EQUIPMENT HEALTHCARE CONSUMER GOODS
Registration Document 2014
Société anonyme (French Joint-stock company) with a Supervisory Board and a Management Board With share capital of €10,459,512 Head office: 18, Rue Troyon, 92316 Sèvres, France Registered in the Nanterre Trade and Companies Registry Under number 552 056 152
REGISTRATION DOCUMENT including the annual financial report 2014
This document is a free translation into English of CFAO’s original Document de Référence (hereinafter referred to as the “Registration Document”), which was prepared in French and filed with the French financial markets authority (Autorité des marchés financiers – AMF) on April 20, 2015 , in accordance with Article 212-13 of the AMF’s General Regulations.
Only the French version of this Registration Document is legally binding.
The French Registration Document may be used in the context of a financial transaction only if it is accompanied by a securities Note approved by the AMF. It was prepared by the issuer and its signatories therefore assume responsibility for its content.
Copies of this English translation of the French Registration Document are available at CFAO’s registered office: 18, Rue Troyon, 92316 Sèvres, France. This document may also be consulted on the website of the AMF (www.amf-france.org) and on the website of CFAO (www.cfaogroup.com).
REGISTRATION DOCUMENT 2014 - CFAO 1 General
General
This Registration Document also includes: ■ the annual management report of the Company’s Management Board, which must be submitted to the shareholders’ Meeting ■ the annual financial report that must be prepared and published called to approve the financial statements for each fiscal by all listed companies within four months following the end of year, pursuant to Articles L. 225-100 et seq. of the French each fiscal year, pursuant to Article L. 451-1-2 of the French Commercial Code (Code de commerce). Monetary and Financial Code (Code monétaire et financier) and Article 222-3 of the AMF’s General Regulations; and The cross-reference table (see Chapter 26) shows where the information pertaining to these two reports can be found.
Incorporations by reference
In accordance with Article 28 of European Regulation (EC) ■ the consolidated financial statements and parent company 809/2004, the following information is incorporated by reference financial statements for the year 2012 and the related Statutory in this Registration Document: Auditors’ reports on pages 212 to 300 (inclusive) of the 2012 Registration Document in French, registered by the AMF on ■ the consolidated financial statements and parent company April 15, 2013 under number D. 13-0358 ; financial statements for the year 2013 and the related Statutory Auditors’ reports on pages 188 to 270 (inclusive) of the 2013 ■ the financial information “Operating and financial review”, Registration Document in French, registered by the AMF on on pages 91 to 115 of the 2012 Registration Document April 23, 2014 under number D.13-0395; in French, registered by the AMF on April 15, 2013 under number D. 13-0358 . ■ the financial information “Operating and financial review”, on pages 78 to 94 of the 2013 Registration Document in French, registered by the AMF on April 23, 2014 under number D.13- 0395;
Definitions
In this Registration Document, and unless otherwise specified in ■ the term “Group” refers to CFAO and its subsidiaries; certain Chapters: ■ the term “Maghreb” refers to Algeria, Morocco and Tunisia, ■ the term “CFAO” or “the Company” refers to the société although the Group only operates in Algeria and Morocco; anonyme (joint-stock company) CFAO SA;
2 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com Definitions
■ the term “French-speaking Sub-Saharan Africa” refers to the following countries:
Benin Côte d’Ivoire Mali Burkina Faso Djibouti Mauritania Burundi Gabon Niger Cameroon Gambia Rwanda Congo Guinea Bissau Sao Tome and Principe Central African Republic Equatorial Guinea Senegal Comoros Guinea Conakry Chad Democratic Republic of the Congo Madagascar Togo
Countries in blue in this table: countries in which the Group operates.
■ the term “English- and Portuguese-speaking Sub-Saharan Africa” refers to the following countries:
South Africa Kenya Seychelles Angola Lesotho Sierra Leone Botswana Liberia Sudan Cape Verde Malawi Swaziland Eritrea Mozambique Tanzania Ethiopia Namibia Zambia Ghana Nigeria Zimbabwe Mauritius (1) Uganda
Countries in blue in this table: countries in which the Group operates. (1) Mauritius, previously classified by CFAO as part of the “French Overseas Territories and Other” category, was included in English-speaking Sub-Saharan Africa in 2012.
■ the term “French Overseas Territories and Other” refers to the following countries and territories:
Overseas departments and regions French overseas territories Overseas collectivities Other French overseas territories Guadeloupe French Polynesia New Caledonia French Guiana Saint Pierre and Miquelon Clipperton Martinique Wallis and Futuna French Southern and Antarctic Lands Reunion Mayotte Saint Martin Saint Barthélémy
Territories in blue in this table: Territories in which the Group operates.
CFAO is also present in the following countries:
CambodiaItaly Vietnam Denmark Portugal India Switzerland
Information concerning the above-mentioned countries and ■ The term “territories” refers to a country or a French overseas geographic areas in which the Group operates is provided in territory. Chapter 6 of this Registration Document. ■ Unless otherwise indicated, the term “revenue” (and related The above classification of the countries and territories corresponds information), when referring to the Group or one of its divisions, to that used by the Group in the context of the presentation of excludes intragroup revenue. its financial statements and may be different from the traditional geopolitical classification for certain countries (in particular Gambia, Guinea-Bissau and Sao Tome and Principe).
REGISTRATION DOCUMENT 2014 - CFAO 3 Market information
Market information
This Registration Document contains information about the Comité des Constructeurs Français d’Automobiles in France, and Group’s markets and competitive position, including information the Association des Importateurs de Véhicules Automobiles and relating to market size and market share. Unless otherwise stated, the Groupement des Poids Lourds et Camions in Morocco) and this information is based on the Group’s estimates and is provided data from operating subsidiaries. for indicative purposes only. To the Group’s knowledge, there are no authoritative external reports providing exhaustive and These various studies, estimates, research and information, comprehensive coverage or analysis of the markets in which the which the Group considers reliable, have not been verified by Group operates. independent experts. The Group does not guarantee that a third party using other methods to collate, analyze or compile market Consequently, the Group has made estimates based on a number data would obtain the same results. In addition, the Group’s of sources including internal surveys, studies and statistics from competitors may define its economic and geographic markets independent third parties (in particular INSEE, Global Insight, differently. To the extent that the data relating to market share Groupement pour l’Elaboration et la Réalisation de Statistiques and market size included in this Registration Document are based and Intercontinental Marketing Services (IMS) Health) or solely on the Group’s estimates, they do not constitute official professional federations of specialized distributors (such as the data.
Forward-looking statements
This Registration Document contains information on the Group’s The forward-looking statements provided in this document are prospects and main lines of development. This information is made as of the date of this Registration Document. Except to sometimes presented by use of the future or conditional tense, comply with any applicable legal or regulatory requirements, or by the use of forward-looking statements such as “considers”, the Group does not make any commitment to publish updates “plans”, “aims to”, “expects”, “intends”, “should”, “is designed of the forward-looking statements provided in this document to to”, “estimates”, “believes” and “may”, or, if applicable, the reflect any changes in its targets or in the events, conditions or negative of these terms and similar expressions. Such information circumstances on which such forward-looking statements are is not historical data and should not be interpreted as a guarantee based. that such facts and events as stated will occur. The Group operates in a rapidly changing and competitive Such information is based on data, assumptions and estimates environment. It is therefore unable to anticipate all risks, that the Group considers reasonable. They are likely to change or uncertainties or other factors that may affect its activities, their be modified due to the uncertainties of the economic, financial, potential impact on its activities or the extent to which the occurrence competitive or regulatory environment. This information is of a risk or combination of risks could have significantly different mentioned in various sections of this Registration Document and results from those set out in any forward-looking statements, it contains data relating to the Group’s intentions, estimates and being noted that such forward-looking statements do not constitute targets concerning in particular its market, strategy, growth, a guarantee of actual results. results, financial position, cash position and projections.
4 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com Risk factors
Risk factors
Investors should read carefully the risk factors described in results or financial position or prospects. Furthermore, other Chapter 4 “Risk factors” of this Registration Document, before risks that have not yet been identified or that are not considered taking any investment decision. The occurrence of all or any of material by the Group at the filing date of this Registration these risks may have an adverse effect on the Group’s business, Document, could have the same adverse effect.
REGISTRATION DOCUMENT 2014 - CFAO 5 The table of contents of this Registration Document uses, the nomenclature set forth in Annex I of Contents European Regulation (EC) 809/2004 implementing European Directive 2003/71/EC, known as the “Prospectus Directive”.
1 STATEMENT OF PERSON 7 ORGANIZATION OF THE GROUP 67 RESPONSIBILE FOR THE 7.1 Simplifi ed operational organization chart REGISTRATION DOCUMENT as of December 31, 2014 68 INCLUDING THE ANNUAL 7.2 Parent company, subsidiaries FINANCIAL REPORT AFR 9and equity interests 69 1.1 Person responsible for the Registration Document 9 PROPERTY PLANT 1.2 Statement of responsibility 9 8 AND EQUIPMENT 75 8.1 Signifi cant existing or planned property, 2 STATUTORY AUDITORS 11 plant and equipment 76 2.1 Principal Statutory Auditors 11 8.2 Environment and sustainable development 77 2.2 Deputy Statutory Auditors 11 2.3 Fees of the Statutory Auditors for 2013 OPERATING AND and 2014 12 9 FINANCIAL REVIEW AFR 79 9.1 Overview 80 3 SELECTED FINANCIAL 9.2 Comparison of the Group’s INFORMATION 13 results of operations for the years ended December 31, 2013 and 2014 Selected fi nancial information – and fi nancial position 88 consolidated income statement 13 9.3 Analysis of revenue, gross profi t and Selected fi nancial information – recurring operating income by division consolidated statement of fi nancial position 15 for 2013 and 2014 91 Selected fi nancial information – consolidated statement of cash fl ows 15 Other selected operating information 15 10 THE GROUP’S CASH FLOW AND CAPITAL RESOURCES AFR 95 10.1 Overview 96 4 RISK FACTORS AFR 17 10.2 Financial resources 96 4.1 Risks relating to the business and regulatory environment 18 10.3 Presentation and analysis of the main categories of use of the Group’s cash 98 4.2 Risks relating to the Group’s business 21 10.4 Analysis of cash fl ows 100 4.3 Risks relating to the Group 24 4.4 Market risks 25 4.5 Risk management 29 11 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES 105 4.6 Insurance 30
INFORMATION ABOUT THE ISSUER 33 12 TREND INFORMATION 5 AND OBJECTIVES 107 5.1 History and development of the Company 34 12.1 Trends and recent developments 108 5.2 Investments 34 12.2 Medium-term outlook 108
6 BUSINESS OVERVIEW 37 13 PROFIT FORECASTS 6.1 Introduction to the Group 38 OR ESTIMATES 109 6.2 Business divisions 42 6.3 Competitive strengths 48 CORPORATE GOVERNANCE AFR 111 6.4 Market overview 52 14 6.5 Strategy 58 14.1 Corporate Governance structure 112 6.6 Regulations 61 14.2 Confl icts of interest 123
6 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com 15 COMPENSATION AND BENEFITS 125 20 FINANCIAL INFORMATION 15.1 Compensation of corporate offi cers CONCERNING THE ASSETS (mandataires sociaux) AFR 126 AND LIABILITIES, FINANCIAL 15.2 Total amounts set aside or recognized POSITION AND PROFITS for retirement or similar benefi ts 137 AND LOSSES OF CFAO AFR 185 15.3 Securities transactions carried out 20.1 Historic fi nancial information 186 by the Company’s corporate offi cers 137 20.2 Pro forma fi nancial information 186 20.3 Financial statements 187 16 ROLE AND ACTIVITIES 20.4 Verifi cation of fi nancial information 274 OF THE MANAGEMENT 20.5 Date of the most recent fi nancial information 276 AND SUPERVISORY BODIES AFR 139 20.6 Interim fi nancial information 276 16.1 Report of the Supervisory Board Chairman 20.7 Dividend policy 276 on Corporate Governance, Internal Control and Risk Management 140 20.8 Litigation and arbitration 277 16.2 Statuory Auditors’ report prepared 20.9 Signifi cant changes in fi nancial in accordance with Article L. 225-235 or trading position 278 of the French Code of Commerce relative to the report prepared by the Chairman of the CFAO Supervisory Board 154 21 OPERATIONS RELATING 16.3 Observations from the Supervisory Board TO THE COMPANY’S STOCK AFR 279 on the management report and fi nancial 21.1 Share capital 280 statements for 2014 155 21.2 Memorandum of association and by-laws 286 21.3 Market information 289 17 SOCIAL AND SUSTAINABLE DEVELOPMENT REPORT 157 MATERIAL CONTRACTS 291 Group policy 158 22
17.1 Healthcare policy 158 Contents 17.2 Education policy 159 23 THIRD PARTY INFORMATION 17.3 A stronger partnership with AND STATEMENT BY EXPERTS Non-Governmental Organizations 159 AND DECLARATIONS 17.4 Corporate transparency 160 OF ANY INTEREST 293 17.5 Employee information 161 17.6 Profi t-sharing and stock options or purchase 165 24 DOCUMENTS ON DISPLAY 295 17.7 Employee shareholding agreements 165 24.1 Place where documents are available 296 17.8 Environmental management 166 24.2 Person responsible for fi nancial communications 296 24.3 Indicative timetable for the publication PRINCIPAL SHAREHOLDERS AFR 175 18 of fi nancial communication in 2015 296 18.1 Breakdown of share capital and voting rights 176 18.2 Voting rights 177 25 INFORMATION 18.3 Principal Shareholders and control 178 ON EQUITY INTERESTS 297 18.4 Shareholder agreements 178 26 REGISTRATION DOCUMENT 19 RELATED PARTY TRANSACTIONS 179 CROSS REFERENCE TABLE 299 19.1 Transactions with the Kering Group (formerly PPR) 180 19.2 Transactions with the TTC group 180 19.3 Regulated agreements and commitments 180
The information included in the annual fi nancial report is identifi ed using the pictogram AFR
REGISTRATION DOCUMENT 2014 - CFAO 7 (This page has been left blank intentionally.)
8 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com STATEMENT OF PERSON RESPONSIBILE FOR THE REGISTRATION DOCUMENT INCLUDING THE ANNUAL FINANCIAL REPORT 1
1.1 Person responsible for the Registration Document
Mr. Richard Bielle, Chairman of the Management Board.
1.2 Statement of responsibility
Sèvres, April 16, 2015
“I hereby certify, having taken all reasonable care to ensure that such is the case, that the information contained in this Registration Document is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import.
I further certify, to the best of my knowledge, that the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and results of CFAO SA and of all the companies of the consolidated Group, and the Management Board’s “management report” (Rapport de gestion) set forth in this Registration Document, as indicated in the cross reference table in Chapter 26 of this Registration Document, provides a fair view of the development of the business, results and financial position of CFAO SA and of all the companies of the consolidated Group, as well as a description of the principal risks and uncertainties to which they are exposed.
I obtained from the Statutory Auditors, upon completion of their work, a letter in which they state that they have audited the information concerning the financial position and the financial statements presented in this Registration Document and that they have read the Registration Document in its entirety.”
Mr. Richard Bielle Chairman of the Management Board
REGISTRATION DOCUMENT 2014 - CFAO 9 STATEMENT OF RESPONSIBILITY FOR THE REGISTRATION DOCUMENT 1 INCLUDING THE ANNUAL FINANCIAL REPORT
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10 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com STATUTORY AUDITORS 2
2.1 Principal Statutory Auditors
Deloitte & Associés KPMG Audit
185, Avenue Charles de Gaulle – 92200 Neuilly-sur-Seine 3, cours du Triangle, Immeuble le Palatin – 92939 Paris La Défense Cedex Represented by Alain Penanguer. Represented by Hervé Chopin. ■ appointed Principal Statutory Auditor at the General Shareholders’ Meeting of May 26, 1992. The most recent term ■ appointed Principal Statutory Auditor in the context of the was renewed at the General Shareholders’ Meeting of May 17, Company’s IPO in 2009, at the General Shareholders’ 2010, and shall expire at the end of the General Shareholders’ Meeting of October 5, 2009, and whose term shall expire at Meeting which will be called in 2016 to approve the financial the end of the General Shareholders’ Meeting which will be statements for the year ending December 31, 2015. called in 2015 to approve the financial statements for the year ending December 31, 2014.
2.2 Deputy Statutory Auditors
BEAS KPMG Audit IS
185, Avenue Charles de Gaulle - 92200 Neuilly-sur-Seine 3, cours du Triangle, Immeuble le Palatin – 92939 Paris La Défense Represented by Alain Pons. Represented by François Caubrière. ■ appointed Deputy Statutory Auditor at the General Shareholders’ Meeting of May 24, 2004. The term was renewed at the ■ appointed Deputy Statutory Auditor at the General General Shareholders’ Meeting of May 17, 2010, and shall Shareholders’ Meeting of June 12, 2013, for the remainder expire at the end of the General Shareholders’ Meeting to be of the term of its predecessor, Mr. François Chevreux, who called in 2016 to approve the financial statements for the year resigned in 2012, i.e. until the end of the General Meeting ending December 31, 2015. which will be called in 2015 to approve the financial statements for the year ending December 31, 2014.
REGISTRATION DOCUMENT 2014 - CFAO 11 STATUTORY AUDITORS 2 Fees of the Statutory Auditors for 2013 and 2014
2.3 Fees of the Statutory Auditors for 2013 and 2014
DELOITTE KPMG Amount (excl. VAT) % Amount (excl. VAT) % (in € thousands, except percentages) 2014 2013 2014 2013 2014 2013 2014 2013 Audit • Statutory audit, certification, review of parent company and consolidated financial statements Issuer (CFAO SA) 213 234 17% 19% 238 234 22% 22% Fully consolidated subsidiaries 966 956 79% 76% 837 767 77% 71% Sub-total 1,179 1,190 96% 95% 1,075 1,001 99% 93% Other services provided to fully consolidated subsidiaries • Legal, tax and labor related services 35 62 3% 5% 8 75 1% 7% • Other work and services 8 1% 0% 4 0% 0% Sub-total 43 62 4%5%12751%7% TOTAL 1,222 1,252 100% 100% 1,087 1,076 100% 100%
12 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com SELECTED FINANCIAL INFORMATION 3
The following tables present consolidated financial information by division for the income statement and other Group operating information. The financial information has been extracted from the audited consolidated financial statements prepared in accordance with IFRS.
Selected financial information – consolidated income statement
SIMPLIFIED CONSOLIDATED INCOME STATEMENT (CFAO GROUP)
(in € millions, except percentages) 2010 2011 2012 2013 2014 Revenue 2,676.2 3,123.7 3,585.2 3,628.1 3,560.4 Gross profit 613.7 705.5 792.8 813.1 842.9 As a % of revenue 22.9% 22.6% 22.1% 22.4% 23.7% Recurring operating income 223.2 256.3 290.3 269.0 270.7 As a % of revenue 8.3% 8.2% 8.1% 7.4% 7.6% Net income of consolidated companies 140.3 170.6 171.2 144.4 149.6 Net income attributable to owners of the parent 100.2 121.1 114.0 100.4 100.5
REGISTRATION DOCUMENT 2014 - CFAO 13 SELECTED FINANCIAL INFORMATION 3 Selected financial information – consolidated income statement
REVENUE AND RECURRING OPERATING INCOME BY BUSINESS LINE
(in € millions, except percentages) 2010 2011 2012 2013 2014 Equipment and services Revenue 1,662.6 2,034.2 2,366.9 2,257.0 1,977.4 Recurring operating income 128.5 147.7 167.1 140.5 139.8 As a % of revenue 7.7% 7.3% 7.1% 6.2% 7.1% Number of new vehicles sold 64,873 82,095 95,063 78,237 61,389 Healthcare Revenue 809.6 864.5 969.2 1,103.4 1,216.1 Recurring operating income 71.4 75.8 84.0 93.8 105.1 As a % of revenue 8.8% 8.8% 8.7% 8.5% 8.6% Consumer goods Revenue 203.9 224.9 248.9 267.5 366.8 Recurring operating income 48.6 60.4 72.5 68.8 64.4 As a % of revenue 23.8% 26.9% 29.1% 25.7% 17.5% Holding Revenue 0.1 0.1 0.2 0.2 0.1 Recurring operating expense (25.3) (27.6) (33.3) (34.1) (38.6)
NB: For a more detailed description, see Chapter 6 “Business Overview”, 6.1.1 of this Registration Document.
RECONCILIATION OF RECURRING OPERATING INCOME TO EBITDA
(in € millions) 2010 2011 2012 2013 2014 Recurring operating income 223.2 256.3 290.3 269.0 270.7 Amortization of intangible assets (3.1) (3.8) (4.4) (4.2) (4.1) Depreciation of land and buildings (6.1) (6.4) (7.4) (8.6) (9.0) Depreciation of plant and equipment (26.2) (30.1) (34.2) (38.6) (41.0) Depreciation of other property, plant and equipment (7.6) (7.9) (8.7) (7.8) (8.4) Additions to provisions for non-current assets 0.0 (0.5) (0.2) (0.1) 1.0 TOTAL EBITDA 266.3 304.9 345.2 328.4 332.2
14 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com SELECTED FINANCIAL INFORMATION Other selected operating information 3
Selected financial information – consolidated statement of financial position
As of December 31 (in € millions) 2010 2011 2012 2013 2014 TOTAL ASSETS 1,918.3 2,315.1 2,624.3 2,603.5 2,685.8 o/w cash and cash equivalents 133.1 251.8 199.3 211.5 202.3 TOTAL EQUITY 646.7 739.1 818.9 853.9 953.8 Non-current liabilities 132.8 131.1 194.0 153.8 151.8 o/w non-current borrowings 99.0 93.5 149.8 109.0 101.9 Current liabilities 1,138.8 1,445.0 1,611.4 1,595.7 1,580.3 o/w current borrowings 234.6 350.3 426.5 506.0 532.9
Selected financial information – consolidated statement of cash flows
Years ended December 31 (in € millions, except percentages) 2010 2011 2012 2013 2014 Cash flow from operating activities before tax, dividends and interest 274.3 314.4 339.6 334.5 336.7 Change in working capital requirement 17.1 0.8 (164.7) (33.0) (46.1) Net cash from operating activities 231.0 241.0 100.1 214.2 203.9 Net operating investments (61.1) (70.0) (89.6) (88.6) (109.0) Net cash used in investing activities (66.6) (89.9) (137.7) (105.0) (126.8) Net cash from (used in) financing activities (162.6) (120.7) (99.3) (160.3) (114.8) CASH AND CASH EQUIVALENTS NET OF BANK OVERDRAFTS (4.2) 26.7 (136.6) (47.5) (42.4)
Other selected operating information
EBITDA
EBITDA is defined as recurring operating income plus depreciation, should it be treated as a measure of liquidity. EBITDA may be amortization and provisions for non-recurring operating assets calculated differently by other companies with businesses that are recognized in recurring operating income. EBITDA is not a similar to or different from that of the Group. Accordingly, the financial measure defined under IFRS. It should not be taken as EBITDA calculated by the Group may not be comparable to that a substitute for operating income, net income or cash flows, nor calculated by other issuers.
REGISTRATION DOCUMENT 2014 - CFAO 15 SELECTED FINANCIAL INFORMATION 3 Other selected operating information
Years ended December 31 (in € millions, except percentages) 2010 2011 2012 2013 2014 Equipment and services 153.0 175.2 198.8 173.7 173.1 Healthcare 76.3 81.1 91.7 102.4 113.3 Consumer goods 61.8 75.6 87.2 85.7 83.5 Holding (24.7) (27.0) (32.6) (33.4) (37.6) TOTAL 266.3 304.9 345.2 328.4 332.2 As % of revenue 10.0% 9.8% 9.6% 9.1% 9.3%
Other financial data
As of December 31 (in € millions, except percentages) 2010 2011 2012 2013 2014 Free operating cash flow (1) (5) 169.9 171.0 10.5 125.6 94.9 Net debt (2) (200.5) (192.0) (377.0) (403.5) (432.5) Capital employed (3) 800.0 926.6 1,055.3 1,302.1 1,352.8 Working capital requirement (in € millions) 383.2 397.0 572.1 604.6 679.3 Working capital requirement (as a % of revenue) 14.3% 12.7% 16.0% 16.7% 19.1% Return on capital employed (ROCE) (3) (4) (5) 28.9% 27.8% 26.5% 20.4% 19.7%
(1) Free operating cash flow is equal to net cash from operating activities less net operating investments. For more information regarding the calculation of free operating cash flow, see section 10.4.4 “Free operating cash flow”. (2) The concept of net debt used by the Group comprises gross debt including accrued interest less net cash as defined by French National Accounting Board (Conseil National de la Comptabilité – CNC) recommendation 2009-R-03 dated July 2, 2009. Net debt includes fair value hedging instruments recorded in the statement of financial position relating to bank borrowings and bonds. The interest rate risk on this debt is covered in full or in part by these fair value hedges. For more information concerning the calculation of net debt, see section 10.4.5 “Change in net debt”. The Group does not currently have any interest rate hedging instruments. (3) Capital employed (i.e., the sum of intangible assets, property, plant and equipment, deposits and guarantees and working capital requirement, less provisions for contingencies and losses) is calculated using the average of the month-end values. (4) ROCE corresponds to the ratio between (1) operating income excluding gains and losses on the sale of financial assets and capital employed. (5) Free operating cash flow and ROCE are not financial measures defined under IFRS. They should not be taken as a substitute for operating income, net income or cash flows, nor should they be treated as measures of liquidity. The amounts of free operating cash flow and ROCE may be calculated differently by other companies with activities that are similar to or different from those of the Group, and accordingly, may not be comparable.
16 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com RISK FACTORS 4
4.1 Risks relating to the business 4.3 Risks relating to the Group 24 and regulatory environment 18 4.3.1 Risks linked to the Group’s external growth 4.1.1 A volatile economic environment in emerging strategy and the development of new activities 24 markets and Africa 18 4.3.2 Less room for fl exibility due to partnerships 4.1.2 Intensifi ed competition in Africa 18 and minority shareholders 24 4.1.3 Foreign exchange risk exposure 19 4.3.3 Financial risks from inadequate insurance coverage 24 4.1.4 Exchange rate controls 19 4.3.4 Risks related to litigation 24 4.1.5 Import restrictions 19 4.3.5 Liquidity of the CFAO share 25 4.1.6 Limitations on foreign investment 19 4.3.6 Ability of Group and Company operating subsidiaries to generate profi ts and pay dividends 25 4.1.7 Unstable legal and regulatory environment 20 4.1.8 Diffi culties obtaining licenses, permits or approvals for carrying out the Group’s businesses 20 4.4 Market risks 25 4.1.9 Risk of infringement of anti-corruption laws and regulations 20 4.4.1 Foreign exchange risks 25 4.1.10 Risk of fraud being committed 4.4.2 Interest rate risk 28 by Group employees 20 4.4.3 Liquidity risk 28 4.1.11 Tax risks related to the geographical location 4.4.4 Counterparty risk 29 of the Group’s activities 21 4.1.12 Investor perceptions of risk in African economies 21 4.5 Risk management 29 4.2 Risks relating to the Group’s business 21 4.6 Insurance 30 4.2.1 Risk resulting from the shareholding structure of CFAO 21 4.6.1 Overview 30 4.2.2 A relatively small number of suppliers 22 4.6.2 Risk prevention policy 30 4.2.3 Risk related to recruiting, retaining and training 4.6.3 The Group’s approach to insurance 30 qualifi ed labor 22 4.6.4 Main insurance policies 31 4.2.4 Risks related to developments in the automobile industry 22 4.2.5 Material and fi nancial risks associated with the import and export of products 22 4.2.6 Functioning of distribution facilities 23 4.2.7 Customer credit risk 23 4.2.8 Changes in pharmaceutical price regulations 23 4.2.9 Risks associated with manufacturing processes 23
REGISTRATION DOCUMENT 2014 - CFAO 17 RISK FACTORS 4 Risks relating to the business and regulatory environment
Investors should read carefully the risk factors described in this Chapter before making any investment decision. At the filing date of this Registration Document, these are the risks the Group considers as having a material adverse effect on its business, financial position, results and prospects. However, other risks may also exist that have not yet been identified as of the filing date of this Registration Document, or that are not considered as having a material adverse effect on the Group’s business, financial position, results and prospects.
4.1 Risks relating to the business and regulatory environment
4.1.1 A volatile economic environment The Group considers that its presence in 34 countries in Africa, in emerging markets and Africa in 7 French Overseas Territories, in Vietnam, Cambodia, China, Portugal, Denmark, Italy and India (for further information, see the list of countries set out in the introduction to this Registration The Group conducts most of its operations in emerging and pre- Document, in the section headed “Definitions”) helps to reduce the emerging markets with economies that remain volatile, and which risk of unfavorable macroeconomic changes in one country having are affected by local political conditions as well as by multiple a significant impact on its results. However, some countries make external factors, including the level of direct foreign investment, a larger contribution to the Group’s results. The French Overseas and conditions in the markets for raw materials and other Territories that accounted for in excess of 5% of sales in 2014 are important export products. as follows: Algeria (10.1%), the Congo (9.5%), Reunion (7.0%), Cameroon (6.9%), French Antilles (Guadeloupe, Martinique and The countries in which the Group does business may also Saint-Martin) (6.2%), Nigeria (5.9%) and Côte d’Ivoire (5.7%). experience political and social unrest, health risks, local or Taken together, these seven partner territories generated more regional conflict, acts of terrorism or other violence, infrastructure than half of sales in 2014. failure or inadequacy, and the risk of loss due to expropriation, nationalization, confiscation of assets and property, or restrictions on foreign investment and the repatriation of invested capital. 4.1.2 Intensified competition in Africa The Group’s future growth prospects are heavily dependent on the development of the emerging or pre-emerging markets of the African countries in which it operates. These economies are in The Group’s competitive environment varies by segments, products various stages of development and their economic performances distributed and the countries and regions in which it operates. In may vary considerably. markets where the Group is the leading distributor and in countries where it has a high market share, it may have more difficulty in As discussed in section 6.4 “Market overview” of this Registration maintaining its market share. The economies of African countries Document, the Group nevertheless believes that the African market where the Group operates are experiencing strong growth with offers generally favorable growth prospects due in particular to a some of them becoming mature, generating great attraction for high GDP growth rate in recent years, the emergence of a middle the continent. Consequently, new distributors are constantly trying class and as-yet low levels of vehicle ownership and medical to penetrate these markets and in certain cases, manufacturers spending in most of the African countries in which the Group decide to distribute their own products directly or through wholly operates. owned subsidiaries, all of which serves to intensify competition in general. A volatile and unpredictable economic environment, lower growth rates, and adverse variation in the price of a raw material, the Although the Group is often the only distributor of a manufacturer’s devaluation of the CFA franc, high inflation or interest rate and products in a given country or region, the Group’s agreements exchange rate fluctuations have in the past, and could in the future, with manufacturers rarely stipulate exclusivity and this leaves the have a negative impact on the economy of the countries where door open for the competition. This increased competition may the Group operates and therefore have a materially adverse effect require the Group to devote greater resources to acquiring and on the Group’s activities, results, financial position and prospects. retaining customers, or may require it to reduce its prices in order to avoid losing market share to competitors. Against this potentially unstable backdrop, CFAO is very aware of country risk. Country risk is closely analyzed before any attempt More generally, some of CFAO’s market leader positions may to set up operations in a new area. Rigorous monitoring of current be challenged due to the general intensification of competition affairs and potential threats is conducted wherever the Group in Africa. operates. CFAO has put in place security arrangements adapted to each environment in which it operates in order to protect, first and foremost, its employees, expatriate families and its assets.
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4.1.3 Foreign exchange risk exposure In addition, as the cash flows of certain countries are highly dependent on the export of certain raw materials, the ability to convert such currencies can be limited by the timing of The Group purchases its products in yen, US dollars and in euros payments for such exports, requiring the Group to plan its and sells them primarily in euros and euro-linked currencies (CFP currency conversions accordingly. The Group cannot guarantee Francs), CFA franc and other local currencies. The Group prepares that additional restrictions on currency exchange will not be its financial statements in euros. If the currencies in which the implemented in the future or that these restrictions will not limit the Group purchases the products it distributes and the raw materials ability of the Group’s subsidiaries to transfer cash to CFAO, which it uses to manufacture products rise against the local currencies in could have an adverse effect on the Group’s business, results, which the Group realizes its sales, the Group may not be able to financial position and prospects. increase its prices sufficiently in these local currencies to bolster its margins or pass these additional costs on. In addition, any The Group takes account of exchange rate controls in its increase in the Group’s sale prices in order to pass these costs on management of day-to-day transactions and in its decision-making could have a negative impact on the Group’s sales volume. analysis prior to launching new sites and operations. In addition, because the Group reports its results in euros, an appreciation of the euro against the currencies in which the Group sells its products may reduce the euro equivalent of such 4.1.5 Import restrictions sales, and conversely a depreciation of the euro may increase the euro equivalent of the Group’s purchases. Furthermore, the A significant portion of the Group’s business involves the Group’s financial commitments (including borrowings) may distribution of products that are sold in regions that are different be denominated in currencies other than the euro, exposing from the places where they are manufactured. As a result, the the Group to foreign exchange risk with respect to its financial Group must comply with applicable import regulations and charges. Failure by the Group to respond effectively to changes restrictions, including import duties. in foreign exchange rates could have a material adverse effect on the Group’s business, results, financial position and prospects. Some countries in which the Group has operations may also (See section 4.4.1 “Foreign exchange risks” below for a more decide to limit imports, by implementing new quotas, conditions detailed description of foreign exchange risk and the tools used for obtaining quotas, customs duties or other import barriers or by by CFAO to manage such risks.) tightening up those already in place. These changes could durably hamper the Group’s ability to import the products it distributes The Group is operates in certain countries whose currency is the or sells in some countries, in particular vehicles, pharmaceutical CFA franc Although the CFA franc is currently pegged to the euro products and spare parts, at reasonable prices, which could also based on a fixed exchange rate, it is possible that the CFA franc negatively impact the Group’s activities, results, financial position could be devalued against, or decorrelated from the euro, either and prospects. The problems associated with obtaining the right of which could have a material adverse effect on the Group’s export permits have led to significant delays in delivering and results. selling these materials, which could reoccur in the future.
4.1.4 Exchange rate controls 4.1.6 Limitations on foreign investment
The Group’s ability to generate operating cash flows at the level The Group is also subject to the regulation of foreign direct of CFAO SA (the Group’s holding company) and to pay dividends investments in the countries in which it operates. Certain countries depends on the ability of its subsidiaries to transfer the funds have implemented measures to encourage foreign investment, such upstream. Several of the African countries in which the Group as tax incentives, the loss or the expiration of which could have operates have exchange controls that place restrictions on the an adverse effect on the Group’s results (for more information, exchange of local currency for foreign currency and the transfer see section 6.6.4 under Chapter 6 of this Registration Document). of funds or payment of dividends abroad. Although these controls Certain measures or tax breaks may also be withdrawn on a have not generally created major operational problems, they discretionary basis by local authorities, impacting CFAO’s results may become more onerous in the future. These and other controls significantly. Other countries may impose new or additional that may be implemented in the future could limit the ability of limitations on foreign direct investment, causing the Group to the Group’s subsidiaries to transfer cash to CFAO. Moreover, incur additional costs. in certain countries, the Group has experienced, and may experience in the future, difficulties in converting large amounts of local currency into foreign currency due in particular to illiquid foreign exchange markets.
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4.1.7 Unstable legal and regulatory 4.1.9 Risk of infringement of environment anti-corruption laws and regulations
The Group’s distribution businesses, and the products and Anti-corruption laws and regulations in force in many countries services the Group offers are subject to a variety of legislative prohibit companies from making direct or indirect payments to and regulatory measures in the countries in which it operates. civil servants, public officials or members of governments for the purpose of entering into or maintaining business relationships. The legal systems and legislation in many of these countries may The Group has activities in certain countries where corruption and create uncertainty for investments and business due to changing extortion are considered to be common practice, where it sells requirements, defective judicial interpretations and/or inadequate products and services to governments and public or quasi-public regulations. They could interrupt some of the Group’s businesses entities requiring obtaining approvals from, or completing certain or lead to an increase in operating expenses in the countries formalities with public officials. Therefore, the Group is exposed concerned. to the risk that its employees, consultants or agents may make Government authorities have sometimes made unpredictable payments or grant hidden benefits in violation of anti-corruption use of their considerable discretionary powers, particularly in laws and regulations, especially in response to demands or the area of tax and customs, in many of the markets in which attempts at extortion. the Group operates. This can be damaging to the Group, if In the past, the Group has experienced actual or alleged violations contracts or approvals are jeopardized (for more information, see of anti-corruption laws and regulations. As a result, the Group has section 6.6.4 under Chapter 6 of this Registration Document). implemented prevention and training programs as well as internal procedures designed to promote best practices and discourage such violations. However, these prevention and training programs 4.1.8 Difficulties obtaining licenses, may prove to be insufficient, and employees, consultants or permits or approvals for carrying out representatives of the Group may have been, or may in the future be engaged in activities for which the Group or its managers the Group’s businesses could be held liable.
The Group’s diversified offer of products and services means Any breach of these anti-corruption laws and regulations that the majority of its activities in the countries it does business could affect the overall reputation of the Group and expose it are subject to regulations imposed by national, regional or to administrative or judicial proceedings, which could result local government authorities and/or regulatory bodies. These in criminal and civil proceedings, culminating in a possible regulations may require it to obtain approvals or permits from prohibition on maintaining business relationships with suppliers or these authorities in order to do business. customers in certain countries. This could have a material adverse effect on the operations, results, financial position and prospects For example, the Group is required to obtain licenses to sell of the Group. pharmaceutical products in certain countries such as Algeria and the majority of the English- and Portuguese-speaking Sub- On the date of filing of this Registration Document, there are Saharan African countries in which the Eurapharma division no material administrative or judicial proceedings in which the operates. Moreover, in some countries, importing activity Group is involved as a result of infringement of anti-corruption requires a government-issued license. These licenses are subject laws or extortion. to the control, interpretation, modification or termination by the competent authorities. A delay in obtaining these licenses can have a significant impact on the Group’s revenue, due to slowing 4.1.10 Risk of fraud being committed down scheduled imports. The Group can offer no assurance that by Group employees the relevant authorities will not take any action that could materially and adversely affect these licenses, permits or approvals, or the Group’s ability to distribute its products and provide its services. The Group has adopted a decentralized business model and operates in emerging and pre-emerging markets where ethical standards for business relations may not be uniformly advanced. Despite the Group’s efforts at training and internal control, the Group has been a victim of fraud by its employees in the past, which could also occur in the future, including cases of theft or misuse of Company property. These cases could have a material adverse impact on the Group’s results.
On the date of filing this Registration Document, the Group is not aware of any other cases of fraud involving employees within the Group, which could have a material adverse effect on the Group’s results or financial position.
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4.1.11 Tax risks related to the geographical In addition, some of the Group’s subsidiaries are currently subject location of the Group’s activities to tax audits and reassessments by the tax authorities in various jurisdictions, in relation to VAT, income tax and other taxes.
As an international group handling flows of funds in multiple jurisdictions, the Group is subject to tax laws in many countries throughout the world, and it structures and conducts its business 4.1.12 Investor perceptions of risk globally around diverse regulatory requirements as well as in African economies the Group’s commercial, financial and tax objectives. The organization and running of the Group’s business activities may Economic crises in one or more emerging or pre-emerging markets be impacted by tax legislation, notably transfer pricing, because in Africa or elsewhere could make access to financing more the jurisdictions where the Group operates do not always have difficult or reduce investors’ general appetite for the financial clear, definite, or permanent laws which mean that the tax regimes instruments of issuers operating in African countries, including applying to the Group’s companies and the interpretations of local when they operate in countries which are not directly affected by tax law may be transitory. This legislation and its interpretation by these crises. the local tax authorities are liable to change, and an inconsistent application could have a negative impact on the Group’s effective tax rate and on its income.
4.2 Risks relating to the Group’s business
4.2.1 Risk resulting from the shareholding renewal of automobile distribution agreements. As of the structure of CFAO publication date of this Registration Document, agreements that were either terminated or not renewed accounted in 2014 for 7.6% of Group consolidated revenue and 6.2% of consolidated Following the sale by Kering (formerly PPR) of its equity interest gross profit. These terminations and non-renewals of agreements in the Company and the subsequent takeover bid launched by took effect, depending on the countries, on dates ranging from Toyota Tsusho Corporation (TTC) to acquire CFAO shares, which December 2013 to March 2015. The Group concluded new closed on December 17, 2012, TTC held 97.81% of the share partnerships and is reviewing opportunities for entering into new capital of CFAO. As of March 31, 2015, TTC held 97.36% of distribution agreements to replace the existing ones for these CFAO’s shares. brands
As of the end of Sept ember 2014, 21.57% of TTC was held by Nevertheless, due to the change of control, the CFAO Group may the Japanese company Toyota Motor Corporation and 11.12% find it more difficult to keep, renew or enter into agreements or to by the Japanese company Toyota Industries Corporation, with develop new business opportunities in the automotive distribution Toyota Motor Corporation holding 23.51% of the voting rights business in the future. in Toyota Industries Corporation on the same date. It should be stressed further that TTC is a Japanese trading house listed on TTC’s acquisition of a majority stake in CFAO’s share capital has the Tokyo and Nagoya stock exchanges which operates in many been subject to merger control clearance in several jurisdictions. businesses outside the automotive industry, such as the trading On the filing date of this Registration Document, final authorization of metals, machinery, chemicals, foodstuffs, electronics and other had been refused in Tanzania, where an appeal is pending. products. The Automotive businesses in these two countries accounted for around 0.84% of the Group’s consolidated revenue in 2014. Certain distribution agreements contain change of control clauses CFAO may face the risk of being forced to reduce its market that have been, and may again be, invoked by certain partners to shares in the given country and this could have an adverse effect terminate these agreements as a result of TTC’s successful takeover on the Group’s consolidated revenue and results. bid for CFAO shares. TTC now holds a majority of CFAO’s share capital and voting Certain suppliers could also decide not to renew their distribution rights and therefore it exercises control over the Group and agreements without necessarily referring to a change of control influence over its strategy and business development. For further clause because they consider TTC to be an affiliate of Toyota information about the principal shareholder, control over the Motor Corporation. Company and measures taken to ensure that this control is not exercised in an abusive manner, see Chapter 18 “Principal As indicated in the interim financial report for 2014, certain shareholders”, section “Principal shareholders and control”. suppliers of CFAO officially requested the termination or non-
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4.2.2 A relatively small number 4.2.4 Risks related to developments of suppliers in the automobile industry
A major part of the Group’s operations depends on its ability to The performance of the Automotive division within the Group negotiate agreements and maintain business relationships notably depends on the success of its key manufacturer suppliers. The with automakers and pharmaceutical companies. While the Group relies on its automaker suppliers to provide it with an Group has long-standing relationships with most of these suppliers, attractive and high-quality range of products in a timely manner the Group’s agreements with them are generally entered into for to meet its customer demands. The Group’s success depends on its fixed terms, and, therefore, must be renewed and renegotiated suppliers’ financial position, new product design and marketing, periodically; the current trend among the main automakers is to reputation, management, production costs and industrial relations. shorten the term of distribution agreements. The termination or failure to renew these agreements is, therefore, a risk. Manufacturers also provide product warranties and, in some cases, service contracts to customers that allow the Group to offer There has been significant consolidation in the automotive and services at the sales locations for vehicles under manufacturer pharmaceutical industries in recent years, and there could be new product warranties and service contracts, and bill the manufacturer mergers in the future. When suppliers merge, they may seek to directly as opposed to invoicing the store customer. Consequently, modify existing distribution strategies, for example by selecting a at any particular time, the Group may have significant receivables single distributor for a given territory or region, or by deciding, balances with manufacturers for customer warranty and service for strategic reasons, to enter or exit a given market. work performed. In addition, the Group relies on manufacturers to varying degrees for replacement parts, technical training, and The Group cannot guarantee that its suppliers will wish to product brochures. continue to renew their agreements with the Group on acceptable terms, that the agreements will actually be renewed, will not be terminated prior to their expiration, or that the Group will remain, in practice, the only distributor of the products of the supplier in 4.2.5 Material and financial risks the countries covered by given agreement. Early termination or associated with the import failure to renew the Group’s main distribution agreements could and export of products have a material adverse effect on the Group’s business, results, financial position and prospects. (For more information, see also “Risk resulting from the shareholding structure of CFAO). The Group imports goods and products from numerous countries and coordinates delivery to the Group’s sites. Accordingly, the Group’s ability to serve its customers competitively depends on its ability to import and export its products in a timely and effective 4.2.3 Risk related to recruiting, retaining manner. The Group uses multiple forms of transportation to bring and training qualified labor its products to market, including trucks, air freight and sea freight. The Group’s products are often under the control of third party transporters for long periods, which can range from five days The Group’s success depends in large part upon its ability to for products shipped from Europe to North Africa, to 90 days attract and retain skilled manufacturing, sales and management for products shipped from Japan to land-locked countries of Sub- personnel, and any difficulties in retaining key employees could Saharan Africa. The weighted average period is 30 days. disrupt its operations. The Group’s future growth, with the introduction of new businesses, especially in the retail sector, The import and export of its products may be disrupted by raw depends on its ability to continue to implement and improve its material shortages, work stoppages, strikes, shipping container management, operational and financial systems and to continue shortages, bankruptcies of transporters, overcrowding of ports, to retain, recruit and train new employees, and this could weigh increased inspections of import deliveries, poor or extreme on the Group’s administrative and operational infrastructure. weather conditions and accidents, or damage or destruction of products during the shipping process. Increased import or export The Group’s ability to recruit and retain key personnel or manage delays or increased forwarding costs for any reason, including growth effectively in its countries, may call into question its ability availability or cost of fuel, regulations affecting the industry, to achieve its goals. competition for shipping capacity, piracy or labor shortages in the transportation industry, could have an adverse effect on the Group’s ability to serve its customers, which could have a material adverse effect on the Group’s business, results, financial position and prospects. In addition, the fact that there is an average period of six months between ordering vehicles (for the automotive sector) and delivery, increases the CFAO’s Group’s need to make forecasts and the risk that its products will be unsuitable for the market’s requirements.
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4.2.6 Functioning of distribution facilities 4.2.8 Changes in pharmaceutical price regulations The efficient functioning of the Group’s global distribution facilities is key to its success. The Group distributes its products to In the French overseas territories, the price of the pharmaceutical customers directly from the manufacturers and through distribution products marketed by the Group is subject to government subsidiaries or platforms located primarily in Africa, as well as in regulation (regulated margins). Government may sometimes France, Italy, Portugal, Denmark and India. The Group’s ability amend the regulations to limit healthcare spending. In 2011, a to satisfy its customer’s expectations depends on its distribution new regulation was adopted to reduce the margins earned by infrastructures functioning properly, the reliability of its centralized wholesale distributors in mainland France. purchasing system and its logistic chain, the development or expansion of its distribution network and third parties (in particular In the French-speaking Sub-Saharan African countries (including those involved in goods transport to and from distribution Mauritania) in which the Group operates, as well as in Algeria, infrastructures) performing services within the deadlines. In order the price of medication is generally regulated, as are the margins to minimize these risks, CFAO uses diverse means of delivery and at different stages of the distribution process. Any reduction in the capitalizes on existing expertise to put in place the logistics for margin the Group is permitted to generate in these markets may these new Group businesses (Retail, FMCG, etc.). have a material adverse effect on its business, results, financial position and prospects. The Group’s distribution systems could be interrupted by power failures, breaches in security, IT problems, natural disasters or In addition, governments or private health insurers may also problems linked to geopolitical instability in one or a number of attempt to reduce spending on pharmaceutical products or to countries where there is a potential or an actual threat to the free lower the reimbursement of medical expenses which could have movement of goods, which could have a materially adverse effect an adverse effect on the Group’s business, results, financial on the Group’s results, financial position and prospects. position and prospects.
4.2.7 Customer credit risk 4.2.9 Risks associated with manufacturing processes Although the Group’s customer base is diversified across industries and countries and no single customer represents more than 1% of The Group manufactures certain products at its production its revenue, the Group is exposed to the risk of non-payment or facilities, including beverages, plastic products, motorcycles delayed payment by its customers. The Group seeks to manage and pharmaceuticals. Although the Group does have business this exposure through guarantees, insurance and credit control, interruption insurance, the loss of all or part of its facilities due to it is not possible to eliminate this risk, which is accentuated by accident, breakdown, fire, flood or explosion, whether short or the economic crisis. In particular, the Group’s risk management long-term, could have a substantial adverse material effect on the model may not accurately anticipate the impact of an economic Group’s business, income, financial position and prospects. crisis on customers, and the Group may fail to set aside adequate provisions for potential losses. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate, particularly in light of the current economic, political, social and monetary instability in certain countries.
These credit risks could have an adverse effect on the Group’s results.
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4.3 Risks relating to the Group
4.3.1 Risks linked to the Group’s In addition, there are minority shareholders in numerous external growth strategy and the subsidiaries in all of its divisions. Agreements with the minority shareholders generally include preemptive and approval development of new activities provisions, as well as commitments regarding representation on the governance bodies of the relevant companies. The Group’s strategy partly relies on external growth through acquisitions and developing new activities. Minority shareholders may also restrict the Group’s freedom of action in certain respects, e.g., corporate restructurings and CFAO may be unable to assess these projects correctly, or dividend policy. Moreover, the Group conducts its pharmaceutical perform them successfully under the initially planned conditions, business in part through local subsidiaries in which local or identify attractive targets or close deals at the right time. The pharmacists hold non-controlling interests. The by-laws of these success of acquisitions and new activities depends on different companies and the agreements between the Group and these factors, including the economic conditions and general business pharmacists do not generally provide for liquidity mechanisms climate, the negotiation of satisfactory terms, the Group’s financial – notably in the event of the retirement of a pharmacist – that capacities, and the presence of teams able to manage the new would enable the Group to repurchase these minority interests projects and integrate acquired entities successfully. and to transfer them to practicing pharmacists. Impediments to transferring shares in these companies could undermine the In its vehicle distribution activity, in the event that it acquires Group’s strategy of fostering loyalty among local pharmacists by distribution businesses for certain brands in certain territories, the giving them an equity interest in the business. Group may have to contend with the loss of distribution rights to rival brands, or with requests to renegotiate contracts from suppliers of these rival brands in the relevant territories and even in other territories, which could have an adverse effect on the 4.3.3 Financial risks from inadequate Group’s results. insurance coverage Further, the Group may need to borrow funds to finance its projects and acquisitions and the resulting debt may reduce its income, or A substantial number of the countries in which the Group operates may not be available on acceptable terms. Acquisitions may also have a history of currency instability, high inflation, political and involve other risks or problems inter alia operating in new markets civil unrest, wars and/or terrorism, and obtaining adequate with which the Group is unfamiliar, disruption to the Group’s insurance coverage against such risks for the Group’s operations, existing business, failure to retain key personnel of the acquired and assets in these countries may be impossible or prohibitively entities, deterioration in relationships with manufacturers and expensive. Should the Group’s insurance coverage prove to be customers or incorrect valuation of acquired entities. inadequate, the Group’s financial position and results could be severely strained by losses arising on the risks inherent to operating in such countries. 4.3.2 Less room for flexibility due The Group is also exposed to risks inherent to its businesses. to partnerships and minority Although the Group maintains civil liability insurance, claims sometimes result in the payment of significant amounts, portions shareholders of which are not covered by insurance policies.
The Group conducts some of these businesses through partnerships. The partnership agreements sometimes include rights of first refusal, preemptive rights (including reciprocal preemptive 4.3.4 Risks related to litigation rights) or put or call options that may restrict the Group’s ability to maximize proceeds in the event of the sale of its stake. Moreover, The Group is party to, or directly or indirectly involved in tax, these agreements may provide for vetoes over certain decisions civil and criminal litigation (see section 20.8 “Litigation and relating to the operations of the partnership that could prevent the arbitration”). At this stage of the proceedings, the Group cannot Group from implementing its strategy, which could in turn have a predict the outcome of these cases or the financial liability that material adverse effect on the Group’s business, results, financial it may incur as a result of these litigations, which, in aggregate, position and prospects. could have a material adverse effect on its financial position or results in the future.
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There are no other governmental, legal, or arbitration proceedings and substantially all of its revenue and cash flows are attributable (including any proceedings of which the Group is aware that to the Group’s operating subsidiaries. If revenue from these are pending or likely) that could have a material impact on the operating subsidiaries were to decline, the Group’s earnings and Group’s financial position or profitability. cash flow would be affected, and the Group might not be able to meet its obligations or pay dividends. The Group’s cash flows are principally derived from dividend payments, management fees, license royalties, interest and repayments of intra-group loans by 4.3.5 Liquidity of the CFAO share its operating subsidiaries.
The liquidity of CFAO’s shares has been reduced because of the The ability of the Group’s operating subsidiaries to make these high percentage of its capital which is held by TTC. The share payments depends on business considerations, regulatory limits in price may therefore not completely reflect the Company’s value France and in the countries in which the Group does business, and It is impossible to guarantee that market-making operations on relationships with other shareholders, in the case of subsidiaries CFAO’s shares will be able to increase share liquidity or even that that are jointly owned with local partners. Moreover, the Group Group management may take a decision to this effect. may, in the future, be subject to exchange controls that restrict the transfer of cash upstream from operating subsidiaries to the TTC has indicated in its information document regarding the holding. takeover bid on CFAO shares its intention that CFAO should continue to be listed on the Euronext Paris exchange, except in The Group cannot guarantee investors that its operating case of a mandatory withdrawal, and it decided in February 2013 subsidiaries will be able to distribute sufficient quantities of cash not to implement such a withdrawal following the offer. However, and cash equivalents to it. Any decrease in revenue or failure or in accordance with applicable French regulations, TTC reserves inability of the Group’s operating subsidiaries to make payments the right to delist CFAO shares if it so wishes. to the Group’s other subsidiaries could have a material adverse effect on the Group’s ability to distribute dividends, service Group debt and satisfy its other obligations, which could in turn have a material adverse effect on the Group’s business, results, financial 4.3.6 Ability of Group and Company position and prospects. operating subsidiaries to generate The Company’s aim is to distribute an annual dividend, although profits and pay dividends this does not create obligations for CFAO in this respect. The amount of dividends paid out in the future will depend on a CFAO, the parent company, is a holding company that conducts number of factors, including the Group’s strategic objectives, the majority of its operations directly or indirectly through its financial position, any contractual restrictions, development operating subsidiaries. Most of the Group’s assets are held by, opportunities or applicable legislation.
4.4 Market risks
The Group has implemented an organizational structure that currency forward hedges to manage the risk on commercial allows it to centralize the management of market risks. Within transactions denominated in foreign currencies (see Note 30.2 the Group, market risk management is placed under the to the consolidated financial statements in Chapter 20 of this responsibility of financial management. The Group believes that Registration Document). addressing these issues at the holding company level allows the Group’s risk management policies to be applied more efficiently. The Group sells its products in euros and equivalent currency (CFP Additional information about these risks is provided in Note 30 Francs), in CFA franc, and in other local currencies and prepares to the consolidated financial statements in Chapter 20 of this its financial statements in euros. Conversely, the Group’s purchases Registration Document. are made in yen, US dollars or in euros. These differences expose the Group to several currency-related risks:
■ the value of the euro could depreciate between the date on 4.4.1 Foreign exchange risks which the Group places an order with a supplier in Japanese yen, US dollars, or any other currency, and the payment date for such an order, resulting in an increase in the euro 4.4.1.1 Overview equivalent of such payment. To limit this risk, the Group enters into forward purchase contracts when it places an order in The Group’s foreign exchange risk management policy consists of yen, US dollars or other currencies for an amount equal to reducing the Group’s intrinsic exchange rate risk by contracting
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100% of the amount of the confirmed order at the payment fluctuations and do not use hedging instruments. However, date. This policy allows the CFAO Automotive Equipment & these subsidiaries can neither exclude nor protect themselves Services division to anticipate the potential impact on the cost against the possibility of changes to the peg. See “Foreign of vehicles sold resulting from the high cost of purchasing exchange risk exposure” in section 4.1 “Risks relating to the currencies as from the time orders are made, and to adjust business and regulatory environment”; its pricing policy where applicable to reduce the impact of ■ exchange rates on gross profit. Any price increase in a local in the countries outside the CFA franc zone and the euro currency may lead to a decline in sales; and euro-equivalent zones, where it is possible to hedge the exchange risk between the local currency and hard, currencies ■ the local currencies in which the Group’s sales are made could (Morocco, Madagascar, Kenya, Denmark and Mauritius, depreciate against the euro (which is either the purchase accounting for 10.3% of the Group’s 2014 revenue), the currency or the currency into which exposure to the supplier’s Group’s subsidiaries set up forward purchase contracts for currency has been converted through the forward purchase an amount equal to the purchase price of the goods ordered contracts described above), requiring a higher amount of local from the central purchasing offices at the scheduled payment currency to cover the purchase price. The Group takes several date. This allows them to hedge against the risk of devaluation measures to minimize this risk: of the local currency against the hard currency in which their purchases are billed to them; − in the central purchasing offices: the central purchasing offices bill the local subsidiaries in the hard currency ■ in the countries outside the CFA franc zone and the Euro and most closely associated with the local currency and, once Euro-equivalent zones, where it is not possible to hedge the a confirmed order is received, they set up forward sale exchange risk between the local currency and hard currencies contracts for 100% of the value of the confirmed order at (in the following table see the “English-speaking Africa”, the payment date by the local subsidiaries. By doing this, “Maghreb” and “Africa – other countries” line excluding the central purchasing offices protect against a devaluation Morocco, Madagascar, Kenya, Denmark and Mauritius) of the hard (billing) currency against the euro between the (accounting for 26.1% of the Group’s 2014 revenue), the billing and payment dates, Group’s subsidiaries must bear the risk of a devaluation in the local currency against hard currencies between the date − in the local subsidiaries: the local subsidiaries either hedge, of the confirmed order with the central purchasing office and when possible, or else bear the risk of devaluation of the the due date for payment to the central purchasing office. For local currency in which they bill their customers against these local subsidiaries, the Group’s policy is to seek to adjust the hard currency in which they are billed by the central sales prices in local currency to cover fluctuations in the value purchasing office, between the order and payment dates; of the local currency against the hard currency in which central ■ in the euro and euro-equivalent zones (see the “French purchasing offices bill the products. Nevertheless, the Group Overseas Territories” line in the following table), (accounting is not always able to adjust its prices to cover the total amount for 25.6% of the Group’s 2014 revenue), the local subsidiaries of exchange rate fluctuations, especially in highly competitive bill customers in euros or in CFP Francs, which are pegged to markets; the euro. There is no foreign exchange risk exposure and these ■ when preparing its consolidated financial statements, the amounts are not hedged; Group must convert the financial statements of its subsidiaries, ■ in the CFA franc zone (see the “French-speaking Africa – which are prepared in local currency, into euros. Any CFA franc zone” line in the following table), (accounting for devaluation of local currencies against the euro has a negative 38.0% of the Group’s 2014 revenue), the local subsidiaries impact on equity (see the “Cumulative translation adjustments” bill customers in CFA franc s, a currency that is pegged to the column in “Consolidated statement of changes in equity” in the euro. These local subsidiaries are not at risk from currency consolidated financial statements presented in Chapter 20 of this Registration Document).
26 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com RISK FACTORS Market risks 4
Presentation of CFAO’s exchange rate hedging policy:
EXCHANGE RATE HEDGING POLICY OF CFAO
SALES/PURCHASES SALES DISTRIBUTION SUBSIDIARIES Functional currency: END CUSTOMER Local currencies Euro and Euro-equivalent zones (XPF) Pay in: Receive in: (25.6% of 2013 revenue) (no exposure) - EUR - Local currencies CFA franc zone (38.0% of 2013 revenue) PURCHASING - USD PURCHASES (risk of change in fixed exchange rate) OFFICES - Other SUPPLIERS Functional currency: Local currency zone – hedged Foreign exchange risk EUR (10.3% of 2013 revenue) on imports hedged (risk hedged by forward purchases) or managed by Pay in: Receive in: distribution subsidiaries - EUR (55%) - EUR Local currency zone – not hedged - JPY (26%) - USD (26.1% of 2013 revenue) (no hedging) - USD (18%) - Other
EXTERNAL CUSTOMERS END CUSTOMER SALES SALES
Foreign exchange risk on imports hedged by purchasing offices
External entities Foreign exchange risk on exports hedged by purchasing offices Group entities
Billing currencies used by the central purchasing offices The central purchasing offices bill local subsidiaries in the hard currencies deemed to be most closely associated with the applicable local currency. These hard currencies are listed in the following table:
Currency of invoicing Geographic location of the subsidiary of the Central Purchases Office Country/Territory/Department Reunion, French Guiana, New Caledonia, Martinique, Guadeloupe, French overseas territories Euro French Polynesia, Saint Martin Benin, Burkina Faso, Côte d’Ivoire, Senegal, Togo, Cameroon, French-speaking Africa – Central African Republic, Congo (Brazzaville), Equatorial Guinea, Gabon, CFA f ranc zone Euro Mali, Niger, Chad, Guinea Bissau English-speaking Africa US dollar Zambia, Malawi, Kenya, Nigeria, Ghana, Zimbabwe, Gambia, Uganda Euro Morocco Maghreb US dollar Algeria Guinea, Democratic Republic of the Congo, Mauritania, Mauritius, São Tomé and Principe, Madagascar, Tanzania, Liberia, Sierra Leone, Africa – other countries US dollar, Euro, Japanese Yen * Angola
* As appropriate.
4.4.1.2 Hedging instruments Analysis of sensitivity to foreign exchange risk In accordance with IAS 39, foreign exchange hedges were For further information, see Note 30.2 “Exposure to foreign analyzed to determine whether they qualified for hedge exchange risk” in the consolidated financial statements in accounting. Chapter 20 of this Registration Document.
For further information, see Note 30.2 “Exposure to foreign exchange risk” in the consolidated financial statements in Chapter 20 of this Registration Document.
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4.4.1.3 Management of foreign exchange risks for 4.4.2 Interest rate risk operational expenditure In order to limit the foreign exchange exposure on the financing The Group is exposed to interest rate risk mainly on its syndicated of its operational expenditure, the Group generally tries to finance credit facility which bears interest at variable rates. The medium- this expenditure out of equity or borrowings in local currency. term borrowings of the Group’s subsidiaries in local currencies are at fixed rates. The interest rate on short term borrowings is not 4.4.1.4 Residual foreign exchange risk (after usually indexed, as these comprise unconfirmed lines of credit. hedging) The Group does not use any derivative instruments to hedge its interest rate risk at present. Despite its efforts to systematically hedge its foreign exchange risk in all cases where this is possible, the Group cannot totally For further information, see Note 30.1 “Exposure to interest rate eliminate its exposure to such foreign exchange fluctuations. Risks risk” in the consolidated financial statements in Chapter 20 of this remain despite the hedges set up: Registration Document.
■ for subsidiaries outside the CFA franc zone that operate in markets in which it is not possible to use forward currency contracts to hedge against the risk of fluctuation between the 4.4.3 Liquidity risk local currency and the currency in which purchases are billed by the central purchasing offices (which is the case in most (For further information, see Note 30.5 to the consolidated of the countries in Africa in which the Group operates), the financial statements in Chapter 20 of this Registration Document.) Group is unable to hedge against fluctuations between these currencies; Most of the Group’s non-derivative financial instruments, which consist primarily of trade payables and other borrowings, have ■ in the CFA f ranc zone, the Group cannot hedge against or maturities of less than one year. Projected cash flows relating to exclude the possibility of a change in the fixed exchange rate accrued interest payable are calculated through to maturity of the of the CFA f ranc against the euro (see section 4.1 “Foreign debt to which they relate. Floating-rate accrued interest payable exchange risk exposure”); at future dates is calculated at the December 31, 2014 interest rate. ■ the Group may place orders via the central purchasing offices without having a matching customer order. When a When it was floated on the stock market at the end of 2009, sale to the final customer takes place after the expiration of the Group set up a syndicated credit facility of €300 million to the corresponding hedge, the Group is exposed to the risk of replace and repay the historical financing supplied by Kering exchange rate fluctuations between the expiration of the hedge (formerly PPR). This syndicated facility with CFAO’s main banks and the sale date; with an initial maturity of three years was extended for one year in 2010 and again for a year in 2011. CFAO signed a new ■ even when the Group is able to fully or partially hedge its revolving credit agreement for €400 million in December 2013, risk using forward currency contracts against exchange with a syndicate of 12 banks. The purpose of this credit line is rate fluctuations between the date an order is placed with a to finance the Group’s general operating requirements and to supplier and the date on which the final customer pays the refinance the €300 million syndicated loan described above. purchase price in local currency, the Group must still set its prices in local currency based on the hedged purchase price For further information concerning the Group’s liquidity sources that it obtains. Although the Group’s policy is to adjust sales see Chapter 10 “Capital resources” of this Registration Document. prices in local currency to reflect exchange rate fluctuations, its ability to increase its prices and maintain its gross profit Given the current instability in the global economy and its impact margins will depend upon market conditions and the level of on each of the markets in which it operates, the Group cannot competition in any given country. be certain that it will still be able to meet certain contractual obligations under the syndicated credit facility in the future, and Because the Group is unable to fully eliminate its currency in particular the restrictive clauses or covenants described in exposure, its revenue, gross profit margin and income are Chapter 10 “Capital resources”. Other circumstances in countries vulnerable to exchange rate fluctuations, particularly with respect in which the Group has operations, particularly political events, to the yen/euro and dollar/euro exchange rates, as well as the could indirectly prevent CFAO from complying with its covenants. dollar, euro and yen exchange rates against other currencies in Failure to comply with these clauses would constitute a default which the Group’s sales are conducted.
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event under a credit facility agreement and entitle the financial if the majority shareholder should no longer have a controlling institutions to demand early repayment of all sums outstanding interest in the Company (under the terms of Article L. 233-10 I as well as accrued interest and related costs. In the event of a and II of the French Commercial Code). demand for early repayment of the sums owed under a credit facility agreement, it is possible that the Group may not have Liquidity risk may also result from local difficulties in transferring sufficient liquid assets to cover the full outstanding amount. At the funds as a dividend or other payment from local subsidiaries, in date of filing this Registration Document, and in light of the current countries where the Group operates, to the holding company. As political and economic environment, the Company considers it a result of the foreign exchange or economic policy of the country unlikely that it will not comply with these covenants at the next in question, the funds may be unavailable (see Note 28.2 to the contractual assessment date, i.e. June 30, 2015, and is unable consolidated financial statements and “Ability of Group operating to make a formal pronouncement with regard to subsequent subsidiaries to generate profits and pay dividends” in section 4.3 assessment dates. above, “Risks relating to the Group”).
It is also possible that a consequence of these restrictive commitments or covenants is to reduce the Group’s flexibility in the way it runs its business activities. The principal risks to 4.4.4 Counterparty risk reduced Group flexibility include: its ability to seize commercial opportunities, its ability to plan for growth and/or have the leeway The Group is exposed to counterparty risk on its use of derivative to sell certain assets, its ability to obtain additional financing over instruments to manage its exchange rate risk (see Notes 30.4 and and above existing arrangements, in order to cover, for example, 30.2 to the consolidated financial statements in Chapter 20 of it working capital requirements, capital expenditure, potential this Registration Document). The Group’s strategy is to minimize acquisition and refinancing. There is also the possibility that it its exposure to counterparty risk by only contracting with leading may be required to devote a significant portion of its cash flows establishments and allocating its transactions among the selected to pay for sums due under the terms of credit agreements, thereby institutions according to pre-defined limits. The counterparties to reducing its ability to use its cash for other purposes. the trading of derivative products are included in the credit risk management procedures: each of them is subject to authorizations Finally, the syndicated credit facility allows the lenders to demand that are updated on a regular basis in amount and in maturity. the early repayment of borrowings and to cancel lines of credit
4.5 Risk management
The Group’s internal control and risk management systems are As part of its internal control and risk management procedures, closely linked. Both rely on a range of systems, procedures and the Group has mapped the main risks to which it is exposed. tailored actions intended to ensure that appropriate measures are For each risk identified, the Group evaluates the likelihood of the taken to control: (i) the Group’s activities, the effectiveness of its occurrence of this risk and its potential impact. The Group’s risk operations and the efficient use of resources; and (ii) risks that are management procedures are set out in more detail in Chapter 16 likely to have a significant impact on the Group’s assets or the of this Registration Document in the report by the Chairman of realization of its objectives, whether these involve operational, the Supervisory Board on Corporate Governance, internal control financial, or legal and regulatory matters. and risk management.
REGISTRATION DOCUMENT 2014 - CFAO 29 RISK FACTORS 4 Insurance
4.6 Insurance
4.6.1 Overview 4.6.3 The Group’s approach to insurance
The Group’s insurance coverage is provided under a number The Group’s significant risk insurance policy is determined of policies taken out either directly at Group level and/or at primarily by evaluating the best economic fit between risk subsidiary level. These are included in international insurance coverage, premiums and the Group’s self-insurance, and the programs, as is the case with carriage insurance, property insurance market offering, constraints and local regulations. damage and business interruption insurance, and civil liability insurance, or in individual policies such as those underwritten for When obtaining coverage, the Group favors an “all risks with the Group’s civil liability insurance for corporate officers and its exceptions” approach and sets coverage levels in light of the construction insurance. Group’s assessment of the potential financial consequences of potential loss events, including civil liability (bodily injury or The Group’s current insurance policies have similar coverage (see property damage caused to third parties by products, installations section 4.6.4 “Main insurance policies”, below, for a description or equipment), property damage resulting from fire, explosions, of the Group’s insurance coverage) and terms and conditions for water damage, riots, terrorism, wars, etc., or operating losses those of last year. The policies were taken out in recent months with arising directly from a loss event. rating conditions which were appreciably the same as those of the previous period. The Group’s Insurance Manager participates in The Group determines the level of appropriate coverage by site identifying and quantifying the consequences of and the reduction and by company, based on its assessment of the amount needed of risks either by recommending measures to prevent risks which to settle or deal with reasonably estimated potential liabilities, can thus be eliminated or reduced, or by planning financing damage or other risks. In making these assessments, the Group conditions, and notably insurance for exceptional risks, which considers the evaluations provided by its insurers. In some cases, have a high potential impact and low frequency. identified risks are not insured because no third party insurance coverage is available or because the price is disproportionately Each Group subsidiary is required to provide the Insurance high compared to the benefits of the insurance. Director with the information needed to identify and quantify risks and to implement business contingency plans in the event of a The Group manages risks within the framework of its general risk major incident. Based on this information, the insurance manager management policy and believes that its approach to insurance negotiates with major insurance and reinsurance providers in is consistent with the market practices of French or foreign order to obtain the most appropriate coverage. companies of a similar size that are exposed to comparable risks. Most of the Group’s policies are “umbrella” insurance policies that cover some or all of its subsidiaries, depending on the particular 4.6.2 Risk prevention policy policy and subject to local regulations. The Group gets coverage through international insurance brokers specialized in obtaining coverage of the Group’s principal risk categories from recognized The Group’s risk prevention measures, which are implemented insurers in the industrial risks sector. The insurance premium is on a decentralized basis at the subsidiary level, are designed to generally paid by the Group’s subsidiaries and is set based on enable the Group to identify, evaluate and reduce its exposure criteria such as the amount of capital insured or the subsidiaries’ to risk and potential losses, and their frequency and intensity, share of the Group’s overall revenue. The cost of corporate officer through valuations of assets at risk. liability insurance and war risk policies is not passed on to the They are based on audits of the Group’s principal operating Group’s subsidiaries. sites and implementation of the recommendations of security In addition to the Group’s main insurance policies, certain professionals, a risk prevention engineering program designed to operating subsidiaries have taken out individual insurance reduce exposure to on-site fire risks in particular, internal control policies to cover risks specific to their businesses (construction, procedures, employee training programs addressing the risk of auto insurance, etc.). misappropriation of assets, and implementation of appropriate contingency plans in certain Group entities. This policy is implemented on a risk-by-risk basis.
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4.6.4 Main insurance policies transport of goods in the various geographic areas in which it operates. This policy covers the risk of damage, theft or major events, including acts of war, occurring during transport The Group’s principal categories of insurance coverage are operations performed by the Group’s operating subsidiaries, described below: from dispatch of the goods by suppliers to delivery to the ■ operating losses and damage: the Group has put in place an recipient; operating losses and damage insurance policy. This cover ■ civil liability: t he Group has set up a civil liability insurance came into effect on July 1, 2010, and has been renewed program for operating risks and risks after delivery or services, since. It insures the Group against damage resulting from covering loss to third parties caused by the activities of all its fire, explosions, water damage, theft, natural events affecting subsidiaries. The amount of damages insured under this policy specific assets (buildings, movable property, equipment, goods, is capped at USD 303 million per claim and per year, in IT equipment) and those for which the Group is responsible, as conjunction with TTC’s corresponding insurance program. The well as lost income resulting from such damages, for a period amount of the premium is paid by the subsidiaries in proportion until normal business can be resumed. The total amount of the to their revenue. The Group has also taken out similar-type civil damages insured by these policies depends on the geographic liability insurance specifically covering its African activities; area and the specific risks. These amounts are based on evaluations of potential maximum loss events within the Group; ■ civil liability for corporate officers: the Group has taken out an insurance policy to cover the civil liability of its corporate ■ credit risk: the Group only insures the central purchasing offices officers. This policy covers the amount of any claim taken when selling to third parties on a transaction specific basis; by third parties against the corporate officer(s) of the Group ■ transportation of goods: t he Group has taken out an insurance resulting from an (unintentional) act giving rise to their policy expiring on December 31, 2015 that covers the individual or joint and several civil liability.
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32 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com INFORMATION ABOUT THE ISSUER 5
5.1 History and development 5.2 Investments 34 of the Company 34 5.2.1 Investments made since 2012 34 5.1.1 Legal and commercial name of the Company 34 5.2.2 Main investments in progress 36 5.1.2 Registered offi ce address 34 5.2.3 Main investments to be undertaken 36 5.1.3 Legal form, incorporation and applicable legislation 34 5.1.4 History of CFAO 34
REGISTRATION DOCUMENT 2014 - CFAO 33 INFORMATION ABOUT THE ISSUER 5 History and development of the Company
5.1 History and development of the Company
5.1.1 Legal and commercial name governed by the provisions of Book II of the French Commercial of the Company Code (Code de commerce). For more information regarding the administrative, management and supervisory bodies and executive management, see Chapter 14 “Corporate Governance” CFAO of the present Registration Document.
CFAO is registered in the Nanterre Trade and Companies Registry under number B 552 056 152. The Company was incorporated 5.1.2 Registered office address on April 4, 1907. The statutory term of the Company will end on April 3, 2042, unless this term is extended or the Company is 18, Rue Troyon subject to early dissolution. 92316 Sèvres, France Tel: +33 (0)1 46 23 56 56 5.1.4 History of CFAO
5.1.3 Legal form, incorporation For more information regarding the History of CFAO, see and applicable legislation Chapter 6 “Business overview”, section 6.1 “Introduction to the Group” of the present Registration Document. CFAO is a French joint-stock company with a Management Board and a Supervisory Board (société anonyme à Directoire et à Conseil de surveillance) incorporated under French law and
5.2 Investments
The investments outlined below relate to purchases and disposals of ■ a program to invest in production equipment for the beverages property, plant and equipment and intangible assets. Acquisitions business to increase production capacity, which includes a of companies by the Group over the last three years are tax incentive. An initial investment program was launched described in Chapter 7 “Organizational structure”, section 7.2.4 in 2002 and was completed in 2008; these investments “Acquisitions and disposals over the past three years”. doubled production capacity. A second program was launched in 2009, and a third one is in progress since January 2012;
■ a program to provide the CFAO Automotive Equipment & 5.2.1 Investments made since 2012 Services division with a dedicated information technology system specifically designed for the business; and a The Group’s total gross operating investments from 2012 to 2014 program for the creation of vehicle leasing fleets, amounting amounted to €315.1 million. to €14.8 million in 2012, €12.3 million in 2013 and €17.3 million in 2014. These investments were made according to the following priorities:
■ a program to modernize and expand the automobile dealership network in Sub-Saharan Africa, the Maghreb and the French overseas territories;
34 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com INFORMATION ABOUT THE ISSUER Investments 5
The table below shows gross operating investments by division from 2012 to 2014:
Holding company (in € millions) Equipment Health Consumer goods and others Total December 31, 2014 Gross purchases of property, plant and equipment and intangible assets 0.2 - 6 0.8 7 Network modernization and expansion 21.6 16.5 - - 38.2 Leasing fleets 17.3 - - - 17.3 Equipment and technical material 9.6 6.4 2.6 0.5 19.1 Information systems 3.8 1.4 0.2 0.8 6.2 Brasseries du Congo - - 33.3 - 33.3 Other -----
CFAO Industries, CFAO CFAO Equipment & CFAO holding (in € millions) Automotive Eurapharma CFAO Industries Technologies Services & other Total December 31, 2013 Gross purchases of property, plant and equipment and intangible assets 24 14.5 57.2 4 99.7 Network modernization and expansion 15.4 9.5 2.1 3.8 30.8 Leasing fleets - - 12.3 - 12.3 Equipment and technical material 5.4 4.4 7.3 0.2 17.3 Information systems 2.8 0.8 0.7 - 4.3 Brasseries du Congo - - 34.7 - 34.7 Other 0.4 - 0.2 0.1 - 0.3 December 31, 2012 Gross purchases of property, plant and equipment and intangible assets 35 11.4 45.7 2.2 94.3 Network modernization and expansion 22.3 6.1 2 1.6 32 Leasing fleets - - 14.8 14.8 Equipment and technical material 8.9 4.6 7.7 0.2 21.4 Information systems 3.1 0.8 0.3 0.4 4.6 Brasseries du Congo - - 20.9 20.9 Other 0.5 - – 0.5
In 2014, proceeds from disposals of property, plant and equipment amounted to €12.3 million.
REGISTRATION DOCUMENT 2014 - CFAO 35 INFORMATION ABOUT THE ISSUER 5 Investments
5.2.2 Main investments in progress 5.2.3 Main investments to be undertaken
The Group’s main investments in progress are as follows: As of the filing date of this Registration Document, no firm commitments had been made to third parties concerning material ■ expansion and modernization of the CFAO Automotive operational investments. Equipment and Services division dealership network, including a ramp-up of the leasing fleet investment program and a ramp- The Group estimates that its net operating investments in 2015 up of the CFAO Equipment investment program; will mainly consist of:
■ additional investments in production equipment for the ■ on the one hand, the continuation of: beverages business in the Congo; − investments in modernizing and extending the CFAO ■ modernization and expansion of the distribution capacity of Automotive Equipment and Services network and the the Eurapharma network; Eurapharma network for an overall sum of around €92 million, ■ continuation of the information systems investment program for subsidiaries; − investments of CFAO Retail (construction of shopping centers) in Côte d’Ivoire, Nigeria and Cameroon amounting ■ investment in the first CFAO Retail center in Abidjan. to approximately €22 million;
■ on the other hand, the continuation of:
− investment programs to expand production and distribution capacity at Brasseries du Congo and to modernize plastics plants for an amount of approximately €48 million; and
− investments in connection with the ramp-up of the equipment distribution and rental services companies amounting to approximately €26 million;
Together representing a total of nearly €187 million. These investments will be partly financed by the cash flow generated by the activities. They could also require specific or dedicated financing.
36 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com BUSINESS OVERVIEW 6
6.1 Introduction to the Group 38 6.5 Strategy 58 6.1.1 Introduction to the Group’s business 38 6.5.1 Maintaining a high level of organic growth 6.1.2 History 40 for existing businesses 59 6.5.2 Optimizing productivity and operating profi t 59 6.5.3 Continuing the geographic expansion 6.2 Business divisions 42 of its various businesses 60 6.2.1 CFAO Automotive Equipment & Services 42 6.5.4 Applying its know-how to the development of new businesses, principally in Africa 60 6.2.2 CFAO Technologies 45 6.5.5 Pursuing a policy of targeted external growth 60 6.2.3 Eurapharma 45 6.2.4 CFAO FMCG Industries & Distribution 47 6.2.5 CFAO Retail 48 6.6 Regulations 61 6.6.1 Pharmaceutical operations 61 6.3 Competitive strengths 48 6.6.2 Exchange controls 63 6.6.3 Regulations concerning the fl ow of goods 65 6.3.1 Leadership positions in Africa and in the French overseas territories 48 6.6.4 Regulations concerning foreign direct investment 65 6.3.2 Unique competitive positioning in key Group markets 49 6.6.5 Product liability 66
6.4 Market overview 52 6.4.1 The Group’s two geographic areas (Africa and the French overseas territories) are growth markets 52 6.4.2 A prime position enjoyed by major players in the Group’s key geographic areas 54 6.4.3 Structural growth factors in the Group’s core markets 55
REGISTRATION DOCUMENT 2014 - CFAO 37 BUSINESS OVERVIEW 6 Introduction to the Group
6.1 Introduction to the Group
6.1.1 Introduction to the Group’s business Equipment ■ CFAO Automotive Equipment & Services
Equipment. Healthcare. Consumer Goods. To capture further synergies and pool available resources and In each of these areas, CFAO has the expertise required to satisfy means, the automobile, equipment and rental businesses were essential needs on the African continent, where the Group has merged into a single division in early 2014. The new division more than 125 years of experience. In Africa, it holds leading is called CFAO Automotive Equipment & Services. It is split positions in the distribution of automobiles and pharmaceuticals into two geographic areas: West Africa (French-speaking (except in South Africa). Ever growing and developing, it also Sub-Saharan Africa, Ghana and Nigeria) and Eurafrica (the operates in the distribution of equipment and everyday consumer Maghreb, East Africa, French overseas territories and Asia). goods as well as in new information and communications CFAO Automotive is one of the leading importers and technologies. distributors of passenger and utility vehicles in Africa (excluding CFAO operates in four main geographic areas: French-speaking South Africa) and in French overseas territories. The network Sub-Saharan Africa, English- and Portuguese-speaking Sub- buys, stocks, imports and distributes vehicles produced by Saharan Africa (excluding South Africa), the Maghreb and major global automobile manufacturers. The Group has over French overseas territories. The Group is present in 34 African 90 years of experience in this business. CFAO Automotive has countries (including Mauritius) and 7 French overseas territories. It dealerships in 36 countries spanning the Maghreb (Algeria, is also present in Vietnam and Cambodia through the distribution Morocco), Sub-Saharan Africa (including Mauritius), four of automobiles. With its Eurapharma division, the Group also has French overseas territories, Vietnam and Cambodia. As well an indirect presence in Denmark and in India, where the two as selling full ranges of new passenger and utility vehicles, Missionpharma (a company acquired by Eurapharma in 2012) CFAO Automotive also distributes motorcycles, boats and storage and distribution platforms are located, as well as in motors for boats, and offers diverse services ranging from after Portugal and in Italy. Most of CFAO’s operations in mainland sales services to selling spare parts and tires. France concern direct export sales. CFAO Equipment is a business to business network devoted As a major global brand distributor, CFAO stands out from its to the selling and maintenance of equipment. It offers an competitors for its before and after sales services which meet extensive range of transport vehicles, construction and the highest international standards, its constant emphasis on handling machinery, agricultural equipment, generators and operational improvements (as illustrated by its showrooms, stores, elevators, with the latter business being operated through a warehouses, workshops, equipment, IT systems, etc.), and a partnership with OTIS. In September 2014, the heavy vehicles supply chain that is able to swiftly serve markets that are located and tires businesses were integrated into CFAO Equipment. far from its production centers. Merged with the CFAO Automotive business at the start The year 2013 saw the launch of a shopping mall development of the year, CFAO Equipment now benefits from the effects project in Africa and the creation of a new division, CFAO Retail. of commercial and back-office synergies, as well as the CFAO intends to successfully complete this project, in particular geographic coverage of the CFAO Group in Africa. through partnerships established with the Carrefour group for food Services include three types of business: short- and long-term distribution and with other international retailers whose brands rental services, used vehicles and spare parts and multi-brand will be used by CFAO in the shopping malls. The construction of services. the first shopping mall began in 2014 in Abidjan (Côte d’Ivoire), with the opening planned for the second half of 2015. This new CFAO manages a fleet of some 2,700 vehicles for short- business will reinforce the Consumer Goods business line, which and long-term rental services in seven countries: Cameroon, already includes the production and distribution of beverages, Congo, Côte d’Ivoire, Gabon, Democratic Republic of plastic products, and consumer goods. Congo, Senegal and Madagascar. To better serve the needs of companies present on the African continent, the Group CFAO operates businesses in three major strategic growth areas expanded its offering. In addition to short- and long-term that focus on high-potential markets: equipment and services rental services for passenger vehicles, pickup trucks and off- (Equipment), health (Healthcare) and everyday consumer road vehicles, it also offers equipment rentals: machinery for goods (Consumer Goods). To optimize its growth, CFAO has public works, handling and generators. All these offerings are reorganized and merged certain Business divisions. In 2014, the combined under a single brand name: LOXEA . These services Group comprised three business lines, as described below.
38 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com BUSINESS OVERVIEW Introduction to the Group 6
effectively round out the short-term vehicle rental franchises This division generated 34.2% of the Group’s total consolidated that the Group operates for the Avis Budget Group and Hertz. revenue in 2014. LOXEA covers all the requirements of professional customers to ensure the optimal use of their vehicles. LOXEA has access Consumer goods to the CFAO brand portfolio to put together an attractive offer ■ including maintenance services in fully-equipped workshops. CFAO FMCG Industries & Distribution
CFAO Automotive Equipment & Services generated 53.3% of The division, hitherto known as CFAO Industries, expanded the Group’s total consolidated revenue in 2014. its scope of business in 2014 in order to offer a more comprehensive range of products to its B2B customers. This ■ CFAO Technologies helped it to pursue further growth in the distribution of fast moving and internationally-recognized brand consumer Created in 2002, CFAO Technologies offers a comprehensive goods and to increase its production of beverages and plastic and integrated, high value added range of services in Africa in products. In early 2014, the division changed its name to the field of New Information and Communication Technologies CFAO FMCG (1) Industries & Distribution. (NICT). In 2012, the division refocused its business activities. By refocusing, it was able to create a portfolio of offers to One of the cornerstones of CFAO FMCG Industries & meet the needs of B2B customers in terms of consultancy and Distribution’s strategy is to strengthen its position in terms of auditing services for infrastructure (with a view to optimizing consumer goods in order to enable African consumers to access their performance and guaranteeing security), integration new products thanks to the development of major brands in the (supply, installation and configuration of systems and network continent. In 2013 and 2014, the first distribution agreements infrastructure), as well as managed services and maintenance, were therefore entered into in Nigeria with Pernod Ricard, the an offer that consists of managing all or part of a customer’s IT joint global leader in wines and spirits, and with Ferrero, the system and infrastructure on their behalf. European number 3 in confectionery.
CFAO Technologies generated 2.2% of the Group’s total The Industries business consists mainly of the beverage business consolidated revenue in 2014. in the Congo, where the Group owns and operates two bottling facilities in Pointe Noire and Brazzaville, through a partnership Healthcare with Heineken, and CFAO is the leading distributor of bottled beverages in the country. It also includes the manufacture ■ Eurapharma and assembly of plastic products (such as razors and BIC® The Group, through its Eurapharma division, is one of brand pens, bottle racks and other packaging products, with the leading importers and distributors of pharmaceutical four plastic processing plants in Sub-Saharan Africa making products in Africa (excluding South Africa), in the French products that are distributed in more than 15 countries in the overseas territories. Eurapharma stands out through the region). range of services it offers to both upstream (laboratories) and The CFAO FMCG Industries & Distribution division generated downstream (pharmacists) customers. Its customers include 10.3% of the Group’s total consolidated revenue in 2014. the largest international laboratories. With over 60 years of experience, Eurapharma enjoys leading positions in its core ■ CFAO Retail historical markets, French-speaking Sub-Saharan Africa, where Eurapharma has operations in 14 countries, and the French In order to grow its retail business in Africa, which it announced overseas territories. Eurapharma also enjoys a major presence in 2013, CFAO created a specific division: CFAO Retail. in markets it has entered more recently in English- and The division’s objective is to build and operate a network of Portuguese-speaking Sub-Saharan Africa, including in Nigeria shopping malls across eight countries in West and Central where Eurapharma became established in 2012 through the Africa (Cameroon, Congo, Côte d’Ivoire, Gabon, Ghana, acquisition of Assene, now Assene Laborex, and in Algeria Nigeria, Democratic Republic of Congo and Senegal) that where Eurapharma manufactures pharmaceutical specialties meet the specific needs of African consumers. Each shopping under license and produces on behalf of Algerian and foreign mall will be organized around a central attraction consisting laboratories, through Propharmal. In 2012, Eurapharma of a Carrefour branded food outlet; Carrefour is the second acquired a controlling equity interest in Missionpharma, the largest retailer in the world. The shopping malls will host a world leader in medical kits, and one of the main suppliers of “club of brands”, a network of international retailers wishing African public healthcare operators. Finally, in October 2014, to support the growth of the middle class in Africa , as well as Eurapharma acquired 70% of the share capital of Fazzini local retailers and services. SRL, an Italian (Milan-based) distributor of small medical and hospital equipment.
(1) Fast Moving Consumer Goods.
REGISTRATION DOCUMENT 2014 - CFAO 39 BUSINESS OVERVIEW 6 Introduction to the Group
The first shopping mall, whose construction began in 2014, Within ten years, the Group plans to develop several dozen will open its doors in Abidjan, Côte d’Ivoire, during the second shopping malls to help it become a benchmark player in retail half of 2015. This event will mark CFAO’s entry into the retail distribution in these regions of Africa. distribution industry in Sub-Saharan Africa. CFAO Retail did not generate revenue in 2014.
The Group’s 2014 consolidated revenue amounted to €3,560.4 million.
CHANGE IN THE BREAKDOWN OF REVENUE BY DIVISION AND BY GEOGRAPHIC AREA FROM 2010 TO 2014
2010 2011 2012 2013 2014 (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) Equipment 1,662.6 62.13% 2,034.2 65.12% 2,366.9 66.02% 2,257.0 62.21% 1,977.4 55.54% Healthcare 809.6 30.25% 864.5 27.68% 969.2 27.03% 1,103.4 30.41% 1,216.1 34.16% Consumer goods 203.9 7.62% 224.9 7.20% 248.9 6.94% 267.5 7.37% 366.8 10.30% Holding 0.1 0.00% 0.1 0.00% 0.2 0.00% 0.2 0.01% 0.1 0.00% TOTAL 2,676.2 100% 3,123.7 100% 3,585.2 100% 3,628.1 100% 3,560.4 100% French-speaking Sub-Saharan Africa 1,128.2 42.2% 1,239.9 39.7% 1,357.9 37.8% 1,446.7 39.8% 1,484.8 41.70% French Overseas Territories and Other 555 20.7% 709.8 22.7% 717.2 20.0% 743 20.4% 747.1 21.0% Maghreb 509.2 19.0% 599.6 19.2% 809.3 22.5% 694 19.1% 490.7 13.8% English- and Portuguese-speaking Sub-Saharan Africa 340.2 12.7% 412.5 13.2% 510.9 14.2% 503.8 13.9% 523.5 14.7% Others Europe (1) 143.4 5.4% 161.8 5.2% 195.1 5.4% 245.9 6.8% 314.3 8.8% TOTAL 2,676 100% 3,123.6 100% 3,590.4 100% 3,633.4 100% 3,560.3 100%
(1) France (export) and Denmark.
