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 April 2020
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.
April 30, 2020 |
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: April 30, 2020
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 (AUDITED) AND MARCH 31, 2020 (UNAUDITED)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 (AUDITED) AND MARCH 31, 2020 (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 - 35 |
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 | ||||||
As at | As at | |||||
December 31, | March 31, | |||||
Note | 2019 | 2020 | ||||
Current assets | ||||||
Cash and cash equivalents | 8 | 948,978 | 973,322 | |||
Trade accounts receivables, net | 9 | 821,737 | 710,769 | |||
Work in progress, net | 10 | 49,457 | 108,413 | |||
Accounts receivable from related parties | 11 | 36,658 | 41,384 | |||
Other accounts receivable | 12 | 444,500 | 414,886 | |||
Inventories, net | 552,573 | 587,136 | ||||
Prepaid expenses | 11,348 | 18,275 | ||||
2,865,251 | 2,854,185 | |||||
Non-current assets as held for sale | 205,418 | 175,780 | ||||
Total current assets | 3,070,669 | 3,029,965 | ||||
Non-current assets | ||||||
Trade accounts receivable, net | 9 | 753,202 | 757,264 | |||
Work in progress, net | 10 | 23,117 | 24,528 | |||
Accounts receivable from related parties | 11 | 546,941 | 569,970 | |||
Prepaid expenses | 27,934 | 30,868 | ||||
Other accounts receivable | 12 | 300,323 | 300,316 | |||
Investments in associates and joint ventures | 13 | 37,035 | 38,163 | |||
Investment property | 28,326 | 27,508 | ||||
Property, plant and equipment, net | 14 | 443,870 | 423,012 | |||
Intangible assets, net | 14 | 853,315 | 849,168 | |||
Right-of-use assets, net | 14 | 78,813 | 74,379 | |||
Deferred income tax asset | 240,919 | 253,935 | ||||
Total non-current assets | 3,333,795 | 3,349,111 | ||||
Total assets | 6,404,464 | 6,379,076 |
LIABILITIES AND EQUITY | ||||||
As at | As at | |||||
December 31, | March 31, | |||||
Note | 2019 | 2020 | ||||
Current liabilities | ||||||
Borrowings | 15 | 454,260 | 331,233 | |||
Bonds | 16 | 44,737 | 43,226 | |||
Trade accounts payable | 17 | 1,136,121 | 1,108,835 | |||
Accounts payable to related parties | 11 | 38,916 | 41,443 | |||
Current income tax | 47,999 | 50,224 | ||||
Other accounts payable | 18 | 635,305 | 777,133 | |||
Provisions | 19 | 113,483 | 62,735 | |||
Total current liabilities | 2,470,821 | 2,414,829 | ||||
Non-current liabilities as held for sale | 210,025 | 185,020 | ||||
Total current liabilities | 2,680,846 | 2,599,849 | ||||
Non-current liabilities | ||||||
Borrowings | 15 | 344,806 | 431,730 | |||
Bonds | 16 | 879,305 | 904,206 | |||
Other accounts payable | 18 | 273,101 | 272,051 | |||
Accounts payable to related parties | 11 | 22,583 | 22,797 | |||
Provisions | 19 | 214,952 | 277,429 | |||
Derivative financial instruments | 52 | 40 | ||||
Deferred income tax liability | 112,734 | 107,105 | ||||
Total non-current liabilities | 1,847,533 | 2,015,358 | ||||
Total liabilities | 4,528,379 | 4,615,207 | ||||
Equity | ||||||
Capital | 20 | 871,918 | 871,918 | |||
Legal reserve | 132,011 | 132,011 | ||||
Voluntary reserve | 29,974 | 29,974 | ||||
Share Premium | 1,132,179 | 1,132,179 | ||||
Other reserves | (177,506) | (204,521) | ||||
Retained earnings | (510,766) | (541,210) | ||||
Equity attributable to controlling interest in the Company | 1,477,810 | 1,420,351 | ||||
Non-controlling interest | 398,275 | 343,518 | ||||
Total equity | 1,876,085 | 1,763,869 | ||||
Total liabilities and equity | 6,404,464 | 6,379,076 |
The accompanying notes on pages 6 to 36 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 March 31, | ||||||||||||
Note | 2019 | 2020 | ||||||||||
Revenues from construction activities | 348,015 | 552,642 | ||||||||||
Revenues from services provided | 243,016 | 240,487 | ||||||||||
Revenue from real estate and sale of goods | 92,840 | 89,621 | ||||||||||
683,871 | 882,750 | |||||||||||
Cost of construction activities | (302,873 | ) | (547,275 | ) | ||||||||
Cost of services provided | (205,747 | ) | (195,869 | ) | ||||||||
Cost of real estate and sale of goods | (70,952 | ) | (70,778 | ) | ||||||||
21 | (579,572 | ) | (813,922 | ) | ||||||||
Gross profit | 104,299 | 68,828 | ||||||||||
Administrative expenses | 21 | (44,042 | ) | (39,413 | ) | |||||||
Other income and expenses | 22 | 8,026 | (8,044 | ) | ||||||||
Operating profit | 68,283 | 21,371 | ||||||||||
Financial expenses | (53,820 | ) | (48,565 | ) | ||||||||
Financial income | 21,829 | 3,438 | ||||||||||
Share of the profit or loss of associates and joint ventures accounted for using the equity method | 13 | (696 | ) | 1,164 | ||||||||
Profit (loss) before income tax | 35,596 | (22,592 | ) | |||||||||
Income tax expense | (23,911 | ) | (2,290 | ) | ||||||||
Profit (loss) from continuing operations | 11,685 | (24,882 | ) | |||||||||
Profit (loss) from discontinued operations | (6,364 | ) | (3,479 | ) | ||||||||
Profit (loss) for the period | 5,321 | (28,361 | ) | |||||||||
Profit (loss) attributable to: | ||||||||||||
Owners of the Company | (1,137 | ) | (30,444 | ) | ||||||||
Non-controlling interest | 6,458 | 2,083 | ||||||||||
5,321 | (28,361 | ) | ||||||||||
Loss per share attributable to owners of the | ||||||||||||
Company during the period | 26 | (0.002 | ) | (0.035 | ) | |||||||
Earnings (loss) per share from continuing operations | ||||||||||||
attributable to owners of the Company during the period | 26 | 0.011 | (0.031 | ) |
The accompanying notes on pages 6 to 36 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 March 31, | ||||||||
2019 | 2020 | |||||||
Profit (loss) for the period | 5,321 | (28,361 | ) | |||||
Other comprehensive income: | ||||||||
Items that may be subsequently reclassified to profit or loss | ||||||||
Cash flow hedge, net of tax | (12 | ) | 11 | |||||
Foreign currency translation adjustment, net of tax | (193 | ) | (35,182 | ) | ||||
Exchange difference from net investment in a foreign operation, net of tax | 41 | 356 | ||||||
Other comprehensive income for the period, net of tax | (164 | ) | (34,815 | ) | ||||
Total comprehensive income for the period | 5,157 | (63,176 | ) | |||||
Comprehensive income attributable to: | ||||||||
Owners of the Company | (1,506 | ) | (57,459 | ) | ||||
Non-controlling interest | 6,663 | (5,717 | ) | |||||
5,157 | (63,176 | ) | ||||||
Comprehensive income for the period attributable to owners of the Company: | ||||||||
Continuing operations | (32,900 | ) | (14,846 | ) | ||||
Discontinued operations | 31,394 | (42,613 | ) | |||||
(1,506 | ) | (57,459 | ) |
The accompanying notes on pages 6 to 36 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 MARCH 31, 2019 AND 2020 | |
(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, 2019 | 729,434 | 729,434 | 132,011 | 29,974 | 992,144 | (170,620 | ) | 375,417 | 2,088,360 | 401,571 | 2,489,931 | |||||||||||||||||||||||||||||
(Loss) profit for the period | - | - | - | - | - | - | (1,137 | ) | (1,137 | ) | 6,458 | 5,321 | ||||||||||||||||||||||||||||
Cash flow hedge | - | - | - | - | - | (11 | ) | - | (11 | ) | (1 | ) | (12 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | (398 | ) | - | (398 | ) | 205 | (193 | ) | |||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | - | - | - | - | - | 40 | - | 40 | 1 | 41 | ||||||||||||||||||||||||||||||
Comprehensive income of the period | - | - | - | - | - | (369 | ) | (1,137 | ) | (1,506 | ) | 6,663 | 5,157 | |||||||||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Dividend distribution | - | - | - | - | - | - | - | - | (1,822 | ) | (1,822 | ) | ||||||||||||||||||||||||||||
- Contributions (devolution) of non-controlling shareholders, net | - | - | - | - | - | - | - | - | (14,641 | ) | (14,641 | ) | ||||||||||||||||||||||||||||
Total transactions with shareholders | - | - | - | - | - | - | - | - | (16,463 | ) | (16,463 | ) | ||||||||||||||||||||||||||||
Balances as of March 31, 2019 | 729,434 | 729,434 | 132,011 | 29,974 | 992,144 | (170,989 | ) | 374,280 | 2,086,854 | 391,771 | 2,478,625 | |||||||||||||||||||||||||||||
Balances as of January 1, 2020 | 871,918 | 871,918 | 132,011 | 29,974 | 1,132,179 | (177,506 | ) | (510,766 | ) | 1,477,810 | 398,275 | 1,876,085 | ||||||||||||||||||||||||||||
(Loss) profit for the period | - | - | - | - | - | - | (30,444 | ) | (30,444 | ) | 2,083 | (28,361 | ) | |||||||||||||||||||||||||||
Cash flow hedge | - | - | - | - | - | 10 | - | 10 | 1 | 11 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | (27,386 | ) | - | (27,386 | ) | (7,796 | ) | (35,182 | ) | ||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | - | - | - | - | - | 361 | - | 361 | (5 | ) | 356 | |||||||||||||||||||||||||||||
Comprehensive income of the period | - | - | - | - | - | (27,015 | ) | (30,444 | ) | (57,459 | ) | (5,717 | ) | (63,176 | ) | |||||||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Dividend distribution | - | - | - | - | - | - | - | - | (42,602 | ) | (42,602 | ) | ||||||||||||||||||||||||||||
- Contributions (devolution) of non-controlling shareholders, net | - | - | - | - | - | - | - | - | (6,438 | ) | (6,438 | ) | ||||||||||||||||||||||||||||
Total transactions with shareholders | - | - | - | - | - | - | - | - | (49,040 | ) | (49,040 | ) | ||||||||||||||||||||||||||||
Balances as of March 31, 2020 | 871,918 | 871,918 | 132,011 | 29,974 | 1,132,179 | (204,521 | ) | (541,210 | ) | 1,420,351 | 343,518 | 1,763,869 |
The accompanying notes on pages 6 to 36 are an integral part of the consolidated financial statements.
