Form 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF A FOREIGN ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For June 9, 2014

 

 

QIWI plc

 

 

12-14 Kennedy Ave.

Kennedy Business Centre, 2nd Floor, Office 203

1087 Nicosia Cyprus

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No   x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

THIS REPORT ON FORM 6-K IS INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-190918) OF QIWI PLC AND IN THE OUTSTANDING PROSPECTUS CONTAINED IN SUCH REGISTRATION STATEMENT.

 

 

 


Explanatory Note

The purpose of this Report on Form 6-K is (1) to republish QIWI’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2014, which were furnished to the SEC on a Report on Form 6-K dated May 21, 2014, and adding thereto the notes to the unaudited interim condensed consolidated financial statements and (2) to publish an operating and financial review and prospects with respect to the three months ended March 31, 2013 and 2014.

 

2


Results of Operations

Set out below are our consolidated statements of operations data for the three months ended March 31, 2013 and 2014:

 

     Three months ended  
     March 31, 2013     March 31, 2014     March 31, 2014  
     (unaudited)     (unaudited)     (unaudited)  
in millions    RUB     RUB     USD(1)  

Revenue

     2,533       3,259       91  

Operating costs and expenses:

      

Cost of revenue (exclusive of depreciation and amortization)

     1,476       1,688       47  

Selling general and administrative expenses

     543       582       16  

Depreciation and amortization

     26       84       2  

Profit from operations

     487       905       25  
  

 

 

   

 

 

   

 

 

 

Impairment of investment in associates

     —         (3 )     —     

Other income

     11       —          —     

Other expenses

     (1 )     (5 )     —     

Foreign exchange gain / (loss), net

     3       (2 )     —     

Share of loss of associates

     (8 )     (7 )     —     

Interest income

     4       1       —     

Interest expense

     (6 )     (11 )     —     
  

 

 

   

 

 

   

 

 

 

Profit before tax

     490       878       25  

Income tax expense

     (136 )     (190 )     (5 )
  

 

 

   

 

 

   

 

 

 

Net profit

     354       688       19  

Attributable to:

      

Equity holders of the parent

     365        704        20   

Non-controlling interests

     (12     (16     —     

 

(1)  Calculated using a ruble to U.S. dollar exchange rate of RUB 35.687 to U.S.$1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of March 31, 2014.

Revenue

Revenue for the three months ended March 31, 2014 was RUB 3,259 million, an increase of 29%, or RUB 727 million, compared to the same period in 2013. This increase was primarily due to an increase in payment processing fees. Payment processing fees for the three months ended March 31, 2014 were RUB 2,756 million, an increase of 29%, or RUB 619 million, compared to the same period in 2013. The increase in payment processing fees resulted primarily from an increase in payment volumes by 20%, from RUB 124.5 billion to RUB 149.6 billion.

The number of active kiosks and terminals was 167,713 as of March 31, 2014, an increase of 1% compared to March 31, 2013. The number of active Visa Qiwi Wallet accounts was 15.6 million as of March 31, 2014, an increase of 20% compared to March 31, 2013.

Advertising revenue for the three months ended March 31, 2014 was RUB 72 million, a decrease of 46%, or RUB 61 million, compared to the same period in 2013. This decrease was primarily due to reduced advertising by retail banks.

Ancillary revenue for the three months ended March 31, 2014 was RUB 320 million, an increase of 22%, or RUB 57 million, compared to the same period in 2013, primarily as a result of increased revenue from cash and settlement services, increased revenue from rent of space of kiosks, following our acquisition of Blestgroup Enterprises Limited in December 2013, and increased interest revenue and gain from currency swaps, partially offset by a decrease in interest revenue from agents’ overdrafts.

 

3


Operating expenses

Cost of revenue (exclusive of depreciation and amortization)

Cost of revenue (exclusive of depreciation and amortization) for the three months ended March 31, 2014 was RUB 1,688 million, an increase of 14%, or RUB 212 million, compared to the same period in 2013. Transaction costs were RUB 1,266 million in the three months ended March 31, 2014, an increase of 7%, or RUB 82 million, compared to the same period in 2013. We attribute this increase in transaction costs primarily to an increase in total payment volume.

Compensation to employees and related taxes for the three months ended March 31, 2014 was RUB 306 million, an increase of 35%, or RUB 79 million, compared to the same period in 2013, primarily due to an increase in salaries and, to a lesser extent, a slight increase in headcount.

Ancillary expenses for the three months ended March 31, 2014 were RUB 116 million, an increase of 77%, or RUB 65 million, compared to the same period in 2013. The increase in ancillary expenses primarily resulted from an increase in the cost of rent of space for kiosks, due to our acquisition of Blestgroup Enterprise Limited, and an increase in other expenses, including expenses relating to our call centers, partially offset by a decrease in advertising commissions.

Total adjusted net revenue

Total adjusted net revenue for the three months ended March 31, 2014 was RUB 1,877 million, an increase of 46% compared with RUB 1,284 million during the same period in 2013. Average net revenue yield increased by 23 bps, from 1.03% for the three months ended March 31, 2013 to 1.26% for the three months ended March 31, 2014. Excluding inactivity fees, average net revenue yield increased by 18 bps, from 0.99% for the three months ended March 31, 2013 to 1.17% for the three months ended March 31, 2014.

Payment adjusted net revenue was RUB 1,362 million for the three months ended March 31, 2014, an increase of 51% compared with RUB 900 million during the same period in 2013. Payment adjusted net revenue growth was predominantly driven by an increase in payment volume and net revenue yield in the E-commerce, Financial Services and Money Remittances market segments.

Other adjusted net revenue was RUB 515 million for the three months ended March 31, 2014, an increase of 34% compared with RUB 383 million during the same period in 2013. Inactivity fees for the first quarter were RUB 127 million compared with RUB 55 million during the same period in 2013 as such fees were not charged for most of the first quarter 2013. Other adjusted net revenue excluding revenue from fees for inactive accounts increased 18% compared with the same period in 2013 primarily due to the increased revenue from cash and settlement services and from interest income.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2014 were RUB 582 million, an increase of 7%, or RUB 39 million, from the same period in 2013. This increase was primarily due to an increase of professional fees, an increase in rent of premises and related utility expenses, following our relocation to our new headquarters at the end of 2013, an increase in office maintenance expense, and an increase in bad debt expense, partially offset by a decrease in offering expenses and a decrease in compensation to employees and related taxes.

 

4


Depreciation and amortization

Depreciation and amortization for the three months ended March 31, 2014 was RUB 84 million, an increase of 223%, or RUB 58 million, compared to the same period in 2013. This increase resulted primarily from capitalization of significant fixed assets in the fourth quarter of 2013 following our move to new office premises and the acquisition of new software.

Income tax

Income tax for the three months ended March 31, 2014 was RUB 190 million, an increase of 40%, or RUB 136 million, compared to the same period in 2013, primarily due to the increase in pre-tax income. Our effective tax rate decreased by approximately 6 percentage points primarily driven by growth of operations in jurisdictions with lower tax rates relative to those with higher tax rates.

Segment Reporting

Beginning January 1, 2014, we revised our financial reporting structure such that we have one financial reporting segment. We decided to consolidate our previous financial reporting segments, Visa QIWI Wallet and QIWI Distribution, in order to better reflect our underlying business in light of the growing interconnectedness and interrelation between Visa QIWI Wallet and QIWI Distribution.

Liquidity and capital resources

Our principal sources of liquidity are cash on hand, deposits received from agents and consumers, and revenues generated from our operations.

Our principal needs for liquidity have been, and will likely continue to be, deposits with merchants and other working capital items, capital expenditures and acquisitions. Although our current liabilities generally exceed our current assets, we believe that our working capital is sufficient to meet our current obligations since we do not expect our agents to withdraw their deposits in the short term.

Our balance of cash and cash equivalents as of March 31, 2014 was RUB 8,128 million compared to RUB 11,637 million as of December 31, 2013. Cash and cash equivalents comprise cash at banks and cash on hand and short-term deposits with an original maturity of three months or less.

An important part of our credit risk management and payment settlement strategy relies on deposits we receive from agents in advance for payments made through the kiosks. When a payment is made through a kiosk, we offset these deposits against the payments we make to the merchant. For certain agents with whom we have long and reliable relationships, we provide limited credit support in the form of overdrafts and loans for processing payments.

 

5


Similarly, certain of our merchants (primarily MegaFon, VimpelCom and MTS) request that we make deposits with them in relation to payments processed through our kiosks. Whenever a customer makes a payment to a merchant with whom we have made a deposit, that payment gets offset against the deposit held with the respective merchant.

As of March 31, 2014, deposits received from agents and individual customers were RUB 5,553 million, compared to RUB 12,352 million as of December 31, 2013. As of March 31, 2014, deposits issued to our merchants were RUB 756 million, compared to RUB 1,939 million as of December 31, 2013.

Capital Expenditures

Our capital expenditures primarily relate to the acquisition of IT equipment for our processing system and the acquisition and development of software that we use in operations. Capital expenditures were RUB 81 million for the three months ended March 31, 2014, relating primarily to expenditures for our new office premises and to software purchases, and RUB 12 million for the three months ended March 31, 2013. As of March 31, 2014, we had no material capital expenditure commitments.

Cash Flow

The following table summarizes our cash flows for the three months ended March 31, 2013 and 2014:

 

     Three months ended  
     March 31, 2013     March 31, 2014     March 31, 2014  
     (unaudited)     (unaudited)     (unaudited)  
in millions    RUB     RUB     USD(1)  

Net cash flow used in operating activities

     (4,491 )     (4,182 )     (117 )

Net cash flow used in/generated from investing activities

     (540 )     425       12  

Net cash flow generated from financing activities

     9       341       10  

Effect of exchange rate changes on cash and cash equivalents

     2       1       —    

Net decrease in cash and cash equivalents

     (4,996 )     (3,509 )     (98 )

Cash and cash equivalents at the beginning of the period

     9,943       11,637       326  

Cash and cash equivalents at the end of the period

     4,947       8,128       228  

 

(1)  Calculated using a ruble to U.S. dollar exchange rate of RUB 35.687 to U.S.$1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of March 31, 2014.

Cash flows from operating activities

Net cash used in operating activities for the three months ended March 31, 2014 was RUB 4,182 million, compared to RUB 4,491 million for the same period in 2013. The primary driver for the decrease in cash used in operating activities was an increase in operating profit before changes in working capital in the three months ended March 31, 2014, compared to the three months ended March 31, 2013 due to increased profitability. We generally generate negative cash flow from operating activities in the first three months of the year due to seasonality as we receive higher deposits from agents immediately before the end of the calendar year to ensure consumer payments can be made during the Russian Christmas and New Year holidays and a change in timing of payment of deposits with larger merchants immediately prior to year end and a return of these deposits during the first six months of the following year.

 

6


Cash flows from investing activities

Net cash flows generated from investing activities for the three months ended March 31, 2014 was RUB 425 million, compared to net cash used in investing activities of RUB 540 million for the same period in 2013. The decrease in net cash used in investing activities was primarily due reduced investment in debt instruments.

