The financial situation of the Budimex Group in 2012 is characterised by selected items disclosed in the Statement of Financial Position and Profit and Loss Account (broken down below together with the 2011 comparative data)1.
The main items of the Consolidated Statement of Financial Position of the Budimex Group as at 31 December 2012, compared to 31 December 2011, are presented in the table below:
| ASSETS | 31.12.2012 | 31.12.2011 | Change | Change % |
|---|---|---|---|---|
| Non-current assets | 559,807 | 801,210 | (241,403) | -30.1% |
| Property, plant and equipment | 111,192 | 274,001 | (162,809) | -59.4% |
| Investment properties | 3,256 | 3,278 | (22) | -0.7% |
| Intangible assets | 2,992 | 7,489 | (4,497) | -60.0% |
| Goodwill of subordinates | 73,237 | 134,356 | (61,119) | -45.5% |
| Investments in equity accounted entities | 16,966 | 13,503 | 3,463 | 25.6% |
| Available-for-sale financial assets | 17,135 | 12,146 | 4,989 | 41.1% |
| Retentions for construction contracts | 19,202 | 37,883 | (18,681) | -49.3% |
| Other long-term receivables | - | 24 | (24) | -100.0% |
| Long-term prepayments and deferred costs | 4,176 | 6,498 | (2,322) | -35.7% |
| Deferred tax assets | 311,651 | 312,032 | (381) | -0.1% |
| Current assets | 2,888,404 | 3,661,350 | (772,946) | -21.1% |
| Inventories | 876,206 | 1,115,558 | (239,352) | -21.5% |
| Trade and other receivables | 401,836 | 511,961 | (110,125) | -21.5% |
| Retentions for construction contracts | 49,419 | 22,394 | 27,025 | 120.7% |
| Amounts due and receivable from customers under construction contracts | 227,490 | 229,762 | (2,272) | -1.0% |
| Current tax assets | 935 | 5,985 | (5,050) | -84.4% |
| Derivative financial instruments | 5,724 | 141 | 5,583 | 3959.6% |
| Cash and cash equivalents | 1,317,733 | 1,761,630 | (443,897) | -25.2% |
| Short-term prepayments and deferred costs | 9,061 | 13,919 | (4,858) | -34.9% |
| TOTAL ASSETS | 3,448,211 | 4,462,560 | (1,014,349) | -22.7% |
1) comparative data for 2011 changed due to a modification of the provisionally determined fair value of the net assets of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. and goodwill impairment. The change did not affect prior reporting periods.
| EQUITY AND LIABILITIES | 31.12.2012 | 31.12.2011 | Change | Change % |
|---|---|---|---|---|
| Shareholders' equity attributable to the shareholders of the Parent Company | 433,130 | 525,830 | (92,700) | -17.6% |
| Share capital | 145,848 | 145,848 | - | 0.0% |
| Share premium | 234,799 | 234,799 | - | 0.0% |
| Other reserves | 2,705 | 1,283 | 1,422 | 110.8% |
| Foreign exchange differences on translation of foreign operations | 2,190 | 2,229 | (39) | -1.7% |
| Retained earnings | 47,588 | 141,671 | (94,083) | -66.4% |
| Non-controlling interests | - | - | - | 0.0% |
| Total shareholders' equity | 433,130 | 525,830 | (92,700) | -17.6% |
| Liabilities | 3,015,081 | 3,936,730 | (921,649) | -23.4% |
| Non-current liabilities | 382,378 | 360,153 | 22,225 | 6.2% |
| Loans, borrowings and other external sources of finance | 75,967 | 73,981 | 1,986 | 2.7% |
| Retentions for construction contracts | 161,143 | 150,122 | 11,021 | 7.3% |
| Provisions for non-current liabilities and other charges | 141,521 | 124,665 | 16,856 | 13.5% |
| Retirement benefits and similar obligations | 3,747 | 11,385 | (7,638) | -67.1% |
| Current liabilities | 2,632,703 | 3,576,577 | (943,874) | -26.4% |
