27/2022 – Notice of the Management Board’s decision on the creation of an impairment write-off and on preliminary estimated financial performance of Trakcja S.A. and the Trakcja Group for the first quarter of 2022

The Management Board of Trakcja S.A. (the „Company”, the “Issuer”) informs that on 19 May 2022:
•    As a result of the conducted impairment test  of the value of investment in subsidiaries at the following company: Przedsiębiorstwo Eksploatacji Ulic i Mostów sp. z o.o. („PEUiM”), an impairment in this regard has  been found. Accordingly, the Company has decided to create an impairment write-off for “Investment in subsidiaries” in the Company’s unit balance sheet in the amount of PLN 12,003,000.00;
•    As a result of the conducted impairment test  of goodwill assigned to the centre which generates funds that includes the following subsidiaries: PEUiM, PPU Dalba sp. z o.o. and Platforma Działalności Międzynarodowej S.A., an impairment in this regard has been found. Accordingly, the Company has decided to create an impairment write-off for “Goodwill with consolidation” in the Trakcja Group’s consolidated balance sheet in the amount of PLN 22,753,000.00;
•    The process of the initial closure of books of account has been completed, including the process of reviewing long-term contacts and collection of the Company’s financial data;
•    The preliminary analysis of available financial performance data of the Issuer’s Group’s units and process of collecting financial data for the purposes of preparing a consolidated quarterly report for the Trakcja Group for the three month period – have been completed on 31 March 2022.

The value of “Investment in subsidiaries” presented in the Company’s unit balance sheet amounted to PLN 288,940,000.00 as at 31 December 2021.

The application of the impairment write-off for “Investment in subsidiaries” will have the impact of reducing unit financial performance for the first quarter of 2022 and reduction of the value of fixed assets presented in the Company’s unit balance sheet as at 31 March 2022 by the amount of PLN 12,003,000.00.
This event will not have an effect on the consolidated financial performance for the first quarter of 2022 and on the value of fixed assets presented in the Trakcja Group’s consolidated balance sheet as at 31 March 2022.

The creation of the impairment write-off for “Goodwill with consolidation” will have the impact of reducing consolidated financial performance for the first quarter of 2022 and reduction of the value of fixed assets presented in the Trakcja Group’s consolidated balance sheet as at 31 March 2022 by the amount of PLN 22,753,000.00

The creation of impairment write-downs is of a non-pecuniary nature and has no impact on the Company’s and Group’s liquidity.

As a result of the conducted cyclical review of ongoing construction contracts, their budgets have been updated in terms of their nature, amounts, temporal distribution and uncertainty as to revenues and cash flows resulting from their performance. During the budget updating, an opportunity and hazard analysis has been conducted, which has identified and taken into account technical, completion and liquidity risks and those associated with the prolongation of project completion.

The total amount of the conducted updating of contract budgets is negative, amounting to PLN 62,011,000.00. The factors which had the most adverse impact on the update amount were as follows:
1)    Increase of prices of outsourced services
2)    Increase of prices of materials;
3)    Increase of expenses associated with the expected prolongation of the completion of contracts.
The factors mentioned in Points 1 and 2 above are primarily a result of the inflation pressure connected, inter alia, with the war in the Ukraine. In Current Report No. 14/2022, the Issuer informed as to the identified risks associated with the war’s impact on the Company’s and Group’s business.
The greatest adverse change in contract profitability concerns contracts with the least degree of progress, where the great share of expenses lies in materials and outsourced services which have not been contracted as at the date of updating.
At the same time, a positive factor for the update amount is the increase of estimated revenues as regards the valorisation of contractual remuneration of contracts. Such revenues are variable, and accordingly, their calculation carries a risk and uncertainty of the estimate.

The impact of contractual budget updating is negative for the Company’s EBIDTA and gross profit for the first quarter of 2022, amounting to PLN 20,732,000.00.

Accordingly, the following is hereby made available to the public:
•    Preliminary estimated financial performance of the Company for the first quarter of 2022:

Revenue on sales: PLN 153,789,000.00
Gross profit from sales: PLN -11,753,000.00
EBITDA: PLN -15,791,000.00
Gross profit: PLN -36,872,000.00

•    Preliminary estimated consolidated financial performance of the Trakcja Group for the first quarter of 2022:

Revenue on sales: PLN 271,923,000.00
Gross profit from sales: PLN -18,756,000.00
EBITDA: PLN -25,589,000.00
Gross profit: PLN -62,232,000.00

The final data of the Company’s and Group’s financial performance shall be provided in the consolidated quarterly report for the 3-month period ending on 31 March 2022, which, in accordance with the accepted report publishing calendar, shall be published on 27 May 2022.

Legal basis:
Article 17 (1) MAR