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 2020

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.

 
 April 30, 2020










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, 2020






GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES



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





GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


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




CONTENTS
 
Page
   
Consolidated Statement of Financial Position
1
   
Consolidated Statement of Income
2
   
Consolidated Statement of Comprehensive Income
3
   
Consolidated Statement of Changes in Equity
4
   
Consolidated Statement of Cash Flows
5
   
Notes to the Consolidated Financial Statements
6 - 35




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
           
       
As at
 
As at
       
December 31,
 
March 31,
   
Note
 
2019
 
2020
             
Current assets
           
Cash and cash equivalents
 
8
 
            948,978
 
            973,322
Trade accounts receivables, net
 
9
 
            821,737
 
            710,769
Work in progress, net
 
10
 
              49,457
 
            108,413
Accounts receivable from related parties
 
11
 
              36,658
 
              41,384
Other accounts receivable
 
12
 
            444,500
 
            414,886
Inventories, net
     
            552,573
 
            587,136
Prepaid expenses
     
              11,348
 
              18,275
       
          2,865,251
 
          2,854,185
             
Non-current assets as held for sale
     
            205,418
 
            175,780
             
Total current assets
     
          3,070,669
 
          3,029,965
             
Non-current assets
           
Trade accounts receivable, net
 
9
 
            753,202
 
            757,264
Work in progress, net
 
10
 
              23,117
 
              24,528
Accounts receivable from related parties
 
11
 
            546,941
 
            569,970
Prepaid expenses
     
              27,934
 
              30,868
Other accounts receivable
 
12
 
            300,323
 
            300,316
Investments in associates and joint ventures
 
13
 
              37,035
 
              38,163
Investment property
     
              28,326
 
              27,508
Property, plant and equipment, net
 
14
 
            443,870
 
            423,012
Intangible assets, net
 
14
 
            853,315
 
            849,168
Right-of-use assets, net
 
14
 
              78,813
 
              74,379
Deferred income tax asset
     
            240,919
 
            253,935
Total non-current assets
     
          3,333,795
 
          3,349,111
             
             
             
             
             
             
             
             
Total assets
     
          6,404,464
 
          6,379,076
 
LIABILITIES AND EQUITY
           
       
As at
 
As at
       
December 31,
 
March 31,
   
Note
 
2019
 
2020
             
Current liabilities
           
Borrowings
 
15
 
            454,260
 
            331,233
Bonds
 
16
 
              44,737
 
              43,226
Trade accounts payable
 
17
 
          1,136,121
 
          1,108,835
Accounts payable to related parties
 
11
 
              38,916
 
              41,443
Current income tax
     
              47,999
 
              50,224
Other accounts payable
 
18
 
            635,305
 
            777,133
Provisions
 
19
 
            113,483
 
              62,735
Total current liabilities
     
          2,470,821
 
          2,414,829
             
Non-current liabilities as held for sale
     
            210,025
 
            185,020
             
Total current liabilities
     
          2,680,846
 
          2,599,849
             
Non-current liabilities
           
Borrowings
 
15
 
            344,806
 
            431,730
Bonds
 
16
 
            879,305
 
            904,206
Other accounts payable
 
18
 
            273,101
 
            272,051
Accounts payable to related parties
 
11
 
              22,583
 
              22,797
Provisions
 
19
 
            214,952
 
            277,429
Derivative financial instruments
     
                    52
 
                    40
Deferred income tax liability
     
            112,734
 
            107,105
Total non-current liabilities
     
          1,847,533
 
          2,015,358
Total liabilities
     
          4,528,379
 
          4,615,207
             
Equity
           
Capital
 
20
 
            871,918
 
            871,918
Legal reserve
     
            132,011
 
            132,011
Voluntary reserve
     
              29,974
 
              29,974
Share Premium
     
          1,132,179
 
          1,132,179
Other reserves
     
(177,506)
 
(204,521)
Retained earnings
     
(510,766)
 
(541,210)
Equity attributable to controlling interest in the Company
 
          1,477,810
 
          1,420,351
Non-controlling interest
     
            398,275
 
            343,518
Total equity
     
          1,876,085
 
          1,763,869
Total liabilities and equity
     
          6,404,464
 
          6,379,076



































 
 
The accompanying notes on pages 6 to 36 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
   
2019
   
2020
 
                   
                   
Revenues from construction activities
         
348,015
     
552,642
 
Revenues from services provided
         
243,016
     
240,487
 
Revenue from real estate and sale of goods
         
92,840
     
89,621
 
           
683,871
     
882,750
 
                       
Cost of construction activities
         
(302,873
)
   
(547,275
)
Cost of services provided
         
(205,747
)
   
(195,869
)
Cost of real estate and  sale of goods
         
(70,952
)
   
(70,778
)
     
21
     
(579,572
)
   
(813,922
)
Gross profit
           
104,299
     
68,828
 
                         
Administrative expenses
   
21
     
(44,042
)
   
(39,413
)
Other income and expenses
   
22
     
8,026
     
(8,044
)
Operating profit
           
68,283
     
21,371
 
                         
Financial expenses
           
(53,820
)
   
(48,565
)
Financial income
           
21,829
     
3,438
 
Share of the profit or loss of associates and joint ventures accounted for using the equity method
   
13
     
(696
)
   
1,164
 
Profit (loss) before income tax
           
35,596
     
(22,592
)
Income tax expense
           
(23,911
)
   
(2,290
)
Profit (loss) from continuing operations
           
11,685
     
(24,882
)
                         
Profit (loss) from discontinued operations
           
(6,364
)
   
(3,479
)
Profit (loss) for the period
           
5,321
     
(28,361
)
                         
Profit (loss) attributable to:
                       
Owners of the Company
           
(1,137
)
   
(30,444
)
Non-controlling interest
           
6,458
     
2,083
 
             
5,321
     
(28,361
)
                         
                         
Loss per share attributable to owners of the
                       
Company during the period
   
26
     
(0.002
)
   
(0.035
)
Earnings (loss) per share from continuing operations
                       
attributable to owners of the Company during the period
   
26
     
0.011
     
(0.031
)

The accompanying notes on pages 6 to 36 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,
 
   
2019
   
2020
 
             
             
Profit (loss) for the period
   
5,321
     
(28,361
)
Other comprehensive income:
               
                 
Items that may be subsequently  reclassified to profit or loss
               
Cash flow hedge, net of tax
   
(12
)
   
11
 
Foreign currency translation adjustment, net of tax
   
(193
)
   
(35,182
)
Exchange difference from net investment in a foreign operation, net of tax
   
41
     
356
 
Other comprehensive income for the period, net of tax
   
(164
)
   
(34,815
)
Total comprehensive income for the period
   
5,157
     
(63,176
)
                 
Comprehensive income attributable to:
               
Owners of  the Company
   
(1,506
)
   
(57,459
)
Non-controlling interest
   
6,663
     
(5,717
)
     
5,157
     
(63,176
)
                 
Comprehensive income for the period attributable to owners of the Company:
               
Continuing operations
   
(32,900
)
   
(14,846
)
Discontinued operations
   
31,394
     
(42,613
)
     
(1,506
)
   
(57,459
)

The accompanying notes on pages 6 to 36 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, 2019 AND 2020
(All amounts are expressed in thousands of S/ unless otherwise stated)

   
Attributable to the controlling interests of the Company
             
   
Number
                                                       
   
of shares
         
Legal
   
Voluntary
   
Share
   
Other
   
Retained
         
Non-controlling
       
   
In thousands
   
Capital
   
reserve
   
reserve
   
premium
   
reserves
   
earnings
   
Total
   
interest
   
Total
 
                                                             
                                                             
Balances as of January 1, 2019
   
729,434
     
729,434
     
132,011
     
29,974
     
992,144
     
(170,620
)
   
375,417
     
2,088,360
     
401,571
     
2,489,931
 
(Loss) profit 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
 
                                                                                 
Balances as of January 1, 2020
   
871,918
     
871,918
     
132,011
     
29,974
     
1,132,179
     
(177,506
)
   
(510,766
)
   
1,477,810
     
398,275
     
1,876,085
 
                                                                                 
(Loss) profit for the period
   
-
     
-
     
-
     
-
     
-
     
-
     
(30,444
)
   
(30,444
)
   
2,083
     
(28,361
)
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
10
     
-
     
10
     
1
     
11
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(27,386
)
   
-
     
(27,386
)
   
(7,796
)
   
(35,182
)
Exchange difference from net investment in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
361
     
-
     
361
     
(5
)
   
356
 
Comprehensive income of the period
   
-
     
-
     
-
     
-
     
-
     
(27,015
)
   
(30,444
)
   
(57,459
)
   
(5,717
)
   
(63,176
)
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(42,602
)
   
(42,602
)
- Contributions (devolution) of non-controlling shareholders, net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(6,438
)
   
(6,438
)
Total transactions with shareholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(49,040
)
   
(49,040
)
Balances as of March 31, 2020
   
871,918
     
871,918
     
132,011
     
29,974
     
1,132,179
     
(204,521
)
   
(541,210
)
   
1,420,351
     
343,518
     
1,763,869
 

The accompanying notes on pages 6 to 36 are an integral part of the consolidated financial statements.


