6-K 1 a52369025.htm AENZA S.A.A. FORM 6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of January 2021

 Commission File Number 001-35991

AENZA S.A.A.
(Exact name of registrant as specified in its charter)
 
N/A
(b) (Translation of registrant’s name into English)
 
Republic of Peru
(Jurisdiction of incorporation or organization)
 
Avenida Paseo de la República 4667, Lima 34,
Surquillo, Lima
Peru
(Address of principal executive offices)
 


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F ___X____ Form 40-F _______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes _______ No ___X____
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.




January 29, 2021



Without any other particular, we remain yours.

Sincerely yours,


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AENZA S.A.A.

By: /s/ LUIS FRANCISCO DIAZ OLIVERO
Name: Luis Francisco Diaz Olivero
Title: Chief Executive Officer
Date: January 29, 2021




AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES




CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT
DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)







AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)





CONTENTS
 
Page
Consolidated Statement of Financial Position
1
Consolidated Statement of Income
2
Consolidated Statement of Comprehensive Income
3
Consolidated Statement of Changes in Equity
4
Consolidated Statement of Cash Flows
5
Notes to the Consolidated Financial Statements
6 - 40




S/                           =    Peruvian Sol
US$                    =    United States dollar




 
AENZA S.A.A (FORMERLYGRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
 
               
               
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
     
(All amounts are expressed in thousands of S/ unless otherwise stated)
 
               
ASSETS
             
       
As at
 
As at
 
         December 31,    December 31,  
   
Note
 
2019
 
2020
 
       
(as restated)
   
Current assets
             
Cash and cash equivalents
 
8
 
              950,701
 
              900,168
 
Trade accounts receivables, net
 
9
 
              914,204
 
              769,556
 
Work in progress, net
 
10
 
                49,457
 
              186,433
 
Accounts receivable from related parties
 
11
 
                36,658
 
                27,338
 
Other accounts receivable
 
12
 
              454,474
 
              435,818
 
Inventories, net
     
              555,401
 
              552,000
 
Prepaid expenses
     
                16,478
 
                22,972
 
       
           2,977,373
 
           2,894,285
 
               
Non-current assets as held for sale
     
                  2,398
 
                       -
 
               
Total current assets
     
           2,979,771
 
           2,894,285
 
               
Non-current assets
             
Trade accounts receivable, net
 
9
 
              779,609
 
              739,901
 
Work in progress, net
 
10
 
                23,117
 
                       -
 
Accounts receivable from related parties
 
11
 
              574,723
 
              638,434
 
Prepaid expenses
     
                27,934
 
                22,264
 
Other accounts receivable
 
12
 
              273,432
 
              370,314
 
Investments in associates and joint ventures
 
13
 
                37,035
 
                35,516
 
Investment property
     
                28,326
 
                26,073
 
Property, plant and equipment, net
 
14
 
              463,990
 
              405,469
 
Intangible assets, net
 
14
 
              854,227
 
              791,990
 
Right-of-use assets, net
 
14
 
                90,581
 
                64,518
 
Deferred income tax asset
     
              271,719
 
             262,655
 
Total non-current assets
     
           3,424,693
 
           3,357,134
 
               
               
               
               
               
               
               
Total assets
     
           6,404,464
 
           6,251,419
 
 
               
               
               
               
               
               
LIABILITIES AND EQUITY
             
       
As at
 
As at
 
         December 31,    December 31,  
   
Note
 
2019
 
2020
 
       
(as restated)
   
Current liabilities
             
Borrowings
 
15
 
              481,529
 
              452,884
 
Bonds
 
16
 
                44,737
 
                58,446
 
Trade accounts payable
 
17
 
           1,159,075
 
           1,099,442
 
Accounts payable to related parties
 
11
 
                38,916
 
                43,817
 
Current income tax
     
                51,169
 
                34,494
 
Other accounts payable
 
18
 
              669,674
 
              793,585
 
Provisions
 
19
 
              113,483
 
                138,780
 
Total current liabilities
     
           2,558,583
 
           2,621,448
 
               
Non-current liabilities
             
Borrowings
 
15
 
              409,066
 
              445,436
 
Bonds
 
16
 
              879,305
 
              874,313
 
Trade accounts payable
 
17
 
                34,814
 
                40,502
 
Other accounts payable
 
18
 
              296,290
 
              201,593
 
Accounts payable to related parties
 
11
 
                22,583
 
                36,298
 
Provisions
 
19
 
              214,952
 
              234,951
 
Derivative financial instruments
     
                       52
 
                       -
 
Deferred income tax liability
     
              112,734
 
              102,907
 
Total non-current liabilities
     
           1,969,796
 
           1,936,000
 
Total liabilities
     
           4,528,379
 
          4,557,448
 
               
Equity
             
Capital
 
20
 
              871,918
 
              871,918
 
Legal reserve
     
              132,011
 
              132,011
 
Voluntary reserve
     
                29,974
 
                29,974
 
Share Premium
     
           1,132,179
 
           1,131,574
 
Other reserves
     
(177,506)
 
(169,234
)
Retained earnings
     
(510,766)
 
(630,391
)
Equity attributable to controlling interest in the
Company
     
           1,477,810
 
           1,365,852
 
Non-controlling interest
     
              398,275
 
             328,119
 
Total equity
     
           1,876,085
 
           1,693,971
 
Total liabilities and equity
     
           6,404,464
 
           6,251,419
 


The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
 

1

 
 
AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
       
                   
                   
CONSOLIDATED STATEMENT OF INCOME
             
(All amounts are expressed in thousands of S/ unless otherwise stated)
 
                   
         
For the year
 
         
ended December 31,
 
   
Note
   
2019
   
2020
 
         
(as restated)
        
                   
Revenues from construction activities
         
2,411,880
     
1,815,671
 
Revenues from services provided
         
1,254,059
     
1,055,423
 
Revenue from real estate and sale of goods
          
671,922
     
442,935
 
           
4,337,861
     
3,314,029
 
                       
Cost of construction activities
         
(2,351,563
)
   
(1,716,311
)
Cost of services provided
         
(1,035,251
)
   
(929,206
)
Cost of real estate and  sale of goods
         
(500,610
)
   
