VINCI - 2005 annual report

20. CONSTRUCTION CONTRACTS
20.1 FINANCIAL INFORMATION ON CONSTRUCTION CONTRACTS
Cost incurred plus recognised profits less recognised losses and intermediate
invoicing is determined on a contract by contract basis. If this amount
is positive, it is shown on the line Construction contracts in progress, assets.
If negative, it is shown on the line Construction contracts in progress,
liabilities.
CONSOLIDATED FINANCIAL STATEMENTS
Advances are the amounts received before the corresponding work has
been performed. The terms of their repayment depend on the specific
provisions of each contract. Most frequently, these advances are maintained
throughout the contract regardless of the amount of work carried out or
in progress.
(in € millions) 31/12/2005 31/12/2004
Construction contracts in progress, assets 995.5 926.2
Construction contracts in progress, liabilities (914.9) (892.9)
Construction contracts in progress, net 80.6 33.3
Costs incurred plus profits recognised
to date less losses recognised to date 20,630.7 18,019.5
Less invoices issued (20,550.1) (17,986.2)
Construction contracts in progress, net 80.6 33.3
Advances received from customers (432.6) (371.2)
20.2 COMMITMENTS GIVEN AND RECEIVED UNDER CONSTRUCTION CONTRACTS
The Group gives and receives guarantees (personal surety) in connection
with its construction contracts, which break down as follows:
31/12/2005 31/12/2004
(in € millions) Given Received Given Received
Performance guarantees 1,777.9 271.8 1,682.2 165.4
Performance bonds 563.8 113.4 529.0 99.2
Retentions 1,518.2 298.0 1,411.7 277.3
Deferred payments to subcontractors 679.2 157.0 603.4 83.6
Deferred payments to suppliers 116.4 2.9 57.5 4.2
Bid bonds 33.1 11.7 35.5 10.9
Total 4,688.6 854.8 4,319.3 640.6
The increase in commitments given under these construction contracts
(+8.5%) is linked to the increase in activity in the Construction, Roads
and Energies business lines in 2005 (+11.3%).
The guarantees given are mainly issued to guarantee construction work
in progress. Whenever events such as late completion or disputes concerning
the execution of a contract make it likely that a liability covered by a
guarantee will materialise, a provision is taken in respect of that liability.
In general, any risk of loss in connection with performance under a
commitment given by VINCI or its subsidiaries results in a provision being
recognised in the Group’s financial statements, under the rules in force.
VINCI therefore considers that the off balance sheet commitments above
are unlikely to have a significant impact on Group assets.
It should also be remembered that, opposite the commitments given, the
Group has an order book of firm orders accepted by customers which
undertake, under the contract terms, to pay for work as it is carried out.
In the context of their works activity, companies in the Group benefit from
guarantees given by financial institutions on the instructions of their
co-contractors or subcontractors or their parent company.
Lastly, VINCI also grants two-year and ten-year warranties in its normal
course of business. These warranties are covered by provisions estimated
on a statistical basis having regard to expenses incurred in the past or on
an individual basis in the case of any major problems identified. These
commitments are therefore not included in the above table.
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