Financial Results Overview
Financial Analysis
Profitability indicators
Profitability indicators of JSC "Lenenergo" in 2010 were positive as a result of profitability of the Company’s activity.
%
| Profitability indicators | Formula | 2008
| 2009 | 2010 |
|---|---|---|---|---|
| Return on sales (ROS) | 050 (f.2)/010 (f.2) | 15,11% | 20,21% | 19,63% |
| Return on total assets (ROTA) | 190 (f.2) / 300 (f.1) | 2,01% | 3,94% | 4,29% |
| Return on equity (ROE) 21 | 190 (f.2) corrected / 490 on the beginning (f.1) | 4,35% | 6,37% | 7,80% |
| Return on capital | 190 (f.2) / (490-450+640) (f.1) | 3,40% | 6,72% | 7,33% |
21 Calculation of actual ROE for 2008-2010 is produced according to the technique regulated by the Standard of business planning of the Company. For calculation of ROE the corrected indicator of Net profit is used.
Return on sales is an indicator that characterizes the efficiency of production activity, and shows that in 2010 the Company received from each ruble of sales a profit at the rate of 19.63 %. Some decrease in ROS following the results of 2010 (by 0.58 percentage points) is associated with the fact that the rates of increase in revenue in 2010 are slightly lower than the rates of increase in costs.
Return on total assets shows that on each ruble invested in assets, JSC "Lenenergo" received 4.29 kopecks of profit in 2010. The growth of ROTA by 0.35 percentage points in comparison with 2009 testifies to an increase in the efficiency of property use belonging to the Company.
Return on equity is one of the key indicators reflecting efficiency of functioning of the Company and the size of profit received from each ruble, invested in the Company by its proprietors. The growth of ROE in comparison with 2009 is associated with an increase in net profit of JSC "Lenenergo".
Following the results of activity for 2010, the majority of profitability indicators reached their maximum for the past three years. This in general testifies to the rather high efficiency of financial and economic activity of JSC "Lenenergo", and can be a sign of carrying out competent policy by the management aimed at achievement of positive results following the results of operational activity.
In the present conditions, this policy assumes:
- implementation of program on a cost decrease;
- withdrawal from the Company of non-core assets;
- performing economically reasonable tariff policy;
- fulfillment of the Company’s obligations on technological connection of subscribers.
Liquidity and solvency indicators
The generalized grouping of assets of the Company on the degree of liquidity and liabilities - on the degree of promptness of repayment is resulted in the table:
mln RUR.
| Indicator | Designation | Formula | 2008 | 2009 | 2010
| Change 2010/2009, absolute | Change 2010/2009 |
|---|---|---|---|---|---|---|---|
| Most liquid assets | А1 | 250+260 | 3 401 | 2 583 | 329 | -2 254 | -87,3% |
| Quick sold assets | А2 | 240+270 | -2 282 | -21,1% | |||
| Slow sold assets | А3 | 210+220+230 | 2 720 | 2 961 | 2 462 | -499 | -16,8% |
| Hard sold assets | А4 | 190 | 16,5% | ||||
| Most urgent liabilities | П1 | 620 | 20 836 | 1 703 | 8,9% | ||
| Short-term liabilities | П2 | 610+630+660 | 238 | 246 | 1 172 | 925 | 375,5% |
| Long-term liabilities | П3 | 590+640+650 | 14 933 | -127 | -0,8% | ||
| Constant liabilities (steady) | П4 | 490 | 45 157 | 48 344 | 51 759 | 3 415 | 7,1% |
| Conditions of absolutely liquid balance | А1>=P1 | А1-P1 | -3 957 | 23,9% | |||
| А2>=P2 | А2-P2 | 7 340 | -3 207 | -30,4% | |||
| А3>=P3 | А3-P3 | -9 402 | -12 471 | -372 | 3,1% | ||
| А4<=P4 | P4-А4 | -25 638 | -7 536 | 41,6% |
The balance of JSC "Lenenergo" at the end of 2010 is not liquid. The conditions of liquid balance are observed only regarding the increase of quick sold assets over short-term liabilities, which testifies to preserving of solvency of the Company in the near future.
