2.1. Business model and value chain, 2.1.5. Financial position, About Budimex Group
2.1.5. Financial position
[GRI 201-1]
KEY ECONOMIC AND FINANCIAL DATA
The financial situation of the Budimex Group in 2023 is characterized by selected items disclosed in the Statement of Financial Position and Profit and Loss Account (broken down below together with the 2022 comparative data).
Table: The main items of the Consolidated Statement of Financial Position of the Budimex Group
(all amounts in tables are expressed in PLN thousand, unless stated otherwise)
As at 31 December 2023, consolidated total assets increased by PLN 1 031 033 thousand compared to 31 December 2022, mainly due to a 10.1% (PLN 183 642 thousand) increase in non-current assets and a 15.22% (PLN 847 391 thousand) increase in current assets.
Non-current assets:
The change in the value of non-current assets as at 31 December 2023 compared to 31 December 2022 was caused mainly by the following:
- an increase in property, plant and equipment by PLN 77 252 thousand, including an increase due to the purchase and lease of property, plant and equipment in the amount of PLN 238 517 thousand, and PLN 17 236 thousand as a result of taking control over PPUH Konstalex Sp. z o.o. and the consolidation of Budimex A Sp. z o.o., Budimex F Sp. z o.o., Budimex O Sp. z o.o., Budimex P Sp. z o.o. and Budimex R Sp. z o.o. In turn, the decrease in the balance was driven by, among other factors, depreciation of property, plant and equipment in the amount of PLN 136 653 thousand.
- an increase in the balance of deferred tax assets by PLN 125 390 thousand due to an increased balance of negative temporary differences on items included in liabilities.
Current assets:
In the same period, current assets increased by PLN 847 391 thousand mainly due to an increase in the balance of cash and cash equivalents by PLN 650 921 thousand, generated from operating activities. Other changes in current assets were related to:
- an increase in the balance of trade and other receivables by PLN 353 743 thousand mainly as a result of the issue of invoices by Group companies for construction work performed in the last days of 2023,
- a decrease in the balance of inventories by PLN 135 801 thousand as a result of the integration of previously purchased materials.
Table: Equity and liabilities of the Budimex Group
Equity and liabilities:
On the side of equity capital and liabilities the changes referred to:
- an increase in ”retained earnings” by PLN 278 910 thousand as a result of the generation of a net profit for 12 months of 2023 and the payment of dividends for 2022;
- an increase in non-current liabilities by PLN 67 199 thousand, mainly due to:
- an increase in long-term loans, borrowings and other external sources of finance by PLN 23 699 thousand as a result of, among other factors, granting a long-term investment loan to Magnolia Energy Sp. z o.o.;
- an increase in the balance of provisions for non-current liabilities and other charges by PLN 30 071 thousand, which mainly relates to the recognition of an additional provision for warranty repairs and for reclamation,
- an increase in the balance of retentions for construction contracts by PLN 14 233 thousand, mainly due to the larger scale of operations and thus higher retentions from subcontractors;
- an increase in current liabilities by PLN 692 991 thousand, of which the greatest balance movements related to the following:
- an increase in the balance of trade and other payables by PLN 265 050 thousand, which was correlated with the increase in the scale of operations and the increase in sales revenues generated,
- an increase in the balance of valuation of construction contracts by PLN 274 472 thousand, as a result of a seasonal increase in the balance of over-invoicing, particularly on contracts performed for public customers,
- an increase in the balance of provisions for current liabilities and other charges by PLN 219 576 thousand, mainly as a result of the recognition of provisions for penalties,
- a decrease in the balance of deferred revenue by PLN 108 860 thousand, mainly due to the settlement of prepayments received in previous financial years.
In 2023, the Budimex Group earned sales revenues of PLN 9 801 515 thousand, which represents a 13.72% increase compared
to the revenue earned in 2022.
Table: Consolidated Profit and Loss Account of the Budimex Group
In 2023, construction and assembly output in Poland expressed in current prices increased by 15.4% year-on-year, while sales of the Budimex Group’s construction segment on the domestic market increased by 13.3% in comparable periods.
In 2023, gross profit on sales stood at PLN 1 124 581 thousand, while in the previous year it reached PLN 872 443 thousand.
