GROUPE keolis s.a.S. FINANCIAL REPORT 2015 CONTENTS
1. Management Report ...... 3 Management report from the President of the Board of Directors on the consolidated and statutory accounts for the year ended 31st December 2015 ...... 4
2. Consolidated financial statements ...... 9
Key figures for the Group...... 10
Consolidated financial statements...... 11
Notes to the consolidated financial statements...... 16 Statutory auditors’ report on the consolidated financial statements...... 65
3. Unaudited management financial statements ...... 67
Key figures...... 68
Income statement...... 69
Statement of financial position...... 70
Statement of cash flows...... 71
4. Annual Financial Statements ...... 73
Financial statements at 31 December 2015...... 74
Notes to the annual financial statements...... 78 Statutory auditors’ report on the Financial Statements...... 86 1. Management Report CONTENTS
4 • SIGNIFICANT EVENTS SINCE A Management report from the President THE END OF THE YEAR ...... 7 of the Board of Directors...... 4 5 • CORPORATE GOVERNANCE ...... 7 1 • ACTIVITY ...... 4 5.1 Members of the Supervisory Board...... 8 1.1 Highlights of the financial year ...... 4 5.2 Internal committees within 2 • NOTES ON FINANCIAL STATEMENTS AND the Supervisory Board...... 8 RESULTS ...... 5 5.3 Group Executive Committee ...... 8 2.1 Consolidated financial statements...... 5 5.4 Capital and shareholdings ...... 8 2.2 Annual financial statements...... 6 6 • PRESENTATION OF RESOLUTIONS 2.3 Subsidiaries and investments...... 6 PROPOSED FOR ADOPTION 2.4 Notification of major holdings and takeovers . . . 6 BY SHAREHOLDERS...... 8 2.5 Research and development activity...... 6 6.1 Allocation of income ...... 8 2.6 Information on supplier payment settlement. . . .7 6.2 Agreements covered by the article 3 • FORESEEABLE TRENDS L227-10 of the Commercial Code...... 8 AND FUTURE OUTLOOK ...... 7
3
1. Management Report
Management report from the President of the Board of Directors on the consolidated and statutory accounts for the year ended A 31st December 2015 Ordinary Annual General Meeting of 11 May 2016
Ladies and Gentlemen, main characteristics of this amendment are: ◗ an increase in the maximum amount from €800 million to €900 In accordance with legal, regulatory and statutory requirements, million, we submit for your approval the consolidated and annual finan- ◗ an adjustment of the financial conditions to correspond to the cial statements for the financial year ended 31st December 2015 current market, which are more favourable, and report to you on the activities of our Company and its sub- ◗ an extension of the maturity until 11 June 2020, sidiaries during the year. ◗ a provision under which Keolis may extend the maturity by an additional year, in 2016 and 2017, subject to the approval of Your auditors will also read their reports to you. the entire financing syndicate. Maturity could thereby be extended until 11 June 2022. This report reviews the various items of information as required by applicable regulations and information on corporate gover- By virtue of the principle of debt continuity, the implementation nance. of the amendment did not give rise to any reimbursement of the nominal amount.
At 31 December 2015 the drawn amount of the loan was €600 1 • ACTIVITY million, with the remaining undrawn amount of €300 million.
1.1 Highlights of the financial year Acquisition of ATE in Australia On 1 May 2015, Keolis Downer (51%-owned by Keolis and 49% Business activity and development by Downer EDI), Australia’s largest light rail operator, acquired Australian Transit Enterprises (ATE), one of the country’s Notable 2015 events in Keolis in France were the renewal of its biggest bus operators. contracts in Le Mans, Châteauroux, Vesoul, on the Blanc Argent As a result of this acquisition, Keolis Downer has become the line (railway operating licence), and contract extensions in Lorient leading privately-owned multi-modal public transport operator and Arras. in Australia. Established in 1974 as a family business, ATE has since conti- EFFIA notably won the parking operations of the Marseille nued to grow, generating revenue of approximately AUD 190 beaches and successfully launched P+R activities in Bordeaux million (€136 million) in 2014. Headquartered in Brisbane, ATE (5,500 spaces). operates a fleet of nearly 1,000 buses and runs urban, inter-city and school services in three states: South Australia (Adelaide), In Continental Europe, Keolis renewed the Hellweg-Netz contract Western Australia (Perth) and Queensland (Brisbane). The com- in Germany, won the Odense bus contract and Aarhus tram pany currently employs 1,600 people. contract in Denmark, won the Zwenzwoka railway tender and As the 5th largest private bus operator in Australia, ATE consists Utrecht bus tender in the Netherlands and won the Dalarna bus of 4 business divisions: contract in Sweden. In the United Kingdom, Keolis opened two ◗ Path Transit, providing timetabled route and school bus ser- new tram lines in Nottingham, almost doubling the size of the vices in the suburbs of Perth (Western Australia); network. In North America, Keolis renewed the urban contract ◗ S outhlink, providing timetabled route and school bus services for MRC Les Moulins in Canada and the railway operating in metropolitan Adelaide (South Australia); contract VRE in the USA. ◗ L inkSA, providing timetabled route, school, special bus and dial-a-ride services within 100 km of Adelaide (South Australia); In the field of new connected mobility solutions, Keolis created ◗ Hornibrook , providing timetabled route and school bus ser- the subsidiary Kisio, bringing together the Group’s skills in vices in the suburbs of Brisbane (Queensland). Solutions and Services around five expertise hubs (analytics with Kisio Analysis, forecasting with Kisio Consulting, operations with Lille ticketing system Kisio Services, scientific and industrial with Kisio Solutions and In Lille, malfunctions of the ticketing system delivered by Parkeon digital with Kisio Digital) and continues to develop new services resulted in its late implementation compared to the initial contrac- projects for all public transport authorities. tual schedule. Lille Métropole (LMCU renamed MEL) decided to introduce it into service in June 2013 against the advice of Keolis Amendment to syndicated loan agreement who had refused acceptance. This resulted in a shortfall in Keolis On 11 June 2015, GROUPE KEOLIS S.A.S. signed an amend- Lille’s revenue. In these circumstances the courts appointed an ment to the syndicated loan agreement dated 12 July 2013. The expert in December 2014 to determine the origin of the flaws
4 1. Management Report
and appraise their financial impact. The expertise is currently Continental Europe zones have not fully counterbalanced the poor ongoing and will continue during 2016. results of North America, Australia and New Territories). An action plan has been established and is currently being deployed to The Group’s financial results boost North America and in particular re-establish profitability on the Boston contract. The Group’s turnover for 2015 amounted to €5,002.5 million, an Operational costs of the holding company are €8.7 million higher increase of €543.4 million, or 12.2%, on 2014. than in 2014, of which 4.3 million relates to the unwinding of diesel hedges. The currency impact is positive at +€73.8 million in particular due to the depreciation of the euro against sterling and the US dollar. Recurrent operating profit stands at €91.0 million, down 13.1% in The consolidation scope effect is +€153.0 million, due to the relation to 2014. One of the reasons for this is the entry into force acquisition of Striebig and the disposal of Transévry in France, the of a new agreement relating to payments due on retirement. acquisition of ATE in Australia and various acquisitions by EBH in Belgium (Doppagen/Sanglier, Schloemer, Dislaire/Ourthe, Van Net income (Group share) for 2015 amounts to €33.3 million Rompaye) and the tie-up with Nettbuss in Denmark. compared with €26.0 million in 2014.
The portfolio impact of contracts won and lost stands at +€172.1 Cash flow generation is -€126.0 million in 2015 (including -€125.5 million, comprising -€13.0 million in France and +€185.1 million million due to acquisitions) versus +€7.4 million in 2014. abroad. In France we can note the loss of the public service dele- gation contracts in Aix-les-Bains, CDG-Val and Concarneau. The consolidated net debt of GROUPE KEOLIS S.A.S. amounts Outside France, it is worth noting the effect of a full year of opera- to €791.3 million at the end of 2015 compared to €607.7 million tions on the Boston contract (+€118 million), the DLR contract in at the end of 2014. The increase is essentially a consequence of London (+€95 million) and the loss of E23 in Sweden (-€27 million). the Group’s active external growth policy.
Excluding foreign exchange impact and change in reporting scope, revenue is up +€319.3 million / 7.2%. 2 • NOTES ON FINANCIAL STATEMENTS AND RESULTS Organic growth within existing contracts stands at +€147.2 million or +3.3%, comprising +€19.9 million for France (large networks 2.1 Consolidated financial statements +€11.9 million, major urban +€5.5 million, Territories -€2.6 million, Ile-de-France +€5.0 million), +€1.4 million for EFFIA (+€4.7 million The consolidated financial statements are prepared in accor- for Parking and Others and -€3.4 million for Kisio) and +€126.6 dance with IFRS as adopted by the European Union. million for international activities (+€4.8 million in the UK, +€33.7 million in Continental Europe, +€15.7 million in North America and Revenues from ordinary activities amount to €5,022 million. +€72.6 million in Australia). After taking into account all operating costs, operating profit after Recurrent EBITDA stands at €296.2 million, up €18.3 million, or income from investments under the equity method amounts to +6.6%, on the previous year. The currency impact accounts for €73.8 million. -€5.2 million. The consolidation scope effect improves recurring EBITDA by Net profit (group share) amounts to €33.3 million for the financial +€19.0 million, comprising +€3.7 million in France (including +€3.4 year ended 31st December 2015. million for the acquisition of Striebig) and +€15.3 million outside France (+€4.2 million for the Belgian acquisitions, +€2.8 million for 2.2 Annual financial statements the Nettbuss tie-up in Denmark and +€8.3 million for ATE in Australia). The operating loss amounts to -€4,177 thousand.
Excluding foreign exchange and consolidation scope impact, Financial income amounts to €18,025 thousand. EBITDA amounts to the same as in 2014. After posting of an exceptional loss of -€14 thousand and a Organic growth of EBITDA including portfolio growth is flat, com- corporate income tax credit of €17,279 related to tax consolida- prising +€10,9 million in France, +€4.4 million for EFFIA and -€6.8 tion gains, the financial statements of GROUPE KEOLIS S.A.S. million from international activities (the growth of the UK and show a profit of €31,113 thousand.
5 1. Management Report
2.3 Subsidiaries and investments Establishment of companies in France – Keolis branch
The table attached to the balance sheet provides all the neces- Name Date Percentage sary information concerning the company’s subsidiaries and KEOLIS BASSIN investments. D’ARCACHON 26/02/2015 100% Keolis S.A. KEOLIS ORLY RUNGIS 03/03/2015 100% Keolis Seine 2.4 Notification of major holdings and takeovers Val de Marne KEOLIS ALES 11/08/2015 100% Keolis S.A. During the financial year 2015, Keolis S.A., a subsidiary of 51% Keolis S.A. TRANSKEO 07/10/2015 49% SNCF GROUPE KEOLIS S.A.S., acquired or took control of the fol- Participations lowing companies: KEOLIS BEAUNE 23/11/2015 100% Keolis S.A. KEOLIS ROISSY SERVICES 01/12/2015 100% Keolis S.A. Acquisition of Companies in France – Keolis branch AEROPORTUAIRES Name Date Percentage KEOLIS PORTE DE L’ISERE 02/12/2015 100% Keolis S.A. VOYAGES A. FOUACHE 15/10/2015 100% Keolis KLP02 14/12/2015 100% Keolis S.A. FOUACHE EVASION 15/10/2015 100% Keolis KLP03 14/12/2015 100% Keolis S.A. 34% of shares held Prioris 30/10/2015 by SIA Acquisition of a 5% Establishment of companies abroad – Keolis branch Forcity 18/03/2015 share Acquisition of a Name Date Percentage OnePark 14/10/2015 20.25% share KEOLIS DOWNER BUS Keolis Downer Pty AND COACHLINES PTY 10/03/2015 LTD Ltd: 100% Acquisition of companies abroad – Keolis branch KEOLIS DOWNER BUS Keolis Downer Bus AND COACHLINES 10/03/2015 and Coachlines Pty Name Date Percentage PROPERTY PTY LTD Ltd: 100% HORNIBROOK TRANSIT Keolis Downer Bus Keolis (UK) Limited: 60% MANAGEMENT PTY 27/05/2015 And Coachlines KEOLIS AMEY 13/11/2015 LTD Pty Ltd: 100% METROLINK LIMITED Amey Rail Limited: Hornibrook Transit 40% SOUTH WEST TRANSIT PTY LTD 27/05/2015 Management Pty Ltd: 100% At the same time, EFFIA S.A., a subsidiary of GROUPE KEOLIS Hornibrook Transit AUSTRALIAN TRANSIT 27/05/2015 Management Pty S.A.S., acquired or took control of the following companies: ENTERPRISES PTY LTD Ltd: 100% Keolis Downer Bus Acquisition of companiy in France by EFFIA And Coachlines HORNIBROOK BUS Pty Ltd: 83.33% Name Date Percentage LINES PTY LTD 27/05/2015 Hornibrook Transit Management Pty EFFIA STATIONNEMENT Ltd: 16.67% 100% EFFIA BGD (formerly Ramery 30/11/2015 STATIONNEMENT Australian Transit Stationnement) PATH TRANSIT PTY LTD 27/05/2015 Enterprises: 100% Australian Transit SOUTHLINK PTY LTD 27/05/2015 Enterprises: 100% Establishment of companies in France by EFFIA Australian Transit LINKSA PTY LTD 27/05/2015 Enterprises: 100% Name Date Percentage MASABI 23/10/2015 Acquisition of a EFFIA Stationnement 100% EFFIA 5.13% share Marseille 13/10/2015 STATIONNEMENT 100% EFFIA KLP01 28/12/2015 STATIONNEMENT
2.5 Research and development activity
The company has no research and development activity.
6 1. Management Report
2.6 Information on supplier payment settlement Express. Keolis Ile-de-France, which generated 400 million euros of turnover in 2014, operates a fleet of 1,900 vehicles across 25 In accordance with articles L 441-6-1 and D 441-4 of the depots. Established in all of the departments comprising the Commercial Code, we analyse the year- end balance of amounts Paris region, its 19 subsidiaries employ 4,000 people and carry due to our suppliers and customers by due date: 70 million passengers each year. The group Transports Daniel Meyer has 440 employees and a fleet of 260 vehicles. It gene- Financial Financial rated a turnover of 40.4 million euros in 2014. Its main line of € thousand year 2015 year 2014 business is in the operation of approximately 50 timetabled bus Breakdown by invoice due date lines, supplemented by school buses and school outings and - Invoices due: charter activity. ◗ from 0 to 30 days EFFIA becomes shareholder of SAEMES ◗ from 31 to 60 days ◗ over 60 days 281 At the beginning of January 2016, EFFIA became the main - Invoices not yet due 1,022 industrial shareholder of Société anonyme d’economie mixte d’exploitation du stationnement de la ville de Paris (SAEMES) by TRADE PAYABLES 281 1,022 acquiring a 33.27% share in the company. Amount owning by suppliers 89 Amount of invoices not yet received 4,530 1,761 EFFIA, which already manages more than 30,000 parking Total trade payables and 4,720 2,783 spaces in the Ile-de-France region, thus initiates closer ties with related accounts the second largest car park operator in the region, SAEMES (€45 million turnover, 25,000 spaces). SAEMES operates a number of major facilities, among which 3 • FORESEEABLE TRENDS AND Paris’ number 1 car park for revenue, Lyon-Méditerrannée, loca- FUTURE OUTLOOK ted under Gare de Lyon.
Keolis has entered into exclusive negotiations with the Lyon The two companies which will remain commercially independent public transport authority for the renewal of its operating contract. but may join together on certain invitations to tender, already The Group is also responding to invitations to tender to renew jointly operate the Lyon-Diderot car park. its operating contracts for networks in Dijon, Artois-Gohelle and After this transaction, EFFIA becomes the second largest sha- Laval. reholder of SAEMES, behind Paris City Hall, which sold 26.50% of the capital of SAEMES but remains majority shareholder with In France and at EFFIA the Group intends to consolidate its a 50.06% share. current positions and will remain attentive to any opportunities.
Keolis wishes to develop its international footprint and will exa- 5 • CORPORATE GOVERNANCE mine all the opportunities related to the mobility chain in the territories where it is already established, but also in new The Company is a société par actions simplifiée whose President countries. is Mr. Jean-Pierre Farandou, President of the Company and sole member of the Executive Board, confirmed in this position on 29 July 2015. 4 • SIGNIFICANT EVENTS SINCE THE END OF THE YEAR The company also has a Supervisory Board whose role, in accordance with legal and statutory requirements, is to supervise Acquisition of Transports Daniel Meyer the management of the Executive Board, made up of one mem- ber in the person of Mr. Farandou, and to decide on the Important In January 2016, the Keolis Group announced the acquisition of Resolutions under the meaning of the Articles of Association. a leading bus and coach service operator in Ile-de-France, Transports Daniel Meyer. With this strategic external growth transaction, Keolis reinforces its foothold in Ile-de-France and consolidates its position for future projects relating to Grand Paris
7 1. Management Report
5.1 Members of the Supervisory Board 6 • PRESENTATION OF RESOLUTIONS PROPOSED FOR ADOPTION BY At 31 December 2015, the Supervisory Board was composed SHAREHOLDERS of 7 members: 6.1 Allocation of profit ◗ Mr. Joël Lebreton, member and President of the Supervisory Board We propose to allocate the profit for the year in the following ◗ Mr. Mathias Emmerich, member of the Board manner: ◗ Mr. Eric Lachance, member of the Board ◗ Mr. Jean-Yves Leblanc, member of the Board Profit for the year 31,113,593.16 € ◗ Mr. Philippe Maystadt, member of the Board Allocation to legal reserve (1,555,679.66 €) ◗ Mr. Normand Provost, member of the Board Retained earnings for year N-1 142,613,581.34 € ◗ Mr. Laurent Trévisani, member of the Board ______Distributable profit 172,171,494.84 € Mr. Patrick Coté is a member of the Board without voting rights. Allocation to Retained earnings 172,171,494.84 €
5.2 Internal committees within the Supervisory Board In accordance with legal requirements, you are requested to note that the amount of the dividend distributed and that of the cor- The Supervisory Board is supported by four internal committees responding dividend tax credit for the previous fiscal years were which prepare the Board’s work: as follows:
◗ the Audit and Ethics Committee ◗ the Investment and Strategy Committee ◗ The Risks and Safety Committee ◗ The Remuneration and Human Resources Committee.
5.3 Group Executive Committee
Jean-Pierre Farandou, President of the Company, set up an Dividend Distributed income eligible for the allowance Distributed income not eligible for the allowance Fi n a nc ial ye r Executive Committee whose members on the date of the Assembly comprise : 2014 Nil - -
◗ Mr. Michel Lamboley, Group CEO 2013 Nil - - ◗ Mr. Thomas Barbelet, Brand and Communications Executive 2012 Nil - - Director ◗ Mr. Frédéric Baverez, CEO France ◗ Mr. Jacques Damas, Executive Director, Rail and Operations Non tax deductible expenses ◗ Mr. Bruno Danet, Group Human Resources Director We advise you that there were no non tax deductible expenses ◗ Mr. Laurent Kocher, Executive Director, Marketing, Innovation within the meaning of Articles 223 quater and 223 quinquies of & Services the General Tax Code during the past year. ◗ Mr. Bernard Tabary, CEO International ◗ Mr. Arnaud van Troeyen, Executive Vice President, Group 6.2 Agreements covered by the article L227-10 of the Strategy and Development Commercial Code
5.4 Capital and shareholdings You will be read the Statutory Auditors’ report on agreements made during the financial year and authorised by the Supervisory On 31st December 2015, the share capital was €237,888,901.80, Board pursuant to Article L227-10 of the Commercial Code. allocated as follows: We hope that you will approve the above proposals and • SNCF Participations: 69.70% consequently vote in favour of the resolutions to be submitted • CDP-IE: 30 % to you. • FCPE “GROUPE KEOLIS ACTIONNARIAT”: 0.16% • Treasury stock: 0.14% President of the Board of Directors
Employee shareholdings in the form of the FCPE “GROUPE KEOLIS ACTIONNARIAT” therefore represent 0.16% of the capital.
8 2. Consolidated financial statements
Consolidated financial 2. statements CONTENTS 5 • Notes to the consolidated statement A Key figures for the Group...... 10 of financial position...... 34 5.1 Goodwill...... 34 5.2 Other intangible assets...... 35 5.3 Property, plant and equipment ...... 36 B Consolidated financial statements. . . 11 5.4 Investments under the equity method...... 37 5.5 Current and non-current financial assets. . . . 38 1 • Income statement...... 11 5.6 Inventories...... 38 2 • Statement of comprehensive income. . .12 5.7 Trade and other receivables...... 39 3 • Statement of financial position . . . . . 13 5.8 Cash and cash equivalents...... 39 5.9 Equity...... 40 4 • Statement of changes in equity. . . . . 14 5.10 Financial debt and long term borrowings. . . . 40 5 • Statement of cash flows...... 15 5.11 Financial assets and liabilities by category . . . 43 5.12 Risk management and financial derivatives . . .44 5.13 Provisions...... 50 C Notes to the consolidated financial 5.14 Operating liabilities and other debt ...... 54 statements...... 16 6 • O ther commitments not recognised 1 • General information ...... 16 in the statement of financial position 2 • Summary of significant accounting and contractual commitments. . . . . 55 policies...... 16 7 • Dis putes ...... 56 2.1 Basis of preparation...... 16 8 • Related party transactions ...... 56 2.2 Changes in accounting principles ...... 16 8.1 Transactions with the SNCF...... 56 2.3 Use of Management estimates in the application 8.2 Transactions with joint ventures of the Group’s accounting standards...... 18 and associates ...... 56 2.4 Accounting principles...... 18 8.3 Remuneration of the Group’s key managers. . . . 56 3 • Highlights of the financial year. . . . . 29 9 • Post balance sheet events...... 56 4 • N otes to the consolidated income 10 • Consolidation scope ...... 57 statement...... 30 10.1 Subsidiaries...... 57 4.1 Staff costs ...... 30 10.2 Joint Ventures and associates...... 64 4.2 Other operating income ...... 30 4.3 Operating profit...... 30 Statutory auditors’ report on the 4.4 EBITDA calculation ...... 31 consolidated financial statements...... 65 4.5 Financial income / (expense)...... 31 4.6 Share in net profit for the year from investments under the equity method...... 31 4.7 Taxation...... 32
9 2. Consolidated financial statements
A Key figures for the Group
(€ million) 31/12/2015 31/12/2014
Revenue 5,002.5 4,459.1 ◗ Revenue France 2,810.3 2,785.7 ◗ Revenue International 2,192.1 1,673.4 Revenue net of sub-contracting 4,818.2 4,272.6 Recurring EBITDA 4.4 296.2 277.8 EBITDA 4.4 274.6 250.9 Recurring operating profit 4.3 91.0 104.7 Operating profit before investments under equity method 51.4 52.7 Operating profit after investments under equity method 73.8 68.7 Profit after tax from continuing operations 26.0 27.8 Profit attributable to equity shareholders 33.3 26.0 Total equity 1,024.7 994.4 of which attributable to equity shareholders 972.9 973.4 Net cash flows from operating activities 201.8 247.3 Industrial investments 237.2 209.9 Net financial debt (cash surplus)(1) 791.3 607.7
(1) Surplus cash positions are presented in brackets.
