UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of April 2019

  Commission File Number 001-35991

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




Sincerely yours,



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

GRAÑA Y MONTERO S.A.A.

By: /s/ LUIS FRANCISCO DIAZ OLIVERO
Name: Luis Francisco Diaz Olivero
Title: Chief Executive Officer
Date: April 30, 2019








GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES



CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS   FOR THE THREE-MONTH PERIOD ENDED AT MARCH 31, 2018 AND 2019 (UNAUDITED);
AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND MARCH 31, 2019 (UNAUDITED)




GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS   FOR THE THREE-MONTH PERIOD ENDED AT MARCH 31, 2018 AND 2019 (UNAUDITED); AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND MARCH 31, 2019 (UNAUDITED)




CONTENTS
Page
   
Condensed Interim Consolidated Statement of Financial Position
1
   
Condensed Interim Consolidated Income Statement
2
   
Condensed Interim Consolidated Statement of Comprehensive Income
3
   
Condensed Interim Consolidated Statement of changes in Equity
4
   
Condensed Interim Consolidated Statement of Cash Flows
5
   
Notes to the Condensed Interim Consolidated Financial Statements
6 - 30







S/            =      Peruvian Sol
US$            =      United States dollar



GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
                 
                                       
                                       
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                 
(All amounts are expressed in thousands of S/ unless otherwise stated)
                 
                                       
ASSETS
                 
LIABILITIES AND EQUITY
                 
         
As at
   
As at
           
As at
   
As at
 
         
December 31,
   
March 31,
           
December 31,
   
March 31,
 
   
Note
   
2018
   
2019
     
Note
   
2017
   
2018
 
                                       
Current assets
                 
Current liabilities
                 
Cash and cash equivalents
 
8
     
801,140
     
754,394
 
Borrowings
 
12
     
826,474
     
699,968
 
Trade accounts receivables, net
           
1,007,828
     
1,109,884
 
Bonds
 
13
     
39,167
     
45,747
 
Work in progress, net
           
28,538
     
51,211
 
Trade accounts payable
           
1,079,531
     
992,832
 
Accounts receivable from related parties
 
9
     
34,903
     
48,307
 
Accounts payable to related parties
 
9
     
55,941
     
68,283
 
Other accounts receivable
           
588,451
     
638,691
 
Current income tax
           
25,807
     
25,153
 
Inventories, net
           
514,047
     
550,718
 
Other accounts payable
           
632,669
     
760,417
 
Prepaid expenses
           
10,549
     
21,249
 
Provisions
 
14
     
6,197
     
6,363
 
             
2,985,456
     
3,174,454
 
Total current liabilities
           
2,665,786
     
2,598,763
 
                                                   
Non-current assets classified as held for sale
           
247,798
     
259,586
 
Non-current liabilities classified as held for sale
           
225,828
     
242,151
 
                                                   
Total current assets
           
3,233,254
     
3,434,040
 
Total current liabilities
           
2,891,614
     
2,840,914
 
                                                   
Non-current assets
                       
Non-current liabilities
                       
Long-term trade accounts receivable, net
           
1,020,067
     
648,098
 
Borrowings
 
12
     
376,198
     
343,350
 
Long-term work in progress, net
           
32,212
     
32,447
 
Long-term bonds
 
13
     
897,875
     
888,450
 
Long-term accounts receivable from related parties
 
9
     
778,226
     
791,290
 
Other long-term accounts payable
           
574,110
     
418,763
 
Prepaid expenses
           
33,697
     
45,751
 
Long-term accounts payable to related parties
 
9
     
21,849
     
45,314
 
Other long-term accounts receivable
           
302,957
     
223,743
 
Provisions
 
14
     
103,411
     
103,087
 
Investments in associates and joint ventures
 
10
     
257,765
     
256,945
 
Derivative financial instruments
           
61
     
78
 
Investment property
           
29,133
     
28,566
 
Deferred income tax liability
           
75,347
     
76,406
 
Property, plant and equipment, net
 
11
     
470,554
     
459,900
 
Total non-current liabilities
           
2,048,851
     
1,875,448
 
Intangible assets, net
 
11
     
847,095
     
849,864
 
Total liabilities
           
4,940,465
     
4,716,362
 
Deferred income tax asset
           
425,436
     
424,343
                           
Total non-current assets
           
4,197,142
     
3,760,947
 
Equity
                       
                         
Capital
 
15
     
729,434
     
729,434
 
                         
Legal reserve
           
132,011
     
132,011
 
                         
Voluntary reserve
           
29,974
     
29,974
 
                         
Share Premium
           
992,144
     
992,144
 
                         
Other reserves
           
(170,620
)
   
(170,989
)
                         
Retained earnings
           
375,417
     
374,280
 
                         
Equity attributable to controlling interest in the Company
           
2,088,360
     
2,086,854
 
                         
Non-controlling interest
           
401,571
     
391,771
 
                         
Total equity
           
2,489,931
     
2,478,625
 
Total assets
           
7,430,396
     
7,194,987
 
Total liabilities and equity
           
7,430,396
     
7,194,987
 
                                                   
                                                   
                                                   
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements.

- 1 -

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
               
                 
                 
CONSOLIDATED STATEMENT OF INCOME
               
(All amounts are expressed in thousands of S/ unless otherwise stated)
               
                 
       
For the period
 
       
ended March 31,
 
 
Note
   
2018
   
2019
 
                 
                 
Revenues from construction activities
       
467,923
     
348,015
 
Revenues from services provided
       
208,385
     
243,016
 
Revenue from real estate and sale of goods
       
133,629
     
92,840
 
         
809,937
     
683,871
 
                     
Cost of construction activities
       
(479,724
)
   
(302,873
)
Cost of services provided
       
(105,500
)
   
(205,747
)
Cost of real estate and goods sold
       
(103,474
)
   
(70,952
)
 
16
     
(688,698
)
   
(579,572
)
Gross profit
           
121,239
     
104,299
 
                         
Administrative expenses
16
     
(58,131
)
   
(44,042
)
Other income and expenses
           
12,769
     
8,026
 
Operating profit
           
75,877
     
68,283
 
                         
Financial expenses
           
(61,546
)
   
(53,820
)
Financial income
           
1,979
     
21,829
 
Share of the profit or loss in associates and joint ventures
           
(2,038
)
   
(696
)
Profit before income tax
           
14,272
     
35,596
 
Income tax
17
     
(9,478
)
   
(23,911
)
Profit from continuing operations
           
4,794
     
11,685
 
                         
Loss from discontinued operations
20
     
(9,794
)
   
(6,364
)
(Loss) profit for the period
           
(5,000
)
   
5,321
 
                         
(Loss) profit attributable to:
                       
Owners of the Company
           
(14,178
)
   
(1,137
)
Non-controlling interest
           
9,178
     
6,458
 
             
(5,000
)
   
5,321
 
                         
Loss per share attributable to owners of the
                       
Company during the period
           
(0.021
)
   
(0.002
)
(Loss) earnings per share from continuing operations
                       
attributable to owners of the Company during the period
           
(0.004
)
   
0.011
 
                         
                         
                         
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements.
         

- 2 -

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
                 
                   
                   
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                 
(All amounts are expressed in thousands of S/ unless otherwise stated)
                 
                   
         
For the period
 
         
ended March 31,
 
   
Note
   
2018
   
2019
 
                   
                   
(Loss) profit for the period
   
     
(5,000
)
   
5,321
 
Other comprehensive income:
                       
                         
Items that may be subsequently  reclassified to profit or loss
                       
Cash flow hedge, net of tax
           
111
     
(12
)
Foreign currency translation adjustment, net of tax
           
15,201
     
(193
)
Exchange difference from net investment in a foreign operation, net of tax
           
1,498
     
41
 
             
16,810
     
(164
)
Other comprehensive income for the period, net of tax
           
16,810
     
(164
)
Total comprehensive income for the period
           
11,810
     
5,157
 
                         
Comprehensive income attributable to:
                       
Owners of  the Company
           
7,967
     
(1,506
)
Non-controlling interest
           
3,843
     
6,663
 
             
11,810
     
5,157
 
                         
Comprehensive income attributable to owners of the Company:
                       
Continuing operations
           
(1,298
)
   
(32,900
)
Discontinued operations
           
9,265
     
31,394
 
             
7,967
     
(1,506
)
                         
                         
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements.
                 

