U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM20-F/A
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number001-35991
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)
Av. Paseo de la República 4667
Surquillo
Lima 34, Peru
(Address of principal executive offices)
Daniel Urbina Pérez, Chief Legal Officer
Tel.011-51-1-213-6565
Av. Paseo de la República 4667
Surquillo
Lima 34, Peru
(Name, telephone,e-mail and/or facsimile number and address of company contact person)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Shares, par value s/.1.00 per share, American Depositary Shares, each representing five Common Shares | New York Stock Exchange* New York Stock Exchange |
* | Not for trading purposes, but only in connection with the registration on the New York Stock Exchange of the American Depositary Shares representing those common shares. |
Securities registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
At December 31, 2016 | 660,053,790 shares of common stock |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every interactive data filed required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 203.405 of this chapter) during the preceding 12 months (or for such other period that the Registrant was required to submit and post such files) Yes ☐ No ☐ Note: Not required for Registrant.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Emerging growth company ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ | International Financial Reporting ☒ Standards as issued by the International Accounting Standards Board | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒
Explanatory Note
This Amendment No. 1 to Form20-F (the “Form20-F/A”) is being filed solely to amend the annual report onForm 20-F for the fiscal year ended December 31, 2016 filed by Graña y Montero S.A.A. on May 15, 2018 (the“Form 20-F”) in the following manner:
• | to include the audit opinion relating to the consolidated financial statements of the company, as of and for the year ended December 31, 2014; |
• | to remove in its entirety the Consolidated Income Statement formerly onpage F-9 of theForm 20-F, which was duplicative of the information in note 2.30 of the consolidated financial statements; |
• | to change the words “Minority Interest” onpage F-28 to“Non-controlling Interest”; and |
• | to update the Table of Contents immediately prior topage F-1 and the corresponding page numbering of the consolidated financial statements. |
Except for the above amendments, no changes have been made to the financial statements of the company as contained in theForm 20-F.
ThisForm 20-F/A consists of a cover page, this explanatory note, Item 18 (as amended) of theForm 20-F, including the audit opinion described herein, the signature page and the required certifications of the principal executive officer and principal financial officer of the company. Other than as expressly set forth above, this Form20-F/A does not, and does not purport to, amend, update or restate the information in theForm 20-F or reflect any events that have occurred after theForm 20-F was filed.
(Free translation from the original in Spanish)
(All amounts expressed in thousands of S/ unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2015 AND 2016
CONTENTS | Page | |||
F-1 - 2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-10 -114 |
S/ = Peruvian Sol
US$ = United States dollar
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Graña y Montero S.A.A. and its subsidiaries
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Graña y Montero S.A.A. and its subsidiaries (the “Company”) as of December 31, 2015 and 2016, the related consolidated statements of operations, comprehensive loss, changes in equity and cash flows for each of the years then ended, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2016, and the results of their operations and their cash flows for each of the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also, in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2015 and 2016, based on criteria established inInternal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because the following material weaknesses in internal control over financial reporting existed as of those dates:
- | Lack of a formally established and documented process for enterprise and fraud risk management. |
- | Deficiencies in the design and operational effectiveness of controls over segregation of duties to help ensure that personnel with potential conflicts were not involved in incompatible activities. |
- | Deficiencies in the design and operational effectiveness of the controls established in the accounting closing process with respect to the review of the consolidated and separate financial statements, including controls over the review, approval and documentation related to journal entries. |
- | Deficiencies in the design and operational effectiveness of controls established with respect to the recognition of revenue and determination of related estimates, including construction contract revenues and contingent revenues, and the accounting for inventory. |
- | Deficiencies in the design of controls over the timely accounting for signed contracts. |
- | Deficiencies in design and operational effectiveness of the controls over the review and approval of the valuation of acquired assets and liabilities as part of a step acquisition. |
- | Lack of adequate supervision, monitoring andfollow-up by the Audit Committee regarding the role of the Internal Audit Department. |
- | Deficiencies in operational effectiveness of controls over SOX compliance. |
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management Report on Internal Control over Financial Reporting appearing under Item 15. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audits of the 2015 and 2016 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
F-1
Emphasis of Certain Matters
As discussed in Note 1 to the financial statements, Peruvian prosecutors included three former executives of the Company in an investigation for the alleged crimes of collusion and money laundering, and included Graña y Montero S.A.A and GyM S.A. as subjects of investigation and as third parties responsible on a civil basis. The Note also describes the results of an independent investigation and estimates that the cases will be resolved in a manner favorable to their interests. We are not able to anticipate the final result of those undertakings and the possible contingencies which may arise.
As discussed in Note 2.30 to the consolidated financial statements, the Company made adjustments to the consolidated financial statements as of December 31, 2015, which were presented in the previous Form20-F. These adjustments consisted of reversals of estimates of work in progress and impairments of accounts receivable for S/ 44.7 million, as well as corrections in the recording of goodwill for S/ 14.7 million, reversal of deferred tax asset for S/ 23.4 million and other items for S/ 3.3 million.
Basis for Opinion
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the Management’s Report on Internal Control over Financial Reporting referred to above. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
/s/ Moore Stephens SCAI S.A. |
Moore Stephens SCAI S.A. |
We have served as the Company’s auditor since 2017. |
Bogota, Colombia |
May 15, 2018 |
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
April 30, 2015
To Graña y Montero S.A.A. Board of Directors and Shareholders:
In our opinion, the consolidated statements of income, of comprehensive income, of changes in equity and of cash flow for the year ended December 31, 2014 present fairly, in all material respects, the results of operations and cash flows of Graña y Montero S.A.A. and its subsidiaries for the year ended December 31, 2014, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/Gaveglio Aparicio y Asociados Sociedad Civil de Responsabilidad Limitada
Lima, Peru
F-3
(Free translation from the original in Spanish)
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 December 31, | ||||||||||||
Note | 2015 | 2016 | ||||||||||
Restated see Note 2.30 | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 9 | 554,002 | 606,950 | |||||||||
Financial asset at fair value through profit or loss | 3,153 | 352 | ||||||||||
Trade accounts receivables, net | 11 | 1,042,455 | 1,031,270 | |||||||||
Unbilled work in progress, net | 12 | 1,278,227 | 680,929 | |||||||||
Accounts receivable from related parties | 13 | 280,153 | 181,664 | |||||||||
Other accounts receivable | 14 | 820,717 | 649,516 | |||||||||
Inventories, net | 15 | 1,159,154 | 1,104,293 | |||||||||
Prepaid expenses | 40,022 | 51,301 | ||||||||||
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5,177,883 | 4,306,275 | |||||||||||
Non-current assets classified as held for sale | 22,511 | 22,385 | ||||||||||
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Total current assets | 5,200,394 | 4,328,660 | ||||||||||
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Non-current assets | ||||||||||||
Long-term trade accounts receivable, net | 11 | 621,831 | 667,519 | |||||||||
Long-term unbilled work in progress, net | 12 | 59,754 | 197,586 | |||||||||
Long-term accounts receivable from related parties | 13 | — | 531,384 | |||||||||
Prepaid expenses | 22,386 | 23,526 | ||||||||||
Other long-term accounts receivable | 14 | 65,929 | 357,952 | |||||||||
Available-for-sale financial assets | 10 | 120,134 | — | |||||||||
Investments in associates and joint ventures | 16 | 637,005 | 389,759 | |||||||||
Investment property | 34,702 | 49,357 | ||||||||||
Property, plant and equipment, net | 17 | 1,111,757 | 1,113,599 | |||||||||
Intangible assets, net | 18 | 878,286 | 960,286 | |||||||||
Deferred income tax asset | 25 | 147,845 | 427,008 | |||||||||
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Total non-current assets | 3,699,629 | 4,717,976 | ||||||||||
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Total assets | 8,900,023 | 9,046,636 | ||||||||||
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LIABILITIES AND EQUITY | ||||||||||||
As at December 31, | ||||||||||||
Note | 2015 | 2016 | ||||||||||
Restated see Note 2.30 | ||||||||||||
Current liabilities | ||||||||||||
Borrowings | 19 | 1,228,020 | 1,961,043 | |||||||||
Bonds | 20 | 37,083 | 46,091 | |||||||||
Trade accounts payable | 21 | 1,635,762 | 1,276,617 | |||||||||
Accounts payable to related parties | 13 | 77,832 | 80,217 | |||||||||
Current income tax | 34,116 | 62,160 | ||||||||||
Other accounts payable | 22 | 1,066,000 | 1,096,307 | |||||||||
Provisions | 23 | 13,468 | 14,531 | |||||||||
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Total current liabilities | 4,092,281 | 4,536,966 | ||||||||||
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Non-current liabilities | ||||||||||||
Borrowings | 19 | 553,336 | 419,395 | |||||||||
Long-term bonds | 20 | 757,008 | 921,623 | |||||||||
Other long-term accounts payable | 22 | 246,396 | 512,803 | |||||||||
Long-term accounts payable to related parties | 13 | 20,136 | 65,320 | |||||||||
Provisions | 23 | 47,460 | 26,542 | |||||||||
Derivative financial instruments | 2,331 | 1,081 | ||||||||||
Deferred income tax liability | 25 | 99,163 | 73,169 | |||||||||
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Total non-current liabilities | 1,725,830 | 2,019,933 | ||||||||||
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Total liabilities | 5,818,111 | 6,556,899 | ||||||||||
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Equity | 24 | |||||||||||
Capital | 660,054 | 660,054 | ||||||||||
Legal reserve | 132,011 | 132,011 | ||||||||||
Optional reserve | 29,974 | 29,974 | ||||||||||
Share Premium | 897,532 | 882,464 | ||||||||||
Other reserves | (143,784 | ) | (167,456 | ) | ||||||||
Retained earnings | 982,987 | 443,377 | ||||||||||
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Equity attributable to controlling interest in the Company |
| 2,558,774 | 1,980,424 | |||||||||
Non-controlling interest | 523,138 | 509,313 | ||||||||||
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Total equity | 3,081,912 | 2,489,737 | ||||||||||
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Total liabilities and equity | 8,900,023 | 9,046,636 | ||||||||||
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The accompanying notes on pages F-10 to F-114 are part of the consolidated financial statements.
F-4
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(All amounts are expressed in thousands of S/. unless otherwise stated)
For the year ended December 31, | ||||||||||||||
Note | 2014 | 2015 | 2016 | |||||||||||
Restated see Note 2.30 | ||||||||||||||
Revenues from construction activities | 4,749,159 | 5,501,537 | 3,945,599 | |||||||||||
Revenues from services provided | 1,912,646 | 1,896,678 | 1,880,634 | |||||||||||
Revenue from real estate and sale of goods | 346,875 | 417,280 | 643,373 | |||||||||||
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7,008,680 | 7,815,495 | 6,469,606 | ||||||||||||
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Cost of construction activities | (4,336,388 | ) | (5,342,379 | ) | (3,751,221 | ) | ||||||||
Cost of services provided | (1,489,574 | ) | (1,526,875 | ) | (1,674,180 | ) | ||||||||
Cost of real estate and goods sold | (231,150 | ) | (296,267 | ) | (440,786 | ) | ||||||||
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27 | (6,057,112 | ) | (7,165,521 | ) | (5,866,187 | ) | ||||||||
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Gross profit | 951,568 | 649,974 | 603,419 | |||||||||||
Administrative expenses | 27 | (421,367 | ) | (413,385 | ) | (399,402 | ) | |||||||
Other income and expenses, net | 29 | 15,136 | 57,287 | (13,270 | ) | |||||||||
Gain from the sale of investments | 6 a) - 10 | — | (8,289 | ) | 46,336 | |||||||||
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Operating profit | 545,337 | 285,587 | 237,083 | |||||||||||
Financial expenses | 28 | (102,816 | ) | (176,802 | ) | (231,571 | ) | |||||||
Financial income | 28 | 11,462 | 38,107 | 20,794 | ||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 16 | 53,445 | 7,724 | (589,710 | ) | |||||||||
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Profit (Loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||||
Income tax | 30 | (146,196 | ) | (99,027 | ) | 111,806 | ||||||||
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Profit (Loss) for the period | 361,232 | 55,589 | (451,598 | ) | ||||||||||
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Profit (Loss) attributable to: | ||||||||||||||
Equity holders of the Company | 299,743 | 7,097 | (509,699 | ) | ||||||||||
Non-controlling interest | 61,489 | 48,492 | 58,101 | |||||||||||
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361,232 | 55,589 | (451,598 | ) | |||||||||||
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Earnings per share from continuing operations attributable to owners of the Company during the period | 35 | 0.454 | 0.011 | (0.772 | ) | |||||||||
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The accompanying notes on pages F-10 to F-114 are part of the consolidated financial statements.
F-5
(Free translation from the original in Spanish)
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 year ended December 31, | ||||||||||||||||
Note | 2014 | 2015 | 2016 | |||||||||||||
Restated see Note 2.30 | ||||||||||||||||
Profit (Loss) for the period | 361,232 | 55,589 | (451,598 | ) | ||||||||||||
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Other comprehensive income: | ||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||
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Re-assessment of actuarial gains and losses, net of tax | 31 | (1,777 | ) | (3,860 | ) | (1,531 | ) | |||||||||
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Items that may be subsequently reclassified to profit or loss | ||||||||||||||||
Cash flow hedge, net of tax | 31 | 568 | 723 | 883 | ||||||||||||
Currency translation adjustment, net of tax | (20,463 | ) | (59,660 | ) | 14,307 | |||||||||||
Impairment of available-for-sale financial assets | 10 | 4,649 | 19,973 | (2,220 | ) | |||||||||||
Impairment of financial assets available for sale, net of tax | 10 | — | — | (41,461 | ) | |||||||||||
Exchange movements on translation of foreign subsidiaries, net of tax | 31 | — | (5,220 | ) | 7,860 | |||||||||||
Exchange difference from foreign net investment, net of tax | 31 | (12,794 | ) | — | 1,563 | |||||||||||
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(28,040 | ) | (44,184 | ) | (19,068 | ) | |||||||||||
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Other comprehensive income for the period, net of tax | (29,817 | ) | (48,044 | ) | (20,599 | ) | ||||||||||
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Total comprehensive income for the period | 331,415 | 7,545 | (472,197 | ) | ||||||||||||
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Comprehensive income attributable to: | ||||||||||||||||
Equity holders of the Company | 277,912 | (25,713 | ) | (534,492 | ) | |||||||||||
Non-controlling interest | 53,503 | 33,258 | 62,295 | |||||||||||||
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331,415 | 7,545 | (472,197 | ) | |||||||||||||
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The accompanying notes on pages F-10 to F-114 are part of the consolidated financial statements.
F-6
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2016
(All amounts are expressed in thousands of S/. unless otherwise stated)
Attributable to the controlling interests of the Company | ||||||||||||||||||||||||||||||||||||||||
Number of shares In thousands | Capital | Legal reserve | Optional reserve | Premium for issuance of shares | Other reserves | Retained earnings | Total | Non-controlling interest | Total | |||||||||||||||||||||||||||||||
Balances as of January 1, 2014 | 660,054 | 660,054 | 111,657 | — | 1,027,533 | 18,423 | 947,766 | 2,765,433 | 431,262 | 3,196,695 | ||||||||||||||||||||||||||||||
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Profit for the year | — | — | — | — | — | — | 299,743 | 299,743 | 61,489 | 361,232 | ||||||||||||||||||||||||||||||
Cash flow hedge | — | — | — | — | — | 540 | — | 540 | 28 | 568 | ||||||||||||||||||||||||||||||
Adjustment for actuarial gains and losses | — | — | — | — | — | — | (1,332 | ) | (1,332 | ) | (445 | ) | (1,777 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | (13,086 | ) | — | (13,086 | ) | (7,377 | ) | (20,463 | ) | ||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | 4,649 | — | 4,649 | — | 4,649 | ||||||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | (12,602 | ) | — | (12,602 | ) | (192 | ) | (12,794 | ) | ||||||||||||||||||||||||||
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Comprehensive income of the year | — | — | — | — | — | (20,499 | ) | 298,411 | 277,912 | 53,503 | 331,415 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | 20,354 | — | — | — | (20,354 | ) | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution (Note 34 and 36 g) | — | — | — | — | — | — | (112,127 | ) | (112,127 | ) | (68,062 | ) | (180,189 | ) | ||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 36 d) | — | — | — | — | — | — | — | — | 47,376 | 47,376 | ||||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (128,222 | ) | — | — | (128,222 | ) | (50,109 | ) | (178,331 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest in GyM Chile Spa (Note 36 b) | — | — | — | — | — | — | — | — | 1,627 | 1,627 | ||||||||||||||||||||||||||||||
- Deconsolidation of subsidiaries (Note 36 e) | — | — | — | — | — | — | — | — | 2,284 | 2,284 | ||||||||||||||||||||||||||||||
- Put option liability from acquisition of non-controlling (Note 22) | — | — | — | — | — | (111,819 | ) | — | (111,819 | ) | (2,010 | ) | (113,829 | ) | ||||||||||||||||||||||||||
- Purchase of subsidiaries (Note 33 a) | — | — | — | — | — | — | — | — | 66,659 | 66,659 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | 20,354 | — | (128,222 | ) | (111,819 | ) | (132,481 | ) | (352,168 | ) | (2,235 | ) | (354,403 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of December 31, 2014 | 660,054 | 660,054 | 132,011 | — | 899,311 | (113,895 | ) | 1,113,696 | 2,691,177 | 482,530 | 3,173,707 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of January 1, 2015 | 660,054 | 660,054 | 132,011 | — | 899,311 | (113,895 | ) | 1,113,696 | 2,691,177 | 482,530 | 3,173,707 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 7,097 | 7,097 | 48,492 | 55,589 | ||||||||||||||||||||||||||||||
Derivative instruments for cashflow | — | — | — | — | — | 687 | — | 687 | 36 | 723 | ||||||||||||||||||||||||||||||
Re-assessment of actuarial gains and losses | — | — | — | — | — | — | (2,921 | ) | (2,921 | ) | (939 | ) | (3,860 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | (45,411 | ) | — | (45,411 | ) | (14,249 | ) | (59,660 | ) | ||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | 19,973 | — | 19,973 | — | 19,973 | ||||||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | (5,138 | ) | — | (5,138 | ) | (82 | ) | (5,220 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Comprehensive income of the year | — | — | — | — | — | (29,889 | ) | 4,176 | (25,713 | ) | 33,258 | 7,545 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to legal reserve | — | — | — | 29,974 | — | — | (29,974 | ) | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution (Note 34, 36 d) | — | — | — | — | — | — | (104,911 | ) | (104,911 | ) | (4,535 | ) | (109,446 | ) | ||||||||||||||||||||||||||
- Contributions of non-controlling shareholders (Note 36 d) | — | — | — | — | — | — | — | — | 10,329 | 10,329 | ||||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (894 | ) | — | — | (894 | ) | (971 | ) | (1,865 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest (Note 36 b) | — | — | — | — | (885 | ) | — | — | (885 | ) | 2,527 | 1,642 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | — | 29,974 | (1,779 | ) | — | (134,885 | ) | (106,690 | ) | 7,350 | (99,340 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of December 31, 2015—Restated | 660,054 | 660,054 | 132,011 | 29,974 | 897,532 | (143,784 | ) | 982,987 | 2,558,774 | 523,138 | 3,081,912 | |||||||||||||||||||||||||||||
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Balances as of January 1, 2016 | 660,054 | 660,054 | 132,011 | 29,974 | 897,532 | (143,784 | ) | 982,987 | 2,558,774 | 523,138 | 3,081,912 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | (509,699 | ) | (509,699 | ) | 58,101 | (451,598 | ) | |||||||||||||||||||||||||||
Derivative instruments for cashflow | — | — | — | — | — | 839 | — | 839 | 44 | 883 | ||||||||||||||||||||||||||||||
Re-assessment of actuarial gains and losses | — | — | — | — | — | — | (1,121 | ) | (1,121 | ) | (410 | ) | (1,531 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | 9,885 | — | 9,885 | 4,422 | 14,307 | ||||||||||||||||||||||||||||||
Change in value of available-for-sale financial assets | — | — | — | — | — | (2,220 | ) | — | (2,220 | ) | — | (2,220 | ) | |||||||||||||||||||||||||||
Transfer to profit or loss of available-for-sale financial assets | — | — | — | — | — | (41,461 | ) | — | (41,461 | ) | — | (41,461 | ) | |||||||||||||||||||||||||||
Exchange difference from net investment in a foreign operation | — | — | — | — | — | 7,722 | — | 7,722 | 138 | 7,860 | ||||||||||||||||||||||||||||||
Transfer to profit or loss of exchange difference from net investment in a foreign operation, net of tax | — | — | — | — | — | 1,563 | — | 1,563 | — | 1,563 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Comprehensive income of the period | — | — | — | — | — | (23,672 | ) | (510,820 | ) | (534,492 | ) | 62,295 | (472,197 | ) | ||||||||||||||||||||||||||
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| |||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||
- Transfer to Optional reserve | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
- Dividend distribution (Note 34, 36 d) | — | — | — | — | — | — | (30,853 | ) | (30,853 | ) | (25,473 | ) | (56,326 | ) | ||||||||||||||||||||||||||
- Contributions (devolution) of non-controlling shareholders,net (Note 36 d) | — | — | — | — | — | — | — | — | (19,099 | ) | (19,099 | ) | ||||||||||||||||||||||||||||
- Additional acquisition of non-controlling (Note 36 a) | — | — | — | — | (15,167 | ) | — | — | (15,167 | ) | (35,972 | ) | (51,139 | ) | ||||||||||||||||||||||||||
- Sale to non-controlling interest (Note 36 b) | — | — | — | — | 99 | — | — | 99 | 236 | 335 | ||||||||||||||||||||||||||||||
- Acquisition of subsidiary Adexus | — | — | — | — | — | — | — | — | 4,153 | 4,153 | ||||||||||||||||||||||||||||||
- Deconsolidation of former subsidiary | — | — | — | — | — | — | 2,063 | 2,063 | 35 | 2,098 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total transactions with shareholders | — | — | — | — | (15,068 | ) | — | (28,790 | ) | (43,858 | ) | (76,120 | ) | (119,978 | ) | |||||||||||||||||||||||||
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| |||||||||||||||||||||
Balances as of December 31, 2016 | 660,054 | 660,054 | 132,011 | 29,974 | 882,464 | (167,456 | ) | 443,377 | 1,980,424 | 509,313 | 2,489,737 | |||||||||||||||||||||||||||||
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The accompanying notes on pages F-10 to F-114 are part of the consolidated financial statements.
F-7
(Free translation from the original in Spanish)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(All amounts are expressed in thousands of S/. unless otherwise stated)
For the year ended December 31, | ||||||||||||||||
Note | 2014 | 2015 | 2016 | |||||||||||||
Restated see Note 2.30 | ||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||||||||||
Profit (Loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||||||
Adjustments to profit not affecting cash flows from operating activities: | ||||||||||||||||
Depreciation | 17 | 185,310 | 217,070 | 205,522 | ||||||||||||
Amortization of other assets | 18 | 74,730 | 89,355 | 82,743 | ||||||||||||
Impairment of inventories | 17 | 62 | 17 | 36,353 | ||||||||||||
Impairment of accounts receivable and other accounts receivable | 11-12 | 71 | 5,806 | 419,584 | ||||||||||||
Debt forgiveness | — | — | (431,484 | ) | ||||||||||||
Impairment of property, plant and equipment | 17 | 2,415 | 3,796 | 9,263 | ||||||||||||
Impairment of other assets | 18 | 14,170 | — | 54,308 | ||||||||||||
Impairment of intangible assets | — | — | — | |||||||||||||
Recovery of impairment of inventory | (1,169 | ) | — | |||||||||||||
Financial expenses-CCDS | — | — | 7,004 | |||||||||||||
Expenses for liquidation of work in progress - CCDS | — | — | 164 | |||||||||||||
Indemnification for loss of profits | — | — | (33,600 | ) | ||||||||||||
Change on fair value of financial asset through profit or loss | — | (2,740 | ) | 31 | ||||||||||||
Change in the fair value of the liability for put option | 22 | — | (18,627 | ) | (984 | ) | ||||||||||
Provisions | 23 | 6,559 | 6,398 | 9,486 | ||||||||||||
Dividends from available-for-sale financial assets | (9,350 | ) | (7,215 | ) | — | |||||||||||
Income from return receipt from Morelco | — | — | (6,658 | ) | ||||||||||||
Re-assessment of purchase consideration of Morelco | 33 b) | — | — | (7,166 | ) | |||||||||||
Financial expense,net | 76,102 | 125,096 | 106,739 | |||||||||||||
Demobilization provisions in CCDS | — | — | 24,915 | |||||||||||||
Share of profit and loss in associates and joint ventures | — | — | ||||||||||||||
under equity method | 16 a) b) | (53,445 | ) | (24,993 | ) | 589,710 | ||||||||||
Reversal of provisions | 23 | (9,394 | ) | (7,796 | ) | (17,883 | ) | |||||||||
Disposal of property, plant and equipment | — | 5,881 | 3,951 | |||||||||||||
Disposal on fair value of financial asset through | — | |||||||||||||||
profit or loss | — | 2,755 | 1,227 | |||||||||||||
Profit on sale of property, plant and equipment | 16 | (4,845 | ) | (17,385 | ) | (18,393 | ) | |||||||||
Loss on financial asset at fair value through profit or loss | — | 450 | 221 | |||||||||||||
Loss on sale of non-current asset held for sale | — | — | 22 | |||||||||||||
Profit on sale from available-for-sale financial assets | 10 | — | — | (46,337 | ) | |||||||||||
Loss on sale of investments in subsidiaries | — | 8,289 | — | |||||||||||||
Loss on re-assessment of accounts receivable | — | — | 76,864 | |||||||||||||
Loss on re-assesment of investment | — | — | 6,832 | |||||||||||||
Increase / (decrease) in assets and liabilities: | ||||||||||||||||
Trade accounts receivable and Unbilled work in progress | (594,993 | ) | (50,150 | ) | 115,263 | |||||||||||
Other accounts receivable | 32,159 | (184,180 | ) | (85,234 | ) | |||||||||||
Accounts receivable from related parties | (15,291 | ) | (133,286 | ) | 84,448 | |||||||||||
Inventories | (51,489 | ) | (220,670 | ) | 33,709 | |||||||||||
Pre-paid expenses and other assets | (8,634 | ) | 11,667 | (99 | ) | |||||||||||
Trade accounts payable | 82,051 | 199,402 | (87,553 | ) | ||||||||||||
Other accounts payable | (19,731 | ) | (60,073 | ) | 114,666 | |||||||||||
Accounts payable to related parties | 55,316 | 14,777 | 45,902 | |||||||||||||
Provisions | (7,208 | ) | (6,770 | ) | (2,756 | ) | ||||||||||
Interest paid | (46,411 | ) | (110,884 | ) | (171,572 | ) | ||||||||||
Payments related to Norvial Concession | (82,698 | ) | (142,575 | ) | (97,711 | ) | ||||||||||
Payment of income tax | (154,878 | ) | (150,337 | ) | (125,619 | ) | ||||||||||
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| |||||||||||
Net cash applied to operating activities | (23,163 | ) | (292,306 | ) | 332,474 | |||||||||||
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F-8
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (continue)
(All amounts are expressed in thousands of S/. unless otherwise stated)
Note | For the year ended December 31, | |||||||||||||
2014 | 2015 | 2016 | ||||||||||||
Restated see Note 2.30 | ||||||||||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||||||||
Sale of available-for-sale investment | — | 5,613 | 107,341 | |||||||||||
Sale of a financial asset through profit or loss | — | — | — | |||||||||||
Sale of property, plant and equipment | 42,968 | 55,832 | 66,086 | |||||||||||
Sale of financial asset at fair value through profit or loss | — | — | 1,427 | |||||||||||
Sale of non-current assets held for sale | — | (13,496 | ) | 117 | ||||||||||
Refunding for price adjustment | — | — | 6,658 | |||||||||||
Return of contributions | — | 481 | 1,963 | |||||||||||
Interest received | 8,909 | 32,162 | 15,370 | |||||||||||
Dividends received | 16 b) 34 | 46,068 | 59,175 | 27,992 | ||||||||||
Payment for purchase of a non-current asset held for sale | — | — | — | |||||||||||
Payment for purchase of investments properties | (1,450 | ) | (748 | ) | (17,543 | ) | ||||||||
Payments for intangible purchase | (60,846 | ) | (32,883 | ) | (45,706 | ) | ||||||||
Payments for purchase and contributions on investment in associates and joint ventures | 16 a) b) | (129,859 | ) | (464,086 | ) | (389,657 | ) | |||||||
Direct cash outflow from acquisition of subsidiaries | (170,372 | ) | — | — | ||||||||||
Purchase of property, plant and equipment | (265,567 | ) | (193,156 | ) | (147,732 | ) | ||||||||
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| |||||||||
Net cash flow from investing activities | (530,149 | ) | (551,106 | ) | (373,684 | ) | ||||||||
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| |||||||||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||||||||||
Loans received | 2,770,286 | 4,448,332 | 3,941,750 | |||||||||||
Bonds issued | 20 | — | 814,016 | 178,640 | ||||||||||
Amortization of loans received | (2,053,422 | ) | (4,549,000 | ) | (3,914,570 | ) | ||||||||
Amortization of bonds issued | — | (16,480 | ) | (25,281 | ) | |||||||||
Payment for debt cost transaction | — | (18,516 | ) | (650 | ) | |||||||||
Dividends paid to holders of the parent | (112,127 | ) | (104,911 | ) | (30,853 | ) | ||||||||
Dividends paid to non-controlling interest | (63,990 | ) | (4,535 | ) | (25,473 | ) | ||||||||
Cash received from non-controlling shareholders | 36 d) | 47,376 | 10,329 | (19,099 | ) | |||||||||
Acquisition or sale of interest in a subsidiary of non-controlling shareholders | 36 a) | (177,451 | ) | (223 | ) | (19,037 | ) | |||||||
Sale of interest in a subsidiary of non-controlling shareholders | 36 b) | 1,627 | — | 335 | ||||||||||
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| |||||||||
Net cash provided by financing activities | 412,299 | 579,012 | 85,762 | |||||||||||
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| |||||||||
Net increase (net decrease) in cash | (141,013 | ) | (264,400 | ) | 44,552 | |||||||||
Cash and cash equivalents at the beginning of the year | 959,415 | 818,402 | 554,002 | |||||||||||
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| |||||||||
Cash and cash equivalents at the end of the period | 818,402 | 554,002 | 598,554 | |||||||||||
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| |||||||||
NON-CASH TRANSACTIONS: | ||||||||||||||
Debt capitalization | — | — | 8,308 | |||||||||||
Acquisition of assets through finance leases | 163,399 | 92,093 | 65,336 | |||||||||||
Recognition of debt as guarantor | — | — | 608,247 | |||||||||||
Change in fair value of available-for-sale financial assets | 4,649 | 19,973 | — | |||||||||||
Adjustment for deconsolidation of former subsidiaries | 2,284 | 9,298 | — | |||||||||||
Establishment of joint operation - Panorama Plaza de negocios (net assets) | — | 36,180 | — | |||||||||||
Account payable - acquisition of Morelco | 45,684 | — | — | |||||||||||
Put option liability from acquisition of non-controlling | 113,829 | — | — |
The accompanying notes on pages F-10 to F-114 are part of the consolidated financial statements.
F-9
(All amounts expressed in thousands of S/ unless otherwise stated)
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2015 AND 2016
1 | GENERAL INFORMATION |
a) | Incorporation and operations |
Graña y Montero S.A.A. (hereinafter the Company) was established in Peru on August 12, 1996 as a result of the equityspin-off of Inversiones GyM S.A. (formerly Graña y Montero S.A.). The Company’s legal address is Av. Paseo de la República 4675, Surquillo Lima, Peru and is listed on the Lima Stock Exchange and the New York Stock Exchange (NYSE).
The Company is the parent of the Graña y Montero Group (hereinafter the Group, which includes the Company and subsidiaries) and it is mainly engaged in holding investments in different Group companies. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory and human resources management to the Group companies; it is also engaged in leasing offices 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), real estate businesses and services. See details of operating segments in Note 7.
b) | Authorization for issue of the financial statements |
The consolidated financial statements for the year ended December 31, 2016 were prepared and issued with Management and Board of Directors authorization on May 15, 2018 and will be submitted for consideration and approval at the General Shareholders’ Meeting. Management expects that the consolidated financial statements as of December 31, 2016 will be approved with no changes.
c) | Current situation of the Company |
i) | Legal Status |
(A) | Projects conducted in association with Odebrecht |
Our company participated as minority shareholder in certain entities that developed six infrastructure projects in Peru with 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 the commission of corrupt acts in connection to two these projects (sections 2 and 3 of the Interoceánica Sur highway (“IIRSA Sur”) and the project to construct the Tren Eléctrico). As a consequence of this agreement, the Peruvian authorities initiated investigations.
(I) | IIRSA Sur |
With respect to the investigations conducted in relation to IIRSA Sur, the Public Prosecutor’s Office included the former Chairman of the Board of Directors, for bribery; a former Director, and a former executive of the company, for money laundering.
Subsequently, Graña and Montero S.A.A. and GyM S.A. were incorporated as subjects investigated in the case described above. The companies have appealed this judgment and the appeals are pending resolution by the Superior Court.
F-10
(All amounts expressed in thousands of S/ unless otherwise stated)
In addition, the Peruvian authorities has requested incorporation of Graña y Montero S.A.A. as third party responsible on a civil basis and the Company has filed an opposition to the government’s motion. Oral arguments will be made before the court on a hearing that is yet to be scheduled.
The Company believes that it has a solid defense and that therefore, the case would be resolved in its favor.
(II) | Electric Train |
The Peruvian authorities also requested to incorporate GyM S.A. as a third party responsible on a civil basis in the case related to the project to construct the electric train. The Company has filed an opposition. Oral arguments will be made before the court on a hearing that is yet to be scheduled.
The Company believes that it has a solid defense and that therefore, the case would be resolved in its favor.
(B) | The Constructor Club |
On July 11, 2017, Commision de libre competence of “Indecopi” initiated an investigation against several construction companies, including GyM S.A., about the existence of an alleged cartel called the Constructor Club, gathering information from the Company. Throughout the investigation, the Company has provided to the Indecopi with all the information requested.
The Company’s former commercial manager is under a criminal investigation, as well as other individuals related to other construction companies. However, the Company is not included in this case.
To the date the result of the case described is uncertain because it is in the preliminary phase and depends on the action of the third parties that have been included in it, However, management believes that the contingency to which the Company is exposed should not have a significant financial impact due to the lack of links I has with the alleged facts.
(C) | Anticorruption Law application to the Company |
Law 30737 and its regulation issued by Supreme Decree096-2018-EF has mitigated the Company’s exposure to the cases described in sub sections (A) and (B) above. These rules set clear guidelines to estimate the potential compensation that would be paid by the Company in the improbable case that it would be convicted. Furthermore, these rules have significantly reduced the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair the ability of the Company to operate.
The benefits of the mentioned rules are subject to the fullfilment of the following obligations:
• | The obligation to set up a trust that will guarantee any potential payment obligation of an eventual civil compensation and the interests in favor of the Peruvian State; |
• | The obligation not to transfer funds abroad without the prior consent of the Ministry of Justice; |
• | The implementation of a compliance program; and |
• | The obligation to disclose information to the authorities and to collaborate in the investigation. |
The Company has designed a robust compliance program which is currently under implementation. In addition, it fully cooperates with the authorities in its investigations of the alleged facts. It is also engaged in preliminary works necessary to set up the trust while it receives from the authorities the amount of the trust. Management estimated that it would need to assign to the trust assets worth approximately USD 41 million and that its potential liability should not exceed USD 51 million.
F-11
(All amounts expressed in thousands of S/ unless otherwise stated)
ii) | Independent Investigationrelated to Company business with Odebrecht S.A. |
On January 9, 2017, the Company Board of Directors approved a plan to conduct an independent investigation related to six projects executed in association with Odebrecht.
On March 30, 2018, the Board of Directors created a Risk, Compliance and Sustainability Committee who was in charge of the oversight of the investigation independent from management. The investigation was entrusted to Simpson, Thatcher and Bartlett that reported exclusively to the Risk, Compliance and Sustainability Committee to preserve its independence.
The independent 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 knowingly participated in acts of corruption related to the 6 projects developed in association with Odebrecht.
2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied in all the years presented, unless otherwise stated.
2.1 | Basis of preparation |
The consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRIC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the IASB in force as of 31 December, 2015 and 2016 respectively.
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, financial assets at fair value through profit and loss,available-for-sale financial assets measured at fair value. The financial statements are presented in thousands of Peruvian Soles, unless otherwise stated.
The preparation of the consolidated financial statements in conformity with IFRS requires Management to make estimates and assumptions in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
2.2 | Consolidation of financial statements |
a) | Subsidiaries |
Subsidiaries are entities over which the Company has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
F-12
(All amounts expressed in thousands of S/ unless otherwise stated)
The Group evaluates measurement of thenon-controlling interest on anacquisition-by-acquisition basis. At December 31, 2015 and 2016, the measurement of thenon-controlling interest in the Group’s acquisitions was made at thenon-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets.
Business acquisition-related costs are expensed as incurred.
Any contingent consideration assumed by the Group with the selling party is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration is recognized in accordance with IAS 39 as profit or loss.
Goodwill is initially measured as the excess of the acquisition cost, the fair value at the acquisition date of any interest previously acquired plus the fair value of thenon-controlling interest, over the net identifiable assets acquired and liabilities and contingent liabilities assumed. If the acquisition cost is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss at the time of acquisition.
For consolidating subsidiaries, balances, income and expenses from transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognized as assets are also eliminated. If required, accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.
b) | Changes in ownership interests in subsidiaries without change of control |
Transactions withnon-controlling interests that do not result in loss of control are accounted for as equity transactions, in other words as transactions with owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interest, are also recorded in equity at the time of disposal.
c) | Disposal of subsidiaries |
When the Group ceases to have control over a subsidiary, any retained interest in the entity isre-measured at its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss at such date. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that the amount previously recognized in other comprehensive income is reclassified to profit or loss.
d) | Joint arrangements |
Contracts in which the Group and one or more of the contracting parties have joint control on the relevant joint activities are called joint arrangements.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be both joint ventures as well as joint operations.
Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition profits or losses and movements in the comprehensive income statement.
F-13
(All amounts expressed in thousands of S/ unless otherwise stated)
The Group assesses on an annual basis whether there is any objective evidence that the investment in the joint ventures and associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the impairment loss in ‘share of profit or loss in associates and joint ventures under the equity method of accounting in the income statement.
Joint operations are joint arrangements whereby the parties that have joint control of the arrangement, have rights over the assets, and obligations for the liabilities, relating to the arrangement. Each party recognizes its assets, liabilities, revenue and cost and its share of any asset or liability jointly held and on any revenue or cost arisen from the joint operation.
In the Group, joint operations mainly relate to consortiums (entities without legal personality) created exclusively for the development of a construction contract. Considering that the only objective of the consortium is to develop a specific construction contract, all costs and revenue are included within revenue from construction activities and cost of construction activities, respectively.
e) | Associates |
Associates are all entities over which the Group has significant influence but not control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see section d above).
Profits and losses resulting from transactions between the Group and its associates are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the Group.
Impairment losses are measured and recorded in accordance with section d) above.
2.3 | Segment reporting |
Operating segments are reported in a consistent manner with internal reporting provided to Management of the Group.
If an entity changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the Group restates the information for earlier periods unless the information is not available.
2.4 | Foreign currency translation |
a) | Functional and presentation currency |
The consolidated financial statements are presented in Peruvian Soles, which is the Company’s functional currency and the Group’s presentation currency. All subsidiaries, joint arrangements and associates use the Peruvian Sol as their functional currency, except for foreign entities, for which the functional currency is the currency of the country in which they operate.
b) | Transactions and balances |
Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transactions or valuation when items arere-measured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated income statement, except when deferred in other comprehensive income.
Exchange differences arising on loans from the Company to its subsidiaries in foreign currencies are recognized in the separate financial statements of the Parent and individual financial statements of the subsidiaries. In the consolidated financial statements, such exchange differences are recognized in other comprehensive income and are subsequentlyre-classified in the income statement on the disposal of the subsidiary or debt repayment, to the extent such loans qualify as part of the “net investment in a foreign operation”.
F-14
(All amounts expressed in thousands of S/ unless otherwise stated)
Foreign exchange gains and losses of all monetary items are included in the income statement within financial income or expense.
c) | Group companies |
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:
i) | Assets and liabilities for each statement of financial position presented are translated using the closing exchange rate prevailing at the date of the consolidated statement of financial position; |
ii) | income and expenses for each income statement are translated at the average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rate on the date of the transaction); |
iii) | capital is translated by using the historical exchange rate for each capital contribution made; and |
iv) | all exchange differences are recognized as separate components in other comprehensive income (loss), within foreign currency translations adjustment. |
Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate. Exchange differences are recognized in other comprehensive income.