4
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||
(All amounts are expressed in thousands of S/ unless otherwise stated) |
For the period | ||||||||||||
ended March 31, | ||||||||||||
Note | 2019 | 2020 | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Profit (loss) before income tax | 29,232 | (27,484 | ) | |||||||||
Adjustments to profit not affecting cash flows from | ||||||||||||
operating activities: | ||||||||||||
Depreciation | 21 | 17,703 | 25,498 | |||||||||
Amortization | 21 | 24,476 | 23,950 | |||||||||
Impairment of accounts receivable and other accounts receivable | 102 | 210 | ||||||||||
Reversal of impairment of inventories | (1,272 | ) | (644 | ) | ||||||||
Debt condonation | - | (183 | ) | |||||||||
Impairment of property, plant and equipment | (200 | ) | (102 | ) | ||||||||
Indemnification | 34,205 | - | ||||||||||
Change in the fair value of the liability for put option | - | 309 | ||||||||||
Other provisions | 560 | 8,623 | ||||||||||
Financial expense,net | 25,087 | 57,924 | ||||||||||
Impairment of investments | 130 | - | ||||||||||
Share of the profit and loss of associates and joint ventures accounted for using the equity method | 13 | 696 | (1,164 | ) | ||||||||
Reversal of provisions | (1,538 | ) | (3,713 | ) | ||||||||
Disposal (reversal) of assets | 224 | (2,323 | ) | |||||||||
(Profit) loss on sale of property, plant and equipment | (733 | ) | 1,682 | |||||||||
Profit on remeasurement of accounts receivable | (11,847 | ) | (2,474 | ) | ||||||||
Net variations in assets and liabilities: | ||||||||||||
Trade accounts receivable and working in progress | 247,741 | 76,852 | ||||||||||
Other accounts receivable | 28,331 | 49,999 | ||||||||||
Other accounts receivable from related parties | (14,080 | ) | (27,260 | ) | ||||||||
Inventories | (34,241 | ) | (32,639 | ) | ||||||||
Pre-paid expenses and other assets | (22,764 | ) | (11,830 | ) | ||||||||
Trade accounts payable | (86,699 | ) | (7,887 | ) | ||||||||
Other accounts payable | (52,931 | ) | 146,367 | |||||||||
Other accounts payable to related parties | 35,848 | (32,441 | ) | |||||||||
Other provisions | (155 | ) | (1,212 | ) | ||||||||
Interest payment | (43,316 | ) | (34,288 | ) | ||||||||
Payments for purchases of intangibles - Concessions | (2,746 | ) | (655 | ) | ||||||||
Payment of income tax | (22,413 | ) | (17,302 | ) | ||||||||
Net cash provided by operating activities | 149,400 | 187,813 | ||||||||||
INVESTING ACTIVITIES | ||||||||||||
Sale of property, plant and equipment | 3,807 | 3,523 | ||||||||||
Interest received | 6,514 | 1,390 | ||||||||||
Payment for purchase of investments properties | (13 | ) | (20 | ) | ||||||||
Payments for intangible purchase | (26,032 | ) | (26,882 | ) | ||||||||
Payments for property, plant and equipment purchase | (8,198 | ) | (12,482 | ) | ||||||||
Net cash applied to investing activities | (23,922 | ) | (34,471 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Loans received | 163,791 | 43,271 | ||||||||||
Amortization of loans received | (309,654 | ) | (109,116 | ) | ||||||||
Amortization of bonds issued | (7,203 | ) | (8,257 | ) | ||||||||
Payment for transaction costs for debt | - | 20 | ||||||||||
Dividends paid to non-controlling interest | (1,822 | ) | (42,602 | ) | ||||||||
Cash received (return of contributions) from non-controlling shareholders | (14,641 | ) | (6,438 | ) | ||||||||
Net cash applied to financing activities | (169,529 | ) | (123,122 | ) | ||||||||
Net increase in cash | (44,051 | ) | 30,220 | |||||||||
Exchange difference | (2,591 | ) | (5,888 | ) | ||||||||
Cash and cash equivalents at the beginning of the period | 801,021 | 948,978 | ||||||||||
Cash and cash equivalents at the end of the period | 8 | 754,379 | 973,310 | |||||||||
NON-CASH TRANSACTIONS: | ||||||||||||
Capitalization of interests | 1,855 | 1,623 | ||||||||||
Acquisition of assets through finance leases | 1,583 | - | ||||||||||
Acquisition of right-of-use assets | - | 1,600 | ||||||||||
Acquisition of subsidiary debt | - | 17,440 |
The accompanying notes on pages 6 to 36 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 AT DECEMBER 31, 2019 (AUDITED) AND MARCH 31, 2020 (UNAUDITED)
1. GENERAL INFORMATION
a) | Incorporation and operations |
Graña y Montero S.A.A. (hereinafter the Company) is the parent Company of the Graña y Montero Group that includes the Company and its subsidiaries (hereinafter, the “Group”) and is mainly engaged in holding investments in Group companies. Additionally, the Company provides services of strategic and functional advice and office leases 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 operating segments in Note 7.
b) | Authorization for the issue of the financial statements |
These condensed interim consolidated financial statements for the year ended December 31, 2019 were authorized preliminary by Management, and Board of Directors on April 30, 2020.
c) | The Impact of the Ongoing Novel Coronavirus (COVID-19) Pandemic |
The ongoing COVID-19 pandemic and government measures to contain the spread of the virus are disrupting economic activity, and consequently adversely affecting our business, results of operations and financial condition. As conditions are recent, uncertain and changing rapidly, it is difficult to predict the full extent of the impact of the pandemic. If conditions persist, however, it is likely that the pandemic and the related government measures will have a material adverse effect on the Company.
Countries around the world—including Peru as well as Chile and Colombia—have adopted extraordinary measures to contain the spread of COVID-19, including imposing travel restrictions, requiring closures of non-essential businesses, establishing restrictions on public gatherings, instructing residents to practice social distancing, issuing stay-at-home orders, implementing quarantines and similar actions.
The COVID-19 pandemic and the related government measures have significantly increased economic uncertainty and are likely to cause a global recession. According to recent projections from the International Monetary Fund, during 2020, the global economy is expected to contract by 3.0%, with Latin America expected to contract 5.2% and Peru, Chile and Colombia, in particular, expected to contract 4.5%, 4.5% and 2.7%, respectively. Moreover, the impact of the pandemic on economic activity has been sudden and severe, and we cannot predict the extent to which the economies in the countries where we operate will ultimately be impacted.
Since mid-March, substantially all engineering and construction and real estate projects have been mandatorily shut down, and we cannot assure you when we will be able to resume work on these projects. Infrastructure operations, which have for the most part been declared essential businesses, have continued; however, certain of our infrastructure businesses have been adversely affected, in particular, by the sharp decline in traffic volumes and oil and gas prices (also due to the dispute in March among OPEC member countries).
6
Regarding the extent of the COVID-19 pandemic and its impact on the industries in which we operate, the full extent to which COVID-19 will impact our business, results of operations and financial condition is currently under evaluation. We believe that the severity of the impact on the company will depend, to a large extent, on how long the crisis continues.
The Company is taking significant measures to mitigate the impact of the crisis on the Group. Among other measures, we are prioritizing the health and safety of our employees, as well as the medium-term sustainability of their employment. Certain actions we are taking include: the design and implementation of protocols to return to project sites, the creation of new office layouts to be compliant with social distancing guidelines, the development of telecommuting schemes, and other cost-saving initiatives.
d) | Current situation of the Company |
As a result of decisions of a previous administration, the Group is involved in a series of corruption cases mainly between 2004 and 2015, which have generated criminal investigations by the Prosecutor's Office and administrative investigations by a regulatory body. Such situations led to organizational changes, external investigations, independent of the Company’s Management, related to the Group's business with Odebrecht and the facts under criminal investigation, as well as other internal measures as explained below:
• | On January 9, 2017, the Board of Directors approved the performance of an independent investigation related to six projects developed in association with companies of the Odebrecht Group. |
• | On March 30, 2017, the Board of Directors created a Risk, Compliance and Sustainability Committee, who was in charge of the oversight of the investigation independently of Management. The external investigation was entrusted to the law firm Simpson, Thacher and Bartlett, who reported exclusively to the Risk, Compliance and Sustainability Committee in order to preserve the independence of the investigation. |
• | The external investigation concluded on November 2, 2017 and found no evidence that the Group or any of its former or current directors or executives had intentionally or knowngly participated in acts of corruption related to the six projects developed in association with Odebrecht. |
• | As new information about the cases emerged, the Company's Board of Directors continued to investigate the facts that were the subject of the criminal investigations described above, including matters that were beyond the scope of the investigation conducted by Simpson, Thacher and Barlett. After an extensive and detailed review process, the Company obtained relevant findings for the criminal investigations in process and, in line with its commitment to transparency and integrity, decided to share them in their entirety with the authorities within the framework of a plea bargain process. |
• | As a result of its contribution to the investigations, on December 27, 2019, the Company signed a preliminary agreement whereby the Anti-Corruption Prosecutor and the Ad hoc Prosecutor's Office promise to execute a final plea bargain agreement with the Company that would provide The Company with certain regarding the contingencies it faces as a result of the above-mentioned processes. Additionally, in the aforementioned preliminary agreement, the Anti-Corruption Prosecutor and the Ad Hoc Attorney General's Office authorize the Company to disclose its existence but maintain the legal reserve on its content |
7
• | On the other hand, over the last three years the new administration together with the new board initiated a transformation process based on the principles of Truth, Transparency and Integrity, making profound changes in the organization such as the reconfiguration of a board of directors with an independent majority, new composition shareholding, as well as the creation of new instances of government such as the Corporate Risk Management and autonomous Compliance, with direct report to the Board of Directors, among other actions. |
Criminal investigations derived from projects developed in partnership with companies of the Odebrecht group
As for the Lava Jato case, the Company participated directly or through its subsidiaries as minority partner in certain entities that developed six infrastructure projects in Peru with companies belonging to the Odebrecht group (hereinafter Odebrecht).
In 2016, Odebrecht entered into a Plea Agreement with the authorities of the United States Department of Justice and the Office of the District Attorney for the Eastern District of New York by which it admitted corruption acts in connection with some of these projects in which the Company participate as minority partner.
• | IIRSA Sur |
In relation to investigations on IIRSA Sur, the former Chairman of the Board of Directors was incorporated as investigated by collusion; a former director and a former executive for money laundering. Subsequently, Graña y Montero S.A.A. and GyM S.A. they have been incorporated as third-party civilians responsible in the process, which means that it will be assessed whether the obligation to indemnify the state for damages resulting from the facts under investigation will be imposed on these entities.
• | Electric Train construction project |
The first Preparatory Investigation Court of the Judiciary decided to incorporate GyM S.A. as civil third party responsible in the process related to the construction of the Electric train construction Project, tranches 1 and 2. In this investigation the former Chairman of the Board, a former director and a former manager have been charged.
• | Gasoducto Sur Peruano (GSP) |
In 2019, the Company concluded that it has an exposure to the preliminary investigation process conducted in relation to GSP (the South Peruvian Gas Pipeline project), even though as of the date hereof, it has not been indicted or incorporated as liable third party, even though the former Chairman of the Board of Directors and a former director are seeking plea bargain agreements in relation to this process, among others.
In addition to the cases described for which a provision for civil damages has been registered, there are two projects carried out in partnership with Odebrecht that are not currently under investigation. If this is initiated and some evidence is found, the maximum possible civil damage exposure estimated under Law 30737 for both projects would be S/52.7 million (US$16 million approximately).
