Budimex Sa · GPW:BDX

Budimex Sa — Investor Presentation (2018)

30 slides from Budimex Sa's investor presentation, 2018

  1. Slide 1: Investor Presentation 1H'18

    Investor Presentation 1H’18

  2. 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 1.6 EU funds – financial perspective 2021-2027 1.5 Current Threats and Opportunities 2. Budimex Group in

  3. Slide 3: 1.1 Market environment – top facts

    1.1 Market environment – top facts  Strong GDP growth in ’18 forecasted for Poland by Eurostat  4,6%  Growth of inflation (HICP) expected  ’19f: 2,6% vs. 1,3% in ’18f  Improving situation of public finances  budget deficit in ’17: 1,7% of GDP  European Commission’s proposal of EU funds ’21-’2

  4. Slide 4: 1.2 Macroeconomic forecasts for Poland

    1.2 Macroeconomic forecasts for Poland  Rising inflation is accompanied by high GDP growth boosted by Comment investments rebound  Condition of Polish public finances improves GDP growth (%, y-o-y) Inflation rate (HICP, %, y-o-y) 4,6 4,6 3,7 2,6 3,0 1,9 1,8 2,4 1,6 1,7 2,0 2,1 2,0 1,3 0,3 '16 '17

  5. Slide 5: 1.3 Overview of construction segment

    1.3 Overview of construction segment  Construction production noted 26,3% y-o-y increase in 1H’18  The growth is driven by all segments (residential, non-residential and infrastructure) Comment  The market is heading to investment peak boosted by big investment programs in road and railway segmen

  6. Slide 6: 1.3 Overview of construction segment

    1.3 Overview of construction segment  Construction companies entered into high production and low margins Comment phase of the cycle  Average net profit margin in 1Q’18 amounted to only 0,8% Construction production in Poland vs. net profit margin in construction companies (bn PLN) 97,1 96,0 85,1 8

  7. Slide 7: 1.4 Labour market

    1.4 Labour market  Construction companies have to deal with labour shortage and Comment increase of labour costs Unemployment rate (%) Employment in construction (thous. employees) 510 12,0 483 10,0 470 8,0 5,9 6,0 430 403 4,0 390 2,0 0,0 350 03'16 06'16 09'16 12'16 03'17 06'17 09'17 12'17 03'18 06

  8. Slide 8: 1.4 Prices of main materials

    1.4 Prices of main materials Comment  The increase of materials prices was still observed in 2Q’18 Concrete Reinforcement steel 160 180 163 135 160 140 160 140 120 142 124 120 140 100 129 100 80 120 80 60 119 60 2Q'10 2Q'11 2Q'12 2Q'13 2Q'14 2Q'15 1002Q'16 2Q'17 2Q'18 2Q'10 2Q'11 2Q'12 2Q'13 2Q'14

  9. Slide 9: 1.5 EU funds – financial perspective 2021-2027

    1.5 EU funds – financial perspective 2021-2027  In May’18 European Commission proposed the allocation of EU funds ’21-’27  Poland will maintain the position of top EU funds’ beneficiary Comment  The level of EU support for Poland in ’21-’27 could be even higher (in current prices) than in EU ’07-

  10. Slide 10: 1.6 Current Threats and Opportunities

    1.6 Current Threats and Opportunities Threats Opportunities  Lack of subcontractors and increasing  Still high investment needs in margins infrastructure after 2020  Increasing prices of materials and  Stable growth of general construction problems with logistics market  Increasing wages in con

  11. Slide 11: 2.1 Budimex Group – top facts

    2.1 Budimex Group – top facts  Record level of 1H sales  1H’18: 3,3 bn PLN (+21,3% y-o-y)  Increasing share of railway in construction sales  1H’18: 7,1% (+4,2 p.p. y-o-y)  Further normalization of operating margin  1H’18: 5,2% (-4,0 p.p. y-o-y)  Mid-year drop of net cash  06’18: 0,7 bn PLN

  12. Slide 12: 2.2 P&L

    2.2 P&L  Top line in 1H’18 was in line with current market trends Comment  In 1H’18 the company faced normalization of margin vs. years ’16-’17 1H'18 1H'17 ∆ FY'17 FY'16 Sales 3 303 2 722 581 1 6 369 5 572 y-o-y dynamics 21,3% 12,0% 9,3 pp. 1 14,3% 8,5% Gross margin 286 352 -66 0 810 751 % sales 8

  13. Slide 13: 2.2 P&L

    2.2 P&L  Maintaining y-o-y dynamics of sales in construction in 2Q’18 vs. 1Q’18 Comment  Q-o-q drop of sales in developer segment (49% drop in notary sales)  Flat volumes of sales achieved in first two quarters in other activity Quarterly sales in Budimex Group (M PLN) Construction Developer 3 04

  14. Slide 14: 2.2 P&L

    2.2 P&L  Drop of % gross margin in construction in 2Q’18 vs 1Q’18 due to further Comment materialization of risks connected with i.a. increase of materials prices and salaries in construction and problems with logistics Quarterly gross margin in Budimex Group (M PLN) Construction Developer 8,6% 6,1

  15. Slide 15: 2.2 P&L

    2.2 P&L  Further normalization of % EBIT in construction vs. above average Comment margin achieved in years ’16-’17  Maintaining good performance in developer segment Quarterly EBIT in Budimex Group (M PLN) Construction Developer 4,5% 3,4% 3,8% 12,7% 16,0% 13,9% 115 64 46 52 27 19 -46% -45% -45% 1