The table below lists the Group’s largest markets by revenue 6.1.2 History in 2014. The recurring operating income of each Group division is provided below in the descriptions of the business divisions. The Group has a history with Africa that spans more than 160 years. It traces its origins to the creation of the Etablissements As a % of revenue Verminck in Marseille in 1852, which were renamed CFAO Algeria 10.1% in 1887. Throughout the second half of the nineteenth century, the Group conducted its business in the principal markets of Congo 9.5% West Africa, including Senegal, Guinea, Gambia, Côte d’Ivoire,
France Export* 8.8% Nigeria and Sierra Leone. At the time, it was principally involved Reunion 7.0% in the trading of consumer products and foods, including nuts, Cameroon 6.9% cocoa, soaps, oils, rubber, coffee, ginger, leather, tobacco, French Antilles 6.2% watches, alcohol and wax. It began distributing automobiles in Nigeria 5.9% Africa in 1913. Côte d’Ivoire 5.7% In the 1920s and 1930s, the Group expanded its businesses Senegal 3.8% to Cameroon, Gabon, Togo and the Democratic Republic of New Caledonia 3.8% Congo. By 1939, it had grown to 11,000 employees, including Morocco 3.7% 1,000 expatriates, and by 1948 it had over 360 sales locations in 19 countries. In the three decades that followed, the Group Gabon 2.9% significantly grew its automobile distribution business and Kenya 2.7% expanded into other industries, such as the manufacturing of Mali 2.6% plastics, becoming a multinational service and trading company. Democratic Republic of Congo 2.3% In the late 1950s, the Group moved its headquarters from Burkina Faso 2.1% Marseille, its historical base, to Paris. During this period, the Group pursued a strategy of diversification, in particular by * France Export revenue represents the revenue generated by export sales carried out by the Group’s central purchasing offices. launching supermarkets in Africa and France. In the 1970s,
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the Group was therefore operating on three continents (Africa, entered the pharmaceutical manufacturing segment for the first Europe, and the United States), with a diversified portfolio of time by buying a 49% stake in an Algerian entity, Propharmal. activities and annual revenue that reached nearly 4 billion French The Group also developed new business lines, including in new Francs (i.e., approximately €610 million). technology with CFAO Technologies in 2002, and in equipment distribution with CFAO Equipment, which was driven by the In 1990, the Group was acquired by the Pinault group, which expected growth in the infrastructure, construction and agricultural later became Pinault Printemps Redoute then PPR and then Kering, markets. after which it became a branch of Pinault SA and refocused on its African business. The Group then began to reorganize its 2009 marked the start of a new Chapter for CFAO, with the businesses in the context of a generally difficult economic climate. launch of its initial public offering on December 3 at an offer price of €26 per share, following the sale by Kering (formerly In 1994, the Group weathered the crisis of the CFA franc (which lost PPR) of 57.94% of the Group’s share capital and voting rights. 50% of its value against the French Franc in January 1994). This 2012 brought about a change in CFAO’s primary shareholder crisis disrupted the economies of the CFA-member countries and following the sale of PPR’s 42% interest in CFAO and the tender caused serious difficulties for many local players. After overcoming offer launched by the Japanese Sogo shosha (general trading this crisis, the Group resumed its strategy in reinforcing its company) Toyota Tsusho Corporation (TTC), at the close of which positions in its key business lines and regions. In 1996, the Group TTC held 97.8% of CFAO’s capital and voting rights. purchased SCOA, one of its historical competitors, assuming and successfully integrating the pharmaceutical distribution business The year 2013 was marked by the launch of the project to create of its subsidiary, Eurapharma. several dozens of shopping malls in Africa, in partnership with the Carrefour group for the Food Distribution division. A new CFAO Since the end of the 1990s, the Group has expanded its Retail business responsible for this development was created business, both organically and through acquisitions in new in 2013. geographic areas, leveraging its strong positions in its traditional businesses and geographic areas. In the automobile sector, it Throughout 2014, and during the first half of 2015, CFAO created or acquired businesses in new regions including certain underwent a large number of changes, including, in particular, the English- and Portuguese-speaking Sub-Saharan African countries reorganization of several divisions in order to optimize synergies (such as Kenya and Nigeria), the Maghreb and, most recently, and accelerate the commercial development of its businesses (for Vietnam. CFAO Automotive has also strengthened its presence in more information, see section 6.2). The Group’s scope of business French-speaking Sub-Saharan Africa and in the French overseas for the CFAO Automotive division expanded with new operations territories. The Group invested substantially in human resources in Liberia, Sierra Leone and Cambodia. At the same time, CFAO (through training and recruiting efforts) and infrastructure to FMCG Industries & Distribution expanded its consumer goods expand and modernize its existing distribution and manufacturing distribution business. New strategic partnerships were entered facilities. In the Group’s pharmaceutical division, Eurapharma into with well-known international brands, recognized for the entered new regions, such as Algeria and Kenya, and developed relevance of their products and services. External acquisitions new business lines, including its pre-wholesale business (in 2001) were also made. and distribution agent business (in 2000). In 2011, Eurapharma
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6.2 Business divisions
In 2014, some of the Group’s business divisions were merged CFAO Automotive is primarily active in business-to-business (see below). The activities of the Group are organized in three markets (private and public companies, NGOs and governments) major strategic business sectors: in Sub-Saharan Africa and larger consumer markets in the French overseas territories and the Maghreb. ■ Equipment and Services (Equipment) comprises CFAO Automotive Equipment & Services and CFAO Technologies; 6.2.1.1.1 Geographic footprint ■ Healthcare comprises Eurapharma; The Group sells motor vehicles in 36 countries spanning the ■ Consumer Goods comprises CFAO FMCG Industries & Maghreb, French-, English- and Portuguese-speaking Sub- Distribution and CFAO Retail. Saharan Africa, four French overseas territories (French Guiana, New-Caledonia, Reunion and Tahiti), Vietnam and Cambodia. The Group’s principal historical market is French-speaking Sub- Saharan Africa, where it operates in 21 countries (including 6.2.1 CFAO Automotive Equipment Cameroon, the Congo, Côte d’Ivoire and Senegal), where it sold & Services its first vehicles in 1913. The Group has also long maintained a presence in English- and Portuguese-speaking Sub-Saharan Africa To optimize these developments and strengthen its position in its in countries such as Nigeria and Ghana. Since 2000, the Group various market segments (equipment, healthcare and consumer has significantly expanded its geographic footprint, launching goods), CFAO restructured a number of its businesses. The CFAO operations in numerous new countries. These new operations, set Automotive, Equipment, and Rental Services divisions (the last up in markets considered to have high potential, have made a two having previously been integrated into the CFAO Industries significant contribution to its growth. In 2014, CFAO Automotive division, Equipment & Services) were merged to become CFAO expanded its operations in Liberia and Sierra Leone. Automotive Equipment & Services. The new division was split into The Group believes that its presence in a broad range of countries two geographic areas: West Africa (French-speaking Sub-Saharan throughout Africa offers it a strategic platform from which to benefit Africa, Ghana and Nigeria) and Eurafrica (the Maghreb, East from growth opportunities in the African market, while at the same Africa, French overseas territories and Asia). time reducing the potential impact on its overall results of adverse political, economic and market developments in individual 6.2.1.1 CFAO Automotive countries. It also believes the geographic scope of its businesses The Group is one of the leading importers and distributors of makes it an attractive distribution partner for automakers, offering passenger and commercial vehicles in the African countries them a single point of access to important regions composed of and the French overseas territories in which it operates. It has multiple markets that taken individually would be too small and dealership networks covering Sub-Saharan French-, English- and remote to be worth accessing. Portuguese-speaking Africa, French overseas territories, Vietnam, and Cambodia. CFAO has more than 90 years’ experience 6.2.1.1.2 Long term partnerships with automakers in selling automobiles in Africa. Its past experience and well- The Group buys, stocks, imports and distributes vehicles produced established presence give it an excellent visibility of local markets by more than 30 automakers. In 2014, the Toyota, Nissan and and have served to build its reputation in the sector and with its Chevrolet brands were the three best sellers in terms of numbers customers. of vehicles sold. The Group believes that having relationships The Group offers a comprehensive range of new passenger and with several automakers allows it to offer a comprehensive commercial vehicles, motorcycles, boats and motors for boats, range of vehicles in each region and to mitigate risks and supply and also provides a full range of services encompassing after- constraints, as well as any problems related to difficulties faced sales services and the sale of spare parts and tires. The Group has by specific automakers. numerous points of sale and after-sales service units, of which the The Group’s largest selling brands in 2014 by region were vast majority are fully-owned. Chevrolet in the Maghreb, Toyota in French-speaking Sub- The Group also assembles motorcycles, mopeds and trucks. Saharan Africa, and Nissan in English- and Portuguese-speaking
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Sub-Saharan Africa. In the French overseas territories, its biggest promote and sell the Group’s products in the various markets in selling brands are Citroën and Toyota. which it operates and whose compensation mainly depends on the number of vehicles sold and sales terms obtained. The Group Although its agreements with automakers rarely contain contractual owns or leases under long-term leases the sales office locations exclusivity clauses, in practice, the Group is the only distributor of of the CFAO Automotive network (see Chapter 8 “Property, plant each brand it sells in all of the countries in which it operates. and equipment” of this Registration Document) and considers this Over the past two years, and more particularly in 2014, the to be an important competitive advantage particularly in terms Group has had to rethink its long-term partnerships strategy with of longevity, control and maintaining the quality of the network. major automakers. Whereas it now works even more closely Alongside its own network, the Group occasionally operates with Toyota, enabling it to achieve growth in new regions, the through a network of sales agents and/or wholesalers who cover distribution of Renault, Nissan and Isuzu branded vehicles has some of the sales territories. gradually stopped. A situation which has encouraged CFAO The Group believes that it benefits significantly from the positive Automotive to enter into and further pursue negotiations with brand image generated by its investment in modern showrooms other manufacturers in order to offer its customers the most in most of its markets. The Group considers that the renovation comprehensive range possible. efforts in the CFAO Automotive network contributed to set the Distribution agreements entered into in 2014 with the automaker Group apart in the market of a growing African middle class Volkswagen in certain East African territories will, over time, help concerned about finding suppliers with standards equivalent to to offset the losses of business agreements with other brands in those seen on developed markets. the region. The Group is committed to continually improve its customer service. Furthermore, on December 12, 2014, CFAO and Yamaha Its quality assurance standards have for many years allowed Motor Co. Ltd. announced the signing of an agreement to enter CFAO to implement standard procedures and documentation for into a partnership in Nigeria to strengthen the production and its sales and maintenance activities. CFAO also works hard to distribution of motorcycles in the country. This new entity, owned optimize the logistics for spare parts with the objective of reducing in equal shares by CFAO and Yamaha Motor Co. Ltd., will benefit the repair time for vehicles to less than two weeks. That led to a from the rights to produce and distribute Yamaha motorcycles in central spare parts warehouse being established. Nigeria, the biggest market in Africa, with more than one million new motorcycles sold every year. The partnership will be called 6.2.1.2 CFAO Equipment CFAO Yamaha Motor Nigeria Ltd. Its premises, which will include The CFAO Equipment network continued structuring its operating a production unit, will be located in Lagos on a CFAO multi- units and further developed its portfolio of products and solutions activity site. The site will be operational during 2015. to meet its customers’ needs. Local contractors and multinationals make up the core customer segment. 6.2.1.1.3 Overall brand strategy The 2014 merger of the CFAO Automotive division and the heavy The Group offers its customers a wide range of vehicles in each vehicles and tires business lines has now given the Equipment region, including passenger vehicles − its core business −, division, hitherto operational in eight African countries, a wider motorcycles as well as premium-segment and (low-cost vehicles). footprint in Africa that can benefit from the distribution and CFAO Automotive is adjusting its portfolio of brands and services structure provided by the CFAO network. expanding the geographic footprint of its strategic partners, aiming to eventually cover all market segments. The Group is also The CFAO Equipment offer is now organized around two areas actively seeking to expand its low-cost offering, which it believes of expertise: will help position it to benefit from expected growth in vehicle ■ the sale and maintenance of equipment, with a comprehensive ownership in its markets in Sub-Saharan Africa, which currently range of high-quality, high-performance products, which are has very low automobile ownership rates. leading brands in their respective market segments: heavy vehicles, construction and handling machinery, tires for 6.2.1.1.4 Distribution networks vehicles used in civil engineering, agricultural equipment, and With the exception of some direct sales conducted by the Group’s generators; central purchasing offices, all of the Group’s vehicle sales are ■ installing and maintaining elevators as part of a long-running conducted locally. CFAO Automotive’s network consists of sales partnership with OTIS, the global leader in this industry. professionals distributed among its local subsidiaries, who
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The CFAO Equipment offer for vehicle and construction equipment expectations in terms of quality, responsiveness, and customized is based on close partnerships with brands that are at the forefront services. To better meet business mobility needs, CFAO continued of their respective market segments. Over the past two years, to expand its pool of rental passenger vehicles, pickup trucks, CFAO Equipment has further reinforced its partnerships and has off-road vehicles and automotive equipment (construction and pursued its geographic expansion by establishing a presence in handling machinery and equipment and generators). CFAO’s Morocco. With its partners in agricultural machinery, CFAO also LOXEA network now offers a wide range of brands and products offers a product range from global market leaders adapted to the to rent for various lengths of time. These offerings further enrich operating conditions for African businesses of all sizes. the partnerships that the Group has enjoyed over the last 20 years with market leaders Avis Budget Group and Hertz for short-term The business will also achieve even greater differentiation car rentals. Revenue from vehicle rental services increased by compared to its competitors through its future Equipment Centers. 11% over 2013 to reach €32 million in 2014, thus highlighting These specialized centers, currently being developed in several the potential this business holds, particularly for long-term rental. countries, offer a comprehensive range of services to B2B In 2014, the Group had 2,700 vehicles available for short- and customers: maintenance, tire services, fleet management, repairs, long-term rental in seven countries – Cameroon, Republic of fitting, dismantling and assembly. Mobile workshops are also Congo, Côte d’Ivoire, the Democratic Republic of Congo, Gabon, available for customers whose sites and operations are located Madagascar and Senegal. far from any towns and major conglomerations (mainly mining customers). The chart below shows the 2014 geographical breakdown of revenue for CFAO Automotive Equipment & Services. As well as the markets for trucks and construction machinery, which are showing strong growth in Africa, the heavy vehicles tire and civil engineering segment are expected to be the main 5% beneficiaries of the ongoing infrastructure projects taking place France Export throughout the continent. The service-driven approach rolled out in 38% this segment by CFAO over the past two years is now paying off: 20% French-speaking more than 200,000 tires are sold every year, the sales network is French Overseas Territories Sub-Saharan Africa growing strongly and a customized range of services is currently and Vietnam undergoing development. In the second half of the year, CFAO obtained exclusive rights to the distribution of Bridgestone civil engineering tires in 18 West African countries, the leading brand in this market segment.
6.2.1.3 Products and Services
A growing number of major operators in Africa are choosing to 20% outsource their vehicles and automotive equipment in order to focus 16% Algeria and Morocco on their core businesses. These customers have particularly high English- and Portuguese- speaking Sub-Saharan
The following table summarizes the revenue generated by the main products of the CFAO Automotive Equipment & Services division in 2014, together with their percentage of total revenue.
2013 2014 (in € millions) (%) (in € millions) (%) Light vehicles 1,271.9 58.58% 1,121.4 59.09% Used vehicles 50.7 2.33% 50.8 2.68% Services, spare parts and tires 270.2 12.44% 254.7 13.42% Motorcycles and other 46.3 2.13% 50.6 2.67% Heavy vehicles 397.9 18.32% 292.5 15.41% Machinery 59.1 2.72% 53.9 2.84% Elevators 38.8 1.79% 33.6 1.77% Rental services 36.5 1.68% 40.4 2.13% TOTAL CFAO AUTOMOTIVE EQUIPMENT & SERVICES 2,171.4 100% 1,897.9 100%
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CFAO Automotive’s main products and services are: Customers
■ light vehicles: t he Group sells light vehicles in all the markets in CFAO Technologies’ broad service range allows it to provide which it operates. Light vehicles are vehicles under 3.5 metric maintenance advice to customers, including on installation and tons, including passenger and commercial vehicles. Most of implementation. CFAO Technologies also maintains a high level the Group’s light vehicle sales are generated from sales of new of expertise by regularly training its technical and sales employees vehicles; and having its engineers certified by its partners.
■ used vehicles: the only used vehicles sold by the Group are CFAO Technologies’ customers include international and pan- those purchased by the Group in connection with the sale of African companies and other local market participants. They new vehicles, mainly; mainly consist of companies and other public sector entities and telecommunications or banking companies in the private sector. ■ services and spare parts: t he Group sells spare parts and vehicle repair and maintenance services for the light and Some of CFAO Technologies’ sales are obtained through bids, heavy vehicle brands it sells, as well as spare parts and tires mainly with public sector entities in the countries in which CFAO (mainly Bridgestone); Technologies operates. ■ motorcycles and other: t he Group imports and distributes Partnerships Yamaha, Suzuki and Sym motorcycles (the latter since 2014), Yamaha and Suzuki motors for boats and, for the last few CFAO Technologies is a commercial partner of major global months inflatable, semi-rigid Sillinger brand boats (and various companies in Africa, including: IBM, Microsoft, Cisco, and other products and services) across more than 20 countries in others. CFAO Technologies has also expanded its partnerships Sub-Saharan Africa. with other well-known global brands, supporting the development of their product offers. In 2014, CFAO Automotive Equipment & Services sold 61,389 new cars, trucks, construction equipment and farming In 2014, CFAO Technologies generated revenue of €79.4 million machines (compared to 78,237 in 2013, 95,063 in 2012, (representing 2.2% of total consolidated CFAO revenue). and 82,095 in 2011). In 2014, CFAO Automotive generated revenue of €1,977.4 million (representing 56% of the Group’s total consolidated revenue) and recurring operating income of 6.2.3 Eurapharma €139,8 million (representing 52% of the Group’s total recurring operating income). In terms of revenue, Eurapharma is the leading importer and distributor of pharmaceutical products and services in Africa and in French overseas territories. Backed by more than 60 years’ 6.2.2 CFAO Technologies experience, Eurapharma has strong and profitable positions in its historical segments, and a significant presence in markets that CFAO Technologies provides an integrated service offering it has entered more recently. Eurapharma currently operates in and innovative solutions with high added value in information 21 African countries, and in seven French overseas territories and communication technologies, using a B2B approach. This (Guadeloupe, French Guiana, Martinique, New Caledonia, Group division operates in 21 African countries through eight French Polynesia, Reunion and Saint-Martin). Eurapharma subsidiaries (Cameroon, Côte d’Ivoire, Algeria, Senegal, Burkina also has indirect operations in India and Denmark through Faso, Gabon, Mali and Togo) and four expertise centers based Missionpharma (a company specializing in the supply of medical in Algeria, Cameroon, Côte d’Ivoire and Senegal. CFAO kits) as well as in Portugal and, since October 2014, in Italy, Technologies draws on the expertise of 160 engineers certified by with the acquisition of a 70% stake in the share capital of Fazzini its business partners to offer its customers a high level of expertise. SRL, which specializes in small medical and hospital equipment. Business in these countries is devoted exclusively to exports. CFAO Technologies has a portfolio of offers consisting of three Eurapharma is the partner of reference for local authorities and product ranges that meet its customers’ needs: pharmacists in its core markets where it is recognized for ensuring a fast, efficient and reliable supply of drugs to pharmacies and ■ audit and consultancy services for infrastructure, focusing on other healthcare providers. optimizing performance and guaranteeing security; In 2014, the Eurapharma division generated revenue of ■ integration, including the supply, installation and configuring €1,216.1 million (representing 34.2% of CFAO’s total of systems and network infrastructure; consolidated revenue) and recurring operating income of ■ managed services and maintenance, an offer that consists of €105.1 million (representing 38.8% of the Group’s recurring managing all or part of a customer’s information systems and operating income). infrastructure on its behalf; this offer applies to user media, automatic telling machines and high-security professional voice and data digital-radio transmission networks.
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6.2.3.1 Main businesses Eurapharma runs this business through its subsidiaries E.P. DIS France and E.P. DIS Algeria. E.P. DIS France has a secure Eurapharma has three main businesses: internet site, E.P. DIS.com, which enables the pharmaceutical ■ I mport-wholesale-retail business companies to monitor the export figures for their products, including the data for sales and inventory, on a daily basis, Eurapharma’s principal and core historical business is using their own customized content (given that E.P. DIS Algeria the import-wholesale-resale of pharmaceutical products to and E.P. DIS France are the owners of their inventory, for most pharmacists in French-speaking Sub-Saharan Africa and the of the business). From its logistics platform – a 12,500 square French overseas territories. The Group is a wholesaler to meters pharmaceutical facility that meets the European Good approximately 5,000 pharmacies that it delivers to on a daily Distribution Practices (GDP) standard – located near Rouen, basis, and is supplied by 450 pharmaceutical companies. E.P. DIS France exports its products to wholesalers and to other end users mainly in Africa, but also in other countries Purchasing for the Group’s import-wholesale-resale business all over the world. E.P. DIS Algeria works with around ten is centralized through its purchasing subsidiary, Continental pharmaceutical companies whose products it imports and sells Pharmaceutique. Continental Pharmaceutique stocks to wholesalers and Algerian hospitals. pharmaceutical products in its more than 12,500 square meters pharmaceutical facility in Rouen, France, and exports ■ D istribution agent business them to Eurapharma’s network of wholesalers in Africa and in the French overseas territories. As an agent, Eurapharma is responsible for selling pharmaceutical and medical products on behalf of major The role of Continental Pharmaceutique in relation to French- pharmaceutical companies on either an exclusive or non- speaking Sub-Saharan African countries differs slightly exclusive basis. Its distribution agent business sells and from its role in relation to the French overseas territories. In delivers products on behalf of pharmaceutical companies French-speaking Sub-Saharan African countries, Continental to local pharmacists, hospitals, non-profit organizations, Pharmaceutique acts as a broker by shipping pharmaceutical institutions, doctors and local wholesalers. In this business, the products to local wholesalers/resellers who become the Group owns its inventory of products. The Group operates a owners of these products and record them as inventory until distribution agent business in English- and Portuguese-speaking they are sold to the end user (pharmacists). Sub-Saharan Africa, namely Kenya, Tanzania, Uganda, Ghana and Angola. It also gained a foothold in Nigeria In relation to the French overseas territories, Continental in 2012, through the acquisition of Assene, now renamed Pharmaceutique centralizes orders, provides administrative Assene Laborex Ltd. Nigeria has a population of 170 million, coordination and ships orders placed by local wholesale/ and is one of the biggest pharmaceutical markets on the resale subsidiaries with pharmaceutical companies. Continental continent. This market is considered to be very buoyant, with Pharmaceutique acts on a commission-only basis but does not an estimated value of over USD 900 million. Annual growth become the owner of the products, as the pharmaceutical is 15%, driven by positive demographics and the emergence companies bill the local wholesale/resale subsidiaries who own of a genuine middle class. Eurapharma hopes to establish the inventory that is sold to pharmacists. Orders received by itself as a multi-brand distributor with nationwide operations. Continental Pharmaceutique are forwarded to pharmaceutical It already counts market leaders such as Novartis, Sanofi companies within 24 hours of receipt. In each local market, the and Astra Zeneca among its partners, and its outsourced Group has at least one warehouse from which all deliveries to logistics network covers fifteen Nigerian cities. Within the pharmacists are coordinated. scope of its drive to consolidate its positioning, Eurapharma ■ P re-wholesale business also acquired Stockpharma, a Portuguese export wholesaler of pharmaceuticals to Portuguese-speaking Africa, allowing it Eurapharma’s pre-wholesale business, launched in 2000, to secure supplies to Angola and improve its knowledge of provides comprehensive logistics services to over markets such as Mozambique and Cape Verde. 50 pharmaceutical companies, allowing them to outsource the process of handling orders for pharmaceutical products from Through its distribution agent business, Eurapharma allows wholesalers primarily in French-speaking Africa, Algeria, as pharmaceutical companies to outsource the import, marketing well as other countries, in addition to delivering and billing and distribution of their products in the countries it serves. said products and collecting payment. The Group acts as It developed this business in 2000 to leverage its strong a pharmaceutical supply chain specialist for companies relationships with pharmaceutical companies in its historic and is responsible for all parts of the export process for French-speaking Sub-Saharan African markets by assisting pharmaceutical companies, ranging from shipping, handling them in selling their products in the English- and Portuguese- and storing to distributing products to local wholesalers. speaking markets in Africa. The distribution agent business has grown substantially since its launch and the Group expects this growth to continue in the coming years.
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■ O ther activities The Eurapharma business relies on an efficient logistics platform and a fully integrated supply chain that are managed by Eurapharma underwent two major developments in 2011. Continental Pharmaceutique for the Group’s import-wholesale- The first relates to the stake acquired in a pharmaceutical resale business and by E.P. DIS for the pre-wholesale business in production unit, Propharmal (Algerian pharmaceuticals), Africa. in Algeria. The Company operates in two segments: manufacturing pharmaceutical specialties under license and The Group’s principal markets in French-speaking Africa and preparing pharmaceutical products for market (by bottling the French overseas territories are characterized by high entry or inserting them into blister packs) on behalf of Algerian or barriers. In these geographic areas, regulatory requirements for foreign pharmaceutical companies. The second development the storage and delivery of drugs require significant investment, concerns the launch of EHS (Eurapharma Healthcare Services), expertise and specific authorizations issued by the relevant a company specialized in the international distribution of authorities. medical and paramedical kits and materials. The target customers are public and semi-public institutions, international organizations and foundations, as well as non-governmental organizations. With a view to spurring growth in the public and 6.2.4 CFAO FMCG Industries institutional healthcare market, Eurapharma acquired in 2012 & Distribution a 75% interest in Missionpharma, the world leader in medical kits and one of the main suppliers of African public healthcare In early 2014, the Equipment and Rental businesses, formerly operators. This merging of the two companies resulted in the part of the CFAO Industries division, have been merged into the creation of a business line called “Custom Division Corporate CFAO Automotive division. At the same time, the CFAO Industries Development”, in 2013. This unit enables Eurapharma to division was renamed CFAO FMCG Industries & Distribution. capitalize on Missionpharma’s expertise in the distribution of generic, low-cost, high-quality medications (INN – International The CFAO FMCG Industries & Distribution division includes Non-proprietary Name) as well as small medical equipment the beverages business in the Congo and the production and and hospital consumables. In October 2014, Eurapharma distribution of plastic products and the consumer goods distribution enriched its range of products and services for public bodies business in Nigeria. and institutions and further strengthened its position in this The Group operates two breweries and bottling companies in the segment with the acquisitions of a 70% stake in the share Congo through a 50-50 joint venture with Heineken International capital of Fazzini srl, an Italian (Milan-based) distributor of that has been in place since 1994 (prior to this date, the small medical and hospital equipment. Fazzini srl, very active Group already operated one of the two breweries and bottling in the African continent, either directly or indirectly makes 85% companies in Congo). These two factories, located in Pointe Noire of its revenue there. and Brazzaville, produce and bottle more than a dozen types of beverages, including local and international brands of beer, 6.2.3.2 Breakdown by geographic area and foreign beer brands. The Group also produces and bottles The chart below shows the distribution of Eurapharma’s revenue brands of soft drinks. The Group has made significant investments by geographic area in 2014. in recent years to modernize and expand the production capacity of its Pointe Noire and Brazzaville plants.
The Group also produces and distributes pens and razors as 38% 17% well as a wide range of plastic packaging products for the food French-speaking France Export and Denmark and petroleum industries. It manufactures BIC® writing products, Sub-Saharan Africa and imports BIC® lighters and razors, in Nigeria, Ghana, Côte d’Ivoire and Cameroon under an arrangement with BIC® that has 8% existed for over 40 years. The Group distributes these products in Algeria 17 African countries, generally on an exclusive basis. To complement this range of products and services, it was decided 7% English- and in 2013 to develop a Fast Moving Consumer Goods distribution Portuguese-speaking business in Nigeria. Building on a pre-existing company and with Sub-Saharan Africa two agreements signed with Pernod Ricard (2013) and Ferrero 30% (2014), the Group has strengthened its network in the country and gradually expanded its range of products distributed. In 2014, the French Overseas Territories and Other division strengthened its position in terms of distribution in order to enable African consumers to access to new products thanks to the
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development of major brands in the continent. In February 2014, In 2014, CFAO FMCG Industries & Distribution generated the Group signed an agreement extending the arrangements revenue of €366.8 million (representing 10.30% of CFAO’s total to Ghana, Benin and Togo. In early 2015, a new partnership consolidated revenue). was entered into with the group L’Oréal for the production and distribution of cosmetics in Côte d’Ivoire. The following table shows the breakdown of revenue for CFAO Industries by business in 2014.
2013 2014 (in € millions) As a % (in € millions) % Beverages 214.3 80.1% 226.3 61.7% Plastics 50.8 19.0% 41.1 11.2% Food, Hygiene and Spirits 2.5 0.9% 99.4 27.1% CFAO FMCG INDUSTRIES & DISTRIBUTION 267.5 100.0% 366.8 100.0%
6.2.5 CFAO Retail entered into in May 2013 with Carrefour, the second largest retailer in the world. The latter has exclusive distribution rights, allowing it to develop different store formats across the eight In May 2013, CFAO embarked upon an ambitious strategy in countries. the retail business in Sub-Saharan Africa with plans to develop several dozen shopping malls over the next ten years to enable In November 2014, CFAO announced the launch of its “club of it to become a major player in retail distribution. The shopping brands”, a network of international retail brands (around twenty in malls, adapted to the needs of African consumers, and organized all) which will accompany CFAO in its retail precincts. Ten major around a central attraction consisting of a food retail outlet, will brands have already joined the club: La Grande Récré (Ludendo be developed in eight countries in West and Central Africa: group), L’Occitane en Provence, Cache Cache and Bonobo Cameroon, Congo, Côte d’Ivoire, Gabon, Ghana, Nigeria, (Beaumanoir group), Kaporal, Beauty Success, San Marina, Jeff Democratic Republic of Congo and Senegal. de Bruges, El Rancho and Baïla Pizza. These partnerships enable CFAO to operate points of sale through exclusive agreements CFAO Retail covers three areas of expertise: (franchises, distribution and dealerships, distribution agreements). ■ the construction and operation of shopping malls. CFAO will Other brands are pending signature and will soon be joining this also operate retail precincts through franchising of international innovative club. The retail precincts will also be housing local brands; retailers and services.
■ food retail outlets; The first shopping mall, consisting of a retail precinct centered around a Carrefour hypermarket that will house around fifty ■ franchises for international retail brands. stores and a food court, will open its doors during the second half of 2015 in Abidjan, Côte d’Ivoire. To ensure that the strategy is a success, CFAO plans to enter into partnerships with major international brands that wish to access The Group is also considering other distribution channels that African markets as part of their growth strategy in emerging correspond to the shopping habits of African consumers. and pre-emerging markets. The first joint venture agreement was
6.3 Competitive strengths
6.3.1 Leadership positions in Africa and in ■ in its Automotive division, the Group believes that it: the French overseas territories − is the market leader in French-speaking Sub-Saharan Africa (excluding Nigeria), its historical market, where it has Thanks to its historical positioning, the Group has a unique operations in 22 countries and estimates that it had a market experience in the specialized distribution market in Africa share of around 35% in 2014, based on the number of new (excluding South Africa) and the French overseas territories. As vehicles sold by the Group in 2014 in these 22 countries a result, the Group has very strong market shares in its various (20,376 units), businesses:
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− has a market share of approximately 21% in 2014 in the leading distributor of beverages in the country. A competing French overseas territories in which it operates (namely brewery opened in 2013, eroding Brasseries du Congo’s Reunion, French Guiana, New Caledonia, but also Vietnam dominant position in the Congolese beer market. CFAO had and Cambodia, as well as Tahiti since the first half of 2009) prepared for the arrival of competition with the development based on the number of new vehicles sold by the Group in of many new products and a more aggressive sales policy. this region in 2014 (9,378 units), As regards its BIC® business (writing and shaving products), CFAO FMCG Industries & Distribution believes it is the − has a market share of approximately 4% in the two Maghreb market leader in Ghana, Côte d’Ivoire and Cameroon, as countries in which it operates (Algeria and Morocco), based well as in neighboring export countries such as Burkina on the number of new vehicles sold by the Group in 2014 in Faso, Mali, Togo, Benin, Congo and Gabon. In Nigeria, these two countries (22,279 units), the business is a major player on the writing and shaving − has an average market share of approximately 12% in the products market. Through its subsidiary ICRAFON, CFAO 9 other countries of English- and Portuguese-speaking Sub- considers itself the leader in Cameroon in the market for Saharan Africa in which it operates (excluding Angola, plastic containers such as bottle racks. where sales are non-material), based on the number of The Group believes that its large market shares in its various new vehicles sold by the Group in 2014 in these countries business sectors reflect its high standards in terms of the quality (5,648 units); and reliability of the services it provides and the fact that the ■ in its equipment distribution business, CFAO is positioning “CFAO” networks (in the automobile and new technology sectors) itself: and “Eurapharma” (in the pharmaceutical sector) now benefit from a strong brand image in the eyes of its manufacturing − as a challenger in all its markets, except the elevator partners and customers. installation market where, thanks to its partnership with OTIS , it has been a major player for 60 years in each of the countries in which it operates (Cameroon, Côte d’Ivoire, 6.3.2 Unique competitive positioning Nigeria, Senegal, Burkina Faso, Gabon, Ghana and Mali). In the other segments, CFAO Equipment can draw on the in key Group markets CFAO Group’s renowned distribution expertise in Africa, the roll-out of new offerings and previous successes in certain countries, such as Nigeria and Gabon, where the business 6.3.2.1 Unrivaled coverage of Africa already existed prior to the establishment of a dedicated In Africa, there is no other player truly comparable to the Group network; in terms of geographic coverage, range of products and services, and market share in its core businesses of automobile and ■ in its new technologies business, the Group believes: pharmaceutical importation and distribution: − it is a major player in the area of computer solutions, ■ the Group’s competitors in the African countries in which CFAO networks and telecommunications in French-speaking Sub- operates are mostly small and medium-sized local or regional Saharan Africa, including Cameroon, Côte d’Ivoire, Gabon, players that are unable to match the Group’s geographic scope, Senegal, Burkina Faso, Mali and Togo. For example, the range of products, services, and market share. The difficulty of Group estimates that it holds roughly a 50% share of the achieving critical mass in the markets in which CFAO operates solutions integration market in Cameroon and Côte d’Ivoire. reflects the entry barriers resulting from the need to forge CFAO is also positioned as one of the Top 3 computer privileged relationships with the main international suppliers, solutions providers in Algeria; comply with local legislative and regulatory restrictions, have ■ in its Eurapharma division, the Group believes that it: a solid and substantial financial base and develop often highly complex logistical networks; − is the leader in the wholesale pharmaceutical distribution ■ market in French-speaking Sub-Saharan Africa and in some significant pan-African or international players operate the French overseas territories. The Group estimates that in certain segments of the specialized distribution market in Eurapharma has a market share of 41.6% in the 14 French- Africa in which the Group operates. However, these players speaking Sub-Saharan African countries in which it are, in general, less diversified and present in fewer African operates (Eurapharma estimate at end-November 2014) countries than CFAO is in its core businesses. This is also the and approximately 53.4% in the seven French overseas case for the company formed from the merger of Optorg- territories in which it operates (Eurapharma estimate at end- Tractafric and SDA-Demimpex; December 2014); ■ an additional analysis of the Group’s competitive environment ■ in its FMCG Industries & Distribution division the Group owns: can be found in section 6.4.2.1 “Few major players operating in the Group’s core markets”. − two breweries in Congo through its partnership with Heineken. In this context, CFAO FMCG Industries & Distribution is the
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6.3.2.2 A recognized ability to enter and succeed in In some of its new territories – particularly the Sub-Saharan African new markets countries – the Group was the first truly international player to enter the markets, which were often emerging. The Group now In the past fifteen years, the Group has established itself in 20 new has strong expertise in identifying promising territories to enter territories, expanding its geographical footprint from 21 to and the conditions needed to manage these operations. This has 41 territories. This expansion was achieved through targeted enabled it to accompany its principal manufacturing partners in acquisitions and start-ups. their geographic expansion and to develop relationships with new partners.
6.3.2.3 Substantial geographic and business diversification resulting in more effective risk management The following table breaks down the Group’s revenue in 2014 by division and by geographic area:
CFAO FMCG CFAO Automotive CFAO Industries As a % of revenue Equipment & Services Technologies Eurapharma & Distribution French-speaking Sub-Saharan Africa 20.5 - 13 6.9 English-speaking Sub-Saharan Africa 8.5 - 2.4 3.3 French Overseas Territories and Asia 9.1 - 10.3 - Maghreb 10.7 0.4 2.7 - France Export 2.9 - 5.8 0.1 TOTAL 53.3 2.2 34.2 10.3
The Group’s presence in several large geographic areas and in in 2014. The Group’s customer base includes individuals and many countries allows it to better manage its country specific risk local, regional and international corporations and businesses as profile, thus limiting its exposure to fluctuations in local economic well as governments, public sector entities and non-governmental cycles and political events. organizations.
Moreover, the Group’s two main businesses – automobile and pharmaceutical distribution – have relatively complementary 6.3.2.4 Skill set and internal organization: features. That is also the case for the grouping together of a key competitive advantage the businesses aimed at meeting more general equipment In its key businesses, the Group offers an integrated set of requirements on the one hand, and those meeting Healthcare and products and services covering the entire import and distribution Consumer Goods requirements on the other: value chain, enabling it to capture a significant share of the value added and the corresponding margin. The Group has significant ■ the distribution of vehicles, equipment and IT systems in pre- expertise and experience in managing local market constraints emerging and emerging markets has rapid growth potential, and optimizing the flow -of products throughout the supply chain. but is also a cyclical business that may be affected by local Suppliers therefore have access to cost-effective and innovative economic conditions and the equipment requirements of solutions, enabling them both to outsource an important part of populations, companies, governments, NGOs, and more; the distribution process and reach markets that are difficult to ■ pharmaceutical distribution market in developing countries has access. grown steadily over the past several years. This is due to the In order to remain a leader in its businesses, the Group has both fact that pharmaceutical products are often essential goods, diversified its business and maintained a very high level of expertise developing countries are growing significantly at a fairly in each of its divisions. The Group’s internal organization is also a consistent rate both demographically and economically, and foundation of its strategic success and its operating performance more and more local populations have access to these products in its various divisions: thanks to employee benefits programs offered by some private companies, social security measures implemented in certain ■ at the management level, the Group’s internal organization is countries, and aid from developed countries, multilateral structured around a clear division of responsibilities between organizations and NGOs. This business is not very cyclical, headquarters and the local operational subsidiaries. Strategic similar to the Industries businesses and will most likely be decisions such as hiring key personnel, setting financial policy, similar to the businesses of CFAO Retail and retail distribution. approving capital expenditures and choosing suppliers and logistical services for the Group’s distribution networks are Lastly, the Group has a diverse customer base with no single made at the headquarters in order to ensure consistency in customer accounting for more than 1% of the Group’s revenue policy across the Group and flexibility to adapt and innovate;
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■ at the operational level, the way the Group is organized Services division’s distribution network, which is now one around specialized business lines (Equipment & Services, of the most modern distribution networks in the markets Healthcare and Consumer Goods) has enabled the Group in which it operates. Eurapharma has developed its own to acquire specific skills. Moreover, within each of these integrated logistics network, thus securing a unique businesses and divisions, the Group has implemented a “flat” competitive position in its market. In the Group’s industrial (i.e., non-hierarchical) organizational structure, thus favoring businesses, considerable capital expenditure is regularly rapid information flow and decision making and fostering a made at sites such as those relating to the beverage business real entrepreneurial approach; to substantially increase production capacity in response to market demand, ■ with respect specifically to logistics, CFAO Automotive Equipment and Services and Eurapharma have been able − the Group’s strong financial base gives it greater capacity to develop efficient systems for centralizing orders with their to invest, innovate and develop its expertise than most of suppliers, as a result of the Group’s strategic decisions relating its competitors, providing unique opportunities to further to internal organization. develop its business relationships with major international brands,
6.3.2.5 A recognized and experienced leadership − in addition, the Group’s distribution networks are staffed with team and local teams with strong execution professional and recognized personnel due to the Group’s skills training programs and corporate culture, which guarantee The success of the Group’s strategy and its growth depends high standards in terms of customer satisfaction, above all on the experience and strong reputation of the Group’s − the Group believes that its distribution networks have a leadership team and the ability of the Group’s local teams genuine brand image vis-à-vis its suppliers and customers, to implement management’s strategic choices. The Group’s resulting not only from the solid reputation of its supplier managers have extensive experience in the distribution sector. partners but also from the high quality services provided Several of the Group’s top managers have been with the Group over the long term. for over ten years. The Group’s management team also has privileged relationships with international and local partners who operate within its geographic areas. In addition the management 6.3.2.7 Consistent and profitable growth team has a unique understanding of the Group’s markets. The Group’s revenue increased from €678 million in 1996 (excluding Eurapharma’s revenue, as it was first consolidated 6.3.2.6 A privileged partner for major international in 1996) to €3,560 million in 2014, representing an increase brands seeking access to high-potential of €2,882 million. This revenue increase represents an average African markets annual growth rate of 9.1%. The Group believes that it is a privileged partner for major This growth includes the expansion of the CFAO range of international manufacturers seeking to access or further develop businesses, with three new divisions: the pharmaceutical division business opportunities in the Group’s regions: (acquisition and first consolidation of Eurapharma in 1996) and the new technologies and consumer goods distribution division. ■ the Group’s broad geographic coverage gives its partners It also reflects the geographic expansion of pre-existing divisions access to the majority of African countries through a single since 1996 (principally the CFAO Automotive division) into new partner offering uniform service quality standards that meet the markets. highest international standards; Between 1996 and 2014, the Group’s growth remained steady ■ the main markets in which the Group operates, particularly except for a slight drop in revenue in 1999 and a sharper decline the African markets and the French overseas territory markets, in 2009 due to the global economic crisis, followed by slower are often located far from the major international suppliers’ growth in 2013 with the strong decline in Automotive sales in production centers and have a specific risk profile, particularly Algeria and the halting of distribution of certain automotive in terms of operating and political risks, which can be high; brands. Over this same period, CFAO recorded a recurring ■ the Group follows a continuous improvement policy for its operating profit margin of between 7.4% and 9.8%. distribution and logistics networks as well as its production The Group’s financial performance is based on its strategy of sites: improving operating margins by leveraging the position of each − the Group has made substantial investments in recent years of its businesses throughout the value chain as well as its size to update and expand CFAO Automotive Equipment & and structure, which allow it to optimize its purchasing and its transportation network.
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6.4 Market overview
CFAO sells goods in geographic areas – principally in Africa (its ■ the French overseas territories, (21.0% of the Group’s total core market) and the French overseas territories – that are located revenue in 2014, including Vietnam and Cambodia). The far away from the main global manufacturing centers. Group operates in French overseas departments (Guadeloupe, Martinique, French Guiana and Reunion), some overseas territories (French Polynesia, Saint Martin) and in New Caledonia. Approximately 2.1 million inhabitants reside in 6.4.1 The Group’s two geographic areas these European-style overseas territories. (Africa and the French overseas territories) are growth markets See section 6.2 “Business divisions” for a fuller analysis of the Group’s operating establishments and businesses run from its bases. 6.4.1.1 Two core regions The Group’s specialized distribution business is concentrated in 6.4.1.2 Favorable African economic conditions two main geographic areas: The Group does not know of any quantitative analysis that provides an overview of the specialized distribution market in ■ the African continent offers a favorable economic environment Africa. However, it estimates that, on the whole, this market will for specialized distribution. continue to grow over the medium to long term, in line with the The Group has operations in: economic development of the continent.
− French-speaking Sub-Saharan Africa (42.2% of the Group’s This growth trend will likely be influenced by a combination of total revenue in 2014), focusing on Cameroon and the structural factors, including: Congo, this region’s two largest countries by revenue, ■ demographic growth in Africa, which is significantly higher together representing a market of 26.5 million inhabitants, than the level observed for more mature economies.
− the Maghreb (13.8% of the Group’s total revenue in 2014), The population of Africa surpassed the 1 billion mark in Algeria and Morocco, the two countries in the region in 2009. The Group has operations in 34 African countries where the Group has operations. Algeria, which is a large that represent approximately 70% of Africa’s total population, producer of oil and gas, represents a market of some a market consisting of approximately 700 million people. 35 million inhabitants. Morocco represents a market of Most economic research into the economic development 31.4 million inhabitants, of the continent indicates that its demographic structure is − English- and Portuguese-speaking Sub-Saharan Africa now having a positive impact, noting the leveling-out of the (14.2% of the Group’s total revenue in 2014), focusing on ratio of the young dependent population versus the working- Nigeria, the main country in the region by revenue: Nigeria, age population and the rapid expansion of the young adult rich in oil and gas, is the most populated country in Africa population, which provides a significant boost to potential and represents a market of over 170 million inhabitants. growth in demand and to labor resources; In 2014, Nigeria became the largest economy in Africa by GDP, ahead of South Africa;
Annual average demographic growth rate (%) Region 2015-2020 2025-2030 World 1.0 0.7 Africa * 2.4 2.2 North America 0.8 0.7 Latin America and the Caribbean 1.0 0.7 Asia 0.9 0.6 Europe 0.0 -0.1 Oceania 1.3 1.1
* The Group’s main geographic area. Source: UN, “World Population Prospects: The 2012 Revision”.
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■ economic development throughout Africa, which has been Similarly, the weak integration of the African economies in strengthened by globalization as well as African countries’ the global financial system, their relatively underdeveloped strategies to encourage international trade, continued efforts banking structures, the need for public sector and judicial to modernize public and private sectors and infrastructure, reform, inadequate budgetary resources to finance the align commercial policies with international standards, and modernization of infrastructure and expenditure on education in certain countries, increase the price of raw materials. and healthcare, and, finally, persistent failings observed in the Economic development in Africa has also been fostered respect for the rule of law in certain African countries could all by the reduction of public debt in several African countries be perceived as obstacles to the acceleration of growth across through international initiatives such as the HIPC plan (Heavily the continent. Another frequently cited problem is the lack of Indebted Poor Countries), which around 30 African countries training and skills necessary to meet companies’ needs. have implemented to date. In terms of foreign direct investment, research published by Ernst & Young in 2012 indicates that In its October 2014 report on the regional economic outlook for the number of foreign investment projects in Africa has grown Sub-Saharan Africa, the International Monetary Fund had the 20% per year since 2007. Ernst & Young also points out that following message: The rate of economic growth in Sub-Saharan intra African investments have risen 42% over the same period, Africa is expected to remain robust, at some 5% in 2014, rising to emphasizing the growing confidence of Africans themselves in a rate of 5.75% in 2015. In the vast majority of the countries in the the development of their continent. Investment is now moving region, growth will continue at a firm pace, mainly underpinned beyond mainly oil and gas projects, into other business areas, by infrastructure investment, the vitality of the service sector and such as banking, retail, transport and telecommunications. The agricultural production in healthy surplus. However, a lesser demand for investments continued to be very strong in 2014 contribution will be made by activities relating to the petroleum in most countries; industry. ■ broad stabilization in macroeconomic conditions in most 6.4.1.3 An economic environment in French African countries and prospects for strong economic growth overseas territories may deliver greater are likely to underpin a gradual improvement in peoples’ market growth than mainland France living standards, fostering the emergence of a middle class. The specialized distribution market should benefit from these The French overseas territories combine a legal and sales nascent middle classes whose increased demand for services environment that meets French and European standards with and products similar to those available in Western economies economic and demographic growth that is historically higher than should allow the Group to continue expanding its businesses, in that of mainland France: particular the new CFAO Retail and FMCG businesses. A study ■ historically high economic and demographic growth rates: conducted by McKinsey “The rise of the African consumer”, the economies of French overseas departments in general promotes Africa as the “new frontier for global economic remain less developed than that of mainland France. growth”. By 2020, revenue generated by the consumer However, overseas territories have benefited over the past services industry are expected to grow by USD 410 billion in ten years from faster economic growth than mainland France. Africa, a forecast made by McKinsey in its study, which is the Between 2002 and 2012, the average annual growth rate result of a survey conducted in ten countries involving 13,000 was 3.1% overseas, compared to 2.12% on the mainland. The urban consumers. In early 2015, CFAO commissioned its own population in the French overseas territories consists primarily study on the African middle classes. It is being conducted by of a middle class with consumer preferences that are identical the IPSOS research company alongside the consultancy firm to those of mainland France, particularly in the areas of motor BearingPoint. The purpose of the study is to define the middle vehicles and pharmaceuticals, the two main types of products classes with greater accuracy and relevance and understand distributed in these regions by the Group. The pharmaceutical their needs as a group of consumers; markets in the French overseas departments reflected the poor ■ a side from the fragility of the global economic context, which growth seen in mainland France; could allow downside risks to prevail, a number of other ■ close ties with mainland France: the French overseas territories identified weaknesses could hold back the Sub-Saharan have few economic relationships with their direct neighbors, economies. These include the need for foreign capital (in the which are generally emerging or developing countries. Their form of foreign direct investment, or bilateral or multilateral economies are therefore highly dependent on imports coming support) to finance development and a significant dependence from mainland France. Between 50% and 60% of their trade on basic commodities that represent a substantial share (and, is conducted with the mainland, with the rest of Europe in some cases, nearly all) of the production and exports of representing 10% to 15% of trade (source: Senate report on the several countries, leaving African economies particularly draft law for the economic development of overseas territories, vulnerable to fluctuations in the prices of certain raw materials.
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February 19, 2009). French producers and suppliers tend local dealers and local independent distributors). Unlike CFAO, to have significant market shares in the French overseas they lack the capacity to operate in multiple markets due to their territories and tend to be partners of reference for independent smaller size or inadequate financial resources: distributors, such as CFAO, who wish to enter or expand their ■ presence in the local specialized distribution market; automobile distribution: on the African markets, unlike more developed economies, automakers generally have little direct ■ a legal framework and business environment that meets French involvement in the distribution of their vehicles because they and European standards: French and European Regulations usually lack familiarity with the characteristics of local markets. apply throughout most of the French overseas territories, and Small or medium sized independent companies, specialized their markets are strictly regulated, especially concerning the in their local market, handle distribution, and usually work distribution of pharmaceutical products, where compliance exclusively for a small number of automakers. In regions such with regulatory requirements is essential for success (see as Sub-Saharan Africa, many companies, with no particular section 6.4.3.2 “The Pharmaceutical Distribution division in ties to car firms, specialize in the sale of used vehicles. Only Africa and in the French overseas territories” of this Registration a few groups, such as Jameel and the subsidiaries of French Document). manufacturers (in the Maghreb), Optorg Tractafric (in French- speaking Sub-Saharan Africa), which merged in 2010 with SDA – Deminpex, GBH and Toyota Tsusho (in English- and Portuguese-speaking Sub-Saharan Africa), CFAO’s new 6.4.2 A p rime position enjoyed primary shareholder, have regional or international branches; by major players in the Group’s key geographic areas ■ pharmaceutical distribution: small local companies distribute pharmaceutical products in Africa (excluding South Africa), with the exception of Eurapharma and a few regional and 6.4.2.1 Few major players operating in the Group’s international players (in particular Ubipharm and CERP core markets Bretagne Nord). Likewise, in the French overseas territories, most distributors operate in one or two such territories at most, Within the Group’s core business divisions (automobile and even when they are regional or international firms. The main pharmaceutical distribution), the specialized distribution market in European and North American distributors are not established Africa and in the French overseas territories is characterized by the in African countries and in the French overseas territories presence of a large number of players, the majority of which are where Eurapharma operates. local and small- or medium-sized (subsidiaries of manufacturers,
The following table shows CFAO’s main competitors by geographic area with regard to automobile and pharmaceutical distribution.
Principal and types of Group competitors The Group’s main countries/regions in terms of revenue CFAO Automotive Equipment & Services Eurapharma * GBH (international), Caillé group (local) Ubipharm (international), French Overseas Territories (and Others) and Jeandot group (local) CERP Bretagne Nord (regional), other local firms Renault (international), Peugeot (international), Jameel group (regional), ONA Sopriam (local), Maghreb other local firms Local firms Optorg group (regional), GBH (international) Ubipharm (international), French-speaking Sub-Saharan Africa other local firms CERP Bretagne Nord (regional), other local firms English- and Portuguese-speaking Sub-Saharan Toyota Tsusho group (international), Africa other local firms Local firms
* The competitors presented in this table distribute the same products as Eurapharma. Source: CFAO.
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6.4.2.2 Markets with significant entry barriers trading partners, suppliers and customers alike, with suitable financial and commercial guarantees; It is essential to have critical mass in terms of geographic coverage, scope of services, market share and organization in order to ■ the need to develop complex logistics networks: In light of the generate adequate margins in CFAO’s core markets. However, often significant distances between production and distribution the markets in which the Group operates have high entry barriers, sites, efficient organizational methods and techniques are which accounts for the low number of major players in each one. required to optimize a distributor’s position on the value These hurdles include: chain in terms of margins and wide geographic coverage for distribution in order to achieve economies of scale. Developing ■ the prior need to establish close relationships with global and implementing these techniques requires specific expertise. manufacturers: The need to establish close relationships with the various players in the specialized distribution market, especially automakers and pharmaceutical companies, constitutes a major entry barrier for new competitors. Potential 6.4.3 Structural growth factors competitors are often international groups that are not directly in the Group’s core markets established in local markets and are seeking partners that already have extended distribution networks in one large region of Africa. In the Eurapharma division, in addition to The deep-seated factors that have helped steady the African the technical requirements imposed by applicable regulations, economy and the low rates of penetration of consumer goods pharmaceutical companies also impose specific distribution among people groups are likely to foster medium- and long-term standards that must be adhered to in order to develop growth in the African markets in which the Group operates: contractual relationships with them. Local and regional firms do not always possess the necessary expertise to comply with 6.4.3.1 Automobile distribution these requirements; ■ The distribution market for new vehicles in Africa is significantly ■ a demanding legal and regulatory framework in some countries less developed than in other geographic regions: and certain market segments: The pharmaceutical product − the African market: compared with other similar regions, distribution market in French overseas territories is highly the automobile market in Africa is still very underdeveloped. regulated. The complex and significant regulatory restrictions According to the latest available statistics, in 2013 that apply to the pharmaceutical distribution business require it represented 1,653 million new vehicles (of which considerable expertise, which is a significant entry barrier for 1,201 million passenger vehicles), which implies 3.3% new competitors; growth compared with the previous year, accounting for 2% ■ the need to have substantial and solid financial resources: of the world market. The rate of vehicle ownership is also It is important to be able to finance the development of the very low in Africa. South Africa, where the Group is not operational cycle and to have the capital expenditure needed present, is the most significant automobile market in Africa, to meet the demands of international suppliers or those with a level of infrastructure and development close to that imposed by the competition, as well as to provide the various of developed countries;
New vehicles sales (in thousands) 2012 2013 Europe 18,666 18,282 South America 23,673 25,004 Asia-Oceania 38,243 40,549 Africa 1,599 1,653 World 82,181 85,489
Source: 2014 French Automobile Manufacturers’ Committee.
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− the Maghreb: The two Maghreb markets in which the Group − the African automobile market is also undergoing significant has operations are Algeria and Morocco. Both are highly changes, creating a more favorable environment for competitive and dominated by sales of entry level light automobile distribution. On the legal and regulatory level, vehicles. These markets have continued to grow, even if restrictions on the import of used automobiles are becoming Morocco suffered a decline after two years of robust growth. increasingly strict, as is the case in Senegal and Algeria. On The rate of growth in Algeria also slowed; the demand front, the market is being driven by growth in sales of low-end vehicles. Africa has also seen an increasing − Sub-Saharan Africa is a nascent market compared with number of manufacturers seeking growth opportunities South Africa and the Maghreb. With the exception of a few on the continent, as evidenced by the recent entry of countries such as Gabon, the rate of vehicle ownership is Chinese manufacturers and the aggressive growth strategy very low. The Group believes that in Sub-Saharan Africa, of Japanese and Korean manufacturers. Furthermore, the Vehicle division is dominated by sales to government segmentation on the vehicle market is shifting, as SUVs are and to private sector companies (approximately 70% beginning to substitute traditional sedans. The development of the market). Because numerous countries in the region of consumer credit could also favor the development of this are still developing, sales to individuals account for only market; a small portion of the market (approximately 10% of the market according to CFAO’s estimates), whereas sales of − with respect to the Maghreb, the Group believes that the used vehicles dominate the market. Despite their smaller Algerian and Moroccan markets present significant growth size, used-vehicle distributors compete with specialized potential. distributors that sell new vehicles. ■ A European style market in the French overseas territories ■ Factors likely to strengthen the medium/long-term development of the African automobile distribution market: − The automobile distribution market in the French overseas territories is similar to that of Europe – very competitive − structural growth factors within the African continent should with high rates of vehicle ownership, a preference for have a positive impact on the local automobile market. In new vehicles and the presence of subsidiaries of large Sub-Saharan Africa, the Group believes that the very low international manufacturers. The light vehicle market consists rate of vehicle ownership in the region will in due course mainly of passenger cars (approximately 80% of the market lead to increased demand for vehicles, in line with the for light vehicles) and commercial vehicles (approximately area’s economic development. The gradual emergence of a 20% of the market (1). It differs from the mainland market in genuine middle class in the region could result in the decline terms of the larger share of entry level vehicles sold. French of the used vehicle market in favor of the new vehicle market, manufacturers (Peugeot, Renault and Citroën) dominate the which is a better fit for the aspirations of the middle classes; market.
New passenger vehicles and light commercial vehicles Region 2012 2013 2014 Guadeloupe 15,372 14,625 14,622 French Guiana 5,668 5,442 5,459 Martinique 13,410 12,895 13,233 Reunion 24,602 23,899 25,365 TOTAL FOR FRENCH OVERSEAS DEPARTMENTS (EXCLUDING MAYOTTE) 59,052 56,861 58,679
To CFAO’s knowledge, no similar data exist for the entirety of the French overseas territories other than that noted in the above table.
(1) Source: French Automobile Manufacturers’ Committee.
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6.4.3.2 The Pharmaceutical Distribution division in 6.4.3.3 The Consumer Goods production segment Africa and in the French overseas territories in Africa ■ Africa and the French overseas territories, the principal markets for the Group’s pharmaceutical distribution business, are two A high demand for Consumer Goods in Africa niche markets with growth potential: With the exception of the more developed regions such as South Africa, the need for consumer goods and services remains − the African market: in Africa, Eurapharma operates mainly very high in Africa, particularly in Sub-Saharan Africa. Growth in French-speaking Sub-Saharan Africa (including countries in the consumer goods market is likely to directly benefit from such as Senegal, Cameroon and Côte d’Ivoire). It also the sustained demographic growth in Africa as well as the operates in English- and Portuguese-speaking Sub-Saharan gradual improvement of its inhabitants’ standard of living (see Africa as well as in Algeria. The African market is, by far, the section 6.4.1.2 “Favorable African economic conditions” above). smallest pharmaceutical market in the world, representing An increase in purchasing power, including among Africa’s only 1% of the worldwide pharmaceutical market, or poorest populations, should continue to favor the growth of the approximately 639 billion euros in 2013, according to consumer goods and services market, such as the beverages or analysis carried out by IMS Health, despite the fact that plastic products markets, but will also help develop the creation Africa is the second most populous continent in the world; of new shopping malls (CFAO Retail) and of distribution centers − the French overseas territories represent approximately for staple consumer goods in Nigeria (FMCG). At the same time, 2.62% of the French market, which is in turn the second the development of the middle classes and their growing demand largest European market, accounting for 4.4% of the global for services and products similar to those available in Western market (1) Eurapharma operates mainly in Guadeloupe, economies should lead to an increased demand for less common Martinique and Reunion. The pharmaceutical distribution consumer products and services (e.g., furniture, motorcycles, market in the French overseas territories is dominated by etc.), as well as a more diverse range of products and services direct individual expenses and is highly regulated. similar to what has been seen in other emerging markets. ■ The pharmaceutical distribution market has strong growth Limited local production with significant development potential in Africa due to: potential − significant demographic and economic growth supported With the exception of South Africa and, to a lesser degree, certain by favorable macroeconomic trends throughout Africa. As countries in the Maghreb and Egypt, most African countries have indicated previously in this report, the gradual emergence of limited or non-existent local industrial production. Most of the a middle class should favor consumer spending, particularly significant investments in the countries on the continent relate to on health; the raw materials sector, which creates potential demand for local industrial production facilities to meet increasingly high demands − for which per capita spending is currently very low. Average for consumer goods that are otherwise imported from abroad. per capita healthcare spending is between USD 5 and 10 Due to the distance between the African market and the principal per annum; manufacturing production centers, the cost and price conditions − the development of ambitious programs in certain countries under which these products are imported from abroad and sold in and companies within Africa aimed at improving access Africa should create opportunities for genuinely competitive local to medical care and health insurance for local populations production of consumer goods. The continued modernization of as well as the assistance provided by developed countries, infrastructure in Africa, the private sector and local regulations multilateral organizations and NGOs. will also be decisive factors in the growth of local production. ■ In the French overseas territories, the market is now in decline: 6.4.3.4 The New Technologies Distribution segment whereas the French overseas territories enjoyed greater in Africa economic and demographic growth than mainland France over the past decade, per capita spending on medications is A budding market on the global scale lower than in France overall (an average of €561.11). The development of the IT services market in Africa is directly dependent on the overall development of new technologies (internet, mobile telephones, etc.). Financing issues, the inadequacy of regulations and the insufficiency of infrastructure networks in Africa have slowed the growth of this market. According to estimates, approximately only 26.5% of Africa’s inhabitants have Internet access.
(1) Source: Eco-santé 2015.
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The Group is not aware of any detailed quantitative analysis that Growth potential of the market provides an overview of IT services in Africa. Growth should benefit from efforts of African countries, However, it believes that: occasionally with the assistance of international organizations, in the area of new technologies. Certain national governments ■ Algeria, where CFAO Technologies has operations, is a have implemented ambitious policies over recent years to country in which the IT services market has huge potential; develop the new technologies sector, by modernizing their network infrastructures, intensifying public expenditure in this ■ Côte d’Ivoire, Cameroon and Senegal (where the Group has sector, encouraging the development of the private sector and by operations) are the most dynamic markets in French-speaking changing their regulations. Countries such as Algeria, where the Sub-Saharan Africa. Group is extremely active, have made becoming regional centers Within this market, the Group’s main customers and the other for new technologies an official target. market players are telecommunication companies, public Alongside the above mentioned structural reforms, the potential companies, governmental authorities, banks and insurance represented by pooling techniques for IT resources and the companies and companies connected to the oil industry. emergence of Cloud Computing are key factors underlying the rapid growth of this market in Africa.
6.5 Strategy
The demand in Africa is based on three strong needs, each in which it operates, and to support geographic expansion in representing promising markets: Equipment, Healthcare and its markets by pursuing a multi-brand distribution strategy; to Consumer Goods. CFAO’s strategy endeavors to meet these basic ensure, as necessary, that the right internal management and needs to the best of its ability, thereby supporting the development governance procedures preserve the conditions needed to be of consumer goods and infrastructures in Africa. able to pursue and further develop this multi-brand strategy in order to maintain relationships with the automakers; to pursue In order to reinforce its leadership position in certain markets and the development of the Equipment business and LOXEA ; to reach that position in other markets, the Group plans to employ a development strategy that leverages its strengths and targets ■ to support the organic growth of Eurapharma and the strong organic growth coupled with a high return on capital Company’s development strategy in Africa and the French employed. Additionally, the Group intends to continue with its overseas territories; policy of selective and targeted acquisitions and developing into ■ new business segments, in particular those related to retail. to support the growth of FMCG Industries & Distribution’s consumer goods production and distribution business; Even in development terms, most African markets are still new ■ compared with the major emerging markets. To be profitable, the for the Retail business, to support the roll-out of shopping malls historical business model employed by distributors like CFAO is in Africa, and in so doing, to help CFAO gradually transform made up, with just a few exceptions, of the various steps of the from a distributor specializing in B2B to a B2C-oriented so-called supply chain, import, wholesale and retail activities. In distribution model. these emerging markets, due to the volumes involved, they are as Within the scope of a new alliance, the two groups are devising yet unable to specialize and, in order to protect profitability, the a common strategy aimed at cementing CFAO’s leadership in Group needs to build up its expertise and ensure that it remains Africa and fostering the development of its business. as strongly positioned as possible in every segment of the value chain. The two groups are complementary with regard to their geographic footprint and their respective growth strategies. CFAO is therefore Since the Japanese trading company Toyota Tsusho Corporation in a position to benefit from any potential synergies that may result (TTC) acquired control of CFAO, TTC declared that it had no from working with the TTC group. intention of challenging CFAO’s autonomy and expressed its desire to support the development strategy of CFAO’s main businesses The Group is therefore continuing to pursue a strategy based on a with the goal of continuing to consolidate the Company’s positions number of priority focus areas. in its core markets. In particular, TTC declared its intention:
■ for CFAO Automotive Equipment & Services, to further reinforce and develop the Company’s presence in the countries
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6.5.1 Maintaining a high level of organic ■ in technologies business, the Group plans to continue the growth for existing businesses strategy initiated in 2011, i.e., to refocus its efforts on developing a range of solutions to integrate new high value added technologies in order to benefit from the expected strong CFAO believes that its existing markets will experience robust growth in the information services market in Africa. To this end, growth over the medium and long term, as projected by the and while trying to expand its circle of partners, the Group will International Monetary Fund, thanks to a combination of overall pay special attention to developing relationships with major favorable structural factors, such as strong population growth and players in the industry, to its capacity for innovation and to the anticipated development of the African middle class. the recruitment, training and retention of highly qualified local professionals; Additionally, the Group will draw upon its expertise and market position in its business segments to pursue specific and pertinent ■ in its healthcare business, the Group intends to continue to strategies to promote organic growth in each of its divisions that implement Eurapharma’s multi-channel growth model to are consistent with the Group’s overall growth strategy: consolidate its position throughout its value chain – as it did in 2011 with the stake acquired in the pharmaceutical ■ in its Automotive business, the Group is implementing an manufacturing company Propharmal in Algeria, and in 2012 ambitious strategy to expand and adapt its portfolio of partner with the acquisition of the Danish company, Missionpharma – brands, particularly in markets such as the Maghreb and to target the clientele of private clinics, hospitals and NGOs English-speaking Sub-Saharan Africa. The Group also intends with a new range of products (medical equipment, hospital to adapt its supply and distribution network on an ongoing consumables, emergency kits and generic products). Thanks to basis in response to changes in demand in the markets in its efficient operational structure, it should be able to capture which it operates. Such adaptations may include, for example, the anticipated rise in demand for pharmaceutical products increasing its portfolio of small or low-cost passenger vehicles in Sub-Saharan Africa. The Group also believes that the to respond to the emergence of a middle class in Sub-Saharan continued growth of its most recent distribution agent activities Africa, responding to an expected increase in demand for mid- (marked by the launch of Nigerian operations in 2012) range and luxury or high-end vehicles, and increasing demand and pre-wholesale activities illustrates the pertinence of this from private sector businesses as local economies grow. The development model; Group is also focusing on heavy trucks for B2B customers. Sales areas, maintenance areas and workshops have been set up in ■ finally, in its i ndustries business, the Group is keen to expand every country in which the division operates. To maintain skills its beverages business into other countries should suitable at the highest possible level, CFAO Automotive has teamed up opportunities arise. Over the past several years, it has made with partner manufacturers to hold training programs. Overall, substantial investments to increase production capacity and to the Group seeks to cover selectively all segments (low-cost, keep up with demand. In its plastic products manufacturing luxury, trucks, motorcycles and tires) within its markets. Lastly, activities, the Group is trying to accelerate the development the Group is looking to progressively strengthen the quality and of products aimed more specifically at agri-business and the performance of the after sales services provided to customers oil industries and to seize, where possible, opportunities to across its network and to develop tailored financing solutions expand its geographical presence. for retail and B2B customers;
■ in its equipment distribution and rental businesses, the Group plans to take part in the development of the construction, 6.5.2 Optimizing productivity power and long-term rental sectors, which are projected to and operating profit enjoy substantial growth over the next ten to fifteen years. Foreign investment, large scale urbanization, infrastructure projects and mining potential are equally favorable factors. Historically, the Group has focused above all on improving In the countries in which it has set up dedicated networks, the efficiency of its operations, with three objectives in mind: the Group plans to grow its market share by developing to improve the underlying long-term profitability of its business new services and innovative, made-to-measure offerings that portfolio; to increase its operational flexibility in order to better respond to the specific needs expressed by its customers. To anticipate and limit the impact, on its margins, of any unfavorable do this, the Group can draw on its existing logistics know- developments in the business environment of one or more markets how, market knowledge and a strong reputation. In order to in which it operates (for example, adverse currency movements); build a solid equipment business line spanning the whole of to maximize the return on capital employed. Africa, the Group is planning to follow an organic growth strategy, although acquisitions cannot be excluded if the right opportunities arise;
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Group policy therefore revolves around three major pillars, CFAO will focus on business projects that respond to several of namely: the continuation of the Group’s strategy of maintaining the following criteria: a unique positioning along the entire value chain, implementing ■ plans to continually improve operational efficiency in the Group’s strong growth and development potential; various businesses and conducting regular strategic reviews of ■ opportunities to develop business in several markets in Africa the optimal structure and breakdown of the Group’s business in a manner similar to the Group’s current businesses; portfolio. ■ opportunities to operate an integrated business with a presence The Group is aware of the fact that the interest Africa represents along the entire value chain, in a manner similar to the Group’s for a growing number of international players, as well as current businesses; the anticipated emergence of an African middle class and a large consumer market, will probably lead to a less favorable ■ opportunities to leverage the Group’s expertise; competitive environment in the coming years compared with the ■ present day, and indirectly to downward pressure on margins. fit with the Group’s existing businesses. With a view to harnessing the potential represented by the gradual emergence of new consumers in Africa, the Group launched a 6.5.3 Continuing the geographic new CFAO Retail business aimed at developing several dozens expansion of its various businesses of shopping malls in Sub-Saharan Africa. This new venture will strengthen the Consumer Goods business line, which already includes the production and distribution of beverages and plastic The Group’s continued geographic expansion will naturally focus products. on Africa and may also include targeted entries into high growth areas. Although the Group prioritizes growth in Africa, it is also open to 6.5.5 Pursuing a policy of targeted other areas of growth, in particular countries with qualities that external growth match its business model. For example, CFAO has a v ietnamese automobile distribution business and expanded into Cambodia in 2013. The Group will consider opportunities to pursue targeted acquisitions that respond to its acquisition criteria and growth strategy in order to reinforce its position in its existing businesses and potentially to enter new markets (see the section above). CFAO 6.5.4 Applying its know-how to the has a successful acquisition track record that has contributed to its development of new businesses, growth and increased market shares. principally in Africa The Group is studying acquisition opportunities that will enable it to both strengthen its existing business lines and allow it to build As a leading player in each of its current businesses, the Group will up positions in new businesses related to specialized distribution. continue to explore opportunities to use its expertise, knowledge of Africa and reputation throughout the African continent to develop new businesses.
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6.6 Regulations
The Group’s business – specialized in automobile distribution Pharmaceutical establishments in Africa and the French overseas territories, as well as the The Group is subject to a certain number of ongoing regulatory manufacture of industrial products and the provision of services requirements set by the national health authorities that regulate related to new technologies – is not in and of itself subject to pharmaceutical establishments. In the French overseas territories, specific regulation. However, the manufacture and/or distribution in most countries of French-speaking Sub-Saharan Africa and in of certain products, in particular pharmaceutical products, is Europe (Portugal, Denmark, Italy and mainland France) in which subject to specific regulations (see sections 6.6.1 “Pharmaceutical the Group operates, the Eurapharma division’s subsidiaries have operations” and 6.6.5 below). pharmaceutical establishment status, which entails notably a In the countries in which the Group operates, an import license is verification that their business and sites comply with applicable generally required for the importation of goods (as is the case for standards. Algeria and Angola). Under French law, prior approval is required in order to conduct Furthermore, the Group’s strong international profile means its any pharmaceutical business, whether related to their importation operations are subject to various regulations that significantly and storage or to the wholesale distribution of pharmaceuticals affect its business. These include regulations concerning: in the given country or the export of pharmaceutical products intended for human or veterinarian use. This authorization is ■ pharmaceutical operations (see section 6.6.1, below); issued by the Director General of the National Agency for the Safety of Medications (Agence nationale de sécurité du ■ exchange controls (see section 6.6.2, below); médicament - ANSM), or the National Agency for Veterinary ■ flow of goods (see section 6.6.3, below); Medications (Agence nationale du médicament vétérinaire - ANMV), the agency for veterinarian drugs, a sub-department ■ foreign direct investment (see section 6.6.4, below); of the French National Agency for Food, Environmental and Safety in the Workplace (Agence nationale de sécurité sanitaire ■ product liability (see section 6.6.5, below). de l’alimentation, de l’environnement et du travail - ANSES). Renewals are not required, but regular audits are conducted. The authorization is issued following an administrative and technical 6.6.1 Pharmaceutical operations process consisting of three steps: eligibility of the application, technical investigation and the decision to authorize. With due notice, the authorization may be suspended or withdrawn in the Through Eurapharma, the Group currently has operations in event of an infringement of the French Public Health Code (Code 21 African countries, as well as in 7 French overseas territories, de la santé publique). Continental Pharmaceutique has enjoyed in mainland France, Italy, Portugal, Denmark and India, countries the benefits of this authorization as a wholesale distributor, in in which the business is focused exclusively on exports. its new premises since September 5, 2005, as has E.P. DIS Within these markets, the sale and/or export of pharmaceutical France as a stockist and export wholesaler in its new premises products is subject to complex legal and regulatory requirements since March 23, 2005. The Eurapharma companies located in established by various government authorities in France (with the French overseas territories are also authorized to operate as respect to the French overseas territories) and in the African countries stockists and/or wholesale distributors. in which the Group operates. In the event of non-compliance with In the 14 French-speaking Sub-Saharan African countries in regulations, the regulatory authorities may impose fines, take which the Group operates, the law generally provides that the disciplinary action against the pharmacists held responsible, importation and distribution of pharmaceutical products is subject order the closure of the relevant pharmaceutical establishments, to approval. Evaluation of the application and the granting of seize or withdraw products from the market, or partly or totally the approval are normally entrusted to an agency or department suspend production and distribution. The regulations regarding of the Ministry of Health in the host country. An approval is also the sale of pharmaceutical products mainly concern entities required in Algeria and most countries of English- and Portuguese- with “pharmaceutical establishment” status (which applies to speaking Sub-Saharan Africa in which the Group operates, the Group’s subsidiaries that operate in the import/wholesale/ including Kenya. resale business), marketing authorizations for the pharmaceutical products sold, the public service obligations incumbent upon the subsidiaries operating as wholesale distributors or under an Marketing authorization equivalent status in each country of operation, and price controls. In the French overseas territories and the other countries in which the Group operates, access to the pharmaceuticals market is regulated by national authorities. The sale of pharmaceutical products requires compliance with a regulatory authorization procedure (the marketing authorization – autorisation de mise sur le marché (“AMM”) – or visa), which aims to verify the quality, safety and effectiveness of products and must be renewed at least
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every five years. The preparation of the marketing authorization government, which either fixes prices or sets social security or visa requests and their examination by the competent authority reimbursement at a flat rate for pharmaceutical products with are costly and may take several years. In almost all cases, a registered generic equivalent. This has the indirect result of pharmaceutical companies are responsible for the entire process, aligning the pricing for generic medicines with that fixed rate. The and own the authorizations, which are their responsibility. In wholesale prices of prescription pharmaceutical products covered their capacity as export wholesalers or wholesale distributors, by the reimbursement system are thus equal to the manufacturer’s the Eurapharma subsidiaries are also obligated to ensure that prices excluding taxes, multiplied by a regulated ratio. Retail sale the products exported and/or sold do indeed have a marketing prices are equal to the retail prices in effect in mainland France authorization in the country of delivery. The Eurapharma multiplied by a regulated ratio. Regulations governing the pricing subsidiaries do not hold the authorizations and are not responsible of medicines, and particularly pharmaceutical specialties, may for them. However, as distribution agents, they may be required to be amended in the near future in the French overseas territories. provide administrative support to the pharmaceutical companies that wish to obtain a local registration. In the 14 countries of French-speaking Sub-Saharan Africa in which the Group operates, the pricing structure of pharmaceutical products is generally regulated, but there is no social security Public service obligations reimbursement of pharmaceutical products. In practice, the relevant In mainland France and the French overseas territories, regulator fixes margins at various points throughout the distribution only wholesalers may distribute pharmaceutical products to process. In some countries, such as Senegal, Cameroon and Côte pharmacists and their operations are regulated. In connection d’Ivoire, price regulation applies to all pharmaceutical products. with this pharmaceutical monopoly, the Group is subject to certain In other countries, such as Mali, only “essential pharmaceutical obligations. Such obligations include placing its pharmaceutical products” are subject to fixed pricing, the prices of other wholesale distributors under the supervision of a so-called head pharmaceuticals being determined by the market. In Algeria, the pharmacist, declaring to the Director General of the ANSM margins generated by the sale of pharmaceutical products are set the territory in which each of its establishments distributes by law at every level of the distribution chain. Angola also has products and stocking in its distribution territory a wide range regulations on medication pricing. of pharmaceutical products, including at least nine-tenths of the pharmaceutical specialties effectively sold in France, as defined English-speaking countries in Sub-Saharan Africa where the below. Group operates have no such regulations regarding the pricing of medications. The following public service obligations are also incumbent upon the establishment: being in a position to satisfy the consumption of Regulation of advertisements its regular customers at all times for at least two weeks, to deliver any orders placed before 2 pm on a Saturday within twenty-four The Group must also comply with strict regulations in hours for any specialties it effectively sells, with the exception of terms of labeling, advertising, promotion and marketing of medications used exclusively by hospitals, for medicinal plants pharmaceuticals. Any infringement of such regulations may result and homeopathic medicines, to deliver any medication and, if it in notices, injunctions, seizure of products or legal proceedings, is responsible for its distribution under the terms set by the French possibly of a criminal nature in certain jurisdictions like France or Public Health Code, any other product, object or article and any the French overseas departments. divided pharmaceutical product covered by the French Public Health Code and sold in France, to any pharmacy that requests it Product traceability and participates in the duty chemist system. As of January 1, 2011, wholesalers must ensure the traceability In the 14 French-speaking Sub-Saharan African countries in which of all the pharmaceutical products they distribute, in compliance the Group operates its import-wholesale-resale activities, the with the French Public Health Code. regulations in force are based on the existing French regulations The information required includes: 1) purchase date, 2) product governing the public service obligations of pharmaceutical name, 3) batch number and expiration date per batch and 4) the establishments. All of the countries concerned require that name and address of the supplier (laboratory) and recipient pharmaceutical establishments include a senior pharmacist within (pharmacist). their management team. This information must be kept on record for five years as of the Regulated prices and product reimbursement date the pharmaceutical products are received. Accordingly, upon request from laboratory suppliers, reminders and requests In the French overseas territories, the pricing of pharmaceutical can be sent for the removal of expiring batches from pharmacies. products marketed by the Group is subject to control by the
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As a result of this traceability requirement, information systems 6.6.2 Exchange controls and operations had to be aligned so that data on all flows of goods to French overseas territories could be stored intelligently. The Group is subject to the exchange controls in force in the foreign countries in which it operates. These controls have Regulations on pharmaceutical production in Algeria several aims: they seek to prevent excessive currency purchases Algerian regulations require facilities manufacturing conducive to the depreciation of the national currency and to pharmaceutical specialties to obtain administrative authorization the deterioration of the balance of payments, to control imports from the Health Minister, subject to approval by a central of products likely to compete with national industries, to reserve commission and the national order of pharmacists. purchases of foreign currency for the payment of imports deemed most useful, and to prevent capital flight and tax evasion. The Authorization is delivered based on the manufacturer’s Group is subject to these regulations in the following significant application, which includes: 1) a description of the production countries: the countries belonging to the CFA franc zone; Algeria, facilities and their compliance with applicable regulations, 2) the Nigeria and Morocco. industrial equipment used in manufacturing the pharmaceutical products, 3) a list of the products manufactured at the facility and ■ The CFA franc zone: The CFA franc zone consists of the West the planned production processes, 4) a presentation of the staff African Economic and Monetary Union (UEMOA), which participating in the production process and their qualifications includes eight West African countries (Benin, Burkina Faso, and, more generally, 5) any information that guarantees that Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and production meets the required quality and control standards. Togo), and of the Central African Economic and Monetary Community (CEMAC), which includes six Central African The manufacturing facility’s Technical Department must be States (Cameroon, Central African Republic, Congo, Gabon, overseen by a Technical Director who guarantees compliance Equatorial Guinea and Chad). with all technical and administrative rules laid down in the interest of public health. The Technical Director must hold a degree in The CFA f ranc zone is a system of monetary cooperation industrial pharmacy and have at least two years of professional between France and the member countries of UEMOA and experience at an industrial facility. The responsibilities of this CEMAC and is based on the following principles: use of the supervising pharmacist entail approving product registration CFA f ranc as a common currency, convertibility guaranteed applications and organizing and inspecting supply and all by the French Treasury, fixed exchange rate, unrestricted manufacturing stages, including the release of finished products transferability and centralization of currency reserves. Since onto the market. The pharmacist is personally liable for all January 1, 2002, the euro has replaced the French Franc at a pharmaceutical work carried out at the manufacturing facility. fixed parity of one euro to 655.957 CFA francs.
Product release onto the market requires authorization from the The main exchange controls in the CFA franc zone are as Health Minister, subject to approval by the national directory follows: commission, to register pharmaceutical products in the national − the Ministries of Finance are responsible for managing directory. In France, this marketing authorization is called exchange controls. They may delegate all or part of their autorisation de mise sur le marché or AMM. powers to the Central Bank of West African Countries Marketing authorizations (AMM) are delivered upon review of the (BCEAO) for UEMOA member countries, or to the Bank scientific and technical application submitted by the manufacturer of Central African Countries (BEAC) for CEMAC member or owner of the intellectual and/or industrial property rights, countries, to approved banks and post offices. All exchange as applicable. The AMM is delivered for five years and can be transactions with foreign countries must be carried out renewed for five-year periods. through approved intermediaries;
The manufacturer must ensure that all pharmaceutical specialties − all imports must be declared and transactions involving produced have obtained this authorization. The Propharmal imports from foreign countries must be domiciled with an subsidiary is mainly involved in packaging on behalf of approved intermediary if goods are not considered to be in pharmaceutical companies that hold the AMM authorizations and transit. The minimum declaration or domiciliation thresholds thus is not responsible for pharmaceutical release, which is always vary depending on the country; carried out by the pharmaceutical customer company. However, it − for the purpose of transfers to foreign countries, supporting does act as a manufacturer in charge of pharmaceutical release documents must be presented to the intermediary responsible whenever it produces pharmaceutical specialties under license. for payment. When supporting documents evidence that the transfer relates to a routine transaction (importation of goods, freight and insurance, salaries, wages, fees, patent and license fees and royalties, interest, dividends, etc.), the approved intermediary is free to carry out the transfer, under its responsibility. Otherwise (such as in the case of foreign investments or loans, except for transfers involving members of the CFA franc zone), the prior approval of the relevant
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Finance Minister is required. Provisions concerning foreign The Nigerian exchange market was deregulated in 1995, direct investment and foreign loans vary depending on the when an autonomous exchange market was created to permit country. purchases of foreign currency by the public from the Central Bank of Nigeria, at the market price and via approved Generally speaking, the Group believes that such regulations intermediaries. Further deregulation of the exchange market do not have a material adverse impact on its operations in followed in October 1999, when the interbank foreign the CFA f ranc zone countries in which it operates. The Group exchange market was created. Capital movements to and from has implemented administrative procedures to achieve Nigeria can now be effected freely. Nevertheless, the Central compliance with the exchange controls described above and Bank of Nigeria may have to adopt an interventionist policy as no significant infringement of rules has been brought to light by witnessed by its decision in November 2014 to oblige import the inspections carried out in several regional countries. companies to buy dollars from the United States through the ■ Algeria: the currency of Algeria is the dinar. Routine currency interbank market, and not via the Central Bank of Nigeria. conversion is subject to strict exchange controls, particularly ■ Morocco: the currency of Morocco is the dirham. The Foreign in the case of capital transfers. The Bank of Algeria, as the Exchange Office, under the supervision of the Ministry of country’s central bank, is responsible for foreign exchange Economy and Finance, is responsible for regulating exchange policy and, therefore, has sole control over the management of transactions by authorizing transfers abroad, in general or the country’s foreign currency resources. specifically.
The real effective exchange rate is determined monthly by As part of its mission, the Foreign Exchange Office has the Bank of Algeria and depends on price indices in Algeria undertaken a deregulation process in recent years to allow and trading partners, the structure of external trade and the banks to perform most transfers abroad freely. Consequently, nominal US dollar exchange rate. In the past, in order to slow banks are now authorized to make payments freely in consumption and reduce the country’s import bill, the Bank connection with transactions concerning imports, exports, of Algeria has allowed the dinar to depreciate against major international transport, insurance and reinsurance, foreign world currencies. technical assistance, travel, education, medical care, savings In accordance with Article VIII of the IMF’s Articles of on income and all other transactions considered to be routine. Agreement, the exchange regime in Algeria offers a degree In accordance with Article VIII of the IMF’s Articles of of flexibility as regards convertibility for routine transactions, Agreement governing currency convertibility for routine including payments for the importation of goods. In the case transactions, Morocco has extended the convertibility of the of the foreign investment flows discussed under Article 2 of the dirham to numerous capital transactions, including foreign 2001 ordinance on the development of investment, the Bank of investment in Morocco, external financing raised by Moroccan Algeria reviews transfers of profit, dividends and the proceeds companies, investments by Moroccan legal entities abroad, of asset disposals carried out by foreign subsidiaries located the implementation of an export credit system and the use of in Algeria after the transaction has taken place. In the case hedging instruments against financial risks. of routine commercial transactions, the procedures, which are now handled by the bank dealing with the transaction, are To date, Moroccan exchange controls have not prevented considerably shorter, although the authorities have sought to the Group from converting income from its operations and reinforce control over these transactions through the various transferring it abroad. measures introduced by the 2009 supplementary finance law ■ (tax on banking domiciliation, limitation of proxy, obligation Other countries: exchange controls are applied to fund to settle imports through CREDOC). For transactions involving inflows and outflows in certain other countries in which the a significant amount, the opinion of the Bank of Algeria may Group operates, such as Malawi. However, in the past three be sought at the discretion of the credit institution concerned. years, exchange control regulations have not prevented the conversion and transfer of significant amounts generated from CFAO cannot guarantee that changes in these regulations will operations in any of the countries concerned. Convertibility not significantly affect the capacity of its local subsidiaries to and transfer issues in certain countries tend to result more from transfer dividends to the parent company. occasional problems with the levels of central banks’ foreign currency reserves than from prevailing regulations. ■ Nigeria: the currency of Nigeria is the naira.
64 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com BUSINESS OVERVIEW Regulations 6
6.6.3 Regulations concerning the flow Algerian state and state entities on any transfer of a stake in an of goods Algerian company by foreign shareholders or for the benefit of foreign shareholders. Various finance laws have been passed to specify how this law can be applied to foreign investments made The Group’s business is subject to regulations concerning the flow before the supplementary finance law for 2009 went into effect. of goods in effect in the countries in which it operates. These As yet, the Group has not had to change any terms or investments regulations are implemented by the customs administration, which to meet the above mentioned requirements. is in charge of applying and collecting customs duties with respect to products imported or exported, in accordance with applicable The Group cannot guarantee that these regulations will not laws and regulations. The customs administration also ensures the significantly affect its capacity to develop new projects in Algeria. safety and quality of goods flows, fraud prevention, and public The Group is subject to regulations on foreign investment in the health and safety protection. countries in which it operates. Such regulations may take the Customs regulations may take forms other than the imposition of form of preferential treatment intended to encourage the entry duties. They may, for example, require an import license, as is of foreign capital, such as the implementation of tax incentives the case in Algeria and Angola. They may also impose import to attract foreign investors. The nature and scope of incentives restrictions on certain specific products or set vehicle related vary across countries and generally depend on the amounts approval requirements that can cause delays or slow down invested and the economic sectors concerned. For instance, the development. regulatory environment in the Congo includes a favorable tax system, from which the Group has benefited since 2006, and Certain tax regulations may have an adverse impact on the flow which was extended in 2012 for a further five years, with regard of goods. to investments in its beverage business. The regulations in the Congo essentially provide for total exemption from corporate income tax for a five-year period from January 1, 2012, subject to 6.6.4 Regulations concerning foreign a certain level of investment in the two main production facilities in Brazzaville and Pointe Noire. Pursuant to an agreement with a direct investment five year term entered into on January 30, 2012 with the Congo, Brasseries du Congo has committed to an investment program, Regulations on foreign investment may take the form of protection to the maintaining of a stable workforce and to the creation of plans or requirements imposed on foreign investors to favor of permanent jobs. Brasseries du Congo has also undertaken to give local businesses. In Algeria, Executive Decree n° 09-181 of priority to Congolese companies for the provision of supplies and May 12, 2009 requires that at least one third of the capital of services in connection with the maintenance and operation of its certain multinational companies’ local subsidiaries be held by production facilities, and to Congolese workers and executives shareholders of Algerian nationality by December 31, 2009. This under its recruitment policy. In return, the Congo has granted to the requirement does not apply to companies registered prior to its Group, for the same period, a certain number of legal, financial, date of entry into force. However, the supplementary finance law economic and administrative guarantees, together with tax and for 2009, which amended the ordinance of August 20, 2001 customs benefits. Pursuant to the 2013 Congolese finance law, a on the development of investment, stipulates that new foreign national commission was tasked with renegotiating agreements investments realized in the economic activities of the production with a term exceeding one year and providing for tax and custom of goods and services should, prior to their realization, be the duty exemptions. This commission was granted an initial six-month subject of a declaration of investment, and can only be realized timeframe to renegotiate these agreements. After this period, any within the framework of a partnership within which the resident tax or custom duty exemptions exceeding the authorized limit shall national shareholding must represent at least 51% of the share be deemed null and void. On the filing date of this Registration capital, except in the case of foreign trade activities where the Document, the members of the commission had been appointed, threshold is set at 30%. New regulations effective from January 1, but no meeting had yet been held with Brasseries du Congo. The 2014 push this threshold to 51% for foreign trade activities. The term of this agreement and the advantages granted thereunder 2009 finance law also introduced a preemptive right for the may, however, be reconsidered by the Congolese government.