10 2. Consolidated financial statements
B Consolidated financial statements 1 • Income statement
(€ million) Note 31/12/2015 31/12/2014
Revenue 5,002.5 4,459.1 Other income from operations 19.3 26.1 Income from continuing operations 5,021.7 4,485.2 Sub-contracting (184.2) (186.5) Purchases consumed and external expenses (1,641.8) (1,489.6) Taxes (17.4) (15.2) Staff costs, incentive schemes, profit-sharing 4.1 (2,891.0) (2,529.1) Other operating income 4.2 50.2 50.3 Other operating expense (31.9) (22.2) Net provisions on current assets (0.1) (4.6) Net depreciation and other provisions charged (221.7) (190.2) Profit/(loss) on recurring fixed asset disposals 0.9 1.1 Amortisation of grants received 6.3 5.5 Recurring operating profit 91.0 104.7 Other non-recurring income 4.3 7.4 6.6 Other non-recurring expense 4.3 (26.0) (30.5) Depreciation and provisions on contractual rights 4.3 (21.0) (28.1) Of which depreciation of other intangible assets and negative Goodwill 5.7 (5.3) Operating profit/loss before investments under equity method 51.4 52.7 Profit/(loss) from associates 22.4 16.0 Operating profit/(loss) after investments under equity method 73.8 68.7 Net cost of financial borrowing 4.5 (18.1) (18.6) Other financial income 4.5 7.3 7.5 Other financial expense 4.5 (19.0) (18.2) Financial income (expense) (29.8) (29.3) Profit before tax 44.0 39.4 Taxation 4.7 (18.0) (11.6) Profit after tax from continuing operations 26.0 27.8 Profit for the year 26.0 27.8 Profit attributable to non-controlling interests 7.3 (1.8) Profit attributable to Group 33.3 26.0
11 2. Consolidated financial statements
2 • Statement of comprehensive income
(€ million) 31/12/2015 31/12/2014
Profit for the year 26.0 27.8 Actuarial gains and losses on defined benefit pension schemes (0.8) (14.2) Tax on actuarial gains and losses on defined benefit pension schemes 0.2 4.9 Share of other items in comprehensive income of investments under equity method 13.0 8.4 Items that will not be reclassified to profit or loss 12.4 (1.0) Translation differences and others 1.2 5.3 Unrealised gains and losses on financial hedging instruments 0.3 (10.6) Tax on items that may be reclassified to profit or loss (0.1) 3.7 Items that may be reclassified to profit or loss 1.4 (1.7) Total gains and losses recognised directly in equity 13.7 (2.7) Total comprehensive income for the year 39.7 25.1 of which attributable to : - Equity shareholders 47.0 22.6 - Non-controlling interests (7.3) 2.4
12 2. Consolidated financial statements
3 • Statement of financial position
Assets Note 31/12/2015 31/12/2014 (€ million) Goodwill 5.1 1,139.6 1,105.1 Other intangible assets 5.2 533.9 489.9 Property, plant and equipment 5.3 891.8 806.3 Investments under the equity method 5.4 35.1 32.5 Non-current financial assets 5.5 171.1 147.7 Deferred tax asset 4.7 84.6 79.9 Non-current assets 2,856.2 2,661.3 Inventories and work in progress 5.6 82.0 78.0 Trade receivables 5.7 426.4 391.5 Other receivables 5.7 348.8 310.5 Current financial assets 5.5 19.4 19.7 Cash and cash equivalents 5.8 312.7 294.6 Current assets 1,189.2 1,094.3 TOTAL ASSETS 4,045.4 3,755.7
Liabilities Note 31/12/2015 31/12/2014 (€ million) Share capital 5.9 237.9 237.9 Reserves and premiums 5.9 701.6 709.5 Net profit/(loss) attributable to Group 5.9 33.3 26.0 Equity attributable to Group 972.9 973.4 Reserves attributable to non-controlling interests 59.1 19.2 Profit for the year attributable to non-controlling interests (7.3) 1.8 Equity 1,024.7 994.4 Non-current provisions 5.13 196.4 182.1 Non-current financial debt 5.10 881.1 653.1 Deferred tax liability 4.7 177.5 153.8 Non-current liabilities 1,255.1 989.0 Current provisions 5.13 55.6 52.4 Current financial debt 5.10 78.8 181.0 Bank borrowings 5.8 189.9 117.7 Trade payables and other liabilities 5.14 1,441.3 1,421.1 Current liabilities 1,765.6 1,772.2 TOTAL LIABILITIES 4,045.4 3,755.7
13 2. Consolidated financial statements
4 • Statement of changes in equity RESERVES AND OTHER Items that may be reclassified to profit
or loss
(€ million)
Share capital Share Reserves Translation differences Other unrecognised gains / (losses), net gains /Other unrealised to(losses), net, not re-classifiable or loss profit Sub-total equity Total AT 31 DECEMBER 2013 237.9 753.3 (14.8) 2.1 (12.2) 728.4 966.3 Attributable to GROUPE KEOLIS S.A.S. shareholders 237.9 740.4 (15.5) 2.1 (12.1) 714.9 952.8 Attributable to minority shareholders in subsidiaries - 12.8 0.7 - - 13.5 13.5 Dividends paid to GROUPE KEOLIS S.A.S. shareholders ------Change in GROUPE KEOLIS SAS shareholdings in its subsidiaries without losing control - (2.0) - - - (2.0) (2.0) OPERATIONS ATTRIBUTABLE TO GROUPE KEOLIS S.A.S. SHAREHOLDERS (A) - (2.0) - - - (2.0) (2.0) Dividends paid to minority shareholders in subsidiaries - (0.6) - - - (0.6) (0.6) Change in shareholdings in subsidiaries related to gaining / losing control ------Change in shareholdings in subsidiaries without gaining/losing control - 5.7 - - - 5.7 5.7 OPERATIONS ATTRIBUTABLE TO MINORITY SHAREHOLDERS IN SUBSIDIARIES (B) - 5.1 - - - 5.1 5.1 Profit for the year - 27.8 - - - 27.8 27.8 Requalification of non-classifiable reserves related to mergers - (2.8) - - 2.8 - - Gains / (losses) recognised directly in equity - - 5.3 (7.0) (1.0) (2.7) (2.7) COMPREHENSIVE INCOME (C) - 25.0 5.3 (7.0) 1.8 25.1 25.1 CHANGE IN THE YEAR (A+B+C) - 28.1 5.3 (7.0) 1.8 28.1 28.1 Attributable to GROUPE KEOLIS S.A.S. shareholders - 23.9 4.6 (7.0) 1.8 23.4 23.4 Attributable to minority shareholders in subsidiaries - 6.9 0.7 - - 7.6 7.6 AT 31 DECEMBER 2014 237.9 781.3 (9.6) (4.9) (10.4) 756.5 994.4 Attributable to GROUPE KEOLIS S.A.S. shareholders 237.9 761.6 (10.9) (4.9) (10.3) 735.5 973.4 Attributable to minority shareholders in subsidiaries - 19.8 1.3 - (0.1) 21.0 21.0 Dividends paid to GROUPE KEOLIS S.A.S. shareholders - (50.0) - - - (50.0) (50.0) Other changes (including effects of application of IFRIC 21) - 2.5 - - - 2.5 2.5 OPERATIONS ATTRIBUTABLE TO GROUPE KEOLIS S.A.S. SHAREHOLDERS (A) - (47.5) - - - (47.5) (47.5) Dividends paid to minority shareholders in subsidiaries - (0.8) - - - (0.8) (0.8) Change in shareholdings in subsidiaries related to gaining / losing control ------Change in shareholdings in subsidiaries without gaining/ losing control - 38.9 - - - 38.9 38.9 OPERATIONS ATTRIBUTABLE TO MINORITY SHAREHOLDERS IN SUBSIDIARIES (B) - 38.1 - - - 38.1 38.1 Profit for the year - 26.0 - - - 26.0 26.0 Gains / (losses) recognised directly in equity - - 1.2 0.2 12.4 13.7 13.7 COMPREHENSIVE INCOME (C) - 26.0 1.2 0.2 12.4 39.7 39.7 CHANGE IN THE YEAR (A+B+C) - 16.6 1.2 0.2 12.4 30.3 30.3 Attributable to GROUPE KEOLIS S.A.S. shareholders - (14.2) 1.2 0.2 12.4 (0.5) (0.5) Attributable to minority shareholders in subsidiaries - 30.8 - - - 30.8 30.8 AT 31 DECEMBER 2014 237.9 797.9 (8.4) (4.7) 2.0 786.8 1,024.7 Attributable to GROUPE KEOLIS S.A.S. shareholders 237.9 747.3 (9.7) (4.7) 2.1 735.0 972.9 Attributable to minority shareholders in subsidiaries - 50.6 1.3 - - 51.9 51.9
14 2. Consolidated financial statements
5 • Statement of cash flows
(€ million) Note 31/12/2015 31/12/2014
Operating profit before investments under equity method 4.3 51.4 52.7 Non-cash items 4.4 223.2 198.3 EBITDA 4.4 274.6 250.9 Elimination of provisions on current assets 0.1 4.6 Changes in working capital (25.5) 13.5 Tax paid (47.3) (21.8) A) Net cash from operating activities 201.8 247.3 Capital expenditure (237.2) (209.9) Proceeds from the sale of tangible and intangible assets 37.3 34.4 Investment grants received 8.1 2.5 Change in financial assets for concessions (IFRIC 12) (14.2) (19.1) Financial investments (133.1) (86.0) Proceeds from disposal of financial assets 6.4 11.0 Cash flows on changes in reporting scope 4.9 27.2 B) Net cash from investing activities (327.8) (239.9) Free cash flow (126.0) 7.4 Net dividends paid (51.0) (1.0) Net dividends received 32.2 13.4 Change in equity (other transactions with shareholders) 38.7 13.0 New borrowings 243.8 104.3 Borrowings repaid (167.2) (130.2) Interest received 0.7 1.2 Interest paid (19.1) (19.6) Change in other financial debts 0.2 0.4 Other (7.9) (10.2) C) Net cash from financing activities 70.4 (28.8) D) Foreign exchange translation differences 1.5 3.0 Change in cash and cash equivalents (A+B+C+D) (54.2) (18.4) Cash and cash equivalents at beginning of period 5.8 176.9 195.3 Cash and cash equivalents at end of period 5.8 122.8 176.9 Change in cash and cash equivalents (54.2) (18.4)
15 2. Consolidated financial statements
C Notes to the consolidated financial statements
1 • General information 2.2 Changes in accounting principles
The activity of GROUPE KEOLIS S.A.S. and its subsidiaries (“the Application of standards, amended standards and Group”) is multimodal passenger transport through Keolis and car interpretations that are mandatory as of 1st January 2015 parking through the EFFIA Group. The Group operates in 9 European countries, in Canada, Australia, the United States and • IFRIC 21 “Levies” India as a licensed public service operator within public-private IFRIC Interpretation 21 “Levies” identifies the “obligating event”, contracts. on the liability side of the balance sheet, which triggers taxes that fall within the scope of application of IAS 37 “Provisions, Contingent GROUPE KEOLIS S.A.S., the Group’s holding company, is a Liabilities and Contingent Assets”. Taxes are outflows of resources simplified joint stock company (société par actions simplifiée) that represent economic benefits imposed by public authorities registered and domiciled in France, with its registered office loca- by virtue of the laws or regulations. ted at 20/22, rue le Peletier, 75320 Paris Cedex 09. However, the scope of application of this interpretation excludes The consolidated financial statements of GROUPE KEOLIS S.A.S. outflows of resources referred to in IAS 12 “Income Taxes”, fines as at 31 December 2015 were approved by the Executive Board and penalties imposed for non-compliance with the laws and on 9 February 2016 and presented to the Supervisory Board on regulations in effect, and payments made by the entity in the fra- 18 February 2016. mework of a contractual agreement with a public authority on the acquisition of an asset or the performance of a service. The financial statements of GROUPE KEOLIS S.A.S. are fully consolidated into those of SNCF. IFRIC Interpretation 21 requires the recognition of the liability according to the due dates of the taxes and not their related commitments. The application of this interpretation within the 2 • Summary of significant Group has led solely to changes in the timing of recognition and accounting policies to the annual period used to calculate the tax related to the “cor- porate social solidarity contribution” (C3S) in effect in France, 2.1 Basis of preparation which had in the past been recognized on a proportional basis in The Group’s consolidated financial statements for the reporting each interim period in accordance with turnover for the current period ending 31 December 2015 have been prepared in accor- period. Henceforth, it is posted on the date of the event that trig- dance with IFRS (standards and interpretations) published by gers the tax payment obligation, i.e. 1 January, in accordance with IASB as adopted by the European Union and rendered manda- the turnover of the prior calendar year. tory from 1st January 2015. They are available at this site: http://ec.europa.eu/internal_market/accounting/ias/index_fr.htm The impact of the application of the interpretation results in impro- ved shareholders’ equity as at 1 January 2014 in the amount of The consolidated financial statements are presented in millions €2.3 million. But, the impact on the 2014 profit and loss statement of euros unless otherwise indicated. is not significant. As the impact is not material, this improvement In the absence of borrowing or equity instruments traded on a in shareholders’ equity was recognized at the start of the 2015 regulated market, the Group chose not to publish information on financial year. earnings per share (IAS 33), or information about operating seg- ments (IFRS 8). The application of IFRIC 21 at the end of December 2015 led to a restatement of the CS3 expense posted at the end of 2014 in The assets and liabilities in the Group’s consolidated financial the amount of €3.5 million, with a tax due date on 1 January 2015. statements are measured and recognised according to various The expense related to this tax without applying IFRIC 21 would measurement bases authorised by IFRS, primarily the historical have been €1.8 million taking account of the tax authorities’ cost basis of accounting, with the exception of derivative finan- changes to the valuation methods for the 2016 fiscal year. cial instruments and financial assets held for trading purposes or classified as AFS (available for sale), which are measured at • Annual Improvements to IFRSs 2011-2013 Cycle fair value. The annual Improvements to the IFRSs 2011-2013 Cycle apply to financial years beginning on or after 1 July 2014 and mainly relate to IFRS 3 “Business Combinations” and IFRS 13 “Fair Value Measurement”. IFRS 3 has been amended so as to exclude the creation of all types of joint arrangements, as defined in IFRS 11
16 2. Consolidated financial statements
“Joint Arrangements”, i.e. joint ventures and joint operations, from nation for the expression “elsewhere in the interim financial report”. its scope of application. With regard to IFRS 13, it now exceptio- nally allows for fair value to be measured not only for a series of • Amendments to IAS 1: “Presentation of Financial Statements” financial assets and liabilities on a net basis, but also for the mea- The amendments applicable to the annual periods starting on or surement of the fair value of all contracts that fall under IAS 39 after 1 January 2016 stipulate that the application of the materia- “Financial Instruments: Recognition and Measurement”, even if lity concept applies to financial statements, including the they do not comply with the definition of financial assets and lia- appended notes to improve their understandability, and that pro- bilities under IAS 32 “Financial Instruments: Presentation”. fessional judgement is to be used more broadly in the information on accounting methods included in the notes. These improvements have no impact on the presentation of the last financial year. • Amendments to IAS 16: “Property, Plant and Equipment” and IAS 38 “Intangible Assets” Standards, amendments to standards and interpretations The amendments applicable to the annual periods starting on or not subject to early application after 1 January 2016 indicate that the use of the revenue based In general, the Group does not apply in advance the standards depreciation methods are not appropriate. and interpretations adopted by the European Union that apply to annual periods that start before 1 January 2015. • Limited amendments to IAS 19 “Employee Benefits” The Group has not applied the standards, annual improvements, The amendments applicable to the annual periods starting on or amendments to standards and interpretations that have not been after 1 February 2015 clarify and simplify the recognition of contri- adopted by the European Union. butions, which do not depend on the employee’s number of years of service to the employer, as a reduction in the service cost in the • Annual Improvements to IFRSs 2010-2012 Cycle period in which the service is rendered instead of being allocated The amendments applicable to the annual periods starting on or across the period of service. after 1 February 2015 relate to IFRS 2 “Share-Based Payment”, which defines a performance condition and a service condition; • Amendments to IAS 27 “Equity Method in Separate Financial IFRS 3 “Business Combinations”, which provides details on the Statements” recognition of potential consideration; IFRS 8 “Operating The amendments applicable to the annual periods starting on or Segments” (not published by the Group); IFRS 13 “Fair Value after 1 January 2016 allow for the use of the equity method as Measurement”, which explains the reasons for the elimination of described in IAS 28 “Investments in Associates and Joint the paragraphs related to the valuation of short-term receivables Ventures” and no longer according to IFRS 9 “Financial and payables, with no stated interest rate on the invoice amounts; Instruments” to measure investments in subsidiaries, associates IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible and joint ventures in the separate financial statements. Assets”, which indicate that accumulated depreciation is calcula- ted on the difference between the gross amount and the net • Amendments to IFRS 11 “Joint Arrangements” amount accounted for; and IAS 24 “Related Party Disclosures”, The amendments applicable to the annual periods starting on or which stipulates that the reporting entity is exempted from the after 1 January 2016 describe the method to recognize acquisi- obligation to report the amount of the remuneration paid to top tions of interests in a joint operation whose operations constitute executives, but it must indicate the amount of fees paid to service a business within the meaning of IFRS 3 “Business Combinations”. provider entities. Standards applicable after 2015 and not yet approved by • Annual Improvements to IFRSs 2012-2014 Cycle the EU Amendments that apply to the annual periods starting on or after The Group does not apply the following texts that did not apply in 1 January 2016 relate to IFRS 5 “Non-Current Assets Held for Sale 2015 but should become mandatory in the future: and Discontinued Operations” with a view to include therein the - IFRS 15 – Revenues from Contracts with Customers (published assets held for distribution to the owners; IFRS 7 “Financial in May 2014). This standard will replace IAS 18 “Revenue” and Instruments: Disclosures”, with regard to the continuing involve- IAS 11 “Construction Contracts”. The application of this standard ment in a transferred asset via a service agreement and the lack should become mandatory for the 2018 and ensuing annual of information on the offsetting of financial assets and financial periods, subject to being adopted by the European Union. liabilities in condensed interim financial statements; IAS 19 - IFRS 9 – Financial Instruments (published in July 2014). This text “Employee Benefits” clarifying that the discount rate should be relates to the classification and valuation of financial instruments, applied no longer at country level but according to the currency; the deprecation of financial assets and hedge accounting. This and IAS 34 “Interim Financial Reporting”, which provides an expla- standard will replace IAS 39 “Financial Instruments”; it should
17 2. Consolidated financial statements
become mandatory for the 2018 and ensuing annual periods, control, account is taken of the established rules of governance and subject to being adopted by the European Union. the rights held by the other shareholders in order to ensure that they The Group is examining these standards in order to determine are merely protective in nature. Potential voting rights, whether their impact on the consolidated financial statements, as well as immediately exercisable or convertible, including those held by their practical consequences. another entity, are also analysed to determine those conferring substantive rights in the assessment of power, in accordance with 2.3 Use of Management estimates in the application of IFRS 10 “Consolidated Financial Statements”. the Group’s accounting standards In order to draw up the Group’s accounts in accordance with Structured entities substantially controlled by the Group are fully IAS 8 - Accounting Policies, Changes in Accounting Estimates consolidated. and Errors, management must make estimates and assump- tions affecting the amounts stated in the financial statements. Associates and joint ventures consolidated under the equity Management has to revise such estimates in the light of changes method in the circumstances on which they are based or further to new Entities in which the Group exerts significant influence without information. Management also has to exercise judgement in how exercising control are associates. Significant influence is presu- accounting methods are applied. As a result, future estimates med when the Group holds upwards of 20% of the voting rights. may be different from those adopted as of 31 December 2015. Under the equity method, investments in associates or joint ventures The estimates and assumptions primarily concern the lengths of are capitalised in the consolidated balance sheet at their cost of contractual relations, asset impairment tests, deferred tax assets acquisition. The Group’s share of income (loss) of associates or joint and financial instruments, as well as provisions, in particular ventures is recognised in profit or loss, whereas its share of post- provisions for pensions, litigation and losses on contracts and acquisition movements in reserves is recognised in reserves. Post- recognition of amounts to be received and penalties to be paid acquisition movements are posted in adjustment to the value of the arising from contractual relationships. investment. The Group’s share of an associate’s or a joint venture’s losses is recognised up to the limit of the carrying amount of the Finally, in the absence of standards or interpretations applicable investment as well as any possible long-term share. Additional to a specific transaction, Group management must use its best losses are not booked as provisions, unless the Group is legally or judgement to define and implement accounting methods that implicitly required to support the said associate or joint venture. provide the most relevant and reliable information, to ensure that the financial statements: Non-controlling investments ◗ present a true and fair view of the Group’s financial position and A non-controlling investment is the share of interest in a subsi- cash flows; diary which is not directly attributable to the parent company. ◗ reflect the economic reality of the accounts. Non-controlling investments are recognised at fair value on the takeover date. 2.4 Accounting principles 2.4.1 Methods of consolidation Year-end closing timing differences Subsidiaries are recognised in the consolidated statements from For companies whose financial year does not end on 31st the date on which control thereof reverted to the Group. They December, interim financial statements as at 31st December are are derecognised from the date on which the Group ceased to established. control them. The income and expenses of the companies are included in the Group’s income statement from the date that Transactions eliminated in the consolidated financial control was taken, up to the date on which the Group lost statements control. Transactions between consolidated companies which have an impact on their balance sheet or income statement are elimina- Fully-consolidated subsidiaries ted. Losses on transactions between consolidated companies All the Group’s subsidiaries are companies it exclusively controls that are indicative of value impairment are not eliminated. IAS 12 directly or indirectly. The Group’s consolidated financial statements “Income Taxes” applies to temporary differences resulting from include the assets, liabilities, income and expenses of these com- the elimination of profits and losses on intra-group transactions. panies. 2.4.2 Translation of transactions and financial statements Exclusive control exists when GROUPE KEOLIS S.A.S. has power of foreign companies over the entity, is exposed or has rights to variable returns, and has The Group’s consolidated financial statements are prepared in the ability to affect those returns. In ascertaining whether there is euros, which is the functional and reporting currency of the parent.
18 2. Consolidated financial statements
Translation of the financial statements of foreign companies Adjustments to the cash consideration during the twelve months The financial statements of consolidated foreign subsidiaries, after the date of acquisition must be analysed in order to deter- whose functional currency is different from the euro, are transla- mine: ted on the following bases: ◗ if the adjustment is linked to new factors occurring since the ◗ assets and liabilities are translated at the official exchange rates acquisition of control: counterpart in profit for the year; prevailing at the year-end date; ◗ if the adjustment is the result of new information collected ◗ income and expenses are translated at the average rate for the enabling fine-tuning of the valuation on the takeover date: period, unless exchange rates fluctuate significantly; counterparty in goodwill. ◗ goodwill and fair value adjustments recognised on the acqui- sition of companies whose functional currency is not the euro The subsequent change of debt corresponding to additional are considered to be the assets and liabilities of such compa- consideration beyond the twelve month period is booked in profit nies: they are thus stated in the functional currency of the said for the year. companies and converted at the closing rate of each period; ◗ the resulting foreign exchange translation differences are reco- After the acquisition of control, purchases/disposals without loss gnised in consolidated equity under the item “foreign exchange of control are treated as transactions between shareholders and translation reserves”. therefore directly through equity.
Translation of foreign currency transactions 2.4.4 Goodwill The functional currency of Group companies is their local cur- Goodwill on acquisition represents the excess of the cost of an rency. Transactions denominated in foreign currency are trans- acquisition over the share acquired by the Group of the fair value lated by the subsidiaries into their functional currency at the rate of the acquired assets and liabilities of the acquired entity on the of exchange prevailing at the transaction date. date of acquisition.
