HELLENIC OPEN UNIVERSITY SCHOOL OF SOCIAL SCIENCES
MASTER IN BUSINESS ADMINISTRATION (MBA) “Construction industry in Greece: the impact of the economic crisis”
by Kapeni Maria
Supervisor: Michalis Bekiaris
Athens,Greece,
May 2020
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“Η επίδραση της οικονομικής κρίσης στον κατασκευαστικό κλάδο στην Ελλάδα.”
Καπενή Μαρία
Supervising Committee
Supervisor: Co-Supervisor: Μπεκιάρης Μιχαήλ Αρτίκης Παναγιώτης
Αθήνα,Μάιος 2020
“Firstly , I want to thanks a lot my supervisor for his help during this dissertation and of course all my family for their support all the years of my studies ”
Undergraduate Thesis / Postgraduate Dissertation 1 Abstract
The present study focuses on the analysis of the Greek construction industry not only during but also after the economic crisis. We first referred to the crisis that erupted in America, how this phenomenon is spread to Europe, and finally we focused on how the crisis affects Greece and the way businesses deal with it. Then we proceed with the financial analysis of three of the largest construction companies in Greece and we interpret their performance on a 10-year basis from 2008 to 2018. The above analysis is realized with the help of indexes focusing on four main parameters of liquidity, profitability, activity and capital structure.
The results of the analysis enable us to identify the extent to which the financial crisis has affected the companies in the construction sector, to what degree , which is their overall performance during this period and how they deal with it. According to the analysis that we have done and the indexes that we have calculated it seems that the construction sector has been significantly affected by the financial crisis and this is reflected in the serious decrease in the financial elements of the companies that we analyzed. Losses during the crisis were numerous with many businesses shutting down, others merging and others suspending their operation. This situation led as it is expected to the shrinkage of the construction industry and the reduction of thousands of jobs. Moreover , the whole negative situation of the sector seems to have contributed to the real estate market where the private home prices have fallen but property tax has increased and the demand for new housing has almost disappeared.
Finally, we summarize the conclusions that we have drawn from the results of the financial ratios that we have calculated and we referred to the industry's prospects in the coming years and some suggestions for their proper functioning.
Keywords
Financial crisis, construction industry, financial analysis
Undergraduate Thesis / Postgraduate Dissertation 2 Περίληψη
Η παρούσα διπλωματική εργασία εστιάζει στην ανάλυση του κατασκευαστικού κλάδου στην Ελλάδα τόσο κατά την διάρκεια όσο και στην διαχείρηση των επιχειρήσεων μετά το ξέσπασμα της οικονομικής κρίσης . Αρχικά αναφερθήκαμε στην κρίση που ξέσπασε στην Αμερική , πώς το φαινομένο αυτό εξαπλώθηκε στην Ευρώπη και τέλος εστιάσαμε πως η κρίση επηρέασε την Ελλάδα και στον τρόπο που οι επιχειρήσεις την αντιμετώπισαν. Στην συνέχεια προχωρήσαμε στη χρηματοοικονομική ανάλυση που έχουμε πραγματοποιήσει και αφορά τρεις από τις μεγαλύτερες εταιρείες του κλάδου των κατασκευων στην Ελλάδα και ερμηνευεται η πορεία τους σε μία δεκαετή βάση από το 2008 έως και το 2018. Η παραπάνω ανάλυση γίνεται με την βοήθεια αριθμοδεικτών εστιάζοντας σε τέσσερις βασικούς πυλώνες την ρευστότητα, την αποδοτικότητα , την δραστηριότητα και την διάρθρωση κεφαλαιού .
Τα αποτελέσματα της ανάλυσης μας δίνουν την δυνατότητα να εντοπίσουμε κατά πόσο η οικονομική κρίση επηρέασε τις εταιρείες του κατασκευαστικού κλάδου , σε τι βαθμό και ποια η γενικότερη πορεία και αντιμετωπίση τους. Σύμφωνα με την ανάλυση που έγινε και τους αριθμοδείκτες που υπολογίσαμε φαίνεται πως ο κλάδος έχει επηρεαστεί σημαντικά από την οικονομική κρίση και αυτό αποτυπώνεται στην μεγάλη μείωση των χρηματοοικονομικών μεγεθών των εταιρειών που αναλύσαμε. Οι απώλειες που σημειώθηκαν κατά την διάρκεια της κρίσης ήταν πολυάριθμες με πολλες επιχειρήσεις να κλείνουν , άλλες να συγχωνεύονται και άλλες να αναστέλλουν την λειτουργία τους. Το γεγονός αυτό δημιούργησε όπως ήταν αναμενόμενο μεγάλη συρρίκνωση του κλάδου και μείωση χιλιάδων θέσεων εργασίας. Στην όλη αρνητική εικόνα του κλάδου φαίνεται πως συνέβαλλε και ο κλαδος της αγοράς ακινήτων όπου οι τιμές των ιδιωτικών κατοικιών μειώθηκαν αλλά η φορολογία των ακινήτων αυξήθηκε και η ζήτηση για την κατασκευή νέων κατοικιών σχεδόν εξαλήφθηκε.
Τέλος συνοψίζονται τα συμπεράσματα στα οποία οδηγηθήκαμε από τα αποτελεσματα των αιθμοδεικτων και καταγράφουμε ποιες φαίνονται να είναι οι προοπτικες του κλάδου τα επόμενα έτη και κάποιες προτάσεις για την εύρυθμη λειτουργία τους .
Λέξεις – Κλειδιά
Οικονομική κρίση , κατασκευαστικός κλάδος , χρηματοοικονομικη ανάλυση
Undergraduate Thesis / Postgraduate Dissertation 3 Table of Contents
Abstract ...... 2 Περίληψη ...... 3 1. INTRODUCTION ...... 5 1.1The contribution of the construction sector to the economy ...... 5 1.2. The impact of the recession on construction sector ...... 5 1.3. Purpose of this study ...... 5 1.4. Methodology ...... 6 1.5. Structure of the study ...... 6 2. ECONOMIC CRISIS AND CONSTRUCTION SECTOR ...... 7 2.1. Construction sector crisis in America and the way it becomes a global financial crisis ...... 7 2.2. How economic crisis affects the Construction sector in Europe ...... 9 2.3. Construction sector in Greece before economic crisis ...... 13 2.4.Construction sector in Greece during economic crisis ...... 16 3. PRESENTATION OF INDUSTRIES IN CONSTRUCTION SECTOR ...... 18 3.1.Market Size of Construction sector ...... 18 3.2. Employment in construction sector in the period of economic crisis ...... 20 3.3. Turnover in construction sector in the period of economic crisis...... 22 4. PROFILES OF THE COMPANIES...... 23 4.1. J&P AVAX ...... 23 4.2. ELLAKTOR ...... 24 4.3. GEK TERNA GROUP ...... 25 4.4. PRESENTATION OF FINANCIAL RATIOS ...... 26 4.4.1 A. Liquidity Ratios ...... 27 4.4.2 B. Profitability Ratios ...... 28 4.4.3 C. Capital Structure Ratios ...... 30 4.4.4. D. Activity Ratios ...... 31 5.FINANCIAL STATEMENT ANALYSIS ...... 33 6. CONCLUSIONS ...... 46 6.1.Prospects of the construction industry ...... 47 6.2.Proposals ...... 47 7. REFERENCES: ...... 49
Author’s Statement: I hereby expressly declare that, according to the article 8 of Law 1559/1986, this dissertation is solely the product of my personal work, does not infringe any intellectual property, personality and personal data rights of third parties, does not contain works/contributions from third parties for which the permission of the authors/beneficiaries is required, is not the product of partial or total plagiarism, and that the sources used are limited to the literature references alone and meet the rules of scientific citations.
Undergraduate Thesis / Postgraduate Dissertation 4 1. INTRODUCTION
1.1The contribution of the construction sector to the economy
The sector of construction is one of the most vital for the Greek economy.What makes Construction industry a particularly important sector for the development of the Greek economy is the link of construction activity with the materials industry, the architectural and trade activities, as well as the substantial support it provides for the implementation of investment projects in areas such as tourism and in urban development.(IOBE, 2015). Consequently, as this sector grows the effects are immense on the rest of the economy. Nevertheless,the decline in GDP growth in recent years is widely connected with the sharp decline in investment in housing and other construction projects. The huge decline of investment in housing, in particular, convert the GDP per year on average, what signals a significant decline in the contribution of construction industry to the national economy.
1.2. The impact of the recession on construction sector
In recent years, the Geek economy has been affected from the economic crisis in particular the period 2008-2016. The non-auctioning of large public works, the cut in public investments programs that are constant and systematic, the construction activity in private sectror that is generally declined due to the lack of bank lending , the long delay in repayment of Greek government obligations to construction companies and the lack of clear development guidance have had a major impact on construction industry.
1.3. Purpose of this study
The purpose of this study is to analyze the construction industry in Greece and especially the Greek companies of this sector that undertake public and private projects. The financial analysis will be carried out on three of the largest and most well-known companies in the sector which are the groups: ELLAKTOR, J & P AVAX ,GEK-TERNA. Then will be commented their performance during the recession between 2008 and 2018 and to what extent these companies face the crisis.
Undergraduate Thesis / Postgraduate Dissertation 5 1.4. Methodology
For the financial analysis will be used indexes that will show the financial position of the groups in the years 2008-2018. Also, the financial figures from their published annual financial statements for the years 2008-2018 will be usefull in order to reach a consecus. This will determine the liquidity, activity, profitability, profitability, and capital structure for each group. An interpretation of the results and a comparison of the positions of the groups will be followed in order to reach a consensus about the overall situation of the industry.
1.5. Structure of the study
Concerning the main body of this study it is structured as follows :
Chapter 1: Introduction . In this part of the study it is described the subject that we choose to occupy with , the purpose of this study , the methodology that we follow in order to reach a concesus and finally the structure of this study.
