Annual Report 2014
FEDERAL PASSENGER COMPANY
Operating and Financial Results Analysis
International activities
Investment Activities
Corporate Governance
Sustainable Development
Appendices
JSC FPC investment attractiveness Monopolistic position on railway passenger longdistance transportation market in Russia
High social and strategic importance of the Company for the state as the main transport operator for long and middle distance covering the majority of Russia; including regions with extreme climatic and natural conditions and absence of road and air transport infrastructure
Low competition on domestic railway passenger transportation market among international companies due to challenges in entering the Russian market
Operational Performance Indicators
114.0
107.0
Passengers transported, mln passengers
114.2 94.6
94.6
108.6
16 98.7
mln passengers
passengers/km
–9.1 %
2014
2012
19,308
57.5 17,210
77 33
52.0
17,210 77
2014
2012
78 *
2013
Пла
Дву
29
Ваг
Про
290
169 57
50 50
48.2 73 16
33 2013
Куп
82
48.2
2012 | 2013 | 2014
%
Compartment and sleeping carriages
17
Second-class carriage
–7.3 p.p.
Double-decker carriage
29
RIC carriages
30 2012
2012 | 2013 | 2014
17
78
2014
cars
–10.9 %
73
30
FPC share in Russian passenger turnover for all types of comparable transport
Operational railcar fleet, cars
20,205
2013
2012 2013 2014
2013
98.7
bn
–11.6 % 2012
Rolling Stock Acquisition, cars
2012 2013 2014
Passenger turnover, bn passengers/km
Other
2014
290
Excluding trains formed in the CIS and the 82States Baltic
169 57 Federal passenger company 2014 Annual Report
4
Strategic importance in implementation of longterm objectives of RZD state holding
Tariff regulation for long-distance passenger transportation by state and income loss compensation paid by the state
Conservative finance policy and low debt ratio
Financial Performance Indicators
183.0
196.1
185.6
185.6
EBITDA (RUB bn) and EBITDA Profitability, % 10.1
10.4 8.1
–2.3 p.p.
11.5
8.1
RUB bn
–5.3 %
Income Mix (income share), %
21.5
22.7
16.9
10.6
16.9
10.3
RUB bn
2013
2012
2014
2013
4.9 1.9
–3.0 p.p.
–0.4
4.1 2.4
RUB bn
0.4 0.05
–0.4 2012
2013
2014
Sales profitability (including subsidies) Net income
42.9
1.04
0.06 10,3 2012
2013
11,5
45,8 2011 44,3
0.5
10,6
2012 | 2013 | 2014 Passenger transportation, deregulating sector Passenger transportation, regulating sector
0.09
Total debt / EBITDA 42,9 Total debt / Proceeds
42,7 46,8
45,1
Пассажи регулир
46.8
Total Debt Ratio Against EBITDA and Proceeds
2012 2013 2014
4.0
Пассажи дерегул
42.7 44.3
2014
EBITDA profitability EBITDA
Net Income (RUB bn) and Sales Profitability Including Subsidies %
2012 | 2013 | 2014
45.8
–25.6 % 2012
2012 2013 2014
Total Income, RUB bn
Income from other activity
45.1
Доходы деятель
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Company Profile Murmansk
Kaliningrad Riga
Archangelsk
St. Petersburg
Vorkuta Norilsk Vologda Salekhard Moscow
Novy Urengoy
Kostroma
Kiev
Kirov
Voronezh
Ulyanovsk
Nizhnevartovsk
Ekaterinburg Samara Rostov-on-Don
Ufa Volgograd
Chelyabinsk
Tomsk
Krasnoyarsk
Krasnodar Omsk
Elista Vladikavkaz
Novosibirsk
Astrakhan
Tbilisi Baku
86 ,000
km The railway infrastructure of JSC Russian Railways (RZD) forms
the basis of JSC FPC route network. JSC FPC railway infrastructure has several routes within Russia where there is no other alternative travel mode, for example: Tynda – Komsomolsk, Petrozavodsk – Kostomuksha, Kamyshin – Moscow, Tomsk – Bely Yar.
77
regions of the Russian Federation JSC FPC provides passenger rail transportation in all regions of the Russian Federation with existing railway infrastructure.
Types of activity
5
1
2
3
Rail passenger transportation on domestic routes in the regulated sector • Passenger transportation in open carriages; • Passenger transportation in general carriages; • Passenger transportation on multiple-unit trains.
Passenger transportation on domestic routes in the deregulated sector • First-class and lounge-car passenger transportation; • Passenger transportation in sleeping cars; • Passenger transportation in compartment carriages; • Passenger transportation in carriages with seating; • Passenger transportation ‘by special order’ and regular tourist trips; • Provision of third-party railcars in JSC FPC trains on domestic routes.
Long-distance international passenger transportation • Passenger services on international routes; • Provision of third-party railcars in JSC FPC trains on international routes.
Federal passenger company 2014 Annual Report
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Passenger Turnover by Train Type, % JSC Federal Passenger Company (FPC) is a national passenger rail carrier of the Russian Federation, and an antimonopoly regulation entity
Express season train 8.7 11.2 10.5
Passenger all-year 17.9 19.8 21.2
Passenger season 2.6 4.2 5.3
Passenger single destination 3.0 0.5 1.1
Passenger local
Khabarovsk
3.8 4.3 5.6
Other 1.6 0.9 0.9
Blagoveshchensk
Express all-year 62.5 59.0 55.4
Chita Ulan-Ude Vladivostok
2012
2013
2014
Irkutsk
Passenger Turnover by Car Type % Compartment
17
countries in Europe and Asia In addition to domestic routes, JSC FPC operates passenger-through trains on direct and transit routes in 17 countries in Europe and Asia on 32 international routes in Austria, Bulgaria, Hungary, Germany, Italy, China, Democratic People’s Republic of Korea, Mongolia, Monaco, Poland, Romania, Slovenia, Slovakia, Finland, France, Croatia, and Czech Republic.
29.3 26.4 27.0
Sitting 0.6 0.8 0.8
Sleeper, soft 1.2 1.1 0.9
Third-class 68.9 71.8 71.2 2012
4
5
Baggage, freight and mail transportation • Baggage transportation; • Freight transportation; • Provision of freightforwarding companies’ railcars in JSC FPC trains, including Federal State Unitary Enterprise Pochta Rossii (Russian Mail Service).
Other types of business activity include: • Repair and maintenance of clients’ rolling stock; • Provision of additional services in trains; • Other types of business activity; • Lease of rolling stock; • Lease of real estate and equipment; • Provision of company property for advertising displays; • Catering and food services; • Other.
6
Federal passenger company 2014 Annual Report
2013
2014
Average Income from One Passenger, RUB 1,445
1,637
1,699 117
107
TOTAL
1,699
91
RUB. 1,354
2012
1,530
1,582
2013
+13.3 %
2014
Transportation Additional services in trains
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Contents
4
18
40
General Information
Company Strategy
Business Model and Assets
4 6 8 10 12 14
Company History
16
Message from the General Director
JSC FPC peer-companies
20 26 27
Types of FPC rail cars
Mission, vision, and strategy Strategy implementation results
42 44
Business Model Map of Assets
Strategic projects implementation results and plans for 2015
Service for passengers Message from the Chairman of the Board of Directors
78
98
106
Operating and Financial Results Analysis
Management of Investment Operations
International Activities
80 82 83 86 91 92 93 94 96 97
2
Passenger Transportation
Operating Results Analysis Financial Results Income Expenses Other income and expenditure Balance Sheet Total Debt Policy Payables and receivables Cash flows Financial analysis
Federal passenger company 2014 Annual Report
100 101 103 105 105
Investment and Investment Ranking System Investment Structure Priority Investments Mid-term investment Procurement
108
International activities
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
46
54
62
Market Overview
Risk Management
Quality and Safety
48
Market overview
56
Risk Management
64
Quality
49
Domestic transport market
57
JSC FPC Risk Map
74
Safety
51
International transport market
52
Tariff policies
53
The JSC FPC interaction with Russian Federation Public Authorities
112
142
164
Corporate Governance
Sustainable Development
Appendices
114 115 118 120 121 128 134 140
JSC FPC Corporate Governance Shareholder Stock and Dividend Policy Corporate Governance Model Shareholder Meeting Board of Directors Committies of the Board of Directors
144
Personnel and Social Policy
157
Energy Consumption and Environment Protection
162
Charity Work
Appendices
166 170 172
Audit report Financial results Corporate Policy and Corporate Code Correspondence
185 187
Glossary and List of Abbreviations Limitations of Liability
Management of JSC FPC Control and Audit
Federal passenger company 2014 Annual Report
3
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Company History 2010
2011
Major Achievements
JSC FPC was included in the Register of Natural Monopolies.
JSC FPC officially joined the International Organisation for Co-operation between Railways (OSJD), was admitted to membership in the International Union of Railways (IUR).
State and Restructuring
Restructuring of long-distance passenger infrastructure under Stage III of the Railway Restructuring Programme was completed.
Regulatory and legal framework for shortfall income calculation was completed.
JSC FPC started independent operation.
All domestic JSC FPC carriages support on-line registration.
Business Development
JSC RZD website facilitates purchase of e-tickets for JSC FPC trains via mobile device. Controlling share of RZD Travel LLC was acquired in order to expand JSC FPC presence on tourism market in railway sector.
Railway Operator
4
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
2012
2013
2014
JSC FPC was awarded the 2012 Company of the Year National Award by RBC Information Systems.
JSC FPC received status of observer at OSJD that gives it the right to represent the Company at the meetings of OSJD working bodies, thus strengthening the position of the Company on the international transportation services market.
JSC FPC was assigned a credit rating by the leading rating agencies.
Cooperation Agreements concluded with the Governments of the Republic of Karelia, Komi, and Ingushetia.
Deputy Prime Minister of the Russian Federation approved the Plan for the Development and Deployment of a Mechanism for the Provision of Long-Term Subsidies of Long-Distance Passenger Service Fares.
Tariffs for travelling in sopen and general carriages were reduced resulting from the Resolution of the Federal Tariff Service of Russia.
JSC FPC Development Strategy was approved until 2030.
Double-decker shuttle launch in MoscowAdler route.
Pilot project on multimodal transportation was implemented (Moscow-Valuyki).
Ticket sales on credit service was launched.
Co-branding card project launch in cooperation with VTB 24 Bank.
Advanced implementation in fitting trains with total turnover technology. A logistics company in freight and post transportation OJSC FPC-Logistics was created. Profitability control system and loyalty programme RZD Bonus were launched. Car carrier was commissioned.
Unified maintenance depot for doubledecker rolling stock was launch at Mineralnye Vody depot. System for e-ticket purchases and returns was simplified, English version of the website for ticket purchase was launched.
Interest payments for double-deck carriages acquisition was initiated.
JSC FPC fully integrated baggage transportation in a separate compartment. Lastochka electric train started operation. Expense optimisation programme resulted in RUB 15 bn in savings. Total result for 2010-2014 totalled RUB 39bn.
High-Speed Traffic Improvement Programme was implemented.
Integrated Mobility Provider
Federal passenger company 2014 Annual Report
5
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Passenger transportation during
608,000
12,000
Transported from January 25 through February 25 by FPC trains to/from Sochi (Games venue)
Transported based on the requests of the Organising Committee for the Olympic Games
passengers
6
volunteers
All capacities stipulated by the Olympic train schedule were used to transport passengers (20 train pairs).
Based on the requests of the Organising Committee for the Olympic Games, over 12,000 volunteers were transported.
From January, 25 to February, 25 FPC trains carried more than 608,000 passengers to Sochi – the capital of the Olympics – and back. This is 65% higher as compared to the same period last year. 38,000 passengers where carried by double-decker railcars.
During the Olympics, over 3,500 children were transported, including 1,100 participants of the joint Children’s Choir of Russia participating in the Olympic Games closing ceremony.
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
the 22nd Olympic Games in Sochi in 2014
6,634 rail cars
used in the peak period during the Olympics with over 300 rail cars with special separate compartments for people with reduced mobility
The Olympic train schedule required that all rail capacity was made available for passenger transport (20 train pairs per day). The following capacity was used in the train transportation peak time. 6,634 rail cars (316 – sleeping and VIP carriages, 2,395 – compartment carriages, 3,619 – open carriages and 304 interregional cars).
100% The Olympic train schedule required that all rail capacity was made available for passenger transport (20 train pairs per day).
Transportation tariffs in the deregulated segment during the Olympic Games to/from railway stations in the Krasnodar Territory were recorded at the 2013 level without a flexible regulation schedule. Russia’s FTS indexed the tariffs for the regulated segment by 4.2% YOY and set a schedule with a 0.91 factor applied for the entire period of the Olympics. Federal passenger company 2014 Annual Report
7
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
JSC FPC peer-companies*
JSC FPC
3,072 EUR mln
1,648 EUR mln
98.7 mln people
30.9 mln people
SC FPC’s business activity features a complete range of business processes: acquisitions, rolling stock maintenance and repair, sales organisation, collection of revenue, management and administration, and IT and communications. JSC FPC has 15 branches and an extensive network of depots, railcar sites and facilities and personnel supporting all the company’s business processes. JSC FPC income comprises passenger transportation less income from baggage and freight transportation.
Amtrak business includes all types of business processes associated with transportation, including repair deports and facilities in 12 states of the USA. The company also controls locomotives and infrastructure of high-speed passenger service in the NorthWestern corridor.
total revenue
passengers transported
*
8
Amtrak
total revenue
passengers transported
Data on DB and SNCF is taken from 2013 Annual Reports; on Amtrak – from press release on the 2014 results. FPC and Amtrak income recounted in EUR based on average weighted exchange rate equalling RUB 50.6 and USD 1.3284 in 2014.
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
DB Bahn Long Distance
Corporate Governance
Sustainable Development
Appendices
SNCF Voyages
4,083 EUR mln
6,831 EUR mln
130.9 mln people
126.9 mln people
DB Bahn Long Distance – several companies comprising a business unit of Deutsche Bahn group, including several carriers with broad geography and types of activity (day/night trains, tourism, train catering, marketing, and sales). Rolling stock repair, maintenance, and management, IT and communication are provided by other Deutsche Bahn unit of specialising companies – DB Services.
Voyages is a business unit at SNCF holding, comprising several companies providing railway and bus transportation in Europe and specialising companies in sales, customer relations, IT, rolling stock control. Repair is not included in the unit’s activities and provided by Masteris that provides services for SNCF and third party customers from all over Europe.
total revenue
passengers transported
total revenue
passengers transported
Federal passenger company 2014 Annual Report
9
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Types of FPC rail cars Average life of railcar is not less than 40 years Passenger double-decker compartment carriage with sleeping seats. Model 61-4465
Passenger non-compartment carriage. Model 61-4447
64 people 160 km/hour
54 people 160 km/hour
•
environment-friendly toilets
•
environment-friendly toilet system
•
air conditioner
•
air conditioner
•
audio and video broadcasting system
•
fire-fighting unit with a water reserve from the water supply system
•
drinking water dispenser
•
train and rail car control and monitoring system (CMS)
Passenger sleeping car for RIC international routes. Model 61-4476
Passenger rail carriage with seating. Model 61-4458
32 people 160– 200 km/hour
60 people 160 km/hour
The average service life of a rail car is at least 40 years
•
environment-friendly toilets
•
climate control system (heating, ventilation, and cooling)
•
air conditioner
•
water supply system
•
diagnostic information accumulation and transfer system
•
environment friendly toilet and shower
•
train attendant call buttons
•
reading lamps
•
train and rail car control and monitoring system (CMS)
•
power sockets for cellular phone and laptop charger
•
audio and video broadcasting system
•
loud-speaker with a volume regulator
•
drinking water dispenser
Lastochka fast train (Desiro RUS)
Passenger compartment carriage for train sets. Model 61-4462
443 people 160 km/hour
36(18) people 160 km/hour
10
•
environment-friendly toilets (motor rail cars)
•
air conditioner — separate units in each compartment and passenger cabin
•
low platforms (200mm) for platform entrance/exit — pull-out steps
audio and video broadcasting system
•
passive passenger security system
train and rail car control and monitoring system (CMS)
•
floor-standing racks for large-sized cabin luggage
•
environment-friendly toilets
•
air conditioner
•
drinking water dispenser
•
diagnostic information accumulation and transfer system
• •
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Rail car with four separate lux compartments and a bar
A luxury rail car has four passenger lux compartments and a bar. Designed for travelling large distances in comfortable conditions. There are two sleeping seats in each separate compartment: a settee transformed in a full-sized bed 120cm wide and a 90cm wide upper berth. The separate compartment is equipped with a spacious closet for clothes and luggage, a folding table, an arm-chair, audio- and video system. There is a toilet room with a wash stand and a shower cubicle, and a vacuum toilet. The floor in the toilet room is heated.
160
km/hour
The rail car is equipped with a hot and cold water ventilation and individual air conditioning system, air decontamination system, fire-fighting unit on the electrical equipment panel, and fire alarm.
Rail car with five separate lux compartments A luxury rail car has five passenger lux compartments. Designed for travelling large distances in comfortable conditions. There are two sleeping seats in each separate compartment: a settee transformed in a full-sized bed 120cm wide and a 90cm wide upper berth. The separate compartment is equipped with a spacious closet for clothes and luggage, a folding table, an arm-chair, audio- and video system. There is a toilet room with a wash stand, a shower cubicle, and a vacuum toilet. The floor in the toilet room is heated.
160 km/hour
The rail car is equipped with a hot and cold water supply system and ventilation and individual air-conditioning, air decontamination, fire-fighting unit on the electrical equipment panel, and fire alarm.
Rail car with six luxe compartments Luxury rail car has six passenger compartments and is used on long-distance routes proving comfortable conditions for passengers. There are two sleeping seats in each separate compartment: a settee transformed in a full-sized bed 120cm wide and a 90cm wide upper berth. The separate compartment is equipped with a spacious closet for clothes and luggage,a folding table, an arm-chair, audio- and video system. There is a toilet room with a wash stand, a shower cubicle, and a vacuum toilet. Heated floor in the toilet room.
160
The rail car is equipped with a hot and cold water supply system, ventilation and individual air conditioning system, air decontamination system, fire-fighting unit on the electrical equipment panel, and a fire alarm. km/hour
Federal passenger company 2014 Annual Report
11
Service for passengers
LUX
SLEEPING CARS WITH SERVICE
MENU
MENU
RADIO
FOR AN ADDITIONAL FEE
FOR AN ADDITIONAL FEE
• In room service of meals from the restaurant car
• Restaurant car services, including ordering meals to be delivered to the compartment
• On-train shop
• Coffee and tea • On-train shop
SLEEPING CARS
RADIO
FOR AN ADDITIONAL FEE • Restaurant car services, including ordering meals to be delivered to the compartment • Coffee and tea • On-train shop • Sanitary kit
Deluxe berths Electronic card key
MENU
Water from the dispenser
Bathrobe
Table d’hote dishes
Door interlocks
Hot meals
Bed cover
Kid’s menu
Display and DVD player in a separate compartment
RADIO
Central radio Printed press
You can order tea, coffee, other beverages and confectionery from the train attendant en route. If you decide to visit a restaurant car, a train attendant will call for a waiter. Drinking water is provided at any time throughout the journey in the rail cars of any class. Train attendant will wake you half an hour before train arrival or at another time you choose. Passengers arriving / leaving in/from Moscow / St. Petersburg can order a taxi from the train attendant en route. When travelling by train abroad you must comply with the visa, customs, and luggage rules.
CARRIAGES WITH SEATING WITH SERVICE
COMPARTMENT CARRIAGES WITH SERVICES RADIO
FOR AN ADDITIONAL FEE
FOR AN ADDITIONAL FEE
• Restaurant car services, including ordering meals to be delivered to the compartment
• Coffee and tea • On-train shop
• Coffee and tea
• Sanitary kit
• On-train shop
OPEN CARRIAGES /CARRIAGES WITH SEATING
COMPARTMENT CARRIAGES
RADIO
RADIO
FOR AN ADDITIONAL FEE
FOR AN ADDITIONAL FEE
• Restaurant car services, including ordering meals to be delivered to the compartment
• Restaurant car services • Coffee and tea
• Coffee and tea
• On-train shop
• On-train shop
• Sanitary kit
• Sanitary kit
Central air conditioning
Drinking water
Personal air conditioner
Cold meals
Bed sheets
Lap blanket
Turkish towel
Coffee and tea
Sanitary kit
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Message from the Chairman of the Board of Directors
Dear Colleagues,
In 2014, JSC Federal Passenger Company celebrated five years of operation as an independent business entity, as part of Russian Railways Holding.
Since the start of operation, JSC FPC has fulfilled a socially significant role as Russia’s long-distance passenger carrier, connecting cities, regions, and countries. The Company not only provides public access to transport and travel, but also contributes to the further development of sustainable economic ties. Last year, complex macro-economic and geopolitical factors impacted on business performance of all participants of rail passenger carrier market, resulting in reduced passenger numbers. In reaction to the changing market conditions, the Company adopted various measures to cut costs and curb losses, setting up an Anticrisis Initiative, which featured projects to
14
Federal passenger company 2014 Annual Report
enhance operations in the Company’s key business areas. These tangible anti-crisis measures enabled the Company to reduce costs by 1.8% compared with the 2013 level. A well thought-out marketing strategy remains an important tool in attracting passengers to the Company. Throughout the year, various marketing campaigns and promotions were run by JSC FPC for selected domestic train compartment carriages and the number of trains being used under the Dynamic Pricing scheme was increased. As a result, revenue from sleeper and compartment rail journeys on domestic routes was maintained at the 2013 level.
RUB
24.5
billion was allocated to
investment in 2014
Share of the investments in the acquisition of new rolling stock
86.1Â %
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Valeriy I. Reshetnikov
It should be noted that in 2014, JSC FPC succeeded in increasing revenue from other types of business activity, which included the repair and maintenance of customers’ rolling stock, the provision of extra services on trains and the leasing of rolling stock. The Company is constantly striving to improve the quality and expand the range of services it provides. Every year, a large proportion of the Company’s investment initiative is aimed at renewing rolling stock. In 2014, RUB 24.5 billion was allocated for investment, 86.1% of which was used to fund the acquisition of new rolling stock. Last year, JSC FPC renewed the rolling stock
of a number of JSC FPC trains running on domestic routes, as well as international trains. The new RIC carriages have already been highly rated by passengers departing from Moscow to Helsinki, Prague, Budapest, and Warsaw. In January 2015, MoscowParis and Moscow-Nice routes were the first to benefit from the use of the RIC trains. Last year, a project for the purchase of passenger rolling stock from the Spanish manufacturers Patentes Talgo S.L. was in full swing; these carriages are planned for use on Moscow-Berlin and Moscow-Nizhny Novgorod routes.
The progress JSC FPC has made in its first five years will undoubtedly lay the foundations for the Company’s further development, subject to present-day requirements. This will allow the Company to remain modern and dynamic, with due consideration for the best interests of every passenger.
Federal passenger company 2014 Annual Report
15
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Message from the General Director Dear Shareholders, Partners and Colleagues, Our Company is Russia’s national carrier and provides longdistance rail passenger services; the Company has been an independent business entity of Russian Railways Holding since 2010. Over the past five years, we have continued to follow our core principle – customer focus, allowing us to continually improve our services and expand the range of services we provide.
In 2014, the Company once again confirmed its status as a reliable, competitive carrier on the transport services market and continued its progress forward. The successful completion of the Company’s key projects is first and foremost owing to the input of nearly 74,000 Company employees. The Sochi 2014 Winter Olympics was one of the country’s most important events last year. The Company actively participated in the Olympic torch relay as well as in the transportation of guests and athletes to the Games: over 608,000 passengers travelled on Sochi routes on JSC FPC trains during the period that the Olympic train timetables and scheduling were in operation. We are proud to have been a part of this major historic event. The Company’s key objectives include improving business efficiency and providing a high-quality response to customers’ expectations. It is pleasing to note that JSC FPC passenger satisfaction ratings are improving every year, last year scoring 4.5 out of a possible 5.
16
Federal passenger company 2014 Annual Report
A number of marketing campaigns and promotions were run over the past year to enhance passenger demand and the RZD Bonus loyalty scheme, launched in 2012, received further impetus. The number of people benefitting from the loyalty programme topped a million in Q1 2015, highlighting the scheme’s popularity and demand with passengers. On December 01, 2014, we launched a new range of services – multi-modal transport on Moscow- Stariy Oskol – Valuyki route. Passengers travel by train from Moscow to Stariy Oskol and then on from Stariy Oskol by bus. Tickets for the bus and train can be purchased at the ticket office at the same time. We envisage extensive possibilities for the development of our multi-modal transport services: these services will allow the Company to expand its routes network, to adapt the timetable to more conveniently connect with other transport routes and to improve the quality of service for passengers when buying tickets. Ultimately, this will considerably enhance public mobility. We intend to offer passengers new multi-modal routes starting from Q2 2015.
over
608,000
passengers travelled on Sochi routes on JSC FPC trains during the period that the Olympic train timetables and scheduling were in operation
Last year, the Company continued to improve the quality of its services: new comfortable RIC carriages were incorporated into international train services and on domestic routes, new technology for transporting passengers’ luggage in a separate compartment was successfully introduced, and vehicle transportation services using custom-made vehicle and car carriages, were considerably improved.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Mikhail P. Akulov
The Company’s day train route network expanded and now includes the highspeed Lastochka trains; year-end results indicate that passenger journeys in this segment were up by 57%. The Daily Express scheme was developed and launched, providing for the further expansion of the Company’s day routes and a gradual reduction in journey time. The Company will continue to focus on future projects in 2015 and to improve the appeal of its passenger services, through the introduction of new technology and the use of innovative rolling stock – double deckers produced by Tver Carriage Works and the high-speed Strizh trains, produced by the company Patentes Talgo S.L. – this will undoubtedly improve the Company’s quality of services.
The swift development of information and communications technology and the move away from working with large customer segments to working with each individual customer is currently an important trend in the passenger transport market and should not be ignored. These factors are giving rise to the development of ‘innovative mobility’, which is also now one of JSC FPC’s key development vectors. In 2015, we anticipate that every third travel document will be processed electronically, as a result of the Company’s continued development of its electronic communications channels.
will enable us to improve the comfort and accessiblity of services for our passengers and we have developed the infrastructure to ensure their implementation. Each year the Company is increasing its rate of growth, striving today to transform the future in which we will have to work tomorrow.
Last year, intrinsic factors caused a decline in consumer activity in virtually all areas of business and it also affected rail passenger transport services. As a result, the Company introduced a series of measures to enhance the Company’s business operations and to implement planned projects, aimed at improving the Company’s appeal with regard to its range of services. We have set ourselves ambitious goals for 2015, which
Federal passenger company 2014 Annual Report
17
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Company Strategy
The Company has remained true to the mission, vision and core values it adopted in 2012 as part of its Development Strategy. Committed to maintaining the same core strategy in the long run, the Company keeps its business on course and stable, responding to a changing external environment through management’s short and mid-term tactical efforts
18
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
The macro-level changes that the
A new system of key performance
year 2014 brought, such as economic
indicators (KPIs) were introduced
fluctuations, developments in
in 2015 in order to in order to align
relationships with governmental
the Company’s system of KPIs with
bodies and further advancement of the
the KPIs proposed by RZD Holding
strategic management system within
as a result of recent developments,
RZD Holding, all had a major impact
has become a significant event in the
on FPC’s efforts to achieve the targets
Company’s strategic development
set by the strategy and implement strategically important projects Federal passenger company 2014 Annual Report
19
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Mission, vision, and strategy In accordance with the Structural Reform of Railway Transport Programme, JSC FPC was set up as a national integrated long-distance rail carrier, with the aim of improving passenger rail service efficiency, while ensuring an adequate level of transparency, corporate governance, and state control.
MISSION
“We improve the quality of life by making your trip as safe, accessible and comfortable as possible.”
The Company sees its mission as improving the quality of life by making train travel as safe, accessible and comfortable as possible for its passengers. JSC FPC’s development strategy was approved on June 28, 2012 by JSC FPC Board of Directors.
REQUIREMENTS AND EXPECTATIONS • Ensuring affordable prices and the geographic reach of long-distance passenger rail service for all social groups • Providing high-quality services to the country’s population • Improving the reliability and safety of long-distance passenger rail services
20
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
COMPANY VISION • A highly-efficient, financially sound, innovative, rapidly developing company, focused on enhancing its shareholder value • A national carrier providing passenger rail services throughout Russia, former FSU countries and the CIS
• A customer-focused company, a leader in the quality of service and amount of railway traffic, ensuring passenger comfort and convenience during train travel, including to other transport connections and means of transport • A socially-oriented company, providing all sectors of the population with an accessible and environmentally-friendly passenger transport service, as commissioned by state order • A recognisable international brand and a reliable partner in the Eurasian space
COMPANY STRATEGY • Expansion of the dynamic pricing mechanism
• Improvement of the route network and development of multimodal transport methods
• Improvement of baggage, freight and mail transportation • Improvement of product offer • Improvement of sales channels (including branding) • Development of advanced skills and competencies in key operational areas.
• Improvement of products and services
CORE VALUES Customer focus
Quality and safety
Social responsibility
Aspiring to perfection, initiative
Traditions and corporate culture
Competence
Federal passenger company 2014 Annual Report
21
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Key strategic goals
The key strategic goals of JSC FPC are defined by Strategic Management System, with a strategic management mechanism at its core.
Analysis phase
Development and approval phase
Annually
External environment analysis: • stakeholder requirements (the state, customers, Russian Railways Holding, staff and suppliers) • macro-environment (GDP, regulations, inflation, projected subsidies, regulatory environment)
Accumulated potential for strategy review
Development of a new strategy for the Company
Enablement and conduct of corporate strategy review procedures
• competitors (airlines, buses, personal vehicles) • requirements of higher level documents (transport strategy, railroad development strategy, Russian Railways Holding development strategy)
Accumulated potential for strategy adjustment Drafting of strategy adjustment proposals
Select and approval by the Board of Directors of a version to be implemented
Company internal analysis:
Forced reduction
• finances, processes, resources. SWOT analysis Evolution
Expert opinion on the need for a strategy review/adjustment
This strategic management procedure enables the company to manage the implementation of its strategy consistently, based on external indicators and the regulation and monitoring of the company’s internal environment at different management levels.
