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 August 19, 2019

 

 

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  ☒            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  ☒

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

EXCEPT FOR REFERENCES TO “TOTAL ADJUSTED NET REVENUE”, “PS PAYMENT REVENUE”, “PS PAYMENT ADJUSTED NET REVENUE”, “PS OTHER REVENUE”, “PS OTHER ADJUSTED NET REVENUE”, “PAYMENT AVERAGE ADJUSTED NET REVENUE YIELD”, “CFS SEGMENT NET REVENUE YIELD”, “ADJUSTED EBITDA”, “ADJUSTED EBITDA MARGIN”, “ADJUSTED NET PROFIT”, AND “ADJUSTED NET PROFIT PER SHARE”, EXHIBIT 99.1 TO THIS REPORT ON FORM 6-K IS INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM S-8 (FILE NO. 333-190918; FILE NO. 333-212441) OF QIWI PLC AND IN THE OUTSTANDING PROSPECTUS CONTAINED IN SUCH REGISTRATION STATEMENTS.

 

 

 


Exhibits

    
99.1    “QIWI Announces Second Quarter 2019 Financial Results” press release dated August 19, 2019
99.2    Interim condensed consolidated financial statements (unaudited) of QIWI plc for the six months ended June 30, 2019
99.3    Acknowledgment letter of Ernst & Young LLC


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: August 19, 2019     By:  

/s/ Vladislav Poshmorga

      Vladislav Poshmorga
      Chief Financial Officer
EX-99.1

Exhibit 99.1

 

LOGO

QIWI Announces Second Quarter 2019 Financial Results

Second Quarter Total Adjusted Net Revenue Increases 23% to RUB 5,563 Million and Adjusted Net

Profit Increases 125% to RUB 1,965 Million or RUB 31.58 per diluted share

QIWI upgrades 2019 Guidance

Board of Directors Approves Dividends of 28 cents per share

NICOSIA, CYPRUS – August 19, 2019 – QIWI plc (NASDAQ: QIWI) (MOEX: QIWI) (“QIWI” or the “Company”) today announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Operating and Financial Highlights

 

   

Total Adjusted Net Revenue increased 23% to RUB 5,563 million ($88.2 million)

 

   

Payment Services Segment Net Revenue increased 35% to RUB 5,158 million ($81.8 million)

 

   

Adjusted EBITDA increased 90% to RUB 2,639 million ($41.8 million)

 

   

Adjusted Net Profit increased 125% to RUB 1,965 million ($31.2 million), or RUB 31.58 per diluted share

 

   

Payment Services Segment Net Profit increased 42% to RUB 3,206 million ($50.8 million) or RUB 51.53 per diluted share

 

   

Total Payment Services volume increased 41% to RUB 370.8 billion ($5.9 billion)

“Today I’m excited to share our second quarter 2019 financial results. This quarter we continue to demonstrate exceptional performance, especially in our Payment Services business, which delivered 35% segment net revenue growth and 42% segment net profit growth. I am glad to say that the performance of our payment services business continues to be driven predominantly by the expansion and enhancement of the product proposition we offer to our users, merchants and partners including solutions for digital entertainment merchants, self-employed and sharing economy partners. Our growth is simultaneously underpinned by the secular trends in our key markets. Our results clearly emphasize the value and relevance of the payment ecosystem we have developed so far and aim to develop further,” said Sergey Solonin, QIWI’s chief executive officer. “As we continue to benefit from the strong performance and substantial cash flows generated by the Payment Services segment, which remains a core part of our business, we proceed with pursuing our strategy, building up our payment and financial services ecosystem and investing in the development of the new products and projects. We see many opportunities both in the payment space and in the adjacent markets and I believe we are well positioned to continue strengthening our ecosystem and increasing the life cycle of our clients with an ultimate goal of securing the long-term growth prospects of our Company.”


The Segment Presentation of the Results of Operations

As of June 30 2019, we distinguish four reportable segments and a Corporate and Other category, as set out below:

 

   

Payment Services (PS) segment, which encompasses our virtual distribution services, including QIWI Wallet and other QIWI applications, payment channels and methods; physical distribution, including our kiosks, terminals and other retail points of service, Contact Money Remittance System; and our merchant focused services, such as QIWI Cashier or acquiring services;

 

   

Consumer Financial Services (CFS) segment, which encompasses our consumer lending business SOVEST;

 

   

Small and Medium Enterprises (SME) segment, which encompasses operations of the Tochka business, which is focused on offering a broad range of services for small and medium enterprises through a multi-bank platform;

 

   

Rocketbank (RB) segment, which encompasses Rocketbank business, a digital banking service offering debit cards and deposits to retail customers; and

 

   

Corporate and Other (CO) category, which encompasses expenses associated with the corporate operations of QIWI Group as well as our R&D, venture projects and emerging business models.

Second Quarter 2019 Results

Adjusted and Segment Net Revenues: Total Adjusted Net Revenue (Total Segment Net Revenue) for the quarter ended June 30, 2019 was RUB 5,563 million ($88.2 million), an increase of 23% compared with RUB 4,510 million in the prior year. The increase was mainly driven by Payment Services and CFS Segments Net Revenue growth, which was partially offset by the decline in the SME Segment Net Revenue as well as negative Net Revenue contribution of Rocketbank Segment.

Payment Services Segment Net Revenue for the quarter ended June 30, 2019 was RUB 5,158 million ($81.8 million), an increase of 35% compared with RUB 3,832 million in the prior year.

PS Payment Adjusted Net Revenue was RUB 4,412 million ($70.0 million), an increase of 31% compared with RUB 3,362 million in the prior year. PS Payment Adjusted Net Revenue growth was predominantly driven by a volume growth in the E-commerce, Financial Services and Money Remittance market verticals partially offset by the decline of the Payment Average Adjusted Net Revenue Yield.

PS Other Adjusted Net Revenue, which is principally composed of revenue from fees for inactive accounts and unclaimed payments, interest revenue, revenue from overdrafts provided to agents, and advertising, was RUB 746 million ($11.8 million), an increase of 59% compared with RUB 470 million in the prior year. Fees for inactive accounts and unclaimed payments for the second quarter ended June 30, 2019 were RUB 471 million ($7.5 million) compared with RUB 326 million for the corresponding period in the prior year, the increase was driven primarily by growth of payment volume and a number of users in the payment services business. PS Other Adjusted Net Revenue excluding revenue from fees for inactive accounts and unclaimed payments increased 91% compared with the same period in the prior year to RUB 275 million predominantly as a result of growth of interest revenue.


Small and Medium Enterprises Segment Net Revenue which is composed of revenue from cash and settlement services related to the operations of the Tochka project for the quarter ended June 30, 2019 was RUB 185 million ($2.9 million) compared with RUB 597 million in the second quarter of the prior year. Segment Net Revenue dynamics were primarily due to the transfer of Tochka multi-bank project to JSC Tochka starting from February 1, 2019. As a result of this transition we no longer recognize a certain portion of Tochka project revenues associated with the information and technology service agreements with Otkritie Bank.

Adjusted EBITDA: For the quarter ended June 30, 2019, Adjusted EBITDA was RUB 2,639 million ($41.8 million), an increase of 90% compared with RUB 1,392 million in the prior year. The adjusted EBITDA increase was driven by Total Adjusted Net Revenue growth as well as a decline in payroll and related taxes (related to the cost of revenue) (excluding effect of share based payments) to RUB 674 million for the quarter ended June 30, 2019 as compared to RUB 914 million for same period in the prior year and advertising, client acquisition and related expenses driven mostly by the transfer of Tochka multi-bank project. The growth was partially offset by an increase of compensation to employees and related taxes (related to the SG&A expenses)(excluding effect of share-based payments) to RUB 869 million for the quarter ended June 30, 2019 as compared to RUB 777 million for same period in the prior year resulting from a personnel expense growth in payment services segment and corporate and other category as well as transfer of Rocketbank personnel to QIWI and an increase of other expenses also related the transfer and operations of Tochka multi-bank project. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of Total Adjusted Net Revenue) was 47.4% for the quarter ended June 30, 2019 compared with 30.9% for the same period in the prior year.

Adjusted and Segment Net Profit: For the quarter ended June 30, 2019, Adjusted Net Profit (Total Segment Net Profit) was RUB 1,965 million ($31.2 million), an increase of 125% compared with RUB 872 million in the prior year. The growth of Adjusted Net Profit was primarily driven by the same factors impacting Adjusted EBITDA as well as by a significantly smaller net foreign exchange loss1 as compared to the same period in the prior year.

For the quarter ended June 30, 2019, Payment Services Segment Net Profit was RUB 3,206 million ($50.8 million), an increase of 42% compared with RUB 2,250 million in the prior year driven by Payment Services Segment Net Revenue growth. Certain expenses that were postponed this quarter will be incurred in the second half of the year.

The Consumer Financial Services Segment Net Loss for the second quarter 2019 was RUB 435 million ($6.9 million) as compared to a Net Loss of RUB 702 million for the same period of the prior year resulting from Segment Net Revenue growth driven by the improving monetization and expansion of the operations of the SOVEST project as well as decrease in payroll and related taxes (excluding effect of share based payments) and advertising, client acquisition and related expenses.

The Small and Medium Enterprises Net Profit was RUB 16 million ($0.3 million) as compared to a Net Loss of RUB 263 million in the prior year. The significant reduction of net loss was primarily driven by the development and scaling of the Tochka business.

 

1 

Foreign exchange gain/loss is calculated as total foreign exchange gain/loss, net recognized in the statement of comprehensive income excluding the effect of foreign exchange gain/loss on June 2014 offering proceeds


Rocketbank Segment Net Loss was RUB 511 million ($8.1 million), an increase of 425% compared with the net loss of RUB 97 million in the prior year primarily driven by expenses incurred in connection with the transfer and roll out of the operations of Rocketbank in QIWI.

Payment Services Other Operating Data: For the quarter ended June 30, 2019, Payment Services Segment payment volume was RUB 370.8 billion ($5.9 billion), an increase of 41% compared with RUB 262.8 billion in the prior year. The increase in payment volume was driven by growth in E-commerce, Financial Services and Money Remittances market verticals resulting largely from the development of certain payment solutions for merchants including betting merchants, new contracts and new projects targeting the self-employed market as well as secular growth in some of our key categories. Payment Average Adjusted Net Revenue Yield was 1.19%, a decrease of 9 bps compared with 1.28% in the prior year primarily driven by a decrease of average net revenue yields across key market verticals including E-commerce and Financial Services driven by the diversification of the suite of services offered to merchants and partners partially offset by the increase in Money Remittance average net revenue yield.

Payment Services Segment Net Revenue Yield was 1.39%, a decrease of 7 bps as compared with 1.46% in the prior year. Payment Services Segment Net Revenue Yield excluding the effect of fees for inactive accounts and unclaimed payments was 1.26%, a decrease of 7 bps as compared with 1.33% in the prior year.

Consumer Financial Services Other Operating Data: For the quarter ended June 30, 2019, Consumer Financial Services Segment payment volume was RUB 5.8 billion ($0.1 billion). CFS payment volume increased by 82% as compared to the RUB 3.2 billion for the second quarter of 2018, while CFS Segment Net Revenue Yield increased to 4.88% driven primarily by the introduction of the customer paid value added options.

Recent Developments

Rocketbank Strategy Update: In August 2017, we have executed a series of transactions to acquire the brands, software and hardware of Tochka and Rocketbank from Otkritie Bank. In July 2018, QIWI finalized the acquisition of the Rocketbank business and, by the end of 2018, had transferred Rocketbank customers, personnel and business processes to QIWI. Further to this acquisition, QIWI began developing a new strategy for Rocketbank. Throughout the first half of 2019, QIWI reviewed a number of strategic opportunities for the development of the Rocketbank business as either a part of the broader QIWI ecosystem or as a standalone project. A final strategic plan for Rocketbank was presented to and reviewed by the Board of Directors of QIWI during its meeting in August 2019. Having duly considered the proposed strategy and required financing, the Board of the Directors of the Company concluded that Rocketbank’s business plan has an investment profile that isn’t compatible with QIWI’s risk appetite and that the business has insufficient potential synergies with the core business of the Company. As a result, the Board of Directors has determined and instructed the management of the Company to explore opportunities of a partial or complete sale of Rocketbank.