Chapter 2: Economic crisis and construction sector. In this part we occupy with the way that the economic crisis begun in America and it is expanded worldwide . Firstly it is mentioned how the economic crisis affects Europe and then how this phenomenon reaches Greece and the way that our country face it.
Chapter 3: Presentation of industries in construction sector. In this part of the study it is described the Market Size of Construction sector , how the employment in the construction sector is affected from the economic crisis and how the turnover of the companies changed during this period.
Chapter 4: Presentation of the profiles of companies. These companies are chosen as they are the biggest companies in Greece. Also , in this part we make the presentation of the financial ratios that we use in order to make some conclusions for the construction sector in Greece. Chapter 5 : Financial analysis of the construction sector. In this part we use liquidity ratios , activity ratios , profitability ratios and capital structure ratios for the three companies in a 10 years base in order to find out how every company separately experience the period of crisis and what is the total situation of the sector. Chapter 6 : Conclusions. In this part of the study having carried out the above analysis , we have all the data so as to estimate the situation of the sector during the period of crisis and the degree that the companies affected from this. Also, they are cited some prospectives of the construction industry for the next years and some proposals for a more efficient operation. Chapter 7 : References . In this part we have cited all the sources that we use in order to write this study.
Undergraduate Thesis / Postgraduate Dissertation 6 2. ECONOMIC CRISIS AND CONSTRUCTION SECTOR
2.1. Construction sector crisis in America and the way it becomes a global financial crisis
The slow pace that the economic downturn came almost silently, this was the reason why the majority of politicians and experts underestimate its strenght. In the spring of 2007 it all seemed that the crisis would be limited to the United States real estate market. The moment that the Europe and the most people in the US understand that the crisis was not manageable and created the opposite from the dominated fealing was when the investment bank Lehman Brothers "sank" shortly after September 15, 2008.What it finally happens is the economic crisis has been hitted the global economy by the worst manner which is noted in decades. To be more spesific, all began when many Americans took the advantage of having loans with excessively low interest rates something that affects them borrow money, which they do not have the economic background in order to pay them. At the same time, US banks sold financial derivatives around the world to avoid the risk of bad loans and as shown by facts and time , this action marked the economic crisis that it burst out globally. In the spring of 2007, the inability of more and more homeowners to service the loans that they have took and this has as a result the closure of mortgage bureaus one after the other. Fed chief Ben Bernaki, however, claimed that the crisis in the real estate market was not a threaten for the US economy. In 2008, the only that survived was the investment bank Bear Stearns this thanks to its acquisition by J.P. Morgan while the crisis in the US real estate market turned into a banking crisis. and. In September, US authorities were forced to support with billions of dollars in specialized mortgage banks Fannie Mae and Freddie Mac. When the bankruptcy of US bank Lehman was a fact, the US government did not intervene, as it did in the case of AIG. Even at the last moment, the danger for the American economy was not claimed by many experts. The fact that disrupt the latest hopes for this crisis to be brief and limited-scale was the bankruptcy of Lehman's bank After that ,the international climate of trust between banks had been affected and central banks not only gave billions into markets but also cut the interest rates. For the first time, the G20 prime ministers and heads of state met in order to define a plan to help international markets to be coordinated as they were out of control and avoid a collapse of the global economy. The crisis expanded into global ecomony due to the fact that banks at that time were lending very limited. Most of the world's strongest economies had had to do something as they were affected by this phenomenon in order to deal with it . One example is the States were launching development support programs and central banks gave money into the market. Thow huge problem was focused more at the weaker economies of the European southbecause it was sure that strong economies like thos one of Germany or the US were quickly overcoming the crisis.(Deutsche Welle,2018) The construction industry of USA was severely affected by the economic crisis. According to ILO it was estimated that there were loss of job of at least 5 million people during 2008. The US economy was hitted from this crisis but very soon overcame this difficulty as we can see in the following figures.it is observed that from 1998 to 2006 the amounts that are spent for construction sector had a steady and continuous ascending pace. On the other hand the construction sector from 2007-2011 appeared to be severely hitted from the economic crisis but with 2011 to be the worst year of the examined period. The economic crisis seams to lead to 5 years continuous descending pace of the US economy but after
Undergraduate Thesis / Postgraduate Dissertation 7 that seemed to overcame the crisis and acquired an ascending pace with 2018 to be the peak of growth among the examined period. On the second figure we observe that the Value added of the construction industry as a share of gross domestic product in the U.S. from 2007 to 2011 is descenting from 4.9% to 3.4% and 2012 was steady at 3.4%. After that , followed a period 2013-2018 in which was continually rising but never reached the percentage that it was noted on 2007.
Construction spending in the United States from 1998 to 2018, by sector (in billion U.S. dollars)
Value added of the construction industry as a share of gross domestic product in the U.S. from 2007 to 2018
Undergraduate Thesis / Postgraduate Dissertation 8 2.2. How economic crisis affects the Construction sector in Europe
The economic crisis which it is created in usa very soon becomes a real problem for the economies in Europe including our country and this fact can be obvious from the figure that it follows. The value added of the Construction sector that is examined in a ten years base is accounted for 5.2% of GDP in 2017 in Greece and 8.8 % the same year in the EU28. To continue with , the Construction sector itself presents gross value added at 2.1% of GDP in year 2017 compared to 6.5% that it presents in 2007. Furthermore, a similar trend seems to have the construction sector in EU28 but it doesn’t have such a big difference as it has the same period in Greece , more specific the percentage of the gross value added from 5.7 % that it is noted in 2007 falls to 4.8 % in 2017. Other construction sectors maintained approximately at the same level from 3,4% that it is noted in 2007 is declined in 3.2% of GDP in 2017. This has as a result the general share of the Greek construction sector in GDP to be declined from 9.9 % in 2007 to 5.2% in 2017. The results that are presented for the EU28 follows the same trend with Greece, as we can see a small decline from 4.8% in 2007 to 4.00% in 2017 concerning the other construction sectors and the Construction's share to declined in the same period but by far less than in Greece. In particular, from 10.5% of GDP in 2007 it declines at 8.8% of GDP in 2017 , with this decline in the general Construction sector being obviously higher than the other construction sectors. (IOBE,2019)
Gross Value Added Construction Sector as a% of GDP in Greece and EU28
Undergraduate Thesis / Postgraduate Dissertation 9
To continue with, we will see in what degree the Construction sector involves in the configuration of the GDP in many countries and more specific in Greece. As we can see in the following figure before the crisis that it bursts out in 2008 Greece's GDP share of the construction sector was close to the EU28 average, and its position among the other countries is that it is only higher than Germany, but lower than Spain , France, Italy , Cyprus and Portugal as it shown in the following figure. Among the countries that we examine Spain and Cyprus are the two with the higher involment in the GDP noting percentages bigger than 10.00%. However, within a decade, the Construction sector in Greece has a very big decline as it falls 2.7 % lower than the EU28 average ( 4.8% in EE28 and 2,1% in Greece )in terms of GDP participation and it deserves to be noted that our country has the lowest percentage compared to all the other countries that we occupy with. On the other hand , the countries that seems to be more affected and appear to have the largest recession in terms of GDP participation are Cyprus and Spain as their involvement is limited almost in the half from 2008 to 2017 . The recession in other countries was smaller, but in any case reflects the faster decline in value added of the Construction sector than GDP in each country.
Involvement of Construction Sector in GDP in various countries
Undergraduate Thesis / Postgraduate Dissertation 10 Moreover one more parameter that we can comment is in what degree the economic crisis affects the employment of people in the construction sector not only in Greece but also in the European Union. Construction employment in Greece declined much faster than overall employment as we can see from the following figure. More specific, the deep recession in this sector is appeared to be from 2008 to 2013. Also , the entire economy of our country seems to present a significant decline during this period but after that it notes a almost steady trend. Since 2008 , employment in the construction sector presents some fluctuations but it doesn’t have negative percentages and the economy of the country has a steady trend before the burst out of the economic crisis. The international economic crisis in 2009 has affected significately the employment not only in the Construction sector that we examine but also in the overall economy of the European Union. In EE28 the situation seems to be milder compared to Greece as the annual change in the employment presents negative percentages but lower than these which are recorded in Greece. To continue with, in the second figure that we have cited we can obtain the information about the degree in which the construction sector involves in the employment in Greece and in other countries. As we can see, the construction sector's share of total employment in Greece in 2008 is well above the EU28 average ( 8,00% in Greece and 7,6% in EE28) , while in 2017 the result of Greece it was down by almost 1.5 percentage points, indicating its particularly negative impact that crisis has in the construction sector. However, in all the countries the share of construction in employment between 2008-2017 declined with the exception of Germany whch it appears to have no change in that period. Moreover , Spain is the country in which is recorded the biggest decline with a change of 5.6 % and follows Cyprus with 4.1% .(IOBE,2019)
Annual change in employment in the construction industry and the entire economy in Greece and the EU28
Undergraduate Thesis / Postgraduate Dissertation 11
Involvement of Construction in employment in different countries
Undergraduate Thesis / Postgraduate Dissertation 12 2.3. Construction sector in Greece before economic crisis
Construction is one of the main sectors of the Greek economy. When the crisis comes out as it is expected the sector of construction industries is one of the most significately affected and at the same time this has a negative impact also to the Public Infrastructure, the Tourism industry and Commerce as they are closely linked. This has as a result the limited contribution of the sector to the economic development of the country. The Greek construction industry seems to note a great increasing trend in the years before the crisis, something that it is depicted in a positive way to Greek economy and its growth. However, the the effect in the development construction sector the recent years is negative because of the bad macroeconomic conditions and the fiscal adjustment of the last years. In order to be more specific, the reasons why the construction sector is really affected from the economic crisis are the following : the limited public and private investment, the lack of liquidity and bank financing, the shrinkage of available income, the uncertainty about the future and its dramatic increase ,the tax burden on real estate etc. These facts are rensponsible for the depreciation of the need of industries of this sector in human resources and capital equipment. Many businesses (techniques companies, manufacturing companies and marketing construction products and materials, consulting offices, etc.) are affected from the economic crisis and lead them to were either they operate with damages not having any profit or even worse there are some companies that do not accomplish to The limited investments in Greece, have impact not only to the construction sector which is a field that it is closely related but also affects indirectly the situation of the construction sector which express the deep recession that the Greek economy faces in recent years. (Mavridis,2015). The construction industry as we have already refer is one of the most important sectors of the Greek economy and this is a fact that can be easily proved as for the period 2000-2004 is accounted for about 7% of the configuration of GDP and over 8% of total employment. However, its overall contribution industry, direct and indirect, exceeds 15% of GDP and 17% of employment. At the same time, the way the sector contributes to the development of the economy of the country is decisive, because this sector has expanded at a great degree in other domains such as metallurgy, non-metallic minerals, electrical materials, wood, metal products, transport, commerce, etc. and it is an undoubtedly significant dimension for the economy development. In addition to the above, the market of houses plays also an important role in the financial cycle through consumption, as house prices affect the economic status of people and psychology of them having as a result the enhancing or reducing their willing for new homes. (IOBE,2015). According to ELSTAT's announcements concerning the private building activity, as we can see in the following figure from 1996-2003 it is noted a rapid pace of development for all these years with the exception of 1999, in which it is presented an 8% decline and this is attributed to ATHEX's excessive growth and the subsequent dramatic fall. It worths to be noticed that this period, the industry was characterized by a continuous increase in its production capacity, and according to SATE theyv are recorded the highest levels of activity of the last 25 years. Moreover , as we can see in the second figure it is observed that there was a tendency to stabilize building orders since 2008, on the basis of the volume corresponding to annual permits, just below the level of 80 million m3 per year
Undergraduate Thesis / Postgraduate Dissertation 13
However, this situation has a completely descending trend after 2008, and the pace of decrease is higher over time. Specifically, according to HELLSTAT data in the first half of 2012, the volume decline corresponding to building permits issued was 12.9% compared to 2011, following six consecutive decreases, -44.1% in 2011- 10, -25.7% in 2010- 09, -27.0% in 2009- 2008, -13.9% in 2008- 2007, -5.2% in 2007- 2006 and -0.2% in 2006- 20005. As the decline is continuous and steadily increasing, this constitutes a characteristic of the crisis that the construction face all these years.