Criminal investigations in conection to the Construction Club case
On the other hand, GyM S.A. has been incorporated, along with other construction companies, as a legal entity investigated in the criminal investigation that the Public Ministry has been carrying out for the alleged crime of corruption of officials in relation to the so-called Construction Club. Similarly, at the end of February 2020, the Public Ministry has requested the incorporation of Concar S.A., the latter is pending judicial decision.
8
On the other hand, like officials of other construction companies, a former commercial manager of GyM S.A., the former president of the Board of Directors, a former director and the former Corporate General Manager of the company have been included in the criminal investigation.
Anticorruption Law - effects on the Group
Law 30737 and its regulation issued by Supreme Decree 096-2018-EF have mitigated the Company and subsidiaries exposure to the cases described in subsections 1) and 2) above. These rules set clear guidelines to estimate the potential compensation reducing the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair its ability to operate.
The benefits of the mentioned rules are subject to the fulfillment of the following obligations:
a. | The obligation to set up a trust that will guarantee any eventual payment obligation of an eventual civil compensation in favor of the Peruvian Government; |
b. | The obligation not to transfer funds abroad without the prior consent of the Ministry of Justice; |
c. | The implementation of a compliance program; and |
d. | The obligation to disclose information to the authorities and to collaborate in the investigation. |
The Group has designed a compliance program which is currently under implementation, it fully cooperates with the authorities in its investigations and has executed a trust agreement with the Ministry of Justice, under which the Company has established for an approximate amount of S/80 million (equivalent to US$24 million).
On the other hand, based on the standards indicated and their guidelines, Management has estimated that the value of the civil damages for the cases described above is S/280 millions (US$85 millions) and has registered as of December 31st, 2019 S/153.9 million (equivalent to US$46.6 million) as net present value (Note 22).
Investigations and administrative process initiated by INDECOPI in conection to the Construction Club case
On July 11, 2017, the Peruvian National Institute for the Defense of Free Competition and the Protection of Intellectual Property (“Indecopi”) initiated an investigation against several construction companies, including GyM S.A., about the existence of an alleged cartel called the Construction Club.
Throughout the investigation, GyM S.A. has provided to Indecopi with all the information requested and continues collaborating with the ongoing investigations.
On February 11, 2020, GyM S.A. was notified by the Technical Secretariat of the Commission for the Defense of Free Competition (“Indecopi”) with the resolution that begins a sanctioning administrative procedure involving a total of 35 companies and 28 natural persons, for an alleged anticompetitive conduct in the market of Public Works. The resolution does not include the assignment of responsibilities or the result of the administrative disciplinary procedure, which will be determined at the end of said procedure. The procedure is in a probatory stage, therefore, INDECOPI has not carried out actions in order to quantifying the possible penalties that could result.
2. | BASIS OF PREPARATION |
These condensed interim consolidated financial statements for the period ended March 31, 2020 have been prepared in accordance with IAS 34 "Interim Financial Reporting". 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, 2019, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").
9
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, 2019.
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, 2019 and March 31, 2020, 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 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.
10
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.
Concerning 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.
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 implemented a divestment plan and a capital rase 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, 2019 | 1 year | years | years | 5 years | Total | |||||||||||||||
Other financial liabilities (except | ||||||||||||||||||||
for finance leases and lease | ||||||||||||||||||||
liability for right-of-use asset) | 479,000 | 147,473 | 177,018 | - | 803,491 | |||||||||||||||
Finance leases | 10,826 | 3,467 | 13,346 | - | 27,639 | |||||||||||||||
Lease liability for right-of-use asset | 24,966 | 38,788 | 31,167 | 7,603 | 102,524 | |||||||||||||||
Bonds | 115,690 | 157,516 | 358,461 | 1,077,960 | 1,709,627 | |||||||||||||||
Trade accounts payables (except | ||||||||||||||||||||
non-financial liabilities) | 966,620 | - | - | - | 966,620 | |||||||||||||||
Accounts payables to related parties | 38,916 | 21,747 | - | 836 | 61,499 | |||||||||||||||
Other accounts payables (except | ||||||||||||||||||||
non-financial liabilities) | 200,098 | 2,505 | 194,908 | - | 397,511 | |||||||||||||||
Other non-financial liabilities | - | 52 | - | - | 52 | |||||||||||||||
1,836,116 | 371,548 | 774,900 | 1,086,399 | 4,068,963 |
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Less than | 1-2 | 2-5 | More than | |||||||||||||||||
At March 31, 2020 | 1 year | years | years | 5 years | Total | |||||||||||||||
Other financial liabilities (except | ||||||||||||||||||||
for finance leases and lease | ||||||||||||||||||||
liability for right-of-use asset) | 342,112 | 236,708 | 178,653 | - | 757,473 | |||||||||||||||
Finance leases | 9,443 | 3,090 | 12,238 | - | 24,771 | |||||||||||||||
Lease liability for right-of-use asset | 20,960 | 39,704 | 13,352 | 25,571 | 99,587 | |||||||||||||||
Bonds | 117,489 | 196,185 | 362,462 | 1,048,743 | 1,724,879 | |||||||||||||||
Trade accounts payables (except | ||||||||||||||||||||
non-financial liabilities) | 968,310 | - | - | - | 968,310 | |||||||||||||||
Accounts payables to related parties | 41,443 | 21,961 | - | 836 | 64,240 | |||||||||||||||
Other accounts payables (except | ||||||||||||||||||||
non-financial liabilities) | 221,612 | 2,446 | 193,013 | - | 417,071 | |||||||||||||||
Other non-financial liabilities | - | 40 | - | - | 40 | |||||||||||||||
1,721,369 | 500,134 | 759,718 | 1,075,150 | 4,056,371 |
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 (Note15).
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, 2019 and March 31, 2020, the gearing ratio is presented below indicating the Group’s strategy to keep it in a range from 0.10 to 0.70.
At | At | |||||||
December 31, | March 31, | |||||||
2019 | 2020 | |||||||
Total financial liabilities and bonds (Note 15 and Note 16) | 1,723,108 | 1,710,395 | ||||||
Less: Cash and cash equivalents (Note 8) | (948,978 | ) | (973,322 | ) | ||||
Net debt | 774,130 | 737,073 | ||||||
Total equity | 1,876,085 | 1,763,869 | ||||||
Total capital | 2,650,215 | 2,500,942 | ||||||
Gearing ratio | 0.29 | 0.29 |
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.
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- | 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.
The carrying amounts of cash and cash equivalents correspond to their fair values. The Group 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 15, 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 Group 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, 2019.
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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. OPERATING SEGMENTS
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.
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.
The table below shows the Group’s financial statements by operating segments:
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Operating segments financial position
Segment reporting
Infrastructure | ||||||||||||||||||||||||||||||||||||
As of December 31, 2019 | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalent | 372,991 | 53,118 | 123,020 | 300,896 | 6,388 | 60,718 | 31,847 | - | 948,978 | |||||||||||||||||||||||||||
Trade accounts receivables, net | 531,591 | 63,402 | 44,513 | 97,059 | 1,168 | 83,019 | 985 | - | 821,737 | |||||||||||||||||||||||||||
Work in progress, net | 49,457 | - | - | - | - | - | - | - | 49,457 | |||||||||||||||||||||||||||
Accounts receivable from related parties | 202,181 | 369 | 43,852 | 1,853 | - | 1,144 | 99,794 | (312,535 | ) | 36,658 | ||||||||||||||||||||||||||
Other accounts receivable | 327,977 | 30,853 | 30,228 | 18,548 | 109 | 9,509 | 27,274 | 2 | 444,500 | |||||||||||||||||||||||||||
Inventories, net | 57,093 | 32,366 | 7,109 | 30,594 | - | 437,012 | - | (11,601 | ) | 552,573 | ||||||||||||||||||||||||||
Prepaid expenses | 6,812 | 1,271 | 2,779 | 231 | 133 | - | 122 | - | 11,348 | |||||||||||||||||||||||||||
1,548,102 | 181,379 | 251,501 | 449,181 | 7,798 | 591,402 | 160,022 | (324,134 | ) | 2,865,251 | |||||||||||||||||||||||||||
Non-current assets classified as held for sale | 2,398 | - | - | - | - | - | 203,020 | - | 205,418 | |||||||||||||||||||||||||||
