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 January 2016
 
Commission File Number 001-35591
 
GRAÑA Y MONTERO S.A.A.
(Exact name of registrant as specified in its charter)

GRAÑA Y MONTERO GROUP
(Translation of registrant’s name into English)

Republic of Peru
(Jurisdiction of incorporation or organization)

Avenida Paseo de la República 4667, Lima 34,
Surquillo, Lima
Peru
( Address of principal executive offices)



Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___ X___   Form 40-F _______

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No ___ X___

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.


 
_____________________
/s/ Claudia Drago Morante
Stock Market Representative
Graña y Montero S.A.A.


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


GRAÑA Y MONTERO S.A.A.





By: /s/ CLAUDIA DRAGO MORANTE

Name: Claudia Drago Morante
 
Title: Stock Market Representative
 
January 25, 2016



(All amounts are expressed in thousands of S/ unless otherwise stated)
 
UNAUDITED
 
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2016 AND 2015 AND FOR THE PERIOD ENDED IN
THIS DATE
 

 

(All amounts are expressed in thousands of S/ unless otherwise stated)
 
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2016 AND 2015 AND FOR THE PERIOD ENDED IN
THIS DATE


CONTENTS





Condensed Interim Consolidated Statement of Financial Position

Condensed Interim Consolidated Income Statement

Condensed Interim Consolidated Statement of Comprehensive Income

Condensed Interim Consolidated Statement of Shareholders’ Equity

Condensed Interim Consolidated Statement of Cash Flows

Notes to the Condensed Interim Consolidated Financial Statements











S/       =     New Peruvian Sol
US$   =   United States dollar




(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS
       
At
 
LIABILITIES AND EQUITY 
   
At 
 
         
December 31,
   
December 31,
           
December 31,
   
December 31,
 
   
Note
   
2015
   
2016
     
Note
   
2015
   
2016
 
Current assets                         Current liabilities                          
Cash and cash equivalents
       
554,002
     
621,016
 
Borrowings
  12      
1,228,020
     
1,113,646
 
Financial asset at fair value through profit or loss
         
3,153
     
352
 
Bonds
  13      
37,083
     
46,091
 
Trade accounts receivables
         
1,050,791
     
1,129,367
 
Trade accounts payable
           
1,635,760
     
1,708,165
 
Unbilled work in progress
         
1,319,187
     
1,267,095
 
Accounts payable to related parties
  9      
77,830
     
81,416
 
Accounts receivable from related parties
  9      
280,153
     
234,789
 
Current income tax
           
34,116
     
28,781
 
Other accounts receivable
           
824,589
     
1,375,104
 
Other accounts payable
           
1,066,000
     
1,012,060
 
Inventories
           
1,159,154
     
1,141,185
 
Provisions
  14      
13,468
     
20,318
 
Prepaid expenses
           
40,023
     
50,789
 
Total current liabilities
           
4,092,277
     
4,010,477
 
             
5,231,052
     
5,819,697
                           
                          Non-current liabilities                          
Non-current assets classified as held for sale
           
22,511
     
22,385
 
Borrowings
 
12
     
553,336
     
825,705
 
Total current assets
           
5,253,563
     
5,842,082
 
Long-term bonds
 
13
     
757,008
     
921,623
 
                         
Other long-term accounts payable
           
246,396
     
502,184
 
Non-current assets
                       
Long-term accounts payable to related parties
  9      
20,136
     
23,647
 
Long-term trade accounts receivable
           
621,831
     
652,278
 
Provisions
  14      
35,618
     
30,670
 
Long-term unbilled work in progress
           
59,754
     
24,165
 
Derivative financial instruments
           
2,331
     
1,081
 
Prepaid expenses
           
22,386
     
23,526
 
Deferred income tax liability
           
101,664
     
90,829
 
Other long-term accounts receivable
           
65,929
     
327,882
 
Total non-current liabilities
           
1,716,489
     
2,395,739
 
Available-for-sale financial assets
  8      
120,134
     
-
 
Total liabilities
           
5,808,766
     
6,406,216
 
Investments in associates and joint ventures
  10      
646,884
     
176,623
                           
Investment property
           
34,702
     
49,357
 
Equity
                       
Property, plant and equipment
  11      
1,111,757
     
1,139,326
 
Capital
  15      
660,054
     
660,054
 
Intangible assets
  11      
881,020
     
1,029,815
 
Legal reserve
           
132,011
     
132,011
 
Deferred income tax asset
           
173,851
     
265,818
 
Optional reserve
           
29,974
     
29,974
 
Total non-current assets
           
3,738,248
     
3,688,790
 
Share Premium
           
897,532
     
882,464
 
                         
Other reserves
           
(129,059
)
   
(146,361
)
                         
Retained earnings
           
1,064,044
     
1,042,738
 
                         
Equity attributable to controlling interest in
the Company
           
2,654,556
     
2,600,880
 
                         
Non-controlling interest
           
528,489
     
523,776
 
                         
Total equity
           
3,183,045
     
3,124,656
 
Total assets
           
8,991,811
     
9,530,872
 
Total liabilities and equity
           
8,991,811
     
9,530,872
 

The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
-1-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
CONSOLIDATED INCOME STATEMENT
          For the year     
          ended December 31,  
   
Note
   
2015
   
2016
 
 
 
Revenues from construction activities
         
5,513,655
     
3,500,221
 
Revenues from services provided
         
1,901,498
     
1,911,631
 
Revenue from real estate and sale of goods
         
417,280
     
643,434
 
           
7,832,433
     
6,055,286
 
                       
Cost of construction activities
         
(5,310,003
)
   
(3,281,080
)
Cost of services provided
         
(1,523,358
)
   
(1,693,779
)
Cost of real estate and goods sold
         
(296,267
)
   
(440,843
)
    16      
(7,129,628
)
   
(5,415,702
)
Gross profit
           
702,805
     
639,584
 
                         
Administrative expenses
  16      
(413,380
)
   
(463,974
)
Other income and expenses
           
57,287
     
48,904
 
Gain from the sale of investments
  8      
(8,289
)
   
30,357
 
Operating profit
           
338,423
     
254,871
 
                         
Financial expenses
           
(176,802
)
   
(162,453
)
Financial income              38,107        24,178  
Share of the profit or loss in associates and joint ventures under the equity method of accounting
           
17,603
     
(1,349)
 
Profit before income tax
           
217,331
     
115,247
 
Income tax
  17      
(75,619
)
   
(43,585
)
Profit for the period
           
141,712
     
71,662
 
                         
Profit attributable to:                          
Owners of the Company
           
88,154
     
8,605
 
Non-controlling interest
           
53,558
     
63,057
 
             
141,712
     
71,662
 
                         
Earnings per share from continuing operations attributable to owners of the Company during the period
           
0.134
     
0.013
 
 
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
 
-2-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

          For the year    
          ended December 31,        
   
Note
   
2015
   
2016
 
 
 
Profit for the period
         
141,712
     
71,662
 
Other comprehensive income:
                     
Items that will not be reclassified to profit or loss
                     
Remeasurement of actuarial gains and losses, net of tax
         
(3,860
)
   
(1,529
)
                       
Items that may be subsequently reclassified to profit or loss                        
Cash flow hedge, net of tax
         
723
     
883
 
Foreign currency translation adjustment, net of tax
         
(44,649
)
   
18,403
 
Change in value of available-for-sale financial assets, net of tax
  8      
19,973
     
(43,681
)
Exchange difference from net investment in a foreign operation, net of tax
           
(5,221
)
   
14,832
 
             
(29,174
)
   
(9,563
)
Other comprenhensive income for the period, net of tax
           
(33,034
)
   
(11,092
)
Total comprehensive income for the period
           
108,678
     
60,570
 
                         
Comprehensive income attributable to:                          
Owners of the Company
           
70,069
     
(9,816
)
Non-controlling interest
           
38,609
     
70,386
 
             
108,678
     
60,570
 
 
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.