Cash flows generated from financing activities

Net cash generated from financing activities for the three months ended March 31, 2014 was RUB 341 million, compared to RUB 9 million for the same period in 2013. The increase in net cash generated from financing activities was primarily due to borrowing incurred from our overdraft facility with VTB Bank.

Borrowings

As of March 31, 2014, our outstanding borrowings consisted of loans to our subsidiaries from non-controlling shareholders of RUB 133 million, other borrowings of RUB 10 million, and overdrafts, including the VTB Bank overdraft facility, of RUB 316 million. The VTB Bank overdraft facility is due in December 2014. All other borrowings (except for overdrafts) are due in 2015-2016.

Off-Balance Sheet Items

We do not have any off-balance sheet financing arrangements.

 

7


Other Selected Financial and Operating Data

 

     Three months ended  
     March 31, 2013     March 31, 2014     March 31, 2014  
     (unaudited)     (unaudited)     (unaudited)  
in millions    RUB     RUB     USD(1)  

Payment Adjusted Net Revenue

     900        1,362        38.2   

E-commerce

     249        380        10.6   

Financial services

     188        375        10.5   

Money remittances

     71        184        5.2   

Telecom

     314        312        8.8   

Other

     78        111        3.1   

Other Adjusted Net Revenue

     383        515        14.4   
  

 

 

   

 

 

   

 

 

 

Total Adjusted Net Revenue

     1,284        1,877        52.6   
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     611        1,068        29.9   
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit

     455        785        22.0   
  

 

 

   

 

 

   

 

 

 

Payment volume (billion)(2)

     124.5        149.6        4.2   
  

 

 

   

 

 

   

 

 

 

E-commerce

     14.6        17.4        0.5   

Financial services

     31.1        47.3        1.3   

Money remittances

     6.0        13.1        0.4   

Telecom

     61.6        58.4        1.6   

Other

     11.3        13.2        0.4   
  

 

 

   

 

 

   

 

 

 

Payment average net revenue yield

     0.72     0.91     0.91
  

 

 

   

 

 

   

 

 

 

E-commerce

     1.71     2.18     2.18

Financial services

     0.61     0.79     0.79

Money remittances

     1.18     1.40     1.40

Telecom

     0.51     0.53     0.53

Other

     0.69     0.84     0.84
  

 

 

   

 

 

   

 

 

 

Total average Net Revenue Yield

     1.03     1.26     1.26

Active kiosks and terminals (units)

     166,154        167,713        167,713   

Active Qiwi Wallet accounts(4)

     13.0        15.6        15.6   

 

(1)  Calculated using a ruble to U.S. dollar exchange rate of RUB 35.687 to U.S.$1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of March 31, 2014.
(2)  Payment volume by market segments and consolidated payment volume consist of the amounts paid by our customers to merchants included in each of those market segments less intra-group eliminations.
(3)  Payment Adjusted Net Revenue is calculated as the difference between Payment Gross Revenue and Payment Costs. Payment Gross Revenue primarily consists of merchant and consumer fees. Payment Costs primarily consist of commission to agents.
(4)  Active VISA Qiwi Wallet accounts calculated on a yearly basis, i.e. an active account is an account that had at least one transaction within the last 12 months from the reporting date.

 

8


Non-IFRS Financial Measures and Supplemental Financial Information

This report presents Total Adjusted Net Revenue, Payment Adjusted Net Revenue, Other Adjusted Net Revenue, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Profit and Adjusted Net Profit per share, which are non-IFRS financial measures. You should not consider these non-IFRS financial measures as substitutes for or superior to revenue, in the case of Total Adjusted Net Revenue, Payment Adjusted Net Revenue and Other Adjusted Net Revenue; Net Profit, in the case of Adjusted EBITDA; and Adjusted Net Profit, or earnings per share, in the case of Adjusted Net Profit per share, each prepared in accordance with IFRS. Furthermore, because these non-IFRS financial measures are not determined in accordance with IFRS, they are susceptible to varying calculations and may not be comparable to other similarly titled measures presented by other companies. QIWI encourages investors and others to review our financial information in its entirety and not rely on a single financial measure. For more information regarding Total Adjusted Net Revenue, Payment Adjusted Net Revenue, Other Adjusted Net Revenue, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Profit, and Adjusted Net Profit per share, including a quantitative reconciliation of Total Adjusted Net Revenue, Payment Adjusted Net Revenue, Other Adjusted Net Revenue, Adjusted EBITDA and Adjusted Net Profit to the most directly comparable IFRS financial performance measure, which is revenue in the case of Total Adjusted Net Revenue, payment revenue in the case of Payment Adjusted Net Revenue, other revenue in the case of Other Adjusted Net Revenue and net profit in the case of Adjusted EBITDA and Adjusted Net Profit, see Reconciliation of IFRS to Non-IFRS Operating Results in this earnings release.

Payment Adjusted Net Revenue is the Adjusted Net Revenue consisting of the merchant and consumer fees collected for the payment transactions. E-commerce payment adjusted net revenue consists of fees charged to customers and merchants that buy and sell products and services online, including online games, social networks, online stores, game developers, software producers, coupon websites, tickets and numerous other merchants. Financial Services payment adjusted net revenue primarily consists of fees charged for payments accepted on behalf of our bank partners and microfinance companies. Money Remittances payment adjusted net revenue primarily consists of fees charged for transferring funds via money remittance companies. Telecom payment adjusted net revenue primarily consists of fees charged for payments to MNOs, internet services providers and pay television providers. Other payment adjusted net revenue consists of consumer and merchant fees charged for a variety of payments including multi-level-marketing, utility bills, government payments, education services and many others. Other Adjusted Net Revenue primarily consists of revenue from inactivity fees, interest on deposits and on overdrafts provided to agents, cash and settlement services and advertising.

 

9


     Three months ended  
     March 31, 2013     March 31, 2014     March 31, 2014  
     (unaudited)     (unaudited)     (unaudited)  
in millions, except per share data    RUB     RUB     USD(1)  

Revenue

     2,533        3,259        91.3   

Minus: Cost of revenue (exclusive of depreciation and amortization)

     1,476        1,688        47.3   

Plus: Compensation to employees and related taxes

     227        306        8.6   
  

 

 

   

 

 

   

 

 

 

Total Adjusted Net Revenue

     1,284        1,877        52.6   
  

 

 

   

 

 

   

 

 

 

Payment Revenue(2)

     2,084        2,628        73.6   

Minus: Cost of payment revenue (exclusive of depreciation and amortization)(3)

     1,372        1,513        42.4   

Plus: Compensation to employees and related taxes allocated to payment revenue(4)

     188        247        6.9   
  

 

 

   

 

 

   

 

 

 

Payment Adjusted Net Revenue

     900        1,362        38.2   
  

 

 

   

 

 

   

 

 

 

Other Revenue(5)

     449        631        17.7   

Minus: Cost of other revenue (exclusive of depreciation and amortization)(6)

     104        175        4.9   

Plus: Compensation to employees and related taxes allocated to other revenue(4)

     38        59        1.7   
  

 

 

   

 

 

   

 

 

 

Other Adjusted Net Revenue

     383        515        14.4   
  

 

 

   

 

 

   

 

 

 

Payment Adjusted Net Revenue

     900        1,362        38.2   

E-commerce

     249        380        10.6   

Financial services

     188        375        10.5   

Money remittances

     71        184        5.2   

Telecom

     314        312        8.8   

Other

     78        111        3.1   

Other Adjusted Net Revenue

     383        515        14.4   
  

 

 

   

 

 

   

 

 

 

Total Adjusted Net Revenue

     1,284        1,877        52.6   
  

 

 

   

 

 

   

 

 

 

Net Profit

     354        688        19.3   
  

 

 

   

 

 

   

 

 

 

Plus:

      

Depreciation and amortization

     26        84        2.4   

Other income

     (11     (0     (0.0

Other expenses

     1        5        0.1   

Foreign exchange (loss) gain, net

     (3     2        0.1   

Share of loss of associates

     8        7        0.2   

Impairment of investment in associates

     —          3        0.1   

Interest income

     (4     (1     (0.0

Interest expenses

     6        11        0.3   

Income tax expenses

     136        190        5.3   

Offering expenses

     20        —          —     

Share-based payments expenses

     78        79        2.2   
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     611        1,068        29.9   
  

 

 

   

 

 

   

 

 

 

 Adjusted EBITDA margin

     47.6     56.9     56.9

Net profit

     354        688        19.3   

Amortization of fair value adjustments

     6        22        0.6   

Offering expenses

     20        —          —     

Share-based payments expenses

     78        79        2.2   

Effect of taxation of the above items

     (1     (4     (0.1
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit

     455        785        22.0   
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit per share:

      

Basic

     8.76        15.04        0.42   

Diluted

     8.75        14.78        0.41   

Shares used in computing Adjusted Net Profit per share

      

Basic

     52,000        52,177        52,177   

Diluted

     52,048        53,078        53,078   

 

(1) Calculated using a ruble to U.S. dollar exchange rate of RUB 35.687 to U.S.$1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of March 31, 2014.
(2) Payment revenue primarily consists of the merchant and consumer fees charged for the payment transactions.
(3) Cost of payment revenue (exclusive of depreciation and amortization) primarily consists of transaction costs to acquire payments from our customers payable to agents, mobile operators, international payment systems and other parties.
(4)  The Company does not record the compensation to employees and related taxes within cost of revenue separately for payment revenue and other revenue, therefore it has been allocated between payment revenue and other revenue in proportion to the relevant revenue amounts for the purposes of the reconciliation presented above.
(5)  Other revenue primarily consists of revenue from inactivity fees, interest on deposits and on overdrafts provided to agents, cash and settlement services and advertising.
(6)  Cost of other revenue (exclusive of depreciation and amortization) primarily consists of direct costs associated with other revenue and other costs, including but not limited to: compensation to employees and related taxes allocated to other revenue, costs of call-centers and advertising commissions.

