6-K 1 a51706984.htm GRANA Y MONTERO S.A.A. 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 October 2017

 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/ Claudia Drago Morante
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/ CLAUDIA DRAGO MORANTE

Name: Claudia Drago Morante

Title: Stock Market Representative

October 30, 2017







(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 SEPTEMBER 30, 2017 AND 2016 AND FOR THE NINE-MONTH PERIOD ENDED IN THIS DATE
 
 
 
 

 

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2017 AND 2016 AND FOR THE NINE-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
            
       
At
    
     
December 31,
   September 30,
   
Note
2016
  
2017
             
Current assets
            
Cash and cash equivalents
  
8
  
           606,949
  
           848,774
Financial asset at fair value through profit or loss
                   352
  
                   276
Trade accounts receivables
      
       1,086,913
  
           940,024
Unbilled work in progress
      
           683,242
  
           810,415
Accounts receivable from related parties
9
  
           181,664
  
           147,680
Other accounts receivable
      
           659,377
  
           610,889
Inventories
      
       1,107,702
  
           949,700
Prepaid expenses
      
             51,348
  
             31,181
       
4,377,547
  
4,338,939
             
Non-current assets classified as held for sale
10
  
             22,385
  
       1,090,329
             
Total current assets
      
       4,399,932
  
       5,429,268
             
Non-current assets
            
Long-term trade accounts receivable
      
           667,519
  
           737,429
Long-term unbilled work in progress
      
           197,586
  
             28,014
Long-term accounts receivable from related parties
9
  
           587,973
  
           587,577
Prepaid expenses
      
             23,526
  
             44,429
Other long-term accounts receivable
      
           357,952
  
           393,373
Investments in associates and joint ventures
11
  
           886,856
  
             57,722
Investment property
      
             49,357
  
             46,117
Property, plant and equipment
  
12
  
       1,113,599
  
           910,959
Intangible assets
  
12
  
           960,286
  
           968,654
Deferred income tax asset
      
           292,375
  
           277,794
Total non-current assets
      
       5,137,029
  
       4,052,068
             
             
             
             
             
             
             
             
Total assets
      
       9,536,961
  
       9,481,336
LIABILITIES AND EQUITY
            
       
At
    
     
December 31,
   September 30,
   
Note
2016
  
2017
             
Current liabilities
            
Borrowings
  
13
  
        1,961,043
  
        1,134,674
Bonds
  
14
  
             46,091
  
             39,928
Trade accounts payable
      
        1,278,387
  
        1,295,217
Accounts payable to related parties
  
9
  
             80,217
  
             58,996
Current income tax
      
             62,160
  
             66,070
Other accounts payable
      
        1,096,307
  
        1,008,985
Provisions
  
15
  
             14,531
  
             13,095
       
        4,538,736
  
        3,616,965
             
Non-current liabilities classified as held for sale
  
                       -
  
           249,493
             
Total current liabilities
      
        4,538,736
  
        3,866,458
             
Non-current liabilities
            
Borrowings
  
13
  
           419,395
  
           702,601
Long-term bonds
  
14
  
           921,623
  
           913,079
Other long-term accounts payable
      
           512,803
  
           632,998
Long-term accounts payable to related parties
9
  
             65,320
  
             25,838
Provisions
  
15
  
             31,155
  
             30,916
Derivative financial instruments
      
                1,081
  
                   598
Deferred income tax liability
      
             75,983
  
             93,967
Total non-current liabilities
      
        2,027,360
  
        2,399,997
Total liabilities
      
        6,566,096
  
        6,266,455
             
Equity
            
Capital
  
16
  
           660,054
  
           660,054
Legal reserve
      
           132,011
  
           132,011
Optional reserve
      
             29,974
  
             29,974
Share Premium
      
           882,464
  
           882,056
Other reserves
      
         (167,572)
  
         (164,232)
Retained earnings
      
           916,396
  
        1,153,943
Equity attributable to controlling interest in the Company
        2,453,327
  
        2,693,806
Non-controlling interest
      
           517,538
  
           521,075
Total equity
      
        2,970,865
  
        3,214,881
Total liabilities and equity
      
        9,536,961
  
        9,481,336
The accompanying notes on pages 8 to 25 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 six months
  
         
ended Septiembre 30,
  
   
Note
    
2016
    
2017
  
                   
                   
Revenues from construction activities
          
2,534,546
      
2,308,847
  
Revenues from services provided
          
1,418,346
      
1,498,428
  
Revenue from real estate and sale of goods
          
285,436
      
654,819
  
           
4,238,328
      
4,462,094
  
                       
Cost of construction activities
          
(2,363,914
)
    
(2,167,354
)
Cost of services provided
          
(1,209,854
)
    
(1,310,668
)
Cost of real estate and goods sold
          
(214,502
)
    
(458,635
)
     
17
      
(3,788,270
)
    
(3,936,657
)
Gross profit
            
450,058
      
525,437
  
                         
Administrative expenses
    
17
      
(289,000
)
    
(288,253
)
Other income and expenses
            
46,289
      
13,012
  
Gain from the sale of investments
            
31,768
      
274,363
  
Operating profit
            
239,115
      
524,559
  
                         
Financial expenses
            
(103,189
)
    
(139,951
)
Financial income
            
21,324
      
26,504
  
Share of the profit or loss in associates and joint
                        
ventures under the equity method of accounting
            
51,741
      
20,912
  
Profit before income tax
            
208,991
      
432,024
  
Income tax
    
18
      
(46,905
)
    
(141,658
)
Profit for the period
            
162,086
      
290,366
  
                         
Profit attributable to:
                        
Owners of the Company
            
138,642
      
238,788
  
Non-controlling interest
            
23,444
      
51,578
  
             
162,086
      
290,366
  
                         
Earnings per share from continuing operations
                        
attributable to owners of the Company during
                        
the period
            
0.210
      
0.362
  
                         
                         
                         
The accompanying notes on pages 8 to 25 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 six months
  
         
ended Septiembre 30,
  
 
   Note    
2016
    
2017
  
                   
                   
Profit for the period
          
162,086
      
290,366
  
Other comprehensive income:
                      
Items that will not be reclassified to profit or loss
                      
Remeasurement of actuarial gains and losses, net of tax
          
(575
)
    
(1,696
)
                       
Items that may be subsequently  reclassified to profit or loss
                      
Cash flow hedge, net of tax
          
217
      
334
  
Foreign currency translation adjustment, net of tax
          
32,213
      
(1,393
)
Transfer to profit or loss of available-for-sale financial assets
          
(43,681
)
    
-
  
Exchange difference from net investment in a foreign operation, net of tax
          
11,712
      
4,653
  
           
461
      
3,594
  
Other comprenhensive income for the period, net of tax
          
(114
)
    
1,898
  
Total comprehensive income for the period
    
 
      
161,972
      
292,264
  
                         
Comprehensive income attributable to:
                        
Owners of  the Company
            
128,372
      
240,887
  
Non-controlling interest
            
33,600
      
51,377
  
             
161,972
      
292,264
  
                         
                         
                         
The accompanying notes on pages 8 to 25 are an integral part of the consolidated financial statements.
  
 
-  4 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES         
                                       
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY             
    
FOR THE PERIOD OF THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017           
 
                                                             
   
Attributable to the controlling interests of the Company
                                  
   
Number
                      
 
    
 
                          
   
of shares
        
 
    
 
    
Premium
    
 
    
 
          
Non-
        
    In           Legal     Optional     for issuance    
Other
     Retained         controlling        
   
thousands
    
Capital
    
reserve
    
reserve
    
of shares
     reserves    
earnings
    
Total
    
interest
    
Total
  
                                                             
                                                             
Balances as of January 1, 2016
    
660,054
      
660,054
      
132,011
      
29,974
      
897,532
      
(129,059
)
    
1,064,044
      
2,654,556
      
528,489
      
3,183,045
  
Profit for the period
    
-
      
-
      
-
      
-
      
-
      
-
      
138,642
      
138,642
      
23,444
      
162,086
  
Cash flow hedge
    
-
      
-
      
-
      
-
      
-
      
206
      
-
      
206
      
11
      
217
  
Adjustment for actuarial gains and losses
    
-
      
-
      
-
      
-
      
-
      
-
      
(422
)
    
(422
)
    
(153
)
    
(575
)
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
22,122
      
-
      
22,122
      
10,091
      
32,213
  
Change in value of available-for-sale financial assets
    
-
      
-
      
-
      
-
      
-
      
(43,681
)
    
-
      
(43,681
)
    
-
      
(43,681
)
Exchange difference from net investment in a foreign operation
    
-
      
-
      
-
      
-
      
-
      
11,505
      
-
      
11,505
      
207
      
11,712
  
Comprehensive income of the year
    
-
      
-
      
-
      
-
      
-
      
(9,848
)
    