- 3 -

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
   
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 
FOR THE PERIOD ENDED MARCH 31, 2018 AND 2019
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
 

   
Attributable to the controlling interests of the Company
             
   
Number
                                                       
   
of shares
         
Legal
   
Voluntary
   
Share
   
Other
   
Retained
         
Non-controlling
       
   
In thousands
   
Capital
   
reserve
   
reserve
   
premium
   
reserves
   
earnings
   
Total
   
interest
   
Total
 
                                                             
                                                             
Balances as of January 1, 2018
   
660,054
     
660,054
     
132,011
     
29,974
     
881,795
     
(169,671
)
   
589,167
     
2,123,330
     
465,748
     
2,589,078
 
- IFRS adoption
   
-
     
-
     
-
     
-
     
-
     
-
     
(52,564
)
   
(52,564
)
   
(979
)
   
(53,543
)
Initial balances restated
   
660,054
     
660,054
     
132,011
     
29,974
     
881,795
     
(169,671
)
   
536,603
     
2,070,766
     
464,769
     
2,535,535
 
Profit for the period
   
-
     
-
     
-
     
-
     
-
     
-
     
(14,178
)
   
(14,178
)
   
9,178
     
(5,000
)
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
105
     
-
     
105
     
6
     
111
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
20,573
     
-
     
20,573
     
(5,372
)
   
15,201
 
Exchange difference from net investment in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
1,467
     
-
     
1,467
     
31
     
1,498
 
Comprehensive income of the period
   
-
     
-
     
-
     
-
     
-
     
22,145
     
(14,178
)
   
7,967
     
3,843
     
11,810
 
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(5,032
)
   
(5,032
)
- Contributions (devolution) of non-controlling shareholders, net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(31,001
)
   
(31,001
)
Total transactions with shareholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(36,033
)
   
(36,033
)
Balances as of March 31, 2018
   
660,054
     
660,054
     
132,011
     
29,974
     
881,795
     
(147,526
)
   
522,425
     
2,078,733
     
432,579
     
2,511,312
 
                                                                                 
Balances as of January 1, 2019
   
729,434
     
729,434
     
132,011
     
29,974
     
992,144
     
(170,620
)
   
375,417
     
2,088,360
     
401,571
     
2,489,931
 
Profit (loss) for the period
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,137
)
   
(1,137
)
   
6,458
     
5,321
 
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
(11
)
   
-
     
(11
)
   
(1
)
   
(12
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(398
)
   
-
     
(398
)
   
205
     
(193
)
Exchange difference from net investment in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
40
     
-
     
40
     
1
     
41
 
Comprehensive income of the period
   
-
     
-
     
-
     
-
     
-
     
(369
)
   
(1,137
)
   
(1,506
)
   
6,663
     
5,157
 
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,822
)
   
(1,822
)
- Contributions (devolution) of non-controlling shareholders, net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(14,641
)
   
(14,641
)
Total transactions with shareholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(16,463
)
   
(16,463
)
Balances as of March 31, 2019
   
729,434
     
729,434
     
132,011
     
29,974
     
992,144
     
(170,989
)
   
374,280
     
2,086,854
     
391,771
     
2,478,625
 
                                                                                 
                                                                                 
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements.
                                         

- 4 -

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
                 
(All amounts are expressed in thousands of S/ unless otherwise stated)
                 
                   
CONSOLIDATED STATEMENT OF CASH FLOWS
                 
                   
                   
         
For the period
 
         
ended March 31,
 
   
Note
   
2018
   
2019
 
                   
OPERATING ACTIVITIES
                 
Loss before income tax
   
     
4,478
     
29,232
 
Adjustments to  profit not affecting cash flows from
                       
operating activities:
                       
Depreciation
   
     
42,229
     
17,703
 
Amortization
           
23,123
     
24,476
 
Impairment of accounts receivable and other accounts receivable
           
110
     
102
 
Reversal of impairment of inventories
                   
(1,272
)
Impairment (reversal) of property, plant and equipment
           
-
     
(200
)
Tax provisions
           
-
     
34,205
 
Other Provisions
           
1,530
     
560
 
Financial expense,net
           
48,022
     
43,831
 
Foreign exchange loss (gain) on loans
           
(2,094
)
   
(18,744
)
Disposal of investments
           
-
     
130
 
Share of the profit and loss in associates and joint ventures
           
1,676
     
696
 
Reversal of provisions
           
(2,366
)
   
(1,538
)
Disposal of assets
           
719
     
224
 
(Profit) loss on sale of property, plant and equipment
           
(24,563
)
   
(733
)
(Profit) loss on sale from available-for-sale financial assets
           
1,478
     
-
 
Loss on remeasurement of accounts receivable
           
15,066
     
(11,847
)
Net variations in assets and liabilities:
                       
Trade accounts receivable and unbilled working in progress
           
(78,871
)
   
247,741
 
Other accounts receivable
           
(25,103
)
   
28,331
 
Other accounts receivable from related parties
           
16,698
     
(14,080
)
Inventories
           
(17,970
)
   
(34,241
)
Pre-paid expenses and other assets
           
(32,901
)
   
(22,764
)
Trade accounts payable
           
104,474
     
(86,699
)
Other accounts payable
           
(100,440
)
   
(52,931
)
Other accounts payable to related parties
           
42,679
     
35,848
 
Other provisions
           
(419
)
   
(155
)
Interest payment
           
(39,070
)
   
(43,316
)
Payments for purchases of intangibles - Concessions
           
(2,186
)
   
(2,746
)
Payment of income tax
           
(512
)
   
(22,413
)
Net cash provided by operating activities
           
(24,213
)
   
149,400
 
                         
INVESTING ACTIVITIES
                       
Sale of available-for-sale investment
           
(36,595
)
   
-
 
Sale of property, plant and equipment
           
37,963
     
3,807
 
Sale of non-current assets held for sale
           
18,865
     
-
 
Interest received
           
1,508
     
6,514
 
Payment for purchase of investments properties
           
(52
)
   
(13
)
Payments for intangible purchase
           
(32,604
)
   
(26,032
)
Payments for property, plant and equipment purchase
           
(22,433
)
   
(8,198
)
Net cash provided by investing activities
           
(33,348
)
   
(23,922
)
                         
FINANCING ACTIVITIES
                       
Loans received
           
308,588
     
163,791
 
Amortization of loans received
           
(225,717
)
   
(309,654
)
Amortization of bonds issued
           
(7,994
)
   
(7,203
)
Dividends paid to non-controlling interest
           
(5,032
)
   
(1,822
)
Cash received (return of contributions )from non-controlling shareholders
           
(5,612
)
   
(14,641
)
Net cash applied to financing activities
           
64,233
     
(169,529
)
Net increase (net decrease) in cash
           
6,672
     
(44,051
)
Exchange difference
           
(2,635
)
   
(2,591
)
Cash and cash equivalents at the beginning of the period
           
626,060
     
801,021
 
Cash and cash equivalents at the end of the period
 
8
     
630,097
     
754,379
 
                         
NON-CASH TRANSACTIONS:
                       
Capitalization of interests
           
-
     
1,855
 
Acquisition of assets through finance leases
           
-
     
1,583
 
                         
                         
The accompanying notes on pages 6 to 26 are an integral part of the consolidated financial statements.
         
- 5 -

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED AT MARCH 31, 2018 AND 2019 (UNAUDITED); AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2018 (AUDITED) AND AT MARCH 31, 2019 (UNAUDITED)



1.    
GENERAL INFORMATION

Graña y Montero S.A.A. (hereinafter the Company) was incorporated in Peru on August 12, 1996, as a result of the equity spin-off of Inversiones GyM S.A. (formerly Graña y Montero S.A.). The Company’s legal address is Av. Paseo de la Republica 4675, Surquillo Lima, Peru and is listed on the Lima Stock Exchange and the New York Stock Exchange (NYSE).

The Company is the parent of the Graña y Montero Group that includes the Company and its subsidiaries (hereinafter, the “Group”) and is mainly engaged in holding investments in different Group companies. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory, human resources management and leases office space to the Group companies.

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

These condensed interim consolidated financial statements as of March 31, 2019 were prepared and authorized for issuance by the Chief Financial Officer on April 30, 2019.

2.    
BASIS OF PREPARATION

These interim condensed consolidated unaudited financial statements for the period ended Marzo 31, 2019 have been prepared in accordance with IAS 34 "Consolidated interim financial information". The interim condensed consolidated financial statements provide comparative information regarding prior periods; however, they do not include all the information and disclosures required in the annual consolidated financial statements, so they must be read together with the audited consolidated financial statements for the year ended December 31, 2018, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").

