BRISA Concessão Rodoviária, S.A. Quinta da Torre da Aguilha, Edifício BRISA, São Domingos de Rana Share capital of 75 000 000 Euros Commercial Registration and Corporate Tax Number 502790024
Contents 1 INTRODUCTION ...... 3
The Year in Review ...... 3 Corporate profile ...... 4 Macroeconomic Overview ...... 5 2 CHARACTERISTICS OF THE CONCESSION AND CORPORATE BUSINESS ...... 8
3 FINANCIAL REPORT ...... 15 4 FORESEEABLE DEVELOPMENT ...... 21 5 CORPORATE GOVERNANCE ...... 21 6 RISK MANAGEMENT - GOALS AND POLICIES ...... 26 7 PROPOSAL FOR THE APPROPRIATION OF RESULTS ...... 31 8 FINANCIAL STATEMENTS ...... 33
Statement of Financial Position ...... 33 Statement of Results and Other Comprehensive Income ...... 34 Statement of Changes in Equity ...... 35 Cash-flow statement ...... 36 9 NOTES TO THE FINANCIAL STATEMENTS ...... 37 10 LEGAL CERTIFICATION OF THE ACCOUNTS ...... 68 11 REPORT OF THE AUDIT BOARD ...... 70 12 TRAFFIC STATISTICS ...... 72 13 GOVERNING BODIES ...... 75
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1 Introduction
The Year in Review
JUNE Bond issue in the amount of € 120M
SEPTEMBER Repayment of € 500M bond issue
NOVEMBER Appointment of Audit Board at the General Shareholders Meeting
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Corporate profile
BRISA Concessão Rodoviária, S.A. (BCR) was created to operate the Brisa Concession following the corporate reorganisation of the Brisa Group in 2010. The Company's corporate objective is the construction, maintenance and operation of motorways and respective service areas and the planning and development of public infrastructures, pursuant to a concession contract.
The history of the concession dates from the foundation of the Group, back in 1972. Over four decades, the concession's activity has resulted in it being the main road axis in Portugal, spanning from north to south and east to west, with two major arteries providing access to Spain. Under the terms of the Concession Contract, Brisa Concessão Rodoviária is to operate this major network until December 2035.
BCR shares Brisa Group corporate culture, based on values such as Ethics, Innovation and Excellence and strongly directed to the promotion of mobility and interurban, inter-regional and international accessibility, with important economic and social benefits for the communities it serves.
Brisa Group views social responsibility from a long term perspective aimed at creating value to all different stakeholders. A Sustainability Report is published every year, disclosing its policy and main strategic vectors, as well as the performance of its economic, environmental and social indicators.
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Macroeconomic Overview
2013 saw a gradual improvement in major macroeconomic indicators following the deterioration of both public and private demand in 2012 as result of the on- going economic adjustment process and a restrictive fiscal policy put in place in Portugal. According to the latest forecasts (December 2013) issued by national and international agencies, in the year under review GDP should have fallen between 1.5% to 1.8% (vs. -3.2% in 2012), with private consumption tumbling by 2.0% to 2.5% (vs. -5.4% in 2012).
Prices and Financial Markets In 2013, Portuguese inflation reached record lows at 0.27%, falling slightly below latest projections. In December, the year-on-year rate of change stood at 0.2% after being negative in the preceding months, but it still is one tenth below the annual average change. This shows continuing pressure towards zero inflation, which could result in a deflation scenario. Note that in 2009 prices fell (-0.83%), but stopped decreasing in the following year. The outlook for inflation in 2014, according to both Banco de Portugal and the Government, is for 0.8%. As far as interest rates are concerned, following a first cut in May (from 0.75% to 0.50%), in November the European Central Bank Council lowered its reference rate to 0.25%, reaching a new historical low. As result, short-term interest rates denominated in Euro also stood at historically low levels and remained relatively stable throughout 2013. The exchange rate of the euro against the US dollar stood at 1.379 at the end of December, corresponding to an appreciation of 4.5% as compared to December 2012. The average exchange rate, however, stood at 1.328, corresponding to an appreciation of 3.3% compared to 2012. Following a steep decrease throughout 2012, the cost of Portuguese sovereign debt suffered fluctuations in 2013, one of which was felt more strongly in July due to political instability. However, an increase in confidence levels sustained by positive macroeconomic figures, led to further decreases in the cost of debt in the second half of the year, with 10-year Treasury bonds closing at around 6.1%, falling by 90 basis points compared to the end of 2012. This positive
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development was also seen in terms of perceived credit risk, as measured by pricing of its Credit Default Swaps (CDS), which recovered to 352 b.p. at the end of the year from 443 b.p. in January.
Fuel Prices Following an increase in fuel prices at the pump in 2012 (+6.5% and +5.8% for gasoline and diesel, respectively), in 2013 retail prices decreased, though not at the same pace as they had risen in the previous year.
Monthly evolution of retail prices of fuel, 2012-2013
Source: General-Directorate for Energy and Geology
Annual average retail price of fuel, 2012-2013 2012 2013 AGR Gasoline 1.68 € 1.62 € -3.7% Diesel 1.45 € 1.39 € -4.4%
AGR - Annual Growth rate
Notwithstanding this drop in prices, cumulative sales as of October 2013 still recorded losses as against 2012. This development was mainly due to the financial burden faced by both companies and households in the present financial crisis.
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Evolution in car fuel retail sales, 2012-2013 (Cumulative quantities as of October)
Source: General-Directorate for Energy and Geology
The car market The number of cars sold in Portugal in 2013 totalled nearly 127 thousand, corresponding to a 12% rise in sales compared to 2012, in marked contrast with previous years (-41% in 2012 and -30% in 2011). However, according to ACAP, the market remained below 2009's levels, as 2012 sales were exceptionally low. According to the same association, the renewal of corporate car fleets and the rent-a-car business keep the car market afloat, since sales to individuals remain stagnant.
Cumulative monthly evolution of new car sales in Portugal, 2012-2013
30,0% Light Veh. , % 20,0% Heavy Veh.
10,0% ,5% 0,0%
-10,0%
-20,0%
-30,0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: ACAP, Associação Automóvel de Portugal
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2 Characteristics of the Concession and Corporate Business
Economic indicators: Operating Income 1: € 439.6M A3 EBITDA 1: € 316.9M A14 A4
N14 Maia Matosin hos A28 1 A20 A43 Porto Gondomar
Gaia A44 EBITDA Margin : 72.1% A1
Espin ho A41
Number of employees: 14 A1
1 Aveiro
EBITDA=Operating profit+provisions, amortisation, Mira
Canta nhede depreciation, adjustments and reversals A17
Coim bra Figueira da Foz 4 Does not include income associated to the construction A1
Pombal Mari nha Grande Leiri a A1 A8
The motorway network operated by BCR A15 consists of 12 motorways totalling 1,123.9 A10 A13 A5 km, including the future motorway access A6 to the New Lisbon Airport. BCR presently A2 operates 11 motorways covering a total of 1,100.2 km in length, of which 1,014.1 km consist of tolled stretches, while 4.3 km is N the link to the Alto da Guerra on the A12 0 50 Kilometers motorway, with a 2x1 lane profile.
The network under concession will be completed following construction of the A33 motorway, i.e. the access to the New Lisbon Airport, which is pending Government approval.
The network runs from North to South, East to West, including the country's main road axes, namely the coastal corridor and the Lisbon-Madrid connection. It also includes important circular roads around the metropolitan areas of Lisbon and Oporto.
According to the latest concession contract negotiated with the Portuguese State, the concession will end in December 2035.
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Characteristics of the Concession in 2013
Lenght (kms) Toll free Tolled Total 2x1 lanes 2x2 lanes 2x3 lanes 2x4 lanes A1 - Auto-estradado Norte 17.4 279.1 296.5 1.3 160.6 127.3 7.3 A2 - Auto Estrada do Sul 9.6 225.2 234.8 0.0 202.8 32.0 0.0 A3 - Auto-estrada Porto - Valença 11.5 101.3 112.8 0.0 91.6 12.8 8.4 A4 - Auto-estrada Porto - Amarante 3.0 48.3 51.3 0.0 51.3 0.0 0.0 A5 - Auto-estrada da Costa do Estoril 8.1 16.9 25.0 0.0 2.3 22.7 0.0 A6 - Auto-estrada Marateca - Elvas 19.1 138.8 157.9 0.0 157.9 0.0 0.0 A9 - Circular Regional Externa de Lisboa 0.0 34.4 34.4 0.0 0.0 34.4 0.0 A10 - Auto-estrada Bucelas - Carregado - IC3 0.0 39.8 39.8 0.0 7.4 32.4 0.0 A12 - Auto-estrada Setúbal - Montijo 4.3 24.8 29.1 4.3 5.2 19.6 0.0 A13 - Auto-estrada Almeirim - Marateca 0.0 78.7 78.7 0.0 78.7 0.0 0.0 A14 - Auto-estrada Figueira da Foz - Coimbra (Norte) 13.1 26.8 39.9 0.0 39.9 0.0 0.0 Total 86.1 1014.1 1100.2 5.6 797.7 281.2 15.7
Investment in the network: widening, expansion and maintenance In what concerns investment as required under the concession contract, in 2013 BCR continued the construction works of the Soure Junction in the Pombal/Condeixa sub-stretch of the A1 Motorway. This should be completed during the first quarter of 2014.
The motorway link to the Poceirão Logistics Platform remains suspended, as construction of the platform itself has not progressed.
Lane widening works in various sub-stretches went ahead according to plans and as provided in the concession contract.
The awarding of the Widening and improvement works to 2x3 lanes of the Carvalhos / Santo Ovídeo sub-stretch on the A1 will take place in the first quarter of 2014 and works should start in the following quarter.
The contract for the design/construction of the New North Tunnel of Águas Santas, included in the widening works of the Águas Santas / Ermesinde sub- stretch of the A4 – Porto / Amarante motorway is planned to start in the second half of 2014.
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As regards road maintenance, in addition to certain specific works carried out, the following construction works were completed: • Improvement of road - Vila Franca de Xira II / A1/A10 Junction / Carregado sub-stretches of the A1 motorway; • Improvement of road - Coimbra Sul / Coimbra Norte sub-stretch of the A1 motorway; • Improvement of the left N/S lane of the Grândola Norte / Grândola Sul sub-stretch of the A2 motorway; • Improvement of the Ermesinde / Valongo sub-stretch of the A4 motorway; • Improvement of the Montemor-o-Novo Nascente / Évora Poente sub- stretch of the A6 motorway; • Improvement of unstable slopes on the Arruda dos Vinhos / Carregado (A1) sub-stretch of the A10 motorway.
As of 31 December 2013 a number of improvement works were still under way, namely the stabilisation of embankment slopes on the St.ª Iria da Azóia / Alverca e Condeixa / Coimbra Sul sub-stretches and the renovation and structural repair of overpass 282 on the Coimbra Sul / Coimbra Norte sub-stretch of the A1 motorway. The following works are still in awarding phase:
• Maintenance of engineering structures on the A1, A2 and A5 motorways; • Construction of the drainage system over Laje and Grande da Pipa rivers on the Bucelas / Arruda dos Vinhos / Carregado sub-stretches of the A10 - Bucelas / Carregado (A1) / IC3 (A13); • Renovation and structural reinforcement of hydraulic crossings on the Carcavelos / Estoril / Alcabideche (PH046 and PH048) sub-stretch of the A5 motorway and Maia / Santo Tirso (PH 026 and PH 037.1) sub-stretch of the A3 motorway.
Meanwhile, the company is assessing proposals submitted for the renovation works of the hydraulic crossings of the drainage system on the Santo Tirso / Famalicão (PH’s km 21+405 and km 21+455) sub-stretch on the A3 motorway and the Vila Verde / Santa Eulália (PH’s km 7+180 and km 11+600) sub-stretch
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on the A14 motorway and for the repair of structures on the Fogueteiro / Coina sub-stretch of the A2 motorway.
During the year under review, BCR maintained its regular inspections to road infrastructure, monitoring pavements, slopes and containment structures and other works. The resulting information was introduced into the Pavement and Structures Management Systems and will be used in future improvement, reinforcement and stabilisation projects.
The first half of 2013 saw the completion of various works including the construction of acoustic barriers on the Fogueteiro / Coina sub-stretch of the A2 motorway, the Paredes / Penafiel sub-stretch of the A4 Porto/Amarante motorway and the Maia / Santo Tirso sub-stretch of the A3 Porto / Valença motorway. Construction of acoustic barriers on the Coina / Palmela / Setúbal junction (A2/A12) sub-stretches of the A2 was still under way at the end of the year. In the second half of the year the company launched a tender for the design and construction of acoustic barriers on the Porto (VCI) / EN12 / Águas Santas and Famalicão/Cruz sub-stretches of the A3 and Penafiel / IP9 / Amarante sub-stretches of the A4 motorway.
Direct investment in the network under concession totalled € 28.9M, mainly widening and pavement works and the new Soure junction. Major repairs, which are considered as expenditure, are nevertheless accounted for as operating costs.
Direct investment in the concession
€M 2007 2008 2009 2010 2011 2012 2013 New stretches 110.6 9.2 - 13.8 17.7 6.8 0.6 Major repairs 17.9 16.4 7.2 11.5 16.8 10.5 12.7 Complementary projects 54.5 73.5 69.7 58.5 37.4 21.1 10.6 Other 17.9 21.7 15.2 18.3 11.2 5.8 5.0
Total 200.9 120.8 92.1 102.1 83.1 44.2 28.9
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Traffic on the network In 2013, Average Annual Daily Traffic (AADT) recorded by Brisa Concessão Rodoviária totalled 15 453 vehicles. Compared to 2012, traffic fell by 2.6%. In terms of kilometres travelled, this change was negative by -2.8%, as February 2013 had one day less than February 2012. Traffic continued to be affected by the adverse macro-economic situation, although 2013 figures were not as bad as 2012's (when AADT fell 14.0%). Indeed, traffic improved quarter-on-quarter in 2013 and grew in the fourth quarter of the year.
Traffic growth in quarter-on-quarter terms
2,4%
-0,6% -2,8% -4,0%
-9,9% 1T 2T 3T 4T 2013
In 2013, organic growth stood at -2.2%, with positive growth in the last quarter of the year, although still not enough to offset the loss suffered in the 1 st quarter. Despite a day less in February, several holidays with good traffic figures contributed to a better performance for the year. Finally, completion of the A33 motorway belonging to the Baixo Tejo concession and the revision of toll tariffs in the formerly toll-free motorways (ex-SCUT) resulted in a 0.7% loss in total traffic on Brisa Concessão Rodoviária.
Breakdown of annual traffic change
Decomposition 2013
Organic grow th -2.2% Calendar effect 0.1% Competition -0.7%
Final Growth -2.8%
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Breakdown by motorway Motorways that recorded a larger drop in traffic in the year under review were those combining business and seasonal traffic (seasonal traffic is more leisure- related - this is the case of the A2 motorway, which was, however, also affected by the opening of the Baixo Tejo concession). As a matter of fact, these motorways started to lose leisure-related traffic in 2012 and this development continued in 2013, aggravated by additional losses in areas with a larger share of business traffic.
The A9 (CREL – Lisbon Outer Ring Road) did not follow this trend as it was the motorway that had the largest traffic loss, although it serves mainly commuters and work-related travel. Part of this loss was due to the IC17 (CRIL), which continued to attract travellers who formerly used the A9 motorway.
Conversely, but also due to the present economic crisis, remaining motorways with commuter and service traffic also lost demand (except for the A4), though less than the motorways referred to above.
Change in annual traffic per motorway
0,5%
-1,6% -2,4% -2,8% -2,8% -2,8% -2,9% -2,8% -3,8%
-5,2% -5,6%
-7,4% A1 A2 A3 A4 A5 A6 A9 A10 A12 A13 A14 BCR
Analysis by class of vehicle The breakdown of traffic per type of vehicle shows higher losses from heavy vehicles, which fell by 5.4%, whilst light vehicles dropped by 2.7%.
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The breakdown of traffic per toll class thus shows a slight increase in Class 1 traffic as compared to remaining classes, contributing to a small decrease in the percentage of heavy vehicles, to 4.8% in 2013 from 4.9% in 2012.
Traffic structure per toll class Class 2012 2013 CL1 84.4% 84.8% CL2 10.8% 10.4% CL3 0.6% 0.6% CL4 4.3% 4.2%
Traffic structure by type of vehicle
2013 95,2% 4,8% Light Heavy 2012 95,1% 4,9%
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3 Financial Report
Operating income In 2013 BCR's operating income (excluding income associated to construction) fell by 1.7% to € 439.6M, as follows:
€M 2012 2013 Var. Toll revenues 432.9 427.5 -1.2% Service areas 8.9 8.6 -3.6% Other revenues 5.3 3.5 -34.7% Total 447.1 439.6 -1.7%
Toll Revenues collected by Via Verde represented, in 2013, over 70% of the total toll revenues (68% in 2012).
The Profit and Loss Statement includes € 14.7M operating income and also operating costs, reflecting the recognition of income and charges with the acquisition of assets allocated to the concession. This was recorded so as to comply with IAS 11 and article 14 IFRIC 12. Therefore, total operating income and costs and operating margins should exclude income and costs recognized pursuant to IAS 11.
