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Comments from Dariusz Blocher, President of the Management Board of Budimex SA, on selected financial data from the consolidated Financial Statements of the Budimex Group for 2013

News date: March 4, 2014
Comments from Dariusz Blocher, President of the Management Board of Budimex SA, on selected financial data from the consolidated Financial Statements of the Budimex Group for 2013

In 2013, the Budimex Group's sales reached 4.75 billion PLN. This figure is 22% lower than the preceding year, when the Budimex Group recorded its best ever turnover of 6.1 billion PLN.
Lower sales in 2013 come as no surprise to the market. This was the year where a slowdown was expected in anticipation of a new EU budget for 2014-2020, which was finally approved
in November 2013.
2013 was another year in a row in which the construction and assembly production recorded a negative growth (-13.6% y/y), which is mainly caused by the situation in the infrastructure segment, which shrank by 18.6%. Infrastructural development accounted for 59% of sales in the construction segment of the Budimex Group in 2013, and for 63% in 2012.

 

In 2013, the Budimex Group recorded an operating profit of 333 million PLN at a profitability of 7%, compared to the 2012 operating profitability of 3%.
An important, although not a decisive factor influencing the results was the sale of the subsidiary, Budimex Danwood, a market leader in the pre-fabrication of timber-frame single-family houses. Sales of the company was part of the strategy to focus on the Budimex Group's core operations and to prepare its structure to meet the new market situation in the coming years.

 

Indeed, a driving force behind the 2013 performance was the construction segment, which contributed to an improved profitability at every level of the business. The segment profitability expressed in terms of gross margin was 7.3%, compared to the 2012 profitability of 6.4%. On the other hand, the operational profitability reached the level of 3.3%, compared to 2.0% in 2012. The situation resulted mainly from the decrease in prices of construction materials, attention to the quality of new contracts, and the fact that we completed the most challenging motorway construction contracts.

 

2013 was a good year for property development activities in terms of pre-selling of flats. Changes in credit requirements, relatively low interest rates and thus relatively low-cost financing, coupled with barely attractive interest rates on banking deposits resulted in a significant increase in pre-sale figures in the flat segment. In 2013 Budimex Nieruchomości pre-sold 742 flats compared to 515 flats pre-sold in 2012, thus recording a 44% increase. The level of pre-sales in the flat segment recorded in 2013 was close to that from the housing market boom period.

 

In 2013, Budimex Nieruchomości sold 495 flats by notarial deed, compared to 740 flats in the same period of 2012. It should be borne in mind that the notarial sales of flats depends on the deadlines for completion of investment projects and the transfer of ready flats to customers, so it is not a seasonal phenomenon that can be compared on a year-to-year basis.

 

The drop in sales did not affect the profitability of real estate development activities, whose gross margin is 20.0%, compared to 22.8% of the profitability recorded in the preceding year.

 

In 2013, the assets of the real estate development segment were reviewed, which resulted in a write-down of some land (to the amount of 61.8 million PLN). The write-down was recognised mainly for the two largest plots held by Budimex Nieruchomości. It has no impact on the cash balance. On the other hand, it will make it possible for us to prepare a more attractive customer proposal, significantly accelerating the commencement of new investment projects and their pre-sale.


As a result of the write-down, the net result of the real estate development segment is negative and amounts to -23.4 million PLN.

In 2013 Budimex Nieruchomości still focused its activities on three locations, namely Warsaw, Kraków and Poznań. At the moment it is disposing of a pool of 700 flats that are ready for sale.
 
The Budimex Group managed to maintain a very high cash position, which at the end of the year amounted to 1.56 billion PLN (accounting for the y/y growth of 31%). The Group's cash position was mainly influenced by a very good level of cash in the real estate development segment, caused by the high pre-sale of flats and the sale of Danwood.

 

In 2013, we witnessed an increase in the average value of new tenders. The average value of Budimex SA's bid in the infrastructural market in 2013 amounted to 55 million PLN, while in 2012 it was 32 million PLN. However, the total value of completed tender proceedings in 2013 was comparable with the 2012 figure.


Owing to our efforts and improved bidding effectiveness, in 2013 the Budimex Group signed contracts worth 3.3 billion PLN. Compared to the value of the contracts signed in 2012, we recorded a growth of nearly 0.5 billion PLN. At the end of 2013, the order portfolio of the Group amounted to 4.3 billion PLN.

 

As part of the new EU perspective, road contracts have already been tendered to a total amount of more than 40 billion PLN. The Budimex Group has reached the prequalification stage in all tenders announced to date. At the moment, we are striving to get contracts of the highest value without compromising their profitability. We would also like to prepare well for the implementation of the awarded contracts, by focusing in the nearest future on the development and retention of the best managerial staff.

 

In 2013 Budimex still remains the most valued construction company among those listed on the Warsaw Stock Exchange. The trust that we enjoy is testified by the awards received by the Company, but primarily by the increase in the value of Budimex SA stock recorded in 2013 (by 89%, from 70 PLN to 132 PLN per share).