UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2019
Commission File Number 001-35991
GRAÑA Y MONTERO S.A.A.
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant’s name into English)
Republic of Peru
(Jurisdiction of incorporation or organization)
Avenida Paseo de la República 4667, Lima 34,
Surquillo, Lima
Peru
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X____ Form 40-F _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.
July 23, 2019
Sincerely yours,
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRAÑA Y MONTERO S.A.A.
By: /s/ LUIS FRANCISCO DIAZ OLIVERO
Name: Luis Francisco Diaz Olivero
Title: Chief Executive Officer
Date: July 23, 2019
Name: Luis Francisco Diaz Olivero
Title: Chief Executive Officer
Date: July 23, 2019
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX- MONTH PERIOD ENDED AT JUNE 30, 2018 AND 2019 (UNAUDITED); AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND JUNE 30, 2019 (UNAUDITED)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX- MONTH PERIOD ENDED AT JUNE 30, 2018 AND 2019 (UNAUDITED); AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND JUNE 30, 2019 (UNAUDITED)
CONTENTS | Page |
Consolidated Statement of Financial Position | 1 |
Consolidated Statement of Income | 2 |
Consolidated Statement of Comprehensive Income | 3 |
Consolidated Statement of Changes in Equity | 4 |
Consolidated Statement of Cash Flows | 5 |
Notes to the Consolidated Financial Statements | 6 - 26 |
S/ | = | Peruvian Sol | |
US$ | = | United States dollar |
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | ||||||||||||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||||||||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | ||||||||||||||
ASSETS | LIABILITIES AND EQUITY | |||||||||||||
As at | As at | As at | As at | |||||||||||
December 31, | June 30, | December 31, | June 30, | |||||||||||
Note | 2018 | 2019 | Note | 2018 | 2019 | |||||||||
Current assets | Current liabilities | |||||||||||||
Cash and cash equivalents | 8 | 801,140 | 791,747 | Borrowings | 12 | 826,474 | 427,883 | |||||||
Trade accounts receivables, net | 1,007,828 | 1,056,859 | Bonds | 13 | 39,167 | 48,488 | ||||||||
Work in progress, net | 28,538 | 46,859 | Trade accounts payable | 1,079,531 | 1,132,989 | |||||||||
Accounts receivable from related parties | 9 | 34,903 | 43,436 | Accounts payable to related parties | 9 | 55,941 | 64,846 | |||||||
Other accounts receivable | 588,451 | 653,996 | Current income tax | 25,807 | 38,951 | |||||||||
Inventories, net | 514,047 | 594,781 | Other accounts payable | 632,669 | 700,443 | |||||||||
Prepaid expenses | 10,549 | 16,522 | Provisions | 14 | 6,197 | 6,518 | ||||||||
2,985,456 | 3,204,200 | Total current liabilities | 2,665,786 | 2,420,118 | ||||||||||
Non-current assets classified as held for sale | 247,798 | 250,233 | Non-current liabilities classified as held for sale | 225,828 | 237,724 | |||||||||
Total current assets | 3,233,254 | 3,454,433 | Total current liabilities | 2,891,614 | 2,657,842 | |||||||||
Non-current assets | Non-current liabilities | |||||||||||||
Long-term trade accounts receivable, net | 1,020,067 | 682,118 | Borrowings | 12 | 376,198 | 230,414 | ||||||||
Long-term work in progress, net | 32,212 | - | Long-term bonds | 13 | 897,875 | 882,558 | ||||||||
Long-term accounts receivable from related parties | 9 | 778,226 | 789,636 | Other long-term accounts payable | 574,110 | 452,867 | ||||||||
Prepaid expenses | 33,697 | 43,712 | Long-term accounts payable to related parties | 9 | 21,849 | 22,919 | ||||||||
Other long-term accounts receivable | 302,957 | 229,909 | Provisions | 14 | 103,411 | 114,972 | ||||||||
Investments in associates and joint ventures | 10 | 257,765 | 255,534 | Derivative financial instruments | 61 | 105 | ||||||||
Investment property | 29,133 | 27,998 | Deferred income tax liability | 75,347 | 77,871 | |||||||||
Property, plant and equipment, net | 11 | 470,554 | 449,213 | Total non-current liabilities | 2,048,851 | 1,781,706 | ||||||||
Intangible assets, net | 11 | 847,095 | 866,032 | Total liabilities | 4,940,465 | 4,439,548 | ||||||||
Deferred income tax asset | 425,436 | 421,835 | ||||||||||||
Total non-current assets | 4,197,142 | 3,765,987 | Equity | |||||||||||
Capital | 15 | 729,434 | 871,918 | |||||||||||
Legal reserve | 132,011 | 132,011 | ||||||||||||
Voluntary reserve | 29,974 | 29,974 | ||||||||||||
Share Premium | 992,144 | 1,131,051 | ||||||||||||
Other reserves | (170,620) | (172,627) | ||||||||||||
Retained earnings | 375,417 | 402,457 | ||||||||||||
Equity attributable to controlling interest in the Company | 2,088,360 | 2,394,784 | ||||||||||||
Non-controlling interest | 401,571 | 386,088 | ||||||||||||
Total equity | 2,489,931 | 2,780,872 | ||||||||||||
Total assets | 7,430,396 | 7,220,420 | Total liabilities and equity | 7,430,396 | 7,220,420 | |||||||||
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements. |
-1-
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | ||||||
For the period | ||||||
ended June 30, | ||||||
Note | 2018 | 2019 | ||||
Revenues from construction activities | 993,952 | 927,841 | ||||
Revenues from services provided | 409,024 | 482,089 | ||||
Revenue from real estate and sale of goods | 286,269 | 219,052 | ||||
1,689,245 | 1,628,982 | |||||
Cost of construction activities | (1,000,414) | (859,651) | ||||
Cost of services provided | (262,028) | (374,206) | ||||
Cost of real estate and goods sold | (218,692) | (168,788) | ||||
16 | (1,481,134) | (1,402,645) | ||||
Gross profit | 208,111 | 226,337 | ||||
Administrative expenses | 16 | (118,667) | (94,840) | |||
Other income and expenses | 11,090 | 46,183 | ||||
Operating profit | 100,534 | 177,680 | ||||
Financial expenses | (122,862) | (117,720) | ||||
Financial income | 14,015 | 44,389 | ||||
Share of the profit or loss in associates and joint ventures | (3,161) | (1,757) | ||||
(Loss) profit before income tax | (11,474) | 102,592 | ||||
Income tax | 17 | (11,941) | (54,804) | |||
(Loss) profit from continuing operations | (23,415) | 47,788 | ||||
Profit (loss) from discontinued operations | 20 | 16,690 | (11,925) | |||
(Loss) profit for the period | (6,725) | 35,863 | ||||
(Loss) profit attributable to: | ||||||
Owners of the Company | (28,387) | 27,040 | ||||
Non-controlling interest | 21,662 | 8,823 | ||||
(6,725) | 35,863 | |||||
(Loss) earnings per share attributable to owners of the | ||||||
Company during the period | (0.043) | 0.035 | ||||
(Loss) earnings per share from continuing operations | ||||||
attributable to owners of the Company during the period | (0.058) | 0.057 | ||||
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements. |
-2-
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | ||||||
For the period | ||||||
ended June 30, | ||||||
Note | 2018 | 2019 | ||||
(Loss) profit for the period | (6,725) | 35,863 | ||||
Other comprehensive income: | ||||||
Items that will not be reclassified to profit or loss | ||||||
Remeasurement of actuarial gains and losses, net of tax | 2,682 | - | ||||
Items that may be subsequently reclassified to profit or loss | ||||||
Cash flow hedge, net of tax | 175 | (32) | ||||
Foreign currency translation adjustment, net of tax | 10,447 | (4,694) | ||||
Exchange difference from net investment in a foreign operation, net of tax | (145) | (13) | ||||
10,477 | (4,739) | |||||
Other comprehensive income for the period, net of tax | 13,159 | (4,739) | ||||
Total comprehensive income for the period | 6,434 | 31,124 | ||||
Comprehensive income attributable to: | ||||||
Owners of the Company | (18,925) | 25,033 | ||||
Non-controlling interest | 25,359 | 6,091 | ||||
6,434 | 31,124 | |||||
Comprehensive income attributable to owners of the Company: | ||||||
Continuing operations | (40,970) | 36,451 | ||||
Discontinued operations | 22,045 | (11,418) | ||||
(18,925) | 25,033 | |||||
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements. |
-3-
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||||||||||||||
FOR THE PERIOD ENDED JUNE 30, 2018 AND 2019 | |||||||||||||||||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | |||||||||||||||||||
Attributable to the controlling interests of the Company | |||||||||||||||||||
Number | |||||||||||||||||||
of shares | Legal | Voluntary | Share | Other | Retained | Non-controlling | |||||||||||||
In thousands | Capital | reserve | reserve | premium | reserves | earnings | Total | interest | Total | ||||||||||
Balances as of January 1, 2018 | 660,054 | 660,054 | 132,011 | 29,974 | 881,795 | (169,671) | 589,167 | 2,123,330 | 465,748 | 2,589,078 | |||||||||
- IFRS adoption | - | - | - | - | - | - | (52,564) | (52,564) | (979) | (53,543) | |||||||||
Initial balances restated | 660,054 | 660,054 | 132,011 | 29,974 | 881,795 | (169,671) | 536,603 | 2,070,766 | 464,769 | 2,535,535 | |||||||||
(Loss) profit for the period | - | - | - | - | - | - | (28,387) | (28,387) | 21,662 | (6,725) | |||||||||
Cash flow hedge | - | - | - | - | - | 166 | - | 166 | 9 | 175 | |||||||||
Adjustment for actuarial gains and losses | - | - | - | - | - | - | 1,962 | 1,962 | 720 | 2,682 | |||||||||
Foreign currency translation adjustment | - | - | - | - | - | 7,479 | - | 7,479 | 2,968 | 10,447 | |||||||||