2.5 | Public services concession agreements |
Concession agreements signed between the Group and the Peruvian Government entitle the Group, as a Concessionaire, to assume obligations for the construction or improvement of infrastructure and which qualify as public service concessions are accounted as defined by IFRIC 12, “Service Concession Arrangements”. The consideration to be received from the Government for the services of constructing or improving public infrastructure is recognized as a financial asset or as an intangible asset (bifurcated model), as set forth below.
The | Group manages three types of concessions, for which accounting treatment is as follows: |
a) | Recognizes a financial asset to the extent that it has a contractual right to receive cash or other financial assets either because the Government secures the payment of specified or determinable amounts or because the Government will cover any difference arising from the amounts actually received from public service users in relation with the specified or determinable amounts. These financial assets are recognized initially at fair value and subsequently at amortized cost (the financial model). |
b) | Recognizes an intangible asset to the extent that the service agreement grants the Group a contractual right to charge users of the public service. The resulting intangible asset is measured at cost and is amortized as described in Note 2.15 (intangible asset model). |
c) | Recognizes a financial asset and an intangible asset when the Group recovers its investment partially by a financial asset and partially by an intangible asset (the bifurcated model). |
2.6 | Cash and cash equivalents |
In the consolidated statements of financial position and cash flows, cash and cash equivalents include cash on hand,on-demand bank deposits, other highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are included in the balance of financial obligations as current liabilities.
F-15
(All amounts expressed in thousands of S/ unless otherwise stated)
2.7 | Financial assets |
2.7.1 | Classification |
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, financial assetsheld-to-maturity, loans and account receivables and financial assetsavailable-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
As of the date of the consolidated financial statements, the Group has classified its financial assets in the following three categories:
a) | Financial assets at fair value through profit or loss |
Financial assets at fair value through profit or loss arenon-derivatives that are designated by the Group as at fair value upon initial recognition and areheld-for-trading. They are included in current assets in the consolidated statement of financial position. The derivative financial instruments policy is included at Note 2.9.
b) | Loans and accounts receivable |
Loans and receivables arenon-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those whose maturity is greater than twelve months after the date of the consolidated financial statements. These are classified asnon-current assets on the consolidated financial position. The Group’s loans and receivables comprise “trade accounts receivables”, “accounts receivable from related parties”, “other accounts receivable”, “unbilled work in progress” and “cash and cash equivalents”.
c) | Available-for-sale financial assets |
Available-for-sale financial assets arenon-derivatives that are either designated in this category or not classified in any of the other categories. They are included innon-current assets as “Other Financial Assets” unless Management intends to dispose them within 12 months of the date of the statement of financial position.
2.7.2 | Recognition and measurement |
Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in profit or loss within “Other income and expenses, net” in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of “Other income and expenses, net” when the Group’s right to receive payments is established.
F-16
(All amounts expressed in thousands of S/ unless otherwise stated)
Changes in the fair value of monetary securities classified as available for sale are recognized in other comprehensive income. When a financial asset classified as available for sale is sold or impaired, the accumulated fair value adjustments recognized in equity are reclassified to profit or loss. Dividends onavailable-for-sale equity instruments are recognized in the income statement as part of “Other income and expenses, net” when the Group’s right to receive payments is established.
2.8 | Impairment of financial assets |
a) | Assets carried at amortized cost |
At the end of each reporting period the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. If a financial asset or a group of financial assets is impaired, the impairment losses are recognized only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
For the loans and receivables category, the amount of any loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of comprehensive income. If a loan or an account receivable has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
b) | Assets classified asavailable-for-sale - |
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets classified asavailable-for-sale is impaired.
For equity investments, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss—is removed from equity and recognized in profit or loss. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.
2.9 | Derivative financial instruments and hedging activities |
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequentlyre-measured at their fair value at the end of each reporting period. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability (fair value hedge) or a highly probable forecast transaction (cash flow hedge). Derivatives are initially recognized at fair value on the date of subscription of the contract and are subsequently recognized at their fair value. The method to recognize the gain or loss resulting from changes in the fair values of the derivatives depends on the nature of the item being covered.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
F-17
(All amounts expressed in thousands of S/ unless otherwise stated)
The fair values of various derivative instruments used for hedging purposes and changes in the account reserves for hedging in equity are disclosed in Note 8. The full fair value of a hedging derivative is classified as anon-current asset or liability when the remaining maturity period of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity period of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as fair value hedges is recognized as other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecasted sale that is hedged takes place).
The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the income statement as “Financial income or Financial expenses”.
However, when the forecasted transaction that is hedged results in the recognition of anon-financial asset (for example, inventory or fixed assets), the gains or losses previously deferred in equity are transferred from equity and are included in the initial measurement of the cost of thenon-financial asset. The deferred amounts are ultimately recognized in cost of goods sold in the case of inventory or in depreciation in the case of fixed assets.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the income statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within “other income and expenses, net”.
2.10 | Trade receivables |
Trade receivables are amounts due from customers for goods or services sold by the Company’s subsidiaries. If collection is expected in one year or less, they are classified as current assets. If not, they are presented asnon-current assets.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for impairment, except for receivables of less than one year that are stated at nominal amount which is similar to their fair values since they are short term.
2.11 | Unbilled work in progress |
Unbilled work in progress comprises the estimation made by the Management of the Engineering and Construction segment related to the unbilled rights receivable for services rendered and not yet approved by the client (valuation based on the percentage of completion).
It also includes the balance of work in progress costs incurred that relates to future activities of the construction contracts and the constructions phase in concessions (see Note 2.25 for detail on Revenue from construction and concession activities).
Changes in estimates of contract revenues and costs can increase or decrease the estimated margin. When a change in the estimate is known, the cumulative impact of the change is recorded in the period in which it is known based on the progress made.
F-18
(All amounts expressed in thousands of S/ unless otherwise stated)
2.12 | Inventories |
Inventory mainly includes land, work in progress and finished properties which are assigned to the real- estate activity. Land intended to carry out real estate projects is recognized at acquisition cost. Work in progress and finished properties comprise design costs, material, labor costs, financial costs (directly attributable to the acquisition, construction and production of qualified assets), other indirect costs and general expenses related to the construction.
Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company reviews annually whether inventories have been impaired identifying three groups of inventories to measure their net realizable value: i) the first group consists of land bought for future real estate projects which are compared to their net appraisal value; if the acquisition value is higher, a provision of impairment is made; ii) the second group consists of land under construction, impairment is measured based on cost projections; if these costs are higher than selling prices of each real estate unit, a provision is made for impairment; and iii) the third group comprises completed real estate units; these inventory items are compared to the selling prices less selling expenses; if these selling expenses are higher, a provision for impairment is made. For the reductions in the carrying amount of these inventories to their net realizable value, a provision is made for impairment of inventories with a charge to profit or loss for the year in which those reductions occur.
It also includes material used in the construction activity. Goods and supplies correspond to goods that the Group trades as part of its IT segment. Materials and supplies used in construction activities and IT equipment are determined under the weighted average cost method. Materials and other supplies are not written down below cost if the finished products in which they will be incorporated are expected to generate margin.
F-19
(All amounts expressed in thousands of S/ unless otherwise stated)
2.13 | Investment properties |
Investment properties are shown at cost less accumulated depreciation and impairment losses, if any. Subsequent costs attributable to investment properties are capitalized only if it is probable that future economic benefits will flow to the Company and the cost of these assets can be measured reliably; if not, they are recognized as expenses when incurred.
Repair and maintenance expenses are recognized in profit and loss when they are incurred. If the property’s carrying amount is greater than its estimated recoverable amount, an adjustment to reduce the carrying amount to the recoverable amount is recognized.
Depreciation is determined at rates calculated to write off cost, less estimated residual value, of each asset on a straight line basis over its estimated useful life. The estimated useful lives of those properties range from 5 to 33 years.
The investment property held by the Group consists of two Shopping Centers owned by subsidiary Viva GyM S.A. Fair value is estimated to be US$29.5 million, equivalent to S/99 million, at December 31, 2016 (US$16.7 million, equivalent to S/58 million, at December 31, 2015). The sales stores of these properties have been leased as an operating lease with third parties.
2.14 | Property, plant and equipment |
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of these items.
Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance expense are charged to the income statement during the financial period in which they are incurred.
Assets under construction are capitalized as a separate component. At their completion, the cost of such assets is transferred to their definitive category.
Replacement units are major spare parts in which depreciation starts when the units are installed for use within the related asset.
Depreciation of machinery and equipment and vehicles recognized as “Major equipment” are depreciated based on their hours of use. Under this method, the total number of work hours that machinery and equipment is capable to produce is estimated and a charge per hour is determined. The depreciation of other assets that do not qualify as “Major equipment” is calculated under the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:
Years | ||||
Buildings and facilities | Between 3 and 50 | |||
Machinery and equipment | Between 4 and 10 | |||
Vehicles | Between 2 and 10 | |||
Furniture and fixtures | Between 2 and 10 | |||
Other equipment | Between 2 and 10 |
F-20
(All amounts expressed in thousands of S/ unless otherwise stated)
Residual values and useful lives are reviewed and adjusted as appropriate at each date of the statement of financial position. Gains and losses on disposals are recognized in “Other income and expenses, net” in the income statement. Regarding joint operations that carry out construction activities, the difference between the proceeds from disposals of fixed assets and their carrying amount is shown within “revenue from construction activities” and “cost of construction activities”, respectively.
2.15 | Intangible assets |
i) | Goodwill |
Goodwill arises on the acquisition of subsidiaries and represents the excess of the purchase consideration, the amount of anynon-controlling interest and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired. If the total of consideration transferred,non-controlling interest recognized and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the income statement.
Goodwill acquired in a business combination is allocated to each cash-generating units (CGU), or group of CGUs, that is expected to benefit from the synergies of the combination. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are performed at least annually and when events or changes in circumstances indicate a potential impairment. Any impairment is recognized immediately as an expense in item “Other income and expenses, net” and cannot be reversed later.
ii) | Trademarks |
Trademarks acquired separately are shown at historical cost. Trademarks acquired in a business combination are recognized at fair value at the acquisition date. Management has determined that these trademarks have indefinite useful lives. These trademarks have a long trajectory (between 24 and 39 years) in each market and the Group is committed to continue investing in the long-term to extend the period over which they are expected to continue to provide economic benefits.
Trademark impairment reviews are performed at least annually and when events or changes in circumstances indicate a potential impairment. Any impairment is recognized immediately as an expense in item “Other income and expenses, net” and cannot be reversed later.
iii) | Concession rights |
The intangible asset consisting of the right to charge users for the services related to service concessions agreements (Note 2.5 and Note 6.b) is initially recorded at the fair value of construction or improvement services. Before amortization is started, an impairment test is performed; it is amortized under the straight-line method, from the date revenue starts using the lower of its estimated expected useful life or effective period of the concession agreement.
iv) | Contractual relationships with customers |
Contractual relationships with customers are assets resulting from business combinations that were initially recognized at fair value as determined based on the expected cash flows from those relations over an estimated period of time based on the time period those customers will remain as customers of the Group (the estimation of useful life is based on the contract terms which fluctuate between 5 and 9 years). The useful life and the impairment of these assets are individually assessed.
F-21
(All amounts expressed in thousands of S/ unless otherwise stated)
v) | Cost of developing wells |
Costs incurred in preparing wells to extract hydrocarbons in Blocks I, III, IV and V, located in Talara, are capitalized as part of intangible assets. These costs are amortized over the useful lives of the wells (10 years for Blocks III, IV and V and 9 years for Block I), when is less than the period of the service agreement signed with Perupetro.
vi) | Internally generated software and development costs |
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:
• | It is technically feasible to complete the software product so that it will be available for use; |
• | management intends to complete the software product and use or sell it; |
• | there is an ability to use or sell the software product; |
• | it can be demonstrated how the software product will probably generate future economic benefits; |
• | technical, financial and other resources are available to complete the development and to use or sell the software product; and |
• | software expense during its development can be reliably measured. |
Other development expenditures that do not meet these criteria are expensed as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their estimated useful lives, which fluctuate between 2 to 8 years.
vii) | Rights of use of land |
Refers rights maintained by the Promotora Larcomar subsidiary S.A. Rights of use of land are stated at historical cost less amortization and any accumulated impairment losses. The useful life of this asset is based on the agreement signed (60 years) and the effective period may be extended if agreed to the parties. Amortization will begin when it becomes ready for its intended use by Management.
2.16 | Impairment ofnon-financial assets |
Assets that have an indefinite useful life are not subject to amortization and are subject to review annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
2.17 | Trade payables |
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented asnon-current liabilities.
Accounts payable are initially recognized at their fair value and subsequently are amortized at amortized cost using the effective interest method, except for accounts payable less than one year that are recorded at their nominal value that is similar to their fair value due to its expiration in the short term.
2.18 | Other financial liabilities |
Correspond to loans and bonds issued by the Group, which are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the cash received (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.
F-22
(All amounts expressed in thousands of S/ unless otherwise stated)
Fees paid for entering into loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
2.19 | Borrowing costs |
Borrowing costs are recognized in the income statement in the period in which they are incurred except for intangible assets and inventories (Note 18 and 15) in which the Group proceeds to capitalize borrowing costs.
General and specific borrowing costs directly attributable to acquisitions, construction or development of qualifying assets, which are assets that necessarily take a substantial period of time (over 12 months) to get ready for their intended use or sale, are added to the cost of those assets, until assets are substantially ready for their intended use or sale. The Company suspends capitalization of a qualifying asset during periods in which qualify asset development is interrupted .Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
2.20 | Current and deferred income tax |
Income tax expense comprises current and deferred tax. Tax expense is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or equity, in which case, it is recognized in the statement of comprehensive income or directly in equity, respectively.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Management, where appropriate, establishes provisions on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority.
F-23
(All amounts expressed in thousands of S/ unless otherwise stated)
2.21 | Employee benefits |
a) | Profit sharing |
Peruvian entities of the Group recognize a liability and an expense for statutory workers’ profit sharing under laws and regulations currently in force. Workers’ profit sharing is equivalent to 5% or 8% of the taxable income determined separately by each of the Group’s Peruvian entities, according to the income tax currently in force. The branch based in the Dominican Republic has a similar profit sharing scheme, with a rate of 10% on the taxable income. For Chile, workers’ profit sharing is a component of remuneration (equivalent to 4.75 minimum salary per year) rather than a percentage based on profits. In Colombia and Guyana no such benefits are paid to workers. In Bolivia workers’ profit sharing is equivalent to aone-month salary and the total amount distributed cannot exceed 25% of company’s profits determined under local regulations.
b) | Statutory bonuses |
Entities of the Group recognize the expense and the related liability for statutory bonuses based on applicable laws and regulations effective in Peru, Chile, Bolivia, Guyana and Colombia.
c) | Severance Compensation |
Employees’ severance payments for time of service of the Peruvian Group staff comprise their indemnification rights, calculated in accordance with the regulations in force, which have to be deposited on bank accounts designated by workers in May and November each year. The compensation for time of service amounts toone-month’s salary effective at the date of bank deposits. There is no such benefit in Chile and Guyana. The Group does not have any additional payment obligation once the annual deposits are made of the amounts to which workers are entitled.
d) | Vacation leave |
Annual vacation leave is recognized on an accrual basis. Provision for the estimated obligations of annual vacations is recognized at the date of the statement of financial position and it corresponds to one month for Peruvian employees and fifteen days for Dominican and Colombian employees per year. In Bolivia and Chile vacation leave depends on seniority of a worker and ranges from fifteen to thirty days.
e) | Pension plans |
The subsidiary CAM has in place a pension plan scheme with its workers. These commitments comprise both defined benefit and defined contribution plans. A defined benefit plan defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of financial position with respect to the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.
Re-measurements arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
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(All amounts expressed in thousands of S/ unless otherwise stated)
f) | Restructuring Cost |
Group companies recognize the liability and the expense for employees’ severance indemnities when they are incurred. Under Peruvian laws, in the event of an arbitrary termination of a worker, the related indemnities equal an additionalone-month salary and a half per each year actually worked by the terminated worker.
Under Colombian laws, this type of indemnities is determined based on the salary. Under Chilean laws, termination indemnities equal an additional30-day salary per each year actually worked up to a maximum 330 days.
2.22 | Other provisions |
a) | General |
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are reviewed at year - end. If the time value of money is significant, provisions are discounted using apre-tax rate that reflects, when applicable, the specific risks related to the liability. Reversal of the discount due to the passage of time results in the obligation being recognized with a charge to the income statement as a financial expense. Provisions are not recognized for future operating losses.
Contingent obligations are disclosed for possible obligations that are not yet determined to be probable. Contingent assets are not recognized and only disclosed if it is probable that future economic benefits will flow to the Company.
b) Provision for the closure of production wells -
The subsidiary GMP recognizes a provision for the closure of operating units that correspond to the legal obligation to close oil production wells once the production phase has been completed. At the initial date of recognition, the liability that arises from said obligation is measured at the amount of expected cash flow discounted to present value, the same amount is simultaneously charged to the intangible account in the statement of financial position. Subsequently, the liability will increase in each period to reflect the financial cost considered in the initial measurement of the discount, and the capitalized cost is depreciated based on the useful life of the related asset. When a liability is settled, the Group’s entities will recognize any gain or loss that may arise. The fair value changes estimated for the initial obligation and interest rates are recognized as an increase or decrease of the carrying amount of the obligation and related asset, any decrease in the provision, and any decrease of the asset that may exceed the carrying amount of said asset is immediately recognized in the income statement.
If the review of the estimated obligation results in the need to increase the provision and, accordingly, increase the carrying amount of the asset, the Group’s entities will also take into consideration if said increase corresponds to an indicator that the asset has been impaired and, if so, impairment tests are carried out (Note 2.16).
2.23 | Put option arrangement |
The Group has written put options over the equity of its subsidiary Morelco SAS (Note 33 b) which permit the holder to put their shares of the subsidiary back to the Group over a 10 -year period. The amount that may become payable under the option upon exercise is initially recognized at the present value of the redemption amount within other accounts payable with a corresponding charge directly to equity. The charge to equity is recognized separately as written put options overnon-controlling interests, adjacent tonon-controlling interest in the net assets of the consolidated subsidiaries.
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(All amounts expressed in thousands of S/ unless otherwise stated)
Subsequently, the financial liability is updated for changes in the assumptions on which the estimated expected cash outflows were based and a financial component for the passage of time. The effects of this update are recognized in the income statement as Other income/expense. In the event that the option expires unexercised, the liability is derecognized with a corresponding adjustment to equity.
2.24 | Capital |
Common shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity, as a deduction, net of taxes, of the proceeds.
Where any Group company purchases the Company’s equity shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects is included in equity attributable to the Group’s equity holders.
2.25 | Revenue recognition |
Revenue is measured at the fair value of the consideration received or receivable. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities.
The Group’s revenue recognition policy is described as follows:
i) | Revenue from construction activities |
Revenues from construction contracts are recognized using thepercentage-of-completion method which is based on the completion of a physical proportion of the overall work contract considering total costs and revenues estimated at the end of the project, in accordance with IAS 11, Construction Contracts. Under this method revenues are determined based on the proportion of actual physical completion compared to the total contracted physical construction commitment.
When it is probable that the total costs of the contract will be above the related revenue, the expected loss will be immediately expensed.
When the outcome of a construction contract cannot be estimated reliably, the associated revenue is recognized to the extent costs incurred are recoverable. Revenue is billed once approval is received by the owners of the work in progress.
In the statement of financial position, the Company shows the net position of each contract as an asset or a liability. A contract is considered an asset when the costs incurred plus recognized earnings less the sum of all the recognized losses and assessments exceed work in progress billings; this asset is shown in the statement of financial position as “Unbilled work in progress”; otherwise they are presented as a liability within “Trade accounts payables”.
A change order is an instruction by the customer for a change in the scope of the work to be performed under the contract that may lead to an increase or a decrease in contract revenue. A variation is included in contract revenue when it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and the amount of revenue can be reliably measured.
F-26
(All amounts expressed in thousands of S/ unless otherwise stated)
A claim is an amount that the Group seeks to collect from the customer or third party as reimbursement for costs not included in the contract price. Claims are included in contract revenue only when negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and the amount that it is probable will be accepted by the customer can be measured reliably.
ii) | Revenue from engineering, advisory, consulting services and other services |
Revenues from service contracts are recognized in the accounting period in which they are performed using the percentage of completion method, calculated based on the percentage of costs incurred. Additionally, there are contracts whereby income is recognized as it is earned, regardless of when the related fees are received.
iii) | Salesof real-estate properties |
Revenue from sales of real estate properties is recognized in the results of the period when sales occur, that is, when the properties are delivered and the risks and rewards inherent to ownership are transferred to the buyer and the collection of the corresponding receivables is reasonably assured.
iv) | Revenue from IT services |
The sale of computer equipment includes some services to be provided in a subsequent date to the asset sale as installation and maintenance. When sales agreements include multiple elements, the amount of the revenue is attributed to each element based on their related fair values. The fair value of each element is determined based on the market price prevailing for each element when sold separately. Revenue derived from computer equipment is recognized when the related risks and rewards are transferred to the customer, which occurs upon delivery. Revenue relating to each service element is recognized using the straight line method.
v) | Interest income |
Interest income is recognized on a time-proportion basis, using the effective interest method.
vi) | Revenue for concession services |
Revenue from concession services is recognized according to its nature. Construction and restoration activities are accounted for applying thepercentage-of-completion method as described above and operation and maintenance services in the accounting period when they are provided (see Note 2.5).
2.26 | Construction contract costs |
Contract costs include all direct costs such as materials, labor, subcontracting costs, manufacturing and supply costs of equipment,start-up costs and indirect costs. Periodically, the Company evaluates the reasonableness of the estimates used in the determination of thepercentage-of-completion. If, as a result of this evaluation, there are modifications to the revenue or cost previously estimated, or if the total estimated cost of the project exceeds expected revenues, an adjustment is made in order to reflect the effect in results of the period in which the adjustment or loss is incurred.
When the outcome of a construction work cannot be estimated reliably, the revenue of the contract is recognized only up to the amount of the contractual costs incurred and that are likely to be recovered.
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(All amounts expressed in thousands of S/ unless otherwise stated)
2.27 | Leases |
a) | The Group as a lessee |
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, including prepayments (net of any incentives received from lessor) are charged to the consolidated income statement under the straight-line method over the lease term. The Group’s major kinds of operating leases are leases of machinery, computer equipment, printing equipment, among others.
Finance leases
Leases in which the Group assumes substantially all the risks and rewards of ownership of an asset are classified as finance leases. Each lease payment is allocated between the liability and finance charges so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The corresponding rental obligations, net of finance charges, are included in other payables, short- and long-term in the consolidated statement of financial position.
The interest element of the finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the useful life of the asset or the lease term.
b) | Group as a lessor |
The Group only has operating leases and the leased assets are stated in the statement of financial position based on the nature of the asset. Revenue from operating leases are recognized under the straight-line method over the lease term and the incentives given to lessees reduce the revenue obtained from leases.
2.28 | Dividend distribution |
Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.
2.29 | Significantnon-operating items |
Significantnon-operating items are separately shown in the financial statements when they are necessary to provide a more adequate understanding of the Group’s financial performance. These material items are income or expenses shown separately due to their nature or significant amount.
2.30 | Restatement of Consolidated Financial Statements |
Company Management identified the need to make adjustments to the consolidated financial statements for the year 2015, so proceed to correct and restructure the financial statements as of December 31, 2015 in the items detailed below:
2015 | Adjustment | 2015 | ||||||||||||||
Restated See Note 2.30 | ||||||||||||||||
Asset Restated | ||||||||||||||||
Trade accounts receivables, net | (1 | ) | 1,050,791 | (8,336 | ) | 1,042,455 | ||||||||||
Unbilled work in progress, net | (1 | ) | 1,319,187 | (40,960 | ) | 1,278,227 | ||||||||||
Other accounts receivable | (1 | ) | 824,589 | (3,872 | ) | 820,717 | ||||||||||
Investments in associates and joint ventures | 646,884 | (9,879 | ) | 637,005 | ||||||||||||
Intangible assets, net | 881,020 | (2,734 | ) | 878,286 | ||||||||||||
Deferred income tax asset | (3 | ) | 173,851 | (26,006 | ) | 147,845 | ||||||||||
Liability Restated | ||||||||||||||||
Provisions | 35,618 | 11,842 | 47,460 | |||||||||||||
Deferred income tax liability | (3 | ) | 101,664 | (2,501 | ) | 99,163 | ||||||||||
Other liabilities | 5,671,484 | 4 | 5,671,488 | |||||||||||||
Equity Control Entity | ||||||||||||||||
Translation Adjustment | (2 | ) | (129,059 | ) | (14,725 | ) | (143,784 | ) | ||||||||
Profit (loss) for the period | 88,153 | (81,057 | ) | 7,096 | ||||||||||||
Noncontrolling interest | 528,489 | (5,350 | ) | 523,138 | ||||||||||||
Gross profit | (1 | ) | 702,805 | (52,831 | ) | 649,974 | ||||||||||
Other expenses / other income, net | (364,382 | ) | (5 | ) | (364,387 | ) | ||||||||||
Financial expenses/income | (138,695 | ) | — | (138,695 | ) | |||||||||||
Share of the profit or loss in associates and joint ventures under the equity method accounting | 17,603 | (9,879 | ) | 7,724 | ||||||||||||
Income Tax | (3 | ) | (75,619 | ) | (23,408 | ) | (99,027 | ) | ||||||||
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Profit (Loss) for the period | 141,712 | (86,123 | ) | 55,589 | ||||||||||||
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Profit (Loss) attributable to: | ||||||||||||||||
Equity holders of the Company | 88,154 | (81,057 | ) | 7,097 | ||||||||||||
Non-controlling interest | 53,558 | (5,066 | ) | 48,492 | ||||||||||||
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141,712 | (86,123 | ) | 55,589 | |||||||||||||
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(1) | The Company performed a review of the estimates made of the work in progress, as well as impairments to the accounts receivable, determining the need to make adjustments to the account balances. |
(2) | The Goodwill of Morelco S.A. during 2015 was recorded using the group the functional currency (soles). In the review conducted in 2016, it was identified that the registration should be made in the currency of the subsidiary, generating a conversion adjustment. |
(3) | Likewise, a review of deferred tax assets was conducted, determining the need to record adjustments in accordance with the adjustments described above. |
As a result of the recording of these adjustments in the consolidated financial statements as of December 31, 2015, the Company’s equity decreased by approximately S / 86 million.
3 | ADOPTION OF NEW INTERNATIONAL FINANCIAL INFORMATION REGULATIONS (IFRS), AMENDMENTS AND INTERPRETATIONS |
3.1. | Standards, amendments and interpretations adopted by the Group |
The Company has adopted as of January 1, 2016 the following amendments to the IFRSs and amendments to IFRSs considered for the first time in the preparation of the financial statements:
F-28
(All amounts expressed in thousands of S/ unless otherwise stated)
• | Annual improvements to IFRS, 2012-2014 cycles, which has required additional minor disclosures. |
• | Acquisition of interest in an entity, amendment to IFRS 11 ‘Joint Arrangements’, this amendment clarifies that a joint operator that acquires an asset or group of assets in a joint operation that represents a business in accordance with IFRS 3, applies the principles of IFRS 3 when accounting for the business combinations of the acquisition. This will result in a separate recognition of goodwill, if any arise in the acquisition. If the asset or group of assets acquired does not constitute a business, the principles of IFRS 3 do not apply. |
• | The amendment also clarifies that a joint operator that increases its interest in an existing joint operation in which the operator retains joint control does not again measure the interest previously held in the joint operation |
• | Amendments to the disclosure initiatives, IAS 1 ‘Presentation of the financial statements’. The amendments intend to clarify a series of disclosure requirements that cover: |
• | The disclosure of significant accounting policies; |
• | The application of materiality to the financial statements; |
• | Presentation of subtotals; |
• | Information to be presented in the other comprehensive income section of the performance statement; and |
• | The structure of financial statements. |
The adoption of these changes did not have a material impact on the current year or prior years’ balances and they are not likely to affect future periods; however, the Group will give continuous consideration to the areas addressed in the amendments to help clear and concise information.
3.2. | New standards, amendments and interpretations effective for financial statements of annual periods beginning on or after January 1, 2017 which have not been early adopted |
• | Amendments to IAS 7 “Statement of cash flows” requires the Group to include an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. |
• | Amendments to IAS 12 “Income taxes” clarifies i) the requirements for recognizing deferred tax assets on unrealized losses ii) the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base and iii) certain other aspects of accounting for deferred tax assets. These amendments are effective for annual financial periods beginning on or after January 1, 2017 and early application is permitted. The Group does not expect these amendments may have a significant impact on its financial statements. |
• | IFRS 9, “Financial instruments”, addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 on the classification and measurement of financial instruments. |
The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group does not expect that the changes in IFRS 9 may have a material impact on its criteria of classification and measurement of financial assets and liabilities.
• | IFRS 15, “Revenue from contracts with customers”, it replaces IAS 18 “Revenue” and IAS 11 “Construction contracts” and the related interpretations. |
The new standard is based on the principle that income is recognized when the control of a good or service is transferred to a customer, in such a way that the notion of control replaces the existing notion of risks and benefits. The new standard establishes a new five-step process that guides the revenue recognition, these are: (i) identify contracts with customers, (ii) identify the performance obligation, (iii) determine the transaction price of the contract, (iv) allocate the transaction price to each of the performance obligations; and, (v) recognize the income as each performance obligation is satisfied
F-29
(All amounts expressed in thousands of S/ unless otherwise stated)
The application of IFRS 15 may haveflow-on effects on the entity’s business practices regarding systems, processes and controls, compensation and bonus plans, contracts, tax planning and investor communication.
The standard is effective for annual periods beginning on or after January 1, 2018 and early application is permitted.
The Group is in the process of estimating the effects of the application of IFRS 15; its assessment is being conducted by operating segment: engineering and construction, infrastructure, real estate, technical services and parent company operation. At December 31, 2016, the Group has conducted qualitative assessment to identify impacts.
The Group estimates that the current procedure of revenue recognition defined according to its types of ordinary activities will not be materially different from the current definition of the standard that is based on compliance with performance obligations, whether for a period or a point in time.
The Group is in the process of evaluating the methodology to be used for the transition of IFRS 15. At this point, despite the qualitative evaluation, the Group cannot reasonably estimate the quantitative impacts that this standard would have on the financial statements.
• | IFRS 16 “Leases”, this standard replaces the current rules relating to the treatment of leases IAS 17 “Leases” and IFRIC 4 “Contracts may contain a lease” and other related interpretations. |
IFRS 16 is effective for financial periods beginning on or after January 1, 2019; early application if permitted provided IFRS 15 is also early adopted. The Group is presently evaluating the impact of these standard on the preparation of its consolidated financial statements.
• | IFRIC 22, “Foreign currency transactions and advance consideration”, the new interpretation clarifies which date should be used for translation when a foreign currency transaction involves an advance payment/receipt. |
This interpretation will impact all entities that enter into foreign currency transactions for which consideration is paid or received in advance.
This interpretation is effective for financial periods beginning on or after January 1, 2018; early application is permitted. The Group is evaluating whether the changes introduced in IFRIC 22 may have a material impact on the qualifying criteria of “date of transaction” at their engineering and construction segment, which is the one with significant advances balances.
• | IFRIC 23 “Uncertainty over income tax treatments”, it clarifies how the recognition and measurement requirements of IAS 12 ‘Income taxes’, are applied on the recognition and measurement of a tax liability or asset in circumstances where there is uncertainty in the application of the tax law in concern. |
The Group is required to consider whether it is probable that a taxation authority will accept an uncertain tax treatment. If an entity concludes that it is not probable that the treatment will be accepted, it should reflect the effect of the uncertainty in its income tax accounting in the period in which that determination is made.
This IFRIC is effective for financial periods beginning on or after January 1, 2019 and early application is permitted. The Group is evaluating the impact of this standard on its financial statements.
F-30
(All amounts expressed in thousands of S/ unless otherwise stated)
No other IFRS or IFRIC interpretations not yet effective are expected to have a material impact on the Group’s financial statements.
F-31
(All amounts expressed in thousands of S/ unless otherwise stated)
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 andnon-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, 2016 and 2015, this exposure is mainly concentrated in fluctuations of U.S. dollar, the Chilean and Colombian Pesos. The foreign exchange risk of the investments in Bolivia and Panama are not significant due to the volume of operations.
At December 31, 2016, the consolidated statement of financial position includes assets and liabilities in foreign currency (mainly in U.S. dollars) equivalent to S/2,770.9 million and S/2,708.3 million, respectively (S/1,659 million and S/2,404 million, respectively, at December 31, 2015) equivalents to US$826.6 million and US$806 million, respectively (US$486.7 million and US$704.5 million, respectively at December 31, 2015).
During 2016, the Peruvian Sol, the Chilean and Colombian Pesos were exposed against the U.S. dollar. The Group’s exchange gains and losses for 2016 amounted to S/761.8 million and S/774.3 million, respectively (S/427.2 million and S/510.1 million, respectively, in 2015 and S/357.3 million and S/401.6 million, respectively in 2014).
If at December 31, 2016 the Peruvian Sol and the Chilean and Colombian Pesos had strengthened/weakened by 2% against the U.S. dollar, with all other variables held constant, thepre-tax profit for the year would have increased/decreased by S/0.3 million (S/1.7 million in 2015 and S/0.9 million in 2014).
At December 31, 2016 the consolidated statement of changes in equity comprises a foreign currency translation adjustment originated by its subsidiaries. Their financial position includes assets and liabilities in functional currency equivalent to CLP$75,561.3 million and CLP$87,221.1 million, respectively (CLP$85,238 million and CLP$80,378 million, respectively at December 2015), COP$169,774.8 million and COP$166,091.8 million, respectively (COP$265,370 million and COP$309,446, respectively at December 2015).
The Group’s foreign exchange translation adjustment for 2016 amounted to S/0.6 million (expenses for S/44.6 million in 2015 and S/20.5 million in 2014).
F-32
(All amounts expressed in thousands of S/ unless otherwise stated)
ii) | Price risk |
Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds and equity securities is low, since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the 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. Group policy is to maintain most of its borrowings at fixed rate instruments; 52.8% of total debt in 2016 (72.7% in 2015) was contracted at fixed rates and 47.2% at variable rates (27.3% in 2015) which consisted of a 18.0% fixed rate plus VAC (adjusted for inflation) and the remaining 29.2% at a variable rate (23.6% fixed rate + VAC and the remaining 3.7% at a variable rate in 2015).
The debt subject to fixed rate plus VAC is related to a bond issued in Peruvian soles to finance the GyM Ferrovías Project, Metro Line 1 (Note 20). Any increase in the interest rate resulting from higher inflation will have no significant impact on the Group’s profit because these revenues are also adjusted for inflation.
During 2016 and 2015 borrowings at variable rates are denominated in Peruvian Soles and U.S. dollars and the Group’s policy is to manage their cash flow risk by using interest-rate swaps, which are recognized under hedge accounting. However, regarding the variable rate loans related to GSP (Note19-a), Management decided to assume the risk since it expects topre-pay them before due. If at December 31, 2016, the libor rate plus 3 months had increased/ decreased by 5%, with all other variables held constant, thepre-tax profit for the year would have increased/ decreased by S/1.4 million (there was not a material effect on the Group’s results in 2015). There was no material ineffectiveness on cash flow hedges occurred in fiscal years 2016 and 2015.
b) | Credit risk |
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.
With respect to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board.
No credit limits were exceeded during the reporting period, and Management does not expect the Group to incur any losses from performance by these counterparties, except for the ones already recorded at the financial statements.
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 (Note 16a-i). As a consequence, the Group has started a disinvestment plan to be able to meet the obligations resulting from this scenario (Note 37).
F-33
(All amounts expressed in thousands of S/ unless otherwise stated)
Group Corporate Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn borrowing facilities (Note 19), 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 year | From 1 to 2 years | From 2 to 5 years | Over 5 years | Total | ||||||||||||||||
At December 31, 2015 | ||||||||||||||||||||
Other financial liabilities (except for finance leases) | 1,102,855 | 181,729 | 223,713 | — | 1,508,297 | |||||||||||||||
Finance leases | 157,957 | 118,311 | 42,513 | 10,431 | 329,212 | |||||||||||||||
Bonds | 69,823 | 82,916 | 217,418 | 1,445,187 | 1,815,344 | |||||||||||||||
Trade accounts payables | 1,635,762 | — | — | — | 1,635,762 | |||||||||||||||
Accounts payables to related parties | 77,832 | 19,728 | — | 408 | 97,968 | |||||||||||||||
Other accounts payables | 181,113 | 36,456 | 121,678 | — | 339,247 | |||||||||||||||
Othernon-financial liabilities | — | 2,331 | — | — | 2,331 | |||||||||||||||
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3,225,342 | 441,471 | 605,322 | 1,456,026 | 5,728,161 | ||||||||||||||||
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At December 31, 2016 | ||||||||||||||||||||
Other financial liabilities (except for finance leases) | 1,936,825 | 128,508 | 173,145 | — | 2,238,478 | |||||||||||||||
Finance leases | 127,496 | 85,989 | 26,780 | 19,506 | 259,771 | |||||||||||||||
Bonds | 113,299 | 180,431 | 365,697 | 1,334,485 | 1,993,912 | |||||||||||||||
Trade accounts payables | 1,276,617 | — | — | — | 1,276,617 | |||||||||||||||
Accounts payables to related parties | 80,217 | 28,082 | 37,238 | — | 145,537 | |||||||||||||||
Other accounts payables | 303,827 | 49,064 | 143,655 | — | 496,546 | |||||||||||||||
Othernon-financial liabilities | — | 1,081 | — | — | 1,081 | |||||||||||||||
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| |||||||||||
3,838,281 | 473,155 | 746,515 | 1,353,991 | 6,411,942 | ||||||||||||||||
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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 to maintain an optimal capital structure to reduce the cost of capital. As described at Note 1, in 2016 the current situation of the Company, has lead Management to monitor deviations that might cause thenon-compliance of covenants and may hinder renegotiation of liabilities(Note19-a and Note37-c).
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 andnon-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.
F-34
(All amounts expressed in thousands of S/ unless otherwise stated)
As of December 31, 2016 and 2015, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 0.70.
As of December 31, the gearing ratio was as follows:
2015 | 2016 | |||||||
Total financial liabilities | 2,575,447 | 3,348,152 | ||||||
Less: Cash and cash equivalents | (554,002 | ) | (606,950 | ) | ||||
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| |||||
Net debt | 2,021,445 | 2,741,202 | ||||||
Total equity | 3,081,912 | 2,489,737 | ||||||
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| |||||
Total capital | 5,103,357 | 5,230,939 | ||||||
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| |||||
Gearing ratio | 0.40 | 0.52 | ||||||
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|
4.3 | Fair value estimation |
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.
• | Level 1: | Measurement based on quoted prices in active markets for identical assets or liabilities. | ||
• | Level 2: | Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). | ||
• | Level 3: | Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group). |
The table below shows the Group’s assets and liabilities measured at fair value at December 31, 2015 and 2016:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
At December 31, 2015 | ||||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 10,104 | — | — | 10,104 | ||||||||||||
Available-for-sale financial assets: TGP S.A. investment (i) | — | — | 120,134 | 120,134 | ||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives used for hedging | — | 2,331 | — | 2,331 | ||||||||||||
At December 31, 2016 | ||||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 6,379 | — | — | 6,379 | ||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives used for hedging | — | 1,081 | — | 1,081 |
There were no transfers between levels 1 and 2 during the year.
Financial instruments in level 3
The fair value of the investment held in Transportadora de Gas del Perú S.A. (TGP) classified asavailable-for-sale financial asset was based on observable inputs in the market and unobservable inputs. The Group calculated its fair value based on its discounted cash flows as of the financial statement date. The information used to determine the fair value of this investment corresponds to Level 3 (Note 10).
F-35
(All amounts expressed in thousands of S/ unless otherwise stated)
The following table shows the changes in fair value by the investment held in TGP for the years ended on December 31:
2014 | 2015 | 2016 | ||||||||||
Opening balance | 88,333 | 93,144 | 120,134 | |||||||||
Unrealized gains (losses) recognized in the period | 4,811 | 26,990 | (2,996 | ) | ||||||||
Derecognition of investment sold: | ||||||||||||
- Historical cost of investment | — | — | (61,105 | ) | ||||||||
- Cumulative fair value | — | — | (56,033 | ) | ||||||||
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Final balance | 93,144 | 120,134 | — | |||||||||
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The carrying amounts of cash and cash equivalents correspond to their fair values. The Company considers that the carrying amount of trade accounts receivable and payable is similar to their fair values since they are short term. The fair value for long-term receivables and liabilities is disclosed in Note 11, Note 12, Note19-c, Note 20 and Note 22. The fair value of financial liabilities has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Company for similar financial instruments (Level 2).
