Soares da Costa I Report and Accounts I First Half

Transcription

1 Soares da Costa I Report and Accounts I First Half

2 CONTENTS MANAGEMENT REPORT 3 1. FIRST HALF OF 2013 CONSOLIDATED RESULTS 3 2. ORGANIZATION CORPORATE SOCIAL RESPONSABILITY MAIN RISKS AND UNCERTAINTIES PARTICIPATIONS AND TRANSACTIONS OF THE MEMBERS OF CORPORATE BODIES QUALIFIED SHAREHOLDINGS STATEMENT ON THE CONFORMITY OF THE FINANCIAL INFORMATION 25 CONSOLIDATED FINANCIAL STATEMENTS 26 CONSOLIDATED FINANCIAL POSITION STATEMENT 26 SEPARATE CONSOLIDATED INCOME STATEMENT 28 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME 30 STATEMENT OF CHANGES IN EQUITY 31 CONSOLIDATED CASH FLOWS STATEMENTS 32 ACCOUNTING POLICIES AND EXPLAINATORY NOTES TO THE CONSOLIDATED ACCOUNTS 36 Soares da Costa I Report and Accounts I First Half

3 MANAGEMENT REPORT 1. FIRST HALF OF 2013 CONSOLIDATED RESULTS (Non-audited accounts) HIGHLIGHTS Consolidated net earnings attributable to the Group in the first half of 2013 reached -9.2 million Euros (versus million Euros in the same period of the previous year); Financial result was million Euros, improving compared with million Euros in the first half of 2012; Recurrent EBITDA of 38.4 million Euros showed a resilient margin (+12.2%); Turnover of million Euros, decreasing 26.3%, mainly due to the pronounced decline of the activity in the domestic market (-44.0%) and delays registered at the start of some works in Angola and in the US market; Order book of 1.1 billion Euros (+1.5% compared with December 31, 2012), with a significant increase of backlog works in Africa (Angola % to 525 million Euros and Mozambique +29.6% to 156 million Euros). Key Performance Indicators (million Euros) 1H H 2012* Variation Turnover % International % Domestic % EBITDA % EBITDA margin 10.6% 9.1% +1.5p.p. Recurrent EBITDA* % Recurrent EBITDA margin* 12.2% 12.7% -0.5p.p. Operational result (EBIT) % Financial Result % Earnings before Taxes Net Earnings attributable to the Group H2012*: Restated accounts with the Beira interior motorway concession accounted by the intangible asset model. EBITDA* = Adjusted EBITDA from non-recurrent costs (from labour contracts termination compensations and from a tax nature lawsuit accounted I 2012). Soares da Costa I Report and Accounts I First Half

4 ACTIVITY ANALYSIS As the activity framework we must refer the Portuguese construction sector decline. Stigmatized by the powers and some (public) opinion with a denounciation based on the supposed fact that it was in the past, an artificially enhanced sector (through the execution of non-priority public projects, and even, in some cases, of projects with a questionable economic rationality) the sector is severely hit by the restrictions on public investment imposed In the context of the excessive deficit budget combat measures and of the Financial and Economic Help Programme. Therefore, we now consistently witness to the stoppage, postponement or abandon of important projects, some of which of strategic interest to the country s development. Associated with this behaviour of the public area, the GDP s decrease, and the restrictive environment in the access to the financing means and the shaken economic confidence, created an adverse framework to the private investment, which embodies and aggravates a recessive cycle of the construction sector to a level without precedents. The construction sector registers, in the domestic context, a cumulative and progressive deterioration well demonstrated in the following chart. The most recent evolution shown by the statistical data from the national static institute (INE 1 ) reveals an average change in last twelve months (as of May 2013) of -19.3% of the construction production index, resulting from variations of -17.4% in the construction of buildings and -20.8% in civil engineering segment. In May, the homologous variation of the production index was -19.4% (-21.3% in April), above the average change in the last twelve months, not indicating any rebound trend. Evolution of the Construction Production Indexes in Portugal ( ) Buildings Civil engineering Total Source: INE Regarding the evolution of employment in the sector, the average change in the last twelve months of the index (as of May) was, according to the same source, -18.6%, while the remunerations index reveals a change of -19.5%. FEPICOP, on the other hand, stated 2 that the sector has lost 74 thousand employees in the last twelve months. In fact, during the first quarter of 2013, was registered the third largest homologous decrease of the last ten and half years in the number of 1 Production, Employment and Wages Indexes in Construction, May 2013 INE, July 11, Conjuntura da Construção nº 69, maio de 2013, FEPICOP (Construction Situation Analysis number 69, May 2013, FEPICOP) Soares da Costa I Report and Accounts I First Half

5 jobs, resulting in an aggravation of the number of unemployed workers accounted in the employment centres that surpassed 111 thousand, on a monthly average during the first quarter of 2013, an historical maximum. Taking into consideration this recessive context, without any prospect of improvement in the short/ medium term, the only rational solution is to continue to invest in the external markets. In the last years the strategy of the company has been based on a high internationalisation level, a trend that should be continued and intensified given the current conditions. Therefore, from the Group s activity during the first half, as in the 2012 s figures, we highlight the following dominant vectors: (i) International bias of the construction business area; (ii) Adjustment of the organisational structures and adaptation of the production means to the market s dimension, with the internal mobilisation of the human resources, reduction in the number of employees and rationalisation, a strategy in which the internal mergers are also included (during the first half, Socometal merged with Sociedade de Construções Soares da Costa). (iii) Focus on the preservation of the economic and financial sustainability of the operations and alienation of noncore participations (during the first half: Carta Angola, MTA and San Jose San Ramón concession in Costa Rica). The results and indicators of the first half of 2013, which are analysed below in a more detailed way, reflect this strategic guidance and the framework described. A note to the fact that, guarantying the comparability in terms of homogeneity of accounting policies, the financial statements of the first half of 2012 were restated to restore the accounting treatment of Beira Interior motorway concession (referring to the jointly controlled participated Scutvias, consolidated by the proportional method) to the intangible asset model, instead of financial asset model that was used in the elaboration of the financial statements of the first half of 2012, and which changing s requisites were not yet confirmed. TURNOVER The following tables show turnover s breakdown by geographical market and by business area: Turnover Breakdown by Geographical Market (million Euros) 1H 2013 % 1H 2012 % Variation Portugal % % -44.0% Angola % % -26.6% U.S % % -18.4% Mozambique % % 1.4% Other countries % % 86.6% Total % % -26.3% Turnover Breakdown by Business Area (million Euros) 1H 2013 % 1H 2012 % Variation Construction % % -33.5% Concessions % % -41.6% Real Estate % % 670.0% Energia Própria % % -35.0% Holding and other % % -9.5% Consolidation s eliminations % % -60.5% Total % % -26.3% Soares da Costa I Report and Accounts I First Half

