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PBG Group announces its audited financial results for 2011

PBG Group announces its audited financial results for 2011

• In 2011, the PBG Group took in revenue of PLN 3.67bn, up by 34% year on year.
• Its gross profit grew by 2%, to PLN 349.2m.
• EBITDA was at PLN 328.7m, against PLN 332.1m a year earlier.
• Operating profit amounted to PLN 269.3m, compared with PLN 285.4m last year.
• Net profit attributable to owners of the Parent reached PLN 160.9m, relative to PLN 186.1m in 2010.

Summary of the 2011 results

The PBG Group has released its 2011 financial results. Having reviewed all its operating segments and contracts, and having consulted the auditor, the Group decided to revise its performance figures relative to those reported after Q4 2011. The revision was made chiefly to account for the revised revenue and expense budgets for road contracts and the "Construction of the Malczyce barrage" contract. In the case of Malczyce, the downward revision of projected revenue followed from the fact that the contract was not extended to cover the remaining scope of work. In the case of certain road contracts, the expense budgets were revised resulting in the need to recognise provisions, which reduced current period's net profit. The contracts with respect to which the Group recognised provisions for losses include the construction of the Włocławek and Toruń section of the A1 motorway (PLN 6.7m) and the construction of the road connection between the Gdańsk Airport and the Port of Gdańsk – Trasa Słowackiego (approximately PLN 9m). The Group decided to make the revision based on its conservative approach to contracts in the case of which there is uncertainty surrounding the actual level of margins, particularly on account of costs remaining to be incurred.

In 2011, the Group posted PLN 3.67bn in revenue, which represented a 34% year-on-year increase, but fell short of the figure reported after Q4 2011 by 2%. The sound year-on-year revenue growth was largely down to the execution of a number of road contracts, notably the construction of the A1 and A4 motorways, as well as projects in the industrial construction segment, where Group companies were building football stadiums, including arenas which will soon stage the upcoming UEFA European Championships.

For the full year, the Group earned PLN 349.2m in gross profit, which represented an improvement of 3% on 2010, but was 16% lower than the figure announced after Q4 2011. The fact that the road segment, which delivers markedly lower margins, still accounts for over 30% of the Group's total revenue had an adverse effect on its 2011 profitability ratios. The Group's profitability was aided by contracts executed in the gas, oil and fuels segment, with the construction of the LNG terminal in Świnoujście as the flagship project.

At PLN 269.3m, consolidated operating profit for 2011 declined by 6% from the year before and was 20% lower than the figure posted after Q4 2011. The Group's net profit attributable to owners of the Parent stood at PLN 160.9m, having gone down 14% year on year, and falling short of the result shown in the Q4 2011 report by 22%. In 2011, earnings per PBG share were PLN 11.25.

The table below presents the PBG Group's financial performance for 2011 against the 2010 performance and performance posted after Q4 2011.

Year 2012

The Group started the year 2012 with a backlog of orders worth PLN 5.93bn, of which PLN 4.3bn are due for execution in 2012. Contracts from the two high margin segments (gas/oil/fuels and power engineering) account for more than half of the total value of that project pipeline. On the other hand, the road segment, consisting solely of work in progress, accounts for some 30% of the order backlog and its effect on the Group's overall performance should diminish from quarter to quarter.

As large-scale plans are afoot to modernise Poland's power generation assets, power engineering is set to become one of the most prospective business segments in the years to come. Based on that assumption, the Group decided to shift its business focus even further towards services for the power industry. A stepping stone in the pursuit of that new strategy was the closing in 2011 of two acquisitions - Energomontaż Południe and Rafako, around which the Group intends to develop its power engineering business. In order to actively expand this business line, PBG Group companies will bid for all major power sector projects up for tender in Poland. Tender proceedings for the construction of units at Elektrownia Jaworzno III (Tauron), Elektrownia Północ (Kulczyk Investments), Elektrownia Ostrołęka (Energa) and ElektrowniaTurów (PGE) are the cases in point.

In early April, the PBG shareholders resolved to issue bonds convertible into shares with a nominal value of up to PLN 1.2bn. Funds raised through the issue would be applied to complete and settle existing projects and to accomplish the new strategy, particularly to finance large-scale projects in the power engineering and gas/oil/fuels area. The first tranche of the bonds is expected to be issued by the end of Q2 2012. In addition, by mid-May PBG expects to secure bridge financing from a bank syndicate, which should enhance the Group's liquidity position.

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