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

3.    
SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements at December 31, 2018, except for the new international financial information regulations (IFRS) effective as of January 1, 2019, which the Group is in the process of adoption.
- 6 -

4.    
FINANCIAL RISK MANAGEMENT

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

4.1  
Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures in one of its subsidiaries and considers the use of other derivatives in the event that it identifies risks that may generate an adverse effect for the Group in the short and medium-term.

a)    Market risks

i.    Foreign Exchange risk

The Group is exposed to exchange rate risk as a result of the transactions carried out locally in foreign currency and due to its operations abroad. As of December 31, 2018 and March 31, 2019, and, this exposure is mainly concentrated in fluctuations of U.S. dollar, the Chilean and Colombian Pesos.

ii.   Price risk

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

iii.  Cash flow and fair value interest rate risk

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

b)   Credit risk

Credit risk arises from cash and cash equivalent and deposits with banks and financial institutions, as well as customer credit counterparties, including the outstanding balance of accounts receivable and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

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

c)    Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate number of sources of committed credit facilities and the capacity to close out positions in the market. Historically, the Group cash flows enabled it to maintain sufficient cash to meet its obligations. However, as of December 31, 2016, the Group started to experienced liquidity risk due to the early termination of the GSP concession agreement and the obligations assumed. As a consequence, the Group started a disinvestment plan to be able to meet the obligations resulting from this scenario. That has been fulfilled, managing to reduce these obligations in an important way.
- 7 -

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

Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable, external regulatory or legal requirements; for example, foreign currency restrictions.

Surplus cash held by the operating entities over the balance required for working capital management are invested in interest-bearing checking accounts or time deposits, selecting instruments with appropriate maturities and sufficient liquidity.

The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 
Less than
     
1-2
     
2-5
 
More than
     
At December 31, 2018
1 year
 
years
 
years
 
5 years
 
Total
 
                             
Other financial liabilities (except
                           
for finance leases)
   
816,122
     
273,079
     
129,233
     
41,577
     
1,260,011
 
Finance leases
   
15,151
     
7,489
     
14,094
     
-
     
36,734
 
Bonds
   
111,080
     
153,287
     
355,667
     
1,174,404
     
1,794,438
 
Trade accounts payables
   
1,079,531
     
-
     
-
     
-
     
1,079,531
 
Accounts payables to related
                                       
parties
   
55,941
     
21,849
     
-
     
-
     
77,790
 
Other accounts payables
   
116,806
     
17,777
     
338,627
     
-
     
473,210
 
Other non-financial liabilities
   
-
     
61
     
-
     
-
     
61
 
     
2,194,631
     
473,542
     
837,621
     
1,215,981
     
4,721,775
 
                                         
                                         
                                         
 
Less than
     
1-2
     
2-5
 
More than
         
At March 31, 2019
1 year
 
years
 
years
 
5 years
 
Total
 
                                         
Other financial liabilities (except
                                       
for finance leases)
   
689,798
     
248,560
     
113,739
     
35,526
     
1,087,623
 
Finance leases
   
14,718
     
6,529
     
13,018
     
-
     
34,265
 
Bonds
   
117,517
     
148,559
     
356,431
     
1,151,192
     
1,773,699
 
Trade accounts payables
   
992,832
     
-
     
-
     
-
     
992,832
 
Accounts payables to related
                                       
parties
   
68,283
     
45,314
     
-
     
-
     
113,597
 
Other accounts payables
   
191,062
     
4,336
     
337,178
     
-
     
532,576
 
Other non-financial liabilities
   
-
     
78
     
-
     
-
     
78
 
     
2,074,210
     
453,376
     
820,366
     
1,186,718
     
4,534,670
 

- 8 -

4.2  
Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital. From 2017 the situation of the Group, has lead Management to monitor deviations that might cause the non-compliance of covenants and may hinder renegotiation of liabilities (Note12).

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

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 ‘equity’ as shown in the consolidated statement of financial position plus net debt.

As of December 31, 2018 and March 31, 2019, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 0.70.

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2018
   
2019
 
Total financial liabilities and bonds
   
2,139,714
     
1,977,515
 
Less: Cash and cash equivalents
   
(801,140
)
   
(754,394
)
Net debt
   
1,338,574
     
1,223,121
 
Total equity
   
2,489,931
     
2,478,625
 
Total capital
   
3,828,505
     
3,701,746
 
                 
Gearing ratio
   
0.35
     
0.33
 

4.3  
Fair value estimation

For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.

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

The fair value of the 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.
- 9 -

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

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

In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended  December 31, 2018.

6.    
SEASONALITY OF OPERATIONS

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

7.    
SEGMENT INFORMATION

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

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

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

Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported 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. There is no external customer that represents 10% or more of the Goup’s revenue.

As of December 31, 2018 management considered not presenting the segment "IT services", due to the sale of the CAM Group in November 2018, which includes the companies CAM Chile S.A., Cam Servicios del Peru S.A. (CAM Group). In addition,Adexus S.A. was reclassified to non-current assets held for sale.

The table below shows the Group’s financial statements by operating segments:
- 10 -

Operating segments financial position
                                                     
Segment reporting
                                                     
                           
Infrastructure
                         
As of December 31, 2018
 
Engineering and
construction
   
Energy
   
Toll roads
   
Transportation
   
Water
treatment
   
Real estate
   
Parent
Company
operations
   
Eliminations
   
Consolidated
 
                                                       
Assets.-
                                                     
Cash and cash equivalent
   
177,455
     
34,816
     
168,460
     
191,178
     
6,700
     
93,262
     
129,269
     
-
     
801,140
 
Trade accounts receivables, net
   
583,842
     
54,350
     
78,013
     
226,919
     
598
     
63,038
     
1,068
     
-
     
1,007,828
 
Work in progress, net
   
24,962
     
-
     
-
     
-
     
-
     
-
     
3,576
     
-
     
28,538
 
Accounts receivable from related parties
   
203,583
     
492
     
40,820
     
758
     
9,930
     
60,759
     
98,308
     
(379,747
)
   
34,903
 
Other accounts receivable
   
386,467
     
37,611
     
28,492
     
31,012
     
199
     
55,508
     
49,160
     
2
     
588,451
 
Inventories, net
   
27,852
     
18,823
     
9,206
     
25,282
     
-
     
448,328
     
-
     
(15,444
)
   
514,047
 
Prepaid expenses
   
3,825
     
1,345
     
3,068
     
874
     
135
     
81
     
1,221
     
-
     
10,549
 
     
1,407,986
     
147,437
     
328,059
     
476,023
     
17,562
     
720,976
     
282,602
     
(395,189
)
   
2,985,456
 
Non-current assets classified as held for sale
   
-
     
-
     
-
     
-
     
-
     
-
     
247,798
     
-
     
247,798
 
Total current assets
   
1,407,986
     
147,437
     
328,059
     
476,023
     
17,562
     
720,976
     
530,400
     
(395,189
)
   
3,233,254
 
                                                                         
Long-term trade accounts receivable, net
   
14,455
     
-
     
33,380
     
966,202
     
-
     
6,030
     
-
     
-
     
1,020,067
 
Long-term work in progress, net
   
-
     
-
     
32,212
     
-
     
-
     
-
     
-
     
-
     
32,212
 
Long-term accounts receivable from related parties
   
254,660
     
-
     
39,341
     
-
     
-
     
-
     
744,655
     
(260,430
)
   
778,226
 
Prepaid expenses
   
-
     
-
     
28,214
     
5,152
     
840
     
-
     
-
     
(509
)
   
33,697
 
Other long-term accounts receivable
   
77,028
     
63,797
     
7,056
     
64,817
     
7,346
     
30,268
     
52,645
     
-
     
302,957
 
Investments in associates and joint ventures
   
114,676
     
7,230
     
-
     
-
     
-
     
5,604
     
2,213,023
     
(2,082,768
)
   
257,765
 
Investment property
   
-
     
-
     
-
     
-
     
-
     
29,133
     
-
     
-
     
29,133
 
Property, plant and equipment, net
   
205,678
     
171,430
     
14,585
     
1,586
     
109
     
9,237
     
69,088
     
(1,159
)
   
470,554
 
Intangible assets, net
   
160,088
     
183,614
     
466,153
     
749
     
-
     
1,105
     
23,514
     
11,872
     
847,095
 
Deferred income tax asset
   
166,624
     
5,025
     
11,875
     
-
     
621
     
17,127
     
218,201
     
5,963
     
425,436
 
Total non-current assets
   
993,209
     
431,096
     
632,816
     
1,038,506
     
8,916
     
98,504
     
3,321,126
     
(2,327,031
)
   
4,197,142
 
Total assets
   
2,401,195
     
578,533
     
960,875
     
1,514,529
     
26,478
     
819,480
     
3,851,526
     
(2,722,220
)
   
7,430,396
 
                                                                         
Liabilities.-
                                                                       
Borrowings
   
232,409
     
26,621
     
15,384
     
209,463
     
-
     
133,105
     
209,492
     
-
     
826,474
 
Bonds
   
-
     
-
     
25,745
     
13,422
     
-
     
-
     
-
     
-
     
39,167
 
Trade accounts payable
   
777,130
     
49,254
     
61,233
     
104,652
     
121
     
31,173
     
55,968
     
-
     
1,079,531
 
Accounts payable to related parties
   
179,351
     
1,933
     
46,099
     
65,256
     
58
     
35,085
     
91,754
     
(363,595
)
   