6 The turnover decline assumes some dimension as a result of some matters that were already described in the first quarter s financial information and that continued to influence turnover s performance. In the domestic market, to the already described market s recessive context, we add as an important reason to the Group s evolution the significant reduction in this half compared with the same period of last year of the contribution of the construction of Transmontana motorway that is almost completed. In the international market, namely in Angola, specific factors, external to the Group s control, determined the delay in the start-up or the lower pace of the production of some important projects athand, implying a gap to the budget as well as a gap between the activity and the installed capacity. Angola, Portugal, United States and Mozambique continued to rank in this decreasing order in terms of contribution to the Group s activity volume. The remaining markets (from which we highlight Brazil, Oman, S. Tomé and Principe and Romania) increased its contribution during this first half from 9.3 to 17.4 million Euros, now representing 5.5% of the consolidated turnover. Following is a summarised description of the activity during the first half of 2013 by geographical market. From the Group s activity in PORTUGAL, we highlight the following works: Mangualde s gas pipeline, to REN; Moura/ Safara water adductor, to Águas do Alentejo; Waste water treatment centre in Paço de Sousa, to Simdouro; Sana Evolution Hotel, to Aziparque. We also highlight the following works that were completed during this first half: Serra da Estrela Heritage Inn, to Enatur; Aljustrel block, to Edia; Pedrógão Block, also to Edia; Widening and reconstruction of 2x3 ways of the stretch Maia/ Santo Tirso of A3 motorway, to Brisa. In spite of the 37 million Euros 3 lower contribution in this first half compared with the same period of last year, we must mention the construction of Transmontana motorway held by the complementary group of companies (ACE), CAET XXI, to the sub concessionaire Autoestradas XXI, in which the Group has 50% stake. With the entry into service, during July, of the sub stretches Santa Comba de Rossas interchange to Mós interchange and of the stretch Mós interchange to Bragança Poente interchange, with a 12 km extension (allotment 9), from circa 20 km of the allotment 8 (Amendoeira/ Vale Figueira) and allotment 9 (stretch 1 up to km 2.8, excluding Santa Comba de Rossas interchange), as well as circa 7 km of allotment 1 (stretch 2 Vila Real Sul interchange to Vila Real Nascente interchange), total 129 kms of Transmontana motorway that are opened to circulation from the 134 km that constitute the whole project, being possible to travel from Vila Real to the Spanish boarder. Therefore, only 5 km are not yet opened to circulation (including Corgo viaduct), which should happen to the end of August, after the completion of Parada de Cunhos motorway interchange. From the activity developed by the complementary group of companies we highlight the contribution from Hidroalqueva, ACE and from Mota-Engil, Soares da Costa, Monte Adriano Matosinhos, ACE, which developed works related with the general contract for the construction of the capacity reinforcement of Alqueva s electricity central, to EDP and with the infrastructures related with Indáqua Matosinhos investment plan, respectively. ANGOLA continues to be the main international market to the Group. To this country, the International Monetary Fund, in its Regional Outlook to Sub-Saharan Africa 4 estimates a GDP real growth rate of 6.2% to 2013, which reaches 7.3% excluding the oil sector. In the construction sector, after the last years outbreak of buildings s construction in Luanda city, the next years should be characterised by a growing diversification of the investment taking into consideration the whole country s strong growth potential in the construction of infrastructures, social equipment and housing. 3 Figure corresponding to the Group s participation in the project. 4 Regional Economic Outlook Sub-Saharan Africa, Building Momentum in a Multi-Speed World IMF, May Soares da Costa I Report and Accounts I First Half

