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Mostotrest publishes 2016 results


PJSC Mostotrest (or, together with its consolidated subsidiaries, Mostotrest, the Company or the Group) publishes its financial and operating results for 2016(a).

Mostotrest, Russia’s leading integrated transport infrastructure construction group, achieved strong operating results in 2016, substantially increasing its backlog with new projects. The Group benefited from a significant upturn in construction volumes which drove strong financial results: revenue increased by 22%, EBITDA grew by 37% and net profit rose by 18%. In addition, the Group registered a substantial increase in operating efficiency, as increased high-margin in-house volumes(b) helped drive an almost 2 percentage point increase in gross margin.

Key Operating and Financial Results

  • Backlog(c) was RUB419.0* billion, up from RUB298.2* billion as at the beginning of the year. New construction projects added in 2016 totalled RUB269.0* billion(d). Services segment backlog grew 38% to RUB43.0* billion(d)
  • Revenue increased by 22% to RUB175.2 billion, driven by strong construction volume growth,
  • Gross profit was 26.8 billion, up 39% from RUB19.2 for 2015. Gross margin increased to 15.3%, mainly driven by an increase in the share of in-house volumes(e)
  • EBITDA(f) increased by 37% to RUB18.1 billion. EBITDA margin was 10.3%, up from 9.3% for 2015
  • Net profit was RUB5.0 billion, an 18% increase year-on-year; net profit attributable to shareholders was RUB4.5 billion
  • Capex grew 40% to RUB9.1 billion, due to deployment on a number of major new construction sites
  • Net debt (debt less cash and equivalents(g)) as at the end of 2016 was RUB2.9 billion.

Mostotrest CEO Vladimir Vlasov comments on the results:

“In 2016, the Company began construction of the Kerch Strait Bridge, the largest project of its type in recent decades. At the initial stage, we encountered numerous technical and engineering challenges. However, thanks to the hard work of our workers (some 6000 of our people and 220 construction vehicles are involved on the project on a daily basis) combined with expert input and ideas from our highly qualified engineers and designers, we were able to devise complex technical solutions. As a result, in just one year of being involved at this unique construction site, we managed to complete a substantial part of the overall construction.

In addition to expanding our backlog with a subcontractor contract for the construction of a strategically important bridge spanning the Kerch Strait, we also won 3 out of the 5 largest general contractor contracts available on the market, including construction of the remaining segments of the new M-11 “Moscow-Saint Petersburg” Highway and the M-4 “Don” Highway. Together with other new contracts, these projects increased the Group's backlog by 1.4 times compared to the beginning of 2016. This ensured high utilization of Mostotrest in-house capacity. In 2016, the Group successfully delivered strong growth across all our key performance indicators: revenue increased by 22%, gross profit by 39%, EBITDA by 37% and net profit by 18%, which overall is a great result.

In 2016, the industry did not face any financing constraints. It was the actual utilization of available financing that was problematic, caused by continuing reduction in the number of construction players in the market which created capacity constraints. We also do not expect any reduction in available financing for the industry in 2017, either in terms of availability of funding for new and ongoing projects, or in terms of the volume of new tenders. In the reporting year, we saw a welcome resumption of revenue from railway infrastructure development and we foresee good prospects for increasing the share of contracts in this segment in 2017. And, of course, we will continue to participate in all attractive projects in the road construction segment, where Mostotrest has no equal in terms of expertise and reputation. We remain confident that the highly capable management and production teams of the Mostotrest Group will successfully cope with the current workload, maintaining and further strengthening the Company's position in the transport infrastructure construction market this year.”

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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 2016 and 2015.

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

c) 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.

d) Excluding VAT.

e) Share of in-house volumes is calculated as in-house volumes divided by total revenue.

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.

g) Including bank deposits with maturities over 3 months and cash at special accounts. Cash at special accounts represents cash received from customers, state entities, for specific financing of certain construction projects as part of treasury or bank supervision of government contracts. Use of these funds is regulated by Resolutions of the Government of Russian Federation #70 dated 04.02.2017, #963 dated 20.09.2014, #1563 dated 27.12.2014, and the Order of the Ministry of Finance of the Russian Federation #213n dated 25.12.2015, which set purpose, procedure and terms of disbursement of these funds.

Full press-release