138,220
      
128,372
      
33,600
      
161,972
  
Transactions with shareholders:
                                                                                
- Dividend distribution
    
-
      
-
      
-
      
-
      
-
      
-
      
(30,853
)
    
(30,853
)
    
(20,965
)
    
(51,818
)
- Contributions of non-controlling shareholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(3,432
)
    
(3,432
)
- Additional acquisition of non-controlling
    
-
      
-
      
-
      
-
      
(18,183
)
    
-
      
-
      
(18,183
)
    
(3,487
)
    
(21,670
)
- Sale to non-controlling interest
    
-
      
-
      
-
      
-
      
-
      
-
      
(292
)
    
(292
)
    
494
      
202
  
- Deconsolidation of former subsidiary
    
-
      
-
      
-
      
-
      
-
      
-
      
2,060
      
2,060
      
37
      
2,097
  
Total transactions with shareholders
    
-
      
-
      
-
      
-
      
(18,183
)
    
-
      
(29,085
)
    
(47,268
)
    
(27,353
)
    
(74,621
)
Balances as of September 30, 2016
    
660,054
      
660,054
      
132,011
      
29,974
      
879,349
      
(138,907
)
    
1,173,179
      
2,735,660
      
534,736
      
3,270,396
  
                                                                                 
Balances as of January 1, 2017
    
660,054
      
660,054
      
132,011
      
29,974
      
882,464
      
(167,572
)
    
916,396
      
2,453,327
      
517,538
      
2,970,865
  
Profit for the period
    
-
      
-
      
-
      
-
      
-
      
-
      
238,788
      
238,788
      
51,578
      
290,366
  
Cash flow hedge
    
-
      
-
      
-
      
-
      
-
      
317
      
-
      
317
      
17
      
334
  
Adjustment for actuarial gains and losses
    
-
      
-
      
-
      
-
      
-
      
-
      
(1,241
)
    
(1,241
)
    
(455
)
    
(1,696
)
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
(1,580
)
    
-
      
(1,580
)
    
187
      
(1,393
)
Exchange difference from net investment in a foreign operation
    
-
      
-
      
-
      
-
      
-
      
4,603
      
-
      
4,603
      
50
      
4,653
  
Comprehensive income of the period
    
-
      
-
      
-
      
-
      
-
      
3,340
      
237,547
      
240,887
      
51,377
      
292,264
  
Transactions with shareholders:
                                                                                
- Dividend distribution
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(39,118
)
    
(39,118
)
- Contributions (devolution) of non-controlling shareholders,net
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(767
)
    
(767
)
- Additional acquisition of non-controlling
    
-
      
-
      
-
      
-
      
(408
)
    
-
      
-
      
(408
)
    
(154
)
    
(562
)
- Deconsolidation of former subsidiary
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(7,801
)
    
(7,801
)
Total transactions with shareholders
    
-
      
-
      
-
      
-
      
(408
)
    
-
      
-
      
(408
)
    
(47,840
)
    
(48,248
)
Balances as of September 30, 2017
    
660,054
      
660,054
      
132,011
      
29,974
      
882,056
      
(164,232
)
    
1,153,943
      
2,693,806
      
521,075
      
3,214,881
  
                                                                                 
                                                                                 
The accompanying notes on pages 8 to 25 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 nine months
  
         
ended September 30,
  
   
Note
    
2016
    
2017
  
                   
OPERATING ACTIVITIES
                  
Profit before income tax
          
208,991
      
432,024
  
Adjustments to  profit not affecting cash flows from
                      
operating activities:
                      
Depreciation
    
17
      
148,090
      
149,387
  
Amortization of other assets
    
17
      
62,274
      
71,046
  
Impairment of inventories
    
17
      
1,329
      
555
  
Impairment of accounts receivable and other accounts receivable
    
17
      
-
      
123
  
Impairment of property, plant and equipment
    
17
      
279
      
334
  
Lower of intangible assets
            
1,621
      
-
  
Profit on fair value of financial asset at fair value through profit or loss
            
34
      
(33
)
Other Provisions
    
15
      
5,470
      
1,490
  
Financial expense,net
            
105,449
      
138,930
  
Foreign exchange loss (gain) on loans
            
(38,649
)
    
(30,766
)
Share of the profit and loss in associates and joint ventures
                        
under the equity method of accounting
    
11
      
(51,741
)
    
(20,912
)
Reversal of provisions
    
15
      
(16,180
)
    
(1,066
)
Lower of fixed assets
            
3,376
      
2,557
  
Lower of investments
            
1,295
      
19
  
Profit on sale of property, plant and equipment
            
(15,223
)
    
(17,016
)
Profit from sale of investments in associates and subsidiaries
            
-
      
(244,313
)
Gain (loss) on financial asset at fair value through profit or loss
            
(31,667
)
    
-
  
Loss on sale of non-current asset held for sale
            
(24
)
    
(25,724
)
Profit on remeasurement of investment in joint ventures
            
-
      
(7,581
)
Net variations in assets and liabilities:
                        
Trade accounts receivable
            
331,500
      
(157,010
)
Other accounts receivable
            
(203,123
)
    
(31,476
)
Other accounts receivable from related parties
            
43,990
      
(16,240
)
Inventories
            
(66,308
)
    
141,249
  
Pre-paid expenses and other assets
            
(2,886
)
    
(10,768
)
Trade accounts payable
            
(143,365
)
    
306,108
  
Other accounts payable
            
188,602
      
154,084
  
Other accounts payable to related parties
            
46,971
      
(65,789
)
Other provisions
            
(570
)
    
(1,692
)
Interest payment
            
(120,419
)
    
(140,157
)
Payments related to Norvial Concession
            
(57,765
)
    
(11,936
)
Payment of income tax
            
(95,663
)
    
(117,339
)
Net cash applied to operating activities
            
305,688
      
498,088
  
                         
INVESTING ACTIVITIES
                        
Sale of investment
            
107,341
      
-
  
Sale of investment in associates and sudsidiaries
            
-
      
397,737
  
Sale of available-for-sale investment
            
1,384
      
-
  
Sale of property, plant and equipment
            
50,407
      
53,385
  
Sale of financial asset at fair value through profit or loss
            
-
      
97
  
Sale of non-current assets held for sale
            
-
      
43,365
  
Return of contributions
            
1,390
      
-
  
Interest received
            
10,734
      
6,024
  
Dividends received
            
18,347
      
1,622
  
Payment for purchase of investments properties
            
(228
)
    
(1,034
)
Payments for intangible purchase
            
(28,693
)
    
(72,646
)
Payments for purchase and contributions on investment
                        
in associate and joint ventures
            
(404,776
)
    
(1
)
Payments for property, plant and equipment purchase
            
(119,771
)
    
(97,565
)
Net cash applied to investing activities
            
(363,865
)
    
330,984
  
                         
FINANCING ACTIVITIES
                        
Loans received
            
2,905,500
      
1,129,625
  
Bonds issued
            
178,375
      
-
  
Amortization of loans received
            
(2,769,817
)
    
(1,616,907
)
Amortization of bonds issued
            
(16,380
)
    
(28,796
)
Payment for transaction costs for debt
            
(13,747
)
    
(31,770
)
Dividends paid to owners of the parent
            
(30,853
)
    
-
  
Dividends paid to non-controlling interest
            
(19,600
)
    
(39,118
)
Cash received from non-controlling shareholders
            
(11,566
)
    
(767
)
Acquisition or sale of interest in a subsidiary of non-controlling shareholders
            
(21,468
)
    
(562
)
Net cash provided by financing activities
            
200,444
      
(588,295
)
Net increase (net decrease) in cash
            
142,267
      
240,777
  
Cash and cash equivalents at the beginning of the year
            
554,002
      
606,949
  
Cash and cash equivalents at the end of the period
    
8
      
696,269
      
847,726
  
                         
NON-CASH TRANSACTIONS:
                        
Dividends declared
            
-
      
-
  
Debt capitalization
            
22,308
      
-
  
Acquisition of assets through finance leases
            
29,089
      
44,056
  
Change in fair value of available-for-sale financial assets
            
(43,681
)
    
-
  
Recognition of non-current assets available for sale by the operations of the CCDS
      
-
      
255,898
  
Reclassification of the investment in the associate GSP to non-current assets classified as held for sale
      
-
      
727,519
  
Reclassification of corporate building to non-current assets classified as held for sale
      
-
      
56,703
  
                         
                         
The accompanying notes on pages 8 to 25 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 SEPTEMBER 30, 2016 AND 2017 (UNAUDITED), AND AT DECEMBER 31, 2016 (UNAUDITED)
 
1
  GENERAL INFORMATION

The Company is the parent company of the Graña y Montero Group (hereinafter the Group) and it is mainly engaged in holding the 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 the Group´s companies; it is also engaged in the leasing of offices to the Group's companies.

