Budimex.pl

Commentary on financial data for the first quarter of 2015

News date: April 29, 2015
Commentary on financial data for the first quarter of 2015

The Budimex Group ended the first quarter of 2015 achieving very good results in the construction segment — high sales volume and an increase in productivity at each level, a very good cash position and high dynamics in the pre-sales of flats. The Group’s results within this period were significantly affected by the current stage of the development projects.

 

Despite high sales volume reported in the construction segment in the first quarter of 2015, sales of the Budimex Group in this quarter increased only slightly (PLN 12.4 million) as compared to the sales volume reached in the corresponding period last year.

 

This situation was caused by a significantly lower sales volume in the real estate development segment in a given period. Sales in the real estate development segment is not a seasonal phenomenon. However, it is closely related to the work schedule regarding the development projects and commences about 3–5 months after completion of construction works. At present, almost all development projects are at the construction stage, thus the number of notarial deeds signed is over three times lower
than in the first quarter of 2014. As a consequence, the sales volume and margin on the development projects in the first quarter of 2015 is much lower than in the corresponding period last year. However, throughout 2015, we expect to deliver a similar number of flats to the customers as in 2014.

 

Favourable weather conditions and over 25% increase in the sales volume of commercial buildings contributed to reaching almost a record sales volume in the construction segment in the first quarter of 2015. The sales volume in this segment amounted to PLN 826.5 million and it was higher by PLN 131 million than the sales volume reported in the first quarter of 2014.

 

In the first quarter of 2015, the construction segment generated better results at each level of activity as compared to the corresponding period last year. The operating profit is higher by 36.5%, and taxable profit by 42.7%, respectively. Profitability at these levels increased by 14.8% and 20.0%, respectively.

However, taxable profit generated within this period by the Budimex Group is lower by PLN 6.5 million than the result achieved in the first quarter of 2014. Profitability at this level decreased by 13.3%.

 

The decrease in the Group’s results in comparison to the corresponding period last year was caused by lower quarterly sales volume in the form of notarial deeds and negative impact of the result attained in the fourth segment referred to as the “netting of mutual transactions” which recorded a deviation in the taxable profit of minus PLN 11 million as compared to the first quarter of 2014.

 

Despite the positive impact of a one-time event in the form of the sale of land at ul. Racławicka on the result, the real estate development segment reported a decrease in the taxable profit by almost PLN 7 million.

 

The current development stage of the development projects (presently, Budimex Nieruchomości carries out 17 such projects) affected the results generated by the Budimex Group in the first quarter of 2015 in a twofold manner.

The fact that almost all development projects are carried out by Budimex S.A., the Group’s company, means that the margin on these projects may be recognised only upon commencing sale in the form of notarial deeds. Currently, it is not recognised in the Budimex Group’s result. As a consequence, the taxable profit of the fourth segment “netting mutual transactions” amounts to PLN -4.7 million as compared to PLN 6.2 million recognised in the corresponding period last year.

The margin, which is derecognised at present, will positively affect the Budimex Group’s results upon commencement of sale in the form of notarial deeds on these projects.

 

The Budimex Group has kept a very high net cash position level amounting to over PLN 1.76 billion at the end of the first quarter, which represents a 36% increase as compared to PLN 1.29 billion at the end of the first quarter of 2014.

It is worth emphasising that in the first quarter of 2015 we did not report any decrease in the cash level as compared to the end of last year, which is typical for this period. This situation was caused by continuous high volume of flat pre-sale and received advance payments for the performance of construction contracts.

 

The value of the Budimex Group’s order book stood at PLN 6.4 billion as at the end of March 2015
and is higher by almost PLN 300 million than the value recorded as at the end of 2014.

The value of the contracts signed in the first quarter of 2015 amounted to PLN 1 billion and was higher by 28.6% as compared to the value from the same period in 2014.

In the subsequent quarters of 2015, we would like to maintain high bidding efficiency recorded in 2014. However, the first quarter of 2015 showed that this may prove to be a difficult task. We were observing more aggressive bidding on the part of our competitors. We aim at further strengthening our position in the road construction segment, but definitely not at any cost. Our priority is to build a profitable order book.

In 2015, we would like to sign a contract in the gas construction segment. Currently, Budimex has been pre-qualified for the construction of a combined cycle gas and steam unit in the Heat Power Plant Łagisza and the Heat Power Plant in Żerań.

In the first quarter of 2015, we commenced implementation of further development stages of the Nowe Czyżyny project in Krakow, owing to which the flat pre-sale volume in the real estate development segment remains at a very high level. In the first quarter of 2015, Budimex Nieruchomości pre-sold 499 flats, i.e. 81% more than in the first quarter of 2014. At present, over 3,000 flats are under construction, 938 of which are included in the bid.

 

In 2015, the Budimex Group will focus on pursuing the selected development path, including strengthening its position on the road construction market, winning a contract in the gas unit segment, procuring further power contracts, if possible, and purchasing land intended for new development investments.

Acquiring qualified specialists and managers able to carry out demanding road construction contracts, the completion of which will fall on the years 2016–2017, is of utmost importance.

 

On 28 April 2015, the General Meeting of Shareholders for the seventh time made a decision on dividend payment.
It will be paid out in May, in the amount of PLN 156 million, i.e. PLN 6.11 per share.

Budimex enjoys investors’ trust, while maintaining the position of the most valuable construction company on the market. Through achieving the set goals, we will pursue to maintain the leading position in the construction market in Poland.

 

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 quarter of 2015 and comparable data for the first quarter of 2014.

 

Results of reporting segments for the first quarter of 2015 (in PLN thousand):

 

  Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
 Net revenues from sales of products, goods and raw materials826,45834,22836,662(50,932)846,416
 Gross profit on sales72,6938,7894,972(5,648)80,806
 Operating profit32,73314,6034,087(4,749)46,674
 Gross profit34,33116,2781,973(4,749)47,833
 Net profit27,05513,1571,319(3,848)37,683
 Gain attributable to shareholders of the Parent Company27,05513,157975(3,848)37,339

 

Results of reporting segments for the first quarter of 2014 (in PLN thousand):

 

 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenues from sales of products, goods and raw materials695,554138,78738,065(38,359)834,047
Gross profit on sales73,43528,3463,2573,268108,306
Operating profit23,97821,5447616,22952,512
Gross profit24,05423,1769176,22954,376
Net profit18,54718,7267815,04543,099
Gain attributable to shareholders of the Parent Company18,54718,7264355,04542,753

 


 
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