Budimex Sa · GPW:BDX
Budimex Sa — H1 2020 Earnings Presentation
35 slides from Budimex Sa's earnings presentation, August 2020
Slide 1: Investor Presentation 1H'20
Investor Presentation 1H’20
Slide 2: Table of Contents
Table of Contents 1. Market snapshot 1.1 Market environment – top facts 1.2 Macroeconomic forecasts for Poland 1.3 Overview of construction segment 1.4 Labour market 1.5 Prices of main materials 2. Budimex Group in 1H’20 2.1 Budimex Group – top facts 2.2 P&L 2.3 Evolution of Net Treasury Position 2.
Slide 3: Market snapshot
Market snapshot
Slide 4: 1.1 Market environment – top facts
1.1 Market environment – top facts ▪ In 07’20 NBP* published the revised macroeconomic forecast for Poland including the impact of COVID-19 pandemic → see: slide No. 5 ▪ Outlays within ’Anti-crisis Shields’ put Polish public finances under high pressure → budget deficit in ’20f: 9,5% of GDP ▪ In 06’
Slide 5: 1.2 Macroeconomic forecasts for Poland
1.2 Macroeconomic forecasts for Poland ▪ COVID-19 pandemic caused deep decline in economic activity impacting Comment forecast of Polish GDP growth and inflation rate GDP growth and inflation rate (%, y-o-y) 5,3 5,0 4,9 4,9 4,1 GDP growth: 3,7 3,8 3,3 3,7 3,6 4,3 3,3 3,1 deep recession and 2,3 2,1 2
Slide 6: 1.2 Public finances
1.2 Public finances ▪ Outlays within ’Anti-crisis Shields’ put Polish public finances under high Comment pressure General government deficit (% of GDP) Public debt (% of GDP) 102,7 Poland 98,8 Eurozone 89,8 87,8 86,0 9,5 8,5 58,5 58,3 50,6 48,8 46,0 3,8 3,5 1,5 1,0 0,5 0,7 0,6 0,2 '17 '18 '19 '20f '
Slide 7: 1.3 Construction production by segment
1.3 Construction production by segment ▪ In 1H’20 construction production in Poland increased by 5,2% Comment ▪ The production was not impacted strongly by COVID-19 epidemic, as no administrative stopping of construction works took place Construction and assembly production ’10 – ’20 (bn PLN, enterp
Slide 8: 1.3 Production vs. net profit margin in construction
1.3 Production vs.net profit margin in construction ▪ High cost inflation combined with no real indexation impacted strongly margins of Comment big construction companies, but recent quarters have brought relief Construction production (companies > 9 employees) vs. net profit margin in construction
Slide 9: 1.3 EBIT margin by size of construction company
1.3 EBIT margin by size of construction company ▪ Small construction companies generate several times higher EBIT margin Comment than big ones ▪ In ’19 profitability of big companies faced a recovery 11,9% 10,6% 8,7% 8,8% 8,2% 7,1% 7,2% 7,5% 7,3% 4,9% 5,2% 5,1% 4,1% 6,7% 4,1% 2,6% 2,4% 2,4% 1,5% 1,2
Slide 10: 1.4 Labour market
1.4 Labour market ▪ Current epidemic could cause visible increase of unemployment rate in upcoming Comment months Unemployment rate (%) Employment in construction (thous. employees) 12,0 510 483 10,0 470 8,0 6,1 6,0 430 418 4,0 390 2,0 0,0 350 12'15 06'16 12'16 06'17 12'17 06'18 12'18 06'19 12'19 06
Slide 11: 1.5 Prices of main materials
1.5 Prices of main materials ▪ Global factors and lower dynamics of construction production in Poland Comment affected the prices of main materials Concrete Reinforcement steel 180 180 160 160 160 142 140 140 128 120 140 131 120 129 100 100 111 80 120 80 60 119 60 2Q'10 2Q'11 2Q'12 2Q'13 2Q'14 2Q'15
Slide 12: Budimex Group 1H'20 results
Budimex Group budim X 1H’20 results
Slide 13: 2.1 Budimex Group – top facts in 1H'20
2.1 Budimex Group – top facts in 1H’20 ▪ Increase of sales in 1H’20 → 1H’20: 3,7 bn PLN (+15,0% y-o-y) ▪ Increase of % EBIT in construction segment → 1H’20: 2,5% (+0,5 p.p. y-o-y) ▪ Rising share of railway in construction sales → 1H’20: 20,0% (+8,1 p.p. y-o-y) ▪ Slight increase of net cash → 06’20:
Slide 14: 2.2 P&L
2.2 P&L ▪ Improvement on top line in 1H’20 (+15% y-o-y) mainly due to high sales Comment dynamics in construction segment (+8% y-o-y) and full consolidation of FBSerwis Group 1H'20 1H'19 ∆ FY'19 FY'18 Sales 3 734 3 248 486 1 7 570 7 387 y-o-y dynamics 15,0% -1,6% 16,6 pp. 1 2,5% 16,0% Gross margin 3
