Budimex Sa · GPW:BDX
Budimex Sa — H1 2019 Earnings Presentation
28 slides from Budimex Sa's earnings presentation, August 2019
Slide 1: Investor Presentation 1H'19
Investor Presentation 1H’19
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’19 2.1 Budimex Group – top facts 2.2 P&L 2.3 Evolution of Net Treasury Position 2.
Slide 3: 1.1 Market environment – top facts
1.1 Market environment – top facts ▪ National Bank of Poland increased forecast of GDP growth → ’19f: 4,5% y-o-y vs. 4,0% published in 03’19 ▪ Average inflation rate should soon close to 3,0% level → ’20f: 2,9% y-o-y ▪ Increase of budget deficit expected soon, but public debt should remain under con
Slide 4: 1.2 GDP growth and inflation rate
1.2 GDP growth and inflation rate ▪ Latest forecast of GDP growth in ’19-’21, published by National Bank of Poland in 07’19, is more optimistic than the one published in 03’19 Comment ▪ National Bank of Poland increased the forecast of CPI in ’19 from 1,7% to 2,0% GDP growth and inflation rate (%, y
Slide 5: 1.3 Construction production by segment
1.3 Construction production by segment ▪ Construction production in 1H’19 grew by 10,5% y-o-y Comment ▪ It is expected that construction production in ’19 will not grow as fast as in ’18 Construction and assembly production ’10 – 1H’19 (bn PLN, enterprises with > 9 employees, current prices) Infrast
Slide 6: 1.3 Production vs. net profit margin in construction
1.3 Production vs.net profit margin in construction ▪ Net margin in construction increased in ’18, however the improvement was probably generated by small and medium companies Comment ▪ Poor FY’18 financial results of some top construction companies show that difficult market conditions deteriorate
Slide 7: 1.3 Net profit margin in construction
1.3 Net profit margin in construction ▪ Net margin in infrastructure companies in 1Q’19 felt below 0 Comment ▪ Companies, which execute big long-term road and railway contracts, are vulnerable to cost inflation, which puts a pressure on their margins Net profit margin in construction by segment (com
Slide 8: 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 5,3 421 6,0 430 4,0 390 2,0 0,0 350 12'15 06'16 12'16 06'17 12'17 06'18 12'18 06'19 12'09 12
Slide 9: 1.5 Prices of main materials
1.5 Prices of main materials ▪ Lower dynamics of construction production may normalize the Comment situation on materials market Concrete Reinforcement steel 180 180 156 160 160 145 140 160 140 144 120 120 127 140 100 100 129 80 80 120 60 60 119 2Q'10 2Q'11 2Q'12 2Q'13 2Q'14 2Q'15 2Q'16 2Q'17 2Q'18
Slide 10: 2.1 Budimex Group – top facts in 1H'19
2.1 Budimex Group – top facts in 1H’19 ▪ Slight fall of sales in 1H’19 → 1H’19: 3,2 bn PLN (-1,6% y-o-y) ▪ Decrease of % EBIT in construction segment → 1H’19: 2,0% (-1,8 p.p. y-o-y) ▪ Rising share of railway in construction sales → 1H’19: 11,9% (+4,8 p.p. y-o-y) ▪ Mid-year drop of net cash → 06’19:
Slide 11: 2.2 P&L
2.2 P&L ▪ Slight decrease of sales in 1H’19 vs. 1H’18 (-1,6%) Comment ▪ Deterioration of Group’s margin due to decrease of profitability in construction segment (high cost pressure) 1H'19 1H'18 ∆ FY'18 FY'17 Sales 3 248 3 303 -54 7 387 6 369 y-o-y dynamics -1,6% 21,3% -23,0 pp. 16,0% 14,3% Gross mar
Slide 12: 2.2 P&L
2.2 P&L ▪ Comparable sales in construction generated in 2Q’19 vs. 2Q’18 Comment ▪ Q-o-q drop of sales in developer segment (42% drop in notary sales) Quarterly sales in Budimex Group (M PLN) Construction Developer 3 126 1 854 1 272 313 187 126 10% -2% 3% -11% 5% -5% 1Q'19 2Q'19 1H'19 1Q'19 2Q'19 1H'
Slide 13: 2.2 P&L
2.2 P&L Comment ▪ Pressure on gross margin in construction was also visible in 2Q’19 Quarterly gross margin in Budimex Group (M PLN) Construction Developer 5,6% 4,3% 4,8% 20,6% 25,2% 22,5% 151 70 72 79 39 32 -28% -30% -29% 3% 10% 6% 1Q'19 2Q'19 1H'19 1Q'19 2Q'19 1H'19 y-o-y dynamics Other activity B
Slide 14: 2.2 P&L
2.2 P&L ▪ Improvement of EBIT margin in construction achieved due to positive effects recognized in other operational activity Comment ▪ Better performance in developer segment in 2Q’19 in terms of EBIT margin: 20,4% in 2Q’19 vs. 14,7% in 1Q’19 Quarterly EBIT in Budimex Group (M PLN) Construction De
Slide 15: 2.2 P&L - results by segment
2.2 P&L - results by segment ▪ Almost half of 1H’19 EBIT was generated in developer segment Comment ▪ At the begin of 07’19 Budimex finalized transaction and became the only owner of FBSerwis (price for equity = 98,5 M PLN) 1H’19 sales 1H’19 EBIT Internal eliminations (% Group sales) (% Group EBIT)
