Mint of Poland reports FY 2019 consolidated performance
Mint of Poland Group has released its consolidated interim reports for Q4 2019 and cumulatively for Q1-Q4 2019. Excluding one-off and extraordinary events, the FY 2019 consolidated result on sales was PLN 25 million, the FY 2019 consolidated EBITDA was PLN 45 million and the FY 2019 consolidated net profit was PLN 11 million. As compared to the FY 2018 results, the relatively weaker performance in FY 2019 was mainly due to significant positive effect of one-offs recorded in 2018.
The FY 2019 consolidated result on sales was PLN 25 million (vs. PLN 86 million in FY 2018), the FY 2019 consolidated EBITDA was PLN 45 million (vs. PLN 102 million in FY 2018), and the adjusted consolidated net profit was PLN 11 million (vs. PLN 59 million in FY 2018). The FY 2019 consolidated net sales revenue was PLN 669 million (vs. PLN 1 billion in FY 2018).
The higher result on sales in FY 2018 is attributable to several significant factors. In the Real Estate Development segment, 179 apartments in the “Mennica Residence I” project were sold in 2018. Throughout 2019, the two real estate development projects implemented in the segment (“Mennica Residence II” and “Bulwary Praskie”) were at the construction stage, which will impact on the result on sales in subsequent reporting periods. In the Mint Products segment, a major sale contract of golden medals with the Treasury Department in the Finance Ministry of Thailand in Thailand was completed. In the segment of Electronic Payments, an additional commission was settled for the final period of the outgoing contract under the Wrocław City Card (“URBANCARD”) project in 2018.
The Mint Products segment accounted for the largest share in the FY 2019 consolidated sales revenues (58.1 percent). The segment’s sales revenues reached PLN 389.4 million (vs. PLN 593.7 million in 2018).
–The main reason for lower sales revenues in the Mint Products segment in 2019 as compared to 2018 was that in January 2018, the final, larger batch of golden medals ordered by the Treasury Department in the Finance Ministry of Thailand was delivered. In Q4 2019, the sales revenues were already higher on a year-on-year basis by PLN 7.6 million, at PLN 95.2 million in Q4 2019 against PLN 87.6 million in Q4 2018 – explains Artur Jastrząb, CFO, Mennica Polska S.A.
The segment generated a year-on-year higher operating result both in Q4 2019 (up by PLN 2.4 million vs. Q4 2018) and in FY 2019 (up by PLN 3.6 million vs. FY 2018) as well as a higher FY 2019 EBITDA (up by PLN 1.9 million vs. FY 2018).
On the domestic market, in 2019 the Mint of Poland made deliveries of coins for general circulation in all denominations on the commission of the National Bank of Poland. Also, several percent more collector coins than the year before were produced for the same client.
On the international market, sale of coins for general circulation to central banks accounted for 60 percent of all export sales. In 2019, the Mint of Poland delivered coins for the Central Bank of Columbia and completed the production of general circulation coins in two denominations for the Bank of Costa Rica. At the beginning of 2019, the Company also won the contract for the manufacture of platinum medals for the Treasury Ministry of Thailand. The contract value was almost PLN 7 million.
During the reporting period, the Mint of Poland was also active in new tender procedures abroad. In the area of general circulation coins, the Company signed contracts with: the Bank of Costa Rica, the Central Bank of the Dominican Republic and the Central Bank of Paraguay. As for the area of collector coins, in 2019 the Mint of Poland signed another contract with the National Bank of Tajikistan (the Company has cooperated with this client for 2 years) and the sale for the Central Bank of Oman was also invoiced. At the same time, a substantial rise in orders from Ukraine was observed – the Mint of Poland concluded distribution contracts with three Ukrainian commercial banks. Also, in South America, the Mint of Poland won two contracts for the manufacture of collector coins – contracts were signed with the Central Bank of Uruguay and the Central Bank of Nicaragua.
The share of the Electronic Payments segment in the FY 2019 consolidated sales revenues was 41.4 percent (up from 30.2 percent year-on-year). In 2019, year-on-year decreases were recorded in the segment’s revenues (from PLN 313.3 million in 2018 to PLN 277.4 million in 2019), result (from PLN 4.5 million in 2018 to PLN 3.3 million in 2019) and EBITDA (down to PLN (-)1.5 million). An important factor behind this change is the recognition in Q1 2018 of the additional commission under the contract for the Wroclaw Municipal Card (“URBANCARD”) that expired at the end of March 2018.
