6-K 1 a51088383.htm GRANA Y MONTERO S.A.A. a51088383.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of April 2015

 Commission File Number 001-35591

GRAÑA Y MONTERO S.A.A.
(Exact name of registrant as specified in its charter)
 
GRAÑA Y MONTERO GROUP
(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.

 
 
 
 
   
/s/Dennis Gray Febres
Stock Market Representative
Graña y Montero S.A.A.
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


GRAÑA Y MONTERO S.A.A.
  
   
   
   
   
 By: /s/ DENNIS GRAY FEBRES  
   
Name: Dennis Gray Febres  
   
Title: Stock Market Representative  
   
April 28, 2015  
 
 
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED




GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2014 AND 2015 AND FOR THE THREE-MONTH PERIOD ENDED IN THIS DATE
 
 
 
 

(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED



GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2014 AND 2015 AND FOR THE THREE-MONTH PERIOD ENDED IN THIS DATE


CONTENTS





Condensed Interim Consolidated Statement of Financial Position

Condensed Interim Consolidated Income Statement

Condensed Interim Consolidated Statement of Comprehensive Income

Condensed Interim Consolidated Statement of Shareholders’ Equity 

Condensed Interim Consolidated Statement of Cash Flows

Notes to the Condensed Interim Consolidated Financial Statements









 


S/.          =      New Peruvian Sol
US$          =      United States dollar
 
 
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
ASSETS
                    
LIABILITIES AND EQUITY
                  
                                         
         
As of March 31,
              
As of March 31,
  
   
Note
  
2014
    
2015
        
Note
  
2014
    
2015
  
                                         
Current assets
                    
Current liabilities
                  
Cash and cash equivalents
           818,402       1,016,085    
Borrowings
     12       1,425,455       1,205,305  
Financial asset at fair value through profit or loss           7,105       7,188      
Bonds
     13       -       26,631  
Trade accounts receivables
           1,108,345       950,677    
Trade accounts payable
             1,178,849       1,089,844  
Unbilled work in progress
           1,152,790       1,259,340    
Accounts payable to related parties
             83,027       87,883  
Accounts receivable from related parties
     9       99,061       100,416    
Current income tax
             89,615       161,628  
Other accounts receivable
             579,654       673,330    
Other accounts payable
             1,007,743       1,049,627  
Inventories
             833,570       847,024    
Provisions
     14       11,441       10,525  
Prepaid expenses
             26,444       30,764    
Total current liabilities
             3,796,130       3,631,443  
Non-current assets classified as held for sale             9,513       9,059                              
Total current assets
             4,634,884       4,893,883    
Non-current liabilities
                        
                           
Borrowings
     12       326,124       336,748  
Non-current assets
                          
Long-term bonds
             -       585,990  
Long-term trade accounts receivable
             579,956       577,817    
Long-term trade accounts payable
             3,779       3,861  
Long-term unbilled work in progress
             35,971       41,545    
Other long-term accounts payable
             294,886       269,872  
Prepaid expenses
             9,478       5,674    
Provisions
     14       46,904       44,621  
Other long-term accounts receivable
             44,553       44,458    
Derivative financial instruments
             2,999       3,207  
Available-for-sale financial assets
     8       93,144       96,674    
Deferred income tax liability
             79,155       82,052  
Investments in associates and joint ventures
     10       229,563       244,946    
Total non-current liabilities
             753,847       1,326,351  
Investment property
             36,244       35,862    
Total liabilities
             4,549,977       4,957,794  
Property, plant and equipment
     11       1,148,651       1,157,179                              
Intangible assets
     11       781,454       805,413    
Equity
                        
Deferred income tax asset
             136,001       139,635    
Capital
     15       660,054       660,054  
Total non-current assets
             3,095,015       3,149,203    
Legal reserve
             132,011       132,011  
                           
Optional reserve
             -       29,974  
                           
Share Premium
             899,311       898,417  
                           
Other reserves
             (113,895 )     (117,316 )
                           
Retained earnings
             1,113,697       994,690  
                            Equity attributable to controlling interest in the Company             2,691,178       2,597,830  
                           
Non-controlling interest
             488,744       487,462  
                           
Total equity
             3,179,922       3,085,292  
Total assets
             7,729,899       8,043,086    
Total liabilities and equity
             7,729,899       8,043,086  
                                                     
                                                     
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
                        
 
 
- 2 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
 
CONSOLIDATED INCOME STATEMENT
 
         
For the period of three months ended
  
         
March 31,
        
   
Note
    
2014
    
2015
  
                   
                   
Revenues from construction activities
           1,052,620       1,241,803  
Revenues from services provided
           391,874       414,337  
Revenue from real estate and sale of goods
           77,753       46,830  
            1,522,247       1,702,970  
                       
Cost of construction activities
           (929,001 )     (1,163,086 )
Cost of services provided
           (313,415 )     (332,284 )
Cost of real estate and goods sold
           (53,002 )     (34,127 )
      16       (1,295,418 )     (1,529,497 )
Gross profit
             226,829       173,473  
                         
Administrative expenses
     16       (96,510 )     (108,908 )
Other income and expenses
             10,671       (4,012 )
Operating profit
             140,990       60,553  
                         
Financial expenses
             (31,184 )     (37,246 )
Financial income
             6,946       3,738  
Share of the profit or loss in associates and joint                        
ventures under the equity method of accounting
             6,114       15,002  
Profit before income tax
             122,866       42,047  
Income tax
     17       (39,762 )     (14,077 )
Profit for the year
             83,104       27,970  
                         
Profit attributable to:
                        
Owners of the Company
             70,863       17,581  
Non-controlling interest
             12,241       10,389  
              83,104       27,970  
                         
Earnings per share from continuing operations                        
attributable to owners of the Company during                        
the year
             0.107       0.027  
                         
                         
                         
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
  
 
 
- 3 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
         
For the period of three months ended
  
         
March 31,
        
   
Note
    
2014
    
2015
  
                   
                   
Profit for the year
           83,104       27,970  
Other comprehensive income:
                      
Items that will not be reclassified to profit or loss
                      
Remeasurement of actuarial gains and losses, net of tax
           (1,865 )     (2,431 )
                       
Items that may be subsequently  reclassified to profit or loss
                      
Cash flow hedge, net of tax
           158       (66 )
Foreign currency translation adjustment, net of tax
           (6,636 )     (9,511 )
Change in value of available-for-sale financial assets, net of tax     9       -       2,542  
Exchange difference from net investment in a foreign operation, net of tax             -       158  
              (6,478 )     (6,877 )
Other comprenhensive income for the year, net of tax
             (8,343 )     (9,308 )
Total comprehensive income for the year
             74,761       18,662  
                         
Comprehensive income attributable to:
                        
Owners of  the Company
             66,221       12,457  
Non-controlling interest
             8,540       6,205  
              74,761       18,662  
                         
                         
                         
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
  
 
 
- 4 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED

 
   
