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PJSC Mostotrest announces 2015 results


PJSC Mostotrest (Mostotrest, the Company or, together with its consolidated subsidiaries, the Group) publishes its financial and operating results for 2015(a).

In 2015, despite a significant decline in industry financing and the general economic situation, Mostotrest further strengthened its position as a leading Group within the Russian infrastructure construction market and delivered healthy financial results. Group revenue and gross profit declined by only 5% and 7% respectively, while gross margin remained broadly in line with the previous year.

Negative market trends were partially offset by increases in government spending in the road repair and maintenance segment. In its turn, the Group’s services segment, despite the deconsolidation of the road operator UTS, posted strong results with increases of 26% and 15% in revenue and gross profit, respectively.

Key Operating Results

  • Market share increased to 13.9%(b) in 2015, compared to 13.4% in 2014, which in a weaker market (-5 p.p.) was driven by stable in-house volumes(с);
  • Backlog(d) amounted to RUB298.2 billion*, with newly added contracts totaling RUB114.5 billion*(e). At the same time, the year end backlog does not include the RUB25.7billion UTS backlog included in the Group 2014 year end backlog. At the beginning of 2016, the Group’s backlog increased with two major contracts totaling RUB88.5 billion*(e).

Key Financial Results

  • Revenue was RUB143.2 billion, down 5% year-on-year, due to lower construction volumes and the deconsolidation of UTS results as of the second half of 2015.
  • Gross profit decreased by 7% to RUB19.2 billion, compared to RUB20.6 billion for 2014. Gross margin remained virtually unchanged at 13.4%.
  • EBITDA(f) fell 14% year-on-year, to RUB13.2 billion. EBITDA margin declined to 9.3% from 10.2% for 2014, due to an increase in provisions for doubtful accounts receivable in the reporting period, including those not related to construction itself.
  • Net profit amounted to RUB4.2 billion, a 30% decrease year-on-year. Profit attributable to equity holders was RUB3.6 billion
  • The Group increased its capital expenditure for fixed and intangible assets by 7% to RUB6.5 billion compared to the previous year.
  • Net cash (cash and cash equivalents (g) less debt) at the end of 2015 amounted to RUB13.6 billion, driven by advances from customers.

Mostotrest CEO Vladimir Vlasov comments on the results:

“2015 was a challenging year for the infrastructure construction industry and the country as a whole, due to general economic instability, financial difficulties at many contractors and the banking crisis. Consequently, funding of federal construction projects was at a record low.

Given the challenging economic environment, the performance of the Mostotrest Group of Companies, both operationally and financially, deserves the highest praise. Overall, the Group’s backlog fell by only 15 per cent, even after excluding a substantial contract of UTS, the toll road operator, which for 50 per cent was sold to Vinci in the middle of 2015. The Group proved its resilience posting only a slight decrease in revenue (-5%), while maintaining gross margin at close to last year’s level. Nevertheless, the Company's performance did suffer from the turbulence in the banking sector which persisted during 2015. Additionally to increasing provisioning for doubtful receivables, as a result of the financial difficulties experienced by a number of subcontactors the Company also had to make a one-time provision relating to cash deposited at a bank that had its banking license terminated in 2015. This overall provisioning had a more significant impact on the EBITDA decline rather than that of gross profit.

In 2015, the government prioritized funding for road repair and maintenance. Consequently, Mostotrest-Service, a specialist Mostotrest subsidiary, significantly increased volumes and continued to invest in equipment. Given the government’s intention to maintain its focus on investment in the road repair and maintenance segment, we see a bright future for this type of operations.

With regard to the outlook for 2016, we expect it to be another challenging year for the industry. The impact of last year’s significantly reduced levels of construction activity and sharply reduced funding is already evident in 2016. Among its investment priorities the government has named road repair and maintenance, construction of the Kerch Bridge, and construction and reconstruction projects for the 2018 World Cup. The Company is actively involved in all three areas, which supports our optimism with regard to 2016 results.”

a)       The press-release has been prepared on the basis of the consolidated financial statements prepared in accordance with the IFRS as at and for the full year ended 31 December 2015 and 2014, as well as on the basis of the management accounts as at and for the same periods, as this set of financial statements in their entirety provide a comprehensive overview of the Group’s performance for full year ended 31 December 2015 and 2014.