 

10


Exhibits

 

99.1    Unaudited interim condensed consolidated financial statements for the three months ended March 31, 2014

 

11


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    QIWI PLC (Registrant)
Date: June 9, 2014     By:  

/s/ Alexander Karavaev

      Alexander Karavaev
      Chief Financial Officer

 

12

EX-99.1

QIWI plc

Unaudited interim condensed consolidated financial statements

March 31, 2014


QIWI plc

Unaudited interim condensed consolidated financial statements

March 31, 2014

Content

 

Interim condensed consolidated financial statements

  

Interim condensed consolidated statement of financial position

     2   

Interim condensed consolidated statement of comprehensive income

     3   

Interim condensed consolidated cash flow statement

     4   

Interim condensed consolidated statement of changes in equity

     5   

Notes to interim condensed consolidated financial statements

     7   


QIWI plc

Interim condensed consolidated statement of financial position

March 31, 2014

(in thousands of rubles, except per share data)

 

     Notes    As of
December 31,
2013 (audited)
    As of
March 31,
2014 (unaudited)
 

Assets

       

Non-current assets

       

Property and equipment

   13      307,500        326,230   

Goodwill and other intangible assets

        2,405,645        2,375,818   

Long-term debt instruments

   21      1,376,862        1,652,483   

Long-term loans

   6, 21      10,637        24,177   

Deferred tax assets

        183,333        214,301   

Other non-current assets

   9      38,394        38,614   
     

 

 

   

 

 

 

Total non-current assets

        4,322,371        4,631,623   
     

 

 

   

 

 

 

Current assets

       

Trade and other receivables

   7, 21      2,772,297        2,165,402   

Short-term loans

   6, 21      65,430        60,188   

Short-term debt instruments

   21      1,635,291        825,472   

Prepaid income tax

        60,537        60,406   

VAT and other taxes receivable

        12,478        38,715   

Cash and cash equivalents

   8, 21      11,636,913        8,127,674   

Other current assets

   9      159,264        189,244   
     

 

 

   

 

 

 

Total current assets

        16,342,210        11,467,101   
     

 

 

   

 

 

 

Total assets

        20,664,581        16,098,724   
     

 

 

   

 

 

 

Equity and liabilities

       

Equity attributable to equity holders of the parent

       

Share capital

        907        909   

Additional paid-in capital

        1,876,104        1,876,104   

Other reserve

        337,254        421,355   

Retained earnings

        573,604        1,277,939   

Translation reserve

        10,757        16,545   
     

 

 

   

 

 

 

Total equity attributable to equity holders of the parent

        2,798,626        3,592,852   

Non-controlling interest

        (94,766     (121,894
     

 

 

   

 

 

 

Total equity

        2,703,860        3,470,958   
     

 

 

   

 

 

 

Non-current liabilities

       

Long-term borrowings

   10, 21      109,351        142,560   

Long-term deferred revenue

        31,629        27,943   

Deferred tax liabilities

        58,630        47,298   

Long-term accounts payable

   21      7,625        —     
     

 

 

   

 

 

 

Total non-current liabilities

        207,235        217,801   
     

 

 

   

 

 

 

Current liabilities

       

Short-term borrowings

   10, 21      635        315,805   

Trade and other payables

   11, 21      16,768,973        11,122,414   

Amounts due to customers and amounts due to banks

   12, 21      831,226        758,758   

Income tax payable

        10,823        82,098   

VAT and other taxes payable

        95,403        97,674   

Deferred revenue

        46,233        31,007   

Other current liabilities

        193        2,209   
     

 

 

   

 

 

 

Total current liabilities

        17,753,486        12,409,965   
     

 

 

   

 

 

 

Total equity and liabilities

        20,664,581        16,098,724   
     

 

 

   

 

 

 

The accompanying notes form an integral part of these interim condensed consolidated financial statements.

 

2


QIWI plc

Interim condensed consolidated statement of comprehensive income

March 31, 2014

(in thousands of rubles, except per share data)

 

          Three months ended (unaudited)  
     Notes    March 31, 2013     March 31, 2014  

Revenue

   14      2,532,696        3,259,462   

Operating costs and expenses:

       

Cost of revenue (exclusive of depreciation and amortization)

   15      1,476,430        1,688,133   

Selling, general and administrative expenses

   16      542,906        582,188   

Depreciation and amortization

        26,154        84,294   
     

 

 

   

 

 

 

Profit from operations

        487,206        904,847   
     

 

 

   

 

 

 

Other income

        11,056        375   

Other expenses

        (1,098     (5,006

Foreign exchange gain/(loss), net

        2,603        (2,053

Share of loss of associates

   4      (7,691     (7,311

Impairment of investment in associates

   4      —          (2,903

Interest income

        4,147        712   

Interest expense

        (6,253     (10,572
     

 

 

   

 

 

 

Profit before tax

        489,970        878,089   

Income tax expense

   18      (136,308     (189,912
     

 

 

   

 

 

 

Net profit

        353,662        688,177   
     

 

 

   

 

 

 

Attributable to:

       

Equity holders of the parent

        365,334        704,335   

Non-controlling interests

        (11,672     (16,158

Other comprehensive income

       

Other comprehensive income to be reclassified to profit or loss in subsequent periods:

       

Exchange differences on translation of foreign operations

        (2,107     (3,012
     

 

 

   

 

 

 

Total comprehensive income, net of tax

        351,555        685,165   
     

 

 

   

 

 

 

Attributable to:

       

Equity holders of the parent

        363,975        710,123   

Non-controlling interests

        (12,420     (24,958

Earnings per share:

       

Basic, profit attributable to ordinary equity holders of the parent

        7.03        13.50   

Diluted, profit attributable to ordinary equity holders of the parent

     7.02        13.27   

The accompanying notes form an integral part of these interim condensed consolidated financial statements.

 

3


QIWI plc

Interim condensed consolidated cash flow statement

March 31, 2014

(in thousands of rubles, except per share data)

 

          Three months ended  
     Notes    March 31,
2013 (unaudited)
    March 31,
2014 (unaudited)
 

Cash flows from operating activities

       

Profit before tax

        489,970        878,089   

Adjustments to reconcile profit before income tax to net cash flows generated from operating activities

       

Depreciation and amortization

        26,154        84,294   

Loss on disposal of property and equipment

        2,854        1,301   

Foreign exchange loss (gain), net

        (33     2,053   

Interest income, net

   14      (83,897     (63,733

Bad debt expense, net

   16      51,908        62,435   

Share of loss of associates

   4      7,691        7,311   

Impairment of investment in associates

        —          2,903   

Share-based payments

   22      77,683        78,933   

Other

        1,255        1,023   
     

 

 

   

 

 

 

Operating profit before changes in working capital

        573,585        1,054,609   

Decrease in trade and other receivables

        1,173,576        526,911   

Increase in other assets

        (1,298     (31,221

Decrease in amounts due to customers and amounts due to banks

        (251,959     (72,468

Decrease in accounts payable and accruals

        (5,958,937     (5,655,583

Loans issued from banking operations

        (26,024     (4,004
     

 

 

   

 

 

 

Cash used in operations

        (4,491,057     (4,181,756

Interest received

        155,830        73,103   

Interest paid

        (3,849     (6,575

Income tax paid

        (128,216     (160,806
     

 

 

   

 

 

 

Net cash flow used in operating activities

        (4,467,292     (4,276,034
     

 

 

   

 

 

 

Cash flows used in investing activities

       

Contribution to associates without change in ownership

   4      —          (10,214

Payment for assignment of loans

        —          (8,471

Purchase of property and equipment

        (10,972     (66,032

Purchase of intangible assets

        (1,453     (14,799

Loans issued

        (11,262     (11,325

Repayment of loans issued

        4,321        720   

Purchase of debt instruments

        (1,499,952     (706,846

Proceeds from settlement of debt instruments

        979,316        1,242,313   
     

 

 

   

 

 

 

Net cash flow used in/generated from investing activities

        (540,002     425,346   
     

 

 

   

 

 

 

Cash flows generated from financing activities

       

Exercise of options

        —          5,168   

Proceeds from borrowings

        8,870        336,206   

Repayment of borrowings

        —          (672
     

 

 

   

 

 

 

Net cash flow generated from financing activities

        8,870        340,702   
     

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        2,260        747   
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (4,996,164     (3,509,239

Cash and cash equivalents at the beginning of the period

   8      9,943,160        11,636,913   
     

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   8      4,946,996        8,127,674   
     

 

 

   

 

 

 

The accompanying notes form an integral part of these interim condensed consolidated financial statements.

 

4


QIWI plc

Interim condensed consolidated statement of changes in equity

March 31, 2014

(in thousands of rubles, except per share data)

 

          Attributable to equity holders of the parent              
          Share capital                                            
    Notes     Number of
shares

issued and
outstanding
    Amount     Additional
paid-in
capital
    Other
reserves
    Retained
earnings
    Translation
reserve
    Total     Non-
controlling
interests
    Total
equity
 

Balance as of December 31, 2013 (audited)

      52,118,794        907        1,876,104        337,254        573,604        10,757        2,798,626        (94,766     2,703,860   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      —          —          —          —          704,335        —          704,335        (16,158     688,177   

Foreign currency translation

      —          —          —          —          —          5,788        5,788        (8,800     (3,012
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —          —          —          —          704,335        5,788        710,123        (24,958     685,165   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share-based payments

    22        —          —          —          78,933        —          —          78,933        —          78,933   

Exercise of options

      86,882        2        —          5,168        —          —          5,170        —          5,170   

Dividends to non-controlling interest

    17        —          —          —          —          —          —          —          (2,170     (2,170
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2014 (unaudited)

      52,205,676        909        1,876,104        421,355        1,277,939        16,545        3,592,852        (121,894     3,470,958   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes form an integral part of these interim condensed consolidated financial statements.

 

5


QIWI plc

Interim condensed consolidated statement of changes in equity (continued)

 

          Attributable to equity holders of the parent              
          Share capital                                            
    Notes     Number of
shares

issued and
outstanding
    Amount     Additional
paid-in
capital
    Other
reserves
    Retained
earnings
    Translation
reserve
    Total     Non-
controlling
interests
    Total
equity
 

Balance as of December 31, 2012 (audited)

      52,000,000        904        1,876,104        101,124        569,317        705        2,548,154        (49,311     2,498,843   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

      —          —          —          —          365,334        —          365,334        (11,672     353,662   

Foreign currency translation

      —          —          —          —          —          (1,359     (1,359     (748     (2,107
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —          —          —          —          365,334        (1,359     363,975        (12,420     351,555   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share-based payments

      —          —          —          77,683        —          —          77,683        —          77,683   

Dividends (5.69 per share)

    17        —          —          —          —          (296,000     —          (296,000     —          (296,000

Dividends to non-controlling interest

    17        —          —          —          —          —          —          —          (2,099     (2,099
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2013 (unaudited)

      52,000,000        904        1,876,104        178,807        638,651        (654     2,693,812        (63,830     2,629,982   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes form an integral part of these interim condensed consolidated financial statements.

 

6


QIWI plc

Notes to interim condensed consolidated financial statements

March 31, 2014

(in thousands of rubles, except per share data)

 

1. Corporate Information and description of business

The interim condensed consolidated financial statements of QIWI plc, formerly QIWI Limited prior to December 31, 2012 when the company’s name was changed, (hereinafter “the Company”) and its subsidiaries (collectively “the Group”) for the three months ended March 31, 2014 were authorized for issue on May 15, 2014.

The Company QIWI plc was registered on February 26, 2007 as a limited liability Company OE Investment in Cyprus under the Cyprus Companies Law, Cap. 113. The registered office of the Company is 12-14 Kennedy Avenue, Kennedy Business Centre, 2nd Floor, office 203 P.C.1087, Nicosia, Cyprus. On September 13, 2010 the directors of the Company resolved to change the name of the Company from OE Investments Limited to QIWI Limited.

The Group operates electronic online payment systems in Russia, Kazakhstan, Moldova, Belarus, Romania, United States of America (USA), United Arabic Emirates (UAE) and other countries, sells electronic payment kiosks and maintains banking activity supporting processing of payments.

None of the direct or indirect shareholders has control over the Company. Therefore there is no ultimate parent for the Group.

Information on the Company’s principal subsidiaries is disclosed in Note 3.

 

2. Principles underlying preparation of interim condensed consolidated financial statements

 

a) Basis of preparation and accounting policies

The interim condensed consolidated financial statements for the three months ended March 31, 2014 have been prepared in accordance with IAS 34.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements as of December 31, 2013.