Monetary assets and liabilities denominated in foreign currency The goodwill recognised for an associate is included in the value are translated into euros at the last official year-end exchange of the capital holding in it under “Investments under the equity rate. The corresponding exchange differences are recorded in method”, in the statement of financial position. financial income (expense). Corrections or adjustments may be made to the fair value of 2.4.3 Business combinations assets, liabilities and contingent liabilities acquired in the twelve The Group has applied IFRS 3 (Revised) since 1st January 2010. months following the acquisition, when new information arises A business combination is understood to involve the obtaining affecting facts and circumstances which were in evidence at this or losing of control. Upon acquisition of a controlling interest, the date of acquisition. Goodwill is then corrected with retroactive acquirer recognises the fair value of the acquired assets and effect. Beyond that date, any change in assets acquired and liabilities of the acquired entity and also assesses the goodwill or liabilities assumed is recognised in the income statement. If the profit from them. information is a result of events occurring after the date of acqui- sition, they are recognised in profit for the year. Non-controlling interests are recognised according to the fol- lowing options for each combination: As goodwill cannot be amortized, it undergoes impairment tests ◗ either based on their share in the fair value of the assets and every year or at more frequent intervals when events or changes liabilities acquired (the so-called partial goodwill method); in circumstances indicate possible loss in value (see 2.4.9). ◗ or at fair value of the shareholding (the so-called complete Goodwill is allocated to cash generating units or groups thereof goodwill method). which are likely to benefit from synergies resulting from aggre- gation as described in note 2.4.9. Acquisition costs are expensed in the year. Negative goodwill is recognised in the income statement on the For a takeover in several stages, the investment held prior to the date of acquisition. establishment of control is revalued at its fair value on the date of takeover and any profit or loss arising therefrom is recognised 2.4.5 Commitments to repurchase the non-controlling under operational profit or loss after gains or losses from disposals. interests in a subsidiary The Group has given promises to non-controlling shareholders Commitments linked to earn-out clauses are measured at their of certain fully consolidated subsidiaries to repurchase their fair value on the acquisition date. shares.
19 2. Consolidated financial statements
These purchase commitments (firm or conditional) of non- an unconditional right to receive cash or other financial asset, controlling interests do not transfer risks and benefits. They are either directly or indirectly through guarantees given by the recognised in financial debts against a reduction of these ear- grantor on the amount of cash payments from the public nings attributable to non-controlling interests. service. The remuneration is independent of the extent to which the public uses the infrastructure. Where the value of the commitment exceeds the amount of earnings attributable to non-controlling interests the balance is Where the service is provided using infrastructure rented from recognised in equity attributable to Group shareholders. a third party and controlled by the grantor, the Group has reco- gnised payments of fixed and variable fees in the IFRIC 12 The fair value of non-controlling interest buyout commitments is asset valuation. reviewed at each financial accounting period end. The change in the corresponding financial liability is booked against equity. Financial asset model This provision applies to commitments to purchase non-control- In service concessions, the operator receives an unconditional ling interests issued after the application date of revised IFRS 3, right if the grantor gives it a contractual guarantee to pay: i.e. 1st January 2010. ◗ amounts specified or determined in the contract; or ◗ the shortfall, if any – between the amount received from users For those issued before that date, the change in valuation will be of the public service and specified or determinable amounts in booked against the associated goodwill. the contract.
2.4.6 Service concession arrangements Financial assets stemming from the application of the IFRIC 12 interpretation are recorded in the statement of financial position Presentation of the IFRIC 12 interpretation under “Non-current financial assets” detailed in Note 5.5. They An arrangement is included in the scope of interpretation of are recognised at amortised cost and repaid according to the IFRIC 12, where the assets used to carry out the public service rents collected. are controlled by the grantor. Control is presumed when the two conditions below are met: The financial income, calculated on the basis of the effective rate ◗ the grantor controls or regulates the public service, i.e. it of interest, the equivalent of the project’s internal rate of return, controls or regulates the services that must be rendered, is recognised as revenue. through the infrastructure covered by the concession and determines to whom and at what price the service shall be Intangible asset model rendered; and The intangible asset model applies where the operator is paid ◗ the grantor controls the infrastructure on termination of the by users or does not receive any contractual guarantee from the contract, i.e. it has the right to regain possession of the infras- grantor on the amount to be collected. The intangible asset tructure at the end of the contract. corresponds to the right granted by the grantor to the operator to charge users for the public service. In its public transport activities, the Group is in particular the holder of outsourced public service contracts. Intangible assets resulting from the application of the IFRIC 12 interpretation are booked in the statement of financial position In France, the Group operates outsourced public service under the heading “Other intangible fixed assets” detailed in contracts, mainly in the form of operate and maintain (O&M) Note 5.2. These assets are amortised straight-line over the term contracts whereby the operator is responsible for operating of the contract. and maintaining facilities owned and funded by local and regio- nal authorities – public transport authorities (PTAs). Within the framework of the intangible asset model, revenues include: Pursuant to the interpretation of IFRIC 12, in this case, the ◗ Turnover as and when assets or infrastructures under construc- operator cannot include the infrastructure controlled by the tion are completed; grantor in its balance sheet as tangible assets, but either as an ◗ Remuneration relating to the provision of services. intangible asset (“intangible asset model”) and/ or as a financial asset (“financial asset model”): Mixed or bifurcation model ◗ the “intangible asset model” applies where the operator Application of the financial asset model or the intangible asset receives a right to charge users for the public service and thus model is based on the existence of guarantees of payment given bears a financial risk; by the grantor. ◗ the “financial asset model” applies where the operator obtains
20 2. Consolidated financial statements
However, certain contracts may include a payment commitment purchase or production cost and all the costs directly incurred from the grantor which partially covers the investment, with the in making it usable. balance covered through fees charged to users. Items of property, plant and equipment cease to be recognised In this case, the amount guaranteed by the grantor is recognised as assets when they are derecognised (through disposal or as a financial asset and the balance as an intangible asset. retirement), or when no future economic benefit is expected from their use or disposal. Any gain or loss arising from the dereco- 2.4.7 Intangible assets excluding goodwill gnition of an asset from the statement of financial position (the Intangible assets are shown in the statement of financial position difference between the net income from disposal and the asset’s at their acquisition cost less the accumulated amortisation and carrying amount) is recognised in the income statement in the impairments. period of its retirement.
Intangible assets mainly consist of patents, licences, trademarks, Given the nature of the Group’s business, the activities of the rights under contracts, pension plan assets, software and service different subsidiaries or joint ventures do not include holding concession intangible assets as defined by IFRIC 12. investment property assets.
When contracts are awarded, the Group capitalises the costs that Subsequent expenditure match the identification criteria, and that are incurred between the Subsequent expenditure incurred in replacing property, plant or date when the contract is awarded and the date when the ope- equipment is recognised under PPE only if it satisfies the fore- ration actually starts up. going general criteria and qualifies as components.
When the Group completes an acquisition, the contractual rela- Otherwise, this expenditure is recognised in the income state- tionship between the acquired company and its client (the public ment as incurred. transport authority) is assessed at fair value and recognised sepa- Through its public passenger transport activity, the Group incurs rately from the goodwill as a contractual right satisfying the qua- multiyear expenditure on heavy maintenance and major servicing lifying criteria of IAS 38 and IFRS 3. operations on its light rail (underground railway, tramway) and passenger rail rolling stock. These are capitalised as assets as a Where their useful life is defined, intangible assets are amortised component overhaul, which is subsequently depreciated. on a straight-line basis over periods corresponding to their expec- Furthermore, expenditure which relates to refurbishments or ted useful life. The amortisation method and useful lives are revised leads to an increase in productive capacity and modifications at least each financial year or when necessary. The estimated bringing new functionality or that extend lifespans are contribu- useful lives are as follows: tions that can be qualified as operator assets. ◗ trademarks: between five and fifteen years; ◗ contractual rights: two to twenty years, corresponding to their Depreciation estimated useful life, allowing for a contract renewal rate when The residual values and useful lives of the assets are reviewed the Group has a high renewal rate in the Cash Generating Unit and, where applicable, adjusted, annually or whenever lasting (CGU) concerned; changes arise in operating conditions. ◗ software: one to five years; To date, the residual values at the end of the useful life are ◗ service concession assets amortised over the term of the regarded as immaterial. contract (see 2.4.6). Land is not depreciated. Other property, plant and equipment items are depreciated using the straight line method. The esti- 2.4.8 Property, plant and equipment mated useful lives are as follows: Expenditure on property, plant and equipment by the Group is Buildings 15 - 20 years recognised as an asset at its acquisition cost where it satisfies Equipment and tooling the following criteria: 5 - 10 years ◗ it is likely that the future economic benefits relating to the asset Office equipment and furniture 5 - 10 years will fall to the Group; Vehicles: ◗ the cost of the asset can be reliably measured. Cars 5 years Property, plant and equipment are shown in the statement of Coaches and buses 10 - 15 years financial position at their acquisition cost less the accumulated Rolling stock 15 - 30 years depreciation and impairments. The cost includes the asset’s
21 2. Consolidated financial statements
Lease agreements groups. Such units or groups of units correspond to activities As part of its various operations, the Group uses assets made in France and, internationally are mainly classed by country. available through lease agreements. These lease agreements are the subject of an analysis based on For testing purposes, the assets are aggregated within CGUs the situations described and indicators provided in IAS 17 in in accordance with IAS 36 “Impairment of Assets”. order to determine whether they are operating lease agreements or finance leases. These tests compare the net carrying amount of assets with Finance leases are agreements that transfer almost all of the risks their recoverable amount, which is the higher of the fair value and benefits of the relevant asset to the lessee. All the lease less the potential sales costs or the value in use of the asset. In agreements that do not comply with the definition of a finance the absence of any fair value observable on an organised lease are classified as operating lease agreements. market, the recoverable value of the CGUs is determined on the The main indicators examined by the Group to assess whether basis of their value in use. a lease agreement transfers almost all of the risks and benefits are as follows: the existence of an automatic ownership transfer The carrying amount of each asset group tested was compared clause or a transfer option; the conditions under which this with its value in use defined as the sum of the net cash flows clause may be exercised; a comparison between the length of arising from the latest forecasts for each of the CGUs, drawn the lease and the estimated life of the asset; the uniqueness of up using the main assumptions and procedures set out below: the asset used, and a comparison of the present value of the ◗ medium-term plan and budgets over a 5-year timeframe, minimum payments under the agreement with the fair value of drawn up by Management on the basis of growth and profi- the asset. tability assumptions taking account of past performance, foreseeable developments in the economic environment and Recognition of finance leases the expected development of markets; At the point of initial recognition the assets treated as finance ◗ extrapolation of the net cash flow of the last year or the ave- leases are posted as tangible assets, with a corresponding finan- rage of cash flows over the five previous years by applying the cial debt. The asset is recognized at the fair value of the asset at growth assumptions stated in note 5.1; the start of the lease or, if it is lower, the present value of the ◗ discounted future value of the cash flows arising from these minimum payments under the lease. plans at a rate determined using the weighted average cost of capital (WACC) of the Group. Recognition of operating leases Payments made under operating lease agreements are reco- Value impairment is recognised in the income statement, under gnised as expenses in the income statement. other non-recurring expense, if the carrying amount of a cash- generating unit or group of such units is greater than its reco- Government investment grants verable amount. The value impairment is allocated first to the Government grants wholly or partly covering the cost of inves- goodwill apportioned to the CGU or CGU group tested, then to ting in an asset are recognised as “Trade payables and other the other assets of the CGU or CGU group in proportion to their liabilities” and systematically written down in the income state- carrying amount. ment over the useful lives of the assets concerned. This allocation must not result in the carrying amount of an 2.4.9 Impairment of capitalised assets and non-financial individual asset being lower than its fair value, value in use or assets zero. The Group performs systematic impairment tests annually (or more frequently where value impairment is indicated) of good- Impairment losses allocated to acquisition goodwill cannot be will and other intangible assets that have indefinite useful lives, reversed, unlike the impairment losses of other property, plant and therefore cannot be depreciated. and equipment and intangible assets.
For property, plant and equipment, and intangible assets with In the event of an impairment loss being reversed, the asset’s finite useful lives, which are therefore depreciated or amortised, carrying amount is capped at the carrying amount, net of any an impairment test is only conducted where impairment is indi- depreciation or amortisation without taking into account any cated. value impairment recognised in prior periods. When an impair- ment loss or a reversal of an impairment loss has been reco- Cash Generating Units (CGUs) are the smallest group of assets gnised, the depreciation charge is adjusted for future periods generating cash flows largely independently of other asset so that the adjusted carrying amount of the asset, less its resi-
22 2. Consolidated financial statements
dual value, if any, is spread systematically over the remaining indication of impairment of these assets, any changes in fair useful life. value that have been recognised directly in equity are transferred to the income statement. 2.4.10 Financial assets Purchases and sales of financial assets are accounted for at their For listed securities, fair value is equal to market price; for unlisted transaction date, the date on which the Group is committed to the securities, reference is made to recent arm’s-length transactions purchase or sale of the asset. On initial recognition, financial assets made between informed and willing parties, or to a technical are recognised in the statement of financial position at fair value measurement based on reliable, objective information consistent plus the transaction costs directly attributable to the acquisition or with the other estimates used by other market operators or using issue of the asset (except for the category of financial assets mea- discounted cash flow analysis. However, when the fair value of sured at fair value, for which transaction costs are recognised a security cannot reasonably be estimated, in the last resort it is directly in the income statement). carried at historical cost. Financial assets are derecognised from the statement of financial position to the extent that entitlements to future cash flows have This category consists mainly of non-consolidated shareholdings. expired or have been transferred to a third party, and the Group has transferred virtually all the risks and benefits or the control of Impairment of financial assets such assets. Financial assets, the maturity (or intended holding Impairment is recognised on a financial asset or group of financial period) of which exceeds one year, are recognised under “Non- assets where there is an objective indication of impairment arising current financial assets”. from one or more events that have occurred since the initial reco- On the date of initial recognition, according to the purpose for gnition of the asset, and such impairing event has an impact on which the asset is acquired, the Group classifies the financial asset the estimated future cash flows from the financial asset or group in one of the accounting categories specified by IAS 39, “Financial of financial assets, and if its carrying value is higher than its esti- Instruments: Recognition and Measurement”. The Group does mated recoverable value. not use the “Held-to maturity investments” category. 2.4.11 Inventories Financial assets at fair value, recognised in profit or loss Inventories consist mainly of consumables and miscellaneous These are financial assets acquired by the Group with the intention goods or supplies used for the maintenance and upkeep of of selling them in the short term. vehicles or intended for resale.
Derivative financial instruments are also classified as held for tra- These inventories are valued at purchase cost. Impairment is ding unless they are designated, effective hedging instruments. recognised to reduce the purchase cost (determined using the They are measured at fair value and their subsequent fair value weighted average cost (WAC) method or the First-in, First-out changes are recognised in the income statement. (FIFO) method) to the net realisable value if lower. Pursuant to IAS 2, the net realisable value is the estimated sale price in the Loans and receivables normal course of business, less the estimated cost for comple- Loans and receivables are non-derivative financial assets, the tion and realisation of the sale. payment of which is fixed or determinable and that are not listed on a regulated market. These assets are recognised at their fair 2.4.12 Trade receivables and other debtors value plus the directly attributable costs of transaction and are Trade receivables and receivables from other debtors are initially then measured at depreciated cost by the effective interest rate recognised at their fair value which, in most cases is their nomi- method. An impairment loss is recognised whenever the esti- nal value, given the generally short payment times. The carrying mated recoverable amount is below the carrying amount. amount is subsequently measured where required at an amor- tised cost using the effective interest rate method, less any This category includes operating receivables, deposits and gua- impairment losses. rantees, loans and concession financial assets. If there is an objective indication of impairment or a risk that the Available for sale (AFS) financial assets Group may be unable to collect all the contractual amounts These are non-derivative financial assets designated as being (principal plus interest) on the date set in the contractual payment available for sale, or not belonging to the other categories. They schedule, an impairment loss is recognised in the income state- are measured at their fair value in the statement of financial posi- ment. This allowance is equal to the difference between the tion; changes in value are recognised in equity. When available- carrying amount and the estimated recoverable future cash for-sale financial assets are sold, or if there is an objective flows, discounted at the original effective rate of interest.
23 2. Consolidated financial statements
2.4.13 Cash and cash equivalents subsidiaries, joint ventures and associates and their tax values. This item includes cash, sight deposits and other short-term This exception applies in particular to the income of subsidiaries deposits as well as other easily convertible liquid instruments yet to be distributed, should distribution thereof to shareholders with negligible risk of a change in value, maturing less than three generate taxation; if the Group has decided not to distribute pro- months from the date of acquisition. fits retained by the subsidiary in the foreseeable future, no deferred tax liabilities are recognised. 2.4.14 Corporate income tax The company GROUPE KEOLIS S.A.S., parent of the tax group, 2.4.15 Financial debt and long term borrowings has opted for the tax consolidation system in France. All borrowings are initially recognised at fair value, less the related Other tax consolidation regimes also exist in Europe and in the borrowing costs. Thereafter, they are recognised at amortised USA. The effect of these regimes is recognised in the income cost, using the effective interest rate method, with the difference statement. Most of the French companies subject to corporate between the cost and the redemption value recognised in the income tax and in which the company GROUPE KEOLIS S.A.S. income statement over the term of the borrowings. holds an equity interest of at least 95% are included in the tax consolidation group. The effective interest rate is the rate used to obtain the original carrying amount of a loan by discounting the future cash inflows The income tax expense or income includes the current tax or outflows over the loan’s term. The original carrying amount of expense or income and the deferred tax expense or income. Tax the loan includes the transaction costs of the operation and any is recognised in profit for the year unless it relates to items that are issuance premiums. directly recognised under equity, in which case, the tax is reco- gnised under equity. When a debt is reimbursed early, any non-amortised costs are recognised as expenses. Current tax is the estimated amount of tax due on the taxable profit for the period. It also includes adjustments to the amount of tax 2.4.16 Derivative financial instruments payable in respect of previous periods. The Group uses derivative financial instruments to manage exposure to financial market risks resulting from its operational, Deferred tax is calculated for each individual entity according to financial and investment activities: the balance sheet approach, on the temporary differences ◗ Interest rate risk; between the carrying amount of the assets and liabilities and their ◗ Foreign exchange risk; taxation base, including assets of which the Group has posses- ◗ Commodities risk. sion under finance lease agreements. The derivative financial instruments are measured and reco- Measurement of deferred tax assets and liabilities depends on gnised at fair value in the statement of financial position on the whether the Group expects to recover or to pay the carrying date they are established, then on each financial year end date. amount of the assets and liabilities, under the variable-carry- Fair value is measured by using standard valuation methods and forward method, using the rates of taxation that were adopted or is based on the mid-market conditions commonly used in the virtually adopted at the reporting date. A deferred tax asset is only markets. The market data used is Level 2 data, as described in recognised or maintained as an asset to the extent that the Group IFRS 13. is likely to benefit from future taxable profits to which the related deductible temporary difference may be imputed. The treatment of the gains and losses under the fair value revalua- tion depends on whether or not the derivative instrument is consi- The deferred tax assets and liabilities are not discounted. dered a hedging instrument and the nature of the hedged item.
Deferred tax assets and liabilities are offset in each taxable entity The changes in fair value of derivative financial instruments that when it recovers the asset and settles the liability on the same due are not eligible for hedge accounting are recognised under finan- date, subject to the following conditions being met: cial income/(expense). ◗ legally enforceable right to offset, ◗ intention to settle, Certain derivative financial instruments are eligible for one of the ◗ schedule of payments. three hedge accounting categories defined in IAS 39: ◗ Fair value hedge; Deferred tax liabilities are recognised for all taxable temporary ◗ Cash flow hedge; differences, with the exception of certain differences between the ◗ Net investment hedge. values of the Group’s proportionate interests in the net assets of They are recognised in accordance with hedge accounting rules.
24 2. Consolidated financial statements
The criteria to apply hedge accounting are mainly: within equity (OCI - other comprehensive income). The other ◗ general hedging documentation that describes the Group’s items are recognised as financial income/(expense): exposure to the various financial risks and its hedging strategy, ◗ changes in fair value of derivative financial instruments not eli- ◗ a hedging relationship clearly established on the date on which gible for hedge accounting (for example, the asymmetrical each derivative financial instrument is established, portion of collars); ◗ the use of effectiveness testing to demonstrate the effective- ◗ changes in the time value of all derivative financial instruments; ness of the hedging relationship prospective to the date of ◗ option premiums. establishment, and retrospective to each financial close. This effectiveness must be reliably measured and fall within 80% Foreign exchange risk and 125%. The Group has put in place intra-group loans denominated in foreign currency and recognised in current accounts. In order to Interest rate, foreign exchange and commodity derivative finan- cover the resulting foreign exchange risk, the Group uses deriva- cial instruments are entered into with first-class bank counter- tive financial instruments which allow it to fix the exchange rate of parties in accordance with the Group’s counterparty risk these intra-group loans. management policy. Consequently, the counterparty risk can be regarded as negligible. The Group also makes net investments in the capital of its foreign subsidiaries in local currency. To cover the foreign exchange risks Interest rate risks relating to the variable rate portion of its engendered by these investments, the Group uses derivative financial debt financial instruments in controlled amounts. Management’s objec- The Group’s interest rate risk exposure results from its financial tive is to protect the balance sheet values of these investments in debt. The Group covers this risk by using derivative financial local currency. The foreign exchange hedging policy implemented instruments. to achieve this objective consists of maintaining a reference exchange rate defined for the year. The objective of the risk management is to protect the Group’s financial income/(expense) from an increase in interest rates, The derivative financial instruments used by the Group are stan- while taking advantage of a decrease in rates to the greatest dard, liquid and market-available: extent possible. ◗ forward and futures sales and purchases; ◗ foreign exchange swaps; The interest rate hedging policy implemented consists in favou- ◗ call options; ring fixed rate derivative financial instruments. The management ◗ put options in combination with call options to provide symme- horizon adopted is usually a rolling five years, but this can be tric or asymmetric collars. greater dependent upon the hedging requirement. Most of the derivative financial instruments held by the Group are The derivative financial instruments which the Group uses, are eligible for net investment hedge accounting as described in IAS standard, liquid and available on the market, namely: 39. The derivative financial instruments that are not eligible are ◗ swaps; recognised under trading. ◗ cap calls; ◗ sales of caps to unwind an existing cap or to realise a cap Changes in the intrinsic value of derivative financial instruments spread; recognised under net investment hedges are entirely recognised ◗ floor puts if tied with cap calls to create a symmetrical or asym- within equity (OCI). The other items are recognised as financial metrical collar; income/(expense): ◗ floor calls, in particular to buy back floors that constitute asym- ◗ Changes in fair value of derivative financial instruments not eli- metrical collars; gible for hedge accounting (for example, the asymmetrical por- ◗ swaption calls; tion of collars); ◗ swaption puts if tied with calls to constitute swaption collars. ◗ changes in the time value of all derivative financial instruments; ◗ option premiums. Derivative financial instruments eligible for hedge accounting are recognised under cash flow hedges. The derivative financial Commodities price risks instruments that are not eligible are recognised under trading. Within the scope of its activities, the Group is exposed to a risk in the fluctuation of the price of certain commodities, in particu- Changes in the intrinsic value of derivative financial instruments lar diesel. recognised under cash flow hedges are entirely recognised The diesel price fluctuation risk is generally hedged using price
25 2. Consolidated financial statements
indexation included in the contracts signed by GROUPE KEOLIS employees their entitlements. Hence, once the contributions are S.A.S. and its subsidiaries with their clients. For its diesel pur- paid, no liability is reported in the Group’s financial statements. chases, the Group nonetheless bears the price risk until it is passed on to its customers. This time lag, when it exists, usually (b) Defined benefit plans lasts only a few months, and up to a maximum of twenty-four Defined benefit plans refer to plans providing post-employment months. A hedging policy has been set up to cover this partial benefits other than defined contribution plans. The Group has a exposure. duty to accrue provisions for the benefits to be paid to serving members of its staff, and to pay the benefits of former members Management’s objective for commodity risk management is to of its staff. In substance, the actuarial and investment risks lie with defend the prices indexed under the contracts. the Group.
