Budimex Sa · GPW:BDX
Budimex Sa — 1-3Q 2020 Earnings Presentation
34 slides from Budimex Sa's earnings presentation, November 2020
Slide 1: Investor Presentation 1-3Q'20
Investor Presentation 1-3Q’20
Slide 2: Table of Contents
Table of Contents 1. Market snapshot 1.1 Macroeconomic forecasts for Poland 1.2 Overview of construction segment 1.3 Labour market 1.4 Prices of main materials 2. Budimex Group in 1-3Q’20 2.1 Budimex Group – top facts 2.2 P&L 2.3 Evolution of Net Treasury Position 2.4 Results by segment 2.4.1 Constr
Slide 3: Market snapshot
Market snapshot
Slide 4: 1.1 Macroeconomic forecasts for Poland
1.1 Macroeconomic forecasts for Poland ▪ COVID-19 pandemic caused deep decline in economic activity impacting forecast of Polish GDP growth and inflation rate Comment ▪ Recent rapid increase in number of new cases may soon change the macroeconomic forecast prepared in mid-’20 GDP growth and inflatio
Slide 5: 1.1 Public finances
1.1 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 6: 1.2 Construction production by segment
1.2 Construction production by segment ▪ In 1-3Q’20 construction production in Poland increased by only 1,0% Comment ▪ Despite no administrative decision about closing construction sites, the production was impacted by COVID-19 epidemic, especially in general construction Construction and assembly p
Slide 7: 1.2 Production vs. net profit margin in construction
1.2 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 8: 1.2 EBIT margin by size of construction company
1.2 EBIT margin by size of construction company 11,9% 10,6% 9,4% 8,7% 8,8% 8,2% 8,4% 7,2% 7,5% 7,3% 7,1% 6,1% 5,2% 5,5% 4,9% 5,1% 6,7% 4,1% 4,1% 3,5% 2,6% 2,4% 2,4% 1,5% 1,2% 1,2% -0,5% '13 '14 '15 '16 '17 '18 '19 1H'19 1H'20 10-49 employees 50-249 empoloyees >=250 employees Investor Presentation 1-
Slide 9: 1.3 Labour market
1.3 Labour market ▪ Current epidemic could cause visible increase of unemployment rate in upcoming Comment months ▪ Wages in construction are still growing Unemployment rate (%) Employment in construction (thous. employees) 12,0 510 483 10,0 470 8,0 6,1 6,0 419 430 4,0 390 2,0 0,0 350 03'16 09'16 03
Slide 10: 1.4 Prices of main materials
1.4 Prices of main materials ▪ Global factors and lower dynamics of construction production in Poland Comment affected the prices of main materials Concrete Reinforcement steel 180 180 160 160 160 133 140 140 123 120 140 120 129 122 100 100 107 80 120 80 60 119 60 3Q'10 3Q'11 3Q'12 3Q'13 3Q'14 3Q'15
Slide 11: Budimex Group 1-3Q'20 results
Budimex Group 1-3Q’20 results
Slide 12: 2.1 Budimex Group – top facts in 1-3Q'20
2.1 Budimex Group – top facts in 1-3Q’20 ▪ Increase of sales in 1-3Q’20 → 1-3Q’20: 6,2 bn PLN (+14,6% y-o-y) ▪ Increase of % EBIT in construction segment → 1-3Q’20: 3,8% (+0,8 p.p. y-o-y) ▪ Rising share of railway in construction sales → 1-3Q’20: 20,0% (+3,7 p.p. y-o-y) ▪ Increase of net cash → 09’2
Slide 13: 2.2 P&L
2.2 P&L ▪ Estimated impact of the COVID-19 on the results of the Budimex Group is slightly over 30 M PLN and mainly relates to additional costs of extension of execution time Comment of several projects, the largest of which is the contract for the construction of a new power unit at Turów Power Pla
Slide 14: 2.2 P&L - results by segment
2.2 P&L - results by segment ▪ Despite the difficulties resulting from the pandemic, Budimex Group Comment maintains business continuity in all operating segments 1-3Q’20 sales 1-3Q’20 EBIT Internal eliminations (% Group sales) (% Group EBIT) -327 M PLN -12 M PLN 6 169 M PLN 369 M PLN -5% -3% Constr
Slide 15: 2.2 P&L - results by segment (sales)
2.2 P&L - results by segment ▪ COVID-19 had no significant impact on 1-3Q’20 sales in the construction segment ▪ Construction segment sales increased by 7% y-o-y achieving dynamics significantly Comment better than the market ▪ In 07’19 Budimex began full consolidation of FBSerwis results Quarterly
Slide 16: 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 2Q-3Q’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%
Slide 17: 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 3Q’20 Quarterly EBIT in Budimex Group (M PLN) Construction Real estate 2,3% 2,6% 5,9% 3,8% -140,5% 23,9% 21,4% 21,1% 211 127 117