The gross sales profitability in 2023 was 11.5% and in 2022 this figure was 10.1%.
In accordance with the adopted accounting policies, as soon as Group companies become aware of the fact that budgeted construction contract costs exceed the entire expected contract revenues, they create provisions for expected contract losses and recognize them in the consolidated statements of financing activities under “Provisions for construction contract losses.”
As of 31 December 2023, the balance of the provision for contract losses amounted to PLN 771 947 thousand. In 2023, the balance of the provision for contract losses was reduced by PLN 31 316 thousand. The Budimex Group companies are required to provide guarantees for their construction services. As at 31 December 2023, the balance of provisions for warranty repairs was PLN 739 910 thousand. In the 12-month period ended 31 December 2023, the balance of provisions for warranty repairs increased by PLN 103 940 thousand.
Compared to the previous year, selling expenses decreased in the twelve-month period ended 31 December 2023 by PLN 14 thousand, while administrative expenses were PLN 54 243 thousand higher than the expenses incurred in 2022. The share of the sum total of selling and administrative expenses in total sales revenue increased from 3.8% in 2022 to 3.9% in 2023. Other operating income in 2023 amounted to PLN 125 722 thousand and other operating expenses amounted to PLN 84 264 thousand. Detailed analytics of other operating income and expenses are presented in Note 32 to the consolidated financial statements.
In 2023, the Group posted an operating profit of PLN 781 127 thousand, representing 8.0% of total sales revenues. In the previous year, the Group reported an operating profit of PLN 562 427 thousand, representing 6.5% of total sales revenues. In the 12-month period ended 31 December 2023, the Group reported profit on financing activities in the amount of PLN 148 180 thousand, while in 2022 – a profit of PLN 86 372 thousand. Detailed analytics of finance income and costs are presented in Note 33 to the consolidated financial statements. In 2023, the Group reported a gross profit of PLN 929 612 thousand, while in the previous year it reported a gross profit of PLN 648 934 thousand.
Income tax expense for 2023 was PLN 183 547 thousand, of which:
- current tax – PLN 310 553 thousand (including prior year’s corrections of PLN -18 301 thousand),
- deferred tax – PLN (127 006) thousand.
As at 31 December 2023, the Group recognized deferred tax assets in the amount of PLN 810 426 thousand and deferred tax liabilities in the amount of PLN 1 633 thousand, while as of 31 December 2022 the Group recorded deferred tax assets of PLN 685 036 thousand and deferred tax liabilities of PLN 1 149 thousand. Items of deferred income tax asset reported in the statement of the financial position of the Budimex Group result mainly from the specific method of settlement of construction contracts, under which the moment of recognition of costs as incurred and revenue as earned is different from the tax and accounting perspective.
The net profit on continuing operations attributable to the shareholders of Budimex SA for 2023 was PLN 738 196 thousand, whereas for 2022 it amounted to PLN 534 443 thousand, representing an increase of 38.1%. Net profit attributable to non-controlling interest for 2023 amounted to PLN 7 869 thousand. In the previous year, net profit attributable to non-controlling interest stood at PLN 13 686 thousand.
Key economic and financial data of Budimex SA
The financial situation of Budimex SA in 2023 is characterized by selected items disclosed in the Statement of Financial Position and Profit and Loss Account (as below, together with the 2022 comparative data).
Statement of financial position of Budimex SA
Table: The main items of the Company’s Statement of Financial Position of Budimex SA
As of 31 December 2023, the total assets increased by PLN 906 394 thousand as compared to 31 December 2022, and amounted to PLN 7 349 333 thousand. Changes in the Statement of Financial Position were mainly related to the following events:
Non-current assets:
The most significant changes in non-current assets were as follows:
- a decrease in the balance of retentions for construction contracts by PLN 14 349 thousand,
- an increase in the balance of deferred tax assets by PLN 119 981 thousand due to an increased balance of negative temporary differences on items included in liabilities,
- an increase in the balance of other financial assets resulting mainly from loans granted to subsidiaries: Magnolia Energy Sp. z o.o., Budimex F Sp. z o.o. and Fotowoltaika HIG XIV Sp. z o.o. in the total amount of PLN 22 130 thousand and an increase from the valuation of financial instruments.