(347,906
)
     
21
     
(3,887,424
)
   
(2,993,423
)
Gross profit
           
450,437
     
320,606
 
                         
Administrative expenses
   
21
     
(248,652
)
   
(152,443
)
Other income and expenses
   
22
     
(339,494
)
   
(96,715
)
Operating (loss) profit
           
(137,709
)
   
71,448
 
                         
Financial expenses
           
(253,134
)
   
(141,618
)
Financial income
           
74,346
     
35,688
 
Share of the profit or loss of associates and joint ventures accounted for using the equity method
   
13
     
(218,774
)
   
769
 
Loss before income tax
           
(535,271
)
   
(33,713
)
Income tax expense
           
(303,371
)
   
(57,957
)
Loss for the year
           
(838,642
)
   
(91,670
)
                         
(Loss) profit attributable to:
                       
Owners of the Company
           
(884,721
)
   
(119,625
)
Non-controlling interest
           
46,079
     
27,955
 
             
(838,642
)
   
(91,670
)
                         
                         
Loss per share attributable to owners of the
                       
Company during the year
   
26
     
(1.076
)
   
(0.137
)
                         
                         
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
 

2


AENZA S.A.A (FORMERLY 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,
 
   
2019
   
2020
 
             
             
Loss for the year
   
(838,642
)
   
(91,670
)
Other comprehensive income:
               
                 
Items that may be subsequently reclassified to profit or loss
               
Cash flow hedge, net of tax
   
6
     
(626
)
Foreign currency translation adjustment, net of tax
   
(8,170
)
   
8,305
 
Exchange difference from net investment in a foreign operation, net of tax
   
(456
)
   
708
 
Other comprehensive income for the year, net of tax
   
(8,620
)
   
8,387
 
Total comprehensive income for the year
   
(847,262
)
   
(83,283
)
                 
Comprehensive income attributable to:
               
Owners of  the Company
   
(891,607
)
   
(111,353
)
Non-controlling interest
   
44,345
     
28,070
 
     
(847,262
)
   
(83,283
)
                 
                 
                 
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
 

3

AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
                                           
                                                             
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                           
FOR THE YEAR ENDED DECEMBER 31, 2019 AND 2020
                                           
(All amounts are expressed in thousands of S/ unless otherwise stated)
                                     
   
Attributable to the controlling interests of the Company
             
   
Number
                                                       
   
of shares
         
Legal
   
Voluntary
   
Share
   
Other
   
Retained
         
Non-controlling
        
   
In thousands
   
Capital
   
reserve
   
reserve
   
premium
   
reserves
   
earnings
   
Total
   
interest
   
Total
 
                                                             
                                                             
Balances as of January 1, 2019
   
729,434
     
729,434
     
132,011
     
29,974
     
992,144
     
(170,620
)
   
375,417
     
2,088,360
     
401,571
     
2,489,931
 
- IFRS adoption
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,462
)
   
(1,462
)
   
-
     
(1,462
)
Initial balances restated
   
729,434
     
729,434
     
132,011
     
29,974
     
992,144
     
(170,620
)
   
373,955
     
2,086,898
     
401,571
     
2,488,469
 
(Loss) profit for the year
   
-
     
-
     
-
     
-
     
-
     
-
     
(884,721
)
   
(884,721
)
   
46,079
     
(838,642
)
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
6
     
-
     
6
     
-
     
6
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(6,440
)
   
-
     
(6,440
)
   
(1,730
)
   
(8,170
)
Exchange difference from net investment in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
(452
)
   
-
     
(452
)
   
(4
)
   
(456
)
Comprehensive income of the year
   
-
     
-
     
-
     
-
     
-
     
(6,886
)
   
(884,721
)
   
(891,607
)
   
44,345
     
(847,262
)
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(12,762
)
   
(12,762
)
- Contributions (devolution) of non-controlling shareholders, net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(32,996
)
   
(32,996
)
- Additional acquisition of non-controlling
   
-
     
-
     
-
     
-
     
1,883
     
-
     
-
     
1,883
     
(1,883
)
   
-
 
- Capital Increase
   
142,484
     
142,484
     
-
     
-
     
138,152
     
-
     
-
     
280,636
     
-
     
280,636
 
Total transactions with shareholders
   
142,484
     
142,484
     
-
     
-
     
140,035
     
-
     
-
     
282,519
     
(47,641
)
   
234,878
 
Balances as of December 31, 2019
   
871,918
     
871,918
     
132,011
     
29,974
     
1,132,179
     
(177,506
)
   
(510,766
)
   
1,477,810
     
398,275
     
1,876,085
 
                                                                                 
Balances as of January 1, 2020
   
871,918
     
871,918
     
132,011
     
29,974
     
1,132,179
     
(177,506
)
   
(510,766
)
   
1,477,810
     
398,275
     
1,876,085
 
                                                                                 
(Loss) profit for the year    
-
     
-
     
-
     
-
     
-
     
-
     
(119,625
)
   
(119,625
)
   
27,955
     
(91,670
)
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
(594
)
   
-
     
(594
)
   
(32
)
   
(626
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
8,158
     
-
     
8,158
     
147
     
8,305
 
Exchange difference from net investment in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
708
     
-
     
708
     
-
     
708
 
Comprehensive income of the year
   
-
     
-
     
-
     
-
     
-
     
8,272
     
(119,625
)
   
(111,353
)
   
28,070
     
(83,283
)
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(82,412
)
   
(82,412
)
- Contributions (devolution) of non-controlling shareholders, net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(15,725
)
   
(15,725
)
- Additional acquisition of non-controlling
   
-
     
-
     
-
     
-
     
(605
)
   
-
     
-
     
(605
)
   
(89
)
   
(694
)
Total transactions with shareholders
   
-
     
-
     
-
     
-
     
(605
)
   
-
     
-
     
(605
)
   
(98,226
)
   
(98,831
)
Balances as of December 31, 2020
   
871,918
     
871,918
     
132,011
     
29,974
     
1,131,574
     
(169,234
)
   
(630,391
)
   
1,365,852
     
328,119
     
1,693,971
 
                                                                                 
                                                                                 
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.
                         