Total current assets | 1,550,500 | 181,379 | 251,501 | 449,181 | 7,798 | 591,402 | 363,042 | (324,134 | ) | 3,070,669 | ||||||||||||||||||||||||||
Long-term trade accounts receivable, net | 97,256 | - | 36,273 | 619,086 | - | 587 | - | - | 753,202 | |||||||||||||||||||||||||||
Long-term work in progress, net | - | - | 23,117 | - | - | - | - | - | 23,117 | |||||||||||||||||||||||||||
Long-term accounts receivable from related parties | 290,966 | - | 836 | - | 10,475 | - | 552,687 | (308,023 | ) | 546,941 | ||||||||||||||||||||||||||
Prepaid expenses | - | 887 | 24,462 | 2,307 | 788 | - | - | (510 | ) | 27,934 | ||||||||||||||||||||||||||
Other long-term accounts receivable | 113,879 | 63,649 | 5,156 | - | 7,346 | 50,449 | 59,844 | - | 300,323 | |||||||||||||||||||||||||||
Investments in associates and joint ventures | 109,839 | 8,006 | - | - | - | 6,062 | 1,495,422 | (1,582,294 | ) | 37,035 | ||||||||||||||||||||||||||
Investment property | 1,450 | - | - | - | - | 26,876 | - | - | 28,326 | |||||||||||||||||||||||||||
Property, plant and equipment, net | 186,589 | 184,819 | 11,106 | 841 | 153 | 11,742 | 49,779 | (1,159 | ) | 443,870 | ||||||||||||||||||||||||||
Intangible assets, net | 136,547 | 244,901 | 443,420 | 794 | - | 1,029 | 19,490 | 7,134 | 853,315 | |||||||||||||||||||||||||||
Right-of-use assets, net | 5,638 | 24,038 | 3,860 | 5 | 7 | 5,048 | 55,532 | (15,315 | ) | 78,813 | ||||||||||||||||||||||||||
Deferred income tax asset | 176,740 | 4,741 | 13,054 | - | 720 | 19,736 | 20,752 | 5,176 | 240,919 | |||||||||||||||||||||||||||
Total non-current assets | 1,118,904 | 531,041 | 561,284 | 623,033 | 19,489 | 121,529 | 2,253,506 | (1,894,991 | ) | 3,333,795 | ||||||||||||||||||||||||||
Total assets | 2,669,404 | 712,420 | 812,785 | 1,072,214 | 27,287 | 712,931 | 2,616,548 | (2,219,125 | ) | 6,404,464 | ||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||
Borrowings | 180,535 | 42,760 | 2,383 | 5 | 6 | 116,231 | 121,379 | (9,039 | ) | 454,260 | ||||||||||||||||||||||||||
Bonds | - | - | 28,995 | 15,742 | - | - | - | - | 44,737 | |||||||||||||||||||||||||||
Trade accounts payable | 932,142 | 67,444 | 34,762 | 28,508 | 132 | 39,645 | 33,488 | - | 1,136,121 | |||||||||||||||||||||||||||
Accounts payable to related parties | 206,907 | 2,233 | 35,554 | 21,024 | - | 23,437 | 58,951 | (309,190 | ) | 38,916 | ||||||||||||||||||||||||||
Current income tax | 18,451 | 961 | 3,710 | 23,887 | - | 704 | 286 | - | 47,999 | |||||||||||||||||||||||||||
Other accounts payable | 441,271 | 16,721 | 53,987 | 4,713 | 835 | 83,345 | 34,433 | - | 635,305 | |||||||||||||||||||||||||||
Provisions | 6,031 | 18,459 | 6,183 | - | - | 230 | 82,580 | - | 113,483 | |||||||||||||||||||||||||||
Non-current liabilities classified as held for sale | - | - | - | - | - | - | 210,025 | - | 210,025 | |||||||||||||||||||||||||||
Total current liabilities | 1,785,337 | 148,578 | 165,574 | 93,879 | 973 | 263,592 | 541,142 | (318,229 | ) | 2,680,846 | ||||||||||||||||||||||||||
Borrowings | 32,620 | 116,218 | 2,070 | - | - | 11,010 | 190,671 | (7,783 | ) | 344,806 | ||||||||||||||||||||||||||
Long-term bonds | - | - | 276,550 | 602,755 | - | - | - | - | 879,305 | |||||||||||||||||||||||||||
Other long-term accounts payable | 222,887 | - | 15,989 | 2,176 | 2,106 | 26,841 | 3,102 | - | 273,101 | |||||||||||||||||||||||||||
Long-term accounts payable to related parties | 120,255 | - | 836 | 22,583 | 23,784 | - | 165,286 | (310,161 | ) | 22,583 | ||||||||||||||||||||||||||
Provisions | 80,125 | 40,268 | 24,691 | 1,394 | - | - | 68,474 | - | 214,952 | |||||||||||||||||||||||||||
Derivative financial instruments | - | 52 | - | - | - | - | - | - | 52 | |||||||||||||||||||||||||||
Deferred income tax liability | 31,037 | 36,476 | 5,806 | 39,172 | - | - | 243 | - | 112,734 | |||||||||||||||||||||||||||
Total non-current liabilities | 486,924 | 193,014 | 325,942 | 668,080 | 25,890 | 37,851 | 427,776 | (317,944 | ) | 1,847,533 | ||||||||||||||||||||||||||
Total liabilities | 2,272,261 | 341,592 | 491,516 | 761,959 | 26,863 | 301,443 | 968,918 | (636,173 | ) | 4,528,379 | ||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 330,992 | 346,415 | 258,223 | 232,692 | 424 | 137,542 | 1,644,707 | (1,473,185 | ) | 1,477,810 | ||||||||||||||||||||||||||
Non-controlling interest | 66,151 | 24,413 | 63,046 | 77,563 | - | 273,946 | 2,923 | (109,767 | ) | 398,275 | ||||||||||||||||||||||||||
Total liabilities and equity | 2,669,404 | 712,420 | 812,785 | 1,072,214 | 27,287 | 712,931 | 2,616,548 | (2,219,125 | ) | 6,404,464 |
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Operating segments financial position
Segment reporting
Infrastructure | ||||||||||||||||||||||||||||||||||||
As of March 31, 2020 | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Eliminations | Consolidated | |||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalent | 404,171 | 55,113 | 137,982 | 288,517 | 6,599 | 64,741 | 16,199 | - | 973,322 | |||||||||||||||||||||||||||
Trade accounts receivables, net | 507,244 | 45,530 | 31,489 | 100,171 | 1,258 | 24,980 | 97 | - | 710,769 | |||||||||||||||||||||||||||
Work in progress, net | 108,413 | - | - | - | - | - | - | - | 108,413 | |||||||||||||||||||||||||||
Accounts receivable from related parties | 190,634 | 137 | 56,465 | 1,834 | - | 626 | 117,678 | (325,990 | ) | 41,384 | ||||||||||||||||||||||||||
Other accounts receivable | 297,650 | 34,889 | 32,132 | 12,262 | 107 | 9,989 | 27,855 | 2 | 414,886 | |||||||||||||||||||||||||||
Inventories, net | 70,094 | 35,835 | 8,655 | 31,927 | - | 452,237 | - | (11,612 | ) | 587,136 | ||||||||||||||||||||||||||
Prepaid expenses | 7,580 | 1,242 | 6,555 | 2,759 | 76 | - | 63 | - | 18,275 | |||||||||||||||||||||||||||
1,585,786 | 172,746 | 273,278 | 437,470 | 8,040 | 552,573 | 161,892 | (337,600 | ) | 2,854,185 | |||||||||||||||||||||||||||
Non-current assets classified as held for sale | 1,968 | - | - | - | - | - | 173,812 | - | 175,780 | |||||||||||||||||||||||||||
Total current assets | 1,587,754 | 172,746 | 273,278 | 437,470 | 8,040 | 552,573 | 335,704 | (337,600 | ) | 3,029,965 | ||||||||||||||||||||||||||
Long-term trade accounts receivable, net | 99,363 | - | 36,273 | 621,153 | - | 475 | - | - | 757,264 | |||||||||||||||||||||||||||
Long-term work in progress, net | - | - | 24,528 | - | - | - | - | - | 24,528 | |||||||||||||||||||||||||||
Long-term accounts receivable from related parties | 289,884 | - | 916 | - | 10,602 | - | 575,150 | (306,582 | ) | 569,970 | ||||||||||||||||||||||||||
Prepaid expenses | - | 981 | 27,448 | 2,174 | 775 | - | - | (510 | ) | 30,868 | ||||||||||||||||||||||||||
Other long-term accounts receivable | 117,321 | 66,883 | 5,674 | - | 7,346 | 52,675 | 50,417 | - | 300,316 | |||||||||||||||||||||||||||
Investments in associates and joint ventures | 110,641 | 8,556 | - | - | - | 6,062 | 1,419,615 | (1,506,711 | ) | 38,163 | ||||||||||||||||||||||||||
Investment property | 1,204 | - | - | - | - | 26,304 | - | - | 27,508 | |||||||||||||||||||||||||||
Property, plant and equipment, net | 171,059 | 181,815 | 10,232 | 815 | 147 | 11,133 | 48,970 | (1,159 | ) | 423,012 | ||||||||||||||||||||||||||
Intangible assets, net | 121,401 | 267,210 | 432,649 | 766 | - | 999 | 19,272 | 6,871 | 849,168 | |||||||||||||||||||||||||||
Right-of-use assets, net | 6,562 | 21,158 | 4,738 | - | 3 | 4,773 | 52,517 | (15,372 | ) | 74,379 | ||||||||||||||||||||||||||
Deferred income tax asset | 184,662 | 5,371 | 13,477 | - | 701 | 20,867 | 23,692 | 5,165 | 253,935 | |||||||||||||||||||||||||||
Total non-current assets | 1,102,097 | 551,974 | 555,935 | 624,908 | 19,574 | 123,288 | 2,189,633 | (1,818,298 | ) | 3,349,111 | ||||||||||||||||||||||||||
Total assets | 2,689,851 | 724,720 | 829,213 | 1,062,378 | 27,614 | 675,861 | 2,525,337 | (2,155,898 | ) | 6,379,076 | ||||||||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||
Borrowings | 169,689 | 38,615 | 2,487 | - | 2 | 112,280 | 16,888 | (8,728 | ) | 331,233 | ||||||||||||||||||||||||||
Bonds | 2,104 | - | 23,516 | 17,606 | - | - | - | - | 43,226 | |||||||||||||||||||||||||||
Trade accounts payable | 892,323 | 82,665 | 42,471 | 28,961 | 116 | 32,837 | 29,462 | - | 1,108,835 | |||||||||||||||||||||||||||
Accounts payable to related parties | 197,468 | 2,321 | 43,060 | 28,418 | 13 | 24,871 | 58,459 | (313,167 | ) | 41,443 | ||||||||||||||||||||||||||
Current income tax | 17,673 | 443 | 3,716 | 26,939 | - | 997 | 456 | - | 50,224 | |||||||||||||||||||||||||||
Other accounts payable | 561,647 | 14,174 | 62,504 | 5,352 | 991 | 97,104 | 35,361 | - | 777,133 | |||||||||||||||||||||||||||
Provisions | 7,985 | 17,540 | 6,183 | - | - | 477 | 30,550 | - | 62,735 | |||||||||||||||||||||||||||
Non-current liabilities classified as held for sale | - | - | - | - | - | - | 185,020 | - | 185,020 | |||||||||||||||||||||||||||
Total current liabilities | 1,848,889 | 155,758 | 183,937 | 107,276 | 1,122 | 268,566 | 356,196 | (321,895 | ) | 2,599,849 | ||||||||||||||||||||||||||
Borrowings | 28,559 | 115,153 | 2,658 | - | - | 10,200 | 282,937 | (7,777 | ) | 431,730 | ||||||||||||||||||||||||||
Long-term bonds | 25,108 | - | 276,646 | 602,452 | - | - | - | - | 904,206 | |||||||||||||||||||||||||||
Other long-term accounts payable | 221,173 | - | 16,948 | 2,142 | 2,146 | 26,599 | 3,043 | - | 272,051 | |||||||||||||||||||||||||||