To make the information in the press-release user friendly special notes are used. The information based on management accounts is marked with {*}.

The detailed “basis of presentation” description can be found in the Appendix nr. 2 at the end of the press-release.

b)      Calculated as the amount of work performed in-house (revenue net of other revenue and cost of services of third-party subcontractors) in 2015, divided by 2015 market volume (including road repair and maintenance), in accordance with the EMBS Report (an independent consultant providing, among others, information and research on developed and emerging markets).

c)       In-house volumes are calculated as revenue net of cost of subcontractor services.

d)      Backlog is not a measure defined by IFRS or RAS. The company’s backlog represents its management’s estimate of the contract value of its projects that remain to be completed as at a particular date, excluding VAT. Such value is calculated as the total contract value for each project that remains to be completed less the amounts already received under the contracts for such projects. The total contract value of a particular project represents the total amount that the relevant entity expects to receive under the contract for such project, assuming the contract is performed in accordance with its terms. A project is included in the backlog of a relevant entity when either a firm letter of commitment is executed by the customer or a letter is received confirming its bid has been successful. Backlog may not be indicative of the relevant entity’s future operating results.

e)       Excluding VAT.

 

f)        EBITDA is defined as net profit from continuing operations net of income tax, net finance costs and depreciation. EBITDA is not defined by, or presented in accordance with IFRS. EBITDA has limitations as an analytical tool, and one should not consider it in isolation, or as a substitute for analysis of the Group’s operating results as reported under IFRS.

Including bank deposits with maturities over 3 months and cash at special accounts. 

 

 

NOTES TO EDITORS

Mostotrest is a major, diversified infrastructure construction company, with an established presence in all core and related market segments, and a participant in Russia’s first public-private partnership projects. According to EMBS Group, an independent industry consultancy, in 2015 Mostotrest held a 13.9% share of the total Russian transport infrastructure construction market.

Mostotrest’s core competences include construction and reconstruction of bridges, roads and other transport infrastructure facilities; provision of road maintenance, repair and operating services. In 2012, Mostotrest also entered a new segment: management of road concessions.

The company was established in 1930 as a developer of complex and oversized bridges.

Mostotrest is currently participating in the implementation of a number of complex transport infrastructure development projects, such as construction of the Section 4 (km 208 km 258) and Section 6 (km 334 – km 543) of the M-11“Moscow St Petersburg” Toll Highway, construction and reconstruction of the M-4 “Don”, M-9 “Baltic” and M-11 “Narva” highways, construction of Businovskaya Interchange in Moscow, Bor Bridge in Nizhny Novgorod and Voroshilovsky Bridge in Rostov-on-Don.

Mostotrest Ownership Structure:

94.2%: OJSC TFK-Finance;

5.8%: free float.

For more detailed Company information, please visit www.mostotrest.ru

LEGAL DISCLAIMER

Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of Mostotrest. You can identify forward-looking statements by terms such as 'expect', 'believe', 'anticipate', 'estimate', 'intend', 'will', 'could', 'may' or 'might', the negative of such terms or other similar expressions. Mostotrest wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Mostotrest does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Mostotrest, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, market change in the Russian infrastructure construction market, as well as many other risks specifically related to Mostotrest and its operations.

The information contained in this document is not for release, publication or distribution in whole or in part in or into the United States. These materials do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The securities referred to in this document have not been and will not be registered under the US Securities Act of 1933, as amended, (the Securities Act) and may not be offered or sold in the United States absent registration under the Securities Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

The information contained in this document is only directed at persons in the United Kingdom who are authorised persons or exempted persons who have professional experience in matters relating to investments, in each case within the meaning of the Financial Services and Markets Act (FSMA) 2000 and Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and to other persons to whom these materials may otherwise be lawfully communicated and must not be acted on or relied on by any other persons. The information contained in this document is restricted and is not for distribution in whole or in part in Australia, Canada or Japan.

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