5 | CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS |
Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
5.1 | Critical accounting estimates and assumptions |
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
a) | Estimated impairment of goodwill and other intangible assets with indefinite useful life |
Impairment reviews are undertaken annually to determine if goodwill arising from business acquisitions and other intangible assets with indefinite useful life are impaired, in accordance with the policy described in Note2.15-i). For this purpose, goodwill is allocated to the different CGUs to which it relates while other intangible assets with indefinite useful life are assessed individually. The recoverable amounts of the CGUs and of other intangible assets with indefinite useful life have been determined based on the higher of theirvalue-in-use and fair value less costs to sell. This evaluation requires the exercise of Management’s professional judgment to analyze any potential indicators of impairment as well as the use of estimates in determining the value in use, including preparing future cash flows, macro-economic forecasts as well as defining the interest rate at which said cash flows will be discounted.
If the Group experiences a significant drop in revenues or a drastic increase in costs or changes in other factors, the fair value of their business units might decrease. If management determines the factors that reduce the fair value of the business are permanent, those economic factors will be taken into consideration to determine the recoverable amount of those business units and therefore, goodwill as well as other intangible assets with indefinite useful life may be deemed to be impaired, which may cause their write-down to be required.
F-36
(All amounts expressed in thousands of S/ unless otherwise stated)
Based on the impairment tests performed by Group Management, no goodwill nor intangible (trademarks) impairment losses were required to be recognized because the recoverable amount of the CGUs subject to testing was substantially higher than their related carrying amounts.
The most significant assumptions used in impairment testing are gross margin, discount rate, terminal growth rate and revenue growth rate which are included in Note 18.
At December 31, 2015 and 2016 the Group has performed a sensitivity analysis increasing or decreasing the assumptions of gross margin, discount rate and revenue and terminal growth rate by a 10%, with all the other variables held constant, as follows:
Difference between recoverable amount and carrying amounts | ||||||||||||||||
2015 | 2016 | |||||||||||||||
Goodwill | ||||||||||||||||
Gross margin: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 68.69% | 184.39% | 19.18% | 71.19% | ||||||||||||
Engineering and construction | (17.96%) | 30.43% | (42.68%) | 17.85% | ||||||||||||
Electromechanical | 159.40% | 240.58% | 32.16% | 74.41% | ||||||||||||
IT equipment and services | 92.38% | 98.22% | 200.93% | 289.04% | ||||||||||||
Telecommunication services | 205.49% | 619.81% | (110.85%) | 176.40% | ||||||||||||
Discount rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 136.90% | 116.77% | 65.94% | 28.99% | ||||||||||||
Engineering and construction | 26.15% | (8.77%) | 8.22% | (27.56%) | ||||||||||||
Electromechanical | 234.27% | 172.83% | 74.42% | 36.77% | ||||||||||||
IT equipment and services | 132.94% | 98.22% | 285.63% | 212.65% | ||||||||||||
Telecommunication services | 468.23% | 367.15% | 70.31% | 4.59% | ||||||||||||
Terminal growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Mining construction services | 123.27% | 129.95% | 42.92% | 47.55% | ||||||||||||
Engineering and construction | 7.90% | 13.02% | (16.49%) | (7.84%) | ||||||||||||
Electromechanical | 196.39% | 203.75% | 51.14% | 55.62% | ||||||||||||
IT equipment and services | — | — | 243.21% | 247.06% | ||||||||||||
Telecommunication services | — | — | 26.14% | 39.94% | ||||||||||||
Trademarks | ||||||||||||||||
Revenue growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 46.23% | 78.73% | 22.37% | 42.03% | ||||||||||||
Vial y Vives - DSD | 32.87% | 47.60% | 17.01% | 43.01% | ||||||||||||
Adexus | — | — | (8.18%) | 9.91% | ||||||||||||
Discount rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 89.07% | 42.12% | 53.35% | 15.66% | ||||||||||||
Vial y Vives - DSD | 61.96% | 23.43% | 56.88% | 10.88% | ||||||||||||
Adexus | — | — | 15.42% | (10.59%) | ||||||||||||
Terminal growth rate: | (10%) | +10% | (10%) | +10% | ||||||||||||
Morelco | 59.07% | 66.12% | 29.19% | 34.94% | ||||||||||||
Vial y Vives - DSD | 36.06% | 44.28% | 23.19% | 37.83% | ||||||||||||
Adexus | — | — | (0.12%) | 1.89% |
In 2016 if the gross margin, the discount rate or terminal growth rate had been 10% below or 10% above Management’s estimates, respectively, the Group would have recognized a provision for impairment of goodwill of the Engineering and Construction CGU and Telecommunication Services CGU (within the Engineering and Construction CGU in 2015).
F-37
(All amounts expressed in thousands of S/ unless otherwise stated)
In 2016 if the revenue growth rate or terminal growth rate had been 10% below Management’s estimates, or the discount rate had been 10% above Management’s estimates, the Group would have recognized a provision for impairment of their trademark Adexus.
At December 31, 2016, as a result of these evaluations, an impairment was identified and recorded in one of the CGU, Vial and Vives DSD (Note 18).
b) | Income taxes |
Determination of the tax obligations and expenses requires interpretations of the applicable tax laws and regulations. The Company seeks legal and tax counsel before making any decision on tax matters. Although Management considers its estimates to be prudent and appropriate, differences of interpretation may arise with Tax Authorities (mainly Peruvian, Chilean and Colombian Authorities) which may require future tax adjustments.
Deferred tax assets and liabilities are calculated on the temporary differences arising between the tax basis of assets and liabilities and the amounts stated in the financial statement using the tax rates in effect in each of the years in which the difference is expected to reverse. Any change in tax rates will affect the deferred income tax assets and liabilities. This change will be recognized in the income statement in the period in which the change takes effect.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and tax loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available evidence, including factors such as historical data, projected income, current operations and tax planning strategies. A tax benefit related to a tax position is only recognized if it is more likely than not that the benefit will ultimately be realized.
The Group’s maximum exposure to tax contingencies amounts to S/11.3 million.
c) | Percentage of completion revenue recognition |
Revenues from construction contracts are recognized using thepercentage-of-completion method which is based on the completion of a physical proportion of the overall work contract considering total costs and revenues estimated at the end of the project (Note 2.25 i).
As of December 31, 2016, 2015 and 2014, a sensitivity analysis was performed considering a 10% increase/decrease in the Group’s gross margins, as follows:
2014 | 2015 | 2016 | ||||||||||
Sales | 4,749,159 | 5,501,537 | 3,945,599 | |||||||||
Gross profit | 412,771 | 159,158 | 194,378 | |||||||||
% | 8.69 | 2.89 | 4.93 | |||||||||
Plus 10% | 9.56 | 3.18 | 5.42 | |||||||||
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Increase inpre-tax profit | 41,249 | 15,787 | 19,473 | |||||||||
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454,020 | 174,949 | 213,851 | ||||||||||
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Less 10% | 7.82 | 2.60 | 4.44 | |||||||||
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Decrease inpre-tax profit | (41,249 | ) | (15,787 | ) | (19,473 | ) | ||||||
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371,522 | 143,371 | 174,905 | ||||||||||
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F-38
(All amounts expressed in thousands of S/ unless otherwise stated)
d) | Provision for well closure costs |
At December 31, 2016 the present value of the estimated provision for closure of 144 wells located in Talara amounted to S/17.2 million (S/7.3 million as of December 31, 2015 for closure of 78 wells). The well closure liability is adjusted to reflect the changes that resulted from the passage of time and from reviews of either the date of occurrence or the amount of the present value of the originally estimated obligations (Note 18).
The Group estimates the present value of its future obligation for well closure costs, or well closure liability, and increases the carrying amount of the asset that will be withdrawn in the future and that is shown under the heading of intangibles in the statement of financial position.
Thepre-tax discount rate used for the present value calculation was 1.93% for Blocks I and V, and 2.93% for Blocks III and IV, respectively, based on a 5 to30-year rate used on U.S. bonds effective at December 31, 2016 (2.09% based on the7-year bond rate at December 2015 for Blocks I and V).
If, at December 31, 2016 and 2015, the estimated rate had increased or decreased by 10%, with all variables held constant, the impact onpre-tax profit would have not been significant.
e) | Impairment of investment in Gasoducto Sur Peruano |
Based on the termination of the concession agreement, on which Gasoducto Sur Peruano S.A. (GSP) acts as concessionaire (Note16.a-i and Note 37), the Group identified potential impairment indicators affecting the recoverability of its investment. Consequently, the Group has applied the rules stated in IAS 36, ‘Impairment of assets” to determine the recoverable amount of this investment.
In that process, the Group has applied judgement to weight the various uncertainties surround the amount that can be recovered from this investment. Management has determined the recoverable amount assuming two key factors: (i) the amount that GSP will recover as a result of the public auction, and (ii) the validity of its right to subordinate the Odebrecht Group’s debts in GSP.
With relation to the amount to be recovered by GSP; the Group is assuming a recovery of the minimum amount established in the concession agreement, which is equivalent to 72.25% of the Net Carrying Amount (NCA) of the Concession assets. This amount, in substance, represents a minimum secured payment to be obtained by GSP based on a public auction (liquidation) to be set up for the adequate transfer of the Concession’s assets to a new Concessionaire within a year, under the relevant contractual terms and conditions.
With relation to the validity of its right to subordinate the Odebrecht Group’s liabilities in GSP, Management assessment, in consultation with its legal advisors, is that, although some uncertainties exist, these do not represent a material risk for exercising this right.
The concession agreement also established two additional tranches of 82.5% or 100% of the NCA to be recovered as a result of public auction, depending on several factors. In any of these scenarios, the Group would be able to recover their total investment and no additional impairment would be necessary to be recognized.
Depending on the date in which the NCA is actually cashed, the Group may need to take into account additional costs ranging from S/18.95 million (US$5.64 million) to S/42.2 million (US$12.56 million), due to higher financial expense.
F-39
(All amounts expressed in thousands of S/ unless otherwise stated)
f) | Impairment of the investment in Consorcio Constructor Ductos del Sur (CCDS) |
CCDS was mainly engaged in performing the engineering, procurement and construction work for GSP. Due to the early termination of GSP, the Group applied the rules stated in IAS 36 “Impairment of assets” and IAS 37 “Provisions” to determine the recoverable amounts of the assets and liabilities to be recorded, respectively. As a result, the following adjustments were included at the financial statements:
S/ | ||||
Income for debt forgiveness (i) | 431,484 | |||
Indemnification income | 33,600 | |||
Unbilled work in progress impairment (ii) | (410,199 | ) | ||
Other provisions | (24,915 | ) | ||
Inventories impairment (iii) | (33,824 | ) | ||
Financial expenses | (7,004 | ) | ||
Property, plant and equipment impairment | (4,143 | ) | ||
Other’s (liability) asset, net | (164 | ) | ||
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| |||
( 15,165 | ) | |||
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(i) | The extinguished trade accounts payable relates to the recognition of the construction project estimated margin recorded as a liability (Note 2.25.i) |
(ii) | The recoverable of unbilled work in progress relates to the minimum secured payment to be obtained from GSP. |
(iii) | Inventories were specialized assets that could not be sold in an active market. |
In 2016, the net impact of the early termination of CCDS construction contract is a loss of S/15.2 million.
5.2 | Critical judgments in applying the entity’s accounting policies |
Consolidation of entities in which the Group holds less than 50%
The Company owns some direct and indirect subsidiaries of which the Group has control even though it has less than 50% of the voting rights. These subsidiaries mainly comprise indirect subsidiaries in the real-estate business owned through Viva GyM S.A., where even though the Group holds interest between 30% and 50%, has the power to affect the relevant activities that impact the subsidiaries’ returns. Additionally, the Group has de facto control over Promotora Larcomar S.A. of which it owns 46.55% of equity interest.
Consolidation of entities in which the Group does not have join control but have rights and obligations over the assets and liabilities
The Group assesses, on an ongoing basis, the nature of the contracts signed with one or more parties. If no control or joint control is determined to be held by the Group but it has rights to assets and obligations for liabilities under the arrangement, then the Group recognizes its assets, liabilities, revenue and expenses and its share of any jointly controlled assets or liabilities and any revenue or expense arising under the arrangement as a joint operation in accordance with IFRS 11—Joint arrangements (Note2.2-d).
Percentage of interest | ||||||||
Joint operations | 2016 | 2015 | ||||||
- Consorcio de Gestión de Información | 56.00 | % | 56.00 | % | ||||
- Consorcio de la Disponibilidad PKI | — | 70.00 | % | |||||
CONCAR S.A. | ||||||||
- Consorcio Ancón-Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Peruano de Conservación | 50.00 | % | 50.00 | % | ||||
- Consorcio Manperan | 67.00 | % | 67.00 | % | ||||
- Consorcio Vial Sierra | — | 50.00 | % | |||||
Viva GyM S.A. | ||||||||
- Consorcio Panorama | — | 35.00 | % | |||||
Cam Holding S.p.A. | ||||||||
- Consorcio Mecam | 50.00 | % | 50.00 | % | ||||
- Consorcio Seringel | 50.00 | % | 50.00 | % |
All of the joint arrangements listed above operate in Peru, Chile and Colombia.
The table below provides a description of the major activities carried out by these joint operations:
Joint Operations in | Economic activity | |
Graña y Montero S.A.A. | Construction, operation and maintenance of La Chira waste water treatment plant south of Lima. The project is aimed to solve Lima’s environmental problems caused by sewage discharged directly into the sea. | |
GyM S.A. | Theses joint operations carried out activities through the four divisions of the engineering and construction segment (Note 6). | |
GMP S.A. | Consorcio Terminales and Terminales del Peru provide services for receiving, storing, shipping and transporting liquid hydrocarbons, such as gasoline, jet fuel, diesel fuel and residual among others. | |
CONCAR S.A. | Joint operations Concar provides rehabilitation service, routine and periodic maintenance of the road; it further provides conservation and supervision services. | |
GMD S.A. | Outsourcing service of online BPO processes (Business Process Outsourcing). | |
Viva GyM S.A. | Construction of a five-star hotel with a convention center, a business center and entertainment center. | |
CAM Holding S.p.A. | Execution of outsourcing services to the electric power sector. |
6 | INTERESTS IN OTHER ENTITIES |
The consolidated financial statements of the Group include the accounts of the Company and its subsidiaries. Additionally, the consolidated financial statements of the Group include its interest in joint operations in which the Company or certain subsidiaries have joint control with their partners (Note2.2-d).
a) | Principal subsidiaries |
The following table shows the principal direct and indirect subsidiaries classified by operating segment (Note 7):
F-40
(All amounts expressed in thousands of S/ unless otherwise stated)
Name | Country | Economic activity | ||
Engineering and Construction: | ||||
GyM S.A. | Peru, and Colombia | Civil construction, electro-mechanic assembly, buildings management and implementing housing development projects and other related services. | ||
Stracon GyM S.A. | Peru and Panama | Mining contracting activities, providing mining services and carrying out drilling, demolition and any other activity related to construction and electro-mechanics; services in the power sector, as well as mining operations. | ||
GyM Chile S.p.A. | Chile | Electromechanical assemblies and services to energy, oil, gas and mining sector. | ||
Vial y Vives - DSD S.A. | Chile | Electromechanical assemblies and services. Develop activities related to the construction of engineering projects, civil construction projects and electromechanical assemblies, as well as architectural design and installations in general. Construction and electromechanical assemblies and services in the areas of energy, oil, gas and mining. | ||
GMI S.A. | Peru | Advisory and consultancy services in engineering, carrying out studies and projects, managing projects and supervision of works. | ||
Morelco S.A.S | Colombia and Ecuador | Providing construction and assembly services, supplying equipment and material to design, build, assemble, operate and maintain all types of mechanical engineering, instrumentation and civil work. | ||
Infrastructure: | ||||
GMP S.A. | Peru | Natural oil and oilby-products extraction services, as well as providing storage and fuel dispatch services. | ||
Oiltanking Andina Services S.A. | Peru | Operation of the gas processing plant of Pisco - Camisea. | ||
Transportadora de Gas Natural Comprimido Andino S.A.C. | Peru | Supply, process and market natural gas and its derivates. | ||
GyM Ferrovías S.A. | Peru | Concession for the operation of the public transportation system (Metro de Lima Metropolitana). | ||
Survial S.A. | Peru | Concession for constructing, operating and maintaining the Section 1 of the “Southern Inter-oceanic” road. | ||
Norvial S.A. | Peru | Concession for restoring, operating and maintaining the “Ancón - Huacho - Pativilca” section of the Panamericana Norte road. | ||
Concesión Canchaque S.A. | Peru | Concession for operating and maintaining the Buenos Aires - Canchaque road. | ||
Concesionaria Vía Expresa Sur S.A. | Peru | Concession for designing, constructing, operating and maintaining the Via Expresa - Paseo de la República in Lima. | ||
Real estate: | ||||
VIVA GyM S.A. | Peru | Developing and managing real estate projects directly or together with other partners. |
F-41
(All amounts expressed in thousands of S/ unless otherwise stated)
Name | Country | Economic activity | ||
Technical services: | ||||
GMD S.A. | Peru | Information technology services. | ||
Gestión de Servicios Digitales S.A. | Peru | Information technology services. | ||
CAM Holding S.p.A. | Chile and Colombia | Electric and technological services for the power industry. Colombia | ||
Concar S.A. | Peru | Operating and maintaining roads. | ||
Coasin Instalaciones Ltda. | Chile | Installing and maintaining network and equipment for telecommunications. | ||
Adexus S.A. | Chile, Peru, Colombia and Ecuador | IT solutions services. | ||
Parent company operation: | ||||
Generadora Arabesco S.A. | Peru | Implementing projects related to electric power-generating activities. | ||
Larcomar S.A. | Peru | Exploiting land right to use the Larcomar Shopping Center. | ||
Promotora Larcomar S.A. | Peru | Building a hotel complex on a plot of land located in the district of Miraflores. | ||
Promotores Asociados de Inmobiliarias S.A. | Peru | Operating in the real-estate industry and engaged in the development and selling office facilities in Peru. | ||
Negocios del Gas S.A. | Peru | Construction, operation and maintenance of the pipeline system to transport natural gas and liquids of natural gas. |
The following are the Group’s subsidiaries and related interests at December 31, 2016:
Percentage of common shares directly held by Parent (%) | Percentage of common shares held by Subsidiaries (%) | Percentage of common shares held by the Group (%) | Percentage of common shares held by non- controlling interests (%) | |||||||||||||
Engineering and Construction: | ||||||||||||||||
GyM S.A. | 98.23 | % | — | 98.23 | % | 1.77 | % | |||||||||
- GyM S.A. subsidiaries | — | 87.06 | % | 87.06 | % | 12.94 | % | |||||||||
Stracon GyM S.A. | — | 87.59 | % | 87.59 | % | 12.41 | % | |||||||||
GyM Chile SpA | — | 99.99 | % | 99.99 | % | 0.01 | % | |||||||||
Vial y Vives - DSD S.A. | — | 94.49 | % | 94.49 | % | 5.51 | % | |||||||||
GMI S.A. | 89.41 | % | — | 89.41 | % | 10.59 | % | |||||||||
Morelco S.A.S. | — | 70.00 | % | 70.00 | % | 30.00 | % | |||||||||
Infrastructure: | ||||||||||||||||
GMP S.A. | 95.00 | % | — | 95.00 | % | 5.00 | % | |||||||||
Oiltanking Andina Services S.A. | — | 50.00 | % | 50.00 | % | 50.00 | % | |||||||||
Transportadora de Gas Natural | ||||||||||||||||
Comprimido Andino S.A.C | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||
GyM Ferrovias S.A. | 75.00 | % | — | 75.00 | % | 25.00 | % | |||||||||
Survial S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||
Norvial S.A. | 67.00 | % | — | 67.00 | % | 33.00 | % |
F-42
(All amounts expressed in thousands of S/ unless otherwise stated)
Concesión Canchaque S.A. | 99.96 | % | — | 99.96 | % | 0.04 | % | |||||||||
Concesionaria Vía Expresa Sur S.A. | 99.98 | % | 0.02 | % | 100.00 | % | — | |||||||||
Real Estate: | ||||||||||||||||
Viva GyM S.A. | 63.44 | % | 36.10 | % | 99.54 | % | 0.46 | % | ||||||||
- Viva GyM S.A. subsidiaries | — | 60.51 | % | 60.51 | % | 39.49 | % | |||||||||
Services: | ||||||||||||||||
GMD S.A. | 89.23 | % | — | 89.23 | % | 10.77 | % | |||||||||
Cam Holding S.p.A. | 100.00 | % | — | 100.00 | % | — | ||||||||||
Concar S.A. | 99.75 | % | — | 99.75 | % | 0.25 | % | |||||||||
Gestión de Servicios Digitales S.A. | — | 100.00 | % | 100.00 | % | — | ||||||||||
Coasin Instalaciones Ltda. | — | 100.00 | % | 100.00 | % | — | ||||||||||
CAM Servicios del Perú S.A. | 73.16 | % | — | 73.16 | % | 26.84 | % | |||||||||
Adexus S.A. | 91.03 | % | — | 91.03 | % | 8.97 | % | |||||||||
Parent company operations: | ||||||||||||||||
Generadora Arabesco S.A. | 99.00 | % | — | 99.00 | % | 1.00 | % | |||||||||
Larcomar S.A. | 79.66 | % | — | 79.66 | % | 20.34 | % | |||||||||
Promotora Larcomar S.A. | 46.55 | % | — | 46.55 | % | 53.45 | % | |||||||||
Promotores Asociados de Inmobiliarias S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||
Negocios del Gas S.A. | 99.99 | % | 0.01 | % | 100.00 | % | — | |||||||||
Agenera S.A. | 99.00 | % | 1.00 | % | 100.00 | % | — |
In August 2016, the Company acquired additional interest in the share capital of Adexus S.A. to obtained control (Note 33 a).
The following are the Group’s subsidiaries and related interests at December 31, 2015:
Percentage of common shares directly held by Parent (%) | Percentage of common shares held by Subsidiaries (%) | Percentage of common shares held by the Group (%) | Percentage of common shares held by non- controlling interests (%) | |||||||||||||
Engineering and Construction: | ||||||||||||||||
GyM S.A. | 98.23 | % | — | 98.23 | % | 1.77 | % | |||||||||
- GyM S.A. subsidiaries | — | 82.49 | % | 82.49 | % | 17.51 | % | |||||||||
Stracon GyM S.A. | — | 87.59 | % | 87.59 | % | 12.41 | % | |||||||||
GyM Chile SpA | — | 99.99 | % | 99.99 | % | 0.01 | % | |||||||||
Vial y Vives – DSD S.A. | — | 80.79 | % | 80.79 | % | 19.21 | % | |||||||||
GMI S.A. | 89.41 | % | — | 89.41 | % | 10.59 | % | |||||||||
Morelco S.A.S. | — | 70.00 | % | 70.00 | % | 30.00 | % | |||||||||
Infrastructure: | ||||||||||||||||
GMP S.A. | 95.00 | % | — | 95.00 | % | 5.00 | % | |||||||||
Oiltanking Andina Services S.A. | — | 50.00 | % | 50.00 | % | 50.00 | % | |||||||||
Transportadora de Gas Natural | ||||||||||||||||
Comprimido | ||||||||||||||||
Andino S.A.C | — | 99.93 | % | 99.93 | % | 0.07 | % | |||||||||
GyM Ferrovias S.A. | 75.00 | % | — | 75.00 | % | 25.00 | % | |||||||||
Survial S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||
Norvial S.A. | 67.00 | % | — | 67.00 | % | 33.00 | % | |||||||||
Concesión Canchaque S.A. | 99.96 | % | — | 99.96 | % | 0.04 | % | |||||||||
Concesionaria Vía Expresa Sur S.A. | 99.98 | % | 0.02 | % | 100.00 | % | — | |||||||||
Real Estate: | ||||||||||||||||
Viva GyM S.A. | 60.62 | % | 38.97 | % | 99.59 | % | 0.41 | % | ||||||||
- Viva GyM S.A. subsidiaries | — | 53.81 | % | 53.81 | % | 46.19 | % | |||||||||
Services: | ||||||||||||||||
GMD S.A. | 89.37 | % | — | 89.37 | % | 10.63 | % | |||||||||
Cam Holding S.p.A. | 100.00 | % | — | 100.00 | % | — | ||||||||||
Concar S.A. | 99.81 | % | — | 99.81 | % | 0.19 | % |
F-43
(All amounts expressed in thousands of S/ unless otherwise stated)
Gestión de Servicios Digitales S.A. | — | 100.00 | % | 100.00 | % | — | ||||||||||
Coasin Instalaciones Ltda. | — | 100.00 | % | 100.00 | % | — | ||||||||||
CAM Servicios del Perú S.A. | 73.16 | % | — | 73.16 | % | 26.84 | % | |||||||||
Parent company operations: | ||||||||||||||||
Generadora Arabesco S.A. | 99.00 | % | — | 99.00 | % | 1.00 | % | |||||||||
Larcomar S.A. | 79.66 | % | — | 79.66 | % | 20.34 | % | |||||||||
Promotora Larcomar S.A. | 46.55 | % | — | 46.55 | % | 53.45 | % | |||||||||
Promotores Asociados de | ||||||||||||||||
Inmobiliarias S.A. | 99.99 | % | — | 99.99 | % | 0.01 | % | |||||||||
Negocios del Gas S.A. | 99.99 | % | 0.01 | % | 100.00 | % | — | |||||||||
Agenera S.A. | 99.00 | % | 1.00 | % | 100.00 | % | — | |||||||||
GYM Colombia S.A. | 66.20 | % | 33.80 | % | 100.00 | % | — |
On November 17, 2015, Cam Holding S.p.A. sold 100% of its shares in Cam Brasil Multiservicos S.A., at a total US$300 thousand; as a result, a loss of S/8.3 million was recorded, which is shown in the statement of income, within “Profit (loss) on sale of investments” (a cash balance of S/0.98 million was presented net of the cash received for the sale of this investment in the statement of cash flow).
All investments in subsidiaries have been included in the consolidation. The percentage of voting rights in those subsidiaries is directly held by the Parent Company and do not significantly differ from the percentage of shares held. There are no restrictions to the access or use of the Group’s assets and liabilities.
The following are the Group’s subsidiariesnon-controlling interests at December 31:
2015 | 2016 | |||||||
Viva GyM S.A. and subsidiaries | 214,260 | 241,140 | ||||||
Viva GyM S.A. | 1,481 | 1,700 | ||||||
GyM S.A. and subsidiaries | 145,699 | 100,840 | ||||||
GyM S.A. | 10,854 | 9,354 | ||||||
Norvial S.A. | 52,993 | 61,349 | ||||||
CAM Holding S.p.A. | 27,652 | 26,589 | ||||||
GMP S.A. | 21,110 | 20,879 | ||||||
GyM Ferrovias S.A. | 24,584 | 30,548 | ||||||
Promotora Larcomar S.A. | 13,609 | 13,539 | ||||||
Others | 10,896 | 3,375 | ||||||
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523,138 | 509,313 | |||||||
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Summarized financial information of subsidiaries with materialnon-controlling interests
Set out below is the summarized financial information for each subsidiary that hasnon-controlling interests that are material to the Group.
Summarized statement of financial position
Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | ||||||||||||||||||||||
At December 31, | At December 31, | At December 31, | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Current: | ||||||||||||||||||||||||
Assets | 1,109,270 | 1,117,065 | 3,140,222 | 1,849,077 | 43,513 | 107,838 | ||||||||||||||||||
Liabilities | (555,148 | ) | (515,781 | ) | (2,809,890 | ) | (2,050,803 | ) | (79,634 | ) | (49,721 | ) | ||||||||||||
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Current net assets (liabilities) | 554,122 | 601,284 | 330,332 | (201,726 | ) | (36,121 | ) | 58,117 | ||||||||||||||||
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Non-current: | ||||||||||||||||||||||||
Assets | 91,677 | 113,594 | 1,144,066 | 1,326,599 | 377,392 | 467,449 | ||||||||||||||||||
Liabilities | (159,583 | ) | (104,179 | ) | (628,670 | ) | (471,424 | ) | (180,686 | ) | (339,661 | ) | ||||||||||||
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Non-current net assets (liabilities) | (67,906 | ) | 9,415 | 515,396 | 855,175 | 196,706 | 127,788 | |||||||||||||||||
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Net assets | 486,216 | 610,699 | 845,728 | 653,449 | 160,585 | 185,905 | ||||||||||||||||||
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F-44
(All amounts expressed in thousands of S/ unless otherwise stated)
Summarized income statement
Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | ||||||||||||||||||||||||||||||||||
For the year ended | For the year ended | For the year ended | ||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
Revenue | 224,560 | 215,764 | 411,518 | 4,861,362 | 5,660,738 | 4,036,226 | 178,170 | 246,231 | 216,260 | |||||||||||||||||||||||||||
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Profit (loss) before income tax | 37,967 | 36,985 | 104,223 | 239,597 | (86,373) | (85,857) | 41,998 | 54,470 | 63,582 | |||||||||||||||||||||||||||
Income tax | (11,452) | (7,649) | (27,054) | (54,657) | (49,304) | (11,228) | (10,908) | (13,611) | (16,262) | |||||||||||||||||||||||||||
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Profit (loss) for the period | 26,515 | 29,336 | 77,169 | 184,940 | (135,677) | (97,085) | 31,090 | 40,859 | 47,320 | |||||||||||||||||||||||||||
Other comprehensive Income | (25) | — | — | ( 26,199) | (60,380) | 19,486 | — | — | — | |||||||||||||||||||||||||||
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Total comprehensive Income for the period | 26,490 | 29,336 | 77,169 | 158,741 | (196,057) | (77,599) | 31,090 | 40.859 | 47,320 | |||||||||||||||||||||||||||
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Dividends paid to non-controlling interest Note(36-d) | 23,785 | 3,066 | 5,050 | 26,640 | — | 8,288 | 8,250 | — | 7,260 | |||||||||||||||||||||||||||
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Summarized statement of cash flows
Viva GYM S.A. and subsidiaries | GyM S.A. and subsidiaries | Norvial S.A. | ||||||||||||||||||||||||||||||||||
For the year ended | For the year ended | For the year ended | ||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||
Cash flows from operating activities (used), net | 9,916 | (68,360 | ) | 44,910 | 147,249 | (303,970 | ) | 224,428 | (30,858 | ) | (111,423 | ) | (42,051 | ) | ||||||||||||||||||||||
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Cash flows from investing activities (used), net | (39,351 | ) | 23,865 | ( 546 | ) | (208,314 | ) | 11,884 | (29,853 | ) | ( 32 | ) | — | — | ||||||||||||||||||||||
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Cash flows from financing activities (used), net | 40,677 | 64,686 | (59,931 | ) | 79,432 | 176,987 | (283,296 | ) | 17,262 | 144,199 | 99,193 | |||||||||||||||||||||||||
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Increase (decrease) in cash and cash equivalents, net | 11,242 | 20,191 | (15,567 | ) | 18,367 | (115,101 | ) | (88,721 | ) | (13,628 | ) | 32,776 | 57,142 | |||||||||||||||||||||||
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Cash and cash equivalents at the beginning of the year | 43,026 | 54,268 | 74,459 | 264,353 | 282,721 | 167,620 | 19,128 | 5,500 | 38,276 | |||||||||||||||||||||||||||
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Cash and cash equivalents at the end of the year | 54,268 | 74,459 | 58,892 | 282,720 | 167,620 | 78,899 | 5,500 | 38,276 | 95,418 | |||||||||||||||||||||||||||
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The information above is the amount before inter-company eliminations.
b) | Public services concessions |
The Group acts as an operator in various public service concessions. When applicable, revenue attributable to the construction or restoration of infrastructure has been accounted for by applying the models set forth in Note 2.5 (financial asset, intangible asset and bifurcated models).
Subsidiary Transportadora de Gas Natural Comprimido Andino S.A.C. (hereinafter TGNCA) held a concession to design, finance, construct, maintain and operate the compressed natural gas supply system to be implemented in certain cities. The Concession was recognized under the financial asset model. In September 2016 the Concession Agreement was terminated on the grounds of counterparty’s failure to meet the required conditions (availability of assets and resources). As a result, TGNCA recognized an impairment loss of receivables amounting to S/6.3 million, which is included in the income statement within “cost of services provided” (Note 27). The balance remaining relates to trade accounts receivable for S/38.7 million, to be received from the Ministry of Energy and Mines. This balance was classified as current assets because Management expects a favorable outcome of the award.
In all the Group concessions’, the infrastructure is returned to grantor at the end of the concession agreement. The concessions held by the Group are as follows at December 31, 2016:
F-45
(All amounts expressed in thousands of S/ unless otherwise stated)
Name of concession | Description | Estimated investment | Consideration | Ordinary shares held | Concession termination | Accounting model | ||||||||||||
Survial S.A. | This company operates and maintains a 750 km road from the San Juan de Marcona port to Urcos, Peru, which is connected to an interoceanic road. The road has five toll stations and three weigh stations. | US$98.9 million | Transaction secured by the Peruvian Government involving from annual payments for the maintenance and operation of the road, which is in charge of the Peruvian Ministry of Transport and Communications (MTC). | 99.9 | % | 2032 | Financial asset | |||||||||||
Canchaque S.A.C. | This company operates and periodically maintains a 78 km road from the towns of Buenos Aires to Canchaque, in Peru The road has one toll station. | US$29 million | Transaction secured by the Peruvian Government regardless the traffic volume. Revenue is secured by an annual minimum amount of US$0.3 million. | 99.96 | % | 2025 | Financial asset | |||||||||||
La Chira S.A. | Designing, financing, constructing, operating and maintaining project called “Planta de Tratamiento de Aguas Residuales y Emisario Submarino La Chira”. The Project will treat approximately 25% of waste waters in Lima. | S/450 million | Transaction secured by the Peruvian Government consisting of anual payment settled by Sedapal S.A. | 50.00 | % | 2036 | Financial asset | |||||||||||
GyM Ferrovías S.A. | Concession for the operation of Line 1 of the Lima Metro, Peru’s only urban railway system in Lima city, which includes (i) operation and maintenance of the five existing trains, (ii) operation and maintenance and the acquisition of 19 trains on behalf of the Peruvian government and (iii) design and construction of the repair yard and maintenance of railway. | S/548.8 million | Transaction secured by the Peruvian Government involving a quarterly payment received from MTC based on km travelled per train. | 75.00 | % | 2041 | Financial asset |
F-46
(All amounts expressed in thousands of S/ unless otherwise stated)
Name of concession | Description | Estimated investment | Consideration | Ordinary shares held | Concession termination | Accounting model | ||||||||||||||
Norvial S.A. | The Company operates and maintains part of the only highway that connects Lima to the northwest of Peru. This 183 km road known as Red Vial 5 runs from the cities of Ancón to Pativilca and has three toll stations. | US$ | 152 million | From users (self-financed concession; revenue is derived from collection of tolls). | 67.00 | % | 2028 | Intangible | ||||||||||||
Vía Expresa Sur S.A. | The Company obtained the concession for designing, financing, building, operating and maintaining the infrastructure associated with the Vía Expresa Sur Project. This project involves the second stage expansion of the Via Expresa—Paseo de la República,between Av. República de Panamá and and Panamericana highway. | US$ | 196.8 million | Contract give the right of collection from users; however the Peruvian government shall pay the difference when the operating revenue obtained is below US$18 million during the first two years and below US$19.7 million from the third year to the fifteenth year of the effective period of the financing, with a ceiling of US$10 million. In June 2017, the contract was suspended temporarily for one year by agreement between Concessionaire and grantor. | 99.98 | % | 2053 | Bifurcated | ||||||||||||
Recaudo Trujillo S.A.C. | Design, implementation, operation, technological maintenance and renewal (estimate) of the single system of electronic collection. Design, implementation, operation and maintenance of the Clearing house Implementation of the Fleet Control Center, as well as training to personnel. | US$ | 40.2 million | Economic consideration resulting from applying the “price for validation” considering daily validations input on the system to be managed through a trust. | 95.00 | % | 2036 | Intangible |
F-47
(All amounts expressed in thousands of S/ unless otherwise stated)
c) | Principal Joint Operations |
At December 31, 2016, the Group is a partner to 69 Joint Operations with third parties (65 at December 31, 2015). The table below lists the Group’s major Joint Operations.
Percentage of interest | ||||||||
Joint operations | 2015 | 2016 | ||||||
Graña y Montero S.A.A. | ||||||||
- Concesionaria la Chira S.A. | 50.00 | % | 50.00 | % | ||||
GyM S.A. | ||||||||
- Consorcio Constructor Alto Cayma | 50.00 | % | 50.00 | % | ||||
- Consorcio Rio Pallca – Huanza | 40.00 | % | 40.00 | % | ||||
- Consorcio Alto Cayma | 49.00 | % | 49.00 | % | ||||
- Consorcio Vial Ayacucho | 50.00 | % | — | |||||
- Consorcio Lima Actividades Comerciales | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – COSAPI | 50.00 | % | 50.00 | % | ||||
- Consorcio Atocongo | 40.00 | % | 40.00 | % | ||||
- Consorcio Norte Pachacutec | 49.00 | % | 49.00 | % | ||||
- Consorcio La Chira | 50.00 | % | 50.00 | % | ||||
- Consorcio Río Urubamba | 50.00 | % | 50.00 | % | ||||
- Consorcio Vial Quinua | 46.00 | % | 46.00 | % | ||||
- Consorcio Rio Mantaro | 50.00 | % | 50.00 | % | ||||
- Consorcio GyM – CONCIVILES | 66.70 | % | 66.70 | % | ||||
- Consorcio Toromocho | 55.00 | % | 55.00 | % | ||||
- Consorcio Construcciones y Montajes CCN | 25.00 | % | 25.00 | % | ||||
- Consorcio HV GyM | 50.00 | % | 50.00 | % | ||||
- Consorcio Stracon Motta Engil JV | 50.00 | % | 50.00 | % | ||||
- Consorcio Huacho Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Constructor Chavimochic | 26.50 | % | 26.50 | % | ||||
- Consorcio Constructor Ductos del Sur | 29.00 | % | 29.00 | % | ||||
- Consorcio Italo Peruano | 48.00 | % | 48.00 | % | ||||
- Consorcio Incolur | 50.00 | % | 50.00 | % | ||||
- Consorcio Menegua | 50.00 | % | 50.00 | % | ||||
- Consorcio Energía y Vapor | 50.00 | % | 50.00 | % | ||||
- Consorcio Ermitaño | — | 50.00 | % | |||||
- Consorcio para la Atención y Mantenimiento de Ductos | — | 50.00 | % | |||||
GMP S.A. | ||||||||
- Consorcio Terminales | 50.00 | % | 50.00 | % | ||||
- Terminales del Perú | 50.00 | % | 50.00 | % | ||||
GMD S.A. | ||||||||
- Consorcio Cosapi-Data – GMD S.A. | 70.00 | % | 70.00 | % | ||||
- Consorcio The Louis Berger Group Inc. - GMD | 66.45 | % | 66.45 | % | ||||
- Consorcio Procesos digitales | 43.65 | % | 43.65 | % | ||||
- Consorcio GMD S.A. – Indra S.A. | 50.00 | % | 50.00 | % | ||||
- Consorcio Fábrica de Software | 50.00 | % | 50.00 | % | ||||
- Consorcio Gestión de Procesos Electorales (ONPE) | 50.00 | % | 50.00 | % | ||||
- Consorcio Lima Actividades Sur | 50.00 | % | 50.00 | % | ||||
- Consorcio Latino de Actividades Comerciales de Clientes Especiales | 50.00 | % | 50.00 | % | ||||
- Consorcio Latino de Actividades Comerciales | 75.00 | % | 75.00 | % | ||||
- Consorcio Gestión de Procesos Junta de Gobernadores | 45.00 | % | 45.00 | % | ||||
- Consorcio Soluciones Digitales | 38.00 | % | 38.00 | % | ||||
- Consorcio de Gestión de la Información | 56.00 | % | 56.00 | % | ||||
- Consorcio de la Disponibilidad PKI | — | 70.00 | % |
F-48
(All amounts expressed in thousands of S/ unless otherwise stated)
Percentage of interest | ||||||||
Joint operations | 2015 | 2016 | ||||||
CONCAR S.A. | ||||||||
- ConsorcioAncón-Pativilca | 67.00 | % | 67.00 | % | ||||
- Consorcio Peruano de Conservación | 50.00 | % | 50.00 | % | ||||
- Consorcio Manperan | 67.00 | % | 67.00 | % | ||||
- Consorcio Vial Sierra | — | 50.00 | % | |||||
Viva GyM S.A. | ||||||||
- Consorcio Panorama | — | 35.00 | % | |||||
Cam Holding S.p.A. | ||||||||
- Consorcio Mecam | 50.00 | % | 50.00 | % | ||||
- Consorcio Seringel | 50.00 | % | 50.00 | % |
All of the joint arrangements listed above operate in Peru, Chile and Colombia.