7 Soares da Costa s major works in terms of contribution to turnover during the first half were the following: Dipanda Towers in Luanda, to Novinvest; Science and Technology Museum in Luanda, to GOE; Requalification of Luanda seaside, to Sociedade Baia de Luanda; INE s new head offices in Luanda; Luanda Towers project, to Vista Club; New office building to Companhia de Seguros AAA (insurance company); Several works in Luanda, to Sonils; Building in Lobito, to BESA; Huambo Cultural Centre, to the Provincial Government; Requalification of Boavista and Sambizanga hillsides in Luanda, to the Construction and Urbanism Ministry; Muxima Plaza building in Luanda, to Prominvest; INE s provincial head offices in Malange, Huambo and Benguela. During the first half of 2013, the Group s turnover in this market reached million Euros, suffering the negative impact arising from the unpredictable delay on the start of the works of three major projects: requalification of Boavista and Sambizanga hillsides, that started only in last March, but still in a conditioned way, as well as the housing project to Angola LNG in Soyo and the infrastructure and administrative buildings of the Futila Industrial Hub in Cabinda, that will start in the first months of the second half of the year. MOZAMBIQUE continues to earn a special attention from the international community regarding the business context in general and the construction and public works in particular, given the positive results of its economic growth translated by indicators that counteract the recessionary environment of the European economies. The Mozambican economy grew 7.5% in 2012 and estimates point out to an 8.4% growth this year 5, to which should significantly contribute the production rise in the extractive industry sector and the financial activities expansion. However, the flows that affect the country in the first months of each year and the recognised deficit in the transport infrastructures, are a constraint to the mining exploitation, and should affect the most optimistic forecasts. Soares da Costa Group is present in Mozambique through a Mozambican law company, Soares da Costa Moçambique, SARL, whose capital is shared between the Soares da Costa Group, with a 80% stake, and IGEPE Instituto de Gestão de Participações do Estado, with the remaining 20%, and also through the permanent establishment of the Sociedade de Construções Soares da Costa, SA. The Group s activity in this market maintained and even slightly surpassed (+1.4%) 2012 s activity level, obtaining a 35.2 million Euros turnover, which represent 11% of the consolidated turnover. Projects run by Sociedade de Construções Soares da Costa, SA are developing according to the initial planning. We highlight the construction works of the new bridge over the Zambezi river in Tete, being completed the bridge s road accesses in both margins, being expected to the third quarter of 2013 the closing of the bridge deck. We also highlight the development of the stretches 2 and 3 of EN 221 road, between Combomune and Chicualacuala, with the start of application of the topcoats, with the conclusion of the work being forecast to the first half of These works that had already started in last year have a relevant social, economic and financial role, both to Mozambique growth and to its neighbour countries and SADC s (Southern African Development Community) partners given its structuring impact in the region s economy. A note also to the substantial development of the works of the extension of Pemba s airport, scheduled for completion in the third quarter of this year. 5 Idem Soares da Costa I Report and Accounts I First Half

8 During this first half were initiated the construction works of nine bridges in the regions of Manica and Sofala and the rehabilitation works of the bridges from stretches 6 and 7 from Nacala s railway corridor, with construction yards being set for both projects at this phase. Regarding the activity of the participate company Soares da Costa Moçambique SARL, we highlight the completion of the following works: social works in Caia for the Zambezi bridge, and rehabilitation of the Revolution Museum. From the circa thirty works currently under construction by this company, we highlight due to the its almost completion phase: Vip Hotel in Tete scheduled for completion by year-end 2013, the rehabilitation of Maputo s central marketplace scheduled for completion in the third quarter of 2013, Vip Hotel in Beira scheduled for completion in the first half quarter of 2014 and two works to Hidroelétrica de Cahora Bassa scheduled for completion in the second half of In the first half several works were initiated, the most relevant being Mapai s hospital, Banco de Moçambique (Bank of Mozambique) in Beira and the extension and reshuffle of Petromoc s head offices. In the UNITED STATES, Prince Contracting LLC s positioning is consolidated in the road infrastructure segment, already being an important player amongst the major contractors of the South eastern U.S. Activity during the first half developed in this segment namely with the construction and rehabilitation of roads and bridges, with a total of eight active works in the states of Florida and Georgia. Amid these works, based of its importance to the activity s turnover, we highlight the I- 595 Section A & B, I-75 Tampa, DB I-75 (SR93) SWFIA Access Road projects, all in the Florida state and I-75- Bibb County project in Georgia state. The decrease of turnover in comparison with last year essentially resulted from delays in two works: Execution of the work I-75 Tampa, due to an earthmoving problem; Start-up of the DB I-75 (SR93) SWFIA Access Road due to an elaboration and approval process of the project longer than initially planned (is a design-build project). Both situations are now surpassed, and we expect that, up to year-end, turnover substantially recovers to a level close to the one achieved in last year. In the other markets, we highlight in S. TOMÉ AND PRÍNCIPE the opening of the new head offices of Banco Internacional de São Tomé e Príncipe by the end of May, located in Praça da Independência, in São Tomé s main city and in which was present the president of S. Tomé and Principe Republic, amongst other members of the government. On the other hand, the rehabilitation works of national road number 1 continue. In the SULTANATE OF OMAN, continues to be developed at the expected pace the Muscat Roadway Interchanges project, an infrastructure work executed in consortium with a local company and that includes roads, five viaducts in interchanges and associated infrastructure networks, between Masqat airport and the express road of the same city. This work already started last year. In ROMANIA, the work Constructia Variantei de Ocolire Tecuci continues under execution, amounting to a total of 49 million RON (circa 11.1 million Euros) to the Romanian national road authority (CNADNR - Compania Nationala de Autostrazi si Drumuri National din Romania S.A.), that started last year and scheduled for completion in the year-end PROFITABILITY Operational Profitability Considering the usual reporting segments, from the financial statements of the first half of 2012 and 2013, we can extract the following key performance indicators (EBITDA, EBIT): Soares da Costa I Report and Accounts I First Half