22
Federal passenger company 2014 Annual Report
Focus on development
The Company is considering three options for JSC FPC development in the long term, which are fundamentally different, including focus on development, evolution and forced reduction. Given the amount of state support, the evolutionary option has been selected as the basic approach.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Implementation phase
Implementation
Who implements • Marketing Section
Monitoring
What
How often
External environment
Ongoing
• Strategic Development Dpt. • Legal Dpt. • Financial and Economic Section
Project managers
Accumulated potential for strategy review
• Every half year – Review of the report by the Strategic Planning Committee • Annually – a strategic session
Project directors
Investment programme
• Annually – FPC Board of Directors • Quarterly – investment committee • Ongoing – investment programme implementation department
End customer
R&D programme
Company-wide
Budgets
• 24/7 – Situation Centre
Production programmes
• Daily – Reports on day-to-day operations
Operations
• Weekly, monthly – Meetings on day-to-day operations
Annually – Centre for Innovative Development
• Quarterly – Budget and investment committees • Annually – Russian Railways Board meeting on results, strategic session meeting, FPC Board of Directors meeting
Comprehensive evaluation of company implementation results * Strategic Planning Committee of the Board of Directors. Federal passenger company 2014 Annual Report
23
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
As a national passenger rail carrier and the face of Russian Railways (hereinafter referred to as the Holding), the Company is aimed at meeting the demands of the economy and society. This means focusing on innovation-based and sociallyoriented developments for competitive high-quality transportation services. In turn, this implies a high degree of JSC FPC involvement into state-level decision making.
State objectives involving JSC FPC
1
4
Enabling economic growth, helping the economy become more competitive and improve the quality of people’s lives
Reducing the cost and increasing the speed of longdistance service, linking geographically separated regions, improving the quality of life, promoting business, enhancing the country’s territorial and regional unity and creating more favourable conditions for the fulfilment of potential economic and social opportunities in every region of Russia
2 Extended the geographic and technological reach of transportation services, boosting the regional economy and social sector development
5 3 Keep the volume of transportation services at the level required to enable economic collabouration inside and outside the country and allow all groups of people to move freely to satisfy their work and social life-related needs
24
Federal passenger company 2014 Annual Report
Improving the quality of the domestic transport service, including such characteristics as service timelines, regularity, safety and environmental friendliness of long-distance passenger service
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
JSC FPC 2030 Development Strategy (approved by the Board of Directors of JSC FPC on June 28, 2012), in its evolutionary version that was chosen as the basic one, sets the following strategic goals and development indicators:
Network’s total traffic:
Average annual revenue growth:
• 102.2 billion passenger-kilometres by 2015
• 6.3% over the period from 2011 through 2015
• 105.0 billion passenger-kilometres by 2030
• 5.4% over the period from 2016 through 2030
EBITDA margin:
Average annual net assets growth:
• 14.2% by 2015
• 1.8% over the period from 2011 through 2015
• 19.2% by 2030
• 7.3% over the period from 2016 to 2030
Investment into development:
Rolling stock acquisition:
• RUB 105.7 billion over the
• 2,078 carriages over the
period from 2011 through 2015
period from 2011 through 2015
• RUB 668.8 billion over the
• 14,518 carriages over the
period from 2016 to 2030
period from 2016 to 2030
Strategic Projects According to JSC FPC’s strategy, achieving these goals involves implementing a number of strategic goals, which, along with performance indicators, are set for the period to 2030 (approved by the Board of Directors of JSC FPC on June 28, 2012). JSC FPC will implement these strategic projects, regardless of the economic development scenario; only the scale of the projects to be implemented and the resources required may differ.
• Extend the use of dynamic pricing and loyalty programme; • Improve the efficiency of luggage, mail and freight transportation; • Optimise investment in rolling stock; • Quick-to-implement product and service improvement measures; • Improve the route network and expand multimodal transport services; • Improve product offers; • Develop key skills and competencies in major functional areas.
Federal passenger company 2014 Annual Report
25
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Strategy implementation results
In 2014, the actual figures for passenger traffic, revenue from transportation services, investment, carriage acquisition and EBITDA margin did not meet the target values. The following factors, which had emerged in 2013 and which are going to continue in the medium term, had a negative impact on FPC’s efforts to implement its strategy: • A falling demand for long-distance passenger service; • Less state subsidies than had been expected and no state support for investments; • Increasing competition from airlines. The decline in demand for passenger was due to a drop in the standard of living against the backdrop of rising transportation service tariffs and Russia’s poor economic performance. The population’s mobility, which is the key factor behind the demand for longdistance service, is linked directly to the state of the national economy and the welfare of households and businesses. 2014 saw a slowdown in the rate of Russia’s economic growth. The country’s performance at the macroeconomic level failed to reach the projections that had been used as the basis in drafting JSC FPC 2030 Development Strategy.
JSC FPC Strategy indicators
Passenger traffic, billion passenger-kilometres 100.3
103.4
100.3
101.0
101.9
102.1
2012
102.2 79 %
96.9 87.5
2011
Revenue, RUB billion
2013
2014
168.2 2011
81.0 2015
EBITDA margin, % 12.4
11.0
11.1
11.6
2011
2012
2013
13.1
30.3
30.9 22.0
27.5
22.0 2011
2012
14.2
180.7 2012
110.9 73 %
9.1 2014
Investment, RUB billion
30.3
183.0
Federal passenger company 2014 Annual Report
222.4 82 %
193.4
185.6
182.5
2013
2014
2015
110.9
101.7
105.8
105.0
101.1
100.2
10.4
100.9
100,0
2015
2011
96.4
2012
2013
2014
2015
34.6 27.8 54 %
447
558
558
577
385
35 % 395
24.5
274
18.5 2013
2014
JSC FPC Development Strategy, approved by JSC FPC Board of Directors
99 %
Carriage acquisition, %
2015
2011
2012
2013
2010–2014 actual values, 2015 JSC FPC 2015-2017 Budget
2014
201 2015 deviation
Changes in the Macroeconomic Environment of JSC FPC 2014 Projection included in JSC FPC Development Strategy*
Actual figure for 2014**
GDP growth rate, %
3.7
0.5
Real wages growth, %
2.6
1.3
Inflation, %
5.2
11.4
Key macroeconomic indicators
* RF Ministry of Economic Development’s 2013-2015 forecast (published on 11 May 2012). ** According to Rosstat’s data.
26
209.2
Net assets growth, %
11.8
11.0
168.2
196.1
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Strategic projects implementation results and plans for 2015
Extend the use of dynamic pricing and the loyalty programme
As of 2014, the number of participants is about 1 million people. Since the launch of the programme, the participants have made 3 million 800 thousand journeys; 65 thousand premium tickets have been issued. Each active participant of the loyalty programme makes 6 journeys a year on average.
In December 2013, Sapsans, high-speed passenger trains, joined the programme. In 2014, the use of the profitability management system, the most flexible set of tariff management tools, was expanded. Over the year, 14 new destinations were added to the list, with a total of 166 trains being managed by the system. The share of trains running under the control of the profitability management system is about 30%, against just 4.5% at the start of the project.
In term of pricing, the key policy during the reporting year was to make passenger service more affordable. The yearly results show that the policy was successful, with a 17% rise in passenger traffic along the destinations covered by the profitability management system. Having said that, it is worth mentioning that this incentivebased policy did not cause a drop in financials; moreover, the revenue figures grew by 4%. In 2015, with the Federal Tariff Service of the Russian Federation setting maximum tariffs for passengers travelling in open and general carriages, the flexible pricing
approach is going to be extended to the regulated segment, which will make it more market- and client-oriented. On February 02, 2015, a pilot project was started in open carriages of direct trains running from Moscow to Cheboksary, Penza, Volgograd and Stary Oskol. The tariffs are differentiated based on seats’ locations. The above-mentioned destinations and trains were selected in the course of a marketing study that showed a sufficient potential for attraction of additional passenger traffic in open carriages. For example, an analysis of the competition in Cheboksary let the Company set the minimum price of a journey in an open carriage to a value that was RUB 100 less than the price of a ticket for a bus service running along the same route. Now, the Company not only listens to passengers but can respond to their sentiment in all segments of service.
Federal passenger company 2014 Annual Report
27
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
3
RZD Bonus Loyalty Programme and VTB24 – RZD Cobranded Card
RZD Bonus Loyalty Programme
28
Aiming to increase the efficiency of passenger service, JSC FPC developed and deployed RZD Bonus, a loyalty programme of RZD Holding. According to the terms of this programme, passengers can become entitled to some privileges by paying for tickets or services provided by JSC FPC and its partners or doing other things as part of marketing campaigns.
•
Create a database of Company’s passengers;
•
Reduce communications costs by introducing a personalised approach and addressing passengers who travel a lot directly;
•
Encourage passengers’ loyalty to JSC RZD as a brand;
The programme objectives include:
•
Cross-sell services to Programme participants across JSC RZD divisions (after they join the Programme).
•
Increase JSC FPC’s revenue through an increase in service consumption;
•
Strengthen the position in and expand the share of the market and, thus, revenue through better competitiveness;
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Cobranded Card
The programme is implemented as a bonus one. It is based on a bonus accumulation mechanism. As of 2014, there are about 1 million people in the programme. Since it was launched, programme participants have made 3 million 800 thousand journeys; 65 thousand premium tickets were issued. Each active participant of the programme makes 6 journeys a year on average. In December 2013, Sapsans, high-speed passenger trains, joined the programme.
On February 01, 2013, VTB24 Bank and JSC FPC launched a new product, offering their clients a cobranded card. About 240 thousand such cards have been issued since the start of the cobranding project. VTB24 – RDZ card holders get bonuses for every purchase they make with the card and can spend accumulated bonuses to buy a premium journey as part of the RZD Bonus programme. Card holders automatically become RZD Bonus members and get points not only for travels, but for every purchase they make.
Federal passenger company 2014 Annual Report
29
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Improve the efficiency of luggage, mail and freight transportation
On October 01, 2014, JSC FPC fully switched to a new approach to baggage transportation, with baggage now being carried in a standard compartment without using a special baggage compartment. This approach was introduced in all of the trains formed by JSC FPC and travelling inside the country.
By the end of the year, about 65 thousand baggage items occupying a seat were carried; more than 38 thousand passengers used the service. This optimisation of the baggage carriage facilities allowed the Company to discontinue the use of 220 baggage
compartments since January 01, 2014 to February 15, 2015. The financial impact of the project was RUB 95 million in 2014. Car transportation, another new service, is becoming more and more popular. The geographic reach of the service expanded to 8 routes. So far, the service has been
available on the routes from Moscow to St. Petersburg, Petrozavodsk, Pskov, Astrakhan, Adler, and from St. Petersburg to Adler and Astrakhan. Since the launch, more than 3 thousand cars have been carried.
The geographic reach of the service expanded to
8 routes
Since the launch, more than 3 thousand cars have been carried.
30
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Optimise investment in rolling stock
Investment dropped by 12.5% on 2013.
In drafting its 2014 investment programme, the Company decided to invest most of its money into new rolling stock; a total of RUB 21.1 billion was spent to buy 274 passenger carriages. Priority was given to new carriages for premiumservice trains. To that end, RUB 5.5 billion was allocated in 2014 to purchase 146 carriages.
50 double-decker carriages were bought to improve the quality of passenger service on busy routes with big passenger numbers, reduce operational costs and use the carriages replaced by those doubledeckers to compensate for standard carriages that had to be decommissioned on other routes because of the end of their service life.
78 of the carriages purchased in 2014 were RIC carriages, which were going to be used to maintain international service.
The Company continued its efforts aimed at ensuring a more even use of the rolling stock over a year. The number of runs
during summer peak periods in 2014 was reduced by 6%, with the number of runs during the November holiday seeing even a greater reduction of 28%.
274
passenger carriages were bought in 2014
50 double-decker carriages were bought to improve the quality of passenger service on busy routes with big passenger numbers.
Federal passenger company 2014 Annual Report
31
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Quick-to-implement product and service improvement measures
Reviewing the list of services in luxury carriages The following results were achieved with respect to the provision of services in luxury carriages: • The number of passengers who used prepaid services grew by 37%; • The amount of revenue from services increased by 32%. The above figures were achieved after JSC FPC’s premium-service trains with luxury carriages were added to the list of trains covered by the profitability management system and became part of a meal delivery initiative implemented within the dynamic pricing use expansion project. Forming additional premium-service trains JSC FPC’s 2014/2015 schedule includes 93 premium-service trains, which is 4 trains less than at the beginning of 2014; as a result, premium-service trains will account for 18% of the total number of trains. The amount of revenue from running premium-service trains grew by 1.7% year-on-year. Replacing single-decker compartment carriages with double-decker ones In 2014, the Company got good financial results from running a double-decker train (No. 103/104) on the Moscow to Adler service. At the beginning of 2015, a double-decker train No. 5/6 was launched on the Moscow to St. Petersburg service.
32
Federal passenger company 2014 Annual Report
The Company is going to expand the reach of double-decker trains, including trains with carriages with seating, and currently is considering the feasibility of running such trains on the Moscow to Kazan, Moscow to Samara and St. Petersburg to Adler long-distance services as well as Adler to Krasnodar and Adler to Rostov regional services. Replacing open carriages with carriages with seating on shortdistance routes An increase in the volume of carriage by “daytime trains” confirms the steadiness of passengers’ demand for this kind of service. In 2014, the total passenger traffic of daytime trains exceeded 6 million people, a 57% increase on 2013. The share of trains travelling during daytime was 6.5% of the total number in 2014 (compared with 3.5% in 2013). Proving transportation services in the country’s regions with daytime trains and attracting more passenger traffic requires that introducing such new routes results in profit. In the end of 2014, the Company launched a new programme called Daytime Express that gave the green light to the expansion of the list of daytime passenger services with train speeds of up to 100 km per hour to 30. Improving sales channels, branding and ad quality In 2014, a quarter of all tickets sold were e-tickets. The Company plans to increase this figure to a third by the end of 2015. Year-on-year, the share of e-tickets grew by 6%, while the number of the Company’s ticket offices was reduced by 9%.
Compared with 2013, JSC FPC’s awarenessraising and information activities grew by 23% in 2014; a total of 16,087 favourable and neutral publications about the Company appeared in mass media. JSC FPC maintains partnerships with major Russian information agencies (Interfax, TASS, RIA News), federal printed and electronic media (Rossiiskaya Gazeta, Kommersant, AiF, MK), popular radio stations (RSN, Dorozhnoe Radio, Avtoradio) and federal TV channels (Rossiya 24, TV Tsentr, Moskva 24, etc). The Company has been building a present on social media. For example, the number of members in JSC FPC’s official social media groups “Better by Train” on Facebook, VKontakte and Odnoklassniki grew by 12% (according to IAS Medialogia).
JSC FPC’s communities devoted to trains and rail travel: Facebook facebook.com/luchshe.poezdom
VKontakte vk.com/luchshe_poezdom
Odnoklassniki ok.ru/luchshe.poezdom
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Improve the route network and expand multimodal transport services
Ensure the submission of a government order for loss-making routes
Given the continuing decline in state subsidies that we have seen over the recent years, the volume of passenger train services provided by JSC FPC was optimised, with 46 pairs of trains taken out of service, which did not have any significant impact on the Company’s ability to meet the passengers’ demand for traveling. The impact of this optimisation effort reached RUB 4.2 billion.
The following work is going to be done as part of the route network optimisation project: • Draw up a Procedure for JSC FPC Route Network and Train Schedule Optimisation in order to improve economic efficiency and reduce costs while retain passenger traffic through train cancellations and launches;
• Create a strategic computing facility implementing the Procedure for JSC FPC Route Network and Train Schedule Optimisation for use in train scheduling and schedule adjustment; • Draw up a list of adjustments for the 2015 train schedule submitted to JSC RZD and a list of passenger train scheduling initiatives for 2016.
The average speed grew by 1% to 54.1 km per hour.
In 2015-2016, the Company plans to introduce high-speed trains on the Moscow to Berlin and Moscow to Nizhny Novgorod service using Talgo carriages purchased under a contract signed in 2011. The travel time will be reduced by: • 6 h (from 24 to 18 h) on Moscow – Berlin route; • 30 minutes (from 4 h to 3 h 35 minutes) on Moscow – Nizhny Novgorod route.
Speed up trains and optimise long-distance train schedules
In order to improve the quality of passenger service and make trains more competitive compared with other means of transport, the Company is speeding up its passenger trains. With the introduction of the 2014/2015 schedule, 364 trains were sped up, including: • 256 trains by up to 30 minutes; • 51 trains by up to 1 hour; • 57 trains by 1 hour or more.
The following train got the maximum acceleration: • 360 Adler to Kaliningrad by 4 h 50 min; • 9/10 St. Petersburg to Arkhangelsk by 2 h 24 min/33 min; • 360 Ufa to Nizhnevartovsk by 4 h 12 min; • 84 Moscow to Priobie by 3 h 47 min; • 147/148 Astrakhan to Nizhnevartovsk by 2 h 07 min/50 min.
Federal passenger company 2014 Annual Report
33
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Draw up and implement multimodal transport schemes
In the reporting year, the Company got its first experience with multimodal transportation, including rail, bus and ferry services. Multimodal transport systems with JSC FPC as participant and development of schemes for complex transport services in regions on the basis of new interregional transport links create a foundation for efficient transport systems.
• Competitive advantages relative to air/motor transport (travel time and price) • Service’s passenger capacity, i.e. if there is a stable passenger traffic between the locations to be linked to a long-distance train service via other kinds of transport
On December 01, 2014, a multimodal service, combining rail and motor transport, was launched on the route Valuiki to Stary Oskol to Moscow, with Stary Oskol being the transfer hub.
• Alignment of long-distance train and other transport schedules so that passengers can get to the train stations by other means of transport
Train/bus services are aligned in terms of their departure and arrival times. The time of travelling from Stary Oskol to Valuiki is 3 h 45 min. Tickets for train 57/58 Moscow to Stary Oskol and the Stary Oskol to Valuiki service can be bought from JSC FPC ticket offices.
• A single travel ticket for various means of transport in same ticket offices
A month-by-month breakdown of the number of tickets sold shows that the service is growing in popularity: about 4 thousand tickets were sold over three months (from December 2014 through February 2015), while the volume of sales rose by 25% against a 20% growth of the seating capacity use rate. The Company plans to introduce multimodal routes on a large scale in the second quarter this year and to have at least 10 of them by the year’s end.
34
The following criteria are considered when deciding on whether to introduce a multimodal service
Federal passenger company 2014 Annual Report
• The distance to a transfer station where passengers can get on a long-distance train from their departure locations cannot exceed 150 km
• The coach station must be located conveniently so as to enable passengers to get to the train station without having to spend too much time, i.e. it must be convenient for passengers to transfer from motor transport to rail
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Optimise product offers
JSC FPC carries on working on improving its portfolio of product offerings.
Expanding the portfolio of products and services
In the reporting year, the Company decided to review its approaches to product portfolio planning and management in an attempt to make it economically efficient.
• Car-carrier service
One of the first steps the Company took to implement that was the reorganisation of JSC FPC’s marketing and transport management functions; a single centre — Marketing and Tariff Policy Department — was created to deal with product offer development tasks in each market segment.
• High-speed Patentes Talgo S.L. trains
• Double-decker trains
The Company hopes that these organisational changes will provide synergy and make it possible to implement the product offer optimisation project in 2015.
• Daytime trains
Succeeding in implementing the project will improve customer experience and satisfaction, enabling the Company to target certain market segments with strategic initiatives and position itself appropriately, which is expected to lead to business profitability growth.
• Multimodal service
Develop key skills and competencies in major functional areas
As part of a project aimed at developing key skills and competencies in major functional areas, the Company is implementing a subproject called Development and Deployment of a Corporate Project Management System and Development of a Target System of Key Performance Indicators. The work is being done in collabouration with McKinsey&Company CIS.
The following outcomes are expected: • Develop a Methodology for the Corporate Project Management System (CPMS); • Test the CPMS in a pilot project, create a project management team; • Develop a target system of KPIs.
Federal passenger company 2014 Annual Report
35
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
2014 Marketing Promotions
For the purpose of attracting additional passengers and boosting revenue, the marketing promotions were introduced in 2014 for passengers travelling in compartment carriages of some domestic trains formed by JSC FPC.
In the first half of 2014, the following pricing adjustments were made for passengers travelling in compartment carriages of some domestic trains formed by JSC FPC: • Ticket price adjustments based on how early passengers buy their tickets: 50% to 20% off the price of tickets sold 45 to 31 days before the train departure or a 10% increase of the price for tickets sold 10 or less days before the train departure;
36
On September 15, 2014, the previously introduced large-scale marketing promotion was updated as The result of the campaign follows: the size of the discount for tickets bought was that revenue reached RUB 45 to 31 days before the departure was reduced to 40% (instead of 50%) and limited to upper berths in compartment carriages only.
• P rice reductions for return tickets and fullcompartment tickets.
The result of the campaign was that, even though the passenger traffic dropped by 2.5% (16.8 thousand people), revenue reached RUB 45 billion by the end of the year, only 1.9% down on 2013. In the deregulated segment, a growth of 100% was seen in the domestic service.
In order to increase revenue in the deregulated segment, the price of compartment carriage tickets was increased by 5% on September 02.
Had no promotions been introduced, the passenger traffic would have fallen by about 7%, while revenue would have been only 96% of what it had been the year before.
Federal passenger company 2014 Annual Report
45
billion by the end of the year In the deregulated segment, a growth of 100% was seen in the domestic service.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
The main goal of these discounts and surcharges is to encourage passengers to buy their tickets as early as possible; it is assumed that such early sales help manage the carriage fleet more efficiently (form trains in the most efficient way).
Discounts and surcharges for passengers travelling in compartment carriages of trains formed by JSC FPC in 2014
Discount or surcharge application terms
Discount or surcharge application period
50% off the price of compartment carriage tickets sold 45 to 31 days before the train departure
01.01.2014 – 24.04.2014 15.09.2014 – 24.12.2014
A 10% surcharge on the price of compartment carriage tickets sold 10 or less days before the train departure
01.01.2014 – 24.04.2014 15.09.2014 – 24.12.2014
20% of the price of compartment carriage tickets sold 45 to 31 days before the train departure
25.04.2014 – 07.05.2014 10.05.2014 – 14.09.2014 25.12.2014 – 31.12.2014
A 5% surcharge on compartment carriage tickets sold 10 or less days before the train departure
25.04.2014 – 07.05.2014 10.05.2014 – 14.09.2014 25.12.2014 – 31.12.2014
20% off the price of tickets for passengers who buy all seats in a compartment
25.04.2014 – 07.05.2014 10.05.2014 – 14.09.2014
30% off the price of return tickets for passengers who buy all seats in a compartment
25.04.2014 – 07.05.2014 10.05.2014 – 14.09.2014
10% off the price of return tickets for passengers travelling in compartment carriage
01.01.2014 – 07.05.2014 10.05.2014 – 31.12.2014
Federal passenger company 2014 Annual Report
37
Introduction
Company Strategy
Business Model and Assets
Market Overview
Key objectives of JSC FPC in 2015
The key objectives of JSC FPC in terms of strategic projects in 2015 are as follows • Expand the reach of JSC FPC profitability management system to 75% of the deregulated segment of the domestic service • E xpand the RZD Bonus loyalty programme and increase the number of programme participants to 1.5 million people • Increase the share of e-tickets for long-distance trains to 33% • D evelop a Daytime Express programme with the aim of expanding the reach of the daytime passenger service at speeds of more than 100 km per hour to 30 destinations • L aunch Talgo trains equipped with a tilting system and an automatic gauge adjustment system on the Moscow to Nizhny Novgorod service • Expand the reach of multimodal services • N egotiate with regulatory governmental bodies, ensure state support for passenger service backed by their social impact • I mplement a route network optimisation project in collabouration with Boston Consulting Group, a consultancy • I ntroduce a project management framework and KPIs in collabouration with McKinsey&Company CIS
The strategic project that involve route network optimisation, project management adoption and KPI development will be submitted to the Strategic Planning Committee at JSC FPC Board of Directors and the Board of Directors for consideration.
38
Federal passenger company 2014 Annual Report
Risk Management
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
KPIs change in 2015
In 2014, JSC FPC initiated an overhaul of its strategic management system and a review of the system of key performance indicators (KPIs). Subject to RF President’s Lists of Assignments of December 27, 2013, No. Pr-3086 (paragraphs 32 and 33 of item 1) and of July 05, 2013, No. Pr-1474 (item 4), RF Government’s assignment of December 31, 2013, No. DM-P13-9589, as well as RF Government’s resolutions (minutes No. 3 of January 30, 2014 No. ISh-P13-98pr of October 03, 2013) aiming to improve the performance of public companies partially or fully owned by the government and make it easier for the government as a stakeholder to exert its influence, a vertical system of strategic planning is being created in the Russian Federation for state-owned companies. The Federal Agency for State
Property Management has developed guidelines on how to implement this system; the guidelines apply to JSC RZD. On December 01, 2014, the Board of Directors of JSC RZD, approved the 2020 Long-Term Development Programme that covers JSC RZD, its subsidiaries and affiliates. As part of RZD Holding’s effort to build a vertical system of strategic management, the Company has been updating its target state indicators.
Having decomposed the indicators provided in the RZD Holding development strategy, JSC FPC defines eight target indicators to 2020 as follows: • Investment volume; • Revenue; • EBITDA, • Subsidies; • Passenger traffic; • Service security level; • Labour productivity growth; • Ratio between Holding’s staff pay to Russia’s average figures for pay. Later in 2015, the Board of Directors of JSC FPC will approve the final list of KPIs and their target values for the period to 2020.
The logic behind the cascading of JSC FPC performance indicators PRESIDENTIAL ADDRESS TO THE FEDERAL ASSEMBLY ON DECEMBER 04, 2014 Every company in which the government has a 50% or larger stake must introduce key performance indicators… there must be a direct link between management pay in stateowned companies and their performance and the economic environment
ROSIMUSHCHESTVO’S RECOMMENDATIONS REGARDING THE DRAFTING OF STRATEGIC DOCUMENTS BY STATEOWNED COMPANIES A timely assessment of compliance with the adopted indicators, with management remuneration being affected by the results of such evaluation, motivates a company’s management to achieve the strategic goals, enables a transparent corporate governance system and makes stateowned companies more appealing to investors
2020 LONG-TERM DEVELOPMENT PROGRAMME OF JSC RZD, ITS SUBSIDIARIES AND AFFILIATES
DECOMPOSITION OF RZD HOLDING’S STRATEGIC DEVELOPMENT GOALS INTO JSC FPC’S GOALS
DECOMPOSITION OF JSC FPC’S STRATEGIC DEVELOPMENT GOALS INTO BRANCH-LEVEL GOALS
Federal passenger company 2014 Annual Report
39
Introduction
Company Strategy
Business Market Model and Assets Overview
Market Business Model Overview and Assets
Risk Контроль Management рисков
Quality and Safety
2
Business model and assets
71,629 employees 40
Federal passenger company 2014 Annual Report
22,136 cars
Operating and Financial Results Analysis
Investment Activities
31
depots
International activities
Corporate Governance
Sustainable Development
Appendices
16.9 EBITDA, RUB billion
Federal passenger company 2014 Annual Report
41
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Business model Government
JSC Federal Passenger Company
Regulation Subsidies Interest in increased population mobility
Key resources
Lines of business
71,629 persons
Long-distance national passenger service in the regulated sector
Personnel (headcount)
Key partners RZD Holding
22.136 carriages Carriage fleet
Long-distance national passenger service in the deregulated sector
3.3 bn car-km
Locomotives and infastructure
JSC RZD
Provider of locomotives and infrastructure Roszheldorsnab
Supplier of equipment, materials and equipment Commuter companies
31 depots
Equipment and materials
>300 contractors
Technical and maintenance services
Long-distance international passenger service Long-distance baggage, freight and mail transportation
Loans and credits worth RUB
13.3 billion
Other lines of business
Borrowings
Ticket sales, combined service
Structure of costs, RUB bn Carriages 88.1
Market
JSC TVZ
Supplier of carriages
211.5
189.7 204.9 Пассажирские Operating costs
RUB bn
Passenger перевозки service costs
Infrastructure 62.9
Locomotives 38.7
Finance market Labour market Materials and equipment market
24.5
Other activity costs
RUB bn
Investment costs
Other costs
Technology market Technical services and maintenance market
Suppliers of resources
94.2
%
42
Federal passenger company 2014 Annual Report
JSC FPC is a monopolist on the Russian railway passenger transportation market
15.2
6.6
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Key value for customers Product line
Promotion
Value for passengers
Recognisable RZD train
Passenger service Premium-service trains: luxury cars, sleeping cars, compartment carriages, open carriages, carriages with seating
Standard trains: luxury cars, sleeping cars, compartment carriages, open carriages, carriages with seating
International service: luxury cars, RIC, carriage with seating
Tourist trains
RZD Bonus loyalty programme Marketing promotions Internet presence
Great travel experience
Ad campaigns Interaction with the government
Time saving
Sale channels, %
Other Baggage, freight and mail transportation
Safe, affordable and comfortable transportation
Value for government
VAS services in trains
17.4
Rolling stock repair and maintenance for clients
JSC FPC ticket offices Agents (third parties)
1.2
Transport mobility of population and efficient use of budget funds
Online
Other services
20.8
Self-service terminals
60.6 Value for corporate customers and other customers
High quality of service at adequate prices within a reasonable timeframe
Structure of revenue, RUB bn 8.1 3.7
Revenue from passenger service Revenue from baggage, freight and mail transportation
21.4 23.4
Revenue from other lines of business
212.7
Funding from the federal budget
RUB bn
Other revenue
16.9 EBITDA
156.1
RUB bn
Customers Passengers Corporate customers Other consumers
48.2
 %
Governmental agencies and bodies
JSC FPC’s share in the long-distance passenger service
Federal passenger company 2014 Annual Report
43
Introduction
Business Model and Assets
Company Strategy
Market Overview
Risk Management
Quality and Safety
Map of assets North-west branch
Northern branch
214.3 th sq m
98.7 th sq m
Gorky branch 105.5 th sq m
6.8 th sq m
13.6 th sq m
1.6 th sq m
2.9 th carriages
1.4 th carriages
1.7 th carriages
RUB 1.2 bn
RUB 0.3 bn
RUB 0.3 bn
Moscow branch, FPC
Murmansk
410.9 th sq m 6.2 th sq m 3.5 th carriages RUB 4.8 bn
Kaliningrad Riga
Archangelsk
St. Petersburg
Vorkuta Norilsk
South East branch
Vologda
71.3 th sq m 0.1 th sq m
Salekhard Moscow Kiev
Novy Urengoy
Kostroma
0.9 th carriages
Kirov
RUB 0.3 bn Voronezh
Ulyanovsk
Nizhnevartovsk
Ekaterinburg Samara Rostov-on-Don
Ufa
North Caucasus branch 185.8 th sq m
Volgograd Krasnodar
Chelyabinsk
Omsk
14.4 th sq m 2.3 th carriages RUB 1.4 bn
Astrakhan
Vladikavkaz
Tbilisi Baku
Privolzhie branch
Ural branch
South Urals branch
185.5 th sq m
98.9 th sq m
105.8 th sq m
1.0 th carriages
1.6 th sq m
1.0 th carriages
RUB 0.2 bn
1.3 th carriages
RUB 0.3 bn
RUB 0.3 bn
44
Federal passenger company 2014 Annual Report
Tomsk
Elista Novosibirsk
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Real estates
Carriages
Land
Other assets
Appendices
Asset structure as of December 31. 2014, RUB billion No.
