Discountinued Operations and Non-current Asset Classified as Held for Sale

12 Months Ended

Dec. 31, 2019

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Discountinued Operations and Non-current Asset Classified as Held for Sale

36 DISCONTINUED OPERATIONS AND NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE

As part of the non-strategic asset divestment process initiated by the Company, in 2017, GMD S.A. was sold (“completed”), and in 2018, CAM Servicios del Peru S.A. and CAM Chile S.A., and Stracon GyM S.A. were sold (“completed”).

Additionally, information is presented on Adexus S.A., a subsidiary that has been reclassified as a non-current asset available for sale (“planned”) as of December 31, 2017, 2018 and 2019.

Below is the information on the financial result and cash flow from discontinued operations, GMD S.A., Stracon GyM S.A., CAM Servicios del Peru S.A., CAM Chile S.A. (done) and Adexus S.A. (planned):

	Discontinued operations
	At December 31,
	2017						2018						2019
	GMD Grupo CAM and Stracon GyM			Adexus S.A.			Grupo CAM and Stracon GyM			Adexus S.A.			Adexus S.A.
	(Completed)			(Planned)			(Completed)			(Planned)			(Planned)
Revenues		1,894,055			284,024			1,010,739			302,936			252,857
Operating costs		(1,751,317	)		(239,680	)		(968,375	)		(263,455	)		(244,183	)
Gross profit		142,738			44,344			42,364			39,481			8,674
Administrative expenses		(83,483	)		(32,761	)		(56,950	)		(32,730	)		(34,744	)
Other (expenses) income, net		13,279			(835	)		860			(4,519	)		(12,740	)
Gain from the sale of investments		21,554			—			—			—			—
Operating (loss) profit		94,088			10,748			(13,726	)		2,232			(38,810	)
Financial expenses		(27,398	)		(10,755	)		(19,971	)		(12,786	)		(24,359	)
Financial income		2,269			264			6,253			610			2,625
Share of the profit or loss in associates and joint ventures		854
Loss before income tax		69,813			257			(27,444	)		(9,944	)		(60,544	)
Income tax		(14,110	)		147			7,112			2,325			16,585
Loss from discontinued operations (a)		55,703			404			(20,332	)		(7,619	)		(43,959	)
Details of the sale of the subsidiary
Revenues from the sale of investments		269,961			—			310,855			—			—
Cost from the sale of investments		(51,697	)		—			(237,213	)		—			—
Income tax expense on gain		(63,940	)		—			(8,906	)		—			—
Gain on sale after income tax (b)		154,324			—			64,736			—			—
Net effect in consolidated (a) + (b)		210,027			404			44,404			(7,619	)		(43,959	)
Cash flows relating to the discontinued operations are as follows:
Operating cash flows		149,687			6,083			6,967			36,450			437
Investing cash flows		(10,377	)		(19,570	)		(11,474	)		(18,141	)		—
Financing cash flows		(136,165	)		14,059			526			(21,422	)		(1,250	)
Net increase generated in subsidiary		3,145			572			(3,981	)		(3,113	)		(813	)

A. Discontinued operations

i) CAM Servicios del Peru S.A. and CAM Chile S.A.

On December 4, 2018, the Company entered into a purchase and sale agreement for all of its shares (representing 73.16%) of CAM Servicios del Peru S.A. and CAM Chile S.A. The Group received for its participation in CAM Chile S.A. and CAM Servicios del Peru S.A. the sum of (i) US$15.78 million (equivalent to S/51.7 million) for the shares of CAM Chile S.A. and (ii) US$3.0 million (equivalent to S/10.4 million) for the shares of CAM Servicios del Peru S.A., respectively. The net gain on the sale of both subsidiaries amounted to S/31.7 million.

ii) Stracon GyM S.A.

On March 28, 2018, the Company entered into a purchase and sale agreement for all of its shares (representing 87.59%) in Stracon GyM S.A. The sale price was agreed in US$76.8 million (equivalent to S/248.8 million), which is fully paid. The net gain on the sale amounted to S/41.9 million.

iii) GMD S.A.

On June 6, 2017, the Company entered into a sales contract for all of its shares (representing 89.19%) in GMD S.A. The sales price was agreed at US$84.7 million (equivalent to S/269.9 million), which is fully paid. The net gain on the sale amounted to S/218.3 million (US$64.6 million approximately).

B. Non-current asset classified as held for sale

At December 31, 2018 and 2019, non-current assets and liabilities held for sale correspond to investments in the company Adexus S.A. (hereinafter Adexus), whose main activity is to provide information technology solutions mainly in Chile and Peru.

On November 19, 2019, Adexus S.A. filed an application for reorganization under Law 20.720 with the Chilean courts of justice. The Company impaired the total investment value as of December 31, 2019.

The reorganization allows companies with temporary liquidity problems to obtain financial protection for a period of 30 days, extendable for a period of 60 days, with the support of their creditors, to prepare, propose and negotiate a plan to restructure their assets and liabilities.

Although the Company investment in Adexus has been declared as an available-for-sale investment and on an exceptional basis, the Group decided that Adexus will be subject to the patrimonial protection law; after achieving this restructuring, the Group will focus on honoring it in the terms agreed while finding the right shareholder for the future development of the Company.

	At December 31,
	2018		2019
ASSETS
Cash and cash equivalets		6,074		1,723
Accounts receivables, net		157,351		129,739
Inventories, net		3,999		2,828
Other assets, net		80,374		68,730
Total assets		247,798		203,020
LIABILITIES
Borrowings		71,810		91,529
Accounts payable		148,817		118,497
Deferred income tax liabilities		5,201		—
Total liabilities		225,828		210,026
Total net assets		21,970		(7,006	)

As of December 31, 2017, this item includes Red Eagle Mining Corporation investment representing 6.18% of shares. In January and March 2018, the Company sold the total of its shares. The sale price was agreed at US$3.99 million (equivalent to S/16.24 million), which were paid in full.