Soares da Costa I Report & Accounts I First Half

Transcription

1 Soares da Costa I Report & Accounts I First Half

2 CONTENTS MANAGEMENT REPORT 3 1. FIRST HALF OF 2012 CONSOLIDATED RESULTS 3 2. ORGANISATION SUSTAINABLE DEVELOPMENT MAIN RISKS AND UNCERTANTIES PARTICIPATIONS AND TRANSACTION OF MEMBERS OF THE CORPORATE BODIES QUALIFIED SHAREHOLDINGS STATEMENT ON THE CONFORMITY OF THE FINANCIAL INFORMATION 25 CONSOLIDATED FINANCIAL STATEMENTS 26 CONSOLIDATED ACCOUNTING POLICIES AND EXPLANATORY NOTES 34 THIS REPORT IS A TRANSLATION OF THE ORIGINAL, ISSUED IN PORTUGUESE. IN THE EVENT OF DISCREPANCIES, THE PORTUGUESE VERSION PREVAIL. Soares da Costa I Report & Accounts I First Half

3 MANAGEMENT REPORT (Non audited accounts) (Translated from the Portuguese original) 1. FIRST HALF OF 2012 CONSOLIDATED RESULTS HIGHLIGHTS Turnover was 411 million Euros (-2.0%); International turnover increased 11.0% (reaching 288 million Euros and representing 70% of the consolidated turnover); Focus on the economic sustainability of the operations, with the reduction of the number of employees, adaptation of the structure and internal mergers; Comparable recurrent EBITDA rose 13.1% to 54.3 million Euros; Financial results of million Euros vs million Euros in the same period of 2011, benefiting from a 7.7 million Euros contribution from the change of the accounting method of Beira Interior concession; Net income attributable to the Group was million Euros, strongly impacted by non recurring items, excluding these items, net income would have reached -0.4 million Euros; Order book was stable at 1.2 billion Euros. Key Consolidated Financial Indicators (million Euros) 1H H 2011 Turnover % International market % Domestic market % EBITDA % EBITDA margin 5.3% 11.3% - EBITDA* comparable recurrent % EBITDA* margin 12.7% 11.4% - Operational results % Operational margin 0.4% 7.4% - Financial results % Earnings before taxes Net income attributable to the Group EBITDA*= EBITDA adjusted excluding non recurrent costs (compensation costs from labor contract s termination and tax-nature costs) and without any change in Beira Interior concession account method Soares da Costa I Report & Accounts I First Half

4 ACTIVITY ANALYSIS The activity in 2012, in the domestic context, is under a macroeconomic environment that significantly penalises the construction sector through the influence of a set of variables that affect the investment and leads to an intense demand constraint. This market crisis is provoking and accelerating adjustment processes, with several construction companies being unsustainable while other reorient their strategy to adapt their internal structures and internationalize aiming at replace markets, and even the most robust, which already have an international and diversified vision, do not go unscathed. In fact, to the already expectable and natural demand reduction after a cycle of expansion of the real estate market, namely in the residential segment and the construction of large infrastructure projects -, joined the financial market crisis, with scarce funding resources and a severely restrictive fiscal and public investment policy imposed, or at least outlined by the international commitments assumed by Portugal. The combination of these factors, unaccompanied by moderating and mitigating policies that could stimulate the reorientation of investment intra industry, is a mix with very negative consequences at the business and employment level and that of course, are reflected in the confidence indicators of confidence and in the concerns of the sector s associations. The Group s activity in the first half reveals an action that has seek dynamic, reliant and possible answers to this adverse context. The key vectors of the first half s activity were the following: (i) (ii) (iii) Intensification of the international guidance of the construction business reinforcing the Group s international profile with pronounced success taking into consideration the fair recognition by the market of the know-how and skills accumulated by a long experience, the technical capabilities shown, and the quality of the Group s staff, in the several construction and civil engineering segments; Construction domestic market weak performance, with the rarefaction of investment decisions in the private sector to together with the strategy pursued by the authorities regarding the stoppage of public investment, and embodied in the abandonment, suspension and abrupt changes in the projects terms/ conditions in their several stages including those already awarded; Adaptation of the organisational structure and allocation of resources to this market and industry reality, with the internal mobilization of human resources, reduction in the number of employees and rationalization of resources, in which also are included the already concretized mergers between some subsidiaries, especially focused in costs reduction, but without losing skills and capabilities and potentiating some synergies. The first half results and indicators, which are analysed in detail below, reflect this environment, besides also being affected by non recurrent items that are penalising in comparable terms, such as compensation costs with labor contracts termination, amounting to 6.4 million Euros (0.5 million Euros in the previous year), 8.7 million Euros from the accounting of tax-nature costs, from a lawsuit referring to facts that occurred between 2001 and 2005, and the accounting method change of Beira Interior motorway concession, as a result from the government decision on the introduction of real tolls. TURNOVER The increase in turnover in the second quarter in this period turnover reached million Euros, above the first quarter figure of million Euros and 0.9% higher than the second quarter of last year s amount elevated turnover in the first half of 2012 to million Euros, vs million Euros of the same period of the previous year. Not taking into consideration the contribution of Scutvias (which contributed with 19.5 million Euros to the consolidated turnover in Soares da Costa I Report & Accounts I First Half