4

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
         
           
           
CONSOLIDATED STATEMENT OF CASH FLOWS
         
(All amounts are expressed in thousands of S/ unless otherwise stated)
   

                   
         
For the period
 
         
ended March 31,
 
   
Note
   
2019
   
2020
 
                   
OPERATING ACTIVITIES
                 
Profit (loss) before income tax
         
29,232
     
(27,484
)
Adjustments to  profit not affecting cash flows from
                     
operating activities:
                     
Depreciation
   
21
     
17,703
     
25,498
 
Amortization
   
21
     
24,476
     
23,950
 
Impairment of accounts receivable and other accounts receivable
     
102
     
210
 
Reversal of impairment of inventories
           
(1,272
)
   
(644
)
Debt condonation
           
-
     
(183
)
Impairment of property, plant and equipment
           
(200
)
   
(102
)
Indemnification
           
34,205
     
-
 
Change in the fair value of the liability for put option
           
-
     
309
 
Other provisions
           
560
     
8,623
 
Financial expense,net
           
25,087
     
57,924
 
Impairment of investments
           
130
     
-
 
Share of the profit and loss of associates and joint ventures accounted for using the equity method
   
13
     
696
     
(1,164
)
Reversal of provisions
           
(1,538
)
   
(3,713
)
Disposal (reversal) of assets
           
224
     
(2,323
)
(Profit) loss on sale of property, plant and equipment
           
(733
)
   
1,682
 
Profit on remeasurement of accounts receivable
           
(11,847
)
   
(2,474
)
Net variations in assets and liabilities:
                       
Trade accounts receivable and working in progress
           
247,741
     
76,852
 
Other accounts receivable
           
28,331
     
49,999
 
Other accounts receivable from related parties
           
(14,080
)
   
(27,260
)
Inventories
           
(34,241
)
   
(32,639
)
Pre-paid expenses and other assets
           
(22,764
)
   
(11,830
)
Trade accounts payable
           
(86,699
)
   
(7,887
)
Other accounts payable
           
(52,931
)
   
146,367
 
Other accounts payable to related parties
           
35,848
     
(32,441
)
Other provisions
           
(155
)
   
(1,212
)
Interest payment
           
(43,316
)
   
(34,288
)
Payments for purchases of intangibles - Concessions
           
(2,746
)
   
(655
)
Payment of income tax
           
(22,413
)
   
(17,302
)
Net cash provided by operating activities
           
149,400
     
187,813
 
                         
INVESTING ACTIVITIES
                       
Sale of property, plant and equipment
           
3,807
     
3,523
 
Interest received
           
6,514
     
1,390
 
Payment for purchase of investments properties
           
(13
)
   
(20
)
Payments for intangible purchase
           
(26,032
)
   
(26,882
)
Payments for property, plant and equipment purchase
           
(8,198
)
   
(12,482
)
Net cash applied to investing activities
           
(23,922
)
   
(34,471
)
                         
FINANCING ACTIVITIES
                       
Loans received
           
163,791
     
43,271
 
Amortization of loans received
           
(309,654
)
   
(109,116
)
Amortization of bonds issued
           
(7,203
)
   
(8,257
)
Payment for transaction costs for debt
           
-
     
20
 
Dividends paid to non-controlling interest
           
(1,822
)
   
(42,602
)
Cash received (return of contributions) from non-controlling shareholders
     
(14,641
)
   
(6,438
)
Net cash applied to financing activities
           
(169,529
)
   
(123,122
)
Net increase in cash
           
(44,051
)
   
30,220
 
Exchange difference
           
(2,591
)
   
(5,888
)
Cash and cash equivalents at the beginning of the period
           
801,021
     
948,978
 
Cash and cash equivalents at the end of the period
   
8
     
754,379
     
973,310
 
                         
NON-CASH TRANSACTIONS:
                       
Capitalization of interests
           
1,855
     
1,623
 
Acquisition of assets through finance leases
           
1,583
     
-
 
Acquisition of right-of-use assets
           
-
     
1,600
 
Acquisition of subsidiary debt
             -        17,440  

The accompanying notes on pages 6 to 36 are an integral part of the consolidated financial statements.

5

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

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


1.         GENERAL INFORMATION

a)
Incorporation and operations

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

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

b)
Authorization for the issue of the financial statements

These condensed interim consolidated financial statements for the year ended December 31, 2019 were authorized preliminary by Management, and Board of Directors on April 30, 2020.

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

The ongoing COVID-19 pandemic and government measures to contain the spread of the virus are disrupting economic activity, and consequently adversely affecting our business, results of operations and financial condition. As conditions are recent, uncertain and changing rapidly, it is difficult to predict the full extent of the impact of the pandemic. If conditions persist, however, it is likely that the pandemic and the related government measures will have a material adverse effect on the Company.

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

The COVID-19 pandemic and the related government measures have significantly increased economic uncertainty and are likely to cause a global recession. According to recent projections from the International Monetary Fund, during 2020, the global economy is expected to contract by 3.0%, with Latin America expected to contract 5.2% and Peru, Chile and Colombia, in particular, expected to contract 4.5%, 4.5% and 2.7%, respectively. Moreover, the impact of the pandemic on economic activity has been sudden and severe, and we cannot predict the extent to which the economies in the countries where we operate will ultimately be impacted.

Since mid-March, substantially all engineering and construction and real estate projects have been mandatorily shut down, and we cannot assure you when we will be able to resume work on these projects. Infrastructure operations, which have for the most part been declared essential businesses, have continued; however, certain of our infrastructure businesses have been adversely affected, in particular, by the sharp decline in traffic volumes and oil and gas prices (also due to the dispute in March among OPEC member countries).
6

Regarding the extent of the COVID-19 pandemic and its impact on the industries in which we operate, the full extent to which COVID-19 will impact our business, results of operations and financial condition is currently under evaluation. We believe that the severity of the impact on the company will depend, to a large extent, on how long the crisis continues.

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

d)
Current situation of the Company

As a result of decisions of a previous administration, the Group is involved in a series of corruption cases mainly between 2004 and 2015, which have generated criminal investigations by the Prosecutor's Office and administrative investigations by a regulatory body. Such situations led to organizational changes, external investigations, independent of the Company’s Management, related to the Group's business with Odebrecht and the facts under criminal investigation, as well as other internal measures as explained below:

•
On January 9, 2017, the Board of Directors approved the performance of an independent investigation related to six projects developed in association with companies of the Odebrecht Group.

•
On March 30, 2017, the Board of Directors created a Risk, Compliance and Sustainability Committee, who was in charge of the oversight of the investigation independently of Management. The external investigation was entrusted to the law firm Simpson, Thacher and Bartlett, who reported exclusively to the Risk, Compliance and Sustainability Committee in order to preserve the independence of the investigation.

•
The external investigation concluded on November 2, 2017 and found no evidence that the Group or any of its former or current directors or executives had intentionally or knowngly participated in acts of corruption related to the six projects developed in association with Odebrecht.

•
As new information about the cases emerged, the Company's Board of Directors continued to investigate the facts that were the subject of the criminal investigations described above, including matters that were beyond the scope of the investigation conducted by Simpson, Thacher and Barlett. After an extensive and detailed review process, the Company obtained relevant findings for the criminal investigations in process and, in line with its commitment to transparency and integrity, decided to share them in their entirety with the authorities within the framework of a plea bargain process.

•
As a result of its contribution to the investigations, on December 27, 2019, the Company signed a preliminary agreement whereby the Anti-Corruption Prosecutor and the Ad hoc Prosecutor's Office promise to execute a final plea bargain agreement with the Company that would provide The Company with certain regarding the contingencies it faces as a result of the above-mentioned processes. Additionally, in the aforementioned preliminary agreement, the Anti-Corruption Prosecutor and the Ad Hoc Attorney General's Office authorize the Company to disclose its existence but maintain the legal reserve on its content


7

•
On the other hand, over the last three years the new administration together with the new board initiated a transformation process based on the principles of Truth, Transparency and Integrity, making profound changes in the organization such as the reconfiguration of a board of directors with an independent majority, new composition shareholding, as well as the creation of new instances of government such as the Corporate Risk Management and autonomous Compliance, with direct report to the Board of Directors, among other actions.


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

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

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

•
IIRSA Sur

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

•
Electric Train construction project

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

•
Gasoducto Sur Peruano (GSP)

In 2019, the Company concluded that it has an exposure to the preliminary investigation process conducted in relation to GSP (the South Peruvian Gas Pipeline project), even though as of the date hereof, it has not been indicted or incorporated as liable third party, even though the former Chairman of the Board of Directors and a former director are seeking plea bargain agreements in relation to this process, among others.

In addition to the cases described for which a provision for civil damages has been registered, there are two projects carried out in partnership with Odebrecht that are not currently under investigation. If this is initiated and some evidence is found, the maximum possible civil damage exposure estimated under Law 30737 for both projects would be S/52.7 million (US$16 million approximately).

Criminal investigations in conection to the Construction Club case

On the other hand, GyM S.A. has been incorporated, along with other construction companies, as a legal entity investigated in the criminal investigation that the Public Ministry has been carrying out for the alleged crime of corruption of officials in relation to the so-called Construction Club. Similarly, at the end of February 2020, the Public Ministry has requested the incorporation of Concar S.A., the latter is pending judicial decision.

8
On the other hand, like officials of other construction companies, a former commercial manager of GyM S.A., the former president of the Board of Directors, a former director and the former Corporate General Manager of the company have been included in the criminal investigation.

Anticorruption Law - effects on the Group

Law 30737 and its regulation issued by Supreme Decree 096-2018-EF have mitigated the Company and subsidiaries exposure to the cases described in subsections 1) and 2) above. These rules set clear guidelines to estimate the potential compensation reducing the uncertainty derived from the legal proceedings, by among other things, preventing the imposition of liens or attachments of assets that would impair its ability to operate.

The benefits of the mentioned rules are subject to the fulfillment of the following obligations:

a.
The obligation to set up a trust that will guarantee any eventual payment obligation of an eventual civil compensation in favor of the Peruvian Government;
b.
The obligation not to transfer funds abroad without the prior consent of the Ministry of Justice;
c.
The implementation of a compliance program; and
d.
The obligation to disclose information to the authorities and to collaborate in the investigation.