Attributable to the controlling interests of the Company
                                
   
Number
                      
Premium
    
Other
                 Non-        
   
of shares
          
Legal
    
Optional
    
for issuance
    
reserves
    
Retained
          
controlling
  
   
In thousands
    
Capital
    
reserve
    
reserve
    
of shares
          
earnings
    
Total
    
interest
    
Total
  
   
In thousands
                                                  
                                                             
Balances as of January 1, 2014
     660,054       660,054       111,657       -       1,027,533       18,423       947,433       2,765,100       431,301       3,196,401  
Profit for the year
     -       -       -       -       -       -       70,863       70,863       12,241       83,104  
Cash flow hedge
     -       -       -       -       -       150       -       150       8       158  
Adjustment for actuarial gains and losses
     -       -       -       -       -       -       (1,398 )     (1,398 )     (467 )     (1,865 )
Foreign currency translation adjustment
     -       -       -       -       -       (3,394 )     -       (3,394 )     (3,242 )     (6,636 )
Comprehensive income of the year
     -       -       -       -       -       (3,244 )     69,465       66,221       8,540       74,761  
Transactions with shareholders:
                                                                                
- Transfer to legal reserve
     -       -       20,354               -       -       (20,354 )     -       -       -  
- Dividend distribution
     -       -       -               -       -       (112,127 )     (112,127 )     (36,128 )     (148,255 )
- Contributions of non-controlling shareholders
     -       -       -               -       -       -       -       21,908       21,908  
Total transactions with shareholders
     -       -       20,354               -       -       (132,481 )     (112,127 )     (14,220 )     (126,347 )
Balances as of March 31, 2014
     660,054       660,054       132,011               1,027,533       15,179       884,417       2,719,194       425,621       3,144,815  
                                                                                 
Balances as of January 1, 2015
     660,054       660,054       132,011               899,311       (113,895 )     1,113,697       2,691,178       488,744       3,179,922  
Profit for the year
     -       -       -               -       -       17,581       17,581       10,389       27,970  
Cash flow hedge
     -       -       -               -       (63 )     -       (63 )     (3 )     (66 )
Adjustment for actuarial gains and losses
     -       -       -               -       -       (1,703 )     (1,703 )     (728 )     (2,431 )
Foreign currency translation adjustment
     -       -       -               -       (6,057 )     -       (6,057 )     (3,454 )     (9,511 )
Change in value of available-for-sale financial assets
     -       -       -               -       2,542       -       2,542       -       2,542  
Exchange difference from net investment in a foreign operation
     -       -       -               -       157       -       157       1       158  
Comprehensive income of the year
     -       -       -               -       (3,421 )     15,878       12,457       6,205       18,662  
Transactions with shareholders:
                                                                                
- Transfer to Optional  reserve
     -       -       -       29,974       -       -       (29,974 )     -       -       -  
- Dividend distribution
     -       -       -               -       -       (104,911 )     (104,911 )     (2,000 )     (106,911 )
- Contributions of non-controlling shareholders
     -       -       -               -       -       -       -       (4,517 )     (4,517 )
- Additional acquisition of non-controlling
     -       -       -               (894 )     -       -       (894 )     (970 )     (1,864 )
Total transactions with shareholders
     -       -       -       29,974       (894 )     -       (134,885 )     (105,805 )     (7,487 )     (113,292 )
Balances as of March 31, 2015
     660,054       660,054       132,011       29,974       898,417       (117,316 )     994,690       2,597,830       487,462       3,085,292  
                                                                                 
                                                                                 
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
                                          
 
 
- 5 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENT OF CASH FLOWS
 
         
For the period of three months ended
  
         
March 31,
        
   
Note
    
2014
    
2015
  
                   
OPERATING ACTIVITIES
                  
Profit before income tax
           122,866       42,047  
Adjustments to profit not affecting cash flows from
                      
operating activities:
                      
Depreciation
     11       40,089       48,279  
Amortization of other assets
     11       20,230       19,892  
Impairment of accounts receivable
     16               194  
Impairment of other assets
                     2,902  
Reversal of impairment of inventories
     16               (269 )
Other Provisions
     14       8,344       330  
Share of the profit and loss in associates
                        
under the equity method of accounting
     10       (6,114 )     (15,002 )
Reversal of provisions
     14       (2,426 )     (1,987 )
Profit on sale of property, plant and equipment
             (7,060 )     (740 )
Net variations in assets and liabilities:
                        
Decrease in trade accounts receivable
             (83,149 )     47,494  
Increase (decrease) in other accounts receivable
             (49,451 )     (92,846 )
Decrease in other accounts receivable from related parties
             3,328       (1,355 )
Decrease in inventories
             (91,300 )     (13,185 )
Increase (decrease) in pre-paid expenses and other assets
             (10,835 )     (23,184 )
Increase in trade accounts payable
             (4,823 )     (88,744 )
Increase (decrease) in other accounts payable
             127,503       19,164  
Increase (decrease) in other accounts payable to related parties
             8,046       4,856  
Decrease in other provisions
             (3,752 )     (1,542 )
Payments related to Norvial Concession
             (551 )     (27,742 )
Payment of income tax
             (69,507 )     (60,708 )
Net cash provided by (applied to) operating activities
             1,438       (142,146 )
                         
INVESTING ACTIVITIES
                        
Sale of property, plant and equipment
             15,861       2,473  
Dividends received
     10       -       99  
Payment for purchase of available-for-sale investment
             -          
Payment for purchase of investments properties
             (935 )     (179 )
Payments for intangible purchase
             (4,516 )     (5,903 )
Payments for purchase and contributions on investment in associate and joint ventures
     (13,791 )        
Direct cash outflow from acquisition of subsidiaries
             (6,387 )        
Payments for property, plant and equipment purchase
             (41,062 )     (57,793 )
Net cash applied to investing activities
             (50,830 )     (61,303 )
                         
FINANCING ACTIVITIES
                        
Loans received
             268,151       1,444,456  
Amortization of loans received
             (302,576 )     (1,012,177 )
Interest payment
             (10,471 )     (22,764 )
Dividends paid to owners of the parent
             -          
Dividends paid to non-controlling interest
             (21,397 )     (2,000 )
Cash received from non-controlling shareholders
             19,085       (4,518 )
Acquisition or sale of interest in a subsidiary of non-controlling shareholders
       -       (1,865 )
Capital contribution
             2,823          
Net cash (applied to) provided by financing activities
             (44,385 )     401,132  
Net increase (net decrease) in cash
             (93,777 )     197,683  
Cash decrease in deconsolidation
                        
Cash and cash equivalents at the beginning of the year
             959,415       818,402  
Cash and cash equivalents at the end of the year
             865,638       1,016,085  
                         
NON-CASH TRANSACTIONS:
                        
Dividends declared
             126,858       104,911  
Acquisition of assets through finance leases
             23,318       16,069  
Change in fair vaue of available-for-sale financial asset
                     3,531  
 
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
 
 
 
- 6 -
 
  
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2014 AND 2015 (UNAUDITED), AND AT DECEMBER 31, 2014 (AUDITED)


1
GENERAL INFORMATION

The Company is the parent company of the Graña y Montero Group (hereinafter the Group) and its principal activity is the holding of investments in the different companies of the Group. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory and human resources management to Group companies; it is also engaged in the leasing of offices to Group companies and third parties.

The Group is a conglomerate of companies with operations including different business activities, of which the most significant are engineering and construction, infrastructure (public concession operation), real estate businesses and technology services.

These condensed interim consolidated financial statements as of March 31, 2015 have been prepared and authorized for issuance by the Chief Financial Officer on on April 28, 2015.