The consolidated financial statements are prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value. The consolidated financial statements are presented in Russian rubles (“RUB”) and all values are rounded to the nearest thousand (RUB (000)) except when otherwise indicated.

 

7


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

2. Principles underlying preparation of interim condensed consolidated financial statements (continued)

 

b) Adoption of new and amended IFRS and IFRIC

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended December 31, 2013, except for the adoption of the following new and amended IFRS and IFRIC interpretations as of January 1, 2014, none of which had a material impact on the Group’s financial position or results of operations:

 

Standard

  

Content of change

  

Effect

IAS 36 Recoverable Amount Disclosures for Non-Financial Assets    These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which impairment loss has been recognized or reversed during the period.    The Group has not provided any additional disclosures in the interim condensed financial statements. The full disclosures will be included into annual consolidated financial statements for the year 2014.
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities    These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss.    The changes did not have any significant effect on the Company’s financial position or financial results.
IAS 32 Offsetting Financial Assets and Financial Liabilities    These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting.    The changes did not have any significant effect on the Company’s financial position or financial results.
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting    These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.    The changes did not have any significant effect on the Company’s financial position or financial results.
IFRIC 21 Levies   

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached.

   The changes did not have any significant effect on the Company’s financial position or financial results.

 

8


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

2. Principles underlying preparation of interim condensed consolidated financial statements (continued)

 

c) Standards issued by the IASB but not yet effective and not yet adopted by EU

Standards issued but not yet effective up to the date of issuance of the Company’s financial statements and not yet endorsed in EU are listed below. This listing of standards and interpretations issued are those that the Company reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Company intends to adopt these standards when they become effective.

 

Standard

  

Content of change

  

Impact and effective date

IFRS 9

Financial Instruments: Classification and Measurement

  

IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets.

 

   The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Company’s financial assets, but will likely have no impact on classification and measurements of financial liabilities. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.
Hedge accounting   

The amendments introduced a new hedge accounting model, together with corresponding disclosures about risk management activity for those applying hedge accounting. The new model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in their financial statements. The most significant improvements apply to those that hedge non-financial risk, and so these improvements are expected to be of particular interest to non-financial institutions.

 

  
Own credit    As part of the amendments, the changes introduced also enable entities to change the accounting for liabilities that they have elected to measure at fair value, before applying any of the other requirements in IFRS 9. This change in accounting would mean that gains caused by a worsening in an entity’s own credit risk on such liabilities are no longer recognised in profit or loss. These amendments will facilitate earlier application of this long-awaited improvement to financial reporting.   

 

9


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

2. Principles underlying preparation of interim condensed consolidated financial statements (continued)

 

(c) Standards issued by the IASB but not yet effective and not yet adopted by EU (continued)

 

Standard

  

Content of change

  

Impact and effective date

IFRS 14

Regulatory Deferral Accounts

   IFRS 14 allows rate-regulated entities to continue recognising regulatory deferral accounts in connection with their first-time adoption of IFRS. Existing IFRS preparers are prohibited from adopting this standard. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate regulation and the effects of that rate regulation on its financial statements.    The Company does not expect the amendments to have a material impact on its future financial statements.

IAS 19

Employee Benefits entitled Defined Benefit Plans: Employee Contributions

   These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service.    The Company does not expect the amendments to have a material impact on its future financial statements.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2010-2012 Cycle is a collection of amendments to IFRSs in response to eight issues addressed during the 2010-2012 cycle for annual improvements to IFRSs. It includes the following amendments:

 

  IFRS 2 Share-based Payment: Definition of vesting condition.

 

  IFRS 3 Business Combinations: Accounting for contingent consideration in a business combination.

 

  IFRS 8 Operating Segments: Aggregation of operating segments.

 

  IFRS 8 Operating Segments: Reconciliation of the total of the reportable segments’ assets to the entity’s assets.

 

  IFRS 13 Fair Value Measurement: Short-term receivables and payables.

 

  IAS 16 Property, Plant and Equipment: Revaluation method – proportionate restatement of accumulated depreciation.

 

  IAS 24 Related Party Disclosures: Key management personnel.

 

  IAS 38 Intangible Assets: Revaluation method – proportionate restatement of accumulated amortization.

 

10


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

2. Principles underlying preparation of interim condensed consolidated financial statements (continued)

 

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle is a collection of amendments to IFRSs in response to four issues addressed during the 2011-2013 cycle. It includes the following amendments:

 

  IFRS 1 First-time Adoption of International Financial Reporting Standards: Meaning of ‘effective IFRSs’.

 

  IFRS 3 Business Combinations: Scope exceptions for joint ventures.

 

  IFRS 13 Fair Value Measurement: Scope of paragraph 52 (portfolio exception).

 

  IAS 40 Investment Property: Clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.

The changes did not have any significant effect on the Company’s financial position or financial results.

 

3. Consolidated subsidiaries

The interim condensed consolidated IFRS financial statements include the assets, liabilities and financial results of the Company and its subsidiaries. The subsidiaries are listed below:

 

          Ownership interest  

Subsidiary

  

Main activity

   As of
December 31,
2013
    As of
March 31,
2014
 

ZAO QIWI (Russia)

  

Operation of electronic payment kiosks

     100     100

ZAO QIWI-Service (Russia)

  

Corporate center of the Group

     100     100

ZAO QIWI Bank (Russia)

  

Maintenance of electronic payment systems

     100     100

OOO QIWI International Processing Services (Russia)

  

Operation of on-line payments

     100     100

QIWI Payment Services Provider Ltd (UAE)

  

Operation of electronic payment kiosks

     100     100

QIWI International Payment System LLC (USA)

  

Operation of electronic payment kiosks

     100     100

TOO OSMP (Kazakhstan)

  

Operation of electronic payment kiosks

     100     100

SOOO OSMP BEL (Belarus)

  

Operation of electronic payment kiosks

     51     51

SP OOO OSMP-M (Moldova)

  

Operation of electronic payment kiosks

     51     51

RO SRL United System of Instant Payments Ltd (Romania)

  

Operation of electronic payment kiosks

     51     51

IT Billion LLC (USA)

  

Operation of electronic payment kiosks

     50.5     50.5

QIWI USA LLC (USA)

  

Operation of electronic payment kiosks

     50.5     50.5

QIWI WALLET EUROPE SIA (Latvia)

  

Operation of electronic payment kiosks

     100     100

K5 Retail LLC (Russia)

  

Sublease of space for electronic payment kiosks in Russia

     100     100

Blestgroup Enterprises Ltd (Cyprus)

  

Sublease of space for electronic payment kiosks in Russia

     100     100

 

11


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

4. Investment in associates

The Group has the following associates:

 

          Ownership interest  

Associate

  

Main activity

   As of
December 31,
2013
    As of
March 31,
2014
 

QIWI Jordan Ltd. Co. (Hashemite Kingdom of Jordan)

  

Operation of electronic payment kiosks in Jordan

     49     49

QIWI BRASIL TECNOLOGIA DE CAPTURA E PROCESSAMENTO DE TRANSAÇÕES LTDA (Brazil)

  

Operation of electronic payment kiosks in Brazil

     29.57     29.57

The Group’s interest in associates is accounted for using the equity method in the consolidated financial statements. The following table illustrates summarized financial information of the Group’s investment in its individually insignificant associates:

 

     As of
December 31,
2013
    As of
March 31,
2014
 

Share of the associates’ statement of financial position:

    

Current assets

     12,301        9,646   

Non-current assets

     16,071        19,520   

Current liabilities

     (9,695     (9,140

Non-current liabilities

     (44,977     (53,637
  

 

 

   

 

 

 

Net liabilities

     (26,300     (33,611

Unrecognized share of losses of associates

     26,300        26,300   

Contribution to associates without a corresponding change in ownership

     —          10,214   

Impairment of investment in associates

     —          (2,903
  

 

 

   

 

 

 

Carrying amount of investment in associates

     —          —     
  

 

 

   

 

 

 

Share of the associates’ revenue and net loss for the three months ended March 31, 2014 and 2013:

    

Revenue

     84,395        653   

Share of net loss (unrecognized share of loss for three months ended March 31, 2014 and 2013: 0)

     (7,691     (7,311

Movements in investments in associates for the three months ended March 31, 2014 and 2013 are presented below:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Investment in associates as of January 1

     100,436        —     

Contribution to associates without a corresponding change in ownership

     —          10,214   

Impairment of investment in associates

     —          (2,903

Share in net losses of associates

     (7,691     (7,311
  

 

 

   

 

 

 

Investment in associates as of March 31

     92,745        —     
  

 

 

   

 

 

 

 

12


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

5. Operating segments

In reviewing the operational performance of the Group and allocating resources, the chief operating decision maker of the Group (CODM), who is the Croup’s CEO and, prior to the appointment of the CEO, was the board of directors of the Group, reviews selected items of segment’s statement of comprehensive income.

The financial data is presented on a combined basis for all key subsidiaries and associates representing the segment net revenue, segment profit before tax and segment net income. The Group measures the performance of its operating segment by monitoring: segment net revenue, segment profit before tax and segment net income. Segment net revenue is a measure of profitability defined as the segment revenues less segment direct costs, which include the same items as the “Cost of revenue (exclusive of depreciation and amortization)” as reported in the Group’s consolidated statement of comprehensive income, except for payroll costs. Payroll costs are excluded because, although required to maintain the Group’s distribution network, they are not linked to payment volume.

Management reporting is different from IFRS, because it does not include certain IFRS adjustments which are not analyzed by the chief operating decision maker in assessing the core operating performance of the business. Such adjustments affect such major areas as deferred taxation, business combinations, offering expenses, share-based payments and fair value adjustments and amortization thereof, impairment, as well as nonrecurring items.

Change in presentation of segments in 2014

The development of the business has resulted in the growing interconnectedness and interrelation between QIWI Wallet and QIWI Distribution segments. As a result since January 1, 2014 the Group does not separate QD, VQW and “Corporate and other” segments in the presentation of operating results to CODM. From January 1, 2014, the review and analysis is performed by the management of the Group based on segment net revenue, segment profit before tax and segment net income for the whole Group to develop the understanding of the Group’s business.

The respective comparative information for 2013 was presented accordingly to conform to the current year segment presentation.