 
-3-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 

GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2016
 
   
Attributable to the controlling interests of the Company
             
   
Number
                     
Premium
   
Other
                Non-          
   
of shares
         
Legal
   
Optional
   
for issuance
   
reserves
   
Retained
         
controlling
       
   
In thousands
   
Capital
   
reserve
   
reserve
   
of shares
         
earnings
   
Total
   
interest
   
Total
 
                                                             
                                                             
Balances as of January 1, 2015
   
660,054
     
660,054
     
132,011
     
-
     
899,311
     
(113,895
)
   
1,113,696
     
2,691,177
     
482,530
     
3,173,707
 
Profit for the period
   
-
     
-
     
-
     
-
     
-
     
-
     
88,154
     
88,154
     
53,558
     
141,712
 
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
687
     
-
     
687
     
36
     
723
 
Adjustment for actuarial gains and losses
   
-
     
-
     
-
     
-
     
-
     
-
     
(2,921
)
   
(2,921
)
   
(939
)
   
(3,860
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
(30,687
)
   
-
     
(30,687
)
   
(13,962
)
   
(44,649
)
Change in value of available-for-sale
financial assets
   
-
     
-
     
-
     
-
     
-
     
19,973
     
-
     
19,973
     
-
     
19,973
 
Exchange difference from net investment
in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
(5,137
)
   
-
     
(5,137
)
   
(84
)
   
(5,221
)
Comprehensive income of the year
   
-
     
-
     
-
     
-
     
-
     
(15,164
)
   
85,233
     
70,069
     
38,609
     
108,678
 
Transactions with shareholders:
                                                                               
- Transfer to legal reserve
   
-
     
-
     
-
     
29,974
     
-
     
-
     
(29,974
)
   
-
     
-
     
-
 
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
(104,911
)
   
(104,911
)
   
(4,535
)
   
(109,446
)
- Contributions of non-controlling shareholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
10,329
     
10,329
 
- Additional acquisition of non-controlling
   
-
     
-
     
-
     
-
     
(894
)
   
-
     
-
     
(894
)
   
(971
)
   
(1,865
)
- Sale to non-controlling interest
   
-
     
-
     
-
     
-
     
(885
)
   
-
     
-
     
(885
)
   
2,527
     
1,642
 
Total transactions with shareholders
   
-
     
-
     
-
     
29,974
     
(1,779
)
   
-
     
(134,885
)
   
(106,690
)
   
7,350
     
(99,340
)
Balances as of September 30, 2015
   
660,054
     
660,054
     
132,011
     
29,974
     
897,532
     
(129,059
)
   
1,064,044
     
2,654,556
     
528,489
     
3,183,045
 
                                                                                 
Balances as of January 1, 2016
   
660,054
     
660,054
     
132,011
     
29,974
     
897,532
     
(129,059
)
   
1,064,044
     
2,654,556
     
528,489
     
3,183,045
 
Profit for the period
   
-
     
-
     
-
     
-
     
-
     
-
     
8,605
 
   
8,605
 
   
63,057
     
71,662
 
Cash flow hedge
   
-
     
-
     
-
     
-
     
-
     
839
     
-
     
839
     
44
     
883
 
Adjustment for actuarial gains and losses
   
-
     
-
     
-
     
-
     
-
     
-
     
(1,119
)
   
(1,119
)
   
(410
)
   
(1,529
)
Foreign currency translation adjustment
   
-
     
-
     
-
     
-
     
-
     
10,846
     
-
     
10,846
     
7,557
     
18,403
 
Change in value of available-for-sale
financial assets
   
-
     
-
     
-
     
-
     
-
     
(43,681
)
   
-
     
(43,681
)
   
-
     
(43,681
)
Exchange difference from net investment
in a foreign operation
   
-
     
-
     
-
     
-
     
-
     
14,694
     
-
     
14,694
     
138
     
14,832
 
Comprehensive income of the period
   
-
     
-
     
-
     
-
     
-
     
(17,302
)
   
7,486
 
   
(9,816
)
   
70,386
     
60,570
 
Transactions with shareholders:
                                                                               
- Dividend distribution
   
-
     
-
     
-
     
-
     
-
     
-
     
(30,853
)
   
(30,853
)
   
(25,473
)
   
(56,326
)
- Contributions (devolution) of
non-controlling shareholders,net
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(13,927
)
   
(13,927
)
- Additional acquisition of non-controlling
   
-
     
-
     
-
     
-
     
(15,167
)
   
-
     
-
     
(15,167
)
   
(35,972
)
   
(51,139
)
- Sale to non-controlling interest
   
-
     
-
     
-
     
-
     
99
     
-
     
-
     
99
     
236
     
335
 
- Deconsolidation of former subsidiary
   
-
     
-
     
-
     
-
     
-
     
-
     
2,061
     
2,061
     
37
     
2,098
 
Total transactions with shareholders
   
-
     
-
     
-
     
-
     
(15,068
)
   
-
     
(28,792
)
   
(43,860
)
   
(75,099
)
   
(118,959
)
Balances as of September 30, 2016
   
660,054
     
660,054
     
132,011
     
29,974
     
882,464
     
(146,361
)
   
1,042,738
     
2,600,880
     
523,776
     
3,124,656
 
                                                                                 
The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
 
-4-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
GRAÑA Y M ONTERO S.A.A. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENT OF CASH FLOWS

         
For the year
       
         
ended December 31,
 
   
Note
   
2015
   
2016
 
                   
OPERATING ACTIVITIES
                 
Profit before income tax
         
217,331
     
115,247
 
Adjustments to  profit not affecting cash flows from
                     
operating activities:
                     
Depreciation
   
11
     
217,070
     
203,457
 
Amortization of other assets
   
11
     
89,355
     
84,457
 
Impairment of inventories
   
16
     
17
     
851
 
Impairment of accounts receivable and other accounts receivable
   
16
     
5,806
     
81,369
 
Impairment of property, plant and equipment
   
16
     
9,677
     
2,754
 
Lower of intangible assets
           
-
     
-
 
Reversal of impairment of inventories
           
-
     
-
 
Profit on fair value of financial asset at fair value through profit or loss
           
(2,740
)
   
31
 
Change in the fair value of the liability for put option
           
(18,627
)
   
(983
)
Other Provisions
   
14
     
6,398
     
9,767
 
Dividends income from available-for-sale financial assets
           
(7,215
)
   
-
 
Financial expense,net
           
129,365
     
139,442
 
Adjustments to PPA of loans
           
-
     
-
 
Foreign exchange loss (gain) on loans
           
-
     
(47,448
)
Share of the profit and loss in associates and joint ventures
           
-
     
-
 
under the equity method of accounting
   
10
     
(34,872
)
   
1,349
 
Reversal of provisions
   
14
     
(7,796
)
   
(18,778
)
Lower of fixed assets
           
-
     
17,440
 
Lower of investments
           
2,755
     
1,227
 
Profit on sale of property, plant and equipment
           
(17,385
)
   
(15,698
)
Gain (loss) on financial asset at fair value through profit or loss
           
279
     
221
 
Loss on sale of non-current asset held for sale
           
171
     
-
 
Profit on sale from available-for-sale financial assets
           
-
     
(31,667
)
Loss on sale of investments in subsidiaries
           
8,289
     
-
 
Loss on remeasurement of accounts receivable
           
-
     
13,440
 
Profit on remeasurement of investment in joint ventures
           
-
     
(2,045
)
Net variations in assets and liabilities:
                       
Trade accounts receivable
           
(99,446
)
   
86,989
 
Other accounts receivable
           
(188,053
)
   
(95,543
)
Other accounts receivable from related parties
           
(133,286
)
   
45,364
 
Inventories
           
(215,196
)
   
30,921
 
Pre-paid expenses and other assets
           
11,667
     
(319
)
Trade accounts payable
           
199,400
     
(70,933
)
Other accounts payable
           
(45,096
)
   
232,402
 
Other accounts payable to related parties
           
13,961
     
7,855
 
Other provisions
           
(6,770
)
   
(600
)
Sale of a financial asset through profit or loss
           
4,604
     
-
 
Interest payment
           
(114,027
)
   
(172,281
)
Payments related to Norvial Concession
           
(142,575
)
   
(75,168
)
Payment of income tax
           
(150,434
)
   
(125,481
)
Net cash applied to operating activities
           
(267,373
)
   
417,639
 
                         
INVESTING ACTIVITIES
                       
Sale of available-for-sale investment
           
26
     
107,341
 
Sale of available-for-sale investment
           
-
     
-
 
Sale of property, plant and equipment
           
55,832
     
68,371
 
Sale of financial asset at fair value through profit or loss
           
-
     
1,427
 
Sale of non-current assets held for sale
           
8,801
     
117
 
Return of contributions
           
481
     
1,963
 
Interest received
           
32,162
     
21,605
 
Dividends received
   
10
     
59,175
     
27,992
 
Payment for purchase of a non-current asset held for sale
           
(22,297
)
   