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6.6.5 Product liability Manufacturing Some of CFAO’s divisions are involved in manufacturing activities within the Group. Imports The Group imports products from manufacturers (primarily The CFAO FMCG Industries & Distribution division includes the automakers and pharmaceutical companies) for the purpose of Group’s beverage business and various light industrial activities, resale. In connection with this activity, the Group may be required such as the production of plastic products. to provide a legal or contractual warranty to its customers, but The Automotive Equipment & Services division includes the such warranty is in turn generally covered by an equivalent assembly of motorcycles and mopeds. manufacturer’s warranty. Therefore, except in the event of a default on its part, the manufacturer ultimately assumes the legal Eurapharma division is a shareholder in a company that owns or contractual warranties related to product liability. a pharmaceutical manufacturing facility in Algeria and an India based manufacturing/assembly unit for medical kits (groupings of different items, including medicines and medical supplies and equipment designed for treatment or first-aid) for international organizations.
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7.1 Simplifi ed operational organization 7.2 Parent company, subsidiaries chart as of December 31, 2014 68 and equity interests 69 7.2.1 Overview 69 7.2.2 Wholly-owned or almost wholly-owned subsidiaries (share capital and voting rights) 70 7.2.3 Subsidiaries other than wholly-owned (in which the Group does not hold all of the share capital and voting rights) 71 7.2.4 Acquisitions and disposals during the past three years 74
REGISTRATION DOCUMENT 2014 - CFAO 67 ORGANIZATION OF THE GROUP 7 Simplified operational organization chart as of December 31, 2014
7.1 Simplified operational organization chart as of December 31, 2014
The table below shows the Group’s main subsidiaries classified by business division, identified according to the criteria set out in section 7.2, below (the description of these companies is given in the same section):
Central purchasing offices SFCE (France) Capstone Corporation (Mauritius) CFAO Automotive Equipment & Services division CFAO Motors Côte d’Ivoire CFAO Motors Maroc (Morocco) CFAO Motors RDC (Democratic Republic of the Congo) CMM (Reunion) Capstone International (Mauritius) Diamal (Algeria) CAMI (Cameroon) CP Holding (New Caledonia) Eurapharma Eurapharma (France) EDPIS (France) Continental Pharmaceutique (France) EDPIS Algérie (Algeria) Soredip (Reunion) Laborex Sénégal Laborex Cameroun Laborex Congo Copharmed (Côte d’Ivoire) Laborex Mali Pharma Gabon Sopharma Antilles Mission Pharma Group A/S CFAO FMCG Industries & Distribution division Brasseries du Congo General Import & Distribution Ltd (Nigeria)
68 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com ORGANIZATION OF THE GROUP Parent company, subsidiaries and equity interests 7
7.2 Parent company, subsidiaries and equity interests
7.2.1 Overview 7.2.1.2 Main cash flows within the Group The principal intragroup cash flows relate to dividends paid to CFAO by subsidiaries, cash flows between operational 7.2.1.1 Parent company subsidiaries and central purchasing offices, which pay suppliers CFAO, a French joint-stock company (société anonyme) is the and bill subsidiaries, as well as investment and cash financing parent company of the Group. It is also the company under which agreements as described below. the Group’s subsidiaries which are subject to French company tax, have consolidated their income for French tax purposes (intégration CFAO has implemented a system of centralization of the treasury fiscale). The list of main consolidated subsidiaries is described in by entering into bilateral cash financing agreements with its Note 37 to the Group’s consolidated financial statements. central purchasing offices (SFCE, Capstone Corporation and Capstone International) as well as with some of its subsidiaries in CFAO is a holding company which is not engaged in any France and in the French overseas territories. Eurapharma has also operational activities outside the Group. The business of the signed cash financing agreements with some of its subsidiaries. holding company consists wholly or mainly in holding shares in subsidiaries and providing technical assistance services to The centralization of the Group’s cash management aims to its subsidiaries. The Company holds direct and indirect interests encourage better management of both credit and cash surpluses in nearly 135 subsidiaries operating mainly in French-speaking within the Group. Pursuant to the above mentioned agreements, Sub-Saharan Africa, English- and Portuguese-speaking Sub- these subsidiaries transfer to CFAO any cash surplus which they Saharan Africa, the Maghreb, the French overseas territories, do not use to finance their operations and capital expenditures, Mauritius, Vietnam, Switzerland, Denmark, Italy, India, Portugal in exchange of this transfer, CFAO finances when necessary their and mainland France. The simplified operational organization working capital needs and capital expenditures. Reimbursements chart in section 7.1 “Simplified operational organization chart of the deposit may be done upon the first request and/or upon as of December 31, 2014” does not include all of its equity maturity, as mutually agreed by the parties. interests, but includes the main subsidiaries as set forth below. Implementing a centralized cash management system with the The subsidiaries are classified by business division based on other subsidiaries the Group’s is generally prohibited by the local their primary business activity, although some of them may have regulations, in particular by those related to exchange control additional business activities related to another Group business requirements. In this case, financing is secured through loans from division. For more information regarding the business activities the local financial institutions for these subsidiaries. and results of each business division, refer to Chapter 6 “Business overview” and Chapter 9 “Operating and Financial Review” of CFAO also provides services to some central purchasing offices the present Registration Document. and to most of the subsidiaries in the CFAO Automotive Equipment & Services and CFAO FMCG Industries & Distribution divisions. The The list of main consolidated subsidiaries is given in Note 37 technical assistance agreement is generally signed for a period of to the consolidated financial statements (“List of consolidated one year and is automatically renewed at its term. The purpose of subsidiaries as of December 31, 2014”) of Chapter 20 “Financial this agreement is to share CFAO’s resources with the parties to the information concerning the assets and liabilities, financial position agreement (its subsidiaries), particularly in the following areas: and profits and losses of CFAO” of this Registration Document. legal, IT, and tax, sales and business development and HR related CFAO does not hold any direct or indirect interests in any listed assistance. The services are invoiced on the annual basis taking companies except for the one it has in CFAO Motors Côte d’Ivoire. into account the services provided. If the contracting subsidiary is The list of the Group’s main subsidiaries selected based on their no longer part of the CFAO Group and/or CFAO has no longer contribution to the Group’s net income is given in Chapter 25 its legal ownership or its economic control, CFAO may terminate “Information on equity interests”. the agreement at any time without any prior notice.
The Group’s subsidiaries that are described below have been Sometimes, it is not possible to enter into technical assistance selected based on the following criteria: agreements with certain Group subsidiaries (CFAO Automotive Equipment & Services and/or CFAO FMCG Industries & ■ each of the subsidiaries in the CFAO Automotive Equipment & Distribution divisions) due to local regulations, such as exchange Services division mentioned below accounted for at least 2% rate controls. of consolidated Group revenue in 2014, with the exception of Capstone Corporation Ltd. and Capstone International, both of Within the Eurapharma division, Continental Pharmaceutique has which are nevertheless included insofar as they represent 4.3% signed a similar technical assistance agreement, as well as supply and 2.8% of the Group’s total consolidated assets in 2014; agreements, with some if its sister companies of this division.
■ each of the subsidiaries of the Eurapharma and CFAO FMCG Industries & Distribution divisions mentioned below generated at least 1% of the Group’s total consolidated revenue in 2014, with the exception of Eurapharma and Continental Pharmaceutique, which were nevertheless included insofar as they represented 2.3% and 6.5% respectively of the Group’s total consolidated assets in 2014.
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7.2.2 Wholly-owned or almost 7.2.2.3 Export-wholesale business wholly-owned subsidiaries ■ E.P. DIS is a French joint-stock company (société anonyme) with (share capital and voting rights) share capital of €6,477,000, whose registered office is located at ZAC du Grand Launay, 8 Avenue Paul Delorme, 76120, Grand Quevilly, France, and registered with the Trade and This list provides the main consolidated subsidiaries of the CFAO Companies Registry of Rouen under number B 412 543 449. Group. Percentages mentioned below are calculated on the basis Eurapharma holds 99.68% of the share capital and voting of the consolidated ownership by the CFAO Group. rights of E.P. DIS, which is one of the Group’s subsidiaries specialized in the ‘pre-wholesale’ business. 7.2.2.1 Sub-holding company Eurapharma is a French joint-stock company (société anonyme) 7.2.2.4 Distribution subsidiaries with share capital of €2,799,750, whose registered office is located at ZAC du Grand Launay, 8 Avenue Paul Delorme, CFAO Automotive Equipment & Services 76120, Grand Quévilly, France, and registered with the Trade ■ CFAO Motors Côte d’Ivoire is an Ivorian joint-stock and Companies Registry of Rouen under number 307 718 577. company (société anonyme) with the share capital of CFAO holds 99.68% of Eurapharma’s share capital and voting 9,068,595,000 CFA francs having its registered office located rights. Eurapharma directly and indirectly holds all of the Group’s at 117 bld de Marseille – Abidjan, R CI, and registered with equity interests relating to its pharmaceutical business. the Trade and Companies Registry of Abidjan under the number B 11362. CFAO holds 95.85% of CFAO Motors 7.2.2.2 Central purchasing offices Côte d’Ivoire’s share capital and voting rights. CFAO Motors ■ Société Française de Commerce Européen (SFCE) is a French Côte d’Ivoire’s primary business is automotive distribution joint-stock company (société anonyme) with share capital in Côte d’Ivoire. CFAO Motors Côte d’Ivoire is listed on the of €12,114,240, whose registered office is located at 18, Regional Securities Exchange in Abidjan (Bourse Régionale Rue Troyon, 92310, Sèvres, France, and registered with the des Valeurs Mobilières). Trade and Companies Registry of Nanterre under number ■ CFAO Motors Maroc is a Moroccan joint-stock company B 333 520 591. CFAO holds 100% of SFCE’s share capital and (société anonyme) with share capital of 284,468,000 voting rights. SFCE acts mainly as a central purchasing office, Moroccan dirhams, whose registered office is located at 15, in the capacity of an undisclosed agent (commissionnaire), or Rue Omar Slaoui, Casablanca, Morocco, and registered trader, with automakers, or with suppliers of the CFAO FMCG with the Trade and Companies Registry of Casablanca under Industries and Distribution division on behalf of the Group’s number 104 285. CFAO holds 100% of CFAO Motors companies developing their automobile distribution business Maroc’s share capital and voting rights. CFAO Motors Maroc’s or other activities in French-speaking Sub-Saharan Africa and primary business is automotive distribution in Morocco. Its by- the French overseas territories. laws require prior approval for any transfers of shares to third ■ Capstone Corporation Ltd. (Capstone) is a Mauritian private parties. company with share capital of €15,000,000, whose ■ CFAO Motors RDC is a Congolese private limited company registered office is located at c/o Globefin Management with share capital of 106,207,478 Congolese Francs, whose Services Ltd., 1st Floor, Anglo-Mauritius House, Intendance registered office is located at 17, Avenue des Poids Lourds, Street, Port Louis, Mauritius, and whose premises are located B.P. 2200, Kinshasa, Democratic Republic of the Congo, at Harbour Front Building, President John F. Kennedy Street, and registered with the Trade and Companies Registry of Port Louis, Mauritius, registered with the Trade and Companies Kinshasa under number 44 560 KIN. CFAO holds 100% of Registry of Mauritius under number 20798/4602. CFAO CFAO Motors RDC’s share capital and voting rights. CFAO holds 100% of Capstone’s share capital and voting rights. Motors RDC’s primary business is automotive distribution in Capstone acts mainly as the Group’s central purchasing the Democratic Republic of the Congo. Its by-laws require prior office for orders placed with certain automakers in the CFAO approval for any transfers of shares to third parties. Automotive Equipment & Services division for English- and Portuguese-speaking Sub-Saharan Africa, certain subsidiaries ■ Compagnie Marseillaise de Madagascar (CMM) is a French in the French overseas territories and the Maghreb, as well as joint-stock company (société anonyme) with share capital with the suppliers of the CFAO FMCG Industries & Distribution of €2,630,625, whose registered office is located at 4, division. Chemin du Grand Canal, BP 106, 97492, Sainte Clotilde Cedex, Reunion Island, and registered with the Trade and Companies Registry of Saint Denis, Reunion, under number B 572 073 914. CFAO holds 98.38% of CMM’s share capital and voting rights. CMM’s primary business is automotive distribution in Reunion.
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7.2.3 Subsidiaries other than (shareholders’ approval and preemptive rights). The main wholly-owned (in which the Group provisions of this type are set forth below. does not hold all of the share capital Over the past three years, Eurapharma has, at times, guaranteed and voting rights) the liquidity of its subsidiaries by repurchasing shares held by minority shareholders.
7.2.3.1 Minority third-party interest 7.2.3.2 Central purchasing offices in non-wholly-owned subsidiaries ■ Capstone International Ltd. is a Mauritian private company The Group has numerous minority third party interests in non- with share capital of €100, whose registered office is located wholly-owned subsidiaries of the Group, principally in the at c/o Globefin Management Services Ltd., 1st Floor, Anglo- Eurapharma division and the subsidiaries of the Automotive Mauritius House, Intendance Street, Port Louis, Mauritius, Equipment & Services division. Equity attributable to non-controlling whose premises are located at Harbour Front Building, interests represented €213 million as of December 31, 2012, President John F. Kennedy Street, Port Louis, Mauritius, and €194.7 million as of December 31, 2013 and €211.7 million registered with the Trade and Companies Registry of Mauritius as of December 31, 2014. Net income attributable to non- under number 59812 C1/GBL. CFAO holds 60% of the share controlling interests amounted to €57.2 million (or 33.4% of capital and voting rights of Capstone International, with the consolidated net income) in 2012, €44.0 million (or 30.5% of remainder held by one of the Group’s partners. Capstone consolidated net income) in 2013 and €49.1 million (or 32.8% International Ltd’s primary business in Mauritius is the same as of consolidated net income) in 2014. Dividends paid to minority that conducted in the Maghreb. shareholders in the Group’s consolidated subsidiaries amounted to ■ €38.8 million in 2012, €47.8 million in 2013 and €37.6 million Continental Pharmaceutique is a French limited partnership in 2014, representing respectively 22.7%, 33.1% and 25.1% of company (société en commandite simple) with share capital consolidated net income in 2012, 2013 and 2014. of €450,000, whose registered office is located at ZAC du Grand Launay, 8 Avenue Paul Delorme, 76120, Grand The existence of minority shareholders within certain Group Quevilly, France, and registered with the Trade and Companies companies or the Group’s non-controlling interest in certain Registry of Rouen under number B 582 113 031. Continental companies is mainly due to the following framework: Pharmaceutique is the Group’s centralized purchasing platform for its pharmaceutical import-wholesale-resale ■ for the companies in the Eurapharma division, the structure business. The Group holds directly and indirectly 83.51% of resulting from the Group’s growth model. The Group carries Continental Pharmaceutique’s share capital and voting rights out a part of its pharmaceutical business activities using local (as a shareholder and as a partner). Certain subsidiaries of subsidiaries in which local pharmacists hold minority interests or companies in which Eurapharma is a stakeholder hold so that to promote the development of the Group’s business a percentage of Continental Pharmaceutique’s capital and activities by sharing the revenues of the these subsidiaries with voting rights, namely Laborex Sénégal, Copharmed Côte its minority shareholders. Certain subsidiaries of Eurapharma d’Ivoire, Laborex Cameroun, Pharma Gabon, Laborex or companies in which Eurapharma has shareholdings, Congo, Laborex Guinée, Promo-Pharma Bénin, Laborex Mali, hold 40% of the capital and voting rights of Continental Laborex Burkina, Sopharma Antilles, Soredip and Société Pharmaceutique, the Group’s centralized purchasing platform Pharmaceutique de Guyane. The agreements entered into with for its pharmaceutical import-wholesale-resale business; import-wholesale-resale subsidiaries that are shareholders of ■ for the other divisions in the Group (i.e. CFAO Automotive Continental Pharmaceutique provide that their interest is to be Equipment & Services, CFAO FMCG Industries & Distribution), reappraised every five years, and if necessary, adjusted based by the Group’s market entry method (for example, by the on purchases from Continental Pharmaceutique, provided acquisition of interests in existing companies) or, in certain that their aggregate interest does not exceed 40%. These cases, local regulatory restrictions that may require the division agreements also restrict the ability of these subsidiaries to to form a partnership with a local player before it can establish transfer their interests to third parties and include an obligation a business within a given territory (see Chapter 4, section 4.1 to transfer their interest to Continental Pharmaceutique in the “Risks relating to the business and regulatory environment”, event of a termination of their supply agreements with the latter and sub-section 4.1.6 of this Registration Document). or a change of control in the majority of their share capital.
The agreements between the Group and its partners generally 7.2.3.3 Import-wholesale business include preemptive and approval provisions, as well as commitments regarding representation on the governance bodies Eurapharma Distribution Spa (E.P. DIS Algérie) is an Algerian of the relevant companies. Liquidity of these shares is therefore joint-stock company (société anonyme) with share capital of relatively limited. 292,000,000 Algerian dinars, whose registered office is located at Zone Industrielle de Réghaia, B.P. 68-5, Algiers, Algeria, and The pharmacist stakeholders have no specific governance registered with the Trade and Companies Registry of Algiers under right attached to their ownership interests. Generally speaking, number 05B0971754. E.P. DIS Algérie is another of the Group’s the shares are only freely transferable between shareholders subsidiaries specialized in the pre-wholesale business. The Group
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holds 69.78% of the share capital and voting rights of E.P. DIS The relationship between the two groups CFAO and Pentecost, Algérie, with the balance of share capital and voting rights being shareholders of CP Holding, are governed by a shareholders’ held by local partners. Pursuant to the agreement entered into pact of which the main provisions are: the Chairman is appointed between the Group and these local partners, Eurapharma may by the Board of Directors of the Company consisting of eight appoint three of the five members of the Board of Directors, and members (five proposed by CFAO and three by its partner) and each of the parties has a preemptive right in the event of a transfer the Chairman is responsible for its operational management. of E.P. DIS Algérie’s shares to a third party. The shareholders’ pact stipulates that the directors present or duly represented must vote unanimously at Board of Directors 7.2.3.4 Distribution subsidiaries meetings on the following issues, whether they concern the Company itself or one of its subsidiaries: (i) investments, loans, CFAO Automotive Equipment & Services division guarantees, divestments, creations, acquisitions or the winding up of businesses or companies that may be decided on or ■ Distribution Automobile et de Matériel en Algérie (Diamal) is granted by the new holding company, (ii) material contracts an Algerian joint stock company (société par actions) with and (iii), entering into or termination of automobile distribution share capital of 1,440,000,000 Algerian dinars, whose agreements. A Management Committee composed of three registered office is located at C.W. No. 31 Les Annassers, members (two appointed by CFAO and one by the partner) will Bir Mourad Raïs, Algiers, Algeria, and registered with the meet on a monthly basis to monitor the Group’s business. The Trade and Companies Registry of Algiers under number agreement also includes a preemptive right in the event that one 00 B 00 12 430. CFAO holds 60% of Diamal’s share capital of the partners decides to terminate the agreement. CFAO and its and voting rights. A local partner holds the remaining 40%. partner have also provided the possibility for CFAO to acquire Diamal’s primary business is the automotive distribution in in the medium term the partner’s minority interest in CP Holding, Algeria. The agreements entered into between the Group through purchase and sale options. and its local partner provide that the Group will hold 60% of Diamal’s capital and voting rights (the remaining 40% must be held by the partner) and may appoint three of the five members Eurapharma division of Diamal’s Board of Directors as well as the Chairman of the ■ Société Réunionnaise de Distribution Pharmaceutique (SOREDIP) Board. These agreements also include a mutual preemptive is a French joint-stock company (société anonyme) with share right for the Group and its partner in the event that Diamal capital of €2,342,250, whose registered office is located at shares are transferred by either party. Finally, the agreements ZIC 2, Pointe des galets, 97822, Le Port Cedex, Reunion, and address several aspects of Diamal’s operations. The by-laws registered with the Trade and Companies Registry of Saint provide that a prior approval is required for any transfer of Denis, Reunion, under number B 314 888 546. The Group shares in accordance with the Algerian Commercial Code. holds 67.43% of Soredip’s share capital and voting rights. Various local partner pharmacists hold the remaining share ■ Cameroon Motors Industries (CAMI) is a Cameroonian joint capital and voting rights. Soredip’s primary business is the stock company (société anonyme) with share capital of distribution of pharmaceutical products in Reunion. Its by-laws 5,441,700,000 CFA francs, whose registered office is located require the approval of the Board of Directors for any third at Douala, Bonabéri, B.P. 1217, Republic of Cameroon, and party share transfers. registered with the Trade and Companies Registry (RCCM) of Douala under number 4060. CFAO holds 67.41% of ■ Laborex Sénégal is a Senegalese joint-stock company (société the share capital and voting rights of CAMI. The remaining anonyme) with a Board of Directors and with share capital of 32.59% is held by a group of local partners (individuals and 1,153,152,000 CFA francs, whose registered office is located legal entities), each of which individually holds less than 10% at Agence Centrale Corniche des HLM, Face Cité HLM 1, of the company’s capital and voting rights. CAMI’s primary Dakar, Senegal, and registered with the Trade and Companies business is automotive distribution in Cameroon. The by-laws Registry (RCCM) of Dakar under number SN-DK-1975-B-7882. provide that any transfer of shares to third parties is subject to CFAO holds 61.68% of Laborex Sénégal’s share capital and the prior approval of the Board of Directors. voting rights on a consolidated basis. Various local partner pharmacists hold the remaining share capital and voting ■ CP Holding is a French simplified joint-stock company (société rights. Laborex Sénégal is a subsidiary being specialized in par actions simplifiée) with share capital of 5,824,080,000 CFP distribution of pharmaceutical products in Senegal. Its by-laws Francs, whose registered office is located at 216 Rue Roger require the approval of the Board of Directors for any third Gervolino Complexe Edouard Pentecost, PK 5, Magenta, party share transfers. 98800, Nouméa, New Caledonia, and registered with the Trade and Companies Registry of Nouméa under number ■ Laborex Cameroun is a Cameroonian joint-stock company 2010 B 1042 712. On a consolidated basis, CFAO holds (société anonyme) with a Board of Directors and with share 100% of CP Holding and 74% of its voting rights. The capital of 3,757,753,728 CFA francs, whose registered office remaining 26% is held by New Caledonian group Pentecost. is located at 1394, Rue du Pasteur Lotin Same, Quartier Akwa, CP Holding owns the entire share capital of operating B.P. 483, Douala, Cameroon, and registered with the Trade and companies Ménard Automobiles, Almameto, Prestige Motors, Companies Registry (RCCM) of Douala under number 708. Intermotors, NC Motors and Sapas. These companies’ primary The Group holds 65.74% of Laborex Cameroun’s share businesses are automotive distribution and civil engineering capital and voting rights. Various local partner pharmacists and mining equipment. hold the remaining share capital and voting rights. Laborex Cameroun is a subsidiary being specialized in distribution of pharmaceutical products in Cameroon. Its by-laws require the approval of the Board of Directors for any third party share transfers.
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■ Laborex Congo is a Congolese joint-stock company (société Antilles is a subsidiary being specialized in distribution of anonyme) with a Board of Directors and with share capital of pharmaceutical products in the French Antilles. Its by-laws 1,076,740,000 CFA franc , whose registered office is located require that any share transfer to non-shareholder third parties at ZI du M’PILA, BP 904 Brazzaville, Congo, and registered is subject to the prior approval of the Board of Directors. with the Trade and Companies Registry (RCCM) of Brazzaville ■ under number CG/BZ/09B1485. The Group holds 80.04% Mission Pharma Group A/S is a Danish joint-stock company of Laborex Congo’s share capital and voting rights. Various (société anonyme) with a Board of Directors and with share local partner pharmacists hold the remaining share capital and capital of 1,000,000 Danish krone, whose registered office voting rights. Laborex Congo is a subsidiary specializing in the is located at Vassingerodvej 9 3540 Lynge, Denmark, and distribution of pharmaceutical products in Congo. Its by-laws registered with the Trade and Companies Registry (RCCM) require the approval of the Board of Directors for any third of under number CVR-NR 26902398. On a consolidated party share transfers. basis, the Group holds 99.68% of Mission Pharma’s share capital and 80% of its voting rights. A local partner holds ■ Compagnie Pharmaceutique et Médicale (COPHARMED) is an the remaining share capital and voting rights. Mission Ivorian joint-stock company (société anonyme) with a Board Pharma is a subsidiary being specialized in distribution of of Directors and with share capital of 1,726,620,000 CFA generic pharmaceuticals and medical devices and medical f ranc, whose registered office is located at Boulevard de Vridi, kits containing pharmaceuticals and medical devices to the 15-BP 954, Abidjan 15, Côte d’Ivoire, and registered with public sector in developing countries. Put and call options the Trade and Companies Registry (RCCM) of Abidjan under were granted by Eurapharma to the minority shareholder for number CI-ABJ-1995B 186 364. The Group holds 60.79% of the 20% remaining securities held by the minority shareholder. COPHARMED’s share capital and voting rights. Various local Such options could be exercised on the second and the fourth partner pharmacists hold the remaining share capital and anniversary date of the signing. In addition, both shareholders voting rights. Copharmed is a subsidiary being specialized were granted tag along and drag along rights in case the in distribution of pharmaceutical products in Côte d’Ivoire. Its other party decided to sell part or all of its securities in by-laws require the prior approval of any third party share Missionpharma. transfers.
■ Laborex Mali is a Malian joint-stock company (société CFAO FMCG Industries & Distribution division anonyme) with a Board of Directors and with share capital of ■ Brasseries du Congo is a Congolese joint-stock company 1,430,000,000 CFA francs, whose registered office is located (société anonyme) with share capital of 24,135,748,200 CFA at Quartier ACI 2000, Hamdallaye, BP 1696, Bamako, f rancs, whose registered office is located at Avenue Edith Republic of Mali, and registered with the Trade and Companies Lucie Bongo – Ondimba – BP 105, Brazzaville, Republic of Registry of Bamako under number Ma.Bko.2004.B.640. The the Congo, and registered with the Trade and Companies Group holds 55.76% of Laborex Mali’s share capital and Registry (RCCM) of Brazzaville under number 07B790. voting rights. Various local partner pharmacists hold the CFAO holds 50% of Brasseries du Congo’s share capital and remaining share capital and voting rights. Laborex Mali is a voting rights, and the remaining 50% is held by the Heineken subsidiary being specialized in distribution of pharmaceutical group. Brasseries du Congo operates two bottling companies products in Mali. Its by-laws require that any share transfer to in Congo in partnership with the Heineken group (For more unrelated third parties is subject to the prior approval of the information regarding the activities of Brasseries du Congo, Board of Directors. please refer to Chapter 6 “Business overview”, section 6.3 “Competitive strengths”, sub-section 6.3.1 “Leadership ■ Société Pharmaceutique Gabonaise (Pharma Gabon) is a positions in Africa and in the French overseas territories” of the Gabonese joint-stock company (société anonyme) with a present Registration Document). Board of Directors and with share capital of 1,115,100 CFA f ranc, whose registered office is located at ZI d’Oloumi, BP To ensure the fair distribution of share capital and voting 2224, Libreville, Gabon, and registered with the Trade and rights of Brasseries du Congo between the Group and the Companies Registry (RCCM) of Libreville under number Heineken group, the agreement entered into between CFAO 2000B00067. The Group holds 52.19% of Pharma Gabon’s and Heineken stipulates the following governance structure share capital and voting rights. Various local partner for Brasseries du Congo: (i) a Chairman of the Board of pharmacists hold the remaining share capital and voting Directors (selected from among the representatives of the rights. Pharma Gabon is a subsidiary being specialized in the Heineken group) responsible for overseeing the management distribution of pharmaceutical products in Gabon. Its by-laws tasks entrusted to the CEO and (ii) a Managing Director require the approval of the Board of Directors for any third (selected from among the representatives of the Group) with party share transfers. the broadest possible powers within the limits of the Company purpose. The Group and the Heineken group have a mutual ■ Société Pharmaceutique Antillaise (Sopharma Antilles) is a preemptive right in the event of a transfer of Brasseries du French joint-stock company (société anonyme) with share Congo shares to a non-shareholder third party or a significant capital of €6,188,757, whose registered office is located at change in the ownership structure of one of the parties (i.e., Pointe des Sables, 97200, Fort de France, French Antilles, if the control of any party is transferred to a third party and and registered with the Trade and Companies Registry of the other party is able to prove (i) that such third party is one Fort de France under number B 572 061 281. The Group of its competitors, or (ii) that it has resulted in a change to holds 47.86% of Sopharma Antilles’ share capital and its industrial or commercial approach in the short- or medium- 51.58% of voting rights. Various local partner pharmacists term). In such an event the price of the shares to be transferred hold the remaining share capital and voting rights. Sopharma will be determined by the parties at the time of the transfer.
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■ General Import & Distribution Ltd is a Nigerian private limited the entire share capital and voting rights of General Import company with share capital of 1,060,200,000 Naira, whose & Distribution Ltd. The main activity of General Import & registered office is located at 71 72 Adeniji – Adele Road Distribution Ltd consists of distributing fast-moving consumer Elegbata – Lagos, Nigeria, and registered with the Trade and products in Nigeria. Companies Registry under number 850 444. CFAO holds
7.2.4 Acquisitions and disposals during the past three years
The table below shows the total amount of the Group’s net investments in financial assets (acquisitions less disposals) over the past three years:
As of December 31 (in € millions) 2012 2013 2014 Net investments in financial assets 48.7 5.7 17.8
CFAO Automotive Equipment & Services division Denmark – in July 2012, Eurapharma acquired 75% of the share capital of the Danish company Missionpharma Group A/S, Tanzania – In 2012, the Group incorporated a new company which is a leader in the distribution of health kits and generic Alliance Auto LTD Tanzania to distribute in Tanzania Volkswagen pharmaceuticals to the public sector in developing countries. Its vehicles. equity interest was increased to 80% at the end of 2014. Zimbabwe – In 2012, the Group acquired 75% of the capital of Italy – on October 31, 2014, Eurapharma acquired 70% of the company Automotive Distributor Incorporated (ADI) company the share capital of the Italian company Fazzini, a company distributing Hyundai vehicles. distributing medical equipment in Africa. Eurapharma division Congo – on November 18, 2014, Eurapharma acquired 99.99% of the share capital of the Congolese companies SEP Pointe Noire French overseas territories – In February 2012, Eurapharma and SEP Brazzaville, companies distributing pharmaceutical incorporated a company (Actidis) which acquired some assets products in Congo. of a group of companies named Actidom which was under receivership. CFAO FMCG Industries & Distribution division Portugal – On June 19, 2012, Eurapharma acquired 13.04% of Nigeria – on January 1, 2014, CFAO acquired 51% of the share the capital of the Portuguese company Stockpharma and was party capital of the Nigerian company General Import & Distribution to an increase of capital of this company to own today 80% of Ltd., a company importing and distributing fast-moving consumer its capital, a company exporting and distributing pharmaceutical products in Nigeria, bringing its shareholding to 100%. products in two African territories. In 2013, CFAO invested in various equity funds intended to invest Nigeria – In July 2012, Eurapharma acquired 60% of the capital in small companies with high growth potential and with business of the Nigerian company Assene-Laborex, a company importing activities similar to those of the Group. and distributing pharmaceutical products in Nigeria and providing promotion services. In 2013, Eurapharma acquired 20% of the For further information on the changes in the scope of consolidation share capital of the Nigerian company Assene Laborex, bringing that occurred during the year under review, see Note 3 “Scope its shareholding to 80%. of consolidation” to the consolidated financial statements in Chapter 20 of this Registration Document.
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8.1 Signifi cant existing or planned 8.2 Environment and sustainable property, plant and equipment 76 development 77
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8.1 Significant existing or planned property, plant and equipment
Pursuant to Appendix I, point 8 of the European Commission ■ car dealership sites belonging to the Group’s network in Africa Regulation no. 809/2004 of April 29, 2004 and and in the French overseas territories, which are generally recommendation 146 of the European Securities and Markets owned by the Group or leased under emphyteutic or regular Authority (ESMA), information is provided hereunder on the leases; property, plant and equipment held or leased by the Group: ■ operating sites for the Group’s wholesale resale business ■ administrative buildings (in particular, the registered offices of (storage warehouses and offices) in Africa and in the French holding and sub-holding companies). overseas territories, which are generally owned by the Group or leased under emphyteutic or regular leases; In France, CFAO has entered into a sublease agreement with the company Discodis (a wholly owned subsidiary of Kering, ■ production facilities for FMCG Industries & Distribution and previously PPR) for the occupation of its Headquarters or offices Eurapharma business divisions of CFAO. at 18, Rue Troyon in Sèvres. This sublease has been renewed on October 23, 2014 (1); Particularly in connection with its activities in Congo, the Group owns two breweries and bottling plants in Brazzaville and ■ premises in which Eurapharma’s depositary, export wholesale Pointe Noire. In Algeria, the Group also owns a manufacturing and central purchasing offices are located. plant specialized in dry and liquid pharmaceutical products (see Chapter 6 “Business Overview” of this Registration The logistics platform in Grand Quevilly, in the suburbs of Document for further information on the Group’s businesses); Rouen thus operates under the terms of a leasing agreement signed by E.P. DIS, a sale-leaseback agreement that covers the ■ supermarket/hypermarket sites (properties either under whole property (land and buildings). This platform, comprising construction or planned): a total surface area of 12,500 sq.m, includes two warehouses approved by the French Agency for the Safety of Health In July 2013, CFAO and Carrefour created a joint venture, Products (Agence Nationale de Sécurité du Médicament). Adialea, 55% owned by CFAO and 45% owned by Carrefour The first, with 5,500 sq.m, is managed by Continental to develop different store formats in eight countries in West Pharmaceutique and is used for storing products. The other, and Central Africa: Cameroon, Congo, Côte d’Ivoire, Gabon, with 7,000 sq.m, is managed by the E.P. DIS division and is Ghana, Nigeria, Democratic Republic of the Congo and used to prepare products for export. E.P. DIS has a purchase Senegal. For more information about this joint project, please option on these premises for an amount of €3,955,000 (before see Chapter 6 “Business Overview”, section 6.2 “Business tax) as from April 1, 2017. The site has been expanded by divisions”. the construction of a 1,500 sq.m building for Continental Under this joint project, the partners have started construction Pharmaceutique and another with 3,000 sq.m for E.P. DIS, in of the first shopping mall (Côte d’Ivoire, Abidjan) with a order to meet the needs created by this growing business. This total surface area of 32,883 sq.m. (including a 6,482 sq.m. project was financed through a sale-leaseback agreement and hypermarket). The shopping mall will house approximately was completed in late 2013;
(1) CFAO has leased the entire building and subletted to its subsidiaries, mainly SFCE and Continental Pharmaceutical.
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50 stores. The mall is scheduled to open in the fourth quarter The Group believes that its percentage of use of its property, plant of 2015. The Group owns the shopping mall. and equipment is consistent with its level of operations, projected growth and its investments that are planned or in progress. Other construction and rental services projects are also underway in the countries covered by the joint development As of the date the present Registration Document, the Group’s project for different store formats in Africa. planned real estate investments correspond to the investments in progress or to be undertaken described in Chapter 5 of this Registration Document, section 5.2.2 “Main investments in progress” and section 5.2.3 “Main investments to be undertaken” (including the investment of Retail business activity).
8.2 Environment and sustainable development
The Group’s goal is to conduct a long-term profitable growth Risks” and “Insurance” of this Registration Document deals policy consistent with economic, social and environmental with environmental issues that may affect the use made by the responsibility. Chapter 4 “Risk Factors”, sections: “Industrial Company of its fixed property, plant and equipment.
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9.1 Overview 80 9.3 Analysis of revenue, gross profi t and recurring operating income 9.1.1 Introduction 80 by division for 2013 and 2014 91 9.1.2 Factors affecting the Group’s results of operations 81 9.1.3 Principal income statement items 83 9.3.1 Comparison of the results of Equipment & Services in 2013 and 2014 91 9.3.2 Comparison of the results of Healthcare 9.2 Comparison of the Group’s in 2013 and 2014 93 results of operations for the years 9.3.3 Comparison of the results of the Consumer ended December 31, 2013 and 2014 Goods pole in 2013 and 2014 94 and fi nancial position 88 9.2.1 Comparison of the Group’s results of operations for the years ended December 31, 2013 and 2014 88 9.2.2 Financial position and changes during the period 91
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The following information concerning the Group’s financial position and results of operations should be read in conjunction with the Group’s consolidated financial statements for the years ended December 31, 2013 and 2014 and the Notes thereto, all of which are included in Chapter 20 of this Registration Document. The Group’s consolidated financial statements were prepared in accordance with IFRS as adopted by the European Union. The Statutory Auditors have audited the consolidated financial statements for the years ended December 31, 2013 and 2014, and their reports certifying these consolidated financial statements are included in Chapter 20 of this Registration Document, “Financial information concerning the assets and liabilities, financial position and profits and losses of the issuer”.
9.1 Overview
9.1.1 Introduction
CFAO is a front-ranking specialized distributor and preferred Consumer Goods) and a Holding segment, and has operations in partner of major international brands, serving the high-potential five geographic areas. markets. chiefly in Africa and the French overseas territories. In 2014, the Group’s revenue and recurring operating income Since the beginning of 2014, the Group is organized with three totaled €3,560.4 million and €270.7 million, respectively. operating business lines (Equipments & Services, Healthcare and
The following table summarizes the Group’s revenue by division and geographic area in 2014:
Year ended December 31, 2014 Equipment & (in € millions) Services Healthcare Consumer Goods Total French-speaking Sub-Saharan Africa 795.4 461.3 246.0 1,484.8 French Overseas Territories and Vietnam 380.8 366.2 0.0 747.1 Maghreb 393.0 97.7 - 490.7 English and Portuguese-speaking Sub-Saharan Africa 303.8 85.9 115.9 523.5 Other Europe * 104.5 205.0 4.9 314.3 TOTAL 1,977.3 1,216.1 366.8 3,560.4
* Other Europe includes revenue for France (export) which corresponds to revenue generated by export sales invoiced by the Group’s central purchasing offices located in mainland France and Mauritius, as well as the activities of Missionpharma (acquired in 2012) in Denmark.
The following table summarizes the Group’s recurring operating income by division for 2013 and 2014:
2013 2014 (in € millions) as a % of revenue (in € millions) as a % of revenue Recurring operating income Equipment & Services 140.5 6.2% 139.8 7.1% Healthcare 93.8 8.5% 105.1 8.6% Consumer Goods 68.8 25.7% 64.4 17.5% CFAO Holding (34.1) - (38.6) - TOTAL 269.0 7.4% 270.7 7.6%
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In accordance with IFRS 8, the Group presents segment The analysis below covers revenue and recurring operating income information in its consolidated financial statements on the basis for each of the Group’s divisions. The analysis of the other line of its operating organization (see Note 4 “Operating segments” items (except revenue) that make up recurring operating income is to the consolidated financial statements included in Chapter 20 carried out at the consolidated Group level, with explanations that and the paragraph 6.1 “Introduction to the Group” of this present refer to the Group’s divisions. The remaining income statement Registration Document). The segments identified in 2014 were: items are discussed at the level of the consolidated Group.
■ Equipment & Services The analysis below also includes quantitative data and qualitative explanations relating to the geographic areas in which the Group Automotive, Equipment & Services. This division includes operates, i.e. French-speaking Sub-Saharan Africa, English- the Automotive operations, including the purchase, storage, and Portuguese-speaking Sub-Saharan Africa, French Overseas import and distribution of vehicles (light vehicles, heavy trucks Territories and Other, the Maghreb and Other Europe. Revenue and motorcycles), related services (particularly after-sales generated in the Other Europe region includes sales in the France services), and the sale of spare parts and tires. It includes also (export) region corresponding to revenue from export sales CFAO Equipment, which includes the construction machinery invoiced by the Group’s central purchasing offices in mainland distribution business created in 2011 along with elevator France and Mauritius, as well as sales by Missionpharma in installation and maintenance operations and Rental services, Denmark. under the brand name of LOXEA encompassing both short- and long-term vehicle and equipment rentals. CFAO Technologies, which includes the design and 9.1.2 Factors affecting the Group’s results implementation of solutions for IT infrastructure and systems, of operations networks and telecommunications for private and public companies.
■ Healthcare 9.1.2.1 General economic conditions in the countries in which the Group operates Eurapharma. This division includes all of the Group’s Economic conditions in the regions and countries in which the pharmaceutical product distribution businesses: the Group operates can have a significant positive or negative import-wholesale-resale business in French-speaking Sub- influence on demand for the Group’s products and services. This Saharan Africa and the French overseas territories; the is particularly true for the Equipment & Services and the Consumer pre-wholesale business in France that exports products to Goods business lines. Eurapharma is not as directly affected French-speaking Sub-Saharan Africa and the Maghreb by economic trends, given the nature of its products and the (Algeria); the distribution agent business in English- and regulatory pricing framework applicable in the principal countries Portuguese-speaking Sub-Saharan Africa; the sale of medical in which the Group operates. kits to clinics, hospitals and NGOs; and the manufacturing of pharmaceutical products in Algeria. The most important Generally speaking, the economies of the African countries in regions for Eurapharma in terms of revenue are French which the Group operates continue to be highly dependent on Overseas Territories and French-speaking Sub-Saharan Africa. the level of foreign direct investment and financial aid received from other countries or international organizations, as well as on ■ Consumer Goods the prices of raw materials. The export of raw materials accounts FMCG (Fast Moving Consumer Goods) Industries & Distribution. for a large portion of gross domestic product (GDP) for many This division encompasses industrial activities based in French- countries and contributes significantly to the amount of foreign and English-speaking Sub-Saharan Africa, mainly involved in currency entering these countries. Some countries in which the the manufacture and bottling of beverages in the Congo and Group operates have several principal raw materials, whereas the production and sale of plastic products. A business unit others have a single primary raw material (see section 6.4 of this dedicated to the distribution of FMCG was launched in 2013, Registration Document, “Market description”). featuring a distribution agreement with Pernod Ricard in Economic conditions in the countries in which the Group operates Nigeria and with Ferrero in Nigeria and in Ghana. are also affected by political and social conditions. Political Retail. This division was created to develop a network of stores stability creates a more favorable climate for business growth in various formats in association with Carrefour in 8 major and economic growth in general. Political instability, as can be West and Central African markets. manifested through political or social upheaval, conflicts or war, has the opposite effect. Certain African countries in which the ■ Holding. The Group’s Holding segment includes centralized Group operates have experienced periods of political instability support services, such as the Group’s Human Resources, IT, and, in some cases, crises, conflicts or war. Communication, Audit and Financial, Accounting, Legal and Tax Departments. This segment does not generate any revenue.
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9.1.2.2 Exchange rate fluctuations such increases, its profit margins will be affected. Any price increase in a local currency may lead to a decline in sales; Exchange rate fluctuations can have a significant impact on the Group’s results of operations. The Group prepares its ■ any depreciation in the euro against other currencies in which consolidated financial statements in euros. In 2014, 25.6% of the the Group has contracted debt would result in an increase Group’s sales were transacted in euros, 38% in CFA francs and in the euro-equivalent value of its debt and have a negative 36.4% in other local currencies. The Group’s purchases in 2014 impact on the Group’s earnings. were made in yen (26%), US dollars (18%) and euros (56%). Eurapharma, CFAO Industries and CFAO Technologies make Conversely, a reversal of the trends described above would have purchases primarily in euros. a positive impact.
These differences expose the Group to several currency-related Whenever possible, the Group therefore seeks to hedge its risks: exposure to exchange rate fluctuations. However, the Group is not able to contract long-term hedges to cover these risks in ■ the value of the euro could depreciate between the date on certain countries and geographic areas such as Algeria, all of which the Group places an order with a supplier in Japanese English-speaking Sub-Saharan Africa (with the exception of Kenya yen, US dollars, or any other currency, and the payment date and Nigeria since December 2010), the Democratic Republic of for such order, resulting in an increase in the euro equivalent of the Congo, Gambia, Guinea and Vietnam. Because the Group such payment. To limit this risk, the Group enters into forward is unable to fully eliminate its currency exposure, its revenue, purchase contracts to convert these amounts into euros at the gross profit margin and income are vulnerable to exchange time it places an order with a supplier in yen, US dollars or other rate fluctuations, particularly with respect to the yen/euro and currencies. This policy allows CFAO Automotive to anticipate dollar/euro exchange rates, as well as the dollar, euro and yen the potential impact on the cost of vehicles sold resulting from exchange rates against other currencies in which the Group’s the high cost of purchasing currencies as from the time orders sales are conducted. are made, and to adjust its pricing policy where applicable to reduce the impact of exchange rates on gross profit. Any price Generally, an appreciation of the yen or dollar against the euro increase in a local currency may lead to a decline in sales; or a local currency would increase the Group’s cost of sales and reduce its gross profit if it is unable, for competitive or other ■ the local currencies in which the Group’s sales are conducted reasons, to raise its prices to cover the full increase in cost. could depreciate against the currencies in which purchases Depreciation in the yen or dollar would have the opposite effect. are conducted or against the euro, requiring a higher amount The pressure on margins is greater in businesses or countries in of local currency to cover the purchase price. If the Group is which there is strong competition. not able to increase its prices in the local currency to cover
The table below sets forth the average euro to yen and euro to dollar exchange rates for 2012, 2013 and 2014:
2012 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Japanese yen to one euro 104.0 102.6 98.3 105.1 121.8 129.1 131.0 136.5 140.8 140.0 137.7 142.7 US dollar to one euro 1.31 1.28 1.25 1.30 1.32 1.31 1.32 1.36 1.37 1.37 1.33 1.25
Source: European Central Bank.
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9.1.2.3 Changes in scope of consolidation on imports of vehicles over three years old imposed by the and business Algerian government in 2005 led to a rise in Group sales of new vehicles in Algeria. In contrast, the introduction in the country The Group’s results of operations are also affected by the creation of a new tax on light vehicles and dealership network revenue, of new subsidiaries, for example to launch a new brand or business effective as of summer 2008, put a brake on new vehicle sales. activity in a given country, or by new sales locations opened in Regulations prohibiting the use of consumer credit to finance a given country. They are also affected by the performance of automobile purchases and imposing new taxes on vehicle sales companies acquired by CFAO to strengthen its businesses. as from August 2009 also had a material adverse effect on the Group’s business and results of operations in Algeria as from the 9.1.2.4 Distribution methods and the mix second half of 2009. of products sold Eurapharma’s sales may also be affected by changes in The Group’s results of operations are affected by the portion of regulations, particularly in certain French overseas territories, revenue and gross profit generated by each division and country, where the wholesale price of pharmaceutical products is and within each division, by the contribution attributable to each regulated under French law. New measures aimed at reducing product and method of distribution. Certain distribution methods healthcare spending could have an impact on the Group’s and products generate higher gross profit margins than others results of operations. At the end of 2011, new regulations were (see section 9.1.3.1 “Revenue”, and section 9.1.3.2 “Gross profit adopted aimed at reducing compensation for wholesaler-resellers and gross profit margin”). in mainland France. Although no official decision has yet been taken in this respect, a similar measure could be introduced in the 9.1.2.5 Country specific risks and customer French overseas territories. credit risk In order to meet regulatory requirements for renewing its import Provisions also affect the Group’s results of operations. The Group quotas in Algeria, the Group has invested in a local drug operates in countries with a high risk of political instability and manufacturing plant through the stake acquired in Propharmal. default by customers and other debtors. Accordingly, the Group Propharmal should develop and enhance Eurapharma’s supply sets aside provisions for such risks using an approach that reflects capabilities in Algeria. its experience and specific risk assessments.
9.1.2.6 Regulatory environment 9.1.3 Principal income statement items The Group’s activities and results of operations may also be negatively impacted by regulatory changes in the countries in which it operates, in relation to import restrictions, direct foreign 9.1.3.1 Revenue investments, internal regulations which could have a side effect on the level of consumption, or administrative authorizations The Group derives its revenue from sales of products and services necessary for the continuance of the Group’s operations. The by its operating divisions. Group’s activities require a great number of approvals, permits and licenses from national, regional and local government 9.1.3.1.1 Equipment & Services authorities as well as regulatory authorities. The Group’s existing activities, results and future development thus depend on obtaining 9.1.3.1.1.1 Automotive, Equipment & Services revenue or maintaining these authorizations. Some countries may also The Automotive, Equipment & Services division generates its decide to limit imports, by implementing new quotas, conditions revenue primarily through sales of new light vehicles, used vehicles, for obtaining quotas, customs duties or other import barriers or by heavy trucks, industrial equipment, motorcycles, services, spare modifying those that exist already, which could durably hamper parts and tires. The revenue of the division depends primarily on the Group’s ability to import its products into some countries and sales volumes and average sales prices. negatively affect the Group’s activities. For example, restrictions
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The degree to which sales volumes are affected by local economic The rental services business in French-speaking Sub-Saharan conditions differs depending on the type of customer, (individuals, Africa derives revenue from its short and long-term vehicle rental businesses or public entities). The automotive industry is largely services. The Group’s rental services now operate under the cyclical in nature, with periods of market growth or contraction LOXEA brand, which was created in 2011 to give new impetus and changes in the range of products offered by automotive to the business. manufacturers (depending on how quickly new models are introduced). The Automotive, Equipment & Services division 9.1.3.1.1.2 CFAO Technologies benefits from the diversification of operating in numerous In its solutions business, CFAO Technologies primarily designs countries and maintaining supplier relationships with several and implements information technology solutions. Sales in this large international car manufacturers, which helps mitigate its business are made primarily on a request-for-proposal basis exposure to the cyclical nature of sales in the automotive market. and are associated with long sales cycles. The Group’s solutions Volumes of sales to retail customers principally depend on the contracts may span several years, in which case revenue is financial resources of potential customers and the effectiveness generated based on services provided throughout the relevant of sales efforts (advertising). The ability of potential customers to contract term. As a result, the revenue generated during a given finance the purchase of a vehicle (either through cash on hand year is often a reflection of the sales efforts in a prior period. or by borrowing) is the principal macroeconomic factor affecting sales. Consequently, a deterioration in the general economic 9.1.3.1.2 Eurapharma revenue environment or the implementation of certain legislative or The Eurapharma division includes all of the Group’s pharmaceutical regulatory measures can have a significant impact on the Group’s product distribution businesses: the import-wholesale-resale sales if they limit the ability of potential customers to take out business in French-speaking Sub-Saharan Africa and the French financing to purchase vehicles on favorable terms. overseas territories; the pre-wholesale business – outsourcing Sales levels are also affected by the ability of dealers to reach the export function of pharmaceutical companies and selling customers in every catchment area, welcome them at prime sales directly to wholesalers – in France that exports products chiefly to locations that adequately promote the product offerings and French-speaking Sub-Saharan Africa and the Maghreb (Algeria); provide quality after-sales services, and offer them a full range and the distribution agent business in English – and Portuguese – of vehicles adapted to their needs. Investments in the distribution speaking Sub-Saharan Africa. Generally speaking, sales volumes network and expansion of the Group’s range of products and in this division depend to a large extent on the level of overall services can therefore significantly affect sales levels. healthcare spending in a given country.
Sales to companies and to public entities are influenced primarily The degree to which sales are affected by local economic by the macroeconomic conditions encountered by the Group’s conditions depends on the type of market. In the French overseas divisions. The price of oil, in particular, has a strong impact on territories, healthcare spending is steadily rising due to the aging Group sales to oil companies and to their subcontractors, as well population, while the government is constantly looking at ways as to public entities operating in countries that generate oil-related of cutting healthcare costs. In Africa, increases in healthcare revenue. Automotive regulations in a given country can also have spending are driven to a greater extent by an increasing number a significant positive or negative impact on sales. of individuals with access to healthcare. The growth rate is understandably lower in the French overseas territories. The average price of vehicles primarily depends on the mix of vehicles sold, the degree of competition in a given country and Revenue is therefore also significantly affected by the regulatory the exchange rate between the currency in which the sales are environment, which has a major impact on the prices of made and the euro. pharmaceutical products distributed by the Group and determines, in the French overseas territories, the categories of products that CFAO Equipment is involved in the installation and maintenance will be reimbursed as well as the amount of such reimbursements. of elevators and the distribution of machinery for the construction, Revenue also depends on the quality of existing healthcare within mining and agricultural industries. The elevator business is a given country. Apart from France, the French overseas territories recurring in nature and generates revenue from the installation and Algeria, none of the countries in which the Group operates or renovation of elevators and from the related maintenance currently has a well-developed medical reimbursement system. contracts. These maintenance contracts generate recurring Macroeconomic trends have a much lower impact on demand revenue throughout the lifespan of the elevator and enhance in Eurapharma than in the Group’s other divisions, because the Group’s competitive position when an elevator needs to be purchases of pharmaceutical products are less discretionary in renovated. nature.
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Import-wholesale-resale. The import-wholesale-resale business and average sales prices. Volume is driven chiefly by demand, is by far the biggest revenue generator for Eurapharma. The which in turn is affected by general economic conditions in the Group generates revenue in this business mainly by reselling Congo, climate, the performance of third party sales networks pharmaceutical products purchased from pharmaceutical and production capacity. Average sales prices depend in part companies to pharmacies. Demand in this business depends on applicable regulations (beer prices are regulated in the on the volume of orders placed by pharmacists, which in turn is Congo), but also reflect the mix of beverages sold and the level affected by the number of pharmacies served by the Group and of competition. healthcare spending levels. FMCG Industries & Distribution also derives a considerable portion Eurapharma’s revenue also reflects the growth of the more of its revenue from its other industrial business (manufacture of recently launched pre-wholesale and distribution agent plastic products). businesses, which have higher growth rates than the historical import-wholesale-resale business. Lastly, the new business unit FMCG (Fast Moving Consumer Goods) dedicated to the distribution of consumer goods has Pre-wholesale. In its pre-wholesale business, the Group usually been launched in 2013, notably with an exclusive distribution buys products from pharmaceutical companies and resells them to agreement with Pernod Ricard in Nigeria and Ferrero in Nigeria wholesalers. In certain limited cases, the Group does not purchase and Ghana. The business will progressively get momentum with products for resale, but instead acts solely as a custodian and the objective to enlarge the network and the range of distributed generates revenue based on the commissions that it receives in brands. this capacity. While Eurapharma generates lower revenue from commissions under this arrangement than if it were to sell its own 9.1.3.2 Gross profit and gross profit margin inventory, the profit margin is higher. Gross profit is equal to revenue minus the cost of sales. Gross Distribution agent. In its distribution agent business, Eurapharma profit margin is gross profit expressed as a percentage of revenue. generates revenue by purchasing products from pharmaceutical companies and reselling them to its customers. The revenue Cost of sales includes the cost of goods sold measured at the from this business is dependent on sales volumes and average net price charged by the supplier, plus all costs incurred to sales prices, which in turn depend on the margins negotiated ensure that the products are made available in their end markets with pharmaceutical companies and the cost of the underlying (freight, transit, customs duties and other import taxes, fees products distributed. payable to agents and self-employed vendors, etc.). Cost of sales also includes net additions to inventory allowances and Manufacturer of pharmaceutical products. The Algerian company other valuation adjustments (inventory unable to be sold, theft, Propharmal, acquired as a partnership in 2011, is developing breakage, currency gains and losses affecting the related invoice, activities in the manufacture of pharmaceutical products and transportation insurance). Inventory is measured on a first-in-first- the distribution of imported pharmaceutical products. It carries out (FIFO) basis or at weighted average cost depending on the out its manufacturing activity under licenses granted by major Group activity. international pharmaceutical groups. Propharmal’s revenue is primarily generated by sales in Algeria. The cost of purchases of goods from manufacturers is the second most important component in the cost of sales. Related fees are Sale of medical kits to clinics, hospitals and NGOs. This activity the second most important component of the cost of sales. For is carried out by Missionpharma, the Danish-based company the industrial businesses of the FMCG Industries & Distribution acquired in 2012. division, the cost of sales includes the cost of the raw materials used in the production of beverages and plastic products.
9.1.3.1.3 FMCG Industries & Distribution revenue Gross profit and gross profit margin at the consolidated level are In FMCG Industries & Distribution division, revenue is driven affected by the relative contributions of the Group’s divisions, as primarily by the performance of the Group’s two breweries and certain divisions have a higher gross profit margin than others, bottling plants based in the Congo, which generate a significant and by the relative contribution within each division of the various portion of the division’s revenue. The revenue generated by business lines and geographic areas (each region has a different the beverages business depends primarily on sales volumes gross profit margin, depending on the competitive environment and the degree of maturity of the business and the market).
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Trends within the Group’s divisions in 2014 are described below: As indicated in this section and in section 9.1.2.2 “Exchange rate fluctuations”, movements in exchange rates have a significant and ■ the Consumer Goods business line generates the highest direct impact on the gross profit margins of the various divisions, gross profit margin, due to the industrial nature of much of its particularly Automotive, Equipment & Services. The exchange business, as the other divisions are more focused on distribution rates for purchasing currencies in the periods in which orders businesses. In industrial businesses, gross profit margin depends were made can have an adverse impact on the gross profit on the cost of materials, such as the raw materials used in the margin despite the price increases implemented to counter this. production of beverages and plastic products. Certain costs of production of the industrial businesses are accounted for At a geographical level, gross profit margins are lowest in according to their nature, and are not therefore recorded in the areas with larger markets. In the Maghreb and French Overseas “cost of sales” line item but in “payroll expenses” and “other Territories and Other regions, gross profit margins are lower than recurring operating income and expenses”. This accounting in other geographic areas. French-speaking Sub-Saharan Africa, treatment adds to the gross profit margin of these businesses. which is characterized by its smaller markets, generally has a CFAO Technologies, a business that incorporates the gross higher gross profit margin than other geographic areas. profit margin on provisions of services and sales of materials, also has a higher-than-average gross profit margin; 9.1.3.3 Payroll expenses ■ the Automotive, Equipment & Services division has the second Payroll expenses include all employee-related expenses (fixed highest gross profit margin of the Group’s divisions. Within and variable compensation, social security charges, provisions this division, the gross profit margin levels vary depending on and retirement expenses, employee profit-sharing and other the business. With respect to the sale of vehicles, the gross incentives) and expenses relating to external employees. profit margin is higher when the Group purchases directly from the manufacturer and delivers the vehicle to the end-customer Variable payroll expenses are linked mainly to business volumes through its own sales offices, which is the case in most of the and the Company’s financial performance. Variable components areas, and particularly in French-speaking Sub-Saharan Africa. include commissions paid to sales teams based on revenue and The gross profit margin is lowest in countries in which the the payroll expenses of the Industries business, which generally Group distributes vehicles through agents (primarily in Algeria, increase in line with production. As a percentage of revenue, and Morocco). The geographic areas generating the lowest payroll expenses vary among the divisions, the percentage being gross profit margins in the division are also its largest markets, generally higher in FMCG Industries & Distribution than in the notably the Maghreb and the French Overseas Territories. The other two divisions. mix of products and services can have a significant impact on the gross profit margin, as is the case for certain businesses 9.1.3.4 Other recurring operating income such as services, spare parts and tires, which generate higher and expenses gross profit margins; Other recurring operating income and expenses comprise all of ■ Eurapharma has the lowest gross profit margin of the Group’s the Group’s general expenses and include cash expenses paid divisions. Eurapharma’s gross profit margin is highly sensitive to and depreciation/amortization expenses. These cover: changes in regulations, in particular those designed to reduce ■ base costs, such as real estate, information technology, fees healthcare costs for consumers and reimbursement entities. and insurance; Prices in this division’s principal markets are limited or set by regulations. The expansion of the distribution agent business ■ variable costs such as advertising expenses, business travel, and of the institutional-customer business, whose gross profit banking services, telecommunications, consumable goods and margin generally exceeds that of Eurapharma’s traditional other expenses incurred in connection with production (water, import-wholesale-resale business, has had a positive effect electricity, etc.); and on the division’s overall gross profit margin because of more ■ flexible price regulations and a higher level of value-added expenses relating to customer default risks: net charges to services provided. provisions for trade receivables, losses on trade receivables.
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9.1.3.5 Recurring operating income In general, net finance costs evolve in line with the financial position of the Group’s subsidiaries and local financing terms. Recurring operating income is an intermediate line item intended to Debt financed in euros (the largest portion of debt) is mostly short- facilitate an understanding of the entity’s operating performance. term. Ancillary finance costs depend on the market’s short-term It comprises revenue minus the cost of sales, payroll expenses and interest rates. For debt financed in local currency, finance costs other recurring operating income and expenses. depend on local interest rates as well as the average financial debt contracted in local currency. 9.1.3.6 Other non-recurring operating income and expenses 9.1.3.8 Income tax Other non-recurring operating income and expenses that are Income tax includes taxes calculated on the basis of earnings and excluded from recurring operating income correspond to items that excludes other taxes or duties paid by the Group, such as land are exceptional in light of their frequency, nature or amount, and taxes, which are recorded in recurring income and expenses. may include proceeds from sales of property, plant and equipment Income tax also includes deferred taxes recognized according to and intangible assets, capital assets or investments (capital gains prudent accounting principles. The effective tax rate is defined as and losses, impairment of goodwill and other intangible assets), income tax divided by pre-tax income. The Group’s effective tax restructuring costs and costs relating to employee retraining rate depends on the levels of taxation in the countries in which it measures, provisions for and losses due to litigation settlements. generates income and the relative contribution to Group income from countries with higher or lower tax rates. 9.1.3.7 Net finance costs Prior to December 31, 2009, none of the Group’s subsidiaries Net finance costs chiefly include fees and interests paid in had been consolidated for tax purposes at the level of CFAO. connection with medium- and long-term financing transactions; Some of the Group’s French subsidiaries were previously fees and interests relating to bank debt and other current consolidated for tax purposes by PPR (now Kering) up to this date. borrowings; capital gains or losses on sales of financial assets; As from January 1, 2010, these companies are included in the and other fees for certain financial management transactions. tax consolidation group created by CFAO. They also reflect interest and other income received on loans, debt or equity securities or other financial instruments held by Some Group subsidiaries are subject to exceptional tax treatment the Group, and gains or losses associated with commercial under specific provisions. transactions carried out in foreign currencies.
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9.2 Comparison of the Group’s results of operations for the years ended December 31, 2013 and 2014 and financial position
9.2.1 Comparison of the Group’s results of operations for the years ended December 31, 2013 and 2014
The table below shows the Group’s consolidated income statements for the years ended December 31, 2013 and December 31, 2014, in millions of euros and as a percentage of consolidated revenue for the periods presented.
2013 2014 (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) Change Revenue 3,628.1 100.0% 3,560.4 100.0% -1.9% Cost of sales (2,814.9) -77.6% (2,717.5) -76.3% +3.5% Gross profit 813.1 22.4% 842.9 23.7% +3.7% Payroll expenses (267.9) -7.4% (282.8) -7.9% -5.5% Other recurring operating income and expenses (276.2) -7.6% (289.4) -8.1% -4.9% Recurring operating income 269.0 7.4% 270.7 7.6% +0.6% Other non-recurring operating income and expenses (1.9) - (4.2) - - Operating income 267.1 7.4% 266.4 7.5% -0.3% Finance costs, net (41.2) -1.1% (41.5) -1.2% -0.7% Income before tax 225.9 6.3% 224.9 6.3% -0.4% Income tax (83.2) -2.3% (76.8) -2.2% +7.7% Overall effective tax rate 36.8% 34,1% -2.7 pt Share in earnings of associates 1.6 - 1.5 - - Net income of consolidated companies 144.44.0% 149.6 4.2% +3.6% Non-controlling interests 44.0 1.2% 49.1 1.4% +11.4% Net income attributable to owners of the parent 100.4 2.8% 100.5 2.8% +0.2%
9.2.1.1 Revenue (+€99.8 million). Other smaller acquisitions took place generating additional revenue of €121.0 million for the year as a whole. Revenue generated by the Group in 2014 decreased by -1.9% year on year, to €3,560.4 million versus €3,628.1 million one Fluctuations in the exchange rates used to translate annual revenue year earlier. Like-for-like, revenue declined by -3.9%. into euros resulted in a negative -€42.4 million impact in 2014. Changes in the scope of consolidation had an impact on changes in revenue between 2013 and 2014 and mainly concerned GI & Distribution for FMCG Industries & Distribution in Nigeria
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The table below provides a breakdown of revenue for 2013 and 2014 by business line and geographic area:
2013 2014 Change on a Change on a (in € millions) (as a % of revenue) (in € millions) (as a % of revenue) reported basis like-for-like basis Equipment & Services 2,257.0 62.2% 1,977.4 55.5% -12.4% -11.4% Healthcare 1,103.4 30.4% 1,216.1 34.2% +10.2% +7.9% Consumer Goods 267.5 7.4% 366.8 10.3% +37.1% +5.6% TOTAL 3,628.1 100.0% 3,560.4 100.0% -1.9% -3.9% French-speaking Sub-Saharan Africa 1,441.3 39.7% 1,484.8 41.7% +3.0% +1.1% French Overseas Territories and Other 743.0 20.5% 747.1 21.0% +0.5% +0.6% Maghreb 694.0 19.1% 490.7 13.8% -29.3% -28.5% English and Portuguese-speaking Sub-Saharan Africa 503.8 13.9% 523.5 14.7% +3.9% -5.3% Other Europe 245.9 6.8% 314.3 8.8% +27.8% +22.4% TOTAL 3,628.1 100.0% 3,560.4 100.0% -1.9% -3.9%
The Group’s revenue decreased by €67.7 million, or -1.9%, 9.2.1.3 Payroll expenses in 2014. The solid growth of pharmaceutical and FMCG Industries Payroll expenses climbed +5.5% year on year, to €282.8 million and Distribution activities failed fully to offset the reduced activity versus €267.9 million one year earlier. Changes in Group level in Automotive, Equipment and Services division. structure and start-up expenses at new businesses being launched Revenue growth of Eurapharma led to an increase in the division’s had an impact on this item. contribution to total revenue, from 30.4% in 2013 to more than In 2014, payroll expenses represented 7.9% of revenue, versus 34.2% in 2014. Equipment & Services contribution edged down 7.4% in 2013. to 55.5% in the year from 62.2% in 2013. Like-for-like (constant scope of consolidation and exchange rates), 9.2.1.4 Other recurring operating income sales growth came in at -3.9% with a decline of Equipment & and expenses Services and a strong increase in the other businesses. Other recurring operating income and expenses moved up +4.9% From a geographical standpoint, the growth remained solid in to €289.4 million in 2014 from €276.2 million in 2013. the French-speaking Sub-Saharan Africa and to a lesser extent This caption represented 8.1% of revenue in 2014, versus 7.6% in the French Overseas Territories. Maghreb revenue was down in 2013. especially due to Automotive Algerian market conditions in 2014 and in the English-speaking Sub-Saharan Africa where Automotive revenue was down on a like-for-like basis. 9.2.1.5 Consolidated recurring operating income The Group’s recurring operating income was up +0.6% year on 9.2.1.2 Gross profit year at €270.7 million compared to €269.0 million one year earlier. The recurring operating profit margin, i.e., recurring Gross profit came in at €842.9 million, or 23.7% of consolidated operating income divided by revenue, came to 7.6% in 2014 to revenue, compared with 22.4% in 2013. be compared with 7.4% in 2013. This +1.3 percentage point improvement is mainly due to the increase in the Automotive division’s gross profit margin, itself mainly attributable to a geographical mix, – although with a significant decline in sales in the Maghreb, where the gross margin rate is historically lower than the average – and due to the favorable evolution of the parity Yen/Euro over the period.
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The table below provides a breakdown of recurring operating income by division:
2013 2014 (in € millions) as a % of revenue (in € millions) as a % of revenue Recurring operating income Equipment & Services 140.5 6.2% 139.8 7.1% Healthcare 93.8 8.5% 105.1 8.6% Consumer Goods 68.7 25.7% 64.3 17.5% CFAO Holding (34.1) - (38.6) - TOTAL 269.0 7.4% 270.7 7.6%
The trend for each of the three CFAO divisions is commented in restructuring costs. It represented in 2014 a net expense of the 9.3.1, 9.3.2 and 9.3.3 paragraphs of the present Chapter. €4.2 million versus a net expense of €1.9 million in 2013. This result was mainly attributable to restructuring costs incurred in CFAO Holding generated a net expense of €38.6 million, up the Automotive, Equipment & Services division due to the non- +13.2% to 2013. renewal of distribution contracts.
9.2.1.6 Other non-recurring operating income and 9.2.1.7 Operating income expenses The Group’s operating income amounted €266.4 million versus The net balance of this caption is an aggregate of net proceeds €267.1 million one year earlier. Operating income represented from the disposal of operating and financial assets, and 7.5% of revenue in 2014 versus 7.4% of revenue in 2013.
9.2.1.8 Net finance costs The table below provides a breakdown of the Group’s net finance costs in 2013 and 2014:
(in € millions) 2013 2014 % change Cost of net debt (39.4) (39.2) - Other financial income and expenses (1.9) (2.3) +25.8% Net finance costs (41.2) (41.5) +0.7%
Average gross debt outstanding stood at €702.4 million in 2014 9.2.1.10 Share in earnings of associates versus €722.7 million in 2013. The Group’s share in earnings of associates totaled €1.5 million Other financial income and expenses increased in 2014 to in 2014, versus €1.6 million in 2013. €2.3 million and include the impact of discounting assets and In the statement of financial position, investments in associates liabilities. represented assets of €13.3 million at December 31, 2014 and €12.2 million at end-2013. 9.2.1.9 Income tax Income tax includes taxes paid or for which provisions are made 9.2.1.11 Non-controlling interests in a given period, as well as tax adjustments paid or provisioned Net income attributable to non-controlling interests was up to during the period. The Group recognized income tax expense of €49.1 million in 2014 (32.8% of consolidated net income), versus €76.8 million in 2014 versus €83.1 million in 2013. The overall €44.0 million in 2013 (30.5% of consolidated net income). This effective tax rate decreased from 36.8% last year to 34.1% slight increase is notably explained by the higher net income in 2014. reported by the FMCG Industries & Distribution division in Congo. For more information on the calculation of income tax, see Note 12 “Income tax” to the consolidated financial statements 9.2.1.12 Net income included in Chapter 20 of this Registration Document. As a result of the above, net income attributable to owners of the parent was stable to €100.5 million in 2014 from €100.4 million in 2013.
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9.2.2 Financial position and changes during the period
Consolidated statement of cash flows (condensed) (in € millions) 2013 2014 Cash flow from operating activities before tax, dividends and interest 334.5 336.7 As a % of revenue 9.2% 9.5% Change in working capital requirement (33.0) (46.1) Income tax paid (87.3) (86.7) Operating capital expenditure, net (88.6) (109.0) Free operating cash flow 125.6 94.8
Free operating cash flow generated in 2014 is lower than last year modernize and extend the Equipment & Services and Healthcare with a strong cash flow from operating activities, a higher working networks (40% and 22% of net operating capex, respectively). The capital requirement and an increased capital expenditure. remaining 38% was for further expansion of Consumer Goods’ productive capacity and initial investments in the new Retail In 2014, operating capital expenditure amounted €109.0 million business line (see Chapters 5 and 10 of the Registration Document vs. €88.6 million in 2013. Most of this related to ongoing plans to for fuller information on the Group’s capital expenditure).
Consolidated statement of financial position (condensed) (in € millions) 31.12.2013 31.12.2014
Intangible assets 229.3 241.2 Property, plant and equipment 392.9 444.7 Working capital requirement 604.7 679.3 Other assets and liabilities 30.5 21.1 Capital employed 1,257.4 1,386.3 Equity (including equity attributable to non-controlling interests) 853.9 953.8 Net debt 403.5 432.5
As of December 31, 2014, net debt totaled €432.5 million, up €29.0 million on end-2013. The gearing ratio is virtually stable at 0.45 at year-end compared with 0.47 at the end of 2013.
9.3 Analysis of revenue, gross profit and recurring operating income by division for 2013 and 2014
9.3.1 Comparison of the results of Equipment & Services in 2013 and 2014
The following table shows key income statement figures for Equipment & Services in 2013 and 2014:
Year ended December 31 (in € millions) 2013 2014 Change Revenue 2,257.0 1,977.4 -12.4% Recurring operating income 140.5 139.8 -0.5% As a % of division revenue 6.2% 7.1% +0.9 pt
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9.3.1.1 Equipment & Services revenue Exchange rate fluctuations related to the translation of subsidiaries’ revenue into euros had a negative impact of around €33 million Revenue reported by Equipment & Services amounted on 2014 revenue, mainly due to Ghana, Algeria and Zambia. €1,977.4 million in 2014 from €2,257.0 million in 2013, down -12.4%. Like-for-like (constant scope and exchange rates), revenue was down -11.4% versus 2013.
The following table provides a breakdown of Equipment & Services revenue by category of product or service:
2013 2014 (in € millions) (%) (in € millions) (%) Change Light vehicles 1,271.9 56.4% 1,121.4 56.7% -11.8% Used vehicles 50.7 2.2% 50.8 2.6% 0% Services, spare parts and tires 270.2 12.0% 254.7 12.9% -5.7% Motorcycles and other 46.3 2.1% 50.6 2.6% +9.3% Heavy trucks 397.9 17.6% 292.5 14.8% -26.5% Machinery 59.1 2.6% 53.9 2.7% -8.8% Elevators 38.8 1.7% 33.6 1.7% -13.3% Rental Services 36.5 1.6% 40.4 2.0% +10.7% Technologies 85.7 3.8% 79.4 4.0% -7.3% TOTAL 2,257.0 100.0% 1,977.4 100.0% -12.4%
Revenue derived from sales of new light vehicles decreased by -11.8%, while revenue from sales of heavy trucks were down by -26.5%. These evolutions resulted mainly from the decrease of the Algerian market and the end of distribution contracts.
The following table provides a breakdown of Equipment & Services revenue by geographic area:
2013 2014 Change on a Change on a (in € millions) (in € millions) reported basis like-for-like basis Revenue French-speaking Sub-Saharan Africa 800.8 777.6 -2.9% -3.8% Maghreb 613.9 393.0 -36.0% -35.3% French Overseas Territories and Other 378.7 380.8 +0.6% +0.7% English- and Portuguese-speaking Sub-Saharan Africa 389.7 321.6 -17.5% -11.6% France (export) 73.9 104.5 +41.4% +41.4% TOTAL 2,257.0 1,977.4 -12.4% -11.4%
Sales were significantly down in Gabon explaining the contraction Revenue for the France export region (mainly exports to major in sales in French-speaking Sub-Saharan Africa. pan-African accounts) increased by 41.4% on 2013.
In Maghreb, volumes of vehicles sold were down in Algeria with a weaker and more competitive Algerian market. Sales were also 9.3.1.2 Equipment & Services gross profit lower in Morocco mainly due to the end of Nissan distribution The gross profit margin reported by the Equipment & Services agreement. division is up in 2014 compared to 2013, mainly attributable to a geographic mix, with weaker sales in the Maghreb where the In a large number of East-African countries, sales were down due gross profit margin remains below the average for the business to the non-renewal of Nissan distribution agreement. In the French line as a whole. The decrease of the yen against euro in the end Overseas Territories, sales were down on the previous year in of 2013 and in 2014 had also an impact on the gross profit New Caledonia for the same reason. margin in 2014.
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9.3.1.3 Equipment & Services recurring operating income Recurring operating income reported by Equipment & Services amounted €139.8 million down -0.5% to 2013. The recurring operating profit margin gained +0.9% point year on year, to 7.1%, mainly attributable to an improved gross profit margin.
9.3.2 Comparison of the results of Healthcare in 2013 and 2014
The following table shows key income statement figures for Eurapharma in 2013 and 2014:
Year ended December 31 (in € millions) 2013 2014 Change Revenue 1,103.4 1,216.1 +10.2% Recurring operating income 93.8 105.1 +12.0% As a % of division revenue 8.5% 8.6% +0.1 pt
9.3.2.1 Eurapharma revenue Changes in the scope of consolidation had a +€30.6 million impact on the division’s revenue in 2014. The following table Revenue generated by Eurapharma in 2014 moved up +10.2% provides a breakdown of Eurapharma revenue by geographic year on year, to €1,216.1 million versus €1,103.4 million area: in 2013. Like-for-like, the division’s revenue advanced +7.9%.
2013 2014 Change on a Change on a (in € millions) (in € millions) reported basis like-for-like basis Revenue French-speaking Sub-Saharan Africa 409.3 461.3 +12.7% +7.7% French Overseas Territories and Other 364.4 366.2 +0.5% +0.5% Maghreb 80.1 97.7 +22.0% +23.6% English and Portuguese-speaking Sub-Saharan Africa 83.2 85.9 +3.2% +9.6% Other Europe * 166.4 205.0 +23.2 % +11.6 % TOTAL 1,103.4 1,216.1 +10.2% +7.9%
* Other Europe includes revenue generated in the France (export) region, which chiefly reflects non-Group revenue relating to the subsidiary EPDIS France (pre-wholesale business), as well as revenue generated by Missionpharma in Denmark.
The division’s sales in French-speaking Sub-Saharan Africa 9.3.2.2 Eurapharma gross profit climbed +12.7% in 2014, with strong growth in the Congo. Again in 2014, Eurapharma’s gross profit margin edged up Revenue in English-speaking Africa, where Eurapharma operates slightly thanks to the sales mix with increased Missionpharma its distribution agent business enjoyed vigorous growth, with sales. +9.6% like-for-like growth. The division’s sales in the Overseas Territories were stable in 2014 in an environment of shrinking markets. 9.3.2.3 Eurapharma recurring operating income Recurring operating income reported by Eurapharma moved up In Algeria, the growth posted in 2014 is due to the strong growth +€11.3 million, or +12.0%, to €105.1 million in 2014. This recorded in the pre-wholesale business. reflects strong sales growth, a slight improvement in gross profit margin and a tight rein on base costs.
The recurring operating margin remained high in 2014 at 8.6% versus 8.5% in 2013.
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9.3.3 Comparison of the results of the Consumer Goods pole in 2013 and 2014
9.3.3.1 Consumer Goods revenue The following table shows key income statement figures for Consumer Goods in 2013 and 2014:
Year ended December 31 (in € millions) 2013 2014 Change Revenue 267.5 366.8 +37.1% Recurring operating income 68.8 64.4 -6.4% As a % of division revenue 25.7% 17.5% -
The following table provides a breakdown of revenue by business line:
2013 2014 (in € millions) (%) (in € millions) (%) Change Beverages 214.3 80.1% 226.3 61.7% +5.6% Plastics 50.8 19.0% 41.1 11.2% -19.1% Food, Hygiene & Spirits 2.5 0.9% 99.4 27.1% x40 TOTAL 267.5 100.0% 366.8 100.0% +37.1%
Revenue reported by the Consumer Goods pole was up +37.1% 9.3.3.2 Consumer Goods gross profit year on year, to €366.8 million in 2014 from €267.5 million The pole’s gross profit margin decreased significantly in 2014. It in 2013. Like-for-like, the pole’s revenue advanced +5.6%. is mainly due to the consolidation of GI & Distribution with a much ■ Revenue generated by the Beverage segment made further lower gross profit margin than the other businesses. strong gains in 2014. Brasseries du Congo produced 3.0 million hectoliters of beer and soft drinks in 2014, up 9.3.3.3 CFAO Industries, Equipment & Services 3% from 2.9 million hectoliters in 2013 thanks to extended recurring operating income production lines in the Congo. With an almost equal growth in Recurring operating income reported by the Consumer Goods soft drinks than in beers, production in 2014 breaks down as pole came in slightly lower, down from €68.8 million in 2013 follows: 69% beer and 31% soft drinks. to €64.4 million in 2014. The recurring operating profit margin ■ Sales of plastic products decreased by -19.1% with 216 million decreased in 2014 at 17.5% to be compared with 25.7% pens, 132 million razors and 3.6 million beverages crates in 2013. sold in 2014. This negative evolution is attributable to the consolidation of GI & Distribution (elimination of group sales previously treated as external sales); the total sales of the plastic segment were actually up +10.9%.
■ Food, Hygiene & Spirits segment benefited strongly from the addition of GI & Distribution sales.
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10.1 Overview 96 10.4 Analysis of cash fl ows 100 10.4.1 Net cash from operating activities 101 10.2 Financial resources 96 10.4.2 Net cash fl ows used in investing activities 101 10.4.3 Net cash used in fi nancing activities 102 10.2.1 Sources 96 10.4.4 Free operating cash fl ow 103 10.2.2 Borrowings 97 10.4.5 Change in net debt 103
10.3 Presentation and analysis of the main categories of use of the Group’s cash 98 10.3.1 Investments 98 10.3.2 Dividends 98 10.3.3 Financing of working capital requirements 99 10.3.4 Financing of non-current assets 99 10.3.5 Contractual obligations 99 10.3.6 Other commitments given 100
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10.1 Overview
The Group’s principal financing requirements include its working The Group estimates that its main financing requirements capital requirement, operating investments, dividend payments to in 2015 (other than working capital requirements) will concern its shareholders and debt repayments. The Group meets these the repayment of drawdowns on the syndicated credit facility requirements mainly with cash flow from operating activities and (amounting to €35.0 million as of December 31, 2014), gross bank financing in local currencies in the countries in which it operating investments (amounting to €121.0 million for 2014, operates as well as in France through a syndicated credit facility. and an estimated €190 million for 2015), dividend payments to On December 17, 2013 the Group signed a new five-year shareholders in respect of 2014, as well as dividends paid by the revolving credit facility for €400 million with its main banks in Group’s subsidiaries to non-controlling interests. order to provide a reasonable margin of liquidity to safeguard the future management of the Group’s financing requirements The Group intends to meet these requirements mainly by using which have been identified to date. This confirmed line enabled cash flow from operating activities and borrowings. the Group to refinance the existing syndicated credit facility of Further information on equity is provided in Note 25 to the €300 million dated December 7, 2009, and to extend the maturity consolidated financial statements in Chapter 20 of this Registration of its main credit line from December 2014 to December 2018, Document. and to increase its amount.
10.2 Financial resources
10.2.1 Sources recurring charges to depreciation, amortization and provisions on non-current operating assets, other non-cash income and expenses, interest paid/received, dividends received, and net The Group has principally used the following sources of financing: income tax payable; ■ cash and cash equivalents, which represents one of the ■ debt, including a medium-term portion in euros through a Group’s sources of financing. Cash and cash equivalents syndicated loan facility with a four-year maturity, and another at December 31, 2014 and 2013 totaled €202.3 million short or long-term portion historically contracted with the and €211.5 million, respectively. For further information on financial institutions in the countries where the Group operates. cash and cash equivalents, see Note 28 to the consolidated The Group is careful to ensure that recourse to leverage is financial statements; reasonable. The table below provides the breakdown of the ■ operating activities, which generated cash flow before tax, Group’s net debt at December 31, 2014 and 2013. For dividends and interest of €336.7 million and €334.5 million more information on changes in net debt, see section 10.4.5 in 2014 and 2013, respectively. Cash flow from operating “Change in net debt” of this Registration Document. For activities before tax, dividends and interest is calculated by a more detailed description of the Group’s net debt, see adding together net income from continuing operations, net section 10.2.2 “Borrowings” below.
(in € millions) 31.12.2014 31.12.2013 Gross borrowings (634.8) (615.0) Cash 202.3 211.5 Net debt (432.5) (403.5)
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10.2.2 Borrowings below reflects the breakdown of the Group’s gross debt as of these dates. The increase in gross debt in 2014 chiefly reflects a bigger drawdown on subsidiaries’ short-term financing lines Borrowings at December 31, 2014 (recorded on “Bank overdrafts”) as described below. For further information regarding changes in net debt, see section 10.4.5 The Group’s gross debt totaled €634.8 million, at December 31, “Change in net debt” in 2013 and 2014. 2014, compared with €615.0 at December 31, 2013. The table
(in € millions) 31.12.2014 31.12.2013 Confirmed lines of credit 52.2 79.4 Bonds 11.4 0 Other bank borrowings 49.6 48.1 Obligations under finance leases Employee profit-sharing 4.0 1.7 Bank overdrafts 487.0 452.8 Other borrowings 30.7 32.9 TOTAL 634.8 615.0
The Group’s main categories of debt are as follows: The principal borrowings with maturities of less than one year mainly include bank overdrafts, amounting to €487 million at ■ confirmed lines of credit. The Group has a syndicated December 31, 2014. Bank overdrafts have maturities of less credit facility, which includes a drawdown of €35 million at than one year because these financing lines are unconfirmed December 31, 2014 (€365.0 million undrawn) with a pool of short-term facilities with no fixed maturity date or firm ongoing leading banks; lending commitment from the lending institutions. The syndicated ■ bond loan. On January 29, 2014, CFAO Motors Côte d’Ivoire credit facility drawdown totaling €35.0 million at December 31, issued a private placement bond loan for FCFA 7.5 billion 2014, is a revolving facility with an initial maturity of four years. (interest rate on issue: 6.75%) through 150 securities with a For more information on the repayment schedule for the Group’s nominal value of FCAF 50 million (i.e. €11.4 million) maturing borrowings see paragraph 29.1 of Chapter 20 of this Registration on January 29, 2020; Document.
■ other borrowings with credit institutions. This caption covers Description of the syndicated credit facility and related medium-term loans financing investments by the Group’s financial covenants subsidiaries mainly in real estate; On December 17, 2013, CFAO entered into a revolving ■ bank overdrafts. The Group uses overdrafts taken out with multicurrency syndicated credit facility agreement, for a total of credit institutions. These facilities are generally put in place €400 million (“the Credit Facility Agreement”). The term of this by the Group’s local subsidiaries in their respective countries Credit Facility Agreement is five years. and are denominated in local currency. They are generally short-term (less than one year) and are contractually renewed Drawdowns on this credit facility bear interest at a rate equal to the periodically depending upon the local subsidiaries’ activities sum of (i) a fixed basic rate indexed to EURIBOR for drawdowns and the terms offered by the lending institutions. The amounts in euros, and to Libor for drawdowns made in other currencies; outstanding under bank overdrafts at December 31, 2014 and (ii) a margin determined on a half-yearly basis depending on and December 31, 2013 totaled €487.0 million and the Group’s gearing ratio (as set out below). €452.8 million, respectively. The Group was authorized to The Credit Facility Agreement has the standard clauses for this draw up to €1,042 million and €936 million, respectively, type of contract: at December 31, 2014 and December 31, 2013, under its unconfirmed bank overdraft lines (including the amounts ■ financial covenant: on each assessment date (June 30 and already drawn on these dates); December 31 each year), the Company undertakes to:
■ employee profit-sharing (€4.0 million as of December 31, (i) maintain a gearing ratio of less than or equal to 3. The ratio 2014; €1.7 million as of December 31, 2013). Employee corresponds to consolidated net debt (i.e. the Group’s gross profit-sharing is also classified within borrowings; borrowings less cash on hand) divided by the EBITDA (i.e. the Group’s current operating income plus depreciation, ■ other borrowings (€30.7 million as of December 31, 2014; amortization for non-current operating assets recognized in €32.9 million as of December 31, 2013). These other debts current operating income: see Chapter 3 “Selected Financial mainly comprise the minority puts granted by CFAO of Information” of this Registration Document), €21.5 million as of December 31, 2014 (see Note 29.3 in Chapter 20).
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(ii) the above financial covenant was respected as of December 31, adverse effect on the Company’s or Group’s overall financial 2014; position or business and the Company’s ability to meet its obligations under the Credit Facility Agreement. ■ other restrictive undertakings: These mainly include clauses which in certain cases, limit the ability of the Company and its main subsidiaries to: (i) grant or maintain guarantees or Financial covenants and ratios linked to other borrowings securities over their assets; (ii) sell, transfer or grant a lease (excluding the syndicated credit facility described above) over their assets; (iii) participate in mergers or restructuring The financing confirmed concluded by the Group’s subsidiaries transactions (excluding intragroup transactions) or in local currencies (basically medium-term loans totaling (iv) significantly modify the nature of the activities; €49.6 million at December 31, 2014) contain commitments corresponding to those generally found in similar loans and ■ early repayment of borrowings or change of control: The Credit generally do not include significant restrictions on the subsidiaries Facility Agreement stipulates that each lender can demand the transferring funds to the Company in the form of dividends, early repayment of the sums owed to it and cancel its credit loans, advances or otherwise (refer to section 4.3 “Group Risks” lines if the majority shareholder ceases to control the Company for a description of the risks connected to the possibility for the (within the meaning of Article L. 233-10 (ii) and II of the French Group’s subsidiaries to make payments to the Company, as well Commercial Code); as section 6.6.2 “Foreign exchange control” of this Registration ■ early repayment: Under the terms of the Credit Facility Document). Similarly, as bank overdrafts are not committed Agreement, lenders can demand the total or partial repayment financing, they are not subject to any particular restrictions or of current drawdowns in certain cases, and notably: (i) non- covenants. compliance with the financial covenants or other restricted Further information on covenants is provided in Note 30.5 undertakings described above; (ii) default or non-payment of “Liquidity risk” (maturity schedule for non-derivative financial other debts by the Company and/or the subsidiaries in which instruments) and Note 29.1 “Breakdown of borrowings by it controls at least two thirds of the capital or voting rights (from maturity” to the consolidated financial statements. fixed thresholds); or (iii) other events likely to have a materially
10.3 Presentation and analysis of the main categories of use of the Group’s cash
10.3.1 Investments 10.3.2 Dividends
The Group’s gross investments amounted to €121.0 million Historically, the Group has made two types of dividend payments: in 2014 and €99.7 million in 2013. These amounts chiefly ■ concern acquisitions of property, plant and equipment with dividends paid in 2014 by the parent company. Dividends the aim of renovating CFAO Automotive Equipment & Services paid by CFAO amounted to €49.9 million in 2014 and division’s points of sale, renovating the Eurapharma division’s €55.4 million in 2013. The 2014 dividend accounted for logistic installations, and increasing production capacity in the 49.7% of 2013 net income attributable to owners of the Congo beverages business and plastic products production. parent; Further information regarding investments made during this ■ dividends paid to non-controlling interests of consolidated period, and current and planned investments, is provided in subsidiaries. These dividends, which totaled €37.6 million section 5.2 “Investments” and section 10.4.2.1 “Gross operating in 2014 and €47.7 million in 2013, primarily include amounts investments” of this Registration Document. paid to non-controlling interests in Eurapharma and CFAO Automotive Equipments & Services subsidiaries, as well as to Brasseries du Congo, a subsidiary of CFAO FMCG Industries & Distribution division.