Exchange difference from net investment in a foreign operation | - | - | - | - | - | (145) | - | (145) | - | (145) | |||||||||
Comprehensive income of the period | - | - | - | - | - | 7,500 | (26,425) | (18,925) | 25,359 | 6,434 | |||||||||
Transactions with shareholders: | |||||||||||||||||||
- Dividend distribution | - | - | - | - | - | - | - | - | (9,585) | (9,585) | |||||||||
- Contributions (devolution) of non-controlling shareholders, net | - | - | - | - | - | - | - | - | (38,845) | (38,845) | |||||||||
- Additional acquisition of non-controlling | - | - | - | - | (9,850) | - | - | (9,850) | (4,172) | (14,022) | |||||||||
- Deconsolidation of former subsidiary | - | - | - | - | - | - | - | - | (32,457) | (32,457) | |||||||||
Total transactions with shareholders | - | - | - | - | (9,850) | - | - | (9,850) | (85,059) | (94,909) | |||||||||
Balances as of June 30, 2018 | 660,054 | 660,054 | 132,011 | 29,974 | 871,945 | (162,171) | 510,178 | 2,041,991 | 405,069 | 2,447,060 | |||||||||
Balances as of January 1, 2019 | 729,434 | 729,434 | 132,011 | 29,974 | 992,144 | (170,620) | 375,417 | 2,088,360 | 401,571 | 2,489,931 | |||||||||
Profit for the period | - | - | - | - | - | - | 27,040 | 27,040 | 8,823 | 35,863 | |||||||||
Cash flow hedge | ��- | - | - | - | - | (30) | - | (30) | (2) | (32) | |||||||||
Foreign currency translation adjustment | - | - | - | - | - | (1,964) | - | (1,964) | (2,730) | (4,694) | |||||||||
Exchange difference from net investment in a foreign operation | - | - | - | - | - | (13) | - | (13) | - | (13) | |||||||||
Comprehensive income of the period | - | - | - | - | - | (2,007) | 27,040 | 25,033 | 6,091 | 31,124 | |||||||||
Transactions with shareholders: | |||||||||||||||||||
- Transfer to voluntary reserve | - | - | - | - | - | - | - | - | - | - | |||||||||
- Dividend distribution | - | - | - | - | - | - | - | - | (3,722) | (3,722) | |||||||||
- Contributions (devolution) of non-controlling shareholders, net | - | - | - | - | - | - | - | - | (17,790) | (17,790) | |||||||||
- Capital Increase | 142,484 | 142,484 | - | - | 138,907 | - | - | 281,391 | - | 281,391 | |||||||||
- Others | - | - | - | - | - | - | - | - | (62) | (62) | |||||||||
Total transactions with shareholders | 142,484 | 142,484 | - | - | 138,907 | - | - | 281,391 | (21,574) | 259,817 | |||||||||
Balances as of June 30, 2019 | 871,918 | 871,918 | 132,011 | 29,974 | 1,131,051 | (172,627) | 402,457 | 2,394,784 | 386,088 | 2,780,872 | |||||||||
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements. |
-4-
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | |||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | |||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||
(All amounts are expressed in thousands of S/ unless otherwise stated) | |||||
For the period | |||||
ended June 30, | |||||
Note | 2018 | 2019 | |||
OPERATING ACTIVITIES | |||||
Profit before income tax | 5,216 | 90,667 | |||
Adjustments to profit not affecting cash flows from | |||||
operating activities: | |||||
Depreciation | 71,547 | 37,964 | |||
Amortization | 52,758 | 49,644 | |||
Impairment of inventories | (13,923) | - | |||
Impairment of accounts receivable and other accounts receivable | 243 | 347 | |||
Reversal of impairment of inventories | - | (1,323) | |||
Impairment (reversal) of property, plant and equipment | - | 10,363 | |||
Impairment of intangible assets | - | 3,257 | |||
Other Provisions | 2,731 | 9,365 | |||
Financial expense,net | 86,562 | 80,644 | |||
Foreign exchange loss (gain) on loans | 17,016 | (16,071) | |||
Share of the profit and loss in associates and joint ventures | 2,425 | 1,757 | |||
Reversal of provisions | (3,982) | (1,547) | |||
Disposal of assets | 4,596 | 332 | |||
Loss (profit) on sale of property, plant and equipment | 3,420 | (1,382) | |||
Loss on sale from available-for-sale financial assets | 1,478 | - | |||
Profit on sale of investments in subsidiaries | (41,895) | - | |||
Loss on remeasurement of accounts receivable | 22,072 | (23,693) | |||
Net variations in assets and liabilities: | |||||
Trade accounts receivable and unbilled working in progress | (154,315) | 300,374 | |||
Other accounts receivable | (87,732) | 6,715 | |||
Other accounts receivable from related parties | 23,818 | 8,390 | |||
Inventories | (8,462) | (77,284) | |||
Pre-paid expenses and other assets | (23,015) | (15,988) | |||
Trade accounts payable | 110,908 | 65,354 | |||
Other accounts payable | 12,728 | (44,254) | |||
Other accounts payable to related parties | 61,898 | 9,962 | |||
Other provisions | (761) | (250) | |||
Interest payment | (74,319) | (80,472) | |||
Payments for purchases of intangibles - Concessions | (5,726) | (9,385) | |||
Payment of income tax | (57,099) | (35,535) | |||
Net cash provided by operating activities | 8,187 | 367,951 | |||
INVESTING ACTIVITIES | |||||
Sale of available-for-sale investment | 197,230 | - | |||
Sale of property, plant and equipment | 18,436 | 5,297 | |||
Sale of non-current assets held for sale | 16,244 | - | |||
Interest received | 13,298 | 15,084 | |||
Dividends received | 653 | 332 | |||
Payment for purchase of investments properties | (84) | (35) | |||
Payments for intangible purchase | (75,605) | (65,798) | |||
Payments for purchase and contributions on investment in associate and joint ventures | (3,770) | - | |||
Payments for property, plant and equipment purchase | (31,543) | (27,359) | |||
Net cash provided by (applied to) investing activities | 134,859 | (72,479) | |||
FINANCING ACTIVITIES | |||||
Loans received | 527,996 | 247,206 | |||
Amortization of loans received | (603,219) | (787,967) | |||
Amortization of bonds issued | (15,001) | (14,843) | |||
Dividends paid to non-controlling interest | (9,585) | (3,721) | |||
Cash received (return of contributions )from non-controlling shareholders | (13,456) | 263,601 | |||
Acquisition or sale of interest in a subsidiary of non-controlling shareholders | (1,581) | - | |||
Net cash applied to financing activities | (114,846) | (295,724) | |||
Net increase (net decrease) in cash | 28,200 | (252) | |||
Exchange difference | (5,968) | (9,027) | |||
Cash and cash equivalents at the beginning of the period | 626,180 | 801,021 | |||
Cash and cash equivalents at the end of the period | 8 | 648,412 | 791,742 | ||
NON-CASH TRANSACTIONS: | |||||
Capitalization of interests | - | 3,525 | |||
Acquisition of assets through finance leases | 226 | 3,038 | |||
Accounts payable to the non-controlling interest for purchase of investments | 12,441 | - | |||
Contribution in inventories | 25,389 | - | |||
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements. |
-5-
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED AT JUNE 30, 2018 AND 2019 (UNAUDITED); AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND AT JUNE 30, 2019 (UNAUDITED)
1. | GENERAL INFORMATION |
Graña y Montero S.A.A. (hereinafter the Company) was incorporated in Peru on August 12, 1996, as a result of the equity spin-off of Inversiones GyM S.A. (formerly Graña y Montero S.A.). The Company’s legal address is Av. Paseo de la Republica 4675, Surquillo Lima, Peru and is listed on the Lima Stock Exchange and the New York Stock Exchange (NYSE).
The Company is the parent of the Graña y Montero Group that includes the Company and its subsidiaries (hereinafter, the “Group”) and is mainly engaged in holding investments in different Group companies. Additionally, the Company provides services of strategic advisory and leases office space to the Group companies.
The Group is a conglomerate of companies with operations including different business activities, the most significant are engineering and construction, infrastructure (public concession ownership and operation) and real estate businesses. See details of operations segments in Note 7.
These condensed interim consolidated financial statements as of June 30, 2019 were prepared and authorized for issuance by the Chief Financial Officer on July 23, 2019.
2. | BASIS OF PREPARATION |
These condensed interim consolidated financial statements for the period ended June 30, 2019 have been prepared in accordance with IAS 34 "Interim financial reports". The condensed interim consolidated financial statements provide comparative information regarding prior periods; however, they do not include all the information and disclosures required in the annual consolidated financial statements, so they must be read together with the audited consolidated financial statements for the year ended December 31, 2018, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").
The condensed interim consolidated financial statements are presented in thousands of Peruvian Soles, unless otherwise stated.
3. | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements at December 31, 2018, except for the new international financial information regulations (IFRS) effective as of January 1, 2019, which the Group is in the process of adoption.
-6-
4. | FINANCIAL RISK MANAGEMENT |
Financial risk management is carried out by the Group’s Management. Management oversees the general management of risks in specific areas, such as foreign exchange rate risk, price risk, cash flow and fair value interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investment of excess liquidity as well as financial risks and carries out periodic supervision and monitoring.