-
 
Payment for purchase of investments properties
           
(748
)
   
(17,543
)
Payments for intangible purchase
           
(32,883
)
   
(23,161
)
Payments for purchase and contributions on investment
                       
in associate and joint ventures
           
(463,103
)
   
(403,697
)
Payments for property, plant and equipment purchase
           
(193,156
)
   
(200,786
)
Net cash applied to investing activities
           
(555,710
)
   
(416,371
)
                         
FINANCING ACTIVITIES
                       
Loans received
           
4,442,858
     
3,953,840
 
Bonds issued
           
814,016
     
178,639
 
Amortization of loans received
           
(4,563,855
)
   
(3,914,572
)
Amortization of bonds issued
           
(16,480
)
   
(25,281
)
Payment for transaction costs for debt
           
(18,516
)
   
(650
)
Dividends paid to owners of the parent
           
(104,911
)
   
(30,853
)
Dividends paid to non-controlling interest
           
(4,535
)
   
(25,473
)
Cash received from non-controlling shareholders
           
10,329
     
(19,100
)
Acquisition or sale of interest in a subsidiary of non-controlling shareholders
           
(223
)
   
(50,804
)
Net cash provided by financing activities
           
558,683
     
65,746
 
Net increase (net decrease) in cash
           
(264,400
)
   
67,014
 
Cash and cash equivalents at the beginning of the year
           
818,402
     
554,002
 
Cash and cash equivalents at the end of the period
           
554,002
     
621,016
 
                         
NON-CASH TRANSACTIONS:
                       
Debt capitalization
           
-
     
8,308
 
Acquisition of assets through finance leases
           
92,093
     
68,905
 
Change in fair value of available-for-sale financial assets
           
19,973
     
(43,681
)
Settlement of joint venture
           
-
     
811,380
 
Adjustment for deconsolidation of former subsidiaries
           
9,298
     
-
 
Establishment of joint operation - Panorama Plaza de negocios (net assets)
           
36,180
     
-
 

The accompanying notes on pages 8 to 24 are an integral part of the consolidated financial statements.
 
-5-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2016 (UNAUDITED), AND AT DECEMBER 31, 2015 (AUDITED)


1
GENERAL INFORMATION

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

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

These condensed interim consolidated financial statements as of December 31, 2016 have been prepared and authorized for issuance by the Chief Financial Officer on January 26, 2017.

2
BASIS OF PREPARATION

These condensed interim consolidated financial statements for the period ended December 31, 2016 have been prepared in accordance with (IAS 34) “Interim financial reporting”. The condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these interim condensed consolidated financial statements are consistent with those applied in the preparation of the year-end financial statements at December 31, 2015.

4
FINANCIAL RISK MANAGEMENT

4.1
Financial risk factors

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

The condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; these should be read in conjunction with the Group’s annual financial statements as of December 31, 2016. There have been no changes since year-end in the risk management department of the Group or in any risk management policies.

4.1.1
Market risk –

Compared to year end, no new material market risk hedging arrangements have occurred.
 
-6-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

4.1.2
Credit risk –

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

4.1.3
Liquidity risk -
Compared to year end, no major changes in undiscounted contractual cash flows have occurred.

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

   
Less than
1 year
   
From 1 to
2 years
   
From 2 to
5 years
   
Over
5 years
   
Total
 
At December 31, 2015
                             
Other financial liabilities (except for finance leases)
   
1,102,855
     
181,729
     
223,713
     
-
     
1,508,297
 
Finance leases
   
157,957
     
118,311
     
42,513
     
10,431
     
329,212
 
Bonds
   
69,823
     
82,916
     
217,418
     
1,445,187
     
1,815,344
 
Trade accounts payables
   
1,635,760
     
-
      -       -          
Accounts payables to related parties
   
77,830
     
19,728
      -       408       97,966  
Other accounts payables
   
181,113
     
36,456
     
121,678
     
-
     
339,247
 
Other non-financial liabilities
   
-
     
2,331
     
-
     
-
     
2,331
 
     
3,225,338
     
441,471
     
605,322
     
1,456,026
     
5,728,157
 
At December 31, 2016
                                       
Other financial liabilities (except for finance leases)
   
1,018,058
     
255,148
     
460,111
     
-
     
1,733,317
 
Finance leases
   
127,490
     
86,016
     
26,780
     
19,506
     
259,792
 
Bonds
   
113,299
     
180,431
     
365,697
     
1,334,485
     
1,993,912
 
Trade accounts payables
   
1,708,165
     
-
     
-
     
-
     
1,708,165
 
Accounts payables to related parties
   
81,416
     
23,647
     
-
     
-
     
105,063
 
Other accounts payables
   
124,720
     
13,813
     
133,986
     
-
     
272,519
 
Other non-financial liabilities
   
-
     
1,081
     
-
     
-
     
1,081
 
     
3,173,148
     
560,136
     
986,574
     
1,353,991
     
6,073,849
 
 
4.2
Capital management -
 
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as total ‘equity’ as shown in the consolidated statement of financial position plus net debt.

As of December 31, 2015 and 2016, the gearing ratio is presented below indicating the Company’s strategy to keep it in a range from 0.10 to 0.70. The gearing ratio was as follows:

   
December 31,
   
December 31,
 
   
2015
   
2016
 
   
Total borrowing and bonds
   
2,575,447
     
2,907,065
 
Less: Cash and cash equivalents
   
(554,002
)
   
(621,016
)
Net debt
   
2,021,445
     
2,286,049
 
Total equity
   
3,183,045
     
3,124,656
 
Total capital
   
5,204,490
     
5,410,705
 
   
Gearing ratio
   
0.39
     
0.42
 

 
-7-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

 
4.3
Fair value estimation -
 
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established.

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

The fair value of the investment held in Transportadora de Gas del Perú S.A. (TGP) classified as available-for-sale financial asset was based on unobservable inputs in the market; the Group calculated its fair value based on its discounted cash flows as of the financial statement date. The information used to determine the fair value of this investment corresponds to Level 3 (Note 8).

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

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

The carrying amounts of cash and cash equivalents correspond to their fair values. The Company considers that the carrying amount of trade accounts receivable and payable is similar to their fair values. The fair value of financial liabilities, disclosed in Note 12-b), has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Company for similar financial instruments (Level 2).

5
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

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

In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2015.

6
SEASONALITY OF OPERATIONS

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

-8-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

7
SEGMENT REPORTING

Operating segments are reported consistent with the internal reports that are reviewed by the Corporate General Manager, who is the chief operating decision maker, responsible for allocating resources and evaluating the performance of each operating segment.

The Group's operating segments are assessed by the activity of the following business units: (i) engineering and construction, (ii) infrastructure, (iii) real estate, (iv) technical services and (v) the operation of the Parent Company (Holding).

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

Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported to the Corporate General Manager are measured in a manner consistent with the basis of preparation of the financial statements.

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

 
-9-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
Operating segments financial position
                                                           
                                                             
Segment reporting
                                                           
                                                             
   
Engineering
   
Infrastructure 
             
Parent
             
   
and construction
   
Energy
   
Toll roads
   
Mass transit
   
Water treatment
   
Real estate
   
Technical services
   
Company Operations
   
Eliminations
   
Consolidated
 
As of December 31, 2015
                                                           
Assets.-
                                                           
Cash and cash equivalents
   
172,116
     
42,638
     
58,640
     
111,454
     
9,094
     
74,459
     
60,193
     
25,408
     
-
     
554,002
 
Financial asset at fair value through profit or loss
   
3,153
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
3,153
 
Trade accounts receivables
   
614,917
     
43,260
     
22,045
     
63,516
     
-
     
59,108
     
247,945
     
-
     
-
     
1,050,791
 
Unbilled work in progress
   
1,301,501
     
-
     
-
     
-
     
17,686
     
-
     
-
     
-
     
-
     
1,319,187
 
Accounts receivable from related parties
   
316,188
     
12,145
     
18,820
     
301
     
-
     
34,724
     
48,520
     
132,735
     
(283,280
)
   
280,153
 
Other accounts receivable
   
599,127
     
25,857
     
5,699
     
25,668
     
10,250
     
20,535
     
102,204
     
35,249
     
-
     
824,589
 
Inventories
   
159,557
     
10,025
     
-
     
13,678
     
-
     
920,092
     
61,734
     
389
     
(6,321
)
   