4


AENZA S.A.A. (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES
 
                   
                   
CONSOLIDATED STATEMENT OF CASH FLOWS
                 
(All amounts are expressed in thousands of S/ unless otherwise stated)
       
                   
         
For the year
 
         
ended December 31,
 
   
Note
   
2019
   
2020
 
                   
OPERATING ACTIVITIES
                 
Loss before income tax
         
(535,271
)
   
(33,713
)
Adjustments to  profit not affecting cash flows from
                     
operating activities:
                     
Depreciation
   
21
     
112,318
     
98,504
 
Amortization
   
21
     
107,499
     
98,621
 
Impairment of inventories
           
4,503
     
791
 
Impairment of accounts receivable and other accounts receivable
           
290,491
     
85,273
 
Reversal of impairment of inventories
           
(4,752
)
   
(821
)
Debt condonation
           
(18,186
)
   
(9,451
)
Impairment (reversal) of property, plant and equipment
           
20,018
     
-
 
Impairment of intangible assets
           
45,821
     
-
 
Reversal of impairment of accounts receivable
           
(19,448
)
   
-
 
Reversal of impairment of intangible assets
           
(20,676
)
   
-
 
Change in the fair value of the liability for put option
           
4,697
     
245
 
Other provisions
           
186,894
     
55,497
 
Financial expense,net
           
167,872
     
225,212
 
Impairment of investment
           
384
     
38
 
Incremental cost accrued
           
-
     
8,875
 
Share of the profit and loss of associates and joint ventures accounted for using the equity method
   
13
     
218,774
     
(769
)
Reversal of provisions
           
(7,471
)
   
(14,310
)
Disposal (reversal) of assets
           
349
     
8,895
 
Profit on sale of property, plant and equipment
           
(11,892
)
   
(2,322
)
Profit on remeasurement of accounts receivable
           
45,363
     
(27,486
)
Net variations in assets and liabilities:
                       
Trade accounts receivable and working in progress
           
457,709
     
61,975
 
Other accounts receivable
           
148,833
     
(48,403
)
Other accounts receivable from related parties
           
(11,178
)
   
(38,875
)
Inventories
           
(34,091
)
   
22,578
 
Pre-paid expenses and other assets
           
4,964
     
(823
)
Trade accounts payable
           
58,973
     
(39,787
)
Other accounts payable
           

          (286,110
)
   
35,480
 
Other accounts payable to related parties
           
(24,461
)
   
3,591
 
Other provisions
           
(1,134
)
   
(9,051
)
Interest payment
           
(172,377
)
   
(137,370
)
Payments for purchases of intangibles - Concessions
           
(25,917
)
   
(3,519
)
Payment of income tax
           
(94,669
)
   
(112,851
)
Net cash provided by operating activities
           
           607,829
     
226,024
 
                         
INVESTING ACTIVITIES
                       
Sale of property, plant and equipment
           
18,607
     
9,118
 
Interest received
           
6,552
     
4,292
 
Dividends received
           
1,517
     
2,318
 
Payment for purchase of investments properties
           
(88
)
   
(98
)
Payments for intangible purchase
           
(84,201
)
   
(46,767
)
Payments for property, plant and equipment purchase
           
(93,017
)
   
(33,596
)
Net cash applied to investing activities
           
(150,630
)
   
(64,733
)
                         
FINANCING ACTIVITIES
                       
Loans received
           
644,312
     
185,644
 
Amortization of loans received
           
(1,130,301
)
   
(275,163
)
Amortization of bonds issued
           
(31,335
)
   
(37,981
)
Payment for transaction costs for debt
           
(4,770
)
   
-
 
Dividends paid to non-controlling interest
           
(12,762
)
   
(82,412
)
Cash received (return of contributions) from non-controlling shareholders
           
(32,996
)
   
(15,725
)
Capital increase
           
280,636
     
-
 
Net cash applied to financing activities
           
(287,216
)
   
(225,637
)
Net increase (net decrease) in cash
           
           169,983
     
(64,346
)
Exchange difference
           
(20,303
)
   
13,813
 
Cash and cash equivalents at the beginning of the year
           
801,021
     
950,701
 
Cash and cash equivalents at the end of the year
   
8
     
           950,701
     
900,168
 
                         
NON-CASH TRANSACTIONS:
                       
Capitalization of interests
           
7,229
     
4,887
 
Acquisition of assets through finance leases
           
3,851
     
71
 
Dividends declared to non-controlling interest
           
-
     
-
 
Acquisition of right-of-use assets
           
101,745
     
12,075
 
Reclassification to other accounts receivable by Concesionaria Vía Expresa Sur
           
-
     
24,157
 
Acquisition of supplier bonds
           
-
     
25,871
 
                         
The accompanying notes on pages 6 to 40 are an integral part of the consolidated financial statements.                        

5


AENZA S.A.A (FORMERLY GRAÑA Y MONTERO S.A.A.) AND SUBSIDIARIES

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2019 AND DECEMBER 31, 2020 (UNAUDITED)


1.    GENERAL INFORMATION

    a)  Incorporation and operations

AENZA S.A.A., previously named Graña y Montero S.A.A. (hereinafter the “Company”) is the parent Company of the AENZA S.A.A. Group (formerly Graña y Montero) that includes the Company and its subsidiaries (hereinafter, the “Group”) and is mainly engaged in holding investments in Group companies. Additionally, the Company provides services of strategic and functional advice and office leases space to the Group companies.

The General Shareholder’s Meeting on November 2, 2020 approved the modification of the Company’s corporate name from Graña y Montero S.A.A. to AENZA S.A.A.

The Group is a conglomerate of companies with operations including different business activities, the most significant are engineering and construction, infrastructure (public concession ownership and operation) and real estate businesses. See details of operating segments in Note 7.

    b)  Authorization for the issue of the financial statements

The condensed interim consolidated financial statements for the period ended Dectember 31, 2020 were authorized preliminary by Management and Board of Directors on January 29, 2021.