Dividend: Considering our expectations about the performance of the Group as well as our anticipated level of investments in 2019 and aiming to provide more transparency and predictability in respect of our dividend distribution practices, the Board of Directors approved a target dividend payout ratio for 2019. In accordance with the decision of the Board of Directors, the Company aims to distribute between 65% to 85% of its adjusted net profit for 2019 starting from the first quarter 2019.


Following the determination of the second quarter 2019 financial results, our Board of Directors approved a dividend of USD 28 cents per share. The dividend record date is August 30, 2019, and the Company intends to pay the dividend on September 3, 2019. The holders of ADSs will receive the dividend shortly thereafter.

The Board of Directors reserves the right to distribute the dividends on a quarterly basis, as it deems necessary so that the total annual payout is in accordance with the target range provided, though the payout ratios for each of the quarters may vary and be outside of this range. It remains the long-term intention of the Company to distribute all excess cash to the shareholders.

2019 Guidance2

QIWI upgrades its Total Adjusted Net Revenue, Payment Services Segment Net Revenue and Payment Services Segment Net Profit guidance in respect of 2019 outlook:

 

   

Total Adjusted Net Revenue is expected to increase by 11% to 16% over 2018;

 

   

Payment Services Segment Net Revenue is expected to increase by 23% to 27% over 2018;

 

   

Payment Services Segment Net Profit is expected to increase by 25% to 29% over 2018.

QIWI reiterates its Adjusted Net Profit guidance in respect of 2019 outlook:

 

   

Adjusted Net Profit is expected to increase by 40% to 50% over 2018;

For the purpose of the guidance in respect of 2019 outlook we would like to outline the following considerations:

We have ceased to recognize the portion of Tochka revenues associated with information and technology service agreements with Otkritie Bank for providing services to Tochka clients that have their accounts with Otkritie Bank starting from February 1, 2019 following the transfer of the Tochka operations to JSC Tochka. Such revenues were recognized in full for the full year 2018; however, they will only be recognized for one month in 2019. For the avoidance of doubt, only the revenues related to Tochka clients that have their accounts with QIWI bank will be recognized as QIWI group revenues in 2019. We will correspondingly account JCS Tochka as an associate going further.

The Company reserves the right to revise guidance in the course of the year.

Earnings Conference Call and Audio Webcast

QIWI will host a conference call to discuss second quarter 2019 financial results today at 8:30 a.m. ET. Hosting the call will be Sergey Solonin, chief executive officer, Andrey Protopopov, chief executive officer of Payment Services Segment, and Vladislav Poshmorga, chief financial officer. The conference call can be accessed live over the phone by dialing +1 (877) 407-3982 or for international callers by dialing +1 (201) 493-6780. A replay will be available at 11:30 a.m. ET and can be accessed by dialing +1 (844) 512-2921 or +1 (412) 317-6671 for international callers; the pin number is 13693578. The replay will be available until Monday, September 2, 2019. The call will be webcast live from the Company’s website at https://www.qiwi.ru under the Corporate Investor Relations section or directly at http://investor.qiwi.com/.

 

2 

Guidance is provided in Russian rubles


About QIWI plc.

QIWI is a leading provider of next generation payment and financial services in Russia and the CIS. It has an integrated proprietary network that enables payment services across online, mobile and physical channels. It has deployed over 21.8 million virtual wallets, over 136,000 kiosks and terminals, and enabled merchants and customers to accept and transfer over RUB 116 billion cash and electronic payments monthly connecting over 44 million consumers using its network at least once a month. QIWI’s consumers can use cash, stored value and other electronic payment methods in order to pay for goods and services or transfer money across virtual or physical environments interchangeably.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding expected total adjusted net revenue, adjusted net profit and net revenue yield, dividend payments, payment volume growth, growth of physical and virtual distribution channels, trends in each of our market verticals and statements regarding the development of our Consumer Financial Services segment, including our SOVEST business, the development of our Small and Medium Enterprises segment, including our Tochka business, the development of our Rocketbank segment, as well as the development of other new projects. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of QIWI plc. to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to, the macroeconomic conditions of the Russian Federation and in each of the international markets in which we operate, growth in each of our market verticals, competition, the introduction of new products and services and their acceptance by consumers, QIWI’s ability to estimate the market risk and capital risk associated with new projects, a decline in net revenue yield, regulation, QIWI’s ability to grow physical and virtual distribution channels, cyberattacks and security vulnerabilities in QIWI’s products and services, QIWI’s ability to expand geographically, the risk that new projects will not perform in accordance with its expectations and other risks identified under the Caption “Risk Factors” in QIWI’s Annual Report on Form 20-F and in other reports QIWI files with the U.S. Securities and Exchange Commission. QIWI undertakes no obligation to revise any forward-looking statements or to report future events that may affect such forward-looking statements unless QIWI is required to do so by law.

Contact

Varvara Kiseleva

Investor Relations

+357.25028091

ir@qiwi.com


QIWI plc.

Consolidated Statement of Financial Position

(in millions)

 

     As of December 31,
2018 (audited)
     As of June 30,
2019 (unaudited)
     As of June 30,
2019 (unaudited)
 
     RUB      RUB      USD(1)  

Assets

        

Non-current assets

        

Property and equipment

     1,074        2,021        32  

Goodwill and other intangible assets

     10,846        10,543        167  

Investments in associates

     812        760        12  

Investments in joint venture

     836        832        13  

Long-term debt securities and deposits

     497        1,880        30  

Long-term loans

     230        248        4  

Other non-current assets

     110        98        2  

Deferred tax assets

     157        204        3  
  

 

 

    

 

 

    

 

 

 

Total non-current assets

     14,562        16,586        263  
  

 

 

    

 

 

    

 

 

 

Current assets

        

Trade and other receivables

     8,042        7,952        126  

Short-term loans

     6,890        6,671        106  

Short-term debt securities and deposits

     1,432        1,082        17  

Cash and cash equivalents(2)

     40,966        38,602        612  

Prepaid income tax

     112        52        1  

Other current assets

     929        992        16  
  

 

 

    

 

 

    

 

 

 

Total current assets

     58,371        55,351        878  
  

 

 

    

 

 

    

 

 

 

Assets held for sale

     90        53        1  
  

 

 

    

 

 

    

 

 

 

Total assets

     73,023        71,990        1,141  
  

 

 

    

 

 

    

 

 

 

Equity and liabilities

        

Equity attributable to equity holders of the parent

        

Share capital

     1        1        0  

Additional paid-in capital

     1,876        1,876        30  

Share premium

     12,068        12,068        191  

Other reserve

     2,097        2,353        37  

Retained earnings

     9,091        11,070        176  

Translation reserve

     513        292        5  
  

 

 

    

 

 

    

 

 

 

Total equity attributable to equity holders of the parent

     25,646        27,660        439  

Non-controlling interests

     60        39        1  
  

 

 

    

 

 

    

 

 

 

Total equity

     25,706        27,699        439  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities

        

Long-term lease liability

     —          547        9  

Long-term customer accounts

     237        300        5  

Deferred tax liabilities

     744        736        12  
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     981        1,583        25  
  

 

 

    

 

 

    

 

 

 

Current liabilities

        

Trade and other payables

     27,499        23,485        372  

Customer accounts and amounts due to banks

     17,868        17,894        284  

Short-term lease liability

     —          396        6  

VAT and other taxes payable

     428        230        4  

Income tax payable

     10        61        1  

Other current liabilities

     531        642        10  
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     46,336        42,708        677  
  

 

 

    

 

 

    

 

 

 

Total equity and liabilities

     73,023        71,990        1,141  
  

 

 

    

 

 

    

 

 

 

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.


QIWI plc.

Consolidated Statement of Comprehensive Income

(in millions, except per share data)

 

     Three months ended (unaudited)  
     As of June 30,
2018
    As of June 30,
2019
    As of June 30,
2019
 
     RUB     RUB     USD(1)  

Revenue:

     6,992       9,566       152  

Payment processing fees

     5,535       7,543       120  

Interest revenue calculated using the effective interest rate

     296       914       14  

Fees from inactive accounts and unclaimed payments

     326       471       7  

Other revenue

     835       638       10  

Operating costs and expenses:

     5,898       7,428       118  

Cost of revenue (exclusive of depreciation and amortization)

     3,420       4,753       75  

Selling, general and administrative expenses

     2,223       2,180       35  

Depreciation and amortization

     208       344       5  

Credit loss expense(2)

     38       151       2  

Impairment of intangible assets

     9       —         —    

Profit from operations

     1,094       2,138       34  
  

 

 

   

 

 

   

 

 

 

Share of loss of an associate and a joint venture

     2       8       0  

Other income and expenses, net

     (67     6       0  

Foreign exchange gain

     480       132       2  

Foreign exchange loss

     (354     (190     (3

Interest income and expenses, net

     5       4       0  
  

 

 

   

 

 

   

 

 

 

Profit before tax

     1,160       2,098       33  

Income tax expense

     (220     (414     (7
  

 

 

   

 

 

   

 

 

 

Net profit

     940       1,684       27  
  

 

 

   

 

 

   

 

 

 

Attributable to:

      

Equity holders of the parent

     929       1,672       27  

Non-controlling interests

     11       12       0  

Other comprehensive income

      

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

      

Exchange differences on translation of foreign operations

     259       (46     (1

Total comprehensive income, net of tax effect of nil

     259       (46     (1
  

 

 

   

 

 

   

 

 

 

Total comprehensive income net of tax

     1,199       1,638       26  
  

 

 

   

 

 

   

 

 

 

attributable to:

      

Equity holders of the parent

     1,188       1,627       26  

Non-controlling interests

     11       11       0  

Earnings per share:

      

Basic profit attributable to ordinary equity holders of the parent

     15.23       27.14       0.43  

Diluted profit attributable to ordinary equity holders of the parent

     15.14       26.87       0.43  

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

Credit loss expense for three months ended June 30, 2018 was separated from of Selling, general and administrative expenses for comparative purposes as a result of adoption of IFRS 9.


QIWI plc.

Consolidated Statement of Comprehensive Income

(in millions, except per share data)

 

     Six months ended (unaudited)  
     As of June 30, 2018     As of June 30, 2019     As of June 30, 2019  
     RUB     RUB     USD(1)  

Revenue:

     13,386       18,504       293  

Payment processing fees

     10,761       14,490       230  

Interest revenue calculated using the effective interest rate

     521       1,710       27  

Fees from inactive accounts and unclaimed payments

     629       916       15  

Other revenue

     1,475       1,388       22  

Operating costs and expenses:

     11,106       14,475       229  

Cost of revenue (exclusive of depreciation and amortization)

     6,515       9,207       146  

Selling, general and administrative expenses

     4,041       4,297       68  

Depreciation and amortization

     402       690       11  

Credit loss expense(2)

     125       281       4  

Impairment of intangible assets

     23       —         —    

Profit from operations

     2,280       4,029       64  
  

 

 

   

 

 

   

 

 

 

Share of loss of an associate and a joint venture

     (19     (71     (1

Other income and expenses, net

     (70     55       1  

Foreign exchange gain

     494       773       12  

Foreign exchange loss

     (377     (989     (16

Interest income and expenses, net

     12       (11     (0
  

 

 

   

 

 

   

 

 

 

Profit before tax

     2,320       3,786       60  

Income tax expense

     (442     (775     (12
  

 

 

   

 

 

   

 

 

 

Net profit

     1,878       3,011       48  
  

 

 

   

 

 

   

 

 

 

Attributable to:

      

Equity holders of the parent

     1,860       2,987       47  

Non-controlling interests

     18       24       0  

Other comprehensive income

      

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

      

Exchange differences on translation of foreign operations

     257       (227     (4

Total comprehensive income, net of tax effect of nil

     257       (227     (4
  

 

 

   

 

 

   

 

 

 

Total comprehensive income net of tax

     2,135       2,784       44  
  

 

 

   

 

 

   

 

 

 

attributable to:

      

Equity holders of the parent

     2,117       2,766       44  

Non-controlling interests

     18       18       0  

Earnings per share:

      

Basic profit attributable to ordinary equity holders of the parent

     30.49       48.49       0.77  

Diluted profit attributable to ordinary equity holders of the parent

     30.31       48.02       0.76  

 

(3)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(4)

Credit loss expense for six months ended June 30, 2018 was separated from of Selling, general and administrative expenses for comparative purposes as a result of adoption of IFRS 9.