The Group covers this commodities risk using standard, liquid These plans mainly concern the following: and market-available derivative financial instruments, namely: ◗ pension commitments: pension annuity plans, retirement gra- ◗ swaps; tuities, other retirement commitments and additional pension ◗ cap calls; benefits; ◗ cap puts to unwind an existing cap or to realise a cap spread; ◗ other long term benefits: long service awards. ◗ floor puts if tied with cap calls to create symmetrical or asym- metrical collars; Description of commitments under defined benefit plans ◗ floor calls, in particular to buy back floors that constitute asym- metrical collars. Apart from ordinary, statutory schemes, the Group provides, according to country and local legislation, retirement gratuity Derivative financial instruments eligible for hedge accounting are schemes (France), defined benefit pension schemes (United recognised under cash flow hedges. The derivative financial Kingdom and Canada) and pensioners’ health benefit schemes instruments that are not eligible are recognised under trading. (Canada and USA).
Changes in the intrinsic value of derivative financial instruments In France, retirement gratuities paid to the employee on leaving recognised under cash flow hedges are entirely recognised employment are determined according to the national collective within equity (OCI). The other items are recognised as financial labour agreement or the company agreement applying in the income/(expense): business. The following are the two main collective labour agree- ◗ Changes in fair value of derivative financial instruments not ments applied within the Group: eligible for hedge accounting (for example, the asymmetrical ◗ “Convention collective des transports publics urbains” portion of collars); (CCN_3099) – the national collective labour agreement for ◗ changes in the time value of all derivative financial instruments; urban public transport; ◗ the contango/backwardation component, corresponding to ◗ “Convention collective des transports routiers” (CCN_3085) – the price difference between the forward price for swaps (or the national road-haulage collective labour agreement. exercise price for options) and the spot price; ◗ option premiums. These schemes are partly financed by insurance policies. Their value is measured over the average term of the policies (20 years) 2.4.17 Provisions except in the case of GROUPE KEOLIS S.A.S., Keolis S.A. and subsidiaries of the EFFIA group, which are measured on a per- Provisions for pension and post-employment commit- petuity basis. ments (IAS 19 revised) The Group offers its employees various fringe benefits while they Annual actuarial evaluations of the commitments of the defined are in employment or after employment. These benefits arise benefit schemes are carried out each year end primarily by inde- under the legislation applicable in certain countries and under pendent actuaries. contractual arrangements concluded by the Group with its employees, and are either defined contribution plans or defined Commitments for pensions, additional pension benefits and benefit plans. retirement gratuities are measured using a method that takes account of the projected final end-of-career salaries (termed the (a) Defined contribution plans Projected Unit Credit Method) on an individual basis, which is Defined contribution plans are characterised by payments to based on assumptions of discount rates and expected long- organisations that discharge the employer from any subsequent term yields from the funds invested for each country, and on obligation, with the organisations taking responsibility for paying assumptions regarding life expectancy, staff turnover, trends in
26 2. Consolidated financial statements
pay, annuity revaluations and the discounted value of payable and major servicing operations on facilities managed under a sums. The specific assumptions for each plan take local econo- public service agreement. The resulting maintenance and repair mic and demographic factors into account. costs are analysed in accordance with IAS 37 on provisions and, where applicable, provisions are accrued for heavy maintenance The value entered in the statement of financial position under and major servicing and also for lossmaking contracts in the event provisions “pensions and other employment benefits” is the that the unavoidable costs incurred to meet the contractual obli- difference between the discounted value of the future obligations gation are greater than the economic benefits of the contract. and the fair value of the pension plan assets intended to cover them. Where the result of this calculation is a net commitment, In cases of restructuring, an obligation is accrued in so far as the an obligation is recognised as a liability in the statement of finan- restructuring has been announced and is the object of a detailed cial position. formalised plan or has been started prior to the reporting date.
When bids are won in France or abroad, the asset representing Provisions due in more than one year are discounted whenever pension rights and all other employee benefits recognised at the the impact is material. start of the franchise is determined on the basis of the amount of pension liabilities and other employee benefits over the esti- 2.4.18 Payments in shares and similar payments mated life of the contract. The Group has no share option plans or share purchase war- rants for the benefit of its members of staff. Actuarial gains/losses relating to post-employment benefits resul- ting from experience and changes in actuarial assumptions are 2.4.19 Trade payables and other accounts payable recognised directly in equity in the year in which they are incurred Trade payables and other accounts payable are measured at and are off set against the increase or decrease of the obligation. their fair value at initial recognition, which in most cases is their They are set out in the statement of comprehensive income. nominal value, and otherwise at the amortised cost. Short-term payables are recognised at their nominal amount unless dis- In the income statement, the cost of service earned during the counting at the market rate would have a material impact. financial year is included in the operating profit. In the event of long payment delays, the suppliers’ debt is discounted. The interest cost in respect of the discounting of pensions and similar obligations, and the income relating to the expected yields Other payables include deferred revenues, corresponding to from the pension plan assets, are recognised under financial income received for services not yet provided, and investment income and expense. grants not yet credited in the income statement.
The actuarial calculations for pension and similar commitments 2.4.20 Revenue and other business income are mainly performed by independent actuaries. Revenue and other business-related income are measured at the fair value of the consideration received or accrued. Long service medals are valued on the same basis as pension commitments, with the exception of the recognition of actuarial They are measured net of discounts and commercial benefits gains and losses. Actuarial gains and losses are recognised in given, where the service has been provided. No income is reco- the income statement. gnised where there exists significant uncertainty as to the recove- rability of the consideration receivable or the costs incurred or to Furthermore, the Group has implemented a long-term employee be incurred in relation to the service, and where the Group remains retention scheme. involved in managing the income.
Other types of provisions The revenue from urban passenger transport companies is reco- Provisions are accrued where at the end of the reporting period gnised according to the terms of the contract signed with the public there is a present legal or implicit obligation towards third parties transport authority, taking account of all additional clauses and any arising from a past event and there is a probability that an outflow vested rights (indexation clauses, etc). of resources embodying economic benefits will be required to settle this obligation and a reliable estimate can be made of the The same applies for revenue from intercity passenger transport amount. companies, and other activities not under contract, recognised In the context of its activity, the Group is generally subject to a according to the services provided. contractual obligation to carry out multiyear heavy maintenance Revenues include fees from value added services arising from the
27 2. Consolidated financial statements
Group’s knowhow. These activities (excluding transportation) startup costs in a new country or zone, and to other items that are mainly relate to the management of car parks, airports and bike by their nature non-recurring. rental. Effects of changes in scope recognised directly in income include: Other business-related income covers fees for services consisting ◗ direct acquisition costs in the case of a takeover; mainly of revenues classified by the Group as incidental, as well as ◗ effects of revaluations, at fair value on the acquisition date, of non- the remuneration of concession financial assets. controlling interests previously acquired in the case of an acquisi- tion in stages; 2.4.21 Other operating expenses ◗ subsequent earn-outs; Since they are a recurrent feature of the activity, losses or gains ◗ profit or loss from divestments of holdings which lead to a change on sales of transport equipment are recognised on a separate in the method of consolidation as well as, where applicable, the line, and included in profit from continuing operations. revaluation effects of retained non-controlling interests.
2.4.22 Other operating income 2.4.25 EBITDA calculation Other operating income mainly comprises the CICE (tax credit EBITDA is calculated based on operating profit/(loss), plus or for competitiveness and employment) which was created to help minus the profit or loss on asset disposals, the amounts repre- companies finance their competitiveness, in particular through senting depreciation and amortisation, increases and reversals investment, research, innovation, recruitment, prospection of of provisions and the share of grant income released. new markets, environmental transition and replenishment of their working capital. It applies to remuneration not exceeding two Recurring EBITDA corresponds to EBITDA less material non- and a half times the minimum wage that the companies pay their recurring items. employees in the course of the calendar year. In 2015, the tax credit rate remained unchanged at 6%. 2.4.26 Financial income (expense) Financial expenses include interest on borrowings and financial The CICE is deducted from corporate income tax due for the debt calculated using the effective interest rate method, the cost year during which the remuneration used for the calculation of of early loan repayments or of cancelling credit lines, the financial the tax credit was paid. Any non-deducted credit is treated as a interest not directly attributable to the operating margin and the receivable from the State and can be used to pay tax due in the financial cost of discounting non-current liabilities. three years following that in which the credit was earned. At the end of this period, any remaining non-deducted amount is reim- Financial income includes income from deposits of cash or cash bursed to the company. equivalents and dividends received from non-consolidated com- panies. The Group holds the view that the CICE is a type of public sub- sidy within the application of IAS 20, insofar as it is used for Other financial income and expense include net foreign exchange financing working capital related expenditure. The CICE is reco- gains and losses, bank commissions on credit transactions gnised under operating subsidies in the line “Other operating booked as an expense and their rebilling as income, changes in income” of the consolidated income statement. the fair value of derivative financial instruments when they are to be recognised in the income statement and are recognised 2.4.23 Recurring operating profit respectively as financial income or expenses on transactions, Recurring operating profit corresponds to the whole of the with the exception of changes in the fair value of hedging deri- expenses and income arising from the Group’s recurring operating vatives which are recorded on the same line as the transaction activity before financing activities, the earnings of associates, hedged within operating profit. Therefore, any change in the fair activities discontinued or being sold and taxation. value of derivatives, when they are not eligible for hedge accoun- ting, and the change in value of the ineffective portion for cash 2.4.24 Operating profit or loss flow hedging are recognised in the financial result. Operating profit includes recurring operating profit and all tran- sactions not directly related to the normal conduct of business, All interest on borrowings is recognised as a financial expense but that cannot be directly attached to any other item in the as and when incurred. income statement. 2.4.27 Changes made to comparative periods Income and expenses, charges to depreciation and provisions on The only change in accounting principles to be noted is that non-recurring items include all non-recurring operations where presented under paragraph 2.2 relating to the application of the costs are significant: this applies in particular to offensive bids, res- IFRIC 21 Interpretation “Levies” as of 1 January 2015. tructuring costs, disposal gains or losses on assets other than transport equipment, the amortisation of contractual rights and
28 2. Consolidated financial statements
3 • Highlights of the financial year
Amendment to syndicated loan agreement
On 11 June 2015, GROUPE KEOLIS S.A.S. signed an amend- ment to the syndicated loan agreement dated 12 July 2013. The main characteristics of this amendment are: ◗ an increase in the maximum amount from €800 million to €900 million, ◗ an adjustment of the financial conditions to correspond to the current market, which are more favourable, ◗ an extension of the maturity until 11 June 2020, ◗ a provision under which Keolis may extend the maturity by an additional year, in 2016 and 2017, subject to the approval of the entire financing syndicate. Maturity could thereby be extended until 11 June 2022.
By virtue of the principle of debt continuity, the implementation of the amendment did not give rise to any reimbursement of the nominal amount.
At 31 December 2015 the drawn amount of the loan was €600 million, with the remaining undrawn amount €300 million.
Acquisition of ATE in Australia
On 1 May 2015, Keolis Downer (51%-owned by Keolis and 49% by Downer EDI), Australia’s largest light rail operator, acquired Australian Transit Enterprises (ATE), one of the country’s biggest bus operators.
Through this acquisition, Keolis Downer has become the leading privately-owned multi-modal public transport operator in Australia.
Established in 1974 as a family business, ATE has since conti- nued to grow, generating revenue of approximately AUD 190 million (€136 million) in 2014. Headquartered in Brisbane, ATE operates a fleet of nearly 1,000 buses and runs urban, inter-city and school services in three states: South Australia (Adelaide), Western Australia (Perth) and Queensland (Brisbane). The com- pany currently employs 1,600 people.
As the 5th largest private bus operator in Australia, ATE consists of 4 business divisions: Path Transit, providing timetabled route and school bus services in the suburbs of Perth (Western Australia); Southlink, providing timetabled route and school bus services in metropolitan Adelaide (South Australia); LinkSA, providing timetabled route, school, special bus and dial- a-ride services within 100km of Adelaide (South Australia); Hornibrook, providing timetabled route and school bus services in the suburbs of Brisbane (Queensland).
29 2. Consolidated financial statements
4 • Notes to the consolidated income statement
4.1 Staff costs
Staff costs
(€ million) 31/12/2015 31/12/2014
Wages and social charges (2,437.4) (2,240.4) Taxes on remuneration (63.0) (62.7) Other staff expenses (1) (390.6) (226.0) Total (2,891.0) (2,529.1) (1) Other staff expenses include incentive schemes and profit sharing.
Average number of employees
31/12/2015 31/12/2014
Managers 2,425 2,171 Supervisory and technical staff 6,461 6,210 Clerical and manual employees, drivers 45,938 42,907 Total 54,824 51,288
The number of staff in the companies acquired during the period is averaged over the period.
4.2 Other operating income Under the CICE, the Group received €49.5 million in 2015, compared to €50.2 million in 2014.
4.3 Operating profit
(€ million) 31/12/2015 31/12/2014
Recurring operating profit 91.0 104.7 Non-recurring costs of offensive bids (12.4) (15.6) Profit/(loss) on non-recurring fixed asset disposals 0.5 1.0 Amortisation of contractual rights and others (1) (21.0) (28.1) Other non-recurring items (6.7) (9.3) ◗ Net reorganisation expenses (8.5) (6.0) ◗ Change in provisions for contract losses 1.4 3.3 ◗ Other 0.2 (6.6) Total non-recurring items (39.6) (52.0) Operating profit before investments under equity method 51.4 52.7 (1) This item includes negative goodwill in Belgium amounting to €5.7 million in 2015 and €5.3 million of depreciation of goodwill in the USA in 2014.
30 2. Consolidated financial statements
4.4 EBITDA calculation
(€ million) 31/12/2015 31/12/2014
Operating profit 51.4 52.7 Net depreciation and other provisions charged 221.7 190.2 Depreciation and provisions on non-recurring items 20.8 30.6 Including amortisation of contractual rights and brands 26.7 22.8 Including Belgium negative goodwill and KTA goodwill depreciation (5.7) 5.3 Amortisation of grants received (6.3) (5.5) Reversals of operating provisions utilised on recurring items (9.4) (10.4) Reversals of provisions utilised on non-recurring items (2.3) (4.6) Profit/(loss) on non-recurring fixed asset disposals (0.5) (1.0) Profit/(loss) on fixed asset disposals (0.9) (1.1) EBITDA 274.6 250.9 Non-recurring income and expense(1) 21.6 26.9 Recurring EBITDA 296.2 277.8
(1) Non-recurring income and expense include significant offensive bid costs, major restructuring expenses and other significant exceptional items.
4.5 Financial income / (expense)
(€ million) 31/12/2015 31/12/2014
Net cost of financial debt (18.1) (18.6) ◗ of which Cost of gross financial debt (19.0) (19.7) ◗ of which Income from cash and cash equivalents 0.9 1.0 Other financial income and charges 7.3 7.5 Other financial charges (19.0) (18.2) ◗ of which foreign exchange impact (5.2) (1.0) Financial income / (expense) (29.8) (29.3)
4.6 Share in net profit for the year from investments under the equity method
(€ million) 31/12/2015 31/12/2014
Govia (UK) 12.4 5.7 First / Keolis Transpennine (UK) 9.4 10.1 Other associates (France) 0.7 0.1 Other associates (international, excluding UK) (0.1) - Total joint ventures and associates 22.4 16.0
31 2. Consolidated financial statements
4.7 Taxation
The 2015 tax charge amounts to €18 million.
(€ million) 31/12/2015 31/12/2014
Current tax expense (24.8) (32.9) Tax payable for the period (25.3) (33.6) Adjustments in respect of prior years 0.5 0.7 Deferred tax income 6.8 21.3 Deferred tax for the period 6.8 24.4 Impairment loss on deferred tax asset - (3.1) Tax expense for the year (18.0) (11.6)
The Group has opted to present a reconciliation of its effective rate at 34.43%, rather than 38%, which is the 2015 rate including the additional contribution of 10.7% (2013 Finance Act). This rate of 38% will not in fact apply to the Group because the impact of the reversal of deferred income taxes is insignificant in the period and currently this measure is only temporary.
The reconciliation between the legal rate of taxation in France and the effective rate is as follows:
31/12/2015 31/12/2014
In % In € million In % In € million Profit for the year 26.0 27.8 Profit/(loss) from associates (22.4) (16.0) Taxation 18.0 11.6 Profit before tax and before profit/loss from associates 21.6 23.3 Legal rate of taxation in France 34.43% (7.4) 34.43% (8.0) French / foreign taxation rate differentials -9.22% 2.0 2.99% (0.7) Effect of reduced rates and changes in tax rates 12.07% (2.6) 2.45% (0.6) Adjustment in respect of tax for prior years -2.18% 0.5 -3.13% 0.7 Other permanent differences 22.02% (4.8) 15.33% (3.6) Crédit d’Impôt Compétitivité Emploi -79.37% 17.1 -73.71% 17.3 Effect of direct taxation (CVAE) 43.17% (9.3) 37.06% (8.7) Unrecognised deferred tax assets 62.46% (13.5) 34.31% (8.0) Effective rate of taxation 83.38% (18.0) 49.73% (11.6) Unrecognised deferred tax assets mainly relate to North America and Germany.
Deferred tax included within non-current assets and liabilities breaks down as follows:
(€ million) 31/12/2015 31/12/2014
Deferred tax assets 84.6 79.9 Less than one year 16.7 8.4 More than one year 67.9 71.5 Deferred tax liabilities (177.5) (153.8) Less than one year (17.3) (6.3) More than one year (160.2) (147.5)
32 2. Consolidated financial statements
Unused losses amounted to €238 million at 31 December 2015 At each financial year end, the Group assesses for each tax entity of which €112 million were not recognised, taking into account the probability of its having taxable profits against which to offset assumptions on the usability of these losses within available time its deferred tax assets or to use available unrecognised tax cre- limits, which would represent a deferred tax asset of €26.2 mil- dits. In making this assessment, the Group takes account of, lion. among other factors, past and present taxable profit, and the companies’ prospects for making future taxable profits.
The change in the net deferred taxes recorded in the statement of financial position breaks down as follows:
(€ million) Net position
Opening balance on 1 January 2015 (73.9) Recognised in equity 0.1 Recognised in profit for the year 6.8 Effect of consolidation scope changes (27.2) Foreign exchange translation difference and other movements 1.3 Closing balance on 31 December 2015 (92.9)
(€ million) Net position
Opening balance on 1 January 2014 (100.3) Recognised in equity 8.6 Recognised in profit for the year 21.3 Effect of consolidation scope changes (5.2) Foreign exchange translation difference and other movements 1.5 Closing balance on 31 December 2014 (73.9)
Net deferred taxes by type are as follows:
(€ million) 31/12/2015 31/12/2014
Purchase accounting asset revaluations (152.8) (140.8) Staff benefits 45.9 40.7 Tax losses 29.2 29.9 Other timing differences (15.2) (3.7) Closing balance on 31 December (92.9) (73.9)
33 2. Consolidated financial statements
5 • Notes to the consolidated statement of financial position
5.1 Goodwill
Changes in carrying amount
Continental North France UK Total (€ million) Europe Australia America At 1 January 2015 740.5 103.6 - 222.8 38.2 1,105.1 Acquisitions (1) 0.4 0.1 38.8 - - 39.3 Disposals ------Impairment loss for the period ------Foreign exchange translation differences and others (3.0) (2.4) (1.9) - 2.6 (4.7) At 31 December 2015 737.8 101.2 36.9 222.8 40.9 1,139.6 Of which gross value 737.8 103.2 37.2 222.8 51.3 1,152.3 Of which accumulated amortisation and impairment charges - (2.0) (0.2) - (10.4) (12.7) (1) The additional goodwill recorded in 2015 arises principally from the acquisition of ATE on 1 May 2015. The assessment of assets and liabilities at the date of acquisition is currently underway and will be completed within one year.
Continental North France UK Total (€ million) Europe Australia America At 1 January 2014 729.5 100.0 - 222.8 41.1 1,093.5 Acquisitions 12.1 5.2 - - 17.3 Disposals ------Impairment loss for the period - - - - (5.3) (5.3) Foreign exchange translation differences and others (1.2) (1.6) - - 2.4 (0.4) At 31 December 2014 740.5 103.6 - 222.8 38.2 1,105.1 Of which gross value 740.5 105.6 - 222.8 48.3 1,117.1 Of which accumulated amortisation and impairment charges - (2.0) - - (10.0) (12.1)
Impairment testing Long-term growth rates The main assumptions made for impairment tests are as follows: The growth rate applied to the main cash-generating units or groups thereof was 2%. Discount rate The discount rate used is based on the average cost of capital Sensitivity of recoverable amounts reflecting current market assessments of the time value of money Sensitivity tests on groups of cash-generating units were carried and the risks specific to the tested asset. out by varying the long-term growth rates or the WACC (weighted average cost of capital). The average weighted cost of capital has been determined by a combination of two methods: the “Capital Asset Pricing Model” A 0.5 point decrease in the indefinite growth rate leaves a positive (CAPM) method and the average weighted cost of capital method margin between the value in use and the carrying amount of cash- for comparable listed companies. Taking into account these fac- generating units. tors, the cost of capital used to discount future cash flows was set at 4.8% in 2015 versus 5.6% in 2014. A 0.5 point increase in the discount rate leaves a positive margin between the value in use and the carrying amount of cash-gene- These discount rates are rates after tax applied to cash flows after rating units. tax. Use thereof results in recoverable amounts identical to those obtained by using pre-tax rates applied to non-taxable cash flows, in accordance with IAS 36.
34 2. Consolidated financial statements
5.2 Other intangible assets
Contractual (1) (€ million) Software Trademarks rights Other Total At 1 January 2015 40.0 63.6 268.3 118.0 489.9 Acquisitions 20.7 - - 41.0 61.6 Assets disposed of and scrapped (1.3) - - (1.4) (2.7) Amortisation (21.1) (2.0) (25.4) (26.1) (74.6) Changes in reporting scope - - 68.8 - 68.8 Foreign exchange translation differences and other movements (2) 16.4 0.6 (1.6) (24.6) (9.3) At 31 December 2015 54.6 62.3 310.1 106.9 533.9 Of which gross value 144.7 70.4 552.4 230.9 998.4 Of which cumulative depreciation and impairment losses (90.1) (8.1) (242.3) (124.0) (464.5)
Contractual (1) (€ million) Software Trademarks rights Other Total At 1 January 2014 33.8 65.6 281.6 94.7 475.6 Acquisitions 17.6 - 0.2 28.5 46.3 Assets disposed of and scrapped - - - (0.5) (0.5) Amortisation (18.5) (2.0) (20.7) (22.7) (64.0) Changes in reporting scope - - 6.1 - 6.2 Foreign exchange translation differences and other movements (2) 7.1 0.1 1.2 17.9 26.2 At 31 December 2014 40.0 63.6 268.3 118.0 489.9 Of which gross value 120.2 69.7 481.2 224.4 895.5 Of which cumulative depreciation and impairment losses (80.2) (6.1) (212.8) (106.4) (405.5)
(1) Of which net value of intangible concession assets of €48.4 million in 2015 versus €56.7 million in 2014. (2) Mainly relates to contractual rights acquired in Australia (ATE).