Long-term accounts payable to related parties | 123,808 | 10 | 836 | 22,795 | 24,207 | - | 170,226 | (319,085 | ) | 22,797 | ||||||||||||||||||||||||||
Provisions | 85,144 | 46,096 | 24,691 | 1,394 | - | - | 120,104 | - | 277,429 | |||||||||||||||||||||||||||
Derivative financial instruments | - | 40 | - | - | - | - | - | - | 40 | |||||||||||||||||||||||||||
Deferred income tax liability | 24,898 | 35,885 | 5,817 | 40,503 | - | - | 2 | - | 107,105 | |||||||||||||||||||||||||||
Total non-current liabilities | 508,690 | 197,184 | 327,596 | 669,286 | 26,353 | 36,799 | 576,312 | (326,862 | ) | 2,015,358 | ||||||||||||||||||||||||||
Total liabilities | 2,357,579 | 352,942 | 511,533 | 776,562 | 27,475 | 305,365 | 932,508 | (648,757 | ) | 4,615,207 | ||||||||||||||||||||||||||
Equity attributable to controlling interest in the Company | 273,828 | 346,682 | 255,735 | 214,362 | 139 | 137,148 | 1,589,922 | (1,397,465 | ) | 1,420,351 | ||||||||||||||||||||||||||
Non-controlling interest | 58,444 | 25,096 | 61,945 | 71,454 | - | 233,348 | 2,907 | (109,676 | ) | 343,518 | ||||||||||||||||||||||||||
Total liabilities and equity | 2,689,851 | 724,720 | 829,213 | 1,062,378 | 27,614 | 675,861 | 2,525,337 | (2,155,898 | ) | 6,379,076 |
16
Operating segment performance |
Segment Reporting |
Infrastructure | ||||||||||||||||||||||||||||||||||||
For the period ended March 31, 2019 - | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Elimination | Consolidated | |||||||||||||||||||||||||||
Revenue | 382,708 | 127,106 | 144,727 | 106,239 | 885 | 25,436 | 22,762 | (125,992 | ) | 683,871 | ||||||||||||||||||||||||||
Gross profit (loss) | 42,065 | 26,888 | 22,801 | 21,094 | 236 | 3,465 | 2,034 | (14,284 | ) | 104,299 | ||||||||||||||||||||||||||
Administrative expenses | (33,571 | ) | (5,861 | ) | (7,979 | ) | (4,490 | ) | (138 | ) | (5,104 | ) | (5,098 | ) | 18,199 | (44,042 | ) | |||||||||||||||||||
Other income and expenses, net | 384 | 1,504 | 50 | (1 | ) | - | (503 | ) | 6,762 | (170 | ) | 8,026 | ||||||||||||||||||||||||
Operating profit (loss) | 8,878 | 22,531 | 14,872 | 16,603 | 98 | (2,142 | ) | 3,698 | 3,745 | 68,283 | ||||||||||||||||||||||||||
Financial expenses | (13,562 | ) | (3,189 | ) | (7,597 | ) | (5,821 | ) | (2 | ) | (4,832 | ) | (22,254 | ) | 3,437 | (53,820 | ) | |||||||||||||||||||
Financial income | 2,746 | 417 | 680 | 6,504 | 178 | 938 | 17,762 | (7,396 | ) | 21,829 | ||||||||||||||||||||||||||
Dividends | - | - | - | - | - | - | 2,440 | (2,440 | ) | - | ||||||||||||||||||||||||||
Share of profit or loss in associates | ||||||||||||||||||||||||||||||||||||
and joint ventures | (1,677 | ) | 580 | - | - | - | - | 18,779 | (18,378 | ) | (696 | ) | ||||||||||||||||||||||||
(Loss) profit before income tax | (3,615 | ) | 20,339 | 7,955 | 17,286 | 274 | (6,036 | ) | 20,425 | (21,032 | ) | 35,596 | ||||||||||||||||||||||||
Income tax | (262 | ) | (5,924 | ) | (2,752 | ) | (5,236 | ) | (197 | ) | 1,470 | (11,020 | ) | 10 | (23,911 | ) | ||||||||||||||||||||
(Loss) profit from continuing operations | (3,877 | ) | 14,415 | 5,203 | 12,050 | 77 | (4,566 | ) | 9,405 | (21,022 | ) | 11,685 | ||||||||||||||||||||||||
Loss from discontinuing operations | - | - | - | - | - | - | (6,338 | ) | (26 | ) | (6,364 | ) | ||||||||||||||||||||||||
(Loss) profit for the year | (3,877 | ) | 14,415 | 5,203 | 12,050 | 77 | (4,566 | ) | 3,067 | (21,048 | ) | 5,321 | ||||||||||||||||||||||||
(Loss) profit from attributable to: | ||||||||||||||||||||||||||||||||||||
Owners of the Company | (5,070 | ) | 13,094 | 3,610 | 9,038 | 77 | (2,598 | ) | 3,102 | (22,390 | ) | (1,137 | ) | |||||||||||||||||||||||
Non-controlling interest | 1,193 | 1,321 | 1,593 | 3,012 | - | (1,968 | ) | (35 | ) | 1,342 | 6,458 | |||||||||||||||||||||||||
(3,877 | ) | 14,415 | 5,203 | 12,050 | 77 | (4,566 | ) | 3,067 | (21,048 | ) | 5,321 |
17
Operating segment performance |
Segment Reporting |
Infrastructure | ||||||||||||||||||||||||||||||||||||
For the period ended March 31, 2020 - | Engineering and construction | Energy | Toll roads | Transportation | Water treatment | Real estate | Parent Company operations | Elimination | Consolidated | |||||||||||||||||||||||||||
Revenue | 661,706 | 106,024 | 113,773 | 88,473 | 916 | 25,827 | 19,903 | (133,872 | ) | 882,750 | ||||||||||||||||||||||||||
Gross profit (loss) | 16,304 | 17,487 | 16,112 | 31,263 | 263 | 4,070 | (2,327 | ) | (14,344 | ) | 68,828 | |||||||||||||||||||||||||
Administrative expenses | (28,801 | ) | (5,001 | ) | (4,282 | ) | (3,713 | ) | (107 | ) | (7,831 | ) | (5,049 | ) | 15,371 | (39,413 | ) | |||||||||||||||||||
Other income and expenses, net | (3,600 | ) | (6,260 | ) | 22 | 328 | - | 40 | 1,413 | 13 | (8,044 | ) | ||||||||||||||||||||||||
Gain from sale of investments | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Operating (loss) profit | (16,097 | ) | 6,226 | 11,852 | 27,878 | 156 | (3,721 | ) | (5,963 | ) | 1,040 | 21,371 | ||||||||||||||||||||||||
Financial expenses | (22,973 | ) | (5,577 | ) | (8,951 | ) | (2,129 | ) | (2 | ) | (3,791 | ) | (11,943 | ) | 6,801 | (48,565 | ) | |||||||||||||||||||
Financial income | 1,359 | 224 | 2,324 | 2,358 | 144 | 2,228 | 2,367 | (7,566 | ) | 3,438 | ||||||||||||||||||||||||||
Dividends | - | - | - | - | - | - | 2,342 | (2,342 | ) | - | ||||||||||||||||||||||||||
Share of profit or loss in associates | ||||||||||||||||||||||||||||||||||||
and joint ventures | 841 | 549 | - | - | - | - | (11,409 | ) | 11,183 | 1,164 | ||||||||||||||||||||||||||
(Loss) profit before income tax | (36,870 | ) | 1,422 | 5,225 | 28,107 | 298 | (5,284 | ) | (24,606 | ) | 9,116 | (22,592 | ) | |||||||||||||||||||||||
Income tax | 4,822 | (448 | ) | (1,715 | ) | (8,545 | ) | (159 | ) | 749 | 3,001 | 5 | (2,290 | ) | ||||||||||||||||||||||
(Loss) profit from continuing operations | (32,048 | ) | 974 | 3,510 | 19,562 | 139 | (4,535 | ) | (21,605 | ) | 9,121 | (24,882 | ) | |||||||||||||||||||||||
Loss from discontinuing operations | - | - | - | - | - | - | (3,442 | ) | (37 | ) | (3,479 | ) | ||||||||||||||||||||||||
(Loss) profit for the year | (32,048 | ) | 974 | 3,510 | 19,562 | 139 | (4,535 | ) | (25,047 | ) | 9,084 | (28,361 | ) | |||||||||||||||||||||||
(Loss) profit from attributable to: | ||||||||||||||||||||||||||||||||||||
Owners of the Company | (32,143 | ) | 274 | 3,026 | 14,671 | 139 | (394 | ) | (25,031 | ) | 9,014 | (30,444 | ) | |||||||||||||||||||||||
Non-controlling interest | 95 | 700 | 484 | 4,891 | - | (4,141 | ) | (16 | ) | 70 | 2,083 | |||||||||||||||||||||||||
(32,048 | ) | 974 | 3,510 | 19,562 | 139 | (4,535 | ) | (25,047 | ) | 9,084 | (28,361 | ) |
18
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
This account comprises:
At December 31, 2019 | At March 31, 2020 | |||||||
Cash on hand | 1,323 | 1,410 | ||||||
Remittances in-transit | 5,664 | 1,323 | ||||||
Bank accounts | 223,378 | 260,445 | ||||||
Escrow account | 552,439 | 531,740 | ||||||
Time deposits | 166,174 | 178,404 | ||||||
948,978 | 973,322 |
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 December 31, 2019 | At March 31, 2020 | |||||||
Cash and cash equivalent on consolidated statement of financial position | 948,978 | 973,322 | ||||||
Bank overdrafts (Note 15) | - | (12 | ) | |||||
Balances per consolidated statement of cash flows | 948,978 | 973,310 |
9. TRADE ACCOUNTS RECEIVABLES, NET
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Receivables | 923,316 | 864,811 | 380,135 | 322,094 | 543,181 | 542,717 | ||||||||||||||||||
Unbilled receivables - Subsidiaries (a) | 421,841 | 373,864 | 336,272 | 285,911 | 85,569 | 87,953 | ||||||||||||||||||
Unbilled receivables - Concessions (b) | 234,688 | 237,826 | 110,236 | 111,232 | 124,452 | 126,594 | ||||||||||||||||||
1,579,845 | 1,476,501 | 826,643 | 719,237 | 753,202 | 757,264 | |||||||||||||||||||
Impairment of account receivables | (4,906 | ) | (8,468 | ) | (4,906 | ) | (8,468 | ) | - | - | ||||||||||||||
1,574,939 | 1,468,033 | 821,737 | 710,769 | 753,202 | 757,264 |
a) | The unbilled receivables by subsidiaries are documents related to the estimates of the degree of progress for services rendered that were not billed, according detail: |
19
At December 31, 2019 | At March 31, 2020 | |||||||
GYM S.A. | 384,660 | 324,101 | ||||||
Concar S.A. | 10,737 | 8,562 | ||||||
GMI S.A. | 24,787 | 39,646 | ||||||
GMP S.A. | 1,657 | 1,555 | ||||||
421,841 | 373,864 | |||||||
b) The unbilled receivables – Concessions, corresponds to future collections for public services granted according detail below: |
At | At | |||||||
December 31, | March 31, | |||||||
2019 | 2020 | |||||||
GyM Ferrovias S.A. | 208,205 | 216,604 | ||||||
Survial S.A. | 16,466 | 11,057 | ||||||
Norvial S.A. | 2,149 | 4,970 | ||||||
Concesión Canchaque S.A.C. | 6,700 | 4,275 | ||||||
Concesionaria La Chira S.A. | 1,168 | 920 | ||||||
234,688 | 237,826 |
10. WORK IN PROGRESS, NET
This account comprises:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Unbilled receivable concessions in progress | 23,117 | 24,528 | - | - | 23,117 | 24,528 | ||||||||||||||||||
Work in progress | 49,457 | 108,413 | 49,457 | 108,413 | - | - | ||||||||||||||||||
72,574 | 132,941 | 49,457 | 108,413 | 23,117 | 24,528 |
The ongoing work costs include all expenses incurred by the Group under construction contracts currently in force. The Group estimates that all the cost incurred will be billed and collected.
