into effect with 2020 financials, while the remaining payment for 2019 will be subject to BoD approval. The payment for 2019 is theoretically covered by the previous (‘progressive’) dividend policy, albeit we note that the company is expected to generate $0.5bn equity FCF after spectrum payments in 2019 ($1bn before), implying a c100% payout. In 2020, bankers expect $0.8bn equity FCF before spectrum payments (the company disclosed similar expectation at the 2018 results announcement). Assuming no spectrum payments in 2020, the minimum dividend suggested by the new dividend policy is $0.23/ADR ($0.4bn payout; 9% yield; 20% decline vs 2019). The company could theoretically pay more, which would be a function of investment and debt repayment plans, but we believe a more conservative stance is warranted now in forming the Basket.
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FSK CEO Andrey Murov has said that the company is not planning to switch to quarterly dividend payments in September or alter its current dividend policy, which envisages a 50% payout of the greater of IFRS or RAS net profit adjusted for paper items. Murov also confirmed that he expected at least RUB 40bn of net profit for the year and RUB 125bn of EBITDA in FY19 under Russian Accounting Standards.
Russian state-controlled grid operator Rosseti (Russian Grid) plans to increase its dividends payment up to the average paid by state owned enterprises (SOEs) by 2023, the CEO of the company Pavel Livinsky told Kommersant daily. As reported by bne IntelliNews, Rosseti has recently called on the government to raise grid tariffs four-fold over the next three years. It also controls 80% in Federal Grid, one of the best-paying dividend names in utilities universe that reported a 23% profit jump in 2Q19. The Finance Ministry requires SOEs to pay out 50% of IFRS net profit as dividends. The ministry recently said that it will impose the rules on subsidiaries of SOEs as well, targeting large utilities holdings such as InerRAO. Rosseti currently pays at least 50% of net profit in dividends, but is subtracting non-cash revenue streams, investment, and transfers to subsidiaries from the revenue base. Livinsky also said that Rosseti could launch long-term share motivation programme for its management linked to share performance as of 2020, with additional share placements possible. "If adopted, the changes to the dividend policy and long-term motivation plan would be welcomed," BCS Equity commented on September 27 while seeing an additional share placement as a long-term overhang risk. BCS estimates that the dividend yield by 2023 would amount to 6% versus actual 2%. Rossseti increased its revenues by 4% year- on-year to RUB234.5bn ($4bn), Ebitda by 7% y/y with 31% margin, and net profit by 5% y/y to RUB27bn in 2Q19 under IFRS.
69 RUSSIA Country Report October 2019 ww.intellinews.com