2
BASIS OF PREPARATION

These condensed interim consolidated financial statements for the period ended March 31, 2015 have been prepared in accordance with (IAS 34) “Interim financial reporting”. The condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2014, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these interim condensed consolidated financial statements are consistent with those applied in the preparation of the year-end financial statements at December 31, 2014.

4
FINANCIAL RISK MANAGEMENT

4.1           Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk.

The condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; these should be read in conjunction with the Group’s annual financial statements as of December 31, 2014.  There have been no changes since year-end in the risk management department of the Group or in any risk management policies.

4.1.1     Market risk –

Compared to year end, no new material market risk hedging arrangements have occurred.
 
 
- 7 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
4.1.2     Credit risk –

Compared to year end, the Group has no exposure to any new relevant credit risk.

4.1.3           Liquidity risk -

Compared with the previous year, there was significant variation in the flow of undiscounted contractual cash due to the issuance of bonds by the subsidiria GyM Ferrovías.

The following table categorizes 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
      
From 1 to
      
From 2 to
      
Over
          
   
Year
      
2 Years
      
5 years
      
5 years
      
Total
  
                                       
At December 31, 2014
                                      
Other financial liabilities (except                                      
finance leases)
   1,318,817       72,696       56,206       -       1,447,719  
Finance leases
   138,988       92,242       122,378       11,224       364,832  
Trade payables
   1,178,849       3,779       -       -       1,182,628  
Payables to related parties
   83,027       -       -       -       83,027  
Other payables
   337,692       45,684       -       -       383,376  
Other non-financial liabilities    -       2,999        -        -       2,999  
    3,057,373       217,400       178,584       11,224       3,464,581  
 
At March 31, 2015
                                      
Other financial liabilities (except
                                      
finance leases)
   1,122,541       93,488       35,327       -       1,251,356  
Finance leases
   117,485       129,722       92,245       17,140       356,592  
Bonds payable
   62,218       68,218       135,490       1,284,918       1,550,844  
Trade payables
   1,089,844       3,861       -       -       1,093,705  
Payables to related parties
   87,883       -       -       -       87,883  
Other payables
   509,419       56,063       37,074       754       603,310  
Other non-financial liabilities
   -       3,207       -       -       3,207  
    2,989,390       354,559       300,136       1,302,812       4,946,897  
 
4.2 Capital management -

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

As of December 31, 2014 and March 31, 2015, due to the fact that the Company has acquired significant borrowings, the Company’s strategy was to maintain a gearing ratio between 0.03 and 1.00.
 
      December 31,       March 31,  
      2014       2015      
                 
Total borrowing
     1,751,579       1,542,053  
Less: Cash and cash equivalents
     (818,402 )     (1,016,085 )
Net debt
     933,177       525,968  
Total equity
     3,179,922        3,081,879  
Total capital
     4,113,099        3,607,847  
                 
Gearing ratio
     0.23        0.15  
 
 
- 8 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
4.3 Fair value estimation -
 
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.

-    Level 1: Measurement based on quoted prices in active markets for identical assets or liabilities.
-    Level 2: Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
-    Level 3: Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group).

The fair value of the investment held in Transportadora de Gas del Perú S.A. (TGP) classified as  available-for-sale financial asset was based on unobservable inputs in the market; 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 8).

Financial assets classified as at fair value through profit or loss corresponds to investments in mutual funds and bonds. Their fair value has been determined with observable information of Level 2.

Other financial instruments measured at fair value correspond to the interest rate swaps signed by subsidiary GMP S.A., by which a variable-interest instrument is changed to a fixed interest rate (cash flow hedge). The information used for determining the fair value of these instruments are Level 2 and has been determined based on the present value of discounted future cash flows applied to the interest-rate change projections of Citibank N.A.

The carrying amounts of cash and cash equivalents correspond to their fair values. The Company considers that the carrying amount of trade accounts receivable and payable is similar to their fair values. The fair value of financial liabilities, disclosed in Note 12-b), 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

Preparation of the condensed interim consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

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, 2014.

6
SEASONALITY OF OPERATIONS

The Group shows no material seasonality in the operations of any of its subsidiaries; operations are carried out regularly during the course of the period.

7
SEGMENT REPORTING
 
 
- 9 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segments are reported consistent with the internal reports that are reviewed by the Corporate General Manager, who 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 activity of the following business units: (i) engineering and construction, (ii) infrastructure, (iii) real estate, (iv) technical services and (v) the operation of the Parent Company (Holding).

As set forth under IFRS 8, reportable segments by significance of income 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.

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 to the Corporate General Manager are measured in a manner consistent with the basis of preparation of the financial statements.

Group sales and receivables are not concentrated on a few customers.
 
 
- 10 -
 

(All the amounts are expressed in thousand of S/. unless otherwise stated)
UNAUDITED
 
Operating segments financial position
 
Segment reporting
 
                                             
Parent
              
   
Engineering
    
Infrastructure
                             Technical    
Company
              
   
and construction
    
Energy
    
Toll roads
    
Mass transit
    
Water treatment
    
Real estate
    
services
    
Operations
    
Eliminations
    
Consolidated
  
As of December 31, 2014
                                                            
Assets.-
                                                            
Cash and cash equivalents
     285,367       54,085       53,312       51,522       8,407       54,268       134,679       176,762       -       818,402  
Financial asset at fair value through profit or loss
     7,105       -       -       -       -       -       -       -       -       7,105  
Trade Accounts receivable
     604,951       35,201       46,598       71,817       -       57,584       292,160       34       -       1,108,345  
Unbilled work in progress
     1,136,404       1,414       -       -       14,972       -       -       -       -       1,152,790  
Accounts receivable from related parties
     121,989       6,723       -       216       -       6,561       65,242       371,765       (473,435 )     99,061  
Other accounts receivable
     384,484       10,781       9,042       29,515       3,154       11,409       63,797       66,414       1,058       579,654  
Inventories
     126,293       7,921       -       13,909       -       630,758       55,601       486       (1,398 )     833,570  
Prepaid expenses
     11,489       891       822       6,056       407       235       5,119       1,425       -       26,444  
Non-current assets classified as held for sale
     9,513       -       -       -       -       -       -       -       -       9,513  
Total Current assets     2,687,595       117,016       109,774       173,035       26,940       760,815       616,598       616,886       (473,775 )     4,634,884  
                                                                                 
Long-term trade accounts receivable
     -       -       -       579,956       -       -       -       -       -       579,956  
Long-term unbilled work in progress
     -       25,387       10,584       -       -       -       -       -       -       35,971  
Long-term trade accounts receivable from related parties
     -       -       408       -       -       -       433       182,548       (183,389 )     -  
Prepaid expenses
     -       -       2,416       7,062       -       -       -       -       -       9,478  
Other long-term accounts receivable
     6,192       4,449       11,776       4,131       1,587       9,705       4,496       2,217       -       44,553  
Available-for-sale financial assets
     -       1,058       -       -       -       -       2       93,144       (1,060 )     93,144  
Investments in associates and joint ventures
     161,938       7,316       -       -       -       62,863       10,059       1,729,640       (1,742,253 )     229,563  
Investment property
     -       -       -       -       -       36,244       -       -       -       36,244  
Property, plant and equipment
     652,797       193,183       2,036       14,270       -       7,344       166,323       119,483       (6,785 )     1,148,651  
Intangible assets
     325,943       146,477       234,923       6,247       1,100       1,187       33,508       17,417       14,652       781,454  
Deferred income tax asset
     91,361       714       4,604       244       -       9       37,557       926       586       136,001  
Total non-current assets
     1,238,231       378,584       266,747       611,910       2,687       117,352       252,378       2,145,375       (1,918,249 )     3,095,015  
Total assets
     3,925,826       495,600       376,521       784,945       29,627       878,167       868,976       2,762,261       (2,392,024 )     7,729,899  
                                                                                 