11. TRANSACTIONS WITH RELATED PARTIES
a) | Transactions with related parties |
Major transactions between the Company and its related parties are summarized as follows:
At March 31, | ||||||||
2019 | 2020 | |||||||
Revenue from sales of goods and services: - Associates | 84 | 911 | ||||||
- Joint operations | 8,194 | 8,100 | ||||||
8,278 | 9,011 |
20
Inter-company services were agreed based on market terms as if they had been agreed to third parties.
b) | Balances of transactions with related parties |
At December 31, | At March 31, | |||||||||||||||
2019 | 2020 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Current portion: | ||||||||||||||||
Joint operations | ||||||||||||||||
Consorcio Rio Urubamba | 9,042 | - | 9,126 | - | ||||||||||||
Consorcio Peruano de Conservacion | 3,592 | - | 2,925 | - | ||||||||||||
Consorcio Italo Peruano | 1,011 | 363 | 1,895 | 217 | ||||||||||||
Consorcio Constructor Chavimochic | - | 5,953 | - | 7,390 | ||||||||||||
Consorcio GyM Conciviles | 1,257 | 1,958 | 1,273 | 2,818 | ||||||||||||
Consorcio La Gloria | 1,750 | 1,017 | 1,586 | 991 | ||||||||||||
Consorcio Ermitaño | 831 | 440 | 714 | 453 | ||||||||||||
Terminales del Peru | 1,176 | - | 995 | - | ||||||||||||
Consorcio TNT Vial y Vives - DSD Chile Ltda | - | 1,088 | - | 1,880 | ||||||||||||
Consorcio Rio Mantaro | - | 5,869 | 64 | 5,211 | ||||||||||||
Consorcio Vial Quinua | - | 2,048 | - | 2,049 | ||||||||||||
Consorcio Huacho Pativilca | 1,419 | 5,895 | 1,480 | 4,574 | ||||||||||||
Consorcio CDEM | 638 | - | 787 | 221 | ||||||||||||
Consorcio GyM-Stracon | 2,230 | - | 1,483 | - | ||||||||||||
Consorcio GyM-OSSA | 7,202 | - | 11,771 | - | ||||||||||||
Consorcio Chicama Ascope | 2,471 | - | 2,500 | - | ||||||||||||
Other minors | 1,407 | 2,102 | 2,558 | 240 | ||||||||||||
34,026 | 26,733 | 39,157 | 26,044 | |||||||||||||
Other related parties | ||||||||||||||||
Ferrovias Argentina | - | 12,183 | - | 15,399 | ||||||||||||
Peru Piping Spools S.A.C. | 2,632 | - | 2,227 | - | ||||||||||||
2,632 | 12,183 | 2,227 | 15,399 | |||||||||||||
Current portion | 36,658 | 38,916 | 41,384 | 41,443 | ||||||||||||
Non-current portion: | ||||||||||||||||
Gasoducto Sur Peruano S.A | 544,842 | - | 556,039 | - | ||||||||||||
Ferrovias Participaciones | - | 22,583 | - | 22,797 | ||||||||||||
Other minors | 2,099 | - | 13,931 | - | ||||||||||||
Non-current | 546,941 | 22,583 | 569,970 | 22,797 |
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 2020 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.
21
12. OTHER ACCOUNTS RECEIVABLE
This account comprises:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Advances to suppliers | 135,481 | 78,385 | 135,481 | 78,385 | - | - | ||||||||||||||||||
Income tax on-account payments | 70,647 | 72,297 | 70,647 | 72,297 | - | - | ||||||||||||||||||
VAT credit | 45,910 | 64,327 | 31,646 | 49,068 | 14,264 | 15,259 | ||||||||||||||||||
Guarantee deposits | 181,400 | 184,801 | 98,046 | 110,691 | 83,354 | 74,110 | ||||||||||||||||||
Claims to third parties | 79,771 | 90,228 | 38,874 | 37,557 | 40,897 | 52,671 | ||||||||||||||||||
Petroleos del Peru S.A.- Petroperu S.A. | 80,942 | 89,683 | 17,293 | 22,800 | 63,649 | 66,883 | ||||||||||||||||||
ITAN and other tax receivable | 60,883 | 57,365 | 30,233 | 26,683 | 30,650 | 30,682 | ||||||||||||||||||
Restricted funds | 15,974 | 8,839 | 973 | 973 | 15,001 | 7,866 | ||||||||||||||||||
Rental and sale of equipment - GyM S.A. projects | 30,798 | 31,500 | 30,798 | 31,500 | - | - | ||||||||||||||||||
Accounts receivable from personnel | 2,836 | 3,446 | 2,836 | 3,446 | - | - | ||||||||||||||||||
Consorcio Constructor Ductos del Sur | 27,782 | 27,782 | - | - | 27,782 | 27,782 | ||||||||||||||||||
Consorcio Panorama | 23,491 | 24,285 | - | - | 23,491 | 24,285 | ||||||||||||||||||
Other minors | 16,488 | 10,666 | 15,253 | 9,888 | 1,235 | 778 | ||||||||||||||||||
772,403 | 743,604 | 472,080 | 443,288 | 300,323 | 300,316 | |||||||||||||||||||
Impairment | (27,580 | ) | (28,402 | ) | (27,580 | ) | (28,402 | ) | - | - | ||||||||||||||
744,823 | 715,202 | 444,500 | 414,886 | 300,323 | 300,316 |
The fair value of the other short-term accounts receivable is similar to their book value due to their short-term maturity. The non-current portion corresponds mainly to non-financial assets such as advances to suppliers and tax credits. Other non-current accounts receivable have maturities that vary between 2 and 5 years.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of other accounts receivable mentioned. The Group does not request guarantees.
22
13. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
The movement of our investments in associates for the period ended March 31, 2019 and March 31, 2020 is as follows:
At March 31, | ||||||||
2019 | 2020 | |||||||
Beginning balance | 257,766 | 37,035 | ||||||
Share of the profit or loss in associates and joint | ||||||||
ventures | (696 | ) | 1,164 | |||||
Impairment of investment | (130 | ) | - | |||||
Translation adjustments | 5 | (36 | ) | |||||
Ending balance | 256,945 | 38,163 |
Concesionaria Chavimochic S.A.C.
The entity was awarded the implementation of the Chavimochic irrigation project, including a) design and construction of the work required for the third-phase of the Chavimochic irrigation project in the province of La Libertad; b) operation and maintenance of works; and c) water supply to the Project users. Construction activities started in 2015; the effective concession period is 25 years, and the total investment amounts US$647 million.
The civil works of the third stage of the Chavimochic Irrigation Project were structured in two phases. To date, the works of the first phase (Palo Redondo Dam) are 70% completed. However, at the beginning of 2017, the procedure for early termination of the Concession Contract was initiated due to the breach of contract by the Grantor, and all activities were suspended in December 2017. Not having reached an agreement, the arbitration process was initiated before the CNUDI, and the Arbitral Tribunal was installed.
Moreover, from 2018 to date, the Peruvian Government has been evaluating the modification of the Concession Contract, to determine a mechanism that allow the completion of the project, without resolution as of todate.
14. PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT-OF-USE ASSETS
For the period ended March 31, 2019 and March 31, 2020, the movement in property, plant and equipment, intangible assets and right-of-use assets accounts was as follows:
23
Property, plant and equipment | Intangibles assets | Right-of-use assets | ||||||||||
Net cost at January 1, 2019 | 470,554 | 847,095 | - | |||||||||
Additions | 9,781 | 29,475 | - | |||||||||
Transfers, disposals and adjustments | (238 | ) | (2,230 | ) | - | |||||||
Deductions for sale of assets | (3,074 | ) | - | - | ||||||||
Depreciation, amortization | (17,123 | ) | (24,476 | ) | - | |||||||
Net cost at March 31, 2019 | 459,900 | 849,864 | - | |||||||||
Net cost at January 1, 2020 | 443,870 | 853,315 | 78,813 | |||||||||
Additions | 12,482 | 33,852 | 1,600 | |||||||||
Transfers, disposals and adjustments (*) | (8,149 | ) | (14,049 | ) | (1,123 | ) | ||||||
Deductions for sale of assets | (5,205 | ) | - | - | ||||||||
Depreciation, amortization | (19,986 | ) | (23,950 | ) | (4,911 | ) | ||||||
Net cost at March 31, 2020 | 423,012 | 849,168 | 74,379 |
(*) Includes translation adjustments in the subsidiary GyM S.A. in property plant and equipment and intangibles, amounted to S/8 million and S/14 million, respectively.
a) | Property, plant and equipment and right-of-use assets |
As of March 31, 2020, additions to property, plant and equipment mainly comprise to S/5 million in machinery in engineering and construction segment and S/4.2 million in working progress in infrastructure segment (as of December 31, 2019, the additions correspond mainly to work in progress for S/4.7 million and S/1.7 million in the infrastructure and real estate segments, respectively).
As of March 31, 2020, additions to right-of-use assets comprise lease agreements signed by the Group between January 1, 2020 up to March 31, 2020.
Depreciation of fixed assets, investment properties and right-of-use assets for the period is broken down in the statement of income as follows:
At March 31, | ||||||||
2019 | 2020 | |||||||
Cost of services and goods (Note 21) | 16,882 | 24,184 | ||||||
Administrative expenses (Note 21) | 821 | 1,314 | ||||||
Total depreciation related to property, plant and equipment, investment property and right-of-use assets | 17,703 | 25,498 | ||||||
(-) Depreciation of investment property | (580 | ) | (601 | ) | ||||
(-) Depreciation of right-of-use asset | - | (4,911 | ) | |||||
Total depreciation of property, plant and equipment | 17,123 | 19,986 |
24
b) | Intangible assets |
As of March 31, 2019 and March 31, 2020, 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.
Amortization of intangibles is broken down in the statement of income as follows:
At March 31, | ||||||||
2019 | 2020 | |||||||
Cost of services and goods (Note 21) | 22,757 | 22,857 | ||||||
Administrative expenses (Note 21) | 1,719 | 1,093 | ||||||
24,476 | 23,950 |
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, | March 31, | |||||||
2019 | 2020 | |||||||
Engineering and construction (*) | 36,632 | 30,647 | ||||||
Electromechanical | 20,735 | 20,735 | ||||||
IT services | 930 | - | ||||||
58,297 | 51,382 |
(*) The variation reported in engineering and construction segment is due to translation adjustment of foreign business of the subsidiary GyM S.A.
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.
This item comprises: |
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Bank overdrafts (Note 8) | - | 12 | - | 12 | - | - | ||||||||||||||||||
Bank loans (a) | 553,658 | 515,277 | 424,362 | 303,971 | 129,296 | 211,306 | ||||||||||||||||||
Finance leases | 22,980 | 20,234 | 9,749 | 8,366 | 13,231 | 11,868 | ||||||||||||||||||
Lease liability for right-of-use asset | 80,216 | 79,047 | 18,246 | 16,088 | 61,970 | 62,959 | ||||||||||||||||||
Other financial entities (b) | 142,212 | 148,393 | 1,903 | 2,796 | 140,309 | 145,597 | ||||||||||||||||||
799,066 | 762,963 | 454,260 | 331,233 | 344,806 | 431,730 |
a) | Bank loans |
As of December 31, 2019 and March 31, 2020, this item comprises bank loans in local and foreign
25
currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.0% and 12.0% in 2019 and in 2020.
Current | Non-current | |||||||||||||||||||||||
At | At | At | At | |||||||||||||||||||||
Interest | Maturity | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
rate | date | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
GyM S.A. (i) | 1.00% / 11.00 | % | 2023 | 170,798 | 162,016 | 26,401 | 20,856 | |||||||||||||||||
GMP S.A. (ii) | 5.05% / 7.68 | % | 2027 | 30,367 | 26,766 | 102,895 | 104,196 | |||||||||||||||||
Viva GyM S.A. | 7.00% / 12.00 | % | 2020 | 110,343 | 106,345 | - | - | |||||||||||||||||
Graña y Montero S.A.A. (iii) | 9.10% / 10.10 | % | 2022 | 112,854 | 8,844 | - | 86,254 | |||||||||||||||||
424,362 | 303,971 | 129,296 | 211,306 |
i) | Financial Stability Framework Agreement |
In July 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). In August 2019, Tranche B was fully paid for the Group, equivalent to S/9.7 million and US$9.2 million. In September 2019, Tranche A was partially paid, for S/0.4 million and US$0.1 million. In October 2019, Tranche A was partially paid, for S/0.5 million.