9 EBITDA and EBIT by Business Area (million Euros) 1H 2013 % Margin 1S 2012 % Margin Variation EBITDA % % -14.0% Construction % 2.2% % 5.9% -74.6% Concessions % 40.9% % 25.3% -5.3% Real Estate % 22.9% % 77.8% 126.9% Energia Própria % -57.5% % -73.0% -48.8% Group and others % 1.4% % - - Eliminations % (million Euros) 1H 2013 % Margin 1S 2012 % Margin Variation EBIT % % 25.4% Construction % -1.0% % 1.4% % Concessions % 27.8% % 17.7% -8.2% Real Estate % 19.7% % 48.9% 209.8% Energia Própria % -76.4% % -76.8% -35.3% Group and others % -6.6% % - - Eliminations % -4.2% As detailed in the previous table, EBITDA reached 33.6 million Euros, decreasing 14.0%, but with margin over turnover with a positive evolution going from 9.1% to 10.6%. For a more accurate comparative analysis, we must consider the abnormal effect last year of the accounting of a cost from a tax related lawsuit amounting to 8.7 million Euros (recorded in the segment Group and others ). Regarding the labour contracts termination by mutual agreement costs these impacted EBITDA and EBIT by 6.4 million Euros and 4.8 million Euros, in the first half of 2012 and first half of 2013, respectively. Therefore, recurrent EBITDA, resulting from the exclusion of the items mentioned in the previous paragraph, reached 38.4 million Euros, below the 54.3 million Euros from the first half of This EBITDA decrease results mainly from the reduction of the activity as EBITDA margin to turnover was 12.2%, sustained at a level of reasonable efficiency (12.7% in the same period of the previous year). This evolution happens in spite of the profitability reduction from the construction business area, affected by some underemployment of the production resources, a situation that we expect to be partially recovered during the second half. Financial Results Financial results in the first half of 2013 were million Euros, improving compared with the million Euros recorded in the same period of The debt restructuring process formalised by the end of last year, has revealed itself as an important tool to the contention of the net financing costs (interest paid less interest received) that reached, in this first half, 20.3 million Euros, versus 23.5 million Euros in the first half of Foreign exchange differences were positive (+0.4 million Euros) in the first half of 2013, however, on a comparable basis, were less favourable than in the same period of 2012 (+1.7 million Euros). Income and capital gains from capital participations amounted to 3.3 million Euros which compares with the inexpressive figure of 0.2 million Euros from the previous year, contributing to the financial results improvement. The 3.3 million Euros accounted in the first half of 2013 results from the alienations that materialised during this period namely of the Soares da Costa I Report and Accounts I First Half

10 participated companies MTA and Carta Angola that performed non-core activities, and the San José- San Ramón concession in Costa Rica. Earnings Before Taxes From the combined effect of the operational and financial results described above, we reach a earnings before taxes figure that exteriorize a loss of 7.3 million Euros (-16.3 million Euros in the first half of 2012). Net Earnings With the tax function suffering in the last years in Portugal an onerous evolution not only regarding its nominal rates but, in particular, in terms of a progressive tax disregard and increasingly more comprehensive of the negative components of the revenue of companies, net earnings stood negative at 9.3 million Euros, still improving compared with million Euros accounted in the same period of last year. CONSOLIDATED FINANCIAL POSITION STATEMENT From the comparative analysis of the consolidate financial position statements as of June 30, 2013 and December 31, 2012, the key and most expressive change at the ASSETS side was recorded at the accounts receivable (non-current) that rose from million Euros to million Euros. This item (and its increase) is related with the financial assets of the concessions that follow the financial asset model and that are still under construction (substantially Autoestrada XXI - Subconcessionária Transmontana but also Estradas do Zambeze in Mozambique). Regarding the current assets, the largest variation was on the other current assets item (+24.1 million Euros) mainly related with the multiannual construction contracts, where stands the weight of the subsidiary Sociedade de Construções Soares da Costa, SA. On the LIABILITIES side, there was an important reduction in the value of the derivatives, namely in the non-current liabilities that went from 67.0 million Euros to 49.7 million Euros, and is related with the fair value of the interest rate hedging derivatives contracted under the concessions business. This evolution, reflecting the change in the fair value of these instruments, also mirrors the fact that the maximum peek of the Group s exposition has been reached, according to the contracts. Still at the non-current level, the consolidated financial position statements records at June 30, 2013, a 14.5 million Eros liabilities in the item other loans, related to the Group s participation in Autoestradas XXI. As happens to the other current assets, also the other current liabilities are mainly related with multiannual construction contracts, and recorded an increase in its value, going from million Euros to million Euros. Concerning SHAREHOLDERS EQUITY in the first half there were not any operations on the share capital. However, it must be noted that, as detailed in the proper section, during the first half the company alienated all the own shares held. In spite of the accounting of the consolidated net earnings of this period (-9.3 million Euros), shareholders equity improved from 53.2 million Euros by year-end 2012 to 56.7 million Euros as of June 30, In this context, the positive contribution of 13.4 million Euros of the variation in the fair value of the coverage derivatives (net of deferred taxes) was crucial. NET DEBT The following table highlights the net debt evolution. Corporate net debt (recourse debt) amounted to million Euros as of June 30, 2013, increasing 28.1 million Euros in the first half of 2013 (+7.9 million Euros during the second quarter of 2013). Soares da Costa I Report and Accounts I First Half