55,941
 
Current income tax
   
5,898
     
2,797
     
1,398
     
9,888
     
226
     
4,219
     
1,381
     
-
     
25,807
 
Other accounts payable
   
389,896
     
13,147
     
72,823
     
11,677
     
631
     
106,286
     
38,209
     
-
     
632,669
 
Provisions
   
521
     
5,412
     
-
     
-
     
-
     
264
     
-
     
-
     
6,197
 
Non-current liabilities classified as held for sale
   
-
     
-
     
-
     
-
     
-
     
-
     
225,828
     
-
     
225,828
 
Total current liabilities
   
1,585,205
     
99,164
     
222,682
     
414,358
     
1,036
     
310,132
     
622,632
     
(363,595
)
   
2,891,614
 
                                                                         
Borrowings
   
9,314
     
87,166
     
556
     
-
     
-
     
10,684
     
268,478
     
-
     
376,198
 
Long-term bonds
   
-
     
-
     
299,637
     
598,238
     
-
     
-
     
-
     
-
     
897,875
 
Other long-term accounts payable
   
357,146
     
-
     
31,477
     
154,756
     
1,656
     
26,470
     
2,605
     
-
     
574,110
 
Long-term accounts payable to related parties
   
8,880
     
-
     
1,167
     
81,207
     
23,445
     
-
     
183,826
     
(276,676
)
   
21,849
 
Provisions
   
32,122
     
20,234
     
-
     
-
     
-
     
-
     
51,055
     
-
     
103,411
 
Derivative financial instruments
   
-
     
61
     
-
     
-
     
-
     
-
     
-
     
-
     
61
 
Deferred income tax liability
   
5,564
     
24,541
     
7,010
     
37,178
     
-
     
-
     
1,054
     
-
     
75,347
 
Total non-current liabilities
   
413,026
     
132,002
     
339,847
     
871,379
     
25,101
     
37,154
     
507,018
     
(276,676
)
   
2,048,851
 
Total liabilities
   
1,998,231
     
231,166
     
562,529
     
1,285,737
     
26,137
     
347,286
     
1,129,650
     
(640,271
)
   
4,940,465
 
Equity attributable to controlling interest in the Company
   
331,178
     
323,943
     
332,403
     
171,594
     
341
     
193,483
     
2,708,803
     
(1,973,385
)
   
2,088,360
 
Non-controlling interest
   
71,786
     
23,424
     
65,943
     
57,198
     
-
     
278,711
     
13,073
     
(108,564
)
   
401,571
 
Total liabilities and equity
   
2,401,195
     
578,533
     
960,875
     
1,514,529
     
26,478
     
819,480
     
3,851,526
     
(2,722,220
)
   
7,430,396
 

- 11 -

Operating segments financial position
                                                     
Segment reporting
                                                     
                           
Infrastructure
                         
As of March 31, 2019
 
Engineering and
construction
   
Energy
   
Toll roads
   
Transportation
   
Water
treatment
   
Real estate
   
Parent
Company
operations
   
Eliminations
   
Consolidated
 
                                                       
Assets.-
                                                     
Cash and cash equivalent
   
257,929
     
36,149
     
135,054
     
192,870
     
6,358
     
90,566
     
35,468
     
-
     
754,394
 
Financial asset at fair value through profit or loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Trade accounts receivables, net
   
521,505
     
53,764
     
66,163
     
407,888
     
1,157
     
56,774
     
2,633
     
-
     
1,109,884
 
Work in progress, net
   
47,742
     
-
     
-
     
-
     
-
     
-
     
3,469
     
-
     
51,211
 
Accounts receivable from related parties
   
167,836
     
660
     
49,426
     
703
     
10,084
     
61,219
     
144,871
     
(386,492
)
   
48,307
 
Other accounts receivable
   
400,121
     
39,327
     
35,978
     
67,054
     
109
     
46,953
     
49,147
     
2
     
638,691
 
Inventories, net
   
34,909
     
22,187
     
10,677
     
25,377
     
-
     
473,018
     
-
     
(15,450
)
   
550,718
 
Prepaid expenses
   
9,198
     
1,836
     
2,798
     
7,193
     
46
     
47
     
131
     
-
     
21,249
 
     
1,439,240
     
153,923
     
300,096
     
701,085
     
17,754
     
728,577
     
235,719
     
(401,940
)
   
3,174,454
 
Non-current assets classified as held for sale
   
2,129
     
-
     
-
     
-
     
-
     
-
     
257,457
     
-
     
259,586
 
Total current assets
   
1,441,369
     
153,923
     
300,096
     
701,085
     
17,754
     
728,577
     
493,176
     
(401,940
)
   
3,434,040
 
                                                                         
Long-term trade accounts receivable, net
   
-
     
-
     
33,380
     
608,758
     
-
     
5,960
     
-
     
-
     
648,098
 
Long-term work in progress, net
   
-
     
-
     
32,447
     
-
     
-
     
-
     
-
     
-
     
32,447
 
Long-term accounts receivable from related parties
   
254,571
     
-
     
39,475
     
-
     
-
     
-
     
751,417
     
(254,173
)
   
791,290
 
Prepaid expenses
   
-
     
-
     
43,069
     
2,326
     
866
     
-
     
-
     
(510
)
   
45,751
 
Other long-term accounts receivable
   
79,301
     
63,460
     
6,521
     
189
     
7,346
     
30,257
     
36,669
     
-
     
223,743
 
Investments in associates and joint ventures
   
112,872
     
7,810
     
-
     
-
     
-
     
5,604
     
2,228,861
     
(2,098,202
)
   
256,945
 
Investment property
   
-
     
-
     
-
     
-
     
-
     
28,566
     
-
     
-
     
28,566
 
Property, plant and equipment, net
   
197,691
     
170,610
     
13,420
     
858
     
163
     
10,262
     
68,055
     
(1,159
)
   
459,900
 
Intangible assets, net
   
159,456
     
198,612
     
457,520
     
829
     
-
     
1,066
     
23,527
     
8,854
     
849,864
 
Deferred income tax asset
   
172,837
     
5,063
     
12,992
     
-
     
574
     
18,650
     
207,613
     
6,614
     
424,343
 
Total non-current assets
   
976,728
     
445,555
     
638,824
     
612,960
     
8,949
     
100,365
     
3,316,142
     
(2,338,576
)
   
3,760,947
 
Total assets
   
2,418,097
     
599,478
     
938,920
     
1,314,045
     
26,703
     
828,942
     
3,809,318
     
(2,740,516
)
   
7,194,987
 
                                                                         
Liabilities.-
                                                                       
Borrowings
   
242,055
     
26,331
     
1,284
     
145,029
     
-
     
132,677
     
152,592
     
-
     
699,968
 
Bonds
   
-
     
-
     
32,282
     
13,465
     
-
     
-
     
-
     
-
     
45,747
 
Trade accounts payable
   
737,458
     
62,289
     
50,475
     
67,777
     
216
     
36,269
     
38,348
     
-
     
992,832
 
Accounts payable to related parties
   
204,080
     
933
     
59,763
     
60,461
     
49
     
34,817
     
94,671
     
(386,491
)
   
68,283
 
Current income tax
   
4,448
     
3,750
     
761
     
11,354
     
168
     
4,063
     
609
     
-
     
25,153
 
Other accounts payable
   
415,282
     
15,259
     
72,101
     
54,813
     
714
     
133,367
     
68,879
     
2
     
760,417
 
Provisions
   
521
     
5,582
     
-
     
-
     
-
     
260
     
-
     
-
     
6,363
 
Non-current liabilities classified as held for sale
   
-
     
-
     
-
     
-
     
-
     
-
     
242,151
     
-
     
242,151
 
Total current liabilities
   
1,603,844
     
114,144
     
216,666
     
352,899
     
1,147
     
341,453
     
597,250
     
(386,489
)
   
2,840,914
 
                                                                         
Borrowings
   
8,285
     
80,490
     
309
     
-
     
-
     
8,975
     
245,291
     
-
     
343,350
 
Long-term bonds
   
-
     
-
     
288,661
     
599,789
     
-
     
-
     
-
     
-
     
888,450
 
Other long-term accounts payable
   
360,800
     
-
     
27,781
     
319
     
1,693
     
25,527
     
2,643
     
-
     
418,763
 
Long-term accounts payable to related parties
   
9,039
     
-
     
1,066
     
82,222
     
23,784
     
-
     
183,377
     
(254,174
)
   
45,314
 
Provisions
   
31,599
     
19,091
     
-
     
-
     
-
     
-
     
52,397
     
-
     
103,087
 
Derivative financial instruments
   
-
     
78
     
-
     
-
     
-
     
-
     
-
     
-
     
78
 
Deferred income tax liability
   
4,188
     
27,344
     
5,855
     
37,957
     
-
     
-
     
1,062
     
-
     
76,406
 
Total non-current liabilities
   
413,911
     
127,003
     
323,672
     
720,287
     
25,477
     
34,502
     
484,770
     
(254,174
)
   