Undergraduate Thesis / Postgraduate Dissertation 14 In order to be defined how important is the situation in the construction sector, it deserves to be noted that according to the data that the SATE holds in the first half of 2012 private building activity, on the basis of the volume corresponding to the annual permits, it corresponds to 8.5 million m3, something that it is, not only lower than the last 32 years for which SATE has data but also it is about the average monthly value of 2005! The decreases that they are noted in the real estate market are becoming worse and this because many projects of private buildings don’t be carried out and this has as a result to create a difficult situation on the business community as well as on the banks. Another researches that takes place refer that the transactions seems to have been limited significately as the desire of buying a new house has been decreased about 1/5 of that which was in effect the previous years. At the same time, the prices for buying a new house are becoming lower and this has as result to make them more attractive and affordable for more people. In the second quarter of the year, it is noted a significant change in the prices of the houses which is about 10.1% lower compared to the same period of the previous year. According to relevant researches that are realized the prices note a continually decreasing trend for the last five years but this fact it doesn’t be a strong motive in order to attract people to buy a new home. This is a reasonable oucome of this situation because of the new measures that are applied concerning the job insecurity, the unemployement that it has been created declining the purchasing power of citizens, wage reductions and increased tax burdens which are signs of the recession of crisis. Last but not least , another factor which affects the housing market is the taxes on real estate something that creates a negative attitude from people leaving many new houses unsold. (SATE,2012)
Undergraduate Thesis / Postgraduate Dissertation 15
2.4.Construction sector in Greece during economic crisis the significant losses that have been recorded in the period from 2008 to 2013 confirm that the construction sector seems to have severely affected from the economic crisis. However, the new large public works that are created and also the enhancement of business extroversion as they are very limited in the market of Greece appeared to improve the situation of technical companies since 2014 and then. The stability of the market seems to be in 2015 when it recovers from the strong recession that it faces, but in the period 2016-2017, it has an improved trend mainly due to the increase in turnover of major construction companies / groups by major infrastructure projects which they take on not only in Greece but also in other countries. The close link with other sectors of industry, commerce and services leads the construction industry to be for many years one of the dominant sectors which contributes significately to the growth of the Greek economy. However, the responsibility for the companies that are shut down, that lose their economic results and that many of them become inactineows to the macroeconomic conditions of the country and the long recession period from the economic crisis that led to some measures (such as the cuts in public and private investment, the lack of bank financing, the liquidity problems, the shrinkage of disposable income and the significant tax burden on real estate). In the Greek Construction sector, approximately 74,000 businesses were active in 2017. Of these, almost the majority 2 in 3 businesses were active in the field of specialized construction work (demolition, electrical and plumbing and finishing work). More specific, a percentage of 29% of businesses focused on building construction, while a much smaller percentage of 8% of the total business that they are in this sector are companies which occupy with civil engineering (infrastructure projects). When the crisis bursts out the number of construction companies which are active the period between 2009 and 2017 is decreased by approximately 39,000 companies . It deserves to be noted that the vast majority of construction companies in Greece are very small businesses such as sole proprietors, self-employed - businesses with fewer than 10 people and this type of business constitutes the percentage of 98.1% in the year 2016 . The fact that the majority of companies don’t be large companies it is a important obstacle not only for the continuing training of the employees for the development of organizational and managerial skills but also this may be inextrically connected with higher financing costs. However, business flexibility particularly important because the feature of the Construction industry has to cope with the (often unpredictable) fluctuation in demand for construction projects that varies of technical requirements in different regions.(IOBE,2019). According to the latest edition of the Sector Study prepared by the ICAP Group's Director of Economic Studies, the decline of the construction industry has started since 2007. Specifically, it is observed that the contribution of the construction sector in the configuration of the GDP is highly decresed from 8.3% which is noted in 2006 to 2.2%. in 2016 . Moreover, according to the same study another element which is examined is the gross value added of the construction sector which appears to have a cumulative decrease of -81.9% during the period 2007-2015, while in 2016 it is recorded an increase which corrensponds to a percentage of 16.7% after 9 continuing years of
Undergraduate Thesis / Postgraduate Dissertation 16 decreasing trend . The contribution of this sector in the total employment of the country is amounted to a percent of 8.1% in 2008 and after that all the next years follows a decresing trend reaching the percent of 4.9% in 2016. It deserves to be noted that during the period from 2008 to 2015, are recorded many job losses which reach the amount of 189.7 thousands. (ICAP,2018). Moreover with a more general view of the situation is obvious that the total fixed capital investment fell from 26% of GDP in 2007 to just 11% of GDP in 2018. At the same time, the investments that concerns housing and more construction projects on total fixed capital investment fell by 56% in 2007 to 38% in 2018, ie the biggest decline was at investment in construction more than other fixed capital investments. This is connected with the fact that new houses are constructed and consist significant part of investments. On the other hand, however, the fact that it appears to be areas of intervention through which a significant rebound in the construction sector could be sought and maximizing its contribution to the effort of reshaping the national economy. Although it is not reasonable, to expect recovery in housing as it had been , it is obvious that compared to other European economies the 'gap' of finance activity and employment created in the industry, directly or indirectly means that without significant aid the construction activity cannot achieve the necessary level of constructive total investment and the creation of new jobs that will make stronger growth rates. (IOBE,2019). The Senior Manager of ICAP Group Financial Studies (Eleni Demertzis), states that the market for technical companies followed a continuing decreasing trend during the period from 2009 to 2012, presenting a vital annual decline in revenues from the construction of own projects by 18, 2%. As we can see in the following figure , after this difficult situation that the companies have to face follows two years 2013-2014 and much better 2014 were the market size appears to have an increasing trend something that it can be attributed in the fact that many big construction projects takes place in our country. However, the year 2015 we can see that we have a small decrease about 5.3% something that happens due to the uncertainty at the political and macroeconomic level and after that the next two years that follows 2016 and 2017 the market is growing again, with an increase of 9% compared to 2015 in 2016 and about 13% in 2017 (own project revenues). (ICAP,2018)
Undergraduate Thesis / Postgraduate Dissertation 17 3. PRESENTATION OF INDUSTRIES IN CONSTRUCTION SECTOR
3.1.Market Size of Construction sector
The size of the Greek Construction sector has changed significatelly with the economic crisis that takes part in the country. To be more specific , approximately 74.100 companies were active in 2017 as we can see in the following figure. The majority of the industries that they are activated in this sector approximately 2 in 3 companies were operating with specialized fields of construction, and a percent around the 29% of the total companies of the sector to focus on building construction. The minority of the businesses in this sector occupys with civil engineering work and it is about a percent of 8% of the total.
Number of companies in Construction sector
As we can see from the figure above , the number of businesses that they are active in Construction sector is decreased by approximately 39,000 between 2009 and 2017 from 112.952 which they are in 2009 to 74.094 that they results in 2017. Concerning the number of companies that they are active in business construction and these that they occupy with civil engineering, we can see that they appears a continuing descending trend until 2012 and after that their numbers have remained low and relatively stable approximately at the same level . On the other hand the companies which are specialized in construction sector the number of businesses follows a continuing shrinkage until 2017 , with one exception in 2016 in which it is noted a small increase but after that the next year in 2017 falls again.