The segments’ statement of comprehensive income for the three months ended March 31, 2014 and 2013, as presented to the CODM are presented below:

 

     Three months ended  
     March 31, 2013
(restated)
     March 31, 2014  

Segment net revenue

     1,283,646         1,877,230   
  

 

 

    

 

 

 

Segment profit before tax

     592,821         978,891   
  

 

 

    

 

 

 

Segment net income

     455,511         784,610   
  

 

 

    

 

 

 

Segment net revenue, as presented to the CODM, for the three months ended March 31, 2014 and 2013 is calculated as follows:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Revenue under IFRS

     2,532,696        3,259,462   

Cost of revenue (exclusive of depreciation and amortization)

     (1,476,430     (1,688,133

Payroll and related taxes

     227,380        305,901   
  

 

 

   

 

 

 

Total segment net revenue, as presented to CODM

     1,283,646        1,877,230   
  

 

 

   

 

 

 

 

13


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

5. Operating segments (continued)

 

Change in presentation of segments in 2014 (continued)

 

A reconciliation of segment profit before tax to IFRS consolidated net profit before tax of the Group, as presented to the CODM, for the three months ended March 31, 2014 and 2013, is presented below:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Total segment net profit before tax, as presented to CODM

     592,821        978,891   

Amortization of fair value adjustments to intangible assets recorded on acquisitions and related impairment

     (5,545     (21,868

Offering expenses

     (19,623     —     

Share-based payments

     (77,683     (78,934
  

 

 

   

 

 

 

Consolidated profit before tax from continuing operations under IFRS

     489,970        878,089   
  

 

 

   

 

 

 

A reconciliation of segment net profit to IFRS consolidated net profit of the Group, as presented to the CODM, for the three months ended March 31, 2014 and 2013, is presented below:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Total segment net profit, as presented to CODM

     455,511        784,610   

Amortization of fair value adjustments to intangible assets recorded on acquisitions and related impairment

     (5,545     (21,868

Offering expenses

     (19,623     —     

Share-based payments

     (77,683     (78,934

Effect from taxation of the above items

     1,002        4,369   
  

 

 

   

 

 

 

Consolidated net profit under IFRS

     353,662        688,177   
  

 

 

   

 

 

 

Geographic information

Revenues from external customers are presented below:

 

     Three months ended  
     March 31, 2013      March 31, 2014  

Russia

     2,169,396         2,671,814   

Kazakhstan

     184,756         136,245   

Other

     178,544         451,403   
  

 

 

    

 

 

 

Total revenue per consolidated income statement

     2,532,696         3,259,462   
  

 

 

    

 

 

 

Revenue is recognized according to merchants’ place.

The Group does not have any single external customer amounting to 10% or greater of Group’s revenue from continuing operations both in three months ended March 31, 2014 and in three months ended March 31, 2013.

 

14


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

5. Operating segments (continued)

 

Geographic information (continued)

 

The Group allocates non-current assets by geographical region based on the principal country of major operations of a particular legal entity within the Group:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Russia

     2,695,778         2,684,011   

Kazakhstan and other

     17,367         18,037   
  

 

 

    

 

 

 

Non-current assets

     2,713,145         2,702,048   
  

 

 

    

 

 

 

Non-current assets for this purpose consist of property and equipment, intangible assets and goodwill.

 

6. Long-term and short-term loans

As of March 31, 2014, the provision for impairment of loans movement was the following:

 

     Provision for
impairment of
loans as of
December 31,
2013
    Charge for the
period
    Write offs      Provision for
impairment of
loans as of
March 31, 2014
 

Loans due from credit institutions

     (3,448     —          —           (3,448

Short term loans and due from legal entities

     (117,306     (4,560     —           (121,866
  

 

 

   

 

 

   

 

 

    

 

 

 

Total short-term loans

     (120,754     (4,560     —           (125,314
  

 

 

   

 

 

   

 

 

    

 

 

 

As of March 31, 2013, the provision for impairment of loans movement was the following:

 

     Provision for
impairment of
loans as of
December 31,
2012
    Charge for the
period
    Write offs      Provision for
impairment of
loans as of
March 31, 2013
 

Loans due from credit institutions

     (3,448     —          —           (3,448

Short term loans and due from to individuals

     (106     —          —           (106

Short term loans and due from legal entities

     (60,000     (1,432     —           (61,432
  

 

 

   

 

 

   

 

 

    

 

 

 

Total short-term loans

     (63,554     (1,432     —           (64,986
  

 

 

   

 

 

   

 

 

    

 

 

 

 

15


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

6. Long-term and short-term loans (continued)

 

The following table demonstrates due dates of the Group’s loans issued including interest accrued as of March 31, 2014 and December 31, 2013:

 

     On demand
and
< 1 month
     1-6 months      6-12 months      >1 year*      Total  

Loans receivable as of December 31, 2013

     5,395         55,345         4,690         10,637         76,067   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans receivable as of March 31, 2014

     2,601         52,320         5,267         24,177         84,365   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Most part of loans receivable in more than one year expected to be repaid by the end of 2016.

 

7. Trade and other receivables

As of March 31, 2014, trade and other receivables consisted of the following:

 

     Total as of
March 31,
2014
     Provision for
impairment of
receivables
    Net as of
March 31,
2014
 

Cash receivable from agents

     1,567,170         (483,209     1,083,961   

Deposits issued to merchants

     762,273         (6,229     756,044   

Payment processing fees receivable from merchants

     128,103         (1,247     126,856   

Receivables for advertising

     82,071         (24,305     57,766   

Advances issued to vendors

     46,802         (2,580     44,222   

Rent receivables

     60,192         (21,155     39,037   

Other receivables and advances

     63,369         (5,853     57,516   
  

 

 

    

 

 

   

 

 

 

Total trade and other receivables

     2,709,980         (544,578     2,165,402   
  

 

 

    

 

 

   

 

 

 

As of December 31, 2013, trade and other receivables consisted of the following:

 

     Total as of
December 31,
2013
     Provision for
impairment of
receivables
    Net as of
December 31,
2013
 

Cash receivable from agents

     932,541         (448,042     484,499   

Deposits issued to merchants

     1,945,370         (6,223     1,939,147   

Payment processing fees receivable from merchants

     150,561         (1,080     149,481   

Receivables for advertising

     74,730         (24,083     50,647   

Advances issued to vendors

     42,763         (1,726     41,037   

Rent receivables

     71,271         (5,459     65,812   

Other receivables and advances

     46,594         (4,920     41,674   
  

 

 

    

 

 

   

 

 

 

Total trade and other receivables

     3,263,830         (491,533     2,772,297   
  

 

 

    

 

 

   

 

 

 

 

16


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

7. Trade and other receivables (continued)

 

Trade receivables aged but not impaired as of March 31, 2014 are presented below:

 

            Ageing of receivables (days)  

As of March 31, 2014

   Total      <30      30-60      60-90      90-180      180-360      >360  

Cash receivable from agents

     1,083,961         1,069,371         8,102         3,969         2,089         71         359   

Payment processing fees receivable from merchants

     126,856         109,182         16,512         —           1,131         —           31   

Receivables for advertising

     57,766         32,796         23,278         —           1,508         184         —     

Rent receivables

     39,037         19,101         18,409         468         1,059         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total receivables ageing

     1,307,620         1,230,450         66,301         4,437         5,787         255         390   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trade receivables aged but not impaired as of December 31, 2013 are presented below:

 

            Ageing of receivables (days)  

As of December 31, 2013

   Total      <30      30-60      60-90      90-180      180-360      >360  

Cash receivable from agents

     484,499         447,640         16,474         2,140         13,330         4,722         193   

Payment processing fees receivable from merchants

     149,481         120,527         28,418         307         227         —           2   

Receivables for advertising

     50,647         18,295         19,714         8,956         3,682         —           —     

Rent receivables

     65,812         25,599         22,384         6,417         11,380         32         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total receivables ageing

     750,439         612,061         86,990         17,820         28,619         4,754         195   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

For the three months ended March 31, 2014, the provision for impairment of receivables movement was the following:

 

     Provision for
impairment of
receivables as
of December 31,
2013
    Charge for the
period
    Write offs     Provision for
impairment of
receivables as
of March 31,
2014
 

Cash receivable from agents

     (448,042     (35,769     602        (483,209

Deposits issued to merchants

     (6,223     (48     42        (6,229

Payment processing fees receivable from merchants

     (1,080     (209     42        (1,247

Receivables for advertising

     (24,083     (276     54        (24,305

Advances issued to vendors

     (1,726     (857     3        (2,580

Rent receivables

     (5,459     (15,703     7        (21,155

Other receivables and advances

     (4,920     (885     (48     (5,853
  

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for impairment of receivables

     (491,533     (53,747     702        (544,578
  

 

 

   

 

 

   

 

 

   

 

 

 

 

17


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

7. Trade and other receivables (continued)

 

For the three months ended March 31, 2013, the provision for impairment of receivables movement was the following:

 

     Provision for
impairment of
receivables as
of December 31,
2012
    Charge for the
period
    Write offs     Provision for
impairment of
receivables as of
March 31,

2013
 

Cash receivable from agent

     (288,017     (50,152     6,487        (331,682

Deposits issued to merchants

     (5,296     130        3        (5,163

Payment processing fees receivable from merchants

     (1,352     112        (36     (1,276

Receivables for advertising

     (16,361     (365     —          (16,726

Advances issued to vendors

     (3,026     984        153        (1,889

Rent receivables

     (3,701     (1,937     (346     (5,984

Other receivables and advances

     (3,804     752        (47     (3,099
  

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for impairment of receivables

     (321,557     (50,476     6,214        (365,819
  

 

 

   

 

 

   

 

 

   

 

 

 

Receivables are non-interest bearing and credit terms generally do not exceed 30 days. There is no requirement for collateral to receive credit. Interest of 18%-24% per annum is accrued on overdrafts granted to some agents.

 

8. Cash and cash equivalents

As of March 31, 2014 and December 31, 2013, cash and cash equivalents consisted of the following:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Correspondent accounts with Central Bank of Russian Federation (CB RF)

     656,488         312,401   

Correspondent accounts with other banks

     6,606,561         6,002,003   

Short-term CB RF deposits

     1,500,000         —     

Other short-term bank deposits

     2,389,619         1,229,523   

RUB denominated cash with banks and on hand

     267,855         225,066   

Foreign currency denominated cash with banks and on hand

     216,390         358,681   
  

 

 

    

 

 

 

Total cash and cash equivalents

     11,636,913         8,127,674   
  

 

 

    

 

 

 

Cash and short-term investments are placed in financial institutions or financial instruments, which are considered at the time of deposit to have minimal risk of default.

 

18


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

9. Other non-current and current assets

As of March 31, 2014 and December 31, 2013, other non-current assets consisted of the following:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Lease deposit

     28,745         28,745   

Other

     9,649         9,869   
  

 

 

    

 

 

 

Total other non-current assets

     38,394         38,614   
  

 

 

    

 

 

 

As of March 31, 2014 and December 31, 2013, other current assets consisted of the following:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Reserves at CB RF*

     108,695         133,114   

Inventories

     19,004         18,405   

Prepaid expenses

     30,981         37,235   

Other

     584         490   
  

 

 

    

 

 

 

Total other current assets

     159,264         189,244   
  

 

 

    

 

 

 

 

* Banks are currently required to post mandatory reserves with the CB RF to be held in non-interest bearing accounts. Starting from March 1, 2013, such mandatory reserves established by the CBR constitute 4.25% for all liabilities. The amount is excluded from cash and cash equivalents for the purposes of cash flow statement and does not have a repayment date.