1,875,448
 
Total liabilities
   
2,017,755
     
241,147
     
540,338
     
1,073,186
     
26,624
     
375,955
     
1,082,020
     
(640,663
)
   
4,716,362
 
Equity attributable to controlling interest in the Company
   
327,165
     
333,759
     
332,667
     
180,644
     
79
     
190,885
     
2,714,260
     
(1,992,605
)
   
2,086,854
 
Non-controlling interest
   
73,177
     
24,572
     
65,915
     
60,215
     
-
     
262,102
     
13,038
     
(107,248
)
   
391,771
 
Total liabilities and equity
   
2,418,097
     
599,478
     
938,920
     
1,314,045
     
26,703
     
828,942
     
3,809,318
     
(2,740,516
)
   
7,194,987
 

- 12 -

Operating segment performance
                                                     
Segment Reporting
                                                     
                           
Infrastructure
                         
For the three-month period ended March 31, 2018 -
 
Engineering and
construction
   
Energy
   
Toll roads
   
Transportation
   
Water
treatment
   
Real estate
   
Parent
Company
operations
   
Eliminations
   
Consolidated
 
                                                       
Revenue
   
437,625
     
124,596
     
148,501
     
151,168
     
806
     
71,372
     
26,069
     
(150,200
)
   
809,937
 
Gross profit
   
26,364
     
29,312
     
27,392
     
25,918
     
119
     
12,287
     
4,506
     
(4,659
)
   
121,239
 
Administrative expenses
   
(31,191
)
   
(4,285
)
   
(7,752
)
   
(2,416
)
   
(66
)
   
(4,113
)
   
(18,349
)
   
10,041
     
(58,131
)
Other income and expenses, net
   
11,525
     
1,027
     
(47
)
   
523
     
-
     
(181
)
   
(111
)
   
33
     
12,769
 
Operating profit
   
6,698
     
26,054
     
19,593
     
24,025
     
53
     
7,993
     
(13,954
)
   
5,415
     
75,877
 
Financial expenses
   
(16,707
)
   
(3,169
)
   
(6,600
)
   
(1,221
)
   
-
     
(5,830
)
   
(33,183
)
   
5,164
     
(61,546
)
Financial income
   
3,060
     
186
     
624
     
907
     
14
     
1,217
     
6,785
     
(10,814
)
   
1,979
 
Dividends
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Share of profit or loss in associates
                                                                       
and joint ventures
   
(2,977
)
   
401
     
-
     
-
     
-
     
-
     
12,827
     
(12,289
)
   
(2,038
)
(Loss) profit before income tax
   
(9,926
)
   
23,472
     
13,617
     
23,711
     
67
     
3,380
     
(27,525
)
   
(12,524
)
   
14,272
 
Income tax
   
(3,873
)
   
(6,780
)
   
(4,121
)
   
(7,139
)
   
(98
)
   
(974
)
   
12,700
     
807
     
(9,478
)
(Loss) profit from continuing operations
   
(13,799
)
   
16,692
     
9,496
     
16,572
     
(31
)
   
2,406
     
(14,825
)
   
(11,717
)
   
4,794
 
Loss from discontinuing operations
   
8,232
     
-
     
-
     
-
     
-
     
-
     
(18,722
)
   
696
     
(9,794
)
(Loss) profit for the period
   
(5,567
)
   
16,692
     
9,496
     
16,572
     
(31
)
   
2,406
     
(33,547
)
   
(11,021
)
   
(5,000
)
                                                                         
(Loss) profit from attributable to:
                                                                       
Owners of the Company
   
(6,667
)
   
15,351
     
7,745
     
12,429
     
(31
)
   
(1,803
)
   
(29,124
)
   
(12,078
)
   
(14,178
)
Non-controlling interest
   
1,100
     
1,341
     
1,751
     
4,143
     
-
     
4,209
     
(4,423
)
   
1,057
     
9,178
 
     
(5,567
)
   
16,692
     
9,496
     
16,572
     
(31
)
   
2,406
     
(33,547
)
   
(11,021
)
   
(5,000
)

- 13 -

Operating segment performance
                                                     
Segment Reporting
                                                     
                           
Infrastructure
                         
For the three-month period ended March 31, 2019 -
 
Engineering and
construction
   
Energy
   
Toll roads
   
Transportation
   
Water
treatment
   
Real estate
   
Parent
Company
operations
   
Eliminations
   
Consolidated
 
                                                       
Revenue
   
382,708
     
127,106
     
144,727
     
106,239
     
885
     
25,436
     
22,762
     
(125,992
)
   
683,871
 
Gross profit
   
42,065
     
26,888
     
22,801
     
21,094
     
236
     
3,465
     
2,034
     
(14,284
)
   
104,299
 
Administrative expenses
   
(33,571
)
   
(5,861
)
   
(7,979
)
   
(4,490
)
   
(138
)
   
(5,104
)
   
(5,098
)
   
18,199
     
(44,042
)
Other income and expenses, net
   
385
     
1,504
     
50
     
-
     
2
     
(503
)
   
6,762
     
(174
)
   
8,026
 
Gain from sale of investments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Operating profit
   
8,879
     
22,531
     
14,872
     
16,604
     
100
     
(2,142
)
   
3,698
     
3,741
     
68,283
 
Financial expenses
   
(13,562
)
   
(3,189
)
   
(7,597
)
   
(5,821
)
   
(2
)
   
(4,832
)
   
(22,254
)
   
3,437
     
(53,820
)
Financial income
   
2,745
     
417
     
680
     
6,504
     
178
     
938
     
17,762
     
(7,395
)
   
21,829
 
Dividends
   
-
     
-
     
-
     
-
     
-
     
-
     
2,440
     
(2,440
)
   
-
 
Share of profit or loss in associates
                                                                       
and joint ventures
   
(1,677
)
   
580
     
-
     
-
     
-
     
-
     
18,779
     
(18,378
)
   
(696
)
(Loss) profit before income tax
   
(3,615
)
   
20,339
     
7,955
     
17,287
     
276
     
(6,036
)
   
20,425
     
(21,035
)
   
35,596
 
Income tax
   
(262
)
   
(5,924
)
   
(2,752
)
   
(5,236
)
   
(197
)
   
1,470
     
(11,020
)
   
10
     
(23,911
)
(Loss) profit from continuing operations
   
(3,877
)
   
14,415
     
5,203
     
12,051
     
79
     
(4,566
)
   
9,405
     
(21,025
)
   
11,685
 
Loss from discontinuing operations
   
-
     
-
     
-
     
-
     
-
     
-
     
(6,338
)
   
(26
)
   
(6,364
)
(Loss) profit for the period
   
(3,877
)
   
14,415
     
5,203
     
12,051
     
79
     
(4,566
)
   
3,067
     
(21,051
)
   
5,321
 
                                                                         
(Loss) profit from attributable to:
                                                                       
Owners of the Company
   
(5,070
)
   
13,094
     
3,610
     
9,038
     
79
     
(2,598
)
   
3,102
     
(22,392
)
   
(1,137
)
Non-controlling interest
   
1,193
     
1,321
     
1,593
     
3,013
     
-
     
(1,968
)
   
(35
)
   
1,341
     
6,458
 
     
(3,877
)
   
14,415
     
5,203
     
12,051
     
79
     
(4,566
)
   
3,067
     
(21,051
)
   
5,321
 

- 14 -
No major changes occurred in total assets as compared to the amount stated in previous year-end financial statements.

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

8.    
CASH AND CASH EQUIVALENTS

This account comprises:

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2018
   
2019
 
Cash on hand
   
1,377
     
1,503
 
Cash in-transit
   
3,566
     
5,786
 
Bank accounts
   
647,832
     
713,282
 
Time deposits
   
148,365
     
33,823
 
     
801,140
     
754,394
 

Reconciliation to the statement of cash flow

The above figures reconcile to the amount of cash shown in the statement of cash flows as follows:.