Operating costs Operating costs for the year totalled € 277.2M, as follows:
€M 2012 2013 Var. Supplies and Services 122.5 120.2 -1.9% Personnel costs 2.9 1.4 -52.6% Other costs 1.3 1.1 -16.3% Sub-Total 126.8 122.7 -3.2% Amortization and Provisions 151.2 154.5 2.2%
Total 277.9 277.2 -0.3%
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"Supplies and Services" mainly relate to the sub-contracting of operation and maintenance services in the motorway network under concession and electronic toll collection costs. "Amortization and Provisions" includes a provision in the amount of € 14.3M net of reversals in the amount of € 6.8M, pursuant to IFRIC 12 relating to future major repairs in the network.
Financial results In 2013 BCR recorded financial losses of € 124.9M, improving by € 2.3M in relation to the previous year.
€M 2012 2013 Var. Interest income 6.0 4.8 -20.2% Financial income 6.0 4.8 -20.2% Interest paid 99.6 104.0 4.4% Other financial costs 33.7 26.2 -22.3% Financial expenses 133.4 130.2 -2.4% Investment income 0.2 0.5 169.5%
Net Financial Results -127.2 -124.9 -1.8%
Financial income made up entirely of interest income totalled € 4.8M, thus falling by € 1.2M in relation to the amount posted in 2012, reflecting a decline in bank deposit rates during 2013.
Financial expenses totalled € 130.2M, which compares to € 133.4M in 2012. The increase in Interest Paid (+ € 4.4M due to higher interest rates) was offset by a decrease in Other Interest and Financial Expenses (-€ 7.5M as result of lower banking fees).
Net Results Net income totalled € 27.5M, whilst profit before tax amounted to € 37.5M, representing a decrease of € 4.5M compared to 2012.
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Financial Position At the end of 2013 total net assets amounted to € 3 067M, corresponding almost entirely to intangible assets allocated to BCR's motorway network. Equity totalled € 687M and total liabilities amounted to € 2 380M. In relation to 2012, total liabilities increased by € 328M and equity rose by €32M.
Financial Debt Despite the adverse environment that continued in 2013, BCR maintained strong liquidity, reducing the amount of its debt and extending maturities, principally as a result of a € 120M bond issue maturing in 2020 and the negotiation and extension of short term credit lines and commercial paper for a total amount of € 320M.
At the end of 2013, BCR’s net debt amounted to € 1 973.8M, having fallen by € 180.6M as against the same period of the previous year. Cash at the end of the year totaled € 138.7M, of which € 135M is placed in reserve accounts.
As of 31 December 2013, BCR's gross debt amounted to € 2 112.5M, which is € 352.2M less than as at 31 December 2012, as follows:
2012 2013 Var. M€ Bonds 1765.2 1402.2 -363.0 EIB 663.4 628.2 -35.2 Commercial Paper 36.1 82.1 46.0 Gross Debt (a) 2464.7 2112.5 -352.2 Cash resources 310.3 138.7 -171.6 Net Debt 2154.4 1973.8 -180.6
(a) This amount corresponds to the nominal value of debt, which totalled € 2 153.3M in 2013, net of accrued interest and expenses associated to the issuing and placing of the loans, which are recognized according to the effective interest method throughout the life of the loans.
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Bonds In June 2013 BCR carried out a bond issue in the amount of € 120M and repaid a € 500M bond issue which was due in September. At the end of the year BCR had 6 bond issues with a total nominal value of € 1 408.5M, the characteristics of which were as follows:
Nominal Rate Maturity €M Bond 2014 225.0 6.250% 2014 Bond 2015 63.5 6.400% 2015 Bond 2016 600.0 4.500% 2016 Bond 2018 300.0 6.875% 2018 Var Bond 2020 120.0 (Eur6M) 2020 Bond 2032 100.0 6.875%* 2032 * Fixed interest rate of 6% in the first five years and remuneration indexed to the consumer price index (excluding housing) as from the sixth year to maturity.
Bank loans As far as bank loans are concerned, BCR is financed by a sole loan with the European Investment Bank (EIB), which has variable interest rate indexed to the 6-month Euribor rate. This loan will be repaid in fixed half-year instalments from June 2014 to December 2030.
At 31 December 2013 the amount recorded in the balance sheet concerning this loan totalled € 628.2M. The amount of outstanding commercial paper as of the same date totalled € 82M.
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epayment profile of debt 700.000 €
600.000 €
500.000 €
400.000 €
300.000 €
200.000 €
100.000 €
0 €
The next five years will see the maturity of several bond issues and one commercial paper programme. From 2019 to 2030 the repayment profile of BCR debt will be more constant, staying always below € 100M. BCR keeps a close eye on the performance of financial markets so as to carefully select the most efficient financing options, namely those with longer average debt maturity in line with its long term assets.
Structure per type of interest 2013
32% Fixed Variable 68%
As of December 2013, BCR had approximately 68% of fixed interest rate debt and 32% floating interest rate debt. The weighted average cost of debt (including the impact of derivative financial instruments) was 4.37%.
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BCR's ratings are “BBB” (Rating Watch Negative) given by Fitch Ratings and “Ba2” (Negative Outlook) from Moody’s.
Moody's Ba2 (Negative Outlook) Fitch Ratings BBB (Rating Watch Negative)
BCR ratings were affected by the sharp deterioration in Portugal's rating, particularly during 2011. It should be noted, however, that at the end of 2013 ratings awarded to BCR by the said agencies were above those provided to the Portuguese Republic (by one notch in Moody’s case and two notches in Fitch's case). This fact shows the company's financial solidity and strong financial structure, which means that creditors are duly safeguarded. On 26 November 2013, Fitch Ratings put BCR on Rating Watch Negative, adding that this would be reviewed if by 31 December the Net Debt/EBITDA ratio was below 6.5x. By the end of 2013 this ratio was 6.44x.
BCR's contract includes a set of covenants providing protection to its creditors. BCR's creditworthiness and the use funds from new loans are limited by various factors, one of which concerns the maintenance of a minimum rating of Baa3/BBB-. Following Moody's revision of BCR's long term rating down to Ba1 on 29 November 2011 BCR became subject to trigger event, which means that the company must have its creditors’ authorisation to pay dividends to its shareholder and must use the funds from new loans to repay existing financial debt and/or deposit them in an account allocated to the repayment of outstanding debt.
Additionally, there are four financial ratios (namely Net Senior Debt/EBITDA, Historic ICR, Forward Looking ICR and CLCR), which are subject to two thresholds - one in the form of trigger event and the other in the form of event of default – implying different consequences if exceeded. As of 31/12/2013 all ratios stood within the applicable levels. Furthermore, improvements were seen, specifically as concerns the Net Senior Debt/EBITDA ratio, which evolved from
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7.01 at the end of 2012 to 6.88 as of 30/06/2013, standing at 6.44 at the end of 2013, i.e. below the 6.50 trigger event level. Historic ICR ratio also moved from 2.12 at 30/06/2013 to 3.16 at the end of 2013, thus returning to above the minimum 2.25 trigger event level.
4 Foreseeable Development
BCR's activity in 2014 is likely to follow the same trend as in 2013. Motorway traffic may well record a small rise, which should push revenues slightly upwards with toll rates remaining unchanged. Operating costs should continue to be stable. As far as investment is concerned, there are plans for two major widening works and several road repair and structures works. Taking into account the foreseeable evolution of financial markets, which remain unstable and fragile, BCR will seek to maintain its strong financial position, assessing and implementing the most efficient financing solutions in the light of current market conditions and future prospects.
5 Corporate Governance
As far as corporate governance is concerned, BCR adopted a governance structure specifically designed to ensure and show the separation within the Brisa Group of all rights, obligations, assets and liabilities allocated to the concession, as approved by council of ministers' resolution no. 198-B/2008 of 31 December, which is operated by BCR alone.
CAPITAL STRUCTURE The Company's share capital is of € 75 000 000 (seventy five million Euros), fully subscribed and paid up, divided into 15 000 000 (fifteen million) unlisted shares with a nominal value of € 5 (five Euros) each . There are no different classes of shares or rights .
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Each share corresponds to one vote and there are no voting restrictions. All shares are indirectly held by BRISA Auto-Estradas de Portugal, S.A., through its equity participation in BRISA Participações, S.G.P.S., S.A. and, in turn, its equity participation in BRISA-Concessão Rodoviária, S.G.P.S., S.A., which holds 100% of BCR’s shares. Limitations as to the transferability or ownership of the shares representing the share capital of BCR are those deriving from its concession contract. Any change to the Articles of Association is the exclusive responsibility of the General Meeting, under the terms of its article 16.
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors of BCR is made up of 10 (ten) members, including three independent directors who must satisfy the following requirements:
(a) they cannot carry out any executive duties in the Company;
(b) they are not covered by any of the incompatibility situations provided in paragraph one of Article 414-A of the Companies Code, except for the one provided in respective sub-paragraph b);
(c) they cannot exercise or have exercised any managing function (whether or not of executive nature) in any Related Party.
SPECIAL REQUIREMENTS OF INDEPENDENT DIRECTORS
In brief terms, the above mentioned paragraph 1 of article 414-A of the Companies Code establishes the incompatibility regime applicable to supervising bodies, which is particularly demanding. Namely, independent directors cannot: a) benefit from private advantages provided by the company; b) Not applicable. c) be members of the managing boards of any company under a parent- subsidiary or group relationship with the supervised company; d) be members of any corporation holding control over the supervised company;
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e) directly or indirectly, provide services or hold a material commercial relationship with the supervised company or any company holding a control or group relationship with the latter; f) hold office in a competing company or exercise a competing activity on behalf of the latter or be bound in any way to the interests of a competing company; g) be spouses, relatives and kin in direct lineage up to and including the third lineage, in the collateral line, of persons prevented under the terms of paragraphs a), c), d) and e) above, as well as spouses of the persons covered by provisions in paragraph e); h) perform management or supervising functions in five companies other than in law firms, statutory auditing firms and statutory auditors, the latter being subject to provisions in article 76 of Decree-law 487/99 of 16 November; i) be statutory auditors presenting other incompatibilities according to the relevant legislation; j) be persons who are banned, incapacitated, insolvent, bankrupt or sentenced to penalties involving the prohibition, even if temporary, of performing public functions.
SPECIFIC POWERS Financing contracts entered by BCR provide that: a) all contracts with related parties which BCR may enter, renew, revoke or alter shall be approved by at least 2 of the 3 independent directors referred to above; b) BCR general meeting shall only approve dividend payment proposals that were previously approved by at least 2 of the 3 independent directors referred to above; c) the said prior approvals shall only occur if such distribution has no materially negative impact on the Company's credit profile. The Board of Directors has no powers to decide on any share capital increases.
FUNCTIONING OF THE BOARD OF DIRECTORS
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There are no specific rules for the composition of the Board of Directors except that it must include at least three independent members, under the terms previously explained. Member Manuel Eduardo Henriques de Andrade Lamego is the managing director with powers to manage the current affairs of BCR, within the scope of the general policies approved by the Board of Directors.
The powers delegated to the managing director are as follows: I - Jointly with another director or attorney-in-fact duly mandated for the purpose: a) Open, operate and close bank accounts; b) Accept, draw, endorse and pay bills of exchange, cheques and invoice statements of accounts held by BCR; c) Deposit cash in bank accounts held by BCR with banks and other credit institutions; d) Under the terms specifically established by the BA, take out and cancel loans with banks and other credit institutions in Portugal and/or abroad. e) Enter, revoke, terminate, rescind or cease, in any way and at any title, insurance, leasing or long term rental contracts. II - Separately: a) Within the limits of his/her financial powers, authorise payments, correct and settle accounts with debtors and creditors; b) Sign, dispatch and receive correspondence; c) Pay taxes and duties, namely to the Treasury (Direcção Geral do Tesouro e Finanças) and Social Security (Instituto de Gestão Financeira da Segurança Social), claim undue payments and receive cancellation letters and respective amounts; d) Issue receipts and give discharge; e) Obtain any relevant registrations with respective land, commercial and industrial registrar offices, requesting annotations and cancellations; f) Sign any document that may be required to retrieve from postal office or railway office or any other any postal order or registered mail or any other mail addressed to BCR; g) Hire and exercise disciplinary, managing and supervision authority over BCR personnel and represent BCR in its relations with its employees;
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h) Prepare and submit to the Board of Directors, in a timely manner, all elements required for the resolutions to be taken by the Board, according to the Agenda of respective meeting; i) Inform the Board of Directors of matters requiring technical studies or special services; j) Act on behalf of BCR before any Ministry, General Directorate, Government department, municipal council and any other public or private office or entity; k) Carry out the financial, operational, business, administrative, advertising and promotional management of BCR; l) Represent BCR in Court or otherwise, as plaintiff or defendant, bring and keep abreast of legal proceedings, accept responsibility and withdraw from or compromise in such lawsuits, and enter into arbitration agreements; Under the terms of the Companies Code, in companies with BCR's governance model (board of directors and audit board), it falls to shareholders in general meeting to submit proposals for the appointment and replacement of members of the board of directors and audit board. There are no statutory restrictions to the submission of proposals and election of these two bodies. In case of resignation or definitive impediment of a director during the course of his mandate, the Board of Directors will co-opt a new member, who will be subject to the approval of the first general meeting occurring after the co-opting concerned.
AUDIT BOARD At the General Meeting held on the 26th November 2013 shareholders decided to change the supervisory body by appointing an Audit Board to replace the existing Sole Auditor structure.
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6 Risk Management - goals and policies
The Risk Management Policy is established at Group level, involving directly the governing bodies of the various companies of the Brisa Group as well as all remaining corporate structures. Risk Management aims at ensuring a sustainable business development, safeguarding the Group's value, based on best practices, allowing to capitalize internal know-how to efficiently manage the risks to which the Group is exposed, namely in the environmental, legal, financial and operational fields. Risk management is a cornerstone of corporate governance. As such, it is part of Brisa’s culture and management processes, and employees have the responsibility to mitigate risk factors, minimizing their impact and identifying improvement and/or return opportunities, where possible. In this context, BCR's risk management policy is an integral part of the risk management system of the Brisa Group, which is based on an integrated, structured, systematised and transversal model designed according to the internationally recognised method COSO ( Committee of Sponsorship Organizations of the Treadway Commission ), which views to ensure the use of the best Corporate Governance practices at the following levels: - Fixing of strategic goals in terms of risk taking; - Aligning of the risks effectively incurred with the group's strategic direction; - Identification of the main risks associated to the group's activities and respective causes; - Analysis and assessment of the impact and likelihood of occurrence of each potential risk; - Establishing mechanisms to control the execution of the risk management measures adopted and follow their impact and effectiveness; - Adoption of internal information and communication mechanisms for the various components of the system, as well as risk alerts; - Regular assessment of the system implemented and adoption of changes deemed necessary.
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To this end, the Group implemented a tool for the integrated management of the risk management system, in line with the aspects referred to above, in order to sustain the convergence process of risk management with strategic planning.
This integrated risk management system allows for an up-to-date identification and assessment of the main risks in the Brisa Group business portfolio, in order to determine the measures to control and/or mitigate such risks. This is particularly relevant in the present unstable economic and financial environment, allowing for a strategic and sustained management of the Group.
In accordance with the governance model adopted by BCR - consisting of a board of directors and an audit board - these two bodies play a crucial role in the creation and monitoring of internal control and risk management systems, assessing their operation and adjusting them to corporate needs. The main objective of BCRs internal control system is to guarantee the quality of the financial report. Therefore, the process of preparation and disclosure of financial information is duly formalized, and this information is regularly and systematically analyzed by BCR management and supervised by the audit board. Following the risk assessment carried out within the scope of the system described above, the following major risk groups likely to affect BCR's normal business development were identified as:
Operational Risks BCR is a leading company in the road and transport sector. As such, risk management is mandatory for the sustainable development of its operations. Continued investment in excellence and innovation at different operating levels, with special focus on clients’ expectations, namely as concerns traffic safety, comfort and traffic movement and the quality of roads and rendered services shows BCR's as well as the Group's commitment to improvement and constitutes a positive differentiating factor in relation to its peers. Within this scope, BCR is continuously organising road safety campaigns, improving the network's safety features by carrying out improvement and widening works in accordance with the Group's required standards and the law, viewing to create the necessary conditions for a better traffic flow. The existence
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of a management and crisis communication model to respond to emergency situations and the establishment of specific contingency plans for the different areas attest for the concern and rigour placed in the management of the Group's operations. In terms of Occupational Health and Safety, the Brisa Group has a specialised structure, which supervises and ensures the central and local coordination of the health and safety plans associated to risk activities.
The Operational Coordination Centre, backed by telematics and road safety structures, ensures the recording, processing and availability of updated and timely information to clients and complementary services. The Brisa Group fosters innovation with a subsidiary company fully devoted to it. This enables the Group to achieve its engagement to this critical area, remaining at the forefront of technological evolution and modernisation of its infrastructures and operations, based on a commendable and innovating partnership policy with various companies and reference universities. Its constant concern for developing efforts to identify operating risks and defining management measures to mitigate them is part of the Group's strategy to face a continuously changing and increasingly demanding and globalised world, where safety is crucial. These activities help to establish mitigating measures in line with current business needs but also to act ahead of and prevent potential risk situations.