1,159,154
 
Prepaid expenses
   
12,899
     
2,207
     
1,401
     
10,787
     
458
     
349
     
11,402
     
520
     
-
     
40,023
 
Non-current assets classified as held for sale
   
22,511
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
22,511
 
Total current assets
   
3,201,969
     
136,132
     
106,605
     
225,404
     
37,488
     
1,109,267
     
531,998
     
194,301
     
(289,601
)
   
5,253,563
 
                                                                                 
Long-term trade accounts receivable
   
-
     
-
     
-
     
621,831
     
-
     
-
     
-
     
-
     
-
     
621,831
 
Long-term unbilled work in progress
   
-
     
40,727
     
19,027
     
-
     
-
     
-
     
-
     
-
     
-
     
59,754
 
Long-term accounts receivable from related parties
   
-
     
-
     
408
     
-
     
-
     
-
     
500
     
256,022
     
(256,930
)
   
-
 
Prepaid expenses
   
-
     
3,692
     
15,584
     
2,112
     
998
     
-
     
-
     
-
     
-
     
22,386
 
Other long-term accounts receivable
   
534
     
14,214
     
30,473
     
2,198
     
1,589
     
14,726
     
-
     
2,195
     
-
     
65,929
 
Available-for-sale financial assets
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
120,134
     
-
     
120,134
 
Investments in associates and joint ventures
   
122,717
     
8,265
     
-
     
-
     
-
     
28,732
     
9,228
     
2,582,913
     
(2,104,971
)
   
646,884
 
Investment property
   
-
     
-
     
-
     
-
     
-
     
34,702
     
-
     
-
     
-
     
34,702
 
Property, plant and equipment
   
606,158
     
198,774
     
1,624
     
217
     
-
     
11,303
     
170,660
     
130,113
     
(7,092
)
   
1,111,757
 
Intangible assets
   
302,992
     
137,130
     
364,819
     
311
     
-
     
1,043
     
37,564
     
23,561
     
13,600
     
881,020
 
Deferred income tax asset
   
126,550
     
1,325
     
3,003
     
-
     
-
     
1,171
     
39,825
     
656
     
1,321
     
173,851
 
Total non-current assets
   
1,158,951
     
404,127
     
434,938
     
626,669
     
2,587
     
91,677
     
257,777
     
3,115,594
     
(2,354,072
)
   
3,738,248
 
Total assets
   
4,360,920
     
540,259
     
541,543
     
852,073
     
40,075
     
1,200,944
     
789,775
     
3,309,895
     
(2,643,673
)
   
8,991,811
 
                                                                                 
Liabilities.-
                                                                               
Borrowings
   
652,974
     
101,096
     
55,428
     
-
     
-
     
224,380
     
91,366
     
102,776
     
-
     
1,228,020
 
Bonds
   
-
     
-
     
5,537
     
31,546
     
-
     
-
     
-
     
-
     
-
     
37,083
 
Trade accounts payable
   
1,409,982
     
35,428
     
3,768
     
24,498
     
154
     
14,334
     
134,973
     
12,623
     
-
     
1,635,760
 
Accounts payable to related parties
   
118,381
     
3,990
     
40,578
     
9,962
     
10,560
     
58,790
     
39,476
     
79,709
     
(283,616
)
   
77,830
 
Current income tax
   
19,337
     
-
     
753
     
-
     
166
     
26
     
13,750
     
84
     
-
     
34,116
 
Other accounts payable
   
645,648
     
20,340
     
2,841
     
1,682
     
-
     
257,616
     
125,020
     
12,853
     
-
     
1,066,000
 
Provisions
   
-
     
6,341
     
-
     
-
     
-
     
-
     
7,127
     
-
     
-
     
13,468
 
Total current liabilities
   
2,846,322
     
167,195
     
108,905
     
67,688
     
10,880
     
555,146
     
411,712
     
208,045
     
(283,616
)
   
4,092,277
 
                                                                                 
Borrowings
   
375,952
     
83,307
     
-
     
-
     
-
     
27,562
     
66,515
     
-
     
-
     
553,336
 
Long-term bonds
   
-
     
-
     
180,686
     
576,322
     
-
     
-
     
-
     
-
     
-
     
757,008
 
Other long-term accounts payable
   
176,644
     
-
     
493
     
-
     
-
     
-
     
68,045
     
1,214
     
-
     
246,396
 
Long-term accounts payable to related parties
   
-
     
-
     
-
     
94,172
     
24,035
     
120,083
     
38,332
     
-
     
(256,486
)
   
20,136
 
Provisions
   
24,624
     
7,034
     
-
     
-
     
-
     
-
     
3,960
     
-
     
-
     
35,618
 
Derivative financial instruments
   
-
     
2,331
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
2,331
 
Deferred income tax liability
   
52,016
     
4,250
     
107
     
9,723
     
270
     
11,937
     
3,164
     
20,197
     
-
     
101,664
 
Total non-current liabilities
   
629,236
     
96,922
     
181,286
     
680,217
     
24,305
     
159,582
     
180,016
     
21,411
     
(256,486
)
   
1,716,489
 
Total liabilities
   
3,475,558
     
264,117
     
290,191
     
747,905
     
35,185
     
714,728
     
591,728
     
229,456
     
(540,102
)
   
5,808,766
 
Equity attributable to controlling interest in the Company
   
720,722
     
255,032
     
198,345
     
78,127
     
4,890
     
158,605
     
162,550
     
3,067,987
     
(1,991,702
)
   
2,654,556
 
Non-controlling interest
   
164,640
     
21,110
     
53,007
     
26,041
     
-
     
327,611
     
35,497
     
12,452
     
(111,869
)
   
528,489
 
Total liabilities and equity
   
4,360,920
     
540,259
     
541,543
     
852,073
     
40,075
     
1,200,944
     
789,775
     
3,309,895
     
(2,643,673
)
   
8,991,811
 

 
-10-
 
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
NOT AUDITED
Operating segments financial position
                                                           
                                                             
Segment reporting
                                                           
                                                             
   
Engineering
   
Infrastructure
                                 
Parent
             
   
and construction
   
 
Energy
   
Toll roads
   
Mass transit
   
Water treatment
   
Real estate
   
Technical services
   
Company Operations
   
 
Eliminations
   
 
Consolidated
 
As of December 31, 2016
                                                           
Assets.-
                                                           
Cash and cash equivalents
   
93,543
     
35,396
     
110,007
     
139,414
     
3,229
     
58,892
     
53,521
     
126,464
     
550
     
621,016
 
Financial asset at fair value through profit or loss
   
352
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
352
 
Trade accounts receivables
   
358,280
     
84,996
     
23,579
     
97,079
     
256
     
83,704
     
481,473
     
-
     
-
     
1,129,367
 
Unbilled work in progress
   
1,267,095
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
1,267,095
 
Accounts receivable from related parties
   
374,979
     
3,255
     
19,684
     
392
     
12,379
     
7,284
     
48,538
     
61,528
     
(293,250
)
   
234,789
 
Other accounts receivable
   
407,196
     
58,232
     
6,189
     
25,895
     
4,841
     
20,198
     
100,420
     
752,133
     
-
     
1,375,104
 
Inventories
   
109,883
     
12,561
     
-
     
16,862
     
-
     
946,657
     
68,336
     
388
     
(13,502
)
   
1,141,185
 
Prepaid expenses
   
9,205
     
2,614
     
1,429
     
17,265
     
167
     
329
     
19,475
     
305
     
-
     
50,789
 
Non-current assets classified as held for sale
   
22,385
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
22,385
 
Total current assets
   
2,642,918
     
197,054
     
160,888
     
296,907
     
20,872
     
1,117,064
     
771,763
     
940,818
     
(306,202
)
   
5,842,082
 
                                                                                 
Long-term trade accounts receivable
   
-
     
-
     
-
     
629,310
     
-
     
-
     
22,968
     
-
     
-
     
652,278
 
Long-term unbilled work in progress
   
-
     
-
     
24,165
     
-
     
-
     
-
     
-
     
-
     
-
     
24,165
 
Long-term accounts receivable from related parties
   
-
     
-
     
408
     
-
     
-
     
-
     
492
     
156,791
     
(157,691
)
   
