Budimex.pl

2020 financial results for the Budimex Group

News date: February 24, 2021
2020 financial results for the Budimex Group

Commentary of the President of the Management Board of Budimex SA, Dariusz Blocher, on selected financial data from the financial statements of the Budimex Group for 2020.

 

  • In 2020, the Budimex Group reported record revenues from sales at PLN 8,382 billion (+8% YoY*) and generated a net profit of PLN 459 million.
  • The Group’s operating profitability improved and reached 7.6% (compared to 4.4%* in 2019), with a profitability of the construction sector of 5.1%.
  • High contracting (PLN 9 billion) allowed the increase in the orders portfolio to PLN 12.7 billion (+18% YoY).
  • Stable net cash position (PLN 2.1 billion, +57% YoY) ensures operational comfort and broader investment opportunities.
  • The net profit of Budimex SA in 2020 amounted to PLN 310.5 million.

 

The year of 2020 was in many aspects a record year for the Budimex Group. Despite the difficulties associated with the state of the epidemic emergency in March, for the first time in the history of the Group we exceeded the level of PLN 8 billion in revenues from sales while improving profitability. This allowed us to regain the first place among the largest building companies in Poland. We signed new contracts worth PLN 9 billion and we enter 2021 with the orders portfolio of nearly PLN 13 billion.

 

 Budimex Group
(PLN million)

Profit and loss account

2020

2019*

YoY

Sales

8,382

7,794

7.6%

Gross margin

937

590

58.8%

% of sales

11.2%

7.6%

3.6% pp.

Operating profit

639

343

86.1%

% of sales

7.6%

4.4%

3.2% pp.

Gross profit

622

347

79.5%

% of sales

7.4%

4.4%

3.0% pp.

Net profit

459

232

98.4%

% of sales

5.5%

3.0%

2.5% pp.

*pro-forma data, drawn up with the assumption that FBSerwis Group has been consolidated since 1 January 2019

 

We estimate that the total impact of the pandemic on the Group's operating result is just over PLN 30 million, which is mainly associated with additional costs related to the extension of the execution time of several contracts, as well as the cost of purchasing PPE and testing of employees. We have recorded around 400 persons infected with the coronavirus in the entire Group, and at the peak time in the beginning of the fourth quarter we had around 190 active infections. We have not stopped any of the construction works, and the vast majority of our projects are being performed according to the schedule. In cases where the pandemic has delayed our works, the Investors show understanding to our proposals for annexes concerning deadlines, which demonstrates the overall very good cooperation with the Contracting Authorities, particularly with Generalna Dyrekcja Dróg Krajowych i Autostrad (General Directorate for National Roads and Motorways) and PKP (Polish State Railways) during this challenging time.

 

Construction sector

Statistical data (PLN billion)

2020

2019

YoY

Sold
production

108.5

108.1

0.4%

Buildings

53.3

53.6

-0.5%

share

49.1%

49.6%

-0.4% pp.

Engineering

55.2

54.5

1.2%

including: roads

20.7

20.2

2.6%

including: railways

7.6

7.1

8.2%

share

50.9%

50.4%

0.4% pp.

 

In 2020 construction and assembly production (in current prices) increased by 0.4%. In the buildings sector, production decreased by 0.5% for the first time since 2016. What is important for non-residential buildings is that the decrease was greater and amounted to -4.2%, which was probably due to the reduction of new businesses in the face of an uncertain economic situation. The biggest decrease of -17.6% concerned office construction, where a long-term structural change in demand is not excluded. The preservation of continuity of works for the vast majority of infrastructure projects resulted in an increase in the engineering sector of 1.2% compared to 2019. The increase in investment carried out by PKP PLK and GDDKiA and the high quality of cooperation resulted in an increase in production in the railway and road areas by 8.2% and 2.6% respectively.

 

 

Construction segment

Profit and loss account

2020

2019

YoY

Sales

7,539

7,152

5.4%

Operating profit

388

207

87.2%

% of sales

5.1%

2.9%

2.2% pp.

Gross profit

372

188

97.6%

% of sales

4.9%

2.6%

2.3% pp.

Order portfolio

12,721

10,781

18.0%

Contracting

8,976

7,496

19.7%

 

Despite the difficult environment, sales in the construction sector of the Budimex Group reached a record level of PLN 7,539 million, an increase by 5.4%. Profitability has also significantly improved in comparison to the previous year. At the gross profit level we achieved a result of 4.9% compared to 2.6% last year. After a few years, with the full commitment of the entire organization, we are finalizing the implementation of difficult projects that have negatively impacted the quality of the order portfolio. The environment of the pandemic and the general economic uncertainty has also influenced the reduction in the continuous high pressure on the increase in wages and prices for subcontracted services and materials, which improved margins by 1-2 percentage points.