Kuibyshev branch 121.8 th sq m 5.7 th sq m 1.5 th carriages RUB 0.3 bn
Assets
Book value
1
Real estates
2
Land
31.4
3
Carriages
4
Other movable assets
5
Intangible assets
0.2 153.2 9.3 1.0
Total
195.1
East Siberia branch 225.7 th sq m 18.4 th sq m 1.7 th carriages
Changes in carriage fleet structure, carriages
RUB 0.1 bn Fleet as of 31.12.2013
Carriage type
Lounge
Purchased
Retired
Fleet as of 31.12.2014
Average age as of 31.12.2014, in years
1,341
152
11
1,482
17.86
51.6 th sq m
Compartment
10,203
223
255
10,170
18.75
2.2 th sq m
Noncompartment
8,855
87
292
8,621
19.32
Enisei branch
0.6 th carriages
Interregional
665
29
–
694
15.33
RUB 0.1 bn
Dining
854
24
15
862
25.51
Baggage
342
4
7
339
20.81
East Siberia branch 95.0 th sq m 0.7 th carriages RUB 0.1 bn
Other
39
–
–
39
27.69
Total
22,299
519
580
22,207
19.12
Khabarovsk Blagoveshchensk
Krasnoyarsk Chita
Priority in 2014 vs 2013 was given to the purchase of rolling stock for particular routes, which helped JSC FPC improve its financial results.
Ulan-Ude Vladivostok Irkutsk
Zabaikalie branch
As part of 2014 investment programme implementation, a total of 274 new carriages were bought, including: • 78 RIC carriages for replacement of retiring carriages on international services; • 146 premium-service train carriages; • 50 double-decker trains.
Far East branch
87.8 th sq m
65.0 th sq m
1.4 th sq m
1.0 th carriages
0.5 th carriages
RUB 0.2 bn
RUB 0.1 bn
Federal passenger company 2014 Annual Report
45
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Market Overview
46
48.2Â %
90.1Â %
share of railway transport on the domestic passenger rail service market
share of JSC FPC on the domestic railway passenger service market
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
3.3Â p.p. was the amount that the share of railway transport in domestic and international passenger service declined by in 2014 Federal passenger company 2014 Annual Report
47
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Market overview1
The reporting year saw a decline in most macroeconomic indicators, which got even worse after the EU, the US and a number of other countries introduced economic sanctions against Russia.
According to the Ministry of Economic Development of Russia, the GDP grew by only 0.6%, which was close to stagnation, while real disposable income went down by 1%.
Key macroeconomic indicators change (% vs 2013)
A broad array of negative factors affected the economic environment in 2014, including a substantially greater rate of inflation, which reached 11.4% against 6.5% in 2013. The key reasons behind this drop were falling oil prices, sanctions and rouble devaluation.
Indicator
2013
2014
GDP growth
1.3
0.6
Industrial production
1.7
0.4
Investment in fixed assets
0.8
–2.7
Import
1.7
–9.8
Export
–0.8
–5.1
Consumer inflation
6.5
11.4
Real disposable income
4.0
–1.0
The economic downturn and rising negative expectations among the population had an impact on JSC FPC’s business, which had to work under the pressure of factors contributing to a decline in demand for passenger rail service in 2014.
1
48
This section is based on Ministry of Economic Development and Federal Service for State Statistics’ data.
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Domestic transport market In 2014, the long-distance passenger service market, including domestic and international service, grew by 2.1% to 349.3 billion passenger-km.
JSC FPC’s advantages in competition with other means of transport
High level of security
One of the forces behind the market expansion was Russia’s civil aviation. So, airlines increased their passenger traffic by 107.2%, while rail companies lost 9% of traffic, which resulted in a change in the transport market structure. At the end of the reporting year, airlines experienced a decline in passenger numbers on international flights, the key market growth driver over recent years. In the face of growing competition on domestic routes,
a high debt burden, weakening rouble and poor financial performance, the companies had to take measures to optimise aircraft supply and improve the efficiency.
High capacity
Versatility and regularity (all-weather service)
As at the end of 2014, rail transport accounted for 27.6% of the long-distance passenger service market, 3.4% down year-on-year.
Affordability for most groups of consumers
High level of comfort
5.9 5.9 46.1 42.1
48.2 Long-distance 52.0 routes (domestic 36.6 57.5 and international routes)
5.6
2012 | 2013 | 2014 Rail
40.1
Aviation
2012 2013 2014 2012 2013 2014
5.7
2012 2013 2014
Domestic Passenger Service Market Structure, %
2012 | 2013 | 2014 2012 | 2013 | 2014
3.3
RailRail
5.9 3.3
27.6
7.1 3.7 36.6Motor vehicles 35.7
69.1
65.8
RailAviation Motor vehicles Motor vehicles
30.9
Long-distance routes (domestic and international routes) 61.0
35.3
57.2 57.5
54.3
Sources: rail transport – JSC RZD’s reports; air transport – Federal Agency for Air Transport’s data (www.favt.ru); motor transport – JSC FPC’s expert opinion.
Federal passenger company 2014 Annual Report
49
Company Strategy
A similar situation was seen on domestic routes. With the passenger service market growing by 4.1%, the share of rail transport reduced by 3.9%. The annual reduction of the rail transport’s market share is a sign of a high level of competition in the transport services sector.
Business Model and Assets
Market Overview
Risk Management
The share of JSC FPC in the domestic passenger service market was 90.1% in 2014 (+1.5 pp vs 2013), while the Directorate for High-Speed Service (DHSS) of RZD accounted for 1.9% (+0.2 p.p. vs 2013). The presence of foreign countries’ railway administrations dropped by 1.8 p.p.
Quality and Safety
Structure of the long-distance rail passenger service market (by carriers), %
Backed by government support, air transport is expanding its domestic presence with subsidised regional flights and allocation of additional funding for air service infrastructure and aircraft fleet.
3.1 2013 2014
Introduction
6.8 8.6
2013 | 2014 JSC FPC
Foreign countries’ r administrations
0.9
Other carriers, inclu
Among the main competitive advantages of airlines are the speed and, as a consequence, quicker journey times, absence of price regulation and better flexibility in terms of pricing, commercial activities and marketing.
Apart from JSC FPC, Russia’s domestic railroad network is currently used by high-speed trains, private carriers’ trains (CJSC Grand Service Express, LLC Tverskoi Express, Megapolis and TransClassService). In addition, JSC FPC has to compete with foreign countries’ railway administrations who offer passenger service to destinations in Russia.
50
Federal passenger company 2014 Annual Report
90.1 3.1 6.8 8.6
2013 2014
Coach services are another notable competitor, especially for distances of up to 400 km.
88.6
2013 | 2014 JSC FPC Foreign countries’ railway administrations
0.9
Other carriers, including
88.6 90.1
1.7
1.9
RZD’s DHSS
0.6
0.6
CJSC TKS
0.1
0.1
CJSC Grand Service Express
0.1
0.1
LLC Tverskoi Express
0.3
0.4
Other carriers
1.7
1.9
RZD’s DHSS
0.6
0.6
CJSC TKS
0.1
0.1
CJSC Grand Service
0.1
0.1
LLC Tverskoi Expres
0.3
0.4
Other carriers
Operating and Financial Results Analysis
International activities
Investment Activities
Corporate Governance
Sustainable Development
Appendices
International transport market The market of rail passenger services between Russia and other countries, including the CIS and Baltic States, had been experiencing a continuous decline from 2010 to 2013; by the end of that period, it had shrunk by 4.9%. In 2014, passenger numbers dropped even further — by 44% — at the backdrop of weakening consumer demand due to macroeconomic and political factors, especially relationships
between Russian and Ukraine, which dominated that segment of the passenger service market. Ukraine accounts for 37% of the rail transport market, followed by Belarus with 28%, Kazakhstan with 10%, Moldova with 6%, Finland and Uzbekistan with 5% each. The other countries account for just 1%.
Changes in Passenger Numbers on International Rail Routes
20,225,764 635,581
19,654,968
19,992,296
748,121
798,080
19,257,315 862,363
By the end of 2014, air passenger traffic grew by 3.6%, with the number of passengers travelling from Russia to other countries beyond the CIS increased by 4.5% and the number of passengers travelling between Russian and the CIS countries decreased by 3.6%. In general, the rail and air transport markets have different trends, with competition causing the rail transport’s share to shrink and the air transport’s share to increase. So, the number of passengers travelling by train dropped by 44% in 2014, while airlines saw a 3.5% increase in their passenger numbers. This is due to airlines’ flexible tariff policies in combination with a growing quality of service (new jets, airport infrastructure development), aggressive promotional and marketing campaigns (ads in mass media) and state support.
10,880,325 19,620,183
684,327 18,906,847
19,194,216
18,394,952 Non-CIS coutnries
10,195,998
2010
2011
2012
2013
CIS and Baltic countries
2014
Structure of the International Rail Passenger Service Market, % Changes in passenger numbers on rail routes to CIS countries, Baltic countries and the rest of the world, %
4 6
Destination
2011
2012
2013
2014
CIS, including
96
102
96
55
Ukraine
95
101
100
38
Baltic countries
95
99
106
79
Other countries
118
107
108
79
90
97
102
96
56
CIS countries
TOTAL
Other countries! * Sources: rail transport – to JSC RZD’s reports; air transport – Federal Agency for Air Transport’s data (http://favt.ru/).
Baltic countries
Federal passenger company 2014 Annual Report
51
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Tariff policies Domestic tariffs for open and general carriages are regulated by the government represented by the Federal Tariff Service (FTS) and are set in accordance with the Tariff Guidelines approved by FTS decree 156-t/1 dated July 27, 2010, which is indexed annually. Annual indexation of passenger service tariffs depends on the overall macroeconomic situation, Ministry of Economic Development’s data on income growth and inflation rate. The tariffs in the open and general carriage segment are not sufficient to cover the reasonable costs that the carries who are subject to the regulation have to bear and are subsidised from the state budget. At the same time, under item 5 of the List of Works (Services) Done (Provided) by Natural Rail Monopolies Whose Tariffs, Fees and Charges are Regulated by the State, as approved by RF Government Decree No. 643 Regarding State Regulation of and Control Over Tariffs, Fees and Charges for Works (Services) Done (Provided) by Natural Rail Monopolies dated August 05, 2009, JSC FPC may set tariffs for sleeping cars and compartment carriages in its internal guidelines. Tariffs for travelling in carriages of these two classes are reasonable in terms of business costs.
52
Federal passenger company 2014 Annual Report
Moreover, the current legislation authorises tariff differentiation subject to the transportation process conditions that affect the amount of costs and revenues of companies under regulation (item 11 of the List of Works (Services) Done (Provided) by Natural Rail Monopolies Whose Tariffs, Fees and Charges are Regulated by the State, as approved by RF Government Decree No. 643 dated August 05, 2009); this provision was used to develop of system of indices designed to adjust tariffs for domestic rail service based on calendar periods. The purpose of this approach is to compensate for fluctuations in demand for long-distance passenger service in order to reduce the costs that the carrier has to incur to keep a spare fleet of carriages and locomotive crews and, through this, ensure service availability during peak periods; when it comes to passengers, they can benefit from lower tariff during periods when the demand is weak.
JSC FPC tariff policy goals The key goals of JSC FPC’s tariff policy includes • Long-term planning of the target level of tariffs in response to state regulation improvement • Prompt and flexible tariff regulation in response to changes in consumer income and competitors’ initiatives • Development of an effective structure of tariffs for rail passenger service in view of the competition from other means of transport and independent carriers
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
The JSC FPC’s Interaction with the Russian Federation Public Authorities Meeting of the population’s needs for railway transportation in the Russian Federation is carried out exclusively by the Company’s resources. Currently JSC FPC is the major long-distance railway passenger carrier. By Decree No.190-t of the Federal Tariff Service dated May 27, 2010, FPC was included into the register of the natural monopoly holders on transport in the sector of railway transportation services. The Company’s activities in the passenger transport service sector are subject to state regulation, according to the Federal Law No.147-FZ dated August 17, 1995 (in the revision dated December 30, 2012) On Natural Monopoly Holders (with the amendments, which entered into force on January 27, 2013). Tariffs for long-distance passenger transportation in open and general carriages are regulated by the state represented by The Federal Tariff Service of the Russian Federation. In order to guarantee affordability of these transportation services the state sets the tariff below the economically feasible level, and these services are unprofitable for the JSC FPC.
To compensate for loss of income resulting from the state regulation of tariffs for long-distance transportation of passengers in open and general carriages the Russian Federation Government issued Decree No.207 dated April 07, 2007, which stipulates the rules for granting subsidies to railway transport organisations. In 2014, JSC FPC developed conceptual basis for creation and implementation of a new state support system for long-distance passenger railway transportation services within the public passenger transport contract. The results were sent to the Russian Federation Ministry of Transport to assess the possibility of using them as a basis for informed decision-making mechanism
for implementation of a long-term subsidization of long-distance passenger transportation mechanism. In 2015, JSC FPC took part in the review of the draft Concept of Long-term Inter-regional Passenger Transportation subsidization, developed by the RF Ministry of Economic Development. The company is also actively engaged with the regional authorities: in 2014 contracts On Provision of Transport Services were signed with the Republic of Ingushetia, Komi Republic, Kabardino-Balkar Republic and the Republic of Karelia, which provide for compensation of the carrier’s decreased income.
State support Budget request for inclusion of necessary funds into the budget of the Russian Federation (subsidy need)
Paying for travel ticket
JSC FPC
Ministry of Transport of the Russian Federation Budget request
Ministry of Finance of the Russian Federation
Estimation of economically feasible tariffs
Budget request
Federal Tariff Service of the Russian Federation
Passenger
Approval
Approval
Central Office of the Government of the Russian Federation Adoption
Adjusting coefficients (in order to estimate revenue losses)
Federal Law «On the Federal Budget» Signing of the Agreement on Subsidies
Clarification
Regulation of Government of the Russian Federation
Paying out budget allocations
The Federal Agency for Railway Transport (Roszheldor)
Distribution of funds Distribution Federal passenger company 2014 Annual Report
53
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Risk Management
Company’s major risks 54
Federal passenger company 2014 Annual Report
Loss of passenger traffic market share
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
Decline in amount of federal subsidies
International activities
Corporate Governance
Sustainable Development
Appendices
Not stable loss compensation from the state
Federal passenger company 2014 Annual Report
55
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management Relevant departments of the Company, which are risk owners within their operating activities, are involved in identification, severity assessment and development of measures to minimise specific risks.
Financial risk management in the Company is carried out in accordance with the financial risk management policy of JSC FPC (hereafter the Policy), approved by the Board of Directors. In accordance with the Policy, the Company defines and identifies financial risks and determines the principles and processes to manage them.
56
Federal passenger company 2014 Annual Report
The major risks map shows the main risks and the JSC FPC’s measures aimed at reducing the likelihood of their realisation.
Risk Management
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
JSC FPC Risk Map Risk
Risk
Risk description
Mitigation measures
1. Market risks 1.1 Decline in traffic volume due to the growth of tariffs, reduction of transport activity and purchasing power
The projected growth of tariffs (ticket prices) in the Strategy at the level above inflation, but lower than the growth of the population’s real disposable income may lead to a drop in long-distance railway passenger transportation volume.
Introduction of the long-term subsidisation system. Improvement of the quality of services to substantiate the increase in prices and reduce the loss of customers to air transport.
Deterioration of the economy: the rise in inflation and unemployment, reduction of the real disposable income may affect the reduction of transport activity and the population’s purchasing power.
Application of dynamic pricing.
1.2 Reduction of international transportation volume
The aggravation of the geopolitical situation and the strengthening of economic sanctions against Russia may lead to a drop in the volume of long distance passenger transportation by railway.
Application of various marketing initiatives: special tariffs for domestic and international long-distance trains.
1.3 A change of passenger preferences in favor of alternative means of transport
A change of passenger preferences in favor of air transport (reduction of air transport fares by subsidising regional transportation with public support) or buses (in case of population income reduction) may lead to a drop in traffic by FPC trains.
Implementation of competitive strategy for passenger retention and attraction of new passengers using other means of transport.
Change of price based on the elasticity of demand for the price and comfort.
Using innovative rolling stock, including: • purchase of 50 double-decker cars to organise doubledecker train communication on the most loaded routes, such as Moscow – St. Petersburg, as well as approval of twostorey carriage with seating; • use of sleeping RIC carriages for international transportation in the trains Moscow–Prague, Moscow–Helsinki,Moscow– Warsaw, Moscow–Paris, Moscow–Nice. Optimisation of the movement of trains, including their acceleration.
Federal passenger company 2014 Annual Report
57
Introduction
Company Strategy
Risk
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Risk description
Mitigation measures
To increase affordability of long-distance railway transportation services for the population the Government can index the tariffs at a rate which is slower than that included in the Strategy.
Reduction of the amount of unprofitable transportation services in case of insufficient subsidising from the Government.
3.1 The absence of investment component in the Government support to fund renovation of the rolling stock
The passenger railcar fleet largely depreciated, JSC FPC’s own sources of investment being insufficient. This can lead to a loss of quality and a reduction in the rail traffic volume.
Active work with executive and representative authorities, business and expert communities aimed at substantiating the need for the Government’s targeted support to finance renovation of the rolling stock.
3.2. Failure to achieve the planned efficiency of investment projects’ results as a result of investment programme implementation
Failure to comply with the terms of capital investments and commissioning, as well as substantial changes in the fixed assets’ operating conditions may lead to a deterioration of the expected investment projects’ results.
Using project management approaches at all stages of investment projects’ implementation.
2. Regular risks Tariff increase in the regulated segment at a faster rate than that which is planned in the Strategy without compensation from the Government. 3. Investment risks
4. Higher-than-anticipated growth of expenses risks Higher-than-anticipated growth of suppliers’ prices and the cost of long-distance passenger transportation services faster than the growth of transportation tariffs
Higher-than-anticipated growth of FPC’s suppliers’ prices compared with the growth of tariffs for long-distance transportation of passenger creates the risk of reducing FPC’s operational efficiency.
Long-term planning of supply needs
Lagging behind in technical, economic and performance characteristics of the passenger rolling stock from the world level creates the risk of reducing FPC’s competitiveness, lagging behind in the required rate of operational costs reduction.
Development and implementation of a long-term strategy of FPC’s innovative development.
Conclusion of mutually beneficial long-term contracts with suppliers
5. Technical and process risks 5.1 Lagging behind in technical, economic and performance characteristics of the passenger rolling stock from the world level
Building the infrastructure and identifying the sources for FPC’s innovative development. Purchase of up-to-date rolling stock, which meets international standards.
5.2 Insufficient pace of innovation in the transportation process
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Federal passenger company 2014 Annual Report
Insufficient pace of innovation in the transportation process will not allow the realisation of technological potential to improve transportation safety and the quality of passenger service.
Introduction of new technologies and enhancements to the existing software.
Operating and Financial Results Analysis
International activities
Investment Activities
Risk
5.3 Safety inhibition
Corporate Governance
Sustainable Development
Appendices
Risk description
Mitigation measures
Events occurring due to violation of safety rules.
Implementation of traffic safety management system in JSC FPC.
Equipment failures. Analysis of traffic safety and equipment failures. Carrying out technical inspections and traffic safety organisation audits. Analysis of non-destructive testing activities and development of measures for their improvement. Implementation of security and communication monitoring systems on staff cars of passenger trains. Carrying out technical audits of repair shops of the Branches’ business units. 5.4 Fire safety
Fire events on rolling stock.
Carrying out fire safety compliance audits in trains. Modernisation of passenger cars in terms of compliance with fire safety requirements. Equipping JSC FPC facilities with security and fire alarms and automatic fire extinguishing devices.
5.5 Environmental safety
Emissions.
Modernisation of rolling stock and civil engineering structures of JSC FPC’s branches’ business units. Measures for saving and protection of water resources used for production purposes.
5.6 Infrastructure constraints
Inability to to determine the most convenient long-distance train schedule for passengers and increase their speed will not improve the FPC’s competitive advantages on short and medium routes and will create the risk of passengers’ leaving to alternative means of transport.
Long-term planning of rail infrastructure development for passenger traffic together with JSCo RZD.
5.7 Threat of terrorist attacks
Threat or committing of unlawful interference acts (including terrorist attacks) at transport infrastructure facilities and JSC FPC’s vehicles.
Carrying out preventive measures in cooperation with the Central Directorate on Transport of the Ministry of Internal Affairs, the FSB, the Security Department of the JSCo RZD and regional security centres of JSCo RZD. Strengthening the access mode and internal security regime at the JSC FPC’s facilities. Proving the JSC FPC’s transport facilities with engineering and technical transport security equipment.
6. Social risks 6.1 The emergence of societal dissatisfaction with the JSC FPC’s activities
Unpopular measures, related to higher tariffs and closure of unprofitable routes, can cause mass discontent among the population.
The introduction of government order for long-distance transportation, and targeted subsidies for wide geographical accessibility and financial affordability of transportation services.
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Introduction
Company Strategy
Risk
6.2 Emergence of tensions among the personnel
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Risk description
Mitigation measures
Optimisation of repair facilities and other assets, accompanied by staff layoffs, may cause employee discontent.
Retraining and transfer of laid-off employees to vacant positions in the FPC or Holding Company. Development of the internal labour market in the FPC and Holding Company. The increased use (work load) of the assets, being optimised, through diversification of activities.
7. Reputational risk Occurrence of corporate reputation loss
Possible increase in negative public relations as a result of train cancellations and issues relating to passenger transport subsidies.
Communication campaign of certain intensity in socio-political printed media, business and specialised publications, as well as online.
Public pressure is associated with an increase in customers’ quality requirements and requirements to the services provided by JSC FPC.
Participation in trade exhibitions and conferences. Holding image-strengthening events.
Negative rating in case of poor travel conditions on FPC’s trains. Increased competitive pressure from aviation and road carriers. Forecasted passenger traffic decrease due to objective factors.
Generation of positive external evaluation of the Company by the expert community. Monitoring consumer loyalty to the JSC FPС’s activities (initiating and maintaining passenger feedback). Monitoring negative reports about the Company in the information space, carrying out crisis management, if necessary, for leveling the negative news flow. Monitoring of competitors – the key players in the market of transport services in the aviation, automotive and railway sectors, ensuring the Company’s presence in the competitors’ information field.
8. Occupational injuries Occupational injuries
Damage from injuries and illnesses of the Company’s employees, received on the job.
Compliance with industrial, fire and environmental safety legislation. Regular employee training and certification, production control in terms of occupational safety and fire safety prevention work.
9. Financial risks 9.1 Foreign currency exchange risk
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Federal passenger company 2014 Annual Report
The risk of JSC FPC’s costs rising on agreements and contracts, denominated in foreign currency: contracts with foreign contractors for the services of FPC trains’ access to foreign railway infrastructure, contracts for the development and delivery of foreign-made passenger trains, contracts for settlements with foreign carriers on the sold travel documents.
Hedging of payments in foreign currency using derivative financial instruments, renegotiation of contracts, denominated in a foreign currency.
Operating and Financial Results Analysis
Risk
9.2 Interest rate risk
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Risk description
Mitigation measures
The risk of interest rates’ increase on borrowed funds and the funds being raised.
Obtaining credit ratings from the leading international rating agencies. Maximum interest rates on loans are limited by conditions of the long-term contracts, signed with creditor banks on the basis of public tenders. Revision of interest rates in accordance with the conditions of loan agreements can be implemented only by mutual agreement of the parties.
9.3 Liquidity risk
The risk related to threats and opportunities related to the management of the Company’s surplus funds (insolvency risks, cash shortages risks).
Daily planning of payments, availability of long-term credit lines, placement of free funds on deposit with the early termination right.
9.4 Credit risk
Risk of contractors’ failure to fulfill their obligations before the Company on the concluded contracts/agreements.
The use of standard terms of payment aimed at minimising upfront payments and pre-payments for contractors’ services. Setting up a requirement for risk group contractors to provide bank guarantees to ensure fulfillment of their obligations.
Federal passenger company 2014 Annual Report
61
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Quality and Safety
25%
share of digital tickets in total ticket sales
62
Federal passenger company 2014 Annual Report
+8.6%
growth in number of grateful reviews of train personnel work
Operating and Financial Results Analysis
Investment Activities
98%
International activities
passenger traffic schedule accuracy
Corporate Governance
Sustainable Development
Appendices
55.8%
share of cars equipped with air conditioning
Federal passenger company 2014 Annual Report
63
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Quality High-quality service and transportation safety are necessary conditions in the Company’s strategy.
JSC FPC’s policies in the sphere of quality To follow management’s leadership, to use a quality management system, and to ensure the involvement of every employee in activities aimed at achieving quality objectives
To continuously improve the JSC FPC’s quality management system, based on the best Russian and international experience, enhance its effectiveness and efficiency through the introduction of innovations, including lean production
To develop the employees’ competence and to ensure their motivation
To ensure compliance of the JSC FPC’s quality management system with the requirements of ISO 9001: 2008 and regulatory requirements
To improve customer satisfaction, to ensure the formation of their loyalty
To develop mutually beneficial and long-term relationship with the Government authorities, civil society, Russian Railways Holding and suppliers
Distribution of Responsibilities Quality control services in JSC FPC’s passenger trains and travel documents sales points is carried out by means of audits and elabouration of corrective actions based on their results by the FPC’s Centre for Internal Control and Audit, which is directly managed by the Director General of the Company.
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Federal passenger company 2014 Annual Report
The management processes, related to transportation service quality at the operational level, are carried out by the chain of command, the top level of which being the Transport Management Department, Passenger Services Department, Car Control Department, Sales Management Department and Catering Management Department.
The formation of corporate quality management system, based on the ISO 9000 international standards is performed by the Deputy General Director for Strategic Development and Corporate Governance.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Monitoring Quarterly the Company monitors the satisfaction of passengers, travelling by train, including the assessment of individual departments’ influence, according to their areas of responsibility for various components of the service. The research is conducted by passenger surveys during the trip.
In the future, the Company plans to switch to and confidently maintain a high level of customer focus. To this purpose JSC FPC is implementing a business process, consisting of a system of measures and projects aimed at meeting customers needs of throughout the full customer value chain.
The high level of customer satisfaction corresponds to estimates in the range of 4.5 to 5 points. The medium customer satisfaction level corresponds to 4 to 4.4 points. The low customer satisfaction level corresponds to 3.9 points and lower.
The increase of customer focus level over 2010–2014, %
88 Low
The overall passenger satisfaction level, according to 2014 results, amounted to 4.5 points, which corresponds to the FPC’s average customer focus level of 90%. This result is 1 p.p. higher than that of 2013.
Medium
High
According to 2014 survey results, passengers noted significant improvements on the following parameters: • the ticket purchase procedure (due to active development of electronic sales channels and e-registration services); • promotions and special offers awareness; • meals in the dining car.
89
90
86
2011
2012
2013
2014
Customer satisfaction parameters’ dynamics Prepaid meals Work of the car captain
Service level/cost of ticket ratio Car interior design
Level of personal security and safety of personal effects
Tes and snack sale
Information materials in the car
Sanitary condition of the car
me schedule and length of trip
4.0 4.2
Procedure of purchasing travel documents on the website
4.4
Meals in the restaurant car
4.6 Linen
4.8 5.0
Technical condition of the restaurant car 2012
2013
Purchasing of a ticket in a ticket office Technical condition ot the passenger car
2014 Federal passenger company 2014 Annual Report
65
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
2014 Results: improving transportation services’ quality JSC FPC’s main business process: transport of passengers by general-purpose railway transport in long-distance trains on the territory of the Russian Federation and abroad.