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 ownership and operation), real estate businesses and services.

These condensed interim consolidated financial statements as of September 30, 2017 have been prepared and authorized for issuance by the Chief Financial Officer on October 26, 2017.

2
  BASIS OF PREPARATION

These condensed interim consolidated financial statements for the period ended September 30, 2017 have been prepared in accordance with (IAS 34) "Interim financial reporting".

To date, the audited report for the period 2016 has not been issued by our external auditors. As we are aware, we are carrying out complementary procedures, since some projects involving minority and non-controlling companies are being investigated in Peru.

In this regard, some items of the Financial Statements as of December 2016 have been adjusted to the amounts previously issued through complementary auditing procedures that are still ongoing. By virtue of this, the information for the 2016 period is preliminary and may be subject to subsequent modifications.

On October 04 2017, we informed through a Relevant Information Communication that Graña y Montero S.A.A (the "Company") and Gaveglio, Aparicio y Asociados S.C. de R.L. ("PwC"), a registered public accounting firm and the member in Peru of the PricewaterhouseCoopers network of firms, have determined that PwC is not independent of the Company with respect to the fiscal year 2016 as a consequence of non-audit services provided by PwC to the Company beginning in the fourth quarter of fiscal year 2016.  The services relate to the Company's testing of controls in accordance with the U.S. Sarbanes-Oxley Act.
 
As a result, the Company, subject to the approval of the shareholders, and PwC mutually agreed to the Company's dismissal of PwC as auditor of the Company's consolidated financial statements for the fiscal year 2016.  A shareholder meeting will be called on November 02, 2017 to approve the withdrawal of PwC as auditor and to appoint a new independent auditor for fiscal year 2016.
 
The independence issue described above does not affect PwC's independence with respect to the 2015 or 2014 fiscal years.  Based on PwC's and the Company's current view of the matter and of the independence standards, PwC and the Company believe that PwC remains independent with respect to the financial periods covered by the Company's fiscal years 2015 and 2014 financial statements.
-  7 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

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, 2016.

 
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.

4.1.1     Market risk –

Compared to year end, no new material market risk hedging arrangements have occurred.

4.1.2     Credit risk –

Compared to year end, no new credit risk has been identified in the Group, considering that the level of lines used has remained the same as in the previous year. .

4.1.3            Liquidity risk -

Compared to year end, no major changes in undiscounted contractual cash flows have occurred. In addition, the company has been working on identifying non-strategic assets for sale and allocating funds to debt amortization.

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:
-  8 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
                                                                     
                                                                                         
                     
    Less than 1     From 1 to     From 2 to     Over        
    year     2 years     5 years     5 years     Total  
                               
At December 31, 2016
                              
Other financial liabilities (except                    
for finance leases)
    
1,936,825
      
128,508
      
173,145
      
-
      
2,238,478
  
Finance leases
    
127,496
      
85,989
      
26,780
      
19,506
      
259,771
  
Bonds
    
113,299
      
180,431
      
365,697
      
1,334,485
      
1,993,912
  
Trade accounts payables
    
1,278,387
      
-
      
-
      
-
      
1,278,387
  
Accounts payables to related parties
    
80,217
      
28,082
      
37,238.00
      
-
      
145,537
  
Other accounts payables
    
303,827
      
49,064
      
131,556
      
-
      
484,447
  
Other non-financial liabilities
    
-
      
1,081
      
-
      
-
       1,081  
      3,840,051       473,155      
734,416
      
1,353,991
      
6,401,613
  
                                         
At September 30, 2017
                                        
Other financial liabilities (except for finance leases)
    
1,072,028
      
523,31
      
167,520
      
-
      
1,762,858
  
Finance leases
    
82,894
      
52,853
      
29,111
      
1,445
      
166,303
  
Bonds
    
112,934
      
150,092
      
356,441
      
1,282,200
      
1,901,667
  
Trade accounts payables
    
1,295,217
      
-
      
-
      
-
      
1,295,217
  
Accounts payables to related parties
    
58,996
      
25,838
      
-
      
-
      
84,834
  
Other accounts payables
    
223,003
      
21,691
      
374,109
      
-
      
618,803
  
Other non-financial liabilities
    
-
      
786
      
-
      
-
      
786
  
 
    
2,845,072
      
774,570
      
927,181
      
1,283,645
      
5,830,468
  
                                         
 
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, 2016 and September 30,2017, the gearing ratio is presented below indicating the Company's strategy to keep it in a range from 0.10 to 0.70. The gearing ratio was as follows:

   
December 31,
    
September 30,
  
   
2016
    
2017
  
             
Total borrowing and bonds
    
3,348,152
      
2,790,282
  
Less: Cash and cash equivalents
    
(606,949
)
    
(848,774
)
Net debt
    
2,741,203
      
1,941,508
  
Total equity
    
2,970,865
      
3,214,881
  
Total capital
    
5,712,068
      
5,156,389
  
                 
Gearing ratio
    
0.48
      
0.38
  
 
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.
-  9 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

 
-
Level 1: Measurement based on quoted prices in active markets for identical assets or liabilities.
 
-
Level 2: Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
 
-
Level 3: Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group).
 
The fair value of the financial assets classified as at fair value through profit or loss has been determined with observable information of Level 1

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

The carrying amounts of cash and cash equivalents correspond to their fair values. The 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 13-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, 2016.


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

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.
-  10 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

Beginning on April 1, 2017, the Company have transferred it´s subsidiary Concar from 'technical services' segment to 'infrastructure segment'. The operating segments for 2016 have been restated for comparative purposes.

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.


-  11 -
(All the amounts are expressed in thousand of S/. unless otherwise stated)            
UNAUDITED      
                                         
Operating segments financial position                
                                         
Segment reporting               
 
                                                             
   
Engineering
    
Infrastructure
                                  
Parent
              
   
and construction
    
 
Energy
    
 
Toll roads
    
 
Mass transit
    
Water treatment
    
 
Real estate
    
Technical 
services
    
Company Operations
    
 
Eliminations
    
 
Consolidated
  
As of December 31, 2016
                                                            
Assets.-
                                                            
Cash and cash equivalents
    
93,543
      
35,396
      
125,853
      
139,414
      
3,229
      
58,892
      
37,675
      
112,397
      
550
      
606,949
  
Financial asset at fair value through profit or loss
    
352
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
352
  
Trade accounts receivables
    
334,426
      
84,996
      
77,615
      
97,079
      
256
      
83,704
      
411,041
      
-
      
(2,204
)
    
1,086,913
  
Unbilled work in progress
    
683,242
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
683,242
  
Accounts receivable from related parties
    
327,385
      
3,255
      
55,907
      
392
      
12,379
      
7,284
      
12,468
      
50,582
      
(287,988
)
    
181,664
  
Other accounts receivable
    
408,379
      
58,235
      
28,779
      
25,895
      
4,841
      
20,198
      
70,917
      
42,133
      
-
      
659,377
  
Inventories
    
76,059
      
12,561
      
9,839
      
16,862
      
-
      
946,657
      
58,839
      
387
      
(13,502
)
    
1,107,702
  
Prepaid expenses
    
9,205
      
2,614
      
2,005
      
17,265
      
167
      
329
      
19,458
      
305
      
-
      
51,348
  
Non-current assets classified as held for sale
    
22,385
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
22,385
  
Total current assets
    
1,954,976
      
197,057
      
299,998
      
296,907
      
20,872
      
1,117,064
      
610,398
      
205,804
      
(303,144
)
    
4,399,932
  
                                                                                 
Long-term trade accounts receivable
    
149
      
-
      
15,092
      
629,310
      
-
      
-
      
22,968
      
-
      
-
      
667,519
  
Long-term unbilled work in progress
    
171,752
      
-
      
24,165
      
-
      
-
      
-
      
-
      
-
      
1,669
      
197,586
  
Long-term accounts receivable from related parties
    
-
      
-
      
408
      
-
      
-
      
-
      
492
      
757,204
      
(170,131
)
    
587,973
  
Prepaid expenses
    
-
      
-
      
20,554
      
2,029
      
943
      
-
      
-
      
-
      
-
      
23,526
  
Other long-term accounts receivable
    
42,511
      
29,533
      
22,926
      
225,565
      
7,347
      
17,887
      
1,075
      
11,108
      
-
      
357,952
  
Investments in associates and joint ventures
    
117,331
      
8,516
      
-
      
-
      
-
      
31,768
      
9,589
      
3,288,773
      
(2,569,121
)
    
886,856
  
Investment property
    
-
      
-
      
-
      
-
      
-
      
49,357
      
-
      
-
      
-
      
49,357
  
Property, plant and equipment
    
592,191
      
176,486
      
23,508
      
193
      
21
      
13,008
      
195,462
      
130,422
      
(17,692
)
    