The table below provides a description of the major activities carried out by these joint operations:
Joint Operations in | Economic activity | |
Graña y Montero S.A.A. | Construction, operation and maintenance of La Chira waste water treatment plant south of Lima. The project is aimed to solve Lima’s environmental problems caused by sewage discharged directly into the sea. | |
GyM S.A. | Theses joint operations carried out activities through the four divisions of the engineering and construction segment (Note 7). | |
GMP S.A. | Consorcio Terminales and Terminales del Peru provide services for receiving, storing, shipping and transporting liquid hydrocarbons, such as gasoline, jet fuel, diesel fuel and residual among others. | |
CONCAR S.A. | Joint operations Concar provides rehabilitation service, routine and periodic maintenance of the road; it further provides conservation and supervision services. | |
GMD S.A. | Outsourcing service of online BPO processes (Business Process Outsourcing). | |
Viva GyM S.A. | Construction of a five-star hotel with a convention center, a business center and entertainment center. | |
CAM Holding S.p.A. | Execution of outsourcing services to the electric power sector. |
The Group’s consolidated financial statements do not include any other type of entities in addition to those mentioned above, such as trust funds or special purpose entities.
7 | SEGMENT REPORTING |
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 Corporate General Manager. This Committee is the chief operating decision maker, 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, (iii) real estate and (iv) technical services.
F-49
(All amounts expressed in thousands of S/ unless otherwise stated)
As set forth under IFRS 8, reportable segments based on the level of revenue are: ‘engineering and construction’ and ‘technical services’. However, the Group has voluntarily decided to report on all its operating segments as detailed in this Note.
The revenues derived from foreign operations (Chile, Panama, Dominican Republic, Colombia, Bolivia, Ecuador and Guyana) comprise 25.4% of the Group’s total revenue reported in 2016 (27.1% in 2015 and 19.9% in 2014).
Sales between segments are carried out at arm’s length, are no material, and are eliminated on consolidation. The revenue from external parties is measured in a manner consistent with that in the income statement. Sale of goods relate to the real state segment. Revenue from services relate to all other segments.
Group sales and receivables are not concentrated in a few customers. There is no external customer that represents 10% or more of the Group’s revenue.
The following segments set forth the principal activities of the Group:
a) | Engineering and construction: This segment includes from traditional engineering services such as structural, civil and design engineering, and architectural planning to advanced specialties including process design, simulation, and environmental services at four divisions; i) civil works, such as the construction of hydroelectric power stations and other large infrastructure facilities; (ii) electro mechanic construction, such as concentrator plants, oil and natural gas pipelines, and transmission lines; iii) building construction, such as office buildings, residential buildings, hotels, affordable housing projects, shopping centers and industrial facilities; and iv) services related to mining, such as earthworks, blasting, loading and hauling ore. |
b) | Infrastructure: The Group has long-term concessions or similar contractual arrangements in Peru for three toll roads, the Lima Metro, a waste water treatment plant in Lima, four producing oil fields, and a gas processing plant. |
c) | Real Estate: The Group develops and sells homes targeted to low and middle-income population sectors which are experiencing a significant increase in disposable income, as well as, office and commercial space to a lesser extent. |
d) | Technical Services: The Group provides: (i) operation and maintenance services for infrastructure assets; (ii) information technology (IT) services, including IT outsourcing, systems integration, application and business process outsourcing services; and (iii) electricity networks services (maintenance) in telecommunications. |
e) | Parent Company Operation corresponds to the services which the Holding company provides, management, logistics and accounting services, among others. |
The Executive Committee uses a measurement of adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to assess the performance of operating segments.
Profit before income tax reconciles to EBITDA as follows:
2014 | 2015 | 2016 | ||||||||||
Profit (loss) before income tax | 507,428 | 154,616 | (563,404 | ) | ||||||||
Financial expense/income, net | 91,354 | 138,696 | 210,778 | |||||||||
Depreciation | 185,310 | 217,070 | 205,522 | |||||||||
Amortization | 74,730 | 89,355 | 82,743 | |||||||||
|
|
|
|
|
| |||||||
EBITDA | 858,822 | 599,737 | (64,361 | ) | ||||||||
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|
|
F-50
(All amounts expressed in thousands of S/ unless otherwise stated)
EBITDA for each segment is as follows:
2014 | 2015 | 2016 | ||||||||||
Engineering and construction | 459,487 | 220,137 | 106,106 | |||||||||
Infrastructure | 272,489 | 232,954 | 210,791 | |||||||||
Real state | 56,502 | 52,794 | 121,421 | |||||||||
Technical services | 63,469 | 113,276 | 117,490 | |||||||||
Parent company operations | 252,312 | (35,591 | ) | (1,026,394 | ) | |||||||
Eliminations intercompany | (245,437 | ) | 16,167 | 406,225 | ||||||||
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| |||||||
EBITDA | 858,822 | 599,737 | (64,361 | ) | ||||||||
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The “Backlog” refers to the expected future revenue under signed contracts and legally binding letters of intent. The breakdown by operating segments as of December 31, 2016, and the dates in which they are estimated to, is shown in the following table:
ANUAL BACKLOG | ||||||||||||||||
2016 | 2017 | 2018 | 2019+ | |||||||||||||
Engineering and Construction | 6,645,729 | 2,883,254 | 1,964,435 | 1,798,041 | ||||||||||||
Infrastructure | 2,403,023 | 678,165 | 792,616 | 932,242 | ||||||||||||
Real Estate | 322,062 | 296,077 | 21,616 | 4,368 | ||||||||||||
Technical Services | 2,882,175 | 1,281,772 | 806,966 | 793,437 | ||||||||||||
Eliminations intercompany | (318,790 | ) | (108,710 | ) | (106,097 | ) | (103,984 | ) | ||||||||
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|
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|
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| |||||||||
11,934,199 | 5,030,559 | 3,479,536 | 3,424,104 | |||||||||||||
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|
F-51
(All amounts expressed in thousands of S/ unless otherwise stated)
The table below shows the Group’s financial statements by operating segments:
Operating segments financial position
Segment reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Water | Technical | Company | |||||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | Mass transit | treatment | Real estate | services | Operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
As of December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 172,116 | 42,638 | 58,640 | 111,454 | 9,094 | 74,459 | 60,193 | 25,408 | — | 554,002 | ||||||||||||||||||||||||||||||
Financial asset at fair value through profit or loss | 3,153 | — | — | — | — | — | — | — | — | 3,153 | ||||||||||||||||||||||||||||||
Trade accounts receivables, net | 614,917 | 43,260 | 22,045 | 55,180 | — | 59,108 | 247,945 | — | — | 1,042,455 | ||||||||||||||||||||||||||||||
Unbilled work in progress, net | 1,260,541 | — | — | — | 17,686 | — | — | — | — | 1,278,227 | ||||||||||||||||||||||||||||||
Accounts receivable from related parties | 316,188 | 12,145 | 18,820 | 301 | — | 34,724 | 48,520 | 132,735 | (283,280 | ) | 280,153 | |||||||||||||||||||||||||||||
Other accounts receivable | 595,255 | 25,857 | 5,699 | 25,668 | 10,250 | 20,535 | 102,204 | 35,249 | — | 820,717 | ||||||||||||||||||||||||||||||
Inventories, net | 159,557 | 10,025 | — | 13,678 | — | 920,092 | 61,734 | 389 | (6,321 | ) | 1,159,154 | |||||||||||||||||||||||||||||
Prepaid expenses | 12,899 | 2,207 | 1,401 | 10,787 | 458 | 349 | 11,402 | 519 | — | 40,022 | ||||||||||||||||||||||||||||||
Non-current assets classified as held for sale | 22,511 | — | — | — | — | — | — | — | — | 22,511 | ||||||||||||||||||||||||||||||
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|
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|
|
|
|
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|
|
|
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|
| |||||||||||||||||||||
Total current assets | 3,157,137 | 136,132 | 106,605 | 217,068 | 37,488 | 1,109,267 | 531,998 | 194,300 | (289,601 | ) | 5,200,394 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Long-term trade accounts receivable, net | — | — | — | 621,831 | — | — | — | — | — | 621,831 | ||||||||||||||||||||||||||||||
Long-term unbilled work in progress, net | — | 40,727 | 19,027 | — | — | — | — | — | — | 59,754 | ||||||||||||||||||||||||||||||
Long-term accounts receivable from related parties | — | — | 408 | — | — | — | 500 | 256,022 | (256,930 | ) | — | |||||||||||||||||||||||||||||
Prepaid expenses | — | 3,692 | 15,584 | 2,112 | 998 | — | — | — | — | 22,386 | ||||||||||||||||||||||||||||||
Other long-term accounts receivable | 534 | 14,214 | 30,473 | 2,198 | 1,589 | 14,726 | — | 2,195 | — | 65,929 | ||||||||||||||||||||||||||||||
Available-for-sale financial assets | — | — | — | — | — | — | — | 120,134 | — | 120,134 | ||||||||||||||||||||||||||||||
Investments in associates and joint ventures | 122,717 | 8,265 | — | — | — | 28,732 | 9,228 | 2,476,689 | (2,008,626 | ) | 637,005 | |||||||||||||||||||||||||||||
Investment property | — | — | — | — | — | 34,702 | — | — | — | 34,702 | ||||||||||||||||||||||||||||||
Property, plant and equipment | 606,158 | 198,774 | 1,624 | 217 | — | 11,303 | 170,660 | 130,113 | (7,092 | ) | 1,111,757 | |||||||||||||||||||||||||||||
Intangible assets | 288,416 | 148,972 | 364,819 | 311 | — | 1,043 | 37,564 | 23,561 | 13,600 | 878,286 | ||||||||||||||||||||||||||||||
Deferred income tax asset | 100,544 | 1,325 | 3,003 | — | — | 1,171 | 39,825 | 656 | 1,321 | 147,845 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Totalnon-current assets | 1,118,369 | 415,969 | 434,938 | 626,669 | 2,587 | 91,677 | 257,777 | 3,009,370 | (2,257,727 | ) | 3,699,629 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total assets | 4,275,506 | 552,101 | 541,543 | 843,747 | 40,075 | 1,200,944 | 789,775 | 3,203,670 | (2,547,328 | ) | 8,900,023 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||||||
Borrowings | 652,974 | 101,096 | 55,428 | — | — | 224,380 | 91,366 | 102,776 | — | 1,228,020 | ||||||||||||||||||||||||||||||
Bonds | — | — | 5,537 | 31,546 | — | — | — | — | — | 37,083 | ||||||||||||||||||||||||||||||
Trade accounts payable | 1,409,984 | 35,428 | 3,768 | 24,498 | 154 | 14,334 | 134,973 | 12,623 | — | 1,635,762 | ||||||||||||||||||||||||||||||
Accounts payable to related parties | 118,383 | 3,990 | 40,578 | 9,962 | 10,560 | 58,790 | 39,476 | 79,709 | (283,616 | ) | 77,832 | |||||||||||||||||||||||||||||
Current income tax | 19,337 | — | 753 | — | 166 | 26 | 13,750 | 84 | — | 34,116 | ||||||||||||||||||||||||||||||
Other accounts payable | 645,648 | 20,340 | 2,841 | 1,682 | — | 257,616 | 125,020 | 12,853 | — | 1,066,000 | ||||||||||||||||||||||||||||||
Provisions | — | 6,341 | — | — | — | — | 7,127 | — | — | 13,468 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total current liabilities | 2,846,326 | 167,195 | 108,905 | 67,688 | 10,880 | 555,146 | 411,712 | 208,045 | (283,616 | ) | 4,092,281 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Borrowings | 375,952 | 83,307 | — | — | — | 27,562 | 66,515 | — | — | 553,336 | ||||||||||||||||||||||||||||||
Long-term bonds | — | — | 180,686 | 576,322 | — | — | — | — | — | 757,008 | ||||||||||||||||||||||||||||||
Other long-term accounts payable | 176,644 | — | 493 | — | — | — | 68,045 | 1,214 | — | 246,396 | ||||||||||||||||||||||||||||||
Long-term accounts payable to related parties | — | — | — | 94,172 | 24,035 | 120,083 | 38,332 | — | (256,486 | ) | 20,136 | |||||||||||||||||||||||||||||
Provisions | 24,624 | 18,876 | — | — | — | — | 3,960 | — | — | 47,460 | ||||||||||||||||||||||||||||||
Derivative financial instruments | — | 2,331 | — | — | — | — | — | — | — | 2,331 | ||||||||||||||||||||||||||||||
Deferred income tax liability | 52,016 | 4,250 | 107 | 7,222 | 270 | 11,937 | 3,164 | 20,197 | — | 99,163 | ||||||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Totalnon-current liabilities | 629,236 | 108,764 | 181,286 | 677,716 | 24,305 | 159,582 | 180,016 | 21,411 | (256,486 | ) | 1,725,830 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total liabilities | 3,475,562 | 275,959 | 290,191 | 745,404 | 35,185 | 714,728 | 591,728 | 229,456 | (540,102 | ) | 5,818,111 | |||||||||||||||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|
| |||||||||||||||||||||
Equity attributable to controlling interest in the Company | 639,194 | 255,032 | 198,345 | 73,751 | 4,890 | 158,605 | 162,550 | 2,961,763 | (1,895,356 | ) | 2,558,774 | |||||||||||||||||||||||||||||
Non-controlling interest | 160,750 | 21,110 | 53,007 | 24,582 | — | 327,611 | 35,497 | 12,451 | (111,870 | ) | 523,138 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total liabilities and equity | 4,275,506 | 552,101 | 541,543 | 843,737 | 40,075 | 1,200,944 | 789,775 | 3,203,670 | (2,547,328 | ) | 8,900,023 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
F-52
(All amounts expressed in thousands of S/ unless otherwise stated)
Operating segments financial position
Segment reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Water | Technical | Company | |||||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | Mass transit | treatment | Real estate | services | Operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Assets.- | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 93,543 | 35,396 | 110,007 | 139,414 | 3,229 | 58,892 | 53,521 | 112,398 | 550 | 606,950 | ||||||||||||||||||||||||||||||
Financial asset at fair value through profit or loss | 352 | — | — | — | — | — | — | — | — | 352 | ||||||||||||||||||||||||||||||
Trade accounts receivables, net | 334,426 | 84,996 | 23,579 | 56,665 | 256 | 83,704 | 449,848 | — | (2,204 | ) | 1,031,270 | |||||||||||||||||||||||||||||
Unbilled work in progress, net | 648,851 | — | — | 32,078 | — | — | — | — | — | 680,929 | ||||||||||||||||||||||||||||||
Accounts receivable from related parties | 327,385 | 3,255 | 19,684 | 392 | 12,379 | 7,284 | 48,691 | 50,582 | (287,988 | ) | 181,664 | |||||||||||||||||||||||||||||
Other accounts receivable | 398,666 | 58,235 | 6,189 | 25,895 | 4,841 | 20,198 | 93,359 | 42,133 | — | 649,516 | ||||||||||||||||||||||||||||||
Inventories, net | 76,058 | 12,561 | — | 16,862 | — | 946,657 | 65,270 | 387 | (13,502 | ) | 1,104,293 | |||||||||||||||||||||||||||||
Prepaid expenses | 9,203 | 2,614 | 1,428 | 17,265 | 167 | 329 | 19,988 | 307 | — | 51,301 | ||||||||||||||||||||||||||||||
Non-current assets classified as held for sale | 22,385 | — | — | — | — | — | — | — | — | 22,385 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total current assets | 1,910,869 | 197,057 | 160,887 | 288,571 | 20,872 | 1,117,064 | 730,677 | 205,807 | (303,144 | ) | 4,328,660 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Long-term trade accounts receivable, net | 149 | — | — | 629,310 | — | — | 38,060 | — | — | 667,519 | ||||||||||||||||||||||||||||||
Long-term unbilled work in progress, net | 171,752 | — | 24,165 | — | — | — | — | — | 1,669 | 197,586 | ||||||||||||||||||||||||||||||
Long-term accounts receivable from related parties | — | — | 408 | — | — | — | 492 | 700,614 | (170,130 | ) | 531,384 | |||||||||||||||||||||||||||||
Prepaid expenses | — | — | 20,554 | 2,029 | 943 | — | — | — | — | 23,526 | ||||||||||||||||||||||||||||||
Other long-term accounts receivable | 42,511 | 29,533 | 22,924 | 225,565 | 7,347 | 17,887 | 1,077 | 11,108 | — | 357,952 | ||||||||||||||||||||||||||||||
Investments in associates and joint ventures | 116,512 | 8,516 | — | — | — | 31,768 | 9,589 | 2,358,917 | (2,135,543 | ) | 389,758 | |||||||||||||||||||||||||||||
Investment property | — | — | — | — | — | 49,357 | — | — | — | 49,357 | ||||||||||||||||||||||||||||||
Property, plant and equipment | 592,191 | 176,486 | 1,243 | 193 | 21 | 13,008 | 217,727 | 130,421 | (17,691 | ) | 1,113,599 | |||||||||||||||||||||||||||||
Intangible assets | 246,715 | 139,353 | 456,000 | 269 | — | 950 | 79,850 | 22,793 | 14,356 | 960,286 | ||||||||||||||||||||||||||||||
Deferred income tax asset | 158,168 | 4,983 | 1,839 | — | — | 623 | 64,408 | 189,230 | 7,757 | 427,008 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Totalnon-current assets | 1,327,998 | 358,871 | 527,133 | 857,366 | 8,311 | 113,593 | 411,203 | 3,413,083 | (2,299,582 | ) | 4,717,976 | |||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total assets | 3,238,867 | 555,928 | 688,020 | 1,145,937 | 29,183 | 1,230,657 | 1,141,880 | 3,618,890 | (2,602,726 | ) | 9,046,636 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
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|
|
|
|
|
|
| |||||||||||||||||||||
Liabilities.- | ||||||||||||||||||||||||||||||||||||||||
Borrowings | 582,260 | 82,063 | — | — | — | 206,456 | 158,151 | 932,113 | — | 1,961,043 | ||||||||||||||||||||||||||||||
Bonds | — | — | 25,540 | 20,551 | — | — | — | — | — | 46,091 | ||||||||||||||||||||||||||||||
Trade accounts payable | 876,849 | 59,830 | 2,310 | 23,882 | 599 | 30,617 | 276,766 | 6,704 | (940 | ) | 1,276,617 | |||||||||||||||||||||||||||||
Accounts payable to related parties | 119,989 | 3,902 | 27,757 | 33,009 | 237 | 66,190 | 44,211 | 67,685 | (282,763 | ) | 80,217 | |||||||||||||||||||||||||||||
Current income tax | 30,576 | 3,631 | 44 | — | 1,064 | 17,944 | 8,901 | — | — | 62,160 | ||||||||||||||||||||||||||||||
Other accounts payable | 485,247 | 11,711 | 10,512 | 14,622 | 27 | 194,441 | 190,303 | 189,444 | — | 1,096,307 | ||||||||||||||||||||||||||||||
Provisions | 6,615 | 6,441 | — | — | — | 131 | 1,344 | — | — | 14,531 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total current liabilities | 2,101,536 | 167,578 | 66,163 | 92,064 | 1,927 | 515,779 | 679,676 | 1,195,946 | (283,703 | ) | 4,536,966 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Borrowings | 246,315 | 80,488 | — | — | — | 16,541 | 76,051 | — | — | 419,395 | ||||||||||||||||||||||||||||||
Long-term bonds | — | — | 338,143 | 583,480 | — | — | — | — | — | 921,623 | ||||||||||||||||||||||||||||||
Other long-term accounts payable | 147,839 | — | 493 | 246,522 | — | 32,000 | 83,516 | 2,433 | — | 512,803 | ||||||||||||||||||||||||||||||
Long-term accounts payable to related parties | 41,672 | — | — | 87,200 | 23,445 | 40,074 | 42,667 | 395 | (170,133 | ) | 65,320 | |||||||||||||||||||||||||||||
Provisions | 7,670 | 17,115 | — | — | — | — | 1,757 | — | — | 26,542 | ||||||||||||||||||||||||||||||
Derivative financial instruments | — | 1,081 | — | — | — | — | — | — | — | 1,081 | ||||||||||||||||||||||||||||||
Deferred income tax liability | 28,278 | 3,546 | 1,518 | 14,482 | 283 | 15,564 | 9,498 | — | — | 73,169 | ||||||||||||||||||||||||||||||
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Totalnon-current liabilities | 471,774 | 102,230 | 340,154 | 931,684 | 23,728 | 104,179 | 213,489 | 2,828 | (170,133 | ) | 2,019,933 | |||||||||||||||||||||||||||||
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Total liabilities | 2,573,310 | 269,808 | 406,317 | 1,023,748 | 25,655 | 619,958 | 893,165 | 1,198,774 | (453,836 | ) | 6,556,899 | |||||||||||||||||||||||||||||
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Equity attributable to controlling interest in the Company | 551,652 | 265,241 | 220,337 | 91,643 | 3,528 | 234,449 | 210,542 | 2,406,573 | (2,003,541 | ) | 1,980,424 | |||||||||||||||||||||||||||||
Non-controlling interest | 113,905 | 20,879 | 61,366 | 30,546 | — | 376,250 | 38,173 | 13,543 | (145,349 | ) | 509,313 | |||||||||||||||||||||||||||||
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Total liabilities and equity | 3,238,867 | 555,928 | 688,020 | 1,145,937 | 29,183 | 1,230,657 | 1,141,880 | 3,618,890 | (2,602,726 | ) | 9,046,636 | |||||||||||||||||||||||||||||
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F-53
(All amounts expressed in thousands of S/ unless otherwise stated)
Operating segment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2014 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 5,035,674 | 350,339 | 338,153 | 166,951 | 29,323 | 224,560 | 1,208,168 | 53,241 | (397,729 | ) | 7,008,680 | |||||||||||||||||||||||||||||
Gross profit (loss) | 535,360 | 124,455 | 76,697 | 42,109 | 2,307 | 62,413 | 142,342 | (7,574 | ) | (26,541 | ) | 951,568 | ||||||||||||||||||||||||||||
Administrative expenses | (258,554 | ) | (17,256 | ) | (8,035 | ) | (14,714 | ) | (317 | ) | (21,058 | ) | (122,506 | ) | (35,444 | ) | 56,517 | (421,367 | ) | |||||||||||||||||||||
Other income and expenses,net | (9,796 | ) | (3,359 | ) | 33 | 18 | — | (852 | ) | 5,856 | 22,063 | 1,173 | 15,136 | |||||||||||||||||||||||||||
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Operating profit (loss) | ||||||||||||||||||||||||||||||||||||||||
Operating profit (loss) | 267,010 | 103,840 | 68,695 | 27,413 | 1,990 | 40,503 | 25,692 | (20,955 | ) | 31,149 | 545,337 | |||||||||||||||||||||||||||||
Financial expenses | (69,046 | ) | (11,564 | ) | (11,321 | ) | (5,245 | ) | (55 | ) | (14,807 | ) | (27,393 | ) | (1,725 | ) | 38,340 | (102,816 | ) | |||||||||||||||||||||
Financial income | 6,623 | 120 | 1,819 | 727 | 16 | 93 | 1,821 | 59,893 | (59,650 | ) | 11,462 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 48,242 | 29 | — | — | — | 12,178 | 590 | 270,045 | (277,639 | ) | 53,445 | |||||||||||||||||||||||||||||
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Profit (loss) before income tax | 252,829 | 92,425 | 59,193 | 22,895 | 1,951 | 37,967 | 710 | 307,258 | (267,800 | ) | 507,428 | |||||||||||||||||||||||||||||
Income tax | (59,252 | ) | (29,768 | ) | (16,158 | ) | (10,842 | ) | (588 | ) | (11,452 | ) | (5,788 | ) | (12,582 | ) | 234 | (146,196 | ) | |||||||||||||||||||||
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Profit (loss) for the year | 193,577 | 62,657 | 43,035 | 12,053 | 1,363 | 26,515 | (5,078 | ) | 294,676 | (267,566 | ) | 361,232 | ||||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | 164,095 | 59,010 | 32,774 | 9,040 | 1,363 | 9,527 | (5,342 | ) | 294,948 | (265,672 | ) | 299,743 | ||||||||||||||||||||||||||||
Non-controlling interest | 29,482 | 3,647 | 10,261 | 3,013 | — | 16,988 | 264 | (272 | ) | (1,894 | ) | 61,489 | ||||||||||||||||||||||||||||
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193,577 | 62,657 | 43,035 | 12,053 | 1,363 | 26,515 | (5,078 | ) | 294,676 | (267,566 | ) | 361,232 | |||||||||||||||||||||||||||||
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F-54
(All amounts expressed in thousands of S/ unless otherwise stated)
Operating segment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2015 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 5,829,441 | 389,377 | 394,462 | 206,459 | 27,994 | 215,764 | 1,152,544 | 70,531 | (471,077 | ) | 7,815,495 | |||||||||||||||||||||||||||||
Gross profit (loss) | 312,780 | 63,530 | 78,544 | 40,468 | 2,225 | 51,755 | 178,303 | (7,004 | ) | (70,627 | ) | 649,974 | ||||||||||||||||||||||||||||
Administrative expenses | (289,149 | ) | (18,214 | ) | (10,319 | ) | (10,529 | ) | (310 | ) | (20,521 | ) | (115,018 | ) | (29,882 | ) | 80,557 | (413,385 | ) | |||||||||||||||||||||
Other income and expenses,net | 30,616 | 1,365 | 55 | 2 | — | 1,759 | 15,348 | 11,114 | (2,972 | ) | 57,287 | |||||||||||||||||||||||||||||
Loss on sales of investments | — | — | — | — | (8,289 | ) | — | — | (8,289 | ) | ||||||||||||||||||||||||||||||
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Operating profit (loss) | 54,247 | 46,681 | 68,280 | 29,941 | 1,915 | 32,993 | 70,344 | (25,772 | ) | 6,958 | 285,587 | |||||||||||||||||||||||||||||
Financial expenses | (127,383 | ) | (19,953 | ) | (4,713 | ) | (5,303 | ) | (45 | ) | (11,642 | ) | (32,246 | ) | (2,818 | ) | 27,301 | (176,802 | ) | |||||||||||||||||||||
Financial income | 8,875 | 158 | 8,722 | 2,316 | 121 | 746 | 2,145 | 56,101 | (41,077 | ) | 38,107 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | (2,234 | ) | 944 | — | — | — | 14,888 | 589 | (14,709 | ) | 8,246 | 7,724 | ||||||||||||||||||||||||||||
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Profit (loss) before income tax | (66,495 | ) | 27,830 | 72,289 | 26,954 | 1,991 | 36,985 | 40,832 | 12,802 | 1,428 | 154,616 | |||||||||||||||||||||||||||||
Income tax | (55,350 | ) | (7,650 | ) | (18,794 | ) | (8,129 | ) | (520 | ) | (7,649 | ) | 6,102 | (9,208 | ) | 2,171 | (99,027 | ) | ||||||||||||||||||||||
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Profit (loss) for the year | (121,845 | ) | 20,180 | 53,495 | 18,825 | 1,471 | 29,336 | 46,934 | 3,594 | 3,599 | 55,589 | |||||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | (131,181 | ) | 17,072 | 40,010 | 14,118 | 1,471 | 12,377 | 40,322 | 4,337 | 8,571 | 7,097 | |||||||||||||||||||||||||||||
Non-controlling interest | 9,336 | 3,108 | 13,485 | 4,707 | — | 16,959 | 6,612 | (743 | ) | (4,972 | ) | 48,492 | ||||||||||||||||||||||||||||
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(121,845 | ) | 20,180 | 53,495 | 18,825 | 1,471 | 29,336 | 46,934 | 3,594 | 3,599 | 55,589 | ||||||||||||||||||||||||||||||
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F-55
(All amounts expressed in thousands of S/ unless otherwise stated)
Operating segment performance
Segment Reporting
Engineering | Infrastructure | Parent | ||||||||||||||||||||||||||||||||||||||
and | Mass | Water | Real | Technical | Company | |||||||||||||||||||||||||||||||||||
construction | Energy | Toll roads | transit | treatment | estate | services | operations | Eliminations | Consolidated | |||||||||||||||||||||||||||||||
Year 2016 - | ||||||||||||||||||||||||||||||||||||||||
Revenue | 4,159,538 | 382,211 | 264,384 | 247,040 | 18,459 | 411,518 | 1,401,781 | 62,070 | (477,395 | ) | 6,469,606 | |||||||||||||||||||||||||||||
Gross profit (loss) | 224,621 | 42,129 | 75,780 | 42,473 | 5,698 | 136,540 | 171,842 | (171 | ) | (95,493 | ) | 603,419 | ||||||||||||||||||||||||||||
Administrative expenses | (258,568 | ) | (17,260 | ) | (10,185 | ) | (12,952 | ) | (786 | ) | (28,430 | ) | (119,003 | ) | (35,740 | ) | 83,522 | (399,402 | ) | |||||||||||||||||||||
Other income and expenses,net | (9,250 | ) | 542 | 128 | 10 | — | 838 | 4,228 | (5,843 | ) | (3,923 | ) | (13,270 | ) | ||||||||||||||||||||||||||
Gain on sales of investments | — | — | — | — | — | — | — | 46,336 | — | 46,336 | ||||||||||||||||||||||||||||||
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Operating profit (loss) | (43,197 | ) | 25,411 | 65,723 | 29,531 | 4,912 | 108,948 | 57,067 | 4,582 | (15,894 | ) | 237,083 | ||||||||||||||||||||||||||||
Financial expenses | (65,138 | ) | (10,801 | ) | (6,478 | ) | (2,810 | ) | (38 | ) | (14,388 | ) | (30,989 | ) | (115,225 | ) | 14,296 | (231,571 | ) | |||||||||||||||||||||
Financial income | 11,216 | 1,040 | 1,145 | 8,037 | 86 | 2,816 | 4,220 | 18,688 | (26,454 | ) | 20,794 | |||||||||||||||||||||||||||||
Share of the profit or loss in associates and joint ventures under the equity method of accounting | 16,501 | 1,615 | — | — | — | 6,850 | 360 | (1,036,889 | ) | 421,853 | (589,710 | ) | ||||||||||||||||||||||||||||
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Profit (loss) before income tax | (80,618 | ) | 17,265 | 60,390 | 34,758 | 4,960 | 104,226 | 30,658 | (1,128,844 | ) | 393,801 | (563,404 | ) | |||||||||||||||||||||||||||
Income tax | (12,828 | ) | (5,308 | ) | (15,490 | ) | (10,904 | ) | (1,433 | ) | (27,054 | ) | (15,835 | ) | 193,425 | 7,233 | 111,806 | |||||||||||||||||||||||
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Profit (loss) for the year | (93,446 | ) | 11,957 | 44,900 | 23,854 | 3,527 | 77,172 | 14,823 | (935,419 | ) | 401,034 | (451,598 | ) | |||||||||||||||||||||||||||
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Profit (loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||
Owners of the Company | (87,710 | ) | 9,370 | 29,284 | 17,891 | 3,527 | 22,106 | 15,918 | (934,508 | ) | 414,423 | (509,699 | ) | |||||||||||||||||||||||||||
Non-controlling interest | (5,736 | ) | 2,587 | 15,616 | 5,963 | — | 55,066 | (1,095 | ) | (911 | ) | (13,389 | ) | 58,101 | ||||||||||||||||||||||||||
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(93,446 | ) | 11,957 | 44,900 | 23,854 | 3,527 | 77,172 | 14,823 | (935,419 | ) | 401,034 | (451,598 | ) | ||||||||||||||||||||||||||||
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F-56
(All amounts expressed in thousands of S/ unless otherwise stated)
Segments by geographical area
2014 | 2015 | 2016 | ||||||||||
Revenue: | ||||||||||||
- Peru | 5,611,844 | 5,690,160 | 4,826,738 | |||||||||
- Chile | 1,011,822 | 944,198 | 707,364 | |||||||||
- Colombia | 125,929 | 778,333 | 570,203 | |||||||||
- Panama | 139,666 | 206,137 | 346,065 | |||||||||
- Guyana | 49,525 | 111,924 | 717 | |||||||||
- Brazil | 68,045 | 39,253 | — | |||||||||
- Ecuador | — | — | 3,682 | |||||||||
- Bolivia | 1,849 | 45,490 | 14,837 | |||||||||
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7,008,680 | 7,815,495 | 6,469,606 | ||||||||||
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Non-current assets: | ||||||||||||
- Peru | 2,461,288 | 3,230,288 | 3,995,453 | |||||||||
- Chile | 359,686 | 320,094 | 446,998 | |||||||||
- Colombia | 272,543 | 124,820 | 260,732 | |||||||||
- Bolivia | 1,890 | 15,043 | 13,043 | |||||||||
- Ecuador | — | — | 888 | |||||||||
- Guyana | 2,974 | 8,800 | 862 | |||||||||
- Brazil | 8,398 | — | — | |||||||||
- Panama | — | 584 | — | |||||||||
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3,106,779 | 3,699,629 | 4,717,976 | ||||||||||
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Until March 2017, the subsidiary Concar belonged to the ‘technical services’ segment, on April 2017, the Company transferred its subsidiary to the ‘infrastructure’ segment.
8 | FINANCIAL INSTRUMENTS |
8.1 | Financial instruments by category |
At December 31 the classification of financial assets and liabilities by category is as follows:
2015 | 2016 | |||||||
Assets according to the statement of financial position | ||||||||
Loans and accounts receivable: | ||||||||
- Cash and cash equivalents | 543,898 | 600,923 | ||||||
- Trade accounts receivable and other accounts receivable not including advances to suppliers, net | 1,292,081 | 1,329,262 | ||||||
- Unbilled work in progress | 1,337,981 | 878,515 | ||||||
- Financial assets related to concession agreements | 699,056 | 685,975 | ||||||
- Accounts receivable from related parties | 280,153 | 713,048 | ||||||
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4,153,169 | 4,207,723 | |||||||
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Available-for-sale financial asset (Note 10) | 120,134 | — | ||||||
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Financial asset at fair value through profit or loss | ||||||||
- Cash and cash equivalents (Mutual funds) | 10,104 | 6,027 | ||||||
- Other financial asset | 3,153 | 352 | ||||||
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13,257 | 6,379 | |||||||
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Financial assets related to concession agreements are recorded in the statement of financial position within the line items of short-term trade accounts receivable and long-term trade accounts receivable.
F-57
(All amounts expressed in thousands of S/ unless otherwise stated)
2015 | 2016 | |||||||
Financial liabilities according to the statement of financial position | ||||||||
Other financial liabilities at amortized cost | ||||||||
- Other financial liabilities | 1,480,071 | 2,140,297 | ||||||
- Finance leases | 301,285 | 240,141 | ||||||
- Bonds | 794,091 | 967,714 | ||||||
- Trade and other accounts payable | 1,967,270 | 1,769,444 | ||||||
- Accounts payable to related parties | 97,968 | 145,537 | ||||||
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4,640,685 | 5,263,133 | |||||||
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Hedging derivatives: | ||||||||
- Derivative financial instruments | 2,331 | 1,081 | ||||||
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8.2 | Credit quality of financial assets |
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external risk ratings (if available) or to historical information about counterparty default rates.
At December 31 the credit quality of financial assets is shown as follows:
2015 | 2016 | |||||||
Cash and cash equivalents (*) | ||||||||
Banco de Crédito del Perú (A+) | 237,870 | 147,759 | ||||||
Banco Continental (A+) | 43,074 | 136,805 | ||||||
Banco Scotiabank (A+) | 38,345 | 121,480 | ||||||
Citibank (A) | 82,471 | 105,812 | ||||||
Banco de la Nación (A) | 64,456 | 30,007 | ||||||
Banco Santander—Perú (A) | 21,660 | 17,480 | ||||||
Banco Interbank (A) | 17,145 | 6,344 | ||||||
Banco de Chile (AAA) | 1,523 | 4,822 | ||||||
Banco Interamericano de Finanzas (A) | — | 4,035 | ||||||
Banco Bogotá (A) | 4,124 | 3,756 | ||||||
Larrain Vial de Chile (A) | 3,368 | 3,514 | ||||||
GNB | — | 2,080 | ||||||
Banco Santander - Chile (AAA) | 7,181 | 1,941 | ||||||
Scotiabank Chile (AAA) | 6,758 | 1,117 | ||||||
Banco de Crédito e Inversiones - Chile (AA+) | 6,331 | 937 | ||||||
Banco Scotiabank de Guyana (A) | 5,462 | 125 | ||||||
Others | 5,064 | 5,061 | ||||||
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544,832 | 593,075 | |||||||
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The ratings in the above table “A and AAA” represent high quality credit ratings. For banks located in Peru, the ratings were derived from risk rating agencies authorized by the Peruvian banking and insurance regulator “Superintendencia de Banca, Seguros y AFP” (SBS). For banks located in Chile, the ratings were derived from risk rating agencies authorized by the Chilean stock and insurance regulator “Superintendencia de Valores y Seguros” (SVS).
(*) | The difference between the balances shown above with the balances shown in the statement of financial position corresponds to cash on hand andin-transit remittances (Note 9). |
F-58
(All amounts expressed in thousands of S/ unless otherwise stated)
The credit quality of customers is assessed in three categories (internal classification):
A: | New customers/related parties (less than 6 months), |
B: | existing customers/related parties (with more than 6 months of trade relationship) with no previous default history; and |
C: | existing customers/related parties (with more than 6 months of trade relationship) with previous default history. |
2015 | 2016 | |||||||
Trade accounts receivable (Note 11 and Note 12) | ||||||||
Counterparties with no external risk rating | ||||||||
A | 540,573 | 117,797 | ||||||
B | 2,119,217 | 2,052,356 | ||||||
C | 342,477 | 407,151 | ||||||
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3,002,267 | 2,577,304 | |||||||
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|
|
| |||||
Receivable from related parties (Note 13) | ||||||||
B | 280,153 | 713,048 |
The total balance of trade accounts receivable and receivable from related parties is in compliance with contract terms and conditions; none of them have beenre-negotiated.
With respect toavailable-for-sale financial assets, the counterparty held an external credit rating of AAA at December 31, 2015.
9 | CASH AND CASH EQUIVALENTS |
At December 31 this account comprises:
2015 | 2016 | |||||||
Cash on hand | 6,116 | 5,944 | ||||||
In-transit remittances | 3,054 | 7,931 | ||||||
Bank accounts | 411,695 | 475,025 | ||||||
Time deposits | 123,033 | 112,023 | ||||||
Mutual funds | 10,104 | 6,027 | ||||||
|
|
|
| |||||
554,002 | 606,950 | |||||||
|
|
|
|
At December 31, 2016, short-term deposits were mainly derived from subsidiaries GyM S.A., GyM Ferrovías, Viva GyM S.A., and GMP S.A. for S/43.7 million, S/24.7 million, S/19.6 million and S/16.4 million respectively and interest rates ranged from 0.10% to 4.95% (GyM S.A., Viva GyM S.A., GyM Ferrovías and Concar S.A. for S/36.7 million, S/33 million, S/23 million and S/11.1 million respectively, at interest rates ranging from 0.10% and 4.70%, at December 31, 2015).
(i) Reconciliation to cash flow statement
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year as follows:
2015 | 2016 | |||||||
Cash and Cash Equivalent on Balance Sheet | 554,002 | 606,950 | ||||||
Bank overdrafts (Note 19) | — | (8,396 | ) | |||||
|
|
|
| |||||
Balances per statement of cash flows | 554,002 | 598,554 | ||||||
|
|
|
|
F-59
(All amounts expressed in thousands of S/ unless otherwise stated)
10 | OTHER FINANCIAL ASSETS |
On April 2016, the Company sold their 1.64% of interest held in Transportadora de Gas del Perú S.A. (TGP) for S/107.3 million, resulting in a net profit of S/46.3 million, as shown in the income statement, within “Profit (loss) on sale of investments”. The balance of its investment at the date of sale was S/117.1 million.
The cumulative amount of fair values at the date of sale amounting to S/41.5 million (S/56 million of gain on fair value and S/14.6 million of income tax), as recognized in the statement of other comprehensive income was transferred to profits for the period.
At December 31, 2015 the fair value of the Group’s interest in TGP equals S/120.1 million based on the discounted cash flow method. The information used in the calculation was as follows:
• | Discounted cash flows from operating activities of TGP net of cash flows from investment activities (CAPEX). |
• | Cash flows were estimated for a30-year term. |
• | The discount rate used was 7.5% corresponding to estimated TGP’s WACC. |
• | The interest of the Company in TGP was 1.64%. |
The fluctuation in the fair value of this investment in 2015 amounted to S/19.9 million (S/4.6 million in 2014) net of its income tax effect amounting to S/7 million (S/1.3 million in 2014), which was recognized in the statement of other comprehensive income.