 

Despite a lower investor activity in 2020, especially noticeable in the sector of railway tenders, the value of bids submitted by Budimex in 2020 was comparable to the previous year. The bidding was driven mainly by road contracts, where we made offers worth PLN 23.4 billion.
In the general construction sector, we recorded a significant slowdown of tendering processed in the second quarter and then a significant acceleration, especially in the fourth quarter. The total value of the prepared offers in the residential and non-residential sector was similar to the result from 2019 and amounted to just over PLN 10 billion.

 

Significant improvements in the efficiency of bidding on road contracts, maintaining high efficiency in the general construction market, as well as obtaining a railway contract for the rebuilding of the Warszawa Zachodnia station worth PLN 1.8 billion, allowed a record number of orders to be signed, worth PLN 9.0 billion. At the end of December 2020 the value of the order portfolio reached PLN 12.7 billion. Through high activity in the road, rail and hydro-engineering sectors, we increased the portfolio value by PLN 1.9 billion, while maintaining a well-diversified structure. As at the end of 2019, the main sectors constituted infrastructure (37%, 4 p.p. increase) and rail contracts (32%, 1 p.p. decrease). We have been increasing the value of industrial contracts in the portfolio since 2018, reaching PLN 1.1 billion (8% of the portfolio) at the end of 2020.

 

Thanks to obtaining two new contracts for the reconstruction of flood control channels and banks (in Racza Struga and Krosno Odrzańskie), we underlined our presence in the hydro-engineering sector, finishing the year with an order portfolio in this sector close to PLN 0.4 billion. We look forward to signing the order for stage II of the works related to ditching through Mierzeja Wiślana, where our offer worth almost PLN 0.5 billion was selected as the most advantageous, which should further strengthen our position.

 

The Budimex Group finished 2020 with a net cash position of PLN 2.1 billion. Compared to 31 December 2019, this was an increase by PLN 770 million. The increase in net cash was mainly due to the overall improvement of the Group’s profitability and the reduction in the amount of dividends paid for 2019. In addition, the cash generation was supported by the flow in newly signed construction contracts and the increase in the balance of payments from customers in the development sector.

 

Real estate segment

Profit and loss account

2020

2019

YoY

Sales

674

558

20.8%

Gross margin

235

137

71.5%

% of sales

34.9%

24.6%

10.3% pp.

Operating profit

191

117

63.7%

% of sales

28.4%

20.9%

7.4% pp.

Gross profit

195

120

62.3%

% of sales

28.9%

21.5%

7.4% pp.

Pre-sales

1,672

1,655

1.0%

Notarial
transfers

1,286

1,534

-16.2%

 

In 2020, the pre-sales of the development sector amounted to 1,672 apartments and was slightly higher (17 apartments) than in the previous year. The pre-sales result is the effect of the company’s continuing extensive housing offer and the continuing stable structural demand for housing in the biggest cities. In 2020 the clients of Budimex Nieruchomości signed 1,286 notarial acts. Compared to 2019, the decline was 16% and the result of fewer finalised projects compared to the previous year. Restrictions resulting from the pandemic had only a temporary impact on commissioning (mainly in March and April), and the total number of notarial acts concluded is in line with our schedule. Sales revenue amounted to PLN 674 million, which indicates an increase of 21% year-on-year. Gross profit has increased from PLN 120 million in 2019 to a record PLN 195 million in 2020. Budimex Nieruchomości consistently holds a high positive net cash position.

 

On 3 July 2020 the Management Board of Budimex S.A. decided to start a review of the strategic options of the development sector, as part of which it decided to analyse, among other things, scenarios including the acquisition of a significant investor or investors, or the introduction of the company on the Warsaw Stock Exchange. The scenario currently analysed in the first place is the sale of the entire package of shares in Budimex Nieruchomości. As part of the process of recognizing interest in acquiring shares at the end of 2020, Budimex decided to grant exclusivity to a selected group of investors making a joint offer. On 22 February Budimex S.A. decided to conclude a conditional sale agreement for Budimex Nieruchomości Sp. z o.o. worth PLN 1 billion 513 million. The purchaser is CP Developer - a company created for the purpose of concluding a contract by entities related to the company: Cornerstone Partners sp. z o.o. with its registered office in Warsaw and Crestyl Real Estate s.r.o. with its registered office in Prague.
In the opinion of the Management Board, the parameters of transaction reached in the course of the negotiations are favourable to both parties and to Budimex Nieruchomości.

 

Service segment

Profit and loss account

2020

2019*

YoY

Sales

612

502

21.9%

Gross margin

110

78

41.7%

% of sales

18.0%

15.5%

2.5% pp.

Operating profit

79

48

63.9%

% of sales

12.8%

9.5%

3.3% pp.