11 Net Debt Evolution and Breakdown (Recourse and Non Recourse) (million Euros) Total Net Debt 1, , ,024.2 Recourse Non recourse Evolution of Recourse Net Debt and Recourse Net Debt to EBITDA Ratio (million Euros) 1H Recourse Net Debt Ratio (Recourse Net Debt / Recourse EBITDA*) 12.3x 8.9x 8.1x Note: EBITDA* = EBITDA from the last twelve months, adjusted, excluding non-recurrent costs (costs from the termination of labour contracts by mutual agreement and from a tax related lawsuit) CAPITALIZATION OPERATION As announced today, the Group has reached an agreement regarding a capitalization operation of its subsidiary Soares da Costa Construção, the sub holding that owns the participations in the construction area. This capitalization will be made through a capital increase to be subscribed by a new investor in the amount of 70 million Euros. After the capitalization operation, in the final corporate structure, Soares da Costa Group will hold 33.33% of the capital of Soares da Costa Construção, and will maintain the participations currently held in the remaining business areas and the construction business in the US market. COMMERCIAL ACTIVITY: ORDER BOOK Above were already mentioned the reasons that lead to an intensification of a strategy mainly focused on the international markets. However, a note to the fact that this effort is not within reach to all the companies that fight for survival on this sector, mainly those with a lower dimension. In this perspective, and adding that there are not enough tenders to fulfil the legitimate prospects of employment of the installed capacity, as well as the effective inefficiency of the permits system in Portugal that do not guarantee the necessary differentiation, it can be easy concluded that the commercial activity in the domestic market is struggling with a massive lowering of prices. Tenders are few, bidders to each work are in large number, and prices presented are abnormally low. In this scenario, the commercial activity of the company s structured based in Portugal, sustained by the technical capacity of the remaining supporting segments, and concentrated its efforts in an intense way in the international tenders. This does not mean that the Group does not seek for commercial opportunities in its domestic country, but only that the needs imposed by this market are quite below the Group companies fair ambitions, namely those from Sociedade de Construções Soares da Costa, SA. Even so, amongst the awards that happened during the first half in PORTUGAL, we highlight the construction works of an industrial block to Groz Beckert and the waste water treatment centre to Águas do Alentejo. In ANGOLA, during the first half there was the award of some important works, significantly increasing the order book in this market. In this context, we highlight the award of the second phase of BESA s head office building in Luanda, the Robert Hudson facilities in Talatona, a call centre to Movicel, industrial facilities to Sonils, a key part of the structure of the Muxima Plaza complex in Luanda to Prominvest and commerce and office buildings, Rainha Ginga and Cidade Alta, in Luanda to Lunendurg and Hightown, respectively. Still under the awards to the subsidiary Sociedade de Construções Soares da Costa, more recently, was awarded the construction contract to the head offices of Empresa Nacional de Electricidade (ENE) in Luanda, amounting to 46.9 million Soares da Costa I Report and Accounts I First Half

12 Dollars (35.5 million Euros) and an office, commerce and residential building, also in Luanda, to a private promoter amounting to 25 million Dollars (19 million Euros). A note to the important award of the subcontract Supply & Installation of IBS (Intelligent Building System) to the subsidiary Clear Angola, concerning the Intercontinental Hotel & Casino Project, already mentioned in the first quarter of In MOZAMBIQUE, in a context strongly streamlined by the external investments in areas like the mineral resources (coal) and natural gas, several business opportunities have emerged, to which Soares da Costa has dedicated the attention they deserve, striving to enter in these niches of opportunity, based on commercial efforts and presenting proposals to public or by invitation tenders, having as goal enhancement of the activity and the increase of turnover in this emerging market. During the first half, we highlight the award by CDN Corredor de Desenvolvimento do Norte, of the project Section 6 & 7 Bridges, consisting on the rehabilitation and construction of thirty bridges/ viaducts along 550 km between the border with Malawi and Nacala. This work has an execution period of 24 months and amounts to 33.4 million Dollars, with its construction yard already being set. The commercial activity developed by the subsidiary Soares da Costa Moçambique, SARL has been intense and fruitful. Amid the recent awards, we stress the following works: extension and reshuffle of the head offices of Petromoc, a works already started, the design-build of the new head offices of the Justice Ministry in Maputo a 11 million Euros works and the rehabilitation of the Maputo s railway station. By the end of the first half, final negotiations with the client HCB-Hidroeléctrica de Cahora Bassa were taking place regarding the construction of fifty dwelling, type 3, in Songo village in Tete region, a work amounting to 15.8 million Euros, an award that was confirmed as announced to the market on August 1, In the UNITED STATES, Prince Contracting. LLC has been able to solidify its position in the infrastructures segment, obtaining in the first half the award of several new projects. Besides the road work of design-build of US27 from Barry Road to US192 in the Polk and Lake Counties (in Orlando zone, Florida), already mentioned in the first quarter, this subsidiary was also the winner of a tender for the construction of two miles of US301 motorway, in Tampa, in the Florida state. Amounting to 21 million Dollars (circa 16 million Euros), the proposal from the Group s subsidiary competed against more than 10 bidders. The works include the requalification of a 150 m bridge, drainage, bases and pavements, services and signalling. To the works portfolio in this market we must add the reconstruction work of the SR544 road in Polk County (Scenic Highway) in Florida. Amounting to approximately 8 million Dollars (circa 6 million Euros), works include the flexible pavement, replacement of the existing drainage system, horizontal and vertical signalling and lightning, in a 1.5 million (circa 2.5 km) extension. Already after the first half (and therefore, still not included in the order book detailed below), is of note that Prince won the tender Design-Build E7I24 I-75 North of CR 54 Widening with a 71.2 million Dollars proposal (approximately 53.8 million Euros). This is a design-build work in Pasco County (in Tampa, Florida), that includes the construction of an additional way in each direction in the Interstate I-75 in a 6.7 million Dollars (10.8 km) extension, including the construction of two new bridges and the reshuffle of other two, and the reshuffle of the interchange to the SR52. Growing prospects to the US economy, as well as the political consensus regarding the need to develop road infrastructures as an important part to fight unemployment, has led to the increment of the federal and state budgets to the sector. It is expected, in the coming years, the launch of a significant set of projects, with Prince in a privileged positioning to a possible intervention with favourable profitability conditions. In BRASIL, we continued with an intense commercial activity mainly directed to private clients; several proposals have been presented, usually in partnership, for execution of works in different states. In the context of the Viracopos airport works,, proposals amounting to 15 million Reais were presented during the first half, originated 11.5 million Reais of contracts (circa 3.8 million Euros). The public sector was not neglected, with the participation in three public tenders in the Ceará state to the Department of Government, Department of Education (SEDUC) and Department of Infrastructure (SEINFRA), consisting the project, in Soares da Costa I Report and Accounts I First Half