4.1 | Financial risk factors |
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures in one of its subsidiaries and considers the use of other derivatives in the event that it identifies risks that may generate an adverse effect for the Group in the short and medium-term.
a) | Market risks |
i. | Foreign Exchange risk |
The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad. As of December 31, 2018 and June 30, 2019, and, this exposure is mainly concentrated in fluctuations of U.S. dollar, the Chilean and Colombian Pesos.
ii. | Price risk |
Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds and equity securities is low, since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the condensed interim consolidated financial statements.
iii. | Cash flow and fair value interest rate risk |
The Group’s interest rate risk mainly arises from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
b) | Credit risk |
Credit risk arises from cash and cash equivalent and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.
With respect to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board.
-7-
c) | Liquidity risk |
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate number of sources of committed credit facilities and the capacity to close out positions in the market. Historically, the Group cash flows enabled it to maintain sufficient cash to meet its obligations. However, as of December 31, 2016, the Group started to experienced liquidity risk due to the early termination of the GSP concession agreement and the obligations assumed. As a consequence, the Group started a disinvestment plan to be able to meet the obligations resulting from this scenario. That has been fulfilled, managing to reduce these obligations in an important way.
Group Corporate Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs, so that the Group does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities. Less significant financing transactions are controlled by the Finance Management of each subsidiary.
Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable, external regulatory or legal requirements; for example, foreign currency restrictions.
Surplus cash held by the operating entities over the balance required for working capital management are invested in interest-bearing checking accounts or time deposits, selecting instruments with appropriate maturities and sufficient liquidity.
The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than | 1-2 | 2-5 | More than | |||||||||||||||||
At December 31, 2018 | 1 year | years | years | 5 years | Total | |||||||||||||||
Other financial liabilities (except | ||||||||||||||||||||
for finance leases) | 816,122 | 273,079 | 129,233 | 41,577 | 1,260,011 | |||||||||||||||
Finance leases | 15,151 | 7,489 | 14,094 | - | 36,734 | |||||||||||||||
Bonds | 111,080 | 153,287 | 355,667 | 1,174,404 | 1,794,438 | |||||||||||||||
Trade accounts payables | 1,079,531 | - | - | - | 1,079,531 | |||||||||||||||
Accounts payables to related | ||||||||||||||||||||
parties | 55,941 | 21,849 | - | - | 77,790 | |||||||||||||||
Other accounts payables | 116,806 | 17,777 | 338,627 | - | 473,210 | |||||||||||||||
Other non-financial liabilities | - | 61 | - | - | 61 | |||||||||||||||
2,194,631 | 473,542 | 837,621 | 1,215,981 | 4,721,775 | ||||||||||||||||
Less than | 1-2 | 2-5 | More than | |||||||||||||||||
At June 30, 2019 | 1 year | years | years | 5 years | Total | |||||||||||||||
Other financial liabilities (except | ||||||||||||||||||||
for finance leases) | 418,353 | 214,192 | - | - | 632,545 | |||||||||||||||
Finance leases | 14,027 | 5,334 | 12,062 | - | 31,423 | |||||||||||||||
Bonds | 120,015 | 143,491 | 356,216 | 1,132,868 | 1,752,590 | |||||||||||||||
Trade accounts payables | 1,132,989 | - | - | - | 1,132,989 | |||||||||||||||
Accounts payables to related | ||||||||||||||||||||
parties | 64,846 | 22,919 | - | - | 87,765 | |||||||||||||||
Other accounts payables | 243,843 | 2,079 | 336,540 | - | 582,462 | |||||||||||||||
Other non-financial liabilities | - | 105 | - | - | 105 | |||||||||||||||
1,994,073 | 388,120 | 704,818 | 1,132,868 | 4,219,879 |
-8-
4.2 | Capital management |
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital. From 2017 the situation of the Group, has lead Management to monitor deviations that might cause the non-compliance of covenants and may hinder renegotiation of liabilities (Note12).
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.
As of December 31, 2018 and June 30, 2019, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 0.70.
At | At | |||||||
December 31, | June 30, | |||||||
2018 | 2019 | |||||||
Total financial liabilities and bonds | 2,139,714 | 1,589,343 | ||||||
Less: Cash and cash equivalents | (801,140 | ) | (791,747 | ) | ||||
Net debt ) | 1,338,574 | 797,596 | ||||||
Total equity | 2,489,931 | 2,780,872 | ||||||
Total capital | 3,828,505 | 3,578,468 | ||||||
Gearing ratio | 0.35 | 0.22 |
4.3 | Fair value estimation |
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.
- | Level 1: Measurement based on quoted prices in active markets for identical assets or liabilities. |
- | Level 2: Measurement based on inputs other than quoted prices included within (Level 1) that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). |
- | Level 3: Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group). |
The fair value of the financial assets classified as at fair value through profit or loss has been determined with observable information of Level 1.
Other financial instruments measured at fair value correspond to the interest rate swaps signed by subsidiary GMP S.A., by which a variable-interest instrument is changed to a fixed interest rate (cash flow hedge). The information used for determining the fair value of these instruments are Level 2 and has been determined based on the present value of discounted future cash flows applied to the interest- rate change projections of Citibank N.A.
-9-
The carrying amounts of cash and cash equivalents correspond to their fair values. The Company considers that the carrying amount of trade accounts receivable and payable is similar to their fair values. The fair value of financial liabilities, disclosed in Note 12, has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Company for similar financial instruments (Level 2).
5. | CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS |
Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2018.
6. | SEASONALITY OF OPERATIONS |
The Group shows no seasonality in the operations of any of its subsidiaries; operations are carried out regularly during the course of the period.
7. | SEGMENT INFORMATION |
Operating segments are reported consistently with the internal reports that are reviewed by the Group’ chief decision-maker; that is, the Executive Committee, which is led by the Chief Executive Officer. This Committee is responsible for allocating resources and evaluating the performance of each operating segment.
The Group's operating segments are assessed by the activities of the following business units: (i) engineering and construction, (ii) infrastructure, and (iii) real estate.
As set forth under IFRS 8, reportable segments by significance of income are: ‘engineering and construction’ and ‘infraestructure’. However, the Group has voluntarily decided to report on all its operating segments as detailed in this Note.
Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported are measured in a manner consistent with the basis of preparation of the financial statements.
Group sales and receivables are not concentrated on a few customers. There is no external customer that represents 10% or more of the Goup’s revenue.
As of December 31, 2018 management considered not presenting the segment "IT services", due to the sale of the CAM Group in November 2018, which includes the companies CAM Chile S.A., Cam Servicios del Peru S.A. (CAM Group). In addition,Adexus S.A. was reclassified to non-current assets held for sale.
The table below shows the Group’s financial statements by operating segments:
-10-
Operating segments financial position | ||||||||||||||||||||||||||||||||||||
Segment reporting | ||||||||||||||||||||||||||||||||||||
Infrastructure | ||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalent | 177,455 | 34,816 | 168,460 | 191,178 | 6,700 | 93,262 | 129,269 | - | 801,140 | |||||||||||||||||||||||||||