Calculation and estimation of liquidity coefficients allows establishing the degree of security of liabilities by the most liquid funds:
| Liquidity and solvency indicators | Formula | 2008
| 2009 | 2010 |
|---|---|---|---|---|
| Cash ratio | (250+260) (f.1) / (690-640) (f.1) | 0,17 | 0,13 | 0,01 |
| Current ratio | (290-230) (f.1) / (690-640) (f.1) | 0,80 | 0,78 | 0,46 |
| Quick ratio | (290-210-220-230) (f.1) / (690-640) (f.1) | 0,75 | 0,69 | 0,40 |
| Share of current funds in assets | 290 (f.1)/700 (f.1) | 0,23 | 0,20 | 0,13 |
Optimum values in liquidity ratios of JSC "Lenenergo" following the results of 2010 were not reached, thus in comparison with the last fiscal year their decrease may be observed.
Deterioration of liquidity indicators was caused by multi-directional changes in the sums of current assets (decrease) and short-term liabilities (growth). The lowering influence on the ratios was associated with the performing by the Company of actions aimed at a decrease in the level of accounts receivable, namely the strengthening of control over advances paid that resulted in an essential decrease in the sum of advances paid in relation to the beginning of the year.
Thus, the basic negative influence on liquidity indicators was rendered by a great sum of liabilities on advances received from subscribers under the contracts on technological connection (constituting the considerable share of short-term accounts payable reflected in line 620 of the balance sheet – 82.1% as of 31.12.2010) which is associated with the particularity of the Company’s activity.
In most cases payments for services on connection to JSC "Lenenergo" networks were advances which were paid at the stage of signing of the contract, and which are actually long-term sources of funds as they are associated with implementation by the Company of a long-term investment program. The specified liabilities do not demand security by current assets since they are sources of forming of non-current assets of the Company to be repaid on rendering of services on technological connection. Improvement of liquidity indicators of the Company can be reached at the expense of a decrease in the sum of advances received by JSC "Lenenergo" on fulfilling of its obligations towards subscribers, i.e. increase in revenues from rendering of services on technological connection. As a result, liquidity indicators will be adjusted towards an increase.
Financial stability
The stability of the financial condition of the Company depends both on the optimality of structure of capital sources (ratio of equity and liabilities), and on the optimality of assets structure of the Company.
| Indicators of financial stability | Formula | 2008
| 2009
| 2010
|
|---|---|---|---|---|
| Relation of borrowed funds to capital and reserves | (590+690) (f.1)/490 (f.1) | 0,70 | 0,71 | 0,71 |
| Equity ratio | (490-450+640) (f.1) / (190+290) (f.1) | 0,59 | 0,59 | 0,59 |
| Financial stability ratio | (490+590) (f.1)/300 (f.1) | 0,74 | 0,76 | 0,75 |
| Ratio of equity to borrowed funds | (490+640) (f.1) / (700-490-640) (f.1) | 1,44 | 1,41 | 1,41 |
*Note: Calculation of indicators of the relation of borrowed funds to capital and reserves, ratio of equity to borrowed funds, and equity ratio is performed according to the Technique of the FSFM approved by the Order of the FSFM of Russia No.06-117/pz-n as of 10.10.2006
As equity is the basis for independence of the Company, a considerable share of equity on the balance of the Company testifies to its sufficient financial independence. As of the end of 2010, the share of equity constituted 58.4% of the currency of balance of JSC "Lenenergo", i.e. was at a level not below the recommended one (50%), which is regarded positively.
In general, values of equity ratio, financial stability ratio, as well as indicators reflecting the relation of borrowed funds to capital and reserves, and the ratio of equity to borrowed funds following the results of 2010 were within the frameworks of standard restrictions. Changes of indicators concerning the last fiscal year were practically absent, and fluctuations of values of indicators from 2008 to 2010 were insignificant.