| Loans, borrowings and other external sources of finance | 17,718 | 37,753 | (20,035) | -53.1% |
| Trade and other liabilities | 1,287,594 | 1,698,239 | (410,645) | -24.2% |
| Retentions for construction contracts | 222,146 | 153,436 | 68,710 | 44.8% |
| Amounts due and payable to customers under construction contracts | 534,870 | 1,037,987 | (503,117) | -48.5% |
| Prepayments received | 274,050 | 357,956 | (83,906) | -23.4% |
| Provisions for current liabilities and other charges | 116,060 | 105,529 | 10,531 | 10.0% |
| Current tax liability | 6,225 | - | 6,225 | 100.0% |
| Retirement benefits and similar obligations | 1,036 | 5,044 | (4,008) | -79,5% |
| Derivative financial instruments | 257 | 12,330 | (12,073) | -97.9% |
| Short-term accruals | 161,608 | 162,231 | (623) | -0.4% |
| Short-term deferred income | 11,139 | 6,072 | 5,067 | 83.4% |
| TOTAL EQUITY AND LIABILITIES | 3,448,211 | 4,462,560 | (1,014,349) | -22.7% |
As at 31 December 2012, consolidated total assets decreased by PLN 1,014,349 thousand, compared to the end of December 2011, mainly due to a 30.1% (PLN 241,403 thousand) decrease in non-current assets and a 21.1% (PLN 772,946 thousand) decrease in current assets.
Decrease in the value of non-current assets as at 31 December 2012 compared to 31 December 2011 was caused mainly by the following:
In the same period, the value of current assets decreased by PLN 772,946 thousand, mainly as a result of a decrease in:
with a simultaneous increase in the balance of short-term retentions for construction contracts by PLN 27,025 thousand.
On the equity and liabilities side, the main changes related to the following:
| TOTAL EQUITY AND LIABILITIES | 01.01 - 31.12.2012 | 01.01 - 31.12.2011 | Change | Change % |
|---|---|---|---|---|
| Net revenue from sales of products, services and goods for resale and raw materials | 6,077,660 | 5,516,487 | 561,173 | 10.2% |
| Cost of finished goods, services, goods for resale and raw materials sold | (5,617,789) | (5,059,721) | (558,068) | 11.0% |
| Gross profit on sales | 459,871 | 456,766 | 3,105 | 0.7% |
| Selling expenses | (24,371) | (24,529) | 158 | -0.6% |
| Administrative expenses | (193,362) | (138,087) | (55,275) | 40.0% |
| Other operating income | 65,780 | 86,338 | (20,558) | -23.8% |
| Other operating expenses | (139,172) | (234,619) | 95,447 | -40.7% |
| Gains/ (losses) on derivative financial instruments | 13,663 | (11,218) | 24,881 | -221.8% |
| Operating profit | 182,409 | 134,651 | 47,758 | 35.5% |
| Finance income | 67,063 | 54,457 | 12,606 | 23.1% |
| Finance costs | (40,723) | (44,777) | 4,054 | -9.1% |
| Share in net profits / (losses) of equity accounted subordinates | (6,121) | (2,537) | (3,584) | 141.3% |
| Gross profit | 202,628 | 141,794 | 60,834 | 42.9% |
| Income tax | (16,646) | (66,200) | 49,554 | -74.9% |
| Net profit for the period | 185,982 | 75,594 | 110,388 | 146.0% |
| of which: | ||||
| Attributable to the shareholders of the Company | 185,982 | 75,594 | 110,388 | 146.0% |
| Attributable to non-controlling interests | - | - | - | - |
In 2012, the Budimex Group earned a sales revenue of PLN 6,077,660 thousand, which represents a 10.2% increase compared to the result for 2011.
Gross profit on sales in 2012 was PLN 459,871 thousand, while in the prior year – PLN 456,766 thousand. The gross sales profitability ratio for 2012 was therefore 7.57%, while for 2011 – 8.28%.