Planning of prices, sales and promotion
30%
of deregulated segment traffic is covered by system of dynamic pricing (166 trains)
17%
is the growth in passenger traffic in 2014 according to yield management system
18%
traffic covered by marketing actions
Elabouration of routes and time schedule
364 trains were accelerated
6.5%
the share of trains with day skipping mode in 2014 (+3.55 than in 2013)
+1.0%
the speed increase with longdistance trains in the whole network
222,057 trains sent in 2014
608
departures of trains per day on average in 2014
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Federal passenger company 2014 Annual Report
Planning of car logistics Work of train brigades and meals
+57%
increase (compared to 2013) in passengers load on day trains
+40
crews have the “passport of trust” (5% of all the FPC crews)
535
thousand children were provided with meals, according to the endof-summer traffic results in 2014
9.4
mln passengers mln passengers provided with meals (+40% than in 2013)
Operating and Financial Results Analysis
Investment Activities
Preparation of cars, maintenance and repairs, formation and equipping of trains
International activities
Corporate Governance
Ticket sales
–34%
24.3%
–10.0%
1 in every tickets sold today is electronic
reduction in the number of failures of technical equipment compared to the level of 2013
reduction in the cost of fuel and energy resources compared to 2013
55.8%
share of cars equipped with air conditioning
34.5%
of car park equipped with environmentally friendly toilets
share of electronic sales by the end of 2014 (+6% than in 2013)
4
85%
travel documents were purchased by participants of RZD Bonus loyalty programme
950
thousand passengers are registered in the RZD Bonus loyalty programme
–15.0%
Sustainable Development
Appendices
Transportation of passengers and travel services on the route
+8.6%
increase in the number of positive reviews about members of train crews (3,542,477 reviews)
18.3%
are firm trains of the total number of trains in the schedule of 2014/2015
98%
was the scheduled movement of passenger trains
–39.0%
reduction in the number of passengers complaints about shortcomings of the organisation of meals
reduction in the number of passenger complaints about the shortcomings of ticket office
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
High Quality Ticket Service
In order to improve the quality and accessibility of the ticket purchasing process for long-distance trains JSC FPC is actively developing electronic sales and service channels.
The Company continues to expand the areas of its e-registration service which allows passengers to get on a train using the electronic train ticket, without issuing a paper ticket.
In 2014 the share of electronic sales of tickets to the JSC FPC’s longdistance trains increased by 6% compared to the previous year and 24.3% of all sales (more than 27.8 million tickets).
In June 2014 passengers of FPC’s train No.325/326 Novosibirsk – Almaty and JSC Passenger Transportations’ train No.71/72 Astana – Moscow had the right of travelling by an electronic ticket. These are trains running between Russia and Kazakhstan.
If in 2014 every fourth ticket was electronic, it is planned for 2015 that one in every three tickets should be electronic. Since February 2014 together with the JSC RZD’s Unified Information and Service Centre JSC FPC has introduced the long-distance train ticket reservation service by telephone number 8-800-775-00-00 with the possibility of buying out of travel documents at any FPC’s ticket office. In the reported year more than 31 thousand passengers used this service.
In addition to developing electronic sales JSC FPC is working to raise customer awareness and stimulate purchase of tickets through electronic sales channels.
How to buy tickets of JSC FPC? On the website http://pass.rzd.ru You can also check railway timetable on this website.
Share of digital sales, %
In person in sales offices. List of sales offices is available at: http://pass.rzd.ru/sellpoints/public/ ru?STRUCTURE_ID=5243 33 25 13
2012
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Federal passenger company 2014 Annual Report
Order in advance by calling 8-800-775-00-00 and buy it in any sales office.
19
2013
2014
2015 Forecast
A ticket is cheaper if you buy it in advance.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Double-Decker Cars
Commissioning of double-decker rolling stock means an improved quality of passenger service, reduction of operating costs, enhancement of the carrier’s efficiency, of the infrastructure’s throughput and other benefits.
The year 2014 showed positive results of the train No.104/103 Moscow – Adler operation, both by volumetric and profit performance:
The FPC’s double-decker train has a number of additional services, which ensure passengers’ comfort: Wi-Fi Internet access, three toilets in each car, a high-tech dining car with a full-scale kitchen. The new train has a high level environmental and general safety.
• an increase of passenger capacity from 59% to 61.5%.
Since the launch of the first double-decker train No.104/103 Moscow – Adler on November 01, 2013 it has transported more than 495 thousand passengers.
The Company plans to expand the coverage area of double-decker train communication, which are also equipped with seating spaces, to such routes as Moscow – Kazan, Samara, St. Petersburg – Adler, as well as local traffic routes, such as Adler – Krasnodar and Adler – Rostov.
Passenger turnover growth
153
%
Increase in gross revenue
165
%
• passenger turnover growth – 153%; • an increase in gross revenue – 165%;
On February 01, 2015, a double-decker train No.5/6 Moscow – St. Petersburg was launched.
Increase in passenger capacity from 59%
61.5
%
Since November 01, 2013 it has transported more than
495,000 thousand passengers
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69
Company Strategy
Introduction
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
Lastochka High-Speed Electric Train
Lastochka High-Speed Electric Train (Desiro RUS) was designed by the German company Siemens AG. It consists of 5 cars, the total length of the train reaching 130 m. The electric train can reach the speed up to 160 kmph. The electric train is equipped with seats for disabled passengers. All the cars are equipped with air-conditioning equipment and digital display for passenger information purposes. Hand luggage shelves are equipped with 220 V electric sockets, which allow mobile telephone and other eqipment charging during the trip.
In 2014 Lastochka High-Speed Electric Trains were put into operation on the following routes: Moscow – Kursk, Moscow – Orel, Moscow – Smolensk, Petrozavodsk – St. Petersburg, Adler – Krasnodar and Rostov – Krasnodar. The number of Lastochka high-speed trains on the route Moscow – Nizhny Novgorod was increased up to three trains a day.
Plan of a car in Lastochka train on the route Moscow – Nizhny Novgorod 1 2
5 6 8
9 17 10 18 12 20
21 22 24 118
29 31 30 32 Entrance
43 44
53 55 61 54 56 62
Luggage
63 81 83 64 82 84 Luggage
Entrance 4 3
70
14 13
16 26 15 25
Federal passenger company 2014 Annual Report
28 120 27
34 33
89 93 101 105 90 94 102 106 113 122 92 96 104 108 114 Entrance
Entrance 38 36 35
42 48 52 40 46 50 39 45 49
60 68 72 76 80 88 58 66 70 74 78 87 57 65 69 73 77
124 98 100 110 112 116 97 99 109 111 115
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
RIC Carriages
The new cars are provided with: wider sleeping berths than in conventional cars, that can easily be transformed into individual seats
The new RIC-dimensions cars include 8 sleeping compartments with a four-seater design (2 lower and 2 upper beds). Tickets are sold either to the 1st or to the 2nd class (at the passenger’s wish). To ensure personal safety all the compartments are equipped with electronic access control system and internal mechanical interlocks.
a folding table in combination with a sink and place for small rubbish
air-conditioning system with individual control in each compartment
a socket for charging mobile devices in each compartment
two sanitary rooms, including one with a built-in shower
Update on the composition of trains with RIC Carriages Composition of trains
Number of trains in operation
Start of operation
Trains
Running intervals
June 1, 2014
No. 32/31 Moscow–Helsinki (Leo Tolstoy)
Daily
13 cars
2
August 1, 2014
No. 21/22 Moscow–Prague (Vltava) with through cars Moscow–Vienna, Moscow–Cheb
In winter period – 3 times per week
11 cars
3
December 14, 2014
No. 9/10 Moscow–Warsow (CJS FPC's train)
Every other day
6 cars
1
January 22, 2015
No. 17/18 Moscow–Nice
Once a week
11 cars
1
January 25, 2015
No. 23/24 Moscow–Paris
In winter period – 3 times per week
9 cars
3
Federal passenger company 2014 Annual Report
71
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Equipping cars with air-conditioning units and environmentally safe toilet complexes
The whole new rolling stock is equipped with environmentally safe toilet complexes and air conditioners. Over 2014 the following improvements were made to passenger cars to increase the comfort level: • Aluminium-and-plastic window units were installed in a total of 881 cars to ensure compliance with the temperature regime. • A total of more than 1,000 sets of new batteries with a significant increase in the period of operation (if in good technical condition). As a result of this work, the number of complaints about the technical condition of passenger cars in 2014 reduced by 0.4% compared to 2013.
Number of cars equipped with air conditioners
11,082
11,855
12,140
12,074
12,402
2010
2011
2012
2013
2014
Number of cars equipped with environmentally safe toilets
6,008
2010
6,829
7,121
7,332
7,665
2011
2012
2013
2014
Aluminium-and-plastic window units were installed in a total of
881
cars to ensure compliance with the temperature regime
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Federal passenger company 2014 Annual Report
New rolling stock is equipped with environmentally safe toilets and airconditioning units
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Improvement of the Corporate Quality Management System
In April 2014, JSC FPC successfully passed an inspection for compliance with the quality management system requirements of ISO 9001: 2008, and GOST State Standard ISO 9001: 2011, with JSC Intertech Rus related to passenger services in lux class cars. In November – December 2014 the Krasnoyarsk depot of the JSC FPC’s Yenisey Branch and the OrekhovoZuevo depot of the Moscow Branch passed an inspection for compliance with the quality management system requirements of the international standard 9001:2008 TUV SUD Management Service GmbH in relation to repair depots. In 2014, 23 depots passed an inspection for compliance with the quality management system requirements of GOST ISO 9001: 2011 in relation to capital repairs in the scope of CR-1 (capital repairs of type 1 passenger cars), which corresponds to 68.5% of the total number
of JSC FPC’s repair depots. In comparison with 2013, the number of certified repair depots increased by 17.1%. In 2014 the methodological and practical corporate quality management system, previously used for business processes of passenger service in lux class cars and depot repairs, continued to incorporate the activities of all the JSC FPC’s management and business units, as well as the JSC FPC’s branches with their business units.
At the end of 2014 on the territory of the Moscow passenger car depot of the North-Western Branch a pilot project for improving car repairs efficiency by means of modelling was started. Its main objective is to reduce technical operations cost. In 2015, the Company plans to continue to develop its corporate quality management system, lean production techniques as well as expand the number of certified depots.
An active work started in terms of lean production techniques, aimed at reducing costs and increasing the efficiency of the production process in the field of passenger cars repair and maintenance, as well as passenger services on the route.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Safety The safety of JSC FPC’s passenger trains is the Company’s top priority.
Distribution of Responsibility and Governance The issues of internal control over different types of safety and their provision are assigned to different management units at the upper level of the JSC FPC’s management. The operational management of the processes, related to train operation safety, is carried out by the Transport Organisation Department, Passenger Service Department and Rolling Stock Management Department.
The functions of continuous monitoring of long-distance passenger traffic, timely response to abnormal situations, taking measures for their elimination and restoration of normal operation are carried out by the Situational Centre, whose activities are synchronised with the JSCo RZD’s Situational Centre for monitoring and emergency situations’ management. The Situational Centre works in real time mode.
During 2014, 53% of all coach trains were accompanied by squads of transport police and private security organisations
The allocation of safety responsibilities Forms of safety
74
Responsible body
Internal control over railway traffic safety.
Chief Train Traffic Safety Auditor Department, which is directly responsible to the Director General of the JSC FPC.
Industrial, fire and environmental safety, occupational health and safety.
Operation and Production Facilities Development Department, Occupational Health and Safety Department under supervision of the Deputy Director General for production development.
Transport security.
Transport Security Department administered by the Deputy Director General for Regime.
Corporate, economic and information security.
Corporate Security Department administered by the Deputy Director General for corporate security.
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Monitoring JSC FPC ensures continuous improvement of traffic safety. Over the four years of the Company’s operation no accidents (train crashes, failures) took place due to the FPC’s fault. The JSC FPC’s condition in terms of maintaining the level of safety is represented by the downward dynamics of change in the number of events*, related to the violation of traffic and railway safety rules.
Dynamics in the number of equipment failures
Share of passenger cars equipped with passenger train safety and communication control systems, %
267 202 153
In 2014, JSC FPC was responsible for 12 incidents connected with violation of traffic and railway safety rules (7.6% less than in the previous year).
100
2011
2012
2014
2013
50.1
52.9
53.9
2011
2012
2013
61.5
2014
In the reported period the JSC FPC’s business units were responsible for 100 equipment failures (34% less than in the previous year). In 2014 the share of railcar fleet, equipped with passenger train safety and communication control system, increased by 1% compared to the previous year. Over 2014 more than one half of passenger train trips (53%) were accompanied by transport police squads and private security agencies. The number of reported offences in the JSC FPC’s trains in 2014 decreased by 12.6% compared to 2013.
Dynamics in the number of incidents due to traffic rules and railway safety violations 2014
5
7
12
2013
5
6
2
13
2012
13
4
6
23
2011
14 Delay of coach trains for 1 hour and more
11 Uncoupling of rail cars
6
31
Other incidents
* Incident that took place during movement of a railway rolling stock and with its involvement, that could result in, but did not result in a traffic accident.
Federal passenger company 2014 Annual Report
75
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Prevention In 2014 to prevent traffic safety violations the following projects were implemented: • The Federal Railway Transport Agency of the Russian Federation developed and approved the plans for maintaining transport security at the JSC FPC’s 28 transport infrastructure facilities (17 passenger car depots and 11 passenger car sites), which are included in the public integrated population safety programme on transport (Decree of the RF Government No.2344-r dated December 11, 2013). • Escort of foreign international passenger trains on the Russian territory by safety instructors from border crossing points to the destination station and back. The result was a significant reduction in technical failures of internal equipment, electrical equipment and fire extinguishing devices on Uzbekistan, Tajikistan, Moldova, Kyrgyzstan and Mongolia trains. • More than 1,200 inspections were performed to ensure safety of the Company’s facilities. • Together with the branch of the federal state enterprise Departmental Security Service of the Russian Federation Railway Transport and private security companies measures were taken to strengthen protection of facilities (429 guard posts and two special rapid response teams at car depots, railway stations, car parks). • In cooperation with the Police Department on Transport, JSCo RZD’s regional security centre and security units three large-scale operational and preventive events across the whole railway network were carried out (April 21 – April 30 – the Teenager, August 25 – September 3 – Children and traffic, 15 – September 25 – Children of Russia).
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Federal passenger company 2014 Annual Report
• The operational condition of engineering means of security of the JSC FPC’s facilities were provided, the level of faulty equipment having been reduced from 11% in 2013 to 6% in 2014. The total number of cameras amounted to 1,392 pieces. • Contracts were signed for the supply of stationary multizone Dozor metal detectors, portable explosives and vapor detectors M-ION, as well as terminal equipment of video surveillance systems. • Delivery, installation and commissioning of passenger train security and communication monitoring systems was carried out on staff cars in the amount of 75 pieces. • The project of retrofitting depots to the level of the technical regulations’ requirements was implemented (including the purchase of diagnostic equipment aimed at improving traffic safety). • A purchase of 300 next generation L-type steel solid-rolled wheel pairs from the Vyksa Metallurgical Plant (JSC VMZ). According to results of field testing and reports by the Scientific Research Institute of Railway Transport (JSC VNIIZT) and the Rolling Stock Scientific Research, Design and
Technology Institute (JSC VNIKTI), the wheels were 20% more wear resistant, which reduces repair costs and increases service life. • The JSC FPC’s 82 facilities are equipped with security and fire alarm system, as well as automatic fire-extinguishing devices (the share of facilities, equipped with automatic fire-fighting systems in 2014 being 63%, which is 6% more than in 2013). In 2014, the Company targeted work to ensure passengers’ safety, including transportation in passenger trains, allowed to prevent cases of unlawful acts, interfering into passenger transport operation.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Industrial Safety Issues of internal control over industrial safety provisions are assigned to the Operations and Production Facility Development Department, administered by the Deputy Director General for production development. As of January 1, 2015 there are the JSC FPC’s 252 hazardous production facilities, listed in the State Register, 540 technical devices being operated there. In 2014 as a result the optimisation of production processes by JSC FPC and in fulfilment of the federal regulations’ requirements the number of hazardous production facilities was reduced from 286 to 252, the number of technical devices from 572 to 540. At the end of 2014 26 technical devices were replaced, including 15 air collectors, 5 lifting mechanisms (5 cranes), 2 steam boilers and 4 compressor plants. In 2014 the Company implemented a centralised industrial safety programme. As part of this programme industrial safety surveys and examinations of 222 hoisting machines, 37 air collectors, 4 chimneys, 22 buildings, 57 boiler equipment units, 147 crane tracks and 18 lifts were conducted. In accordance with the Federal Law dated March 4, 2013 No.22-FZ on amendments to the Federal Law On Industrial Safety of Hazardous Production Facilities Rostekhnadzor Interregional Territorial Administration carried out re-registration in the public register of all the hazardous production facilities operated by JSC FPC. In accordance with the RF Government Decree No.492 dated June 10, 2013 On licensing manual explosives and chemically hazardous production facilities of I, II and III hazard class the license dated March 24, 2014 No.VC-01-007467 for the JSC FPC’s operation of explosive facilities was extended. In the reported year gas
consumption network activities were licensed for the workshop St. Petersburg – Moskovsky of the North-Western Branch, of the gas boiler houses of Nikolayevka, Moscow-3, Moscow – Smolensk and Moscow – Kiev depots of the Moscow Branch, of Novorossiysk and Adler depots of the North Caucasus Branch. In 2014 as part of professional development course in industrial safety 18 managers, specialists and members of the evaluation committees of the JSC FPC’s branches went through training and certification conducted by the JSC FPC’s Central Attestation Commission, using OLIMPOKS instruction monitoring system. Work on compulsory insurance of civil liability for damage resulting from accidents at hazardous production facilities was carried out. In 2014, no cases of accidents or incidents were reported at the JSC FPC’s hazardous production facilities.
indicators at the corporate level, as well as their inclusion into the managers’ and employees’ bonus system. In 2015 JSC FPC will implement organisational and technical measures, approved by the Director General, to improve train safety organisation and the reliability of FPC’s equipment, including: • integration of the JSC FPC’s Incidents Database information system with the JSCo RZD’s rolling stock automated control system; • modernisation of Peleng Automat wheel sets automated control complex (17 units); • modernisation of passenger cars in terms of compliance with fire safety requirements (with KR-2 and KVR). To achieve sustainable and secure longterm development of the Company, RZD Holding is implementing a strategy for the guaranteed safety and reliability of the transportation process.
In accordance with the international obligations of the Russian Federation, the Constitution of the Russian Federation, the Transport Strategy of the Russian Federation, federal laws and other normative legal acts of the Russian Federation policies of the Russian Railways Holding in the field of traffic safety were elabourated. They are aimed at achieving the Russian Railways Holding’s mission, conservation and enhancement of its values. The management of the Russian Railways Holding confirms by its actions a commitment to continuous improvement of the Company’s performance in the field of traffic safety. Heads of divisions of the Russian Railways Holding, including the FPC managers, are responsible for implementing the policies’ objectives in the field of traffic safety. This is confirmed by including traffic safety into the JSC FPC’s benchmark efficiency levels
Federal passenger company 2014 Annual Report
77
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Operating and Financial Results Analysis
Execution of Anti-crisis program resulted in a reduction of the Company’s budgeted costs of RUB
15.3Â RUB billion 78
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Income from all actiities amounted to
Passenger turnover amounted to
185.6Â RUB billion
94.6 billion passenger-kilometres Federal passenger company 2014 Annual Report
79
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Operating Results Analysis
Based on the 2014 results the passenger turnover amounted to 94.6 billion passenger-kilometres or 88.4% of the previous year’s level, out of which trains made up by JSC FPC had 87.5 billion passenger-kilometers or 90.3% of the 2013 level.
In spite of the transfer growth in domestic traffic in compartment carriages and sleeping cars by 5.8% to the 2013 level, on the whole, the transfer volume in the deregulated segment decreased by 14.1% from the previous year’s level. The transfer volume in the regulated segment was 92.6% of the 2013 level.
In the reporting year the passenger turnover in trains made up in CIS and Baltic countries totalled 7.1 billion passenger-kilometres, a decline of 30.1%. The decline in volume indicators to the previous year’s level is due to the drop in passenger turnover in the international traffic (63.4% to the previous year’s level), tight national macroeconomic situation and changes in geopolitical environment.
In 2014, 98.7 million passengers were transferred. The decline from 2013 was 9.1%, including: • in trains made up by JSC FPC 91.3 million passengers were transferred or 92.7% of the 2013 level; • in trains made up in CIS and Baltic countries 7.4 million passengers were transferred or 73.1% of the 2013 level. In the reporting period the number of kilometres travelled by the cars was reduced of 92.8% of the 2013 level and totalled 3,293.6 million car-kilometres. With regard to decline in the number of kilometres travelled by the cars, seat usage was 69.1% which is 2.4% lower lower than the previous year’s level.
Volume indicators
Indicators
Passenger turnover billion passenger-kilometres in trains made up by JSC FPC
2013
2014
Growth 2014 on 2013, %
114.0
107.0
94.6
88.4
103.3
96.9
87.5
90.3
deregulated segment
35.4
33.4
28.7
85.9
in domestic traffic
26.2
23.8
25.2
105.8
in interstate traffic
9.2
9.6
3.5
36.6 92.6
regulated segment in trains made up in CIS and Baltic countries Passengers carried million passengers
67.9
63.6
58.8
10.7
10.1
7.1
69.9
114.2
108.6
98.7
90.9
deregulated segment
43.3
41.9
35.9
85.6
regulated segment
70.9
66.7
62.8
94.2
13.4
13.3
13.0
97.7
Average number of cars in a train, cars
80
2012
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Passenger turnover decline factor analysis, %
The work results of trains made up by JSC FPC, international trains made up by foreign railways and railways administrations of CIS and Baltic countries in 2014: • 222.1 thousand trains travelled which made up 93.1% of the 2013 level; • train turnover was 290.7 million train kilometers, 95.9% of the 2013 level; • cars turnover made up 3,850.1 million car kilometers or 94.4% of the 2013 level, including cars for passenger transfer – 3,260.0 million car kilometers or 95.1% of the 2013 level.
Growth 2014 on 2013, % Deregulated segment
Regulated segment
Cancellation of unprofitable trains
–1.7
–1.3
Indexation of passenger service rates, flexible rates regulation schedule
–0.3
–2.1
Macroeconomic situation
–1.7
–4.5
Promotions
+3.0
Increase in the number of car dispatches in peak periods
+0.6
Decline factors
Geopolitical environment deterioration (Ukraine, sanctions) National currency weakening
In the reporting period, a passenger train of JSC FPC had 13.0 cars on average which is 2.3% lower than the 2013 level.
+0.5
–12.2 –1.8
Total
–14.1
Passenger turnover in trains made up by JSC FPC amounted to
87.5
–7.4
Number of transported passengers amounted to
98.7 billion people
billion
passenger-kilometers
Federal passenger company 2014 Annual Report
81
Introduction
Company Strategy
Business Model and Assets
Market Overview
Financial Results
Risk Management
Quality and Safety
Changes in net assets at the end of the year, RUB bn 181.1
Income from operating activities amounted to RUB 185.6bn in the reporting period, which is 5.3% lower vs 2013 level. In turn, expenses decreased to RUB 204.9bn or by 1.8% to the 2013 level.
Short-term liabilities increased to RUB 35.5bn or by RUB 2.7bn compared to 2013. The growth is determined by the growth of short-term liabilities in the loan portfolio by RUB 2.2bn due for settlement within 12 months.
Subsidies from the federal budgets amounted to RUB 23.3 billion.
172.4
162.4
2012
2014
2013
EBITDA at the end of the year totalled RUB 16.9bn which is lower than the 2013 level by RUB 5.8bn. Loss at year end totalled RUB 0.4bn. The decline in income flows and hence the loss is due to the drop in transfer volume in the international traffic and tight national macroeconomic situation.
Financial results, RUB bn
Indicators
Income, total - income from passenger service
However, the company took some action to cut costs and minimise loss which resulted in saving RUB 15.3bn of the Company’s budgeted costs.
- income from other activities Expenses, total - expenses for passenger service - expenses on other activities
Investment totalled RUB 24.5bn which is 11.1% lower than in the previous year. Investment in new rolling stock as in the previous year accounted for the main part of the programme, RUB 21.1bn or 86.1% of the entire volume. Long-term liabilities grew from RUB 11.1 billion to RUB 15.8 billion or by 46.8%. The growth is determined by the growth of long-term loans by RUB 5.3bn.
Operating profit - from passenger service - from other activities Other income Other expenses
Federal passenger company 2014 Annual Report
2013
2014
183.0
196.1
185.6
94.7
164.1
175.4
164.2
93.7
18.9
20.7
21.4
103.2
204.1
208.7
204.9
98.2
190.0
194.0
189.7
97.8
14.2
14.7
15.2
103.8
–21.1
–12.6
–19.3
153.1
–25.9
–18.7
–25.4
136.4
4.7
6.0
6.2
101.7
33.7
26.9
27.1
100.8
6.7
6.9
6.6
95.6
Total effect on other income and expenses
27.1
20.0
20.5
102.6
Subsidies from the federal budget
29.6
23.2
23.3
100.2
5.9
7.4
1.2
16.6
EBITDA
21.5
22.7
16.9
74.2
EBITDА margin (including subsidies)
10.1
10.4
8.1
– 2.3 p.p.
3.5
3.3
1.6
49.1
Profit (loss) before tax
Profit tax and other similar liabilities
82
Growth 2014 on 2013, %
2012
Net profit / loss
2.4
4.1
– 0.4
–
Net profit margin
1.31
2.09
–0.21
–
Operating and Financial Results Analysis
Investment Activities
Income Company’s income from all activities totalled RUB 185.6bn in the reporting period, down by 5.3% from the 2013 level with the general decline in passenger turnover by 11.6%.
International activities
Corporate Governance
Sustainable Development
Appendices
Changes in income by operating activity, RUB bn
183.0
196.1
185.6
2012
2013
2014
Changes in income by operating activity by element, RUB bn
2012
2013
2014
Growth on 2013, %
Income from operating activity
183.0
196.1
185.6
94.7
101.4
- income from passenger service
164.1
175.4
164.2
93.7
100.1
85.6
88.5
79.3
89.6
92.6
in sleeping cars and compartment carriages
58.0
59.5
59.4
100.0
102.5
international service
27.6
29.1
19.8
68.3
71.9
in regulated state segment
78.5
86.8
85.0
97.8
108.2
from passenger service
69.0
77.7
76.8
98.9
111.4
66.2
75.1
73.7
98.2
111.3
in general carriages
2.8
2.6
3.1
120.9
113.8
Transfer of baggage, freight and mail
9.5
9.2
8.1
88.6
85.2
18.9
20.7
21.4
103.2
113.3
2.3
2.4
2.3
94.5
98.6
10.4
11.6
11.6
100.0
111.7
premium services
1.8
2.5
3.0
119.4
164.1
linen in trains
7.7
8.1
7.7
95.8
100.7
tea, confectionary and printed media sales
0.9
1.0
0.9
86.3
100.8
other business (rentals, agency fee by agreement)
6.2
6.7
7.5
111.9
121.2
Indicator
in deregulated segment
in open carriages
- income from other activities rolling stock repair and maintenance services provision of non-carriage services in trains
Growth on 2012, %
Federal passenger company 2014 Annual Report
83
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Income from Passenger Service
In 2014, income from passenger service reached RUB 164.2bn, down 6.3% on the 2013 level. In the deregulated segment (passengers travelling sleeping cars and compartment carriages as well as international passenger service), the Company earned RUB 79.3bn. A 10.4% decline on the previous year’s figure. In the domestic service (passengers travelling in sleeping cars and compartment carriages) income remained at the 2013 level due to the Company’s marketing policy and dynamic pricing system. A 5% increase in the price of seats in sleeper cars was made only in September 2014. The price of seats in sleeping cars and luxe class cars remained the same in 2014 (as in 2013). In 2014, the Company continued implementation of revenue management system, 14 new routes were added to the regions of application. As at the end of 2014, 166 JSC FPC’s trains were under the system’s management, about 30% of the deregulated domestic segment were covered by the system. In 2014, the rise in passenger turnover in the regions where it was applied was 117%. The growth in demand is due to the launch of Lastochka trains on Moscow – Smolensk and Moscow – Nizhny Novgorod routes. The increase in gross revenue was 4% from the 2013 level.
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Federal passenger company 2014 Annual Report
Since 2014, the challenging international environment has resulted in dramatic passenger turnover loss both in the Company’s trains (36.6% to the 2013 level) and in CIS and Baltic countries (69.9% to the 2013 level), which resulted in income decline for international passenger service by 31.7% from the previous year’s level. In the regulated segment (seats in open and general carriages), the Company earned RUB 85.0bn. A 2.2% decrease on the previous year is due to a combination of decline in passenger turnover in this segment by 3.5% and the price of seats growth by 4.2%. Income from carry-on baggage, unaccompanied baggage and mail totalled RUB 8.1bn. An 11.4% decrease from the 2013 level was due to a combination of decline in baggage turnover and unaccompanied baggage in the Company’s own and rented baggage cars by 20% from the previous year and the growth of tariff by 4.2%.
Income from passenger service reached RUB
164.2 billion
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Income from Other Sales
“Other activities” are an integral part of the Company’s business. They include, among other things, rolling stock repair and maintenance services, provision of non-carriage services in trains and renting rolling stock out. In 2014, income from other sales totalled RUB 21.4bn, up 3.2% on 2013. Income from other sales accounts for about 11.5% of the total income, against 10.5% in 2013. In 2014, such services were actively developing as agency agreement activities, including selling voluntary passenger insurance policies in the Company’s ticket offices. Despite the general decline in transfer volumes, income from agency agreements increased by 13% from the 2013 level.
One of the major factors for other sales development in 2014 was bringing to the common standards of the complex of standard services that are provided to passengers in the trains that are under the dynamic pricing system management and when travelling in compartment carriages, sleeping cars and lux class cars in branded trains. Income in this segment of business increased by 119.4% on 2013.
In 2014, income from other sales totalled RUB
21.4 billion
up 3.2% on 2013
Increased demand for rolling stock from third party clients also improved other activities indicators: income growth from rentals was up 20% from the 2013 level.
Federal passenger company 2014 Annual Report
85
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Carriage costs, %
4.7
Expenses
4.7 11.9
0.6 3.2
11.9 0.6 4.1 3.2 6.8 4.1
Company’s operating expenses totalled RUB 204.9bn in the reporting period. Savings against 2013 reached 1.8% or RUB 3.8bn.
