Daily analyst comments
MOESK publishes positive IFRS financials for FY2009
25.05.10 10:41
Moscow Integrated Electricity Distribution Co. (Russian acronym, MOESK) has improved financials in 2009; however, the company is still needs to optimize its operating expenses, in our view.
On May 24, Moscow Integrated Electricity Distribution Co. released a financial statement for FY2009, based on IFRS.
Table 1. MOESK: key income indicators, mn RUB
MOESK saw productive electricity output decline 2% y-o-y in 2009, as the economic crisis unfolded. However, revenues climbed by over 31% on a sharp growth in the electricity transmission tariff. Revenues on payments of connection fees stayed flat at last year’s level.
Table 2. MOESK: basic operating expenses, mn RUB
MOESK operating expenses climbed 16% in 2009, with growth in expenses lagging far behind revenue growth. Expenses on electricity transmission, which are beyond the management’s control, appeared the key factor behind the rise in operating expenses, which include spending on compensation for electricity losses and expenditures on services from territorial electric grids. Growth in staff costs partly attributed to a 7.6% increase in the number of personnel.
The company saw profit margins broaden as revenue growth outpaced the rise in expenses.
Table 3. MOESK: size and dynamics of profit margins
We view the financials released as positive. The company has managed to achieve substantial profitability growth. The share of connection fees in total revenues has declined, which we view as a positive sign, given that payment of connection fees is to be cancelled as of 2011. We are somewhat wary of growth in the staff costs and headcount, given that numerous inter-regional distribution grid companies stepped up efforts at shedding jobs and trimming the respective costs in crisis-stricken 2009. We expect the MOESK management to address this issue in 2010, as the forthcoming switch to a RAB tariff system will spur management to consider optimizing operating expenses.