26.04.2019
Press release to the financial data of the Budimex Group for the first quarter of 2019
Market situation:
▪ Construction and assembly production increased in Q1. 2019 by 13% to reach PLN 18 billion
▪ The industry’s appeals for the introduction of contract valorisation have not solved the problems of contracts in progress – there is no systemic solution to the issue of unprofitable contracts signed 2-3 years ago
▪ Statistical data indicate that the sector ended last year with a profit, but this is most likely due to the high profitability of smaller entities
▪ Market difficulties mainly affect large companies (over 250 employees), which carry out the largest orders, sometimes lasting up to 3-4 years, largely based on subcontracting services
Budimex Group results:
▪ The Group’s sales in Q1 2019 increased by 3% and reached PLN 1.4 billion
▪ The gross profit margin of the Budimex Group amounted to 3.3% compared to 6.0% in Q1 2019. 2018
▪ Cost pressure in the construction industry had a negative impact on the results of the construction segment, where the gross profit margin fell to 1.3% (vs. 4.4% in Q1 2018)
▪ The real estate development segment achieved a gross profit margin of 14.8%, thus improving the result from Q1. 2018, when the profitability amounted to 13.1%
Cash position of the Budimex Group:
▪ In the first quarter of 2019, we recorded a seasonal decrease in the net cash balance to PLN 627 million
▪ We continue our policy of financing subcontractors by offering early payments and frequent invoicing of the works carried out
▪ The cash situation prompted the Company’s Management Board to recommend to shareholders the payment of a dividend of PLN 6.3 per share, i.e. approximately 50% of the profit for 2018
Results of the construction segment of the Budimex Group:
▪ Sales of the construction segment increased by 10%, reaching a slightly lower dynamics than the industry
▪ The Budimex Group’s order book remains at a safe level of over PLN 10 billion
▪ Further cost inflation in the industry translated into a decrease in the profitability of the gross profit of the construction part to 1.3%
▪ Continuing the strategy of development on the railway market, in March we signed another important contract for the completion of works on railway line No. 7 – its value is PLN 0.6 billion. In addition, we are preparing to sign a contract for the modernization of the railway station
Gdynia Port worth PLN 1.5 billion
▪ Contractors’ bids are more cautious and begin to reflect the new cost environment, as a consequence of which investor budgets are regularly exceeded
Results of the development segment of the Budimex Group:
▪ Budimex Nieruchomości’s customers in Q1 2019, they signed 601 notarial deeds
▪ Pre-sales in the development segment reached 265 apartments and were close to Q1 2019. 2018
▪ The revenues of the real estate development segment decreased by 11% and amounted to PLN 187 million, and the gross profit amounted to PLN 28 million with a high profitability of 14.8%
▪ The current offer of Budimex Nieruchomości is almost a thousand apartments in 4 locations.
The coming quarters through the eyes of the Budimex Group…
▪ The situation of the Budimex Group is stable and the current level of the order book is safe
▪ The average profitability of the portfolio is relatively good, although it remains under pressure from difficult contracts signed 2-3 years ago. We hope for the stabilization of profitability with the end of these contracts
▪ The availability and retention of staff and wage inflation in the sector remain a challenge. The difficult situation of the industry prompts us to take a selective approach to increasing the number of employees. Recruitment plans for this year mainly concern the railway area
▪ We try to create the best possible working conditions for our employees. Our work has been awarded the title of “Best Quality Employer 2018”
▪ We continue negotiations to acquire a 51% stake in FBSerwis. Decisions in this regard should be made in the next few months
▪ In the development segment, we plan to launch several residential projects in 2019. Our ambitions are higher, but administrative and regulatory barriers often stand in the way
Budimex Group
▪ It is a responsible contractor and, despite losses on some contracts, it performs contracts in accordance with the public interest, often handing over projects before the contract deadline
▪ It develops corporate social responsibility. The “Parent Zone. Budimex for Children” and “Change the World. Budimex 50 years” were included in the report “Responsible Business in Poland. Good Practices”, which presents the most inspiring and interesting activities of companies in the field of CSR
201903 Press Note