Commentary by the President of the Management Board of Budimex SA – Dariusz Blocher on the financial data from the consolidated financial statements of the Budimex Group for 2015

2015 was a very good year for the Budimex Group. We have achieved all the goals we set for ourselves. We have employed over 650 people, maintained our leading position in the infrastructure market, while diversifying our business.

In 2015, the Budimex Group signed contracts of a record high value: PLN 7.1 billion. We are the company that won the most road contracts in 2015 (21% of the market)
and since the beginning of the new EU perspective, it has submitted the best offers for almost 1/4 of the contracts announced by GDDKiA. As a result, the order book of the Budimex Group at the end of 2015 amounted to PLN 8.4 billion, i.e. 38% more than at the end of 2014. Currently, the value of contracts where Budimex’s offer has been selected as the most advantageous is PLN 2 billion.

In 2015, the construction and assembly production increased by 2.3% compared to the previous year. At the same time, we are observing a dynamic decline in the prices of raw materials, mainly steel and bitumen, which had a positive impact on the margins of general contractors achieved in 2015. However, this means a risk of price increases at the time of intensification of construction works in 2017-2018. Then we can also expect a significant increase in construction and assembly production.

In 2015, the Budimex Group recorded an increase in sales by 4% compared to the previous year, thus exceeding the value of PLN 5 billion. We have improved our financial results at every level. The Group’s operating profitability amounted to 5.7% and increased compared to 2014
by 14%. The Group generated nearly PLN 300 million of profit before tax, i.e.: nearly PLN 55 million (22%) more than in the previous year.

The Group’s cash position at the end of 2015 amounted to PLN 2.3 billion (a year-on-year increase of 34%). This is an exceptionally high level, but it is a cyclical phenomenon. The advance payments received for the performance of construction contracts had a positive impact on the Group’s cash level. The balance of advances in Budimex SA amounted to PLN 460 million at the end of 2015. However, this means that
In the coming years, during the implementation of contracts, we will observe their settlement. In addition, PLN 180 million is our clients’ cash blocked in the escrow accounts of the development segment.

The main driver of the Group’s results was the construction segment, in which we recorded a 5% increase in sales and a 25% and 30% increase in operating profit and profit before tax, respectively.

Cost control, strong emphasis on effective project management and attention to quality, to which the company attaches great importance, contribute to the continuous, systematic improvement of financial results. In 2015, Budimex expanded and modernised the central laboratory by equipping it
modern equipment for the inspection of construction products and pavement diagnostics. Currently, we have 20 laboratories throughout Polish, where over 150 people work on quality control at every stage of the investment.

Invariably, the energy and railway markets remain key to the diversification of the Group’s operations. In March, we plan to submit a commercial offer for the construction of a CCGT unit in Żerań
in Warsaw.

In 2015, we successfully completed the first large project in the industrial segment “Construction of the Municipal Waste Disposal Plant in Białystok” in the design and build formula. We have also completed two important projects in the railway area: “Design and construction of the Pomeranian Metropolitan Railway Stage I-revitalization” and “Modernization of the railway line in the area of LCS Iława”. In 2016, we plan to invest in the machinery necessary for the implementation of further railway contracts, which we want to win. FBSerwis is also developing its operations intensively, finalizing the purchase of two companies in the area of municipal waste management.

The development segment also achieved better results at each level. In 2015, 908 apartments were sold by notaries, i.e.: 30% more than in the previous year. As a result, segment sales increased by 17% year-on-year and operating profit by 20%.

The attractiveness of the offer of the Nowe Czyżyny project in Krakow has allowed the upward trend in pre-sales of apartments to be maintained. In 2015, Budimex Nieruchomości pre-sold 1918 flats (a year-on-year increase of 14%), of which 69% were pre-sales of flats on this project.
In 2016, we will start the last stages of this project. Maintaining pre-sales at the level of 1500 apartments per year in the coming years will require effort and a constant level of about 3500 apartments under construction.

We are currently building over 4000 apartments, of which 1235 are not pre-sold and are an offer for our customers. Most of the offer are apartments in Poznań and Warsaw.

In 2015, Budimex Nieruchomości purchased land for the construction of nearly 2,600 flats in Warsaw
and in Gdańsk. In 2016, we will continue the process of searching for attractive locations for new investments.

Since 2011, Budimex has been included in the RESPECT Index – a stock market index comprising companies conducting business in a responsible manner. In 2015, the Budimex Group paid a total of PLN 570 million in taxes to the State Treasury and social security contributions. Our activities in the area of social policy bring measurable results. Nearly 20 thousand children from 230 Polish schools have been equipped with plastic ICE cards as part of our original program “ICE Intercom. Budimex for Children”, and almost 25 thousand children benefit from 12 Parent Zones created by Budimex operating in children’s wards in Polish hospitals.

In 2016, we expect a further increase in sales dynamics, but we expect construction works to intensify in 2017-2018. This year, we will focus on maintaining high bidding efficiency and further winning infrastructure contracts so as to maintain our leading position in this area. We also plan to strengthen our position in the general construction segment in smaller towns. We believe that it is crucial to build a profitable order book and deliver high-quality facilities to investors on time. To meet this challenge, we hired more than 650 new employees in 2015. The policy of strengthening the staff will be continued in 2016, when we plan to employ another 700 people.

BUDIMEX Group

Selected financial data from the consolidated financial statements of the Budimex Group prepared in accordance with
with International Financial Reporting Standards (IFRS) for 2015 and comparable data for 2014.

Results of the reporting segments for 2015 (in PLN thousand):

Results of the reporting segments for 2014 (in PLN thousand):