QIWI plc.

Consolidated Statement of Cash Flows

(in millions)

 

     Six months ended (unaudited)  
     As of June 30, 2018     As of June 30, 2019     As of June 30, 2019  
     RUB     RUB     USD(1)  

Cash flows from operating activities

      

Profit before tax

     2,320       3,786       60  
  

 

 

   

 

 

   

 

 

 

Adjustments to reconcile profit before tax to net cash flow (used in)/generated from operating activities

      

Depreciation and amortization

     402       690       11  

Foreign exchange loss/(gain), net

     (117     216       3  

Interest income, net

     (499     (1,289     (20

Credit loss expense

     125       281       4  

Share of loss of an associate and a joint venture

     19       71       1  

Share-based payments

     160       256       4  

Loss from initial recognition

     —         91       1  

Other

     82       (10     (0
  

 

 

   

 

 

   

 

 

 

Operating profit before changes in working capital

     2,492       4,092       65  
  

 

 

   

 

 

   

 

 

 

Decrease/(increase) in trade and other receivables

     1,559       (281     (4

Increase in other assets

     (111     (35     (1

Increase in amounts due to customers and amounts due to banks

     1,547       66       1  

Decrease in accounts payable and accruals

     (1,403     (3,179     (50

(Increase)/decrease in loans issued from banking operations

     (1,761     220       3  
  

 

 

   

 

 

   

 

 

 

Cash received from operations

     2,323       883       14  
  

 

 

   

 

 

   

 

 

 

Interest received

     533       1,741       28  

Interest paid

     (46     (144     (2

Income tax paid

     (414     (748     (12
  

 

 

   

 

 

   

 

 

 

Net cash flow received from operating activities

     2,396       1,732       27  
  

 

 

   

 

 

   

 

 

 

Cash flows used in investing activities

      

Cash investment in associate and joint control companies

     (9     (200     (3

Purchase of property and equipment

     (442     (291     (5

Purchase of intangible assets

     (137     (116     (2

Proceeds from sale of fixed and intangible assets

     —         134       2  

Loans issued

     (125     (345     (5

Repayment of loans issued

     4       26       0  

Purchase of debt securities and placement of deposits

     (810     (2,468     (39

Proceeds from settlement of debt instruments

     672       1,412       22  
  

 

 

   

 

 

   

 

 

 

Net cash flow used in investing activities

     (847     (1,848     (29
  

 

 

   

 

 

   

 

 

 

Cash flows used in financing activities

      

Repayment of borrowings and lease liabilities

     —         (142     (2

Dividends paid to owners of the Group

     —         (1,122     (18

Dividends paid to non-controlling shareholders

     (25     (39     (1
  

 

 

   

 

 

   

 

 

 

Net cash flow used in financing activities

     (25     (1,303     (21
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     527       (945     (15

Net increase\(decrease) in cash and cash equivalents

     2,051       (2,364     (37
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     18,435       40,966       649  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the end of the period(2)

     20,486       38,602       612  
  

 

 

   

 

 

   

 

 

 

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.


QIWI plc.

Reporting Segments Data

 

     Three months ended (unaudited)  
     As of June 30, 2018     As of June 30, 2019     As of June 30, 2019  
     RUB     RUB     USD(1)  

Total Segment Net Revenue(2)

     4,510       5,563       88.2  
  

 

 

   

 

 

   

 

 

 

Payment Services

     3,832       5,158       81.8  

Consumer Financial Services

     58       283       4.5  

Small and Medium Enterprises

     597       185       2.9  

Rocketbank

     —         (132     (2.1

Corporate and Other

     23       69       1.1  
  

 

 

   

 

 

   

 

 

 

Total Segment Net Profit(3)

     872       1,965       31.1  
  

 

 

   

 

 

   

 

 

 

Payment Services

     2,250       3,206       50.8  

Consumer Financial Services

     (702     (435     (6.9

Small and Medium Enterprises

     (263     16       0.3  

Rocketbank

     (97     (511     (8.1

Corporate and Other

     (316     (311     (4.9
  

 

 

   

 

 

   

 

 

 
     Six months ended (unaudited)  
     As of June 30, 2018     As of June 30, 2019     As of June 30, 2019  
     RUB     RUB     USD(1)  

Total Segment Net Revenue(2)

     8,609       10,930       173.3  
  

 

 

   

 

 

   

 

 

 

Payment Services

     7,500       9,994       158.4  

Consumer Financial Services

     61       501       7.9  

Small and Medium Enterprises

     1,017       597       9.5  

Rocketbank

     —         (295     (4.7

Corporate and Other

     31       133       2.1  
  

 

 

   

 

 

   

 

 

 

Total Segment Net Profit(3)

     1,953       3,618       57.4  
  

 

 

   

 

 

   

 

 

 

Payment Services

     4,459       6,194       98.2  

Consumer Financial Services

     (1,381     (967     (15.3

Small and Medium Enterprises

     (416     11       0.2  

Rocketbank

     (170     (1,001     (15.9

Corporate and Other

     (539     (619     (9.8
  

 

 

   

 

 

   

 

 

 

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

For the three and six months ended June 30, 2018 and June 30, 2019 Total Adjusted Net Revenue is equal to Total Segment Net Revenue

(3)

For the three and six months ended June 30, 2018 and June 30 Total Adjusted Net Profit is equal to Total Segment Net Profit


Non-IFRS Financial Measures and Supplemental Financial Information

This release presents Total Adjusted Net Revenue, PS Payment Adjusted Net Revenue, PS 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, PS Payment Adjusted Net Revenue and PS 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, PS Payment Adjusted Net Revenue, PS 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, PS Payment Adjusted Net Revenue, PS 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, PS Payment Adjusted Net Revenue and PS 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.

PS 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, betting, 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, card-to-card transfers and certain wallet-to-wallet transfers. 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. PS Other Adjusted Net Revenue primarily consists of revenue from fees for inactive accounts and unclaimed payments, interest revenue, revenue from overdrafts provided to agents, rent of space for kiosks, cash and settlement services and advertising.


QIWI plc.

Reconciliation of IFRS to Non-IFRS Operating Results

(in millions, except per share data)

 

     Three months ended (unaudited)  
     June 30, 2018     June 30, 2019     June 30, 2019  
     RUB     RUB     USD(1)  

Revenue

     6,992       9,566       151.7  

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

     3,420       4,753       75.4  

Plus: Payroll and related taxes

     938       750       11.9  
  

 

 

   

 

 

   

 

 

 

Total Adjusted Net Revenue

     4,510       5,563       88.2  
  

 

 

   

 

 

   

 

 

 

Segment Net Revenue

      

Payment Services Segment Revenue

     6,238       8,569       135.9  

PS Payment Revenue(2)

     5,535       7,543       120  

Minus: Cost of PS Payment Revenue (exclusive of depreciation and amortization)(3)

     2,459       3,490       55  

Plus: Compensation to employees and related taxes allocated to PS Payment Revenue(4)

     286       359       6  
  

 

 

   

 

 

   

 

 

 

PS Payment Adjusted Net Revenue

     3,362       4,412       70.0  
  

 

 

   

 

 

   

 

 

 

PS Other Revenue(5)

     703       1,026       16  

Minus: Cost of PS Other Revenue (exclusive of depreciation and amortization)(6)

     270       328       5  

Plus: Compensation to employees and related taxes allocated to PS Other Revenue(4)

     37       48       1  
  

 

 

   

 

 

   

 

 

 

PS Other Adjusted Net Revenue

     470       746       11.8  
  

 

 

   

 

 

   

 

 

 

Payment Services Segment Net Revenue

     3,832       5,158       81.8  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment Revenue

     95       328       5.2  

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

     236       189       3.0  

Plus: Compensation to employees and related taxes

     199       144       2.3  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment Net Revenue

     58       283       4.5  
  

 

 

   

 

 

   

 

 

 

SME Revenue

     625       232       3.7  

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

     355       52       0.8  

Plus: Compensation to employees and related taxes

     327       5       0.1  
  

 

 

   

 

 

   

 

 

 

SME Net Revenue

     597       185       2.9  
  

 

 

   

 

 

   

 

 

 

Rocketbank Revenue

     —         338       5.4  

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

     61       616       9.8  

Plus: Compensation to employees and related taxes

     61       146       2.3  
  

 

 

   

 

 

   

 

 

 

Rocketbank Net Revenue

     —         (132     (2.1
  

 

 

   

 

 

   

 

 

 

Corporate and Other Category Revenue

     34       99       1.6  

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

     39       79       1.2  

Plus: Compensation to employees and related taxes

     28       49       0.8  
  

 

 

   

 

 

   

 

 

 

Corporate and Other Category Net Revenue

     23       69       1.1  
  

 

 

   

 

 

   

 

 

 

Total Segment Net Revenue

     4,510       5,563       88.2  
  

 

 

   

 

 

   

 

 

 

Net Profit

     940       1,684       26.7  
  

 

 

   

 

 

   

 

 

 

Plus:

      

Depreciation and amortization

     208       344       5.5  

Other income

     67       (6     (0.1

Foreign exchange gain

     (480     (132     (2.1

Foreign exchange loss

     354       190       3.0  

Loss on set up of associate

     (2     (8     (0.1

Interest expenses

     (5     (4     (0.1

Income tax expenses

     220       414       6.6  

Share-based payments expenses

     90       157       2.5  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     1,392       2,639       41.8  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

     30.9     47.4     47.4

Net profit

     940       1,684       26.7  

Amortization of fair value adjustments(7)

     73       95       1.5  

Share-based payments expenses

     90       157       2.5  

Foreign Exchange loss/(gain) on June 2014 offering proceeds(8)

     (216     44       0.7  

Effect of taxation of the above items

     (15     (15     (0.2
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit

     872       1,965       31.2  
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit per share:

      

Basic

     14.30       31.89       0.51  

Diluted

     14.22       31.58       0.50  

Weighted-average number of shares used in computing Adjusted Net Profit per share

      

Basic

     61,003       61,623       61,623  

Diluted

     61,371       62,224       62,224  


 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

PS Payment Revenue represents payment processing fees, which primarily consists of the merchant and consumer fees charged for the payment transactions.

(3)

Cost of PS 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 PS Payment Revenue and PS Other Revenue; therefore, it has been allocated between PS Payment Revenue and PS Other Revenue in proportion to the relevant revenue amounts for the purposes of the reconciliation presented above.

(5)

PS Other Revenue primarily consists of revenue from fees for inactive accounts and unclaimed payments, interest revenue, revenue from overdrafts provided to agents, rent of space for kiosks, cash and settlement services and advertising.

(6)

Cost of PS 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 PS Other Revenue and costs of call-centers and advertising commissions.

(7)

Amortization of fair value adjustments primarily includes the effect of the acquisition of control in Contact and Rapida.

(8)

The Forex loss on SPO funds as presented in the reconciliation of Net Profit to Adjusted Net Profit differs from the Foreign exchange loss and Foreign exchange gain in the reconciliation of Net Profit to Adjusted EBITDA as the latter includes all the foreign exchange losses/(gains) for the period, while the former only include the foreign exchange loss/(gain) on the US dollar amount, which we received at SPO.


QIWI plc.