The Group has designed a compliance program which is currently under implementation, it fully cooperates with the authorities in its investigations and has executed a trust agreement with the Ministry of Justice, under which the Company has established for an approximate amount of S/80 million (equivalent to US$24 million).

On the other hand, based on the standards indicated and their guidelines, Management has estimated that the value of the civil damages for the cases described above is S/280 millions (US$85 millions)  and has registered as of December 31st, 2019 S/153.9 million (equivalent to US$46.6 million) as net present value (Note 22).


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

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

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

2.
BASIS OF PREPARATION

These condensed interim consolidated financial statements for the period ended March 31, 2020 have been prepared in accordance with IAS 34 "Interim Financial Reporting". The condensed interim consolidated financial statements provide comparative information regarding prior periods; however, they do not include all the information and disclosures required in the annual consolidated financial statements, so they must be read together with the audited consolidated financial statements for the year ended December 31, 2019, which have been prepared in accordance with International Standards. of Financial Information (hereinafter "IFRS").
9

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, 2019.


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, 2019 and March 31, 2020, 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 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.
10

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.

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

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 implemented a divestment plan and a capital rase to be able to meet the obligations resulting from this scenario, that has been fulfilled, managing to reduce these obligations in an important way.

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, 2019
 
1 year
   
years
   
years
   
5 years
   
Total
 
                                   
Other financial liabilities (except
                                 
  for finance leases and lease
                                 
  liability for right-of-use asset)
   
479,000
     
147,473
     
177,018
     
-
     
803,491
 
Finance leases
   
10,826
     
3,467
     
13,346
     
-
     
27,639
 
Lease liability for right-of-use asset
   
24,966
     
38,788
     
31,167
     
7,603
     
102,524
 
Bonds
   
115,690
     
157,516
     
358,461
     
1,077,960
     
1,709,627
 
Trade accounts payables (except
                                       
  non-financial liabilities)
   
966,620
     
-
     
-
     
-
     
966,620
 
Accounts payables to related parties
   
38,916
     
21,747
     
-
     
836
     
61,499
 
Other accounts payables (except
                                       
  non-financial liabilities)
   
200,098
     
2,505
     
194,908
     
-
     
397,511
 
Other non-financial liabilities
   
-
     
52
     
-
     
-
     
52
 
     
1,836,116
     
371,548
     
774,900
     
1,086,399
     
4,068,963
 


11

   
Less than
     
1-2
     
2-5
   
More than
       
At March 31, 2020
 
1 year
   
years
   
years
   
5 years
   
Total
 
                                   
Other financial liabilities (except
                                 
  for finance leases and lease
                                 
  liability for right-of-use asset)
   
342,112
     
236,708
     
178,653
     
-
     
757,473
 
Finance leases
   
9,443
     
3,090
     
12,238
     
-
     
24,771
 
Lease liability for right-of-use asset
   
20,960
     
39,704
     
13,352
     
25,571
     
99,587
 
Bonds
   
117,489
     
196,185
     
362,462
     
1,048,743
     
1,724,879
 
Trade accounts payables (except
                                       
  non-financial liabilities)
   
968,310
     
-
     
-
     
-
     
968,310
 
Accounts payables to related parties
   
41,443
     
21,961
     
-
     
836
     
64,240
 
Other accounts payables (except
                                       
  non-financial liabilities)
   
221,612
     
2,446
     
193,013
     
-
     
417,071
 
Other non-financial liabilities
   
-
     
40
     
-
     
-
     
40
 
     
1,721,369
     
500,134
     
759,718
     
1,075,150
     
4,056,371
 

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 (Note15).

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

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2019
   
2020
 
Total financial liabilities and bonds (Note 15 and Note 16)
   
1,723,108
     
1,710,395
 
Less: Cash and cash equivalents (Note 8)
   
(948,978
)
   
(973,322
)
Net debt
   
774,130
     
737,073
 
Total equity
   
1,876,085
     
1,763,869
 
Total capital
   
2,650,215
     
2,500,942
 
                 
Gearing ratio
   
0.29
     
0.29
 

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.


12

-
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 Group 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 15, 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 Group 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, 2019.


13
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.       OPERATING SEGMENTS

Operating segments are reported consistently with the internal reports that are reviewed by the Group’ chief decision-maker; that is, the Executive Committee, which is led by the Chief Executive Officer. This Committee 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.

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.

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


14
Operating segments financial position
Segment reporting


                           
Infrastructure
                         


As of December 31, 2019
 
Engineering and construction
   
Energy
   
Toll roads
   
Transportation
   
Water treatment
   
Real estate
   
Parent Company operations
   
Eliminations
   
Consolidated
 
                                                       
Assets.-
                                                     
Cash and cash equivalent
   
372,991
     
53,118
     
123,020
     
300,896
     
6,388
     
60,718
     
31,847
     
-
     
948,978
 
Trade accounts receivables, net
   
531,591
     
63,402
     
44,513
     
97,059
     
1,168
     
83,019
     
985
     
-
     
821,737
 
Work in progress, net
   
49,457
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
49,457
 
Accounts receivable from related parties
   
202,181
     
369
     
43,852
     
1,853
     
-
     
1,144
     
99,794
     
(312,535
)
   
36,658
 
Other accounts receivable
   
327,977
     
30,853
     
30,228
     
18,548
     
109
     
9,509
     
27,274
     
2
     
444,500
 
Inventories, net
   
57,093
     
32,366
     
7,109
     
30,594
     
-
     
437,012
     
-
     
(11,601
)
   
552,573
 
Prepaid expenses
   
6,812
     
1,271
     
2,779
     
231
     
133
     
-
     
122
     
-
     
11,348
 
     
1,548,102
     
181,379
     
251,501
     
449,181
     
7,798
     
591,402
     
160,022
     
(324,134
)
   
2,865,251
 
Non-current assets classified as held for sale
   
2,398
     
-
     
-
     
-
     
-
     
-
     
203,020
     
-
     
205,418
 
Total current assets
   
1,550,500
     
181,379
     
251,501
     
449,181
     
7,798
     
591,402
     
363,042
     
(324,134
)
   
3,070,669
 
                                                                         
Long-term trade accounts receivable, net
   
97,256
     
-
     
36,273
     
619,086
     
-
     
587
     
-
     
-
     
753,202
 
Long-term work in progress, net
   
-
     
-
     
23,117
     
-
     
-
     
-
     
-
     
-
     
23,117
 
Long-term accounts receivable from related parties
   
290,966
     
-
     
836
     
-
     
10,475
     
-
     
552,687
     
(308,023
)
   
546,941
 
Prepaid expenses
   
-
     
887
     
24,462
     
2,307
     
788
     
-
     
-
     
(510
)
   
27,934
 
Other long-term accounts receivable
   
113,879
     
63,649
     
5,156
     
-
     
7,346
     
50,449
     
59,844
     
-
     
300,323
 
Investments in associates and joint ventures
   
109,839
     
8,006
     
-
     
-
     
-
     
6,062
     
1,495,422
     
(1,582,294
)
   
37,035
 
Investment property
   
1,450
     
-
     
-
     
-
     
-
     
26,876
     
-
     
-
     
28,326
 
Property, plant and equipment, net
   
186,589
     
184,819
     
11,106
     
841
     
153
     
11,742
     
49,779
     
(1,159
)
   
443,870
 
Intangible assets, net
   
136,547
     
244,901
     
443,420
     
794
     
-
     
1,029
     
19,490
     
7,134
     
853,315
 
Right-of-use assets, net
   
5,638
     
24,038
     
3,860
     
5
     
7
     
5,048
     
55,532
     
(15,315
)
   
78,813
 
Deferred income tax asset
   
176,740
     
4,741
     
13,054
     
-
     
720
     
19,736
     
20,752
     
5,176
     
240,919
 
Total non-current assets
   
1,118,904
     
531,041
     
561,284
     
623,033
     
19,489
     
121,529
     
2,253,506
     
(1,894,991
)
   
3,333,795
 
Total assets
   
2,669,404
     
712,420
     
812,785
     
1,072,214
     
27,287
     
712,931
     
2,616,548
     
(2,219,125
)
   
6,404,464
 
                                                                         
Liabilities.-
                                                                       
Borrowings
   
180,535
     
42,760
     
2,383
     
5
     
6
     
116,231
     
121,379
     
(9,039
)
   
454,260
 
Bonds
   
-
     
-
     
28,995
     
15,742
     
-
     
-
     
-
     
-
     
44,737
 
Trade accounts payable
   
932,142
     
67,444
     
34,762
     
28,508
     
132
     
39,645
     
33,488
     
-
     
1,136,121
 
Accounts payable to related parties
   
206,907
     
2,233
     
35,554
     
21,024
     
-
     
23,437
     
58,951
     
(309,190
)
   
38,916
 
Current income tax
   
18,451
     
961
     
3,710
     
23,887
     
-
     
704
     
286
     
-
     
47,999
 
Other accounts payable
   
441,271
     
16,721
     
53,987
     
4,713
     
835
     
83,345
     
34,433
     
-
     
635,305
 
Provisions
   
6,031
     
18,459
     
6,183
     
-
     
-
     
230
     
82,580
     
-
     
113,483
 
Non-current liabilities classified as held for sale
   
-
     
-
     
-
     
-
     
-
     
-
     
210,025
     
-
     
210,025
 
Total current liabilities
   
1,785,337
     
148,578
     
165,574
     
93,879
     
973
     
263,592
     
541,142
     
(318,229
)
   
2,680,846
 
                                                                         
Borrowings
   
32,620
     
116,218
     
2,070
     
-
     
-
     
11,010
     
190,671
     
(7,783
)
   