Trade accounts receivables, net | 583,842 | 54,350 | 78,013 | 226,919 | 598 | 63,038 | 1,068 | - | 1,007,828 | |||||||||||||||||||||||||||
Work in progress, net | 24,962 | - | - | - | - | - | 3,576 | - | 28,538 | |||||||||||||||||||||||||||
Accounts receivable from related parties | 203,583 | 492 | 40,820 | 758 | 9,930 | 60,759 | 98,308 | (379,747 | ) | 34,903 | ||||||||||||||||||||||||||
Other accounts receivable | 386,467 | 37,611 | 28,492 | 31,012 | 199 | 55,508 | 49,160 | 2 | 588,451 | |||||||||||||||||||||||||||
Inventories, net | 27,852 | 18,823 | 9,206 | 25,282 | - | 448,328 | - | (15,444 | ) | 514,047 | ||||||||||||||||||||||||||
Prepaid expenses | 3,825 | 1,345 | 3,068 | 874 | 135 | 81 | 1,221 | - | 10,549 | |||||||||||||||||||||||||||
1,407,986 | 147,437 | 328,059 | 476,023 | 17,562 | 720,976 | 282,602 | (395,189 | ) | 2,985,456 | |||||||||||||||||||||||||||
Non-current assets classified as held for sale | - | - | - | - | - | - | 247,798 | - | 247,798 | |||||||||||||||||||||||||||
Total current assets | 1,407,986 | 147,437 | 328,059 | 476,023 | 17,562 | 720,976 | 530,400 | (395,189 | ) | 3,233,254 | ||||||||||||||||||||||||||
Long-term trade accounts receivable, net | 14,455 | - | 33,380 | 966,202 | - | 6,030 | - | - | 1,020,067 | |||||||||||||||||||||||||||
Long-term work in progress, net | - | - | 32,212 | - | - | - | - | - | 32,212 | |||||||||||||||||||||||||||
Long-term accounts receivable from related parties | 254,660 | - | 39,341 | - | - | - | 744,655 | (260,430 | ) | 778,226 | ||||||||||||||||||||||||||
Prepaid expenses | - | - | 28,214 | 5,152 | 840 | - | - | (509 | ) | 33,697 | ||||||||||||||||||||||||||
Other long-term accounts receivable | 77,028 | 63,797 | 7,058 | 64,817 | 7,346 | 30,268 | 52,645 | (2 | ) | 302,957 | ||||||||||||||||||||||||||
Investments in associates and joint ventures | 114,676 | 7,230 | - | - | - | 5,604 | 2,213,023 | (2,082,768 | ) | 257,765 | ||||||||||||||||||||||||||
Investment property | - | - | - | - | - | 29,133 | - | - | 29,133 | |||||||||||||||||||||||||||
Property, plant and equipment, net | 205,678 | 171,430 | 14,585 | 1,586 | 109 | 9,237 | 69,088 | (1,159 | ) | 470,554 | ||||||||||||||||||||||||||
Intangible assets, net | 160,088 | 183,614 | 466,153 | 749 | - | 1,105 | 23,514 | 11,872 | 847,095 | |||||||||||||||||||||||||||
Deferred income tax asset | 166,624 | 5,025 | 11,876 | - | 620 | 17,127 | 218,201 | 5,963 | 425,436 | |||||||||||||||||||||||||||
Total non-current assets | 993,209 | 431,096 | 632,819 | 1,038,506 | 8,915 | 98,504 | 3,321,126 | (2,327,033 | ) | 4,197,142 | ||||||||||||||||||||||||||
Total assets | 2,401,195 | 578,533 | 960,878 | 1,514,529 | 26,477 | 819,480 | 3,851,526 | (2,722,222 | ) | 7,430,396 | ||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||
Borrowings | 232,409 | 26,621 | 15,384 | 209,463 | - | 133,105 | 209,492 | - | 826,474 | |||||||||||||||||||||||||||
Bonds | - | - | 25,745 | 13,422 | - | - | - | - | 39,167 | |||||||||||||||||||||||||||
Trade accounts payable | 777,130 | 49,254 | 61,233 | 104,652 | 121 | 31,173 | 55,968 | - | 1,079,531 | |||||||||||||||||||||||||||
Accounts payable to related parties | 179,351 | 1,933 | 46,099 | 65,256 | 58 | 35,085 | 91,754 | (363,595 | ) | 55,941 | ||||||||||||||||||||||||||
Current income tax | 5,898 | 2,797 | 1,398 | 9,888 | 226 | 4,219 | 1,381 | - | 25,807 | |||||||||||||||||||||||||||
Other accounts payable | 389,896 | 13,147 | 72,823 | 11,677 | 631 | 106,286 | 38,209 | - | 632,669 | |||||||||||||||||||||||||||
Provisions | 521 | 5,412 | - | - | - | 264 | - | - | 6,197 | |||||||||||||||||||||||||||
Non-current liabilities classified as held for sale | - | - | - | - | - | - | 225,828 | - | 225,828 | |||||||||||||||||||||||||||
Total current liabilities | 1,585,205 | 99,164 | 222,682 | 414,358 | 1,036 | 310,132 | 622,632 | (363,595 | ) | 2,891,614 | ||||||||||||||||||||||||||
Borrowings | 9,314 | 87,166 | 556 | - | - | 10,684 | 268,478 | - | 376,198 | |||||||||||||||||||||||||||
Long-term bonds | - | - | 299,637 | 598,238 | - | - | - | - | 897,875 | |||||||||||||||||||||||||||
Other long-term accounts payable | 357,146 | - | 31,477 | 154,756 | 1,656 | 26,470 | 2,605 | - | 574,110 | |||||||||||||||||||||||||||
Long-term accounts payable to related parties | 8,880 | - | 1,167 | 81,207 | 23,445 | - | 183,826 | (276,676 | ) | 21,849 | ||||||||||||||||||||||||||
Provisions | 32,122 | 20,234 | - | - | - | - | 51,055 | - | 103,411 | |||||||||||||||||||||||||||
Derivative financial instruments | - | 61 | - | - | - | - | - | - | 61 | |||||||||||||||||||||||||||
Deferred income tax liability | 5,564 | 24,541 | 7,010 | 37,178 | - | - | 1,054 | - | 75,347 | |||||||||||||||||||||||||||
Total non-current liabilities | 413,026 | 132,002 | 339,847 | 871,379 | 25,101 | 37,154 | 507,018 | (276,676 | ) | 2,048,851 | ||||||||||||||||||||||||||
Total liabilities | 1,998,231 | 231,166 | 562,529 | 1,285,737 | 26,137 | 347,286 | 1,129,650 | (640,271 | ) | 4,940,465 | ||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 331,178 | 323,943 | 332,406 | 171,594 | 340 | 193,483 | 2,708,803 | (1,973,387 | ) | 2,088,360 | ||||||||||||||||||||||||||
Non-controlling interest | 71,786 | 23,424 | 65,943 | 57,198 | - | 278,711 | 13,073 | (108,564 | ) | 401,571 | ||||||||||||||||||||||||||
Total liabilities and equity | 2,401,195 | �� | 578,533 | 960,878 | 1,514,529 | 26,477 | 819,480 | 3,851,526 | (2,722,222 | ) | 7,430,396 |
-11-
Operating segments financial position | ||||||||||||||||||||||||||||||||||||
Segment reporting | ||||||||||||||||||||||||||||||||||||
Infrastructure | ||||||||||||||||||||||||||||||||||||
As of June 30, 2019 | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalent | 293,872 | 27,248 | 106,969 | 242,191 | 6,641 | 95,176 | 19,650 | - | 791,747 | |||||||||||||||||||||||||||
Financial asset at fair value through profit or loss | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Trade accounts receivables, net | 691,152 | 62,220 | 91,596 | 151,736 | 600 | 58,512 | 1,043 | - | 1,056,859 | |||||||||||||||||||||||||||
Work in progress, net | 43,889 | - | - | - | - | - | 2,970 | - | 46,859 | |||||||||||||||||||||||||||
Accounts receivable from related parties | 214,741 | 550 | 50,189 | 1,612 | 21 | 62,632 | 219,128 | (505,437 | ) | 43,436 | ||||||||||||||||||||||||||
Other accounts receivable | 441,525 | 42,297 | 34,037 | 57,777 | 195 | 38,832 | 39,331 | 2 | 653,996 | |||||||||||||||||||||||||||
Inventories, net | 66,400 | 20,992 | 8,551 | 33,151 | - | 481,240 | - | (15,553 | ) | 594,781 | ||||||||||||||||||||||||||
Prepaid expenses | 5,732 | 2,318 | 2,966 | 5,111 | 253 | 13 | 129 | - | 16,522 | |||||||||||||||||||||||||||
1,757,311 | 155,625 | 294,308 | 491,578 | 7,710 | 736,405 | 282,251 | (520,988 | ) | 3,204,200 | |||||||||||||||||||||||||||
Non-current assets classified as held for sale | 843 | - | - | - | - | - | 249,390 | - | 250,233 | |||||||||||||||||||||||||||
Total current assets | 1,758,154 | 155,625 | 294,308 | 491,578 | 7,710 | 736,405 | 531,641 | (520,988 | ) | 3,454,433 | ||||||||||||||||||||||||||
Long-term trade accounts receivable, net | - | - | 58,537 | 619,808 | - | 3,773 | - | - | 682,118 | |||||||||||||||||||||||||||
Long-term work in progress, net | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Long-term accounts receivable from related parties | 256,371 | - | 39,683 | - | 10,044 | - | 714,261 | (230,723 | ) | 789,636 | ||||||||||||||||||||||||||
Prepaid expenses | - | 17 | 41,096 | 2,295 | 814 | - | - | (510 | ) | 43,712 | ||||||||||||||||||||||||||
Other long-term accounts receivable | 64,917 | 62,102 | 6,105 | - | 7,346 | 30,953 | 58,486 | - | 229,909 | |||||||||||||||||||||||||||
Investments in associates and joint ventures | 110,470 | 7,970 | - | - | - | 5,604 | 2,176,288 | (2,044,798 | ) | 255,534 | ||||||||||||||||||||||||||
Investment property | - | - | - | - | - | 27,998 | - | - | 27,998 | |||||||||||||||||||||||||||
Property, plant and equipment, net | 195,500 | 175,263 | 12,505 | 853 | 157 | 9,539 | 56,555 | (1,159 | ) | 449,213 | ||||||||||||||||||||||||||
Intangible assets, net | 155,765 | 225,497 | 450,396 | 833 | - | 1,085 | 23,865 | 8,591 | 866,032 | |||||||||||||||||||||||||||
Deferred income tax asset | 173,233 | 5,652 | 11,393 | - | 724 | 19,038 | 205,163 | 6,632 | 421,835 | |||||||||||||||||||||||||||
Total non-current assets | 956,256 | 476,501 | 619,715 | 623,789 | 19,085 | 97,990 | 3,234,618 | (2,261,967 | ) | 3,765,987 | ||||||||||||||||||||||||||