1,113,599
  
Intangible assets
    
246,715
      
139,353
      
457,163
      
269
      
-
      
950
      
78,687
      
22,793
      
14,356
      
960,286
  
Deferred income tax asset
    
185,957
      
4,983
      
13,244
      
-
      
-
      
623
      
50,450
      
29,361
      
7,757
      
292,375
  
Total non-current assets
    
1,356,606
      
358,871
      
577,060
      
857,366
      
8,311
      
113,593
      
358,723
      
4,239,661
      
(2,733,162
)
    
5,137,029
  
Total assets
    
3,311,582
      
555,928
      
877,058
      
1,154,273
      
29,183
      
1,230,657
      
969,121
      
4,445,465
      
(3,036,306
)
    
9,536,961
  
                                                                                 
Liabilities.-
                                                                                
Borrowings
    
582,260
      
82,063
      
3,014
      
-
      
-
      
206,456
      
155,137
      
932,113
      
-
      
1,961,043
  
Bonds
    
-
      
-
      
25,540
      
20,551
      
-
      
-
      
-
      
-
      
-
      
46,091
  
Trade accounts payable
    
876,847
      
59,830
      
31,857
      
23,882
      
599
      
30,617
      
248,991
      
6,703
      
(939
)
    
1,278,387
  
Accounts payable to related parties
    
119,989
      
3,902
      
38,219
      
33,009
      
237
      
66,190
      
33,749
      
67,685
      
(282,763
)
    
80,217
  
Current income tax
    
30,576
      
3,631
      
3,401
      
-
      
1,064
      
17,944
      
5,544
      
-
      
-
      
62,160
  
Other accounts payable
    
485,247
      
11,711
      
43,614
      
14,622
      
27
      
194,441
      
157,201
      
189,444
      
-
      
1,096,307
  
Provisions
    
6,615
      
6,441
      
-
      
-
      
-
      
131
      
1,344
      
-
      
-
      
14,531
  
Total current liabilities
    
2,101,534
      
167,578
      
145,645
      
92,064
      
1,927
      
515,779
      
601,966
      
1,195,945
      
(283,702
)
    
4,538,736
  
                                                                                 
Borrowings
    
246,315
      
80,488
      
2,510
      
-
      
-
      
16,541
      
73,541
      
-
      
-
      
419,395
  
Long-term bonds
    
-
      
-
      
338,143
      
583,480
      
-
      
-
      
-
      
-
      
-
      
921,623
  
Other long-term accounts payable
    
147,839
      
-
      
44,451
      
246,522
      
-
      
32,000
      
39,558
      
2,433
      
-
      
512,803
  
Long-term accounts payable to related parties
    
41,672
      
-
      
408
      
87,200
      
23,445
      
40,074
      
42,259
      
394
      
(170,132
)
    
65,320
  
Provisions
    
12,283
      
17,115
      
-
      
-
      
-
      
-
      
1,757
      
-
      
-
      
31,155
  
Derivative financial instruments
    
-
      
1,081
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
1,081
  
Deferred income tax liability
    
28,278
      
3,546
      
1,525
      
16,983
      
283
      
15,564
      
9,491
      
313
      
-
      
75,983
  
Total non-current liabilities
    
476,387
      
102,230
      
387,037
      
934,185
      
23,728
      
104,179
      
166,606
      
3,140
      
(170,132
)
    
2,027,360
  
Total liabilities
    
2,577,921
      
269,808
      
532,682
      
1,026,249
      
25,655
      
619,958
      
768,572
      
1,199,085
      
(453,834
)
    
6,566,096
  
Equity attributable to controlling interest in the Company
    
616,916
      
265,241
      
282,851
      
96,019
      
3,528
      
234,449
      
158,641
      
3,232,803
      
(2,437,121
)
    
2,453,327
  
Non-controlling interest
    
116,745
      
20,879
      
61,525
      
32,005
      
-
      
376,250
      
41,908
      
13,577
      
(145,351
)
    
517,538
  
Total liabilities and equity
    
3,311,582
      
555,928
      
877,058
      
1,154,273
      
29,183
      
1,230,657
      
969,121
      
4,445,465
      
(3,036,306
)
    
9,536,961
  
-  12 -
(All the amounts are expressed in thousand of S/. unless otherwise stated)           
UNAUDITED
 
Operating segments financial position               
                                       
Segment reporting               
 
   
 
Engineering
    
 
Infrastructure
                                  
 
Parent
              
   
and construction
    
 
Energy
    
 
Toll roads
    
 
Mass transit
    
Water treatment
    
 
Real estate
    
Technical services
    
Company Operations
    
 
Eliminations
    
 
Consolidated
  
As of sSeptember 30, 2017
                                                            
Assets.-
                                                            
Cash and cash equivalents
    
250,170
      
31,682
      
140,175
      
221,327
      
3,562
      
83,268
      
7,920
      
110,670
      
-
      
848,774
  
Financial asset at fair value through profit or loss
    
276
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
276
  
Trade accounts receivables
    
305,921
      
62,978
      
101,126
      
66,100
      
549
      
38,135
      
364,586
      
629
      
-
      
940,024
  
Unbilled work in progress
    
801,873
      
-
      
-
      
-
      
-
      
-
      
-
      
8,542
      
-
      
810,415
  
Accounts receivable from related parties
    
230,620
      
2,663
      
60,914
      
405
      
8,852
      
70,263
      
5,264
      
57,366
      
(288,667
)
    
147,680
  
Other accounts receivable
    
419,168
      
51,523
      
43,748
      
14,866
      
2,540
      
25,568
      
39,770
      
13,706
      
-
      
610,889
  
Inventories
    
53,884
      
14,417
      
16,789
      
18,377
      
-
      
798,639
      
67,544
      
9
      
(19,959
)
    
949,700
  
Prepaid expenses
    
4,477
      
1,880
      
1,998
      
4,623
      
242
      
233
      
15,977
      
1,751
      
-
      
31,181
  
Non-current assets classified as held for sale
    
306,108
      
-
      
-
      
-
      
-
      
-
      
-
      
784,221
      
-
      
1,090,329
  
Total current assets
    
2,372,497
      
165,143
      
364,750
      
325,698
      
15,745
      
1,016,106
      
501,061
      
976,894
      
(308,626
)
    
5,429,268
  
                                                                                 
Long-term trade accounts receivable
    
-
      
-
      
15,092
      
707,845
      
-
      
-
      
14,492
      
-
      
-
      
737,429
  
Long-term unbilled work in progress
    
-
      
-
      
28,014
      
-
      
-
      
-
      
-
      
-
      
-
      
28,014
  
Long-term accounts receivable from related parties
    
-
      
-
      
408
      
-
      
-
      
-
      
477
      
709,886
      
(123,194
)
    
587,577
  
Prepaid expenses
    
-
      
-
      
30,058
      
17,025
      
905
      
-
      
-
      
-
      
(3,559
)
    
44,429
  
Other long-term accounts receivable
    
25,570
      
44,459
      
14,416
      
246,597
      
7,347
      
16,587
      
2,149
      
36,248
      
-
      
393,373
  
Investments in associates and joint ventures
    
115,335
      
8,092
      
-
      
-
      
-
      
1
      
10,487
      
2,491,125
      
(2,567,318
)
    
57,722
  
Investment property
    
-
      
-
      
-
      
-
      
-
      
46,117
      
-
      
-
      
-
      
46,117
  
Property, plant and equipment
    
547,282
      
176,383
      
19,480
      
816
      
60
      
12,232
      
101,251
      
71,081
      
(17,626
)
    
910,959
  
Intangible assets
    
240,500
      
162,275
      
480,475
      
236
      
-
      
1,001
      
48,642
      
24,044
      
11,481
      
968,654
  
Deferred income tax asset
    
180,175
      
5,179
      
15,128
      
-
      
-
      
12,545
      
42,014
      
25,681
      
(2,928
)
    
277,794
  
Total non-current assets
    
1,108,862
      
396,388
      
603,071
      
972,519
      
8,312
      
88,483
      
219,512
      
3,358,065
      
(2,703,144
)
    
4,052,068
  
Total assets
    
3,481,359
      
561,531
      
967,821
      
1,298,217
      
24,057
      
1,104,589
      
720,573
      
4,334,959
      
(3,011,770
)
    
9,481,336
  
                                                                                 
Liabilities.-
                                                                                
Borrowings
    
599,462
      
44,790
      
1,866
      
-
      
-
      
162,464
      
175,854
      
150,238
      
-
      
1,134,674
  
Bonds
    
-
      
-
      
25,424
      
14,504
      
-
      
-
      
-
      
-
      
-
      
39,928
  
Trade accounts payable
    
886,414
      
69,029
      
65,243
      
12,753
      
75
      
35,904
      
176,937
      
49,801
      
(939
)
    
1,295,217
  
Accounts payable to related parties
    
108,374
      
2,865
      
32,402
      
33,157
      
137
      
46,426
      
10,798
      
114,074
      
(289,237
)
    
