Financial Position of Budimex Group - Key economic and financial data of the Budimex Group

Key economic and financial data of the Budimex Group

The financial position of the Budimex Group in 2015 is characterised by selected financial and economic data disclosed in the Statement of Financial Position and the Profit and Loss Account (broken down below together with the 2014 comparative data).

Consolidated statement of financial position of the Budimex Group

The main items of the Consolidated Statement of Financial Position of the Budimex Group as at 31 December 2015, compared with 31 December 2014, are presented in the table below:

ASSETS (PLN THOUSAND)	31.12.2015	31.12.2014	Change	Change %
Non-current assets (long-term)	821,207	677,496	143,711	21.2%
Property, plant and equipment	83,248	79,513	3,735	4.7%
Investment properties	63,410	24,994	38,416	153.7%
Intangible assets	4,000	4,494	(494)	(11.0%)
Goodwill of subsidiaries	73,237	73,237	0	0.0%
Investments in equity accounted entities	45,762	7,539	38,223	507.0%
Available-for-sale financial assets	9,247	8,376	871	10.4%
Retentions for construction contracts	20,388	27,923	(7,535)	(27.0%)
Trade and other receivables	34,909	29,945	4,964	16.6%
Receivables from concession agreement	45,688	45,214	474	1.0%
Other financial assets	396	-	396	100.0%
Deferred tax assets	440,922	376,261	64,661	17.2%
Current assets (short-term)	3,892,157	3,180,713	711,444	22.4%
Inventories	867,581	648,655	218,926	33.8%
Trade and other receivables	420,558	495,364	(74,806)	(15.1%)
Retentions for construction contracts	16,276	10,248	6,028	58.8%
Amounts due and receivable from customers under construction contracts	171,763	172,548	(785)	(0.5%)
Current income tax receivables	421	265	156	58.9%
Other financial assets	2,432	19,800	(17,368)	(87.7%)
Cash and cash equivalents	2,413,126	1,831,652	581,474	31.7%
Non-current assets (disposal groups) classified as held for sale	-	2,181	(2,181)	(100.0%)
TOTAL ASSETS	4,713,364	3,858,209	855,155	22.2%

EQUITY AND LIABILITIES	31.12.2015	31.12.2014	Change	Change %
Equity attributable to the shareholders of the Parent Company	599,206	519,265	79,941	15.4%
Share capital	145,848	145,848	-	0.0%
Share premium	87,163	87,163	-	0.0%
Other reserve capitals	4,801	4,816	(15)	(0.3%)
Foreign exchange differences on translation of foreign operations	5,425	5,326	99	1.9%
Retained earnings	355,969	276,112	79,857	28.9%
Non-controlling interests	3,918	3,244	674	20.8%
Total equity	603,124	522,509	80,615	15.4%
Liabilities	4,110,240	3,335,700	774,540	23.2%
Non-current liabilities	444,226	412,629	31,597	7.7%
Loans, borrowings and other external sources of finance	44,563	46,298	(1,735)	(3.7%)
Retentions for construction contracts	207,239	176,116	31,123	17.7%
Provisions for non-current liabilities and other charges	181,691	179,169	2,522	1.4%
Retirement benefits and similar liabilities	7,657	6,121	1,536	25.1%
Other financial liabilities	3,076	4,925	(1,849)	(37.5%)
Current liabilities	3,666,014	2,923,071	742,943	25.4%
Loans, borrowings and other external sources of finance	19,778	21,402	(1,624)	(7.6%)
Trade and other liabilities	1,135,894	1,117,743	18,151	1.6%
Retentions for construction contracts	168,033	201,207	(33,174)	(16.5%)
Amounts due and payable to customers under construction contracts	1,239,940	920,668	319,272	34.7%
Deferred income	896,448	520,766	375,682	72.1%
Provisions for current liabilities and other charges	135,565	111,598	23,967	21.5%
Current tax liabilities	67,568	26,291	41,277	157.0%
Retirement benefits and similar liabilities	1,350	1,080	270	25.0%
Other financial liabilities	1,438	2,316	(878)	(37.9%)
TOTAL EQUITY AND LIABILITIES	4,713,364	3,858,209	855,155	22.2%

As at 31 December 2015, consolidated total assets increased by PLN 855,155 thousand compared with the end of December 2014, mainly due to a 21.2% (PLN 143,711 thousand) increase in non-current assets and a 22.4% (PLN 711,444 thousand) increase in current assets.