Undergraduate Thesis / Postgraduate Dissertation 18
As we have already refer , the majority of companies that they are active in the Greek construction sector are amounted to a percentage about 98.1% in 2016 and are very small businesses (sole proprietors, self-employed - businesses with fewer than 10 employees). The small size of the companies plays an important role in the configuration of the situation of Greek economy as their size is the reason why the continuing training of the crew is limited , the development of organizational and management skills is decreased and also why higher financing costs are applied to them. It is, however, a characteristic of the Construction industry, which has to cope with many fluctuations in demand for the construction of projects without having a standard degree of technical requirements or a standard area in which they can be active. Under these difficult circumstances , that the companies are obliged to operate , the flexibility in order to deal with these changes is crusial and also their target to minimize their fixed costs (eg permanent staff pay), is necessary and it can be achieved by collaborating with small businesses for specific construction projects. As we can see in the figure below the very small enterprises, which employs less than 10 people, comprises the majority of people who are employed in the Greek construction sector which corrensponds to 71,2% of the total number people who occupy with it in 2016. In particular, in the same year the percentage of people who are employed in this category is well above the EU28 average which is 47.8% , as well as compared to other countries . (IOBE,2019)
Number of Employees by Size of Employment, 2016
Undergraduate Thesis / Postgraduate Dissertation 19 Moreover, one more parameter that we can examine is the distribution of production value in relation to the employment . as we can see in the figure below, in Greece, the small businesses which has fewer than 10 employees accounted for 40,4 % of the production value of construction in 2016, a good percentage compared to other European countries that we have data . It worths to be noted that the distribution of production value by size of business in Greece has been strongly influenced by the decline in private building activity and the fluctuations in public projects that take place in our country. (IOBE,2019)
Distribution of production value by employment size, 2016
3.2. Employment in construction sector in the period of economic crisis
The employment in the construction sector is strongly affected from the economic crisis creating many changes in the number of people who work in this. As we can see in the following figure the Construction sector in 2007 were employed 389 thousand people and in the other Construction sectors another 174 thousand people something that it has changed a lot through the passage of the years reaching 2017 , 202 thousand people in construction sector and in the other Construction sectors another 135 thousand people . Thus, total employment in the wider construction sector in 2017 reached 337 thousand people. The sector seems to play an important role in the economy of Greece, despite the fact that construction activity has declined significatelly after 2007. It worths to be noticed that in 2008, employment in the construction sector reached 578 thousand people, while only in the Construction sector were employed 386 thousand people a little better from 2007. In the second figure which is cited below we can see that the employment expressed as a percentage of the total employment of our country seems to follows a continuing descending trend from 11.7 % of total employment in the Greek economy in 2007 to 8.1 % in 2017. At the same time, only in the construction industry the percentage is also declined from 8.1% in 2007 to 4.9% in 2017, while the other sectors of the Construction industry remained stable at approximately same level in overall employment. (IOBE,2019)
Undergraduate Thesis / Postgraduate Dissertation 20 Construction Jobs (Thousands and % of Total Employment)
Undergraduate Thesis / Postgraduate Dissertation 21 3.3. Turnover in construction sector in the period of economic crisis
Turnover, that is, sales of construction companies, could not be left unaffected by the financial figures that have been extensively quoted above. Turnover also declines as businesses leave the industry and their business shrinks with any negative effects on public revenue and social security contributions. Both are hit hard as tax collections collapse and reductions in insurance premiums soar to government spending on health care and insurance for the unemployed from the sector that we occupy with.
TURNOVER(IN EURO) 16.000.000.000,00
14.000.000.000,00
12.000.000.000,00
10.000.000.000,00
8.000.000.000,00 TURNOVER(IN EURO) 6.000.000.000,00
4.000.000.000,00
2.000.000.000,00
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
In the figure above we can see that the sales have a descending trend from 2008 until 2014 where 2015 it seems to exist a small increase in the sales of the companies of construction sector. After this fact, follows a decrease in 2016 which is the lower level that it is noted in the period that we examine. In 2017 we have an increase again but the amount which corrensponds to this of 2008 is not reached yet and it has a great difference of 4.939.093.034,32 € as we can be informed from the data that they are provided from Hellenic Statistical Authority (HELLSTAT).
Undergraduate Thesis / Postgraduate Dissertation 22 PART Β’
In this part of the present study we will present the methodology that we follow in order to make some conclusions for the construction sector in Greece during the period of economic crisis. In order to make a complete financial analysis which will provide all the necessary information in order to draw a complete conclusion about the construction industry, it is necessary to use and analyze some ratios for the three of the biggest companies of this sector which are J&P AVAX , ELLAKTOR and GEK-TERNA for a 10 years base from 2008 to 2018.
4. PROFILES OF THE COMPANIES
According to a recent survey of Deloitte which is realized in 2017 it is published a list with the biggest construction companies all over the world. It is true that Chinese, Japanese, French and US companies dominate to the Top 100 listed construction companies in terms of revenue but in this list are also included three Greek construction companies. The company ELLAKTOR is placed in the 81 of the ranking and it holds the better position among the Greek construction companies. The second in turn company of Greece that is enlisted in the top 100 ranking companies worldwide is GEK TERNA which holds the 91 position of the list. Last but not least , it appears the greek company J &P AVAX holding the 98 position of the 100 largest companies of the world. ( Deloitte, 2017). This survey consists the reason why we choose to occupy with these companies. Below , it is cited a presentation of the companies that we have already refer.
4.1. J&P AVAX
J&P AVAX Group SA is one of the strongest Groups which is activated in the Construction sector in Greece. The year 1994 this group entered the Athens Stock Exchange taking over many projects not only in Greece but also internationally. The AVAX Group SA with the passage of the years is expanded in many domains such as Real Estate, Management Installations, Renewable Energy Exploitation, Wind and Photovoltaic Park Development etc. Except for the additional activities that it takes part , the AVAX Group SA is also focused in the field of construction activating in Civil Engineering, Building, Plumbing, Ports, Road Construction, Electromechanical, Energy- Industrial, Piping and Gas Networks and it achieves to buid a good reputation and make
Undergraduate Thesis / Postgraduate Dissertation 23 collaborations all over the world. J&P AVAX Group SA except for the fact that it has been expanded in many fields its activity is not limited in Greece but it has build a stable carrier taking over projects and signing contracts in many countries. Concerning the jobs offering it deserves to be noted that this technical group provides many opportunities as it researchs also people who have specialized knowledge in management of co-financed projects, environmental activities and strategic participations in other companies. Moreover , this technical group is complied to the international management systems for Quality, Safety and Environment, which are certified by ISO 9001:2000, OSHSAS 18001 and ISO 14001 certificates respectively something that makes it competitive and wide acceptable from many countries in international level.
4.2. ELLAKTOR
ELLAKTOR Group is the largest infrastructure group in Greece and one of the leading groups in Southeastern Europe. It is true that the ELLAKTOR Group is activated in many countries at international level focusing on construction , environment, renewable energy and real estate development. More specific, this technical group has expanded in 30 countries and it offers many job opportunities as it has 6.000 employees. Also, it is a group which despite the bad macroeconomic conditions it achieves to generate a turnover of €1.85 billion in 2018 showing that it constitutes a strong power in the Greek construction sector . ELLAKTOR Group has as a characteristic that it is specialized in very difficult projects using the latest technologies which are available and this is the reason why it has such a growth across the world. ELLAKTOR Group assures all the above references as it is ranked 83rd among the top 100 global manufacturing groups (Global Powers of Construction 2018, Deloitte). The existence of the group counts more than 70 years experience as its creation is a merging of three large and historic construction companies of Greece, the Volos Engineering Company (TEB), founded in 1949, Elliniki Technodomiki, founded in 1955 and AKTOR, which started its operation in 1977. Then , follows some more mergers in order to reach the today’s composition and acquire this financial and engineering strength taking on very demanding projects all over the world. After that , from early 2000 the ELLAKTOR Group chooses to expands also in other activities apart from only the construction domain , which are real estate development, concessions, waste management and wind parks and it accomplish this by establishment, acquisition or absorption of respective companies (AKTOR CONCESSIONS S.A., HELECTOR S.A. EL.TECH. ANEMOS S.A.). Finally , it deserves to be noted that at the same period the Group expanded except for Greece in Southeast Europe and the Middle East by establishment of subsidiaries and branches there.
Undergraduate Thesis / Postgraduate Dissertation 24 4.3. GEK TERNA GROUP
GEK TERNA Group belongs to one of the biggest and most important business groups in Greece. The GEK TERNA Group has invested more than 2.5 billion euros during the economic crisis, not only in the domain of energy but also in the infrastructure . This Group is activated in many domains such as this of infrastructure, electricity production etc. having a leading role among the groups of this sector. GEK TERNA Group is not limited only in Greece but it has also been expanded in 16 countries all over the world having as a crew 5.000 employees. Some important events that take place through the years and build this strong position of the GEK TERNA Group is that in 1969 is established both GEK and TERNA and in 1994 it is the first year in which they take part in Athens Stock Exchange. After that, the Group starts to activate in the field of energy production from Renewable Energy Sources and the expansions are continued in other domains such as the real estate development, the supply of energy from thermal sources etc. In year 2002 it happened a significant fact as it is created a restructure of the group with the absorption of the construction sector of GEK by TERNA. To continue with, the expanding trend of the group is continued with the acquisition of a company which is activated in the mining sector and the entering of TERNA ENERGY on the Athens Stock Exchange. Finally the year 2008 GEK and TERNA were merged bringing together all of the Group's construction activities. This is the history of one of the biggest companies – groups in Greece and except for all the above facts that took place and they configurate the position of it in the construction industry it is also vital to be reffered that the group is also very environmentally friendly as it realizes actions for protecting it. More specific, it has a strong presence concerning the waste management in Greece utilizing its experience in the field of management of the useless and harmful for the environment items and undertaking waste management projects in both the private and public sectors.