*pro-forma data, drawn up with the assumption that FBSerwis Group has been consolidated since 1 January 2019

 

The year 2020 was a record year for the FBSerwis Group. It was another subsequent year when the company recorded a two-digit growth in sales while improving its profitability. Income from sale of the Group amounted to PLN 610 million and increased in relation to last year by 22%, the net profit amounting to PLN 47 million, which was an increase by 31 million year on year. The Budimex Group fully consolidated the FBSerwis Group within the service sector from July 2019. The results were achieved through: continued investments of the Group in fixed assets, increasing the portfolio of contracts, and a high operational efficiency in the waste industry, which is the main source of revenue of the Group. The FBSerwis Group’s development plans are based on further long-term investments increasing the Group’s operational potential and seeking attractive acquisition targets.

 

We enter the year of 2021 with an order portfolio of PLN 12.7 billion. Such an ambitious level of orders for execution allows us to take a safe approach to bidding, and the signed long-term road and rail contracts ensure that the engineering works remain well-covered for at least a dozen months. We are well prepared in personnel and technical terms to carry out these works. We are regularly upgrading our infrastructure in the road area and increasing production capacity in that of railways. In the last 3 years, in preparation for increasing the scale of the activity, as a Group we have invested more than PLN 300 million, mainly in the renewal and purchase of new machinery.

 

The challenge in the coming quarters may be to gain contracts in the buildings area, where increased competition and a risk of reduction of new private investments (office and hotel facilities in particular) as well as a partial suspension of planned public investments are evident. In the engineering area, the scale of new investments, as announced by the GDDKiA and the PKP PLK, should be similar to 2020. This is good news, because a few months ago we were afraid of a slowdown in the tender processes, which is characteristic of entering the new 7-year European budget. Looking at the current order portfolio, we expect that the next quarters and the whole year of 2021 should bring the maintenance of a high level of sales and profitability above the market indicators. As always, we focus on the implementation of the assigned projects, with particular regard to safety, timeliness and quality of work. The good balance sheet position and the prospect of leaving the development sector encourage us to explore new opportunities for sectors (including the entry as an investor in the renewable energy market) and geographic diversification.

 

The continued progress of the pandemic and its impact on the functioning of the economy, including staffing and continuity of supplies, remains very uncertain, and we are constantly monitoring the situation and reviewing our operational assumptions on an ongoing basis.

 

In 2020, the Budimex Group invested more than PLN 4 million in social programs, sponsorships and donations. More than PLN 2.6 million related to donations and financial grants for combating the effects of the coronavirus pandemic. These funds were mainly transferred to hospitals, nursing homes and medical facilities treating patients with COVID-19. Some of these funds have been provided to public benefit organizations that support local communities in preventing the spread of the pandemic. Budimex remains the biggest CIT taxpayer among construction companies in Poland. According to a ranking prepared by the Ministry of Finance, since 2017 Budimex has moved from 61st to 25th place in the list of the largest individual CIT payers in Poland..

 

BUDIMEX Group

 

Selected financial data from the consolidated financial statements of the Budimex Group prepared in accordance with the International Financial Reporting Standards (IFRS) for the 2020 year and the comparable data for 2019.

 

Results of the reporting segments for 2020 (in PLN thousand):

 

 

Construction segment

Real estate segment

Service segment

Exclusions

Consolidated data

Net revenue from sale of products, goods and materials

7,539,404

673,564

612,391

(443,119)

8,382,240

Gross profit on sales

629,381

235,096

110,053

(37,497)

937,033

Selling costs

(11,219)

(20,054)

-

-

(31,273)

General and administrative costs

(232,885)

(29,772)

(33,075)

18,766

(276,966)

Operating profit

387,535

191,139

78,629

(18,731)

638,572

Gross profit

372,407

194,981

73,031

(18,379)

622,040

Net profit

270,162

157,698

58,424

(14,890)

471,394

Profit attributable to the Parent Company’s shareholders

270,162

157,698

46,495

(14,890)

459,465

 

Results of the reporting segments for 2019 (in PLN thousand):

 

 

Construction segment

Real estate segment

Service segment

Exclusions

Consolidated data

Net revenue from sale of products, goods and materials

7,151,978

557,811

278,281

(418,407)

7,569,663

Gross profit on sales

418,189

137,115

39,303

(43,055)

551,552

Selling costs

(10,721)

(19,757)

-

-

(30,478)

General and administrative costs

(173,135)

(26,183)

(14,157)

14,483

(198,992)

Operating profit

206,994

116,785

23,187

(28,572)

318,394

Gross profit

188,461

120,146

52,075

(28,325)

332,357

Net profit

106,794

97,056

47,946

(22,945)

228,851

Profit attributable to the Parent Company’s shareholders

106,794

97,056

45,109

(22,945)

226,014

 


 
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