Regulation & Compliance Risks The operation of road concessions is subject to specific and comprehensive regulations. Hence, the risk stemming from regulatory changes is particularly relevant. The Legal Department follows the regulatory evolution of BCR's activities closely and suggests legal steps and solutions deemed suited to the normal development of the company's operations, in accordance with the legal framework in force at any time. We point out the work developed over the last few years viewing the convergence of procedures and practices to new road safety requirements.
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Environmental Risks Environmental management through design, construction and operation phases is a top priority of Brisa's risk management system. Measures to identify environmental risk situations have long been carried out to allow taking preventive actions and mitigate impacts, in light of the environmental policy followed by BCR and the Brisa Group at all levels. This environmental risk management includes eco-efficiency measures, which is a way of integrating environmental risk management throughout the value chain, i.e. in terms of impacts on the environment and the management of related costs and benefits. The existence of environmentally certified companies according to ISO 14001 standards, which are internationally recognized as guidelines for corporate environmental management, and the adoption by the Group of its own specific guidelines (Environmental Policy Statement), eco-efficiency criteria, quantitative goals for environmentally critical indicators, plus a Sustainability Management Information System, all strengthen the Group's strict standards as it continuously seeks improvement and a sustainable business performance.
Information systems risk The Information Systems area is a crucial instrument for sustained growth, given the continuous technological innovation and its contribution to improving efficacy and efficiency in business processes. The laying down of a medium / long-term risk management strategy in information systems, including a Disaster Recovery solution, which by definition, is closely related to business processes, enables to significantly reduce the risk of operating losses in those circumstances. At the same time, it ensures the efficacy of investments made and allows for a quick reaction in the event of sudden changes in business environment. The systematic and parallel development of activities in multiple areas, including areas relating to safety of information and resilience to failures in infrastructures, has also provided greater efficiency in handling this type of risks. As far as internal controls and information supporting processes are concerned, systems are constantly reassessed, based on the best practices in this area, namely the ITIL framework.
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Amongst the activities developed in 2013 to mitigate these risks and strengthen the existing corporate policy in this area, following a critical assessment of the systems and applications which support the Group's business processes - known as Business Impact Analysis (BIA), tests to the implemented Disaster Recovery Solution were carried out, thus ensuring that in the event of disaster, the Group will have all the information means required to continue operating.
Financial Risks As with the majority of companies, BCR is exposed to a number of financial risks deriving from its business activity. These include in particular: liquidity and interest rate risk resulting from its financial indebtedness; counterparty risk to which the Company is exposed, as it contracts interest rate risk hedging operations and implements treasury management. Following the splitting-off and ring-fencing of Brisa Concession, the financial risks to which BCR is subject were strongly mitigated thanks to the implementation of an innovative financial structure. Note that BCR financial structure follows a risk hedging policy with its own risk management requirements and guidelines, including, for instance, a minimum ratio of fixed rate debt, non-existence of significant foreign exchange exposure, as well as a minimum financial solidity (according to rating) required from counterparties to perform financial operations. Even against an adverse macroeconomic background BCR's access to credit and its liquidity position has remained strong thus mitigating its refinancing risk.
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7 Proposal for the appropriation of results
The Board of Directors proposes to allocate the Net Income for the year in the amount of € 27,531,474 as follows: · 5% corresponding to € 1,376,574 to legal reserves · The remaining, in the amount of € 26,154,600, to the Other Reserves account.
Under the terms of paragraph 1-c) of article 245 of the Securities Code, and in compliance with legal and statutory provisions, the Board of Directors submits to shareholders for consideration the condensed financial statements and management report relating to 2013, in the firm belief that to the best of its knowledge, the information contained therein was prepared in accordance with the relevant accounting standards, providing a true and fair view of the assets and liabilities and the financial situation of the issuer and that the management report contains a faithful account of the information required.
São Domingos de Rana, 25 February 2014.
The Board of Directors
Vasco Maria Guimarães José de Mello (chairman)
João Pedro Stilwell Rocha e Melo
João Pedro Ribeiro de Azevedo Coutinho
António José Lopes Nunes de Sousa
Daniel Alexandre Miguel Amaral
Manuel Eduardo Henriques de Andrade Lamego
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Michael Gregory Allen
Miguel José Pereira Athayde Marques
João Filipe Maia de Lima Mayer
Emanuel José Leandro Maranha das Neves
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8 Financial Statements
Statement of Financial Position as of 31 December 2012 and 2013 (amounts in Euro) Notes 2013 2012
Non-current assets: Tangible fixed assets 10 14 943 925 20 748 322 Intangible assets 11 2 829 609 583 2 943 728 346 Advances to be forwarded as tangible fixed assets 10 - 221 065 Deferred tax assets 12 49 854 844 46 061 365 Other non current assets 13 3 750 000 6 264 406 Total non-current assets 2 898 158 352 3 017 023 504
Current assets: Inventories 1 521 1 512 Other investments 14 - 34 000 000 Trade and other receivables 15 23 401 930 28 994 814 Other current assets 16 6 245 610 5 972 130 Cash and cash equivalent 17 138 748 003 276 316 523 Total current assets 168 397 064 345 284 979
Total assets 3 066 555 416 3 362 308 483
Shareholders' equity: Share capital 18 75 000 000 75 000 000 Supplementary capital 19 126 302 678 126 302 678 Share premiums 18 354 744 809 354 744 809 Legal reserve 20 5 486 213 4 099 461 Other reserves 20 97 798 369 67 127 321 Net profit for the year 27 531 474 27 735 051 Total shareholders' equity 686 863 543 655 009 320
Non-current liabilities: Loans 21 1 750 249 637 1 881 957 935 Provisions 23 133 346 132 127 018 883 Other non current liabilities 24 62 555 377 74 687 043 Total non-current liabilities 1 946 151 146 2 083 663 861
Current liabilities: Provisions 23 14 156 824 12 708 634 Suppliers 29 12 321 575 3 122 123 Loans 21 362 263 167 582 757 239 Suppliers of investment 12 826 239 8 273 130 Other accounts payable 29 16 887 731 2 015 316 Other current liabilities 25 15 085 191 14 758 860 Total current liabilities 433 540 727 623 635 302
Total liabilities and equity 3 066 555 416 3 362 308 483
The accompanying notes form an integral part of the statement of financial position for the period ended 31 December 2013.
The Accountant, no. 62018 THE BOARD OF DIRECTORS
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Statement of Results and Other Comprehensive Income for the Years ended as of 31 December 2012 and 2013 (amounts in Euro)
Notes 2013 2012
Operating income: Rendered Services 3 436 089 957 441 842 840 Other operating income 3 3 471 594 5 283 424 Income associated to construction service 3 14 703 503 32 784 703 Total operating income 454 265 054 479 910 967
Operating expenses: Supplies and services 4 ( 120 175 716) ( 122 513 016) Personnel costs ( 1 393 470) ( 2 939 665) Provisions, amortisation, depreciation, adjustments and reversals 10, 11, 22 and 23 ( 154 537 020) ( 151 164 490) Tax ( 887 530) ( 1 034 822) Other operating expenses ( 201 230) ( 266 469) Expenses associated to construction service 3 ( 14 703 503) ( 32 784 703) Total operating expenses ( 291 898 469) ( 310 703 165)
Operating Results 162 366 585 169 207 802
Financial expenses 6 ( 130 183 108) ( 133 357 838) Financial income 6 4 774 240 5 983 114 Investment income 6 492 817 182 867 Profit before tax 37 450 534 42 015 945
Income tax 7 ( 9 919 060) ( 14 280 894) Net profit for the year 27 531 474 27 735 051
Other income and expenses recognised under Shareholders' Equity which will be reclassified to results: Increase/(decrease) in the fair value of financial instruments 26 4 322 750 ( 5 104 601) Income recognised directly in shareholders' equity 4 322 750 ( 5 104 601)
Total net profit and loss and other comprehensive income for the year 31 854 224 22 630 450
Earnings per share: Basic 8 1.84 1.85 Diluted 8 1.84 1.85
The accompanying notes form an integral part of the results and other comprehensive income for the year ended 31 December 2013.
The Accountant, no. 62018 THE BOARD OF DIRECTORS
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Statement of Changes in Equity for the years ended as of 31 December 2012 and 2013 (amounts in Euro)
Share Supplementary issue Legal Other Profit/(loss) Notes Share capital capital contributions premiums reserve Reserves for the year Total
Balance at 1 January 2012 75 000 000 126 302 678 354 744 809 304 119 120 439 75 906 825 632 378 870
Net profit for 2012 - - - - - 27 735 051 27 735 051 Increase/(decrease) in the fair value of financial instruments net of tax 26 - - - - ( 5 104 601) - ( 5 104 601) Total net profit and loss and other comprehensive income for the year - - - - ( 5 104 601) 27 735 051 22 630 450
Appropriation of net profit for 2011: Transferred to legal reserve 9 - - - 3 795 342 -( 3 795 342) - Transferred to other reserves 9 - - - - 72 111 483( 72 111 483) - Balance at 31 December 2012 75 000 000 126 302 678 354 744 809 4 099 461 67 127 321 27 735 051 655 009 320
Balance at 1 January 2013 75 000 000 126 302 678 354 744 809 4 099 461 67 127 321 27 735 051 655 009 320
Net profit for 2013 - - - - - 27 531 474 27 531 474 Increase/(decrease) in the fair value of financial instruments net of tax 26 - - - - 4 322 749 - 4 322 749 Total net profit and loss and other comprehensive income for the year - - - - 4 322 749 27 531 474 31 854 223
Appropriation of net profit for 2012: Transferred to legal reserve 9 - - - 1 386 752 -( 1 386 752) - Transferred to other reserves 9 - - - - 26 348 299( 26 348 299) - Balance at 31 December 2013 75 000 000 126 302 678 354 744 809 5 486 213 97 798 369 27 531 474 686 863 543
The accompanying notes form an integral part of the statement of changes in shareholders' equity for the year ended 31 December 2013.
The Accountant, no. 62018 THE BOARD OF DIRECTORS
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Cash-flow statement for the years ended as of 31 December 2012 and 2013 (amounts in Euro)
Notes 2013 2012 OPERATING ACTIVITIES: Cash receipts from clients 419 073 526 434 585 141 Cash paid to suppliers ( 102 980 277) ( 139 901 605) Cash paid to personnel ( 1 513 790) ( 2 745 630) Flows generated by operations 314 579 459 291 937 906
Income tax received/paid 9 837 564 ( 8 044 109) Payments for the replacement of infrastructures ( 8 911 778) ( 13 277 211) Other receipts/(payments) relating to operating activities 1 802 953 ( 2 114 231) Net cash from operating activities (1) 317 308 198 268 502 355
INVESTING ACTIVITIES: Cash receipts relating to: Other investments 14 34 000 000 - Tangible and intangible fixed assets 81 400 127 965 Interest and similar income 5 332 265 5 791 771 39 413 665 5 919 736 Cash payments relating to: FinancialOther investments investments 14 - ( 34 000 000) Tangible and intangible fixed assets ( 16 668 708) ( 45 821 503) ( 16 668 708) ( 79 821 503) Net cash from investing activities (2) 22 744 957 ( 73 901 767)
FINANCING ACTIVITIES: Cash receipts relating to: Borrowings 264 000 000 2 566 500 000
Cash payments relating to: Borrowings ( 636 985 409) ( 2 497 285 409) Interest and similar costs ( 98 519 282) ( 123 849 274) Derivative financial instruments ( 6 116 985) ( 4 713 041) ( 741 621 676) ( 2 625 847 724) Net cash from financing activities (3) ( 477 621 676) ( 59 347 724)
Variation in cash and cash equivalents (4) = (1) + (2) + (3) ( 137 568 521) 135 252 864
Cash and cash equivalents at the beginning of the year 17 276 316 318 141 063 454 Cash and cash equivalents at the end of the period 17 138 747 797 276 316 318
The accompanying notes form an integral part of the cash flow statement for the year ended 31 December 2013.
The Accountant, no. 62018 THE BOARD OF DIRECTORS
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9 Notes to the Financial Statements as of 31 December 2013 (Amounts in Euro)
1. INTRODUCTION
BRISA Concessão Rodoviária, S.A. (the “Company” or “BCR”), previously called MCall – Serviços de Telecomunicações, S.A., was set up in 2001 and since 30 April 2010, as result of the separation of the call centre business unit and subsequent change in the company's articles of association, its new main object is the construction, maintenance and operation of motorways and respective service areas and the planning and development of social equipment infrastructures pursuant to a concession contract.
The above mentioned split-off was carried out in April 2010, with accounting effect as of 1 January 2010, following the separation of the property relating to the call centre services.
On 22 December 2010 the Company, which is included in the consolidation perimeter of the Brisa Group, was assigned by Brisa - Auto-Estradas de Portugal, S.A. (“BAE”), its position in the concession contract approved by Council of Ministers Resolution no. 198-B/2008, of 31 December (“Brisa Concession”). This operation was followed by the assignment by BAE of a set of assets and liabilities allocated to Brisa Concession by means of contributions in kind for the realization of a share capital increase that took place on 22 December 2010.
The bases of Brisa Concession were established pursuant to Decree-law 467/72 of 22 November, namely the construction, maintenance and operation of motorways. Since then the concession bases have been reviewed on several occasions as amended in respective clauses of the concession contract.
Decree-Law 294/97 of 24 October, Decree-Law 287/99 of 28 July, Decree-Law 314 A/2002 of 26 December and Decree-Law 247-C/2008 of 30 December approved the bases of the concession currently in force. These bases are pointed out below given their importance and impact on the Company's financial and economic situation:
• The total length of the motorway network operated under concession was fixed at 1100 kilometres. Except for the access to the new airport, the length of which will depend on the location of the future airport, the rest is fully operational. All motorways are tolled except for 86 kilometres.
• The term of the concession was fixed at 31 December 2035 and tangible and intangible fixed assets directly related to the concession as recognized in the financial statements, will revert to the State at the end of the period.
• The concessionaire's minimum share capital is 75 million Euros.
• In the last 5 years of the concession the State may redeem it against compensation payable to the Concessionaire.
The supervision of the concession falls to the Ministry of Finance in what concerns financial matters and to the ministry with tutelage over the road sector as concerns remaining issues.
2. MAIN ACCOUNTING POLICIES
2.1. Basis of presentation
The accompanying financial statements were prepared on a going concern basis from the Company's books and accounting records, restated to International Financial Reporting Standards, effective for the years beginning 1 January 2013, as adopted in the European Union. Such standards include the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), the International Accounting Standards (“IAS”) issued by the Accounting Standards Committee (“IASC”) and respective interpretations – SIC and IFRIC issued by the International Financial Reporting Interpretation Committee (“IFRIC”) and Standing Interpretation Committee (“SIC”). These standards and interpretations are hereinafter referred to collectively as “IFRS”.
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Adoption of new standards and interpretations, amended or revised
The rules, interpretations, amendments and revisions endorsed by the European Union with mandatory application in financial years starting on or after 1 January 2013, which had no impact on these financial statements, are as follows:
Effective date (years beginning on or Standard/Interpretation after)
IFRS 1 – Amendment (Government 01-Jan-13 This amendment exempts a first-time adopter of IFRS from the loans) retrospective application of provisions in IAS 39 and paragraph 10A of IAS 20 relating to government loans.
IFRS 7 – Amendment (2011) 01-Jan-13 This amendment stipulates additional requirements of disclosure in relation to financial instruments relating to the offsetting financial assets and financial liabilities.
IFRS 13 - Fair value measurement 01-Jan-13 This standard supersedes existing guidelines in different IFRS relating to fair value measurement. This standard applies when another IFRS requires or allows fair value measurements or disclosures.
IAS 1 – Amendment (Other 01-Jul-12 This amendment concerns the follows changes: (i) Other Comprehensive Income) comprehensive income comprises items of income and expense recognized in results for the year are now disclosed separately; (ii) the statement of profit and loss is now called Statement of profit and loss and other comprehensive income.
IAS 12 - Amendment (Deferred Tax: 01-Jan-13 This amendment provides a presumption that recovery of the Recovery of Underlying Assets) carrying amount of an asset measured at fair value according to IAS 40 will be through sale.
Effective date (years beginning on or Standard/Interpretation after)
IAS 19 - Amendment (Employee 01-Jan-13 This amendment introduces a number of changes relating to the benefits) (2011) reporting of employee benefits, namely: (i) Actuarial gains/losses are fully recognised in reserves (the "corridor" approach is no longer applicable); (ii) a sole interest rate is applicable to the benefits liability and assets. The difference between the fund's effective return and the interest rate is recorded as actuarial gains/losses; (iii) expenses recognised as profit and loss correspond only to the cost of interest current service and net expenses; introduction of new disclosure requirements.
Non adopted new standards and interpretations, amended or revised
Until the date of approval of these financial statements, the European Union endorsed the following standards, the adoption of which is mandatory in future financial years:
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Effective date (years beginning on or Standard/Interpretation after)
IFRS 10 – Consolidated Financial 01-Jan-14 This standard establishes the requirements for the presentation of Statements consolidated financial statements by the parent company, replacing in this respect, Standard IAS 27 - Separate and Consolidated Financial Statements and SIC 12 - Consolidation - Special Purpose Entities. This standard further introduces new rules concerning the definition of control and determination of the consolidation perimeter.
IFRS 11 - Joint arrangements 01-Jan-14 This standard supersedes IAS 31 – Joint Undertakings and SIC 13 – Jointly Controlled Entities – Non Monetary Contributions by Venturers, and eliminates the possibility of using the proportional consolidation method in accounting for interests in joint ventures.
