Financial Position of Budimex Group - Managing of finance at the Budimex Group

Managing of finance at the Budimex Group

The cash balance of the Budimex Group as at 31 December 2015 amounted to PLN 2,413,126 thousand and was by PLN 581,474 thousand higher than as at 31 December 2014. In 2015, Budimex SA paid out a dividend in the amount of PLN 155,989 thousand. Over 2015, Budimex Nieruchomości sp. z o.o. invested also 151,649 of its own funds in land for development activities. The generation of cash at the above level, despite the dividend payout and the mentioned expenses for land, was possible mainly due to: high profitability of Group companies in all business segments in 2015, as well as sustained favourable tendencies in working capital in the construction segment during the second half of 2015, including an increase in the net balance of advance payments on contracts received from customers in the construction segment, and an increase in the net balance of payments received from customers in the development segment.

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 companies reported an external debt in respect of bank loans and borrowings and other external sources of financing, including finance lease liabilities, which as at 31 December 2015 amounted to PLN 64,341 thousand, hence it was by PLN 3,359 thousand lower than as at 31 December 2014 (see table below). The Group’s debt is mainly composed of: loan incurred by Budimex Parking Wrocław Sp. z o.o. to finance the car park concession (car park at Hala Stulecia in Wrocław) and the liabilities of Budimex SA under finance lease agreements (concluded in order to finance purchases of property, plant and equipment — primarily machines and equipment for performing roadwork contracts). As at the end of 2015, the Group had no debt in respect of bank loans to finance the development business.

Liabilities due to bank loans and borrowings and other external sources of financing:	31.12.2015	31.12.2014	31.12.2013
- long-term	44 563	46 298	34 355
- short-term	19 778	21 402	19 729
Total	64 341	67 700	54 084

The following ratios illustrate the structure of financing at the Budimex Group:

Ratio	31.12.2015	31.12.2014	31.12.2013
Equity to assets ratio: (equity attributable to the shareholders of the Parent Company) / (total assets)	0,13	0,13	0,17
Equity to non-current assets ratio: (shareholders’ equity attributable to the shareholders of the Parent Company) / (non-current assets)	0,73	0,77	1,01
Debt ratio: (total assets — equity attributable to the shareholders of the Parent Company) / (total assets)	0,87	0,87	0,83
Debt to equity ratio: (total assets — equity attributable to the shareholders of the Parent Company) / (equity attributable to the shareholders of the Parent Company)	6,87	6,43	4,89

At the end of 2015, ratios illustrating the Group’s equity structure did not show any material differences as compared with the position at the end of 2014. A significant increase in the balance sheet total, predominantly due to the aforementioned increase in advance payments and the accompanying increase in the cash balance, led to an increase of the debt to equity ratio.

Liquidity ratios, although slightly lower than as at the end of 2014, remain at the level close to the level recorded at the end of 2015.

Ratio	31.12.2015	31.12.2014	31.12.2013
Current ratio (current assets) / (current liabilities)	1,06	1,09	1,14
Quick ratio (current assets — inventories) / (current liabilities)	0,83	0,87	0,88

Due to the current very good financial standing of the Budimex Group, cash resources, access to credit limits and insignificant level of financial debt, there are no threats to the Group’s ability to finance its business activities in 2016.