(Translation from the Italian original which remains the definitive version)
ANNUAL REPORT
ATM has been a leading transport provider in Milan for 85 years, transporting millions of people around the city every day. Consolidated experience, investment capacity and technological innovation are the foundations of its work.
Letter to the shareholder
Dear shareholder
During the year, ATM S.p.A. significantly improved all its operating parameters. Net profit rose to over €10.8 million compared to €3.08 million in the previous year. Gross operating profit, an indicator of its core business, increased by 25%, reaching over €126 million after having exceeded €100 million in 2014. This increase was the result of the careful monitoring of all costs, which kept cost increases at levels less than proportional to the strong growth of revenues, which came from activities related to Expo and the parent’s overall higher number of passengers and mileage.
The substantial economic equilibrium now achieved by all of the investees who have overcome the very critical situation of just a few years ago, along with the excellent performance of the Danish investee, Metro Service A/S, which operates the metro network in Copenhagen very successfully, contributed significantly to the parent’s net profit. At a consolidated level, the Group’s net profit was €25.8 million, including minority interests. An excellent result, with a strong increase compared to the €5.6 million achieved in the previous year. At the same time, the Group’s gross operating profit reached €163 million, a 36% increase compared to €120 million in 2014.
From the beginning of 2015 (and in previous years), the whole Group worked towards following goals, fully aware of the complexities involved: the most well known and obvious was to ensure the continuity of an excellent service for visitors during the six months of Expo. Another objective was to balance the accounts in order to ensure the Group’s financial solidity.
As these consolidated financial statements show, the Group succeeded in overcoming its challenges on many fronts, simultaneously paving the way for new scenarios in the coming year and the years that follow.
The Group took on an exceptional workload for Expo and with a sense of responsibility, dedication and professionalism it transported over 26 million extra passengers, managing extraordinary flows and successfully adapting organisational and maintenance processes. It absorbed the enormous impact of 184 consecutive days of the exhibition without disturbing the balance of the city and ATM’s regular customers, citizens of Milan.
The unanimously acknowledged high quality of the service provided for Expo and the perfect organisation shown during the IUTP World Congress & Exhibition 2015 in Milan both gave ATM the possibility to offer a tangible testimony to its abilities. The Group was under close scrutiny in those six months but is now regarded with admiration. ATM has recently received invitations to participate in tenders to manage local public transport (LPT) services in foreign cities. These initiatives outside Italy will naturally be evaluated with a lot of care and caution, rigorously verifying that they are, in fact, viable opportunities.
ATM is healthy and efficient, but must continue to develop its productive elements as this is necessary in order to overcome ambitious and essential challenges. The only way to guarantee stability and safety is through the ability to organise an important investment plan for modernisation works. The
determination to follow through with it will allow the Group to keep pace with the times and meet the growing expectations of customers to maintain and expand its presence in the panorama of public transport.
Next year there may also be the question of a new service contract, which as other national experiences have shown, may not be the only feasible solution, owing to the ongoing legislative uncertainty. With all the variables that this circumstance brings, (also considering legitimate interests that are already showing themselves to be interested in taking over the management of the networks or part of them), it is a procedure that, in addition to generating an extraordinary workload in order to prepare the terms of the bid, will inevitably create turbulence in the performance of the Group’s core business. It will be crucial to safeguard the unity of the Group and its organisational model, as these are the elements that produced results. In 2015, the Group accomplished two other very important objectives. The implementation of an impressive investment programme (93% of which was carried out using the Group’s own funds, a percentage that was equal to 56.5% in 2010) and the hiring of 558 new employees.
The decision to pay for the investments with its own resources was a virtuous choice, although it was also an obligation, due to the difficulty that the national authorities and regional institutions have in effectively assisting investments in the local public transport sector. These grants have dropped significantly in recent times and despite hoping that as a sector that is strategic for the development of the country, the flow of incentives will recover quickly, it is inevitable that a Group that intends to guarantee a satisfactory supply of its services must know to use its own resources. While waiting to secure greater support in terms of public grants to the investments made by the sector companies, it is essential that companies are able to generate funds through their operations. With this is mind, ATM implemented a huge investment plan for €626.6 million over three years, which was used for, amongst other things, the acquisition of metro trains for line 2, electric buses and 18 metre-long buses and the modernisation of systems on the green line.
The figures related to the percentage of breakdowns (of all systems and rolling stock) on the metro lines, or rather the “major lines” on which Milan’s public transport network is based, are important. During 2015, the figures regarding these breakdowns (reported per kilometre travelled) improved by 13.8% compared to 2014, despite the increased services for Expo and the greater concentration during the summer period. The figures are even more significant when considering the fact that since 2012, improvements have always been visible and significant, in particular, they improved by over 50% from 2012 to 2015. Over the six months of Expo, this helped to guarantee a punctuality rate of over 98% on the metro lines, an outstanding performance, superior to the European benchmarks for lines of the same structure and age.
Last but not least, in 2015, as a provider of travel tickets, ATM generated proceeds of €423 million, covering over 54% of the service contract costs of €779.7 million (gross of VAT), covering more than in previous years (it was 53% in 2014 and 48% in 2011). According to reliable estimates, this increase of around €37 million, was largely due to the flow of visitors to Expo (about 80%) as well as the strong impact generated by the overall increase of passengers using the network (nearly 34 million).
The grants of €267.4 million that the Milan municipality received from the Lombardy region using the national transport fund, as well as minor grants from other bodies and proceeds from Area C, from parking fees and other proceeds related to the same activity transferred by ATM contributed to covering the remainder of the contract costs. In 2016, the Group will have to try to repeat the previous year’s successful results even though many positive factors that contributed to the 2015 net profit will not be repeated. There are many challenges that must be overcome. Firstly, the Group’s accounts must be able to absorb the growing personnel expenses related to the 558 new employees taken on in the last few months.
It is essential that the successful recovery of productivity that started in recent years continues to grow, in order to generate the resources required to cover the investments and implement a group-level agreement for all the areas in which the workers and managers could use their ability to provide an organisational and economic development that is always closer to the service needs.
Issues regarding the investee, Metro 5, will have a strong impact on the Group’s performance. ATM holds a minority investment in said investee, which prevents it from participating directly in the management of the many issues, which, since the beginning, have affected Metro 5. However, under the operation contract which entrusted ATM with the operation of the metro line, the ATM Group is identified, not only by the public, as the main body that can resolve the technical problems which still affect the line. Despite reiterating the specific limits of its role, the ATM Group, as a whole, shall be clearly committed to participating in the resolution of the above issues. Indeed, it is well aware that the “method” used to deal with and successfully overcome the challenges it has faced in the past, will need to be applied also to Metro 5 which needs to urgently resolve its problems.
On behalf of the board of directors chairman Bruno Rota
3 Directors’ report
55 Consolidated financial statements
57 Financial statements
67 Notes
107 Annexes
Directors’ report
Directors’ report
3
4
COMPANY BODIES ...... 7
GOVERNANCE AND GROUP STRUCTURE ...... 9
MACROECONOMIC CONTEXT ...... 12
HIGHLIGHTS ...... 14
OPERATING CONTEXT ...... 15
PERFORMANCE ...... 20
ATM FOR EXPO ...... 20 KEY EVENTS IN 2015 ...... 22 INVESTMENTS ...... 24 OPERATING ACTIVITIES ...... 25 TECHNOLOGICAL INNOVATION ...... 27 BUSINESS PLAN AND INVESTMENT PLAN ...... 29
RESPONSIBLE MANAGEMENT OF RELATIONSHIPS WITH STAKEHOLDERS ...... 31
CUSTOMERS ...... 32 SUPPLIERS ...... 33 HUMAN RESOURCES AND ORGANISATION ...... 34 PROTECTION OF GROUP ASSETS AND SAFETY OF INDIVIDUALS ...... 37 HEALTH, SAFETY AND THE ENVIRONMENT ...... 37 TRANSPARENCY AND ANTICORRUPTION ...... 38
FINANCIAL HIGHLIGHTS ...... 40
RISKS AND UNCERTAINTIES ...... 49
EVENTS AFTER THE REPORTING DATE ...... 51
OUTLOOK ...... 51
OTHER INFORMATION...... 52
OTHER DISCLOSURES PURSUANT TO ARTICLE 40 OF LEGISLATIVE DECREE NO. 127/91 ...... 52 RELATED PARTY TRANSACTIONS ...... 53
SHAREHOLDER’S RESOLUTIONS...... 53
5
6 Company bodies
Board of directors 1
Chairman Bruno Rota
Directors Nunzio Domenico Paolo Dragonetti
Carmela Francesca
Alessandra Perrazzelli
Paolo Simonetti
Board of statutory auditors 2
Chairman Stefano Poggi Longostrevi
Statutory auditors Gaetano Frigerio
Maria Luisa Mosconi
Alternate statutory auditors Monica Bellini
Matteo Bocca
Independent auditors 3 KPMG S.p.A.
1. The board of directors was elected by the shareholder on 22 April 2014 with a term of office that ends with the approval of the 2016 financial statements.
2. The board of statutory auditors was elected by the shareholder on 29 April 2013 with a term of office that ends with the approval the 2015 financial statements.
3. The independent auditors were engaged with the resolution passed by the shareholder on 29 April 2013 proposed by the board of statutory auditors, their term of office expires with approval of the financial statements for 2015.
7
8 Governance and group structure
Governance
Keeping in mind the fact that the ATM Group is state-owned, and considering the role that it performs for a wide range of stakeholders, as it is not a listed company, it has a voluntary governance structure in line with best market practice.
As well as the governing bodies provided in accordance with current regulations, the following committees work alongside the board of directors:
remuneration committee: It carefully monitors all the issues that have a significant effect on the structure of personnel expenses, examines the remuneration structure for all the managers and in particular key management personnel These remuneration guidelines must be approved by the board of directors; ethics committee : an organisation with advisory and guidance responsibilities, in charge of evaluating possible situations that go against the code of ethics bringing any necessary disciplinary action to the attention of the senior members of the group companies; financial assistance and development committee: responsible for the evaluation of the initiatives aimed at supporting and assisting people through the management of the welfare system.
The board of directors also avails itself of the support of the Group for the examination of disciplinary actions, which has evaluation and consultancy duties with regard to appeals presented by employees to the board of directors.
In November 2015, with regard to the evolution of the organisational structure, as well as the recent developments of the anti-corruption and transparency regulations, the board of directors approved an update of the Group’s regulation. This regulation is applicable to all the subsidiaries and regulates the activities of the management committees that work alongside the general director on the process of decision-making and monitoring the operating performance and correlated risks: The steering committee, the operating committee and the engineering committee.
With regard to the companies’ compliance with the requirements concerning administrative liability, pursuant to Legislative decree no. 231/01, the parent, ATM S.p.A. and the subsidiaries that adopted the 231 model (ATM Servizi S.p.A., GeSAM S.r.l., NET S.r.l. and Rail Diagnostics S.p.A.) have continued to monitor the degree of regulatory compliance of the respective models, providing for their immediate adjustment whenever necessary.
The main objectives when deciding to adhere to the standards and regulations of Legislative decree no. 231/01 were:
to guarantee the integrity of all group companies, strengthening the internal control system integrated by the three-year 2016-2018 corruption prevention plan, in accordance with Law no. 190 of 6 November 2012 (so-called anti-corruption law); to improve the efficacy and transparency of the management of group activities and to ensure that the provisions of Legislative decree no. 231/01 are respected with the publication in the section “transparent company” on the institutional website of the three-year transparency and integrity programme, in accordance with Legislative decree no. 33/2013;
9 to raise the awareness of all those who work with ATM S.p.A. and other group companies regarding the principles of transparency and correct conduct.
In 2015, the activities of the supervisory body, set up in 2008, focused on the careful verification of the implementation of the organisational model and risk assessment prior to updating the 231 model, as well as continuously monitoring the implemented audit reports, drawn up by the appointed advisors for the various departments.
The supervisory body also provided training regarding the organisational model pursuant to Legislative decree no. 231/01 for the managers and junior managers working for group companies.
To comply with the sector regulations, the control system includes the engagement of the independent auditors to carry out the legally-required audit and the board of statutory auditors’ monitoring that the Group complies with the law and by-laws and correct management practices and that its organisational structure is appropriate.
Group structure
Companies included in the consolidation scope
ATM S.p.A.: a company limited by shares since 2001, 100% controlled by the Milan municipality. It is the parent and carries out management and coordination activities pursuant to article 2497 and subsequent articles of the Italian civil code. The company manages the transport systems, structures and infrastructure, and the mobility of people, goods and information.
ATM Servizi S.p.A.: incorporated on 22 September 2006 and 100% controlled by ATM S.p.A.. The company manages all transport services, including railway services, as well as services related to the transport of people, goods and information, and mobility, including on-street parking and car parks. It has a service contract with the Milan municipality for local public transport and related and ancillary services.
ATM Servizi Diversificati S.r.l.: set up on 9 September 2010, and 100% controlled by ATM S.p.A.. The company manages services for the transport of people and goods both by surface and by rail in the rentals sector as well as diversified service sectors such as the tram restaurant and tourist services.
GeSAM S.r.l.: established on 22 December 2005, it is 100% controlled by ATM S.p.A.. The company carries out consultancy activities in the insurance sector, including all the related specialist assistance, aimed at the preparation and settling of claims, with the exception of insurance mediation activities.
International Metro Service S.r.l.: established on 12 April 2007, it is 51% controlled by ATM S.p.A.. The company provides services for the transport of people and goods, with related programming and operational organisation activities, all with a view to implementing contracts for the operating and maintenance of metro systems.
10 The company controls 100% of Metro Service A/S, the company that manages the metro in Copenhagen.
Nord Est Trasporti S.r.l. : established on 5 December 2007, it is 100% controlled by ATM S.p.A. The company manages transport services for people, goods and information, with the related programming activities and operational organisation as well as services connected to transport and mobility around the Metropolitan city of Milan, the Monza and Brianza province and the Monza municipality.
Rail Diagnostics S.p.A.: established on 31 October 2006, and 97.27% controlled by ATM S.p.A.. The company focuses on the design, construction, maintenance and integrated diagnostics of the metro and tram equipment and control systems.
Hereinafter in this directors’ report, ATM refers to all of the group companies included in the consolidation scope.
11 Macroeconomic context
1. Macroeconomic situation
2015 was characterised by weak economic growth. The worldwide decline of demand and the fragility of emerging economies slowed down the expansion of trade and held down the prices of raw materials, triggering new risks of impaired inflation and growth, which became more evident in the last months of the year.
The performance of the world’s largest economy, the USA, was supported by internal demand rather than by its exports, also related to the appreciation of the dollar. The rate of unemployment fell by around 5% at the end of 2015 and economic growth was equal to approximately 2.4%, justifying the rise of the federal fund rate by the Federal Reserve in December, an important signal in terms of the expansionary monetary policy adopted in 2008. Prospects of moderate growth were also confirmed within the Eurozone. The monetary policy continued the expansionary phase thanks to the ECB’s public sector purchase programme that was introduced (recently expanded in terms of length and quantity), together with the liquidity injections into the system, operations that contributed to the rebalancing of risks in the Eurozone. In Italy the recovery gradually continued. The exportation drive was gradually replaced by domestic demand for consumption and especially for restocking. The recovery of the manufacturing cycle, expansion of services and stabilisation of the construction sectors all contributed to the performance of GDP, estimated to be +0.7% for 2015.
The domestic labour market showed positive signs thanks to the legislative measures that have been adopted. In October and November, the unemployment rate fell to 11.4%, the lowest since the end of 2012.
In December, inflation fell to 0.1% for the year. Inflation is affected by the large drop in energy prices, as well as the persistent widespread under-use of the production capacity, which keeps the background dynamic of prices low. The inflationary dynamics expected over the next five years show levels of around 1.5%.
2. Main factors concerning the raw materials market
The structure of costs in the LPT sector is very rigid and very vulnerable to the volatility of the price of raw materials, particularly diesel fuel and electrical energy.
In 2015, the oil sector was characterised by a structural oversupply (price per barrel fell by 40%, down to around USD35), further complicated by geopolitical factors, capable of affecting future trends. The economic slowdown in China and emerging countries, shale oil production in the USA and the failure to meet agreements needed to regulate the OPEC offer, all had a negative impact on prices.
12 Brent and WTI price trends from 1 January 2014 - 31 December 2015
SOURCE: ELABORATION OF FIGURES FROM BLOOMBERG
The downward price trend did not have a similar positive effect on ATM’s cost structure due to the structural effect of the fixed governmental component (excise duty), on average over 50% of the final price of diesel.
Similarly, the price of electrical energy includes a portion of non-negotiable charges (dispatching, system charges, distribution) that are defined by the authorities and account for 60% of the total amount.
13 Highlights
2015 2014 2013
Financial figures
Production revenues (mln) 1,056.4 961.9 944.1 attributable to LPT service contracts 1 786.0 728.0 730.6 attributable to on-street parking, car parks and 28.9 25.5 25.3 towing away
Production costs (mln) 1,035.6 953.4 924.3 attributable to personnel 510.8 479.5 478.4 attributable to traction and lighting 60.0 59.7 62.6
Gross operating profit (mln) 163.4 120.1 120.8 % of production revenues 15.5 % 12.5 % 12.8 % Operating profit (mln) 20.7 8.5 19.8 % of production revenues 2.0 % 0.9 % 2.1 % Net profit for the year (mln) 25.8 5.6 5.3
Net invested capital (mln) 1,614 1,573 1,594 Net equity (mln) 929.3 906.7 903.5
ROI 1.3 % 0.5 % 1.2 %
ROE 2.8 % 0.6 % 0.6 %
1 the figures refer to services provided by the ATM Group in the Metropolitan city of Milan, the provinces of Monza and Brianza, Bergamo and Lecco and in Copenhagen
14 Operating context
ATM has developed distinctive skills that characterise it within the national panorama, for its range of land-based mobility services.
Milan and Metropolitan city and the provinces of Services provided in Milan and Metropolitan Monza and Brianza, Bergamo, Lecco and Como city city and the provinces of Monza and Brianza, 11 Bergamo and Lecco77
Whole network Area covered (km²) 662.7 Area covered (km²) 1,083 Municipalities covered 59 Municipalities covered 96 Passengers ( mln ) 10.6 Passengers ( mln ) 735.6 Km travelled ( mln ) 8.1 Km travelled (mln) 169.5 Number of lines 28 Network length (km) 413.6 Metro network Fleet 91 Number of lines 4 Network length (km) 2 2 96.8 System length (km)3 3 215.9 Funicular railway Fleet (engines and carriages) 44 942 Como - Brunate Number of stations 113 Network length (km) 1.1 Passengers ( mln ) 0.9 Road network Km travelled 49,677 Number of lines 156 Network length (km) 2 2 1,544.1 Fleet 44 1,469 Metro Copenhagen Average age of fleet (years) 8.9 Area covered (km²) 162 Tram network 55 Municipalities covered 3 Number of lines 20 Passengers ( mln ) 57.0 Network length (km) 2 2 180.4 Km travelled (mln) 14.4 System length (km) 3 3 282.9 Number of lines 2 Fleet 44 481 Network length (km) 21 Fleet 34 Trolleybus network Number of lines 4 Network length (km) 2 2 38.8 System length (km) 3 3 85.8 Fleet 44 147
Mini metro Cascina Gobba - H. San Raffaele Network length (km) 0.7 Km travelled 84,733
Car parks and on-street parking Bike Sharing
6 Car parks 6 Stations 275 Number 22 Bikes 4,650 Spaces 18,635 Annual subscriptions 44,408 Entrances 6,049,370 Weekly subscriptions 8,453 Day passes 37,442 On-street parking Spaces 73,923 Customers 8,744,543
1 Figures refer to the service provided by ATM in the city and in the M etropolitan city of M ilan, with the funicular railway in Como and provided by NET in the M etropolitan city of M ilan and in the provinces of M onza and Brianza 2 Length of network refers to the sum of all of the lengths of each line 3 Line superstructures and overhead lines in km are included 4 Owned vehicles 5 This also includes the M ilan-Desio intercity tram line, which has temporarily been suspended (replaced by a bus since 1 October 2011) 6 This includes the Expo car park on Via Novara, which was open during Expo from 1 M ay to 31 October 2015 and has 1,613 spaces and 108,376 entrances 7 Service operated by NET. Figures also included in "Whole network"
15 Evolution of the transport network
The metro and surface transport network managed by ATM guarantees extensive coverage of the city of Milan and the surrounding urban areas.
Metro lines
Line Route Inauguration Length Stations
Sesto I Maggio ↔ Rho Fiera / Bisceglie 1964 26.70 km 38
Abbiategrasso/Assago Milanofiori Forum ↔ Cologno
1969 39.88 km 35 Nord / Gessate
San Donato ↔ Comasina 1990 17.31 km 21
Bignami ↔ San Siro Stadio 2013 12.88 km 19
96.77 TOTAL 113 km
At 31 December 2015, Milan’s metro network was made up of four lines, with a total length of around 97 km and 113 stations.
In 2015, the last ten stations were opened on line 5:
On 29 April, before the opening of Expo, five stations on the line between Garibaldi and San Siro Stadio (San Siro Stadio, San Siro Ippodromo, Segesta, Lotto and Domodossola); between June and November the Portello, Cenisio, Gerusalemme, Monumentale and Tre Torri stations.
16 In 2015, the first building sites for the construction of line 4 were set up; like line 5, it will be completely automated.
ATM will be responsible for its operation following the construction period, expected to finish in 2023.
Surface network
In 2015, the surface network underwent a considerable reorganisation following the opening of ten stations on line 5 and the opening of the building sites for line 4. The current configuration of the network is as follows:
automotive network: 78 urban lines (including the district radiobus services and night services), of which three have a night service that replaces the metro service, 50 are suburban lines and 28 are provincial lines. The district radiobus service operates in 14 districts of Milan; From 1 May 2015, 15 lines started a night service, which continues throughout the night, with departures every 30 minutes; tram network: 18 urban lines and two intercity lines; trolleybus network: four urban lines.