IFRS 12 – Disclosure of interests in 01-Jan-14 This standard establishes a new set of disclosures relating to other entities holdings in subsidiaries, joint arrangements, associates and non consolidated entities.
IFRS 10 and IFRS 12 - Amendment 01-Jan-14 This amendment provides an exception to the consolidation (Investment entities) requirements for certain entities falling into the definition of investment entity. It stipulates the measurement rules for investments held by these investment entities.
IAS 27 – Separate financial 01-Jan-14 This amendment restricts the scope of application of IAS 27 to statements separate financial statements.
IAS 28 – Investments in associates 01-Jan-14 This amendment ensures consistency between IAS 28 – and joint ventures (2011) Investments in Associates and the recently adopted standards, namely IFRS 11 – Joint Arrangements.
Effective date (years beginning on or Standard/Interpretation after)
IAS 32 – Amendment (2011) 01-Jan-14 This amendment clarifies certain aspects of the standard given the diversity in the application of offsetting requirements.
IAS 36 - Amendment (Recoverable 01-Jan-14 This amendment eliminates disclosure requirements as to the amounts disclosures) recoverable amount of a cash-generating unit with goodwill or intangible assets with indefinite useful life allocated in periods during which no impairment loss or reversal was recorded. It introduces additional disclosure requirements concerning assets in relation to which an impairment loss or reversal was recorded and the recoverable amount of which was determined based on the fair value less costs to sell .
IAS 39 - Amendment (Novation of 01-Jan-14 This amendment allows for the continuation ofhedge accounting in derivatives and continuing hedge certain circumstances in which a hedging instrument is novated. accounting)
These standards, although endorsed by the European Union, were not adopted by the Company in the year started at 31 December 2013 as their application is still not mandatory. Their adoption should bear no significant impacts on financial statements.
The following standards, interpretations, amendments and revision the adoption of which is s mandatory in future financial years were not endorsed by the European Union as of the date of these financial statements.
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Standard/Interpretation
IFRS 9 (2009) and subsequent This standard is included in the revision of IAS 39 and establishes the amendments requirements for the classification and measurement of financial assets.
IFRS 7 and 9 (2013) Amendment to IFRS 9 is part of the revision project of IAS 39 and establishes the requirements for the application of hedge accounting rules. IFRS 7 was revised following this amendment.
IAS 19 - Amendment This amendment clarifies in which circumstances employees contributions to post-employment benefits are a reduction of the cost with short-term benefits.
IFRIC 21 – Levies This amendment establishes the obligating event for the recognition of a liability as the activity that triggers the payment of the levy (for instance, participation in a certain market) and removes guidance on determining whether a liability to pay a levy gives rise to an asset or expense.
The financial statements were prepared in accordance with the historical cost convention, except in the case of financial instruments. Following is a summary of the main accounting policies adopted.
2.2. Intangible assets
Intangible assets, which comprise essentially contractual rights and costs incurred on specific projects with future economic value, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are only recognised if it is probable that they will produce future economic benefits for the Company, they are controllable by the Company and their value can be determined reliably.
Internally generated intangible assets, namely current research and development costs, are recognised as costs when incurred.
Amortisation of such assets is provided on a straight-line basis as from the date the assets start being used, in accordance with the period the Company expects to use them.
Intangible assets directly related to Brisa Concession are amortised until the end of the concession contract, presently fixed at 31 December 2035.
Intangible assets which are expected to generate future economic benefits for an unlimited period are known as intangible assets of undefined useful life. Such assets are not amortised but are subject to annual impairment tests.
2.3. Tangible fixed assets
Tangible fixed assets used in rendering services or for administrative use are stated at cost, including expenses incurred with their purchase, less accumulated depreciation and, where applicable, impairment losses.
Depreciation of tangible fixed assets is provided on a straight-line basis over their estimated useful lives, as from when the assets become available for their intended use, in accordance with the following estimated periods of useful life:
Years of useful life
Buildings and other constructions 10 Machinery and equipment 1 to 20 Transport equipment 3 to 6 Tools and utensils 4 Administrative equipment 1 to 10
Tangible fixed assets directly related to the concession will revert to the concession grantor at the term of the concession contract. They are amortized throughout their estimated useful lives up to the end of the concession period.
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2.4. Leasing
Lease contracts are classified as: (i) finance leases, if all the benefits and risks of ownership are substantially transferred pursuant to them; and (ii) operating leases, if all the benefits and risks of ownership are not substantially transferred pursuant to them.
Leases are classified as finance or operating leases based on the substance and not form of the contract.
Fixed assets acquired under finance lease contracts as well as the corresponding liabilities are recorded in accordance with the financial method, where fixed assets, corresponding accumulated depreciation and liabilities are recognised in accordance with the contracted financial plan. In addition, interest included in lease instalments and depreciation of tangible fixed assets are recognised as costs in the statement of profit and loss and other comprehensive income for the year they concern.
In the case of operating leases, lease instalments are recognised as expenses in the statement of profit and loss and other comprehensive income on a straight-line basis over the period of the lease contract.
2.5. Impairment of non-current assets
Impairment assessments are made as of the date of the statement of financial position and whenever an event or change in circumstances is identified that indicates that the book value of an asset may not be recovered. Where such indications exist, the Company will determine the recoverable value of the asset, so as to determine the possible extension of the impairment loss.
In situations in which the individual asset does not generate cash flows independently of other assets, the estimated recoverable value is determined for the cash generating unit to which the asset belongs.
Whenever the book value of an asset exceeds its recoverable amount, an impairment loss is recognised by charge to the statement of profit and loss and other comprehensive income, under caption “Provisions, amortisation, depreciation, adjustments and reversals”..
The recoverable amount is the higher of the net selling price (selling price less costs to sell) and the usable value of the asset. Net selling price is the amount that would be obtained from selling the asset in a transaction between knowledgeable independent entities less the costs directly attributable to the sale. Usable value is the present value of the estimated future cash flows resulting from the continued use of the asset and sale thereof at the end of its useful life. The recoverable amount is estimated for each asset individually or, where this is not possible,, the unit generating the cash flows to which the asset belongs.
Impairment losses recognised in prior years are reversed when there are indications that such losses no longer exist or have decreased. The reversal of impairment losses is recognized in the statement of profit and loss and other comprehensive income as "Provisions, amortisation, depreciation, adjustments and reversals". However, impairment losses are reversed up to the amount that would have been recognised (net of amortisation) if the impairment loss had not been recorded in prior years.
2.6. Financing costs
Loan costs are recognised in the statement of profit and loss and other comprehensive income for the period to which they relate.
Costs incurred on loans obtained directly to finance the acquisition, construction or production of tangible and intangible fixed assets are capitalised as part of the cost of the assets. Such costs are capitalised as from the beginning of the preparation for construction or development of the assets and ends on the date such assets are available for use or when the project in question is suspended. Any financial income generated by loans obtained in advance to finance specific capital expenditure is deducted from the capital expenditure subject to capitalisation.
2.7. Result of operations
Operating results include all operating expenses and income, whether recurring or not, including restructuring expenses and expenses and income relating to operating assets (tangible fixed assets and intangible assets). These results do not include therefore, net financing expenses and income taxes.
2.8. Provisions
Provisions are recognised when, and only when, the Group has an obligation (legal or implicit) resulting from a past event, under which it is probable that it will have an outflow of resources to resolve the
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obligation and the amount of the obligation can be reasonably estimated. At each statement of financial position date provisions are reviewed and adjusted to reflect the best estimate as of that date.
The amount recognised as provisions consists of the present value of the best estimate on reporting date of the resources required to settle the obligation. This estimate is determined taking into account the risks and uncertainties surrounding the obligation.
In particular, provisions are set up to face contractual obligation for maintaining or repairing infrastructures operated under the concession agreements requiring a specific level of service. These provisions are calculated based on planned intervention programs, namely in what concerns road resurfacing.
2.9. Financial instruments
Financial assets and liabilities are recognised when the Company becomes a party to the contractual relationship.
Cash and cash equivalent
Amounts included in caption “Cash and cash equivalents” include cash, bank deposits, term deposits and other treasury applications which mature in less than three months and can be immediately withdrawable with insignificant risk of change in amount.
Caption “Cash and cash equivalents” in the cash flows statement also includes bank overdrafts, reflected in the statement of financial position in the caption “Loans”.
Held to maturity investments
Held-to-maturity investments are classified as non-current assets, except if they mature in less than twelve months from the statement of financial position, including investments with a defined maturity date for which there is no intention or capacity to hold up to that date.
Held-to-maturity investments are recorded at capitalised cost based on the effective interest rate, less repayments of principal and interest income.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified in accordance with the substance of the contract, independently of its legal form. Equity instruments are contracts that reflect a residual interest in the Company’s assets after deduction of the liabilities.
Equity instruments issued by the Company are recorded at the amount received net of costs incurred for their issuance.
Financial assets and liabilities at amortised cost
Financial assets and liabilities at amortised costs, deducted of any accumulated impairment losses include: − Accounts receivable; − Accounts payable.
The amortised cost is the amount at which a financial asset or liability is measured at initial recognition, less principal repayments, and plus or minus cumulative amortisation, using the effective interest rate method, of any difference between such original amount and the amount at maturity. The effective interest rate is the rate that discounts estimated future payments or receivables to the net amount recognized in the financial asset or liability.
Derivative financial instruments and hedge accounting
The Company has the policy of contracting derivative financial instruments to hedge the financial risks to which it is exposed as a result of changes in interest rates. The Company does not contract derivative financial instruments for speculation purposes.
The Group contracts derivative financial instruments in accordance with internal policies approved by the Board of Directors.
Derivative financial instruments are measured at their fair value. The method for recognising them will depend on the nature and purpose of the transaction.
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Hedge accounting
Derivative financial instruments are designated as hedging instruments in accordance with provisions of IAS 39, as to their documentation and effectiveness.
Changes in the fair value of derivative instruments designated as fair value hedges are recognised in the income statement for the year, together with changes in the fair value of the asset or liability subject to that risk.
Changes in the fair value of derivative financial instruments designated as cash flow hedging instruments are recorded in caption “Other reserves” as concerns their effective component and in the income statement as concerns their non-effective component. The amounts recorded under “Other reserves” are transferred to the income statement in the year in which the effect on the hedged item is also reflected in the income statement.
Hedge accounting is discontinued when the hedging instrument matures or is sold or exercised or when the hedging relationship ceases to comply with requirements of IAS 39.
Trading instruments
Changes in the fair value of derivative financial instruments which are contracted for financial hedging purposes in accordance with the Company's risk management policies, but do not comply with requirements of IAS 39 to qualify for hedge accounting, are recorded in the statement of profit and loss and other comprehensive income for the year in which they occur.
Fair value of financial instruments
The fair value of financial assets and liabilities is determined as follows:
• The fair value of standard financial assets and liabilities traded on active markets is determined based on their listed prices;
• The fair value of other assets and liabilities (except derivative financial instruments) is determined in accordance with generally accepted valuation models, based on discounted cash flow analyses, considering prices observable in current market transactions;
• The fair value of derivative financial instruments is determined based on listed prices. Where listed prices are not available, fair value is determined based on analyses of discounted cash flow, which include assumptions not supported by prices or market rates.
Impairment of financial assets
Financial assets carried at the amortized cost are assessed for indicators of impairment at each reporting period. Such financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For financial assets carried at the amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the best estimate of the fair value of the financial asset.
Impairment losses are recorded in the statement of profit and loss and other comprehensive income in the caption “Provisions, amortisation, depreciation, adjustments and reversals” in the year they are identified.
In the subsequent period, if the amount of the impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the income statement, to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. The reversal of impairment losses is recorded in the statement of profit and loss and other comprehensive income in the caption Provisions, amortisation, depreciation, adjustments and reversals”.
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Derecognition of financial assets and liabilities
The Company derecognizes financial assets only when the contractual rights to receive the cash flows expire or when the financial assets and the risks and rewards of its ownership are transferred to another entity. The Company derecognizes transferred financial assets in relation to which it still retains significant risks and benefits, insofar as their control was transferred.
The Company derecognizes financial liabilities when, and only when, the corresponding obligation is either discharged or cancelled or expires.
2.10. Contingent assets and liabilities
Contingent assets are not recognised in the financial statements, but are disclosed in the notes to the financial statements when a future economic benefit is probable.
Contingent liabilities are not recognised in the financial statements but are disclosed in the notes to the financial statements, unless the possibility of an outflow of funds affecting future economic benefits is remote, in which case they are not subject to disclosure.
2.11. Income and accrual basis
Income from services rendered is recognised in the statement of profit and loss and other comprehensive income in the period they are provided.
Where a reliable estimate is possible, results from construction contracts, i.e. corresponding expenses and income, are recognised in relation to the percentage of contracted work finished at the date of the report. The stage of completion is measured based on the stage of realization of the construction work in the infrastructure. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized up to the amount of the contract costs incurred which are expected to be recovered. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Interest and financial income are recognised on an accrual basis in accordance with the effective interest rate.
Expenses and income are recognised in the year to which they relate independently of when they are paid or received. Expenses and income in which the amount is not known are estimated.
Expenses and income attributable to the current period, which will only be paid or received in future periods, as well as the amounts paid and received in the current period that relate to future periods and will be attributed to each of these periods, are recorded in the captions “Other current assets” and “Other current liabilities.
2.12. Income tax
Tax on income for the year is calculated based on the taxable results and takes into consideration deferred taxation.
Current income tax is determined based on the taxable income for the year. Taxable income differs from accounting results since it excludes several expenses and income which will only be deductible or taxable in subsequent years, as well as expenses and income which will never be deductible or taxable under the terms of the tax rules in force.
Deferred taxes refer to temporary differences between the amounts of assets and liabilities for accounting purposes and the corresponding amounts for tax purposes, as well as those resulting from tax benefits obtained and temporary differences between tax and accounting income.
Deferred tax assets and liabilities are calculated and assessed periodically using the tax rates expected to be in force when the timing differences reverse.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are only recognised when there is reasonable expectation that there will be sufficient future taxable income to utilise them. The temporary differences underlying deferred tax assets are
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reappraised annually in order to recognise or adjust the deferred tax assets based on the current expectation of their future recovery.
2.13. Subsidies
State subsidies are recognised based on their fair value, when there is reasonable certainty that they will be received and that the Company will comply with the conditions required for them to be granted.
Operating subsidies, namely those for employee training, are recognised in the statement of profit and loss and other comprehensive income in accordance with expenses incurred.
Investment subsidies relating to the acquisition of tangible and intangible fixed assets are deducted from the value of such fixed assets and recognised in the statement of profit and loss and other comprehensive income on a consistent straight-line basis proportionally to the depreciation of the subsidised fixed assets.
2.14. Critical judgements/estimates in applying the accounting standards
The preparation of financial statements in accordance with the IFRS recognition and measurement principles require the Board of Directors to make judgements, estimates and assumptions that can affect the value of the assets and liabilities presented, especially deferred tax assets, intangible assets, tangible fixed assets and provisions, the disclosure of contingent assets and liabilities as of the date of the financial statements as well as income and costs.
These estimates are based on the best knowledge available at the time and on the actions planned, and are constantly revised based on the information available. Changes in the facts and circumstances can result in revision of the estimates, and so the actual future results can differ from such estimates.
Significant estimates and assumptions made by the Board of Directors in preparing these financial statements include deferred taxes, the useful life of tangible and intangible fixed assets, impairment analyses and provisions.
2.15. Subsequent events
Events that occur after the statement of financial position date that provide additional information on conditions that existed as of the statement of financial position date are reflected in the financial statements.
Events that occur after the statement of financial position date that provide additional information on conditions that existed after the statement of financial position date are reflected in the financial statements.
3. OPERATING INCOME
Operating income for the years ended as of 31 December 2013 and 2012 are made up as follows:
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2013 2012 Services rendered Tolls 427 483 390 432 886 275 Service areas 8 606 567 8 926 592 Other - 29 973 436 089 957 441 842 840
Other operating income Compensation for operating losses (Note 24) 1 572 225 1 572 225 Equipment rental 1 201 892 1 056 317 Recovery of revenues 404 729 630 805 Toll fines 233 506 1 741 933 Gains on tangible and intangible fixed assets 44 528 44 822 Other 14 714 237 322 3 471 594 5 283 424
Income associated to construction service (a) 14 703 503 32 784 703
Total operating income 454 265 054 479 910 967
(a) Within the scope of BCR concession contract covered by IFRC 12, construction activity is sub- contracted to external specialised companies. BCR does not have, therefore, any margin in the construction of assets allocated to the concession and the income and expenses associated to the construction of these assets are recorded in equal amount.
4. SUPPLIES AND SERVICES
The Goods & Services Account for the years ended 31 December 2013 and 2012 is made up as follows:
2013 2012
Operation and Maintenance 82 896 145 85 338 728 Logistic and administrative support 20 521 988 19 956 725 Electronic toll services 9 054 065 9 276 755 Maintenance and repair Motorway stretches 1 772 558 1 592 731 Other 350 745 334 662 Insurance 1 509 969 1 574 750 Technical and administrative assistance 1 437 929 1 567 085 Communications 695 197 694 670 Advertising costs 563 278 527 199 Fuel 402 020 460 274 Other 971 822 1 189 437 120 175 716 122 513 016
5. OPERATING LEASES
Expenses of 54 981 Euros and 64 416 Euros relating to lease instalments under operating lease contracts were recognised in the years ended 31 December 2013 and 2012, respectively.