5 the first half of 2011 and with only 5.0 million Euros in 2012, following the change in the accounting method of the concession), we conclude that the real activity during the first half of 2012 stood 1.5% above the same period of The following tables detail turnover breakdown by business area and by geographical market: Turnover breakdown by Geographical Market Market (million Euros) 1H 2012 % 1H 2011 % Portugal % % -23.2% Angola % % 17.5% U.S % % 28.7% Mozambique % % -23.9% Other % % -16.5% Total % % -2.0% Turnover breakdown by Business Area Business Area (million Euros) 1H 2012 % 1H 2011 % Construction % % 6.2% Concessions % % -18.6% Real Estate % % -26.1% Energia Própria % % -63.9% Holding and others % % -7.9% Intragroup eliminations % % 20.2% Total % % -2.0% Analysis of the performance by geographical market: The construction sector in the domestic market registers a cumulated and progressive deterioration. INE 1 (Portuguese National Statistic Institute) statistical data show that the construction production index had an average change in the last twelve months of -14.2%, of which -14.6% in the construction of buildings and -13.8% in civil engineering. These indexes have been revealing an aggravation trend as the decreasing rhythm of the homologous variations in the last months are now more sharp (-19.2% in June vs % in May, without any significant differences between the several segments, with the civil engineering registering a homologous decrease of 20.4% (-18.7% in May) and the construction of buildings -17.9% (-17.6% in the previous month). To this market crisis is also associated a financial crisis. During decades, the construction sector was the main financial agent of a major part of the works done in our country, from buildings to infrastructures, negotiating with the banking sector the necessary financing means, that frequently were not timely made available by the owners of the work to the realization of the necessary works. During a long period and up to the start of the current financial crisis, the activity s financing was guaranteed by the banks, in a relatively easy way and with reduced costs. As a result, the sector increased its indebtness level and increased its exposure to the crisis Índices de Produção, Emprego e Remunerações na Construção (Production, Employment and Wages Indexes in the Construction), June 2012 INE, August 10, Conjuntura da Construção n.º 61 junho / 2012 (Construction Analysis nº. 61 June/ 2012) - FEPICOP Soares da Costa I Report & Accounts I First Half

6 The severe restrictions and the credit cutbacks that are influencing a highly leveraged sector, in a time of market crisis, must have relevant consequences on the industry corporate structure, which are being dramatic, with the uncontrolled destruction of companies and employment. This depressive context justifies the extreme figures reached by the construction sector confidence indicator, which has been decreasing sustainably since 2010, reaching a minimum of -71.4% in May Construction Sector Confidence Indicator Source: INE Refocusing the analysis to the Group s activity, the strong starting order book was allowed a gradual decrease of the domestic turnover. However, the persistence and aggravation of the context described above makes the fact the Portuguese market only represented 30% of the Group s consolidated turnover by the end of the first half not a surprise (vs. 36% in the previous year), reflecting a homologous change of -23%. In more rigorous analysis, we must isolate from this evolution the already mentioned effect of the accounting change of the Beira Interior motorway concession (Scutvias). Therefore, not considering the contribution from this company, the domestic turnover change would be %. This trend will become more pronounced in the near future, taking into consideration the stagnation of the construction in Portugal. From the Group s activity in Portugal, and amongst the largest works, the highlights goes to the construction of Transmontana motorway, by CAET XXI, a complementary group of companies (ACE) where the Group has a 50% participation. In this infrastructure, we must refer the entry into service, as a motorway, of the so called lots 3, 5 and 6. This opening occurred in advance to the contractual planned dates. Other works in the domestic market: - Accesses to the logistic platform of Castanheira do Ribatejo to Brisa; - Resort Quinta do Lorde in Madeira Island; - Enlargement and improvement of the Maia-Santo Tirço stretch of A3 motorway to Brisa; - Serra da Estrela Inn to Enatur; - Tróia Resort infraestrutures; - Supermarket Continente Bom dia in Ramalde, Porto to Sonae Group. Soares da Costa I Report & Accounts I First Half

7 Regarding the complementary group of companies activity, we must highlight the Hidroalqueva and ME, SDC, MA Matosinhos, ACE, referring to a water distribution project in Matosinhos (Indáqua). The Angolan market continues to be the key international market of the Group and in this first half exceeded by a long distance the domestic market. To this country the International Monetary Fund, in its Regional Outlook for the Sub- Saharan Africa 3, estimates a GDP growth of 9.7% in 2012 (one of the highest of that region), of which 9.0% from the non oil sector. In the construction sector, after the outbreak in the Luanda building segment in the last years, the next years should bring a growing diversification of the investment in function of the strong growth potential of the infrastructure, social equipments and social residential construction segments, all over the country. During the first half of 2012, the Group s turnover in this marker reached 176 million Euros, surpassing by 17.5% the figures registered in the same period of last year. Amongst the works with higher contribution to turnover during the first half we refer the following: - TTA-2 office building in Luanda to Bayview; - Dipanda Towers in Luanda to Novinvest; - Requalification of Luanda seaside to Sociedade Baía de Luanda; - New headquarters of INE; - 1º Congresso Tower, BESA s new headquarters, in Luanda, to Investe Group; - Office building to Companhia de Seguros AAA; - Luanda Towers Project to Vista Club; - Hotel da Ilha (Island Hotel) in Luanda to Forçauto; - PK Building (2nd phase) to Sonangol; - Largo do Ambiente Building to C. R. ROCA; - Sagrada Família Building to Matra; - Science and Technology Museum in Luanda to GOE; - Packing warehouse in Tofa to Nestlé Angola; - AES Facility Extension to Sonils; - Bairro Fina School no Soyo, to Bechtel. In this market we must highlight the growth and performance of the subsidiary Clear Angola, that in its individual financial statements achieved a 30.5 million Euros turnover, growing 15.6% the 26.3 million Euros reached in the first half of last year, following an upward trajectory uninterruptedly for some years, being a reference company in the electromechanical, electrical and HVAC segments. In the United States, the Group is consolidating its positioning in the infrastructure segment, through its subsidiary Prince Contracting. This company is now in 10 th place of the ranking The Southeast's Top 20 General Contractors of the ENR magazine, the main reference of the sector. Prince, that concentrates the Group s activity in this market, continued in the first half of 2012 a development and consolidation strategy, as defined in previous periods. Therefore, growth in the road infrastructure segment continued, namely in roads and bridges, with 12 active works, distributed by the Florida and Georgia states. The consistence of this course was reinforced in the first half of 2012 with the award of two new contracts in Florida, worth a total of 42 million Euros. In this first half, activity reached a historically high level, translated in a 67.8 million Euros turnover, more 28.7% than in the same period of last year. 3 Regional Economic Outlook Sub-Saharan Africa, Sustaining Growth amid Global Uncertainty IMF Apr Soares da Costa I Report & Accounts I First Half