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10.3.3 Financing of working capital 10.3.4 Financing of non-current assets requirements Non-current assets are comprised of (i) goodwill (€208.5 million The Group’s working capital requirement (see Note 23 to the at December 31, 2014 and €199.5 million at December 31, consolidated financial statements) at December 31, 2014 2013) mainly relating to CFAO Automotive Equipment & Services and December 31, 2013 amounted to €679.3 million and and Eurapharma; and (ii) other intangible assets (€32.7 million at €604.6 million, respectively. The Group finances its working December 31, 2014 and €29.8 million at December 31, 2013), capital requirement mainly through cash flow from operating mainly relating to trademarks, leasehold rights, concessions, activities and, where appropriate, bank overdrafts and licenses and software. Non-current assets also include property, drawdowns on confirmed credit facilities. The Group manages plant and equipment representing €444.7 million at December 31, its working capital requirement principally through the centralized 2014 and €392.9 million at December 31, 2013. At the end process for placing orders with suppliers via the central purchasing of 2014, this item included land, buildings, fixtures and fittings offices. This process allows the Group to manage inventory levels for €217.7 million, and technical equipment, IT equipment and according to the forecast demand for its products, and to carefully other property, plant and equipment and assets in progress for monitor payments to manufacturers and the collection of accounts €227.0 million. Investments in equity accounted companies receivable (see the breakdown below in section 10.4.1.2 (€13.3 million) and non-current financial assets (€61.1 million) “Change in working capital requirement”). are also included in non-current assets as of December 31, 2014. Non-current financial assets include non-consolidated investments In line with its approach to managing working capital requirement, that are not of strategic importance to the Group’s core activities. the Group manages inventory levels through its centralized process for placing orders with suppliers. In the CFAO Automotive and Eurapharma divisions, the Group stocks some of the products it distributes in permanent or temporary storage facilities intended 10.3.5 Contractual obligations for this purpose. In the CFAO Automotive division, the Group seeks to maintain a minimum level of inventory that takes into account The table below reflects the Group’s contractual commitments and the forecast demand for vehicles. Given delivery lead times in this obligations at December 31, 2014, excluding commitments related business, there can be time lags between the moment a decision to employee benefits and short-term loans, which are described is made to reduce vehicle inventory levels and the point at which in Note 26 “Employee benefits” and Note 29 “Borrowings” to inventory levels are actually reduced. In the Eurapharma division, the consolidated financial statements in Chapter 20 “Financial the Group’s inventory levels are determined in part by regulatory information concerning the assets and liabilities, financial position requirements in terms of minimum inventories (see section 6.6.1 and profits and losses of the issuer” of this Registration Document. “Pharmaceutical operations” of this Registration Document). In the CFAO Industries business, the Group manages its inventory levels based on the forecast demand for its products. In the CFAO Technologies business, the Group principally works on the basis of customer orders.
Payments due by period Less than One to More than (in € millions) one year five years five years 2014 2013 Non-current borrowings 0.0 99.2 2.8 101.9 109.0 Operating lease agreements 35.3 47.2 19.2 101.7 94.7 Binding purchase commitments 129.1 0.0 0.0 129.1 139.8 TOTAL COMMITMENTS GIVEN 164.4 146.4 22.0 332.8 343.4
Apart from the long-term borrowings and debt described above, minimum future lease payments under operating leases during the Group’s contractual obligations include: the period that cannot be canceled by the lessee. These mainly include non-cancelable rental payments in respect of stores, ■ binding purchase commitments. This category principally head offices and administrative offices. The rental charge includes non-cancelable purchase commitments made to amounted to €39.0 million in 2014. Commitments relating suppliers by the Group’s central purchasing offices; to non-cancelable rental payments totaled €101.7 million at ■ operating lease commitments. The contractual obligations December 31, 2014. shown under “Operating leases agreements” represent
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10.3.6 Other commitments given
The following table summarizes the other main commitments given statements in Chapter 20 “Financial information concerning the by the Group for the periods indicated (for more information, see assets and liabilities, financial position and profits and losses of Note 34.2.4 “Other commitments” to the consolidated financial the issuer” of this Registration Document).
Payments due by period Less than From More than (in € millions) one year 1 to 5 years five years 31.12.2014 31.12.2013 Bank guarantees 60.1 4.0 0.0 64.1 62.9 Rent guarantees, property guarantees 10.7 0.0 0.0 10.7 10.2 Tax guarantees 2.2 2.2 0.0 Customs securities 79.9 0.1 0.2 80.1 71.7 Other commitments 386.9 24.3 5.4 416.6 489.1 TOTAL COMMITMENTS GIVEN 539.8 28.4 5.6 573.7 633.9
Commitments given do not include commitments related to “Bank guarantees” relate to exceptional guarantees covering intragroup debts. periods of less than one year given by CFAO to banks that have provided credit facilities for its subsidiaries. “Other commitments” mainly relate to guarantees given by the Group to banks in the context of bank guarantees provided to The main guarantees given by the Group in the context of previous suppliers for the payment of orders and invoices. Payment terms asset sales are summarized in Note 34 “Contingent liabilities, granted to the Group’s central purchasing offices by suppliers contractual commitments not recognized and other contingencies” are sometimes covered by bank guarantees in favor of suppliers to the consolidated financial statements included in Chapter 20 of on behalf of the Group’s central purchasing offices. This practice this Registration Document. involves a number of the Group’s divisions and in particular CFAO Automotive Equipments & Services division. To the best of the Group’s knowledge, there are no other commitments given or contingent liabilities, other than those described in Note 34 to the consolidated financial statements and in this section 10.3.
10.4 Analysis of cash flows
The following table sets out the Group’s cash flows for the periods indicated.
(in € millions) 31.12.2014 31.12.2013 Net cash from (used in) operating activities 203.9 214.2 Net cash used in investing activities (126.8) (105.0) Net cash used in financing activities (114.8) (160.5) Impact of exchange rate variations (0.9) 2.5 Impact of treasury shares (0.6) 1.0 Other movements (3.1) 0.3 Net increase (decrease) in cash and cash equivalents (42.4) (47.5)
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10.4.1 Net cash from operating activities
Net cash from operating activities can be broken down as follows for the periods indicated.
(in € millions) 31.12.2014 31.12.2013 Net income 149.6 144.4 Net recurring charges to depreciation, amortization and provisions on non-current operating assets 61.5 59.4 Proceeds on disposal of leasing fleets (amendment to IAS 16) 5.0 3.4 Other non-cash income and expenses (0.5) 7.0 Cash flow from operating activities 215.6 214.2 Interest paid/received 42.9 43.1 Dividends received (1.7) (1.4) Net income tax payable 80.0 78.6 Cash flow from operating activities before tax, dividends and interest 336.7 334.5 Change in working capital requirement (46.1) (33.0) Income tax paid (86.7) (87.3) Net cash from (used in) operating activities 203.9 214.2
Net cash from operating activities amounted to €203.9 million at December 31, 2013. Trade payables as a percentage of in 2014, compared to €214.2 million in 2013. This €10.3 million revenue declined to 16.1% at December 31, 2014 from 17.1% decrease is primarily due to an increase in working capital at December 31, 2013. Trade receivables as a percentage of requirements. revenue stood at 15.8% in 2014 compared with 15.3% in 2013.
10.4.1.1 Cash flow from operating activities before tax, dividends and interest 10.4.2 Net cash flows used in investing Cash flow from operating activities before tax, dividends activities and interest totaled €336.7 million in 2014, compared to €334.5 million in 2013. Net cash used in investing activities includes (i) purchases and disposals of property, plant and equipment (net operating 10.4.1.2 Change in working capital requirements investments); (ii) acquisitions and disposals of subsidiaries, net The Group seeks to optimize working capital by managing its of cash acquired or transferred; (iii) purchases and disposals of inventory through its central purchasing offices, which carefully other financial assets; and (iv) interest and dividends received monitor orders with suppliers. As a percentage of revenue, the (net financial investments). Investing activities resulted in net cash working capital requirement was 19.1% in 2014, versus 16.6% outflows of €126.8 million and €105.0 million in 2014 and in 2013. Inventories rose to 25.3% at December 31, 2014 with 2013, respectively (see Note 33 to the financial statements, in a slight increase at the end of the period compared with 24.8% Chapter 20).
(in € millions) 31.12.2014 31.12.2013 Purchases of leasing fleets (amendment to IAS 16) (17.3) (12.3) Other purchases of property, plant and equipment and intangible assets (103.7) (87.4) Proceeds from disposals of property, plant and equipment and intangible assets12.0 11.2 Acquisitions of subsidiaries, net of cash acquired (20.3) (3.9) Proceeds from disposals of subsidiaries, net of cash transferred 0.4 (2.5) Purchases of other financial assets (20.4) (22.6) Proceeds from sales of other financial assets (20.0) 10.1 Interest and dividends received 2.4 2.3 Net cash used in investing activities (126.8) (105.0)
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10.4.2.1 Gross operating investments is summarized in Chapter 5.2 “Investments” of this Registration Document. Gross operating investments amounted to €121.0 million in 2014. Taking into account disposals in the amount of €12.0 million in 2014, mainly of non-strategic assets, net operating investments 10.4.2.2 Net financial investments amounted to €109.0 million. Net financial investments, i.e., acquisitions of subsidiaries (net of cash acquired), net of proceeds from disposals of subsidiaries (net Operational investments in 2014 mainly involved increasing of cash transferred), plus purchases of other financial assets net of the production capacities at Brasseries du Congo, modernizing proceeds from disposals of other financial assets, plus interest and and extending the CFAO Automotive Equipment & Services dividends received, resulted in net cash outflows of €17.8 million network and modernizing Eurapharma’s logistic installations. The in 2014 and €16.5 million in 2013. breakdown of gross operating investments from 2012 to 2014
10.4.3 Net cash used in financing activities
Net cash used in financing activities can be broken down as follows for the years indicated.
(in € millions) 31.12.2014 31.12.2013 Share capital increase/decrease 31.6 1.6 Dividends paid to owners of the parent company (49.9) (55.4) Dividends paid to non-controlling interests (37.6) (47.7) Issuance of debt 35.9 24.6 Repayment of debt (51.2) (39.5) Increase/decrease in other borrowings Interest paid and equivalent (43,6) (44.1) Net cash used in financing activities (114.8) (160.5)
Financing activities as shown above resulted in net cash outflows ■ interest paid and equivalent, totaling €43.6 million; of €114.8 million in 2014 and €160.5 million in 2013. The main ■ uses of cash for financing activities in 2014 were: the payment of dividends to non-controlling interests in consolidated subsidiaries, for a total amount of €37.6 million; ■ the payment of dividends by the parent company, for ■ €49.9 million; the repayment of loans and other borrowings, for €51.2 million.
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10.4.4 Free operating cash flow
The following table sets out changes in free operating cash flow for the fiscal years indicated. Free operating cash flow is equal to cash flow from operating activities less net operating investments.
(in € millions) 31.12.2014 31.12.2013 Net income 149.6 144.4 Net recurring charges to depreciation, amortization and provisions on non-current operating assets 61.5 59.4 Proceeds on disposal of leasing fleets (amendment to IAS 16) 5.0 3.4 Other non-cash income and expenses (0.5) 7.0 Cash flow from operating activities 215.6 214.2 Interest paid/received 42.9 43.1 Dividends received (1.7) (1.4) Net income tax payable 80.0 78.6 Cash flow from operating activities before tax, dividends and interest 336.7 334.5 Change in working capital requirement (46.1) (33.0) Income tax paid (86.7) (87.3) Net cash from (used in) operating activities 203.9 214.2 Purchases of leasing fleets (amendment to IAS 16) (17.3) (12.3) Other purchases of property, plant and equipment and intangible assets (103.7) (87.4) Proceeds from disposals of property, plant and equipment and intangible assets 12.0 11.2 Free operating cash flow 94.8 125.6
Free operating cash flow amounted to €94.8 million in 2014, dividends and interest remained stable with increased working compared to €125.6 million in 2013. The Group continued capital requirements and a sustained investment program (see to generate high free operating cash flow at the end of 2014. sections 10.4.1 “Net cash from operating activities” and 10.4.2.1 In 2014, cash flow from operating activities before tax, “Gross operating investments”).
10.4.5 Change in net debt
The change in net debt between December 31, 2013 and December 31, 2014 can be analyzed as follows:
(in € millions) 31.12.2014 31.12.2013 Net debt at January 1 (403.5) (377.0) Free operating cash flow 94.8 125.6 Interest paid net of dividends received (41.1) (41.7) Acquisitions and disposals of subsidiaries, net of cash acquired or transferred (19.9) (6.3) Purchases and disposals of other financial assets (net) (0.4) (12.5) Dividends paid (87.5) (103.1) Other 25.0 11.6 Net debt at December 31 (432.5) (403.5)
The slight increase in net debt at December 31, 2014 compared to December 31, 2013 is chiefly explained by the increase in working capital requirement.
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Due to the nature of its business, the Group does not conduct any ■ owned by the Group’s partners, such as certain beer brand significant research and development activities. In addition, the names of the Heineken group (Maltina, Turbo King) and certain Group holds few patents and licenses. beverage brand names of other groups. For these brand names, licensing agreements may either be signed directly The Group owns the CFAO trademark as well as several other by Brasseries du Congo, or by one of the Group’s central trademarks developed within the scope of the business activities purchasing offices, before being sub-licensed to Brasseries du of its divisions, such as CFAO Technologies and, for its rental Congo. services business, LOXEA , which are registered with the OAPI (African Intellectual Property Organization). In the CFAO FMCG The Group also owns the Laborex brand name, which is used Industries & Services division, Brasseries du Congo, the Group’s by Eurapharma’s wholesale-resale subsidiaries in Africa and was beverage subsidiary, benefits from several licensing agreements first registered with the OAPI on May 2, 1991. related to the beverage brands that it markets, which are either: In general, the Group’s policy is to protect the brands and ■ directly owned by the Group, such as the Ngok and Primus trademarks it holds in the countries in which it has operations and beer brand names, which are owned by Capstone Corporation where this is required to carry on its business activities. and which are the subject of a promise to sell, relating to 50% of the brands, granted to the Heineken group; or
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12.1 Trends and recent developments 108 12.2 Medium-term outlook 108
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12.1 Trends and recent developments
The IMF’s growth forecasts for Africa remain favorable in 2015, has specific projects to develop its activities in the areas related to with GDP expected to grow by +5.75% in Sub-Saharan Africa. the sale of new vehicles. Growth should be mainly driven by investment in infrastructures, the vitality of the services sector, surplus agricultural production, Eurapharma is expected to continue its steady growth in Africa although with a smaller contribution from activities in the oil in 2015. The acquisitions made during the year just elapsed will sector. However the continuing security risks in some areas could contribute to growth in revenue. impact these forecasts if they worsened. The FMCG Industries & Distribution activities should also continue The Automotive, Equipment & Services division should continue to grow in the Consumer Products sector. The Retail division will redeploying its activities in 2015. Distribution agreements entered open its first shopping mall in Abidjan (Ivory Coast) in the second into in 2014 in East Africa with the automaker Volkswagen will, half of the year. The division’s development plan covers a total of over time, help to offset the loss of the distribution of Nissan in this eight territories in Sub-Saharan Africa. region. Similarly, the Group’s objective is to find a replacement The Group does not wish to make any projections nor lay down for the Isuzu brand in Algeria and Morocco after the distribution any objective regarding revenue, recurring operating margin or of this brand stopped there at the end of 2014. The division also free operating cash flow in 2015.
12.2 Medium-term outlook
The Group confirms the strong growth potential of its current of contracts which have been affecting the Automotive, Equipment businesses. It reaffirms the need to maintain geographic and & Services division since fiscal year 2013. The growth of the business diversity, and confirms the place of specialized middle class should gradually lead from a mainly B2B (Business to distribution as its core business. Business) model to a more balanced B2C (Business to Consumer) model for all activities. The Group’s strategy is based on three pillars: Equipment and Services, Health and Consumer Goods. They reflect the basic The Group set medium-term targets at its stock market flotation needs of the population of Africa and the French overseas in December 2009, covering the period 2010-2013. CFAO is territories, which are CFAO’s current markets, and unify all of the not setting forth any medium-term objectives in this Registration Group’s activities today. Document.
On completion of a takeover bid in 2012, the Japanese trading The indications set out above do not constitute forecasts or house TTC acquired control of CFAO, with an interest currently estimates of the Group’s future profits, but relate to its strategic of 97.4%. TTC has a diversified trading portfolio. Both groups orientation and business plan. They are based on data, are developing a strategy as part of a new Alliance to strengthen assumptions, and estimates that the Group considers reasonable. CFAO’s leadership in Africa with growth hinging on the three These data, assumptions and estimates may change as a result pillars described above, and in close partnership with strong of uncertainties related to, among other things, the economic, brands. financial, competitive and regulatory environment.
CFAO considers that its current business-lines portfolio, the In addition, the occurrence of one or more of the risks described development projects it has under way, and its positioning on, in Chapter 4 “Risk Factors” of this Registration Document and control and integration of numerous links in the value chain, could impact the Group’s activities, results, financial position, place it in a good position to benefit from the emerging African or prospects, threatening its future capacity for growth. The middle class which has very promising growth prospects. These Group can give no assurance or provide any guarantee that the prospects should gradually offset the residual effects of the losses indications and trends set out in this Chapter will be fulfilled.
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CFAO has decided not to include any profit forecasts or estimates in this Registration Document.
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14.1 Corporate Governance structure 112 14.2 Confl icts of interest 123 14.1.1 Group’s Executive bodies 112 14.1.2 Supervisory Board 116 14.1.3 Declarations concerning the members of the Management Board and the Supervisory Board 123
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On October 5, 2009, CFAO S.A. adopted a new Corporate Governance structure with a Management Board and a Supervisory Board, making it possible to distinguish between executive and management functions, under the responsibility of the Management Board, and oversight functions, carried out by the Supervisory Board. Prior to the initial public offering, the decision was made to modify the Corporate Governance structure by separating these two functions (until then, management of the Company had been entrusted to a Board of Directors). This separation is especially effective in addressing the concern for a balance of power between the executive and oversight functions, as reflected in the principles of good Corporate Governance. The way in which the Management and Supervisory Boards operate is presented in Chapter 16 “Roles and activities of the Management and Supervisory Bodies”. The main provisions of the Company by-laws and internal regulations of the Management and Supervisory bodies are described in Chapter 21 “Operations relating to the Company’s stock”, section 2 “Memorandum of association and by-laws”.
14.1 Corporate Governance structure
14.1.1 Group’s Executive bodies meet every month to discuss ongoing business, major projects and any new issue that need addressing. They may also meet as necessary outside of planned meetings. The members of the The Management Board is responsible for executive leadership Executive Committee meet on a quarterly basis. and financial management. It defines and implements the Group’s strategic vision, developed in accordance with the objectives set and approved by the Supervisory Board. As part of its general 14.1.1.1 Information about the members role, the Management Board is a decision-making body which of the Management Board defines Group policies and allocates resources. It receives Management Board members are appointed by the Supervisory support from the General Management Committee (“GMC”) and Board for a three-year term. The Management Board members the Group Executive Committee. may be dismissed by resolution of the Shareholders’ General Meeting or of the Supervisory Board. At the filing date of this Registration Document, the GMC has 11 members, the members of the Management Board, the Article 10 of the Company by-laws stipulates that, during his or Managing Directors of the business divisions, and the Director of her term of office, each member of the Management Board must Human Resources and Environmental and Social Responsibility. own at least 150 registered shares of the Company, no later than 3 months after his or her appointment. The Company’s registered The Executive Committee has a total of 26 members: the members office is the business address of the members of the Management of the Management Board, the other members of the GMC, the Board. chief operating officers of geographic areas and some functional Directors. The members of the Management Board and the GMC
Information regarding the members of the Management Board, as well as, to the Company’s best knowledge, the shareholdings of its members in the Company’s registered capital, as of December 31, 2014 are as follow:
Office within Date of first Number of Name CFAO Age appointment Renewal date Office expiry date shares held Richard Bielle Chairman 52 December 16, 2013* October 5, 2015 18,190 Ichiro Kashitani Vice-Chairman 55 December 26, 2012 - October 5, 2015 150 Olivier Marzloff Member 56 October 5, 2009 October 5, 2012 October 5, 2015 8,557 Alain Pécheur Member 46 March 19, 2012 October 5, 2012 October 5, 2015 5,126
* As a reminder, Mr. Bielle’s first term as Chairman of the Management Board began when he was appointed on October 5, 2009. The Supervisory Board terminated his appointment on September 4, 2012.
Following the acquisition of control of CFAO by TTC (for more Mr Alain Viry was appointed to replace him during a transitional information regarding these changes, please refer to Chapter 18 period. On December 16, 2013, Mr Richard Bielle was “Principal shareholders”, section 18.1 “Breakdown of share reappointed Chairman of the Management Board in replacement capital and voting rights” of the present Registration Document), of Mr Alain Viry. Mr Richard Bielle left the Group. On September 5, 2012,
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14.1.1.2 Management experience, past and present positions and offices This section includes management experience and information regarding past and present positions and offices as of December 31, 2014.
RICHARD BIELLE
Chairman of the Management Board since December 16, 2013
POSITIONS AND OFFICES HELD AS OF DECEMBER 31, 2014 CURRENT POSITIONS AND OFFICES (1) Within the CFAO Group companies: Permanent representative of Serom on the Board of Directors of Eurapharma Director of: • Chairman of the Board of Directors of Diamal (Algeria) Age: 52 • CFAO Nigeria Plc • Member of the Management Committee of Adialea Outside the CFAO Group companies: None
OTHER PAST POSITIONS AND OFFICES HELD DURING THE LAST FIVE YEARS (2) • Member of the Board of Directors of Monoprix SA • Chairman of Afriteam SAS
MANAGEMENT EXPERIENCE • Mr. Bielle began his career in the financial sector. In 1988, he joined Renault Trucks where he held various financial management positions. In 1997, he joined ING Barings as Senior Manager in charge of project financing. • He joined CFAO in 1999 as Business Development Director for Group Automotive operations, then in 2002, he also became Group Corporate Secretary in charge of finance. In 2005, he was appointed Chief Executive Officer of CFAO Automotive. • He was appointed Chairman of the Management Board on October 5, 2009, and his office terminated on September 4, 2012. He was replaced by Mr. Alain Viry, former Chairman of the Supervisory Board for a transition period. On December 16, 2013 Mr. Richard Bielle was reappointed Chairman of the Management Board in replacement of Mr. Alain Viry. • Mr. Bielle is a graduate of the Ecole Supérieure de Commerce de Paris (ESCP).
(1) For companies not domiciled in France and those whose company name does not indicate the country of domicile, this information is indicated in brackets. (2) Other than the positions and offices held in a subsidiary of CFAO.
ICHIRO KASHITANI
Vice-Chairman of the Management Board, Corporate Planning and Alliance Development since December 26, 2012
POSITIONS AND OFFICES HELD IN ANY COMPANY AS OF DECEMBER 31, 2014 CURRENT POSITIONS AND OFFICES (1) Within the CFAO Group companies: None Outside the CFAO Group companies: Age: 55 • Executive Officer of Toyota Tsusho Corporation (Japan)
OTHER PAST POSITIONS AND OFFICES HELD DURING THE LAST FIVE YEARS (2) None
MANAGEMENT EXPERIENCE • Mr. Ichiro Kashitani joined the Japanese company Toyota Tsusho Corporation (“TTC”), where he spent 29 years with missions in various industrial divisions such as Machinery, Automotive and Foodstuffs, as well as in the Administrative division. He was also assigned overseas for a total of 9 years, in France, Morocco and the UK. • Mr. Kashitani joined the CFAO team in France on December 26, 2012 as Vice-Chairman of the Management Board, Corporate Planning and Alliance Development. • He holds a Degree in Economics from the University of Doshisha in Kyoto, Japan.
(1) For companies not domiciled in France and those whose company name does not indicate the country of domicile, this information is indicated in brackets. (2) Other than the positions and offices held in a subsidiary of CFAO.
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OLIVIER MARZLOFF
Member of the Management Board since October 5, 2009 Executive Vice-President and Corporate Secretary
POSITIONS AND OFFICES HELD IN ANY COMPANY AS OF DECEMBER 31, 2014 CURRENT POSITIONS AND OFFICES (1) Within the CFAO Group companies: • Chairman and CEO of SFCE • Statutory manager (gérant) of CFAO Technologies, Cotafi, Domafi, Gerefi, Sevragim, Holdinter and HDS Age: 56 • Member of the Management Committee of Adialea • Permanent representative of: - SECA on the Board of Directors of Eurapharma - Holdinter as Statutory manager (gérant) of Holdinter et Cie - Cotafi as Statutory manager (gérant) of SEI - Cotafi on the Board of Directors of Sodiapa - Cotafi on the Board of Directors of CFAO Technologies Benin - Domafi on the Board of Directors of SEP. - Domafi on the Board of Directors of Alios Finance Outside the CFAO Group companies: None
OTHER PAST POSITIONS AND OFFICES HELD DURING THE LAST FIVE YEARS (2) • None
MANAGEMENT EXPERIENCE • He began his career as a Manager in the Audit Department of Pricewaterhouse Coopers. • In 1994, he joined PPR (now Kering) as Head of the Group’s Internal Auditing Department and then joined Pinault Distribution as Chief Financial Officer. • In 1998, he was appointed Corporate Secretary of Pinault Bois et Matériaux (“PBM”), and continued to hold this position after the acquisition of PBM by the British group, Wolseley, in 2003. • In May 2004, he returned to PPR (now Kering) as Executive Vice President and Chief Financial Officer of Redcats USA in New York. • On June 30, 2008, he joined CFAO as Corporate Secretary (Secrétaire général). On October 5, 2009 he was appointed as member to the Management Board. He is currently in charge of the following departments: legal, tax and insurance, information systems, internal audit, financial communication and investor relations and developments and acquisitions. • Olivier Marzloff graduated from ISG with a degree in finance and accounting (DESCF).
(1) For companies not domiciled in France and those whose company name does not indicate the country of domicile, this information is indicated in brackets. (2) Other than the positions held in a subsidiary of CFAO.
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ALAIN PECHEUR
Member of the Management Board since March 19, 2012 Chief Financial Officer
POSITIONS AND OFFICES HELD IN ANY COMPANY AS OF DECEMBER 31, 2014 CURRENT POSITIONS AND OFFICES (1) Within the CFAO Group companies: • Permanent representative of: - Holdinter on the Board of Directors of CFAO Motors Maroc Age: 46 - Gerefi on the Boards of Directors of SFCE and CFAO Motors Mali - Cotafi on the Boards of Directors of CFAO Motors Mauritanie and Alios Finance - Gerefi on the Board of Directors of SGI (Société de Gestion Immobilière Commerciale du Boulevard VGE - Côte d’Ivoire) - Domafi on the Board of Directors of Sodiapa (France) - Mercure Consult on the Board of Directors of Eurapharma • Director of: - Capstone Corporation Limited (Mauritius) - Capstone International Limited (Mauritius) - LOXEA Holding (Mauritius) - African Automotive Trading (Mauritius) - CFAO Nigeria Plc - Eurafric Trading Company Limited (UK) - Massilia Holdings Ltd. (UK) • Statutory manager (gérant) of: - Mercure Consult - Serom Outside the CFAO Group companies: None
OTHER PAST POSITIONS AND OFFICES HELD DURING THE LAST FIVE YEARS (2) None
MANAGEMENT EXPERIENCE • He began his career at the Pinault Group before joining CFAO in 1992 as an auditor, and then as a financial controller. In 1998, he was appointed Internal Audit Manager and later, he was appointed Corporate Secretary of the Purchasing offices. • In 2002, he became the Head of Financial Services at CFAO and, in 2005, he joined CFAO Automotive as Chief Financial Officer. • He has held the position of Chief Financial Officer of CFAO since March 1, 2009. Mr. Pécheur was appointed a member of the Management Board on March 19, 2012. • Mr. Pécheur graduated from ESG Management School and also holds an Executive MBA from HEC.
(1) For companies not domiciled in France and those whose company name does not indicate the country of domicile, this information is indicated in brackets. (2) Other than the positions held in a subsidiary of CFAO.
14.1.1.3 Information on changes to the governing bodies During 2014, and as of the date of this Registration Document, there have been no changes in the composition of the Management Board.
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14.1.2 Supervisory Board 14.1.2.2 Past and present positions and offices, management experience This section includes the management experience and information concerning the positions and offices of members of the Supervisory Board as of December 31, 2014. 14.1.2.1 Information about the members of the Supervisory Board
JEAN-CHARLES PAUZE Article 10 of the Company by-laws stipulates that, during his or appointment. The Company’s registered office is the business her term of office, each member must own at least 250 registered address of the members of the Supervisory Board. Member of the Supervisory Board (since February 8, 2011), then Chairman of the Supervisory Board shares of the Company, no later than 3 months after his or her (since September 5, 2012) Chairman of the Compensation Committee (until February 16, 2014) (1) The information concerning the members of the Supervisory Board as well as, to the Company’s best knowledge, the shareholdings of Chairman of the Nomination and Compensation Committee (since February 17, 2014) (1) its members in CFAO’s registered capital, as of December 31, 2014 are as follow: Member of the Nomination Committee (until February 16, 2014) (1) Member of the Strategy Committee (since February 17, 2014) (1)
Expiration of Number of shares (2) Members of the Supervisory Board Office First appointment date the term of office held Independent POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 Current Positions and Offices : Jean-Charles Pauze Chairman February 8, 2011 AGM * 2016 250 × Age: 67 Chairman of the Board of Directors of Europcar (since February 13, 2012) (3) Pierre Guénant Vice-Chairman November 16, 2009 AGM * 2015 250 × • Non-Executive Director of BUNZL Plc (UK) (since January 1, 2013) (1) • Nathalie Delapalme Member May 17, 2010 AGM * 2018 250 × • Chairman of the Supervisory Board of IMCD NV (Netherlands) since July 2014 Sylvie Rucar Member May 25, 2012 AGM * 2016 250 × Other past positions and offices held during the last five years: Yasuhiko Yokoi Member August 2, 2012 AGM * 2017 250 • Director of Redcats (France) Takashi Hattori Member August 2, 2012 AGM * 2016 250 • Chairman of the Management Board of Rexel (until February 2012) (2) (3) Corinne Le Goff Member October 28, 2014 AGM * 2017 × • Director of Rexel France Chart legend : • Chairman of Rexel North America, Inc. * Annual General Meeting (AGM). Manager (Geschäftsführer) of Rexel GmbH (1) The Annual General Meeting held on June 10, 2014 approved the renewal of Mrs. Delapalme’s term of office as a member of the Supervisory Board. • (2) Appointment by cooptation which will be submitted for ratification to the Annual General Meeting to be held on June 12, 2015. Mrs. Corinne Le Goff was appointed to replace Mr. Kiyoshi • Director and Chairman of Rexel Holdings USA Corp. Yamakawa until the end of his term in office, i.e. until the date of the Annual General Meeting to be held in 2017. • Director of Rexel Senate Limited (3) Mrs. Corinne Le Goff acquired 250 CFAO shares on January 26, 2015, within the time limits stipulated by the Company’s by-laws (within three months of her appointment to the Supervisory Board). • Chairman of the Supervisory Board of Hagemeyer • Statutory manager (gérant) of: - Rexel Deutschland Elektrofach grosshandel GmbH - Galatea Einhund-ertvierzigste Vermögensverwaltungs GmbH - Rexel Central Europe Holding GmbH • Director of: - Rexel Inc. - General Supply & Services, Inc. - Rexel Belgium • Chairman of Rexdir • Chairman and CEO of Rexel Distribution • Director of Discodis and CFP (France)
MANAGEMENT EXPERIENCE • He began his career with Total in 1971 before joining the Alfa Laval group in France in 1974. • After having held various positions, he served as Chief Executive Officer of Alfa Laval Industrie from 1981 until 1984 when he was appointed Chief Executive Officer of the group’s German subsidiary, Bran & Luebbe. • In 1986, he joined the Strafor Facom Group as Chairman and Chief Executive Officer of Clestra Hausermann. In 1991, he became Chairman and Chief Executive Officer of Steelcase Strafor. • In 1998, Jean-Charles Pauze joined the PPR group (now Kering) and was appointed Chairman of the Management Board of Guilbert, the leading European supplier of office furniture and stationery, and then of the Rexel Group. • In February 2004, PPR sold its controlling stake in Rexel. Mr Jean-Charles Pauze continues to hold his management position. Rexel is a global leader in the distribution of electrical equipment and is listed on Euronext Paris. He serves as Chairman of the Management Board until February 2012. • Mr. Pauze graduated from IDN-EC Lille with an engineering degree. He also holds an MBA from INSEAD.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committees in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list. (3) Europcar adopted a new governance structure i n March 9, 2015: a Management Board and a Supervisory Board with the appointment of Jean-Charles Pauze as Vice-Chairman of the Supervisory Board.
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14.1.2.2 Past and present positions and offices, management experience This section includes the management experience and information concerning the positions and offices of members of the Supervisory Board as of December 31, 2014.
JEAN-CHARLES PAUZE
Member of the Supervisory Board (since February 8, 2011), then Chairman of the Supervisory Board (since September 5, 2012) Chairman of the Compensation Committee (until February 16, 2014) (1) Chairman of the Nomination and Compensation Committee (since February 17, 2014) (1) Member of the Nomination Committee (until February 16, 2014) (1) Member of the Strategy Committee (since February 17, 2014) (1)
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2) Current Positions and Offices: Age: 67 • Chairman of the Board of Directors of Europcar (since February 13, 2012) (3) • Non-Executive Director of BUNZL Plc (UK) (since January 1, 2013) • Chairman of the Supervisory Board of IMCD NV (Netherlands) since July 2014 Other past positions and offices held during the last five years: • Director of Redcats (France) • Chairman of the Management Board of Rexel (until February 2012) • Director of Rexel France • Chairman of Rexel North America, Inc. • Manager (Geschäftsführer) of Rexel GmbH • Director and Chairman of Rexel Holdings USA Corp. • Director of Rexel Senate Limited • Chairman of the Supervisory Board of Hagemeyer • Statutory manager (gérant) of: - Rexel Deutschland Elektrofach grosshandel GmbH - Galatea Einhund-ertvierzigste Vermögensverwaltungs GmbH - Rexel Central Europe Holding GmbH • Director of: - Rexel Inc. - General Supply & Services, Inc. - Rexel Belgium • Chairman of Rexdir • Chairman and CEO of Rexel Distribution • Director of Discodis and CFP (France)
MANAGEMENT EXPERIENCE • He began his career with Total in 1971 before joining the Alfa Laval group in France in 1974. • After having held various positions, he served as Chief Executive Officer of Alfa Laval Industrie from 1981 until 1984 when he was appointed Chief Executive Officer of the group’s German subsidiary, Bran & Luebbe. • In 1986, he joined the Strafor Facom Group as Chairman and Chief Executive Officer of Clestra Hausermann. In 1991, he became Chairman and Chief Executive Officer of Steelcase Strafor. • In 1998, Jean-Charles Pauze joined the PPR group (now Kering) and was appointed Chairman of the Management Board of Guilbert, the leading European supplier of office furniture and stationery, and then of the Rexel Group. • In February 2004, PPR sold its controlling stake in Rexel. Mr Jean-Charles Pauze continues to hold his management position. Rexel is a global leader in the distribution of electrical equipment and is listed on Euronext Paris. He serves as Chairman of the Management Board until February 2012. • Mr. Pauze graduated from IDN-EC Lille with an engineering degree. He also holds an MBA from INSEAD.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committees in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list. (3) Europcar adopted a new governance structure i n March 9, 2015: a Management Board and a Supervisory Board with the appointment of Jean-Charles Pauze as Vice-Chairman of the Supervisory Board.
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PIERRE GUENANT
Member of the Supervisory Board (since November 16, 2009) Then, Vice-Chairman of the Supervisory Board (since September 4, 2012) Chairman of the Nomination Committee (until February 16, 2014) (1) Member of the Compensation Committee (until February 16, 2014) (1) Chairman of the Strategy Committee (since February 17, 2014) (1) Member of the Audit Committee
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2) Current Positions and Offices: Age: 64 • Co-Statutory Manager of PGA (Holding) SARL (France) • Member of the Supervisory Board and Chairman of the Audit Committee of AdVini S.A. (France) • Director of HDL/Assystem (France) Other past positions and offices held during the last five years: • Chairman of the Supervisory Board of PGA S.A. • Member of the Supervisory Board and member of the Audit Committee of Assystem S.A. (France)
MANAGEMENT EXPERIENCE • Mr. Guénant founded the PGA group and expanded it across Europe, turning it from a French automotive dealership into the leader in the automotive distribution market in France, the Netherlands and Poland. As Chairman of PGA Holding, he is also involved in the distribution of equipment for public works, the hotel industry, the wine industry, and in investment funds. • He began his career in the Jacobs/Jacques Vabre Group before joining the Heuliez Group as a Factory Manager and also holds a position as Managing Director. • He is also a member of the Advisory Board of Ernst & Young. • Mr. Guénant is a graduate of Ecole Supérieure de Commerce de Paris (ESCP).
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committees in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list.
NATHALIE DELAPALME
Member of the Supervisory Board (since May 17, 2010) Chairman of the Sustainable Development Committee Member of the Nomination Committee (until February 16, 2014) (1) Member of the Nomination and Compensation Committee (since February 17, 2014)
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2 ) Current Positions and Offices: • Member of the Board of Directors and Executive Director of the Mo Ibrahim Foundation (United Kingdom) • Member of the Board of Directors of: Age: 58 - Pierre Fabre Foundation - Elle Foundation - Maurel & Prom - MPI - IFRI (French Institute of International Relations) Other past positions and offices held during the last five years: • Inspecteur général des finances - Interdepartmental auditing and supervisory body - (2007-2010) • Africa Advisor to the Minister of Foreign Affairs (2002-2007)
MANAGEMENT EXPERIENCE • Mrs. Delapalme began her career as a macroeconomic research analyst at the French National Foundation for Political Sciences (FNSP). • She then served as administrator (administrateur) at the French Senate, first within the macroeconomics unit, and then on the Finance Committee (tax legislation and budgetary public policy monitoring) from 1984 to 1995 and 1997 to 2002. • She was deputy chief of staff to the French Minister for Cooperation from 1995 to 1997, and advisor on Africa to the Ministry of Foreign Affairs from 2002 to 2007. • She then served as Inspecteur général des finances (2007-2010). • Mrs. Delapalme is a graduate of the Institut d’Etudes Politiques de Paris (IEP) and also holds a post-graduate diploma in applied economics (DEA). • She holds French national distinctions as Chevalier de la Légion d’Honneur and of the Ordre National du Mérite.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committees in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list.
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SYLVIE RUCAR
Member of the Supervisory Board (since May 25, 2012) Chairman of the Audit Committee Member of the Sustainable Development Committee
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2) Current Positions and Offices: • Senior advisor at Alix Partners (American consultancy firm, Paris office) • Statutory Manager (Gérante) SR CFA (Corporate Finance Advisory) Age: 58 Other past positions and offices held during the last five years: • Director of SOPROL (France) and Cooper Standard France • Senior Advisor at Grant-Thornton Corporate Finance (consultancy firm) • Deputy CEO of Cogepa (France)
MANAGEMENT EXPERIENCE • Mrs. Rucar began her career at Citroën (PSA Group), and then joined PSA Group Finance Department (1984-2007), where she served as Group CFO and Chairman of Banque PSA Finance (after having been Head of Group Treasury and worked in M&A, controlling and international finance). She was a member of the PSA Management Committee. • At the beginning of 2008, she joined Société Générale where she was Deputy CFO and COO of Investor Services and, in mid- 2009, she joined the Family Office Cogepa. • Since the end of 2010, Mrs. Rucar has been an advisor in financial management, M&A and restructuring within her own firm, and has also worked with two consulting firms, Grant-Thornton Corporate Finance (in 2011 and 2012) and Alix Partners, where she is a Senior Advisor. • Mrs. Rucar is a graduate of Ecole Supérieure de Commerce de Paris (ESCP), specialized in finance.
(2) The principal function exercized appears at the top of the list.
CORINNE LE GOFF
Member of the Supervisory Board (since October 28, 2014) Member of the Nomination and Compensation Committee (1) Member of the Sustainable Development Committee (1)
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2 ) Current Positions and Offices: • Chairman of Roche SAS (since June 1, 2012) • President of the Imaginons la Santé (Let’s think health) think-tank of LIR (association of international research laboratories) Member of the Board of Directors and member of the Bureau du LEEM (medical enterprises), the pharmaceutical industry union Age: 49 • Other past positions and offices held during the last five years: • Senior Vice-President of Global Strategy for Neurosciences, Roche Group (Basel, Switzerland) • Senior Vice-President of Global Strategy and Marketing for neurodegenerative diseases and rheumatology at Merck-Serono (Geneva, Switzerland) • Vice-President Empowered Regions Commercial Operations at Sanofi-Aventis (United States)
MANAGEMENT EXPERIENCE • Mrs. Le Goff began her career in the pharmaceutical industry 25 years ago. For most of her career, she has worked in the United States • During her career, she has held positions in marketing, strategy, business development and operational management in numerous medically related fields, including with Pfizer and Sanofi. • She is a regular speaker at conferences on topics as varied as the communication of risk, market research cycles and customer relations • Mrs. Le Goff holds a PharmD from the University of Paris V, an MBA from the University of Pantheon-Sorbonne and an Executive MBA from INSEAD, Kelloggs’ University and from the Hong Kong Institute of Science and Technology. • She has the French national distinction of a Chevalier de la Légion d’Honneur.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committees in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list.
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YASUHIKO YOKOI
Member of the Supervisory Board (from August 2, 2012) Member of the Nomination Committee (from March 28, 2013 to February 16, 2014) (1) Member of the Nomination and Compensation Committee (since February 17, 2014) Member of the Strategy Committee (since February 17, 2014) (1)
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2) Current positions and offices held within the TTC Group: • Executive Vice-President of Toyota Tsusho Corporation (“TTC”) (since June 2012) Age: 61 • Auditor of Toyota Tsusho Electronics Corporation and Fukuske Corporation • Director of: - Toyota Tsusho Africa Pty. Ltd - Toyota Tsusho India Pte. Ltd - Toyota Tsusho Asia Pacific Pte. Ltd - UMW Toyota Motors Sdn. Bhd - Toyota Tsusho (China) Co., Ltd Main past positions and offices held during the last five years (within the TTC Group): • 2009-2012: Senior Managing Director • Positions at Toyota Motor Corporation (“TMC”) - 2009-2010: Advisor - 2006-2009: Managing Officer • Positions at TMC subsidiaries & regional headquarters: - 2007-2009: Director of Toyota Motor Corporation Australia Ltd., of Toyota Motor Korea Co., Ltd., and of Toyota New Zealand Ltd. - 2008-2009: Director of Toyota Motor Asia Pacific Pte. Ltd. - 2008-2009: Auditor of PT Toyota Astra Motor (all past positions in TTC subsidiaries are not listed.)
MANAGEMENT EXPERIENCE • He began his career in sales & marketing for the Japanese domestic market at Toyota Motor Corporation (“TMC”). During his career at TMC, he was in charge of sales & marketing for the Asia & Oceania regions from 1987 to 1996, including TMC in Australia from 1991 to 1993. He then moved on from the positions he held in the Asia & Oceania regions to take over Toyota Motor Marketing Europe from 1997 to 2000. • After his return to Japan, he was appointed General Manager of Lexus Japan Sales & Marketing division where he successfully launched the Lexus brand in Japan. In 2006, he was subsequently appointed Managing Officer of TMC. • After resigning from TMC, he joined Toyota Tsusho Corporation (“TTC”) as Senior Managing Director in 2009 and was further appointed Chief Division Officer of TTC Automotive division in 2010, where he successfully headed numerous projects, notably in emerging markets. • In June 2012, he was promoted to Executive Vice- President of TTC, managing and supervising international business strategy and operations. • As a result of his varied career, Mr. Yokoi has significant and renowned expertise and experience in the global automotive businesses. • Mr. Yokoi graduated from Nagoya University in Japan.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committee s in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list.
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TAKASHI HATTORI
Member of the Supervisory Board (from August 2, 2012) Member of the Audit Committee Member of the Sustainable Development Committee (from September 4, 2012 to February 16, 2014, and again as of October 28, 2014) (1) Member of the Strategy Committee (since February 17, 2014) (1)
POSITIONS AND OFFICES HELD OUTSIDE THE CFAO GROUP AS OF DECEMBER 31, 2014 (2) • Managing Director of Toyota Tsusho Corporation (“TTC”) (since June 2012) Age: 60 Positions and offices currently held (within the TTC Group): • Director of: - Tas Corporation - O-Rush International Co., Ltd. - Toyota Tsusho Africa Pty. Ltd. - Toyota Tsusho East Africa Ltd. - L&T Corporation - L&T Lexus Corporation - Toyota Tsusho Automobile London Holdings Ltd. - Toyota Tsusho Automobiles France S.A.S - Toyotsu Auto Mart Kenya Limited • Chairman of: - Toyota De Angola S.A.R.L. - Toyota Zambia Ltd. - Toyota Kenya Limited Main past positions and offices held during the last five years (within the TTC Group): • 2011-2012: Managing Executive Officer • 2006-2011: Executive Officer (all past positions within the TTC subsidiaries are not listed)
MANAGEMENT EXPERIENCE • Mr. Takashi Hattori began his career with Toyota Tsusho Corporation (“TTC”) in 1978. Since then, he has spent his entire career in the Automotive businesses of TTC. • During his career at TTC, he works as Representative of the Nairobi Office from 1984 to 1988, and as Chief Representative of the Abidjan Office from 1993 to 1997. He steadily stepped up his involvement in TTC’s automotive business in Africa, and became the President of Toyota Tsusho Africa Pty. Ltd. in 2000, he took charge of all TTC’s local operations in South East Africa, including automotive operations in that region. • Leaving the chairmanship of Toyota Tsusho Africa Pty. Ltd. in 2006, Mr. Hattori was appointed Executive Officer of TTC Automotive division, notably responsible for Africa and the Middle-East. • He was then appointed Managing Director and Chief Division Officer of TTC Automotive division in June 2012. • As reflected by his career, Mr. Hattori has great expertise and experience in the automotive business on the African continent. • Mr. Hattori graduated from Nagoya Institute of Technology in Japan.
(1) For more information about changes to the membership of the Supervisory Board’s specialist Committee s in 2014, please see Chapter 16, section 16.1 “Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management”, sub-section 1 “Composition and work of the Supervisory Board and its Committees”. (2) The principal position held appears at the top of the list.
In 2014, Mrs. Nathalie Delapalme, Mrs. Sylvie Rucar, Mrs. Corinne of this Registration Document). The Supervisory Board of CFAO Le Goff and Mr. Pierre Guénant and Mr. Jean-Charles Pauze were still considered them to be independent when it performed its considered by CFAO to be independent members according to the annual independence review in March 2015. Considering their definition of the AFEP-MEDEF Corporate Governance Code (for respective career and experience as CEO and CFO of major more information regarding the composition of the Supervisory companies, Mr. Pierre Guénant and Mrs. Sylvie Rucar, members Board and its specialist Committees, please see Chapter 16 of the Audit Committee, are both recognized for their financial “Role and activities of the management and supervisory bodies” and accounting expertise.
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14.1.2.3 Information on changes to the governing bodies The following tables summarize the changes that have occurred within the Supervisory Board during 2014 and until the date of this Registration Document.
CHANGES IN THE COMPOSITION OF THE SUPERVISORY BOARD (PURSUANT TO RECOMMENDATION 1.1.3. OF THE 2013 CORPORATE GOVERNANCE REPORT PUBLISHED BY THE AMF)
Effective date Description of change Comments February 17, 2014 • Creation of a Strategy Committee • Improving the functioning of the specialized Committees, • Merger of the Nomination Committee with the Compensation in accordance with the decisions taken during the annual Committee assessment work of the Board and its Committees, which took • Changes to the membership of the Board’s Committees (1) place in October 2013. June 10, 2014 • Renewal of Mrs. Nathalie Delapalme’s term as a member of the Supervisory Board by the Annual General Shareholders’ Meeting October 28, 2014 • Resignation of Mr. Kiyioshi Yamakawa from the Supervisory • Experience in the pharmaceutical sector. In accordance with the Board decisions taken during the annual assessment work of the • Cooptation of Mrs. Corinne Le Goff to the Supervisory Board as Board and its Committees, which took place in October 2013. an independent member replacing her predecessor, Mr. Kiyioshi Yamakawa
(1) See the following table for further information about changes to the structure and membership of the Supervisory Board specialized Committees since December 31, 2013.
SUPERVISORY BOARD SPECIALIZED COMMITTEES During 2014, the structure and membership of the Supervisory Board specialized Committees changed as follows:
Membership of the Committee s Membership of the Committee s Membership of the Committee s as of December 31, 2013 as of December 31, 2013 since October 28, 2014 Name AC CC NC SDC StC AC NCC SDC StC AC NCC SDC StC
Jean-Charles PAUZE Pierre GUÉNANT Independent Nathalie member s DELAPALME Sylvie RUCAR Corinne LE GOFF Yasuhiko YOKOI Members Takashi representing HATTORI TTC Kiyoshi -- YAMAKAWA
Key: AC: Audit Committee CC: Compensation Committee Chairman NC: Nomination Committee NCC: Nomination and Compensation Committee SDC: Sustainable Development Committee Member StC: Strategy Committee
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14.1.3 Declarations concerning the To the best of the Company’s knowledge during the last five years: members of the Management Board ■ none of the members of the Management Board or the and the Supervisory Board Supervisory Board have been convicted of fraud;
■ none of the members have been involved in a bankruptcy, As of the filing date of this Registration Document, and to the best receivership or liquidation proceeding (in an executive of the Company’s knowledge: capacity) and none have been incriminated and/or officially ■ there are no family ties between the members of the sanctioned by a statutory or regulatory authority (including Management Board and the Supervisory Board; professional organizations officially appointed); ■ ■ the members of the Management Board and the Supervisory none of the members of the Management Board or the Board have no potential conflicts of interest between their Supervisory Board have been banned by a court of law duties as corporate officers of the Group and their private from acting as a member of the oversight, executive or interests. supervisory body of a listed company, or from participating in the management or conducting of the business of a listed company.
14.2 Conflicts of interest
As of the filing date of this Registration Document, and to the best certain members of the Management Board and CFAO and other of CFAO’s knowledge, there are no potential conflicts of interest benefits granted to these members are described in Chapter 15 between the obligations of the members of the Management Board “Compensation and benefits” and Chapter 19 “Related-party or the Supervisory Board towards CFAO and their private interests transactions” of this Registration Document. and/or other obligations, except for the cases set forth herein below. The independent members of the Supervisory Board were not Mr. Yasuhiko Yokoi and Mr. Takashi Hattori, members of the selected by virtue of an arrangement or an agreement concluded Supervisory Board of CFAO since August 2, 2012, hold with the Company’s main shareholders, customers, suppliers or various positions within the governing bodies of Toyota Tsusho other third parties. Corporation (“TTC”), the majority shareholder of CFAO, and the main subsidiaries of TTC. Mr. Ichiro Kashitani has been a To the best of CFAO’s knowledge, no loan or guarantee has been member of the Management Board of CFAO since December 26, granted or set up in favor of members of the Management Board 2012. He spent his career at TTC before being appointed to the or the Supervisory Board, and the Company does not use any Management Board of CFAO and is Managing Executive Officer assets that belong either directly or indirectly to the members of of TTC (before March 31 st 2015, he was Executive Officer). the Management Board or the Supervisory Board or to members of their family. As of the date of the filing of this Registration Document, there is no service agreement entered into between the members of The members of the Management Board accepted the restrictions the Management or Supervisory Boards and CFAO or one of its on transfers of their CFAO shares, as described in Chapters 15 subsidiaries resulting in a personal benefit for any member of the and 16 of this Registration Document. Supervisory or Managing Board. Employment contracts between
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15.1 Compensation of corporate offi cers 15.2 Total amounts set aside or (mandataires sociaux) 126 recognized for retirement or similar benefi ts 137 15.1.1 Global compensation package of the executive corporate offi cers 127 15.1.2 Variable compensation for members of the Management Board 129 15.3 Securities transactions carried out by the Company’s corporate offi cers 137 15.1.3 Deferred compensation of executive corporate offi cers 130 15.1.4 2015 Compensation for executive corporate offi cers 131 15.1.5 Attendance fees paid to non-executive corporate offi cers, members of the Supervisory Board 132 15.1.6 History of the deferred compensation of executive corporate offi cers 133 15.1.7 Employment contracts and indemnities of the executive corporate offi cers 136 15.1.8 Termination indemnities for executive corporate offi cers 136
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15.1 Compensation of corporate officers (mandataires sociaux)
Since December 16, 2013, the Management Board of CFAO to determine the compensation of corporate officers” of this has been composed as follows: Richard Bielle (Chairman), Registration Document. Compensation and benefits granted to the Ichiro Kashitani (Vice-Chairman), Olivier Marzloff and Alain corporate officers are presented in the tables of this Chapter in Pécheur. The Supervisory Board consists of seven members: accordance with the (i) legal and regulatory framework (French five independent members, Jean-Charles Pauze (Chairman), Commercial Code and the European Commission Regulation Pierre Guénant (Vice-Chairman), Nathalie Delapalme, Sylvie “EC Regulation N° 809/2004 of April 29, 2004”), (ii) AFEP- Rucar, Corinne Le Goff, and two representatives of the majority MEDEF Corporate Governance Code updated in June 2013, shareholder, Yasuhiko Yokoi and Takashi Hattori. For further (iii) recommendations of the French financial markets authority information about the members of the Management Board and (Autorité des marchés financiers – “AMF”) on the Corporate Supervisory Board, see Chapter 14 “Corporate Governance” of Governance and compensation of the corporate officers and (iv) this Registration Document. i n accordance with the recommendations of the AFEP-MEDEF Code (Article 24.3) the remuneration which is owed or awarded The principles and rules followed by CFAO’s Supervisory to each company officer for the 2014 financial year is submitted Board when setting the compensation and benefits of all kinds to the advisory vote of the General Shareholders’ Meeting to be granted to the corporate officers are described in the report of held on June 12, 2015, in a specific resolution for each corporate the Chairman of the Supervisory Board to the Shareholders’ officer. The tables, compliant with AFEP-MEDEF recommendations, Meeting set out in section 16.1 “Report of the Supervisory Board will be included in the convening notice sent out to personally Chairman on Corporate Governance, Internal Control and Risk invite the Shareholders within the legal timeframe. Management”, sub-section II “Principles and rules approved
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15.1.1 Global compensation package of the executive corporate officers
Summary of compensation, stock options and shares allocated to each executive corporate officer (dirigeant mandataire social) (Table 1 – AMF Recommendation) The table below summarizes compensation payable to the Management Board members with respect to the last two fiscal years. It lists the compensation and benefits of all types that are to be paid by (i) CFAO or (ii) controlled companies as defined by Article L. 233-16 of the French Commercial Code by CFAO.
(in €) 2014 2013 Richard Bielle, Chairman of the Management Board Compensation payable for the year (see details given in Table 2) 976,962 435,132 Value of multi-annual variable compensation granted during the year * 408,000 N/A Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A Ichiro Kashitani, Vice-Chairman of the Management Board Compensation payable for the year (see details given in Table 2) 237,627 381,475 Value of multi-annual variable compensation granted during the year * N/A N/A Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A Olivier Marzloff, member of the Management Board Compensation payable for the year (see details given in Table 2) 683,240 336,608 Value of multi-annual variable compensation granted during the year * 127,340 119,679 Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A Alain Pécheur, member of the Management Board Compensation payable for the year (see details given in Table 2) 645,627 337,849 Value of multi-annual variable compensation granted during the year * 127,020 104,250 Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A Jean-Yves Mazon, member of the Management Board (until October 5, 2012) Compensation payable for the year (see details given in Table 2) N/A 21,768 Value of multi-annual variable compensation granted during the year * N/A N/A Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A Alain Viry, Chairman of the Management Board (from Sept. 5, 2012 until Dec. 15, 2013) Compensation payable for the year (see details given in Table 2) N/A 2,568,330 Value of multi-annual variable compensation granted during the year * N/A 331,500 Value of stock options granted during the year N/A N/A Value of performance shares granted during the year N/A N/A
* For further information about the deferred compensation system, please refer to the sub-section “Deferred compensation”, in this section. ** Mr. Alain Viry is not a beneficiary of the Deferred Remuneration Plan 2013-2017, because he opted to waive his rights upon leaving the Group in December 2013.
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Summary of compensation payable and paid to each executive corporate officer (Table 2 – AMF Recommendation) The table below presents a breakdown of compensation payable and compensation paid to each executive corporate officer for the last two years.
2014 2013 Gross compensation (in €) Amounts payable Amounts paid Amounts payable Amounts paid Richard Bielle, Chairman of the Management Board (from December 16, 2013) Fixed compensation (2) 600,000 600,000 433,940 433,940 Annual variable compensation (3) 363,906 0 N/A 400,324 Multi-annual variable compensation (4) N/A N/A N/A N/A Exceptional compensation (8 ) N/A N/A N/A N/A Benefits in kind (5) 13,056 13,056 1,192 1,192 Departure indemnities (6) 0 688,681 Other compensation (7) 147,227 TOTAL 976,962 613,056 435,132 1,671,364 Ichiro Kashitani, member of the Management Board (as from December 26, 2012) Fixed compensation 182,871 182,871 220,463 220,463 Annual variable compensation (3) (3) 152,213 152,213 115,996 Multi-annual variable compensation (4) N/A N/A N/A N/A Exceptional compensation (8) N/A N/A N/A N/A Benefits in kind (5) 54,756 54,756 45,016 45,016 TOTAL 237,627 389,840 381,475 381,475 Olivier Marzloff, member of the Management Board Fixed compensation (1) 302,740 302,740 297,000 297,000 Annual variable compensation (3) 118,467 35,875 35,875 111,930 Multi-annual variable compensation (4) N/A N/A N/A N/A Exceptional compensation (8) N/A N/A N/A 25,000 Retention bonus (9) 258 300 258 300 Benefits in kind (5) 3,733 3,733 3,733 3,733 TOTAL 683,240 600,648 336,608 437,663 Alain Pécheur, member of the Management Board (from March 19, 2012) Fixed compensation (1) 302,000 302,000 260,000 260,000 Annual variable compensation (3) 115,540 37,500 37,500 97,500 Multi-annual variable compensation (4) N/A N/A N/A N/A Exceptional compensation (8) N/A 37,500 37,500 20,000 Retention bonus (9) 225,000 225,000 Benefits in kind (5) 3,087 3,087 2,849 2,849 TOTAL 645,627 605,087 337,849 380,349 Alain Viry, Chairman of the Management Board (from Sept. 5, 2012 until Dec. 15, 2013) Fixed compensation N/A N/A 650,000 650,000 Annual variable compensation (3) N/A N/A 255,667 407,334 Benefits in kind (5) N/A N/A 5,163 5,163 Departure indemnities (6) N/A N/A 1,657,500 1,657,500 TOTAL N/A N/A 2,568,330 2,719,997
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2014 2013 Gross compensation (in €) Amounts payable Amounts paid Amounts payable Amounts paid Jean-Yves Mazon, member of the Management Board (until October 5, 2012) Fixed compensation N/A N/A 21,392 21,392 Annual variable compensation (3) N/A N/A 172,961 Benefits in kind (5) N/A N/A 376 376 Departure indemnities (6) N/A N/A N/A 181,648 Other compensation (7) N/A N/A 46,163 TOTAL N/A N/A 21,768 422,540
(1) Fixed compensation includes compensation under the employment contract and compensation for duties as Management Board member amounting to €10,000 each for Mr. Olivier Marzloff and Mr. Alain Pécheur. (2) The fixed compensation for Mr. Richard Bielle in 2013 (payable and paid) includes: the end of the employment contract paid-for in 2013, a non-compete clause limited to the importation/ distribution sector for vehicles, compensation in his capacity as Chairman of the Management Board from December 16 to December 31, 2013. These amounts do not include the sums due under the terms of the Company profit sharing plan. In 2013 and 2014, the members of the Management Board received the following amounts under the terms of their employment contracts. 2014 2013
Olivier Marzloff 13,494 15,531 Jean-Yves Mazon N/A 15,531 Alain Pécheur 13,759 15,531
(3) The amounts for variable compensation are paid in year N for the year N-1. For Mr. Ichiro Kashitani, variable compensation for 2014 having been set after publication of the present Registration Document (after the end of the TTC fiscal year ended March 31, 2015), the amount due for 2014 will be approved at a later date. (4) The amounts payable for variable multi-year compensation will become due in 2017 and 2018. For further information about the deferred compensation system, please refer to the sub-section “Deferred compensation”, in this section. The value of multi-annual variable compensation granted during 2014 for each executive corporate officer is mentioned in the AMF’s Table 1. (5) A company vehicle for all Management Board members, Richard Bielle also receives executive officer unemployment insurance and Ichiro Kashitani also receives benefit in kind relating to housing, in accordance with TTC expatriate compensation practices. (6) Mr. Richard Bielle’s term as Chairman of the Management Board came to an end on September 4, 2012, and for this he received severance indemnity payments. Mr. Jean-Yves Mazon’s term of office was not renewed in October 2012, and his employment with CFAO was terminated as a result. In addition to the departure indemnities mentioned in the table, Mr. Richard Bielle and Mr. Jean-Yves Mazon received upon termination of their employment contracts indemnities relating to paid vacation (respectively in the amount of €145,364 and €43,912 paid in 2012), which were paid in 2013. Concerning Mr. Alain Viry, his term as Chairman of the Management Board came to an end on December 15, 2013, and he received severance pay as a result. (7) Excluding termination indemnity payments. (8) Exceptional compensation is granted in fiscal year N for the fiscal year N-1. Therefore, the amounts payable for the 2013 and 2014 fiscal years will be paid in 2014 and 2015, respectively. For 2013, Mr. Alain Pécheur received extraordinary compensation of €37,500 with regard to his commitment to the reconciliation process with TTC. (9) In December 2014, Mr. Olivier Marzloff and Mr. Alain Pécheur received the retention bonus provided for when TTC assumed control, amounting to the gross sum of €258,300 and €225,000 each for 2014.
15.1.2 Variable compensation of the criteria. In application of these criteria, the variable portion of the members of the Management Board compensation could amount 100% of the fixed portion. For confidentiality reasons, the level of objectives which must be achieved to meet each of the performance conditions stated 15.1.2.1 2013 Variable compensation (paid in 2014) above cannot be disclosed to the public. On April 25 and on July 24, 2013 the Supervisory Board, on the proposal of the Compensation Committee, approved the 2013 Mr. Richard Bielle (Chairman of the Management Board variable compensation for the members of the Management Board. since December 16, 2013) No variable compensation for 2013 was paid to Mr. Bielle Mr. Olivier Marzloff and Alain Pécheur in 2014 as he was appointed as Chairman of the Management Variable compensation for 2013 to be paid in 2014 was Board on December 16, 2013. calculated partly on the basis of four financial criteria (two thirds) and partly on the basis of non-financial criteria (one third). Mr. Ichiro Kashitani (Vice-Chairman of the Management Variable compensation is due if at least 90% of the objectives is Board since December 26, 2012) reached. If the objectives are exceeded, for three financial criteria out of four, it is capped at 200% and, for the final target, at The Supervisory Board, as proposed by the Compensation 150% of the amount due if they are fully achieved. In application Committee, approved the variable compensation objective of these criteria, the variable portion of the compensation could for 2013 for Mr. Ichiro Kashitani, a member of the Management amount 45% of the fixed portion. Board. In accordance with the compensation policy for the expatriate Mr. Alain Viry (Chairman of the Management Board until employees of Toyota Tsusho Corporation (TTC), majority December 15, 2013) shareholder of the Company, the variable compensation for 2013 Variable compensation for 2013 to be paid in 2014 was to be paid in 2014 for Mr. Ichiro Kashitani was calculated only on calculated partly on the basis of two financial criteria (60%) the basis of non-financial criteria. In accordance with these criteria, and partly on the basis of non-financial criteria (40%). Variable the variable portion of the compensation could be between 50 compensation is due if at least 90% of the objectives is reached. If and 100% of the fixed portion. Variable compensation payable the objectives are exceeded, it is capped at 171% for two financial for 2013 and paid in 2014 was approved by the Supervisory Board at its meeting held on July 25, 2014.
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15.1.2.2 2014 Variable compensation (paid in 2015) ■ The maximum payment for exceeding targets is 200% of the amount for the first financial criterion, 150% for the second As proposed by the Nomination and Compensation Committee, financial one and 100% for non-financial criteria. at its meetings held on March 27 and April 29, 2014, the Supervisory Board approved the variable compensation for the ■ Under these criteria the variable portion of compensation can members of the Management Board for 2014 (thus completing represent 69.75% of the fixed part in applying these criteria. the process begun by approving the fixed compensation at the Supervisory Board meeting on March 27, 2014). At its meeting on March 27, 2015, the Supervisory Board set the amounts of variable compensation in respect of 2014 for Mr. Richard Bielle Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur (see the amounts shown in Table 2 of the AMF). The target variable compensation represents 70% of his fixed compensation. The variable remuneration for 2014 paid in 2015 was partly based on two financial criteria (60%) and several non- financial criteria (40%). 15.1.3 Deferred compensation of executive corporate officers ■ The weighting of the two financial criteria will represent 42% (35% for the indicator combining Net Income Attributable to the Group and Return on Capital Employed, and 7% for the A) Retention bonus indicator based on Cash F low). The threshold of the payment of variable compensation is set at 80% of target achieved for In 2013, the Supervisory Board, upon the recommendation of the the first criterion and 90% for the second one. Compensation Committee, decided to grant a retention bonus to Mr. Olivier Marzloff and Mr. Alain Pécheur consisting of a sum ■ The weight of the non-financial criterion represents 28%. which will be paid as long as the beneficiaries are still in office at CFAO as of December 31, 2014. This bonus, which represents ■ The maximum payment for exceeding targets is 200% of the twice the variable compensation for 2012 when the objectives amount for the first financial criteron , 150% for the second are met, is part of a larger scheme aimed at ensuring that the financial one and 100% for the non-financial criteria. management remains stable following the acquisition of control Under these criteria, the variable compensation can represent up by a new reference shareholder, TTC. to 108.5% of his fixed compensation. However, under the terms On December 31, 2014, Mr. Olivier Marzloff and Mr. Alain of his office as Chairman of the Management Board, the variable Pécheur received their retention bonuses in the respective gross portion of his compensation is capped at 100%. amounts of €258,300 and €225,000.
Mr. Ichiro Kashitani B) Stock options plans and performance share plans In compliance with the compensation policy for expatriate Detailed information about these plans is provided in Table 8 personnel at Toyota Tsusho Corporation (TTC), majority “History of share stock options granted” and Table 10 “History shareholders in the Company, the variable compensation of performance shares granted in section 15.1.4 “History of the for 2014, payable in 2015, is to be determined after the fiscal deferred compensation of executive corporate officers” of this year-end on March 31, 2015. Its amount shall then be submitted Registration Document. for approval to the Supervisory Board after the Nomination and Compensation Committee has issued its opinion. The system of Stock Option Plans and Performance shares Plans implemented by the Company respectively in 2010, 2011 and The variable portion of the compensation could represent between 2012 has been replaced by a Long Term Incentive Plan scheme 50% and 100% of the fixed portion. beginning from 2013.
Mr. Olivier Marzloff and Mr. Alain Pécheur C) Long Term Incentive Plan (LTIP) Target variable compensation represents 45% of their fixed compensation. The variable remuneration for 2014 paid in 2015 2013-2017 Long Term Incentive Plan was partly based on the two financial criteria (60%) and several Taking into account the new composition of the Company’s non-financial criteria (40%). shareholding structure, after consultation of the compensation Committee, the Supervisory Board held on July 24, 2013 decided ■ The weighting of the two financial criteria will represent 27% to approve the proposal made by the Management Board (22.5% for the indicator combining Net Income Attributable to setting out the terms of a long-term incentive plan for the 2013- the Group and Return on C apital E mployed and 4.5% for the 2017 period, of which certain members of the Management indicator based on Cash Flow). The threshold for the payment Board (Mr. Olivier Marzloff and Mr. Alain Pécheur) are also of variable compensation is set at 80% of target achieved for be beneficiaries. The Management Board meeting held on the first criterion and 90% for the second one. November 7, 2013 finalized the list of the beneficiaries of the above-mentioned Plan. ■ The weighting of the non-financial criterion is 18%.
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The beneficiaries of the Plan are the members of the Management 15.1.4 2015 Compensation for executive Board, employees of continental France having a role of managers, corporate officers or being in charge of a particular area or activity, as well as employees who are General Managers or Administrative and Financial Managers or members of the Management Committee Following the recommendation of the Nomination and of one of the subsidiaries, or key employees identified as high- Compensation Committee, the Supervisory Board held on potential ones. In total, 631 employees are beneficiaries of this March 27, 2015 reviewed and approved the compensation (fixed plan. The Plan implies having a system of deferred compensation and variable compensation) for the members of the Management remitted to the beneficiaries if the presence criteria as well as the Board of the Company. performance criteria are met. This system is based on the current 1) Gross fixed compensation item amounts to: operating profit increase. The performance criterion defines the compensation as being payable if the objectives are met by at ■ €600,000 for Mr. Richard Bielle, Chairman of the Management least 80% and it is capped at 150% of the target. Board (remains unchanged);
The Supervisory Board decided that the individual amount to be ■ €298,600 for Mr. Olivier Marzloff, member of the Management granted to the members of the Management Board will be 30% Board; of the addition of 2013 fixed compensation and 2012 variable compensation paid in 2013. ■ €298,600 for Mr. Alain Pécheur, member of the Management Board. For confidentiality reasons, the level of objectives which must be achieved to meet each of the performance conditions stated Mr. Olivier Marzloff and Mr. Alain Pécheur, who both have an above cannot be disclosed to the public. employment contract with CFAO, will each continue to receive yearly gross compensation of €10,000 for their duties as members 2014-2018 Long Term Incentive Plan of the Management Board. The Supervisory Board held on March 27, 2014, decided, after Benefits in kind are the same as those received by the members of consultation of the Nomination and Compensation Committee the Management Board in 2014: company car for all the members to approve the proposal made by the Management Board of the Management Board, unemployment insurance for Mr. Bielle. setting out the terms of the Long Term Incentive Plan covering Mr. Ichiro Kashitani will also receive his accommodation as a the period from 2014 to 2018, of which certain members of fringe benefit, in accordance with TTC’s policy for expatriates. the Management Board (Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur) are also beneficiaries. The meeting of the 2) 2015 Variable compensation (to be paid in 2016): Management Board held on July 4, 2014 definitively set the list of The structure of the variable compensation for members of the the beneficiaries of the above-mentioned Plan. Management Board remains unchanged. The performance criteria The beneficiaries of the Plan are the members of the Management for 2015 are similar to the financial objectives defined for 2014, Board, employees of continental France having a role of (Net Income Attributable to Owners , ratio on capital employed managers, or being in charge of a particular area or activity, as and Cash Flow). The confidential nature of the individual targets well as employees who are General Managers or Administrative for each member of the Management Board prevents them from and Financial Managers or members of the Management being published. Committee of one of the subsidiaries, or key employees identified In accordance with the compensation policy for the expatriate as high-potential ones. In total, 669 employees are beneficiaries personnel of Toyota Tsusho Corporation (“TTC”), the Company’s of this Plan. majority shareholders, the elements of Mr. Ichiro Kashitani’s overall The Plan implies having a system of deferred compensation compensation for 2015 (fixed and variable) will be determined remitted to the beneficiaries if the presence criterion as well as after the end of the fiscal year closed on March 31, 2015. They the performance criteria are met. This system is based on the Net will then be put to the Supervisory Board for approval after the Income Attributable to Owners annual increase. The performance Nomination and Compensation Committee has given its opinion. criterion defines the compensation as being payable if the 3) Retention bonus for the 2014 fiscal year: objectives are met by at least 80% and it is capped at 150% of the target. In 2013, the Supervisory Board upon the recommendation made by the Compensation Committee by awarding a retention bonus The Supervisory Board has decided that the amount allocated to to Messrs. Marzloff and Pécheur which would be paid to them if Mr. Olivier Marzloff and Mr. Alain Pécheur should represent 30% they still held their functions on December 31, 2014. This bonus, of the addition of 2014 compensation and of the target variable which represents twice the variable compensation for 2012 compensation for 2013. For Mr. Richard Bielle, the amount would when the objectives are met, is part of a larger scheme aimed represent 40% of this fixed addition. at ensuring that the management remains stable following the For confidentiality raisons, the level of objectives which must acquisition of control by a new reference shareholder TTC. be achieved to meet each of the performance conditions stated On December 31, 2014, Mr. Olivier Marzloff and Mr. Alain above cannot be disclosed to the public. Pécheur received their retention bonuses in the respective gross The amounts granted in 2013 and 2014 to each member of amounts of €258,300 and €225,000. the Management Board under the Long Term Incentive Plans are provided in Table 1 of the AMF Recommendation (target amounts, the maximum allowed being 150% of the target).
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15.1.5 Attendance fees paid to non-executive corporate officers, members of the Supervisory Board
Attendance fees and other compensation paid to the members of the Supervisory Board (Table 3 – AMF Recommendation) The amounts paid during the year are the amounts payable for attendance during that same year, the attendance fees being paid at the end of the calendar year.
Amounts (1) paid Amounts (1) paid Non-executive corporate officers during 2014 (in €) during 2013 (in €) Jean-Charles Pauze Attendance fees 115,000 115,000 Pierre Guénant Attendance fees 65,000 69,000 Nathalie Delapalme Attendance fees 55,000 55,000 Sylvie Rucar Attendance fees 55,000 55,000 Takashi Hattori Attendance fees 00 Yasuhiko Yokoi Attendance fees 00 Kiyoshi Yamakawa Attendance fees 00 Corinne Le Goff (2) Attendance fees 0 N/A TOTAL 290,000 294,000
(1) The above amounts are gross amounts, i.e., net of social contributions and net of withholding tax for any Board members who are not resident for tax purposes in France. The social contributions to be paid by the Company amount to 20% of these gross amounts, i.e. €58,800 for 2013 and €58,000 for 2014. (2) Corinne Le Goff was appointed as member of the Supervisory Board at the end of the Board’s meeting on October 28, 2014 (the last Supervisory Board meeting held in 2014). Consequently, she received no attendance fees for the 2014 fiscal year. For further information regarding Corinne Le Goff’s office, see Chapter 14 “Corporate Governance” of this Registration Document.
It is stressed that Mr. Takashi Hattori, Mr. Yasuhiko Yokoi and attendance. As from September 5, 2012, it was decided that Mr. Kiyoshi Yamakawa have not received attendance fees the amounts allocated to the Chairman and the Vice-Chairman for 2014, in line with the general compensation policy at TTC. of the Supervisory Board would be respectively €100,000 and €50,000. An amount of €40,000 is allocated to each of Since the Company’s IPO in December 2009, the overall amount the other members of the Supervisory Board for their respective of regular attendance fees has remained the same: €390,000. duties as members, to which €10,000 is added for the functions There are no plans to change this envelope in 2015. of Chairman of each of the Committees and €5,000 for the This amount is allocated to each member of the Supervisory chairmanship of each committee and €5,000 for membership on Board using the following rules: there is a fixed amount set for each of the Board’s specialized Committees. the attendance fees allocated to each member of the Supervisory Regular attendance fees actually paid for 2013 and 2014 Board, and the Supervisory Board may decide to reduce amounted to €294,000 and €290,000 respectively. these amounts for the whole year based on effective meeting
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15.1.6 History of the deferred compensation of executive corporate officers
A) Stock Options Plan
Stock options or purchase options granted by the issuer and by any group company to each executive corporate officer (Table 4 – AMF Recommendation) No stock options or purchase options were granted by CFAO to its executive corporate officers in 2014.
Stock options exercised during the year by each executive corporate officer (Table 5 – AMF Recommendation) The Company’s only stock option plan was set up on January 4, 2010. The subscription options are to be exercised from January 4, 2014 until January 4, 2018. At the date of filing this Registration Document with the AMF, the executive corporate officers have already exercised their options and sold all or part of the shares arising from stock options (for the member of the Management Board concerned by the requirement to hold shares for this Plan) for this plan. The information related to these transactions has been declared to the AMF and is included in the 2014 Registration Document (section “Securities transactions carried out by the Company’s corporate officers”). For more information concerning the retention obligation see sub-section “C) Subscription options and Performance Shares” of section II of Chapter 16 of the present Registration Document.
Name of director Stock Options Plan (number and date) Number of the options exercised during the fiscal year Exercise price Richard Bielle Plan of January 4, 2010 82,500 26.00 Olivier Marzloff Plan of January 4, 2010 37,500 26.00 Alain Pécheur Plan of January 4, 2010 22,500 26.00
History of s tock options / purchase options granted (Table 8 – AMF Recommendation)
INFORMATION ON STOCK OPTIONS OR PURCHASE OPTIONS
Date of General Meeting November 16, 2009 Date of the Management Board January 4, 2010 Total number of shares which may be subscribed or purchased 1,350,000 by corporate officers: 315,000 • Mr. Richard Bielle (1) 110,000 • Mr. Olivier Marzloff 50,000 • Mr. Alain Pécheur (1) 30,000 Total number of beneficiaries 239 First exercise date January 4, 2014 Expiration date January 4, 2018 Price payable to subscribe for or purchase shares €26 (2) Right to vest one quarter of granted options at each anniversary date on the condition that the performance Terms and conditions for exercising options criteria outlined below are met (3) Number of shares subscribed as of December 31, 2014 931,871 Number of beneficiaries as at December 31, 2014 239 Cumulative number of cancelled or void stock subscription or purchase options (4) 423,942 O utstanding stock options as of December 31, 2014 187
(1) At the time the stock options were awarded, Mr. Alain Pécheur was not an executive corporate officer. Therefore, the shares resulting from these options were not be subject to the retention requirement until the end of his office. At the time of exercise of the stock options, this obligation was no longer applied to Mr. Richard Bielle and Mr. Alain Viry. For further information concerning the retention requirement , please refer to s ub-section C) “Stock options and performance shares” of s ection II “Principles and rules approved to determine the compensation of corporate officers”, Chapter 16 “Role and activities of the Management and Supervisory bodies” of this Registration Document. (2) The subscription price includes a discount: it corresponds to the price at the time of the stock market listing of the Company in 2009, and the listing documents indicated that the stock options would be granted at that price. For more information related to this exception to the AFEP-MEDEF Code, please refer to sub-section “Stock options and performance shares” (exceptions to the Art. 23.2.4 of the AFEP-MEDEF Code), section “Principles and rules approved to determine the compensation of corporate officers”, Chapter 16 “Role and activities of the Management and Supervisory bodies” of this Registration Document. (3) 75% of the stock options are subject to performance conditions related to the achievement of certain levels of the CFAO Group’s recurring operating profitability and free operating cash flow. (4) Certain subscription options became null and void due to the non-achievement of a performance condition stipulated at the time the stock options were granted (25% of the options initially awarded), or were canceled due to the employee leaving the Group.
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As a fraction of share capital, the amount granted to each of the acquired by the exercise of his share subscription options. (For Management Board members in the event that they exercise all further information concerning this retention requirement, please subscription options granted was 0.06% for Mr. Olivier Marzloff, refer to Chapter 16 “Role and activities of Corporate Governance 0.04% for Mr. Alain Pécheur and 0.13% for Mr. Richard Bielle (due and Control Bodies”, section II “Principles and rules approved to the fact that 25% of the options initially awarded were cancelled to determine the compensation of corporate officers”, of this as one of the performance conditions was not met, the number of Registration Document.) options which were granted to them was reduced by 25%). The level of objectives that must be achieved to meet the Each member of the Management Board is obliged, until the performance conditions had been precisely calculated, but for end of his corporate term of office, to hold a number of shares confidentiality reasons, it cannot be disclosed to the public.
Stock options granted during the year to the fiscal trading ten CFAO’s employees who are not Company officers (Table 9 – AMF Recommendation) No stock options were granted during 2014.
The table below gives an overall view of the total number and the average weighted exercice price of shares subscribed by the ten Group employees (who are not corporate officers of CFAO SA) whose number of CFAO options exercised during 2014 is highest.
Weighted Total number average price Plan of of options per share (€) January 4, 2010 Options granted during the 2014 fiscal year to 10 employees whose number of options granted is highest 180,000 26.00 180,000 Options exercised during the 2014 fiscal year by 10 employees whose number of options thus subscribed is highest. 180,000 39.33 180,000
B) Performance shares plans
Performance shares granted to each executive corporate officer (Table 6 – AMF Recommendation) No performance shares were granted by CFAO to its executive corporate officers in 2014.
Performance shares granted to each executive corporate officer that became available (Table 7 – AMF Recommendation) Performance shares granted to each executive corporate officer (i) in 2011 will become available on July 18, 2015 and (ii) those granted in 2012 will become available on July 6, 2016 following the expiration of the lock-up period (two years from the date of grant).
History of performance shares granted (Table 10 − AMF Recommendation)
INFORMATION ABOUT THE PERFORMANCE SHARES GRANTED
2011 Plan 2012 Plan Date of the Shareholders’ Meeting November 16, 2009 May 25, 2012 Date of the Management Board July 18, 2011 July 6, 2012 Total number of performance shares granted to: 172,203 174,601 A) Executive corporate officers (1) (composition at the date of the Plans as published in the 2011 and 2012 Registration Documents) 18,002 20,151 B) Executive corporate officers (1) (composition of the Management Board as of December 31, 3013) 13,529 16,010 Mr. Richard Bielle 9,213 8,977 Mr. Olivier Marzloff 4,316 3,807 Mr. Alain Pécheur (1) 1,750 3,226 Mr. Jean Yves Mazon (1) 4,473 4,141 Acquisition date (2) July 18, 2013 July 6, 2014 Expiration date of the mandatory holding period July 18, 2015 July 6, 2016 Number of shares subscribed as of December 31, 2014 N/A N/A Cumulative number of canceled or void shares N/A N/A Performance shares outstanding at year-end N/A N/A
(1) The composition of the Management Board has been modified since 2011. To take these changes into account, the total amount of performance shares allocated in 2011 and 2012 to the executive corporate officers is indicated as follows: A) past composition of the Management Board and B) its current composition. In other words, for the 2011 Plan, the adjusted amount of shares excluded the performance shares granted to Mr. Jean-Yves Mazon and those granted to Mr. Alain Pécheur (as at the moment of the grant he was not Corporate Executive Officer, the performance shares granted to him is given for information), for the 2012 Plan, the adjusted amount of shares exclude those granted to Mr. Jean-Yves Mazon who have left the Group in October 2012. (2) Performance conditions are described further in this section.
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Previous performance share plans and performance shares policy The method for awarding the shares was as follows: (i) the shares which were already purchased by CFAO with the purpose of 2012 Performance share plan being remitted to the beneficiaries of the performance share plan The performance conditions set out to grant performance shares were used for that purpose (CFAO held 23,820 shares for that under the performance share plan of July 6, 2012 was based purpose as of the date of the acquisition of the shares), and (ii) the on the performance of the CFAO share price compared with the remainder of the shares was made up of newly issued shares. On SBF 120 index. July 18, 2013, the Management Board has fixed the final list of On January 21, 2013, the Management Board changed the the beneficiaries (539) and the number of shares to be delivered rules governing that plan to take into account a contingent lack (158,443 shares). Therefore, the Company issued 134,623 new of liquidity of CFAO shares given that TTC held more than 85% shares for the purpose of this Plan. of these shares. 2010 Performance share plans CFAO and TTC decided that the performance conditions for the An initial performance share plan was implemented in performance share plans 2012 and 2011 would depend on the December 2010, involving 97,400 shares allocated to consolidated net profit after tax of CFAO. 592 beneficiaries. None of the corporate officers benefited from this plan. This was an extraordinary plan in the sense that it aimed This performance condition is the same for all beneficiaries of to reward the Group’s key employees who had not received the performance share plan. There are 604 beneficiaries in total, stock options immediately following the IPO. This initial plan was including the three executive corporate officers, and an overall subject to the same performance condition as described above, amount of 16,010 shares has been granted. As a fraction of based on the performance of the CFAO share price compared share capital, the amount granted to each executive corporate with the SBF 120 index. officer is 0.015% for Mr. Richard Bielle, 0.006% for Mr. Olivier Marzloff and 0.005% for Mr. Alain Pécheur. C) Liquidity offer by TTC on the shares underlying 2011 Performance share plans the stock option and performance share plans The performance condition applicable to the 2011 performance In April 2013, TTC held 97.8% of the share capital of CFAO. share plan was set and changed on the same terms as those As a result, TTC and CFAO agreed to consider that CFAO share applicable to the performance 2012 share plan described above. market became illiquid and that it shall still be qualified as such as long as TTC directly or indirectly holds, alone or in concert, at This performance condition is the same for all beneficiaries of least 85% of CFAO shares. Therefore, TTC decided to enter into the performance share plan. There are 606 beneficiaries in total, an agreement which was proposed to each of the beneficiaries including the three executive corporate officers, and an overall of stock options and/or performance shares, according to which amount of 13,529 shares has been granted. As a fraction of (i) performance conditions would be modified to adapt to the share capital, the amount granted to each corporate officer was new situation and (ii) TTC would purchase the shares from the 0.007% Olivier Marzloff and 0.015% for Richard Bielle. Alain beneficiaries, once the shares are available for sale, i.e. with Pécheur was also a beneficiary of the plan, but not as a member respect to stock options, after the exercise of the options as from of the Management Board. January 4, 2014, and with respect to the performance shares Amendments to the 2011 and 2012 Performance share plans after the respective two year mandatory holding periods following the delivery of the shares at acquisition (December 4, 2014 for Existing shares and shares to be issued to serve the plans the 2010 Plan, July 18, 2015 for the 2011 Plan, July 6, 2016 It was initially decided that the shares granted under CFAO for the 2012 Plan). performance share plans would be existing shares and would therefore not trigger any dilution of the share capital. As indicated in the previous section, TTC and CFAO also agreed that the new performance conditions set forth for the 2011 and With respect to the 2011 performance share plan, the awards 2012 performance share plans would now depend on a level vested on July 18, 2013 and 172,203 existing shares held by of consolidated net profit after income tax of CFAO. If CFAO CFAO were delivered to 606 beneficiaries. These shares are shares are no longer admitted to trading on a regulated market, subject to a mandatory holding period of two years as from no performance condition will be required, and 100% of the their delivery date, and can be sold by the beneficiaries only performance shares would vest, subject to the other relevant afterwards. conditions of the performance share plans.
Due to the change in the CFAO share market at the beginning The agreement proposed by TTC to the beneficiaries is to buy of 2013, the Management Board decided pursuant to the the shares which could become available for sale under the authorization of the Supervisory Board given on February 14, 3 performance share plans (2010, 2011 and 2012), in the case 2013 to change the modalities for delivering the shares under where the CFAO share market is still illiquid at that time. The the performance share plans. This decision was however subject beneficiaries would have a 60-day period from the availability to the grant of a specific authorization by the General Meeting date to request from TTC to buy their shares and at the end of of Shareholders held on June 12, 2013 for the 2011 share plan. this first 60-day period, TTC would have another 60-day period to request from the beneficiaries to sell their shares to TTC. The agreement required the individual approval of each beneficiary in order to be valid.
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Under the above mentioned agreement, the shares must be under similar terms and conditions, except that the shares purchased by TTC at a price calculated on the basis of the tender acquired with performance shares granted to executive corporate offer price (€37.5) as adjusted upward or downward by the officers will be subject to a specific holding period for a portion annual growth rate of the consolidated recurring EBIT of CFAO of the shares acquired at vesting of the performance shares until compared with the level of recurring EBIT in 2011. termination of the relevant corporate officer’s duties.
Keeping the price of the offer is conditional on achieving an As the first performance shares were allocated by CFAO average growth in current operating profit of 8% per year from during 2010, the shares acquired in 2012 have been sold and the profit for the year 2011. are being sold on the day of filing of this Registration Document between December 4, 2014 and May 23, 2015 (in accordance The liquidity mechanism has been offered to all holders of with the timetable established as part of the liquidity agreement performance shares including the executive corporate officers for insiders and non-insiders).
15.1.7 Employment contracts and indemnities of the executive corporate officers
Employment contracts and indemnities (Table 11 – AMF Recommendation)
Indemnities or benefits as a result Indemnities related Supplementary of the termination to a non-competition Employment contract pension plan or change of position (3) clause Yes No (1) Yes (2) No Yes (4) No Yes No Richard Bielle, Chairman of the Management Board ✓✓✓✓ Olivier Marzloff, member of the Management Board ✓✓ ✓✓ Alain Pécheur, member of the Management Board ✓✓ ✓✓ Ichiro Kashitani, member of the Management Board ✓✓✓✓
(1) On January 15, 2013, Richard Bielle’s contract was suspended during his term as Chairman of the Management Board. He is currently an executive corporate officer without an employment contract. (2) Based on their employment contracts with the Company, in 2013, Mr. Olivier Marzloff and Mr. Alain Pécheur received a defined contribution pension plan for which the contributions at the rate of approximately 4% are entirely covered by the Company, as is the case for the members of the Group’s Executive Committee. Section 15.2 below sets out the expense recognized in connection with the pension plans for the three members of the Management Board. (3) Excluding any severance payments payable in the event of termination of the employment contract pursuant to legal provisions or the relevant collective bargaining agreement. (4) Termination indemnities are described below.
15.1.8 Termination indemnities for In case of termination of his functions, Mr. Bielle will also be executive corporate officers entitled to a non-competition indemnity equal to 50% of his last fixed compensation (including 10% of paid leave) during a one- year period. A) Termination indemnities for Mr. Richard Bielle as decided by the Supervisory Board meeting held B) Termination indemnities for Mr. Alain Viry on December 2, 2013 (Chairman of the Management Board until December 15, 2013) During a meeting held on December 2, 2013, the Supervisory Board decided to appoint Mr. Richard Bielle in capacity as The Supervisory Board decided on October 29, 2012 to grant member and Chairman of the Management Board for a term Mr. Alain Viry the right to an indemnity in case of his revocation . effective on December 16, 2013 in replacement of Mr. Alain Viry. This indemnity was contingent upon the satisfaction of certain performance conditions. The performance criteria were based on The Supervisory Board also decided to grant to Mr. Richard Bielle EBITDA levels. the right to an indemnity in the event of dismissal from his office as Chairman of the Management Board after December 31, Mr. Alain Viry was dismissed from his office on December 15, 2016. This indemnity shall be contingent upon the satisfaction 2013. After due deliberation, the Supervisory Board decided that of performance conditions. These conditions shall be defined in the conditions for eligibility to 100% of the indemnity had been due time, by the Supervisory Board. Where those performance met, and approved the application of the conditions pertaining to conditions are not satisfied, no revocation indemnity shall be the payment of this indemnity. Its amount was capped at 1.5 times paid. the latest gross annual compensation (if the objectives are met) as Chairman of the Management Board as of the date of his departure The amount of this indemnity is capped at 1.5 times the sum of from the Company, in compliance with the recommendation of the the fixed compensation and the target variable compensation of AFEP-MEDEF Code. Mr. Richard Bielle as Chairman of the Management Board, as of the date of his departure from the Company, in accordance with The total amount of his termination indemnities paid in 2013 the recommendation of the AFEP-MEDEF Code. as corporate officer is mentioned here above in Table 2 – AMF Recommandation.