Reconciliation of IFRS to Non-IFRS Operating Results

(in millions, except per share data)

 

     Six months ended (unaudited)  
     June 30, 2018     June 30, 2019     June 30, 2019  
     RUB     RUB     USD(1)  

Revenue

     13,386       18,504       293.4  

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

     6,515       9,207       146.0  

Plus: Payroll and related taxes

     1,738       1,633       25.9  
  

 

 

   

 

 

   

 

 

 

Total Adjusted Net Revenue

     8,609       10,930       173.3  
  

 

 

   

 

 

   

 

 

 

Segment Net Revenue

      

Payment Services Segment Revenue

     12,124       16,438       260.6  

PS Payment Revenue(2)

     10,761       14,490       230  

Minus: Cost of PS Payment Revenue (exclusive of depreciation and amortization)(3)

     4,738       6,602       105  

Plus: Compensation to employees and related taxes allocated to PS Payment Revenue(4)

     562       699       11  
  

 

 

   

 

 

   

 

 

 

PS Payment Adjusted Net Revenue

     6,585       8,587       136.1  
  

 

 

   

 

 

   

 

 

 

PS Other Revenue(5)

     1,363       1,948       31  

Minus: Cost of PS Other Revenue (exclusive of depreciation and amortization)(6)

     519       634       10  

Plus: Compensation to employees and related taxes allocated to PS Other Revenue(4)

     71       93       1  
  

 

 

   

 

 

   

 

 

 

PS Other Adjusted Net Revenue

     915       1,407       22.3  
  

 

 

   

 

 

   

 

 

 

Payment Services Segment Net Revenue

     7,500       9,994       158.4  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment Revenue

     147       587       9.3  

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

     441       371       5.9  

Plus: Compensation to employees and related taxes

     355       285       4.5  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment Net Revenue

     61       501       7.9  
  

 

 

   

 

 

   

 

 

 

SME Revenue

     1,065       683       10.8  

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

     654       229       3.6  

Plus: Compensation to employees and related taxes

     605       143       2.3  
  

 

 

   

 

 

   

 

 

 

SME Net Revenue

     1,017       597       9.5  
  

 

 

   

 

 

   

 

 

 

Rocketbank Revenue

           613       9.7  

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

     93       1,227       19.4  

Plus: Compensation to employees and related taxes

     93       319       5.1  
  

 

 

   

 

 

   

 

 

 

Rocketbank Net Revenue

           (295     (4.7
  

 

 

   

 

 

   

 

 

 

Corporate and Other Category Revenue

     50       183       2.9  

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

     70       145       2.3  

Plus: Compensation to employees and related taxes

     51       95       1.5  
  

 

 

   

 

 

   

 

 

 

Corporate and Other Category Net Revenue

     31       133       2.1  
  

 

 

   

 

 

   

 

 

 

Total Segment Net Revenue

     8,609       10,930       173.3  
  

 

 

   

 

 

   

 

 

 

Net Profit

     1,878       3,011       47.7  
  

 

 

   

 

 

   

 

 

 

Plus:

      

Depreciation and amortization

     402       690       10.9  

Other income and expenses, net

     70       (55     (0.9

Foreign exchange gain

     (494     (773     (12.3

Foreign exchange loss

     377       989       15.7  

Loss from associates and joint ventures

     19       71       1.1  

Interest income and expenses, net

     (12     11       0.2  

Income tax expenses

     442       775       12.3  

Share-based payments expenses

     160       256       4.1  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     2,842       4,975       78.9  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

     33.0     45.5     45.5

Net profit

     1,878       3,011       47.7  

Amortization of fair value adjustments(7)

     147       197       3.1  

Share-based payments expenses

     160       256       4.1  

Foreign Exchange loss/(gain) on June 2014 offering proceeds(8)

     (203     185       2.9  

Effect of taxation of the above items

     (29     (31     (0.5
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit

     1,953       3,618       57.4  
  

 

 

   

 

 

   

 

 

 

Adjusted Net Profit per share:

      

Basic

     32.01       58.74       0.93  

Diluted

     31.82       58.17       0.92  

Weighted-average number of shares used in computing Adjusted Net Profit per share

      

Basic

     60,995       61,601       61,601  

Diluted

     61,365       62,200       62,200  


 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

PS Payment Revenue represents payment processing fees, which primarily consists of the merchant and consumer fees charged for the payment transactions.

(3)

Cost of PS 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 PS Payment Revenue and PS Other Revenue; therefore, it has been allocated between PS Payment Revenue and PS Other Revenue in proportion to the relevant revenue amounts for the purposes of the reconciliation presented above.

(5)

PS Other Revenue primarily consists of revenue from fees for inactive accounts and unclaimed payments, interest revenue, revenue from overdrafts provided to agents, rent of space for kiosks, cash and settlement services and advertising.

(6)

Cost of PS 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 PS Other Revenue and costs of call-centers and advertising commissions.

(7)

Amortization of fair value adjustments primarily includes the effect of the acquisition of control in Contact and Rapida.

(8)

The Forex loss on SPO funds as presented in the reconciliation of Net Profit to Adjusted Net Profit differs from the Foreign exchange loss and Foreign exchange gain in the reconciliation of Net Profit to Adjusted EBITDA as the latter includes all the foreign exchange losses/(gains) for the period, while the former only include the foreign exchange loss/(gain) on the US dollar amount, which we received at SPO.


QIWI plc.

Other Operating Data

 

     Three months ended (unaudited)  
     June 30, 2018     June 30, 2019     June 30, 2019  
     RUB     RUB     USD(1)  

Payment Services Segment key operating metrics

      
  

 

 

   

 

 

   

 

 

 

Payment volume (billion)(2)

     262.8       370.8       5.9  
  

 

 

   

 

 

   

 

 

 

E-commerce

     57.6       100.2       1.6  

Financial services

     57.0       86.6       1.4  

Money remittances

     93.2       132.8       2.1  

Telecom

     43.1       41.8       0.7  

Other

     11.9       9.4       0.1  
  

 

 

   

 

 

   

 

 

 

Payment adjusted net revenue (million)(3)

     3,361.9       4,411.8       69.9  
  

 

 

   

 

 

   

 

 

 

E-commerce

     2,015.7       2,520.1       40.0  

Financial services

     275.6       272.8       4.3  

Money remittances

     806.2       1,392.4       22.1  

Telecom

     197.9       176.0       2.8  

Other

     66.5       50.5       0.8  
  

 

 

   

 

 

   

 

 

 

Payment Average Adjusted Net Revenue Yield(4)

     1.28     1.19     1.19
  

 

 

   

 

 

   

 

 

 

E-commerce

     3.50     2.51     2.51

Financial services

     0.48     0.31     0.31

Money remittances

     0.87     1.05     1.05

Telecom

     0.46     0.42     0.42

Other

     0.56     0.54     0.54
  

 

 

   

 

 

   

 

 

 

Payment Services Segment Net Revenue Yield

     1.46     1.39     1.39

Active kiosks and terminals (units)(5)

     152,055       136,134       136,134  

Active Qiwi Wallet accounts (million)(6)

     20.5       21.8       21.8  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment key operating metrics

      
  

 

 

   

 

 

   

 

 

 

Payment volume (million)(7)

     3.2       5.8       0.1  

CFS Segment Net Revenue Yield

     1.82     4.88     4.88
  

 

 

   

 

 

   

 

 

 

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

Payment Services Segment payment volume by market verticals and consolidated payment volume consist of the amounts paid by our customers to merchants or other customers included in each of those market verticals less intra-group eliminations. The methodology of payment volumes allocation between different market verticals in Contact and Rapida may differ from the methodology used by QIWI. We therefore retain the right to restate the presented volumes, net revenues and net revenue yields data in case the methodology of Contact and Rapida will be brought in conformity with the methodology used by QIWI.

(3)

PS Payment Adjusted Net Revenue is calculated as the difference between PS Payment Revenue and PS Cost of Payment Revenue (excluding D&A) plus compensation to employees and related taxes allocated to PS Payment Revenue. PS Payment Revenue primarily consists of merchant and consumer fees. Cost of PS Payment Revenue primarily consists of commission to agents.

(4)

Payment Average Adjusted Net Revenue Yield is defined as PS Payment adjusted net revenue divided by Payment Services payment segment volume.

(5)

We measure the numbers of our kiosks and terminals on a daily basis, with only those kiosks and terminals being taken into calculation through which at least one payment has been processed during the day, which we refer to as active kiosks and terminals. The period end numbers of our kiosks and terminals are calculated as an average of the amount of active kiosks and terminals for the last 30 days of the respective reporting period.


(6)

Active 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.

(7)

Consumer Financial Services segment payment volume consists of the transaction amounts paid by SOVEST card customers to merchants offline and online (including, but not limited to the partner-merchants) or withdrawn through ATMs less the amount returned for corresponding reimbursements.


QIWI plc.

Other Operating Data

 

     Six months ended (unaudited)  
     June 30, 2018     June 30, 2019     June 30, 2019  
     RUB     RUB     USD(1)  

Payment Services Segment key operating metrics

      
  

 

 

   

 

 

   

 

 

 

Payment volume (billion)(2)

     512.1       696.8       11.0  
  

 

 

   

 

 

   

 

 

 

E-commerce

     109.4       193.0       3.1  

Financial services

     113.8       155.4       2.5  

Money remittances

     178.8       249.1       3.9  

Telecom

     84.6       80.2       1.3  

Other

     25.5       19.2       0.3  
  

 

 

   

 

 

   

 

 

 

Payment adjusted net revenue (million)(3)

     6,584.4       8,586.3       136.1  
  

 

 

   

 

 

   

 

 

 

E-commerce

     3,777.2       4,992.5       79.2  

Financial services

     565.2       542.8       8.6  

Money remittances

     1,722.1       2,611.3       41.4  

Telecom

     377.1       334.5       5.3  

Other

     142.8       105.2       1.7  
  

 

 

   

 

 

   

 

 

 

Payment Average Adjusted Net Revenue Yield(4)

     1.29     1.23     1.23
  

 

 

   

 

 

   

 

 

 

E-commerce

     3.45     2.59     2.59

Financial services

     0.50     0.35     0.35

Money remittances

     0.96     1.05     1.05

Telecom

     0.45     0.42     0.42

Other

     0.56     0.55     0.55
  

 

 

   

 

 

   

 

 

 

Payment Services Segment Net Revenue Yield

     1.46     1.43     1.43

Active kiosks and terminals (units)(5)

     152,055       136,134       136,134  

Active Qiwi Wallet accounts (million)(6)

     20.5       21.8       21.8  
  

 

 

   

 

 

   

 

 

 

Consumer Financial Services Segment key operating metrics

      
  

 

 

   

 

 

   

 

 

 

Payment volume (billion)(7)

     5.5       10.8       0.2  

CFS Segment Net Revenue Yield

     1.11     4.63     4.63
  

 

 

   

 

 

   

 

 

 

 

(1)

Calculated using a ruble to U.S. dollar exchange rate of RUB 63.0756 to U.S. $1.00, which was the official exchange rate quoted by the Central Bank of the Russian Federation as of June 30, 2019.

(2)

Payment Services Segment payment volume by market verticals and consolidated payment volume consist of the amounts paid by our customers to merchants or other customers included in each of those market verticals less intra-group eliminations. The methodology of payment volumes allocation between different market verticals in Contact and Rapida may differ from the methodology used by QIWI. We therefore retain the right to restate the presented volumes, net revenues and net revenue yields data in case the methodology of Contact and Rapida will be brought in conformity with the methodology used by QIWI.

(3)

PS Payment Adjusted Net Revenue is calculated as the difference between PS Payment Revenue and PS Cost of Payment Revenue (excluding D&A) plus compensation to employees and related taxes allocated to PS Payment Revenue. PS Payment Revenue primarily consists of merchant and consumer fees. Cost of PS Payment Revenue primarily consists of commission to agents.

(4)

Payment Average Adjusted Net Revenue Yield is defined as PS Payment adjusted net revenue divided by Payment Services payment segment volume.

(5)

We measure the numbers of our kiosks and terminals on a daily basis, with only those kiosks and terminals being taken into calculation through which at least one payment has been processed during the day, which we refer to as active kiosks and terminals. The period end numbers of our kiosks and terminals are calculated as an average of the amount of active kiosks and terminals for the last 30 days of the respective reporting period.

(6)

Active 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.

(7)

Consumer Financial Services segment payment volume consists of the transaction amounts paid by SOVEST card customers to merchants offline and online (including, but not limited to the partner-merchants) or withdrawn through ATMs less the amount returned for corresponding reimbursements.

EX-99.2
Table of Contents

Exhibit 99.2

INDEX TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QIWI plc

Interim condensed consolidated financial statements

(unaudited)

 

Report of independent registered public accounting firm

     F-2  

Interim condensed consolidated financial statements

  

Interim condensed consolidated statement of financial position as of December 31, 2018 and June 30, 2019

     F-3  

Interim condensed consolidated statement of comprehensive income for the six months ended June 30, 2018 and 2019

     F-4  

Interim condensed consolidated statement of cash flows for the six months ended June 30, 2018 and 2019

     F-5  

Interim condensed consolidated statement of changes in equity, for the six months ended June 30, 2018 and 2019

     F-6  

Notes to interim condensed consolidated financial statements

     F-8  

 

F-1


Table of Contents

Report of independent registered public accounting firm

To the Shareholders and Board of Directors of Qiwi plc

Results of Review of Interim Financial Statements

We have reviewed the accompanying interim condensed consolidated statement of financial position of Qiwi plc and subsidiaries (“the Group”) as of June 30, 2019, the related interim condensed consolidated statements of comprehensive income and interim condensed consolidated statements of changes in cash flows and equity for the six-month periods ended June 30, 2019 and 2018, and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the interim financial statements for them to be in conformity with International Financial Reporting Standards (IFRS).