8 The Mozambican market continues to be under the radar of the international community regarding businesses in general and the construction and public works in particular, bearing in mind the positive results of its economic growth, sustained by successively improving indicators, which contrast with the recessive context of the European economies. Soares da Costa presence in this country is developed through the stable establishment of the domestic construction company and through a Mozambican law company, Soares da Costa Moçambique, S.A.R.L., in which the Group was a 80% participation, having as local partner IGEPE - Instituto de Gestão de Participações do Estado (State s participations manager institute). The projects under the stable establishment in the country of Sociedade de Construções Soares da Costa, SA, are evolving in a sustainable way with considerable rhythms. In this context, the highlight goes to the rehabilitation works of EN 211 road, between Combomune and Chicualacuala, with a 187 km length, and to the construction works of the new bridge over the Zambeze River in Tete, and accesses. These two works, with a structural impact in the region s economy, assume a social, economic and financial relevant weight, for both the Mozambican growth and to its neighbours and partners at SADC (Southern African Development Community). Soares da Costa is committed namely, through the guarantee of the quality and security levels and meeting deadlines that correspond to the technical and political dimension of these projects. Regarding the subsidiary Soares da Costa Moçambique, SARL, in the first half of 2012, we highlight the following: Works concluded: Construction of the Administrative Court building; Construction of the INNOQ (Instituto de Normalização e Qualidade - Standards and Quality Institute) building. Works in progress: Rehabilitation of Museu da Revolução (Revolution Museum); Construction of VIP Executive Tete Hotel; Rehabilitation of Maputo central marketplace; Enlargement of VIP INN Beira Hotel. Even so, given the exceptionally high turnover reached in the first half of 2011 with the conclusion of the work olympic village for the X All-African Games, the good level of activity in 2012 is hurt by that comparison. The other markets contributed in the first half of 2012 with 9.3 million Euros to the Group s consolidated turnover. Within these markets we must refer Brazil, in which activity was focused on: (i) Civil construction services to the implementation of the complete unit of Rio Branco do Sul (Paraná) 5,000 tonnes/ day production line, a contract which is part of an investment plan named 3ª Onda de Investimentos (Third Phase of Investment) from Votorantim Cimentos. This work is being executed, since last year, by Terceira Onda Planejamento e Desenvolvimento Ltda in which the Group has a 50% stake, via Sociedade de Construções Soares da Costa, with Serpal Engenharia e Construtora, Ltda. holding the remaining capital. (ii) Line 3 project of the Cezarina Cimpor Brasil cement plant. In this case, the work is being executed by Linha 3 Cezarina Construções Ltda, in which the Group also has a 50% stake but via Soares da Costa Brasil, Ltda, having as partner the company Gutierrez Empreendimentos e Participações, Ltda.; the works started in April 2012 and should be concluded in 13 months. In what concerns Romania, the accesses works of the wind park of Casimcea and Alpha, both in Tulcea, were concluded, being in a start up phase the work Constructia Variantei de Ocolire Tecuci, worth 49 million Ron (11.1 million Euros) to Soares da Costa I Report & Accounts I First Half