The business
Operating area Services provided
Milan municipality: * local public transport operating in Milan and the surrounding area * "callbuses" in the city and in the municipalities of Peschiera Borromeo and Basiglio
Operation and maintenance of Milan metro line 5
LPT Monza municipality, Monza and Brianza province and Metropolitan city of Milan: road local public transport service
Como municipality: operation of Como-Brunate funicular railway
Operation and maintenance of the Copenhagen metro
Milan municipality:
Related and ancillary * management of paid-on-street parking and 22 park and ride car parks activities towing away and impounding of vehicles on municipal territory pursuant to the new * highway code (Legislative decree no. 285/92) and the related Implementing regulation (Presidential decree no. 495/92) operation of the S5 Milan suburban railway service, including checking tickets providing customers with information and selling tickets
Bike sharing service supporting and enhancing the Milanese transport network
Other Tram restaurant and tourist tram services in the city of Milan and private bus and tram hire (with driver)
Maintenance and integrated diagnostics of the metro and tram equipment and control systems.
Management of insurance claims
17 Core business: reference contractual framework
Institutions assign LPT operation contracts and related and ancillary activities using two types of contract:
Gross Cost: the operator bears the industrial risk, while the commercial risk is borne by the grantor, which is the beneficiary of revenue deriving from the sale of travel tickets.
The operator receives an amount proportional to the service it provides, re-evaluated each year based on inflation.
The amount is not in any way influenced by the trend in revenue from the sale of travel tickets, the effects of any tariff changes or change in demand.
It is, therefore, necessary for the operator to continue to strive for operating efficiency objectives, mainly by controlling costs.
Net Cost: the operator bears both the industrial and commercial risks. It is a beneficiary of revenues deriving from the sale of travel tickets and receives a sum calculated to cover theoretical production costs from the grantor.
***
The services ATM provides for the Milan municipality through the subsidiary ATM Servizi S.p.A. are regulated by “contract for local public transport service and connected and ancillary services”
The contract has a duration of seven years starting from 1 May 2010.
The services subject to “gross cost” contracts, are the intermodal operation of local public transport (metro, trams, buses and trolley buses), demand responsive transport, related activities such as distribution of travel tickets and related information to customers and controlling fare evasion.
The contract governs the duties and responsibilities of ATM and the Milan municipality.
ATM is responsible for the operation of transport services and ancillary services based on the directions and directives of the Milan municipality, which is responsible for planning.
The municipality is a beneficiary of proceeds deriving from the sale of travel tickets and can define the tariff system. ATM, however, performs a strategic role as operator of the sales network on behalf of the municipality.
Investments for the development and maintenance of the public transport network and related infrastructures are the responsibility of the owner, the Milan municipality.
In addition to the transport services operated by ATM, by virtue of the same contract, it is also responsible for ancillary services to local public transport, such as on and off-street parking and the towing away and impounding of vehicles pursuant to the new highway code. The municipality decides the tariff policy related to on-street parking, while the proceeds are recognised by ATM, which pays the municipality a fee based on the amount of proceeds.
18 As part of their contractual relations, other than those that have already been mentioned, those of particular relevance are:
the single operation contract for metro line 5, under the “gross cost” regime, between ATM and the operator, Metro 5 S.p.A.. The contract regulates the operation and related activities for the entire duration of the concession until 2040; the service contracts under the “net cost” regime, between the subsidiary NET S.r.l., the Metropolitan city of Milan, the Monza municipality and the Monza-Brianza province, for the management of the public suburban automotive transport. The contract with the Monza municipality expires on 1 December 2016; the contracts with the Metropolitan city of Milan and the Monza-Brianza province expired on 31 December 2015 and were extended for 2016. the “gross cost regime” service contract for the management through the Danish subsidiary Metro Service A/S for the operation and maintenance of the Copenhagen metro. The contract expires on 31 December 2018.
***
In 2015, as an operator of the sales network that sells travel tickets, ATM earned €423 million, covering more than 54% of the payment of the service contract equal to €779.7 million, gross of VAT, a further increase compared to 2014.
In general, the remainder is covered by the following:
the grants that the Milan municipality receives from the Lombardy region using the national transport fund (€267.4 million), as well as smaller grants from bodies; proceeds from Area C, from parking fees and other proceeds related to the same activity transferred by ATM.
19 Performance
2015 was a year of important events for ATM, first and foremost “Expo 2015” and the related events spread across the city of Milan.
Milan also hosted the UITP (International Association of Public Transport) World Congress and Exhibition in June 2015; In virtue of ATM’s core know-how and organisational abilities, it took on the prestigious role of local host for the congress.
The great organisational effort and use of its best expertise led to important and measurable results, meeting and even surpassing the expectations of the institutions and citizens.
The city welcomed millions of Italian and foreign visitors, who mainly used the metro to move around the city.
It was unanimously recognised that ATM achieved its objectives, continuously providing an excellent service with very high performance levels when faced with extraordinary volumes of passengers over a prolonged period.
ATM for Expo
Achievements
During the six-months of Expo from the beginning of May to the end of October, on line 1 of the metro, ATM transported more that 5.8 million passengers directly to the exposition site and recorded more that 11 million transfers. Based on the figures provided by Expo regarding the total number of admissions recorded, ATM transported 26.2% of the visitors.
This result is particularly significant and surpasses the best expectations, which had forecast a percentage of no more than 22.5%; the metro was, therefore, the most used means of transport used by visitors.
The whole metro network benefited from a strong growth in the volume of passengers during Expo; there were 18.7 million more passengers compared to the corresponding months of 2014 (+12.2%). Surface transport also saw an increase in passengers of around 10% with respect to the previous year.
The Group’s ability to cope with the surges of extraordinary demand for such a prolonged period was praiseworthy, maintaining extremely high levels of regularity and reliability. In this context, the performance of line 1 stands out, as it continuously guaranteed 99% regularity on its routes.
Development of the transport service and operational planning
The development of the service provided by ATM concerned the whole network.
In particular, line 1 of the metro, which was the main means of transport used to reach the exposition site, substantially increased its frequency during the day and extended its evening operating hours.
The increased need for transport was due to:
repetitive, concentrated passenger flows travelling to Expo, therefore using line 1 to Rho Fiera, the main link between the city and the exposition site;
20 widespread increase, especially on the metro network and the main surface lines, due to the transfers to line 1 to travel to and from Expo, increased movement around Milan due to citizens and higher numbers of tourists and the fruition of certain events as part of “Expo in the city” (exhibits, theatrical performances, commercial initiatives); significant and concentrated passenger flows in specific areas for other “Expo in the city” events, that took place at regular intervals and had a strong public appeal.
As a consequence, the following measures were identified and implemented:
strengthening of line 1 for all time slots, every day of the week; strengthening of line 2 and 3 and the main surface lines, particularly on Saturdays and national holidays and during the summer period; extension of the metro’s evening timetable.
The night time network also guaranteed a regular service every night during the six months of Expo.
The management of the six-months of Expo required the involvement of all operating sectors and generated a considerable amount of preventive planning and risk-evaluation work, a substantial reorganisation of shifts and a rearrangement of the main maintenance appointments on the transport vehicles and systems.
ATM used the months leading up to Expo to define the service needs and to arrange all necessary and suitable preventive measures relating to the potential security risks connected to the event.
The control rooms and external control adapted the organisational configuration to include the increased public transport in circulation on the network.
In order to strengthen the service for Expo, ATM launched a recruitment plan, which mainly recruited drivers, maintenance personnel, traffic wardens, tutors and security personnel.
21 The fleet
The prompt availability of a renovated and upgraded fleet from the beginning of the event was another factor that contributed to the success of ATM’s management.
The investments, consistent with the business plans, created the conditions for an improvement of performance, also after the event finished.
This allowed ATM to guarantee its customers better performance levels and greater comfort and safety during their journeys.
In particular, ATM made the following available:
14 new “Leonardo” trains; 125 new “Urbino” 12 metre-long Euro 6 buses; 12 completely renovated 4900 series trams.
Continued customer services
Throughout the six months of Expo, ATM guaranteed its customers support and assistance through a widespread presence of dedicated personnel for the whole duration of the service. The service was mainly provided on the metro.
The institutional customer support and information channels, such as ATM points, infomobility and call centres were also reinforced in line with the expected needs of the customers.
In order to guide passengers towards the exposition site, ATM carried out important updates to the signage in the metro network stations, providing ad hoc maps and informative materials.
Customer information regarding new offers and services was strengthened by numerous information campaigns circulated throughout all of ATM’s media.
Key events in 2015
> On 3 February, the new official app for smart phones, “ATM Milano” was launched, aimed at improving travel conditions. Using the app, it is possible to purchase urban tickets, paying by credit card or PayPal. > On 22 March, arriving ahead of schedule, all 125 Euro 6 “Urbino” buses came into use. > Between March and April, ATM started the third and fourth phases of the “Mobile Ticketing” project: travel tickets are immediately available with a simple SMS text message; digital QR code readers were installed on the turnstiles of the metro, to allow passengers who have bought their tickets using the smart phone app “ATM Milano” or via SMS, to validate their tickets and pass through.
This innovation places ATM among the most advanced European capitals, providing its customers with a modern form of mobile ticketing. > On 27 April, ATM implemented the plan stipulated by the Milan municipality for the reorganisation of surface lines, in correspondence with the opening of the five new stations of line 5.
22 > From 29 April, paid parking also became virtual. Customers can use three free apps to pay for parking in blue (paid) parking spaces directly from their smart phones. > 1 May was the first day of Expo. Please refer to the specific section. The plan to strengthen the metro and surface services began. Front-line personnel welcomed citizens and millions of foreign visitors wearing a new blue uniform, with red seams and a modern fit, made using innovative materials and chosen with the help of the university, Politecnico di Milano. The website was modernised with a more technological new design, enhanced by important new features. > On 6 May, the new “Leonardo” train with red livery and white trim came into service, perfectly meeting the expectations set out two years earlier. > From 8 to 10 June, Milan hosted the 61st UITP World Congress and for three days it became the world capital of public transport, with ATM acting as “local host”; the event involved the presence of representatives from 75 countries (more than 320 exhibitors and 2,000 delegates. > On 30 June, ATM and the EIB signed a second contract for a €30 million loan to finance the renovation of the fleet for metro lines 1 and 2. > On 9 September, another digital innovation was introduced. It is now possible to reserve a slot at the ATM points by taking a virtual ticket via mobile phone. > On 29 September, the sale of 99% of Guidami S.r.l. to ACI Global S.p.A. was completed. > On 21 October, the Ministry of Infrastructure and Transport allocated ATM financing of €18.8 million for the acquisition of three new metro trains. > In October, the first phase, placing 13 defibrillators in the metro stations, was completed. In the following months, 118 AEDs (Automated external defibrillators) were placed in all of the stations on the four metro lines. > On 1 November, the no. 10 tram line was established between Viale Lunigiana and Piazzale XXIV maggio. > Between November and December, the new “Leonardo” trains came into service on the metro line 2. The first was black with green outlines, followed by the new train in metallic green with a white trim. > On 22 December, the Antitrust Authority (l’Autorità Garante della Concorrenza e del Mercato) allocated ATM a legality rating of two stars and two “+”.
23 Investments
In 2015, ATM made investments of around €190 million for the following:
€172 million for the renovation of the fleet; €10 million for infrastructural works; €8 million to improve technological systems.
The amount, in line with 2014, confirms the Group’s ability to manage a large volume of investments while preserving financial sustainability.
The organisational and financial commitment was focused on projects for the renovation of the fleet of metro and surface vehicles, with the objective of providing the city ever more innovative public transport in terms of performance, safety, accessibility and comfort.
In 2015, the following came into service:
nine “Leonardo” trains, six of which came into use on line 1 before Expo began and subsequently three more on line 2; 40 “Urbino” Solaris buses, the second batch of a total 125 buses, of which 85 were already operating from 2014 (12 metre-long motorised Euro 6 buses with a low environmental impact, replacing the Euro 2 vehicles); nine completely renovated “4900” series trams operating since the middle of the 1970s.
The investments for the renovation of the vehicle fleet allowed for an increase in the number of vehicles equipped with all the most modern devices necessary to meet the needs of passengers with motor or sensory disabilities; furthermore, the investments for the technological innovation of customer information systems facilitated the fruition of transport services that meet specific needs, establishing a permanent and significant improvement to the accessibility of the network for people with disabilities.
At the same time, the three-year extraordinary maintenance programme began at the group buildings and depots and the works aimed at improving safety on the metro continued.
In order to increase the productivity of the maintenance department, to raise safety standards and adapt technological materials, the renovation process for the Group’s facilities continued in 2015.
From a financial point of view, only a small part of the investments was covered by public contributions. The sustainability of the annual investment programme has been possible thanks to an increased volume of self-financing generated by ATM, equal to more than €163 million in 2015.
The EIB provided important financial assistance with its loan to be used to renovate the metro fleet. In 2015, considering the financial stability of ATM and its ability to meet deadlines provided in investment plans, the EIB granted another financing of €30 million, in addition to the first contract for €220 million signed in 2012.
24 Operating activities
2015
2015 was characterised by the most structured and cohesive reorganisation of the surface network of recent years, mainly connected to:
- the opening of new stations of metro line 5 and the subsequent restoration of some pre- existing routes; - the completion of large public works (Darsena) and the subsequent recommencement of the transport service; - the opening of building sites for the construction of new metro line 4.
The redistribution of buses and trams on the surface network was made in line with the logistical availability in different depots.
ATM’s commitment to the timely adjustment of the service offered, the related productive resources and customer communication was remarkable.
With regard to performance, both on the metro network and the surface network, results in terms of the regularity and punctuality of the service were significant, superior even to the encouraging results achieved in 2014. The rate of regularity on the metro lines was 98.65%; the rate of regularity on the surface network also improved, with 82.23% of routes meeting programmed times despite the increase in traffic for Expo and the aforementioned building sites for line 4.
The six months of Expo ended and the increased scheduling connected to the period came to a close. However, new works to strengthen the metro and surface service were carried out and a new tram line was introduced. All of this was with the objective to maintain and stabilise part of the increased level of service provided during the six-months of Expo.
Engineering works
The assets that ATM owns and manages -depots, vehicles, infrastructures, network equipment, technology, systems, traffic control centres- are constantly undergoing verification tests, maintenance and improvements according to the Group’s regulations and requirements.
One of the most structured and organised internal engineering maintenance works concerned the coordination of works on the tram superstructure systems in the areas in which the Milan municipality is working, which are also the areas open to private traffic: in particular, the area around the new Darsena underwent important and innovative functional renovation works.
In 2015, in preparation for Expo, functional renovation works and extraordinary maintenance continued on the escalators, as part of the plan launched in conjunction with the Milan municipality in the second half of 2012.
Between the end of 2014 and the beginning of Expo, 58 new escalators were activated, well in advance of schedule and available for customer use during the exposition period.
Another strategic subject in terms of importance and impact were the points/switches on the metro network: for 25 of these, stationed in critical points in terms of use on the metro lines, general structural inspections were brought forward.
25 With regard to the works carried out on assets owned by the Milan municipality, with the specific appointment of ATM, the restyling of Centrale FS M2 M3 station was finalised in accordance with the renovation works in the passenger buildings in the main stations.
The increased provision of metro services and journeys, especially on line 1, was guaranteed by the specific organisational and operational decisions aimed at eliminating the unproductive use of assets beyond the six months of Expo.
The following interventions took place:
rearrangement of the scheduling of annual ministerial inspections; reprogramming workshop inspections in advance; updating the specific plan for inspections to ensure full reliability of air conditioning units on the whole fleet.
26 Technological innovation
ATM is always committed to experimenting with new technologies for mobility services and in this way it has developed strong distinctive competencies when it comes to creating platforms for the management of integrated mobility information.
Partly in preparation for Expo, 2015 was characterised by an intense implementation and development of innovative customer support technologies, to guarantee the greatest diversification of sales channels and electronic payment instruments.
ATM is one of the first in Europe to have integrated standard market systems for electronic tickets, like the QR code technology, to grant access to the metro using a virtual ticket.
The introduction of this application marked the end of the fourth phases of the “mobile ticketing” project, which progressively improved between 2014 and 2015 with the following technologies: phase 1 From October 2014, Near Field Communication (NFC) technology was in place. By placing a mobile directly on the reader, passengers can pass through the turnstile to access the metro, using a ticket bought directly from an app; phase 2 from December 2014, ATM launched a new official app, which not only introduced innovative ways to access route and journey information, search for lines and view real- time waiting times, but also provided the possibility to buy tickets online; phase 3 from April 2015, the SMS ticketing system was launched, offering the possibility to buy single tickets and Expo tickets directly via SMS text message, paying directly using the telephone account; phase 4 from 1 May 2015, the QR code system was activated, allowing passengers to pass through the turnstiles of all metro stations by simply placing their smart phones near the digital reader, with the ticket purchased from the app store or via SMS text message on the screen.
From 29 April, another innovation was introduced to the IT platform containing a collection of all the data about on-street parking from three mobile apps, in order to pay for parking in a simple and immediate way.
In preparation for Expo, ATM significantly renovated its internet site, equipping it with new functions: one of the most significant additions was the possibility to calculate the cost of tickets, find free park & ride parking spaces in real-time and find information about network access for people with disabilities. Integrations that are greatly appreciated by customers and that will continue to be improved in the near future, with the possibility to view the routes of different lines at the same time and to directly research the stops, with all the useful information.
Thanks to the strengthening of the infrastructure, it was possible to support a greater number of users, guaranteeing an accessible and effective service to ever greater numbers of visitors to the site (41% more than the previous year during the months of Expo).
27 Numbers from 2015 highlight the wise operating choices:
ATM app downloads over 1,000,000; Tickets sold via SMS text message and the app over 1,000,000; Parking spaces paid for through the use of the app around 500,000; QR code validation over 900,000; Visitors to the ATM website over 7,800,000 of which 7% were foreigners; Routes calculated using “GIROMILANO” over 5,500,000 of which 20% were in a foreign language.
At the same time as its external commitments, ATM’s IT department developed and launched significant technological changes for Group processes as part of their dematerialisation, with the aim of speeding up, standardising and aligning internal processes, saving time and money. The innovations principally concerned maintenance and operations through dedicated apps and platforms:
to improve diagnostic processes, signalling and repairs of equipment breakdowns; to make communication between those who work in the field and central departments more direct and effective; to strengthen controls regarding health and safety at work, integrating health surveillance processes into human resource processes.
28 Business plan and investment plan
ATM drew up a particularly tough business plan for the 2015-2017 three-year period, aimed at maintaining its position of leadership in the domestic local public transport market, preserving a solid financial structure, also against the backdrop of ever-scarcer public resources.
The main objective of self-financing has been confirmed, at least equal to that achieved in the 2012- 2014 three-year period, mainly possible thanks to the increased efficiency through actions aimed at the containment of operating costs. the drivers of the business plan are:
- priority investments in the renovation of the metro and surface fleets; - completion of the unification of metro control rooms; - further improvement of service provisions by revising the maintenance processes and related IT platforms; - the launch of the evaluation process of “no core” properties to generate cash flows to service the investment plan. - the expansion of “core” activities through a close analysis of opportunities from different markets, including in Europe; - the strengthening of the know-how and specific internal expertise, through customised and continued training.
Part of the above-outlined strategy was the sale of 99% of Guidami S.r.l. in 2015, which signalled ATM’s departure from the car sharing business, as the developments in the reference market strongly reduced the future profitability projections in that line of business.
The investment plan for the 2016-2018 three-year period approved by the board of directors includes a 20.3% increase in investments with respect to the previous approved plan. The plan will entail a significant financial and operational commitment by ATM.
The investment plan favours high-value projects in view of the reinforcement and strengthening of the quality of service, performance parameters and technological innovation.
It is predicted that total investments will be equal to €626 million for the three-year period, of which:
- €423 million will be used to renovate rolling stock, in particular, trains and buses, with the launch of pilot projects such as the acquisition of the first electric buses and the creation of the related refuelling infrastructures. - €104 million for infrastructural works, of which the most important, from a strategic point of view, is the first phase of the expansion of the Gallaratese depot, with a view to developing depots for the metro fleet; - €88 million for the development of technological systems. The first project will be the strengthening of line 2 of the metro, for €36.6 million, 60% of which will be co-financed using state aid; this project requires extraordinary financing from ATM.
29 - A fundamental requirement for the effective completion of the plan is ATM’s ability to generate an adequate volume of self-financing in order to cover the costs.
In that regard, it is estimated that for the next three years, ATM will have to finance over 80% of the plan using its own resources, as it did in the last three years.
The current and prospective financial stability, and the great sense of responsibility already demonstrated when providing for the chronic lack of public funds, does not, however, excuse the institutions from serious reflection regarding the role that they should perform in sustaining the development and maintenance of the local public transport infrastructures.
30 Responsible management of relationships with stakeholders
ATM is strongly committed to building proper and transparent relationships with its stakeholders in order to pursue shared and feasible sustainable development objectives and to contribute to the well- being, quality of life and growth of the community in which it works.
It also promotes internal awareness of the culture and principles of sustainable development, continuously transmitting and sharing its principles and values with partners, suppliers and customers, with whom it has relationships built on transparency, fairness and loyalty.
All group sectors are involved and they shape internal and external activities to comply with the principles and values.
Social responsibility
Social responsibility is one of the factors with the greatest effect on the organisation, and the business and social policies of ATM. Today it would be unimaginable for a large company to pursue economic objectives without being in sync with the civil society’s values, which are ever more appreciated not only by institutions, but also by financial markets.