The consolidated financial statements for the year ended December 31, 2019 were approved on the Annual General Mandatory Shareholder’s Meeting on July 13, 2020.

    c)  The Impact of the Ongoing Novel Coronavirus (COVID-19)

The ongoing COVID-19 pandemic and government measures to contain the spread of the virus are disrupting economic activity, and consequently adversely affecting our business, results of operations and financial condition, mainly during second quarter.

Countries around the world—including Peru as well as Chile and Colombia—have adopted extraordinary measures to contain the spread of COVID-19, including imposing travel restrictions, requiring closures of non-essential businesses, establishing restrictions on public gatherings, instructing residents to practice social distancing, issuing stay-at-home orders, implementing quarantines and similar actions.

The COVID-19 pandemic and the related government measures have significantly increased economic uncertainty and caused a global recession. According to recent report from World Bank dated January 2021, during 2020, the global economy contracted by 4.3%, with Latin America contracted by 6.9% and Peru, Chile and Colombia, in particular, contracted 12%, 6.3% and 7.5%, respectively.

Since mid-March to June, substantially all of our engineering and construction and real estate projects were mandatorily shut down, mainly in Peru.  However, since July projects have resumed their operations to normal with COVID-19 protocols. Our infrastructure operations, which have for the most part been declared essential businesses, have continued to operate; however, certain of our infrastructure businesses have been adversely affected, by the sharp decline in traffic volumes and oil and gas prices between March and May.
6


Regarding the extent of the COVID-19 pandemic and its impact on the industries in which we operate, the full extent to which COVID-19 impact our business, results of operations and financial condition is currently under evaluation. We believe that the severity of the impact on the Company will depend, to a large extent, on how long the crisis continues, so we cannot predict to what extent the economies of the countries where we operate will be affected.

The Company has been taking significant measures to mitigate the impact of the crisis on the Group. Among other, we are prioritizing the health and safety of our employees, as well as the medium-term sustainability of their employment. Certain actions we are taking include: the design and implementation of protocols to return to project sites, the creation of new office layouts to be compliant with social distancing guidelines, the development of telecommuting schemes, and other major cost-saving initiatives in operation and in support offices.

    d)  Current situation of the Company

As a result of decisions of a previous administration, the Group is involved in a series of criminal investigations and administrative procedures conducted by the Public Ministry that are based on events that occurred between 2004 and 2015. Such situations led to organizational changes at Group´s corporate governance structure, the initiation of independent investigations and the adoption of measures to address and clarify such situations, as explained below:

On January 9, 2017, the Board of Directors approved the performance of an independent investigation related to six projects developed in association with companies of the Odebrecht Group.
On March 30, 2017, the Board of Directors created a Risk, Compliance and Sustainability Committee, who was in charge of the oversight of the investigation independently of Management. The external investigation was performed by the law firm Simpson Thacher & Bartlett LLP, with the assistance of forensic accountants, who reported exclusively to the Risk, Compliance and Sustainability Committee.
The external investigation concluded on November 2, 2017 and identified no evidence to conclude that any company personnel engaged in bribery in connection with any of our Company’s public projects in Peru with Odebrecht or its subsidiaries, or that any Company personnel was aware of, or knowingly participated in, any corrupt payments made in relation to such projects.
Subsequently, in August 2019, José Graña Miró Quesada, a shareholder and the former chairman of our Company, indicated in public statements to the media that he and Hernando Graña Acuña, a shareholder and former board member of our Company, had initiated a process of plea bargaining to cooperate with Peruvian prosecutors in respect of multiple projects in which our Company or our Subsidiaries participated in respect of the alleged “Lava Jato” or others. Due to the confidential nature of the plea bargain process, the reported information is limited and difficult to verify. Any admission or other evidence of wrongdoing would be inconsistent with information gathered during the internal investigation and would have a material impact on the findings of the prior internal investigation.
As new information about the various Peruvian criminal investigations of the Company emerged, and news that the Company’s former chairman and director were plea bargaining with Peruvian authorities, the Company's Board of Directors continued to investigate the allegations that were the subject of the investigations, including matters relating to the “Construction Club”, which was beyond the scope of the internal investigation conducted by Simpson Thacher & Bartlett LLP. After an extensive and detailed review process, the Company shared information relevant to the investigations with the Peruvian authorities within the framework of a plea bargain process.

7


As a result of its contribution to the investigations, on December 27, 2019, the Company signed a preliminary settlement and cooperation agreement whereby the Anti-Corruption Prosecutor and the Ad Hoc Prosecutor's Office promise to execute a final plea bargain agreement with the Company that would provide the Company with certainty regarding the contingencies it faces as a result of the above-mentioned processes. Additionally, in the aforementioned preliminary agreement, the Anti-Corruption Prosecutor and the Ad Hoc Attorney General's Office authorize the Company to disclose its existence but maintain its content confidential.
At the same time, over the last three years, the new administration together with the newboard initiated a transformation process based on the principles of Truth, Transparency and Integrity, making profound changes in the organization of the Company, such as the reconfiguration of the Board of Directors with an independent majority, as well as the creation of new governance practices, such as the Corporate Risk Management and autonomous Compliance function, with direct report to the Board of Directors, among other actions.

Criminal investigations derived from projects developed in partnership with companies of the Odebrecht group

In connection with the Lava Jato case, the Company participated directly or through its subsidiaries as minority partner in certain entities that developed six infrastructure projects in Peru with companies belonging to the Odebrecht group (hereinafter Odebrecht).

In 2016, Odebrecht entered into a Plea Agreement with the authorities of the United States Department of Justice and the Office of the District Attorney for the Eastern District of New York by which it admitted corruption acts in connection with some of these projects in which the Company participate as minority partner.

IIRSA Sur

In relation to investigations on IIRSA Sur, the former Chairman of the Board of Directors was included as a subject of an investigation for collusion, and a former director and a former executive was included as a subject of an investigation for money laundering. Subsequently, Graña y Montero S.A.A. and GyM S.A.  have been included as third-party civilians responsible in the process, which means that it will be assessed whether the obligation to indemnify Governement for damages resulting from the facts under investigation will be imposed on these entities.

Electric Train Construction Project

The first Preparatory Investigation Court of the Judiciary decided to incorporate GyM S.A. as civil third-party responsible in the process related to the construction of the Electric train construction Project, tranches 1 and 2. In this investigation the former Chairman of the Board, a former director and a former manager have been charged.