Total assets | 2,714,410 | 632,126 | 914,023 | 1,115,367 | 26,795 | 834,395 | 3,766,259 | (2,782,955 | ) | 7,220,420 | ||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||
Borrowings | 260,004 | 23,639 | 1,108 | - | - | 140,570 | 2,562 | - | 427,883 | |||||||||||||||||||||||||||
Bonds | - | - | 32,944 | 15,544 | - | - | - | - | 48,488 | |||||||||||||||||||||||||||
Trade accounts payable | 858,344 | 82,791 | 45,141 | 83,559 | 131 | 32,832 | 30,191 | - | 1,132,989 | |||||||||||||||||||||||||||
Accounts payable to related parties | 310,888 | 1,335 | 76,237 | 52,700 | - | 34,193 | 92,964 | (503,471 | ) | 64,846 | ||||||||||||||||||||||||||
Current income tax | 29,505 | 1,955 | 2,650 | 4,354 | 216 | - | 271 | - | 38,951 | |||||||||||||||||||||||||||
Other accounts payable | 401,137 | 17,315 | 63,735 | 33,350 | 737 | 146,244 | 37,923 | 2 | 700,443 | |||||||||||||||||||||||||||
Provisions | 578 | 5,703 | - | - | - | 237 | - | - | 6,518 | |||||||||||||||||||||||||||
Non-current liabilities classified as held for sale | - | - | - | - | - | - | 237,724 | - | 237,724 | |||||||||||||||||||||||||||
Total current liabilities | 1,860,456 | 132,738 | 221,815 | 189,507 | 1,084 | 354,076 | 401,635 | (503,469 | ) | 2,657,842 | ||||||||||||||||||||||||||
Borrowings | 8,224 | 75,166 | 108 | - | - | 7,749 | 139,167 | - | 230,414 | |||||||||||||||||||||||||||
Long-term bonds | - | - | 283,226 | 599,332 | - | - | - | - | 882,558 | |||||||||||||||||||||||||||
Other long-term accounts payable | 399,240 | - | 22,654 | 308 | 1,730 | 25,597 | 3,338 | - | 452,867 | |||||||||||||||||||||||||||
Long-term accounts payable to related parties | 15,772 | - | 836 | 31,799 | 23,784 | - | 183,417 | (232,689 | ) | 22,919 | ||||||||||||||||||||||||||
Provisions | 40,753 | 20,444 | - | - | - | - | 53,775 | - | 114,972 | |||||||||||||||||||||||||||
Derivative financial instruments | - | 105 | - | - | - | - | - | - | 105 | |||||||||||||||||||||||||||
Deferred income tax liability | 4,273 | 30,698 | 3,076 | 38,842 | - | - | 982 | - | 77,871 | |||||||||||||||||||||||||||
Total non-current liabilities | 468,262 | 126,413 | 309,900 | 670,281 | 25,514 | 33,346 | 380,679 | (232,689 | ) | 1,781,706 | ||||||||||||||||||||||||||
Total liabilities | 2,328,718 | 259,151 | 531,715 | 859,788 | 26,598 | 387,422 | 782,314 | (736,158 | ) | 4,439,548 | ||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 314,775 | 347,646 | 315,579 | 191,684 | 197 | 187,774 | 2,977,148 | (1,940,019 | ) | 2,394,784 | ||||||||||||||||||||||||||
Non-controlling interest | 70,917 | 25,329 | 66,729 | 63,895 | - | 259,199 | 6,797 | (106,778 | ) | 386,088 | ||||||||||||||||||||||||||
Total liabilities and equity | 2,714,410 | 632,126 | 914,023 | 1,115,367 | 26,795 | 834,395 | 3,766,259 | (2,782,955 | ) | 7,220,420 |
-12-
Operating segment performance | ||||||||||||||||||||||||||||||||||||
Segment Reporting | ||||||||||||||||||||||||||||||||||||
Infrastructure | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2018 - | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Revenue | 920,117 | 269,314 | 304,879 | 304,965 | 1,598 | 143,559 | 43,219 | (298,406 | ) | 1,689,245 | ||||||||||||||||||||||||||
Gross profit (loss) | 34,849 | 61,750 | 50,068 | 53,173 | 209 | 25,059 | (6,426 | ) | (10,571 | ) | 208,111 | |||||||||||||||||||||||||
Administrative expenses | (64,565 | ) | (9,824 | ) | (15,221 | ) | (5,361 | ) | (118 | ) | (9,147 | ) | (33,272 | ) | 18,841 | (118,667 | ) | |||||||||||||||||||
Other income and expenses, net | 8,920 | (15 | ) | 2 | 2 | - | (1,118 | ) | 628 | 2,671 | 11,090 | |||||||||||||||||||||||||
Operating profit (loss) | (20,796 | ) | 51,911 | 34,849 | 47,814 | 91 | 14,794 | (39,070 | ) | 10,941 | 100,534 | |||||||||||||||||||||||||
Financial expenses | (34,447 | ) | (7,366 | ) | (13,801 | ) | (3,719 | ) | - | (11,146 | ) | (63,430 | ) | 11,047 | (122,862 | ) | ||||||||||||||||||||
Financial income | 6,331 | 337 | 2,004 | 11,091 | 30 | 2,844 | 14,610 | (23,232 | ) | 14,015 | ||||||||||||||||||||||||||
Dividends | - | - | - | - | - | - | 2,196 | (2,196 | ) | - | ||||||||||||||||||||||||||
Share of profit or loss in associates | ||||||||||||||||||||||||||||||||||||
and joint ventures | (4,522 | ) | 709 | - | - | - | - | 35,875 | (35,223 | ) | (3,161 | ) | ||||||||||||||||||||||||
(Loss) profit before income tax | (53,434 | ) | 45,591 | 23,052 | 55,186 | 121 | 6,492 | (49,819 | ) | (38,663 | ) | (11,474 | ) | |||||||||||||||||||||||
Income tax | 3,772 | (13,564 | ) | (7,203 | ) | (16,788 | ) | (177 | ) | (1,837 | ) | 23,046 | 810 | (11,941 | ) | |||||||||||||||||||||
(Loss) profit from continuing operations | (49,662 | ) | 32,027 | 15,849 | 38,398 | (56 | ) | 4,655 | (26,773 | ) | (37,853 | ) | (23,415 | ) | ||||||||||||||||||||||
Loss from discontinuing operations | 44,096 | - | - | - | - | - | (27,786 | ) | 380 | 16,690 | ||||||||||||||||||||||||||
(Loss) profit for the period | (5,566 | ) | 32,027 | 15,849 | 38,398 | (56 | ) | 4,655 | (54,559 | ) | (37,473 | ) | (6,725 | ) | ||||||||||||||||||||||
(Loss) profit from attributable to: | ||||||||||||||||||||||||||||||||||||
Owners of the Company | (7,582 | ) | 29,496 | 13,149 | 28,799 | (56 | ) | (2,978 | ) | (50,071 | ) | (39,144 | ) | (28,387 | ) | |||||||||||||||||||||
Non-controlling interest | 2,016 | 2,531 | 2,700 | 9,599 | - | 7,633 | (4,488 | ) | 1,671 | 21,662 | ||||||||||||||||||||||||||
(5,566 | ) | 32,027 | 15,849 | 38,398 | (56 | ) | 4,655 | (54,559 | ) | (37,473 | ) | (6,725 | ) |
-13-
Operating segment performance | ||||||||||||||||||||||||||||||||||||
Segment Reporting | ||||||||||||||||||||||||||||||||||||
Infrastructure | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 - | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Revenue | 1,050,498 | 274,222 | 315,137 | 202,958 | 1,782 | 65,820 | 44,565 | (326,000 | ) | 1,628,982 | ||||||||||||||||||||||||||
Gross profit (loss) | 103,187 | 57,749 | 46,323 | 37,459 | 393 | 8,883 | (1,985 | ) | (25,672 | ) | 226,337 | |||||||||||||||||||||||||
Administrative expenses | (66,993 | ) | (12,322 | ) | (15,150 | ) | (7,317 | ) | (258 | ) | (11,008 | ) | (13,908 | ) | 32,116 | (94,840 | ) | |||||||||||||||||||
Other income and expenses, net | 5,216 | 226 | (16,911 | ) | (1 | ) | - | (144 | ) | 56,917 | 880 | 46,183 | ||||||||||||||||||||||||
Gain from sale of investments | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Operating profit (loss) | 41,410 | 45,653 | 14,262 | 30,141 | 135 | (2,269 | ) | 41,024 | 7,324 | 177,680 | ||||||||||||||||||||||||||
Financial expenses | (36,505 | ) | (5,663 | ) | (14,521 | ) | (7,302 | ) | (11 | ) | (8,975 | ) | (52,078 | ) | 7,335 | (117,720 | ) | |||||||||||||||||||
Financial income | 2,293 | 565 | 1,305 | 14,855 | 328 | 1,968 | 38,249 | (15,174 | ) | 44,389 | ||||||||||||||||||||||||||
Dividends | - | - | - | - | - | - | 3,904 | (3,904 | ) | - | ||||||||||||||||||||||||||
Share of profit or loss in associates | ||||||||||||||||||||||||||||||||||||
and joint ventures | (4,063 | ) | 1,073 | - | - | - | - | (1,017 | ) | 2,250 | (1,757 | ) | ||||||||||||||||||||||||
(Loss) profit before income tax | 3,135 | 41,628 | 1,046 | 37,694 | 452 | (9,276 | ) | 30,082 | (2,169 | ) | 102,592 | |||||||||||||||||||||||||
Income tax | (13,378 | ) | (12,046 | ) | (6,891 | ) | (10,925 | ) | (256 | ) | 1,845 | (13,181 | ) | 28 | (54,804 | ) | ||||||||||||||||||||
(Loss) profit from continuing operations | (10,243 | ) | 29,582 | (5,845 | ) | 26,769 | 196 | (7,431 | ) | 16,901 | (2,141 | ) | 47,788 | |||||||||||||||||||||||
Loss from discontinuing operations | - | - | - | - | - | - | (11,844 | ) | (81 | ) | (11,925 | ) | ||||||||||||||||||||||||
(Loss) profit for the period | (10,243 | ) | 29,582 | (5,845 | ) | 26,769 | 196 | (7,431 | ) | 5,057 | (2,222 | ) | 35,863 | |||||||||||||||||||||||
(Loss) profit from attributable to: | ||||||||||||||||||||||||||||||||||||
Owners of the Company | (10,539 | ) | 27,001 | (9,235 | ) | 20,077 | 196 | (5,709 | ) | 10,471 | (5,222 | ) | 27,040 | |||||||||||||||||||||||
Non-controlling interest | 296 | 2,581 | 3,390 | 6,692 | - | (1,722 | ) | (5,414 | ) | 3,000 | 8,823 | |||||||||||||||||||||||||
(10,243 | ) | 29,582 | (5,845 | ) | 26,769 | 196 | (7,431 | ) | 5,057 | (2,222 | ) | 35,863 |
-14-
No major changes occurred in total assets as compared to the amount stated in previous year-end financial statements.
There are no differences as compared to previous year-end financial statements based on segmentation or measurement of financial performance by segment.