 

10. Borrowings

As of March 31, 2014, outstanding borrowings consisted of the following:

 

Short-term borrowings

   Effective
interest rate, %
    Maturity    As of
March 31, 2014
 

VTB overdraft facility agreement

     10.3   December 2014      315,000   

Bank overdrafts (U.S.$9,706)

     0   On demand      805   
       

 

 

 

Total short-term borrowings

          315,805   
       

 

 

 

Long-term borrowings

   Effective
interest rate, %
    Maturity    As of
March 31, 2014
 

Due to non-controlling shareholders of subsidiaries (U.S.$2,837,296 and €214,257)

     10%-10.5%      August 2015 –
December 2016
     132,789   

Other Borrowings (U.S.$ 269,450)

     10%      November-
December 2016
     9,771   
       

 

 

 

Total long-term borrowings

          142,560   
       

 

 

 

 

19


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

10. Borrowings (continued)

 

Repayments of long-term and short-term borrowings beginning on April 1, 2014, including interest are as follows:

 

April 1, 2014 – March 31, 2015

     326,929   

April 1, 2015 – March 31, 2016

     112,965   

April 1, 2016 – December 31, 2016

     40,970   
  

 

 

 

Total repayment

     480,864   

Less interest

     22,965   
  

 

 

 

Total repayment less interest

     457,899   
  

 

 

 

As of December 31, 2013, outstanding borrowings consisted of the following:

 

Short-term borrowings

   Effective
interest rate, %
    Maturity    As of
December 31,
2013
 

Bank overdrafts

     0   On demand      635   
       

 

 

 

Total short-term borrowings

          635   
       

 

 

 

Long-term borrowings

   Effective
interest rate, %
    Maturity    As of
December 31,
2013
 

Due to non-controlling shareholders of subsidiaries (U.S.$ 2,253,796 and €214,257)

     10.0-10.5%      August 2015 –
December 2016
     100,550   

Other Borrowings (U.S.$ 269,450)

     10.0%      November-
December 2016
     8,801   
       

 

 

 

Total long-term borrowings

          109,351   
       

 

 

 

On September 27, 2013 ZAO QIWI entered into a short-term ruble overdraft facility agreement with bank VTB for an overdraft up to 85,000 with a commitment fee payable on the total amount of the facility of 0.45% per annum, and interest payable on amounts drawn and outstanding at 10.3%. The credit facility is available for 335 days and to be settled within 365 days. Interest on the outstanding credit facility can be increased by 1% if a monthly turnover of overdraft does not exceed the average outstanding loan plus 800,000. The overdraft facilities contain covenants, mainly related to maintaining certain level of revenue, profitability, debt, as well as contractual relationships with the three largest Russian mobile operators as service providers, and maintaining liquidity at QIWI Bank. The overdraft facility is guaranteed by the CEO of the Group. There are no amounts drawn and outstanding under this overdraft facility at any reporting dates presented in these financial statements.

On December 31, 2013 ZAO QIWI entered into a short-term ruble overdraft facility agreement with bank VTB for an overdraft up to 315,000 with a commitment fee payable on the total amount of the facility of 0.45% per annum, and interest payable on amounts drawn and outstanding at 10.3%. The credit facility is available for 335 days and to be settled within 365 days. Interest on the outstanding credit facility can be increased by 1% if a monthly turnover of overdraft does not exceed the average outstanding loan plus 950,000. The overdraft facilities contain covenants, mainly related to maintaining certain level of revenue, profitability, debt, as well as contractual relationships with the three largest Russian mobile operators as service providers, and maintaining liquidity at QIWI Bank. The overdraft facility is guaranteed by the CEO of the Group. There is an outstanding amount under this overdraft facility as of March 31, 2014 – 315,000.

 

20


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

11. Trade and other payables

As of March 31, 2014 and December 31, 2013, the Group’s accounts payable and other payables consisted of the following:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Payables to merchants

     3,305,537         4,452,142   

Deposits received from agents

     9,203,947         2,347,383   

Deposits received from individual customers

     3,147,674         3,205,635   

Payment processing fees payable to agents

     545,043         403,257   

Accrued expenses

     170,542         208,921   

Payables to vendors

     351,102         408,174   

Payables for rent

     22,577         32,110   

Payables to employees

     18,747         61,297   

Other advances received

     3,804         3,495   
  

 

 

    

 

 

 

Total trade and other payables

     16,768,973         11,122,414   
  

 

 

    

 

 

 

 

12. Amounts due to customers and amounts due to banks

As of March 31, 2014 and December 31, 2013, amounts due to customers and amounts due to banks consisted of the following:

 

     As of
December 31,
2013
     As of
March 31,
2014
 

Due to banks

     95,977         7,678   

Due to customers: individuals

     285,440         357,957   

Due to customers: legal entities

     449,809         393,123   
  

 

 

    

 

 

 

Total amounts due to customers and amounts due to banks

     831,226         758,758   
  

 

 

    

 

 

 

Amounts due to customers and amounts due to banks bear the interest up to 1% and are due on demand.

 

13. Property and equipment

During the three months ended March 31, 2014, the Group acquired assets with a cost of 40,009 (three months ended March 31, 2013: 10,972). The main additions were processing servers and engineering equipment.

As of March 31, 2014 the Group did not identify any indicators of property and equipment impairment.

 

14. Revenue

 

     Three months ended  
     March 31, 2013      March 31, 2014  

Payment processing fees

     2,136,538         2,755,600   

Revenue from advertising

     133,374         72,345   

Interest revenue from agent’s overdrafts

     54,522         43,204   

Interest revenue and gain from currency swaps

     86,003         123,220   

Revenue from rent of space for kiosks

     14,684         72,912   

Cash and settlement services

     89,137         172,327   

Other revenue

     18,438         19,854   
  

 

 

    

 

 

 

Total revenue

     2,532,696         3,259,462   
  

 

 

    

 

 

 

 

21


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

14. Revenue (continued)

 

For the purposes of consolidated cash flow statement, “Interest expense/(income), net” consists of the following:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Interest income classified as part of revenue

     (86,003     (123,220

Gain from currency swaps classified as part of revenue

     —          49,627   

Interest income from non-banking loans classified separately in the consolidated statement of comprehensive income

     (4,147     (712

Interest expense

     6,253        10,572   
  

 

 

   

 

 

 

Interest income, net, for the purposes of consolidated cash flow statement

     (83,897     (63,733
  

 

 

   

 

 

 

 

15. Cost of revenue (exclusive of depreciation and amortization)

 

     Three months ended  
     March 31, 2013      March 31, 2014  

Transaction costs

     1,184,788         1,266,403   

Compensation to employees and related taxes

     227,380         305,901   

Advertising commission

     23,092         12,482   

Cost of rent of space for kiosks

     6,607         37,176   

Other expenses

     34,563         66,171   
  

 

 

    

 

 

 

Total cost of revenue (exclusive of depreciation and amortization)

     1,476,430         1,688,133   
  

 

 

    

 

 

 

 

16. Selling, general and administrative expenses

 

     Three months ended  
     March 31, 2013      March 31, 2014  

Compensation to employees and related taxes

     331,107         317,977   

Rent of premises and related utility expenses

     39,263         55,009   

Bad debt expense

     51,908         62,435   

Office maintenance expenses

     24,478         35,821   

Telecommunication and internet expenses

     9,656         9,172   

Travelling and representation expenses

     10,947         12,298   

Advertising and related expenses

     7,447         7,409   

Professional fees

     4,511         39,346   

Other tax expenses

     26,416         16,450   

Bank services

     2,324         2,434   

Offering expenses

     19,623         —     

Other operating expenses

     15,226         23,837   
  

 

 

    

 

 

 

Total selling, general and administrative expenses

     542,906         582,188   
  

 

 

    

 

 

 

 

22


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

17. Dividends paid and proposed

Dividends paid and proposed by the Group are presented below:

 

     Three months ended  
     March 31, 2013      March 31, 2014  

Proposed, declared and approved during the period:

     

(Three months ended March 31, 2013: Final dividend for 2012: 296,000 or 5.69 per share.)

     296,000         —     

Paid during the period:

     —           —     

Proposed for approval (not recognized as a liability as of March 31):

     

Three months ended March 31, 2014: Final dividend for 2013: U.S.$ 16,700,349 or U.S.$ 0.32 per share.

     

Interim dividend for 2014: U.S.$ 15,139,646 or U.S.$ 0.29 per share.

     

(Three months ended March 31, 2013: Interim dividend for 2013: U.S.$ 2,125,000 or 0.04 per share.)

     65,967         1,136,277   

Dividends payable as of March 31

     296,000         —     

During the three months ended March 31, 2014, SP OOO OSMP-M (Moldova) proposed and declared dividends to non-controlling shareholders in the amount of 2,170. Dividends payable as of March 31, 2014, relates to dividends payable by QIWI Bank and SP OOO OSMP-M (Moldova) to non-controlling shareholders in the amount of 21 and 2,170 accordingly.

During the three months ended March 31, 2013, SP OOO OSMP-M (Moldova) proposed dividends to non-controlling shareholders in the amount of 2,099. Dividends payable as of March 31, 2013, relates to dividends payable by OOO OSMP-M (Moldova) to non-controlling shareholders in the amount of 2,099 and dividends payable by QIWI Bank to non-controlling shareholders in the amount of 7.

 

     Dividend payable as of  
     March 31, 2013      March 31, 2014  

Total amount of dividends payable to shareholders and non-controlling shareholders

     298,106         2,191   

The Company itself is a holding company, and majority of its consolidated earnings are earnings of its foreign subsidiaries. Earnings of its foreign subsidiaries are not easily distributable to the Company due to currency control restrictions, taxation of dividends and other restrictions.

 

18. Income tax

The Company is incorporated in Cyprus under the Cyprus Companies Law, but the business activity of the Group and its associates is subject to taxation in multiple jurisdictions, the most significant of which include:

Cyprus

Starting from January 1, 2013, the Company is subject to 12.5% corporate income tax applied to its worldwide income (prior to that it was 10%). Gains from the sale of securities/titles (including shares of companies) either in Cyprus or abroad are exempt from corporate income tax in Cyprus. Capital Gains Tax is levied at a rate of 20% on net profits from disposal of immovable property situated in Cyprus or of shares in companies which own immovable property situated in Cyprus (unless the shares are listed on a recognized stock exchange). Dividend income is unconditionally exempt from Income Tax. In certain cases dividends received from abroad may be subject to defence contribution at the rate of 20% for the year 2013 and 17% for 2014 and thereafter.

 

23


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

18. Income tax (continued)

 

Cyprus (continued)

 

Under certain conditions interest income may be subject to defence contribution at the rate of 30% (15% to April 29, 2013). In such cases this interest will be exempt from corporation tax.

The Russian Federation

The Company’s subsidiaries and associates incorporated in the Russian Federation are subject to corporate income tax at the standard rate of 20% applied to their taxable income. Withholding tax of 15% is applied to any dividends paid out of Russia, reduced to as low as 5% for some countries (including Cyprus), with which Russia has double-taxation treaties.

Kazakhstan

The Company’s subsidiaries incorporated in the Kazakhstan are subject to corporate income tax at the standard rate of 20% applied to their taxable income.