-
 
Prepaid expenses
   
-
     
-
     
20,554
     
2,029
     
943
     
-
     
-
     
-
     
-
     
23,526
 
Other long-term accounts receivable
   
10,025
     
31,618
     
22,924
     
225,565
     
7,347
     
17,887
     
1,406
     
11,110
     
-
     
327,882
 
Investments in associates and joint ventures
   
117,593
     
8,530
     
-
     
-
     
-
     
31,769
     
9,591
     
2,689,979
     
(2,680,839
)
   
176,623
 
Investment property
   
-
     
-
     
-
     
-
     
-
     
49,357
     
-
     
-
     
-
     
49,357
 
Property, plant and equipment
   
602,236
     
192,167
     
1,243
     
193
     
21
     
13,008
     
217,730
     
130,420
     
(17,692
)
   
1,139,326
 
Intangible assets
   
305,494
     
123,672
     
456,000
     
269
     
-
     
950
     
101,989
     
22,794
     
18,647
     
1,029,815
 
Deferred income tax asset
   
162,862
     
4,983
     
1,839
     
-
     
-
     
623
     
61,862
     
26,555
     
7,094
     
265,818
 
Total non-current assets
   
1,198,210
     
360,970
     
527,133
     
857,366
     
8,311
     
113,594
     
416,038
     
3,037,649
     
(2,830,481
)
   
3,688,790
 
Total assets
   
3,841,128
     
558,024
     
688,021
     
1,154,273
     
29,183
     
1,230,658
     
1,187,801
     
3,978,467
     
(3,136,683
)
   
9,530,872
 
                                                                                 
Liabilities.-
                                                                               
Borrowings
   
576,417
     
82,063
     
-
     
-
     
-
     
206,456
     
158,146
     
90,564
     
-
     
1,113,646
 
Bonds
   
-
     
-
     
25,540
     
20,551
     
-
     
-
     
-
     
-
     
-
     
46,091
 
Trade accounts payable
   
1,299,935
     
59,830
     
2,310
     
23,882
     
599
     
30,618
     
284,288
     
6,703
     
-
     
1,708,165
 
Accounts payable to related parties
   
118,665
     
3,902
     
27,757
     
33,009
     
237
     
66,190
     
56,528
     
67,685
     
(292,557
)
   
81,416
 
Current income tax
   
1,098
     
3,631
     
44
     
-
     
1,064
     
17,944
     
5,000
     
-
     
-
     
28,781
 
Other accounts payable
   
579,346
     
11,706
     
10,512
     
14,622
     
27
     
194,441
     
182,963
     
18,443
     
-
     
1,012,060
 
Provisions
   
-
     
6,441
     
-
     
-
     
-
     
131
     
13,746
     
-
     
-
     
20,318
 
Total current liabilities
   
2,575,461
     
167,573
     
66,163
     
92,064
     
1,927
     
515,780
     
700,671
     
183,395
     
(292,557
)
   
4,010,477
 
                                                                                 
Borrowings
   
246,315
     
80,657
     
-
     
-
     
-
     
16,541
     
76,077
     
406,115
     
-
     
825,705
 
Long-term bonds
   
-
     
-
     
338,143
     
583,480
     
-
     
-
     
-
     
-
     
-
     
921,623
 
Other long-term accounts payable
   
135,740
     
-
     
493
     
246,522
     
-
     
32,000
     
84,996
     
2,433
     
-
     
502,184
 
Long-term accounts payable to related parties
   
-
     
-
     
-
     
87,200
     
23,445
     
40,074
     
30,197
     
395
     
(157,664
)
   
23,647
 
Provisions
   
12,283
     
17,115
     
-
     
-
     
-
     
-
     
1,272
     
-
     
-
     
30,670
 
Derivative financial instruments
   
-
     
1,081
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
1,081
 
Deferred income tax liability
   
32,578
     
4,112
     
1,518
     
16,983
     
283
     
15,564
     
14,471
     
5,320
     
-
     
90,829
 
Total non-current liabilities
   
426,916
     
102,965
     
340,154
     
934,185
     
23,728
     
104,179
     
207,013
     
414,263
     
(157,664
)
   
2,395,739
 
Total liabilities
   
3,002,377
     
270,538
     
406,317
     
1,026,249
     
25,655
     
619,959
     
907,684
     
597,658
     
(450,221
)
   
6,406,216
 
Equity attributable to controlling interest in the Company
   
718,719
     
266,532
     
220,337
     
96,019
     
3,528
     
234,449
     
236,603
     
3,367,228
     
(2,542,535
)
   
2,600,880
 
Non-controlling interest
   
120,032
     
20,954
     
61,367
     
32,005
     
-
     
376,250
     
43,514
     
13,581
     
(143,927
)
   
523,776
 
Total liabilities and equity
   
3,841,128
     
558,024
     
688,021
     
1,154,273
     
29,183
     
1,230,658
     
1,187,801
     
3,978,467
     
(3,136,683
)
   
9,530,872
 
 
 
 
 
-11-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
Operating segment performance
                                                           
                                                             
Segment Reporting
                                                           
                                                             
   
Engineering
   
Infrastructure
               
Parent
             
   
and
construction
   
Energy
   
Toll roads
   
Mass
transit
   
Water
treatment
   
Real
estate
   
Technical
services
   
Company
operations
   
Eliminations
   
Consolidated
 
Year 2015 -
                                                           
                                                             
                                                             
Revenue
   
5,841,559
     
389,377
     
394,462
     
211,279
     
27,994
     
215,764
     
1,152,544
     
70,531
     
(471,077
)
   
7,832,433
 
Gross profit (loss)
   
357,274
     
63,530
     
78,544
     
48,804
     
2,225
     
51,755
     
178,303
     
(7,004
)
   
(70,626
)
   
702,805
 
Administrative expenses
   
(289,144
)
   
(18,214
)
   
(10,319
)
   
(10,529
)
   
(310
)
   
(20,521
)
   
(115,018
)
   
(29,882
)
   
80,557
     
(413,380
)
Other income and expenses
   
30,616
     
1,365
     
55
     
2
     
-
     
1,759
     
15,348
     
11,114
     
(2,972
)
   
57,287
 
Loss from the sale of investments
                   
-
     
-
     
-
     
-
     
(8,289
)
   
-
     
-
     
(8,289
)
Operating profit (loss)
   
98,746
     
46,681
     
68,280
     
38,277
     
1,915
     
32,993
     
70,344
     
(25,772
)
   
6,959
     
338,423
 
Financial expenses
   
(127,383
)
   
(19,953
)
   
(4,713
)
   
(5,303
)
   
(45
)
   
(11,642
)
   
(32,246
)
   
(2,818
)
   
27,301
     
(176,802
)
Financial income
   
8,875
     
158
     
8,722
     
2,316
     
121
     
746
     
2,145
     
56,101
     
(41,077
)
   
38,107
 
Share of the profit or loss
                                                                               
in associates and joint ventures under the equity
                                                                               
method of accounting
   
(2,234
)
   
944
     
-
     
-
     
-
     
14,888
     
589
     
76,226
     
(72,810
)
   
17,603
 
Profit (loss) before income tax
   
(21,996
)
   
27,830
     
72,289
     
35,290
     
1,991
     
36,985
     
40,832
     
103,737
     
(79,627
)
   
217,331
 
Income tax
   
(29,441
)
   
(7,650
)
   
(18,794
)
   
(10,630
)
   
(520
)
   
(7,649
)
   
6,102
     
(9,208
)
   
2,171
     
(75,619
)
Profit (loss) for the year
   
(51,437
)
   
20,180
     
53,495
     
24,660
     
1,471
     
29,336
     
46,934
     
94,529
     
(77,456
)
   
141,712
 
                                                                                 
Profit (loss) attributable to:
                                                                               
                                                                                 
Owners of the Company
   
(64,379
)
   
17,072
     
40,010
     
18,495
     
1,471
     
12,377
     
40,322
     
95,271
     
(72,485
)
   
88,154
 
Non-controlling interest
   
12,942
     
3,108
     
13,485
     
6,165
     
-
     
16,959
     
6,612
     
(742
)
   
(4,971
)
   
53,558
 
     
(51,437
)
   
20,180
     
53,495
     
24,660
     
1,471
     
29,336
     
46,934
     
94,529
     
(77,456
)
   
141,712
 
 
 
-12-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
NOT AUDITED
 
Operating segment performance
                                                           
                                                             
Segment Reporting
                                                           
                                                             
   