Slide 15: 2.2 P&L - results by segment
2.2 P&L - results by segment Comment ▪ In 1H’20 services segment generated one fifth of Group’s EBIT 1H’20 sales 1H’20 EBIT Internal eliminations (% Group sales) (% Group EBIT) -199 M PLN -14 M PLN 3 734 M PLN 157 M PLN -5% -9% Construction segment Real estate segment Services segment 3 381 M PLN 84
Slide 16: 2.2 P&L - results by segment (sales)
2.2 P&L - results by segment ▪ COVID-19 had no significant impact on 1H’20 sales in the construction segment ▪ Favorable weather conditions allowed to maintain high sales in the construction Comment segment in 1H’20 ▪ In 07’19 Budimex began full consolidation of FBSerwis results Quarterly sales in B
Slide 17: 2.2 P&L - results by segment (gross margin)
2.2 P&L - results by segment ▪ Good margin achieved in the real estate segment in 1H’20 due to higher Comment profitability of projects contributing to notary sales and change of notary deeds geographical structure Quarterly gross margin in Budimex Group (M PLN) Construction Real estate 6,9% 6,8% 6,
Slide 18: 2.2 P&L - results by segment (EBIT)
2.2 P&L - results by segment ▪ New contracts that have been signed over last quarters improved the Comment profitability of backlog and contributed to the decent margin in 1H’20 Quarterly EBIT in Budimex Group (M PLN) Construction Real estate 2,3% 2,6% 2,5% -140,5% 23,9% 20,7% 84 64 57 51 33 49% 26%
Slide 19: 2.2 P&L – historical results
2.2 P&L – historical results ▪ The Group achieved record sales in 1H’20 Comment ▪ In 1H’20 Budimex was able to improve profitability as a result of increasing margin in construction & real-estate segments and full consolidation of FBSerwis Sales in Budimex Group (M PLN) 3 734 3 303 3 248 2 884 2 722
Slide 20: 2.3 Evolution of Net Treasury Position
2.3 Evolution of Net Treasury Position ▪ Company kept satisfying NTP level due to advance payments and efficient invoicing Comment of construction works ▪ 06’20 NTP does not include dividend payout, which took place in 07’20 (-161 M PLN) Net Treasury Position in Budimex Group (M PLN) 2,6 2,3 2,2 2,1
Slide 21: Construction segment – 1H'20 results
Construction segment – 1H’20 results
Slide 22: 2.4.1 Construction segment
2.4.1 Construction segment ▪ Improvement of EBIT margin in 1H’20 Comment ▪ The share of sales generated in railway segment increased due to further execution of record railway backlog 1H'20 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 3 381 8% 8,4% 8,3% 3,9% 2,9% 2,0% 2,5% Gross margin 231 53%
Slide 23: 2.4.1 Construction segment – offers placed
2.4.1 Construction segment ▪ Few high value bids placed on GDDKiA market helped to generate 13% y-o-y increase in 1H’20 Comment ▪ Lower activity in general construction due to i.a. prudence of private investors related with COVID-19 Offers placed in Budimex Group (bn PLN) 31 58 95 120 110 123 47,4 a
Slide 24: 2.4.1 Construction segment – contracts signed
2.4.1 Construction segment ▪ Strong value of contracts signed in road & hydro segment Comment ▪ Top contracts signed in 1H’20 include: S61 Suwałki - Budzisko (844 M PLN), S7 Modlin – Czosnów (487 M PLN), S5 Nowe Marzy – Dworzysko (461 M PLN), S11 Koszalin - Bobolice part I (471 M PLN) and Vistula co
Slide 25: 2.4.1 Construction segment – backlog
2.4.1 Construction segment ▪ Strongly diversified backlog ▪ New contract signed at the begin of 07’20 (West Warsaw railway station: 1,8 bn Comment PLN) and other contracts pending (1,5 bn PLN) secure the backlog for upcoming quarters Backlog in Budimex Group (bn PLN) Share 11,6 10,8 0,9 8% 10,3 10,1
Slide 26: Real estate segment – 1H'20 results
Real estate segment – 1H’20 results
Slide 27: 2.4.2 Real estate segment
2.4.2 Real estate segment ▪ In May and June Budimex Nieruchomosci was able to catch up notary sales Comment delayed in March and April 1H'20 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 275 -12% 13,4% 13,2% 16,8% 20,9% 17,0% 20,7% 548 558 Gross margin 74 6% 504 % of sales % sales 27,1% 4,6 pp.