8. | CASH AND CASH EQUIVALENTS |
At | At | |||||||
December 31, | June 30, | |||||||
2018 | 2019 | |||||||
Cash on hand | 1,377 | 1,515 | ||||||
Cash in-transit | 3,566 | 3,942 | ||||||
Bank accounts | 647,832 | 654,820 | ||||||
Time deposits | 148,365 | 131,470 | ||||||
801,140 | 791,747 |
Reconciliation to the consolidated statement of cash flow
The above figures reconcile to the amount of cash shown in the statement of cash flows as follows:
At | At | |||||||
December 31, | June 30, | |||||||
2018 | 2019 | |||||||
Cash and cash equivalent on Consolidated statement of | ||||||||
financial position | 801,140 | 791,747 | ||||||
Bank overdrafts (Note 12) | (119 | ) | (5 | ) | ||||
Balances per Consolidated statement of cash flows | 801,021 | 791,742 |
9. | TRANSACTIONS WITH RELATED PARTIES |
a) Transactions with related parties
Major transactions between the Company and its related parties are summarized as follows:
At June 30, | ||||||||
2018 | 2019 | |||||||
Revenue from sales of goods and services: | ||||||||
- Associates | 1,691 | 108 | ||||||
- Joint operations | 15,782 | 20,418 | ||||||
17,473 | 20,526 |
Inter-company services were agreed based on market terms as if they had been agreed to third parties.
-15-
b) Balances of transactions with related parties
At December 31, | At June 30, | |||||||||||||||
2018 | 2019 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Current portion: | ||||||||||||||||
Joint operations | ||||||||||||||||
Consorcio Rio Urubamba | 9,122 | - | 9,007 | - | ||||||||||||
Consorcio Peruano de Conservacion | 6,417 | - | 3,101 | - | ||||||||||||
Consorcio Italo Peruano | 3,322 | 4,996 | 608 | 984 | ||||||||||||
Consorcio Constructor Chavimochic | 2,138 | 6,199 | - | 6,531 | ||||||||||||
Consorcio GyM Conciviles | 1,855 | - | 1,217 | - | ||||||||||||
Consorcio La Gloria | 1,369 | 1,006 | 1,373 | 1,022 | ||||||||||||
Consorcio Ermitaño | 781 | 624 | 877 | 507 | ||||||||||||
Terminales del Peru | 459 | - | 2,470 | - | ||||||||||||
Consorcio TNT Vial y Vives - DSD Chile Ltda | - | 11,804 | - | 3,565 | ||||||||||||
Consorcio Rio Mantaro | - | 6,655 | 2,359 | 8,357 | ||||||||||||
Consorcio Vial Quinua | - | 1,970 | - | 2,049 | ||||||||||||
Consorcio Huacho Pativilca | - | 475 | 8,959 | 16,202 | ||||||||||||
Consorcio CDEM | - | - | 2,294 | - | ||||||||||||
Consorcio GyM-Stracon | - | - | 2,018 | - | ||||||||||||
Other minors | 9,215 | 11,323 | 8,111 | 5,704 | ||||||||||||
34,678 | 45,052 | 42,394 | 44,921 | |||||||||||||
Other related parties | ||||||||||||||||
Ferrovias Argentina | - | 10,242 | - | 15,861 | ||||||||||||
Peru Piping Spools S.A.C. | 225 | - | 1,042 | - | ||||||||||||
Other minors | - | 647 | - | 4,064 | ||||||||||||
225 | 10,889 | 1,042 | 19,925 | |||||||||||||
Current portion | 34,903 | 55,941 | 43,436 | 64,846 | ||||||||||||
Non-current portion: | ||||||||||||||||
Gasoducto Sur Peruano S.A | 773,927 | - | 787,553 | - | ||||||||||||
Ferrovias Participaciones | - | 21,849 | - | 22,919 | ||||||||||||
Consorcio Constructor Chavimochic | - | - | 2,083 | - | ||||||||||||
Other minors | 4,299 | - | - | - | ||||||||||||
Non-current | 778,226 | 21,849 | 789,636 | 22,919 |
Receivables and payables are mainly current and do not have specific guarantees, except for the receivable account from GSP. Accounts receivable from related parties have maturity periods of 60 days and are related to sales of goods and services. These balances are non-interest-bearing, and during 2019 do not require a provision for impairment.
Accounts payable to related parties mainly related to services of engineering, construction, maintenance and others and have a maturity period of 60 days. Such accounts are not interest bearing because they are short-term.
-16-
10. | INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
The movement of our investments in associates for the period ended June 30, 2018 and 2019 is as follows:
At June 30, | ||||||||
2018 | 2019 | |||||||
Beginning balance | 268,671 | 257,765 | ||||||
Contributions received | 3,770 | - | ||||||
Dividends received | (653 | ) | (332 | ) | ||||
Share of the profit or loss in associates and joint ventures | (3,161 | ) | (1,757 | ) | ||||
Write-off of investment | - | (142 | ) | |||||
Translation adjustments | (2,533 | ) | - | |||||
Discontinued operations | 736 | - | ||||||
Ending balance | 266,830 | 255,534 |
11. | PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS |
For the period ended June 30, 2018 and 2019, the movement in property, plant and equipment and intangible assets accounts was as follows:
Property, | ||||||||
plant and | Intangibles | |||||||
equipment | assets | |||||||
Net cost at January 1, 2018 | 865,735 | 940,070 | ||||||
Additions | 31,769 | 83,258 | ||||||
Subsidiary deconsolidation | (207,243 | ) | (16,509 | ) | ||||
Transfers, disposals and adjustments | (5,496 | ) | 1,008 | |||||
Deductions for sale of assets | (21,856 | ) | - | |||||
Depreciation, amortization | (70,389 | ) | (52,758 | ) | ||||
Net cost at June 30, 2018 | 592,520 | 955,069 | ||||||
Net cost at January 1, 2019 | 470,554 | 847,095 | ||||||
Additions | 30,652 | 74,544 | ||||||
Transfers, disposals and adjustments (*) | (11,327 | ) | (5,963 | ) | ||||
Deductions for sale of assets | (3,872 | ) | - | |||||
Depreciation, amortization | (36,794 | ) | (49,644 | ) | ||||
Net cost at June 30, 2019 | 449,213 | 866,032 |
(*) Includes impairment of property, plant and equipment amounted to S/10.7 million and intangible assets amounted to S/3.3 million, recorded in other income and expenses.
-17-
a) Property, plant and equipment
As of December 31, 2018 and June 30, 2019, additions to property, plant and equipment comprise acquisition of machinery and equipment required for Group’s operations.
Depreciation of fixed assets and investment properties for the period is broken down in the statement of income as follows:
At June 30, | ||||||||
2018 | 2019 | |||||||
Cost of services and goods (Note 16) | 43,560 | 36,141 | ||||||
Administrative expenses (Note 16) | 2,696 | 1,823 | ||||||
(+) Depreciation discontinued operation | 25,291 | - | ||||||
Total depreciation related to property, plant and equipment and investment property | 71,547 | 37,964 | ||||||
(-) Depreciation of investment property | (1,158 | ) | (1,170 | ) | ||||
Total depreciation of property, plant and equipment | 70,389 | 36,794 |
b) Intangible assets
As of December 31, 2018 and June 30, 2019, additions registered in intangible assets mainly comprise of investments in preparation of wells located in Lots I, III, IV and V to provide oil and hydrocarbon explotation services and in building the second Ancón-Huacho-Pativilca road section of the Panamericana Norte highway (concession under intangible model).
Amortization of intangibles for the year is broken down in the statement of income as follows:
At June 30, | ||||||||
2018 | 2019 | |||||||
Cost of services and goods (Note 16) | 46,769 | 46,822 | ||||||
Administrative expenses (Note 16) | 1,299 | 2,822 | ||||||
(+) Amortization discontinued operations | 4,690 | - | ||||||
52,758 | 49,644 |
i) Goodwill
Management reviews the results of its businesses based on the type of economic activity carried out. Goodwill allocated to cash-generating units are:
At | At | |||||||
December 31, | June 30, | |||||||
2018 | 2019 | |||||||
Engineering and construction | 71,621 | 70,694 | ||||||
Electromechanical | 20,737 | 20,737 | ||||||
IT services | 930 | 930 | ||||||
93,288 | 92,361 |
-18-
As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on the higher of its value in use and fair value less cost of disposal. Value in use is determined based on the future cash flows expected to be generated by the assessed CGU.
12. | BORROWINGS |
This item comprises:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | June 30, | December 31, | June 30, | December 31, | June 30, | |||||||||||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | |||||||||||||||||||
Bank overdrafts (Note 8) | 119 | 5 | 119 | 5 | - | - | ||||||||||||||||||
Bank loans | 1,023,481 | 487,663 | 810,188 | 412,724 | 213,293 | 74,939 | ||||||||||||||||||
Finance leases | 33,488 | 28,905 | 13,514 | 12,597 | 19,974 | 16,308 | ||||||||||||||||||
Other financial entities | 145,584 | 141,724 | 2,653 | 2,557 | 142,931 | 139,167 | ||||||||||||||||||
1,202,672 | 658,297 | 826,474 | 427,883 | 376,198 | 230,414 |
a) Bank loans
As of December 31, 2018 and June 30, 2019, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.6% and 15.8% in 2018 and between 5.25% and 12% in 2019.