As of March 31, 2020 and the date of this report, there was US$42.7 million (equivalent to S/146.8 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) and up to 50% of the amount of Tranche A (project valuations) should be presented; the request was accepted by the lenders. As of March 31, 2020 and the date of this report, the value of client invoices and the value of project valuations is 64% and 51%, respectively, both percentages comply with the provisions of the approved dispensation.
As of March 31, 2020 and the date of this report, GyM is in compliance with the ratios established under the Financial Stability Framework Agreement.
ii) | Terminales del Peru Loan |
Terminales del Peru (hereinafter “TP”), a joint operation of the subsidiary GMP S.A., signs a medium- term loan agreement with Banco de Credito del Peru (hereinafter BCP) for up to US$30 million to finance the investments committed and up to US$70 million to finance the additional investments arising from the operation contract of the North and Center terminals from the period 2015 to 2019 with a maximum exposure limit of US$80 million. These financings are repaid within 5 years. As of March 31, 2020, these loans amount to S/84.9 million and mature in 2027.
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In addition, in November 2019, TP signed a loan agreement to finance the additional investments from 2019 to 2023, for a credit line amount of US$46 million with the BCP. The contract confirmed the participation of an assignee and in this sense BD Capital (BDC) acquired 50% of the contractual position of the BCP through the subscription of the accession contract and in November 2019 disbursed a TP US$23 million. As of March 31, 2020, the balance amounts to S/39.6 million and matures in 2026.
iii) | CS Peru Infrastructure Holdings LLC Loan |
In July 2019, the Company entered into a medium term loan credit agreement for up to US$35 million with CS Peru Infrastructure Holdings LLC. The term of the loan is three years, with quarterly installments of principal starting on the 18th month. The loan accrued interest at the following rates per annum: (i) for the period from and including the July 31, 2019 (“Closing Date”) to but excluding the date that is 6 months after the Closing Date, 9.10%; (ii) for the period from and including the date that is 6 months after the Closing Date to but excluding the date that is 1 year after the Closing Date, 9.35%; (iii) for the period from and including the date that is 1 year after the Closing Date to but excluding the date that is 30 months after the Closing Date, 9.60%; and (iv) for the period from and including the date that is 30 months after the Closing Date to the third anniversary of the Loan, 10.10%.
The proceeds were used for working capital in the Company, GyM S.A. and Adexus S.A. As of the date of this report, the principal amount outstanding under this loan is US$25 million (equivalent to S/86 million).
On November 21, 2019, due to the filing of a preventive bankruptcy process by its Chilean subsidiary, Adexus S.A., the Company received a communication from CS Peru Infrastracture Holdings LLC informing of the occurrence of an event of default under the terms of the credit agreement, according to section 7.02(e) and 9.09 of the agreement. As a result, the loan was classified as a current liabilities. At February 28, 2020, the waiver was obtained by the Company, and at the date of this report it was reclassified to non-current liabilities.
b) | Other financial entities |
Monetization of Norvial dividends
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 (equivalent to S/138 million) 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. As of March 31, 2020, the balance of the loan payable amounts to S/148.4 million (S/142.2 million as of December 31, 2019).
c) | Fair value of borrowings |
The carrying amount and fair value of borrowings are broken down as follows:
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Carrying amount | Fair value | |||||||||||||||
At | At | At | At | |||||||||||||
December 31, | March 31, | December 31, | March 31, | |||||||||||||
2019 | 2020 | 2019 | 2020 | |||||||||||||
Bank overdrafts (Note 8) | - | 12 | - | 12 | ||||||||||||
Bank loans | 553,658 | 515,277 | 572,019 | 549,728 | ||||||||||||
Finance leases | 22,980 | 20,234 | 23,027 | 21,011 | ||||||||||||
Lease liability for right-of-use asset | 80,216 | 79,047 | 96,799 | 95,784 | ||||||||||||
Other financial entities | 142,212 | 148,393 | 142,212 | 148,393 | ||||||||||||
799,066 | 762,963 | 834,057 | 814,928 |
As of March 31, 2020, the fair value is based on cash flows discounted using a rate based on the borrowing rate of 1.75% and 11% (2.9% and 11% as of December 31, 2019) and are included as Level 2 in the level of measurement.
16. BONDS
This item is broken down as follows:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
GyM Ferrovias S.A. (a) | 618,497 | 620,058 | 15,742 | 17,606 | 602,755 | 602,452 | ||||||||||||||||||
Norvial S.A. (b) | 305,545 | 300,162 | 28,995 | 23,516 | 276,550 | 276,646 | ||||||||||||||||||
GyM S.A. (c) | - | 27,212 | - | 2,104 | - | 25,108 | ||||||||||||||||||
924,042 | 947,432 | 44,737 | 43,226 | 879,305 | 904,206 |
a) | GyM Ferrovias S.A. |
In February 2015, the subsidiary GyM Ferrovias 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 March 31, 2020, an amortization has been made up to S/81.9 million (S/79 million as of December 31, 2019).
As of March 31, 2020, the balance includes accrued interest payable and VAC adjustments for S/91 million (S/86.8 million as of December 31, 2019).
At March 31, 2019 and March 31, 2020 the account movement was as follows: | ||||||||
2019 | 2020 | |||||||
Balance at January, 1 | 611,660 | 618,497 | ||||||
Amortization | (2,807 | ) | (2,873 | ) | ||||
Accrued interest | 11,906 | 11,946 | ||||||
Interest paid | (7,505 | ) | (7,512 | ) | ||||
Balance at March, 31 | 613,254 | 620,058 |
As part of the structuring process of the bond, GyM Ferrovias S.A. committed to report and verify compliance with the following, measured based on their individual financial statements (covenants):
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- | 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 Ferrovias 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. Tha last payment for the sale of CPAO was made on December 10, 2019.
On August 23, 2017, GyM Ferrovias 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. In May, 2019, the working capital loan was fully paid, and the working capital loan agreement culminated.
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 March 31, 2019 and March 31, 2020 the account movement was as follows:
2019 | 2020 | |||||||
Balance at January, 1 | 325,382 | 305,545 | ||||||
Amortization | (4,396 | ) | (5,384 | ) | ||||
Accrued interest | 5,899 | 6,193 | ||||||
Capitalized interest | 697 | 91 | ||||||
Interest paid | (6,639 | ) | (6,283 | ) | ||||
Balance at March, 31 | 320,943 | 300,162 |
As part of the process of bond structuring, Norvial S.A. engaged to adhere to the following covenants:
- | Debt service coverage ratio of not less than 1.3 times. |
- | Proforma gearing ratio lower than 4 times. |
c) | GyM S.A. |
In 2020, the subsidiary GyM S.A. developed the First Private Bond Program, up to a maximum amount of US$8 million.
In the first quarter of the year, the bonds issue amount of US$7.8 million (equivalent to S/26.8 million) under the debt swap modality, related to its outstanding trade accounts.
The bonds mature in December 2027 and bear interest at a rate of 8.5%, the payment is semi-annual and have a risk rating of B-, granted by the rating company Moody’s Peru.
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As of March 31, 2020, the balance includes accrued interest payable for US$125 thousand (equivalent to S/431 thousand).
The fair value of obligations as of March 31, 2020 amounts to S/ 1,047 million (as of December 31, 2019 amounts to S/1,011 million), is based on discounted cash flows using rates between 4.32% and 7.45% (between 4.32% and 7.59% as of December 31, 2019) and is within level 2 of the fair value hierarchy.
As of December 31, 2019 and March 31, 2020, the subsidiaries GyM Ferrrovias S.A., Norvial S.A. and GyM S.A. have complied with the covenants of all bonds.
17. TRADE ACCOUNTS PAYABLE
This item includes:
At | At | |||||||
December 31, | March 31, | |||||||
2019 | 2020 | |||||||
Invoices payable | 352,287 | 402,112 | ||||||
Provision of contract costs (*) | 746,408 | 671,407 | ||||||
Notes payable | 37,426 | 35,316 | ||||||
1,136,121 | 1,108,835 |
(*) As of March 31, 2020, the provisions of contract costs include the measurement by the degree of progress of the projects of S/140.5 million (as of December 31, 2019, S/169.5 million).
18. OTHER ACCOUNTS PAYABLE
This item includes:
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Advances received from customers (a) | 307,839 | 397,788 | 270,714 | 361,719 | 37,125 | 36,069 | ||||||||||||||||||
Consorcio Ductos del Sur - payable (b) | 148,076 | 142,919 | - | - | 148,076 | 142,919 | ||||||||||||||||||
Salaries and other payable | 87,869 | 114,446 | 87,869 | 114,446 | - | - | ||||||||||||||||||
Other taxes payable | 104,444 | 108,721 | 84,235 | 89,722 | 20,209 | 18,999 | ||||||||||||||||||
Put option liability on Morelco acquisition | 106,444 | 110,764 | 71,341 | 74,029 | 35,103 | 36,735 | ||||||||||||||||||
Consorcio Rio Mantaro - payables | 35,625 | 53,651 | 35,625 | 53,651 | - | - | ||||||||||||||||||
Acquisition of additional non-controlling interest | 22,697 | 23,552 | 22,697 | 23,552 | - | - | ||||||||||||||||||
Guarantee deposits | 13,201 | 14,640 | 13,201 | 14,640 | - | - | ||||||||||||||||||
Third-party loans | 11,619 | 11,596 | 9,545 | 9,521 | 2,074 | 2,075 | ||||||||||||||||||
Other accounts payables | 70,592 | 71,107 | 40,078 | 35,853 | 30,514 | 35,254 | ||||||||||||||||||
908,406 | 1,049,184 | 635,305 | 777,133 | 273,101 | 272,051 |
30
(a) | Advances received from customers relate mainly to construction projects, and are discounted from invoicing, in accordance with the terms of the contracts. |
Total | Current | Non-current | ||||||||||||||||||||||
At | At | At | At | At | At | |||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Advances Customers Consortiums | 115,250 | 101,962 | 113,093 | 100,499 | 2,157 | 1,463 | ||||||||||||||||||
Customer advances for real estate projects | 66,258 | 81,692 | 66,258 | 81,692 | - | - | ||||||||||||||||||
Concentradora Norte - Quellaveco | 64,118 | 98,995 | 44,932 | 78,466 | 19,186 | 20,529 | ||||||||||||||||||
Engineering and construction - Chile | - | 56,894 | - | 56,894 | - | - | ||||||||||||||||||
Special National Transportation Infrastructure Project | 42,030 | 47,070 | 26,534 | 33,245 | 15,496 | 13,825 | ||||||||||||||||||
Others | 20,183 | 11,175 | 19,897 | 10,923 | 286 | 252 | ||||||||||||||||||
307,839 | 397,788 | 270,714 | 361,719 | 37,125 | 36,069 |
(b) | The other accounts payable of Consorcio Constructor Ductos del Sur correspond to payment obligations to suppliers and the main subcontractors for S/142 million (as of December 31, 2019 amounts to S/148 million), assumed by the subsidiary GyM S.A; as a result of the termination of GSP operations. |
The fair value of short-term accounts approximates their book value due to their short-term maturities. The non-current part mainly includes non-financial liabilities such as advances received from customers; the remaining balance is not significant in the financial statements for the periods shown.