Turnover indicators
Relative indicators of business activity characterize the efficiency of use of resources (property) of the Company. They can be presented in the form of a system of financial ratios – turnover indicators.
| Indicators of business activity (turnover) | Formula | 2008
| 2009 | 2010 |
|---|---|---|---|---|
| General turnover (times) | 010 (f.2)/300 (f.1) | 0,27 | 0,32 | 0,39 |
| Turnover of current assets (times) | 010 (f.2)/290 (f.1) | 1,20 | 1,60 | 3,03 |
| Receivables turnover* (times) | 010 (f.2) / (230+240-244) (f.1) | 1,61 | 2,16 | 3,56 |
| Payables turnover (times) | 010 (f.2)/620 (f.1) | 1,09 | 1,36 | 1,64 |
*Note: calculation of the indicator is performed according to the Technique of the FSFM approved by the Order of the FSFM of Russia No.06-117/pz-n as of 10.10.2006
Concerning the last fiscal year, growth of turnover indicators of JSC "Lenenergo" was observed. Positive dynamics of indicators was caused by the growth in revenue relative to the last fiscal year, thus the Company’s revenue was growing at rates exceeding total assets, and the sum of current assets was decreasing. Considerable growth of receivables turnover was affected by optimization in the size of advances paid to building organizations.
As the economic result of the turnover acceleration is the additional release of current assets in the economic circulation of the Company, the given changes can be regarded positively from the position of estimation of the Company’s financial condition.
In general, there remained the tendency of improvement of the majority of profitability indicators that was accompanied by an increase in net profit of JSC "Lenenergo" (by 1.2 times) and in revenues (in 1.3 times) in the reporting year in comparison with 2009. Values of turnover indicators that testify to the increase in efficiency of the use of resources by the Company also increased. The growth of net assets was steady. The level of financial independence of the Company was in limits of legislative values and concerning the last fiscal year practically has not changed. At the same time, in comparison with 2009, dynamics of some financial indicators of JSC "Lenenergo" had a negative character. Therefore, liquidity indicators, and the indicator reflecting the ratio of accounts receivable and payable, deteriorated.
The analysis of dynamics of the indicators of activity of JSC "Lenenergo", In general, testifies to the high enough level of efficiency of activity of the Company. However, considering the influence of financial crisis on economical conditions of the Company’s operating, the further optimization of the Company’s governance aimed at improvement of its financial condition remains important.
Credit portfolio
Changes in the credit portfolio of JSC "Lenenergo" in 2010 resulted in the table:
RUR mln
| Type of borrowed funds | Residue as of 01.01.2010 | Borrowed from 01.01.2010 to 31.12.2010 | Interest accrued from 01.01.2010 to 31.12.2010 | Repaid from 01.01.2010 to 31.12.2010 | Interest paid from 01.01.2010 to 31.12.2010 | Residue as of 31.12.2010 | Average rate as of 31.12.2010 |
|---|---|---|---|---|---|---|---|
| JSC "Lenenergo" bonds | 6 000 | 6 000 | 7,85% | ||||
| Long-term borrowings | 6 900 | 8 562 | 7 900 | 7 562 | |||
| TOTAL | 12 900 | 8 562 |
| 7 900 |
| 13 562 | |
| Short-term borrowings* | 1 000 | 2 328 | 2 328 | 1 000 | |||
| Interest on borrowings | 246 | 1 194 | 1 268 | 172 | |||
| TOTAL | 14 146 | 10 890 | 1 194 | 10 228 | 1 268 | 14 734 |
* In compliance with the rules of accounting liabilities in the sum of RUR 1,000 mln as of 31.12.2010 are re-classified in short-term liabilities. For comparability the given liabilities as of 01.01.2010 is also shown as a part of short-term liabilities
As of 31.12.2010, liabilities on borrowed funds constituted RUR 14,734 mln, including:
- RUR 14,562 mln on the sum of the main debt;
- RUR 172 mln of interest accrued, but not paid.
Within 2010, there was no infringement of terms of repayment of liabilities on the main debt and payment of interest for using borrowed funds. As of 31.12.2010, JSC "Lenenergo" had no overdue liabilities on repayment of main debt, interest and payments on servicing of credit resources.
Flow on credit resources in 2010:
- RUR 10,890 mln borrowed,
- RUR 10,228 mln repaid
The key banks – partners of JSC "Lenenergo" are as follows:
JSC "Sberbank of Russia"
JSC "Bank VTB Northwest"
JSC AKB "Svyaz-Bank"
JSC "AB "RUSSIA"
JSC "Alfa-Bank"