Budimex Group’s results after three quarters of 2020

After three quarters of 2020, Budimex generated higher sales and better profitability. A stable level of the order book allows for fully effective use of resources. The long-term road and rail contracts signed will allow us to maintain an appropriate order book in the engineering area for at least several months.

Market situation:
▪ Construction and assembly production increased by 1% after three quarters of 2020, reaching PLN 73.7 billion
▪ We are observing a significant decrease in orders on the part of private and local government investors, which affects the reduction of offer prices by construction companies at the expense of the profitability of contracts
▪ The coronavirus pandemic has had a limited impact on the Budimex Group’s results. Despite the difficulties resulting from the state of epidemic, the Budimex Group maintains business continuity in all operating segments

Budimex Group results:
▪ Sales after three quarters of 2020 reached PLN 6.17 billion and were 15% higher year-on-year, recording increases in each segment
▪ The gross profit margin of the Budimex Group amounted to 5.7% compared to 4.0% in the first three quarters of 2019
▪ The gross profit margin in the construction part was 3.5% compared to 2.7% in the corresponding period of 2019. The restrictions related to the introduction of the state of epidemic did not significantly disrupt the Group’s operations in this area
▪ In the development segment, in recent months we have recorded a significant increase in the number of notarial agreements concluded, resulting from the schedules of implementation of individual residential investments. After a period of slowdown in the second quarter of 2020, the recovery and stabilization of monthly pre-sales volumes is visible

Cash position of the Budimex Group:
▪ At the end of September, the Budimex Group’s net cash amounted to PLN 2,145 million
▪ In the first three quarters of 2020, the net cash balance improved by PLN 790 million
▪ The cash position was supported primarily by efficient invoicing of current works and quick payment of receivables by investors, as well as positive operating cash flows at the early stages of newly signed infrastructure contracts

Results of the construction segment of the Budimex Group:
▪ Sales of the construction segment increased by 7%, reaching a slightly better dynamics than the market. Profit Profitability
gross construction part amounted to 3.5% compared to 2.7% in the corresponding period of 2019. In recent quarters, we have observed a stabilization of the profitability of the order portfolio, with the exception of a few projects, in all segments of our business▪ Since the beginning of the year, we have signed contracts worth PLN 7.0 billion, thanks to which the order book at the end of September increased to PLN 12.9 billion
▪ The contracts won in the area of infrastructure are mostly (PLN 3.1 billion) “design and build” projects, which allows for proper planning of work and effective use of production capacity in the perspective of 2-3 years
▪ Currently, the implementation of construction contracts is proceeding without major disruptions, and cooperation with contracting authorities is at a very good level

Results of the development segment of the Budimex Group:
▪ In the first three quarters of 2020, Budimex Nieruchomości’s clients signed 1,087 notarial deeds, of which 465 agreements in Q3 2020
▪ The development segment’s revenues amounted to PLN 553 million and were 31% higher compared to 2019, and gross profit reached PLN 121 million (an increase of 65%)
▪ Pre-sales of apartments in the first three quarters of 2020 amounted to 1,199 units. After a period of slowdown in March and April, we have been recording a gradual increase in interest in apartments for several months
▪ The current offer of Budimex Nieruchomości is just over 1,500 apartments in 5 cities

Results of the services segment of the Budimex Group:
▪ Sales in the service segment amounted to PLN 431 million and were 20% higher* than in the corresponding period of the previous year
▪ The segment’s gross profit amounted to PLN 51 million, and the profitability reached 11.7%

Budimex’s forecast for the coming quarters:

▪ A stable level of the order book allows for fully effective use of resources. The long-term road and rail contracts signed will allow us to maintain an appropriate order book in the engineering area for at least several months.

▪ The challenge in the coming quarters will be to obtain contracts in the cubature part, where there is a visible reduction in new private investments and a partial suspension of planned public investments
▪ In recent months, we have been observing more aggressive behavior of the competition. The cheapest offers often differ from our reliably calculated cost estimates by up to 20-30% and are significantly lower than the investor’s budget
▪ We estimate that the impact of the coronavirus pandemic on the Budimex Group’s results to date is slightly more than PLN 30 million and mainly concerns additional costs related to the extension of the implementation time of several construction projects. However, for several weeks we have been observing an increase in the number of infected employees of the Group, which destabilizes work and generates delays on subsequent contracts. We expect a further increase in the number of new cases
▪ Nevertheless, in the perspective of the coming quarters, we hope for the stabilization of the business, which, given the current structure and quality of the order book, allows us to look optimistically at the profitability of the construction segment
▪ We have decided to review the strategic options of the development segment. We are considering several scenarios, but currently the option analysed in the first place is to examine the market’s interest in the sale of Budimex Nieruchomości shares. We expect the first results of market analyses at the turn of November and December this year.
▪ We want to develop our business in the service segment, especially in the area of waste disposal and management. We are analyzing several medium-sized acquisition projects, but we are also not ruling out larger investments
▪ Budimex remains the largest CIT payer among construction companies in the country. According to the ranking prepared by the Ministry of Finance, Budimex has moved up from 61st to 25th since 2017. place among the largest individual CIT payers in Poland