                                                                                 
Liabilities.-
                                                                                
Borrowings
     629,584       69,577       95,902       404,915       -       144,314       80,531       632       -       1,425,455  
Trade accounts payable
     940,042       27,148       3,250       12,385       159       31,690       155,714       8,461       -       1,178,849  
Accounts payable to related parties
     89,445       1,061       55,679       278,819       24,552       24,106       82,203       12,421       (485,259 )     83,027  
Current taxes
     71,288       5,493       249       32       138       1,150       11,259       6       -       89,615  
Other accounts payable
     771,127       18,518       26,076       2,308       -       65,316       101,973       22,425       -       1,007,743  
Provisions
     -       8,414       -       -       -       -       3,027       -       -       11,441  
Total current liabilities
     2,501,486       130,211       181,156       698,459       24,849       266,576       434,707       43,945       (485,259 )     3,796,130  
                                                                                 
Borrowings
     144,081       99,767       633       -       -       16,368       63,070       2,205       -       326,124  
Long-term trade accounts payable
     -       -       1,622       2,157       -       -       -       -       -       3,779  
Accounts payables to related parties
     -       -       -       -       -       109,126       62,522       -       (171,648 )     -  
Other long-term accounts payable
     214,462       349       495       4,820       -       4,679       69,201       880       -       294,886  
Provisions
     26,878       5,774       -       -       -       -       14,252       -       -       46,904  
Derivative financial instruments
     -       2,999       -       -       -       -       -       -       -       2,999  
Deferred income tax liability
     51,556       1,331       -       -       325       8,707       7,021       10,215       -       79,155  
Total non-current liabilities
     436,977       110,220       2,750       6,977       325       138,880       216,066       13,300       (171,648 )     753,847  
Total liabilities
     2,938,463       240,431       183,906       705,436       25,174       405,456       650,773       57,245       (656,907 )     4,549,977  
Equity attributable to controlling interest in the Company
     817,356       236,925       150,788       59,633       4,453       157,276       128,429       2,695,401       (1,559,083 )     2,691,178  
Non-controlling interest
     170,007       18,244       41,827       19,876       -       315,435       89,774       9,615       (176,034 )     488,744  
Total liabilities and equity
     3,925,826       495,600       376,521       784,945       29,627       878,167       868,976       2,762,261       (2,392,024 )     7,729,899  
 
 
- 11 -
 
 
(All the amounts are expressed in thousand of S/. unless otherwise stated)
UNAUDITED
 
Operating segments financial position
 
Segment reporting
 
                                             
Parent
              
   
Engineering
    
Infrastructure
                             Technical    
Company
              
   
and construction
    
Energy
    
Toll roads
    
Mass transit
    
Water treatment
    
Real estate
    
services
    
Operations
    
Eliminations
    
Consolidated
  
As of March 31, 2015
                                                            
Assets.-
                                                            
Cash and cash equivalents
     249,166       80,275       111,332       103,369       2,918       55,652       44,547       368,826       -       1,016,085  
Financial asset at fair value through profit or loss
     7,188       -       -       -       -       -       -       -       -       7,188  
Trade Accounts receivable
     521,272       43,042       19,681       71,894       -       50,370       244,418       -       -       950,677  
Unbilled work in progress
     1,228,958       3,294       -       -       27,088       -       -       -       -       1,259,340  
Accounts receivable from related parties
     126,749       1,686       -       250       -       2,601       50,055       258,151       (339,076 )     100,416  
Other accounts receivable
     453,520       22,309       4,874       33,583       4,681       11,160       77,109       66,091       3       673,330  
Inventories
     124,214       9,164       -       14,712       -       639,177       59,765       486       (494 )     847,024  
Prepaid expenses
     12,968       1,796       390       3,587       433       80       10,406       1,104       -       30,764  
Non-current assets classified as held for sale
     9,059       -       -       -       -       -       -       -       -       9,059  
Total Current assets
     2,733,094       161,566       136,277       227,395       35,120       759,040       486,300       694,658       (339,567 )     4,893,883  
                                                                                 
Long-term trade accounts receivable
     -       -       -       577,817       -       -       -       -       -       577,817  
Long-term unbilled work in progress
     -       29,635       11,910       -       -       -       -       -       -       41,545  
Long-term trade accounts receivable from related parties
     -       -       411       -       -       -       453       156,489       (157,353 )     -  
Prepaid expenses
     -       -       5,674       -       -       -       -       -       -       5,674  
Other long-term accounts receivable
     6,192       4,784       14,270       4,154       1,589       9,668       2,098       1,703       -       44,458  
Available-for-sale financial assets
     -       -       -       -       -       -       2       96,674       (2 )     96,674  
Investments in associates and joint ventures
     165,818       7,588       -       -       -       67,525       10,428       1,672,927       (1,679,340 )     244,946  
Investment property
     -       -       -       -       -       35,862       -       -       -       35,862  
Property, plant and equipment
     646,507       192,909       1,927       19,223       -       8,883       168,707       124,713       (5,690 )     1,157,179  
Intangible assets
     321,118       148,205       259,934       6,218       1,087       1,163       35,517       17,783       14,388       805,413  
Deferred income tax asset
     93,451       2,146       5,290       -       -       177       37,988       989       (406 )     139,635  
Total non-current assets
     1,233,086       385,267       299,416       607,412       2,676       123,278       255,193       2,071,278       (1,828,403 )     3,149,203  
Total assets
     3,966,180       546,833       435,693       834,807       37,796       882,318       741,493       2,765,936       (2,167,970 )     8,043,086  
                                                                                 
Liabilities.-
                                                                                
Borrowings
     768,967       81,661       124,032       -       2,501       152,787       74,713       644       -       1,205,305  
Bonds
     -       -       -       26,631       -       -       -       -       -       26,631  
Trade accounts payable
     869,015       26,725       1,237       14,595       339       30,221       140,319       7,393       -       1,089,844  
Accounts payable to related parties
     95,947       44,537       34,468       111,492       17,938       27,943       89,947       6,526       (340,915 )     87,883  
Current taxes
     134,717       9,458       941       224       157       1,391       8,451       6,289       -       161,628  
Other accounts payable
     679,395       9,295       66,325       1,090       -       74,415       99,718       119,390        (1 )     1,049,628  
Provisions
     -       8,372       -       -       -       -       2,153       -       -       10,525  
Total current liabilities
     2,548,041       180,048       227,003       154,032       20,935       286,757       415,301       140,242       (340,916 )     3,631,444  
                                                                                 