Lease instalments due as of 31 December 2013 and 2012 under operating lease contracts are payable as follows:
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Year 2013 2012
2013 - 49 411 2014 25 894 11 562 2015 3 825 4 855 29 719 65 828
6. NET FINANCIAL RESULTS
Financial results for the years ended as of 31 December 2013 and 2012 were made up as follows:
2013 2012 Expenses and losses: Interest expense 103 969 115 99 613 632 Financial revision of provisions for the replacement of infrastructures (Note 23) 6 024 789 4 796 155 Other operating costs (a) 20 189 204 28 948 051 130 183 108 133 357 838
Income and gains: Interest income 4 773 092 5 867 740 Other 1 148 115 374 4 774 240 5 983 114
Investment income: Deutsche Bank Notes (b) 492 817 182 867
Financial result ( 124 916 051) ( 127 191 857)
(a) This heading includes mainly expenses with banking services and funding expenses, which form an integral part of the effective financing cost.
(b) This heading includes interest deriving from the Deutsche Bank Bond Notes (Note 14).
7. INCOME TAX
The Company is subject to Corporate Income Tax ("IRC) at the normal rate of 25%, which can be increased by a municipal surcharge of up to a maximum rate of 1.5% of taxable income.
Additionally, the nominal tax rate may vary from 26.5% to 31.5%, depending on the amount of taxable income (TI) determined, which will be subject to a tax surcharge at the following rates:
- Tax surcharge: 3% on TI if € 1.5M < TI <= € 7.5M or 5% on TI if TI > € 7.5M
According to Law 2/2014 of 16 January which approved the corporate Income Tax (IRC) revision, the IRC rate decreased to 23% as concerns the year started as of 1 January 2014 and the tax surcharge will be levied on the taxable income, as follows:
- Tax surcharge: 3% on TI if € 1.5M < TI <= € 7.5M; 5% on TI if € 7.5M < TI <= € 35M; and 7% on TI > € 35M
The Company is taxed for Corporate Income Tax under the Special Regime for the Taxation of Group of Companies (“RETGS”) together with the companies controlled by BAE. This regime consists of the sum of the taxable results of all the companies included in the tax perimeter, less the dividends distributed, to which the applicable Corporate Income Tax rate plus municipal Surcharge is applied.
In accordance with current legislation, tax returns are subject to review and correction by the tax authorities during a period of four years (five years for social security), except where tax losses exist or tax benefits have been granted or inspections, claims or appeals are in progress, in which case, depending on the
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circumstances, the period can be extended or suspended. Therefore the Company's tax returns for the years 2010 to 2013 may still be subject to review and correction.
In the year ended at 31 December 2013 the Company received the Tax Inspection Report for 2011, where, in line with what Tax Inspection Reports for BAE relating to years 2007 to 2010, the Tax Authority ("TA") concludes as to the inadequacy of the legal and tax framework applied to the securitization of future receivables in the amount of 400 000 thousand Euros, carried out in 19 December 2007 and transferred to BCR as part of the assets and liabilities allocated to Brisa Concession (Note 1). The report further establishes that the Company fails to comply with the legislation for the securitization of credits as provided in Decree-law 453/99 of 5 November, as amended by Decree-Law 82/02 of 5 April, and consequently the tax regime provided in Decree-Law 219/2001 of 4 August, both altered by Decree-law 303/2003 of 5 December is not applicable.
In view of the above, the Tax Authority considers that:
• Income corresponding to the services giving rise to the assigned future receivables are to be recognized in tax and accounting terms, in the tax periods in which they are generated;
• When determining the taxable income relating to 2011 (already inspected) an amount of Euro 80 000 thousand was unduly deducted from taxable income.
The Board of Directors, based on the opinion of its legal and accounting experts and consultants, deems that the recognition of the said operation is adequately based from the legal point of view, and therefore, it is also adequately based in accounting and tax terms. As result, the Board of Directors deems that the corrections proposed in the Tax Inspection Report relating to 2011 totally lack grounds, therefore, BCR will use all defence instruments at its disposal as taxpayer to assert the accounting treatment given to this operation at all levels. In view of the above, as of 31 December 2013, no provision was recorded for this purpose.
The Board of Directors believes that any possible corrections resulting from revisions/inspections of these tax returns will not have significant impact on the financial statements as of 31 December 2013.
The period to deduct reportable tax losses ("RTL") determined in tax periods started on or after 1 January 2012 changed from four to five taxable periods (this period is of four years for RTL determined during tax periods of 2010 and 2011 and of six years for previous periods)
Additionally, the deduction of RTL is now limited to 75% of taxable income, this rule applying to deductions made in tax periods started on or after 1 January 2012, regardless of the tax periods in which they were determined.
Following the IRC revision, RTL determined in taxable periods starting on or after 1 January 2014 will be deducted to the taxable income of the following twelve tax periods. The deduction amount to be made in each of the tax periods will be limited to 70% of respective taxable income.
In the year ended at 31 December 2013, these changes only had impact at deferred tax level, since the tax rate to be used to determine them depends on the tax rate applicable to taxable income on the date of reversal.
Income tax recognised in the years ended 31 December 2013 and 2012 is made up as follows:
2013 2012
Current tax 14 879 006 ( 7 123 342) Deferred taxation (Note 12) ( 4 899 820) 21 405 598 Taxes on previous years income ( 60 126) ( 1 362) 9 919 060 14 280 894
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The reconciliation between income before tax and income tax for the year is as follows:
2013 2012
Net profit for the year 27 531 474 27 735 051 Non taxable income and other deductions: Credit securitization (Note 12) - ( 80 000 000) Use of provisions (Note 23) ( 12 596 932) ( 10 510 328) Reversal of provisions (Note 23) ( 6 737 771) ( 3 358 127) Derivative financial instruments ( 1 486 187) ( 1 700 861) Use of impairment losses (Note 22) - ( 886 180) Taxes on previous years income ( 60 126) ( 1 362) Deferred taxation (Note 12) ( 4 899 820) - Income tax - ( 7 123 342) ( 25 780 836) ( 103 580 200) Non tax deductible costs: Set up of provisions (Note 23) 26 782 608 23 444 320 Set up of impairment losses (Note 22) 4 418 642 2 376 787 Non accepted depreciation and amortisation 4 194 19 803 Income tax 14 870 443 - Deferred taxation (Note 12) - 21 405 598 Other 277 763 46 076 164 47 247 271 Taxable income 47 826 802 ( 28 597 878) Income tax rate 25% 25% Determined tax 11 956 701 ( 7 149 470) Autonomous taxation 8 563 26 128 Municipal surcharge 717 402 - State surcharge 2 196 340 - Taxes on previous years income ( 60 126) ( 1 362) Set up/reversal of deferred taxation (Note 12) ( 4 899 820) 21 405 598 Income tax 9 919 060 14 280 894
Effective tax rate 26.49% 33.99%
8. EARNINGS PER SHARE
Basic and diluted earnings per share for the years ended 31 December 2013 and 2012 were determined based on the following amounts:
2013 2012
Basic and diluted earnings per share Result for the purpose of determining the basic and diluted earning per share (net profit for the year) 27 531 474 27 735 051
Average number of shares for the purpose of determining the basic and diluted earning per share 15 000 000 15 000 000
Basic and diluted earnings per share 1.84 1.85
At 31 December 2013 and 2012 no diluting effects have occurred, hence basic and diluted earnings per share are identical.
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9. DIVIDENDS
During the general meetings held on 4 March 2013 and 6 March 2012 it was resolved not to distribute the dividends relating to the net profits for 2012 and 2011, respectively.
Appropriation of results
During the general meetings held on 4 March 2013 and 6 March 2012 it was resolved to appropriate the net results for the years ended on 31 December 2012 and 2011, respectively, as follows:
2013 2012
Legal reserve 1 386 752 3 795 342 Other reserves 26 348 299 72 111 483 27 735 051 75 906 825
10. TANGIBLE FIXED ASSETS
The changes in other tangible fixed assets and corresponding accumulated depreciation and impairment losses in the years ended 31 December 2013 and 2012 are as follows:
Buildings and Tangible fixed Advances Other Basic Transport Administrative Tools assets on assets constructions equipment equipment equipment and utensils in progress Tangible fixed assets Total
Opening balance 31 490 126 307 704 1 539 765 284 118 129 120 649 221 065 128 504 920 Increases - 1 397 161 206 211 841 - 475 276 - 2 079 489 Disposals - - ( 274 382) - - - - ( 274 382) Write-offs - ( 730 049) - - - - - ( 730 049) Transfers - 221 065 - - - - ( 221 065) -
Closing Balance 31 490 127 195 881 1 471 594 284 959 129 595 925 - 129 579 978
Cumulative depreciation Cumulative impairment: Opening balance 31 490 106 795 376 497 619 210 919 129 - - 107 535 533 Increase - 7 615 081 277 127 62 232 - - - 7 954 440 Decrease - - ( 128 064) - - - - ( 128 064) Write-offs - ( 725 856) - - - - - ( 725 856)
Closing Balance 31 490 113 684 601 646 682 273 151 129 - - 114 636 053 Net value - 13 511 280 824 912 11 808 - 595 925 - 14 943 925
Buildings and Tangible fixed Advances Other Basic Transport Administrative Tools assets on assets constructions equipment equipment equipment and utensils in progress Tangible fixed assets Total Gross assets: Opening balance 31 490 125 105 428 1 417 705 277 231 129 270 857 - 127 102 840 Increases - 3 345 923 502 232 6 887 - - 221 065 4 076 107 Disposals - - ( 380 172) - - - - ( 380 172) Write-offs - ( 2 287 847) - - - - - ( 2 287 847) Transfers - 150 208 - - - ( 150 208) - - Contributions - ( 6 008) - - - - - ( 6 008) Closing Balance 31 490 126 307 704 1 539 765 284 118 129 120 649 221 065 128 504 920
Cumulative depreciation Cumulative impairment: Opening balance 31 490 101 074 856 411 797 139 478 129 - - 101 657 750 Increase - 7 988 564 272 717 71 441 - - - 8 332 722 Decrease - - ( 186 895) - - - - ( 186 895) Write-offs - ( 2 268 044) - - - - - ( 2 268 044) Closing Balance 31 490 106 795 376 497 619 210 919 129 - - 107 535 533 Net value - 19 512 328 1 042 146 73 199 - 120 649 221 065 20 969 387
11. INTANGIBLE ASSETS
The changes in intangible fixed assets and corresponding accumulated depreciation and impairment losses in the years ended 31 December 2013 and 2012 are as follows:
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2013 Licenses Intangible assets Rights and software in progress Total Gross assets: Opening balance 4 619 910 779 99 753 7 345 510 4 627 356 042 Increases 6 572 532 74 402 6 964 610 13 611 544 Transfers - 124 385 ( 124 385) - Capitalized financial costs - - 171 416 171 416 Closing Balance 4 626 483 311 298 540 14 357 151 4 641 139 002
Cumulative depreciation and impairment losses Cumulative impairment: Opening balance 1 683 582 739 44 957 - 1 683 627 696 Increase 127 818 090 83 633 - 127 901 723 Closing Balance 1 811 400 829 128 590 - 1 811 529 419
Net value 2 815 082 482 169 950 14 357 151 2 829 609 583
2012 Licenses Intangible assets Rights and software in progress Total Gross assets: Opening balance 4 525 872 214 84 753 66 304 922 4 592 261 889 Increases 32 578 164 15 000 330 925 32 924 089 Transfers 61 460 401 - ( 61 460 401) - Capitalized financial costs - - 2 170 064 2 170 064 Closing Balance 4 619 910 779 99 753 7 345 510 4 627 356 042
Cumulative depreciation and impairment losses Cumulative impairment: Opening balance 1 558 322 397 16 081 - 1 558 338 478 Increase 125 260 342 28 876 - 125 289 218
Closing Balance 1 683 582 739 44 957 - 1 683 627 696
Net value 2 936 328 040 54 796 7 345 510 2 943 728 346
The gross value of intangible assets at 31 December 2013 includes essentially:
(i) Right to operate Brisa concession, obtained as consideration for motorway and related infrastructures construction services in the amount of 4 144 672 132 Euros of which 241 169 828 Euros relate to the capitalization of financial expenses.
(ii) Payment to the State (Grantor) as consideration for the right to collect tolls on the CREL motorway as from 1 January 2003, under the terms of Decree-law 314 A/2002, of 26 December – 236 318 343 Euros;
(iii) Amount deriving from the General Agreement entered with the State and Estradas de Portugal, S.A. corresponding to changes in the Concession Bases (Decree-law 247-C/2008, of 30 December) - 158 100 000 Euros (Note 24);
(iv) Costs with the renegotiation of the concession contract in 1991, namely the extension of the concession period initially established – 101 749 989 Euros;
12. DEFERRED TAXES
Deferred tax assets and liabilities at 31 December 2013 and 31 December 2012, by underlying timing difference, are as follows:
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2013 2012
Provisions for the replacement of infrastructures 45 603 085 40 134 007 Derivative financial instruments 4 215 934 5 886 766 Provisions not considered for tax purposes 35 825 40 592 49 854 844 46 061 365
The changes in deferred tax assets and liabilities in the years ended 31 December 2013 and 2012 are as follows: 2013 2012
Opening balance 46 061 365 65 431 799
Effect on results: Effect of change in rate: Change in provisions for the replacement of infrastructures 3 265 372 ( 78 057) Increase / (decrease) of financial instruments ( 133 497) 19 269 Change in provisions not accepted for tax purposes 2 843 ( 700) 3 134 718 ( 59 488)
Change for the year: Change in provisions for the replacement of infrastructures 2 203 706 2 776 999 Increase / (decrease) of financial instruments ( 430 994) ( 535 416) Change in provisions not accepted for tax purposes ( 7 610) 12 307 Credit securization (a) - ( 23 600 000) 1 765 102 ( 21 346 110)
Sub-total (Note 7) 4 899 820 ( 21 405 598)
Effect on equity Effect of change in rate: Increase / (decrease) of financial instruments 468 096 ( 71 067)
Change for the year: Increase / (decrease) of financial instruments ( 1 574 437) 2 106 231
Sub-Total ( 1 106 341) 2 035 164
Closing Balance 49 854 844 46 061 365
(a) As result of the credit securitization operation carried out in December 2007 by BAE, and pursuant to provisions in Decree-law 219/2001 of 4 August, the amount of 400 000 000 Euros was added for the purposes of determining the taxable income of BAE (Corporate Tax Income) for 2007, giving rise to deferred tax assets. Considering the transfer of this liability to the Company by means of a capital increase through contributions in kind carried out on 22 December 2010, covered by the tax neutrality regime, up to maturity of the operation occurred on 31 December 2012 the gradual reversion of the corresponding deferred tax asset was made by deducting the amount of 80 000 000 Euros to the taxable income of each year (Note 7).
13. OTHER NON CURRENT ASSETS
This caption includes the amount of an indemnity receivable from ESAF/Edifundo for the expenses incurred with the works required to resume traffic on the CREL motorway, following a landslide occurred on 22 January 2010. A lawsuit brought by BCR against Edifundo is currently open in the Court of Sintra claiming the payment by the fund an the amount of Euro 7 801 035. The lawsuit is pending decision in inheritance proceedings concerning one defendant.
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14. OTHER INVESTMENTS
On 25 September 2013 the Deutsche Bank AG Floating Rate Notes in the amount of Euro 34 000 000 recorded in caption Other Investments at 31 December 2012 reached maturity and were repaid.
15. TRADE AND OTHER RECEIVABLES
At 31 December 2013 and 2012 this caption was made up as follows:
2013 2012 Customers: Tolls 19 040 495 16 927 601 Group companies and related parties (Note 29) 25 110 49 110 Other 1 628 324 2 200 863 Doubtful receivables 19 540 827 18 679 908 40 234 756 37 857 482 Other debtors Expropriation proceedings (a) 738 928 651 547 Personnel 8 437 342 Group companies and related parties (Note 29) - 7 151 093 Other 1 960 636 2 014 258 Other doubtful receivables 2 603 635 41 505 5 311 636 9 858 745
Cumulative impairment losses (Note 22) ( 22 144 462) ( 18 721 413) 23 401 930 28 994 814
(a) This amount concerns contentious land expropriations, which at 31 December 2013 had been appealed against and corresponds to the difference between the amounts deposited by the Company by Court order (in an amount determined by an arbitral court) and decisions issued by the said courts. This difference was recorded against intangible assets.
Trade and other receivables result from operating activities and are net of accumulated impairment losses. These are estimated based on available information and past experience.
Given the nature of the Company's operation, there is no significant concentration of credit risk.