For ATM to be socially responsible, it must do more than just satisfy its legal obligations, it must also invest in human capital, in knowledge, in the environment and in its relationships with the community, adopting adequate ethical behaviour and participating in the public life of the city. For this reason, it is committed to developing a quality service for the public, through actions aimed at enhancing the skills of the people who work for the Group, choices that respect the environment, investments that improve performance and that boost national and international competitiveness.
The SA 8000 standard, which has been the reference tool for the management of the Group’s social responsibility since 2012, is applied by all the ATM group companies. ATM S.p.A., ATM Servizi S.p.A., ATM Servizi Diversificati S.r.l. and Nord Est Trasporti S.r.l. are certified. The compliance with the principles sanctioned by the SA 8000 translates into the values and commitments that ATM makes clear in its “code of ethics” and the “quality environmental and social responsibility policy”, as well as in the welfare and diversity management policies communicated to all employees and available for all interested parties in the dedicated section of the Group’s website.
In 2015, the SA 8000 certification was reconfirmed by the control body following the inspection and related audits.
In 2015, the IT code of ethics was also updated, aimed at governing the use of technology for all the group companies, to guarantee privacy and confidentiality of all group data.
Lastly, a procedure was created regarding the rights of the data owner, provided for by the Group’s privacy code. Consistent with the organisational changes that have taken place, the Group’s privacy owners were updated.
In December 2015, the Antitrust authority allocated ATM a legality rating of two stars and two “+”, positively evaluating it with respect to the Ministry of the Interior’s legality protocols, the adoption of a group code of ethics, subscription to the self-regulatory codes of sector associations and organisational models for the prevention and fight against corruption.
31 Customers
The relationship with the clientèle must be continually reinforced through the quality, reliability and efficiency of the service, as well as through timely, precise, clear, easily accessible and truthful information about the services and features offered.
The code of ethics effectively summarises ATM’s philosophy in its relationship with its customers, who represent an asset to be enhanced and whose needs and expectations should be met.
ATM manages the sale and distribution of travel tickets on behalf of the Milan municipality. Customers can purchase their tickets through a number of physical channels throughout the surface and underground network (shops, ATM points, automatic ticket machines, parking meters) and virtual ones (mobile ticketing systems).
Constant attention is paid to the update of sales instruments and the most recent technological evolutions, as already highlighted in the relevant section of this report.
In 2015, customer care and assistance underwent a great change aimed at improving the quality of the service provided and in line with obligations taken on as part of the contract with the Milan municipality.
No matter which channel they come through, all communications from customers are managed by the customer service office. The procedure for responding to complaints is part of the quality and environment management system in accordance with standards UNI EN ISO 9001 and 14001, and it is periodically assessed.
In 2015, the average time frame for handling customer complaints was equal to around 2.8 days; Infoline responded to over 134 thousand requests for information about the service.
The information provided on the new website was enhanced during 2015, adding more real-time information about the service, such as the state of the underground lines and the flow of passengers using Twitter @atm_informa.
The annual survey regarding customer satisfaction confirmed the quality of the work carried out by ATM, especially in 2015, a year characterised by considerable operational complexity.
The average score given to ATM by 94% of customers was equal to 7.3 (on a scale of 1 to 10), the best score ever achieved. A result that is more than just flattering, the outcome of the enormous amount of work the Group has put in during recent years in terms of investments and service planning, all aimed at improving the quality of the performance of local public transport.
The most rewarding efforts were those aimed at improving the quality of the service in terms of:
the diversity of sales channels; the efficiency of the service; the cleanliness of the vehicles.
The rating of personnel also improved significantly both in terms of relational aspects and also regarding the driving and feeling of safety and confidence.
32 Suppliers
As stated in ATM’s code of ethics, every group company guarantees a true and fair competition between suppliers.
In turn, the “quality environmental and social responsibility policy” specifies that the Group’s sustainable development strategies hinge on, among other things, the commitment to continually improve aspects regarding the environment, health and safety in the workplace, also through the constant monitoring of relationships with suppliers/subcontractors and subsuppliers.
The procurement processes and partnerships with suppliers are centrally managed by the purchasing department of the parent, ATM S.p.A..
Like in the previous three years, 2015 was characterised by further growth in the number of calls to tender, 1,876, of which 76 were public.
Procurement figures for 2015 compared to those from 2011 show the growth of the total number of calls to tender and those open to the public were 49% and 81% respectively.
With regard to the relationship with current and potential suppliers, great attention is paid to communication, which aims at maximum clarity and information regarding values, guidelines and standards adopted by ATM.
At an internal level, in conformity with the lines imposed by the group companies, in 2015, in full compliance with the principles of transparency and competitiveness, all individuals involved in the procurement process were provided with training in order to ensure that they operated in conformity with the Group’s regulations, fully adhering to the laws and regulations for work, supply and service contracts.
The IT platforms created for full traceability of the authorisation process for the selection of contractors and for the subsequent administrative management efficiently support the whole procurement process.
33 Human resources and organisation
Workforce
ATM’s workforce at 31 December 2015 totalled 9,695 members.
31 31 Incoming Outgoing Contract December December employees employees 2014 2015 Managers 33 1 34
Public transport workers 9,001 555 (234) 9,322 Others 322 49 (32) 339
Total 9,356 605 (266) 9,695
Female employees accounted for more than 7%; and mainly worked in staff positions.
The overall trend for the workforce in 2015 was characterised by considerable growth, with 339 new employees compared to the previous year end. This increase was thanks to a sizeable workforce strengthening programme, which translated into the recruitment and employment of 558 new employees. The subsidiary Metro Service A/A hired a further 47 employees.
This intervention not only responded to the exceptional demands linked to Expo, but also allowed the Group to implement certain activities linked to security, taxation and customer assistance with greater efficiency, guaranteeing an overall greater quality of the service offered; it also allowed the Group to attain a partial recovery of turnover and to ensure an adequate workforce size.
To a large extent, the incoming employees were employed with fixed-term contracts; following the entry into force of the “Jobs Act” and considering the relief from social security contributions provided for by Law no. 190/2014, ATM proceeded to transform the aforementioned contracts into open-ended contracts before 31 December 2015.
Industrial relations
The industrial relations system focuses on consultation policies, which constitute the primary tool for the promotion of employee participation through their representatives, in the pursuit of strategic objectives and for the prevention and resolution of possible conflicts.
ATM protects employees’ freedom of association. The rate of union membership is around 65% of over 9,000 group employees and, as well as the trade unions that signed the Industrial relations protocol, there are also other smaller trade unions.
In 2015, ATM, the trade unions and the workplace union representative successfully negotiated and signed (on 12 April 2015) the “EXPO 2015 agreement” which regulated the impact of the event on personnel from 1 May-31 October 2015. With regard to greater commitment and productivity required, specific economic rewards were introduced. During the six months, the parties continuously monitored the functioning of the agreement.
On 28 November 2015, the national labour contract for internal navigation public transport and shipping workers (LPT-mobility) was renewed until 31 December 2017. This was a significant
34 event that ended a period of contractual delay that lasted for seven years. ATM had intervened with specific group agreements aimed at safeguarding remuneration in the meantime.
Personnel management and development
In 2015, ATM implemented development policies capable of guaranteeing a sustainable remuneration system, aligned with the Group’s medium-long term objectives and the market situation.
In accordance with current contractual regulations, remuneration and incentivisation processes are used to:
guaranteeing all employees a fair remuneration, rewarding their professionalism expressed daily in the attainment of their respective professional objectives; attracting, retaining and motivating highly qualified employees, capable of providing a crucial support for the maintenance and improvement of the Group’s operational standards; ensuring sustainable long-term performance; creating a work environment that is inclusive of all ethnicities and religions, capable of encouraging the development of individual potential.
The incentive system (directed at all managers and a large population of junior managers, as well as at commercial personnel) is integrated into the human resources’ larger management and development system.The Group regularly monitors attainment of assigned objectives. Funds earmarked for HR purposes are revised annually considering the Group’s general cost containment goals.
Training
Within the context of personnel development paths, training is considered a strategic lever, directly developed by the parent, ATM S.p.A. through a dedicated structure. In particular, close attention is paid to the technical updating, safety training and training related to customer relations.
In 2015, 290 training courses took place, involving 11,750 participants for a total of 160,370 hours, corresponding to around two and a half days of training per employee.
Some of the most significant were:
Turnover Other Use of Other Net from sales revenues Financial Transactions Services third party operating extraordinary and and income assets costs income services income
- from parent Milan municipality 704,431 36,982 131 1,014 63 - 1,325
- From associates Brianza Trasporti S.c.a.r.l. - 2 - - - - - Como Fun&Bus S.c.a.r.l. 527 41 - 205 3 - - Metro 5 S.p.A. 19,674 5,802 395 61 150 2,047 - Movibus S.r.l. - 541 - - 9 - -
35 66,574 hours of training and coaching for newly hired personnel; 18,976 hours of training between 2014 and 2015 for existing personnel in anticipation of Expo 2015, consisting of both English courses and courses provided for front-line personnel; 24,525 hours of training regarding safety at work; a mandatory professional update for registered personnel: Campus ATM made contact with the order of engineers and architects and the board of surveyors, making it one of the first companies in Italy to provide internal training courses for the purposes of professional development.
The use of interprofessional funds for “Fonservizi” (training for industrial public service employees) and “Fondirigenti” (ongoing training for managers), under strict internal administrative supervision, guaranteed that all training costs were covered for 2015.
Welfare
ATM has implemented an innovative welfare system, with the aim of improving the individual well-being and organisation of its employees, bearing in mind the social role they play. In this scenario, there is a strong crossover between the strategic objectives set out in the welfare system, ATM’s commitment and the values it expresses.
ATM and Fondazione ATM work in a joint and integrated way to offer a wide selection of services for people and support initiatives, including economic ones.
ATM’s welfare system is made up of four areas:
services; work-time flexibility; corporate culture and managerial training; family economy.
It is made up of over ninety services and activities, represented with reference to the above- mentioned internal areas of the matrix/map of the welfare system, communicated to all employees, and available to the community of stakeholders through the website.
36 Protection of group assets and safety of individuals
The safeguarding of group assets and the protection of employees and passenger safety are guaranteed by the security sector, in collaboration with law enforcement (local police, tax police, military police, state police), with particular attention both to highly-used lines of transport and to car parks managed by ATM as well as park and rides. Security activities are planned in relation to the need to protect the assets and sometimes to the needs connected to particular events (concerts, trade shows or sporting events).
In 2015, instead of normal operators, security guards were employed to safeguard group assets; in 2015, this significantly reduced the number of aggressions against employees, attaining the best result of recent years, and also significantly reducing incidents involving customers, guaranteeing a safer work environment and transport service,
Travelling security guards on the surface and metro transport, alternating with fixed strongholds in stations and susceptible areas helped to obtain significant results, also confirmed by the customer satisfaction analysis which recognised an increase of five percent compared to 2014 on the theme of safety. The number of aggressions during the four-year period dropped by 35%. From February 2015, ATM more than doubled the number of its security staff (125 people).
The adjustment of control technologies to bring them into line with the new requested safety standards and the continued collaboration with law enforcement guaranteed a quick and effective intervention in the resolution of the most delicate situations and events.
The profitable relationship with law enforcement is confirmed every month by their active participation at the ATM safety committee for all institutional safety components (national police, military police, local police) working on the ground.
The greater number of men employed, advanced technologies and a strong collaboration with law enforcement have enabled a significant and tangible improvement, also in the fight against graffiti artists.
Health, safety and the environment
With reference to company crimes against safety at work or the liability for the environment included in Legislative decree no. 231/01, ATM has adopted health, safety and the environment management systems aimed at evaluating the risks, monitoring the sensitive activities, assuring the continuous improvement of its performance and the efficiency of actions undertaken.
The impacts on safety and the environment of production activities are continuously monitored and aimed at guaranteeing adherence with the regulatory constraints and the correct application of general control principals (segregation of duties, traceability, authorisation and signatory powers and compliance with company policies) and specific control principles of every sensitive activity defined in model 231.
In 2015:
evaluation procedures regarding risks generated by interference between activities conducted simultaneously in the same workplace and the risk assessment report (DUVRI) of contracts with third parties that work at the group premises were reviewed;
37 the evaluation of the risk of work-related stress was updated and the Group assessed the risk of repetitive motion injuries on all those at risk, by applying methodology proposed by INAIL (National Institute for workplace injury insurance). The results of this evaluation did not show any critical issues;
the IT platform for the management of workplace risks connected to different types of work was implemented. The risks were reclassified based on their impact on employee health and the respective investigative protocol, allowing for a more efficient protection of the individual health of those with different work duties;
the mandatory training of personnel continued. In 2015, 24,525 hours of training were provided, with the objective of creating and spreading the culture of safety at work and making training a means of mitigating risks. health surveillance was remodelled, in line with the needs and demands of the personnel working for Expo. During 2015, 12,760 medical check-ups were carried out on ATM employees, in line with previous years. The outcomes indicate that the personnel generally had good health conditions, in confirmation of health surveillance aimed at promoting the good-health of employees.
Quality and environment certification
In 2015, there were visits to certify the conformity with voluntary international standards; audits carried out by the certification body acknowledged that the Group knew how to respond to the needs of the situation and of the interested parties during Expo, as well as during all related extraordinary events, carrying out a strategic plan with precise monitoring, and guaranteeing contractually established quality parameters, even in exceptional situations. The certified group companies operated in compliance with ISO standards.
In line with the ongoing regulatory evolutions regarding quality and the environment, ATM put a three-year programme in place to achieve full conformity in all operating areas.
Transparency and anticorruption
During 2015, the first “three-year programme for transparency and integrity” was adopted and the “ 2015-2017 three-year plan for corruption prevention” was updated.
The three-year plan for corruption prevention is the reference framework for the prevention or reduction of the risk of corruption, and reaffirms, integrates and reinforces the principles already expressed in the Group’s code of ethics.
The 2015-2017 three-year programme for transparency and integrity, based on regulations regarding advertising, transparency and distribution of information set out by Legislative decree no. 33/2013 and subsequent modifications and integrations, aims to introduce and carry out transparency measures, that is, providing effective and total accessibility to the information regarding the Group’s organisation and activities.
The documents, approved by the parent’s board of directors and recognised by all group companies, are available to all stakeholders in the specific section “transparent company” on the institutional
38 website, in accordance with the ruling anticorruption and transparency regulations, and in compliance with publication obligations.
ATM has also voluntarily adopted a “whistleblowing” procedure for its employees, in line with guidelines set out by ANAC (national anticorruption authority), in which a state body has an investment for companies. This allows employees to confidentially signal any violation or suspected violation of the code of ethics and the code of conduct set out by the Group regarding anticorruption and health, occupational safety, environment and social responsibility policies.
The commitment to strengthen internal control systems aimed at preventing corruption can also be seen in the guidelines provided by the parent, ATM S.p.A. to all group subsidiaries that derive from the above-mentioned plans, including the obligation to elect a manager for the prevention of corruption and a manager for transparency and integrity.
Lastly, the Group provided its managers and junior managers with a dedicated training course as part of the initiatives aimed at strengthening the culture of integrity, transparency and anticorruption. The training sessions, run by Transparency International Italia in collaboration with the manager for the prevention of corruption and transparency, took place during September-October 2015, with a considerable number of events and participants. The training course reinforced management’s familiarity with the issue of risk management and the monitoring of the processes that are at the highest risk of corruption.
39
Financial highlights
The Group’s financial position and results of operations improved considerably, despite the extremely complex operating context which characterised 2015 during the six-month Expo period.
For the first time, thanks to the Expo effect, production revenues exceeded €1 billion (€1,056,382 thousand), up 9.8% on 2014.
Operating costs of €892,936 thousand grew considerably thanks to the increased production during the Expo period which, however, was less than proportional (+6.1%) to the increase in production revenues.
Gross operating profit amounts to €163,446 thousand reaching an all-time high, up by €43,315 thousand (+36.1%) on 2014.
Net profit for the year of €25,813 thousand (€5,634 thousand in 2014) reflects the effects of the above trends and those due to the halving of taxation following the tax changes affecting the deduction of the expenses related to employees with an open-ended contract from the IRAP tax base.
Net equity rose from €900,110 thousand at 31 December 2014 to €923,658 thousand at 31 December 2015.
The net financial debt is substantially unchanged (from €-234,277 thousand at 31 December 2014 to €-217,773 thousand at 31 December 2015), as a result of the combined effect of the greater self-financing generated by management and the increase in the loans from the EIB.
Net invested capital rose from €1,573,757 thousand at 31 December 2014 to €1,614,131 thousand and is 57.2% covered by net equity.
40
Directors' report
Reclassified profit and loss account
(€/000)
Δ % 2015 2014 Δ change change
TOTAL PRODUCTION REVENUES 1,056,382 961,881 94,501 9.8 %
Revenues from the LPT 803,944 742,763 61,181 8.2 %
Revenues from on-street parking, car parks, towing 28,944 25,481 3,463 13.6 % away service National labour contract contributions 50,299 50,299 - - %
Internal work capitalised 39,360 46,842 (7,482) (16.0) %
Other revenues and income 133,835 96,496 37,339 38.7 %
TOTAL OPERATING COSTS 892,936 841,750 51,186 6.1 %
Raw materials, consumables, supplies and goods 89,841 101,192 (11,351) (11.2) %
Services 234,697 227,840 6,857 3.0 %
Use of third party assets 5,832 7,138 (1,306) (18.3) %
Personnel expenses 510,778 479,491 31,287 6.5 %
Change in raw materials, consumables, supplies and (8,568) (1,369) (7,199) (525.9) % goods Other operating costs 60,356 27,458 32,898 119.8 %
GROSS OPERATING PROFIT 163,446 120,131 43,315 36.1 %
Amortisation, depreciation and write-downs 142,717 111,649 31,068 27.8 %
OPERATING PROFIT 20,729 8,482 12,247 144.4 %
Net financial income 6,842 10,900 (4,058) (37.2) %
Net extraordinary income 7,255 4,553 2,702 59.3 %
PRE-TAX PROFIT 34,826 23,935 10,891 45.5 %
Income taxes (9,013) (18,301) 9,288 50.8 %
NET PROFIT FOR THE YEAR 25,813 5,634 20,179 358.2 %
NET PROFIT FOR THE YEAR ATTRIBUTABLE TO 23,779 3,068 20,711 675.1 % THE GROUP
NET PROFIT FOR THE YEAR ATTRIBUTABLE TO 2,034 2,566 (532) (20.7) % MINORITY INTERESTS
Production revenues
Production revenues for 2015 amount to €1,056,382 thousand, up by 9.8% thousand on the previous year.
2015 revenues from the core business, i.e. those from the LPT service amount to €803,944 thousand, up by 8.2% on the €61,181 thousand for 2014. The increase is mainly due to the rise in:
41
- the fee for the service agreement entered into with the Milan municipality, which went up from €49,137 thousand to €704,431 thousand, due to the increased demand in transport during the six months of the Expo; - the fees for the contract to manage line 5 of the metro, including as a result of the extension from the Garibaldi station to San Siro station; - special/dedicated transport services, following the increased work requested by the Milan municipality.
Δ % 2015 2014 Δ change change
Revenues from the LPT service, of which:
Fees as per the service agreement with the 704,431 655,294 49,137 7.5 % Milan municipality Fees as per the service agreement - 42,649 41,445 1,204 2.9 % Copenhagen Fees as per the service agreement - intercity 19,919 20,079 (160) (0.8) % area Fees as per the single agreement to operate 19,014 11,143 7,871 70.6 % line 5 Revenues from tariffs - intercity area 11,599 11,346 253 2.2 %
Special/dedicated transport services 6,332 3,456 2,876 83.2 %
Total 803,944 742,763 61,181 8.2 %
Revenues from the management of on-street parking, car parks and the towing away service increased from €25,481 thousand in 2014 to €28,944 thousand in 2015 (+13.6%) as a consequence of greater monitoring activities in the area, increased traffic volumes due to the Expo and revenues from the management of the via Novara car park during the Expo period.
Internal work capitalised is down by €7,482 thousand (or 16.0%) to €39,360 thousand due to the re- scheduling of extraordinary maintenance activities to meet Expo management needs.
The increase in other revenues and income (up by €37,339 thousand or 38.7%) is mainly due to the release of risk provisions as the related requirements no longer existed, greater advertising revenues, greater income from fines to passengers and greater penalties charged to supply contracts.
Operating costs
Operating costs rose from €841,750 thousand to €892,936 thousand, up by 6.1% on 2014.
Raw materials, consumables, supplies and goods decreased by €11,351 thousand (11.2%) on 2014 as a result of the rescheduling of maintenance work to meet the operating needs of the Expo period and the reduction in diesel fuel costs. The latter did not fully benefit from the effect of the decrease in the price of the raw material due to the high fixed percentage (excise duty) applied to the final price.
Outsourced services (including cleaning and canteen services, utilities, collaborations and marketing) rose by 3.0% from €227,840 thousand to €234,697 thousand due to the greater activities carried out during the six-month Expo period.
Personnel expenses of €510,778 thousand increased by €31,287 thousand on 2014 due to the company agreement entered into to regulate the Expo period, the rise in workforce (up by 339 employees at 31 December 2015) and more overtime.
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Directors' report
Other operating costs (€60,356 thousand, up by 119.8% on 2014) mainly increased as a result of the accruals recognised to reflect the events of the year and the losses on assets sold.
Amortisation/depreciation and write-downs increased by 27.8% from €111,649 thousand to €142,717 thousand. The change is mainly due to the write-downs of the fleet which will be progressively sold in the next three years in line with the approved investment plan.
Net financial income decreased by 37.2% from €10,900 thousand to €6,842 thousand due to changes in interest rates, which hit an all-time low in 2015.