Borrowings
     160,433       98,759       480       -       -       19,654       55,383       2,039       -       336,748  
Long-term bonds
     -       -       -       585,990       -       -       -       -       -       585,990  
Long-term trade accounts payable
     -       -       1,704       2,157       -       -       -       -       -       3,861  
Accounts payables to related parties
     -       -       -       -       11,500       109,126       34,888       -       (155,514 )     -  
Other long-term accounts payable
     191,138       -       494       5,739       -       4,951       66,738       812       -       269,872  
Provisions
     26,230       6,449       -       -       -       -       11,942       -       -       44,621  
Derivative financial instruments
     -       3,207       -       -       -       -       -       -       -       3,207  
Deferred income tax liability
     52,778       2,169       -       1,872       318       8,087       4,920       11,908       -       82,052  
Total non-current liabilities
     430,579       110,584       2,678       595,758       11,818       141,818       173,871       14,759       (155,514 )     1,326,351  
Total liabilities
     2,978,620       290,632       229,681       749,790       32,753       428,575       589,172       155,001       (496,430 )     4,957,794  
Equity attributable to controlling interest in the Company
     814,273       237,691       161,215       63,764       5,043       149,856       125,585       2,601,416       (1,561,013 )     2,597,830  
Non-controlling interest
     173,287       18,510       44,797       21,253       -       303,887       26,736       9,519       (110,527 )     487,462  
Total liabilities and equity
     3,966,180       546,833       435,693       834,807       37,796       882,318       741,493       2,765,396       (2,167,970 )     8,043,086  
 
 
 
 
- 12 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segment performance
 
Segment Reporting
 
   
Engineering
    
Infrastructure
                                  
Parent
              
   
and
construction
    
Energy
    
Toll roads
    
Mass
transit
    
Water
treatment
    
Real
estate
    
Technical
services
    
Company
operations
    
Eliminations
    
Consolidated
  
For the three-month period
                                                            
ended Mar 31, 2014
                                                            
                                                             
Revenue
     1,105,106       79,623       35,901       44,277       6,416       53,620       246,202       12,294       (61,192 )     1,522,247  
Gross profit
     140,924       29,145       14,674       15,697       523       13,143       22,604       (291 )     (9,590 )     226,829  
Administrative expenses
     (63,159 )     (3,914 )     (1,635 )     (2,004 )     (81 )     (5,381 )     (28,667 )     (7,162 )     15,493       (96,510 )
Other income and expenses
     (1,724 )     (461 )     237       (3,028 )     (4 )     (347 )     2,650       13,961       (613 )     10,671  
Profit before interests
                                                                                
and taxes
     76,041       24,770       13,276       10,665       438       7,415       (3,413 )     6,508       5,290       140,990  
Financial expenses
     (18,429 )     (1,895 )     (6,784 )     (2,621 )     (11 )     (2,068 )     (6,134 )     (466 )     7,224       (31,184 )
Financial income
     6,260       16       570       74       5       27       787       14,211       (15,004 )     6,946  
Share of the profit or loss
                                                                                
in associates and joint ventures under the equity
                                                                                
method of accounting
     6,909       245       -       -       -       -       692       55,246       (56,978 )     6,114  
Profit before income tax
     70,781       23,136       7,062       8,118       432       5,374       (8,068 )     75,499       (59,468 )     122,866  
Income tax
     (21,563 )     (7,193 )     (2,278 )     (2,945 )     (131 )     (2,310 )     1,570       (5,190 )     278       (39,762 )
Net profit for the period
     49,218       15,943       4,784       5,173       301       3,064       (6,498 )     70,309       (59,190 )     83,104  
                                                                                 
Profit attributable to:
                                                                                
                                                                                 
Owners of the Company
     37,912       14,915       3,375       3,880       301       683       (4,081 )     70,450       (56,572 )     70,863  
Non-controlling interest
     11,306       1,028       1,409       1,293       -       2,381       (2,417 )     (141 )     (2,618 )     12,241  
Net profit for the period
     49,218       15,943       4,784       5,173       301       3,064       (6,498 )     70,309       (59,190 )     83,104  
 
 
- 13 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segment performance
 
Segment Reporting
 
   
Engineering
    
Infrastructure
                                  
Parent
              
   
and
construction
    
Energy
    
Toll roads
    
Mass
transit
    
Water
treatment
    
Real
estate
    
Technical
services
    
Company
operations
    
Eliminations
    
Consolidated
  
For the three-month period
                                                            
ended Mar 31, 2015
                                                            
                                                             
Revenue
     1,310,454       72,437       67,812       50,677       12,402       23,773       243,000       17,031       (94,616 )     1,702,970  
Gross profit
     106,443       10,890       14,671       12,187       908       4,625       39,939       (1,696 )     (14,494 )     173,473  
Administrative expenses
     (69,127 )     (3,989 )     (2,370 )     (3,056 )     (69 )     (4,726 )     (36,014 )     (6,798 )     17,241       (108,908 )
Other income and expenses
     (7,635 )     (986 )     -       -       -       (591 )     3,719       1,614       (133 )     (4,012 )
Profit before interests
                                                                                
and taxes
     29,681       5,915       12,301       9,131       839       (692 )     7,644       (6,880 )     2,614       60,553  
Financial expenses
     (25,521 )     (4,936 )     (1,276 )     (1,240 )     (9 )     (4,606 )     (7,864 )     (568 )     8,774       (37,246 )
Financial income
     3,049       58       3,128       10       15       52       639       9,122       (12,335 )     3,738  
Share of the profit or loss
                                                                                
in associates and joint ventures under the equity
                                                                                
method of accounting
     8,457       267       -       -       -       4,663       332       15,581       (14,298 )     15,002  
Profit before income tax
     15,666       1,304       14,153       7,901       845       (583 )     751       17,255       (15,245 )     42,047  
Income tax
     (5,708 )     (564 )     (3,820 )     (2,392 )     (254 )     154       (1,226 )     (656 )     389       (14,077 )
Net profit for the period
     9,958       740       10,333       5,509       591       (429 )     (475 )     16,599       (14,856 )     27,970  
                                                                                 
Profit attributable to:
                                                                                
                                                                                 
Owners of the Company
     3,944       416       7,364       4,132       591       (131 )     (388 )     16,693       (15,040 )     17,581  
Non-controlling interest
     6,014       324       2,969       1,377       -       (298 )     (87 )     (94 )     184       10,389  
Net profit for the period
     9,958       740       10,333       5,509       591       (429 )     (475 )     16,599       (14,856 )     27,970  
 
 
- 14 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
No major changes occurred in total assets as compared to the amount stated in the year-end financial statements.

There are no differences as compared to the year-end financial statements based on segmentation or measurement of financial performance by segment.

8
AVAILABLE-FOR-SALE FINANCIAL ASSETS

This account comprises the investment held by the Company, directly and indirectly, in Transportadora de Gas del Perú S.A. (TGP), a Peruvian entity engaged in providing gas transportation services.

In December 2013, the Group acquired from one of the TGP’s shareholders, Pluspetrol Resources Corporation (hereinafter Pluspetrol), an additional 1.04% interest in TGP paying a consideration of US$20 million (equivalent to S/.56.1 million) obtaining a total interest of 1.64% at December 31, 2013.