16. OTHER CURRENT ASSETS
At 31 December 2013 and 2012 this caption was made up as follows:
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2013 2012 Government and other public bodies Income tax Tax withheld 2 960 484 2 733 497
Accrued income: Interest receivable 992 820 1 059 110 Other accrued costs 1 362 623 1 264 426 2 355 443 2 323 536
Deferred costs: Insurance 816 742 814 435 Rents 2 601 2 576 Other deferred costs 110 340 98 086 929 683 915 097
6 245 610 5 972 130
17. CASH AND CASH EQUIVALENT
Cash and cash equivalents at 31 December 2013 and 2012 are made up as follows:
2013 2012
Bank deposits 138 748 003 276 316 523 Bank overdrafts (Note 21) ( 206) ( 205) Cash and cash equivalent 138 747 797 276 316 318
Within the scope of the contractual obligations assumed by BCR, the balance of bank deposits as of 31 December 2013 and 2012 includes the following reserve accounts:
2013 2012
Debt service reserve account 129 800 000 103 458 000 Reserve account for investment purposes 6 092 000 7 751 000 135 892 000 111 209 000
Pursuant to bylaws and its concession contract, the Company is limited in terms of the activities it can pursue. As the abovementioned reserve accounts are to be used for investments and repayment of associated debt, the Company considers the balances of these reserve accounts as cash and cash equivalents.
18. CAPITAL
The Company’s capital at 31 December 2013 is made up of 15 000 000 fully subscribed and paid up shares of five Euro each.
BRISA - Concessão Rodoviária, SGPS, S.A. holds the 15 000 000 shares representing 100% of the share capital.
Share premiums
The share premium resulted from the difference between: (i) the net value of assets and liabilities transferred by BAE in the year ended on 31 December 2010 for the purposes of a capital increase by contribution in kind´, and (ii) the nominal value of the issued shares.
As is the case of the legal reserve, this reserve is not available for distribution except upon liquidation of the company, but can be used to absorb losses once the other reserves have been exhausted, or to increase capital.
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19. SUPPLEMENTARY CAPITAL CONTRIBUTIONS
Accessory contributions were granted by the shareholder, they do not pay interest and according to the relevant law, they can only be repaid pursuant to resolution of the General Meeting when, following respective payment, the equity exceeds the sum of the share capital and the legal reserve.
20. LEGAL RESERVE AND OTHER RESERVES
Legal reserve
Commercial legislation establishes that at least 5% of annual net profit must be appropriated to a legal reserve until the reserve equals at least 20% of share capital. This reserve is not available for distribution except upon liquidation of the company, but can be used to absorb losses once the other reserves have been exhausted, or to increase capital.
At 31 December 2013 and 2012 the legal reserve set up totalled Euro 5 486 213 and Euro 4 099 461, respectively.
Other reserves
At 31 December 2013 and 2012 this caption was made up as follows:
2013 2012
Free reserves 103 573 048 77 224 750 Hedging derivatives ( 5 774 679) ( 10 097 429) 97 798 369 67 127 321
(a) This caption includes changes in the fair value of financial hedging instruments (Note 2.9.) net of the tax effect (Note 12).
21. LOANS
At 31 December 2013 and 2012 loans contracted by the Company were as follows:
2013 2012 Current Non current Current Non current
Bond loans 244 175 281 1 158 048 046 510 642 275 1 254 587 496 Bank loans 35 978 195 592 201 591 36 017 792 627 370 439 Comercial paper 82 109 485 - 36 096 967 - Bank overdrafts (Note 17) 206 - 205 - 362 263 167 1 750 249 637 582 757 239 1 881 957 935
BOND LOANS
At 31 December 2013 and 2012 non convertible bonds issued are as follows:
Nominal Value 2013 2012 Interest rate Issue of the issue Current Non current Current Non current Maturity Nominal 2003 500 000 000 - - 503 021 014 - set/13 4.797% 2006 600 000 000 - 586 686 901 - 581 937 119 dez/16 4.500% 2012 63 500 000 449 198 63 342 981 512 605 62 529 940 mar/15 6.400% 2012 225 000 000 223 253 120 - - 220 415 409 dez/14 6.250% 2012 100 000 000 5 602 672 92 907 620 2 599 601 92 691 114 jan/32 6%* 2012 300 000 000 14 870 291 297 626 500 4 509 055 297 013 914 abr/18 6.875% 2013 120 000 000 - 117 484 044 - - jun/20 Variable 244 175 281 1 158 048 046 510 642 275 1 254 587 496
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* Fixed interest rate of 6% in the first five years and remuneration indexed to the consumer price index (excluding housing) as from the sixth year to maturity.
2003-2013 Issue
Bond issue in the amount of 500 000 000 Euros initially carried out by Brisa Finance B.V. on 26 September 2003, which was subsequently replaced by BCR as issuer, as described hereinbelow. The bonds were issued for a period of ten years with annual interest payments of 4.797%. Repayment of principal was made in one instalment on 26 September 2013.
2006-2016 Issue
Bond issue in the amount of 600 000 000 Euros initially carried out by BAE on 5 December 2006, which was subsequently replaced by BCR as issuer, as described hereinbelow. This bond loan with a 10-year maturity bears interest at a fixed rate of 4.5%.
This was the first issue by a private Portuguese company under new legislation relating to securities representing liabilities, introduced by the Portuguese State on 7 November 2005 through Decree-Law 193/2005 with the objective of making it easier for Portuguese companies to obtain funding from non resident investors. Repayment of principal will be made in one instalment at maturity in 05 December 2016.
2012-2015 Issue
The 63 500 000 Euros bond issue was carried out by BCR on 8 March 2012. This bond loan with a 3-year maturity bears interest at a fixed rate of 6.4%. Repayment of principal will be made in one instalment at maturity in 09 March 2015.
2012-2014 Issue
The 225 000 000 Euros bond issue was carried out by BCR on 06 July 2012. This bond loan with a 2-year and five months maturity bears interest at a fixed rate of 6.25%. Repayment of principal will be made in one instalment at maturity in 05 December 2014.
2012-2032 Issue
The 100 000 000 Euros bond issue was carried out by BCR on 12 July 2012. This bond loan with a 19.5- year maturity, pays interest at a fixed rate of 6% in the first five years and interest indexed to the consumer price index (except housing) as from the sixth year to maturity. Repayment of principal will be made in one instalment at maturity in 12 January 2032.
2012-2018 Issue
The 300 000 000 Euros bond issue was carried out by BCR on 02 October 2012. This bond loan with a 5.5-year maturity bears interest at a fixed rate of 6.875%. Repayment of principal will be made in one instalment at maturity in 06 April 2018.
2013-2020 Issue
The 120 000 000 Euros bond issue was carried out by BCR on 24 September 2013. This bond loan has a floating interest rate indexed to the 6-month Euribor. Principal repayment will be made in two equal instalments of 60 000 000 Euros in June 2019 and 2020, respectively.
As of 31 December 2013 and 2012, the market value of listed bond issues was as follows:
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2013 2012 Issue nominal Nominal Market value (a) Market value (a) Issue Stock Exchange value Book value Book value Maturity interest rate 2003 Luxembourg SE - - - 503 021 014 507 410 000 set/13 4.797% 2006 Luxembourg SE 600 000 000 586 686 901 626 742 000 581 937 119 607 206 000 dez/16 4.500% 2012 Euronext Lisboa 225 000 000 223 253 120 231 007 500 220 415 409 230 850 000 dez/14 6.250% 2012 Luxembourg SE 300 000 000 312 496 791 332 967 000 301 522 969 317 145 000 abr/18 6.875% 1 122 436 812 1 190 716 500 1 606 896 511 1 662 611 000 (a) Source: Bloomberg and Euronext w ebsite
The above mentioned bond issues are part of an Euro Medium Term Note Programme, which may be extended to a maximum amount of 3 000 000 000 Euro.
Within the scope of the corporate reorganization of the Brisa Group, on 22 December 2010 Brisa Finance B.V. and BAE were replaced by BCR as issuer of these bonds, as result of which BCR assumed all associated obligations as from that date forward. The replacement was approved on the Bondholders Meetings of 5 November 2010, for the bond issue of Brisa Finance B.V., and of 15 November 2010, for the bond issue of BAE.
BANK LOANS
Caption “Bank loans” at 31 December 2013 and 2012 is made up as follows:
Amortisation Closing rate 2013 2012 Maturity Periodicity Interest rate Amount used Amount used Amount No Amount No Contracted Current Current Contracted Current Current
628 179 786 35 978 195 592 201 591 663 388 231 36 017 792 627 370 439 dez/30 Half-year Variable
Within the scope of the reorganization process, the Group negotiated with the European Investment Bank (EIB) the transfer to BCR of the loans contracted by BAE with the EIB. The amount of debt transferred as of 22 December 2010 totalled 779 708 171 Euros. It was also agreed with the EIB the consolidation of 16 existing financing contracts into one sole contract, subject to floating interest rate indexed to the 6-month Euribor with extended term (this loan will be repaid in half-year instalments as from June 2011 to December 2030).
Additionally, the Company contracted derivative financial instruments associated with this loan, which are classified as hedging instruments (Note 26).
As of 31 December 2013 and 31 December 2011, bank loans had the following repayment schedule:
2013 2012
Up to 1 year 35 978 195 36 017 792 Up to 2 years 35 367 589 35 166 940 Up to 3 years 35 560 010 35 366 298 Up to 4 years 35 775 045 35 559 066 Up to 5 years 35 983 658 35 774 423 More than 5 years 449 515 289 485 503 712 628 179 786 663 388 231
COMMERCIAL PAPER AND SHORT TERM LINES
Caption “Other loans obtained” at 31 December 2013 and 2012 is made up as follows:
2013 2012 Other loans CommercialCommercial paper paper 82 109 485 36 096 967
Bank overdrafts Bank overdraft lines (Note 17) 206 205 82 109 691 36 097 172
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At 31 December 2013 and 2012 BCR had short term credit lines and commercial paper issues with guaranteed subscription contracted with banks in a total maximum amount of 320 000 000 Euros and 349 400 000 Euros, respectively (Note 28), of which an amount of approximately 82 000 000 Euros and 36 000 000 Euros, respectively, were placed as of this date.
22. CUMULATIVE IMPAIRMENT LOSSES
Changes in cumulative impairment losses in the years ended 31 December 2013 and 2012 are as follows:
2013 Balance Increase Closing Balance Opening (Note 7) Used Decrease (Note 15) Impairment losses: Accounts receivable 18 721 413 1 856 512 ( 910 226) ( 85 367) 19 582 332 Other accounts receivable - 2 562 130 - - 2 562 130 18 721 413 4 418 642 ( 910 226) ( 85 367) 22 144 462
2012 Balance Increase Used Closing Balance Opening (Note 7) (Note 7) Decrease (Note 15) Impairment losses: Accounts receivable 17 443 095 2 376 787 ( 886 180) ( 212 289) 18 721 413
23. PROVISIONS
The changes in the provisions and accumulated impairment losses in the years ended 31 December 2013 and 2012 are as follows:
2013 Revision Balance Increase Used Reversal financial Balance Opening (Note 7) (Note 7) (Note 7) (Notes 6 and 7) Transfers closing Provisions: Non current Pending legal proceedings 2 289 990 327 534 - - - - 2 617 524 Replacement of infrastructures 124 588 922 14 177 534 ( 780 431) ( 3 913 955) 5 261 179 ( 8 718 372) 130 614 877 Other risks and charges 139 971 - - ( 26 240) - - 113 731 127 018 883 14 505 068 ( 780 431) ( 3 940 195) 5 261 179 ( 8 718 372) 133 346 132
Current Replacement of infrastructures 12 708 634 6 580 285 ( 11 816 501) ( 2 797 576) 763 610 8 718 372 14 156 824
139 727 517 21 085 353 ( 12 596 932) ( 6 737 771) 6 024 789 - 147 502 956
2012 Revision Balance Increase Used Reversal financial Balance Opening (Note 7) (Note 7) (Note 7) (Notes 6 and 7) Transfers closing Provisions: Non current Pending legal proceedings 2 201 976 88 014 - - - - 2 289 990 Replacement of infrastructures 127 763 610 18 606 246 ( 10 510 328) ( 3 358 127) 4 796 155 ( 12 708 634) 124 588 922 Other risks and charges 98 052 41 919 - - - - 139 971 130 063 638 18 736 179 ( 10 510 328) ( 3 358 127) 4 796 155 ( 12 708 634) 127 018 883
Current Replacement of infrastructures - - - - - 12 708 634 12 708 634
130 063 638 18 736 179 ( 10 510 328) ( 3 358 127) 4 796 155 - 139 727 517
The provision for pending legal proceedings views to cover liabilities estimated by the Board of Directors, based on information from its lawyers, concerning claims for motor accidents, losses caused by the construction of motorways and labour claims. At 31 December 2013 and 2012 the total amount of claims
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was of 17 294 377 Euros and 15 437 159 Euros, respectively. The provision set up corresponds to the Board of Directors’ best estimate of the amount of such liabilities.
The provision for reinstatement of infrastructures relates to the responsibilities to replace the wear layer of the flexible pavements and is recognised, at the present value, through the period up to the date in which the intervention takes place. The provision is subject to a financial update at each reporting date calculated at the average interest cost rate of the company and recorded as a financial expense The recorded reversals relate essentially to the reassessment of the estimates for the costs to be incurred and changes in the planned schedule of the interventions in the infrastructure.
24. OTHER NON CURRENT LIABILITIES
At 31 December 2013 and 2012 this caption was made up as follows:
2013 2012
Compensation for operating losses (Note 28) 33 016 724 34 588 949 Fair value of derivative instruments (Notes 26 and 28) 13 762 370 20 686 464 Financial contributions (Note 28( (b) 11 745 957 12 912 317 Advanced revenues of service areas (Note 28) (c) 4 030 326 6 499 313 62 555 377 74 687 043
(a) This heading includes 73 669 709 Euros of compensations obtained from the State for the non collection of tolls in some motorway sub-stretches located in the metropolitan areas of Lisbon and Oporto, deducted of the amount of 39 080 760 Euros recognised as income by BCR and BAE (up to the transfer of Brisa Concession to BCR). Additionally, in the year ended at 31 December 2013, BCR transferred to income under caption "Other operating income and gains" the amount of 1 572 225 Euros (Notes 3 and 25).
(b) This caption corresponds to the difference between the amount received from the State, under the Global Agreement established with BCR (Note 11) and the balances pending settlement and recognised in the financial statements as of the date of the agreement. Pursuant to the contract in force, an inspection by IGF (tax inspection authority) is still pending, viewing to validate and confirm balances, to be settled in the amount specified.
(c) This amount corresponds to payments by the sub-concessionaires on account of future lease payments, the Company having recognised income of 2 468 987 Euros for the year ended 31 December 2013 (Note 25).
25. OTHER CURRENT LIABILITIES
At 31 December 2013 and 2012 this caption was made up as follows:
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2013 2012 Government and other public bodies Personal income tax: Income tax withheld 36 186 187 833 Value added tax 10 423 110 9 132 158 Payments to Social Security 30 883 66 912 Other taxes 9 164 176 995 10 499 343 9 563 898
Accrued costs: Remuneration payable 416 069 370 065 Invoices receivable relating to contract works - 472 139 Other accrued costs 85 407 268 386 501 476 1 110 590
Deferred income: Advanced revenues of service areas (Notes 24 and 28) 2 468 987 2 468 987 Compensation for operating losses (Note 24 and 28) 1 572 225 1 572 225 Other deferred income 43 160 43 160 4 084 372 4 084 372
15 085 191 14 758 860
26. DERIVATIVE FINANCIAL INSTRUMENTS
The Group has contracted a series of derivative financial instruments to minimise the risk of exposure to variations in interest rates.
Such instruments are contracted considering the risks that affect its assets and liabilities, after verifying which market instruments available are the most adequate to hedge the risks.
Such operations, which are contracted with the prior approval of the Chief Financial Officer or the Executive Commission, are permanently monitored through analysis of the various indicators relating to such instruments, including evolution of their market value and sensitivity of their projected cash flows and market value to changes in key variables that affect the structures, with the purpose of assessing their financial effect.
These financial derivative instruments are recorded in accordance with the provisions of IAS 39, being measured at their fair value considering mathematical models, such as option pricing models and discounted cash flow models for unlisted instruments (over-the-counter instruments). These models are based essentially on market information.
Derivative financial instruments used by the Company are interest rate swaps.
Such instruments are classified as hedge instruments or instruments held for trading, in accordance with provisions in IAS 39 (Note 2.9).
Hedge accounting is applicable to derivative financial instruments that are efficient as regards the effect of offsetting the variations in the fair value or cash flows of the underlying assets/liabilities. The efficiency of these operations is checked on a quarterly basis.
Cash flow hedge instruments are derivative financial instruments that hedge interest rate risk. The effective component of the variations in the fair value of the cash flow hedges is recognised in caption “Other Reserves”, while the non efficient part is reflected immediately in the income statement.
Fair value of the derivative financial instruments was determined based on valuations made by financial entities.
Cash flow hedges
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As of 31 December 2013 and 2012 the Company had contracted the following interest rate derivative instruments:
2013 2012 Amount Fair value Amount Fair value Type of operation Maturity Counterparty underlying (Notes 24 and 28) underlying (Notes 24 and 28) BBVA and Fixed/var. int. rate swap 15 June 2019 BST 140 735 294 ( 9 612 753) 166 323 529 ( 14 696 712) Fixed/var. int. rate swap 15 June 2023 Caixa-BI 39 583 333 ( 4 149 617) 43 750 000 ( 5 989 752) 180 318 627 ( 13 762 370) 210 073 529 ( 20 686 464)
The said derivative instruments were initially contracted by BAE. Within the scope of the corporate reorganization process of the Group, the contractual position in the said instruments was transferred to the Company on 22 December 2010, as integral part of the assets and liabilities entered as contributions in kind for the capital increase carried out on the said date (Note 21).