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Group as of December 31, 2018, the related consolidated statements of comprehensive income, consolidated statements of changes in consolidated cash flow statements and equity for the year then ended, and the related notes (not presented herein); and in our report dated March 28, 2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position of the Group as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLC

Moscow, Russia

August 16, 2019

 

F-2


Table of Contents

QIWI plc

Interim condensed consolidated statement of comprehensive income

June 30, 2019

(in millions of rubles)

 

     Notes      As of
December 31, 2018
(audited)
     As of
June 30, 2019
(unaudited)
 

Assets

        

Non-current assets

        

Property and equipment

     14, 15        1,074        2,021  

Goodwill and other intangible assets

        10,846        10,543  

Investments in associates

     12        812        760  

Investments in joint venture

     13        836        832  

Long-term debt securities and deposits

     23        497        1,880  

Long-term loans

     5, 23        230        248  

Other non-current assets

        110        98  

Deferred tax assets

        157        204  
     

 

 

    

 

 

 

Total non-current assets

        14,562        16,586  
     

 

 

    

 

 

 

Current assets

        

Trade and other receivables

     6        8,042        7,952  

Short-term loans

     5        6,890        6,671  

Short-term debt securities and deposits

     23        1,432        1,082  

Prepaid income tax

        112        52  

Other current assets

     8        929        992  

Cash and cash equivalents

     7        40,966        38,602  
     

 

 

    

 

 

 

Total current assets

        58,371        55,351  
     

 

 

    

 

 

 

Assets held for sale

        90        53  
     

 

 

    

 

 

 

Total assets

        73,023        71,990  
     

 

 

    

 

 

 

Equity and liabilities

        

Equity attributable to equity holders of the parent

        

Share capital

        1        1  

Additional paid-in capital

        1,876        1,876  

Share premium

        12,068        12,068  

Other reserve

        2,097        2,353  

Retained earnings

        9,091        11,070  

Translation reserve

        513        292  
     

 

 

    

 

 

 

Total equity attributable to equity holders of the parent

        25,646        27,660  

Non-controlling interests

        60        39  
     

 

 

    

 

 

 

Total equity

        25,706        27,699  
     

 

 

    

 

 

 

Non-current liabilities

        

Long-term lease liabilities

     15        —          547  

Long-term Customer accounts

     10        237        300  

Deferred tax liabilities

        744        736  
     

 

 

    

 

 

 

Total non-current liabilities

        981        1,583  
     

 

 

    

 

 

 

Current liabilities

        

Trade and other payables

     9        27,499        23,485  

Customer accounts and amounts due to banks

     10        17,868        17,894  

Short-term lease liabilities

     15        —          396  

VAT and other taxes payable

        428        230  

Income tax payable

        10        61  

Other current liabilities

     8        531        642  
     

 

 

    

 

 

 

Total current liabilities

        46,336        42,708  
     

 

 

    

 

 

 

Total equity and liabilities

        73,023        71,990  
     

 

 

    

 

 

 

 

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

F-3


Table of Contents

QIWI plc

Interim condensed consolidated statement of comprehensive income

June 30, 2019

(in millions of rubles)

 

            Six months ended (unaudited)  
     Notes      June 30, 2018     June 30, 2019  

Revenue:

        13,386       18,504  
     

 

 

   

 

 

 

Payment processing fees

        10,761       14,490  

Interest revenue calculated using the effective interest rate

     16        521       1,710  

Fees from inactive accounts and unclaimed payments

        629       916  

Other revenue

     16        1,475       1,388  
     

 

 

   

 

 

 

Operating costs and expenses:

        (11,106     (14,475
     

 

 

   

 

 

 

Cost of revenue (exclusive of depreciation and amortization)

     17        (6,515     (9,207

Selling, general and administrative expenses

     18        (4,041     (4,297

Depreciation and amortization

        (402     (690

Credit loss expense

     5, 6, 7, 21        (125     (281

Impairment of intangible assets

        (23     —    
     

 

 

   

 

 

 

Profit from operations

        2,280       4,029  
     

 

 

   

 

 

 

Share of loss of an associate and a joint venture

     12, 13        (19     (71

Other income and expenses, net

        (70     55  

Foreign exchange gain

        494       773  

Foreign exchange loss

        (377     (989

Interest income and expenses, net

        12       (11
     

 

 

   

 

 

 

Profit before tax

        2,320       3,786  

Income tax expense

     20        (442     (775
     

 

 

   

 

 

 

Net profit

        1,878       3,011  
     

 

 

   

 

 

 

Attributable to:

       

Equity holders of the parent

        1,860       2,987  

Non-controlling interests

        18       24  

Other comprehensive income

       

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

       

Exchange gain/(loss) on translation of foreign operations

        257       (227

Total other comprehensive income, net of tax effect of nil

        257       (227
     

 

 

   

 

 

 

Total comprehensive income, net of tax

        2,135       2,784  
     

 

 

   

 

 

 

Attributable to:

       

Equity holders of the parent

        2,117       2,766  

Non-controlling interests

        18       18  

Earnings per share:

       

Basic, profit attributable to ordinary equity holders of the parent

        30.49       48.49  

Diluted, profit attributable to ordinary equity holders of the parent

        30.31       48.02  

 

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

F-4


Table of Contents

QIWI plc

Interim condensed consolidated statement of cash flows

June 30, 2019

(in millions of rubles)

 

            Six months ended (unaudited)  
     Notes      June 30, 2018     June 30, 2019  

Cash flows from operating activities

       

Profit before tax

        2,320       3,786  

Adjustments to reconcile profit before tax to net cash flows (used in) /generated from operating activities

       

Depreciation and amortization

        402       690  

Foreign exchange loss/(gain), net

        (117     216  

Interest income, net

     16        (499     (1,289

Credit loss expense

        125       281  

Share of loss of an associate and a joint venture

        19       71  

Share-based payments

        160       256  

Loss from initial recognition

     18        —         91  

Other

        82       (10
     

 

 

   

 

 

 

Operating profit before changes in working capital

        2,492       4,092  

Decrease/(increase) in trade and other receivables

        1,559       (281

Increase in other assets

        (111     (35

Increase in amounts due to customers and amounts due to banks

        1,547       66  

Decrease in accounts payable and accruals

        (1,403     (3,179

(Increase)/decrease in loans issued from banking operations

        (1,761     220  
     

 

 

   

 

 

 

Cash received from operations

        2,323       883  

Interest received

        533       1,741  

Interest paid

        (46     (144

Income tax paid

        (414     (748
     

 

 

   

 

 

 

Net cash flow received from operating activities

        2,396       1,732  
     

 

 

   

 

 

 

Cash flows used in investing activities

       

Cash investment in associate and joint control companies

        (9     (200

Purchase of property and equipment

        (442     (291

Purchase of intangible assets

        (137     (116

Proceeds from sale of fixed and intangible assets

        —         134  

Loans issued

        (125     (345

Repayment of loans issued

        4       26  

Purchase of debt securities and placement of deposits

        (810     (2,468

Proceeds from settlement of debt instruments

        672       1,412  
     

 

 

   

 

 

 

Net cash flow used in investing activities

        (847     (1,848
     

 

 

   

 

 

 

Cash flows used in financing activities

       

Repayment of borrowings and lease liabilities

        —         (142

Dividends paid to owners of the Group

     19        —         (1,122

Dividends paid to non-controlling shareholders

        (25     (39
     

 

 

   

 

 

 

Net cash flow used in financing activities

        (25     (1,303

Effect of exchange rate changes on cash and cash equivalents

        527       (945
     

 

 

   

 

 

 

Net increase\(decrease) in cash and cash equivalents

        2,051       (2,364

Cash and cash equivalents at the beginning of the period

     7        18,435       40,966  
     

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     7        20,486       38,602  
     

 

 

   

 

 

 

 

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

F-5


Table of Contents

QIWI plc

Interim condensed consolidated statement of changes in equity

June 30, 2019

(in millions of rubles, except per share data)

 

    Notes     Attributable to equity holders of the parent     Non-controlling
interests
    Total
equity
 
  Share capital     Additional
paid-in
capital
    Share
premium
    Other
reserves
    Retained
earnings
    Translation
reserve
    Total  
  Number of
shares
issued and
outstanding
    Amount  

Balance as of December 31, 2018 (audited)

      61,451,513       1       1,876       12,068       2,097       9,091       513       25,646       60       25,706  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impact of adopting IFRS 16

    2       —         —         —         —         —         117       —         117       —         117  

Restated opening balance as of December 31, 2018

      61,451,513       1       1,876       12,068       2,097       9,208       513       25,763       60       25,823  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

      —         —         —         —         —         2,987       —         2,987       24       3,011  

Exchange differences on translation of foreign operations

      —         —         —         —         —         —         (221     (221     (6     (227
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —         —         —         —         —         2,987       (221     2,766       18       2,784  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share-based payments

    24.4       —         —         —         —         256       —         —         256       —         256  

Exercise of options

      186,066       —         —         —         —         —         —         —         —         —    

Dividends (18 RUR per share)

      —         —         —         —         —         (1,125     —         (1,125     —         (1,125

Dividends to non-controlling interests

      —         —         —         —         —         —         —         —         (39     (39
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019 (unaudited)

      61,637,579       1       1,876       12,068       2,353       11,070       292       27,660       39       27,699  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

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QIWI plc

Interim condensed consolidated statement of changes in equity  (continued)

 

    Notes     Attributable to equity holders of the parent     Non-controlling
interests
    Total
equity
 
  Share capital     Additional
paid-in
capital
    Share
premium
    Other
reserves
    Retained
earnings
    Translation
reserve
    Total  
  Number of
shares
issued and
outstanding
    Amount  

Balance as of December 31, 2017 (audited)

      60,932,654       1       1,876       12,068       1,462       5,715       (2     21,120       37       21,157  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impact of adopting IFRS 9

      —         —         —         —         —         (208     —         (208     —         (208

Restated opening balance as of December 31, 2017

      60,932,654       1       1,876       12,068       1,462       5,507       (2     20,912       37       20,949  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

      —         —         —         —         —         1,860       —         1,860       18       1,878  

Exchange differences on translation of foreign operations

      —         —         —         —         —         —         257       257       —         257  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      —         —         —         —         —         1,860       257       2,117       18       2,135  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share-based payments

    24.4       —         —         —         —         160       —         —         160       —         160  

Exercise of options

      61,505       —         —         —         —         —         —         —         —         —    

Dividends to non-controlling interests

      —         —         —         —         —         —         —         —         (25     (25
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2018 (unaudited)

      60,994,159       1       1,876       12,068       1,622       7,367       255       23,189       30       23,219  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)

 

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 six months ended June 30, 2019 were authorized for issue on August 9, 2019.

The Company was registered on February 26, 2007 as a limited liability Company OE Investments in Cyprus under the Cyprus Companies Law, Cap. 113. The registered office of the Company is Kennedy 12, Kennedy Business Centre, 2nd Floor, 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.

Sergey Solonin is the ultimate controlling shareholder of the Group as of June 30, 2019.

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

 

2.

Basis of preparation and changes to the Group’s accounting policies

2.1. Basis of preparation

The interim condensed consolidated financial statements for the six months ended June 30, 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as of December 31, 2018.

2.2. New standards, interpretations and amendments adopted by the Group

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 consolidated financial statements for the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies IFRS 16 Leases for the first time in 2019. As required by IAS 34, the nature and effect of changes to the Group’s financial statements as a result of adopting IFRS 16 Leases are disclosed below.

Several other amendments and interpretations are applied for the first time in 2019, but do not have an impact on the interim condensed consolidated financial statements of the Group.

 

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

F-8


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

2.

Basis of preparation and changes to the Group’s accounting policies (continued)

2.2. New standards, interpretations and amendments adopted by the Group (continued)

 

IFRS 16 - Leases

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.

The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’).