Undergraduate Thesis / Postgraduate Dissertation 25 4.4. PRESENTATION OF FINANCIAL RATIOS
For our financial analysis we choose to occupy with ratios which are from different categories in order to have a completed view of the economic situation of the companies in the construction sector. First of all , we calculate three ratios which are relevant to the liquidity of the companies separately. The second parameter that we examine is the profitabibility of the three companies in the period that we have defined . Moreover , another category that we occupy with is this of capital structure of the companies during the years 200-2018 . And finally , the last ratios that we have compute are these with which we can interpret the activity of the three companies. Specifically , the ratios of every category that we decide to occupy with are the following:
A. Liquidity Ratios 1. Current (General) Ratio 2. Quick Ratio 3. Cash Ratio
B. Profitability Ratios 1. Gross Profit Margin 2. Net Profit Margin 3. Return on Equity 4. Financial Leverage Ratio
C. Capital Structure Ratios 1. Ratio of owner’s equity to fixed assets 2. Ratio of owner’s equity to total assets 3. Ratio of fixed assets to long-term liabilities
D. Activity Ratios 1. Inventories turnover ratio 2. Asset turnover ratio 3. Owner’s equity turnover ratio
Undergraduate Thesis / Postgraduate Dissertation 26 4.4.1 A. Liquidity Ratios
Using the ratios of liquidity we can estimate in what extent a company is able to deal with its short term liabilities and how efficient it can exploits its assets for having cash availability. The liquidity is a critical factor for the status of the company as it affects directly its profits. From this category we will occupy with the following ratios : (Eriotis,2008)
1. Current (General) Ratio The ratio of Current (General) Ratio shows us whether a business has the ability to cover its liabilities and the daily problems that it may face. This index is calculated if we divide the current assets of the company by its short term liabilities. The utility of this ratio except for being a liquidity measure for the company, it can determine the security margin that the management team of the company has to maintain for adjusting the unwanted increases in the flows of working capital. Generally , in order to have an efficient current ratio its result should be greater than 1 ( >1) as in this way it is achieved a high margin of safety. The opposite happens when the outcome of the index is low that means, that the company don’t have a satisfactory level of liquidity and has a low margin of safety. The calculation of the Current (General) Ratio is realized as follows:
Current (General) Ratio = Current Assets / Short-term liabilities
2. Quick Ratio The index of Quick Ratio shows us how many times the current assets of the company are able to cover its short-term liabilities. Generally , if the outcome of the index is approximately equal and higher than unit (>1) we say that the company status is satisfying. On the other hand if the results of the ratio are low and under the unit that means that the current assets of the company are not enough in order to cover its short terms liabilities and appears to have problems with its liquidation. This index is calculated if we divide the current assets of the company without taking into account the Inventories by its short term liabilities. The principle difference between the current ( general) liquidity ratio and that of the quick liquidity ratio is that the numerator does not include the inventories. The reason why this happens is the fact of time or potential difficulties in its liquidation. The calculation of the Quick Ratio is realized as follows:
Quick Ratio = Current Assets – Inventories / Short-term liabilities
Undergraduate Thesis / Postgraduate Dissertation 27
3.Cash Ratio
The index of Cash Ratio shows us how efficient a company can deal with its current liabilities with the cash availability that it has. Generally , this index is more satisfying as higher is the outcome that we calculate. This ratio is a true and very strict indicator of liquidity and this happens because the information that it provides is limited, as in practice companies hold a low amount of cash in order to make their scheduled payments. The most common fact that it happens to companies is that their current assets are consisted of inventories that they are expected to be sold or consumed in production and of credits given to customers (receivables) to purchase goods and finished products. This index is calculated if we divide the cash that the company has available by its short- term liabilities. The calculation of the Cash Ratio is realized as follows:
Cash Ratio = Cash / Short-term liabilities
4.4.2 B. Profitability Ratios This category of ratios depicts the general goal of companies to achieve profit .The profitability ratios are very useful for the stakeholdes of the companies because they can estimate if they are profitable and to what degree they are. Calculating these ratios the company can see if its operation is worthy and it is efficient generating profits and not damages. After the calculation of the profitability ratios the stakeholders will be informed about the situation of their companies and can make estimatons of their future moves as concerns the credits that they offer and the way they will utilize their profits. (Eriotis, 2008)
1.Gross Profit Margin This indicator shows the gross profit margin of a company from its sales and its calculation is very important in order to estimate the profitability of the company. For having the desired results, the outcome of the calculation of the gross profit margin ratio should be as higher as it can be because this means that the degrre that a company is able to face possible increases in the cost of its products sold . Also, when the outcome of the ratio is high it shows the ability of the company to buy at low prices and sell the goods at high prices. On the contrary, when the results of the calculation of ratios are low, this shows the weakness that the management team has as concerns the sales. This index is calculated if we divide the gross profit that the company has achieved by its sales that they are recorded in the economic period. The calculation of the Gross Profit Margin is realized as follows and it is expressed as a percentage in order to understand it better:
Gross Profit Margin = Gross Profit / Sales x 100
Undergraduate Thesis / Postgraduate Dissertation 28 2.Net Profit Margin Using this ratio we can see what percentage of the company’s net profit is derived from its sales. In other words we can estimate the net profit that it is generated from a sale that it has a cost one hundred euros. Generally we want the outcome of the calculation of the net profit margin ratio to be as higher as it may be because this index is directly linked to the profit that the company achieves so the higher is the ratio the more profitable is the company. This index is calculated if we divide the net profit that the company has achieved by its sales that they are recorded in the economic period. The calculation of the Net Profit Margin is realized as follows and it is expressed as a percentage in order to understand it better:
Net Profit Margin =(Net Profit / Sales) x 100
3. Return on Equity Using this indicator we wil be able to see how profitable is a company and simultaneously if it achieves to succed the goals that it has set by itself. Generally we can say that the higher it may be the outcome of the ratio the better is for the company as concerns its management or the economic conditions that dominate that period. On the other side, when the result of the ratio is low, that means that the company face some difficulties and the owner’s equity is not utilized in a efficient way. (Niarchos, 2004). This index is calculated if we divide the net profit that the company has achieved by its total equity that they is recorded in the economic period. The calculation of the Return on Equity ratio is realized as follows and it is expressed as a percentage in order to understand it better:
Return on Equity =(Net Profit / Total Equity) x 100
4. Financial Leverage Ratio Using this indicator we wil be able to see to which extent the assets of the company have been funded with equity. In other words, the calculation of this ratio is very useful for the estimation of the effects that the foreign capital has on the profitability of the company's own funds. Generally, the results of the calculation of the Financial Leverage Ratio should be greater than the unit meaning that the using of liabilities is beneficial and it has a positive impact to the company. If the outcomes of the ratios are negative this shows that the liabilities don’t be beneficial for the company and this means that it borrows in order to operate. This index is calculated if we divide the Total Assets that the company has on itself by its Equity that it is recorded in the economic period. The calculation of the Financial Leverage Ratio is realized as follows:
Financial Leverage Ratio = (Total Assets / Equity)
Undergraduate Thesis / Postgraduate Dissertation 29 4.4.3 C. Capital Structure Ratios The category of Capital structure and sustainability ratios can contribute in a high percent to the analyzing of the financial position of the company over the years and more specific if the company is able to deal with its difficulties and finally how protected are the creditors of the company. This category of ratios has to do not only with the owner’s equity but also with the short term and long term liabilities that means all the ways that a company can be financed. Moreover these ratios can be useful in order to define how important is the capital structure which derives from the substantial difference between the equity that the company has and the loan capital which has to pay. Equity is that which is rensponsible for the venture that in all companies exist. If the company is not able to deal with and pay its liabilities, this will have as a result its own funds to be damaged. The larger the proportion of foreign capital to the total capital of a company, the more it seems to have debts and the pressure in order to pay its liabilities becomes greater. (Niarchos, 2004).
1. Ratio of owner’s equity to fixed assets The equity to fixed assets ratio is used in order to see the way that the fixed assets of the company are financed. Generally, an effective outcome of the ratio is when it is greater than the unit (>1) , something which means that the equity of the company is greater than its investment in fixed assets so a part of its working capital comes from its shareholders. On the other hand , when the ratio is less than the unit , the equity is lower than its fixed assets so the foreign capital has been used to in order to finance the company. This index is calculated if we divide the Equity that the company has by its fixed assets that it has on its own. The calculation of the Ratio of owner’s equity to fixed assets is realized as follows:
Ratio of owner’s equity to fixed assets= (Equity/ Fixed Assets)
2. Ratio of owner’s equity to total assets This index of owner’s equity to total assets shows to what percentage of assets that a company has, is funded by its own equity. This ratio is as important as the liquidity index is because using it we will be able to see the financial strength of the company as well as its long-term liquidity. In order to have an efficient way of operating the company we want to have as higher as it may be the outcome of the index, meaning that the company will be able to pay its liabilities by itself and uses less foreign capital. On the contrary, if the results of the calculation of index are low, it means that the company uses a large portion of foreign capital to pay its liabilities , because its own equity is not adequate , resulting in risk to the business. This index is calculated if we divide the Equity that the company has by its total assets that they are recorded in the economic period. The calculation of the Ratio of owner’s equity to total assets is realized as follows:
Ratio of owner’s equity to total assets= (Equity/ Total Assets)
Undergraduate Thesis / Postgraduate Dissertation 30 3. Ratio of fixed assets to long-term liabilities Using this index we are able to see to what extent the long-term creditors of the company feel secure. If we calculate the ratio for many years we can be informed about the policy that the company follows concerning the financing of its fixed assets. The oucome of the the index indicates the level of security that the creditors feel. An increasing trend of the index over the years means that the security margin of the creditors is increased and that any expansion of fixed assets was financed by its equity. On the other hand a decreasing trend in the calculation of the index means that the long-term creditors' security margin has decreased and that any expansion of fixed assets it is provoked from lending. This index is calculated if we divide the fixed assets that the company has on its own by its long term liabilities that it has to face. The calculation of the Ratio of fixed assets to long- term liabilities is realized as follows:
Ratio of fixed assets to long-term liabilities = (Fixed Assets/ Long-term liabilities)
4.4.4. D. Activity Ratios
This category of ratios is very useful in order to understand the way that a company uses its assets and if this is really effective for the operation of the company. Also , using these ratios we will be able to meausure the productivity of the company and the variety of ways that it uses in order to exploit its assets. Moreover , the activity ratios show the ability of management of the company to manage its assets in an effective way. Alternatively, this category of indexes are able to present how easily the asset accounts changed over the time. Finally , we can determine the extent that some assets such as the inventories and the receivables are converted into cash. (Niarchos, 2004).