35 2. Consolidated financial statements
5.3 Property, plant and equipment
(€ million) otal L and & Developments Buildings Equipment and tooling Transport equipment PPE under construction Other T
At 1 January 2015 25.4 183.4 42.8 427.1 52.7 75.0 806.3 Acquisitions 2.4 13.3 12.4 123.5 19.6 19.2 190.3 Assets disposed of and scrapped (1.8) (3.3) (1.6) (20.8) (1.0) (6.3) (34.8) Depreciation (1.8) (22.2) (13.5) (92.9) 0.1 (18.0) (148.3) Changes in reporting scope (1) 4.9 0.1 - 62.4 - 2.0 69.3 Foreign exchange translation differences and other movements 8.6 46.8 7.2 (9.4) (36.3) (7.9) 9.0 At 31 December 2015 37.8 218.0 47.2 489.8 35.1 64.0 891.8 Of which gross value 45.9 391.2 140.6 1,135.4 35.1 172.4 1 920.6 Of which cumulative depreciation and impairment losses (8.2) (173.2) (93.5) (645.6) - (108.4) (1,028.8)
(1) Relates mainly to acquisition in Australia (ATE).
(€ million) otal L and & Developments Buildings Equipment and tooling Transport equipment PPE under construction Other T
At 1 January 2014 25.6 174.2 44.2 379.9 37.2 67.8 729.0 Acquisitions 3.8 11.4 8.3 116.6 39.9 25.2 205.2 Assets disposed of and scrapped (3.0) (1.1) (0.3) (26.5) (0.4) (1.1) (32.3) Depreciation (1.1) (16.9) (12.4) (84.9) - (17.7) (133.0) Changes in reporting scope - 0.7 - 35.3 - 1.0 37.0 Foreign exchange translation differences and other movements 0.1 15.1 2.9 6.6 (24.0) (0.2) 0.5 At 31 December 2014 25.4 183.4 42.8 427.1 52.7 75.0 806.3 Of which gross value 31.4 338.8 128.0 1,050.1 52.8 170.2 1,771.3 Of which cumulative depreciation and impairment losses (6.0) (155.4) (85.2) (623.0) (0.1) (95.2) (965.0)
Finance leases At 31 December 2015, finance leased assets included within assets in the statement of financial position comprised:
Transport Land and Total (€ million) equipment Buildings Gross value 276.1 7.0 283.1 Depreciation (143.3) (3.9) (147.2) Total finance leased fixed assets 132.9 3.1 136.0
Schedule of minimum finance lease payments
(€ million) 1 year 1 to 5 years > 5 years Total Principal 26.1 77.9 19.6 123.6 Interest 5.3 7.7 4.5 17.5 Finance lease payments 31.4 85.6 24.1 141.1
36 2. Consolidated financial statements
5.4 Investments under the equity method The Group holds several investments in joint ventures and associates notably in the United Kingdom, consolidated under the equity method. The changes in the value of these investments during the financial year can be explained by the items below:
(€ million) 31/12/2015 31/12/2014
At 1 January 32.5 20.1 Net profit attributable to Group 22.4 16.0 Depreciation - - Profit/(loss) from investments under equity method 22.4 16.0 Change in fair value affecting equity (1) 13.1 8.4 Foreign exchange translation differences (1.5) 0.7 Dividends paid (31.9) (12.9) Changes in consolidation scope & other 0.6 0.2 At 31 December 35.1 32.5
(1) Changes in fair value affecting equity relate to actuarial gains and losses within the defined benefit pension schemes of the Railways Pension Scheme which are a function of franchise length.
The financial elements relating to significant joint ventures are presented below at 100% of their values:
At 31 December 2015 At 31 December 2014
(€ million) Govia & subsidiaries First / Keolis Transpennine Others associates Total Govia & subsidiaries First / Keolis Transpennine Others associates Total
Non-current assets 27.0 1.8 NA NA 37.6 2.8 NA NA Net WCR 31.8 25.4 NA NA 7.5 29.2 NA NA Equity 56.8 27.3 NA NA 45.1 32.0 NA NA Incl. net profit 35.5 20.8 NA NA 16.4 22.5 NA NA Non-current liabilities 2.0 (0.1) NA NA - - NA NA Net assets 56.8 27.3 NA NA 45.1 32.0 NA NA Percentage owned 35% 45% 35% 45% Reconciliation of financial data with value of investments under equity method: Group share of net assets 19.9 12.3 3.0 35.1 15.8 14.4 2.3 32.5 Goodwill ------Other ------Net book value of investments 19.9 12.3 3.0 35.1 15.8 14.4 2.3 32.5
37 2. Consolidated financial statements
5.5 Current and non-current financial assets
(€ million) otal L oans and receivables Securities available for sale Deposits and guarantees Derivative assets Concession financial assets T
At 31 December 2015 Gross value 1.4 29.6 33.6 0.7 125.4 190.8 Impairment - (0.3) - - - (0.3) Net value 1.4 29.4 33.6 0.7 125.4 190.5 ◗ Less than one year 0.1 - 18.5 0.7 - 19.4 ◗ More than one year 1.3 29.4 15.0 - 125.4 171.1
(€ million) otal L oans and receivables Securities available for sale Deposits and guarantees Derivative assets Concession financial assets T
At 31 December 2014 Gross value 1.5 23.3 36.7 0.1 106.1 167.7 Impairment - (0.3) - - - (0.3) Net value 1.5 23.0 36.7 0.1 106.1 167.4 ◗ Less than one year (0.1) - 19.7 0.1 - 19.7 ◗ More than one year 1.6 23.0 17.0 - 106.1 147.7
The securities available for sale relate to investments in companies which are not consolidated.
The changes in concession financial assets in the period include new acquisitions for €22.3 million and reimbursements for €8.1 million.
5.6 Inventories
(€ million) At 31 December 2015 At 31 December 2014
Gross inventories 86.4 82.5 Provisions (4.4) (4.4) Net inventories 82.0 78.0
38 2. Consolidated financial statements
5.7 Trade and other receivables
(€ million) At 31 December 2015 At 31 December 2014
Trade receivables 429.6 394.2 Advances and down payments on orders 8.1 8.2 Amortisation of accounts receivable (11.3) (10.9) Trade receivables 426.4 391.5 Receivables from staff and welfare agencies 4.4 7.2 Central government and local authorities 151.4 119.6 Prepayments 24.8 21.8 Other(1) 169.5 163.0 Depreciation of other debtors (1.3) (1.1) Other receivables 348.8 310.5
(1) Other receivables for 2015 include €65 million representing the Australian Department for Transport’s guarantee on extra holiday rights; these rights appear under liabilities as payables to staff.
5.8 Cash and cash equivalents
Analysis by type
(€ million) At 31 December 2015 At 31 December 2014
Cash 287.3 228.0 Short term investments 25.4 66.6 Total recognised as assets 312.7 294.6 Bank overdrafts (189.9) (117.7) Net cash and cash equivalents 122.8 176.9
Cash equivalents include highly liquid short term investments that €27.4 million at 31 December 2015 versus €23.6 million at 31 are easily convertible into a known amount of cash and present December 2014. no significant risk of loss of value. The receivable arising in 2013, 2014 and 2015 from the CICE The Group takes the view that its UCITS classified by the AMF implemented by the French government and recognised by (French financial markets authority) as “euro money-market” meet French consolidated tax groups was subject to a “Dailly” sale. the criteria necessary to classify them as cash equivalents.
In 2015, the Group carried out several transactions to monetise trade receivables. The amount of receivables thus monetised was
39 2. Consolidated financial statements
5.9 Equity Distributable reserves and earnings At 31 December 2015, the company GROUPE KEOLIS S.A.S. Share capital and share premium had distributable reserves and earnings of €143.0 million and At 31 December 2015, the share capital was €237.9 million, €29.2 million respectively. comprising 180,218,865 ordinary shares with a nominal value of one euro and thirty-two cents each, fully paid up. The share Non-controlling interests premium amounted to €303.2 million. At 31 December 2015, non-controlling interests amounted to €51.9 million as against €21.0 million at 31 December 2014. The Group’s borrowing contracts do not include any mandatory The main non-controlling interests are Keolis Commuter Services gearing ratio clauses. LLC, Keolis Downer and KDR Victoria Pty Ltd.
Treasury shares Foreign exchange translation reserve On 31 December 2015 all of GROUPE KEOLIS S.A.S.’ treasury During 2015, foreign exchange translation reserves increased by shares, totalling €1.9 million, were cancelled. €1.2 million. The following were the main exchange rates against the euro used for the 2015 and 2014 financial years:
(for 1 euro) 2015 2014 Average rate Closing rate Average rate Closing rate Pound sterling 0.725978 0.733950 0.806100 0.778900 Australian dollar 1.476802 1.489700 1.471900 1.482900 Danish crown 7.458912 7.462600 7.454800 7.445300 Swedish crown 9.352400 9.189500 9.098500 9.393000 Norvegian crown 8.944238 9.603000 8.354400 9.042000 US dollar 1.109067 1.088700 1.328500 1.214100 Canadian dollar 1.417910 1.511600 1.466100 1.406300 Indian rupee 71.141807 72.021500 81.040600 76.719000
5.10 Financial debt and long term borrowings
Financial debt breakdown by type At 31 December 2015 Amounts in the (€ million) statement of financial Term Rates position Finance leasing 2.8 2016 Variable rates Finance leasing 23.4 2016 Fixed rates Derivatives 6.1 2016 - Loans 4.3 2016 Fixed rates Loans 42.2 2016 Variable rates Subtotal less than 1 year 78.8 - Owed to non-controlling shareholders (put option) 9.5 2017 - Finance leasing 4.5 2017-2021 Variable rates Finance leasing 93.0 2017-2021 Fixed rates Employee profit-sharing 0.6 2017-2020 Fixed rates Derivatives - - Loans 37.8 2017-2021 Fixed rates Loans 735.7 2017-2021 Variable rates Subtotal more than 1 year 881.1 - TOTAL 959.9 -
40 2. Consolidated financial statements
At 31 December 2014
Amounts in the (€ million) statement of financial Term Rates position Finance leasing 10.1 2015 Variable rates Finance leasing 15.8 2015 Fixed rates Derivatives 6.8 - - Loans 4.3 2015 Fixed rates Loans 144.0 2015 Variable rates Subtotal. less than 1 year 181.0 - - Owed to non-controlling shareholders (put option) 10.4 2016 - Finance leasing 7.9 2015-2018 Variable rates Finance leasing 82.1 2015-2018 Fixed rates Employee profit-sharing 0.9 2015-2018 Fixed rates Derivatives - - - Loans 17.5 2015-2018 Fixed rates Loans 534.4 2015-2018 Variable rates Subtotal. more than 1 year 653.1 - - TOTAL 834.1 - -
At 31 December 2015, the amount drawn under the syndicated loan put in place on 12 July 2013 and amended on 11 June 2015 stood at €600 million and the amount undrawn was €300 million.
Financial debt breakdown by maturity
Maturity
After 2016 2017 2018 2019 2020 Total (€ million) 2020
Finance leasing 26.2 26.7 24.8 16.6 9.6 19.6 123.7 Other liabilities 52.6 46.4 30.8 7.4 676.0 23.1 836.3 Total 78.8 73.2 55.6 24.1 685.6 42.7 959.9
Financial debt breakdown by currency
(€ million) At 31 December 2015 At 31 December 2014
Euro 655.0 624.6 Canadian dollar 51.3 53.9 Pound sterling 17.8 0.7 Swedish crown 33.1 34.1 US dollar 76.3 73.5 Australian dollar 78.9 9.9 Danish crown 47.5 37.4 Norwegian crown - - Total financial debts 959.9 834.1
41 2. Consolidated financial statements
Mandatory financial ratios In the documentation for the syndicated loan, the “Leverage” financial ratio is to be complied with on a six-monthly basis. At 31 December 2015 this ratio under the syndicated loan was met.
The Leverage ratio corresponds to the ratio between the adjusted net debt and the adjusted recurring EBITDA.
The Group’s contracts, and those of its subsidiaries, also include cross acceleration clauses. If the Group or, under certain conditions, its largest subsidiaries do not comply with their commitments, lending institutions may claim default and early reimbursement of a major portion of the Group’s debt.
Taking account of the spread of this financing among various subsidiaries and the quality of the Group’s liquidity resources, the existence of these clauses does not create a material risk to the Group’s financial situation.
In 2014 the Group introduced monitoring of the financial ratios relating to the financing of the Group and its subsidiaries in order to anticipate any adverse changes to these ratios.
The aggregations used to calculate the financial ratio strictly comply with the definitions set out in the syndicated loan documentation.
Statement of changes in financial debts
(€ million) A t 31 December 2014 I ncrease D ecrease Changes in scopereporting I mpact of exchange rate O ther A t 31 December 2015
Finance leasing 25.9 5.4 (16.8) 4.2 (0.4) 7.8 26.2 Owed to non-controlling shareholders (put option) ------Derivatives 6.8 - - - - (0.7) 6.1 Loans 148.3 6.1 (130.6) 0.8 1.8 20.2 46.5 Subtotal less than 1 year 181.0 11.5 (147.4) 5.0 1.4 27.3 78.8 Owed to non-controlling shareholders (put option) 10.4 - - - - (0.8) 9.5 Finance leasing 90.0 27.2 (19.0) 6.5 (1.8) (5.5) 97.5 Employee profit-sharing 0.9 - - - - (0.4) 0.6 Derivatives ------Loans 551.8 237.9 (1.0) 3.9 - (19.0) 773.6 Subtotal more than 1 year 653.2 265.1 (20.0) 10.4 (1.8) (25.7) 881.1 TOTAL 834.1 276.6 (167.5) 15.4 (0.4) 1.6 959.9
42 2. Consolidated financial statements
5.11 Financial assets and liabilities by category
At 31 December 2015 Book value by category of instruments
€ million Fair value through and loss profit Fair value through equity P& L Fair value through and equity (derivative instruments) Debts at amortised cost Total
Investments available for resale - 29.4 - - 29.4 Other non-current financial assets - - - 141.7 141.7 Trade receivables - - - 426.4 426.4 Other receivables - - - 348.8 348.8 Current financial assets - - 0.7 18.6 19.4 Cash and cash equivalents 25.4 - - 287.3 312.7 ASSETS 25.4 29.4 0.7 1,222.8 1,278.3 Non-current financial debt - - - 881.1 881.1 Current financial debt - - 6.1 72.7 78.8 Bank borrowings - - - 189.9 189.9 Customer deposits and advances received - - - 34.5 34.5 Trade and other payables - - - 542.8 542.8 Other current operating liabilities - - 6.4 857.6 864.0 LIABILITIES - - 12.5 2,578.6 2,591.1
At 31 December 2015 Fair value by level
€ million L evel 1: L isted price L evel 2: Model based on observable parameters L evel 3: Model based on non-observable parameters Total
Investments available for resale - - 29.4 29.4 Other receivables - - - - Current financial assets - 0.7 - 0.7 Cash and cash equivalents 25.4 - - 25.4 ASSETS 25.4 0.7 29.4 55.5 Current financial debt - 6.1 - 6.1 Other current operating liabilities - 6.4 - 6.4 LIABILITIES - 12.5 - 12.5
43 2. Consolidated financial statements
5.12 Risk management and financial derivatives The Group uses derivative financial instruments to manage exposure to financial market risks resulting from its operational, financial and investment activities: ◗ Interest rate risk; ◗ Foreign exchange risk; ◗ Commodities risk.
As at 31 December 2015, the Group held derivative instruments: ◗ eligible for hedge accounting and recognised as cash flow hedges (CFH), or as net investment hedges (NIH); ◗ or non-eligible for hedge accounting and recognised in trading.
Fair values are calculated by using standard valuation methods and on a basis of mid-market conditions commonly used in the finan- cial markets. The market data used is level 2 under the terms of IFRS 13. The impacts on performance and the financial position of derivatives are presented in the table below:
Latent Other comprehensive income financial account (OCI) (reclassifiable as (€ million) income/ income) (expense)
Fair value at Fair value at Underlying asset Hedge accounting 31/12/2014 Change (1) Reclassified (2) Change (3) 31/12/2015 Interest rates CFH (5.3) (2.2) 2.4 (0.1) (5.2) Interest rates Trading - - - - - Total Interest rates (5.3) (2.2) 2.4 (0.2) (5.2) Currency NIH - (0.1) 0.1 - - Currency Trading (1.3) - - 1.1 (0.2) Total currency (1.3) (0.1) 0.1 1.1 (0.2) Commodities CFH (6.5) (4.2) 4.9 (0.5) (6.3) Commodities Trading (0.2) - - - (0.2) Total Commodities (6.8) (4.2) 4.9 (0.4) (6.5) Total (13.3) (6.5) 7.4 0.5 (11.9) (1) Changes in market values, which have impacted the other comprehensive income account (reclassifiable reserves) for the financial year. (2) Reclassifications from equity have had a negative impact of €4.9 million on EBITDA and a negative impact of €2.5 million on financial income / (expense). (3) Changes in market values that impacted financial income (expense) for the financial year.
This table excludes accrued interest.
The impact on 2015 profit for the year is presented in the table below:
(€ million) EBITDA Financial result obtained
Underlying asset Hedge accounting Change Change Interest rates CFH - (2.4) Interest rates Trading - (1.1) Total Interest rates - (3.5) Currency NIH - (0.3) Currency Trading - (9.6) Total currency - (9.9) Commodities CFH (6.6) (0.3)
Commodities Trading - (0.3) Total Commodities (6.6) (0.6) Total (6.6) (14.0)
44 2. Consolidated financial statements
Derivative instruments are recognised in the statement of financial position at their fair value for the following amounts:
At 31 December 2015 At 31 December 2014 (€ million) Assets Liabilities Assets Liabilities Interest rate instruments 0.8 6.0 0.1 5.4 Currency instruments - 0.3 - 1.4 Commodities instruments - 6.5 - 6.8 Total 0.8 12.8 0.1 13.6
Management of interest rate risk The exposure of the Group to interest rate risk stems from its net financial debt. The Group covers this risk by using derivative financial instruments.
The hedging instruments linked to the debt agreement put in place by Keolis S.A. in 2010 (“private placement with Caisses Régionales de Crédit Agricole” or CRPP) matured at the same time as the debt on 30 September 2015.
Derivative financial instruments eligible for hedge accounting are recognised under cash flow hedges. The derivative financial ins- truments that are not eligible are recognised under trading.
The breakdown between the Group’s fixed and variable rate debt is as follows:
(€ million) At 31 December 2015 At 31 December 2014
Variable rate 791.3 703.2 Fixed rate 159.1 120.6 Financial debt and long term borrowings adjusted for accrued interest 950.4 823.8 Variable rate cash and cash equivalents (122.7) (176.9) Fixed rate cash and cash equivalents - - Cash and cash equivalents (122.7) (176.9) Accrued interest receivable (0.1) 0.1 Loans and receivables (1.4) (1.5) Deposits and guarantees (33.6) (36.6) Derivative assets (0.7) (0.1) Profit-sharing (0.6) (0.9) Net financial debt 791.3 607.7
The Group is exposed to interest rate variability on the variable rate portion of its net financial debt.
At 31 December 2015, on the basis of a constant net financial debt, an increase of 50 basis points in market interest rates would have increased the annual borrowing cost by €4.0 million (excluding accrued interest, derivatives and amounts owed to non-control- ling shareholders) and in parallel would have increased the financial income from cash and cash equivalents by €0.6 million.
On the basis of the interest rate hedging portfolio, an instantaneous increase of 50 basis points in market interest rates would cut the cost of annual debt by €2.0 million.
Hence, on the basis of constant net financial debt adjusted to reflect the impact of interest rate hedging derivative financial instru- ments, an immediate increase of 50 basis points in market interest rates would increase the annual cost of debt by €1.3 million.
Equally, on the basis of constant net financial debt adjusted to reflect the impact of interest rate hedging derivative financial instru- ments, an immediate decrease of 50 basis points in market interest rates would reduce the annual cost of debt by €1.4 million.
45 2. Consolidated financial statements
The derivative instruments are recognised in the statement of financial position at their fair value at the following amounts:
At 31 December 2015 At 31 December 2014 (€ million) Assets Liabilities Assets Liabilities
Interest rate instruments: ◗ Cash flow hedges 0.8 6.0 0.1 5.4 ◗ Trading - - - - Total 0.8 6.0 0.1 5.4
The nominal amounts and fair values of derivative financial instruments are detailed below:
At 31 December 2015 (€ million) Nominal Fair Value
Rate swaps 385.0 (4.2) Purchases of options 95.0 0.1 Collars 65.0 (1.1) Sales of options - - TOTAL 545.0 (5.2)
The sensitivity of the portfolio of derivative financial instruments to an impact of 0.50% on interest rate levels is presented below:
At 31 December 2015 (€ million) Market rate -0.5% Market rate +0.5%
Impact OCI (reserve reclassifiable as income) (12.9) 2.6 Impact financial income (expense) (0.8) (0.3) Valuation (13.7) 2.4
All of the interest rate hedging instruments held at 31 December 2015 mature between 2016 and 2023.
46 2. Consolidated financial statements
Foreign exchange risk management The Group has put in place intra-group loans denominated in foreign currency and recognised in current accounts. In order to cover the resulting foreign exchange risk, the Group uses derivative financial instruments which allow it to fix the exchange rate of these intra-group loans.
The Group also makes investments in foreign entities. To cover the foreign exchange risk engendered by these investments, the Group uses derivative financial instruments for controlled amounts, with the management objective being to maintain the reference exchange rate defined for the year.
Some of the derivative financial instruments held by the Group are eligible for net investment hedge accounting as described by IAS 39, the rest are recognised under trading.
Derivative financial instruments are recognised in the statement of financial position at their fair value at the following amounts:
At 31 December 2015 At 31 December 2014 (€ million) Assets Liabilities Assets Liabilities
Currency instruments: ◗ Net investment hedges - - - - ◗ Trading - 0.3 - 1.4 Total - 0.3 - 1.4
The derivative financial instruments hedge transactions in the following currencies in particular: AUD, CAD, DKK, SEK, NOK, AED, USD and GBP.
All of the foreign exchange hedging derivatives held at 31 December 2015 mature in 2016.
The sensitivity of foreign exchange hedging contracts to a variation of plus or minus 10% in foreign exchange rates is detailed below:
At 31 December 2015 (€ million) 90% of the 110% of the exchange rate exchange rate Impact OCI (reserves reclassifiable as income) - - Impact financial income (expense) 16.2 (16.6) Fair Value 16.2 (16.6)
47 2. Consolidated financial statements
Management of risk of fluctuations in commodities prices Within the scope of its activities, the Group is exposed to a risk of fluctuation in the price of certain commodities, in particular diesel. The Group covers this risk by using derivative financial instruments.
Derivative financial instruments eligible for hedge accounting are recognised under cash flow hedges as described by IAS 39. The derivative financial instruments that are not eligible are recognised under trading.
The derivative instruments are recognised in the statement of financial position at their fair value at the following amounts:
At 31 December 2015 At 31 December 2014
(€ million) Assets Liabilities Assets Liabilities
Derivative financial instruments on commodities ◗ Cash flow hedges - 6.3 - 6.5 ◗ Trading - 0.2 - 0.2 Total - 6.5 - 6.8
The sensitivity of commodity hedging contracts to a variation of plus or minus 10% in commodities’ prices is detailed below:
At 31 December 2015 (€ million) 90% of diesel 110% of diesel price price Impact OCI (reserves reclassifiable as income) (7.8) (5.0) Impact financial income (expense) (0.2) - Impact Fair Value (8.0) (4.9)
All commodities’ hedging instruments held at 31 December 2015 mature between January 2016 and August 2017.