344,806
 
Long-term bonds
   
-
     
-
     
276,550
     
602,755
     
-
     
-
     
-
     
-
     
879,305
 
Other long-term accounts payable
   
222,887
     
-
     
15,989
     
2,176
     
2,106
     
26,841
     
3,102
     
-
     
273,101
 
Long-term accounts payable to related parties
   
120,255
     
-
     
836
     
22,583
     
23,784
     
-
     
165,286
     
(310,161
)
   
22,583
 
Provisions
   
80,125
     
40,268
     
24,691
     
1,394
     
-
     
-
     
68,474
     
-
     
214,952
 
Derivative financial instruments
   
-
     
52
     
-
     
-
     
-
     
-
     
-
     
-
     
52
 
Deferred income tax liability
   
31,037
     
36,476
     
5,806
     
39,172
     
-
     
-
     
243
     
-
     
112,734
 
Total non-current liabilities
   
486,924
     
193,014
     
325,942
     
668,080
     
25,890
     
37,851
     
427,776
     
(317,944
)
   
1,847,533
 
Total liabilities
   
2,272,261
     
341,592
     
491,516
     
761,959
     
26,863
     
301,443
     
968,918
     
(636,173
)
   
4,528,379
 
Equity attributable to controlling interest in the Company
   
330,992
     
346,415
     
258,223
     
232,692
     
424
     
137,542
     
1,644,707
     
(1,473,185
)
   
1,477,810
 
Non-controlling interest
   
66,151
     
24,413
     
63,046
     
77,563
     
-
     
273,946
     
2,923
     
(109,767
)
   
398,275
 
Total liabilities and equity
   
2,669,404
     
712,420
     
812,785
     
1,072,214
     
27,287
     
712,931
     
2,616,548
     
(2,219,125
)
   
6,404,464
 


15
Operating segments financial position
Segment reporting

                           
Infrastructure
                         


As of March 31, 2020
 
Engineering and construction
   
Energy
   
Toll roads
   
Transportation
   
Water treatment
   
Real estate
   
Parent Company operations
   
Eliminations
   
Consolidated
 
                                                       
Assets.-
                                                     
Cash and cash equivalent
   
404,171
     
55,113
     
137,982
     
288,517
     
6,599
     
64,741
     
16,199
     
-
     
973,322
 
Trade accounts receivables, net
   
507,244
     
45,530
     
31,489
     
100,171
     
1,258
     
24,980
     
97
     
-
     
710,769
 
Work in progress, net
   
108,413
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
108,413
 
Accounts receivable from related parties
   
190,634
     
137
     
56,465
     
1,834
     
-
     
626
     
117,678
     
(325,990
)
   
41,384
 
Other accounts receivable
   
297,650
     
34,889
     
32,132
     
12,262
     
107
     
9,989
     
27,855
     
2
     
414,886
 
Inventories, net
   
70,094
     
35,835
     
8,655
     
31,927
     
-
     
452,237
     
-
     
(11,612
)
   
587,136
 
Prepaid expenses
   
7,580
     
1,242
     
6,555
     
2,759
     
76
     
-
     
63
     
-
     
18,275
 
     
1,585,786
     
172,746
     
273,278
     
437,470
     
8,040
     
552,573
     
161,892
     
(337,600
)
   
2,854,185
 
Non-current assets classified as held for sale
   
1,968
     
-
     
-
     
-
     
-
     
-
     
173,812
     
-
     
175,780
 
Total current assets
   
1,587,754
     
172,746
     
273,278
     
437,470
     
8,040
     
552,573
     
335,704
     
(337,600
)
   
3,029,965
 
                                                                         
Long-term trade accounts receivable, net
   
99,363
     
-
     
36,273
     
621,153
     
-
     
475
     
-
     
-
     
757,264
 
Long-term work in progress, net
   
-
     
-
     
24,528
     
-
     
-
     
-
     
-
     
-
     
24,528
 
Long-term accounts receivable from related parties
   
289,884
     
-
     
916
     
-
     
10,602
     
-
     
575,150
     
(306,582
)
   
569,970
 
Prepaid expenses
   
-
     
981
     
27,448
     
2,174
     
775
     
-
     
-
     
(510
)
   
30,868
 
Other long-term accounts receivable
   
117,321
     
66,883
     
5,674
     
-
     
7,346
     
52,675
     
50,417
     
-
     
300,316
 
Investments in associates and joint ventures
   
110,641
     
8,556
     
-
     
-
     
-
     
6,062
     
1,419,615
     
(1,506,711
)
   
38,163
 
Investment property
   
1,204
     
-
     
-
     
-
     
-
     
26,304
     
-
     
-
     
27,508
 
Property, plant and equipment, net
   
171,059
     
181,815
     
10,232
     
815
     
147
     
11,133
     
48,970
     
(1,159
)
   
423,012
 
Intangible assets, net
   
121,401
     
267,210
     
432,649
     
766
     
-
     
999
     
19,272
     
6,871
     
849,168
 
Right-of-use assets, net
   
6,562
     
21,158
     
4,738
     
-
     
3
     
4,773
     
52,517
     
(15,372
)
   
74,379
 
Deferred income tax asset
   
184,662
     
5,371
     
13,477
     
-
     
701
     
20,867
     
23,692
     
5,165
     
253,935
 
Total non-current assets
   
1,102,097
     
551,974
     
555,935
     
624,908
     
19,574
     
123,288
     
2,189,633
     
(1,818,298
)
   
3,349,111
 
Total assets
   
2,689,851
     
724,720
     
829,213
     
1,062,378
     
27,614
     
675,861
     
2,525,337
     
(2,155,898
)
   
6,379,076
 
                                                                         
Liabilities.-
                                                                       
Borrowings
   
169,689
     
38,615
     
2,487
     
-
     
2
     
112,280
     
16,888
     
(8,728
)
   
331,233
 
Bonds
   
2,104
     
-
     
23,516
     
17,606
     
-
     
-
     
-
     
-
     
43,226
 
Trade accounts payable
   
892,323
     
82,665
     
42,471
     
28,961
     
116
     
32,837
     
29,462
     
-
     
1,108,835
 
Accounts payable to related parties
   
197,468
     
2,321
     
43,060
     
28,418
     
13
     
24,871
     
58,459
     
(313,167
)
   
41,443
 
Current income tax
   
17,673
     
443
     
3,716
     
26,939
     
-
     
997
     
456
     
-
     
50,224
 
Other accounts payable
   
561,647
     
14,174
     
62,504
     
5,352
     
991
     
97,104
     
35,361
     
-
     
777,133
 
Provisions
   
7,985
     
17,540
     
6,183
     
-
     
-
     
477
     
30,550
     
-
     
62,735
 
Non-current liabilities classified as held for sale
   
-
     
-
     
-
     
-
     
-
     
-
     
185,020
     
-
     
185,020
 
Total current liabilities
   
1,848,889
     
155,758
     
183,937
     
107,276
     
1,122
     
268,566
     
356,196
     
(321,895
)
   
2,599,849
 
                                                                         
Borrowings
   
28,559
     
115,153
     
2,658
     
-
     
-
     
10,200
     
282,937
     
(7,777
)
   
431,730
 
Long-term bonds
   
25,108
     
-
     
276,646
     
602,452
     
-
     
-
     
-
     
-
     
904,206
 
Other long-term accounts payable
   
221,173
     
-
     
16,948
     
2,142
     
2,146
     
26,599
     
3,043
     
-
     
272,051
 
Long-term accounts payable to related parties
   
123,808
     
10
     
836
     
22,795
     
24,207
     
-
     
170,226
     
(319,085
)
   
22,797
 
Provisions
   
85,144
     
46,096
     
24,691
     
1,394
     
-
     
-
     
120,104
     
-
     
277,429
 
Derivative financial instruments
   
-
     
40
     
-
     
-
     
-
     
-
     
-
     
-
     
40
 
Deferred income tax liability
   
24,898
     
35,885
     
5,817
     
40,503
     
-
     
-
     
2
     
-
     
107,105
 
Total non-current liabilities
   
508,690
     
197,184
     
327,596
     
669,286
     
26,353
     
36,799
     
576,312
     
(326,862
)
   
2,015,358
 
Total liabilities
   
2,357,579
     
352,942
     
511,533
     
776,562
     
27,475
     
305,365
     
932,508
     
(648,757
)
   
4,615,207
 
Equity attributable to controlling interest in the Company
   
273,828
     
346,682
     
255,735
     
214,362
     
139
     
137,148
     
1,589,922
     
(1,397,465
)
   
1,420,351
 
Non-controlling interest
   
58,444
     
25,096
     
61,945
     
71,454
     
-
     
233,348
     
2,907
     
(109,676
)
   
343,518
 
Total liabilities and equity
   
2,689,851
     
724,720
     
829,213
     
1,062,378
     
27,614
     
675,861
     
2,525,337
     
(2,155,898
)
   
6,379,076
 


 
 
16
Operating segment performance
Segment Reporting


                         
Infrastructure
                         
For the period ended March 31, 2019 -
 
Engineering and construction
   
Energy
   
Toll roads
   
Transportation
   
Water treatment
   
Real estate
   
Parent Company operations
   
Elimination
   
Consolidated
 
                                                       
Revenue
   
382,708
     
127,106
     
144,727
     
106,239
     
885
     
25,436
     
22,762
     
(125,992
)
   
683,871
 
Gross profit (loss)
   
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
   
384
     
1,504
     
50
     
(1
)
   
-
     
(503
)
   
6,762
     
(170
)
   
8,026
 
Operating profit (loss)
   
8,878
     
22,531
     
14,872
     
16,603
     
98
     
(2,142
)
   
3,698
     
3,745
     
68,283
 
Financial expenses
   
(13,562
)
   
(3,189
)
   
(7,597
)
   
(5,821
)
   
(2
)
   