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15.2 Total amounts set aside or recognized for retirement or similar benefits
The Company has not set aside any provisions for the payment connection with the defined contribution pension plans for of pension, retirement or other similar benefits for its corporate Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur. officers. In 2014, it recognized an expense of €31,539 in
15.3 Securities transactions carried out by the Company’s corporate officers
Pursuant to Article L. 621-18-2 of the French Monetary and performed by the members of the Management Board and of the Financial Code, as well as Article 223-26 of the AMF General Supervisory Board. The table below details those transactions, to Regulation, shareholders must be informed of all acquisitions, the best of CFAO’s knowledge. sales, subscriptions and exchanges of the securities of CFAO
Date and market Corporate officer Type of transaction Unit price Gross amount 03.05.2014 – OTC* Richard Bielle Exercising of stock options 26.00 2,145,000.00 03.05.2014 – OTC* Richard Bielle Sale of shares 39.33 3,244,725. 00 04.07.2014 – OTC* Olivier Marzloff Exercising of stock options 26.00 975,000.00 04.07.2014 – OTC* Olivier Marzloff Sale of shares 39.33 1,463,705.28 04.07.2014 – OTC* Alain Pécheur Exercising of stock options 26.00 585,000.00 04.07.2014 – OTC* Alain Pécheur Sale of shares 39.33 884,925.00 10.28.2014 – OTC Kiyoshi Yamakawa Return of loan of 250 CFAO shares by TTC N/A N/A * As part of a liquidity agreement entered into between TTC and each beneficiary.
Mrs Corinne Le Goff acquired 250 CFAO shares on January 26, 2015 within the time limit set under the Company’s by-laws (within three months of her appointment to the Supervisory Board).
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16.1 Report of the Supervisory Board 16.3 Observations from the Supervisory Chairman on Corporate Governance, Board on the management report Internal Control and Risk and fi nancial statements for 2014 155 Management 140
16.2 Statuory Auditors’ report prepared in accordance with Article L. 225-235 of the French Commercial Code relative to the report prepared by the Chairman of the CFAO Supervisory Board 154
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16.1 Report of the Supervisory Board Chairman on Corporate Governance, Internal Control and Risk Management
This report has been drawn up by Mr. Jean-Charles Pauze, Compliance with the AFEP-MEDEF Chairman of the Supervisory Board, in accordance with Corporate Governance Code Article L. 225-68 of the French Commercial Code. The Chairman of the Supervisory Board entrusted the preparation of this report to several of the Legal and Financial Department. It was In connection with Corporate Governance, CFAO, a company then reviewed by the Audit Committee, the Nomination and listed on Euronext Paris since December 3, 2009, adheres to the Compensation Committee and the Sustainable Development Corporate Governance Code of listed corporations (the “AFEP- Committee, and approved by the Supervisory Board during its MEDEF Code”). The present code is available on the MEDEF’s meetings on February 20, 2014 and March 27, 2015. website (www.medef.fr). The Group strives to improve its Corporate Governance best practices every year. Certain provisions of this To have more details on the composition of the Supervisory Board C ode were adjusted or interpreted in line with the Group’s specific as well as the Management Board see Chapter 14 “Corporate situation or with respect to the other provisions in the AFEP-MEDEF Governance” of this Registration Document. Code. They are summarized in the table below and explained in detail in section II “Principles and rules approved to determine the compensation of corporate officers” in this report.
Recommendations in the AFEP-MEDEF Code which have been adjusted or interpreted The Company’s position Explanations Stock options – Price The stock options plan for 2010 applied a discount of The Company believed that the 4.2% (Art. 23.2.4 of the AFEP-MEDEF Code): no discount 4.2% . discount allowed to aligne the fiscal year shall be applied upon the award of stock options value of exercise of stock options on the share value when first quoted on the stock market. Stock options – Exercise The stock options plan for 2010: the allocation of stock The Company believed that owing to the fact (Art. 23.2.4 of the AFEP-MEDEF Code): the exercise options and awards to executive corporate officers that many company employees benefited by executive corporate officers of all of the options were related to performance for only for three-quarters from this Plan, this would not run contrary to and the acquisition of shares must be related to of the options actually allocated; the remaining 25% the objectives stated by this Code. services and demanding performance conditions of were related to the conditions of presence. the shares. Performance shares – award The Supervisory Board believed that the mechanism T he Company believed that it was therefore (Art. 23.2.4 of the AFEP-MEDEF Code): In accordance was equivalent to the obligation of corporate officers to not necessary to impose an additional share with terms determined by the Board and announced retain their shares (as specified under Article 23.2.1 of retention requirement. upon the award, the performance shares awarded to the AFEP-MEDEF Code) implemented by the Company. executive directors are conditional upon the acquisition of a defined quantity of shares once the awarded shares are available. Termination payment The Supervisory Board authorised termination payment The Company believed that its situation (Article 23-2-5 of the AFEP-MEDEF Code): the for Mr. Richard Bielle with the clause related to a change would require the return of an experienced performance conditions related to termination of control or strategy. executive with in-depth knowledge of car payments set by the Board must be demanding and manufacturers. may not allow for the indemnification of an executive director, unless his or her departure is imposed, regardless of the form of this departure, and linked to a change in control or strategy.
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I. Composition and work of the Supervisory Pursuant to Article L. 225-79-2 of the French Commercial Code Board and its Committees (resulting from the provisions of the French Law for employment security of June 14, 2013, which came into force on June 16, 2013) A) Supervisory Board the companies which, during two successive financial years, meet the three criteria defined by the present law will have to designate Compositin of the Supervisory Board or elect one or two employee representatives to the Board, by As of December 31, 2014, the Company’s Supervisory Board December 31, 2014 at the latest. T he three following criteria are (hereafter “the Board” in this section) has seven members: Mr. Jean- as follows: Charles Pauze (Chairman), Mr. Pierre Guénant (Vice-Chairman), (i) to be a French joint-stock company (société anonyme); Mrs Nathalie Delapalme, Mrs Sylvie Rucar, Mrs Corinne Le Goff (five independent members) and Mr. Yasuhiko Yokoi, Mr. Takashi (ii) to have more than 50 employees and therefore a Works Council; Hattori, (members representing Toyota Tsusho Corporation (“TTC”)). Mrs Corinne Le Goff was appointed a member of (iii) to employ more than 10,000 employees worldwide under the Supervisory Board by co-optation on October 28, 2014. permanent employment contracts (the holding company and She replaces Mr. Kiyoshi Yamakawa until the end of his term of its majority-held subsidiaries). office, i.e. up to the Annual General Meeting to be held in 2017. This obligation is not applicable to CFAO because as of The Supervisory Board now comprises five independent members, December 31, 2013 and December 31, 2014, the threshold of representing over half of the Board’s members (71%), namely a 10,000 employees has not been crossed. higher proportion than that required by the AFEP-MEDEF Code for companies held under control in the meaning of Article L. 233-3 of the French Commercial Code (at least one third according to Work of the Supervisory Board Recommendation 9.2 of the code). Persuant to the Supervisory The Supervisory Board’s operating rules set out in its Internal Rules Board’s Internal Rules, independence of these members is reviewed (hereinafter stated as the “Rules”), and their main provisions are by the Supervisory Board after recommendation of the Nomination summarized below. Based on these Rules, the Board puts in place and Compensation Committee before the Registration Document continuous controls over the management of the Company by the is published. The criteria of independence for the fiscal year Management Board, in accordance with the applicable legal ended December 31, 2014 was reviewed during the Nomination provisions, the Company’s by-laws and the internal regulations and Compensation Committee meeting held on March 27, 2015. of the Board and of its specialized Committees. Throughout the The term of office of the members of the Supervisory Board is four year, the Board carries out controls and verifications as it deems years. The terms of office are staggered in accordance with the appropriate and may ask to receive any documents that it may recommendations of the AFEP-MEDEF Code so that the terms of need to complete its work. office do not all expire at the same time (Article 14 of the AFEP- Particularly, at the end of each half year, the Supervisory Board MEDEF Code). verifies and controls the interim and annual statutory and Two stages of compliance must be mentioned regarding gender consolidated financial statements prepared by the Management equality on the Boards: Board. Each year at the Ordinary Shareholders’ Meeting, the Supervisory Board presents a report with its observations on the 1) Article 6.4 of the Recommendations of the AFEP-MEDEF Code Management Board’s management report as well as the statutory (published in April 2010), each Board must have at least and consolidated financial statements for the last fiscal year. 20% of women before the Ordinary Shareholders’ Meeting held in 2013 for the 2012 fiscal year. As for CFAO, a first The Management Board provides the Supervisory Board with woman joined the Supervisory Board in May 2010, a second information on a regular basis relative to the Group’s management woman joined the Supervisory Board in May 2012 bringing objectives and the results of these objectives, as well as policies the percentage of female Supervisory Board members to 29% regarding capital expenditure, controlling risk exposure and as at December 31, 2012. CFAO was therefore compliant human resources management, and how these policies have been with the said recommendations; implemented within the Group. The Supervisory Board is called on, as needed, by the Management Board for any extraordinary 2) Article L. 225-18-1 of the French Commercial Code (issued situations. from the provisions of the French Law dated January 27, 2011 on the balanced representation of men and women on The Rules also set out the obligations of the Board members as Boards): On January 1, 2017, the percentage of each gender described in section 20 “Ethical rules for directors” of the AFEP- on the Supervisory Board cannot be below 40%. CFAO has MEDEF Code. In particular, the Internal Rules provide that the already adapted the composition of the Supervisory Board to members of the Supervisory Board are each required to hold comply with the targets set by the applicable law for 2017, at least 250 shares of CFAO stock during their term of office. given that the arrival of a third woman on the Supervisory They also stipulate that its members may ask to receive special Board in October 2014 increased the percentage of female training related to the Company’s business activities, that they members of its Board to 43% as at December 31, 2014. may obtain information as needed or interview the members
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of the Management Board or the key senior managers of the year period. A questionnaire was sent to each Board member CFAO Group. Finally, the members of the Board may generally and the answers were then analyzed at the Board’s meeting. obtain information on a continuous regular basis relative to the The same questionnaire was used for the purpose of the annual Company’s results, activities and developments. assessment of the Board in October 2013 and in October 2014. F or 2014, t his analysis showed that as for the Supervisory Board’s The Rules also set out the procedures for the Board meetings. composition the Company should heed to CFAO’s needs and Thus, the Supervisory Board is convened – by any means, even focus on seeking (in the long-term) specialists in areas of business verbally – by the Chairman, or if the Chairman is unable to do so, which are new to CFAO (for example, Retail business). It was by the Vice-Chairman. However, the Chairman must convene the decided that the Board’s functioning method was satisfactory, but Supervisory Board when at least one member of the Management to make it more efficient it was proposed that it an annual meeting Board or at least one-third of the members of the Supervisory is held with the Chief Executive Officers of the divisions at the Board makes a written request to do so. The meeting must be warrant of the presentation of the budget to the Board to organise convened within fifteen days of receipt of this request. If no such a better communication of the Board members with the “operational meeting is convened, those requesting the meeting may convene functions”. the meeting themselves, indicating the agenda for the meeting. In 2014, the Board met five times with an average attendance The Supervisory Board meets at least once every three months, rate of 83%. In particular, the Board reviewed the annual and in particular to examine the quarterly business review that must interim financial statements, as well as the annual management be presented by the Management Board after assessment by the report and the interim report. It reviewed the content of the Audit Committee, as well as to verify and control the documents quarterly financial information, as well as global compensation and information provided by the Management Board, and at any of the corporate officers. other time based on the interest of the Company. The length and frequency of meetings must be such that they allow for in-depth During 2014, the Board was assisted by four specialized review and discussion of the topics within the purview of the Committees: The Audit Committee, the Nomination and Supervisory Board. Compensation Committee, the Sustainable Development Committee and the Strategy Committee (for more information, see Board meetings are chaired by the Chairman or, in his/her sections B, C, D and E below). absence, by the Vice-Chairman. In the absence of both the Chairman and the Vice-Chairman, meetings are chaired by a member appointed by the Board. Members are deemed present B) Audit Committee at Board meetings when they participate in meetings by video Composition of the Audit Committee conference or other means of telecommunication that allow them to be identified and that ensure actual participation, in In 2014, the members of the Audit Committee were: Ms. Rucar accordance with applicable laws and regulations. (Chairman of the Committee) and Mr. Pierre Guénant (both independent Board members), and Mr. Yasuhiko Yokoi (TTC’s The Rules set out the procedures for assessing the operation representative). Therefore, two-thirds of the members of the Audit of the Supervisory Board. Thus, once a year, the Supervisory Committee were still independent members. Mr. Pierre Guénant Board must, after reviewing the Nomination and Compensation brings to the Company rich and extensive business management Committee’s report, dedicate one point on its agenda to assessing experience, while Mrs. Sylvie Rucar brings experience as a Chief its operating procedures, verifying that the important issues are Financial Officer of a large company and significant expertise in properly prepared and discussed by the Supervisory Board, financial and accounting matters. and assessing the actual contribution of each member to the Supervisory Board’s work with regard his or her expertise and Work of the Audit Committee involvement. The Audit Committee ensures the follow-up of questions relating Based on the Nomination and Compensation Committee’s report, to the preparation and auditing of accounting and financial a formal assessment must be conducted by the Board every information in order to facilitate the Supervisory Board’s control three years. This may be carried out under the direction of an and review thereof. To this end, the Audit Committee is primarily independent Supervisory Board member, and if necessary, with responsible for monitoring: the assistance of an independent consultant. Under the same (i) the preparation process for financial information; conditions and based on the same frequency, the Supervisory Board assesses the operating procedures of the permanent (ii) the effectiveness of internal control, internal audit and risk Committees established within the Board. The annual report management systems related to financial and accounting informs shareholders of the assessments carried out and any information; possible follow-up that may be necessary. (iii) the audit by the Statutory Auditors of the social and The Supervisory Board carried out a formal assessment of its consolidated financial statements; and own functioning and that of its Committees, in October 2012 as recommended by the AFEP-MEDEF Code at the end of each three- (iv) the work and the independence of the Statutory Auditors.
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The Audit Committee’s Internal Rules stipulate that whenever Work of the Nomination and Compensation Committee deemed necessary it has the means at its disposal to carry out The Nomination and Compensation Committee assists the its responsibilities. In particular, the Audit Committee can call on Supervisory Board in: the expertise of the Internal Audit Director or the Chief Financial Officer, as well as the Statutory Auditors, and if necessary, audit 1) appointing individuals to the Company’s management and firms or other experts of its choice, even without the presence of supervisory bodies. the Company’s management. The Committee may also contact To this end, the Committee is primarily responsible for: the members of the Management Board after having informed the Chairman of the Supervisory Board. The Committee receives (i) proposing appointments to the Supervisory Board and its important documents that fall within its purview (documents from Committees as well as to the Management Board, and financial analysts, summaries of audit work performed and any additional research needed). (ii) assessing the independence of Supervisory Board members each year. The Audit Committee’s review of the annual and interim financial statements includes a report drawn up by the management on This Committee is also responsible for governance, as it produces the main points of the results and the accounting options used, an annual report for the Supervisory Board on the activities of the a report by the Statutory Auditors on the conclusions of their Board and its Committees. work, as well as a report by the Finance Department to the 2) establishing and periodically assessing the compensation and Committee on the Group’s risk exposure and material off-balance benefits of the Company’s executive corporate officers and sheet commitments (off-balance sheet commitments for 2014 are members of the General Management Committee, including described in Note 34 to the consolidated financial statements – any deferred benefits and/or severance pay for voluntary or “Contingent liabilities, contractual commitments not recognized, compulsory departures. and other contingencies”). The Company also strives, as far as possible, to comply with the two-day deadline for examining the To this end, the Compensation Committee is primarily financial statements before they are reviewed by the Board, and responsible for: does its utmost to submit the documents to be reviewed to the Committee members well in advance so that they may conduct (i) reviewing and proposing to the Supervisory Board all their analysis under the best possible conditions. the components of and conditions for the compensation of members of the Management Board, and In 2014, the Audit Committee met four times with an average attendance rate of 92%. It met in particular to review the annual (ii) examining and proposing the method for allocating and interim financial statements, related reports, the quarterly attendance fees to the Supervisory Board. business review from the Management Board and documents In 2014, the Nominations and Compensation Committee met relating to financial information. four times with an average attendance rate of 75%. It met in particular at the beginning of 2014 to review and confirm C) Nomination and Compensation Committee the independence of the members of the Supervisory Board, as qualified by the Supervisory Board. It also reviewed the Composition of the Nomination and Compensation Committee appointment and succession plans within the Group (members A Nomination and Compensation Committee was set up by of the General Management Committee including Management merging the two existing Committees (Nomination Committee Board members). It also evaluated the operation of the Board and and Compensation Committee) into one Committee, following the of its specialist Committees and issued opinions on opportunities decision taken by the Supervisory Board held in February 2014. of improving its operation to the Board members in October 2014 In 2014, the Committee comprised the following members: (see section A “Supervisory Board” above). Mr. Jean-Charles Pauze (Chairman) and Mrs Nathalie Delapalme, (both independent Board members), Mr. Yasuhiko Yokoi and In particular, it assessed the variable compensation of the members Mr. Kiyoshi Yamakawa (TTC’s representatives). Mrs Corinne Le of the Management Board for 2013 paid in 2014, based on set Goff replaced Mr. Yamakawa in October 2014. Consequently, criteria. It also assessed the fixed and variable compensation of the percentage of independent members was 75%, which the members of the Management Board for 2014. complies with the recommendations of the AFEP-MEDEF Code (Articles 17 and 18: the Committee must have a majority of independent members).
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D) Sustainable Development Committee As part of its general role of analyzing the Group’s major strategic directions, the Strategy Committee prepares the deliberations Composition of the Sustainable Development Committee of the Supervisory Board. It issues proposals, opinions and In 2014, until the meeting of the Supervisory Board held recommendations regarding: on February 17, 2014 during which the composition of a) the Group’s strategic and medium-term plan; the specialised Committees was modified, the Sustainable Development Committee was composed of the following members: b) transactions likely to have a material impact on the Group’s Mrs Nathalie Delapalme (Chairman) and Mrs Sylvie Rucar (both strategy, its financial structure or its scope of business; independent members) Mr. Takashi Hattori (TTC representative). At that date, Mr. Takashi Hattori left the Committee and was c) plans to acquire new business activities, whether through replaced by Mr. Kiyoshi Yamakawa. asset acquisitions or shareholding interests in companies;
Following Kiyoshi Yamakawa’s resignation, Mrs Corinne Le Goff d) plans to sell assets, companies or investments belonging to the became a member of the Sustainable Development Committee Group; on October 28, 2014. On the same day, Takashi Hattori also joined this Committee to represent TTC in such a Committee. e) plans to form joint companies with partners. The percentage of independent members is now 75%, namely The Strategy Committee shall be provided with all the means a higher proportion than that recommended by this Committee’s deemed necessary to fulfill its duties. In particular, it may hear Rules (at least 50% of independent members). Group employees, external auditors and all other external or internal experts, including the other members of the Supervisory Work of the Sustainable Development Committee Board, for all questions related to investments, risks, and the The Sustainable Development Committee assists the Company impacts on the financing of the Group from proposals submitted in designing, implementing and ensuring proper corporate to it. g overnance in light of its inherent obligations of disclosure and transparency, as well as its ethical goals and the CFAO Group’s In 2014, t he Strategy Committee met twice with a 100% attendance principles and practices as regards corporate social responsibility. rate, notably to define its scope of action, prepare the Committee’s Internal Rules and determine the Group’s major projects. In 2014, the Sustainable Development Committee met twice, with an average attendance rate of 67%. It met in particular to II. Principles and rules approved to determine review the corporate governance report, employee information the compensation of C orporate O fficers and environmental information included in the Company’s annual report. The Group’s compensation policy is designed to attract and retain qualified and experienced employees in order to help make the Company successful and enable it to achieve, first and foremost, E) Strategy Committee its business objectives. As regards the compensation policy for its executive corporate officers, the Company adheres to the AFEP- Composition of the Strategy Committee MEDEF Corporate Governance Guidelines. Exceptions to these A Strategy Committee was set up on February 17, 2014 following guidelines are explained below in accordance with the “Comply the decision taken by the Supervisory Board held on the same or explain” principle (Article 25.1 of the AFEP-MEDEF Code). date. The members of this Committee are: Mr. Pierre Guénant (Chairman) and Mr. Jean-Charles Pauze, both independent members, Mr. Yasuhiko Yokoi and Mr. Takashi Hattori (TTC’s A) Compensation representatives). Members of the Management Board The annual compensation of each member of the Management Work of the Strategy Committee Board includes a fixed portion and a variable portion. In 2014, The Internal Rules of the Strategy Committee were approved on the Supervisory Board, upon recommendation of the Nomination March 27, 2014. and Compensation Committee, decided that the variable portion The Strategy Committee is a specialized Committee of the of the 2014 compensation to be paid in 2015 would depend on Supervisory Board. It is primarily tasked with helping the Supervisory the achievement of (i) financial criteria related to the indicator Board to make strategic decisions for the Company, in addition to combining Net Income Attributable to the Group and Return helping the Management Board to build a long-term vision. on Capital Employed and the indicator based on Cash Flow (ii) individual objectives defined for each member of the Board (except Mr. Kashitani).
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Mr. Olivier Marzloff and Mr. Alain Pécheur, who both have an fixed compensation (including 10% of paid leave) for a maximum employment contract with CFAO, will each continue to receive period of 12 months. gross annual compensation of €10,000 for their duties as members of the Management Board. It was also decided to grant Mr. Richard Bielle the right to an indemnity in the event of his revocation from his offices after Benefits in kind will be of the same type as those received by the December 31, 2016. The amount of this indemnity is capped members of the Board in 2013, as indicated in Chapter 15 of this at 1.5 times his fixed compensation and his target variable Registration Document. compensation as Chairman of the Board as of the date of his departure from the Company, in accordance with the Concerning Mr. Ichiro Kashitani, in conformance with the recommendation of the AFEP MEDEF Code. This indemnity shall compensation policy for expat personnel from the Toyota Tsusho be contingent upon the satisfaction of performance conditions Corporation (TTC), the Company’s majority shareholder, variable which the Supervisory Board will define in due time. In the event compensation for 2013 to be paid in 2014 was determined that he does not fulfil the performance conditions, no indemnity after the end of the fiscal year ending on March 31, 2014. will be paid. This indemnity is applicable in the event of his The variable portion of compensation could represent between revocation from his office when his revocation is not the result of 50% and 100% of the fixed portion. a change in control or strategy. Therefore, this rule is contrary to The variable portions of compensation for 2013 paid in 2014 the AFEP-MEDEF Code recommendation (Art. 23.2.5 of the AFEP- and the variable portion for 2014 to be paid in 2015 are MEDEF Code). presented in Chapter 15, “Compensation and Benefits” of the present Registration Document, which is a part of the Company’s Supplementary defined contribution pension plan management report. In 2014, Olivier Marzloff and Alain Pécheur It should be noted that Mr. Olivier Marzloff and Mr. Alain Pécheur received profit sharing in respect of their employment contract. who are members of the Company’s Management Board, benefit, These amounts are also given in Chapter 15. based on their employment contracts, from a funded pension plan for which contributions are entirely covered by the Company, Member s of the Supervisory Board as it is the case for the other members of the Group’s Executive The members of the Supervisory Board receive attendance fees. Committee. There is a fixed amount set for the attendance fees allocated to each member of the Board, and the Supervisory Board may decide C) Stock options and performance shares to reduce these amounts for the whole year based on effective The extraordinary stock option plan put in place in January 2010 meeting attendance. For 2014, the theoretical amounts over the relates specifically to the plan for the reorganisation of the Group whole year are €100,000 for the Chairman of the Supervisory and the Company’s initial public offering (“IPO”). Board, €50,000 for the Vice-Chairman of the Supervisory Board, and €40,000 for each of the other members of the Board for In accordance with the AFEP-MEDEF Code, the three performance their duties. To this is added €10,000 for the Chairmanship for share plans implemented in 2010, 2011 and 2012 are subject to each Committee and €5,000 for the membership of each Board’s performance conditions. The 2011 and 2012 plans included the specialized Committee . The amounts of attendance fees paid in members of the Management Board as beneficiaries. These Plans 2014 are provided in Chapter 15 “Compensation and Benefits”. are described in Chapter 15 “Compensation and Benefits” of the present Registration Document being a part of the Company’s B) Termination indemnities for the Chairman management report. As a reminder, TTC offered a liquidity of the Management Board mechanism to the beneficiaries of stock options and performance shares, which is also described in details in Chapter 15 of the During a meeting held on December 2, 2013, the Supervisory present Registration Document. Board decided to appoint Mr. Richard Bielle as Chairman of the Management Board for a term effective on December 16, 2013 The Internal Rules of the Company’s Compensation Committee also in replacement of Mr. Alain Viry. stipulate that the members of the Management Board must refrain from hedging the risks related to their stock options, shares acquired In the event of his removal from office, Mr. Richard Bielle will be by exercising the stock options or their performance shares. entitled to a non-competition indemnity equal to 50% of his last
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Stock options and performance shares As for Mr. Richard Bielle who was awarded the stock options (exceptions to the Article 23.2.4 of the AFEP-MEDEF Code) during his previous term as Chairman of the Management Board 1) Price and kept his rights to these stock-options, following the decision taken by the Supervisory Board when he left the Group, this The stock option plan launched in 2010 provides a 4.2% discount obligation applies only to the Plans to come . The Supervisory (Decision of the Management Board held on January 4, 2010). Board held on December 2, 2013 decided to reappoint him as As previously mentioned, the 2010 Stock Option Plan was Chairman of the Management Board. His reappointment does not associated with the Company’s reorganization and the Company’s have an effect of reviving the retention requirement that applied to IPO. According to the AFEP-MEDEF Code guidelines, no discount him prior to the termination of his previous mandate as Chairman should be granted when awarding stock options, and especially of the Management Board. for stock options awarded to executive corporate officers. The Company believed that the price of the shares being fixed as the When the stock option plans and performance shares were one used for its IPO was fair in light of the beneficiaries’ efforts in awarded to Mr. Alain Pécheur in 2011, he was not yet a member connection with the above mentioned reorganization plan. of the Management Board. Mr. Pécheur was therefore not bound with this share retention obligation related to the Plans, as the 2) Exercise of stock option plans legal obligation is applied to certain executive corporate officers The 2010 stock option plan provided that the granting to the specifically identified by law, but not to employees who are not executive corporate officers of all the stock options were subject corporate officers. Since these requirements are fixed at the date to performance conditions but only on three quarters of the of a grant, in the case in which an employee is granted stock options granted the 25% remaining were subject to a presence options or performance shares and then subsequently becomes condition which was contradictory to the AFEP-MEDEF Code. The an executive corporate officer, becoming an executive corporate Company believed that due to the fact that a large number of officer will not have the effect of subjecting prior grants to the employees were beneficiaries of this stock options plan, it would obligation to the shares retention obligations. not contradict the objectives of the Code. During its meeting of March 27, 2014, the Supervisory Board 3) Award of stock option plans and performance shares decided: Although the AFEP-MEDEF Code recommends that the (i) to modify the percentage of the net vesting gain from 20% to performance shares awarded to the executive corporate officers 5% exclusively for the 2010 Stock option plan for Mr. Olivier are conditional upon the acquisition of a fixed quantity of shares Marzloff; once the awarded shares are available, the Supervisory Board considered such a mechanism equivalent to the obligation of share (ii) not to modify the said percentage for the 2011 and 2012 retention for the executive corporate officer as described below . Performance Share Plans (applicable to Mr. Alain Pécheur for Therefore, the Company considered that it was not necessary to the 2012 Performance Share Plan and to Mr. Olivier Marzloff create an additional share retention requirement for the members for the 2011 and 2012 Performance Share Plans); of the Management Board. (iii) to keep the same percentage (20% as previously defined by The members of the Management Board who have been awarded the Supervisory Board) for possible future stock options and stock options and performance shares are thus obliged until the Performance Share Plans. end of their office, to keep a number of shares corresponding to a percentage of the net vesting gain, net of tax and social For more information, see Chapter 15 “Compensation and deductions, realized on disposal which amounts to 5% for 2010 Benefits” of this Registration Document. stock options and 20% for the two other performance share plans.
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III. Limitations imposed on the powers IV. Internal control and risk management of the Management Board system implemented by the Company CFAO’s by-laws stipulate that, in addition to the transactions The Company’s management and supervisory bodies have that require the Supervisory Board’s prior authorization under delegated to the Company’s management the task of implementing applicable legislation and regulations, the following decisions of internal control procedures in order to ensure a true and fair the Management Board also require such an approval (Art. 11 presentation of the accounts and obtain reasonable assurance of the by-laws): of the representation of the assets, liabilities and possible risks of any kind that may prevent the Company from achieving its (i) transactions likely to have a substantial impact on the strategy, objectives. As a basis, CFAO used the Reference Framework for the financial structure or the scope of business of the Group; risk management and internal control systems (the “Reference (ii) issuance of securities, whatever their nature, likely to result in Framework”) proposed by the AMF on July 22, 2010, to describe a modification of the share capital of the Company; such systems within the Company.
(iii) the following transactions, wherever they exceed a certain The description of CFAO’s system is broken down as follows: amount set by the Supervisory Board: ■ general framework;
− any investment in any company formed or to be formed, ■ components of the system; and any investment in the formation of any company, group or organization, any subscription to any issuance of shares, ■ individuals Involved. securities or bonds,
− any exchange, with or without set-off, involving assets, IV.1 General framework of the system implemented shares or securities, any acquisition of buildings or other by the Company property, any acquisition or transfer, by any means, of any A) Definition of the system receivables. Risk management and internal control are an ongoing process The Supervisory Board’s internal rules stipulate that it must ensure overseen by the Management Board under the supervision of the that sufficient information is provided in order for the Supervisory Supervisory Board. This process is implemented by all employees Board to approve any strategic transaction or any significant at all levels of the organization. transaction that is not within the strategy announced by the Group. The risk management and internal control system comprises a The Company’s Supervisory Board set a €20 million threshold combination of resources, behaviors, procedures and actions that above which the transactions described in point (iii) above must (i) keep the risk exposure at an acceptable level for the Company receive prior authorization. This amount is set as an annual ceiling and (ii) ensure oversight of its activities, make its operations per transaction. effective and allow efficient use of its resources. The Supervisory Board has fixed a ceiling of twenty (20) million B) Scope of the system euros beyond which the Management Board must obtain the Board’s prior authorization for: (i) commitments in the form of The system applies to all of the consolidated companies covering guarantees, endorsements or securities or other sureties. The prior all business lines (Automotive, Equipment and Services/ authorization or capped amount does not apply to guarantees, Eurapharma/FMCG Indusdtries&Distribution/Retail). endorsements or securities granted to fiscal or customs and excise administrations and (ii) to total or partial transfers of immovable C) Objectives of the system property and equity interests. The system helps:
■ anticipate risks affecting the Company;
■ safeguard the Company’s assets;
■ make decision-making and operating processes more secure, particularly those related to safeguarding of the Company’s assets;
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■ ensure that the instructions and strategic plans set by the IV.2. Components of the system implemented Management Board are being followed by using tools and procedures that allow employees to understand what is A) Organization expected of them and assess the effectiveness of the controls CFAO is a holding company with no operating activity of its own. performed; The majority of operations are conducted through subsidiaries, which hold the majority of the assets to be safeguarded and ■ raise awareness among operating managers of the inherent generate virtually all cash flows to be secured. risks in the activities for which they are responsible and train them to strictly enforce the controls; The Company’s organizational and internal control framework was designed taking into account the specific way that CFAO ■ ensure that financial information is reliable and that it complies operates. The organization implemented is based on: with applicable laws, regulations and accounting principles in force. ■ the granting of powers and responsibilities necessary for the smooth running of operations carried out by the various This system is the product of the various improvements in risk subsidiaries within their respective scopes; management and internal control made by CFAO to oversee its operations within its subsidiaries. The system has been ■ the separation of roles in order to ensure better control of strengthened considerably since 2003 and takes into account the activities; changes that came with the French Financial Security Act (Loi de ■ Sécurité Financière) and the AMF’s Reference Framework, which a definition of roles and responsibilities of the individuals was published in 2007 and updated in 2010. involved in risk management and internal control; ■ The system was completed in 2013 by the adoption of the the internal communication of relevant and reliable “Japanese SOX Act” (a reference to the American Sarbanes management information enabling everyone to carry out their Oxley Act, or SOX), after the Japanese company, Toyota Tsusho responsibilities. Corporation (TTC), became the majority shareholder of CFAO following the takeover bid in December 2012. The review relating 1) The Management Board and Functional Departments reporting to the “Japanese Sox” focuses on the following four main areas: to the Management Board preparing financial information, organizing information systems, The Supervisory Board and the Management Board are the coordinating the relationship between the head office and its Company’s governing and control bodies since October 5, 2009. subsidiaries and implementing a control procedure adapted to the The Management Board, a collective body, oversees the main subsidiary processes (Process Level Controls). The internal preparation of the statutory and consolidated financial statements control teams (TTC and CFAO) coordinate the review which is in accordance with accounting standards and regulations. The supervised by the Statutory Auditors of the major shareholder in Tax and Legal Affairs, Internal Audit, Communication and Investor Japan. Relations, IT and Mergers & Acquisitions Departments report directly to the Corporate Secretary, who is a member of the D) Limits of the system Management Board. The IT Department implements the resources Handling risks involves implementing controls to eliminate or to ensure that the tools are adapted to the organization’s current reduce the probability that these risks will occur and/or their objectives and that they are designed so that they can handle its financial impact. However, no matter how well it is applied, the future objectives. The Finance Department and the Supply Chain system implemented cannot on its own guarantee absolute control Department report to the Chief Financial Officer, who is also a over internal processes and full achievement of objectives. member of the Management Board.
The process for handling risks is subject, like any other process, The Human Resources Department, which reports directly to the to limits related to uncertainties resulting from the environment, Management Board, leads and oversees the human resources internal problems resulting from human or technical failures, policy for compensation, training, recruiting and career collusion among several individuals to make controls fail, and development. The internal control process is based on: (i) the the cost of internal control itself if it is deemed too expensive to selection of competent employees, their ongoing training and maintain. personal development, (ii) individual performance evaluations including assessment of the attainment of control-related objectives.
The Management Board is assisted in the performance of its duties by the Group General Management Committee (“GMC”)
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and the Executive Committee. For more information regarding 3) Subsidiaries the Corporate Governance Structure, please refer to Chapter 14: The Company holds direct and indirect interests in over “Corporate Governance”, section 14.1 “Corporate Governance 170 subsidiaries operating mainly in French-speaking Sub- Structure” of the present Registration Document. Saharan Africa, English- and Portuguese-speaking Sub-Saharan Africa, the Maghreb, the French overseas territories, Mauritius, 2) Business lines and divisions Vietnam, India, Denmark and mainland France. The Company The Group currently operates through three business lines in has primarily two types of subsidiaries: central purchasing offices 34 African countries, 7 French overseas territories, Cambodia and distribution subsidiaries. and Vietnam, broken down as follows: ■ Central purchasing offices – The Company has central ■ Equipment & Services, which includes: purchasing offices in France and Mauritius. Central purchasing offices are used to pool and centralize the direct purchases of − CFAO Automotive Equipment & Services division organized the distribution subsidiaries. Centralizing purchasing offers a geographically and operating in 32 countries located in the means to control volume and purchasing terms for subsidiaries, Maghreb (Algeria, Morocco) and Sub-Saharan Africa, as well and is also used to centralize the management of foreign as in 4 French overseas territories and Mauritius. The division exchange risks for supplies. has also a network of dealerships in Vietnam since 2007, The business lines strengthen these control procedures by − CFAO Technologies, located in 21 countries in Africa, is a overseeing the orders from the distribution subsidiaries. division focused on providing IT products and solutions; ■ Distribution subsidiaries – The Company operates through ■ Healthcare includes t he Eurapharma division which currently distribution subsidiaries spanning 37 countries, including operates in 21 African countries and 7 French overseas 34 African countries and 7 French overseas territories. territories (Guadeloupe, French Guiana, Martinique, New Caledonia, French Polynesia, Reunion and Saint Martin) as B) Principles and values a major importer/distributor of pharmaceutical products. Since 2012, Eurapharma is also present in Denmark, India and The Group’s principles and values with regard to internal control Portugal where it carries out logistical and supply activities. and business ethics foster the Group’s business culture and all Since 2014, the division has been present in Italy; senior managers and employees are asked to demonstrate them in their daily professional behavior. These principles and values ■ Consumer goods, which includes: are described and set forth in two documents: CFAO’s Internal Control Charter and Code of Business Conduct. − CFAO FMCG Industries & Distribution division (beverages, plastic products and consumer product distribution) currently The Charter reflects CFAO’s desire that all managers are operating in 5 countries and consisting of industrial activities personally committed to carrying out their day-to-day controls. (beverages and various light industrial activities), The CFAO Code of Business Conduct is available on the CFAO − CFAO Retail division (Shopping centers, franchises and website (www.cfaogroup.com) under the headings Sustainable brands partnership with Carrefour), located in 8 African development/Code of Conduct. All of the employees from these countries. subsidiaries have received detailed information about this code’s contents. It reaffirms the principles and values that must guide the Each business line director has a Finance Director or a business CFAO Group’s employees every day as they conduct business, controller reporting to him/her and who ensures on an ongoing by making reference to standards as regards ethics, social and basis the quality of the management and control of the subsidiaries environmental responsibility, and Corporate Governance. With within his/her scope of responsibility. These responsibilities regards to insider trading, CFAO has put in place measures to include managing the budget process, supervising the monthly protect sensitive information by establishing black-out periods budget review, overseeing the preparation of reports from the during which employees who have access to privileged business lines and ensuring the quality of internal control. information must refrain from trading in Company shares.
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C) Risk management process D) Internal Control Procedures 1) Identifying and analyzing the main risks 1) Formalization and communication of control procedures Each year, the Company submits to the Audit Committee risk All of the Company’s key control points are included in an Internal mapping on the main risks to which it is exposed. The main Control Self-Evaluation Guide, the common reference for all of the categories of risks that may have an impact on the Company’s operating subsidiaries. performance are described in Chapter 4 of CFAO’s 2014 Registration Document: This Guide defines more than 300 internal controls covering all of the subsidiaries’ activities. It is available online for all of the ■ risks relating to the economic and regulatory environment; Company’s subsidiaries and is used for training purposes. It is an essential tool for communicating control procedures within the ■ risks relating to the Group’s business; Company. ■ risks relating to the Group; It is presented as a questionnaire presenting risk assessment ■ market risks. alongside solutions provided by the control system. The standards set out are listed in order of the level of the risk involved. 50 2) Processing risks and the link with internal control of these standards are categorized as “Key Standards” and The actions undertaken by the Company to process the risks must be enforced. This Guide is used during the annual self- identified are described in Chapter 4 of the Registration Document. evaluation performed by the subsidiaries (see IV.2. F). Each Specifically, the Group’s exposure to foreign exchange risks is employee involved has the necessary information to achieve his/ described in this Chapter, as well as in Note 30.2 “Exposure to her assigned objectives in ensuring that the risk management and foreign exchange risk” to the consolidated financial statements. internal control system operates properly and is monitored on an This Chapter also presents the measures taken by the Company to ongoing basis. manage or limit these risks whenever possible. Furthermore, the documentation of the Company’s internal Risks affecting the consolidated subsidiaries (for all business control procedures was extended with the creation of a kit for activities), which conduct most of the Company’s transactions, are executive and financial management at subsidiaries (to be used processed using specific control procedures that are integrated upon transmission of powers when there is a change of person into the following operating processes: in a business position). The kit contains a checklist of the controls that must be verified each time there is a change of person in a ■ investment decisions and overseeing assets; position regarding each key business processes. This kit and its operating method, validated by business lines, were disseminated ■ purchasing decisions and monitoring trade payables; and published on CFAO’s intranet site to ensure improved communication with the operating teams. ■ monitoring inventories, transported goods and production costs; 2) Internal control procedures relating to the preparation and ■ supervising work in progress (workshops and sites); processing of financial information Using the management accounting function, the Company has ■ sales decisions and monitoring trade receivables (credit and implemented a system to communicate internally the relevant collection); and reliable information enabling everyone to perform their responsibilities in a timely manner. Procedures for budgets, ■ overseeing cash and bank transactions; reporting and the preparation of annual and interim consolidated ■ validating pay and benefits granted to employees; financial statements that are specific to CFAO have been in place since the Company’s IPO in 2009. Monthly reporting from ■ accounting entry of transactions and supervising the monthly subsidiaries is sent every month (on the fifth business day of the account closing; following month) to the Finance Directors or business controllers of the business lines and to the Company’s Consolidation ■ administering access to IT applications and data protection Department. and hardware.
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The Chairman of the Management Board schedules Management conduct the assessment based on a questionnaire prepared by meetings every month with each division, between the eleventh Internal Audit. This approach makes it possible to: and 15th business day of the following month. The Corporate ■ Secretary, Chief Financial Officer, Chief Financial Controller, immediately and independently identify any discrepancy business line director and his/her Finance Director/business which exists between the prescribed key control and its actual controller participate in this meeting, during which the management performance; of the business line presents the changes in the business activities ■ map out remaining areas for caution (by business activity, and results of the subsidiaries under his/her responsibility. The geographic area, subsidiary and type of problem); highlights and the main operating events of the month are also presented at these meetings. ■ define for each business line the action plans aiming to correct the discrepancies identified, divided into four categories of Since 2013 and since the implementation of the “Japanese SOX problems: “controls not performed”, “insufficient records for Act”, a questionnaire related to the preparation of financial controls performed”, “frequency of controls not respected”, information is sent to the major subsidiaries. This questionnaire “separation of tasks not respected”. provides the subsidiaries with a series of “best practices” to be applied as part of the monthly reviews of financial statements. The The results of the evaluation and the primary action plans are answers provided by local management are then checked by the presented to the Audit Monitoring Committee that ensures that the Statutory Auditors on site. The annual and interim consolidated corrective measures taken are effective. financial statements are drawn up based on reporting plus specific notes to the financial statements. 3) Internal audit assignments and action plan monitoring i. Internal audit assignments under the annual audit plan The Audit Committee and the Supervisory Board review the The assignments in the audit plan are presented and approved quarterly information to be published during a meeting or a during the Audit Monitoring Committee meetings. The objective is conference call that is scheduled in advance. to review all of the operating subsidiaries at least once every two years. A total of 46 assignments were carried out in 2014 across E) Assessing internal control and monitoring action plans all business activities, representing 870 man-days. 1) Subsidiaries’ “Internal Control Self-Evaluation Guide” questionnaire Management of the subsidiaries audited systematically provides The Company has rolled-out a self-evaluation questionnaire based comments on the audit reports. The reports are then sent to the on the Internal Control Self-Evaluation Guide, which is available Chairman of the Management Board, the Corporate Secretary, online for all subsidiaries. Every year, the subsidiaries carry out the Chief Financial Officer, the division and business line directors, a self-evaluation based on the 300 points from the questionnaire. as well as the Managing Director and the Finance Director of This exercise is one of the key tools of the risk management and the subsidiary. After the final presentation of the conclusions and internal control system within the Company. once a collective decision has been made on the action required, the subsidiaries are responsible for making sure that they quickly 2) “Internal Control Improvement Plan” (ICIP) and monitoring correct any weaknesses identified based on an established subsidiary action plans timetable. This plan involves all of the business lines. The objective of this plan is to build on the various implemented actions in order to ensure ii. Monitoring action plans The operating subsidiaries are responsible for overseeing the continuous improvement of internal control and risk management. roll-out of the action plans. The Internal Audit Department carries The Plan assesses for all the subsidiaries on an annual basis the out a remote control at regular milestones during the roll-out, in extent to which the “Key Standards” of the “Internal Control Self- coordination with the business lines: on a general basis, twice Evaluation Guide” are applied and reflect the specificities of each a year, within at least six months of the audit assignment, and of the business lines. The Statutory Auditors of each subsidiary on a one-time, targeted basis for action plans that require prompt implementation in light of the financial or organizational challenges.
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F) Controls and risk awareness training program IV.3. Persons involved in risk management and internal The “Business Under Control” training and awareness program control developed by Internal Audit has two distinct complementary Everyone – from the Company’s governing bodies to all of its modules. employees – is involved in risk management and internal control.
1) Business Under Control – module 1 A) Management Board and Supervisory Board This module is designed to improve understanding of key controls by linking them to accounting and financial mechanisms and the Under the supervision of the Supervisory Board, the Management Group’s operating processes. Launched in 2008, the module Board is responsible for overseeing the risk management and focuses on the following main topics: (i) becoming familiar with internal control process and monitoring the process in order to the main points of CFAO’s financial reporting, underscoring the preserve its integrity and effectiveness. The Management Board is main objectives and the requirements in terms of reliability for the responsible in particular for initiating any necessary measures to Group’s reporting; and (ii) knowing how to apply the fundamental correct the issues identified and stay within the limits of acceptable controls that are integrated into the operating processes, notably risk. It also ensures that these actions are carried out successfully the 50 “Key Standards” described in the Internal Control Guide. and within the allotted time frame.
Two sessions per year are held in France for managers who have B) The Audit Committee just joined the Group or who wish to refresh their knowledge of the The Supervisory Board is assisted by an Audit Committee, the “Key Standards” of CFAO control. To date, some 172 operating majority of whose members are independent. The Audit Committee managers have taken part in this training module, including ensures the follow-up of questions related to the preparation and 25 participants in 2014. auditing of accounting and financial information. For this purpose, the Audit Committee ensures the quality of the risk management 2) Business Under Control – module 2 and internal control process applied in particular to financial and Implemented in 2005, this module is primarily for managers who accounting information. At such time, the internal audit report of have a good command of control standards. It is designed to the year’s activity is presented. raise awareness among the operating managers of subsidiaries of the challenges of day-to-day risk prevention. Information is also C) Internal Audit provided on Corporate Governance and tax risk management The Internal Audit Department reports to the Corporate Secretary. matters. The sessions focus on: Within the scope of its work, it is responsible for assessing how the ■ sharing knowledge about any issues experienced by CFAO risk management and internal control system operates, monitoring and applying what has been learned to the risk involved; the system on a regular basis and making any recommendations to improve it. ■ identifying the risk areas in each operating process and highlighting the best practices in order to deal with these risks; It also helps raise awareness of risks and train all operating managers on carrying out controls, without, however, being ■ highlighting fundamental controls that must be carried out and involved in the day-to-day roll-out of the system. that personally involve each manager. Within the scope of the audit program approved by the This module is generally offered twice a year in Africa. To date, Management Board, Internal Audit: (i) provides the subsidiary’s some 381 operating managers have taken part in this training Executive management with a regular assessment of the level of module, including 45 participants in 2014. assurance provided by the internal control system implemented by operating managers, (ii) makes recommendations to make the system more efficient, (iii) identifies and communicates best practices. As of the date hereof, the Internal Audit Department is made up of a director and six auditors.
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D) The Internal Audit Monitoring Committee V. Other information required This Committee is made up of the Management Board and the by Article L. 225-68 of the French Internal Audit Director. At the end of each half-year, the internal Commercial Code auditors are asked to present, to members of the Committee and business line directors, a summary of the internal audit work A) Special terms and conditions for shareholder carried out over the past half-year. The audit program for the next participation at General Meetings half-year is validated during this meeting. Shareholders participate at General Meetings in accordance with The Committee also monitors the financial impact of any possible applicable legal provisions and Article 13 of the Company’s by- shortcomings and validates the progress of the action plans to laws. More specifically, any shareholder is entitled to participate prevent such problems. It is responsible for establishing the action at Shareholders’ Meetings and decisions either personally or plans to be implemented to improve internal control. through an authorized representative, regardless of the number of shares held, in accordance with the conditions stipulated in the E) Operating subsidiaries and business lines relevant article of the by-laws. The management of each subsidiary ensures that the risk management and internal control procedures described in the B) Publication of information provided for by Internal Control Guide are applied. Each operating manager Article L. 225-100-3 of the French Commercial Code is responsible for ensuring that risk exposure complies with the (Information on factors likely to have an impact on guidelines set out by the relevant business lines. The business a takeover bid) lines’ management then reviews the quality and effectiveness The information mentioned in Article L. 225-100-3 of the French of the controls performed in the operating subsidiaries during Code of Commerce is given in the following chapters: Chapter 10 internal audit assignments and at the presentation of the results “Group cash flow and capital”, 14 “Corporate Governance”, 18 of the assessment of the “Internal Control Improvement Plan” (see “Principal shareholders”, 7 “Organization of the Group” , and 22 section IV.2. E above). “Material Contracts” of this Registration Document, forming part of the Company’s management report. F) The Role of the Statutory Auditors The Statutory Auditors give an independent opinion to certify This Registration Document is available on the AMF’s website that the accounts, results and financial statements intended for (www.amf-france.org) and CFAO’s website (www.cfaogroup. shareholders and third parties provide a true and fair view. They com). CFAO issues a press release specifying the availability and also present any observations on the internal control procedures terms of access to the present Registration Document. relating to the preparation and processing of financial and Jean-Charles Pauze accounting information. Chairman of the Supervisory Board They are required to bring attention to any weaknesses found in Sèvres, March 27, 2015 these procedures that could have a material impact on the financial statements or any other financial information. As such, they have complete and unrestricted access to all transactions, documents, people and physical assets that they may deem useful to carry out their assignment. However, it should be noted that the Statutory Auditors’ engagement does not discharge Executive Management and all of the Company’s employees from their responsibility with regard to implementing and maintaining a reliable and effective internal control system.
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16.2 Statuory Auditors’ report prepared in accordance with Article L. 225-235 of the French Commercial Code relative to the report prepared by the Chairman of the CFAO Supervisory Board
For the year ended December 31, 2014
To the Shareholders,
In our capacity as Statutory Auditors of CFAO and in accordance with Article L. 225-235 of the French Code of Commerce, we hereby report to you on the report prepared by the Chairman of your Company in accordance with Article L. 225-68 of the French Code of Commerce for the fiscal year ended December 31, 2014.
It is the Chairman’s responsibility to prepare, and submit to the Supervisory Board for approval, a report describing the internal control and risk management procedures put in place within the Company and that also provides the other information required by Article L. 225-68 of the French Commercial Code, in particular relating to Corporate Governance.
It is our responsibility:
■ to report to you on the information set out in the Chairman’s report on internal control and risk management procedures relating to the preparation and processing of financial and accounting information; and
■ to attest that the report contains the other information required by Article L. 225-68 of the French Commercial Code, it being specified that it is not our responsibility to verify the fairness of the other information.
We conducted our work in accordance with professional standards applicable in France.
Information concerning the internal control and risk management procedures relating to the preparation and processing of financial and accounting information
Professional standards require that we perform procedures to assess the fairness of the information on internal control and risk management procedures relating to the preparation and processing of financial and accounting information set out in the Chairman’s report. These procedures mainly consist in:
■ obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of financial and accounting information on which the information presented in the Chairman’s report is based, and of the existing documentation;
■ obtaining an understanding of the work performed to support the information given in the report and of the existing documentation;
■ taking note of the assessment process implemented and evaluating the quality and nature of its documentation, as regards the information on the evaluation of internal control and risk management procedures;
■ determining if any material weaknesses in the internal control procedures relating to the preparation and processing of financial and accounting information that we may have identified in the course of our work are properly described in the Chairman’s report.
On the basis of our work, we have no matters to report on the information given on internal control and risk management procedures relating to the preparation and processing of financial and accounting information, set out in the Chairman of the Supervisory Board’s report, prepared in accordance with Article L. 225-68 of the French Commercial Code.
Other information
We attest that the Chairman of the Supervisory Board’s report sets out the other information required by Article L. 225-68 of the French Commercial Code.
Paris La Défense and Neuilly-sur-Seine, April 16, 2015
The Statutory Auditors
KPMG Audit Department, a division of KPMG SA Deloitte & Associés Hervé CHOPIN Alain PENANGUER
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16.3 Observations from the Supervisory Board on the management report and financial statements for 2014
After verification and control of the consolidated and separate financial statements for fiscal year 2014 adopted by the Management Board, and in accordance with Article L. 225-68, paragraph 6 of the French Commercial Code, the Supervisory Board of CFAO has no observations to make either as to the financial statements or the accompanying management report prepared by the Management Board, which were presented during meetings held on February 19, and March 27, 2015, after examination by the Nomination and Compensation Committee, the Sustainable Development Committee and the Audit Committee.
For the Supervisory Board, Jean-Charles Pauze Chairman
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Group policy 158 17.6 Profi t-sharing and stock options or purchase 165 17.1 Healthcare policy 158 17.7 Employee shareholding agreements 165 17.1.1 The “Health by CFAO” program to combat HIV and other diseases 158 17.1.2 Health coverage 159 17.8 Environmental management 166 17.1.3 Death and disability coverage 159 CFAO and environmental challenges 166 17.2 Education policy 159 17.8.1 Environmental policy 166 17.8.2 Pollution and waste management 167 17.8.3 Sustainable use of resources 168 17.3 A stronger partnership with 17.8.4 Report of the Statutory Auditors, designated Non-Governmental Organizations 159 as independent third-party entities, on the consolidated environmental, social and societal information published in the management report 172 17.4 Corporate transparency 160 Consumer health and safety 160
17.5 Employee information 161 17.5.1 Employment 161 17.5.2 Organization of work time 162 17.5.3 Employee relations 162 17.5.4 Health and safety 163 17.5.5 Training 163 17.5.6 Equal treatment 164 17.5.7 Promotion and respect of the fundamental conventions of the International Labor Organization. 165
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Group policy
CFAO has conducted most of its business in Africa for over a Committee, one of the four specialized Committees to assist century. As such, the Group has a vested interest in the continent’s the Supervisory Board. Lastly, the Group actively keeps its development. Through its various operations in Africa, CFAO seeks employees up to date on sustainable development issues through to provide solutions to the continent’s sustainable development its communication mediums or during the annual discovery day challenges, including the mobility of people, improvements in organized for the Group employees. public health, reduction of the digital divide and access to retail products. CFAO’s approach has four major ambitions: to be an exemplary employer with a social policy in line with the specific characteristics In keeping with its sense of social and environmental responsibility, of the regions where it operates; to contribute to the economic the Group continuously bolsters its programs in this direction. and social development of the communities in the countries The Environmental and Social Responsibility Department (CSR) is where it operates through partnerships with non-governmental represented on the General Management Committees to ensure organizations; to minimize its impact on the environment; and that its policy is consistent with the Group’s operational targets. lastly, to ensure that its employees comply with the rules listed in The department regularly reports to the Sustainable Development the Group’s Code of Business Conduct.
17.1 Healthcare policy
17.1.1 The “Health by CFAO” program to In order to facilitate the implementation of this program within the combat HIV and other diseases subsidiaries, an educational tool was developed and delivered in CD-ROM format in 2013. It contains practical sheets of all the steps to be implemented, filmed interviews, best practices, With over 36 million deaths to date, HIV continues to be a major the Group’s Charter as well as an annual reporting grid, which public health problem. Sub-Saharan Africa is still the world region answers three levels of progress of the program defined by the most seriously affected by HIV. According to UNAIDS, the region CSR Department. Thus, each subsidiary can work towards the is home to two-thirds of all HIV-infected people worldwide and program’s full deployment depending on local restrictions and accounts for three-quarters of all AIDS-related deaths. reach the level set for them at the beginning of the year.
CFAO is also involved in actions to combat other pathologies Coordination at the first level ensures that the Group’s anti-HIV in Africa such as malaria, diabetes or hypertension which is the policy is a reality on the ground. The second level is an “active” cause of a sharp increase in cardio-vascular diseases. level with specific actions that must lead to the voluntary screening of employees. The third level is the program’s advanced level: For nearly the last decade, CFAO has deployed a special policy Subsidiaries which have successfully rolled out the first two levels for all its employees and their families in order to deal with HIV. can open up the program to beneficiaries and to other pathologies The Group’s HIV Charter, which came into effect in 2004 and was such as malaria, diabetes, hypertension or other chronic illnesses. updated in 2011, complies with the recommendations issued by the ILO, the International Labour Organization, maintaining the In 2014, CFAO renewed its partnership agreement with Group’s stand on anti-discrimination practices and confidentiality ENTREPRISES & SANTE, an association which aims to create with regard to the disease. awareness about HIV among large groups on the African continent. This association is partly responsible for the yearly In 2012, this program was formalized and named “Health by assessment of the effective application of the anti-HIV program CFAO”, a true operational application of the Group’s health conducted in the CFAO Group subsidiaries in Sub-Saharan policy. It is based on four aspects: Africa. Moreover, it also supports the Group subsidiaries in the ■ information and education on the disease; operational implementation of this program.
■ prevention of and protection against infection;
■ access to screening on a voluntary, anonymous and confidential basis;
■ access to treatment.
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17.1.2 Health coverage 17.1.3 Death and disability coverage
The CFAO Group continued with its policy of providing healthcare All the Group’s employees who have been under permanent coverage to all its permanent employees and their families (not all contracts for at least one year are covered by Death and disability families in Angola are covered by these guarantees yet, due to coverage, which CFAO instituted in July 2013. the very high cost of healthcare in this country). The Group aims to offer minimum coverage of 75% of their healthcare expenses. In the event of death or total and permanent disability, an amount Diseases such as HIV, STDs and malaria are fully covered. The representing at minimum, one and a half year’s salary is paid, healthcare cover and limits depend on the practices prevalent in after deducting the amount already paid at this time (retirement each country. benefits, legal or contractual benefits, etc.). An additional one- month salary is paid towards funeral expenses.
Employees who enjoyed better healthcare coverage compared with this minimum coverage in their subsidiaries before July 2013 will continue to enjoy their previous level of healthcare coverage.
17.2 Education policy
Sub-Saharan Africa has a fast-rising demand for high school are studying in the sectors sought after by the Group: commerce, education. In this region, however, there are still enough school marketing, management, finance, computing, technical training places for only 36% of children of age to enroll. Girls face the courses, logistics and pharmaceutical studies. 174 young people, greatest barriers as the gender gap widens across the region, with an almost equal split between boys and girls, received grants according to the Global Education Digest 2011, published by from this program in 2014, i.e. an increase of 24% compared to UNESCO’s Institute of Statistics. 2013. The momentum of this program demonstrates the Group’s commitment to create employability amongst young African Barely 5% of school-going children reach university, according to people. the World Bank. CFAO is also a partner of the “HR Excellence Africa” project, CFAO is keenly aware that education is an essential and powerful which was started in 2014 by the CIAN and the Franco-African tool in combating poverty and in training the employees of the foundation for growth. This program aims to set up effective public- future. The Group has provided scholarships for the children of its private partnerships between schools and companies to improve non-management employees enrolled in high school since 2001. the match between training courses and the skills expected on Thanks to CFAO’s funding of school expenses, 685 children the job market. The academic establishments ready to join can were able to attend high school during the 2014 academic year, obtain the “HR Excellence Africa” label while companies provide up 9% from the previous year. The Group also began a higher technical and financial support for schools. Initially started in education financial support program for all its employees in French-speaking West African, the program is intended to become 2011. The purpose: to allow students to continue their studies in continental and multilingual in the future. African schools or universities. This program targets students who
17.3 A stronger partnership with Non-Governmental Organizations
Based on its strategy of supporting non-governmental and non- and Bouygues. The AMREF- Flying Doctors, present in 20 Sub- profit organizations, the Group encourages initiatives that promote Saharan African countries, is the leading African public health long-term development in Africa. Partnerships which have already NGO. It has become known through its “flying doctors”, whose been initiated with certain NGOs in connection with the Group’s initiatives have improved access to healthcare for isolated rural main activities were strengthened in 2014. populations through regional flying and mobile medicine circuits. Club Santé Afrique is a ground-breaking initiative which groups In particular, CFAO is a founding member of Club Santé Afrique together several private sponsors under a single umbrella to pool alongside AMREF Flying Doctors, the Sanofi Espoir Foundation their resources and experience. In particular, it should enable the
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AMREF to roll out its programs that have been successful in East Training and professional insertion Africa to West Africa, such as telemedicine and e-learning, into Promoting training and social entrepreneurship West Africa. Health The Group has also consolidated its links with three other NGOs: Combating chronic diseases The Fondation Chirac, which is committed to combating the illegal trade and counterfeiting of medicines; IECD, which encourages The environment professional insertion through diploma-based electrotechnical Helping to protect the environment training courses in Nigeria and CARE International, which is In 2014, CFAO Solidarité supported two education and school working on a project in Benin and Togo to help women accede to building projects in Togo, and in Madagascar, a training and agricultural ownership as well as a program on farming practices professional insertion project in Burkina Faso and a health project and adapting to climate change in Niger. in the Central African Republic.
At the same time, CFAO Solidarité is continuing its initiatives. Every year, through CFAO Solidarité, the Group encourages two- Created by the Group in 2002 and redefined this year, CFAO thirds of its employees to take solidarity leave, thereby enabling Solidarité aims to co-finance local initiatives managed by local motivated employees to contribute their skills to a development NGOs and supported by the subsidiary’s employees in six areas: project. Projects are carried out under the aegis of Planète Education and risk prevention Urgence and Coup de pouce humanitaire in the countries and Promoting the education of young people and other populations territories where CFAO operates.
17.4 Corporate transparency
As a socially responsible company operating in a number by local correspondents in the subsidiaries. Since its IPO, CFAO of countries where corrupt practices are considered to be has also drawn up its own Code of Business Conduct, which widespread, CFAO has long fostered a clear ethical ambition and represents a set of standards applicable to all of the Group’s aimed to discourage such practices. business divisions and includes major social and environmental responsibility standards and responsible business practices. In this respect, the Group and its management have an Following the Code’s development in 2010, it was redistributed enduring commitment. Following a program set up in 2004, this and republicized in a new communication campaign in 2012 in commitment is based on anti-corruption measures based on three light of a survey which assessed employees’ understanding of its simple principles which all the Group’s employees are informed main issues. This will lead to the implementation of new training of: (i) not to obtain unfair advantage through corruption (ii) to initiatives. respect declarative obligations so the Group does not receive unwarranted solicitations and (iii) to combat blackmail and extortion. CFAO has also implemented training programs for Group executives working at the headquarters and in all Sub- Consumer health and safety Saharan African countries. It also subscribed to the Declaration of the French Council of Investors in Africa (CIAN) regarding the This subject is relevant to health activities based on the nature of fight against corruption and promoted this Declaration among its products distributed or produced. subsidiaries. In terms of distribution, the Group ensures the traceability of flows CFAO intends to further its efforts to promote ethics in its business throughout the chain and maintains strict compliance with the operations, in compliance with the commitments made at the storage and cold chain conditions. time of its IPO in 2009. That is why a Sustainable Development Committee was created, intended primarily to assist CFAO Furthermore, distributors collect all information on problems in building, implementing and monitoring proper Corporate related to product quality and comply with the principle of Governance in light of the Group’s ethical goals. In order to pharmacovigilance, which aims to notify laboratories of any supervise these projects, the Sustainable Development Committee problems related to adverse effects observed. endorsed the appointment of a Compliance Officer in early 2011, In terms of manufacturing, Propharmal in Algeria has incorporated followed by the appointment of a “Group Compliance Officer” the French quality reference “Good Manufacturing Practices” (BPF, in April 2013, who reports directly to said Committee and the Bonnes pratiques de fabrication) in its manufacturing processes to Board of Directors. The Group Compliance Officer is supported guarantee product quality.
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17.5 Employee information
The information included in this section 17.5 “Employee 17.5.1 Employment information” concerns all companies within the financial scope of consolidation of CFAO Group, with a workforce. The companies As of December 31, 2014, the Group had 11,996 employees have a Reference Guide, which are partly based on the regulatory in more than 40 countries, compared with 11,590 as of requirements of Article 225 of the Grenelle II Law. This information December 31, 2013 and 11,415 as of December 31, 2012. is consolidated in a core application. Consistency controls are run As of the end of December 2014, the headcount had increased during the data entry and consolidation phases. The relevance by 3.5% compared to 2013. This is mainly due to changes in of social indicators can be limited, mainly due to the lack of the scope of consolidation including several acquisitions in the harmonization between national and international legislation in Healthcare sector in Congo and in Italy and new developments relation to certain types of indicators. in Liberia, Sierra Leone, Côte d’Ivoire and Nigeria in particular (see section 7.2.4 of this Registration Document “Acquisitions and disposals over the last three years”).
The table below gives a breakdown of the Group’s employees by geographic area and division as of December 31, 2014, 2013 and 2012. It also provides data on expatriates and local employees. At 97.6%, local employees make up the vast majority of the total workforce.
NUMBER OF EMPLOYEES AT DECEMBER 31
2012 2013 2014 TOTAL NUMBER OF EMPLOYEES 11,415 11,590 11,996 Expatriates 278 271 284 Local employees 11,137 11,319 11,712 By geographic area Mainland France and Others 513 535 593 Mainland France 394 431 460 Other (Denmark, India, Italy Portugal, Switzerland) 119 104 133 French Overseas Territories and Asia 1,216 1,200 1,175 Maghreb 1,312 1,291 1,005 French-speaking Sub-Saharan Africa 5,469 5,677 5,963 English- and Portuguese-speaking Sub-Saharan Africa 2,905 2,887 3,260 By division Equipment and Services (including Technologies and Equipment since 2014) 6,168 6,085 7,265 Health 2,253 2,336 2,516 Consumer goods (Industries Equipment and Services in 2012 and 2013) 2,784 2,947 1,932 Other (mainly CFAO Holding) 210 222 283
At the end of 2014, 20.62% of the Group’s employees were On December 31, 2014, approximately 68% of the Group’s women, compared with 20.50% at the end of 2013 and 20.55% expatriates were employed in French-speaking Sub-Saharan at the end of 2012. The Group had 2,064 managers, 22.34% of Africa, 27% in English- and Portuguese-speaking Sub-Saharan whom were women, compared to 22.07% at the end of 2013. Africa and 4% in the Maghreb. In 2014, the majority of the Group’s expatriates (approximately 80%) were employed by the On December 31, 2014, 49.7% of the Group’s headcount was CFAO Automotive Equipment and Services. employed in French-speaking Sub-Saharan Africa, 27.2% in English- and Portuguese-speaking Sub-Saharan Africa, 8.4% in A significant number of employment contracts within the Group the Maghreb and 9.8% in the French overseas territories and are permanent contracts. However, the Group also uses fixed-term Asia. In 2014, 60.6% of the Group’s employees were employed contracts when appropriate. As of December 31, 2014: in the Equipment and Services businesses, 21% in Health and ■ 16.6% in Consumer Goods. The change in the breakdown of 10,835 employees (90.3% of the total workforce) were the headcount is related to the reorganization of the three employed under permanent employment contracts; divisions with the integration of “Technologies and Equipment” in ■ 1,161 employees (9.7% of the total workforce) were employed “Equipment and Services” in 2014. under fixed-term contracts.
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The table below presents changes between 2012 and 2014 in the age of employees with permanent employment contracts.
Age of employees 2012 2013 2014 Under 25 311 3.0% 247 2.3% 261 2.4% 25-29 1,823 17.4% 1,748 16.2% 1,305 12.0% 30-39 3,972 38.0% 4,085 38.4% 4,280 39.5% 40-49 2,800 26.8% 2,943 27.6% 3,068 28.3% 50-54 998 9.5% 1,013 9.5% 1,102 10.2% 55-59 477 4.6% 516 4.8% 666 6.1% 60 and over 85 0.8% 92 0.9% 153 1.4%
In 2014, the Group hired 1,172 employees under permanent In 2014, the Group’s total payroll amounted to €192,763,037 contracts, and 1,078 under fixed-term contracts, compared (excluding social security contributions), compared to with 1,382 and 1,000 respectively in 2013. In 2014, 2,331 €184,212,174 in 2013, i.e. 4.64% higher than in 2013 due to employees left the Group, including 1,370 permanent employees. a 3.5% increase in workforce. In France (mainland France and The three main reasons for the departure of permanent employees the French overseas territories), payroll totaled €65,862,070 in were resignation (43.9%), dismissal (32.0%) and retirement 2014 (excluding social security contributions), compared with (10.0%). The Group did not encounter any particular recruitment €65,471,881 in 2013, and employer social security contributions problems in 2014. totaled €30,926,357.
The table below sets out the amounts paid by CFAO to the Group’s employees in mainland France in 2012, 2013 and 2014 in connection with profit-sharing agreements (in euros): PAYMENTS MADE DURING THE FISCAL YEAR
2014 2013 2012 Profit-sharing agreements (in €) 3,870,336 3,361,729 3,404,629
The 2014 figures relate to the financial statements for the year ended December 31, 2014, which will be submitted to shareholders for approval in June 2015.
17.5.2 Organization of work time In mainland France, the Group has two Works Councils: one for the Unit of Economic and Employee Interest (Unité Economique et Sociale – UES), which includes the employees of CFAO, SFCE The legal work time in France is 35 hours per week, compared and SEVRAGIM (comprising five employee representatives), and with an average of 40 hours per week in other geographic areas. another representing the employees of Continental Pharmaceutique In 2014, 16 employees had permanent part-time contracts in (comprising four employee representatives). France (mainland France and overseas territories). In 2014, In 2013, the Company-wide agreements signed mainly involved 20,954 overtime hours were worked in French subsidiaries, compulsory annual negotiations (CAN). mainly in the CTOM operational activities (CFAO AES and HEALTH). The company welfare services budget for mainland France in 2014 was €182,202. In France (mainland France and the French overseas territories), the absenteeism rate was 4.30% in 2014, versus 4.33% in 2013 and 3.20% in 2012. Absenteeism is calculated in working days Profit-sharing agreements and is mainly connected with illness. In mainland France, the specific UES profit-sharing agreement entered into in 2011 is based on the Company’s actual profits, i.e. the Current Operating Income (COI).
17.5.3 Employee relations For employees in the pharmaceutical businesses of mainland France (Continental Pharmaceutique, EP DIS and Eurapharma), Representative bodies have been set up for employees within each no amendments were made to the specific Group profit-sharing Group subsidiary in accordance with applicable legislation in agreement entered into in 2010. each country. These representative bodies operate very differently depending on the country and local legislation.
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Corporate savings plans and similar plans Many of the Group’s subsidiaries have a health Committee, a safety Committee and working conditions Committee (or similar Corporate savings plan Committees), which is more than required by French legal requirements. At the global level, 59 subsidiaries have a Health All the corporate savings plans set up in France include socially and Safety at Work Committee or equivalent, covering 66% of the responsible investment funds. Group’s total workforce. These corporate savings plans, which are group savings schemes, Health and safety issues pose a challenge for all of the Group’s offer the employees of participating companies the possibility of business activities. Every year, employees from all of the Group’s building up a securities portfolio with the help of their employer. divisions are trained in safety. The last three years have seen an Sums from an incentive plan or a profit-sharing agreement may be increase in these training efforts. 1,586 employees were trained paid into this plan, as well as voluntary payments. Funds invested in 2014, versus 1,126 in 2013 and 1,019 in 2012. A total of in a corporate savings plan are locked up for five years, unless 51 occupational hazard identification reports and Hygiene and they are released early in one of the special cases as provided Safety action plans were conducted across all of the Group’s by law. divisions. Moreover, the Group’s subsidiaries signed 22 health and safety agreements with social partners in 2014, mainly Collective pension savings plan pertaining to accident prevention and occupational illnesses. In early 2008, CFAO implemented a collective pension savings In 2014, the group identified a single occupational illness in a plan for all companies in mainland France. This collective pension French subsidiary (CMM). savings plan is similar to a corporate savings plan and offers the In mainland France, a Committee comprising representatives of employees of participating companies the possibility of building the Health and Safety at Work Committee, the Works Council, up a securities portfolio with the help of their employer. Except in the Human Resources Department and volunteer employees the event of an early release, said portfolio will only be available developed an awareness campaign on Quality of Life at Work upon the employee’s retirement. within the scope of psychosocial risk prevention. The awareness st These funds may be managed in one of two ways, as chosen by campaign will begin in the 1 quarter of 2015. beneficiaries: In 2014, the Group set up road safety campaign tools (posters, (i) guided management if beneficiaries prefer their savings to be brochures and a training course), which will be rolled out to all of managed by a financial institution; the Group subsidiaries in 2015.
(ii) free management if they prefer to make their own investment decisions. 17.5.5 Training CFAO makes complementary contributions to the collective pension savings plan. The maximum annual contribution varies The Group’s total training expenditure in 2014 amounted to between €1,500 and €4,500, depending on CFAO’s results. approximately €3,499 million, representing an increase of 7.7% It represents the full amount deposited in connection with profit- compared with 2013. sharing plans or voluntary payments up to €1,000. Above this threshold, it represents 50% of the amount of voluntary payments, Regarding the recognition of training hours (excluding safety within the limit of the maximum annual amount. training), the reliability of the reporting is being implemented in the most contributing subsidiaries. Thus in 2014, the total number In 2013, a rider to the collective pension savings plan agreement of employees trained in the subsidiaries (CFAO Motors Maroc, was signed to enable employees to transfer up to five days of SIAB in Morocco, CFAO Motors RCI, CFAO Techno RCI, EPDIS paid leave per year to the pension savings plan. Algeria and Brasseries du Congo) was 970 and the total trained hours came to 56,41 8 hours. This scope covers 19.02% of the Company’s workforce and will extend to the Group scope during 17.5.4 Health and safety future reporting periods. In 2014, the Group maintained its focus on the following training In terms of health and safety, the accident frequency rate with objectives: work stoppage in the Group was 5.22 in 2014, compared to ■ 6.69 in 2013 and 7.38 in 2012. The frequency rate measures to strengthen managerial skills in order to create, drive and the number of accidents with work stoppage of more than one preserve motivated and competent teams; day during a year, per million hours of work. Work accidents do ■ to improve the Group’s economic performance in terms of not include accidents when traveling. In 2014, the measures of finance, management and internal control; and control for calculating days of sick leave for work accidents, the severity rate of work accidents with sick which can be calculated ■ to improve business skills, and particularly our technical skills. and is 0.1% have been increased. The aim of these objectives is to meet requirements on the ground There was one fatal accident in the Group in 2014 at SICAM - one and support the professional development of Group employees, of the Equipment and Services business entities in Madagascar. thereby enabling them to work more responsibly. These objectives also aim to anticipate the need for new skills.
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In 2013, the Group’s programs focused on the following areas intended for all employees who communicate, negotiate or work in particular: with other countries.
■ communication: training program on public speaking intended Finally, as part of the synergy between CFAO and TTC, three for all Group employees required to speak in public; “Remote CFAO managers attended the Global Advance Leadership communication in a multicultural environment” training sessions Program, which is a program set up by TTC to develop the intended for new employees to make them aware of the Group’s high potential and future leaders. intercultural communication environments specific to CFAO;
■ finance: seminars on internal control (Business Under Control 1 and 2) for senior executives, finance executives and 17.5.6 Equal treatment department heads, intended to improve and strengthen the Group’s internal control techniques and procedures and to raise employee awareness of these matters. Gender equality All the Group’s subsidiaries aim to treat men and women equally. “Finance for non-financial employees” training sessions for At the end of 2014, 20.62% of the Group’s employees were operational managers on the concepts, terminology and women, compared with 20.50% at the end of 2013 and 20.55% instruments used for the Company’s economic and financial at the end of 2012. The Group employs 2,064 managers, management, to give them basic financial foundation for their 22.34% of whom are women. duties; Inside the UES, a comparative report on employment, age and ■ management: management-oriented training sessions covering compensation is presented to the social partners. This report is annual appraisal interviews, project management, operational available on the Group’s intranet. management and training development aimed at all managers, including future and experienced managers; Employment and integration of disabled workers ■ First-aid, security and safety: Training courses on preventing Since 2006, the Group has encouraged partnerships with health risks, safety at work and personal safety when traveling companies in the protected sector and has set up concrete actions for French teams; to have a better understanding of the challenges of disability at ■ office skills, personal development, etc.: customized individual work: E-learning training available on the Group’s Intranet for and collective training sessions organized throughout the year all the Group’s employees, recourse to services in the protected depending on the needs and specific characteristics of each sector: Maintenance of green areas on the Health Division’s sites, business line; recycling paper at CFAO’s head office and printing documents in different French entities. ■ business lines etc.: specific team training courses for each business lines of the Group. For example, after-sale service Anti-discrimination and equality policy for the car brands we distribute, certification with IS suppliers. CFAO’s policy is to ensure that all recruitment, mobility and Furthermore, to prepare and accompany taken of the position training procedures and decisions are carried out without any by future Chief Executive Officers of its subsidiaries, the Group discrimination based on origin, religion, age, gender, union has reinforced and updated the content of its assessment process membership or political affiliation. intended to evaluate the level of key skills required for this position. Each prospective Chief Executive Officer follows a specific Senior agreements were signed in all French subsidiaries, resulting individual development program based on their own needs. This in actions implemented each year in favor of senior employees program is called the Talent Observation Program. (part-time work arrangements, training activities, pension balance sheet). The Group has also initiated a 360° program which is initially intended for the Executive Committee. With almost 50 nationalities represented in its workforce, the Group has a wide cultural diversity at all levels of the Company The Group maintains its desire to reinforce and develop and in all jobs. Thus, the geographical origin of the Group’s the behavioral and managerial skills of its Management employees continues to change with the enlargement of the Committees, senior managers and future senior managers. This geographical scope and the Group’s international mobility policy. objective involves being in touch with needs on the ground and accompanying the business by offering a training program which At the end of 2014, expatriates came from 32 different is adapted to the Group’s emerging needs and challenges. nationalities, including 65.2% from France, 23.5% from Africa and 12% from the rest of the world. The Group also set up a new training course with an intercultural theme “Work effectively with another country”. This course is
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17.5.7 Promotion and respect of the assignments on an everyday basis. It has three themes: respect fundamental conventions of the for the individual, respect for Company property and respect for trade regulations, with reference to the main principles of International Labor Organization. the International Labor Organization. Thus, the Group does not collaborate with anyone who it knows to practice child labor, The Group does not systematically subcontract work. It does, undeclared labor or forced labor. It will refuse to work or stop however, occasionally employ temporary staff owing to the working with a supplier or service provider who employs people seasonal nature of certain activities. working by force or under threat.
Considering the very nature of its distribution business, the CFAO Respect for social dialogue is one of the key elements of the Group does not generally resort to subcontracting. However, it Group’s Human Resources Policy. In compliance with the laws may resort to subcontracting on an ad hoc basis. of its countries of operation, our Group allows its employees freedom of association and expression within the Company on When using the services of subcontractors and in its dealings with matters pertaining to the conditions for carrying out their activities. its suppliers, the Group aims to remain very vigilant as to the social and environmental conditions in which they work. The Group’s business activities have an impact on regional development. By nature, the Group’s various businesses have CFAO’s Code of Business Conduct is designed to remind a positive impact on the development and maintenance of employees of the importance of the common core values that the employment opportunities in all the Group’s countries of operation. Group upholds in its business activities, and constitutes a frame In France and abroad, the Group’s subsidiaries employ local of reference for the performance of the Group’s activities and people (at 97.7%) and give preference to local sub-contractors.
17.6 Profit-sharing and stock options or purchase
The number of shares held by each member of the Group’s The Group’s directors and corporate officers received stock options governance bodies is provided in Chapter 14 “Corporate and performance shares, as stated in Chapter 15 “Compensation Governance” of this Registration Document in section 14.1.1.1 and Benefits” of this Registration Document. “Information about the members of the Management Board” and section 14.1.2.1 “Information about the members of the Supervisory Board”.
17.7 Employee shareholding agreements
Details on the stock option or purchase plan and performance shares are provided in Chapter 15 “Compensation and Benefits” of this Registration Document.
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17.8 Environmental management
CFAO and environmental challenges 17.8.1 Environmental policy
CFAO is active in Africa, in the French overseas territories, in The large number of CFAO’s sites, the different sizes and Vietnam, in Switzerland, in India, in Portugal and in Italy with a types of business activities makes it difficult to apply a uniform range of businesses: environmental policy across the entire Group.
■ the distribution of vehicles and equipment through However, the Group strives to measure the environmental impact CFAO Automotive Equipment & Services; of its activities through an annual reporting over the whole of its scope. ■ the integration of new information technologies through CFAO Technologies; Environmental data is collected by network of contributors working in the Group’s different entities. Close to the field, they check the ■ the distribution of pharmaceutical products through reliability of the information transmitted, report on environmental Eurapharma; initiatives and justify any variations found. ■ the distribution and production of staple consumer goods The Group provides initial and refresher training courses for these through CFAO FMCG Industries & Distribution. contributors throughout the year and organizes conference calls The main environmental impacts generated by the import and dedicated to environmental reporting. distribution businesses are due to international sourcing and the Apart from publishing qualified data, the purpose of this report is regional scope of the Group’s network, which lead to energy to share the Group’s best environmental practices and encourage and water consumption, greenhouse gas emissions and waste their dissemination. production from logistics and packaging operations, and various other activities. 17.8.1.1 Reporting guidelines Each Group business faces specific environmental issues, such as: Reporting guidelines comprise indicators which are common to ■ energy consumption linked to air conditioning in showrooms all the business activities but also takes specific elements into and waste production caused by after sales services in the account using dedicated indicators. It focuses on the Group’s automobile and equipment businesses; main environmental challenges such as the greenhouse gas emissions inherent in import and logistics activities, consumption ■ the consumption of energy, water, raw materials and packaging of raw materials and energies and the production of hazardous in the case of industrial businesses; and non hazardous waste.
■ fuel consumption by Eurapharma’s vehicle fleet in distributing The contributors use a reporting protocol and follow-up file, which pharmaceutical products, as well as hazardous waste such as is updated annually. These media aim to explain each reporting expired drugs. criterion and specify the data sources and calculation methods to be used. This detail in drafting indicators provides a common These impacts and CFAO’s solutions to reduce them are outlined understanding and means that comparable data can be obtained below. across the Group.
The data submitted by the contributors during the reporting period is subjected to a dual validation by the management controllers of the business centers and then by the Environmental and Social Responsibility Department. The numerous exchanges between the head office and the contributors help make the reporting reliable. In addition, the figures provided are systematically audited to ensure consistency.
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17.8.2.1 Reporting Scope ■ Motors Uganda;
In accordance with Article 225 of the Grenelle II law, the reporting ■ STOCKPHARMA Portugal; scope includes all of the consolidated entities as of December 31, 2014. The reconciliation between the accounting scope of ■ VECOPHARM Switzerland; consolidation and the environmental scope of consolidation is The environmental reporting scope for the 2014 fiscal year covers made six months later, i.e. on June 30, 2014 for this fiscal year. 91% of the Group’s headcount. Some entities have been excluded for this fiscal year for reasons which are mainly connected to a small workforce, low business volume, recent consolidation, or ongoing reorganizations: 17.8.2 Pollution and waste management ■ Bavaria Motors Algeria;
■ Asian Hall Algeria; Prevention, Recycling and elimination of waste ■ SIAB Morocco; CFAO classifies its waste in 2 categories: ■ DIMAC Morocco; ■ hazardous or non-hazardous taken to processing, upgrading ■ Openasia Heavy Equipment Vietnam; or recycling channels;
■ Automotive Asia Cambodia; ■ dangerous or non-dangerous non-upgradable waste.
■ Prestige Auto Services & Performance Auto Tahiti; The main hazardous waste produced by the Group is the waste produced by CFAO Automotive Equipment and Services ■ SONCAR Angola; mechanical and bodywork after-sales workshops as well as broken or expired medicines connected with Eurapharma’s ■ Cica Liberia; pharmaceutical business. ■ Motors Sierra Leone;
Theme Indicators Value 2013 2014 value Units Variation Total waste production 31,846 31,365 metric tons -1.5% Taken to processing, upgrading or recycling channels 22,862 21,903 metric tons -4% Waste including hazardous waste 1,913 1,398 metric tons -27% Non-upgraded 8,984 * 9,462 metric tons 5% including hazardous waste 1,071 745 metric tons -30%
* Corrected 2013 data.
In 2014, the total waste production generated by CFAO Informal recycling channels for non-hazardous waste are common Group remains relatively stable. Close to 70% of waste is in Africa and many of the Group’s entities use them. sent to processing plants, notably through the non-hazardous waste recycling system set up by Brasseries du Congo and the CFAO Automotive Equipment and Services recycles 69% of management of hazardous waste at CFAO Automotive Equipment its hazardous waste, which is mainly used oils from after sales & Services described below. activities. Given that most African countries have no facilities available for this type of waste, the oil suppliers are responsible At Brasseries du Congo, waste brewers’ grain and malt dust from for its collection and treatment. beer production is supplied to farmers to use as animal feed. Packaging containing the raw materials from breweries is resold. The Group encourages the systematic use of processing facilities The proceeds provision a fund for employees for zero rate housing when they exist. Several partnerships have been concluded in loans, for example. the last two years, notably in Senegal, Cameroon, Congo,
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Madagascar, and Morocco. The trend today is for sharing waste through a partnership with ElisE, which has been in effect since management between the Group’s different entities, as is the case 2011. in New Caledonia or in Reunion. Ateliers du Bocage, a branch of Emmaüs, collects old or obsolete The management of hazardous waste is central to the Group’s IT equipment and either sells them cheaply after reconditioning, environmental policy. In 2013 and 2014, CFAO designed and or recycles them. This partnership is also in effect in Burkina Faso, deployed a training and awareness operation with its CFAO where Ateliers du Bocage is located. Automotive Equipment & Services network. A guide explaining sorting rules and prevention measures was distributed to after- Lastly, subsidiaries are gradually implementing measures to sales professionals. A flyer was printed to make employees and prevent water and ground pollution. customers aware of the potential danger from these products for At Brasseries du Congo, the Brazzaville and Pointe Noire sites health and the environment. have waste treatment plants, each with the capacity to process Finally, the Group supplied subsidiaries with a list of materials for more than 500,000 cu.m. of water. All wastewater processed is after sales workshops geared towards preventing pollution and discharged back into the natural environment. health risks. These media are permanently available on CFAO’s At CFAO Automotive Equipment and Services, a certain number of intranet. entities possess settling tanks to avoid discharging hydrocarbons Expired or broken medicines are the main hazardous waste into the natural environment. For example, the Toyota site being generated by Eurapharma entities. Their destruction is strictly built in Abidjan in Côte d’Ivoire has two settling tanks. regulated by laboratories and public authorities. Good inventory The Group has not identified any other types of pollution other management limits the destruction of pharmaceutical products. than those described above or sound nuisances connected to its At the Group’s head office in Sèvres, paper, ink cartridges, cans, activities. plastic bottles and used batteries are collected and recycled
17.8.3 Sustainable use of resources
17.8.3.1 Raw materials consumption
Theme Indicators 2013 values 2014 values Units variations Water consumption (network or drilling water) 1,220,415 1,355,385 cu.m. 11% Industrial raw material Gas consumption 13,295 8,157 cu.m. -39% consumption Plastics consumption (total excl. packaging) 8,035 10,868 metric tons 35%
Water Water as a raw material is basically consumed by Brasserie Measuring water consumption can sometimes be complex, in du Congo for beer and soda production. The opening of two particular due to the different sources of supply (network, well new production lines in 2014 has mechanically led to a rise in water or delivery by outside service providers). Nevertheless, its consumption. use is carefully monitored, especially in regions with high water stress. The “Water consumption per hectoliter produced” indicator is monitored very strictly. It is one of the priorities of the Heineken One of the most widespread practices in the Automotive network “Brewing a better future” sustainable development program, and industries is the recovery of rainwater for cleaning vehicles one of the goals of which is to optimize and preserve water and or washing units. Likewise, water-free cleaning products also energy resources. conserve the resource.
The portion of water used as a raw material accounts for around half of the Group’s total water consumption.
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Gas Plastic Gas is mainly used in the workshops of the CFAO Automotive Plastic is used as a raw material by the Mipa plants in Côte d’Ivoire, & Equipment and Services and for welding plastic materials in Icrafon in Cameroon, Nipen in Nigeria and Ppgl in Ghana to industries. produce containers and units. The increased plastic consumption is explained firstly by the steady volume of business at PPGL and The strong reduction in gas consumption is explained by the Nipen, and secondly by the launch of a unit production business exclusion of the Dimac motorcycle assembly plant in Morocco at Brasseries du Congo. from the reporting scope. By neutralizing Dimac’s impact in 2013, the consumed volume in fact increases by 38%, mainly due 13% and 26% of plastic material was crushed and re-used at the to Brasseries du Congo and a few CFAO Automotive, Equipment Mipa and Icrafon plants in 2014. & Services entities whose increased after-sales activities demand significant volumes of gas.
Packaging and paper
Theme Indicators 2013 values 2014 values Units Variations Packaging consumption Total consumption 8,666 8,667 metric tons 0% Total consumption 539 507 metric tons -6% Paper consumption Of which recycled or issued from sustainable managed forests 231 235 metric tons 1%
90% of the Group’s total packaging consumption is concentrated The data also covers paper consumption for internal use and in the industries. external publications.
70% of the packaging is used glass bottles notably by Brasseries A growing number of entities use best practices in this area such du Congo for beverage manufacturing and 11% are cardboard setting printers to double-sided printing by default, encouraging boxes used for packing pens in the plastic and beverage plants digital media or reusing paper. in the breweries. In addition, the purchase of recycled paper or paper from In general, many entities optimize consumption by reusing sustainably managed forests is becoming systemic and now packaging received from suppliers or by replacing cardboard accounts for over half of total consumption. packaging with plastic trays for their deliveries.
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17.8.3.2 Energy consumption and associated greenhouse gas emissions
Theme Indicators 2013 values 2014 values Units Variations Electricity consumption 62,507 74,053 MWh 18%
Scope 2 40,211 47,764 metric tons of CO2 Light fuel oil (diesel) consumption 16,909 11,527 cu.m. -33% Energy consumption Scope 1 45,431 30,244 metric tons of CO2 Natural gas consumption 831 1,071 MWh 29%
Scope 1 154 198 metric tons of CO2 The emission factors used were updated in 2013. They are based on Bilan Carbone© V7 (French system for evaluating and reducing greenhouse gas emissions). The air freight emission factor is based on DEFRA 2013 (UK government department for environment, food and rural affairs).
Electricity the use of generators, and therefore decreasing associated fuel consumption. The electricity consumption of industries accounts for 55% of the Group’s total consumption. In 2014, almost 61% of the increase There is no distinction between the different types of fuels used recorded is due to the growth in the business activities Brasseries (heavy vs. light notably). d u Congo and Nipen alone.