13 this last case, of works for the implementation of the east line of the Fortaleza subway, including the civil construction of 12 km of a subway in double tunnel using a shield, the execution of twelve underground stations and a surface station. We expect that from this diversified pipeline of works, some bids may be successful in the near future. Confirming these expectations, already after the closing of the first half, was awarded in Fortaleza, Ceará, an 84 million Reais (circa 29 million Euros) a work consisting in the construction of a set of dwellings and respective infrastructures. In ROMANIA, commercial effort was been focused in projects related with renewable energies (wind and photovoltaic parks) and environment (water and sewage networks). We still waiting for more information on a tender in partnership with Eiffage Energia to Vestas, related with the construction of a wind park, totalling 25 million Euros. Also waiting for a decision by the contracting authority are four public tenders to the construction of the water and sewage networks to Hidroprahova, amounting to 52 million Euros (tenders in partnership with local company). Globally, by the end of the first half, order book reached 1,063.6 million Euros, broke down by market as detailed below, a figure 1.5% above the value recorded by year-end 2012, a growth that becomes 5.8% considering the adjustment from the elimination of the order book of Costa Rica concession, included in the previous year figure. The following table shows a summary of the evolution of the backlog by geographical market. Stands out the very significant growth of the weight of Angola and Mozambique that reveal high growth compared with the previous year, with the particularity of the Mozambican market reaching the level of representativeness of the domestic market. Order Book (million Euros) % % % Variation Total 1, % 1, % 1, % 1.5% Angola % % % 26.4% Portugal % % % -25.8% United States % % % -9.5% Mozambique % % % 29.6% Other countries % % % -39.7% Prospects and Guidance to 2013 In the domestic market the Transmontana motorway project will be concluded; this is a multiannual project that in the last couple of years gave a significant contribution to the Group s activity and assumed an important role given the depressive context of the domestic demand. In the international market, namely in Angola, it is expected some recovery of the operational activity during the second half, a topic that together with the preservation of the operational profitability margins are crucial to guarantee the economic sustainability. RELEVANT FACTS DURING THE FIRST HALF Work awards in Angola: in February 2012 were awarded to the subsidiary Sociedade de Construções Soares da Costa, SA, two works of office and commercial buildings in Luanda, including foundations, structure, finishing works and installation of special equipment worth a total of 51.5 million Dollars (39 million Euros), and an execution period of 16 to 24 months. Merger of Socometal: as of March 1, 2013 was made the definitive register of the merger by incorporation of Construções Metálica Socomeral, SA in Sociedade de Construções Soares da Costa, SA. As the mergers by incorporation done in mid-2012, this operation is justified by the significant slowdown of the construction activity in Portugal, and has as goals, on one hand the operational and costs rationalisation, and on the other hand, to create Soares da Costa I Report and Accounts I First Half

14 opportunities to the internationalisation of Socometal s activities under Sociedade de Construções Soares da Costa s geographical diversity. Works award in Mozambique: the company reported on April 12, 2013 that was awarded to its subsidiary Sociedade de Construções Soares da Costa, SA by CDN Corredor de Desenvolvimento do Norte, the concessionaire of Nacala s railway in Mozambique, the work Section 6 & 7 Bridges. The project entails the rehabilitation of the set of bridges and construction of new ones, totalling 30 bridges and will be developed on the north of Mozambique, on a 550 km extension between the border with Malawi and Nacala. The works has an execution period of 24 months and is worth 33.4 million Dollars (25.5 million Euros). General meeting of shareholders: as of April 30, 2013 was held the Group s general meeting of shareholders that, along with other deliberations, approved the management report, individual and consolidated accounts from 2012, the application of the individual net earnings and elected the corporate bodies for the triennium The board of directors that meet after the general meeting of shareholders, deliberated to nominate an executive committee, the company s secretary and the alternate secretary (please see its composition in the section Organisation ). Was also announced that the term to the capitalisation operation (announced on November 27, 2012) in accordance with the Bank Debt Reprogramming, was extended, with the agreement of the banks involved, to August 31, SOARES DA COSTA SHARES ON THE STOCK EXCHANGE SHARE CAPITAL REPRESENTATION Pursuant to article 4, no. 3, of the by-laws, the company s share capital is represented by one hundred and sixty million scriptural bearer shares, without par value, divided into two categories of shares, reciprocally convertible through a general meeting deliberation: a) one hundred and fifty-nine million nine hundred and ninety-four thousand four hundred and eighty-two (159,994,482) ordinary shares; b) five thousand five hundred and eighteen (5,518) preferred non-voting share, but with a preferential right to a dividend and to the reimbursement of the respective nominal amount in the event of the liquidation of the company. OWN SHARES During the first half of 2013, and as announced on April 24, 2013, Soares da Costa Group alienated 597,292 own shares, and as of June 30, 2013 does not hold any own shares. SHARE PERFORMANCE During the first half of 2013, the price of the Soares da Costa shares recorded a very positive evolution, translated into a 62% increase, after a cumulated fall of 65% in Therefore, as of June 30, 2013, each share was worth 0.21 Euros versus 0.13 Euros by the end of Only considering the second quarter of 2013 evolution, the performance was also positive, with the share price rising 11% to 0.21 Euros from 0.19 Euros per share. In comparative terms, in the first six months of this year, the PSI20 index lost 2%, with the 5% fall in the second quarter of 2013, offsetting the gains achieved during the first quarter. Concerning liquidity s progression in this first half, Soares da Costa share also recorded a very positive performance, with the average number of traded shares by trading day reaching 362 thousand shares versus 50 thousand in On a quarterly analysis, in the first quarter this average was even higher than the first half, circa 460 thousand shares versus 264 thousand shares in the second quarter. The improvement in terms of amount traded (or turnover) was even more pronounced, benefiting from the already mentioned rebound of the share price: average turnover in the first half of 2013 was 76 thousand Euros versus 10 thousand Euros in full-year Soares da Costa I Report and Accounts I First Half