Together with the acquisition of the 1.04% interest, the Company acquired from Pluspetrol on behalf of the Canada Pension Plan Investment Board (CPPIB) an additional indirect interest of 11.34% in TGP. The investment for US$217 million was funded entirely by CPPIB. The risk and rewards of the entire investment are assumed by CPPIB.

Given the features of the transaction, it has been treated as an off-balance-sheet transaction because, in substance, the Company is acting as an agent to CPPIB. Therefore, the Company did not recognized either the investment in TGP nor any obligation to CPPIB. This acquisition is part of an investment agreement entered into with CPPIB, whereby both parties commit themselves to initiate and develop projects in the oil and gas industry.

On December 27, 2013 the Company announced its intention to transfer the previously acquired interest of 11.34% in TGP to CPPIB (10.43%) and to Corporación Financiera de Inversiones – CFI (0.91%), if none of the existing TGP shareholders exercise their first option of share acquisition rights.

On February 27, 2014, the Company transferred the shares to the above indicated entities, retaining in TGP an interest equivalent to 1.64%, for this transaction the Group obtained a commission fee of S/.7.5 million which is included in ‘other income and expenses’.

At December 31, 2014, the fair value of the Group´s interest in TGP equals S/.93.14 million the base on the discounted cash flow method. The information used in the calculation is as follows:

-  Discounted cash flows from operating activities of TGP net of cash flows from investment activities (CAPEX).
-  Cash flows were estimated for a 30 year term.
-  The discount rate used is 8% corresponding to the Company’s WACC.
-  The interest of the Company in TGP is 1.64% as of December 31, 2014

The fluctuation in the fair value of this investment in 2014 amounts to S/.3.56 million, net of its income tax effect amounting to  S/.1.25 million, plus the adjustment for changes in rate of income tax amounting to S/.1.09 million, which has been recognized in the statement of other comprehensive income.

At March 31, 2015, no major changes, except for adjustment of exchange difference for S/.3.53 million, net of the effect on income tax up to S/.0.99 million, which has been recognized in the statement of other comprehensive income.

9
TRANSACTIONS WITH RELATED PARTIES

a)      Transactions with related parties -

Major transactions between the Company and its related parties are summarized as follows:
 
 
- 15 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
    From the period        
    ended March 31,        
    2013     2014  
 Revenue from sale of goods and services:            
 - Associates     -       1,128  
- Joint operations     10,149       10,536  
      10,149       11,664  

Inter-company services were agreed upon under market terms as if they had been agreed to with third parties.

b)      Balances of transactions with related parties
 
 
 
- 16 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 

 
      At December 31,            
At March 31,
          
     
2014
      
 
      
2015
          
     
Receivable
       Payable      
Receivable
      
Payable
  
                                 
Consorcio GyM Conciviles
     48,581       -       51,159       -  
Consorcio Peruano de Conservación
     15,365       -       11,427       -  
Consorcio Tren Electrico
     7,380       -       6,338       -  
Consorcio Terminales
     6,837       -       518       -  
Consorcio Rio Urubamba
     5,107       3,796       5,512       3,351  
Consorcio Sistemas SEC
     4,349       -       -       -  
Consorcio La Gloria
     3,805       3,423       3,822       3,032  
Consorcio Constructor Alto Cayma
     1,424       -       122       -  
Consorcio JV Panamá
     1,043       -       1,105       -  
Consorcio Lima
     877       -       291       -  
Consorcio Norte Pachacutec
     531       1,068       1087       1,015  
Consorcio Huacho Pativilca
     369       4,555       -       5,268  
Consorcio Rios Pallca
     187       282       141       559  
Consorcio Constructor Chavimochic
     141       2,896       -       665  
Consorcio Alto Cayma
     121       700       122       690  
Consorcio Construcciones y Montajes
     115       1,198       -       1,673  
Consorcio Vial Quinua
     116       0       135       -  
Bechtel Vial y Vives Servicios Complementarios Ltd
     96       4,648       -       6,305  
   Consorcio Atocongo      -       915        82        300  
   Consorcio brocal pasco      -        -        -        -  
Consorcio Ingenieria y Construcción Bechtel
   -       5,140       137       62  
Consorcio Rio Mantaro
   -       -       466       2603  
Consorcio Vial Ipacal
   -       -       -       -  
Consorcio Vial Sullana
   -       -       -       -  
Consorcio Vial Sur
   -       -       -       -  
Consorcio EIM ISA
   -       2,955       -       2,965  
Ingeniería y Construcción Sigdo Koppers-Vial
   -       35,302       163       38,603  
Consorcio Lima Actividades Comerciales
   -       -       2,922       469  
Terminales del Perú
   -       -       1,291       -  
Consorcio Constructor Alto Cayma
   -       -       1,445       -  
CONSTRUCTORA INCOLUR-DSD LIMITADA
   -       -       -       2663  
Other minor
   2,617       2,056       12,131       3,214  
    99,061       68,934       100,416       73,437  
Other related parties:
                              
Ferrovias Argentina
   -       14,093       -       14,043  
Besco
   -       -       -       403  
    -       14,093       -       14,446  
    99,061       83,027       100,416       87,883  
 
 
 
- 17 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Accounts receivable and payable are of current maturity and have no specific guarantees.

Accounts receivable from related parties mainly arise from sales transactions for goods and services with a maturity period of 60 days. These balances are non-interest-bearing because they have short-term maturities and do not require a provision for impairment.

Accounts payable to related parties mainly arise from transactions to provide services of engineering, construction, maintenance and others and have a maturity period of 60 days. Such accounts are not interest bearing because they are short-term.

10
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
 
As of March 31, 2015, associates in which the Group has significant influence are substantially the same as those existing as of December 31, 2014.

The movement of our investments in associates for the period ended March 31, 2014 and March 31, 2015 is as follows:
 
   
2014
    
2015
  
             
Beginning balance
     87,967       229,563  
Acquisition and/or contributions received
     13,791       -  
Share of the profit and loss in associates
                
under the equity method of accounting
     6,114       15,002  
Dividends received
     -       (99 )
Other
     (2,662 )     480  
Ending balances
    105,210       244,946  

For the operation of the concession the Company, Constructora Norberto Odebrecht S.A. and Odebrecht Partipacoes e Investimentos S.A. have formed Concesionaria Chavimochic S.A.C. in wich the Company has 26.5% interest. As of March 14, 2014 the Company has issued S/.13.3 million equity.
 
11           PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

For the period ended March 31,2014 and 2015, the movement in property, plant and equipment and intangible assets accounts was as follows:
 
 
- 18 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
   
Property,
plant and
equipment
    
Intangible
assets
  
                 
At January 1, 2014
     952,906       480,885  
                 
Additions
     64,380       5,067  
Acquisition of subsidiary - net
     711       7,790  
Transfers, disposals and adjustments
     (24,945 )     10,536  
Deductions for sale of assets
     (8,800 )     -  
Depreciation,  amortization
     (39,565 )     (20,230 )
Net cost at March 31, 2014
     944,687       484,048  

 
At January 1, 2015
     1,148,651       781,454  
                 
Additions
     73,862       33,645  
Transfers, disposals and adjustments
     (16,023 )     10,206  
Deductions for sale of assets
     (1,594 )     -  
Depreciation,  amortization
     (47,717 )     (19,892 )
Net cost at March 31, 2015
     1,157,179       805,413  
 
As of March 31, 2014 and 2015, additions to property, plant and equipment comprise of acquisition of plant and equipment intended for the Group’s operations.