Total
189.7 Total RUB bn 189.7
6.8
15.0RUB bn
53.6 53.6
15.0
Infrastructure costs and locomotive lease Payroll costs Infrastructure costs and locomotive lease Depreciation Payroll Socialcosts security
Carriage costs
Depreciation Materials Social Fuelsecurity and electricity Materials Other material costs Fuel and electricity Other costs Other material costs Other costs
The major part of carriage costs was infrastructure payments and locomotive lease costs – 53.6% of the total volume (RUB 189.7bn). Carriage costs amounted to RUB 189.7bn, 97.8% to the previous year’s level (with the consumer price index growth at 7.4%). Payroll costs totalled RUB 28.5bn (99.4% of the previous year’s level). Saving is due to downsizing of the workforce to the volume of the work performed, reduction of baggage offices with low activities, liquidation of repair bays in car depots and switching to part-time work in the period of traffic drop. Material costs totalled RUB 6.1bn (101.6% of the previous year’s level). Due to the decrease in the volume of the work, the repair and maintenance programme was decreased thus allowing to reduce the demand for new materials and repair of reusable materials (wheel pairs, other spare parts).
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Federal passenger company 2014 Annual Report
On the whole, fuel and electricity costs totalled RUB 1.08bn (96.0% of the previous year’s level). Fuel and electricity consumption was reduced due to optimisation of electricity consumption by 3%, fuel consumption – by 3.6%.
car kilometer work of trains made up by JSC FPC, international trains made up by foreign railways and railways administrations of CIS and Baltic countries that travelled within the boundaries of the JSC RZD infrastructure.
Other material costs totalled RUB 22.6bn (93.0% of the previous year’s level). Cost optimisation allowed the reduction of rolling stock repair, maintenance and preparation costs. Also, current building, constructions and general business operating equipment repair costs were reduced by 35.5%.
Savings on the rest of other costs of RUB 0.7bn were reached through optimisation of telecommunication costs, keeping in-house a security and watchman service, personnel training, medical check-ups and business travel expenses as well as through the optimisation of management body costs.
Depreciation costs reached RUB 12.9bn (97.5% of the previous year’s level). Reduction was achieved due to conservation of 1,691 units of depreciation (including cars and equipment). Other material costs totalled RUB 110.6bn (98.1% of the previous year’s level). The main saving of RUB 3.3bn arose from infrastructure costs due to decrease in
Operating and Financial Results Analysis
International activities
Investment Activities
Corporate Governance
Sustainable Development
Appendices
Changes in carriage costs, RUB bn 2014 Indicator
Growth on 2013, %
2012
2013
Actual
Total costs
190.0
194.0
189.7
97.8
Payroll costs
29.5
28.7
28.5
99.4
Social security
7.9
7.8
7.8
99.7
Materials
5.9
6.0
6.1
101.6
Fuel
0.8
0.79
0.74
93.9
Electricity
0.3
0.34
0.34
100.7
22.7
24.4
22.6
93.0
109.1
112.8
110.6
98.1
99.3
103.0
101.7
98.7
13.8
13.3
12.9
97.5
Other material costs Other costs, including infrastructure costs and locomotive lease Depreciation
Infrastructure payments and locomotive lease cost
53.8% of the total volume
Tariff share in carriage costs, RUB bn 2014 Indicator
Carriage costs
Growth on 2013, %
2012
2013
Actual
190.0
194.0
189.7
97.8
90.7
91.0
88.0
96.7
99.3
103.0
101.7
98.7
car
Car component in carriage costs amounted to
46.2%
infrastructure and locomotive
Other sales costs
Other sales costs in 2014 totalled RUB 15.2bn, a 3.8% increase from the the 2013 level. The increase was due to a growth in non-carriage services in trains, expansion of these services to all cars in branded
trains (that do not participate in the dynamic pricing system), supported by the respective growth in income.
Growth in costs from other sales is due to increase in volume of services
Federal passenger company 2014 Annual Report
87
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Overhaul Programme Actual expenses for overhaul of fixed assets in 2014 amounted to RUB 8.5 billion. A reduction of 15.0% versus 2013.
Actual expenses for overhaul of fixed assets in 2014 amounted to RUB 8.5 billion. This was a reduction of 15.0% versus 2013: • overhaul of passenger rail cars – by RUB 0.3 billion; • due to the reduction of the production repair programme at car repair plants by 86 rail cars: overhaul of the first volume – by 31 rail cars (RUB 0.1 billion), overhaul of the second volume – by 55 rail cars (RUB 0.2 billion);
• by RUB 0.1 billion due to the reduction of the cost indexation applicable to main rolling stock repair to 4.2% which is 1.2% below the indexation level under relevant agreements; • the expenses under the itemised list of overhaul of production facilities at JSC FPC Branch decreased by RUB 0.1 billion.
Thanks to anti-crises measures, expenses for overhaul of fixed assets were reduced by RUB
0.5 billion
Costs of fixed asset overhaul, RUB bn
Indicator
Growth versus 2012, %
2013
2014
Overhaul of fixed assets
9.7
10.0
8.5
85.0
87.6
third parties:
8.9
8.8
7.4
84.1
83.1
rail cars
7.5
8.2
6.9
84.1
92.0
buildings and structures
1.4
0.6
0.5
83.3
35.7
0.8
1.2
1.1
91.7
137.5
own resources (rail cars)
88
Growth versus 2013, %
2012
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Cost optimisation programme In order to stabilise the Company’s financial activities in 2014, an Anti-crisis Programme was developed, as well as projects covering key areas with a targeted savings of RUB 14.6 billion. The actual savings based on the operations results amounted to RUB 15.3 billion which was 4.3% above the target.
Projects under the Anti-crisis Programme Main Anti-crisis Programme, target
Additional Anti-crisis Programme, target
Target, total
Movement
3.48
0.76
4.24
4.27
100.7
Fixed Assets Repair, Equipment Maintenance, and Fuel Resources
0.24
0.13
0.37
0.41
110.8
Personnel
2.76
0.05
2.81
2.86
101.6
Projects
Actual
Achievement of targets, %
Luggage
0.10
–
0.10
0.00
0.0
Rolling Stock Repair and Capacity Utilisation
0.70
1.15
1.85
2.09
112.7
Miscellaneous
3.32
1.94
5.27
5.64
107.2
10.60
4.04
14.64
15.27
104.3
Projects, total
Main outcomes of the projects under the Anti-crisis Programme: Movement Project • wagon kilometres for the infrastructure of JSC Russian Railways decreased by 5.6% year-on-year; • train turnover for the infrastructure of JSC Russian Railways decreased by 4.1% year-on-year; • in order to optimise the transportation process, 107 trains were cancelled; • the intervals between eight trains were lengthened; • 550 additional time-tabled trains were cancelled.
Fixed Assets Repair, Equipment Maintenance, and Fuel Resources Project • programmes were curtailed for the overhaul of 86 rail cars, maintenance of 62,000 rail cars, and internal and external washing of 48,180 rail cars. Personnel Project • headcount was reduced by 6,093 employees, including 1,229 employees transferred to part-time work; • salary indexation was discontinued with an effect RUB 305 million. Luggage Project • A total of 220 low-density luggage desks were closed.
Rolling Stock Repair and Capacity Utilisation Project • production programmes were optimised; • subject to wagon kilometres reduction by 7.2% year-on-year, maintenance (MT-1) and current repair scopes decreased by 5.3%. Miscellaneous Project • optimised expenses for telecommunications, in-house security and watchman services, personnel training, medical examinations, travel expenses, as well as administration support.
Federal passenger company 2014 Annual Report
89
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Employee headcount and payroll The headcount of personnel involved in transportation in 2014 was 65,893 employees which was 2,909 employees fewer than in 2013 (4.2%) taking into account replacement of outstaffed passenger car attendants. Since July 2014, outstaffing personnel has not been engaged at passenger trains, while in Q3 and Q4 2013 there were 4,300 and 1,778 outstaffed employees respectively. A total of 2,173 employees (7%) were laid off on the jobs not directly related to servicing passengers en route. In relation to the anti-crisis measures, the wagon depots in Kemerovo, Rostov, Ruzaevka, Abakan, and Liski were either closed or restructured with 552 FTEs, or 227 actual employees, laid off. Since the second half of the reporting year, the administrative headcount has been reduced by 10% with 99 employees laid off (or 303 FTEs optimised). The implementation of electronic ticket selling systems resulted in headcount reduction by 539 ticket clerks or optimisation of 646 FTEs. Closing of inefficient luggage desks resulted in the optimisation of 79 receiving clerks (headcount) or 307 FTEs.
90
Federal passenger company 2014 Annual Report
Additionally to the said measures, improvement of operational and performance standards allowed the Company to cut headcount by 1,229 employees (versus 783 employees in 2013) by introducing part-time jobs. As a result of anti-crisis measures, payroll expenses were aligned with the work scope (94.1%).
The implementation of electronic ticket selling systems resulted in headcount reduction by
539
employees
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Other income and expenditure
The financial result from other income and expenditure amounted to RUB 20.5 billion. Other income, RUB bn The main proceeds as part of FPC other income are free subsidies from the federal budget to reimburse a shortfall in income caused by government regulation of tariffs for long-haul transportation in open and general carriages. The subsidies from the federal budget in 2014 totalled RUB 23.3 billion. Furthermore, the same year the Company received RUB 0.15 billion from regional budgets to compensate for its shortfall in income. A significant contribution to other budgeted income and expenses was interest on bank deposits and interest accrued on balance in settlement accounts. In 2014, efficient liquidity management against the backdrop of declining revenues from transportation brought RUB 0.5 billion (67% year-on-year). FX rates changes during FX settlements (USD, EUR, and CHF) resulted in FX gain of RUB 0.3 billion recorded based on the 2014 performance (over 7-fold growth year-on-year). The main item in other expenses is cashin-transit and cash management costs accounting for 24% of the total expenses. Expenses based on the operations in the reporting period amounted to RUB 1.6 billion (80% year-on-year).
Indices
Other income interest receivable budget funds other
YOY change 2014 Growth in 2014 vs vs 2013 2013, %
2012
2013
2014
33.7
26.9
27.1
0.2
101.7
1.0
0.8
0.5
–0.3
65.9
29.6
23.4
23.5
0.1
100.2
3.1
2.7
3.1
0.4
116.6
2012
2013
2014
Other expenses, RUB bn
Indices
YOY change 2014 Growth in 2014 vs vs 2013 2013, %
Other expenses
6.7
6.9
6.6
–0.3
95.1
interest payable
0.4
0.7
1.0
0.3
145.4
expenses for social policy implementation
1.2
1.3
1.1
–0.2
86.4
cash management services
1.9
2.0
1.6
–0.4
79.5
other
3.2
2.9
2.8
–0.1
97.6
Furthermore, an interest of RUB 1.0 billion was accrued based on the 2014 results due to a growing loan portfolio (150% year-on-year). FX loss/gain related expenses in foreign currency and in Russian rubles under currency agreements totalled RUB 0.4 billion (474% growth vs 2013).
Federal passenger company 2014 Annual Report
91
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Balance sheet total On November 10, 2014, the General Shareholders’ Meeting of JSC FPC resolved to increase the authorised capital by allotment of 12,825,192,406 additional ordinary shares with a par value of one (1) ruble each.
Key balance items, RUB bn
Indices
Non-current assets Current assets
An additional securities issue was needed to optimise the use of property of Russian Railways Holding.
2012
2013
2014
YOY change 2014 vs 2013
178.0
186.8
206.7
19.9
In Q1 2014, JSC FPC completed the additional issue of shares worth RUB 5 billion started in 2013 (resolution registered by the Financial Markets services of the Bank of Russia on December 12, 2013 under state registration number 1-01-55465-Е-002D).
110.7
28.2
29.0
25.1
–3.8
86.8
Equity and provision
162.4
171.8
180.5
8.7
105.0
Long-term liabilities
10.8
11.1
15.8
4.8
143.2
Short-term liabilities
32.9
32.9
35.5
2.7
108.1
A total of RUB 4.5 billion in cash and property worth RUB 8.3 billion was transferred to pay for the securities. – 17 property items, 399 passenger rail cars, and 432 other movable property items. During 2014, the authorised capital was increased by RUB 5.0 billion to make RUB 152.6 billion as at December 31, 2014.
Growth in 2014 vs 2013, %
FPC long-term liabilities as at December 31, 2014 amounted to RUB 15.8 billion, including credits and loans in the amount of RUB 13.3 billion. The Company’s net assets in the reporting years grew by 5.0% to RUB 181.1 billion.
Changes in the net assets of JSC FPC, RUB bn
162.4
2012
+5.0 %
172.4
+6.1 %
181.1
2014
2013
Balance sheet changes, RUB bn 2014
2014
206.7
186.8
15.8
11.1
35.5
32.9
2012
178.0
Federal passenger company 2014 Annual Report
171.8
29.0
2012
92
180.5 2013
2013
Current assets
25.1
Current assets
162.4
28.2 Equity and provision
Long-term liabilities
10.8
32.9
Short-term liabilities
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Debt policy JSC FPC is guided by the credit policy approved by the resolution of its Board of Directors on June 22, 2011.
The credit policy documents control on the part of the parent company over the borrowings-related transactions of JSC FPC and outlines the procedure for assessment of FPC financial sustainability and creditworthiness. Moreover, during seasonal decline in passenger transportation volumes in Q1 2014, the Company received a short-term three-month loan of RUB 5.0 billion. As at December 31, 2014, the Company’s loan portfolio was RUB 17.5 billion. Against the backdrop of appreciation of borrowings in the interbank crediting market, JSC FPC set fixed disbursement dates and interest rates under the credit facility to finance its cash gaps in 2015.
JSC FPC defined the following credit covenants for borrowings management: Covenants
Set limits
Value in 2014
Debt structure (short-term loan to total borrowings ratio)
max 0.2
0.2
Debt coverage (net debt (less cash and term deposits) to EBITDA ratio)
max 1.5
0.4
min 5
12.0
max 0.5
0.1
Interest coverage (EBITDA to interest expenses ratio) Equity structure (borrowings to equity ratio)
Borrowings repayment schedule, RUB mln
The loan and credit related expenses included in other expenses and cost of investment assets in 2014 totalled RUB 1.1 billion and RUB 0.4 billion.
1 348
1 765 851
1 303
807
7 224 420 4 229
3 248 9 2011
4 229
4 229 2 563
513 2012
Interest
2013
2014
2015
2016
2017
2018
201 901
124 677
43 677
2019
2020
2021
Principal
* In 2013, in order to decrease costs for servicing of credit portfolio, JSC FPC refinanced its debt in one of its credit agreements beforehand (without paying out a comission for early payment) on beneficial terms.
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Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Changes in FPC credit portfolio by repayment date, RUB mln
2011 2012 2013 2014
In order to receive borrowings in open financial markets, JSC FPC registered a Prospectus for first series bond issue worth RUB 5 billion on March 13, 2014. However, due to the unfavourable market environment in cash markets, JSC FPC postponed its first issue of corporate RUB bonds until cost of funds decreases by replacing a bond-secured loan with a bank loan.
4,258 2011 | 2012 | 2013 | 2014
2,026
Short-term
600
Long-term
855
7,985 9,331 13,227
Payables and receivables Receivables as at December 31, 2014 were RUB 9.2 billion.
The receivables due from buyers and customers (except for transportation) as at end of 2014 were RUB 0.8 billion. The largest share was receivables for repair and maintenance of rolling stock amounting to RUB 0.39 billion, or 48.7%, and for lease of rolling stock and immovable property of RUB 0.22 billion, or 27.5%. The receivables due from buyers and customers for passenger transportation services as at December 31, 2014 made up RUB 1.2 billion. The debt is in line with the conditions of relevant agreements.
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Federal passenger company 2014 Annual Report
Receivables, RUB bn YOY change 2014 vs 2013
December 31, 2012
December 31, 2013
December 31, 2014
Buyers and customers (except for transportation)
0.6
1.0
0.8
–0.2
Buyers and customers (for transportation)
1.3
2.0
1.2
–0.8
Advances
0.4
0.6
0.5
–0.1
Taxes and duties
3.6
3.1
3.3
0.2
Other receivables
2.2
1.6
3.4
1.8
TOTAL
8.2
8.3
9.2
0.9
Indices
Operating and Financial Results Analysis
Investment Activities
Actual receivables due under advances as at December 31, 2014 were RUB 0.5 billion. The payables as at end of December 2014 grew year-on-year by a mere of RUB 0.2 billion to RUB 27.8 billion. Actual payables to suppliers and contractors as at December 31, 2014 amounted to RUB 10.9 billion, including payables to JSC Russian Railways and its subsidiaries of RUB 4.3 billion and to third parties of RUB 6.6 billion with RUB 0.001 billion overdue. As payables are significantly above the receivables, the Company can use payables as an additional source of financing.
International activities
Corporate Governance
Sustainable Development
Appendices
Payables, RUB bn
Indices
Debt due to suppliers and contractors
December 31, 2012
December 31, 2013
December 31, 2014
YOY change 2014 vs 2013
10.9
9.5
10.9
1.4
Payroll and other transactions with accountable person in arrears
2.1
2.1
1.7
–0.4
Social insurance
0.9
0.8
0.6
–0.2
Taxes and duties
0.9
0.8
1.5
0.7
Advances for other activities
0.3
0.3
0.4
0.1
Advances for transportation
7.7
8.4
8.5
0.1
Other payables
6.9
5.7
4.1
–1.6
29.7
27.6
27.8
0.2
Total
Payables and receivables review Payables and receivables ratio amounts to
0.33
This allows the Company to use payables as an additional source of funding
December 31, 2012
December 31, 2013
Changes in receivables, RUB bn
–2.4
+ 0.1
+ 0.9
Changes in payables, RUB bn
+ 4.3
–2.1
+ 0.2
Receivables growth / reduction rates, %
77.6
101.7
110.4
Indices
Payables growth / reduction rates, %
December 31, 2014
117.1
93.0
100.7
Days receivables outstanding
14
13
15
Days payables outstanding
41
36
37
0.28
0.30
0.33
Payables and receivables ratio
Federal passenger company 2014 Annual Report
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Cash flows As at January 01, 2014, the Company’s balance was RUB 3.2 billion.
Cash from operations Cash from operations in 2014 amounted to RUB 260.6 billion, including RUB 23.5 billion from the federal budget. Most proceeds were from passenger transportations amounting to RUB 191.1 billion, or 73% (less transit payments).
Cash from operations, RUB bn
Operations-related payments totalled RUB 244.5 billion with RUB 120.1 billion, or 49%, as payment for infrastructure services and lease of locomotives. Net cash flows from operations amounted to RUB 16.1 billion.
272.8 249.1
278.9 259.1
260.6 244.5
23.7
19.8
16.1
2012
2013
2014
Cash proceeds Cash drain Net cash flow
Cash flow from investment A negative cash flow from investment in the reporting year was RUB 29.0 billion. RUB 0.9 billion was earned on the sale of fixed assets.
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Federal passenger company 2014 Annual Report
Investment payments (financing of the investment programme) reached RUB 29.9 billion. Cash was also allocated to: • purchase rolling stock (RUB 21.1 billion); • upgrade the rolling stock (RUB 0.9 billion);
• purchase equipment to retrofit the depot (RUB 0.9 billion).
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Cash flow from financing
Net cash flows from financing amounted to RUB 8.8 billion. Proceeds from financing in 2014 were RUB 21.6 billion, including: • RUB 13.4 billion of borrowings; • RUB 4.5 billion as contributions to the authorised capital.
Cash drain from financing reached RUB 12.8 billion, including: • interest payments on loans and credits of RUB 1.4 billion; • loan and credit repayment of RUB 7.2 billion.
The cash flows in JSC FPC in the reporting period totalled RUB 0.6 billion. Cash balance as at December 31, 2014 was RUB 3.7 billion. Balance of cash and cash equivalents on the settlement account (including shortterm deposits) as at December 31, 2014 was RUB 11.2 billion.
Financial analysis Indices
2012
2013
2014
Revenue, RUB bn
182.99
196.07
185.61
Subsidies, RUB bn
29.56
23.24
23.28
EBITDA, RUB bn
21.50
22.70
16.86
EBITDA margin (including subsidies), %
10.12
10.35
8.07
1.13
1.11
0.95
Absolute liquidity ratio
0.46
0.46
0.31
Current liquidity ratio
0.85
0.88
0.71
Equity to total assets
0.79
0.80
0.78
Sales margin (including subsidies), %
3.97
4.85
1.91
Return on equity (ROE), %
1.49
2.45
neg.
Return on assets (ROA), %
1.21
1.94
neg.
Liabilities in the balance sheet total
0.21
0.20
0.22
Financial leverage (borrowings / equity)
0.27
0.26
0.28
Total debt / EBITDA
0.40
0.50
1.04
Total debt / Revenue (including subsidies)
0.04
0.05
0.08
General indices
ROA (revenue / fixed assets), RUB Liquidity
Margin
Liabilities
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Management of Investment Operations
Total amount of investment under the Investment programme amounted to RUB
24.5 98
Federal passenger company 2014 Annual Report
RUB billion
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
274
International activities
coach cars were acquired
Corporate Governance
Sustainable Development
Appendices
50
double-decker cars were placed in operation Federal passenger company 2014 Annual Report
99
Introduction
Company Strategy
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
Investments and Investment Ranking System The company’s investment policy is a part of implementation of the development strategy, which sets priorities and investment structure, as well as establishes criteria for project investment attractiveness, and the trend of using investments and their sources. There are 5 types of investment projects: • Long-term projects are projects in progress, earlier ranked due to economic impacts and technological expediency. • Replacement of retiring fixed assets, resulting in an economic impact.
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Federal passenger company 2014 Annual Report
• Cost effective projects. • Replacement of retiring fixed assets, resulting in a technological impact. • Technological and social projects, being ranked on a scale from 0 to 100. The greater the rank of the project, the higher the priority of the project when it is included in the investment programme.
In order to create an investment programme we use integral ranking system, that takes into account economic effectivenes, project implementation, its technological necessity and correspondence with Company’s strategic guidelines
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Investment Structure
In accordance with the strategic guidelines of JSC FPC, based on the integrated system of ranking, the structure of the Company’s investment programme for 2014 by investment priorities, including actual progress, is as follows: The investment programme of JSC FPC in 2014 totaled RUB 24.5 billion. When preparing the investment programme for 2014, the bulk of capital investments (RUB 21.1 billion) went on the rolling stock renewal, including acquisition of 274 passenger cars (RUB 20.5 billion). When preparing the car purchase programme, the priority was given to the purchase of new rolling stock to renew cars of delux trains. To implement this goal, RUB 5.5 billion went on renewal of 146 cars in 2014.
Structure of the Company’s investment programme for 2014
Programme share, %
Programme name
Rank
Long-term projects (Acquisition of RIC carriages)
49.7
from 63 to 100
Replacement of retiring fixed assets resulting in a direct economic impact (Rolling stock renewal in delux trans)
22.4
From 46 to 100
Projects with direct economic impact (Acquisition of double-decker cars, development of e-ticket sales)
15.2
from 26 to 80
Replacement of retiring fixed assets, resulting in a technological impact (Rolling stock modernisation, Re-equipment of the depot to the level of technical regulations)
11.1
from 18 to 45
1.6
from 0 to 25
Technological and social projects TOTAL
100.0
In 2014, the project goal for acquisition of 78 RIC carriages at a cost of RUB 11.6 billion was the provision of international passenger service.
In 2014, JSC FPC acquired
78
RIC carriages
RUB
0.9
billion were spent for rolling stock
modernisation
Federal passenger company 2014 Annual Report
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Investment programme structure, RUB billion
To improve the quality of passenger service on routes with a high passenger flow, to reduce operating costs, to send released rolling stock for replacement of retiring cars on other routes, the project for acquisition of 50 double-decker cars in the amount of RUB 3.4 billion was implemented.
Program
Rolling stock acquisition
In addition, the investment programme provided for the implementation of depot renewal projects, as well as investment projects for development of information technologies. In total, RUB 1.8 billion was spent on the depot renewal. The main depot investment trends included the following: • reconstruction of production facilities (RUB 1.3 billion); • purchase of the equipment required for maintenance of continuous depot operations (RUB 0.3 billion); • equipping of workshops with security and fire alarms (RUB 0.1 billion); • renovation of hazardous production facilities (RUB 0.1 billion).
21.1
Rolling stock modernisation
0.9
Depot renewal and safety
1.8
IT programme
0.5
Other TOTAL
The project Passenger Rolling Stock Upgrade was implemented in the amount of RUB 0.9 billion, including overhaul and renovation of 23 cars in the amount of RUB 0.3 billion.
2014
RUB 0.5 billion was invested in IT development. In this area, the priority was given to the development of e-ticket sales, with a total amount of investments of RUB 0.2 billion. RUB 0.2 billion was spent on the implementation of other projects in 2014. In 2014, the investment programme sourcing is as follows: • internal funds – RUB14.2 billion; • loan funds – RUB10.3 billion.
0.2 24.5
RUB
0.5
billion was invested in IT development
RUB
1.8
billion was spent on the depot
renewal
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Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Priority Investments
Client-Focused Investment
JSC FPC spent RUB 21.9 billion to improve its client-focused approach, and also JSC FPC purchased 274 new passengers cars in the amount of RUB 21.1 billion and performed the overhaul reconditioning of 23 passenger cars in the amount of RUB 0.3 billion to create more attractive
conditions for passengers, to increase comfort and safety of passenger services, and to provide international passenger transportation.
In addition, RUB 0.5 billion was spent on the introduction of new information technologies.
• RUB 0.3 billion on ensuring that JSC FPC’s facilities comply with fire safety requirements; • RUB 0.1 billion on equipment of transport means with GLONASS/GPS satellite navigation systems;
• RUB 0.2 billion on installation of new frames, bolsters and 1520 mm trucks in passenger cars during scheduled repairs.
Investment in safety
Investment in safety and quality of transportation services amounted to RUB 1.0 billion in 2014. The main transport safety investment projects included the following: • RUB 0.2 billion on replacement of retiring equipment;
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Modernisation and Innovation Development
In 2014, JSC FPC spent RUB 1.5 billion on maintenance of existing production facilities and innovations. The bulk of investments went on reconstruction of structures and constructions, as well
as on implementation of the project to equip passenger cars with air and water decontamination systems.
RUB
1.5
billion were spent on
maintenance of existing
Investment in Energy Efficiency
production facilities and innovations
In 2014, JSC FPC spent RUB 0.1 billion on energy saving encouragement and energy efficiency improvement for implementation of energy saving projects to reduce energy consumption, including the project to install pellet-fired boilers in passenger cars.
In 2015–2017 JSC FPC is planning to buy
146
double-decker cars
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Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Mid-Term Investment In 2015–2017, the investment programme of JSC FPC provides for the acquisition of 146 double-decker cars in the amount of RUB 12.0 billion to be used on promising routes, such as Moscow-Samara. The use of the double-decker rolling stock will enable to improve the Company’s competitiveness by reducing the carrier cost. In 2014-2015, for organisation of highspeed service using modern types of rolling stock the Company is planning to buy 140 Talgo cars in the amount of RUB 8.3 billion to use them on the routes Moscow- Nizhny Novgorod (80 units) and Moscow- Berlin (60 units).The project has the following goals:
• Provide comfortable service to passengers on the specified routes and reduce the travelling time. • Increase passenger flow. • Improve operating profitability of the Company. • Achieve a substantial improvement of RZD Holding’s image and brand awareness, including that in the international market. In 2015-2017, in order to renew cars of delux trains, the investment programme provides for the purchase of 259 cars in the amount of RUB 11.4 billion, including 174 cars for replacement in already specified trains and 85 cars for promising routes to be determined depending on the passenger transport demand.
In 2015-2017, in order to renew cars of delux trains, it is provided to purchase
259
cars
Procurement
The procurement policy held by JSC FPC is aimed at keeping prices for consumable goods and services down. The main policy instruments are the highest use of the mechanism of tendering procedures and conclusion of long-term contracts and fixed price contracts or unit price review contracts. These approaches are reflected in the work with the following largest contractors:
• JSC TVZ (contract for the delivery of RIC carriages); • railway-car repair works (repair agreements in 2012- 2017 and further); • JSC Wagon-Service (unit-linked contract till 2024); • Patentes ТALGO SL (rolling stock maintenance contract till 2054).
In addition, the meetings of the Price Commission of JSC FPC considered 94 issues on conclusion of standalone agreements and additional agreements to precontracts in 2014. Savings compared to the initial proposals of contractors amounted minimum RUB 450 million excluding VAT.
In 2014, the Company organised competitive ordering procedures with a total number of 546 lots, which economic effect amounted to RUB 1,199.5 million excluding VAT.
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Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
International Activities
JSC FPC carries out transportation services to the CIS countries, the Baltic States and to the following 17 European and Asian countries along 24 international routes: Austria, Bulgaria, Hungary, Germany, Italy, China, North Korea, Mongolia, Monaco, Poland, Romania, Slovenia, Slovakia, Finland, France, Croatia and the Czech Republic.
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Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Federal passenger company 2014 Annual Report
107
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
International Activities
JSC FPC carries out transportation services to the CIS countries, the Baltic States and to the following 17 European and Asian countries along 24 international routes: Austria, Bulgaria, Hungary, Germany, Italy, China, North Korea, Mongolia, Monaco, Poland, Romania, Slovenia, Slovakia, Finland, France, Croatia and the Czech Republic.
The Company participates in major international professional organisations in the field of railway transport: Organisation
Status of JSC FPC
The Organisation for Cooperation of Railways (OSJD)
associate member observer
The International Rail Transport Committee (CIT)
full member
The International Union of Railways (UIC)
international carrier code assigned
European / Asian Assembly of UIC
associate member
In 2014, JSC FPC had to operate in challenging conditions that included a tense geopolitical situation, economic sanctions, and rapid devaluation of the national currency. The acute decline in passenger traffic and the population’s
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tourist activity on international routes have affected the Company’s financial results and the possibility for further development of the business.
Date when the status is awarded
April 2011 June 2013 May 01, 2012 2011 July 2012
However, the Company managed to achieve certain results in several areas.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
2
Technical and Technological Cooperation with Foreign Partners Last year, much work was done on updating the rolling stock, providing international transportation services. The construction of 200 Russian-Austrian production cars of RIC-200 dimensions was completed. Permission was obtained for their running on the territory of 11
European countries (Finland, Poland, Bulgaria, Hungary, Slovakia, Slovenia, Croatia, the Czech Republic, Austria, Germany and France). In 2014, the new RIC carriages consumer properties were appreciated by passengers travelling from Moscow Prague, Warsaw and Helsinki, and since January 2015 on the trains, running to Nice and Paris.