27. CONTINGENT LIABILITIES
As of 31 December 2013 and 2012 BCR had the following bank guarantees given to third parties: 2013 2012 Guarantees given: Portuguese State (Base XX of BCR Concession Contract) 60 646 293 58 266 437 Other guarantees provided to third parties 1 559 546 3 500 000 62 205 839 61 766 437
28. MANAGEMENT OF FINANCIAL RISKS
General principles
As with the majority of companies, BCR is exposed to a number of financial risks stemming from its business activity, including: liquidity and interest rate risk resulting from its financial indebtedness; credit risk to which the Company is exposed, following the contracting of risk hedging operations and financial applications.
As part of its contractual structure, BCR has a financial risk coverage policy established in schedule attached to its Common Terms Agreement. This policy, with binding effects, provides the main rules and guidelines relating to both the management of exposure and the contracting of hedging instruments.
All the financial risk management operations which involve the use of derivative financial instruments are submitted for prior approval to the Director in charge of the financial area and/or the Board of Directors.
Following is a more detailed description of the Company’s main financial risks and measures implemented to manage them.
Interest rate risk
The objective of interest rate risk management is to minimise the cost of debt by keeping the volatility of financial costs at a low level. BCR hedging policy requires the maintenance of a fixed rate ratio of 50% or more of total debt.
At the end of 2013, approximately 68% of financial debt had fixed interest rate (79% at the end of 2012), which, ensures that financial costs have low sensitivity to increases in interest rates and complies with the risk management policy. The remaining 32% of total debt is subject to variable interest rates (21% at the end of 2012), which enabled BCR to benefit from the historically low level of short term interest rates.
If market interest rates in the years ended 31 December 2013 and 2012 had been 1% higher, the financial expenses for the year would have increased by approximately 3 450 000 Euros and 8 650 000 Euros, respectively.
Interest rate hedge derivatives held by BCR correspond to part of the derivative portfolio previously contracted by BAE and assigned to BCR on 22 December 2010, following the financial close of the Brisa Group corporate reorganization, together with hedged loans. Since some of the characteristics of the
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hedged loans were altered, as a consequence of the transfer process from BAE to BCR, the terms of the associated swaps were also changed in order to ensure correspondence with the characteristics of the associated hedge loan.
Exchange rate risk
At 31 December 2013, BCR had no relevant exchange rate risk exposure, as its operation is strictly national.
However, in order to safeguard any future exposure, BCR's hedging risk policy establishes that the company cannot bear any exchange rate risk relating to debt instruments denominated in currency other than the Euro, as well as in any other material purchases of foreign currency. In the event of any exposure of this kind, it must be mitigated by means of appropriate hedging instrument.
Credit risk
Credit risk relates to trade and other accounts receivable. Although limited, due to the nature of the Company’s main operations (motorway concessions), the risk in the various businesses is monitored on a regular basis with the objective of:
- monitoring evolution of the level of balances receivable; - reviewing the recoverability of amounts receivable on a regular basis.
The Board of Directors deems that the estimated impairment losses on accounts receivable as of 31 December 2013 are adequately provided for in the financial statements.
Accounts receivable at 31 December 2013 and 2012 include the following overdue balances, for which the Board of Directors has not recognised impairment losses as it believes that they will be receivable:
2013 2012 Overdue balances Up to 90 days 952 424 850 427 1 to 180 days 397 532 794 574 1 to 360 days 540 822 673 113 More than 360 days 36 749 24 101 1 927 527 2 342 215
Counterparty Risk
The application of cash surpluses and the majority of operations involving derivative financial instruments expose the Company to the risk of non compliance by the counterparties in these operations. In order to mitigate this risk the Company’s Financial Management maintains permanent control of the level of exposure to each counterparty, and counterparty credit limits are defined based on their rating levels, amongst other factors.
Note that in the particular case of BCR, the hedging policy determines that in treasury and hedging operations the counterparties must meet strict rating criteria (Qualifying Banks) or provide a guarantee from an entity that meets the same criteria.
Liquidity risk
The funding and liquidity risk management policies are based on the following objectives:
• To ensure that debt maturity is scaled over time;
• Continue to extend the average maturity of debt to make it more consistent with the long term assets held by BCR.
In compliance with these objectives, BCR closely monitors the financing markets, carefully selecting the most efficient alternatives at any moment.
The setting up at the end of 2010 of an innovating financial and contractual structure common to all senior creditors provided an effective ring-fencing of BCR, reducing creditors exposure to this company alone. The limitation of the financial risk provided by this contractual structure, combined with a low operational
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risk that results from the nature of BCR activity, led to strong ratings at the time (A-Stable by Fitch and Baa1 Stable by Moody’s). These ratings were affected by a steep downgrade in Portugal's sovereign debt rating, particularly in 2011; however, it should be noted that at the end of 2013 the ratings given to BCR (BBB Rating Watch Negative by Fitch and Ba2 Negative Outlook by Moody’s) were above Portugal's ratings (one notch above in Moody's case and two notches above in Fitch case). This fact constitutes the recognition of BCRs financial solidity and of the creditor protection ensured by its financial and contractual structure.
The financial and contractual structure referred to above includes a set of covenants, which provide added protection to creditors.
On the other hand, BCR's creditworthiness is limited by various factors, one of which concerns the maintenance of a minimum rating of Baa/BBB-.
As result of the cut down in Moody's long term rating to Ba1 on 29 November 2011, BCR became subject to a trigger event, as disclosed at the time, which means that the company must have its creditors’ authorisation to pay dividends to its shareholder and must use the funds from new loans to repay existing financial debt and/or deposit them in an account allocated to the repayment of outstanding debt. Additionally, four other covenants should be pointed out on account of their action range, namely Net Senior Debt/EBITDA, Historic ICR, Forward Looking ICR and CLCR, which are subject to two thresholds - one in the form of trigger event and the other in the form of event of default - implying different consequences if exceeded. As of 31/12/2013 all ratios above stood within the levels set forth. Note the improvement of the Net Senior Debt/EBITDA ratio, which evolved from 7.01 at the end of 2012 to 6.88 at the end of the first half of 2013, standing at 6.44 at the end of 2013, i.e. below the ceiling of 6.50 established for respective trigger event; the Historic ICR ratio also improved moving from 2.12 at 30/06/2013 to 3.16 at the end of 2013, thus returning to above the minimum 2.25 level set forth for respective trigger event threshold.
BCR has a Euro Medium-Term Notes Programme (EMTN) totalling 3 000 000 000 Euros, of which 1 408 500 thousand Euros had been used at 31 December 2013. During 2013 an additional amount of 120 000 000 Euros was raised with a bond issue carried out pursuant to the EMTN allowing BCR to continue pursuing its strategy viewing the extension of its debt maturity.
In order to ensure its financial flexibility, at the end of 2013 BCR had credit lines and commercial paper programmes in the total amount of 320 000 000 Euros (Note 21).
The existence of reserve accounts to ensure compliance with the debt service and investment obligations also contributes to mitigate financing risk.
Maturity of financial liabilities at 31 December 2013 and 2012 is as follows:
2013 Up to 1 year 1 to 2 years 2 to 3 years More than 3 years Total Borrowings(Note 21) 362 263 167 89 138 212 628 926 278 1 032 185 147 2 112 512 804 Compensation for operating losses (Note 24 and 25) 1 572 225 1 572 225 1 572 225 29 872 274 34 588 949 Advanced revenues of service areas (Notes 24 and 25) 2 468 987 2 468 987 1 561 339 - 6 499 313 Financial contributions (Note 24) - - - 11 745 957 11 745 957 Derivative instruments (Notes 24 and 26) - - - 13 762 370 13 762 370 Suppliers 12 321 575 - - - 12 321 575 Suppliers of investment 12 826 239 - - - 12 826 239 Other accounts payable 16 887 731 - - - 16 887 731 Other liabilities (Note 25) 11 043 979 - - - 11 043 979 419 383 903 93 179 424 632 059 842 1 087 565 748 2 232 188 917
2012 Up to 1 year 1 to 2 years 2 to 3 years More than 3 years Total
Borrowings(Note 21) 582 757 239 246 708 475 92 291 988 1 542 957 472 2 464 715 174 Compensation for operating losses (Note 24 and 25) 1 572 225 1 572 225 1 572 225 31 444 499 36 161 174 Advanced revenues of service areas (Notes 24 and 25) 2 468 987 2 468 987 2 468 987 1 561 339 8 968 300 Financial contributions (Note 24) - - - 12 912 317 12 912 317 Derivative instruments (Notes 24 and 26) - - - 20 686 464 20 686 464 Suppliers 3 122 123 - - - 3 122 123 Suppliers of investment 8 273 130 - - - 8 273 130 Other accounts payable 2 015 316 - - - 2 015 316 Other liabilities (Note 25) 10 717 648 - - - 10 717 648 610 926 668 250 749 687 96 333 200 1 609 562 091 2 567 571 646
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Financial liabilities within the scope of IAS 29
In its day to day activities, the Company is exposed to financial risks, particularly interest rate risks, which are likely to affect its equity and results.
Precisely, financial risk is the probability of obtaining different than expected results, whether income or losses, altering the company's equity in a materially relevant and unexpected way.
The management of the risks referred to above, which to a large extent, derive from the unpredictability of financial markets, requires the stringent application of a set of rules and methodologies approved by the Executive Committee, the ultimate purpose of which is to minimise their potential negative impact on the Company's net worth and performance.
With this goal, risk management is directed to address two major concerns:
• Reduce, whenever possible, fluctuations in results and cash flows subject to risk situations;
• Limit deviations from projected results, by means of a strict financial planning, based on pluriannual budgets.
Fair value estimate - liabilities measured at fair value
The following table shows the Company's liabilities measured at fair value at 31 December 2013 according to the following fair value levels:
• Level 1: the fair value of financial instruments is based on prices ruling on active, liquid markets at the date of the statement of financial position;
• Level 2: the fair value of financial instruments is not determined based on active market prices but according to valuation models;
• Level 3: the fair value of financial instruments is not determined based on active market prices but according to valuation models, the main inputs of which are not observable on the market.
Class: Item Level 1 Level 2 Level 3
Available-for-sale financial assets Hedge instruments (Note 26) - 13 762 370 -
As far as loans are concerned, as shown in Note 21, they are mainly subject to variable interest rates. Therefore, the corresponding book value (amortised cost) is deemed not to differ significantly from the corresponding market value.
29. GROUP COMPANIES AND RELATED PARTIES
At 31 December 2013 and 31 December 2012, balances with group companies were made up as follows:
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Suppliers debtors Clients (Note 15) Suppliers Investment (Note 15) 2013 2012 2013 2012 2013 2012 2012
Parent company: BAE (a) 8 952 13 986 2 103 504 1 812 - - 7 151 093
Group companies: BRISA O&M, S.A. ("BOM") 12 604 7 345 8 791 737 366 579 1 145 120 9 058 - Via Verde Portugal, Gestão de Sistemas Electrónicos de Cobrança, S.A. ("Via Verde") - 4 858 291 797 196 775 - - -
BRISA Engenharia e Gestão, S.A. ("BEG") - 7 833 232 600 329 762 1 178 889 815 703 -
Brisa Inovação e Tecnologia, S.A. ("BIT") - - - 2 879 818 482 757 787 - Brisal - Auto-Estradas do Litoral, S.A. ("Brisal") 53 18 - - - - -
AEDL - Auto-Estradas do Douro Litoral, S.A. 2 928 4 145 - - - - -
AEBT - Auto-Estradas do Baixo Tejo, S.A. 272 102 - - - - - Controlauto - Controlo Técnico Automóvel, S.A. ("Controlauto") - 8 511 113 28 - - -
Iteuve Portugal, Sociedade Unipessoal, Lda. ("Iteuve") - 2 246 - - - - - Sicit - Sociedade de Investimento e Consultoria em Infra-estruturas de Transportes, S.A. ("Sicit") 301 66 - - - - -
Related parties: BCI - Brisa Conservação de Infra-estruturas, S.A. ("BCI") - 18 247 - 3 229 - 3 921 - 25 110 67 357 11 419 751 901 064 3 142 491 1 586 469 7 151 093
Other current Other current Other accounts payable assets liabilities 2013 2012 2013 2012 2013 2012
BAE (a) 14 851 255 - - - - 505 402
Via Verde - - 347 773 299 091 5 288 -
BEG - - - - - 34 276
BIT - - - - - 180 694 Auto-Estradas do Atlântico, S.A. - 80 140 - - - - Mcall, S.A. ("Mcall") - 2 002 - - - -
14 851 255 82 142 347 773 299 091 5 288 720 372
(a) At 31 December 2013, total balance with BAE in caption Other Debtors corresponded to the amounts to be received from the said company within the scope of the RETGS (Note 6). At 31 December 2012, total balance with BAE in caption Other Debtors corresponded to the amounts to be received from the said company within the scope of the RETGS (Note 7).
Additionally, transactions carried out with Group companies in the years ended as of 31 December 2013 and 2012 were as follows:
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Operating Operating Intangible Tangible income expenses assets fixed assets 2013 2012 2013 2012 2013 2012 2013 2012
Parent company: BAE - - 20 521 988 19 956 725 - - 841 852
Group companies: BOM - 29 973 83 157 810 85 438 112 902 115 1 390 898 16 952 9 960 Via Verde 52 762 49 226 10 099 074 10 984 753 ---- BEG 80 712 16 645 1 188 023 1 069 833 4 054 085 4 779 998 - - BIT 6 24 143 471 50 521 - 15 000 1 776 564 2 011 480
Brisal 186 197 ------AEBT 635 576 ------Controlauto 93 880 90 931 225 113 - - - - Iteuve 21 760 21 329 28 - - - - - Mcall 6 069 6 804 - 16 - - - - BCI 12 919 ------SICIT 665 428 ------
Related parties: M Dados – Sistemas de Informação, S.A. - - 3 279 - - - - - Efacec Group - 44 020 - 13 567 - 19 058 - - 269 594 260 153 115 113 898 117 513 640 4 956 200 6 204 954 1 794 357 2 022 292
In the years ended 31 December 2013 and 2012, remuneration of the members of Brisa's corporate bodies was as follows:
2013 2012 Non-executive directors: Fixed remuneration 209 723 204 202 Supervisory Board 21 212 - 230 935 204 202
In the years ended 31 December 2013 and 2012, remuneration of key management personnel was as follows:
2013 2012 Key managing personnel Fixed remuneration 410 703 598 210 Variable remuneration: 68 442 100 591 Defined benefits 21 683 31 294 500 828 730 095
30. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements for the year ended 31 December 2013 were approved by the Board of Directors on 25 February 2014.
31. STATUTORY OFFICIAL AUDITOR FEES
In the years ended 31 December 2013 and 2012, the Official auditor's fees totalled Euro 54 000 each of the said years.
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São Domingos de Rana, 25 February 2014
The Accountant, Registered under nº 62018
______João Miguel Rodrigues
THE BOARD OF DIRECTORS
Vasco Maria Guimarães José de Mello
João Pedro Stilwell Rocha e Melo
João Pedro Ribeiro de Azevedo Coutinho
António José Lopes Nunes de Sousa
Daniel Alexandre Miguel Amaral
Manuel Eduardo Henriques de Andrade Lamego
Michael Gregory Allen
Miguel José Pereira Athayde Marques
João Filipe Maia de Lima Mayer
Emanuel José Leandro Maranha das Neves
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10 Legal certification of the accounts
Introduction
1. In compliance with the applicable legislation we hereby present our Legal Certification of Accounts and Auditors’ Report on the financial information contained in the Board of Directors’ Report and the accompanying financial statements of Brisa – Concessão Rodoviária, S.A. (“the Company”) for the year ended 31 December 2013, which comprise the statement of financial position as of 31 December 2013 (that present totals of 3,066,555,416 Euros and shareholders’ equity of 686,863,543 Euros, including a net profit of 27,531,474 Euros), the statements of profit and loss and other comprehensive income, of changes in shareholders’ equity and of cash flows for the year then ended and the corresponding notes.
Responsibilities
2. The Company’s Board of Directors is responsible for: (i) the preparation of financial statements which present a true and fair view of the financial position of the Company, the results and comprehensive income of its operations, the changes in its shareholders’ equity and its cash flows; (ii) the preparation of historical financial information in accordance with International Financial Reporting Standards as adopted by the European Union (“IAS/IFRS”) and that is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Market Code (“Código dos Valores Mobiliários”); (iii) the adoption of adequate accounting policies and criteria and the maintenance of appropriate systems of internal control; and (iv) the disclosure of any significant facts that have influenced its operations, financial position, results and its comprehensive income.
3. Our responsibility is to examine the financial information contained in the documents of account referred to above, including verifying that, in all material respects, the information is complete, true, timely, clear, objective and licit, as required by the Portuguese Securities Market Code, and to issue a professional and independent report based on our examination.