  16. Slide 16: 2.2 P&L

    2.2 P&L  In 1H’18 Bx achieved record sales at the level of 3,3 bn PLN Comment  EBIT margin returned to the level achieved in years’14-’15 Sales in Budimex Group (M PLN) 3 303 2 884 2 722 2 268 2 430 2 249 2 088 2 153 1 723 1 517 1H'09 1H'10 1H'11 1H'12 1H'13 1H'14 1H'15 1H'16 1H'17 1H'18 EBIT in B

  17. Slide 17: 2.3 Evolution of Net Treasury Position

    2.3 Evolution of Net Treasury Position  NTP noted a comparable seasonal drop like in 06’17 Comment  Net cash was additionally under pressure due to high dividend paid and decline in advances’ balance Net Treasury Position in Budimex Group (M PLN) -1 308 -511 -1 503 -235 2 596 -650 2 295 2 237 2 12

  18. Slide 18: 2.4 Results by segment

    2.4 Results by segment  In 1H’18 the share of particular segments in Group’s result did not Comment note any unnatural change 1H’18 sales 1H’18 EBIT (% Group sales) (% Group EBIT) Internal eliminations -146 M PLN +4 M PLN 3 303 M PLN 170 M PLN -4% +2% Construction segment Developer segment Other ac

  19. Slide 19: 2.4.1 Construction segment

    2.4.1 Construction segment  EBIT margin in 1H’18 amounted to 3,8% Comment  The share of sales generated in infrastructure segment dropped in favor of railway and general construction 1H'18 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 3 043 17% 4,2% 5,0% 8,4% 8,3% 8,1% 3,8% Gross margin 213 -

  20. Slide 20: 2.4.1 Construction segment

    2.4.1 Construction segment  Lower tender activity of GDDKiA and Bx’s selective bidding (also in Comment railway segment) generated 21,5% y-o-y decrease of value of offers placed in 1H’18 Offers placed in Budimex Group (bn PLN) 64 31 58 113 66 43,7 average value (M PLN) 39,8 3,8 2,5 2,1 6,9 9,7 8,6

  21. Slide 21: 2.4.1 Construction segment

    2.4.1 Construction segment  Big contract for KGHM and contract for construction of Museum of Polish Comment History affected significantly the value of contract signed in 1H’18  Much lower value of railway contracts signed in 1H’18 vs. 1H’17 Contracts signed in Budimex Group (M PLN) Annual data Se

  22. Slide 22: 2.4.1 Construction segment

    2.4.1 Construction segment  At the end of 1H’18 Budimex had a record backlog of 10,8 bn PLN Comment  Current backlog is well diversified Backlog in Budimex Group (M PLN) Share 10 784 10 300 745 9% 1 014 10% 8 930 1 143 12% 8 421 13% 1 223 12% 10% 1 149 849 2% 136 2% 187 3 006 27% 26% 1 894 22% 29%

  23. Slide 23: 2.4.1 Construction segment

    2.4.1 Construction segment  Current backlog includes many high-value projects at the early stage of Comment execution Top projects executed by Budimex Group Total value for Bx Contract Signing month Sales progress (bn PLN) Łagiewnicka route in Kraków 03-2017 0,7 Completion of reservoir in Racibórz

  24. Slide 24: 2.4.2 Developer segment

    2.4.2 Developer segment  Developer segment kept gross margin at the level of 20,0% Comment  Number of presales dropped due to no significant expansion of market stock 1H'18 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 331 42% 15,6% 16,0% 13,4% 13,0% 13,9% 13,9% Gross margin 66 40% 499 % of s

  25. Slide 25: 2.4.2 Developer segment

    2.4.2 Developer segment  Despite high land bank, market offer was not developed due to long- Comment lasting legal procedures preceding the start of the project  In 06’18 land bank amounted to 8 332 flats Market offer as at 06’18 (flats) presold not presold 3 223 3 057 10 Gdansk 1 980 2 134 246 69

  26. Slide 26: 2.4.3 Other activities

    2.4.3 Other activities  In 1H’18 the segment achieved comparable results to 1H’17 Comment  Good results in other activities is mainly driven by good performance of Elektromontaż Poznań 1H'18 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 75 0% 2,6% 4,9% 6,3% 7,9% 6,1% 6,7% Gross margin 11 19%

  27. Slide 27: 2.5 Employment

    2.5 Employment  In 1H’18 Budimex increased employment by 672 people Comment  In response to current market situation Budimex develops own workforce Employment in Budimex Group 6 539 Share in Bx Group’s employment*: 5 708 White-collars Blue-collars 5 185 employment in Bx Group* 7 211 6 539 5 708 5

  28. Slide 28: 3. Budimex S.A. on WSE

    3. Budimex S.A. on WSE  Pressure on margin and bad sentiment to construction segment pushed Comment Budimex’s market capitalization to the level achieved in’13-’14 Shareholders structure P/E ratio Budimex P/E ratio WIG_Budownictwo P/E 22,7 Ferrovial Group 20,7 30,3% 15,5 Aviva OFE 13,8 12,4 11,2 10

  29. Slide 29: 3. Budimex S.A. on WSE

    3. Budimex S.A. on WSE  Budimex’s market cap has recently noted significant decline, but it Comment still stands out from other construction companies Market value as at 06’18 (M PLN) -42% -23% -23% -43% -26% -62% -3% -38% +1% -36% -55% -36% excl. dividend % change vs. 31.12'17 payout effect WIG20:

  30. Slide 30: 3. Budimex S.A. on WSE

    3. Budimex S.A. on WSE  For last 10 years company have allocated 100% of net profit to Comment dividend payment Dividends paid (M PLN) ∑ = 2 445 95,8 M PLN PLN per share 450 383 303 280 Dividend 232 208 174 149 156 112 Dividend 5,8 6,8 9,1 11,0 4,4 11,9 6,1 8,1 15,0 17,6 per share '09 '10 '11 '12 '

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