Mission Pharma’s entry into the consolidation scope also Natural gas contributed 6.2% of the increase recorded. Mission Pharma’s entry into the scope has led to a significant Initiatives to reduce electricity consumption are continuing in the increase in this indicator because it’s premises in Denmark are network, particularly by putting equipment on standby or turning exclusively heated by natural gas. Its consumption now accounts it off, or fitting low consumption light bulbs. for 37% of consumption and is added to the consumption of Continental Pharmaceutique and EPDIS in Rouen and of CFAO Technologies Algeria. Fuel This indicator covered fuel consumption for generating sets, 17.8.3.3 Transport and associated greenhouse gas boilers and company vehicles in 2012 and 2013. This year, it emissions was decided to restrict it to generators and boilers in order to improve how we identify our energy requirements. This change in The Group’s imports and distribution create a significant need for scope is partly explained by reduced fuel consumption. transport of all kinds. The Group has decided to be comprehensive and to measure the emissions generated by its fleet of delivery In addition, a large number of subsidiaries saw an overall vehicles and the transport subcontracted to specialist service improvement in the electricity grid in West Africa, due to restricting providers.
Theme Indicators 2013 values 2014 values Units Variations Road freight – fuel consumption 2,410 2,464 cu.m. 2% Internal transport Scope 1 6,475 6,620 metric tons of CO2 Air 16,595,178 18,260,811 t.km * 10%
Scope 3 11,483 12,636 metric tons of CO2 Rail 7,013,941 6,637,301 t.km -5% Scope 3 166 157 metric tons of CO External transport 2 Maritime 1,329,779,446 1,414,241,830 t.km 6%
Scope 3 15,683 16,679 metric tons of CO2 Road 58,133,719 70,774,753 t.km 22.6%
Scope 3 5,083 6,188 metric tons of CO2 * Indicators expressed in metric tons x km represent the number of metric tons transported multiplied by the number of kilometers traveled. The emission factors used were updated in 2013. They are based on Bilan Carbone© V7 (French system for evaluating and reducing greenhouse gas emissions). The air freight emission factor is based on DEFRA 2013 (UK government department for environment, food and rural affairs).
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Internal transport inventory has therefore reduced the carbon footprint for transport, for this activity. The subsidiaries’ delivery fleets deliver goods to customers or between sites. Eurapharma and General Import & Distribution Limited have the biggest fleets; Eurapharma delivers to pharmacist Other greenhouse gas emissions customers, while General Import & Distribution Limited delivers The carbon dioxide from beer fermentation by Brasseries du consumer goods across the whole of Nigeria. Congo is captured, stored and reused for the beer and soda Actions such as grouping orders, optimizing deliveries and the production process. This gas is therefore not emitted into the journeys made, are aimed at reducing fuel consumption. The atmosphere. geolocation systems installed in delivery vehicles also reduces The Group is aware of the impact climate change could have on fuel consumption. its environment and is leading discussions to adapt to this.
There is no distinction between the different types of fuel consumed. It endeavors to use transport means with low levels of greenhouse emissions, such as maritime transport, as much as possible. Even External transport though the underdeveloped infrastructure in Africa often requires the Group to use more emission-intensive modes of transport, such The small increase in maritime and air transport conceals strong as air freight, or to choose road over rail transport where the disparities. latter does not offer sufficient flexibility for the Group’s business The sharp rise in Continental Pharmaceutique’s logistics activities activities. and Mission Pharma’s entry into the scope have had a significant Greenhouse gas emissions are associated with their scope, in impact on the volume of goods transported. Nevertheless, this accordance with the GHG Protocol, the international benchmark. increase has been partially offset by the falloff in transport to the The emission factors used are those of the Bilan Carbone© v 7 and Maghreb connected with the loss of Isuzu trucks. the DEFRA (Department for Environment, Food and Rural Affairs, There is a more significant increase in road transport. This UK). increase is explained by the increase in heavy vehicle deliveries in Algeria by Diamal (+74%), and greater use of the Pointe Noire Protection of biodiversity and Land use – Dolisie road link by Brasseries du Congo (+17%). CFAO’s sites are not located in rural farming or natural areas. Mission Pharma’s share of the Groups external transport is 9% for Accordingly, they have a relatively limited impact on the maritime, 7% for air and 8% for road. environment, soil use and biodiversity.
Mirroring internal transport, numerous entities organize and It should be noted that the subsidiary DT Dobie Kenya has involved optimize external transport by grouping orders or sharing logistic its employees in reforestation initiatives in the Nairobi National operations with other entities in the country. Park and the Karura Forest since 2003.
The use of AZAP software to supply Toyota’s central spare parts The Group did not set aside any provisions for environmental risks warehouse in Le Havre has reduced the number of air supply in 2014. CFAO was not required to pay any compensation as a flights from Japan. In 2014, almost all orders by subsidiaries result of lawsuits or held liable to repair any damage. were served from this inventory. The correct management of this
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17.8.4 Report of the Statutory Auditors, designated as independent third-party entities, on the consolidated environmental, social and societal information published in the management report
Year ended December 31, 2014
To the Shareholders,
In our capacity as Statutory Auditor of CFAO Group, appointed as Independent Third Party, accredited by the COFRAC registered under number 3-1049 (1), we hereby present to you our report on the consolidated environmental, social and societal information (hereinafter the “CSR Information”) for the year ended December 31, 2014, presented in the management report. This report has been prepared in accordance with Article L. 225-102-1 of the French Commercial Code.
Responsibility of the Company The Board is responsible for preparing the Company’s management report including CSR Information in accordance with the provisions of Article R. 225-105-1 of the French Commercial Code and with the guidelines used by the Company (hereinafter the “Guidelines”), summarized in the management report and available on request from the Company’s head office.
Independence and quality control Our independence is defined by regulations, the French code of ethics governing the audit profession and the provisions of Article L. 822-11 of the French Commercial Code. We have also implemented a quality control system comprising documented policies and procedures for ensuring compliance with the codes of ethics, professional auditing standards and applicable law and regulations.
Responsibility of the Statutory Auditor On the basis of our work, it is our responsibility to:
■ attest that the required CSR Information is presented in the management report or, in the event that any CSR Information is not presented, that an explanation is provided in accordance with the third paragraph of ArticleR. 225-105 of the French Commercial Code (Statement of completeness of CSR Information);
■ express limited assurance that the CSR Information, taken as a whole, is presented fairly, in all material respects, in accordance with the Guidelines (opinion on the fair presentation of the CSR Information).
Our work was performed by a team of six people between December 2014 and April 2015 and took around four weeks. We were assisted by our specialists in Corporate Social Responsibility.
We performed the procedures below in accordance with professional auditing standards applicable in France, with the decree dated 13 May 2013 determining the manner in which the independent third party should carry out his work, and with ISAE 3000 (2) concerning our opinion on the fair presentation of CSR Information.
(1) Details available at www.cofrac.fr. (2) ISAE 3000 – Assurance engagements other than audits or reviews of historical financial information.
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1 Statement of completeness of CSR Information On the basis of interviews with the individuals in charge of the relevant departments, we reviewed the Company’s sustainable development strategy with respect to the social and environmental impact of its activities and its societal commitments and, where applicable, any initiatives or programmes it has implemented as a result.
We compared the CSR Information presented in the management report with the list provided in Article R. 225-105-1 of the French Commercial Code.
For any consolidated information that was not disclosed, we verified that the explanations provided complied with the provisions of Article R. 225-105, paragraph 3 of the French Commercial Code.
We verified that the CSR Information covers the consolidation scope, i.e. the Company, its subsidiaries as defined by Article L. 233-1 and the entities it controls as defined by Article L. 233-3 of the French Commercial Code, within the limitations set out in the methodological information presented in the management report in the Registration Document.
Based on these procedures and taking into account the limitations mentioned above, we attest that the management report includes the required CSR Information.
2 Reasoned opinion on the fairness of the CSR Information
Nature and scope of the work We conducted two interviews with the people responsible for preparing the CSR Information in the departments in charge of collecting the information and, where appropriate, with those responsible for internal control and risk management procedures, in order to:
■ assess the suitability of the Guidelines in terms of their relevance, completeness, reliability, impartiality and understandability, taking into account best practice, where appropriate;
■ verify that a data-collection, compilation, processing and control procedure has been implemented to ensure the completeness and consistency of the Information and review the internal control and risk management procedures used to prepare the CSR Information.
We determined the nature and scope of our tests and controls according to the nature and importance of the CSR Information with respect to the characteristics of the Company, the social and environmental impact of its activities, its sustainable development strategy and best practice.
With regard to the CSR Information that we considered to be the most important (1 ):
■ at parent entity level, we consulted documentary sources and conducted interviews to substantiate the qualitative information (organization, policy, action), we performed analytical procedures on the quantitative information and verified, using sampling techniques, the calculations and consolidation of the data. We also verified that the data was consistent by cross-checking it with other information in the management report;
■ at the entity level for a representative sample of entities selected (2 ) on the basis of their activity, their contribution to the consolidated indicators, their location and risk analysis, we conducted interviews to verify that the procedures were followed correctly and we performed tests of details, using sampling techniques, in order to verify the calculations made and reconcile the data with the supporting documents. The selected sample represents between 15% and 88% of quantitative social information, and between 17% and 100% of quantitative environmental information.
(1 ) Social indicators: Total workforce at 31.12.2014, Number of men, Number of women, Permanent employees slipted by age group, Total number of hires, Total number of dismissals for permanent contracts, Total number of leaves for permanent contracts, Total number of leaves for fixed-term contracts, Annual wage bill (employer wage cost excluded), Number of occupational accidents (excluding fatal accidents) with work stoppage, Number of training hours. Environmental indicators: Consumption of water used as raw material, Electricity consumption, Natural gas consumption, Fuel consumption for generators and heaters, Consumption of plastics (total excluding packaging), Packaging consumption, Air freight (outsourced), Railway freight (outsourced), Maritime freight (outsourced), Road freight (outsourced), Road freight (group companies own fleets). Other qualitative information: Occupational health and safety conditions, Promotion and compliance with ILO fundamental conventions relative to the freedom of association and recognition of the right to collective bargaining, the elimination of discrimination in respect of employment and occupation, the elimination of all forms of forced labour and the abolition of child labour, The organization of the Company to integrate environmental issues and, if appropriate, the assessments and certification process regarding environmental issues, Measures of prevention, reduction or repair of discharges into the atmosphere, water and soil, impacting severely the environment, Measures regarding waste prevention, recycling and disposal, Territorial, economic and social impact of the Company activity regarding regional employment and development and on the local populations, Conditions of the dialogue with stakeholders, Actions of partnership and sponsorship, Measures implemented to promote consumers health and safety. (2 ) CFAO Motors Côte d’Ivoire (Côte d’Ivoire), CAMI (Cameroon), CFAO Motors Niger, Brasseries du Congo (Congo Brazzaville), MIPA (Ivory Coast), Continental Pharmaceutique (France), Copharmed (Côte d’Ivoire), CFAO Motors RDC (Democratic Republic of the Congo), CFAO Zambia.
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For the other consolidated CSR information, we assessed its consistency based on our understanding of the Company.
We also assessed the relevance of explanations given for any information that was not disclosed, either in whole or in part.
We believe that the sampling methods and sample sizes used, based on our professional judgement, were sufficient to enable us to provide limited assurance; a higher level of assurance would have required us to carry out more extensive work. Due to the use of sampling techniques and other limitations intrinsic to the operation of information and internal control systems, we cannot completely rule out the possibility that a material irregularity has not been detected.
Conclusion Based on our work, we did not identify any material anomalies likely to call into question the fact that the CSR Information, taken as a whole, is presented fairly in accordance with the Guidelines.
Paris La Défense, April 16, 2015 KPMG SA
Anne Garans Hervé Chopin Partner Partner Climate Change & Sustainability Services
174 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com PRINCIPAL SHAREHOLDERS 18
18.1 Breakdown of share capital 18.3 Principal Shareholders and control 178 and voting rights 176 18.4 Shareholder agreements 178 18.2 Voting rights 177
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18.1 Breakdown of share capital and voting rights
18.1.1 Changes in the breakdown of share 18.1.1.1 Summary table capital and voting rights over the The table below lists CFAO’s shareholders as of December 31, past three years 2012, 2013 and 2014, based on the threshold crossings declared on those dates. It should be noted that the Company has received no threshold declarations since the closing of the reopened voluntary public tender offer filed by Toyota Tsusho Corporation (“TTC”).
December 31, 2014 Number Number % % Shareholders of shares of voting rights of share capital of voting rights Toyota Tsusho Corporation 61,102,346 61,102,346 97.36% 97.43% Corporate officers (1) 33,523 33,523 0.05% 0.05% Treasury shares (2) 44,190 - 0.07% - CFAO Group employees (3) 325,154 325,154 0.52% 0.52% Public (4) (5) 1,251,852 1,251,852 1.99% 2.00% TOTAL 62,757,065 62,712,875 100% 100%
December 31, 2013 Number Number % % Shareholders of shares of voting rights of share capital of voting rights Toyota Tsusho Corporation 60,176,509 60,176,509 97.59% 97.62% Corporate officers (1) 17,479 17,479 0.03% 0.03% Treasury shares (2) 41,782 - 0.06% - CFAO Group employees (3) 222,125 222,125 0.36% 0.36% Public (4) (5) 1,207,088 1,207,088 1.95% 1.96% TOTAL 61,664,983 61,623,201 100% 100%
December 31, 2012 Number Number % % Shareholders of shares of voting rights of share capital of voting rights Toyota Tsusho Corporation 60,176,909 60,176,909 97.80% 97.87% Corporate officers (1) 2,050 2,050 0.003% 0.003% Treasury shares (2) 43,702 - 0.07% - CFAO Group employees (3) 84,900 84,900 0.14% 0.14% Public (4) (5) 1,220,549 1,220,549 1.98% 1.98% TOTAL 61,528,110 61,484,408 100% 100%
(1) Members of the Management Board and the Supervisory Board. It should be noted that TTC lent 900 of its CFAO shares belonging to the TTC group to three members of the Supervisory Board (250 shares for each member) and to one member of the Management Board (150 shares). Mr Yamakawa resigned from his office of member of the Supervisory Board on October 28, 2014, and the 250 lent shares were given back to TTC. Consequently, as of December 31, 2014, TTC had lent 650 of its CFAO shares to members representing TTC on the Management Board and on the Supervisory Board. Furthermore, the number of shares as of December 31, 2014 does not yet include the 250 shares that Mrs Corinne Le Goff acquired on January 26, 2015 within her obligation imposed by CFAO’s by-laws following her appointment to the Supervisory Board of CFAO. (2) For 2012, treasury shares represent the number of shares held under the liquidity agreement and the number of shares held including those repurchased by CFAO under the repurchase program. For 2013 and 2014, following the distribution of all shares assigned to cover the performance share Plans , CFAO owned no share (excluding liquidity agreements) as of December 31, 2013. (3) Performance shares granted to employees (excluding members of the Management Board) and subject to a lock-up period. For further information concerning these Plans, see Chapter 15 of the present Registration Document. (4) Estimate obtained by difference. (5) These amounts include shareholdings held by the principal shareholding funds.
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18.1.1.2 Comments on the changes in shareholding 18.1.2 Other information concerning and voting rights shareholders ■ Up to December 2009: Kering indirectly owned 99.94% of CFAO; As of December 31, 2014, 61,518,023 CFAO shares were held in registered form (99.49% of the share capital), and gave the ■ On August 2, 2012: acquisition by Toyota Tsusho Corporation right to the same number of voting rights. (TTC) of 29.8% of the share capital of CFAO from Kering; Pursuant to Article L. 225-102 of the French Commercial Code, ■ a voluntary takeover bid was subsequently made by TTC. This it is indicated that no CFAO share is held by employees under a voluntary takeover bid was opened on October 19, 2012. collective management scheme (through the Group’s employee It closed on December 17, 2012. When it was over, TTC savings plans in mainland France). held 60,177,409 CFAO shares, equivalent to 97.81% of the Company’s share capital and voting rights. However, as of December 31, 2014, 325,154 shares were held by employees and managers of the Group (excluding For further information about this takeover, see the 2013 the members of the Management Board) beneficiaries of the Registration Document, section 18.1 “Shareholder s base”, the Performance Share Plans who were awarded free shares within note issued by CFAO in response to the bid initiated by TTC, these Plans on December 3, 2010, July 18, 2013 and July 7, as well as the result of the reopening of the bid, available on 2014. These shares cannot be sold to third parties before the end CFAO’s website and on the French Financial Markets Authority of a two-year lock-up period ending on December 3, 2014 for the (AMF) website. first plan, July 18, 2015 for the second plan, and July 6, 2016 for the third plan.
For further information concerning these plans, see Chapter 15 “Compensation and Benefits”, section 15.1.6 “History of the deferred compensation of executive corporate officers”, sub-section “B) Performance share plans” of this Registration Document.
18.2 Voting rights
Each share gives the right to a vote at the Shareholders’ Meeting. Pursuant to Article L. 225-123 paragraph 3 of the French There are no double voting rights attached to the shares of the Commercial Code, a resolution to amend the company’s by laws Company, and the principal shareholders of the Company do not will be put to the Combined Shareholders’ General Meeting to hold different voting rights. be held on June 12, 2015, for the purpose of confirming that each share gives only one voting right at general shareholders’ meetings.
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18.3 Principal Shareholders and control
Kering (formerly PPR) was indirectly CFAO’s principal shareholder TTC is not a member of CFAO’s Supervisory Board as a legal with 41.99% of the share capital and voting rights until August 2, person. However, as of the date that this Registration Document 2012 (not taking into account the treasury shares). As indicated was filed, the Supervisory Board includes two members who are above, Kering sold its stake in CFAO’s share capital to the executive officers of TTC. Japanese company TTC. As a result, TTC offered to purchase the other shareholders’ shares. As at December 31, 2014, TTC Since the closing of the take-over bid in December 2012, CFAO owned 97.36% of CFAO’s share capital, and 97.43% of the has been a company controlled by TTC under the terms of Article voting rights (not taking into account the treasury shares). This L. 233-3 of the French Commercial Code. However, it should percentage was 97.36% at the date on which this Registration be noted that the Supervisory Board of CFAO comprises 71% Document was filed. independent members, this being a higher proportion than that required by the AFEP-MEDEF Code (at least one-third under recommendation 9.2 of that Code).
18.4 Shareholder agreements
CFAO is not aware of any shareholder agreements or other arrangements between its shareholders. The Company is not party to any agreement which could result in a change in its shareholder base, and has no knowledge of the existence of such an agreement.
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19.1 Transactions with the Kering Group 19.3 Regulated agreements (formerly PPR) 180 and commitments 180 19.3.1 Agreements and commitments that remained 19.2 Transactions with the TTC group 180 in force in 2014 180 19.3.2 Agreements approved and entered into in 2014 181 19.3.3 Agreements mentioned in the annual management report 181 19.3.4 Statutory Auditors’ special report on related party agreements and commitments 182
REGISTRATION DOCUMENT 2014 - CFAO 179 RELATED PARTY TRANSACTIONS 19 Transactions with the Kering Group (formerly PPR)
CFAO Group’s related parties in 2013 and 2014 comprised its main shareholders Toyota Tsusho Corporation (“TTC”), the affiliates, as well as its senior corporate executives and their close family members. Before August 2, 2012, CFAO’s main shareholder was Kering (formerly PPR), the affil iates, its senior corporate executives and their close family members. In accordance with the European Regulation (EC) No. 1606/2002), the details of the operations with related parties entered into by the issuer must be presented for the period covered by the historical financial information (the last three years) up to the registration date of the Registration Document. Therefore the operations are presented in two parts: 19.1 “Operations with the Kering group (formerly PPR) before August 2, 2012” and 19.2 “Operations with the TTC group after August 2, 2012”. Parties related to CFAO also include CFAO’s subsidiaries; however, transactions between the parent company and its fully consolidated subsidiaries and between these subsidiaries are eliminated in the consolidated financial statements.
19.1 Transactions with the Kering Group (formerly PPR)
The CFAO Group was party to various agreements with entities later. For more information on these agreements, see Chapter 19, within the Kering Group (formerly PPR). These agreements were section 19.1 “Transactions with the PPR group” of the 2012 applied until CFAO’s IPO in December 2009, subsequent to Registration Document. which they were terminated, either immediately or a few months
19.2 Transactions with the TTC group
None.
19.3 Regulated agreements and commitments
19.3.1 Agreements and commitments ■ Supplementary pension plan for the members of the that remained in force in 2014 Management Board (except Mr. Ichiro Kashitani): At its meeting on August 30, 2010, the Supervisory Board extended the existing funded, defined pension plan to members of the The following agreements or commitments were entered into or Management Board. made before 2014, and continued to be implemented in 2014: ■ Retention Bonus paid on condition of continued presence ■ Agreements entered into with Richard Bielle at the time of his within the Company as of December 31, 2014 for certain return to the CFAO Group: The Supervisory Board held on members of the Management Board, Mr. Olivier Marzloff December 2, 2013 approved (i) the granting to Richard Bielle and Mr. Alain Pécheur (approved by the Supervisory Board of corporate officer unemployment insurance taken out with on July 27, 2013): the implementation of a management Garantie Sociale des chefs et dirigeants d’entreprise (ii) the retention plan, following the changes in the composition of possibility of receiving the supplementary pension plan for the Company’s shareholding structure. This plan provided the corporate officers pursuant to his term of office (iii) the setting allocation of bonuses to the managers concerned, based on up of a new non-competition indemnity equal to 50% of his the sole condition of their presence within the Company as of last fixed compensation (including 10% of paid leave) for a December 31, 2014. It should be noted that this agreement maximum period of 12 months. was executed as the condition of presence was met by the two members of the Management Board. On December 31, ■ Agreement entered into with Richard Bielle at the time of 2014, Mr. Olivier Marzloff and Mr. Alain Pécheur received his return to the CFAO Group: The Supervisory Board held their retention bonuses in the respective gross amounts of on December 2, 2013 decided to grant Richard Bielle an €258,300 and €225,000. indemnity in the event of revocation from his office of Chairman of the Management Board after December 31, 2016.
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■ Implementing a Long-Term Incentive Plan 2013-2017: the 2014 (amount) and variable compensation (financial criteria). beneficiaries of this plan are the members of the Management (For further information concerning the compensation of Board, including Mr. Olivier Marzloff and Mr. Alain Pécheur, the members of the Management Board, see Chapter 15 employees of continental France having a role of managers, “Compensation and Benefits” of this Registration Document). or being in charge of a particular area or activity, as well as ■ employees who are general Managers or Administrative or Implementing a Long-Term Incentive Plan 2014-2018: the Financial Managers or members of the Management Comittee beneficiaries of this plan are the members of the Management of one of the subsidiaries, or key employees identified as high- Board, including Mr. Olivier Marzloff and Mr. Alain Pécheur, potential ones (approved by the Supervisory Board held on employees of continental France having a role of managers, July 24, 2013). or being in charge of a particular area or activity, as well as employees who are general Managers or Administrative or ■ Exceptional compensation for his contribution during the Financial Managers or members of the Management Comittee transition in the governance with TTC. On March, 27 of one of the subsidiaries, or key employees identified as high- 2014, the Supervisory Board decided to grant to Mr. Alain potential ones (approved by the Supervisory Board meetings Pécheur an exceptional compensation of €37,500 for 2013 on March 27 and July 25, 2014). in consideration of his exceptional contribution during the ■ transition in the governance including TTC. This special bonus Implementing a Long-Term Incentive Plan 2014-2018: Mr. Bielle was paid in 2014. being the beneficiary of this plan, by the payment of the amount due would be considered under Article L. 225-90-1 of In accordance with Ordinance No. 2014-863 related to corporate the Code de Commerce as part of his termination indemnity law and published on July 31, 2014 (hereafter the “Ordinance”) in the event of revocation of his mandate as Chairman of the entered into force on August 2, 2014 modifying various aspects Management Board under certain conditions (authorized by of related party transactions regime, the agreements signed the Supervisory Board of March 27 and July 25, 2014). between a Company and a 100% (or almost 100%) directly or indirectly owned subsidiary (Article L. 225-39 of the French The conclusion of these agreements or these commitments which Commercial Code) are now excluded from the scope of related- are agreements or as referred to the Article L. 225-86 of the party agreements. According to the above-mentioned Ordinance, French Commercial Code were previously authorized by CFAO’s the Supervisory Board is now required to conduct an annual Supervisory Board and they will be submitted to the Company’s review of on-going related party transactions(Article L. 225-40-1 Annual Shareholders’ Meeting to be called in 2015 to approve of the new French Commercial Code). The Supervisory Board held the financial statements for 2014. on March 27, 2015, duly conducted a review of the agreements For further information on transactions with related parties also see and commitments mentioned in point I. Note 35 “Transactions with related parties” to the consolidated Regarding earlier agreements, in accordance with Article 38 financial statements. of the Ordinance, the Supervisory Board may decide not to apply Article L. 225-88-1 of the French Commercial Code to the agreements approved prior to the publication date of said 19.3.3 Agreements mentioned Ordinance and which fall under the scope of Article L. 225-39 in the annual management report of this Code. Consequently, during the same meeting, the Supervisory Board decided that the agreement to make CFAO’s distribution network avaiable to its wholly-owned subsidiary The agreements entered into by one of the members of the (100%), SFCE (amended in 2012) is no more considered as a Management Board or of the Supervisory Board, or a shareholder related party transaction. Therefore, the Supervisory Board did with more than 10% of the Company’s voting rights as well not review it during this meeting. as another company that directly or indirectly holds more than half of the share capital of the Company (Article L. 225-102- 1 final paragraph of the new French Commercial Code) must be mentioned in the annual management report presented to the 19.3.2 Agreements approved and entered s hareholders of the Company (the previous regime did not include into in 2014 this obligation) . To the best of the Company’s knowledge, as of December 31, 2014, this type of agreement did not exist. ■ Modification of the employment contracts of Mr. Olivier Marzloff and Mr. Alain Pécheur: approved by the Supervisory Board held on March 27, 2014: fixed compensation for
REGISTRATION DOCUMENT 2014 - CFAO 181 RELATED PARTY TRANSACTIONS 19 Regulated agreements and commitments
19.3.4 Statutory Auditors’ special report on related party agreements and commitments
Annual General Meeting to approve the financial statements for the fiscal year ended December 31, 2014
To the Shareholders,
In our capacity as Statutory Auditors of CFAO, we hereby report to you on related party agreements and commitments.
It is our responsibility to report to shareholders, based on the information provided to us, on the main terms and conditions of agreements and commitments that have been disclosed to us or that we may have identified as part of our assignment, without commenting on their relevance or substance or identifying any undisclosed agreements or commitments. Under the provisions of Article R. 225-58 of the French Commercial Code (Code de commerce), it is the responsibility of the shareholders to determine whether the agreements and commitments are appropriate and should be approved.
Where applicable it is also our responsibility to provide shareholders with the information required by Article R. 225-58 of the French Commercial Code in relation to the implementation during the year of agreements and commitments already approved by the Annual General Meeting.
We performed the procedures that we deemed necessary in accordance with professional standards applicable in France to such engagements. These procedures consisted in verifying that the information given to us is consistent with the underlying documents.
1 Agreements and commitments to be submitted for the approval of the Annual General Meeting
1.1 Agreements and commitments authorized during the year In accordance with Article L. 225-88 of the French Commercial Code, we were informed of the following agreements and commitments previously authorized by the Supervisory Board.
1.1.1 Amendment to the employment contract of Mr. Olivier Marzloff, member of the Management Board On March 27, 2014 and March 27, 2015, the Supervisory Board authorized the amendment of the compensation package of Mr. Olivier Marzloff, who is an employee of CFAO in his position as Corporate Secretary and a corporate officer as a member of the Management Board.
Taking into account these changes, Mr. Oliver Marzloff’s compensation for 2014 consisted of:
■ Fixed compensation of €302,740, including compensation due under his employment contract in the amount of €292,740, and compensation for his duties as a Management Board member in the amount of €10,000.
■ Variable compensation calculated on the basis of the achievement of (i) financial objectives relating to recurring operating margin and free operating cash flow and (ii) non-financial objectives. His variable compensation amounted to €118,467 for 2014.
■ A company car declared as a benefit in kind valued at €3,733 in 2014.
1.1.2 Amendment to the employment contract of Mr. Alain Pécheur, member of the Management Board On March 27, 2014 and March 27, 2015, the Supervisory Board authorized the amendment of the compensation package of Mr. Alain Pécheur who is an employee of CFAO in his position as Financial Director and a corporate officer as a member of the Management Board.
Taking into account these changes, Mr. Alain Pécheur’s compensation for 2014 consisted of:
■ Fixed compensation of €302,000, including compensation due under his employment contract in the amount of €292,000, and compensation for his duties as a Management Board member in the amount of €10,000.
■ Variable compensation calculated on the basis of the achievement of (i) financial objectives relating to recurring operating margin and free operating cash flow and (ii) non-financial objectives. His variable compensation amounted to €115,540 for 2014.
■ A company car declared as a benefit in kind valued at €3,087 in 2014.
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1.1.3 Implementing a Long-Term Incentive Plan 2014-2018 On March 27, 2014 and July 25, 2014, the Supervisory Board set up a Long-Term Incentive Plan for 669 “key employees identified as high-potential ones” in the Group, including three members of the Management Board, Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur.
The plan is a deferred gross compensation, subject to the condition of presence and performance conditions. The sums to be paid to Mr. Olivier Marzloff and Mr. Alain Pécheur will be equivalent to 30% of their fixed compensation in 2014 and of the variable target compensation for 2013. They will represent up to 40% of the same base for Mr. Richard Bielle.
The target sums available for Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur under the terms of the Plan 2014-2018 amount respectively to €408,000, €127,340 and €127,020, with the maximum being equivalent to 150% of the target.
For confidentiality reasons, the level of achievement of objectives which must be reached to satisfy each of the performance conditions stated above cannot be disclosed to the public.
2 Agreements and commitments already approved by the General Shareholders’ Meeting
2.1 Agreements and commitments the performance of which continued during this year In accordance with Article R. 225-57 of the French Commercial Code, we were informed that the following agreements and commitments, approved by the General Shareholders’ Meeting in previous years, were implemented during the year ended December 31, 2014.
2.1.1 A retention bonus based on the presence within the company as at December 31, 2014, granted to certain members of the Management Board On July 27, 2013, the Supervisory Board decided to implement a management retention plan following the modification in the composition of the Company’s shareholding structure. This plan provided for the allocation of bonuses to the managers concerned, based on the sole condition of their presence within the Company as of December 31, 2014.
Two members of the Management Board were eligible for the plan, Mr. Olivier Marzloff and Mr. Alain Pécheur. Being still in office at December 31, 2014, they received on that date bonuses of respectively € 258,300 and €225,000.
2.1.2 Exceptional compensation for the contribution during the transition in governance with TTC The Supervisory Board meeting of March 27, 2014 decided to grant extraordinary compensation of €37,500 to Mr. Alain Pécheur, to reward his involvement during the transition in governance with TTC.
This extraordinary compensation was paid during the 2014 fiscal year.
2.1.3 Implementing a a Long-Term Incentive Plan 2013-2017 On July 24, 2013 the Supervisory Board set up a Long-Term Incentive Plan for 631 “key employees identified as high-potential ones ” in the Group, including two members of the Management Board, Mr. Olivier Marzloff and Mr. Alain Pécheur.
The plan is a deferred gross compensation, subject to the condition of presence and performance conditions. The sums which can be awarded will represent up to 30% of their fixed compensation for 2013 and the variable target compensation for 2012.
The target amounts awarded to Mr. Olivier Marzloff and Mr. Alain Pécheur for the 2013-2017 plan amount respectively to €119,679 and €104,250 , with the maximum being equivalent to 150% of the target.
For confidentiality reasons, the level of achievement of objectives which must be reached to satisfy each of the performance conditions stated above cannot be disclosed to the public.
REGISTRATION DOCUMENT 2014 - CFAO 183 RELATED PARTY TRANSACTIONS 19 Regulated agreements and commitments
2.1.4 Agreements entered into with Richard Bielle, Chairman of the Management Board, at the time of his return to CFAO Group The Supervisory Board held on December 2, 2013 decided to grant Mr. Richard Bielle a termination indemnity in the event of his revocation from his term of office as Chairman. These indemnities will be limited to 1.5 times the amount of his target compensation as Chairman of the Management Board, and will depend on and be adjusted in accordance with various performance criteria.
The Supervisory Board held on December 2, 2013 also authorized the award of directors’ unemployment insurance for Mr. Richard Bielle and authorized his affiliation to the directors’ supplementary pension plan under his mandate as Chairman of the Management Board.
Lastly, again assuming Mr. Bielle may be forced to leave his position, the Supervisory Board decided to implement a new non-competition agreement for a maximum of 12 months with the payment of an amount limited to 50% of his annual base salary.
2.1.5 Supplementary pension plan for the members of the Management Board At its meeting on August 30, 2010, the Supervisory Board extended the existing funded pension plan in place within the Company to the members of the Management Board.
The contribution accounted in 2014 for this agreement for Mr. Richard Bielle, Mr. Olivier Marzloff and Mr. Alain Pécheur amounted to €31,539.
Paris La Défense and Neuilly-sur-Seine, April 16, 2015
The Statutory Auditors KPMG Audit Deloitte & Associés A division of KPMG SA Hervé Chopin Alain Penanguer Partner Partner
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20.1 Historic fi nancial information 186 20.5 Date of the most recent fi nancial information 276 20.2 Pro forma fi nancial information 186 20.6 Interim fi nancial information 276 20.3 Financial statements 187 20.7 Dividend policy 276 20.3.1 Consolidated fi nancial statements 187 20.3.2 Parent company fi nancial statements 248 20.8 Litigation and arbitration 277 20.4 Verifi cation of fi nancial information 274 20.8.1 Tax litigation 277 20.4.1 Statutory Auditors’ reports for 2014 274 20.8.2 Civil and criminal litigation 277 20.4.2 Additional information verifi ed by the Statutory Auditors 276 20.9 Signifi cant changes in fi nancial or trading position 278
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The consolidated and parent company financial statements presented below will be submitted for the approval of CFAO’s Annual General Meeting to be held on June 12, 2015.
20.1 Historic financial information
In compliance with Article 28 of European Regulation 809/2004 Auditors’ reports. These financial statements and reports are of the European Commission, this Registration Document contained in the 2011 and 2012 Registration Documents filed incorporates by reference the consolidated financial statements with the French financial markets authority (Autorité des marchés for 2011 and 2012, as well as the corresponding Statutory financiers – AMF).
20.2 Pro forma financial information
None.
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20.3 Financial statements
20.3.1 Consolidated financial statements
Consolidated financial statements for the year ended December 31, 2014
NOTE: In this report, “Company” refers to CFAO SA, parent company of the CFAO Group. “Group” refers to the Company, its consolidated subsidiaries and its interests in associates. The Group’s consolidated financial statements for the years ended December 31, 2014 and 2013 were prepared in accordance with the International Financial Reporting Standards (“IFRS”) and IFRIC interpretations adopted for use by the European Union and applicable as of December 31, 2014.
The comparative information for 2013 set out in this document is in compliance with the IFRS applicable at the closing date of the financial statements for 2014.
Consolidated income statement for the years ended December 31, 2014 and 2013
(in € millions) Notes 31.12.2014 31.12.2013 Revenue 5.1 3,560.4 3,628.1 Cost of sales 5.2 (2,717.5) (2,814.9) Gross profit 842.9 813.1 Payroll expenses 6 (282.8) (267.9) Other recurring operating income and expenses (289.4) (276.2) Recurring operating income 9 270.7 269.0 Other non-recurring operating income and expenses 10 (4.2) (1.9) Operating income 266.4 267.1 Cost of net debt 11 (39.2) (39.4) Other financial income and expenses 11 (2.3) (1.9) Income before tax 224.9 225.9 Income tax 12 (76.8) (83.1) Share in earnings of associates 1.5 1.6 Net income from continuing operations 149.6 144.4 o/w attributable to owners of the parent 100.5 100.4 o/w attributable to non-controlling interests 49.1 44.0 Net income of consolidated companies 149.6 144.4 Net income attributable to owners of the parent 100.5 100.4 Net income attributable to non-controlling interests 49.1 44.0 NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT 100.5 100.4 Earnings per share (in €) 13 1.6 1.6 Fully diluted earnings per share (in €) 13 1.6 1.6
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Consolidated statement of comprehensive income for the years ended December 31, 2014 and 2013
(in € millions) Notes 31.12.2014 31.12.2013 Net income 149.6 144.4 Items recycled to income: 8.3 (10.5) Foreign exchange gains and losses and other 8.3 (10.5) Items not recycled to income: (0.3) (0.2) Actuarial gains and losses* (0.3) (0.2) Other comprehensive income 14 8.0 (10.7) Total comprehensive income 157.6 133.7 o/w attributable to owners of the parent 108.4 89.8 o/w attributable to non-controlling interests 49.1 44.0
* Net of tax
Consolidated statement of financial position as of December 31, 2014 and 2013 ASSETS (in € millions) Notes 12/31/2014 12/31/2013 Goodwill 15 208.5 199.5 Other intangible assets 16 32.7 29.8 Property, plant and equipment 17 444.7 392.9 Investments in associates 19 13.3 12.2 Non-current financial assets 20 61.1 64.8 Deferred tax assets 12.2 26.0 24.3 Other non-current assets 2.3 1.0 Non-current assets 788.6 724.5 Inventories 21 899.3 900.4 Trade receivables 22 561.4 553.5 Current tax receivables 12.2 40.4 37.0 Other current financial assets 30 15.2 6.0 Other current assets 23 178.6 170.5 Cash and cash equivalents 28 202.3 211.5 Current assets 1,897.2 1,879.0 Assets held for sale TOTAL ASSETS 2,685.8 2,603.5
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EQUITY AND LIABILITIES
(in € millions) Notes 31.12.2014 31.12.2013 Share capital 25 10.5 10.3 Translation adjustments (26.9) (34.8) Treasury shares (0.9) (0.3) Other reserves 759.4 684.1 Equity attributable to owners of the parent 25 742.0 659.2 Non-controlling interests 211.7 194.7 Total equity 25 953.8 853.9 Non-current borrowings 29 101.9 109.0 Provisions for pensions and other post-employment benefits 26 41.9 36.3 Other provisions 27 7.6 7.2 Deferred tax liabilities 12.2 0.4 1.3 Non-current liabilities 151.8 153.8 Current borrowings 29 532.9 506.0 Other current financial liabilities 30 16.8 19.0 Trade payables 23 573.9 619.9 Provisions for pensions and other post-employment benefits 26 1.2 1.2 Other provisions 27 30.6 25.7 Current tax liabilities 12.2 50.0 52.6 Other current liabilities 23 374.9 371.4 Current liabilities 1,580.3 1,595.7 TOTAL EQUITY AND LIABILITIES 2,685.8 2,603.5
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Consolidated statement of cash flows for the years ended December 31, 2014 and 2013
(in € millions) Notes 31.12.2014 31.12.2013 Net income 149.6 144.4 Net recurring charges to depreciation, amortization and provisions on non-current operating assets 61.5 59.4 Proceeds on disposal of leasing fleets (amendment to IAS 16) 5.0 3.4 Other non-cash income and expenses (0.5) 7.0 Cash flow from operating activities 33.1 215.6 214.2 Interest paid/received 42.9 43.1 Dividends received (1.7) (1.4) Net income tax payable 12.1 80.0 78.6 Cash flow from operating activities before tax, dividends and interest 336.7 334.5 Change in working capital requirement (46.1) (33.0) Income tax paid (86.7) (87.3) Net cash from (used in) operating activities 203.9 214.2 Purchases of leasing fleets (amendment to IAS 16) 33.2 (17.3) (12.3) Other purchases of property, plant and equipment and intangible assets (103.7) (87.4) Proceeds from disposals of property, plant and equipment and intangible assets 12.0 11.2 Total investments in property, plant and equipment (109.0) (88.6) Acquisitions of subsidiaries, net of cash acquired 33.3 (20.3) (3.9) Proceeds from disposals of subsidiaries, net of cash transferred 33.3 0.4 (2.5) Purchases of other financial assets (20.4) (22.6) Proceeds from sales of other financial assets 20.0 10.1 Interest and dividends received 2.4 2.3 Total financial investments (17.8) (16.5) Net cash used in investing activities (126.8) (105.0) Share capital increase/decrease 31.6 1.6 Dividends paid to owners of the parent company (49.9) (55.4) Dividends paid to non-controlling interests (37.6) (47.7) Issuance of debt 29 - 33.4 35.9 24.6 Repayment of debt 29 - 33.4 (51.2) (39.5) Interest paid and equivalent (43.6) (44.1) Net cash used in financing activities (114.8) (160.5) Impact of exchange rate variations (0.9) 2.5 Impact of treasury shares (0.6) 1.0 Other movements (3.1) 0.3 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (42.4) (47.5) Cash and cash equivalents net of bank overdrafts at beginning of the period 33 (243.1) (195.6) Cash and cash equivalents net of bank overdrafts at end of the period 33 (285.5) (243.1)
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Consolidated statement of changes in equity
Other reserves Equity Cumulative and net income Number of translation attributable shares adjustments to owners Owners Non-controlling (in € millions) outstanding Share capital and other of the parent of the parent interests Total equity As of December 31, 2012 61,484,408 10.3 (42.5) 638.2 605.9 213.0 818.9 Comprehensive income for the year 2013 (10.1) 99.9 89.8 44.0 133.7 Share capital increase/decrease 1.0 1.0 2.1 3.1 Treasury shares 41,782* 1.0 1.0 1.0 Valuation of share-based payment 3.8 3.8 3.8 Dividends paid (55.4) (55.4) (47.8) (103.2) Changes in scope of consolidation 17.8 (4.8) 13.0 (16.6) (3.6) As of December 31, 2013 61,623,201 10.3 (34.8) 683.7 659.2 194.7 853.9 Comprehensive income for the year 2014 8.0 100.3 108.4 49.1 157.5 Share capital increase/decrease 0.3 24.7 24.9 6.6 31.6 Treasury shares 44,190* (0.6) (0.6) (0.6) Valuation of share-based payment 1.3 1.3 1.3 Dividends paid (49.9) (49.9) (37.3) (87.2) Changes in scope of consolidation (0.2) (1.2) (1.3) (1.4) (2.7) AS OF DECEMBER 31, 2014 62,712,875 10.5 (26.9) 758.3 742.0 211.7 953.8
* Within the framework of the liquidity agreement and share buybacks for performance share plans.
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Notes to the consolidated financial statements
Summary
NOTE 1 Introduction 193 NOTE 21 Inventories 220
NOTE 2 Accounting policies and methods 193 NOTE 22 Trade receivables 221
NOTE 3 Scope of consolidation 202 NOTE 23 Working capital requirement 221
NOTE 4 Operating segments 202 NOTE 24 Other current financial assets 222
NOTE 5 Revenue and cost of sales 205 NOTE 25 Equity 222
NOTE 6 Payroll expenses 206 NOTE 26 Employee benefits 223
NOTE 7 Share-based payment 207 NOTE 27 Provisions 226
NOTE 8 Long term incentive plan 208 NOTE 28 Cash and cash equivalents 227
NOTE 9 Recurring operating income 209 NOTE 29 Borrowings 228
NOTE 10 Other non-recurring operating income NOTE 30 Exposure to foreign exchange, interest rate and expenses 209 and credit risk 231
NOTE 11 Financial income and expenses 210 NOTE 31 Net debt 237
NOTE 12 Income tax 210 NOTE 32 Accounting classification and market value of financial instruments 237 NOTE 13 Earnings per share 213 NOTE 33 Notes to the statement of cash flows 238 NOTE 14 Other comprehensive income 214 NOTE 34 Contingent liabilities, contractual NOTE 15 Goodwill 214 commitments not recognized and other contingencies 239 NOTE 16 Other intangible assets 215 NOTE 35 Transactions with related parties 242 NOTE 17 Property, plant and equipment 216 NOTE 36 Subsequent events 243 NOTE 18 Impairment tests on non-financial assets 218 NOTE 37 List of consolidated companies NOTE 19 Investments in associates 219 as of December 31, 2014 243 NOTE 20 Non-current financial assets 219
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Notes to the consolidated financial statements for the years ended December 31, 2014 and 2013
3 NOTE 1 Introduction
The CFAO Group, comprising CFAO SA (“the Company”) and its Management Board incorporated under French law, whose subsidiaries (together, “the CFAO Group” or “the Group”) is one registered office is located at 18, rue Troyon, 92310 Sèvres, of the leading specialized retail brands in its key businesses in France. It is registered with the Nanterre Register of Commerce Africa and the French overseas territories. CFAO is a major player and Companies under the reference 552 056 152 RCS Nanterre. in the import and distribution of vehicles and pharmaceutical CFAO SA is bound by all regulations governing commercial products, and related logistical services, as well as in certain companies in France, and particularly the provisions of the French industrial activities and technological services in Africa and the Commercial Code (Code de commerce). French overseas territories. The CFAO Group prepared its first financial statements under IFRS The Group currently has operations in France, 34 African for the year ended December 31, 2008. countries, seven French overseas territories, Vietnam, Cambodia and Mauritius. CFAO is also present in Portugal, Denmark, Italy The CFAO Group’s consolidated financial statements were and India where it carries out logistical and supply activities. approved for issue by the Management Board on February 16, 2015 and are presented in euros. These consolidated financial CFAO, the Group’s parent company, is a société anonyme statements will be presented to CFAO’s General Shareholders’ (joint stock company) governed by a Supervisory Board and Meeting for approval.
3 NOTE 2 Accounting policies and methods
General principles and statement of compliance Further to analysis by the Group IFRS 10, 11 and 12 (applicable to financial periods beginning on or after January 1, 2014) have The consolidated financial statements of the CFAO Group for the no material impact on the consolidated financial statements. year ended December 31, 2014 were prepared in accordance IFRS 9 has not yet been adopted by the European Union. with applicable International Financial Reporting Standards adopted by the European Union and of mandatory application as of that date. These international standards comprise International Financial Reporting Standards (IFRS), International Accounting 2.1 Basis of preparation of the Standards (IAS) and the interpretations of the International consolidated financial statements Financial Reporting Interpretations Committee (IFRIC).
All accounting standards and guidance adopted by the European Union can be consulted on the European Commission’s website: 2.1.1 Basis of measurement http://ec.europa.eu/internal_market/accounting/ias_en.htm. The consolidated financial statements are prepared based on the historical cost convention with the exception of certain financial IFRS basis adopted assets and liabilities carried at fair value. The standards, amendments and interpretations applicable for the first time in accounting periods beginning on or after January 1, 2.1.2 Use of estimates and judgment 2013, 2014 and 2015 are as follows: The preparation of consolidated financial statements requires the use of estimates and assumptions by Group management that ■ IFRS 9, which redefines the classification and measurement can affect the carrying amounts of certain assets and liabilities, rules for financial assets based on the entity’s business model income and expenses, and the information disclosed in the for managing the financial assets and the contractual cash flow accompanying notes. Group management reviews these estimates characteristics of the financial asset. and assumptions on a regular basis to ensure their pertinence with ■ IFRS 10, IFRS 11 and IFRS 12 on consolidation, which redefine respect to past experience and the current economic situation. the notion of control of an entity, eliminate the option of using Items in future financial statements may differ from current the proportionate consolidation method to consolidate joint estimates as a result of changes in these assumptions. The impact ventures (replacing it with the use of the equity method alone), of changes in accounting estimates is recognized during the and introduce new disclosure requirements for the notes to the period in which the change occurs and all affected future periods. consolidated financial statements.
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The main estimates made by management in the preparation on internal transactions with controlled companies are fully of the financial statements concern the value and useful lives of eliminated. operating assets, property, plant and equipment, intangible assets and goodwill; the amount of contingency provisions and other Subsidiaries’ accounting policies and methods are modified provisions relating to operations; and assumptions underlying the where necessary to ensure consistency of accounting treatment calculation of obligations relating to employee benefits, deferred at Group level. tax balances and derivatives. In particular, the Group uses discount rate assumptions based on market data to estimate the Associates value of long-term assets and liabilities. Associates are all entities in which the Group exercises a The main assumptions made by the Group are detailed in specific significant influence over the entity’s management and financial sections of the notes to the financial statements, in particular: policy, without exercising control, and generally implies holding 20% to 50% of the voting rights. ■ Note 7 – Share-based payment; Associates are accounted for using the equity method and are ■ Note 12 – Income tax; initially measured at cost, except when the associates were previously controlled by the Group in which case they are ■ Note 18 – Impairment tests on non-financial assets; measured at fair value through the income statement as of the date ■ Note 21 – Inventories; control is lost. Subsequently, the Group’s share in profits or losses of the associate attributable to owners of the parent is recognized ■ Note 22 – Trade receivables; in net income, and the Group’s share in the associate’s other comprehensive income is recognized on a separate line of the ■ Note 26 – Employee benefits; statement of comprehensive income, under other comprehensive ■ Note 27 – Provisions; income. If the Group’s share in the losses of an associate equals or exceeds its investment in that associate, the Group no longer ■ Note 30 – Exposure to foreign exchange, interest rate and recognizes its share of losses, unless it has legal or constructive credit risk; obligations to make payments on behalf of the associate.
■ Note 32 – Accounting classification and market value of Goodwill related to an associate is included in the carrying financial instruments. amount of the investment. Gains or losses on internal transactions with equity-accounted 2.1.3 Statement of cash flows associates are eliminated in the amount of the Group’s investment The Group’s statement of cash flows is prepared in accordance in these companies. with IAS 7 – “Statement of Cash Flows”, using the indirect method. The accounting policies and methods of associates are modified where necessary to ensure consistency of accounting treatment at Group level. 2.2 Consolidation principles Business combinations The consolidation is based on financial statements (or interim Business combinations, where the Group acquires control of financial statements) drawn up for the 12-month periods ended one or more other activities, are recognized using the purchase December 31, 2014 and 2013 for all Group companies. method. The consolidated financial statements include the financial Business combinations that took place prior to January 1, 2010 statements of acquired companies as from the acquisition date, were recognized using the accounting principles used to prepare and sold companies up until the date of disposal. the financial statements for the year ended December 31, 2008. Subsidiaries Business combinations carried out after January 1, 2010 are recognized and measured in accordance with the provisions of Subsidiaries are entities controlled by the Group. The Group the revised IFRS 3. Accordingly, the consideration transferred controls an entity when it is exposed to, or has rights to, variable (acquisition cost) is measured at the fair value, at the date of returns from its involvement with the entity and has the ability to exchange, of the assets transferred, equity interests issued and affect those returns through its power over the entity. liabilities incurred by the acquirer. Identifiable assets and liabilities Subsidiaries are fully consolidated from the effective date of are generally measured at their fair value on the acquisition control. date. Costs directly attributable to the business combination are recognized in expenses. Intercompany assets and liabilities and transactions between fully consolidated companies are eliminated. Gains and losses The excess of the consideration transferred over the Group’s interest in the net fair value of the identifiable assets and liabilities of the acquired entity is recognized as goodwill.
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The Group may elect to measure any non-controlling interests Put options granted after January 1, 2010 resulting from a business combination at fair value. In this case, The Group records a financial liability for the put options goodwill is recognized on all of the identifiable assets and granted to the minority shareholders of the entities concerned liabilities (full goodwill method). and the corresponding non-controlling interests are reclassified Goodwill is determined at the date control over the acquired and included in this financial liability. The difference between entity is obtained and may not be adjusted after the measurement the debt representing the commitment to purchase the non- period. No additional goodwill is recognized on any subsequent controlling interests and the carrying amount of the reclassified acquisition of non-controlling interests. non-controlling interests is recorded in Goodwill when these put options are granted at acquisition date, as anticipated-acquisition Acquisitions and/or disposals of non-controlling interests are model allows it. It is recorded as a deduction from equity in other recognized directly in consolidated equity. cases.
If the consideration transferred is less than the Group’s interest in This liability is initially recorded at the present value of the strike the net assets (measured at fair value) of the acquired subsidiary, price and at the end of subsequent reporting periods, based on the difference is recognized directly in net income for the period. the fair value of shares potentially purchased if the strike price is linked to the fair value. Subsequent changes in the value of the The accounting for a business combination must be completed commitment are recorded by an adjustment to equity. within 12 months of the acquisition date. This applies to the measurement of identifiable assets and liabilities, consideration transferred and non-controlling interests. 2.3 Foreign currency translation Put options granted to minority shareholders The Group has undertaken to repurchase the non-controlling Functional and presentation currency interests of shareholders of certain subsidiaries. The strike price of these put options may be set or determined according to a Items included in the financial statements of each Group entity are predefined calculation formula, and the options may be exercised valued using the currency of the primary economic environment at any time or on a specific date. in which the entity operates (functional currency). The Group’s consolidated financial statements are presented in euros, which is The revised IAS 27 – applied by the Group in its consolidated the presentation currency. financial statements as of January 1, 2010 – prescribes the appropriate accounting treatment for acquisitions of additional Foreign currency transactions shares in a subsidiary after control is obtained. Given that the the norm provides no precise guidance and, as permitted by Transactions denominated in foreign currencies are recognized in the French financial markets authority (Autorité des marchés the entity’s functional currency at the exchange rate prevailing on financiers – AMF), the Group has decided to apply two different the transaction date. accounting methods to these put options, depending on whether Monetary items in foreign currencies are translated at the end they were granted before or after the date the revised standard of each reporting period using the closing rate. Translation first came into effect. adjustments arising from the translation or the settlement of these items are recognized in income or expenses for the period. Put options granted before January 1, 2010 Non-monetary items in foreign currencies valued at historical cost The Group uses its existing goodwill method for put options are translated at the rate prevailing on the transaction date, and granted before January 1, 2010, whereby a financial liability is non-monetary items in foreign currencies measured at fair value recorded for the put options granted to the minority shareholders are translated at the rate prevailing on the date the fair value of the entities concerned and the corresponding non-controlling is determined. When a gain or loss on a non-monetary item is interests are reclassified and included in this financial liability. recognized directly in other comprehensive income, the foreign The difference between the debt representing the commitment to exchange component is also recognized in other comprehensive purchase the non-controlling interests and the carrying amount of income. Otherwise, the component is recognized in income or the reclassified non-controlling interests is recorded as goodwill. expenses for the period.
This liability is initially recorded at the present value of the strike The treatment of foreign exchange rate hedges in the form of price and at the end of subsequent reporting periods, based on derivatives is described in the paragraph on derivative instruments the fair value of shares potentially purchased if the strike price is in Note 2.8 “Financial assets and liabilities”. linked to the fair value. Subsequent changes in the value of the commitment are recorded by an adjustment to goodwill.
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Translation of the financial statements of foreign 2.6 Property, plant and equipment subsidiaries The results and financial statements of Group entities with a Property, plant and equipment are recognized at cost less functional currency that differs from the presentation currency are accumulated depreciation and impairment losses with the translated into euros as follows: exception of land, which is presented at cost less impairment losses. The various components of property, plant and equipment ■ items recorded in the statement of financial position other than are recognized separately when their estimated useful life and equity are translated at the exchange rate at the end of the therefore their depreciation periods are significantly different. The reporting period; cost of an asset includes the expenses that are directly attributable ■ income and cash flow statement items are translated at the to its acquisition. average exchange rate for the year, which in the absence of Subsequent costs are included in the carrying amount of the asset material fluctuations approximates the exchange rate at the or recognized as a separate component, where necessary, if it is transaction date; probable that future economic benefits will flow to the Group and ■ foreign exchange differences are recognized as translation the cost of the asset can be reliably measured. All other routine adjustments in the statement of comprehensive income under repair and maintenance costs are expensed in the year they “Other comprehensive income” and notably include gains and are incurred. losses on foreign currency borrowings used to hedge foreign Depreciation is calculated using the straight-line method, based currency investments and on permanent advances to foreign on the purchase or production cost, less any residual value subsidiaries. which is reviewed annually if considered material, over a period Goodwill and fair value adjustments arising from a business corresponding to the useful life of each asset category, i.e., 10 to combination with a foreign activity are recognized in the functional 40 years for buildings and improvements to land and buildings, currency of the entity acquired. They are then translated at the and 3 to 10 years for equipment. closing exchange rate into the Group’s presentation currency, and the resulting differences are recognized in consolidated equity. Lease contracts Agreements whose fulfillment depends on the use of one or more specific assets and which transfer the right to use the asset may be 2.4 Goodwill classified as lease contracts. Lease contracts which transfer to the Group substantially all Goodwill represents the excess of the cost of a business the risks and rewards incidental to ownership of an asset are combination over the acquirer’s interest in the net fair value of classified as finance leases. the identifiable assets, liabilities and contingent liabilities on the acquisition date. Goodwill is allocated as of the acquisition date Assets acquired under finance leases are recognized in property, to cash-generating units (CGUs) or groups of CGUs defined by plant and equipment against the corresponding debt recognized the Group based on the characteristics of the business. in borrowings for the same amount, at the lower of the fair value of the asset and the present value of minimum lease payments. The corresponding assets are depreciated over a useful life identical to that of property, plant and equipment acquired outright. 2.5 Other intangible assets Deferred tax is recognized in respect of the capitalization of finance leases where appropriate. Intangible assets acquired as part of a business combination, which are controlled by the Group and can be measured reliably, Lease contracts that do not transfer substantially all the risks and which are separate or arise from contractual or other legal and rewards incidental to ownership are classified as operating rights, are recognized separately from goodwill. These assets, leases. Payments made under operating leases are recognized in the same way as intangible assets acquired separately, are in recurring operating expenses on a straight-line basis over the amortized over their useful life where this is finite and written term of the lease. down if their recoverable amount is less than their carrying amount. Software acquired as part of recurring operations is Capital gains on the sale and leaseback of assets are recognized usually amortized over a period not exceeding 12 months. in full in income at the time of disposal when the lease qualifies as an operating lease and the transaction is performed at fair value. Software developed in-house by the Group and meeting all the recognition criteria in IAS 38 is capitalized and amortized on a The same accounting treatment is applied to agreements which, straight-line basis over its useful life, which is generally between while not presenting the legal form of a lease contract, confer three and five years. on the Group the right to use a specific asset in exchange for a payment or series of payments.
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2.7 Asset impairment 2.8 Financial assets and liabilities
Goodwill and intangible assets with an indefinite useful life, such as brands, and CGUs or groups of CGUs containing these items, Financial assets are tested for impairment at least annually, during the second half Pursuant to IAS 39, financial assets are classified within one of the of each reporting period. following four categories:
An impairment test is also performed when events or circumstances ■ financial assets at fair value through the income statement; indicate that goodwill, other intangible assets, property, plant and ■ equipment, and CGUs or groups of CGUs may be impaired. Such loans and receivables; events or circumstances include material unfavorable changes of ■ held-to-maturity investments; a permanent nature affecting either the economic environment or the assumptions or objectives used on the acquisition date. ■ available-for-sale financial assets.
Impairment tests seek to determine whether the recoverable The classification determines the accounting treatment for the amount of an asset, a CGU or a group of CGUs is less than its instrument. It is defined by the Group on the initial recognition date, net carrying amount. based on the objective behind the asset’s purchase. Purchases and sales of financial assets are recognized on the trade date, The recoverable amount of an asset, a CGU or a group of CGUs which is the date the Group is committed to the purchase or sale is the higher of its fair value less costs to sell and its value in use. of the asset. A financial asset is derecognized if the contractual The value in use is determined based on future cash flow rights to the cash flows from the financial asset expire or the asset projections, taking into account the time value of money and the is transferred. specific risks attributable to the asset or CGU or group of CGUs. An after-tax discount rate is applied to after tax future cash flow A) Financial assets at fair value through the income projections, while a growth rate is used to extrapolate the cash statement flows to perpetuity. These are financial assets held by the Group for short-term profit, Future cash flow projections are based on medium-term budgets or assets voluntarily classified in this category. and plans spanning a period of five years. To calculate value in These assets are measured at fair value, with changes in fair value use, a terminal value equal to the perpetual capitalization of a recognized in income. normative cash flow is added to the estimated future cash flows. Fair value less costs to sell is the amount obtainable from the sale of B) Loans and receivables an asset or group of assets in an arm’s length transaction between Loans and receivables are non-derivative financial assets with knowledgeable, willing parties, less the costs of disposal. These fixed or determinable payments that are not listed in an active values are determined based on market data (comparison with market and are not held for trading purposes or available for sale. amounts used in recent transactions). These assets are initially recognized at fair value and subsequently When the recoverable value of an asset, CGU or group of CGUs at amortized cost using the effective interest method. Short-term is less than its carrying amount, an impairment loss is recognized receivables without a stated interest rate are valued at the amount in respect of the asset or group of assets. of the original invoice unless the effective interest rate has a For a CGU or group of CGUs, impairment is charged first to material impact. goodwill where appropriate, and recognized under “Other These assets are subject to impairment tests when there is an non-recurring operating income and expenses” in the income indication of impairment loss. An impairment loss is recognized if statement. the carrying amount exceeds the estimated recoverable amount. Impairment losses recognized in respect of property, plant and Loans and receivables due from non-consolidated investments, equipment and other intangible assets may be reversed at a later other loans and receivables and trade receivables are included date up to the amount of the losses initially recognized, when the in this category and are presented in non-current financial assets, recoverable amount once again exceeds the carrying amount. trade receivables and other non-current financial assets. Impairment losses in respect of goodwill may not be reversed.
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C) Held-to-maturity investments The carrying amount of financial liabilities that qualify as hedged items as part of a fair value hedging relationship and are valued Held-to-maturity investments are non-derivative financial assets, at amortized cost, is adjusted with respect to the hedged risk. other than loans or receivables, with fixed or determinable payments and fixed maturity that the Group has the positive Hedging relationships are described in the section below on intention and ability to hold to maturity. These assets are initially derivative instruments. recognized at fair value and subsequently at amortized cost using the effective interest method. Derivative instruments These assets are subject to impairment tests when there is an The Group uses various financial instruments to reduce its exposure indication of impairment loss. An impairment loss is recognized if to foreign exchange risk. These instruments are chiefly traded over the carrying amount exceeds the estimated recoverable amount. the counter with banks.
Held-to-maturity investments are presented in non-current financial Derivatives are recognized at fair value under other current or assets. non-current assets and liabilities depending on their maturity. Changes in the fair value of these derivatives are always recorded D) Available-for-sale financial assets in income. Available-for-sale financial assets are non-derivative financial Derivatives designated as hedging instruments are classified as assets that are not included in the aforementioned categories. fair value hedges (the Group does not classify any derivatives Unrealized capital gains or losses are recognized in Other as cash flow or net investment hedges). A fair value hedge is Comprehensive Income until the disposal of the assets. However, used to hedge the risk of changes in the fair value of recognized when there is a significant or prolonged decline in value of an assets or liabilities or a firm commitment not yet recognized that available-for-sale asset, the unrealized capital loss is reclassified would impact consolidated net income. For fair value hedges, the from equity to income for the period. Impairment losses recognized hedged component of these items is measured at fair value. Fair in respect of variable income securities cannot be reversed through value gains and losses are recorded in the income statement and the income statement at the end of a subsequent reporting period. offset, to the extent the hedge is effective, by matching fair value gains and losses on the hedging instrument. For listed securities, fair value corresponds to a market price. For unlisted securities, fair value is determined by reference to recent Hedge accounting can only be applied if all the following transactions or using valuation techniques based on reliable and conditions are met: observable market data. However, when the fair value of a security cannot be reasonably estimated, it is recorded at historical cost. ■ there is a clearly identified, formalized and documented These assets are subject to impairment tests in order to assess hedging relationship as of the date of inception; whether they are recoverable. ■ the effectiveness of the hedging relationship can be This category mainly comprises non-consolidated investments and demonstrated on a prospective and retrospective basis. The marketable securities that do not meet the other financial asset results obtained must attain a confidence level of between 80% definitions. They are presented in non-current financial assets. and 125%.
Financial liabilities Cash and cash equivalents The valuation of financial liabilities depends on their IAS 39 The “Cash and cash equivalents” line item recorded on the classification. The Group recognizes all financial liabilities and assets side of the consolidated statement of financial position particularly borrowings, trade payables and other liabilities, comprises cash, short-term investments and other liquid and initially at fair value less transaction costs and subsequently at readily convertible instruments with an insignificant risk of amortized cost, using the effective interest method. changes in value and a maximum maturity of three months as of the purchase date. The effective interest rate is determined for each transaction and corresponds to the rate that would provide the carrying amount of Investments with a maturity exceeding three months, and blocked a financial liability by discounting its estimated future cash flows or pledged bank accounts, are excluded from cash. Bank until maturity or until the nearest date the price is reset to the overdrafts are presented in borrowings on the liabilities side of market rate. The calculation includes transaction costs and any the statement of financial position. premiums and/or discounts. Transaction costs correspond to the In the statement of cash flows, “Cash and cash equivalents” costs directly attributable to the acquisition or issue of a financial includes accrued interest receivable on assets presented in cash liability. and cash equivalents and bank overdrafts. A schedule reconciling cash per the statement of cash flows and per the statement of financial position is provided in Note 33.
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Definition of consolidated net debt 2.11 Income tax The concept of net debt used by the Group comprises gross debt including accrued interest less net cash as defined by The income tax charge for the period comprises the current and French National Accounting Board (Conseil National de la deferred tax charge. Comptabilité – CNC) recommendation 2013-03. In France, the 2013 finance law introduced the Company value-added contribution (Cotisation sur la Valeur Ajoutée des Entreprises – CVAE). In line with similar taxes within the Group, 2.9 Share-based payment the CVAE is treated as an income tax in application of IAS 12. Consequently, it is accounted for under “Income tax”. The Group awards performance shares and stock options which Deferred tax is calculated using the liability method on all constitute equity settled share-based payment transactions. In temporary differences between the book value of assets and accordance with IFRS 2 – “Share-based Payment”, the fair value liabilities recorded in the consolidated statement of financial of the plans concerned – which corresponds to the fair value of position and their tax value. The measurement of deferred tax the services rendered by the beneficiaries – is measured at the balances depends on the way in which the Group intends to grant date. recover or settle the carrying amount of assets and liabilities, The pricing models used for this measurement are described in using tax rates enacted or substantively enacted at the end of the Note 7. Subsequent to the grant date, the fair values recognized reporting period. for the stock options or performance shares are spread over Deferred tax assets and liabilities are not discounted and are the vesting period. The related expense is recorded in payroll classified in the statement of financial position within non-current expenses with an offsetting increase in equity. assets and liabilities.
A deferred tax asset is recognized on deductible temporary 2.10 Inventories differences and for tax loss carry-forwards and tax credits to the extent that their future offset appears probable.
Inventories comprise goods for resale that are physically located A deferred tax liability is recognized on taxable temporary at different stages of the supply chain, from suppliers through to differences relating to investments in subsidiaries, associates and end customers. They include: joint ventures unless the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the ■ goods being transported between suppliers and subsidiaries temporary difference will not reverse in the foreseeable future. or storage facilities managed by central purchasing offices;
■ goods in stock at the subsidiaries or at the storage facilities managed by central purchasing offices. 2.12 Provisions Inventories comprise goods for resale as well as raw materials used by CFAO Industries in its production processes. Provisions for litigation and disputes, and miscellaneous contingencies and losses are recognized as soon as a present Inventories are valued at the lower of cost and net realizable obligation arises from past events that is likely to result in an value. Net realizable value is the estimated sale price in the outflow of resources embodying economic benefits, and where normal course of operations, net of costs to be incurred to the amount of the obligation can be reliably estimated. complete the sale. Provisions also include costs arising as a result of labor or tax- The same method for determining cost is adopted for inventories related disputes. No provision is set aside for tax reassessments of a similar nature and use within the same entity. Inventories are issued (or in the process of being issued) by the tax authorities valued on a first-in-first-out (FIFO) basis or at weighted average if the Group considers that the reasons for the reassessment are cost depending on the Group activity. unfounded, or that there is a reasonable chance it will be able to defend its position successfully in the dispute with the tax Interest expenses are excluded from inventories and expensed as authorities. A restructuring provision is recognized when there is finance costs in the year they are incurred. a formal and detailed restructuring plan and the plan has begun The Group may write down inventory based on expected turnover, to be implemented or its main features have been announced if inventory items are damaged, have become wholly or partially before the end of the reporting period. Restructuring costs for obsolete, the selling price has declined, or if the estimated costs which a provision is made essentially represent employee costs to completion or to be incurred to make the sale have increased. (severance pay, early retirement plans, payment in lieu of notice, etc.), work stoppages and compensation for breaches of contract with third parties.
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Provisions maturing in more than one year are valued at the 2.14 Revenue recognition discounted amount representing the best estimate of the expense necessary to extinguish the present obligation at the end of The Group derives the bulk of its revenue from the sale of vehicles, the reporting period. The discount rate used reflects current pharmaceutical products, and consumer goods and related assessments of the time value of money and specific risks related services. to the liability. Revenue is valued at the fair value of the consideration received for goods and services sold, royalties, licenses and operating 2.13 Post-employment benefits subsidies granted, excluding taxes, net of rebates and discounts and after elimination of intercompany sales.
The Group’s companies grant various types of benefits to their Sales of goods are recognized when a Group entity has employees depending on the laws and practices of each country. transferred the risks and rewards incidental to ownership to the buyer on delivery except in exceptional circumstances), Under defined contribution plans, the Group is not obliged to when revenue can be reliably measured and when recovery is make additional payments over and above contributions already reasonably assured. made to a fund if the fund does not have sufficient assets to cover the benefits corresponding to services rendered by personnel The amendment to IAS 16, which has been applied since during the current period and prior periods. Contributions paid January 1, 2010, sets out the recognition method for the sale of into these plans are expensed as incurred. assets that were previously held for rental, where entities routinely carry out this type of transaction in the course of their ordinary Under defined benefit plans, obligations are valued using the activities. At the end of the lease, the asset concerned must be projected unit credit method based on agreements in effect in transferred to inventories and the proceeds from the sale recorded each company. Under this method, each period of service gives in revenue. rise to an additional unit of benefit entitlement and each unit is measured separately to build up the final obligation. The obligation is then discounted. The actuarial assumptions used to determine the obligations vary according to the economic conditions of the 2.15 Operating income country where the plan is established. These plans, as well as the termination benefits, are valued by independent actuaries on an Operating income comprises: annual basis for the most significant plans and at regular intervals for the other plans. The valuations take into account the level of ■ r ecurring operating income which is an intermediate line item future compensation, the probable active life of employees, life intended to facilitate understanding of the Group’s operating expectancy and staff turnover. performance;
Actuarial gains and losses are primarily due to changes in ■ o ther non-recurring operating income and expenses excluded assumptions and the difference between estimated results from recurring operating income; which include non-recurring based on actuarial assumptions and actual results. All actuarial items corresponding to revenues and expenses that are unusual differences in respect of defined benefit plans are recognized due to their frequency, nature or amount and especially: immediately in Other Comprehensive Income. − impairment of goodwill and other intangible assets, Past service cost – corresponding to the increase in an obligation − gains or losses on disposals of property, plant and equipment following the introduction of a new plan or changes to an existing and intangible assets, or investments, plan – is expensed immediately whether the benefit entitlement has already vested or is still vesting. − restructuring costs and costs relating to employee deployment measures. Expenses relating to this type of plan are recognized in recurring operating income (service cost) and net finance costs (interest cost and net interest on the net defined benefit liability or asset). Curtailments, settlements and past service costs are recognized 2.16 Earnings per share in recurring operating income. The provision recognized in the statement of financial position corresponds to the present value of Basic earnings per share are calculated by dividing net income the obligations calculated as described above, less the fair value attributable to owners of the parent by the weighted average of plan assets. number of shares outstanding during the year.
In the case of material non-recurring items, earnings per share excluding non-recurring items are calculated by adjusting net income attributable to owners of the parent for non-recurring items net of taxes and non-controlling interests. Non-recurring
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items taken into account for this calculation correspond to all the 2.18 Non-current assets (or disposal items included under “Other non-recurring operating income and groups) classified as held for sale expenses” in the income statement.
Fully diluted earnings per share are calculated by adjusting net The CFAO Group did not have any non-current assets (or disposal income attributable to owners of the parent and the number of groups) held for sale in 2014 or 2013. outstanding shares for all instruments granting deferred access to the share capital of the Company whether issued by CFAO or one The Group may be impacted by IFRS 5 – “Non-current Assets of its subsidiaries. Held for Sale and Discontinued Operations”, which requires the separate recognition and presentation of assets (or disposal groups) held for sale and operations discontinued, sold or to be sold. 2.17 Operating segments Non-current assets, or groups of assets and liabilities directly associated with those assets, are considered as held for sale if In accordance with IFRS 8 – Operating Segments, segment their carrying amount will be recovered principally through a sale information is reported on the same basis as used internally by transaction rather than through continuing use. For this to be the the Chairman and/or other members of the Management Board case, the asset (or disposal group) must be available for immediate – who are the Group’s chief operating decision makers – for sale and its sale must be highly probable. Non-current assets evaluating operating segment performance and deciding how to (or disposal groups) held for sale are measured and recognized allocate resources to the segments. at the lower of their carrying amount and their fair value less the In accordance with IFRS 8, an operating segment is a component costs of disposal. These assets are no longer depreciated from the of the Group that engages in business activities from which it may time they qualify as assets (or disposal groups) held for sale. They earn revenues and incur expenses, whose operating results are are presented on separate lines in the consolidated statement of regularly reviewed by the chief operating decision maker, and for financial position, without restatement for previous periods. which discrete financial information is available. Assets and liabilities arising from discontinued operations are not Each operating segment is monitored separately for internal presented on separate lines in the Group’s statement of financial reporting purposes, according to performance indicators common position. to all of the Group’s segments. An operation discontinued, sold or to be sold is defined as a The segments presented are operating segments or groups of component of an entity that generates cash flows that can be similar operating segments. clearly distinguished from the rest of the entity and represents a separate major line of business or geographical area of As of the beginning of 2014, CFAO’s organizational structure is operations. Net income from these activities is presented under a based around our three strategic development areas Equipment & separate income statement heading, “Discontinued operations”, Services, Healthcare and Consumer Goods. and is restated in the statement of cash flows. ■ Equipment & Services: Automotive, Equipment & Services (the Equipment and Rental Services businesses now form part of this business line) and Technologies. 2.19 Cost of sales ■ Healthcare: Eurapharma. Cost of sales chiefly includes the cost of goods sold, measured ■ Consumer Goods: FMCG Industries & Distribution (comprising at the net price charged by the supplier, plus all costs incurred the beverages, plastic products and FMCG businesses) and to ensure that the products are made available in their end CFAO Retail. markets (freight, transit, customs duties and other import taxes, fees payable to agents and self-employed vendors). Cost of sales The CFAO Holding & Others division primarily includes the includes net additions to inventory impairment provisions, as well overhead costs of the registered office at Sèvres with all cross- other valuation adjustments (inventory unable to be sold, theft, divisional services which are not allocated to the operating breakage, currency gains and losses affecting the related invoice, divisions. transportation insurance). No aggregation of operating segments has taken place since the year ended December 31, 2013.
The management data used to assess operating segment performance are prepared in accordance with IFRS as applied by the Group for its consolidated financial statements.
The performance of each operating segment is measured based on recurring operating income and Net Income Attributable to Owners, which is the method used by the Group’s chief operating decision maker.
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3 NOTE 3 Scope of consolidation
The CFAO Group’s consolidated financial statements for the year consumer goods distribution. CFAO owned previously 46.38% ended December 31, 2014 include the financial statements of the of this company which was consolidated with equity method. In companies listed in Note 37. 2014, GI&D reported €99.8 million in revenue and a loss of €2.1 million in net income. In 2013, the net result consolidated The following changes in the scope of consolidation have occurred with equity method was a loss of €0.8 million. since December 31, 2013: The other changes in the Group’s scope of consolidation did not On January 1, 2014, CFAO acquired 51% of General Import have a material impact on the financial statements for the year. & Distribution ltd (GI&D), a nigerian company specialized in
3 NOTE 4 Operating segments
The policies applied to determine the operating segments Purchases of property, plant and equipment and intangible presented comply with IFRS 8 and are set out in Note 2.17. assets primarily correspond to gross asset purchases, including cash timing differences but excluding assets purchased under Information provided on operating segments is prepared in finance leases. accordance with the same accounting rules as for the consolidated financial statements and set out in the notes thereto. Non-current segment assets comprise goodwill, intangible assets, property, plant and equipment and other non-current assets. Charges to depreciation, amortization and provisions on non- current operating assets reflect net charges on intangible assets Segment assets comprise non-current segment assets, inventories, and property, plant and equipment recognized in recurring trade receivables and other current assets. operating income. Segment liabilities mainly include trade payables and other current liabilities.
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4.1 Information by division
Equipment Consumer CFAO Holding (in € millions) & Services Healthcare Goods & Other Eliminations Total As of December 31, 2014 Revenue 2,081.3 1,216.2 391.8 (128.8) 3,560.4 • non-Group 1,977.4 1,216.1 366.8 0.1 3,560.4 • Group 103.9 0.0 25.0 (0.1) 128.8 RECURRING OPERATING INCOME 139.8 105.1 64.4 (38.6) 270.7 Net recurring charges to depreciation, amortization and provisions on non-current operating assets 33.3 8.2 19.1 0.9 0.0 61.5 Proceeds on disposal of leasing fleets 5.0 5.0 Other non-cash recurring operating income and expenses (4.4) 0.2 (2.1) 5.8 0.0 (0.5) Purchases of leasing fleets (amendment to IAS 16) 17.3 0.0 17.3 Other purchases of property, plant and equipment and intangible assets, gross 35.3 24.3 42.1 2.0 103.7 Segment assets 1,297.7 696.3 302.6 30.7 2,327.4 Segment liabilities 544.0 324.3 63.7 16.9 948.8
Equipment Consumer CFAO Holding (in € millions) & Services Healthcare Goods & Other Eliminations Total As of December 31, 2013 Revenue 2,355.8 1,103.5 288.9 (120.1) 3,628.1 • non-Group 2,257.0 1,103.4 267.5 0.2 3,628.1 • Group 98.8 0.1 21.4 (0.2) 120.1 RECURRING OPERATING INCOME 140.5 93.8 68.8 (34.1) 269.0 Net recurring charges to depreciation, amortization and provisions on non-current operating assets 33.1 8.6 16.9 0.7 59.4 Proceeds on disposal of leasing fleets 3.4 3.4 Other non-cash recurring operating income and expenses (1.9) 1.0 (0.3) 8.1 7.0 Purchases of leasing fleets (amendment to IAS 16) 12.3 12.3 Other purchases of property, plant and equipment and intangible assets, gross 30.0 14.5 42.0 1.0 87.4 Segment assets 1,330.1 623.8 268.4 25.2 2,247.5 Segment liabilities 615.1 296.9 61.5 17.8 991.3
The new organisation can be summarized as a transfer of and €10.8 million of recurring operating profit in 2013 and Equipment (Engines & lifts), Rental and Technologies businesses €194.2 million of revenue and €1.2 million of recurring operating from former Industrie, Equipment & Services division to the new loss in 2014. Equipment & Services division that includes former Automotive division. The transfer represented €208.0 million of revenue
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4.2 Information by geographic area exception of data for France (export), which reflects export sales to customers outside the CFAO Group.
Information is presented by geographic area based on the A detail by country is also provided for all countries that represent geographic location of customers for revenue and the geographic over 5% of Group turnover. location of assets for non-current segment assets, with the
English & Portuguese- French-speaking speaking French Overseas Sub-Saharan Sub-Saharan Territories (in € millions) Africa Africa and Other Maghreb France (export) Total As of December 31, 2014 Revenue 1,502.6 505.7 747.1 490.7 314.3 3,560.4 Non-current segment assets 338.1 71.8 96.2 86.2 95.8 688.2 As of December 31, 2013 Revenue 1,458.0 487.1 743.0 694.0 246.0 3,628.1 Non-current segment assets 284.5 64.1 93.6 89.1 92.0 623.2
(in € millions) Algeria Congo Reunion Cameroon French Antilles Nigeria Ivory Coast As of December 31, 2014 Revenue 360.1 338.5 248.7 245.1 220.3 210.8 204.2 as a % of revenue 10.1% 9.5% 7.0% 6.9% 6.2% 5.9% 5.7% Non-current segment assets 36.8 179.9 21.1 19.0 12.5 37.1 28.7 as a % of revenue 5.4% 26.1% 3.1% 2.8% 1.8% 5.4% 4.2% As of December 31, 2013 Revenue 538.8 307.3 242.7 233.6 223.5 147.4 194.7 as a % of revenue 14.8% 8.5% 6.7% 6.4% 6.2% 4.1% 5.4% Non-current segment assets 38.8 155.3 21.9 18.6 11.0 31.3 21.1 as a % of revenue 6.2% 24.9% 3.5% 3.0% 1.8% 5.0% 3.4%
4.3 Reconciliation of segment assets and liabilities
The reconciliation of total segment assets and non-current segment assets with total Group assets is as follows:
(in € millions) 31.12.2014 31.12.2013 Goodwill 208.5 199.5 Other intangible assets 32.7 29.8 Property, plant and equipment 444.7 392.9 Other non-current assets 2.3 1.0 Non-current segment assets 688.2 623.2 Inventories 899.3 900.4 Trade receivables 561.4 553.5 Other current assets 178.6 170.5 Current segment assets 1,639.3 1,624.4 Segment assets 2,327.4 2,247.6 Investments in associates 13.3 12.2 Non-current financial assets 61.1 64.8 Deferred tax assets 26.0 24.3 Current tax receivables 40.4 37.0 Other current financial assets 15.2 6.0 Cash and cash equivalents 202.3 211.5 TOTAL ASSETS 2,685.8 2,603.5
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The reconciliation of total segment liabilities with total Group equity and liabilities is as follows:
(in € millions) 31.12.2014 31.12.2013 Trade payables 573.9 619.9 Other current liabilities 374.9 371.4 Segment liabilities 948.8 991.3 Total equity 953.8 853.9 Non-current borrowings 101.9 109.0 Non-current provisions for pensions and other post-employment benefits 41.9 36.3 Non-current provisions 7.6 7.2 Other deferred tax liabilities 0.4 1.3 Current borrowings 532.9 506.0 Other current financial liabilities 16.8 19.0 Current provisions for pensions and other post-employment benefits 1.2 1.2 Current provisions 30.6 25.7 Current tax liabilities 50.0 52.6 TOTAL EQUITY AND LIABILITIES 2,685.8 2,603.5
3 NOTE 5 Revenue and cost of sales
5.1 Revenue
(in € millions) 31.12.2014 31.12.2013 Net sales of goods 3,407.9 3,483.5 Net sales of services 140.6 136.3 Other revenue 11.9 8.2 TOTAL 3,560.4 3,628.1
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Sales for 2014 and 2013 can be broken down as follows:
CFAO Automotive 31.12.2014 31.12.2013 Equipment & Services 1,977.4 2,257.0 Light vehicles 1,121.4 1,271.9 Used vehicles 50.8 50.7 Services, spare parts and tires 254.7 270.2 Motorcycles and other 50.6 46.3 Heavy trucks 292.5 397.9 Machinery 53.9 59.1 Elevators 33.6 38.8 Rental services 40.4 36.5 Technologies 79.4 85.7 Healthcare 1,216.1 1,103.4 Import-Wholesale-Resale 827.5 765.5 Pre-wholesale 193.6 171.3 Distribution agents 85.9 83.2 Direct Sales 95.4 72.6 Other 13.6 10.7 Consumer Goods 366.8 267.5 Beverages 226.3 214.3 Plastics 41.1 50.8 Food, Hygiene & Spirits 99.4 2.5 Holding & others 0.1 0.2 TOTAL 3,560.4 3,628.1
5.2 Cost of sales
Cost of sales for 2014 and 2013 can be analyzed as follows:
(in € millions) 31.12.2014 31.12.2013 Breakdown of cost of sales (2,717.5) (2,814.9) Purchases (2,155.5) (2,130.6) Miscellaneous expenses (466.2) (516.5) Damaged inventories/Inventory variances (9.2) (7.8) Net additions to inventory allowances (1.9) (5.2) Change in inventories (24.9) (82.2) Cost of vehicle rentals (16.5) (17.1) Other (43.2) (55.6)
3 NOTE 6 Payroll expenses
Payroll expenses primarily include fixed and variable charges relating to employee benefits recognized in recurring remuneration, social security charges, charges relating to operating income. Payroll expenses totaled €282.8 million in employee profit-sharing and other incentives, training costs, and 2014 and €267.9 million in 2013.
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The Group’s average headcount on a full-time equivalent basis breaks down as follows:
31.12.2014 31.12.2013 Average headcount 11,952 11,517 Headcount 11,996 11,590
Average headcount Headcount As of January 1, 2014 11,517 11,590 Changes on a constant scope basis 435 406 Impact of changes in scope of consolidation AS OF DECEMBRE 31, 2014 11,952 11,996
3 NOTE 7 Share-based payment
On January 4, 2010 the Group set up a stock option plan for date to the vesting date. The grant date is the date at which the certain employees. On December 3, 2010, July 18, 2013 and Management Board approved the plans concerned and the plans July 6, 2014, the Group awarded performance shares to certain were communicated to the beneficiaries. employees. Vested rights may only be exercised by beneficiaries at the end The Group recognizes its obligation as and when services are of a lock-in period, the length of which varies depending on the rendered by the beneficiaries, over the period from the grant type of plan.
The characteristics of the plans are set out below:
2010 Plan 2010 Plan 2011 Plan 2012 Plan Stock option and performance share plan Subscription options Performance shares Performance shares Performance shares Grant date 04.01.2010 03.12.2010 18.07.2011 06.07.2012 Expiration date 04.01.2018 03.12.2014 18.07.2015 06.07.2016 Vesting of rights 04.01.2014 03.12.2012 18.07.2013 06.07.2014 Number of original beneficiaries 239 600 606 604 Number originally granted 1,350,000 97,400 172,203 174,601 Number outstanding as of December 31, 2013 926,058 165,821 Number forfeited in 2014 579 Number exercised in 2014 Number expired in 2014 Number of shares delivered 925,871 84,400 158,443 166,711 NUMBER OUTSTANDING AS OF DECEMBER 31, 2014 187 Number exercisable as of December 31, 2014 Number of outstanding beneficiaries Strike price (in €) 26.00 N/A N/A N/A Fair value at grant date (in €) 4.18 22.96 20.38 27.92 Weighted average price of option exercised (in €)
Vesting of the options awarded under the stock option plan options granted are subject to performance conditions related is subject to the beneficiaries’ presence within the Group and to the CFAO Group’s recurring operating profit margin and free performance conditions. Options vest at a rate of 25% per full operating cash flow. One of the vesting conditions was not met, year of presence within the Group. Three-quarters of the stock giving rise to the cancellation of one-quarter of the options.
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Vesting of the shares awarded under the performance share plan The fair value of the rights awarded to the beneficiaries was is subject to the beneficiaries’ presence within the Group and a determined on the grant date of the plans. performance condition in respect of the CFAO share compared to the SBF120 benchmark index. For the stock option plan, a Black & Scholes model was used with a trinomial algorithm and exercise thresholds, which takes into In the event of retirement (under certain conditions), death account the number of potentially exercisable options at the end or disability, the rights vest in full. In the event of resignation, of the vesting period. dismissal for gross negligence or misconduct, or removal of a corporate officer, all rights are lost. For the performance share plan, a Black & Scholes model was used with a Monte Carlo algorithm and two underlyings.
The exercise thresholds and probability assumptions used for the stock option plan are as follows:
Threshold as a % of the strike price Probability of exercise 125% 15% 150% 20% 175% 20% 200% 20%
The main valuation assumptions are summarized below:
2010 Plan 2010 Plan 2011 Plan 2012 Plan Stock option and performance share plan Subscription options Performance shares Performance shares Performance shares Volatility 35,00% 37,00% 34,00% 34,00% Risk-free interest rate 3,35% 1,56% 1,92% 1,92%
The above volatility represents the weighted sum of the volatilities The total expense recognized in 2014 in respect of stock option of each division, determined on the basis of benchmarks. and performance share plans was €1.3 million.
The dividends used for the valuation correspond to dividends Following the take-over bid from TTC on CFAO in 2012, TTC estimated by CFAO in accordance with income forecasts and owns 97.43% of CFAO. As the liquidity on CFAO stock is distribution policies. reduced, a liquidity agreement was signed between TTC and stock option and performance share plans beneficiaries. The liquidity The risk-free interest rate used was the Euribor swap rate at the condition is based on a price linked to the EBIT progression grant date (the 8-year rate for the stock option plan and the 2-year since 2011. The market performance condition for performance rate for the performance share plan). share was replaced by a condition of progression on Net income attributable to owners of the parent
3 NOTE 8 Long term incentive plan
As a consequence of the illiquidity described above, long Income from 2014 to 2016. The value of the plan is €7.1 million term incentive plans are now granted in place of share-based including employer contribution and was granted to 631 payments. These plans are cash based plans with a vesting period beneficiaries. of 4 years and have presence and performance conditions. A second plan was granted on July 1, 2014. Performance criterium Rights are progressively acquired under the condition of remaining is linked to a 7% yearly growth of net income attributable to the on the payroll of any TTC group company (33% at the end of year owners of the parent from 2015 to 2017. The value of the plan 2, 66% at the end of year 3 and 100% at the end of year4). The is €7.8 million including employer contribution and was granted plans charge is spread linearly over the four vesting years to 669 beneficiaries.
A first plan was granted on November 7, 2013. Performance The total expense recognized in 2014 in respect of LTI plans was criterium is linked to a 7% yearly growth of recurring Operating €2.3 million.
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3 NOTE 9 Recurring operating income
Recurring operating income is the primary indicator of the Group’s operating performance, and breaks down as follows:
(in € millions) 31.12.2014 31.12.2013 Equipment & Services 139,8 140,5 Healthcare 105,1 93,8 Consumer Goods 64,4 68,8 Holding CFAO & Other (38,6) (34,1) RECURRING OPERATING INCOME 270,7 269,0
Net recurring charges to depreciation, amortization and provisions on non-current operating assets (mainly property, plant and equipment and intangible assets) included in recurring operating income amounted to €61.5 million in 2014 (€59.4 million in 2013).
3 NOTE 10 Other non-recurring operating income and expenses
The CFAO Group’s other non-recurring operating income and expenses consist of unusual items that could distort the assessment of each division’s financial performance. These amount to an expense of -€4.2 million in 2014, versus non-recurring loss of -€1.9 million in 2013.