Current | Non-current | |||||||||||||||||||||||||
At | At | At | At | |||||||||||||||||||||||
Interest | Maturity | December 31, | June 30, | December 31, | June 30, | |||||||||||||||||||||
rate | date | 2018 | 2019 | 2018 | 2019 | |||||||||||||||||||||
| ||||||||||||||||||||||||||
GyM S.A. | 5.25% / 8.91% | 2019 | 227,770 | 255,725 | (iii) | - | - | |||||||||||||||||||
Graña y Montero S.A.A. | Libor USD 3M + de 4.9% a 5.5% | 2018 / 2019 | 206,836 | - | (ii) | 125,547 | - | (i) | ||||||||||||||||||
GyM Ferrovías S.A. | Libor USD 1M + 2% | 2019 | 209,463 | - | - | - | ||||||||||||||||||||
Viva GyM S.A. | 7.00% / 12.00% | 2018 / 2020 | 129,617 | 136,856 | 2,102 | - | ||||||||||||||||||||
GMP S.A. | 4.55% / 6.04% | 2018 / 2020 | 22,587 | 20,143 | 85,644 | 74,939 | ||||||||||||||||||||
CONCAR S.A. | 15.75% | 2019 | 13,915 | - | - | - | ||||||||||||||||||||
810,188 | 412,724 | 213,293 | 74,939 |
i) Credit Suisse Syndicated Loan
In December 2015, the Group entered into a US$200 million (equivalent to S/672 million) medium-term agreement with Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC. The loan term is five years, with quarterly installments starting on the 18th month. The loan bears interest at a rate of three months Libor plus 4.9% per year. The funds were used to finance the equity participation in GSP. On June 27, 2017, the Company renegotiated the terms of this loan to correct defaults related to the cancellation of the GSP concession.
As of June 30, 2019, the outstanding balance of the loan capital was fully paid.
ii) GSP Bridge Loan
At December 31, 2016, the current balance of bank loans included US$129 million (equivalent to S/433.3 million) of the corporate guarantee issued by the Company to guarantee the bridge loan granted to GSP. On June, 2017, the Company reached a refinancing agreement with Natixis, BBVA, SMBC and MUFJ for US$78.7 million (equivalent to S/256.3 million), this amount was used to repay the GSP bridge loan. The new loan would remain until June, 2020.
As of June 30, 2019, the principal of the loan was fully paid.
-19-
iii) Financial Stability Framework Agreement
On July 31, 2017, the Company and its subsidiaries, GyM S.A., Construyendo Pais S.A., Vial y Vives-DSD S.A. and Concesionaria Vía Expresa Sur S.A., entered into a Financial Stability Framework Agreement (together with certain complementary contracts, the “Framework Agreement”) with the following financial entities: Scotiabank Perú S.A., Banco Internacional del Perú S.A.A., BBVA Banco Continental, Banco de Crédito del Perú, Citibank del Peru SA and Citibank N.A. The Framework Agreement aims to: (i) grant GyM a syndicated revolving line of credit for working capital for up to US$1.6 million and S/143.9 million, which may be increased by an additional US$14 million subject to certain conditions; (ii) grant GyM S.A. a line of credit of up to US$51.6 million and S/33.6 million; (iii) grant the Company, GyM S.A., Construyendo Pais S.A., Vial y Vives - DSD S.A. and Concesionaria Vía Expresa Sur S.A. a non-revolving line of credit to finance reimbursement obligations under performance bonds; (iv) grant a syndicated line of credit in favor of Graña y Montero S.A.A. and GyM S.A. for the issuance of performance bonds up to an amount of US$100 million (which may be increased by an additional US$50 million subject to compliance with certain conditions); and (v) to commit to maintain existing standby letters of credit issued at the request of GyM S.A. and the Company, as well as the request of Construyendo Pais S.A., Vial y Vives – DSD and Concesionaria Vía Expresa Sur S.A. In April of 2018, the Group repaid US$72.7 million (equivalent to S/245.8 million) of the facility with the proceeds of the sale of Stracon GyM S.A., and in July of 2018, an additional of US$15.4 million (equivalent to S/52.1 million). As of June 30, 2019, and the date of this report, there was US$59.4 million (equivalent to S/195.5 million) outstanding under this agreement.
GyM S.A. requested a waiver for a change in the Financial Stability Framework Agreement, in which at least 50% of the amount of Tranche A (client invoices (facturas)) and up to 50% of the amount of Tranche B (project valuations (valorizaciones) should be presented; the request was accepted by the lenders. As of June 30, 2019 and the date of this report, the value of client invoices and the value of project valuations is 68% and 126%, respectively, both percentages comply with the provisions of the approved dispensation.
As of June 30, 2019 and the date of this report, GyM is in compliance with the ratios established under the Financial Stability Framework Agreement.
b) Other financial entities
Securitization of Norvial flows
At May 29, 2018 the Company subscribes an agreement between the Company and Inversiones Concesiones Vial S.A.C. ("BCI Peru") -whith the intervention of Fondo de Inversiones BCI NV (“Fondo BCI”) and BCI Management Administradora General de Fondos S.A. (“BCI” Asset Management”) - to monetize future dividends from Norvial S.A. to the Company. This operation has as a finality to reduce the indebtness of the Company.The amount of the transaction was US$42.3 millions and ended on June 11, 2018.
Likewise, it has been agreed that our company will have purchase options on 48.8% of Norvial's economic rights that BCI Peru will maintain through its participation in Inversiones en Autopistas S.A.. These options will be subject to certain conditions such as the expiration of different terms, recovery of the investment made with the funds of the BCI Fund (according to different economic calculations) and/or that a change of control occurs.
-20-
c) Fair value of borrowings
The carrying amount and fair value of borrowings are broken down as follows:
Carrying amount | Fair value | |||||||||||||||
At | At | At | At | |||||||||||||
December 31, | June 30, | December 31, | June 30, | |||||||||||||
2018 | 2019 | 2018 | 2019 | |||||||||||||
Bank overdrafts (Note 8) | 119 | 5 | 119 | 5 | ||||||||||||
Bank loans | 1,023,481 | 487,663 | 1,152,885 | 487,612 | ||||||||||||
Finance leases | 33,488 | 28,905 | 38,399 | 27,173 | ||||||||||||
Other financial entities | 145,584 | 141,724 | 145,584 | 141,724 | ||||||||||||
1,202,672 | 658,297 | 1,336,987 | 656,514 |
As of June 30, 2019, the fair value is based on cash flows discounted using a rate based on the borrowing rate of 3.6% and 8.9% (2.4% and 8.9% in 2018) and are included as Level 2 in the level of measurement.
13. | BONDS |
This item is broken down as follows:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | June 30, | December 31, | June 30, | December 31, | June 30, | |||||||||||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | |||||||||||||||||||
GyM Ferrovías S.A. | 611,660 | 614,876 | 13,422 | 15,544 | 598,238 | 599,332 | ||||||||||||||||||
Norvial S.A. | 325,382 | 316,170 | 25,745 | 32,944 | 299,637 | 283,226 | ||||||||||||||||||
937,042 | 931,046 | 39,167 | 48,488 | 897,875 | 882,558 |
a) | GyM Ferrovías S.A. |
In February 2015, the subsidiary GyM Ferrovías S.A. made an international issue of corporate bonds under Regulation S. The issue was made in soles VAC (adjusted for the Constant Update Value) for an amount of S/629 million. The bonds mature in November 2039 and earn interest at a rate of 4.75% (plus the VAC adjustment), present a risk rating of AA + (local scale) granted by Apoyo & Asociados Internacionales Clasico de Riesgo. As of June 30, 2019, an amortization has been made up to S/73.3 million (S/67.7 million as of December 31, 2018).
As of June 30, 2019, the balance includes accrued interest payable and VAC adjustments for S/77.9 million (S/72.0 million as of December 31, 2018).
At June 30, 2018 and 2019 the account movement was as follows:
-21-
2018 | 2019 | |||||||
Balance at January, 1 | 603,657 | 611,660 | ||||||
Amortization | (5,064 | ) | (5,638 | ) | ||||
Accrued interest | 23,814 | 23,894 | ||||||
Interest paid | (14,960 | ) | (15,040 | ) | ||||
Balance at June, 30 | 607,447 | 614,876 |
As part of the structuring process of the bond, GyM Ferrovías S.A. committed to report and verify compliance with the following, measured based on their individual financial statements (covenants):
- | Debt service coverage ratio not less than 1.2 times. |
- | Maintain a constant balance in the minimum trust equal to one quarter of operation and maintenance costs (including the IGV). |
- | Maintain a constant balance in the minimum trust equal to the following two coupons according to the bond schedule. |
On August 23, 2017, GyM Ferrovías S.A. and Line One CPAO Purchaser LLC subscribed the contract for the sale and assignment of collection rights of the "Annual Payment for Complementary Investment (Complementary PAO)" derived from the Concession Contract up to an amount equivalent to US$316 million.
On August 23, 2017, GyM Ferrovías S.A. as Borrower, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation as Lenders and Mizuho Bank, Ltd. as Administrative Agent signed a loan contract for Working Capital for an amount equivalent to US$80 million to partially finance the Expansion Project of the Line 1 of the Lima Metro. As of June 30, 2019, the Working Capital loan was fully paid.
b) | Norvial S.A. |
Between 2015 and 2016, the subsidiary Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA.
The capital raised was used to finance the construction of the Second Phase of Red Vial No.5 and the financing of VAT arising from a project-related expenses.
At June 30, 2018 and 2019 the account movement was as follows:
2018 | 2019 | |||||||
Balance at January, 1 | 343,910 | 325,382 | ||||||
Amortization | (9,937 | ) | (9,205 | ) | ||||
Accrued interest | 11,886 | 11,782 | ||||||
Capitalized interest | 1,927 | 1,398 | ||||||
Interest paid | (13,822 | ) | (13,187 | ) | ||||
Balance at June, 30 | 333,964 | 316,170 |
- | Debt service coverage ratio of not less than 1.3 times. |
- | Proforma gearing ratio lower than 4 times. |
-22-
The fair value of both obligations as of June 30, 2019 amounts to S/1,042 million (as of December 31, 2018 amounts to S/1,037 million), is based on discounted cash flows using rates between 4.32% and 6.93% (between 4.09% and 5.45% as of December 31, 2018) and is within level 2 of the fair value hierarchy.
As of December 31, 2018 and June 30, 2019, the Company has complied with the covenants of both types of bonds.