(4,832
)
   
(22,254
)
   
3,437
     
(53,820
)
Financial income
   
2,746
     
417
     
680
     
6,504
     
178
     
938
     
17,762
     
(7,396
)
   
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
     
17,286
     
274
     
(6,036
)
   
20,425
     
(21,032
)
   
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
     
12,050
     
77
     
(4,566
)
   
9,405
     
(21,022
)
   
11,685
 
Loss from discontinuing operations
   
-
     
-
     
-
     
-
     
-
     
-
     
(6,338
)
   
(26
)
   
(6,364
)
(Loss) profit for the year
   
(3,877
)
   
14,415
     
5,203
     
12,050
     
77
     
(4,566
)
   
3,067
     
(21,048
)
   
5,321
 
                                                                         
(Loss) profit from attributable to:
                                                                       
Owners of the Company
   
(5,070
)
   
13,094
     
3,610
     
9,038
     
77
     
(2,598
)
   
3,102
     
(22,390
)
   
(1,137
)
Non-controlling interest
   
1,193
     
1,321
     
1,593
     
3,012
     
-
     
(1,968
)
   
(35
)
   
1,342
     
6,458
 
     
(3,877
)
   
14,415
     
5,203
     
12,050
     
77
     
(4,566
)
   
3,067
     
(21,048
)
   
5,321
 


17

Operating segment performance
Segment Reporting


                           
Infrastructure
                         
For the period ended March 31, 2020 -
 
Engineering and construction
   
Energy
   
Toll roads
   
Transportation
   
Water treatment
   
Real estate
   
Parent Company operations
   
Elimination
   
Consolidated
 
                                                       
Revenue
   
661,706
     
106,024
     
113,773
     
88,473
     
916
     
25,827
     
19,903
     
(133,872
)
   
882,750
 
Gross profit (loss)
   
16,304
     
17,487
     
16,112
     
31,263
     
263
     
4,070
     
(2,327
)
   
(14,344
)
   
68,828
 
Administrative expenses
   
(28,801
)
   
(5,001
)
   
(4,282
)
   
(3,713
)
   
(107
)
   
(7,831
)
   
(5,049
)
   
15,371
     
(39,413
)
Other income and expenses, net
   
(3,600
)
   
(6,260
)
   
22
     
328
     
-
     
40
     
1,413
     
13
     
(8,044
)
Gain from sale of investments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Operating (loss) profit
   
(16,097
)
   
6,226
     
11,852
     
27,878
     
156
     
(3,721
)
   
(5,963
)
   
1,040
     
21,371
 
Financial expenses
   
(22,973
)
   
(5,577
)
   
(8,951
)
   
(2,129
)
   
(2
)
   
(3,791
)
   
(11,943
)
   
6,801
     
(48,565
)
Financial income
   
1,359
     
224
     
2,324
     
2,358
     
144
     
2,228
     
2,367
     
(7,566
)
   
3,438
 
Dividends
   
-
     
-
     
-
     
-
     
-
     
-
     
2,342
     
(2,342
)
   
-
 
Share of profit or loss in associates
                                                                       
and joint ventures
   
841
     
549
     
-
     
-
     
-
     
-
     
(11,409
)
   
11,183
     
1,164
 
(Loss) profit before income tax
   
(36,870
)
   
1,422
     
5,225
     
28,107
     
298
     
(5,284
)
   
(24,606
)
   
9,116
     
(22,592
)
Income tax
   
4,822
     
(448
)
   
(1,715
)
   
(8,545
)
   
(159
)
   
749
     
3,001
     
5
     
(2,290
)
(Loss) profit from continuing operations
   
(32,048
)
   
974
     
3,510
     
19,562
     
139
     
(4,535
)
   
(21,605
)
   
9,121
     
(24,882
)
Loss from discontinuing operations
   
-
     
-
     
-
     
-
     
-
     
-
     
(3,442
)
   
(37
)
   
(3,479
)
(Loss) profit for the year
   
(32,048
)
   
974
     
3,510
     
19,562
     
139
     
(4,535
)
   
(25,047
)
   
9,084
     
(28,361
)
                                                                         
(Loss) profit from attributable to:
                                                                       
Owners of the Company
   
(32,143
)
   
274
     
3,026
     
14,671
     
139
     
(394
)
   
(25,031
)
   
9,014
     
(30,444
)
Non-controlling interest
   
95
     
700
     
484
     
4,891
     
-
     
(4,141
)
   
(16
)
   
70
     
2,083
 
     
(32,048
)
   
974
     
3,510
     
19,562
     
139
     
(4,535
)
   
(25,047
)
   
9,084
     
(28,361
)



18

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 December 31,
2019
   
At March 31,
2020
 
Cash on hand
   
1,323
     
1,410
 
Remittances in-transit
   
5,664
     
1,323
 
Bank accounts
   
223,378
     
260,445
 
Escrow account
   
552,439
     
531,740
 
Time deposits
   
166,174
     
178,404
 
     
948,978
     
973,322
 

Reconciliation to the consolidated statement of cash flow:

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

   
At December 31,
2019
   
At March 31,
2020
 
 
Cash and cash equivalent on consolidated statement of financial position
   
948,978
     
973,322
 
Bank overdrafts (Note 15)
   
-
     
(12
)
Balances per consolidated statement of cash flows
   
948,978
     
973,310
 

9.  TRADE ACCOUNTS RECEIVABLES, NET

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Receivables
   
923,316
     
864,811
     
380,135
     
322,094
     
543,181
     
542,717
 
Unbilled receivables - Subsidiaries (a)
   
421,841
     
373,864
     
336,272
     
285,911
     
85,569
     
87,953
 
Unbilled receivables - Concessions (b)
   
234,688
     
237,826
     
110,236
     
111,232
     
124,452
     
126,594
 
     
1,579,845
     
1,476,501
     
826,643
     
719,237
     
753,202
     
757,264
 
Impairment of account receivables
   
(4,906
)
   
(8,468
)
   
(4,906
)
   
(8,468
)
   
-
     
-
 
     
1,574,939
     
1,468,033
     
821,737
     
710,769
     
753,202
     
757,264
 

a)
The unbilled receivables by subsidiaries are documents related to the estimates of the degree of progress for services rendered that were not billed, according detail:


19


   
At
December 31,
2019
   
At
March 31,
2020
 
GYM S.A.
   
384,660
     
324,101
 
Concar S.A.
   
10,737
     
8,562
 
GMI S.A.
   
24,787
     
39,646
 
GMP S.A.
   
1,657
     
1,555
 
     
421,841
     
373,864
 
                 
b) The unbilled receivables – Concessions, corresponds to future collections for public services granted according detail below:
               

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2019
   
2020
 
             
GyM Ferrovias S.A.
   
208,205
     
216,604
 
Survial S.A.
   
16,466
     
11,057
 
Norvial S.A.
   
2,149
     
4,970
 
Concesión Canchaque S.A.C.
   
6,700
     
4,275
 
Concesionaria La Chira S.A.
   
1,168
     
920
 
     
234,688
     
237,826
 


10.   WORK IN PROGRESS, NET

  This account comprises:

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Unbilled receivable concessions in progress
   
23,117
     
24,528
     
-
     
-
     
23,117
     
24,528
 
Work in progress
   
49,457

   
108,413
     
49,457
     
108,413

   
-
     
-
 
     
72,574
     
132,941
     
49,457
     
108,413
     
23,117
     
24,528
 


The ongoing work costs include all expenses incurred by the Group under construction contracts currently in force. The Group estimates that all the cost incurred will be billed and collected.

11.     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,  
   
2019
   
2020
 
Revenue from sales of goods and services:
- Associates
   
84
     
911
 
- Joint operations
   
8,194
     
8,100
 
     
8,278
     
9,011
 

20

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,  
   
2019
   
2020
 
   
Receivable
   
Payable
   
Receivable
   
Payable
 
Current portion:
                       
Joint operations
                       
Consorcio Rio Urubamba
   
9,042
     
-
     
9,126
     
-
 
Consorcio Peruano de Conservacion
   
3,592
     
-
     
2,925
     
-
 
Consorcio Italo Peruano
   
1,011
     
363
     
1,895
     
217
 
Consorcio Constructor Chavimochic
   
-
     
5,953
     
-
     
7,390
 
Consorcio GyM Conciviles
   
1,257
     
1,958
     
1,273
     
2,818
 
Consorcio La Gloria
   
1,750
     
1,017
     
1,586
     
991
 
Consorcio Ermitaño
   
831
     
440
     
714
     
453
 
Terminales del Peru
   
1,176
     
-
     
995
     
-
 
Consorcio TNT Vial y Vives - DSD Chile Ltda
   
-
     
1,088
     
-
     
1,880
 
Consorcio Rio Mantaro
   
-
     
5,869
     
64
     
5,211
 
Consorcio Vial Quinua
   
-
     
2,048
     
-
     
2,049
 
Consorcio Huacho Pativilca
   
1,419
     
5,895
     
1,480
     
4,574
 
Consorcio CDEM
   
638
     
-
     
787
     
221
 
Consorcio GyM-Stracon
   
2,230
     
-
     
1,483
     
-
 
Consorcio GyM-OSSA
   
7,202
     
-
     
11,771
     
-
 
Consorcio Chicama Ascope
   
2,471
     
-
     
2,500
     
-
 
Other minors
   
1,407
     
2,102
     
2,558
     
240
 
     
34,026
     
26,733
     
39,157
     
26,044
 
                                 
Other related parties
                               
Ferrovias Argentina
   
-
     
12,183
     
-
     
15,399
 
Peru Piping Spools S.A.C.
   