The Impact of adopting IFRS 16 on the statement of financial position (increase/ (decrease)) as at January 1, 2019:

 

     Amount  

Assets

  

Property and equipment (Right-of-use assets)

     1,082  

Deferred tax assets

     (29

Total assets

     1,053  

Liabilities

  

Long-term portion of lease liabilities

     704  

Short-term portion of lease liabilities

     364  

Trade and other payables

     (132

Total Liabilities

     936  
  

 

 

 

Net impact on equity, Including

     117  
  

 

 

 

Retained earnings

     117  

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

2.

Basis of preparation and changes to the Group’s accounting policies (continued)

2.2. New standards, interpretations and amendments adopted by the Group (continued)

 

a) Nature of the effect of adoption of IFRS 16

The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use assets). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use assets.

Lessees are also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee generally recognizes the amount of the remeasurement of the lease liability as an adjustment to the right-of-use assets.

Most contracts where the Group acts as a lessee (except for long-term contract for office premises lease), fall under the recognition exemption for being short-term leases. The Group did not recognize either assets or liabilities for them and will continue recognize expenditure arising from them as expenses on rent of premises and related utility expenses (within selling, general, and administrative expenses) as they are incurred.

Accounting of several long-term contracts of lease of office premises where the Group acts as a lessee, had a material effect on the consolidated financial statements of the Group. This effect resulted from recognition of lease liabilities and right-of-use assets and from derecognition of accounts payable related to these contracts.

The lease liabilities as at January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018 as follows:

 

     Amount  

Operating lease commitments as at December 31, 2018

     1,242  

Weighted average incremental borrowing rate as at January 1, 2019

     9

Discounted operating lease commitments at January 1, 2019

     1,202  

Less:

  

Commitments relating to short-term lease

     (134
  

 

 

 

Lease liabilities as at January 1, 2019

     1,068  
  

 

 

 

 

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

F-10


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

2.

Basis of preparation and changes to the Group’s accounting policies (continued)

2.2. New standards, interpretations and amendments adopted by the Group (continued)

 

b) Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application.

Lease liabilities

Lease liabilities are recognized at the date of initial application at the present value of the remaining lease payments discounted using the Group’s incremental borrowing rate at the date of initial application.

Right-of-use assets

Right-of-use assets are recognized at an amount equal to the lease liability adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application. No impairment is accrued on right-of-use assets as at the date of initial application.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of office premises and places for equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Lease payments on short-term leases are recognized as expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its leases to lease the assets for additional term. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

The Group included the renewal period as part of the lease term for leases of various premises in Moscow equal to the term of lease of the main office premises because it is highly unlikely that these premises will be left until the main office moves to another place.

The carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period are disclosed in note 15.

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

2.

Basis of preparation and changes to the Group’s accounting policies (continued)

2.2. New standards, interpretations and amendments adopted by the Group (continued)

 

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

 

   

Whether an entity considers uncertain tax treatments separately

 

   

The assumptions an entity makes about the examination of tax treatments by taxation authorities

 

   

How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

 

   

How an entity considers changes in facts and circumstances

The interpretation did not have an impact on the consolidated financial statements of the Group.

Amendments to IFRS 9: Prepayment Features with Negative Compensation

Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no impact on the consolidated financial statements of the Group.

Amendments to IAS 28: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures.

These amendments had no impact on the consolidated financial statements as the Group does not have long-term interests in its associate and joint venture.

 

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

F-12


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

2.

Basis of preparation and changes to the Group’s accounting policies (continued)

2.2. New standards, interpretations and amendments adopted by the Group (continued)

 

Annual Improvements 2015-2017 Cycle

 

   

IFRS 3 Business Combinations

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

 

   

IFRS 11 Joint Arrangements

A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

 

   

IAS 12 Income Taxes

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events. An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

 

   

IAS 23 Borrowing Costs

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

3.

Group structure

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,
2018
    As of
June 30,
2019
 

JSC QIWI (Russia)

   Operation of electronic payment kiosks      100     100

QIWI Bank JSC (Russia)

   Maintenance of electronic payment systems, money transfer, consumer and SME financial services      100     100

QIWI Payments Services Provider Ltd (UAE)

   Operation of on-line payments      100     100

QIWI International Payment System LLC (USA)

   Operation of electronic payment kiosks      100     100

Qiwi Kazakhstan LP (Kazakhstan)

   Operation of electronic payment kiosks      100     100

JLLC OSMP BEL (Belarus)

   Operation of electronic payment kiosks      51     51

QIWI-M S.R.L. (Moldova)

   Operation of electronic payment kiosks      51     51

QIWI ROMANIA SRL (Romania)

   Operation of electronic payment kiosks      100     100

QIWI WALLET EUROPE SIA (Latvia)

   Operation of on-line payments      100     —    

QIWI Management Services FZ-LLC (UAE)

   Management services      100     100

Attenium LLC (Russia)

   Management services      100     100

Postomatnye Tekhnologii LLC (Russia)

   Logistic      100     100

Future Pay LLC (Russia)

   Operation of on-line payments      100     100

Qiwi Blockchain Technologies LLC (Russia)

   Software development      100     100

QIWI Shtrikh LLC (Russia)

   On-line cashbox production      51     51

QIWI Platform LLC (Russia)

   Software development      100     100

QIWI Processing LLC (Russia)

   Software development      100     100

Joint ventures

       

Flocktory Ltd (Cyprus)

   Holding company      82     82

Flocktory Spain S.L. (Spain)

   SaaS platform for customer lifecycle management and personalization      82     82

FreeAtLast LLC (Russia)

   SaaS platform for customer lifecycle management and personalization      82     82

Associate

       

JSC Tochka (Russia)

   Digital services for banks      40     40

 

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

F-14


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

4.

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 Group’s CEO and its ultimate controlling shareholder, reviews selected items of segment’s statement of comprehensive income.

In determining that the CODM was the CEO, the Group considered the aforementioned roles of CEO responsibilities as well as the following factors:

 

   

The CEO determines compensation of our other executive officers while board of directors approves corporate key performance indicators (KPIs) and total bonus pool for those executive officers. In case of underperformance of corporate KPIs a right to make a final decision on bonus pool distribution is left with the BOD;

 

   

The CEO is actively involved in the operations of the Group and regularly chairs meetings on key projects of the Group; and

 

   

The CEO regularly reviews the financial and operational reports of the Group. These reports primarily include segment net revenue, segment profit before tax and segment net profit for the Group as well as certain operational data.

The financial data is presented on a combined basis for all key subsidiaries, joint ventures and associates representing the segment net revenue, segment profit before tax and segment net profit. The Group measures the performance of its operating segments by monitoring: segment net revenue, segment profit before tax and segment net profit. 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 operations, they are not linked to volume. The Group does not monitor balances of assets and liabilities by segments as CODM considers they have no impact on decision-making.

The Group has identified its operating segments based on the types of products and services the Group offers. Before January 1, 2018, the Group reported two segments: Payment Services (PS) and Consumer Financial Services (CFS). Since 2018, the Group additionally discloses: Small and Medium Enterprises (SME) segment and Rocketbank segment. In 2018, the Group completed the deal related to the acquisition of Rocketbank and started to invest in the new business activities which resulted in Rocketbank segment becoming significant. As a result, starting from 2018, CODM reviews segment net revenue, segment profit before tax and segment net profit separately for each of the following reportable segments: Payment Services, Consumer Financial Services, Small and Medium Enterprises and Rocketbank:

 

   

Payment Services (PS), operating segment that generates revenue through operations of our payment processing system offered to our customers through a diverse range of channels and interfaces;

 

   

Consumer Financial Services (CFS), operating segment that generates revenue through financial services rendered to individuals, currently presented by SOVEST installment card project;

 

   

Small and Medium Enterprises (SME), operating segment that generates revenue through operations of the Tochka business, which is focused on offering a broad range of services for small and medium enterprises through a multi-bank platform;

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

4.

Operating segments (continued)

 

   

Rocketbank (RB), operating segment that generates revenue through offering digital banking service including debit cards and deposits to retail customers.

For the purpose of management reporting, expenses related to corporate back-office operations were not allocated to any operating segment and are presented separately to CODM. Results of other operating segments and corporate expenses are included in Corporate and Other (CO) category for the purpose of segment reporting.

Management reporting is different from IFRS, because it does not include certain IFRS adjustments, which are not analyzed by the CODM in assessing the operating performance of the business. The adjustments affect such major areas as deferred taxation, share-based payments, foreign exchange gain/(loss) from revaluation of cash proceeds received from secondary public offering, effect from disposal of subsidiaries and fair value adjustments, such as amortization and impairment.

The segments’ statement of comprehensive income for the six months ended June 30, 2019, as presented to the CODM are presented below:

 

     Six months ended June 30, 2019  
     PS      CFS     SME      RB     CO     Total  

Revenue

     16,438        587       683        613       183       18,504  

Segment net revenue

     9,994        501       597        (295     133       10,930  

Segment profit/(loss) before tax

     7,420        (1,214     33        (1,245     (570     4,424  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Segment net profit/(loss)

     6,194        (967     11        (1,001     (619     3,618  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The segments’ statement of comprehensive income for the six months ended June 30, 2018, as presented to the CODM are presented below:

 

     Six months ended June 30, 2018  
     PS      CFS     SME     RB     CO     Total  

Revenue

     12,124        147       1,065       —         50       13,386  

Segment net revenue

     7,500        61       1,017       —         31       8,609  

Segment profit/(loss) before tax

     5,417        (1,706     (518     (211     (558     2,424  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment net profit/(loss)

     4,459        (1,381     (416     (170     (539     1,953  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment net revenue, as presented to the CODM, for the six months ended June 30, 2019 and 2018 is calculated by subtracting cost of revenue (exclusive of depreciation and amortization) from revenue and adding back payroll and related taxes as presented in the table below:

 

     Six months ended  
     June 30, 2018      June 30, 2019  

Revenue under IFRS

     13,386        18,504  

Cost of revenue (exclusive of depreciation and amortization)

     (6,515      (9,207

Payroll and related taxes

     1,738        1,633  
  

 

 

    

 

 

 

Total segments net revenue, as presented to CODM

     8,609        10,930  
  

 

 

    

 

 

 

 

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

F-16


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

4.

Operating segments (continued)

 

A reconciliation of segment profit before tax as presented to the CODM to IFRS consolidated profit before tax of the Group, for the six months ended June 30, 2019 and 2018, is presented below:

 

     Six months ended  
     June 30, 2018     June 30, 2019  

Consolidated profit before tax under IFRS

     2,320       3,786  

Amortization of fair value adjustments recorded on business combinations

     147       197  

Share-based payments

     160       256  

Foreign exchange (gain)/loss from revaluation of cash proceeds received from secondary public offering

     (203     185  
  

 

 

   

 

 

 

Total segments profit before tax, as presented to CODM

     2,424       4,424  
  

 

 

   

 

 

 

A reconciliation of segment net profit as presented to the CODM to IFRS consolidated net profit of the Group, for the six months ended June 30, 2019 and 2018, is presented below:

 

     Six months ended  
     June 30, 2018     June 30, 2019  

Consolidated net profit under IFRS

     1,878       3,011  

Amortization of fair value adjustments recorded on business combinations

     147       197  

Share-based payments

     160       256  

Foreign exchange (gain)/loss from revaluation of cash proceeds received from secondary public offering

     (203     185  

Effect from taxation of the above items

     (29     (31
  

 

 

   

 

 

 

Total segments net profit, as presented to CODM

     1,953       3,618  
  

 

 

   

 

 

 

Geographic information

Revenues from external customers are presented below:

 

     Six months ended  
   June 30, 2018      June 30, 2019  

Russia

     9,845        13,750  

Other CIS

     643        753  

EU

     988        1,716  

Other

     1,910        2,285  
  

 

 

    

 

 

 

Total revenue per consolidated statement of comprehensive income

     13,386        18,504  
  

 

 

    

 

 

 

Revenue is recognized according to merchants’ geographic place. The majority of the Group’s non-current assets is located in Russia.

The Group does not have any single external customer amounting to 10% or greater of the Group’s revenue both in the six months ended June 30, 2019 and in the six months ended June 30, 2018.

 

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

F-17


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

5.

