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Financial results for the Budimex Group for the first quarter of 2020.

News date: April 28, 2020
Financial results for the Budimex Group for the first quarter of 2020.

Market situation:
- Construction and assembly production rose by 9% in the first quarter of 2020 and reached the level of PLN 19.5 billion.
- The state of emergency introduced in Poland on March 20, 2020 due to the pandemic had no significant impact on the financial parameters of the Budimex Group achieved in the first quarter of 2020.
- Despite the many restrictions resulting from the introduction of the state of emergency, the Budimex Group maintains business continuity in all operating segments.

 

Results for the Budimex Group:
- Sales in the first quarter of 2020 reached PLN 1.48 billion and were higher than in the first quarter of 2019, mainly due to the consolidation of results achieved by the FBSerwis Group and higher sales in the construction segment. Gross profit margin for the Budimex Group amounted to 1.9%, as compared to 3.3% in the first quarter of 2019.
- In the first quarter of 2020, profitability of the construction segment improved noticeably.
- A significant decrease in the volume of notarial deeds in the property development segment, resulting from the schedules for the implementation of individual housing projects, as well as from restrictions - in the scope concerning the second half of March - related to the introduction of the state of emergency in Poland, was reflected in a significant, temporary decrease in sales and profit.

 

Cash position of the Budimex Group:
- At the end of March, the Budimex Group's net cash position was PLN 1.793 million.
- During the first three months of the year, the net cash balance improved by PLN 438 million.
- The cash position was supported by new contractual advances as well as efficient invoicing of current works and quick payment of receivables by investors.


Results for the construction segment of the Budimex Group:
- The sales in the construction segment increased by 12%, reaching a growth rate slightly higher than that of the industry.
- Gross profit margin of the construction segment increased to 2.1%, as compared to 1.3% in the first quarter of 2019, which results from improved profitability of the portfolio in the area of infrastructure and general construction.

- At the end of March, the order book of the Budimex Group reached a record level of PLN 12.0 billion (compared to PLN 10.8 billion at the end of the year) mainly due to high contracting in the road area (including S-61 Suwałki – Budzisko bypass and S-11 Koszalin – Bobolice).
- The value of pending contracts is over PLN 3 billion.
- Currently, the execution of construction contracts is progressing without major disturbances. A challenge is posed by the contract for the waste incineration plant in Vilnius, where the flow of workers was blocked due to COVID-19.

Results for the property development segment of the Budimex Group:
- In the first quarter of 2020, the customers of Budimex Nieruchomości signed only four notarial deeds, which results from the distribution of schedules for the implementation of individual housing projects.
- Revenues from the property development segment amounted to PLN 5 million and the gross loss was PLN 8 million.
- The pre-sale of apartments in the first quarter of 2020 amounted to 541. However, since mid-March, the number of new transactions has been decreasing. Therefore, we plan to be cautious about launching new projects.
- Budimex Nieruchomości now offers more than 1,300 apartments in 5 locations.

Results for the service segment of the Budimex Group:
- The sales of the service segment amounted to PLN 132 million (including PLN 131 million of the FBSerwis Group).
- The segment's gross profit amounted to PLN 17 million and profitability reached 12.7%.

 

The Budimex Group’s outlook on the upcoming quarters…
- The record level of orders facilitates fully effective use of resources and secures the work front for the next few quarters. In addition, we have pending contracts worth over PLN 3 billion.
- The situation related to the COVID-19 pandemic did not significantly affect results of the Budimex Group in the first quarter of 2020. The risk associated with the spread of COVID-19 was reflected in the change of work organisation in the companies belonging to the Budimex Group through the introduction of remote work, securing disinfectants for employees and reorganising the space to ensure that working conditions are consistent with recommendations of the Chief Sanitary Inspector.
- The supply chain was disrupted at a few construction sites, especially with regard to components coming from Asia, but this does not affect the current operations of the Group.
- We view the quality of customer relations in the current circumstances as positive – they are acting in a responsible way. Cooperation with public procurers, especially GDDKiA and PKP PLK, as well as the Ministry of Infrastructure, is very good. Communication is fast and effective.
- The situation in the coming months will largely depend on subsequent administrative decisions. Downtime in the construction process can result in a wave of bankruptcies within a few weeks. Budimex is in a narrow group of entities that can withstand several months of downtime.
- In the nearest future, we can expect a reduction in the scale of new construction projects, especially private ones, which may translate into a decreased workload in 2-3 years’ time. When it comes to the property development segment, we expect a short-term drop in the rate of pre-sales of apartments.
- We are undertaking support measures for hospitals fighting against COVID-19. The Budimex Group has provided financial and material support to several hospitals in the areas of Poland with the largest scale of needs.


 
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