Engineering
   
Infrastructure
                                 
Parent
             
   
and
construction
   
 
Energy
   
Toll roads
   
Mass
transit
   
Water
treatment
   
Real
estate
   
Technical
services
   
Company
operations
   
 
Eliminations
   
 
Consolidated
 
Year 2016 -
                                                           
                                                             
                                                             
Revenue
   
3,730,785
     
382,211
     
264,384
     
247,040
     
18,459
     
411,518
     
1,419,011
     
60,575
     
(478,697
)
   
6,055,286
 
Gross profit (loss)
   
245,146
     
42,129
     
75,780
     
42,473
     
5,698
     
136,540
     
190,677
     
(6,027
)
   
(92,832
)
   
639,584
 
Administrative expenses
   
(251,179
)
   
(14,848
)
   
(10,185
)
   
(12,952
)
   
(786
)
   
(28,430
)
   
(120,156
)
   
(108,960
)
   
83,522
     
(463,974
)
Other income and expenses
   
45,688
     
(1,897
)
   
128
     
10
     
-
     
838
     
4,221
     
3,838
     
(3,922
)
   
48,904
 
Gain from the sale of investments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
30,357
     
-
     
30,357
 
Operating profit (loss)
   
39,655
     
25,384
     
65,723
     
29,531
     
4,912
     
108,948
     
74,742
     
(80,792
)
   
(13,232
)
   
254,871
 
Financial expenses
   
(61,329
)
   
(8,852
)
   
(6,478
)
   
(2,810
)
   
(38
)
   
(14,388
)
   
(31,062
)
   
(49,135
)
   
11,639
     
(162,453
)
Financial income
   
12,728
     
1,035
     
1,145
     
8,037
     
86
     
2,816
     
4,212
     
17,916
     
(23,797
)
   
24,178
 
Share of the profit or loss
                                                                               
in associates and joint ventures under the equity
                                                                               
method of accounting
   
17,586
     
1,629
     
-
     
-
     
-
     
6,850
     
360
     
5,155
     
(32,929
)
   
(1,349
)
Profit before income tax
   
8,640
     
19,196
     
60,390
     
34,758
     
4,960
     
104,226
     
48,252
     
(106,856
)
   
(58,319
)
   
115,247
 
Income tax
   
(10,116
)
   
(5,872
)
   
(15,490
)
   
(10,904
)
   
(1,433
)
   
(27,054
)
   
(19,282
)
   
39,999
     
6,567
     
(43,585
)
Profit (loss) for the year
   
(1,476
)
   
13,324
     
44,900
     
23,854
     
3,527
     
77,172
     
28,970
     
(66,857
)
   
(51,752
)
   
71,662
 
                                                                                 
Profit (loss) attributable to:
                                                                               
                                                                                 
Owners of the Company
   
1,851
     
10,661
     
29,284
     
17,891
     
3,527
     
22,106
     
26,271
     
(65,982
)
   
(37,004
)
   
8,605
 
Non-controlling interest
   
(3,327
)
   
2,663
     
15,616
     
5,963
     
-
     
55,066
     
2,699
     
(875
)
   
(14,748
)
   
63,057
 
     
(1,476
)
   
13,324
     
44,900
     
23,854
     
3,527
     
77,172
     
28,970
     
(66,857
)
   
(51,752
)
   
71,662
 
 
 
-13-
 

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

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

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

8
AVAILABLE-FOR-SALE FINANCIAL ASSETS

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

At December 31, 2015, the fair value of the Group’s interest in TGP amounted to S/120.1 million; on March 31,2016 the Company decided to transfer its total interest of 1.64% to the company Enagás International S.L.U.; the amount of the transfer was for US$31.9 million (S/107.28 million).

9
TRANSACTIONS WITH RELATED PARTIES

a)
Transactions with related parties -

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

   
From the period
ended December 31,
 
    2015     2016  
             
Revenue from sale of goods and services:
           
             
- Associates
   
1,400
     
112,524
 
- Joint operations
   
52,384
     
36,901
 
     
53,784
     
149,425
 
Inter-company services were agreed upon under market terms as if they had been agreed to with third parties.

b)
Balances of transactions with related parties


-14-

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

 
    At December 31,         At December 31,     
    2015        2016     
   
Receivable
    Payable     Receivable     Payable  
Joint operations:                          
Consorcio Constructor Ductos del Sur      154,383       -       117,461       -  
Consorcio GyM Conciviles      57,679       -       61,006       -  
Consorcio Rio Urubamba
   
10,856
      2,819       9,072       -  
Consorcio Peruano de Conservación
   
6,270
      -       8,784       -  
Consorcio Vial Quinua
   
-
     
-
     
4,198
     
738
 
Consorcio Italo Peruano
   
465
     
21,907
     
4,174
     
17,325
 
Consorcio La Gloria
   
3,116
     
3,077
     
3,521
     
3,080
 
Terminales del Perú
   
9,459
     
-
     
3,215
     
259
 
Consorcio Rio Mantaro
   
6,021
     
15,941
     
3,191
     
6,886
 
Bechtel Vial y Vives Servicios
   
-
     
-
     
1,818
     
67
 
 
Consorcio Terminales
    3,235       -       1,326       -  
Consorcio Lima Actividades Comerciales
   
-
      -       1,283       77  
Consorcio Norte Pachacutec    
1,026
      669       1,017       620  
Consorcio Vial Sierra
   
-
     
-
      940      
5,400
 
Consorcio Constructor Chavimochic
   
2,558
     
6,422
      915      
2,471
 
Consorcio Constructor Alto Cayma
   
387
     
-
      510      
37
 
Energía y Vapor
   
3,328
     
-
      491      
3,203
 
Consorcio Lima
   
1,430
     
-
      153      
157
 
Consorcio Construcciones y Montajes
   
112
      2,533       112       -  
Consorcio Ermitaño
   
-
     
-
      83      
6,372
 
Consorcio Menegua
   
1,910
      -       30       3,803  
Consorcio Huacho Pativilca
   
80
      5,041       -       3,434  
Consorcio para la atención y mantenimiento de ductos  
    -      
-
      -      
21,791
 
Adexus S.A.
   
8,521
      -       -       -  
Ingeniería y Construcción Sigdo Koppers-Vial
   
2,659
      3,900       -       -  
Constructora Incolur DSD Ltda.
   
1,681
      -       -       -  
Complementarios Ltda.
   
84
      6,956       -       -  
Other minor
   
4,893
     
4,275
     
2,412
     
1,260
 
     
280,153
     
73,540
     
225,712
     
76,980
 
Other related parties:
                               
Peru Piping Spools SAC      -        -      
9,077
       -  
Ferrovias Argentina
   
-
     
20,136
     
-
     
23,647
 
Arturo Serna
   
-
     
4,290
             
4,436
 
     
-
     
24,426
     
9,077
     
28,083
 
Less non-current portion:
   
280,153
     
97,966
     
234,789
     
105,063
 
Ferrovias Argentina
   
-
     
( 20,136
)
   
-
     
( 23,647
)
Current portion
   
280,153
     
77,830
     
234,789
     
81,416
 
 
Accounts receivable and payable have no specific guarantees.

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

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

10
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

As of December 31, 2016, associates in which the Group has significant influence are similar to those existing as of December 31, 2015, except for the acquisitions mentioned.

The movement of our investments in associates for the period ended December 31, 2015 and December 31, 2016 is as follows:
 

 
-15-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

    2015     2016  
             
Beginning balance
   
229,563
     
646,884
 
Acquisition and/or contributions received
   
481,639
     
-
 
Increase in capital
   
-
     
405,703
 
Decrease in capital
   
( 3,364
)
   
( 1,963
)
Change in corporate structure of Panorama project
   
( 39,180
)
   
-
 
Share of the profit and loss in associates
               
under the equity method of accounting
   
34,872
     
( 1,349
)
Dividends received
   
( 51,960
)
   
( 27,992
)
Acquisition of control - Adexus
   
-
     
( 46,126
)
Contract adjustment - Gasoducto Sur Peruano
   
-
     
( 811,380
)
Remediation in invesment
   
-
     
10,256
 
Other
   
( 4,686
)
   
2,590
 
Ending balance
   
646,884
     
176,623
 

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

On November 2015, subsidiary Negocios del Gas SA. adquired an interest of 20% of concessionaire Gasoducto Sur Peruano, which represents an investment of approximately US$248 million, at December 2015 the contribution was S/391 million and at December 2016 its contribution was increased in S/198.3 million.