15 This liquidity improvement recorded during the first half was in line with the market s general evolution: PSI20 s average turnover in the first half was 113 million Euros by trading day versus 77.5 million Euros in 2012, with a slight higher average in the second quarter (116 million Euros in the second quarter and 119 million Euros in the first three months of the year). Key Performance Indicators of Soares da Costa s shares Q 1Q Q 3Q 2Q 1Q 2011 Share Price, beginning of the period (Euro) Share Price, end of the period (Euro) Higher share price (Euro) Lower share price (Euro) Number of shares traded (thousand shares) 16,647 28,549 12,902 5,009 3,109 1,413 3,372 21,293 Cumulated turnover (million Euros) Number of shares traded by trading day (average; thousand shares) Turnover by trading day (average; thousand Euros) Source: Euronext Evolution of Soares da Costa Stock Price (Euros) and Number of Shares Traded in the first half of ,750 3,500 3,250 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1, Number of Shares Traded ('000 shares) Stock Price (Euro) Jan Feb Mar May Jun Jul Source: Euronext Soares da Costa I Report and Accounts I First Half

16 2. ORGANIZATION Below we detail the composition of the corporate bodies, the company s organogram and the changes that occurred during the first half in the Group s consolidation perimeter and consequent participations and consolidation methods structure, allowing observing the coverage and composition of Soares da Costa Group. The complete list of the participated companies, directly or indirectly held, is presented in the explanatory notes to the financial statements, note 6 to 9, where other information is also displayed. CORPORATE BODIES The current composition of the corporate bodies following the deliberations of the general meeting of shareholders held at April 30, 2013 and the board of directors held at the same date: Board of the General Meeting: Chairman: Júlio de Lemos Castro Caldas Secretary: João Pessoa e Costa Board of Directors: Chairman: António Sarmento Gomes Mota Members: António Manuel Pereira Caldas Castro Henriques (CEO) Pedro Gonçalo de Sotto-Mayor de Andrade Santos (executive member) Jorge Domingues Grade Mendes (executive member) Investifino, Ltd., NIPC MT appointing to hold office in his own name José Manuel Baptista Fino Parinama Participações e Investimentos, S.A. NIPC , appointing to hold office in his own name Jorge Armindo de Carvalho Teixeira Manuel Fernando de Macedo Alves Monteiro Supervisory Board: Chairman: António Pereira da Silva Neves Members: Carlos Pedro Machado de Sousa Góis Jorge Bento Martins Ledo Chartered Accountant: Effective: Deloitte & Associados, SROC S.A., NIPC , Nº 43 da OROC, represented by António Manuel Martins Amaral, ROC nº 1130 Alternate: Paulo Alexandre Rocha Silva Gaspar, ROC nº 1300 Soares da Costa I Report and Accounts I First Half

17 Remuneration Committee: Chairman: João Vieira de Almeida Members: Martim Salema de Sande e Castro Fino João Pessoa e Costa Secretary of the Company: Jorge Manuel de Oliveira Alves Pedro Miguel Tigre Falcão Queirós (alternate) COMPANY S ORGANOGRAM Chairman António Gomes Mota Executive Committee António Castro Henriques (CEO) Gonçalo Andrade Santos (CFO) Jorge Grade Mendes (COO) Corporate Governance Committee General Secretary António Frada Secretary of the Company Jorge Alves Pedro Queirós (Alternate) Management Control and Strategic Planning Auditing and Risk Management Report andtax Legal Office Investor Relations Comunication Conceição Vaz Sousa Sandra Paredes Fernando Semana Jorge Alves Rita Carles Rita Carles Soares da Costa I Report and Accounts I First Half

18 CHANGES IN THE CONSOLIDATION PERIMETER IN THE FIRST HALF OF 2013 Merger by incorporation of the company Construções Metálicas Socometal, S.A. into the company Sociedade de Construções Soares da Costa, S.A. ; Acquisition of 51% of the shares of the Talatona Imobiliária, Lda., with the company now being owned by Soares da Costa Group; Dissolution of the company INR Investimentos Nacionais Rodoviários, SGPS, S.A. that was fully owned by Soares da Costa Concessões, SGPS, S.A. ; Alienation of the full participation of the company Global Azoague, S.L., held by the company Ventos do Horizonte, S.A. ; Alienation of the full participation that the Group held on the Angolan company Carta Restauração e Cantinas, Lda. ; Merger by incorporation of the company Ventos do Horizonte, S.A. into the company Self Energy Engineering & Innovation, S.A. ; Change of the corporate name of the company Linha 3 Cezarina Construções Ltda in which the Soares da Costa Brasil Construções Ltda. has a 50% participation, that is now named Linha 3 Construções Ltda, including in its social object the construction, management, supervision, analysis, projects, planning, consulting and execution of any relevant services related with engineering works in general; Constitution of the company Self-Energy Angola, Lda., an Angolan company, in which the Group has a 49% participation through the company IMOSDC Investimentos Imobiliária. Lda. and having as social object the provision of services targeting the implementation, development and maximization of the renewable energy use and the recourse to innovative solutions as the alternative energies, namely through the provision of integrated solutions and services for energy management that maximize the value of energy resources for conducting energy audits and efficiency consulting and installation of energy equipment; Alienation of the full participation that the Group held in the company MTA - Máquinas e Tractores de Angola, Lda.. Soares da Costa I Report and Accounts I First Half