Non-current assets (long-term):

The change in non-current assets as at 31 December 2015 as compared with 31 December 2014 was triggered mainly by the following factors:

• an increase in the balance of investment properties due to the purchase of properties for rent by the development segment with the value of PLN 38,788 thousand,
• an increase in investments in equity accounted entities due to the conversion of the borrowing into capital in the affiliated company FBSerwis SA in the amount of PLN 41,650 thousand, with a simultaneous balance decrease by PLN 3,427 thousand due to losses of affiliated entities,
• an increase in the balance of deferred income tax assets by PLN 64,661 thousand as a result of creation of assets in the amount of PLN 61,008 thousand, a reversal of the reserve in the amount of PLN 3,467 thousand and other changes in the amount of PLN 186 thousand.

Current assets (short-term):

In the same period, the value of current assets increased by PLN 711,444 thousand, mainly as a result of an increase in:

• the balance of inventories by PLN 218,926 thousand, mainly due to a larger scale of development business,
• the balance of cash and cash equivalents by PLN 581,474 thousand,

with a simultaneous decrease in:

• the balance of trade and other receivables by PLN 74,806 thousand,
• the balance of other financial assets by PLN 17,368 thousand, mainly related to the conversion of borrowings granted to an affiliated entity.

Equity and liabilities:

On the equity and liabilities’ side, the main changes related to the following:

• an increase in the value of non-current liabilities by PLN 31,597 thousand, mainly due to an increase in the balance of liabilities under long-term retentions by PLN 31,123 thousand,
• an increase in current (short-term) liabilities by PLN 742,943 thousand, of which major changes were related to the following:
  • an increase in amounts due to customers under construction contracts by PLN 319,272 thousand, being a result of an increased scale of construction activities of the Group,
  • an increase in the balance of deferred income by PLN 375,682 thousand, mainly due to advance payments towards implemented contracts and payments for flats in development business.

Consolidated Profit and Loss Account of the Budimex Group

CONSOLIDATED PROFIT AND LOSS ACCOUNT	01.01 - 31.12.2015	01.01 - 31.12.2014	Change	Change %
Net revenue from sales of products, services, goods and materials	5 133 994	4 949 939	184 055	3,7%
Cost of products, services, goods and materials sold	(4 641 280)	(4 517 259)	(124 021)	2,7%
Gross profit on sales	492 714	432 680	60 034	13,9%
Selling costs	(29 742)	(27 660)	(2 082)	7,5%
General and administrative costs	(190 081)	(177 743)	(12 338)	6,9%
Other operating income	56 205	60 191	(3 986)	(6,6%)
Other operating costs	(36 878)	(40 150)	3 272	(8,1%)
Operating profit	292 218	247 318	44 900	18,2%
Financial income	39 545	42 841	(3 296)	(7,7%)
Financial costs	(31 535)	(41 688)	10 153	(24,4%)
Shares in net (losses) of subsidiary companies valued using equity method	(3 427)	(5 852)	2 425	(41,4%)
Gross profit	296 801	242 619	54 182	22,3%
Income tax	(60 281)	(48 681)	(11 600)	23,8%
Net profit for the period	236 520	193 938	42 582	22,0%
of which:
attributable to the shareholders of the Company	235 846	191 973	43 873	22,9%
attributable to non-controlling interests	674	1 965	(1 291)	(65,7%)

In 2015, the Budimex Group earned sales revenue of PLN 5,133,994 thousand, which represents an increase by 3.72% compared with the result for 2014.

Gross profit on sales in 2015 was PLN 492,714 thousand, while in the previous year it amounted to PLN 432,680 thousand. Hence, gross sales profitability in 2015 was 9.60%, as compared with 8.74% in 2014.
In accordance with the accounting policies adopted, when budgeted construction contract costs exceed the entire expected contract revenue, Group companies create provisions for expected contract losses and recognise them under “Amounts due and payable to customers under construction contracts” in the consolidated report on financial activity. As at 31 December 2015, the balance of provisions for contract losses amounted to PLN 629,689 thousand. In 2015, the balance of the provisions for contract losses increased by PLN 184,531 thousand.

Selling expenses increased in the period of 12 months ended 31 December 2015 by PLN 2,082 thousand, as compared with the year before, while general and administrative costs are by PLN 12,338 thousand higher than expenses incurred in 2014. The share of selling and general and administrative costs in total sales increased from 4.15% in 2014 to 4.28% in the current year.

Other operating income in 2015 amounted to PLN 56,205 thousand and included, among others, received compensations and liquidated damages in the amount of PLN 14,929 thousand, reversal of the provisions for penalties and sanctions in the amount of PLN 4,346 thousand, reversal of the provisions for restructuring in the amount of PLN 2,769 thousand, reversal of impairment write-downs against receivables in the amount of PLN 9,719 thousand and a write-off of overdue liabilities in the amount of PLN 3,698 thousand. Additionally, in 2015, Group companies disposed of property, plant and equipment and investment properties, and reported a total gain on the disposal of PLN 16,829 thousand. The net value of the property, plant and equipment disposed in 2015 amounted to PLN 3,997 thousand, whereas the value of fixed assets for sale amounted to PLN 2,181 thousand. The sale transaction of assets for sale was completed on 24 February 2015. Profit on this operation amounted to PLN 11,819 thousand and was included in the segment of development activities and property management.