Net extraordinary income rose 59.3%from €4,553 thousand to €7,255 thousand.
Income taxes decreased by 50.8% from €18,301 thousand to €9,013 thousand. The reduction is due to the implementation of the tax changes that extend the deductibility of the expenses related to employees with an open-ended contract from the IRAP tax base to all companies operating in the local public service sector.
The net profit for the year amounts to €25,813 thousand, gross of minority interests of €2,034 thousand. The foreign subsidiary Metro Service A/S’s contribution to the net profit for the year amounts to €4,307 thousand.
43
Reclassified balance sheet
Net invested capital
At 31 December 2015, net invested capital amounted to €1,614,131 thousand, up by €40,374 thousand on 31 December 2014.
31.12.2015 31.12.2014 Change
NET INVESTED CAPITAL
Tangible fixed assets 1,595,369 1,575,371 19,998
Intangible fixed assets 63,778 84,195 (20,417)
Financial fixed assets 31,919 29,702 2,217
A. FIXED ASSETS 1,691,066 1,689,268 1,798
Trade receivables 210,964 201,866 9,098
From others 86,802 54,876 31,926
Net inventory 70,124 61,610 8,514
Prepayments and accrued income 2,841 3,204 (363)
B. CURRENT ASSETS 370,731 321,556 49,175
Trade payables 311,337 300,156 11,181
Other payables 159,912 167,224 (7,312)
Accrued expenses and deferred income 3,788 1,855 1,933
C. CURRENT LIABILITIES 475,037 469,235 5,802
D. RECEIVABLES FOR GRANTS RELATED TO PLANT 27,371 32,168 (4,797)
E. NET WORKING CAPITAL (E=B-C+D) (76,935) (115,511) 38,576
F. NET INVESTED CAPITAL (F=A+E) 1,614,131 1,573,757 40,374
Fixed assets, including grants, net of amortisation/depreciation and write-downs of the year, amounted to €1,691,066 thousand at 31 December 2015 and are substantially unchanged on the previous year end.
At 31 December 2015, net working capital was negative by €76,935 thousand and worsened by €38,576 thousand compared to 31 December 2014. The deterioration is mainly due to the significant increase in tax receivables of approximately €23 million as a result of the application of the new tax legislation on the VAT split payment for the first time in 2015.
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Directors' report
Financed capital
31.12.2015 31.12.2014 Change
FINANCED CAPITAL
Financial payables 204,384 175,617 28,767
Financial receivables (40,142) (46,098) 5,956
Liquid funds and securities (382,015) (363,796) (18,219)
G. NET FINANCIAL DEBT (217,773) (234,277) 16,504
Employees’ leaving entitlement 150,580 157,210 (6,630)
Other provisions 162,036 127,837 34,199
Grants related to plant 590,034 616,310 (26,276)
H. NON-CURRENT LIABILITIES 902,650 901,357 1,293
I. NET EQUITY 923,658 900,110 23,548
- Share capital 700,000 700,000 -
- Reserves 165,453 165,464 (11)
- Retained earnings 58,205 34,646 23,559
L. PROFITS AND RESERVES ATTRIBUTABLE TO 5,596 6,567 (971) MINORITY INTERESTS M. FINANCED CAPITAL (M=G+H+I+L) 1,614,131 1,573,757 40,374
At 31 December 2015, net financial debt amounted to €217,773 thousand and was substantially unchanged on the previous year end (€234,277 thousand).
The balance may be analysed as follows:
financial payables net of financial receivables of €40,142 thousand, for a total of €164,242 thousand, up by €34,723 thousand. The increase is the net effect of: the rise in the exposure to the EIB (€54,723 thousand); the decrease in the financial payables to the Milan municipality related to the payment of dividends/reserves worth €20,000 thousand whose distribution was approved in prior years; the change in other captions related to subsidiaries. liquid funds and securities recognised under current assets of €382,015 thousand.
At 31 December 2015, net equity attributable to the Group amounted to €923,658 thousand, up by €23,548 thousand.
Net invested capital not covered by the above captions is covered by other non-current liabilities of €312,616 thousand, including the employees’ leaving entitlement and the other risk provisions.
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Directors' report
Reclassified cash flow statement
Net cash flows from operating activities in 2015 amounted to €168,217 thousand. They covered almost the entire cash requirements arising from investing activities (€189,983 thousand, gross of the assets sold), accounting for approximately 88%.
Cash outflows related to EIB financing amount to €54,723 thousand.
The net cash flows of the year of €18,219 thousand led to an increase in liquid funds and securities to €382,015 thousand (31 December 2014: €363,796 thousand).
2015 2014 Change
Net profit for the year 25,813 5,634 20,179
Adjustments to align the net profit for the year with the net cash flows from operating activities:
- amortisation/depreciation and other non-monetary 141,559 109,570 31,989 components - net gains from the sale of assets 1,971 886 1,085 - dividends, interest and taxes (4,085) 4,360 (8,445) Change in working capital (46,110) 69,305 (115,415) Non-current liabilities 45,187 44,973 214 Dividends received, taxes paid, interest (paid) received 3,882 (7,769) 11,651
Net cash flows from operating activities 168,217 226,959 (58,742)
Capital expenditure
Net capital expenditure (183,890) (195,605) 11,715 Net investments in equity investments, consolidated (2,217) (7,705) 5,488 companies and business units Other changes related to investing activities 1,386 - 1,386
Free cash flow (16,504) 23,649 (40,153)
Change in current and non-current financial payables 54,723 37,785 16,938 Cash outflows related to using own funds (dividends (20,000) (1,290) (18,710) paid)
Net cash flows for the year 18,219 60,144 (41,925)
***
At 31 December 2015, the Group’s workforce numbered 9,695 compared to 9,356 at 31 December 2014.
Contract 31.12.2015 % 31.12.2014 %
Managers 34 0.4 % 33 0.4 % Public transport workers 9,322 96.2 % 9,001 96.2 % Other 339 3.5 % 322 3.4 %
Total 9,695 100.0 % 9,356 100.0 %
46
ATM S.p.A.’s performance
RECLASSIFIED PROFIT AND LOSS Δ change 2015 2014 Δ change ACCOUNT %
TOTAL PRODUCTION REVENUES 581,294 556,460 24,834 4.5 %
Revenues from core business 461,274 441,015 20,259 4.6 %
Internal work capitalised 32,416 46,843 (14,427) (30.8) %
Other revenues and income 87,604 68,602 19,002 27.7 %
TOTAL OPERATING COSTS 455,079 455,503 (424) (0.1) %
Raw materials, consumables, supplies and 88,525 98,939 (10,414) (10.5) % goods Services 196,165 188,956 7,209 3.8 %
Use of third party assets 4,134 3,948 186 4.7 %
Personnel expenses 152,217 144,584 7,633 5.3 %
Change in raw materials, consumables, (8,068) (1,350) (6,718) (497.6) % supplies and goods Other operating costs 22,106 20,426 1,680 8.2 %
GROSS OPERATING PROFIT 126,215 100,957 25,258 25.0 %
Amortisation, depreciation and write-downs 135,888 104,356 31,532 30.2 %
OPERATING LOSS (9,673) (3,399) (6,274) (184.6) %
Financial income and charges 7,615 13,538 (5,923) (43.8) %
Net extraordinary income (expense) 2,737 (1,266) 4,003 316.2 %
PRE-TAX PROFIT 679 8,873 (8,194) (92.3) %
Income taxes 10,165 (5,788) 15,953 275.6 %
NET PROFIT FOR THE YEAR 10,844 3,085 7,759 251.5 %
Production revenues
Production revenues for 2015 amount to €581,294 thousand, up by 4.5% thousand on the previous year (€556,460 thousand).
Revenues from the core business amount to €461,274 thousand in 2015, up by €20,259 thousand on 2014 (+4.6%) mainly as a result of the increase in the activities carried out for ATM Services S.p.A. and the contractual fees to manage line 5 of the metro following the extension from the Garibaldi station to the San Siro station.
Internal work capitalised is down by €14,427 thousand (or 30.8%) from €32,416 thousand due to the re-scheduling of extraordinary maintenance activities to meet Expo management needs.
The rise in other revenues and income (€87,604 thousand or 27.7%) is mainly due to more maintenance activities carried out for the subsidiaries, increased advertising revenues, greater compensation for damage and greater penalties for supply contracts.
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Directors' report
Operating costs
Operating costs amount to €455,079 thousand and are substantially unchanged on 2014.
Raw materials, consumables, supplies and goods decreased by €10,414 thousand (10.5%) on 2014 as a result of the rescheduling of maintenance to meet the operating needs of the Expo period and the decrease in diesel fuel. The latter did not fully benefit from the effect of the decrease in the price of the raw material due to the high fixed percentage (excise duty) applied to the final price.
Outsourced services (including cleaning and canteen services, utilities, collaborations and marketing) rose by 3.8% from €188,956 thousand to €196,165 thousand due to the greater activities carried out during the six-month Expo period.
Personnel expenses of €152,217 thousand increased by €7,633 thousand on 2014 due to the company agreement entered into to regulate the Expo period, the rise in workforce (up by 121 at 31 December 2014) and more overtime.
The €8,068 thousand decrease in raw materials, consumables, supplies and goods is due to the effects of rescheduling maintenance to meet the operating needs of the Expo period.
Amortisation/depreciation and write-downs increased by 30.2% from €104,356 thousand to €135,888 thousand. The change is mainly due to the write-downs of the fleet which will be progressively sold in the next three years in line with the approved investment plan.
Net financial income decreased by 43.8% from €13,538 thousand to €7,615 thousand due to the changes in the interest rates which hit an all-time low in 2015.
Net extraordinary income amounts to €2,737 thousand and includes the gain on the sale of 99% of the equity investment in Guidami S.r.l, in addition to the repayment of sickness benefits for 2011.
The net profit of €10,844 thousand benefits from the positive contribution of the application of the tax consolidation scheme which generated income of €12,064 thousand for the parent.
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Risks and uncertainties
ATM regularly monitors its complex management processes and the developments of the legislative, operational and financial context in order to provide the board of directors with every tool necessary and useful for a correct assessment of the related risks and to facilitate the preparation of the related action plans.
External risks
The local public transport sector is undergoing great change in terms of liberalisation and the definition of fee calculation and methodologies which the granting bodies must implement in the service agreements.
This development, the content and outcome of which is not yet known, will considerably affect operating management decisions in view of the full liberalisation of the market which will take place in 2019 under the European legislation.
Another issue is the uncertainty surrounding the possible sources of financing for infrastructural projects and the plans to renew the metro and tram fleet.
Operational risks
Generally speaking, internal controls and the action plans implemented by the company ensure service continuity, the safeguarding of company assets and compliance with the laws and regulations.
In 2015, as part of the operation of line 5 of the metro, ATM detected unusual instances of wear and tear of tracks and train wheels which were immediately reported to the operator Metro 5 S.p.A..
During the year, as contractually agreed and within its area of responsibility, ATM carried out all maintenance and monitoring activities necessary to ensure the smooth operation of the service.
The specific Safety commission reported the issue to the Milan municipality.
Information system and network infrastructure risks
ATM’s operations are increasingly dependent on the smooth and uninterrupted operation of the information systems and the network infrastructures supporting operations and maintenance. The development of a new disaster recovery technical and organisational solution is at an advanced stage and is aimed at ensuring the continuity of the systems supporting the Group’s operations.
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Directors' report
Environmental risks
In line with applicable legislation, ATM carefully monitors the environmental risk factors typical of each process, in order to prevent and respond rapidly to any event that may have a significant effect internally and externally.
Risks related to the health and safety of employees
As part of its current operations, ATM bears the costs and charges related to the measures that ensure compliance with applicable regulations governing health and safety in the workplace.
Financial risks
Liquidity risk
The liquidity risk does not pose any issues. Indeed, through its regular scheduling and monitoring activities, ATM ensures an adequate level of liquid funds and/or short-term monetisable securities to promptly meet its commitments vis-à-vis its commercial and financial counterparts.
Interest rate risk
Interest rate fluctuations may affect the market value of the Group’s financial assets and liabilities and its net financial income and charges.
ATM regularly monitors receivables and payables and implements all actions necessary to mitigate this risk.
Credit risk
Credit risk reflects the Group’s exposure to the potential losses arising from non-compliance with obligations vis-à-vis commercial and financial counterparts.
At 31 December 2015, the Group had less past due trade receivables thanks to the careful monitoring and controlling of individual commercial counterparts. Monitoring activities are also carried out on the credit risk of financial counterparties.
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Events after the reporting date
> On 20 January 2016, the call to tender for the construction of the first stage of the project to extend line 2 of the metro was launched, entailing an investment of €36.6 million, 60% financed by the state. Between January and March 2016, Metro Service A/S concluded the negotiations for the > operation of the Copenhagen City Ring metro. The sale of the non-operating building in Via Ricasoli, Milan, was completed on 28 January > 2016. This is the first transaction which forms part of a wider property-enhancing project in order to raise additional funds to be used to strengthen and improve service quality through investments.
> The obligation to validate tickets also when leaving metro stations was introduced on 15 February 2016 in almost all stations to further reinforce the fight against ticket evasion.
Outlook
Thanks to the much improved operating profits, the Group has greater financial resources available to support the major investment plan already approved by the board of directors.
In 2016, the Group’s objective is to repeat the improvement of its financial performance, while acknowledging the contribution of many concurrent positive factors to its results in 2015. Many challenges are ahead that the Group will have to tackle and overcome: first, confirming that it will be able to absorb the increase in personnel expenses due to the hiring of 558 employees in the last few months of the year.
Moreover, the Group is strongly committed to continuing to minimise costs, while increasing its maintenance programmes and the ability to support investments, on a self-financing basis, through increasing annual accruals. This is necessary in the light of the growing and prolonged difficulties in obtaining public funding. In the past, investments in rolling stock and local public transport vehicles benefited from public funds which, despite being insufficient, enabled operators to update equipment, impacting their accounts only in part. However, these investments have shrunk considerably in the recent past; consequently, while aspiring to a prompt resumption of incentives to support a strategic sector for the country, it is essential that a company that is willing to maintain a satisfactory service level, be able to rely on its own funds.
In 2016, the Group will implement the agreements governing the operation of the new Copenhagen metro line. Furthermore, the other possibilities of increasing the size of the activities under concession both in Italy and abroad will be analysed in detail.
Pending the understanding of the final guidelines of the Milan administration about the service agreement governing the LPT operating service contract which, if not extended, will expire in 2017, the Group will begin an assessment process to decide, within the timeframe to be defined, on a possible competitive bid.
The issues surrounding the investee Metro 5 will have a strong impact on the Group’s operations. ATM holds a minority investment in said investee which prevents it from participating directly in the management of the many issues which, since the beginning, have affected Metro 5. However, under
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Directors' report
the operation contract which entrusted ATM with the operation of the metro line, the ATM Group is identified, not only by the public, as the main body that can resolve the technical problems which still affect the line. Despite reiterating the specific limits of its role, the ATM Group, as a whole, shall be clearly committed to participating in the resolution of the above issues. Indeed, it is well aware that the “method” used to deal with and successfully overcome the challenges it has faced in the past, will need to be applied also to Metro 5 which needs to urgently resolve its problems.
Other information
The City council’s resolution no. 70 of 23 January 2015 is based on the law whereby «local bodies and investees/subsidiaries are required to ensure increasing cost containment and streamlining. The legislator intends to implement the principle of containing personnel expenses.» These principles did not apply to ATM in 2015 as set out in the resolution, whereby «hiring of new employees is permitted as an exception to the above guidelines as a consequence of the exceptional increase in the activities/services managed as part of Expo 2015».
Although 2015 may be considered an exceptional year, personnel expenses confirm the success of ATM policies adopted during the year which enabled it to increase human resources’ productivity levels.
Most employees were hired under fixed-term contracts. Based on the operational plans for 2016 and in compliance with the provisions of resolution no. 70/2015, by 31 December 2015, ATM transformed the above contracts into open-ended contracts, benefitting, to the full extent permitted, from the social security relief introduced by Law no. 190/2014.
Other disclosures pursuant to article 40 of Legislative decree no. 127/91
The following is noted pursuant to article 40 of Legislative decree no. 127/91:
- in 2015, the Group did not carry out any research or development activities;
- no ATM group company holds or purchased or sold own shares or shares of the parent, including through trustees or nominees;
- in 2015, the Group did not trade in any derivatives to determine its financial position and results of operations, except to cover the price of diesel fuel.
52
Related party transactions
Most of the transactions carried out by ATM S.p.A., as the parent, with its subsidiaries refer to services and funding and lending activities. Transactions are strictly of a financial and commercial nature and, consequently, do not include atypical and/or unusual transactions and are regulated by contracts agreed in line with market conditions.
ATM S.p.A. set up a tax consolidation scheme together with the following subsidiaries: ATM Servizi S.p.A., ATM Servizi Diversificati S.r.l., GeSAM S.r.l., Inmetro S.r.l., Mipark S.r.l. in liquidation, NET S.r.l. and Rail Diagnostics S.p.A..
Under the relevant contract, when a positive tax base is transferred, the consolidated company recognises a payable to the consolidating company equal to the amount resulting from application of the IRES rate to the transferred profit. Conversely, when a tax loss is transferred, the consolidating company will recognise a payable to the consolidated company equal to the amount resulting from the application of the IRES rate to the transferred tax loss.
ATM also set up a VAT scheme together with the following subsidiaries: ATM Servizi S.p.A., ATM Servizi Diversificati S.r.l., GeSAM S.r.l., Mipark S.r.l. in liquidation, NET S.r.l., and Rail Diagnostics S.p.A.. Under this scheme, the VAT balance is transferred monthly to the parent which, accordingly, is the only company with tax payables, while the subsidiaries recognise receivables from/payables to the parent. The annexes to the notes to the financial statements of ATM S.p.A. summarise related party transactions based on the nature of the services provided.
Shareholder’s resolutions
Dear shareholder
You are invited to approve the financial statements of ATM S.p.A. as at and for the year ended 31 December 2015 which show a net profit for the year of €10,843,599.
In order to strengthen the Group’s financial position and considering the provisions of the law and the by-laws, we propose allocating the net profit for the year as follows:
- €10,843,599 to retained earnings.