19 ACQUISITION COST EQUITY METHOD PROPORTIONAL METHOD FULL CONSOLIDATION METHOD PARTICIPATIONS STRUCTURE AND CONSOLIDATION METHODS GRUPO SOARES DA COSTA, SGPS, SA Consolidated Accounts 30 June 2013 Consolidation Perimeter and Methods Grupo Soares da Costa, SGPS, SA SDC Construção,SGPS, SA SDC América, INC 60% Porto Construction Group, LLC 80% SDC Construction Services, LLC Soares da Prince, LLC Costa CS, LLC SDC Contractor, LLC 51% GEC Guiné Ecuatorial Construcciones 80% SDC Moçambique, SARL SDC S. Tomé e Príncipe, Construções, Lda. SDC Construcciones Centro Americanas, SA Coordenação & SDC CARTA, LDA CLEAR, SA 95% CLEAR ANGOLA, LDA 51% CERENNA, SA SDC/Contacto, ACE SANTOLINA Holding B.V. 53,6% 46,4% Soares da Costa Brasil, Ltda. Soc. Construções Soares da Costa, SA SDC Imobiliária, SGPS, SA Mercados Novos, LDA CIAGEST, SA SOARTA, SA HABITOP, SA NAVEGAIA, SA 99% SDC IMOBILIÁRIA, LDA (2) 50,6% HOTTI Angola Hóteis, S.A. 98% COSTA SUL, LDA (7) 98% IMOSEDE, LDA (7) CAIS da FONTINHA, SA 51% IMOKANDANDU, LDA 99% IMOSDC - Investimentos LDA 1% 70% Talatona Imobiliária, Lda. 30% SDC Concessões, SGPS, SA SDC CONCESIONESC.RICA,SA COSTAPARQUES, SA CPE, SA SDC Concessions USA, Inc INTEVIAS, SA 75% Hidroequador S. Tomense 60% Hidroeléctrica STP, Lda. INR Inv. Nac. Rodoviários 75% SDC Hidroenergia, S.A. (6) 0,2% 99,8% SDC Hidroenergia 1T, Lda 0,2% 99,8% SDC Hidroenergia 8C, Lda 0,2% 99,8% SDC Hidroenergia 8T, Lda 0,2% SDC Hidroenergia 4T, Lda 99,8% 99,96% SCSP SDC Serviços Partilhados, SA (3) Energia Própria, S.A. Self Energy Engineering & Innovation, S.A. 57,26% 78,1% Self Energy UK TRANSMETRO, ACE 50% 28,57% GCVC, ACE ASSOC-Estádio de 40% 40% Estádio d Braga, ACE Braga, ACE Estádio Coimbra, ACE 60% 25% Nova Estação, ACE Somague-SDC, ACE 50% 28,57% Matosinhos, ACE Três ponto dois, ACE 50% 50% Teatro Circo, ACE HidroAlqueva, ACE 50% 50% CAET XXI, ACE GCF, ACE 28,57% 17,25% LGV, ACE Israel Metro Builders 30% 30% LGC, ACE NORMETRO, ACE 17,9% 50% SdC e Lena, ACE Terceira Onda, Lda 50% 24% GACE Gondomar, ACE 40% 50% SOMAFEL, SA 45% 50% 60% 95% Alsoma, AEIE 49% SDC Emirates, LLC Traversofer, SARL CFE Indústria de Condutas, S.A. (1) 11,3% VSL, SA 7,24% VORTAL SGPS, SA OFM, SA Construtora S. José Caldera, SA Grupul Portughez de Constructii Construtora - S.José-S.Ramon, SA Linha3 Construções Ltda Somafel e Ferr.,ACE Somafel,Ltda.(Brasil) 17% 17% (1) Clear Instalações Electromecânicas, S.A. holds a 33.33% stake. (2) Ciagest, SA holds 1% in the share capital of SDC Imobiliária, Lda. 5% 50% 49% Self-Energy Angola, LDA SCUTVIAS, SA 33,33% 33,33% 0,002% MRN Man. Rod.Nacionais 33,33% 0,002% Portvias, S.A. (9) 46% Auto-estradas XXI, S.A. (4) 98% Indáqua V. do Conde, S.A. (10) 0,5% 93% Indáqua Feira, S.A. (9) 20% MTS, LDA (3) Sociedade de Construções Soares da Costa, SA, Ciagest, SA, Clear, SA and SDC Concessões, SGPS each holds 0,01% of the capital of SCSP Soares da Costa Serviços Partilhados, SA. (4) Sociedade de Construções Soares da Costa, S.A. holds a 4% participation the capital of Autoestradas XXI, S.A. e Operestradas XXI, SA.. (5) Sociedade de Construções Soares da Costa, S.A. holds 0,004% of the company Exproestradas XXI, S.A.. (6) SDC Concessões, SGPS and Hidroequador Santomense each hold 0,002% of the capital of SDC Hidroenergia, SA.. (7) Clear Angola, Lda holds 2% of the company Costa Sul, Lda. and Imosede, Lda.. (8) Soares da Costa Concessões, SGPS holds a % participation and Sociedade de Construções Soares da Costa, S.A. holds 0.002% (9) Grupo Soares da Costa, SGPS, SA holds a 0,5% in de capital of Indáqua Feira, S.A.. (10) Sociedade de Construções Soares da Costa, S.A. holds 0,5% and 0,57% of the capital of Indáqua Matosinhos, S.A. and Indáqua Vila do Conde, S.A., respectively. 46% 50% Operestradas XXI, S.A. (4) Exproestradas XXI, S.A. (5) 40% Oper. Estradas. Zambeze, S.A. 40% Estradas do Zambeze, S.A. 25% GAYAEXPLOR, LDA 28,57% INDÁQUA, SA 0,5% 97,5% Indáqua Matosinhos, S.A. (10) Autopistas del Valle 16,3% Elos OM, S.A. 16,3% Elos, S.A. (8) 17% 50% Ute Efacec/Self Energy 45% Self Energy Moçambique 49,5% Larvick Espanha Sustentável, Desafio Lda. 35% 10% Roof Tops of Spain, S.A. Soares da Costa I Report and Accounts I First Half