Slide 18: 2.2 P&L – historical results
2.2 P&L – historical results ▪ The Group achieved record sales in 1-3Q’20 Comment ▪ In 1-3Q’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) 6 169 5 390 5 383 4 580 4
Slide 19: 2.3 Evolution of Net Treasury Position
2.3 Evolution of Net Treasury Position ▪ Company kept satisfying NTP level due to efficient invoicing of construction works, quick settlement of receivables and positive operating cash flows in the early stages Comment of newly signed infrastructure contracts ▪ In 07’20 Budimex paid a dividend amoun
Slide 20: Construction segment – 1-3Q'20 results
Construction segment – 1-3Q’20 results
Slide 21: 2.4.1 Construction segment
2.4.1 Construction segment ▪ High improvement of EBIT margin in 3Q’20 Comment ▪ In recent quarters, we have observed a stabilization of backlog’s profitability in all business segments 1-3Q'20 y-o-y dynamics Sales and EBIT margin (M PLN) 8,4% 8,3% 3,9% 2,9% 3,0% 3,8% Sales 5 512 7% Gross margin 402
Slide 22: 2.4.1 Construction segment – offers placed
2.4.1 Construction segment ▪ In recent months, more aggressive bidding by competition in the area of Comment infrastructure segment have been observed ▪ The challenge in the coming quarters will be to win contracts in general construction Offers placed in Budimex Group (bn PLN) 31 58 95 120 118 110
Slide 23: 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 1-3Q’20 include: Warsaw railway station (1 761 M PLN), S61 Suwałki - Budzisko (844 M PLN), S7 Modlin – Czosnów (487 M PLN), S11 Koszalin - Bobolice part I (471 M PLN) and S5 Nowe M
Slide 24: 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 (1,6 bn PLN) secure the backlog for upcoming quarters Backlog in Budimex Group (bn PLN) Share 12,9 0,8 7% 10,8 10,3 10,1
Slide 25: Real estate segment – 1-3Q'20 results
Real estate segment – 1-3Q’20 results
Slide 26: 2.4.2 Real estate segment
2.4.2 Real estate segment ▪ Budimex decided to review the strategic options of the development segment Comment ▪ Several scenarios are considered, but the option currently being analyzed in the first place is researching the market interest in selling Budimex Nieruchomości 1-3Q'20 y-o-y dynamics Sal
Slide 27: 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 09’20 land bank amounted to 7 415 flats Market offer as at 09’20 (flats) presold 4 056 3 656 Gdansk not presold 104 Poznan Warsaw 2 501 2 128 489 665 Cracow Wroclaw 101 196 400 1 528 1 555 373 27 Finished
Slide 28: Services segment – 1-3Q'20 results
Services segment – 1-3Q’20 results
Slide 29: 2.4.3 Services
2.4.3 Services ▪ Services results in 1-3Q’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 1-3Q'20 Sales 431 ▪ environmental services, ▪ construction & administration Gross margin 75
Slide 30: 2.4.3 FBSerwis – key financial data
2.4.3 FBSerwis – key financial data ▪ Sales structure in 1-3Q’20: Waste Management – 67%, Infrastructure Maintenance – 23%, Comment Facility Management & Street Lightening – 11% ▪ FBSerwis Group reported comparable margin in 1-3Q’20 vs. 1-3Q’19 Sales (M PLN) EBIT (M PLN) 498 -1,3% -0,4% -0,1% 3,9% 8
Slide 31: 2.5 Employment
2.5 Employment ▪ Generally, in 1-3Q’20 the Group maintained the employment level Comment ▪ Taking control over FBSerwis Group in 07’19 increased employment of Budimex Group by over 1 000 people Employment in Budimex Group* Bx Group w/o FBS FBS 7 840 7 478 7 507 7 256 934 989 1 031 1 006 6 054 5 313
Slide 32: 3. Budimex S.A. on WSE
3. Budimex S.A. on WSE Comment ▪ In recent months Budimex’s share price noted a serious growth Shareholders structure P/E ratio Budimex P/E ratio WIG_Budownictwo P/E 22,7 23,6 20,7 20,7 Ferrovial Group 33,5% 15,5 13,8 50,1% Aviva OFE 12,4 11,2 10,3 7,7 15,3 7,7 NN OFE 12,4 6,3% 11,1 10,6 10,9 10,0%
Slide 33: 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 next quarters share prices of most construction companies faced a rebound Market value as at 09’20 (M PLN) +42% -3% +84% -4% +2% +129% -4% -1% +23% -11% -0% +45% +96% -2% +132% 6 25
Slide 34: 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