1. Inventories turnover ratio Using his index we are able to see how many times the inventories of a company has been renewed in relation to the sales that it realizes in the economic period. In other words, this ratio is used in order to define how quickly the inventories are replaced during a economic use. If the outcome of the ratio is low or the trend is descending throughout the period that we examine , it means that the inventories are not renewed rapidly either because it is difficult for the company to sell its products or because there is a specific purpose for which the company chooses to have high portion of inventories . This index is calculated if we divide the sales that the company has achieved in the economic use by its inventories. The calculation of the Inventories turnover ratio is realized as follows:
AssetInventories turnover ratioturnover ratio = (Sales / Inventories)
Undergraduate Thesis / Postgraduate Dissertation 31 2. Asset turnover ratio
Using this ratio we will be informed about the extent to which the company uses its assets in order to realize sales. This index can shows us if there is an over-investment of capital compared to the amount of sales that the company has suceed. Generally , we want to have the higher outcome in the calculation of this index meaning that the company uses its assets in the most efficient way. Moreover , we can exploit very useful information when we compare this indicator with the total situation of the sector. The outcome of the ratio is interpreted in how many times the company uses its assets in order to make sales. This index is calculated if we divide the sales that the company has achieved in the economic use by its total assets. The calculation of the Assets turnover ratio is realized as follows:
AssetAssets turnover turnover ratio ratio = (Sales / Total Assets)
3. Owner’s equity turnover ratio Using the owner’s equity turnover ratio we can see to what extent the owners equity of the company is used in relation to the sales that it achieves. In other words , we can define the sales which are realized by the company with each unit of equity. Generally , in order to have a good operation of the company we want the outcome of the calculation of this ratio to be as higher as it may be , because this means that it makes plenty of sales using a small amount of equity something that can lead to increased profits. On the other hand, if we succeed high outcomes of this index simuoustaneously means that the company operates based on foreign capital. So, the higher is the ratio the less beneficial is for the company as concerns the security. This index is calculated if we divide the sales that the company has achieved in the economic use by its equity . The calculation of the Owner’s equity turnover ratio is realized as follows:
AssetOwner’s turnover equity ratio turnover ratio = (Sales / Equity)
Undergraduate Thesis / Postgraduate Dissertation 32 5.FINANCIAL STATEMENT ANALYSIS
A. Liquidity Ratios 1. Current (General) Ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 1,17 1,08 1,10 1,08 1,12 1,09 1,28 1,24 1,13 1,14 1,09 ELLAKTOR 1,70 1,80 1,69 1,61 1,51 1,76 1,61 1,46 1,37 1,41 1,49 GEK- TERNA 1,19 1,2 1,34 1,27 1,31 1,31 1,14 1,29 1,43 1,16 1,09
1.Current Ratio 2,00
1,80
1,60
1,40
1,20 J&P AVAX 1,00 ELLAKTOR 0,80 GEK-TERNA 0,60
0,40
0,20
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
From the data and the figure above we can proceed to the following conclusions. With this ratio we can check in what degree the companies have the necessary liquidity to face their short- term liabilities. In order to have an effective ratio ,its result should be >1. To begin with , we can observe that the company ELLAKTOR throughtout the period that we examine has by far the best results among the three companies except one year 2016 in which GEK TERNA has a quite better current ratio.After the company ELLAKTOR the next company which deals with better its short term liabilities is GEK TERNA which appears to has higher results in its current ratio throughout the examined period than the J&P AVAX. It is important to be noted that all companies have liquidity as all the results of the current ratio computation are > 1 with ELLAKTOR be the strongest company of the three companies that we examine.
Undergraduate Thesis / Postgraduate Dissertation 33
2. Acid –test (quick) Ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 1,12 1,04 1,05 1,03 1,07 1,05 1,21 1,18 1,08 1,08 1,03 ELLAKTOR 1,63 1,77 1,66 1,58 1,48 1,73 1,58 1,42 1,33 1,37 1,46 GEK- TERNA 1,18 1,18 1,3 1,24 1,27 1,26 1,11 1,26 1,39 1,13 1,06
2. Quick Ratio 2,00
1,80
1,60
1,40
1,20 J&P AVAX 1,00 ELLAKTOR 0,80 GEK-TERNA 0,60
0,40
0,20
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
From the data and the figure above we can observe the following: The acid-test ratio can shows how many times the immediate liquidated elements of the company can cover its short term liabilities. This ratio in order to be satisfying its result should be around 1. If the computation of the acid test ratio is <1 ,in this case it is considered that the company is unable to face its current liabilities. To begin with, we observe that the company ELLAKTOR has the best results compared to the other companies that we examine. It has some fluctuations but it appears to be the strongest concening its liquidation. The second in turn company that appears to has a more stable trend with few fluctuations is GEK TERNA. In 2016 it is recorded the higher result as concern the computation of quick ratio and after two years it appears the lower one. Finally the weaker company as concerns its liquidity is the J&P AVAX where until 2013 its results are obvious lower than the two other companies and only one year it seems to be higher than GEK TERNA in 2014. However all companies are able to face their current liabilities as all the results that we compute are >1.
Undergraduate Thesis / Postgraduate Dissertation 34
3. Cash Ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 0,20 0,17 0,18 0,14 0,10 0,15 0,12 0,17 0,13 0,13 0,14 ELLAKTOR 0,63 0,64 0,63 0,67 0,50 0,71 0,55 0,34 0,38 0,46 0,51 GEK- TERNA 0,40 0,31 0,27 0,22 0,18 0,27 0,29 0,28 0,62 0,40 0,31
3.Cash Ratio 0,80
0,70
0,60
0,50 J&P AVAX 0,40 ELLAKTOR 0,30 GEK-TERNA
0,20
0,10
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Having the data and the figure above we can observe the following: Using the Cash ratio we have the capability to know how the company face its current liabilities with cash. Also it shows how many times the available assets can cover its short term liabilities. We can observe that the company ELLAKTOR until 2015 seems to have the best results from the calculation of this ratio among the three examined companies. The year 2015 it has its lower cash ratio and after that it has a continually rising trend but lower than GEK TERNA for the next year 2016, taking again the best performance among the three companies for years 2017 and 2018 . The second company which appears to have good results is GEK TERNA where it notes its higher result in 2016 overcoming ELLAKTOR which has for the best performance for the majority of years that we examine. We can see from the figure that until 2012 presents a descending trend where in 2012 reach its lower point. Finally the company J&P AVAX it seems to have the weakest performance and present for all the examined period the lowest results in the cash ratio calculation.
Undergraduate Thesis / Postgraduate Dissertation 35
B. Profitability Ratios 1. Gross Profit Margin
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 5,9% 7,9% 10,1% 9,0% 9,7% 3,4% 10,6% 8,3% 5,6% 5,5% 5,5% ELLAKTOR 15,1% 12,9% 11,1% 1,6% 13,5% 14,3% 9,4% 8,6% 6,5% 11,4% 7,4% GEK- TERNA 8,8% 8,4% 5,6% 6,4% 1,2% 4,0% 1,6% 5,1% 14,1% 11,2% 4,4%
1.Gross Profit Margin 16,0%
14,0%
12,0%
10,0% J&P AVAX 8,0% ELLAKTOR 6,0% GEK-TERNA
4,0%
2,0%
0,0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The ratio of gross profit margin is very important as it is a measure of estimation the profitability of businesses. It shows the operational efficiency of the company and the policy of its price. As higher is the gross profit margin as better it is for the company. As we can see from the data and the figure above the company ELLAKTOR seems to present a descending trend from 2008 to 2011 where it reaches the lowest percentage of the examinated period. After that , for the next two years the company ELLAKTOR notes the best results by far compared to the other companies. Generally it is observed that all companies present many fluctuations but for the majority of the years that we examine ELLAKTOR has the best performance. Contrary to ELLAKTOR , the company J&P AVAX present a rising trend for the first three years 2008-2011 and then it has some alters where for the last three years 2016-2018 it seems to have a more steady trend. Finally the company GEK-TERNA in 2012 has the lowest result in the calculation of the gross profit margin ratio throught the years that we occupy with but in 2016 appears to be the most efficient company by far reaching the percentage of 14,1%.
Undergraduate Thesis / Postgraduate Dissertation 36
2. Net Profit Margin
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 - J&P AVAX 2,5% 2,9% 0,8% -0,5% -2,9% 17,7% -7,8% -7,5% -8,0% -1,6% -4,5% ELLAKTOR 7,3% 4,4% 1,1% 6,1% 2,6% -3,9% -2,2% -5,9% -5,0% -0,5% -5,1% GEK- TERNA 2,7% 3,9% 0,1% 0,3% -4,2% -6,4% -6,3% -1,3% 2,4% 3,0% -1,2%
2.Net Profit Margin 10,0%
5,0%
0,0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX -5,0% ELLAKTOR GEK-TERNA -10,0%
-15,0%
-20,0%
The ratio of the net profit margin defines the percentage of profit that the company can benefit after the reduction from the net sales the cost of goods sold and the rest expenses. The higher is the result of this ratio , the more profitable is the company . As we can see from the table and the figure above the company ELLAKTOR for the first five years from 2008 to 2012 it presents positive results but for all the rest period the net profit margin ratio is negative something that states that the company has damages. The company GEK-TERNA is also presenting a positive outcome until 2011 but after that the calculation of the ratio is negative and the year 2016 and 2017 it seems to be more profitable as the ratios are positive again. The company J&P AVAX has the worst performance of the three compared companies where the outcomes of the net profit margin ratio are negative for the majority of years that we examine and for the years that the results are positive 2008-2010 it has the lowest percentage compared to ther other two companies. This has a reasonable base as the company appears to have damages from 2011 until today.
