Management of the Budimex Group’s financial resources

The Budimex Group started 2018 with cash in the bank and in hand for a total of 2,126,839 thousand PLN. The net cash flow for the previous year was negative and amounted to 694,728 thousand PLN, which as at 31 December 2018 gave a reporting cash balance in the amount of 1,409,152 thousand PLN. The balance of cash from operating activities in 2018 decreased by 523, 375 thousand PLN in comparison with 2017 mainly due to the Group entities’ greater financial engagement (along with the reduction in the investors’ engagement) in implemented projects, but also due to the profitability and cash generated in construction activities significantly lower than in the previous years or the dividend payment. In 2017, Budimex SA paid out a dividend in the amount of 449,585 thousand PLN.

In accordance with the Group’s policy, the Group's cash surpluses were kept as bank deposits at banks and issuers’ short-term debt securities with a good rating. In addition, Budimex SA used cash surpluses to finance the suppliers of its services and raw materials, which had a positive effect on the financial liquidity of these suppliers, and generated extra income for Budimex SA.

The Budimex Group entities reported an external debt in respect of bank loans and borrowings and other external sources of finance, including finance lease liabilities, which as at 31 December 2018 amounted to 238,933 thousand PLN and were 116,523 thousand PLN higher than on 31 December 2017 (see the table below). The Group’s debt is mainly composed of: the debt of Budimex SA, Budimex Kolejnictwo SA and Mostostal Kraków SA under finance lease agreements (made primarily for the purpose of financing the purchase of property, plant and equipment – machines and equipment for performing road and railway construction contracts) and a loan taken out by Budimex Parking Wrocław sp. z o.o. to finance a car park concession (car park at the Centennial Hall Conduit in Wrocław). The aforementioned increase in total debt in 2018 results primarily from the increase in Budimex SA’s and Budimex Kolejnictwo SA’s debt under finance lease agreements. As at the end of 2018, the Group had no debt on account of the bonds issued or bank loans financing the property development activities.

The following ratios illustrate the structure of finance at the Budimex Group:

Equity to assets ratio: (equity attributable to the shareholders of the Parent Company) / (total assets)0,140,150,14
Equity to fixed assets ratio: (equity attributable to the shareholders of the Parent Company) / (fixed assets)0,750,950,94
Total debt ratio: (total assets - equity attributable to the shareholders of the Parent Company) / (total assets)0,860,850,86
Debt to equity ratio: (total assets - equity attributable to the shareholders of the Parent Company) / (equity attributable to the shareholders of the Parent Company)6,345,85,98

At the end of 2018, the sustainability of financing described by the above indicators worsened. The fixed asset coverage with equity reduced by the payment of dividends. For the same reason, the equity is burdened with higher debt despite a significant drop in the balance sheet total.

Although the current liquidity ratio remained at the end of 2018 at a similar level compared with the previous year, the quick liquidity ratio decreased significantly as a result of the above described significant reduction in the Group's cash balance and the simultaneous increase in the inventory balance, both in the real estate development part and the construction part.

Current ratio (current assets) / (current liabilities)1,141,131,11
Quick ratio (current assets - inventory) / (current liabilities)0,730,810,83

Owing to the current good financial standing of the Budimex Group, the cash resources, access to credit limits in banks and the still insignificant level of financial debt, there are no threats to the Group’s ability to finance its business activities in 2019.