2,632
     
-
     
2,227
     
-
 
     
2,632
     
12,183
     
2,227
     
15,399
 
Current portion
   
36,658
     
38,916
     
41,384
     
41,443
 
                                 
Non-current portion:
                               
Gasoducto Sur Peruano S.A
   
544,842
     
-
     
556,039
     
-
 
Ferrovias Participaciones
   
-
     
22,583
     
-
     
22,797
 
Other minors
   
2,099
     
-
     
13,931
     
-
 
Non-current
   
546,941
     
22,583
     
569,970
     
22,797
 

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 2020 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.


21

12.    OTHER ACCOUNTS RECEIVABLE
This account comprises:


   
Total
   
Current
   
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Advances to suppliers
   
135,481
     
78,385
     
135,481
     
78,385
     
-
     
-
 
Income tax on-account payments
   
70,647
     
72,297
     
70,647
     
72,297
     
-
     
-
 
VAT credit
   
45,910
     
64,327
     
31,646
     
49,068
     
14,264
     
15,259
 
Guarantee deposits
   
181,400
     
184,801
     
98,046
     
110,691
     
83,354
     
74,110
 
Claims to third parties
   
79,771
     
90,228
     
38,874
     
37,557
     
40,897
     
52,671
 
Petroleos del Peru S.A.- Petroperu S.A.
   
80,942
     
89,683
     
17,293
     
22,800
     
63,649
     
66,883
 
ITAN and other tax receivable
   
60,883
     
57,365
     
30,233
     
26,683
     
30,650
     
30,682
 
Restricted funds
   
15,974
     
8,839
     
973
     
973
     
15,001
     
7,866
 
Rental and sale of equipment - GyM S.A. projects
   
30,798
     
31,500
     
30,798
     
31,500
     
-
     
-
 
Accounts receivable from personnel
   
2,836
     
3,446
     
2,836
     
3,446
     
-
     
-
 
Consorcio Constructor Ductos del Sur
   
27,782
     
27,782
     
-
     
-
     
27,782
     
27,782
 
Consorcio Panorama
   
23,491
     
24,285
     
-
     
-
     
23,491
     
24,285
 
Other minors
   
16,488
     
10,666
     
15,253
     
9,888
     
1,235
     
778
 
     
772,403
     
743,604
     
472,080
     
443,288
     
300,323
     
300,316
 
Impairment
   
(27,580
)
   
(28,402
)
   
(27,580
)
   
(28,402
)
   
-
     
-
 
     
744,823
     
715,202
     
444,500
     
414,886
     
300,323
     
300,316
 

         
The fair value of the other short-term accounts receivable is similar to their book value due to their short-term maturity. The non-current portion corresponds mainly to non-financial assets such as advances to suppliers and tax credits. Other non-current accounts receivable have maturities that vary between 2 and 5 years.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of other accounts receivable mentioned. The Group does not request guarantees.


22

13.     INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The movement of our investments in associates for the period ended March 31, 2019 and March 31, 2020 is as follows:

         
At March 31,
 
   
2019
   
2020
 
             
Beginning balance
   
257,766
     
37,035
 
Share of the profit or loss in associates and joint
               
  ventures
   
(696
)
   
1,164
 
Impairment of investment
   
(130
)
   
-
 
Translation adjustments
   
5
     
(36
)
Ending balance
   
256,945
     
38,163
 


Concesionaria Chavimochic S.A.C.

The entity was awarded the implementation of the Chavimochic irrigation project, including a) design and construction of the work required for the third-phase of the Chavimochic irrigation project in the province of La Libertad; b) operation and maintenance of works; and c) water supply to the Project users. Construction activities started in 2015; the effective concession period is 25 years, and the total investment amounts US$647 million.

The civil works of the third stage of the Chavimochic Irrigation Project were structured in two phases. To date, the works of the first phase (Palo Redondo Dam) are 70% completed. However, at the beginning of 2017, the procedure for early termination of the Concession Contract was initiated due to the breach of contract by the Grantor, and all activities were suspended in December 2017. Not having reached an agreement, the arbitration process was initiated before the CNUDI, and the Arbitral Tribunal was installed.

Moreover, from 2018 to date, the Peruvian Government has been evaluating the modification of the Concession Contract, to determine a mechanism that allow the completion of the project, without resolution as of todate.

14.     PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT-OF-USE ASSETS

For the period ended March 31, 2019 and March 31, 2020, the movement in property, plant and equipment, intangible assets and right-of-use assets accounts was as follows:


23

   
Property, plant and equipment
   
Intangibles
assets
   
Right-of-use
assets
 
 
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
     
-
 
 
 
Net cost at January 1, 2020
   
443,870
     
853,315
     
78,813
 
Additions
   
12,482
     
33,852
     
1,600
 
Transfers, disposals and adjustments (*)
   
(8,149
)
   
(14,049
)
   
(1,123
)
Deductions for sale of assets
   
(5,205
)
   
-
     
-
 
Depreciation, amortization
   
(19,986
)
   
(23,950
)
   
(4,911
)
Net cost at March 31, 2020
   
423,012
     
849,168
     
74,379
 

(*) Includes translation adjustments in the subsidiary GyM S.A. in property plant and equipment and intangibles, amounted to S/8 million and S/14 million, respectively.

a)
Property, plant and equipment and right-of-use assets

As of March 31, 2020, additions to property, plant and equipment mainly comprise to S/5 million in machinery in engineering and construction segment and S/4.2 million in working progress in infrastructure segment (as of December 31, 2019, the additions correspond mainly to work in progress for S/4.7 million and S/1.7 million in the infrastructure and real estate segments, respectively).

As of March 31, 2020, additions to right-of-use assets comprise lease agreements signed by the Group between January 1, 2020 up to March 31, 2020.

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

   
At March 31,
 
   
2019
   
2020
 
             
Cost of services and goods (Note 21)
   
16,882
     
24,184
 
Administrative expenses (Note 21)
   
821
     
1,314
 
Total depreciation related to property, plant and equipment, investment property and right-of-use assets
   
17,703
     
25,498
 
(-) Depreciation of investment property
   
(580
)
   
(601
)
(-) Depreciation of right-of-use asset
   
-
     
(4,911
)
Total depreciation of property, plant and equipment
   
17,123
     
19,986
 


24
b)
Intangible assets

As of March 31, 2019 and March 31, 2020, 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.

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

         
At March 31,
 
   
2019
   
2020
 
             
Cost of services and goods (Note 21)
   
22,757
     
22,857
 
Administrative expenses (Note 21)
   
1,719
     
1,093
 
     
24,476
     
23,950
 

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,
 
 
2019
 
2020
 
         
Engineering and construction (*)
   
36,632
     
30,647
 
Electromechanical
   
20,735
     
20,735
 
IT services
   
930
     
-
 
     
58,297
     
51,382
 


(*) The variation reported in engineering and construction segment is due to translation adjustment of foreign business of the subsidiary GyM S.A.

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.


15.   BORROWINGS         
 
 This item comprises:
    

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Bank overdrafts (Note 8)
   
-
     
12
     
-
     
12
     
-
     
-
 
Bank loans (a)
   
553,658
     
515,277
     
424,362
     
303,971
     
129,296
     
211,306
 
Finance leases
   
22,980
     
20,234
     
9,749
     
8,366
     
13,231
     
11,868
 
Lease liability for right-of-use asset
   
80,216
     
79,047
     
18,246
     
16,088
     
61,970
     
62,959
 
Other financial entities (b)
   
142,212
     
148,393
     
1,903
     
2,796
     
140,309
     
145,597
 
     
799,066
     
762,963
     
454,260
     
331,233
     
344,806
     
431,730
 


a)
Bank loans

     As of December 31, 2019 and March 31, 2020, this item comprises bank loans in local and foreign
25

currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.0% and 12.0% in 2019 and in 2020.

                     
Current
         
Non-current
 
               
At
   
At
   
At
   
At
 
   
Interest
   
Maturity
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
rate
   
date
   
2019
   
2020
   
2019
   
2020
 
                                     
GyM S.A. (i)
   
1.00% / 11.00
%
   
2023
     
170,798
     
162,016
     
26,401
     
20,856
 
GMP S.A. (ii)
   
5.05% / 7.68
%
   
2027
     
30,367
     
26,766
     
102,895
     
104,196
 
Viva GyM S.A.
   
7.00% / 12.00
%
   
2020
     
110,343
     
106,345
     
-
     
-
 
Graña y Montero S.A.A. (iii)
   
9.10% / 10.10
%
   
2022
     
112,854
     
8,844
     
-
     
86,254
 
                     
424,362
     
303,971
     
129,296
     
211,306
 
     

i)
Financial Stability Framework Agreement

In July 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). In August 2019, Tranche B was fully paid for the Group, equivalent to S/9.7 million and US$9.2 million. In September 2019, Tranche A was partially paid, for S/0.4 million and US$0.1 million. In October 2019, Tranche A was partially paid, for S/0.5 million.

As of March 31, 2020 and the date of this report, there was US$42.7 million (equivalent to S/146.8 million) outstanding under this agreement.

GyM S.A. requested a waiver for a change in the Financial Stability Framework Agreement, in which at least 50% of the amount of Tranche A (client invoices) and up to 50% of the amount of Tranche A (project valuations) should be presented; the request was accepted by the lenders. As of March 31, 2020 and the date of this report, the value of client invoices and the value of project valuations is 64% and 51%, respectively, both percentages comply with the provisions of the approved dispensation.

As of March 31, 2020 and the date of this report, GyM is in compliance with the ratios established under the Financial Stability Framework Agreement.

ii)
Terminales del Peru Loan

Terminales del Peru (hereinafter “TP”), a joint operation of the subsidiary GMP S.A., signs a medium- term loan agreement with Banco de Credito del Peru (hereinafter BCP) for up to US$30 million to finance the investments committed and up to US$70 million to finance the additional investments arising from the operation contract of the North and Center terminals from the period 2015 to 2019 with a maximum exposure limit of US$80 million. These financings are repaid within 5 years. As of March 31, 2020, these loans amount to S/84.9 million and mature in 2027.