11
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

For the period ended December 31,2015 and 2016, the movement in property, plant and equipment and intangible assets accounts was as follows:

   
Property,
       
   
plant and
   
Intangible
 
   
equipment
   
assets
 
   
At January 1, 2015
   
1,147,018
     
778,743
 
   
Additions
   
297,956
     
183,136
 
Transfers, disposals and adjustments
   
(79,990
)
   
8,496
 
Deductions for sale of assets
   
(38,447
)
   
-
 
Depreciation, amortization
   
(214,780
)
   
(89,355
)
Net cost at December 31, 2015
   
1,111,757
     
881,020
 
   
   
At January 1, 2016
   
1,111,757
     
881,020
 
 
Additions
   
269,691
     
138,480
 
Acquisition of subsidiary - net
   
41,988
     
62,551
 
Transfers, disposals and adjustments
   
(30,890
)
   
32,221
 
Deductions for sale of assets
   
(52,084
)
   
-
 
Depreciation, amortization
   
(201,136
)
   
(84,457
)
Net cost at December 31, 2016
   
1,139,326
     
1,029,815
 

 
-16-
 
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

 
As of December 31, 2015 and 2016, additions to property, plant and equipment comprise of acquisition of plant and equipment intended for the Group’s operations.

As of December 31, 2015 and 2016, the amounts registered in Intangible assets comprise of investments in building the second Ancón-Huacho-Pativilca road section of the Panamericana Norte highway (concession under intangible model ) and acquisitions by Adexus business combination.

Goodwill -

Management reviews the results of its business operations based on the type of economic activity carried out. The economic activities that have given rise to goodwill for the Group were engineering and construction, electro-mechanical works, mining services, IT services and telecommunications services.
 
Goodwill by cash-generating units is broken down as follows:

 
 
At December 31,
   
At December 31,
 
   
2015
   
2016
 
Engineering and construction
   
140,090
     
141,734
 
Electromechanical
   
20,737
     
20,737
 
Mining and construction services
   
13,366
     
13,366
 
Telecommunications services
   
6,443
     
6,728
 
IT equipment and services
   
4,172
     
11,275
 
     
184,808
     
193,840
 
 
As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on its value in use. Value in use is determined based on the future cash flows expected to be generated by the assessed CGU. As a result of these assessments no provisions for impairment were required. As of December 31, 2016 same criteria were applied as those in test impairment at December 31, 2015.

12
BORROWINGS

This item comprises:

    Total         Current         Non-current      
   
At
December
31, 2015
   
At
December
31, 2016
   
At
December
31, 2015
   
At
December
31, 2016
   
At
December
31, 2015
   
At
December
31, 2016
 
                                     
Bank loans
   
1,480,071
     
1,699,188
     
1,082,860
     
996,344
     
397,211
     
702,844
 
Leases
   
301,285
     
240,163
     
145,160
     
117,302
     
156,125
     
122,861
 
     
1,781,356
     
1,939,351
     
1,228,020
     
1,113,646
     
553,336
     
825,705
 
      
a) Bank loans -
 
As of December 31, 2016 and 2015, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 1.0% and 14.4% in 2016 and between 1.0% and 13.1% in 2015.
 

 
-17-
 
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
                                     
               
Current  
    Non-current       
   
Interest
rate
   
Date of
maturity
   
At
December
31, 2015
   
At
December
31, 2016
    At
December
31, 2015
   
At
December
31, 2016
 
GyM S.A.
  1.00% / 7.80%
 
   
2016 / 2020
     
535,776
     
495,464
     
286,671
     
187,029
 
Graña y Montero S.A.A.
 
Libor USD 3M +4.9%
     
2016 / 2020
     
102,776
     
90,564
     
-
     
406,114
 
Viva GyM S.A.
  6.75% / 8.90%
 
   
2016 / 2017
     
220,423
     
201,609
     
8,372
     
-
 
GMP S.A.
  3.65% / 6.04%
 
   
2016 / 2020
     
95,824
     
77,857
     
70,220
     
71,622
 
CAM Holding S.A.
  1.30% / 14.43%
 
   
2016 / 2020
     
42,534
     
69,702
     
31,948
     
24,889
 
Adexus S.A.
  5.90%
 
   
2019
     
-
     
42,782
     
-
     
13,190
 
GMD S.A.
  6.20% / 7.47%
 
   
2016 / 2017
     
30,107
     
14,746
     
-
     
-
 
CAM Servicios Perú S.A.
  6.39% / 7.18%
 
   
2017
     
-
     
3,620
     
-
     
-
 
GMI S.A.
  5.56% / 6.55%
 
   
2016
     
714
     
-
     
-
     
-
 
Norvial S.A.
  8.37%
 
   
2016
     
54,706
     
-
     
-
     
-
 
                     
1,082,860
     
996,344
     
397,211
     
702,844
 
 
As of December 31, 2016, the Company maintained unused credit limits for S/3,933 million, which expire within one year (S/4,666 million as of December 31, 2015).

b)
Fair value of borrowings -

The carrying amount and fair value of borrowings are broken down as follows:
 
 
  Carrying amounts          Fair value       
 
 
At December
31, 2015
   
At December
31, 2016
   
At December
31, 2015
   
At December
31, 2016
 
 
Total loans
   
1,781,356
     
1,939,351
     
1,802,183
     
2,057,400
 

The fair value is based on cash flows discounted using a rate based on the borrowing rate of 1.3% and 14.3% (4.8% and 13.1% in 2015). It should be noted that the interest rate used are those applicable and negotiated by each Company.

13
BONDS

This item is broken down as follows:

    Total          Current         Non-current       
   
At
December
31, 2015
    At
December
31, 2016
    At
December
31, 2015
    At
December
31, 2016
    At
December
31, 2015
    At
December
31, 2016
 
                                                 
GyM Ferrovías (a)
   
607,868
     
604,031
     
31,546
     
20,551
     
576,322
     
583,480
 
Norvial (b)
   
186,223
     
363,683
     
5,537
     
25,540
     
180,686
     
338,143
 
     
794,091
     
967,714
     
37,083
     
46,091
     
757,008
     
921,623
 

a)
GyM Ferrovías S.A. -

In February 2015 subsidiary GyM Ferrovías issued corporate bonds under the U.S. Regulation S. This issue was carried out in Peruvian Soles VAC (the Spanish acronym for constant value update) for a total amount of S/629 million. The issues costs for this transactions were for S/22 million. Maturity of these bonds is November 2039 and bear interest at a rate of 4.75% (plus VAC adjustment), they have a risk rating of AA+ (local grading) granted by Apoyo & Asociados Internacionales Clasificadora de Riesgo and a collateral structure that includes a mortgage on the concession to which GyM Ferrovías is a concessionaire, security on the shares of GyM Ferrovías, Assignment of the collection rights arising from the Management Trust, a Cash Flow and Reserve Trust for the Service of the Debt, Operation and Maintenance and in-progress Capex. At December 31, 2016 the Group made a payment of S/38.4 million.
-18-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED

Capital raised from bond issue were used in amortizing a short-term loan with Banco de Crédito del Perú – BCP for S/400 million, funding the reserve accounts, payment of costs of bond issue and partial repayment of the subordinated loan obtained from parent Company by GyM Ferrovías.

At December 31, 2016 the balance includes accrued interest payable for S/32.9 million.

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

-
Debt service coverage ratio of not less than 1.2 times.
-
Keeping a constant minimum balance of trust equal to a quarter of operating and maintenance costs (including VAT)
-
Keeping a constant minimum balance of trust equal to two coupons as per schedule.

b)
Norvial S.A. -

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

At December 31, 2016 the balance included interest payables for S/4.9 million (S/2.7 million at December 31, 2015)

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

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

As of December 31,2016 and December 31,2015 both Companies have complied with their covenants.

Fair value of the bonds of both Companies at December 31, 2016 amounted to S/1,055 million (at December 31,2015 amounted to S/769.5 million), which has been calculated based on the discounted cash flows, using rates between 4.20% and 7.99% (rates between 4.88% and 8.89% at December 31,2015 ) which are within level 2 of the fair value hierarchy.

