PJSC Mostotrest Publishes 2017 Results


PJSC Mostotrest (Mostotrest, the Company or, together with its consolidated subsidiaries, the Group) publishes financial and operating results for the year 2017(a).

Mostotrest, the leading Group of Companies in the Russian infrastructure construction market, reaffirmed its position as the market leader in 2017, delivering a significant increase in revenue and retaining market share. Supported by the continued growth of government investment in road repair and maintenance, the Group's road services franchise maintained positive dynamics, posting a 4% increase in revenue and 9% gross profit growth.

Key Operating and Financial Results:

  • At 14.6%(b), the Group's 2017 market share remained flat year-on-year
  • Backlog(c) was RUB288.1* billion, having expanded in 2017 with new projects for a total of RUB74.3* billion
  • Revenue totaled RUB207.8 billion, a 19% increase year-on-year, driven by construction volume growth
  • Gross profit decreased by 12% year-on-year, to RUB23.6 billion (2016: RUB26.8 billion). Gross margin was down 3.9 pp. to 11.4%, affected by significant growth across a number of cost items
  • EBITDA(d) was RUB15.0 billion, a 17% decrease year-on-year. EBITDA margin was 7.2%
  • Net profit was RUB3.0 billion, a 40% decrease year-on-year
  • The Company announced and paid out a RUB3 billion dividend for 2016, equivalent to 60% of 2016 IFRS net profit. In addition, on the back of strong 9M2017 RAS results Mostotrest at the end of reporting period paid out an interim dividend in the total amount of RUB2 billion
  • Capital expenditure totaled RUB6.6 billion, down from RUB9.1 billion in 2016
  • Net debt(e) was RUB15.8 billion, up from RUB2.9 billion for 2016, mainly driven by significant volumes of co-financing under long-term investment contracts in 2017.

Mostotrest CEO Vladimir Vlasov comments on the results:

“Last year’s construction of the Kerch Strait Bridge was, undoubtedly, the flagship project for the entire Group. This complex project brought with it great responsibility and huge professional challenges for our team, requiring the use of a number of unique construction technologies. Among others, in the fall of 2017, an usual seaborne operation was mounted to install the bridge arches, which each weighed around 5.5 thousand tons and measured 227 meters long. It was the first-ever seaborne installation of its kind involving such outsized structures in the history of domestic bridge construction. Never before have Russian bridge builders undertaken a similar project in terms of scale, climatic and hydrological conditions.

Overall, the year 2017 met our expectations. Public tendering volume increased by 8% to RUB539.6 billion(f). The largest tenders were those for the Central Ring Road (CRR) Startup Facility No. 4 project (RUB108.3 billion(f)), and the project for construction and reconstruction of segments of the Kerch-Sevastopol highway (RUB149.3 billion(f)). Mostotrest has been historically avoided participation in construction tenders for the CRR, and the most recent tender was no exception. As for tendering for additional work in Crimea, the Company took the view that such a one-off engagement in a standalone region was risky, given that we are currently at peak capacity utilization on the Kerch Bridge construction project. Our disciplined approach to tendering meant that our backlog decreased over the period. In 2017, excluding the two projects Iíve mentioned, all the other tenders offered were for projects of less than RUB10 billion, reflecting the fact that the average road construction tender size shrank by 42%(f) in 2017. Moreover, those Moscow-based tenders that were attractive to us were actually postponed and held over into 2018. The contraction, however, may be offset by new project wins in the near future.

As for our financial results, despite a backdrop of strong overall revenue dynamics (+19%), the Groupís bottom-line performance was disappointing, as profitability was affected by a sharp rise in costs that resulted in a sharp fall in Group profits. The increased costs were mainly associated with the final stages of construction in a number of large-scale projects, including the World Cup infrastructure, as well as delays in making Moscow-based construction sites duly available to the Group.

We hope that in 2018 the Moscow City Government will relaunch the postponed tenders, which the Group is interested to bid for and which could significantly enhance our backlog. We also expect that a number of large-scale projects currently under discussion will come online in 2018, including the construction of a bridge across the Ob River in Salekhard, the high-speed Moscow-Kazan railway and the Moscow Central Diameter”.

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 2017 and 2016, 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 Groupís performance for full year ended 31 December 2017 and 2016.

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 ďbasis of presentationĒ description can be found in the Appendix nr. 2 at the end of the press-release.

b) Market share is calculated as the ratio of 2017 in-house volumes less other revenue, to market volume (including road maintenance and operation), in accordance with the report of EMBS Group (combined market share of Mostotrest, TSM and Mostotrest-Service).

c) Backlog is not a measure defined by IFRS or RAS. The companyís backlog represents its managementís 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 entityís future operating results.

d) 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 Groupís operating results as reported under IFRS.

e) Debt less cash and equivalents, including bank deposits with maturities over 3 months and cash at special accounts.

Including VAT. Customers: Avtodor, the Federal Roads Agency, Moscow City Construction Department. Company estimates based on information available on the official Russian Federation public procurement information website http://zakupki.gov.ru.