Mission & Investment Strategy
Sistema is focused on achieving the long-term growth of shareholder value by deriving high returns on capital through diversified investments.
The investment portfolio of
Sistema is composed of predominantly Russian businesses, which
include mature companies with stable cash flows and developing
companies with growth potential. Since the mature assets comprise
the largest part of portfolio, Sistema has significant resources
for investing in developing assets and taking new opportunities
available in the market.
The Group's goal of consistently
delivering superior shareholder value is driven by a dual strategy
of enhancing the return on invested capital from the existing
portfolio and recycling the majority of the spare cash proceeds
into new investments to diversify and grow its asset base.
Core investment principles
- Creation of additional value: achievement of strong and
transparent financial results; diversification of risks and active
capital financing and allocation.
- Strict financial discipline: dominance of TSR in decision
making; a clear and intelligent system of KPIs for the
Corporate Centre and portfolio companies.
- Efficient and compliance-driven corporate governance
- Macro-economic driven investment strategy and risk-assessed
- Rigorous IR and corporate governance practices.
- We are mainly focused on acquiring assets in complementary sectors where we have expertise and are able to build synergies with existing portfolio companies. We are also interested in new, economically attractive industries, such as agriculture, infrastructure, transportation and logistics, as well as chemicals and petrochemicals;
- We concentrate on large scale assets and projects worth at least US$ 300 mln, that enable us to take a leading position in the sector by means of synergy effects, industry consolidation opportunities and successful implementation of our investment and operating strategy;
- We make investments in accordance with the adopted internal investment criteria aimed at increasing economic efficiency:
- generation of returns on investments above the long-term cost of capital (IRR>WACC) with a 5-7 year payback period; - focus on projects generating positive income within 3 years;
- We continually monitor and realise value creation opportunities by means of efficient portfolio management, including the restructuring of existing assets, a sale to strategic investors or an IPO.
- We aim to maintain a balanced portfolio that includes large cash-generating core assets and companies at the stage of active business development.
- The assets are split into portfolios based on the principle of origination and sector expertise of the portfolio manager. The key indicator of investment performance (KPI) for the management is the TSR (total shareholder return) which is targeted for each asset.
- We are pursuing a progressive dividend policy. The amount of dividends is determined on the basis of the performance results of previous financial periods and equals at least 10% of the Group’s net income under US GAAP and a minimum of 10% of net gain from transactions with incoming cash flows, such as sale of assets, subject to the decision of the Board of Directors.
- To ensure financial stability, Sistema seeks to maintain an optimum level of debt both at the Corporate Centre and subsidiary level.
- The key indicator used by the Corporate Centre is the dividend flow / debt ratio, which will be kept at the level of 1 in the long-term perspective.
- The Corporation also aims to acquire assets with an acceptable debt level (Debt/OIBDA of the acquired asset <3.0x) in order to maintain a stable financial position for the Group as a whole.
- We aim to set up partnerships with leading international and Russian companies, to exchange experience and industry-specific expertise, and to diversify financial risks.
- We oversee the implementation of our investment strategy through the participation of portfolio managers in the Boards of Directors, and through involving industrial experts in the management of portfolio assets.