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2018
   
2019
 
             
Cash and cash equivalent on Consolidated statement of
           
financial position
   
801,140
     
754,394
 
Bank overdrafts (Note 12)
   
(119
)
   
(15
)
Balances per Consolidated statement of cash flows
   
801,021
     
754,379
 

9.    
TRANSACTIONS WITH RELATED PARTIES

a) Transactions with related parties

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

         
At March 31,
 
   
2018
   
2019
 
Revenue from sales of goods and services:
           
- Associates
   
70
     
84
 
- Joint operations
   
8,313
     
8,194
 
     
8,383
     
8,278
 

- 15 -

Inter-company services were agreed based on market terms as if they had been agreed to third parties.







b) Balances of transactions with related parties

         
At December 31,
         
At March 31,
 
         
2018
         
2019
 
   
Receivable
   
Payable
   
Receivable
   
Payable
 
Current portion:
                       
Joint operations
                       
Consorcio Rio Urubamba
   
9,122
     
-
     
9,047
     
-
 
Consorcio Peruano de Conservacion
   
6,417
     
-
     
3,004
     
-
 
Consorcio Italo Peruano
   
3,322
     
4,996
     
1,688
     
16,654
 
Consorcio Constructor Chavimochic
   
2,138
     
6,199
     
2,102
     
5,833
 
Consorcio GyM Conciviles
   
1,855
     
-
     
24,036
     
-
 
Consorcio La Gloria
   
1,369
     
1,006
     
1,373
     
1,361
 
Consorcio Ermitaño
   
781
     
624
     
854
     
356
 
Terminales del Peru
   
459
     
-
     
467
     
-
 
Consorcio TNT Vial y Vives - DSD Chile Ltda
   
-
     
11,804
     
-
     
3,100
 
Consorcio Rio Mantaro
   
-
     
6,655
     
1,832
     
16,620
 
Consorcio Vial Quinua
   
-
     
1,970
     
-
     
2,130
 
Consorcio Huacho Pativilca
   
-
     
475
     
-
     
3,071
 
Other minors
   
9,215
     
11,323
     
3,442
     
5,868
 
     
34,678
     
45,052
     
47,845
     
54,993
 
                                 
Other related parties
                               
Ferrovias Argentina
   
-
     
10,242
     
-
     
12,942
 
Peru Piping Spools S.A.C.
   
225
     
-
     
424
     
348
 
Other minors
   
-
     
647
     
-
     
-
 
     
225
     
10,889
     
424
     
13,290
 
Current portion
   
34,903
     
55,941
     
48,269
     
68,283
 
                                 
Non-current portion:
                               
Gasoducto Sur Peruano S.A
   
773,927
     
-
     
778,736
     
-
 
Ferrovias Participaciones
   
-
     
21,849
     
-
     
34,599
 
Consorcio Constructor Chavimochic
   
-
     
-
     
2,136
     
-
 
Other minors
   
4,299
     
-
     
10,418
     
10,715
 
Non-current
   
778,226
     
21,849
     
791,290
     
45,314
 


- 16 -


Receivables and payables are mainly current and do not have specific guarantees, except for the receivable account from GSP. Accounts receivable from related parties have maturity periods of 60 days and are related to sales of goods and services. These balances are non-interest-bearing, and during 2019 do not require a provision for impairment.

Accounts payable to related parties mainly related to 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.





- 17 -

10.  
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The movement of our investments in associates for the period ended March 31, 2018 and 2019 is as follows:

         
At March 31,
 
   
2018
   
2019
 
             
Beginning balance
   
268,671
     
257,766
 
Equity interest in results
   
(2,038
)
   
(696
)
Decrease in capital
   
(289
)
   
-
 
Write-off of investment
   
-
     
(130
)
Translation adjustments
   
(901
)
   
5
 
Discontinued operations
   
362
     
-
 
Ending balance
   
265,805
     
256,945
 

In June 2018, the subsidiary Viva GyM S.A. signed a partnership agreement with the company OBRATRES S.A.C, percentage of interest 37.5%, to develop a real estate project located at Calle Tacna 544 in Barranco, the project will consist of 31 departments, 52 parking lots and 24 warehouses.

11.  
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

For the period ended December 31, 2018 and March 31, 2019, the movement in property, plant and equipment and intangible assets accounts was as follows:

- 18 -


   
Property,
       
   
plant and
   
Intangibles
 
   
equipment
   
assets
 
             
Net cost at January 1, 2018
   
865,735
     
940,070
 
                 
Additions
   
22,433
     
36,002
 
Subsidiary deconsolidation
   
(13,100
)
   
-
 
Transfers, disposals and adjustments
   
6,715
     
6,844
 
Deductions for sale of assets
   
(13,400
)
   
-
 
Depreciation, amortization
   
(41,651
)
   
(23,123
)
                 
Net cost at March 31, 2018
   
826,732
     
959,793
 
                 
Net cost at January 1, 2019
   
470,554
     
847,095
 
                 
Additions
   
9,781
     
29,475
 
Transfers, disposals and adjustments
   
(238
)
   
(2,230
)
Deductions for sale of assets
   
(3,074
)
   
-
 
Depreciation, amortization
   
(17,123
)
   
(24,476
)
                 
Net cost at March 31, 2019
   
459,900
     
849,864
 



a) Property, plant and equipment

As of December 31, 2018 and March 31, 2019, additions to property, plant and equipment comprise acquisition of machinery and equipment required for Group’s operations.

Depreciation of fixed assets and investment properties for the period is broken down in the statement of income as follows:

         
At March 31,
 
   
2018
   
2019
 
             
Cost of services and goods (Note 16)
   
25,716
     
16,882
 
Administrative expenses (Note 16)
   
1,045
     
821
 
(+) Depreciation discontinued operation
   
15,468
     
-
 
Total depreciation related to property, plant and equipment and investment property
   
42,229
     
17,703
 
(-) Depreciation of investment property
   
(578
)
   
(580
)
Total depreciation of property, plant and equipment
   
41,651
     
17,123
 

- 19 -

b) Intangible assets

As of December 31, 2018 and March 31, 2019, additions registered in intangible assets mainly comprise of investments in preparation of wells located in Lots I, III, IV and V to provide oil and hydrocarbon explotation services and in building  the second Ancón-Huacho-Pativilca road section of the Panamericana Norte highway (concession under intangible model).

Amortization of intangibles is broken down in the statement of income as follows:

         
At March 31,
 
   
2018
   
2019
 
             
Cost of services and goods (Note 16)
   
17,374
     
22,757
 
Administrative expenses (Note 16)
   
1,090
     
1,719
 
(+) Amortization discontinued operations
   
4,659
     
-
 
     
23,123
     
24,476
 

i) Goodwill

Management reviews the results of its businesses based on the type of economic activity carried out.

Goodwill allocated to cash-generating units are:

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2018
   
2019
 
             
Engineering and construction
   
71,621
     
72,053
 
Electromechanical
   
20,737
     
20,737
 
IT equipment and services
   
930
     
930
 
     
93,288
     
93,720
 

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 the higher of its value in use and fair value less cost of disposal.  Value in use is determined based on the future cash flows expected to be generated by the assessed CGU.

As of March 31, 2019 same criteria used  as those applied in the impairment test at December 31, 2018 that concluded there was no impairment in the CGU.

12.  
BORROWINGS

This item comprises:
- 20 -

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2018
   
2019
   
2018
   
2019
   
2018
   
2019
 
                                     
Bank overdrafts (Note 8)
   
119
     
15
     
119
     
15
     
-
     
-
 
Bank loans
   
1,023,481
     
868,574
     
810,188
     
683,880
     
213,293
     
184,694
 
Finance leases
   
33,488
     
31,356
     
13,514
     
13,178
     
19,974
     
18,178
 
Other financial entities
   
145,584
     
143,373
     
2,653
     
2,895
     
142,931
     
140,478
 
     
1,202,672
     
1,043,318
     
826,474
     
699,968
     
376,198
     
343,350
 

a)  Bank loans

As of December 31, 2018 and March 31, 2019, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.6% and 15.8% in 2018 and between 1.6% and 12% in 2019.

                     
Current
         
Non-current
 
               
At
   
At
   
At
   
At
 
   
Interest
   
Date of
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
rate
   
maturity
   
2018
   
2019
   
2018
   
2019
 
                                     
GyM S.A.
 
1.63% / 8.91 %

   
2019 / 2020
     
227,770
     
238,038
(iii)
   
-
     
-
 
Graña y Montero S.A.A.
 
Libor USD 3M + from 4.9% to 5.5%
     
2018 / 2020
     
206,836
     
149,682
(ii)
   
125,547
     
104,813
(i)
GyM Ferrovías
 
Libor USD 1M + to 2%
     
2019
     
209,463
     
145,029
     
-
     
-
 
Viva GyM S.A.
 
7.00% / 12.00 %

   
2018 / 2020
     
129,617
     
128,938
     
2,102
     
-
 
GMP S.A.
 
4.55% / 6.04 %

   
2018 / 2020
     
22,587
     
22,193
     
85,644
     
79,881
 
CONCAR S.A.
 
15.75 %

   
2019
     
13,915
     
-
     
-
     
-
 
                     
810,188
     
683,880
     
213,293
     
184,694
 

i) Credit Suisse Syndicated Loan

In December 2015, the Group entered into a US$200 million (equivalent to S/672 million) medium-term agreement with Credit Suisse AG, Cayman Islands Branch and Credit Suisse Securities (USA) LLC.  The loan term is five years, with quarterly installments starting on the 18th month. The loan bears interest at a rate of three months Libor plus 4.9% per year. The funds were used to finance the equity participation in GSP.   On June 27, 2017, the Company renegotiated the terms of this loan to correct defaults related to the cancellation of the GSP concession.