In 2019, the Company concluded that it may have exposure with respect to the preliminary investigation process conducted in relation to GSP (the South Peruvian Gas Pipeline project). As of the date hereof, the Company has not been indicted or incorporated as a civilly liable third-party.

Subsequently, in 2020, the Company and its legal advisors concluded that there is exposure to the preliminary investigation process conducted in relation to the IIRSA Norte project. To date, the Company has not been incorporated either as a responsible civil third party or as an investigated legal person.

8


Criminal investigations in conection to the Construction Club case

GyM S.A. has been incorporated, along with other construction companies, in the criminal investigation that the Public Ministry has been carrying out for the alleged crime of corruption of officials in relation to the so-called Construction Club. Similarly, at the end of February 2020, the Public Ministry has requested the incorporation of Concar S.A., the latter is pending judicial decision. Like officials of other construction companies, a former commercial manager of GyM S.A., the former president of the Board of Directors, a former director and the former Corporate General Manager of the Company have been included in the criminal investigation.

Anticorruption Law - effects on the Group

Law 30737 and its regulation issued by Supreme Decree 096-2018-EF have mitigated the Company and subsidiaries exposure to the corruption cases. These rules set clear guidelines to estimate the potential compensation reducing the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair its ability to operate.

In the case of the Company and its subsidiary GyM, the benefits of the mentioned rules are subject to the fulfillment of the following obligations as a consequence of the association with Odebrecht in the IRSA Sur and construction of the Electric train construction Project, tranches 1 and 2:


a.
The obligation to set up a trust that will guarantee any eventual payment obligation of an eventual civil compensation in favor of the Peruvian Government;

b.
The obligation not to transfer funds abroad without the prior consent of the Ministry of Justice;

c.
The implementation of a compliance program; and

d.
The obligation to disclose information to the authorities and to collaborate in the investigation.

The Group has designed a compliance program which is currently under implementation, it fully cooperates with the authorities in its investigations and has executed a trust agreement with the Ministry of Justice, under which the Company has established for an approximate amount of S/72 million (equivalent to US$20 million).

In 2020, the Company was included in the framework of Law 30737 for the IIRSA Norte and Chavimochic.  However, the Company has been in contact with the Ministry of Justice in order to clarify this information, given that the incorporation of the Company in the Category 2 is not in accordance with the provisions set forth in the law.  Based on the standards indicated and their guidelines, Management has estimated that the value of the civil damages for the cases described above is S/330 million (US$91.1 million)  and has registered as of December 31, 2020 S/186 million (equivalent to US$51.3 million) as net present value.

On the other hand, in addition to the cases where a provision for civil reparation has been registered, there is a project carried out in partnership with Odebrecht that to date is not under investigation. If this is started and some evidence is found, the maximum possible exposure for civil reparation estimated according to Law 30737 for the project would be S/9.6 million (approximately US$2.6 million).

However, the Company, through its external legal advisors, continues to conduct an ongoing evaluation of the information related to the criminal investigations described in this note in order to keep its defense prepared in the event any new charges may arise during those investigations. In conducting the aforementioned evaluation, the Company does not rule out the possibility of finding new incriminating evidence that is not known to date.

Investigations and administrative process initiated by INDECOPI in conection to the Construction Club case

On July 11, 2017, the Peruvian National Institute for the Defense of Free Competition and the Protection of Intellectual Property (“INDECOPI”) initiated an investigation against several construction companies, including GyM S.A., about the existence of an alleged cartel called the Construction Club. Throughout the investigation, GyM S.A. has provided to INDECOPI with all the information requested and continues collaborating with the ongoing investigation.

9

On February 11, 2020, GyM S.A. was notified by the Technical Secretariat of the Commission for the Defense of Free Competition (“INDECOPI”) with the resolution that begins a sanctioning administrative procedure involving a total of 35 companies and 28 natural persons, for  alleged anticompetitive conduct in the market of Public Works. The resolution does not include the assignment of responsibilities or the result of the administrative disciplinary procedure, which will be determined at the end of the aforementioned procedure. The procedure is in a probatory stage, therefore, INDECOPI has not carried out actions in order to quantifying the possible penalties that could result.


2.
IMPACT OF THE COVID-19 PANDEMIC

The outbreak of the Coronavirus 2019 (COVID-19) pandemic, which has been declared by the World Health Organization to be a “public health emergency of international concern”, has spread across the world since the end of 2019. Throughout 2020, countries around the world, including Perú, Chile and Colombia, implemented measures to contain the spread of COVID-19, including travel restrictions, temporary closure of non-essential businesses, restrictions on public meetings and others. In response to the decline in economic activity, the governments of Perú, Chile and Colombia have announced large stimulus programs to assist families and businesses.

As a result of the outbreak, the Group’s results of operations, financial positions and cash flows have been adversely affected during second quarter of 2020, however as of the date of this report and as a result of the gradual normalization of activities since July, the results of the following months show a significant recovery in activity.

From the analysis made the different business of the Group have been impacted during 2020 as follows:

1)
In the engineering and construction business the stoppage, specially form March to June, produce a reduction of 25% in revenues comparing to 2019.  However, the gradual normalization of activities and the result of negotiations with our clients regarding higher costs due to stoppages and new operating standards due to the COVID-19 situation prevented decrease in gross and operating margins from deteriorating substantially.  However, at the end of the third quarter, the backlog has increased with the award of the contract for the construction of the second runway at Jorge Chavez airport and the contract for the construction of the Piura gas pipeline.

2)
In the real estate business the shut down of projects has impacted the delivery of real estate units during the year, which impacts the revenues and results of the year. However, despite these adverse circumstances, a positive result was achieved for this business in 2020.