9 the Romanian national road authority (CNADNR - Compania Nationala de Autostrazi si Drumuri National din Romania S.A.), a work awarded in June By business area, we highlight the turnover growth of the Construction area (+6.2%), with the international activity having a dominant role, namely with the contribution of the United States and Angola, and the construction of Transmontana motorway in the domestic market, oriented to the concession area (which also results in a higher value for intragroup eliminations). In the Concessions business area, reported turnover was negatively impacted by the already mentioned accounting change effect of the Beira Interior motorway concession (5.0 million Euros accounted in the first half of 2012 vs million Euros in the first half of 2011). In fact, the maintenance of the intangible asset method would enlarge the first half of 2012 turnover by 17.5 million Euros, with the concession business area turnover reaching 90.6 million Euros under that hypothesis, broadly in line with the amount registered in the previous year (+0.3%). Also in this business area, in the parking exploration segment, turnover suffered a 9% reduction, an unavoidable reflection of the lower utilisation of the car as a transport imposed by the context. The remaining business areas have a modest contribution to consolidated turnover. Facing a severe context in what concerns access to financing sources, which determined the lack of development of new projects, the Real Estate area is focused on asset management and in the marketing of stocks still in inventory, while Energia Própria has not yet been able to achieve a turnover growth in a scale in accordance with the potential of the sector in which it operate. PROFITABILITY Operational profitability Taking into consideration the usual reporting segments, from the financial statements of the first half 2012 and 2011, we can extract the following operational performance indicators: EBITDA and EBIT Breakdown by Business Area (million Euros) 1H2012 % Margin 1H 2011 % Margin EBITDA % 5.3% % 11.3% -54.4% Construction % 5.9% % 6.4% -2.7% Concessions % 7.9% % 24.7% -74.0% Real Estate % 77.8% % 57.7% -0.4% Energia Própria % % -37.2% -29.1% Holding + Others % % 5.1% - Eliminations - 0.0% % - - EBIT % 0.4% % 7.4% -95.0% Construction % 1.4% % 4.1% -63.4% Concessions % 6.0% % 17.1% -71.6% Real Estate % 48.9% % 37.6% -4.0% Energia Própria % -76.8% % -38.5% -28.0% Holding + Others % -1.7% - Eliminations % 0.4% - Soares da Costa I Report & Accounts I First Half

10 These indicators are affected by non recurrent factors that occurred during the first half of 2012, which were already mentioned in this report, and also by the effect of the change in the accounting of Beira Interior concession, which constraints a comparative analysis. The compensation costs had a 6.4 million Euros effect on EBITDA and EBIT in the first half of 2012 (vs. 0.5 million Euros in the previous year), with a strong concentration (but not exclusively) in the construction business area, while the tax-nature costs amounting to 8.7 million Euros were accounted in the Holding + Others caption. The accounting changes of Beira Interior concession, detailed in the following table, impact the concessions business area s figures. Scutvias (figures corresponding to the Group s participation) (million Euros) 1H 2012 F 1H 2012 I* 1H 2011 I Turnover EBITDA EBIT Financial results Earnings before taxes Net income H 2012 F: Amounts effectively considered in the financial statements (financial asset model) 1H2012 I*: Amounts (proforma) according to the intangible assets model 1H2011 I: Amounts effectively considered in first half 2012 financial statements The recalculation of EBITDA and EBIT on a comparable basis, excluding the effects of the referred non recurring factors and admitting the maintenance of the Beira Interior concessions accounting by the intangible assets model, would lead to the following: EBITDA and EBIT Breakdown by Business Area (million Euros) 1H 2012 % Margin 1H 2011 % Margin EBITDA* % 12.7% % 11.3% 13.1% Construction % 7.4% % 6.4% 20.7% Concessions % 25.4% % 24.7% 3.2% Real Estate % 79.9% % 57.7% 2.3% Energia Própria % -73.0% % -37.2% -29.1% Holding + Others % % 5.1% - Eliminations - 0.0% % - - EBIT* % 7.0% % 7.5% -8.8% Construction % 3.0% % 4.2% -25.6% Concessions % 17.9% % 17.2% 4.5% Real Estate % 51.1% % 37.6% 0.3% Energia Própria % -76.8% % -38.5% -28.0% Holding + Others % % -1.7% - Eliminations % 0.4% - Soares da Costa I Report & Accounts I First Half

11 Therefore, the comparable adjusted EBITDA would reach 54.3 million Euros, representing a 13.1% growth and increasing its margin to 12.7%, while EBIT would present an 8.8% decrease to 28.6 million Euros. In fact, in the first half of 2012, there was an increase in the difference between EBITDA and EBIT compared with the previous year, due to the higher provisions and value adjustments. By business areas, the construction, that presents a 5.9% EBITDA margin, without the compensation costs, would register a positive evolution of its profitability reaching a 7.4%, EBITDA margin, while the concessions area, with the maintenance of the accounting criteria of the previous year, would register an positive evolution of EBITDA, in absolute terms (+4.5%). These conclusions are important demonstrations of the Group s economic sustainability and operational profitability. Financial Results In the first half 2012, financial results were million Euros vs million Euros in the first half of In this context, the influence of the change in the accounting treatment of Beira Interior motorway concession was positive (symmetrical to that seen at the operational level, +7.7 million Euros). The replacement of the same method, with the elimination of this positive contribution, would lead to financial results of million Euros in the first half of The net financing costs declined from 19.3 million Euros in the first half of 2011 to 15.8 million Euros in this first half, benefiting from the already mentioned positive effect from Scutvias. Foreign exchange differences contributed to the financial results in the first half of 2012 with +1.7 million Euros (vs. the negative contribution of -1.8 million Euros in the same period of 2011). Earnings Before Taxes Earnings before taxes presented a 20.6 million Euros loss (vs. a 3.4 million Euros profit in the previous year). However, this numerical expression results from the decisive impact from non recurring items. Excluding the already mentioned three non recurring items, earnings before taxes would be -1.2 million Euros. Net income Exteriorized and analyzed the different levels of results above the net income line, this does not justify particular additional comments, reaching, after +3.4 million Euros of income tax, a net loss attributable to the Group of million Euros. CONSOLIDATED FINANCIAL POSITION STATEMENT From the comparable analysis of the consolidated financial position statements as of June 30, 2012 and December 31, 2011, results that the main and must expressive variation at the assets level occurred at the accounts receivable (non current) and is related with the concessions that follow the financial asset model, which rose from million Euros to million Euros; this increase, besides being a consequence of the financial assets from the infrastructure concessions that are under construction (mainly Autoestrada XXI - Subconcessionária Transmontana but also Estradas do Zambeze), also embodies the effect from the transfer of the Beira Interior concession assets, that were previously accounted as intangibles; this is the key justification beyond the evolution of the intangibles assets from the financial position statement as of million Euros relatively to million Euros by December Soares da Costa I Report & Accounts I First Half