In accordance with the adopted accounting policies, where budgeted contract costs exceed the entire expected contract revenues, Group companies create provisions for expected contract losses and recognize them under “Amounts due and payable to customers under construction contracts”. In subsequent periods, a part of the earlier created provision is reversed in proportion to the percentage of contract completion, after taking into account a total negative margin on the entire contract. As at 31 December 2012, the balance of the provision for contract losses amounted to PLN 228,439 thousand. In 2012, the balance of the provision for contract losses decreased by PLN 267,372 thousand, of which PLN 137,345 thousand was due to discontinuing the consolidation of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o.
Compared to the prior year, selling expenses decreased in the twelve-month period ended 31 December 2012 by PLN 158 thousand, while administrative expenses were PLN 55,275 thousand higher than the expenses incurred in 2011. The share of the sum total of selling and administrative expenses in total sales revenue increased from 2.95% in 2011 to 3.58% in the current year.
Other operating income in 2012 was PLN 65,780 thousand and comprised, among others, received compensations and liquidated damages in the amount of PLN 39,996 thousand, reversal of the provision for penalties and sanctions in the amount of PLN 3,116 thousand, reversal of impairment write-downs against doubtful receivables in the amount of PLN 13,541 thousand, as well as reversal of the provision for litigation in the amount of PLN 1,592 thousand. In addition, in 2012, Group companies sold property, plant and equipment and investment properties and earned a profit on those sales in the total amount of PLN 4,042 thousand. The net carrying amount of the property, plant and equipment sold in 2012 was PLN 315 thousand.
Other operating expenses in the 12-month period ended 31 December 2012 amounted to PLN 139,172 thousand, of which PLN 13,194 thousand related to impairment write-downs against receivables, PLN 13,246 thousand – to recognised impairment write-downs against inventories, and PLN 45,000 thousand concerned impairment write-downs against the goodwill of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. The cost of restructuring provisions amounted to PLN 36,096 thousand, PLN 3,288 thousand concerned recognized provisions for litigation and PLN 7,236 thousand concerned recognized provisions for claims and penalties. The value of compensations and liquidated damages charged to the Group result in 2012 was PLN 3,373 thousand. Derecognition of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. resulted in a charge to other operating expenses of PLN 13,493 thousand.
In 2012, the Group reported a profit on valuation and realization of derivatives (made with a view to limiting the FX risk on foreign currency construction contracts) in the amount of PLN 13,663 thousand.
In 2012, the Group reported an operating profit of PLN 182,409 thousand, representing 3.00% of total sales revenues, while in the prior year – an operating profit of PLN 134,651 thousand, representing 2.44% of sales revenues.
In the 12-month period ended 31 December 2012, the Group reported a profit on financing activities of PLN 26,340 thousand, while in 2011 – a profit of PLN 9,680 thousand. Finance costs in 2012 represented, among others, interest costs of PLN 6,862 thousand, bank commissions on guarantees and loans of PLN 13,906 thousand paid by Group companies, cost of discounting long-term receivables and non-current liabilities arising from retentions for construction contracts in the amount of PLN 14,991 thousand, and the costs of recognition of impairment write-downs against shares in the company Inversora de Autopistas del Levante S.L. in the amount of PLN 4,916 thousand. Finance income in 2012 represented mainly interest received in the amount of PLN 63,894 thousand and the surplus of FX gains over losses of PLN 3,026 thousand.
In 2012, the Group reported a gross profit of PLN 202,628 thousand, while in the previous year – a gross profit of PLN 141,794 thousand.
Income tax liability for 2012 was PLN 16,646 thousand, of which:
As at 31 December 2012, the Group recognized a deferred tax asset in the amount of PLN 311,651 thousand, while as at 31 December 2011 – a deferred tax asset of PLN 312,032 thousand. Items of deferred tax asset reported in the Statement of Financial Position result mainly from the specific method of settlement of construction contracts, under which the moment of recognition of costs as incurred and revenue as earned is different from the tax and accounting perspective.
The net profit attributable to the shareholders of Budimex SA for 2012 was PLN 185,982 thousand, while the net profit attributable to the shareholders of Budimex SA for 2011 - PLN 75,594 thousand.
Cash and cash equivalents included in the Statement of Cash Flow comprise cash on hand and bank deposits which have a maturity period of 3 months or less and were not included under investing activities.
Included in cash of restricted use are mainly cash items representing:
provided their maturity does not exceed 3 months.