In 2015 dividends from this investment were received for a total S/7.2 million (S/9.3 million in 2014) included within Other income (Note 29).
The most significant assumptions are the discount rate and cash flows affected by the U.S. Wholesale Price Index; the Group performed a sensitivity analysis of this assumptions: if the discount rate were adjusted down by 5% the fair value would be 7.4% lower; and if the discount rate were adjusted up by 5% the fair value would be 7.1% higher; if the cash flows were adjusted down by 5% the fair value would be 9.1% lower and if the cash flows were adjusted up by 5% the fair value would be 8.8% higher.
11 | TRADE ACCOUNTS RECEIVABLE, NET |
At December 31 this account comprises:
2015 | 2016 | |||||||
Invoices receivable | 1,548,669 | 1,556,817 | ||||||
Collection rights | 135,267 | 164,645 | ||||||
|
|
|
| |||||
1,683,936 | 1,721,462 | |||||||
Impairment of receivables | (19,650 | ) | (22,673 | ) | ||||
|
|
|
| |||||
1,664,286 | 1,698,789 | |||||||
Less:non-current portion | ||||||||
Invoices receivable | (610,695 | ) | (652,939 | ) | ||||
Collection rights | (11,136 | ) | (14,580 | ) | ||||
|
|
|
| |||||
Totalnon-current | (621,831 | ) | (667,519 | ) | ||||
|
|
|
| |||||
Total current | 1,042,455 | 1,031,270 | ||||||
|
|
|
|
Invoices receivable are related to estimated percentages of completion approved by customers.
The fair value of current receivables is similar to their carrying amount since their average collection turnover is less than 60 days. These current receivables do not bear interest and have no specific guarantees.
F-60
(All amounts expressed in thousands of S/ unless otherwise stated)
Thenon-current portion of the trade accounts receivable is related to the financial asset model (Note 2.5) of subsidiary GyM Ferrovías S.A.
At December 31, 2016 the fair value ofnon-current accounts receivable amounted to S/606 million (S/514 million at December 31, 2015), which was calculated under the discounted cash flows method, using rates of 7.14% (8.98% at December 31, 2015).
At December 31, 2016, collection rights primarily relate to GyM Ferrovías S.A., GMD S.A., GMI S.A., Concar S.A., CAM Servicios del Perú S.A. and Survial amounting to S/68 million, S/49 million, S/19 million, S/13 million, S/12 million and S/11 million, respectively (GyM Ferrovías S.A., GMD S.A., GMI S.A. and Survial S.A. for S/65 million, S/37 million, S/22 million and S/16 million, respectively in 2015).
Aging of trade accounts receivable is as follows:
At December 31, | ||||||||
2015 | 2016 | |||||||
Current | 1,245,266 | 1,396,040 | ||||||
Past due up to 30 days | 256,743 | 103,617 | ||||||
Past due from 31 days up to 180 days | 122,948 | 113,825 | ||||||
Past due from 181 days up to 360 days | 16,988 | 29,506 | ||||||
Past due over 360 days | 41,991 | 78,474 | ||||||
|
|
|
| |||||
1,683,936 | 1,721,462 | |||||||
|
|
|
|
At December 31, 2016 trade accounts receivables with maturity greater than 31 days for S/221.8 million (S/182 million in 2015) are not fully impaired. For 2016 the Group recognized impairment of S/3.1 million (S/5.8 million in 2015) in the consolidated income statement (Note 27).
The maximum exposure to credit risk at the reporting date is the carrying amount of the accounts receivable and of unbilled work in progress (Note 12).
12 | UNBILLED WORK IN PROGRESS, NET |
At December 31 this account comprises:
2015 | 2016 | |||||||
Unbilled rights receivable | 1,092,877 | 1,143,634 | ||||||
Rights for concessions in progress | 77,440 | 57,912 | ||||||
Cost of work in progress | 167,664 | 87,168 | ||||||
|
|
|
| |||||
1,337,981 | 1,288,714 | |||||||
Impairment of work in progress (Note5.1-f) | — | (410,199 | ) | |||||
|
|
|
| |||||
1,337,981 | 878,515 | |||||||
Less:non-current portion | ||||||||
Unbilled rights receivable | — | (171,752 | ) | |||||
Rights for concessions in progress | (59,754 | ) | (25,834 | ) | ||||
|
|
|
| |||||
Totalnon-current | (59,754 | ) | (197,586 | ) | ||||
|
|
|
| |||||
Total current | 1,278,227 | 680,929 | ||||||
|
|
|
|
Unbilled rights receivable are the rights that were not billed by the Engineering and Construction segment. Until that revenue is billed, they are stated as unbilled rights receivable. At December 31, 2016, the book value ofnon-current unbilled rights receivable is similar to its fair value since it was recorded using the discounted cash flow method, using a 1.71% rate.
Rights for concessions in progress include rights of future collections from public services concessions that are inpre-operational stage.
F-61
(All amounts expressed in thousands of S/ unless otherwise stated)
Deferred costs of work in progress include all those expenses incurred by the Group comprising future activities to be carried out under construction contracts currently effective. The Group estimates that all incurred cost will be billed and collected.
At December 31, 2016 and 2015 work in progress that remained to be billed are shown net of any advances received from customers for S/10.58 million and S/42.5 million, respectively under the terms and conditions set forth in each specific agreement. These advances are mostly related to subsidiary GyM S.A.
13 | TRANSACTIONS WITH RELATED PARTIES AND JOINT OPERATORS |
a) | Transactions with related parties |
Major transactions between the Company and its related parties are summarized as follows:
2014 | 2015 | 2016 | ||||||||||
Revenue from sales of goods and services: | ||||||||||||
- Associates | 6,040 | 1,400 | — | |||||||||
- Joint operations | 43,897 | 52,384 | 36,901 | |||||||||
|
|
|
|
|
| |||||||
49,937 | 53,784 | 36,901 | ||||||||||
|
|
|
|
|
| |||||||
Purchase of goods and services: | ||||||||||||
- Associates | 42 | 18 | — | |||||||||
- Joint operations | 715 | 489 | 3,228 | |||||||||
|
|
|
|
|
| |||||||
757 | 507 | 3,228 | ||||||||||
|
|
|
|
|
|
Inter-company transactions are based on the price lists in force and terms and conditions that would be agreed with third parties.
b) | Key management compensation |
Key management includes directors (executives andnon-executives), members of the Executive Committee and Internal Audit Management. The compensation paid or payable to key management in 2016 amounted to S/106.9 million (S/111.7 million in 2015) and only relates to short-term benefits.
c) | Balances at the end of the year were: |
At December 31, 2015 | At December 31, 2016 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Joint operations: | ||||||||||||||||
Consorcio Constructor Ductos del Sur | 154,383 | — | 62,834 | 37,238 | ||||||||||||
Consorcio GyM Conciviles | 57,679 | — | 61,006 | — | ||||||||||||
Consorcio Rio Urubamba | 10,856 | 2,819 | 9,072 | — | ||||||||||||
Consorcio Peruano de Conservación | 6,270 | — | 8,784 | |||||||||||||
-Consorcio Vial Quinua | 1,036 | 89 | 4,198 | 738 | ||||||||||||
Consorcio Italo Peruano | 465 | 21,907 | 4,174 | 17,325 | ||||||||||||
Consorcio La Gloria | 3,116 | 3,077 | 3,521 | 3,080 | ||||||||||||
Terminales del Perú | 9,459 | — | 3,215 | 259 | ||||||||||||
Consorcio Rio Mantaro | 6,021 | 15,941 | 3,191 | 6,886 | ||||||||||||
Consorcio Vial Sierra | — | — | 940 | 5,400 | ||||||||||||
Consorcio Constructor Chavimochic | 2,558 | 6,422 | 915 | 2,471 | ||||||||||||
Consorcio Energía y Vapor | 3,328 | — | 491 | 3,203 | ||||||||||||
Consorcio Ermitaño | — | 83 | 6,372 | |||||||||||||
Consorcio Menegua | 1,910 | — | 30 | 3,803 | ||||||||||||
Consorcio para la Atención y Mantenimiento de Ductos - | — | — | 21,790 | |||||||||||||
Consorcio Huacho Pativilca | 80 | 5,041 | — | 3,434 | ||||||||||||
Ingeniería y Construcción Sigdo Koppers-Vial | 2,659 | 3,900 | — | — | ||||||||||||
Complementarios Ltda. | 84 | 6,956 | — | — | ||||||||||||
Other minors | 11,728 | 7,390 | 10,134 | 2,472 | ||||||||||||
|
|
|
|
|
|
|
|
F-62
(All amounts expressed in thousands of S/ unless otherwise stated)
At December 31, 2015 | At December 31, 2016 | |||||||||||||||
Receivable | Payable | Receivable | Payable | |||||||||||||
Carried forward: | 271,632 | 73,542 | 172,588 | 114,471 | ||||||||||||
Brought forward: | 271,632 | 73,542 | 172,588 | 114,471 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other related parties: | ||||||||||||||||
Adexus S.A. | 8,521 | — | — | — | ||||||||||||
Gaseoducto Sur Peruano S.A | — | — | 531,383 | — | ||||||||||||
Perú Piping Spools S.A.C. | — | — | 9,077 | — | ||||||||||||
Ferrovias Participaciones | — | 20,136 | — | 20,813 | ||||||||||||
Ferrovias Argentina | — | — | — | 2,835 | ||||||||||||
Arturo Serna | — | 4,290 | — | 7,418 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
8,521 | 24,426 | 540,460 | 31,066 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
280,153 | 97,968 | 713,048 | 145,537 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Lessnon-current portion: | ||||||||||||||||
Gaseoducto Sur Peruano S.A | — | — | (531,384 | ) | — | |||||||||||
Consorcio Constructor Ductos del Sur | — | — | — | (37,238 | ) | |||||||||||
Ferrovias Participaciones | — | (20,136 | ) | — | (20,813 | ) | ||||||||||
Ferrovias Argentina | — | — | — | (2,835 | ) | |||||||||||
Arturo Serna | — | — | — | (4,434 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-current portion | — | (20,136 | ) | (531,384 | ) | (65,320 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Portion current | 280,153 | 77,832 | 181,664 | 80,217 | ||||||||||||
|
|
|
|
|
|
|
|
Receivables and payables are mainly of current maturity 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 arise from sales of goods and services. These balances arenon-interest-bearing due to their short-term maturities and are not impaired.
This balance relates to the commitments that resulted from the early termination of GSP project (Note16.a-i). At December 31, 2016 thenon-current account receivables from related parties is similar to its fair value since it was accounted for using the discounted cash flow method with a 1.71% rate which originated a discount value of US$25.8 million. View events after the date of the statement of financial position in Note 37.
Accounts payable to related parties have maturity periods of 60 days and arise from engineering, construction, maintenance and other services received. These balances are not interest-bearing due to their short-term maturities.
Transactions withnon-controlling interest are disclosed in Note 36.
14 | OTHER ACCOUNTS RECEIVABLE |
At December 31 this account comprises:
2015 | 2016 | |||||||
Advances to suppliers (a) | 170,126 | 305,022 | ||||||
Income taxon-account payments (b) | 165,705 | 202,045 | ||||||
Fiscal credit (c) | 146,785 | 132,316 | ||||||
Guarantee deposits (d) | 125,269 | 95,916 | ||||||
Claims to third parties | 17,846 | 59,198 | ||||||
Petróleos del Perú S.A.- Petroperú S.A. | 8,891 | 46,413 | ||||||
Temporary tax on net assets | 20,051 | 21,204 | ||||||
Taxes receivable | 42,404 | 13,954 | ||||||
Claims to SUNAT(pre-paid taxes) | 19,544 | 16,479 | ||||||
Restricted funds | — | 14,067 | ||||||
Rental and sale of equipment | 9,919 | 13,640 | ||||||
Receivables from personnel | 8,168 | 10,726 | ||||||
Advances pending liquidation | 3,478 | 2,447 | ||||||
Loans to third parties | 83,657 | 1,065 | ||||||
Other | 64,803 | 72,976 | ||||||
|
|
|
| |||||
Carried forward: | 886,646 | 1,007,468 | ||||||
|
|
|
|
F-63
(All amounts expressed in thousands of S/ unless otherwise stated)
2015 | 2016 | |||||||
Brought forward: | 886,646 | 1,007,468 | ||||||
Lessnon-current portion: | ||||||||
Advances to suppliers | (2,200 | ) | (225,567 | ) | ||||
Fiscal credit | (55,663 | ) | (52,225 | ) | ||||
Claims to third parties | — | (32,669 | ) | |||||
Petróleos del Perú S.A.- Petroperú S.A. | (7,948 | ) | (29,534 | ) | ||||
Other | (118 | ) | (17,957 | ) | ||||
|
|
|
| |||||
Non-current portion | (65,929 | ) | (357,952 | ) | ||||
|
|
|
| |||||
Current portion | 820,717 | 649,516 | ||||||
|
|
|
|
Other receivables are neither past due nor impaired. Othernon-current accounts receivable have maturities between 2 and 5 years.
The fair value of the short-term receivables approximates their carrying amount due to their short-term maturities. Thenon-current portion mainly comprisesnon-financial assets such as advances to suppliers and fiscal credit; the remaining balance is not significant for any period shown in the financial statements.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of above-mentioned other receivables. The Group does not demand guarantees.
The following paragraph contains a description of major accounts receivable:
(a) | Advances to suppliers |
In 2016, the balance mainly comprises advances that subsidiary GyM Ferrovias S.A. gave to Alsthom Transporte for S/230 million. In 2015 the balance mainly comprises advances that subsidiary GyM S.A. gave for importing equipment to be used in Consorcio Río Mantaro Project amounting to S/76 million.
(b) | Income taxon-account payment |
This balance mainly consists of income taxon-account payments made by GyM S.A., GMP S.A., Graña y Montero S.A.A., CAM Holding S.p.A., Viva GyM S.A., GMI S.A. and GMD S.A. for S/133 million, S/17 million, S/16 million, S/16 million, S/5 million, S/4 million and S/4 million, respectively (GyM S.A., Graña y Montero S.A.A., GMP S.A., CAM Holding S.p.A., Concar S.A. and Viva GyM S.A. for S/95 million, S/16 million, S/12 million, S/8 million, S/5 million and S/4 million, respectively in 2015).
(c) | Fiscal credit |
This item is related to subsidiaries GyM S.A., Viva GyM S.A., Norvial S.A., Negocias del Gas S.A., La Chira S.A. and Concesionaria Vía Expresa Sur S.A. amounting to S/55 million, S/25 million, S/15 million, S/8 million, S/5 million and S/5 million, respectively (GyM S.A., Viva GyM S.A., Norvial S.A., Survial S.A., GyM Ferrovías S.A., La Chira and GMP S.A. for S/41 million, S/22 million, S/15 million, S/14 million, S/13 million, S/12 million and S/3 million, respectively in 2015). Management considers that this VAT fiscal credit will be recovered in the normal course of future operations of these subsidiaries.
(d) | Guarantee deposits - |
Guarantee deposits are the funds retained by customers for work contracts assumed basically by subsidiary GyM S.A. These deposits are retained by the customers to secure the Subsidiary’s compliance with its obligations under the contracts. The amounts retained will be recovered once the contracted work is completed.
F-64
(All amounts expressed in thousands of S/ unless otherwise stated)
15 | INVENTORIES, net |
At December 31 this account comprises:
2015 | 2016 | |||||||
Land | 361,082 | 398,120 | ||||||
Work in progress - Real estate | 415,538 | 289,775 | ||||||
Finished properties | 136,621 | 244,240 | ||||||
Construction material | 162,538 | 114,919 | ||||||
Merchandise and supplies | 87,643 | 97,860 | ||||||
|
|
|
| |||||
1,163,422 | 1,144,914 | |||||||
Impairment of inventories (Note5.1-f) | (4,268 | ) | (40,621 | ) | ||||
|
|
|
| |||||
1,159,154 | 1,104,293 | |||||||
|
|
|
|
Land -
At December 31, land comprises properties for the implementation of the following projects of subsidiary Viva GyM:
2015 | 2016 | |||||||
Lurín (a) | 92,071 | 95,634 | ||||||
Miraflores (b) | 79,971 | 80,552 | ||||||
San Miguel (c) | 69,859 | 70,556 | ||||||
San Isidro (d) | — | 46,606 | ||||||
Ancón (e) | 33,068 | 35,934 | ||||||
Nuevo Chimbote | 15,834 | 17,054 | ||||||
Huancayo | 11,324 | 11,618 | ||||||
Villa el Salvador | 19,143 | — | ||||||
San Martín de Porres | 12,978 | — | ||||||
Others | 26,834 | 40,166 | ||||||
|
|
|
| |||||
361,082 | 398,120 | |||||||
|
|
|
|
(a) | Plot of land of 750 hectares located in the district of Lurín, province of Lima, for industrial development and public housing. |
(b) | Plot of land located in Av. El Ejército, Urbanización. Santa Cruz, Miraflores, province of Lima, a development complex consisting of a5-star hotel, convention center, business, cultural, commercial and residential building center. |
(c) | Plot of land located in the district San Miguel of 1.4 hectares to develop a traditional multi-family building of 1,004 apartments in 4 stages. |
(d) | A plot of land in the district of San Isidro in which a15-storey building will be built with 28 apartments and 121 parking spaces. |
(e) | A108-hectare land property in which a mega housing-project will be implemented, including apartments ranging from 55 m2 to 75 m2, as well as houses of 75 m2. |
F-65
(All amounts expressed in thousands of S/ unless otherwise stated)
Land properties maintained from 2015 consist of assets of projects, the construction of which have not begun. Changes in these balances over 2016 primarily reflects higher costs of project engineering, license paperwork and other smaller costs. Construction in these land properties is expected to begin in late 2017 and the first quarter of 2019. The land property located in San Martín de Porres was reclassified to “Finished properties” since the construction started and finished at December 31, 2016. The plot of land in Villa El Salvador was sold in 2016.
Real estate - work in progress
At December 31, real state work in progress comprises the following projects:
2015 | 2016 | |||||||
Klimt | 67,910 | 100,751 | ||||||
Los Parques de Comas | 77,346 | 89,074 | ||||||
Los Parques del Callao | 57,672 | 51,613 | ||||||
Real 2 | 7,497 | 17,181 | ||||||
Villa El Salvador 2 | 9,918 | 12,674 | ||||||
El Rancho | 166,256 | — | ||||||
Los Parques de San Martín (2nd phase) | 19,063 | — | ||||||
Others | 9,876 | 18,482 | ||||||
|
|
|
| |||||
415,538 | 289,775 | |||||||
|
|
|
|
During 2016 the Company has capitalized financing costs of these construction projects amounting to S/12.2 million at interest rates between 6.75% and 8.90% (S/4 million in 2015 at interest rates between 5.3% and 9.5%; and S/9 million in 2014 at interest rates between 3.12% and 8.5%).
Finished properties -
At December 31, the balance of finished properties consists of the following investment properties:
2015 | 2016 | |||||||
El Rancho | — | 121,302 | ||||||
Panorama | 70,951 | 33,443 | ||||||
Los Parques de San Martín de Porres | 21,557 | 30,724 | ||||||
Los Parques del Callao | — | 19,736 | ||||||
Rivera Navarrete | 14,085 | 11,966 | ||||||
Los Parques de Carabayllo 2nd phase | 9,848 | 7,497 | ||||||
Los Parques de Comas | 4,115 | 7,336 | ||||||
Los Parques de Villa El Salvador II | 12,604 | 5,951 | ||||||
Others | 3,461 | 6,285 | ||||||
|
|
|
| |||||
136,621 | 244,240 | |||||||
|
|
|
|
Construction materials
At December 31, 2016 and 2015, construction materials relates mainly to GSP project for S/54.8 million and S/68.3 million, respectively, of which S/33.8 million corresponding to Consorcio Constructor Ductos del Sur (CCDS) were impaired in 2016 (Note5.1-f).
At December 31, 2016 borrowings are secured with land properties and work in progress comprising the following projects: Los Parques de Callao, Ancón and El Rancho. The total amount of the guarantee is S/101.2 million (S/175 million in 2015).
F-66
(All amounts expressed in thousands of S/ unless otherwise stated)
16 | INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
At December 31 this account comprises:
2015 | 2016 | |||||||
Associates | 490,702 | 286,403 | ||||||
Joint ventures | 146,303 | 103,356 | ||||||
|
|
|
| |||||
637,005 | 389,759 | |||||||
|
|
|
|
The amounts recognized in the income statement are as follows:
2014 | 2015 | 2016 | ||||||||||
Associates | 29,132 | 22,800 | (584,801 | ) | ||||||||
Joint ventures | 24,313 | 2,193 | (4,909 | ) | ||||||||
|
|
|
|
|
| |||||||
53,445 | 24,993 | (589,710 | ) | |||||||||
|
|
|
|
|
|
a) | Investment in associates |
Set out below are the associates of the Group at December 31, 2015 and 2016. The associates listed below have share capital solely consisting of common shares, which are held directly by the Group. None of the associates are listed companies; therefore, there is no quoted market price available for their shares.
Carrying amount | ||||||||||||||||||||
Class | Interest in capital | At December 31, | ||||||||||||||||||
Entity | of share | 2015 | 2016 | 2015 | 2016 | |||||||||||||||
% | % | |||||||||||||||||||
Gasoducto Sur Peruano S.A. | Common | 20.00 | 20.00 | 437,494 | 218,276 | |||||||||||||||
Promoción Inmobiliaria del Sur S.A. | Common | 22.50 | 22.50 | 28,733 | 31,768 | |||||||||||||||
Concesionaria Chavimochic S.A.C. | Common | 26.50 | 26.50 | 17,202 | 32,394 | |||||||||||||||
Betchel Vial y Vives Servicios | ||||||||||||||||||||
Complementarios Ltda. | Common | 40.00 | 40.00 | 6,187 | 69 | |||||||||||||||
Others | 1,086 | 3,896 | ||||||||||||||||||
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|
| |||||||||||||||||
490,702 | 286,403 | |||||||||||||||||||
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|
|
The most significant associates are described as follows:
i) | Gasoducto Sur Peruano S.A. - |
In November 2015, the group acquired a 20% interest in Gasoducto Sur Peruano (hereinafter GSP) and obtained a 29% interest in the Ductos del Sur Consortium (CCDS) through its subsidiary GyM. GSP signed on July 22, 2014 a concession contract with the Peruvian government (Grantor) to build, operate and maintain the transportation system by natural gas pipelines to meet the demand of the cities of the Peruvian southern region. Additionally, GSP signed an engineering, procurement and construction (EPC) contract with the Ductos del Sur Consortium (CCDS). The Group made an investment of US $ 242.5 million (S / 811 million), and was required to assume 20% of the performance guarantee established in the Concession contract for US $ 262.5 million (equivalent to S / 882 million) and 20% of the guarantee for the bridge loan obtained by GSP for US $ 600 million (equivalent to S / 2,016 million) See subsequent events after the date of the statement of financial position in Note 37.
ii) | Promoción Inmobiliaria del Sur S.A. |
An entity engaged in purchasing land properties to obtain gains from their subsequent appreciation and disposal in the long term. Major assets consist of plots of land of 891.08 hectares in Lurín and 2.07 hectares in Punta Hermosa, both in Lima. Based on recent appraisals of the properties,
F-67
(All amounts expressed in thousands of S/ unless otherwise stated)
Management believes that the commercial value of these properties is higher than their carrying amount.
iii) | Concesionaria Chavimochic S.A.C. |
An entity that was awarded with 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 concession effective period is 25 years and the total investment amounts US$647 million.
F-68
(All amounts expressed in thousands of S/ unless otherwise stated)
The following table shows financial information of the principal associates:
Summarized financial information for associates -
Gaseoducto Sur Peruano S.A. | Promoción Inmobiliaria del Sur S.A. | Chavimochic S.A.C. | ||||||||||||||||||||||
At December, 31 | At December, 31 | At December, 31 | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Current | ||||||||||||||||||||||||
Assets | 303,219 | 375,547 | 124,887 | 149,300 | 171,400 | 120,342 | ||||||||||||||||||
Liabilities | (3,357,508 | ) | (6,747,492 | ) | (32,072 | ) | (187,380 | ) | (110,799 | ) | (3,160 | ) | ||||||||||||
Non-current | ||||||||||||||||||||||||
Assets | 4,943,392 | 8,522,099 | 47,699 | 193,127 | 8,608 | 8,282 | ||||||||||||||||||
Liabilities | (7,442 | ) | — | (13,090 | ) | (13,855 | ) | (2,547 | ) | (1,918 | ) | |||||||||||||
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| |||||||||||||
Net assets | 1,881,661 | 2,150,154 | 127,424 | 141,192 | 66,662 | 123,546 | ||||||||||||||||||
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Gasoducto Sur Peruano S.A. | Promoción Inmobiliaria del Sur S.A. | Chavimochic S.A.C. | ||||||||||||||||||||||||||||||
2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | |||||||||||||||||||||||||
Revenues | 3,007,799 | 3,323,410 | 88,870 | 90,970 | 65,071 | 67,473 | 376,124 | 264,386 | ||||||||||||||||||||||||
Profit (loss) from continuing operations | 69,191 | (1,372,594 | ) | 82,080 | 80,372 | 42,281 | 175 | 22,995 | (2,994 | ) | ||||||||||||||||||||||
Incometax | (19,828 | ) | — | (24,521 | ) | (25,373 | ) | (11,839 | ) | (57 | ) | (6,656 | ) | 921 | ||||||||||||||||||
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| |||||||||||||||||
Profit (loss) from continuing operations after income tax | 49,363 | (1,372,594 | ) | 61,402 | 65,245 | 30,442 | 118 | 16,339 | (2,073 | ) | ||||||||||||||||||||||
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Othercomprehensiveincome | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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| |||||||||||||||||
Total comprehensive income | 49,363 | (1,372,594 | ) | 61,402 | 65,245 | 30,442 | 118 | 16,339 | (2,073 | ) | ||||||||||||||||||||||
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F-69
(All amounts expressed in thousands of S/ unless otherwise stated)
The movement of the investments in associates is as follows:
2014 | 2015 | 2016 | ||||||||||
Opening balance | 28,209 | 82,494 | 490,702 | |||||||||
Contributions | — | — | 390,506 | |||||||||
Acquisition of Gasoducto Sur Peruano (Note 16a-i) | — | 437,494 | — | |||||||||
Acquisitions | 51,244 | — | — | |||||||||
Change in corporate structure of | ||||||||||||
Panorama Project (Note 16a-ii) | — | (39,180 | ) | — | ||||||||
Dividends received | (25,191 | ) | (9,838 | ) | (10,149 | ) | ||||||
Equity interest in results | 29,132 | 22,800 | 8,304 | |||||||||
Impairment of GSP | — | — | (593,105 | ) | ||||||||
Decrease in capital | — | — | (166 | ) | ||||||||
Derecognition of investments | — | (2,755 | ) | — | ||||||||
Conversion adjustment | (900 | ) | (313 | ) | 311 | |||||||
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|
|
|
| |||||||
Final balance | 82,494 | 490,702 | 286,403 | |||||||||
|
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|
|
In addition to the GSP acquisition described in Note 16a-i); in 2014, 2015 and 2016 the following significant movements were noted:
• | During 2016 cash contributions were made principally to Gasoducto Sur Peruano S.A. and Concesionaria Chavimochic amounting to S/373.9 million and S/15.7 million, respectively. |
• | In 2016 the Group obtained dividends mainly from Betchel Vial y Promoción Inmobiliaria del Sur S.A. amounting to S/6.3 million and S/3.8 million, respectively. In 2015 the Group received dividends from Promoción Inmobiliaria del Sur S.A. amounting to S/9.8 million (from Promoción Inmobiliaria del Sur S.A., Ingeniería y Construcción Vial y Vives OGP-1 Limitada y Betchel Vial y Vives Servicios Complementarios Ltda. for S/3.4 million, S/16.6 million and S/4.9 million, respectively in 2014). |
• | In 2016, the Group included an impairment provision of GSP for S/593.1 million (US$176.49 million). See subsequent events after the date of the statement of financial position in Note 37. |
• | In 2015, the “share of the profit or loss in associates and joint ventures under the equity method” shown in the income statement includes S/17.3 million as expenses that subsidiary GyM S.A. had to pay for the execution of the letter of guarantee in JV Panama. |
• | In March 2014, Constructora Norberto Odebrecht S.A. and Odebrecht Partipacoes e Investimentos S.A. formed Concesionaria Chavimochic S.A.C., in which the Company had a 26.5% interest based on a capital contribution of S/13.3 million. |
• | In December 2014, subsidiary Viva GyM S.A. made a capital contribution of S/37.8 million, by which it joined the Panama Project initially carried out by a third party and the Group and by which a 35% interest was obtained. On December 17, 2015 the business operating structure was decided to be changed, which resulted in the extinguishment of the association and the formation of a consortium by which the partners would have joint control of the business, with no effect on their percentage share in profit distribution. From that date onwards, the Group ceased to use the equity method of accounting to recognize the investment and began to use the joint operation accounting treatment. |
F-70
(All amounts expressed in thousands of S/ unless otherwise stated)
b) | Investment in Joint Ventures - |
Set out below are the joint ventures of the Group as of December 31:
Entity | share | 2015 | 2016 | 2015 | 2016 | |||||||||||||||
% | % | |||||||||||||||||||
Tecgas N.V. | Common | 51.00 | 51.00 | 79,450 | 84,100 | |||||||||||||||
Sistemas SEC | Common | 49.00 | 49.00 | 9,228 | 9,591 | |||||||||||||||
Logistica Químicos del Sur S.A.C. | Common | 50.00 | 50.00 | 8,265 | 8,515 | |||||||||||||||
G.S.J.V. SCC | Common | 50.00 | 50.00 | 8,800 | 861 | |||||||||||||||
ConstructoraSK-VyV Ltda. | Common | 50.00 | 50.00 | 3,287 | 59 | |||||||||||||||
Adexus S.A. (Note 33 a) | Common | 44.00 | — | 37,034 | — | |||||||||||||||
Others | Common | 239 | 230 | |||||||||||||||||
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|
|
| |||||||||||||||||
146,303 | 103,356 | |||||||||||||||||||
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|
i) | Tecgas N.V. - |
This entity provides services of operations and maintenance of oil pipelines and related activities, its activities are focused in the service agreement of operations and maintenance of oil pipelines of the concession of Transportadora de Gas del Perú S.A.A. - TGP (its largest customer).
ii) | Sistemas SEC - |
The company’s activities include the renovation and automation of the electrical system and signaling of railways and communications within the Santiago - Chillán - Bulnes - Caravans and Conception areas. The contract was awarded in 2005 for a period of 16 years.
iii) | Adexus S.A. - |
It is mainly engaged in providing specialized technological IT services and communications solutions, including system integration to companies in a wide range of industries, such as financial services, telecommunications, manufacturing, mining, retail, among others. The Group acquired control of this company since August 2016, going from a joint venture to a subsidiary (Note33-a).
The following table shows the financial information of the principal joint ventures:
Summarized financial information for joint ventures -
Tecgas N.V. | Adexus S.A. | |||||||||||
At December 31, | At December 31, | |||||||||||
2015 | 2016 | 2015 | ||||||||||
Current | ||||||||||||
Cash and cash equivalents | 71,903 | 67 | 13,626 | |||||||||
Other current assets | 41,219 | 92,843 | 128,616 | |||||||||
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| |||||||
Total current assets | 113,122 | 92,910 | 142,242 | |||||||||
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| |||||||
Financial liabilities (excluding trade payables) | — | — | (100,618 | ) | ||||||||
Other current liabilities | (103,941 | ) | (87,780 | ) | (68,116 | ) | ||||||
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| |||||||
Total current liabilities | (103,941 | ) | (87,780 | ) | (168,734 | ) | ||||||
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|
| |||||||
Non-current | ||||||||||||
Totalnon-current assets | 192,360 | 33,336 | 174,159 | |||||||||
Totalnon-current liabilities | (47,686 | ) | (7,367 | ) | (63,397 | ) | ||||||
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|
| |||||||
Net assets | 153,855 | 31,099 | 84,270 | |||||||||
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|
F-71
(All amounts expressed in thousands of S/ unless otherwise stated)
Tecgas N.V. | Adexus S.A. | |||||||||||
At December 31, | At December 31, | |||||||||||
2015 | 2016 | 2015 | ||||||||||
Revenue | 426,487 | 457,554 | 334,376 | |||||||||
Depreciation and amortization | (11,749 | ) | (2,266 | ) | (18,387 | ) | ||||||
Interest income | 138 | 215 | 47 | |||||||||
Interest expense | (122 | ) | — | (23,026 | ) | |||||||
Profit (loss) from continuing operations | 1,876 | (3,209 | ) | (35,573 | ) | |||||||
Income tax expense | (892 | ) | (4,078 | ) | 2,391 | |||||||
|
|
|
|
|
| |||||||
Post-tax profit (loss) from continuing operations | 984 | (7,287 | ) | (33,182 | ) | |||||||
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| |||||||
Other comprehensive income | — | — | — | |||||||||
|
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| |||||||
Total comprehensive income | 984 | (7,287 | ) | (33,182 | ) | |||||||
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|
|
The movement of the investments in joint ventures was as follows:
2014 | 2015 | 2016 | ||||||||||
Opening balance | 59,758 | 147,069 | 146,303 | |||||||||
Debt capitalization | — | — | 8,308 | |||||||||
Contributions | — | — | 6,889 | |||||||||
Equity interests in profits | 24,313 | 2,193 | (4,909 | ) | ||||||||
Acquisitions | 78,615 | 44,145 | — | |||||||||
Transfer of Adexus from acquisition of control | — | — | (35,870 | ) | ||||||||
Dividends received | (11,527 | ) | (42,122 | ) | (17,843 | ) | ||||||
Decrease in capital | — | (3,364 | ) | (1,798 | ) | |||||||
Translation adjustment | (4,090 | ) | (1,618 | ) | 2,276 | |||||||
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| |||||||
Final balance | 147,069 | 146,303 | 103,356 | |||||||||
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|
In 2016, 2015 and 2014 the following significant movements were carried out:
• | The Group obtained dividends in 2016 principally from Consorcio G.S.J.V.SCC and Constructora SK - VyV Ltda. for S/13.1 y S/3.3 million (S/41.1 million in 2015 and S/11.5 million in 2014 from Constructora SK - VyV Ltda.). |
• | In February and December 2016 a debt with Adexus was capitalized and a cash contribution was made to Tecgas N.V. for S/8.3 million and S/6.9 million, respectively. |
• | In August 2015 the Company acquired a 44% interest in the share capital of Adexus S.A. amounting to S/44.1 million. This investment includes goodwill arising from the acquisition for S/20.7 million. In February 2016 the Group acquired 8% of additional interest by capitalizing debt for S/8.3 million. In August 2016, the Group obtained control over Adexus S.A. and the balance of the investment at that date was transferred to investments in subsidiaries for S/35.9 million. Since that date, the Company consolidated the financial statements of Adexus S.A (Note 33 a). |
• | In December 2014, the Company acquired 51% of the share capital of Tecgas N.C. current strategic partner of Transportadora de Gas del Perú, which holds 100% the share capital of Compañía Operadora de Gas del Amazonas (hereinafter COGA) for a total of S/75.8 million. This investment included goodwill resulting from the above-mentioned acquisition amounting to S/68.2 million. |
F-72
(All amounts expressed in thousands of S/ unless otherwise stated)
17 | PROPERTY, PLANT AND EQUIPMENT, NET |
The movement in property, plant and equipment accounts and its related accumulated depreciation for the year ended December 31, 2014, 2015 and 2016 is as follows:
Furniture and | Other | Replacement | In-transit | Work | ||||||||||||||||||||||||||||||||||||
Land | Buildings | Machinery | Vehicles | fixtures | equipment | units | units | in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 29,342 | 110,456 | 855,084 | 361,876 | 37,675 | 149,438 | 10,646 | 21,829 | 98,043 | 1,674,389 | ||||||||||||||||||||||||||||||
Accumulated depreciation | — | (26,130 | ) | (380,281 | ) | (180,793 | ) | (23,906 | ) | (110,305 | ) | (68 | ) | — | — | (721,483 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 29,342 | 84,326 | 474,803 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,043 | 952,906 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net opening carrying amount | 29,342 | 84,326 | 474,803 | 181,083 | 13,769 | 39,133 | 10,578 | 21,829 | 98,043 | 952,906 | ||||||||||||||||||||||||||||||
Additions | 17 | 19,349 | 133,230 | 87,958 | 8,434 | 40,125 | 98 | 19,982 | 119,773 | 428,966 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Morelco (Note 33 b) | 1,993 | 8,869 | 53,942 | 1,844 | 254 | 1,653 | — | — | 526 | 69,081 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Coasin (Note 33 c) | — | — | — | — | — | 711 | — | — | — | 711 | ||||||||||||||||||||||||||||||
Reclassifications | — | 67,454 | 24,523 | (3,048 | ) | 468 | (3,316 | ) | (2,043 | ) | (31,415 | ) | (52,623 | ) | — | |||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | — | — | — | — | (66,604 | ) | (66,604 | ) | ||||||||||||||||||||||||||||||
Deduction for sale of assets | — | (3,066 | ) | (61,508 | ) | (52,364 | ) | (2,514 | ) | (3,087 | ) | (851 | ) | (830 | ) | — | (124,220 | ) | ||||||||||||||||||||||
Disposals - cost | — | (2,327 | ) | (10,404 | ) | (1,402 | ) | (585 | ) | (8,319 | ) | (605 | ) | — | 801 | (22,841 | ) | |||||||||||||||||||||||
Depreciation charge | — | (11,996 | ) | (89,463 | ) | (52,697 | ) | (6,896 | ) | (22,100 | ) | (7 | ) | — | — | (183,159 | ) | |||||||||||||||||||||||
Depreciation for transfers | — | (2,222 | ) | 375 | (3,036 | ) | 958 | 3,925 | — | — | — | — | ||||||||||||||||||||||||||||
Depreciation for sale deductions | — | 2,959 | 45,001 | 33,458 | 2,214 | 2,394 | 71 | — | — | 86,097 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 1,910 | 8,339 | 1,253 | 351 | 5,753 | — | — | — | 17,606 | ||||||||||||||||||||||||||||||
Translations adjustments | (677 | ) | (285 | ) | ( 8,380 | ) | (787 | ) | (586 | ) | (336 | ) | — | (389 | ) | (85 | ) | (11,525 | ) | |||||||||||||||||||||
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| |||||||||||||||||||||
Net final carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
At December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 30,675 | 200,450 | 986,487 | 394,077 | 43,146 | 176,869 | 7,245 | 9,177 | 99,831 | 1,947,957 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (35,479 | ) | (416,029 | ) | (201.815 | ) | (27,279 | ) | (120,333 | ) | (4 | ) | — | — | (800,939 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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F-73
(All amounts expressed in thousands of S/ unless otherwise stated)
Furniture and | Other | Replacement | In-transit | Work | ||||||||||||||||||||||||||||||||||||
Land | Buildings | Machinery | Vehicles | fixtures | equipment | units | units | in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 30,675 | 200,450 | 986,487 | 394,077 | 43,146 | 176,869 | 7,245 | 9,177 | 99,831 | 1,947,957 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (35,479 | ) | (416,029 | ) | (201,815 | ) | (27,279 | ) | (120,333 | ) | (4 | ) | — | — | (800,939 | ) | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | 99,831 | 1,147,018 | ||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||
Net initial carrying amount | 30,675 | 164,971 | 570,458 | 192,262 | 15,867 | 56,536 | 7,241 | 9,177 | �� | 99,831 | 1,147,018 | |||||||||||||||||||||||||||||
Additions | — | 9,021 | 105,575 | 86,923 | 12,684 | 22,802 | — | 16,018 | 44,933 | 297,956 | ||||||||||||||||||||||||||||||
CAM Brazil deconsolidation | — | (839 | ) | ( 1,462 | ) | ( 633 | ) | (70 | ) | — | — | — | — | (3,004 | ) | |||||||||||||||||||||||||
Reclassifications | — | 36,180 | 32,389 | 9,300 | 1,245 | 7,272 | 10,529 | (23,092 | ) | (73,823 | ) | — | ||||||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | 68 | — | — | — | — | — | (36,785 | ) | (36,717 | ) | ||||||||||||||||||||||||||||
Transfers to accounts receivable | — | (3,635 | ) | — | — | (777 | ) | (4,442 | ) | — | — | (5,168 | ) | (14,022 | ) | |||||||||||||||||||||||||
Deduction for sale of assets | (2,001 | ) | (1,235 | ) | ( 35,118 | ) | (42,464 | ) | (1,491 | ) | (7,979 | ) | — | — | (14,185 | ) | (104,473 | ) | ||||||||||||||||||||||
Disposals - cost | — | (5,057 | ) | ( 10,224 | ) | ( 362 | ) | (2,299 | ) | (1,810 | ) | (2,326 | ) | (89 | ) | (1,206 | ) | (23,373 | ) | |||||||||||||||||||||
Depreciation charge | — | (13,598 | ) | (116,993 | ) | (54,808 | ) | (5,156 | ) | (24,225 | ) | — | — | — | (214,780 | ) | ||||||||||||||||||||||||
Depreciation for sale deductions | — | 1,003 | 23,907 | 32,566 | 799 | 7,751 | — | — | — | 66,026 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 3,060 | 4,373 | 323 | 503 | 1,331 | — | — | — | 9,590 | ||||||||||||||||||||||||||||||
Translations adjustments | (265 | ) | (306 | ) | ( 8,288 | ) | ( 2,221 | ) | (128 | ) | (506 | ) | — | (197 | ) | (553 | ) | (12,464 | ) | |||||||||||||||||||||
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| |||||||||||||||||||||
Net final carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 28,409 | 231,029 | 1,074,195 | 443,239 | 52,225 | 191,238 | 15,448 | 1,817 | 13,044 | 2,050,644 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (41,464 | ) | (509,510 | ) | (222,353 | ) | (31,048 | ) | (134,508 | ) | (4 | ) | — | — | (938,887 | ) | |||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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F-74
(All amounts expressed in thousands of S/ unless otherwise stated)
Land | Buildings | Machinery | Vehicles | Furniture and fixtures | Other equipment | Replacement units | In-transit units | Work in progress | Total | |||||||||||||||||||||||||||||||
At January 1, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 28,409 | 231,029 | 1,074,195 | 443,239 | 52,225 | 191,238 | 15,448 | 1,817 | 13,044 | 2,050,644 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (41,464 | ) | (509,510 | ) | (222,353 | ) | (31,048 | ) | (134,508 | ) | (4 | ) | — | — | (938,887 | ) | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||
Net initial carrying amount | 28,409 | 189,565 | 564,685 | 220,886 | 21,177 | 56,730 | 15,444 | 1,817 | 13,044 | 1,111,757 | ||||||||||||||||||||||||||||||
Additions | 6,238 | 12,126 | 81,378 | 50,574 | 4,423 | 24,870 | 553 | 19,312 | 13,594 | 213,068 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary – Adexus (Note 33 a) | — | 13,913 | — | 420 | 1,525 | 26,130 | — | — | — | 41,988 | ||||||||||||||||||||||||||||||
Reclassifications | — | 588 | 1,927 | ( 1,172 | ) | 4,456 | 13,156 | 2,583 | (17,349 | ) | (4,189 | ) | — | |||||||||||||||||||||||||||
Transfers from inventories | 2,941 | — | — | — | — | — | — | — | — | 2,941 | ||||||||||||||||||||||||||||||
Transfers to intangibles (Note 18) | — | — | — | — | — | — | — | — | (1,257 | ) | (1,257 | ) | ||||||||||||||||||||||||||||
Deduction for sale of assets | (5,256 | ) | (14,333 | ) | ( 60,374 | ) | (48,521 | ) | (1,724 | ) | (5,766 | ) | — | — | — | (135,974 | ) | |||||||||||||||||||||||
Disposals - cost | — | ( 1,232 | ) | ( 15,149 | ) | ( 1,354 | ) | (1,579 | ) | (4,364 | ) | (661 | ) | (2 | ) | — | (24,341 | ) | ||||||||||||||||||||||
Depreciation charge | — | (14,842 | ) | (104,638 | ) | (48,041 | ) | (7,548 | ) | (28,127 | ) | (5 | ) | — | — | (203,201 | ) | |||||||||||||||||||||||
Impairment loss | — | ( 73 | ) | ( 5,190 | ) | ( 317 | ) | (3,301 | ) | (382 | ) | — | — | — | (9,263 | ) | ||||||||||||||||||||||||
Depreciation for sale deductions | — | 8,113 | 48,266 | 29,536 | 1,026 | 1,907 | — | — | — | 88,848 | ||||||||||||||||||||||||||||||
Disposals - accumulated depreciation | — | 939 | 14,430 | 886 | 1,540 | 3,991 | — | — | — | 21,786 | ||||||||||||||||||||||||||||||
Translations adjustments | 282 | 130 | 5,987 | 922 | 176 | (344 | ) | — | — | 94 | 7,247 | |||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||
Net final carrying amount | 32,614 | 194,894 | 531,322 | 203,819 | 20,171 | 87,801 | 17,914 | 3,778 | 21,286 | 1,113,599 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
At December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 32,614 | 241,150 | 1,088,229 | 443,641 | 59,593 | 246,102 | 17,923 | 3,778 | 21,286 | 2,154,316 | ||||||||||||||||||||||||||||||
Accumulated depreciation and impairment | — | (46,256 | ) | (556,907 | ) | (239,822 | ) | (39,422 | ) | (158,301 | ) | (9 | ) | — | — | (1,040,717 | ) | |||||||||||||||||||||||
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| |||||||||||||||||||||
Net carrying amount | 32,614 | 194,894 | 531,322 | 203,819 | 20,171 | 87,801 | 17,914 | 3,778 | 21,286 | 1,113,599 | ||||||||||||||||||||||||||||||
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F-75
(All amounts expressed in thousands of S/ unless otherwise stated)
In 2016 and 2015 additions to the carrying amount correspond to the acquisition of fixed assets under finance leases or by direct acquisition.