Milan, 31 March 2016
On behalf of the board of directors The chairman Bruno Rota
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Directors' report
54
Consolidated financial statements
Consolidated financial statements
55
Consolidated financial statements
56
Consolidated financial statements
1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements
57
Consolidated financial statements
58
Consolidated financial statements
BALANCE SHEET
59
Consolidated financial statements
(€/000) 31.12.2015 31.12.2014
A) SHARE CAPITAL PROCEEDS to be received - -
B) FIXED ASSETS
I. Intangible fixed assets 50,974 68,795
4) Concessions, licences, trademarks and similar rights 2,582 2,304
5) Goodwill 472 943
6) Assets under development and payments on account 3,764 3,823
7) Other 44,156 61,725
II. Tangible fixed assets 1,050,746 1,012,503
1) Land and buildings 239,090 256,131
2) Plant and machinery 694,994 607,460
3) Industrial and commercial equipment 21,862 22,752
4) Other assets 7,876 4,835
5) Assets under construction and payments on account 86,924 121,325
III. Financial fixed assets 31,919 29,702
1) Equity investments 13,112 10,732
b) associates 10,679 10,679
d) other 2,433 53
2) Financial receivables 18,807 18,970
b) from associates 16,865 12,868
Due within one year 16,865 12,868
d) from others 1,942 6,102
Due within one year 310 4,370
Due after one year 1,632 1,732
Total fixed assets (B) 1,133,639 1,111,000
C) CURRENT ASSETS
I. Inventory 70,124 61,610
1) Raw materials, consumables and supplies 65,704 57,143
4) Finished goods 2,992 -
5) Payments on account 1,428 4,467
II. Receivables 400,877 335,008
1) Trade receivables 43,972 31,458
Due within one year 43,972 31,458
3) From associates 4,543 16,378
Due within one year 4,543 16,378
4) From parents 207,748 165,025
Due within one year 207,748 165,025
4bis) Tax receivables 74,313 51,452
Due within one year 25,923 9,271
Due after one year 48,390 42,181
4-ter) Deferred tax assets 1,086 1,135
Due within one year 1,086 1,135
5) From others 69,215 69,560
Due within one year 69,215 69,560
III. Current financial assets 217,674 226,626
6) Other securities 217,674 226,626
IV. Liquid funds 164,341 137,170
1) Bank and postal accounts 163,318 136,290
3) Cash-in-hand and cash equivalents 1,023 880
Total current assets (C) 853,016 760,414
D) PREPAYMENTS AND ACCRUED INCOME 2,841 3,204
TOTAL ASSETS 1,989,496 1,874,618
60
Consolidated financial statements
(€/000) 31.12.2015 31.12.2014
A) NET EQUITY
I - Share capital 700,000 700,000
IV - Legal reserve 140,000 140,000
VII - Other reserves, shown separately 25,452 25,464
- contribution reserve 19,690 19,690
- extraordinary reserve 5,764 5,764
- translation reserve (2) 10
VIII - Retained earnings 34,427 31,578
IX - Net profit for the year 23,779 3,068
Net equity attributable to the Group 923,658 900,110
A2.I - Share capital and reserves attributable to minority interests 3,562 4,001
A2.II - Profit for the year attributable to minority interests 2,034 2,566
Net equity attributable to minority interests 5,596 6,567
Total net equity (A) 929,254 906,677
B) PROVISIONS FOR RISKS AND CHARGES
2) Tax provision, including deferred tax liabilities 817 1,041
3) Other provisions 161,219 126,796
3.a) Provisions for risks 140,654 108,462
3.b) Provisions for charges 20,565 18,334
Total provisions for risks and charges (B) 162,036 127,837
C) EMPLOYEES’ LEAVING ENTITLEMENT 150,580 157,210
D) PAYABLES
4) Bank loans and borrowings: 150,809 102,042
Due within one year 6,821 6,601
Due after one year 143,988 95,441
7) Trade payables 262,773 229,497
Due within one year 262,773 229,497
10) Payables to associates 675 877
Due within one year 675 877
11) Payables to parents 137,061 143,357
Due within one year 137,061 143,357
12) Tax payables 18,891 23,750
Due within one year 18,891 23,750
13) Social security charges payable 43,759 44,963
Due within one year 43,759 44,963
14) Other payables 97,263 98,511
Due within one year 97,263 98,511
Total payables (D) 711,231 642,997
E) ACCRUED EXPENSES AND DEFERRED INCOME 36,395 39,897
Total accrued expenses and deferred income (E) 36,395 39,897
TOTAL LIABILITIES 1,989,496 1,874,618
Memorandum and contingency accounts
1) Third party assets 4,843,223 4,503,286
2) Guarantees, of which: 338,106 323,992
- To third parties 74,614 64,027
- From third parties 225,612 231,720
- To associates 37,880 28,245
TOTAL MEMORANDUM AND CONTINGENCY ACCOUNTS 5,181,329 4,827,278
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Consolidated financial statements
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Consolidated financial statements
PROFIT AND LOSS ACCOUNT
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Consolidated financial statements
(€/000) 2015 2014
A) PRODUCTION REVENUES
1) Turnover from sales and services 833,844 769,840
4) Internal work capitalised 39,360 46,842
5) Other revenues and income 183,178 145,199
Grants related to income 52,251 52,193
Total production revenues (A) 1,056,382 961,881
B) PRODUCTION COST
6) Raw materials, consumables, supplies and goods 89,841 101,192
7) Services 234,697 227,840
8) Use of third party assets 5,832 7,138
9) Personnel expenses: 510,778 479,491
a) Wages and salaries 371,737 349,375
b) Social security contributions 105,258 97,251
c) Employees’ leaving entitlement 24,388 23,619
d) Pension and similar costs 3,980 3,800
e) Other costs 5,415 5,446
10) Amortisation, depreciation and write-downs: 142,717 111,649
a) Amortisation of intangible fixed assets 23,265 22,912
b) Depreciation of tangible fixed assets 77,544 76,609
c) Other write-downs of fixed assets 41,273 10,093
d) Write-downs of current receivables and liquid funds 635 2,035
11) Change in raw materials, consumables, supplies and goods (8,568) (1,369)
12) Provisions for risks 43,575 13,174
13) Other provisions 2,488 4,697
14) Other operating costs 14,293 9,587
Total production cost (B) 1,035,653 953,399
Operating profit (A-B) 20,729 8,482
C) FINANCIAL INCOME AND CHARGES
15) Income from investments, showing separately income from subsidiaries and - - income from assets 16) Other financial income: 12,264 12,301
a) From financial receivables classified as fixed assets 1,028 862
From associates 897 835
Other 131 27
b) From securities classified as fixed assets which are not equity - 183 investments c) From securities classified as current assets which are not under equity 10,363 10,357 investments d) Other income 873 899
Other 873 899
17) Interest and other financial charges (2,053) (879)
Other (2,053) (879)
17-bis) Net exchange rate gains (losses) (53) 69
a) Gains 22 123
b) Losses (75) (54)
Net financial income (C) (15+16-17+-17-bis) 10,158 11,491
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Consolidated financial statements
(€/000) 2015 2014
D) ADJUSTMENTS TO FINANCIAL ASSETS 18) Write-backs: - -
19) Write-downs: (3,316) (591)
c) Securities classified as current assets which are not equity investments (3,316) (591)
Total adjustments (D) (18-19) (3,316) (591)
E) EXTRAORDINARY INCOME AND EXPENSE
20) Income 7,255 6,025
Gains on sale of assets which cannot be recognised under caption 5 1,386 -
Other 5,869 6,025
21) Expense - (1,472)
Other - (1,472)
Net extraordinary income (E) 7,255 4,553
Pre-tax profit (A-B+-C+-D+-E) 34,826 23,935
22) Income taxes, current and deferred (9,013) (18,301)
Current taxes (21,111) (18,704)
Change in deferred tax assets (22) (39)
Change in deferred tax liabilities 136 143
Benefit from participation in the tax consolidation scheme 11,984 299
Net profit for the year before the portion attributable to minority interests 25,813 5,634
Net profit for the year attributable to minority interests 2,034 2,566
Net profit for the year 23,779 3,068
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Consolidated financial statements
66
Consolidated financial statements
2. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated
financial statements
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Consolidated financial statements
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Consolidated financial statements
Basis of preparation
The consolidated financial statements as at and for the year ended 31 December 2015 have been prepared in accordance with the provisions of articles 29 and 39 of Legislative decree no. 127/91 and, where necessary, interpreted in the context of and integrated by the reporting standards promulgated by the Italian Accounting Standard Setter (OIC).
They consist of a balance sheet, a profit and loss account and these notes and are accompanied by a directors’ report that provides information on the nature and business of the group companies, events after the reporting date and transactions with group companies.
The amounts presented in the balance sheet and profit and loss account as well as in these notes are expressed in thousands of Euros.
The above basis of preparation and the following accounting policies applied are those in force at the reporting date and do not reflect the legislative changes introduced by Legislative decree no. 139/2015 which will be applied starting from the 2016 financial statements.
Basis of consolidation
Companies directly controlled by the parent are consolidated in accordance with the line-by-line consolidation method.
Accordingly, assets and liabilities and revenues and costs are consolidated on a line-by-line basis, eliminating all amounts related to transactions among consolidated companies and allocating the relevant portion of net equity and net profit (loss) for the year to minority interests.
The carrying amount of the investments included in the consolidation scope is eliminated against the related net equity. Upon acquisition or first consolidation, the difference between the acquisition cost and the related portion of net equity is recognised in the consolidated financial statements, where possible, under the assets and liabilities of the consolidated companies. Any residual negative difference is recognised in net equity, under the “Consolidation reserve” or, when due to expected unfavourable results, in the “Provision for risks and charges”. Conversely, any residual positive difference is recognised as “Goodwill arising on consolidation” under assets, when the higher amount effectively reflects the greater carrying amount of the investment which may be recovered through the future income the investee will generate.
When the higher amount does not reflect the real greater carrying amount of the investment, but is due to a bad deal or decisions that are not directly attributable to the operating performance of the investee, it is recognised as a decrease of the consolidation reserve or, alternatively, is taken to the profit and loss account. The amount, if any, recognised in assets is amortised over the period set out in article 2426.6 of the Italian Civil Code.
Investments in companies controlled by the parent ATM S.p.A. of negligible significance or which are no longer strategic are measured at cost, adjusted to reflect impairment losses.
Investment of between 20% and 50% in associates over which the parent ATM S.p.A. has direct or indirect significant influence are measured at cost.
Finally, investments of less than 20% in companies classify as financial fixed assets and are measured at cost.
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Consolidated financial statements
Unless otherwise stated, the information provided in the financial statements at 31 December 2015 submitted to the boards of directors of each investee is described in the notes.
Translation of foreign currency financial statements
The financial statements of investees operating in a currency other than the Euro are translated into Euro by applying closing exchange rates to assets and liabilities, the historical exchange rates to net equity captions and the average exchange rates of the year to profit and loss account captions. The difference between the two calculations using the average rate and the closing rate is taken to the “Translation reserve”.
The exchange rates applied to translate foreign currency financial statements are as follows (foreign currency unit = €1):
Currency
Danish krone (DKK)
Historical exchange rate at 31 December 2008 applied to net equity figures
€1 = DKK7.4428
Spot rate at 31 December 2015 applied to assets and liabilities
€1 = DKK7.4626
2015 average exchange rate applied to profit and loss account figures
€1 = DKK7.4587
Accounting policies
The consolidated financial statements comprise the financial statements of the parent ATM S.p.A. and those prepared by the directors of the consolidated companies, approved by the relevant share/quotaholders.
The reporting date of the consolidated financial statements is 31 December 2015, which coincides with that of the parent.
The individual financial statements, including those of foreign companies, have been adjusted to comply with the Group’s accounting policies as defined by the parent ATM S.p.A., which prepares consolidated financial statements. Hence, they are consistent with the structure and the accounting policies set out in the Italian Civil Code and applicable to consolidated financial statements.
These policies are the same as those used to prepare the consolidated financial statements of the prior year and have been applied on a going concern basis.
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Consolidated financial statements
INTANGIBLE FIXED ASSE TS
Intangible fixed assets are recognised at contribution, acquisition or production cost, with the prior consent of the board of statutory auditors, where required, net of accumulated amortisation.
The acquisition cost includes the related transaction costs. The production cost includes all directly attributable costs and the reasonably attributable portion of other costs incurred from production up to when the asset is available for use.
Intangible fixed assets are amortised systematically and amortisation expensed each year reflects the allocation of the cost incurred over their entire useful life. Amortisation begins when the asset is available for use. The amortisation pattern depends on how the expected benefits are expected to flow to the Group.
Amortisation is charged using the rates held to reflect the asset’s estimated useful life (Annex 5).
When, regardless of the amortisation already charged, an impairment loss is identified, the asset is written down accordingly. If the reasons therefor cease to exist in subsequent years, the write-down is reversed up to the original amount of the asset, net of the amortisation that would have been recognised in the absence of the write-down.
TANGIBLE FIXED ASSETS
Tangible fixed assets are recognised at contribution, acquisition or production cost, adjusted by accumulated depreciation.
The acquisition cost includes the related transaction costs. The production cost includes all directly attributable charges and the reasonably attributable portion of other costs incurred from production up to when the asset is available for use.
The costs incurred to expand, modernise or improve the structural elements of a tangible fixed asset, including changes made to make it more compliant with its intended use, are capitalised if they result in a significant and measurable increase in its production capacity, safety or useful life. If not, they are treated as ordinary maintenance costs and are expensed.
Depreciation is calculated systematically, using the rates held to reflect the asset’s estimated useful life. Such rates are halved in the first year in which the asset is available for use, in order to reflect the shorter period in which the asset has been used. Unused assets are also depreciated.
Reference should be made to Annex 5 for information about the depreciation rates applied.
Assets under construction are measured using the incurred cost method.
When, regardless of the depreciation already charged, an impairment loss is identified, the asset is written down accordingly. If the reasons therefor cease to exist in subsequent years, the write-down is reversed up to the original amount of the asset, net of the depreciation that would have been recognised in the absence of the write-down.
No write-downs or discretionary or voluntary revaluations were made.
GRANTS FOR INVESTMENT S
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Consolidated financial statements
Grants for investments are recognised under receivables with a balancing entry under deferred income in the year they are applied for. Upon collection and when the asset to which they refer becomes operative, they are recognised as a reduction in fixed assets and taken to the profit and loss account in proportion to the depreciation charged.
ASSETS UNDER FINANCE LEASE
Assets under finance leases are recognised in accordance with IAS 17.
FINANCIAL FIXED ASSET S
Equity investments, debt instruments and own shares which the Group intends and has the capacity to hold in the long term are recognised under financial fixed assets. Otherwise, they are recognised under current assets.
Transfers in or out of the two categories are recognised in accordance with the accounting policies applicable to the portfolio which the asset comes from.
Receivables are recognised under fixed or current assets depending on their intended use in relation to the Group’s ordinary activities that generate them. Accordingly, financial receivables are recognised under financial fixed assets, whereas trade receivables are recognised under current assets, regardless of their due date. They are measured as detailed in the relevant section.
EQUITY INVESTMENTS
Investments in associates and other companies are measured at cost.
They are initially recognised at acquisition or incorporation cost, including the related transaction costs. The latter comprise costs that are directly attributable to the transaction such as, for example, bank and financial brokerage fees, commissions, expenses and taxes.
The carrying amount of investments rises as a result of capital increases against consideration or waivers of repayment of receivables by the investor. Any bonus issue does not increase the investments’ carrying amount.
They are written down for impairment, when their carrying amount decreases to below their recoverable amount at the reporting date. The recoverable amount is calculated based on the economic benefits the Group expects to receive from the investment. They are written down to the extent of the carrying amount. If the investor has an obligation to cover an investee’s losses, it sets up a provision under liabilities to cover its share of the investee’s deficit.
Equity investments are written back up to their original cost if the reasons for the write-downs cease to exist.
INVENTOR Y
Inventory is initially recognised at purchase or production cost and subsequently measured at the lower of cost and estimated realisable value based on market trends.
Purchase cost is the actual cost paid upon purchase including related charges, less borrowing costs.
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Consolidated financial statements
The purchase cost of materials includes their price, transport costs, customs and other duties and other directly attributable costs. Returns, commercial discounts, rebates and bonuses are deducted from costs.
Production cost is the purchase cost plus industrial production costs. It includes all direct costs and the reasonably attributable portion of indirect costs incurred from production up to when the asset is available for use, based on normal production capacity. Production cost excludes general and administrative costs, distribution costs and research and development costs.
The Group has adopted the average cost model.
The estimated realisable value based on market trends of raw materials and supplies used in the production of finished products is the replacement cost, while that of goods, finished goods, semi- finished products and work in progress is the net realisable value. Obsolete and slow-moving items are also taken into account.
Inventory items whose estimated realisable value based on market trends is lower than their carrying amount are written down. Obsolete and slow-moving items are written down through provisions that reduce their carrying amounts.
Should the reasons for the write-down applied as an adjustment to the realisable value based on market trends cease to exist, the write-down is reversed in subsequent years and the closing carrying amount is increased, on a prudent basis, only if its recovery through the sale of the inventory is certain in the short term.
RECEIVABLES
Receivables are rights to receive liquid funds from customers or other third parties and are measured at their estimated realisable value.
Their nominal amount is adjusted for expected losses for irrecoverable amounts, invoicing adjustments, discounts, allowances and other reasons leading to a lower realisation.
When the Group identifies expected losses for irrecoverable amounts, it writes down the receivable’s nominal amount through the provision for bad debts, in order to account for the possibility that a debtor may partially default. The write-downs are estimated on an individual basis, by calculating the expected loss for each irregular position already existing or reasonably foreseeable at the reporting date, based on past trends and any other useful information about expected additional losses at the reporting date. The write-downs recognised in the provision for bad debts for receivables covered by guarantees consider the effects of enforcing the guarantees.
Invoicing adjustments are considered on an accruals and prudent basis, by providing for credit notes to be issued and adjusting receivables and related revenues accordingly.
CURRENT FINANCIAL ASSETS
Equity investments are initially recognised at acquisition cost, including the related transaction costs, and are subsequently measured individually at the lower of acquisition cost and estimated realisable value based on market trends. When the reasons for previous write-downs entirely or partially cease to exist due to a recovery in market value, the investments are written back up to their original cost.
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Consolidated financial statements
Debt instruments are initially recognised at acquisition cost, including the related transaction costs, and are subsequently measured at the lower of acquisition cost and estimated realisable value based on market trends.
Any resulting write-down is recognised individually for each type of instrument.
When the reasons for previous write-downs entirely or partially cease to exist due to a recovery in market value, the debt instruments are written back up to their original cost.
LIQUID FUNDS
These are the positive balances of bank and postal accounts, as well as the cash-in-hand and cash equivalents at year end.
Bank and postal account deposits are recognised at their estimated realisable value and cash and revenue stamps at their nominal amount , while foreign currency is measured at the closing rate.
PREPAYMENTS AND ACCRU ED INCOME AND ACCRUED EXPENSES AND DEFERRED INCOME
Accrued income and expense are respectively portions of income and expenses pertaining to the year but that will be collected/paid in subsequent years.
Prepayments and deferred income are respectively portions of expenses and income collected/paid during the year or in previous years but pertaining to one or more subsequent years.
Accordingly, these captions comprise only portions of expense and income relating to two or more years, whose amount varies on a time or economic accruals basis.
At each year end, the Group analyses the conditions underlying their initial recognition and makes any necessary adjustments. Specifically, the balance of accrued income varies not only over time, but also based on its expected realisable value, whereas that of prepayments is based on the existence of future economic benefits matching the deferred costs.
PROVISIONS FOR RISKS AND CHARGES
Provisions for risks and charges are recognised to cover specific liabilities that are certain or probable, but whose amount or due date is unknown at the reporting date. Specifically, provisions for risks relate to specific liabilities whose occurrence is probable and amount estimated, while provisions for charges relate to specific liabilities, whose occurrence is certain and amount or due date estimated, that arise from obligations already taken on at the reporting date but which will be paid in subsequent years.
Accruals to provisions for risks and charges are recognised in the profit and loss account section to which the transaction relates, privileging the classification of costs by nature.
The amount of the accruals to the provisions is based on the best estimate of costs, including the legal expenses, at each reporting date and is not discounted. If the measurement of the accruals gives a range of values, the accrual represents the best possible estimate between the upper and lower thresholds of the range.
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Consolidated financial statements
The provisions are subsequently used directly and solely for those costs and liabilities for which they were originally set up. The shortfall or surplus is recognised in the profit and loss account in line with the original accrual.
EMPLOYEES ’ LEAVING ENTITLEMENT
The Italian employees’ leaving entitlement (TFR) is the benefit to which employees are entitled in any case of termination of employment pursuant to article 2120 of the Italian Civil Code and considering the changes in legislation introduced by Law no. 296 of 27 December 2006. The overall accrued benefit considers any type of continuous remuneration and is net of any payments on account and partial advances paid by virtue of national or individual labour contracts or company agreements which are not required to be repaid. The related liability is the amount that the Group would have paid had all employees left at the reporting date. The amount due to employees who had already left the Group at the reporting date but that will be paid in the following year is reclassified to payables.
PAYABLES
Payables are recognised at their nominal amount.
Trade payables are initially recognised when the significant risks, charges and benefits relating to ownership have been transferred. Payables relating to services are recognised once the services have been provided.
Loans and borrowings and payables unrelated to the procurement of goods and services are recognised when the company has an obligation vis-a-vis the counterparty.
In the event of early settlement, the difference between the residual outstanding amount and the overall outlay to settle the obligation is recognised as financial income or charges.
MEMORANDUM AND CONTIN GENCY ACCOUNTS
The memorandum and contingency accounts show the Group’s guarantees and commitments, third party assets with the Group and group assets with third parties. They do not include items that have already been recognised in the balance sheet, profit and loss account and/or notes.
Guarantees are included in the memorandum and contingency accounts at their value or, if this has not been calculated, using the best estimate of the risk taken on given the situation at that time. Commitments are recognised at their nominal amount, while unquantifiable commitments are commented on in the notes to the financial statements. Third party assets with the Group are presented at their nominal amount, market value or the value obtained from the existing documentation, depending on the type of asset.
The amounts presented in the memorandum and contingency accounts are reviewed at each reporting date.
REVENUES AND COSTS
Revenues and income, costs and charges are stated net of returns, allowances, discounts and premiums, in compliance with the accruals and prudence concepts.
Revenues from the sale of goods or provision of services are recognised when the production process of goods or services has been completed and the exchange has already taken place i.e., upon the substantial rather than formal transfer of title.
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Consolidated financial statements
GRANTS RELATED TO INC OME AND FOR THE RENEWAL OF T HE NATIONAL LABOUR C ONTRACT
They are allocated to the profit and loss account of the year they pertain to and recognised in accordance with the relevant disbursement measures, if any, or estimated based on available information.
INCOME TAXES
Current income taxes for the year are calculated on the basis of a realistic forecast of the taxable profit under the relevant tax legislation and applying the enacted tax rates at the reporting date.
Through the parent, the Group has opted for some time to join the domestic tax consolidation scheme for IRES purposes whereby IRES is calculated on a taxable base that is the algebraic sum of the taxable base of each participating company.
The transactions, the responsibilities and the mutual obligations between the consolidating company and the consolidated company are governed by the tax consolidation agreement. Accordingly, when a positive tax base is transferred, the consolidated company recognises a payable to the consolidating company equal to the amount resulting from application of the IRES rate to the transferred profit. Conversely, when a tax loss is transferred, the consolidating company will recognise a payable to the consolidated company equal to the amount resulting from the application of the IRES rate to the transferred tax loss. The tax consolidation agreement lasts three years. It was renewed in June 2013 and is valid until the year ended 31 December 2015.
IRAP is calculated exclusively for the parent.
DEFERRED TAX ASSETS A ND LIABILITIES
In accordance with OIC 25, deferred tax assets and liabilities are usually recognised on the temporary differences between the carrying amounts of assets and liabilities and their tax base. The Group does not recognise deferred tax assets in these consolidated financial statements as the availability of future taxable profits is uncertain.
Workforce
The average workforce rose from 9,292 in 2014 to 9,563 in 2015. The increase on the previous year is due to the personnel hired in connection with the Expo and to partially recover turnover, ensuring an adequate level of personnel.
International Metro Service S.r.l. has no employees as it avails of its parent’s personnel.
Changes of the year may be analysed as follows:
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Consolidated financial statements
Incoming Outgoing Intragroup 2014 employees employees 2015 transfers ( + ) ( - ) ATM S.p.A. 2,778 209 (82) (6) 2,899 ATM Servizi S.p.A. 5,962 316 (142) 10 6,146 ATM Servizi Diversificati S.r.l. 31 22 (2) (3) 48 GeSAM S.r.l. 15 1 - - 16 International Metro Service S.r.l. - - - - - Metro Service A/S 276 47 (31) - 292 NET S.r.l. 263 9 (8) (1) 263 Rail Diagnostics S.p.A. 31 1 (1) - 31 Total 9,356 605 (266) - 9,695
At 31 December 2015, employees numbered 9,695 compared to 9,356 at 31 December 2014. The net increase is the sum of 605 incoming and 266 outgoing employees. Outgoing employee figures are in line with the past few years and mainly refer to employees who retire or resign voluntarily.