Current assets:
In the same period, the value of current assets increased by PLN 758 679 thousand, mainly as a result of the following events:
- an increase in the balance of cash by PLN 654 162 thousand, generated primarily from operating activities,
- a decrease in the balance of inventories by PLN 112 365 thousand as a result of the consumption of materials accumulated in the previous year,
- an increase in trade and other receivables by PLN 230 941 thousand, mainly as a result of an increase in trade receivables by PLN 253 455 thousand.
Table: Equity and liabilities of Budimex SA
Equity and liabilities:
On the side of equity and liabilities, the most significant changes referred to:
- an increase in the balance of current liabilities by PLN 587 655 thousand, mainly due to:
- an increase in the balance of valuation of construction contracts by PLN 260 397 thousand, representing the difference between revenues invoiced to investors and revenues recognized in the profit and loss account,
- an increase in the balance of trade and other payables by PLN 221 082 thousand, which was mainly due to the persistence of good weather conditions for construction work and related settlements with suppliers and was correlated with the increase in the scale of operations and the increase in sales revenues generated,
- an increase in the balance of provisions for liabilities by PLN 188 416 thousand, resulting mainly from an increase in the balance of provisions for penalties and warranty repairs,
- a decrease in the balance of deferred revenue by PLN 128 325 thousand, mainly due to the accounting for received prepayments for performance of contracts.
- an increase the balance in non-current liabilities by PLN 31 054 thousand, mainly due to:
- an increase in the balance of provisions for non-current liabilities and other charges by PLN 27 212 thousand, mainly due to an increase in provisions for warranty repairs,
- an increase in the balance of retentions for construction contracts by PLN 13 281 thousand.
Table: Profit and Loss Account of Budimex SA
Within the twelve-month period of 2023, Budimex SA generated revenues from sales in the amount of PLN 8 469 668 thousand, while in 2022 they amounted to PLN 7 507 937, i.e., a 12.8% increase.
In 2023, gross profit on sales stood at PLN 940 160 thousand, while in the previous year it reached PLN 718 372 thousand. The gross sales profitability ratio for 2023 was therefore 11.1% and was higher than in 2022, when it reached 9.6%.
Pursuant to the adopted accounting principles, the Company creates provision for contract losses if the budgeted costs exceed the total revenues under the agreement. In the subsequent periods, a part of the earlier created provision is reversed in proportion to the percentage of contract completion, after taking into account the total negative margin on the entire contract. As at 31 December 2022, the balance of the provision for contract losses amounted to PLN 791 275 thousand. In the twelve-month period ended 31 December 2023, the balance of the provision for contract losses decreased by PLN 33 039 thousand.
The selling expenses in 2023 decreased by PLN 17 thousand year-on-year, while the general administrative expenses grew by PLN 33 304 thousand. The share of the sum total of selling and administrative expenses in total sales revenue for the year under review was unchanged from 2022 at 3.6%.
Other operating income in the twelve-month period of 2023 amounted to PLN 98 931 thousand and other operating expenses – to PLN 32 569 thousand. Detailed analytics of other operating income and expenses are presented in Note 31 to the financial statements. In the twelve-month period of 2023, the Company reported profit on financing activities of PLN 199 002 thousand. Detailed analytics of finance income and costs are presented in Note 32 to the financial statements.
In 2023, the Company earned a gross profit of PLN 901 004 thousand. The comparable gross profit for 2022 amounted to PLN 543 942 thousand and was lower by 65.64% than in the current year.
Income tax for the 12 months of 2023 amounted to PLN 151 435 thousand, including:
- current tax – PLN 271 091 thousand (including prior years’ corrections of PLN -20 158 thousand),
- deferred tax – PLN (119 655) thousand.
In 2023, Budimex SA earned a net profit in the amount of PLN 749 569 thousand.
STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows of the Budimex Group
“Cash and cash equivalents” included in the Statement of Cash Flows comprise cash in hand, demand deposits, and bank deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 
Included in cash of restricted use are mainly cash items representing:
- security for bank guarantees,
- funds on split payment accounts,
- cash in escrow accounts and current accounts in the part due to partners performing construction contracts together with a company from the Group.
The Budimex Group entered 2023 with cash in hand and cash at bank amounting to a total of PLN 3 249 369 thousand. For the purpose of the Statement of Cash Flows, this amount was reduced by the amount of restricted cash of PLN 27 959 thousand.