Nominal amounts for positions open at 31 December 2015 are as follows:
Volume in tonnes Type of hedge instrument yet to mature Maturing in 2016 Maturing in 2017 Swaps 32,632 28,932 3,700 ◗ Cap purchase and floor sale 11,500 9,900 1,600 Tunnels ◗ Floor sales 1,950 1,950 - Total 46,082 40,782 5,300
Counterparty risk The transactions generating a potential counterparty risk for the Group are as follows: ◗ cash deposits; ◗ derivative financial instruments; ◗ trade receivables.
In 2013, the Group established and implemented a counterparty risk procedure for bank counterparties relating to its investments and derivative financial instruments. This procedure is based on the principles set out below: ◗ Definition of three categories within which the Group’s bank counterparties are divided: • Authorised Banks; • Banks under supervision; • Non-authorised Banks.
48 2. Consolidated financial statements
These categories are defined based on criteria specific to banks (rating) or GROUPE KEOLIS S.A.S. (Group financing): ◗ Cash investments and derivative financial instruments are only undertaken with counterparties that belong to the “Authorised Banks” category; ◗ The portfolio of cash investments complies with weighting restrictions; ◗ The “fair value at risk” (fair value in favour of the Group) of the portfolio of derivative financial instruments is monitored regularly so as to spread the risk over various counterparties; ◗ The banks and categories are monitored regularly.
If a bank that is a Group counterparty is removed from the “Authorised Banks” category, the portfolio of derivative financial instruments is restructured so as to comply once again with the category criteria.
At 31 December 2015: ◗ All the investments made and all the derivative financial instruments held by the Group were established with bank counterparties in the “Authorised Banks” category; ◗ The analysis of fair values at risk indicates that there is no major counterparty risk to report.
Finally, the credit and debit valuation adjustment calculations for the counterparty risk, as required by IFRS 13, indicate that the counterparty risk related to the valuation of the Group’s portfolios of derivative financial instruments is negligible.
Liquidity risk The available, confirmed and undrawn syndicated credit facility at 31 December 2015 is €300 million. This credit line is available to GROUPE KEOLIS S.A.S.
On 11 June 2015, an amendment to the syndicated loan was signed to renegotiate its terms, raise its nominal amount to €900 million and extend its maturity to 11 June 2020 and possibly to 11 June 2022 if the two options to extend for one year are exercised.
In 2015, two credit facilities were set up by Keolis S.A.: ◗ A loan of €15 million taken out at Société Générale, set up and drawn on 15 October 2015 repayable in instalments over 8 years, to finance rolling stock. This loan is fully hedged by a derivative financial instrument; ◗ A loan of €5 million taken out at the Banque Publique d’Investissement (BPI), set up in December 2014 and drawn in February 2015. This credit facility was amended on 7 December 2015 to increase its amount to €7 million repayable over 3 years.
From 3 to 5 (€ million) < =1 year 2 years years > 5 years
Financial debt (1.9) (21.9) (612.6) (5.5) Debt expense (6.4) (5.6) (12.9) (0.1) ◗ of which interest rate hedges (2.8) (2.1) (0.7) 0.1
The forecasted interest charges on the debt are calculated on the gross debt on the basis of the forward Euribor 1 month/3 months rate on the date of closing, to which is added the Group’s interest margin. It takes into account the impact of the interest rate derivative financial instruments.
At 31 December 2015 2016 2017 2018 2019 2020
Forward Interest rates -0.27% -0.23% 0.01% 0.31% 0.64% The Group ensures that it has sufficient resources to meet its financial obligations. To ensure this, each year the Group prepares a table of projected cash flows several years into the future to identify financing requi- rements and their seasonality.
49 2. Consolidated financial statements
5.13 Provisions
Analysis by type
At 31 December 2015 At 31 December 2014 (€ million) More Less More Less than a than a Total than a than a Total year year year year Pensions 129.2 6.3 135.5 117.9 2.4 120.3 Other employee benefits 31.1 0.9 32.0 30.1 0.9 31.0 Employment and tax risks 12.3 16.3 28.6 13.8 16.8 30.6 Losses on contract termination and loss-making contracts 2.6 2.4 5.0 4.1 2.6 6.7 Contract fines - 2.9 2.9 - 1.9 1.9 Major repairs and maintenance 12.4 24.9 37.3 9.2 26.2 35.4 Other 8.8 1.9 10.7 7.0 1.6 8.6 Total 196.4 55.6 252.0 182.1 52.4 234.5
Movements during the financial year
At 1 January Changes in Other At 31 (€ million) Charges Reversals reporting December 2015 scope movements 2015
Pensions 120.3 23.2 (9.2) 0.4 0.7 135.5 Other employee benefits 31.0 2.4 (1.3) - (0.1) 32.0 Employment and tax risks 30.6 6.8 (9.0) 0.1 0.2 28.6 Losses on contract termination and loss- 6.7 5.0 (6.7) - - 5.0 making contracts Contract fines 1.9 2.9 (1.9) - - 2.9 Major repairs and maintenance 35.4 6.3 (4.3) - (0.2) 37.2 Other 8.6 7.1 (4.9) 0.1 (0.1) 10.8 Total 234.5 53.7 (37.3) 0.6 0.5 252.0
At 1 January Changes in Other At 31 (€ million) Charges Reversals reporting December 2014 scope movements 2014
Pensions 104.1 8.9 (7.3) - 14.6 120.3 Other employee benefits 14.2 2.5 (0.7) - 15.0 31.0 Employment and tax risks 23.2 15.1 (7.4) - (0.3) 30.6 Losses on contract termination and loss- 11.0 0.6 (5.7) 0.8 - 6.7 making contracts Contract fines 2.6 1.9 (2.6) - - 1.9 Major repairs and maintenance 32.3 5.8 (2.9) - 0.2 35.4 Other 9.6 4.3 (5.2) - (0.1) 8.6 Total 196.9 39.1 (31.8) 0.8 29.4 234.5
50 2. Consolidated financial statements
Pensions and similar benefits The amount of commitments recognised in the statement of financial position breaks down as follows:
(€ million) At 31 December 2015 At 31 December 2014
Commitments recorded in the statement of financial position: Pensions and other post-employment benefits 135.5 120.3 Other employee benefits 32.0 31.0 Total 167.5 151.3 ◗ Of which: Non-current 160.3 148.0 ◗ Of which: Current 7.2 3.3
Pensions and other post-employment benefits
Actuarial assumptions
The following are the main actuarial assumptions adopted in evaluating pension commitments under the defined benefit schemes:
At 31 December 2015 At 31 December 2014
(per cent) France Canada France Canada
Discount rate 1.49 3.30 1.35 3.75 Rate of increase in salaries 2.00-6.20 N/A 2.00-5.80 N/A Expected rate of return on assets 1.49 3.75 1.35 4.25
The plan assets break down as follows:
At 31 December 2015 At 31 December 2014 (€ million) France Canada France Canada Equities - 5.3 - 5.9 Bonds 0.1 1.4 0.2 1.6 Real estate - 0.3 - 0.3 Other 0.1 - - -
The sensitivity to discount rates in relation to the assumptions adopted is as follows:
Commitment at Service cost 2016 Financial cost 2016 (€ million) 31/12/2015
discount rate less 0.25% 138.8 8.5 2.0 discount rate (basic assumption) 135.5 8.3 2.2 discount rate plus 0.25% 131.9 8.1 2.4
51 2. Consolidated financial statements
Commitments recorded in the statement of financial position
The commitments recognised in the statement of financial position break down as follows:
(€ million) At 31 December 2015 At 31 December 2014
Present value of non-financed liabilities 133.0 121.1 Present value of financed liabilities 9.7 7.3 Present value of total liabilities 142.7 128.4 Fair value of pension scheme assets (7.2) (8.1) Present value of net liabilities recognised 135.5 120.3
Analysis of changes in liabilities and assets
The net present value of the liabilities comprises:
(€ million) 31/12/2015 31/12/2014
Net present value of liabilities at 1 January 128.3 111.4 Service cost 7.1 6.0 Financial cost 1.9 2.9 Benefits paid (9.4) (7.6) Employee contributions - - Changes in pension schemes 14.1 0.1 Actuarial gains/(losses) 1.0 14.9 Foreign exchange translation difference (0.2) 0.3 Effect of changes in consolidation scope (0.1) 0.3 Effect of reductions and pension scheme settlements - - Net present value of liabilities at 31 December 142.7 128.3
The fair value of the assets comprises:
(€ million) 31/12/2015 31/12/2014
Fair value of pension plan assets at 1 January 8.1 7.5 Expected return on assets 0.3 0.3 Actuarial gains/(losses) on pension fund returns 0.1 0.7 Employer contributions 0.2 0.3 Employee contributions - - Benefits paid (0.9) (0.9) Foreign exchange translation differences (0.6) 0.3 Effect of changes in consolidation scope - - Effect of reductions and pension scheme settlements - - Fair value of pension plan assets at 31 December 7.2 8.1
52 2. Consolidated financial statements
The following are the actuarial gains and losses both in the light of experience and due to changes in actuarial assumptions:
(€ million) 31/12/2015 31/12/2014
Impact of changes in assumptions (1.5) 11.9 Losses/(gains) in the light of experience 2.5 2.3 Actuarial losses/(gains) for the year 1.0 14.2
The following is the geographical breakdown of the liabilities and assets:
At 31 December 2015 (€ million) France Canada Total Present value of the liabilities 135.1 7.6 142.7 Fair value of pension scheme assets (0.2) (7.0) (7.2) Net Present Value of net obligations 134.9 0.6 135.5
Benefit cost for the financial year
The cost of benefits recognised in the income statement breaks down as follows:
(€ million) 31/12/2015 31/12/2014
Service cost 7.1 6.0 Interest cost 1.9 2.9 Expected return on assets (0.3) (0.3) Depreciation of past service costs 14.1 0.1 Changes in pension schemes - - Total expense recognised in the income statement 22.8 8.8
The service cost is recognised within staff expenses. The interest cost on liabilities and the expected return on the pension scheme assets are recognised as financial expense and financial income respectively.
Change in the net commitment recorded as a liability in the statement of financial position
(€ million) 31/12/2015 31/12/2014
Opening provision at 1 January 120.3 104.1 Newly consolidated companies 0.1 0.3 Benefit cost for the financial year 22.9 8.7 Used (Benefits / Contributions paid) (8.7) (6.9) Provision charged to/(reversed from) equity 1.0 14.2 Foreign exchange translation differences and other changes (0.1) - Closing provision at 31 December 135.5 120.3
53 2. Consolidated financial statements
The cumulative movements in charges/ (reversals) recognised directly in equity are as follows:
(€ million) 31/12/2015 31/12/2014
Cumulative opening balance of charges/(reversals) 38.5 24.3 Actuarial (gains) / losses for the year 1.0 14.2 Foreign exchange translation differences (0.2) - Cumulative closing balance of charges/(reversals) 39.3 38.5
Variations for the current financial year and for the three previous ones:
(€ million) 31/12/2015 31/12/2014 31/12/2013 31/12/2012
Present value of liabilities 142.7 128.4 111.6 113.9 Fair value of pension scheme assets (7.2) (8.1) (7.5) (8.7) Surplus (deficit) of the pension scheme 135.5 120.3 104.1 105.2 Adjustments related to experience 2.5 2.3 (3.8) 1.1
Other employee benefits
Description of commitments and actuarial assumptions Other employee benefits consist of long-service awards to employees working in France and healthcare expenses of employees in the USA who have taken early retirement. These schemes are not funded by external assets (e.g. insurance policies). The obligations arising from these defined benefit schemes are measured using the same methods and assumptions as for the pension schemes.
The actuarial gains and losses arising from both experience and due to changes in actuarial assumptions are immediately recognised in the income statement for the financial year.
Analysis of changes in obligations
Change in Foreign exch (€ million) 01/01/2015 Charge Reversals transl. diff & 31/12/2015 scope other France – long service awards 15.7 1.8 (0.9) - 0.1 16.7 USA – healthcare expenses of retired employees 15.4 0.6 (0.5) - (0.2) 15.3 Total 31.1 2.4 (1.4) - (0.1) 32.0 The change in the USA relates to the provision for healthcare expenses recorded as part of the Boston tender award, counterbalanced by the recording of an intangible asset depreciated over the contract’s duration.
5.14 Operating liabilities and other debt
(€ million) At 31 December 2015 At 31 December 2014
Trade receivables: advances and deposits received 34.5 58.6 Trade payables 543.2 521.7 Payables to PPE suppliers 41.0 62.4 Payables to staff 479.5 460.1 Central government and local authorities 101.4 83.0 Deferred income (1) 137.0 141.6 Other 104.6 93.7 Total 1,441.3 1,421.1
(1) including €37.1 million as IFRIC 12 financial liabilities in 2015 compared to €44.3 million in 2014.
54 2. Consolidated financial statements
6 • Other commitments not recognised in the statement of financial position and contractual commitments
(€ million) At 31 December 2015 At 31 December 2014
Unutilised credit lines 508.6 318.1 Guarantees given to secure debt 43.8 41.2 Guarantees given for operating commitments 677.8 651.8 Securities provided - - Total commitments made and guarantees given, excluding operating leases 721.6 693.1
The amount of railway path access entitlements within the “Guarantees given for operating commitments” is €72.0 million at 31 December 2015 compared to €73.8 million at 31 December 2014.
The future minimum payments on operating lease contracts break down as follows:
(€ million) At 31 December 2015 At 31 December 2014
Less than one year 171.6 174.8 One to five years 456.1 496.0 More than five years 286.1 333.8 Total 913.8 1,004.5
Future commitments linked to leases primarily relate to the rental of transport equipment and buildings. They comprise €435 million internationally and €478.8 million in France. IT equipment rental contracts are in place for immaterial values.
France
Rental contracts Contracts entered into on vehicles (buses and coaches) relate to average durations of ◗ 7 to 8 years for buses and coaches; ◗ 3 or 4 years for minibuses.
The manufacturer’s buyback undertaking corresponds to the estimated market value of the vehicle at the end of the rental period.
Most of these contracts are entered into directly by the subsidiaries, with a guarantee signed by Keolis S.A. in favour of the financing bodies. This guarantee takes the form of an undertaking to continue the rental and binds Keolis S.A. only in terms of the payment of the rental amounts that remain due under the contract if the subsidiary defaults. In return, the financing body undertakes to keep the related vehicles available to the Group.
Outside France We distinguish between railway contracts and bus contracts.
Railway contracts Railway rental contracts are entered into for the term of the franchise contract.
Rentals under leases due in less than one year amount to €17.8 million.
Rentals under leases due in more than one year depend on the end date of each of the railway or similar franchises. They amount to €98.9 million.
Bus and coach contracts Rental instalments outstanding on these contracts amount to €202.5 million.
As in France, Keolis S.A. is required to provide guarantees of rental payments on behalf of its foreign subsidiaries.
55 2. Consolidated financial statements
7 • Disputes The following director’s fees were paid to outside directors: €337,000 in 2015 and €325,000 in 2014. The estimates and underlying assumptions relating to current disputes are continuously re-examined. In particular, current There are no outstanding advances or credit facilities extended disputes and litigation, especially with tax administrations or to members of the Group’s management or executive commit- relating to appeals on tenders or on warranty claims, have been tees. examined by the management with its advisers and lawyers for the purpose of assessing the risk they entail to the measurement of assets or liabilities. 9 • Post balance sheet events
The impact of changes in accounting estimates is recognised EFFIA becomes shareholder of SAEMES during the period of the change where they only affect that At the beginning of January 2016, EFFIA became the main period, or during the period of the change and subsequent industrial shareholder of Société anonyme d’economie mixte periods where the latter are also affected by the change. d’exploitation du stationnement de la ville de Paris (SAEMES) by acquiring a 33.27% share in the company. Risks are measured at fair value and where appropriate a provi- EFFIA, which already manages more than 30,000 parking sion is made in the accounts (see note 5.13). spaces in the Ile-de-France region, thus initiates closer ties with the second largest car park operator in the region SAEMES (€45 On 27 June 2014, the Group decided to terminate a subcontrac- million turnover, 25,000 spaces). tor agreement. On 4 August 2014, the subcontractor filed a SAEMES operates a number of major facilities, among which claim against a subsidiary of the Group without producing any Paris’ number 1 car park for revenue, Lyon-Méditerrannée, evidence to support this action, which is thus entirely refuted by located under Gare de Lyon. the subsidiary concerned. At this stage in the procedure, no The two companies which will remain commercially independent provision has been made in the financial statements. but may join together on certain invitations to tender, already jointly operate the Lyon-Diderot car park. After this transaction, EFFIA becomes the second largest sha- 8 • Related party transactions reholder of SAEMES, behind Paris City Hall, which sold 26.50% of the capital of SAEMES but remains majority shareholder with The revised IAS 24 norm, applicable from 1 January 2011, has a 50.06% share. modified disclosure obligations for public entities regarding tran- sactions with related parties. Keolis acquires Transports Daniel Meyer in Ile-de-France In January 2016, the Keolis Group announced the acquisition of GROUPE KEOLIS S.A.S. is majority-owned by SNCF, a public a leading bus and coach service operator in Ile-de-France, entity with an industrial and commercial activity whose capital is Transports Daniel Meyer. With this strategic external growth wholly owned by the French State. transaction, Keolis reinforces its foothold in Ile-de-France and consolidates its position for future projects relating to Grand 8.1 Transactions with the SNCF Paris Express. Keolis Ile-de-France, which generated 400 million 69.69% of GROUPE KEOLIS S.A.S. is owned by SNCF euros of turnover in 2014, operates a fleet of 1,900 vehicles Participations and 30.00% by Caisse de Dépôt et Placement du across 25 depots. Established in all of the departments compri- Québec. Transactions mainly correspond to general manage- sing the Paris region, its 19 subsidiaries employ 4,000 people ment services. and carry 70 million passengers each year. The group Transports Transactions with the SNCF and its subsidiaries mainly concern Daniel Meyer has 440 employees and a fleet of 260 vehicles. It car park rentals, and either permanent or occasional passenger generated a turnover of 40.4 million euros in 2014. Its main line transport services. of business is in the operation of approximately 50 timetabled bus lines, supplemented by school buses and school outings 8.2 Transactions with joint ventures and associates and charter activity. Transactions with joint ventures and associates are undertaken according to normal market conditions.
8.3 Remuneration of the Group’s key managers The key managers in the Group are defined as being the com- pany officers of GROUPE KEOLIS S.A.S. and the members of the executive committee. Remuneration and other short-term benefits paid to these directors amounted to €5.1 million for 9 people in 2015, compared to €3.1 million for 8 people in 2014.