14. | PROVISIONS |
The movement of this item is as follows:
Contingent | ||||||||||||||||
liabilities | Provision | |||||||||||||||
Legal | resulting from | for well | ||||||||||||||
contingencies | acquisitions | closure | Total | |||||||||||||
At January 1, 2018 | 23,364 | 7,249 | 16,804 | 47,417 | ||||||||||||
Additions | 2,731 | - | 2,139 | 4,870 | ||||||||||||
Reversals of provisions | (3,684 | ) | (298 | ) | - | (3,982 | ) | |||||||||
Payments | (761 | ) | - | - | (761 | ) | ||||||||||
Translation adjustments | (20 | ) | 35 | - | 15 | |||||||||||
At June 30, 2018 | 21,630 | 6,986 | 18,943 | 47,559 | ||||||||||||
At January 1, 2019 | 84,728 | 4,498 | 20,382 | 109,608 | ||||||||||||
Additions | 13,564 | - | 200 | 13,764 | ||||||||||||
Reversals of provisions | (1,091 | ) | (456 | ) | - | (1,547 | ) | |||||||||
Payments | (250 | ) | - | - | (250 | ) | ||||||||||
Translation adjustments | (29 | ) | (56 | ) | - | (85 | ) | |||||||||
At June 30, 2019 | 96,922 | 3,986 | 20,582 | 121,490 |
15. | CAPITAL |
As of June 30, 2019, the capital of the Company is represented by 871,917,855 shares of a nominal value of S/1.00 each, all registered in the Public Registries.
As of December 31, 2018, the capital of the Company were represented by 729,434,192 shares of a nominal value of S/1.00 each, of which 660,053,790 were registered in the Public Registries and 69,380,402 were in process of registration formalization.
At June 30, 2019, a total of 230,470,860 shares were represented in ADS, equivalent to 46,094,172 ADSs at a rate of 5 shares per ADS. As of December 31, 2018, a total of 207,931,660 shares were represented by ADS equivalent to 41,586,332 ADSs.
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16. | EXPENSES BY NATURE |
For the period ended June 30, 2018 and 2019, this item comprises:
Cost of | ||||||||||||
goods and | Administrative | |||||||||||
services | expenses | Total | ||||||||||
At June 30, 2018 | ||||||||||||
Salaries, wages and fringe benefits | 444,201 | 50,682 | 494,883 | |||||||||
Services provided by third-parties | 455,457 | 42,755 | 498,212 | |||||||||
Purchase of goods | 340,658 | - | 340,658 | |||||||||
Other management charges | 158,310 | 20,859 | 179,169 | |||||||||
Depreciation | 43,560 | 2,696 | 46,256 | |||||||||
Amortization | 46,769 | 1,299 | 48,068 | |||||||||
Taxes | 5,859 | 376 | 6,235 | |||||||||
Impairment of accounts receivable | 243 | - | 243 | |||||||||
Inventory recovery | (13,923 | ) | - | (13,923 | ) | |||||||
Total report reclassified (Note 20 C) | 1,481,134 | 118,667 | 1,599,801 | |||||||||
At June 30, 2019 | ||||||||||||
Salaries, wages and fringe benefits | 378,778 | 58,403 | 437,181 | |||||||||
Services provided by third-parties | 500,917 | 19,054 | 519,971 | |||||||||
Purchase of goods | 246,355 | - | 246,355 | |||||||||
Other management charges | 190,766 | 12,438 | 203,204 | |||||||||
Depreciation | 36,141 | 1,823 | 37,964 | |||||||||
Amortization | 46,822 | 2,822 | 49,644 | |||||||||
Taxes | 4,150 | 300 | 4,450 | |||||||||
Impairment of accounts receivable | 347 | - | 347 | |||||||||
Inventory recovery | (1,323 | ) | - | (1,323 | ) | |||||||
property, plant and equipment recovery | (308 | ) | - | (308 | ) | |||||||
Total report | 1,402,645 | 94,840 | 1,497,485 |
As of June 30, 2019, the subsidiary Viva GyM S.A. reverse the excess of provision for impairment in inventories for S/1.3 million (S/13.9 million as of June 30, 2018).
17. | INCOME TAX |
These condensed interim consolidated financial statements for the period ended June 30, 2019, income tax expense is recognized based on management’s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to June 30, 2019 is 53.42% (104.06% for the period ended June 30, 2018). The variation of the effective rate as compared to the previous year is due to the effect of the permanent differences in the income tax calculation.
18. | CONTINGENCIES, COMMITTMENTS AND GUARANTEES |
As of June 30, 2019, contingencies held by the Group are substantially the same as those existing as of December 31, 2018.
In addition the Group had performace bonds and guarantees commitments with different financial institutions securing to secure transactions for US$434.3 million and US$13.9 million, respectively (US$471.60 million and US$13.9 million, respectively, as of December 31, 2018).
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19. | DIVIDENDS |
As part of the covenants at the refinancing agreements mentioned in Note 12, the Company is unable to pay dividends as established in the Financial Stability Framework Agreement.
For the period ended June 30, 2019, the Group has paid dividends to its non-controlling subsidiaries in the amount of S/3.7 million (S/9.6 million for the same period in 2018).
20. | DISCONTINUED OPERATIONS AND NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE |
As part of the process of divestments of non-strategic assets initiated by the Company; CAM Servicios del Peru S.A., CAM Chile S.A. and Stracon GyM SA were sold, during the year 2018 (completed).
Additionally, at December 31, 2018, the subsidiary Adexus S.A. has been reclassified as non-current assets available for sale (planned) at December 31, 2018 and June 30, 2019.
A. | Discontinued operations |
i) CAM Servicios del Peru S.A. and CAM Chile S.A.
On December 4, 2018, the Company entered into a purchase and sale agreement for all of its shares (representing 73.16%) of CAM Servicios del Peru S.A. and CAM Chile S.A. The Group received for its participation in CAM Chile S.A. and CAM Servicios del Peru S.A. the sum of (i) US$15.78 million (equivalent to S/51.7 million) for the shares of CAM Chile S.A. and (ii) US$3.0 million (equivalent to S/10.4 million) for the shares of CAM Servicios del Peru S.A. The net gain on the sale of both subsidiaries amounted to S/31.7 million.
ii) Stracon GyM S.A.
On March 28, 2018, the Company entered into a purchase and sale agreement for all of its shares (representing 87.59%) in Stracon GyM S.A. The sale price was agreed in US$76.8 million (equivalent to S/248.8 million), which is fully paid. The net gain on the sale amounted to S/41.9 million.
B. | Non-current asset classified as held for sale |
At December 31, 2018 and at June 30, 2019, non-current assets and liabilities held for sale correspond to investments in the company Adexus S.A., whose main activity is to provide information technology solutions mainly in Chile and Peru. Account balances are classified as assets held for sale taking into account that the Group has a sales plan defined within the next 12 months.
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At | At | |||||||
December 31, | June 30, | |||||||
2018 | 2019 | |||||||
ASSETS | ||||||||
Cash and cash equivalets | 6,074 | 3,555 | ||||||
Accounts receivables, net | 157,351 | 152,710 | ||||||
Inventories, net | 3,999 | 2,033 | ||||||
Other assets, net | 80,374 | 91,092 | ||||||
Total assets | 247,798 | 249,390 | ||||||
LIABILITIES | ||||||||
Borrowings | 71,810 | 100,476 | ||||||
Accounts payable | 148,817 | 132,408 | ||||||
Deferred income tax liabilities | 5,201 | 4,840 | ||||||
Total liabilities | 225,828 | 237,724 | ||||||
Total net assets | 21,970 | 11,666 |
C. | Consolidated statement of income |
The Company reclassified financial results of discontinued operations, Stracon GyM S.A., CAM Servicios del Peru S.A., CAM Chile S.A. (completed) and Adexus S.A. (planned) for the period ended June 30, 2018 as follows:
At June 30, 2018 | Reclassification discontinued operations | At June 30, 2018 | ||||||||||||||
Reported | Completed | Planned | Reclassified | |||||||||||||
Revenues | 2,241,743 | (417,353 | ) | (135,145 | ) | 1,689,245 | ||||||||||
Operating costs | (2,003,595 | ) | 401,207 | 121,254 | (1,481,134 | ) | ||||||||||
Gross profit (loss) | 238,148 | (16,146 | ) | (13,891 | ) | 208,111 | ||||||||||
Administrative expenses | (164,618 | ) | 26,562 | 19,389 | (118,667 | ) | ||||||||||
Other (expenses) income, net | 6,346 | 1,977 | 2,767 | 11,090 | ||||||||||||
Gain from the sale of investments | 41,895 | (41,895 | ) | - | - | |||||||||||
Operating profit (loss) | 121,771 | (29,502 | ) | 8,265 | 100,534 | |||||||||||
Financial expenses | (137,870 | ) | 9,288 | 5,720 | (122,862 | ) | ||||||||||
Financial income | 14,086 | (54 | ) | (17 | ) | 14,015 | ||||||||||
Share of the profit or loss in associates and joint ventures | (2,425 | ) | (736 | ) | - | (3,161 | ) | |||||||||
(Loss) profit before income tax | (4,438 | ) | (21,004 | ) | 13,968 | (11,474 | ) | |||||||||
Income tax | (10,878 | ) | 2,424 | (3,487 | ) | (11,941 | ) | |||||||||
(Loss) profit from continuing operations | (15,316 | ) | (18,580 | ) | 10,481 | (23,415 | ) | |||||||||
Profit (loss) from discontinued operations | 8,591 | 18,580 | (10,481 | ) | 16,690 | |||||||||||
Loss of the period | (6,725 | ) | (6,725 | ) |
21. | EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION |
Between June 30, 2019 and the date of approval of the condensed interim consolidated financial statements, there have been no subsequent events that may affect the reasonableness of the financial statements issued. |
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