Slide 28: 2.4.2 Real estate segment – market offer
2.4.2 Real estate segment ▪ Market offer increased to over 4 000 flats Comment ▪ At the end of 06’20 land bank amounted to 8 047 flats Market offer as at 06’20 (flats) presold 4 054 3 765 Gdansk not presold 3 557 155 Poznan Warsaw 2 583 562 2 555 347 2 354 Cracow Wroclaw 161 246 208 1 471 1 203 1 21
Slide 29: Services segment – 1H'20 results
Services segment – 1H’20 results
Slide 30: 2.4.3 Services
2.4.3 Services ▪ Services results in 1H’20 encompassed Bx Parking Wroclaw and FBSerwis Comment ▪ Since 07’19 Budimex began full consolidation of FBSerwis Group’s results Group’s services segment composition 1H'20 Sales 277 ▪ environmental services, ▪ construction & administration Gross margin 43 inf
Slide 31: 2.4.3 FBSerwis – key financial data
2.4.3 FBSerwis – key financial data ▪ Sales structure in 1H’20: Waste Management – 65%, Infrastructure Maintenance – 22%, Comment Facility Management & Street Lightening – 13% ▪ FBSerwis Group reported attractive margin in 1H’20 Sales (M PLN) EBIT (M PLN) 498 -1,3% -0,4% -0,1% 3,9% 8,9% 11,1% 13,4%
Slide 32: 2.5 Employment
2.5 Employment ▪ Generally, in 1H’20 the Group maintained the employment level Comment ▪ Taking control over FBSerwis Group in 07’19 increased employment of Budimex Group by ca. 1 000 people Employment in Budimex Group* Bx Group w/o FBS FBS 7 840 7 478 7 470 7 256 934 989 1 005 1 006 6 054 5 313 635
Slide 33: 3. Budimex S.A. on WSE
3. Budimex S.A. on WSE Comment ▪ In 2Q’20 Budimex’s share price faced a rebound Shareholders structure P/E ratio Budimex P/E ratio WIG_Budownictwo P/E 24,9 22,7 20,7 20,7 Ferrovial Group 33,5% 15,5 Aviva OFE 13,8 50,1% 12,4 11,2 10,3 7,7 15,3 8,2 NN OFE 12,4 6,3% 11,1 10,6 10,9 10,0% Other 7,4 8,4 8
Slide 34: 3. Budimex S.A. on WSE – market value
3. Budimex S.A. on WSE ▪ After a drop of market value in 1Q’20 caused by the outbreak of Comment COVID-19 pandemic, in 2Q’20 share prices of most construction companies faced a rebound Market value as at 06’20 (M PLN) +24% +16% +13% +91% -1% +45% +48% +47% +2% +15% 0% +27% +16% 5 463 % change vs. 31
Slide 35: 3. Budimex S.A. on WSE – dividends paid
3. Budimex S.A. on WSE ▪ As a result of COVID-19 pandemic, in 05’20 Management Board recommended a Comment dividend payment of ca. 50% of FY’19 net profit ▪ Remaining part of net profit was allocated to reserve capital Dividends paid (M PLN) ∑ = 2 722 106,6 M PLN PLN per share 450 383 Dividend 303 2