Budimex.pl

Executive Commentary of Dariusz Blocher, Chairman of the Management Board of Budimex S.A., on selected financial data

News date: July 26, 2017
Executive Commentary of Dariusz Blocher, Chairman of the Management Board of Budimex S.A., on selected financial data

Major achievements of the Budimex Group for the first half of 2017 have been the following: historically high order book, 12% year-on-year increase in sales, very strong financial performance at all levels of business activity, including a net profit of PLN 195 million and a significant extension of the land bank in the developer segment.

 

In the first half of the year, the construction and assembly production increased by 8.0%. During the same period, sales in the construction segment of the Budimex Group were by 10% higher compared to the same period of the previous year, and reached the level of PLN 2,597 million. The positive sales dynamics in the construction segment of the Group is expected to continue in subsequent quarters. The general construction section, with sales by 26% higher year-on-year was the driver of sales growth in the analysed period. Record awarded contracts in 2016 have translated into a significant increase of a share of building projects in sales of the construction segment in the first half of 2017.

 

Budimex Nieruchomości has recorded a significant sales growth. In the first half of 2017, 892 flats were handed over to clients, i.e. 106% more than in the same period last year. As a result, the sales in the developer segment reached the level of PLN 230 million, increasing by 81% year-on-year.

 

In the first half of 2017, the Budimex Group achieved very good results, improving them on every level: gross margin, operating result and net profit by: 17%, 40% and 33%, respectively, compared to the same period of the previous year. During the first six months of 2017, operating profitability at the Budimex Group reached the level of 9.2% of sales. However, since a few months, an increased price pressure can be noticed from subcontractors, as well as a significant growth of wages and material prices. Due to the increasingly difficult situation on the construction market maintaining the profitability level comparable to the first half of the year may prove impossible in subsequent quarters.

 

At the end of June 2017, the value of the Budimex Group order book again reached a historic high of PLN 9.6 billion and was higher by PLN 684 million than the value recorded as at the end of 2016. The construction season enters a peak production period, which – with a positive sales dynamics – can affect the value of outstanding orders in subsequent quarters.

 

Within six months of 2017, the Budimex Group signed contracts worth PLN 3.2 billion. The value of the contracts signed is similar to the value in the corresponding period of 2016, while their structure significantly differs. Due to a revival in the infrastructure and railway tender market, a share of building contracts dropped from 45% in the first half of 2016 to 32% in 2017.

 

An estimated value of contracts signed by PKP PLK within the framework of the National Railway Programme exceeded PLN 9 billion net in the first half of 2017. As announced by the railway investor, the amount may exceed PLN 20 million by the end of 2017. In the first half of 2017, the Budimex Group signed with PKP PLK contracts totalling PLN 1,003 million (excluding consortium embers), which is 32% of the total value of acquired contracts. Consequently, we achieved the objective set, which was to build up the railway order book of PLN 1 billion. Additionally, in July 2017, we submitted the best priced bids for the modernisation of the E-30 Trzebinia-Krzeszowice railway line, with a value of PLN 299 million in part due to the Budimex Group, and for construction of the Warsaw Main Railway Station with a value of PLN 96 million.

 

We have been observing a revival in the road infrastructure market for a few months. After a period of a slowdown on the market of tenders announced by the General Directorate for National Roads and Motorways in 2016, a fierce price competition could be noticed in the first quarter of 2017. In the second quarter of 2017, the Budimex Group submitted the best bids in four tenders announced by the General Directorate for National Roads and Motorways, with a total value of PLN 885 million.

 

We are consistently pursuing the strategy involving adding new construction market segments to our business, strengthening our position on the energy and gas transmission market. In July 2017, we signed with Tameh Polska Sp. z o.o. the contract for construction of a gas power unit with a value of PLN 126 million. We are starting the project involving construction of a new heat and power plant in Vilnius, where the Ordering Party has issued the order to start the works. On the gas transmission market, the consortium including Budimex SA submitted the lowest price bid for construction of the Brzeg-Kiełczów section of a pipeline, with a value of PLN 188 million and the second one, considering the value, for construction of the Strachocina-Pogórska Wola section of a pipeline with a value of PLN 413 million – however, both bids are above the Ordering Party’s budget.

