The FBRK editorial team continues its series of publications dedicated to the analysis of the financial statements of Kazakhstan's social-entrepreneurial corporations (SECs). Today we look at the financial statements of SEC "Ertis" for 2023, which demonstrates a decline in revenue against a backdrop of significant asset growth of 13% and a fourfold increase in cash and cash equivalents, as well as active investments in the development of the industrial and social infrastructure of the East Kazakhstan region.
FINANCIAL RESULTS: DECLINE IN OPERATING PERFORMANCE
In 2023, SEC "Ertis" demonstrated mixed trends in its key financial indicators. According to the consolidated financial statements, the company's revenue amounted to 2.62 billion tenge, which is 41.4% lower than the 2022 figure (4.46 billion tenge). Gross profit amounted to 214.5 million tenge, which is 38.1% lower than the previous year's figure (346.3 million tenge).
The non-consolidated statements also show a decline in revenue: 1.31 billion tenge in 2023 against 2.69 billion tenge in the previous period (a decrease of 51.3%). Gross profit according to the separate statements amounted to 133.9 million tenge.
The revenue structure of SEC "Ertis" shows that the main sources of income are income from joint activities in housing construction (1.31 billion tenge) and sales of scrap metal (2.99 million tenge). In the consolidated statements, income from the provision of aviation services (1.30 billion tenge) is additionally accounted for.
ASSETS AND BALANCE SHEET STRUCTURE: STRENGTHENING THE FINANCIAL POSITION
The company's total assets demonstrated steady growth. According to consolidated data, they increased from 55.4 billion tenge in 2022 to 62.9 billion tenge in 2023 (growth of 13.5%), and according to separate data — from 56.9 billion tenge to 63.6 billion tenge (growth of 11.8%).
Particular attention is drawn to the significant increase in cash and cash equivalents. According to consolidated statements, they grew from 3.2 billion tenge in 2022 to 13.6 billion tenge in 2023 (an increase of 4.25 times), and according to separate statements — from 2.9 billion tenge to 13.4 billion tenge (an increase of 4.62 times).
The structure of cash shows a concentration of liquidity: funds in current accounts amount to 12.1 billion tenge, on deposits — 1.34 billion tenge. The company also received remuneration on deposits in the amount of 584.4 million tenge (according to separate statements) and 612 million tenge (according to consolidated statements), which demonstrates effective management of temporarily available funds.
HR POLICY AND STAFF COSTS
The company's staff costs show a moderate decline. According to consolidated statements, administrative expenses amounted to 1.20 billion tenge in 2023 against 1.27 billion tenge in 2022 (a decrease of 5.5%).
According to separate statements, administrative expenses amounted to 906.4 million tenge in 2023 against 940.6 million tenge in the previous year (a decrease of 3.6%).
INVESTMENT ACTIVITIES AND INTERESTS IN SUBSIDIARIES
The investment portfolio of SEC "Ertis" demonstrates a strategic approach to the development of the regional economy. The company holds interests in 30 subsidiary and joint venture entities with a total value of 30.0 billion tenge, including:
- Semey International Airport LLP (14.4 billion tenge)
- OblDorKomKhoz LLP (119.4 million tenge)
- Shygys Samgau LLP (170.1 million tenge)
- Ust-Kamenogorsk Airport JSC (12.9 billion tenge)
Under the equity method, investments in MKO Ertis LLP (341.4 million tenge) and SZC Semey LLP (84 thousand tenge) are accounted for. In 2023, the company also sold its equity interests in Anisimov Klyuch LLP and ADAL Pharm Telegraph LLP.
LOANS AND FINANCING OF DEVELOPMENT PROJECTS
SEC "Ertis" actively participates in financing regional development projects. The portfolio of loans provided includes:
- Loans under the "Employment Roadmap 2021" programme (3.94 billion tenge)
- Loans under the "Development of Single-Industry Towns" programme (11.9 million tenge)
- Debt on loans under the "Floods" programme (14.7 million tenge)
The total portfolio of long-term financial assets amounts to 3.96 billion tenge, indicating the active role of the SEC in supporting entrepreneurship and the development of the region.
RELATED PARTY TRANSACTIONS
The company maintains close operational ties with its parent and subsidiary organisations. In 2023, 100% of the equity interest in Semey International Airport LLP was transferred; settlement balances remain open. Equity interests in joint ventures were sold: GRK "Manka" LLP and ALAYGYR GOLD LLP.
Transactions with key management personnel include key management remuneration during the year. The composition of the company's board of directors includes representatives of Baiterek Holding JSC and other key partners.
AUDITORS' OPINION AND SUBSEQUENT EVENTS
An unmodified opinion on the fairness of the financial statements was expressed by the independent auditor Premium Auditor LLP. The auditors noted the compliance of the statements with international standards and the quality of the internal control system.
Significant events occurred after the reporting date: an increase in share capital to 55.6 billion tenge through payment for shares with a land plot in Ust-Kamenogorsk valued at 761.4 million tenge. Additionally, a 49% equity interest in Microfinance Organisation "Oskemen-Atameken" LLP was sold for 136.4 million tenge.
CONCLUSIONS
Analysing the financial statements of SEC "Ertis" for 2023, one can note mixed dynamics in the indicators. Despite the decline in operating results (revenue decreased by 41.4%, gross profit by 38.1%), the company demonstrated a significant strengthening of its financial position: asset growth of 13% and a significant strengthening of liquidity.
The fourfold increase in cash and cash equivalents provides the company with high financial stability and creates a solid base for further investments. The diversified portfolio of 30 subsidiaries demonstrates a systematic approach to the development of the region's key industries - from airports to industrial enterprises.
Participation in government lending programmes through a loan portfolio of 3.96 billion tenge confirms the active role of SEC "Ertis" in supporting entrepreneurship and the socio-economic development of the East Kazakhstan region. The auditors' unmodified opinion guarantees the high quality of corporate governance and financial reporting.
Overall, SEC "Ertis" demonstrates a stable financial position and effectively fulfils its functions as a regional development institution, despite the temporary decline in operating performance.
Earlier we analysed the financial statements of SEC "Konaev" for 2023. In future publications, the FBRK editorial team plans to continue the analysis of the financial statements of other regional SECs, which will make it possible to build a complete picture of the effectiveness of these development institutions and their contribution to the economy of Kazakhstan.
To be continued...