12 Regarding current assets, the major change is related with the desirable reduction in customers (-42.2 million Euros) with other current assets and cash and equivalents increasing, while inventories remain stable. At the liabilities side, there was an increase at the current liabilities of 87.0 million Euros, while non current liabilities rose 18.5 million Euros. We expect that the conclusion and formalisation, on the short run, of an ongoing negotiating project regarding the restructuring of a relevant part of the bank debt, with a significant enlargement of the maturity profile of that debt, will allow a substantial reduction of the pressure over the liquidity ratios/ indicators. At the shareholders equity, there were not any operations over the share capital, nor own shares movements in the first half, as its evolution was mainly determined by the recognition of the first half loss (-17 million Euros) and by the net change of the deferred tax assets resulting from variations in the value of hedging derivatives (-8.3 million Euros). Net debt Remunerated net debt reached million Euros by June 30, 2012 (including 417 million Euros of non recourse debt, from the concessions business area), vs million Euros at the year-end 2011 (that included million Euros of non recourse debt). Therefore, during the first half, corporate debt (recourse) rose 36.1 million Euros. From this amount, 16.3 million Euros were used to finance the shareholders equity effort at the Transmontana motorway concession project, with the remaining being used as working capital. Evolution of Net debt (recourse and non recourse) (million Euros) June 2012 March 2012 December 2011 Total Net Debt Recourse Non Recourse Evolution on Recourse Net Debt and Recourse Net Debt / EBITDA Ratio (million Euros) H 2012 Recourse Net Debt Ratio Recourse Net Debt / Recourse EBITDA* 7.2x 8.3x 8.2x 8.0x Note: EBITDA* = Last 12 months EBITDA excluding non recurrent costs (staff s compensation costs and tax-nature costs COMMERCIAL ACTIVITY: ORDER BOOK The Portuguese budgetary framework strongly pressures public investment and the private investment anaemic condition determine the occurrence of some factors that influence the commercial activity and impose a growing investment of the company in its international activity. From these facts we highlight the most significant: - General lack of tenders, with the consequent pressure over prices; - Suspension of virtually all public investment, by both the state and local authorities; Soares da Costa I Report & Accounts I First Half

13 - Reduced decision rate on tenders launched; - Delay in the national dams investment plan (Plano Nacional de Barragens), with many tenders held, but almost none materialized; - Little appetite from the banking sector to invest in the construction market; - Suspension of several works already awarded, allegedly due to lack of funding. This market context, in addition to the impact from the withdrawal of the construction project of the high speed railway stretch between Poceirão and Caia, from the high speed railway connection Lisbon-Madrid, after its refusal by the Audit Court on March 21, originates a reduction of the order book in the domestic market. In the domestic market, we highlight the following works awarded: construction of the pipeline Mangualde-Celorico- Guarda, worth 16.8 million Euros and the Puaça Building project, in Lisbon. With a weak domestic market, the Group continues to dynamically explore international markets, focusing on the markets where it has a historically stable intervention. In Angola we highlight the award of the engineering, procurement and construction of the permanent residential housing development for Angola LNG employees (phase I) in Soyo, referred ahead as a privileged information released in the first half; the work will be executed in consortium with MSF, having Soares da Costa a 50% participation; this work will be executed in 36 months, and is worth a total of 252 million Dollars (189 million Euros). During the second quarter we also highlight the following awards, although of a different magnitude, the finishing and speciality works of the Huambo Cultural Centre, the construction of Shopping Fortaleza (in consortium) and BESA s branch in Viana. In July, and therefore still not impacting the order book presented, was awarded the construction of a data center and office building to Movicel in Talatona, Luanda, worth more than 25 million Dollars. In Mozambique, in a context strongly streamlined by the external investments in areas such as mineral resources (coal) and natural gas, several business opportunities have arise, to which Soares da Costa has dedicated the attention they deserve, making an effort to enter these niches of opportunities, using its commercial resources, presenting proposals in public tenders, presenting proposals to invitations, aiming to enlarge its activity and turnover in this emerging market. As part of the activity performed by the subsidiary Soares da Costa Mozambique, SARL were obtained during the semester several awards, namely: Construction of a fuel station of Petromoc Zoo (Maputo); Construction of 15 habitations to HCB (Cahora Bassa Hydroelectric Plant) Songo (Tete); Construction of a building with 8 flats in Costa do Sol Maputo; Rehabilitation of a substation in HCB (Cahora Bassa Hydroelectric Plant) Songo, phase II; Construction of the bus station of Zimpeto (Maputo); Rehabilitation and enlargement of the Pemba s flight terminal; Reshuffle of the Mozabanco branch in Xai-Xai. Already after the end of the first half were awarded by ANE- Administração Nacional de Estradas (National Road Authority) to Sociedade de Construção Soares da Costa, SA the construction works of the bridges over the Sangaze, Pomwpe, Macuca and Chidge rivers in Sofala region and the bridges over the Muira, Tzanzabue e Nhagucha rivers in Manica region, in Mozambique. This works include the design and built of nine bridges (of which six with bridge decks in reinforced concrete, prestressed with several lengths), the correction of the accesses roads and other diverse related works, totalling 21.7 million Euros. In the United States, Prince has reinforced its position in the market in the infrastructure segment, with two works awarded in this first half: I 275 Tampa, Hillborough County, amounting to 30 million Dollars, consisting on the rehabilitation of circa 6 km of road and sixteen bridges, to be concluded by July 2014; Soares da Costa I Report & Accounts I First Half