3)
The infrastructure businesses continue operating because they were declared esencial services.  However, there were some impacts on the different businesses:


a.
Line 1 of the Metro operated with less passengers but revenues were not impacted due to the fact that revenues don’t depend on traffic but on the amount of kms travelled by each train.

b.
Oil and gas business was impacted by the reduction of the oil Price to levels below the estimations considered for 2020.  During the sanitary crisis, the enforceability of further investment obligation on new wells in Lots III and IV was suspended and suppliers obligations were renegotiated.

c.
The sanitary emergency situation caused an impact on Norvial S.A. revenues and on the results of 2020 as a result of traffic reduction. However, the level of traffic carried has been gradually recovered.  In addition, in May the Republic Congress approved a law in order suspending the collection of toll, a measure that was in effect from May 9 to June 30, 2020. The Concession Contract clause 9.9, about operator contract guarantee, establishes Grantor’s obligation to recognize and pay the Concessionaire the corresponding rate difference in the event that any public entity does not allow the Concessionaire to collect the rate in accordance to the Concession Contract.  The estimate compensation in application of the aforementioned clause has been claimed to the Government.

d.
In the case of the other two road concessions, Survial S.A. and Concesion Canchaque S.A., the suspension in the collection of tolls did not impact the results of the year because the revenues do not depend on traffic.
10


In general terms, we have not been affected by interruptions in the supply chain of personnel, services or materials, and despite the shut down of some of our projects, we do not estimate penalties or breach of our agreements.

The most important goodwill of the Group are the result of acquisitions in Colombia and Chile. Considering that in both countries the impacts of the pandemic did not lead to major projects shut downs, our estimates of the value of the goodwill have not been affected. Based on our impairment assessment as of December 31, 2020, we have determined that our goodwill is not impaired.

On the liquidity side, the Group has implemented a plan that includes several measures to reduce expenses and preserve cash in response to the ongoing COVID-19 pandemic, including the following: (i) developing a twelve-week cash plan, project-by-project, to ensure that Group subsidiaries will continue to meet its critical obligations during that period, which plan is monitored and updated weekly; (ii) preparing a cash plan for the remainder of the 2020 fiscal year, to identify in advance key liquidity issues that may arise; (iii) renegotiating certain of the Group’s subsidiaries obligations with respect to suppliers, banks and other third parties; (iv) identifying and reducing non-essential general expenses across the Group; (v) reducing headcount, and temporarily reducing salaries of senior management and Directors’ allowances, across the Group’s three segments; and (vi) reducing capital expenditures across the Group’s subsidiaries. In addition, the Group is evaluating the selling of non-strategic assets to finance any cash flow deficit during the year. This plan was approved by the Board of Directors on April and May 2020. The Group will continue to closely monitor the impacts of COVID-19 through the course of the year 2020. Therefore, the accompanying financial statements have been prepared assuming that the Group and subsidiaries will continue as a going concern.


3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


3.1
Basis of preparation

The condensed interim consolidated financial statements for the year ended December 31, 2020 have been prepared in accordance with IAS 34 "Interim Financial Reporting". The condensed interim consolidated financial statements provide comparative information regarding prior periods; however, they do not include all the information and disclosures required in the annual consolidated financial statements, so they must be read together with the audited consolidated financial statements for the year ended December 31, 2019, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").

The condensed interim consolidated financial statements are presented in thousands of Peruvian Soles, unless otherwise stated.

3.1.1.  Account balance reclassified as of December 31, 2019


a)
The receivable balance to Consorcio Constructor Ductos del Sur amounting to S/27.8 million as of December 31, 2019 was reclassified from “other accounts receivable” to “accounts receivable from related parties”.


b)
Information on the subsidiary Adexus S.A. is presented. (hereinafter “Adexus”), whose main activity is to provide information technology solutions mainly in Chile and Peru, as of December 31, 2019 the subsidiary was recognized as a non-current asset held for sale; However, as of September 30, 2020, it was reclassified as a continuing operation for the reasons set forth in note 27.


11


As a result of this process, the balances in the consolidated statement of financial position are reclassified as follows:

   
As at
               
As at
 
   
December 31,
               
December 31,
 
   
2019
   
Reclassified (a)
   
Adexus (b)
   
2019
 
ASSETS
 
Audited
               
As restated
 
Current assets
                       
Cash and cash equivalents
   
948,978
     
-
     
1,723
     
950,701
 
Trade accounts receivables, net
   
821,737
     
-
     
92,467
     
914,204
 
Work in progress, net
   
49,457
     
-
     
-
     
49,457
 
Accounts receivable from related parties
   
36,658
     
-
     
-
     
36,658
 
Other accounts receivable
   
444,500
     
-
     
9,974
     
454,474
 
Inventories, net
   
552,573
     
-
     
2,828
     
555,401
 
Prepaid expenses
   
11,348
     
-
     
5,130
     
16,478
 
     
2,865,251
     
-
     
112,122
     
2,977,373
 
                                 
Non-current assets as held for sale
   
205,418
     
-
     
(203,020
)
   
2,398
 
                                 
Total current assets
   
3,070,669
     
-
     
(90,898
)
   
2,979,771
 
                                 
Non-current assets
                               
Trade accounts receivable, net
   
753,202
     
-
     
26,407
     
779,609
 
Work in progress, net
   
23,117
     
-
     
-
     
23,117
 
Accounts receivable from related parties
   
546,941
     
27,782
     
-
     
574,723
 
Prepaid expenses
   
27,934
     
-
     
-
     
27,934
 
Other accounts receivable
   
300,323
     
(27,782
)
   
891
     
273,432
 
Investments in associates and joint ventures
   
37,035
     
-
     
-
     
37,035
 
Investment property
   
28,326
     
-
     
-
     
28,326
 
Property, plant and equipment, net
   
443,870
     
-
     
20,120
     
463,990
 
Intangible assets, net
   
853,315
     
-
     
912
     
854,227
 
Right-of-use assets, net
   
78,813
     
-
     
11,768
     
90,581
 
Deferred income tax asset
   
240,919
     
-
     
30,800
     
271,719
 
Total non-current assets
   
3,333,795
     
-
     
90,898
     
3,424,693
 
                                 
Total assets
   
6,404,464
     
-
     
-
     
6,404,464
 


12



   
As at
               
As at
 
   
December 31,
               
December 31,
 
   
2019
   
Reclassified (a)
   
Adexus (b)
   