The Budimex Group entered the year 2012 with cash on hand and cash in bank amounting to a total of PLN 1,761,630 thousand. For the purpose of the Statement of Cash Flow, this amount was reduced by the amount of cash of restricted use of PLN 21,142 thousand. Net cash flow for the year 2012 was negative and amounted to PLN 433,825 thousand. As at 31 December 2012, the Group’s reported cash balance was PLN 1,317,733 thousand, of which the cash of restricted use was PLN 10,987 thousand.
In 2012, the balance of cash from operating activities decreased by PLN 44,147 thousand.
Cash flow from investing activities came out to a negative balance of PLN 98,693 thousand.
Cash flow from financing activities for 2012 showed a negative balance which amounted to PLN 290,985 thousand and resulted mainly from the 2011 dividend payment.
The cash balance of the Budimex Group as at 31 December 2012 amounted to PLN 1,317,733 thousand and was PLN 443,897 thousand lower than as at 31 December 2011. In the course of 2012, Budimex SA paid dividend in the amount of PLN 280,065 thousand, which exceeded the amount of net profit for 2011 adjusted in 2012. Furthermore, in the course of 2012, the company committed total funds of PLN 111,373 thousand towards financing Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. (including capital increases, advance payments on contracts and trade receivables) for which 100% impairment write-downs were made due to the announcing that company’s bankruptcy with an arrangement option. Given the above, one should consider that the amount of cash in the Group as at 31 December 2012 was very high. Generating cash assets at the above level was possible owing to positive profitability maintained by Group companies in 2012 as well as to sustained favourable tendencies in working capital which took place in the second half of 2012.
In accordance with the Group’s policy, cash surpluses were placed as bank deposits at banks with a good rating. In addition, Budimex SA used cash surpluses to finance its suppliers of services and raw materials. This had a positive effect on the financial liquidity of these suppliers, and generated extra finance income for Budimex SA.
The Budimex Group entities reported an external debt in respect of bank loans and borrowings and other external sources of finance, including finance lease liabilities, which as at 31 December 2012 amounted to PLN 93,685 thousand and was PLN 18,049 thousand lower than as at 31 December 2011 (see table below). The decrease in debt stems primarily from the fact that as at 31 December 2012, Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. was not subject to consolidation (Budimex SA lost control over the company in 2012) and thus, its debt did not increase the debt of the Budimex Group on the Group’s consolidated balance sheet as at 31 December 2012. The Group’s debt is mainly composed of the debt of Budimex SA under finance leases (concluded for the purpose of financing the purchase of property, plant and equipment – primarily machines and equipment for performing roadwork contracts) and the debt of Budimex Nieruchomości Sp. z o.o. under bank loans financing development activities.
| Bank loans and borrowings and other external sources of finance, of which: | 31.12.2012 | 31.12.2011 |
|---|---|---|
| - long-term | 75,967 | 73,981 |
| - short-term | 17,718 | 37,753 |
| Total | 93,685 | 111,734 |
The following ratios illustrate the structure of finance at the Budimex Group2:
| Ratio | 31.12.2012 | 31.12.2011 |
|---|---|---|
| Equity to assets ratio: (shareholders' equity attributable to the shareholders of the Parent Company)/ (total assets) |
0.13 | 0.12 |
| Equity to non-current assets ratio: (shareholders' equity attributable to the shareholders of the Parent Company)/ (total non-current assets) |
0.77 | 0.66 |
| Debt ratio: (total assets - shareholders' equity attributable to the shareholders of the Parent Company)/(total assets) |
0.87 | 0.88 |
| Assets to equity ratio: (total assets - shareholders’ equity attributable to the shareholders of the Parent Company)/(shareholders' equity attributable to the shareholders of the Parent Company) |
6.96 | 7.49 |
2) comparative data for 2011 changed due to a modification of the provisionally determined fair value of the net assets of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. and goodwill impairment. The change did not affect prior reporting periods.
At the end of 2012, the Group’s debt ratios decreased, whilst equity to assets or non-current assets ratios- increased (see table above). This was related to a significant decrease in total assets, which was large enough to offset the decrease in the Group’s shareholders’ equity due to dividend payment by Budimex SA in recent years and goodwill impairment write-downs due to the bankruptcy of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o.