Net cash flow for 2023 was positive and amounted to PLN 654 933 thousand. As at 31 December 2023, the Group’s reported cash balance was PLN 3 900 290 thousand, of which restricted cash was PLN 22 396 thousand.
In 2023, the balance of cash from operating activities increased by PLN 1 312 035 thousand, mainly due to decreased financial involvement of the Group companies (and increased involvement of investors) in projects implemented.
Cash flow from investing activities came out to a negative balance of PLN 131 810 thousand, which was mainly the result of the acquisition of property, plant and equipment, as well as shares in related entities. Cash flow from financing activities for 2023 showed a negative balance, which amounted to PLN 525 292 thousand and resulted mainly from the 2022 dividend payment and payment of lease liabilities and credit.
Statement of Cash Flows of Budimex SA
The balance of cash in bank accounts and in hand at the beginning of 2023 amounted to PLN 2 830 825 thousand. For the purposes of drafting the statement of cash flows, this amount was adjusted with the value of restricted cash (in the amount of PLN 9 010 thousand), comprising mainly cash accumulated in split payment accounts and in accounts of consortia in the portion attributable to other consortium members. In the twelve months of 2023, net cash flow was positive and amounted to PLN 648 690 thousand. As at 31 December 2023, the Company reported a cash balance of PLN 3 484 987 thousand, including restricted cash of PLN 12 930 thousand.
In 2023, the balance of cash from operating activities increased by PLN 1 176 541 thousand.
The Company’s balance of cash from investing activities decreased by PLN 7 125 thousand, with the largest contribution coming from the acquisition of property, plant and equipment and the granting of loans to Group companies, including Budimex F Sp. z o.o., Mostostal Kraków SA and Fotowoltaika HIG XIV Sp. z o.o. while receiving dividends, including from FBSerwis SA, Budimex Budownictwo Sp. z o.o. and Mostostal Kraków SA.
Cash flow from financing activities for 2023 showed a negative balance of PLN 520 726 thousand. The expenses were connected with payment of the dividend made by the Company in the amount of PLN 459 286 thousand and repayment of lease liabilities.
Managing of finance
Managing of finance at the Budimex Group
The balance of cash and liquid deposits of the Budimex Group as at 31 December 2023 amounted to PLN 3 900 290 thousand and was PLN 650 921 thousand higher than as of 31 December 2022. The most important factors affecting this change in financial resources of the Budimex Group during 2023 include the following events:
- maintaining high profitability of construction activities,
- favorable changes in the components of net working capital in the construction segment, including an increase in the balance of inventories,
- a significant increase in finance income from interest on cash as a result of continued high interest rates,
- continued high profitability in the waste collection and management segment of the FBSerwis Group,
- dividend paid by Budimex SA in the amount of PLN 459 286 thousand, which took place in June 2023.
In accordance with the Group’s policy, cash surpluses were placed as bank deposits in banks with high credit ratings. In addition, Budimex SA used cash surpluses to finance its suppliers of services and raw materials.
This had a positive effect on the financial liquidity of these suppliers.
At the same time, the Budimex Group reported an external debt in respect of bank loans, borrowings and leases, which as of 31 December 2023 amounted to PLN 236 591 thousand, including lease liabilities recognized in accordance with IFRS 16, amounting to PLN 130 153 thousand. The amount of the Group’s external debt on account of bank loans, borrowings and leases, without lease liabilities reported in accordance with IFRS 16, was PLN 106 438 thousand and was therefore PLN 12 779 thousand lower than as at 31 December 2022 (see table below). The Group’s debt is mainly composed of:
- the debt of Budimex SA, Budimex Kolejnictwo SA, Mostostal Kraków SA and the FBSerwis Group companies under finance leases (concluded for the purpose of financing the purchase of property, plant and equipment),
- the debt of Magnolia Energy Sp. z o.o. on account of a credit facility for financing a RES project (wind farm) – debt without recourse to Budimex SA,
- debt of Budimex Parking Wrocław Sp. z o.o. on account of a loan for financing a concession project and a subordinated borrowing granted by a minority shareholder – debt without recourse to Budimex SA,
- debt of FBSerwis Kamieńsk Sp. z o.o. on account of a borrowing granted by the National Fund for Environmental Protection and Water Management to finance investments related to waste management.
