Letter to shareholders following the publication of Unibep Group’s results for 2023
On 18 April 2024, Unibep SA published its annual report for 2023. Below is a letter from Dariusz Blocher, President of the Management Board of Unibep SA, addressed to the shareholders.
In 2023, the Unibep Capital Group achieved revenues from its core operations of approx. PLN 2.4 billion, marking an 8% increase compared to the previous year. At the same time, we recorded a net loss of approximately PLN 156 million, with the loss attributable to the shareholders of the parent company amounting to around PLN 166 million. These financial results reflect an analysis of operational risks in construction projects and changes in profitability estimates, as well as a challenging and dynamic business environment affected by numerous unfavourable internal and external factors.
The year 2023 was exceptionally challenging for the construction industry, characterised by a lower number of orders, high inflation, unprecedented increases in construction material prices, a persistent shortage of blue-collar and white-collar workers, due in part to the outflow of workers from Ukraine and rising labour costs resulting from increases in the minimum wage.
All these factors led to higher construction production costs for the ongoing projects. Approx. 30% of the contracts proved unprofitable and are nearing the end of the construction process, which, in accordance with accounting principles, required the creation of appropriate provisions for anticipated losses. In many cases, we did not reach suitable agreements with the clients regarding additional payments. Additionally, in the valuations of contracts with threatened deadlines, we accounted for the negative economic impact on the operating result.
In 2023, Unihouse SA incurred a net loss of approx. PLN 45 million. In the past year, the company underwent significant process and organisational changes aimed at adjusting the production capacity at the production plant in Bielsk Podlaski to the current economic and market conditions. Higher contract acquisition, which would allow the full utilization of the factory’s capacity, remains an ongoing challenge for Unihouse SA. We are currently preparing for implementation of various possible scenarios — from potential collaboration with an external partner to a possible change in ownership structure. As of the publication date of this report, no decisions in this regard have been made.
The sales of Unidevelopment SA reached PLN 316 million in 2023 (a decrease of approx. 5% year-over-year) and were in line with the projections outlined in the schedules of ongoing development projects. A small decrease in profitability of this segment year-over-year was caused by the sale of a significant portion of residential units to an institutional client, which usually entails a lower margin compared to sales to individual buyers.
The Unidevelopment Group is fully prepared for continued stable growth and the achievement of its goals. This includes both the completion of its current projects (with a land bank for approx. 48 hundred residential units), potential new collaboration opportunities with external partners, and the initiation of new expansion directions.
We have conducted a thorough review of internal processes, including contract acquisition, collaboration with support teams, and oversight of construction projects. As a result, the main objective of the optimisation activities in the organisation is to increase efficiency, strengthen operational and internal control processes and enhance risk management, all of which will contribute to achieving synergistic effects. The results of these initiatives, which are being or will soon be formalised, will be reflected in action plans of individual teams and financial strategies for each business segment. We closely monitor the market, analyse all risks, and develop various scenarios to be prepared for dynamic business and business-related changes.
For several months, we have been transforming our business: The greatest prospects for contract acquisition lie in the infrastructure as well as power and industrial construction sector. To this end, we are reorganising the Capital Group to secure contracts with higher profitability in the near future. This also applies to structural construction.
I hope that the introduced optimisation mechanisms will allow the Group to achieve measurable financial and operational benefits as early as 2024. This would contribute to improvement in the overall profitability of the Capital Group, and the operational profitability (EBIT) would return to the positive levels recorded in previous periods. It will be possible, among other things, thanks to actions aimed at reducing the Capital Group’s debt, which the Company’s Management Board undertook in the first months of 2024.
I would like to thank you for the positive signals from our partners in the capital market, indicating the approval of our actions and the trust in our company expressed by individual stakeholders. Our team has contributed significantly through highly diligent and open communication and by nurturing excellent investor relations. This is evident in both explaining the current financial situation and outlining action plans for the upcoming periods.
In 2023 the Unibep Capital Group secured agreements with a total value of approx. PLN 2.4 billion, providing a solid foundation for performance in 2024 and subsequent years, with an order portfolio worth approx. PLN 3.6 billion. Additionally, the value of agreements awaiting finalisation, where our offer received the highest evaluation, currently stands at approx. PLN 1 billion. Since the beginning of 2024, we have signed agreements worth approx. PLN 600 million.
In recent months, we have met multiple times with employees to present the vision for the Capital Group's development and to discuss the challenges ahead of us. Seeing the commitment and openness, we are encouraged by the team's attitude — employees are motivated and engaged in the ongoing changes and are aware of the challenging situation. This bodes well for the future.
We are determined to achieve our set goals by implementing the ESG strategy adopted at the end of 2022 and focusing on the development of our company and employees.
Read the consolidated annual report