19. PROVISIONS
The movement of this item is as follows:
Contingent | ||||||||||||||||
liabilities | Provision | |||||||||||||||
Legal | resulting from | for well | ||||||||||||||
contingencies | acquisitions | closure | Total | |||||||||||||
At January 1, 2019 | 84,728 | 4,498 | 20,382 | 109,608 | ||||||||||||
Additions | 2,645 | - | - | 2,645 | ||||||||||||
Reversals of provisions | (1,077 | ) | (461 | ) | (1,147 | ) | (2,685 | ) | ||||||||
Payments | (155 | ) | - | - | (155 | ) | ||||||||||
Translation adjustments | 10 | 27 | - | 37 | ||||||||||||
At march 31, 2019 | 86,151 | 4,064 | 19,235 | 109,450 | ||||||||||||
At January 1, 2020 | 278,319 | - | 50,116 | 328,435 | ||||||||||||
Additions | 8,623 | - | 6,315 | 14,938 | ||||||||||||
Reversals of provisions | (3,713 | ) | - | - | (3,713 | ) | ||||||||||
Payments | (395 | ) | - | (817 | ) | (1,212 | ) | |||||||||
Exchange difference | 1,875 | - | - | 1,875 | ||||||||||||
Translation adjustments | (159 | ) | - | - | (159 | ) | ||||||||||
At march 31, 2020 | 284,550 | - | 55,614 | 340,164 |
Legal contingencies
1. | Civil compensation |
As of March 31, 2020, the present value of the estimated provision amounting to million S/154.1 (S/153.9 million as of December 31, 2019), corresponding to the legal contingency estimated by management for exposure of the Company and its subsidiaries to a probable compensation in relation to their participation as minority partners in certain entities that developed infrastructure projects in Peru with companies belonging to the Odebrecht group and projects related to “Club de la Construcción”.
2. | Securities Class actions NY SEC |
31
Two securities class actions have been filed against the Company, and certain former employees in the Eastern District of New York during the first quarter of 2017. Both complaints allege false and misleading statements during the class period. In particular, they allege that the Company failed to disclose, among other things, that a) the company knew that its partner Odebrecht was engaged in illegal activities, and b) the Company profited from such activities in violation of its own corporate governance standards. All parties have agreed to unify the two lawsuits and appoint a single lead plaintiff, with one single council to control the class action. On March 6, 2018, the court appointed Treasure Finance Holding Corp. as the plaintiffs' representative. After this, the Court could dismiss the claim or admit it.
As of March 31, 2020, the Company has made a provision of S/51.6 million (US$15 million) based on the estimation of the probable result of the Securities Class Actions process.
20. CAPITAL
As of March 31, 2020 and as of December 31, 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.
At March 31, 2020, a total of 214,630,805 shares were represented in ADS, equivalent to 42,926,161 ADSs at a rate of 5 shares per ADS.
As of December 31, 2019, a total of 218,043,480 shares were represented by ADS, equivalent to 43,608,696 ADSs at a rate of 5 shares per ADS.
21. EXPENSES BY NATURE
For the period ended March 31, 2019 and March 31, 2020, this item comprises:
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Cost of | ||||||||||||
goods and | Administrative | |||||||||||
services | expenses | Total | ||||||||||
At March 31, 2019 | ||||||||||||
Salaries, wages and fringe benefits | 162,892 | 28,026 | 190,918 | |||||||||
Services provided by third-parties | 213,398 | 5,222 | 218,620 | |||||||||
Purchase of goods | 98,555 | - | 98,555 | |||||||||
Other management charges | 63,851 | 8,024 | 71,875 | |||||||||
Depreciation (Note 14 a) | 16,882 | 821 | 17,703 | |||||||||
Amortization (Note 14 b) | 22,757 | 1,719 | 24,476 | |||||||||
Taxes | 2,407 | 230 | 2,637 | |||||||||
Impariment of property, plant and equipment | 102 | - | 102 | |||||||||
Inventory recovery | (1,272 | ) | - | (1,272 | ) | |||||||
Total | 579,572 | 44,042 | 623,614 | |||||||||
At March 31, 2020 | ||||||||||||
Services provided by third-parties | 242,867 | 8,119 | 250,986 | |||||||||
Salaries, wages and fringe benefits | 294,241 | 24,326 | 318,567 | |||||||||
Purchase of goods | 160,359 | - | 160,359 | |||||||||
Other management charges | 69,362 | 4,481 | 73,843 | |||||||||
Depreciation (Note 14 a) | 24,184 | 1,314 | 25,498 | |||||||||
Amortization (Note 14 b) | 22,857 | 1,093 | 23,950 | |||||||||
Impairment of accounts receivable | 205 | 5 | 210 | |||||||||
Taxes | 593 | 75 | 668 | |||||||||
Property, plant and equipment recovery | (102 | ) | - | (102 | ) | |||||||
Inventory recovery | (644 | ) | - | (644 | ) | |||||||
Total | 813,922 | 39,413 | 853,335 |
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22. OTHER INCOME AND EXPENSES
For the period ended March 31, 2019 and March 31, 2020, this item comprises:
At March 31, | ||||||||
2019 | 2020 | |||||||
Other income: | ||||||||
Sale of fixed assets | 3,807 | 3,523 | ||||||
Present value for well closure provision (a) | 1,147 | - | ||||||
Debt forgiveness with suppliers | - | 183 | ||||||
Recovery of provisions and impairments | - | 1,571 | ||||||
Profit from Mizuho agreement (b) | 40,608 | - | ||||||
Others | 1,377 | 979 | ||||||
46,939 | 6,256 | |||||||
Other expenditures: | ||||||||
Net cost of fixed assets disposal | 3,294 | 4,884 | ||||||
Legal and tax litigation (c) | 34,797 | 239 | ||||||
Present value for well closure provision (a) | - | 6,325 | ||||||
Administrative sanctions | - | 2,403 | ||||||
Others | 822 | 449 | ||||||
38,913 | 14,300 | |||||||
8,026 | (8,044 | ) |
a) | Corresponds to the valuation for the dismantling of the wells of the subsidiary GMP S.A. updated to present value. As of March 31, 2019 the Group recorded a reversal of provision for S/1.1 million, and as of March 31, 2020 the Group recorded a provision expense for S/6.3 million. |
b) | Corresponds to the refinancing agreement linked to the contract signed between GyM Ferrrovias S.A. and Mitzuho Bank Ltd. where the Company acted as an endorsement of the transaction. Under the contract, a bond letter was issued with Mitzuho Bank Ltd. for it to be covered with a financial derivative. The contract further indicated that in the event that the bank refinanced the debt, the Company received 70% of the gains obtained. |
c) | Corresponds mainly to provisions for contingencies with the Tax Administration. |
23. INCOME TAX
These condensed interim consolidated financial statements for the period ended December 31, 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 March 31, 2020 is 7.32% (67.18% for the period 2019).
24. CONTINGENCIES, COMMITTMENTS AND GUARANTEES
As of March 31, 2020, contingencies held by the Group are substantially the same as those existing as of December 31, 2019.
The Group maintains letters of guarantees and guarantees in force in various financial entities guaranteeing operations for US$373.7 and US$13.9 million, respectively (US$376.1 million and US$13.9 million, respectively, as of December 31, 2019).
34
25. DIVIDENDS
As part of the covenants at the refinancing agreements mentioned in Note 15, the Company is unable to pay dividends as established in the Financial Stability Framework Agreement.
For the period ended March 31, 2020, the Group’s subsidiaries have paid dividends to its non- controlling interests in the amount of S/42.6 million (S/1.8 million for the period ended in December 31, 2019).
26. LOSS PER SHARE
The basic loss per common share has been calculated by dividing the loss of the period attributable to the Group’s common shareholders by the weighted average of the number of common shares outstanding during that period. No diluted loss per common share has been calculated because there is no potential diluent common or investment shares (ie, financial instruments or agreements that entitle to obtain common or investment shares); therefore, it is the same as the loss per basic share.
The basic loss per common share is as follows:
At March 31, | ||||||||||||
2019 | 2020 | |||||||||||
Loss attributable to owners of the Company | ||||||||||||
during the period | (1,137 | ) | (30,444 | ) | ||||||||
Weighted average number of shares in issue | ||||||||||||
at S/1.00 each, at March 31, | 729,434,192 | 871,917,855 | ||||||||||
Basic loss per share (in S/) | (*) | (0.002 | ) | (0.035 | ) | |||||||
At March 31, | ||||||||||||
2019 | 2020 | |||||||||||
Loss from continuing operations attributable to owners | ||||||||||||
of the Company during the period | 7,912 | (26,965 | ) | |||||||||
Weighted average number of shares in issue | ||||||||||||
at S/1.00 each, at March 31, | 729,434,192 | 871,917,855 | ||||||||||
Basic earnings (loss) per share (S/) | (*) | 0.011 | (0.031 | ) |
(*) The Group does not have common shares with dilutive effects at March 31, 2019 and March 31, 2020.
27. DISCONTINUED OPERATIONS AND NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE
The subsidiary Adexus S.A. (hereinafter Adexus) has been reclassified as non-current assets held for sale at December 31, 2019 and March 31, 2020, whose main activity is to provide information technology solutions mainly in Chile and Peru
On November 19, 2019, Adexus filed an application for reorganization under law 20 720 with the Chilean courts of justice. The Company impaired the total investment value as of December 31, 2019.
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On January 9, 2020, the Company communicated that the creditors committee of Adexus approved with the favorable vote of more than 80% of the pledge creditors and 85% of the unsecured creditors, respectively, the judicial reorganization agreement proposed by Adexus in the framework of the reorganization procedure. According to the terms of the judicial reorganization agreement, Adexus will restructure and pay the total of its reorganized liabilities within a maximum period of six years, according to the new agreed conditions, being authorized to continue with its commercial activities normally. As a result of the financial protection provided by the Chilean law and with the support of its creditors, Adexus has achieved the restructuring of its liabilities while continuing to serve all its customers.
Although the Company investment in Adexus has been declared as an available-for-sale investment and on an exceptional basis, the Group decided that Adexus will be subject to the patrimonial protection law; after achieving this restructuring, the Group will focus on honoring it in the terms agreed while finding the right shareholder for the future development of the Company.
At | At | |||||||
December 31, | March 31, | |||||||
2019 | 2020 | |||||||
ASSETS | ||||||||
Cash and cash equivalets | 1,723 | 1,356 | ||||||
Accounts receivables, net | 129,739 | 109,168 | ||||||
Inventories, net | 2,828 | 2,846 | ||||||
Other assets, net | 68,730 | 60,442 | ||||||
Total assets | 203,020 | 173,812 | ||||||
LIABILITIES | ||||||||
Borrowings | 91,529 | 78,447 | ||||||
Accounts payable | 118,497 | 106,573 | ||||||
Total liabilities | 210,026 | 185,020 | ||||||
Total net assets | (7,006 | ) | (11,208 | ) |
28. EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION
Between December 31, 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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