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Consolidated financial statements
Notes to the balance sheet captions
B) Fixed assets
Fixed assets, caption B, amount to €1,133,639 thousand, net of grants related to plant and write- downs.
I. Intangible fixed assets
Changes of the year are shown in the tables included in Annex 2.
The caption may be analysed as follows:
- software of €2,582 thousand related to operational management systems, classified under “concessions, licences, trademarks and similar rights”; - “goodwill arising on consolidation” related to the €472 thousand investment in Rail Diagnostics S.p.A., amortised at 20%; - “other” of €44,156 thousand related to works on assets owned by the Milan municipality; - “assets under development and payments on account” of €3,764 thousand to purchase software and for works on assets owned by the Milan municipality (tram points, branches and superstructure).
Amortisation charged to the profit and loss account is adjusted by the portion of grants received to finance the investments of the year (€2,631 thousand).
Grants related to plant may be broken down by financing body as follows:
- €1,354 thousand from the state; - €1,245 thousand from the Milan municipality; - €32 thousand from private bodies.
The main changes of the year refer to:
purchases of software; works on third party assets: . superstructure extraordinary maintenance and renewal of tram points and branches; . installation of air-cooling systems in the technological rooms of the metro; . installation of passenger information system ground facilities in tunnels; . installation of the RCC/METS/TETRA systems on the Urbino buses.
II. Tangible fixed assets
Changes of the year are shown in the tables included in Annex 2.
The caption may be analysed as follows:
- “land and buildings” of €239,090 thousand; - “plant and machinery” of €694,994 thousand; - “industrial and commercial equipment” of €21,862 thousand; - “other assets” of €7,876 thousand;
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Consolidated financial statements
- “assets under construction and payments on account” of €86,924 thousand.
The main changes are due to:
- the purchase of Leonardo trains for metro lines 1 and 2; - the purchase of 40 Solaris Urbino city buses; - the purchase of 5 intercity buses; - the overhaul of metro trains and the replacement of metro bogies; - the overhaul of tram vehicles and bogies; - the introduction of the bike sharing system; - the purchase of 300 parking metres.
Assets under lease were recognised in this caption for consolidation purposes in accordance with IAS 17. They refer to the buildings in via Monte Rosa and those in Binasco held by the parent ATM S.p.A. and the machinery of the subsidiary Rail Diagnostics S.p.A..
The carrying amount of tangible fixed assets is shown net of the write-downs recognised at 31 December 2015 on the residual value of the metro rolling stock which is expected to exit the production process earlier than originally forecast following the progressive replacement of trains as envisaged in the investment plan approved in 2015, and on the residual value of some vehicles and buildings which, due to technical reasons, can no longer be used in production. The economic impact of said write-downs totals €41,273 thousand.
Asset disposals generated gains of €649 thousand classified under caption A) line 5.
Losses of €25,541 thousand are mainly due to:
the sale of metro trains (€16,511 thousand); the remeasurement of some assets, which were reclassified to inventory (€8,989 thousand).
Following the above, the specific provisions accrued in the previous year were released proportionally, offsetting the related effect on the profit and loss account:
€16,511 thousand related to the sale of trains; €5,024 thousand related to the reclassification of assets.
The net impact on the profit and loss account is recognised in caption B) line 14.
Depreciation charged to the profit and loss account is adjusted by the portion of grants received to finance the investments of the year (€36,462 thousand).
Grants related to plant may be broken down by financing body as follows:
- €8,466 thousand from the state; - €17,100 thousand from the Lombardy region; - €731 thousand from the Metropolitan city; - €9,457 thousand from the Milan municipality; - €709 thousand from private bodies.
No fixed assets were revalued.
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Consolidated financial statements
The carrying amount of a non-operating building held for sale (historical cost at 31 December 2015: €4,101 thousand) was reclassified to current assets. The related accumulated depreciation amounts to €1,109 thousand.
Grants for investments
Grants for investments may be analysed as follows:
31.12.2014 Increase Decrease Utilisation 31.12.2015
Government grants
- Awaiting collection 5,854 7,201 ( 617 ) - 12,438
- Collected and allocated to 221,926 617 ( 10 ) ( 9,820 ) 212,713 assets
Regional grants
- Awaiting collection 21,172 4,762 ( 15,467 ) - 10,467
- Collected and allocated to 171,907 12,850 ( 139 ) ( 17,100 ) 167,518 assets
Metropolitan city grants
- Awaiting collection - - - - -
- Collected and allocated to 4,633 - - ( 731 ) 3,902 assets
Municipal grants
- Awaiting collection 11,015 6,614 ( 7,927 ) 9,702
- Collected and allocated to 178,110 7,907 ( 2,792 ) ( 10,702 ) 172,523 assets
Private body grants
- Awaiting collection - - - - -
- Collected and allocated to 1,692 - ( 177 ) ( 741 ) 774 assets
Total grants awaiting 38,041 18,577 ( 24,011) - 32,607 collection
Total grants collected and 578,268 21,374 ( 3,118) ( 39,094) 557,430 allocated to assets
Assets purchased with regional co-financing are subject to restrictions on sale pursuant to Regional council decree no. 14795/2003 as subsequently amended and supplemented. The time restrictions provided for under the above decree are as follows:
- city buses: 8 years; - intercity and suburban buses: 10 years; - trolley buses: 15 years; - metro trains and trams: 30 years; - technologies: 7 years; - infrastructures: 30 years.
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Consolidated financial statements
The restrictions on sale applicable to the roadway rolling stock co-financed by the Lombardy region under the 2009 allocation plan, pursuant to Laws nos. 296/2006 and 133/2008, cover the buses’ entire useful life set at 15 years as per the Regional council decree no. IX/4619 of 28 December 2012, unless otherwise agreed in the service agreements.
III. Financial fixed assets
“Financial fixed assets” amount to €31,919 thousand and may be analysed as follows:
31.12.2015 31.12.2014 Change
Equity investments
Associates 10,679 10,679 -
Other 2,433 53 2,380
Financial receivables
From associates 16,865 12,868 3,997
From others 1,942 6,102 (4,160)
Total 31,919 29,702 2,217
Equity investments
They amount to €13,112 thousand as follows:
31.12.2014 Change 31.12.2015
Subsidiaries and unconsolidated subsidiaries Mipark S.r.l. in liquidation - - - Associates
Brianza Trasporti S.c.a.r.l. 15 - 15 CO.MO. Fun&Bus S.c.a.r.l 4 - 4 Metro 5 S.p.A. 10,660 - 10,660 Movibus S.r.l. - - - Total associates 10,679 - 10,679 Other
Guidami S.r.l - - - Metrofil s.c.a.r.l. - - - Sp M4 S.c.p.A. 25 - 25 SPV Linea M4 S.p.A. 28 2,380 2,408 Total other 53 2,380 2,433
Total 10,732 2,380 13,112
The increase in “equity investments” is due to SPV Linea M4 S.p.A.’s share capital subscription of €2,380 thousand. Its carrying amount reflects the Group’s share of net equity compared to the investment’s carrying amount.
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Consolidated financial statements
During the year, the investments in SPV Linea M4 S.p.A. and SP M4 S.c.p.A. were reclassified from equity investments in associates to equity investments in other, also reclassifying the related balance at 31 December 2014.
Subsidiaries consolidated on a line-by-line basis
Share/ Net equity Net profit Investment Carrying Registered office quota Net equity attributable for the year % amount capital to the Group
Milan, via Monte Rosa ATM Servizi S.p.A. 4,343,593 21,475,806 10,898,608 100.00 21,475,806 1,100,000 89
Milan, Foro Buonaparte ATM Servizi Diversificati S.r.l. 100,000 481,591 13,129 100.00 481,591 100,000 61
Milan, Foro Buonaparte GeSAM S.r.l. 20,000 282,943 51,069 100.00 282,943 20,000 61
International Metro Service Milan, via Monte Rosa 700,000 8,044,372 2,978,910 51.00 4,102,630 357,000 S.r.l. 89
Milan, via Monte Rosa Nord Est Trasporti S.r.l. 925,180 2,581,783 1,594,374 100.00 2,581,783 715,631 89
Rail Diagnostics S.p.A. Milan, via Teodosio 125 5,500,000 10,217,923 15,741 97.27 9,938,974 13,000,000
Unconsolidated subsidiaries
Share/ Net equity Net loss for Investment Carrying Registered office quota Net equity attributable the year % amount capital to the Group Mipark S.r.l. Milan, via Monte Rosa 100,000 113,458 ( 3,006 ) 51.00 57,864 - (in liquidation) 89
Investees measured at cost
Share/ Net profit Net equity Investment Carrying Registered office quota Net equity (loss) for attributable % amount capital the year to the Group
Metro 5 S.p.A. Milan, Via Adige 19 53,300,000 56,693,833 ( 4,304,268 ) 20.00 11,338,767 10,660,000
SPV Linea M4 S.p.A. Milan, Piazza Castello 3 26,700,000 26,700,000 - 2.33 623,000 2,408,000
Movibus S.r.l. Milan, P.zza Castello 1 780,000 3,033,565 1,390,430 26.18 794,187 0-
Società di Progetto Consortile Milan, via dei Missaglia 360,000 360,000 - 7.00 25,200 25,200 per Azioni M4 (*) 97
Milan, Foro Buonaparte Guidami S.r.l. (*) 100,000 154,354 10,759 1.00 1,544 - 61
Brianza Trasporti S.c.a r.l. Monza, Via Borgazzi 35 50,000 50,000 - 30.00 15,000 15,000
Co.Mo. Fun&Bus S.c.a r.l. Como, Via Asiago 16/18 20,000 20,000 - 20.00 4,000 4,000
Metrofil S.c.a.r.l. (*) Rome, via Genova 23 10,000 9,999 - 24.08 2,408 -
(*) Figures at 31 December 2014
82
Consolidated financial statements
Financial receivables
31.12.2014 Repayments Increases 31.12.2015
From associates
Metro 5 S.p.A. 12,868 - 3,997 16,865 From others
SP M4 S.c.p.A. 4,270 (4,060) - 210 Coop. S.E.D. A.T.M./ S.C.C.A.T.I. 1,832 (100) - 1,732 Total 18,970 (4,160) 3,997 18,807
This caption includes the financial receivables due from:
- the associate Metro 5 S.p.A. for the subordinated shareholder loan of €16,865 thousand (principal €14,844 and interest €2,021 thousand); - the investee SP M4 S.c.p.A. for the shareholder loan of €210 thousand (only principal). Interest of €268 thousand accrued at 31 December 2015 was written off; - the SED-ATM and SCCATI building cooperatives, for the €1,732 thousand loans granted for social housing projects.
83
Consolidated financial statements
C) Current assets
I. Inventory
This caption at 31 December 2015 may be analysed as follows:
31.12.2015 31.12.2014 Change
Tickets 648 795 (147)
Ecopass tickets 22 24 (2)
Car park tickets 40 121 (81)
Tracks 3,344 4,793 (1,449)
Personal protective equipment 84 55 29
Consumables supply office 44 24 20
Heating oil 5 12 (7)
Diesel fuel 657 802 (145)
Automotive materials 6,269 5,031 1,238
Common materials 1,287 1,237 50
Electric/electronic materials 9,849 10,239 (390)
Trolley-bus materials 2,872 2,335 537
Materials for superstructure maintenance 2,057 2,258 (201)
Metro-tram materials 65,849 54,674 11,175
Consumables not for maintenance 5 4 1
Materials for building maintenance 84 68 16
Metro service materials 3,028 2,503 525
Tyres 490 454 36
Sub total 96,634 85,429 11,205
Advances to suppliers 1,428 4,467 (3,039)
Buildings held for sale 2,992 - 2,992
Provision for obsolete inventory (30,930) (28,286) (2,644)
Total inventory 70,124 61,610 8,514
Inventory, gross of “advances to suppliers” and the “provision for obsolete inventory”, rose by €11,205 thousand on the previous year end. The increase is mainly due to the reclassification of recognised assets, as described in the note to “tangible fixed assets”.
Following the sale of obsolete goods, the related provision was used for €831 thousand. The provision was brought into line with the new inventory balance by accruing €3,475 thousand, reflecting the plan for the future disposal of obsolete materials and goods which show a low turnover rate.
31.12.2014 Increases Decreases 31.12.2015
Provision for obsolete inventory 28,286 3,475 (831) 30,930
Total 28,286 3,475 (831) 30,930
84
Consolidated financial statements
“Buildings held for sale” of €2,992 comprise the carrying amount of a non-operating building whose sale was completed at the end of January 2016. The decrease in advances to suppliers is due to the pattern of the delivery plan of wheelsets and bogies for metro trains that began in 2012.
II. Receivables
At 31 December 2015, they amount to €400,877 thousand and may be analysed as follows:
31.12.2015 31.12.2014 Change
Trade receivables 43,972 31,458 12,514 From associates 4,543 16,378 (11,835) From parents 207,748 165,025 42,723 Tax receivables 74,313 51,452 22,861 Deferred tax assets 1,086 1,135 (49) From others 69,215 69,560 (345) Total 400,877 335,008 65,869
Receivables are mainly due from Italian and EU counterparties and are due within one year.
At 31 December 2015, “trade receivables” amount to €43,972 thousand, net of the specific provision for bad debts of €13,690 thousand at the reporting date. This provision was accrued to cover, specifically, doubtful receivables and receivables in respect of which legal actions have been taken.
They may be analysed as follows:
No. of customers Balance
2 ≥ 20,000,000
2 ≥ 5,000,000 < 20,000,000
7 ≥ 1,000,000 < 5,000,000
19 ≥ 500,000 < 1,000,000
84 ≥ 100,000 < 500,000
8,004 < 100,000
The first ten customers account for 67.42% of total “trade receivables”.
The provision for bad debts changed as follows:
Change
Balance at 31.12.2014 14,350 Reclassification 268 Change in scope (56) Release (851) Utilisation (271) Accrual 250 Balance at 31.12.2015 13,690
85
Consolidated financial statements
Receivables “from associates” refer to services provided to associates as per the agreements in place. The related provision for bad debts which, at 31 December 2014, amounted to €3,189 thousand, decreased by €759 thousand in 2015, as shown below:
31.12.2015 31.12.2014 Change
Brianza Trasporti S.c.a.r.l. 357 1,149 (792)
Co.Mo. Fun&Bus S.c.a.r.l. 283 205 78
Metro 5 Lilla S.r.l. - 7,249 (7,249)
Metro 5 S.p.A. 4,020 7,914 (3,894)
Movibus S.r.l. 2,313 2,884 (571)
SP M4 S.c.p.A. - 166 (166)
Total 6,973 19,567 (12,594)
Provision for bad debts (2,430) (3,189) 759
Total 4,543 16,378 (12,572)
ATM Group companies recognised receivables from the Milan municipality of €207,748 thousand. They may be analysed as follows:
31.12.2015 31.12.2014 Change
Trade receivables 198,046 154,030 44,016
Grants related to plant from the Municipality 9,702 10,995 (1,293)
Total 207,748 165,025 42,723
The €198,046 thousand balance includes the invoices issued and to be issued as per the relevant service agreement. Invoices to be issued include the related retentions, equal to 5% of the annual consideration, which is invoiced on a deferred basis. This caption also includes the receivables for incremental transport services and accessory and complementary projects.
Receivables for “grants related to plant” of €9,702 thousand refer to grants not yet reimbursed on investments made.
86
Consolidated financial statements
“Tax receivables” of €74,313 thousand at 31 December 2015 (€48,390 thousand of which due after one year) may be analysed as follows:
31.12.2015 31.12.2014 Change
Due within one year 25,923 9,271 16,652
VAT claimed for reimbursement 6,000 747 5,253
Group VAT 13,537 4,889 8,648
Withholding taxes to be used for 1,958 1,237 721 offsetting Excise duty on diesel fuel 1,682 1,636 46
Payments on account (IRAP) 2,746 2,746 -
IRAP from IRES Leg. decree no. 201/2011 762 (762) - Due after one year 48,390 42,181 6,209
VAT claimed for reimbursement 37,798 30,798 7,000
Consolidated withholdings 9,830 11,383 (1,553)
IRAP from IRES Leg. decree no. 201/2011 762 762 - Total 74,313 51,452 22,861
The main items making up the caption balance are:
- the VAT claimed for reimbursement totalling €43,798 thousand, comprised of a portion due within one year (€6,000 thousand) related to the reimbursement claimed for the third quarter of 2015 and a portion due after one year (€37,798 thousand) which may be analysed as follows:
€30,798 thousand as the receivable originated before joining the Group’s VAT scheme, which the tax authorities currently suspended as a guarantee for the 2004-2005 IRAP disputes still in progress; €7,000 thousand as the receivable originated from the 2016 VAT return;
- €13,537 thousand as the Group’s VAT which rose significantly on the previous year, considering the quarterly reimbursements received or under disbursement, following the introduction of the new split payment tax legislation;
- €9,830 thousand as the receivable for the withholding taxes on the group companies which joined the tax consolidation scheme.
No deferred tax assets were recognised for IRES purposes on deductible temporary differences, specifically on prior year losses as, pursuant to OIC 25, there is no certainty that positive taxable income will be generated in a reasonably short time.
The IRES tax losses incurred prior to opting for the tax consolidation scheme in 2007 amount to €864,382 thousand, fully deductible, and €173,763 thousand deductible to a limited extent. The related unrecognised deferred tax assets would amount to approximately €249 million, estimated using the 24% IRES rate, based on the modification introduced by the 2016 stability law.
87
Consolidated financial statements
Receivables “from others” of €69,215 thousand may be analysed as follows:
31.12.2015 31.12.2014 Change
From public bodies 67,850 67,468 382
From employees 215 230 (15)
Other 1,150 1,862 (712)
Total 69,215 69,560 (345)
Receivables “from public bodies” include grants related to plant from:
- the state (€47,344 thousand); - the region (€10,467 thousand). These receivables originate from requests related to subsidised investments.
The €10,039 thousand receivable refers to the grants financing the reimbursement of the national labour contract renewal pursuant to Laws nos. 47/2004, 58/2005 and 296/2006. Collection times worsened on 31 December 2014 due to the new resource management approach adopted by the bodies in accordance with article 67.13 quater of regional law no. 6/2012.
Other receivables refer, in particular, to advances on behalf of INAIL (Italy’s institute for insurance against accidents at work) to employees who suffered an accident, travel passes sold to family members, deposits to sundry bodies and advances for insurance premiums. They are recognised net of the specific provision for bad debts of €202 thousand.
III. Current financial assets
“Current financial assets” include government securities, other bonds and units of UCITS denominated in Euro and, to a limited extent, in currencies other than the Euro (USD – TRY – BRL – AUD), for a total of €217,674 thousand. They may be analysed as follows:
31.12.2015 31.12.2014 Change
Government securities 13,375 48,116 (34,741)
Other bonds 72,477 70,414 2,063
UCITS 95,822 103,096 (7,274)
Overnight and time deposits 36,000 5,000 31,000
Total 217,674 226,626 (8,952)
Under the Italian reporting standards, items were measured at the lower of the price as per the financial statements at 31 December 2014, or the purchase price for transactions carried out in 2015, and the market value at 31 December 2015. Market value is equal to the average prices recorded in the last month of the year. Securities whose average market price is higher than the reference one were written back to their purchase price. Write-backs and write-downs arising from the adjustment of securities are taken to the profit and loss account caption D) “Adjustments to financial assets”.
The net write-down for 2015 amounts to €3,316 thousand.
88
Consolidated financial statements
Furthermore, €36,000 thousand was recognised against term deposits which can be monetised with a notice of at least 48 hours.
IV. Liquid funds
31.12.2015 31.12.2014 Change
Bank accounts 161,432 129,816 31,616
Postal accounts 1,886 6,474 (4,588)
Cash-in-hand and cash equivalents 1,023 880 143
Total 164,341 137,170 27,171
This caption includes liquid funds with banks and Poste Italiane at the reporting date, petty cash and cash held by the ticket counter staff and change dispensers of ticketing machines.
All accounts are in Euro, except for one current account expressed in Danish krone held by the subsidiary Metro Service, equal to €3,096 thousand.
D) Prepayments and accrued income
This caption may be analysed as follows:
31.12.2015 31.12.2014 Variazione
Accrued income 657 1,040 (383)
Prepayments 2,184 2,164 20
Total 2,841 3,204 (363)
There are no prepayments or accrued income due after more than five years.
89
Consolidated financial statements
A) Net equity attributable to the Group
31.12.2015 31.12.2014 Change
I - Share capital 700,000 700,000 -
IV - Legal reserve 140,000 140,000 -
VII - Other reserves, shown separately:
- contribution reserve 19,690 19,690 -
- extraordinary reserve 5,764 5,764 -
- translation reserve (2) 10 (12)
VIII - Retained earnings 34,427 31,578 2,849
IX - Net profit for the year 23,779 3,068 20,711
Net equity attributable to the Group 923,658 900,110 23,548
Share capital and reserves attributable to 3,562 4,001 (439) minority interests Net profit for the year attributable to minority 2,034 2,566 (532) interests Net equity attributable to minority interests 5,596 6,567 (971)
Total net equity 929,254 906,677 22,577
Annexes 3 and 4 include a statement of changes in net equity and a reconciliation between the net profit for the year and net equity of the parent and the net profit for the year and net equity as per the consolidated financial statements.
Share capital amounts to €700,000 thousand and consists of 70,000,000 shares of a nominal amount of €10 each. It is fully subscribed and paid up and did not change during the year. The Milan municipality is the sole shareholder.
The contribution reserve has been recognised since 2002 as part of the final calculation of share capital when the company was transformed into a company limited by shares, as per the appraisal issued pursuant to article 2343 of the Italian Civil Code.
90
Consolidated financial statements
B) Provisions for risks and charges
The tax provision includes €817 thousand related to the deferred taxes arising from consolidation transactions following the application of IAS 17 to finance leases.