The balance of work in progress at December 31, 2016 relates mainly to investments made by the subsidiary GMP S.A. for S/19 million (S/3 million at December 31, 2015) for the activities of oil drilling in order to increase the volume of exploitation of oil and gas. Additionally, the balance includes the construction work of Proyecto Hotel Larcomar for S/14.4 million (S/11 million in 2015).
In 2016 fixed asset sales amounted to S/70.5 million (S/55.8 million and S/42.4 million in 2015 and 2014, respectively) resulting in profits of S/18.4 million (profits of S/17.4 and S/4.3 million in 2015 and 2014, respectively) that are shown in the statement of income within “other income and expenses, net” (Note 29), the difference between the income proceeds from disposals of fixed assets and their profit are shown within “revenue from construction activities” and “gross profit”, respectively.
Depreciation of fixed assets and investment properties for the year is broken down in the statement of income as follows:
2014 | 2015 | 2016 | ||||||||||
Cost of services and goods | 168,634 | 196,725 | 191,113 | |||||||||
Administrative expenses | 14,525 | 18,055 | 12,088 | |||||||||
|
|
|
|
|
| |||||||
Total depreciation related to property, plant and equipment | 183,159 | 214,780 | 203,201 | |||||||||
|
|
|
|
|
| |||||||
(+) Depreciation related to investment property | 2,151 | 2,290 | 2,321 | |||||||||
|
|
|
|
|
| |||||||
Total depreciation charged to expenses | 185,310 | 217,070 | 205,522 | |||||||||
|
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|
|
|
|
The Group determined indicators of impairment of items of property, plant and equipment relating to: i) early termination of the GSP concession in respect of Consorcio Constructor Ductos del Sur (CCDS) and ii) assets understand-by status. Management calculated the recoverable amount of those assets as the fair value; fair value was determined taking into account appraisals performed by independent experts. The recognized impairment loss is mainly related to Consorcio Constructor Ductos del Sur (CCDS) for a total of S/4.1 million (Note5.1-f), GyM for S/2.39 million and Stracon GyM S.A. for S/2.34 million, which are shown within “Expenses by nature” (Note 27).
The net carrying amount of machinery and equipment, vehicles and furniture and fixtures acquired under finance lease agreements is broken down as follows:
At December 31, | ||||||||
2015 | 2016 | |||||||
Cost of acquisition | 735,591 | 800,927 | ||||||
Accumulated depreciation | (327,465 | ) | (386,411 | ) | ||||
|
|
|
| |||||
Net carrying amount | 408,126 | 414,516 | ||||||
|
|
|
|
Other financial liabilities are secured with items of property, plant and equipment for S/617.9 million (S/440.8 million in 2015).
At December 31, 2016 the Group have fully depreciated property, plant and equipment items that are still in use for S/151.6 million (S/155.8 million, at December 31, 2015).
F-76
(All amounts expressed in thousands of S/ unless otherwise stated)
18 | INTANGIBLE ASSETS, NET |
The movement of intangible assets and that of their related accumulated amortization, as of December 31, 2014, 2015 and 2016, is as follows:
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 95,342 | 75,812 | 438,167 | 57,791 | 27,547 | 217,214 | 3,623 | 13,288 | 11,636 | 940,420 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (2,868 | ) | (258,172 | ) | (28,256 | ) | (23,450 | ) | (118,612 | ) | (3,623 | ) | — | (2,559 | ) | (459,535 | ) | |||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 73,347 | 72,944 | 179,995 | 29,535 | 4,097 | 98,602 | — | 13,288 | 9,077 | 480,885 | ||||||||||||||||||||||||||||||
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net initial carrying amount | 73,347 | 72,944 | 179,995 | 29,535 | 4,097 | 98,602 | — | 13,288 | 9,077 | 480,885 | ||||||||||||||||||||||||||||||
Additions | — | — | 135,502 | — | 2,804 | — | — | — | 5,238 | 143,544 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Morelco (Note 33 b) | 103,055 | 33,326 | 847 | 30,318 | — | — | — | — | — | 167,546 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary - Coasin (Note 33 c) | 6,413 | — | 6 | — | 1,371 | — | — | — | — | 7,790 | ||||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | 1,845 | — | 1,677 | 64,759 | — | — | (1,677 | ) | 66,604 | |||||||||||||||||||||||||||||
Reclassifications | — | — | 920 | — | 180 | (251 | ) | — | — | (849 | ) | — | ||||||||||||||||||||||||||||
Derecognition - cost | — | — | (16,016 | ) | — | (29 | ) | — | — | — | (91 | ) | (16,136 | ) | ||||||||||||||||||||||||||
Amortization charge | — | — | (26,823 | ) | (14,987 | ) | (3,013 | ) | (31,780 | ) | — | — | (778 | ) | (77,381 | ) | ||||||||||||||||||||||||
Derecognition - accumulated amortization | — | — | 15,491 | — | 1 | — | — | — | — | 15,492 | ||||||||||||||||||||||||||||||
Amortization reversal (Vial y Vives) | — | 2,651 | — | — | — | — | — | — | — | 2,651 | ||||||||||||||||||||||||||||||
Translations adjustments | (2,666 | ) | (6,303 | ) | (88 | ) | (1,876 | ) | (1,319 | ) | — | — | — | — | (12,252 | ) | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net final carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
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|
|
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|
| |||||||||||||||||||||
At December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
Cost | 202,144 | 102,835 | 561,183 | 86,233 | 32,231 | 281,722 | 3,623 | 13,288 | 14,257 | 1,297,516 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (269,504 | ) | (43,243 | ) | (26,462 | ) | (150,392 | ) | (3,623 | ) | — | (3,337 | ) | (518,773 | ) | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
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|
F-77
(All amounts expressed in thousands of S/ unless otherwise stated)
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 202,144 | 102,835 | 561,183 | 86,233 | 32,231 | 281,722 | 3,623 | 13,288 | 14,257 | 1,297,516 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (269,504 | ) | (43,243 | ) | (26,462 | ) | (150,392 | ) | (3,623 | ) | — | (3,337 | ) | (518,773 | ) | |||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net initial carrying amount | 180,149 | 102,618 | 291,679 | 42,990 | 5,769 | 131,330 | — | 13,288 | 10,920 | 778,743 | ||||||||||||||||||||||||||||||
Additions | 5,418 | — | 165,149 | — | 9,141 | 11,842 | — | — | 3,429 | 194,979 | ||||||||||||||||||||||||||||||
CAM Brazil Deconsolidation | — | — | — | — | (129 | ) | — | — | — | — | (129 | ) | ||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | — | (68 | ) | 1,562 | 33,396 | — | — | 1,827 | 36,717 | |||||||||||||||||||||||||||||
Transfers to accounts receivable | — | — | (2,278 | ) | — | — | — | — | — | — | (2,278 | ) | ||||||||||||||||||||||||||||
Transfers topre-paid expenses | — | — | (10,923 | ) | — | — | — | — | — | (3,684 | ) | (14,607 | ) | |||||||||||||||||||||||||||
Reclassifications | — | — | — | — | 188 | (188 | ) | — | — | (3 | ) | (3 | ) | |||||||||||||||||||||||||||
Amortization charge | — | — | (25,683 | ) | (14,697 | ) | (6,033 | ) | (42,117 | ) | — | — | (825 | ) | (89,355 | ) | ||||||||||||||||||||||||
Translations adjustments | (15,335 | ) | (6,084 | ) | (51 | ) | (4,031 | ) | (280 | ) | — | — | — | — | (25,781 | ) | ||||||||||||||||||||||||
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net final carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||||||||||||
At December 31, 2015 | ||||||||||||||||||||||||||||||||||||||||
Cost | 192,227 | 96,751 | 716,125 | 82,134 | 42,761 | 326,723 | 3,623 | 13,288 | 15,425 | 1,489,057 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (298,232 | ) | (57,940 | ) | (32,543 | ) | (192,460 | ) | (3,623 | ) | — | (3,761 | ) | (610,771 | ) | |||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 |
F-78
(All amounts expressed in thousands of S/ unless otherwise stated)
Goodwill | Trade- marks | Concession rights | Contractual relations with clients | Internally generated software and development costs | Costs of development of wells | Development costs | Land use right | Other assets | Totals | |||||||||||||||||||||||||||||||
At January 1, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 192,227 | 96,751 | 716,125 | 82,134 | 42,761 | 326,723 | 3,623 | 13,288 | 15,425 | 1,489,057 | ||||||||||||||||||||||||||||||
Accumulated amortization | (21,995 | ) | (217 | ) | (298,232 | ) | (57,940 | ) | (32,543 | ) | (192,460 | ) | (3,623 | ) | — | (3,761 | ) | (610,771 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net initial carrying amount | 170,232 | 96,534 | 417,893 | 24,194 | 10,218 | 134,263 | — | 13,288 | 11,664 | 878,286 | ||||||||||||||||||||||||||||||
Additions | — | — | 118,222 | — | 16,477 | 17,772 | — | — | 19,255 | 183,568 | ||||||||||||||||||||||||||||||
Acquisition of subsidiary – Adexus (Note 33 a) | 930 | 9,088 | 6,090 | 12,822 | — | — | — | — | 4,203 | 33,133 | ||||||||||||||||||||||||||||||
Transfers from assets under construction (Note 17) | — | — | — | — | — | — | — | — | 1,257 | 1,257 | ||||||||||||||||||||||||||||||
Reclasifications | — | — | 5,258 | — | 345 | — | — | — | (5,603 | ) | — | |||||||||||||||||||||||||||||
Disposals – net cost | — | — | (1,395 | ) | — | — | (2,395 | ) | — | — | — | (3,790 | ) | |||||||||||||||||||||||||||
Amortization charge | — | — | (28,206 | ) | (4,376 | ) | (8,043 | ) | (40,918 | ) | — | — | (1,200 | ) | (82,743 | ) | ||||||||||||||||||||||||
Impairment loss | (38,680 | ) | (15,628 | ) | — | — | — | — | — | — | — | (54,308 | ) | |||||||||||||||||||||||||||
Translations adjustments | 12,038 | 3,672 | (102 | ) | 171 | 1,024 | — | — | — | (78 | ) | 2,149 | ||||||||||||||||||||||||||||
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net final carrying amount | 144,520 | 93,666 | 517,760 | 32,811 | 20,021 | 108,722 | — | 13,288 | 29,498 | 960,286 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
| |||||||||||||||||||||
At December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
Cost | 205,195 | 109,511 | 844,213 | 95,127 | 60,607 | 342,100 | 3,623 | 13,288 | 34,294 | 1,707,958 | ||||||||||||||||||||||||||||||
Accumulated amortization and impairment | (60,675 | ) | (15,845 | ) | (326,453 | ) | (62,316 | ) | (40,586 | ) | (233,378 | ) | (3,623 | ) | — | (4,796 | ) | (747,672 | ) | |||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net carrying amount | 144,520 | 93,666 | 517,760 | 32,811 | 20,021 | 108,722 | — | 13,288 | 29,498 | 960,286 | ||||||||||||||||||||||||||||||
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|
|
F-79
(All amounts expressed in thousands of S/ unless otherwise stated)
a) | Goodwill - |
Management reviews the results of its businesses based on the type of economic activity carried out.
At December 31 goodwill allocated to cash-generating units (CGU) are:
2015 | 2016 | |||||||
Engineering and construction | 125,514 | 98,587 | ||||||
Electromechanical | 20,737 | 20,737 | ||||||
Mining and construction services | 13,366 | 13,366 | ||||||
IT equipment and services | 4,172 | 5,102 | ||||||
Telecommunications services | 6,443 | 6,728 | ||||||
|
|
|
| |||||
170,232 | 144,520 | |||||||
|
|
|
|
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 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.
As a result of these assessments an impairment was identified in one of the CGU’s, Vial y Vives—DSD, and was accounted as of December 31st, 2016. The loss to impairment was generated due to the decrease in the expected flows, as a result of the reduction of the contracts linked to the Backlog. The amount of the impairment it impacted the total amount of goodwill was S/38.7 million.
Major assumptions used by the Group in determining the fair value less cost of disposal and the value in use were as follows:
Engineering and construction | Electro- mechanical | Mining and construction | IT equipment and services | Telecommunication services | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
2015 - | ||||||||||||||||||||
Gross margin | 10.80 to 11.50 | 10.33 | 11.81 | 24.31 | 14.39 | |||||||||||||||
Terminal growth rate | 3.00 | 2.00 | 2.00 | — | — | |||||||||||||||
Discount rate | 9.66 to 12.72 | 11.01 | 11.71 | 21.74 | 10.02 | |||||||||||||||
2016 - | ||||||||||||||||||||
Gross margin | 9.50 to 12.99 | 11.10 | 12.04 | 15.00 to 23.19 | 11.75 | |||||||||||||||
Terminal growth rate | 3.00 to 4.00 | 2.00 | 2.00 | 2.00 to 3.00 | 3.00 | |||||||||||||||
Discount rate | 9.87 to 11.85 | 11.48 | 11.31 | 14.64 to 24.10 | 10.80 |
These assumptions have been used for the analysis of each CGU included in the operating economic activities for a period of 5 years.
Management determines the budgeted gross margins based on past results and market development expectations. Average growth rates are consistent with those prevailing in the industry. Discount rates used arepre-tax orpost-tax as appropriate and reflect the specific risk related to the assessed CGUs.
b) | Trademarks - |
This item mainly comprises the trademarks acquired in the business combination processes with Vial y Vives S.A.C. (S/75.4 million) in October 2012; Morelco S.A.S. (S/33.33 million) in December 2014; and Adexus S.A. (S/9.1 million) in August 2016. Management determined that the brands obtained from Vial y Vives, Morelco and Adexus have indefinite lives; consequently, annual impairment tests are performed on these intangibles, as described in paragraph a) above.
F-80
(All amounts expressed in thousands of S/ unless otherwise stated)
As a result of these tests, at December 31, 2016, the Vial y Vives - DSD trademark was partially impaired, the amount of the impairment was S/15.6 million. No provision for impairment was considered necessary to be recorded for 2015.
Major assumptions used by the Group in determining the fair value less cost of disposal are as follows:
Engineering and construction and | IT equipment services | |||||||||||
Morelco % | Vial y Vives - DSD | Adexus % | ||||||||||
2015 - | ||||||||||||
Average revenue growth rate | 13.65 | 44.49 | — | |||||||||
Terminal growth rate | 3.00 | 3.00 | — | |||||||||
Discount rate | 12.72 | 9.66 | — | |||||||||
2016 - | ||||||||||||
Average revenue growth rate | 14.39 | 24.53 | 12.60 | |||||||||
Terminal growth rate | 3.00 | 4.00 | 3.00 | |||||||||
Discount rate | 11.85 | 9.87 | 16.05 |
c) | Concessions - |
The Concession’s intangibles at December 31, 2016 mainly consist of: i) EPC contract for S/405 million (S/317.5 million at December 31, 2015) comprising the construction of the second section of“Ancón-Huacho-Pativilca” highway; ii) improvement of highway for S/18.1 million (S/19.6 million at December 31, 2015), and iii) Borrowing costs that were capitalized for a total of S/22.5 at an interest rate ranging from 7.14% y 8.72% (S/7.7 million in 2015 at an interest rates ranging from 6.75% to 8.375%). By those contracts, the Concessionaire should perform activities to construct, improve and remediate road infrastructure during the Concession effective period.
d) | Costs of development of wells - |
Through one of its subsidiaries, the Group operates and extracts oil from two oil fields (Block I and Block V) located in the province of Talara in northern Peru. Both oil fields are operated under long-term service agreements by which the Group provides hydrocarbon extraction services to Perupetro.
On December 10, 2014 the Peruvian Government granted subsidiary GMP S.A. a right of exploiting for 30 years the oil blocks III and IV (owned by the Peruviangovernment-run entity- Perupetro) located in Talara, Piura, 230 wells and 330 wells respectively. The total investment expected to be made in both wells is estimated to be US$560 million; operations began in April 2015 in both blocks.
As part of the Group’s obligations under the relevant service agreements, certain costs will be incurred in preparing the wells in Blocks I, III, IV and V. These costs are capitalized as part of intangible assets at a carrying amount of S/80 million at December 31, 2016 (S/118.4 million at December 31, 2015).
All blocks are amortized on the basis of the useful lives of the wells (estimated to be 5 years for Blocks I and V and 10 years for Blocks III and IV), which is less than the total effective period of the service agreement with Perupetro.
e) | Amortization of intangible assets - |
Amortization of intangibles is broken down in the income statement as follows:
2014 | 2015 | 2016 | ||||||||||
Cost of sales and services (Note 27) | 68,089 | 81,841 | 74,849 | |||||||||
Administrative expenses (Note 27) | 6,641 | 7,514 | 7,894 | |||||||||
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| |||||||
74,730 | 89,355 | 82,743 | ||||||||||
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F-81
(All amounts expressed in thousands of S/ unless otherwise stated)
19 | OTHER FINANCIAL LIABILITIES |
At December 31 this account comprises:
Total | Current | Non-current | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Bank overdrafts | — | 8,396 | — | 8,396 | — | — | ||||||||||||||||||
Bank loans | 1,480,071 | 2,131,901 | 1,082,860 | 1,835,340 | 397,211 | 296,561 | ||||||||||||||||||
Finance leases | 301,285 | 240,141 | 145,160 | 117,307 | 156,125 | 122,834 | ||||||||||||||||||
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| |||||||||||||
1,781,356 | 2,380,438 | 1,228,020 | 1,961,043 | 553,336 | 419,395 | |||||||||||||||||||
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|
a) | Bank loans - |
At December 31, 2016 and 2015, this item comprises bank borrowings contracted in local and foreign currency intended for working capital. These obligations are subject to fixed interest rates ranging between 1.0% and 14.4% in 2016 and between 1.0% and 13.1% in 2015.
Current | Non-current | |||||||||||||||||||||||
Interest | Date of | At December 31 | At December 31 | |||||||||||||||||||||
rate | maturity | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
Graña y Montero S.A.A. | | Libor USD 3M + from 4.9% to 5.5% | | 2016 / 2020 | 102,776 | 932,114 | — | — | ||||||||||||||||
GyM S.A. | 1.00% / 7.80% | 2016 / 2020 | 535,776 | 492,910 | 286,671 | 187,029 | ||||||||||||||||||
Viva GyM S.A. | 6.75% / 8.90% | 2016 / 2017 | 220,423 | 201,609 | 8,372 | — | ||||||||||||||||||
GMP S.A. | 3.65% / 6.04% | 2016 / 2020 | 95,824 | 77,857 | 70,220 | 71,453 | ||||||||||||||||||
CAM Holding S.A. | 1.30% / 14.43% | 2016 / 2018 | 42,534 | 69,702 | 31,948 | 24,889 | ||||||||||||||||||
Adexus S.A. | 5.9% | 2019 | — | 42,782 | — | 13,190 | ||||||||||||||||||
GMD S.A. | 6.20% / 7.47% | 2016 / 2017 | 30,107 | 14,746 | — | — | ||||||||||||||||||
Norvial S.A. | 8.37% | 2016 | 54,706 | — | — | — | ||||||||||||||||||
Others | 5.56% / 7.18% | 2016 | 714 | 3,620 | — | — | ||||||||||||||||||
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|
|
| |||||||||||||||||
1,082,860 | 1,835,340 | 397,211 | 296,561 | |||||||||||||||||||||
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|
|
i) | Credit Suisse Syndicated Loan - |
In December 2015, the Group entered into a medium term loan credit agreement for up to US$200 million (equivalent to S/672 million), with Credit Suisse AG, Cayman Islands Branch, Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC. The initial term of the loan was set at five years, with quarterly installments starting to be paid on the 18th month. The loan accrued interest at a rate of three months Libor plus 3.9% per year. The proceeds were used to finance the equity interest in GSP. As of December 31, 2016, the outstanding balance amounted to US$148.5 million (equivalent to S/498.8 million), and it is included within the current portion.
On June 27, 2017, the Group renegotiated the terms of this loan to clear breaches related to the termination of the GSP concession. The new terms require repayment by December, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the amendment. The syndicated loan accrues interest at LIBOR plus 4.90% per year. Under the amendment, the Group is prohibited from paying dividends until the loan is fully repaid. The loan is secured by (i) a lien on Concar’s shares; (ii) a lien on Almonte’s shares; (iii) a mortgage over certain real estate properties in Miraflores and Surquillo; (iv) liens on certain accounts; (v) a lien on GyM’s share; (vi) a second lien on CAM Holding SPA’s shares; (vii) a second lien on CAM Servicios del Perú S.A.’s shares; and (viii) a first lien on cash flows from the sale of certain assets.
The agreement contains certain covenants, including the obligation by the Company to maintain the following financial ratios during the term of the agreement: (1) the Consolidated EBITDA to Consolidated Interest Expense Ratio shall not be less than 3.5:1.0 commencing on April 1, 2018 and thereafter; (2) the Consolidated Leverage Ratio (as defined therein) shall not be greater than 3.5:1.0 at any time during the period commencing on December 31, 2016 and ending on March 31, 2017; 3.5:1.0 at any time during the period commencing on July 1, 2017 and ending on September 30, 2017; and no greater than 2.5:1.0 at any time thereafter; and (3) the Debt Service Coverage Ratio as of the last day of any fiscal quarter of the borrower, falling on or after the first anniversary of the closing date, shall not be less than 1.5:1.0, commencing on April 1, 2018 and thereafter.
F-82
(All amounts expressed in thousands of S/ unless otherwise stated)
As of the date of this annual report, we are under continuing default in this financing due to the non-delivery of the audited consolidated financial statements of Graña y Montero and GyM for the 2016 and 2017 fiscal years. The syndicated loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. We are in the process of obtaining waivers from the lenders.
As of to date, the outstanding balance of the loan capital is US$81.1 million (equivalent to S/264.9 million).
ii) | GSP Bridge Loan - |
At December 31, 2016, the current balance includes US$129 million (equivalent to S/433.3 million) of the corporate guarantee issued by the Company to secure the bridge loan given to GSP, which was enforceable at that date. On June, 2017, the Company has reached a new term loan with Natixis, BBVA, SMBC and MUFJ for US$78.7 million (equivalent to S/264.8 million), the proceeds of which were used to repay the GSP bridge loan.
The maturity is June, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year. The new term contains the following covenant: the consolidated leverage ratio shall not be more than 3.5:1.0 at any time, and accrues interest at LIBOR plus 4.50% per year, which increases to 5.00% during the second year and 5.50% during the third year. Under the new term, the Group is prohibited from paying dividends until the loan is fully repaid. Also, the new term is secured by (i) a first lien on rights to receive the termination payment derived from the GSP termination (the “VCN”), (ii) a second lien on our shares of GyM and Concar; (iii) a second lien on our shares of Almonte; (iv) a second lien on certain real estate properties in Miraflores and Surquillo; (v) a second lien on our shares of CAM Holding SPA; (vi) a second lien on our shares of CAM Servicios del Perú S.A.; and (vii) a first lien on cash flows from the sale of certain assets.
As of the date of this annual report, we are under certain continuing defaults under the term loan with respect to certain financial ratios and the non-delivery of the audited consolidated financial statements of Graña y Montero for the 2016 and 2017 fiscal years. The term loan required that we provide the financial statements for the 2016 and 2017 fiscal years no later than April 30, 2018. As of March 2018, (a) our Consolidated Leverage Ratio (as defined therein) was 2.62, rather than no more than 2.50 as required under the syndicated loan and (b) [●]. We are in the process of obtaining waivers from the lenders.
b) | Finance lease obligations - |
Current | Non-current | |||||||||||||||||||||||
Interest | Date of | At December 31 | At December 31 | |||||||||||||||||||||
rate | maturity | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
GyM S.A. | 1.90% / 8.96% | 2016 / 2023 | 116,205 | 80,570 | 88,715 | 58,937 | ||||||||||||||||||
GMD S.A. | 4.99% / 7.00% | 2016 / 2020 | 10,474 | 10,404 | 20,024 | 12,099 | ||||||||||||||||||
Adexus S.A. | 3.36% / 18.00% | 2016 / 2020 | — | 9,884 | — | 12,287 | ||||||||||||||||||
Viva GyM S.A. | 7.30% / 8.95% | 2018 / 2022 | 3,957 | 4,847 | 19,190 | 16,541 | ||||||||||||||||||
GMP S.A. | 2.65% / 7.20% | 2016 / 2018 | 5,272 | 4,206 | 13,087 | 9,035 | ||||||||||||||||||
CAM Holding S.A. | 7.19% / 9.27% | 2016 / 2020 | 4,633 | 3,729 | 12,382 | 10,590 | ||||||||||||||||||
Others | 3.23% / 7.75% | 2016 / 2019 | 4,619 | 3,667 | 2,727 | 3,345 | ||||||||||||||||||
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| |||||||||||||||||
145,160 | 117,307 | 156,125 | 122,834 | |||||||||||||||||||||
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|
The minimum payments to be made by maturity and present value of the finance lease obligations are as follows:
At December 31, | ||||||||
2015 | 2016 | |||||||
Up to 1 year | 157,957 | 127,496 | ||||||
From 1 to 5 years | 160,824 | 112,769 | ||||||
Over 5 years | 10,431 | 19,506 | ||||||
|
|
|
| |||||
329,212 | 259,771 | |||||||
Future financial charges on finance leases | (27,927 | ) | (19,630 | ) | ||||
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|
|
| |||||
Present value of the obligations for finance lease contracts | 301,285 | 240,141 | ||||||
|
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|
F-83
(All amounts expressed in thousands of S/ unless otherwise stated)
The present value of finance lease obligations is broken down as follows:
At December 31, | ||||||||
2015 | 2016 | |||||||
Up to 1 year | 145,160 | 117,307 | ||||||
From 1 year to 5 years | 146,316 | 105,978 | ||||||
Over 5 years | 9,809 | 16,856 | ||||||
|
|
|
| |||||
301,285 | 240,141 | |||||||
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|
c) | Fair value of borrowings - |
The carrying amount and fair value of borrowings are broken down as follows:
Carrying amount | Fair value | |||||||||||||||
At December 31, | At December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Bank overdrafts | — | 8,396 | — | 8,396 | ||||||||||||
Loans | 1,480,071 | 2,131,901 | 1,493,981 | 2,142,890 | ||||||||||||
Leases | 301,285 | 240,141 | 308,202 | 240,089 | ||||||||||||
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| |||||||||
1,781,356 | 2,380,438 | 1,802,183 | 2,391,375 | |||||||||||||
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Fair values are determined based on discounted expected cash flows using borrowing rates between 1.3% and 14.3% (between 4.8% and 13.1% in 2015) that corresponds to level 2 of the fair value hierarchy.
20 | BONDS |
At December 31 this account comprises:
Total | Current | Non-current | ||||||||||||||||||||||
2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||||||||||
GyM Ferrovías | 607,868 | 604,031 | 31,546 | 20,551 | 576,322 | 583,480 | ||||||||||||||||||
Norvial | 186,223 | 363,683 | 5,537 | 25,540 | 180,686 | 338,143 | ||||||||||||||||||
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| |||||||||||||
794,091 | 967,714 | 37,083 | 46,091 | 757,008 | 921,623 | |||||||||||||||||||
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GyM Ferrovías S.A. -
In February 2015, subsidiary GyM Ferrovías carried out an international issue of corporate bonds under the U.S. Regulation S. The issue was carried out in Soles VAC (the Spanish acronym for constant value update) for a total amount of S/629 million. The costs of issue in this transaction were S/22 million. Maturity of these bonds is November 2039 and interest is accrued at a rate of 4.75% (plus VAC adjustment); they have a risk rating of AA+ (local level) granted by Apoyo & Asociados Internacionales Clasificadora de Riesgo and a guarantee scheme that includes a mortgage on the concession to which GyM Ferrovías is the concessionaire, security interest over the shares of GyM Ferrovías, Cession of the Collection Rights of the Administration Trust, a Flow and Reserve Account Trust for the Debt, Operation and Maintenance Service and Capex currently in progress. At December 31, 2016 the Group amortized a total of S/38.4 million (S/16 million in 2015).
At December 31, 2016 the balance included accrued interest and VAC adjustments payable for S/34.5 million (S/17.3 million at December 31, 2015).
As part of the process of bond structuring, GyM Ferrovías engaged to report on and verify the following covenants measured on the basis of the individual financial statements:
• | Maintaining debt service coverage ratio of not less than 1.2 times. |
F-84
(All amounts expressed in thousands of S/ unless otherwise stated)
• | Mantaining a constant minimum balance of trust equal to a quarter of operating and maintenance costs (including VAT) |
• | Maintaining a constant minimum balance of trust equal to two coupons as per schedule. |
Norvial S.A. -
In July 2015, Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. The first issue was for S/80 million at 5 years, bearing an interest rate of 6.75% and funds drawdown performed on July 23, 2015. The second issue was for S/285 million at 11.5 years, bearing an interest rate of 8.375%, structured in 3 disbursements: the first disbursement of S/105 million was on July 23, 2015; the second disbursement of S/100 million was on January 25, 2016; and the third disbursement of S/80 million will be made effective in July 25, 2016. The issues costs corresponding to the first issue and the first disbursement of the second issue were for S/3.9 million. Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA.
This financing transaction has been secured by (i) a cash flow trust, related to the consideration and the regulatory rate; (ii) a mortgage on the concession in which Norvial S.A. is a concessionaire; (iii) a security on shares; (iv) collection rights and (v) in general, all those additional collaterals given to the secured creditors.
The capital raised is intended to finance the construction of the Second Phase of Red Vial No.5 and the financing of VAT arising from project-related expenses.
At December 31, 2016 the balance included interest payables for S/4.9 million (S/2.7 million at December 31, 2015).
As part of the process of bond structuring, Norvial engaged to report on and verify periodically the compliance of the following covenants:
• | Debt service coverage ratio of not less than 1.3 times. |
• | Proforma gearing ratio lower than 4 times. |
As of December 31, 2015 and 2016 both Companies have complied with their covenants.
Fair value of the bonds of both Companies at December 31, 2016 amounted to S/1,055 million (S/769.5 million at December 31, 2015), which was calculated under discounted cash flows method, using rates between 4.20% and 7.99% (between 4.88% and 8.89% at December 31, 2015), which are within level 2 of the fair value hierarchy.
21 | TRADE ACCOUNTS PAYABLE |
At December 31 this account comprises:
2015 | 2016 | |||||||
Unbilled services received | 703,801 | 924,025 | ||||||
Invoices payable | 911,793 | 350,559 | ||||||
Bills of exchange payable | 20,168 | 2,033 | ||||||
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1,635,762 | 1,276,617 | |||||||
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Unbilled services received include the estimate made by Management of the valuation of the percentage of completion, amounting to S/127.2 million at December 31, 2016 (S/164.1 million at December 31, 2015).
F-85
(All amounts expressed in thousands of S/ unless otherwise stated)
22 | OTHER ACCOUNTS PAYABLE |
At December 31, this account comprises:
2015 | 2016 | |||||||
Advances received from customers | 607,097 | 810,755 | ||||||
Salaries and profit sharing payable | 232,102 | 176,022 | ||||||
GSP performance guarantee (Note37-a-i) | — | 176,401 | ||||||
Put option liability on Morelco acquisition (Note 29 and33-b) | 111,349 | 110,604 | ||||||
Third-party loans | 94,553 | 69,991 | ||||||
VAT payable | 77,461 | 51,607 | ||||||
Other taxes payable | 51,893 | 50,548 | ||||||
Supplier funding | 59,992 | 40,612 | ||||||
Acquisition ofnon-controlling interest (Note36-a,i) | — | 32,102 | ||||||
Guarantee deposits | 26,806 | 16,799 | ||||||
VAT payable - Fractional | — | 14,170 | ||||||
Post-retirement benefits | 9,043 | 9,088 | ||||||
Interest payable to Oiltanking Perú S.A.C. | 9,015 | — | ||||||
Other accounts payables | 33,085 | 50,411 | ||||||
|
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| |||||
1,312,396 | 1,609,110 | |||||||
Lessnon-current portion: | ||||||||
Advances received from customers | (80,936 | ) | (300,388 | ) | ||||
Put option liability - Morelco acquisition | (111,349 | ) | (110,604 | ) | ||||
Third-party loans | — | (32,000 | ) | |||||
Supplier funding | (33,031 | ) | (14,086 | ) | ||||
VAT payable - Fractional | — | (12,099 | ) | |||||
Post-retirement benefits | (9,043 | ) | (9,088 | ) | ||||
Others | (12,037 | ) | (34,538 | ) | ||||
|
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| |||||
(246,396 | ) | (512,803 | ) | |||||
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| |||||
Current portion | 1,066,000 | 1,096,307 | ||||||
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|
Advances received from customers relate mainly to construction projects and are discounted from billing under the terms of the relevant agreements.
The fair value of the short-term payables approximates their carrying amount due to their short-term maturities. Thenon-current portion, mainly comprisesnon-financial liabilities such as advances received from customers; the remaining balance is not significant for any period shown in the financial statements.
23 | PROVISIONS |
At December 31 this account comprises:
2015 | 2016 | |||||||
Legal claims | 15,000 | 15,732 | ||||||
Contingent liabilities from the acquisition of Morelco | 15,374 | 5,182 | ||||||
Contingent liabilities from the acquisition of Coasin and Vial yVives - DSD | 7,586 | 1,815 | ||||||
Contingent liabilities from the acquisition of Adexus | — | 1,128 | ||||||
Contingent liabilities from CAM acquisition | 3,819 | — | ||||||
Provision for well closure (Note 5.1 d) | 19,149 | 17,216 | ||||||
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| |||||
60,928 | 41,073 | |||||||
Less: | ||||||||
Non-current portion | (47,460 | ) | (26,542 | ) | ||||
|
|
|
| |||||
Current portion | 13,468 | 14,531 | ||||||
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|
F-86
(All amounts expressed in thousands of S/ unless otherwise stated)
At December 31, 2016, legal claims mainly comprise provisions for labor liabilities and tax claims for S/14.7 million (S/8 million at December 31, 2015). Claims with the tax authority have been accounted for based on management estimates of the amounts the Group would most likely be required to pay in regard of these current court actions. Due to the fact those amounts will depend on the tax authority, the Group does not have an estimated timing of when these cash outflows would be required.
This legal claims balance also includes court actions brought against the Group by the Peruvian energy regulator (OSINERGMIN) resulting from the storage of hydrocarbons and the applicable environmental laws and regulations for S/6.3 million (S/6.1 million at December 31, 2015).
The gross movement of other provisions is broken down as follows:
Other provisions | Legal claims | Contingent liabilities resulting from acquisitions | Provision for well closure | Total | ||||||||||||
At January 1, 2015 | 13,056 | 45,349 | 7,210 | 65,615 | ||||||||||||
Additions | 6,297 | — | 11,943 | 18,240 | ||||||||||||
Reversals | — | (7,796 | ) | — | (7,796 | ) | ||||||||||
Offsetting | — | (1,216 | ) | — | (1,216 | ) | ||||||||||
Deconsolidation of CAM Brazil | (2,353 | ) | — | — | (2,353 | ) | ||||||||||
Payments | (1,580 | ) | (5,186 | ) | (4 | ) | (6,770 | ) | ||||||||
Translation adjustments | (420 | ) | (4,372 | ) | — | (4,792 | ) | |||||||||
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| |||||||||
At December 31, 2015 | 15,000 | 26,779 | 19,149 | 60,928 | ||||||||||||
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At January 1, 2016 | 15,000 | 26,779 | 19,149 | 60,928 | ||||||||||||
Additions | 9,486 | — | 462 | 9,948 | ||||||||||||
Acquisition of subsidiaries | 1,926 | 1,149 | — | 3,075 | ||||||||||||
Reversals | (10,569 | ) | (17,883 | ) | (2,395 | ) | (30,847 | ) | ||||||||
Payments | (298 | ) | (2,458 | ) | — | (2,756 | ) | |||||||||
Translation adjustments | 187 | 538 | — | 725 | ||||||||||||
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At December 31, 2016 | 15,732 | 8,125 | 17,216 | 41,073 | ||||||||||||
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The reverses relate mainly to contingent liabilities in 2016 from subsidiaries Morelco, Vial y Vives - DSD and CAM Chile for S/10.1 million, S/4.0 million and S/3.8 million, respectively (from subsidiaries CAM Chile for S/7.8 million in 2015).