As of March 31, 2019, the outstanding balance of the loan capital is US$31.4 million (equivalent to S/104.5 million, approx.). The Company is in compliance with its obligations to do and not to do under the credit agreement.

- 21 -

ii) GSP Bridge Loan

At December 31, 2016, the current balance of bank loans included US$129 million (equivalent to S/433.3 million) of the corporate guarantee issued by the Company to guarantee the bridge loan granted to GSP, which was due as of December 31, 2016.  However, on June, 2017, the Company reached a refinancing agreement with Natixis, BBVA, SMBC and MUFJ for US$78.7 million (equivalent to S/256.3 million), this amount was used to repay the GSP bridge loan.  The new loan matures in June, 2020, with prepayments coming from the sale of asset sales for 40% in the first year and an additional 30% in the second year.

As of March 31, 2019, the principal balance of the loan capital is US$47.3 million (equivalent to S/156.9 million, approx.). The Company is in compliance with its obligations to do and not to do under the credit agreement.

iii) Financial Stability Framework Agreement

On July 31, 2017, the Company and its subsidiaries, GyM S.A., Construyendo Pais S.A., Vial y Vives-DSD S.A. and Concesionaria Vía Expresa Sur S.A., entered into a Financial Stability Framework Agreement (together with certain complementary contracts, the “Framework Agreement”) with the following financial entities: Scotiabank Perú S.A., Banco Internacional del Perú S.A.A., BBVA Banco Continental, Banco de Crédito del Perú, Citibank del Peru SA and Citibank N.A. The Framework Agreement aims to: (i) grant GyM a syndicated revolving line of credit for working capital for up to US$1.6 million and S/143.9 million, which may be increased by an additional US$14 million subject to certain conditions; (ii) grant GyM S.A. a line of credit of up to US$51.6 million and S/33.6 million; (iii) grant the Company, GyM S.A., Construyendo Pais S.A., Vial y Vives - DSD S.A. and Concesionaria Vía Expresa Sur S.A. a non-revolving line of credit to finance reimbursement obligations under performance bonds; (iv) grant a syndicated line of credit in favor of Graña y Montero S.A.A. and GyM S.A. for the issuance of performance bonds up to an amount of US$100 million (which may be increased by an additional US$50 million subject to compliance with certain conditions); and (v) to commit to maintain existing standby letters of credit issued at the request of GyM S.A. and the Company, as well as the request of Construyendo Pais S.A., Vial y Vives – DSD and Concesionaria Vía Expresa Sur S.A. In April of 2018, the Group repaid US$72.7 million (equivalent to S/245.8 million) of the facility with the proceeds of the sale of Stracon GyM S.A., and in July of 2018, an additional of US$15.4 million (equivalent to S/52.1 million). As of March 31, 2019, and the date of this report, there was US$59.4 million (equivalent to S/197.4 million) outstanding under this agreement.

As of March 31, 2019 and as of the date hereof, our construction subsidiary GyM is under a continuing default under the Financial Stability Framework Agreement with respect to its failure to comply with certain ratios between Tranche A (client invoices (facturas)) and Tranche B (project valuations (valorizaciones)). No event of default has been formally noticed to GyM by the lenders, and our subsidiary has requested a waiver from the lenders, which is pending. If duly noticed to GyM by the lenders, the consequence of this default would be to transfer certain amounts due under Tranche B to Tranche A, for which payment is not due until July 2019. As of March 31, 2019, there was US$43.7 million (S/145.3 million) outstanding under Tranche A and US$15.7 million (S/.52.1 million) outstanding under Tranche B of the facility, for a total of US$59.4 million (equivalent to S/197.4 million).

- 22 -

b) Other financial entities

Securitization of Norvial flows

At May 29, 2018 the Company subscribes an agreement between the Company and Inversiones Concesiones Vial S.A.C. ("BCI Peru") -whith the intervention of Fondo de Inversiones BCI NV (“Fondo BCI”) and BCI Management Administradora General de Fondos S.A. (“BCI” Asset Management”) -  to monetize future dividends from Norvial S.A. to the Company. This operation has as a finality to reduce the indebtness of the Company.The amount of the transaction was US$42.3 millions and ended on June 11, 2018.

Likewise, it has been agreed that our company will have purchase options on 48.8% of Norvial's economic rights that BCI Peru will maintain through its participation in Inversiones en Autopistas S.A.. These options will be subject to certain conditions such as the expiration of different terms, recovery of the investment made with the funds of the BCI Fund (according to different economic calculations) and/or that a change of control occurs.

c) Fair value of borrowings

The carrying amount and fair value of borrowings are broken down as follows:

         
Carrying amount
         
Fair value
 
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2018
   
2019
   
2018
   
2019
 
                         
Bank overdrafts (Note 8)
   
119
     
15
     
119
     
15
 
Bank loans
   
1,023,481
     
868,574
     
1,152,885
     
1,214,724
 
Finance leases
   
33,488
     
31,356
     
38,399
     
30,795
 
Other financial entities
   
145,584
     
143,373
     
145,584
     
143,373
 
     
1,202,672
     
1,043,318
     
1,336,987
     
1,388,908
 

As of March 31, 2019, the fair value is based on cash flows discounted using a rate based on the borrowing rate of 3.8% and 8.9% (2.4% and 8.9%  in 2018) and are included as Level 2 in the level of measurement.

13.  
BONDS

This item is broken down as follows:

- 23 -

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2018
   
2019
   
2018
   
2019
   
2018
   
2019
 
                                     
GyM Ferrovías
   
611,660
     
613,254
     
13,422
     
13,465
     
598,238
     
599,789
 
Norvial
   
325,382
     
320,943
     
25,745
     
32,282
     
299,637
     
288,661
 
     
937,042
     
934,197
     
39,167
     
45,747
     
897,875
     
888,450
 


a) GyM Ferrovías S.A.

In February 2015, the subsidiary GyM Ferrovías S.A. made an international issue of corporate bonds under Regulation S. The issue was made in soles VAC (adjusted for the Constant Update Value) for an amount of S/629 million. The bonds mature in November 2039 and earn interest at a rate of 4.75% (plus the VAC adjustment), present a risk rating of AA + (local scale) granted by Apoyo & Asociados Internacionales Clasico de Riesgo. As of March 31, 2019, an amortization has been made up to S/70.5 million (S/67.7 million as of December 31, 2018).

As of March 31, 2019, the balance includes accrued interest payable and VAC adjustments for S/73.7 million (S/72.0 million as of December 31, 2018).

At March 31, 2018 and 2019 the account movement  was as follows:

   
2018
   
2019
 
             
Balance at January, 1
   
603,657
     
611,660
 
Amortization
   
(2,521
)
   
(2,807
)
Accrued interest
   
11,851
     
11,906
 
Interest paid
   
(7,464
)
   
(7,505
)
Balance at March, 31
   
605,523
     
613,254
 

As part of the structuring process of the bond, GyM Ferrovías S.A. committed to report and verify compliance with the following, measured based on their individual financial statements (covenants):

- 
Debt service coverage ratio not less than 1.2 times.
- 
Maintain a constant balance in the minimum trust equal to one quarter of operation and maintenance costs (including the IGV).
- 
Maintain a constant balance in the minimum trust equal to the following two coupons according to the bond schedule.

- 24 -

On August 23, 2017, GyM Ferrovías S.A. and Line One CPAO Purchaser LLC subscribed the contract for the sale and assignment of collection rights of the "Annual Payment for Complementary Investment (Complementary PAO)" derived from the Concession Contract up to an amount equivalent to US$316 million.

On August 23, 2017, GyM Ferrovías S.A. as Borrower, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation as Lenders and Mizuho Bank, Ltd. as Administrative Agent signed a loan contract for Working Capital for an amount equivalent to US$80 million to partially finance the Expansion Project of the Line 1 of the Lima Metro. As of March 31, 2019, US$97.9 million (equivalent S/325.3 million) has been disbursed.
.
b) Norvial S.A.

Between 2015 and 2016, the subsidiary Norvial S.A. issued the First Corporate Bond Program on the Lima Stock Exchange for a total S/365 million. Risk rating agencies Equilibrium y Apoyo & Asociados Internacionales graded this debt instrument AA.

The capital raised was used to finance the construction of the Second Phase of Red Vial No.5 and the financing of VAT arising from a project-related expenses.