58,996
  
Current income tax
    
23,809
      
1,187
      
346
      
-
      
81
      
56,013
      
4,594
      
26
      
(19,986
)
    
66,070
  
Other accounts payable
    
533,315
      
13,736
      
85,319
      
27,534
      
56
      
145,857
      
99,772
      
103,396
      
-
      
1,008,985
  
Provisions
    
6,615
      
5,102
      
-
      
-
      
-
      
36
      
1,342
      
-
      
-
      
13,095
  
Non-current assets classified as held for sale
    
249,493
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
249,493
  
Total current liabilities
    
2,407,482
      
136,709
      
210,600
      
87,948
      
349
      
446,700
      
469,297
      
417,535
      
(310,162
)
    
3,866,458
  
                                                                                 
Borrowings
    
149,985
      
96,767
      
2,177
      
-
      
-
      
19,897
      
29,860
      
403,915
      
-
      
702,601
  
Long-term bonds
    
-
      
-
      
323,914
      
589,165
      
-
      
-
      
-
      
-
      
-
      
913,079
  
Other long-term accounts payable
    
143,562
      
-
      
52,474
      
366,773
      
154
      
32,058
      
35,542
      
2,435
      
-
      
632,998
  
Long-term accounts payable to related parties
    
4,405
      
-
      
408
      
87,845
      
23,445
      
-
      
32,498
      
-
      
(122,763
)
    
25,838
  
Provisions
    
12,388
      
16,736
      
-
      
-
      
-
      
-
      
1,792
      
-
      
-
      
30,916
  
Derivative financial instruments
    
-
      
598
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
598
  
Deferred income tax liability
    
29,916
      
5,084
      
6,058
      
22,141
      
282
      
-
      
9,352
      
12,998
      
8,136
      
93,967
  
Total non-current liabilities
    
340,256
      
119,185
      
385,031
      
1,065,924
      
23,881
      
51,955
      
109,044
      
419,348
      
(114,627
)
    
2,399,997
  
Total liabilities
    
2,747,738
      
255,894
      
595,631
      
1,153,872
      
24,230
      
498,655
      
578,341
      
836,883
      
(424,789
)
    
6,266,455
  
Equity attributable to controlling interest in the Company
    
616,140
      
284,177
      
305,033
      
108,260
      
(173
)
    
229,494
      
109,187
      
3,484,606
      
(2,442,918
)
    
2,693,806
  
Non-controlling interest
    
117,481
      
21,460
      
67,157
      
36,085
      
-
      
376,440
      
33,045
      
13,470
      
(144,063
)
    
521,075
  
Total liabilities and equity
    
3,481,359
      
561,531
      
967,821
      
1,298,217
      
24,057
      
1,104,589
      
720,573
      
4,334,959
      
(3,011,770
)
    
9,481,336
  
                                                                                 
-  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 nine-month period
                                                            
ended September 30, 2016
                                                            
                                                             
Revenue
    
2,714,934
      
277,452
      
428,614
      
174,750
      
17,629
      
138,863
      
775,396
      
45,355
      
(334,665
)
    
4,238,328
  
Gross profit (loss)
    
190,584
      
31,120
      
97,193
      
43,480
      
5,764
      
38,638
      
96,976
      
(4,079
)
    
(49,618
)
    
450,058
  
Administrative expenses
    
(189,779
)
    
(10,749
)
    
(25,756
)
    
(8,373
)
    
(545
)
    
(14,779
)
    
(67,528
)
    
(26,269
)
    
54,778
      
(289,000
)
Other income and expenses
    
47,036
      
(1,943
)
    
159
      
(2
)
    
-
      
707
      
3,109
      
1,847
      
(4,624
)
    
46,289
  
Gain from the sale of investments
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
31,768
      
-
      
31,768
  
Operating profit (loss)
    
47,841
      
18,428
      
71,596
      
35,105
      
5,219
      
24,566
      
32,557
      
3,267
      
536
      
239,115
  
Financial expenses
    
(43,900
)
    
(6,897
)
    
(4,509
)
    
(2,120
)
    
(36
)
    
(10,141
)
    
(20,961
)
    
(24,451
)
    
9,826
      
(103,189
)
Financial income
    
15,710
      
1,679
      
1,675
      
4,538
      
104
      
1,687
      
3,370
      
12,360
      
(19,799
)
    
21,324
  
Share of the profit or loss
                                                                                
in associates and joint ventures under the equity
                                                                                
method of accounting
    
12,409
      
1,282
      
-
      
-
      
-
      
2,022
      
459
      
176,269
      
(140,700
)
    
51,741
  
Profit before income tax
    
32,060
      
14,492
      
68,762
      
37,523
      
5,287
      
18,134
      
15,425
      
167,445
      
(150,137
)
    
208,991
  
Income tax
    
(13,238
)
    
(3,962
)
    
(19,424
)
    
(11,325
)
    
(1,481
)
    
(4,610
)
    
(5,966
)
    
10,556
      
2,545
      
(46,905
)
Profit for the period
    
18,822
      
10,530
      
49,338
      
26,198
      
3,806
      
13,524
      
9,459
      
178,001
      
(147,592
)
    
162,086
  
                                                                                 
Profit attributable to:
                                                                                
                                                                                 
Owners of the Company
    
22,406
      
7,711
      
38,119
      
19,649
      
3,806
      
3,736
      
7,021
      
178,912
      
(142,718
)
    
138,642
  
Non-controlling interest
    
(3,584
)
    
2,819
      
11,219
      
6,549
      
-
      
9,788
      
2,438
      
(911
)
    
(4,874
)
    
23,444
  
     
18,822
      
10,530
      
49,338
      
26,198
      
3,806
      
13,524
      
9,459
      
178,001
      
(147,592
)
    
162,086
  
-  14 -
(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 nine-month period
                                                            
ended September 30, 2017
                                                            
                                                             
Revenue
    
2,465,066
      
318,313
      
386,225
      
213,077
      
2,297
      
443,581
      
896,592
      
51,819
      
(314,876
)
    
4,462,094
  
Gross profit (loss)
    
209,815
      
46,773
      
88,956
      
35,241
      
260
      
144,066
      
92,355
      
(44,330
)
    
(47,699
)
    
525,437
  
Administrative expenses
    
(151,474
)
    
(12,032
)
    
(24,407
)
    
(9,509
)
    
(254
)
    
(13,600
)
    
(80,060
)
    
(46,752
)
    
49,835
      
(288,253
)
Other income and expenses
    
6,033
      
567
      
523
      
(675
)
    
-
      
(2,863
)
    
8,436
      
923
      
68
      
13,012
  
Gain from the sale of investments
    
25,768
      
-
      
-
      
-
      
-
      
49,002
      
-
      
195,378
      
4,215
      
274,363
  
Operating profit (loss)
    
90,142
      
35,308
      
65,072
      
25,057
      
6
      
176,605
      
20,731
      
105,219
      
6,419
      
524,559
  
Financial expenses
    
(37,185
)
    
(8,862
)
    
(5,283
)
    
(4,081
)
    
(36
)
    
(15,111
)
    
(24,961
)
    
(59,109
)
    
14,677
      
(139,951
)
Financial income
    
4,674
      
1,728
      
2,426
      
2,706
      
7
      
2,152
      
1,835
      
38,267
      
(27,291
)
    
26,504
  
Share of the profit or loss
                                                                                
in associates and joint ventures under the equity
                                                                                
method of accounting
    
35,781
      
1,198
      
-
      
-
      
-
      
455
      
685
      
211,763
      
(228,970
)
    
20,912
  
Profit before income tax
    
93,412
      
29,372
      
62,215
      
23,682
      
(23
)
    
164,101
      
(1,710
)
    
296,140
      
(235,165
)
    
432,024
  
Income tax
    
(15,298
)
    
(8,458
)
    
(17,921
)
    
(7,363
)
    
(150
)
    
(43,211
)
    
(2,075
)
    
(49,210
)
    
2,028
      
(141,658
)
Profit (loss) for the period
    
78,114
      
20,914
      
44,294
      
16,319
      
(173
)
    
120,890
      
(3,785
)
    
246,930
      
(233,137
)
    
290,366
  
                                                                                 
Profit (loss) attributable to:
                                                                                
                                                                                 
Owners of the Company
    
71,783
      
18,260
      
31,939
      
12,240
      
(173
)
    
60,852
      
(3,305
)
    
247,019
      
(199,827
)
    
238,788
  
Non-controlling interest
    
6,331
      
2,654
      
12,355
      
4,079
      
-
      
60,038
      
(480
)
    
(89
)
    
(33,310
)
    
51,578
  
     
78,114
      
20,914
      
44,294
      
16,319
      
(173
)
    
120,890
      
(3,785
)
    
246,930
      
(233,137
)
    