Undergraduate Thesis / Postgraduate Dissertation 37 3.Return on Equity
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 9,7% 9,9% 1,9% -1,1% -4,5% -30,5% -18,7% -21,2% -37,3% -9,6% -29,9% ELLAKTOR 11,7% 7,8% 1,6% 5,5% 2,6% -4,3% -3,0% -8,8% -10,8% -1,1% -14,7% GEK- TERNA 13,6% 17,5% 0,3% 1,4% -13,0% -24,1% -58,3% -8,8% 16,4% 17,9% -8,4%
3.Return on Equity 30,0%
20,0%
10,0%
0,0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -10,0% J&P AVAX -20,0% ELLAKTOR GEK-TERNA -30,0%
-40,0%
-50,0%
-60,0%
-70,0%
This ratio provides an index about the grade that a company achieves its goals for a satisfying result using the owners equity. The return in equity ratio measure the efficiency of using the equity of the company . From the table and the figure above we can make the following conclusions : The company ELLAKTOR presents a positive outcome as concerns the calculation of the return on equity ratio for the years 2008 to 2012 but after that it follows a period with negative results reaching the worst result of all the examined period in 2018. The company GEK-TERNA it seems to have a positive trend until 2011 but the next years the ratio is negative especially the year 2014 where it is noted the worst outcome of all years that we examine and for the three companies. However the years 2016 and 2017 it is the only company that notes positive outcomes where the other two companies present damages and the ratios are negative. Last but not least, the company J&P AVAX the majority of years that we occupy with, presents damages something that it has an obvious impact on the trend of the ratio noting negative results. The only years that appears to be efficient is the years between 2008 and 2010.
Undergraduate Thesis / Postgraduate Dissertation 38 4. Financial Leverage Ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 5,06 5,02 3,90 4,00 4,24 5,39 6,42 7,39 11,27 11,28 12,71 ELLAKTOR 3,28 3,25 3,47 3,31 3,47 3,62 3,74 3,90 4,35 4,13 4,95 GEK- TERNA 4,99 4,51 7,24 6,68 6,75 6,93 11,81 10,38 9,88 8,16 8,62
4.Financial Leverage Ratio 14,00
12,00
10,00
8,00 J&P AVAX ELLAKTOR 6,00 GEK-TERNA
4,00
2,00
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Using this ratio we can see how the net operational profit is affected from the change in net pofit before taxes and the expenses. If from the calculation of the financial leverage ratio the result is > 1 the impact of liabilities on the profit of the company is positive and beneficial for itself , the opposite happens when the outcome of the ratio is <1. From the data and the figure that we have cited above we can see that the company GEK-TERNA present many fluctuations but it is the company that for the greater part of the examinated period appears to be the company with the highest benefit of all using the liabilities. To be more specific the company from 2010 until 2015 is by far the most benefited company using the liabilities. The second in turn company that appears to have a continually rising trend is J&P AVAX where the outcomes of the calculation of the financial leverage ratio are the highest of the three companies from year 2016 and then. Finally the company ELLAKTOR seems to be benefited of the using of liabilities but at a more low grade. However all the examined companies throughout the period that we occupy with seems to have a positive affect using its liabilities as the results of the ratio are all > 1.
Undergraduate Thesis / Postgraduate Dissertation 39 C. Capital Structure Ratios 1. Ratio of owner’s equity to fixed assets
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
J&P AVAX 0,58 0,57 0,60 0,56 0,52 0,43 0,39 0,33 0,21 0,19 0,15 ELLAKTOR 0,68 0,63 0,59 0,54 0,57 0,54 0,51 0,49 0,43 0,43 0,36 GEK- TERNA 1,19 1,18 0,63 0,63 0,58 0,51 0,28 0,39 0,39 0,41 0,37
1.Ratio of owner's equity to fixed assets 1,40
1,20
1,00
0,80 J&P AVAX ELLAKTOR 0,60 GEK-TERNA 0,40
0,20
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
This ratio of owners equity to fixed assets can give us the information of the way the fixed assets of the company are financed. Especially when this index has a rising trend that means that the increase of fixed assets is financed at a high percentage from the owners equity. Contrary to that , when the calculation of the ratio has a descending trend that means that the amount of money that using for increasing the fixed assets are used at a high percentage from liabilities and not from using owners equity. Observing the data and the figure above we can reach the conclusion that all the companies appear to have a descending trend in the decade that we examine. The company GEK-TERNA seems to have the highest result in the calculation of the ratio during the years 2008 to 2010 compared to the other businesses. After that all the companies are approximately at the same level with a descending trend almost all the years. The company ELLAKTOR is presented to have a more stable but descending trend with no big fluctuations. Finally the company J&P AVAX follows also an descending trend reaching the lowest outcome in 2018 of all companies and years that we examine.
Undergraduate Thesis / Postgraduate Dissertation 40
2. Ratio of owner’s equity to total assets
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
J&P AVAX 0,25 0,25 0,35 0,33 0,31 0,23 0,18 0,16 0,10 0,10 0,09 ELLAKTOR 0,44 0,44 0,40 0,43 0,41 0,38 0,37 0,34 0,30 0,32 0,25 GEK- TERNA 0,25 0,28 0,16 0,18 0,17 0,17 0,09 0,11 0,11 0,14 0,13
2.Equity to Total Assets Ratio 0,50
0,45
0,40
0,35
0,30 J&P AVAX 0,25 ELLAKTOR 0,20 GEK-TERNA 0,15
0,10
0,05
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The ratio of equity to total assets it is effective when the results of its calculation are low. That means that the biggest part of profit remains to the shareholders. Contrary to that if this ratio is high means that there are difficulties in offering extra liabilities and the investors wait for the shareholders to finance first. As we can see from the table and the figure above the company ELLAKTOR seems to have the highest results throughout the examined period. This is a bad situation as the aim is to reach as lower index as it can. However, the trend of the ratio for this company is descending ,something that indicates an improved result with the greater part of the profit remains to shareholders. The company J&P AVAX is also appears to have a continually descending trend achieving in 2018 the best outcome in the calculation of the ratio very close to zero. The last company that we examine is GEK-TERNA where its results are the most satisfying compared to the other companies. The period from 2010 to 2015 has the lowest results of the three companies ,something that is really beneficial for itself as the nearly whole amount of profit is adressed to shareholders.
Undergraduate Thesis / Postgraduate Dissertation 41
3. Ratio of fixed assets to long-term liabilities
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
J&P AVAX 1,41 1,76 1,90 1,88 1,66 1,47 1,07 1,05 1,06 1,05 1,08 ELLAKTOR 1,21 1,19 1,19 1,32 1,31 1,15 1,20 1,26 1,24 1,26 1,12 GEK- TERNA 1,65 1,86 0,79 0,95 0,89 0,92 0,99 0,77 0,69 1,10 1,23
3.Ratio of fixed assets to long-term liabilities 2,00
1,80
1,60
1,40
1,20 J&P AVAX 1,00 ELLAKTOR 0,80 GEK-TERNA 0,60
0,40
0,20
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
This ratio depicts the level of security that the long term creditors of the company feel. The performance of the ratio over the years shows the policy that a company follows for the finance of its fixed assets. An increase of the ratio over time presents the change in the security that the the long term creditors feel and a possible extension in fixed assets is financed from owners equity , the opposite happens when we have a decrease of the ratio , where a possible extension in fixed assets is financed by long term liabilities. According to the data and the figure above the company J&P AVAX seems to have an increasing trend for the first three years that we examine something that indicates that the security level of the long term creditors become bigger and after that it is steadily descending until 2014 where remain almost steady for the rest years. Then the company GEK- TERNA appears with a ascending trend and after that it notes a big fall from 2009 to 2010 never reaching again the outcome of 2009 in the examined decade. Finally the company ELLAKTOR is not presenting many fluctuations over the years, the outcomes of the ratio are varied just above the unit so the security of the creditors remains the same.
Undergraduate Thesis / Postgraduate Dissertation 42 D. Activity Ratios 1. Inventories turnover ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
J&P AVAX 27,83 31,01 21,63 21,15 16,12 15,25 12,88 13,60 16,24 17,17 21,66 ELLAKTOR 20,84 56,19 37,30 41,17 28,42 32,25 44,31 34,21 42,09 47,00 66,27 GEK- TERNA 85,33 75,75 21,62 29,24 18,88 20,08 42,47 36,51 39,18 38,86 39,22
1.Inventories turnover ratio 90,00
80,00
70,00
60,00
50,00 J&P AVAX
40,00 ELLAKTOR GEK-TERNA 30,00
20,00
10,00
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
This ratio can allow us to check how many times the inventories of the company are renewed related to its sales. This ratio is used in order to be defined the velocity that the inventories of the company are replaced during a year. From the data and the figure above we can reach the following consensus concerning the examined companies. The company GEK-TERNA for the first two years notes the highest results compared to the other two companies. After that follows a descending trend with some fluctuations never reaching again the outcomes of the years 2008 and 2009. The company ELLAKTOR except for years 2008 and 2009 all the rest period that we examine has the best results of the calculation of the inventories turnover ratio something that indicates that it renews its inventories faster than the competition. Finally the company J&P AVAX is limited in very low results concerning this ratio something that characterized the company the weaker of the three and the velocity that it replaces its inventories very slow throughtout the decade.