During 2023, Budimex SA did not draw on credit lines to which it has access. Persisting high interest rates in Poland in 2023 did not have a significant negative impact on the Budimex Group’s financial performance through rising interest expenses due to:
- the Group’s relatively low level of financial debt: PLN 106 438 thousand (see table below),
- a fixed interest rate on the loan from the National Fund for Environmental Protection and Water Management
- transactions concluded to hedge interest rate risk in Budimex Parking Wrocław Sp. z o.o.
Table: Liabilities due to bank loans and borrowings and other external sources of finance of the Budimex Group
Table: Ratios showing the financing structure of the Budimex Group
At the end of 2023, compared to the end of 2022, the Group’s financing structure ratios remained roughly unchanged. The liquidity ratios (current and quick ratios) at the end of 2023 increased slightly, despite the dividend paid by Budimex SA.
Table: The liquidity ratios of the Budimex Group
Owing to the current very good financial standing of the Budimex Group, the cash resources held, access to credit at banks as well as the insignificant level of financial debt, there are no threats to the Group’s ability to finance its business activities in 2024.
Managing of finance at Budimex SA
The balance of cash and liquid deposits of Budimex SA as of 31 December 2023 amounted to PLN 3 484 987 thousand and was PLN 654 162 thousand higher than as of 31 December 2022. The most important factors contributing to this change in financial resources of Budimex SA during 2023 include the following events:
- continued high profitability of Budimex SA’s activities,
- favorable changes in the components of net working capital, including an increase in the balance of contract prepayments,
- a significant increase in finance income from interest on cash as a result of rising interest rates,
- dividend paid by Budimex SA in the amount of PLN 459 286 thousand, which took place in June 2023.
At the same time, the Company reported an external debt in respect of bank loans and borrowings and other external sources of finance, including lease liabilities, which as at 31 December 2023 amounted to PLN 103 860 thousand, including lease liabilities recognized in accordance with IFRS 16, amounting to PLN 88 757 thousand. The amount of Budimex SA’s external debt on account of bank loans, borrowings and leases understood in accordance with IAS 17, i.e., without lease liabilities, reported in accordance with IFRS 16, was PLN 15 103 thousand and was therefore PLN 16 830 thousand lower than as of 31 December 2022 and PLN 41 672 thousand lower than as of 31 December 2021 (see table below). The amount of financial debt of Budimex SA [1] comprises only liabilities under lease agreements in respect of machines and equipment required to carry out road construction projects. As at the end of 2022, the Company had no debt under bonds issued.
Table: Liabilities due to bank loans and borrowings and other external sources of finance of Budimex SA
Table: Ratios showing the financing structure of Budimex SA
At the end of 2023, the sustainability of the financing structure, as described above, improved as compared to 2022. The foregoing indicators were most significantly driven by two opposing factors: high profitability of the Company (high operating profitability and high net finance income – interest income and dividends received) resulting in an increase in equity and the dividend policy (annual payments close to the amount of net profits earned by the Company) which limits the rate of increase in equity. Liquidity ratios also improved in 2023 compared to 2022, reaching levels similar to those experienced at the end of 2021 (see table below).
Table: Liquidity ratios of Budimex SA
The Company’s situation with respect to liquidity and access to external sources of finance is currently very good, and there
are no risks to the financing of the Company’s activities in 2024.
Contingent liabilities and contingent receivables of the Budimex Group
Guarantees, sureties, and other contingent liabilities and receivables are described in Note 44 to the consolidated financial statements of the Budimex Group and in Note 44 to the financial statements of Budimex SA.The table below shows loan guarantees and sureties issued by Budimex SA or its subsidiaries as of 31 December 2023.
Table: Contingent liabilities and contingent receivables of the Budimex Group
* The surety was granted in relation to contracts executed by Budimex SA.
Differences between forecast and actual financial results of the Budimex Group
The Budimex Group did not publish any financial forecasts for 2023.
Utilization of proceeds from issues of securities
In the period covered by the report, no securities were issued either within or outside the Budimex Group.
[1] Items that do not include amounts of lease liabilities reported in accordance with IFRS 16.