In 2019, the contract for installation of modern mobile ticket vending machines in all Warsaw trams enabling passengers to pay for tickets by card or smart phone was completed. The Warsaw Trams company, the operator of the tram system in the capital of Poland, signed with the Mint of Poland a contract for the lease of at least 583 modern ticket vending machines. The number of leased machines may be revised up by another 178 to be installed in newly-purchased trams.
Moreover, another 30 ticket vending machines were installed in the capital city of Poland (including at newly-opened metro stations). Mobile applications for ticket purchase (Mint Mobile Warszawa and Mint Mobile Łódź) were also launched in Łódź and Warsaw. The Mint of Poland continued works on acquisition of new projects using the innovative and award-winning Open Payment System.
Towards the end of the year, the Mint of Poland was certified with PCI Data Security Standard (PCI DSS), Merchant Level 1. This document confirms compliance with the restrictive requirements set by international payment organizations in terms of processing cardholder data. Every public transport user who purchases a public transport ticket in one of self-service machines owned by the Mint of Poland (stationary, mobile and smart validators located on buses and trams) is now guaranteed the maximum level of security.
Real Estate Development
In 2019, no significant sales revenues were recorded in the Real Estate Development segment and the segment’s profitability ratios were lower than the year before. This was mainly due to the ongoing implementation of two major real estate development projects: “Mennica Residence II” and “Bulwary Praskie”, without any final sales.
– Expenditures on our ongoing real estate development projects, which increase our inventories in the reported period, will continue to be recognised within inventories as work in progress until the signing of final contracts for the sale of apartments in the form of notary deeds – Artur Jastrząb explains.
In the “Mennica Residence” project, at the end of 2019 the sale of apartments (within the meaning of signed development agreements or preliminary sale agreements) closed with 188 agreements signed in Stage I (99.5 percent of all apartments available) and 338 development agreements signed in Stage II (99.12 percent of all apartments available).
In the “Bulwary Praskie” project, during the reported period design works commenced for the first three quarters where building permits are expected to be obtained at the turn of 2020/2021. In the meantime, the 110kV high-voltage overhead transmission line was replaced with an underground cable, which released about 4 hectares of land for construction of buildings. At the same time, work was carried out on the first multi-family building marked S1 (143 apartments). As at the end of last year, the sale of apartments closed with 124 development agreements or preliminary sale agreements (87.32 percent of all apartments available in Building S1). Building permits for Buildings S2 and S3 as well as R1, R2 and R3 (a total of 323 apartments) are expected to be obtained between July and October 2020.
The “Mennica Legacy Tower” project is presently in the phase of the acquired tenants taking over occupancy of their premises. At the same time, Golub GetHouse, a company responsible for management of the project, is currently conducting talks with a potential buyer for the office building. It is not possible to predict the potential date for completion of these talks. Only based on the final offer will the Mint of Poland be able to decide on what further steps to take. The Mint Group is one of the companies with controlling stake in the project company with respect to taking key decisions.
Impact of COVID-19 on operations of the Mint of Poland Group
Towards the end of 2019, first reports of an illness caused by infection with the coronavirus now known as SARS-CoV-2 started to come from China. In the first months of 2020, the virus spread all around the world. In the opinion of the Management Board of the Parent Company, no adjustments will need to made in the consolidated and non-consolidated financial statements for FY 2019 on account of this event as it should be considered to be an event after the balance-sheet date requiring additional disclosures.
– At the time of release of these consolidated financial statements, the situation is still changing very dynamically, but any risk to the financial result is effectively minimised by the fact that our Group's activities are highly diversified. One of the developments we can observe is increased turnover in the gold market due to investors looking for a safe haven for their capital. This, in turn, makes it possible to compensate for the repercussions of this situation in other segments of our business, such as electronic payments, where there is limited passenger mobility – comments Grzegorz Zambrzycki, President of the Management Board and Managing Director, Mennica Polska S.A.