14 I-75 design and built of airport access in Fort Myers; this design and built contract worth 54 million Dollars includes a new direct connection with 12 km of length between I-75 and the Southwest Florida International Airport (SWFIA), in Fort Myers, to be concluded up to September In Romania, a work to the national road authority (CNADNR Compania Nationala de Autostrazi si Drumuri National din Romania, SA) Constructia Variantei de Ocolire Tecuci project was awarded, worth 49 million Ron (11.1 million Euros); consignment of this work took place on June 18, In this market, commercial effort has been focused on projects on the renewable energy sector (wind parks), area in which the Group is currently negotiating with two different customers two projects that are waiting for an award decision. At the same time, has been given priority to roads, water distribution and sewage construction projects, segments in which the Group already has experience in this market. In Brazil was awarded the work related with the execution of line 3 of Cezarina cement plant, in consortium with Gutierrez Engenharia, contributing with 10.4 million Euros to the Group s order book. Regarding new markets, we highlight the award to Sociedade de Construções Soares da Costa, SA of a work in the Sultanate of Oman, worth 48 million Euros, with an execution deadline of 654 days; this work includes the project s design and construction works of a road infrastructure, including several sections and five interchanges bridges, in the zone between the Muscat international airport and Muscat express road. The work will be jointly executed with a local construction company, having Sociedade de Construções Soares da Costa, SA a 70% participation. Globally, by the end of the first half, order book amounted to 1,181.6 million Euros (with the breakdown by geographical market presented below), at a similar level to those achieved by the end of 2011, considering the adjustment resulting from the removal from the order book of the high speed railway project. This figure is slightly below (-4.3%) the one reached by the end of the first quarter. Order Book (million Euros) June 2012 % March 2012 % Dec % Total 1, % 1, % -4.3% 1, % Angola % % -13.0% % Portugal % % 1.1% % U.S % % 14.1% % Mozambique % % -3.6% % Other countries % % -5.6% % Prospects and Guidance for 2012 During the second half of 2012 the adjustment process of the internal structure will continue, with its resizing taking into consideration the estimated dimension of the several markets, achieving a stable situation by the end of the year. The business strategic focus will continue oriented to the construction segment and to the international markets were core geographies Angola, United States and Mozambique assume a relevant and key role. In Brazil, the Group will continue to seek for growth opportunities in order to solidify its knowledge and presence in this new market. In Portugal, taking into consideration the already described environment, activity will remain strongly concentrated on the construction of the Transmontana motorway. Soares da Costa I Report & Accounts I First Half

15 RELEVANT FACTS RELEASED DURING THE FIRST HALF Court of Auditors refusal of the concession contract of the HSR stretch between Poceirão Caia from the high speed line Lisbon-Madrid; Awarded a work in the Sultanate of Oman to the subsidiary Sociedade de Construções Soares da Costa, SA, which includes the project s design and construction works of a road s infrastructure, including several sections and five interchanges bridges, in the zone between the Muscat international airport and Muscat express road. This work, worth 48 million Euros, with a 654 day-deadline, will be jointly executed with a local construction company, having Sociedade de Construções Soares da Costa, SA a 70% participation; Work awarded in Angola: Sociedade de Construções Soares da Costa, SA, in consortium with MSF, has closed a contract for the engineering, procurement and construction of the permanent residential housing development for Angola LNG employees (phase I) in Soyo, worth a total of 252 million Dollars (189 million Euros), having Soares da Costa a 50% participation; Provisional suspension of a tax related lawsuit, resulting in a 8.7 million Euros liability for the Group; Intention of work award regarding the construction of a gas pipeline between Mangualde-Celorico-Guarda, worth a total of 16.8 million Euros; Design-Build Project in the U.S.: Prince, the Group s subsidiary in the U.S. market was announced as the apparent low bidder for the Florida design-build I-75 (SR 93) airport access project at Southwest Florida International Airport in Fort Myers, worth a total of 54.1 million Dollars (42.3 million Euros); The annual general shareholders meeting took place on May 24, 2012, approving, amongst other items, the management report, the individual and consolidation financial statements and the proposal for the application of the individual net income; Internal Mergers: Soares da Costa Group carried out the merger of our two most relevant construction subsidiaries in Portugal, with Sociedade de Construções Soares da Costa, S.A. absorbing Contacto Sociedade de Construções, S.A.. In the pursuit of measures to adjust our structure, our subsidiary, from the concessions area, Soares da Costa Serviços Técnicos e de Gestão, S.A. was been absorbed by Soares da Costa Concessões, SGPS, S.A.. SOARES DA COSTA SHARES 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, with a par value of one Euro each, divided into two categories of shares, reciprocally convertible through a general meeting deliberation: a) one hundred and fifty-nine million nine hundred and ninetyfour 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. Soares da Costa I Report & Accounts I First Half