At March 31, 2018 and 2019 the account movement  was as follows:

   
2018
   
2019
 
             
Balance at January, 1
   
343,910
     
325,382
 
Amortization
   
(5,524
)
   
(4,396
)
Accrued interest
   
5,775
     
5,899
 
Capitalized interest
   
1,212
     
697
 
Interest paid
   
(7,045
)
   
(6,639
)
Balance at March, 31
   
338,328
     
320,943
 

As part of the process of bond structuring, Norvial S.A. 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.

The fair value of both obligations as of March 31, 2019 amounts to S/1,036 million (as of December 31, 2018 amounts to S/1,037 million), is based on discounted cash flows using rates between 4.32% and 6.93% (between 4.09% and 5.45% as of December 31, 2018) and is within level 2 of the fair value hierarchy.

- 25 -

As of December 31, 2018 and March 31, 2019, the Company has complied with the covenants of both types of bonds.

14.  
PROVISIONS

The gross movement of this item is as follows:

         
Contingent
             
         
liabilities
   
Provision
       
   
Legal
   
resulting from
   
for well
       
   
contingencies
   
acquisitions
   
closure
   
Total
 
                         
At January 1, 2018
   
23,364
     
7,249
     
16,804
     
47,417
 
Additions
   
1,369
     
161
     
-
     
1,530
 
Reversals of provisions
   
(1,928
)
   
(438
)
   
(554
)
   
(2,920
)
Payments
   
(117
)
   
(302
)
   
-
     
(419
)
Translation adjustments
   
52
     
387
     
-
     
439
 
At March 31, 2018
   
22,740
     
7,057
     
16,250
     
46,047
 
                                 
At January 1, 2019
   
84,728
     
4,498
     
20,382
     
109,608
 
Additions
   
2,645
     
-
     
-
     
2,645
 
Reversals of provisions
   
(1,077
)
   
(461
)
   
(1,147
)
   
(2,685
)
Payments
   
(155
)
   
-
     
-
     
(155
)
Translation adjustments
   
10
     
27
     
-
     
37
 
At March 31, 2019
   
86,151
     
4,064
     
19,235
     
109,450
 

As of March 31, 2019, the Group registered the present value of the estimated provision of S/75.6 million (S/73.5 million as of December 31, 2018), corresponding to the legal contingency estimated by management for the Company's and Subsidiaries exposure to a possible compensation in relation to their participation as minority partner in certain entities that developed six infrastructure projects in Peru with companies belonging to the Odebrecht group.

15.  
CAPITAL

As of December 31, 2018 and March 31, 2019, the capital of the Company is represented by 729,434,192 shares of a nominal value of S/1.00 each, of which 660,053,790 are registered in the Public Registries and 69,380,402 are in the process of formalization registration.

At March 31, 2019, a total of 207,667,205 shares were represented in ADS, equivalent to 41,533,441 ADSs at a rate of 5 shares per ADS; and a total of 207,931,660 shares were represented by ADS equivalent to 41,586,332 ADSs as of December 31, 2018.

- 26 -

16.  
EXPENSES BY NATURE

For the period ended March 31, 2018 and 2019, this item comprises:

   
Cost of
       
   
goods and
   
Administrative
 
   
services
   
expenses
 
At March 31, 2018
           
Salaries, wages and fringe benefits
   
243,824
     
25,704
 
Services provided by third-parties
   
239,090
     
21,597
 
Purchase of goods
   
121,768
     
-
 
Other management charges
   
40,594
     
8,492
 
Depreciation
   
25,716
     
1,045
 
Amortization
   
17,374
     
1,090
 
Taxes
   
225
     
200
 
Impairment of accounts receivable
   
107
     
3
 
Total report reclassified
   
688,698
     
58,131
 
                 
                 
At March 31, 2019
               
Salaries, wages and fringe benefits
   
162,892
     
28,026
 
Services provided by third-parties
   
213,398
     
5,222
 
Purchase of goods
   
98,555
     
-
 
Other management charges
   
63,851
     
8,024
 
Depreciation
   
16,882
     
821
 
Amortization
   
22,757
     
1,719
 
Taxes
   
2,407
     
230
 
Impairment of accounts receivable
   
102
     
-
 
Inventory recovery
   
(1,272
)
   
-
 
Total report
   
579,572
     
44,042
 

As of March 31, 2019, the subsidiary Viva GyM S.A. reverse the excess of provision for impairment in inventories  for S/1.3 million.

17.  
INCOME TAX

These condensed interim consolidated financial statements for the period ended March 31, 2019, income tax expense is recognized 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 March 31, 2019 is 67.18% (66.41% for the period ended March 31, 2018). 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.

- 27 -

18.  
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of March 31, 2019, contingencies held by the Group are substantially the same as those existing as of December 31, 2018.

In addition the Group had performace bonds and guarantees commitments with different financial institutions securing to secure transactions for US$405.6 million and US$13.9 million, respectively (US$471.60 million and US$13.9 million, respectively, as of December 31, 2018).

19.  
DIVIDENDS

As part of the covenants at the refinancing agreements mentioned in Note 12, the Company is unable to pay dividends until the cancellation of all liabilities related to these borrowings.

For the period ended March 31, 2019, the Group has paid dividends to its non-controlling subsidiaries in the amount of S/1.8 million  (S/5 million for the same period in 2018).

20.  
DISCONTINUED OPERATIONS

As part of the process of divestments of non-strategic assets initiated by the Company; CAM Servicios del Peru S.A., CAM Chile S.A. and Stracon GyM SA were sold, during the year 2018 (completed).

Additionally, at December 31, 2018, the subsidiary Adexus S.A. has been reclassified as non-current assets available for sale (planned) at December 31, 2018 and at March 31, 2019.

A.   
Discontinued operations

a) 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.  The net gain on the sale of both subsidiaries amounted to S/31.7 million.

b) 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.

B.   
Non-current asset classified as held for sale

- 28 -

At December 31, 2018 and at March 31, 2019, non-current assets and liabilities held for sale correspond to investments in the company Adexus S.A., whose main activity is to provide information technology solutions mainly in Chile and Peru.  Account balances are classified as assets held for sale taking into account that the Group has a sales plan defined within the next 12 months.

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2018
   
2019
 
             
ASSETS
           
Cash and cash equivalets
   
6,074
     
2,723
 
Accounts receivables, net
   
157,351
     
159,852
 
Inventories, net
   
3,999
     
1,430
 
Other assets, net
   
80,374
     
93,452
 
Total assets
   
247,798
     
257,457
 
                 
LIABILITIES
               
Borrowings
   
71,810
     
90,878
 
Accounts payable
   
148,817
     
146,198
 
Deferred income tax liabilities
   
5,201
     
5,075
 
Total liabilities
   
225,828
     
242,151
 
Total net assets
   
21,970
     
15,306
 

C.   
Consolidated statement of income

The Company reclassified financial results of discontinued operations, Stracon GyM S.A., CAM Servicios del Peru S.A., CAM Chile S.A. (completed) and Adexus S.A. (planned) for the period ended March 31, 2019 as follows:

- 29 -

         
Reclassification
       
   
At March 31, 2018
         
discontinued operations
   
At March 31, 2018
 
   
Reported
   
Completed
   
Planned
   
Reclassified
 
                         
                         
Revenues
   
1,311,031
     
(436,850
)
   
(64,244
)
   
809,937
 
Operating costs
   
(1,157,784
)
   
411,938
     
57,148
     
(688,698
)
Gross profit (loss)
   
153,247
     
(24,912
)
   
(7,096
)
   
121,239
 
                                 
Administrative expenses
   
(92,990
)
   
25,631
     
9,228
     
(58,131
)
Other (expenses) income, net
   
14,247
     
(1,459
)
   
(19
)
   
12,769
 
Loss (gain) from the sale of investments
   
(1,529
)
   
1,529
     
-
     
-
 
Operating profit
   
72,975
     
789
     
2,113
     
75,877
 
                                 
Financial expenses
   
(69,122
)
   
4,925
     
2,651
     
(61,546
)
Financial income
   
4,919
     
(2,832
)
   
(108
)
   
1,979
 
Share of the profit or loss in associates and joint ventures
   
(1,676
)
   
(362
)
   
-
     
(2,038
)
Profit before income tax
   
7,096
     
2,520
     
4,656
     
14,272
 
Income tax
   
(12,096
)
   
3,947
     
(1,329
)
   
(9,478
)
(Loss) profit from continuing operations
   
(5,000
)
   
6,467
     
3,327
     
4,794
 
Loss from discontinued operations
   
-
     
(6,467
)
   
(3,327
)
   
(9,794
)
Loss of the period
   
(5,000
)
                   
(5,000
)


21.  
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

On April 2, 2019, the Company concluded the capital increase process by completing the subscription of 142,483,663 new common shares. In the private offer completed, 55,291,877 shares were paid in full, and 87,191,786 shares were paid by 50%, both at a price per share of US$0.6136.


- 30 -
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