In 2014, the project for the purchase of passenger train sets, produced by the Spanish company Patentes Talgo S.L., entered the active implementation phase. The Talgo car trains, equipped with the tilting system and automatic change of wheelset gauge, are scheduled to run on the routes Moscow – Berlin and Moscow – Nizhny Novgorod.
Improvement of the Tariff Policy and Optimisation of International Railway Communication Acute decline in the passenger traffic and a drop in the proceeds from international passenger transport raised the question of revising the tariff policy in the interstate transportation services, creation of the conditions under which the result of settlement would allow to cover the costs related to the organisation of foreign trains’ running on the territory of the Russian Federation. During 2014 negotiations were held with the management of the railway administrations and carriers of the CIS and Baltic countries, in which, among other things, the following issues were discussed: the current tariff formation,
the system of discounts and allowances, prospects for creation of dynamic pricing and the use of loyalty programmes in the interstate transportation services. The partners showed keen interest for the new pricing approach, based on the live balance between supply and demand, and the RZD Bonus loyalty programme. In particular, JSC FPC and Latvian Railways (LDZ Cargo and L-Ekspresis) reached an agreement on inclusion of the Latvian trains, running on the routes Moscow – Riga and St. Petersburg – Riga, into the RZD Bonus loyalty programme.
Due to reduction of demand for international railway transportation services the Company had to reduce the amount of railway communication with the CIS and other foreign countries. Thus, out of the 77 pairs of trains of JSC FPC formation, running to the CIS countries only 15 were left; in 2015 in the railway communication with foreign countries out of 13 pairs of trains and 18 direct cars only eight pairs of trains and seven direct cars have been left, with reduced frequency of all international commercial trains down to one train per week. The overall reduction in the international railway traffic amounted to almost 67%.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Promotion of JSC FPC Transportation Products in the International Markets
One of the highlights of the reporting period at the international level were celebrations to mark the 500th anniversary trip of train No.23/24 Moscow-Berlin-Paris, which were taking place from July 20 – 22, 2014 in Moscow, Minsk, Warsaw, Berlin and Paris, with the participation of foreign railway administrations, national carrier companies, the diplomatic corps and travel agencies.
In October 2014, this event included a round table in the town of Vyborg, where tour operators discussed promotion of tourist products, involving railway services. The event also included demonstration of Leo Tolstoy train-hotel and a presentation of tourist opportunities in Moscow and Helsinki.
In Paris, JSC FPC delegation took part in the meeting of the Steering Group for preparation of the Train to Paris Project. The project is being implemented in the framework of the UN Convention on climate change and aims at attracting the world community to environmental problems and minimising the environmental impact of the railway transport.
Improvement of the Regulatory Framework to Ensure International Passenger, Baggage and Cargo Railway Transportation Services
Acting as the national carrier, JSC FPC is actively involved in updating the regulatory framework, held by international organisations. In the context of the passenger traffic drop this work has become especially urgent. Starting from Q2 2014, all the international negotiations have included a discussion of tariff issues and the need for transition to a new order of economic responsibility in train appointments.
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JSC FPC is actively involved in the work on drafting a new Convention to facilitate railway transportation of passengers and baggage across borders in international passenger train communication. This document, being developed under the auspices of the UNECE ITC, will provide a basis for improvement of passenger comfort by reducing international passenger trains’ transit time through optimising control operations at railway border crossing checkpoints. The draft new Convention, prepared by JSC FPC specialists in cooperation with JSC Russian
Railways, was praised by the members of the informal expert group. One of the meetings in 2015 is scheduled to be held on board the train Moscow – Paris.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
2
Expansion of Bilateral Cooperation
In 2014, five cooperation agreements on international rail transportation of passengers, baggage and cargo-luggage (with Czech, Belarusian, Kyrgyz, Uzbek and Tajik partners) were signed. A project of a similar agreement is under consideration in the administration of the Southern Railway (Armenia), the Moldovan and Ukrainian railways.
agreement on cooperation between the JSC FPC and the Harbin Railway and to sign it after achieving agreement on all the issues. Setting up of a workgroup is also planned to implement this agreement between the JSC FPC and the Harbin Railway.
On November 25, 2014, negotiations with a delegation from Harbin Railway (PR小) were held in JSC FPC office. For the first time in four years of cooperation an understanding was reached with the Chinese party on a number of topical issues, such as expansion of the sales network, acceleration of train No.19/20 Moscow-Beijing on Chinese territory, organisation of the cargo-luggage traffic together with the subsidiary company FPC-Logistics, cooperation in the field of IT. In addition, the Chinese party expressed its readiness to consider the
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111
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Corporate Governance
The reporting year saw
3 112
General Shareholders Meetings;
1 Annual General Shareholders Meeting; 2 Extraordinary General Shareholders Meetings Federal passenger company 2014 Annual Report
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
During the last year,
18
sessions of the JPC FPC Board of Directors were held:
16 sessions in absentia and 2 sessions in person
Sustainable Development
Appendices
169
issues were examined by JSC FPC Board of Directors113 Federal passenger company 2014 Annual Report
Introduction
Company Strategy
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
JSC FPC Corporate Governance JSC FPC corporate governance practice is based on the following principles:
1
2
3
4
5
Protecting shareholder interests and rights
Equality in our relationships with all stock holders
Timely disclosure of information
A unified corporate policy amongst all the subsidiaries and affiliates of the Company
Mutual trust and respect to all interested parties
The Statute on the procedure for the preparation and holding of JSC FPC General Shareholders Meeting provides for the right of the shareholder to participate in the company governance. (Available on JSC FPC website).
Shareholders are provided with an equal and fair opportunity to participate in JSC FPC profit distribution through collecting dividends. The Regulations for JSC FPC dividend policy establish the mechanism for dividend determination and payment. All shareholders receive materials required for the shareholders meeting and are provided with access to all required information at the location of the Company.
JSC FPC executes a united corporate policy amongst its subsidiaries with the purpose to implement united corporate standards: model articles and provisions that spell out the rules for management and control bodies, unified business planning standards, unified corporate reporting, unified principles of financial and budgetary control.
Relations between shareholders, members of the Board of Directors and the management of the Company are built on honesty, trust, mutual respect of legitimate interests and prudent performance of their duties by all the parties.
The Company protects interests and rights of shareholders and ensures that the rights to shares are registered in a reliable way; the share register is administered by JSC STATUS independent organisation.
The Company adheres to timely disclosure of information on the holding of the General Shareholders Meeting on JSC FPC site and in the news bulletin of the CJSC SCREEN information agency that is authorised by the Federal Financial Markets Service of Russia to publicly distribute information that is disclosed on the share market.
During the period of preparation of the General Shareholders Meeting shareholders are provided with additional information to supplement the mandatory information required by the law.
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Detailed information on observance of shareholders’ rights is presented in the Appendix of the report On compliance of the Company corporate policy with the corporate governance code.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Shareholder Stock and Dividend Policy Shareholder stock In 2014, no changes of shareholders took place. JSC FPC main shareholder is JSC RZD that holds 152,635,848,132 shares, one share belongs to JSC Baminvest.
JSC FPC share distribution In September 2014 JSC FPC initiated a scheduled issuance of additional company shares in a sum of RUB 12,825,192,406.
JSC Baminvest 1 share
The issuance of additional shares by JSC FPC is determined by the need to optimise utilisation of the RZD holding assets. To pay for securities money in the amount of RUB 4.5bn and property with the value of RUB 8.3bn that included 17 immovable property items; 399 passenger cars and 432 items of other movable property was transferred.
JSC RZD 100% –1 share
Federal passenger company 2014 Annual Report
115
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Changes in authorised capital stock, RUB bn Contribution of the specified property into the authorised capital stock of JSC FPC will allow JSC RZD to increase the value of financial investments into JSC FPC shares, whereas JSC FPC will reduce rental costs for this property. The money is planned to fund the investment programme of the Company. Upon the completion of the issuance of additional shares procedure the authorised capital stock of the Company will increase to RUB 165bn.
137
2011
Voting shares by class (type) of shares
Class (type) of securities
116
Registered ordinary shares
Form of shares issued
uncertified
Number of shares issued
152,635,848,133
Public registration information
1-01-55465-Đ•
Nominal value per 1 share
RUB 1
Federal passenger company 2014 Annual Report
147
152
2012
2013
165
2014
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Dividend policy
JSC FPC shareholders decided not to pay out dividends at the Annual General Shareholders Meetings of 2010, 2011 and 2012. On December 17, 2012 JSC FPC Board of Directors approved the Regulations for JSC FPC dividend policy. In accordance with the Regulations, the magnitude of dividend payouts according to the totals of the financial year are determined by the sums of a fixed amount of dividend payments (DIV1) and a residual amount of dividend payments (DIV2).
Fixed dividend payments (DIV1) = Net profits for the reporting year * (fixed amount of dividends paid (no less than 25%)) + coefficient of variations to the dividend payments actually received by the Company by the deviation of the net profit from the target value (CP). Where the deviation of actual net profits from the target value is no greater than 15%, CP is equal to 0. Where the deviation of actual net profits from the target value is greater than 15% but no greater than 50%, CP is equal to 5%. Where the deviation of actual net profits from the target value is greater than 50% CP is equal to 10%.
Residual dividend payments (DIV2) = Net profits for the reporting year — value of mandatory deductions from net income (reserve fund and charities) — the value of fixed dividend payments (DIV1) — the portion of the Company profits for the financing of the Company’s investment programme (investment programme — deprecation — loans).
In 2014, the Extraordinal General Shareholders Meeting dated November 10 made the decision to direct the undistributed profit of past years for dividend payment and simultaneous contribution of the specified sum to the authorised capital stock of JSC FPC for the purpose of the Company investment programme financing.
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117
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Corporate Governance Model
Audit Commission
General Shareholders Meeting
Auditor
HR and Remuneration Committee
Secretary of the BoD
Board of Directors
Audit Committee
Strategic Planning Committee
Company Management
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Federal passenger company 2014 Annual Report
General Director
Centre for Internal Inspection and Auditing
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
JSC FPC corporate governance model is built as to the requirements of the Russian legislation and presents a multilayer system of relations between corporate process parties.
The principle of interaction between the administrative bodies of the Company, that is similar to the principles of corporate interaction employed in JSC RZD, forms the basis of the model. The highest administrative body of the Company is the General Shareholders Meeting, the Board of Directors occupies a central position in the system of corporate governance, the Company’s day-to-day operations are managed by the General Director. The General Director is accountable to the General Shareholders Meeting and the Board of Directors. In its turn, the Board of Directors is accountable to the General Shareholders Meeting of JSC FPC. The authorities of all administrative bodies are clearly defined and formalised in the provisions of the Company’s Charter.
The General Shareholders Meeting has the exclusive authority to appoint the Company Auditor, elect the Audit Commission and the Board of Directors. The Board of Directors occupies a key position in JSC FPC system of corporate governance, as it determines which direction of the Company’s development to prioritise, authorises the basic financialeconomic indicators of the Company and functions as an overseer for their fulfillment, develops both near-future and long-term strategies and oversees performance of the executive bodies of the Company. The Board of Directors has the exclusive authority to elect the General Director, to elect the Secretary of the Board of Directors and form Board of Directors Committees.
The Board of Directors has established three committees: The Strategic Planning Committee, the Audit Committee and the Human Resources and Remunerations Committee. The Secretary of the Board of Directors ensures efficient current interaction with shareholders, coordinates the Company’s activities to protect the rights and interests of shareholders and supports efficient work of the Board of Directors. To provide the Company’s shareholders with reliable and complete information on financial and economic activities of the Company, the Auditor is annually appointed by the Company, the Audit Commission functions on a full-time basis, the Centre for Internal Inspection and Auditing was created.
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119
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Shareholders Meeting
The highest administrative body of the Company is the General Shareholders Meeting. In 2014, 3 General Shareholders Meetings of JSC FPC were held: Annual General Shareholders Meeting and two Extraordinary General Shareholders Meetings.
General Shareholders Meeting Map General Shareholders Meeting
03/19/2013
General Shareholders Meeting Number of items examined
11/10/2014 6/30/2014
2
11
5
Decisions made at the Annual General Shareholders Meeting
120
6/30/2014
3/19/2014
11/10/2014
• Approved the Annual Report of the Company. • Approved JSC FPC’s Annual Financial Statements. • Distributed JSC FPC’s net income. • Elected the new Board of Directors and the Audit Commission. • Appointed Company’s Auditor for 2014 according to Russian accounting standards and IFRS. • Specified amounts of annual remuneration of the Board of Directors and the Audit Commission of JSC FPC. • Approved the additional agreement to the RIC clearance carriages supply contract between the Company and OJSC TVZ as an interested party transaction.
• On early termination of a member of JSC FPC Audit Commission. • On election of members of JSC FPC Audit Commission.
• On distribution of the undistributed JSC FPC’s net income. • On JSC FPC dividend payment. • On determination of denomination, class (type) and number of the additional authorised shares and the rights that these shares grant. • On approval of the new JSC FPC Charter. • On increasing the authorised capital stock by placing additional shares.
Federal passenger company 2014 Annual Report
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Board of Directors
V. I. Reshetnikov
G. V. Verkhovikh
M. P. Akulov
The Chairman of the Board of Directors
Deputy Chairman of the Board
General Director of JSC FPC
Date of Birth 1952
Date of Birth 1959
Date of Birth 1960
Citizenship Russian Federation.
Citizenship Russian Federation.
Citizenship Russian Federation.
Selection to the Board of Directors First selected to the Board of Directors in December of 2009 by a founders meeting. Has acted as Chairman of the Board of JSC FPC since December of 2009.
Selection to the Board of Directors First selected to the Board of Directors in December of 2009 by a founders meeting. Has acted as Deputy Chairman of the Board of JSC FPC since December of 2009. Chairman of the Human Resources and Remunerations Committee of JSC FPC Board of Directors.
Selection to the Board of Directors First selected to the Board of Directors in December of 2009 by a founders meeting.
Education Graduated from the Leningrad Electrotechnical Institute as a Systems Engineer. Skills and experience Since 2002, has worked in different positions in the Ministry of Railways of the RF and JSC RZD. In 2007 he was appointed Vice-President of JSC RZD. Since 2010, has functioned as Senior VicePresident of JSC RZD. Membership in various organisations: Member of the Board of Directors at: JSC UK Murmansk Transport Hub, JSC VNIIZhT, JSC TransTeleCom, JSC Yuzhno-Kavkazskaya Railways, JSC Skorostniye Magistrali and RZD International LLC. Member of the Supervisory Board of the ANO Corporate University of RZD. Member of Management at JSC RZD.
Education Graduated from the Leningrad Institute of Railway Engineers with a specialisation in Railway Operation. Skills and experience Since 2005, he has functioned as Deputy Chief of the October Railway, a branch of JSC RZD for passenger transport. Since 2007, has functioned as Head of the Department of Passenger Transport at JSC RZD. Since 2013, has functioned as Head of the Department of the Passenger Transport Business Management unit of JSC RZD. Membership in various organisations: Member of the Board of Directors at: JSC TVZ, Aeroekspress LLC.
Education Graduated from the Moscow Institute of Railway Engineers with a specialisation in Electrification of Railway Transport and the Russian Presidential Academy of National Economy and Public Administration. Skills and experience His career in railway transport began in 1982 as a foreman at the Moscow-Kiev Passenger railway locomotive depot. Since 2005, has functioned as Vice-President of JSC RZD. In 2009, he was selected as the General Director of JSC FPC. Membership in various organisations: Member of the Board of Directors of Oy Karelian Trains Ltd. Member of the Supervisory Board at: ANO Corporate University of RZD. Member of Management at JSC RZD.
Federal passenger company 2014 Annual Report
121
Introduction
Company Strategy
Market Overview
Risk Management
Quality and Safety
I. S. Shytkina
Ann-Marie Idrak
Y. Z. Saakyan
Independent Director
Independent Director
Independent Director
Date of Birth 1965
Date of Birth 1951
Date of Birth 1956
Citizenship Russian Federation.
Citizenship France.
Citizenship Russian Federation.
Selection to the Board of Directors Selected to the Board of Directors in June 2014.
Selection to the Board of Directors Selected to the Board of Directors in June 2012.
Education Graduated from Lomonosov Moscow State University with specialisation in Law. Doctor of Law, professor.
Education Graduated from the University of Paris with a level II degree in Law, the Institute of Political Studies (IEP), the Graduate School of Public Service (ENA) and education in Simone Weil classes.
Selection to the Board of Directors Selected to the Board of Directors in June 2012. Member of the Strategic Planning Committee of JSC FPC Board of Directors.
Skills and experience Since 2009, she has been a professor of business law with the Law Faculty of Lomonosov Moscow State University. From 2009 to 2011 acted as Deputy General Director of OJSC Elinar Holding Company. From 2011 until today she has been advisor to the General Director of Elinar Holding Company. Membership in various organisations Member of the Board of Directors at PJSC TransContainer, JSC Kompaniya TransTeleKom, JSC Skorostniye Magistrali, JSC VRK-1, JSC VRK-2, JSC Kaluga Plant Remputmash, JSC OTLK, Poultry Farm Elinar-Broiler LLC, CJSC Elinar. Chairman of the Board of Directors of Narpromrazvitiye LLC. Chairman of the Supervisory Board at Elinar Holding Company.
122
Business Model and Assets
Federal passenger company 2014 Annual Report
Skills and experience For a significant portion of her career, she held senior positions in public housing, urban development and transportation services. Since 2002, she has functioned as Chairman and General Director of RATP, a public transport organisation in Paris. From 2006 until 2008 she was the Chairman and General Director of SNCF French Railways. She is currently a Senior Advisor to the General Director of SUEZ Environment S.A. and the Chairman at SIA Partners. Membership in various organisations: Member of the Board of Directors at: BOUYGUES S.A., MEDIOBANCA S.p.A., VALLOUREC S.A., TOTAL S.A., SAINT GOBAIN S.A. Member of the Supervisory Board at VALLOUREC S.A. Vice-President of the ROBERT SCHUMAN Foundation.
Education Graduated from Lomonosov Moscow State University with a specialisation in Mechanics. PhD in Physics and Mathematics. Skills and experience From 1998 until 2005, he held senior positions in various commercial organisations. Since 2005, he has worked as the General Director of the Institute of Natural Monopolies Research (IPEM), an independent research centre, and Chairman of the Academic Council at ANO IPEM. Membership in various organisations Currently serves as a member of the RF Government’s Interagency Commission on the implementation of structural reforms in railway transport. Vice-president, member of the Supervisory Board at the Association of Railway Equipment Manufacturers, a nonprofit partnership. Member of the Board of Directors at JSC Skorostniye Magistrali.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
O. E. Gnedkova
V. A. Veremeev
I. A. Kostenetz
Non-Executive Director
Non-Executive Director
Non-Executive Director
Date of Birth 1960
Date of Birth 1976
Date of Birth 1961
Citizenship Russian Federation.
Citizenship Russian Federation.
Citizenship Russian Federation.
Selection to the Board of Directors First selected to the Board of Directors in December of 2009 by a founders meeting. Chairman of the Audit Committee of JSC FPC Board of Directors.
Selection to the Board of Directors First selected to the Board of Directors in December of 2009 by a founders meeting. Chairman of the Strategic Planning Committee of JSC FPC Board of Directors.
Selection to the Board of Directors Selected to the Board of Directors in June 2013.
Education Graduated from the Novosibirsk Institute of Railway Engineers with a specialisation in Accounting. PhD in Economics.
Education Graduated from the Moscow State University of Railway Engineering (MIIT) with a specialisation in Economic Informatics and Automated Control Systems. PhD in Economics.
Skills and experience She began her career in railway transport in 1981 as an accountant at the Zapadno-Sibirskaya Railway. In 2000, she was appointed Head of Financial Services at the Zapadno-Sibirskaya Railway. From 2002 until 2004, she was the Deputy Chief of the Moscow Railway and Head of Financial Services. In 2004, she was appointed Deputy Chief of Economics and Finances of the Moscow Railway. From 2004 until 2005, she was the Head of the Department of Financial Management at JSC RZD. Since 2005, she has functioned as Head of the Department of Corporate Finance at JSC RZD. Membership in various organisations Member of Management at JSC RZD. Member of the Board of Directors at: JSC Kompaniya TransTeleKom.
Skills and experience He began his career in railway transport in 2002 as Deputy Chief of Consolidated Forecasts and Economic Analysis in the Department of Economics of the Ministry of Railways of the RF. Since 2010, he has functioned as the Head of the Department of Economic Markets and Strategic Development at JSC RZD. In 2012, he was appointed advisor to the President of JSC RZD. Membership in various organisations Member of the Board of Directors at: JSC Yuzhno-Kavkazskaya Railway, JSC Federal Freight Company, JSC RZD Logistika, JSC Transmashkholding.
Education Graduated from the Irkutsk Institute of Railway Engineers with a specialisation in the Construction of Railway, Road and Track Facilities as well as the Russian Presidential Academy of National Economy and Public Administration with a specialisation in Public Economic and Financial Management of Railway Transport. Skills and experience Since 2008, she has worked for the Krasnoyarsk Railway as Head of Economic Services and Deputy Chief of Road Economic Issues. From 2003 until 2005, she served as the Deputy Chief of the Department of Planning and Budgeting. Since 2005, she has functioned as Head of the Department of Organisational and Staffing Issues at JSC RZD. Since 2012, she has functioned as Head of the Department of Economics at JSC RZD. Membership in various organisations Member of the Board of Directors at: JSCÂ ZhASOÂ Insurance Company, JSC YuzhnoKavkazskaya Railway, PJSC TransContainer.
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123
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
JSC FPC Board of Directors Report
The nine members of the Board of Directors are elected every year by JSC FPC Annual General Shareholders Meeting in accordance with the Company’s Charter.
In June 2014, changes were made to the Board of Directors. I.S. Shytkina, professor of business law with the Law Faculty of Lomonosov Moscow State University, Doctor of Law was selected to the Board of Directors for the 2014-2015 corporate year by the decision of the Annual General Shareholders Meeting of JSC FPC.
V. I. Reshetnikov Chairman of the Board of Directors
The powers of JSC FPC Board of Directors member A.V. Illarionov, Vice-President of JSC RZD, were terminated.
Structure of the Board of Directors of JSC FPC, %
33 44 56
56
11
Non-Executive Director
Men
Executive Directors
Woman
Independent Directors
124
Federal passenger company 2014 Annual Report
Currently, the Board of Directors of JSC FPC consists of: 3 independent directors, 1 executive director and 5 non-executive directors, three of whom are members of committees of the Board of Directors. The Company’s Board of Directors is balanced in terms of independent directors and women. Members of the Board of Directors of JSC FPC have flawless professional reputation and significant experience in the area of rail transport and related industries which ensures that the Board of Directors makes efficient decisions within its authority. 78% of the total number of the Board of Directors members have experience in the area of rail transport (including international experience), 57% of those members of the Board of Directors have over 30 years of experience in the area of railways. More than 50% of the Board of Directors has remained unchanged since having been elected at JSC FPC founder’s meeting in 2009 which adds stability and succession of moves to the work of the Board of Directors of the Company.
Operating and Financial Results Analysis
Investment Activities
In 2014, 18 sessions of the JPC FPC Board of Directors were held: 16 sessions in absentia and 2 sessions in person. 169 issues were examined by JSC FPC Board of Directors in 2014.
International activities
Corporate Governance
Statistics of the issues examined by the Board of Directors in 2014, %
2
5
Sustainable Development
Appendices
Length of Board service during the period 2009-2014 11
6 30
14
11 56 22
18
Experience in railway industry, %
11 14
22
Financial-Economic
2-5 years
Social-Human Resources
2-5 years
Organisational Security
1-2 years
Property Transactions
Less than 1 year
Internal Documents
67
11
Charity S&A Other
Have experience in railway industry have international experience in railway industry have experience in industries related to railway industry
Participation of each member of the Board of Directors at sessions in 2014, %
M.P. Akulov
29
Under 10 years
67
A.V. Illarionov
100
O.E. Gnedkova
100
Ann-Marie Indrak
57
72
V.A. Veremeev G.V. Verkhovikh
14
89
78
I.S. Shytkina
89
I.A. Kostenets
89
V.I. Reshetnikov
100
Yu.Z. Saakyan
100
10-20 years Over 30 years
* The powers of the Board of Directors member A.V. Illarionov were terminated by the decision of the Annual General Shareholders Meeting No.22, dated 06/30/2014. ** I.S. Shytkina selected to the Board of Directors by the decision of the Annual General Shareholders Meeting No.22, dated 06/30/2014.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Key Decisions of the Board of Directors in 2014
JSC FPC budget for 2014-2016 was approved
The Insider Information Policy was approved
The General Director of JSC FPC was elected
The Company’s Registering clerk was approved
The decision to issue additional shares of JSC FPC was approved
The Regulations on Organisation of Transport Security Provision in JSC FPC was approved
A decision was made to introduce changes into the Chapter of JSC FPC connected with liquidation of Kaliningrad branch of JSC FPC
Safety of operation key performance indicators were established for 2014
Candidates to the Boards of Directors and the Audit Commissions of JSC FPC subsidiaries were agreed upon
126
Federal passenger company 2014 Annual Report
The members of the Board of Directors do not possess Company shares, no claims were filed against the members of the Board of Directors in relation to their performance of the duties of the member of the Board of Directors. The Company did not give any loans to the members of the Board of Directors. The members of the Company’s Board of Directors had no conflict of interest.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Remuneration of Members of the Board of Directors
The principles for motivation of members of the Board of Directors, as well as payment of compensation/ expense reimbursement to members of the Board of Directors are provided in the Regulations for the payment of remunerations and compensation to members of JSC FPC Board of Directors. The amount of remuneration depends on participation of a member of the Board of Directors in the work of the Board and performance of the Company. Remuneration for participation in sessions was not paid to members of the Board of Directors in 2014.
*
Also, the regulations provide for performing the functions of Chairman of the Board of Directors and Deputy Chairman of the Board of Directors in the amount of 50% and 25% respectively.
Non-executive and independent directors are not provided with pension contributions, insurance programmes, investment programmes and other social benefits and privileges.
The total remunerations to members of the Board of Directors for 2013 was paid in full in 2014. The total sum of renumeration amounted to RUB 6,005,923.* Members of the Board of Directors are not reimbursed on expenses other than travel expenses for trips to location of sessions and other trips made to perform their duties as members of the Company’s Board of Directors.
Chairman of the Board of Directors V.I. Reshetnikov refused the remuneration offered. Part of remuneration for M.P. Akulov was forwarded to the Podari Zhizn (Gift of Life) charitable foundation.
Federal passenger company 2014 Annual Report
127
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
The Human Resources and Remuneration Committee Report The functions of the Human Resources and Remuneration Committee of JSC FPC Board of Directors include the development of recommendations for the Board of Directors: on the definition of the criteria for the selection of persons to serve in the management bodies of the Company and the candidates who match said criteria; on the evaluation of, and remunerations to be paid to, persons to serve in the management bodies of the Company; G. V. Verkhovikh Deputy Chairman of the Board
on the basic principles of human resource policies.
Statistics of the Committee sessions
The composition of the Human Resources and Remuneration Committee is determined by the Board of Directors. In July 2014, the Human Resources and Remuneration Committee was elected in the same composition as in the previous year. The chairman of the Committee is G.V. Verkhovikh G.V. Verkhovikh
Head of the JSC RZD Department Business Management Passenger Transport Block, member of JSC FPC Board of Directors
T.V. Andravonich
Deputy Head of the JSC RZD Department of Economics
L.A. Levina
Head of the Division of Working with the Management and Control of Subsidiaries and Affiliates of JSC RZD
L.A. Paristaya
Deputy General Director of the Head JSC FPC Block of Staff Management and Social Issues
A.D. Sevidov
Head of the Human Resourses Department, Division of the Managerial Personnel and Business Trips Affairs
1
6
8
3
2013 In absentia
128
Federal passenger company 2014 Annual Report
2014 In person
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Statistics of participation in Committee sessions in 2014, %
100
G.V. Verkhovikh T.M. Andranovich
89
L.A. Levina
89 78
L.A. Paristaya
100 89
A.D. Sevidov
The total remuneration paid to members of the Committee in 2014 came to RUB 1,869,027. Part of remuneration for G.V. Verkhovikh was forwarded to the “Spread your wings” charitable foundation.
100
Key issues discussed by the Committee Election of the General Director of JSC FPC A change to the organisational management structure of JSC FPC The amount of remuneration to members of Audit Commission and the Board of Directors of JSC FPC was determined A change to the procedure for forming the organisational management structure of JSC FPC A unified approaches to remuneration for secretaries of the committees of JSC FPC Board of Directors was formed A change to the regulations on non-state pension provision of JSC FPC employees The candidate to the position of Deputy General Director – Head of JSC FPC Marketing and Tariff Policy Management department was agreed to JSC FPC candidates for participation in top management of organisations of various organisational legal forms in which JSC FPC participates were agreed to
Plans of the Committee for 2015 • Examine the 2014 HR policy report. Practice of applying the key performance indicators system in JSC FPC operations.
• Update the Federal Passenger Company joint-stock company young professional regulations.
• Discuss JSC FPC management development issues, provision of social assistance and protection of retired JSC FPC pensioners, non-state pension provision of JSC FPC employees.
Federal passenger company 2014 Annual Report
129
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
The Audit Committee Report
The Audit Committee’s tasks include developing recommendations for the Board of Directors as to the selection of external auditors and working with external auditors (including the examination and judgment of the results of annual and interim audits), working with the audit commission (including the examination and judgment of the results of the commission’s audits), the creation of reports on violations in the financial and economic activities of JSC FPC during the reported period and proposals for their elimination and prevention as well as informing the Board of Directors of possible risks in the Company’s operations.