26

In addition, in November 2019, TP signed a loan agreement to finance the additional investments from 2019 to 2023, for a credit line amount of US$46 million with the BCP. The contract confirmed the participation of an assignee and in this sense BD Capital (BDC) acquired 50% of the contractual position of the BCP through the subscription of the accession contract and in November 2019 disbursed a TP US$23 million. As of March 31, 2020, the balance amounts to S/39.6 million and matures in 2026.

iii)
CS Peru Infrastructure Holdings LLC Loan

In July 2019, the Company entered into a medium term loan credit agreement for up to US$35 million with CS Peru Infrastructure Holdings LLC. The term of the loan is three years, with quarterly installments of principal starting on the 18th month. The loan accrued interest at the following rates per annum: (i) for the period from and including the July 31, 2019 (“Closing Date”) to but excluding the date that is 6 months after the Closing Date, 9.10%; (ii) for the period from and including the date that is 6 months after the Closing Date to but excluding the date that is 1 year after the Closing Date, 9.35%; (iii) for the period from and including the date that is 1 year after the Closing Date to but excluding the date that is 30 months after the Closing Date, 9.60%; and (iv) for the period from and including the date that is 30 months after the Closing Date to the third anniversary of the Loan, 10.10%.

The proceeds were used for working capital in the Company, GyM S.A. and Adexus S.A. As of the date of this report, the principal amount outstanding under this loan is US$25 million (equivalent to S/86 million).

On November 21, 2019, due to the filing of a preventive bankruptcy process by its Chilean subsidiary, Adexus S.A., the Company received a communication from CS Peru Infrastracture Holdings LLC informing of the occurrence of an event of default under the terms of the credit agreement, according to section 7.02(e) and 9.09 of the agreement. As a result, the loan was classified as a current liabilities. At February 28, 2020, the waiver was obtained by the Company, and at the date of this report it was reclassified to non-current liabilities.

b)
Other financial entities

Monetization of Norvial dividends

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 (equivalent to S/138 million) 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. As of March 31, 2020, the balance of the loan payable amounts to S/148.4 million (S/142.2 million as of December 31, 2019).

c)
Fair value of borrowings

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

27

         
Carrying amount
         
Fair value
 
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
 
                         
Bank overdrafts (Note 8)
   
-
     
12
     
-
     
12
 
Bank loans
   
553,658
     
515,277
     
572,019
     
549,728
 
Finance leases
   
22,980
     
20,234
     
23,027
     
21,011
 
Lease liability for right-of-use asset
   
80,216
     
79,047
     
96,799
     
95,784
 
Other financial entities
   
142,212
     
148,393
     
142,212
     
148,393
 
     
799,066
     
762,963
     
834,057
     
814,928
 

As of March 31, 2020, the fair value is based on cash flows discounted using a rate based on the borrowing rate of 1.75% and 11% (2.9% and 11% as of December 31, 2019) and are included as Level 2 in the level of measurement.

16.     BONDS

This item is broken down as follows:

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
GyM Ferrovias S.A. (a)
   
618,497
     
620,058
     
15,742
     
17,606
     
602,755
     
602,452
 
Norvial S.A. (b)
   
305,545
     
300,162
     
28,995
     
23,516
     
276,550
     
276,646
 
GyM S.A. (c)
   
-
     
27,212
     
-
     
2,104
     
-
     
25,108
 
     
924,042
     
947,432
     
44,737
     
43,226
     
879,305
     
904,206
 

a)
GyM Ferrovias S.A.

In February 2015, the subsidiary GyM Ferrovias 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, 2020, an amortization has been made up to S/81.9 million (S/79 million as of December 31, 2019).

As of March 31, 2020, the balance includes accrued interest payable and VAC adjustments for S/91 million (S/86.8 million as of December 31, 2019).

At March 31, 2019 and March 31, 2020 the account movement  was as follows:
       
             
   
2019
   
2020
 
             
Balance at January, 1
   
611,660
     
618,497
 
Amortization
   
(2,807
)
   
(2,873
)
Accrued interest
   
11,906
     
11,946
 
Interest paid
   
(7,505
)
   
(7,512
)
Balance at March, 31
   
613,254
     
620,058
 

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

28
 -
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.

On August 23, 2017, GyM Ferrovias 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. Tha last payment for the sale of CPAO was made on December 10, 2019.

On August 23, 2017, GyM Ferrovias 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. In May, 2019, the working capital loan was fully paid, and the working capital loan agreement culminated.

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, 2019 and March 31, 2020 the account movement was as follows:

   
2019
   
2020
 
             
Balance at January, 1
   
325,382
     
305,545
 
Amortization
   
(4,396
)
   
(5,384
)
Accrued interest
   
5,899
     
6,193
 
Capitalized interest
   
697
     
91
 
Interest paid
   
(6,639
)
   
(6,283
)
Balance at March, 31
   
320,943
     
300,162
 

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.

c)
GyM S.A.

In 2020, the subsidiary GyM S.A. developed the First Private Bond Program, up to a maximum amount of US$8 million.

In the first quarter of the year, the bonds issue amount of US$7.8 million (equivalent to S/26.8 million) under the debt swap modality, related to its outstanding trade accounts.

The bonds mature in December 2027 and bear interest at a rate of 8.5%, the payment is semi-annual and have a risk rating of B-, granted by the rating company Moody’s Peru.

29
As of March 31, 2020, the balance includes accrued interest payable for US$125 thousand (equivalent to S/431 thousand).

The fair value of obligations as of March 31, 2020 amounts to S/ 1,047 million (as of December 31, 2019 amounts to S/1,011 million), is based on discounted cash flows using rates between 4.32% and 7.45% (between 4.32% and 7.59% as of December 31, 2019) and is within level 2 of the fair value hierarchy.

As of December 31, 2019 and March 31, 2020, the subsidiaries GyM Ferrrovias S.A., Norvial S.A. and GyM S.A. have complied with the covenants of all bonds.

17.   TRADE ACCOUNTS PAYABLE

      This item includes:

   
At
   
At
 
   
December 31,
   
March 31,
 
   
2019
   
2020
 
             
Invoices payable
   
352,287
     
402,112
 
Provision of contract costs (*)
   
746,408
     
671,407
 
Notes payable
   
37,426
     
35,316
 
     
1,136,121
     
1,108,835
 








   
    

    (*) As of March 31, 2020, the provisions of contract costs include the measurement by the degree of progress of the projects of S/140.5 million (as of December 31, 2019, S/169.5 million).

18.   OTHER ACCOUNTS PAYABLE

    This item includes:

   
Total
   
Current
   
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Advances received from customers (a)
   
307,839
     
397,788
     
270,714
     
361,719
     
37,125
     
36,069
 
Consorcio Ductos del Sur - payable (b)
   
148,076
     
142,919
     
-
     
-
     
148,076
     
142,919
 
Salaries and other payable
   
87,869
     
114,446
     
87,869
     
114,446
     
-
     
-
 
Other taxes payable
   
104,444
     
108,721
     
84,235
     
89,722
     
20,209
     
18,999
 
Put option liability on Morelco acquisition
   
106,444
     
110,764
     
71,341
     
74,029
     
35,103
     
36,735
 
Consorcio Rio Mantaro - payables
   
35,625
     
53,651
     
35,625
     
53,651
     
-
     
-
 
Acquisition of additional non-controlling interest
   
22,697
     
23,552
     
22,697
     
23,552
     
-
     
-
 
Guarantee deposits
   
13,201
     
14,640
     
13,201
     
14,640
     
-
     
-
 
Third-party loans
   
11,619
     
11,596
     
9,545
     
9,521
     
2,074
     
2,075
 
Other accounts payables
   
70,592
     
71,107
     
40,078
     
35,853
     
30,514
     
35,254
 
     
908,406
     
1,049,184
     
635,305
     
777,133
     
273,101
     
272,051
 


30
  (a)
Advances received from customers relate mainly to construction projects, and are discounted from invoicing, in accordance with the terms of the contracts.

         
Total
         
Current
         
Non-current
 
   
At
   
At
   
At
   
At
   
At
   
At
 
   
December 31,
   
March 31,
   
December 31,
   
March 31,
   
December 31,
   
March 31,
 
   
2019
   
2020
   
2019
   
2020
   
2019
   
2020
 
                                     
Advances Customers Consortiums
   
115,250
     
101,962
     
113,093
     
100,499
     
2,157
     
1,463
 
Customer advances for real estate projects
   
66,258
     
81,692
     
66,258
     
81,692
     
-
     
-
 
Concentradora Norte - Quellaveco
   
64,118
     
98,995
     
44,932
     
78,466
     
19,186
     
20,529
 
Engineering and construction - Chile
   
-
     
56,894
     
-
     
56,894
     
-
     
-
 
Special National Transportation Infrastructure Project
   
42,030
     
47,070
     
26,534
     
33,245
     
15,496
     
13,825
 
Others
   
20,183
     
11,175
     
19,897
     
10,923
     
286
     
252
 
     
307,839
     
397,788
     
270,714
     
361,719
     
37,125
     
36,069
 

   (b)
The other accounts payable of Consorcio Constructor Ductos del Sur correspond to payment obligations to suppliers and the main subcontractors for S/142 million (as of December 31, 2019 amounts to S/148 million), assumed by the subsidiary GyM S.A; as a result of the termination of GSP operations.

The fair value of short-term accounts approximates their book value due to their short-term maturities. The non-current part mainly includes non-financial liabilities such as advances received from customers; the remaining balance is not significant in the financial statements for the periods shown.