2019
 
   
Audited
               
As restated
 
LIABILITIES AND EQUITY
                       
Current liabilities
                       
Borrowings
   
454,260
     
-
     
27,269
     
481,529
 
Bonds
   
44,737
     
-
     
-
     
44,737
 
Trade accounts payable
   
1,136,121
     
-
     
22,954
     
1,159,075
 
Accounts payable to related parties
   
38,916
     
-
     
-
     
38,916
 
Current income tax
   
47,999
     
-
     
3,170
     
51,169
 
Other accounts payable
   
635,305
     
-
     
34,369
     
669,674
 
Provisions
   
113,483
     
-
     
-
     
113,483
 
Total current liabilities
   
2,470,821
     
-
     
87,762
     
2,558,583
 
                                 
Non-current liabilities as held for sale
   
210,025
     
-
     
(210,025
)
   
-
 
                                 
Total current liabilities
   
2,680,846
     
-
     
(122,263
)
   
2,558,583
 
                                 
Non-current liabilities
                               
Borrowings
   
344,806
     
-
     
64,260
     
409,066
 
Bonds
   
879,305
     
-
     
-
     
879,305
 
Trade accounts payable
   
-
     
-
     
34,814
     
34,814
 
Other accounts payable
   
273,101
     
-
     
23,189
     
296,290
 
Accounts payable to related parties
   
22,583
     
-
     
-
     
22,583
 
Provisions
   
214,952
     
-
     
-
     
214,952
 
Derivative financial instruments
   
52
     
-
     
-
     
52
 
Deferred income tax liability
   
112,734
     
-
     
-
     
112,734
 
Total non-current liabilities
   
1,847,533
     
-
     
122,263
     
1,969,796
 
Total liabilities
   
4,528,379
     
-
     
-
     
4,528,379
 
                                 
Equity
                               
Capital
   
871,918
     
-
     
-
     
871,918
 
Legal reserve
   
132,011
     
-
     
-
     
132,011
 
Voluntary reserve
   
29,974
     
-
     
-
     
29,974
 
Share Premium
   
1,132,179
     
-
     
-
     
1,132,179
 
Other reserves
   
(177,506
)
   
-
     
-
     
(177,506
)
Retained earnings
   
(510,766
)
   
-
     
-
     
(510,766
)
Equity attributable to controlling interest in the Company
   
1,477,810
     
-
     
-
     
1,477,810
 
Non-controlling interest
   
398,275
     
-
     
-
     
398,275
 
Total equity
   
1,876,085
     
-
     
-
     
1,876,085
 
Total liabilities and equity
   
6,404,464
     
-
     
-
     
6,404,464
 


As a result of this process, the amounts in the consolidated statement of income are reclassified as follows:


13




   
For the year ended
 
   
December 31, 2019
 
   
Reported
   
Adexus
   
As restated
 
                   
                   
Revenues from construction activities
   
2,411,880
     
-
     
2,411,880
 
Revenues from services provided
   
1,089,465
     
164,594
     
1,254,059
 
Revenue from real estate and sale of goods
   
583,659
     
88,263
     
671,922
 
     
4,085,004
     
252,857
     
4,337,861
 
                         
Cost of construction activities
   
(2,351,563
)
   
-
     
(2,351,563
)
Cost of services provided
   
(866,326
)
   
(168,925
)
   
(1,035,251
)
Cost of real estate and  sale of goods
   
(425,352
)
   
(75,258
)
   
(500,610
)
     
(3,643,241
)
   
(244,183
)
   
(3,887,424
)
Gross profit
   
441,763
     
8,674
     
450,437
 
                         
Administrative expenses
   
(213,908
)
   
(34,744
)
   
(248,652
)
Other income and expenses
   
(326,754
)
   
(12,740
)
   
(339,494
)
Operating loss
   
(98,899
)
   
(38,810
)
   
(137,709
)
                         
Financial expenses
   
(231,709
)
   
(21,425
)
   
(253,134
)
Financial income
   
74,656
     
(310
)
   
74,346
 
Share of the profit or loss of associates and joint ventures accounted for using the equity method
   
(218,774
)
   
-
     
(218,774
)
Loss before income tax
   
(474,726
)
   
(60,545
)
   
(535,271
)
Income tax expense
   
(319,957
)
   
16,586
     
(303,371
)
Loss from continuing operations
   
(794,683
)
   
(43,959
)
   
(838,642
)
                         
(Loss) profit from discontinued operations
   
(43,959
)
   
43,959
     
-
 
Loss for the year
   
(838,642
)
   
-
     
(838,642
)
                         
(Loss) profit attributable to:
                       
Owners of the Company
   
(884,721
)
   
-
     
(884,721
)
Non-controlling interest
   
46,079
     
-
     
46,079
 
     
(838,642
)
   
-
     
(838,642
)



3.2
Significant accounting policies

The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements at December 31, 2019.


3.3
Standards, amendments, and interpretation adopted by the Group

Standards, amendments and interpretation that have entered in force as of January 1, 2020, have not had impact on the condensed interim consolidated financial statements as of December 31, 2020, and fo this reason thay have not been disclosed.  The Group has not adopted in advance any amendment and modification that are not yet effective.


4.
FINANCIAL RISK MANAGEMENT

Financial risk management is carried out by the Group’s Management. Management oversees the general management of risks in specific areas, such as foreign exchange rate risk, price risk, cash flow and fair value interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investment of excess liquidity, which are supervised and monitored periodically.


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.

14


a)
Market risks


i)
Foreign exchange risk

The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad.  As of December 31, 2019 and December 31, 2020, this exposure is mainly concentrated in fluctuations of U.S. dollar, the Chilean and Colombian Pesos.


ii)
Price risk

Management considers that the exposure of the Group to the price risk of its investments in mutual funds, bonds, and equity securities is low since the invested amounts are not significant. Any fluctuation in their fair value will not have any significant impact on the balances reported in the consolidated financial statements.


iii)
Cash flow and fair value interest rate risk

The Group’s interest rate risk mainly arises from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

b)
Credit risk

Credit risk arises from cash and cash 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.

Concerning to loans to related parties, the Group has measures in place to ensure the recovery of these loans through the controls maintained by the Corporate Finance Management and the performance evaluation conducted by the Board of Directors.