56 2. Consolidated financial statements
10 • Consolidation scope
10.1 Subsidiaries
Method of % of Name Country consolidation shareholding Aérobag France FC 100.00% Aérolis France FC 50.10% Aéroport de Troyes Barberey France FC 100.00% Aérosat France FC 85.00% Airelle France FC 100.00% Athis Cars France FC 100.00% Autocars Delion France FC 100.00% Autocars Eschenlauer France FC 100.00% Autocars Garrel et Navarre France FC 100.00% Autocars Planche France FC 100.00% Autocars Striebig France FC 100.00% Caennaise de Services France FC 100.00% Canal TP France FC 100.00% Cariane Littoral France FC 100.00% Caron Voyages France FC 100.00% Cars de Bordeaux France FC 100.00% Cars et Autobus de Cassis - SCAC France FC 100.00% Cars Planche France FC 100.00% Compagnie des Transports Méditerranéens France FC 100.00% Compagnie du Blanc Argent France FC 99.43% Devillairs France FC 100.00% DROP&GO France FC 100.00% EFFIA (Holding) France FC 100.00% EFFIA Concessions France FC 100.00% EFFIA Stationnement France FC 100.00% EFFIA Stationnement Cassis France FC 100.00% EFFIA Stationnement Grenoble France FC 100.00% EFFIA Stationnement Lille France FC 100.00% EFFIA Stationnement Lyon France FC 100.00% EFFIA Stationnement Marseille France FC 100.00% EFFIA Stationnement Saint-Etienne France FC 100.00% EFFIA Synergies France FC 100.00% EFFIA Transport France FC 100.00% Enlèvement et Gardiennage Services France FC 100.00% Fouache Evasion France FC 100.00% GROUPE KEOLIS S.A.S. France FC 100.00% Holding Striebig France FC 100.00% Institut Keolis France FC 100.00% Interhône-Alpes France FC 100.00% Intrabus Orly France FC 100.00% Keolis Abbeville France FC 99.02%
57 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding Keolis Agen France FC 100.00% Keolis Aix-les-Bains France FC 100.00% Keolis Alençon France FC 100.00% Keolis Alès France FC 100.00% Keolis Amiens France FC 100.00% Keolis Angers France FC 100.00% Keolis Arles France FC 100.00% Keolis Armor France FC 100.00% Keolis Artois Gohelle France FC 100.00% Keolis Atlantique France FC 100.00% Keolis Auch France FC 100.00% Keolis Aude France FC 100.00% Keolis Baie des Anges France FC 100.00% Keolis Bassin D’Arcachon France FC 100.00% Keolis Bassin de Pompey France FC 100.00% Keolis Beaune France FC 100.00% Keolis Besançon France FC 99.96% Keolis Blois France FC 100.00% Keolis Bordeaux France FC 99.99% Keolis Bordeaux Métropole France FC 100.00% Keolis Boulogne sur Mer France FC 100.00% Keolis Bourgogne France FC 99.50% Keolis Brest France FC 100.00% Keolis Bus Verts France FC 100.00% Keolis Caen France FC 100.00% Keolis Calvados France FC 100.00% Keolis Camargue France FC 100.00% Keolis Centre France FC 100.00% Keolis Châlons-en-Champagne France FC 99.24% Keolis Charente Maritime France FC 99.96% Keolis Château Thierry France FC 100.00% Keolis Châteauroux France FC 100.00% Keolis Châtellerault France FC 100.00% Keolis Chaumont France FC 100.00% Keolis Chauny-Tergnier France FC 100.00% Keolis Cherbourg France FC 100.00% Keolis Concarneau* France FC 100.00% Keolis Conseil et Projets France FC 100.00% Keolis Dijon France FC 100.00% Keolis Drôme France FC 100.00% Keolis Drouais France FC 100.00% Keolis Emeraude France FC 100.00% Keolis en Cévennes France FC 99.19% Keolis Epinal France FC 100.00%
58 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding Keolis Eure et Loir France FC 100.00% Keolis Garonne France FC 100.00% Keolis Gascogne France FC 100.00% Keolis Gironde ( ex SNCOA ) France FC 100.00% Keolis Grand Tarbes France FC 100.00% Keolis Ille et Vilaine France FC 100.00% Keolis Languedoc France FC 100.00% Keolis Laval France FC 100.00% Keolis Lille (ex Transports en Commun de la Métropole Lilloise (Transpole)) France FC 100.00% Keolis Littoral France FC 100.00% Keolis Lorient France FC 100.00% Keolis Lyon France FC 99.99% Keolis Manche France FC 100.00% Keolis Maritime Brest France FC 100.00% Keolis Maritime Lorient France FC 99.00% Keolis Marmande France FC 100.00% Keolis Mobilité Hauts de Seine France FC 100.00% Keolis Mobilité Roissy France FC 100.00% Keolis Montargis France FC 100.00% Keolis Montélimar France FC 100.00% Keolis Montluçon France FC 100.00% Keolis Morlaix France FC 100.00% Keolis Narbonne France FC 100.00% Keolis Nevers France FC 100.00% Keolis Nord Allier France FC 100.00% Keolis Normandie Seine France FC 100.00% Keolis Obernai France FC 100.00% Keolis Oise France FC 100.00% Keolis Orléans France FC 100.00% Keolis Orly Rungis France FC 100.00% Keolis Oyonnax France FC 100.00% Keolis Pays d'Aix France FC 100.00% Keolis Pays de Montbéliard France FC 100.00% Keolis Pays des Volcans France FC 100.00% Keolis Pays Nancéien France FC 100.00% Keolis Pays Normands France FC 100.00% Keolis PMR Rhône France FC 100.00% Keolis Porte de l’Isère France FC 100.00% Keolis Provence France FC 100.00% Keolis Pyrénées France FC 95.16% Keolis Quimper France FC 100.00% Keolis Rennes France FC 100.00% Keolis Réseau Départemental Sud Oise France FC 100.00%
59 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding Keolis Roissy Services Aéroportuaires France FC 100.00% Keolis Rouen Vallée de Seine France FC 100.00% Keolis S.A. France FC 100.00% Keolis Saint Malo France FC 100.00% Keolis Saintes France FC 100.00% Keolis Seine Maritime France FC 100.00% Keolis Somme France FC 100.00% Keolis Sud Allier France FC 100.00% Keolis Sud Lorraine France FC 100.00% Keolis Touraine France FC 100.00% Keolis Tours France FC 100.00% Keolis Travel Services France FC 100.00% Keolis Trois Frontières France FC 100.00% Keolis Urbest France FC 100.00% Keolis Val d’Oise France FC 100.00% Keolis Val de Maine France FC 100.00% Keolis Val de Saône France FC 100.00% Keolis Val Hainaut France FC 96.32% Keolis Vesoul France FC 100.00% Keolis Vichy France FC 100.00% Keolis Voyages France FC 100.00% Keolis Yvelines France FC 100.00% KTA France FC 100.00% Les Autobus d'Arcachon France FC 100.00% Les Cars du Bassin de Thau France FC 100.00% Les Cars Roannais France FC 100.00% Les Courriers Catalans France FC 99.99% Les Courriers de l'Ile-de-France France FC 99.99% Les Courriers du Midi France FC 100.00% Les Transports Dunois France FC 100.00% Loisirs et Voyages France FC 100.00% Millau Cars France FC 100.00% Monnet Tourisme France FC 100.00% Monts Jura Autocars France FC 99.99% Motion Lines France FC 100.00% MTI Conseil France FC 100.00% Pacific Cars France FC 100.00% Prioris France FC 100.00% Réseau en Vosges France FC 70.00% S.T.E.F.I.M. France FC 100.00% SA SAP Drogoul France FC 100.00% SAP Cariane Provence France FC 100.00% SCAC Bagnis France FC 100.00% Setver France FC 100.00%
60 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding SFD France FC 100.00% SNC du Parc Lyon Diderot France FC 50.00% Société Bordelaise d’exploitation de Services France FC 100.00% Société d’Exploitation des Transports Urbains d’Oyonnax France FC 100.00% Société d'exploitation de l'Aéroport de Dole Jura France FC 51.00% Société d'exploitation de l'Aéroport Albert Picardie France FC 51.00% Société de Gestion de l'Aéroport d'Angers-Marcé France FC 100.00% Société de Transports et de Services Aéroportuaires France FC 100.00% Société Départementale des Transports du Var France FC 95.08% Société des Transports Côte d’Azur Riviéra France FC 100.00% Société des Transports de la Communauté Urbaine d'Arras France FC 100.00% Société des Transports en Commun Nîmois France FC 100.00% Société des Transports Robert France FC 100.00% Société Nantaise de Fourrière Automobile France FC 100.00% Société Rennaise de Transport et de Services (Handistar) France FC 100.00% Société pour la Mobilité à Paris (SOMAP) France FC 100.00% STA France FC 100.00% STAC France FC 100.00% Strasbourgeoise d'Enlèvement et de Gardiennage France FC 100.00% SVTU France FC 100.00% TPR France FC 100.00% Train Bleu St Marcellin France FC 100.00% Trans Val de Lys France FC 99.99% Transétude* France FC 100.00% Transkeo France FC 51.00% Transports de la Brière France FC 60.10% Transports et Services Aérolignes France FC 100.00% Transports Evrard France FC 100.00% Transports Gep Vidal France FC 100.00% Transroissy France FC 100.00% Var Tours France FC 99.45% Voyages Autocars Services France FC 100.00% Voyages Chargelègue France FC 100.00% Voyages Dourlens France FC 100.00% Voyages Fouache France FC 100.00% Voyages Monnet France FC 100.00% Voyages Striebig France FC 100.00% VTS Roissy France FC 100.00% Westeel Voyages France FC 100.00% Keolis Deutschland GmbH & Co. KG Germany FC 100.00% Keolis Deutschland Holding GmbH Germany FC 100.00% Keolis Deutschland Verwaltung GmbH Germany FC 100.00% Schloemer Verkehrsbetrieb GmbH Germany FC 100.00%
61 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding Striebig Deutschland Germany FC 100.00% Striebig GmbH Germany FC 100.00% Australian Transit Enterprises Pty Ltd Australia FC 51.00% KDR Gold Coast Pty Ltd Australia FC 51.00% KDR Victoria Pty Ltd Australia FC 51.00% Keolis Australie Australia FC 100.00% Keolis Downer Pty Ltd Australia FC 51.00% Keolis Downer Bus and Coachlines Property Pty Ltd Australia FC 51.00% Keolis Downer Bus and Coachlines Pty Ltd Australia FC 51.00% Hornibrook Bus Lines Pty Ltd Australia FC 51.00% Hornibrook Transit Management Pty Ltd Australia FC 51.00% Link SA Pty Ltd Australia FC 51.00% Path Transit Pty Ltd Australia FC 51.00% South West Transit Pty Ltd Australia FC 51.00% Southlink Pty Ltd Australia FC 51.00% Autobus De Genval Belgium FC 100.00% Autobus Dony Belgium FC 100.00% Autobus Dujardin Belgium FC 100.00% Autobus Lienard Belgium FC 100.00% Cardona-Deltenre Belgium FC 100.00% Cintra Belgium FC 100.00% Cintral Belgium FC 100.00% De Turck Belgium FC 100.00% Eltebe Belgium FC 100.00% Etablissements Picavet & Co Belgium FC 100.00% Eurobus Holding Belgium FC 100.00% Eurobussing Airport Belgium FC 100.00% Eurobussing Brussels Belgium FC 100.00% Eurobussing Wallonie Belgium FC 100.00% Flanders Bus Belgium FC 100.00% Garage Du Perron Belgium FC 100.00% Gino Tours Belgium FC 100.00% Heyerick Belgium FC 100.00% Joye Belgium FC 100.00% Keolis Vlaanderen Belgium FC 100.00% Kibel (ex Belbus) Belgium FC 100.00% Kortenbergse Busonderneming Belgium FC 100.00% L.I.M. Collard-Lambert Belgium FC 100.00% Le Cinacien Belgium FC 100.00% N.V. Autobusbedrijf Bronckaers Hamont Belgium FC 100.00% N.V. Autobussen De Reys Belgium FC 100.00% N.V. Autocars Henri De Boeck En Reizen Andre Leloup Belgium FC 100.00% Pirnay Belgium FC 100.00% Ramoudt Tours Belgium FC 100.00%
62 2. Consolidated financial statements
Method of % of Name Country consolidation shareholding Reniers & Co Belgium FC 50.02% S.A.D.A.R Belgium FC 100.00% SA A.B.C. Cars Belgium FC 100.00% Satracom Belgium FC 100.00% Société de Transport Automobiles Cars Autobus SA* Belgium FC 100.00% Sophibus Belgium FC 100.00% Sprl Bertrand Belgium FC 100.00% Sprl Taxis Melkior Belgium FC 100.00% Sprl Voyages F. Lenoir Belgium FC 100.00% Sprl Truck Bus Repair (Tbr) Belgium FC 100.00% T.C.M. Cars Belgium FC 100.00% Transport Penning Belgium FC 100.00% Trimi Belgium FC 100.00% Van Rompaye NV Belgium FC 100.00% Voyages Doppagne Belgium FC 100.00% Voyages Nicolay Belgium FC 100.00% West Belgium Coach Company Belgium FC 100.00% Keolis Canada Inc. Canada FC 100.00% Keolis Grand River Sec Canada FC 100.00% Keolis Bus Danmark (ex City-Trafik) Denmark FC 75.00% Keolis Espagne Spain FC 100.00% Keolis America Inc. United States FC 100.00% Keolis Commuter Services LLC United States FC 60.00% Keolis Rail Services America United States FC 100.00% Keolis Rail Services Virginia United States FC 100.00% Keolis Transit America United States FC 100.00% Keolis Hyderabad Mass Rapid Transit System Private Limited India FC 100.00% Kilux Luxembourg FC 100.00% Luxbus* Luxembourg FC 100.00% Keolis Nederland Netherlands FC 100.00% Keolis Norge (ex Fjord1 Partner AS) Norway FC 100.00% Syntus BV Netherlands FC 100.00% Keolis Amey Docklands Ltd United Kingdom FC 70.00% Keolis UK United Kingdom FC 100.00% Nottingham Trams Ltd United Kingdom FC 80.00% Citypendeln Sweden FC 100.00% CSG Commuter Security Sweden FC 100.00% Keolis Nordic Sweden FC 100.00% Keolis Sverige AB Sweden FC 100.00%
*companies removed from the consolidation scope on 31 December 2015.
63 2. Consolidated financial statements
10.2 Joint Ventures and associates
Method of % of Name Country consolidation shareholding Compagnie des Transports Collectifs de l’Ouest Parisien France EM 50.00% Effia SEM Roubaix France EM 50.00% Orgebus France EM 50.00% Passerelle CDG* France EM 34.00% RDK France EM 50.00% SCODEC France EM 35.00% Société de Promotion et d'Exploitation de Parkings* France EM 49.97% Société de Transport de l’Agglomération de Chauny France EM 50.00% Trans Pistes France EM 40.00% Transévry France EM 39.42% Transports de l’Agglomération de Metz France EM 25.00% Transports Intercommunaux Centre Essonne (TICE) France EM 19.00% NETLOG Germany EM 33.00% Shanghai Keolis Public Transport Operation Management Co. China EM 49.00% Wuhan Tianhe Airport Transport Center Operation and Management Co. Ltd. China EM 40.00% PROMETRO Portugal EM 20.00% First Keolis Holding Limited United Kingdom EM 45.00% First Keolis Transpennine Holding Limited United Kingdom EM 45.00% First Keolis Transpennine Limited United Kingdom EM 45.00% Govia United Kingdom EM 35.00% Govia Thameslink Railway Limited United Kingdom EM 35.00% London & Birmingham Railway Limited United Kingdom EM 35.00% London & South Eastern Railway Limited United Kingdom EM 35.00% New Southern Railway Limited United Kingdom EM 35.00% Southern Railway Limited United Kingdom EM 35.00% Thameslink Rail Limited United Kingdom EM 35.00%
* companies removed from the consolidation scope on 31 December 2015.
64 2. Consolidated financial statements
Statutory auditors’ report on the consolidated financial statements (For the year ended December 31, 2015)
This is a free translation into English of the statutory auditors’ report on the consolidated financial statements issued in the French language and is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the consolidated financial statements and includes explanatory paragraphs discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were made for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. This report also includes information relating to the specific verification of information given in the Group’s management report. This report should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders,
In compliance with the assignment entrusted to us by your Annual In our opinion, the consolidated financial statements give a true General Meeting, we hereby report to you, for the year ended and fair view of the assets and liabilities and of the financial posi- December 31, 2015, on: tion of the Group at December 31, 2015 and of the results of its ◗ the audit of the accompanying consolidated financial statements operations for the year then ended in accordance with of Groupe Keolis S.A.S.; International Financial Reporting Standards as adopted by the ◗ the justification of our assessments; European Union. ◗ the specific verifications required by law. These consolidated financial statements have been approved by II - Justification of our assessments the Executive Board. Our role is to express an opinion on these In accordance with the requirements of article L.823-9 of the consolidated financial statements based on our audit. French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the I - Op inion on the consolidated financial following matters: statements ◗ Keolis carries out impairment tests on goodwill and indefinite life We conducted our audit in accordance with professional stand- assets and also assesses whether there is any indication of ards applicable in France; those standards require that we plan impairment on non-current assets, as described in note 2.4.9 and perform the audit to obtain reasonable assurance about to the consolidated financial statements. We have examined the whether the consolidated financial statements are free of material methods used to carry out this impairment test as well as the misstatement. An audit involves performing procedures, using corresponding cash flow forecasts and assumptions, and have sampling techniques or other methods of selection, to obtain verified that the notes to the consolidated financial statements audit evidence about the amounts and disclosures in the con- provide appropriate disclosures. solidated financial statements. An audit also includes evaluating ◗ Note 2.4.17 specifies the valuation methods for provisions for the appropriateness of accounting policies used and the rea- pensions and other employee benefits. An evaluation of these sonableness of accounting estimates made, as well as the over- provisions was carried out by independent actuaries. Our work all presentation of the consolidated financial statements. We consisted in examining the data and assumptions used and believe that the audit evidence we have obtained is sufficient and verifying that note 5.13 to the consolidated financial statements appropriate to provide a basis for our audit opinion. provides appropriate disclosures.
65 2. Consolidated financial statements
◗ Note 2.4.17 specifies the methods used to take into account the III - Specific verification risks relating to ongoing litigation and contracts. Our work con- As required by law, we have also verified in accordance with sisted in examining the procedures used by the Company to professional standards applicable in France the information pre- identify and assess these risks and the accounting treatment sented in the Group’s management report. applied and in assessing the resulting estimates. We have no matters to report as to its fair presentation and its These assessments were made as part of our audit of the con- consistency with the consolidated financial statements. solidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report.
Neuilly-sur-Seine, March 7, 2016
The Statutory Auditors
PricewaterhouseCoopers Audit deloitte & Associés French original signed by french original signed by Françoise Garnier-Bel bertrand Boisselier
66 3. Unaudited financial statements
Unaudited management 3. financial statements
The Group considers that the following financial statements, prepared without applying IFRS 10 and 11, are accurate indica- tors of the operational and financial performances of the Group. They should be considered as an additional source of infor- mation and are in no way a substitute for other strictly accounting-related forms of the measurement of operational and financial performance as presented in the consolidated financial statements and the notes thereto, or referred to in the financial report.
The management accounts as at 31 December 2015 have not been audited. ContentS
1 • Key figures...... 68
2 • Income statement...... 69
3 • Statement of financial position ...... 70
4 • Statement of cash flows...... 71
67 3. Unaudited financial statements
1 • key figures
(€ million) 31/12/2015 31/12/2014
Revenue 6,425.4 5,564.5 ◗ Revenue France 2,819.1 2,797.5 ◗ Revenue International 3,606.3 2,766.9 Revenue net of sub-contracting 6,238.6 5,375.3 Recurring EBITDA 355.5 323.1 EBITDA 327.4 291.9 Recurring operating profit 128.5 131.3 Operating profit before investments under equity method 82.4 74.9 Operating profit after investments under equity method 82.1 75.2 Profit after tax from continuing operations 25.7 27.2 Profit attributable to equity shareholders 33.3 26.0 Total equity 1,024.4 994.1 of which attributable to equity shareholders 972.9 973.4 Net cash flows from operating activities 301.7 344.5 Industrial investments 242.2 220.6 Net financial debt (cash surplus) (1) 467.3 360.2
(1) Surplus cash positions are presented in brackets
68 3. Unaudited financial statements
2 • income statement
(€ million) 31/12/2015 31/12/2014
Revenue 6,425.4 5,564.5 Other income from operations 20.8 26.1 Income from continuing operations 6,446.2 5,590.6 Sub-contracting (186.8) (189.2) Purchases consumed and external expenses (2,555.5) (2,195.6) Taxes (18.0) (15.6) Staff costs, incentive schemes, profit-sharing (3,253.9) (2,799.3) Other operating income 50.5 50.5 Other operating expense (116.6) (103.0) Net provisions on current assets (1.0) (4.6) Net depreciation and other provisions charged (247.6) (212.3) Profit/(loss) on recurring fixed asset disposals 1.4 1.2 Amortisation of grants received 9.8 8.6 Recurring operating profit 128.5 131.3 Other non-recurring income 7.4 4.4 Other non-recurring expense (32.5) (32.6) Depreciation and provisions on contractual rights (21.0) (28.1) Of which depreciation of other intangible assets and negative goodwill 5.7 (5.3) Profit before investments under the equity method 82.4 74.9 Profit/(loss) from associates (0.3) 0.2 Profit after investments under the equity method 82.1 75.2 Net cost of financial borrowing (18.0) (18.5) Other financial income 12.4 6.7 Other financial expense (24.2) (17.4) Financial income (expense) (29.8) (29.2) Net profit before taxation 52.3 46.0 Taxation (26.6) (18.7) Net profit from continuing operations 25.7 27.2 Profit for the year 25.7 27.2 Profit attributable to non-controlling interests 7.6 (1.3) Profit attributable to Group 33.3 26.0
69 3. Unaudited financial statements
3 • statement of financial position
Assets 31/12/2015 31/12/2014 (€ million) Goodwill 1,139.6 1,105.1 Other intangible assets 534.5 490.9 Property, plant and equipment 900.6 821.2 Investments under equity method 2.1 2.0 Other non-current financial assets 171.1 147.7 Deferred tax asset 84.7 80.1 Non-current assets 2,832.6 2,646.9 Inventories and work in progress 89.0 85.1 Trade receivables 466.6 437.3 Other receivables 456.8 387.3 Other current financial assets 14.0 13.7 Cash and cash equivalents 655.3 563.5 Current assets 1,681.7 1,486.9 TOTAL ASSETS 4,514.4 4,133.8
Liabilities 31/12/2015 31/12/2014 (€ million) Share capital 237.9 237.9 Reserves and premiums 701.6 709.5 Net profit/(loss) attributable to Group 33.3 26.0 Equity attributable to Group 972.9 973.4 Reserves attributable to non-controlling interests 59.1 19.5 Profit for the year attributable to non-controlling interests (7.6) 1.3 Equity 1,024.4 994.1 Non-current provisions 194.9 180.8 Non-current financial debt 881.2 653.7 Deferred tax liability 178.2 153.2 Non-current liabilities 1,254.3 987.7 Current provisions 55.6 52.4 Current financial debt 91.3 195.1 Bank borrowings 190.7 118.5 Trade payables and other liabilities 1,898.0 1,785.9 Current liabilities 2,235.6 2,151.9 TOTAL LIABILITIES 4,514.4 4,133.8
70 3. Unaudited financial statements
4 • statement of cash flows
(€ million) 31/12/2015 31/12/2014
Operating profit before investments under equity method 82.4 74.9 Non-cash items 245.1 216.9 EBITDA 327.4 291.9 Elimination of provisions in current assets 1.0 4.6 Changes in working capital 30.5 77.9 Tax paid (57.2) (29.8) A) Net cash from operating activities 301.7 344.5 Capital expenditure (242.2) (220.6) Proceeds from sale of tangible and intangible assets 39.4 35.0 Investment grants received 7.7 7.3 Change in financial assets for concessions (IFRIC 12) (14.2) (19.1) Financial investments (133.3) (82.0) Gains/ (losses) from disposal of financial assets 5.6 35.1 Cash flows on changes in reporting scope 4.9 27.2 B) Net cash from investing activities (332.1) (217.2) Free cash flow (30.4) 127.3 Net dividends paid (50.6) (0.7) Net dividends received 0.5 0.5 Change in equity (other transactions with shareholders) 38.7 13.0 New borrowings 243.8 108.3 Borrowings repaid (170.1) (117.8) Interest received 2.2 2.4 Interest paid (20.5) (20.6) Change in other financial debts 0.2 0.4 Other (7.9) (10.2) C) Net cash from financing activities 36.3 (24.8) D) Foreign exchange translation differences 13.7 15.8 Change in cash and cash equivalents (A+B+C+D) 19.6 118.3 Cash and cash equivalents at beginning of period 445.0 326.7 Cash and cash equivalents at end of period 464.6 445.0 Change in cash and cash equivalents 19.6 118.3
71 Annual 4. Financial Statements 4. Annual Financial Statements
Annual Annual Financial Financial 4. Statements Statements ConTENTS
3.2 Receivables...... 79 A Financial statements 3.3 Details of prepayments and deferred income . . .80 at 31 December 2015...... 74 3.4 Equity...... 80 3.5 Provisions...... 81 1 • Balance sheet 3.6 Liabilities...... 81 AT 31 dEcembER 2015 ...... 74 3.7 Exchange differences on receivables 2 • INCOME STATEMENT and payables in foreign currencies...... 81 AT 31 DECEMBER 2015 ...... 76 4 • N otes on the INCOME STATEMENT . . . . . 81 4.1 Analysis of turnover...... 81 4.2 Details of other operating income B Notes to the annual and expense...... 81 financial statements ...... 78 4.3 Share of profit of joint ventures...... 81 4.4 Transfers of expenses...... 82 1 • Significant events of the 4.5 Gains and losses relating to prior years . . . . . 82 financial year...... 78 4.6 Financial income and expenses ...... 82 2 • ACCOUNTING PRINCIPLES, 4.7 Taxation...... 82 RULES AND METHODS ...... 78 4.8 Exceptional income and expense...... 82 2.1 Contract managed...... 78 5 • O ther information...... 83 2.2 Fixed assets...... 78 5.1 Related party transactions...... 83 2.3 Inventories...... 78 5.2 Financial Instruments ...... 83 2.4 Receivables and payables ...... 78 5.3 Pension and long service award commitments. . 85 2.5 Marketable securities ...... 78 5.4 Information on leasing...... 85 2.6 Cash...... 78 5.5 Personal training account...... 85 2.7 Provisions...... 78 5.6 Identity of the consolidating company...... 85 2.8 Employee benefits...... 79 5.7 Information on subsidiaries and investments . . .85 2.9 Public investment subsidies...... 79 5.8 Post balance sheet events...... 85 2.10 Tax status...... 79
3 • Notes on the balance sheet ...... 79 Statutory auditors’ report on the financial 3.1 Fixed assets...... 79 statements ...... 86
73 4. Annual Financial Statements
A Financial statements at 31 December 2015 1 • Balance sheet AT 31 dEcembER 2015
31/12/2015 31/12/2014
Accumulated Gross Depreciation Net Net
in euros Uncalled subscribed capital INTANGIBLE ASSETS Preliminary expenses - - - - Development costs - - - - Concessions, patents and related rights - - - - Goodwill 343,750,090 - 343,750,090 343,750,090 Other intangible assets - - - - Advances, down payments for intangible assets - - - - PROPERTY, PLANT AND EQUIPMENT Land - - - - Buildings - - - - Technical facilities, equipment, machinery - - - - Other property, plant and equipment - - - - PPE under construction - - - - Advances and down payments - - - - NON-CURRENT FINANCIAL ASSETS Shareholdings under the equity method - - - - Other shareholdings 758,667,888 - 758,667,888 757,955,588 Receivables from shareholdings 310,584,600 - 310,584,600 - Other long-term investments - - - - Loans 2,755,580 - 2,755,580 2,403,268 Other non-current financial assets 538 - 538 538 TOTAL FIXED ASSETS (I) 1,415,758,697 - 1,415,758,697 1,104,109,484 INVENTORIES AND WORK IN PROGRESS Raw materials, supplies - - - - Production in progress (goods) - - - - Production in progress (services) - - - - Semi-finished and finished goods - - - - Goods - - - - Advances and down payments on orders 40,178 - 40,178 - TRADE RECEIVABLES Trade receivables and related accounts 3,697,559 - 3,697,559 6,351,755 Other receivables 68,311,138 - 68,311,138 232,371,814 Subscribed called non paid-up capital - - - - MISCELLANEOUS Marketable securities held for trading 5 - 5 5 Cash 598,707 - 598,707 389,902 ACCRUALS Prepayments - - - 20,077 TOTAL CURRENT ASSETS (II) 72,647,587 72,647,587 239,133,554
Unrealised losses on foreign exchange (III) transactions - - - - TOTAL ASSETS (I to III) 1,488,406,284 1,488,406,284 1,343,243,038
74 4. Annual Financial Statements
31/12/2015 31/12/2014 in euros LIABILITIES EQUITY Share capital or individual capital 237,888,902 237,888,902 Additional paid-in capital 303,246,055 353,238,942 Revaluation reserves - - Legal Reserve 7,717,008 6,213,321 Statutory or contractual reserves - - Regulated reserves - - Other reserves 2,386,768 2,386,768 Retained earnings brought forward 142,613,581 114,043,532 NET PROFIT/(LOSS) FOR THE YEAR 31,113,593 30,073,736 Investment grants - - Regulated provisions - - TOTAL EQUITY (I) 724,965,907 743,845,201 CONTINGENCY AND LOSS PROVISIONS Provisions for contingencies - - Provisions for charges 6,297,021 3,215,309 TOTAL PROVISIONS (iI) 6,297,021 3,215,309 DEBTS (1) Convertible bond issues - - Other bond issues - - Bank borrowings (2) 620,669,969 510,390,057 Loans and other financial debts - - Customer advances and down payments - - Trade payables and related accounts 4,720,473 2,783,475 Tax and social security liabilities 3,516,234 6,281,409 Liabilities on assets and related accounts - - Other liabilities 127,884,369 76,727,586 ACCRUALS Deferred income - - LIABILITIES AND ACCRUALS (III) 756,791,045 596,182,528 Unrealised gains on foreign exchange transactions (IV) 352,312 - TOTAL LIABILITIES (I TO IV) 1,488,406,284 1,343,243,038 (1) Liabilities and deferred income less than 1 year 136,791,045 86,182,527 (2) Overdrafts (short-term borrowings for cash requirements) and bank credit balances of which - Amounts payable after one year 620,000,000 510,000,000 - Amounts due within one year 669,969 390,057
75 4. Annual Financial Statements
2 • INCOME STATEMENT AT 31 DECEMBER 2015
In euros 31/12/2015 31/12/2014
OPERATING REVENUE Sales of goods - - Services 14,412,921 10,047,085 NET REVENUE 14,412,921 10,047,085 Production held as inventory - - Capitalised production - - Operating grants - - Reversal of depreciation, provision and expense transfers - 3,725,904 Other income 12 4,052 TOTAL OPERATING INCOME (I) 14,412,933 13,777,041 Stock purchases (including customs duties) - - Change in inventory of goods - - Purchase raw materials, other supplies (including customs duties) - - Change in inventory purchases (raw materials and supplies) - - Other purchases and operating expenses 8,973,657 5,130,618 Taxes and similar payments 1,095,258 702,487 Wages and salaries 3,932,432 5,381,625 Welfare contributions 1,162,947 2,286,613 OPERATING ALLOWANCES On capital/ fixed assets: - - On current assets: charge to provisions - - For contingency and loss provisions: charge to provisions 3,081,711 159,913 Other charges 344,122 325,814 TOTAL OPERATING EXPENSES (II) 18,590,127 13,987,070 OPERATING PROFIT / (LOSS) (I - II) (4,177,194) (210,029) FINANCIAL INCOME Financial income from shareholdings 26,565,823 19,145,039 Other marketable and receivables from capitalized assets - - Other interest and similar income - - Reversal of provisions charged and expense transfers - - Foreign exchange gains - - Net gains on sales of marketable securities - - TOTAL FINANCIAL INCOME (III) 26,565,823 19,145,039 Changes to depreciation and provisions - - Interest and similar expenses 8,540,090 9,518,513 Foreign exchange losses - 75 Net expenses on sales of marketable securities - TOTAL FINANCIAL EXPENSES (IV) 8,540,090 9,518,588 FINANCIAL INCOME / (EXPENSE) (III - IV) 18,025,733 9,626,452 RECURRING PROFIT BEFORE TAX (I - II + III - IV) 13,848,539 9,416,422
76 4. Annual Financial Statements
In euros 31/12/2015 31/12/2014
EXCEPTIONAL GAINS Exceptional gains on operations - - Exceptional gains on equity transactions - - Reversal of provisions charged and expense transfers - - TOTAL EXCEPTIONAL GAINS (V) - - Exceptional losses on operations 14,179 - Exceptional losses on equity transactions - - Exceptional charges to depreciation and provisions - - TOTAL EXCEPTIONAL LOSSES (VI) 14,179 - EXCEPTIONAL INCOME/ (LOSS) (V - VI) (14,179) - Employee profit-sharing (VII) - - Corporate income tax (VIII) (17,279,233) (20,657,314) TOTAL INCOME (I + III + V) 40,978,756 32,922,080 TOTAL CHARGES (II + IV + VI + vii + VIII) 9,865,163 2,848,344 NET PROFIT/ (LOSS) 31,113,593 30,073,737
77 4. Annual Financial Statements
B Notes to the annual financial statements
1 • Significant events of the 2.2 Fixed assets financial year 2.2.1 Intangible assets Syndicated loan amendment The goodwill recorded in the balance sheet as an intangible asset On 11 June 2015, GROUPE KEOLIS S.A.S. signed an amend- is exclusively composed of technical losses from mergers. ment to the syndicated loan agreement dated 12 July 2013 arranged with a syndicate of 13 banks for a nominal amount of Technical losses from mergers carried in goodwill are not amor- €800 million maturing on 12 July 2018. This amendment pro- tised, but are tested for loss of value at each annual close by vides for the renegotiation of borrowing conditions of the credit reference to a separate review of the related underlying asset line, the increase of its nominal amount to €900 million, the values. Any losses in value would be recognised by the esta- extension of its maturity until 11 June 2020 and a provision under blishment of an impairment charge. which Keolis may extend maturity by an additional year, in 2016 Technical losses from mergers within assets relate directly to the and 2017, subject to the approval of the entire lending syndicate. investment in Keolis S.A. Maturity could thereby be extended until 11 June 2022. 2.2.2 Tangible assets Monetisation of CICE (Crédit d’Impôt pour la Compétitivité et Nil. l’Emploi) receivable The receivable arising in 2015 from the CICE, implemented by 2.2.3 Financial assets the French government, was subject to a “Dailly” sale. This sale Equity investments are recorded at acquisition cost, including resulted in net proceeds of €47.4 million for the Company on direct expenses. Under a specific tax provision, these expenses behalf of the tax group. As the parent company of the tax group, are amortised pro rata over 5 years. GROUPE KEOLIS S.A.S. recognised a debt owing to the com- panies that are part of the tax group for the amount of €49.5 If this value is greater than the inventory value an impairment is million (gross amount). The impact of the CICE receivable sale recognised for the difference. For each of the holdings, the inven- on GROUPE KEOLIS S.A.S’s income statement is €1.1 million tory value is determined based on future cash flows which their included as a financial expense. business activity could generate.