As of March 31, 2014, the amounts registered in Property, plant and equipment and intangible assets were obtained through the acquisition of Coasin Instalaciones Limitada (Note 19.a), direct control acquired by CAM Chile S.A.

As of March 31, 2015, the amounts registered in Intangible assets comprise of investements in building  the second Ancón-Huacho-Pativilca road section of the Panamericana Norte highway ( concession under intangible model ).

Goodwill -

Management reviews the results of its business operations based on the type of economic activity carried out. The economic activities that have given rise to goodwill for the Group were engineering and construction, electro-mechanical works, mining services, IT services and telecommunications services.

Goodwill by cash-generating units is broken down as follows:
 
      At December       At March  
 
     31, 2014       31, 2015  
                 
Construction - Engineering
     138,172       138,283  
Construction - Mining services
     13,366       13,366  
Construction - Electromechanical
    20,737       20,737  
IT services
     4,172       4,172  
Telecommunications Services
    6,413       6,413  
      182,860       182,971  
 
As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on its value in use.
 
 
- 19 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
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 no provisions for impairment were required. As of March 31, 2015 same criteria were applied as those in test impairment at December 31, 2014.
 
12
BORROWINGS

This item comprises:
 
    Total           Current           Non-current        
    At     At     At     At     At     At  
    December     March     December     March     December     March  
    31, 2014     31, 2015     31, 2014     31, 2015     31, 2014     31, 2015  
                                                 
                                                 
Bank loans     1,419,428       1,218,002       1,300,636       1,098,852       118,792       119,150  
Leases     332,151       324,051       124,819       106,453       207,332       217,598  
      1,751,579       1,542,053       1,425,455       1,205,305       326,124       336,748  
 
Bank loans -
 
As of March 31, 2015 and December 31, 2014, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1% and 9% in 2014 and 2015.

On January 15, 2014 the subsidiary Norvial S.A. signed a short term bridge loan with Banco de Crédito del Perú – BCP for an amount of up to S/. 120 million and US$12 million.  On such date, under the aforementioned facility S/.50 million were disbursed at an interest rate of 6.32%, and during 2014 an accumulated of S/.85 million have been disbursed.  This loan will be canceled with a bond issuance to placed in the local capital markets that will finance the construction of the second stage of this road.

In June 2014, the subsidiary GyM Ferrovías signed a short term loan with BBVA Continental of S/.200 million at an interest rate of 5.75%, due on December 2014.  In December 2014, the short term loan with BBVA Continental was refinanced through a short term loan provided by BCP, due in February 2015. In August 2014, another short term loan with Banco de Crédito del Perú-BCP of S/.200 million at an interest rate of 5.90%, due on January 2015.  These loans were canceled with an international bond issuance under the Regulation S, placed in February 2015. 

As of Mach 31, 2015, the Company maintained unused credit limits for S/. 2,921 million, which expire within one year (S/.2,459 million as of December 31, 2014).

b)      Fair value of borrowings -

The carrying amount and fair value of borrowings are broken down as follows:
 
   
Carrying amounts
           Fair value        
 
  At December     At March     At December     At March  
    31, 2014     31, 2015     31, 2014     31, 2015  
                                 
Other loans
     1,751,579       1,542,053       1,705,843       1,506,342  
 
    1,751,579       1,542,053       1,705,843       1,506,342  
 
The fair value is based on cash flows discounted using a rate based on the borrowing rate of 3.3% and 8.6% (4.4% and 8.0% in 2014). It should be noted that the interest rate used are those applicable and negotiated by each Company.
 
 
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13
BONDS
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
On February 10th, 2015, the subsidiary GyM Ferrovías completed an international corporate bonds issuance under the Regulation S.  The bonds were issued in Soles VAC (adjusted by the “Valor de Actualización Constante”) for an amount of S/. 629 million.  The bonds are due on November 25th, 2039 (a tenor of 24.8 years), and interest rate of 4.75% (plus the VAC adjustment), a local rating of AA+ provided by Apoyo & Asociados Internacionales Clasificadora de Riesgo, and are secured by Mortgage on the Concession, Lien on GyM Ferrovías shares, Assignment of Collection Rights on the Administration Trust, a Cash Flow Trust and Reserve Accounts for Debt Service, Operation and Maintenance and Ongoing Capex.  The bonds were assigned to Insurance Companies, Peruvian Pension Funds and Government Funds.  The proceeds from the issuance were used to amortize a short term loan provided by Banco de Crédito del Perú-BCP for S/.400 million, funding of the reserve accounts, payment of the issuance expenses, and finally the partial repayment of a subordinated loan provided by Graña y Montero S.A.A. to GyM Ferrovías.

14
PROVISIONS

This item is broken down based on the expectation of liquidation as follows:
 
 
  
At December
    
At March
  
 
    31, 2014      31, 2015  
                 
      11,441       10,525  
Current portion
     46,904       44,621  
Non-current portion
     58,345       55,146  

The movement of this item for the period ended March 31, 2014 and 2015 is as follows:
 
             
Contingent 
    
Provisions for the 
    
Provision 
      
Provision 
          
      Legal       
liabilities from 
    
for the acquisition
    
for well
      
for periodic 
          
      Claims       
acquisitions 
      
of CAM 
      
closure  
      
maintenance 
       Total  
                                                 
At January 1, 2014
     12,217       9,852       21,546       4,852       3,846       52,313  
Additions
     839       -       -       -       7,505       8,344  
Additions from business combinations
     -       2,658       -       -       -       2,658  
Reversals
     -       (290 )     (2,426 )     -               (2,716 )
Payments
     -       -       -       (205 )     (3,547 )     (3,752 )
At March 31, 2014
     13,056       12,220       19,120       4,647       7,804       56,847  
 
                                                
At January 1, 2015
     13,056       25,927       12,152       7,210       -       58,345  
Additions
     -       -       -       330       -         330  
Reversals
     -       -       (1,987 )       -       -       (1,987 )
Payments
     (1,538 )     -       -        (4 )     -       (1,542 )
At March 31, 2015
     11,518       25,927       10,165       7,536       -       55,146 )
 
Reversals for the period ended March 31, 2015 mainly consists of write-offs of provisions recognized in conjunction with the purchase price allocation related to acquisition of CAM Chile in S/.1.9 million. (S/.2.4 million as of March 31, 2014).

15
CAPITAL

As of December 31, 2014 and March 31, 2015, the authorized, subscribed and paid-in capital, according to the Company’s bylaws as amended, is represented by 660,053,790 common shares at S/.1.00 par value each.

As of December 31, 2014, the amount of 253,635,480 common shares is representing en ADSs (equivalents at 50,727,096 ADS’s therefore, at 5 shares per ADS).

As of March 31, 2015, the amount of  252,814,960 common shares is representing en ADSs (equivalents at 50,562,992 ADS’s therefore, at 5 shares per ADS).