14
PROVISIONS

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

   
At December 31, 2015
   
At December 31, 2016
 
                 
Current portion
   
13,468
     
20,318
 
Non-current portion
   
35,618
     
30,670
 
     
49,086
     
50,988
 


-19-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
The movement of this item for the period ended December 31, 2015 and 2016 is as follows:
 
   
Legal
claims
   
Contingent
liabilities from
acquisitions
   
Provisions
for the acquisition
of CAM
   
Provision
for well
closure
    Total  
At January 1, 2015
   
13,056
     
33,197
     
12,152
     
7,210
     
65,615
)
Additions
   
6,297
     
-
     
-
      1,707       6,398  
101    
6,398
             
-
                 
Translation adjustment
   
( 420
)
   
( 3,835
)
   
( 537
)
   
-
      (4,792 )
Reversals
   
-
     
-
     
( 7,796
)
   
-
      (7,796 )
Offsetting
   
-
     
( 1.216
)
           
-
      (1,216 )
CAM Brasil deconsolidation
   
( 2,353
)
   
-
      -      
-
     
( 2,353
)
Payments
   
( 1,580
)
   
( 5,1 86
)
    -      
( 4
)
   
( 6,7 70
)
At December 31, 2015
   
15,000
     
22,960
      3,819      
7,307
     
49,086
)
                                         
At January 1, 2016
   
15,000
     
22,960
     
3,819
     
7,307
     
49,086
 
Additions
   
2,838
             
6,467
     
12,304
     
21,609
 
Acquisition of subsidiaries
           
1,149
                     
1,149
 
Translation adjustment
   
12
     
559
     
346
     
-
     
917
 
Reversals
   
( 895
)
   
( 14,064
)
   
( 3,819
)
   
-
     
( 18,778
)
Payments
   
( 298
)
   
( 3 02
)
   
-
     
-
     
( 6 00
)
At December 31, 2016
   
16,657
     
10,302
     
6,813
     
17,216
     
50,988
 
Reversals for the period ended December 31, 2016 mainly consists of write-offs of provisions recognized in conjunction with the purchase price allocation related to acquisition of CAM Chile in S/3.8 million (S/7.8 million as of December 31, 2015), and acquisition of Morelco and VyV DSD in S/10.1million and S/4.3 million, respectively.

15
CAPITAL

As of December 31, 2015 and 2016, the authorized, subscribed and paid-in capital, according to the Company’s bylaws as amended, is represented by 660,053,790 common shares at S/1.00 par value each.

As of December 31, 2015, the amount of 250,860,370 common shares is represented by 50,172,074 ADSs, at 5 shares per ADS.

As of December 31, 2016, the amount of 264,817,035 common shares is represented by 52,963,407 ADSs, at 5 shares per ADS.

16
EXPENSES BY NATURE

For the period ended December 31, 2015 and 2016, this item comprises:
-20-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
   
Cost of
services
and goods
   
Adminis-
trative-
expenses
 
2015
       
 
Inventories, materials and consumables used    
1,094,836
     
-
 
Personnel charges
   
2,128,130
     
215,101
 
Services provided by third-parties
   
2,924,711
     
137,980
 
Taxes
   
37 , 129
     
1,919
 
Other management charges
   
651 , 057
     
30,220
 
Depreciation
   
199 , 015
     
18,055
 
Amortization
   
81 , 841
     
7,514
 
Impairment
   
12 , 909
     
2,591
 
     
7,129,628
     
413,380
 
2016
               
Inventories, materials and consumables used
   
942,354
     
-
 
Personnel charges
   
1,559,387
     
235,623
 
Services provided by third-parties
   
2,260,800
     
90,996
 
Taxes
   
13 , 913
     
1,759
 
Other management charges
   
359 , 635
     
42,321
 
Depreciation
   
191 , 367
     
12,090
 
Amortization
   
75 , 452
     
9,005
 
Impairment
   
12 , 794
     
72,180
 
     
5,415,702
     
463,974
 

17
INCOME TAX

These condensed interim consolidated financial statements for the period ended December 31, 2016, income tax expense is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to December 31,2016 is 37.82% (35% for the period ended December 31, 2015). The variation of the effective rate as compared to the previous year is due to the effect of the permanent differences in the income tax calculation.

18
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

As of December 31, 2016, contingencies held by the Group are substantially the same as those existing as of December 31, 2015.

In addition the Group had guarantee commitments with different financial institutions securing transactions in the amount of US$330.7 million.

19
DIVIDENDS

For the period ended December 31, 2016 , the Group has paid dividends to its non-controlling subsidiaries participate by S/25.5 million (S/4.5 million for the same period in 2015).

Dividends from the year ended December 31, 2015, of S/0.0467 per share totaling S/ 30,853,485 were approved at the General Shareholders’ meeting held on March 29, 2016, and and was paid on April 27, 2016.
-21-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
 
20
BUSINESS COMBINATIONS

a)
Acquisition of Adexus S.A.

In June 2015 the Company acquired a 44% interest in a Chilean entity called Adexus S.A., which is mainly engaged in providing IT services and solutions. At December 31, 2015 the Company arrived at the conclusion that joint control existed and that this business arrangement qualified as a joint venture. Accordingly, this investment was recognized under the equity method of accounting (EM) in the Group’s consolidated financial statements.

In January 2016 the Company acquired an additional 8% interest in this entity, for a total 52% interest in the capital stock of Adexus S.A. The consideration paid by the Company was $1,750,000 thousand Chilean pesos (equivalent to S / 8,307,000) settled in cash. This increased interest in capital stock did not change the classification of the investment as a joint venture.

Subsequently, in August 2016, the Company acquired an additional interest of 39.03%, for a total interest in the entity’s capital stock of 91.03%; and thus, control was obtained. The consideration paid by the Company for these additional interest totaled $2,720,000 thousand Chilean pesos (equivalent to S/14,040,000) which was settled through debt capitalization.

This acquisition is part of the Group’s business plan to have the largest market share in Latin America by merging the business unit of IT solutions services provided by subsidiary GSD S.A.
into those of Adexus S.A.

The Company has achieved a business combination in stages; and therefore, it applied the acquisition method of accounting at the date of acquiring the additional 39.03% interest. For this purpose, a PPA (“ purchase price allocation ”) exercise was performed at the acquisition date. The table below shows the consideration paid by Adexus and the determination of the fair values of the acquired assets, the assumed liabilities and non-controlling interest at the date of acquisition:
 
    Provisional values      
    S/000       US$000     
                 
Cash and cash equivalents
   
7,737
     
2,303
 
Trade accounts receivables
   
107,426
     
31,972
 
Accounts receivable from related parties
   
2,610
     
777
 
Other accounts receivable
   
1,160
     
345
 
Inventories
   
1,647
     
490
 
Prepaid expenses
   
11,587
     
3,449
 
Long-term trade accounts receivable
   
29,829
     
8,878
 
Other long-term accounts receivable
   
2,063
 
   
614
 
Property, plant and equipment
   
41,988
     
12,946
 
Intangible assets
   
55,448
     
16,503
 
Deferred income tax asset
   
11,815
     
3,516
 
Borrowings
   
(108,808
)
   
(32,383
)
Trade accounts payable
   
(59,399
)
   
(17,678
)
Accounts payable to related parties
   
(29,724
)
   
(8,846
)
Other accounts payable
   
(10,643
)
   
(3,168
)
Other provisions
   
(1,926
)
   
(573
)
Contingent liabilities
   
(1,149
)
   
(342
)
Deferred income tax liability Fair value of net assets
   
(12,390
)
   
(3,688
)
                 
      49,270       14,664  
                 
Non-controlling interest (8.97%)
   
(4,420
)
   
(1,315
)
Fair value of the subsidiary
   
44,850
     
13,349
 
                 
Amount paid for the purchase 
   
14,040
     
4,179
 
Fair value of interest                 
Previously purchased      37,914       11,284  
Fair value consideration
   
51,954
     
15,463
 
Godwill (Nota 11)
   
7,103
     
2,114
 


-22-
(All amounts are expressed in thousands of S/ unless otherwise stated)
UNAUDITED
Losses resulting from re-measurement at fair value of the previously held interest was S/8,211 thousand; which was recognized in the statement of income at the date of acquisition of the additional interest.

Costs of acquisition amounting to S/1.4 million were charged to profit or loss within administrative expenses.

Income and expenses arising during the period from the acquisition date and December 31, 2016 amounted to S/114 million and S/3.1 million, respectively.

If Adexus had been consolidated from January 1, 2016, revenue and profits obtained would have been S/272.7 million and S/20.2 million, respectively.

21
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

Between December 31, 2016 and the date of approval of the condensed interim consolidated financial statements, there have been no subsequent events that may affect the fairness of the financial statements issued.

-23-
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