The major components of income tax in the interim consolidated statement of comprehensive income are:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Current income tax expense

     (157,068     (231,508

Deferred tax benefit

     20,760        41,596   
  

 

 

   

 

 

 

Income tax expense for the year

     (136,308     (189,912
  

 

 

   

 

 

 

Theoretical and actual income tax expense is reconciled as follows:

 

     Three months ended  
     March 31, 2013     March 31, 2014  

Profit before tax

     489,970        878,089   

Theoretical income tax expenses at the Company’s tax rate of 12.5% (Cyprus)

     (61,246     (109,761

Increase resulting from the tax effect of:

    

Non-deductible expense and not recognized income

     (22,012     (20,702

Tax on dividends

     (22,487     (16,045

Effect of income of subsidiaries taxed at different rates

     (27,972     (21,165

Unrecognized tax assets

     (2,591     (22,239
  

 

 

   

 

 

 

Income tax expense

     (136,308     (189,912
  

 

 

   

 

 

 

During the three months ended March 31, 2014 and 2013 the Group does not recognize deferred tax assets related to tax loss carry forward in the amount of 22,239 (three months 2013 – 2,591) mostly in Romania, K5 and QIWI USA because the Group does not believe that the realization of the related deferred tax assets is probable.

 

24


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

19. Commitments, contingencies and operating risks

Operating environment

Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the government.

The Russian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. The global financial crisis has resulted in uncertainty regarding further economic growth, availability of financing and cost of capital, which could negatively affect the Group’s future financial position, results of operations and business prospects.

Management believes it is taking appropriate measures to support the sustainability of the Group’s business in the current circumstances.

Taxation

Russian and the CIS’s tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities. Recent events within Russia and the CIS suggest that the tax authorities are taking a more assertive position in its interpretation of the legislation and assessments and as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged.

Due to its international structure, the Group is subject to permanent establishment and transfer pricing risks in various jurisdictions it operates in. The Group manages the related risks by looking at its management functions and risks in various countries and level of profits allocated to each subsidiary. If additional taxes are assessed with respect to these matters, they may be material. The new Russian transfer pricing legislation, which came into force on January 1, 2012, allows the Russian tax authority to apply transfer pricing adjustments and impose additional profits tax liabilities in respect of all “controlled” transactions if the transaction price differs from the market level of prices. The list of “controlled” transactions includes transactions performed with related parties and certain types of cross-border transactions. The Group will determine its tax liabilities arising from “controlled” transactions using actual transaction prices. Due to the uncertainty and absence of current practice of application of the current Russian transfer pricing legislation the Russian tax authorities may challenge the level of prices applied by the Group under the “controlled” transactions and accrue additional tax liabilities unless the Group is able to demonstrate the use of market prices with respect to the “controlled” transactions, and that there has been proper reporting to the Russian tax authorities, supported by appropriate available transfer pricing documentation.

The Group’s operations and financial position will continue to be affected by Russia and the CIS political developments, including the application and interpretation of existing and future legislation and tax regulations. Such possible occurrences and their effect on the Group could have a severe impact on the Group’s operations or its financial position in Russia and the CIS.

While management believes, it is taking appropriate measures to support the sustainability of the Group’s business in the current circumstances, unexpected further deterioration in the areas described above could negatively affect the Group’s results and financial position in a manner not currently determinable.

 

25


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

19. Commitments, contingencies and operating risks (continued)

 

Government regulation of the electronic payment systems, and advertising

In certain jurisdictions where the Group operates, the legislation on e-payments is not yet mature and is developing, and no assurance can be made that if such legislation is changed or the new legislation adopted it will be beneficial to the Group’s business. From time to time, the Group may also be subject to the investigations in the area of anti-money laundering by the regulatory authorities. The subject of investigation varies and may include alleged violations of the Russian law on advertising, in particular related to consents from the Group’s consumers for sending them SMS advertising messages. Historically, the penalties imposed on us as a result of such investigations were insignificant. In addition, the Group generally disputes them in the normal course of business, and expects to be able to resolve such disputes in Group’s favor. In addition, there is a lot of uncertainty regarding future legislation on taxation of e-payments, including in respect of the place of taxation. Subsequent legislation and regulation and interpretations thereof, litigation, court rulings, or other events could expose the Group to increased costs, liability and reputational damage that could have a material adverse effect on the Group’s business, financial condition and results of operations.

Starting from November 2013, certain mobile network operators introduced measures to limit the number of SMS delivered to their customers. These measures may substantially increase the fees for delivering SMS to the Group’s consumers, as well as limit the amount of such SMS delivered. As a consequence, the Group’s management expects that SMS advertising revenues may be materially negatively affected going forward.

Anti-Trust Investigation in Kazakhstan

In March 2012, Group’s subsidiary in Kazakhstan became subject to the anti-trust investigation conducted by the Competition Protection Agency of the Republic of Kazakhstan, or the Agency, concerning alleged abuse of its dominant electronic payment market position in this country. The maximum liability to which the Group can be exposed is a penalty equal to 10% of the revenue earned as a result of market abuse, plus confiscation of the full amount of such revenue. The maximum liability is determined in reference to not more than one year of such revenues. No fine has been levied as a result of the investigation, but the Agency has issued an order to rectify violations of the anti-trust legislation. The Group has complied with the orders and has taken actions to remedy applicable failures. The Group expects similar investigations by the Agency in future to recur, but cannot reliably estimate at this time the amounts of claims that can be brought against the Group in the future in connection with them.

In March 2014, Group’s subsidiary in Kazakhstan received a request from anti-trust authorities for information related to Group subsidiary’s business in the framework of analysis of the Kazakhstan market of payments for goods (works, services) through payment terminals. As of the date hereof the Group sent the information requested to the anti-trust authorities.

 

26


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

19. Commitments, contingencies and operating risks (continued)

 

Risk of cybersecurity breach

The Company stores and/or transmits sensitive data, such as credit or debit card numbers and mobile phone numbers, and the Company has ultimate liability to its consumers for the failure to protect this data. The Company has experienced breaches of its security by hackers in the past, and breaches could occur in the future. In such circumstances, the encryption of data and other protective measures have not prevented unauthorized access and may not be sufficient to prevent future unauthorized access. However, any future breach of the system, including through employee fraud, may subject the Company to material losses or liability, payables to other payment systems, fines and claims for unauthorized purchases with misappropriated credit or debit card information, identity theft, impersonation or other similar fraud claims. In addition, misuse of such sensitive data or a cybersecurity breach could result in claims, regulatory scrutiny and other negative consequences.

Insurance policies

The Group holds no insurance policies in relation to its assets, operations, or in respect of public liability or other insurable risks. There are no significant physical assets to insure. Management has considered the possibility of insurance of business interruption in Russia, but the cost of it outweighs the benefits in management’s view.

Legal proceedings

The Group has been and continues to be the subject of legal proceedings and adjudications from time to time, none of which has had, individually or in the aggregate, a material adverse impact on the Group. Management believes that the resolution of all business matters will not have a material impact on the Group’s financial position or operating results.

Cyprus issue

The Cyprus economy has been adversely affected from the crisis in the Cyprus banking system in conjunction with the inability of the Republic of Cyprus to borrow from international markets. As a result, the Republic of Cyprus entered into negotiations with the European Commission, the European Central Bank and the International Monetary Fund (the “Troika”), for financial support, which resulted into an agreement and the Eurogroup decision of March 25, 2013. The decision included the restructuring of the two largest banks in Cyprus Laiki Bank and Bank of Cyprus. During 2013 the Cyprus economy contracted further with a decrease in the Gross Domestic Product.

Following the positive outcome of the first, second and third quarterly reviews of Cyprus’s economic programme by the European Commission, the European Central Bank and the International Monetary Fund during 2013, the Eurogroup endorsed the disbursement of the scheduled tranches of financial assistance to Cyprus.

The Group’s assets domiciled in Cyprus are not significant, and on this basis the directors and management do not anticipate any material impact on the future recovery of the Group’s assets from the resolution of this issue.

 

27


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

19. Commitments, contingencies and operating risks (continued)

 

QIWI Bank issues

The legal meaning of the prepaid cards in accordance with the existing law is not clear, the Group used to consider them as a different form of payment not expressly provided but not prohibited by Russian law.

At the end of March, 2014 QIWI Bank received an opinion of the Bank of Russia on this issue according to which prepaid cards are classified as electronic payment instruments as the Bank of Russia presumes that there are no other forms of payments than expressly provided by law. The Group realizes that based on the aforesaid opinion, the Bank of Russia may further issue an instruction to rectify discovered violations. As a result QIWI Bank may be subject to fines and/or additional regulations which may impact QIWI Bank’s business and results of operations in the future.

Russian de-offshorization

Recent legislative initiatives in the context of Russia’s tax policies aimed at combating tax base erosion and profit shifting indicate that the level of potential risks associated with the operating structure and ownership structure of groups of companies may grow in the foreseeable future.

The initiatives include proposals to establish in law such international concepts and approaches as “taxation of controlled foreign companies”, “tax residence of organizations” and “actual recipient (owner) of income”. There are measures to increase the level of co-operation with foreign tax authorities and information exchange regarding the application of international double taxation treaties.

It is also expected that tougher administrative and criminal sanctions will be introduced for illegal capital export, tax evasion, and so on. Particular close attention will be paid to the disclosure of companies’ beneficiaries where there is access to State procurement orders, subsidies and other types of State support.

The establishment of such measures in law will have a significant impact on the conduct of business in Russia and may in the future result in additional tax risks for existing holding structures.

Operating lease commitments

The Group has commercial lease agreements of office buildings and kiosk places. The leases have an average life of between one (for kiosk places) and seven (for office buildings) years. Total lease expense for the three months ended March, 2014 is for rent of office places 49,977 (three months 2013 – 34,817) and for kiosk places rent 37,173 (three months 2013 – 6,607).

Future minimum lease rentals under non-cancellable operating lease commitments for office premises as of March 31, 2014 are as follows:

 

Within one year

     150,613   

After one year but not more than five years

     469,160   

More than five years

     135,989   

 

28


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

19. Commitments, contingencies and operating risks (continued)

 

Pledge of assets

As of March 31, 2014 the Group pledged debt instruments with the carrying amount of 400,000 (2013 – 400,000) as collateral for merchants, 1,136,653 (2013 – 1,083,574) as collateral for VTB bank guarantee issued to VISA and 509,007 (2013 – 462,732) as coverage for supporting its short-term overnight credit facility at CB RF.