O. E. Gnedkova
Statistics of the Committee sessions
8
3
3
2013
2014
In absentia
130
7
Federal passenger company 2014 Annual Report
In person
The composition of the Committee is determined by the Board of Directors. In July 2014, the Committee was elected in the same composition as in the previous year. The chairman of the Committee is O.E. Gnedkova.
O.E. Gnedkova
Head of the Department of Corporate Finance at JSC RZD, member of the Board of Directors of JSC FPC
T.V. Andravonich
Deputy Head of the JSC RZD Department of Economics
A.G. Derin
Deputy Chief of the Department of the Management of Subsidiaries and Affiliates of JSC FPC
O.B. Ivanov
Director of Internal Auditing at JSC RZD
N.A. Lem
Head of the Department of Accounting at JSC RZD
A.A. Myslovets
Deputy General Director of the Head JSC FPC Block of Economics and Finance
O.M. Yakoleva
First Deputy Director at the Zheldoruchet Centre for Corporate Accounting and Reporting, a partner of JSC RZD
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Statistics of the Committee sessions, %
O.E. Gnedkova
100
T.V. Andravonich
100
The remuneration paid to members of the Committee for participation in sessions in 2014 came to RUB 1,034,616.
90
A.G. Derin
100
O.B. Ivanov N.A. Lem
90
A.A. Myslovets
90
O.M. Yakoleva
80
Key issues discussed by the Committee in 2014 Executing a loan agreement with GPB (OJSC) Executing agreements on provision of bank guarantee between VTB24 (CJSC) and JSC FPC JSC FPC Centre for Internal Inspection and Auditing work results reports were examined JSC FPC General Director’s quarterly reports were examined The results of the audit of JSC FPC accounting (financial) statements according to Russian standards and IFRS for 2013 held by JSC FPC independent auditor were examined JSC FPC Auditor for 2014 was agreed to The plan for the audit of JSC FPC statements according to Russian standards and IFRS for 2014 was examined and agreed to The 2015 JSC FPC financial plan and 2016-2017 forecast were examined
Plans of the Committee for 2015 • Discuss the 2016 JSC FPC financial plan and 2017-2018 forecast and then submit them to the Board of Directors of JSC FPC and General Director’s interim reports on results of financial and economic activities in 2015.
• R eview the 2014 JSC FPC insurance coverage report and the 2015 insurance coverage programme. • Review the report on the results of the implementation of JSC FPC financial risk management policies in 2014 and the action plan for reducing financial risk in 2015.
• Review JSC FPC Centre for Internal Inspection and Auditing work results report. Discuss a candidate for External Auditor and significant conditions of his contract, examine the audit report for JSC FPC accounting (financial) statements according to Russian standards and IFRS for 2014.
Federal passenger company 2014 Annual Report
131
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Strategic Planning Committee Report The functions of the Committee include developing proposals for the Board on the priorities of the Company’s actions and the development of both JSC FPC’s medium- and long-term strategies to implement the strategic goals of RZD Holding.
The composition of the Strategic Planning Committee is determined by the Board of Directors. In July 2014, the 8-member Strategic Planning Committee was elected. The following significant changes happened to the composition of the Committee: Yu.Z. Saakyan, an independent member of the Board of Directors, and V.N. Vargunin, a representative of the Federal Tariff Service of the Russian Federation – Head of Department of Transport Regulation, participated in the work of the Committee. Taking into account specifics of the Company’s operations, representatives of the Ministry of Economic Development of the Russian Federation and the Ministry of Transport of the Russian Federation participated in the Committee. V.A. Veremeev was elected chairman of the Committee.
V. A. Veremeev
Statistics of the Committee sessions
3
Members of the Strategic Planning Committee in January–June 2014 V.A.Veremeev
Advisor to the President of JSC RZD, Member of JSC FPC Board of Directors
M.L. Artemov
Deputy Chief of the JSC RZD Department of Business Management of the Passenger Transport unit
M.E. Vorontsova
Head of the Division of Strategic Development of Types of Businesses at the Department of Economic Markets and Strategic Development of JSC RZD
A.A. Emelyanov
Deputy Director of the Department of Government Policies of Railway Transport in the Ministry of Transportation of the RF
Ya.V. Mandron
Deputy Director of the Department of the State Regulation of Tariffs, Infrastructure Reform and Energy Efficiency in the RF Ministry of Economic Development
V.V. Mishanin
Deputy General Director of JSC FPC on Strategic Development and Corporate Management
A.Yu. Romanov
Deputy Chief of the Department of Corporate Finance of JSC RZD
5
4 2 2013 In absentia
132
Federal passenger company 2014 Annual Report
2014 In person
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Members of the Strategic Planning Committee in July–December 2014 V.A.Veremeev
Advisor to the President of JSC RZD, Member of JSC FPC Board of Directors
M.L. Artemov
Deputy Chief of the JSC RZD Department of Business Management of the Passenger Transport unit
V.N. Vargunin
Head of Department of Transport Regulation of the Federal Tariff Service of the Russian Federation
V.A. Maksimushkin
First Deputy Chief of the JSC RZD Department of Economic Conditions and Strategic development
V.P. Shypilov
acting Deputy Director of the Department of the State Regulation of Tariffs, Infrastructure Reform and Energy Efficiency in the Ministry of Economic Development of the Russian Federation
V.V. Mishanin
Deputy General Director of JSC FPC on Strategic Development and Corporate Management
Yu.Z. Saakyan
General Director of ANO IPEM, an independent director, an independent member of the Board of Directors of JSC FPC
I.V. Mitsuk*
Deputy Manager of the Federal Railway Agency of the Ministry of Transport of the Russian Federation
Statistics of participation in Committee sessions in 2014, % 100
V.A. Veremeev M.L. Artemov
57
The remuneration paid to members of the Committee for participation in sessions in 2014 came to RUB 970,344.
75
V.N. Vargunin
100
V.A. Maksimushkin
86
V.V. Mishanin
67
I.V. Mitsuk Yu.Z. Saakyan
100
V.P. Shipilov
100
Key issues discussed by the Committee in 2014 Reports on the implementation of JSC FPC’s strategy were discussed JSC FPC’s investment programme for 2015-2017 and adjustments to it were discussed JSC FPC 2013 Annual Report was discussed Reports on the efficiency of the dynamic pricing and RZD-Bonus loyalty programme in 2013 and during the period of 2014 summer peak passenger traffic
Plans of the Committee for 2015 • Review the report on implementation of JSC FPC’s strategy in 2014 and strategic initiatives for route network optimisation and implementation of the
project management in the Company; • R eview the report on JSC FPC financial plan and investment programme execution in 2014.
• U pdate JSC FPC strategy, develop suggestions for the Company’s investments increase.
* Voluntarily retired from responsibility of the member of the Committee (excluded from the composition of the Committee by the decision of the Board of Directors, dated December 24 2014 (Minutes No. 9). Federal passenger company 2014 Annual Report
133
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
General Director
The management of JSC FPC’s current operations is the responsibility of an individual executive body: the General Director. The General Director functions as the Chairman of the Science and Technical Board of the Company and the Chairman of the Board of the Heads of the Company’s Subsidiaries.
M.P. Akulov General Director of JSC FPC
He has worked in railway transport since 1982. From 1983 until 1999, he held managerial positions in the enterprises and structural subdivisions of the Moscow Railway. From 2000 until 2002, he served as the head of the Yugo-Vostochnaya Railway. From 2003 until 2004, he was the First Deputy Minister of the Railways of the Russian Federation. From 2004 until 2005 he served as the Manager of the Federal Railway Transport Agency of the Ministry of Transport of the Russian Federation. From 2005 until now, he has served as the VicePresident of JSC RZD. Since 2009, he has held the post of General Director of JSC FPC.
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Federal passenger company 2014 Annual Report
The General Director reports to shareholders and the Board of Directors and delivers quarterly reports to the Board of Directors on the Company’s operations (budget performance, contract work performance, HR policy, credit policy, social programmes, insurance coverage, execution of the Board of Directors’ decisions). The Board of Directors makes the decision on election of the General Director, termination of his term, approval of the terms of agreement with the General Director of the Company, including conditions of renumeration and termination of the agreement.
The General Director is responsible for the timeliness and quality of creating and executing the Company’s budget and for preparing reports on the use of the budget for the organisation of the Company’s branches. In March 2014, the JSC FPC’s Board of Directors reelected M.P. Akulov to the position of the General Director of the Company for the 3-year term and agreed holding by JSC FPC General Director M.P. Akulov position of a member of the Board of JSC RZD. The total remuneration paid to the General Director of the Company for all work in 2014 amounts to RUB 2,017,773.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Deputy General Directors
The Organisational Structure of JSC FPC provides for the distribution of responsibilities in key areas of the Company’s activities among Deputies of General Director.
General Director
First Deputy General Director
Deputy General Director for Transportation
Deputy General Director for Economics and Finance
Deputy General Director for Strategic Development and Corporate Management
Deputy General Director for Production Development
Deputy General Director for HR Management and Social Issues
Deputy General Director for Transportation and Sales
Deputy General Director for Marketing
Deputy General Director of Corporate Security and Head of Corporate Security Management
Deputy General Director for External Relations and Legal Support
Deputy General Director for Regulations
Federal passenger company 2014 Annual Report
135
Introduction
Company Strategy
Market Overview
Risk Management
Quality and Safety
V. I. Kalyapin
A. S. Melnikov
A. A. Muslovets
First Deputy General Director
Deputy General Director of Transport
Deputy General Director of Economics and
Security
Finance
Date of Birth: 1961
Date of Birth: 1964
Date of Birth: 1977
Education: Graduated from the Moscow Institute of Railway Engineers with a specialisation in Railway Transportation Management.
Education: Graduated from the Leningrad Institute of Railway Engineers with a specialisation in robotic systems, Saint Petersburg State Transport University with a specialisation in Economics and Management at railway transport enterprises.
Education: Graduated from the Far Eastern State Transport University with a specialisation in Economics and Management at railway transport enterprises, PhD in Economics.
Skills and experience: He has worked in railway transport since 1980. In 2007, he was the Head of the Division of Luggage and Cargo Management and Passenger Transport of the Federal Passenger Directorate, a branch of JSC RZD. From 2007 until 2010, he served as the Head of Passenger, Luggage and Cargo Transport Management at the Federal Passenger Directorate, a branch of JSC RZD. From 2010 until 2012, he served as Head of Transport Organisation at JSC FPC. Since 2012, he has held the post of First Deputy General Director of JSC FPC.
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Business Model and Assets
Federal passenger company 2014 Annual Report
Skills and experience: He has worked in railway transport since 1991. From 2004 until 2006, he served as the Head of the Transservice Oktyabrskaya Railway Long-distance Passenger Transport Directorate, a branch of JSC RZD. From 2006 until 2007, he served as the Head of the Wagon Economy Service Federal Passenger Directorate, a branch of JSC RZD. From 2007 until 2010, he served as Deputy General Director of the Federal Passenger Directorate, a branch of JSC RZD. From 2010 to February 2015, he held the post of Deputy General Director of JSC FPC.
Skills and experience: He has worked in railway transport since 1999. From 2004 until 2005, he served as Head of the Division of Finance of the MoscowRyazansky Division of the Moscow Railway, a branch of JSC RZD. From 2005 until 2009, he served as First Deputy Chief of Financial Services of the Moscow Railway, a division of JSC RZD. From 2009 until 2010, he served as Deputy General Director of the Federal Passenger Directorate, a branch of JSC RZD. Since 2010, he has held the post of Deputy General Director of JSC FPC.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
V. V. Mishanin
L. A. Paristaya
A. V. Petrunin
Deputy General Director of Strategic
Deputy General Director of Personnel
Deputy General Director of Production
Development and Corporate Management
Management and Social Issues
Development
Date of Birth: 1974
Date of Birth: 1960
Date of Birth: 1958
Education: Graduated from the Siberian Academy of Transport with a specialisation in Economics and Management at railway transport enterprises, PhD in Economics.
Education: Graduated from the Moscow Institute of Railway Engineers with a specialisation in Railway Operation.
Education: Graduated from the Moscow Order of Lenin and Order of the Red Banner of Labour Institute of Railway Engineers with a specialisation in Electrification of Railway Transport and the Russian Presidential Academy of National Economy and Public Administration.
Skills and experience: He has worked in railway transport since 1999. From 2006 until 2008, he served as the Deputy Chief of the Department of Passenger Traffic of JSC RZD. From 2008 until 2009, he served as Project Manager at JSC Integrated Transport Systems. From 2009 until 2010, he served as the Deputy General Director of JSC Integrated Transport Systems. Since 2010, he has held the post of Deputy General Director of JSC FPC.
Skills and experience: She has worked in railway transport since 1983. From 2006 until 2009, she served as the Head of Personnel Management Services and Social Development at the Federal Passenger Directorate, a branch of JSC RZD, as well as Head of the Division of Managerial Personnel. From 2009 until 2010, she served as Head of the Agency Network of the Federal Passenger Directorate, a branch of JSC RZD. From 2010 until 2012, she served as Head of Personnel Management and Social Development at JSC FPC. Since 2012, she has held the post of Deputy General Director of JSC FPC.
Skills and experience: He has worked in railway transport since 1977. From 2009 until 2011, he served as the Head Engineer at the Locomotive Repair Directorate of JSC RZD. From 2011 until 2012, he served as the Deputy Chief of Technical Policy Management of JSC FPC and as the Head of the Production Technology Division. From 2012 until 2013, he served as the Deputy Head of Engineering of JSC FPC. Since 2013, he has held the post of Deputy General Director of JSC FPC.
Federal passenger company 2014 Annual Report
137
Introduction
Company Strategy
Market Overview
Risk Management
Quality and Safety
O. A. Nikitin
O. P. Myagotin
A. G. Orlovsky
General Director of External Relations and
General Director of Transport Organisation
Deputy General Director of Regulations
Legal Support
and Sales
Date of Birth: 1957
Date of Birth: 1961
Date of Birth: 1974
Education: Graduated from the Moscow Institute of Railway Engineers with a specialisation in Railway Operation, PhD in Engineering Science.
Education: Graduated from the All-Russia Part-time Institute of Railway Engineers with a specialisation in Railway Transportation Management and the Russian Presidential Academy of National Economy and Public Administration.
Education: Graduated from the Federal Security Service Academy with a specialisation in Law.
Skills and experience: He has worked in railway transport since 1979. From 2003 until 2006, he served as Head of the Department of Long-distance Passenger Transport of JSC RZD. From 2006 until 2007, he served as Head of the Department of Passenger Traffic of JSC RZD. From 2007 until 2008, he served as Deputy Chief of the Oktyabrskaya Railway, a branch of JSC RZD for passenger transport. From 2008 until 2010, he served as the First Deputy General Director of the Federal Passenger Directorate, a branch of JSC RZD. Since 2010, he has held the post of Deputy General Director of JSC FPC.
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Business Model and Assets
Federal passenger company 2014 Annual Report
Skills and experience: He has worked in railway transport since 1983. From 2007 until 2009, he served as the First Deputy Chief of the Moscow-Kursk Division of the Moscow Railway, a branch of JSC RZD. From 2009 until 2011, he served as Head of the Moscow-Kursk Centre for Organising the Railway Stations of the Moscow Directorate of Traffic Control of the Moscow Railway, a branch of JSC RZD. From 2011 until 2013, he served as Head of the Moscow-Kiev Passenger Station, the Moscow-Smolensk Centre for Organising the Railway Stations of the Moscow Directorate of the Central Directorate of Traffic Control, a branch of JSC RZD. Since 2013, he has held the post of Deputy General Director of JSC FPC.
Skills and experience: In 2010, he served as Advisor to the General Director of the Federal Passenger Directorate Administrative and Economic Centre, a branch of JSC RZD. In 2010, he served as Advisor to the General Director of JSC FPC. From 2010 until 2011, he served as Advisor to the General Director of CAO and to the General Director of Business Management of JSC FPC. Since 2012, he has held the post of Deputy General Director of JSC FPC.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Y. Y. Lyapin
A. G. Kaliberdin
D. A. Gorbatov
Deputy General Director of Corporate
Deputy General Director
Deputy General Director of Marketing – Head
Security and Head of Corporate Security
of Marketing
of the Marketing and Tariff Policy Management
Management
of JSC FPC
Date of Birth: 1969
Date of Birth: 1961
Date of Birth: 1969
Education: Graduated from the Moscow State Aviation Institute with a specialisation in Economics and Management at Engineering Enterprises.
Education: Graduated from the Ministry of Foreign Affairs of the USSR Moscow Order of the Red Banner of Labour Institute of International Relations with a specialisation in International Economic Relations, PhD in Economics.
Education: Graduated from the Moscow State Aviation Institute with a specialisation in Economics and Management at Engineering Enterprises.
Skills and experience: From 2004 to 2006, he served as Advisor to the Sales Director of JSC Aeroflot – Russian Airlines. From 2004 to 2006, he served as the Head of the Revenue Loss Prevention and Expenditure Control Service in JSC Aeroflot – Russian Airlines global distribution systems. From 2007 to 2009, he served as Director of the Revenue Management and Tariff Policy Department of JSC Aeroflot – Russian Airlines. From 2010 to 2012, he served as Head of the Centre for Revenue and Loyalty Programme Management of JSC FPC. From 2012 to 2014, he served as Head of the Revenue and Loyalty Programme Management of JSC FPC. In December 2014, he was appointed to the position of Deputy General Director – Head of JSC FPC Marketing and Tariff Policy Management.
Skills and experience: From 2002 until 2006, he served as the Executive Director of the Russian Marketing Association, a nonprofit organisation. From 2006 until 2009, he served as General Director of Marketing and Investment Projects LLC. In 2008, he served as a Senior Management Partner at Marketing and Investing Projects LLC. From 2009 until 2010, he served as General Director of Marketing and Investing Projects LLC. Since May of 2010, he has served as Head of the Centre for Scientific and Technological Development and Modern Technology at JSC FPC. From June 2010 to December 2014, he held the post of Deputy General Director of JSC FPC.
Skills and experience: From 2004 to 2006, he served as Advisor to the Sales Director of JSC Aeroflot – Russian Airlines. From 2004 to 2006, he served as the Head of the Revenue Loss Prevention and Expenditure Control Service in JSC Aeroflot – Russian Airlines global distribution systems. From 2007 to 2009, he served as Director of the Revenue Management and Tariff Policy Department of JSC Aeroflot – Russian Airlines. From 2010 to 2012, he served as Head of the Centre for Revenue and Loyalty Programme Management of JSC FPC. From 2012 to 2014, he served as Head of the Revenue and Loyalty Programme Management of JSC FPC. In December 2014, he was appointed to the position of Deputy General Director – Head of JSC FPC Marketing and Tariff Policy Management.
Federal passenger company 2014 Annual Report
139
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Audit Commission
The Audit Commission is a permanentlyfunctioning internal control mechanism at JSC FPC which implements regular inspections of the financial and economic activities of the Company, its branches, the responsibilities of its bodies of management and the structural subdivisions of management at JSC FPC to ensure conformity between the legislation of the Russian Federation, JSC FPC Charter and JSC FPC’s internal documentation.
In June of 2014, the Annual General Shareholders Meeting of JSC FPC selected the following for service in the Audit Commission:
for payment of remunerations for participation in every inspection (audit) of the financial and economic activities of the Company as well as annual remunerations.
1. Oleg Borisovich Ivanov — Director of Internal Auditing at JSC RZD.
For participation in each audit, the member of the Audit Commission shall receive remunerations in an amount equivalent to three times the minimum wage at Joint Stock Company “Russian Railways.”
The Audit Commission acts in the interest of the Company’s shareholders and its actions are accountable JSC FPC General Shareholders Meeting.
3. Aleksandr Yuryevich Romanov — Deputy Chief of the Department of Corporate Finance at JSC RZD.
The Audit Commission is independent of the responsibilities of the Management of the Company and of the structural subdivisions of the Management of the Company. In accordance with JSC FPC Charter, the 5-member Audit Commission is elected on a yearly basis by the Annual General Shareholders Meeting of JSC FPC. JSC FPC employees may not serve in JSC FPC Audit Commission.
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Federal passenger company 2014 Annual Report
2. Natalia Alekseevna Lem — Head of the Department of Business Accounting Services at JSC RZD.
5. Yuri Aleksandrovich Fedosov – Head of the Division of Subsidiaries and Affiliates Management Department at JSC RZD.
The decision as to the payment of annual remunerations to members of the Audit Commission is made by the Annual General Shareholders Meeting of JSC FPC according to a recommendation from JSC FPC Board of Directors. The size of annual remunerations paid to members of JSC FPC Audit Commission may not exceed an amount equivalent to twenty times the minimum wage at JSC RZD for each inspection made.
The incentive for members of the Audit Commission is defined in the Regulations on the payment of remunerations and compensations to members of JSC FPC Audit Commission and provides
By decision of the Annual General Shareholders Meeting, in 2014 the members of JSC FPC Audit Commission were paid annual remunerations totalling RUB 947,700.
4. Olesya Petrovna Chernysheva – Deputy Chief of the IFRS Consolidated Statements Management at JSC RZD.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Company Auditor
For the verification and confirmation of the Company’s annual financial accounts, the General Shareholders Meeting of JSC FPC approves an Auditor on a yearly basis.
In June of 2014, the Annual General Shareholders Meeting approved Ernst and Young LLC as the Auditor Company to carry out the audit of JSC FPC’s financial accounts according to Russian accounting standards and IFRS in 2014.
Centre for Internal Inspection and Auditing The Centre for Internal Inspection and Auditing was created for the purpose of improving the efficiency of the system of internal inspection and auditing in the Company, guaranteeing the Company’s bodies of management trustworthy and complete information about the Company’s activities as well as the identification and prevention of abuses of power in the Company. The Centre is functionally subordinate to the General Director of JSC FPC and accountable to the Audit Committee of JSC FPC Board of Directors.
The tasks of the Centre for Internal Inspection and Auditing include: The organisation and implementation of internal inspections and audits of the financial and economic activities of the Company, its branches and structural subdivisions; the identification of financial and economic reserves and the preparation of statements warning of financial and tax-related risks and losses; the prevention of violations and shortages in the financial and economic activities of JSC FPC and the preparation of suggestions for their elimination as well as for the establishment of procedures for holding guilty member of management
accountable to the laws of the Russian Federation; exposing revenue losses from passenger and postal luggage transport and the irrational use of passenger cars and identifying citizens attempting to travel in passenger trains without travel documents; the implementation of inspections to establish the required quality of long-haul passenger train service in the subdivisions of JSC FPC.
Federal passenger company 2014 Annual Report
141
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Sustainable Development
By the end of 2014, headcount at FPC amounted to
73,935 142
5% less than in 2013 Federal passenger company 2014 Annual Report
people,
Operating and Financial Results Analysis
Investment Activities
Women account for
65 % of Company’s personnel
International activities
Corporate Governance
Sustainable Development
Appendices
Corporate Training Centre
is the main facility for continued and professional education of employees Federal passenger company 2014 Annual Report
143
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Personnel and Social Policy One of indisputable advantages of FPC is its professional and highly qualified personnel motivated to perform at their best. About 74,000 Company employees ensure the comfort, quality, and safety of railway passenger transportation by railway across Russia, to the CIS and overseas.
Personnel Headcount by type of job, employees Most Company employees (44,700 employees, or 60% of the total) directly serve customers (passengers). As a result of optimisation, Company headcount decreased by 5% year-on-year.
Employees by type of job
As at December 31, 2014
As at December 31, 2013
39,517
40,737
Services in trains Ticket sale
5,175
TOTAL
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Federal passenger company 2014 Annual Report
Modern double-deckers are used, train traffic is optimised
5,906
Implementation of electronic systems and transaction terminals speeded up the process and improved accessibility of tickets and reduced ticket handling costs Passenger railway depots in Tavda, Abakan, Liski, and Ruzaevka were redesigned
Maintenance and repair personnel Other personnel
Actions
6,987
7,219
22,256
23,981
73,935
77,843
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Age mix, % The Company maintains the balance between young and more experienced employees. The average employee age at FPC is 40. Young people under 30 years old account for 21% of the total. Most employees (65%) are women. The main focus in 2014 was on strengthening and retention of FPC human resources. The employee turnover rate remained flat year-on-year at 9%. The personnel stability index is 65%. The Company is fully staffed with employees holding university and vocational college degrees in line with the relevant regulations. The percentage of employees with a university degree is 22%.
Appendices
Gender mix, %
22
21 35 12
15
65 30 Under 30 years old
Women
31–35 years old
Men
36–45 years old 46–50 years old Above 50 years old
6.8 18.6 4.0
Education, %
Total
73,935 employees
50.9
7.5
Employee ratio by job (profession), %
7.0 2.6 2.6
ы
ы
Professional college degree
22 56
Other (secondary complete, complete and initial professional education)
Passenger train attendants
6.8
University degree
22
Train masters
18.6 4.0
Train electricians
Total
73,935 employees
Ticket clerks
50.9
7.5 7.0 2.6 2.6
Specialists Managers Other workers and clerks Rolling stock repair technicians and rail car inspectors
Passenger train attendants Train masters Train electricians Ticket clerks Specialists Managers Other workers and clerks Rolling stock repair technicians and rail car inspectors Federal passenger company 2014 Annual Report
145
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Competency-based approach
Implementation of the competencybased approach in the Company started in 2013. The 360 degree method to assess front-line personnel was automated. The developed Test FPC is means of assessing the degree of competency of personnel involved in passenger services and making a forecast of successful service performance in deluxe and international trains. The reporting year saw commissioning of an automated system for assessment of corporate competency development using Business Profile and Business IQ test methodologies for managers and specialists at FPC.
Name of assesment method
FPC Test Business Profile RZhD and Business IQ Tests
PES assessment etc. 360 degree (pilot survey) TOTAL
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Federal passenger company 2014 Annual Report
In 2014, corporate competency assessment to build a talent pool covered 24,800 employees, 90% of them being front line personnel, and 288 managers.
There are plans to further automate the personnel assessment system involving integration with the Unified Corporate Automated Human Resources System (UCAHRS).
In order to ensure reliable professional performance of front line personnel and maintain health, employees have their psychoemotional state (hereinafter, PES) assessed. Professional burnout is prevented by restorative (corrective) measures in specifically equipped rooms.
Total, people
Candidates, people
20,528
13,118
Employees, people
7,410
369
41
328
320 managers
4
316
49 specialists
37
12
3,858
–
3,858
80
–
80
24,835
13,159
11,676
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
FPC personnel training and development
The Company has an efficient training and personnel qualification development system in place. A total of 22,700 employees or 30.7% of the total headcount had training in 2014.
Training in the Corporate HR Centre (hereinafter, the Corporate Centre) develops full-scale. Over 9,000, or 41% of the total number of trainees, had professional training in 92 licensed offices of the Corporate Centre in the reporting year.
A total of
22,700 employees or
30.7% of the total headcount had training in the reporting period
Changes in the personnel training system, people
Indicators
27,673
26,595
22,731 20,352
17,348 10,325
6,243 2012
2013
Main indicators of the training system
2014
2013
Headcount at FPC, people
73,935
77,843
80,415
Total number of employees trained, people
22,731
27,673
26,595
41.4
37.0
23.4
113.6
138.1
134.2
13,328
Percentage of employees trained in the Corporate Centre, %
9,410
Budget, RUB mln
2012
2014
Total Corporate Centre Other educational institutions
Federal passenger company 2014 Annual Report
147
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Training for front-line personnel in the Corporate Centre, people Since 2014, training in all jobs (covered by FPC license for educational activities) in the Corporate Training Centre has been conducted using new electronic first aid simulators which facilitated update of the training process making occupational health and safety and first aid issues more practical. The trainers in the Corporate Centre train employees and have professional training. In 2014, eight trainers attended further skills development courses on Efficient Teaching Technologies of Professional Workforce Training in MSRU (Moscow State Railways University). Training deliverables were practical guidelines aimed to ensure an efficient learning process in class. A total of 3,600 people had job training and 14,000 employees had professional training courses. In 2014 a special recruitment and training process was launched to staff Talgo high-speed train with maintenance and operations personnel. All candidates had training in the Corporate Centre under a specially approved programme involving experts from Patentes Talgo S.L. Additionally trainings included English and catering technology classes. A total of 114 people were trained.
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Federal passenger company 2014 Annual Report
Train attendant
Ticket clerk
52 2,255 1,879 141
880
4,463
607 416
1,964 2012
1,003
83
5,486
2013
Professional development
2014
2012
2013
2014
Training
In order to develop management competencies and personal efficiency of managers and improve professional skills, FPC collabourates with its longstanding external providers on additional professional development, relevant operations and financial management aspects, and builds a talent pool under special integrated programmes.
Over 5,000 managers, specialists, and office clerks took professional development courses.
Operating and Financial Results Analysis
Investment Activities
FPC specialists take active part in the development of corporate programmes to ensure common theory and practice, visibility, accessibility, and targeted orientation for each specific category of attendees.
International activities
Corporate Governance
Providers
Sustainable Development
Appendices
Main training courses
Russian Railways Corporate University
Corporate Leader Corporate Management
Railway Transport University Complex
MBA in: Transport Business Management: Customer-Focus and Efficiency of Passenger Carriage Management Economics Corporate Talent Pool courses Courses aimed to improve passenger services and transportation security
ANO PM Expert
Project management
Targeted training of young talents The Company cooperates with nine core railway universities. Over thousand students have targeted courses in professional colleges and universities.
The trainers of the HR Centre held open classes for MSRU undergraduates. Students in their fifth year could attend a workshop of Customer-Focused Marketing of Passenger Transportation.
A total of 24 Company employees embarked on distance-learning in Technology Innovation Management in the reporting year.
These students could attend public lectures and professional days to learn about the Company’s operations and objectives.
Federal passenger company 2014 Annual Report
149
Introduction
Company Strategy
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
Development of student train attendant teams Trends in student engagement in passenger transportation during summer, people FPC’s annual tradition of engaging students in the transportation process in summer has become increasingly popular among young aspiring people. While in 2010 the train service team included 2,000 students, their numbers in 2014 increased to 8,000 students both from railway colleges and other educational institutions (over 300 schools).