Long-term and short-term loans issued

As of June 30, 2019, long-term and short-term loans issued consisted of the following:

 

     Total as of
    June 30, 2019    
     Expected credit
loss allowance
     Net as of
     June 30, 2019     
 

Long-term loans

        

Loans to legal entities

     248        —          248  
  

 

 

    

 

 

    

 

 

 

Total long-term loans

     248        —          248  
  

 

 

    

 

 

    

 

 

 

Short-term loans

        

Loans to individuals

     6        —          6  

Loans to legal entities

     1,452        (36      1,416  

Installment Card Loans

     6,359        (1,110      5,249  
  

 

 

    

 

 

    

 

 

 

Total short-term loans

     7,817        (1,146      6,671  
  

 

 

    

 

 

    

 

 

 

As of December 31, 2018, long-term and short-term loans consisted of the following:

 

     Total as of
December 31, 2018
     Expected credit
loss allowance
     Net as of
December 31, 2018
 

Long-term loans

        

Loans to legal entities

     235        (5      230  
  

 

 

    

 

 

    

 

 

 

Total long-term loans

     235        (5      230  
  

 

 

    

 

 

    

 

 

 

Short-term loans

        

Loans to individuals

     30        —          30  

Loans to legal entities

     1,612        (26      1,586  

Installment Card Loans

     6,096        (822      5,274  
  

 

 

    

 

 

    

 

 

 

Total short-term loans

     7,738        (848      6,890  
  

 

 

    

 

 

    

 

 

 

The amounts in the tables show the maximum exposure to credit risk regarding loans issued. The Group has no internal grading system of loans issued for credit risk rating grades analysis. Loans issued are not collateralized.

An analysis of the changes in the ECL allowances due to changes in corresponding gross carrying amounts for the six months ended June 30, 2019, was the following:

 

     Stage 1
Collective
     Stage 2
Collective
     Stage 3      Total  

ECL allowance as of January 1, 2019

     (216      (120      (517      (853
  

 

 

    

 

 

    

 

 

    

 

 

 

Changes because of financial instruments (originated or acquired)/derecognized during the reporting period

     (81      1        (213      (293

Transfers between stages

     127        (7      (120      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

ECL allowance as of June 30, 2019

     (170      (126      (850      (1,146
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

F-18


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

5.

Long-term and short-term loans issued (continued)

 

An analysis of the changes in the ECL allowances due to changes in corresponding gross carrying amounts for the six months ended June 30, 2018, was the following:

 

     Stage 1
Collective
     Stage 2
Collective
     Stage 3      Total  

ECL allowance as of January 1, 2018

     (175      (60      (194      (429

Changes because of financial instruments (originated or acquired)/derecognized during the reporting period

     (61      (4      (67      (132

Transfers between stages

     71        (9      (62      —    

Amounts written off

     —          —          8        8  
  

 

 

    

 

 

    

 

 

    

 

 

 

ECL allowance as of June 30, 2018

     (165      (73      (315      (553
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2019, and December 31, 2018, the Group had no overdue but not impaired loans.

 

6.

Trade and other receivables

As of June 30, 2019, trade and other receivables consisted of the following:

 

     Total as of
    June 30,    
2019
     Expected credit loss
allowance/Provision
for impairment
     Net as of
     June 30,     
2019
 

Cash receivable from agents

     5,650        (200      5,450  

Deposits issued to merchants

     2,030        (13      2,017  

Commissions receivable

     150        (21      129  

Advances issued

     268        (1      267  

Other receivables

     125        (36      89  
  

 

 

    

 

 

    

 

 

 

Total trade and other receivables

     8,223        (271      7,952  
  

 

 

    

 

 

    

 

 

 

As of December 31, 2018, trade and other receivables consisted of the following:

 

     Total as of
December 31,
2018
     Expected credit loss
allowance/Provision
for impairment
     Net as of
December 31,
2018
 

Cash receivable from agents

     4,207        (270      3,937  

Deposits issued to merchants

     2,975        (16      2,959  

Commissions receivable

     559        (21      538  

Advances issued

     287        (12      275  

Other receivables

     380        (47      333  
  

 

 

    

 

 

    

 

 

 

Total trade and other receivables

     8,408        (366      8,042  
  

 

 

    

 

 

    

 

 

 

The amounts in the tables show the maximum exposure to credit risk regarding Trade and other receivables. The Group has no internal grading system of Trade and other receivables for credit risk rating grades analysis. Receivables are non-interest bearing, except for agent receivables bearing, generally, interest rate of 20%-36% per annum and credit terms generally do not exceed 30 days. There is no requirement for collateral for customers to receive credit.

 

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

F-19


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

6.

Trade and other receivables (continued)

 

An analysis of the changes in the ECL allowances due to changes in the corresponding gross carrying amounts for the six months ended June 30, 2019 and June 30, 2018, was the following:

 

     2018     2019  

ECL allowance as of January 1,

     (578     (366
  

 

 

   

 

 

 

Changes because of financial instruments (originated or acquired)/ derecognized during the reporting period

     (18     23  

Amounts written off

     125       72  
  

 

 

   

 

 

 

ECL allowance as of June 30,

     (471     (271
  

 

 

   

 

 

 

 

7.

Cash and cash equivalents

As of June 30, 2019, and December 31, 2018, cash and cash equivalents consisted of the following:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Correspondent accounts with Central Bank of Russia (CBR)

     5,587        1,153  

Cash with banks and on hand

     13,119        3,788  

Short-term CBR deposits

     21,000        13,350  

Other short-term bank deposits

     1,267        20,313  

Less: Allowance for ECL

     (7      (2
  

 

 

    

 

 

 

Total cash and cash equivalents

     40,966        38,602  
  

 

 

    

 

 

 

The amounts in the table show the maximum exposure to credit risk regarding cash and cash equivalents. The Group has no internal grading system of cash and cash equivalents for credit risk rating grades analysis.

Since 2017 the Company has a bank guarantee and secured it by a cash deposit of U.S.$ 2.5 mln until July 31, 2019.

 

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

F-20


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

8.

Other current assets and other current liabilities

8.1 Other current assets

As of June 30, 2019 and December 31, 2018, other current assets consisted of the following:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Reserves at CBR*

     684        767  

Prepaid expenses

     156        141  

Other

     89        84  
  

 

 

    

 

 

 

Total other current assets

     929        992  
  

 

 

    

 

 

 

 

*

Banks are currently required to post mandatory reserves with the CBR to be held in non-interest bearing accounts. Starting from April 1, 2019, such mandatory reserves established by the CBR constitute 4.75% for liabilities in RUR and 7-8% for liabilities in foreign currency. The amount is excluded from cash and cash equivalents for the purposes of cash flow statement and does not have a repayment date.

The Group has no internal grading system of other current assets for credit risk rating grades analysis.

8.2 Other current liabilities

As of June 30, 2019 and December 31, 2018, other current liabilities consisted of the following:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Loyalty program liability

     473        534  

Other

     58        108  
  

 

 

    

 

 

 

Total other current liabilities

     531        642  
  

 

 

    

 

 

 

 

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

F-21


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

9.

Trade and other payables

As of June 30, 2019, and December 31, 2018, the Group’s trade and other payables consisted of the following:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Payables to merchants

     13,942        12,696  

Money remittances and e-wallets accounts payable

     6,571        6,771  

Deposits received from agents

     4,839        2,018  

Commissions payable

     601        506  

Accrued personnel expenses and related taxes

     562        739  

Provision for undrawn credit commitments (Note 21)

     84        100  

Other payables

     848        599  

Other advances received

     52        56  
  

 

 

    

 

 

 

Total trade and other payables

     27,499        23,485  
  

 

 

    

 

 

 

 

10.

Customer accounts and amounts due to banks

As of June 30, 2019, and December 31, 2018, customer accounts and amounts due to banks consisted of the following:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Due to banks

     1,391        1,553  

Individuals’ current/demand accounts

     10,844        10,730  

Legal entities’ current/demand accounts

     3,767        3,249  

Term deposits

     2,103        2,662  
  

 

 

    

 

 

 

Total customer accounts and amounts due to banks

     18,105        18,194  
  

 

 

    

 

 

 

Including long-term deposits

     237        300  
  

 

 

    

 

 

 

Customer accounts and amounts due to banks bear interest of up to 6%.

 

11.

Borrowings

During the six months ended June 30, 2019, the Group had available overdraft credit facilities with an overall credit limit of 1,460, with maturity from December 2019 to June 2020, and interest rate of up to 30% per annum. The balance payable under these credit lines as of June 30, 2019 was nil. Some of these agreements stipulated the right of a lender to increase the interest rate in case the covenants are violated.

 

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

F-22


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

12.

Investment in associates

The Group has a single associate: JSC Tochka.

QIWI Group assesses its share in the new entity at 45% according to its share in dividends and potential capital gains. The Group’s interest in JSC Tochka 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 JSC Tochka associate:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Associates’ statement of financial position:

     

Non-current assets

     149        523  

Current assets

     1,836        2,265  

including cash and cash equivalents

     1,326        1,406  

Non-current liabilities

     —          (90

Current liabilities

     (183      (1,010

including financial liabilities

     (183      (902
  

 

 

    

 

 

 

Net assets

     1,802        1,688  
  

 

 

    

 

 

 

Carrying amount of investment in associates (45%) of net assets

     812        760  
  

 

 

    

 

 

 

Associate’ revenue and net income for six months ended June 30, 2019 was as follows:

 

Revenue

     2,050  

Cost of revenues

     (931

Other income and expenses, net

     (1,234

including depreciation and amortization

     (28
  

 

 

 

Total net loss

     (115
  

 

 

 

Group’s share (45%) of total net loss

     (52
  

 

 

 

 

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

F-23


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

13.

Investment in joint venture

The Group has a single joint venture: Flocktory Ltd with subsidiaries. Three parties exercising joint control over this entity make unanimous decisions on major issues, including distribution and payment of dividends.

The Group’s interest in Flocktory joint venture 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 Flocktory joint venture:

 

     As of
December 31, 2018
     As of
June 30, 2019
 

Joint venture companies’ statement of financial position:

     

Non-current assets

     598        598  

Current assets

     191        226  

including cash and cash equivalents

     144        175  

Non-current liabilities

     —          (13

Current liabilities

     (20      (63

including financial liabilities

     (18      (56

Net assets

     769        748  

Group’s share of net assets

     631        613  

Goodwill

     205        219  
  

 

 

    

 

 

 

Carrying amount of investment in joint venture company

     836        832  
  

 

 

    

 

 

 

Joint venture’ revenue and net income for six months ended June 30 was as follows:

 

     Six months ended  
     2018      2019  

Revenue

     148        199  

Cost of revenues

     (68      (104

Other income and expenses, net

     (103      (118

including depreciation and amortization

     (39      (46
  

 

 

    

 

 

 

Total net loss

     (23      (23
  

 

 

    

 

 

 

Group’s share of total net loss

     (19      (19
  

 

 

    

 

 

 

 

14.

Property and equipment

During the six months ended June 30, 2019, the Group acquired fixed assets and rights of use of fixed assets in the amount of 308 (six months ended June 30, 2018: 442). The main additions were leasehold improvements, processing servers and office equipment.

As of June 30, 2019, the Group did not identify any indicators of property and equipment impairment.

 

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

F-24


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

15.

Leases

The Group has commercial lease agreements of office buildings and premises for equipment. The leases have an average life of between one and seven years. The contracts for a term of less than a year fall under the recognition exemption for being short-term leases. Total lease expense for the six months ended June 30, 2019 recognized under such contracts is 151. Future minimum lease rentals under non-cancellable operating lease commitments for office equipment premises for a term less than 1 year as of June 30, 2019 are 31.

For long-term contracts, right-of-use assets and lease liabilities were recognized. Right-of-use assets are included into property and equipment. There change from the date of initial recognition was as follows:

 

     Right-of-use assets
Office buildings
     Lease
liabilities
 

As at January 1, 2019 (Note 2.2)

     1,082        1,068  

Additions

     17        17  

Depreciation

     (187      —    

Interest expense

     —          42  

Payments

     —          (184
  

 

 

    

 

 

 

As at June 30, 2019

     912        943  
  

 

 

    

 

 

 

Including short-term portion

        396  

For the amount of rent expense recognized from short-term leases and variable lease payments for the six months ended June 30, 2019 and June 30, 2018 see note 18.

 

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

F-25


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

16.

