Finance management at Budimex Group

Our cash balance, short-term bonds and liquid deposits as of 31 December 2019 amounted to PLN 1,635,698 thousand and were PLN 226,546 thousand higher than as of 31 December 2018. The most important factors influencing the above-mentioned change in our financial resources during 2019 are events affecting the growth of the cash balance, such as:

• increase in the net balance of contractual advances received from customers in the construction sector,
• traditional seasonal drop in financial involvement in the implementation of large infrastructural contracts in the last months of the year,
• increase in the net balance of payments received from customers in the development segment,
• increase in the cash balance due to the commencement of consolidation of the companies from the FBSerwis group, starting from July 2019.

and, on the other hand, the events affecting its decrease, such as:

• dividend payment by Budimex SA,
• purchase of land under development activity,
• acquisition by Budimex SA shares in the affiliate FBSerwis SA, financed from its own funds.

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

At the same time, our companies had an external debt due to loans, borrowings and other external sources of financing, including financial lease, which amounted to PLN 450,366 thousand as of 31 December 2019, including PLN 175,862 thousand as an adjustment for the first application of IFRS 16 in H1 2019. The amount of our external debt for bank loans, borrowings and lease, without the above-mentioned IFRS 16 adjustment, i.e. comparable with the data from previous years, amounted to PLN 274,504 thousand

and thus higher by PLN 35,571 thousand compared to 31 December 2018 (the table below). The amount of our financial debt includes: debt of Budimex SA and Budimex Kolejnictwo SA and Mostostal Kraków SA under financial lease agreements (financing the purchase of machinery and equipment for road and railway contracts), debt of companies from the FBSerwis group, loan raised by Budimex Parking Wrocław Sp. z o.o. (financing parking concessions), as well as the loan raised by Budimex Nieruchomości Sp. z o.o. (financing development projects). At the end of 2019, we did not have any debt due to bonds issued.

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

At the end of 2019, the ratios reflecting the sustainability of the capital structure deteriorated, i.e. both the total debt and the debt of equity increased. The greatest impact on the increase in the value of these ratios was: the purchase transaction of FBSerwis SA shares which was financed from the equity of Budimex SA and dividend payment by Budimex SA

Liquidity ratios (current and quick) remained at a lower level at the end of 2019 than in previous years, despite an increase in cash balance, which was influenced by the same factors that contributed to the deterioration of debt ratios and, additionally, the consolidation of companies from the FBSerwis group.

Owing to our current good financial standing, the cash resources, access to credit limits in banks, the still insignificant level and favourable structure of the financial debt, there are no threats to our ability to finance business activities in 2020.