“Other provisions” may be analysed as follows:
31.12.2015 31.12.2014 Change
Provisions for risks:
To cover future losses 1,070 1,278 (208)
For damages, towing away and impounding 233 214 19
IRAP 37,003 36,237 766
Claims settlement 14,978 14,191 787
Early retirement, Law no. 11/96 119 119 -
Sundry risks 57,787 31,841 25,946
Labour disputes 29,464 24,582 4,882
Provisions for charges:
Indemnity for war veterans 2,172 358 1,814
Extraordinary maintenance 18,302 17,976 326
Future expenses 91 - 91
Total 161,219 126,796 34,423
Changes in the provisions for risks and charges are as follows:
31.12.2014 Increases Utilisation Release 31.12.2015
Provisions for risks:
To cover future losses 1,278 - (208) - 1,070
For damages, towing away 214 19 (1) - 233 and impounding IRAP 36,237 766 37,003
Claims settlement 14,191 2,742 (1,947) (8) 14,978
Early retirement, Law no. 119 119 11/96 Sundry risks 31,841 34,724 (511) (8,268) 57,787
Labour disputes 24,582 5,324 (152) - 29,464
Provisions for charges:
Indemnity for war veterans 358 2,000 (186) - 2,172
Extraordinary maintenance 17,976 397 (60) - 18,302
Future expenses - 91 - - 91
Total 126,796 46,063 (3,065) (8,276) 161,219
The main items making up the caption balance are:
- the provision “to cover future losses” of €1,070 thousand, accrued upon the contribution of the TPM business unit;
91
Consolidated financial statements
- the provision “ for damages, towing away and impounding” of €233 thousand, equal to estimated damages to be paid in the next few years for the damage caused by towing away and on-street parking services, to the extent of the risk bracket not covered by insurance policies; - the provision for “IRAP” of €37,003 thousand, already accrued in prior years in respect of a dispute with the tax authorities about the failure to levy IRAP on employees’ contributions. The provision was adjusted to reflect the default interest that the parent ATM S.p.A. may be asked to pay if its application to the tax is not successful; - the provision for “claims settlement” of €14,978 thousand reflects the estimated compensation to be paid in the next few years for damage/accidents related to the circulation of regular service vehicles, to the extent not covered by the insurance policies agreed with the various insurance companies. Doubtful claims were estimated based on an analysis of the individual dossiers outstanding at 31 December 2015; - the provision for “sundry risks” of €57,787 thousand related to the contingent liabilities vis-à-vis suppliers, customers, third and related parties arising from the Group’s ordinary operations. The balance is mainly comprised of the updating of the potential risks on the ongoing tax disputes and other ongoing or potential disputes, related to the parent ATM S.p.A. and the subsidiary ATM Servizi S.p.A. and, residually, the compensation imposed by the Council of State in its judgement on the awarding of the tender for the purchase of buses; - the provision for “labour disputes” of €29,464 thousand comprises the amounts accrued over the years in relation to labour disputes, either potential or underway. During the year, the provision was used to offset the costs incurred in relation to the risks that occurred and was increased with an accrual; - the provision for “indemnity for war veterans” of €2,172 thousand was recognised by the parent ATM S.p.A. and refers to pensions for the two-year war. The increase reflects the best estimate of the expected future disbursements; - the provision for “extraordinary maintenance” of €18,302 thousand, which may be analysed as follows: €13,459 thousand related to prior year accruals for the planned maintenance to be carried out in future years on metro trains and the plan to bring the Group’s structures into line with ruling safety regulations. The provision is unchanged since these activities will begin next year; €4,843 thousand related to the expected costs to be incurred by Metro Service A/S for the assets received upon the launch of the Copenhagen metro to be returned as contractually agreed. This provision was used for €71 thousand to cover the charges of the seven-year contract. It was increased by €397 thousand.
92
Consolidated financial statements
C) Employees’ leaving entitlement
This caption is the actual amount due by the Group at 31 December 2015 to its employees in force on said date. It was calculated for all employees in accordance with current employment regulations and contracts.
Changes of the year are as follows:
Change
Opening balance 157,210
Accruals of the year 24,389 Substitute tax as per Leg. decree no. 47/2000 (382) Acquisition or transfer of employees’ leaving 65 entitlement from/to third party companies Other changes 43 Utilisation for departures and advances (9,388) INPS treasury fund (12,490) Supplementary pension funds (8,867)
Closing balance 150,580
The accruals of the year were recognised in accordance with article 2120 of the Italian Civil Code. Specifically, an amount equal to 1/13.5 of remuneration and the revaluation of principal to the extent required by the law was accrued.
The liability is shown net of the tax advance equal to 17% of the annual revaluation pursuant to Law no. 47/2000.
D) Payables
Payables, net of intragroup balances, are measured at their nominal amount and mainly relate to Italian and EU counterparties. They may be analysed as follows:
31.12.2015 31.12.2014 Change
Bank loans and borrowings 150,809 102,042 48,767
Trade payables 262,773 229,497 33,276
Payables to associates 675 877 (202)
Payables to parents 137,061 143,357 (6,296)
Tax payables 18,891 23,750 (4,859)
Social security charges payable 43,759 44,963 (1,204)
Other payables 97,263 98,511 (1,248)
Total 711,231 642,997 68,234
93
Consolidated financial statements
Payables may be broken down by due date as follows:
Due within Due after Due after Total one year one year five years Bank loans and borrowings 6,821 45,128 98,860 150,809 Trade payables 262,773 - - 262,773 Payables to associates 675 - - 675 Payables to parents 137,061 - - 137,061 Tax payables 18,891 - - 18,891 Social security charges payable 43,759 - - 43,759 Other payables 97,263 - - 97,263 Total 567,243 45,128 98,860 711,231
“Bank loans and borrowings” of €150,809 thousand can be analysed as follows:
- €110,000 thousand related to the first three instalments of the 25-year €220,000 thousand loan agreed with the EIB to finance the new metro trains of lines 1 and 2. In 2015, €55,367 thousand was disbursed. Borrowing costs total €1,319 thousand. Under the loan agreement, the Group is required to comply with financial covenants which it fully met again in 2015; - €40,142 thousand related to the bank loan agreed with Cassa Depositi e Prestiti to purchase the metro trains for line 1, for the Accessing Fiera Milano project. The loan, which will expire in 2021, is entirely secured by the state. Consequently, a receivable of the same amount was recognised under “receivables from others”; - €667 thousand related to the loan granted by BPM to the subsidiary NET S.r.l., which will expire in 2016, to purchase the site in via Pompei, Monza.
“Trade payables” of €262,773 thousand include outstanding invoices and invoices to be received related to the purchase of materials, services and capitalised assets. They are mainly due to Italian and EU counterparties and may be analysed as follows:
No. of suppliers Balance
3 ≥ 20,000,000
5 ≥ 5,000,000 < 20,000,000
37 ≥ 1,000,000 < 5,000,000
29 ≥ 500,000 < 1,000,000
147 ≥ 100,000 < 500,000
1966 < 100,000
The top 10 suppliers account for 59.99% of the total balance.
94
Consolidated financial statements
“Payables to associates” of €675 thousand at 31 December 2015 may be analysed as follows:
31.12.2015 31.12.2014 Change
Brianza Trasporti S.c.a.r.l. - 226 (226)
Co.Mo. Fun&Bus S.c.a.r.l. 35 24 11
Metro 5 S.p.A. 85 89 (4)
Movibus S.r.l. 555 538 17
Total 675 877 (202)
At 31 December 2015, “payables to parents” amount to €137,061 thousand and are entirely due to the Milan municipality. They may be analysed as follows:
- €1,644 thousand related to the amounts collected from Ecopass management; - €81,842 thousand related to proceeds from travel tickets, fees from management of on-street parking and “Area C” proceeds. The decrease on 2014 is due to the transfer of the monthly proceeds from the sale of travel tickets to the Milan municipality in January 2016; - €53,575 thousand related to reserves whose distribution was approved by the parent ATM S.p.A. in prior years.
“Tax payables” of €18,891 thousand mainly refer to:
- the IRES tax; - the tax payable by Metro Service A/S; - local taxes; - the deferred VAT liability pursuant to article 6.5 of Presidential decree no. 633/1972; - taxes withheld as withholding agent to be transferred to the tax authorities.
“Social security charges payable” of €43,759 thousand relate to the amounts due to INPS, Previndai, INAIL and pension funds of the relevant sector.
“Other payables” of €97,263 thousand may be analysed as follows:
- €63,804 thousand due to employees; - €22,793 thousand related to untaken holidays and overtime which may be used as paid leave, still to be used; - €10,666 thousand related to sundry payables, including the amount due to Fondazione ATM in relation to the amounts withheld on employees’ remuneration, as the withholding agent, for contributions and payments for the services provided.
95
Consolidated financial statements
E) Accrued expenses and deferred income
They may be analysed as follows:
31.12.2015 31.12.2014 Change
Grants related to plant 32,607 38,042 (5,435)
Accrued expenses and deferred income 3,788 1,855 1,933
Total 36,395 39,897 (3,502)
Grants are recognised in the year they are applied for as a receivable, with a balancing entry under deferred income. Once the asset to which they relate becomes operative, grants are recognised as a decrease in fixed assets to the extent of the collected amount and taken to the profit and loss account, proportionally decreasing the related depreciation.
This caption comprises:
- €12,438 thousand related to government grants to finance the purchase of metro trains for lines 1 and 2 and works to increase safety in the metro; - €10,467 thousand related to regional grants to finance the purchase of metro trains for line 2, new hybrid and conventional buses; - €9,702 thousand related to municipal grants for waterproofing works at metro stations and to implement stages two and three of the bike sharing scheme.
Accrued expenses mainly refer to insurance premiums, while deferred income refers to membership fees and receivables from building cooperatives.
96
Consolidated financial statements
Memorandum and contingency accounts
At 31 December 2015, they amount to €5,181,329 thousand and may be analysed as follows:
31.12.2015 31.12.2014 Change
1) Third party assets 4,843,223 4,503,286 339,937
2) Guarantees, of which: 338,106 323,992 14,114
- To third parties 74,614 64,027 10,587
- From third parties 225,612 231,720 (6,108)
- To associates 37,880 28,245 9,635
Total 5,181,329 4,827,278 354,051
€4,843,223 thousand related to “third party assets” mainly comprises:
€4,715,272 thousand, being the value of the assets of the Milan municipality to operate the local public transport service and €119,008, being the value of on-street parking and car parks (as per the Service agreements); €6,641 thousand related to the materials owned by Metro 5 S.p.A. and received for maintenance work under warranty; €2,092 thousand, being the value of the assets used to operate the people mover service that links the Cascina Gobba station on line 2 of the metro to San Raffaele hospital.
Guarantees “to third parties” of €74,614 thousand refer to sureties and commitments given in favour in third parties.
Guarantees “from third parties” of €225,612 thousand refer to sureties or guarantee deposits issued by third parties in favour of the Group. They amounted to €231,720 thousand at 31 December 2015.
Guarantees “to associates” of €37,880 thousand may be analysed as follows:
€11,283 thousand related to the pledge on 106,600 shares of Metro 5 S.p.A. and 6,230 shares of SPV Linea M4 S.p.A. in favour of a bank syndicate guaranteeing the medium/long-term loan granted to associates; €26,597 thousand related to co-obligations and guarantees given in favour of the associate Metro 5 S.p.A. and SPV Linea M4 S.p.A..
97
Consolidated financial statements
Notes to profit and loss account captions
Reference should be made to the directors’ report for information about the general trend of costs and revenues pursuant to article 2428.1 of the Italian Civil Code.
Based on the breakdown of positive and negative income components in the profit and loss account and the previous notes to the balance sheet, the following notes are limited to the main captions detailed below.
A) Production revenues
2015 2014 Change
Turnover from sales and services 833,844 769,840 64,004
Internal work capitalised 39,360 46,842 (7,482)
Other revenues and income 183,178 145,199 37,979
Total 1,056,382 961,881 94,501
“Production revenues” include revenues from the Group’s core business and from management of ancillary and accessory activities.
“Turnover from sales and services” of €803,944 thousand refers to revenues from the local public transport service. It may be analysed as follows:
2015 2014 Δ change
Revenues from the local public transport service, of which: Fees as per the service agreement with the Milan 704,431 655,294 49,137 municipality Fees as per the service agreement - Copenhagen 42,649 41,445 1,204
Fees as per the service agreement - intercity area 19,919 20,079 (160)
Fees as per the single agreement to manage line 5 19,014 11,143 7,871
Proceeds from tariffs - intercity area 11,599 11,346 253
Special/dedicated transport services 6,332 3,456 2,876
Total 803,944 742,763 61,181
In addition, €28,944 thousand refers to revenues from management of on-street parking and car parks and the towing away service.
In Italy, ATM’s revenues from transport services are earned in the municipality and Metropolitan city of Milan, the Bergamo, Monza Brianza and Lecco provinces and in Como. Those from the management of on-street parking and car parks, the towing away service and the car sharing scheme are earned in the Milan municipality as well as other revenues from the restaurant tram and catering services and the Service agreement governing management of the S5 railway link.
Revenues from abroad refer to the management fee earned by the subsidiary Metro Service A/S for operating the Copenhagen metro service.
“Internal work capitalised”, of €39,360 thousand, refers to capitalisable costs for internal work (personnel and materials) incurred to improve and/or enhance fixed assets.
98
Consolidated financial statements
“Other revenues and income” may be analysed as follows:
2015 2014 Change
National labour contract grants 50,299 50,299 -
Sundry grants 1,952 1,894 58
Other 130,927 93,006 37,921
Total 183,178 145,199 37,979
“National labour contract grants”, of €50,299 thousand, refer to the grants of the year disbursed under Law no. 47 of 27 February 2004 to cover the charges from the renewal of the collective bargaining agreement for the two year-period 2002/2003, under Law no. 58 of 22 April 2005 to cover the charges from the renewal of the collective bargaining agreement for the two year-period 2004/2005 and under Law no. 296 of 27 December 2006 (2007 finance act) to cover the charges from the renewal of the collective bargaining agreement for the two year-period 2006/2007.
“Sundry grants”, of €1,952 thousand, refer to the grants disbursed for the Group’s training plans, the installation of photovoltaic systems at the San Donato and Precotto warehouses and for European projects.
“Other” includes revenues from non-core businesses and mainly include:
extraordinary maintenance work on infrastructure owned by the Milan municipality and the implementation and management of limited traffic area payment systems and the system monitoring traffic and the area (€39,015 thousand);
advertising or promotional revenues (€18,664 thousand);
compensation for damage and reimbursement of the costs incurred on behalf of third parties (€14,371 thousand);
passenger fines (€8,479 thousand);
release of provisions for risks (€8,276 thousand);
revenue from the lease of metro premises (€6,571 thousand);
extraordinary maintenance work for metro line 5 (€5,802 thousand);
penalties invoiced to suppliers for contractual breaches (€3,865 thousand);
gains from the sale of materials or fixed assets (€1,354 thousand).
99
Consolidated financial statements
B) Production cost
“Production cost” includes costs related to operations. It may be analysed as follows:
2015 2014 Change
Raw materials, consumables, supplies and 89,841 101,192 (11,351) goods Services 234,697 227,840 6,857
Use of third party assets 5,832 7,138 (1,306)
Personnel expenses 510,778 479,491 31,287
Amortisation, depreciation and write-downs 142,717 111,649 31,068
Change in raw materials, consumables, supplies (8,568) (1,369) (7,199) and goods Provision for risks 43,575 13,174 30,401
Other provisions 2,488 4,697 (2,209)
Other operating costs 14,293 9,587 4,706
Total 1,035,653 953,399 82,254
“Raw materials, consumables, supplies and goods” of €89,841 thousand refer to the purchase of materials used in maintenance and repair activities, in the construction of vehicles and plant, diesel fuel and travel and on-street parking documents.
The €11,351 thousand decrease on the previous year is mainly due to the reduction in the purchase of metro-tram materials, tracks and diesel fuel.
“Services” of €234,697 thousand may be analysed as follows:
2015 2014 Change
Insurance 9,652 9,511 141
Electric traction power 47,933 48,122 (189)
Maintenance, cleaning and security 95,203 90,488 4,715
Seconded personnel - 14 (14)
Professional services 3,863 3,975 (112)
Production and distribution of travel tickets 12,807 12,610 197
Services for employees 12,370 9,480 2,890
Customer services, advertising and marketing 6,552 5,648 904
Subcontracting 24,529 25,109 (580)
Sundry and administrative services 1,340 1,483 (143)
Utilities 20,448 21,400 (952)
Total 234,697 227,840 6,857
The most significant changes relate to:
maintenance, cleaning and security, up by €4,715 thousand on the previous year, mainly as a result of the increase in maintenance work for information systems, superstructure and roadway rolling stock; services for employees, up by €2,890 thousand. The increase is due to the distribution of new uniforms to employees;
100
Consolidated financial statements
utilities down by €952 thousand, mainly in respect of gas and district heating.
“Use of third party assets” may be analysed as follows:
2015 2014 Change
Rentals 3,373 3,408 (35)
- Plant and equipment 1,236 1,095 141
- Vehicles 2,137 2,313 (176)
Leases and instalments 2,459 3,730 (1,271)
- Leases 447 366 81
- Instalments 2,012 3,364 (1,352)
Total 5,832 7,138 (1,306)
“Personnel expenses” of €510,778 thousand include remuneration and social security contribution costs, accruals required by the law and bargaining agreements as well as costs related to untaken accrued holidays and paid leave:
2015 2014 Change
Wages and salaries 371,737 349,375 22,362
Social security contributions 105,258 97,251 8,007
Employees’ leaving entitlement 24,388 23,619 769
Pension and similar costs 3,980 3,800 180
Other costs 5,415 5,446 (31)
Total 510,778 479,491 31,287
101
Consolidated financial statements
“Amortisation, depreciation and write-downs” amount to €142,717 thousand, adjusted to reflect the portion of the year (€39,097 thousand) related to the grants for investments. Write-downs of fixed assets amount to €41,273 thousand and refer to the residual value of the metro rolling stock which is expected to exit the production process following the progressive replacement of trains as envisaged in the investment plan, and the residual value of some vehicles and buildings which, due to technical reasons, can no longer be used in production.
2015 2014 Change
Amortisation of intangible fixed assets 23,265 22,912 353
- Concessions, licences, trademarks and similar 1,324 1,432 (108) rights - Goodwill 472 472 -
- Other 24,101 23,672 429
- Grants related to plant - current portion (2,632) (2,664) 32
Depreciation of tangible fixed assets 77,544 76,609 935
- Land and buildings 5,790 5,782 8
- Plant and machinery 101,148 101,308 (160)
- Industrial and commercial equipment 3,614 3,371 243
- Other assets 3,457 2,941 516
- Grants related to plant - current portion (36,465) (36,793) 328
Other write-downs of fixed assets 41,273 10,093 31,180
Total 142,082 109,614 32,468
“Write-downs of current receivables and liquid funds” amount to €635 thousand. As mentioned earlier, the accrual refers to doubtful receivables.
The “change in raw materials, consumables, supplies and goods” amounts to €8,568 thousand.
“Provisions for risks” of €43,575 thousand mainly refer to the amounts accrued to the claim settlement provision in relation to the expenses to be paid in future years following the events of the year, the updating of the potential risks arising from ongoing tax disputes and other ongoing or potential disputes in which the parent ATM S.p.A. and the subsidiary ATM Servizi S.p.A. are involved, as well as the risks arising from disputes with personnel.
“Other provisions” of €2,488 thousand include the expected costs for the assets received upon the launch of the Copenhagen metro to be returned as contractually agreed.
102
Consolidated financial statements
“Other operating costs” of €14,293 thousand mainly refer to sundry and local taxes, losses on receivables, prior year expenses related to the Group’s ordinary business and sundry costs which cannot be classified as above, including associations, publications and book stamping. They may be analysed as follows:
2015 2014 Change
Prior year and inexistent costs: 7,916 3,683 4,233
- Losses and inexistent costs 4,006 1,195 2,811
- Prior year costs 3,910 2,488 1,422
Penalties and fines 155 104 51
Sundry taxes: 5,038 4,975 63
- Municipal taxes 4,167 4,181 (14)
- Sundry taxes 871 794 77
Other costs 1,184 825 359
Total 14,293 9,587 4,706
C) Financial income and charges
“Net financial income” amounts to €10,158 thousand in 2015 and may be analysed as follows:
Financial income 2015 2014 Change
From financial receivables classified as fixed 1,028 862 166 assets From securities classified as fixed assets which - 183 (183) are not equity investments From securities classified as current assets which 10,363 10,357 6 are not equity investments Other income 873 899 (26)
Total 12,264 12,301 (37)
Financial charges 2015 2014 Change
Bank interest expense 1,369 578 791
Losses on securities 684 301 383
Total 2,053 879 1,174
Net exchange rate gains (losses) (53) 69 (122)
Net financial income 10,158 11,491 (1,333)
Financial income “from financial receivables classified as fixed assets” amounts to €1,028 thousand and refers to interest accrued on the loans granted to Metro 5 S.p.A. and SP M4 S.c.p.A. and the implicit interest accrued on the loans to the building cooperatives SED-ATM and SCCATI.
Income from “securities classified as current assets which are not equity investments” refers to interest on government securities and bonds (€2,269 thousand) and to gains on the sale of securities (€8,094 thousand).
103
Consolidated financial statements
“Other income” of €873 thousand refers to interest on bank deposits, term and other deposits, including, inter alia, default interest and discounts to suppliers.
Bank interest expense of €1,369 thousand refers to interest on the bank loans and borrowings recognised under payables.
Losses on securities of €684 thousand are due to the difference between the sale price of securities and their carrying amount at 31 December 2014 or, for those purchased during the year, at the acquisition date.
