Executive Commentary of Chairman of the Management Board on selected financial data for the year 2015

News date: February 24, 2016
Executive Commentary of Chairman of the Management Board on selected financial data for the year 2015

Executive Commentary of the Chairman of the Management Board of Budimex S.A., Dariusz Blocher, on financial data from the consolidated financial statements of the Budimex Group for the year 2015:


2015 was a very good year in the Budimex Group. We achieved all the objectives set for ourselves. We hired more than 650 employees, maintained the leading position in the infrastructure market while simultaneously diversifying our activity.

In 2015, the Budimex Group signed contracts with record worth of PLN 7.1 billion. Our company was awarded the highest number of road contracts in 2015 (21% of the market) and ever since the beginning of the new EU perspective, it presented the best bids for nearly 1/4 of contracts announced by the General Directorate for National Roads and Motorways. As a consequence, the Budimex Group’s order book at the end of 2015 stood at PLN 8.4 billion, i.e. 38% more than at the end of 2014. Currently, the worth of contracts in which Budimex’s bid was chosen as the most favourable one amounts to PLN 2 billion.

In 2015, the construction and assembly production increased by 2.3% in comparison to the previous year. At the same time, we are observing a dynamic decrease in prices of raw materials, including primarily steel and asphalt, which had positive impact on the margins of general contractors in 2015. However, this means there will be a risk of price increase once construction works intensify in 2017–2018. This is when we can also expect a considerable growth of construction and assembly production.

In 2015, the Budimex Group recorded a 4% increase in sales compared to the previous year, thus exceeding the value of PLN 5 billion. We improved financial results at all levels. The Group’s operating profitability amounted to 5.7% and increased by 14% compared to 2014. The Group generated approximately PLN 300 million of profit before tax, i.e. approximately PLN 55 million (22%) more than in the year before.

The cash position of the Group at the end of 2015 amounted to PLN 2.3 billion (recorded growth YOY by 34%). It is an exceptionally high level, but it is a cyclical occurrence. Advance payments received for implementation of construction contracts had a positive effect on the level of cash in the Group. The balance of advance payments in Budimex S.A. as at the end of 2015 amounted to PLN 460 million. However, this means that in subsequent years, during contract implementation, we will be observing their settlement. Moreover, PLN 180 million is cash of our customers, blocked on escrow accounts of the development segment.

The main driving force behind the Group’s results was the construction segment in which we recorded a 5% growth of sales as well as 25% and 30% growth of operating profit and profit before tax, respectively.

Cost control, great emphasis on efficient project management and quality assurance, which is extremely important to the company, contribute to continuous, systematic improvement of financial results. In 2015, Budimex expanded and modernised its central laboratory, equipping it with modern equipment for controlling building materials and surface diagnostics. We currently have 20 laboratories all over Poland, where more than 150 people work on quality control at every step of the investment.


The energy and railway markets invariably remain of key importance to diversification of the Group’s activity. In March, we are planning to present a commercial bid for construction of a combined cycle gas and steam unit in the Żerań district in Warsaw.


In 2015, we successfully completed our first large project in the industry segment, “Construction of the Municipal Waste Disposal Plant in Białystok” under the “design and build” formula. We also completed two important projects in the railway sector: “Design and construction of the Pomeranian Metropolitan Railway Stage I-revitalisation” and “Modernisation of the railway line in the LCS Iława area”. In 2016, we are planning to invest in a machine park necessary to execute subsequent railway contracts that we want to win. FBSerwis, which has completed purchase of two companies in the municipal waste management sector, is also intensively developing its activity.


The development segment also generated better results on all levels. In 2015, 908 apartments were sold upon notarial agreements, i.e. 30% more than the year before. As a consequence, sales in the segment increased by 17% YOY, while the operating profit — by 20%.


The attractiveness of the Nowe Czyżyny project offer in Kraków made it possible to maintain the upward trend in apartment pre-sale. In 2015, Budimex Nieruchomości pre-sold 1,918 apartments (YOY increase by 14%), of which 69% was pre-sale of apartments under this project. In 2016, we will already commence the last stages of this project. In subsequent years, maintaining pre-sale at the level of 1,500 apartments annually will require effort and a continuous level of approximately 3,500 apartments under construction.

We are currently building more than 4,000 new apartments, of which 1,235 have not been pre-sold and are on offer for our customers. The offer comprises mostly apartments in Poznań and Warsaw.


In 2015, Budimex Nieruchomości purchased land for construction of approximately 2,600 apartments in Warsaw and Gdańsk. In 2016, we will continue the process of searching for attractive locations for new investments.


Since 2011, Budimex has been continuously included in the RESPECT Index — a stock exchange index of companies which conduct their business activity in a responsible manner. In 2015, the Budimex Group paid a total of PLN 570 million in tax to the State Treasury and in social insurance contributions. Our actions in the area of social policy have tangible results. Approximately 20 thousand children from 230 Polish schools have been equipped with plastic ICE cards as a part of the original programme “Domofon ICE. Budimex Dzieciom” [ICE Card. Budimex for Children]. Nearly 25 thousand children use 12 Parents’ Zones created by Budimex at paediatric departments in Polish hospitals.

In 2016, we are anticipating further increase in growth of sales; however, we predict that construction works will intensify in 2017–2018. This year, we are going to focus on maintaining high effectiveness of offering and on winning further infrastructure contracts in order to retain the leading position in this area. We are also planning to strengthen our position in the general construction segment in smaller towns. We consider it crucial to develop a profitable order book and to hand over high-quality facilities to investors on a timely basis. In order live up to these expectations, in 2015, we hired more than 650 new employees. The staff strengthening policy will continue in 2016, when we are planning to hire 700 more people.


The attached table contains the results of reported segments for 2015 and comparable figures for 2014.