290,366
  


-  15 -
(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
   CASH AND CASH EQUIVALENTS

This account comprises:

    At December,31     At September,30  
   
2016
    
2017
  
             
Cash on hand
    
5,943
      
5,877
  
In-transit remittances
    
7,931
      
867
  
Checking accounts
    
475,025
      
726,283
  
Time deposits
    
112,023
      
115,747
  
Mutual funds
    
6,027
      
-
  
     
606,949
      
878,774
  
 
Reconciliation to cash flow statement
The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of:

    At December,31     At September,30  
    2016     2017  
Balances as above
    
606,949
 
    
848,774
 
Bank overdrafts (note 13)
    
(8,396
)
    
(1,048
)
Balances per statement of cash flows
    
598,553
 
    
847,726
 

9
      TRANSACTIONS WITH RELATED PARTIES

a)    Transactions with related parties -

Major transactions between the Company and its related parties are summarized as follows:

   
From the period
ended September 30, 
   
2016
    
2017
  
             
Revenue from sale of goods and services:
            
- Associates
    
-
      
1,654
  
- Joint operations
    
22,304
      
8,595
  
     
22,304
      
10,249
  

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 September 30,      
    2016         2017      
    Receivable       Payable      Receivable       Payable    
                         
Joint operations
                                
Consorcio Constructor Ductos del Sur
    
62,834
      
37,238
      
15,682
      
-
  
Consorcio GyM Conciviles
    
61,006
      
-
      
61,833
      
-
  
Consorcio Rio Urubamba
    
9,072
      
-
      
8,993
      
-
  
Consorcio Peruano de Conservación
    
8,784
      
-
      
7,182
      
-
  
Consorcio Vial Quinu
    
4,198
      
738
      
-
      
1,837
  
Consorcio Italo Peruano
    
4,174
      
17,325
      
17,158
      
16,029
  
Consorcio La Gloria
    
3,521
      
3,080
      
1,690
      
1,355
  
Consorcio Terminales del Perú
    
3,215
      
259
      
3,52
      
-
  
Consorcio Rio Mantaro
    
3,191
      
6,886
      
12,374
      
10,045
  
Consorcio Vial Sierra
    
940
      
5,400
      
2,819
      
4,521
  
Consorcio Constructor Chavimochic
    
915
      
2,471
      
1,361
      
5,816
  
Consorcio Energía y Vapor
    
491
      
3,203
       -      
73
  
Consorcio Ermitaño
    
83
      
6,372
      
1,006
      
7
  
Consorcio Menegua
    
30
      
3,803
       -      
691
  
Consorcio para la Atención y Mantenimiento de Ductos    
     -      
21,790
       -      
10,152
  
Consorcio Huacho Pativilca
    
-
       3,434       -      
133
  
Other minors
    
10,133
      
2,472
      
11,577
      
4,543
  
     
172,587
      
114,471
      
145,195
      
55,202
  
Other related parties:
                        
Gaseoducto Sur Peruano S.A
    
587,973
      
-
      
589,929
      
-
  
Perú Piping Spools S.A.C.
    
9,077
      
-
      
133
      
587
  
Ferrovias Participaciones
    
-
      
20,813
      
-
      
21,434
  
Ferrovias Argentina
    
-
      
2,835
      
-
      
3,206
  
Arturo Serna
    
-
      
7,418
      
-
      
4,405
  
     
597,050
      
31,066
      
590,062
      
27,599
  
     
769,637
      
145,537
      
735,257
      
102,225
  
 
Less non-current portion:
                        
Gaseoducto Sur Peruano S.A
    
(587,973
)
    
-
      
(587,577
)
    
-
  
Consorcio Constructor Ductos del Sur
    
-
      
(37,238
)
    
-
      
-
  
Ferrovias Participaciones
    
-
      
(20,813
)
    
-
      
(21,433
)
Ferrovias Argentina
    
-
      
(2,835
)
    
-
 
    
-
  
Arturo Serna
    
-
      
(4,434
)
    
-
 
    
(4,405
)
Portion current
    
181,664
      
80,217
 
    
147,680
 
    
58,996
  
 
 
Accounts receivable and payable 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
NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

As of September 30, 2017, this item includes the balances of the Consorcio Constructor Ductos del Sur for S/288.4 million, and the reclassification of the investment in the associate Gasoducto Sur Peruano S.A. for S/727.5 million.

In February and March 2017, the Company has sold through its brokerage operations part of its shares (representing 9.97%) in the Red Eagle Mining Corporation investment, obtaining a remaining interest of 2.70%. The sale price was agreed at US$13.3 million (equivalent to S/43 million), which were canceled in full.
-  17 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

In August 2017, the Company has capitalized claims to Red Eagle Mining Corporation for US$4 million. As of September 30, 2017, a holding of 6.18%

11
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

As of September 30, 2017, associates in which the Group has significant influence are similar to those existing as of December 31, 2016, except for the reclassification mentioned
The movement of our investments in associates for the period ended September 30, 2016 and 2017 is as follows:
   
     2016      2017  
             
Beginning balance
    
646,884
 
    
886,855
 
Acquisition and/or contributions received
    
850
 
    
-
  
Increase in capital
    
389,662
 
    
-
  
Debt capitalization
    
-
 
    
-
  
Share of the profit and loss in associates
    
-
 
        
under the equity method of accounting
    
51,741
 
    
7,946
 
Sale of investments
    
-
      
(120,779
)
Dividends received
    
(18,347
)
    
( 1,873
)
Acquisition of control – Adexus
    
(26,432
)
    
-
  
Contract adjustment - Gasoducto Sur Peruano
    
20,554
 
    
-
  
Reclassification discontinuous operation
    
-
      
(714,554
)
Other
    
507
 
    
127
 
Ending balance
    
1,065,419
 
    
57,722
 

In January and August 2016, the Company capitalized debt with Adexus by S/8.3 million and S/14 million respectively, increasing its participation in the first case from 44% to 52% and in the second capitalization from 52% to 91.03 % control is adquired. To date, the Company has incorporated in the Consolidated Financial Statements assets and liabilities of Adexus, the process of measuring the fair value of net asset is concluded by the end of December 2016.

On November 2015, subsidiary Negocios del Gas SA. adquired an interest of 20% of concessionaire Gasoducto Sur Peruano, which represents an investment of approximately US$248 million, at December 2015 the contribution was S/391 million and at December 2016 its contribution was increased in S/374 million.

Gasoducto del Sur Peruano S.A. ("GSP"), company owner of the concession "Improvements to the Energy Security of the Country and Development of the Peruvian Southern Gas Pipeline" (the "Concession") and of which our subsidiary Negocios de Gas S.A is a shareholder with 20%, received a notification on January 24, 2017, from the Ministry of Energy and Mines, as Grantor of the Concession, by which it terminated the concession agreement signed on July 23, 2014 (the "Concession Contract").

In case of the termination of the Concession, the Concession Contract states that the Net Book Value of the Concession's assets ("VCN") must be determined, and then call a public auction for the transfer of the Concession's assets to a new concessionaire. From this amount, GSP is entitled to receive, within a maximum term of 12 months as of the termination of the Concession, a payment that can range from the guaranteed minimum of 72.25% of the VCN to the 100% of the VCN that is a function of the result of the auction.

According to the analysis made by the Company with the information available to date, and under the agreements entered into with the other shareholders of GSP, in the event that the payment reaches 72.25% of the VCN we would recover more than 95% of the total commitments which include the equity invested in GSP amounting to US$220 million, the amount honored by the corporate guarantee granted to the bridge loan conferred to GSP by a syndicate of five banks amounting to US$129 million, as well as the percentage honored in relation to the Guarantee of Fulfillment of the Concession Contract that amounts to US$52.5 million.
-  18 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

The Company has registered the impacts of such termination in the Financial Statement to fiscal year 2016, which is a result that considers receiving the minimum payment of 72.25% of the aforementioned VCN.

In March 2017, the investment was reclassified to Non-current assets classified as held for sale.

In February 2017 subsidiary Viva GyM S.A. signed a purchase-sales agreement comprising its equity interest (representing 22.5%) held in associate Promoción Inmobiliaria del Sur S.A. The agreed selling price was US$25 million (equivalent to S/81 million), which was fully paid.

In April 2017 the Company signed a purchase-sale agreement for their total share (representing 51%) at their joint venture with Compañía Operadora de Gas del Amazonas S.A.C. (COGA). The selling price was agreed at US$21.5 million (equivalent to S/69.8 million), which was fully paid.

In June 2017, the Company sold all of GMD's shares, which represent 89.19% of the company's shareholding, in favor of AI Inversiones Palo Alto II S.A.C., an affiliate of Advent International. The value agreed for the total participation was US$84.7 million. As of to date, the amount was fully collected.