Undergraduate Thesis / Postgraduate Dissertation 43 2. Asset turnover ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 0,77 0,69 0,59 0,54 0,36 0,32 0,37 0,38 0,41 0,54 0,52 ELLAKTOR 0,49 0,55 0,41 0,28 0,28 0,30 0,37 0,38 0,50 0,53 0,58 GEK- TERNA 0,99 1,00 0,46 0,63 0,46 0,55 0,78 0,65 0,69 0,72 0,83
2.Asset turnover ratio 1,20
1,00
0,80
J&P AVAX 0,60 ELLAKTOR GEK-TERNA 0,40
0,20
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The asset turnover ratio shows in what degree the company uses its assets in order to realize its sales. Calculating this ratio we can see if there is over investment of assets in the company related to its sales. The higher is the outcome of the index , the more efficient are used the assets of the company. Observing the data and the figure above we can make the conclusion that the company GEK-TERNA seems to have the better performance among the three companies as all the years notes the highest results except for one year 2010. That means that this company exploits in the best way its assets. The company J&P AVAX appears to have an descending trend until 2013 where it notes the lowest outcome , after that the ratio improved somehow over the years. Finally the company ELLAKTOR has the worst performance for the first three years that we examine , presenting some fluctuation through the decade. From the year 2013 is moving approximately at the same level with J&P AVAX never reaching by far the outcomes of the company GEK- TERNA which seems to uses its assets with the most beneficial way for itself.
Undergraduate Thesis / Postgraduate Dissertation 44 3. Owner’s equity turnover ratio
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 J&P AVAX 3,89 3,44 2,31 2,15 1,55 1,72 2,39 2,82 4,67 6,13 6,63 ELLAKTOR 1,62 1,80 1,41 0,92 0,98 1,08 1,38 1,49 2,18 2,17 2,85 GEK- TERNA 4,94 4,52 3,33 4,23 3,12 3,78 9,22 6,75 6,86 5,89 7,11
3.Owner's turnover ratio 10,00
9,00
8,00
7,00
6,00 J&P AVAX 5,00 ELLAKTOR 4,00 GEK-TERNA
3,00
2,00
1,00
0,00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The owners turnover ratio shows in what extent the company uses its owners equity related to its sales. As higher is the outcome of the ratio as better is the status of the company because it realizes big sales without using big owner’s equity and lead to increased profit. On the other side concerning the security as higher is the index means that it operates based in liabilities.From the table and the figure above we can observe that the company GEK-TERNA has the higher outcomes all the decade except for one year 2017 something that indicates it is in the better situation of the three companies but its operation is based on liabilities. The company J&P AVAX seems to have lower results related to GEK-TERNA but it appears to have a better performance compared to ELLAKTOR. It realizes big sales without using large amount of its owner’s equity and is based on liabilities. Finally the company ELLAKTOR seems to have the lowest performance in the calculation of the ratio throughout the decade , it is not based on liabilities and realizes sales with its owner’s equity.
Undergraduate Thesis / Postgraduate Dissertation 45 6. CONCLUSIONS
In the study that we realize, we focus on the financial statement analysis of three of the biggest companies in the construction sector in Greece using the financial ratios. The financiall ratios that we decide to use , are applied in every company separately and with the comparison among the results that arise we reach in the following conlusions : First of all, the category of financial ratios that we calculate is this which is related to the liquidation of the companies. All the groups that we examine GEK-TERNA , J&P AVAX and ELLAKTOR seems to have quite sufficient results for the difficult economic conditions that they have to face. Taking as a base the current ratio that we have calculate, we can observe that all companies have result bigger than unit ( >1) something that indicates that they have the capability to confront their short terms liabilities quite easy. The strongest company seems to be the ELLAKTOR which some years its current ratio is close to 2 when the others are around the unit. One more parameter that we examine is the profitability of the companies. From the ratios that we have calculated of this category all the groups GEK-TERNA , J&P AVAX and ELLAKTOR we can see that all have to deal with many difficulties concerning their profitability. To be more specific , the ratios of net profit margin and this of return on equity for three successively years from 2013 to 2015 present negative results. This happens because all the companies appear to have damages and not profit for these years for every unit of their total assets that they use something that it has negative effects such as the usage of their equity or the shrinkage of their assets. So , these years the economic crisis affects significately the profitability of the companies decreasing it approximately to the half and more. Moreover , all the companies that we examine seem to have a significant decrease in their sales and mainly the years between 2009 - 2013 where it is observed that they records their worst performance during the period that we examine. More specific , concerning the activity ratios that we have already calculate we can see that during the years 2012 and 2013 it is noted that in the asset turnover ratio is reached the lowest result for all companies throughtout the decade. This fact, shows that the companies can not use efficiently their assets and they are leading to make more and more investments as their sales are decreasing and their assets can not be covered from them. Finally , another aspect that we approach this financial analysis is this of the capital structure of the companies. The situation that we can observe here is that all the companies that we examine appears to be in a degree depended from their long term liabilities and other creditors something that leads them to a lack of their autonomy. Taking into account the results of the equity to total assets ratio we can see that from 2011 to 2014 the companies GEK-TERNA , J&P AVAX and ELLAKTOR seem to follow a descending trend as they are obviously affected from the economic crisis that dominates in this period. Also , approximately the same descending trend seems to have in the calculation of the other two ratios these of owners equity to fixed assets and the fixed assets to long term liabilities. This has as a result the weakness of the companies to based on theirs powers and the creation of their need to search for creditors in order to survive decreasing somehow the percent of “ownership” that they hold. Having complete the analysis of the ratios we occupy with, we can say that the companies appear to show a quite resistance to the difficult economic conditions that they have to face as they are prepared to some extent . However , the groups that we examine as it is expected are significantly affected from the economic crisis noting many decreases in their financial elements. This situation is caused because of the size that the crisis has and the inexperience of the companies to operate under these difficult conditions which until then they did not have met again .
Undergraduate Thesis / Postgraduate Dissertation 46 6.1.Prospects of the construction industry
The economic crisis has undoubtedly affects the construction industry for many years. However , the situation seems to be under control and the news are positive for the next years according to the research that it is realized in 2019 from Deloitte, Global M&A Construction Monitor . More specific, in a part of its study focus on the construction industry of Greece in which it reaches some useful conclusions as follows :
First of all, this consulting company supports that the period between 2018 to 2022 it is estimated that the annual growth rate (CAGR) will be increased to 4.7% from -2.4% that it was the years from 2013 to 2017. Also , it observes that the housing market is kept at a stable level during the years that the country has to face the economic crisis and this is provoked because of the liquidity problems and also the great number of news houses that are offered.
Moreover in its study, referred to the local commercial real estate market in which it is noted an increasing trend during the years 2017 and 2018 thanks to the investments in prime assets with more features. To continue with, the greek companies of housing investment and the international and national investment funds play a significant role to be acquired prime real estate assets in high class locations all over the country.
Finally , in this research it is noted that the economic crisis creates many difficulties and delays in the development of the infastrure domain in Greece for many years but the good news are that according to their data this situation will be overcame and the conditions seem to change very fast. ( Deloitte, 2019)
6.2.Proposals
As we have already refer, the contribution of the development of the construction sector plays an important role to the overall development of the Greek economy. Increasing the investments not only in infrastrure domain but also in all the construction projects it has a positive affect in improving the growth rate of the economy of our country and simustaneousely reducing the unemployment.
Some proposals that we can make in order to improve and boost the contribution of the Construction sector to our country's development process are the following:
- First of all , it can be beneficial if it is enhanced and accelerated the processes for the implementation of the projects that they are already scheduled.
- Then , it will be efficient if are given incentives in order to induce people investing in new houses and buildings and eliminate the elements that make them negative such as the taxes etc.
- Furthermore , another way to contribute in the development of the construction sector is the promotion of investments in infrastructure of private buildings using the appropriate tools .
Undergraduate Thesis / Postgraduate Dissertation 47
- Also , another parameter which will contribute is the maintance of such conditions of competition in the public works market where the relation between cost and benefit be optimized of infrastructure projects over their lifecycle .
- Last but not least , it will be of great importance if they are defined priorities in order to be achieved a long-term strategic infrastructure plan.( IOBE,2019)
Undergraduate Thesis / Postgraduate Dissertation 48 7. REFERENCES:
Νιάρχος Ν. (2004) “Χρηματοοικονομική ανάλυση λογιστικών καταστάσεων”, 7η έκδοση. Αθήνα. Εκδόσεις Α. Σταμούλης.
ΣΑΤΕ - Πανελλήνιος Σύνδεσμος Τεχνικών Εταιρειών, (2012) , «Ο Ελληνικός Κατασκευαστικός Κλάδος»
Ι.Ο.Β.Ε. - Foundation for economic & Industrial Research (2019), «Οι αναπτυξιακές προοπτικές των Κατασκευών στην Ελλάδα»
Ι.Ο.Β.Ε. - Foundation for economic & Industrial Research, (2015), «Η σημασία ανάπτυξης, τα εμπόδια και το μέλλον του κλάδου των Κατασκευών»
SCIENCEDIRECT – Article : “Investment in Construction and Economic Growth in Greece”, (2015) Savvas Chr.Mavridis a ,Konstantinos I. Vatalis
MBA Module “ Financial Management and Accounting” , Volume 4, “Financial Statement Analysis” , N. Eriotis
Ελληνική Στατιστική Αρχή ( HELLSTAT), https://www.statistics.gr/el/home
Deutsche Welle,2018 https://www.dw.com/search/?languageCode=el&item=%CE%BA%CF%81%CE%B9%CF%83%CE %B7%202008&searchNavigationId=10507&sort=DATE&resultsCounter=20
ICAP - ΔΕΛΤΙΟ ΤΥΠΟΥ ΚΛΑΔΙΚΗΣ ΜΕΛΕΤΗΣ «ΤΕΧΝΙΚΕΣ ΕΤΑΙΡΕΙΕΣ 5ης, 6ης, 7ης τάξης 2017», (2018)
Data for the group of J & P AVAX S.A. : http://www.jp-avax.gr/default.aspx?pid=348&lang=1
Data for the group of ELLAKTOR S.A. : https://ellaktor.com/
Data for the group of TERNA S.A. : http://www.terna.gr/
Undergraduate Thesis / Postgraduate Dissertation 49
https://www2.deloitte.com/gr/en/pages/energy-and-resources/articles/global-ma- construction-monitor-2019.html
Deloitte, “ Global Powers of Construction 2017”
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