Management does not expect the Group to incur any losses from the 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 meet its obligations. However, since 2017, the Group experienced liquidity problems due to the early termination of the GSP concession agreement and the obligations assumed. As a consequence, the Group started a disinvestment plan to be able to meet the obligations resulting from this scenario. This plan was met and the GSP debt was terminated. Due to the COVID-19 pandemic (Note 2), the Group considered diverse measures to reduce its liquidity risk exposure and developed a financial plan with the objective to meet its obligations at the corporate as well as the subsidiary level.

The Group’s Corporate Finance Officemonitors rolling forecasts of the Group’s liquidity requirements to ensure it exists sufficient cash to meet operational needs so that the Group does not breach borrowing limits or covenants, where applicable, on any of its borrowing facilities.  Less significant financing transactions are controlled by the Finance Management of each subsidiary.

15


Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal ratio targets in the statement of financial position 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 is 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 consolidated statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, which include interest to be applied according to the established schedule.

   
Less than
     
1-2
     
2-5
   
More than
       
At December 31, 2019
 
1 year
   
years
   
years
   
5 years
   
Total
 
 
                                 
Other financial liabilities (except
                                 
  for finance leases and lease
                                 
  liability for right-of-use asset)
   
501,864
     
147,473
     
235,222
     
-
     
884,559
 
Finance leases
   
11,438
     
3,531
     
13,346
     
-
     
28,315
 
Lease liability for right-of-use asset
   
31,036
     
40,808
     
32,562
     
11,551
     
115,957
 
Bonds
   
115,690
     
157,516
     
358,461
     
1,077,960
     
1,709,627
 
Trade accounts payables (except
                                       
  non-financial liabilities)
   
989,574
     
-
     
34,814
     
-
     
1,024,388
 
Accounts payables to related parties
   
38,916
     
21,747
     
-
     
836
     
61,499
 
Other accounts payables (except
                                       
  non-financial liabilities)
   
200,098
     
2,505
     
194,908
     
-
     
397,511
 
Other non-financial liabilities
   
-
     
52
     
-
     
-
     
52
 
 
   
1,888,616
     
373,632
     
869,313
     
1,090,347
     
4,221,908
 
 
                                       
 
                                       
 
                                       
 
 
Less than
     
1-2
     
2-5
   
More than
         
At December 31, 2020
 
1 year
   
years
   
years
   
5 years
   
Total
 
 
                                       
Other financial liabilities (except
                                       
  for finance leases and lease
                                       
  liability for right-of-use asset)
   
433,318
     
183,796
     
197,785
     
23,953
     
838,852
 
Finance leases
   
16,287
     
14,919
     
20,851
     
8,515
     
60,572
 
Lease liability for right-of-use asset
   
24,714
     
32,006
     
19,847
     
11,131
     
87,698
 
Bonds
   
137,090
     
168,673
     
385,919
     
971,543
     
1,663,225
 
Trade accounts payables (except
                                       
  non-financial liabilities)
   
1,003,745
     
40,502
     
-
     
-
     
1,044,247
 
Accounts payables to related parties
   
43,817
     
35,462
     
-
     
836
     
80,115
 
Other accounts payables (except
                                       
  non-financial liabilities)
   
273,278
     
2,185
     
133,684
     
-
     
409,147
 
      1,932,249
      477,543
      758,086
      1,015,978
      4,183,856
 


4.2    Capital management risk

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 minimize the cost of capital.  In 2017 the situation of the Group had lead Management to monitor deviations that might cause the non-compliance of covenants and may hinder the renegotiation of liabilities (Note15). In extraordinary events as explained in Note 2, the Group identifies the possible deviations and requirements and establishes a plan.

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.

16

The Group monitors capital based on the gearing ratio.  This ratio is calculated as net debt divided by total capital.  Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.

As of December 31, 2019 and December 31, 2020, the gearing ratio is presented below indicating the Group’s strategy to keep it in a range from 0.10 to 0.70.

         
At December 31,
 
   
2019
   
2020
 
Total financial liabilities and bonds (Note 15 and Note 16)
   
1,814,637
     
1,831,079
 
Less: Cash and cash equivalents (Note 8)
   
(950,701
)
   
(900,168
)
Net debt
   
863,936
     
930,911
 
Total equity
   
1,876,085
     
1,693,971
 
Total capital
   
2,740,021
     
2,624,882
 
                 
Gearing ratio
   
0.32
     
0.35
 


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 liabilities measured at fair value:

   
Level 2
At December 31, 2019
   
     
Financial liabilities
   
Derivatives used for hedging
 
                  52







As of December 31, 2020, this financial liability was settled.

17



5.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments used are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended  December 31, 2019.


6.
SEASONALITY OF OPERATIONS

The Group does not present seasonality in the operations of any of its subsidiaries; however, economic activities temporarily restricted during last seven months, due to COVID-19 pandemic and government measures implemented to contain the spread of the virus. As a result,  this situation affected negatively Group's revenues and financial position (Note 2).


7.
OPERATING SEGMENTS

Operating segments are reported consistently with the internal reports that are reviewed by the Group’ chief decision-maker; that is, the Executive Committee, which is led by the Chief Executive Officer. This Committee acts as the highest authority in making operational decisions, responsible for allocating resources and evaluating the performance of each operating segment.

The Group's operating segments are assessed by the activities of the following business units: (i) engineering and construction, (ii) infrastructure, and (iii) real estate.

As set forth under IFRS 8, reportable segments by significance of income are: ‘engineering and construction’ and ‘infraestructure’. However, the Group has voluntarily decided to report on all its operating segments.

Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported are measured in a manner consistent with the basis of preparation of the financial statements. Sales of goods are related to Real State segment. Revenues from services are related to other segments.

Group sales and receivables are not concentrated on a few customers. There is no external customer that represents 10% or more of the Goup’s revenue.

The table below shows the Group’s financial statements by operating segments:
18



Operating segments financial position
                                           
Segment reporting
                                           
         
Infrastructure
                         
As of December 31, 2019
 
Engineering and construction
   
Energy
   
Toll roads
   
Transportation
   
Water
treatment
   
Real estate
   
Parent
Company
operations
   
Eliminations