12
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

For the period ended September 30, 2016 and 2017, the movement in property, plant and equipment and intangible assets accounts was as follows:

   
Property,
        
   
plant and
    
Intangible
  
   
equipment
    
assets
  
             
At January 1, 2016
    
1,111,757
      
881,020
  
                 
Additions
    
148,861
      
102,367
  
Acquisition of subsidiary - net
    
47,165
      
101,534
  
Transfers, disposals and adjustments
    
9,364
      
22,995
  
Deductions for sale of assets
    
(35,184
)
    
-
  
Depreciation, amortization
    
(146,352
)
    
(62,274
)
Net cost at September 30, 2016
    
1,135,611
      
1,045,642
  
                 
At January 1, 2017
    
1,113,599
      
960,286
  
                 
                 
Additions
    
141,621
      
104,095
  
Subsidiary deconsolidation
    
(83,441
)
    
(23,666
)
Reclasification to non-current assets available for sale
    
(56,703
)
    
-
  
Transfers, disposals and adjustments
    
(20,092
)
    
(1,014
)
Deductions for sale of assets
    
(36,369
)
    
-
  
Depreciation, amortization
    
(147,656
)
    
(71,047
)
Net cost at September 30, 2017
    
910,959
      
968,654
  
 
-  19 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

As of September 30, 2016 and 2017, additions to property, plant and equipment comprise of acquisition of plant and equipment intended for the Group's operations.

As of September 30, 2016 and 2017, the amounts registered in Intangible assets comprise of investments in building  the second Ancón-Huacho-Pativilca road section of the Panamericana Norte highway (concession under intangible model)  and in preparation of wells located in Lots I, III, IV and V to provide oil and hydrocarbon exploitation services.

In June 2017, the Company sold all of GMD's shares, so property, plant, equipment and intangible assets were deconsolidated for S/83.4 million and S/23.7 million, respectively.

In September 2017,  the Company agreed to sale corporate building located in Miraflores with option to repurchase Building between the fifth and eighth year of the lease term, therefore, its book value (S/56.7 million) was reclassified to non-current assets available for sale (Note 21).

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 31,     At Septemer 30,  
   
2016
    
2017
  
             
Engineering and construction
    
98,587
      
97,157
  
Electromechanical
    
20,737
      
20,737
  
Mining and construction services
    
13,366
      
13,366
  
Telecommunications services
    
6,728
      
6,866
  
IT equipment and services
    
5,102
      
930
  
     
144,520
      
139,056
  
                 
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. 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 September 30, 2017 same criteria were applied as those in test impairment at December 31, 2016.

13
BORROWINGS

This item comprises:

    Total        Current        Non-current      
    At     At     At     At     At     At  
    December
31, 2016
     September
30, 2017
     December
31, 2016
     September
30, 2017
     December
31, 2016
     September
30, 2017
  
                                                 
Bank overdrafts
    
8,396
      
1,048
      
8,396
      
1,048
      
-
      
-
  
Bank loans
    
2,131,901
      
1,682,738
      
1,835,340
      
1,057,417
      
296,561
      
625,321
  
Leases
    
240,141
      
153,489
      
117,307
      
76,209
      
122,834
      
77,280
  
     
2,380,438
      
1,837,275
      
1,961,043
      
1,134,674
      
419,395
      
702,601
  
 
 
 
  a)     Bank loans -
 
As of September 30, 2017 and December 31, 2016, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.1% and 14.2% in 2017 and between 1.0% and 14.4% in 2016.
-  20 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

       
Current   
    
Non-current   
  
 
 
 Interest
 
Date of
  
At
December
    
At
September
    
At
December
    
At
September
  
 
rate
maturity
    
31, 2016
      
30, 2017
      
31, 2016
      
30, 2017
  
 
GyM S.A.
    
2.40% / 8.00
%
    
2017 / 2020
      
492,910
      
549,261
      
187,029
      
104,570
  
Graña y Montero S.A.A.
  
 Libor USD 3M
 +                                        
 
    
de 4.9% a 5.5
  %    
2017 / 2020
      
932,114
      
150,238
      
-
      
403,915
  
Viva GyM S.A.
    
7.00% / 11.22
%
    
2017 / 2018
      
201,609
      
157,665
      
-
      
7,025
  
GMP S.A.
    
3.65% / 6.04
%
    
2017 / 2020
      
77,857
      
40,649
      
71,453
      
90,502
  
CAM Holding S.A.
    
1.10% / 14.24
%
    
2017 / 2020
      
69,702
      
102,088
      
24,889
      
13,214
  
Adexus S.A.
    
3.63% / 5.90
%
    
2017 / 2019
      
42,782
      
57,516
      
13,190
      
6,095
  
CAM Servicios Perú S.A.
    
6.39% / 7.18
%
    
2017
      
3,620
      
-
      
-
      
-
  
GMD S.A.
    
6.20% / 7.47
%
    
2017
      
14,746
      
-
      
-
      
-
  
(Missing Graphic Reference) (Missing Graphic Reference) (Missing Graphic Reference) (Missing Graphic Reference)
                    
1,835,340
      
1,057,417
      
296,561
      
625,321
  
 
    
 
      
 
      
 
                          


i) Credit Suisse Syndicated Loan -
In December 2015, the Group entered into a medium term loan credit agreement for up to US$200 million (equivalent to S/672 million), with Credit Suisse AG, Cayman Islands Branch, Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC.  The initial term of the loan was set at five years, with quarterly installments starting to be paid on the 18th month. The loan accrued interest at a rate of three months Libor plus 3.9% per year.  The proceeds were used to finance the equity interest in GSP.   As of December 31, 2016, the outstanding balance amounted to US$148.5 million (equivalent to S/498.8 million), and it's included within the current portion.

On June 27, 2017, the Group renegotiated the terms of this loan to clear breaches related to the termination of the GSP concession. The new terms require repayment by December, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year of the amendment.  The syndicated loan accrues interest at LIBOR plus 4.90% per year.  Under the amendment, the Group is prohibited from paying dividends until the loan is fully repaid.  The loan is secured by (i) a lien on Concar's shares; (ii) a lien on Almonte's shares; (iii) a mortgage over certain real estate properties in Miraflores and Surquillo; (iv) liens on certain accounts; (v) a lien on GyM's share; (vi) a second lien on CAM's shares; (vii) a second lien on CAM Servicios del Perú S.A.'s shares; and (viii) a first lien on cash flows from the sale of certain assets.

The agreement contains certain covenants, including the obligation by the Group to maintain the following financial ratios during the term of the agreement: (1) the Consolidated EBITDA to Consolidated Interest Expense Ratio shall not be less than 3.5:1.0 commencing on April 1, 2018 and thereafter; (2) the Consolidated Leverage Ratio (as defined therein) shall not be greater than 3.5:1.0 at any time during the period commencing on December 31, 2016 and ending on March 31, 2017; 3.5:1.0 at any time during the period commencing on July 1, 2017 and ending on September 30, 2017; and no greater than 2.5:1.0 at any time thereafter; and (3) the Debt Service Coverage Ratio as of the last day of any fiscal quarter of the borrower, falling on or after the first anniversary of the closing date, shall not be less than 1.5:1.0, commencing on April 1, 2018 and thereafter.

As of to date, the outstanding balance of the loan is US$81.1 million (equivalent to S/264.9 million).

 
        ii)    GSP Bridge Loan -

At December 31, 2016, the current balance includes US$129 million (equivalent to S/433.3 million) of the corporate guarantee issued by the Company to secure the bridge loan given to GSP, which was enforceable at that date.  On June, 2017, the Company has reached a new term loan with Natixis, BBVA, SMBC and MUFJ for US$78.7 million (equivalent to S/264.8 million), the proceeds of which were used to repay the GSP bridge loan.

The maturity is June, 2020, with required prepayments to be made with the proceeds of asset sales of 40% in the first year and an additional 30% in the second year. The new term contains the following covenant: the consolidated leverage ratio shall not be more than 3.5:1.0 at any time, and accrues interest at LIBOR plus 4.50% per year, which increases to 5.00% during the second year and 5.50% during the third year.  Under the new term, the Group is prohibited from paying dividends until the loan is fully repaid.  Also, the new term is secured by (i) a first lien on our rights to receive the termination payment derived from the GSP termination (the "VCN"), (ii) a second lien on our shares of GyM and Concar; (ii) a second lien on our shares of Almonte; (iii) a second lien on certain real estate properties in Miraflores and Surquillo; (iv) a second lien on our shares of CAM; (v) a second lien on our shares of CAM Servicios del Perú S.A.; and (vi) a first lien on cash flows from the sale of certain assets.
-  21 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

As of to date, the outstanding balance of the new term loan is US$72.5 million (equivalent to S/236.8 million)

As of September 30, 2017, the Company maintained unused credit limits for S/1,256 million, which expire within one year (S/3,922 million as of December 31, 2016).