(in € millions) 31.12.2014 31.12.2013 NON-RECURRING OPERATING INCOME 11.8 4.4 Net proceeds from the disposal of non-current operating assets 4.4 3.0 Net proceeds from the disposal of investments (0.1) 1.5 Other 7.50.0 NON-RECURRING OPERATING EXPENSES (16.0) (6.3) Restructuring costs (13.0) (6.3) Asset depreciation (2.2) Provisions for risks (0.8) Other TOTAL (4.2) (1.9)
In 2014, proceeds from the disposals of non current assets In 2013, proceeds from the disposals of non current assets comprise the sale of land in Madagascar (Equipment & Services comprise the sale of a land in Reunion (Equipment & Services business line) and land in Congo (Consumer Goods business line). division). Proceeds from the disposal of investments comprise the sale of non controlling interests in rental services companies in Restructuration costs and assets depreciation are mainly linked to New Caledonia (Equipment & Services division). Other charges a resizing of organization in Algeria and Morocco after the loss for -€6.3 millions comprise departure cost of the Chairman of of BMW, Nissan and Isuzu cards. the Management Board and depreciation of intangible assets on Actidis. The business model of this distribution and promotion of pharmaceutical products company need to impair its intangible assets.
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3 NOTE 11 Financial income and expenses
This caption can be analyzed as follows:
(in € millions) 31.12.2014 31.12.2013 Cost of net debt (39.2) (39.4) Income from cash and cash equivalents 0.7 0.9 Finance costs at amortized cost (39.9) (40.3) Other financial income and expenses (2.3) (1.9) Gains and losses on fair value foreign exchange hedges (1) 0.0 (0.1) Foreign exchange gains and losses 0.3 (1.3) Dividends and interim dividends received 1.7 1.5 Impact of discounting assets and liabilities (0.9) 0.3 Other finance costs (3.5) (2.2) TOTAL (41.5) (41.2)
(1) This item corresponds to the ineffective portion of fair value hedges.
Finance costs carried at amortized cost mainly consist of interest The net impact on income of the ineffective portion of foreign on bank overdrafts. exchange hedges was €0 million.
Other financial expenses include discount costs.
3 NOTE 12 Income tax
12.1 Analysis of income tax expense
12.1.1 Income tax expense
(in € millions) 31.12.2014 31.12.2013 Income before tax 224.9 225.9 Taxes paid out of operating income (80.0) (78.6) Other taxes payable not impacting operating cash flow 0.5 (2.7) Income tax payable (79.5) (81.3) Deferred tax income/(expense) 2.8 (1.8) TOTAL TAX EXPENSE (76.8) (83.1) Effective tax rate 34.1% 36.8%
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12.1.2 Reconciliation of the tax rate
(as a % of pre-tax income) 31.12.2014 31.12.2013 Tax rate applicable in France 38.0% 38.0% Impact of taxation of foreign subsidiaries (6.1%) (6.1%) Theoretical tax rate 31.9% 31.9% Effect of items taxed at reduced rates 0.0% (0.2% ) Other tax credits (10.8%) (10.5%) Effect of permanent differences 8.8% 10.5% Effect of unrecognized temporary differences 1.7% 0.8% Effect of unrecognized tax losses carried forward 8.6% 3.9% Effect of changes in tax rates (0.2%) 0.3% Company value-added contribution (CVAE) 1.3% 1.2% Other (7.3%) (1.2%) EFFECTIVE TAX RATE 34.1% 36.8%
The income tax rate applicable in France is the standard rate of 33.33% subject to: (i) the social surtax of 3.3% and (ii) a one-off additional 10.7% levy voted in the 2014 finance act, both of which are applied to the standard rate, bringing the total to 38.0%.
12.1.3 Recurring tax rate Excluding non-recurring items, the Group income tax rate for 2014 and 2013 was as follows:
(in € millions) 31.12.2014 31.12.2013 Income before tax 224.9 225.9 Non-recurring items (4.2) (1.9) Recurring income before tax 229.2 227.8 Total tax expense (76.8) (83.1) Total tax expense excluding Company value-added contribution (CVAE) (73.8) (80.4) Tax on non-recurring items (2.0) Total current tax expense excluding CVAE (71.7) (80.3) EFFECTIVE TAX RATE 34.1% 36.8% Total current tax rate excluding CVAE 31.3% 35.3%
12.2 Movement in statement of financial position headings
12.2.1 Net current tax liabilities
Cash outflows relating Impact of Changes to operating changes in in scope of (in € millions) 31.12.2013 Net income activities exchange rates consolidation 31.12.2014 Current tax receivables 37.0 40.4 Current tax liabilities (52.6) (50.0) NET CURRENT TAX LIABILITIES (15.5) (80.0) 86.7 0.0 (0.8) (9.6)
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12.2.2 Deferred tax
Impact of Effect of Other changes in change comprehensive (in € millions) 31.12.2013 Net income exchange rates in scope income 31.12.2014 Intangible assets0.0 0.0 0.0 0.0 0.00.0 Property, plant and equipment (0.7) 0.1 0.0 0.0 0.0 (0.7) Other non-current assets 0.7 (0.5) 0.0 0.0 0.0 0.2 Other current assets 9.0 2.7 0.0 0.0 11.7 Provisions for pensions and other post- employment benefits 5.2 0.30.0 0.0 (0.2) 5.3 Other provisions (0.5) 1.20.0 0.0 0.7 Other current liabilities 8.3 (0.9)0.0 0.0 0.0 8.3 Recognized tax losses and tax credits 1.0 (0.9)0.0 0.0 0.0 0.1 NET DEFERRED TAX ASSETS (LIABILITIES) 23.0 1.7 0.0 0.0 (0.2) 25.6 Deferred tax assets 24.3 1.7 0.0 0.1 (0.2) 26.0 Deferred tax liabilities (1.3) 0.90.0 0.0 0.0 (0.4) Net Deferred tax assets 23.0 2.8 0.00.0 (0.2) 25.6
12.3 Unrecognized deferred tax
Tax losses and tax credits not recognized as deferred tax assets amounted to €142 million at December 31, 2014 (€100.7 million at December 31, 2013).
Changes in unused tax losses and tax credits and the associated expiration schedule are set out below:
(in € millions) As of Decembre 31, 2013 100.7 Losses generated during the year 46.8 Losses utilized and time barred during the year (10.0) Effect of changes in scope of consolidation and exchange rate adjustments 4.3 As of Decembre 31, 2014 142.0 Ordinary tax loss carry-forwards 76.6 Expiring in less than five years 70.7 Expiring in more than five years 5.9 Indefinite tax loss carry-forwards 65.4 TOTAL 142.0
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3 NOTE 13 Earnings per share
Basic earnings per share are calculated on the basis of the basic earnings per share, plus the weighted average number of weighted average number of shares outstanding, after deducting potentially dilutive ordinary shares. the weighted average number of shares held by consolidated companies. As all the share based payments plans were attributed and due to the liquidity contract, these plans represent no potential dilution Fully diluted earnings per share are based on the weighted on CFAO’s capital anymore. average number of shares as defined above for the calculation of
Earnings per share for 2014
(in € millions) Consolidated Group Net income attributable to ordinary shareholders 100.5 Weighted average number of ordinary shares outstanding 61,768,189 Weighted average number of treasury shares (10,614) Weighted average number of ordinary shares 61,757,575 Basic earnings per share (in €) 1.63 Net income attributable to ordinary shareholders 100.5 Stock subscription options Performance shares DILUTED NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT 100.5 Weighted average number of ordinary shares 61,757,575 Stock subscription options Performance shares Weighted average number of diluted ordinary shares 61,757,575 Fully diluted earnings per share (in €) 1.63
Earnings per share for 2013
(in € millions) Consolidated Group Net income attributable to ordinary shareholders 100.4 Weighted average number of ordinary shares outstanding 61,591,092 Weighted average number of treasury shares (46,087) Weighted average number of ordinary shares 61,545,004 Basic earnings per share (in €) 1.63 Net income attributable to ordinary shareholders 100.4 Stock subscription options Performance shares DILUTED NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT 100.4 Weighted average number of ordinary shares 61,545,004 Stock subscription options 213,797 Performance shares 125,988 Weighted average number of diluted ordinary shares 61,884,790 Fully diluted earnings per share (in €) 1.62
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3 NOTE 14 Other comprehensive income
The components of other comprehensive income include: ■ components relating to the measurement of employee benefit obligations (unrecognized surplus of pension plan assets and ■ gains and losses arising from translating the financial actuarial gains and losses on defined benefit plans). statements of a foreign activity;
These items can be analyzed as follows, before and after the tax effect:
(in € millions) Gross Tax Net Translation adjustments and other (10.5) (10.5) Actuarial gains and losses (0.8) 0.5 (0.2) Other comprehensive income (expense) As of December 31, 2013 (11.3) 0.5 (10.7) Translation adjustments and other 8.3 8.3 Actuarial gains and losses 0.0 (0.2) (0.3) OTHER COMPREHENSIVE INCOME (EXPENSE) AS OF DECEMBER 31, 2014 8.2 (0.2) 8.0
3 NOTE 15 Goodwill
(in € millions) 31.12.2014 31.12.2013 As of Decembre 31, 2013 199.5 200.1 Acquisitions 7. 7 Translation adjustments 2. 9 (1.8) Other movements (1. 6) 1. 2 AS OF DECEMBRE 31, 2014 208. 5 199.5
All items of goodwill recognized in 2014 and 2013 were Other movements concern adjustment value of put options granted allocated to cash-generating units at the year-end. The CFAO to minority shareholders in Vietnam. Group’s main CGUs are described in Note 17.
The breakdown of the net amount of goodwill by division is as follows:
(in € millions) 31.12.2014 31.12.2013 Equipment & Services 115. 1 112. 8 Healthcare 88. 2 82. 6 Consumer Goods 5. 2 4. 1 TOTAL 208. 5 199.5
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3 NOTE 16 Other intangible assets
(in € millions) Other intangible assets Gross amount as of December 31, 2012 54.0 Changes in scope of consolidation 0.0 Acquisitions 3.2 Other disposals (0.9) Translation adjustments (0.4) Other movements 0.2 Gross amount as of December 31, 2013 56.0 Accumulated amortization and impairment as of December 31, 2012 (22.6) Changes in scope of consolidation 0.0 Other disposals 0.4 Amortization (4.2) Translation adjustments 0.2 Other movements 0.0 Accumulated amortization and impairment as of December 31, 2013 (26.2) Carrying amount as of December 31, 2012 31.3 Changes in scope of consolidation 0.0 Acquisitions 3.2 Other disposals (0.5) Amortization (4.2) Translation adjustments (0.2) Other movements 0.2 Carrying amount as of December 31, 2013 29.8
(in € millions) Other intangible assets Gross amount as of December 31, 2013 56.0 Changes in scope of consolidation 3.8 Acquisitions 3.2 Other disposals (2.6) Translation adjustments 1.0 Other movements 0.0 Gross amount as of December 31, 2014 61.4 Accumulated amortization and impairment as of December 31, 2013 (26.2) Changes in scope of consolidation (0.1) Other disposals 9.1 Amortization (4.1) Translation adjustments (0.1) Other movements (7.2) Accumulated amortization and impairment as of December 31, 2014 (28.7) Carrying amount as of December 31, 2013 29.8 Changes in scope of consolidation 3.7 Acquisitions 3.2 Other disposals 6.5 Amortization (4.1) Translation adjustments 0.9 Other movements (7.2) CARRYING AMOUNT AS OF DECEMBER 31, 2014 32.7
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The table below provides a breakdown of the net value of intangible assets by type as of December 31, 2014 and December 31, 2013:
(in € millions) 31.12.2014 31.12.2013 Other intangible assets (net) 32.7 29.8 Brands, leasehold rights, concessions, licenses and other 26.6 24.1 Purchased software 5.7 5.0 Intangible assets in progress 0.4 0.7
Barring exceptional cases, brands and concessions have indefinite useful lives or are systematically renewed.
Purchased software is amortized over a period of five to seven years.
The breakdown of the net amount of other intangible assets with indefinite useful life by division is as follows:
(in € millions) 31.12.2014 31.12.2013 Equipment & Services 24. 5 20. 4 Healthcare 1. 9 3. 5 Consumer Goods 0. 2 0. 2 TOTAL 26. 6 24.1
3 NOTE 17 Property, plant and equipment
Land and Plant and Other property, plant (in € millions) buildings equipment and equipment Total Gross amount as of December 31, 2012 230.7 350.7 104.3 685.7 Changes in scope of consolidation0.0 0.0 0.00.0 Acquisitions 14.7 54.7 27.1 96.5 Disposals (3.6) (23.8) (11.8) (39.3) Translation adjustments (3.4) (3.5) (1.9) (8.7) Other movements 4.3 1.0 (6.0) (0.7) Gross amount as of December 31, 2013 242.7 379.0 111.7 733.4 Accumulated depreciation and impairment as of December 31, 2012 (73.6) (204.3) (41.8) (319.8) Changes in scope of consolidation 0.0 0.00.0 0.0 Disposals 1.3 24.4 4.4 30.2 Depreciation (8.6) (38.6) (7.8) (55.0) Impairment losses (see Note 18) Translation adjustments 0.8 1.9 0.6 3.2 Other movements 0.1 0.7 0.0 0.8 Accumulated depreciation and impairment as of December 31, 2013 (80.0) (215.9) (44.6) (340.6) Carrying amount as of December 31, 2012 157.0 146.3 62.5 365.9 Changes in scope of consolidation 0.00.0 0.0 0.0 Acquisitions 14.7 54.7 27.1 96.5 Disposals (2.3) 0.6 (7.4) (9.1) Depreciation (8.6) (38.6) (7.8) (55.0) Impairment losses (see Note 18) Translation adjustments (2.6) (1.6) (1.3) (5.5) Other movements 4.4 1.7 (6.0) 0.1 Carrying amount as of December 31, 2013 162.6 163.1 67.1 392.9 o/w assets owned outright 162.6 163.1 67.1 392.9 o/w assets held under finance leases
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Land and Plant and Other property, plant (in € millions) buildings equipment and equipment Total Gross amount as of December 31, 2013 242.7 379.0 111.7 733.4 Changes in scope of consolidation 0.1 2.6 2.2 4.9 Acquisitions 24.2 42.0 49.0 115.2 Disposals (1.2) (18.0) (9.8) (29.1) Translation adjustments 1.3 1.5 1.6 4.4 Other movements 4.8 0.5 (5.0) 0.3 Gross amount as of December 31, 2014 271.9 407.6 149.8 829.3 Accumulated depreciation and impairment as of December 31, 2013 (80.0) (215.9) (44.6) (340.5) Changes in scope of consolidation 0.0 (1.8) (1.1) (2.8) Disposals 0.3 13.5 5.5 19.3 Depreciation (9.1) (41.0) (8.4) (58.4) Impairment losses (see Note 18) Translation adjustments (0.6) (0.9) (0.5) (2.0) Other movements0.0 0.2 (0.1) 0.0 Accumulated depreciation and impairment as of December 31, 2014 (89.5) (245.9) (49.1) (384.5) Carrying amount as of December 31, 2013 162.6 163.1 67.2 392.9 Changes in scope of consolidation 0.1 0.9 1.2 2.1 Acquisitions 24.2 42.0 49.0 115.2 Disposals (1.0) (4.5) (4.3) (9.8) Depreciation (9.1) (41.0) (8.4) (58.4) Impairment losses (see Note 18) Translation adjustments 0.7 0.6 1.1 2.4 Other movements 4.8 0.7 (5.1) 0.3 CARRYING AMOUNT AS OF DECEMBER 31, 2014 182.4 161.7 100.6 444.7 o/w assets owned outright 182.4 161.7 100.6 444.7 o/w assets held under finance leases
Charges to depreciation are recognized under “Cost of sales” and “Other recurring operating income and expenses” in the income statement.
The table below provides a breakdown of the net value of property, plant and equipment by type as of December 31, 2014 and December 31, 2013:
(in € millions) 31.12.2014 31.12.2013 Property, plant and equipment (net) 444.7 392.9 Land and buildings 182.4 162.6 Fixtures and fittings 35.3 35.5 Technical equipment 120.4 121.9 IT and telephony 6.1 5.7 Other property, plant and equipment 30.2 26.7 Property, plant and equipment in progress 70.4 40.5
Construction in progress is reclassified to “Land and buildings” The useful lives of property, plant and equipment are as follows: and “Fixtures and fittings” when construction work – mainly under ■ concessions – is completed. Owner improvements 20 years ■ Other property, plant and equipment mainly include vehicles and Leasehold improvements remaining lease term office furniture. ■ Improvements to land and buildings 10 years
■ Technical equipment 5 to 8 years
■ IT and telephony 5 years
■ Vehicles 5 years
■ Office equipment and furniture 10 years
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3 NOTE 18 Impairment tests on non-fi nancial assets
The principles governing the impairment of non-financial assets are set out in Note 2.7.
The main items of goodwill are broken down by division in Note 15.
18.1 Impairment losses recognized during the period
The impairment tests carried out in 2014 and 2013 did not Based on the sensitivity analyses covering a variety of likely identify any impairment losses in respect of intangible assets, scenarios, no impairment losses need to be recognized in the property, plant and equipment or goodwill assigned to the Group’s consolidated financial statements. various divisions. A change of 10% in the discount rate and a perpetual growth rate of 2% would not give rise to the recognition of additional impairment for any of these divisions.
18.2 Assumptions underlying impairment tests
The discount and perpetual growth rates applied to expected cash flows in connection with the economic assumptions and forecast operating conditions retained by the Group were as follows:
Discount rate after tax Discount rate before tax Perpetual growth rate 2014 2013 2014 2013 2014 2013 Equipment & Services 9.6% 11.1% 16.9% 18.1% 3.0% 3.0% Healthcare 7.0% 7.6% 10.8% 11.4% 3.0% 3.0% Consumer Goods 5.6% 6.1% 8.5% 8.7% 3.0% 3.0%
The discount rates are calculated using the weighted average cost No impairment losses would have been recognized in the Group’s of capital (WACC) method. consolidated financial statements if the same discount rate had been used in 2014 than in 2013.
18.3 Impairment tests on major items
The CGUs tested are operating segments. year timescale. To calculate value in use, a terminal value equal to the perpetual capitalization of a normative annual cash flow is The recoverable amounts of the Equipment & Services, Healthcare added to the estimated future cash flows. and Consumer Goods CGUs were determined on the basis of their value in use. Value in use is determined with respect to The budgets and the medium term plans fully take into account the projected estimated future cash flows, taking into account the time impacts of the deteriorated Algerian automotive market in 2013- value and specific risks associated with the CGU. Estimated future 2014 and the non renewal of Nissan, Renault, BMW, and Isuzu cash flow projections were prepared during the second half of the distribution licenses. year on the basis of budgets and medium-term plans with a five-
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3 NOTE 19 Investments in associates
(in € millions) 31.12.2014 31.12.2013 Carrying amount of investments in associates 13.3 12.2
The table below shows the main associates and the earnings of these associates for the periods presented:
Share in earnings (losses) (in € millions) % interest 31.12.2014 31.12.2013 La Seigneurie Océan Indien 49.00% 0.7 0.7 Compagnie Equatoriale des Peintures 24.19% 0.3 0.5 Propharmed International 34.87% 0.3 0.1 Alios Finance (ex HOLDEFI) 24.27% 0.2 1.0 Propharmed France 34.87% 0.2 0.1 Office Calédonien de Distribution 33.11% 0.0 0.1 G&I Distribution LTD 46.38% (0.8) Ressourcethica 34.89% (0.3) (0.2)
In 2013, the associate companies Locauto and Prestige Lease (rental services in Automotive division) were sold. In 2014 CFAO acquired 51% of General Import & Distribution ltd (GI&D), a Nigerian company specialized in consumer goods distribution. This company has been fully integrated.
3 NOTE 20 Non-current fi nancial assets
Non-current financial assets break down as follows:
(in € millions) 31.12.2014 31.12.2013 Non-consolidated investments 11.1 7.9 Loans and receivables 41.5 45.7 Deposits and guarantees 7.9 9.0 Other 0.6 2.2 TOTAL 61.1 64.8
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3 NOTE 21 Inventories
(in € millions) 31.12.2014 31.12.2013 Commercial inventories 905.2 909.9 Industrial inventories 49.4 42.6 Gross amount 954.7 952.4 Allowances (55.4) (52.0) CARRYING AMOUNT 899.3 900.4
Movements in allowances 31.12.2014 31.12.2013 As of January 1 (52.0) (47.5) Net charges (1.8) (5.5) o/w gross charges to inventory allowances (8.8) (11.1) o/w reversals of inventory allowances 7.0 5.6 Changes in scope of consolidation (0.9) 0.0 Translation adjustments (0.7) 0.9 AS OF DECEMBER 31 (55.4) (52.0)
Inventories comprise goods for resale that are physically located ■ goods in stock at the subsidiaries or at the storage facilities at different stages of the supply chain, from suppliers through to managed by central purchasing offices. end customers. They include: Inventories comprise goods for resale as well as raw materials ■ goods being transported between suppliers and subsidiaries used by CFAO Industries in its production processes. or storage facilities managed by central purchasing offices;
(in € millions) 31.12.2014 31.12.2013 Net inventories by nature Raw materials 33.3 32.6 Finished goods and in-progress inventories 16.1 9.9 Inventory held for resale 646.9 647.1 Commercial inventories in transit 218.0 229.2 Other commercial inventories 40.4 33.6 Gross inventories 954.7 952.4 Inventory allowances (55.4) (52.0) NET INVENTORIES 899.3 900.4
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3 NOTE 22 Trade receivables
(in € millions) 31.12.2014 31.12.2013 Trade receivables 679.7 652.2 Allowances (118.3) (98.7) CARRYING AMOUNT 561.4 553.5
Movements in allowances 31.12.2014 31.12.2013 As of January 1 (98.7) (95.0) Net reversals (16.4) (4.2) Changes in scope of consolidation (2.6) (0.2) Translation adjustments (0.7) 0.6 AS OF DECEMBER 31 (118.3) (98.7)
Provisions for impairment of trade receivables are calculated based on the likelihood of recovering the receivables concerned. As of December 31, 2014 and 2013, trade receivables broke down by age as follows:
(in € millions) 31.12.2014 31.12.2013 Not past due 325.4 340.1 Less than one month past due 71.3 53.4 One to six months past due 129.9 138.3 More than six months past due 153.2 120.4 Allowance for doubtful receivables (118.3) (98.7) CARRYING AMOUNT 561.4 553.5
3 NOTE 23 Working capital requirement
Working Changes in Translation capital Other scope of adjustments (in € millions) 31.12.2013 cash flows cash flows consolidation and other 31.12.2014 Inventories 900.4 (29.3) 21.3 6.9 899.3 Trade receivables 553.5 (4.6) 0.2 9.1 3.1 561.4 Other current financial assets and liabilities (13.0) 11.6 (0.2)0.0 (1.6) Current tax receivables/payables (15.5) 6.7 (0.8) 0.0 (9.6) Trade payables (619.9) 61.2 (13.1) (2.1) (573.9) Other current assets and liabilities (200.8) 7.2 (0.2) 1.2 (3.6) (196.3) WORKING CAPITAL REQUIREMENT 604.6 46.1 6.7 17.6 4.3 679.3
Other current assets and liabilities consist mainly of tax and social Given the broad geographic presence in the differents activities security receivables and payables (excluding corporate income of CFAO Group customers, the Group’s exposure to customer tax), amounts receivable from suppliers and payable to customers, default would not have a material impact on its business, financial and other operating receivables and payables. position or assets.
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3 NOTE 24 Other current fi nancial assets
Other current financial assets are primarily comprised of derivative financial instruments (see Note 29).
3 NOTE 25 Equity
Share capital amounted to €10,459,512 at December 31, 2014, The dividend paid in respect of 2013 amounted to €0.81 per comprising 62,757,065 fully paid-up shares. share.
The Management Board will submit a recommendation to the In accordance with the law and the applicable accounting Ordinary Shareholders’ Meeting called to approve the 2014 standards, no dividend was paid in respect of treasury shares and financial statements to pay a dividend in respect of 2014 the corresponding amounts were carried over to the Company’s corresponding to €0.81 per share or €50.8 million in total. reserves.
Non Controling Interests
(in € millions) 31.12.2014 31.12.2013 Consumer Goods division 31.5 29.1 Healthcare division 14.6 13.5 Automotive division 2.9 1.5 Net income attibutable to non-controlling interests 49.1 44.0 Consumer Goods division 31.6 29.5 Healthcare division 14.2 13.3 Automotive division 3.3 1.4 COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 49.1 44.1
(in € millions) 31.12.2014 31.12.2013 Minority shareholders Equity 211.7 194.7 Consumer Good division 100.7 87.1 Healthcare division 84.1 78.0 Automotive division 27.0 29.6 Dividends paid to minority shareholders 37.3 47.8 Consumer Goods division 20.8 30.7 Healthcare division 11.0 11.6 Automotive division 5.5 5.4
Non controlling interests in Consumer Goods division are mainly represented by Brasseries du Congo. In Healthcare division, they are moslty represented by Sopharma (West Indies), Soredip (Reunion Island), Laborex Mali, Laborex Cameroun, Laborex Senegal, Copharmed CI and Continental companies.
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3 NOTE 26 Employee benefi ts
In accordance with the laws and practices in each country, Group An actuarial valuation of defined benefit plans is carried out by employees receive long-term or post-employment benefits in independent experts. These benefits primarily concern termination addition to their short-term remuneration. These additional benefits payments and long-service bonuses in France, and final salary take the form of defined contribution or defined benefit plans. type supplementary pension plans, mainly in the United Kingdom.
Under defined contribution plans, the Group is not obliged to The Group has no obligation with respect to medical costs. make any additional payments beyond contributions already made. Contributions to these plans are expensed as incurred.
26.1 Changes during the year
Changes in the present value of the obligation in respect of defined benefit plans are shown below:
(in € millions) 31.12.2014 31.12.2013 Present value of obligation as of January 1 105.3 105.2 Current service cost 3.3 2.9 Contributions paid by beneficiaries 0.0 Interest cost 4.1 1.7 Benefits paid (6.8) (6.4) Past service cost 0.1 Actuarial gains and losses 12.9 3.7 Curtailments and settlements (0.8) Other movements 0.60.0 Exchange differences 5.1 (1.7) PRESENT VALUE OF OBLIGATION AS OF DECEMBER 31 123.9 105.3
As of December 31, 2014, the present value of the obligation amounted to €123.9 million (€105.3 million as of end-2013), and related to fully or partially funded plans.
The breakdown in the present value of the obligation by type of plan as of December 31 was as follows:
(in € millions) 31.12.2014 31.12.2013 Retirement bonuses 36.5 33.0 Long-service awards 6.6 4.5 Supplementary plans – United Kingdom 80.5 66.9 Supplementary plans – Other 1.1 0.9 PRESENT VALUE OF OBLIGATION AS OF DECEMBER 31 123.9 105.3
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Changes in the fair value of defined benefit plan assets are shown below:
(in € millions) 31.12.2014 31.12.2013 Fair value of defined benefit plan assets as of January 1 79.8 85.0 Contributions paid by employer (1.8) Contributions paid by beneficiaries Interest Income 3.3 3.0 Return on plan assets exclud. Interest income 8.9 2.7 Benefits paid (5.3) (6.4) Actuarial gains and losses 0.3 (0.7) Settlement (2.1) Other movements Exchange differences 5.7 (1.9) FAIR VALUE OF DEFINED BENEFIT PLAN ASSETS AS OF DECEMBER 31 90.0 79.8
Funded defined benefit plan assets broke down as follows as of ■ equity instruments accounted for 12.1% (11.9% as of end- December 31, 2014: 2013);
■ insurance policies accounted for 77.2% of the total fair value ■ debt instruments accounted for 5.9% (5.9% as of end-2013); of plan assets (73.5% as of end-2013); ■ other assets accounted for 4.9% (8.8% as of end-2013).
2014 Actuarial gains & losses analysis:
(in € millions) 31.12.2014 31.12.2013 Actuarial gains & losses due to scheme experience 0.8 5.3 Actuarial gains & losses due to change in demographic assumptions 2.3 Actuarial gains & losses due to changes in financial assumptions 12.4 (3.9) TOTAL 13.2 3.7
The reconciliation of statement of financial position data with the projected benefit obligation in respect of defined benefit plans breaks down as follows:
(in € millions) 31.12.2014 31.12.2013 Present value of obligation 123.9 105.3 Fair value of defined benefit plan assets 90.0 79.8 Funding shortfall/(excess) 33.9 25.5 Amount not recognized in assets 9.2 12.0 PROVISIONS (NET ASSETS) RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 43.1 37.5 o/w provisions - continuing operations 43.1 37.5 Experience adjustments on plan liabilities 10.4 % 3.5% Experience adjustments on plan assets -9.9 % 0.9%
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26.2 Expenses recognized
Defined benefit plans The total expense for defined benefit plans in 2014 was €4.1 million (€1.5 million in 2013), breaking down as follows:
(in € millions) 31.12.2014 31.12.2013 Current service cost 3.3 2.9 Interest cost 4.1 1.7 R eturn on plan assets (3.3) (3.0) Actuarial gains/losses recognized in net income Past service cost taken to net income Curtailments and settlements TOTAL CHARGE 4.1 1.5 o/w recognized in: operating expenses 3.3 2.9 net finance costs 0.8 (1.3)
In accordance with the revised version of IAS 19 issued in Cumulative actuarial gains and losses recognized in equity since December 2004, the Group recognizes actuarial gains and January 1, 2004 totaled €23.2 million as of December 31, 2014. losses on defined benefit plans directly in equity in the period. Actuarial gains and losses recognized in the income statement Defined contribution plans arise on long-service bonuses. An expense of €0.6 million was recognized in respect of defined Actuarial gains and losses recognized in equity and income contribution plans in 2014 (€0.4 million in 2013). represented a negative net balance of €1.6 million in 2014 (versus a negative net balance of €2.2 million in 2013), including a negative €1.9 million recognized in equity.
26.3 Actuarial assumptions
The main actuarial assumptions used to estimate the Group’s employee benefit obligations are as follows:
Total France Total United Kingdom incl. Nigéria Total Other 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 Discount rate 1.70% 3.25% 3.15% 3.55% 4.30% 4.00% 14.00% 13.00% 12.00% 1.70% 3.25% 3.15% Inflation rate 1.80% 2.00% 2.00% 3.20% 3.50% 2.50% 10.00% 10.00% 10.00% 1.80% 2.00% 2.00% Expected rate of increase in salaries 2.00% 3.00% 3.00% S/O S/O S/O 10.00% 10.00% 10.00% 2.00% 3.00% 3.00%
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26.4 Sensitivity on assumptions
Change in assumption Change in liability Discount rate Retirement bonuses and long-service awards -1. 00% +11.6% Supplementary plans – United Kingdom -1. 00% +14.4% Expected rate of increase in salaries Retirement bonuses and long-service awards +0. 50% +5.8% Supplementary plans – United Kingdom NA NA Rate of mortality Supplementary plans – United Kingdom increase in life expectancy of 1 year +5.70%
3 NOTE 27 Provisions
Reversal Reversal Changes in (utilized (surplus Translation scope of (in € millions) 31.12.2013 Charge provision) provision) adjustments consolidation Other 31.12.2014 Non-current provisions for restructuring 0.3 0.3 Non-current provisions for claims and litigation 5.1 1.6 (0.4) (0.2) 0.0 0.0 6.2 Other non-current provisions 1.9 0.2 (0.3) (0.7) 0.0 0.0 1.1 Other non-current provisions for contingencies and losses 7.2 1.8 (0.7) (0.9) 0.0 0.0 0.0 7.6 Current provisions for restructuring 2.6 4.9 (3.0) 0.1 4.6 Current provisions for claims and litigation 18.5 3.8 (1.4) (0.5) 0.2 0.0 20.6 Other current provisions 4.7 1.9 (1.3) 0.0 0.2 5.4 Other current provisions for contingencies and losses 25.7 10.6 (5.8) (0.5) 0.2 0.2 0.0 30.6 OTHER PROVISIONS FOR CONTINGENCIES AND LOSSES 33.0 12.4 (6.4) (1.3) 0.3 0.2 38.2 Impact on income (7.5) (12.4) 6.4 1.3 (4.7) • Impact on recurring operating income (1.7) (2.6) 2.2 0.2 (0.2) • Impact on other non-recurring operating income and expenses (3.2) (8.9) 3.3 0.7 (5.0) • Impact on net finance costs • Impact on income taxes (2.6) (0.9) 1.0 0.5 0.5
Provisions for claims and litigation mainly relate to claims brought by third parties in various countries or cover risks relating to tax disputes for which the timing of payment is uncertain.
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3 NOTE 28 Cash and cash equivalents
28.1 Breakdown by category
This item breaks down as follows:
(in € millions) 31.12.2014 31.12.2013 Cash 202.3 211.5 Cash equivalents 0.0 0.0 TOTAL 202.3 211.5
The €202.3 million in cash and cash equivalents includes €55.6 million (versus €92.9 million at end 2013) in surplus cash from the management of central purchasing accounts by CFAO Holding.
28.2 Breakdown by currency
(in € millions) 31.12.2014 % 31.12.2013 % CFA franc 66. 8 33. 0% 40. 6 19. 2% Euro 39. 8 19. 7% 76. 3 36. 1% US dollar 31. 4 15. 5% 39. 1 18. 5% Japanese yen 11.9 5. 9% 21. 7 10. 3% Moroccan dirham 8.5 4. 2% 0. 1 0. 0% Danish krone 8.3 4. 1% 0. 4 0. 2% Kenyan shilling 7.0 3. 5% 1. 6 0. 8% Malagasy franc 5.2 2. 6% 2. 2 1. 0% Algerian dinar 4.7 2. 3% 10. 2 4. 8% Nigerian naira 3.7 1. 8% 3. 2 1. 5% CFP franc 2. 4 1. 2% 1. 0 0. 5% Swiss franc 2. 1 1. 0% 2. 3 1. 1% Zambian kwacha 1.8 0. 9% 1. 6 0. 8% Angolan new kwanza 1.6 0. 8% 0. 8 0. 4% Ghanaian cedi 1.2 0. 6% 0. 6 0. 3% Vietnamese dong 1.0 0. 5% 4. 7 2. 2% Congolese franc 1.0 0. 5% 0. 8 0. 4% Pound sterling 0.8 0. 4% 0. 2 0. 1% Sao Tome Dobra 0.7 0. 3% 0. 2 0. 1% Other currencies 2. 4 1. 2% 3. 9 1. 8% TOTAL 202. 3 211.5
For the purposes of capital control or economic reasons, certain countries in which the Group operates place restrictions on the exchange of local currency for foreign currency and the transfer of funds abroad.
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3 NOTE 29 Borrowings
29.1 Breakdown of borrowings by maturity
(in € millions) 31.12.2013 N+1 N+2 N+3 N+4 N+5 Beyond Non-current borrowings 109.0 12.4 15.8 6.8 69.8 4.2 Confirmed lines of credit 65.0 65.0 Other bank borrowings 34.7 11.2 8.3 6.4 4.6 4.2 Employee profit-sharing 1.4 0.5 0.3 0.3 0.2 Other borrowings 7.9 0.7 7.2 0.0 Current borrowings 506.0 506.0 Confirmed line of credit 14.4 14.4 Other bank borrowings 13.4 13.4 Employee profit-sharing 0.3 0.3 Bank overdrafts 452.8 452.8 Other borrowings 25.0 25.0 TOTAL 615.0 506.0 12.4 15.8 6.8 69.8 4.2 % 82.3% 2.0% 2.6% 1.1% 11.4% 0.7%
(in € millions) 31.12.2014 N+1 N+2 N+3 N+4 N+5 Beyond Non-current borrowings 101.9 16.3 28.1 45.4 9.4 2.8 Bonds 11.4 1.4 2.9 2.9 2.9 1.4 Confirmed lines of credit 35.0 35.0 Other bank borrowings 32.9 11.6 8.0 6.4 5.8 1.1 Employee profit-sharing 3.7 0.3 1.8 1.1 0.4 0.2 Other borrowings 18.9 3.0 15.4 0.0 0.4 Current borrowings 532.9 532.9 Bonds Confirmed lines of credit 17.2 17.2 Other bank borrowings 16.7 16.7 Employee profit-sharing 0.3 0.3 Bank overdrafts 487.0 487.0 Other borrowings 11.8 11.8 TOTAL 634.8 532.9 16.3 28.1 45.4 9.4 2.8 % 83.9% 2.6% 4.4% 7.1% 1.5% 0.4%
As of December 31, 2014, all gross borrowings were recognized This facility was classified within non-current confirmed lines of at amortized cost based on the effective interest rate. credit in light of its four-year term.
Non-current borrowings mainly include the €35 million drawdown As of December 31, 2014, the Group complied with the credit on the syndicated facility out of a total confirmed credit line of facility covenants. €400 million. CFAO signed on December 17, 2013 a new 5-year €400 million revolving credit facility including the refinancing Accrued interest is recorded in “Other borrowings”. of CFAO’s existing €300 million revolving credit facility dated Borrowings with a maturity of more than one year represented December 7, 2009. 16.1% of total gross borrowings as of December 31, 2014 (17.7% as of December 31, 2013).
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29.2 Breakdown by repayment currency
Non-current Current (in € millions) 31.12.2013 borrowings borrowings % 31.12.2012 CFA franc 209.6 9.1 200.5 34.1% 182.1 Algerian dinar 130.0 18.1 111.9 21.1% 117.7 Euro 125.3 79.0 46.2 20.4% 134.5 Moroccan dirham 41.8 0.0 41.8 6.8% 31.8 US dollar 32.1 0.0 32.1 5.2% 11.1 Japanese yen 19.9 0.0 19.9 3.2% 2.2 Nigerian naira 19.9 0.0 19.9 3.2% 37.2 CFP franc 15.8 0.2 15.6 2.6% 23.3 Ghanaian cedi 6.0 0.0 6.0 1.0% 4.7 Kenyan shilling 3.8 0.0 3.8 0.6% 3.1 Tanzanian shilling 1.5 0.0 1.5 0.2% 2.3 Danish krone 1.5 1.1 0.4 0.2% 3.6 Other currencies 7.9 1.6 6.3 1.3% 22.8 TOTAL 615.0 109.0 506.0 576.3
Non-current Current (in € millions) 31.12.2014 borrowings borrowings % 31.12.2013 CFA franc 215.2 26.3 189.0 33.9% 209.6 Algerian dinar 162.6 14.2 148.4 25.6% 130.0 Euro 96.1 59.0 37.1 15.1% 125.3 Nigerian naira 44.0 0.0 44.0 6.9% 19.9 Moroccan dirham 34.6 0.0 34.6 5.4% 41.8 US dollar 31.9 0.4 31.5 5.0% 32.1 Japanese yen 13.1 0.0 13.1 2.1% 19.9 CFP franc 8.7 0.0 8.7 1.4% 15.8 Ghanaian cedi 8.1 0.3 7.8 1.3% 6.0 Vietnamese dong 3.6 0.0 3.6 0.6% Mauritanian Ouguiya 2.7 0.1 2.7 0.4% Malagasy franc 2.4 0.8 1.7 0.4% Other currencies 11.5 0.9 10.7 1.8% 14.7 TOTAL 634.8 101.9 532.9 615.0
Borrowings denominated in currencies other than the euro are distributed to Group subsidiaries for local financing purposes.
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29.3 Breakdown of gross borrowings by category
CFAO Group gross borrowings break down as follows:
(in € millions) 31.12.2014 31.12.2013 Bonds 11.4 Confirmed lines of credit 52.2 79.4 Other bank borrowings 49.6 48.1 Employee profit-sharing 4.0 1.7 Bank overdrafts 487.0 452.8 Other borrowings 30.7 32.9 TOTAL 634.8 615.0
A bond was issued in Ivory Coast at the beginning of 2014 to ■ New Caledonia companies Holding: 26%; finance local operations in the different businesses. ■ Mission Pharma Holding: 20%. Group borrowings primarily consist of the syndicated facility (“Confirmed lines of credit”) and bank overdrafts. The financial liability calculated for put options is a multiple of Recurring Operating Income or EBITDA (Recurring Operating Other borrowings include a financial liability of €21.5 millions Income plus depreciation, amortization, and provisions for non- for the put options granted to the minority shareholders of the recurring operating assets recognized in recurring operating following companies: income) minus the Net Debt.
■ Vietnamese companies Holding: 24%;
29.4 Main bank borrowings
29.4.1 Breakdown of main bank borrowings The Group has the following main bank borrowings:
Borrowings contracted by CFAO and subsidiaries
Borrowing type Issue Effective (in € millions) Par value interest rate interest rate Issue date Maturity 31.12.2014 31.12.2013 Medium term Borrowing 17.4 Fixed 6.5% 6.50% 15.08.2012 15.08.2019 17.4 17.7 Bond 11.4 Fixed 6.75% 7.21% 06.12.2013 06.12.2019 11.4 11.4 Medium term Borrowing 4.0 Fixed 3.55% 3.55% 01.11.2012 30.08.2019 3.1 3.6 Medium term Borrowing 2.3 Fixed 4.75% 4.75% 03.03.2014 03.03.2019 2.0 Medium term Borrowing 3.7 Fixed 7.8% 7.80% 03.02.2013 03.02.2018 2.5 Medium term Borrowing 2.4 Fixed 6.5% 6.50% 16.12.2014 16.12.2020 2.4 Medium term Borrowing 2.1 Fixed 6% 6.00% 21.11.2014 21.11.2019 2.1 Medium term Borrowing 3.8 Fixed 8.26% 8.26% 05.10.2012 05.10.2015 1.2 2.4 Medium term Borrowing 1.8 Fixed 8.26% 8.26% 16.10.2013 16.10.2016 1.2 1.7
These borrowings were contracted by subsidiaries outside the eurozone, mainly in CFA francs.
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3 NOTE 30 Exposure to foreign exchange, interest rate and credit risk
The Group uses derivative financial instruments to manage its exposure to foreign exchange risk. It has no cash flow or net investment hedges.
30.1 Exposure to interest rate risk
The CFAO Group does not use any financial instruments to manage the interest rate risk arising on its assets and liabilities.
The Group’s exposure to interest rate risk is presented below:
Fixed rate Floating rate TOTAL (in € millions) 2014 2013 2014 2013 2014 2013 Loans and receivables 33.3 25.6 33.3 25.6 Marketable securities and cash and cash equivalents 202.3 211.5 202.3 211.5 Financial assets 235.6 237.1 235.6 237.1 Other borrowings 555.3 488.6 79.6 126.3 634.8 615.0 Financial liabilities 555.3 488.6 79.6 126.3 634.8 615.0
Debt contracted by subsidiaries is denominated in local currency and is at fixed rates.
In 2014, as in 2013, interest rate risk arose solely on the floating-rate syndicated loan denominated in euros.
■ Fixed-rate financial assets and liabilities exposed to the risk of a change in value:
2013 maturities Less than One to More than (in € millions) 2013 one year five years five years Loans and receivables 25.6 25.6 Marketable securities and cash and cash equivalents 211.5 211.5 Floating-rate financial assets 237.1 237.1 Other borrowings 488.6 458.5 26.4 3.7 Floating-rate financial liabilities 488.6 458.5 26.4 3.7
2014 maturities Less than One to More than (in € millions) 2014 one year five years five years Loans and receivables 33.3 33.3 Marketable securities and cash and cash equivalents 202.3 202.3 Fixed-rate financial assets 235.6 235.6 Other borrowings 555.3 503.9 48.9 2.5 Fixed-rate financial liabilities 555.3 503.9 48.9 2.5
■ Floating-rate financial assets and liabilities exposed to the risk of a change in value:
2013 maturities Less than One to More than (in € millions) 2013 one year five years five years Loans and receivables Marketable securities and cash and cash equivalents Floating-rate financial assets Other borrowings 126.3 47.5 78.4 0.5 Floating-rate financial liabilities 126.3 47.5 78.4 0.5
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2014 maturities Less than One to More than (in € millions) 2014 one year five years five years Loans and receivables Marketable securities and cash and cash equivalents Fixed-rate financial assets Other borrowings 79.6 28.5 50.8 0.2 Fixed-rate financial liabilities 79.6 28.5 50.8 0.2
The breakdown of gross borrowings by type of interest rate is shown below:
(in € millions) 2013 Fixed rate Floating rate Gross borrowings 615.0 488.6 126.3 % 79.5% 20.5%
(in € millions) 2014 Fixed rate Floating rate Gross borrowings 634.8 555.3 79.6 % 87.5% 12.5%
Analysis of sensitivity to interest rate risk on pre-tax consolidated net income in 2014, compared with an impact of €6.4 million in 2013. In light of the Group’s fixed/floating rate mix, a sudden 100 basis point increase or decrease in interest rates based on average All other market variables were assumed to remain unchanged for monthly debt would have had a full-year impact of €7.0 million the purpose of the sensitivity analysis.
30.2 Exposure to foreign exchange risk
The outstanding notional amounts of instruments used by the CFAO Group to manage its foreign exchange risk were as follows:
(in € millions) 31.12.2014 31.12.2013 Currency forwards and currency swaps 127.8 163.2 TOTAL 127.8 163.2
The Group primarily uses forward currency contracts to hedge Some of the Group’s local subsidiaries, mainly in Morocco, commercial import/export risks and financial risks stemming in Kenya and New Caledonia record forward purchase contracts in particular from inter-company refinancing transactions in foreign their accounts. As of December 31, 2014, outstanding notional currencies. amounts under these agreements totaled €10.4 million.
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These derivative financial instruments were analyzed with respect to IAS 39 hedge accounting eligibility criteria. As of December 31, 2014, derivative instruments documented as hedges were as follows:
(in € millions) 31.12.2013 Japanese yen US dollar Euro Other Fair value hedges Forward purchases and forward purchase swaps 334.2 83.2 221.2 23.4 6.3 Forward sales and forward sale swaps (171.0) (2.8) (168.1) 0.0 TOTAL 163.2 80.4 53.1 23.4 6.3
(in € millions) 31.12.2014 Japanese yen US dollar Euro Other Fair value hedges Forward purchases and forward purchase swaps 306.2 55.5 222.6 23.3 4.9 Forward sales and forward sale swaps (178.4) (0.6) (177.8) 0.0 0.0 TOTAL 127.8 54.9 44.8 23.3 4.9
The “Other” column mainly reflects transactions carried out in South African rands and pounds sterling.
Foreign exchange derivatives are recognized in the statement of financial position at their market value as of the end of the reporting period.
As of December 31, 2014, the exposure to foreign exchange risk on the statement of financial position was as follows:
(in € millions) 31.12.2014 Euro US dollar Japanese yen Other 31.12.2013 Central purchasing offices Central purchasing receivables 75.2 74.7 0.5 0.0 114.5 Central purchasing payables 124.3 96.4 27.4 0.5 164.1 Gross exposure in the statement of financial position - central purchasing (49.1) 0.0 (21.7) (26.9) (0.5) (49.6) Customer orders 55.1 55.0 0.1 0.0 63.7 Supplier orders 123.9 92.4 27.6 3.9 124.5 Projected gross exposure – central purchasing (68.8) 0.0 (37.4) (27.5) (3.9) (60.9) Gross exposure before hedging – central purchasing (117.9) 0.0 (59.1) (54.4) (4.4) (110.4) Hedging instruments – central purchasing 121.0 0.0 61.8 54.9 4.4 119.4 Net exposure after hedging – central purchasing 3.1 0.0 2.6 0.5 0.0 9.0
CFAO’s central purchasing offices hedge the foreign exchange risk arising on the statement of financial position (trade receivables/ payables) and on forecast transactions (confirmed supplier and customer orders) with respect to their reporting currency (euro).
(in € millions) 31.12.2014 Euro US dollar Japanese yen Other 31.12.2013 Intercompany refinancing Financial assets 4.1 0.0 4.1 0.0 0.0 0.5 Financial Liabilities 0.5 0.0 0.0 0.0 0.5 0.4 Gross exposure before hedging 3.6 0.0 4.1 0.0 (0.5) 0.1 Hedging instruments (3.6) 0.0 (4.1) 0.0 0.5 6.4 Net exposure after hedging 0.0 0.0 0.0 0.0 0.0 6.5
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(in € millions) 31.12.2014 Euro US dollar Japanese yen Other 31.12.2013 Subsidiaries hedged (excluding central purchasing) Subsidiaries that use hedging instruments Receivables due to subsidiaries hedging foreign exchange risk 45.5 45.5 Payables owed by subsidiaries hedging foreign exchange risk 56.0 23.3 32.7 0.0 37.4 Gross exposure in the statement of financial position (10.4) (23.3) 12.8 0.0 0.0 (37.4) Customer orders 0.0 Supplier orders 0.0 Projected gross exposure 0.0 0.0 0.0 0.0 0.0 0.0 Gross exposure before hedging (10.4) (23.3) 12.8 0.0 0.0 (37.4) Hedges set up by subsidiaries 10.4 23.3 (12.8) 0.0 0.0 37.4 Net exposure after hedging of foreign exchange risk by subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0
Certain subsidiaries may use financial instruments to hedge the foreign exchange risk between their debt in US dollars, euros or Japanese yen and their reporting currency (Moroccan dirhams, Kenyan shillings).
(in € millions) 31.12.2014 Euro US dollar Japanese yen Other 31.12.2013 Subsidiaries not hedged Subsidiaries that do not use hedging instruments Receivables due to subsidiaries 34.4 8.3 14.5 0.2 11.3 3.6 Payables owed by subsidiaries 105.8 35.7 69.8 0.0 0.4 140.6 Cash 17.6 3.2 12.5 1.5 0.4 68.2 Borrowings 43.3 10.8 21.5 3.0 8.0 60.0 Gross exposure in the statement of financial position (97.1) (35.1) (64.2) (1.2) 3.4 (128.8) Hedging instruments 0.0 Net exposure after hedging (97.1) (35.1) (64.2) (1.2) 3.4 (128.8) 10% depreciation in local currency (9.7) (3.5) (6.4) (0.1) 0.3 (12.9)
Subsidiaries excluding central purchasing offices that do not The above table does not include the exposure of euro-denominated use foreign exchange hedging instruments owing to regulatory assets and liabilities of subsidiaries in the CFA zone, since the constraints are exposed to the risk of changes in the value of their exchange rate of this currency is fixed against the euro. These reporting currency against operating and financial receivables items amounted to €153.0 million as of December 31, 2014. and payables denominated in euros or US dollars.
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The following table summarizes the Group’s net consolidated position:
(in € millions) 31.12.2014 Euro US dollar Japanese yen Other 31.12.2013 CFAO Group Receivables 166.1 19.3 134.7 0.7 11.3 118.1 Payables 434.2 207.0 198.9 27.4 0.8 419.2 Cash 21.7 3.2 16.6 1.5 0.4 68.7 Borrowings 59.7 26.7 21.5 3.0 8.5 65.1 Gross exposure in the statement of financial position (306.0) (211.3) (69.0) (28.2) 2.4 (297.5) Customer orders 55.1 0.0 55.0 0.1 0.0 63.7 Supplier orders 123.9 0.0 92.4 27.6 3.9 124.5 Projected gross exposure (68.8) 0.0 (37.4) (27.5) (3.9) (60.9) Gross exposure before hedging (374.8) (211.3) (106.4) (55.6) (1.5) (358.4) Hedging instruments 127.9 23.3 44.8 54.9 4.9 163.2 Net exposure after hedging (247.0) (188.0) (61.6) (0.7) 3.4 (195.2)
Analysis of sensitivity to foreign exchange risk This analysis excludes the impacts of translating the financial statements of each Group entity into the Group’s presentation Based on year-end market data, the negative impact of a sudden currency (euro). 10% increase in the exchange rate of unhedged purchasing currencies against local currencies (excluding the CFA franc) The sensitivity analysis assumes that all other market variables would have been €9.8 million in 2014. remain unchanged.
30.3 Credit risk
The Group uses derivative instruments solely to reduce its overall At December 31, 2014, the main counterparties are Société exposure to foreign exchange risk arising in the normal course Générale, Natixis, Crédit Agricole and Barclays. of business. All transactions involving derivatives are carried out over the counter.
30.4 Derivative instruments at market value
As of December 31, 2014 and 2013, and in accordance with IAS 39, the market values of derivative financial instruments were recognized in assets under “Other current financial assets” and in liabilities under “Other current financial liabilities”.
The fair values of foreign exchange derivatives were recognized in other current financial assets or liabilities.
Interest Foreign Other (in € millions) 31.12.2014 rate risk exchange risk market risks 31.12.2013 Derivative assets 14.8 14.8 5.7 Non-current Current 14.8 14.8 5.7 Fair value hedges 14.8 14.8 5.7 Derivative liabilities 11.9 11.9 14.6 Non-current Current 11.9 11.9 14.6 Fair value hedges 11.9 11.9 14.6 TOTAL 2.9 2.9 (8.9)
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30.5 Liquidity risk
Liquidity risk management for the Group and each of its Forecast cash flows relating to interest payable are included in subsidiaries is closely monitored and periodically assessed by “Other borrowings” and calculated up to the contractual maturity CFAO, using Group financial reporting procedures. of the borrowings to which they relate. Floating-rate interest payable at future dates is fixed based on the interest rate at the The analysis below covers contractual commitments regarding end of the reporting period. borrowings and trade payables, including interest due. The future cash flows presented have not been discounted.
2013 Less than One to More than (in € millions) Carrying amount Cash flow one year five years five years Non-derivative financial instruments Other borrowings 615.0 (618.9) (506.0) (108.5) (4.3) Trade payables 619.9 (619.9) (619.9) TOTAL 1,234.9 (1,238.8) (1,125.9) (108.5) (4.3)
2014 Less than One to More than five (in € millions) Carrying amount Cash flow one year five years years Non-derivative financial instruments Other borrowings 634.8 (638.3) (532.9) (102.6) (2.8) Trade payables 573.9 (573.9) (573.9) TOTAL 1,208.8 (1,212.2) (1,106.8) (102.6) (2.8)
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3 NOTE 31 Net debt
Group net debt breaks down as follows:
(in € millions) 31.12.2014 31.12.2013 Gross borrowings (634.8) (615.0) Cash 202.3 211.5 NET DEBT (432.5) (403.5)
3 NOTE 32 Accounting classifi cation and market value of fi nancial instruments
The basis of measurement for financial instruments and their market values as of December 31, 2014 are presented below:
31.12.2013 Derivatives qualifying Carrying Available-for- Loans and for hedge (in € millions) amount Market value sale assets receivables Amortized cost accounting Non-current assets Non-current financial assets 64.8 64.8 7.9 45.7 11.2 Current assets Trade receivables 553.5 553.5 553.5 Other current financial assets 6.0 6.0 0.3 5.7 Cash and cash equivalents 211.5 211.5 211.5 Non-current liabilities Non-current borrowings 109.0 109.0 109.0 Current liabilities Current borrowings 506.0 506.0 506.0 Other current financial liabilities 19.0 19.0 4.3 14.6 Trade payables 619.9 619.9 619.9
31.12.2014 Derivatives qualifying Carrying Available-for- Loans and for hedge (in € millions) amount Market value sale assets receivables Amortized cost accounting Non-current assets Non-current financial assets 61.1 61.1 11.1 41.5 8.5 Current assets Trade receivables 561.4 561.4 561.4 Other current financial assets 15.2 15.2 0.5 14.8 Cash and cash equivalents 202.3 202.3 0.0 202.3 Non-current liabilities Non-current borrowings 101.9 101.9 101.9 Current liabilities Current borrowings 532.9 532.9 532.9 Other current financial liabilities 16.8 16.8 5.0 11.9 Trade payables 573.9 573.9 573.9
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Assets and liabilities recognized at fair value are measured as futures prices, yield curves, etc. Most derivatives traded on follows: markets are measured based on models commonly used by market practitioners in pricing these financial instruments. ■ Level 1: prices quoted in an active market ■ Level 3: internal models based on non-observable inputs Where available, prices quoted in an active market are used as the preferred method for determining market value. No The fair values used to determine the instruments’ carrying instruments were included in level 1 of the fair value hierarchy amounts represent reasonable estimates of their market values. as of December 31, 2014. This method chiefly concerns non-current financial assets. Non- current financial assets are described in Note 20. ■ Level 2: internal models using valuation techniques drawing on observable market inputs No changes were made to the methods used to measure the fair values of financial assets and liabilities in 2014. These techniques are based on standard mathematical calculations incorporating observable market inputs such as
3 NOTE 33 Notes to the statement of cash fl ows
As of December 31, 2014, cash and cash equivalents net of bank overdrafts and cash current accounts with a credit balance stood at a negative €285.5 million, representing total cash and cash equivalents as shown in the statement of cash flows.
(in € millions) 31.12.2014 31.12.2013 Cash and cash equivalents as reported in the statement of financial position 202.3 211.5 Bank overdrafts (486.9) (454.6) Cash current accounts with a credit balance (0.9) 0.0 CASH AND CASH EQUIVALENTS AS REPORTED IN THE STATEMENT OF CASH FLOWS (285.5) (243.1)
33.1 Cash flow from operating activities
Cash flow from operating activities breaks down as follows for 2014 and 2013:
(in € millions) 31.12.2014 31.12.2013 Net income from continuing operations 149.6 144.4 Gains/(losses) on asset disposals, net of tax (4.3) (4.5) Deferred tax (2.8) 1.8 Share in earnings (losses) of associates (1.5) (1.6) Dividends received from associates 1.2 1.7 Other non-cash income and expenses 73.3 72.4 CASH FLOW FROM OPERATING ACTIVITIES 215.6 214.2
33.2 Purchases of property, plant and equipment and intangible assets
Purchases of property, plant and equipment and intangible assets totaled €121.0 million in 2014, versus €99.7 million in 2013.
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33.3 Acquisitions and disposals of subsidiaries
(in € millions) 31.12.2014 31.12.2013 Acquisitions of subsidiaries, net of cash acquired (20.3) (3.9) Proceeds from disposals of subsidiaries, net of cash transferred 0.4 (2.5) TOTAL (19.9) (6.3)
In 2014, Healthcare division bought out non controlling interests on Mission Pharma and acquired Fazzini in Italy and SEP in Congo (Import-Wholesale-Distributor). Equipment & Service division acquired two companies operating in automotive distribution, one in Liberia, the other in Sierra Leone.
Acquisitions in 2013 reflecting the buy out of non controlling interests on Assene Laborex Nigeria by the Healthcare division.
33.4 Debt issues and redemptions
(in € millions) 31.12.2014 31.12.2013 Bond issuances 35.9 24.6 Bond redemptions (51.2) (39.5) Increase/decrease in other borrowings (15.3) (14.9)
3 NOTE 34 Contingent liabilities, contractual commitments not recognized and other contingencies
34.1 Commitments given following asset disposals
The main vendor warranties given by the Group on the sale of companies are summarized below:
Disposals Vendor warranties September 2010 Sale of Fantasia, Comamussy Guarantee on compliance of provisions related to income tax, VAT and customs duties, capped at €7,3 million, and Sud Participations expiring on September 8, 2015
In addition to the vendor warranties described above, vendor warranty agreements with standard terms were set up for the purchasers of the other companies sold by the Group.
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34.2 Other commitments given
34.2.1 Contractual obligations The table below shows all of the Group’s contractual commitments and obligations, excluding employee benefit obligations presented in the preceding notes.
Payments due by period Less than 1 to More than (in € millions) 1 year 5 years 5 years 2014 2013 Non-current borrowings 0.0 99.2 2.8 101.9 109.0 Operating lease agreements 35.3 47.2 19.2 101.7 94.7 Binding purchase commitments 129.1 0.0 0.0 129.1 139.8 TOTAL COMMITMENTS GIVEN 164.4 146.4 22.0 332.8 343.4
Binding purchase commitments consist mainly of commitments operating leases for the period, which cannot be canceled by undertaken with regard to suppliers. the lessee. These mainly include non-cancelable rental payments in respect of showrooms, logistics hubs and other buildings Operating leases (headquarters and administrative offices). Contractual obligations presented under “Operating lease The rental charge in respect of minimum lease payments amounted agreements” represents future minimum lease payments under to €39.0 million in 2014 (versus €33.5 million in 2013). There was no charge for contingent payments either in 2014 or 2013.
34.2.2 Guarantees and other collateral Guarantees and other collateral granted by the Group break down as follows:
Carrying Amount of assets amount in Amount of assets pledged at the statement pledged at Pledge Pledge December 31, of financial Corresponding December 31, (in € millions) start date expiration date 2014 position % 2013 Intangible assets 0.8 1.3 09.01.2004 17.12.2017 0.8 0.2 0.8 05.06.2007 20.03.2017 0.0 0.1 0.6 Property, plant and equipment 3.6 5.6 28.11.2012 28.11.2015 3.6 7.9 5.6 Non-current financial assets Total non-current assets pledged as collateral 4.4 8.2 53.9% 7.0 Inventories 0.0 Trade receivables (0.3) 0.0 Total current assets pledged as collateral (0.3) 0.0
34.2.3 Individual training entitlement entitlement are deducted from the number of training hours accumulated. Pursuant to French Law no. 2004-391 of May 4, 2004 on vocational training, all employees of the Group’s French The total unused cumulative training entitlement accrued by companies receive a 20-hour training credit each year, which can employees represented 94,850 hours as of December 31, 2014 be accumulated over six years and is capped at 120 hours. Any (95,328 hours as of December 31, 2013). training courses followed within the framework of this training
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34.2.4 Other commitments Other commitments break down as follows:
Payments due by period Less than 1 to More than (in € millions) 1 year 5 years 5 years 31.12.2014 31.12.2013 Confirmed lines of credit 400.0 400.0 400.0 Letters of credit 3.4 3.4 0.0 Discounted notes not yet due 2.6 2.6 1.4 Sale of receivables - Other programs 0.0 Other guarantees received 13.2 13.6 41.4 68.2 58.7 Total commitments received 19.3 413.6 41.4 474.3 460.1 Bank guarantees 60.1 4.0 64.1 62.9 Rent guarantees, property guarantees 10.7 0.0 0.0 10.7 10.2 Tax guarantees 2.2 2.2 0.0 Customs securities 79.9 0.1 0.2 80.1 71.7 Other commitments 386.9 24.3 5.4 416.6 489.1 Total commitments given 539.8 28.4 5.6 573.7 633.9
Other commitments relate mainly to letters of credit provided on distribution activities require it to enter into short- and medium-term behalf of suppliers, in order to guarantee the Group’s compliance agreements. In light of the number of suppliers and the volumes with its contractual obligations. They include also commitments purchased, the Group considers that it is significantly dependent given following assets disposal indicated in note 34.1. on its main suppliers.
The confirmed credit line commitment reflects the amount of the syndicated loan, on which €35 million had been drawn down as of December 31, 2014. 34.4 Litigation
To the best of the Group’s knowledge, there are no other significant Group companies are involved in a number of lawsuits or disputes commitments given or contingent liabilities. arising in the normal course of business, including litigation with tax, social security and customs authorities. Provisions have been 34.2.5 Other guarantees given set aside for the probable costs, as estimated by the Group’s CFAO has given a guarantee to four banks mainly regarding entities and their counsel. According to the Group’s legal counsel, the representations made in the various documents prepared no litigation currently in progress is likely to have a material impact in connection with its stock market listing (offering circular and on normal or foreseeable operations or the planned development prospectus). of the Group or any of its subsidiaries. The Group believes there is no known litigation likely to have a potential material impact on its net assets, activity or financial position that is not adequately covered by provisions recorded at the end of the reporting period. 34.3 Dependence on patents, licenses and supply contracts No litigation that the Company considers as well grounded, taken alone, is material for the Company or the Group.
The Group is not significantly dependent on any patents, licenses No litigation or arbitration that the Company considers as well or supply contracts. grounded, taken alone, has had in the recent past or is likely to have a material impact on the financial position, the activity or the However, a significant portion of CFAO’s product range is geared results of the Company or of the Group. to several “strategic” suppliers. Generally speaking, the Group’s
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3 NOTE 35 Transactions with related parties
35.1 Party exercising significant influence in respect of 2012 results. In 2014, a dividend of €48.7 million over the Group was paid to TTC in respect of 2013 results. CFAO group purchased in 2014 Toyota cars and spare parts to Toyota Tsusho Corporation (TTC) owns 97.43% of the CFAO TTC group companies for an amount of €7,6 millions. Group’s voting rights, further to its tender offer on CFAO shares in 2012. In 2013, a dividend of €54.1 million was paid to TTC
35.2 Associates
In the normal course of business, the Group enters into transactions with associates on an arm’s length basis.
The main transactions with associates are summarized in the following table:
(in € millions) 31.12.2014 31.12.2013 Non-current loans and receivables due from non-consolidated investments 2.5 8.0 Trade receivables 13.3 12.6 Other current assets Other current liabilities 13.4 11.1 Sales of goods and services 1.9 18.7
35.3 Management remuneration
The table below shows remuneration paid to members of the Management Board and Executive Committee:
(in € millions) 31.12.2014 31.12.2013 Short-term benefits 12.7 10.3 Post-employment benefits 0.4 0.5 Other long term benefits Share-based payments 1.1 1.2 Retirement / Departure and other bonuses 0.8 2.9 TOTAL 15.0 14.8
Short-term benefits relate to amounts recognized during the year and include employer taxes.
The Executive Committee comprised 23 members at the beginning of 2014 and 27 members at the end of the year.
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3 NOTE 36 Subsequent events
No subsequent events had a material impact on the consolidated financial statements for the year ended December 31, 2014.
3 NOTE 37 List of consolidated companies as of December 31, 2014
The list of Group subsidiaries is as follows:
Full consolidation F Consolidation method Equity method E
% interest Companies 31.12.2014 31.12.2013 CFAO Parent company CFAO G 100.00 G 100.00 France ACTIDIS G 99.68 G 99.68 ADIALEA G 55.01 ALIOS FINANCE E 24.27 E 24.27 CFAO TECHNOLOGIES G 100.00 G 100.00 CONTINENTAL PHARMACEUTIQUE G 83.51 G 83.33 COTAFI G 100.00 G 100.00 DOMAFI G 100.00 G 100.00 ECS G 99.68 G 99.68 EP DIS G 99.68 G 99.68 EP HEALTHCARE SERVICES G 99.68 G 99.68 EURAPHARMA G 99.68 G 99.68 FORAPHARMA G 99.68 G 99.68 GEREFI G 100.00 G 100.00 HDS G 100.00 G 100.00 HOLDINTER G 100.00 G 100.00 HOLDINTER AND CIE G 100.00 G 100.00 PROPHARMED FRANCE E 34.87 E 34.87 PROMOTION DT E 34.87 E 34.87 RESSOURCETHICA E 34.89 E 34.89 SECA G 99.69 G 99.69 SEI G 100.00 G 100.00 SEP G 100.00 G 100.00 SEROM G 99.90 G 99.90 SEVPHARM G 99.68 G 99.68 SGI AFRICA G 100.00 SODIAPA G 55.01 SORAPHARMA G 99.68 G 99.68 SFCE G 100.00 G 100.00
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% interest Companies 31.12.2014 31.12.2013 CFAO Parent company French overseas and territories ALMAMETO (New Caledonia) G 100.00 G 100.00 CMM (Réunion) G 98.38 G 98.28 CMR (Réunion) G 100.00 G 100.00 CP HOLDING (New Caledonia) G 100.00 G 100.00 EPDEP (West Indiest) G 83.51 G 83.33 EPDEP (Réunion) G 83.51 G 83.33 INTERMOTORS (New Caledonia) G 100.00 G 100.00 LABOREX SAINT MARTIN (West Indiest) G 73.89 G 73.89 LOCAUTO (New Caledonia) SOLD 0.00 E 36.27 MENARD AUTOMOBILE (New Caledonia) G 100.00 G 100.00 NCCIE (Guyana) G 100.00 G 100.00 NEW CALEDONIA MOTORS (New Caledonia) G 100.00 G 100.00 OCDP (New Caledonia) E 33.11 E 33.11 PERFORMANCE AUTOS (French Polynesia) G 100.00 G 100.00 PRESTIGE AUTO SERVICE (French Polynesia) G 100.00 G 100.00 PRESTIGE MOTORS (New Caledonia) G 100.00 G 100.00 PRESTIGE LEASE (New Caledonia) SOLD 0.00 E 36.26 SAPAS (New Caledonia) G 100.00 G 100.00 SCI DU BAIN LOTI (French Polynesia) G 100.00 G 100.00 SEIGNEURIE OCEAN INDIEN (Réunion) E 49.00 E 49.00 SOCIETE PHARMACEUTIQUE DES CARAIBES (West Indiest) G 81.74 G 81.74 SOREDIP (Réunion) G 67.43 G 67.36 SPA (West Indiest) G 47.86 G 47.86 SPG (Guyana) G 60.86 G 57.96 TAHITI PHARM (French Polynesia) G 88.68 G 88.67 Denmark GIN INVEST 1 APS G 99.68 G 99.68 MIFAMED MEDICAL PVT LTD G 99.68 G 99.68 MIFAMED APS G 99.68 G 99.68 MISSIONPHARMA GROUP APS G 99.68 G 99.68 MISSIONPHARMA AS G 99.68 G 99.68 MISSION PHARMA LOGISTIC INDIA G 99.68 G 99.68 MISSION PHARMA PROPERTIES AS G 99.68 G 99.68 P GINNERUP APS G 99.68 G 99.68 PHARMA DANICA AS G 99.68 G 99.68 Italy FAZZINI G 69.78 Portugal STOCKPHARMA G 79.75 G 79.75 United Kingdom EURAFRIC TRADING COMPANY LIMITED G 100.00 G 100.00 MASSILIA HOLDINGS LIMITED G 100.00 G 100.00 Switzerland EURALAB G 99.66 G 99.66 PROPHARMED INTERNATIONAL E 34.87 E 34.87 VECOPHARM G 99.68 G 99.68
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% interest Companies 31.12.2014 31.12.2013 CFAO Parent company Algeria ASIAN HALL ALGERIE G 100.00 G 100.00 BAVARIA MOTORS ALGERIA G 100.00 G 100.00 CFAO TECHNOLOGIES (EX ALBM) G 69.94 G 69.94 DIAMAL G 60.00 G 60.00 EPDIS ALGERIE G 69.78 G 69.78 PROPHARMAL G 48.84 G 48.84 Angola LABOREX ANGOLA G 94.66 G 94.66 SONCAR G 79.00 G 79.00 Benin CFAO MOTORS BENIN G 99.27 G 99.27 CFAO TECHNOLOGIE BENIN G 100.00 PROMO - PHARMA G 50.94 G 50.83 Burkina Faso CFAO MOTORS BURKINA G 73.09 G 73.09 CFAO TECHNOLOGIES BURKINA G 100.00 G 100.00 LABOREX BURKINA G 84.22 G 86.53 Cambodia AUTOMOTIVA ASIA (CAMBODIA) LIMITED G 57.55 AUTOMOTIVE ASSOCIATES LIMITED G 57.55 Cameroon CAMI G 67.41 G 67.41 CFAO EQUIPEMENT CAMEROUN G 100.00 G 100.00 CFAO TECHNOLOGIES CAMEROUN G 89.19 G 89.19 COMPAGNIE EQUATORIALE DES PEINTURES E 24.19 E 24.19 ICRAFON SOCIETE INDUSTRIELLE DES CRAYONS G 52.00 G 52.00 LABOREX - CAMEROUN G 65.74 G 65.69 SOCADA G 100.00 G 100.00 SUPERDOLL E 45.00 E 45.00 Central African Republic CFAO MOTORS CENTRAFRIQUE G 100.00 G 100.00 China OPENASIA EQUIPMENT LTD G 75.00 G 75.00 Congo BRASSERIES DU CONGO G 50.00 G 50.00 CFAO CONGO G 100.00 G 100.00 LABOREX - CONGO G 80.04 G 76.55 SEP POINTE NOIRE G 99.44 SEP BRAZZAVILLE G 99.68 Ivory Coast CFAO EQUIPEMENT CI G 100.00 G 100.00 CFAO MOTORS COTE D’IVOIRE G 95.85 G 95.80 CFAO TECHNOLOGIES COTE D’IVOIRE G 100.00 G 100.00 COPHARMED CI G 60.79 G 60.55 MANUFACTURE IVOIRIENNE DES PLASTIQUES G 100.00 G 100.00 SDA RCI G 55.01 0.00 SDM RCI G 100.00 0.00 SGI G 100.00 G 100.00
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% interest Companies 31.12.2014 31.12.2013 CFAO Parent company Gabon CFAO EQUIPEMENT GABON G 100.00 G 100.00 CFAO MOTORS GABON G 98.84 G 96.87 CFAO TECHNOLOGIES GABON G 100.00 G 100.00 KIA GABON G 100.00 G 100.00 SOCIETE PHARMACEUTIQUE GABONAISE G 52.19 G 51.20 Gambia CFAO GAMBIA G 97.26 G 78.98 Ghana CFAO GHANA EQUIPEMENT G 100.00 G 100.00 CFAO (GHANA) LIMITED G 94.43 G 94.43 GOKALS LABOREX LTD G 64.79 G 64.79 LOXEA GHANA G 94.43 G 94.43 PENS AND PLASTICS (GHANA) LIMITED G 100.00 G 100.00 Guinea-Bissau CFAO GUINEE BISSAU G 100.00 G 100.00 Guinea-Conakry CFAO MOTORS GUINEE G 100.00 G 100.00 LABOREX GUINEE G 71.66 G 71.66 Equatorial Guinea CFAO MOTORS GUINEA ECUATORIAL G 100.00 G 100.00 Mauritius AFRICAN AUTOMOTIVE TRADING G 100.00 AFRICAN FOOD TRADING G 55.01 CAPSTONE G 100.00 G 100.00 CAPSTONE INTERNATIONAL G 60.00 G 60.00 EASTPHARMA LTD G 99.68 G 99.68 ELDO MOTORS LIMITED G 100.00 G 100.00 ELDO MOTORS INTERNATIONAL CLOSED 0.00 G 100.00 IMC G 100.00 G 100.00 INTERCONTINENTAL PHARM G 64.79 G 64.79 LOXEA HOLDING G 100.00 G 100.00 Kenya CICA MOTORS KENYA LIMITED G 100.00 G 100.00 DT DOBIE KENYA G 100.00 G 100.00 EP DIS KENYA LIMITED G 99.68 G 99.68 KVM E 32.50 E 32.50 LABOREX KENYA G 99.68 G 99.68 Liberia CICA LIBERIA INC G 100.00 0.00 Madagascar AUSTRAL AUTO G 100.00 G 100.00 SICAM G 55.91 G 55.91 SIGM G 99.96 G 99.96 SIRH G 100.00 G 100.00 SME G 99.00 G 99.00 SOCIMEX G 100.00 G 100.00 SOMADA G 56.00 G 56.00 SOMAPHAR G 89.29 G 89.30
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% interest Companies 31.12.2014 31.12.2013 CFAO Parent company Malawi CFAO MALAWI LIMITED G 100.00 G 100.00 CICA MOTORS MALAWI G 100.00 G 100.00 Mali CFAO MOTORS MALI G 90.00 G 90.00 CFAO TECHNOLOGIES MALI G 100.00 G 100.00 IMACY G 100.00 G 100.00 LABOREX MALI G 55.76 G 55.76 Morocco ASIAN HALL MAROC G 100.00 G 100.00 CFAO MOTORS MAROC G 100.00 G 100.00 DIMAC G 100.00 G 100.00 SALSABILA G 100.00 G 100.00 SIAB G 100.00 G 100.00 Mauritania CFAO MOTORS MAURITANIA G 100.00 G 100.00 LABOREX MAURITANIE G 99.55 G 99.41 Niger CFAO MOTORS NIGER G 99.85 G 99.85 LABOREX NIGER G 67.64 G 69.35 Nigeria ALLIANCE AUTOS NIGERIA G 100.00 G 100.00 ASSENE LABOREX LTD G 79.75 G 79.75 CFAO CICA NIGERIA LIMITED G 99.52 G 99.52 CFAO EQUIPEMENT NIGERIA LTD G 100.00 G 100.00 CFAO MOTORS NIGERIA LTD G 100.00 G 100.00 CFAO NIGERIA G 100.00 G 100.00 CFAO TRUCKS & TYRES NIGERIA LTD G 100.00 G 100.00 G&I DISTRIBUTION LTD G 100.00 E 46.38 GLOBAL BRAND NIGERIA G 100.00 G 100.00 NIGERIAN BALL POINT PEN INDUSTRIES LTD G 96.44 G 94.66 Uganda CFAO MOTORS UGANDA LTD G 100.00 G 100.00 LABOREX OUGANDA G 99.68 G 99.68 Democratic Republic of Congo CFAO MOTORS RDC G 100.00 G 100.00 Sao Tomé CFAO MOTORS STP G 100.00 G 100.00 Senegal CFAO EQUIPEMENT SENEGAL G 94.61 G 94.61 CFAO MOTORS SENEGAL G 89.70 G 89.70 CFAO TECHNOLOGIES SENEGAL G 100.00 G 100.00 LABOREX SENEGAL G 61.68 G 60.72 PM II G 100.00 G 100.00 Sierra Leone CICA MOTORS SIERRA LEONE LIMITED G 100.00
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% interest Companies 31.12.2014 31.12.2013 CFAO Parent company Tanzania ALLIANCE AUTOS LTD (TANZANIE) G 100.00 G 100.00 CFAO MOTORS TANZANIA LTD G 100.00 G 100.00 LABOREX TANZANIE G 99.68 G 99.63 Chad CFAO MOTORS TCHAD G 98.11 G 98.11 LABOREX TCHAD G 53.23 G 50.79 Togo CFAO MOTORS TOGO G 69.72 G 69.72 TOGO UNIPHART G 59.33 G 59.33 Zambia CFAO TECHNOLOGIE TOGO G 100.00 CFAO ZAMBIA LTD G 100.00 G 100.00 VEHICLE CENTER ZAMBIA LTD G 100.00 G 100.00 Vietnam AUTOMOTIVE ASIA G 75.00 G 75.00 LIEN A G 60.00 G 60.00 OPENASIA HEAVY EQUIPMENT LTD G 75.00 G 75.00 Zimbabwe AUTOMOTIVE DISTRIBUTOR INCORPORATED G 75.00 G 75.00 NISSAN ZIMBABWE USD G 75.00 G 75.00
20.3.2 Parent company financial statements Net financial income fell by 65.2% year-on-year to €56.7 million from €86.9 million in 2013. This item comprises dividends received from entities in the investment portfolio, amounting Presentation of the parent company financial to €94.8 million, and provisions for the impairment of equity statements and the measurement methods used investments, amounting to €70.0 million. Consequently, net recurring income decreased by 58.9%. The parent company financial statements for the year ended December 31, 2014 have been prepared and presented in Net non-recurring expense for 2014 came in at €2.0 million accordance with the provisions of the French accounting law of compared to €3.8 million in 2013 and mainly reflects write- April 30, 1983, and the implementing decree of November 29, offs of receivables and provision for risks offset by an insurance 1983. In accordance with the provisions of Article L. 232-6 of indemnity. As a result, net income (after tax and employee profit- the French Commercial Code, the parent company financial sharing) stood at €51.1 million compared to €80.7 million in statements have been prepared using the same accounting rules 2013. and measurement methods as for 2013. As at December 31, 2014, cash and cash equivalents and Results of operations of the parent company marketable securities stood at €3.2 million versus €23.2 million at the end of 2013. CFAO SA is a holding company and does not carry on any operating activities. The company reported an operating loss of In accordance with Article L. 441-6-1 of the French Commercial €7.8 million in 2014, after a €4.4 million in 2013, primarily due Code, it is noted that trade payables amounted to €0.71 million to a 5% decrease in operating income combined with an increase in operating expenses.
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at December 31, 2014 (compared to €0.62 million at December 31, 2013). All trade payables fall due in less than 60 days (as at December 31, 2012)
Balance sheet at December 31, 2014 and December 31, 2013 ASSETS
2014 2013 Depreciation, amortization (in € thousands) Notes Gross and provisions Net Net Intangible assets 2.1 3,578. 6 3, 008. 8 569. 8 427. 8 Property, plant and equipment 2.2 3,533. 6 2, 789. 7 743. 9 665. 6 Equity investments 2.3 423,783. 0 165,470. 2 258,312. 8 239,140. 1 Other investments 2.3 2,713. 7 580.0 2, 133. 7 2,133. 7 Receivables due from investments 2.4 10,096. 9 5, 476. 5 4, 620. 4 8,777. 1 Other financial fixed assets 2.5 172.5 136.9 35. 6 24. 5 Non-current assets 443,878. 3 177, 462.1 266, 416.2 251, 168.8 Trade receivables 2.6.1 2,123. 1 782. 8 1, 340. 3 2. 2 Other receivables 2.6.2 167,610. 9 5, 322. 9 162,288. 0 152,323. 4 Marketable securities and cash and cash equivalents 2.6.3 3,269. 6 0. 0 3, 269. 6 23,244. 1 Prepayments and other accruals 2.6.4 2,547. 7 0. 0 2, 547. 7 2,866. 6 Current assets 2.6 175,551. 3 6, 105.7 169, 445.6 178,436. 0 TOTAL ASSETS 619,429. 6 183,567. 8 435, 861. 8 429,605. 0
EQUITY AND LIABILITIES
(in € thousands) Notes 2014 2013 Share capital 10, 459. 5 10,277. 5 Legal reserves 1, 850. 3 1, 850. 3 Additional paid-in capital 24, 073. 3 155. 0 General reserve 0. 0 0.0 Unavailable reserve 5, 975. 8 5, 975. 8 Retained earnings 146, 035. 8 115,278. 9 Net income for the year 51, 134.3 80, 707.5 Shareholders’ equity 2.7 239, 529.0 214, 245.0 Provisions for contingencies and losses 2.8 45,667. 1 33, 535.6 Borrowings 37, 411. 1 65,354. 7 Trade payables 713. 9 617. 5 Other payables 107, 000. 1 110,869. 1 Deferred income and other accruals 5, 540. 6 4, 983. 0 Liabilities 2.9 150, 358.2 181, 824.4 TOTAL EQUITY AND LIABILITIES 435, 861. 8 429,605. 0
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Income statement for the years ended December 31, 2014 and 2013
(in € thousands) Notes 2014 2013 Other income 29,561.4 26,198.9 Operating income 29,561.4 26,198.9 Payroll expenses (20,982.5) (15,154.3) Other operating expenses (15,884.5) (14,614.2) Net charges to depreciation and amortization (544) (544.4) Net charges to provisions 0.0 0.0 Operating expenses (37,410.4) (30,218.3) Net operating income (expense) 2.12 (7,849.0) (4,019.4) Net financial income 2.13 56,709.0 86,982.3 Net recurring income 48,860.0 82,962.9 Net non-recurring income (expense) 2.14 (1,989.3) (3,781.1) Employee profit-sharing (1,231) (1,231.2) Income tax 5,494.8 2,585.1 NET INCOME FOR THE YEAR 51,134.3 80,707.5
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Notes to the parent company financial statements of CFAO SA for the years ended December 31, 2014 and 2013
The accompanying notes are an integral part of the 2014 financial statements.
2014 Highlights
None.
3 NOTE 1 Basis of measurement and presentation
The financial statements for the fiscal year 2014 have been applicable, impairment provisions are recognized to reduce the prepared in accordance with the Regulations 2014-03 of the value of equity investments, and provisions for contingencies are Autorité des Normes Comptables, approved by Ministerial Decree recognized for the amount of any negative net equity. Unrealized of September 8, 2014 related to General Accounting Plan. gains are not recognized.
1.1 Property, plant and equipment and 1.3 Receivables and payables intangible assets Receivables and payables are recognized at face value. Property, plant and equipment and intangible assets are measured Provisions for impairment of receivables are recorded when there at purchase cost in accordance with accounting rules. The basis of is a risk of non-collection. measurement remains the same.
In accordance with rules pertaining to property, plant and equipment and intangible assets (CRC 2002-10 and CRC 2004- 1.4 Foreign currency transactions 06), the Company has identified no material component. The depreciation periods applied reflect the useful lives of the property Transactions denominated in foreign currency are recognized and, accordingly, they have not been changed in 2014. at the exchange rate in force at the transaction date or at the hedging rate. Foreign currency receivables and payables The purchase cost for property, plant and equipment and outstanding at year-end on unhedged transactions are recognized intangible assets comprises the purchase price and all directly and measured at the closing exchange rate. attributable costs. Intangible assets are measured at purchase cost or contribution value, and are amortized over the statutory amortization period or their effective useful lives, whichever is shorter. Intangible assets mainly comprise software, which is 1.5 Related parties amortized on a straight-line basis over three years. All fully consolidated entities are considered “related parties” in the Property, plant and equipment are recorded in the balance sheet notes below. at purchase cost. (See the notes to the consolidated financial statements). Fixed assets other than land are depreciated on a straight-line basis over their probable useful lives. The depreciation rates used vary between 5% and 25%. 1.6 Stock option and performance share plans 1.2 Long-term investments In accordance with generally accepted accounting principles Equity investments are recorded in the balance sheet at purchase (GAAP): provisions are recognized for stock options and cost. Equity investment costs are included in the cost. An allowance performance share plans settled in shares purchased. No brings them down to their present value if it is lower. The present provisions are recognized for plans that are settled by issuing value is determined based on several measurement factors, such new shares. The payment method – and accordingly the decision as net assets at end of year for all companies concerned, their on whether to recognize a provision – is assessed based on level of profitability, their outlook and their market value. Where decisions of management and/or the Shareholders’ Meeting in force at the end of the reporting period.
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3 NOTE 2 Notes to the balance sheet and income statement
2.1 Intangible assets
Intangible assets mainly include IT-related expenses for €3,578.6 thousand. Accumulated amortization recognized in respect of these items amounted to €3,008.8 thousand.
2.2 Property, plant and equipment
Property, plant and equipment mainly includes IT equipment and furniture for €2,413.1 thousand, and fixtures and fittings at the Company’s head office at 18, rue Troyon for €1,059.3 thousand. At December 31, 2014, accumulated depreciation recognized in respect of these items amounted to €2,020.9 thousand and €707.7 thousand, respectively.
2.3 Equity investments and other investments
(in € thousands) Gross Provisions Net Balance – January 1, 2014 384,746.3 (143,472.5) 241,273.8 Disposals and restructurings (1,930.5) 0.0 (1,930.5) Acquisitions/Capital increase 43,681.2 0.0 43,681.2 Charges to provisions for the year 0.0 (27,683.2) (27,683.2) Reversals from provisions for the year 0.0 5,105.5 5,105.5 BALANCE AT DECEMBER 31, 2014 426,497.0 (166,050.2) 260,446.7
Main movements in equity investments (in € thousands) Cica Libéria Acquisition 4,074.8 GI & Distrib. Nigéria Capital increase 1,538.0 Adialea Capital increase 4,411.0 CFAO Motors Gabon Capital increase 5,550.0 CFAO Motors Guinée Equatoriale Capital increase 2,300.0 Nipen Acquisition 1,710.0 CFAO Motors Uganda Capital increase 852.8 Reelin Sierra Leone Acquisition 3,338.1 CMR Capital increase 9,000.0 Domafi Capital increase 1,385.8 CMDA Acquisition 1,500.0 CFAO Motors Nigéria Capital increase 2,537.0 African Automotive Trading Acquisition 1,000.0 CFAO Motors Gambie Capital increase 800.0 I nvestment Fund Acquisition 847.0 CFAO (liquidity agreement) Acquisition 2,494.1 CFAO (liquidity agreement) Disposal of shares (1,930.5) LOXÉA Congo Capital increase 251.5 Others Capital increase 91.1 MOVEMENTS IN 2014 41,750.7
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Main movements in provisions during the year
Charges to provisions for the year (in € thousands) Dotations Domafi 1,385.8 CFAO Motors Nigéria 657.6 CFAO Gambie 600.1 CFAO Gabon 5,347.1 CMM 2,656.9 CFAO Congo 1,759.5 CFAO Guinée Equatoriale 2,118.9 CFAO Motors Tchad 405.3 Diamal 611.1 Cica Kenya 458.2 Splv Gabon 2,176.5 Splv Cameroun 1,122.2 CFAO Sénégal Equipement 602.5 CMR 4,690.7 CFAO Motors Uganda ltd 852.8 Other 2,238.0 BALANCE AT DECEMBER 31, 2014 27,683.2
Reversals for the year (in € thousands) Reversals Sep 2,665.8 Mipa 844.5 CFAO Centrafrique 550.8 Massilia 106.2 Icrafon 223.3 NCCIE 13.9 Socada 249.2 CFAO Malawi 90.8 CFAO Guinée Bissau 21.3 Openasia Equip. Ltd 339.5 BALANCE AT DECEMBER 31, 2014 5,105.5
2.4 Receivables due from investments
(in € thousands) 2014 2013 Related parties 10,096.9 11,344.1 Third parties 0,0 1,499.6 TOTAL, GROSS 10,096.9 12,843.7 Related impairment (5,476.5) (4,066.6) NET 4,620.4 8,777.1
Changes in receivables due from investments and impairment are primarily related to DIMAC .
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2.5 Other financial fixed assets
2014 2013 (in € thousands) Gross Provisions Net Net Loans 141.9 (136.9) 5.0 5.0 Other 30.6 0,0 30.6 19.5 TOTAL 172.5 (136.9) 35.6 24.5
Loans to non-Group entities amounted to €141.9 thousand at December 31, 2014.
Provisions recorded in respect of these loans at December 31, 2014 amounted to €136.9 thousand, which represents the impairment of loans granted under the statutory building aid program (aide à la construction).
2.6 Circulating assets
2.6.1 Trade and other receivables
(in € thousands) 2014 2013 Related parties, gross 1,338.1 0.0 Third parties, gross 785.0 785.0 Provisions for third parties (782.8) (782.8) TOTAL, NET 1,340.3 2.2
2.6.2 Other receivables
(in € thousands) 2014 2013 Related parties 163,343.8 149,477.1 Third parties 4,267.0 4,475.2 Total 167,610.9 153,952.3 Provisions (5,322.9) (1,628.9) TOTAL 162,288.0 152,323.4
Other receivables have maturities of less than one year and to cash advances to subsidiaries of €10,290.5 thousand. The include current accounts, cash advances to subsidiaries and increase in provisions is due to the depreciation of the current accrued income. The increase for related parties is primarily due account with CFAO Motors Maroc of €3,694 thousand.
2.6.3 Cash and cash equivalents
(in € thousands) 2014 2013 Investments 0.0 0.0 Cash on hand 3,269.7 23,244.0 TOTAL 3,269.7 23,244.0
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2.6.4 Prepayments and other accruals
((in € thousands) 2014 2013 Prepaid expenses 2,547.7 2,866.6 Foreign exchange losses -- TOTAL 2,547.7 2,866.6
Prepaid expenses comprise an insurance premium for the first half of the subsequent year for €360.2 thousand and financing expenses for €1,782 thousand relating to the opening of the syndicated credit facility for the period running from December 17, 2013 to December 17, 2018.
2.7 Shareholders’ equity
At December 31, 2014, the share capital amounted to stock option plan, an issue premium of €23,918.3 thousand was €10,459,512 following a capital increase of 925,871 shares recognized. created within the stock option plan for a value of €154.3 thousan and a capital increase of 166,211 shares created the free share The share capital consists of 62,757,065 fully paid shares of par plan by withdrawing €27.7 thousand from the Company’s reserves. value of €0.1667. This value was €1 in 2008 and was divided As part of the capital increase of €154.3 thousand related to the by 6 in 2009. The accounting profit for the year amounted to €51,134,256.06 and the credit balance brought forward amounted to €146,035,842.60.