Scope
4. Our examination was performed in accordance with the Auditing Standards (“Normas Técnicas e Directrizes de Revisão/Auditoria”) issued by the Portuguese Institute of Statutory Auditors (“Ordem dos Revisores Oficiais de Contas”), which require the examination be planned and performed with the objective of obtaining reasonable assurance about whether the financial statements are free of material misstatement. Our examination included verifying, on a sample basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on judgements and criteria defined by the Board of
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Directors, used in their preparation. Our examination also included assessing the adequacy of the accounting policies used, their uniform application and their disclosure, taking into consideration the circumstances, verifying of the applicability of the going concern concept, assessing the adequacy of the overall presentation of the financial statements and assessing if, in all material respects, the financial information is complete, true, timely, clear, objective and licit. Our examination also included verifying that the financial information included in the Directors’ Report is consistent with the other financial statements as well as carrying out the verifications set forth in items 4 and 5 of article 451 of the Portuguese Commercial Company Code (“Código das Sociedades Comerciais”). We believe that our examination provides a reasonable basis for expressing our opinion.
Opinion
5. In our opinion, the financial statements referred to in paragraph 1 above, present fairly, in all material respects, the financial position of Brisa – Concessão Rodoviária, S.A. as of 31 December 2013 and the results and comprehensive income of its operations, the changes on its shareholders’ equity and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as endorsed by the European Union and the information included therein is, in accordance with the definitions contained in the standards referred to in paragraph 4 above, complete, true, timely, clear, objective and licit.
Report on other legal requirements
6. It is also our opinion that the financial information included in the Directors’ Report is consistent with the annual financial statements and the corporate governance practices includes the information required for the Company in accordance with article 245 - A of the Portuguese Securities Market Code.
Lisbon, 25 February 2014
______Deloitte & Associados, SROC S.A. Represented by Carlos Alberto Ferreira da Cruz
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11 Report of the Audit Board
1. In accordance with legal and statutory provisions, the Audit Board issues this Report and Opinion on the Management Report and other accounting documents of BRISA - Consessão Rodoviária, S.A. that have been presented by its Board of Directors for the 2013 financial year.
2. Over the year under review the Audit Board followed the management and evolution of the Company's businesses, having held regular meetings with the Director for financial affairs, the Corporate Secretary and the Official Auditor, entities with whom this Board kept a close collaboration. It was also present in the meeting of the Board of Directors that approved the management report and had access to the minutes of the meetings of this governing body and to all financial and management accounting documents. The Audit Board was not aware of any situation violating legal and statutory rules.
3. With the periodicity deemed suitable, the Audit Board performed its duties as laid down in Article 420 of the Companies Code; namely, it assessed the accounting principles and valuation criteria used in the preparation of the financial information, which it deemed adequate and followed the implementation of the risk management system, the development of internal audit actions and the efficiency of the internal control system.
4. The Audit Board considers that the Board of Directors’ report and the financial statements for the year ended as of 31 December 2013 (statement of financial position, statement of profit and loss and other comprehensive income, statement of changes in equity, cash flow statements, and the notes to the financial statements) provide an adequate view of the Company's equity at the end of the financial year and provide a clear understanding of how profit and losses originated and how the business evolved. The financial information referred hereinabove is sustained by adequate accounting records and documents and was adequately prepared.
5. The Audit Board assessed the legal certification of the financial statements issued by the Official Auditor under the terms of the law, which deserved its agreement; it analysed the annual audit report issued by the Official Auditor and followed the
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development of the audit work, which in its opinion, was carried out with full independence.
6. The Audit Board expresses its appreciation for the collaboration received from the Board of Directors, the Official Auditor and the Services in general.
OPINION
In view of the foregoing, the Audit Board is of the opinion that the conditions are met for the General Meeting of Brisa – Concessão Rodoviária, SA, to approve:
a) The Board of Directors' Report and the Financial Statements for 2013.
b) The Proposal for the Allocation of Net Income submitted by the Board of Directors in its Management Report.
Audit Board's Statement
As expressly requested by the Securities Commission (CMVM), the members of the Audit Board hereby warrant that, as far as they are aware, the information contained in the Management Report, Balance Sheet and Income Statements relating to 2013 was drawn up in compliance with the applicable accounting standards and regulations, and that it gives a true and fair view of the Company's assets and liabilities, financial situation and results and faithfully describes the development of its businesses, the performance and situation of the Company and the main risks and uncertainties it faces.
São Domingos de Rana, 25 February 2014.
THE SUPERVISORY BOARD
Francisco Xavier Alves (Chairman)
Tirso Olazábal Cavero (Member)
Joaquim Patrício da Silva (Member)
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12 Traffic Statistics
A1/IP1 - Auto-Estrada do Norte Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Alverca (A1/A9)-V. Franca de Xira II 1.5 1.5 59 014 57 451 -2.9% -2.6% V. Franca de Xira II-V. Franca de Xira I 0.9 0.8 59 868 58 799 -2.1% -1.8% V. Franca de Xira I-Castanheira do Ribatejo (b) 0.7 0.7 47 988 46 901 -2.5% -2.3% Castanheira do Ribatejo-A1/A10 (b) 0.2 0.2 47 863 46 537 -3.0% -2.8% A1/A10-Carregado 0.2 0.2 54 151 52 383 -3.5% -3.3% Carregado-Aveiras de Cima 2.2 2.2 38 739 37 795 -2.7% -2.4% Aveiras de Cima-Cartaxo 1.2 1.2 29 256 28 386 -3.2% -3.0% Cartaxo-Santarém 0.9 0.8 29 665 28 795 -3.2% -2.9% Santarém-A1/A15 0.1 0.1 31 485 30 485 -3.4% -3.2% A1/A15-Torres Novas (A1/A23) 2.9 2.8 29 489 28 492 -3.6% -3.4% Torres Novas (A1/A23)-Fátima 1.6 1.5 21 490 20 485 -4.9% -4.7% Fátima-Leiria 1.2 1.2 22 107 21 147 -4.6% -4.3% Leiria-Pombal 1.9 1.8 21 386 20 596 -4.0% -3.7% Pombal-Condeixa 2.2 2.1 21 518 20 711 -4.0% -3.8% Condeixa-Coimbra Sul 0.6 0.6 22 661 21 999 -3.2% -2.9% Coimbra Sul-Coimbra Norte (A1/A14) 0.7 0.6 21 807 20 633 -5.6% -5.4% Coimbra Norte (A1/A14)-Mealhada 0.9 0.9 22 036 21 446 -2.9% -2.7% Mealhada-Aveiro Sul 1.9 1.8 21 617 21 060 -2.8% -2.6% Aveiro Sul-Albergaria (A1/IP5) 1.0 1.0 19 490 19 072 -2.4% -2.1% Albergaria (A1/IP5)-Estarreja 1.2 1.2 30 491 30 754 0.6% 0.9% Estarreja-Feira 1.7 1.7 28 047 28 363 0.8% 1.1% Feira-Espinho (IC24) 1.2 1.2 32 292 32 388 0.0% 0.3% Espinho (IC24)-Feiteira 0.9 0.9 34 165 34 114 -0.4% -0.2% Castanheira do Ribatejo-PLLN (b) (c) 0.0 0.0 1 010 1 245 - - A1 27.8 27.0 27 35226 664 -2.8% -2.5% (a) Circulation in 10 8 veic.km (b) 136 days in operation (c) PLLN - Plataforma Logística Lisboa Norte
A2/IP1 - Auto-Estrada do Sul Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Fogueteiro-Coina 1.3 1.1 38 468 32 661 -15.3% -15.1% Coina-Palmela 1.2 1.1 27 602 26 393 -4.6% -4.4% Palmela-A2/A12 0.2 0.2 27 809 26 812 -3.8% -3.6% A2/A12-Marateca 1.2 1.2 18 902 18 227 -3.8% -3.6% Marateca-A2/A6/A13 0.1 0.1 17 083 16 490 -3.7% -3.5% A2/A6/A13-Alcácer do Sal 1.3 1.2 14 027 13 569 -3.5% -3.3% Alcácer do Sal-Grândola Norte 1.0 1.0 12 326 12 093 -2.2% -1.9% Grândola Norte-Grândola Sul 0.5 0.5 9 209 9 141 -1.0% -0.7% Grândola Sul-Aljustrel 0.8 0.8 7 083 7 100 0.0% 0.2% Aljustrel-Castro Verde 0.7 0.7 6 958 6 988 0.2% 0.4% Castro Verde-Almodôvar 0.5 0.5 7 546 7 568 0.0% 0.3% Almodôvar-S.B. Messines 0.9 0.9 7 718 7 731 -0.1% 0.2% S.B. Messines-Paderne (A22) 0.3 0.3 7 309 7 363 0.5% 0.7% A2 10.0 9.6 12 12711 703 -3.8% -3.5% (a) Circulation in 10 8 veic.km
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A3/IP1 - Auto-Estrada Porto-Valença Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Maia-Santo Tirso 2.1 2.1 44 775 44 169 -1.6% -1.4% Santo Tirso-Famalicão 0.8 0.7 38 636 37 885 -2.2% -1.9% Famalicão-Cruz 0.6 0.6 19 372 18 960 -2.4% -2.1% Cruz-Braga Sul 0.4 0.4 16 582 16 270 -2.2% -1.9% Braga Sul-Braga Poente 0.1 0.1 6 877 6 774 -1.8% -1.5% Braga Poente-EN 201 0.5 0.5 6 401 6 283 -2.1% -1.8% EN201-Ponte de Lima Sul 0.3 0.3 7 239 7 043 -3.0% -2.7% Ponte de Lima Sul-Ponte de Lima Norte 0.0 0.0 10 532 9 396 -11.0% -10.8% Ponte de Lima Norte-EN 303 0.4 0.4 5 831 5 551 -5.1% -4.8% EN 303-Valença 0.2 0.2 5 653 5 380 -5.1% -4.8% Braga Sul-C eleirós 0.1 0.1 13 406 13 098 -2.6% -2.3% Celeirós-EN14 0.1 0.1 22 709 21 472 -5.7% -5.4% A3 5.6 5.5 15 07614 749 -2.4% -2.2% (a) Circulation in 10 8 veic.km
A4/IP4 - Auto-Estrada Porto-Amarante Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Ermesinde-Valongo 0.6 0.6 36 998 37 009 -0.2% 0.0% Valongo-Campo 0.6 0.6 34 542 34 711 0.2% 0.5% Campo-Baltar 0.7 0.7 30 191 30 570 1.0% 1.3% Baltar-Paredes 0.6 0.6 26 075 26 482 1.3% 1.6% Paredes-Guilhufe 0.2 0.2 22 489 22 833 1.2% 1.5% Guilhufe-Penafiel 0.2 0.2 21 928 22 355 1.7% 1.9% Penafiel-Castelões (A4/IP9) 0.5 0.5 19 085 19 349 1.1% 1.4% Castelões (A4/IP9)-Amarante Poente 0.7 0.7 13 721 13 673 -0.6% -0.4% A4 4.1 4.1 23 31623 499 0.5% 0.8% (a) Circulation in 10 8 veic.km
A5/IC15 - Auto-Estrada da Costa do Estoril Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Estádio Nacional-Oeiras 1.4 1.3 108 514 105 122 -3.4% -3.1% Oeiras-C arcavelos 0.9 0.8 69 954 67 974 -3.1% -2.8% Carcavelos-Estoril 0.8 0.8 45 057 43 970 -2.7% -2.4% Estoril-Alcabideche 0.3 0.4 30 723 33 026 7.2% 7.5% Alcabideche-Alvide 0.1 0.1 30 740 34 213 11.0% 11.3% Alvide-Cascais 0.1 0.1 27 021 27 363 1.0% 1.3% A5 3.6 3.6 58 38557 585 -1.6% -1.4% (a) Circulation in 10 8 veic.km
A6/IP7 - Auto-Estrada Marateca (A2)-Caia Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT A2/A6/A13-Vendas Novas 0.5 0.5 6 653 6 433 -3.6% -3.3% Vendas Novas-Montemor-o-Novo Poente 0.4 0.4 6 098 5 878 -3.9% -3.6% Montemor-o-Novo Poente-Montemor-o-Novo Nascente0.1 0.1 5 536 5 337 -3.9% -3.6% Montemor-o-Novo Nascente-Évora Poente 0.3 0.3 4 872 4 692 -4.0% -3.7% Évora Poente-Évora Nascente 0.1 0.1 2 312 2 287 -1.3% -1.1% Évora Nascente-Estremoz 0.3 0.3 2 857 2 822 -1.5% -1.2% Estremoz-Borba 0.1 0.1 2 179 2 175 -0.5% -0.2% Borba-Elvas Poente 0.2 0.2 2 091 2 095 -0.1% 0.2% A6 2.0 1.9 3 910 3 812 -2.8% -2.5% (a) Circulation in 10 8 veic.km
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A9/IC18 - CREL - Circular Regional Exterior de Lisboa Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Estádio Nacional (A5/A9)-Queluz 0.3 0.3 22 471 21 184 -6.0% -5.7% Queluz-A9/A16 0.2 0.2 19 855 18 168 -8.7% -8.5% A9/A16-Radial Pontinha 0.3 0.3 26 390 24 480 -7.5% -7.2% Radial Pontinha-Radial Odivelas 0.4 0.4 16 722 15 503 -7.5% -7.3% Radial Odivelas-A8/A9 0.2 0.2 17 833 16 440 -8.1% -7.8% A8/A9-Bucelas (Zambujal) 0.2 0.2 17 089 16 077 -6.2% -5.9% Bucelas (Zambujal)-A9/A10 0.3 0.3 10 522 9 765 -7.5% -7.2% A9/A10-Alverca 0.1 0.1 6 683 6 094 -9.1% -8.8% A9 2.0 1.9 16 20315 045 -7.4% -7.1% (a) Circulation in 10 8 veic.km
A10/IC2 - Auto-Estrada Bucelas (CREL)-Carregado-IC3 Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT A9/A10-Arruda dos Vinhos 0.2 0.2 9 146 8 532 -7.0% -6.7% Arruda dos Vinhos-Carregado 0.2 0.2 5 990 5 651 -5.9% -5.7% Carregado-Benavente 0.2 0.2 4 396 4 292 -2.6% -2.4% Benavente-A10/A13 0.0 0.0 1 673 1 581 -5.8% -5.5% A10 0.8 0.7 5 154 4 898 -5.2% -5.0% (a) Circulation in 10 8 veic.km
A12/IC3 - Auto-Estrada Setúbal-Montijo Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Montijo-Pinhal Novo 0.6 0.5 14 879 14 497 -2.8% -2.6% Pinhal Novo-A2/A12 0.5 0.5 14 545 14 243 -2.3% -2.1% A2/A12-Setúbal 0.5 0.5 24 467 23 745 -3.2% -3.0% A12 1.5 1.5 16 76316 340 -2.8% -2.5% (a) Circulation in 10 8 veic.km
A13/IC3/IC11 - Auto-Estrada Almeirim-Marateca Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Almeirim-Salvaterra Magos 0.3 0.3 3 034 2 845 -6.5% -6.2% Salvaterra Magos-A13/A10 0.1 0.1 3 096 2 865 -7.7% -7.5% A13/A10-Sto. Estevão 0.2 0.2 4 054 3 864 -5.0% -4.7% Sto. Estevão-Pegões 0.3 0.3 3 844 3 677 -4.6% -4.3% Pegões-Marateca 0.1 0.1 3 781 3 632 -4.2% -3.9% A13 1.0 0.9 3 481 3 295 -5.6% -5.3% (a) Circulation in 10 8 veic.km
A14/IP3 - Auto-estrada Figueira da Foz-Coimbra (Norte) Circulation (a) ADT Variation Sub-Stretch 2012 2013 2012 2013 Circulation ADT Santa Eulália-Montemor-o-Velho 0.1 0.1 3 286 3 208 -2.6% -2.4% Montemor-o-Velho-EN335 0.1 0.1 3 393 3 301 -3.0% -2.7% EN335-Ançã 0.1 0.1 3 486 3 384 -3.2% -2.9% Ançã-Coimbra Norte (A14/A1) 0.1 0.1 5 918 5 785 -2.5% -2.2% A14 0.4 0.4 3 822 3 722 -2.9% -2.6% (a) Circulation in 10 8 veic.km
Circulation (a) ADT Variation 2012 2013 2012 2013 Circulation ADT BCR 58.8 57.1 15 864 15 453 -2.8% -2.6% (a) Circulation in 10 8 veic.km
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13 GOVERNING BODIES
2012/2014
The Board of Directors
CHAIRMAN Vasco Maria Guimarães José de Mello
MEMBER João Pedro Stilwell Rocha e Melo
MEMBER João Pedro Ribeiro de Azevedo Coutinho
MEMBER Daniel Alexandre Miguel Amaral
MEMBER António José Lopes Nunes de Sousa
MEMBER Manuel Eduardo Henriques de Andrade Lamego*
MEMBER Michael Gregory Allen
MEMBER Miguel José Pereira Athayde Marques**
MEMBER João Filipe Maia de Lima Mayer**
MEMBER Emanuel José Leandro Maranha das Neves**
*Managing director **Non Executive Directors
Board of the General Meeting
CHAIRMAN OF THE BOARD Luís Rua Geraldes
CORPORATE SECRETARY Tiago Severim de Melo Alves dos Santos
Audit Board
CHAIRMAN Francisco Xavier Alves
MEMBERS Tirso Olazábal Cavero Joaquim Patrício da Silva
ALTERNATE MEMBER = Diogo da Gama Lobo Salema da Costa EXTERNAL AUDITOR W Deloitte & Associados, SROC, S.A., represented by Carlos Alberto Ferreira da Cruz.
ALTERNATE EXTERNAL AUDITOR W =António José Araújo de Beja Neves
CORPORATE SECRETARY Tiago de Melo
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