Financial results for Q1 2019
In the first quarter of 2019, the Torpol Capital Group generated revenues of almost PLN 264 million (+ 24.6% y/y), operating profit of PLN 5.15 million and net profit of PLN 3.9 million, which is an improvement of over 8 million PLN yty. Gross profit margin on sales for the first quarter of 2019 amounted to approx. 4.9%.
The Group’s results for the first quarter of 2019 are primarily the result of the high pace and scope of work carried out as part of the record high portfolio of orders developed in 2017-2018. We strictly guard the cost side of project implementation on the very difficult market of rail infrastructure modernization, thanks to which the Group is able to generate positive financial results. We still feel a significant pressure on margins due to the risk of rising prices of building materials, more difficult access to subcontractors and an increase in employee costs, and therefore, it is necessary to take systemic solutions and decisions regarding the valorization of currently implemented contracts. We believe, however, that in terms of operations the year 2019 will be similar to 2018, but without the burden of the situation in Norway – said Grzegorz Grabowski, president of Torpol S.A.
At the end of the first quarter of 2019, the Group had a portfolio of orders worth over PLN 3 billion excl. VAT without the participation of consortium members. The long-term, average gross profitability on sales of the order backlog is around 5%. In addition, the company won two electronic auctions with a value of over PLN 1.4 billion excl. VAT and is currently awaiting further actions of the contracting authority under the tender procedure. After taking into account the results of these auctions, the order portfolio can reach almost PLN 4.5 billion.
This is a historical value of the portfolio, the efficient implementation of which requires enormous human resources and equipment capacity, but also guarantee limits and financial liquidity. It should be emphasized that these contracts are in the majority advanced by the contracting authority (in the amount of 10% of the contract’s gross value).
We are also working on acquiring further orders, using our potential and experience in the implementation of large multi-branch projects. In addition, we carry out orders not only those related to the national rail infrastructure. We diversify the portfolio in terms of both recipients and construction industries. An example is the ongoing contract for the construction of a railway sidetrack in Jaworzno or the newly acquired contract for the revitalization of the railway station in Pomiechówek. The operations of Torpol Oil & Gas sp.z o.o. (TOG) are also noteworthy. At the end of the first quarter, TOG had the highest backlog in its history at the level of PLN 53 million, which means tripling the order portfolio yoy. I would also like to remind you that in our short shared history, TOG generated a small, positive net result for the entire 2018 and upheld this result in the first quarter of this year, which is a milestone for this company towards strengthening its market position – added the president.
The company’s situation in Norway currently has a negligible impact on the financial results of the Group. At the beginning of 2019, the liquidation process of that company began. Currently, the company is at the stage of repayment of liabilities.
The decommissioning process is proceeding according to the adopted plan. At the end of April this year, the balance of liabilities to creditors amounted to less than PLN 1.4 million and is systematically decreasing, as a result of repayment of liabilities from the proceeds from the sale of the assets of the liquidated company. We assume that within two or three months we will complete the liquidation procedure – as assessed by President Grabowski.
The company proposed a dividend payment of PLN 5.74 million, i.e. PLN 0.25 per share.
Our recommendation has received a positive opinion of the Supervisory Board and is subject to approval on June 11 at the Ordinary General Meeting. We are – and in the long term we want to be – a dividend company that shares its profit with its shareholders – the CEO summed up.