It was for the first time that the Company practised distance recruitment of students from the Urals, Western and Eastern Siberia to FPC’s structural units in the European part of Russia. FPC received a recognition letter from the Russian Ministry of Education and Science for its significant contribution to the implementation of public youth policy and development of student teams.
7,831 5,320 3,263 2,000
2010
2,594
2011
2012
2013
2014
System of remuneration and motivation of staff
150
In 2014, new Regulations on the Staff Remuneration System were enacted, which focus on compliance with the legal requirements of the Russian Federation, enforcement of employees’ rights in respect of remuneration, and conformity to the corporate standards for management of monetary remuneration of staff.
The Regulations have kept the remuneration for loyalty to the company, which had proven effective in previous years, and salary indexation pro rata to the growth of consumer prices.
The Regulations were developed subject to the principles of the Concept of Staff Remuneration at the Organisations of the Russian Railways holding.
In particular, extra bonuses are paid for the safety of train traffic and for high quality of repair and maintenance of cars. An extended list of motivation payments and the circle of positions covered has made it possible to pay bonuses to 1.5 times more employees in 2013 with
Federal passenger company 2014 Annual Report
The competitiveness of salaries at the Company is raised through increasing the efficiency of motivation.
a smaller number of events involving violation of traffic safety rules or railway transport operation rules and technical facility failure. Bonuses are also paid for sales of products and provision of extra services to passengers.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Social policy
Implementation of the Collective Agreement
In 2014, the social policy of the Company was implemented pursuant to the Collective Agreement of the JSC Federal Passenger Company for 2013 – 2014. Privileges and guarantees that are stipulated by the Collective Agreement and local bylaws of the Company exceed the guarantees that are stipulated by the labour law and provide extra social security.
In 2014, the cost of individual social benefits per one employee of JSC FPC amounted to RUB 40,500, and of social benefits per one retired pensioner of JSC FPC, RUB 7,500.
The Company has an established operating system of social benefits and guarantees for developing, stimulating, and preserving the efficiency of staff and maintaining social stability among staff.
In 2014, the costs of performance of liabilities of JSC FPC under the Collective Agreement amounted to RUB 6.5 billion.
Housing policy
Being able to buy or build one’s own housing is an important condition for employment especially when one has to move from one region of Russia to another. The Company provides its employees with an opportunity to get a loan for buying or building a home on privileged conditions.
Every month, over 1,200 employees are paid subsidies for interest on mortgage loans, and 60 of those got free of charge subsidies for childbirth during mortgage loan repayment for a total amount of RUB 30.7 million.
Federal passenger company 2014 Annual Report
151
Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Resort healthcare
Healthcare programs for the staff are a priority of the Company’s social policy and aim to develop conditions for proper rest and healthcare and therefore make the staff more efficient. In the reported year, 3,878 trip vouchers were sold, 2,445 of which were to resort facilities of OJSC RZD-HEALTH, and 1,433, to local resorts.
Employees pay a part of the voucher price in accordance with the Company regulations. JSC FPC is committed to protecting and improving the health of employees’ children, preventing children’s diseases, and providing conditions for proper rest and engagement of children in the summer. In 2014, 2,526 children went to healthcare camps including 803 children
on the Black Sea Coast, 1,576 children in camps of OJSC Russian Railways, and 147 children in other healthcare facilities. The Company’s costs of healthcare for employees’ children amounted to RUB 60.6 million.
Competition
The Company is committed to systems of non-material motivation and fostering a spirit of competition and commitment to success. The following staff teams were recognised as best on the results of 2014: • The Pskov car section of the Northwest branch. • The Novosibirsk passenger car shed of the West Siberian branch. • The Siberian railway agency of the West Siberian branch.
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Awards were given to employees of key professions for professional achievements, namely, Best Middle Manager (10 people), Best Foreman (8 people), and Best in Profession (39 people). A significant step in improvement of the work motivation system of JSC FPC is a project entitled The First among the Best. The First among the Best is a business competition of train crew employees.
Results of the competition on the level of structural divisions are drawn every month and on the level of the Company and branch and annual results, every quarter. The First among the Best award and sign are granted to one team only who wins on the results of the year. The 2014 winner is the Urals branch of JSC FPC, the crew of the Perm-Novorossiysk passenger train No. 325/326 of the Perm passenger car shed that is headed by the passenger train commander M.V. Zheltyshev.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
In 2014,
8
employees received national awards
In 2014,
184
employees received awards from Ministry of Transport of the Russian Federation
In 2014,
In 2014,
employees of received awards from RZD
employees received awards from Ministry of Culture of the Russian Federation
450
5
In 2014,
635
employees of received awards from FPC
Care of professional sanity of staff
The Company is implementing a project entitled Health Management with psychological support offices where train crew are offered rehabilitation (corrective) procedures to prevent professional burnout. There is also monitoring of the mental and emotional condition of this category of staff.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Culture and sports
Healthy lifestyle promotion is a part of the healthcare programme for employees. In September 2014, the final stage of the JSC FPC staff Olympics was held in St. Petersburg for the first time in the Company’s history. There were competitions in mini football, volleyball,
swimming, weights, and track and field. The Olympics were organised by the Primary Trade Union Organisation, a social partner of the Company.
Mass corporate sport events promote a healthy lifestyle and provide for better relations between the staff.
OJSC Russian Railways and took active part in the roundtable discussion with the top management of the Company, department managers, and trade union delegates.
The skills that are gained at such assemblies will enable every young employee to raise his or her professional and corporate competencies and to become a better qualified professional.
Youth policy
In 2014, the Federal Passenger Company held its 5th anniversary Youth Assembly. Young employees of the Company were trained under the programme entitled ‘заключить в апострофы – ‘Young Leaders. Efficient Team. Innovative Thinking’ by trainers from the corporate university of
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Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Corporate pension system
Corporation pensions are a part of employees’ benefits and meet the basic principles of the Strategy of Long-Term Development of the Pension System of the Russian Federation.
As of the end of the reported period, over 27,000 employees, which is 37% of all the Company staff, joined the nongovernment pension agreement with the Blagosostoyaniye (Wellbeing) private pension fund.
The Company provides comprehensive support to its veterans; social guarantees to retired pensions of JSC FPC are provided via Pochet (Honor) charity foundation.
In 2014, the costs of private pension plans amounted to RUB 701.9 million.
Corporate research
The Company does an annual sociological poll of the staff on the effectiveness of implementation of the strategy of development of the human resource potential. The staff satisfaction index is growing steadily by one point per year. Employees are involved intensively in solving business problems, which proves that JSC FPC is a company whose staff
provide a balanced combination of focusing on customers’ needs and, on the other hand, compliance with the standards of quality and traffic safety.
In 2014, the costs of private pension plans amounted to RUB
701.9 million
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Corporate events
In 2014, the Company did an environmental project entitled ‘Plant Your Own Tree’ with over 50 trees and shrubs planted. In December, a Major Day was held for last year students of railway colleges. V.Barashkin, Supreme Category Teacher of the Corporate Centre, was awarded at the competition of professional teaching skills of teachers at teaching centres of OJSC Russian Railways in the nomination
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entitled Best Teaching Practices in Professional Training of Workers of OJSC Russian Railways in the Systems of Railways and Facilities, Car Systems, and Transportation Systems. A competition entitled ‘A Day in a Soldier’s Life’ with stories about students working as stewards in passenger cars during summer vacations was held at the Facebook page of the Company.
The authors of three stories got letters of gratitude and corporate gifts at the 2014 National Assembly of Student Teams at the Moscow State University.
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Energy Consumption and Environment Protection Energy Consumption
In 2014, JSC FPC, in line with its Energy Conservation and Energy Efficiency Improvement Programme, continued its long-standing efforts aimed at reducing operational costs through better fuel and energy use. As part of the Energy Conservation and Energy Efficiency Improvement Program of JSC FPC for 2013-2015, the Company installed new metering equipment at 24 energy metering points in 2014. With this equipment installed, the Company’s divisions started to pay to steam and oil suppliers based on actual consumption reported by the meters. In 2014, the Company purchased 300 nextgeneration L-type steel solid-rolled wheel pairs from Vyksa Steel Works. According to the results of field testing and reports by Railway Transport Research Institute and Rolling Stock Research, Design and Technology Institute, the wheels were 20% more wear resistant, which meant less repair costs and a longer service life. In the reporting year, experiments were done to show that new materials and lubricants increased the number of kilometers a generator drive reducer could run without oil change up to 300k km.
Fuel and Energy Use Highlights
Fuel
Unit of measure
2014/2013 Change
2012
2013
2014
154.3
152.4
144.4
- 5.3%
Electricity
million kWh
Diesel
thousand tons
2.6
2.5
2.2
- 11.9%
Coal
thousand tons
192.2
164.7
146.4
- 11.1%
Furnace oil
thousand tons
28.9
27.6
27.0
- 1.9%
Natural gas
million cub. m
28.3
27.5
25.9
- 5.9%
Petrol
thousand ton
1.7
1.6
1.5
- 9.5%
Total
thousand ons of fuel equivalent
284.8
260.9
241.1
- 7.6%
The Company continued its work on treating the water sections of boiler houses and heat and water supply systems connected to passenger carriage depots and areas using the energy method, which allows for increasing heat output by 1.5 times and reducing fuel consumption by 8%. In 2014, that method was used at eight boiler houses run by JSC FPC.
In the reporting year, the operational testing of 20 carriages equipped with ASLO, an automated radiant heating system, was completed. The system proved to be efficient and safe for humans and the environment; it can be installed as an addition to the standard heating systems in passenger carriages. The testing showed a 5.7 times reduction in electricity consumption in the main heating system of a carriage (17.6% of the standard consumption in a standard carriage), a 1.5 times reduction in coal
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Introduction
Company Strategy
consumption, a better quality of heating and better microclimatic conditions both for passengers and attendants. JCS FPC is planning to deploy ASLO in its passenger carriages. The Company went on working on improving energy efficiency. In 2014, as part of the Moscow-Kievskaya carriage depot renovation project, a modern LED lighting system, with a section-by-section illumination intensity management capability, was installed. That helped
Business Model and Assets
Market Overview
Risk Management
reduce division’s energy consumption by 30% and improve the level of comfort for the depot staff through better lighting in the depot shops.
Quality and Safety
JSC FPC invested in the development and operational testing of an automated fuel and energy management solution (ASU TER).
Aiming to ensure a consistent fuel and electricity use planning and consumption policy, save employees’ working time and improve the quality of decision-making at the management level through a quicker delivery of latest information, in 2014
Environmental Protection
Environmental protection and negative impact minimisation are among JSC FPC’s priorities. In its environment-related activities, the Company is guided by the applicable laws of the Russian Federation and the Environmental Strategy of JSC RZD to 2017 and, in the long run, to 2030. The Strategy implies a 35% reduction of the negative environmental impact by 2015 and a 70% reduction by 2030.
158
Contaminated Waste Water Discharge, thousand cub. m
To reduce the man-made impact relating to passenger service, the Company took efforts to modernise rolling stock and facilities in its divisions.
13.62
Aiming to prevent tracks from being polluted and maintain an adequate level of sanitation at infrastructure facilities, the Company bought only carriages equipped with environmentally friendly green toilets. Such toilets were also installed in carriages that were undergoing an overhaul. In 2014, 274 carriages with green toilets were bought. The total number of carriages with such toilets achieved 7,770 or 82% of the fleet used in year-round trains.
2011
Federal passenger company 2014 Annual Report
13.66
14.73
2012
2013
14.63
2014
Operating and Financial Results Analysis
Investment Activities
International activities
To reduce air emissions, the Company has been equipping carriages with pellet fuel-fired boilers; 583 carriages has been completed so far. In addition, there is a procurement programme, which involves buying carriages with centralised energy supply. There were 682 carriages purchased by January 01, 2015. The Company took steps to reduce the amount of water it used for operational needs and protect the water bodies involved. In 2014, Company’s divisions discharged 80.96k cubic meters of wastewater (2013: 75.99k cubic meters), 66.3k cubic meters of which complied with all the water-quality standards that applied. Water use by Company’s divisions, including for operational needs, decreased by 0.646 million cub. m to 8.598 million cub. m in 2014.
Corporate Governance
Sustainable Development
Appendices
Regulatory Clean Waster Water Discharge, thousand cub. m
67.2
63.59
61.26
2011
2012
2013
Air emissions were reduced by 3.9% in 2014.
66.33
2014
Waste volume was reduced by 0.4% in 2014 against 2013, which was achieved through a reduction of the volume of solid domestic waste and outsourcing of some operations.
Water Use, million cub. m In 2014,
8.6
million cub. m
9.42
9.25
9.24
2011
2012
2013
8.6
were used, that is 7% less, as compared to the level of 2013
2014
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159
Company Strategy
Introduction
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Air Emissions, thousand tonnes
1.35
In 2014,
1.29
1.2
1.05
3.9
air emissions was reduced by 3.9% 6.69
6.42
2011
2012
Stationary sources
6.06
2013
5.92
2014
Moving sources
Waste Volume, thousand tonnes In 2014, waste volume was reduced by
0.4
105.02
2011
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Federal passenger company 2014 Annual Report
99.61
99.32
98.95
2012
2013
2014
%
Operating and Financial Results Analysis
Investment Activities
In 2014, the Company invested about RUB 730 million into projects directly or indirectly affecting the scale of the environmental impact. Aiming to reduce the sources of discharge negatively affecting the centralised water discharge systems, the Company implements programmes involving renovation of water treatment facilities and carriage-washing facilities, including the installation of water recirculation systems and local water treatment facilities. In 2014, the Company did the following environmentally-relevant work: • Renovation of the carriage-washing facility at the Chelyabinsk Passenger Carriage Depot of the South Ural Branch. • Renovation of the water treatment facilities of the Severobaikalsk carriage washing facilities, including the installation of a recirculation system.
International activities
Corporate Governance
• Renovation of the carriage washing facility at the Adler Passenger Carriage Depot of the North Caucasus Branch. • Installation of pellet fuel-fired boilers in passenger carriages. Implementing the above measures aimed at improving the Company’s environmental performance will allow for a reduction of emissions (discharge) and a decrease in the overall negative impact on the environment. Committed to improving its environmental performance and reducing the negative environmental impact, the Company is planning to take the following steps in 2015: • Develop a conceptual framework for the environmental strategy of JSC FPC. • Develop an automated system for management of environment protection activities. • Continue to implement environmentally-relevant projects, including renovations of water treatment and carriage washing
Sustainable Development
Appendices
facilities, purchase of new rolling stock with green toilets and centralised heating, installation of automated radiant heating systems and pellet fuelfired boilers in carriages and replacing the fuel fired by boiler houses with a more environmentally friendly one.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Charity Work Charity is an important part of JSC FPC’s work. From year to year, the Company has been increasing its involvement in social initiatives, including provision of social support to employees and retirees, lower-income and poor people, veterans and disabled people. As before, the Company focuses on helping children who need costly treatment or medicines and orphans who are in children’s institutions or have just left them.
In 2014, the Company donated a total of RUB 11.2 million to employees and retirees who found themselves in a difficult situation or faced some real-life hardships and who needed financial assistance, costly treatment or surgery. Help to children is a priority in the Company’s charity work. A total of RUB 0.6 million was donated to charity funds providing money to children with severe conditions requiring costly treatment.
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Helping children deprived of parental care has become a good tradition for JSC FPC. Since 2012, the Company has been sponsoring and supporting the Safronovo Boarding School (in a town called Safronovo in the Smolensk Region). As part of its charity work, the Company bought things that children who were going to leave the school and live as adults needed as well as paid for the renovation of the physical therapy room. The total amount of financial help provided by the Company was RUB 0.3 million. In addition, a charity event called Give Good was held on the eve of the New
In 2014, the Company donated RUB
11.2
million to employees and retirees
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Year’s Day celebrations for the orphaned children. It was funded with the donations made by employees of the Company’s administration.
educational literature to every region of the Russian Federation at Russian Orthodox Church’s request on a free of charge basis.
The Company has been helping the Russian Orthodox Church for several years. In 2014, it donated 22 passenger carriages, which were to be removed from the inventory, to the Church. The Company took part in the purchase of furniture for the future hotel of the Zadonsk’s Eparchial Monastery of the Nativity of the Mother of God in the Lipetsk Region. The contribution amounted to RUB 0.9 million. The Company also delivered spiritual and
As part of the RZD Holding’s charity program, the Company donated a total of RUB 41.0 million for charitable purposes.
Sustainable Development
Appendices
The total amount of charity donations was RUB
55.7
million in 2014
The total amount of charity donations was RUB 55.7 million in 2014.
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Introduction
Company Strategy
Business Model and Assets
Appendices
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Market Overview
Risk Management
Quality and Safety
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
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165
Introduction
Company Strategy
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
Audit report In February 2015, JSC FPC received a very positive auditor’s report from Ernst & Young, LLC as regards to its accounting (financial) reports in 2014. The full version of the auditor’s report as well as the list of contacts of organisation with due qualification that deal with valuation activities can be found at http://fpc.ru/static/ public/ru?STRUCTURE_ID=17.
Balance Sheet, RUB thousand Indicator
December 31, 2014
December 31, 2013
1,124,638
1,243,381
1,032,896
920,187
91,741,
323,194
204,209,704
181,434,044
194,063,324
175,611,126
190,286,411
171,324,707
3,528,032
4,013,818
ASSETS I. NON-CURRENT ASSETS Intangible assets including: intangible assets in-progress investments in intangible assets advance payments made Research and development results including: research, development, and engineering in-progress investments in research, development, and engineering advance payments made Intangible development assets Tangible development assets Fixed assets including: fixed assets including: buildings, machinery and equipment, transport vehicles installations and transmission facilities
248,882
272,601
in-progress investments in fixed assets
other fixed assets
3,760,883
3,526,118
advance payments made
6,385,497
2,296,800
47,438
39,223
47,438
39,223
978,159
978,159
978,159
978,159
Income-bearing investments in tangible assets including: income-bearing investments in tangible assets in-progress investments in income-bearing investments in tangible assets Financial investments including: contributions to charter (contributed) capitals of other organisations granted loans and deposits other financial investments
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Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Indicator
Sustainable Development
Appendices
December 31, 2014
December 31, 2013
advance payments Deferred tax assets Other non-currents assets Section I total
335,911
3,079,542
206,695,850
186,774,348
3,491,258
3,642,902
3,411,360
3,534,85
1,118
2,646
77,759,
97,811
1,021
7,593
II. CURRENT ASSETS Inventories including: raw materials, materials and other similar assets rearers and fatteners work-in-progress costs finished products and goods for resale goods dispatched deferred expenses other inventories and costs Value added tax on assets purchased Accounts receivable
8,867
569,354
9,193,327
8,328,476
38,402
43,399,
35,391
43,399
including: accounts receivable (amounts falling due after more than 12 months from balance sheet date) including: buyers and customers (excluding transport operations) buyers and customers for transport operations advance payments made other receivables accounts receivable (amounts falling within 12 months from balance sheet date)
,3,011 9,154,925
8,285,077
including: buyers and customers (excluding transport operations)
803,088
1,012,570
1,186,020
2,016,891
450,607
546,317
taxes, dues, state social security and welfare
3,269,798
3,062,023
other receivables
3,445,412
1,647,275
buyers and customers for transport operations advance payments made
Financial investments (excluding cash equivalents)
500,000
including: granted loans and deposits
500,000
other financial investments Cash and cash equivalents
10,661,395
15,196,460
117,385
19,647
3,125,361
2,650,185
including: cash on hand settlement accounts foreign currency accounts
12,542
96,249
506,107
430,379
cash equivalents
6,900,000
12,000,000
Other current assets
1,293,282
1,227,431
25,148,129
28,964,622
231,843,980
215,738,970
other cash and transfers in transit
Section II total BALANCE
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167
Introduction
Company Strategy
Business Model and Assets
Indicator
Market Overview
Quality and Safety
Risk Management
December 31, 2014
December 31, 2013
152,635,848
147,635,848
LIABILITIES III. EQUITY Charter capital Reacquired shares Revaluation of non-current assets
572,661
575,596
25,593,336
17,438,232
assets acquired to increase the charter capital
12,825,192
5,000,000
other assets
12,768,144
12,438,232
Reserve capital
345,525
140,567
345,525
140,567
1,343,420
6,027,587
180,490,790
171,817,829
13,276,869
9,330,907
13,276,869
9,330,907
2,549,757
1,720,942
15,826,626
11,051,849
4,258,183
2,025,761
4,258,183
2,025,761
27,802,932
27,603,429
Capital surplus (without revaluation) including: share premium
including: reserves required by law reserves required by constitutional documents Unappropriated profits (unrecovered loss) Section III total IV. LONG-TERM LIABILITIES Borrowed assets including: credits repayable after more than 12 months from balance sheet date loans repayable after more than 12 months from balance sheet date Deferred tax assets Estimated liabilities Other liabilities Section IV total V. SHORT-TERM LIABILITIES Borrowed assets including: credits repayable within 12 months from balance sheet date loans repayable within 12 months from balance sheet date Accounts payable including: suppliers and contractors
10,906,759
9,456,581
company staff
1,417,035
1,848,230
taxes, dues, state social security and welfare
2,406,692
1,913,285
advance payments received (excluding transport operations) advance payments received for transport operations
388,939
332,622
8,548,092
8,396,588
4,135,416
5,656,123
shareholders (income payment) other liabilities Deferred income Estimated liabilities Other short-term liabilities Section V total BALANCE
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Federal passenger company 2014 Annual Report
577,982
576,804
2,885,128
2,662,869
2,339
430
35,526,563
32,869,292
231,843,980
215,738,970
Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Statement of financial results Financial results, RUB thousand Indicator name
Income
January-December 2014
January-December 2013
185,611,386
196,065,432
164,235,584
175,356,650
2,253,831
2,385,594
including: freight transportation long-distance passenger transportation suburban passenger transportation infrastructure services locomotive traction services rolling stock maintenance infrastructure facilities construction research and development social services other activities Cost of sales
199,817
133,125
18,922,154
18,190,063
204,630,237
208,288,005
189,679,901
194,007,889
1,628,324
1,660,904
including: freight transportation long-distance passenger transportation suburban passenger transportation infrastructure services locomotive traction services rolling stock maintenance infrastructure facilities construction research and development social services
222,240
142,197
other activities
13,099,772
12,477,015
Gross profit (loss)
–19,018,850
–12,222,573
275,047
382,696
–19,293,897
–12,605,269
–25,444,317
–18,651,240
625,507
724,691
Selling expenses Administrative expenses Sales profit (loss) including: freight transportation long-distance passenger transportation suburban passenger transportation infrastructure services locomotive traction services rolling stock maintenance infrastructure facilities construction research and development social services other activities
–22,423
–9,072
5,547,335
5,330,351
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Company Strategy
Introduction
Business Model and Assets
Market Overview
Quality and Safety
Risk Management
January-December 2014
January-December 2013
Income from investment in other companies
13,272
6,916
Interests receivable
527,489
785,039
Interests payable
965,787
665,027
26,543,066
26,068,917
Indicator name
Other income Other expenses
5,595,850
6,196,334
Income (loss) before tax
1,228,292
7,394,241
842,389
2,816,041
1,419,030
–1,869,561
917,145
719,369
Current income tax including: permanent tax liabilities (assets) Changes in deferred tax liabilities Changes in deferred tax assets Other
95,764
191,279
–45,334
–49,053
–55,569
–53,319
2,800
–543
5,252
12,984
including: prior periods income tax previous period unified imputed income tax penalties for taxes, dues, state social security and welfare derecognised deferred tax liabilities derecognised deferred tax assets Net profit (loss)
12,686
17,793
–390,143
4,099,163
FOR REFERENCE Surplus of revaluation of fixed assets not included in net profit (loss) for the period Surplus of other operations not included in net profit (loss) for the period Total financial result for the period
0
304,671
–1
–5
–390,144
4,403,828
Basic earnings (loss) per share
0
0
Diluted earnings (loss) per share
0
0
Corporate Policy and Corporate Code of Conduct Correspondence
The Company observes key principles of Code of Corporate Management, which according to Federal Property Management Agency, require obligatory implementation. The full version of the Appendix, that confirms compliance of corporate policy of the Company with Code of Corporate Conduct, is available from the extended version of the JSC FPC 2014 Annual Report at the corporate website www.fpc.ru («Statements» tab in Information Disclosure segment).
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Operating and Financial Results Analysis
Investment Activities
International activities
Corporate Governance
Sustainable Development
Appendices
Glossary and List of Abbreviations
Outstaffing
is a human resources management method under which the Customer is provided with certain amount of the personnel of the Contractor. The personnel of the Contractor does not enter in any kind of direct legal relations (under civil or labour law) with the Customer, but provides certain services on behalf of the Contractor at the premises of the Customer.
Car km work
is an indicator reflecting the volume of work performed, taking into account the distance travelled by cars as part of the train.
RIC carriages
are Reglamento Internazionale delle Carrozze passenger cars confirming to requirements of the International Union of Railways which are used on railways of the European countries that are members of the International Union of Railways. These cars are suitable for 1435mm gauge.
Sleeping car (Pullman car)
is a luxurious sleeping car used for passenger transportation and providing adequate facilities for passengers. Russian abbreviation SV was originally used to denote cars for imperial retinue.
Falling income of the carrier
is the loss in the income of transport operator, resulting from state regulation of long-distance passenger transportation fares for open and general carriages.
Global prices
are the rate for the transportation of passengers in international trains, including costs of «ticket» and «reserved seat».
Cargo and luggage
is an object accepted in the prescribed manner from a physical person or a legal entity for transportation in a passenger, postal-freight or passenger-freight train.
Deregulated segment
is a segment for passenger transportation in sleeping cars and compartment carriages as well as international passenger transportation. Rates for this segment are set by JSC FPC.
Natural monopoly
is a market condition when due to technological characteristics of the production (unit cost is significantly reduced with growth of production) demand is more efficiently met without completion. At the same time the demand for products of the natural monopoly is less dependent on price change than demand for any other type of products, as products of a natural monopoly cannot be substituted by other products. JSC FPC is a subject of a natural monopoly as it provides services under conditions of the natural monopoly.
Infrastructure of JSCo RZD
is a complex of technologies which includes the public railroad and other structures, railway stations, power supply devices, communication networks, centralisation, blocking and alarm systems, information systems, system of traffic management and other buildings, structures, devices and equipment that ensure the functioning of this complex.
Capital repair and reconditioning
is capital repairs and reconditioning of cars in order to prolong the target life of a passenger car using rebuilt body and wheel truck parts, as well as renovation of indoor equipment and creation of modern interior.
KPI (Key Performance Indicators)
are indicators of performance of a company or its subdivision that help the company to achieve its strategic or tactical (operational) targets. KPI usage allows the company to evaluate its condition and valuate policy implementations.
Capital repair
is capital repairs of the cars. It is done to recover good condition and fully or nearly fully restore resource of the passenger car by replacement or restoration of any components of the car, including basic.
MSURE (MIIT)
is Moscow State University of Railway Engineering, former Moscow Institute of Transport Engineering.
UIC
is International Union of Railways.
Multimodal transportation
is transportation of goods, passengers and baggage carried out by two or more modes of transport. As a rule, multimodal transportation is carried out on the basis of a single transport document drawn up for the entire route.
OSZD
is Organisation for the Cooperation of Railways.
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Introduction
Company Strategy
Business Model and Assets
Market Overview
Risk Management
Quality and Safety
Passenger turnover
is an indicator reflecting the passenger traffic in passenger-kilometers. It is calculated by multiplying the number of passengers carried and the length of average distance covered.
Pellet fuel
is granules of compressed waste of wood and other plants. It is very ecological and safe for burning.
Loyalty programme
is RZD-Bonus programme, which grants passengers the chance to build up points for completed journeys in JSC FPC trains and exchange them for bonus trips.
Incidents
are accidents and crashes resulting in death or serious bodily injuries of people or damage to the railway rolling stock requiring capital repair.
Regulated segment
is a segment for passenger transportation in open and general carriages and for domestic transportation of baggage and cargo. Rates for this segment are set by the Federal Rate Service of Russia.
Steel grade L
is a special grade of steel used for wheels of passenger cars. This grade has higher tensile strength, ductility and impact resistance compared to other grades of steel. Wheels of this grade of steel are able to run longer distance before repairs, which leads to considerable economy.
AC
is air conditioning systems.
CIT
is International Rail Transport Committee.
ECTS
is ecologically clean toilet systems.
Limitations of Liability
The current Annual Report of the Federal Passenger Company (henceforth, the Company) on the results of 2014 (henceforth, the reported year) has been prepared using the information available to the Company at the time of its creation. The Annual Report contains information about the results of the Company’s activities in 2014, forecasting data and statements regarding the intentions, beliefs or current expectations of the Company relating to its operations, financial state, liquidity, prospects for growth, strategy as well as the development of the industry in which the Company is operating. By their very nature, such forecasting statements involve risks and uncertainties because
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Federal passenger company 2014 Annual Report
they relate to events and depend on circumstances that may not come to pass in the future. The Company makes no direct or implied representations or guarantees and assumes no responsibility in the event of losses incurred by persons or legal entities as a result of the use of the forecasting statements in this annual report for any reason, either directly or indirectly. These persons should not rely on the forecasting statements contained in this current document as they are not the only possible scenario of events. The sum of the parts of figures is not always equal to the total due to rounding of the arithmetic.
Except as provided for by the applicable laws of the Russian Federation, the Company accepts no obligation to review or confirm expectations and estimates or to publish updates and changes to the forecasting statements made in this current report in connection with future events or the receipt of new information.
Contacts
Full name of the Company
Joint Stock Company Federal Passenger Company
Short name of the Company
JSC FPC
Location
#34, Mashi Porivaevoi street, Moscow, 107078
Postal Address
#34, Mashi Porivaevoi street, Moscow, 107078
Tel.
(495) 988-10-00 (auto-attendant); (499) 260-84-74 / Fax: (499) 262-33-49
reception@fpc.ru
www.fpc.ru
FSC logo means that this Report was printed on paper that comes from responsibly managed forests