Changes in shareholders’ equity can be analyzed as follows:
Share Incentive Stocks options Plan capital Appropriation (in € thousands) 2013 capital increase increase Net income of net income 2014 Share capital 10,277.5 154.3 27.7 - - 10,459.5 Additional paid-in capital 155.0 23,918.3 - - - 24,073.3 Legal reserve 1,850.3 ----1,850.3 Merger premiums ------Unavailable reserve 5,975.7 ----5,975.7 Retained earnings 115,279.0 - (27.7) - 30,784.6 146,035.9 Net income for the year 80,707.5 - - 51,134.3 (80,707.5) 51,134.3 Dividends paid ----49,922.9 - SHAREHOLDERS’ EQUITY 214,245.0 24,072.6 0.0 51,134.3 0.0 239,529.0
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2.8 Provisions
Charges in income statement Reversal to income statement Amount Amount (in € thousands) 01.01.2014 Operating Financial Non-recurring Operating Financial Non-recurring 31.12.2014 Provisions recorded under assets Loans 4,264.5 3,057.0 1,647.0 5,674.5 Equity portfolio 143,472.5 27,683.2 5,105.5 166,050.2 Trade receivables 782.8 782.8 Other receivables 1,628.9 3,693.9 5,322.8 Total provisions recorded under assets 150,148.7 0.0 34,434.1 0.0 0.0 6,752.5 0.0 177,830.3 Provisions recorded under liabilities - 0.0 Contingencies and losses 33,535.6 35,535.0 1,520.5 24,924.0 0.0 45,667.1 GRAND TOTAL 183,684.3 0.0 69,969.1 1,520.5 0.0 31,676.5 0.0 223,497.4
Provisions for contingencies and losses (in € thousands) concern the following items:
(in € thousands) 2014 2013 Restructuring costs 0.0 0.0 Negative equity of subsidiaries 43,681.6 33,070.6 Provisions for risks on disputes and other 1,985.5 465.0 TOTAL 45,667.1 33,535.6
The main movements in provisions for negative net equity of subsidiaries break down as follows:
(in € thousands) HDS 18,618.0 CFAO Motors Maroc 5,002.7 Diamal 1,993.6 CFAO Motors Mali 850.0 Bavaria Motors 4,342.2 CFAO Equipement Gabon 816.1 Alliance Motors Nigéria 811.0 CFAO Equipement CI 818.9 CFAO Motors Gabon (2,930.9) Holdinter et cie (8,103.5) Holdinter (5,786.6) Performance Autos (2,307.2) CFAO Motors Guinée Equatoriale (1,321.0) CFAO Technologies (437.3) CFAO Motors Réunion (850.6) Other (904.5) Balance at December 31, 2014 net charges 10,610.9
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2.9 Liabilities
2.9.1 Maturity schedule of borrowings at year-end
(in € thousands) 2014 Less than one year 2 to 5 years Borrowings Accrued interest 24.8 24.8 Syndicated credit facility 35,000.0 35,000.0 Other bank borrowings 2,386.4 2,386.4 Total 37,411.2 2,411.2 35,000.0 Trade payables 713.9 713.9 Other payables Tax and employee-related liabilities 18,732.5 18,732.5 Other liabilities • Related parties 86,392.9 86,392.9 • Third parties 1,402.2 1,402.2 • Accrued expenses • Related parties 0.0 0.0 Third parties 6,013.2 6,013.2 Total 112,540.8 112,540.8 0.0 GRAND TOTAL 150,665.9 115,665.9 35,000.0
Other liabilities chiefly correspond to current accounts with subsidiaries.
Trade payables fall due in less than 60 days.
2.9.2 Borrowings Movements in borrowings during the year can be analyzed as follows:
Syndicated (in € thousands) credit facility Bank borrowings Interest Total At January 1, 2014 65,000.0 405.8 (51.1) 65,354.7 Repayment of borrowings (65,000.0) (405.8) 51.1 (65,354.7) New borrowings 35,000.0 2,386.3 24.8 37,411.1 AT DECEMBER 31, 2014 35,000.0 2,386.3 24.8 37,411.1
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2.10 Tax position The income tax is broken down as follows: ■ the tax paid by each subsidiary is the same as the tax it would On December 15, 2009, CFAO SA and several of its subsidiaries have paid if it had it not been consolidated in a tax group; opted for the tax consolidation scheme introduced by Article 68 of the French Finance Act of 1988. ■ CFAO SA immediately takes into account the tax expense or savings generated by the difference between the amount of The tax consolidation agreement entered into on July 29, 2010 tax which should have been paid by each company as if they between CFAO SA and its subsidiaries and sub-subsidiaries took had paid their own income tax and the amount of tax due in effect on January 1, 2010. As at December 31, 2014, the scope respect of the taxable income of the whole group. included 22 companies. At December 31, 2014, tax consolidation led to an income Under this scheme, CFAO SA collects income tax from its tax saving amounting €7,491.3 thousand in CFAO’s financial subsidiaries and is alone liable for such tax. statements.
Tax consolidation 2014 tax adjustment consolidation Taxes on (in € thousands) in 2013 gain dividends Other Total Movements 2014 (386.8) 7,491.3 (1,497.7) (112.1) 5,494.7 AMOUNT AT CLOSING (386.8) 7,491.3 (1,497.7) (112.1) 5,494.7
2.11 Off-balance sheet commitments
A) Off-balance sheet commitments (in € thousands) 2014 2013 1 – Commitments given 81,821.7 76,695.2 Endorsements and guarantees given on behalf of related parties 60,602.0 54,524.0 Miscellaneous endorsements and guarantees given 13,764.0 13,444.0 Commitment to repurchase shares 5,185.0 5,933.0 Retirement indemnities 2,030.4 2,492.5 Long-service awards 240.3 301.7 Individual training entitlement (accumulated hours) 8,270 Hours 7,539 Hours 2 – Commitments received 391,816.0 361,816.0 Undrawn confirmed lines of credit 365,000.0 335,000.0 Clawback clauses (return-to-profit) 26,816.0 26,816.0
B) Operating leases (in € thousands) 2014 2013 None
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2.12 Net operating income (expense)
2.12.1 Other income Other income corresponds to support and administration expenses invoiced to CFAO SA subsidiaries.
2.12.1 Other operating expenses Other operating expenses mainly include:
(in € thousands) 2014 2013 Audit and consulting fees 4,592.2 3,137.7 Rental and related expenses 1,843.0 1,772.3 Other external IT costs 2,250.3 2,132.5 Taxes and levies other than on income 1,146.1 1,262.8 Travel expenses 1,442.1 1,384.7 TOTAL 11,273.6 9,689.9
2.13 Net financial income
(in € thousands) 2014 2013 Income from investments 94,751.3 125,840.7 Other interest and similar income 2,663.0 3,327.2 Translation gains 88.6 0.0 Reversals of provisions for equity investments, loans, risks and other (see Note 2.8) 31,676.6 3,649.9 Interest and similar expenses (2,559.3) (4,297.3) Translation losses (0.0) (186.6) Charges to provisions for investments and other (see Note 2.8) (69,969.3) (41,351.5) Interest income on loans 58.2 0.0 TOTAL 56,709.1 86,982.3
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2.13.1 Income from investments Income from investments consists of dividends received from entities in the investment portfolio. The main items are shown below:
(in € thousand) 2014 2013 Brasserie du Congo 17,517.3 25,942.8 Eurapharma 17,303.6 20,838.7 Cami 1,310.3 760.6 Capstone corporation 14,697.5 31,289.2 Capstone International 0.0 2,950.0 Socimex 552.9 1,099.6 CP Holding 2,799.1 1,195.5 Nissan Zimbabwe 0.0 507.1 Imc 162.4 902.5 CFAO Motors Burkina 1,648.0 1,184.6 CFAO Congo 1,095.0 1,389.1 CFAO Côte d’ivoire 4,477.2 4,317.3 CFAO Sénégal 577.1 0.0 CFAO Motors Benin 204.9 680.5 CFAO Motors mali 0.0 0.0 Nccie 1,132.7 1,283.2 Sfce 20,190.3 19,786.5 Seigneurie Ocean Indien 734.1 614.5 CFAO Guinée équatoriale 676.6 633.6 CFAO Togo 547.5 467.2 Dobie Tanzanie 366.6 932.3 Zambia motors 0.0 1,143.5 CFAO Zambia 0.0 812.9 Ppgl 0.0 578.6 Dobie Kenya 4,091.1 1,939.2 Splv Gabon 1,324.4 647.9 CFAO Tchad 562.2 902.5 Opens Asia 688.6 1,151.0 CFAO rdc 0.0 613.2 Others 2,092.0 1,277.1 TOTAL 94,751.4 125,840.7
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2.13.2 Other interest and similar income
(in € thousands) 2014 2013 Interest on loans and current accounts with subsidiaries 2,663.0 3,327.2 TOTAL 2,663.0 3,327.2
2.13.3 Reversals of provisions for equity investments, receivables and other
(in € thousands) 2014 2013 Investments 5,105.5 3,089.5 Loans 1,647.0 374.6 Provisions for contingencies 24,924.0 185.8 TOTAL 31,676.5 3,649.9
Reversals of provisions for equity investments mainly concern the following entities:
Provisions for equity investments (in € thousands) 2014 2013 Sep 2,665. 8 1,275.0 Mipa 844.5 561.5 CFAO Centrafrique 550.8 0.0 Socada 249.2 0.0 Openasia Equip Ltd 339.5 Icrafon 223.3 Massilia 106.2 CFAO Technologies Algérie 656.3 Other 126.2 596.7 Balance at December 31, 2014 5,105.5 3,089.5
Reversals of provisions for contingencies mainly concern the following entities:
(in € thousands) 2014 CFAO Gabon 2,930.9 Holdinter 6,427.6 Holdinter et cie 9,215.4 Performance Autos 2,307.2 CFAO Motors Guinée Equatoriale 1,321.0 CFAO Technologies 437.3 CMR 850.6 Other 1,434.0 Balance at December 31, 2014 24,924.0
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2.13.4 Charges to provisions for equity investments, receivables and other
(in € thousands) 2014 2013 Investments 27,683.2 20,044.7 Loans 3,057.0 1,383.5 Provisions for contingencies 35,535.0 19,923.4 Provisions on other debtors 3,694.0 0.0 TOTAL 69,969.2 41,351.6
Charges to provisions for equity investments mainly concern the following entities:
(in € thousands) 2014 2013 CFAO Motors Nigeria 657.6 1,247.7 Domafi 1,385.8 0,0 CFAO Gambie 600.1 0,0 CMM 2,656.9 2,195.5 CFAO Congo 1,759.5 0,0 CFAO Gabon 5,347.1 990.6 CFAO Guinée Equatoriale 2,118.9 0,0 CFAO Motors Tchad 405.3 0,0 Diamal 611.1 0,0 SPLV Gabon 2,176.5 0,0 SPLV Cameroun 1,122.2 0,0 CFAO Sénégal Equipement 602.5 0,0 CMR 4,690.7 0,0 CFAO Motors Uganda ltd 852.8 0,0 Cica Kenya 458.2 1,079.0 Alliance Motors Nigeria 0.0 1,211.0 CFAO Centrafrique 0.0 865.3 CFAO Guinée 0.0 762.2 CFAO motors Maroc 0.0 5,064.7 Openasia equipement 0.0 755.9 CFAO Ghana equipement 0.0 996.5 Dimac 0.0 753.1 CFAO Motors Réunion 0.0 2,000.0 Lusitana Sao Tome 0.0 538.0 Other 2,238.0 1,585.2 TOTAL 27,683.2 20,044.7
Charges to provisions for contingencies mainly concern:
(in € thousands) 2014 2013 Provisions for contingencies on net negative equity 35,535.0 19,923.4 Provisions for non-Group contingencies and disputes 0.0 0.0 Other 0.0 0.0 TOTAL 35,535.0 19,923.4
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2.14 Net non-recurring income
The net non-recurring expense of €1,989.3 thousand chiefly breaks down as follows:
(in € thousands): 2014 2013 Write-off of receivables and clawback clause (return-to-profit) (CFAO Liquidity agreement) (3,875.0) 327.7 Disposals of equity investments (46.1) (534.9) Charges to provisions for claims and litigation (1,520.5) (39.9) Costs related to changes in governance 0,0 (3,038.4) Donations and patronage (256.3) (347.8) Insurance indemnity 3,470.8 0,0 Other 237.8 (147.8) TOTAL (1,989.3) (3,781.1)
2.15 Average headcount during the year
The average headcount is 119 people; the headcount as at December 31, 2014 was 139 people (78 men and 61 women).
2.16 Compensation paid to members of the administrative and management bodies
The gross compensation paid to corporate officers by CFAO in 2014 amounted to €2,195,754.
2.17 Fees paid to the Statutory Auditors
Statutory Auditors – DELOITTE and KPMG Amount (excl. VAT) % (in € thousands) 2014 2013 2014 2013 Audit Statutory audit, certification, review of parent company and consolidated financial statements DELOITTE 212.8 232.8 47.2% 50% KMPG 212 .8 232.8 47.2% 50% Other audit-related services DELOITTE 0.0 0.0 0% 0% KPMG 25 .0 0.0 5.6%0% Sub-total 450 .6 465.5 100% 100% Other services Legal, tax and labor related services Other DELOITTE 0.0 0.0 0% 0% KMPG 0.0 0.0 0% 0% Sub-total 0.0 0.0 0% 0% TOTAL 450 .6 465.5 100% 100%
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2.18 Subsidiaries and investments to be transferred by the consolidation
Reserves and retained earnings before income Subsidiaries and investments Currency Share Capital Currency appropriation % capital held A – Detailed information concerning subsidiaries and investments 1 - Subsidiaries (more than 50% owned by CFAO) ADIALEA 18, rue Troyon 92310 Sèvres (France) EUR 8,022,000 EUR 0 55.01 ALBM 16, rue Payen - Hydra Alger (Algérie) DZD 86,064,000 DZD 49,908,000 69.94 ALLIANCE AUTOS NIGERIA 2 & 4 Apapa Industrial Layout, Amuwo Odofin Lagos (Nigeria) NGN 287,410,000 NGN (368,885,000) 89.56 ALLIANCE AUTOS TANZANIE PO Box 40798 - Dar es Salaam (Tanzanie) TZS 328,000,000 TZS (79,065,000) 100.00 BAVARIA MOTORS ALGERIE 150, rue de Tripoli - Hussein Dey Alger (Algérie) DZD 300,000,000 DZD (622,318,000) 80.00 CAMI - Cameroon Motors Industries B.P 1217 - Douala (Cameroun) XOF 5,441,680,000 XOF 7,064,697,000 67.41 CAPSTONE CORPORATE LTD Jamalac Building Vieux Conseil Street - Port Louis (MAURICE) EUR 15,000,000 EUR 2,915,000 100.00 CFAO MOTORS BURKINA Rue Patrice Lumumba - Ouagadougou (Burkina Faso) XOF 990,180,000 XOF 2,695,952,000 73.08 CFAO MOTORS RCA Avenue du Tchad - Bangui (Centrafrique) XOF 550,000,000 XOF (2,381,117,000) 99.99 CFAO CONGO BP 247 - Avenue Paul Doumer - Brazzaville (Congo) XOF 1,450,000,000 XOF 516,709,000 100.00 CFAO COTE D’IVOIRE Rue pasteur Carrefour CHU de Treichville - Abidjan (CI) XOF 9,068,595,000 XOF 8,436,739,000 95.8 CFAO GHANA EQUIPEMENT 6 Olublohum Road, Accra GHS 3,050,000 GHS (4,149,000) 100.00 CFAO MOTORS GABON ZI D’Oloumi - BP 2181 - Libreville (Gabon) XOF 2,140,090,000 XOF 710,536,000 96.87 CFAO GAMBIA Ltd Mamadi Manyang Highway Kanifing Po Box 297 - Banjul (Gambie) GMD 47,811,000 GMD (33,727,000) 97.26 CFAO GHANA Ltd House n° 8 (Formely house n°714) High Street - Accra (Ghana) GHS 1,596,000 GHS 24,044,000 94.43 CFAO GUINEE 6e Avenue BP 4400 - CONAKRY (Guinée Konakry) GNF 3,001,000,000 GNF 3,408,320,000 100.00 CFAO GUINEE BISSAU avenuue Pansau Batiment ORDMAG Guinée Bissau XOF 150,000,000 XOF (39,949,000) 100.00 CFAO MALAWI PO Box 49, Blantyre (Malawi) MWK 287,188, 000 MWK 1,636,002,000 100.00 CFAO MOTORS BENIN BP 147 Cotonou (Bénin) XOF 26,140,000 XOF 737,603,000 99.12 CFAO MOTORS MALI BP 1655 - Quinzambougou - Bamako (Mali) XOF 156,000,000 XOF 1,752,751,000 89.99 CFAO MOTORS MAROC 15, RUE Omar Slaoui - Casablanca (Maroc) MAD 284,468,000 MAD (125,399,000) 100.00 CFAO MOTORS MAURITANIE Nouakchott Mauritanie MRO 1,172,880,000 MRO (664,064,000) 100.00 CFAO MOTORS NIGERIA N° 4a,Ljora Causeway 234 Lagos (Nigéria) NGN 3,618,892,000 NGN (3,121,950,000) 53.63
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Carrying amount of shares Endorsements Outstanding and guarantees Dividends received loans granted by given by Last published Last Published by the Company At Dec. 31, 2014 - Gross Net the Company the Company revenue net income in the year Observations
4,412,000 4,412,000 0 1,000 0
2,827,968 391,369 37,657 13,459,765 (128,144) 0
R/E: 6,502,271 0 0 105,323 (721,225) 0 (1,580,212,000) R/E: 463,100 0 43,016 3,760,024 (147,774) 0 (749,415,000) R/E: 2,429,647 0 6,019,790 2,049,063 (4,255,861) (622,318,000)
4,420,932 4,420,932 880,816 95,466,960 1,599,431 1,310,297
15,000,000 15,000,000 18,075,332 345,143,000 8,510,000 14,697,527
2,742,713 2,742,713 346,434 49,991,324 1,517,002 1,647,979 R/E: 3,607,107 550,790 113,182 12,362,864 3,539,622 0 (2584,982,000)
3,060,311 1,300,761 610,063 55,722,558 (1,251,161) 1,095,005
9,541,299 9,541,299 670,100 99,931,088 5,720,582 4,477,155
1,250,250 0 169,884 7,269,089 (261,833) 0 R/E: (4,149,000) R/E: 8,171,534 202,850 331,199 38,443,122 (2,427,109) (281,861,000)
1,367,945 199,888 13,835 2,952,652 (431,381) R/E: (33,737,000)
2,901,119 2,901,119 168,315 36,368,167 1,260,877 0
589,996 589,996 54,790 9,668,502 594,304 676,557
228,659 196,237 5,975 1,419,918 30,199 0 R/E: (39,949,000)
4,787,979 3,917,053 809,186 12,616,985 768,618 377,729
1,172,329 1,172,329 96,893 17,029,604 549,225 204,852
237,833 0 219,072 31,030,261 (560,596) 0 R/E: 29,984,241 0 3,693,965 78,694,951 (15,327,853) 0 (246,764,000) R/E: 3,207,718 847,316 26,926 3,688,006 (423,514) 0 (664,064,000) R/E: 10,537,000 1,879,394 36,015,093 (1,905,324) 0 (3,121,950,000)
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Reserves and retained earnings before income Subsidiaries and investments Currency Share Capital Currency appropriation % capital held CFAO MOTORS RDC 6/8 Avenue du Lieutenant-Colonel Lukusa - Kinshasa (Rép.démocr. du Congo) CDF 110,000,000 CDF 17,678,968,000 99.00 CFAO MOTORS TCHAD BP 474 N’Djaména (Tchad) XOF 1,750,000,000 XOF 332,043,000 98.10 CFAO MOTORS UGANDA Plot 180, 6th Street - Industrial Area - Kampala UGX 2,806,250,000 UGX (1,268,480,000) 100.00 CFAO MOTORS NIGER Route de l’Aéroport - BP 204 - Niamey (Niger) XOF 847,280,000 XOF 755,425,000 99.85 CFAO NIGERIA Ltd 1, Davies Street - Lagos - (Nigeria) NGN 208,000,000 NGN 6,085,877,000 100.00 CFAO SENEGAL KM 2,5 Bd du Centenaire - BP 2631 - Dakar (Sénégal) XOF 3,663,100,000 XOF 1,260,826,000 89.70 CFAO MOTORS TOGO 5 Av Tokmake, BP 332 - Lomé (Togo) XOF 1,061,455,000 XOF 721,353,000 69.72 CFAO ZAMBIE PO BOX 32665 - Lusaka (Zambie) ZMK 10,000 ZMK 53,386,000 99.99 CICA MOTORS LIBERIA INC UN Drive - Sayon town - Bushrod Island - Monrovia (Libéria) Monrovia USD 5,600,000 USD (24,000) 100.00 CMM - Compagnie Marseillaise de Madagascar 20, rue Lislet Geoffroy - Sainte Clotilde (La Réunion) EUR 2,670,000 EUR 5,418,000 98.38 CMR 18, rue Lislet Geoffroy - Sainte Clotilde (La Réunion) EUR 2,000,000 EUR (1,000) 100.00 CP HOLDING 216 rue Roger Gervelino, PK 5, Magenta - Nouméa (Nouvelle Calédonie) XPF 5,824,080,000 XPF 49,873,000 74.00 DIAMAL CW N°31, Les Annassers Bir Mourad Raïs - Alger (Algérie) DZD 1,440,000,000 DZD 855,605,000 59.98 DIMAC Aïn Sebaa Route N° 110 KM 11,5 - Casablanca (Maroc) MAD 1,495,000 MAD (18,966,000) 99.65 DT DOBIE KENYA P.O BOX 30160 Lusaka Road - Nairobi (Kenya) KES 35,000,000 KES 1,797,731,000 99.98 DOMAFI 18 rue Troyon - 92310 Sèvres (France) EUR 79,200 EUR (76,000) 100.00 CFAO MOTORS TANZANIA LTD 217/205 Nkrumah Gereziani Dar Es Sallam (Tanzanie) TZS 991,195,000 TZS 16,496,291,000 100.00 ELDOMOTORS 2nd Floor, Fairfax House, N°21 Mgr Gonin Street Port Louis Mauritius MUR 11,137,000 MUR 21,997,000 100.00 EURAPHARMA Le grand Launay 8 av paul doumer 76120 Le Grand Quevilly EUR 2,799,750 EUR 19,552,000 99.68 HOLDINTER SARL 18 rue Troyon - 92316 Sèvres Cédex EUR 314,292 EUR (311,000) 99.99 HOLDINTER ET CIE 18 rue Troyon - 92316 Sèvres Cédex (France) EUR 878,700 EUR (17,901,000) 60.00 ICRAFON - Société Industrielle des Crayons et Fournitures BP 2040 - ZI Bassa Magzi - Douala (Cameroun) XOF 3,307,500,000 XOF 1,085,164,000 52.00 IMACY BP 95 - Boulevard Cheik Zayed - Bamako (Mali) XOF 10,000,000 XOF (18,834,000) 99.85 IMC PO BOX 654 Bell Village - Motorway M2, Pailles - Mauritius MUR 87,000,000 MUR 34,024,000 100.00
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Carrying amount of shares Endorsements Outstanding and guarantees Dividends received loans granted by given by Last published Last Published by the Company At Dec. 31, 2014 - Gross Net the Company the Company revenue net income in the year Observations
218,808 218,808 1,015,584 82,352,937 (314,460) 0
3,248,565 2,843,239 97,941 18,572,995 (150,728) 562,237 R/E: 1,231,067 0 3,697 498,332 (510,555) (2,761,880,000)
130,021 130,021 116,305 15,906,866 127,635 211,253
17,578,269 17,578,269 127,309 1,052,401 438,700 0
5,536,738 5,536,738 88,614 57,609,949 695,329 577,067
2,569,692 2,498,819 121,958 18,744,649 1,076,775 547,473
1,855,838 1,855,838 68,082 12,992,535 625,382 0
4,074,802 4,074,802 2,275,102 6,986,301 121,180 0 R/E: (24,000)
12,000,738 2,705,092 337,476 88,588,000 (3,624,000) 129,402
11,000,000 4,309,300 566,958 66,077,000 (2,855,000) R/E: (1,000)
36,117,633 36,117,633 3,348 0 11,583,590 2,799,117
611,109 0 336,740 244,340,744 (7,968,236)
1,233,261 0 2,656,115 1,928,666 (802,535) 0
6,689,499 6,689,499 1,027,318 66,000,134 1,880,139 4,091,129
1,749,442 0 97,681 0 (1,104,000) R/E: (87,000)
1,535,791 1,535,791 232,210 26,320,752 1,361,455 366,612
344,706 340,651 19,594 3,396,816 (448,353)
26,339,853 26,339,853 51,069,401 0 23,163,000 17,303,605
5,336,043 0 0 (1,903,000) R/E: (383,000)
5,163,651 0 2,568,918 0 (4,150,000) 0 R/E: (17,901,000)
3,484,961 3,015,513 57,455 10,069,067 342,647 134,765
1,374,951 0 0 0 0 R/E: (20,834,000)
2,903,533 2,903,533 151,639 17,261,297 80,328 162,388
REGISTRATION DOCUMENT 2014 - CFAO 267 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Financial statements
Reserves and retained earnings before income Subsidiaries and investments Currency Share Capital Currency appropriation % capital held CFAO MOTORS STP Rue DOMAO 11 SAO TOME CP 605 STD 25,190,000,000 STD (31,754,751,000) 99.63 LOXEA CONGO 13, rue Cote Mateve - BP 1110 - Pointe Noire (Congo) XOF 165,300,000 XOF 0 100.00 MASSILIA Cunard Building LIVERPOOL L3 IDS (Grande Bretagne) GBP 2,750,000 GBP 1,911,000 100.00 MIPA - Manufacture Ivoirienne des Plastiques Africains ZI De Yopougon Banco Nord - Abidjan (Côte d’Ivoire) XOF 774,000,000 XOF 456,355,000 99.98 NCCIE - Nouveau Comptoir Caraïbe d’Importation et d’Exportation PK 2, route de Baduel 97300 Cayenne (Guyane) EUR 2,036,000 EUR 1,055,000 99.99 NISSAN ZIMBABWE PRIVATE LTD Building 9, Arundel Office Park, Mount Pleasant HARARE(Zimbabwe) USD 0 USD 1,602,000 75.00 OPENASIA EQUIPMENT LTD 34/F, the lee gardens 33 hysan av causeway bay (Hong Kong) USD 1,000 USD 5,000,000 50.99 PENS AND PLASTICS LTD Block XI Plot n° 1, 2 RING RD - Accra (GHANA) GHS 2,518,000 GHS 6,895,000 100.00 REELIN SLL LTD 21 BAI BUREH ROAD KISSY, 00232- Sierra Leone SLL 18,931,250,000 SLL (9,571,139,000) 100.00 CFAO MOTORS GUINEE EQUATORIALE BP 127 Bata (Guinée Equatoriale) XOF 712,510,000 XOF 6,000 100.00 SEP - Société Européenne des Peaux 31 rue Jean Chatel - 97400 Saint Denis (La Réunion) EUR 675,000 EUR 5,722,000 99.99 SFCE - Société Française de Commerce Extérieur 18 rue Troyon 92316 Sévres Cédex (France) EUR 12,114,240 EUR 4,355,000 100.00 SGI Commune de Marcory, bd VGE 01, BP 2114 Abidjan (Côte d’Ivoire) XOF 2,113,900,000 XOF (206,562,000) 100.00 SIAB 166 Boulevard Moulay Ismaël casablanca (Maroc) MAD 80,500,000 MAD 998,000 100.00 SIGM BP 44 - 17 rue Rabefiraisana Analakely - Antananarivo (Madagascar) MGA 20,000,000 MGA 2,000,000 99.40 SIRH BP 44 - 17 rue Rabefiraisana Analakely - Antananarivo (Madagascar) MGA 20,000,000 MGA 24,492,000 99.50 LOXEA HOLDING 1stFloor AngloMautitius house intendance Street Port louis(Maurice) EUR 11,000 EUR 4,411,000 100.00 SOCIMEX BP 44 - 17 rue Rabefiraisana Analakely - Antananarivo (Madagascar) MGA 86,400,000 MGA 4,974,826,000 99.42 SOCADA Boulevard du Général Leclerc - BP 4080 - Douala (Cameroun) XOF 3,900,000,000 XOF (1,065,554,000) 100.00 CFAO EQUIPEMENT CI Boulevard de Vridi 01 BP 2114 ABIDJAN 01 (Côte d’Ivoire) XOF 100,000,000 XOF 404,588,000 99.97 CFAO EQUIPEMENT GABON Boulevard de l’Indépendance BP 7661 - Libreville (Gabon) XOF 300,000,000 XOF 1,203,584,000 99.99 CFAO EQUIPEMENT CAMEROUN Boulevard Général Leclerc - S/C BP 4080 Douala (Cameroun) XOF 1,600,000,000 XOF (247,691,000) 99.99 PERFORMANCE AUTOS rue Paul Bernière BP 51564 Pirae TAHITI XPF 48,915,000 XPF (397,605,000) 99.82
268 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO Financial statements 20
Carrying amount of shares Endorsements Outstanding and guarantees Dividends received loans granted by given by Last published Last Published by the Company At Dec. 31, 2014 - Gross Net the Company the Company revenue net income in the year Observations R/E: 1,596,785 0 98,012 1,779,362 (318,759) (31,754,751,000)
251,541 251,541 3,000 0 0
35,952,814 5,493,316 0 (143,863) 0 R/E: 2,451,813 2,451,813 62,241 11,263,119 765,125 0 (597,880,000)
4,005,561 4,005,561 278,595 23,696,000 1,300,000 1,132,716
1,691,661 1,625,210 739,136 7,918,109 (835,466) 0
7,686,649 3,005,963 1,637,062 1,779,317 688,577.70
1,788,135 1,788,135 48,139 7,605,288 1,101,299 0 R/E: 3,338,106 3,187,725 321,718 722,175 (249,641) 0 (9,568,346,000)
3,062,199 181,110 103,365 16,515,701 (550,777)
4,850,670 4,850,670 0 7,000
12,312,268 12,312,268 21,518,230 542,166,000 34,800,000 20,190,275
R/E: 490,000 490,000 12,630,000 0 (483,919) 0 (206,562,000)
12,576,231 12,576,231 1,445,057 47,672,173 597,890 0 R/E: (1,279,000)
952,597 748,846 2,058 467,866 268,546 445,647
956,125 956,125 1,795 1,165 0
4,502,001 4,416,000 1,000 (5,000)
2,256,836 2,256,836 33,373 6,817,551 615,279 552,951
R/E: 2,439,184 2,439,184 506,975 44,062,541 310,174 (1,596,645,000)
152,403 0 517,813 12,171,225 (2,019,446) 159,463
2,176,509 0 237,003 15,804,338 (3,648,353) 1,324,385
R/E: 2,438,910 396,687 896,977 13,468,427 (1,051,656) 0 (247,691,000) R/E: 1,527,208 0 27,824 6,286,819 2,488,919 0 (472,356,000)
REGISTRATION DOCUMENT 2014 - CFAO 269 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Financial statements
Reserves and retained earnings before income Subsidiaries and investments Currency Share Capital Currency appropriation % capital held CICA MOTORS KENYA LIMITED (Tridecon) Lusaka Road - Nairobi (Kenya) KES 2,700 KES 109,861,000 99.26 VEHICLE CENTER ZAMBIA LTD 1637 Malambo Road, Industrial Area - Lusaka ZMK 327,000 ZMK 26,703,000 100.00 2 - Investments (10 to 50% owned by CFAO) BRASSERIES DU CONGO Rue Du Nouveau Port - BP 105 - Brazzaville (Congo) XOF 24, 135,748,000 XOF 67,741,314,000 50.00 CEP - Compagnie Equatoriale des Peintures Zone industrielle de Bassa - Douala (Cameroun) XOF 446,400,000 XOF 2,973,983,000 24.15 ALIOS FINANCE 8 rue de Berry 75008 paris EUR 10,699,282 EUR 8,689,000 24.27 CFAO EQUIPEMENT SENEGAL KM 2,5 Bd de la commune de Dakar - BP 27306 - Dakar (Sénégal) XOF 1,490,000,000 XOF (851,951,000) 47.65 G&I Distribution LTD 71/72, ADENIJI ADELE ROAD,ELEGBATA - Lagos (Nigéria) ELEGBATA NGN 1,060,200,000 NGN (428,940,000) 29.36 NIPPEN Israël Adebajo Close Ind. Estate, BP 21424 Ikeja - Lagos (Nigéria) NGN 442,951,000 NGN 1,764,863,000 25.06 SEIGNEURIE OCEAN INDIEN Zac chemin Finette II - 97490 Sainte Clotilde (La Réunion) EUR 508,200 EUR 4,828,000 48.97 SUPERDOLL BP 4382 - DOUALA (Cameroun) XOF 200,000,000 XOF (642,866,000) 45.00 B - General information concerning other subsidiries and investments 1 – Subsidiaries not listed in section A
a – French subsidiaries (all)
b – Non French-subsidiaries (all) 2 – Investments not listed in section A
a – French investments (all) b – Non French investments (all)
R/E: Retained earnings. P/L: Provision for loans .
270 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO Financial statements 20
Carrying amount of shares Endorsements Outstanding and guarantees Dividends received loans granted by given by Last published Last Published by the Company At Dec. 31, 2014 - Gross Net the Company the Company revenue net income in the year Observations
8,991,199 360,740 2,436,825 (375,009) 0
4,238,785 4,238,785 262,878 25,688,777 2,564,068 587,000
7,873,153 7,873,153 224,605,750 61,156,490 17,517,311
687,932 687,932 0 0 1,383,545 253,370
3,402,277 3,402,277 0 0 1,000,000 0
R/E: 1,082,372 479,920 29,198 3,955,514 (599,420) 0 (851,951,000)
R/E: 1,538,000 1,378,590 0 99,886,799 (1,947,595) 0 (428,940,000)
1,710,000 1,710,000 7,374 24,445,420 311,338 0
653,496 653,496 0 0 1,327,000 734,118 R/E: 1,491,683 0 327,765 0 0 0 (662,866,000)
Provision for losses: 5,019,604 110,796 3,621,385 0 €3,953,078 Provision for losses: 494,594 98,168 565,453 0 €170,337
Provision for losses: 20,257 20,000 0 0 €2,182 1,707,025 682,705 0 380,374
REGISTRATION DOCUMENT 2014 - CFAO 271 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Financial statements
Fixing Dec. 31, 2014 Average Dec. 31, 2014 Exchange rate: 1 euro in foreign currency Balance Sheet Income statement CDF Congolese franc 1,127.320 1,223.071 DZD Algerian dinar 106.919 106.888 EGP Egyptian pound 8.704 9.361 GBP Pound sterling 0.779 0.806 GHS Ghanaian cedi 3.896 3.873 GMD Gambian dalasi 54.671 54.780 GNF Guinean franc 8,663.910 9,252.693 KES Kenyan shilling 110.171 116.850 MAD Moroccan dirham 10.970 11.156 MGA Malagasy ariary 3,167.330 3,208.681 MRO Mauritanian ouguiya 380.330 399.387 MUR Mauritian rupee 38.517 40.546 MWK Malawian kwacha 575.451 560.190 NGN Nigerian naira 203.550 207.543 STD Sao Tome and Principe dobra 24,500.000 24,500.000 TZS Tanzanian shilling 2,097.090 2,191.074 UGX Ugandan shilling 3,373.710 3,455.877 USD US dollar 1.214 1.329 VND Vietnamese dong 25,794.770 28,097.409 XPF CFP franc 119.332 119.332 XOF CFA franc 655.957 655.957 ZMW Zambia n Kwacha 7.753 8.171 SLL Leone Sierra-Léonais 6,013 .850 5,988.713
272 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO Financial statements 20
Five-year financial summary
(in € thousands) 2010 2011 2012 2013 2014 Indicators 1. Share capital at year-end (in € thousands) Share capital 10,254 10,254 10,255 10,277 10,460 Number of shares outstanding 61,525,860 61,525,860 61,528,110 61,664,983 62,757,065 Number of bonds convertible into shares 2. Results of operations (in € thousands) Revenue (excl. VAT) 27,884 24,916 27,646 26,199 29,561 Net income before tax, depreciation, amortization and provisions 84,175 106,724 74,311 115,240 85,997 Income tax 138 654 2,913 2,585 5,495 Net income after tax, depreciation, amortization and provisions 95,138 84,029 66,056 80,708 51,134 Dividends paid 47,989 50,451 52,785 55,317 49,923 3. Per share data (in €) Earnings per share after tax, but before depreciation, amortization and provisions 1.37 1.75 1.26 1.91 1.46 Net income after tax, depreciation, amortization and provisions 1.55 1.37 1.07 1.31 0.81 4. Employee data Number of employees 91 89 95 102 139 Total payroll 7,840 8,493 9,174 10,227 13,166 Total employee benefits paid during the year (social security, donations, etc.) 4,264 4,208 6,412 4,928 7,817
(Article 133-135 and 148 of the French decree of March 23, 1967 regarding commercial companies.)
Tax-deductible donations, sponsorships and patronage
Humanitarian work (in €) Association Baobas donations 5,000 Scholarships 51,046 Sida Entreprises donations 17,950 ONG Santé Diabète donations 33,952 CFAO Solidarité donations 30,000 Fondation Chirac donations 30,000 Mission Humanitaire donations 5,000 Care France donations 100,000 ACF International donations 1,300 BALANCE AT DECEMBER 31, 2014 274,248
REGISTRATION DOCUMENT 2014 - CFAO 273 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Verification of financial information
20.4 Verification of financial information
20.4.1 Statutory Auditors’ reports for 2014
Statutory Auditors’ report on the financial statements Year ended December 31, 2014 To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December 31, 2014, on: ■ the audit of the accompanying financial statements of CFAO; ■ the justification of our assessments; ■ the specific verifications and information required by law. These financial statements have been approved by the Management Board. Our role is to express an opinion on these consolidated financial statements based on our audit.
I. Opinion on the financial statements We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as 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. In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company at December 31, 2014 and of the results of its operations for the year then ended in accordance with French accounting principles.
II. Justification of our assessments In accordance with the requirements of Article L. 823-9 of the French Commercial Code relating to the justification of our assessments, we hereby inform you that the assessments which we have performed covered the appropriateness of the accounting policies adopted and the reasonableness of material estimates made, as well as the overall presentation of the financial statements, in particular relating to the measurement of investments and provisions for contingencies and liabilities. These assessments were made as part of our audit of the financial statements, taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
III. Specific verifications and information In accordance with professional standards applicable in France, we have also performed the specific verifications required by French law. We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the Management Board, and in the documents addressed to the shareholders with respect to the financial position and the financial statements. Concerning the information given in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code relating to remuneration and benefits received by corporate officers and any other commitments made in their favor, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your Company from companies controlling it or controlled by it. Based on this work, we attest to the accuracy and fair presentation of this information. In accordance with French law, we have verified that the required information concerning the purchase of investments and controlling interests and the identity of shareholders and holders of the voting rights has been properly disclosed in the management report. Paris La Défense and Neuilly-sur-Seine, April 16, 2015
The Statutory Auditors
KPMG Audit, a department of KPMG SA Deloitte & Associés Hervé CHOPIN Alain PENANGUER
Partner Partner
274 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO Verification of financial information 20
Statutory Auditors’ report on the consolidated financial statements Year ended December 31, 2014
To the Shareholders,
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December 31, 2013, on:
■ the audit of the accompanying consolidated financial statements of CFAO;
■ the justification of our assessments;
■ the specific verification required by law.
These consolidated financial statements have been approved by the Management Board. Our role is to express an opinion on these consolidated financial statements based on our audit.
I. Opinion on the consolidated financial statements We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as 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.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group at December 31, 2014 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
II. Justification of our assessments Pursuant to the provisions of Article L. 823-9 of the French Commercial Code relating to the justification of our assessments, we bring to your attention the following matters:
■ Asset impairment
The Company systematically carries out impairment tests at each year-end on goodwill, intangible assets with an indefinite useful life such as brands, and CGUs or groups of CGUs, in accordance with the methods described in Note 2.7 to the consolidated financial statements. We have examined the methods used to carry out these impairment tests as well as the corresponding cash flow forecasts and assumptions, and have verified that Note 18 to the consolidated financial statements provides appropriate disclosures.
■ Provisions
The Company sets aside provisions for litigation as described in Notes 2.12 and 27 to the consolidated financial statements.
Our work consisted in assessing the information and assumptions upon which these estimates were based and verifying the calculations made by the Company.
These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
III. Specific verification As required by law and in accordance with professional standards applicable in France, we have also verified the information presented in the Group’s management report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
Paris La Défense and Neuilly-sur-Seine, April 16, 2015
The Statutory Auditors
KPMG Audit, a department of KPMG SA Deloitte & Associés Hervé CHOPIN Alain PENANGUER
Partner Partner
REGISTRATION DOCUMENT 2014 - CFAO 275 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Date of the most recent financial information
20.4.2 Additional information verified by and will issue a special report on these agreements to the Annual the Statutory Auditors General Meeting. They also reviewed the report by the Chairman of the Supervisory Board on Corporate Governance and internal control, and issued a related report which can be found in The Statutory Auditors verified the related party agreements Chapter 16 of this Registration Document. entered into in 2014 or which remained in effect during 2014,
20.5 Date of the most recent financial information
The date of the most recent financial information is December 31, 2014.
20.6 Interim financial information
The Company has not published any interim financial information since the date of its most recent audited financial statements.
20.7 Dividend policy
The table below sets out the net per-share dividends paid by the Group over the course of the last three years:
Year in which dividends were paid (in €) 2012 2013 2014 Net dividend per share 0.86 0.90 0,81 Fully eligible for the tax reduction of 40% 40% 40%
CFAO’s dividend policy takes into account the Company’s profits objectives, its financial position and any other factor considered and losses, its financial position and the dividend policies of its to be relevant by CFAO’s Management Board. main subsidiaries. The Group’s aim is to pay out approximately 40% to 60% of the Group’s attributable net income for the At CFAO’s Annual General Meeting to be held in 2015 to year. However, this aim is in no way an obligation for CFAO approve the 2014 financial statements, the shareholders will be and the payment of future dividends will depend on the Group’s asked to approve a dividend payment of €0.81 per share.
276 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO Litigation and arbitration 20
20.8 Litigation and arbitration
The Group may be involved in legal, administrative, or regulatory 20.8.2 Civil and criminal litigation proceedings in the ordinary course of its business. The Group sets aside provisions for the probable costs of such litigation to CFAO Starting in 1996, various minority shareholders of SCOA (which or its subsidiaries. The following section only describes the most became CFAO following its merger with the latter in 1997) filed material proceedings and litigation to which the Group is party. various claims in civil and criminal courts relating to certain reorganization transactions involving SCOA that were conducted between 1993 and 1996. The disputed transactions include 20.8.1 Tax litigation SCOA’s subscription in 1993 to the capital increase of two of its subsidiaries for a total amount of 337,000,000 francs (i.e., ■ The Group company Diamal has been audited by the €51,375,318.80) paid up by offsetting against receivables, and Algerian tax administration (proposition of adjustment dated the subsequent sale by SCOA for a token franc of its shares in December 22, 2008) in connection with the payment of these two subsidiaries. taxes of 741,709,586 Algerian dinars, or €6,937,110 as at ■ Regarding the criminal proceedings and to the best of December 31, 2014 for fiscal years 2004 to 2007. This tax CFAO’s knowledge (CFAO not being party to any of these audit relates to the accounting methods and the accounting proceedings), Mr Pouillet, certain entities that were related treatment of certain transactions. The Group believes this to him and another SCOA shareholder filed several criminal tax adjustment is not justified and is in discussions with the actions against persons unnamed and other named persons Algerian tax administration to defend its arguments. The including CFAO, accusing SCOA of preparing falsified Company received the final tax deficiency notice in 2009 financial statements for 1992, 1993 and 1995, obstruction and has filed a claim with the Algerian tax administration to of justice, criminal association, circulating false or misleading challenge the tax adjustment. This claim has been reviewed financial information, insider trading and fraud. To the best of and rejected on November 20, 2013 by the Algerian tax the Company’s knowledge, these claims have not resulted in administration, a claim has been filed on March 17, 2014. the investigation of CFAO or of its managers, nor have these Another tax audit has been conducted in 2014 for the tax individuals been called as assisted witnesses. Two dismissal year 2010 using the same method as previously stated and orders have been issued in these cases. Certain other claims a proposition of adjustment dated December 25, 2014 has are still pending in court. been received which includes a proposal of increase of the turn over of the Company for 2010 of 938,937,310 Algerian ■ Mr Pouillet and/or his group and Mr Poulet also filed several dinars (€8,781,755). The Group believes this tax adjustment claims between 1997 and 2004 in civil courts: is not justified; − on December 10, 1996 and September 22, 1997, ■ Brasseries du Congo has filed a claim with the Congolese Mr Pouillet, the company GLP vins and Mr Poulet filed administration concerning a special corporate tax amounting proceedings against CFAO in the Commercial Court to 5,158,433,300 CFA francs, i.e. €7,863,981 in respect of of Nanterre seeking to annul SCOA’s Extraordinary 2012. The company believes that it is exempt from this tax due Shareholders’ Meetings of December 10, 1996 and to its establishment agreement. This claim has been referred September 22, 1997, which approved the merger with to a higher administrative authority through pre-ligitation CFAO. These two proceedings were joined and are now proceedings. before the Commercial Court of Versailles. The plaintiffs have requested a stay of proceedings pending the outcome For more information on the amount of provisions set aside for of the criminal proceedings described above. In May 2011, tax litigation, see section “Tax risks related to the geographical the Court rescheduled hearings for this case. The case is still location of the Group’s activities” in section 4.1 “Risks relating pending before the Commercial Court; to the business and regulatory environment” of Chapter 4 “Risk factors” of this Registration Document. − on February 27, 2004, Mr Pouillet and other plaintiffs filed proceedings against CFAO (and various other parties) before the Commercial Court of Paris seeking to cancel SCOA’s
REGISTRATION DOCUMENT 2014 - CFAO 277 FINANCIAL INFORMATION CONCERNING THE ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES OF CFAO 20 Significant changes in financial or trading position
reorganization transactions carried out between 1993 and The Group has not set aside any provisions with respect to the June 1996 (including the capital increases and the sale of the disputes between the Group and Mr Pouillet. two subsidiaries mentioned above). Mr Pouillet is requesting the Court to order CFAO, certain of its shareholders and At the filing date of this Registration Document, there is no other other defendants, jointly and severally, to pay the sum of governmental, judicial or arbitration proceedings (including €674,750,000 in damages as compensation for the loss any proceedings of which CFAO is aware, that are pending or of his investment in SCOA due to the reduction of capital to threatened) other than those described in this Chapter, that could zero followed by the capital increase carried out in 1997 have or have had in the past twelve months a material effect on in which he did not participate, all of the unpaid dividends the Group’s or CFAO’s financial position or profitability. attributable to his former shares in SCOA and the non- No litigation that the Company considers as well grounded, taken pecuniary damage that he claims to have suffered. The case alone, is material for the Company or the Group. No litigation or is still pending before the Commercial Court. CFAO believes arbitration that the Company considers as well grounded, taken that Mr Pouillet’s claims have no merit. alone, has had in the recent past or is likely to have a material impact on the financial position, the activity or the results of the Company or of the Group.
20.9 Significant changes in financial or trading position
To the best of CFAO’s knowledge, at the filing date of this 2014, with the exception of the information set out in Chapter 12 Registration Document, there have been no significant changes “Trend information and objectives”. in the Group’s financial or trading position since December 31,
278 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com OPERATIONS RELATING TO THE COMPANY’S STOCK 21
21.1 Share capital 280 21.2 Memorandum of association and by-laws 286 21.1.1 Subscribed share capital and authorized but unissued share capital 280 21.2.1 Corporate purpose (Article 3 of the by-laws) 286 21.1.2 Securities not representing capital 282 21.2.2 Administrative, management and supervisory 21.1.3 Holding and repurchase of treasury shares 282 bodies (Articles 10 and 11 of the by-laws) 286 21.1.4 Other securities giving access to the Company’s 21.2.3 Rights and obligations attached to the shares share capital 284 (Article 8 of the by-laws) 287 21.1.5 Terms and conditions governing any acquisition 21.2.4 Modifi cation of shareholders’ rights 287 rights and/or obligations on authorized but 21.2.5 General Shareholders’ Meetings unissued capital or undertaking to increase (Article 13 of the by-laws) 287 the capital 284 21.2.6 Provisions in the by-laws likely to have 21.1.6 Share capital of any member of the Group’s an impact in the event of a change of control 288 companies which is subject to an option 21.2.7 Crossing of thresholds and identifi cation or an agreement to be put under an option 284 of shareholders (Article 9 of the by-laws) 288 21.1.7 Change in share capital over the past 3 years 285 21.2.8 Special provisions governing changes 21.1.8 Pledges, guarantees and other collateral 285 in share capital 288
21.3 Market information 289
REGISTRATION DOCUMENT 2014 - CFAO 279 OPERATIONS RELATING TO THE COMPANY’S STOCK 21 Share capital
21.1 Share capital
21.1.1 Subscribed share capital and Board to carry out capital increases, which since the date of this authorized but unissued share capital Shareholders’ Meeting have not been used. These delegations and authorizations were renewed at the Shareholders’ Meeting on June 12, 2013 for a period of twenty-six (26) months, expiring As of the date of this Registration Document, the Company’s share in August 2015. The Shareholders’ Meeting on June 10, 2014 capital totals €10,459,512, divided into 62,757,065 fully paid- renewed four of them. The Shareholders’ Meeting of June 12, 2013 up shares. There is only one class of share. The shares have no and that of June 10, 2013 approved a number of delegations face value. Each share represents a portion of share capital, “the and financial authorizations granted to the Management Board to par” which is obtained by dividing the amount of capital by the carry out capital increases, which are still in force at the date of number of existing shares. this Registration Document, as summarized in the following table: The Shareholders’ Meeting of May 25, 2012 granted several delegations and financial authorizations to the Management
Table of financial authorizations and delegations
Date of AGM and No. Type of authorization/delegation Duration and Authorized amount of resolution Purpose of authorization expiration (par or % of capital) Use Share repurchases and reductions in share capital 10% of the share 18 months capital to a 06.10.2014 Repurchase of share s (December 10, maximum of described in Resolution N° 10 Purchase of CFAO shares. 2015) €230 million paragraph 21.1.3 Cancellation of shares 10% of the share 06.10.2014 Authorization to be given to the Management Board to reduce the 26 months capital by periods of Resolution N° 11 share capital by canceling treasury shares. (August 10, 2016) (1) 24 months None Share issues Capital increase Delegation of authority given to the Management Board to decide to increase the share capital by issuing (with the preferential subscription right) shares and/or securities giving access to the 06.12.2013 Company’s capital and/or the issue of securities entitling their 26 months €4 million Resolution N° 12 holders to the allotment of debt securities. (August 12, 2015) (1) at par value (2) None Capital increase Delegation of authority to the Management Board to decide to increase the share capital by issuing (without preferential subscription right) shares and/or securities giving access to the 06.12.2013 Company’s capital and/or the issue of securities entitling their 26 months €2 million Resolution N° 13 holders to the allotment of debt securities. (August 12, 2015) (1) at par value (3) None Capital increase Delegation of authority given to the Management Board to decide to increase the share capital by issuing (without preferential subscription right) shares and/or securities giving access to the Company’s capital and/or the issue of securities entitling their holders to the allotment of debt securities through an offer as referred to in Article L. 411-2 II. of the Monetary and Financial 06.12.2013 Code, (Code monétaire et financier) notably to qualified investors 26 months €2 million Resolution N° 14 or a small circle of investors. (August 12, 2015) (1) at par value (3) None
280 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com OPERATIONS RELATING TO THE COMPANY’S STOCK Share capital 21
Date of AGM and No. Type of authorization/delegation Duration and Authorized amount of resolution Purpose of authorization expiration (par or % of capital) Use Capital increase Authorization given to the Management Board to issue shares and/ or securities giving access to the share capital without preferential 06.12.2013 subscription right as compensation for contributions in kind 26 months 10% of the share Resolution N° 15 involving equity shares or securities that give access to the capital. (August 12, 2015) (1) capital (3) None Capital increase Authorization given to the Management Board to determine the issue price of shares and/or any securities giving access to the 06.12.2013 capital, in connection with a capital increase without preferential 26 months 10% of share capital Resolution N° 16 subscription rights. (August 12, 2015) (1) per year (2) None Capital increase Delegation of authority given to the Management Board to decide 06.12.2013 to increase the share capital by the incorporation of premiums, 26 months Resolution N° 17 reserves, profits or others. (August 12, 2015) (1) €2 million (2) None Capital increase Delegation of authority given to the Management Board to 06.12.2013 increase the number of shares to be issued in the case of a capital 26 months 15% of the initial Resolution N° 18 increase with or without preferential subscription rights. (August 12, 2015) (1) issue (2) None Issues reserved for employees and senior corporate executives Capital increase Delegation of authority given to the Management Board to decide to increase the share capital by the incorporation of premiums, reserves, profits or others, to cover the allocations of free shares 0.5% of the share to certain members of the Group’s salaried personnel and capital on the day of 06.12.2013 corporate officers, implying the waiver of their preferential 26 months the Management Resolution N° 20 subscription right by shareholders. (August 12, 2015) (1) Board’s award (3) None Capital increase Delegation of authority to the Management Board to decide to increase the capital through the issue of shares and/or securities 3% of the share that give access to the Company’s capital, reserved for members capital on the day of 06.10.2014 of a savings plan, with the cancellation of preferential subscription the Management Resolution N° 12 rights for these members. (August 12, 2015) (1) Board’s decision None Capital increase Delegation of authority given to the Management Board to decide to increase the capital through the issue of share warrants and/or 0.5% of the share redeemable equity warrants (BSAAR) to a category of capital on the day of 06.10.2014 beneficiaries consisting of the Group’s employees and corporate the Management Resolution N° 13 officers, suppressing the preferential subscription rights. (August 12, 2015) (1) Board’s decision (2) None Free allocation of shares Delegation of authority to the Management Board for the free allocation of existing or future shares to members of the Group’s 0.5% of the share salaried personnel and corporate officers or some of them, capital on the day of 06.12.2013 entailing the waiver by the shareholders of their preferential 38 months the Management Described in Resolution N° 21 subscription right. (August 12, 2016) (1) Board’s decision (2) paragraph 21.1.7 Free allocation of shares Delegation of authority given to the Management Board to grant stock options or share purchase options to members of the 0.5% of the share Group’s salaried personnel or corporate officers, or to some of capital on the day of 06.12.2013 them, implying the waiver by the shareholders of their preferential 38 months the Management Resolution N° 22 subscription right. (August 12, 2016) (1) Board’s decision (2) None
(1) Renewal submitted to the General Shareholders’ Meeting, which must be held on June 12, 2015. (2) The maximum overall amount of capital increases which can be performed under the delegations granted under these various resolutions is fixed at €4 million (stipulated in the 12th resolution of the Combined Shareholders’ Meeting of June 12, 2013). (3) Within the limit of a ceiling for increases in share capital without preferential subscription right of €2 million in resolution n o 13 of the 2013 Shareholders’ Meeting. This and a total common capital increase authorization of €4 million. (4) This delegation would be valid until the expiration date of the 12th resolution of the Shareholders’ Meeting on June 12, 2013.
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21.1.2 Securities not representing capital The 2009 authorization was replaced by a new authorization at each General Shareholders’ Meeting for a maximum of 10% of the share capital: on May 17, 2010, May 20, 2011, May 25, On March 31, 2015, the Company had not issued any securities 2012, June 12, 2013 and June 10, 2014. This authorization was which did not represent capital. granted for 18 months expiring on December 10, 2015 and is therefore still in force at the date of this Registration Document.
21.1.3 Holding and repurchase of treasury B) Use of the share buyback authorization under the shares liquidity agreement concluded with Crédit Agricole Cheuvreux As of December 31, 2014, CFAO held 44,190 treasury shares Under this agreement, in 2014, 79,594 shares were purchased purchased under its share repurchase program. The Company at an average price of €31.56 and 59,454 shares were sold at held no shares outside the liquidity contract (shares allocated an average price of €31.78. to cover the 2011 free allocation plan), because the Company distributed all these shares to the said plan’s beneficiaries in On March 31, 2015, 44,150 shares were held in the liquidity July 2013. For more information on these plans, see Chapter 15 account for the purposes of the agreement. “Compensation and benefits” of this Registration Document. C) Use of the share repurchase authorization excluding At March 31, 2015, CFAO held 44,15 0 treasury shares. These the liquidity agreement entered into with Crédit shares are allocated solely to the repurchase program under the Agricole Cheuvreux liquidity agreement entered into with Crédit Agricole Chevreux. For further information, see section 21.1.3.1 of this Registration CFAO did not acquire any treasury shares in 2014 under the Document. above authorizations.
No CFAO shares are held by any of its subsidiaries or by a 21.1.3.2 Use of the authorization to cancel third party on its behalf (except under the liquidity agreement the repurchased shares given by described below). the shareholders on June 10, 2014 (resolution N° 11) 21.1.3.1 Use of the share repurchase authorizations granted by shareholders on June 10, 2014 Resolution N° 11 of Shareholders’ General Meeting of June 10, (resolution N° 10) 2014 also authorized the Management Board to reduce the share capital, once or several times, at the times and in the proportions A) Description of the share repurchase program decided by it, by canceling all or some of the Company’s shares under the liquidity agreement concluded with held by the Company or acquired by it under the share repurchase Crédit Agricole Cheuvreux (excluding the liquidity programs authorized by the Shareholders’ Meeting within the agreement) limits authorized by law in accordance with Articles L. 225-209 et seq. of the French Commercial Code. The Shareholders’ Meeting of May 16, 2009 authorized the Management Board to implement a share repurchase program The maximum number of shares which can be canceled by the within a maximum 10% of the Company’s share capital with a Company under this authorization is 10% of the shares comprising maximum purchase price of €39 per share. On February 5, 2010, the Company’s share capital per 24-month period. This limit within the scope of this authorization, the Company entered into applies to the amount of the Company’s capital which will if a liquidity agreement with Crédit Agricole Cheuvreux, for CFAO necessary be adjusted to take account of transactions affecting shares listed on the Euronext Paris exchange, in accordance with the share capital after this Shareholders’ General Meeting. the applicable regulations, independence rules and practices. This authorization expires on August 10, 2016. This authorization In order to implement this agreement, the Company allocated was not used. The new share-repurchase program and the €6 million to the Euronext liquidity account. No shares were resolution to cancel treasury shares will be proposed to the contributed. Annual General Meeting planned for June 12, 2015, is described in section 21.1.3.3 below.
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21.1.3.3 Description of the proposed repurchase ■ to deliver shares for payment or exchange in connection with program at the next Annual General an acquisition, merger, spin-off or contribution in accordance Meeting which must be held on June 12, with applicable regulation and recognized market practices; 2015 ■ market making for the CFAO share within the framework of Pursuant to Article 241-2 of the AMF’s General Regulations, a liquidity agreement with an investment services provider, in this section describes the share repurchase program that will be accordance with the professional code of conduct recognized submitted for approval at the next Annual General Meeting to be by the AMF. held on June 12, 2015. This program is also intended to enable the implementation of Within the scope of the mechanism in Article L. 225-209 of the all market practices that may be authorized by the AMF in the French Commercial Code, the Management Board will propose future and, more generally, to enable the completion of any other that the Annual General Meeting authorize the Board to set up a transaction in accordance with applicable regulations. In such new share repurchase program, such authorization terminating event, the Company will inform its shareholders by an official the current share repurchase program, replacing it by a new statement. one, with the execution of the liquidity agreement mentioned in section a) of section 21.1.3.1 being continued. Maximum fraction of the share capital, maximum number and nature of the shares that the issuer intends to buy and Objectives of the repurchase program the maximum purchase price The purposes of the repurchase program are the following: Purchases of shares in the Company are subject to the following limits: ■ the implementation of the whole award or assignment of shares to the employees and/or corporate officers of the Company ■ the number of shares purchased by the Company during and its affiliated companies in or outside France under the the repurchase program may not exceed 10% of the shares terms of Article L. 225-180 of the French Commercial Code that make up the Company’s capital at any given time; this and for any award of free shares, any stock option plan, percentage applies to the capital that is adjusted based on any employee shareholding operation, any remuneration transactions carried out after this Shareholders’ Meeting mechanism for the Company, notably under the relevant (as an indication, 62,757,065 shares as of the date of this provisions of the French Commercial Code and/or Labor code Registration Document). It is specified that in accordance with or French or foreign statutory and regulatory provisions and Article 225-209 of the French Commercial Code, when the any hedging operation connected to these transactions and shares are repurchased for liquidity reasons under the AMF’s commitments to the Company under the conditions stipulated General Rules, the number of shares taken into account by the market authorities and at times the Management Board to calculate the 10% limit corresponds to the number of or persons delegated by the Management Board decide; shares purchased, less the number of shares sold during the authorization period; ■ to deliver shares from exercising the rights attached to securities giving access to the Company’s capital by redemption, ■ the number of shares held by the Company at any time must conversion, exchange, presentation of a warrant or by any not exceed 10% of the shares that make up the Company’s other means; capital on the date in question.
■ to cancel all or some of the shares thus repurchased (subject Shares may be acquired, sold, exchanged or transferred at any to the approval of the corresponding resolution included in time (except during a takeover bid for the Company’s shares), in the agenda of the General Shareholders’ Meeting on June 12, one or more stages, and by any means, on a regulated market, 2015); through a multilateral trading system, systematic internalizers or over the counter, subject to the limits authorized by applicable law
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and regulatory provisions, including through the acquisition or 21.1.4 Other securities giving access sale of blocks of shares (without limiting the part of the repurchase to the Company’s share capital program that may be carried out in this way), by way of a takeover bid or public exchange offer, or by the use of derivative financial instruments traded on a regulated market, through a multilateral On the date of this Registration Document, the Company has trading system, systematic internalizers or over the counter. not issued any securities giving access to the capital. It should be noted that the General Shareholders’ Meeting authorized The maximum purchase price per share shall be €42 (before fees the Management Board to issue such securities in the future (see and commission) and the total amount allocated to the authorized Summary Table in paragraph 21.1.1). repurchase program shall not exceed €230 million. The Company awarded stock subscription options in 2010 Term of the repurchase program and performance shares in 2010, 2011, and 2012. For more information concerning these allotments see Chapter 15 The repurchase authorization submitted for approval at the “Compensation and benefits” of this Registration Document. General Shareholders’ Meeting on June 12, 2015 would be granted for an 18-month period starting from that date, i.e. until December 11, 2016. 21.1.5 Terms and conditions governing any Cancellation of repurchased shares acquisition rights and/or obligations The Management Board’s authorization to cancel, where on authorized but unissued appropriate, all or some of the shares repurchased under the capital or undertaking to increase repurchase program and to reduce the share capital accordingly on one or several occasions, in the proportions and at the times it the capital considers necessary by cancelling all or some of the Company’s treasury shares or shares acquired by the Company in the share Non applicable. purchase programs authorised by the General Shareholders’ Meeting, within the statutory limits, in accordance with articles L. 225- 209 et seq. of the French Commercial Code, will also be 21.1.6 Share capital of any member submitted for approval at the General Shareholders’ Meeting on June 12, 2015. of the Group’s companies which is subject to an option Under this authorization, the Company can cancel a maximum or an agreement to be put of 10% of the shares comprising its share capital per 24 month period. This limit applies to the company’s capital which will under an option be adjusted by any operations which occur before the General Shareholders’ Meeting which must be held on June 12, 2015. As some of the Group’s subsidiaries are not wholly owned, agreements between shareholders exist that may provide for This authorization, which renders ineffective the part of the preemptive rights for shareholders in the event a shareholder sells similar authorization granted by the Combined Ordinary and its interest, makes commitments to sell or disposes of its obligations. Extraordinary Shareholders’ Meeting of June 12, 2014 (Resolution These different rights are mentioned in Chapter 7 “Organization no 11) that has not been used, is granted for a period of twenty- of the Group” of this Registration Document for the Group’s large six (26) months from the date of the Shareholders’ Meeting which subsidiaries which are described in the said Chapter. must be held on June 12, 2015.
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21.1.7 Change in share capital correction of a material error of non-delivery of shares over the past 3 years following an erroneous interpretation of the departure clause of the beneficiary in question): the Company issued 1,469 new shares, which it created by incorporating profits. A sum There was no change in the Company’s share capital between of €245 corresponding to the nominal value of newly created January 1, 2006 and December 2010. In December 2010, only shares was deducted from the retained earnings account. 1,500 shares were issued due to the exercise of stock options by The share capital was increased to €10,305,200 and was the heirs of a deceased beneficiary. In 2012, 2,250 shares were composed of 61,831,194 shares. issued due to the exercise of stock options by the heirs of two deceased beneficiaries. ■ Stock-option Plan 2010: the Company issued 925,871 new shares. The share capital was increased by €154,312, On January 1, 2013 the share capital amounted to €10,254,685 corresponding to the nominal value of the newly created divided into 61,528,110 shares. On July 18, 2013, the company shares. The shares were subscribed at the price of €26; the issued 134,623 new shares created by incorporating profits, as difference between the nominal value and the subscription price part of the capital increase to distribute shares from the 2012 was carried over to additional paid-in capital (€23,918,334). free share plan. A sum of €22,438 corresponding to the nominal The share capital was increased to €10,459,512 and was value of newly created shares was deducted from the retained composed of 62,757,065 shares at that date. earnings account bringing the share capital to €10,277,498, consisting of 61,664,983 shares. The share capital was thus constituted as of December 31, 2013. 21.1.8 Pledges, guarantees On July 7, 2014, the Company issued 164,742 new shares and other collateral created by incorporating profits, as part of the capital increase to distribute shares from the 2012 Performance shares plan. A sum of €27,457 corresponding to the nominal value of the At the date of this Registration Document, no shares in registered newly created shares was deducted from the retained earnings form were pledged, and the Company had no knowledge of account. The share capital was increased to €10,304,955 and pledges on other shares comprising its capital. The shares held by was composed of 61,829,725 shares at that date. CFAO in its subsidiaries are not pledged.
On December 23, 2014, the Company recorded the following For more information on pledges of the Group’s assets and two increases in share capital: other Securities see Note 34.2.2 to the consolidated financial statements “Guarantees and other collateral” of this Registration ■ The distribution of performance shares to one of the Document. beneficiaries of the 2012 Performance shares plan (the
REGISTRATION DOCUMENT 2014 - CFAO 285 OPERATIONS RELATING TO THE COMPANY’S STOCK 21 Memorandum of association and by-laws
21.2 Memorandum of association and by-laws
21.2.1 Corporate purpose Board must own at least 150 registered shares of the Company, (Article 3 of the by-laws) no later than three (3) months after his or her appointment. The Management Board is appointed for a three-year term. In The purposes of the Company are: the event of vacancy due to death, resignation or dismissal, the Supervisory Board may replace the vacant position in accordance ■ the purchase, production, transport, importation, distribution, with the legal conditions. commercialization and sale of any goods or services, of any kind, for its own account or for the account of third parties and by any means; Dismissal of members of the Management Board The members of the Management Board may be dismissed from ■ the purchase, construction, use, management, lease or sale office by the Shareholders’ Meeting, as well as by the Supervisory of any land, plant, warehouse, dealership site or other real Board. estate assets;
■ and, more generally, any commercial, financial, industrial, Deliberations of the Management Board agricultural, securities or real estate transactions in direct or A member of the Management Board may give a proxy to another indirect relation with the above-mentioned activities or any member to represent him or her at a meeting of the Board, under other similar or related activities, or those likely to facilitate the same conditions as for the Supervisory Board. In order to hold their operation and implementation. valid deliberations, at least half of the members of the Management To this effect, the Company may in particular create, purchase or Board must be present. The decisions are made with a majority of exploit any designs, trademarks, models, patents or processes, the votes of present or represented members; in the event of a tied acquire any stake or interest in any company or enterprise vote, the Chairman has the casting vote. The Management Board with any purpose, and may operate in any country, directly or may adopt internal rules outlining its operating mode, including, indirectly, alone or through an association, a company or any where appropriate, attendance of meetings via videoconference other form of entity or enterprise. or conference calls.
Chairman of the Board – Executive Management 21.2.2 Administrative, management The Chairman of the Board represents the Company in its and supervisory bodies relations with third parties. The Supervisory Board may grant the same power of representation to one or several members of the (Articles 10 and 11 of the by-laws) Management Board who are then referred to as “Chief Executive Officer” (Directeur Général). The Chairman and, as the case 21.2.2.1 Management Board (Article 10 of the by- may be, the Chief Executive Officer(s) may delegate part of their laws) powers, with or without powers of subdelegation, when they deem it appropriate, to any special representatives they may designate. Appointment of the members of the Management Board Powers and duties of the Management Board The Management Board, a collegial body, is composed of a minimum of two members and a maximum of seven members, Without prejudice to the powers of the Supervisory Board and appointed by the Supervisory Board, which designates one of to the decisions which shall be first approved by the Supervisory them as Chairman. No member of the Management Board can Board, the Management Board has the broadest powers with be over 70. Any member of the Management Board in office who regards to third parties to act under any circumstances in the name reaches an age exceeding this limit is deemed to have resigned, of the Company within its corporate purpose, and subject to the unless the Supervisory Board authorizes him or her to remain in powers expressly reserved to the shareholders. The Management his or her position until the expiration of his or her term of office. Board may delegate part of its powers, with or without powers During his or her term of office, each member of the Management of subdelegation, when it deems it appropriate to any special representative it may designate.
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Apart from for certain transactions stipulated in the statutory and 21.2.4 Modification of shareholders’ rights regulatory provisions – guarantees, endorsements and securities to third parties and sale of buildings, total or partial disposal of The modification of the rights attached to the shares shall be made interests and constitution of the securities – the Management Board in accordance with legal provisions. can only take or perform certain actions or decisions with the prior authorization of the Supervisory Board, as stated in Chapter 16 “Role and activities of the management and supervisory bodies” of this Registration Document in section III “Limitations imposed on 21.2.5 General Shareholders’ Meetings the powers of the Management Board”. (Article 13 of the by-laws) 21.2.2.2 Supervisory Board (Article 11 of the by-laws and internal rules of the Supervisory Board) Notice and admission to the Shareholders’ Meetings The provisions of the by-laws and the Supervisory Board’s Shareholders’ Meetings are convened and deliberate under the internal rules on the composition and functioning of the Board are conditions provided for by the law and the by-laws. The meetings described in Chapter 16 “Role and activities of the management take place at the registered office or any other place indicated in and supervisory bodies” of this Registration Document in the the notice. Chairman’s report on Corporate Governance and internal control Any shareholder may attend these meetings, in person or by (section 16.1 “Report of the Supervisory Board Chairman on proxy, and in accordance with the legal provisions, upon proof of Corporate Governance, Internal Control and Risk Management”. his or her identity and of his or her share ownership by registering these shares in his or her name or in the name of the intermediary registered for his or her account within the regulatory deadlines, 21.2.3 Rights and obligations attached to either in the registered share accounts held by the Company, or the shares (Article 8 of the by-laws) in the bearer share accounts held by the authorized intermediary. The shareholders may, under the legal and regulatory provisions, send their proxy or voting form for the Shareholders’ Meeting by Each share entitles the holder to a share in the Company’s assets, mail. The Management Board specifies in the notice the deadlines profits and liquidation dividend proportional to the fraction of the for sending the proxy and voting forms and may, if necessary, share capital the share represents. reduce the regulatory deadlines applicable for all shareholders. Every time it is required to possess a certain number of shares to exercise any right whatsoever notably in case of an exchange, Quorum – vote – number of votes conversion, regrouping or allocation of shares or on an increase Upon decision of the Management Board published in the or reduction in capital, merger or any other operation, the shares notice convening the Shareholders’ Meeting, the shareholders below the number required do not give their owner any right attending the meeting by videoconference or by other means of against the Company. In this case, the shareholders are personally telecommunication permitting their identification in accordance responsible for obtaining the required number of shares or a with the law and regulations shall be deemed present for the multiple of this number and the provisions of Article L. 228-6 of calculation of the quorum and of the majority. the French Commercial Code apply to odd lots. The voting right attached to the shares is proportionate to the The ownership of one share automatically triggers compliance fraction of capital represented. Except for cases where the with the by-laws and the decisions of the Shareholders’ Meetings. unanimity of shareholders is required, the voting right attached The shares are in registered form or in bearer form, at the option to a share is exercised by the beneficial owner (usufruitier) of of the shareholders, unless contrary legal provisions. the share at Ordinary Shareholders’ Meetings and by the bare owner (nu-propriétaire) at Extraordinary Shareholders’ Meetings, unless the beneficial owner and the bare owner agree otherwise and jointly notify the Company at the latest five days before the meeting date.
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Votes shall be cast at Shareholders’ Meetings in accordance with The notice to the Company shall indicate the same information the terms indicated by the Management Board in the notice. as the information required by the General Regulations of the AMF when a legal threshold is crossed, and shall be sent to Pursuant to Article L. 225-123 new paragraph 3 of the French the Company by registered letter with return receipt requested, Commercial Code, a resolution to amend the Company’s bylaws within four trading days from the date the threshold was crossed. will be put to the Combined Shareholders’ General Meeting to The obligation to notify the Company also applies when the be held on June 12, 2015, for the purpose of confirming that shareholder’s interest, in capital or in voting rights, falls below each share gives only one voting right at general shareholders’ each of the abovementioned thresholds for any reason. The meetings. sanctions provided by law in the event of non-compliance with the obligation to declare the crossing of legal thresholds will also Chairman of Shareholders’ Meetings apply in case of non-declaration of the crossing of a threshold The Shareholders’ Meeting is chaired by the Chairman of the required by these by-laws, upon the request, which shall be Supervisory Board, or in his absence, by the Vice-Chairman mentioned in the minutes of the Shareholders’ Meeting, of one of the Supervisory Board, or in his absence, by a member of or several shareholders holding at least 5% of the capital or of the Supervisory Board specially designated to this effect by the the voting rights of the Company. Subject to the abovementioned Supervisory Board. provisions, this obligation contained in the by-laws is governed by the same provisions as those governing the legal obligation, including the cases of legal assimilation provided for by legal and regulatory provisions. 21.2.6 Provisions in the by-laws likely to have an impact in the event Identification of shareholders of a change of control The Company is authorized to apply the statutory and regulatory provisions concerning the identification of the shareholders and To the Company’s knowledge, the by-laws do not include any the shares which, either immediately or in the future, give the provision that could delay, defer or prevent a change in control right to vote at shareholders’ meetings in accordance with Articles of the Company. L. 228-1 to L. 228-3-4 of the French Commercial Code).
21.2.7 Crossing of thresholds and 21.2.8 Special provisions governing identification of shareholders changes in share capital (Article 9 of the by-laws) The share capital of the Company may be increased or reduced by any means and in any manner authorized by the law. The Crossing of thresholds Shareholders’ Meeting may decide, in relation to any reduction Provided that the shares of the Company are listed on a regulated of capital, that this reduction will be realized in kind through the market and in addition to the thresholds provided for by law, remittance of Company securities or assets, or by repurchase any physical or legal person, acting alone or in concert with and cancellation, exchange, conversion of securities, with or others, who directly or indirectly acquires a number of shares or without balancing cash adjustment, or in any other manner, with voting rights representing more than 3% of the capital or voting the obligation for the shareholders, where applicable, to form a rights, and then each supplementary tranche of 0.5% (even group to obtain a whole number of securities or assets or to be when above the legal thresholds), must inform the Company. able to exercise a right.
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21.3 Market information
CFAO has been listed on Compartment A of Euronext Paris since December 3, 2009 (ISIN code: FR0000060501). HISTORY OF MARKET PRICES (IN €) AND TRADING VOLUMES OF CFAO SHARES FOR THE PAST 18 MONTHS
Volume Last price Highest price Lowest price of the of shares traded of the month of the month month Oct. 2013 42,672 34.40 34.95 34.00 Nov. 2013 21,972 33.90 34.40 33.15 Dec. 2013 26,354 33.60 34.50 32.90 Jan. 2014 26,601 33.30 33.60 31.90 Feb. 2014 26,841 32.76 33.50 31.60 March 2014 47,761 33.50 34.80 31.40 April 2014 22,301 32.40 33.80 32.30 May 2014 48,879 32.40 32.50 31.01 June 2014 24,163 32.30 33.50 31.90 July 2014 18,134 32.35 33.50 32.00 Aug. 2014 51,181 31.50 32.39 29.90 September 2014 15,317 31.00 32.09 30,40 October 2014 37,994 30.10 31.40 28.20 November 2014 29,389 30.00 30.75 29.20 December 2014 33,162 30.40 30.75 29.20 January 2015 17,812 30.30 30.45 28.90 February 2015 42,889 29.90 30.30 29.20 March 2015 41,871 30.30 32.50 29.50
Source: Reuters.
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290 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com MATERIAL CONTRACTS 22
During the last two years, Group companies have been party to Company’s IPO and registered on October 7, 2009 by the AMF the following material contracts: under number I.09-079, this paragraph being incorporated by reference in this Registration Document. The Group’s distribution ■ the agreement dated December 6, 2010 between the Group contracts contain customary clauses for early termination or non- and Toyota pertaining to the importation and distribution of renewal, which mainly concern the Company’s failure to fulfill vehicles in certain African countries; certain obligations, such as its obligation to maintain the ownership ■ the agreements between the Group and Nissan for different structure and the management teams of certain Group entities: territories in which the Group distributes its vehicles; as ■ the reusable multi-currency syndicated credit facility agreement mentioned in Chapter 4 “Risk Factors”, the Renault Nissan of €400 million entered into on December 17, 2013 with Group has informed some CFAO Group companies that their Barclays Bank Plc, Crédit Agricole Corporate and Investment importation and distribution contracts will not be renewed. Bank, Société Générale Corporate & Investment Banking, These non-renewals of contracts took effect on different Natixis. A description of this agreement is set out in Chapter 10 dates, staggered between the end of December 2013 and “the group’s cashflow and capital resources” of this Registration October 2014, depending on the country; Document under section 10.2.2.1 “Outstanding borrowings at ■ the agreement dated January 1, 2006 between the Group and December 31, 2014”; General Motors pertaining to the importation and distribution ■ the agreements entered into with the Heineken group regarding of its vehicles in Algeria. the Brasseries du Congo (operating breweries in Congo). A The aforementioned contracts are included due to the high volume description of these agreements is contained in Chapter 7 of of business that they represent. The Toyota, General Motors this Registration Document in the “CFAO Industries” paragraph (including Chevrolet and Opel) brands together represented of section 7.2.3.4 “Distribution subsidiaries”. Brasseries approximately 21.8% of the Group’s consolidated revenue du Congo generates around 66.4% of the Group’s revenue in 2014. In 2013, the same brands represented 25.3% of in the Congo, which itself accounted for 9.5% of CFAO’s consolidated Group sales. consolidated revenue in 2014 and 8.5% in 2013.
A description of these agreements is provided in section 6.5.1.3.4 In the normal course of their business, Group companies may “Agreements with Automobile Manufacturers” of the Registration enter into other contracts that are deemed material in terms of Document (pages 85 et seq.) prepared in the context of the revenue or geographical coverage.
REGISTRATION DOCUMENT 2014 - CFAO 291 22 MATERIAL CONTRACTS
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292 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST 23
Non applicable.
REGISTRATION DOCUMENT 2014 - CFAO 293 23 THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST
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294 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com DOCUMENTS ON DISPLAY 24
24.1 Place where documents are available 296 24.3 Indicative timetable for the publication of fi nancial communication in 2015 296 24.2 Person responsible for fi nancial communications 296
REGISTRATION DOCUMENT 2014 - CFAO 295 DOCUMENTS ON DISPLAY 24 Place where documents are available
24.1 Place where documents are available
The by-laws and other corporate documents, any assessment or Moreover, the Company’s historical financial information and all declaration prepared by an expert at the Company’s request, if other documents which must be made available to shareholders part of said document is included or referred to in this Registration in accordance with legal provisions are available on the CFAO Document, and all documents sent or made available to the website. shareholders in accordance with the law, are available at the Company’s headquarters at 18, rue Troyon, 92316 Sèvres. Copies of this document are available free of charge from CFAO. This Registration Document can also be read on CFAO’s website.
24.2 Person responsible for financial communications
The person responsible for the financial communication is: To obtain documents published by the Company, as well as for all financial information, please contact Investor Relations by ■ Olivier Marzloff, member of the Management Board, Executive telephone on +33 (0)1 46 23 58 25, or by e-mail at [email protected]. Vice-President and Corporate Secretary.
24.3 Indicative timetable for the publication of financial communication in 2015
This indicative timetable is based on information known as of at the date hereof.
■ 2015 1st quarter revenue: May 4, 2015.
■ General Shareholders’ Meeting: June 12, 2015.
■ 2015 Half-year revenue and results: July 31, 2015.
■ 2015 3rd quarter revenue: November 9, 2015.
296 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com INFORMATION ON EQUITY INTERESTS 25
Information regarding companies in which the Company owns a office of the Group. Brasseries du Congo has an industrial percentage of the share capital that is likely to have a material activity which is the production of beverages in the Congo. These impact on the assessment of its assets and liabilities, financial subsidiaries are described in Chapter 7 “Group Organization” of position or results is provided in this Registration Document under this Registration Document. Chapter 7 “Group Organization”, under Chapter 20 “Financial information concerning the assets and liabilities, financial The subsidiaries comprising the sub-group Eurapharma, under the position and profits and losses of CFAO”, and in Note 37 to joint stock corporation Eurapharma, represent more than 10% of the consolidated financial statements. In addition, Note 2.18 attributable net income. Eurapharma is described in Chapter 7 to the parent company financial statements in Chapter 20 of of this Registration Document. The activity and the results of the Registration Document contains information on the direct Eurapharma and of the sub-subsidiaries in which Eurapharma subsidiaries of CFAO SA. holds all or part of the capital are described in detail in Chapters 6 “Business overview” and 9 “Operating and financial review” of The subsidiaries of the CFAO Group generating more than 10% this Registration Document, in the sections relating to the Group’s of consolidated net income (attributable to owners of the parent) pharmaceutical activities. are SFCE and Brasseries du Congo. SFCE is a central purchasing
REGISTRATION DOCUMENT 2014 - CFAO 297 25 INFORMATION ON EQUITY INTERESTS
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298 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com REGISTRATION DOCUMENT CROSS REFERENCE TABLE 26
For the purposes of clarity, the cross-reference table below 3 the information relating to the environmental and social identifies: consequences of CFAO’s activities as required by Articles L. 225-102-1, R. 225-104 and R. 225-105-2 of the 1 the information included in the annual financial report that French Commercial Code. must be published by all listed companies in accordance with the provisions of the French Monetary and Financial As for the cross-reference table with the headings of Annex I Code (Art. L. 451-1-2-I), and which reflects the transposition of European Regulation (EC) 809/2004, as specified in the of European Directive 2004/109/EC, known as the comment to the table of contents on page 6 of this Registration “Transparency Directive”; Document, said table of contents uses the nomenclature set forth in Annex I of European Regulation (EC) 809/2004 implementing 2 the information included in the management report which must the European Directive known as Prospectus 2003/71/CE. be prepared by the Management Board of CFAO pursuant to Articles L. 225-100 et seq. of the French Commercial Code;
Annual financial report cross-reference table
Corresponding sections and Annual financial report chapters of the annual report Page No. Statement of the person responsible for the Registration Document Chapter 1 9 Management report See below Financial statements • Company financial statements Chapter 20, section 20.3.2 248 • Statutory Auditors’ report on the Company financial statements Chapter 20, section 20.4.1 274 • Consolidated financial statements Chapter 20, section 20.3.1 187 • Statutory Auditors’ report on the consolidated financial statements Chapter 20, section 20.4.1 275 • Statutory Auditors’ fees Chapter 2, section 2.3 12 • Report by the Chairman of the Supervisory Board on the composition, the conditions of preparation and organization of the Board’s work and the internal control and risk management procedures implemented by the Company Chapter 16, section 16.1 140 • Statutory Auditors’ report on the report prepared by the Chairman of the Supervisory Board Chapter 16, section 16.2 154
REGISTRATION DOCUMENT 2014 - CFAO 299 INFORMATIONS FINANCIERES CONCERNANT LE PATRIMOINE, LA SITUATION FINANCIERE ET LES RESULTATS DE L’EMETTEUR 26 Management report reconciliation table
Management report reconciliation table (Article L. 225-100 et seq. of the French Commercial Code)
Corresponding sections and Annual management report (French Commercial Code) chapters of the annual report Page No. 1. Group management report Chapters 6 and 9 37 and 79 2. Business and results of operations of the parent company, CFAO SA Chapters 7 and 20 67 and 185 3. Major risks and uncertainties Chapter 4 17 4. Information on market risks and financial risk management Chapters 4 and 10 17 and 95 5. Significant events after the reporting period Chapters 12 and 20 107 and 185 6. Trend information for the Company and the Group and outlook Chapters 12 and 13 107 and 109 7. Equity interests – control – subsidiaries Chapters 7 and 25 67 and 297 8. Employee information Chapter 17, section 17.5 161 9. Environmental information Chapter 17, section 17.8 166 10. Information on terms of payment Chapter 20, section 20.3.2 248 11. Research and development activities Chapter 11 105 12. Information relating to administrative and management bodies Chapters 14 and 16 111 and 139 13. Compensation and benefits of corporate officers (mandataires sociaux) Chapters 15 and 16 125 and 139 14. Transactions by corporate officers (mandataires sociaux) involving the Company’s shares Chapter 15, section 15.3 137 Chapters 18, section 18.1 176 15. Information on the share capital and Chapter 21, section 21.1 280 16. Summary of current delegations of authority to the Management Board and their use in 2012 Chapter 21, section 21.1.1 280 17. Five-year financial summary Chapter 20, section 20.3.2 248 18. Report of the Chairman of the Board on Corporate Governance and internal control Chapter 16, section 16.1 139 19. Information on factors likely to have an impact in the event of a takeover bid Chapter 16, section 16.1.V 153 20. Observations of the Supervisory Board on the financial statements and on the management report of the Management Board Chapter 16, section 16.3 155
300 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com INFORMATIONS FINANCIERES CONCERNANT LE PATRIMOINE, LA SITUATION FINANCIERE ET LES RESULTATS DE L’EMETTEUR Social and environmental consequences of the Company’s activities 26
Social and environmental consequences of the Company’s activities (Article R. 225-105-1 of the French Commercial Code)
Corresponding sections and Social and environmental consequences of the Company’s activities chapters of the annual report Page No. 1. Employee information Chapter 17 a. Employment • Total number of employees and analysis of workforce by gender, age and geographic area Section 17.5.1 161 • New hires and layoffs Section 17.5.1 161 • Compensation and changes in compensation Section 17.5.6 b. Organization of work • Organization of work time Section 17.5.2 162 • Absenteeism Section 17.5.2 162 c. Employee relations • Organization of employee relations Sections 17.5.4 and 17.5.3 162 • Summary of collective agreements Section 17.5.3 162 d. Health and safety • Health and safety conditions in the workplace Section 17.5.4 163 • Summary of agreements signed concerning health and safety in the workplace Section 17.5.4 163 • Workplace accidents and illnesses Section17.5.4 163 e. Training • Training policies rolled out Section17.5.5 163 • Total number of training hours Section 17.5.5 163 f. Equal treatment • Measures taken to promote gender equality Section 17.5.6 164 • Measures taken to promote the employment and integration of disabled workers Section 17.5.6 164 • Anti-discrimination policy Section 17.5.6 164 g. Promotion and compliance with the provisions of ILO fundamental conventions regarding: • Freedom of association and the right to collective bargaining Section 17.5.7 165 • Elimination of discrimination in respect of employment and occupation Section 17.5.7 165 • Elimination of all forms of forced or compulsory labor Section 17.5.7 165 • Effective abolition of child labor Section 17.5.7 165 2. Environmental information Chapter 17, section 17.8 a. Group environmental policy • Environmental issues included in the Company’s organization Section 17.8.1 166 • Environmental protection training and seminars for employees Section 17.8.1 166 • Resources allocated to prevent environmental risks and pollution Section 17.8.1 166 • Provisions and guarantees set aside for environmental risks Section 17.8.3 168 b. Pollution and waste management • Measures to prevent, reduce and clean hazardous emissions, effluents and soil contamination Section 17.8.2 167 • Measures to prevent, recycle and eliminate waste Section 17.8.2 167 • Noise pollution and any other form of pollution produced by a business Section 17.8.2 167 c. Sustainable use of resources • Water consumption and supply Section 17.8.3 168 • Raw materials consumption Section 17.8.3 168 • Energy consumption Section 17.8.3 168 • Land use Section 17.8.3 168 d. Climate change • Greenhouse gas emissions Section 17.8.3 168 • Adapting to the impacts of climate change Section 17.8.3 168 e. Protection of biodiversity • Measures taken to preserve and develop biodiversity Section 17.8.3 168
REGISTRATION DOCUMENT 2014 - CFAO 301 INFORMATIONS FINANCIERES CONCERNANT LE PATRIMOINE, LA SITUATION FINANCIERE ET LES RESULTATS DE L’EMETTEUR 26 Social and environmental consequences of the Company’s activities
Corresponding sections and Social and environmental consequences of the Company’s activities chapters of the annual report Page No. 3. Information on corporate commitments to sustainable development Chapter 17 a. The Company’s territorial, economic and social impact on: • Employment and regional development NC • Local populations NC b. Relations with individuals or organizations interested in the Company’s business • Conditions for dialog with these individuals or organizations Section 17.3 157 • Partnerships and patronage Section 17.5.3 157 c. Subcontracting and suppliers • Social and environmental issues included in the purchasing policy Section 17.5.7 165 • The importance of subcontracting and corporate social responsibility in relations with suppliers and subcontractors Section 17.5.7 165 d. Fair practices • Anti-corruption measures taken Section 17.4 160 • Measures taken that promote the health and security of consumers Section 17.4 160 e. Other measures taken, in respect of section 3, that support human rights NC
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304 REGISTRATION DOCUMENT 2014 - CFAO www.cfaogroup.com This document is printed in accordance with an ISO 14001: 2004-certified management system. Photo credits: Getty Images, Shutterstock, Thomas Renaut, Joan Bardeletti, Patrick Sagnes, Group all rights reserved. Patrick Labrousse, TTC, and CFAO Isabelle Nery, Drink responsibly. 18, RUE TROYON 92316 SÈVRES CEDEX – FRANCE Tél. : +33 (0)1 46 23 56 56 - Fax : +33 (0)1 46 23 57 10 www.cfaogroup.com