Furthermore, there was an improvement in liquidity ratios (see table below). This was possible thanks to the high profitability of the Budimex Group companies operating in the construction and development segments, and thanks to the high balances of cash generated in both areas of business. This decrease occurred despite a large cash outflow relating to dividend payment and the investments into financing Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. by Budimex SA, as described above.
| Ratio | 31.12.2012 | 31.12.2011 |
|---|---|---|
| Current Ratio (current assets)/(current liabilities) |
1.10 | 1.02 |
| Quick Ratio (or Acid Test) (current assets - inventory)/(current liabilities) |
0.76 | 0.71 |
Due to the current very good financial standing of the Budimex Group and significant cash resources, there are no threats to the Group’s ability to finance its business activities in 2013.
Guarantees, suretyships, other liabilities and contingent liabilities:
| OFF-BALANCE SHEET ITEMS | 31.12.2012 | 31.12.2011 |
|---|---|---|
| Contingent receivables | 369,358 | 378,269 |
| From related parties, of which: | 2,372 | - |
| - guarantees and suretyships received | 2,372 | - |
| - bills of exchange received as security | - | - |
| From other entities, of which: | 363,986 | 378,269 |
| - guarantees and suretyships received | 349,791 | 358,041 |
| - bills of exchange received as security | 14,195 | 20,228 |
| Other contingent liabilities, of which: | 3,000 | - |
| - other off-balance-sheet liabilities | 3,000 | - |
| Contingent liabilities | 1,573,708 | 1,971,353 |
| To related parties, of which: | 803 | 503 |
| - guarantees and suretyships issued | 803 | 503 |
| - bills of exchange issued as security | - | - |
| To other entities, of which: | 1,429,725 | 1,832,131 |
| - guarantees and suretyships issued | 1,423,993 | 1,801,518 |
| - bills of exchange issued as security | 5,732 | 30,613 |
| Other contingent liabilities, of which: | 143,180 | 138,719 |
| - other off-balance-sheet liabilities | 143,180 | 138,719 |
| Total off-balance sheet liabilities | (1,204,350) | (1,593,084) |
Contingent receivables arising from guarantees and suretyships represent guarantees issued by banks or other entities in favour of Budimex Group companies serving as security for the Group’s claims against business partners in connection with executed construction contracts.
Contingent liabilities arising from guarantees and suretyships represent guarantees issued by banks to business partners of Group companies to secure their claims against Group companies that may arise on the grounds of executed construction contracts. The banks are entitled to recourse claims against Group companies under these guarantees.
The table below shows loan guarantees and suretyships issued by Budimex SA or its subsidiaries as at 31 December 2012:
| Name of the company granting a suretyship for a loan or borrowing or granting a guarantee | Name of the (company) entity to which suretyships or guarantees were granted | Total amount of loans or borrowings that has been duly guaranteed to the extent specified (PLN '000) |
Term for which suretyships or guarantees were granted | Financial terms on which suretyships or guarantees were granted | The nature of the relationship existing between BUDIMEX SA and the entity that incurred the loan or borrowing |
|---|---|---|---|---|---|
| Budimex SA | Mostostal Kraków SA | 50,184 | 2018-11-13 | free of charge | subsidiary |
| Budimex SA | Budimex Nieruchomości Sp. z o.o. | 13,576 | 2017-07-15 | free of charge | subsidiary |
| Budimex SA | Budimex Danwood SA | 26,060 | 2015-12-21 | free of charge | subsidiary |
| Budimex SA | FBSerwis SA | 803 | 2017-11-01 | free of charge | associate |
| Budimex SA | Budimex Bau GmbH | 210 | 2015-06-30 | free of charge | subsidiary |
| Budimex SA | Budimex Budownictwo Sp. z o.o. | 35,500 | 2020-02-12 | free of charge | subsidiary |
| TOTAL | 126,333 |
The Budimex Group did not publish any financial forecasts for 2012.
In the period covered by the report, no securities were issued outside the Group.