24 | EQUITY |
a) | Capital - |
At December 31, 2016 and 2015, the authorized, subscribed andpaid-in capital, according to the Company’s by laws, and its amendments, comprises 660,053,790 common shares at S/1.00 par value each.
At December 31, 2014 a total of 253,635,480 shares were represented by ADS, equivalent to 50,727,096 ADS at a ratio of 5 shares per ADS; a total of 250,860,370 shares were represented by ADS, equivalent to 50,172,074 ADSs at December 31, 2015 and a total of 264,809,545 shares were represented by ADS, equivalent to 52,961,909 ADSs at December 31, 2016
F-87
(All amounts expressed in thousands of S/ unless otherwise stated)
As of December 31, 2016 the Company’s shareholding structure was as follows:
Percentage of individual interest in capital | Number of shareholders | Total percentage of interest | ||||||
Up to 1.00 | 1,988 | 15.77 | ||||||
From 1.01 to 5.00 | 9 | 21.13 | ||||||
From 5.01 to 10.00 | 1 | 5.12 | ||||||
Over 10 | 2 | 57.98 | ||||||
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2,000 | 100.00 | |||||||
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As of December 31, 2016 theyear-end quoted price of the Company’s shares was S/4.7 per share, with a trading frequency of 97.60% (quoted price of S/1.97 per share and a trading frequency of 91.94% at December 31, 2015).
b) | Other reserves - |
This item comprises legal reserve exclusively. In accordance with Peruvian Company Law, the Company’s legal reserve is formed by the transfer of 10% of the annual net profits, up to a maximum of 20% of thepaid-in capital. In the absence of profits or freely available reserves, this legal reserve can be applied to offset losses but it has to be replenished with the profits to be obtained in subsequent years. This reserve can also be capitalized but its subsequent replenishment is equally mandatory. At December 31, 2016 and 2015 the legal reserve balance reached the above-mentioned limit.
c) | Voluntary reserve - |
At December 31, 2016 and 2015 the balance of this reserve of S/29.97 million correspond to the excess legal reserve, which is above the limit established of 20% ofpaid-in capital.
d) | Share premium - |
This item comprises the excess of the total proceeds obtained for the issuance of common shares in 2013 in comparison with the nominal value of those for S/1,055,488.
Also, this balance shows the difference between the par value and transaction value of thenon-controlling interest acquired. A detail of this transactions is disclosed in Note 36.
e) | Retained earnings - |
Dividends to be distributed to shareholders other than legally resident entities are subject to a 4.1% rate (based on 2014’s profits), 6.8% (based on 2015’s and 2016’s profits) and 5.00% (on profits for 2017 and onwards) of income tax payable by these shareholders; this tax rate should be withheld and settled by the Company. Dividends were distributed over 2016 and 2015 (Note 34).
F-88
(All amounts expressed in thousands of S/ unless otherwise stated)
25 | DEFERRED INCOME TAX |
Deferred income tax is broken down by its estimated reversal period as follows:
At December 31, | ||||||||
2015 | 2016 | |||||||
Deferred income tax asset: | ||||||||
Reversal expected in the following 12 months | 76,469 | 86,990 | ||||||
Reversal expected after 12 months | 71,376 | 340,018 | ||||||
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Total deferred tax asset | 147,845 | 427,008 | ||||||
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Deferred income tax liability: | ||||||||
Reversal expected in the following 12 months | (10,551 | ) | (166 | ) | ||||
Reversal expected after 12 months | (88,612 | ) | (73,003 | ) | ||||
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Total deferred tax liability | (99,163 | ) | (73,169 | ) | ||||
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Deferred income tax (liability) asset, net | 48,682 | 353,839 | ||||||
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The gross movement of the deferred income tax item is as follows:
2014 | 2015 | 2016 | ||||||||||
Deferred income tax asset (liability), net as of January 1 | (3,033 | ) | 58,723 | 48,682 | ||||||||
Credit to income statement (Note 29) | 57,689 | (175 | ) | 263,806 | ||||||||
Adjustment for changes in rates of income tax | 2,746 | (2,008 | ) | 17,105 | ||||||||
Credit (charge) to other comprehensive income | (1,328 | ) | (7,298 | ) | 15,004 | |||||||
Tax charged to equity | — | — | 159 | |||||||||
Acquisition of a subsidiary | 6,172 | — | 10,363 | |||||||||
Acquisition of joint operation | — | 1,476 | — | |||||||||
Other movements | (3,523 | ) | (2,036 | ) | (1,280 | ) | ||||||
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Total as of December 31 | 58,723 | 48,682 | 353,839 | |||||||||
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F-89
(All amounts expressed in thousands of S/ unless otherwise stated)
The movement of deferred tax assets and liabilities in the year, without taking into account the offsetting of balances, is as follows:
Deferred income tax liability | Non-taxable income | Difference in depreciation rates | Fair value gains | Outstanding work in progress | Difference in depreciation rates of assets leased | Receivables from local Government | Borrowing costs recognized as assets | Purchase price allocation | Others | Total | ||||||||||||||||||||||||||||||
At January 1, 2014 | 14,190 | 13,121 | 27,857 | 86,774 | 10,500 | — | — | — | 3,628 | 156,070 | ||||||||||||||||||||||||||||||
Charge (credit) to P&L | — | 9,936 | (8,585 | ) | (72,488 | ) | 219 | — | — | — | 5,754 | (65,164 | ) | |||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | — | — | — | — | — | — | 1,328 | 1,328 | ||||||||||||||||||||||||||||||
Reclassification of prior years | — | 13,458 | (5,540 | ) | 82 | (274 | ) | — | — | — | 7,777 | 15,503 | ||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | — | 3,047 | 3,047 | ||||||||||||||||||||||||||||||
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At December 31, 2014 | 14,190 | 36,515 | 13,732 | 14,368 | 10,445 | — | — | — | 21,534 | 110,784 | ||||||||||||||||||||||||||||||
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Charge (credit) to P&L | — | 2,791 | 15,338 | 16,393 | — | 9,986 | 15,178 | — | 1,347 | 61,032 | ||||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | 7,016 | — | — | — | — | — | 281 | 7,297 | ||||||||||||||||||||||||||||||
Reclassification of prior years | (14,190 | ) | 5,849 | (5,402 | ) | (6,038 | ) | (10,445 | ) | 15,557 | — | — | (11,354 | ) | (26,020 | ) | ||||||||||||||||||||||||
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At December 31, 2015 | — | 45,155 | 30,684 | 24,723 | — | 25,543 | 15,178 | — | 11,808 | 153,093 | ||||||||||||||||||||||||||||||
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Charge (credit) to P&L | — | 16,595 | 13,587 | (16,481 | ) | — | 3,324 | 6,240 | — | 2,619 | 25,883 | |||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | (15,348 | ) | — | — | — | — | — | — | (15,348 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | — | — | (28,923 | ) | — | — | — | — | 30,187 | (1,264 | ) | — | ||||||||||||||||||||||||||||
Acquisition of Adexus | — | — | — | — | — | — | — | (3,069 | ) | — | (3,069 | ) | ||||||||||||||||||||||||||||
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At December 31, 2016 | — | 61,750 | — | 2,452 | — | 28,867 | 21,418 | 27,118 | 13,163 | 160,559 | ||||||||||||||||||||||||||||||
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F-90
(All amounts expressed in thousands of S/ unless otherwise stated)
Deferred income tax asset | Provisions | Accelerated tax depreciation | Tax losses | Outstanding work in progress | Provision for unpaid vacations | Investments in subsidiaries | Impairment | Tax goodwill | Others | Total | ||||||||||||||||||||||||||||||
At January 1, 2014 | 23,887 | 8,343 | 52,880 | 51,645 | 7,294 | — | — | — | 8,990 | 153,039 | ||||||||||||||||||||||||||||||
Credit (charge) to P&L | 1,579 | 9,054 | 2,492 | (24,886 | ) | 4,083 | 5,613 | — | — | (2,664 | ) | (4,729 | ) | |||||||||||||||||||||||||||
Acquisition of Coasin (Note32-c) | 16 | — | — | — | — | — | — | — | — | 16 | ||||||||||||||||||||||||||||||
Acquisition of Morelco (Note32-b) | — | — | — | — | — | 6,156 | — | — | — | 6,156 | ||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | (473 | ) | (473 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | 324 | 5,953 | 3,664 | (2,818 | ) | 5,596 | — | — | — | 2,783 | 15,502 | |||||||||||||||||||||||||||||
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At December 31, 2014 | 25,806 | 23,350 | 59,036 | 23,941 | 16,973 | 11,769 | — | — | 8,636 | 169,511 | ||||||||||||||||||||||||||||||
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Credit (charge) to P&L | 342 | 4,076 | 26,661 | 18,623 | 772 | (13,832 | ) | — | 17,522 | 4,646 | 58,810 | |||||||||||||||||||||||||||||
Acquisition of joint operation | — | — | — | — | — | 1,476 | — | — | — | 1,476 | ||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | (1,895 | ) | (2,002 | ) | ||||||||||||||||||||||||||||
Reclassification of prior years | (5,199 | ) | (12,534 | ) | 5,615 | (19,544 | ) | (2,768 | ) | 2,063 | ) | — | — | 5,263 | (26,020 | ) | ||||||||||||||||||||||||
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At December 31, 2015 | 20,973 | 14,892 | 91,313 | 24,103 | 14,977 | 1,476 | — | 17,522 | 16,463 | 201,775 | ||||||||||||||||||||||||||||||
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Charge (credit) to P&L | 84,571 | 1,489 | 51,163 | (6,486 | ) | (2,005 | ) | (312 | ) | 172,052 | 3,003 | 3,322 | 306,794 | |||||||||||||||||||||||||||
Charge (credit) to equity | 159 | — | — | — | — | — | — | — | — | 159 | ||||||||||||||||||||||||||||||
Charge (credit) to OCI | — | — | — | — | — | — | — | — | (343 | ) | (343 | ) | ||||||||||||||||||||||||||||
Acquisition of Adexus (Note32-a) | — | — | 10,607 | — | — | — | — | — | (3,313 | ) | 7,294 | |||||||||||||||||||||||||||||
Others | — | — | — | — | — | (556 | ) | — | — | (724 | ) | (1,280 | ) | |||||||||||||||||||||||||||
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At December 31, 2016 | 105,679 | 16,381 | 153,083 | 17,614 | 12,972 | 608 | 172,052 | 20,525 | 15,487 | 514,398 | ||||||||||||||||||||||||||||||
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At December 31, 2016, total tax losses amounted to S/507.3 million of which S/22.28 million are expected to be applied in 2017, S/57.55 million in 2018 and the remaining balance in the following fiscal years (S/334.5 million in 2015, of which S/53.6 were expected to be applied in 2016, S/56.9 million in 2017 and the remaining balance in the following fiscal years).
Tax goodwill arose from a tax credit balance resulting from the reorganization of Chilean subsidiaries in 2014 under Chilean tax laws and regulations. In 2016, the arbitration process relating to Project Collahuasi was completed and an additional payment was determined to be paid to the Chilean subsidiary selling party; which resulted in a higher balance in this item.
F-91
(All amounts expressed in thousands of S/ unless otherwise stated)
26 | WORKERS’ PROFIT SHARING |
Worker’s profit sharing is broken down in the income statement as of December 31 as follows:
2014 | 2015 | 2016 | ||||||||||
Cost of sales of goods and services | 27,396 | 27,618 | 15,234 | |||||||||
Administrative expenses | 9,541 | 7,263 | 1,297 | |||||||||
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36,937 | 34,881 | 16,531 | ||||||||||
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27 | EXPENSES BY NATURE |
For the years ended December 31 this item comprises the following:
Goods and | Administrative | |||||||
services | expenses | |||||||
2014: | ||||||||
Inventories, materials and consumables used | 1,148,533 | 52 | ||||||
Wages, salaries and fringe benefits | 1,864,053 | 210,028 | ||||||
Services provided by third-parties | 2,105,226 | 120,714 | ||||||
Taxes | 11,356 | 6,212 | ||||||
Other management charges | 686,593 | 63,124 | ||||||
Depreciation | 170,785 | 14,525 | ||||||
Amortization | 68,089 | 6,641 | ||||||
Impairment of inventories | 62 | — | ||||||
Impairment of accounts receivable | — | 71 | ||||||
Impairment of property, plant and equipment | 2,415 | — | ||||||
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6,057,112 | 421,367 | |||||||
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2015: | ||||||||
Inventories, materials and consumables used | 1,094,836 | — | ||||||
Wages, salaries and fringe benefits | 2,128,130 | 215,101 | ||||||
Services provided by third-parties | 2,953,247 | 137,980 | ||||||
Taxes | 37,129 | 1,919 | ||||||
Other management charges | 651,057 | 30,225 | ||||||
Depreciation | 199,015 | 18,055 | ||||||
Amortization | 81,841 | 7,514 | ||||||
Impairment of inventories | 62 | — | ||||||
Impairment of accounts receivable | 13,118 | — | ||||||
Impairment of property, plant and equipment | 7,086 | 2,591 | ||||||
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7,165,521 | 413,385 | |||||||
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2016: | ||||||||
Inventories, materials and consumables used | 942,354 | — | ||||||
Wages, salaries and fringe benefits | 1,544,128 | 234,474 | ||||||
Services provided by third-parties | 2,358,699 | 118,293 | ||||||
Taxes | 13,922 | 1,771 | ||||||
Other management charges | 273,601 | 24,882 | ||||||
Depreciation | 193,434 | 12,088 | ||||||
Amortization | 74,849 | 7,894 | ||||||
Impairment of inventories | 36,353 | — | ||||||
Impairment of accounts receivable (Note5.1-f) | 419,584 | — | ||||||
Impairment of property, plant and equipment | 9,263 | — | ||||||
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5,866,187 | 399,402 | |||||||
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F-92
(All amounts expressed in thousands of S/ unless otherwise stated)
For the years ended December 31 wages, salaries and fringe benefits comprise the following items:
2014 | 2015 | 2016 | ||||||||||
Salaries | 1,579,515 | 1,792,723 | 1,312,968 | |||||||||
Social contributions | 133,760 | 177,307 | 107,340 | |||||||||
Statutory bonuses | 134,892 | 135,980 | 147,311 | |||||||||
Employee’s severance indemnities | 91,100 | 98,604 | 72,608 | |||||||||
Vacations | 69,417 | 79,354 | 66,305 | |||||||||
Worker’s profit sharing (Note 26) | 36,937 | 34,881 | 16,531 | |||||||||
Others | 28,460 | 24,382 | 55,539 | |||||||||
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2,074,081 | 2,343,231 | 1,778,602 | ||||||||||
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28 | FINANCIAL INCOME AND EXPENSES |
For the years ended December 31 these items comprise the following:
2014 | 2015 | 2016 | ||||||||||
Financial income: | ||||||||||||
Interest on short-term bank deposits | 8,010 | 12,413 | 9,229 | |||||||||
Interest on loans to third parties | 899 | 19,749 | 6,142 | |||||||||
Commissions and collaterals | 969 | 3,026 | 4 | |||||||||
Others | 1,584 | 2,919 | 5,419 | |||||||||
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11,462 | 38,107 | 20,794 | ||||||||||
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Financial expenses: | ||||||||||||
Interest expense: | ||||||||||||
- Bank loans | 21,307 | 55,027 | 99,730 | |||||||||
- Bonds | — | 6,370 | 25,352 | |||||||||
- Financial lease | 12,872 | 15,243 | 13,847 | |||||||||
- Commissions and collaterals | 4,927 | 9,368 | 10,168 | |||||||||
- Loans from third parties | 2,432 | 6,335 | 4,681 | |||||||||
- Interest on loans from related parties | 3,026 | 814 | 3,452 | |||||||||
- Multilateral loans | 5,022 | — | — | |||||||||
Exchange difference loss, net | 44,282 | 82,851 | 12,527 | |||||||||
Derivative financial instruments | 1,819 | 1,691 | 1,248 | |||||||||
Lost by Measurement of Financial Asset VR | — | — | 76,864 | |||||||||
Other financial expenses | 9,992 | 12,256 | 18,402 | |||||||||
Less capitalized interest | (2,863 | ) | (13,153 | ) | (34,700 | ) | ||||||
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102,816 | 176,802 | 231,571 | ||||||||||
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F-93
(All amounts expressed in thousands of S/ unless otherwise stated)
29 | OTHER INCOME AND EXPENSES, NET |
For the years ended December 31 these items comprise the following:
2014 | 2015 | 2016 | ||||||||||
Other income: | ||||||||||||
Sales of fixed assets | 33,711 | 25,690 | 40,146 | |||||||||
Reversal of legal and tax provisions (Note 23) | 9,394 | 7,796 | 18,778 | |||||||||
Legal indemnities | — | — | 8,957 | |||||||||
Sales of investments | 7,481 | 60 | 46 | |||||||||
Dividends received from TGP (Note 10) | 9,350 | 7,215 | — | |||||||||
Disposal ofnon-current assets classified as held for sale | — | 8,775 | — | |||||||||
Present value of the liability from put option | — | 18,627 | — | |||||||||
Others | 7,509 | 14,467 | 18,792 | |||||||||
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67,445 | 82,630 | 86,719 | ||||||||||
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Other expenses: | ||||||||||||
Impairment of goodwill and trademarks | — | — | 54,308 | |||||||||
Net cost of fixed assets disposal | 29,367 | 15,669 | 31,339 | |||||||||
Loss on remeasurement of previously held interest (Note33-a) | — | — | 6,832 | |||||||||
Present value of the liability from put option | — | — | 984 | |||||||||
Cost of sales ofnon-current assets classified as held for sale | — | 8,945 | — | |||||||||
Others | 22,942 | 729 | 6,526 | |||||||||
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52,309 | 25,343 | 99,989 | ||||||||||
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15,136 | 57,287 | ( 13,270 | ) | |||||||||
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30 | TAX SITUATION |
a) | In accordance with current legislation in Peru, Chile, Brazil, Colombia, Ecuador, Bolivia, Guyana and Panama, each company in the Group is individually subject to the applicable taxes. Management considers that it has determined the taxable income under general income tax laws in accordance with the tax legislation current effective of each country. |
b) | Changes in the Peruvian Income Tax Law - |
By means of Law No.30296 enacted on December 31, 2014 amendments to Income Tax Law have been made, which are effective starting in fiscal year 2015 onwards. Among these amendments, it should be noted the progressive reduction in the corporate income tax rate (on the Peruvian third-category income earners) from 30% to 28% for fiscal years 2015 and 2016; then a reduction to 27% for fiscal years 2017 and 2018; and a final reduction to 26% from fiscal year 2019 onwards. Tax on dividends and other forms of profit distribution, agreed on by any legal entities to individuals andnon-domiciled legal persons is to be progressively increased from 4.1% to 6.8% for distributions that are agreed on or paid during fiscal years 2015 and 2016; then an increase to 8.8% for fiscal years 2017 and 2018 will be effective; and a final increase to 9.3% will be effective from fiscal year 2019 onwards. The distribution of retained earnings until December 31, 2015 will continue to be subject to a 4.1% tax even when the distribution is to be made in the subsequent years.
By means of Legislative Decree No. 1261, enacted on December 10, 2016 the Peruvian income tax law was amended to be effective from fiscal 2017 onwards. This amendment sets forth a corporate income tax rate of 29.5%. It also sets forth an income tax rate on dividends of 5% applicable tonon-domiciled legal entities and individuals effective from fiscal 2017 onwards. Undistributed profits up to December 31, 2016 will continue to be affected to a 6.8% income tax rate regardless of whether the distribution is agreed or occurs in subsequent periods.
c) | Amendments to Income Tax Law in Chile - |
On September 29, 2014, Law No 20780 was enacted by which certain changes are made to the Chilean tax system, such as: changes in the Income Tax Law, VAT Law and Tax Code. Also, on February 1, 2016 Law No 20899 was enacted to simplify and define the application of the above-mentioned tax reform. With respect to income tax, two systems have been established:
F-94
(All amounts expressed in thousands of S/ unless otherwise stated)
i) | Attributable income system: the tax rate of first-category applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, up to 25% in 2017. Its choice is being restricted to companies whose partners are individuals domiciled or resident in Chile or individuals or legal personsnon-domiciled and non-resident in Chile. This system levies the shareholders of Chilean entities with taxes on an annual basis regardless of any effective distribution of profits from the local entity; and entitles them to use the total taxes paid as income tax fiscal credit. |
ii) | Partially integrated system: of first-category taxes applicable on entities will be progressively increased, 21% in 2014, 22.5% in 2015, 24% in 2016, 25.5% in 2017, up to 27% in 2018. Subject to this system are corporations and entities in which at least one of its owners is not an individual (whether domiciled or not) ornon-domiciled legal entity. This system levies the shareholders of Chilean entities that distribute dividends and entitle them to use such distribution as a fiscal credit at a 65% of the total taxes paid. This limit does not apply to investors with whom Chile had signed double taxation agreements, such as Peru. |
d) | Changes in the Income Tax Law in Colombia - |
In December 2014 Law No 1739 was enacted amending the Tax Code and introducing diverse temporary changes in Income Tax, CREE (Tax on income for equity) and includes the tax on wealth (Impuesto a la Riqueza). Major changes are as follows:
• | Setting the CREE tax rate at 9% and creating an incremental additional overrate effective until 2018, as follows: for fiscal 2015, 2016, 2017 and 2018 the applicable CREE tax overrate will be 5%, 6%, 8% and 9%, respectively. |
• | Starting 2015 tax losses can be offset to the CREE taxable amount. |
• | The tax on wealth levies the wealth owned by an individual or legal entity that are income taxpayers; this is determined on the basis of the gross equity less current debts that are equal to or higher than a 1,000 million Colombian pesos (S/1.1 million approximately) at January 01, 2015. |
• | The tax on wealth rates are marginal and cascaded in ranges of taxable base ranging from 0.2% to 1.15% in 2015, from 0.15% to 1% in 2016 and from 0.05% to 0.4% in 2017. |
In December 2016 Law No.1819 was published with another amendment to the tax laws, effective from fiscal 2017. Major changes are as follows:
• | Income tax rates effective until 2016 (Income tax + CREE+ Overrate + Wealth) are now simplified with one single rate, i.e. 34% income tax rate and a temporary overrate of 6% for fiscal 2017 and an income tax rate of 33% and a temporary overrate of 4% for fiscal 2018 and onwards on a taxable income of above S/895 thousand (equivalent to COP800 million). |
• | The Colombian taxable income, applicable when there are tax losses, will be subject to a tax base of 4% of the liquid equity (formerly 3%) and will be considered as a“on-account payment” of the taxable income. |
• | Tax losses can be offset in the following eight (8) years from the date they were generated. |
• | The special rate on dividends and interests obtained bynon-domiciled foreign legal entities and individuals will be 5% |
• | VAT rate changes from 18% to 19% |
e) | The income tax expense shown in the consolidated income statement comprises: |
2014 | 2015 | 2016 | ||||||||||
Current income tax | 212,569 | 138,164 | 176,894 | |||||||||
Deferred income tax (Note 25) | (60,435 | ) | 2,222 | (280,911 | ) | |||||||
PPUA | (5,938 | ) | (41,359 | ) | (7,789 | ) | ||||||
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| |||||||
Income tax expense | 146,196 | 99,027 | (111,806 | ) | ||||||||
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F-95
(All amounts expressed in thousands of S/ unless otherwise stated)
Under Chilean Legislation, when a Company reports tax losses, it can apply for a refund of first-category taxes paid in prior years up to an amount that equals the taxes that would be levied on the tax losses, provided that no dividends have been distributed on the income obtained from the refund. The amount to be refunded by the Chilean Tax Authorities is called “provisional payment on absorbed profits - PPUA”. The Company recognizes income from income tax and an account receivable when applying for this tax refund.
In 2016 the PPUA-derived income is related to the tax losses reported by of subsidiaryVyV-DSD. In 2015 this item was related to the tax losses reported by CAM Chile Spa andVyV-DSD, amounting to S/19.4 million and S/21.9 million, respectively.
f) | The Group’s income tax differs from the theoretical amount that would have resulted from applying the weighted-average income tax rate applicable to the profit reported by of the consolidated companies, as follows: |
2014 | 2015 | 2016 | ||||||||||
Pre-tax profit | 507,428 | 154,616 | (563,404 | ) | ||||||||
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| |||||||
Income tax by applying local applicable tax rates on profit generated in the respective countries | 146,113 | 54,631 | (157,276 | ) | ||||||||
Tax effect on: | ||||||||||||
-Non-taxable income | (14,420 | ) | (31,266 | ) | (1,068 | ) | ||||||
- Equity method (profit) loss | 1,790 | 2,171 | 3,673 | |||||||||
-Non-deductible expenses | 25,967 | 9,831 | 57,044 | |||||||||
- Unrecognized deferred tax asset income (expense) | 13,922 | 31,432 | (4,535 | ) | ||||||||
- Adjustment for changes in rates of income tax | (2,746 | ) | 2,008 | (17,105 | ) | |||||||
- Tax goodwill | (20,542 | ) | — | — | ||||||||
- PPUA adjustment for changes in tax rates | (5,938 | ) | 15,296 | 4,871 | ||||||||
- Change in prior years estimations | 3,891 | 12,762 | (181 | ) | ||||||||
- Others, net | (1,841 | ) | 2,162 | 2,771 | ||||||||
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Income tax charge | 146,196 | 99,027 | (111,806 | ) | ||||||||
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g) | The theoretical tax disclosed resulted from applying the income tax rate stipulated in the tax laws of the country in which a Group company is legally resident. Accordingly, for fiscal 2016, companies that are legally resident in Peru, Chile and Colombia applied income tax rates of 28%, 24% and 40% respectively (28%, 22.5% and 39% for 2015; 28%, 21% and 34% for 2014). Norvial, GyM Ferrovías, Vesur and GMP (Blocks III and IV) have legal stability agreements with Peruvian Government, in force for all years preserved. In this sense, the consolidated theoretical amount is obtained as a weighted averagepre-tax profit or loss and the applicable income tax rate. |
F-96
(All amounts expressed in thousands of S/ unless otherwise stated)
Country | Statutory tax rate | Pre - tax profit | Tax at statutory tax rate | |||||||||
(A) | (B) | (A)*(B) | ||||||||||
2016 | ||||||||||||
Perú | 28.00 | % | (1,071,663 | ) | (300,066 | ) | ||||||
Perú - Norvial | 27.00 | % | 63,583 | 17,167 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 34,760 | 10,428 | ||||||||
Perú – Vesur | 30.00 | % | 888 | 267 | ||||||||
Perú – GMP | 30.00 | % | 8,602 | 2,581 | ||||||||
Chile | 24.00 | % | (86,151 | ) | (20,676 | ) | ||||||
Colombia | 40.00 | % | (25,555 | ) | (10,222 | ) | ||||||
Bolivia | 25.00 | % | (703 | ) | (176 | ) | ||||||
Unrealized gains | 512,836 | 143,421 | ||||||||||
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Total | (563,404 | ) | (157,276 | ) | ||||||||
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| |||||||||
2015 | ||||||||||||
Perú | 28.00 | % | 174,432 | 48,841 | ||||||||
Perú - Norvial | 27.00 | % | 54,471 | 14,707 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 26,954 | 8,086 | ||||||||
Perú – Vesur | 30.00 | % | 2,336 | 701 | ||||||||
Perú – GMP | 30.00 | % | 15,007 | 4,502 | ||||||||
Chile | 22.50 | % | (95,284 | ) | (21,439 | ) | ||||||
Colombia | 39.00 | % | 40,900 | 15,951 | ||||||||
Bolivia | 25.00 | % | (57,382 | ) | (14,345 | ) | ||||||
Unrealized gains | (6,817 | ) | (2,045 | ) | ||||||||
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| |||||||||
Total | 154,616 | 54,631 | ||||||||||
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| |||||||||
2014 | ||||||||||||
Perú | 30.00 | % | 288,917 | 86,675 | ||||||||
Perú - Norvial | 27.00 | % | 41,999 | 11,340 | ||||||||
Perú - GyM Ferrovías | 30.00 | % | 22,894 | 6,868 | ||||||||
Perú – Vesur | 30.00 | % | 96 | 29 | ||||||||
Perú – GMP | 30.00 | % | 92,425 | 27,728 | ||||||||
Chile | 21.00 | % | 49,484 | 10,392 | ||||||||
Colombia | 34.00 | % | 1,290 | 439 | ||||||||
Bolivia | 25.00 | % | 484 | 121 | ||||||||
Others - elimination | 9,839 | 2,521 | ||||||||||
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| |||||||||
Total | 507,428 | 146,113 | ||||||||||
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|
h) | Peruvian tax authorities have the right to examine, and, if necessary, amend the income tax determined by the Company in the last four years - from January 1 of the year after the date when the tax returns are filed (years subject to examination). Therefore, years 2012 through 2016 are subject to examination by the tax authorities. Since differences may arise over the interpretation by the tax authorities of the regulations applicable to the Company, it is not possible at present to estimate if any additional tax liabilities will arise as a result of any eventual examinations. Any additional tax, fines and interest, if they occur, will be recognized in the results of the period when such differences with the tax authorities are resolved. Management considers that no significant liabilities will arise as a result of these possible tax examinations. Additionally, income tax returns for fiscal years 2013 to 2014 and those to be filed for fiscal year 2016 remain open for examination by the Chilean tax authorities who have the right to carry out said examination within the three years following the date the income tax returns have been filed. Fiscal years 2014 and 2015 are open for tax audit by Colombian tax authorities; fiscal 2016 will also be open for audit. Colombian tax authorities are entitled to audit two consecutive years following the date the income tax returns were filed. |
i) | As established under regulations in force in Peru, for purposes of determining income tax and the general sales tax, transfer pricing must be taken into account for transactions with related parties and/or tax havens, which must be supported with the relevant documentation and information on the methods and valuation criteria applied in their determination. Peruvian tax authorities are entitled to request such information from the taxpayer. |
F-97
(All amounts expressed in thousands of S/ unless otherwise stated)
j) | Temporary tax on net assets - |
The temporary tax on net assets is applied by the companies which operate in Peru, to third category income generators subject to the Peruvian Income Tax General Regime. Effective in the year 2012, the tax rate is 0.4%, applicable to the amount of the net assets exceeding S/1 million.
The amount effectively paid may be used as a credit against payments on account of income tax under the General Regime or against the provisional tax payment of the income tax of the related period.
k) | The weighted average rate applicable is 19.84% (64.05% in 2015 and 28.8% in 2014). The decrease in the effective tax rate , as compared to that one effective in the previous year, primarily to the following: |
• | CCDS. In 2016, expenses related to manager cost and expenses provisions did not meet the requirements of the Peruvian tax legislation. |
• | Morelco. In 2016, assets were written off because their supporting documentation did not meet the requirements of the Colombia tax legislation. |
• | GyM. In 2016, a provision of taxes, fines and interests related to an appeal of Tax Court process (VAT and Income Tax 2001) was registered. This provision of expense is not deductible for tax purposes. |
• | CAM SPA. In 2015 a deduction was obtained in the base of the taxable income resulting from the disposal of CAM Brazil, in respect of which the tax cost was higher than the accounting cost. |
l) | At December 31, 2015 deferred income tax asset was not recognized on tax losses mainly of Consorcio Rio Mantaro, Graña y Montero Construcciones y Montajes S.A., Consorcio Norte Pachacutec y Consorcio Urubamba, since of some no taxable profits are expected to be obtained . The deferred income tax asset not recognized was for S/30.6 million. At 2016, Consorcio Río Mantaro obtained a profit applied to tax losses and adjust the deferred income tax asset no recognized for S/5 millon. |
m) | The current income tax payable, after applying the corresponding tax credits and whose due date arrives until the first week of April of the following year, includes mainly: |
• | CCDS, S/14.9 million in 2016 |
• | Consorcio AMDP, S/9.3 million in 2016 |
• | Terminales del Perú, S/3.6 million in 2016 |
• | Concar, S/3.3 million in 2016 |
31 | ACCUMULATED OTHER COMPREHENSIVE INCOME |
The | analysis of the movement is as follows: |
Exchange | ||||||||||||||||||||
Foreign | Increase in | difference from | ||||||||||||||||||
currency | fair value of | net investment | ||||||||||||||||||
Cash flow | translations | available-for | in a foreign | |||||||||||||||||
hedge | adjustment | sale assets | operation | Total | ||||||||||||||||
At January 31, 2014 | (2,153 | ) | (5,944 | ) | 26,520 | — | 18,423 | |||||||||||||
(Charge) credit for the year | 750 | (13,086 | ) | 4,811 | (17,030 | ) | (24,555 | ) | ||||||||||||
Tax effects | (210 | ) | — | (1,251 | ) | 4,428 | 2,967 | |||||||||||||
Adjustment for changes in rates of income tax | — | — | 1,089 | — | 1,089 | |||||||||||||||
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| |||||||||||
Other comprehensive income of the year | 540 | (13,086 | ) | 4,649 | (12,602 | ) | (20,499 | ) | ||||||||||||
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| |||||||||||
At December 31, 2014 | (1,613 | ) | (19,030 | ) | 31,169 | (12,602 | ) | (2,076 | ) | |||||||||||
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| |||||||||||
(Charge) credit for the year | 954 | (45,411 | ) | 26,991 | (6,942 | ) | (24,408 | ) | ||||||||||||
Tax effects | (267 | ) | — | (7,018 | ) | 1,804 | (5,481 | ) | ||||||||||||
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| |||||||||||
Other comprehensive income of the year | 687 | (45,411 | ) | 19,973 | ( 5,138 | ) | (29,889 | ) | ||||||||||||
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|
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| |||||||||||
At December 31, 2015 | (926 | ) | (64,441 | ) | 51,142 | (17,739 | ) | (31,965 | ) | |||||||||||
|
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| |||||||||||
(Charge) credit for the year | 1,190 | 9,885 | (3,149 | ) | 10,965 | 18,891 | ||||||||||||||
Tax effects | (351 | ) | — | 929 | (3,243 | ) | (2,665 | ) | ||||||||||||
Transfer to profit or loss (Note 10) | — | — | (41,461 | ) | 1,562 | (39,899 | ) | |||||||||||||
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| |||||||||||
Other comprehensive income of the year | 839 | 9,885 | (43,681 | ) | 9,284 | (23,673 | ) | |||||||||||||
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| |||||||||||
At December 31, 2016 | (87 | ) | (54,556 | ) | 7,461 | (8,455 | ) | (55,638 | ) | |||||||||||
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F-98
(All amounts expressed in thousands of S/ unless otherwise stated)
Amounts in the table above represent only amounts attributable to the Company’s controlling interest net of taxes. Below is the movement in Other Comprehensive Income for each year:
2014 | 2015 | 2016 | ||||||||||
Controlling interest | (20,499 | ) | (29,889 | ) | (23,673 | ) | ||||||
Non-controlling interest | (7,986 | ) | (15,235 | ) | 4,191 | |||||||
Adjustment for actuarial gains and losses, net of tax | (1,332 | ) | (2,921 | ) | (1,119 | ) | ||||||
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| |||||||
Total value in OCI | ( 29,817 | ) | (48,045 | ) | (20,601 | ) | ||||||
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32 | CONTINGENCIES, COMMITMENTS AND GUARANTEES |
a) | Tax contingencies - |
• | For fiscal 2016 an appeal is in progress with the Peruvian Tax Court and another administrative action with the Judiciary involving the results of tax audits of VAT (IGV) and Income Tax returns performed by the Peruvian tax authorities for fiscal years 1999 to 2002. The maximum exposure amount is S/5.2 million. |
• | With respect to our subsidiary GyM S.A., as a result of the tax audits of fiscal 1999, 2001 and 2010, SUNAT issued tax determination and tax penalties resolutions amounting to approximately S/19.1 million (S/24.5 million as of December 31, 2015): |
In fiscal year 2017, the tax litigation process related to 2001 was resolved, where the Tax Court orders SUNAT to recalculate the observations, determining an amount lower than initially claimed. Our subsidiary has decided to accept the conclusions of this resolution and submit fractionation requests for the payment of the debt in reference amounting to S/14.1 million
Likewise, at the end of fiscal year 2017, the contentious-administrative process related to the 1999 fiscal year was resolved, where the Judicial Branch rejected our arguments and confirmed what was stated by SUNAT. Regarding this process, there was already a contingency provision of S/5 million.
An administrative tax process related to the 2010 fiscal year is still underway, however, its resolution will not imply economic damage since it corresponds to a greater refund of the balance in favor in 2011, already audited by the Tax Administration
• | Consortiums in which subsidiary GyM S.A takes part, brought claims with SUNAT against the results of the tax inspection, which had a maximum exposure at December 31, 2016 of S/2.8 million (S/0.8 million at December 31, 2015). |
• | GMD and its subsidiaries have tax claims currently in progress involving fiscal years 2002, 2011 and 2012 with a maximum exposure of S/2.7 million at December 31, 2016. |
F-99
(All amounts expressed in thousands of S/ unless otherwise stated)
Management expects the outcome of the other court actions will be favorable to the Company considering their nature and characteristics as well as the opinion of its legal advisor.
b) | Other contingencies - |
Year 2016 -
i) | Civil-court lawsuits mainly related to indemnities for damages, contract termination and workplace accidents amounting to S/0.61 million (S/0.15 million attributable to GyM; S/0.19 million attributable to Concar; S/0.17 million attributable to Viva GyM while the remaining S/0.1 million attributable to GMP and CAM Peru). |
ii) | Contentious administrative lawsuits for S/4 million, of which, S/3.4 million is related to 14 processes of GMP S.A. and Consorcio Terminales, S/0.5 million resulting from an action brought against GyM Ferrovías for alleged noncompliance with OSITRAN’s General Rules of Oversight. In addition, it includes S/0.1 million GyM S.A. related to a contentious administrative process. |
iii) | Administrative lawsuits for S/3.29 million, S/0.85 million is related to 24 processes of GMP S.A., Consorcio Terminales and Terminales del Perú; S/2 million involving GyM Ferrovías resulting from an action brought by OSITRAN, the Municipalities of Villa María del Triunfo and San Juan de Miraflores comprising the property tax; S/0.24 million against Viva GyM for a claim made by the Asociación Peruana de Consumidores y Usuarios before Indecopi in relation to the Parques del Agustino project; and S/0.2 million involving an action brought against Concesionaria Canchaque for alleged contractual noncompliance with OSITRAN). |
iv) | Labor lawsuits for a total S/6.12 million (S/5 million comprising actions brought against GyM, S/0.35 million against STRACON GyM; S/0.65 million against GMP, S/0.2 million against GMD S.A., and the remaining balance of S/0.1 million comprising actions brought against Concar, CAM Colombia and CAM Perú S.A.). |
v) | Two securities class action have been filed against the Company, an executive and a former executive officers 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. In addition, the court has established the following schedule: i) on May 4, 2018, consolidation of files; ii) on July 3, 2018, presentation of the request for dismissal; iii) September 4, 2018, presentation of the opposition to the request for dismissal; and iv) October 3, 2018, submission of allegations by GyM. After this, the court could dismiss the claim or admit it. Management believe that both of those actions would likely be dismissed by the court for failure to adequately file a claim. Therefore, at the reporting date, we consider the risk of a material loss to the company is not probable. |
vi) | On March 30, 2017, the minority interest holders of Adexus (Sistemas y Redes S.A. and Asesorías e Inversiones Busso Ltda.) filed three lawsuits against Graña y Montero S.A.A., GMD, Adexus and their major executives, related to: a) the unenforceability of the Investment Agreement and Shareholders’ Agreement under the provisions of Law 18.046 (“Ley de Sociedades Anónimas” in Chile), for a total amount claimed of US$11.4 million (equivalent to S/38.3 million); b) the declaration of nullity because of fraud of the Investment Agreement and other acts and damages and the order of forced execution of the Investment Agreement, plus damages for a total amount claimed of US$50 million (equivalent to S/168 million); c) the declaration of nullity of the Shareholders’ Agreement and its amendments. The parties have responded and counterclaimed and up to date we are waiting for the date of the Conciliation Hearing. The probability of loss of the present litigations is classified as remote. |
F-100
(All amounts expressed in thousands of S/ unless otherwise stated)
Year 2015 -
vii) | Civil court actions mainly involving costs and damages and contract terminations as well as work accidents amounting to S/1.1 million (S/0.5 million for GyM S.A., S/0.3 million for Viva GyM and S/0.3 million for Concar SA.). |
viii) | Arbitration processes amounting to S/122.3 million related to an action brought by Contugas S.A.C. and IMECON S.A. against the court action brought by GyM S.A. involving recognition of expenses and indemnification for costs and damages for S/112.3 million and S/10 million, respectively. |
ix) | Administrative challenge actions amounting to S/4.1 million, of which, S/4 million comprising an action brought by the Peruvian mining and energy regulator—OSINERMIN for an alleged noncompliance by GMP S.A. and Consorcio Terminales. Also included is S/.0.1 million to be assumed by GyM S.A.as a result of an actions brought by the Peruvian Ministry of Labor. |
x) | Administrative actions amounting to S/3.1 million (S/2 million comprising an action brought by the Peruvian Mining and Energy regulator (OSINERMIN) for the alleged noncompliance of GMP S.A., Consorcio Terminales and Terminales del Peru; S/0.9 million of GyM Ferrovías S.A. comprising an action brought by Municipality of La Victoria, Lima, Villa María del Triunfo and San Juan de Luriganch o for property tax; and S/.0.2 million compromising action brought against Morelco S.A.S.) |
xi) | Labor-related court actions amounting to S/3.7 million (S/1.4 million were actions against Vial yVives-DSD S.A., S/0.9 million against GMP S.A., S/0.6 million against GyM S.A, S/0.2 million against GMD S.A, S/0.2 million against Concar S.A, S/0.1 million against Stracon GyM S.A. and S/0.1 million against CAM Perú S.A.). |
c) | Performance Bonds and Guarantees - |
At December 31, 2016, the Group holds current performance bonds and guarantees with a number of financial institutions to secure transactions for US$1,258.5 million and US $330.5 million, respectively (US$820.2 million and US$27.4 million, respectively, as of December 31, 2015).