2.3 Inventories 2 • Accounting principles, rules Nil. and methods 2.4 Receivables and payables These financial statements are prepared in accordance with the Receivables are recorded at their nominal value. rules laid down by the general chart of accounts in accordance Where applicable, a depreciation is recognised whenever there with regulation ANC N°2014-03 dated 5 June 2014 of the is a risk of non-recovery. French Accounting Standards Authority (Autorité des Normes Comptables) and principles generally accepted in the profession. 2.5 Marketable securities General conventions were applied in compliance with the pru- Nil. dence principle, in accordance with the basic assumptions of: ◗ continuity of operations, 2.6 Cash ◗ consistency of accounting methods from one year to another, Cash balances in foreign currencies are converted at the closing ◗ independence of financial years. exchange rate of the financial period. The difference that results from this adjustment is recognised in the year’s income state- The underlying method used to value the items in the accounts ment in foreign exchange gains and losses. is the historical cost method. There were no exceptions from standards nor changes in 2.7 Provisions method that affected the annual financial statements. A provision for contingencies and charges is recorded when the company has a legal or implicit obligation to a third party The main accounting policies used are described below. arising from a past event, whose amount can be reliably esti- mated and where it is probable that its settlement will cause an 2.1 Contract managed outflow of resources without compensation of at least an equi- Nil. valent amount.
78 4. Annual Financial Statements
2.8 Employee benefits 2.10 Tax status Employee benefits relate to payments due on retirement. The Company opted for the tax group regime from the year Evaluations of these obligations are carried out annually using commencing 1st January 2008. the projected unit credit method. The main actuarial assumptions used for the assessment of Procedures for allocating corporate tax are: employee benefits are: ◗ tax is calculated as if the Company were taxed separately, ◗ Discount rate 1.49% ◗ the savings achieved by the parent company from the tax ◗ Long-term expected inflation rate 1.75% losses and long-term capital losses of the subsidiary are taken ◗ Rate of increase of payrolls used to calculate by the latter in its income statement. payments due on retirement 3.70% ◗ Average turnover rate 2.20% However, in accordance with current corporate tax legislation ◗ Type of retirement At the initiative of the employee governing the carrying forward of losses, these are reallocated ◗ Mortality table INSEE TD/TV 2011-2013 to the subsidiary as and when it generates future profits.
These commitments appear under off-balance sheet commit- ments.
2.9 Public investment subsidies Nil.
3 • Notes on the balance sheet
3.1 Fixed assets
Gross value at Gross value at end beginning of Increase Decrease (in euros) of financial year financial year
Intangible assets Goodwill 343,750,090 - - 343,750,090 Financial assets Shares 757,955,588 712,300 - 758,667,888 Receivables from shareholdings* - 310,584,600 - 310,584,600 Deposits & guarantees 538 - - 538 Loans 2,403,269 352,312 - 2,755,580 TOTAL 1,104,109,484 311,649,212 - 1,415,758,697
*On 7 July 2015, GROUPE KEOLIS S.A.S. entered into a loan agreement with Keolis S.A.
3.2 Receivables
Due in less than Due in more than Amount gross (in euros) one year one year
Trade receivables and related accounts 3,697,559 3,697,559 - Other receivables* 68,311,138 68,311,138 - TOTAL 72,008,697 72,008,697 - * Other receivables comprise €36,064 thousand in trade receivables from the Group, €23,247 thousand of tax group receivables, €7,968 thousand of tax receivables and €49 thousand represented by a supplier credit note.
79 4. Annual Financial Statements
Receivables represented by commercial bills Nil.
3.3 Details of prepayments and deferred income Nil.
3.4 Equity
Statement of changes in equity (in euros)
Situation at the beginning of year Balance
Equity before distribution of prior year retained profits 743,845,201 Distributions of prior year retained profits - Equity after distributions of prior year retained profits 743,845,201 Movements during the year Decreases Increases Changes in capital - - Changes in share premium 49,992,887 - Changes in reserves - 1,503,687 Changes in capital grants - - Changes in untaxed reserves - - Other changes - 28,570,050 Profit for the year 30,073,736 31,113,593 BALANCE 80,066,624 61,187,330
Situation at the end of the year Balance
Equity before appropriation 724,965,907
Share capital The capital of the company amounts to €237,888,901.80, made up of 180,218,865 shares of €1.32 each.
GROUPE KEOLIS S.A.S. holds 0.14% of its own capital, or 257,000 shares (nominal value €1.32 each), following the acquisition in 2015 of 85,000 shares from FCPE GROUPE KEOLIS ACTIONNARIAT for a total of €712,300.00. These shares do not carry voting rights.
Allocation of net income for the previous year The General Meeting of 30 June 2015 allocated the result of financial year 2014 amounting to €30,073,736.55 as follows: (in euros) ◗ Legal Reserve of: 1,503,686.83 euros ◗ Retained profits: 28,570,049.72 euros
Changes in paid-in capital The company distributed reserves amounting to €49,992,887.05 from additional paid-in capital, in accordance with the written resolution of the shareholders of 2 October 2015.
Regulated provisions and investment subsidies Nil.
80 4. Annual Financial Statements
3.5 Provisions A provision is recorded when the company has a legal or implicit obligation to a third party arising from a past event, whose amount can be reliably estimated and where it is probable that its settlement will cause an outflow of resources.
The tax consolidation agreement obligates the parent company to return to its subsidiaries the tax savings resulting from the use of their tax losses, which it has recorded in its income statement, as soon as they become profitable.
Pursuant to Article 322-1 of Regulation No. 2014.03 of the French Accounting Standards Authority (ANC), a provision has been stated arising from this obligation where restitution in cash of the tax savings is likely.
Gross value at Gross value at (in euros) beginning of Charge Release end of financial financial year year Tax provisions 2,550,197 2,707,058 - 5,257,256 Other provisions 665,112 374,653 - 1,039,765 TOTAL 3,215,309 3,081,711 - 6,297,021
3.6 Liabilities At 31 December 2015, the amount of bank borrowings drawn down is €620 million and the undrawn balance is €300 million.
Due in less than Due in more Amount gross (in euros) one year than one year
Bank borrowings 620,669,969 669,969 620,000,000 Trade payables and related accounts 4,720,473 4,720,473 - Tax and social security debts 3,516,234 3,516,234 - Other liabilities 127,884,369 127,884,369 - TOTAL 756,791,045 136,791,045 620,000,000
Other liabilities comprise €127,531 thousand of tax group payables and €353 thousand of miscellaneous creditors.
Details of accrued liabilities at 31/12/2015 4 • Notes on the income (in euros) statement
Bank borrowings 4.1 Analysis of turnover Accrued interest 153,181 The company generates all of its turnover in France. Trade payables and related accounts Suppliers, invoices not yet received 4,350,494 4.2 Details of other operating income and expense Tax and social security debts Staff, accrued charges 1,694,426 Income Social institutions, accrued charges 777,754 (in euros) State, accrued charges 45,044 Total accrued liabilities 7,020,900 Settlement differences 12 TOTAL 12 3.7 Exchange differences on receivables and payables in foreign currencies Expenses GROUPE KEOLIS S.A.S. took out a loan (convertible bond) (in euros) for 3 million dollars. It was booked on 31 December 2015 at the closing exchange rate of €1 = USD 1.08870 equating to Attendance fees 344,000 an unrealised foreign exchange transaction gain of Settlement differences 122 €352,311.55. TOTAL 344,122
4.3 Share of profit of joint ventures Nil.
81 4. Annual Financial Statements
4.4 Transfers of expenses Nil.
4.5 Gains and losses relating to prior years Nil.
4.6 Financial income and expenses
(in euros) Income Expense Balance
Income from shareholdings 24,226,938 - 24,226,938 Interest on loans - (6,608,906) (6,608,906) Losses/receivables related to shareholdings 2,338,885 - 2,338,885 Other financial income and expense - (1,931,184) (1,931,184) Total 26,565,823 (8,540,090) 18,025,733
4.7 Taxation The corporate income tax for the year consists of:
(in euros) Profit before tax Tax due Net profit
Current 13,848,539 13,848,539 Exceptional (14,179) (14,179) Tax integration (18,779,233) 18,779,233 Exceptional contribution 1,500,000 (1,500,000) Total 13,834,360 (17,279,233) 31 113 593
4.8 Exceptional income and expense (in euros) Exceptional expenses Tax penalties 14,179 Total 14,179
82 4. Annual Financial Statements
5 • Other information
5.1 Related party transactions
(in euros) 31/12/2015 31/12/2014
Assets Investments 758,667,888 757,955,588 Receivables from shareholdings 310,584,600 - Trade receivables and related accounts 3,697,559 6,351,755 Current accounts 36,068,193 225,018,193 Other operating receivables - - Liabilities Tax provision 5,257,256 2,550,198 Trade accounts payable and related accounts 684,978 89,800 Other operating payables - - Current accounts - - Income statement Financial income 26,565,823 19,145,039 Financial expense - -
5.2 Financial instruments GROUPE KEOLIS S.A.S. uses derivative financial instruments to manage its exposure to financial risks resulting from its financial and investing activities: ◗ interest rate risk; ◗ foreign exchange risk.
At the end of the financial year, unrealised gains are not recognised in the accounts. Unrealised losses are accounted for except when they relate to instruments qualified as hedging and falling within one of the following two cases: ◗ to hedge underlying items in the balance sheet which have not been revalued; ◗ to hedge future cash flows expected in a future year, under the principle of matching the accounting impact in the same financial year.
The gains and losses realised are reported in the same income statement as the income and expenses on the hedged item.
Interest rate and foreign exchange derivative financial instruments are traded with first-class bank counterparties in accordance with the Group’s counterparty risk management policy. Consequently, the counterparty risk can be regarded as negligible.
5.2.1 Interest rate risks relating to the variable rate portion of its financial debt
The Group’s interest rate risk exposure results from its financial debt. This financial debt mainly relates to its syndicated loan.
To cover this risk, the Group uses standard, liquid and market-available derivative financial instruments: ◗ swaps, ◗ cap calls, ◗ floor puts if tied with cap calls to create a symmetrical or asymmetrical collar, ◗ sales of caps to unwind an existing cap or to realise a cap spread, ◗ floor calls, in particular to buy back floors that constitute asymmetrical collars.
83 4. Annual Financial Statements
The distribution of GROUPE KEOLIS S.A.S.’ debt between fixed and variable rates, without taking into account the derivatives portfolio, is as follows:
(€ million) 31/12/2015 31/12/2014
Variable rates 620.0 510.0 Fixed rates Loans and financial debts net of accrued interest 620.0 510.0 Cash and cash equivalents at variable rates (35.8) (224.9) Cash and cash equivalents at fixed rates - - Total cash and cash equivalents (35.8) (224.9) Accrued interest receivable (0.6) - Variable rate financial receivables (310.0) - Premiums (0.3) (0.4) Loans and guarantees (3.7) (3.9) Accrued interest payable - - Net financial debt 269.5 280.8
GROUPE KEOLIS S.A.S. is subject to variations in interest rates on the part of its net debt at variable rates. At 31 December 2015, an immediate increase of 50 basis points of market interest rates, based on unchanged net debt, would increase the annual cost of debt by €3.1 million and in parallel would increase financial income in cash and cash equivalents by €0.2 million, and also would increase the financial income of variable rate receivables by €1.5 million.
An immediate increase of 50 basis points in market interest rates on the hedge portfolio would reduce the annual cost of debt by €1.7 million.
Hence, an immediate increase of 50 basis points in market interest rates on an unchanged amount of net debt, taking into account the impact of hedges, would reduce the net annual debt cost by 0.3 million.
Equally, an immediate decrease of 50 basis points in market interest rates on an unchanged amount of net debt, taking into account the impact of hedges, would increase the net annual debt cost by 0.3 million.
5.2.2 Foreign exchange risk
The Company GROUPE KEOLIS S.A.S., given its status as the parent company of the Group, carries out net investments in foreign currencies in the capital of its foreign subsidiaries. To cover the foreign exchange risk engendered by these investments, GROUPE KEOLIS S.A.S. uses derivative financial instruments for limited amounts. Management’s objective is to protect the reference exchange rate defined for the year.
The instruments used by the Group are standard, liquid and market-available: ◗ forward and futures sales and purchases; ◗ foreign exchange swaps; ◗ call options; ◗ put options in combination with call options to provide symmetric or asymmetric collars.
At 31 December 2015, GROUPE KEOLIS S.A.S. had no open foreign exchange positions.
84 4. Annual Financial Statements
Other financial commitments Committed credit lines available but not drawn down as at 31 December 2015 amount to €300 million, available to GROUPE KEOLIS S.A.S. In addition, on 22 January 2014 a €20 million bilateral bank loan agreement was set up, maturing on 22 January 2017. The nomi- nal amount drawn down at 31 December 2015 is €20 million.
5.3 Pension and long service award commitments The amount of pension liabilities at 31 December 2015 stood at 356,131 euros. This sum is not provided for in the annual financial statements and appears under financial commitments.
5.4 Information on leasing Nil.
5.5 Personal Training Account The compte personnel de formation (CPF) replaced the droit individuel de formation (DIF) on 1 January 2015, taking over the training entitlements accrued at 31 December 2014. It is funded by the single contribution to the state-approved collecting bodies which have replaced the companies as responsible for its management.
5.6 Identity of the consolidating company The Company belongs a group whose consolidating company is SNCF PARTICIPATIONS, incorporated and domiciled in France, under SIRET number 572 150 977 01821, whose headquarters is located at 2 place aux Étoiles - CS 70001 - 93633 LA PLAINE ST DENIS CEDEX. The Company’s accounts are fully consolidated within the consolidated accounts of SNCF PARTICIPATIONS.
5.7 Information on subsidiaries and investments (in euros)
Gross value of Loans, Name & registered Capital Shares held % Revenue office shares advances
KEOLIS S.A. 46,851,276.00 100.00% 480,342,045 - 196,787,773 EFFIA 3,136,000.00 100.00% 276,430,523 - 15,738,901 20 - 22 RUE le peletier 75009 PARIS
Dividends Profit for the Name & registered Equity Net value of shares Guarantees office received year
KEOLIS S.A. 186,905,847 19,130,938 480,342,045 - 37,599,518 EFFIA 25,255,942 5,096,000 276,430,523 - 6,924,520 20 - 22 RUE le peletier 75009 PARIS
5.8 Post balance sheet events There are no significant post balance sheet events to report.
85 4. Annual Financial Statements
Statutory auditors’ report on the financial statements (For the year ended December 31, 2015)
This is a free translation into English of the statutory auditors’ report issued in French and is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the financial statements and includes explanatory paragraphs discussing the audi- tors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the financial statements. This report also includes information relating to the specific verification of information given in the management report and in the document addressed to shareholders. This report should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards appli- cable in France.
To the Shareholders,
In compliance with the assignment entrusted to us by your II - Justification of our assessments Annual General Meeting, we hereby report to you, for the year In accordance with the requirements of article L.823-9 of the ended December 31, 2015, on: French Commercial Code (Code du commerce) relating to the ◗ the audit of the accompanying financial statements of Groupe justification of our assessments, we inform you that the Keolis S.A.S. ; assessments made by us focused on the appropriateness of ◗ the justification of our assessments; the accounting principles used and the reasonableness of the ◗ the specific verifications and information required by law. significant estimates made by the management relating particularly to the following matters: These financial statements have been approved by the Executive ◗ measure the recoverable amount of goodwill resulting from Board. Our role is to express an opinion on these financial technical losses on mergers (§2.2.1 of the notes); statements based on our audit. ◗ measure the value in use of financial investments (§2.2.3 of the notes); I. Opinion on the financial statements ◗ measure the current tax provision made in application of the We conducted our audit in accordance with professional tax consolidation regime (§3.5 of the notes). standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about These assessments were made as part of our audit of the whether the financial statements are free of material financial statements taken as a whole, and therefore contributed misstatement. An audit involves performing procedures, using to the opinion we formed which is expressed in the first part of sampling techniques or other methods of selection, to obtain this report. audit evidence about the amounts and disclosures in the financial statements. An audit also includes evaluating the appropriateness III. Specific verifications and information of accounting policies used and the reasonableness of We have also performed, in accordance with professional accounting estimates made, as well as the overall presentation standards applicable in France, the specific verifications required of the financial statements. We believe that the audit evidence by French law. we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We have no matters to report as to the fair presentation and the In our opinion, the financial statements give a true and fair view consistency with the financial statements of the information of the assets and liabilities and of the financial position of the given in the management report of the Executive Board and in company at December 31, 2015 and of the results of its the documents addressed to shareholders with respect to the operations for the year then ended in accordance with French financial position and the financial statements. accounting principles.
Neuilly-sur-Seine, March 7, 2016
The Statutory Auditors
PricewaterhouseCoopers Audit d eloitte & Associés
French original signed by French original signed by Françoise Garnier-Bel Bertrand Boisselier
86 4. Annual Financial Statements
87