 

In the first half of 2017, we observed a decrease in the cash level, which is typical of this period. At the end of June, net cash position was PLN 1,288 million. In 2017, a balance of cash decreased mainly as a result of seasonally lower cash flows from operating activities, higher investment outlays (inter alia on railway equipment), payment of the record-high dividend of PLN 383 million, as well as significant spending on land in the developer segment. Deteriorating financial position and liquidity of subcontractors due primarily to amendments to VAT regulations has recently affected the level of capital engaged by general contractors. We endeavour to support our business partners, while adjusting payment terms to the changing market environment. In recent time, a significant increase in bureaucracy for public contracts could have been noticed, which delays the invoicing process for completed works and negatively affects the cash level. 

 

In the first half of 2017, in line with the market trend, we observed an increase in the number of pre-sold flats by 24% in the Budimex Group. Over the six months of 2017, pre-sales reached the level of 886 flats in comparison to 712 flats in the similar period of the previous year. In 2017, we started 4 new investment projects, adding 710 flats to our offer. At present, more than 4 thousand flats are being erected, of which 902 are still available to clients. In order to satisfy the continuously growing demand, we are actively looking for attractive locations for new investment projects. In the first half of 2017, the Budimex acquired plots of land in Warsaw, Poznań, Gdynia and Wrocław, which will allow extending the sale offer by more than 2,600 flats. In the second half of 2017, we will continue the implementation of ambitious investment plans in this segment.

 

In line with the pursued strategy of expansion on the market of maintenance services, in June 2017, FBSerwis, being a 49% property of Budimex SA, finalised the acquisition of Trans-Formers companies specialising in waste collection and management. The total transaction value exceeded PLN 150 million.

 

Ambitious infrastructural investment plans encourage us to further develop our human resources. During six months of 2017, we employed almost 360 people in the Budimex Group in the home market, and further employment growth is planned. At the same time, a significant shortage of employees, in particular blue-collar workers can be noticed. The situation on the labour market and availability of employees may further deteriorate together with the expected growth of the investment project scale.

 

BUDIMEX Group

 

Financial highlights from the consolidated financial statements of the Budimex Group prepared in compliance with the International Financial Reporting Standards (IFRS) for the first half of 2017 and comparable data for the first half of 2016.

 

Results of reporting segments for the first half of 2017 (in PLN thousand)

 

 Construction segmentReal estate development segment

Other activity

DerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials

2 597 291

229 588

77 324

(182 431)

2 721 772

Gross profit on sales

297 302

46 055

10 379

(1 642)

352 094

Selling costs

(5 004)

(8 822)

(2 492)

15

(16 303)

General and administrative costs

(95 158)

(10 168)

(2 683)

5 687

(102 322)

Operating profit

211 230

31 199

5 709

1 016

249 154

Profit before tax

 

207 821

32 696

2 180

992

243 689

Net profit

166 492

26 339

1 145

805

194 781

Profit attributable to shareholders of the Parent Company

166 492

26 339

947

860

194 638

 

Results of reporting segments for the first half of 2016 (in PLN thousand)

 

 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials

2 371 776

126 944

87 719

(156 739)

 2 429 700

Gross profit on sales

258 256

33 477

12 574

(4 033)

300 274

Selling costs

(5 328)

(7 148)

(2 298)27

(14 747)

General and administrative costs

(92 610)

(7 725)

(2 780)

3 854

(99 261)

Operating profit

151 483

18 708

8 231(152)

178 270

 

Profit before tax

154 246

21 034

7 816

(152)

182 944

Net profit

123 248

16 9956 398

(123)

146 518

Profit attributable to shareholders of the Parent Company

123 248

16 995

5 947

(123)

146 067


 
I understand

This site uses cookies, so that might work better. Read about cookies at Website Privacy Policy