 

20. Balances and transactions with related parties

The following table sets forth the total amount of transactions entered into with related parties for the three months ended March 31, 2014 and three months ended March 31, 2013, as well as balances with related parties as of March 31, 2014 and December 31, 2013:

 

Category of related party

   Amounts
owed by
related
parties
     Amounts
owed to
related
parties
    Cash due
to related
party
customers
 

As of March 31, 2014

       

Associates

     5,730         —          —     

Key management personnel of the entity or its parent, incl.:

       

Short-term benefits

     —           (9,474     —     

Other operations

     1,581         —          (298,474

Other related parties (A) (B)

     28,026         (406,927     (7,674

As of December 31, 2013

       

Associates

     5,255         —          —     

Key management personnel of the entity or its parent, incl.:

       

Short-term benefits

     —           (14,016     —     

Other operations

     1,581         —          (229,585

Other related parties (A) (B)

     30,186         (533,635     (3,828

 

29


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

20. Balances and transactions with related parties (continued)

 

Category of related party

   Sales to
related
parties
     Transaction
costs to
related
parties
    Operating
expenses
    Interest
paid/
(received)
 

Three months ended March 31, 2014

         

Associates

     729         —          —          712   

Key management personnel of the entity or its parent, incl.:

         

Short-term benefits (C)

     —           —          (40,242     —     

Share-based payments

     —           —          (8,169     —     

Other operations

     —           —          (2,757     —     

Other related parties (A) (B)

     80,868         (62,970     (2,885     (2,501

Three months ended March 31, 2013

         

Associates

     21,432         (1     —          2,914   

Key management personnel of the entity or its parent, incl.:

         

Short-term benefits (C)

     —           —          (29,855     —     

Share-based payments

     —           —          (24,323     —     

Other operations

     —           —          —          —     

Other related parties (A)

     28,110         (364     (1,790     (1,319

Other related parties mostly include transactions that are described below:

 

(A) Other related parties include a group of companies controlled by one of the shareholders that act as merchants. Revenue accrued by the Group from these related parties for the three months ended March 31, 2014 in the amount of 29,850 (three months ended March 31, 2013 – 28,021) represents payment processing fees. Cost of revenue incurred from these entities by the Group for the three months ended March 31, 2014 and three months ended March 31, 2013 is not significant. The terms of this commission arrangement were entered into on arm’s length terms and do not deviate in any material aspect from the terms that the Group would use in similar contracts with non-related parties.
(B) Since June 7, 2013 other related parties include a group of companies under common control with one of the Group’s shareholders described in the previous paragraph above, which act as both merchants and agents for the Group and include a mobile network operator, which is one of the Group’s top three customers. Revenue accrued to the Group by these related parties for the three months ended March 31, 2014 in the amount of 50,860 (three months ended March 31, 2013 – nil) represents payment processing fees. Cost of revenue, incurred to these entities by the Group for the three months ended March 31, 2014 in the amount 60,341 (three months ended March 31, 2013 – nil) represents transaction costs. The terms of this commission arrangement were entered into on arm’s length terms and do not deviate in any material aspect from the terms that The Group would use in similar contracts with non-related parties.
(C) Short-term benefits of key management comprise cash remuneration of the members of the Board of Directors and key management. Cash remuneration of the members of the Board of Directors (each a “Director” and collectively, “Directors”) of the Company amounted to 40,242 the three months ended March 31, 2014 (three months ended March 31, 2013 – 29,855).

The above stated balances and transactions have been entered into on terms as described above or as between the parties, are not secured, nor bear interest except that disclosed above and in Note 10. None of these balances has been impaired.

 

30


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

21. Financial instruments

The Group’s principal financial instruments comprise loans receivable, trade and other receivables, trade and other payables, cash and cash equivalents, long and short-term debt instruments and borrowings. The Group has various other financial assets and liabilities such as options over the shares of subsidiaries and associates which arise directly from its operations. During the year, the Group did not undertake trading in financial instruments.

The fair value of the Group’s financial instruments as of March 31, 2014 and December 31, 2013, is presented by type of the financial instrument in the table below:

 

            As of December 31, 2013      As of March 31, 2014  
            Carrying
amount
     Fair
value
     Carrying
amount
     Fair
value
 

Financial assets

              

Cash and cash equivalents

     LAR         11,636,913         11,636,913         8,127,674         8,127,674   

Trade and other receivables

     LAR         2,717,604         2,717,604         2,110,143         2,110,143   

Debt instruments

     HTM         3,012,153         3,013,975         2,477,955         2,481,018   

Short-term loans

     LAR         65,430         65,430         60,188         60,188   

Long-term loans

     LAR         10,637         10,637         24,177         24,177   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

        17,442,737         17,444,559         12,800,137         12,803,200   
     

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Long-term borrowings

     FLAC         109,351         109,351         142,560         142,560   

Short-term borrowings

     FLAC         635         635         315,805         315,805   

Trade and other payables

     FLAC         16,776,598         16,776,598         11,122,414         11,122,414   

Due to banks

     FLAC         95,977         95,977         7,678         7,678   

Bank’s customer’s accounts

     FLAC         735,249         735,249         751,080         751,080   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

        17,717,810         17,717,810         12,339,537         12,339,537   
     

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2014 and December 31, 2013 the Group has unrecognized gain on debt instruments in the amount of 3,063 and 1,822 correspondingly.

Financial instruments used by the Group are included in one of the following categories:

 

  LAR – loans and receivables;

 

  AFS – available-for-sale financial assets;

 

  FLAC – financial liabilities at amortized cost;

 

  HTM – held-to-maturity financial assets.

The fair value of the financial assets and liabilities included at the amount the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate fair values:

 

  Cash and cash equivalents, short-term investments and accounts receivable and payable, other current assets and liabilities approximate their carrying amount largely due to short-term maturities of these instruments;

 

  Non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities.

 

31


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

21. Financial instruments (continued)

 

Long-term fixed-rate assets are evaluated by the Group based on parameters such as interest rates, specific country risk factors and individual creditworthiness of the customer. Based on this evaluation, impairment is taken into account for the expected losses of these receivables. As of March 31, 2014 the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values.

Long term and short-term investments include debt securities carried at amortized cost and mainly consist of treasury bills of Ministry of Finance of Russia and promissory notes of various banks.

The Group uses the following IFRS hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

  Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities;

 

  Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly;

 

  Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

As of March 31, 2014 and December 31, 2013 the Group has financial instruments which carrying amount is a reasonable approximation of fair value.

 

22. Share-based payments

In October, 2012 the board of directors and shareholders approved an Employee Stock Ownership Plan (“ESOP”) for management of the Group, under which up to 2,565,000 shares of the Company can be granted to management during the ten years of the plan term. Later in January 2013, the Company’s ESOP was amended and restated to increase the maximum amount of shares reserved for issuance under the Plan to 3,640,000 class B shares, or 7% of the Company entire issued and outstanding share capital. Vesting is individually agreed for each grant. The contractual term of the options granted is 10 years from the date of grant. The board of directors shall determine the exercise price applicable to the options granted under the ESOP. Following an initial public offering of the Group, the exercise price shall not be less than the average closing price of the shares on the principal exchange on which such shares are then traded for the ten business days immediately preceding the grant date. The options can be exercised on a gross or net share basis. Upon exercise, the shares cannot be sold or otherwise transferred until after the Group achieve a net income target per the Group’s management accounts (prepared on a basis consistent with the basis of preparation of segment data) of U.S.$170,000,000 for the last four consecutive fiscal quarters.

The following table illustrates the movements in share options during the three months ended March 31, 2014:

 

     Tranche vesting date    As of
December 31,
2013
     Forfeited
during the
period
    Exercised
during the
period
    Granted
during the
period
     As of
March 31,
2014
 

Tranche 1

   December 21, 2012      247,308         —          (38,782     —           208,526   

Tranche 2.1

   upon IPO (May 2013)      247,308         —          (38,782     —           208,526   

Tranche 2.2

   January 1, 2014      575,604         —          (38,998     167,000         703,606   

Tranche 3

   January 1, 2015      735,505         (16,023     —          167,000         886,482   

Tranche 4

   January 1, 2016      503,579         (8,011     —          167,000         662,568   

 

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QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

22. Share-based payments (continued)

 

Based on the above, as of March 31, 2014 the Company has a total of 2,669,708 options outstanding, of which 1,120,658 is vested and 1,549,050 are unvested.

The amount of expense arising from equity-settled share-based payment transactions for the three months ended March 31, 2014 was 78,933 (three months ended March 31, 2013 – 77,683).

The weighted average remaining contractual life for the share options outstanding as of March 31, 2014 was 3.75 years.

The following table presents the summary of inputs of the Black-Scholes Merton option pricing model used for the ESOP for the determination of the fair value of the granted options which was calculated separately for each tranche:

 

     Granted on  
     December 21,
2012
     November 15,
2013
     November 16,
2013
     December 4,
2013
     February 6,
2014
     February 14,
2014
 

Exercise price (U.S.$)

     13.6452         41.2380         41.3990         46.573         36,091         37,427   

Dividend yield (%)

     —           2.83         2.83         2.83         2.83         2.83   

Expected volatility (%)

     28-30         30-32         30-32         29-32         28-31         29-32   

Risk free interest rate (%)

     0.75-1.09         0.34-0.63         0.34-0.63         0.30-0.61         0.32-0.65         0.31-0.66   

Expected life of options (years)

     5.0-6.5         2.0-3.0         2.0-3.0         2.0-3.0         2.0-3.0         2.0-3.0   

Share price (U.S.$)

     15.84         43.32         43.32         45.37         38,69         39,93   

Grant-date fair value of the options, (U.S.$)

     5.34-5.73         7.09-8.32         7.02-8.27         5.86-7.57         6.10-7.56         6.26-7.86   

The expected volatility was determined by reference to the historical volatility of peer companies. The share price for options granted on December 21, 2012 was determined using the discounted cash flows projections based on financial budgets approved by the Group’s senior management covering an eight-year period (2013-2020). An eight-year period was used for projections, as the Group considers this time frame to be reasonably forecasted. The share price for options granted after IPO was determined by reference to closing market prices of the Group’s traded shares. Due to lack of historical data, the expected life of the options was estimated as a mid-point average between the vesting and the expected term of each option vesting tranche.

 

23. Events after the reporting date

On May 15. 2014, the Board of Directors of the Company approved a dividend of U.S.$ 15,139,646 (equivalent of 540,290).

Sanctions

Subsequent to March 31 2014, international rating agencies revised their outlook of Russia’s sovereign credit rating in local and foreign currency from stable to negative following the political instability in Ukraine and heightened geopolitical risk and the prospect of U.S. and EU economic sanctions following Russia’s incorporation of Crimea, which may reduce the flow of potential investment, limitation of activity of payment systems Visa and Master Card in Russia, trigger rising capital outflows and other negative economic effects.

Management is monitoring these developments in the current environment and taking actions where appropriate. These and any further possible negative developments in Ukraine could adversely impact results and financial position of the Group in a manner not currently determinable.

 

33


QIWI plc

Notes to interim condensed consolidated financial statements (continued)

 

23. Events after the reporting date (continued)

 

National Payment System law amendments

Amendments to the law “On the national payment system” and to the anti-terrorism legislation were enacted and shall have legal effect starting from May 15, 2014. The law includes no limits on consumer to business payment transactions. However, under the new law, customers who do personalize their Visa QIWI Wallet account through a simplified identification procedure will see their previous transaction limits significantly increased to 60,000 Rubles per day and 200,000 Rubles per month, up from 15,000 Rubles and 40,000 Rubles previously. Management believes this provision could be a long-term positive for the Group, as it plans to identify certain Visa QIWI Wallet customers. Next, the law does prohibit unidentified P2P money transfers. As a result, Visa QIWI Wallet customers who wish to make personal, wallet-to-wallet money transfers will be required to go through an identification procedure. The Group expects little or no impact to its current business as a result of this as the Group does not charge its customers for P2P money transfer.

As at the date hereof the Group takes all possible measures to bring its current activities in compliance with the requirements of the above mentioned amendments to law. Though certain clauses of the law may impact the loan repayment and money remittance volumes and the Group is currently assessing the potential impact on its business. The analysis has not yet been completed, but the adverse impact on Group’s business cannot currently be ruled out.

 

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