Slide 16: 2.2 P&L
2.2 P&L ▪ In 1H’19 Group’ sales noted 1,6% decline y-o-y Comment ▪ Due to unfavorable market environment in construction sector, EBIT margin felt in 1H’19 to 3,4% Sales in Budimex Group (M PLN) 3 303 3 248 2 884 2 722 2 430 2 249 2 153 2 268 2 088 1 723 1 517 1H'09 1H'10 1H'11 1H'12 1H'13 1H'14 1H'1
Slide 17: 2.3 Evolution of Net Treasury Position
2.3 Evolution of Net Treasury Position ▪ In 2Q the Group faced seasonal drop of net cash Comment ▪ Cash balance was under pressure due to dividend payment and significant investment in working capital Net Treasury Position in Budimex Group (bn PLN) 2,6 2,3 2,2 2,1 2,0 2,0 1,8 1,8 1,7 1,8 1,6 1,6 1,6
Slide 18: 2.4.1 Construction segment
2.4.1 Construction segment ▪ EBIT margin in 1H’19 amounted to 2,0% Comment ▪ The share of sales generated in railway segment increased due to further execution of record railway backlog 1H'19 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 3 126 3% 4,2% 5,0% 8,4% 8,3% 3,8% 2,0% Gross margin 151 -
Slide 19: 2.4.1 Construction segment
2.4.1 Construction segment ▪ +37% increase of value of offers placed in 1H’19 vs. 1H’18 due to increased activity in all segments Comment ▪ Current offers seem to reflect new cost environment, as a result of which investor budgets are regularly exceeded Offers placed in Budimex Group (bn PLN) 31 58
Slide 20: 2.4.1 Construction segment
2.4.1 Construction segment ▪ Slowdown on GDDKiA market had an impact on contracts signed in infrastructure Comment ▪ High y-o-y increase of contracts signed in railway due to two big projects acquired (continuation of railway No. 7: Deblin – Naleczow and railway contract in Gdynia seaport) Contracts
Slide 21: 2.4.1 Construction segment
2.4.1 Construction segment ▪ At the end of 1H’19 Budimex had a backlog of 11,1 bn PLN Comment ▪ Share of railway projects in backlog is higher than general construction Backlog in Budimex Group (bn PLN) 11,1 Share 10,3 10,1 0,6 5% 1,0 10% 0,6 6% 8,9 2,5 23% 8,4 1,1 13% 2,5 25% 0,8 10% 2,7 26% 1,9 2,
Slide 22: 2.4.2 Developer segment
2.4.2 Developer segment ▪ High level of notary sales in 1H’19 (947 flats) Comment ▪ Much higher presales reached in 1H’19 (731 flats) vs. 1H’18 ▪ Developer segment generated gross margin at 22,5% level 1H'19 y-o-y dynamics Sales and EBIT margin (M PLN) Sales 313 -5% 15,6% 16,0% 13,4% 13,0% 13,9% 17,
Slide 23: 2.4.2 Developer segment
2.4.2 Developer segment ▪ Market offer noted serious increase vs. 12’18 due to few projects Comment launched in Warsaw, Tricity, Poznan & Wroclaw ▪ In 06’19 land bank amounted to 9 803 flats Market offer as at 06’19 (flats) presold 4 011 not presold 3 819 Gdansk 359 1 871 2 052 Poznan Warsaw 183 1 1
Slide 24: 2.4.3 Other activities
2.4.3 Other activities ▪ Other activities results in 1H’18 encompassed Elektromontaz Poznan and BIG that were disposed in 3Q’18 Comment ▪ 1H’19 results were generated by two companies: FBSerwis and Budimex Parking Wroclaw ▪ Budimex will begin full consolidation of FBSerwis Group’s results in 2H’19 1
Slide 25: 2.5 Employment
2.5 Employment ▪ The level of employment did not change significantly vs. 12’18 Comment ▪ Taking control over FBSerwis Group will increase employment of Budimex Group by ca. 1 000 people Employment in Budimex Group 6 539 Share in Bx Group’s employment*: 5 708 White-collars Blue-collars 5 185 6 906 6
Slide 26: 3. Budimex S.A. on WSE
3. Budimex S.A. on WSE ▪ In 1H’19 Budimex market capitalization faced 20% increase vs year-end Comment ▪ Total pension funds’ share in BDX amounts to 30-35% Shareholders structure (12’18) P/E ratio Budimex P/E ratio WIG_Budownictwo P/E 22,7 Ferrovial Group 20,7 29,5% 15,5 Aviva OFE 13,8 12,8 12,4 11
Slide 27: 3. Budimex S.A. on WSE
3. Budimex S.A. on WSE ▪ After declines in share prices from ’18, in 1H’19 market value of some Comment construction companies, including Budimex S.A., faced a rebound Market value as at 06’19 (M PLN) +20% -4% +12% +42% +81% +24% -48% -12% +1% +104% +39% +26% % change vs. 31.12'18 3 472 % change vs.
Slide 28: 3. Budimex S.A. on WSE
3. Budimex S.A. on WSE ▪ As a result of decreasing margin in construction sector and planned investment outlays, in 04’19 Management Board recommended a dividend Comment payment of 50% of FY’18 net profit ▪ In 05’19 shareholders accepted Board’s recommendation Dividends paid (M PLN) ∑ = 2 606 102,1