Besides, in 2015, the Group reported profit on valuation and realisation of FX Forward derivative instruments and currency options (concluded with a view to limiting the FX risk on foreign currency construction contracts) in the amount of PLN 2,654 thousand.

Other operating expenses in the period of 12 months ended 31 December 2015 amounted to PLN 36,878 thousand, of which PLN 4,796 thousand related to impairment write-downs against receivables, and PLN 2,533 thousand related to recognised impairment write-downs against inventories. The costs of recognised provisions for litigation amounted to PLN 855 thousand and the amount of PLN 11,212 thousand related to provisions for penalties and compensations. The value of compensations and liquidated damages charged to the Group result in 2015 was PLN 14,900 thousand. In turn, costs of court fees and enforcement procedures, as well as litigation costs amounted to PLN 990 thousand.

In 2015, the Group reported an operating profit of PLN 292,218 thousand, representing 5.69% of total sales revenue.

In the previous year, the operating profit amounted to PLN 247,318 thousand, representing 5.00% of sales revenues.

In the 12-month period ended 31 December 2015, the Group reported a profit on financing activities of PLN 8,010 thousand, in comparison with PLN 1,153 thousand of reported profit in 2014. Financial costs in 2015 represented, among others, interest costs of PLN 4,186 thousand, bank commissions paid by the Group companies on guarantees and loans of PLN 20,766 thousand, costs of discounting long-term receivables and liabilities arising from guarantee deposits in the amount of PLN 5,346 thousand. In 2015, the Group also incurred a loss on realisation of interest rate swap derivative instrument contracts (concluded with a view to limiting the interest risk) in the amount of PLN 627 thousand, at the same time reporting profit on valuation of these instruments in the amount of PLN 349 thousand. Finance income for 2015 comprised mainly interest in the amount of PLN 35,630 thousand, valuation receivables from a concession agreement in the amount of PLN 2,956 thousand and a reversal of discounting of long-term receivables in the amount of PLN 510 thousand.

The Group ended the year 2015 with a gross profit of PLN 296,801 thousand, and the previous year — with a gross profit of PLN 242,619 thousand.
Income tax charge for 2015 was PLN 60,281 thousand, of which:

• current tax: PLN 124,604 thousand,
• deferred tax: PLN (64,323) thousand.

As at 31 December 2015, the Group recognised deferred tax assets in the amount of PLN 440,922 thousand, while as at 31 December 2014 the Group recognised deferred tax assets of PLN 376,261 thousand. Items of deferred tax assets of the Budimex Group reported in the Statement of Financial Position result mainly from the specific method of settlement for construction contracts, under which the moment of recognition of costs as incurred and revenue as earned is different from the tax and accounting perspective.

Net profit attributable to the shareholders of Budimex SA for 2015 was PLN 235,846 thousand, while the net profit attributable to the shareholders of Budimex SA for 2014 was PLN 191,973 thousand.

Net profit attributable to non-controlling interest for 2015 amounted to PLN 674 thousand. In the corresponding period of the previous year, the net profit attributable to non-controlling interest amounted to PLN 1,965 thousand.

Statement of Cash Flow

Cash and cash equivalents included in the Statement of Cash Flow comprise cash in 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:

• security for bank guarantees,
• amounts gathered on open housing escrow accounts,
• amounts on escrow and current accounts in the part due to partners executing construction contracts together with a Group company,

provided their maturity does not exceed 3 months.

The Budimex Group entered the year 2015 with cash on hand and cash at bank amounting to a total of PLN 1,831,652 thousand. For the purpose of the Statement of Cash Flow, this amount was reduced by the amount of cash of restricted use of PLN 104,962 thousand. Net cash flow for 2015 was positive and amounted to PLN 457,287 thousand. As at 31 December 2015, the Group’s reported cash balance was PLN 2,413,126 thousand, of which the cash of restricted use was PLN 229,049 thousand.

In 2015, the balance of cash from operating activities increased by PLN 699,259 thousand.

Cash flow from investing activities showed a negative balance of PLN 70,462 thousand which was mainly a result of the acquisition of non-financial fixed assets, purchase of additional shares in FBSerwis SA and loans granted.
Cash flow from financing activities for 2015 showed a negative balance which amounted to PLN 171,510 thousand and resulted mainly from the 2014 dividend payment.