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 September     At December     At September  
    31, 2016     30, 2017     31, 2016     30, 2017  
                                 
Total loans
    
2,380,438
      
1,837,275
      
2,391,375
      
1,918,253
  
 
The fair value is based on cash flows discounted using a rate based on the borrowing rate of 1.1% and 13.3% (1.3% and 14.3%  in 2016). It should be noted that the interest rate used are those applicable and negotiated by each Company.

14
BONDS

This item is broken down as follows:

     Total            Current            Non-current        
     At       At       At       At       At       At   
   
December
31, 2016
    
September
30, 2017
    
December
31, 2016
    
September
30, 2017
    
December
31, 2016
    
September
30, 2017
  
     
 
      
 
      
 
      
 
      
 
      
 
  
GyM Ferrovías (a)
    
604,031
      
603,669
      
20,551
      
14,504
      
583,480
      
589,165
  
Norvial (b)
    
363,683
      
349,338
      
25,540
      
25,424
      
338,143
      
323,914
  
     
967,714
      
953,007
      
46,091
      
39,928
      
921,623
      
913,079
  
 
 
 a)        G yM Ferrovías S.A. -

In February 2015 subsidiary GyM Ferrovías issued corporate bonds under the U.S. Regulation S. This issue was carried out in Peruvian Soles VAC (the Spanish acronym for constant value update) for a total amount of S/629 million. The issues costs for this transactions were for S/22 million. Maturity of these bonds is November 2039 and bear interest at a rate of 4.75% (plus VAC adjustment), they have a risk rating of AA+ (local grading) granted by  Apoyo & Asociados Internacionales Clasificadora de Riesgo and a collateral structure that includes a mortgage on the concession to which GyM Ferrovías is a concessionaire, security on the shares of GyM Ferrovías, Assignment of the collection rights arising from the Management  Trust, a Cash Flow and Reserve Trust  for the Service of the Debt, Operation and Maintenance and in-progress Capex. On September 30, 2017 the Group made a payment of S/53 million.

Capital raised from bond issue were used in amortizing a short-term loan with Banco de Crédito del Perú – BCP for S/400 million,  funding the reserve accounts,  payment of costs of bond issue and partial repayment of the subordinated loan obtained from parent Company by GyM Ferrovías.
-  22 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

On September 30, 2017 the balance includes accrued interest payable for S/3 million.

As part of the process of bond structuring, GyM Ferrovías engaged to adhere to the following covenants: 
 
-
Debt service coverage ratio of not less than 1.2 times. 
-
Keeping a constant minimum balance of trust equal to a quarter of operating and maintenance costs (including VAT) 
-
Keeping a constant minimum balance of trust equal to two coupons as per schedule.

 
 
b)
Norvial S.A. -

In July 2015, Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. The first issue was for S/80 million at 5 years, bearing an interest rate of 6.75% and funds were drawn on July 23, 2015. The second issue was for S/285 million at 11.5 years, bearing an interest rate of 8.375%, structured in 3 disbursements: the first disbursement of S/105 million was on July 23,2015; the second disbursement of S/100 million was on January 25, 2016; the third disbursement of S / 80 million was received in July 25, 2016. The issues costs corresponding to the first issue and to the first and second disbursements of the second issue were for S/3.9 million.  Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA. This financing transaction has been secured by (i) a cash flow trust, related to the consideration and the regulatory rate; (ii) a mortgage on the concession in which Norvial S.A. is a concessionaire; (iii) a security on shares: (iv) collection rights and (v) in general, all those additional collaterals given to the secured creditors. The capital raised is intended to finance the construction of the Second Phase of Red Vial No.5 and the financing of VAT arising from a project-related expenses.

As of September 30, 2017 the balance included interest payables for S/4.4 million (S/4.9 million at December 31, 2016)

As part of the process of bond structuring, Norvial engaged to adhere to the following covenants: 

 
-
Debt service coverage ratio of not less than 1.3 times.
 
-
Proforma gearing ratio lower than 4 times.

As of September 30,2017 and December 31,2016 both Companies have complied with their covenants.

Fair value of the bonds of both Companies at September 30, 2017 amounted to S/1,040 million (at December 31,2016 amounted to S/1,055 million), which has been calculated based on the discounted cash flows, using rates between 3.41% and 6.77% (rates between 4.20% and 7.99% at December 31,2016) which are within level 2 of the fair value hierarchy.

15
PROVISIONS

This item is broken down based on the expectation of liquidation as follows:

   
At December
    
At September
  
    31, 2016     30, 2017  
                 
Current portion
    
14,531
 
    
13,095
  
Non-current portion
    
31,155
 
    
30,916
  
     
45,686
 
    
44,011
  
 
The movement of this item for the period ended September 30, 2016 and 2017 is as follows:
-  23 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED


          Contingent                    
          liabilities     Provisions     Provision        
 Other provisions   Legal     resulting from     for the acquisition     for well        
    claims     acquisitions     of CAM     closure     Total  
At January 1, 2016
    
15,000
      
22,960
      
3,819
      
7,307
      
49,086
  
Additions
    
3,508
      
1,562
      
-
      
400
      
5,470
  
Reversals of provisions
    
(237
)
    
(13,882
)
    
(2,061
)
    
-
      
(16,180
)
Payments
    
(299
)
    
(271
)
    
-
      
-
      
(570
)
Translation adjustments
    
471
      
1,888
      
295
      
-
      
2,654
  
At September 30, 2016
    
18,443
      
12,257
      
2,053
      
7,707
      
40,460
  
(Missing Graphic Reference) (Missing Graphic Reference) (Missing Graphic Reference) (Missing Graphic Reference) (Missing Graphic Reference)
                                        
                                         
At January 1, 2017
    
20,345
      
8,125
      
-
      
17,216
      
45,686
  
Additions
    
1,127
      
363
      
-
      
-
      
1,490
  
Reversals of provisions
    
(238
)
    
(828
)
    
-
      
(382
)
    
(1,448
)
Payments    
(1,692
)
     -       -       -      
(1,692
)
Translation adjustments    
(24
)
    
(1
)
     -       -      
(25
)
At September 30, 2017    
19,518
      
7,659
       -      
16,834
      
44,011
  
                                         

 
16
  CAPITAL

As of December 31, 2016 and September 30,2017, 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, 2016, the amount of 264,809,545 common shares is represented by 52,961,909   ADSs, at 5 shares per ADS.

As of September 30, 2017, the amount of 258,907,580 common shares is represented by 51,781,516 ADSs, at 5 shares per ADS.

17
EXPENSES BY NATURE

For the period ended September 30, 2016 and 2017, this item comprises:
 
   
Cost of
services
and goods
    
Adminis-
trative-
expenses
  
 
2016
            
Inventories, materials and consumables used
    
566,846
      
-
  
Personnel charges
    
1,060,428
      
168,891
  
Services provided by third-parties
    
1,693,746
      
82,134
  
Taxes
    
14,078
      
6,512
  
Other management charges
    
259,575
      
13,088
  
Depreciation
    
136,323
      
11,767
  
Amortization
    
55,682
      
6,592
  
 Impairment of inventories     1,329       -  
Impairment of property, plant and equipment
    
263
      
16
  
     
3,788,270
      
289,000
  
 2017
                
Inventories, materials and consumables used
    
723,366
      
102
  
Personnel charges
    
1,238,017
      
162,903
  
Services provided by third-parties
    
1,270,922
      
54,813
  
Taxes
    
9,443
      
2,136
  
Other management charges
    
492,258
      
49,505
  
Depreciation
    
138,335
      
11,051
  
Amortization
    
63,324
      
7,723
  
Impairment of inventories
    
555
      
-
  
Impairment of accounts receivable
    
123
      
-
  
Impairment of property, plant and equipment
    
314
      
20
  
     
3,936,657
      
288,253
  
 
-  24 -
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

18
INCOME TAX

These condensed interim consolidated financial statements for the period ended September 30, 2017, 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 31,2017 is 32.8% (22.4% for the period ended September 30, 2016). 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.

19
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of September 30, 2017, contingencies held by the Group are substantially the same as those existing as of December 31, 2016.

In addition the Group had guarantee commitments with different financial institutions securing transactions in the amount of US$203.2 million.

20          DIVIDENDS
 

As of September 30, 2017, the Company has not declared any dividends due to the fact that the financial statements have not been approved at the Annual General Shareholders' Meeting.

For the period ended September 30, 2017 , the Group has paid dividends to its non-controlling subsidiaries participate by S/39.1 million (S/20.9 million for the same period in 2016).

21
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

On September 29, 2017, we sold our Corporate Building located in Miraflores to Volcomcapital Petit Thouars S.A.C. for US$ 20.46 (S/.66.8 million);  as per stated in the purchase agreement we have also signed a lease agreement for the whole Building with a ten (10) year term, with the option to repurchase the Building between the fifth and eighth year of the lease term.

-  25 -