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PJSC Mostotrest announces 1H2015 operating and financial results


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

Given the backdrop of a challenging market environment characterized among other things by rising costs for the industry, Mostotrest, the leading group of companies in the Russian infrastructure construction market, reported an increase in operating and decrease in financial results in 1H 2015.  

Key Operating and Financial Results: 

  • Backlog(b) slightly increased from the beginning of the year and amounted to RUB353.6* billion, with additions totaling RUB52.9* billion(c);
  • Revenue was down 1% to RUB52.0 billion on a like-for-like basis, driven by decrease in backlog utilization given the backdrop of the industry financing;
  • Gross profit declined by 37% from RUB7.6 billion in 1H2014 to RUB4.8 billion in 1H2015. Gross margin fell from 14.4% in 1H2014 to 9.2% in the reporting period, due to an increased share of subcontracted volumes(d) and in-house volumes(e) negative dynamics outstripped decrease in cost of in-house volumes(f);
  • EBITDA(g) was down 61% on a like-for-like basis, to RUB1.9 billion; 
  • Net profit was RUB104 million;
  • RUB2.0 billion (33% of 2014 IFRS net profit) dividend was paid out for 2014;
  • Capex down 40% on a like-for-like basis.

Mostotrest CEO Vladimir Vlasov comments on the results: 

“As we expected at the beginning of 2015, the year to date has been challenging for the construction industry. There has been a significant reduction in new project tendering. In addition, financing of existing projects has been cut back, due to issues that include the failure to observe construction schedules and the abandonment of operations by financially distressed contractors. At the same time, the real costs for construction companies have outstripped deflators embedded in their contracts, driven by both direct and indirect cost growth, while bank financing became virtually unobtainable for the industry.

I am pleased to note that Mostotrest has been able to maintain its absolute leadership in the infrastructure construction market amid the generalized crisis. The Company continues to comply with construction timelines and quality standards, and customers continue to entrust us with new projects, which enabled Mostotrest to slightly increase its backlog to the beginning of this year. At the same time and similar to other construction players, the Company faced rising costs and suffered from funding cutbacks, which slightly affected revenue growth. In addition, Mostotrest subcontracted out significant volumes of non-core work in the reporting period. Also the Company continues to  have to make provisions for doubtful receivables from subcontractors that are on the verge of bankruptcy.

In the current macroeconomic environment it is difficult to accurately predict how the second half performance will unfold. However, given that a number of ongoing projects are entering their main construction phases, we expect to increase volumes and participate in new tenders for federal highways, airports and Moscow City transport infrastructure development projects.”

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a) The press-release has been prepared on the basis of the unaudited consolidated interim condensed financial statements prepared in accordance with the IFRS for the six months ended 30 June 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 the six months ended 30 June 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) 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, net of 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.

c) Net of VAT.

d) The share of subcontracted volumes is calculated as the ratio of cost of subcontractor services to revenue.  

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

f) Cost of in-house volumes is calculated as the Group's total cost of sales less cost of subcontractor services

g) EBITDA is defined as net profit from continuing operations net of income tax, net finance costs and depreciation and amortisation. 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.

f) Cost of in-house volumes is calculated as the Group's total cost of sales less cost of subcontractor services

g) EBITDA is defined as net profit from continuing operations net of income tax, net finance costs and depreciation and amortisation. 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.

NOTES TO EDITORS

Mostotrest is a major diversified infrastructure construction company, with an established presence in all core and related market segments, and is a participant in Russia’s first public-private partnership projects. According to EMBS Group, an independent industry consultancy, in 2014 Mostotrest held a 13.4% 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 constructor of complex and oversized bridges.

Mostotrest is currently participating in the implementation of a number of complex transport infrastructure 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 and Bor Bridge in Nizhny Novgorod

Mostotrest’s share capital consists of 282,215,500 ordinary shares distributed among its shareholders as follows:

  • OJSC "TFK - Finance" - 94.2%
  • Free float — 5,8%

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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