16
EXPENSES BY NATURE

For the period ended March 31, 2014 and 2015, this item comprises:
 
 
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(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
                                      
      Cost of         Adminis-  
      services       trative-  
      and goods       expenses  
                 
2014                
Purchase of goods      30,560         -  
Personnel charges
     384,660       52,253  
Services provided by third-parties
     511,209       33,875  
Taxes
     2,761       533  
Other management charges
     146,765       5,187  
Depreciation
     36,916       3,173  
Amortization
     18,741       1,489  
Variation of inventories
     163,806       -  
      1,295,418       96,510  
                 
                 
2015                
Purchase of goods       222,869         -  
Personnel charges
     454,167       59,162  
Services provided by third-parties
     634,225       29,079  
Taxes
     4,259       735  
Other management charges
     165,830       13,311  
Depreciation
     44,247       4,032  
Amortization
     17,303       2,589  
Impairment
     194       -  
Reversal of impairment
     (269 )     -  
Variation of inventories
     (13,328 )     -  
      1,529,497       108,908  
 
17
INCOME TAX

These condensed interim consolidated financial statements for the period ended March 31, 2015, income tax expense is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to December 31, 2015 is 33.48% (32.36% for the three-month period ended March 31, 2014). The variation of the effective rate as compared to the previous year is due to the effect of the permanent differences in the income tax calculation.

18
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of March 31, 2015, contingencies held by the Group are substantially the same as those existing as of December 31, 2014.

In addition the Group had guarantee commitments with different financial institutions securing transactions in the amount of US$ 38 million and S/. 155 million.

19
DIVIDENDS

For the three months ended March 31, 2015 , the Group has paid dividends to its non-controlling subsidiaries participate by S /. 2 million ( S / . 36 million for the same period in 2014) .
 
 
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(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Dividends from the year ended December 31, 2014, of S/.0.159 per share totaling S/. 104,910,523 were approved at the General Shareholders’ meeting held on March 27, 2015, and was paid on April 2014.

 
20
BUSINESS COMBINATIONS

a)  
Acquisition of Coasin Instalaciones Limitada.

In March 2014, through the subsidiarie CAM Chile S.A., the Group acquired control of Coasin Instalaciones Limitada with the purchase of 100.00% of its equity shares. Coasin is an entity domiciled in Chile, whose main economic activity is the provision of maintenance and installation services and telecommunications equipment..

This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile, and in attractive industries, such as public services.

During the period of twelve months after the acquisition date the Group reassessed the purchase price allocation from the acquisition of Coasin Instalaciones Limitada which was made in March 2014 and reallocated the amount of S/.0.67 million from goodwill (net of tax impact of S/.0.19 million to trade accounts receivable in the amounts of S/.0.86 million. This effect corresponds to the measurement period adjustment of the preliminary fair value assigned to the assets and liabilities acquired.

The Price paid by CAM Chile S.A. for the acquisition of Coasin amounted to US$2.1 million (equivalent to S/.6.4 million) and resulted in the recognition of goodwill for S/.6.4 million at the acquisition date, which is detailed as follows:
 
   
Previous reported
    
 
     Revised        
      S/.000     US$000    
US$000
       S/.000  
 
                            
Cash and cash equivalents
     3       1       3       1  
Trade accounts receivable
     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
     (178 )     (60 )     16       4  
Trade accounts payable
     (3,592 )     (1,202 )     (3,592 )     (1,202 )
Contingent liabilities
     (2,658 )     (889 )     ( 2,658 )     (889 )
Fair value of net assets
     647       216       ( 23 )     (9 )
 
                                
Goodwill
     5,743       1,921       6,413       2,146  
Total paid for acquisition
     6,390       2,137       6,390       2,137  
                                 
Cash payment for the acquisition
     6,390       2,137       6,390       2,137  
Cash and cash equivalent
                                
of the acquired subsidiary
     (3 )     (1 )     (3 )     (1 )
Direct cash outflow from acquisition
     6,387       2,136       6,387       2,136  

 
The income and the profit generated for the period from the acquisition date to March 31, 2014 amounted to S/.5.4 million and S/.0.3 million, respectively.

b)  Acquisition of DSD Construcciones y Montajes S.A. (DSD)

In August 2013, through the subsidiaries GyM Minería S.A., Ingeniería y Construcción Vial y Vives
 
 
- 23 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
S.A. and GyM Chile S.p.A., the Group acquired control of DSD with the purchase of 85.95% of its equity shares. DSD is an entity domiciled in Chile whose main economic activity is the execution of electromechanical works and assemblies in construction projects of oil refineries, pulp and paper, power plants and mining plants.

During the period of twelve months after the acquisition date the Group reassessed the purchase price allocation from the acquisition of DSD Construcciones y Montajes S.A. which was made in August, 2013 and reallocated the amount of S/.1.7 million from goodwill (net of tax impact of S/.0.5 million and non-controlling interest of S/.0.3 million) to fixed assets, intangible, trade accounts receivable, other accounts receivable and contingent liabilities in the amounts of S/.0.4 million, S/.1.9 million, S/.0.2 million, S/.3.5 million and S/.3 million respectively. This effect corresponds to the measurement period adjustment of the preliminary fair value assigned to the assets and liabilities acquired.

The price paid by GyM for the acquisition of DSD Construcciones y Montajes S.A. amounted to US$37.2 million (equivalent to S/.103.9 million) and resulted in the recognition of goodwill for S/.6.1 million, at the acquisition date, which is detailed as follows:
 
 
 
      Previous reported        Revised   
      S/.000        US$000        S/.000        US$000  
                                 
Cash and cash equivalents
     15,530       5,562       15,530       5,562  
Trade accounts receivable
     74,502       26,684       74,317       26,618  
Accounts receivable from related parties
     6,605       2,366       10,083       3,611  
Prepaid expenses
     1,032       369       1,032       369  
Investments
     2,608       935       2,608       935  
Property, plant and equipment
     52,504       18,805       52,922       18,955  
Intangibles
     5,741       2,056       7,591       2,719  
Deferred income tax
     2,192       785       2,192       785  
Trade accounts payable
     (5,328 )     (1,908 )     (5,328 )     (1,908 )
Other accounts payable
     (38,679 )     (13,854 )     (38,679 )     (13,854 )
Contingent liabilities
     (815 )     (292 )     (3,846 )     (1,378 )
Deferred income tax liability
     (4,187 )     (1,500 )     (4,692 )     (1,681 )
Fair value of net assets
     111,705 )     40,008 )     113,730       40,733  
                                 
Non-controlling interest (14.05%)
     (15,701 )     (5,624 )     (15,986 )     (5,725 )
Goodwill
     7,868       2,802       6,128        2,178  
Total paid for acquisition
     103,872       37,186       103,872        37,186  
                                 
Cash payment for the acquisition
     103,872       37,186       103,872       37,186  
Cash and cash equivalent
                                
of the acquired subsidiary
     (15,530 )     (5,562 )     (15,530 )     (5,562 )
Direct cash outflow from acquisition
     88,342       31,624 )     88,342        31,624  
 
 
The income and the profit generated for the period from the acquisition date to December 31, 2013 amounted to S/.82.97 million and S/.8.3 million, respectively.

If DSD Construcciones y Montajes S.A. had been consolidated from January 1, 2013, the income and the profit generated would have been S/.182.68 million and S/.10.15 million, respectively

20
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

Between March 31, 2015 and the date of approval of the condensed interim consolidated financial statements, there have been no subsequent events that may affect the fairness of the financial statements issued.
 
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