16 Own Shares Grupo Soares da Costa held, at June 30, 2012, 507,292 own shares, corresponding to 0.317% of its share capital, a participation unchanged to December 31, Dividends As proposed by the board of directors to the shareholders general meeting of May 24, 2012, it was approved and paid a gross preferred dividend of Euros, corresponding to 0.05 Euros per preferred share. As released at June 7, 2012, the dividends were placed at the shareholders disposal as from June 22, 2012, with the shares transacting on the stock exchange without the right to the dividend as from June 19, Share price Performance The share registered in the first half of the year a quite negative performance, both in terms of price evolution and liquidity. Therefore, share price lost 57% in the first six months of 2012, decreasing from 0.37 Euros by the end of 2011 to 0.16 Euros by the end of the first half. This negative performance was accentuated in the second half of the semester, when the share price lost 45% (-22% in the first quarter). Compared with the PSI20 index, this declined 14% in the first six months, a decrease totally concentrated in the second quarter (-15%), as in the first quarter, the index was almost unchanged (+0.1%) to year-end Thus, the Soares da Costa Group share followed the market s negative trend, although with a sharper movement, which can be explained by the strong contraction and low visibility that currently affects the Portuguese construction market, which negatively influences the investors expectation for the sector, although for Soares da Costa Group the domestic market represents less 40% of total turnover (2011). In addition, the concession business area expectations and visibility also suffered a significant degradation. The traded volume of the Portuguese stock market continued fairly depressed in the first half, with the average traded amount per trading session of the PSI20 index reaching 86 million Euros, less 20% than full-year 2011 s average figure. Even so, in the second quarter there was a slight recovery (+15%) compared with the first three months of the year. Soares da Costa Group shares followed this liquidity reduction trend, although again in a sharper way, reaching an average traded value per session in the first half of 11 thousand shares, 71% below the average figure for full-year Contrary to the market trend that showed some liquidity recovery in the April-June quarter, the liquidity of Soares da Costa share decrease was quite accentuated in the second part of the semester: 4 thousand Euros of average daily traded value in the second quarter of 2012 vs. almost 18 thousand Euros in the first three months. Soares da Costa I Report & Accounts I First Half

17 Key Performance Indicators of Soares da Costa s shares 2Q Q Q Q Q Q Share Price, beginning of the period (Euro) Share Price, end of the period (Euro) Higher share price (Euro) Lower share price (Euro) Shares traded (thousand shares) 1,413 3,372 21,293 3,065 4,376 3,986 9,866 59,101 Cumulated value of shares traded (million Euros) Shares traded by session (thousand shares) Value traded by session (average; thousand Euros) Source: Euronext Evolution of Soares da Costas stock price and number of shares traded in the first half of Jan 12 Jan 12 Feb 12 Mar 12 Mar 12 Apr 12 May 12 May 12 Jun Volume (# 000 shares) Stock Price (Euro) Source: Euronext Soares da Costa I Report & Accounts I First Half

18 2. ORGANIZATION Below is the composition of the governing bodies, the organizational structure of the company and the structure of participations and consolidation methods allowing to observe the extent and composition of Soares da Costa Group. Afterwards are listed the changes to the Group s consolidation perimeter during the first half of A complete list of subsidiaries (directly or indirectly held) is presented in the notes with the numbers 6 to 9 from the Accounting Policies and Explanatory Notes, which also included other information. Governing bodies The current composition of the governing bodies is the following: General Meeting Board: Fernando Enes Gaião (Chairman) João Pessoa e Costa (Secretary) Board of Directors: Manuel Roseta Fino (Chairman) António Manuel Pereira Caldas Castro Henriques (Executive Committee, Chief Executive Officer) Pedro Gonçalo de Sotto-Mayor de Andrade Santos (Executive Committee) Jorge Domingues Grade Mendes (Executive Committee) António Manuel Formigal de Arriaga (Non executive, Independent) António Pereira da Silva Neves (Non executive) Carlos Moreira Garcia (Non executive, Independent) José Manuel Baptista Fino (Non executive) Martim Salema de Sande e Castro Fino (Non executive) PARINAMA - Participações e Investimentos, SGPS, SA, corporate body number , that designated Ana Maria Martins Caetano (Non executive). Supervisory Board: Júlio de Lemos de Castro Caldas (Chairman) Carlos Pedro Machado de Sousa Góis Joaquim Augusto Soares da Silva Júlio de Jesus Pinto (substitute) Chartered Accountant: Grant Thornton Associados, SROC, Lda, represented by Jorge Bento Martins Ledo Remuneration Committee: José Manuel Baptista Fino (Chairman) António Jorge Gonçalves Afonso João Pessoa e Costa Soares da Costa I Report & Accounts I First Half

19 Secretary of the Company: Jorge Manuel de Oliveira Alves Pedro Miguel Tigre Falcão Queirós (substitute) Furthermore, in accordance with Securities Code, we inform that the company s external auditor is BDO & Associados, SROC, represented by Paulo Jorge de Sousa Ferreira (Chartered Accountant number 781). Organisational Structure and Structure of Participations of the Group Soares da Costa I Report & Accounts I First Half