D) Adjustments to financial assets
This caption comprises:
- write-downs of securities/UCITS units recognised under current assets (€3,316 thousand), net of write-backs of €103 thousand.
In accordance with applicable reporting standards, items were measured at the lower of the price as per the financial statements at 31 December 2014, or the purchase price for transactions carried out in 2015, and market value. Market value is equal to the average prices recorded in the last month of the year. Securities whose average market price is greater than the reference one were written back to their purchase price.
Securities/UCITS units expressed in a currency other than the Euro were translated at the closing rate.
E) Extraordinary income and expense
“Extraordinary income” amounts to €7,255 thousand and refers to the repayment of sickness benefits for 2011 (€4,544 thousand), the repayment from the Milan municipality of work on the metro infrastructure to restore operations after the overflowing of the Seveso river in 2010 (€1,325 thousand) and the sale of 99% of Guidami S.r.l. (€1,386 thousand).
Income taxes
2015 2014 Change
Current taxes:
- IRES (15,527) (464) (15,063)
- IRAP (4,184) (16,853) 12,669
- Foreign taxes (1,400) (1,387) (13)
Total current taxes 21,111 18,704 2,407
Change in deferred tax assets (22) (39) 17
Change in deferred tax liabilities on the 136 143 (7) depreciation of leased assets Benefit from participation in the tax consolidation 11,984 299 11,685 scheme
Total income taxes 9,013 18,301 (9,288)
104
Consolidated financial statements
The Group companies opted to join the tax consolidation scheme. Consequently, the Group’s taxable profit is the algebraic sum of the taxable profit of each participating company, less the tax losses carried forward, up to 80%.
“Benefit from participation in the tax consolidation scheme” refers to the transfer of the IRES tax of each participating company to the consolidating company, up to 80%.
Other information
As required by the law, the fees paid to directors and statutory auditors are given below.
2015 2014 Change
Fees to directors 162 192 (30)
Fees to statutory auditors 288 304 (16)
Total 450 496 (46)
Total fees due to the independent auditors for the legally-required audit of the 2015 financial statements amount to €200 thousand. In addition, €74 thousand was recognised as fees to other auditors (foreign).
Milan, 31 March 2016
On behalf of the board of directors The chairman Bruno Rota
105
Consolidated financial statements
106
Consolidated financial statements
3. ANNEXES
Annexes to the consolidated
financial statements
107
Consolidated financial statements
108
Annex 1 Cash flow statement
2015 €'000 A. Cash flows from operating activities Net profit for the year 25,813 income taxes 9,013 interest income (10,158) dividends (2,940) gains form the sale of assets 3,357 extraordinary gains (losses) from the sale of assets (1,386)
1. Net profit for the year before income taxes, interest, dividends and gains (losses) on the sale of assets 23,699
Adjustments for non-monetary items with no balancing entry in net working capital change in provisions for risks and charges 37,264 change in employees' leaving entitlement 2,758 amortisation/depreciation 100,582 adjustments to fixed assets 41,273 consolidation adjustments (296) Total adjustments for non-monetary items 181,581 2. Cash flows before changes in NWC 205,280 Change in net working capital: (28,492) inventory (8,514) trade receivables (44,695) other receivables (31,924) prepayments and accrued income 1,020 trade payables 46,778 other payables (10,708) accrued expenses and deferred income 1,933 change in grants related to plant 17,618 3. Cash flows after changes in NWC 176,788
Other adjustments (8,571) interest received 9,501 (income taxes paid) (5,619) (utilisation of the provision for risks and charges) (3,065) (utilisation of employees' leaving entitlement) (9,388) Cash flows generated by operating activities (A) 168,217 B. Cash flows from investing/divesting activities Tangible fixed assets (Investments) (184,437) Proceeds on divestments 6,026 Intangible fixed assets (Investments) (5,516) Proceeds on divestments 37 Financial fixed assets (Investments) (6,377) Proceeds on divestments 4,160 Current financial assets (Investments) Proceeds on divestments 1,386 Acquisition or sale of subsidiaries or business units, net of liquid funds Cash flows used in investing/divesting activities (B) (184,721) C. Cash flows from financing activities Third party funds Increase (decrease) in short-term bank loans and borrowings New loans 55,367 Loans repaid (644) Own funds Share capital increase against consideration Sale (repurchase) of own shares Dividends (and interim dividends) paid (20,000) Cash flows from financing activities (C) 34,723 Increase in liquid funds and current securities 18,219 Opening liquid funds and current securities * 363,796 Closing liquid funds and current securities ** 382,015 * - of which at the beginning of the year 137,170 ** - of which at year end 164,341
109
Annex 2 a) Changes in tangible fixed assets
129
438
-
-
-
-
-
1,262
1,109
2,080
2,518
69,511
74,529
72,011
Sales/Disposals
Reclassifications
-
-
-
-
depr
.
( 471 ( )
./
ec
( 3,460 ( )
( 3,614 ( )
( 5,790 ( )
( 1,324 ( )
( 24,100 ( )
Amortisation/depreciation
( 101,901 ( )
(25,895 )
(140,660 )
(114,765 )
Amort
-
-
-
-
-
( 132 ( )
( 414 ( )
( 1,419 ( )
( 4,101 ( )
( 2,141 ( )
( 97,269 ( )
(2,555 )
(105,476 )
(102,921 )
Changes of the year the of Changes
Sales/Disposals Sales/Disposals
Reclassifications Reclassifications
-
50
-
-
-
-
-
plant plant
7,586
3,186
3,967
1,608
208,016
( 5,575 ( )
( 218,838 ( )
Historical cost Historical
Transfers to to Transfers
finished finished
-
-
-
-
-
-
-
-
-
5,516
5,516
184,437
and and
189,953
184,437
acquisitions acquisitions
Investments Investments
943
-
-
4,835
3,823
2,304
22,753
61,725
68,795
121,325
607,459
256,131
amount amount
Carrying Carrying
1,081,298
1,012,503
-
-
-
-
-
-
-
-
-
-
( 1,640 ( )
( 25,084 ( )
downs
Write-
(26,724 )
(26,724 )
-
-
-
-
-
-
( 55 ) (
( 3,652 ( )
( 12,569 ( )
( 15,345 ( )
( 546,647 ( )
(15,400 )
Grants for for Grants
(578,268 )
(562,868 )
investments
.
Opening balance Opening
-
-
.
( 48 ) (
( 131 ( )
deprec
( 5,025 ( )
( 6,090 ( )
( 24,822 ( )
( 47,461 ( )
( 84,257 ( )
( 72,588 ( )
./
(83,882 )
Accum
( 1,273,629 ( )
(1,514,051 )
(1,430,169 )
amort
48
131
3,823
5,968
8,449
33,309
70,214
cost cost
121,325
354,597
149,658
168,077
2,452,819
Historical Historical
3,200,341
3,032,264
Tangible fixed assets fixed Tangible
Intangible fixed assets fixed Intangible
Total Total
paymentson account
5) Assets 5) under construction and
4) Other 4) assets
3Industrial and equipment commercial
2) Plant 2) and machinery
1) Land 1) and buildings
II. II.
7) Other 7)
paymentson account
6) Assets 6) under development and
5) Goodwill 5) arising on consolidation
andrights similar
4) Concessions, 4) licences, trademarks
advertisingcosts
2) Research, 2) development and 1) Start-up 1) and capital costs I.
110
Annex 2 b) Changes in tangible fixed assets
472
-
-
7,876
3,764
2,582
86,924
21,862
44,156
50,974
694,994
239,090
amount amount
Carrying Carrying
1,101,720
1,050,746
-
-
-
-
-
-
-
-
-
( 460 ( )
( 2,938 ( )
( 42,087 ( )
downs downs
Write-
(45,485 )
(45,485 )
-
-
-
-
-
-
-
( 4,580 ( )
( 19,580 ( )
( 12,805 ( )
( 520,466 ( )
(12,805 )
Grants for for Grants
(557,431 )
(544,626 )
investments
Closing balance Closing
-
-
-
( 43 ) (
.
( 5,496 ( )
( 5,321 ( )
( 27,001 ( )
( 50,946 ( )
( 88,938 ( )
( 96,250 ( )
Accum. Accum.
(107,110 )
( 1,306,010 ( )
(1,580,005 )
(1,472,895 )
amort./deprec
43
-
3,764
5,968
7,903
86,924
39,457
73,268
350,546
153,211
cost cost
170,889
2,563,557
3,284,641
3,113,752
Historical Historical
9
5
19
13
28
.
131
-
-
-
-
-
-
dep
177
149
.
./
rec
Accum
amort
-
-
( 9) (
-
-
-
-
( 5) (
( 19 ) (
( 13 ) (
(28 )
( 131 ( )
(177 )
(149 )
Change in scope scope in Change
cost
Historical
-
-
-
-
-
-
-
-
-
-
-
22,512
22,512
22,512
ecreases
Sales and Salesand
d
-
-
-
-
-
-
-
-
-
Write-downs Write-downs
( 460 ( )
( 1,298 ( )
( 39,515 ( )
Increases Increases
(41,273 )
(41,273 )
18
55
55
-
-
-
-
-
-
-
-
3,045
3,118
3,063
disposals disposals
Sales and Salesand
496
-
-
-
-
-
-
-
1,003
2,631
2,631
34,963
39,093
36,462
year
of the the of
Accruals Accruals
Changesofthe year
-
-
-
-
-
-
-
( 91 ) (
Grants for investments for Grants
(91 )
( 1,949 ( )
( 7,507 ( )
( 11,827 ( )
Increases Increases
(21,374 )
(21,283 )
Tangible fixed assets fixed Tangible
Intangible fixed assets fixed Intangible
Total Total
paymentson account
5) Assets 5) under construction and
4) Other 4) assets
equipment
3) Industrial 3) and commercial
2) Plant 2) and machinery
1) Land 1) and buildings
II. II.
7) Other 7)
paymentson account
6) Assets 6) under development and
5) Goodwill 5) arising on consolidation
andrights similar
4) Concessions, 4) licences, trademarks
advertisingcosts
2) Research, 2) development and
1) Start-up 1) and capital costs I. I.
111
Annex 3 a) Changes in net equity
Change in Allocation of Net profit Dividend 31.12.2013 consolidation Increases the net profit for the 31.12.2014 distribution scope for the year year
Net equity attributable to the Group 896,512 514 16 - - 3,068 900,110 Share capital 700,000 700,000 Legal reserve 140,000 140,000
Extraordinary reserves Contribution reserve 19,690 19,690 Extraordinary reserve 5,764 5,764 Translation reserve ( 6 ) 16 10
Retained earnings 27,936 514 3,128 31,578 Net profit for the year 3,128 ( 3,128 ) 3,068 3,068
Net equity attributable to minority interests 7,024 ( 573 ) - - ( 2,450 ) 2,566 6,567 Share capital and reserves attributable to minority interests 4,811 ( 573 ) 2,213 ( 2,450 ) 4,001 Net profit for the year 2,213 ( 2,213 ) 2,566 2,566
Total net equity 903,536 ( 59 ) 16 - ( 2,450 ) 5,634 906,677
(*) A: share capital increase; B: to cover losses; C: dividends
Change in Allocation of Net profit Dividend Balance at 31.12.2014 consolidation Increases the net profit for the distribution 31.12.2015 scope for the year year
Net equity attributable to the Group 900,110 ( 219 ) ( 12 ) - - 23,779 923,658 Share capital 700,000 700,000 Legal reserve 140,000 140,000
Extraordinary reserves Contribution reserve 19,690 19,690 Extraordinary reserve 5,764 5,764 Translation reserve 10 ( 12 ) ( 2 )
Retained earnings 31,578 ( 219 ) 3,068 34,427 Net profit for the year 3,068 ( 3,068 ) 23,779 23,779
Net equity attributable to minority interests 6,567 ( 65 ) - - ( 2,940 ) 2,034 5,596 Share capital and reserves attributable to minority interests 4,001 ( 65 ) - 2,566 ( 2,940 ) - 3,562 Net profit for the year 2,566 ( 2,566 ) 2,034 2,034
Total net equity 906,677 ( 284 ) - 12 - ( 2,940 ) 25,813 929,254
(*) A: share capital increase; B: to cover losses; C: dividends
112
Annex 3 b) Net equity
Possible Available Distributable Net equity use portion portion
Net equity attributable to the Group 59,881 923,658 923,658
Share capital 700,000 700,000
Legal reserve 140,000 B 140,000
Extraordinary reserves
- contribution reserve A,B,C 19,690 19,690 19,690
- extraordinary reserve 5,764 5,764 A,B,C 5,764 Translation reserve ( 2 ) B ( 2 )
Retained earnings 34,427 34,427 A,B,C 34,427
Net profit for the year 23,779 23,779
Net equity attributable to minority 2,990 interests 5,596 5,024
Share capital - 572
Share premium reserve 229 229 A,B,C 229
Retained earnings 2,761 2,761 A,B,C 2,761
Net profit for the year 2,034 2,034
Total net equity 62,871 929,254 928,682
A = share capital increase B = to cover losses C = dividends
113
Annex 4 Reconciliation between the parent’s and consolidated net equity and net profit for the year Share capital and Net profit for 2015 reserves at 31.12.2015 ATM S.p.A 10,844 887,802
Write-downs: Guidami S.r.l. ( 700 ) - Mipark S.r.l. ( 765 ) - NET S.r.l. 2013 44 NET S.r.l. 2012 753 NET S.r.l. 2011 1,311 NET S.r.l. 2010 3,275 NET S.r.l. 2009 3,098 NET S.r.l. 2008 521 Allocation of Rail Diagnostics S.p.A.'s goodwill ( 472 ) 471 Elimination of the write-down of Rail Diagnostics S.p.A.'s goodwill 2,481 2,481 Write-down of fixed assets recognised in the consolidated financial statements ( 1,640 ) Mipark's deconsolidation ( 117 ) Guidami's deconsolidation ( 162 ) Contributions from consolidated companies ATM Servizi S.p.A. 10,899 21,476 ATM Servizi Diversificati S.r.l. 13 481 GeSAM S.r.l. 51 282 Guidami S.r.l. 4 159 International Metro Service S.r.l. 2,979 19,045 Elimination of Metro Service A/S's dividend ( 3,195 ) ( 13,328 ) Metro Service A/S 4,307 19,104 Adjustment of amortisation/depreciation rates 70 379 Adjustment to income from investments 41 Elimination of International Metro Service S.r.l.'s dividend ( 3,060 ) ( 11,000 ) Mipark S.r.l. - 121 NET S.r.l. 1,594 2,582 Rail Diagnostics S.p.A. 16 10,218 Adjustments to leased assets as per IAS 17 ( 712 ) 12,907 Other adjustments ( 6 ) ( 13 ) Elimination of investments Elimination of the investment in ATM Servizi S.p.A. ( 1,100 ) Elimination of the investment in ATM Servizi Diversificati S.r.l. ( 100 ) Elimination of the investment in GeSAM S.r.l. ( 20 ) Elimination of the investment in Guidami S.r.l. 700 - Elimination of the investment in International Metro Service S.r.l. ( 357 ) Elimination of the investment in Metro Service A/S ( 4,261 ) Elimination of the investment in Mipark S.r.l. 765 - Elimination of the investment in NET S.r.l. ( 6,500 ) Elimination of Capitale NET S.r.l.'s quota capital increase - 2010 ( 3,132 ) Elimination of the acquisition of NET's minority interests ( 86 ) Elimination of the investment in Rail Diagnostics S.p.A. ( 11,481 ) Elimination of Capitale Rail Diagnostics S.p.A.'s share capital increase - 2014 ( 4,000 )
CAPITAL/RESERVES AND NET PROFIT FOR THE YEAR AS PER 25,813 929,254 THE CONSOLIDATED FINANCIAL STATEMENTS
of which: attributable to the Group 23,779 923,658 attributable to minority interests 2,034 5,596
114
Annex 5 Amortisation and depreciation rates
AMORTISATION /DEPRECIATION RATE
B I INTANGIBLE FIXED ASSETS
4. CONCESSIONS, LICENCES, TRADEMARKS AND SIMILAR RIGHTS Software 20 5. GOODWILL ARISING ON CONSOLIDATION Software 20 7 OTHER Leasehold improvements: . Tram/metro superstructure 10 . Escalators 15 . Tram/metro/trolleybus overhead lines 15 . Metro buildings and plant 10 . Works related to car parks/on-street parking 10 . Works on other infrastructures 10 . Works on third party vehicles 20 Long-term charges 20 B II TANGIBLE FIXED ASSETS 1 LAND AND BUILDINGS 2 2 PLANT AND MACHINERY: - LINESIDE EQUIPMENT Refuelling facilities 11.5 Control rooms 5.75 Line systems and technologies 10 Substations power 5.75 Localisation 5.75 Workshop fixed installations 5 Strategic spare parts for electrical installation 5.75 Magnetic and electronic ticketing system 10-20-6.67 Building systems 5.75 Signalling systems 4 - LINE ROLLING STOCK Metro drawing vehicles 3.33 Metro carriages 3.33 Strategic spare parts for metro drawing vehicles 3.33 Trams 3.33 Strategic spare parts for trams 3.33 Buses 8.33 Strategic spare parts for buses 8.33 Special buses 8.33 Hydrogen powered buses 15 Electric buses 25 Trolleybuses 7.5 Strategic spare parts for trolleybuses 7.5 Discontinued vehicles 100 3 INDUSTRIAL AND COMMERCIAL EQUIPMENT Trucks 20 Scaffolding 20 Service drawing vehicles 10 Transport carriages 7.5 Trailers 10 Sundry equipment 10 Ticket stamping and validating machines 12 Phone networks/Badges 20 Circulation/collection and parking metres 20-10 Vehicles for sundry services 20 4 OTHER ASSETS Furniture and fittings 12 Office equipment 20 Hardware 20 Air conditioning systems 20 Domestic appliances 20 Phone equipment 20 Audio/video systems 20 Bike sharing scheme 12 - 20
115
Annex 6 Related party transactions
Trade Grants 31.12.2015 receivables
- To parents Milan municipality 198,046 9,702 207,748
- To associates Brianza Trasporti S.c.a.r.l. 357 - 357 Como Fun&Bus S.c.a.r.l. 283 - 283 Metro 5 S.p.A. 4,020 - 4,020 Movibus S.r.l. 2,313 - 2,313
Trade Financial 31.12.2015 receivables receivables*
- To parents Milan municipality 83,487 53,575 137,061
- To associates Brianza Trasporti S.c.a.r.l. - - - Como Fun&Bus S.c.a.r.l. 35 - 35 Metro 5 S.p.A. 85 - 85 Movibus S.r.l. 555 - 555
*Reserves whose distribution was approved in prior years.
Turnover Other Use of Other Extraordinary from sales revenues Financial Services third party operating income and and income assets costs (expense) services income
- With parents Milan municipality 704,431 36,982 131 1,014 63 - 1,325
- With associates Brianza Trasporti S.c.a.r.l. - 2 - - - - - Como Fun&Bus S.c.a.r.l. 527 41 - 205 3 - - Metro 5 S.p.A. 19,674 5,802 395 61 150 2,047 - Movibus S.r.l. - 541 - - 9 - -
116 (Translation from the Italian original which remains the definitive version)
Azienda Trasporti Milanesi Group
Consolidated financial statements as at and for the year ended 31 December 2015 (with independent auditors' report thereon)
KPMG S.p.A. 8 April 2016 KPMG S.p.A. Telefono +39 02 6763 1 Revisione e organizzazione contabile Telefax +39 02 67632445 Via Vittor Pisani, 25 e-mail [email protected] 20124 MILANO Ml PEC [email protected]
(Translation from the Italian original which remains the definitive version)
Independent auditors' report pursuant to article 14 of Legislative decree no. 39 of 27 January 2010
To the sole shareholder of Azienda Trasporti Milanesi S.p.A.
Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of the Azienda Trasporti Milanesi Group (the "group"), which comprise the balance sheet as at 31 December 2015, the profit and loss account for the year then ended and notes thereto.
Directors' responsibility for the consolidated.financial statements The parent's directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the Italian regulations governing their preparation.
Independent auditors' responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing (ISA Italia) promulgated pursuant to article 11.3 of Legislative decree no. 39/10. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Societa per azioni Capitale sociale Euro 9. 179 700,00 i.v. Ancona Aosta Bari Bergamo Registro lmprese Milano e Bologna Balzano Brescia Cadice Fiscale N 00709600159 Catania Como Firenze Genova R E A, Milano N. 512867 Lecce Milano Napoli Novara Partita IVA 00709600159 KPMG Sp A e una societ.3 per azioni di diritto italiano e fa parte del Padova Palermo Parma Perugia VAT number IT00709600159 network KPMG di ent1t8 indipendenti affiliate a KPMG International Pescara Roma Torino Treviso Sede legale: Via Vittor Pisani, 25 Cooperative ("KPMG International") entitB di diritto svizzero Trieste Varese Verona 20124 Milano Ml ITALIA Azienda Trasporti Milanesi Group Independent auditors' report 31December2015
Opinion In our opinion, the consolidated financial statements give a true and fair view of the group's financial position as at 3 1 December 2015 and of its financial performance for the year then ended in accordance with the Italian regulations governing their preparation.
Report on other legal and regulatory requirements
Opinion on the consistency of the directors' report with the consolidatedfinancial statements We have performed the procedures required by Standard on Auditing (SA Italia) 7208 in order to express an opinion, as required by the law, on the consistency of the directors' report, which is the responsibility of the parent's directors, with the consolidated financial statements. In our opinion, the directors' report is consistent with the consolidated financial statements of the Azienda Trasporti Milanesi Group as at and for the year ended 31 December 2015.
Milan, 8 April 2016
KPMG S.p.A.
(signed on the original)
Claudio Mariani Director of Audit
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