Revenue

Other revenue for six months ended June 30 was as follows:

 

     Six months ended  
     June 30, 2018      June 30, 2019  

Cash and settlement service fees

     1,088        799  

Other revenue

     387        589  
  

 

 

    

 

 

 

Total Other revenue

     1,475        1,388  
  

 

 

    

 

 

 

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

 

     Six months ended  
     June 30, 2018     June 30, 2019  

Interest revenue calculated using the effective interest rate

     (521     (1,710

Interest expense classified as part of cost of revenue

     34       410  

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

     (12     11  
  

 

 

   

 

 

 

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

     (499     (1,289
  

 

 

   

 

 

 

 

17.

Cost of revenue (exclusive of depreciation and amortization)

 

     Six months ended  
     June 30,
2018
     June 30,
2019
 

Transaction costs

     4,177        5,904  

Payroll and related taxes

     1,738        1,633  

Cost of cash and settlement service fees

     51        628  

Interest expense

     34        410  

Other expenses

     515        632  
  

 

 

    

 

 

 

Total cost of revenue (exclusive of depreciation and amortization)

     6,515        9,207  
  

 

 

    

 

 

 

 

18.

Selling, general and administrative expenses

 

     Six months ended  
     June 30, 2018      June 30, 2019  

Compensation to employees, related taxes and other personnel expenses

     1,552        1,888  

Advertising, client acquisition and related expenses

     1,034        766  

Tax expenses, except of income and payroll relates taxes

     301        282  

Advisory and audit services

     302        291  

Rent of premises and related utility expenses

     276        164  

IT related services

     161        195  

Loss from initial recognition

     —          91  

Other expenses*

     415        620  
  

 

 

    

 

 

 

Total selling, general and administrative expenses

     4,041        4,297  
  

 

 

    

 

 

 

 

*

Other expenses for the six months ended June 2019, include costs related to Tochka multi-bank platform services in the amount of 181 (nil – for the six months ended June 2018).

 

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

F-26


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

19.

Dividends paid and proposed

Dividends paid and proposed by the Group are presented below:

 

     Six months ended  
     June 30, 2018      June 30, 2019  

Proposed, declared and approved during the period:

Six months ended June 30, 2019: Interim dividend for Q1 2019:

U.S.$ 17,252,078 or U.S.$ 0.28 per share

        1,125  

(Six months ended June 30, 2018: no dividends)

     —       

Paid during the period:

Six months ended June 30, 2019: Interim dividend for Q1 2019: U.S.$ 17,252,078 or U.S.$ 0.28 per share

        1,122  

(Six months ended June 30, 2018: no dividends)

     —       

Proposed for approval

(not recognized as a liability as of June 30):

Six months ended June 30, 2019: Interim dividend for 2019: U.S.$ 17,258,522 or U.S.$ 0.28 per share

        1,124  

(Six months ended June 30, 2018: no dividends)

     —       

Dividends payable as of June 30:

     —          —    

 

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

F-27


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

20.

Income tax

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

Cyprus

The Company is subject to 12.5% corporate income tax applied to its worldwide income.

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 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).

Dividends received from a non-resident (foreign) company are exempt from the levy of defense contribution if either the dividend paying company derives at least 50% of its income directly or indirectly from activities which do not lead to investment income (“active versus passive investment income test” is met) or the foreign tax burden on the profit to be distributed as dividend has not been substantially lower than the Cypriot corporate income tax rate (i.e. lower than 6.25%) at the level of the dividend paying company (“effective minimum foreign tax test” is met). The Company has not been subject to defense tax on dividends received from abroad as the dividend paying entities are engaged in operating activities.

The Russian Federation

The Company’s subsidiaries incorporated in the Russian Federation are subject to corporate income tax at the standard rate of 15% applied to income received from Russia government bonds and 20% applied to their other 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 subsidiary incorporated in Kazakhstan is 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:

 

     Six months ended  
     June 30, 2018      June 30, 2019  

Current income tax expense

     (407      (861

Deferred tax benefit/(expense)

     (35      86  
  

 

 

    

 

 

 

Income tax expense for the period

     (442      (775
  

 

 

    

 

 

 

 

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

F-28


Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

21.

Commitments, contingencies and operating risks

Operating environment

Russia’s economy has been facing significant challenges for the past few years due to the combined effect of various geopolitical, macroeconomic and other factors. The Russian economy has demonstrated modest growth rates while the population’s purchasing power has decreased. Currently, consumer spending generally remains cautious and consumer confidence is far from its peaks. A further decline in real disposable income and consumer purchasing power is expected in connection with the recent increase of VAT in Russia effective as of the beginning of 2019. As a result of the challenging operating environment in Russia, the Group has experienced slower payment volume growth. Further adverse changes in economic conditions in Russia could adversely impact the Group’s future revenues and profits and cause a material adverse effect on its business, financial condition and results of operations.

Some of Group’s agents, merchants or Tochka’s SME clients, although mostly not incorporated in Crimea, may have operations there. To date, management does not believe that any of the current sanctions as in force limit the Group’ ability to work with entities that may have operations in Crimea or operate in Crimea. Nevertheless, if the Group is deemed to be in violation of any sanctions currently in place or if any new or expanded sanctions are imposed on Russian businesses operating in Crimea the Group’s business and results of operations may be materially adversely affected.

Further, in the ordinary course of the Group’s business, it may accept payments from consumers to or otherwise indirectly interact with certain entities that are the targets of U.S. and/or EU sanctions. For example, the U.S., EU and other countries have adopted a package of economic restrictive measures imposing certain sanctions on the operations of various Russian banks, including VTB Bank and Gazprombank. Some of the Group’s subsidiaries hold bank accounts at the aforementioned banks as well as have overdrafts and bank guarantees with VTB Bank. Moreover, the Group may be associated with U.S.- designated banks due to accepting payments for them from consumers in the ordinary course of business, even though the Group may not have any direct contract relationships with them.

In addition, because of the nature of the Group’s business, management does not generally identify the Group’s customers where there is no express requirement to do so under Russian anti-money laundering legislation. Therefore, management is not always able to screen them against the Specially Designated Nationals and Blocked Persons List published by OFAC and other sanctions lists.

Even if the Group is not subjected to U.S. or other economic sanctions, its participation in the Russian financial system and indirect interaction with sanctioned banks and potential interaction with designated individuals may adversely impact the Group’s reputation among investors.

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

21.

Commitments, contingencies and operating risks (continued)

Operating environment (continued)

 

The Group contracts with some of international merchants in U.S. dollars and other currencies such as Euros. Recently it started to encounter difficulties in conducting such transactions, even with respect to largest and most well-known international merchants, due to the refusal of an increasing number of the Group’s U.S. relationship banks and the correspondent U.S. banks of the Group’s non-U.S. relationship banks to service U.S. dollar payments. Even though the Group still maintains a number of U.S. dollar accounts with various financial institutions, at the same time the Group is already conducting a portion of U.S. dollar transactions with international merchants in other currencies, bearing additional currency conversion costs. No assurance can be given that such institutions or their respective correspondent banks in the U.S. will not similarly refuse to process the Group’s transactions, thereby further increasing the currency conversion costs that the Group has to bear or that international merchants will agree to accept payments in any currency, but the U.S. dollar in the future. If the Group is not able to conduct transactions in U.S. dollars, it may bear significant currency conversion costs or lose some merchants who will not be willing to conduct transactions in currencies other than the U.S. dollars, and the Group’s business, financial condition and results of operations may be materially adversely affected. Management can give no assurance that similar issues would not arise with respect to the Group’s transactions in other currencies, such as the Euro, which could have similarly adverse consequences.

In recent years, the CBR has considerably increased the intensity of its supervision and regulation of the Russian banking sector. Starting October 2013 the CBR has launched a campaign aimed at cleansing the Russian banking industry, revoking the licenses from an unusually high number of banks, which resulted in turmoil in the industry, instigated bank runs on a number of Russian credit institutions, and severely undermined the trust that the Russian population had with private banks. In addition, in the course of 2017 three of Russia’s largest private banks, Otkritie Bank, Binbank and Promsvyazbank, were all bailed out and taken over by the CBR.. License revocations have continued throughout 2018 and early 2019, again with some major players impacted. This can be expected to result in reduced competition in the banking sector (while at the same time putting alternative payment solution providers such as itself in the position of having to predominantly compete with the government itself), increased inflation and a general deterioration of the quality of the Russian banking industry. With few exceptions (notably the state-owned banks), the Russian banking system suffers from weak depositor confidence, high concentration of exposure to certain borrowers and their affiliates, poor credit quality of borrowers and related party transactions

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

21.

Commitments, contingencies and operating risks (continued)

Operating environment (continued)

 

As part of its business operations, the Group provides payment processing services to a number of merchants in the betting industry. Processing payments to such merchants represents a significant portion of the Group’s revenues. Processing such payments generally carries higher margins than processing payments to merchants in most other categories. Moreover, the repayment of winnings by such merchants to customers also serves as an important and economically beneficial Qiwi Wallet reload channel and new customer acquisition tool. The Group’s operating results will continue to depend on merchants in the betting industry and their use of the Group’s services for the foreseeable future. The betting industry is subject to extensive and actively developing regulation in Russia, as well as increasing government scrutiny. In 2016 QIWI Bank established a TSUPIS together with one of the self -regulated associations of bookmakers in order to be able to accept such payments. If any merchants engaged in the betting industry are not able or willing to comply with the Russian betting legislation or if they decide to cease their operations in Russia for regulatory reasons or otherwise or shift to another payment processor (TSUPIS), the Group would have to discontinue servicing them and would lose associated volumes and income. Moreover, if the Group is found to be in non-compliance with any of the requirements of the applicable legislation, it could not only become subject to fines and other sanctions, but could also have to discontinue to process transactions that are deemed to be in breach of the applicable rules and as a result lose associated revenue streams. Effective January 1, 2018, relevant legislation has been supplemented with the concept of government blacklisting of betting merchants that have been found to be in violation or allegedly are not in compliance with applicable Russian laws, and the requirement for credit institutions to block any payments to such blacklisted merchants.

A substantial part of the Russian population continues to rely on cash payments, rather than credit and debit card payments or electronic banking. The Group’s business has developed as a network of kiosks and terminals allowing consumers to use physical currency for online payments While the Group has since largely outgrown that model, kiosks and terminals network remains a significant part of the Group’s infrastructure as a reload and client acquisition channel for Qiwi Wallet.

Certain factors may further contribute to a decline in the use of kiosks and terminals, including regulatory changes, increases in consumer fees imposed by the agents and development of alternative payment channels. Based on available data, management believes that the overall number of and the use of kiosks declined substantially in 2015 versus prior years and continues to decline slightly since then. The decline in 2015 was a result, among other things, of enhanced scrutiny by the CBR over the compliance by the agents with legislation that requires them to remit their proceeds to special accounts. Other statutory requirements that could have a similar effect on the Group’s business if fully enforced are the amendments to the Federal Law of the Russian Federation No. 54-FZ “On the use of cash registers in cash payments and (or) settlements with the use of payment cards”, dated May 22, 2003 (as amended). In particular, the law mandates that all kiosks (subject to certain exceptions) should be equipped with new or modernized cash registers. There can be no assurance that the Group’s agents are and will continue to be fully in compliance with these requirements, which could cause a further reduction of the Group kiosk network. Moreover, failure to comply with such enhanced control measures by the Group or the Group’s agents could result in the CBR imposing fines or restrictions on the Group’s activities.

 

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

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Table of Contents

QIWI plc

Notes to interim condensed consolidated financial statements (unaudited)  (continued)

 

21.

Commitments, contingencies and operating risks (continued)

 

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 which are discussed below suggest that the tax authorities are taking a more assertive position in their 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 in the future.

On November 24, 2016, the OECD published the multilateral instrument (“MLI”) which introduces new provisions to existing double tax treaties limiting the use of tax benefits provided thereof. For example, the reduced rate on dividends provided under a double tax treaty shall be denied if the conditions for holding equity interest or shares by the time of the dividend payout are met over less than a 365-day period. Thus, when determining tax consequences several sources of legislation will now need to be considered, namely the domestic tax law, double tax treaties and MLI provisions, which have been adopted by states-parties to the relevant double tax treaty. To date the MLI has not been ratified by Russia. The draft law on ratification of the MLI has been submitted to the Russian State Duma (the low chamber of the parliament). However, it is likely that the application of the double tax treaties, which Russia is a party to, i.e. the double tax treaty between Russia and Cyprus, will be significantly limited by the MLI.