20 ACQUISITION COST EQUITY CONSOLIDATION PROPORTIONAL CONSOLIDATION METHOD FULL CONSOLIDATION METHOD GRUPO SOARES DA COSTA, SGPS, SA Consolidated Accounts June 30, 2012 Perimeter and Consolidation Methods SDC Construção,SGPS, SA Grupo Soares da Costa, SGPS, SA SDC América, INC 99,96% SDC CONCESIONESC.RICA,SA CIAGEST, SA SCSP SDC Serviços 60% Porto Construction Group, LLC Partilhados, SA (3) 80% COSTAPARQUES, SA SDC Construction Services, LLC Soares da Mercados Novos, LDA Prince, LLC Costa CS, LLC CPE, SA SOARTA, SA SDC Contractor, LLC INFRAESTRUCT. SDC C.RICA, SA HABITOP, SA 51% GEC Guiné Ecuatorial Construcciones NAVEGAIA, SA 57,26% 80% Energia Própria, S.A. SDC Moçambique, SARL 99% SDC IMOBILIÁRIA, LDA (2) INTEVIAS, SA 75% SDC S. Tomé e Príncipe, Construções, Lda. 50,6% Self Energy Engineering Hidroequador S. Tomense HOTTI Angola Hóteis, S.A. & Innovation, S.A. 60% 98% 60% SOCOMETAL, SA Hidroeléctrica STP, Lda. COSTA SUL, LDA (7) Ventos do Horizonte, S.A. SDC Construcciones Centro Americanas, SA 98% INR Inv. Nac. Rodoviários 78,1% IMOSEDE, LDA (7) 75% Self Energy UK SDC Hidroenergia, S.A. Coordenação & SDC (6) CAIS da FONTINHA, SA 0,2% 99,8% 99% SDC Hidroenergia 1T, Lda CARTA, LDA Carta Angola, Lda. (11) 51% IMOKANDANDU, LDA 0,2% 99,8% 95% SDC Hidroenergia 8C, Lda CLEAR, SA CLEAR ANGOLA, SA 99% IMOSDC - Investimentos LDA 1% 0,2% 99,8% 51% SDC Hidroenergia 8T, Lda CERENNA, SA 0,2% SDC Hidroenergia 4T, Lda 99,8% SDC/Contacto, ACE SANTOLINA Holding B.V. 59% 41% Soares da Costa Brasil, Ltda. Soc. Construções Soares da Costa, SA 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 50% Linha3 - Cezarina,Ltda 40% SOMAFEL, SA OFM, SA 60% Somafel e Ferr.,ACE 95% 5% Somafel,Ltda.(Brasil) 45% Alsoma, AEIE 50% Traversofer, SARL 33% MTA, LDA. 49% (11) SDC Emirates, LLC 17% 50% Construtora S. José Caldera, SA Grupul Portughez de Constructii CFE Indústria de Condutas, S.A. (1) 11,3% VSL, SA 7,24% VORTAL SGPS, SA Construtora - S.José-S.Ramon, SA 17% SDC Imobiliária, SGPS, SA 14,7% Talatona Imobiliária, Lda. 46% Operestradas XXI, S.A. (4) 50% 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, SA Indáqua V. do Conde, SA 98% 0,5% 93% Indáqua Feira, S.A. (10) 20% MTS, LDA Autopistas del Sol Autopistas del Valle (1) Company in which Clear Instalações Electromecânicas, S.A. has a 33.33% participation (2) Additionally, Ciagest, SA has a 1% participation in SDC Imobiliária, Lda. (3) Additionally, Sociedade de Construções Soares da Costa, SA, Ciagest, SA, Clear, SA and SDC Concessões SGPS have, each, a 0.01% participation in SCSP Soares da Costa Serviços Partilhados, SA. (4) Additionally, Sociedade de Construções Soares da Costa, SA holds a 4% participation in Auto-estradas XXI, S.A. and Operestradas XXI, SA. (5) Additionally, Sociedade de Construções Soares da Costa, S.A. holds a 0.004% participation in Exproestradas XXI, S.A. (6) Additionally, SDC Concessões SGPS and Hidroequador Santomense hold, each, a 0.002% participation in SDC Hidroenergia, SA. (7) Additionally, Clear Angola, S.A. holds a 2% participation in Costa Sul, Lda. and in Imosede, Lda. (8) Company held (16.302%) by Soares da Costa Concessões, SGPS and by (0.002%) Sociedade de Construções Soares da Costa, S.A. (9) Additionally, Intevias Serviços e Gestão, S.A. holds a 0.002% of Portvias, S.A. (10) Additionally, Grupo Soares da Costa, SGPS, S.A. holds a 0.5% participation in Indáqua Feira, S.A. (11) Additionally, Sociedade de Construções Soares da Costa, S.A. Holds a 1% stake in MTA, LDA. and in Carta Angola, Lda. 34,3% SDC Concessões, SGPS, SA SDC Concessions USA, Inc SCUTVIAS, SA 33,33% 33,33% 0,002% MRN Man. Rod.Nacionais 33,33% Portvias, S.A. (9) 46% Auto-estradas XXI, S.A. (4) 16,3% Elos OM, S.A. 16,3% Elos, S.A. (8) 17% 17% 50% Ute Efacec/Self Energy 45% Self Energy Moçambique 49,5% Larvick Espanha 25% MY WATT, LDA Global Azoague, S.L. 50% 10% Roof Tops of Spain, S.A. Soares da Costa I Report & Accounts I First Half