19.   PROVISIONS

    The movement of this item is as follows:

                         
         
Contingent
             
         
liabilities
   
Provision
       
   
Legal
   
resulting from
   
for well
       
   
contingencies
   
acquisitions
   
closure
   
Total
 
                         
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
 
                                 
                                 
At January 1, 2020
   
278,319
     
-
     
50,116
     
328,435
 
Additions
   
8,623
     
-
     
6,315
     
14,938
 
Reversals of provisions
   
(3,713
)
   
-
     
-
     
(3,713
)
Payments
   
(395
)
   
-
     
(817
)
   
(1,212
)
Exchange difference
   
1,875
     
-
     
-
     
1,875
 
Translation adjustments
   
(159
)
   
-
     
-
     
(159
)
At march 31, 2020
   
284,550
     
-
     
55,614
     
340,164
 






Legal contingencies

1.
Civil compensation

As of March 31, 2020, the present value of the estimated provision amounting to million S/154.1 (S/153.9 million as of December 31, 2019), corresponding to the legal contingency estimated by management for exposure of the Company and its subsidiaries to a probable compensation in relation to their participation as minority partners in certain entities that developed infrastructure projects in Peru with companies belonging to the Odebrecht group and projects related to “Club de la Construcción”.

2.
Securities Class actions NY SEC

31
Two securities class actions have been filed against the Company, and certain former employees in the Eastern District of New York during the first quarter of 2017. Both complaints allege false and misleading statements during the class period. In particular, they allege that the Company failed to disclose, among other things, that a) the company knew that its partner Odebrecht was engaged in illegal activities, and b) the Company profited from such activities in violation of its own corporate governance standards. All parties have agreed to unify the two lawsuits and appoint a single lead plaintiff, with one single council to control the class action. On March 6, 2018, the court appointed Treasure Finance Holding Corp. as the plaintiffs' representative. After this, the Court could dismiss the claim or admit it.

As of March 31, 2020, the Company has made a provision of S/51.6 million (US$15 million) based on the estimation of the probable result of the Securities Class Actions process.

20.    CAPITAL

As of March 31, 2020 and as of December 31, 2019, the capital of the Company is represented by 871,917,855 shares of a nominal value of S/1.00 each, all registered in the Public Registries.

At March 31, 2020, a total of 214,630,805 shares were represented in ADS, equivalent to 42,926,161 ADSs at a rate of 5 shares per ADS.

As of December 31, 2019, a total of 218,043,480 shares were represented by ADS, equivalent to 43,608,696 ADSs at a rate of 5 shares per ADS.

21.     EXPENSES BY NATURE

For the period ended March 31, 2019 and March 31, 2020, this item comprises:


32

   
Cost of
             
   
goods and
   
Administrative
       
   
services
   
expenses
   
Total
 
At March 31, 2019
                 
Salaries, wages and fringe benefits
   
162,892
     
28,026
     
190,918
 
Services provided by third-parties
   
213,398
     
5,222
     
218,620
 
Purchase of goods
   
98,555
     
-
     
98,555
 
Other management charges
   
63,851
     
8,024
     
71,875
 
Depreciation (Note 14 a)
   
16,882
     
821
     
17,703
 
Amortization (Note 14 b)
   
22,757
     
1,719
     
24,476
 
Taxes
   
2,407
     
230
     
2,637
 
Impariment of property, plant and equipment
   
102
     
-
     
102
 
Inventory recovery
   
(1,272
)
   
-
     
(1,272
)
Total
   
579,572
     
44,042
     
623,614
 
                         
                         
At March 31, 2020
                       
Services provided by third-parties
   
242,867
     
8,119
     
250,986
 
Salaries, wages and fringe benefits
   
294,241
     
24,326
     
318,567
 
Purchase of goods
   
160,359
     
-
     
160,359
 
Other management charges
   
69,362
     
4,481
     
73,843
 
Depreciation (Note 14 a)
   
24,184
     
1,314
     
25,498
 
Amortization (Note 14 b)
   
22,857
     
1,093
     
23,950
 
Impairment of accounts receivable
   
205
     
5
     
210
 
Taxes
   
593
     
75
     
668
 
Property, plant and equipment recovery
   
(102
)
   
-
     
(102
)
Inventory recovery
   
(644
)
   
-
     
(644
)
Total
   
813,922
     
39,413
     
853,335
 


33

22.    OTHER INCOME AND EXPENSES

For the period ended March 31, 2019 and March 31, 2020, this item comprises:

   
At March 31,
 
   
2019
   
2020
 
Other income:
           
Sale of fixed assets
   
3,807
     
3,523
 
Present value for well closure provision (a)
   
1,147
     
-
 
Debt forgiveness with suppliers
   
-
     
183
 
Recovery of provisions and impairments
   
-
     
1,571
 
Profit from Mizuho agreement (b)
   
40,608
     
-
 
Others
   
1,377
     
979
 
     
46,939
     
6,256
 
                 
Other expenditures:
               
Net cost of fixed assets disposal
   
3,294
     
4,884
 
Legal and tax litigation (c)
   
34,797
     
239
 
Present value for well closure provision (a)
   
-
     
6,325
 
Administrative sanctions
   
-
     
2,403
 
Others
   
822
     
449
 
     
38,913
     
14,300
 
     
8,026
     
(8,044
)

a)
Corresponds to the valuation for the dismantling of the wells of the subsidiary GMP S.A. updated to present value. As of March 31, 2019 the Group recorded a reversal of provision for S/1.1 million, and as of March 31, 2020 the Group recorded a provision expense for S/6.3 million.

b)
Corresponds to the refinancing agreement linked to the contract signed between GyM Ferrrovias S.A. and Mitzuho Bank Ltd. where the Company acted as an endorsement of the transaction. Under the contract, a bond letter was issued with Mitzuho Bank Ltd. for it to be covered with a financial derivative. The contract further indicated that in the event that the bank refinanced the debt, the Company received 70% of the gains obtained.

c)
Corresponds mainly to provisions for contingencies with the Tax Administration.

23.       INCOME TAX

These condensed interim consolidated financial statements for the period ended December 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, 2020 is 7.32% (67.18% for the period 2019).

24.      CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of March 31, 2020, contingencies held by the Group are substantially the same as those existing as of December 31, 2019.

The Group maintains letters of guarantees and guarantees in force in various financial entities guaranteeing operations for US$373.7 and US$13.9 million, respectively (US$376.1 million and US$13.9 million, respectively, as of December 31, 2019).


34
25.      DIVIDENDS

As part of the covenants at the refinancing agreements mentioned in Note 15, the Company is unable to pay dividends as established in the Financial Stability Framework Agreement.

For the period ended March 31, 2020, the Group’s subsidiaries have paid dividends to its non- controlling interests in the amount of S/42.6 million (S/1.8 million for the period ended in December 31, 2019).

26.    LOSS PER SHARE

The basic loss per common share has been calculated by dividing the loss of the period attributable to the Group’s common shareholders by the weighted average of the number of common shares outstanding during that period. No diluted loss per common share has been calculated because there is no potential diluent common or investment shares (ie, financial instruments or agreements that entitle to obtain common or investment shares); therefore, it is the same as the loss per basic share.

The basic loss per common share is as follows:

               
At March 31,
 
         
2019
   
2020
 
                   
Loss attributable to owners of the Company
                 
during the period
         
(1,137
)
   
(30,444
)
Weighted average number of shares in issue
                     
at S/1.00 each, at March 31,
         
729,434,192
     
871,917,855
 
                       
Basic loss per share (in S/)
   
(*)
   
(0.002
)
   
(0.035
)
                         
                         
                   
At March 31,
 
             
2019
     
2020
 
                         
Loss from continuing operations attributable to owners
                       
of the Company during the period
           
7,912
     
(26,965
)
Weighted average number of shares in issue
                       
at S/1.00 each, at March 31,
           
729,434,192
     
871,917,855
 
                         
Basic earnings (loss) per share (S/)
   
(*)
   
0.011
     
(0.031
)

(*) The Group does not have common shares with dilutive effects at March 31, 2019 and March 31, 2020.

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

The subsidiary Adexus S.A. (hereinafter Adexus) has been reclassified as non-current assets held for sale at December 31, 2019 and March 31, 2020, whose main activity is to provide information technology solutions mainly in Chile and Peru

On November 19, 2019, Adexus 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.


35

On January 9, 2020, the Company communicated that the creditors committee of Adexus approved with the favorable vote of more than 80% of the pledge creditors and 85% of the unsecured creditors, respectively, the judicial reorganization agreement proposed by Adexus in the framework of the reorganization procedure. According to the terms of the judicial reorganization agreement, Adexus will restructure and pay the total of its reorganized liabilities within a maximum period of six years, according to the new agreed conditions, being authorized to continue with its commercial activities normally. As a result of the financial protection provided by the Chilean law and with the support of its creditors, Adexus has achieved the restructuring of its liabilities while continuing to serve all its customers.

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
   
At
 
   
December 31,
   
March 31,
 
   
2019
   
2020
 
             
ASSETS
           
Cash and cash equivalets
   
1,723
     
1,356
 
Accounts receivables, net
   
129,739
     
109,168
 
Inventories, net
   
2,828
     
2,846
 
Other assets, net
   
68,730
     
60,442
 
Total assets
   
203,020
     
173,812
 
                 
LIABILITIES
               
Borrowings
   
91,529
     
78,447
 
Accounts payable
   
118,497
     
106,573
 
Total liabilities
   
210,026
     
185,020
 
Total net assets
   
(7,006
)
   
(11,208
)

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

Between December 31, 2019 and the date of approval of the condensed interim consolidated financial statements, there have been no subsequent events that may affect the reasonableness of the financial statements issued.



36



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