Commentary on selected financial data for 2014

News date: February 11, 2015
Commentary on selected financial data for 2014

The year 2014 was the time when the Budimex Group recorded a significant growth in all main areas: sales, operating profit, cash position, awarded contracts, order portfolio and pre-sales of flats.


The year 2014 was the best in the history of the Budimex Group as regards the value of signed contracts. The value of awarded contracts reached the high level of PLN 6.3 billion, i.e. almost twice higher than in the previous year.


As a consequence, the value of the portfolio at the end of the year amounted to PLN 6.1 billion, and was by 41% higher than at the end of the preceding year.


In 2014, the effectiveness of the bidding process of Budimex in the road construction segment was very high (25%). In the next year, we would like to maintain it at the level not lower than 20%, so as we could continue to fill the portfolio with infrastructural contracts.


The cash position of the Group at the end of 2014 amounted to PLN 1.72 billion (recorded growth YOY by 10%). This position is close to the historical maximum recorded in 2010. Cash position has mainly been influenced by high level of cash in the developer sector, achieved due to high pre-sales of flats and an amendment to the legislation concerning advance payments at the implementation of construction contracts.


Good weather conditions and the schedule of contractual works which assumed their finalisation within the framework of key road construction contracts had a significant impact on the sales level in 2014. It amounted to PLN 4.95 billion and was higher by almost 600 million, i.e. by 13.3%, as compared to 2013, based on comparable data, namely excluding the revenues of Budimex Danwood sold in December 2013.


In 2014, the results and profitability of the Budimex Group improved at all levels of its activity as compared to the results from 2013, excluding the results of Budimex Danwood, profit on its sales and land revaluation write-off.


Operating profit of the Group earned in 2014 rose by 46.1% as compared to the corresponding period of the preceding year.


Operating profitability of the Group reached the level of 5.0% and improved by 28.9% as compared to the profitability recorded in the corresponding period of the preceding year.


Such improvement of the Group’s profitability results first of all from the improvement of profitability in the construction segment, in which we earned the operating profit close to PLN 200 million. This profit is higher from the profit of the preceding year by 53.4%. Profitability in this segment has improved by 34.4%.


Profitability in the construction segment has improved as a consequence of the completion of troublesome road construction contracts, a drop in the prices of construction materials and the expenses on services provided by the subcontractors. However, we expect that in H2 2015 these prices will rise again. 


In 2014 we decided to organically develop our own technical department. Taking into account the type of road construction contracts, most of which are announced in the formula: “design and build”, we believe that our own department will allow us to manage contract risks more effectively.


Pre-sales of flats in 2014 reached a historical level of 1,685 flats. This represents an almost two-fold growth as compared to the previous year, when we pre-sold 742 flats.  The attractiveness of the offer of Budimex in Krakow under the “Nowe Czyżyny” project that meets the criteria of “A Flat for the Young” programme definitely contributed to the achievement of such a high level of pre-sales. Therefore, although in 2014 Budimex Nieruchomości added to its offer as much as 2,204 flats, the portfolio offered at present includes 1,008 flats.


In 2014, Budimex Nieruchomości was intensively analysing the market of land intended for development investments. The Company finalised three transactions — in Poznań, Gdańsk and Warsaw. In 2015, next contracts will be concluded. The legal status of purchased land must be regulated to enable a quick start of construction works.


In 2014 Budimex SA purchased 41.65% of shares of Elektromontaż Poznań SA, thereby increasing its share in the company up to 92.31%. Currently we are working on its strategic plan for the incoming 2–3 years, including the option of sale of the business operational part.


We are expecting the stabilisation of results at the level comparable to 2014. We will be implementing contracts signed in 2014. Taking into account the formula of signed contracts, their implementation will be spread over more months. Hence, it will require a lot of effort to reach the level of sales from 2014. We will strive to achieve the set goals, and — if possible — to exceed them. Our primary goal is to ensure that Budimex remains a predictable company, reliable and trustworthy for investors.


In the current year, we want to strengthen our position in the road market. At the same time we would like to implement railway contracts. However, tenders are most likely to appear not earlier than in Q4 2015 or at the beginning of 2016. We will also fight for orders from the power plant construction segment. We are analysing investments in gas units and we will certainly compete in the selected tenders.


Besides, in 2015 we would like to prepare capital and human resources for the expected cumulation of works in the period 2016–2018. We are planning to significantly increase capital expenditure, but first of all to concentrate on the recruitment of the best specialists in the industry, for whom we can offer approx. 800 jobs.


The selected financial data from the consolidated financial statements of the Budimex Group prepared in accordance with the International Financial Reporting Standards (IFRS) for the financial year of 2014 and comparable data for the financial year of 2013.


Additional information:

Annual results (in PLN thousand) — excluding the results of Budimex Danwood, the transaction of its sale and 2013 land revaluation write-off:


 Net revenues from the sales of products, goods and raw materials4,949,9394,367,10513.3% 
 Operating profit247,318169,32346.1% 
 Net profit attributable to shareholders of the Parent Company191,973130,89946.7%