33 | BUSINESS COMBINATIONS |
a) | Acquisiton of Adexus S.A. - |
In June 2015 the Company acquired 44% interest in the capital stock of Chilean entity Adexus S.A., which is mainly engaged in providing IT solutions services. At December 31, 2015 the Company arrived at the conclusion that joint control existed and that the joint arrangement qualified as a joint venture; therefore, the investment was recorded under the equity method of accounting in the consolidated financial statements of the Group (Note16-b).
In January 2016 the Group acquired an additional interest of 8%, totaling 52% of total interest; the consideration agreed totaled S/8.3 million which was settled through debt capitalization. This larger interest did not affected the investment classification as a joint venture.
Subsequently, in August 2016, the Group acquired an additional interest of 39.03% to obtain total interest in its capital stock of 91.03%; thus gaining control over this entity. The consideration agreed totaled S/14 million which was initially stated as debt and then capitalized in the same period.
F-101
(All amounts expressed in thousands of S/ unless otherwise stated)
Upon obtaining control, the Company accounted for the transaction using the acquisition method of accounting set forth in IFRS 3 “Business Combination” and determined goodwill resulting from the acquisition. The balance at December 31, 2016 was stated at provisional values.
The table below itemizes the provisional determination of the fair value of the identifiable assets acquired, liabilities assumed,non-controlling interest held and goodwill at the acquisition date:
Provisional fair values | ||||||||
S/ | US$000 | |||||||
Purchase consideration | 14,040 | 4,179 | ||||||
Fair value of previously held interest | 29,039 | 8,643 | ||||||
|
|
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| |||||
Total consideration (a) | 43,079 | 12,822 | ||||||
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| |||||
Carried forward: | 43,079 | 12,822 | ||||||
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| |||||
Provisional fair values | ||||||||
S/ | US$000 | |||||||
Brought forward: | 43,079 | 12,822 | ||||||
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|
| |||||
Fair value of assets and liabilities of Adexus S.A.: | ||||||||
Cash and cash equivalents | 7,737 | 2,303 | ||||||
Trade receivables | 107,426 | 31,972 | ||||||
Receivables from related parties | 2,610 | 777 | ||||||
Other receivables | 1,160 | 345 | ||||||
Inventories | 1,647 | 490 | ||||||
Prepaid expenses | 11,587 | 3,449 | ||||||
Long-term trade receivables | 26,886 | 8,195 | ||||||
Other long-term receivables | 2,063 | 614 | ||||||
Property, plant and equipment | 41,988 | 12,496 | ||||||
Intangibles | 32,204 | 9,585 | ||||||
Deferred income tax assets | 18,115 | 5,198 | ||||||
Borrowings | (108,808 | ) | (32,383 | ) | ||||
Trade payables | (59,399 | ) | (17,678 | ) | ||||
Payables to related parties | (15,683 | ) | (4,667 | ) | ||||
Current income tax | (2,763 | ) | (822 | ) | ||||
Other payables | (10,291 | ) | (3,063 | ) | ||||
Other provisions | (1,926 | ) | (573 | ) | ||||
Contingent liabilities | (1,149 | ) | (342 | ) | ||||
Deferred income tax liabilities | (7,102 | ) | (2,114 | ) | ||||
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| |||||
Fair value of net identifiable assets | 46,302 | 13,782 | ||||||
Non-controlling interest (8.97%) | (4,153 | ) | (1,236 | ) | ||||
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| |||||
Fair value of net assets attributable to the Group (b) | 42,149 | 12,546 | ||||||
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| |||||
Goodwill (Note 18) (a) - (b) | 930 | 276 | ||||||
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|
|
Losses arising from there-measurement at fair value of the previously held interest amounted to S/6.8 million, which was recognized in the statement of income within “Other income and expenses, net”, at the date of acquisition of that additional interest (Note 29).
Acquisition transaction costs amounting to S/1.4 million were charged to profit or loss within administrative expenses.
Revenue and net losses obtained for the period from the acquisition date to December 31, 2016 were S/113.2 million and S/3.7 million, respectively. If Adexus had been consolidated from January 1, 2016, the balances of revenue and net losses would have been S/272.7 million and S/20.2 million, respectively.
F-102
(All amounts expressed in thousands of S/ unless otherwise stated)
Provided that the distribution of the consideration is divided between the fair values on a provisional basis for the 2016 financial statements, the Group will complete the distribution process over a period that should not exceed one year as of the acquisition date of Adexus.
During such review period, additional assets and liabilities will be recognized as they may arise from updated data that may be obtained in relation with the information that existed at the acquisition date and that does not comprise new incidents occurred after the acquisition date; that is, if the Group were to adjust initial amounts recognized at the business combination dates.
b) | Acquisition of Morelco S.A.S. - |
In December 23, 2014, through subsidiary GyM S.A. the Company obtained control of Morelco S.A.S. (Morelco) by acquiring 70.00% of its capital shares. Morelco is an entity domiciled in Colombia that is mainly engaged in providing construction and assembly services. This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Colombia, and in attractive industries, such as mining and energy.
At December 31, 2014 the Company determined goodwill resulting from this acquisition on the basis of an estimated purchase price of US$93.7 million (equivalent to S/277.1 million), which included cash payments made for US$78.5 million and cash payable estimated to be US$15.1 million (equivalent to S/45.7 million), which, under the agreement of the parties, would be defined after a review of the acquiree’s balance sheet, mainly working capital, cash and financial debt as well as the final carrying amount of the acquiree’s work backlog. The estimated purchase price was allocated to the provisional carrying amounts of the assets acquired and the liabilities assumed.
As a result of this allocation, the balance of goodwill was determined to be US$36.1 million (equivalent to S/105.8 million).
In 2015 as part of the review of the provisional allocation of the purchase price, the following situations arose:
a) | The balance at December 31, 2014 of the consideration payable of US$15 million (equivalent to S/46 million) was adjusted in 2015 to US$9.1 million (S/32 million) as a result of the final determination of the working capital, cash and financial debt balances, under the purchase agreement. This amount was fully paid in 2015. |
b) | The provisional fair values of certain assets acquired and liabilities assumed were reviewed. |
As a result of the above, the purchase price was adjusted to US $87.5 million (equivalent to S/258.6 million); the provisional fair values of certain asset and liabilities were modified, giving rise to an adjustment of goodwill to US$35.2 million (equivalent to S/103 million).
The table below summarizes the consideration paid by Morelco and the determination of the fair value of the assets acquired and liabilities assumed as well as anon-controlling interest at the date of acquisition:
Provisional fair values | Final amounts | |||||||||||||||
S/ | US$000 | S/ | US$000 | |||||||||||||
Cash and cash equivalents | 69,930 | 23,514 | 69,930 | 23,514 | ||||||||||||
Trade receivables | 92,138 | 30,981 | 67,716 | 22,769 | ||||||||||||
Work in progress remaining to collect from customers | 101,533 | 34,140 | 110,777 | 37,248 | ||||||||||||
Other accounts receivables | 63,949 | 21,503 | 63,949 | 21,504 | ||||||||||||
Inventories | 18,037 | 6,065 | 18,037 | 6,065 | ||||||||||||
Prepaid expenses | 2,133 | 717 | 2,127 | 715 | ||||||||||||
Financial asset through profit or loss | 7,291 | 2,452 | 5,747 | 1,932 | ||||||||||||
Property, plant and equipment | 70,756 | 23,792 | 69,081 | 23,228 |
F-103
(All amounts expressed in thousands of S/ unless otherwise stated)
Intangibles | 64,491 | 21,685 | 64,491 | 21,685 | ||||||||||||
Deferred income tax asset | 8,031 | 2,700 | 24,560 | 8,258 | ||||||||||||
Other short-term financial liabilities | (31,204 | ) | (10,492 | ) | (31,204 | ) | (10,492 | ) | ||||||||
Other long-term financial liabilities | (9,315 | ) | (3,132 | ) | (9,315 | ) | (3,132 | ) | ||||||||
Trade accounts payables | (103,739 | ) | (34,882 | ) | (102,438 | ) | (34,444 | ) | ||||||||
Other accounts payable | (87,863 | ) | (29,544 | ) | (87,863 | ) | (29,544 | ) | ||||||||
Contingent liabilities | (17,533 | ) | (5,895 | ) | (24,993 | ) | (8,404 | ) | ||||||||
Deferred income tax liabilities | (3,801 | ) | (1,278 | ) | (18,404 | ) | (6,188 | ) | ||||||||
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Fair value of net assets | 244,834 | 82,326 | 222,198 | 74,714 | ||||||||||||
Non-controlling interest (30.00%) | (73,450 | ) | (24,697 | ) | (66,659 | ) | (22,414 | ) | ||||||||
Goodwill (Note 18) | 105,764 | 36,118 | 103,055 | 35,240 | ||||||||||||
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Purchase consideration | 277,148 | 93,747 | 258,594 | 87,540 | ||||||||||||
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Cash paid atyear-end | 231,464 | 78,462 | 231,464 | 78,462 | ||||||||||||
Cash and cash equivalents of the acquired subsidiary | (69,930 | ) | (23,514 | ) | (69,930 | ) | (23,514 | ) | ||||||||
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Direct cash outflows for acquisition for the year | 161,534 | 54,948 | 161,534 | 54,948 | ||||||||||||
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Acquisition-related costs of S/4.5 million have been recognized to 2014’s profits within administrative expenses.
If Morelco had been consolidated from January 1, 2014 revenue and profit would have been S/722.57 million and S/80.8 million, respectively.
Put and call options ofnon-controlling interest-
Under the shareholder agreement signed for the acquisition of Morelco, the subsidiary GyM signed a purchase-sale agreement for 30% of Morelco’s capital stock held by thenon-controlling shareholders. By this agreement, thenon-controlling shareholders obtained a right to sell their shares over a period and for an amount set in the agreement (put option). The period to exercise the option began on the second anniversary of the acquisition of the option and expires on its tenth anniversary. The option exercise price is based on a EBITDA multiple less the net debt and until months 51 and 63 until from the date of the agreement a minimum amount is set that is based on the price per share that GyM paid to buy 70% of Morelco’s share capital.
On the other hand, the subsidiary GyM obtains call option to buy those shares over a period of 10 years and at a price that is determined the same way as the put option price is determined, except for the fact the minimum amount is effective for the entire effective period of the option (call option).
Under the IFRS framework, the put option is for the Company an obligation to purchasenon-controlling interest shares, and therefore, the Group recognizes a liability measured on the basis of the present value of that option. Since the Group arrived at the conclusion that as a result of this agreement, it did not obtained the risks and rewards inherent to the ownership of this share package underlying the option, initial recognition of this liability was a charge to equity of controlling shareholders within other reserves.
The amount of the liability arising from the put option was estimated at the present value of the redemption amounts expected on the basis of minimum amount of the Morelco’s agreement and the exercise rights of the option. The Company expects that purchase options are to be exercised at the date following the date of transfer. The expected redemption of thenon-controlling interest is as follows: 41.66% in the second year, 41.66% in the fourth year and the remaining shares will be sold on the fifth anniversary of the option grant date. The discount rate used to determine the present value of the expected redemption amounts is a risk-free rate available to comparable market participants and indicates the fact that the Group estimates to pay the minimum price of the agreement. At December 31, 2016 the liability is estimated to be S/109.9 million, using a 0.78% discount rate for the first year, 1.37% discount rate for the third year and 1.76% for the fourth year (at December 31, 2015 it was S/113.5 million, using a 0.65% discount rate for the first year, 1.31% discount rate for the third year
F-104
(All amounts expressed in thousands of S/ unless otherwise stated)
and 1.76% for the fourth year). In 2016 the changes in the present value of the put option estimated to be S/0.7 million were recognized in the statement of income (an expense by S/1 million stated within “Other income and expenses, net” and an income by S/1.7 million stated within “Exchange losses, net”, Note 28).
c) | Acquisition of Coasin Instalaciones Ltda. |
In March 2014, through the subsidiary CAM Chile S.A., the Group acquired control of Coasin Instalaciones Limited with the purchase of 100% of its capital shares. Coasin is an entity incorporated in Chile and is mainly engaged in providing installation and maintenance services for networks and equipment related to the telecommunications industry.
This acquisition is part of the Group’s plan to increase its market share considering the significant growth potential in Chile, and in other attractive industries, such as utilities.
During a period of twelve months after the date of acquisition, the Group reviewed the allocation of the purchase price for the acquisition of Coasin Instalaciones Limitada.
Over a period of twelve months after the acquisition, the Group reviewed the allocation of the purchase price and fair values determined provisionally for certain assets and liabilities. As a result of this process, the balance of goodwill was changed to US$2.2 million (equivalent to S/6.4 million).
Provisional values | Final amounts | |||||||||||||||
S/ | US$000 | S/ | US$000 | |||||||||||||
Cash and cash equivalents | 3 | 1 | 3 | 1 | ||||||||||||
Trade accounts receivables | 4,675 | 1,564 | 3,811 | 1,275 | ||||||||||||
Inventories | 276 | 92 | 276 | 92 | ||||||||||||
Prepaid expenses | 33 | 11 | 33 | 11 | ||||||||||||
Property, plant and equipment | 711 | 238 | 711 | 238 | ||||||||||||
Intangibles | 1,377 | 461 | 1,377 | 461 | ||||||||||||
Deferred income tax liability | (178 | ) | (60 | ) | 16 | 4 | ||||||||||
Trade accounts payables | (3,592 | ) | (1,202 | ) | (3,592 | ) | (1,202 | ) | ||||||||
Contingent liabilities | (2,658 | ) | (889 | ) | (2,658 | ) | (889 | ) | ||||||||
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Fair value of net assets | 647 | 216 | (23 | ) | (9 | ) | ||||||||||
Goodwill (Note 18) | 5,743 | 1,921 | 6,413 | 2,146 | ||||||||||||
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Consideration provided for the acquisition | 6,390 | 2,137 | 6,390 | 2,137 | ||||||||||||
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Payment for the acquisition settled in cash | 6,390 | 2,137 | 6,390 | 2,137 | ||||||||||||
Cash and cash equivalents of the subsidiary acquired | (3 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
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Direct outflow of cash for the acquisition | 6,387 | 2,136 | 6,387 | 2,136 | ||||||||||||
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Revenue and profit resulting for the period between the date of acquisition and December 31, 2014 amounted to S/66.3 million and S/0.7 million, respectively.
34 | DIVIDENDS |
Due to the loss reported for fiscal 2016, no dividends will be paid.
At the General Shareholders’ meeting held on March 29, 2016 the decision was made to distribute dividends for S/30,853 (S/0.0467 per share), which correspond to 2015 earnings.
At the General Shareholders’ meeting held on March 27, 2015 the decision was made to distribute dividends for S/104,911 (S/0.159 per share), which correspond to 2014 earnings.
F-105
(All amounts expressed in thousands of S/ unless otherwise stated)
At the General Shareholders’ meeting held on March 28, 2014, the decision was made to distribute dividends amounting to S/112,127 (S/0.169 per share), corresponding to 2013 earnings.
35 | EARNINGS (LOSSES) PER SHARE |
Basic earnings per share are calculated by dividing the net profit of the period attributable to common shareholders of the Group by the weighted average number of common shares outstanding during the year. No diluted earnings per common share were calculated because there are no common or investment shares with potential dilutive effects (i.e., financial instruments or agreements that give the right to obtain common or investment shares); therefore, it is equal to basic earnings per share.
The basic earnings per share are broken down as follows:
2014 | 2015 | 2016 | ||||||||||
Profit (Losses) attributable to the controlling interest in the Company | 299,743 | 7,097 | (509,699 | ) | ||||||||
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Weighted average number of shares in issue at S/1.00 each, at December 31, | 660,053,790 | 660,053,790 | 660,053,790 | |||||||||
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Basic and diluted earnings per share (in S/) | 0.454 | 0.011 | (0.772 | ) | ||||||||
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36 | TRANSACTIONS WITHNON-CONTROLLING INTERESTS |
a) | Additional acquisition ofnon-controlling interest - |
i) | In May, November and December 2016, GyM Chile SPA acquired 5.43%, 6.77% and 1.49% respectively additional capital stock in Vial y Vives—DSD S.A. at a purchase price of S/21.6 million, S/25.7 million y S/3.8 million, respectively. The carrying amounts of thenon-controlling interests at the date of the acquisitions were S/13.9 million, S/17.9 million and S/3.9 million. The Groupde-recognized thenon-controlling interests by reducing the equity attributable to the owners of the parent Company by S/15.4 million. At December 31, 2016, there is an outstanding balance of S/32.1 million (Note 22). |
ii) | In January 2015, the Company acquired 0.102% of additional shares in GyM S.A. at a price of S/1.87 million. The carrying amount ofnon-controlling interests at the acquisition date was S/0.97 million. The Group eliminated thenon-controlling interest and recognized a decrease in equity attributable to the parent owners of S/0.89 million. |
iii) | In July 2014, GyM S.A. acquired 13.49% of additional shares in Stracon GyM at a price of US$24.9 million (equivalent to S/72.8 million). The carrying amount ofnon-controlling interest at the acquisition date was S/22.5 million. The Group eliminated thenon-controlling interest and recognized a decrease in equity attributable to the parent owners of S/50.7 million. |
iv) | In August, November and December 2014, the Company acquired 4.567% (2.25%, 1.95% and 0.367% respectively) additional shares in GyM S.A. at a total purchase price of S/93.2 million. The carrying amount of thenon-controlling interest at the acquisition date was S/24.6 million. The Group eliminatednon-controlling interest and recognized a decrease in equity attributable to the owners of the parent for S/71.5 million. |
v) | In August 2014, the Company acquired 1.37% additional shares in Viva GyM S.A. at a price of S/9.4 million. The carrying amount of thenon-controlling interest at the acquisition date was S/3.4 million. The Group eliminatednon-controlling interest and recorded a decrease in equity attributable to the parent owners of S/6.03 million. |
F-106
(All amounts expressed in thousands of S/ unless otherwise stated)
The effect of these changes is broken down as follows:
2014 | 2015 | 2016 | ||||||||||
Carrying amount ofnon-controlling interest acquired | 50,109 | 971 | 35,972 | |||||||||
Consideration provided fornon-controlling interest | (178,331 | ) | (1,865 | ) | (51,139 | ) | ||||||
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Higher payment attributable to the Company’s controlling interest | (128,222 | ) | (894 | ) | (15,167 | ) | ||||||
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b) | Disposal of interests in subsidiary without loss of control - |
i) | In March 2015, GyM S.A. sold 0.048% (S/97) of its total 87.64% interest held in Stracon GyM for a payment of S/377. The carrying amount of thisnon-controlling interest in Stracon GyM at the date of disposal was S/23.7 million (a 12.36% interest). |
ii) | In June 2015, GyM S.A. sold 1.92% (S/385) of its total 82.04% interest held in Vial y Vives - DSD S.A. for a payment of S/385. The carrying amount of thisnon-controlling interest in Vial y Vives - DSD S.A. at the date of disposal was S/3.6 million (a 17.96% interest). |
iii) | In April 2015, CAM Holding Spa sold a 2.45% (S/2,045) of its total 75.61% interest held in CAM Chile S.A. for S/880. The carrying amount of thenon-controlling interest in CAM Chile at the disposal date was S/20.4 million (a 24.39% interest). |
iv) | In November 2014, GyM Chile Spa sold 1.01% (S/1.6 million) of its total 82.04% interest held in Vial y Vives - DSD for a total US$0.582 million (equivalent to S/1.6 million). The carrying amount of thisnon-controlling interest in Vial y Vives - DSD at the date of disposal was S/1.6 million |
The effect of this changes at December 31 is summarized below:
2014 | 2015 | 2016 | ||||||||||
Carrying amount of thenon-controlling interest sold | (1,627 | ) | (2,527 | ) | (236 | ) | ||||||
Consideration received fromnon-controlling interest | 1,627 | 1,642 | 335 | |||||||||
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Decrease in equity of the Company‘s controlling interest | — | (885 | ) | 99 | ||||||||
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c) | Contributions ofnon-controlling shareholders - |
This balance mainly corresponds to the contributions and returns made by the partners of subsidiary Viva GyM S.A. of their real estate projects. At December 31 this balance comprises:
2014 | 2015 | 2016 | ||||||||||
Viva GyM S.A.: | ||||||||||||
Contributions received | 48,793 | 20,446 | 6,380 | |||||||||
Returns of contributions | (4,240 | ) | (14,987 | ) | (27,134 | ) | ||||||
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44,553 | 5,459 | (20,754 | ) | |||||||||
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Contributions from other subsidiaries | 2,823 | 4,870 | 1,655 | |||||||||
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Increase (decrease) in equity of non controlling parties | 47,376 | 10,329 | (19,099 | ) | ||||||||
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F-107
(All amounts expressed in thousands of S/ unless otherwise stated)
Returns of contributions mainly correspond to the following projects: “Los Parques de Comas” for S/6.3 million, “Los Parques de Villa El Salvador II” for S/12.6 million and “Klimt” for S/7.1 million in 2016 (“Los Parques del Callao” for S/6.7 million, “Los Parques de San Martín de Porres” for S/4.8 million and “Los Parques de Piura” for S/3.3 million in 2015).
d) | Dividends - |
At December 31, 2016, 2015 and 2014 dividends were distributed for S/25.5 million, S/4.5 million and S/68.1 million, respectively.
37 | EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION |
a) | Early termination of the GSP’s concession agreement - |
According to a notification issued by the Ministry of Energy and Mines of Peru on January 24, 2017, the early termination of the Concession Contract was declared, based on the provisions of clause 6.7 of the Concession Agreement “Improvements to the country’s energy security and development of the South Peru Gas Pipeline “, as GSP failed to certify the financial closing within the established contractual deadline and proceeded to the immediate execution of the performance guarantee. This situation generated the execution of the counter-guarantees offered by the Group to the company issuing the performance guarantee of the Concession Contract for US $ 52.5 million (S /. 176.6 million) and US $ 129 million (S / 433.3 million). for the corporate guarantee of the bridge loan granted to GSP.
On October 11, 2017, the agreement was signed for the delivery of the goods of the Southern Peru Gas Pipeline concession between GSP and the Ministry of Energy and Mines (MEM). As stated in the agreement, GSP delivered most of the Concession Assets in possession to the administrator designated by the MEM for its custody and conservation. The assets include all the works, equipment and facilities provided for the execution of the project, as well as the engineering studies that were prepared by the concessionaire company.
After the termination of the contract, the Peruvian Government, in accordance with the contract, had to hire an audit entity of recognized international prestige to calculate the Net Book Value (“VCN” for its Spanish definition “Valor Contable Neto”) of the Concession Assets and the subsequent call for up to three public auctions, being the base amount for the first of them 100% of the VCN, guaranteeing in any case that after the third auction, in case the concession has not been awarded, the payment to GSP would be at least 72.25% of the VCN. Having elapsed more than a year since the termination of the contract, the Peruvian Government has not taken any action to calculate the VCN and call for auctions. In the opinion of the external and internal legal advisors, since the previous procedure had not been done within the established deadlines, the Peruvian Government would be obliged to pay GSP 100% of the VCN. Regarding the amount of the VCN there is a previous calculation commissioned by GSP reviewed by an audit firm as an independent expert as of December 31, 2016, which determined a VCN of US $ 2,602 million.
GSP as of December 4, 2017 entered into a bankruptcy proceeding that will be carried out by the National Institute for the Defense of Competition and Intellectual Protection of Peru (hereinafter, INDECOPI), and the Group registered a claim for accounts receivable in 2017 charge for US $ 434,465.77 and the fiduciary based in its capacity as administrator accounts receivable amounting US $ 169,287,006
F-108
(All amounts expressed in thousands of S/ unless otherwise stated)
Based on the amount of the VCN, applying the payments foreseen in the insolvency proceedings, the subordination contracts and the loan cession agreements between the Group and GSP partners, the assumption that an international arbitration will be required to achieve the payment by the Government, and, in accordance with the conclusions of the internal and external legal advisors, it is estimated that the international arbitration would take approximately 5 years to resolve. This is why an impairment of the investment was recorded, which includes a finance update and estimation of costs for US $ 202.3 million before taxes at the income statement, as indicated in notes 13. c) and 16.
In addition, considering the early termination of the GSP contract, the Group evaluated the impairment of the financial statements of CCDS. As a result, a net loss before taxes of S / 15.2 million was determined (Note5.1-f), that was recognized in gross profit in the Engineering and Construction segment.
Same as in the Emergency Decree 003, Law 30737 (see note 1 c) iii) in its First Section, includes Odebrecht and its related companies, which include GSP. According to this Law, GSP will not be able to make transfers abroad, will require the consent of the Ministry of Justice in case it wishes to sell assets and must deposit the proceeds of such sale in a guarantee trust. Likewise, the entities of the Government that must make some payment to the entities included in the Law, must withheld according to the contract 10%, equivalent to the net profit margin, and deposit it in the aforementioned trust in guarantee. According to our internal and external legal advisors, Government payment for the VCN is not within the scope of the withholding, as this payment does not include net profit margin, nor is a sale of assets.
b) | Renegotiations of liabilities and credit lines - |
i) | Credit Suisse Syndicated Loan |
On June 27, 2017, the Company renegotiated the terms of this loan to clear breaches related to the termination of the GSP concession. The new terms establish repayment by December, 2020. See Note 19-i)
ii) | GSP Performance Guarantee |
On March 31, 2017, the Company renegotiated the terms for repayment obligations regarding the proportional share of the performance guarantee issued in connection with the GSP concession (Note 22). The new terms require repayment by June 30, 2018, with interest accrual 6% per year, and provide a security interest over our shares in CAM, and lien on certain assets’ cash flows.
F-109
(All amounts expressed in thousands of S/ unless otherwise stated)
iii) | GSP Bridge Loan |
On June 27, 2017 the Company entered in a new US$78.7 million term loan with Natixis, BBVA, SMBC and MUFJ, the proceeds of which were used to repay the GSP bridge loan. The maturity is June, 2020. See Note 19-ii)
iv) | Financial Stability Framework Agreement - |
On July 31, 2017, GyM S.A., Graña y Montero S.A.A., CAM Peru S.A., Vial and Vives—DSD S.A. and Concesionaria Vía Expresa Sur S.A. entered into a Financial Stability Framework Agreement (together with certain complementary contracts) with the following financial entities: Scotiabank Peru S.A.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 (together with its complementary contracts) was intended to: (i) grant GyM S.A. a line of a syndicated revolving loan for working capital of up to US$1.6 million and S/143.9 million (extendable to an additional US$14 million subject to certain conditions; (ii) grant GyM S.A. anon-revolving line of up to US$51.6 million and S/33.6 million; (iii) grant GyM S.A., Graña y Montero S.A.A., CAM Peru S.A., Vial and Vives—DSD S.A. and Concessionaire Vía Expresa Sur S.A anon-revolving line to finance the amounts payable resulting from the performance bonds that may become enforceable; (iv) grant a line of a syndicated loan to GyM S.A. and Graña y Montero S.A.A. for the newly-issued performance bonds of up to US$100 million (extendable up to US$150 million, subject to compliance with certain conditions); and (v) commit to maintaining the existingstand-by letters of credit issued at the request of GyM S.A. and Graña y Montero S.A.A as well as of CAM Perú S.A., Vial andVives-DSD S.A. and Concesionaria Vía Expresa Sur S.A.
c) | Divestment process - |
• | The Company has initiated a divestment process ofnon-strategic assets for up to US$300 million (equivalent to S/1,008 million) to meet the obligations arose from the early terminations of the GSP project. It should be noted that outside the situation described above, the subsidiaries of the Group are operating normally with their own capital and financing needs. To date these divestments are the following: |
• | On February 3, 2017 subsidiary Viva GyM S.A. signed a purchase-sales agreement comprising all its shares and rights (representing 50%) of the property at which Project Cuartel San Martín was to be developed jointly with another entity. The agreed selling price was US$50 million (equivalent to S/163 million), which were fully paid on April 3, 2017 with the signing of public deeds. |
• | On February 24, 2017 subsidiary Viva GyM S.A. signed a purchase-sales agreement comprising its equity interest (representing 22.5%) held in associate Promoción Inmobiliaria del Sur S.A. (Note16.a-ii) The agreed selling price was US$25 million (equivalent to S/81 million), which was fully paid. |
• | In February and March, 2017 subsidiary Stracon GyM S.A. sold in a trade session at the Lima Stock Exchange a portion of its equity interest (representing 9.97%) of Red Eagle Mining Corporation (included asnon-current assets at the consolidated financial statement), keeping an interest of 2.70%. The agreed selling price was US$13.3 million (equivalent to S/43 million), which was fully paid. |
F-110
(All amounts expressed in thousands of S/ unless otherwise stated)
• | On April 24, 2017 the Company signed a purchase-sale agreement for their total capital stock (representing 51%) held in their joint venture with Compañía Operadora de Gas del Amazonas S.A.C. (COGA). The selling price was agreed at US$21.5 million (equivalent to S/69.8 million), which was fully paid. |
• | On June 6, 2017 the Company signed a purchase-sale agreement for their total share (representing 89.19%) of GMD S.A. The selling price was agreed at US$84.7 million (equivalent to S/281.3 million), which was fully paid. |
• | On the other hand, on March 28, 2018, the subsidiary GYM sold its total share (87.59%) in Stracon GyM S.A. for a total of US $ 76.8 million. All of the inflows will be used to amortize their financial obligations. |
d) | Legal processes arising in 2017 - |
i) | Consorcio Rio Mantaro |
a) | On February 2, 2017, ULMA Encofrados Perú S.A. (hereinafter “ULMA”) started an arbitration process against Consorcio Río Mantaro (hereinafter, the “Consortium”) involving S/5.1 million for the alleged breach of returning in optimum conditions the equipment that was leased to them, and for not making the corresponding payment to ULMA for the reduction of the equipment |
On September 14, 2017, the Consortium and ULMA signed anout-of-court settlement for which ULMA agrees to grant Consortium a final reduction in the amount due to shortages and unusable. Therefore, the Consortium was obliged to pay ULMA the total amount of S/2 million, amount that includes the VAT.
b) | On June 1, 2017, Consorcio Rĺo Mantaro (the “Consortium”) filed a lawsuit against Andritz Hydro GmbH; Andritz Hydro SRL and Andritz Hydro S.A ( the “Subcontractors”) , who participated as electromechanical subcontractors of the Cerro del Águila Project (Hydroelectric Power Plant). The Consortium demands US$ 73.5 million (US $ 36.7 million what corresponds to GyM) for several breaches (including delays) in the execution of the electromechanical subcontract that binds them, in addition to demanding compensation for the other damages caused by the subcontractors. |
To date, the Consortium has complied with submitting its briefs to the Arbitral Tribunal, so we are waiting for the counterclaim.
ii) | Consorcio Ermitaño |
On March 3, 2017, Consorcio Ermitaño (hereinafter, the “Consortium”) initiated an arbitration against the Potable Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”) for:
a. | recognition of the Extension of Term No. 5 and payment of the respective general expenses, equivalent to S/13 million (being S/6.5 million what corresponds to GyM S.A.) |
On May 10, 2018, the Court heard oral arguments on this matter..
b. | recognition of the Term Extensions N ° 3 and N ° 4 and payment of the respective variable general expenses, equivalent to S/9.3 million (being S/4.6 million what corresponds to GyM SA). |
To date, the Arbitral Tribunal has declared that the arbitration is in a period to be waived, which expires on June 14.
c. | claiming the variable general expenses corresponding to the Extension of Term No. 6, equivalent to S/10.7 million (with S/5.3 million corresponding to GyM S.A.). |
F-111
(All amounts expressed in thousands of S/ unless otherwise stated)
On April 9, 2018, by means of Resolution No. 20, the Arbitral Tribunal declares that the arbitration is within a period of 30 business days
d. | recognition of the Extension of Term N ° 7 and N ° 9 and payment of the respective variable general expenses, equivalent to S / 4.4 million (S / 2.2 million corresponds to GyM ). |
To date, it is still pending that the Arbitral Tribunal sets the rules of the arbitration, after which the period to formulate the claim will begin.
e. | On April 12, 2018, (the “Consorcio”) initiated an arbitration against “SEDAPAL” by recognition of the Extension of Term N ° 7 and N ° 9 and payment of the respective variable general expenses, equivalent to S / 4.4 million (S / 2.2 million corresponds to GyM). |
iii) | Consorcio Constructor Ductos del Sur |
On May 31, 2017, Elecnor Perú S.A.C. (hereinafter “ELECNOR”) started an arbitration process against Consorcio Constructor Ductos del Sur, through the Companies partners of this Consortium, at their proportional share, to honor a payment of US$29.3 million (equivalent to S/95.9 million), for the alleged breach of the obligations expressly set forth in the contract.
On June 14, 2017, CCDS filed and responded to ELECNOR’s arbitration request.
At the reporting date, two arbitrators have been appointed and a third one remains pending to appoint.
iv) | Consorcio La Gloria |
On August 9, 2017, the Consorcio La Gloria (hereinafter, the “Consortium”) initiated an arbitration against the Drinking Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”), with the aim of resolving all pending matters pertaining to the settlement of the work contract signed with SEDAPAL.
On March 7, 2018 the Consortium filed its claim with the Arbitral Tribunal, and now we are waiting for the reply from SEDAPAL.
v) | GyM S.A. |
On October 10, 2017, Workbe Latam S.p.A. (hereinafter, “Workbe”) initiated an arbitration to order GyM S.A. (hereinafter, “GyM”) the compensation payment of US$0.7 million (equivalent to S/2.3 million) for early termination of service contract signed between the parties in 2016.
On April 26, 2018, GyM submitted to the Arbitral Tribunal the answer to the lawsuit.
vii) | Consorcio Italo Peruano |
On January 26, 2018, GyM S.A. (hereinafter, “GyM”) initiated an arbitration against the National Institute of Neoplastic Diseases (hereinafter, “INEN”), its claim being the approval of the Extension of Term No. 1 for a period of 62 calendar days and, recognition of expenses S / 1.3 million (S / 664 thousands corresponds to GyM SA).
To date, the installation of the Arbitral Tribunal is pending.
F-112
(All amounts expressed in thousands of S/ unless otherwise stated)
vii) | Consorcio Norte Pachacutec. |
On February 8, 2018, the North Pachacutec Consortium (hereinafter, the “Consortium”) initiated an arbitration against the Drinking Water and Sewerage Service of Lima S.A. (hereinafter, “SEDAPAL”), its main claim being the determination of the final cost of the work executed by the Consortium, considering unrecognized, recognized concepts and awards previously issued and that has not yet been met with the payment in favor of the Consortium, equivalent to the sum of S / 36.3 million (S / 17.8 million corresponds to GyM).
To date, the installation of the Arbitral Tribunal is pending.
38 | DISCONTINUED OPERATION |
As part of the divestment process conducted by the Company (Note 37 c) subsidiaries and joint ventures were dispose. The effect in the consolidated income statement is summarized as follows:
SUBSIDIARIES
GMD | ||||||||
2015 | 2016 | |||||||
Revenue | 232,582 | 279,289 | ||||||
Operating costs | (219,433 | ) | (257,294 | ) | ||||
Finance costs, net | (8,249 | ) | (9,758 | ) | ||||
|
|
|
| |||||
Operating profit from discontinued activities before taxation | 4,901 | 12,237 | ||||||
Income tax expense | (3,129 | ) | (7,466 | ) | ||||
|
|
|
| |||||
Profit from discontinued ordinary activities after taxation | 1,772 | 4,771 | ||||||
Profit from discontinued activities attributable to owners of the Company | 1,581 | 4,257 | ||||||
|
|
|
| |||||
Earnings per share relating to the discontinued operation are as follows: | ||||||||
Basic | 0.138 | 0.372 | ||||||
|
|
|
| |||||
Cash flows relating to the discontinued operation are as follows: | ||||||||
Operating cash flows | (14,193 | ) | 78,286 | |||||
Investing cash flows | (17,499 | ) | (30,712 | ) | ||||
Financing cash flows | (53,501 | ) | (48,516 | ) | ||||
STRACON GyM S.A. | ||||||||
2015 | 2016 | |||||||
Revenue | 1,476,764 | 1,222,707 | ||||||
Operating costs | (1,305,806 | ) | (1,099,789 | ) | ||||
Finance costs, net | (21,478 | ) | (3,104 | ) | ||||
|
|
|
| |||||
Operating loss from discontinued activities before taxation | 149,480 | 119,814 | ||||||
Income tax expense | (40,492 | ) | (32,558 | ) | ||||
|
|
|
| |||||
Profit from discontinued ordinary activities after taxation | 108,988 | 87,256 | ||||||
Profit from discontinued activities attributable to owners of the Company | 95,463 | 76,428 | ||||||
|
|
|
| |||||
Earnings per share relating to the discontinued operation are as follows | ||||||||
Basic | 1.395 | 1.117 | ||||||
|
|
|
| |||||
Cash flows relating to the discontinued operation are as follows: | ||||||||
Operating cash flows | 166,438 | 49,105 | ||||||
Investing cash flows | (19,914 | ) | (31,132 | ) | ||||
Financing cash flows | (120,655 | ) | (71,382 | ) |
F-113
(All amounts expressed in thousands of S/ unless otherwise stated)
JOINT OPERATION
CONSORCIO CONSTRUCTOR DUCTOS DEL SUR | ||||||||
2015 | 2016 | |||||||
Revenue | 154,110 | 998,463 | ||||||
Operating costs | (133,674 | ) | (977,729 | ) | ||||
Finance costs | (882 | ) | (3,670 | ) | ||||
|
|
|
| |||||
Operating profit from discontinued activities before taxation | 19,554 | 17,064 | ||||||
Income tax expense | (5,471 | ) | (19,347 | ) | ||||
|
|
|
| |||||
Profit from discontinued ordinary activities after taxation | 14,083 | (2,283 | ) | |||||
|
|
|
|
JOINT VENTURE
TECGAS N.V. | ||||||||
2015 | 2016 | |||||||
Revenue | 426,487 | 457,554 | ||||||
Finance costs | 16 | 215 | ||||||
|
|
|
| |||||
Operating profit from discontinued activities before taxation | 1,876 | (3,209 | ) | |||||
Income tax expense | (892 | ) | (4,078 | ) | ||||
|
|
|
| |||||
Loss from discontinued ordinary activities after taxation | 984 | (7,287 | ) | |||||
|
|
|
|
F-114
EXHIBIT INDEX
*** | This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. §78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this Amendment No. 1 to the annual report on Form20-F on its behalf.
GRAÑA Y MONTERO S.A.A. | ||
By: | /s/ Luis Francisco Díaz Olivero | |
Name: | Luis Francisco Díaz Olivero | |
Title: | Chief Executive Officer | |
By: | /s/ Monica Miloslavich | |
Name: | Monica Miloslavich | |
Title: | Chief Financial Officer |
Date: May 16, 2018