Core Investment Principles1. Creation of additional value
- Achievement of strong and transparent financial results
- Diversification of risks and active capital financing and allocation
2. Strict financial discipline
- Dominance of TSR in decision making
- A clear and intelligent system of KPIs for the Corporate Center and portfolio companies
3. Efficient and compliance-driven corporate governance structure:
4. Macro-economic driven investment strategy and risk-assessed asset allocation
5. Rigorous IR and corporate governance practices The principles of asset portfolio management
As well as helping businesses achieve their growth potential, Sistema’s key objective is to become a leading investor in terms of high returns and smart capital allocation. When making new investments, the Group follows several key principles:
- 80% of NAV is represented by core assets, which generate stable dividend flow, and 20% is contributed by developing businesses
- Seek material new investment projects with enterprise values (shareholders’ equity and debt) of at least US$ 300 million
- Target businesses which will generate a return on investment above the cost of capital, within the investment horizon of 5-7 years (IRR>WACC)
- Aim towards medium term profitability and independent servicing of financial obligations. All businesses, including current projects and new investments, should start making profit in the medium term and independently service their financial obligations
- Review potential partnerships with financial, strategic and state-run investors Strategy implementation in 2010In 2010, Sistema continued its transition from the operating holding to the investment fund model. Several large scale M&A deals were completed in the reporting period, making this the most active period in Sistema’s investment history.
The Group completed the reorganization of its telecom assets through the sale of Comstar and Skylink and other transactions between Svyazinvest and Comstar. It decided to exit the real estate business and agreed to a partial disposal of Intourist assets to Thomas Cook. Sistema continued to attract new partners, such as the Russian Government for SSTL and Sberbank at Detsky Mir, whilst also finding unique new investment opportunities such as the acquisition of a 49% stake in Russneft, one of Russia’s top ten oil producers.
The Group also adopted changes to the incentive system for the employees of Sistema and its subsidiaries, and revised processes and procedures for investment decision-making.
The final step towards the new investment model was made in 2011 when the Board of Directors approved the reorganization of the Group into two new business units based on the maturity of the underlying assets.
These and other portfolio actions reflect management’s drive to effectively execute Sistema’s development strategy and grow shareholder value.
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